BigTrends

The State of California plans on issuing over $3 Billion worth of "IOUs" with a 3.75% yield as it wrangles with budget issues.  This would mark only the second time since the Great Depression that the Golden State has issued such promise repayment notes (technically they are registered warrants).

Major banks are balking at accepting these IOUs, thus causing the SEC and other bodies to consider making them municipal-type securities that can be traded in secondary markets.


(image from hispanicbusiness.com)

BankUnited FSB was seized on Thursday and is expected to cost the FDIC around $4.9 billion, marking the 2nd biggest FDIC hit after IndyMac last year.

There is a strong likelihood that GM will file for bankruptcy by their deadline on June 1.  It was only nine months prior that Lehman went down that same path.  But this one seems to be a different case.  Oh, the creditors and shareholders are still left holding the bag for the most part.  But the Lehman BK was somewhat unexpected as it was hoped some firm would step up to buy them.  In GM's case, that is not happening.  The gov't has 'prepared' the markets well for this news when it comes.  The Lehman case was preparation, it was damage control.  The lower VIX proves it.

You may have seen video of a backhoe demolishing a neighborhood out here in Southern Calif yesterday.  The bulldozer went to work on about 16 unfinished homes in the Victorville area.  This city was hard-hit by the recent downturn, not unlike many other cities in America.  Out west the overbuilding was obvious but not unique.  But, it seems rather useless and wasteful to destroy homes that were nearly complete.  The homebuilder went bankrupt and the unfinished project was seized by a Texas bank.  They could not manage the project and felt the best solution was to bulldoze.  Could they have been built and surrendered to a local charity?  Habitat for Humanity?  Perhaps shelter for some who were in need?  There must have been some positive to be seen.  Donate the homes to the government?

The Fed basically did not change a thing with their statement, except they continue to buy more 'stuff' with the expanded balance sheet.  One thing that was interesting was the 'quiet' stimulus released by the Govt.  Simply put they have thrown another bone to the consumer with the following:

Banks are blowing up left and right here, gains from the previous six week are vaporizing in minutes and hours....akin to taking the elevator up and the window down.  Are these still trading vehicles, or true investments?  It's clear the former is true for now.  A big move higher in volatility yesterday was a reminder that the bear market still lives on.

I've been wondering what the short- and long-term effects are going to be of the massive slashing of consumer credit card limits. I'm seeing evidence of this occurring everywhere but would like to see more numbers and specifics about what each credit card issuer is doing and has done. To some degree it obviously will be dampen consumer spending in the short run, but in the long run it may make a more savings-driven, less over-extended U.S. consumer. Interesting that I view this as a possible short-term negative with possible long-term positive results ... yet I view the Fed's and government's money printing as short-term positive but likely long-term negative.

Position: How are they going to buy those 60-inch LCDs?