Get Rich Slick

Here’s some food for thought, I looked at the USO and UNG call options for January 2012 (in the money) and I was surprised to see over 20% premiums on these two ETFs two years out.   I checked on UGA and this is showing 11% premium just SIX months into the future!  This bothered me quite a bit so I did some further research using my utility company.  I am fortunate enough to live in a state that offers competitive electric utility companies and all of them are pricing in electricity 20% higher than I have today for two years into the future.   My current rate is about $0.10 per kilowatt and signing a two year deal today would cost me $0.12 to $0.13 per kilowatt.

The utility companies are pricing in inflation at 20% two years into the future on electricity rates!   For reference (and control), Microsoft call options TWO years into the future barely show 10% premiums.  Verizon and AT&T are also at 10% or less two years into the future!

This is extremely concerning on one level and extremely profitable potentially if I can figure out what the reason behind this is that people aren’t seeing.  When I check the futures market on WTI Crude it only shows a 10% premium for January 2012.   Somethings out of whack.

Check out the sample charts and calculations.

On one level, I’m tempted to buy UNG or USO or even UGA and sell those options and book my profits for the year.   A 20% return on two years is about 10% per year and way much better than any bank is paying.   The risk?  Who the hell knows what will happen to energy prices two years from now but a 20% return over two years ain’t bad!

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There should be a show on TV called “Banking Makover” along the lines of the Home Makeover show.   The premise of the show should be normal everyday struggling Americans being freed from the shackles of big banks and being moved to small community banks and credit unions.   Personally, I’ve begun my own bank make over journey.   Unfortunately it’s going to take at least 30 days if not more to move all of my accounts.   I’ve already sent letters to Bank of American and HSBC advising them of my displeasure with their little cartel and my intention to shut down all my accounts.

I’m in the process of slashing and burning my accounts at Chase but I’ve got so much money and things tethered to those accounts that it is going to take a while to undo but once done, I won’t be going back.   Hopefully, I’ll post an update by the end of the month but to give you a taste, it takes two payroll cycles to move from one bank to another and although I only had a small amount of my paycheck going to Chase, it’s going to take a whole month to unravel that process!

If you’re angry about the bank bailouts, bank bonuses, and the fleecing of the American taxpayer, I would encourage you to move your money to a credit union or community bank.   So far, my credit union has given me a credit card with a low 7% interest rate compared to the ridiculous rates at the big banks.  It’s not a bad deal altogether.    As an added bonus, my credit union offered to move my remaining auto loan over to the credit card.  This will create two bonuses for me:

1. The title to my car will be released to me -- I’ve switched from a secured loan to an unsecured loan.

2. I ended a business relationship with a big bank and will not be paying them any more interest.

Before you fret about paying the credit card interest rate, I don’t plan on paying interest on more than a month or two since I’ll pay that off once all my money has settled after all the moves.

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I was just amazed when I saw this article about the city of Phoenix implementing a sales tax on groceries!   If any astute readers can tell me what they see wrong with the logic, you’ll win a coveted RichSlick kudos!   I’ve given you a hint (see bold words).

Desperate to save police, fire and other city jobs, a divided Phoenix City Council on Tuesday approved a sales tax on grocery items that will generate tens of millions of dollars a year.

The 2 percent food tax will take effect April 1 and expire after five years, though Mayor Phil Gordon said the council has the option of reversing its decision after it hears from the public during 15 budget hearings planned for this month.

The tax on milk, meat, vegetables and other food purchased by shoppers will generate an estimated $12.5 million for the fiscal year that ends June 30. It will raise another $50 million for fiscal 2011. Food purchased with food stamps will not be taxed.

Uh, excuse me here but where is really the desperation in this scenario?   So the city’s brilliant plan is to make it difficult for people to buy food that they need to survive so they can have bureaucrats and other “essential” services survive?  Is this the worlds greatest oxymoron or what?

Long before we had police, fire or city officials, we had land and labor that meant food but somehow we’ve now inverted that logic where people must starve in order for police, fire and city officials survive.    I can tell you what is going to happen, the people of Phoenix are simply going to drive to Mesa or any other nearby town that doesn’t have this silly tax and the city of Phoenix will end up losing revenue.

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Change you can believe in?  Well it’s turned out to be chump change and if that nincompoop Bernanke is re-confirmed I will close ALL of my big bank accounts which currently include Chase, Bank of America and HSBC.   I’ve already opened a new credit union account and plan on moving my money there as soon as this foolishness continues.  I’ve also applied for credit card through the credit union so I can dump my big bank accounts as well.    The only way we’re going to get any real reform here is to suffocate the system and I’m doing my part.

I’m still totally disgusted that Geithner hasn’t been fired for his role in the whole AIG 100% payout and everyday new revelations show the ridiculous activity of these idiots.

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Well I honestly hoped that I would never have to write this post but I can’t hold back anymore.  I am seriously disappointed in Obama’s administration…seriously disappointed.   I was willing to suspend certain inalienable views in exchange for a single thing:  serious health care reform.   But what team Obama has created is a Frankenstein bill no different than Bush’ Bernankestein during the start of the banking crisis a while ago.

It’s become clear to me that Obama is a one term President and I won’t be surprised to see him as a lame duck President after the 2010 elections.  If it’s any consolation for Democrats, I have no plans on voting Republican as that earth has been scorched as well.   At next years election I will either vote completely 3rd party (libertarian, green, whatever) or not bother voting at all.

Oh well, all I want for Christmas is what I wanted last year, a stable monetary policy with a competent central bank.   Perhaps this is the year….

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I couldn’t believe my doublespeak ears when I watched this video by FDIC chair Sheila Bair.  She is literally lying to your face.  Here’s an interesting game, can you tell how many times she lies right to your face?

Lie #1 0:26 seconds into the video: “Your insured deposits are absolutely safe.”  -- Correct me if I am wrong but aren’t deposits UP TO $250k safe (did you catch that carefully parsed sentence: insured deposits are safe) and not ALL deposits?

Lie #2 0:46 seconds into the video: “Since the history of FDIC no insured depositors have every lost money and no one ever will.”  -- That’s a pretty bold statement, Sheila knows the future with absolute certainty.  No one will EVER lose money with FDIC.

Lie #3 0:57 seconds into the video:  “the overwhelming majority will weather this economic storm.”  -- And how does Shiela know with absolute certainty that this statement is true?

Lie #4 1:04 seconds into the video:  “As the economy heals, so will the banking system.”  -- Really?  What if people lose faith in the banking system, how will it be healed with absolute certainty?   Why are you on a YouTube video assuring us that everything is ok?  You don’t regularly do this do you?   Isn’t the mere fact that you are on telling everyone everything is safe a concern for alarm?

Lie #5 1:44 seconds into the video:  “for the bank depositor, a failure is a non-event.”  -- A non-event huh?   I don’t seem to have the exact same feature that I once had in my bank account once it was converted over; my local branch office closed and now I have to drive further to make deposits.  This is a plain lie.

Lie #6 2:03 seconds into the video: “we are the government” (can borrow from Treasury) -  One the one hand the FDIC claims it is “An independent agency of the federal government” and then on the other it claims it is the government.  Which one is it?

Lie #7 2:09 seconds into the video: “in short we cannot run out of money” -- While technically a true statement, the important thing to note is that being paid back with worthless pieces of paper is just as bad as not being paid back at all.

Lie #8 2:54 seconds into the video: “we can borrow $500 billion from Treasury (i.e. tax payer)” -- This isn’t a reassuring statement, dumping banking problems to the tune of $500 billion on the tax payer is concerning not to mention that  you still can’t cover $4 Trillion dollar worth of deposits with $500 billion.

Lie #9 3:28 seconds into the video: “no insured depositor has ever lost money in the history of FDIC.” -- Curious that this agency isn’t subject to the same “past performance is no indication of future performance” disclaimer any financial agency has to disclose these days.   I guess because FDIC is the government it doesn’t have to comply.

Watch the video for yourself:

I need to hire that facial recognition guy on Lie to Me to check out that eye twitch on Sheila’s left eye.   She almost seems to be having a difficult time telling the truth right to your face but I could be wrong

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I kept hearing that the “recovery” was underway but real unemployment seems to be at 20% so why do I keep hearing the term recovery?   I get my real employment numbers from Shadowstats who use the traditional method of tracking unemployment (see chart below).

So I ask again, why are we calling it a recovery?

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I read two stories today that I thought fit very well together despite not having to do anything with each other.  The first is an interesting post about the Federal Reserve owning more than 100% of mortgages.    The second was about these amazing curtains that block over 100% of sunlight thereby creating a singularity that absorbs all light.

Perhaps the Federal Reserve should buy these curtains to balance out the mortgage issue;  I’m sure the Fed would love to see 100% of the mortgages fall into a black hole and disappear but the silly Fed, they don’t know that they ARE the black hole!

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It looks like check mate for the FDIC.  On one side, if the FDIC taps the Treasury then tax payers are essentially bailing out banks again.  If this happens, what’s the point of banks paying premiums to FDIC if the tax payer is the real guarantee behind deposits?

On the other side, if the FDIC doesn’t tap the Treasury but seeks to borrow money from member banks to cover the losses then where’s the extra capital coming from?  Isn’t this a giant “wealth transfer” system of robbing the rich to pay the poor?

If you think about either situation carefully,  you begin to realize that everyone’s screwed no matter what and more and more people are coming around to that fact:

Bair, the Federal Deposit Insurance Corp.’s chairman since 2006, says the agency has many options. One way to boost its coffers, now running low after a surge in bank failures, would be to charge banks higher premiums. It could make them pay future assessments in advance. Alternatively, the FDIC could borrow money from the banks it regulates. Or it could borrow from the Treasury, where it has a $500 billion line of credit.

“There’s a philosophical question about the Treasury credit line, whether that is there for losses that we know we will have, or whether it’s there for unexpected emergencies,” Bair said Sept. 18 at a Georgetown University conference in Washington. “This is really a debate for Washington and for banks,” she added.

Keep an eye out….

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Wow, I am absolutely amazed at some of the news stories and information coming out.  First, I just read that 40% of families on food stamps in the USA are actually working and drawing income.  Wow, 40%!

The number of working Americans turning to free government food stamps has surged as their hours and wages erode, in a stark sign that the recession is inflicting pain on the employed as well as the newly jobless.

While the increase in take-up is often attributed to the sharp rise in unemployment – which on Friday hit 9.7 per cent – the Financial Times has learnt that some 40 per cent of the families now on food stamps have “earned income”, up from 25 per cent two years ago.

The agriculture department, which runs the programme, attributes this rise to workers having their hours cut back.

“I’m sort of stunned, it seems like a dire warning . . . that even the jobs people are retaining in this recession aren’t at the wage level and hours level that they need to provide for their families,” said Heidi Shierholz, economist at the Economic Policy Institute.

Second, I’m reading that unemployment insurance from various states is running critically low and borrowing at the Federal level is taking place to stem the tide but it’s all just borrowed money:

Fourteen states have simply run out of money to pay benefits and been forced to borrow from Washington a total of more than $8 billion. That number is almost certain to grow as more states reach the brink. If they are not able to pay that amount back before 2011, which most will not be able to do, they face paying hundreds of millions of dollars in interest.

Third, I’m reading about some interesting things regarding the PBGC (pension insurance) and estimated projections:

July 30 (Bloomberg) — The government agency that guarantees the pensions of more than 44 million Americans would be restructured under legislation introduced in the U.S. Senate.

The Pension Benefit Guaranty Corp.’s finances and structure need revamping as “several of the country’s largest automobile and manufacturing companies are teetering on the edge of bankruptcy,” Senator Herb Kohl, a Wisconsin Democrat and a sponsor of the measure, said in a statement.

The agency, created by Congress in 1974 to protect the pension programs of bankrupt companies, reported in May a deficit of $33.5 billion, triple that of six months earlier. Last week it took over the pension plan of Delphi Corp. the auto-parts maker in bankruptcy since 2005.

And the bad news keeps coming but there may be hope…..see tomorrow’s post!

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