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Mike Hoy


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Welcome to Uncle Ben's Traveling Helicopter Relief Show!

By Mike Hoy      Printer Friendly Version
Nov 6 2008 11:44AM

www.kitco.com

I do not have to tell anyone reading this article how tough it has been to get a good nights sleep over the last year. It truly saddens me when events which could have been avoided blow up in our faces changing our lives forever for the worse.  Knowing that the mistakes of the past must be financially borne by our children and our grandchildren is a legacy that is as embarrassing as it is criminal. The disgusting shame associated with this crisis is the fact that the people most responsible for destroying a way of life, that was pretty good for the vast majority of those striving to better themselves, walk away with fortunes never to be punished for their greed and manipulation.

I don’t know whether to laugh or beat my head up against the wall when I hear people like Greenspan, Paulson, Bernanke, Barney Frank and the heads of all these major financial institutions pass the blame or admit that no one could have forecast the fiscal disaster that is our fate as a result of gross negligence while on their watch. In my opinion, looking the other way and ignorance are absolutely no excuses for those who were and are in a position of safeguarding the assets and best interests of those they have been privileged to serve.

The irony to this whole mess is the fact that many of those who are directly responsible for the chaos of today are the same people dictating the direction of the future.  I think it is insane to allow anyone who shares responsibility for this nightmare to be in a position to pass laws and direct the flow of capital that has been created in hopes of bailing the world out of the crater it has fallen into.

THE GREATEST SWINDLE IN HISTORY:

The American public has been led to believe the $700,000,000,000 care package is a bailout designed to protect American homeowners and in the end American jobs.  They have been told that it is absolutely necessary that this money be created now with no voice, choice or accountability as to where the funds will be spent.  

What will the American people think when they realize that things are not quite as they have been told?  The dust hasn’t even settled on the creation of the $700,000,000,000 and they are now being hit up for another $550,000,000,000 to shore up the once financially unquestioned money market funds. 

I have no doubt the most disgusting part of this whole story has yet to play out. I think most of this money will be used to pay the “bookie.” I think much of this money will be used as payment to settle the failed end of the CDO derivative contracts. I think the recipients of this money will do their very best to pocket the proceeds for their own personal gain. We are already seeing these people granting themselves huge bonus’ and luxury vacations.  I find it appalling that it is still “business as usual!”   To reward individuals responsible for the destruction of millions of lives is a system that is in dire need of change.  If my thinking is correct, in the end, the public will know as much about the true use of these funds as they do about 43 story buildings that collapse for no apparent reason.

“Fool me once shame on you; fool me twice or $700,000,000,000+ shame on me!”  Giving the people responsible for this nightmare the keys to the treasury can only end in turning a nightmare into depression!”

BAND AIDS ARE NOT THE ANSWER FOR BROKEN BONES:

The public has been led to believe the subprime mortgage market is responsible for bringing our financial system to its knees.  If the subprime mortgage market is responsible for the challenges faced by the financial system then the financial risk should be placed on those institutions which failed to do the proper underwriting on the paper they wrote and bought as investments for their clients. Institutions who failed to exercise this basic premise of due diligence in the lending and investing of money do not belong in business and should be allowed to fail. New financial companies will rise from the dust to take their place.

Homeowners, who bought homes without having the proper financial income to afford them, most with no money down, are making a mockery of the system with hopes and claims of keeping a home that should not have been theirs in the first place. Most of these homes were sold with adjustable rate mortgages and interest only mortgages at a time when the fixed rates on a 15 year and a 30 year mortgage were trading at multi decade lows. These people have lived well above their means for a very long time. They have enjoyed a lifestyle that should have been financially out of their reach.  If they were being honest with themselves they would realize they have been on an extended vacation and now it is time to come home to the real world.  

Homebuyers that exercised financial responsibility bought their homes based on a fixed monthly payment with locked in interest rates. These prudent home buyers should not be penalized for buying a home that was affordable over what they desired based on the future escalation in income. I am sure most of these fiscally responsible home buyers walked through many homes they would have loved to own but knew they could not afford. The real crime would be to subsidize those who do not belong in the homes they now have at the expense of the taxpayer who is living within his or her own budget while making all their payments on time.

I feel it is also a given that a large majority of these people, who have fallen behind on their payments, will not be able to afford these homes in the future regardless of any “BAND AID” package  designed  to keep them in their homes today.  If this thinking is correct then taxpayers should not be forced to throw good money after bad.

I think it would be terrific if everyone who wanted to own a home could become a homeowner. Unfortunately, this is not possible in the real world and it is time someone stepped up to bring sanity back to an industry long out of control.

The housing market for the next several years will undoubtedly take a severe hit. In the end the torrential flood of homes that come to market for sale will be bought at much lower prices by my children as well as yours at prices which are affordable. The irony to this is the fact that those who have sacrificed buying a home, they felt they could not afford, will find themselves in a position to step up to a nicer home as prices fall.  The smaller than expected proceeds on the sale of their current home will be more than offset by the fall in price of the home they will be buying. 

Looking down the road several years you will find that the housing market will recover and sanity will be restored when everyone who deserves to be in a home finds a home in a price range that is affordable to the income they earn. 

In the end someone is going to live in all these homes and if this situation is properly resolved the residents of these homes will be able to pay for them without any assistance from the powers that be. 

I wish the problems in the subprime mortgage market were this simple. They would be if the natural course of events were freely allowed to take place.  In the end the losses associated with the foreclosures on these subprime loans would be the difference between the mortgages on the foreclosed homes less the selling price the homes will bring at auction. I find it difficult to understand how these future losses are being used as the scapegoat to con the taxpayers into blindly spending, what I believe will be several trillion dollars, to bail out individuals and institutions that should be in jail or allowed to go bankrupt.

As most of us already know, the real reason the financial system is on its death bed lies directly in the heart of the UNREGULATED derivatives market. The failure of Enron should have been the first shot fired in bringing an end to the plague that was being spread by this out of control financial infection.  As usual, those who should have recognized the inevitable future financial disasters failed to do so because their heads were buried deep in the dark. Not only did they refuse to vaccinate the public from this plague but they made absolutely no effort to keep it from spreading. And this ladies and gentleman is what brings us to “Uncle Ben’s Traveling Helicopter Relief Show” too little too late!

I have not done much writing over the last year as I felt it was time to sit back and observe the course of events as they unfold.  I have made it clear in the past that I felt the Fed would throw as much money into the system as they could for as long as they could. Never could I have imagined the Fed putting together a $700,000,000,000 package and shoving it down the throats of the American taxpayer with no questions asked.

For those of us who remember the 70’s and 80’s we know that this is the beginning stages of hyperinflation. Those who understand this also realize that now is the time to purchase and build positions in physical gold and silver as well as the precious metal and natural resource stocks. 

The equity markets have been pounded as a result of these uncertain times. There has been absolutely no place to hide for the longs. As a result of this beating there are many stocks trading at prices that offer excellent buying opportunities. I hope to share a few of my own personal favorites to anyone who is on my FREE E-MAIL LIST. Anyone can sign up and it is free. All you have to do is click on the link below and ask to be added to the list. You also have the assurance of knowing that I have never sold or shared any name on the list.

As always folks, these are my own personal beliefs and it is important for each of you to do your own homework as in the end your thinking may differ from mine.

May God bless America and give our newly elected leaders the wisdom to make the correct decisions as well as the guts to stand up and carry them out!  The future of the world lies in the hands of those responsible for making the decisions of tomorrow today.

Mike Hoy

 

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As always folks these are just my opinions and it is up to each of you to do your own due diligence as your conclusions may vary from mine.
mhoy@neb.rr.com 402-483-4484