Wednesday, April 22, 2009

Economic Realities Ignored by Propagandist Media

The media is doing a very nice job of covering up the real issues involving the US economy, the banks, TARP and Treasury's role in the massive fraud being foisted on the nation's public.

Yesterday, Tim Geithner's comments that the "vast majority" of US banks had sufficient capital were largely credited for pumping an afternoon market rally led by the financial sector. That tidbit was so widely reported that it brought back memories of Republican "talking points" to media outlets, all of which parroted the party line during the Bush years.

It now seems apparent that the press corps is still being led by nose rings pulled by the PR machine of the federal government. Much of the news that the government doesn't want the public to know about is widely dispensed by newspapers - which nobody reads anymore - and online, increasingly becoming the true fourth estate. Case in point is that at the very same time Treasury Secretary Tim Geithner was testifying that government programs were working, TARP Inspector General Neil Barofsky issued a scorching 250-page report detailing "staggering" fraud and waste inherent in the program, citing the more than 20 separate criminal investigations involving TARP, while criticizing the program's size as unwieldy and prone to abuse.

The controlled propaganda from D.C., the major TV networks and cable outlets is probably not going to be able to stem the tide of negatives which eventually will flood the secondary news media, on the internet, radio, financial newsletters and magazines. There is simply too much bad news for the mainstream media to blunt all of it. Just this morning, prior to the markets' opening, more bad news from the banking complex overwhelmed the investing community as Morgan Stanley (MS) reported a 1st quarter loss far in excess of analyst expectations. The company posted a loss of 57 cents a share ($177 million), swinging completely around from the profit of $1.41 billion, or $1.26 a share, generated in the first three months of 2008.

Analysts were looking for a loss of 8 cents a share in the quarter. This was a massive miss that everyone should notice, not just the investment community.

As it was, the Dow opened with a loss of just 75 points, with other indices responding in similar ho-hum fashion, no doubt due to excess upside pressure being exerted by the brokerages which control most of the trading. By 10:00 am, the Dow, S&P and NASDAQ had already turned positive and headed higher, begging the question of just how much bad news will it take to make the markets respond in anything close to realism?

While control issues of the media and the markets become more apparent, maybe the Machiavellian nature of this episode in American history will become more apparent with today's apparent suicide of acting chief financial officer of troubled mortgage giant Freddie Mac.

According to reports, 41-year-old David Kellerman was a lifer at Freddie, having worked his way up from his analyst position in 1992 all the way to the executive suite. His death brings into play many questions, because he - of all people - was a man who may have known too much. Did Kellerman kill himself because he was being set up for a fall, or was the suicide another "black op" designed to silence him from going public on matters that might expose key politicians or people on their staffs?

Either case is damning to the government, as they attempt to plug every leak in their quickly-sinking ship of state. Fannie Mae and Freddie Mac are linchpins in the entire financial meltdown that have yet to be adequately exposed. They are both severely undercapitalized and without enormous injections of government money, would be insolvent. Even with the massive funding from the government, they are already deeply underwater.

Also being represented on the national airwaves, Chrysler and GM's dire straits. Both companies continue to inch closer to bankruptcy. In Chrysler's case, such a scenario would mean liquidation. GM might be able to restructure in an orderly proceeding, though tens of thousands of jobs would be lost. Chrysler faces a May 1 deadline to reach a merger agreement with Italian automaker Fiat, itself under severe strain from declining auto sales.

Separately, General Motors announced late Wednesday that they may close some plants for up to 9 weeks this summer to save money. The automaker, once the pride of US industrial might, faces a government-imposed June 1 deadline to craft a workable plan to receive more federal aid. The alternative is bankruptcy, though even those closest to negotiations are unclear as to how such a plan would be structured.

Meanwhile, on Wall Street Wednesday, stocks were up early and down late, as the drumbeat of bad economic news is offset by a smattering of reasonable earnings reports from major firms.

Dow 7,886.57, -82.99 (1.04%)
NASDAQ 1,646.12, +2.27 (0.14%)
S&P 500 843.55, -6.53 (0.77%)
NYSE Composite 5,290.61, -48.98 (0.92%)

Despite the negative slant to the markets on the day, advancers actually outperformed declining issues, 3440-3006. There were 83 reported new lows to 34 new highs. Volume was again on the high side.

NYSE Volume 1,770,590,000
NASDAQ Volume 2,662,538,000

Commodities continued to limp along, dealing with slack demand in many industries. Crude oil for June delivery (new contract) gained just 30 cents, closing at $48.85. Foodstuffs were marginally lower. Precious metals continued to show some strength, with gold higher by $9.80, to $892.50. Silver finished the day in New York up 25 cents, at $12.31.

First time unemployment claims will greet market players on Thursday morning before the open. Experts are hoping for a continuation of last week's slight surprise of lower claims, though overall, unemployment remains abnormally high an a chief concern for millions of Americans and their families. More corporate reports will flow to market, though expectations are now so low that a good number may beat the Street but still be seen as vulnerable investments.

Sooner or later, the bad news catches up to everyone. While the government and media outlets try to paint a brighter picture than that which exists, issues such as trust and confidence are being severely tested.

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