GDP ONLY DOWN 5.7%!

I get a kick out of financial headlines. They are so...well...stupid. This is the one I am referring to today:

http://www.cnbc.com/id/30996435

Let's think about it for a minute. "GDP Drops 5.7% as Fall in Economy Begins to Ease" What does that mean? The government thought first quarter GDP would fall by 6.1%, so 5.7% looks like the fall is slowing. Wall Street estimated GDP would fall 5.5%. So to them (whoever "they" are) the number should look terrible.

Sounds like a game of Liars Poker.

Semantic games aside, the economy is still contracting at a very fast pace by historical standards. The next wave of foreclosures in the prime market has already begun.

http://www.cnbc.com/id/30984467

Interest rates are RISING, increasing the cost of refinancing, or thwarting the possibility of refinance at all. Gas prices are rising again. All this and the bulls still say it is the credit card waving consumer who is going to save us.

Guess what, they are wrong....again. I know I have egg on my face. I know my "fake" portfolio is under 1,000,000 by about 4.5%. But the market, since I started trading and blogging is down over 38%. That means I am still ahead of the market by over 33%. Perhaps it won't last. Maybe we will hit DOW 11,000 again in the next 6 months. I doubt it. And if we do, then this world doesn't make sense to me at all. Which I will accept with dignity.

So.......I am still short. (MA, LOW, AZO) I am long (SKF, SDS, and NXG). This is not investment advice. (I HAVE NO IDEA WHAT YOUR PARTICULAR SITUATION IS) Trade at your own risk!

Scary Islamic Extremeism

Never ceases to amaze me:

http://online.wsj.com/article/SB124355320443064445.html

Trouble In Exburb Banking?

I must preface this post with the caution that it is only a hunch. The story goes like this:

This beautiful Memorial Day Weekend (Thank You Service Men & Women!) I was returning from my parents beautiful place on Cross Lake with my two wonderful children. We even caught a few (small ) perch. Anyway, on the way home we were driving through the "exburbs" of Elk River, Ramsey, and Anoka and I noticed the local banks were offering 5.45% on a CD. Now, I did not see the terms, however, 5.45% seemed VERY high in an environment where banks are borrowing from the fed at .25%. One year treasuries are going for approximately .49% and a 30 year fixed mortgage is running about 5%.

Why on earth would they still need to pay more for money than they can lend it out for when the federal government is giving it away for free? Answer: It's not enough to fill the hole. The hole that is left by all the bad loans they made to people who bought McMansions in the exburbs that they couldn't afford. If they do not fill the hole they will go under. Therefore, in a desperate attempt to ward off insolvency, they are willing to pay more for cash than they can lend it out at. (at least to creditworthy borrowers - they might be planning on lending it to less creditworthy borrowers to make a buck)

If my logic is anywhere near close to the truth, small community banks are in big trouble. I guess with the new $250,000 FDIC limit this means little to most people.

But it does mean that FDIC itself may not be able to meet its obligations without passing the cost on to the taxpayer. Again.