To refresh your memory, the rumor dated back nearly a year.  During a secret session of Congress, members were supposedly briefed on plans for “the imminent collapse of the U.S. economy to occur by September 2008”… followed by “the imminent collapse of US federal government finances by February 2009″… followed by the introduction of the Amero and roundups of dissidents to be hauled off to camps built by the former Halliburton subsidiary KBR.

What made the rumor so spooky, of course, were the events of September last year — Fannie and Freddie nationalized (although its debts weren’t taken onto government books, go figure), Lehman collapsing, Merrill Lynch’s shotgun marriage, WaMu seized, Wachovia, AIG… as I said last month, maybe not outright collapse, but close enough.

But it’s hard to say “U.S. government finances” collapsed last month.  Yes, we now have a record-high proposed federal budget with a record-high deficit to match.  But none of the possible catalysts I wrote about took place: Commercial real estate is in horrible shape, but nothing that’s triggered a big crisis.  The Treasury auctions went about as well as could be reasonably expected.  U.S. Treasury debt is still rated AAA.

That’s the good news.  The bad news is that all the Black Swans that could have shown up in February and didn’t could well show up during March.  Because the driving forces behind fading market and consumer confidence are all still there — starting with indecision and repeated acts of insanity from the White House and Treasury stunningly similar to that of the previous administration.

I mean, how many more bailouts is AIG going to need?  “Had the government not taken such action, AIG would have had its credit ratings cut by major agencies,” reports Marketwatch, “and that would have triggered the need for the firm to post collateral it did not have.”

Collateral it doesn’t have — isn’t that sort of the whole problem everybody’s got?  So there are the Fed and Treasury essentially telling us, “Yes, we know the last bailout didn’t really do the trick, but take our word for it, this one will.”  It’s like Bullwinkle forever trying to pull the rabbit out of his hat — “This time for sure!”

At some point, he’ll pull out a Black Swan.  Then it’ll get really interesting.

Source:You Survived Black Swan Month

• JPMorgan Chase & Co. (JPM) will eliminate 2,800 jobs at Washington Mutual through attrition, Bloomberg reported. In December, the company slashed 9,200 jobs at WaMu, which it bought for $1.9 billion last year.

• General Motors Corp. (GM) posted a loss of almost $31 billion in the fourth quarter, and said its auditors will likely doubt its viability. The company burned through $5 billion during the quarter, and warned that its pension plans were underfunded by $12.4 billion, Reuters reported.

• Hong Kong’s January exports sunk 21.8% from a year earlier, the biggest decline in 50 years. “It’s not just Hong Kong, the financial crisis is dragging down the whole of Asia,” Wang Qian, an economist at JPMorgan Chase & Co. in Hong Kong, told Bloomberg. “The trade environment is going to get worse.”

• Tech giant IBM (IBM) retained its full-year earnings outlook, saying that service contracts are grew in January. “Recognizing that it is still early in the quarter, the company expects double-digit growth in long term signings, and growth in total signings in first quarter 2009,” IBM said in a regulatory filing, Reuters reported.

• The number of Americans filing initial claims for unemployment insurance spiked the week ended Feb. 21, as 667,000 Americans filed initial jobless claims, up 36,000 from a revised 631,000 the previous week, the Labor Department reported.

• Oil prices jumped for a second straight day yesterday (Thursday) with light, sweet crude for April delivery jumping $2.72, or 6.4%, to settle at $45.22 a barrel on the New York Mercantile Exchange.

Global Investment News Briefs Friday, February 27, 2009

JP Morgan Chase has announced it will delay foreclosure proceedings while it works with struggling homeowners.  Over the next 90 days, the bank will look at loans and determine if the loan is eligible for a reduced interest rate or loan balance.

The company has already helped over 250,000 families with over $40 billion in troubled loans, and over the next two years plan to help another 400,000 homeowners with over $70 billion in loans. Loans held by Washington Mutual (NYSE:WAMU) and EMC Mortgage Corp, which were recently acquired by JP Morgan Chase, will also be eligible for revision.

What remains to be seen is the effect this will have on foreclosure rates. Reducing a borrower’s interest rate slightly doesn’t necessarily translate to a large reduction in a mortgage payment. A drop of $75 or $100 a month in the mortgage payment would be welcome for the homeowners, but the savings could quickly be eaten up by rising costs elsewhere.

Hopefully the plan relies more on reducing principal balances to more accurately reflect fair market values. This would help by stabilizing home values at fair-market levels, rather than letting foreclosures decimate neighborhoods.

For example, if a home bought a few years ago for $250,000 gets re-appraised for $180,000 and the borrower can now afford the payments and avoids foreclosure. This drops the value down to $180,000 for comparables, but avoids a potential drop to $125,000-140,000 if the home goes into foreclosure and gets sold at auction. Not a perfect solution, but anything is better than another foreclosure.

Source: Focus Can Now Shift To The Collapsed Housing Market

• Microsoft Corp.’s (MSFT) quarterly profit rose 2% from a year ago, the company said yesterday (Thursday) in a statement. The world’s largest software maker earned $4.37 billion, or 48 cents per share, in the quarter ended Sept. 30. Sales rose 9% to $15.1 billion.

• Goldman Sachs Group Inc. (GS) is cutting 3,200 jobs, or 10% of its work force, as the firm struggles with the credit crisis and transitions into a holding company. The cuts add to more than 130,000 jobs eliminated in the financial industry since mid-2007, topping the 83,000 lost after the Internet bubble burst in 2001, Bloomberg reported.

• The Dow Chemical Co. (DOW) yesterday (Thursday) reported a 6% rise in third-quarter profit. The company reported earnings of $428 million, or 46 cents per share, up from $403 million, or 42 cents per share, a year ago. Sales rose 13% to $15.4 billion.

• Sony Corp. (ADR: SNE), the Japanese consumer electronics giant, announced (Thursday) that profits would be markedly weaker for fiscal year 2008. Sony predicted earnings of $1.5 billion (150 billion yen), down from an earlier July forecast of $2.4 billion (240 billion yen), The Washington Post reported.

• An auction to set the value of Washington Mutual Inc. (OTC: WAMUQ) debt was held yesterday (Thursday). Markit and Creditex, auction administrators, set the debt cost of failed bank Washington Mutual at 57 cents on the dollar. Sellers of credit default swap protection must pay 43 cents to counterparties, MarketWatch reported.

• Crude oil gained $1.09, or 1.6%, to settle at $67.84 yesterday (Thursday) in anticipation of the Organization of Petroleum Exporting Countries (OPEC) meeting today (Friday). “If OPEC makes a cut of 1 to 2 million barrels tomorrow, prices should firm up and move higher in the short term,” Gene McGillian, an analyst at Tradition Energy in Stamford, Conn., told Bloomberg News. “Unless there is something huge announced, the market will eventually start moving lower again because of the weak economy.”

Source: Global Investing Roundups Friday, October 24th, 2008

Last night they were closed by the government and banking assets were sold to JPMorgan Chase & Co (NYSE:JPM) for $1.9 billion. Shares of Washington Mutual plunged $1.24 to 45 cents in after-hours trading.

Washington Mutual has a major presence in California and Florida, two of the states hardest hit by the housing crisis. It also has a big presence in the New York City area.

The thrift amassed $6.3 billion of losses in the nine months ended June 30. It had also projected $19 billion of mortgage losses through 2011, but analysts said credit losses could reach as high as $30 billion.

“It is surprising that it has hung on for as long as it has,” said Nancy Bush, an analyst at NAB Research LLC.

Read on: http://biz.yahoo.com/rb/080925/business_us_washingtonmutual_jpmorganbiz.html?.v=3

“They’ve got to run out of victims sooner or later,” he replied. “Besides, all the skeletons are out of the closet now.”

That’s it. That’s what the bulls have for you. “We’re all out of blood, so it must be the end.” Yeah, someone’s end is coming, “Buddy.” Yours!

Call me paranoid, but when the bullets are flying and the bodies are falling, I’m inclined to worry that I might be next. As for the big banks (investment and otherwise), Bear Stearns is not in anyway shape or form the last man to hit the ground.

Whistling Past the Graveyard

Even since that massive, ill-thought out (and possibly illegal) bailout took place, we’ve heard more and more strange news from the banking sector. Sometimes it’s hard to make out the exact nature of this news, what with all the smoke in the air. (Gun smoke, I suppose, if we are going to play this metaphor out to its bitter end.)

Just the other day, the United States’ largest savings and loan, Washington Mutual (WM: NYSE), announced that it will lose $1.1 billion during the first quarter of 2008. What’s more, WaMu is being forced to take another $3.5 billion out of circulation so as to armor itself against further write-downs.

While there have been so many massive write-downs recently, this episode is particularly instructive. Both figures are a bit larger than Wall Street had projected — by an order of magnitude!

A Miss is as Good as a Mile

Following previous guidance, Thompson Financial’s survey of analysts had WaMu’s losses slated at $344.3 million. The bank’s set aside funds totted up at $2 billion. That’s a shortfall error of $2.26 billion, or roughly 96%.

And the analysts’ response, after getting the numbers so massively wrong? “Oops. Our bad.”

And now, in an attempt to set the record straight, these late-to-the-party analysts are predicting WaMu will have to set aside another $10 or $12 billion this year.

So what do you do after you’ve misplaced five billion of your investors’ dollars? In Japan, you write an extremely apologetic note, go into a quiet corner, and disembowel yourself. We, however, are a younger, more energetic culture. Here, when we have shamed ourselves, we lie, cheat and spin instead.

No Such Thing as a Free Lunch – Or Free Money

So, prior to announcing this awesome failure, WaMu execs announced that they had somehow ginned up $7 billion with which they could reenergize their operations!

Needless to say, when investors got wind of this magnificent windfall, they practically fell over each other buying shares up. WaMu stock went up some 37% over 24 hours.

They should have read the fine print.

That $7 billion did not magically fly in over the transom. Rather the company sold its, umm, “assets” to a group of cold-hearted venture vultures in exchange for 176 million shares of common stock at a 33% discount to market. WaMu also issued some 55,000 brand new shares of preferred stock at $100,000 per share.

Squeezing the Last Penny out of Investors

But wait, there’s more! Not only did management screw existing shareholders by massively diluting the value of their holdings, they also announced that they were cutting dividends from 15 cents a share… to one measly, insulting penny!

And then, they admitted to the aforementioned losses.

As I write, WM shares are down some 20% for the week, and 74% over the past 12 months. I suppose the only reason they are not down more is because my “buddy” thinks that banking has hit its bottom.

Again.

If you are appalled at the rapacity and outright gall of these financial insiders — and the utter cupidity of the fools who believe their press releases — then I recommend to you what I have recommended to my WaveStrength Options Weekly readers (for max gains of some 654%). Buy puts against the lot of ’em.

Because there are plenty more bodies where that last one came from.

by Adam Lass, Senior Editor, WaveStrength Options Weekly

US stocks slumped today following disappointing quarterly earnings and news that mortage lender Washington Mutual needed a bigger cash injection than expected. WaMu today drew $7 billion in capital, $2 billion more that the amount originally circulated.

News that existing home sales dropped in February also weighed on investor sentiment.

The Dow Jones industrials were recently down 32.73 points to 12,579.78.

Read on at Dow Jones MarketWatch.

“Seems like only Thursday Ben Bernanke testified before Congress he thought Bear Stearns was the worst,” says Addison Wiggan, “and that the worst is behind us.”

“Oh yeah, it was only Thursday. Granted, “The government was not directly involved in forging a deal as in the recent purchase of Bear Stearns,” reports The Wall Street Journal, but still…”

“There’s nothing out there that could fuel a market rally,” wrote Charles Delvalle ahead of the bell this morning. “And in my opinion, a recession hasn’t even been fully priced in yet.”

Rising crude oil prices have also helped boost oil-sector stocks.

Dow Jones MarketWatch reports that the Dow Jones industrials were up 104 points to 12,713, with 24 of its 30 components moving higher, with financials leading the rise.