Like WaMu, the FDIC brokered most of Colonial’s burden onto another bank’s balance sheet. BB&T (NYSE:BTT) picked up the lion’s share. And just like the WaMu/JP Morgan (NYSE:JPM) deal, the FDIC greased the gears by including some kind of backstop provision. In this case, BB&T and the FDIC (read: your tax revenues) will enter a loss sharing agreement on $15 billion in shaky Colonial assets.

Colonial’s failure took a $2.8 billion chunk out of the FDIC’s deposit insurance fund. With just $13 billion left — at best — the fund is at its lowest level since 1993. Along with four other banks that failed over the weekend as well, the FDIC has closed 77 banks this year. One more and we’ve tripled last year’s count.

“The FDIC has been tardy in resolving banks and cleaning them up,” says Dan Amoss, “which will result in higher costs to the FDIC in the long run. Plus, with these ‘loss sharing’ deals (Colonial/BB&T), the FDIC is putting off the recognition of losses over a period of years, and its estimates of ultimate losses will likely be low, whether they’re ultimately absorbed by the deposit insurance fund or acquiring banks like BB&T.

“A perfect example is Integrity Bank in Georgia, which should have been shut down long before it was allowed to attract new deposits with high CD rates.

“Also, note to readers: If your CD rates seem too good to be true, your bank may not be healthy, and you may have to deal with the hassle of not accessing your money while the bank is resolved.”

Source: More Bad Banking News

Constant readers know I’ve gone back and forth on this:  In September I figured the bailout bill smacked of making things up as he went along.  But on Monday I took note of the phone conversation he had two months before Washington Mutual collapsed, in which Paulson told WaMu’s CEO he ought to sell out to JPMorgan Chase (NYSE:JPM) because his company was in big trouble.

I guess it’s possible Paulson knew bad things were going down, but he still didn’t know what to do about it.  And this morning, the making-things-up-as-he’s-going-along thesis seems inescapable.  I mean, really: The bailout bill was predicated on buying up toxic, er, um “troubled” assets.  Then in the middle of the game it became a hybrid of buying up “troubled” assets and “recapitalizing” the financial sector (for bonuses and takeovers, natch).  And as of yesterday, the buying up “troubled” assets went by the boards altogether.  Now Paulson aims to “recapitalize” the financial sector and “increase the availability of student loans, auto loans and credit cards,” according to the Wall Street Journal.  Right, because if EZ credit got is into this mess, more EZ credit is sure to get us out.

You’d think the media could at least have trotted out some of his quotes and sound bites from September, when he warned of apocalypse if Congress didn’t immediately cave to his demands that he be given unlimited authority to buy up “troubled” assets.  Alas, it’s all gone down the memory hole.  We have always been at war with Eastasia.

Anyway, it sure looks like negligent homicide to me.

And now we have corroborating testimony from Paulson’s protege and bailout point man, Neel Kashkari (a name for a villainous bureaucrat that could have come out of an Ayn Rand novel).  On Monday he gave a speech with some choice quotes picked out by Phil Mattera.

Kashkari spoke of having made “tremendous progress” and of having “accomplished a great deal in a short period of time.” He bragged that his team is “working around the clock” while “ensuring high quality execution.”

Again, this was Monday — hours after AIG (NYSE:AIG) got a do-over on its bailout and around the same time Fannie Mae (NYSE:FNM) reported a $29 billion third-quarter loss.

Heckuva job, Kashie.  We’re staring at a bailout tab of $5 trillion as figured by the firm CreditSights.  That’s not including anything in the future; it’s $5 trillion to date. We have experts not named Peter Schiff going on CNBC and talking about the United States losing its AAA credit rating.

Yup, negligent homicide.  Guilty as charged.

Source: The $5 Trillion Fiasco

First comes word that Hank Paulson rewrote tax law without Congress’s say-so, giving the banks a $140 billion tax windfall.  Now one could argue the tax law Paulson circumvented was a dumb idea, but even mainstream analysts who don’t fuss over the plain language of the Constitution say Treasury overstepped its bounds here.  I hope conservatives who hailed the “unitary executive” philosophy of Team Bush might be rethinking things by now… but I doubt it.

Meanwhile, Paulson and Ben Bernanke have gone back on their promise to disclose just who’s benefiting from all the Fed’s emergency loans.  $2 trillion, no transparency.  To its credit, Bloomberg News has filed a lawsuit under the Freedom of Information Act to bring this out into the open.  (What if the Fed pleads it doesn’t have to comply because it’s not a government entity?  No, I don’t really want to go there on a Monday morning…)

While the Bloomberg folks are at it, they might want to get their hands on Hank Paulson’s phone records.  Over the weekend, one of the Seattle papers reported this:  Two months before Washington Mutual collapsed, Paulson told WaMu’s CEO he ought to sell out to JPMorgan Chase (NYSE:JPM) because his company was in such poor shape.

So Big Hank knew bad things were going down.  It’s enough to make me rethink the notion that Paulson and Bernanke were just making it all up as they went along.  Maybe in fact the bailout bill was sitting on the shelf, waiting for the right moment to be rammed through Congress, just like the Patriot Act.

And to add insult to injury, AIG (NYSE:AIG) just got a do-over on its bailout.  Neat trick.  How many of us can consolidate two loans we took out barely two months before?  And up the amount of the loan by 22 percent?

Had enough for one morning?  Yeah, me too.  Meanwhile the media will be fixated today on the face-to-face between the incoming president and the outgoing one, and what kind of body language the incoming and outgoing first ladies will demonstrate.

Can I just crawl into a hole for the next 15 years or so?

Source: Pigs At The Trough

This from Today’s Financial News:

All across America, huge companies are selling at deep discounts. One of those companies is General Electric (NYSE:GE). It is one of the most prominent, well-known and successful companies in the world, yet its shares are selling for prices just shy of half what traders were getting one year ago.

In fact, GE has not been this cheap in over a decade. The last two times shares of General Electric were this cheap, investors more than doubled their money in the following few years.

Imagine having the opportunity to purchase shares of the company for just $22 this time last year when shares were peaking at $42.

Investors would have pushed their own mothers out of the way for that kind of opportunity.

Let’s face it. General Electric has been in business for a long, long time. And it will remain in business for an even longer period of time. Because the company is such a diversified mega-conglomerate it has the power to withstand immense turmoil.

A Wall Street panic like the one we saw recently is nothing new to this Blue Chip. GE has endured huge price declines many times in its past. Each and every time it did, share price rebounded dramatically higher than where it started.

As I write, GE’s fundamentals are in ranges we have not seen in a very long time. With a reading of just 9.6, the company’s price-to-earnings ratio is insanely low. It should be twice that figure, at least. The downturn has created the ultimate value play.

That is why Warren Buffett recently wrote the company a check for $5 billion so he could get his hands on the profit potential. You do not become the nation’s richest person by paying too much for something. Follow his lead.

Shares of GE are priced at levels we should not see except during the most catastrophic economic events. We are nowhere close to that situation. Granted, the company’s earnings will suffer over the next few quarters. But the decline will not be anywhere close to justifying this huge share price decline.

General Electric is oversold. Warren Buffett knows it. I know it. Now you know it.

Buy shares of the company and wait for the rebound. In just a year or two, when shares are once again trading for $40 and more, you will be very, very glad you did.

Discover what it is like to be rich

Since we are following in the footsteps of Buffett, how about we take another piece of his sage advice…

Buffett is constantly discussing his investment philosophy: buy what you know and use. This theory is why Campbells Soup and McDonalds have remained relatively unscathed by the credit crunch.

To learn about the next undervalued superstar, all you have to do is open your wallet. I bet you have a few credit cards stashed in there.

All of the major credit card companies – names like Visa (NYSE:V), Mastercard (NYSE:MA), and American Express (NYSE:AXP) – have seen their valuations drastically reduced during the recent bear market. None of them are as undervalued as Discover Financial Services (NYSE:DFS) and its powerful Discover Card brand.

Selling for less than $11, down from over $32 less than two years ago, shares of the company are a downright steal.

Again, this company and its products are in a very strong position. No matter what happens in this economy, people will still use their credit cards. And even if every American cuts their cards to shreds, Discover still has a strong network in 184 other countries.

Like I mentioned above, all of the major credit card companies have been hit hard in recent weeks. And all of them have created fantastic buying opportunities. But only Discover adds a powerful technical investing layer to the mix.

Over the next few weeks and months, we are bought to hear the mainstream media discussing record-breaking delinquency rates. More people than ever will be late with credit card payments as the economic machine grinds to a halt.

For the nation as a whole, folks that cannot afford to pay their credit card bills is a terrible thing. But for credit card companies, like Discover, that are allowed to charge huge annual interest rates and levy fees for just about everything, late payers create a wealth of revenue streams.

Shares of the company are trading right at all-time lows. It means no investors have ever bought shares of this company at prices this cheap. It also means if anybody wants to sell, they would have to do it at a loss. It puts a solid floor under share price and is a phenomenon technical investors love.

Even if the economy were to take a strong downward slide, Discover’s firm price floor would help avoid any serious share-price decline. It will also create a catapulting function as the market and the economy rebound.

As long as you buy shares below $12, your position should create some fantastic profits.

The coal industry cannot die

While we are on the subject of investing in what we know and use, let’s discuss another product that we are both using right now, electricity.

Electricity is the commodity this world depends on every second of every day. And chances are the electricity your computer is using as you read this report was created by coal. It is a good bet because about 50% of this nation’s electricity is generated by burning coal.

If you have heard any of the presidential debates, coal is going to be a major energy focus over the next four or eight years. Both candidates are pushing for increased growth in the clean-coal industry.

That means coal is not going away anytime soon. But if an outsider were to look at the prices for the raw material or the share price of the companies mining and selling the indispensable fuel, they may be inclined to believe coal’s days are numbered.

They would be dead wrong.

Coal will play a vital role in the global economy for decades, if not centuries, to come. Thanks to new technologies, coal can be burnt in an ultra-efficient, super-clean process. It can even be used to make the fuels that power our cars, trucks, trains, and planes. Coal is the next “super fuel.”

One company poised to take advantage of any growth in the coal-producing industry is James River Coal Company (NASDAQ:JRCC). It is yet another company with shares trading for just a fraction of what they were a few months ago.

Right now, you can get your hands on shares for just less than $20.

In June, they would have cost you over $60. This time next year, they will likely cost you at least that much.

There are two important facts to understand about the coal industry.

First, there is a global coal shortage. Demand far outstrips supply no matter where in the world you go. China, India, Australia, and Russia are desperate to get their hands on more fuel. Fortunately, the United States has over a quarter of the world’s coal supply in our own backyards. Finally, we have the power in our hands.

The second thing you need to know is that once a coal-fired generating plant goes online, it cannot afford to shut down. It will need a continuous supply of coal for decades to come. It is just the opposite of nuclear-operated facilities. A nuke plant only needs fuel every twenty years or so. Coal plants are addicted to fuel.

Combine a nearly constant demand stream with a lack of supply and every economist will say you have a perfect recipe for profits. Throw in a stock price that has been unduly beaten down because of unfounded fears of an industry slowdown and you have an opportunity to score big time as share price rebounds.

James River Coal Company is trading well below dirt-cheap territory. Take advantage of Wall Street’s mistakes and buy shares under $22 while you still can.

An American classic

Finally, there is one more all-American company investors absolutely must know about. This one is truly a Blue Chip selling at penny-stock prices.

Take a look at a chart of Ford Motor Company (NYSE:F) and you will see a history of ups and downs. The company is in the heart of a highly cyclical industry constantly expanding and contracting. But no downturn has ever been as big as this one.

A decade ago shares of Ford were selling for over $37. Today, you can get them for less than $3.

It is the price of a mere cup of coffee at Starbucks and is a price Ford shareholders have not seen since the Reagan administration.

Granted it may be a long time before the company sees shares trading for over $35, but it certainly will not be long until we see them at $10 or even $15.

The domestic auto industry has reached its bottom. It is impossible to argue any other way.

Just look at the deal General Motors (NYSE:GM) and Chrysler are working to create. Obviously, if it can get its hands on Chryslers strong Jeep and minivan lineup, plus billions of dollars in desperately needed liquidity, General Motors will be a major benefactor. But so will Ford.

The auto industry will consolidate. There will be one less major competitor. Prices will begin to rise and margins will increase substantially. This is a deal that could save Detroit and make a lot of smart investors rich along the way.

But there is even better news.

Just recently, Congress handed Detroit automakers its own version of a rescue package. It came in the form of $25 billion in loans. The deal gives the automakers an insurance policy that will ensure they make it through this latest cyclical downturn. After all, no politician will ever let Ford go belly up on their watch.

Experts agree by 2010, the nation’s car industry is going to embark on a serious upswing. The cars that Americans bought during the last boom cycle will be wearing out, Detroit will have a new, high-tech product lineup, and customers will once again be walking into showrooms with pockets full of cash.

You can wait for the company to start making big headlines and get shares at $10 or more. Or you can invest at penny-stock prices and hold onto the shares as Ford gets back on its feet.

In less than 24 months, we will be entering the fourth-quarter of 2010. This credit crunch and recession talk will be in the history books. Most importantly, your shares of Ford will be worth three or four times more than they are right now.

Investors have an exciting road ahead. We have made it through the worst of the market turmoil. The economy is going to slow but it is finally back to fundamental investing. No longer will we see wild swings wiping out entire sectors. Now the weak will be eliminated and the strong will flourish.

Invest in the strong companies while their prices are dirt cheap and watch your profits grow as Wall Street figures out how to fix this mess. In just a few years, the credit crisis will be behind us and some huge profits will be in your pockets.

Source: Blue chips at penny stock prices

This from Today’s Financial News:

The markets were forced to endure one round of default swap payouts last week. Now, the debt from three more companies will hit the auction blocks. Even more trouble is on the way.

On a micro level, yesterday’s 900-point rally looks like a big deal. Many short-sighted investors look at the day as an indication that the worst is behind us. But on a macro-level, the surge barely stands out. After all, yesterday’s bounce did not put us anywhere near the levels we started out at last week. We still have a long way to go and there are some pretty big hurdles to clear along the way.

One major challenge over the next few weeks is three more debt auctions. Yes, three more defaulted credit auctions.

The International Swaps and Derivatives Association has held just nine auctions since 2005. It will hold five of them in October alone. It is a sign of the times.

Last week, we saw Lehman Brother’s debt on the auction block. Selling for about nine cents on the dollar, the market had a tough time swallowing the nearly $400 billion that was suddenly needed to cover the debt’s default insurance.

Now, there are more costly auctions on the way. On October 23, Washington Mutual’s debt will be sold. Again, investors can expect the debt to sell at a drastic discount.

You can count on the equities market taking a shot on the chin that day as credit default swap (CDS) owners are forced to cash in their portfolios to write checks for tens of billions of dollars in insurance payouts.

Just as we saw a “run” on the markets last week, we will see it again as another multi-billion payout comes due.

Big problems overseas

In Iceland, the country that is arguably feeling the credit crunch the most, investors are already flinching at what could be deadly CDS payments.

When Landsbanki and Glitnir were taken over by the Icelandic government, its debt went into default. That means the folks stuck holding the default insurance will be forced to pay up. Even if the debt is auctioned at a fairly substantial rate, billions will be paid out.

Landsbanki CDS sellers are obviously hoping for a highly successful auction. If the debt sells for fifty cents on the dollar (which is highly unlikely), some of them may actually make money. After all, the banks default insurance was selling for nearly a nearly 50% premium in the last few weeks.

I would not expect too many smiles.

Look for strong selling activity on the markets across the globe on November 4 and 5, the dates Landsbanki and Glitnir will see their former debt hit the auction house. Once again, CDS sellers will be forced to liquidate their portfolios (hundreds of billions of dollars worth) in order to pay their insurance guarantees.

It will be an interesting week for the global markets.

Some investors may believe the panic selling is over. It is not. As more and more debt hits the auction block, even more investors will be forced to cash out of the markets, creating another round of harsh sell-offs.

Source: Iceland’s CDS Market Will Create More Turmoil

This from The Daily Reckoning:

I don’t particularly buy into the talk gurgling across the Internets that the whole worldwide banking system is going to freeze up this month, rendering your ATM card inoperable.  But if it were to go down, tomorrow’s as good a day as any.

Tomorrow is the settlement auction for $400 billion of credit default swaps connected to bonds issued by Lehman Bros (NYSE:LEH).

Actually, this whole month is a minefield of settlement days for toxic derivatives — Fannie (NYSE:FNM) and Freddie (NYSE:FRE) last Monday, Lehman tomorrow, Washington Mutual two weeks from today.

The Fannie and Freddie auction passed without incident, perhaps because the Treasury explicitly stands behind Fannie and Freddie’s debt.  Too, the Fannie and Freddie default claims totaled “only” about $50 billion.  But $400 billion of Lehman paper with no government guarantee?

There’s no telling what will happen, considering what the Financial Times reported last week in a story previewing these auctions:

Because of the opacity of this market, it is still not clear how many contracts have to be settled and whether payouts on the defaulted contracts, which could reach billions of dollars, are concentrated with any particular institutions.

According to dealers, insurance companies and investors such as sovereign wealth funds, which are widely believed to have written large amounts of credit protection through credit default swaps on financial institutions, could have to pay out huge amounts.

But the Lehman cards will be laid on the table tomorrow.  At least one reporter suspects the primary reason the credit markets have come to a near-standstill is that institutions are cashing up for tomorrow.  (Taken to its logical conclusion, you could even say it’s the reason gold is down today.)  If that’s the case, and the various and sundry counterparies have adequately cashed up, we’ll come out unscathed.

At least until the Washington Mutual auction in two weeks.  Whatever the outcome, it might be time to consider a “paddle strategy.”

PS. Last month Money Morning’s Shah Gilani called the $62 trillion CDS market a “ticking time bomb.” This is what he had to say:

“There are credit default swaps written on subprime mortgage securities. It’s bad enough that these subprime mortgage pools that banks, investment banks, insurance companies, hedge funds and others bought were over-rated and ended up falling precipitously in value as foreclosures mounted on the underlying mortgages in the pools.

What’s even worse, however, is that speculators sold and bought trillions of dollars of insurance that these pools would, or wouldn’t, default! The sellers of this insurance (AIG is one example) are getting killed as defaults continue to rise with no end in sight.”

Source: The $400 Billion Trigger?

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

The financials got whacked again yesterday — taking the market down along with it — on news of further debt downgrades from Standard & Poor’s.

On the i-bank side, Lehman, Merrill and Morgan all saw their credit ratings take a hit. On the commercial bank side, Wachovia and Washington Mutual said sayonara to their current leaders. This implies more bad news in the pipeline.

About a month ago, your humble editor compared Western banks to an old radio filled with cockroaches. (See Banks a Lot archived on the TPG Web site.) Four weeks later, the roaches are still pouring out.

At various times in the past few months, Taipan Daily has pounded the table for shorts on the broader financials. Those shorts are working well now, with XLF (the financial SPDR) trending lower in stair-step fashion and the Philly Bank Index ($BKX) testing its lows.

But in terms of keeping a finger on the pulse, the new bellwether for financial stocks just might be Lehman Brothers (LEH:NYSE).

Lehman is the smallest bulge-bracket investment house on the Street now that Bear Stearns is no more. Many thought it would follow in Bear’s footsteps during the heat of the crisis. (That’s where that big downward spike came from in early Feb.)

So far, Lehman has defied its critics — thanks in part to the smart moves of CFO Erin Callan and CEO Dick Fuld. But the sharks are still circling, and some very smart people think Lehman is still teetering on the brink.

The sharks smelled blood in the water this morning, as news arose that Lehman may be forced to raise billions in fresh capital to shore up its balance sheet.

The big question is how much exposure the investment bank still has to toxic mortgage trades and so-called “level 3 assets” — opaque stuff holdings that are extremely hard to value.

Watch LEH and the $BKX. If one or the other cracks, there could be another big downward whoosh for the financials. (“Whoosh,” of course, being a highly technical trading term.)

Buy One, Get One Free

Meanwhile, the housing bust is still in full swing. The above chart was featured in a recent Chart of the Day, but is worth reposting for those of you who didn’t catch it.

Good day… And a Terrific Tuesday to you! Well… The reigniting of fears really caught some wind in its sails yesterday, and why not? You see, Lehman Brothers was rumored to announce their first quarterly loss since going public, and will seek additional capital to shore up their balance sheet… I keep telling people / anyone that will listen, that we’re not even close to being out of the woods, and the losses, if being honest, will continue to mount…

Did you see the news yesterday that Wachovia’s CEO was asked to resign? Or that Washington Mutual also announced a change at the helm… It wouldn’t surprise me one iota if long after Lehman announces that loss that another “change” is announced…

So… The Risk Aversion has a two day win streak going… It will be interesting to see if the Lehman story comes to fruition, and if it does, what it will do to the Risk Aversion move… Or… Was it a case of sell the rumor, buy the fact? We’ll have to see, eh?

With the two day win streak for Risk Aversion, the currencies have seen some lovin’ once again… Forgotten but not gone, the euro, yen, and franc all posted nice gains yesterday and overnight… I’m seeing a little dollar strength right now, as the euro was 1.5606 when I turned on the screens, and it’s now fallen back below 1.56…

Eurozone Manufacturing posted a better than expected number yesterday, remaining above the 50 level… So… Economic growth hasn’t slowed as much as the pundits have been going around talking about… Inflation remains the bugaboo for the European Central Bank (ECB) and ECB President Trichet…

I had a reader send me a very funny note yesterday regarding the Eurozone’s inflation problem… “A suggestion for the Eurozone. If they’re worried about rapid rising inflation stats they should hire the U.S. stat calculation folks and they can moderate those nasty numbers and give them the great peace we have here in the USA!”

Now that’s funny! Whoa! We just had a streak of lightening outside my window here that was too close for comfort! It made me jump! The rain is falling so hard that it sounds like a train on our roof! Yikes! I’m sure glad I made here before this all started! WOW!

Speaking of Manufacturing reports… The U.S. ISM Manufacturing Index, did improve in May, but remained under the 50 level that marks the dividing line between contraction and expansion… These data reports lately don’t really say anything but confirm my friend, John Mauldin’s description of the economy… “muddle through”…

Speaking of John Mauldin, I’m going to be speaking in Dallas in September, and I going to catch up with John then… I’m looking forward to that!

Yesterday, I reported that the Australian Retail Sales shocked on the downside, but warned not to take one soft report and make a slowdown of it… Then came word that the soft Retail Sales could be explained… Let’s listen in on the explanation from the folks down under… “Retail trade fell by 0.2% in April, well below expectations for a rise of 0.2%. However almost all of this decline is due to the early timing of Easter, which caused unusual volatility in food retailing.

Ex-food, retail trade has been flat for the last two months. Moreover, sales in some discretionary areas, such as household goods and clothing are holding up quite well.”

Like I said yesterday, I don’t see anything here that makes me change my thought that the Reserve Bank of Australia will hike rates two more times this year… Oh, and one thing to think about here is on July 1st, income tax cuts set in, and I would expect this to spur economic activity like Retail Sales…

There are lots and I mean lots of people jumping off the weak dollar trend bandwagon these days… And most have very good reasons for doing so, at least that’s what they think! I prefer to think of this as a “pause”, not a reversal… Sort of like 2005, when the currencies got ahead of themselves at the end of 2004, only to spend 2005 in the correction mode, before going bonkers in 2006 & 2007.

The euro had moved so quickly from 1.44 at the end of the year, to 1.60 in less than 5 months… Can you say, too fast too soon? A Pause of the Cause, is what it looks like to me… As I said yesterday, the fundamentals in the U.S. are just absolutely awful! And since we’re dealing with nothing but fiat currencies these days, the “attitude” toward a currency can dictate the performance… But eventually, that “attitude” will come back to the underlying fundamentals…

So… In other words… The “attitude” may be changing toward the dollar… But, it’s not a trend reversal, it’s a Pause… Eventually, the underlying fundamentals will come home to roost!

One of those awful fundamentals is the Current Account Deficit… A reader made a great point yesterday in an email… “Didn’t they make a BIG deal about this when talking about the deficit a coupla years ago? That the reason that they don’t matter was that we had a healthy GDP (4.0%? at the time?). Well, how about now, with a .9% GDP??? (if you believe that number!) Shouldn’t there now be an uproar about the deficits?”

He’s absolutely correct! Why isn’t there an uproar about these deficits? Because, to harp on the Deficit would not make us “feel good”! But you know me… I like to pour salt on a wound… And that wound is the Deficit! I’ll repeat what I always tell a crowd when speaking… The folks that say Deficits Don’t Matter remind me of the man on top of the Empire State Building… He decides to jump off the building… And as he passes the 56th floor, he says… “So far, so good!”

OK… Remember 3 months ago when I was speaking just about every day on some radio station about the so-called “Stimulus Package”? I kept telling anyone that would listen to me that this was no “stimulus package”, that it was simply another “tax” and an additional $150 Billion on our already bleeding deficits! I said then that “by the time the checks get in the hands of consumers, they will be so stretched out from rising costs that they will most likely use the funds to pay a bill, pay down some debt, or save (a novel idea, eh?) but not spend the way the Gov’t wants them to do… Well…

The chickens have come home to roost on this “stimulus package”… Dave Carpenter wrote on Friday in the Chicago Tribune that “many consumers spend rebates on cost of living”… Here’s a snippet of his report…

“But reality has interfered, in the form of ever-climbing food bills and $4-a-gallon gasoline. Day-to-day living costs have sopped up the checks for many other early recipients and spoiled their rebate fantasies. Government figures released Friday showed consumer spending inched up just 0.2 percent in April, despite widespread anticipation of the stimulus payments sent out starting late in the month.

More than $16 billion in write-downs and higher consumer credit costs caused the company to record a loss of $5.11 billion, or $1.02 a share, compared with a profit of $5.01 billion, or $1.01 a share, a year earlier. Revenue fell 48% to $13.22 billion.

Reuters analysts expected an average loss of 96 cents a share and revenue of $14.35 billion.

“This is the quarter they get to clear the decks,” Arthur Hogan, chief market analyst at Jefferies & Co. in Boston, told Reuters. “(Chief Executive Officer) Vikram Pandit is coming in and making pretty big changes, and that’s what he gets to do.”

But so was the fourth quarter, with the first 4,200 job cuts.

Pandit, who assumed CEO duties in December, said the company’s financial results “reflect the continuation of the unprecedented market and credit environment and its impact on our historical risk positions.”

Despite Citigroup’s loss, its stock rose more than 6% by mid-morning trading today (Friday).

Financials’ Earnings

Citigroup’s earnings cap a week that’s seen many of the nation’s biggest financial firms post mixed, though fairly cathartic, results.

On Thursday, Merrill Lynch & Co. (MER) posted its third consecutive quarterly loss – $1.96 billion, or $2.19 a share – and announced 3,000 job-cuts.

On Wednesday, JPMorgan & Chase Co. (JPM) reported profit of $2.37 billion (or 68 cents a share), more than a 50% drop from $4.79 billion (or $1.34 a share) from a year earlier.

On Monday, Wachovia Corp. (WB) beat estimates with a first-quarter loss of $350 million. Washington Mutual Inc. (WM), however, reported a $1.1 billion loss.

Bank of America Corp. (BAC) will release its earnings Monday, and expectations are low.

“Our expectation is for the economic environment to continue to be weak and for the capital markets to remain under stress,” JPMorgan CEO Jamie Dimon said Wednesday.