In 2000 the Country saw a credit crunch that was instantiated by World Comm, Enron, Global Crossing defrauding banks out of billions with lies about profits and sales in order to borrow cheap money. No matter how many times and how deep Greenspan cut the rates. The banks refused to loan new money to the telecoms. Instead they dumped the cheap money on to the consumer.
The telecoms had no money, and were slamming into their trillions in debt. As PSI NET, World Com, Global Crossing, RCN Communication all went under and Sprint, Verizon, AT&T struggle to survive. The Networking companies like Nortel and Cisco got hammer from the spending freeze of the telecoms. Mean while The home builders could not build houses fast enough to sell to the newly rich consumer that was being shoved money down it’s throat. Toll brothers, KB Homes, Lennar, all exploded. Taking with them Countrywide, and Washington Mutual.. The housing boom enrichment of the consumer brought on the Home ATM - good at any department store. Target, Wal-Mart, Best Buy were all set to rally.
Banks who should have been the single greatest beneficiary of the rate cuts remain flat. Lose a few billion here and there and the extra profits from the rate cuts just don’t float the boat.
Now it’s 2008.…
The banks are getting screwed again. This time by all the worthless mortgage papers they bought from the likes of Countrywide and Washington Mutual. The default rate and housing collapse has hit crisis level. Once again we see rate cut after rate cut. But the banks are refusing to invest in what bit them on the ass. No one can buy a house now. No one has their house ATM machine operating to buy those toys at Wal-Mart and Target.
So where is all that cheap money from the banks going?
Here is something interesting …
AT&T capital expenditures
2004 - 5 billion
2005 - 5.6 billion
2006 - 8.3 billion
2007 - 16.8 billion
See the leap? Could we have found the money trail? If the capital expenditure of AT&T is any indication of the sales that the networking companies are seeing , Cisco (CSCO) is ready to explode.
Is there more cheep money flowing out there?
Terra Industry (TRA) sells fertilizer. The following is their sales record
2004 - 1.5 billion
2005 - 1.9 billion
2006 - 1.8 billion
2007 - 2.4 billion
Could the farmers be getting the money? With a richer emerging market do more people eat meat and dairy products? In order for you to drink that glass of milk a calf went without milk. It ain’t easy to keep the calf deprive of milk alive and it isn’t cheap. Without high meat demand most calves are turn to a low poundage of meat. Just get it over with quick. As meat prices go up. More and more money is spent to keep the milk deprive calf alive long enough to gain over a thousand ponds.
Soybeans with the help of a shit load of fertilizers have the ability to take on the fat and protein requirement needed to keep a calf alive. They are also a great crop for converting the lime in the soil into calcium. They perfect crop for a growing calf and a nursing cow..
The following are the commodity prices for live cattle….
2004 June - $82
2005 June - $84
2006 June - $80
2007 June - $90
2008 January - $94
Amazing. After years of stagnation it’s moving up!!!! If you were a banker would you trust the farmer to turn a profit 2008? Rising sales prices and cheaper money = farm as many acres with crops instead of pastures as possible!!!!!
For 2008 I like the following:
Telecoms AT&T (T), Sprint Nextel (S), Verizon Communications , VZ
Networking Cisco (CSCO)
Agriculture Terra Industry (TRA), Potash Corporation (POT), Monsanto (MON), Bunge (BG)
Stay away from the savings and loans, stay away from the credit card companies, stay away from the retail stores, and banks will see no gains this year.
T S VZ CSCO TRA POT MON BG
$42.0 (01/09/08)
