www.charlestonmarketreport.

com

January 2009 Edition

1/25/2009

In This Issue:
Song Dedication: “I Want My Bailout Money”
Cartoons
CofC Carter Real Estate Center Network Event
Beware of Happy Talk from the MSM!
Why Economists Missed the Crisis
The Bailout
Atlas Shrugged Lives
The Bad Banks
Long Term Dow: 1901-2009
Charleston Real Estate
Things to Know for 2009

I hope everyone had a wonderful holiday and New Year. Good riddance to 2008 and let’s pray 2009 is a better year!
I really hope everyone ate plenty of hoppin john and collard greens on New Year’s Day so that 2009 brings you good
luck and plenty of income. ☺ I know I did!

FYI, I am no longer doing the quarterly CMR reports. They take to much time and my schedule just does not allow
enough time for these reports. From now on I am only going to be able to do the monthly reports.

Advertising
If anyone is interested in advertising on The CMR website please feel free to contact me at brundbaken@comcast.net.
I am working with a very talented SEO (Search Engine Optimization) marketing and internet professional who is
going to take The CMR to the next level. The rates will probably increase in the future as traffic grows so take
advantage now. We can provide some very unique advertising options other than the typical link on my website that
will help drive leads to your website which will help you increase revenue for 2009 and beyond.

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Song Dedication
The song dedication for the first CMR Edition of 2009 is a hip hop satire song by Michael Adams. Considering the
often satire nature of The CMR I felt this song was appropriate to ring in the New Year. It is a very clever and
original tune that has great lyrics related to the good old Bailout. It is really a good tune and I think you will like it.

Click below to Play:

http://www.youtube.com/watch?v=dnT21hmlT4o

Cartoons

FYI, the leaf blower guy is Alan Greenputz.

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3
CofC Carter Real Estate Center Networking Event
If you are involved in real estate in Charleston you probably missed the program below this past Tuesday evening.
Dr. Tim Allen, staff and local supporters are doing a great job of providing speakers who are leaders in the real estate
industry and creating a top notch college education in the real estate field. If you have a son or daughter interested in
real estate you should definitely have them take a look at the real estate program at the College of Charleston. There
are tremendous opportunities in real estate even though all you hear about in the media is the doom and gloom. I
expect the future graduates of the Carter Real Estate Center will have excellent opportunities finding jobs in the real
estate profession.

Below is a link to their website:

http://www.cofc.edu/cartercenter/

College of Charleston’s Carter Real Estate Center cordially invites you to our

Friends of the Carter Real Estate Center networking event

Topic: Credit Market Conditions Facing the Commercial Real Estate Industry Nationwide

Keynote speaker: Paul Saylor of CS Capital Management from Atlanta, GA- CSCM currently manages
$900 million of institutional capital funded to $1.5 billion of income-producing real estate assets nationwide.

Michael Torres of Adelante Capital from Oakland, CA- One of nation’s largest REIT investors on behalf
of institutional clients.

Stan Harrelson of Olympic/Cascade/Pinnacle from Seattle, WA- A national and international apartment
company.

Bryan McGowan of the Koll Company from Newport Beach, CA- A primarily Western US operator of
industrial and office properties.

**Email Dr. Tim Allen at allent@cofc.edu to get notified of future Carter Real Estate Center speaker events**

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Beware of Happy Talk from the Main Stream Media!

Over at Marketwatch, Paul Farrell sifts through a book (sitting on my shelf) and pulls out these embarrassing quotes.
(Hat tip to The Big Picture for this one.)

15 reminders of how happy talk misled us a decade ago

1. October 1999: James Glassman, author “Dow 36,000.” “What is dangerous is for Americans not to be
in the market. We’re going to reach a point where stocks are correctly priced, and we think that’s
36,000 … It’s not a bubble. Far from it. The stock market is undervalued.” (Fact: dot-com PE’s were
astronomical, most over 40)
2. December 1999: Joseph Battipaglia, market analyst. “Some fear a burst Internet bubble, but our
analysis shows that Internet companies account for only 7% of the overall Nasdaq market cap but
carry expected long-term growth rates twice those of other rapidly growing segments within tech.”
(Fact: Internet Index lost two-thirds within six months.)
3. December 1999: Larry Wachtel, Prudential. “Most of these stocks are reasonably priced. There’s no
reason for them to correct violently in the year 2000.” (Fact: NASDAQ lost 50% in 2000.)
4. December 1999: Ralph Acampora, Prudential Securities. “I’m not saying this is a straight line up. I’m
not saying you can’t have pauses. I’m saying any kind of declines, buy them!” (Fact: He also predicted
a 14,000 Dow by year-end 2000, and an 11-year bull.)
5. February 2000: Larry Kudlow, CNBC host. “This correction will run its course until the middle of
the year. Then things will pick up again, because not even Greenspan can stop the Internet economy.”
(Fact: This faux economist is still hosting a cable show.)
6. April 2000: Myron Kandel, CNN. “The bottom line is, before the end of the year, the NASDAQ and
Dow will be at new record highs.” (Fact: In September he even predicted a rally to 12,000 by Election
Day 2000.)
7. September 2000: Jim Cramer, Mad Money host. “SUNW probably has the best near-term outlook of
any company I know.” (Fact: Within four months Sun Microsystems dropped from $60 to $30. Down
to $10 in a year. Below $3 in two years.)
8. November 2000: Louis Rukeyser on CNN. “Over the next year or two” the stock market “will be
higher, and I know over the next five to 10 years it will be higher.” (Fact: The market continued
sinking, we fell into a recession, and tech lost 70% within two years.)
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 9. December 2000: Jeffrey Applegate, Lehman Strategist. “The bulk of the correction is behind us, so
now is the time to be offensive, not defensive.” (Fact: A sucker’s rally.)
10. December 2000: Alan Greenspan. “The three- to five-year earnings projections of more than a
thousand analysts, though exhibiting some signs of flattening in recent months, have generally held
firm. Such expectations, should they persist, bode well for continued capital deepening and sustained
growth.” (Fact: In 2008 he admitted he misled America.)
11. January 2001: Suze Orman, financial guru. “In the low 60s here, I think the QQQ, they’re a buy. They
may go down, but if you dollar-cost average, where you put money every single month into them, I
think, in the long run, it’s the way to play the NASDAQ.” (Fact: You lose — the QQQ lost 60% more
by October 2002.)
12. March 2001: Maria Bartiromo, CNBC anchor. “The individual out there is actually not throwing
money at things that they do not understand, and is actually using the news and using the information
out there to make smart decisions.” (Fact: Maria sounds more like a writer for The Onion.)
13. April 2001: Abby Joseph Cohen, Goldman Sachs. “The time to be nervous was a year ago. The S&P
then was overvalued, it’s now undervalued.” (Fact: The markets continued down for another 18
months.).
14. August 2001: Lou Dobbs, CNN. “Let me make it very clear. I’m a bull, on the market, on the
economy. And let me repeat, I am a bull.” (Fact: The market was actually in bear territory for another
year as the Dow and NASDAQ lost another third.).
15. June 2002: Larry Kudlow, CNBC host. “The shock therapy of a decisive war will elevate the stock
market by a couple thousand points.” (Fact: For Larry, war is just another “economic stimulus
program.” He also said the Dow would hit 35,000 by 2010.)

You just can not make this stuff up! Unbelievable! If I made these predictions I would want to crawl under a rock
and never come out! Larry Kudlow is the worst offender and biggest kook out of all the MSM personalities you
should avoid taking advice from. Funny, how Cramer is not in this list and they both used to be on the same TV
show. Talk about two guys with brown eyes!

Why Economists Missed the Crisis

Why did Economists, as a group, miss the warning signs of housing, credit and market crisis?

I don’t mean individuals — several professional Economists got it right; Academics like Nouriel Roubini of NYU and
Robert Shiller of Yale, as well as a few Wall Streeters, such as David Rosenberg of Merrill Lynch and Paul Kasriel of
Northern Trust. Too many bloggers to name also got it right. Meanwhile, the vast majority of professional
economists, strategists and analysts — the “Herd” — totally missed it.

One explanation comes from Dean Baker, who channels Keynes, and says “incentives in the economics profession,
just as in finance, strongly encourage a lack of original thinking.” (That’s a variation of Keynes: “Worldly wisdom
teaches that it is better for reputation to fail conventionally than to succeed unconventionally“). Paul Krugman
wondered if it was a fear of going “against bubble denier Alan Greenspan.”

I find all these explanations wanting — and quite frankly, too generous by half.

My explanation is there were systemic failures in economics as a discipline, at least as it is employed in the real
world. Note that these are not theoretical critiques (i.e., Keynesians versus Monetarists), but rather, these are broader
inquiries as to why so many working economists were so utterly clueless about all of the red flags for so long. The
inherent biases of working on Wall Street go along to explain why those economists were so awful — but I have less
of an explanation as to why so many academic economists were so blind. Perhaps it is the profession itself.

As far as Central Bankers were concerned, they too missed the warning signs — but there were several notable
exceptions to this to, including the Bank of England’s concerns about a credit crunch and a collapse in asset prices.
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Ideas? I have a few. Here are my top 10 indictments as to why professional economists missed the crises until it was
too late:

1. An inherent upward bias is built into ALL Wall Street research — including economic research;

2. Ideological rigidity prevented creative thinking;

3. Non-critical acceptance of official data from BEA, BLS, Commerce led to only a passing familiarity with reality;

4. Institutional rejection of negative analyses remains endemic;

5. Traditional (non-behavioral) economic analysis seems to have difficulty with human irrationality;

6. Political Bias; (Right wing during GOP Presidencies; Left Wing during DEM Presidencies);

7. Corporate bias — Stock option compensation — skewed views too optimistic;

8. “Timing” is very different from Analysis;

9. Factoring in excessive leverage and liquidity is exceedingly difficult from a traditional economic perspective
(Derivatives especially);

10. Herding instinct is powerful;

Economics as a discipline does not seem to be particularly introspective. In my opinion, the sooner the profession
develops some self doubt, recognizes its own failings and shortcomings, the faster they will be able to recognize the
failing constructs of the profession and fix them. The Efficient Market Hypothesis, homo economicus, the deification
of markets, all need an open public review and a good thrashing.

There were many professions that did not distinguish themselves in the lead up to the housing boom and bust,
financial bust, the credit crisis, and the recession. Economics is near the very top of that list.

Source: The Big Picture

The Bailout
A subject that we should all be passionate about is this cluster___ of a bill that was passed by our fearless leaders in
Congress just a few months ago. I am very outspoken about The Bailout because it will have repercussions on us, our
children and grandchildren for years to come because of the costs. It is also important because the sole purpose of
The Bailout is to help repair our very sick economy, which has an impact on everyone in America.

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An Interesting Discussion regarding whether America needs this money hole. (Very Funny)

Click below to Play:

http://www.theonion.com/content/video/in_the_know_should_the_government

Classic Quotes:
“America Needs the Money Hole!”
“I love the Money Fire!”
“My momma worked two jobs so she had money to put in the money hole!”
“If you love America you throw money in its hole.”

I really believe the politicians in D.C. actually love the money hole. Obviously they did not listen to their constituents
and passed this bailout. Why? Consider the kickbacks and grease they get when “Big Spender” Obama creates an
even bigger money hole after his $150 MILLION Inauguration.

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This is another example of a disregard for money in D.C. but why should they care when it is NOT their money.
Obama has already warned us that Trillion dollar deficits are going to be the norm in D.C.

$1,186,000,000,000 TRILLION DEFICIT!

I am rooting for Obama to fix the economy but realize that creating bigger money holes, Tarp 2.0, 3.0 and higher is
NOT the answer. Why? I read history and realize government is never the answer to stimulating the economy. The
answer resides in the citizens of this country. The Money Holes and future TARPs are just a waist of money and the
money will go to the biggest and baddest lobbyists in D.C. but unfortunately will lead to ballooning deficits for years
to come. This is the Ponzi Economy at work. We just have to get used to it and figure out ways to make money in
the Ponzi Economy since the overhaul necessary to create a true free economy is not in the cards. Just remember,
there is always a bull market out there somewhere. I think I just stole a quote from Cramer. ☺
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Other examples of Money Holes:
Money Hole #1- FHLBs
FHLBs sell debt into the capital markets to raise money, using their AAA ratings to borrow cheaply. They use that
money to make advances to banks that are members of the system and take collateral in exchange — often mortgages
or mortgage-backed securities.
The banks use the money they get from the FHLB, along with cash raised elsewhere from their own debt sales and
depositors, to make loans. The banks are required to own stock in the FHLBs, and that stock helps capitalize the
regional FHLBs.

While many investors have never heard of the FHLBs, they collectively have roughly $1.25 trillion — with a "T" —
in debt outstanding. That makes them the biggest borrowers in the U.S.— behind the federal government!
If you thought it was expensive to bail out Fannie Mae and Freddie Mac (The Treasury has pledged to inject up to
$200 billion in capital into the two of them), just you wait. Should the FHLBs need a bailout, there's no telling how
much it will cost!

Money Hole #2-The Insurance Sector

The industry's so-called statutory surplus, or difference between assets and liabilities — plunged 24%, or $76.8
billion, last year to $237.3 billion, according to research firm Conning & Co.
In an effort to rescue their collapsing balance sheets, some insurance firms are trying to get government bailout
money by buying up teeny-tiny thrifts and banks.

Money Hole #3-Pension Funds

The consulting firm Mercer recently estimated that the pension funds of big U.S. companies are under funded to the
tune of $409 BILLION! At the end of 2007, they were running a $60 billion surplus. That huge swing could drive up
corporate borrowing costs and drive down corporate earnings.
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It could also lead to reduced business investment as companies are forced to divert money from equipment and
facilities budgets to their pension funds. Advisory firm Watson Wyatt recently estimated that U.S. corporations will
have to boost pension fund contributions to $111.2 billion in 2009 from $50.5 billion last year.
Source: Money and Markets

If you want to have some fun with the Bailout Game Congress is playing then you have to check out this website and
play The Bailout Game. This game is a trip!
Click Below to Play:
http://www.thebailoutgame.us/

Atlas Shrugged Lives

(Thanks and Hat Tip to Vince for sending me this article.)

Probably one of the best articles I have ever read especially if you are an Ayn Rand fan. I placed in bold sections of
the article that IMO are very compelling. Why hasn’t the MSM (Main Stream Media) picked up on this classic book
and the importance of its message in today’s society?
This is a must read article so you understand the problems of government attempting to be the market!!

'Atlas Shrugged': From Fiction to Fact in 52 Years

By STEPHEN MOORE

Some years ago when I worked at the libertarian Cato Institute, we used to label any new hire who had not yet read
"Atlas Shrugged" a "virgin." Being conversant in Ayn Rand's classic novel about the economic carnage caused by big
government run amok was practically a job requirement. If only "Atlas" were required reading for every member of
Congress and political appointee in the Obama administration. I'm confident that we'd get out of the current financial
mess a lot faster.

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Many of us who know Rand's work have noticed that with each passing week, and with each successive bailout plan
and economic-stimulus scheme out of Washington, our current politicians are committing the very acts of economic
lunacy that "Atlas Shrugged" parodied in 1957, when this 1,000-page novel was first published and became an instant
hit.

Rand, who had come to America from Soviet Russia with striking insights into totalitarianism and the destructiveness
of socialism, was already a celebrity. The left, naturally, hated her. But as recently as 1991, a survey by the Library of
Congress and the Book of the Month Club found that readers rated "Atlas" as the second-most influential book in
their lives, behind only the Bible.

For the uninitiated, the moral of the story is simply this: Politicians invariably respond to crises -- that in most
cases they themselves created -- by spawning new government programs, laws and regulations. These, in turn,
generate more havoc and poverty, which inspires the politicians to create more programs . . . and the
downward spiral repeats itself until the productive sectors of the economy collapse under the collective weight
of taxes and other burdens imposed in the name of fairness, equality and do-goodism.

In the book, these relentless wealth redistributionists and their programs are disparaged as "the looters and their laws."
Every new act of government futility and stupidity carries with it a benevolent-sounding title. These include the
"Anti-Greed Act" to redistribute income (sounds like Charlie Rangel's promises soak-the-rich tax bill) and the
"Equalization of Opportunity Act" to prevent people from starting more than one business (to give other people a
chance). My personal favorite, the "Anti Dog-Eat-Dog Act," aims to restrict cut-throat competition between firms and
thus slow the wave of business bankruptcies. Why didn't Hank Paulson think of that?

These acts and edicts sound farcical, yes, but no more so than the actual events in Washington, circa 2008. We
already have been served up the $700 billion "Emergency Economic Stabilization Act" and the "Auto Industry
Financing and Restructuring Act." Now that Barack Obama is in town, he will soon sign into law with great urgency
the "American Recovery and Reinvestment Plan." This latest Hail Mary pass will increase the federal budget (which
has already expanded by $1.5 trillion in eight years under George Bush) by an additional $1 trillion -- in roughly his
first 100 days in office.

The current economic strategy is right out of "Atlas Shrugged": The more incompetent you are in business, the
more handouts the politicians will bestow on you. That's the justification for the $2 trillion of subsidies doled
out already to keep afloat distressed insurance companies, banks, Wall Street investment houses, and auto
companies -- while standing next in line for their share of the booty are real-estate developers, the steel
industry, chemical companies, airlines, ethanol producers, construction firms and even catfish farmers. With
each successive bailout to "calm the markets," another trillion of national wealth is subsequently lost. Yet, as
12
"Atlas" grimly foretold, we now treat the incompetent who wreck their companies as victims, while those
resourceful business owners who manage to make a profit are portrayed as recipients of illegitimate
"windfalls."

When Rand was writing in the 1950s, one of the pillars of American industrial might was the railroads. In her novel
the railroad owner, Dagny Taggart, an enterprising industrialist, has a FedEx-like vision for expansion and first-rate
service by rail. But she is continuously badgered, cajoled, taxed, ruled and regulated -- always in the public interest --
into bankruptcy. Sound far-fetched? On the day I sat down to write this ode to "Atlas," a Wall Street Journal headline
blared: "Rail Shippers Ask Congress to Regulate Freight Prices."

In one chapter of the book, an entrepreneur invents a new miracle metal -- stronger but lighter than steel. The
government immediately appropriates the invention in "the public good." The politicians demand that the metal
inventor come to Washington and sign over ownership of his invention or lose everything.

The scene is eerily similar to an event late last year when six bank presidents were summoned by Treasury Secretary
Hank Paulson to Washington, and then shuttled into a conference room and told, in effect, that they could not leave
until they collectively signed a document handing over percentages of their future profits to the government. The
Treasury folks insisted that this shakedown, too, was all in "the public interest."

Ultimately, "Atlas Shrugged" is a celebration of the entrepreneur, the risk taker and the cultivator of wealth
through human intellect. Critics dismissed the novel as simple-minded, and even some of Rand's political
admirers complained that she lacked compassion. Yet one pertinent warning resounds throughout the book:
When profits and wealth and creativity are denigrated in society, they start to disappear -- leaving everyone
the poorer.

One memorable moment in "Atlas" occurs near the very end, when the economy has been rendered comatose
by all the great economic minds in Washington. Finally, and out of desperation, the politicians come to the
heroic businessman John Galt (who has resisted their assault on capitalism) and beg him to help them get the
economy back on track. The discussion sounds much like what would happen today:

Galt: "You want me to be Economic Dictator?"

Mr. Thompson: "Yes!"

"And you'll obey any order I give?"

"Implicitly!"

"Then start by abolishing all income taxes."

"Oh no!" screamed Mr. Thompson, leaping to his feet. "We couldn't do that . . . How would we pay government
employees?"

"Fire your government employees."

"Oh, no!"

Abolishing the income tax. Now that really would be a genuine economic stimulus. But Mr. Obama and the
Democrats in Washington want to do the opposite: to raise the income tax "for purposes of fairness" as Barack
Obama puts it.

13
David Kelley, the president of the Atlas Society, which is dedicated to promoting Rand's ideas, explains that "the
older the book gets, the more timely its message." He tells me that there are plans to make "Atlas Shrugged" into a
major motion picture -- it is the only classic novel of recent decades that was never made into a movie. "We don't
need to make a movie out of the book," Mr. Kelley jokes. "We are living it right now."

Mr. Moore is senior economics writer for The Wall Street Journal editorial page.

Me: I can not overstate how powerful the message of “Atlas Shrugged” is to the present economic problems here in
the US and around the world. Money is power and the creation of money was given to a bunch of private bankers
called the Federal Reserve in 1913. This is the root of all of our problems and the Federal Reserve and Greenspan I
mean Greenputz positioned us in the economic predicament we are in today. Ben “Bunyon” Bernanke is just picking
up where Greenputz left off and exacerbates the economic problems.

How convenient that we now discuss The Federal Reserve in our next section of The CMR.

The Bad Banks

“Mirror mirror on the wall.

Who is the worst and most dangerous bank of them all?”
THE FED!

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Charts courtesy of Then Financial Ninja

So Obama wants to create a good bank/bad bank. Create a ‘bad bank?’ Is he kidding? The world’s full of bad banks
already. Banks that did just what Bernanke is proposing to do; they bought financial assets, notably mortgage market
derivatives, for cash. Now, they turn to the taxpayer, desperate for a handout to keep them from going under.

And the baddest bank of all next to the Central Bank of Zimbabwe is the U.S. Fed. What’s it doing? It’s buying trash
and paying cash so that the mistakes of rich bankers are transferred to the people via the people’s bank, the Fed. Of
course, the people don’t know what’s going on. We really need to do a better job edumucating our society in financial
and economic matters.

The Economist says that this photo is "one of the most apt visual metaphors for the crisis yet". I'm not sure that it isn't
literally true. After all, Charlotte is a banking center, and 23 of the passengers worked at Bank of America alone. I'd
say that the passengers in the 12 first-class seats at the front of the plane were disproportionately likely to be bankers,
no?

15
Let us not forget that since late 2006 317 major U.S. Lending operations have imploded!
Source: Implode Meter

I am furious that these large banks continuously are getting billion dollar handouts from us the taxpayer and you
should also be mad as hell. When I went on the Rocky D Radio Show a couple of weeks ago I wanted to make it
clear that many of the banks in the country are NOT getting bailout money because there are many good banks locally
and nationally that were conservative during the “go-go days.” I have many friends who work at these Bailout Banks
such as Bank of America and Citi.

16
I feel sorry for anyone who works at these institutions. The financial status of their company is not their fault but
instead the fault of their top management who make the big bucks. They should be embarrassed working for
institutions that constantly have their hand out for money in order to survive. I would recommend that everyone in
Charleston support the strong local banks that are running their business the right way and your money is going to be
safer at these institutions. A couple of solid local banks in Charleston that come to mind are First Citizens, Harbor
National Bank, SC Federal Credit Union, First Federal, The Bank of SC. I apologize for the institutions I left out.

You can try and check the strength of your bank on the website below:
Safe and Sound Ratings
http://www.bankrate.com/brm/safesound/select.asp?insttype=0

Swindle
By Tony. Posted on January 16th, 2009 in BREAKING NEWS!, Bank Bailout Count

Wall Street is a criminal enterprise based on a confidence scam so it should be no surprise that the swindle
continues unabated. Bank of America and Citigroup, two of the biggest swindlers on the street reported repugnant
fourth-quarter results, but had a lot of clean up help from the New York Times.

Hours after receiving another government lifeline, Bank of America announced gaping fourth-quarter losses on
Friday. The bank lost $1.79 billion in the fourth quarter, down from a gain of net income of $268 million a year ago,
in a reversal caused largely by growing consumer loan losses.

And bigger troubles came from Merrill Lynch, which Bank of America hastily snapped up in September for $50
billion. A fresh round of write-downs at Merrill pushed that firm into a $15.3 billion loss for the fourth quarter. That
was the firm’s sixth troubled quarter since the credit crisis began. Merrill was among the most aggressive — and most
harmed — by mortgage investments.

That’s because Merrill was piloted by a kamikaze CEO.

Merrill’s results for the fourth quarter are not a part of Bank of America’s. The merger of the two banks closed on
Jan. 1.

In a conference call Friday morning, analysts asked Kenneth D. Lewis, the bank’s chairman, whether he had regrets
that he had agreed to purchase Merrill.
17
He should have been asked if he had any choice in the deal.

Mr. Lewis said that as Merrill’s fourth-quarter losses mounted, he did re-evaluate whether he should close the deal
and whether he could renegotiate the price for Merrill. But, he said, regulators implored him to complete the
transaction and said they would provide support.

The above question answered.

“The government was firmly of the view that terminating or delaying the closing of the transaction could lead to
significant concerns and could result in significant systemic concerns,” Mr. Lewis said. “We did think we were doing
the right thing for the country.” This is an example of Ken Lewis drinking the Paulson Kool Aid.

What he means is he did the right thing for Merrill’s well-connected insiders. Emperor Paulson’s force-feeding
of Merrill Lynch to Bank of America was to disguise to bail out as a merger, but that Emperor is butt naked as
we all saw through that one!

Still Mr. Lewis expressed optimism about the conglomerate he has built, once the economy recovers.

Does he mean in our lifetimes?

“This company will generate huge amounts of profit when we get a normal economic environment, not even a great
one but a normal one, and so it’s almost directly related to how fast you think the economy will come back,” he said.

Blame it on the economy then, the same Ponzi economy that Bank of America and it’s now not so tasty wholly
owned subsidiaries took such a big part in wrecking.

Bank of America’s shares, which have fallen sharply over the last week, were down sharply again in early-afternoon
trading on Friday, shedding $1.17, or 14 percent, to $7.15.

Bank of America’s shares, have traded above $50.

In the conference call, Bank of America executives also discussed the government assistance that was announced
overnight to help them complete the merger with Merrill.

Two weeks after closing its purchase of Merrill Lynch at the urging of federal regulators, the government cemented a
deal at midnight Thursday to supply Bank of America with a fresh $20 billion capital injection and absorb as much as
$98.2 billion in losses on toxic assets, according to people involved in the transaction.

Blame it on those urging federal regulators, it’s their fault that the serfs in the surf them will be serving up
over $100 billion more of the fruits of their labors to save Merrill Lynch’s insiders entitlements.

The bank had been pressing the government for help after it was surprised to learn that Merrill would be taking a
fourth-quarter write-down of $15 billion to $20 billion, according to two people who have been briefed on the
situation, in addition to Bank of America’s rising consumer loan losses.

Oh I get it now the bank was surprised to learn that Merrill Lynch would be taken a fourth-quarter write-
down of $15 billion to $20 billion. Oh my!

The second lifeline brings the government’s total stake in Bank of America to $45 billion and makes it the bank’s
largest shareholder, with a stake of about 6 percent.

18
That just about nationalizes Bank of America!

The program is modeled after a larger one engineered to stabilize Citigroup as its stock price plummeted in late
November, but it appears to have had limited success. Under the terms, Bank of America will be responsible for the
first $10 billion in losses on a pool of $118 billion in illiquid assets, including residential and commercial real estate
and corporate loans, and that will remain on its balance sheet.

This is not to be the last carbon copy cutouts of the Citigroup bailout.

The Treasury Department and the Federal Deposit Insurance Corporation will take on the next $10 billion in losses.
The Fed will absorb 90 percent of any additional losses, with Bank of America responsible for the rest.

In exchange for the new support, Bank of America will give the government an additional $4 billion stake in preferred
stock. It has also agreed to cut its quarterly dividend to a penny, from 32 cents, and accept more stringent restrictions
on executive pay.

The F.D.I.C. announced separately that it would soon propose to extend its guarantee on supporting new consumer
lending to 10 years, from 3 years.

The F.D.I.C. is attempting to put the “confidence” backing to the confidence scam.

“The U.S. government will continue to use all of our resources to preserve the strength of our banking institutions and
promote the process of repair and recovery and to manage risks,” regulators said.

Meaning the government will bail out its banker best friends even if it breaks the backs of every worker in the
country.

With losses mounting in the financial industry, other banks may eventually feel compelled to turn to the government
for assistance, and the program could to used for other big banks. Taxpayers could end up guaranteeing hundreds of
billions of dollars of banks’ toxic assets.

Taxpayers already have guaranteed hundreds of billions of dollars of banks’ toxic assets.

“The financial services sector still needs more equity,” said Frederick Cannon, the managing director at Keefe,
Bruyette & Woods. “TARP was announced in mid-September and most of the initial decisions were based on the
state of the economy then. The economy has gotten a heck of a lot worse.”

Then why should we give the financial services sector anymore equity?
Government officials said that they did not have new money to allocate for this assistance, so they used funds that
were already allocated from the $350 billion bailout fund for other banks or for future stabilization programs. The
officials said that even though Citigroup’s stock had tumbled since November, that bank’s stock price might not be
the best indicator of whether the program was working.

Meaning that government officials are allocating unallocated money to banker billionaires banker buddies that
that working tenthousandaires, will have to pay back.

Bank of America’s troubles are only adding to the worries. Mr. Lewis had earned a reputation for taking big bets that
helped transform NationsBank, a small lender, into a consumer powerhouse with bicoastal branches — and was often
accused of overpaying. It snapped up Bank of America and took on its name, then followed with flashy deals for
FleetBoston Financial in 2003 and then the credit card giant MBNA in 2006. That was followed by US Trust and
LaSalle Bank of Chicago a year later.

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Last year, Mr. Lewis’s bank also bought Countrywide Financial Corporation, the troubled mortgage giant that has
come to symbolize many of the excesses of the subprime mortgage era. That made Bank of America the biggest
player in every major financial service but wealth advice.

Even before the most recent deal with Merrill closed, troubles began to surface. At the time, shareholders liked the
strategic fit of adding Merrill Lynch, the nation’s biggest brokerage firm, to the nation’s biggest bank. Still, they
worried that Mr. Lewis had paid a hefty premium — or underestimated Merrill’s losses — in the merger stitched
together over the mid-September weekend that Lehman Brothers filed for bankruptcy.

When the deal was announced, Mr. Lewis said that he had considered buying Merrill months earlier but was not
comfortable with its mortgage exposure. John A. Thain, the chief executive of Merrill Lynch, said he had cleaned up
many of his company’s problems. “We have been consistently cleaning up the balance sheet, repairing the damage
that was done over the last few years,” Mr. Thain said.

Mr. Lewis praised Mr. Thain for decreasing risks at the firm and said that Merrill’s capital levels were in good shape.

FYI, Lewis fired Thain this week for various conflicts including spending $30k on a commode. You just can not make
this stuff up.

Then why were they so desperate for cash?

As it turned out, more problems were lurking. In December, when executives at Merrill began tallying losses on its
mortgage investments, they were found to exceed previous estimates. When Bank of America was informed of the
gaping write-downs, the bank became fearful it would not have the capital to cover them. The revelations, which
came just weeks before the merger was expected to close, prompted Bank of America to ask the government for
additional help.

As it turned out??? You got it be kidding me!!!

After Bank of America told regulators in December that it might walk away from Merrill because of mounting losses
at the brokerage, government officials said they decided they needed to take immediate action to avert a systemic risk.

The only system at risk was the well-connected insider elites at Merrill.

Still, the Merrill deal has not been any easy deal for Mr. Lewis to digest. “He made a bet,” said Brad Hintz, an analyst
with Sanford C. Bernstein & Company. “He bought the retail broker operation, and in a normal environment that’s a
gold mine.

If Mr. Lewis was such a great CEO and he should certainly know that this is not a normal environment.

The challenge that Bank of America has is, can they keep their hands off of the retail brokerage operation, because
their history in terms of acquisitions isn’t really perfect.”

Bank of America has no challenges it was given an offer it could not refuse and did not refuse it, by bailing out
Merrill Lynch and it’s a board room load of important insiders, Bank of America has cementedits foothold as
the Bank of America.

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Let’s take a look at what is happening to these Bailout Banks by looking at their stock charts. Warning: This is NOT
pretty and all of these stocks look like double black diamond downhill ski slopes.

**Thankfully for the Big Guy in the Sky, I do not have any stock positions in any of these companies.**

Bank of America (BAC)

aka “Bank By America”
New Slogan: What did Bank of America do with your money? They spent it, silly.

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Click Below to Play:
http://www.youtube.com/watch?v=hkek9JZWXjs

JP Morgan (JPM)
JP Morgan’s Last Hurrah?
http://bankimplode.com/blog/2009/01/16/jp-morgans-last-hurrah/

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Citigroup (C)
aka “Shitigroup”

Goldman Sachs (GS)

aka “The Golden Gangsters”

It looks like someone over at Goldman Sachs figured out that posting a profit while taking $10 billion from the peons
would not look good for the bleachers, so the company bit the bullet and cooked the books to show a fourth-quarter
loss. But the “Golden Gangsters” are still too vain to admit to a yearly loss.

The good folks over there said in their financials that they want us to use the level 3 count from their third-quarter
2008 10 Q as an estimate of this quarter’s level 3. Okay but note that their level 3 tide is rising fast so it’s probably a
low ball estimate.

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Here’s the tally thus far:

1. Write-Downs/Charge-Offs: $7.275B + $1.5 B = $8.775B

2. Cash Raised: $3.0B +$5.75B + $5b=$13.75B (from AIG rescue+stock sale+Buffett)
3. TARP: $10B
4. Level III assets: $66B
5. Loan Loss Reserves: $0.0

We now sum all the distresses to get Goldman’s current Misery Index of $98.525B

Morgan Stanley (MS)

aka “The A-Holes” (Watch the SNL Video…hint hint)

Click below to Play:

http://www.hulu.com/watch/2356/saturday-night-live-dad
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Source: Bank Implode Meter

**One of the main reasons the TARP banks are not lending is that they have to pay a non-cumulative dividend at a
5% rate per year on Senior Preferred Stock and the 6 month LIBOR is 1.55%. Why should they lend to each other
when they would be upside down while lending in a risky market. The reality is that after 2006-2008 many markets
have much less risk now due to price corrections. So the TARP banks take the TARP money and what many have
done is park the money in Treasuries because they have so many business units such as commercial real estate, credit
cards, SIVs, residential real estate, CDS that are bleeding to death. Combine the fact that these banks DO NOT know
how to measure risk in this market and you have a frozen market which has a negative affect on the economy.
Nobody wins. The government needs to overhaul the TARP because the TARP stinks. It was poorly conceived at the
last minute and has ZERO transparency.

What Does London Interbank Offered Rate - LIBOR Mean?

An interest rate at which banks can borrow funds, in marketable size, from other banks in the London interbank
market. The LIBOR is fixed on a daily basis by the British Bankers' Association. The LIBOR is derived from a
filtered average of the world's most creditworthy banks' interbank deposit rates for larger loans with
maturities between overnight and one full year.

Investopedia explains London Interbank Offered Rate - LIBOR...

The LIBOR is the world's most widely used benchmark for short-term interest rates. It's important because it is the
rate at which the world's most preferred borrowers are able to borrow money. It is also the rate upon which rates for
less preferred borrowers are based. For example, a multinational corporation with a very good credit rating may be
able to borrow money for one year at LIBOR plus four or five points.
Source:Investopedia

Below is a good article on the TARP problem.

“Bank Stocks: The Trouble with TARP”
http://www.businessweek.com/investor/content/jan2009/pi20090120_891614.htm

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Since this entire economy runs on credit and debt we have to find new ways to lend because the securitization of debt
is no longer a market and has vanished. All the banks cannot pick up the slack because many do not have enough
capital and are bleeding to death from previous bad loans made during the bubble years. My solution is to allow
private sector of the economy come up with solutions NOT the government. The government could ignite
entrepreneurism by eliminating taxes and reducing spending….Yeah right! Future lending solutions will need to
come from sources such as private equity and pensions since they have cash. The key is for these entities to have
robust risk management systems in place so they lend their money to crappy assets. These guys are very gun shy
right now after buying billions of dollars of securitized FAKE AAA paper from Wall Street during the bubble years.
I do believe there is an opportunity for these institutions to take over this market share but the volume will not be the
same as previous years because of the slowdown and reduction of credit in the system.

Long Term Dow: 1901-2009

Take note of the years ending in 2. There is a ten yr cycle from 1932-1942, a 40 yr cycle from 1942 to 1982 and 50 yr
cycle from 1932 to 1982. Projecting 10 yrs from 2002 we get 2012 which fits with the Mayan calendar dates. If you
shoot out 40 and yrs from 1982, you get 2022 and 2032. Just fun with cycles.

The long-term 1932-1982 trendline is sloping into 4000 in 2009. It is a bet I am sure the Black Swan guru has a few
nickels on.

Event-Driven Research for Risk Managers

John Bougearel
Director of Financial and Equity Research
Structural Logic, Inc.

If you are a believer in the Mayan Calendar or Structural Bear Market better get a long/short or hedging strategy
implemented quick!

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Charleston Real Estate

I want to spend some extra space discussing the Charleston real estate market. I do quite a bit of analytical and
consulting real estate work here in town so I feel I have a very good pulse of the market conditions. Let me just state
that there is not one city in the country that I know of that has been spared from the credit meltdown I warned
everyone about in 2006 and really hit the fan in late 2007 and 2008. The local real estate stats below when you
compare 2007 to 2008 are terrible. 2008 was a year that will go down in the history books for financial and equity
destruction. I hope things get better in 2009 but nobody has a crystal ball. The low interest rate environment,
slowdown in building and declining prices should help the Charleston market. Let’s not forget that the engine behind
the real estate machine, credit, is in need of a major overhaul. This overhaul will take years to play out and the real
estate market will also take years to work itself out from the excess leverage created during the “go-go years.”

Everyone wants to know if we have hit the bottom of the real estate market. My answer is it is simply impossible to
predict and every market is different. It takes time to determine whether a trend has stabilized and even that is not a
guarantee. If someone out there can predict housing bottoms please let me know and I would love to know your
methodology.

Unfortunately, the future of every real estate market and economy hinges on how our new president and government
proceed with the existing economic problems. Capitalism and what is left of the free market is at risk right now. I am
waiting to see what the Obama Administration has planned for the economic stimulus. If this economy completely
implodes we are all doomed but it is difficult to say what the future holds right now. I am cautiously optimistic.
Every time I turn on the news and listen to the morons in DC I get nervous. They really have no clue about how the
economy and capitalism should work yet they continue to believe there own BS. This is normal behavior of

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egomaniacs that are commonly known as politicians. Why do we treat these clowns as rock stars as they recklessly
burn through our money year after year? Someone please tell me!

The bottom line is that there are some fantastic buying opportunities in the Charleston market right now. There are
some horrible ones as well. I am continuously amazed at some of the unrealistic listing prices I see on the MLS but
the fact is that those properties will not sell. Hint: Many sellers need to get a clue and/or maybe a new agent. I know
of some very knowledgeable local agents that subscribe to this report who understand the dynamics of the Charleston
market.

The Charleston real estate market is unique because of the quality of life here in the low country. We have beaches,
golf, tennis, great weather, history, wonderful restaurants, etc. Unemployment has gone up in Charleston but it has
increased in virtually every city across the country. Charleston is not heavily affected by corporate layoffs because
we are not a corporate town like Atlanta or Charlotte. We have a very diverse mix of retirees and professionals. The
diversity of the Charleston economy should insulate us from future major real estate declines in certain segments of
this market. When the real estate market does turn I feel Charleston will be one of the first markets to rebound.

In order to back up the resiliency of the Charleston real estate market everyone should be aware that Forbes Magazine
just named Charleston one of the top 25 markets in the country. Forbes is a highly respected business magazine that
has an excellent reputation. Do I think there will be appreciation in the Charleston real estate market in 2009? No.
2010? It depends.

The bottom line is that housing is meant to be a long term investment. It is not meant to be flipped and traded like a
stock like it was a couple of years ago. Buying a house in Charleston (especially a historic one in the picture below)
is different than buying a stock. A home is a tangible asset that gives you shelter and family memories unlike other
investments. A home also brings some nice tax write offs with it as well. So what I am saying is be careful with all
the macro stats that this website puts out or that the local and national press publishes. I try to be careful when I
publish this report and stress that every home and buyer has unique characteristics unto themselves when there is a
potential transaction on the line. For example, I recently reviewed an $875,000 transaction for a subscriber regarding
a home they were purchasing in a very stable subdivision in Mt. Pleasant. They were getting a good deal in Mt.
Pleasant in the upper end of the market. They were planning to live there the rest of their lives and they were
qualified. I recommended they pull the trigger.

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2009 will be a critical year for the local and national economy. We are all rooting for President Obama to get it right
because we are all affected by future economic policies that are weighed and implemented out of DC. If you are
nervous about committing to a major buying decision in 2009 then wait but I have no idea where interest rates will be
a year from now. If you are ready to pull the trigger and have a good deal you should do it as long as you are
qualified and not heavily in debt. I am not nearly as bearish on residential real estate here in Charleston as I was in
2006 and 2007 because I have seen pricing decline in many areas which in certain circumstances makes this market
more affordable. We are also past the shock of the credit meltdown that very few saw coming.

If you need help making a major buying decision here in Charleston you are welcome to call me and we can set up a
fee schedule since I charge by the hour.

The CMR will do its best to try and maneuver through the local and national trends. It is not easy but somebody has
got to try and do it. I look forward to the challenge and pray that our country pulls out of this mess so we can all
prosper in 2009 and beyond.

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Single Family Residential

The two main trends for 2008 were that the average and median price declined for both the attached and detached
homes. I discussed this quite a bit in 2007 and the overall price decline trend showed up in 08. This is a natural
occurrence of the downturn in any economic cycle, especially a deflationary one like we are in right now. Price
declines are not bad because this helps clean up the excess inventory in the market so it can return to a more
affordable and equilibrium state. The fact that new housing starts and new building permits decline is healthy for any
market with excess supply. We do not want inventory to continuously grow or we run the risk of future price declines
and foreclosures. Even though months inventory for both attached and detached homes has increased in 2008 due to
sales slowing from a brutal September and October stock market and the seasonality of the real estate market the
current inventory has been declining in both housing segments since reaching highs during the summer months. Yes,
there are a bunch of homes still sitting on the market but I hope the low interest rates and price declines will help. I
will monitor this trend closely over the next few months.

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Condo/Townhomes

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We need to wait until 2009 until we see an improvement with existing home sales. I believe we will see this trend
improve but only time will tell.

Although the building permits are in unfavorable market conditions this is a positive development based on existing
market conditions. We need fewer homes to enter the market so we can clear out excess inventory.

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We are witnessing the inventory situation improve although it dipped a bit due to very slow months in September and
October due to the market and credit meltdown. I believe this chart will continue to improve moving into 2009.

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This is a very important chart. This shows the average 30 year mortgage rates for each month since 1990. You can
see that rates are at historical lows right now. Not sure how long this will last but if you can refinance or have a good
deal on a purchase the low rates give you an excellent opportunity for cheap financing if you have good credit.

If anyone needs help with a refinance or purchase let me know. I can put you in touch with an excellent
mortgage broker I use who will treat you right.

Things to Know for 2009

• There is no guarantee that “Big Mama’s” economic policies will work. Especially if they nominate a tax
cheating, Keynesian, TARP creating, Lehman buster economist to run the Treasury.
• Focus on risk management for all investment decisions!
• I do not believe the dollar will crash in 2009. Why? Where is everyone going to park their money? The
Pound, Euro, Yen, Ruble? There is really no substitute right now because the entire global economy is
struggling and the dollar is still the top currency in the world. This will change in the future.
• Look at demographics for trends. We have permanently shifted from a spending to saver economy for the
foreseeable future. Businesses that focus on the frugal economy will outperform.
• I believe we will continue to fight deflationary economic forces throughout 2009.
• Focus on paying off debt. Interest rates will not remain this low forever. Be counterintuitive and do NOT
take spending and budget lessons from the US Government.
• Many in the media say stocks are cheap. Barron’s had its annual forecast for 2009 and 10 out of 10 experts
predicted that the US stock market would rise between 10 and 20% in 2009. My contrarian alert says this
means the market will be down for 2009.
• Commercial real estate problems will overshadow residential issues because of the economic slowdown. This
trend will place enormous pressure on the “Bad Banks.” The financing of commercial property is much more

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 complicated than residential properties and many banks were very aggressive lending money to overleveraged
clients over the past few years.
• Commodities look interesting right now if you can hold long term. Oil is very attractive if you can be patient.
• Be careful with bonds since interest rates have nowhere to go but up. FYI, bond prices drop when rates go up.
• Scared or confused what to do right now? You are not alone. Sometimes patience is a virtue! No point in
making investments that do not allow you to sleep at night. Life is to short.
• Make 2009 a safe and prosperous year! Thanks for reading The Charleston Market Report!

Disclaimer
The research done to gather the data in The Charleston Market Report involves examining thousands of listings. With
this much data inaccuracies will occur. Care is taken in gathering and processing the data and information within this
report is deemed reliable. IT IS NOT GUARANTEED. The real estate market is cyclical and will have its ups and
downs. Past performance cannot determine future performance. The purpose of the Charleston Market Report is to
educate you on current and consistent market conditions by reporting leading market indicators with the support of
traditional real estate data.

This information is offered with the understanding that the author is not engaged in rendering legal, tax or other
professional services. If legal, tax or other expert assistance is required, the services of a competent professional are
recommended. This is a personal newsletter reflecting the opinions of its author. It is not a production of my
employer. Statements on this site do not represent the views or policies of anyone other than myself.

Investing in real estate is not a get-rich-quick scheme nor is there any guarantee you will make a profit. Every effort
has been made to make this report as complete and accurate as possible. However, there may be mistakes. Therefore,
this report should be used only as a general guide and not as the ultimate source for making money in real estate.

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