AMERICA, WE HAVE A SERIOUS PROBLEM

by ilene - November 30th, 2010 11:31 pm

Courtesy of The Pragmatic Capitalist 

That is the headline on CNBC at the moment.  And I fully agree.  We do have a serious problem.  We have a group of leaders who have zero experience in monetary theory, little to no financial background and those that actually do tend to be descendants of a line of thought that has largely been proven wrong in recent years.

Alan Simpson, the co-chair of the deficit reduction committee says we have a serious problem with our debts and deficit.  And we should believe him, right?  Why?  Because he has ZERO background in the financial industry or in monetary operations.  He is a law grad, served in the US Army and a lifelong politician.  Certainly an admirable resume.  But where is his background in the financial world and why in the world is he discussing the deficit and its impacts on the economy?

It’s not fair to single Mr. Simpson out.  After all, he is just the CO-chair of this committee.  His partner in crime is Erskin Bowles.  Now, Mr. Bowles is no stranger to the financial world.  He worked at Morgan Stanley and helped found his own successful financial firm.  He went on to become Bill Clinton’s Chief of Staff and was instrumental in helping the Clinton administration substantially reduce the national debt.  That all sounds great until you realize that Mr. Bowles is simply another case of Mr. Obama rehashing the Clinton administration and hoping for the same results.  Yes, the same results that helped lay the foundation for this very financial crisis.

In a press conference earlier today Mr. Bowles said that he is initiating an important discussion. According to him it’s an:

“adult conversation about the dangers of this debt”.

Yes.  America has a debt problem.  We have a very serious household, municipality and state debt crisis that is in many ways similar to what is going on in Europe.  What we absolutely don’t have is a federal government debt problem.  After all, a nation with monopoly supply of currency in a floating exchange rate system never really has “debt” unless that debt is denominated in a foreign currency.  He says this conversation is the:

“exact same conversation every family, every single business, every single state and every single municipality has been having these last few years.”

There is only one problem with this remark.  The federal government is NOTHING like…

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Without Much Fanfare, The HSKAX Is Back To August 2007 “Quant Implosion” Levels

by Zero Hedge - November 30th, 2010 10:50 pm

Courtesy of Tyler Durden

While everyone knows that it was two and a half decades of imbecilic monetary policy courtesy of the Monstro [sic] that caused the credit bubble, few things were as much of a direct proximal cause of the market crash as the August 2007 quant collapse. And few indices tracked the obliteration of the M/N quant landscape that followed as well as the HSKAX (below). Well, after two years of painful grinding (for the market neutrals), the HSKAX is back to the same level to which it plunged in that week in early August 2007. What does it mean? Who knows, suffice to say that the market not only stopped working when the quants were all briefly destroyed back in 2007, but it marked the all time high in the S&P. We are now back to those same levels.Only this time instead ot the Market Neutrals providing the traditional market liquidity it is the HFTs, the NYSE DMMs, and the New York Fed. What happens next is anyone’s guess.

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Following Wikileaks Revelations, The Tricky Dick Rushes To The Rescue, Sees Bank of America Worth $21 In Bankruptcy

by Zero Hedge - November 30th, 2010 10:02 pm

Courtesy of Tyler Durden

This is certifiably one of those days when the insanity refuses to end. The latest laugh out loud episode come from the lunatic who has outstayed his “analytic” welcome by about 2 years following his Buy recommendation on a soon to be bankrupt Lehman Brothers (sorry Dick, nobody will ever let it go): The Rochdale analyst, continues to reprise the role of the evil grandpa-in-law who just. refuses. to. leave. even though it is about 12 hours past his credibility-time, now sees Bank of America as worth $21 in bankruptcy. You really can’t make this shit up. To wit: from a very funny Dick: “In death, this company would be worth 91% more than it is worth in life.” You may laugh now.

From Tricky Dick Bove: Bank of America (BAC) – Let’s Get Real

• It has been reported that Wikileaks has obtained the hard drive of a Bank of America executive. This hard drive is believed to have 5 gigabytes of data on it. Consequently, it may take until the beginning of next year for Wikileaks to sort out the information and select what it wants to reveal. The organization is striving to make the biggest impact by touching upon data that is relevant in today’s marketplace.
• It is further believed that this may narrow the data down to either the Merrill Lynch acquisition or Countrywide’s lending policies. It may be that the executive indicated that Bank of America was fully aware of all the write-offs and bonuses at Merrill well before this information was made available to shareholders.
• Or, the data may deal with Countrywide’s underwriting policies and some type of collusion between the bank and Countrywide related to the issuance of securities. Possibly, the “friends of Angelo” may be revealed including Senator Dodd’s relationship with the company.
• Wikileaks may not even know at this moment what it is going to reveal. The only issue one can be sure of is that whatever the data it will be sensational.
• However, will it be relevant? Bank of America has already paid fines related to the events surrounding its acquisition of Merrill Lynch and no further government action is contemplated.
• The Countrywide underwriting policies and Bank of America’s collusion or non-collusion is now in the courts and there are multiple lawsuits still being prepared relative to

…

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Gold, the EU and the Fed

by Zero Hedge - November 30th, 2010 8:45 pm

Courtesy of Bruce Krasting

Central bankers hate gold. That’s surprising given that they collectively own the lions share of what’s out there. The record is pretty clear however, most of the majors have sold gold over the past few decades. Today they have even more reason to hate it. It makes them look bad. This chart shows that both the Euro and the dollar are losing the race against gold as a store of wealth.

That the Euro is hitting all time lows against gold is an old story. But the move has gone parabolic of late, including a 3% pasting today

A very high percentage of Europeans own some gold. Much more than Americans. Younger people who don’t own gold have parents that do. They are more aware of gold as an asset class and something to turn to when there is trouble. Therefore the collapse of the Euro against gold is much more relevant then the fall in the EURUSD. EURGOLD is probably the best barometer of how desperate Europeans see their collective financial future. This does not bode well for consumer or business confidence.

The US Fed is adding to the misery of the EU Central bankers. They are part of the problem, not part of the solution. They are contributing to the appreciation of gold at a time when the Euro is weak versus the dollar. This creates the exponential price action in EURGOLD.

Many things are influencing gold of late. Inflation in China, nuts shooting cannons, a melt down of Europe’s financial picture and of course the biggest of all is the Fed and its effort to create inflation as a policy goal. What does this story from the WSJ do for gold?

It’s a good bet that Ben Bernanke and his talking heads will get their way. Actual inflation, and even worse, expectations of inflation will rise. Gold will rise against the dollar as a result. It’s an equally good bet that the Euro is headed lower against the Buck. So the measuring stick that Europeans look at is going to get even more stretched. I wonder if those European central bankers (and a few political leaders) are hating Ben for adding to their woes.

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Interpol Issues Arrest Warrant For Wikileaks Founder

by ilene - November 30th, 2010 8:14 pm

Courtesy of Joe Weisenthal, The Business Insider

There ya go. 

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BOMBSHELL: Wikileaks Will Unveil Major U.S. Banking Scandal In Early 2011 – “An Ecosystem Of Corruption”

by ilene - November 30th, 2010 7:58 pm

See also: Interpol Issues Arrest Warrant For Wikileaks Founder

Courtesy of The Daily Bail

This is going to be huge, and my gut says Goldman Sachs, based on Assange’s comments inside.  This will not make Dr. Bernanke and Tim Geithner very happy, as they have worked tirelessly to cover-up Wall Street fraud since the Bear Stearns bailout.  And if you thought the Pentagon was pushing hard to shut down Wikileaks, wait until the Federal Reserve gets involved. 

It’s not inconceivable that the Fed itself could one day be a Wikileaks target, and so better to destroy the enemy now.

—

Source – Forbes

Source – Reuters

First WikiLeaks spilled the guts of government.  Next up: The private sector, starting with one major American bank.  In an exclusive interview, WikiLeaks founder Julian Assange told Forbes that his whistleblower site will release tens of thousands of documents from a major U.S. financial firm in early 2011.  Assange said the documents could "take down a bank or two."

Assange mentioned Goldman Sachs by name in the interview, but did not confirm the Wall Street giant will be the target of the leak.  Assange wouldn’t say exactly what date, what bank, or what documents, but he compared the coming release to the emails that emerged in the Enron trial, a comprehensive look at a corporation’s bad behavior.

• "We have one related to a bank coming up, that’s a megaleak. It’s not as big a scale as the Iraq material, but it’s either tens or hundreds of thousands of documents depending on how you define it."

• "It will give a true and representative insight into how banks behave at the executive level in a way that will stimulate investigations and reforms, I presume."

• "Yes, there will be some flagrant violations, unethical practices that will be revealed, but it will also be all the supporting decision-making structures and the internal executive ethos … and that’s tremendously valuable."

• "You could call it the ecosystem of corruption,” Assange added. “But it’s also all the regular decision making that turns a blind eye to and supports unethical practices: the oversight that’s not done, the priorities of executives, how they think they’re fulfilling their own self-interest."

Assange also told the magazine that his group has material on many businesses and…

Tags: arrest, Interpol, WikiLeaks

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Google to Offer Groupon $5-6 Billion; From Startup to Megabucks in 2 Years; “Grouponicius” Holiday Deals

by ilene - November 30th, 2010 7:45 pm

Help Mish earn Groupon bucks by signing up for the program using his link. Does this sound appealing: living expense-free for a year, relying on the kindness of others, abandoning home and material things, and – if you can pull it off – winning $100,000? That’s what it takes to be a Groupawn. For more details, read Google to Offer Groupon $5-6 Billion; From Startup to Megabucks in 2 Years; "Grouponicius" Holiday Deals. - Ilene 

Courtesy of Mish

It’s not easy to to go from startup to $6 billion in two short years. That Groupon is about to do so is testimony as to just what can happen when a good idea goes viral.

Certainly Groupon had the right idea in these cost-conscious times: super-deals on goods and services that people want.

Groupon hooks up buyers with sellers at fantastic prices, but only if enough people sign up. Sellers determine how big the group of buyers need to be in advance, and how many offers they wish to make.

That simple idea will now net Groupon a reported $5-6 Billion deal with Google.

Please consider Google Is Said to Be Poised to Buy Groupon

Google is near a deal to acquire Groupon, the pioneering online discounter, for as much as $6 billion, people with direct knowledge of the matter told DealBook on Monday.

At that price, Groupon — known for its daily discounts — would be one of Google’s largest acquisitions, dwarfing its $3.1 billion purchase of DoubleClick, the display advertising giant, in 2007.

The deal would also be Google’s boldest foray in local business online advertising, a large and untapped market it has been trying to get into, most recently by promoting Marissa Mayer to oversee the local business and attempting to buy Yelp, the local review site, last year.

The average Groupon deal offers 50 to 90 percent off retail goods and services, from restaurant certificates to skydiving lessons. It has grown beyond local merchants to encompass retailers like Gap, which offered a nationwide deal this summer. On the day of the Gap promotion, Groupon sold 440,000 units and generated $11 million in revenue.

Groupon’s success has helped turn the company into a cash-generating machine, signing up more than 12 million registered users and reaping more than $350 million in estimated annual revenue.

"Grouponicius Deals"

Techland…

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Pension Accounting Change to Hit Profits?

by Zero Hedge - November 30th, 2010 7:30 pm

Courtesy of Leo Kolivakis

Via Pension Pulse.

Bob Tita of the Dow Jones Newswire reports in the WSJ, Pension Accounting Change Could Make Company Profits Less Predictable:

Efforts to make pension accounting more transparent could cause corporate profits to become more volatile if gains and losses from pension assets are mingled with results from companies’ business operations.

 

The agency for international accounting standards is expected to take up a proposal next year that would require companies with defined-benefit pensions to report annual changes in the value of their pension assets as part in their income statements. Under current procedures, returns on pension investments and gains and losses in pension-plan assets are accounted for in small increments over several years to keep them from skewing companies’ earnings.

 

 

 

 

 

 

The change would provide a more immediate snapshot of companies’ pension-plan performance. But U.S. companies, aside from Honeywell International Inc. (HON), have so far been reluctant to voluntarily change their pension accounting. Observers warn that investors could be subjected to bouncier stock prices if earnings become significantly less reliable with the addition of unpredictable gains and losses from pensions.

 

 

“If we’ve learned nothing else over the last three years, it’s that the market isn’t always rational,” said Alan Glickstein, senior consultant for Towers Watson, an employee benefits consultancy. “It’s not necessarily a good thing if [the accounting change] just increases earnings volatility.”

 

If the International Accounting Standards Board--the nongovernmental agency for accounting rules used by companies outside the U.S.--adopts the change for pension accounting, observers predict the Financial Accounting Standards Board will follow suit for the sake of consistency and amend the Generally Accepted Accounting Principles used by U.S. companies.

 

 

“To the degree that a company wants to make sure that their financials are reflective of their operations, it would make sense to go through a change like this. It would add transparency to the numbers,” said Daniel Holland, an analyst for research firm Morningstar Inc.

 

More than 340 companies in the Standard & Poor’s 500 Index have defined-benefit pensions that guarantee employees pension incomes when they retire. To meet these obligations, the companies have set aside a combined $1.22 trillion that is invested in stocks, bonds and

…

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Interpol Issues International Arrest Warrant For Julian Assange For “Sex Crimes”

by Zero Hedge - November 30th, 2010 5:55 pm

Courtesy of Tyler Durden

Per BreakingNews.com, Interpol has just issued an international arrest warrant for Julian Assange. The offense listed: SEX CRIMES. And somehow Interpol does not have access to the Internet and is unable to pull an image of the wanted criminal. Unclear if Ben Bernanke will follow suit in the same Sex Crime category for repeated involuntary fornication with the world’s middle class. In other news, we are now taking odds on a dramatic, globally televized slow speed chase on a California highway in Julian Assange’s future?

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A Perfectly Stable Market? 18,209 “Mini Crashes” In The Past 5 Years Claim Otherwise

by Zero Hedge - November 30th, 2010 5:18 pm

Courtesy of Tyler Durden

There was a time when the SEC at least tried to pretend the market is safe and efficient for investors. That was before Reg NMS, ATS and who knows what other mandated changes to market structure made a once stable marketplace into a labyrinth of fragmented sub-markets, exchanges, ATS, OTC venues and dark pools, where flash crashes, sub-pennying, HFT scalper algos, feedback loop generating synthetic CDOs aka ETFs, bank internalization and rampant outright fraud made the market into a sad and pale imitation of what it used to be. Of all this, May 6 was merely the culminating point. It is no wonder that since the first of many Flash Crashes investors have pulled money in 29 consecutive weeks: the message is all too clear – the retail participant has left the building…and the market. And to put the final nail in the coffin of investor confidence, we present the following detailed analysis from Nanex, which proves that in the past 5 years trading is nothing short of a travesty. The market analysis firm has conducted the definitive exchaustive analysis of “mini crashes” and has found a whopping 18,209 events of either mini melt downs ot melt ups. We hope Mary Schapiro reads this report and provides us with a refutation of either the analysis or the conclusion. We will gladly provide her the venue she so desperately needs to address an infinitely skeptical public that she has anything under control at this point.

From Nanex:

We have analyzed all listed equities for 2006, 2007, 2008, 2009 and 2010 for potential “mini crashes” in individual stocks. We were surprised at the number of incidents we found.

Parameters used:

1. To qualify as a down-draft candidate, the stock had to tick down at least 10 times before ticking up — all within 1.5 seconds and the price change had to exceed 0.8%.
2. To qualify as a up-draft candidate, the stock had to tick up at least 10 times before ticking down — all within 1.5 seconds and the price change had to exceed 0.8%.

Because there are so many of these instances, showing all the individual charts on a page would simply be to unwieldy. Instead, we are providing ZIP archives for each year analyzed. Simply download the files, unzip and start viewing. We also made 10 pages…

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