by ilene - April 22nd, 2014 2:27 pm
Courtesy of Larry Doyle.
Every now and then I come across a document or statement that simply stops me in my tracks. In the process of pondering the weight and importance of the embedded message, I am typically left totally aghast.
Today I had one of those experiences as I continued to review the treasure trove of material in the recently released documents from the Clinton Presidential Library. From a document covering the work of the Council of Economic Advisers, I almost spilled my coffee when I read the following:
There is a case for a lender of last resort in catastrophic cases (Greenspan.)
Uncle Alan effectively acknowledges the ‘too big to fail’ problem all the way back in 1998 when we experienced the meltdown of the hedge fund Long Term Capital Management.
Improved capital standards–Capital standards are seriously broken. We need to improve measurement of risk and capital so that banks have adequate capital against the risks they run.
Be mindful that at this point in time Wall Street firms were supposed to be able to leverage themselves at a maximum of 12 to 1. Even by that standard, this document is highlighting that the President’s advisers felt that capital standards were not sufficient. Fast forward 6 years and those capital standards were eroded so Wall Street firms could triple their leverage.
You can’t make this stuff up.
They then asked themselves the following:
. . . should we address leverage in the system?
If I were not reading a document from a presidential library, I may have been confused to think I was reading a script from an Abbott and Costello skit when I see how the advisers answered this question regarding leverage:
We should not address leverage per se, because it is too difficult to define given derivatives and is not the proper measure of the problem. We should control excessive exposure to risk.
Let’s see here. Leverage is too difficult to define given the unknown risks lurking within the derivatives markets, but there is a need to control excessive exposures to risk.
Huh? What? “Who’s on first??”
Is it any wonder that the big money interests on Wall Street were able to ply their trade and fill the coffers of those in Washington to relax the net capital standards and triple their leverage in the process? We still…
by ilene - April 22nd, 2014 1:37 pm
Courtesy of Mish.
ECB president Mario Draghi has been making lots of noise recently about cutting interest rates because the euro is too strong and banks aren’t lending enough.
Realistically, there’s not much room to cut with rates already at a rock-bottom .25 percent.
Some suggest negative interest rates are the just the ticket to spur lending. Should that happen, the Bank of New York Mellon Eyes Charging Clients for Euro Deposits.
Bank of New York Mellon said it was considering charging clients for depositing euros if the European Central Bank decides to cut key interest rates below zero.
The potential move by the world’s biggest custody bank comes after Mario Draghi, president of the ECB, said last week that the region could require “further monetary stimulus” to offset a strengthening euro.
“If the eurozone were to go to negative rates that would actually present the opportunity for us to charge for deposits and we are giving that very serious consideration,” Todd Gibbons, BNY Mellon’s chief financial officer, said on a conference call as the bank unveiled its first-quarter earnings.
Reflections on Forcing Banks to Lend
For starters, banks lend when they believe they have creditworthy customers and lending is worth the risk.
An attempt to make banks lend to non-creditworthy customers is not only foolish but reckless. How many times do we have to march down that path to prove it?
Banks Should be Banks
Moreover, and as I have commented before, banks should be banks. I see nothing at all wrong with banks charging a slight fee for deposits.
Banks ought not be lending demand deposit accounts in the first place. The practice is fraudulent. Thus, it is natural for banks to charge for safekeeping of such deposits.
If the ECB forces banks into a corner where they have to start charging for deposits, arguably the system will be better off for it.
by ilene - April 22nd, 2014 1:05 pm
Submitted by Tyler Durden.
The proud recipient of today's $250,000 invoice for propaganda rendered by Ben Bernanke will be the Economic Club of Canada…
- BERNANKE: FED ACTIONS DIDN'T FAVOR WALL STREET OVER MAIN STREET
- Bernanke Says US Economy Is Heading Towards Complete Recovery
Just don't tell Obama (or the Democrats who have been told not to mention the 'recovery'), or the record number of middle-aged people living with their parents, or the almost imperceptible rise in the employed population since QE began…
by ilene - April 22nd, 2014 12:33 pm
In the meantime, commodity prices have been resilient despite all the deflation talk and China slowdown concern. On top of that, shareholder-friendly initiatives across the sector seem to be popping up everywhere – from increased dividends to the willingness to spin off non-core assets and break apart empires. This is bullish.
Here’s Bank of America Merrill Lynch’s technician Stephen Suttmeier with the technical set up:
We highlighted Energy as a sector showing good tactical relative strength. Two signs of relative rehab for the sector that we highlighted in our Monthly Report were
1) reclaiming the prior relative lows from 2010 and 2012 and
2) sustaining the move above the 13, 26, and 40-week moving averages relative to the S&P 500. S&P 500 Energy has done both.
In addition, S&P 500 Energy is pushing to new all-time highs with confirmation from the sector advance-decline line (side bar). The relative set-up for Energy is similar to that of October 2010, when the sector moved above its 13, 26, and 40-week relative moving averages and outperformed until April 2011.
…and his chart, showing the relative breakout of the sector versus the S&P 500:
Energy remains tactically strong
Bank of America Merrill Lynch – April 22nd 2014
by ilene - April 22nd, 2014 12:20 pm
In the aftermath of the 2008 financial crisis, economists debated whether the Federal Reserve should be involved — at all — in pricking bubbles. The housing bubble, and subsequent financial crisis, had led to a disastrous result: Hundreds of banks had failed and millions of Americans had lost their jobs. At the time, many still believed the emergence of future bubbles could only be prevented through financial regulation, and not through interest rate hikes.
Today, however, as interest rates remain at historically low levels and are expected to stay low at least into next year, there is growing concern among investors, economists and central bankers that a new bubble has emerged, and that increased regulation isn’t enough to stop it. Led by a powerful Fed governor, there’s a growing call for the Federal Reserve to raise interest rates to prevent this bubble from growing.
So what bubble are we talking about? It’s not the one you might expect.
Most of us worry about bubbles in housing and stocks because that’s what we own. But those markets are not really what worries the Fed the most. Central bankers are more concerned about the far bigger, but less sexy, bond market. That’s because a bubble exploding in this market could lead to another devastating financial crisis.
by ilene - April 22nd, 2014 11:45 am
Courtesy of The Automatic Earth.
Edwin Rosskam Workers and hurricane shelter in tobacco field, Puerto Rico January 1938
Once more for everyone who’s got even the lightest slightest shade of green in their thoughts and dreams and fingers, I’ll try and address the issue of why going or being green is a futile undertaking as long as it isn’t accompanied by a drive for a radical upheaval of the economic system we live in. Thinking we can be green – that is to say, achieve anything real when it comes to restoring our habitat to a healthy state – without that upheaval, is a delusion. And delusions, as we all know all too well, can be dangerous.
It’s not possible to “save the planet” while maintaining the economic system we currently have, because that system is based on and around perpetual growth. It’s really as simple as that, and perhaps it’s that very simplicity which fools people into thinking that can’t be all there is to it. Switching to different fuels, alternative energy forms, is useless in such a system, because there will be a moment when the growth catches up with all preservation measures; it’s not a winnable race. There will come a time when a choice between preservation and growth must be made, and the latter will always win (as long as the system prevails). It would be very helpful if the environmental movement catches up on the economics aspect, because it’s not going anywhere right now. It’s a feel-good ploy that comforts parts of our guilty minds but won’t bring about what’s needed to eradicate that guilt.
If you’re serious about preserving the world and restoring it to the state your ancestors found it in, it’s going to take a lot more than different lightbulbs or fuels or yearly donations to a “good” cause. That, too, is very simple. You won’t be able to keep living the way you do, and preserve the place you have in your society, your job, your home, your car. That is a heavy price to pay perhaps in your view, but there is no other way. Whether you make that choice is another story altogether. Just don’t think you’re going to come off easy.
by ilene - April 22nd, 2014 11:33 am
Courtesy of Pam Martens.
There is now overwhelming evidence that Wall Street firms have entered a race to the bottom in high-tech trading wars. To grab the best programming talent, Wall Street firms are paying top dollar for the best and brightest coders and developers and potentially sapping the ability of other U.S. industries – those that make real products – to compete.
Just this month, Jamie Dimon, CEO of JPMorgan, told the firm’s shareholders in his annual letter that JPMorgan employs “nearly 30,000 programmers, application developers and information technology employees who keep our 7,200 applications, 32 data centers, 58,000 servers, 300,000 desk-tops and global network operating smoothly for all our clients.”
According to Anish Bhimani, Chief Information Risk Officer at JPMorgan Chase, in an interview published at the Information Networking Institute (INI) at Carnegie Mellon, JPMorgan has “more software developers than Google, and more technologists than Microsoft…we get to build things at scale that have never been done before.”
Obviously, not all of those tech guys are engaged in creating ever more rapid trading strategies; but to stay competitive with the technology arms race on Wall Street, new algorithms, programs deploying artificial intelligence, and high-speed routing techniques are being created at break-neck speed across the industry.
Industry insiders say that Wall Street is a potent force in campus recruiting, seeking out the computer whiz kids with large pay deals months before their graduation and before non-financial firms have had a chance to even schedule an interview.
An online advertisement at efinancialcareers says that “The market for intelligent and sophisticated programmers within finance is still booming, and not just for those with existing finance experience. The world’s top financial institutions are continuing to search for the most talented technologists from an array of backgrounds…” Salaries are listed at $150,000 to $400,000 for programmers skilled in C, C++, Core Java, Low Latency, Multithreading, FX [Foreign Exchange], Equities, Futures, Perl, Python, TCP/IP, High Frequency, Bank, C#, Operations, Python, Unix, Linux.
How Bill Ackman Scrambled To Acquire Over $3 Billion In Allergan Calls Knowing Valeant Would Submit A Bid
by ilene - April 22nd, 2014 9:46 am
Submitted by Tyler Durden.
In yet another page of the activist investor's sleaze book, last night Bill Ackman showed that when it comes to unethical way to generate "alpha" he truly may have no equal, when we learned that together with serial-acquirer and emplyee terminator Valeant, Ackman's Pershing Square would join in on a debt-funded (thank you ZIRP) acquisition of botox maker Allergan.
Nothing about that is odd. Where the story, however, becomes a near-criminal farce (if the US actually had a regulator which itself was not an agency designed to promote and reward criminality in hopes of getting a job as a kickback), is that as Valeant was preparing to announce its bid, Pershing Square – well aware of what was coming – was buying, and buying, and buying Valeant stock. Actually, Ackman bought almost no stock: in fact he only bought some $76 million in AGN stock in late February. The balance: all call options, accumulated on an almost daily basis through March all the way until April 21, the day the news was leaked.
Ackman began buying Allergan stock Feb. 25 and then in March switched to over-the-counter call options to accumulate his stake, regulatory filings show. A buying pause April 9 and 10 helped lower the price, before Ackman resumed in earnest April 11, according to two people familiar with the matter.
Valeant was interested in the unusual arrangement with Ackman because the hedge fund could amass more of Allergan’s shares before making a public disclosure, said a person familiar with the matter. The shares rallied the most since 2009 in the six days before the stake and bid were disclosed yesterday, soaring 22 percent, and trading volume last week approached the highest level in a year.
Why? Because Ackman had accumulated so many calls, it was in his interest at this point to leak the "news" about not his but Valeant's involvement, which is always happy to trade off its balance sheet and future growth prospects in exchange for a pop in the stock price here and now, even if that means firing thousands of workers, and actually cutting back even more on the company's own internal…
by ilene - April 22nd, 2014 12:01 am
By TIM WU
Everyone knows about the big Internet scams: the e-mails advertising diet pills, the proposed Nigerian bank transfers. But we tend to overlook the milder forms of truth-stretching that have come to shape online living, and it’s hard not to. They’re often perpetuated by big and reputable companies, like Apple, Seamless, and Amazon.
Take search. General search sites, like Google and Bing, are pretty straightforward: you type in a query and get results ranked by some measure of relevance; you also see clearly marked advertisements. This experience tends to shape our expectation that searches deliver relevant results. But the same search on sites like Amazon or Seamless turns up not only relevant results but disguised advertisements, as well. As George Packer recently wrote in the magazine, “Few customers realize that the results generated by Amazon’s search engine are partly determined by promotional fees.” GrubHub Seamless, the merged food-delivery engine, recently revealed in an S.E.C. filing that “restaurants can choose their level of commission rate … to affect their relative priority in sorting algorithms, with restaurants paying higher commission rates generally appearing higher in the search order than restaurants paying lower commission rates.”
These practices seem to run afoul of Federal Trade Commission policies. …
by ilene - April 21st, 2014 11:08 pm
By STEVE CONNOR
A genetic disease has been cured in living, adult animals for the first time using a revolutionary genome-editing technique that can make the smallest changes to the vast database of the DNA molecule with pinpoint accuracy.
Scientists have used the genome-editing technology to cure adult laboratory mice of an inherited liver disease by correcting a single “letter” of the genetic alphabet which had been mutated in a vital gene involved in liver metabolism.
A similar mutation in the same gene causes the equivalent inherited liver disease in humans – and the successful repair of the genetic defect in laboratory mice raises hopes that the first clinical trials on patients could begin within a few years, scientists said.