FINREG Dead?
by ilene - June 29th, 2010 3:44 am
FINREG Dead?
Courtesy of Karl Denninger at The Market Ticker
"As I have indicated for some time now, my test for the financial regulatory reform bill is whether it will prevent another crisis. The conference committee’s proposal fails that test and for that reason I will not vote to advance it. During debate on the bill, I supported several efforts to break up ‘too big to fail’ Wall Street banks and restore the proven safeguards established after the Great Depression separating Main Street banks from big Wall Street firms, among other issues. Unfortunately, these crucial reforms were rejected. While there are some positive provisions in the final measure, the lack of strong reforms is clear confirmation that Wall Street lobbyists and their allies in Washington continue to wield significant influence on the process.”
Interesting. Note that:
Senator Feingold was one of eight senators to oppose the repeal of Glass-Steagall in 1999. Senator Feingold also opposed the Wall Street bail-out in 2008.
Oh my the balls are still there!
There are times when one Senator with a pair of church-ringers can make a difference. This is one of them.
I have long said that Glass-Steagall, which was all of 37 pages, is more than sufficient to stuff the genie back in the bottle. Indeed, all of Mr. Feingold’s complaints would be addressed by simply reinstating it.
Yes, I know the banks would howl, and claim that "they’d all move to Britain."
Fine. Let ‘em.
If you know someone is playing around with the materials to blow up your economy, do you want them to do so in your country or somewhere else? Clearly, we’d prefer to have that happen "somewhere else", right?
Banking should be a utility function. Those institutions that want to play in the capital markets are free to do so, but they should NOT have access toany sort of support whatsoever – not from The Fed, not from Treasury, not from anyone but themselves. If they fail then they go under and everyone holding their paper takes a haircut (or worse.)
All this arm-waving and 2200 pages of legislation is another attempt…
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DiggTHE THIRD DEPRESSION?
by ilene - June 28th, 2010 3:35 pm
THE THIRD DEPRESSION?
Courtesy of The Pragmatic Capitalist
That’s what Paul Krugman says is on the horizon. In a sobering article in Sunday’s NY Times Mr. Krugman says policy errors are leading us right off the cliff:
“We are now, I fear, in the early stages of a third depression. It will probably look more like the Long Depression than the much more severe Great Depression. But the cost — to the world economy and, above all, to the millions of lives blighted by the absence of jobs — will nonetheless be immense.
And this third depression will be primarily a failure of policy. Around the world — most recently at last weekend’s deeply discouraging G-20 meeting — governments are obsessing about inflation when the real threat is deflation, preaching the need for belt-tightening when the real problem is inadequate spending.”
Regular readers know my position. I never thought the secular bear ended or that the credit crisis was over. This has become abundantly clear as unemployment has remained stubbornly high and the credit crisis evolves into a full blown sovereign debt crisis. The recent evolution of the Greek crisis and scare mongering of certain market participants is almost certainly walking us off the edge of the cliff. Policymakers have misdiagnosed this crisis from the very beginning so it’s not surprising to see them continue down this same path.
It’s unfortunate that this is all unraveling with Greece at the epicenter. Policymakers have utterly failed in understanding that the Euro currency system is fundamentally different from the others around the globe – specifically in Japan, UK and USA. We’ve all become convinced that we are the next Greece (which is utterly insane). The Euro crisis is staggering and beyond frightening in my opinion. As I have maintained for years there is no true fix in Europe that doesn’t include full unity (a United States of Europe – which is impossible) or partial or full restructuring (full restructuring is inevitable in the long-run in my opinion). There is no bailout that can fix the inherent flaws in the single currency system. It is destined to fail in my opinion. That’s a terribly frightening thought and the Euro’s death might very well be on our doorstep. A swift death would be preferable in my opinion. Unfortunately, I see this crisis playing out for a very long time…
TALKING OURSELVES OFF THE EDGE OF THE CLIFF
by ilene - May 29th, 2010 5:53 pm
TALKING OURSELVES OFF THE EDGE OF THE CLIFF
Courtesy of The Pragmatic Capitalist
Yesterday’s WSJ MarketBeat blog took David Einhorn to task for his op-ed in the NY Times titled “Easy Money, Hard Truths“. They make the argument that Einhorn is simply pushing his massive gold position. I fear Einhorn is doing something much worse – helping to scare us all into continued recession.
First off, I have no problem when someone talks their book. In fact, I almost prefer for people to talk their book. There’s a certain trust in someone who is willing to “put their money where their mouth is”. It’s the primary reason why I believe the hedge fund business is such a wonderful advancement beyond traditional mutual funds – the manager’s interests are generally aligned with those of the investor. If you can find a manager who is not only intelligent, but has a sound moral compass you’ve wandered upon quite a gem. From all accounts David Einhorn appears to fit the mold. But I take very serious issue with his recent comments which I believe are filled with half-truths and propaganda that we continually hear from the inflationistas (all of whom have been terribly wrong thus far in terms of their macroeconomic outlook) who are driving the country towards the edge of the cliff.
Einhorn is a great investor and clearly a brilliant man, but for two years I have watched policymakers and fear mongerers misdiagnose the problems that we confront and this is, in my opinion, why we are still wrangling with these issues. In 2008 I wrote a letter to the Federal Reserve saying that this was a classic “balance sheet recession” with problems rooted in the private sector – specifically the consumer. I told them that saving banks was not the solution and that monetary policy would prove as fruitless in the U.S. as it has in Japan. I was shocked to receive a friendly response to my letter but not shocked to see Mr. Bernanke implement his Friedman-like monetarist campaign of “saving the world”. Obviously it hasn’t worked (unless you’re a banker) as we sit here two years later still discussing this wretched credit crisis and the ranks of the unemployed continue to climb. If we cannot properly diagnose the problems we cannot find a proper cure. Thus far, we have failed.…
AMERICANS ARE ONCE AGAIN BAILING OUT BANKS VIA GREECE
by ilene - April 29th, 2010 3:40 pm
AMERICANS ARE ONCE AGAIN BAILING OUT BANKS VIA GREECE
Courtesy of The Pragmatic Capitalist
Most Americans probably haven’t connected the dots yet, but you’re going to be signing an enormous check over to Greece over this weekend. That’s right, as the largest contributor to the IMF the United States taxpayer is on the hook for the Greek bailout. The numbers aren’t set in stone quite yet, but the latest rumors are for a $160B bailout over three years. Of course, the most despicable part of this whole thing is not just the fact that the U.S. is helping to bail out Greece, but that this bailout is actually another bank bailout! That’s right. This isn’t really about the people of Greece. They are going to be forced into years of austerity and painful economic times regardless of the situtation. What this is really about is the $189B in Greek debt that the European banks have on their books. No one wants them to take a 70% haircut on the debt. So, connecting the dots here for you – Americans are once again bailing out banks – this time via the IMF.
If this doesn’t outrage you then I don’t know what will. We all know how well the last bank bailout worked for all of us. With the banks reaping record profits and doling out record bonuses U.S. unemployment remains near its 25 year highs. The only true v-shaped recovery in this “recovery” has been the one in bank profits. The bailouts sure worked great for Wall Street, but didn’t work for Main Street. And make no mistake here – the people of Greece will be forced into years of painful austerity measures regardless of the outcome here. But who will be made whole? That’s right, those God damned bankers.
Bailouts for everyone! Oh, but not you Main Street. No soup for you.
THE DRUNKEN WALK TAKES ANOTHER SUDDEN TURN
by ilene - February 25th, 2010 12:56 pm
THE DRUNKEN WALK TAKES ANOTHER SUDDEN TURN
Courtesy of The Pragmatic Capitalist
The drunk is having a particularly difficult time finding his way home this time. The market has now swung in opposing 1% directions on three consecutive days – a sure sign of near total confusion in the equity markets. Today’s swing comes courtesy of declining sentiment and weak jobs – the never ending thorn in this markets side.
Jobless claims rocketed higher to 496K and there were no administrative excuses behind this jump. Analysts had expected a reading of 460K. Continuing claims also climbed to 4.61MM. This doesn’t bode well for the monthly jobs report.
Reports of weak weather were already contributing to a potentially poor jobs figure, but this data all but seals the deal. The recovery on Main Street has been delayed for yet another month. Anyone who is big on chart reading does not like the recent uptick in claims. It certainly looks like the trend is higher to sideways from here.
In other news, durable goods posted a gain of 0.3%, but was well below anlayst estimates of 1.3%. The durable goods data is notoriously volatile so it’s difficult to gauge too much from this data. The news is a bit mixed as transportation goods posted strong orders while non-transport related goods posted weak orders. The overall trend remains higher for now, however.
In other other news, the currency markets were once again shaken up as problems in Greece appear to be never ending. Ratings agencies are threatening downgrades of Greece as austerity looks like the country’s final resort. The Euro remains the worst house in a very bad neighborhood.
So where do we stand on this market? Uncertainty remains the name of the game and uncertainty is rarely good for a market. As earnings season comes to a close I fully expect the uncertainty level to pick it up a notch. There is very little positive news for investors to hang their hats on. For now, the macro trends of global rate increases, weak jobs, sovereign debt, regulation and the…
INSIDER BUYING DROPS TO LOWEST LEVELS IN A YEAR
by Insider Scoop - January 19th, 2010 11:59 pm
INSIDER BUYING DROPS TO LOWEST LEVELS IN A YEAR
Courtesy of The Pragmatic Capitalist
As the recession on Main Street continues the negative trends in insider buying get even worse. Insider buying fell to a new low of $7.8MM on the week. Selling dropped from $318MM to $293.22MM, but remains at very high levels. I continue to believe this is a reflection of the ongoing secular bear market as corporate
Notable selling:
Notable buying:
Conversation with John Rubino
by ilene - January 3rd, 2010 8:56 pm
Conversation with John Rubino
John Rubino is the co-author, with GoldMoney’s James Turk, of The Collapse of the Dollar and How to Profit From It (Doubleday, 2007), and author of Clean Money: Picking Winners in the Green-Tech Boom (Wiley, 2008), How to Profit from the Coming Real Estate Bust (Rodale, 2003) and Main Street, Not Wall Street (Morrow, 1998). After earning a Finance MBA from New York University, he spent the 1980s on Wall Street, as a Eurodollar trader, equity analyst and junk bond analyst. During the 1990s he was a featured columnist with TheStreet.com and a frequent contributor to Individual Investor, Online Investor, and Consumers Digest, among many other publications. He now writes for CFA Magazine and manages and edits the terrific websites DollarCollapse.com and GreenStockInvesting.com.“This is the end of a long era and the beginning of another that is not going to be nearly as nice.” John Rubino
John: First, this was obviously a lame year – not much competition. Second, it’s a great negative indicator, like Time’s “Home Sweet Home” edition just prior to the housing collapse. Ben Bernanke is part of the old monetary order, in which it was acceptable to create paper money in infinite amounts to finance a growing government. The peak of his popularity coincides with the end of the system he helped design.…
2009: The Year Wall Street Bounced Back and Main Street Got Shafted
by ilene - December 27th, 2009 6:36 pm
2009: The Year Wall Street Bounced Back and Main Street Got Shafted
Courtesy of Robert Reich, of Robert Reich’s Blog
In September 2008, as the worst of the financial crisis engulfed Wall Street, George W. Bush issued a warning: "This sucker could go down." Around the same time, as Congress hashed out a bailout bill, New Hampshire Sen. Judd Gregg, the leading Republican negotiator of the bill, warned that "if we do not do this, the trauma, the chaos and the disruption to everyday Americans’ lives will be overwhelming, and that’s a price we can’t afford to risk paying."
In less than a year, Wall Street was back. The five largest remaining banks are today larger, their executives and traders richer, their strategies of placing large bets with other people’s money no less bold than before the meltdown. The possibility of new regulations emanating from Congress has barely inhibited the Street’s exuberance.
But if Wall Street is back on top, the everyday lives of large numbers of Americans continue to be subject to overwhelming trauma, chaos and disruption.
It is commonplace among policymakers to fervently and sincerely believe that Wall Street’s financial health is not only a precondition for a prosperous real economy but that when the former thrives, the latter will necessarily follow. Few fictions of modern economic life are more assiduously defended than the central importance of the Street to the well-being of the rest of us, as has been proved in 2009.
Inhabitants of the real economy are dependent on the financial economy to borrow money. But their overwhelming reliance on Wall Street is a relatively recent phenomenon. Back when middle-class Americans earned enough to be able to save more of their incomes, they borrowed from one another, largely through local and regional banks. Small businesses also did.
It’s easy to understand economic policymakers being seduced by the great flows of wealth created among Wall Streeters, from whom they invariably seek advice. One of the basic assumptions of capitalism is that anyone paid huge sums of money must be very smart.
But if 2009 has proved anything, it’s that the bailout of Wall Street didn’t trickle down to Main Street. Mortgage delinquencies continue to rise. Small businesses can’t get credit. And people everywhere, it seems, are worried about losing their…
‘Overvalued, Check. Overbought, Check. Overbullish, Check….’
by ilene - December 24th, 2009 3:44 am
‘Overvalued, Check. Overbought, Check. Overbullish, Check….’
Courtesy of Michael Panzner at Financial Armageddon, and John Hussman
I’ve written a fair number of posts highlighting the disconnect between Wall Street and Main Street (far more than I can remember, in fact). But even if you ignore what is happening in the real economy (you know, like Wall Street usually does), share prices are out of whack — with their own history. In "Clarity and Valuation," John P. Hussman, President of Hussman Investment Trust, discusses that very issue in this week’s edition of Hussman Funds’ Weekly Market Comment:
Last week, the dividend yield on the S&P 500 dropped below 2%, versus a historical average closer to double that level. While part of the reason for the paucity of yield in the current market can be explained by the 20% plunge in dividend payouts over the past year, as financial companies have cut or halted dividends to conserve cash, the fact is that current payouts are not at all out of line with their historical relationship to revenues, and even a full recovery of the past year’s dividend cuts would still leave the yield at a paltry 2.5%. The October 1987 crash occurred from a yield of 2.65%, which was, at the time, the lowest yield observed in history, matched only by the 1972 peak prior to the brutal 1973-74 bear market.
Those two periods had a few other things in common. In the weeks immediately preceding the market downturn, stocks were overbought, had advanced significantly over prior weeks, bond yields were creeping higher, and investment advisory bearishness had dropped below 19%. All of those features should be familiar, because we observed them at the 1987 and 1972 peaks, and we observe them now.
On the basis of normalized profit margins, the average price/earnings ratio for the S&P 500, prior to 1995, was only about 13. Higher historical “norms” reflect the addition into that average of extremely high “recession P/Es,” based on dividing the S&P 500 by extremely low, but temporarily depressed earnings. For example, the P/E for the S&P 500 currently is 86, because earnings have been devastated, but it would be foolish to take that figure at face value, and equally foolish to work it into a historical “average” P/E. The pre-1995 norm
…
Main Street: Can We Have a Recovery Too?
by ilene - October 12th, 2009 6:37 pm
Main Street: Can We Have a Recovery Too?
Plante/ Tulsa World
Here’s a pair of headlines that I thought were fantastic in a juxtapositional way:
Goldman Faces PR Dilemna Over Huge Bonuses (CNBC)
Debt, Unemployment Weigh on Recovery (WSJ)
Both articles out on the same day. Today. Only in America.
Cartoon Source: TIME
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