Posts Tagged ‘Paul Volcker’

PAUL VOLCKER: THE MARKET IS “BROKEN”

PAUL VOLCKER: THE MARKET IS “BROKEN”

Courtesy of The Pragmatic Capitalist 

This is a superb summary of Paul Volcker’s must read comments at the Federal Reserve bank of Chicago from today. Highly recommended reading (via the WSJ):

1) Macroprudential regulation — “somehow those words grate on my ears.”

2) Banking — Investment banks became “trading machines instead of investment banks [leading to] encroachment on the territory of commercial banks, and commercial banks encroached on the territory of others in a way that couldn’t easily be managed by the old supervisory system.”

3) Financial system — “The financial system is broken. We can use that term in late 2008, and I think it’s fair to still use the term unfortunately. We know that parts of it are absolutely broken, like the mortgage market which only happens to be the most important part of our capital markets [and has] become a subsidiary of the U.S. government.”

4) Business schools — “We had all our best business schools in the United States pouring out financial engineers, every smart young mathematician and physicist said ‘I don’t want to be a civil engineer, a mechanical engineer. I’m a smart guy, I want to go to Wall Street.’ And then you know all the risks were going to be sliced and diced and [people thought] the market would be resilient and not face any crises. We took care of all that stuff, and I think that was the general philosophy that markets are efficient and self correcting and we don’t have to worry about them too much.

5) Central banks and the Fed — “Central banks became…maybe a little too infatuated with their own skills and authority because they found secrets to price stability…I think its fair to say there was a certain neglect of supervisory responsibilities, certainly not confined to the Federal Reserve, but including the Federal Reserve, I only say that because the Federal Reserve is the most important in my view.”

6) The recession — “It’s so difficult to get out of this recession because of the basic disequilibrium in the real economy.”

7) Council of regulators — “Potentially cumbersome.”

8 ) On judgment — “Let me suggest to you that relying on judgment all the time makes for a very heavy burden whether you are regulating an individual institution or whether you are regulating the whole market or whether you are deciding what might be disturbing or what might not be disturbing.


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Double dip or global deflation?

Christopher Whalen writes about how the U.S. economy in first half of the 20th Century could be characterized as stagnant, with a brief growth spurt during WWI and a mirage of growth during WWII and the cold war:

Following the Crash of 1929, the pretense observed by both political parties that all was well in the U.S. economy evaporated into almost twenty years of economic stagnation. While the massive mobilization for WWII provided the appearance of a recovery, and the period of the Cold War extended this mirage on a sea of public debt and paper dollars, the basic issue of overcapacity remained.

The illusion continued through the 1970s when the housing sector took over defense as the main driver of economic growth. However, Chris argues, that what was perceived by most Americans as real growth was actually the result of deficit spending and "reckless monetary expansion" by the Fed, courtesy of Alan Greenspan and later Ben Bernanke. – Ilene 

Double dip or global deflation?

By Christopher Whalen 

1936

The page proofs of my upcoming book, "Inflated: How Money and Debt Built the American Dream," just went back to the editors. One of the benefits of writing a book about U.S. financial history is that it forces you to take a long view of both economics and the political narrative used to describe it. It is the issue of language and labels, in my view, that is making it so difficult for Americans to understand the current state of the economy.

The National Bureau of Economic Research just declared that the “recession” that began in 2007 ended in the middle of 2009, making it the longest downturn since WWII. The only problem is that none of the people who work at NBER today, which is one of my favorite research organizations, are old enough to remember what the U.S. economy was like before WWII; before the age of Keynesian socialism and the use of debt to stimulate growth and employment became standard policy in Washington.

Let’s start with the term “recession,” which itself reflects the assumption that economic growth is always positive and the trend line is always upward sloping… 

Continue here: blogs.reuters.com


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Paul Volcker Obviously Reads Jr Deputy Accountant, Says America Can Learn From Europe Debt Crisis

Paul Volcker Obviously Reads Jr Deputy Accountant, Says America Can Learn From Europe Debt Crisis

Courtesy of Jr. Deputy Accountant

How many times have I said this? Seriously?

Reuters:

Europe’s debt crisis shows the risks for the United States if it does not get its budget deficits under control, former Federal Reserve Chairman Paul Volcker said on Tuesday.

"If we need any further illustration of the potential threats to our own economy from uncontrolled borrowing, we have only to look to the struggle to maintain the common European currency, to rebalance the European economy, and to sustain political cohesion of Europe," Volcker said.

There, it’s official and Paul Volcker said so. 


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Droppin’ Knowledge: Volcker On America’s Ability To Compete

Droppin’ Knowledge: Volcker On America’s Ability To Compete

Paul Volcker Courtesy of Joshua M Brown, The Reformed Broker 

I just snatched this little exchange out of the transcript of Paul Volcker‘s recent interview with CNN.  The greatest Fed Head in history gives us his take on the competitiveness of America and what we must figure out how to do to become great again.

Volcker and I share the contention that having the majority of our best and brightest off in a corner trading with each other is not a good long-term trend for society…

From CNN:

ZAKARIA: You feel that the longer term issue, the big issue is really this issue of how do we get real growth. How do we get exports, manufacturing — not growth that’s based on borrowing, not growth that’s based on each of us selling each other our own houses in a kind of ascending spiral…

VOLCKER: Absolutely.

ZAKARIA: … of asset inflation.

VOLCKER: We’ve got to produce something that somebody else wants to buy.

ZAKARIA: How do you do that? What should we be doing?

VOLCKER: Well, you really want to get — fundamentally, I think we spent a — more than a decade — we spent 20 years inducing some of our brightest people, our most energetic people to go to Wall Street. And nobody wants to be a mechanical engineer or a chemical engineer or a civil engineer. They want to be a financial engineer.

If you go to a university graduation these days, and you get to the advanced degrees in mathematics, engineering, physics, you’re rather hard pressed to find an American. There are Chinese, there are Indians, they’re Taiwanese, they’re from the Middle East.

Look, it’s not easy to answer your question, because there’s no easy answer.

ZAKARIA: When you look at American industry, making it more competitive again, do you think that when you compare it to industry in China, or in India or in South Korea, is part of the problem that there is — our corporate tax rate is now the second-highest in the industrialized world?

We probably have more regulation. There’s the issue of tort, you know, and the way…
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Senator Bob Corker Needs to Be Updated on His Bank Failure History

Senator Bob Corker Needs to Be Updated on His Bank Failure History

Courtesy of Reggie Middleton

Senator Corker challenged Mr. Volcker’s stance in today’s congressional hearings on the Volcker Rule by saying that no financial holding company that had a commercial bank failed while performing proprietary trading. It appears as if Mr. Corker may have received his information from the banking lobby, and did not do his own homework.

Let’s reference the largest commercial bank/thrift failure of all:

From …
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The ‘Volcker Rule’ Will Be A Body Blow To Hedge Funds And Private Equity!

The ‘Volcker Rule’ Will Be A Body Blow To Hedge Funds And Private Equity!

paul volcker fed chairmanCourtesy of John Carney at Clusterstock/The Business Insider

At the heart of Obama’s new regulatory proposal is the ‘Volcker Rule.’

Named for Paul Volcker, the new rule would bar banks from owning or investing in or sponsoring hedge funds, private equity funds or proprietary trading operations. It’s still not clear how far this goes but a complete bar on investing in hedge funds or p.e. could be a serious blow to alternative investments.

Was Obama overstating his case? Or will redemptions from banks have to begin as soon as the rule takes effect?

Here’s the full quote from Obama’s speech:

It’s for these reasons that I’m proposing a simple and common-sense reform, which we’re calling the "Volcker Rule" — after this tall guy behind me.  Banks will no longer be allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers.  If financial firms want to trade for profit, that’s something they’re free to do.  Indeed, doing so –- responsibly –- is a good thing for the markets and the economy.  But these firms should not be allowed to run these hedge funds and private equities funds while running a bank backed by the American people.

 


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Did The President FINALLY Wake Up?

Did The President FINALLY Wake Up?

ObamaCourtesy of Karl Denninger at The Market Ticker


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“Wake Up, Gentlemen”

Paul Volcker’s message, passed along by Simon Johnson, with love. - Ilene  

“Wake Up, Gentlemen”

Paul Volcker Courtesy of Simon Johnson at The Baseline Scenario

The guiding myth underpinning the reconstruction of our dangerous banking system is: Financial innovation as-we-know-it is valuable and must be preserved.  Anyone opposed to this approach is a populist, with or without a pitchfork.

Single-handedly, Paul Volcker has exploded this myth.  Responding to a Wall Street insiders‘ Future of Finance “report“, he was quoted in the WSJ yesterday as saying: “Wake up gentlemen.  I can only say that your response is inadequate.”

Volcker has three  main points, with which we whole-heartedly agree:

  1. “[Financial engineering] moves around the rents in the financial system, but not only this, as it seems to have vastly increased them.”
  2. “I have found very little evidence that vast amounts of innovation in financial markets in recent years have had a visible effect on the productivity of the economy”

and most important:

     3. “I am probably going to win in the end”.

Volcker wants tough constraints on banks and their activities, separating the payments system – which must be protected and therefore tightly regulated – from other “extraneous” functions, which includes trading and managing money.

This is entirely reasonable – although we can surely argue about details, including whether a very large “regulated” bank would be able to escape the limits placed on its behavior and whether a very large “trading” bank could (without running the payments system) still cause massive damage. 

But how can Mr. Volcker possibly prevail?  Even President Obama was reduced, yesterday, to asking the banks nicely to lend more to small business – against which Jamie Dimon will presumably respond that such firms either (a) are not creditworthy (so give us a subsidy if you want such loans) or (b) don’t want to borrow (so give them a subsidy).  (Some of the bankers, it seems, didn’t even try hard to attend – they just called it in.)

simon johnsonThe reason for Volcker’s confidence in his victory is simple - he is moving the consensus.  It’s not radicals against reasonable bankers.  It’s the dean of American banking, with a bigger and better reputation than any other economic policymaker alive – and with a lot of people at his back – saying, very simply: Enough.

He


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Volcker: There’s No Growth Other Than What The Fed’s Pouring Into The Economy

Volcker: There’s No Growth Other Than What The Fed’s Pouring Into The Economy

paul volckerCourtesy of Joe Weisenthal at Clusterstock/Business Insider

Obama advisor and former Fed chief Paul Volcker has an excellent interview this weekend with Germany’s Der Spiegel.

An excerpt:

SPIEGEL: The US has not yet instituted any kind of reform policy. What we see is the government and the Federal Reserve pouring money into the economy. If one looks beyond that money, one sees that the economy is in fact still shrinking.

Volcker: What should I say? That’s right. We have not yet achieved self-reinforcing recovery. We are heavily dependent upon government support so far. We are on a government support system, both in the financial markets and in the economy.

SPIEGEL: To get the recovery to the point where it is right now has cost a lot of money. National debt will probably reach $12 trillion in 2019. Just serving the debt costs $17 billion a year — at least according to this year’s forecast. That’s difficult to sustain.

Volcker: You’ve got to deal with the deficit and you’ve got to deal with it in a timely way. Right now, with the unemployment rate still very high, excess capacity is still evident, and the economy is dependent on government money as we said. We are not going to successfully attack the deficit right now but we have got to prepare for attacking it.

Read the whole thing >>

 


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The Banks Must Be Restrained, The Financial System Must Be Reformed

The Banks Must Be Restrained, The Financial System Must Be Reformed

Courtesy of Jesse’s Café Américain

Mass Protests Are Held During The G20 World Leaders Summit

There has been a loss of perspective with regard to the financial sector led by the Anglo-American banking interests.

This will have to change before there can be a sustainable economic recovery. This will be difficult to accomplish, because there exists a fusion of corporate and government desires to control the distribution of wealth and power that is opposed to any significant reforms.

"A certain type of person strives to become a master over all, and to extend his force, his will to power, and to subdue all that resists it. But he encounters the power of others, and comes to an arrangement, a union, with those that are like him: thus they work together to serve the will to power. And the process goes on." Friedrich Nietzsche, The Will to Power

Until then, the world will experience a series of asset bubbles and an increasing disparity in wealth between the productive and administrative sectors of the economy. This will continue until it becomes unsustainable, and unstable. And then it will change.

UK Telegraph
Ex-Fed chief Paul Volcker’s ‘telling’ words on derivatives industry
By Louise Armitstead
9:41PM GMT 08 Dec 2009

The former US Federal Reserve chairman told an audience that included some of the world’s most senior financiers that their industry’s "single most important" contribution in the last 25 years has been automatic telling machines, which he said had at least proved "useful".

Echoing FSA chairman Lord Turner’s comments that banks are "socially useless", Mr Volcker told delegates who had been discussing how to rebuild the financial system to "wake up". He said credit default swaps and collateralised debt obligations had taken the economy "right to the brink of disaster" and added that the economy had grown at "greater rates of speed" during the 1960s without such products.

When one stunned audience member suggested that Mr Volcker did not really mean bond markets and securitisations had contributed "nothing at all", he replied: "You can innovate as much as you like, but do it within a structure that doesn’t put the whole economy at risk."

He said he agreed with George Soros, the billionaire investor, who said investment banks must stick to serving clients and "proprietary trading should be pushed out
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Phil's Favorites

Allegations of Vote Fraud Emerge in Spain

Courtesy of Mish.

Exit polls in the Spanish election were not only wrong, they were wrong by mind-numbing amounts. United We Can was supposed to pick up seats. Instead it dropped by million votes.

Is this just another case of bad polls, or is something else happening?

Fraud allegations charges revolve around the company Indra awarded a contract to count the vote.

The company claims to speed up the counting process via technologies such as OCR, OMR and ICR , which provide reliability, speed and transparency.

Recount Petitioned Filed

A Recount Peti...



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Zero Hedge

Paul Singer: "Donald Trump Will Cause A Widespread Global Depression"

Courtesy of ZeroHedge. View original post here.

In addition to the recently quite vocal George Soros and Stanley Druckenmiller, one republican hedge fund billionaire who has been warning for years about not only the looming trouble for the market but also a calamitous collapse of the establishment, is Elliott's Paul Singer, who has been advocating gold as insurance against just this inevitable systemic collapse. Singer has also been an outspoken opponent of Trump,  having supported Florida Sen. Marco ...



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Chart School

Moving Averages: Month-End Preview

Courtesy of Doug Short's Advisor Perspectives.

Here is an advance preview of the monthly moving averages we track after the close of the last business day of the month. At this point, before the close on the last day of the month, all three S&P 500 strategies are signaling "invested" — unchanged from last month's triple "invested" signal. Four of five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), iShares' Barclays 7-10 Year Treasury (IEF), PowerShares DB (DBC) and Vanguard REIT Index ETF (VNQ), — are signaling "invested", changed from last month's all invested signal.

...

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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Stocks are climbing again (Business Insider)

Futures are higher for a second straight day since the sell-off after the UK referendum last week. The pound is also higher. 

5 Things to Watch in the Fed’s Stress Test Results (Wall Street Journal)

Wednesday may be the most important day of the year for large U.S. banks, with the Federal Reserve set to release its verdicts on whether they have passed or failed annual stress tests. The 33 large U.S. banks taking...



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ValueWalk

TESARO Inc (TSRO) Shares On Drug Trial Success, Up 1100 Percent

By Jacob Wolinsky. Originally published at ValueWalk.

Shares of TESARO Inc (NASDAQ:TSRO) are super hot today today on Ovarian Cancer results and the rally could continue to be hot until phase 3 results in the fall. The stock is up at the time of this written by over $40, 110%, destroying the shorts (at least for today). The sell side are panicing to play catch up with price targets here is what they are saying.

Jefferies:

This morning TESARO Inc (NASDAQ:TSRO reported long-waited Ph3 NOVA data, showing s.s. PFS benefits in both cohorts; plans to file for U.S. & EU approval in 4Q16. Contrary to our cautious stance on non-gBRCAm/HRD+ arm following experts’ discussions, this arm also showed s.s clinically meaningful PFS benefits of ~9mo. AE profile was consistent with Ph1 data (most common Gr3/4 AEs thrombocytopenia, anemia & neutropenia). Full data to b...



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Kimble Charting Solutions

London- Attempting bullish upside breakout, following Brexit

Courtesy of Chris Kimble.

The media seems to be focused on the Brexit issue, with most of the coverage suggesting it was a negative event. Regardless of the media’s focus, prices are attempting to do something in Europe, that could be bullish and surprise a few investors.

CLICK ON CHART TO ENLARGE

The FTSE 100 Index remains in a long-term bullish trend (lower highs and higher highs) over the past 5-years. The bottom of the rising channel (A) was hit in Fe...



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OpTrader

Swing trading portfolio - Week of June 27th, 2016

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Mapping The Market

Thoughts on Brexit

I have mixed feelings about Brexit today. Clearly the European institution need reforming. The addition of so many countries in the last 20 years has created a top heavy administration. The Euro adds more complexities to the equation as the ECB policies cannot fit every country's problem. On the other hand, a unified Europe has advantages as well – some countries have benefited from the integration.

For Britain, it's hard to say what the final price will be. My guess is that Scotland might now vote for independence as they supported staying in Europe overwhelmingly. Northern Ireland might be tempted to leave as well so possibly RIP UK in the long run. I was talking to some French people and they were saying that now there might be no incentive for France to stop immigrants from crossing over to the UK like they do now and simply allow for travel there and let the UK deal with them. The end game is not clear to anyone at the moment....



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Digital Currencies

Bitcoin Tumbles 10%

Courtesy of ZeroHedge. View original post here.

One week ago, when bitcoin first crossed above $700 on the seemingly insatiable Chinese buying which we forecast last September (when bitcoin was trading at $230) would take place as a result of China's capital controls (to much pushback by the "mainstream" financial media), we tried to predict what may happen next. We said that "it could go much higher. That said, anyone who bought last September when the digital currency was trading at $230 may be advised to take some profits, and at least make...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Biotech

This Is Why Biotech Stocks May Explode Again

Reminder: Pharmboy and Ilene are available to chat with Members.

Here's an interesting article from Investor's Business Daily arguing that biotech stocks are beginning to recover from their recent declines, notwithstanding current weakness.

This Is Why Biotech Stocks May Explode Again

By 

Excerpt:

After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.

...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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