“We now have an economy in which five banks control over 50 percent of the entire banking industry, four or five corporations own most of the mainstream media, and the top one percent of families hold a greater share of the nation’s wealth than any time since 1930. This sort of concentration of wealth and power is a classic setup for the failure of a democratic republic and the stifling of organic economic growth.” - Jesse –http://jessescrossroadscafe.blogspot.com/
Source: Barry Ritholtz
“All of the old-timers knew that subprime mortgages were what we called neutron loans — they killed the people and left the houses.” - Louis S. Barnes, 58, a partner at Boulder West, a mortgage banking firm in Lafayette, Colo
One of the things I’m increasingly dismayed to learn is that no matter how much detail, data, and qualification I might include in these commentaries, my conclusions will often be summed up by writers or bloggers in a single sentence that often bears no relation to my point. For instance, my view that quantitative easing will trigger a "jump depreciation" in the dollar has evidently placed me among analysts warning of hyperinflation and Treasury default (a club whose card is nowhere in my wallet).
To clarify once again – I emphatically do not anticipate inflationary pressures until the second half of this decade. As I’ve repeatedly emphasized, the primary driver of inflation – historically and across countries – has been growth in government spending for purposes that do not expand the productive capacity of the economy.
Quantitative easing does not pressure the dollar by fueling inflation. It has a much more subtle effect (but one that can be expected to be amplified if fiscal policy is long-run inflationary as it is at present). Normally, equilibrium in capital flows between countries is achieved through changes in interest rates. As a result, countries with greater capital needs or higher long-run inflation tendencies also have higher interest rates. If interest rates can adjust, exchange rates don’t have to. But notice what quantitative easing does: by sitting on long-term bond yields (and creating a negative real interest rate differential versus other countries), quantitative easing prevents bond prices from acting as an adjustment factor, and forces the burden of adjustment on the exchange rate.
While some observers have noted that the value of the Japanese yen did not deteriorate dramatically over the full course of quantitative easing by the Bank of Japan – from its beginning until it was finally wound down
The Euro Zone is in serious trouble, and Britain and we are next.
The game’s up folks.
Many people talk about us "printing" money. Indeed, there’s a large brokerage that runs advertisements on CNBS with that exact claim, over and over and over. Ron Paul and Peter Schiff have run this mantra for years.
This chart says something else entirely:
THERE HAS BEEN NO PRINTING GOING ON!
No, what’s been happening is worse.
Worldwide governments have borrowed and spent huge percentages of their GDP in a puerile attempt to protect a criminal class that has looted the public and bribed the legislature - THE BANKS.
There was always a point where this would fail, but it is flatly impossible for anyone to know exactly where it was beforehand.
But mathematically, there was a point where it would fail.
The gamble that Bernanke, Trichet, Obama, Bush, Paulson, Geithner and everyone else in the world took is that we could do this for a short period of time and that in doing so private demand would pick up and return us to "stability."
THESE PEOPLE DID NOT STUDY THE ABOVE CHART, AND THEY’RE F^#KING IDIOTS FOR BELIEVING THAT WHICH WAS TRIED IN 2003-2007, WITH A HIGHER DEBT LOAD THAN WE HAD THEN, WOULD WORK NOW WHEN IT FAILED IN 2003.…
“Only fraud and falsehood dread examination. Truth invites it.”
- Dr. Samuel Johnson
The SEC is formally charging Goldman Sachs with fraud in the derivatives markets, specifically with regard to Collateralized Debt Obligations related to subprime mortgages.
Investors in Goldman’s Abacus CDO lost one billion dollars.
In addition to the company, an individual VP in Goldman’s international group is being charged, Fabrice Tourre.
Paulson and Company, a major hedge fund, paid Goldman to structure a CDO based on mortgages that Paulson selected, so that they could bet against it.
"The product was new and complex, but the deception and conflicts are old and simple. Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party,” said Robert Khuzami, director of the division of enforcement.
This could be construed as a deft way of throwing red meat to the angry mob, nailing a specific individual at Goldman while limiting the criminal charges against the company although there will be significant civil cases, and dealing with the billionaire hedge fund owner Paulson who made a fortune betting against the subprime market.
This could be more damaging if this includes other Goldman bets against its customers on products it represented and created, and it shows an overall intent to create fraudulent products for the purpose of shorting them. For now the SEC will not say if this fraud is a singular event or more systemic.
Goldman will almost certainly attempt to spin this as the actions of a ‘rogue trader‘ who was an aggressive exception.
Last week the White House asked Jamie Dimon and Lloyd Blankfein to ‘cool it’ on their intense lobbying efforts against derivatives and financial reform.
Perhaps this will help them in their decision.
This is just the tip of the iceberg. The Wall Street Banks are knee deep in fraud.
The New York Times reports that financial reform is the next top priority for Democrats. Barney Frank, fresh from meeting with the president, sends a promising signal,
“There are going to be death panels enacted by the Congress this year — but they’re death panels for large financial institutions that can’t make it,” he said. “We’re going to put them to death and we’re not going to do very much for their heirs. We will do the minimum that’s needed to keep this from spiraling into a broader problem.”
But there is another, much less positive interpretation regarding what is now developing in the Senate. The indications are that some version of the Dodd bill will be presented to Democrats and Republicans alike as a fait accompli – this is what we are going to do, so are you with us or against us in the final recorded vote? And, whatever you do – they say to the Democrats – don’t rock the boat with any strengthening amendments.
Chris Dodd, master of the parliamentary maneuver, and the White House seem to have in mind curtailing debate and moving directly to decision. Republicans, such as Judd Gregg and Bob Corker, may be getting on board with exactly this.…
The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. Wednesday’s hearing described a secretive group deploying billions of dollars to favored banks, operating with little oversight by the public or elected officials.
We’re talking about the Federal Reserve Bank of New York, whose role as the most influential part of the federal-reserve system — apart from the matter of AIG’s bailout — deserves further congressional scrutiny.
Treasury Secretary Timothy Geithner was head of the New York Fed at the time of the AIG moves. The hearing before the House Committee on Oversight and Government Reform also focused on what many in Congress believe was the New York Fed’s subsequent attempt to cover up buyout details and who benefited.
By pursuing this line of inquiry, the hearing revealed some of the inner workings of the New York Fed and the outsized role it plays in banking. This insight is especially valuable given that the New York Fed is a quasi-governmental institution that isn’t subject to citizen intrusions such as freedom of information requests, unlike the Federal Reserve.
This impenetrability comes in handy since the bank is the preferred vehicle for many of the Fed’s bailout programs. It’s as though the New York Fed was a black-ops outfit for the nation’s central bank.
As Representative Marcy Kaptur told Geithner at the hearing: “A lot of people think that the president of the New York Fed works for the U.S. government. But in fact you work for the private banks that elected you.”
Let’s take Geithner at his word that a failure to resolve the insurer’s default swaps would have led to financial Armageddon. Given the stakes, you might think Geithner would have coordinated actions with then-Treasury Secretary Henry Paulson. Yet Paulson testified that he wasn’t in the loop.
“I had no involvement at all, in the payment to the counterparties, no involvement whatsoever,” Paulson said.
Fed Chairman Bernanke also wasn’t involved. In a written response to questions from Representative Darrell Issa, Bernanke said he “was not directly involved in the
As the disaster in Haiti moves into its "Katrina" phase of a organizational chaos, relief effort failure, and public health calamity, the world will get another lesson in the dangers of techno-triumphalist posturing. American authority pretends to be in flawless control of a situation that by the minute crumbles into anarchy and death as the generals strut their stuff and the CNN crews broadcast yet another feel-good segment about adopted orphans. At this point, one rainstorm is all it will take to kill what is left of the Haitian social order.
It’s a tragedy for the ages, and tragedy is a fulcrum of the human condition that techno-triumphalism pretends to have vanquished. All the meals-ready-to-eat on God’s green earth won’t add up to a happy ending for everybody. Haiti was a disaster waiting to happen every bit as much as the Federal Reserve is for us. For decades, the USA’s policy (and the UN’s too) was just to stuff more food aid onto an island already so far beyond its carrying capacity for human existence that every new birth certificate was a death warrant in disguise. But free people are free to do what they will do, and in Haiti there was not much more to do than make more people.
Now the USA will also pretend that there is a Haitian government in charge — as in the pathetic grandstanding of Secretary of State Hillary Clinton the other day — though the Haitian government was a fiction for decades before the earthquake struck. The recent blatherings of Bill Clinton would have us believe that Haiti is poised to become an exemplar of economic development for the Caribbean once things are tidied up there. What planet are these people living on? (Answer: Planet Limousine.) Rather Haiti is the example of what life may become in nations bethinking themselves developed further along in The Long Emergency. If the figures on world crop failures for 2009 are relevant, even places like the USA may get a taste of this before the end of 2010.
On the home front we have President Obama’s announcement last week of a tax on banks that received bailouts of one kind or another. This tax, he said, would amount to $90 billion over ten…
Treasury Secretary Timothy Geithner came under increased scrutiny Tuesday when a key congressman said he would subpoena the Federal Reserve Bank of New York about bailout decisions made on Geithner’s watch.
Rep. Edolphus Towns, D-N.Y., said Tuesday he will subpoena the New York Fed for documents related to the bailout of failed insurer American International Group Inc.
Towns chairs the House Oversight and Government Reform Committee. The committee is investigating deals that diverted billions of AIG bailout dollars to banks including Goldman Sachs Group Inc.
The committee has been investigating e-mails from New York Fed lawyers telling AIG not to disclose details about the deal. The e-mails were released last week by California Rep. Darrell Issa., the committee’s top Republican.
Issa asked Towns to subpoena the New York Fed after the Fed blocked a separate request for documents.
In a statement Tuesday, Towns said the subpoena will "shed light on how and why taxpayer dollars were used for a backdoor bailout."
The "backdoor bailout" refers to money being funneled to banks including Goldman, Societe Generale and Deutsche Bank.
The latest revelations about the New York Fed’s actions in the AIG bailout make one thing clear: Treasury Secretary Tim Geithner must go.
Geithner must go not just because of the emails showing that his New York Fed ordered AIG to keep details of the bailout secret, but because of many other decisions and policies he has championed in the past two years.
These decisions and policies have consistently put the interests of Wall Street ahead of the interests of the taxpayer, and they have undermined the public’s confidence in the government at a time when the country needs it the most.
Tim Geithner’s defense of his actions continues to be, in effect, "We had to do it or the world would have ended." This isn’t good enough. It is also, at the very least, debatable. ….
Contrary to the revisionist history now being promulgated, these [Geithner's] actions were not the only
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 firstname.lastname@example.org 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.
This week will see a hurricane of economic data -- GDP, Personal Consumption and Outlays, the July Employment Report, a couple of key Consumer Confidence metrics and of course Wednesday's FOMC Statement. Today we got the quiet before the potential storm (to extend the weather metaphor). The S&P 500 sold off to is -0.56% intraday low in the first 45 minutes of trading. It then reverse course to its 0.16% early afternoon high before drifting to its 0.03% closing gain. Today's price range was at the 49th percentile of the 143 market days this year. Essentially the index went nowhere on average price volatility.
The yield on the 10-year note ended the day at 2.50%, up 2 bps from the previous close. It is now 6 bps above its interim closing low of May 28th.
Here is a 15-minute chart of the past five sessions. The S&P 500 is up 7.06% year-to-date.
Shares in packaged foods producer Kellogg Co. (Ticker: K) are in positive territory on Monday afternoon, trading up by roughly 0.20% at $65.48 as of 2:20 p.m. ET. Options volume on the stock is well above average levels today, with around 12,500 contracts traded on the name versus an average daily reading of around 1,700 contracts. Most of the volume is concentrated in September expiry calls, perhaps ahead of the company’s second-quarter earnings report set for release ahead of the opening bell on Thursday. Time and sales data suggests traders are snapping up calls at the Sep 67.5, 70.0 and 72.5 strikes. Volume is heaviest in the Sep 72.5 strike calls, with around 4,600 contracts traded against sizable open interest of approximately 11,800 contracts. It looks like traders paid an average premium of $0.37 per contrac...
"Do as we say, not as we do," appears the modus operandi of the current administration's increasingly totalitarian regime. Today's edition of 'wait, what?' comes from The WSJ who report that The U.S. House of Representatives told a federal court Friday it should dismiss a lawsuit filed by the SEC (regarding the long-running insider-trading investigation) because Congress is lawfully allowed to ignore requests to turn over records and testimony to the executive branch agency. Arguing "sovereign immunity" and responding in a rather snarky (almost "do you know who we are?" manner), House attorneys blasted the SEC's "fool's errand."
This Cool Video is a clip from my appearance on CNBC's Squawk Box this morning. I offered a nuanced view, suggesting that while the dollar appears to be at a turning point, unless US yields find better traction, it is difficult to be too bullish on the dollar.
Once again, stocks have shown some inkling of weakness. But every other time for almost three years running, the bears have failed to pile on and get a real correction in gear. Will this time be different? Bulls are almost daring them to try it, putting forth their best Dirty Harry impression: “Go ahead, make my day.” Despite weak or neutral charts and moderately bullish (at best) sector rankings, the trend is definitely on the side of the bulls, not to mention the bears’ neurotic skittishness about emerging into the sunlight.
In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up some actionable trading ideas, incl...
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
We tried holding up stock prices but couldn’t get the job done. Market Shadows’ Virtual Value Portfolio dipped by 2% during the week but still holds on to a market-beating 8.45% gain YTD. There was no escaping the downdraft after a major Portuguese bank failed. Of all the triggers for a large selloff, I’d guess the Portuguese bank failure was pretty far down most people's list of "things to worry about."
All three major indices gave up some ground with the Nasdaq composite taking the hardest hi...
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
I just wanted to be sure you saw this. There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.
If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.
Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither MaddJack Enterprises, LLC
d/b/a PhilStockWorld (PSW) nor its affiliates
warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.