by ilene - November 4th, 2010 5:23 pm
Courtesy of The Pragmatic Capitalist
Great commentary right now on CNBC by Starbucks CEO Howard Schultz. He succinctly summarizes what QE is doing. Coffee prices have risen almost 50% since QE2 rumors first began in August. Schultz says the price rise is hurting his business and that he will not be passing the costs along to the consumer. He says the only people benefiting from this price rise are the commodity speculators because the consumer remains too weak to accept the price rise.
So what do we have? It’s quite literally a ponzi scheme. We have a Fed that has openly admitted that they want prices “higher than they otherwise should be”. And speculators are taking them up on their offer by borrowing in dollars and buying any and all inflation hedges. Meanwhile, the real economic benefit of this all is nil. In fact, it is doing nothing but generating margin compression, excess volatility in financial markets and promoting the financialization of this country – the same thing that nearly destroyed it just two years ago.
by ilene - June 20th, 2010 4:56 pm
Courtesy of Karl Denninger at The Market Ticker
Referring to the G20 summit in Canada next weekend, Merkel said in a videotaped message that "we are going to discuss when to quit the phase of short-term measures and go on to lasting budget consolidation."
Such a move was "urgently necessary, in the view of the Europeans and particularly of Germany," she said.
Obama urged the world’s leading economies Friday to avoid scaling back government spending too quickly or risk derailing the global recovery.
Heh heh heh….
Oh Mr. President? Yes, you Mr. Obama.
Chancellor Merkel appears to have figured out the meaning of this graph:
That is, more than two years of attempting to force credit creation to expand, thereby once-again restarting the Ponzi Scheme, has failed.
All further exercises in this vein will do is make the damage worse, exactly as I said it would in 2007 initially.
"Our highest priority in Toronto must be to safeguard and strengthen the recovery," Obama said in the letter dated June 16, but released Friday amid concerns about the pace of the global recovery.
There is no recovery Mr. President. There has not been and will not be until the speculators and banksters that have taken on excessive debt, either as creditors or debtors, are forced to disgorge same.
The below chart lays forth the wasteland you are creating:
You (and you predecessor, George Bush) have replaced 11% of final demand (in the form of GDP) with deficit spending. You have no credible plan to stop doing it as final private demand has failed to rebound, just as it did not in the 2003-2007 years and thus George Bush was unable to withdraw his bogus "stimulus" measures.
You are now trapped in an exponentially-deteriorating credit picture Mr. President. The only question remaining is whether you and your idiot "advisors" will recognize this and act in time to prevent the destruction of the political system of The United States.
There is no means by which you can avoid the pain and adjustment that has to be taken. It is not possible, mathematically, to continue to increase the total systemic indebtedness, irrespective of the manipulations and games you attempt to pull on the body politic.
by ilene - May 27th, 2010 1:20 pm
The European banking system is in crisis, says Hendry.
"I would recommend you panic."
The hedge fund manager of Eclectica Management went on BBC Newsnight last night to play pessimist against Jeffrey Sachs, an economist from Columbia University.
Of course the two get into a fight. It’s awesome.
At first Hendry is talking quietly and his manner is worryingly subdued but wait just a minute. He starts going after Sachs at 2:38.
"When you bring on a professor and when you bring on a politician, they are unaccountable. Jeffrey’s wrong, you know what? He’ll survive and tenure. I’m wrong, I go bankrupt."
Then Jeffrey defends himself a little bit, says no one should jump to the conclusion that all is lost, and Hendry literally jumps on him. (4:50)
"I don’t know," says Hendry, "because, was Jeffrey skiing two months ago? I was working, Gillian (Tett, who was also on the show) was working. So we can tell you about the real world."
It’s so offensive that the host has to jump in and say, "Now that’s just a low blow."
(Meanwhile, Gillian Tett is loving this, grinning from ear to ear.)
Then Jeffrey, who doesn’t want to let some other guy fight his fight for him, warns Hendry:
"Please watch your language, it’s just ridiculous. Watch your rhetoric a little bit."
Seriously, says Hendry. It’s time to worry. Panic.
"Banks today are refusing to lend to each other. Bank share prices are collapsing. We have no ability to gauge the credit-worthiness of the banking system."
"I say, let’s purge this system of its rottenness," recommends Hendry. "Let’s take on a recession. It’s going to be tough. People are going to lose their jobs."
"The banking sector is responsible for gross folly," he says. The solution is just, "Don’t pay them. Don’t reward folly."
"We can spread this over 20 years or we can get rid of it over 3 years… You make a mistake, you pay for it."
Of course remember that Hendry is shorting the crap out of Greece and the European banking crisis. He’s a big proponent of speculation and shorting, so he hates bailouts and would love massive failure.
by ilene - May 18th, 2010 7:50 pm
Droppen Sie Dead? I think that means drop dead.
Courtesy of JESSE’S CAFÉ AMÉRICAIN
There is much surprise that the German government has declared a ban on naked short selling, including CDS, as of midnight tonight, with no prior notice or the niceties demanded by the banks when government chooses to act. This action seems to have perturbed some and confused many.
The reason for this may be quite simple.
After tonight, when hedge funds and the NY and London Banks call upon German financial firms and European governments to make payments on Credit Default Swaps or other financial instruments that are subject to the ban, the Germans will have a great big hammer in hand to help them to negotiate the terms.
Since the CDS will be deemed to be no longer legal, the option to default on them with the backing of the government may be an option. This seems quite similar to the stance that the Chinese government took on behalf of some Chinese firms that were caught on the wrong side of energy derivatives.
I have heard that there was a general disappointment in Europe and in parts of Asia at the lack of progress being made in the US Congress towards creating meaningful reforms in their financial system. In fact, there is a widespread belief that Washington is being dictated to by the Banks, and that their lobbyists are directing the conversation, and in many cases writing the actual legislation. The final straw was when the Obama Administration itself sought to water down and block key provisions of the legislation to limit the power and size of the Banks.
"To some degree this is a battle between the politicians and the markets," she said in a speech in Berlin. "But I am firmly resolved — and I think all of my colleagues are too — to win this battle….The fact that hedge funds are not regulated is a scandal," she said, adding that Britain had blocked previous efforts to do this. "However, this will certainly have taken place in Europe in three weeks," she said, without giving more details." Reuters, 6 May 2010
"German Chancellor Angela Merkel accused the financial industry of playing dirty. ‘First the banks failed, forcing states to
by ilene - May 11th, 2010 1:31 pm
Courtesy of Karl Denninger of The Market Ticker
No, no, not the ECB’s.
The "currency speculators" – cough - BANKS that were shorting the hell out of the Euro.
Let’s see if I can figure out what’s happened here.
- Banks shorted the Euro, (correctly) surmising that Greece, Portugal, Spain and others can’t possibly cover their debts.
- The ECB freaks out as the Euro heads toward PAR and calls "emergency meetings" (forgetting, I might add, that the Euro traded under PAR not that long ago.)
- The ECB and Eurozone decides to "defend" the Euro with €1t in "defensive measures", including buying bonds of bankrupt sovereigns (gee, that’s nice – monetization by another name.) Since the ECB and EuroZone cognescenti is of course connected to the large banks in Europe (including France, where Sarkozy is located) these banks know to back off on Friday (notice the nice little uptick?) to lock in their bonuses from these insanely-profitable trades against their own currency.
- The very same banks, including the ones in Sarkozy’s back yard, see the very nice spike and short the Euro even harder, (correctly) surmising that they have successfully stuck the gun up the nose of the ECB!
Rinse and repeat until you have all the money.
Naw, it wouldn’t be that simple, would it? Why of course it would.
See, lending someone money when they’re bankrupt can’t possibly make them not-bankrupt. It can only make them more-bankrupt. As a consequence the ECB’s action is self-destructive and doomed to fail, and as a consequence there is no reason for these banks to back off at all! Indeed, quite to the contrary – they have (correctly) deduced that they can make billion in bonuses by shorting their own currency to destruction, forcing ever-larger "interventions" by the ECB!
If you’ve ever seen a meth addict goose himself with his drug of choice to the point where his teeth literally fall out, you know how this story ends.
The only winning play is to refuse to play at all, and force the bankrupt to recognize their insolvency and reorganize their debts. That’s it. Attempting to paper over insolvency never works, and the market has now deduced this, as I expected – although I didn’t think it would happen quite this quickly.
“We Will Defend the Euro, Whatever it Takes” Says EC President; Neither Speculators nor Goldman Sachs to Blame; What is the EU Really Defending?
by ilene - May 8th, 2010 9:53 pm
"We Will Defend the Euro, Whatever it Takes" Says EC President; Neither Speculators nor Goldman Sachs to Blame; What is the EU Really Defending?
Courtesy of Mish
EU finance ministers are meeting this weekend in a mad race to Defend the Euro, whatever it takes.
On Friday, French President Nicolas Sarkozy Vowed to "Confront Speculators Mercilessly" via Secret Plans he could Reveal.
On Saturday, Sarkozy said "When the markets re-open Monday, we will have in place a mechanism to defend the euro. If you don’t think that’s significant, you haven’t been to many EU summits."
It seems secrets were needed on Friday, but not on Saturday, meaning of course there were no plans on Friday, secret or not.
Stabilization Fund Created – Undisclosed Amount
Bloomberg describes the setup in EU Finance Ministers Race to Ready Euro Fund Before Asia Opens
European Union finance ministers meet today to hammer out the details of an emergency fund to prevent a sovereign debt crisis from shattering confidence in the 11- year-old euro.
Jolted into action by last week’s slide in the currency to the lowest in 14 months and soaring bond yields in Portugal and Spain, leaders of the 16 euro nations agreed to the financial backstop at a May 7 summit. They assigned finance chiefs to get it ready before Asian markets open later today European time.
“We will defend the euro, whatever it takes,” European Commission President Jose Barroso told reporters in the early hours yesterday after the leaders met in Brussels.
European officials declined to disclose the size of the stabilization fund, to be made up of money borrowed by the EU’s central authorities with guarantees by national governments.
“When the markets re-open Monday, we will have in place a mechanism to defend the euro,” French President Nicolas Sarkozy said. “If you don’t think that’s significant, you haven’t been to many EU summits.” Sarkozy cancelled a planned trip to Moscow today to deal with the crisis.
In Brussels, German Chancellor Angela Merkel stepped up German calls for a closer monitoring of government finances and more rigorous enforcement of the deficit-limitation rules, originally drafted by Germany in the 1990s.
Europe will send “a very clear signal against those who want to speculate against the euro,” Merkel said.
Speculators Did Not Cause This Crisis
by ilene - May 3rd, 2010 7:31 pm
Courtesy of Joshua M Brown, The Reformed Broker
The big story of national interest this weekend was the worsening ecological sitch in the Gulf, specifically as it pertains to the seafood industry. The waters may be unsafe for shrimping for longer than what we had initially thought, and people are apparently searching high and low for a way to play this crisis financially.
Ain’t that America?
Anyway, I had accidentally predicted this development last Friday with my post Shrimp Futures Soar on Gulf Oil Spill. It was a sardonic yet prescient piece of writing in which I quoted a fictional spike in the ‘Shellfish Index’ and mentioned the trading activity on the ‘New York PrawnEx’.
Well, a glance at my blog’s backend statistic page tells an interesting tale this morning – the search engines are being flooded with speculators and investors looking to play the potential scarcity crisis in gulf shrimp. Viewers are being directed to my site when placing the following queries in the Google search box:
- "Shrimp Futures"
- "How can I buy shrimp futures"
- "Trading shrimp"
- "Gulf shrimp crisis plays"
will lament the fact that I have no way to express the shrimp trade for my own benefit. Shorting Darden ($DRI), the owner of Red Lobster, had crossed my mind, but I think most of their shellfish is frozen, farmed or fake anyway.
Holler at me if you have any interesting plays, I’m looking around but have come up with nothing so far…
Meanwhile, having a website that’s search engine optimized and relevant for the term "Shrimp Futures" is my crowning achievement as a blogger.
by ilene - March 1st, 2010 10:13 pm
Courtesy of Karl Denninger at The Market Ticker
Yes, I said CRASH, and I meant it.
SINGAPORE/CAIRO, March 1 (Reuters) – Copper is likely to
climb when trading starts on Monday, lifted by uncertainty over
supply after the world’s top copper producer Chile was pounded
by a massive earthquake, analysts said over the weekend.
The front-month contract opened up more than 8%.
This, despite the fact that the earthquake was hundreds of miles away from the mines in Chile and there was zero damage to them. Some were offline for a few hours due to power failures, but none suffered any physical or structural damage, nor did their export points and the transportation network between the two.
So why did price spike more than 8% even though all this was known by the market before it re-opened for trading?
No part of the markets are trading on fundamental values, nor on forward business expectations. They are instead trading as "hot money" repositories where speculators rotate in and out of various instruments literally on a minute-by-minute basis.
This is how crashes happen.
When there is no fundamental value underlying a market there is no floor on price. Price then becomes one thing and one thing only – the number at which you can find another sucker to take your position from you.
This is how tulip bulbs went nuts in Holland, it is how houses went nuts in California in 2005, it is how tech stocks went nuts in 1999 and it is how oil went nuts in 2008.
But now literally everything has gone this way.
Take European national debt. We now know that Italy, for example, was cooking their books as early as 1995. This means that bond buyers overpaid for their bonds and took less coupon than they should have. This should have resulted in an immediate destruction in the value of those bonds when discovered, but it did not.
Because there was still a bigger fool.
by ilene - February 18th, 2010 12:36 am
Courtesy of MICHAEL HUDSON writing at Counter Punch
Former Treasury Secretary Hank Paulson wrote an op-ed in The New York Times yesterday, February 16 outlining how to put the U.S. economy on rations. Not in those words, of course. Just the opposite: If the government hadn’t bailed out Wall Street’s bad loans, he claims, “unemployment could have exceeded the 25 per cent level of the Great Depression.” Without wealth at the top, there would be nothing to trickle down.
The reality, of course, is that bailing out casino capitalist speculators on the winning side of A.I.G.’s debt swaps and CDO derivatives didn’t save a single job. It certainly hasn’t lowered the economy’s debt overhead. But matters will soon improve, if Congress will dispel the present cloud of “uncertainty” as to whether any agency less friendly than the Federal Reserve might regulate the banks.
Paulson spelled out in step-by-step detail the strategy of “doing God’s work,” as his Goldman Sachs colleague L. Blankfein sanctimoniously explained Adam Smith’s invisible hand. Now that pro-financial free-market doctrine is achieving the status of religion, I wonder whether this proposal violates the separation of church and state. Neoliberal economics may be a travesty of religion, but it is the closest thing to a Church that Americans have these days, replete with its Inquisition operating out of the universities of Chicago, Harvard and Columbia.
If the salvation is to give Wall Street a free hand, anathema is the proposed Consumer Financial Protection Agency intended to deter predatory behavior by mortgage lenders and credit-card issuers. The same day that Paulson’s op-ed appeared, the Financial Times published a report explaining that “Republicans say they are unconvinced that any regulator can even define systemic risk. … the whole concept is too vague for an immediate introduction of sweeping powers. …” Republican Senator Bob Corker from Tennessee was willing to join with the Democrats “to ensure ‘there is not some new roaming regulator out there … putting companies unbeknownst to them under its regime.”
Paulson uses the same argument: Because the instability extends not just to the banks but also to Fannie Mae and Freddie Mac, Lehman Brothers, A.I.G. and Wall Street underwriters, it would be folly to try to regulate the banks alone! And because the financial sector is so far-flung and complex, it is best to leave everything deregulated. Indeed, there simply is no time…
by ilene - August 24th, 2009 10:52 am
Must see video. Stephen Schork – oil "coming out the wazoo," – a repeat permformance of last year, high prices the justification for high prices, another mini bubble. – Ilene
Courtesy of The Pragmatic Capitalist
If you can tell me where the price of oil is going in the next few weeks I’ll tell you where the S&P is going. Stephen Schork believes oil is heading to $85 if we settle over $75. Unfortunately, the fundamentals say the price of oil should be $50. Schork is short-term bullish, but long-term bearish.