By now it is more than obvious except to a few economists (yes, we realize this is a NC-17 term) that QE2 will be an absolute and unmitigated disaster, which will likely kill the dollar, send risk assets vertical (at least as a knee jerk reaction), and result in a surge in inflation even as deflation on leveraged purchases continues to ravage Bernanke’s feudal fiefdom. So all the rational, and very much powerless, observers can do is sit back and be amused as the kleptogarchy with each passing day brings this country to final economic and social ruin. Oddly enough, as Paul Farrell highlights, the list of objectors has grown from just fringe blogs (which have been on Bernanke’s case for almost two years), to such names as Buffett, Gross, Grantham, Faber and Stiglitz. And that the opinion of all these respected (for the most part) investors is broadly ignored demonstrates just how unwavering is the iron grip on America’s by its economist overlords. Which brings us back to the amusement part. Here are Farrell’s always witty views on the object which very soon 99% of American society will demand be put into exile: the genocidal Ph.D. holders of the Marriner Eccles building.
Warning, Fed Chairman Ben Bernanke’s foolish gamble to stimulate the economy will backfire, triggering a new double-dip recession. Bernanke is “medding” too much in the economy, say Marc Faber, Bill Gross, Jeremy Grantham, Joseph Stiglitz and others.
The Fed is making the same kind of mistakes Japan made that resulted in its 20-year recession. The Washington Post says Larry Mayer, a former Fed governor, estimates that to work it would take QE2 bond purchases of “more than $5 trillion …10 times what analysts are expecting.”
Bernanke’s plan is designed to fail. And, unfortunately, that will make life far more dangerous for American investors, consumers, taxpayers and voters.
“I’m ultrabearish on everything, but I believe you’ll be better off owning shares than government bonds,” said Hong Kong economist Marc Faber at a recent forum in Seoul. He sees a repeat of dot-com-bubble insanity today. Faber publishes the Gloom, Boom & Doom Report.
Some rather scary predictions out of Paul Farrell today: "It’s inevitable: Wall Street banks control the Federal Reserve system, it’s their personal piggy bank. They’ve already done so much damage, yet have more control than ever.Warning: That’s a set-up. They will eventually destroy capitalism, democracy, and the dollar’s global reserve-currency status. They will self-destruct before 2035 … maybe as early as 2012 … most likely by 2020. Last week we cheered the Tea Party for starting the countdown to the Second American Revolution. Our timeline is crucial to understanding the historic implications of Taleb’s prediction that the Fed is dying, that it’s only a matter of time before a revolution triggers class warfare forcing America to dump capitalism, eliminate our corrupt system of lobbying, come up with a new workable form of government, and create a new economy without a banking system ruled by Wall Street." And just like in the Hangover, where the guy is funny because he’s fat, Farrell is scary cause he is spot on correct.
Handily, Farrell provides a projected timeline of events:
Stage 1: The Democrats just put the nail in their coffin confirming they’re wimps when they refused to force the GOP to filibuster Bush tax cuts for billionaires.
Stage 2: In the elections the GOP takes over the House, expanding its strategic war to destroy Obama with its policy of “complete gridlock” and “shutting down government.”
Stage 3: Post-election Obama goes lame-duck, buried in subpoenas and vetoes.
Stage 4: In 2012, the GOP wins back the White House and Senate. Health care returns to insurers. Free-market financial deregulation returns. Lobbyists intensify their anarchy.
Stage 5: Before the end of the second term of the new GOP president, Washington is totally corrupted by unlimited, anonymous donations from billionaires and lobbyists. Wall Street’s Happy Conspiracy triggers the third catastrophic meltdown of the 21st century that Robert Shiller of “Irrational Exuberance” fame predicts, resulting in defaults of dollar-denominated debt and the dollar’s demise as the world’s reserve currency.
Stage 6: The Second American Revolution explodes into a brutal full-scale class war with the middle class leading a widespread rebellion against the out-of-touch, out-of-control Happy Conspiracy sabotaging America from within.
Stage 7: The domestic class warfare is exaggerated as the Pentagon’s global warnings play out: That by 2020
In a unorthodox piece by the WSJ, which goes direct to discussing some of the less than pleasant possible outcomes of central planning, Brett Arends asks "could Wall Street be about to crash again? This week’s bone-rattlers may be making you wonder" and says: "way too many people are way too complacent this summer. Here are 10 reasons to watch out." And without further ado…
The market is already expensive. Stocks are about 20 times cyclically-adjusted earnings, according to data compiled by Yale University economics professor Robert Shiller. That’s well above average, which, historically, has been about 16. This ratio has been a powerful predictor of long-term returns. Valuation is by far the most important issue for investors. If you’re getting paid well to take risks, they may make sense. But what if you’re not?
The Fed is getting nervous. This week it warned that the economy had weakened, and it unveiled its latest weapon in the war against deflation: using the proceeds from the sale of mortgages to buy Treasury bonds. That should drive down long-term interest rates. Great news for mortgage borrowers. But hardly something one wants to hear when the Dow Jones Industrial Average is already north of 10000.
Too many people are too bullish. Active money managers are expecting the market to go higher, according to the latest survey by the National Association of Active Investment Managers. So are financial advisers, reports the weekly survey by Investors Intelligence. And that’s reason to be cautious. The time to buy is when everyone else is gloomy. The reverse may also be true.
Deflation is already here. Consumer prices have fallen for three months in a row. And, most ominously, it’s affecting wages too. The Bureau of Labor Statistics reports that, last quarter, workers earned 0.7% less in real terms per hour than they did a year ago. No wonder the Fed is worried. In deflation, wages, company revenues, and the value of your home and your investments may shrink in dollar terms. But your debts stay the same size. That makes deflation a vicious trap, especially if people owe way too much money.
People still owe way too much money. Households, corporations, states, local governments and, of course, Uncle Sam. It’s the debt, stupid. According to the Federal Reserve, total U.S.
“For want of a nail . . . the kingdom was lost.” Will Greece’s debt crisis lead to a Greek debt default and the collapse of the euro and an ensuing collapse of the 27-member European Union (or EU), and trigger the next round of crashes that will be described by economic historians decades from now as “the Great Depression II”? The assassination of Archduke Franz Ferdinand of Austria and his wife in Sarajevo, Serbia brought the tensions between Austria-Hungary and Serbia to a head. In turn, it is said this triggered a chain of international events that embroiled Russia and the major European powers; and World War I broke out in Europe. Will Greece’s debt crisis set a series of events in motion that sends the world into a downward economic spiral of unfathomable proportions?
For years, I have wrestled with the question of whether the Europe would collapse economically, politically, socially and militarily. Sounds absurd, you say? The countries are too interwoven and mutually dependent now for that to happen, and at the very least they will muddle along, making the worst of the best situations, and achieving the lowest common denominator? The United States of Europe, they are not and never will be, but they have achieved a degree of cohesiveness that I never thought was likely years ago.
I believed jealousies and rivalries and, yes, the hatreds of the past would linger barely beneath the surface, coming unglued at the most inopportune times when it really mattered the most. When the chips were down, I felt the EU would splinter and fall apart; and that its participants and the world would write it off as a noble experiment that failed, much like the League of Nations. After all, its successor—the United Nations—is considered to be a colossal joke by Americans, many of whom would love to see it shipped to Europe, and its building on the East River in Manhattan bulldozed and turned into a park, or made into co-ops or condominiums.
The bitter hatreds of the past seem to have subsided in Europe though, and it has become a cultural melting pot, more and more. Airbus was the first tangible sign of economic integration that I never thought would…
At one extreme of Corporate America is a cadre of companies and banks, mostly big, united by an enviable access to credit. At the other end are firms, chiefly small, with slumping sales that can’t borrow or are facing stiff terms to do so.
On Main Street, there are consumers with rock-solid jobs — but also legions of debt-strapped individuals struggling to keep their noses above water.
This split helps explain the patchiness of the recovery that appears to be taking hold after the worst recession in a half-century.
The split between companies that can borrow and those that can’t shows the extent to which any recovery depends on reviving the nation’s ailing banks and squeamish credit markets. Until that happens, the vigor of the economy will remain in doubt.
"If you’re not making money, you need to borrow money," says John Graham, a finance professor at Duke University’s Fuqua School of Business. But "you need to be creditworthy in order to borrow, and if you’re not making money, you’re creditworthiness isn’t very strong."
Mr. Graham, who oversees a quarterly survey of CFOs, says more companies are doing better than they were a few months ago. Still, he estimates, one in four is in "dire straights due to lack of profits combined with not being able to borrow."
Companies big enough to bypass banks and go directly to capital markets are finding a warmer reception. That’s because the markets are showing more willingness to make risky loans: In January, only eight of the 56 companies that sold bonds were rated below-investment-grade, or "junk," according to Dealogic. In August, by contrast, 24 of the 60 deals had junk ratings.
Since the start of the year, companies have been increasingly turning to the bond markets to raise money. Through August thus far, companies have issued $395.4 billion in bonds over 512 deals, according to
Here’s a credit-crisis video retrospective from the Wall Street Journal. It is chapter one of a three part series. Notice the Wall Street meme that subprime borrowers caused the crisis which is patently false. It’s all about dodgy credits and Fannie and Freddie? Total rubbish.
Easy money, as the clip says, is the culprit. And this money went into credit cards, leveraged buy outs, residential housing, student loans, commercial property and on down the line. It’s not about subprime, my friends I like the rest of it, but remember the Wall Street Journal has a certain bias and it is reflected here.
Chapter One: In the first of this three-part series, WSJ reporters explain how the housing bubble inflated and burst, and why easy money led to the collapse of Wall Street’s biggest financial institutions.
This is part two of the End of Wall Street series the Wall Street Journal is producing.
Chapter Two of A WSJ series: What was going through the minds of CEOs, corporate boards, fund managers and mortgage lenders as they created hard-to-understand derivatives Warren Buffett once called "weapons of financial mass destruction."
You have to love how it starts off with Alan Murray saying “There’s plenty of blame to go around. I think in retrospect lots of people who were doing stupid things.” Then the famous NYSE opening bell goes off and they cut to a shot of Alan Greenspan.
I couldn’t help but think about Tim Iacono’s site when I saw this. Watch this video. They really takeoff the gloves here. Regulators and the rating agencies get a severe beat-down. Well-done.
“Goldman will surely deny that its risk-taking is subsidized by the taxpayer — but then so did Fannie Mae and Freddie Mac, right up to the bitter end. An implicit government guarantee is only free until it’s not, and when the bill comes due it tends to be huge. So for the moment, Goldman Sachs — or should we say Goldie Mac? — enjoys the best of both worlds: outsize profits for its traders and shareholders and a taxpayer backstop should anything go wrong.”
“So what’s wrong with Goldman posting $3.44 billion in second-quarter profits, what’s wrong with the company so far earmarking $11.4 billion in compensation for its employees? What’s wrong is that this is not free-market earnings but an almost pure state subsidy.”
Pop quiz: which one of the above quotes comes from Rolling Stone’s Matt Taibbi and which comes from the editorial page at the Wall Street Journal.
We’ll get to the answer in a bit. What fascinating is that it’s so hard to tell which is the long-standing voice of capitalism and which is the writer for the one time icon of the counter-culture. To put it differently: what could have brought us to the point where both are aiming their scornful analysis at the most successful firm on Wall Street?
In a word: Bailout.
It’s taken some time but finally people from all over the political spectrum are looking up and noticing that the banner waving on the flagpole stands for Bailout Nation rather than the land of the free. And they’re pissed.
Not everyone understands why they are pissed off. For instance, the Congressmen grilling Hank Paulson today are thoroughly confused. Some want to know why Paulson didn’t fire Bank of America CEO Ken Lewis. Others want to know where Paulson got the temerity to threaten Lewis’s job. Still others just seem to want a chance to vent.
When one of your ardent supporters likens your business model to that of Fannie and Freddie you have problems. That is how the Wall Street Journal on its editorial pages described the Goldman Sachs that has emerged from the financial crisis.
Of course, if the feds do let CIT fail, this will only confirm that the only certain survivors in the current market are banks big enough that the government figures it must bail them out. Just ask the many small banks that have been rolled up by the FDIC at a rate of two a week since the beginning of the year, with eight so far in July alone. That can only strengthen the likes of Goldman, which apparently needs no help printing money anyway.
Goldman’s traders profited in the second quarter from taking advantage of spreads left wide by the disappearance of some competitors (Lehman, Bear Stearns) and the risk aversion of others (Morgan Stanley). Meantime, Goldman’s own credit spreads over Treasurys have narrowed as the market has priced in the likelihood that the government stands behind the risks it is taking in its proprietary trading books.
Goldman will surely deny that its risk-taking is subsidized by the taxpayer — but then so did Fannie Mae and Freddie Mac, right up to the bitter end. An implicit government guarantee is only free until it’s not, and when the bill comes due it tends to be huge. So for the moment, Goldman Sachs — or should we say Goldie Mac? — enjoys the best of both worlds: outsize profits for its traders and shareholders and a taxpayer backstop should anything go wrong.
The Journal goes on to suggest that Goldman’s newly acquired special status entitles the taxpayer to some say in the way the company operates which is strong stuff indeed coming from them. They suggest that absent a policy that no bank is too big to fail — an impossibility in their opinion — the rarefied atmosphere that Goldman and the other chosen few inhabit should be subject to either a proscription against proprietary trading or a special FDIC bailout tax perhaps tied to leverage.
Private equity firm Irving Place Capital ("IPC") and Victor Technologies ("Victor") announced today that they have entered into a definitive agreement to sell Victor to Colfax Corporation ("Colfax") (NYSE: CFX), a global manufacturer of gas- and fluid-handling and fabrication technology products. The all cash transaction values Victor at approximately $947 million, including the assumption of debt, and is subject to customary closing conditions.
Victor is a leading designer and manufacturer of a comprehensive suite of metal cutting, gas control, and specialty welding products. IPC acquired Victor, which was previously named Thermadyne Holdings Corporation, in a take-private transaction in December 2010.
"We are pleased with the progress that we have made in partnership ...
Who says QE is ineffective? If you’re an owner of real estate or financial assets, it’s pretty darn f*cking effective.
From the Wall Street Journal:
The net worth of U.S. households and nonprofit organizations rose 14% last year, or almost $10 trillion, to $80.7 trillion, the highest on record, according to a Federal Reserve report released Thursday. Even adjusted for inflation using the Fed’s preferred gauge of prices, U.S. household net worth—the value of homes, stocks and other assets minus debts and other liabilities—hit a fresh record.
.."There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. Not many can always have adequate reasons for buying and selling stocks daily – or sufficient knowledge to make his play an intelligent play."...
Plenty of excuses out there for this evening's collosal miss in Chinese exports (-18.1% YoY vs an expectation of a 7.5% rise) mainly based on timing issues over the Lunar New Year (but didn't the 45 economists who forecast this data know the dates before they forecast?) This is a 6-sigma miss and plunges China's trade balance to its biggest miss on record and 2nd largest deficit on record. Combining Jan and Feb data (i.e. smoothing over the holiday), exports are still down 1.6% YoY - not good for the much-heralded global recovery. Exports to the rest of the BRICs were all down over 20% but no there is no contagion from an emergin...
The Global X Social Media Index ETF (Ticker: SOCL) touched fresh record highs on Thursday morning, surprising no one given the top three holdings of the Fund are Hong Kong-based Tencent Holdings (12.678%), Facebook Inc. (12.506%) and LinkedIn Corp. (8.166%), which are up 130%, 160% and 22%, respectively, since this time last year. The SOCL reflects the performance of companies involved in the social media industry, including companies that provide social networking, file sharing and other web-based media applications. Shares in the ETF rose 1.3% today to a new high of $23.00, and have soared approximately 65% since this time last year.
Today brought three better than expected economic releases from Construction Spending, ISM Manufacturing, and Personal Income. The ISM figure was quite unexpected and Personal Income was well above expectations. If we ignore for a moment that the Final GDP reading for Q4 was lowered on Friday (which may or may not have been primarily caused by severe weather), we have had a week of better than expected economic numbers. Corporate earnings have also continued to exceed forecasts, albeit with a bit more cautious guidance.
Of course, none of that matters when the “war drums” start beating. Russia and the Ukraine are engaged in a serious game of “chicken” with a bear in the hen house. The Russian ruble has borne the brunt of the damage so far with a double digit drop today again...
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Ladies and Gentlemen, hobos and tramps,
Cross-eyed mosquitoes, and Bow-legged ants,
I come before you, To stand behind you,
To tell you something, I know nothing about.
And so the circus begins in Union Square, San Francisco for this weeks JP Morgan Healthcare Conference. Will the momentum from 2013, which carried the S&P Spider Biotech ETF to all time highs, carry on in 2014? The Biotech ETF beat the S&P by better than 3 points.
As I noted in my previous post, Biotechs Galore - IPOs and More, biotechs were rushing to IPOs so that venture capitalists could unwind their holdings (funds are usually 5-7 years), as well as take advantage of the opportune moment...
Welcome to the fouth update of the IRA Virtual Portfolio. First I am going to summarize the current state of the Portfolio then I will get into all the activity we had during September expiration.
Profit and Loss – Net of closed positions the portfolio is up a total of $769
Market Commentary – Last expiration I said, "I would like to put a total of $20,000 to work by the end of SEP expiration. If the VIX pops up to around 20 I plan to put about $50,000 total to work." The market didn't quite reach the goal but I did manage to deploy $15,000 of buying power. I still feel the market is too high and expect a correction during October. If the vix pops up to around 20 I still plan to put about $50,000 to work. If a correction doesn't happen I still plan to have a total of $25,000 in buying power put to work by October expiration. Now on to the act...
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