Posts Tagged ‘Financial Crisis’

The Next Financial Crisis Will Be Even Worse

By Brett Arends

The last financial crisis isn’t over, but we might as well start getting ready for the next one.

Sorry to be gloomy, but there it is.

Why? Here are 10 reasons.

1. We are learning the wrong lessons from the last one. Was the housing bubble really caused by Fannie Mae, Freddie Mac, the Community Reinvestment Act, Barney Frank, Bill Clinton, "liberals" and so on? That’s what a growing army of people now claim. There’s just one problem. If so, then how come there was a gigantic housing bubble in Spain as well? Did Barney Frank cause that, too (and while in the minority in Congress, no less!)? If so, how? And what about the giant housing bubbles in Ireland, the U.K. and Australia? All Barney Frank? And the ones across Eastern Europe, and elsewhere? I’d laugh, but tens of millions are being suckered into this piece of spin, which is being pushed in order to provide cover so the real culprits can get away. And it’s working.

2. No one has been punished. Executives like Dick Fuld at Lehman Brothers and Angelo Mozilo at Countrywide , along with many others, cashed out hundreds of millions of dollars before the ship crashed into the rocks. Predatory lenders and crooked mortgage lenders walked away with millions in ill-gotten gains. But they aren’t in jail. They aren’t even under criminal prosecution. They got away scot-free. As a general rule, the worse you behaved from 2000 to 2008, the better you’ve been treated. And so the next crowd will do it again. Guaranteed.

Read the rest here: The Next Financial Crisis Will Be Even Worse – SmartMoney.com.


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Video: Talking Wall Street With Democracy Now!

Via Matt Taibbi at Rolling Stone


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GRAPES OF WRATH – 2011

Excellent article comparing current situation with lead up to the Great Depression.  Well worth reading. – Ilene 

Courtesy of Jim Quinn at The Burning Platform

“And the great owners, who must lose their land in an upheaval, the great owners with access to history, with eyes to read history and to know the great fact: when property accumulates in too few hands it is taken away. And that companion fact: when a majority of the people are hungry and cold they will take by force what they need. And the little screaming fact that sounds through all history: repression works only to strengthen and knit the repressed.” – John Steinbeck – Grapes of Wrath

  

John Steinbeck wrote his masterpiece The Grapes of Wrath at the age of 37 in 1939, at the tail end of the Great Depression. Steinbeck won the Nobel Prize and Pulitzer Prize for literature. John Ford then made a classic film adaption in 1941, starring Henry Fonda.


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“If These Allegations Are Correct, It Appears To Have Been A Direct Transfer Of Wealth From The United States Treasury To Goldman Sachs Shareholders”: Josh Rosner

Courtesy of The Daily Bail 

"If These Allegations Are Correct, It Appears To Have Been A Direct Transfer Of Wealth From The United States Treasury To Goldman Sachs Shareholders": Josh Rosner

 

 

 

Our favorite quotes so far from today’s FCIC report and reaction from analysts…

  • "Less than a 3 percent drop in asset values could wipe out a firm." – FCIC Report
  • "The AIG counterparty bailout, which was spun as necessary to protect the public, seems to have protected the institution at the expense of the public." – Josh Rosner
  • "The total was for proprietary trades," the report asserts. "Unlike the $14 billion received from AIG on trades in which Goldman owed the money to its own counterparties, this $2.9 billion was retained by Goldman."
  • "At the time, the idea was the sucker could go down because there wasn’t enough liquidity in the system, money wasn’t moving, and you could see a domino effect," said Ann Rutledge, a principal at R&R Consulting in New York, which specializes in structured finance.  In reality, she contends, those fears were overblown: There was ample money in the financial system.  Rather, individual institutions did not have enough cash on hand to survive their losses, she asserts. But the fear of a broader liquidity crisis was used as justification for what now appears to have been a backdoor means of bailing out Goldman, said Rutledge.
  • The details in the commission’s report leave Goldman "naked," she added. "It doesn’t have the fig leaf of a systemic risk argument. Normally what happens when you have a sophisticated institution that’s doing stupid credit stuff is you let them eat it, but that didn’t happen in the bailout."
  • "If these allegations are correct, it appears to have been a direct transfer of wealth from the Treasury to Goldman’s shareholders." – Josh Rosner

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What Most People Don’t Realize About The Fed’s Superpowers

Bob Prechter’s Conquer The Crash reveals whether the Fed really can rescue the US economy 

By Elliott Wave International

Since its creation in 1913, the primary intended role of the U.S. Federal Reserve Bank has been that of protector. In theory, the central bank was bestowed with the power to shape monetary policy in a way that would keep both booms and busts in check. The two main tools at its disposal — interest rates and money creation — would provide a "ceiling of normalcy" above expansions AND a "net of safety" below contractions.

To this day, the financial mainstream holds great faith in the Fed’s ability to fulfill its save-the-day duties — as these recent news items make plain:

  • "Why Raising Fed Funds Rate Is Positive For Equities." (Seeking Alpha)
  • "Fed’s Moves Lift All Asset Classes." (Associated Press)
  • "US Stocks Erasing Losses: The aggressive moves of the Fed have been an important driver for the stabilization of stock prices." (Bloomberg)

But of all the variables the Fed creators took into account, there’s one glaring factor they neglected to consider: Namely, it cannot force consumers to spend, creditors to lend, or businesses to borrow. The events of 2007-2009 "credit crunch" and the subsequent "Great Recession" made that obvious. Remember how the government was upset at banks for sitting on the bailout funds instead of lending them out to consumers? And consumers weren’t exactly lining up on the street to get a loan, either.

The Fed’s inability to change social mood is the central theme in Chapter 13 of EWI President Bob Prechter’s NY Times business bestseller book Conquer the Crash. There, Bob describes the Fed’s strategy of lowering the federal funds rate to stimulate spending to be as effective as "pushing on a string." Writes Bob:

"The primary basis for today’s belief in perpetual prosperity and inflation with an occasional recession is what I call the ‘Potent Directors Fallacy.’ It is nearly impossible to find a treatise on macroeconomics today that does not assert or assume that the Federal Reserve Board has learned to control both our money and our economy. Many believe that it also possesses the immense power to manipulate the stock market. The very idea that it can do these things is false."

And so begins one of the most groundbreaking studies into the very real INABILITY of the Fed to fell the great bears of economic declines, or…
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12 Economic Collapse Scenarios That We Could Potentially See In 2011

Courtesy of Michael Snyder at Economic Collapse 

What could cause an economic collapse in 2011? Well, unfortunately there are quite a few "nightmare scenarios" that could plunge the entire globe into another massive financial crisis.  The United States, Japan and most of the nations in Europe are absolutely drowning in debt.  The Federal Reserve continues to play reckless games with the U.S. dollar.  The price of oil is skyrocketing and the global price of food just hit a new record high.  Food riots are already breaking out all over the world.  Meanwhile, the rampant fraud and corruption going on in world financial markets is starting to be exposed and the whole house of cards could come crashing down at any time.  Most Americans have no idea that a horrific economic collapse could happen at literally any time.  There is no way that all of this debt and all of this financial corruption is sustainable.  At some point we are going to reach a moment of "total system failure".

So will it be soon?  Let’s hope not. Let’s certainly hope that it does not happen in 2011. Many of us need more time to prepare. Most of our families and friends need more time to prepare.  Once this thing implodes there isn’t going to be an opportunity to have a "do over".  We simply will not be able to put the toothpaste back into the tube again.

So we had all better be getting prepared for hard times.  The following are 12 economic collapse scenarios that we could potentially see in 2011….

#1 U.S. debt could become a massive crisis at any moment.  China is saying all of the right things at the moment, but many analysts are openly worried about what could happen if China suddenly decides to start dumping all of the U.S. debt that they have accumulated.  Right now about the only thing keeping U.S. government finances going is the ability to borrow gigantic amounts of money at extremely low interest rates.  If anything upsets that paradigm, it could potentially have enormous consequences for the entire world financial system.

#2 Speaking of threats to the global financial system, it turns out that "quantitative easing 2" has had the exact opposite effect that Ben Bernanke planned for it to have.  Bernanke insisted that the main goal of QE2 was to lower interest rates, but instead all it has done is…
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Stock World Weekly

Here’s the latest Stock World Weekly Newsletter, New Year’s Edition.

Feedback welcome — please leave comments, we value your input. - Ilene

BEN DEVIL

Picture credit: William Banzai7


For Stock World Weekly archives, click here.   


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One Investment Strategy for Q1 2011: Cash, Baby, All the Way

Charles Hugh Smith agrees with us on the wisdom of cash: One Investment Strategy for Q1 2011: Cash, Baby, All the Way  - Ilene 

Piggy bank with crumpled dollar bills

Courtesy of Charles Hugh Smith

In response to readers’ requests, I disclose my own amateur’s Investment Strategy for Q1 2011: cash is king, and the U.S. dollar looks good simply because almost everyone expects it to collapse. 

Despite my oft-avowed amateur-market-observer status, readers often ask me for advice or opinions on where to put their capital. This is not advice (please read the HUGE GIANT BIG FAT DISCLAIMER below), it is a disclosure of my own personal opinion, what we might call "one investment strategy of many possible investment strategies" for the first quarter of 2011: cash, baby, cash all the way.

Why am I in cash? Because I don’t trust the parallel rallies, and I am extremely skeptical of the various "stories" which are driving the rallies. Why am I skeptical? Because everybody and their sister has bought into the stories, and a one-sided trade is rarely the winning one.

Yes, it’s my contrarian nature: when everyone is a believer in a "story" that is too good to be true, then I become skeptical. This often gets me in trouble. When everyone was buying GM at $50, I was shorting it. When everyone was buying Fannie Mae at $60, I was shorting it (via puts). Both GM and FNM were obviously, painfully insolvent, but it took practically forever for reality to intrude on the fantasy/narrative that each firm was a "solid blue chip" investment with numerous analyst recommendations. In the meantime, I lost money treading water for quarter after quarter.

So even though the market is clearly top-heavy, the short-side trade may yet be ground down by the Fed’s prop-job and the Wall Street/Central State partnership’s desperate desire to use a rising stock market as a propaganda proxy for the "recovery."

(Hey, just borrow and squander roughly 13% of GDP, year after year after year (roughly 45% of the entire Federal budget), and you might stimulate a modest "recovery," too.)

So let’s examine each of the "stories" driving the rallies.

1. The global recovery is solid, and Central State stimulus and quantitative easing will keep growth rising and interest rates low. This narrative drives capital into "risk assets," i.e. stock markets, commodities, FX carry trades, Chinese real estate, junk bonds, etc.

I’m not really sure…
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2011 – What’s Coming

Courtesy of Bruce Krasting

Oh boy is 2011 going to be an exciting year! Some things that I think might happen:

  • -Volatility is going up across the board. If you have the stomach for the swings that are coming across all markets there is a ton of money to be made; balls and timing are all that are necessary. The markets will create dozens of opportunities to make and lose.
  • -There will be 50 days with a swing in the S&P greater than 1%. There will be 10 days where gold swings $50. There will be two days with a drop greater than 100 bucks. Most of the big moves will be down moves. Bonds will not be spared the volatility.
  • -Gold will be higher a year from now but off its peak. At some time in the fall, gold will be near 1,800 and the New York Times will do a front-page story that gold is on its way to 2,000. That will be the high point of the year.
  • -Copper will continue to rise. This metal will benefit as the poor man’s gold. Why buy an ounce of something for $1,600 when you can have a whole pound of something else for only $5? The logic is compelling only because there is no logic. Increasingly, it will become understood that money does not hold value. Copper will do a better job of storing value then a Treasury Bond.
  • -The US bond market is in for a heck of a year. The 30-year will trade at BOTH 3% and 5%. Higher rates will come early in the year, then the deflation trade will come back into vogue.
  • -Spain will be the next sovereign debtor that falls prey to the market. This will happen before the end of the 1st Q. The package to bail them out will exceed $500b. This will exhaust the EU resources. There will be very high expectations that contagion will then move to Italy. That will not happen in 2011 (2012?) The European Central Bank will step up to the table (finally) and support the market for Italy. Sometime between March and June Italian bonds will be a great buy.
  • -The IMF will contribute $125b to the Spanish bailout. The US portion


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WE ARE NOT REPEATING THE MISTAKES OF JAPAN….YET

Pragcap explains why "WE ARE NOT REPEATING THE MISTAKES OF JAPAN….YET".

Cherry blossom festival

Courtesy of The Pragmatic Capitalist 

When confronted with a balance sheet recession the math regarding economic growth gets relatively simple – either the government spends in times of below trend private sector spending or the economy contracts. For several years now I have maintained that we are in a balance sheet recession – an unusual recession caused by excessive private sector debt.  Although this balance sheet recession created the risk of prolonged weakness I have been quick to dismiss the persistent discussions that compare this to anything close to a second great depression - as I showed in 2009 the comparisons were always ridiculous.  The much closer precedent was Japan, where the economy actually expanded throughout their balance sheet recession, but a persistent malaise left a dark cloud over the private sector as they paid down debts.

Over the last year I have consistently expressed concerns that the USA was going to suffer the same fate as Japan, which consistently scared itself into recession due to austerity measures. At the time, most pundits were comparing us to Greece and attempting to scare us into thinking that the USA was bankrupt, on the verge of hyperinflation and general doom. I wrote several negative articles in 2009 & 2010 berating public officials who said the USA was going bankrupt and that the deficit was at risk of quickly turning us into Greece, Weimar or Zimbabwe.  Nothing could have been farther from the truth.  The inflationists, defaultistas and other fear mongerers have been wrong in nearly every aspect of their arguments about the US economy.

US government default was never on the table, the bond vigilantes were not just taking a nap and now, with the passage of the most recent stimulus bill it’s likely that we’ve (at least temporarily) sidestepped the economic decline that was likely to accompany a decline in government spending.  Richard Koo, however, believes we are repeating the mistakes of our past.  In a recent strategy note he said:

“The situation in Europe is no different from that in the US. I therefore have to conclude that the western nations have learned nothing from Japan’s lessons and are likely to repeat its mistakes.”

I have to disagree here.  The most important factor impacting economic growth in the prior year…
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Phil's Favorites

Identifying a fake picture online is harder than you might think

 

Identifying a fake picture online is harder than you might think

If you know how photo editing works, you might have a leg up at spotting fakes. Gorodenkoff/Shutterstock.com

Courtesy of Mona Kasra, University of Virginia

It can be hard to tell whether a picture is real. Consider, as the participants in our recent research did, these two images and see whether you think neither, either or both of them has been doctored.

...



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Zero Hedge

Shocking Before & After Photos Reveal Awful Truth About Widespread US Crop Failures In 2019

Courtesy of Michael Snyder, The Economic Collapse

Torrential rains have been hammering the heartland of America for months, and at this point vast stretches of farmland in the middle of the country are nothing but mud.  As a result of the endless rain and unprecedented flooding that we have witnessed, millions of acres of farmland will have nothing planted on them at all in 2019, and that is a major national crisis.  But most farmers were able to get seeds planted in the deplorable conditions, and now they are desperately hoping that something will actually grow.  Unfortunately, on farm after farm what is coming out of the ground looks absolutely terrible.  Even if we get ideal weather conditions for the rest of the summer, there is no way that many of t...



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Kimble Charting Solutions

Wilshire 5000 Creating A Triple Top? An Important Breakout Test Is In Play!

Courtesy of Chris Kimble.

The stock market has been on fire of late, rallying up to the edge of price resistance on several indexes. Today, we look at one of those stock market indexes: the Wilshire 5000.

The Wilshire 5000 tracks all of the stocks in the US market, so it is a broad-based index that carries significant importance when gauging the health of the overall US stock market.

Looking at the long-term “weekly” chart above, it is pretty clear that the index is at an important price juncture.

The Wilshire 5000 spent the last 25 years trading within a rising price channel (1)...



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Insider Scoop

Jefferies Upgrades Deere, Cites 'Significantly Improved Farmer Income Outlook'

Courtesy of Benzinga.

Farmer buying power will remain pressured for 2019, but this will change for the better next year and will help support Deere & Company (NYSE: DE), according to Jefferies.

The Analyst

Jefferies' Stephen Volkmann upgraded Deere from Hold to Buy with a price target lifted from $150 to $190....



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Chart School

Formula for when the Great Stock Market Rally ends

Courtesy of Read the Ticker.

When valuations for the boring water company or the boring electric company is trading like your Facebook, Apple, Amazon or Netflix or Google (ie FANG) you know something is wrong.

This is when a seriously over valued market is screaming at you.

Of course the reader must understand in a world where money printing goes super nuts (Zimbabwe style) the stock market may go hyper inflationary and picking a time frame for a top is never a good idea, but we are not there yet. There is no Ben Bernanke helicopter money to the masses yet (ie MMT). 

To see when water company's (and such like) are nearing the crazy FANG like valuations a review of the Dow Jones Utility Index channel shows us how history can repeat. The c...

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ValueWalk

The "Tesla Killer" Car Is Nowhere In Sight

 

The “Tesla Killer” Car Is Nowhere In Sight

By Jacob Wolinsky, ValueWalk

Here’s some catnip for the Tesla bulls on this email list: my analyst, Kevin DeCamp, a longtime TSLA shareholder and car owner, took a test drive of the Jaguar I-PACE and, while it “looks great and is fun to drive… it is lacking in a few areas where Tesla really shines.” He concludes that “Tesla may end up killing itself, but the “Tesla killer” car is nowhere in sight.”

The Tesla Killer Hasn’t Arrived Yet: My Test Drive of the Jaguar I-PACE

By Kevin DeCamp

As a long-time, devoted Tesla...



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Digital Currencies

Cryptocurrencies are finally going mainstream - the battle is on to bring them under global control

 

Cryptocurrencies are finally going mainstream – the battle is on to bring them under global control

The high seas are getting lower. dianemeise

Courtesy of Iwa Salami, University of East London

The 21st-century revolutionaries who have dominated cryptocurrencies are having to move over. Mainstream financial institutions are adopting these assets and the blockchain technology that enables them, in what ...



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Biotech

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

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

 

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

If you’ve got the raw data, why not mine it for more info? Sergey Nivens/Shutterstock.com

Courtesy of Sarah Catherine Nelson, University of Washington

Back in 2016, Helen (a pseudonym) took three different direct-to-consumer (DTC) genetic tests: AncestryDNA, 23andMe and FamilyTreeDNA. She saw genetic testing as a way...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

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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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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