Posts Tagged ‘Financial Engineering’

“Goldman Sachs Are Scum:” Max Keiser on Goldman Sachs From July 2009

"Goldman Sachs Are Scum:" Max Keiser on Goldman Sachs From July 2009

Courtesy of JESSE’S CAFÉ AMÉRICAIN

Here is a video interview on France 24 television with Max Keiser speaking on Goldman Sachs from almost one year ago.

By the way, NO ONE who is a serious player on Wall Street is legitimately surprised by this, and probably no one in regulatory bodies are either, unless they are just showing up to collect a paycheck and obtain free Internet access.

The antics of Goldman Sachs have been getting by on a ‘wink and a nod’ from the regulators and the market for some time. Why? Because they are powerful, and because like Lehman and their off balance sheet frauds, they are almost ALL doing it on Wall Street as part of the franchise. Goldman has just been a pig about it, and probably burned some insiders and powerful investors in their fraudulent Abacus trade.

The excuses being made for Goldman by some on Bloomberg Television and CNBC are setting new lows in journalism. It was just a simple failure to disclosure Paulson’s involvement right? Almost a technicality. No one forced the customers to buy those fraudulently packaged and labeled assets or stocks (this was a favorite excuse from Joe Kernan during the Internet/tech bubble collapse). No involvement from the Ratings Agencies in the purposeful crafting of a fraudulent financial instrument. Guest Calls Cramer a ‘PR Man for Goldman Sachs’ and is ejected from the show by the resident money honey.

As you may recall, Mr. Cramer represents himself as highly experienced in manipulating stocks using CNBC reporters from his days as a hedge fund manager. So it might not be so outre to inquire if he is working the other side of that Wall Street scam these days. 

Why, these derivatives were SO complex that the poor Goldman management barely understood them themselves. They were tricked by Paulson. Tourre is a rogue trader. Bernie Madoff ate their Series 7 cheatsheets. Compliance was seconded to the Riviera. Lloyd was busy doing missionary work in Bangkok. More regulation will just hurt the recovery.

Don’t just regulate them. Break them up. And audit the Fed.

I am glad the professor is from HEC. I did my international business MBA sequence (an extended field trip for adults, but the refreshments were good) at the ‘other’ business school in Paris at La Defense, ESSEC.

Max Keiser 

 


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The Federal Reserve’s Veil of Secrecy Is Being Taken Down, But Slowly

Here’s Jesse’s thoughts on the essay by Robert Reich posted here a couple hours ago. Jesse’s introductions are always worth reading. Jr. Deputy Accountant (photo credit) addresses the credibility of Obama’s financial team. – Ilene 

The Federal Reserve’s Veil of Secrecy Is Being Taken Down, But Slowly

Courtesy of JESSE’S CAFÉ AMÉRICAIN

One of the first things that ‘put me off’ of Obama was the choice he made of key appointments to his Administration, selecting the two Robert Rubin acolytes Tim Geithner and Larry Summers to his team, marginalizing Paul Volcker, and then making no place for Robert Reich.

Make no mistake, the Fed looks to have been abusing its secrecy and its position, and Bernanke and Geithner are culpable. Reich makes the points as well or better than I could so here is his recent piece on the subject. All the blog’s are picking it up.

As I recall, the Fed said they were only acquiring ‘investment grade’ instruments, which would be taken on its balance sheet in support of the US Dollar, in addition to the usual Treasury Debt. The recent exposures of the holdings of Maiden Lane show these to be more like junk bonds, and certainly not as represented.

The Fed must be audited, and it role as the ‘master regulator’ and as the place where the Office of Consumer Financial Protection would be located is a farce, a cruel joke. Chris Dodd must either be senile, entirely cynical, or believe the American people to be complete idiots. The only reason I could even imagine for considering it is that the Fed is a ‘cost plus’ agency, meaning that they are self funding out of the mechanism of creating money, taking all their costs out before they turn over the interest income from the public debt back to Treasury. This is also a source of their growth and power. The problem that public agencies often have is that the industries that are regulated by them use their donations and lobbyists to stifle approrpriations for the agencies that regulate them in order to hamper and stifle them.

How can you even think of putting an office of reform and consumer protection in the very institution that was at the epicenter of a historic fraud? And shows itself completely willing to mislead the public, and some even believe perjure itself to the…
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Modern Economic Myths and The Failure of Financial Engineering

Modern Economic Myths and The Failure of Financial Engineering

Courtesy of JESSE’S CAFÉ AMÉRICAIN 

The housing bubble did nothing for real median incomes in the US but it did wonders for the insiders in the financial sector.

This is why the average Joe in the States went into debt to continue to maintain their consumption.

Until this situation is addressed, there will be no sustained economic recovery in the US.

Trickle down or supply side economics does well for the upper percentiles of income but does much less for the median wage.

Why care? For several reasons.

First, the median wage is the bulwark of general consumption and savings, and the prosperity of a nation. It must match the character of the social fabric, or place a severe strain on the contract between classes and peoples. A nation cannot survive both slave and free without necessarily resorting to repression.

Second, in any relatively free society, the reversion to the mean in the distribution wealth and justice is never pleasant, and often bloody and indiscriminate.

There are several economic myths, popularized over the last thirty years, that are falling hard in the recent series of financial crises: the efficient market hypothesis, the inherent benefits of globalization from the natural equilibrium of national competitive advantages, and the infallibility of unfettered greed as a ideal method of managing and organizing human social behaviour and maximizing national production. 

One has to wonder what would have happened if some more coherent, approachable science, had put forward a system of management that relied upon the nearly perfect rationality and unnatural goodness of men as a critical assumption in order to work? They would have been laughed out of the academy. Yes, there is a certain power to befuddle and intimidate common sense in professionally specific jargon, supported by pseudo-scientific equations.

Why doesn’t ‘greed is good’ work? Because rather than work harder, a certain portion of the population, not necessarily the most productive and intelligent, will immediately seek rents and income obtained by unnatural advantages, by gaming the system, by cheating and coercion, by the subversion of the rule of law, which will sap the vitality of the greater portion of the population which does in fact work harder, until they can no longer sustain themselves. 

What will take the place of these modern economic myths? Time…
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The First Year of Obama’s Failed Economic Policies: The Worst May Yet Be Avoided

The First Year of Obama’s Failed Economic Policies: The Worst May Yet Be Avoided  

Courtesy of Jesse’s Café Américain  

"The banks must be restrained, the financial system reformed, and balance restored to the economy before there can be any sustained recovery."

We have been saying this for some time. The report below from Neil Barofsky says essentially the same thing.

"Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," Barofsky wrote.

The US is heading towards a double dip recession, and the next leg down may be more fundamentally damaging than before.

The reason for the decline will be the abject failure of the Obama Administration to address the roots of the problem, instead wasting trillions to prop up a banking system that is a useless distortion.

Worse than useless really, because it actually presents a huge negative influence by stifling the recovery, channeling funds to the crony capitalists and non-producing wealth extraction sector, who tax the people like feudal lords under license of a corrupt government.

So far, Obama has failed the people, but preserved the banks. A source of his failure has been his weakness in listening to Larry Summers and Tim Geithner, the Rubin-Clinton wing of Democrats, who have well established their incompetence and inability to act at a level suitable to their positions. They are captive to special interests, locked into the ways of thinking that brought the world to the point of crisis.

In response to the next leg down, Bernanke will monetize debt at an even more furious and clever pace, perhaps in alliance with the Bank of England and Bank of Japan. The ECB resists, and all who balk will be chastised by the monied powers and their demimonde, the ratings agencies and global banks. This is modern warfare of a sort.

We do not expect the corruption of the world’s reserves to be so blatant that the inflation will immediately appear, except in more subtle manner. At some point it may explode, especially if Ben is particularly good at concealing its subtle growth.

Monetary inflation is the growth of the money supply in excess of the demands of the real economy, not nominal growth of the supply. The US has been shifting…
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Krugman Declares “Mission Accomplished,” Maginot Line Completed

Krugman Declares "Mission Accomplished," Maginot Line Completed

Courtesy of Jesse’s Café Américain

The triumph of financial engineering based on an analysis of the past. 

Conscience of a Liberal
The story so far, in one picture

By Paul Krugman
November 3, 2009

World industrial production in the Great Depression and now:

Jesse here. This chart is a bit deceptive because it compares two periods of time based on the start of the crisis. It would be interesting to compare the two crises from the start of the Fed’s expansion of the monetary base. As I recall, the early 20th century Fed did not react this way until 1931 and did so in two stages. Ok, Ben was quick out of the starting gate, and in a big way. Score one for the Fed. They are quick on the draw.

And there is little hazard that Ben will tighten prematurely out of fear of inflationary forces, having learned at least that lesson which is obvious enough as well.

It would be unjust to not note that the 1930′s Fed suffered a bit under multiple chairmen, and the difficulties of an entirely different type of commercial banking structure and the restraints of a gold standard. The challenge instead in this era of fiat currency will be to avoid the ‘zombification’ of the economy, the appearance of vitality with none of the self-sustaining growth.

Before this Administration declares "Mission Accomplished" and high fives its victory, they may wish to consider that they have done the obvious quickly in one dimension, but have done very little to change the dynamics of what created the crisis in the first place, choosing instead to support the status quo to a fault.

There are three traits that make a nominal bounce in production fueled by a record expansion in the monetary base a success: sustainable growth without subsidy, sustainable growth without subsidy, and sustainable growth without subsidy.

Our forecast is that Ben and Team Obama are failing badly because they are fighting the last war, in the almost classic style of incompeteng generals who lost the early stages of the Second World War because they were using the game plan from the First.

 


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An Independent Look into JP Morgan

An Independent Look into JP Morgan

Reggie MiddletonCourtesy of Reggie Middleton’s Boom Bust Blog

The JP Morgan forensic preview is now available. Remember, this is not subscription material, but a "public preview" of the material to come. I thought non-subscribers would be interested in knowing what my opinion of the country’s most respected bank was. There is some interesting stuff here, and the subscription analysis will have even more (in terms of data, analysis and valuation). As we have all been aware, the markets have been totally ignoring valuation for about two quarters now. It remains to be seen how long that continues.

Click graph to enlarge

image001.png, JP Morgan Notional Derivatives

Cute graphic above, eh? There is plenty of this in the public preview. When considering the staggering level of derivatives employed by JPM, it is frightening to even consider the fact that the quality of JPM’s derivative exposure is even worse than Bear Stearns and Lehman‘s derivative portfolio just prior to their fall. Total net derivative exposure rated below BBB and below for JP Morgan currently stands at 35.4% while the same stood at 17.0% for Bear Stearns (February 2008) and 9.2% for Lehman (May 2008).

JP Morgan cartoonWe all know what happened to Bear Stearns and Lehman Brothers, don’t we??? I warned all about Bear Stearns (Is this the Breaking of the Bear?: On Sunday, 27 January 2008) and Lehman ("Is Lehman really a lemming in disguise?": On February 20th, 2008) months before their collapse by taking a close, unbiased look at their balance sheet. Both of these companies were rated investment grade at the time, just like "you know  who". Now, I am not saying JPM is about to collapse, since it is one of the anointed ones chosen by the government and guaranteed not to fail – unlike Bear Stearns and Lehman Brothers, and it is (after all) investment grade rated. Who would you put your faith in, the big ratings agencies or your favorite blogger? Then again, if it acts like a duck, walks like a duck, and quacks like a duck, is it a chicken??? I’ll leave the rest up for my readers to decide. 

This public preview is the culmination of several investigative posts that I have made that have led me to look more closely into the big money center banks. It all started with a hunch that JPM wasn’t…
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ValueWalk

5 truths about the second round of coronavirus stimulus checks

By Aman Jain. Originally published at ValueWalk.

Whether or not Congress will be able to issue another coronavirus relief package or if there will be another round of direct payments is the biggest question nowadays. Although no one has accurate answers to these questions, there are a few truths about the next round of coronavirus stimulus checks.

Truths about coronavirus stimulus checks

The first truth is that everyone wants to send stimulus checks. “Everyone” here means Republican and Democratic lawmakers and President Donald Trump. Both Republicans and Democrats have included stimulus checks in their proposals, the HEALS Act and HEROES Act, respectively. Alt...



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Zero Hedge

The State's Response To This "Virus" Is Nothing More Than A Weapon Of Mass Submission

Courtesy of ZeroHedge View original post here.

Authored by Gary Barnett via LewRockwell.com,

“The great masses of men, though theoretically free, are seen to submit supinely to oppression and exploitation of a hundred abhorrent sorts. Have they no means of resistance? Obviously they have. The worst tyrant, even under democratic plutocracy, has but one throat to slit. The moment the majority decided to overthrow him he would be overthrown. But the maj...



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Phil's Favorites

Venture Capital...Big Money Still Flowing and Power In The Valley

 

Venture Capital…Big Money Still Flowing and Power In The Valley

Courtesy of Howard Lindzon 

Money continues to flow into the venture capital industry.

I won't complain.

The money flow should increase as rates stay low and the mantra of alternative investing picks up pace. I can feel that happening.

One big rule change that should really accelerate money flows is the final Volcker Rule:

The Final Volcker Rule[1], which goes into effect October 1, 2020, makes a number of significa...



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Kimble Charting Solutions

Key Inflation Indicators Facing Big Test In September!

Courtesy of Chris Kimble

Inflation has long been a word that the Federal Reserve uses but the general markets have forgotten about.

Why? Well because it’s been virtually non-existent for years. Key indicators like commodities (i.e. copper) have been in a down-trends and the Materials Sector (XLB) has lagged… until this year.

In today’s chart 3-pack, we take a look at the Equal Weight Commodity Index, ...



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Digital Currencies

The Great Unbanking: How DeFi Is Completing The Job Bitcoin Started

Courtesy of ZeroHedge View original post here.

Authored by Paul De Havilland via CoinTelegraph.com,

While most of us will prefer to forget the horrors of 2020, DeFi may well prove to be the guarantee of a better, more liberated future...

...



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Politics

'Colossal Backdoor Bailout': Outrage as Pentagon Funnels Hundreds of Millions Meant for Covid Supplies to Private Defense Contractors

 

'Colossal Backdoor Bailout': Outrage as Pentagon Funnels Hundreds of Millions Meant for Covid Supplies to Private Defense Contractors

"If you can't get a Covid test or find an N95, it’s because these contractors stole from the American people to make faster jets and fancy uniforms."

By Jake Johnson

Secretary of Defense Mark Esper and Chairman of the Joint Chiefs of Staff Army Gen. Mark Milley hold an end of year press conference at the Pentagon on December 20, 2019 in Arlington, Virginia. (Photo: Drew Angerer/Getty Images)

Instead of adhering to congressional inten...



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Biotech/COVID-19

How and when will we know that a COVID-19 vaccine is safe and effective?

 

How and when will we know that a COVID-19 vaccine is safe and effective?

How much longer must society wait for a vaccine? ANDRZEJ WOJCICKI/Getty Images

By William Petri, University of Virginia

With COVID-19 vaccines currently in the final phase of study, you’ve probably been wondering how the FDA will decide if a vaccine is safe and effective.

Based on the status of the Phase 3 trials currently underway, it i...



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Chart School

Stocks are not done yet - Update

Courtesy of Read the Ticker

There are a few times in history when a third party said this US paper (stocks, funds or bonds) is worthless.

Here is two.

1) 1965 Nixon Shock - The French said to US we do not want your paper dollars please pay us in gold. This of course led to the US going off the gold standard.

2) 2007 Bear Stern Fund Collapse - Investors said their funds collateral was worth much less than stated. This of course was the beginning of the great america housing bust of 2008.


In both cases it was stated .."look the Emperor is naked!"... (The Empe...

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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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