Posts Tagged ‘Mervyn King’

Obama No Longer Bothering to Lie Credibly: Claims Financial Crisis Cost Less Than S&L Crisis

Obama No Longer Bothering to Lie Credibly: Claims Financial Crisis Cost Less Than S&L Crisis

Courtesy of Yves Smith at Naked Capitalism 

I’m so offended by the latest Obama canard, that the financial crisis of 2007-2008 cost less than 1% of GDP, that I barely know where to begin. Not only does this Administration lie on a routine basis, it doesn’t even bother to tell credible lies. .And this one came directly from the top, not via minions. It’s not that this misrepresentation is earth-shaking, but that it epitomizes why the Obama Administration is well on its way to being an abject failure.

On the Jon Stewart Show (starting roughly at the 1:10 mark on this segment) Obama claims the cost of this crisis will be less than 1% of GDP, versus 2.5% for the savings and loan crisis (hat tip George Washington, sorry, no embed code, you need to go here):

Picture 3

The reason Obama makes such baldfacedly phony statements is twofold: first, his pattern of seeing PR as the preferred solution to all problems, and second, his resulting slavish devotion to smoke and mirrors over sound policy.

The savings & loan crisis led to FDIC takeovers of dud banks and the creation of a resolution authority to dispose of bad assets. That produced costs which were largely funded by the Federal government. I’ve heard economists repeatedly peg the costs at $110 to $120 billion; Wikipedia puts it at about $150 billion. This approach, of cleaning up and resolving banks, has been found repeatedly to be the fastest and least costly way to contend with a financial crisis.

The reason Obama can claim such phony figures is that many of the costs of saving the financial system are hidden, the biggest being the ongoing transfer from savers to banks of negative real interest rates, which is a covert way…
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The Buttonwood Gathering – View from the Top

This was an interesting event!  

On May 17th 1792, twenty-four stock brokers met under a buttonwood tree outside 68 Wall Street and agreed to set up the New York Stock and Exchange board. The tree was a symbol of Wall Street, but also, it was where people originally met to trade, to discuss and to argue.

The Economist has done an excellent job of keeping the tradition alive by bringing together top global financial executives, policymakers, global regulators and opinion leaders to discuss and debate proposed guidelines for the financial community, seeking to bridge fundamental financial issues with macroeconomic and geopolitical viewpoints.

As I mentioned yesterday, I usually don’t like conferences but not only did I find myself sitting between BOE Governor Mervyn King and Nobel Prize winner Joseph Stiglitz but we got to watch my favorite economics rap video together and even met the guys who created it from EconStories, who have lots of good videos on their site (of a more serious nature). 

The conference itself does not take itself too seriously.  Even Nassim Taleb was able to make a few jokes while explaining to us why the financial system is irrevocably screwed up unless we give it a major overhaul.  Taleb’s main points were:

  • People are inherently greedy.
  • The Financial Crisis was caused by and increase of hidden risks that was encouraged by the rules set forth in Basel II
  • Multiple exposure to low-probability, high-risk events accumulate to high probability of bad outcome (Taleb’s "Black Swan").
  • Bonus packages and compensation encourage very bad risky behavior. Stock options that offer potential upside and no downside encourage the maxing of risk-taking by potential beneficiaries.
  • This leads to a banking system where all the traders get rich and all the investors become poor.
  • There is a general,.chronic underestimation of risk and business schools reinforce this bad behavior.
  • Regulation gives investors a false sense of security. 
  • Capitalism must be symmetrical – bonus without penalties (clawbacks, etc.) must be eliminated.

When I am at one of these conferences, I like to watch the audience reaction to what is being said.  Here we have a gathering of the World’s movers and shakers and sometimes the reaction to what is being said is more important than the thing that is said.  For instance, my note on Taleb’s comment that regulations give investors a false sense of security is that
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The Silver Curtain

The Silver Curtain

Courtesy of Marla Singer, Zero Hedge 

On the 5th of March in 1946, in Fulton Missouri, at Westminster College, Winston Churchill delivered an address (since christened the "Sinews of Peace") lamenting the burgeoning power and influence being slowly but surely gathered up by the Soviet Union.  Perhaps the address will be familiar to some of you owing to its most famous passage:

From Stettin in the Baltic to Trieste in the Adriatic, an iron curtain has descended across the Continent. Behind that line lie all the capitals of the ancient states of Central and Eastern Europe. Warsaw, Berlin, Prague, Vienna, Budapest, Belgrade, Bucharest and Sofia, all these famous cities and the populations around them lie in what I must call the Soviet sphere, and all are subject in one form or another, not only to Soviet influence but to a very high and, in many cases, increasing measure of control from Moscow. Athens alone — Greece with its immortal glories — is free to decide its future at an election under British, American and French observation.

Ironic, as I will address, that he should mention Greece.

Much less well known perhaps is this later passage:

Our difficulties and dangers will not be removed by closing our eyes to them. They will not be removed by mere waiting to see what happens; nor will they be removed by a policy of appeasement. What is needed is a settlement, and the longer this is delayed, the more difficult it will be and the greater our dangers will become.1

The "Iron Curtain" came, of course, to signify the cavernous ideological, and eventually concretely physical, divide between East and West.  It took some 43 years before it was lifted once more, first and haltingly, in the form of the removal of Hungary’s border fence in mid-1989 and then, of course, finally via the fall of the Berlin Wall in November that same year.

Not to be compared with a production of Italian Opera, the Iron Curtain did not describe a sudden, smooth, abrupt descent over the stages of Eastern Europe.  Quite the contrary, its drop was in stutters of discrete, fractional lowerings, such that it was a full fifteen years after Churchill used the term before its ultimate expression, the Berlin Wall, was finally…
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Distortions, Lies, and Muggings by the Fed, Bank of England

Distortions, Lies, and Muggings by the Fed, Bank of England

Courtesy of Mish

The first priority of Central Bankers in any crisis is to buy time by any method available. By now, it should be perfectly clear that Central Bankers are willing to unconstitutionally usurp authority in an effort to buy that time.

I talked about that idea most recently in Hussman Accuses the Fed and Treasury of "Unconstitutional Abuse of Power"

Hussman: "The policy of the Fed and Treasury amounts to little more than obligating the public to defend the bondholders of mismanaged financial companies, and to absorb losses that should have been borne by irresponsible lenders. From my perspective, this is nothing short of an unconstitutional abuse of power, as the actions of the Fed (not to mention some of Geithner’s actions at the Treasury) ultimately have the effect of diverting public funds to reimburse private losses, even though spending is the specifically enumerated power of the Congress alone.

Needless to say, I emphatically support recent Congressional proposals to vastly rein in the power (both statutory and newly usurped) of the Federal Reserve."

Fed Uncertainty Principle

Long before that, and even before such blatant abuses occurred, I predicted such happenings in the Fed Uncertainty Principle, written April 3, 2008.

Uncertainty Principle Corollary Number Two: The government/quasi-government body most responsible for creating this mess (the Fed), will attempt a big power grab, purportedly to fix whatever problems it creates. The bigger the mess it creates, the more power it will attempt to grab. Over time this leads to dangerously concentrated power into the hands of those who have already proven they do not know what they are doing.

Uncertainty Principle Corollary Number Four: The Fed simply does not care whether its actions are illegal or not. The Fed is operating under the principle that it’s easier to get forgiveness than permission. And forgiveness is just another means to the desired power grab it is seeking.

Ironically, after being lied to for years by the likes of Bernanke and the BOE, the Central Bankers act shocked at proposals like "Audit The Fed".

With that backdrop, let’s now look at shenanigans, lies, and manipulations by the Bank of England.

Bank of England Props Up RBS, HBOS at Height of Crisis

Inquiring minds are reading Bank of England propped


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The Consensus On Big Banks Begins To Move

Optimistic words from Simon Johnson: green shoots of possible financial system reform, or wishful thinking? – Ilene  

The Consensus On Big Banks Begins To Move

Courtesy of Simon Johnson at Baseline Scenario

Paul Volcker Testifies Before House Financial Services Committee

Just when our biggest banks thought they were out of the woods and into the money, the official consensus in their favor begins to crack. The Obama administration’s publicly stated view – from the highest level in the White House - remains that the banks cannot or should not be broken up.  Their argument is that the big banks can be regulated into permanently low risk behavior.

In contrast, in an interview reported in the NYT this morning, Paul Volcker argues that attempts to regulate these banks will fail:

“The only viable solution, in the Volcker view, is to break up the giants. JPMorgan Chase would have to give up the trading operations acquired from Bear Stearns. Bank of America and Merrill Lynch would go back to being separate companies. Goldman Sachs could no longer be a bank holding company.”

Volcker may not have the ear of the President (as the NYT points out), and Alan Greenspan – also arguing for bank breakup, but along different lines – might also be ignored. But watch Mervyn King closely.

Mervyn King is governor of the Bank of England and a hugely influential figure in central banking circles. Time and again he has proved to be not only ahead of his peers in terms of thinking about the latest problems, but also the person who is best able to frame an issue and articulate potential solutions so as to draw support from other officials around the world.

Mervyn King also does not mince words.  In a major speech last night, he said, “Never in the field of financial endeavour has so much money been owed by so few to so many. And, one might add, so far with little real reform.” (full speech)

He hits hard (implicitly) at the White House’s central idea on large banks: ”The belief that appropriate regulation can ensure that speculative activities do not result in failures is a delusion”. And he lines up very much with Paul Volcker’s views – breaking up big banks is necessary, doable, and actually essential.

Remember and repeat this Mervyn King line: ”Anyone who proposed giving government guarantees to retail depositors and…
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Zero Hedge

"Tool Of Terror": This Killer Opioid Could Be Used As "Weapon Of Mass Destruction"

Courtesy of ZeroHedge. View original post here.

Fentanyl is so powerful that a few milligrams can be fatal. It would take about 40 pounds of fentanyl to kill everyone in New York City and 1,515 pounds to kill almost all Americans. This killer opioid is so potent, according to Bloomberg it could be used as a "weapon of mass destruction," adding that national security experts are becoming increasingly alarmed at the prospect of it being used in the next terror attack.

A sil...



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Kimble Charting Solutions

Regional Banks About To Send Important Message!

Courtesy of Chris Kimble.

Large and Regional banks have struggled this year, as both indices have declined nearly 15% in 2018.  These declines have taken place as interest rates have been moving higher, which historically is positive for banks.

The declines of late in Regional Bank ETF (KRE) has it testing 7-year rising support as well as the 2007 highs at (1).

The Power of the Pattern is of the opinion, what KRE does at (1), will send an important message to the banking industry and the broad markets.

Keep a close eye on KRE in the weeks ahead friends, this looks to be an important test of support!...



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Phil's Favorites

Walmart Testing Flippy The Job-Stealing Robot Cook

Courtesy of Zero Hedge

Walmart is testing out a new kitchen robot assistant named "Flippy" at its Bentonville, Arkansas headquarters in order to see if it might make for a valuable team member in its in-store delis, according to Yahoo! Finance

While Flippy had somewhat of a rocky start at a Pa...



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Insider Scoop

52 Biggest Movers From Yesterday

Courtesy of Benzinga.

Gainers
  • Sparton Corporation (NYSE: SPA) shares climbed 39.63 percent to close at $18.32 on Wednesday after the company agreed to be purchased by Cerberus at $18.50 per share in cash.
  • Astrotech Corp (NASDAQ: ASTC) shares gained 26.87 percent to close at $3.40 after the company's subsidiary, 1st Detect, announced its TRACER 1000 explosives trace detector passed the European Civil Aviation Conference's common evaluation conference.
  • LexinFintech Holdings Ltd. (NASDAQ: LX) climbed...


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Biotech

Those designer babies everyone is freaking out about - it's not likely to happen

Reminder: We're available to chat with Members, comments are found below each post.

 

Those designer babies everyone is freaking out about – it's not likely to happen

Babies to order. Andrew crotty/Shutterstock.com

Courtesy A Cecile JW Janssens, Emory University

When Adam Nash was still an embryo, living in a dish in the lab, scientists tested his DNA to make sure it was free of ...



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Members' Corner

Blue Wave with Cheri Jacobus (Q&A II, Updated)

By Ilene at Phil's Stock World

Cheri Jacobus is a widely known political consultant, pundit, writer and outspoken former Republican and frequent guest on CNN, MSNBC, FOX News, CBS.com, CNBC and C-Span. Cheri shares her thoughts on the political landscape with us in a follow up to our August interview.

Updated 12-10-18

Ilene: What do you think about Michael Cohen's claim that the Trump Organization's discussions with high-level Russian officials about a deal for Trump Tower Moscow continued into June 2016?

...

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Digital Currencies

How low will Bitcoin now go? The history of price bubbles provides some clues

 

How low will Bitcoin now go? The history of price bubbles provides some clues

The Bitcoin bubble is perhaps the most extreme speculative bubble since the late 19th century. Shutterstock

Courtesy of Lee Smales, University of Western Australia

Nearly 170 years before the invention of Bitcoin, the journalist Charles Mackay noted the way whole communities could “fix their minds upon one object and go mad in its pursuit”. Millions of people, he wrote, “become simultaneously impressed with one delusion, and run after it, till their attention is caught by some new folly more captivating than the first”.

His book ...



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Chart School

Weekly Market Recap Dec 09, 2018

Courtesy of Blain.

Bears are certainly showing the type of strength we haven’t seen in a long time.   A week ago at this time futures were surging on news of a “truce” for 90 days between China and the U.S. in their trade spat.  But the charts were still not saying lovely things despite a major rally the week prior.   And by Tuesday, darkness had descended back on the indexes, with another gut punch Friday.    A lot of emphasis was put on a long term Treasury yield dropping below a shorter term Treasury.

On Monday, the yield on five year government debt slid below the yield on three year debt, a phenomenon which has p...



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Mapping The Market

Trump: "I Won't Be Here" When It Blows Up

By Jean-Luc

Maybe we should simply try him for treason right now:

Trump on Coming Debt Crisis: ‘I Won’t Be Here’ When It Blows Up

The president thinks the balancing of the nation’s books is going to, ultimately, be a future president’s problem.

By Asawin Suebsaeng and Lachlan Markay, Daily Beast

The friction came to a head in early 2017 when senior officials offered Trump charts and graphics laying out the numbers and showing a “hockey stick” spike in the nationa...



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ValueWalk

Vilas Fund Up 55% In Q3; 3Q18 Letter: A Bull Market In Bearish Forecasts

By Jacob Wolinsky. Originally published at ValueWalk.

The Vilas Fund, LP letter for the third quarter ended September 30, 2018; titled, “A Bull Market in Bearish Forecasts.”

Ever since the financial crisis, there has been a huge fascination with predictions of the next “big crash” right around the next corner. Whether it is Greece, Italy, Chinese debt, the “overvalued” stock market, the Shiller Ratio, Puerto Rico, underfunded pensions in Illinois and New Jersey, the Fed (both for QE a few years ago and now for removing QE), rising interest rates, Federal budget deficits, peaking profit margins, etc...



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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

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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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