Posts Tagged ‘Regulatory arbitrage’

Currency Wars: Debase, Default, Deny!

Currency Wars: Debase, Default, Deny! 

Hiker pausing at fork in path

Courtesy of Gordon T Long of Tipping Points

In September 2008 the US came to a fork in the road. The Public Policy decision to not seize the banks, to not place them in bankruptcy court with the government acting as the Debtor-in-Possession (DIP), to not split them up by selling off the assets to successful and solvent entities, set the world on the path to global currency wars.

By lowering interest rates and effectively guaranteeing a weak dollar through undisciplined fiscal policy, the US ignited an almost riskless global US$ Carry Trade and triggered an uncontrolled Currency War with the mercantilist, export driven Asian economies. We are now debasing the US dollar with reckless spending and money printing with the policies of Quantitative Easing (QE) and the expectations of QE II. Both are nothing more than effectively defaulting on our obligations to sound money policy and a “strong US$”. Meanwhile with a straight face we deny that this is our intention. 

It’s called debase, default and deny.

Though prior to the 2008 financial crisis our largest banks had become casino like speculators with public money lacking in fiduciary responsibility, our elected officials bailed them out. Our leadership placed America and the world unknowingly (knowingly?) on a preordained destructive path because it was politically expedient and the easiest way out of a difficult predicament. By kicking the can down the road our political leadership, like the banks, avoided their fiduciary responsibility. Similar to a parent wanting to be liked and a friend to their children they avoided the difficult discipline that is required at certain critical moments in life. The discipline to make America swallow a needed pill. The discipline to ask Americans to accept a period of intense adjustment. A period that by now would be starting to show signs of success versus the abyss we now find ourselves staring into.  A future that is now significantly worse and with potentially fatal pain still to come.

Unemployed Americans, the casualties of the financial crisis wrought by the banks, witness the same banks declaring record earnings while these banks refuse to lend. When the banks once more are caught with their fingers in the cookie jar with falsified robo-signing mortgage title fraud, they again look for the compliant parent to look the other way. Meanwhile the US debt levels and spending associated with protecting these failed…
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By “Shopping” for Regulators, Private Equity Firms Have Discovered How to Buy Banks

By “Shopping” for Regulators, Private Equity Firms Have Discovered How to Buy Banks – Leaving Taxpayers With All the Risk

Courtesy of Shah Gilani
Contributing Editor, Money Morning

The financial Barbarians are at the gates of the U.S. banking sector.

“Regulatory arbitrage” – sometimes called “regulatory shopping” – has emerged as the favorite strategy for these Barbarians, otherwise known as private equity firms, to get around the federal rules that kept them from owning banks.

Why the sudden interest in banks? Like legendary bank robber Willie Sutton is famously (and probably falsely) remembered for saying: “That’s where the money is.”

Like so many of the businesses in the financial sector, the private equity business is right now reeling – and littered with its own bankrupt leveraged buyout deals. So now these LBO firms are shrewdly targeting failed banks, playing regulatory arbitrage, and shopping around as they search for ways around the regulations that were designed to keep companies with their motives out of the U.S. banking industry’s venerable vaults.

The new twist on acquisition leverage is to have taxpayers, through the Federal Deposit Insurance Corp. (FDIC), backstop losses on acquired banks if the economy continues to falter.  And as soon as they can leverage depositors and the FDIC as a source of funds, these private equity firms will go back to buying leveraged-up targeted companies with cheap borrowed money – to which they’ll have easy access, since they’ll actually own the banks.

The Background on Banking Regs

Banks are regulated at the federal level by a number of agencies. The regulators include the Federal Reserve Board (FRB), which oversees national banks chartered by the government, the Office of Thrift Supervision (OTS), a U.S. Treasury Department office that oversees thrift institutions, savings and loans and credit unions, the Office of the Comptroller of the Currency (OCC), and the FDIC, not to mention various state banking regulatory bodies.

Lately, approval actions by the OTS and FDIC are at odds with the U.S. Federal Reserve, which has not authorized the acquisition of controlling interests in any banks by any private equity players. The FDIC has expressed its acquiescence as a way of more-quickly offloading insolvent banks in the hope that doing so might help limit its exposure to depositor claims. And the OTS, after being somewhat hesitant – and with its future as…
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Phil's Favorites

Brief Summary of Friday's stock market action

 

It was a good idea from Paul Krugman on Thursday, but by Friday, hopes for a sane approach to economic matters all but disappeared...

What about calling off the trade war that has been depressing business investment? This seems unlikely, because protectionism is right up there with racism as a core Trump value. And merely postponing tariffs might not help, since it wouldn’t resolve the uncertainty that may be the trade war’s biggest cost.

The truth is that Trump doesn’t have a Plan B, and probably can’t come up with one. On the other hand, he might not have to. Who needs competent policy when you’re the chosen one and the ...



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Zero Hedge

How Negative Interest Rates Screw Up The Economy

 

By Wolf Richter via WolfStreet.com, as published at Zero Hedge

Now they’re clamoring for this NIRP absurdity in the US. How will this end?

This is the transcript from my podcast last Sunday, THE WOLF STREET REPORT:

Now there is talk everywhere that the United States too will descend into negative interest rates. And there are people on Wall Street and in the media that are hyping this absurd condition where government...



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Biotech

The Big Pharma Takeover of Medical Cannabis

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

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Kimble Charting Solutions

Bearish Divergences Similar To 2000 & 2007 In Play Again!

Courtesy of Chris Kimble

Does history at important junctures ever repeat itself exactly? Nope

Do look-alike patterns take place at important price points? Yup

This chart looks at the S&P 500 over the past 20-years.

In 2000 and 2007 bearish momentum divergences took place months ahead of the actual peak in stocks.

Currently, momentum has created a bearish divergence to the S&P 500 for the past 20-months, as the seems to have stopped on a dime at its 261% Fibonacci extension level of the 2007 highs/2009 lows.

Joe Friday Just The Fact Ma’am; A negative sign for the S&P 500 with the divergence in play, would take place if support b...



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The Technical Traders

Do Good Traders Make Good Gamblers?

Courtesy of Technical Traders

Without breaking the rules, have you ever made a trade that was guaranteed to make you money? A trade that was literally guaranteed to succeed.

If you’re struggling to come up with an answer, we’ll give you a helping hand, the word you’re searching for is likely no. Every financial trade ever made – no matter how sound and well researched using technical analysis – carries with it an element of risk.

Outside factors beyond your control always have the possibility of turning profits into losses and ecstasy into agony. In many ways, trading is similar to gambling. For instance, you may think you know ...



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Insider Scoop

Earnings Scheduled For August 22, 2019

Courtesy of Benzinga

Companies Reporting Before The Bell
  • Hormel Foods Corporation (NYSE: HRL) is estimated to report quarterly earnings at $0.36 per share on revenue of $2.29 billion.
  • BJ's Wholesale Club Holdings, Inc. (NYSE: BJ) is projected to report quarterly earnings at $0.37 per share on revenue of $3.38 billion.
  • DICK'S Sporting Good...


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Chart School

Gold Gann Angle Update

Courtesy of Read the Ticker

Everything awesome? Gold over $1500. Central banks are printing money to generate fake demand. Germany issues first ever 30 year bond with negative interest rate. Crazy times!

Even Australia and New Zealand and considering negative interest rates and printing money, you know a bunch of lowly populated islands in the South Pacific with no aircraft carriers or nuclear weapons. They will need to do this to suppress their currency as they are export nations, as they need foreign currency to pay for foreign loans. But what is next, maybe Fiji will start printing their dollar. 

Now for a laugh, this Jason Pollock sold for more than $32M in 2012. 





Ok, now call Dan...

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Lee's Free Thinking

Watch Out Bears! Fed POMO Is Back!

Courtesy of Lee Adler

That’s right. The Fed is doing POMO again.  POMO means Permanent Open Market Operations. It’s a fancy way of saying that the Fed is buying Treasuries, pumping money into the financial markets.

Over the past 6 days, the Fed has bought $8.6 billion in T-bills and coupons. These are the first regular Fed POMO Treasury operations since the Fed ended outright QE in 2014.

Who is the Fed buying those Treasuries from?

The Primary Dealers. Who are the Primary Dealers?  I’ll let the New York Fed tell you:

Primary dealers are trading counterparties of the New York Fed in its implementation of monetary policy. They are also expected to make markets for the New York Fed on behalf of its official accountholders as needed, and to bid on a ...



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Digital Currencies

New Zealand Becomes 1st Country To Legalize Payment Of Salaries In Crypto

Courtesy of ZeroHedge View original post here.

Bitcoin and other cryptocurrencies have been on a persistent upswing this year, but they're still pretty volatile. But during a time when even some of the most developed economies in the word are watching their currencies bounce around like the Argentine peso (just take a look at a six-month chart for GBPUSD), New Zealand has decided to take the plunge and become the first country to legalize payment in bitcoin, the FT reports.

The ruling by New Zealand’s tax authority allows salaries and wages to b...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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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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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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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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