Posts Tagged ‘undercapitalized’

From the Greenspan Archive: We Were Undercapitalized for 40 or 50 Years

From the Greenspan Archive: We Were Undercapitalized for 40 or 50 Years

Courtesy of Jr. Deputy Accountant 

How can an economic system be chronically undercapitalized for "40 or 50 years"? There’s only supposed to be as much money as there is demand for that money, right? Someone has to pay for something and sometimes they have to borrow money to get the things they want. That’s fine, it creates more demand for money (Someone A has to get the money to pay Someone B for the things they wanted but couldn’t afford and ends up paying both for the things and the interest on the money used to get the things) and supposedly our friends at the Fed are there watching that. Did any of these 40 to 50 years involve Greenspan?

I can’t believe this a**hole says some of this sh*t out loud sometimes.

“During the past 18 months, there were very few instances of serial default and contagion that could have not been contained by adequate risk-based capital and liquidity,” he said. In response to a question, Greenspan said “we were undercapitalized in the banking system for maybe 40 or 50 years.”

Maybe I’m completely off but I read that to mean all we have to do is continue to throw a whole sh*t ton of dirty Fed money out there and that could totally fix these rotting cesspools of residential real estate popping and fizzing around America.


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The Google Maps foreclosure dots look slightly less contagious than they did last time I checked but it still looks like an outbreak out there.

Here’s a solution since we’re just making this up: rent out foreclosed homes and make "owners" responsible for collecting the payments and returning the majority to whomever owns the mortgage (you know, like normal f**king homedebtors do minus the rent). Make these nearly foreclosed but rented out homes like operating leases so struggling CRE companies can pick them up and make a percentage from rents for holding them. It’s genius. F**k it! Otherwise bulldoze half of them and call the housing problem "corrected". 

Good thing Greenspan fixed that little undercapitalization problem by opening Pandora’s box on all sorts of creative blip-creating genius. Greenspan is the libertarian of the century for freeing the dollar, aren’t you glad he decoupled it from gold? Maybe that’s…
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GREECE: SOUNDING VERY LEHMAN-ISH

GREECE: SOUNDING VERY LEHMAN-ISH

Greek restaurant

Courtesy of The Pragmatic Capitalist 

If you recall the early stages of the financial crisis there was one glaring trend from the various bank CEO’s and CFO’s – they just couldn’t wait to get on TV with their slogan:

“We are well capitalized.”

Of course, that turned out to be a lie as it’s now clear that most banks in the USA were woefully undercapitalized.  Today, Greece’s finance minister is out with similar comments:

“Restructuring is not going to happen. There are much broader implications for the eurozone should Greece have to restructure its debt.  People fail to see the costs to both Greece and the eurozone of a restructuring: the cost to its citizens, the cost to its access to markets. If Greece restructures, why on earth would people invest in other peripheral economies? It would be a fundamental break to the unity of the eurozone.”

In other words, “we are well capitalized”.  That’s all well and good, but actions speak louder than words. The truth is that austerity is not working in Greece.   They have failed to realize the crucial flaw in the Greek austerity plan: the private sector and public sector can’t save at the same time.  They’re essentially hoping that they can get more blood to the heart by cutting off both arms.  That’s just not how it works.  Cutting off both arms simply exacerbates the problems.  Slowly, but surely, you bleed out.

Their continued funding woes are obvious.  According to the bailout facility Greece continues to increase their reliance on the ECB.  ECB funding now represents 20% of total Greek banking assets.  The following two charts from Goldman Sachs show Greece’s (and the entire periphery’s) increasing reliance on the kindness of strangers.

Of course, this is all just politics as Greek politicians hope for some sort of economic miracle (which isn’t going to happen) and the ECB tries to come up with a plan that actually resolves the structural flaws in the Euro system.  The markets (as seen by yields and CDS) clearly aren’t so optimistic that Greece is “well capitalized”.  Without major reforms in the EMU or an economic miracle the endgame for Greece looks increasingly dire. These periphery nations sound all too much like the many US banks that were on the verge of collapse in 2007 and 2008. 


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The Technical Traders

Massive Price Reversion May Be Days or Weeks Away

Courtesy of Technical Traders

Our researcher team believes a massive global market price reversion/correction may be setting up and may only be a
few days or weeks away from initiating. 
Our team of dedicated researchers and market analysts have been studying the markets, precious metals, and most recently the topping formation in the ES (S&P 500 Index).  We believe the current price pattern formation is leading into a price correction/reversion event that could push the US major indexed lower by at least 12 to 15%.

Historically, these types of price reversion events are typically considered “price exploration”.  Over time, investors push a pricing/valuation bias into the ma...



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Zero Hedge

Jeffrey Epstein Paid Doctors To Drug 'Sex Slaves': Report

Courtesy of ZeroHedge View original post here.

Victims of dead pedophile Jeffrey Epstein say he paid doctors and psychiatrists to dope them up with anti-anxiety and antidepressant medications, according to a new report in the Miami Herald

"There were doctors and psychiatrists and gynecologist visits. There were dentists who whitened our teeth. There was a docto...



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Insider Scoop

Notable Insider Buys In The Past Week: AbbVie, Kraft Heinz And More

Courtesy of Benzinga

Insider buying can be an encouraging signal for potential investors.

A packaged food giant and two drugmakers saw notable insider buying activity this past week.

Some of this insider buying occurred alongside insider sales.

Conventional wisdom says that insiders and 10% owners really only buy shares of a company for one reason — they believe the stock price will rise and they want to profit. So insider...



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Phil's Favorites

Peloton IPO Guide... And Why It Makes No Sense

Courtesy of ZeroHedge

By Scott Willis via Grizzle.com

BOTTOM LINE

At the end of the day, Peloton is a gym membership pretending to be a tech company.

We fully admit the product is exciting and unique in the market, but Peloton still faces the same problem...



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Digital Currencies

Buyer beware: How Libra differs from Bitcoin

 

Buyer beware: How Libra differs from Bitcoin

Recent revelations about the lack of privacy protections in place at the companies involved in Facebook’s new Libra crytocurrency raise concerns about how much trust users can place in Libra. (Shutterstock)

Courtesy of Alfred Lehar, University of Calgary

Facebook, the largest social network in the world, stunned the world earlier this year with the announcement of its own cryptocurrency, Libra.

The launch has raised questions about the difference between Libra and existing cryptocurrencies, as well as the implications of private companies competing with s...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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Kimble Charting Solutions

India About To Experience Major Strength? Possible Says Joe Friday

Courtesy of Chris Kimble

If one invested in the India ETF (INDA) back in January of 2012, your total 7-year return would be 24%. During the same time frame, the S&P 500 made 124%. The 7-year spread between the two is a large 100%!

Are things about to improve for the INDA ETF and could it be time for the relative weakness to change? Possible!

This chart looks at the INDA/SPX ratio since early 2012. The ratio continues to be in a major downtrend.

The ratio hit a 7-year low a few months ago and this week it kissed those lows again at (1). The ratio near weeks end is attempting to...



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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 

...

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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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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

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

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