by ilene - April 9th, 2010 11:18 am
Courtesy of Karl Denninger at The Market Ticker
Chairman Bernanke spewed froth (sic) last evening:
Good evening. It is a great pleasure to share a meal with the Center for the Study of the Presidency and Congress, and especially with the Center’s fellows. Doubtless your participation in the fellowship program as undergraduate and graduate students--writing and thinking about leadership, governance, and public policy--will prove immensely valuable as you develop your own intellectual and leadership skills and embark on careers that I hope will include a period of public service.
Translation: You need to learn how to lie very convincingly in order to succeed in public policy. I’m one of the best, so listen to me dissemble here and nod your heads as I provide an excellent object lesson.
The first lesson--economic prosperity depends on financial stability--seems obvious, but this connection was not always well understood.
This, of course, is why The Fed sat back and watched the housing bubble inflate. It is often lamented that the lending standards were "violated", but exactly what "standards" existed for a NINJA loan? You know: No job, no income, no assets? Right – none. How do you violate non-existent standards?
Never mind the other conundrum – The Fed’s incessant claim that "it can’t see bubbles." An 80% stock market rally in one year caused by legalized accounting fraud isn’t an obvious bubble? Oil going from $30-85 while supply rockets to record highs – to the point that tankers are leased for speculative storage by banks – isn’t an obvious bubble? Treasuries aren’t an obvious bubble when "magical demand" appears that allegedly is from foreign central banks, but which isn’t reflected in either TIC data or custodial holdings? Pull the other one you jackass.
In contrast, more recent work on the subject, to which I contributed, showed that the health of the financial system and the performance of the broader economy are closely interrelated, both in the short run and in the long run.
Oh, so you allowed all this game-playing, and still do, on purpose so as to create imbalances that you know will damage the economy? How does this escape the definition of economic terrorism?
For example, in October 2008, just weeks after the sharp intensification of the crisis, the Congress authorized the Troubled Asset Relief Program (TARP) to support stabilization of
…
by ilene - April 4th, 2010 1:59 am
Courtesy of Simon Johnson at Baseline Scenario
There are two kinds of bankers to fear. The first is incompetent and runs a big bank. This includes such people as Chuck Prince (formerly of Citigroup) and Ken Lewis (Bank of America). These people run their banks onto the rocks – and end up costing the taxpayer a great deal of money. But, on the other hand, you can see them coming and, if we ever get the politics of bank regulation straightened out again, work hard to contain the problems they present.
The second type of banker is much more dangerous. This person understands how to control risk within a massive organization, manage political relationships across the political spectrum, and generate the right kind of public relations. When all is said and done, this banker runs a big bank and – here’s the danger – makes it even bigger.
Jamie Dimon is by far the most dangerous American banker of this or any other recent generation.
Not only did Mr. Dimon keep JP Morgan Chase from taking on as much risk [as] its competitors, he also navigated through the shoals of 2008-09 with acuity, ending up with the ultimate accolade of “savvy businessman” from the president himself. His letter to shareholders, which appeared this week, is a tour de force – if Machiavelli were a banker alive today, he could not have done better. (You can access the full letter through the link at the end of the fourth paragraph in this WSJ blog post; for another assessment, see Zach Carter’s piece.)
Dimon fully understands – although he can’t concede in public – the private advantages (i.e., to him and his colleagues) of a big bank getting bigger. Being too big to fail – and having cheaper access to funding as a result – may seem unfair, unreasonable, and dangerous to you and me. But to Jamie Dimon, it’s a business model – and he is only doing his job, which is to make money for his shareholders (and for himself and his colleagues).
Dimon represents the heavy political firepower and intellectual heft of the banking system. He runs some of the most effective – and tough – lobbyists on Capitol Hill. He has the very best relationships with Treasury and the White House. And…
by ilene - February 8th, 2010 11:39 am
Courtesy of Joe Weisenthal at Clusterstock/The Business Insider
What are banks doing with the billions upon billions of dollars they’ve taken from the taxpayer?
The St. Louis Fed has just updated its latest data on bank health and activity, and the charts paint a great picture of what’s really going on in our banking system.
The bottom line: lending is still tanking (unless you count lending to the government)
by ilene - December 28th, 2009 2:52 pm
Courtesy of Jesse’s Café Américain
The deterioration of the dollar reserve currency regime is obvious.
If we have forecasted correctly, the world will look to some variation of the IMF’s Special Drawing Rights as an eventual replacement for the US dollar. Therefore, the recomposition of the SDR next year will become a lightning rod for the global stresses created by an increasingly unstable and impractical system of global trade.
As you may recall, Russia and China have called for the inclusion of more currencies such as the rouble, the yuan, the Aussie and Canadian dollars, and gold and possibly silver into the mix. The BRIC’s seem determined to break the western dominance of global monetary policy.
This may also explain some of the highly emotional,and we would say nonsensical, arguments attacking gold and silver by some of the house economists for the western Banks, and their camp followers and hand puppets in the universities, of late.
The bankers are appalled at the prospect of the new SDR including gold or silver in its new composition to be set in 2010. And so they are jawboning ahead of it. Any country can build its gold and silver reserves in the open market, and the big central bankers find it difficult to manipulate their supplies to their own advantage, despite years of desperate efforts to substitute paper for metal.
Bad enough that the basket may include currencies of non-G7 countries. As you will recall, the G7 was formed when Canada joined the Group of Six: US, Great Britain, France, Germany, Japan, and Italy. The power balances of the post World War II era are changing, and the shifts in trade and financial power reflect this.
In the interim, there will be regional currency arrangements and trading blocs as in the past. The strength and suitability of the new SDR regime will help to determine the disposition of these regional arrangements.
‘Free trade’ without a floating monetary exchange system is not possible. Otherwise there will be artificial subsidies and penalties among nations, as in all systems of price control. These lead inevitably to imbalances, bubbles, and crises.
The adjustments that are overdue for the dollar and renminbi in particular will make political progress difficult. But the greatest impediment to progress will
…
by ilene - December 23rd, 2009 3:39 pm
Courtesy of Joshua M Brown, The Reformed Broker
As the average US citizen drags his wounded semi-corpse of a body across 2009′s finish line, it is heartwarming and life-affirming to know that the bloodsucking lobbyists are raking it in like never before down in Washington D.C.
From Politico via the CATO Institute:
K Street is raking it in.
Washington’s influence industry is on track to shatter last year’s record $3.3 billion spent to lobby Congress and the rest of the federal government — and that’s with a down economy and about 1,500 fewer registered lobbyists in town, according to data collected by the Center for Responsive Politics.
One giddy veteran lobbyist exclaims, "It is the most active time that I have ever seen in the advocacy business — from 1973 on.” The "advocacy business"…lol, that’s like "efficiency expert" or "downsizing consultant". Gross.
With every new social program, bailout, industry overhaul, regulatory takeover and bureacracy’s birth, the influence peddlers see another opportunity to move and place their chips as though they’re at a roulette table in hell.
It’ll be Kristmas on K Street for the foreseeable future. In the words of David Boaz, "If you put out a picnic, you’re going to get ants."
Sources:
Lobbyists On Pace For a Record Year (Politico)
http://www.cato-at-liberty.org/2009/12/23/boom-time-on-k-street/
by ilene - December 15th, 2009 12:00 pm
Paul Volcker’s message, passed along by Simon Johnson, with love. - Ilene
Courtesy of Simon Johnson at The Baseline Scenario
The guiding myth underpinning the reconstruction of our dangerous banking system is: Financial innovation as-we-know-it is valuable and must be preserved. Anyone opposed to this approach is a populist, with or without a pitchfork.
Single-handedly, Paul Volcker has exploded this myth. Responding to a Wall Street insiders‘ Future of Finance “report“, he was quoted in the WSJ yesterday as saying: “Wake up gentlemen. I can only say that your response is inadequate.”
Volcker has three main points, with which we whole-heartedly agree:
and most important:
3. “I am probably going to win in the end”.
Volcker wants tough constraints on banks and their activities, separating the payments system – which must be protected and therefore tightly regulated – from other “extraneous” functions, which includes trading and managing money.
This is entirely reasonable – although we can surely argue about details, including whether a very large “regulated” bank would be able to escape the limits placed on its behavior and whether a very large “trading” bank could (without running the payments system) still cause massive damage.
But how can Mr. Volcker possibly prevail? Even President Obama was reduced, yesterday, to asking the banks nicely to lend more to small business – against which Jamie Dimon will presumably respond that such firms either (a) are not creditworthy (so give us a subsidy if you want such loans) or (b) don’t want to borrow (so give them a subsidy). (Some of the bankers, it seems, didn’t even try hard to attend – they just called it in.)
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The reason for Volcker’s confidence in his victory is simple - he is moving the consensus. It’s not radicals against reasonable bankers. It’s the dean of American banking, with a bigger and better reputation than any other economic policymaker alive – and with a lot of people at his back – saying, very simply: Enough.
He
…
by ilene - November 5th, 2009 1:15 pm
Government manipulation--the slide show. Is this the "change" we voted for? – Ilene
A recent CBO report estimated that the government spends about $300 billion to intervene in the housing market each year. That’s based on a range of activities, from direct subsidies to homebuyers, to the mortgage interest tax deduction, and the backstop of Fannie and Freddie.
And thus it’s no surprise that the housing market doesn’t work like other markets, and that we had a major bubble there. Even now, Goldman Sachs estimates, the government is adding at least 5% to the cost of each home, through its various "affordability" measures.
But it’s not just housing. Virtually every important sector of the economy is being manipulated in some way.
by ilene - October 16th, 2009 5:11 pm
Courtesy of Zero Hedge
At first it was just the smaller banks, but now the big boys have joined the collective cry against FASB 166 and 167, according to which beginning January 1, banks will likely see up to $900 billion in off-balance sheet assets being onboarded to bank balance sheets. This would likely mean banks need to dramatically increase their Tangible and Tier 1 Capital to offset the capital needed to account for possible asset deterioration. And that, of course, is unacceptable to banks who know too well the deep shit they still find themselves in.
The irony is that banks, which have already virtually halted lending to those in need of credit, are threatening they will cut any available credit even futher. How anyone could admit to being stupid enough to believe this latest episode of Mutual Assured Destruction courtesy of the US banking system is a mystery. And yet this is precisely the type of "gun against the head" negotiating that Max Keiser was fulminating against, and that the banks are once again perpetrating:
“With any increase in required capital, a banking institution is likely to reduce the amount of lending using such securitization vehicles, as well as other lending,” the American Bankers Association wrote in a letter to regulators. The association, the nation’s biggest banking lobby, suggested that any transition period should be three years at least, with no change in regulatory capital impact in the first year.
Taking a cue from the ABA, the big 3 record earners have decided to join in: last thing one would want is JPMorgan not earning yet another record amount in Q4. First Citi chimes in:
Banks should be given three years to raise capital for offsetting assets and liabilities that must be brought onto their balance sheets, Citigroup Chief Financial Officer John Gerspach said yesterday in a letter to regulators. Requiring banks to “assume the risk-based capital effects immediately, or even over one year, is an undeniably severe penalty,” he wrote.
Then you have record earner JPMorgan:
The capital requirements “will have a significant and negative impact on the amount of consumer-conduit funding that will be made available by U.S. banks,” said
…
by ilene - October 15th, 2009 12:36 pm
Here’s an excellent, must-read article by William K. Black. Special thanks to New Deal 2.0. - Ilene
By Bill Black, Courtesy of New Deal 2.0
Roosevelt Institute Braintruster William K. Black explains how the finance economy preys on the real economy instead of serving it. He shows how both have become dysfunctional and warns that we must not neglect the real economy — the source of our jobs, our incomes, and the creator of goods and services — as we focus on financial reform.
What exactly is the function of the financial sector in our society? Simply this: Its sole function is supplying capital efficiently to aid the real economy. The financial sector is a tool to help those that make real tools, not an end in itself. But five fatal flaws in the financial sector’s current structure have created a monster that drains the real economy, promotes fraud and corruption, threatens democracy, and causes recurrent, intensifying crises.
Even when not in crisis, the financial sector harms the real economy. First, it is vastly too large. The finance sector is an intermediary — essentially a “middleman”. Like all middlemen, it should be as small as possible, while still being capable of accomplishing its mission. Otherwise it is inherently parasitical. Unfortunately, it is now vastly larger than necessary, dwarfing the real economy it is supposed to serve. Forty years ago, our real economy grew better with a financial sector that received one-twentieth as large a percentage of total profits (2%) than does the current financial sector (40%). The minimum measure of how much damage the bloated, grossly over-compensated finance sector causes to the real economy is this massive increase in the share of total national income wasted through the finance sector’s parasitism.
Second, the finance sector is worse than parasitic. In the title of his recent book, The Predator State, James Galbraith aptly names the problem. The financial sector functions as the sharp canines that the predator state uses to rend the nation. In addition to siphoning off capital for its own benefit, the finance sector misallocates the remaining capital in ways that harm the real economy in order to reward already-rich financial elites harming the nation. The facts are alarming:
• Corporate stock repurchases…
by ilene - October 12th, 2009 2:44 pm
Courtesy of Washington’s Blog
New York Versus the Rest of the Country
If you are happy with the banking system, and don’t think it needs to be reformed, then you probably work for one of the banks headquartered in New York.
Indeed, the banks outside of New York have acted much more conservatively, used more conservative capital ratios and less leverage and gotten less involved in credit derivatives and other speculative investments.
Buy a banker in the Midwest a drink, and he will probably rail against the giant New York banks for causing the financial crisis, costing the smaller, better run banks a lot of money and huge fees, and driving many smaller banks out of business.
And even within the Federal Reserve, what the New York Fed and Bernanke are saying is wholly different from what the heads of the regional Fed banks are saying. The Fed banks in Philadelphia and Kansas City and Dallas and elsewhere disagree with what the New York Fed and Fed’s Open Market Committee are doing. See this and this.
So the battle isn’t between bankers versus outsiders. It is between the giant New York money-centered banks and the rest of the country.
Reserve Requirements
Congresswoman Kaptur said last week:
We used to have capital ratios. We need to get back to them. Ten to one. For every dollar in your bank, you can lend ten. You know what J.P. Morgan did? A hundred to one. And then with derivatives, who knows how much?
Remember, Milton Friedman – the monetary economist worshipped as the guy with all of the answers in the latter part of the 20th century – advocated for 100% reserves.
Forget 100 to 1 or even 10 to 1. Friedman said the capital ratio should be 1 to 1, where banks only lend out the amount they actually have as deposits on hand.
Friedman has been deified as the economist to follow. But his views on reserve requirements have been completely ignored.
Money Out of Thin Air
Congresswoman Kaptur also said last week:
Banks have the power to create money. And decide how much that is worth.
What is Kaptur talking about?
Here Comes the Judge
Well, in First National Bank v. Daly (often referred to as…
April 26th, 2012 6:14 pm
Courtesy of Lee Adler of the Wall Street Examiner
Improvement in first time unemployment claims is slowing. Actual, not seasonally manipulated data, including an adjustment for the usual weekly upward revision, shows that the year to year rate of change is on the cusp of a possible upside breakout, which would be good news for stock market bears if it happens.
Initial Unemployment Claims Chart- Click to enlarge
Here’s why it’s mind blowing. I’ve plotted it below on an inverse scale with the S&P 500 overlaid.
Unemployemt Claims and Stock Prices - Click to enlarge
That speaks for itself. As the i...
April 4th, 2012 4:33 pm
Today’s tickers: S, FTR, JTX & SBUX
more from Caitlin
November 9th, 2011 5:48 pm
Courtesy of John Nyaradi.
Major US Markets including (NYSEARCA:DIA), (NYSEARCA:SPY), (NASDAQ:QQQ), and (NYSEARCA:IWM) dropped over 3% each on Italian bond fears and an increased worry that Europe will not be able to bail out its 4th largest economy. Furthermore, the iShares MCSI Italy Fund (NYSEARCA:EWI) wiped out over 9% today, further illustrating the dire situation in Italy and the European Union: ...November 4th, 2011 9:51 pm
Courtesy of Doug Short.
The S&P 500 broke its string of four-consecutive weekly gains with loss of 0.63% for the day and 2.48% for the week.
The index is back in the red year-to-date, down 0.35% and 8.09% below the interim high of April 29.
From an intermediate perspective, the index is 85.2% above the March 2009 closing low and 19.9% below the nominal all-time high of October 2007.
Below are two charts of the index, with and without the 50 and 200-day moving averages.
August 29th, 2011 10:52 am
Courtesy of ZeroHedge. View original post here.
Submitted by Tyler Durden.
The second economic disappointment of the day comes from the Dallas Fed, which dropped from -2.0 to -11.4 on expectations of -9.0- this was the 4th consecutive negative print month. The report was, in a word, horrible, with just 2 of the 15 constituent indices posting an increase, and the bulk solidly in the red, led by Unfilled and New Orders which dropped 16.8 and 11.2, respectively: not good for economic growth. On the employment side there was nothing good either, with both employment and hours worked declining by -...
May 25th, 2011 4:59 pm
Courtesy of Benzinga
Bloomberg reports that Diana Containerships (NASDAQ: DCIX) files to offer stock up to $172.5M. Diana Containerships says that Diana shipping will also buy $20M of stock.
Visit Benzinga >
...March 12th, 2011 12:00 am
Top 5 RisersStockRatingAnalysisVLOSTRONGBUYAn increasingly positive growth rate of past earnings, along with improving expectations for long term growth, make Valero a good prospect for high returns.KROSTRONGBUYKronos Worldwide has been gaining recognition from analysts as a good canditate for achieving higher than expected earnings along with higher overall projected valuation.SFIBUYiStar is one of the top candidates projected to achieve both higher than previously projected earnings in the short run and a higher earnings growth rate in the long run.AMATSTRONGBUYApplied Materials has been...March 6th, 2011 11:25 pm
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Here's the newest Stock World Weekly: Illusion Based on a Fantasy
Comments welcome... share your thoughts.
Stock World Weekly archives here >
...March 1st, 2011 9:42 am
February is now past, and the Biotech Porfolio is loaded with winners and a miss (PLX). MRK is down a bit, but I expect that trade to recover, and one could be more agressive and double down on it, or play another round at the Jan13 $30 options for roughly the same price. Below is the summary, and note the grey boxes are ones that did not fill. I am still a fan of BMRN, and like DEPO as well. Now let's look at a few others.
Table 1. PSW Biotech Plays Since January 2011
 
Our newest play is Momenta Pharmaceuticals (MNTA), who is pursuing a three-part business model which includes complex generic equivalents in partnership with the Sandoz division of Novartis, proprietary compounds, and follow-on- biologics (FOB). It seems that this company is tied up in competition/litigation wit...
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Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Philstockworld, LLC (PSW) nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice. |
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