Euro Pacific Capital chief Peter Schiff showed up on Fox Biz to discuss Warren Buffett’s doom-mongering in the NYT today. Schiff tries to thread the needle, saying that Buffett is right that the dollar will collapse, but wrong to think that the bailouts and stimuli we’ve done so far were necessary.
We just received a phone call from a man in California named Peter who wanted to know why Barney Frank was holding up his fellow congressman Ron Paul’s bill to audit the Federal Reserve.
We assured Peter that Barney Frank had a long record of supporting Ron Paul’s efforts to impose greater transparency upon the actions of the Fed.
‘In 2007 Barney Frank had in fact given an affectionate interview on the subject of Ron Paul’s quixotic campaign for the presidency to the New York Times magazine in which he said of his relationship with his colleague from Texas:
"We first bonded because we were both conspicuous non-worshipers at the Temple of the Fed and of the High Priest Greenspan.”
But Peter was not satisfied; he was certain conspiracy must be afoot. He began talking about JP Morgan and the Council on Foreign Relations, Skull & Bones and the various other front organizations in addition to the Fed through which some believe a secretive cabal of elites known as the Illuminati govern world affairs. (The Masons, Peter said, may also be involved.)
The conversation echoed another we’d had back in November, when while writing a story about, of all people, Barney Frank, we looked up an old Reagan-era rival of Frank’s by the name of Bill Dannemeyer.
As an Orange County Republican serving in the eighties Dannemeyer had made a name for himself reading graphic depictions of gay sex from the floor of the House, claiming people with AIDS emitted "spores that cause birth defects" and leading an infuriated crusade to oust Barney Frank over a relationship he’d carried on with a male prostitute.
But by the time we got around to talking to Dannemeyer he had mellowed considerably. He no longer saw Frank as the promulgator of some sort of insidious "gay agenda."
All he asked of Frank as a public citizen was for him to use his chairmanship of the Financial Services Committee to pass a bill demanding a full congressional audit of the Federal Reserve. (Dannemeyer, too, had referenced the Illuminati and the Council on Foreign Relations, JP Morgan and the Rockefellers.)
It would take too much space to explain even the bit we do
Speaking on the Sunday morning shows, neither Tim Geithner nor Larry Summers would rule out the prospect of higher taxes to pay for healthcare:
AP: Geithner and Summers both sidestepped questions on Obama’s intentions about taxes. Geithner said the White House was not ready to rule out a tax hike to reduce the federal deficit; Summers said Obama’s proposed health care overhaul needs funding from somewhere.
"There is a lot that can happen over time," Summers said, adding that the administration believes "it is never a good idea to absolutely rule things out, no matter what."
During his presidential campaign, Obama repeatedly pledged "you will not see any of your taxes increase one single dime." But the simple reality remains that his ambitious overhaul of how Americans receive health care — promised without increasing the federal deficit — must be paid for.
Here’s the problem. It’s not that higher taxes to pay for healthcare are inherently a bad idea. Indeed, if the idea is to expand coverage and leave nobody uninsured then of course reform is going to be expensive. The problem is that it acknowledges the plan has no solution on the cost side. We keep hearing about how we need to bend the cost curve down so that medical care doesn’t swallow up all of our money and bust the deficit. So while we might be able to handle things on the government side, via taxes, it means that overall we’re making no progress on costs — just paying for it in a different way.
Anyway, Republicans will go crazy with the latest statements. We applaud their honesty, but the messaging on healthcare continues to be awful.
There’s some fear out there that one of the big "shoes to drop" could be dropping — namely our massive debt and the potential unwillingness of our trading partners to keep financing it.
This week saw a series of monster bond sales--so many, in fact that buyers may be getting a stomachache.
WSJ: Tension on Wall Street trading desks began building late last week when the Treasury surprised the market with plans for a record week of sales. A Monday sale of $90 billion in Treasury bills with maturities of as much as a year went well. But China appeared absent from the following two sales, which totaled $81 billion of debt, traders say.
By Thursday morning, trading-desk heads were frantically working with clients to ensure a better fate for the $28 billion seven-year note auction. It did fare far better, allaying some concerns.
When asked about the shaky auctions, a Treasury official gave exactly the kind of answer that could assure nobody.
"We believe by maintaining the deepest, most liquid market in the world, we will continue to attract capital from a broad array of investors," said Andrew Williams, a spokesman for the Treasury Department.
At the heart of the clash between TARP watchdog Neil Barofsky and his critics in the Obama administration is that Barofsky thinks that the bailout should be publicly accountable for meeting its public goal: Keeping banks lending money to fuel the economy.
The Treasury Department, meanwhile, is happy with the secret goal--recapitalizing banks and consolidating weak banks with stronger ones.
Barofsky wants to compel banks to account for those [TARP] funds and then publicize that information, while the administration opposes such efforts, claiming that accounting for TARP monies is impossible due to the "fungibility" of those funds. To disprove that claim, Barofsky sent out voluntary surveys to the bank which proved that those funds could be tracked (and he found TARP funds were being used by receiving banks largely to acquire other institutions and/or create "capital cushions" rather than increase lending activity, the principal justification for TARP).
Now it’s been obvious to many of us for quite some time that financially unhealthy banks would never use the TARP money for anything but hoarding, paying bonuses and trying to prop themselves up. But that’s because we’re as cynical as the architects of the TARP. Barofsky, a career prosecutor, takes the entirely reasonable view that government programs shouldn’t be based on lies.
On a deeper level, what Barofsky is running into is a core problem with the way the TARP was designed. There’s simply no way the government could use capital injections to spur lending into a recessionary economy. It was bound to be used to increase capital cushions. And that’s because the Treasury Department and the Federal Reserve simply lacked the political imagination to find a way to shore up the financial system without propping up zombie banks.
What else could they have done? Very simply, we could have allowed failing firms to fail, wiped out shareholders, devastated bondholders, seized depositor assets, perhaps while increasing liquidity to make sure healthy financial institutions had enough cash on hand to deal with any panic.
Here’s a crazy stat for you. The total amount of US backstops and bailouts has reached a staggering $23.7 trillion!
How do we know? Because TARP watchdog Neil Barofsky is going to say so in his fresh report, and that report was leaked to many top media outlets, like WaPo and Dow Jones. If it’s available to the public, we certainly can’t find it on the SIGTARP website. The last report that’s up is from April, 21.
Presumably, one of Neil Barofsky’s main goals is to promote transparency within TARP. He could start by increasing transparency in his own office, instead of playing footsie with the same old media pals.
Neil Barofsky, the TARP Inspector General, comes back today with a by-now old classic.
Banks aren’t using the cash for lending, as would be proper, but are instead using it to make investments, or to repay debt, or in some cases — gasp! — to make acquisitions.
The Treasury has fired back with, again, the same old response: Money is fungible. It’s impossible to say which cash is going where.
This debate is really tired, and we think Barofsky is being disingenuous, perhaps because as IG he has to justify his work.
Here’s the thing, and it’s really pretty simple: No matter what politicians were saying at the time, TARP wasn’t passed to spur lending, and it wasn’t an investment. There were fears of a run on the bank, and the solution was to just take a whole big chunk of taxpayer money and throw it at the system. That’s it.
It was a blunt measure, and the long-term consequences of it we may come to regret, but it pretty much worked.
To, after the fact, go back and say, "Ah, but you said it was about lending, and banks aren’t lending," is just silly. That was never the point, and Barofsky, presumably, knows that, otherwise we should get a more informed IG. Besides, since when does anyone who’s serious take Congress at its word? That’s his first problem right there.
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
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: ...
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 -...
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.
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...
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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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On a deeper level, what Barofsky is running into is a core problem with the way the TARP was designed. There’s simply no way the government could use capital injections to spur lending into a recessionary economy. It was bound to be used to increase capital cushions. And that’s because the Treasury Department and the Federal Reserve simply lacked the political imagination to find a way to shore up the financial system without propping up zombie banks.
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(