Wednesday, September 30, 2009

Marc Faber On The Future Of The Global Economy

Marc, one of our favorites, has a three part series on Bloomberg video. I have great admiration for Marc but he missed much of this crisis in the past as we have highlighted. And while there are some perspectives I agree with in his current analysis below, I believe he is again looking in the rear view mirror for an inaccurate perspective on much of the future. We'll continue to highlight those differences in future posts. But, if you have been with me for the last three or four years, you already can point out the substantial differences. Regardless, when Marc Faber talks, I want to listen. And so should you.

The links to the video are

Part 1
Part 2
Part 3
posted by TimingLogic at 2:54 PM

Tuesday, September 29, 2009

Dylan Ratigan Barbecues Health Care Lobbyist

Starting at 4:50 of this clip is a very interesting exchange between a lobbyist and Dylan Ratigan over the illegal monopoly status of health insurers. Another case of our government not enforcing antitrust laws. Ratigan's exchange is a reminder of why such power was granted to the press in the Constitution - to educate and inform society. If anyone argues the American people are uninformed, I would first argue that most people don't have the time to become experts on every political issue. We elect politicians as protectors of our way of life and they have clearly defrauded us across a number of major issues. Additionally, the press has failed us, mostly because of politicians who dismantled the checks and balances of a free press. The American people are taking care of the issue themselves as every mainstream news source is in financial crisis. Why? Because they don't deliver a product the American people want. Tranform or die.

The lobbyist in this exchange looks like the cat that swallowed the canary.

This dialogue brings to light a substantially larger issue. Can we imagine if every journalist and every source of media was so demanding of public officials and the political machine? Corrupting elements in our society would be marginalized. Only politicians with a virtuous agenda would get any "air time". Those espousing morally bankrupt positions would never seek a public voice because their position would be indefensible. We would then have debates of substance instead of the Animal House exchanges we generally see on media outlets like CNBC.

Hopefully Dylan Ratigan is representative of a new type of journalism taking root in this country while the good ole boys club takes a permanent vacation. Ratigan has more than redeemed himself for his temporary insanity on tout tv.

posted by TimingLogic at 12:10 PM

Monday, September 28, 2009

42% Of Americans Would Replace Congress With Random Names From The Phone Book

posted by TimingLogic at 12:11 PM

More Washington Piggery - Lobbyists Are Feeding At The Trough Of The Stimulus Package

When we have a corrupt government beholden to monied interests, any attempt at stimulating the economy will surely end up serving those same monied interests instead of the sovereign. Our government is literally holding court. Just as similar pigs did in European colonial times. Bring your gifts to the table in return for political favoritism. This dynamic is seen in the continued foreclosures, defaults, bankruptcies and general rotting of Americans at record rates while the corporate profit bubble keeps on humming ... for now. It will collapse.

Our President has informed us that lobbyists won't play a role in fiscal stimulus. At least not within the executive branch. But the government in total seems unphased according to OMB Watch.

Many watchdog groups including the Sunlight Foundation are also reporting that government officials are failing to report contacts with lobbyists - witness the single lobbyist which has supposedly had contact with the Department of Defense. That's almost believable given the United States spends substantially more money on defense than the rest of the world combined and we have about 45,000 lobbyists in Washington.

Of course, we really know lobbyists have no impact on the decision making in Washington. How do we know this? Because the honorable Senator Grassley tells us it is so. I guess the reports of Wall Street lobbyists (lawyers) writing their own regulatory legislation aren't true. Or the fact that legislation not only deregulated financial markets but actually made it illegal to regulate certain financial derivatives and this was done to promote the economic well-being of the small business owner or entrepreneur and had nothing to do with Wall Street lobbyists. Or the fact that government destroyed countless banking regulations over the past thirty years wasn't done under the influence of lobbyists or huge sums of money or revolving doors from government to corporations and back. Or that legislation which paid companies to close factories and offshore them wasn't done under the influence of lobbyists. Or the health care lobbyists pumping millions of dollars a day are having no impact on how potential legislation is written. And I suppose the military-industrial complex lobbyists had nothing to do with pumping up our military budgets for profits at the expense of education, Social Security and other socially responsible programs. Or the bankster lobbyists had nothing to do with telling us Social Security should be privatized so we could hand our money over to the most corrupt institutions in our country's history.

I'm sure Senator Grassley is correct. He has participated in a Congress that has done all of these wonderful deeds and more because of their great altruism for the American people. His great compassion for the American people. Knowing deep in his heart these deeds were of great benefit to the community.

I guess I should humbly support all decision making by our government. A government that has served society so well in the last few decades. I know they will make the right decisions to get us out of this mess. A mess created by people working at McDonald's and Wal-mart. By entrepreneurs and small business owners. By main street America. All because they simply won't spend anymore or don't want to pay even greater sums of money to our wonderful government.

It's good to be the pig, er, king. Not much longer though.
posted by TimingLogic at 10:12 AM

Sunday, September 27, 2009

The Movie 'Capitalism: A Love Story' Opens Today

Today Michael Moore's movie Capitalism: A Love Story opens.

Let's make a few remarks here. Some people despise Michael Moore for his political perspectives. And some people love him. Regardless, personal attacks against Moore are the same attempts to marginalize people like Glenn Beck, Ron Paul, Noam Chomsky, Ralph Nader or other political or civil rights activists today or throughout history including Martin Luther King, Susan Anthony, Nelson Mandela, Cesar Chavez and others. I don't necessarily agree with every perspective of any particular activist. But there is one thing that all activists have in common - a reasoned attempt to address human rights, social issues or government transformation for the common good or some attempt to give voice to those marginalized. Whether you agree or disagree with any particular reasoned attempt at debate, it is imperative for a democracy to have this type of discourse or it will die. Michael Moore's movie is an attempt at raising public awareness, educating society and creating civil dissent towards policies which have destroyed our economy. This type of discourse is key to any type of constructive change. Whether it is change Moore or Beck agrees with is irrelevant. These two personalities are on opposite sides of many issues yet they will find great common ground with reasoned discourse. Just as Ron Paul and Ralph Nader do. What democracy and society doesn't need is the politicization and emotional fomenting of radical elements in society. Instigating hate, intolerance or violence.

As we have remarked before, capitalism is not democracy. It is simply a particular economic model where the means of production is privatized. That's it. Our democracy is not predicated on capitalism. People misuse terminology too often to stir up emotional and unreasoned reactions. The health care debate is not socialism any more than a public water utility. Yet there are more productive answers to the health care problems of today just as there are better answers than anything being considered by Congress.

Capitalism is a sound economic model. That said, there are many, many improvements which could be made to capitalism as we know it to further democratize the process substantially. But what we are experiencing today is not American-style capitalism anyway - worker and entrepreneur capitalism. Our current economic model isn't American-style capitalism and our current trade policies aren't rooted in capitalism. Instead we see a co-mingling of large private businesses and government created a corporate socialism of sorts. This dynamic has always existed in America on some level but it has become even mildly fascist and terribly corrupt in its characteristics. Again, nothing necessarily new but given government has become so involved in society, the impacts of today are far more serious than historical comparatives.

Moore is down on capitalism. And why wouldn't he be? But I believe he incorrectly chooses to throw the baby out with the bath water. Regardless, we've remarked before that we aren't wedded to capitalism. There are countless methods to re-ignite the American economy. Our future might involve a smattering of many solutions, some based on capitalism and some based on other solutions. One example we said could develop was cooperatives meant to act as a localization bulwark against concentrated Washington and corporate power. Ironically, just months after we mentioned this obscure concept, cooperatives have entered into the health care debate. If executed properly, that's a very good thing regardless of the rhetoric.

I would encourage everyone to continue to embrace any and all new ideas based on some type of reason. Moore has an objective and there is most likely bias as there is in most any position but this is another example of a voice outside of the status quo adding positively to the national debate.
posted by TimingLogic at 5:23 AM

Saturday, September 26, 2009

The Government Can

How about some more levity today. This is more than appropriate given the government has enabled the greatest theft and wealth transfer in history with a fraudulent banking system that it has enabled to steal from society. And then when they had stolen most everything, receive trillions more in taxpayer bailouts.

Yes, indeed. The government can. And it has. More is on the way.
posted by TimingLogic at 5:53 AM

Friday, September 25, 2009

The Bailout Barons Are America's New Robber Barons

We have written of this dynamic numerous times over the years and Sarah Anderson at the Institute for Policy Studies has released a report highlighting the executive excess of the Bailout Barons aka banksters. The crooks who stole our money and kept the compensation received for doing so with numerous perditious schemes.

This link is an executive overview and the entire report can be found at the link on the upper right side of the page titled "Download Executive Excess 2009". I would encourage you to peruse the report. It highlights many of the dynamics we have discussed including CEO pay comparative to average salaries along with some new statistics.

We'll bring down this beast eventually. The American people have a bazooka aimed at the target. The elitist party with other people's money is ending. Free markets determine executive compensation? Baaahaaaa. Clubby compensation committees negotiating schemes outside of the view of transparency fraudulently heist shareholder equity while millions of Americans live on shit sandwiches because they are told that is the way of the free market.
posted by TimingLogic at 12:37 PM

Update On The Madness That Is Wall Street - The Apple Bubble

I pulled this data yesterday to highlight the type of lunacy which reigns in much of today's financial markets. Apple is the perfect Wall Street momentum stock - Wall Street picks a concept they can sell that has strong earnings momentum, they liquefy the stock with a tremendous amount of trading volume and then run the propaganda machine off the table. We saw the same thing with the housing bubble, the internet bubble, the commodities bubble and the emerging markets bubble. Not just in the stocks but in the actions and liquefying of related financial products

Momentum is a strategy that has made Wall Street enormous profits in these bubbles. But momentum strategies only work when there is enormous liquidity available. We have had that in spades with easy credit, highly-levered balance sheets and derivatives. The monster has been building for fifteen years and they all contribute to the liquidity scheme. That is going to change drastically over coming years as globalization implodes. And so will the success of such algorithms. This at a time when many trading firms and hedge funds are just recently launching momentum strategies.

Main street buys into this type of mania and misinformation then ultimately gets burned. Although main street has been substantially limited in their participation of this action since the 2000 collapse.

The chart of Apple is frightening. Absolutely frightening. A massive move higher with literally no support underneath it. But then all the Fed is doing is attempting to reflate the same bubble given we see no underlying change in economic policy, easy money is going to go right back into the same failed schemes. We often hear many pundits state that concept stocks defy valuation. That's rubbish. Every stock has an intrinsic value. We've remarked that Apple's is likely well below its post-collapse low. Really, it's the dynamics of liquidity bubbles which defy valuation. And we have been in one for about 15 years.

I have attached the buy and sell points of a momentum algorithm onto the stock and you can see within the last year there have only been four trades. Two of them were incredible money winners and the other two stopped out with small returns. What I want you to take away from this graphic is that Apple's pricing action has little reflection of fundamentals. Wall Street uses the same type of momentum algorithms. And with massive sums of free money, they ride Apple's stock or any other investment the same way I would. That is, until something breaks. How does this have any foundation in reality? It's simply a pump and dump game that fleeces main street. The only difference is that I don't have billions of dollars and a legion of traders using leverage to drive markets into wild swings. And soon neither will they. Momentum investing is not a sustainable strategy. If anyone understands what is going on in financial markets, they realize the hot money in this stock will eventually dump it like a bad habit at the sign of any bad news. Be that bad news associated with Apple or bad news associated with the financial firms plowing this stock.

Sustainable cash flows, intrinsic value, book value, dividend/sustainable cash flow yields or any other fundamental metric is completely irrelevant not only in the valuation of Apple but in any financial product. When I, as a financial firm, have all of the liquidity and leverage available to me that I would ever want to drive financial products without any concern of fundamentals, I am able to create any reality I want. That is, until the liquidity pool recedes. We already lived through this more than once. It ain't over.

Where is the investing genius in any of this? Harvard-educated MBAs in financial firms hiring legions of science-minded drones to create mathematical strategies inversely correlated to long term fundamentals. ie, Unsustainable stupidity. Then pay yourself hundreds of billions of dollars in bonuses over the last decade in order to take advantage of it. It is pure madness. But for now Frankenstein finance lives. It too will eventually die the death of the monster it is if the government won't kill it. All because of an unhinged currency and legalized bribery of our public officials. Glorified by the crooks who created it.

I have said this a dozen times and it is worth repeating for any new readers. Only a firm understanding of fundamentals will save anyone from the Frankenstein Wall Street has created.

posted by TimingLogic at 7:56 AM

Thursday, September 24, 2009

You Can't Make This Stuff Up - China Appeals US Win In Trade Dispute Over Music And Film

China is clearly recognized as a long-standing offender in its rampant abuse of intellectual property rights of film and music. This appeal is based on the same fraud perpetuated by the Chinese government in their massive counterfeiting racket.

If you are an advocate of what we now see called free trade, you need to look yourself squarely in the mirror and do a gut check because you are in violation of the natural laws governing intelligence. As we have highlighted before, there is no such thing as free trade. And there is no one who can cite a single example of it because it doesn't exist and never has. We should seek generally fair trade. And that doesn't apply just to other countries but also trade within the American economy itself. Fair trade generally benefits the common good. How does anything we see today compare favorably to fair trade? We have never witnessed anything remotely similar to today's definition of trade since this country was founded. There is a reason for that. This is not capitalism.

Over the years we have highlighted abuses by the Chinese communists in their attempt to manipulate trade and their never-ending fraudulent counterfeiting schemes. These schemes cost the U.S. countless thousands, if not millions of jobs and over some period of time what would likely amount to hundreds of billions of dollars or more in lost revenue. All because of the U.S.'s abhorrent enforcement of intellectual property rights and dubious trade agreements. The only reasons I could ever fathom why these policies are allowed by the American government are either corruption or as I remarked a few years ago, the U.S. is engaged in a little game of economic warfare of its own and using its citizen's plight to accomplish it. Almost surely the former but with such little transparency who really knows?

Anyone naive enough to believe global trade is not a form of economic warfare needs to wake up. Chronic trade cheaters are morally indistinguishable from the warfare practiced by Central American drug cartels. China's economy relies substantially on illegal activities and represents an astronomical percentage of counterfeited goods into both the U.S. and Europe. Some estimates have China's involvement in global product counterfeiting at greater than 50%. This includes everything from from drugs to cars to electronics to shoes to software.

Counterfeiting is a form of government-sponsored corruption rampant in underdeveloped economies. Why relinquish power and embrace domestic reforms when you can maintain the status quo and steal from legitimate sources of invention around the world? Especially when the consequences are nonexistent.

I used to work with a company that had full-time investigators in China and southeast Asia constantly attempting to shut down the never-ending stream of factories producing counterfeited goods using their brand. Yet many of these targeted businesses are restricted from selling their goods in these very countries. This is symptomatic of an undeveloped rule of law. Which, by the way, is a substantial attraction to manufacturing in China and underdeveloped economies by western multi-nationals. A complicit corruption of exploitation in itself. Multi-national corporations aka oligopolies are exposed to tremendous risks in the coming shakeout of the global economy. But then they never should have existed in the first place were antitrust rules to be enforced.
posted by TimingLogic at 7:52 AM

Downturn Derails The Self-Employed

Large business in the U.S. remains a substantial employer but has been a net destroyer of jobs in the U.S. for forty years. Large employers are the Soviet Unions of our economy - run by politburos most often not representative of the ideals of its employees, stifling individual creativity and freedoms, using girth in lieu of invention to control markets, lobbying government for rules to strangle entrepreneurs and competition, stripping employees of pensions they have worked decades for and a host of other similar pleasantries. Then they wrap it all with a pretty bow and use corporate communications and advertising to claim how much they give back to communities. In other words, plenty of propaganda by the ministry of misinformation. I pretty much wrote that sentiment on here three years ago and I doubt it meant a darn thing to most people reading it. I bet it does now.

Small companies and entrepreneurs are the source of new invention and new ideas. The only net job creators for forty years. Often brilliant minds stifled by working for major corporate bureaucracies. People who seek new ideas for the market place. People who may have a dream of being free of corporate control. People who want to create a work environment with a conscience. Small companies are the thirteen colonies before the American Revolution comparative to the corrupt bloat that was England.

Now obviously these are idealized views of reality. But, in general there is substantial truth in that sardonic assessment.

If the U.S. is going to give more than lip service to new business creation in the United States, we need policies that will level the playing field with the monstrosities that are mega-businesses. Especially if government is not going to enforce antitrust rules which, in itself, is a crime. And that means we need to check the lobbying efforts of the Chamber of Commerce and similar organizations choking off creativity, invention and fair trade in the American economy. And we need health care reform so that entrepreneurs can be confident that immoral health insurers and their legion of lawyers can't cancel our policies for some ridiculously trivial reasons like a missing toenail. And we need new economic rules which incent new capital formation in lieu of the economically destructive mergers business which creates even more job losses and less competition in the economy courtesy of Wall Street.

Why would anyone seek to start a new business in the United States? And yet they do. Even though the government has made the playing field completely uneven. How incredible would that engine of growth become if we actually had a level playing field?

Link here.
posted by TimingLogic at 5:55 AM

Wednesday, September 23, 2009

The Hedge Fund Business Continues Its Implosion

Needless to say, were the finance industry not backstopped by trillions of taxpayer money, there probably wouldn't be a hedge fund business any more. Something we said would happen before this crisis developed. My favorite, the "fund of funds" business isn't doing so well either. While Wall Street was feeding the world its favorite flavor of bullshit, we wrote that the fund of funds business was ridiculous and had just about no chance of being sustainable.

Almost all hedge funds are substantially underperforming the markets today. Another dynamic we wrote would happen. The fee squeeze ain't over even though many hedge funds are trying to withstand the pressure for fee changes. If hedge funds don't implode due to their own foolishness, fee structure changes will impact their profitability and ability to invest in future capabilities thus contributing to a self-fulfilling dynamic of even further underperformance for many.

Here's the new deal I see happening. Some of the savants who ran hedge funds are now offering workshops on how to open a hedge fund. That's just too rich. One has proven no ability to manage risk, understand little about financial markets and know nothing about economics yet they are going to impart this vital wisdom on unsuspecting prey err ... clients. Of course, all for the benefit of the common good. The hedge fund business should have been regulated from day one.

There are surely many bright and honest folk working in the hedge fund industry just as is the case with Wall Street. But most serve a system they do not understand. Hence most will fail. The vast majority of these people should be plying their trade in the underlying economy for productive use. And this is exactly what we said would happen four years ago when we wrote of what would happen to the people employed in the financial bubble when it collapsed. Some firms will surely survive but in what form remains to be seen. The more complex or transient the strategy, the more likely they are to fail in my estimation. (strategies such as the very popular momentum or long-short approach to gambling .... err ... investing are wildly successful at times but are transient as a point of reference.) Firms employing complex or transient strategies rely too heavily on curve-fitted models or mathematical gibberish or unfair advantage through regulatory loopholes which are likely to be closed over time as the monster on Wall Street continues to cause future crises.

posted by TimingLogic at 9:08 AM

Hedge Funds Most Bullish Since Market Peak

This is a dynamic we highlighted before the market collapse when certain famous financial personalities were espousing that the market could not be peaking because Goldman Sachs, the world's largest hedge fund, was levered to the hilt. Obviously something we reported as a major concern rather than being bullish. Goldman remains the world's largest hedge fund speculating in countless risky schemes even though they were allowed to become a bank holding company on the taxpayer's dole after their profligacy contributed to economic collapse. Goldman's business model has not changed at all since then. Instead they now get to play with taxpayer-backed money. Not only in markets but with their substantial government lobbying efforts.
posted by TimingLogic at 8:54 AM

More Signs Of Our Theme Of Ever Rising Volatility - Australia Experiences Worst Dust Storms In Generations

posted by TimingLogic at 8:46 AM

Tuesday, September 22, 2009

The Corporate Profligacy Bubble

"When plunder becomes a way of life for a group of men living together in society, they create for themselves, in the course of time, a legal system that authorizes it and a moral code that glorifies it." -- Frederic Bastiat

Chart courtesy of the New York Times

Isn't it ironic that just a year ago corporations were buying back record shares and this year financial firms are reissuing record shares. And the corporate debt market is exploding. Both dynamics have effectively unwound the record stock repurchases we saw this past cycle as it pertains to shareholder value.

I wrote on here years ago that I don't like stock buybacks. This dynamic is often more about personally enriching corporate executives rather than for any value to the company. In fact, buybacks are often counter to long term goals of a company. This graphic ties in with countless posts on here over the years -the financialization of our corporate leadership structure and the subsequent destructive decision-making by said idiots, the great theft of America's wealth with the massive bubble in executive pay, the earnings bubble, failed corporate governance and incentive structures, a leadership vacuum in society, the failures of our business schools and college educational system, the wrongly-perceived brilliance of CEOs, insiders are not smart money, the corporate debt bubble (many corporations issued billions of debt to buy back shares thus actually weakening the financial strength of their balance sheets and shareholder equity at the worst time in modern history. How's that for accountability?) and on and on. We've covered most every interpretation one can imagine as it pertains to this graphic.

What can you surmise based on all of these posts and what you see today? Is your belief system shattered? Do you now question who or what to believe? Hopefully so. Because that is my intent. To encourage you to educate and inform yourself and trust what you know deep down to be true regardless of what media or politicians tell you. To realize authority is not to be confused with leadership or truth.

With truth comes enlightenment and awakening. And with an awakening comes a completely different world. You might consider this to be the start of the greatest social movement in the history of the United States of America. Possibly greater than the American Revolution. For this is a populist movement to restore nobility, equality and virtue to our democracy. For everyone. An ideal which was never fulfilled by the American Revolution.

Here's the link to the article from which we took the above graphic.....from the always insightful Floyd Norris.

posted by TimingLogic at 7:11 AM

Monday, September 21, 2009

Bank Of England Embraces George Bush And Christina Romer Dingaling Economics

It's good to know Mervyn King went to the same school of economics as our prior President and President Obama's economic advisor. That would be the school of dingaling economics.

All three are now famous for publicly stating their philosophy of dingaling economics - the consumer should get right back out there and spend more money to stuff more purchases into their public storage rentals. Don't have a job? No problem. Just ask Mervyn, George or Christina to pay for it. Lost your house? No problem. Just head over to Mervyn, George or Christina's house to plug your new TV into their electrical outlets.
posted by TimingLogic at 2:02 PM

2009 Corporate Debt Issuance Up Over 1,000% From 2005 Levels

How about a short Twitter-ish post since I don't Twitter. I have talked repeatedly over the last two years about the corporate debt bubble. And the fact that corporations across the world are issuing massive new levels of debt since this crisis started. And that debt is not going towards new capital formation in the economy but is instead is being used to "float" the business until a recovery takes hold. It's no different than using credit cards to float your existence when times are tough. Now, some of this is likely because the commercial paper market collapsed but so far in 2009, corporate debt issuance in the U.S. is up over 1,000% from 2005 levels courtesy of just released government statistics. This at a time when large corporations are once again almost universally bullish about the future. Needless to say, that probably makes me almost universally bearish on large corporations.
posted by TimingLogic at 10:01 AM

Banking Compensation Back In The Spotlight And Paul Volcker's Call To End Taxpayer Subsidies For Wall Street's Gambling With Our Nation's Savings

Paul Volcker's voice has been marginalized for some time. Volcker clearly understands the risks we continually write about as it pertains to Wall Street firms using society's money to gamble in risky schemes. But let's be clear. Volcker does not go far enough. These banks must be removed from the American economy. Monopolies limit competition and the free flow of capital in the underlying economy. At the minimum we should be returning to community banking - something we have highlighted repeatedly since this crisis started. Community banking will return naturally as localization takes hold regardless of what policy makers do. But, the government should encourage this process to speed up any sustainable recovery. A part of that encouragement would be to break up large banks.

In a perfect world we would actually migrate to a public banking structure or a combination of public and community banking. The only DEMOCRATIC banking structure is a public banking structure which serves the common good, democratizes access to capital and democratizes capital formation in the American economy. This would have an impact of blowing up the destructive private equity firms, blowing up most hedge funds, blowing up mergers and acquisitions business, blowing up investment banking, blowing up derivatives and on and on and on. None of these entities increase the capital stock of society. Period. And certain of these entities and products actually contributes substantially to the destruction of capital and democratized economics. In other words, most of Wall Street's businesses add no value to the underlying economy or to society. Which, if you haven't figured out by now, is why these entities are actually blowing up. The natural selection of what is sustainable is simply reflecting what was a universal truth all along. Wall Street's current business model must collapse. Our government should be facilitating that process with an orderly dismantling of the Frankenstein they allowed to be built with more and more deregulation.

Were we to have a public banking system, we wouldn't need to regulate compensation or the risky schemes that excessive compensation encourages. Public banking and-or community banking would return us to the only sustainable business model for banking. That is the 3-6-3 banking model. Pay deposits at 3%, process loans at 6% and be on the golf course by three o'clock. And do so primarily for purposes of wealth creation or investment and not consumption. Everything else contributes to inefficiency which adds little or no value to society. The compensation issue is going to take care of itself regardless of what government does. Wall Street's business model is completely unsustainable. In a period of less than ten years, it's current business model has completely imploded. It has no sustainability. If government would listen to what the markets were telling them instead of accepting billions in banker lobbyist money, they would already know this.

Remember, even though Goldman and others are minting profits right now, we believe their business model is completely unsustainable. And have written that it is highly plausible Wall Street firms will eventually fail without transformational business strategies. Whether that is failure by more risky bets gone bad or a blow up in Frankenstein finance or a distributed capital model we have written of or some other mechanism is irrelevant. Failure may take the form of government receivership or outright failure or some unforeseen event. But we remain extremely concerned about the fate of Wall Street. Especially Goldman Sachs which relies almost exclusively on unsustainable businesses.
posted by TimingLogic at 7:47 AM

Saturday, September 19, 2009

California's Jobless Rate Increases Most In Five Months

Industrial powerhouse economies in Michigan, Ohio, Indiana, Illinois, Pennsylvania and California continue to crumble.

Link here.

posted by TimingLogic at 10:02 AM

Professer Elizabeth Warren Takes Timmy Geithner To School

Over the last half year I have become a fan of Elizabeth Warren's genuine concern about the state of governance in the United States. Would we ever be so lucky to see her or someone like her as Treasury Secretary or any other major political role?

The bureaucrats who presided over this crisis have a hard time standing up to any serious questioning. Geithner's answers are so calculated it's hard to watch but this is the type of serious, accountable public inquiry we need to get to the bottom of this crisis and affect reform. Warren mops the floor with Geithner in the search for truth. We need a public commission to hold public hearings. Transparency for the benefit of the people of this country. To hear from the politicians who deregulated our financial markets and understand why. To hear from Wall Street leaders who spent billions lobbying our government and understand why.

I'm sort of curious how finance industry executives would answer the question of why they spent hundreds of millions of dollars trying to overturn Glass-Steagall. It's a simple question but why have we not heard it? Of course we know why...........

Authority has no legitimacy.
posted by TimingLogic at 6:51 AM

Friday, September 18, 2009

One Small Step For Man, One Giant Leap For Mankind

posted by TimingLogic at 11:07 AM

Federal Reserve Reports Americans Regained $2 Trillion In Wealth - On A Separate Note My Flight To The Planet Pluto Leaves In An Hour

This is the same voodoo which led people to believe they were rich in the technology bubble in 2000, the housing bubble in 2006, the commodities bubble in 2008 and again the many financial market bubbles of 2009. The majority of this "wealth" is from a rising equity market.

We have been remarking for years that the equity market is more expensive than it was in 1929 right before the Great Depression. That dynamic still exists today. What we now hear being used as support of renewed spending and economic vigor - asset price reflation - will fail. It has never, ever, ever worked in the history of finance. Ever. Did I say never? If anyone understands what really causes deflation they know what a fallacy this truly is. More on that later.

The Federal Reserve is making this crisis worse. When we were in all of these recent bubbles, it encouraged business, government and consumers to spend money they would not have spent were the bubbles not to have existed. In other words, perceived paper wealth led to unsustainable and irresponsible spending. That ultimately had the effect of reducing the true savings and wealth of society. Our brilliant leaders are doing the same doggone thing again. Not just with attempting to reflate financial markets but also by the auto stimulus program and the housing stimulus program. They are simply making the mess bigger. Oh well, how many times can we say this and keep our sanity? Apparently at least once more with this post.

Just like the good little servants they are, a dozen media sources, who understand nothing about anything, are today reporting how wonderful this development is. Enjoy the party.
posted by TimingLogic at 8:35 AM

OECD - Global Unemployment Continues To Hit New Highs

After the biggest global stimulus package in the history of the world, we still are experiencing rising unemployment globally. Conclusion? No amount of additional profligacy will save the global economy. The OECD is projecting member countries could see unemployment hit 10% next year.

I wrote last year that a 30-50% drop in China's GDP is possible. I remain extremely confident of this dynamic. We'll more than likely look back on such rosy projections of 10% unemployment as wishful thinking before this crisis has passed.

But never fear. 80% of economists, Ben Bernanke and Wall Street have all recently told us the "recession" is over. Recession huh?
posted by TimingLogic at 7:30 AM

Thursday, September 17, 2009

Banksters Helping Iran Launder Money To Make The Bomb Per Dan Rather's Investigative Report Titled Iran's Manhattan Project?

Dan Rather is now remarking that there are likely more banks involved.   Is there anyone naive enough to believe large bankster corporations are concerned about morality or national interests?   Please.  We clearly know this not to be the case.  If they were driven by morality, they would not have sought near complete deregulation which only allowed them to engage in wholesale theft of society's money.  I can almost assure you this is the tip of a much bigger iceberg involving fraudulent money from every corner of the globe.

When globalization was in full bloom we highlighted issues of criminal money coursing through the global financial system.  I'm going to use that dirty word again - deregulation.  But deregulated international capital has provided a cover for international mobsters to join forces with western banksters to legitimize criminal money on what is likely a massive scale.  As we reported before, even the Bernie Madoff whistle blower remarked of massive criminal money in the financial system.  And because regulatory agencies have been declawed due to lobbyist-driven deregulation and because regulatory agencies are not ramped up to handle international criminal fraud investigations, we have no idea where much of this criminal capital is sloshing in our banking systems.   Who knows.  It is possible we might be funding our own economy with drug money from Afghanistan.  Criminal money used to fund the Taliban's efforts to kill our men and women in the Afghan war.  Or even fund terrorist activities such as the 9/11 attack.  

International capital should NEVER, EVER, EVER bave been deregulated.  Yet I saw a bankster on tout TV yesterday remarking how imperative this dynamic is.  I guess he didn't know that this was a major contributor to the Great Depression.  Or maybe he did.  Again banksters lobbied during that time frame to engage in the same crooked behavior.  Of course, securitization and financial innovation also contributed to the Great Depression.  History is doing a fine job of repeating itself after the repeal of Glass-Steagall and dozens of other bankster regulations overturned because of crooked corporate lobbying .  It would be nearly impossible to convince me a public banking system would be engaged in any of these frauds.  Private banking is the scourge of mankind and does not serve the public good in any way.  

Why do you never read about any of this in the media?  It's quite easy to explain.  The corporate-owned media is beholden to Wall Street.  Media is now owned by major corporations which represent monopolies or oligopolies.  These firms need big banks as partner businesses.  They aren't going to a community banker for a loan.  Need a business loan?  It's time to go to Wall Street.  Sorry, no loan for you if you are engaged in investigative journalism involving Wall Street banksters.  Another scourge of private banking and/or monopolies.   All courtesy of our government.     

President Obama is getting terrible advice.  He needs to ram banking reform down Wall Street's throat instead of almost begging them to buy in to reform.  And we need to demand he do it.  
posted by TimingLogic at 8:52 AM

Max Baucus - I'm Such A Shitty Senator

posted by TimingLogic at 8:41 AM

Auto Sales A Disaster This Month

That according to an industry official.  Just as we said was likely to happen with the government cash for clunkers program.  Just a month ago government and the main stream media were giddy at their supposed brilliance.  I actually saw someone remark at the time that auto sales were within months of returning to 14 million units.  Where do these people come from?

Not only did this program likely have the shortcomings we said it would but there is surely another enormous cost that cannot be easily quantified until we see financial results for coming months.  Manufacturers brought back laid off employees, ramped up their inventory builds and production.  If sales continue to tank, this will have been a very expensive program only realized after the fact.  Manufacturers could be saddled with high carrying costs, excess inventory and paying rehired workers to make cars that aren't selling.

If politicians were brilliant at business, they would be in the private sector making their own money instead of sitting in taxpayer-funded towers spending our money.  There's a never-ending slew of stupid ass ideas a politician can come up with to spend someone else's money.  Max Baucus proved that in spades yesterday with the worst health care proposal to date.  One that sounds like the former Soviet plan.

Government needs to set rules for competition and productive capital formation in our economy, enforce the rules and get the hell out of the way and let people earn a living.  Our economy is in shambles because of constant meddling with or removal of the rules courtesy of corporate lobbyists paying off politicians.  Government can help the economy get out of this crisis but NOT the type of government we have today.  Our government today has little semblance of anything remotely benefiting the economy or its people.  A key to getting out of this crisis is a transformed government that actually works for the people of this country.

Story link here.
posted by TimingLogic at 8:06 AM

Wednesday, September 16, 2009

President Obama's Approval Rating At 92%

How about a little humor for today. According to the poll on TMZ, 92% of Americans support the President - Kanye West is a jackass.
posted by TimingLogic at 12:05 PM

Max Baucus Releases Health Care Reform Bill Today And Confirms What We Already Knew - Max Baucus Does Not Work For The American People

This isn't remotely health care reform. This is absolutely pathetic work of a politician beholden to corporations. It addresses absolutely none of the problems with health care delivery . And, it provides zero choices for 200 million Americans. This is forced tyranny and more corporate socialism. If Max Baucus can do no better for the people of this country, why are we paying for his health care?
posted by TimingLogic at 11:10 AM

The Path To Enlightenment - Just How Deluded Has Washington Become?

I wanted to get this post up while it was still relevant. It's a few weeks old but there is really no time constraint other than the news sources used for the post are dated.

I have always been intrigued by social moods, sociology, psychology and human behavior. In other words, the human condition. It's a disease we all suffer from. When one realizes how few people are self-aware to this fact, one cannot be anything other than a contrarian or a free thinker. On that note, I have consciously kept track of my experiences on occasion and have gone through an entire day not hearing a single fact either through human interaction or via the mainstream media. The world is seldom as reported. Even science is often a best-fit representation of the world in a form we can comprehend as opposed to certainty or truth. Were we all on a path to personal enlightenment, I'd give up being a contrarian because it would cease to be a provider of truth. But reality is different. It's amazing how much utter garbage is perpetuated as fact. Nothing could crystallize this any more than the mindless idiocy perpetuated about the global economy before this crisis hit and the equally mindless idiocy perpetuated by the same authority about how the world is now in grand recovery.

I had lunch with a few business associates a month or so ago and one woman commented on how she was frustrated with the youth of this country because they didn't want to listen. And how that made her dubious as to our future. I asked her what she meant. She clarified her position and I remarked that in reality her frustration was that they didn't want to listen to her. I told her that as ironic as it may sound, I considered that about the most constructive thing I had heard in weeks. For the fact that our youth is questioning authority simply reinforces my faith in the future. I am sure my remarks shocked her somewhat but then our conversation was light-hearted and in good fun. But I was making a substantial point which she likely missed. Authority is always to be questioned. Always. Endlessy. Be it expert authority in science or government authority or teachers or elders. Authority is not necessarily representative of leadership nor of truth. Contrarily it is often anything but. If authority is just and represents truth, it seeks question and encourages discourse as a method of perpetuating and increasing knowledge. If it is false and represents no semblance of truth, this probing will determine its illegitimacy. That our government seems to want to discourage discourse and discovery on topics of war, government spending, banking transparency, Federal Reserve legitimacy, torture, health care, lobbying, transparency and many other topics is a telling sign.

On some level, questioning the validity of authority is no different than the discovery process so essential in science and the perpetuation and acquisition of knowledge so fundamental to reason. Reason is foundational to the rule of law and to a secular society in general. I am not talking about education. They are often mutually exclusive. Were I a benevolent king for a day, I would require individualism, free thought and personal discovery as required curriculum in our public schools. But then teachers would probably lose control of the discovery process when students realized that truth ultimately leads to the fallibility of teachers. :-) Something that enlightened teachers would embrace. But a process which would threaten the legitimacy of misplaced authority - validating the existence of a false authority. Instead leadership is fundamentally about nurturing development and enlightenment, be it of society or of a student. Whether that leadership is the President of the United States or a kindergarten teacher is irrelevant. The goal is consistent. But ultimately we all achieve some level of discovery at some point. Often that discovery is a near universal one which happens somewhat simultaneously. This very fact is the reason why politicians have lost control of the discovery process or debate today. Society has realized their fallibility and the voices of our politicians are now the ones being marginalized. They seek to maintain authority by marginalizing dissent. Frankly, by any means possible. All of the lobbyist money on earth will not save the system as it exists today. Years of politicians successfully marginalizing truth and knowledge has come to an end for citizens of these United States.

Some say the greatest movie ever made is Masaki Kobayashi's The Human Condition, a 1959 existential classic. I have tried for ages to find an English subtitled copy both in Japan and in the U.S. The cheapest sets were near $300 or more. Now Criterion is scheduled to release a subtitled version in September for $79 at their web site and via Feel free to buy me the set for my birthday. Ha! This movie has incredible relevance today where many in the United States, especially its youth, are on the verge of a major change in their value system after metaphorically experiencing a path similar to Kaji's either through personal experience or by absorbing experiences of the world around them. Remember, as we have cited before, it is always the idealism and innocence of youth and those who continually embrace these ideals which changes the world for the better. And really, what are our often haranguing rants other than embracing idealism and rebuking the wrongs of this world? Wrongs perpetuated by authority. Wrongs which must be challenged.

"Russia has to make some very difficult, calculated decisions," Mr. Biden said. "They have a shrinking population base, they have a withering economy, they have a banking sector and structure that is not likely to be able to withstand the next 15 years, they're in a situation where the world is changing before them and they're clinging to something in the past that is not sustainable."

The Vice President's arrogance in that statement is incredible. In fact, the article goes on to quote Biden remarking of Russia's loss of empire. "It's a very difficult thing to deal with, loss of empire," Mr. Biden said. "This country, Russia, is in a very different circumstance than it has been any time in the last 40 years, or longer."

The Vice President obviously does not appreciate the world as it truly exists and has not embraced the truth of present circumstances. Does the Vice President think we can afford to keep 800 military bases outside of the U.S. and $1 trillion military budgets while the great people of our nation live in squalor? Are denied of economic opportunity? Denied by government policy? This lack of appreciation for how the world has changed is something that all but a handful of politicians in Washington have yet to grasp. Of course, neither have the politicians in most other countries. And that is why these G20 summits, meetings between China and the U.S. bureaucrats and other photo-ops are so utterly ridiculous. Yet, we see another scheduled G20 meeting in Pittsburg in a handful of days. Authority has become completely irrelevant in determining the future of the American economy. Instead, once again the process of democracy has taken root.

This arrogance and lack of accountability to the American people gives us some indication of just how insular Washington really is. And how vulnerable our leadership is to being caught off guard by the forces building in the global economy and within the United States itself. Life-long politicians like Biden are as hard to rid ourselves of as cockroaches. I would argue he and most others in Washington have no idea what good really is when it comes to governance or leadership. Specifically, because he has presided over terrible governance and a leadership vacuum for the last twenty years or more.

It was just a few months ago that Vice President Biden told us he miscalculated how bad the American economy was. Get out much? I could take Russia out of his remarks and replace it with the U.S. or Europe or China. The American economy is broken courtesy of the Joe Bidens of this world. A major reason why it is broken is because of structural and permanent problems in the banking system he so aptly point to as a problem in Russia. Then there are the many other travesties that have developed over the past generation due to absolutely horrible economic policies instituted by Washington. America's structural problems are courtesy of elitist politicians. If we don't see structural reform, we won't weather the next 15 years any more successfully than Russia. But, then we'll make it well beyond 15 years because in some way, shape or form, the American people are going to take back the governance of our country. Our system is self-correcting, our people are forever questioning of authority and our greatness is in often in spite of our government. In those times, America has often transformed itself. Just as the world often believes the end of America is nigh. Ironically, these statements seldom come from within the United States. Instead they almost always come from around the globe. From societies that themselves have become institutionalized under authority. Who have long ago buckled to authority at the expense of truth.

Economics is determined not by ideologues, silly theory and authority but by substantial social movements. The party is ending for authority. Yet ask any of them and they'll tell you the world is recovering. Just ask any politician and they'll be sure to tell you the global economy is recovering. It's good to be the king. Not much longer though.
posted by TimingLogic at 5:32 AM

Japan's Fifth Prime Minister In Five Years Takes Office Today

The natives are restless in Japan and around the globe. American and European politicians would be smart to heed the warnings. In the U.S. Congress has the lowest approval ratings in polling history. And approval ratings for the Republican party show on a national scale it has little relevance.

It's interesting to note that Japan's new prime minister was politically irrelevant just four months ago.
posted by TimingLogic at 5:22 AM

Monday, September 14, 2009

One Year After Lehman's Collapse, Financial Fraud On Wall Street Continues Unchecked

“I want everybody here to hear my words,” Mr. Obama said. “We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.” - President Obama, today on the anniversary of the collapse of Lehman Brothers.

In fact, Mr. President, that is exactly what they have done. Washington's endless rhetoric now falls upon deaf ears as Americans are now focused clearly on accountability and results. One year later, nothing of substance has been done to reform our banking system. Nothing. In fact, as we have stated countless times since this crisis hit, the global crisis is worsening not getting better.
posted by TimingLogic at 12:34 PM

Ramblings And Rantings On The Rising Trade Tensions Reported Over The Last Few Days

We have been highlighting the rising trade tensions on here since this crisis started. This is nothing new to us. We first said the world was entering a period of rising nationalism four years ago when there was absolutely no one talking about this dynamic. This position would have gotten me laughed out of any serious conversation by any leading economist in the world.

I like to get a sense of sentiment by turning on tout TV and this morning they are babbling about a trade war with China. You have got to be kidding. We have been in a trade war for forty years. This isn't a trade war. It's rising nationalism as an outcome of a beggar thy neighbor economic philosophy. A philosophy which dominates economic lunacy around the globe. Now we'll get to listen to the pinheaded experts remind us how tariffs caused the Great Depression. The same pinheaded experts who didn't see this crisis coming. This is one of the most partisan lies ever to be perpetrated on modern society. One perpetuated by self-serving doofuses. Tariffs had a statistically insignificant impact on the Great Depression. In fact, the U.S. economy had been a tariff-driven economy since its inception up through the Great Depression. But most "experts" today know little of what they talk about so they believe prior generations were equally as stupid as they are. More proof that it's quite easy to go throughout an entire day and not hear an ounce of truth or knowledge in this batty world. Especially not from the media or supposed experts. This all just makes me really pissy on a Monday morning. Haha.

I'm not going to get into it today but this topic ties directly into the idiocy perpetuated by the banksters and their stooges - economists. (You must read the article at this link to get an appreciation for my use of the word stooge.) Definition - Stooge => One who allows oneself to be used by another for profit or advantage.

There is so much marginal to useless economic theory that it's truly hard to believe we have intelligent people embracing this baloney. This talk of trade wars is a prime example. It's really brainwashing on some level which is why I used the Einstein remark about education a few posts ago. This is a major problem with education when it comes to learning beyond basic facts of the three R's - Reading, Riting and Rithmatic. On some insanely twisted level, the United State's abysmal educational system reinforces society's creativity and lays seeds for economic vibrancy and new ideas. In other words, as a society we are so bad at teaching faulty thinking or dubious information that it has some effect of leaving a vacuum that would otherwise be filled with .... faulty thinking or dubious information. That vacuum can be filled with creative and unique perspectives on life, art, literature, science or other outlets for the human mind. A major reason why we have accurately called more global outcomes to this crisis than any economist in America today. In other words, it is a benefit that I wasn't taught the batty theories and ideology in the Harvard economics curriculum. It's also no coincidence that most Nobel Prize winning scientists were American-born and American-educated contrary to the gibberish perpetuated by elitists that Americans are generally idiots who need to be pulled around by their nose. Maybe more on this sidebar rant in an equally twisted post at some point. One that would send some in the educational community off of a cliff. Yet some would clearly understand what I am talking about. Note: I surely don't condone our educational system's abysmal state. But I'm not sure more preaching and indoctrination as is prescribed educational ideology today is the best method of inspiring the creative energies and development of our youth. Back to the topic at hand.

It seems Austrians are in vogue today because they were smart enough to figure out the exponential growth of debt is unsustainable. That's about all they have figured out. Of course, were I to ask anyone in antiquity to explain this same dynamic as it pertains to debt, they would have responded with a much more philosophically accurate answer than the Austrian perspective. In other words, rational perspectives on debt were far from original thought to Austrian economics. They were known for thousands of years in very great detail including policies to keep these crises from happening and solutions on how to deal with them. The reality is most Austrian economics as interpreted by modern day economists is equally as senseless as the Keynesianism they rebuff. We'll tear down most of these walls using our voluminous posts from the last four years before this crisis is over.

Instead, I have a new economic theory. It's called the Big Bang theory. I believe the Big Bang theory in physics a whole lot less than I believe in my Big Bang theory of economics. The Big Bang theory in economics goes something like this - We are closing in on one hell of a big bang that is going to heard in every country on earth. And we get the pleasure of living through it courtesy of the monkeys who have been running the zoo for the last few decades.

Trade war? How the hell can you have a trade war when trade has collapsed? The trade war was what we were witnessing over the last forty years. Globalization is dead.
posted by TimingLogic at 9:27 AM

Saturday, September 12, 2009

The United States Ranks Dead Last In The Most Important Statistic Of All - Preventable Deaths

Benchmarked against the best in the world, the United States has 101,000 unnecessary deaths each year. That's nearly one million unnecessary deaths since the 9/11 attacks. Deaths often involving those marginalized by society. Those without lobbyists. Those without a political voice comparative to the billions spent serving the court of Congress.

ter⋅ror⋅ism [ter-uh-riz-uhm]
1.the use of violence and threats to intimidate or coerce, esp. for political purposes.
2.the state of fear and submission produced by terrorism or terrorization.
3.a terroristic method of governing or of resisting a government.
posted by TimingLogic at 7:18 PM

The Congressional Heatlh Care Road To Perdition

While the President outlined changes to the health insurance industry which were constructive, including no right to deny insurance based on pre-existing conditions and no right to cancel insurance after receiving it, (it's morally bankrupt that Congress ever allowed these crimes against humanity to ever be legal in the first place.) the health care debate remains mired in a corrupt process controlled by political elites under the influence of lobbyists.
posted by TimingLogic at 6:54 PM

One Last Call To See The Movie Food Inc

This is the last week Food Inc will be showing in my metro area. Nationally or internationally, that may be a different story.

This is simply the best documentary on the substantial safety crisis in our food supply chain. All due to deregulation and corporatization of our food supply chain. Sound familiar? If you watch this movie, you'll wonder what difference there is between Wall Street banksters and the food oligopoly highlighted in the movie. And frankly, there isn't really a difference - corruption and monied interests operating at the expense of society's well being.

Regardless of where you live in the world, this issue is playing a major role in your health and the health of your food.
posted by TimingLogic at 5:15 AM

Tuesday, September 08, 2009

The Fraud Of Financial Engineering & Financial Innovation - A Future Of Doom Is Set Without Substantial Financial Reform

"The only thing that interferes with my learning is my education." -- Albert Einstein

I think we can generally glean the truth behind that statement. Learning is about the search for truth and knowledge. An education often involves biased perspectives, beliefs and prejudice. Education is what stands between transformation of our economy & our financial system and truth.

This is a follow up the Steve Pearlstein post of a few weeks ago. Where Pearlstein wondered out loud in a Washington Post article how fast computer trading really needed to be. Couldn't we just back off the gas pedal a little bit he asked. I want to use that perspective to reframe the truth. Possibly words Pearlstein was seeking but couldn't quite verbalize because the financial monster before him was too complex to completely digest. That is, the system of financial engineering needs to be abolished all together. We need to return to investing. Not only in financial markets but in the real economy. You remember the real economy? The real economy is the only reason financial markets exist. Were a capitalist of the late 1800s to come back from his or her grave today, they would look at the American economy and wonder what the hell these elitist boobs in Washington and Wall Street had created. Surely not capitalism. Surely not an entrepreneurial economy. Surely not American-style worker capitalism. Although the Robber Barons would be happy that government has deregulated nearly every part of the economy possible. Thus benefiting big business - the longest work hours in the developed world, pensions being robbed and shut down, wages for most in a multi-decade death spiral, health care being stripped from Americans at an alarming rate. The fraud has become so ingrained and the "education" so pervasive that no one has really stepped back to ask the most pertinent question - Why the hell does this financial Frankenstein even exist in the first place? The answer is very simple. It exists to steal. There is no other reason. Putting patches and more regulations on a fraudulent system accomplishes what? More lipstick on the pig so the elitists can continue their theft of this nation. Stealing from the middle class. From the vast majority of Americans who aren't dealt into the game of wealth transfer. There can be no other mathematical outcome. Haven't you ever wondered why the income statistics are even more disparate than they were in 1929? It's the greatest wealth transfer in the history of the United States.

Give me an oil options condor with an oil futures long position coupled with a 130-30 equity market exposure and a hedged put covered call, mortgage-backed securitized, cap and trade derivative position with a double shot of espresso and a beer chaser. To make matters even more insane we now have Wall Street, flush with cash, running around pulling bear raids on every stock with a substantial short position. We surely know this is so because high short interest stocks have returned nearly 4x the overall market in the last few months. Bear raids, bull raids, jams on large options positions, futures traders ramming shorts, stock raiders driving shorts out of completely bankrupt companies and god knows what else.

And as I highlighted in a comment the day after, on a Monday of a few weeks ago, Freddie Mac and Fannie Mae were up about 40% in a single day. That move in those two companies represented about a third of all New York Stock Exchange volume - probably an event that has never been seen in the two hundred year history of the New York Stock Exchange. Even in the early days when there were a handful of shares trading. That is, two insolvent companies representing such an enormous percentage of volume. Add in the volume of a few insolvent banks and you have the vast majority of New York Stock Exchange volume for that Monday's session. Some have been speculating this is the government propping up stocks. That makes no sense. This market action is pure financial speculation. And it is a very, very dangerous dynamic if volume does not pick up. In other words, it will lead to future liquidity shocks. Liquidity shocks we uniquely called before this crisis hit and that we have said are going to happen again unless...........we see true market reform.

So here's a simple question. How the hell does any of this financial engineering help or even reflect the economy? Or maybe better put is how does any of the Frankenstein finance structure on Wall Street benefit main street or wealth creation in the economy? It doesn't. The bad news for the bulls is eventually the two shall marry again. In other words, the economy and financial markets will eventually meet in the market place and resolve themselves to a same outcome. Yes government-provided financial market liquidity has given the appearance of stabilizing fundamentals but it is not a recipe for economic recovery. That liquidity too shall pass. Just as massive liquidity in 2006 and 2007 eventually passed. The employment work week increases a few tenths of a percentage point after $12 trillion in stimulus money we don't have? Well, hell, let's throw another $300 trillion dollars of debt into the market and maybe we can employment up to some reasonable number.

What we are witnessing is the Federal Reserve temporarily restarting the credit engine to pile even more debt onto a broken economy. Something that has already been happening for nearly twenty years. And as we highlighted in a recent post, business is now almost universally bullish about an economic recovery - nearly 90% surveyed. And as a result of the Federal Reserve restarting the credit cycle, we not only see record debt issuance by public sources but also by companies around the globe. Companies in Europe and the U.S. have piled on record debt in 2009 thanks the the Federal Reserve and other central banks. Little to none of this debt is for the intent of creating capital in the economy. It is not going into new plant and equipment. To employee training. To enter new markets. To create future wealth. It is simply being issued to survive. Hope to fight another day. Debt based on hope. That's a real winner. This is no different than shifting money between credit cards while out of work. Hoping to find a new job. But, then we have already written this exact remark quite some time ago. In other words, the policies and actions of the government are making matters worse. And the private sector is dysfunctionally enabled to similar destructive actions only because government policy is encouraging it. Government has become the enabler to the drug addict. The drug is more debt. And more economic fallacies embraced by ruling elites.

"Policy does not allow a choice between depression and no depression, but between depression now and a worse depression later: inflation pushed far enough would undoubtedly turn depression into the sham prosperity so familiar from European postwar experience, and would, in the end, lead to a collapse worse than the one it was called in to remedy." -- Joseph Schumpeter, one of the greatest economists to ever grace the profession

If you believe the government has pulled off a hat trick and the economy is recovering, you believe the move in financial markes is divining the future. If you truly understand Wall Street's Frankenstein finance, you realize financial markets are simply embracing the same failed schemes we saw before the market collapse. The same failed schemes that had no reflection on the underlying economy. The same failed schemes that failed miserably when fundamentals started encroaching on financial markets. The same failed schemes that will fail again. Absolutely none of the U.S.'s economic problems are being resolved constructively. And already government has lost any momentum to embrace transformational change. Back to the stooges of the political unions carping back and forth while Rome burns. Once again our political stooges are deluded by appearances. By the fraud they helped create and now perpetuate.

I highlighted YRC Worldwide some weeks ago - the largest trucking company in the U.S. It was basically trading down 99%. Their business has imploded. Literally revenue is down 50% and the company is in a fight for its very existence. News continues to be negative with concerns about even more lost revenue. Such a catastrophe would likely push YRC into bankruptcy. Shortly after that post the stock doubled in a period of a week. Most assuredly some hedge fund or traders at a major Wall Street firm used government-provided liquidity to hunt down shorts. In other words, the government has rewarded Wall Street for punishing anyone who may have done their homework and were short YRC. This type of action in YRC, Freddie, Fannie and other extremely speculative stocks is often a late stage rally dynamic. Especially since Frankenstein finance has gained a lock on financial markets. In any event, this action sure helps the out of economy now doesn't it?

So, let's look at another chart. Wynn Resorts. Wynn reported a 91% drop in profit. The stock then almost doubled in two weeks on completely terrible fundamentals. Please don't tell me it is based on future expectations either. That is even more ridiculous. It is more financial fraud. Most likely someone with free Federal Reserve money jamming negative positions in the stock or its options. Raiding. And what benefit does this type of activity have on the American economy? Financial engineering has no relevance to fundamentals, except for one - liquidity.

If anyone buys into this all-knowing stock market forecasting sunny skies ahead, you need to wake up. It isn't forecasting anything more than it was forecasting before the market collapsed in 2007 and 2008. Financial markets were at record highs while the underlying economy had been deflating since the mid nineties - something we wrote years ago. Why should markets reflect reality? The dynamics are still the same courtesy of a government unwilling to address reform in a rigorous and expedient fashion. Instead this is a return to theft and gambling with society's money and the subsequent destruction of society's wealth. This very fact is what I was alluding to in my remarks about Stephen Pearlstein's comments a handful of days ago. What Pearlstein intuitively understood about high frequency trading but couldn't quite verbalize is that the problem isn't high frequency trading. The problem isn't credit default swaps. The problem isn't securitized debt. The problem isn't program trading. The problem isn't banks trading oil derivatives. The problem is financial engineering in its grand entirety is literally larceny. It doesn't add to society's wealth one iota. It serves no productive purpose for society's capital. It is strictly a compendium of wealth-shifting strategies. Strategies that only work because Wall Street paid politicians so they uniquely could set the rules to the game and determine its outcome. It is the greatest of fraudulent acts against our country's citizens. Ever.

Financial engineering and its wealth-shifting dynamics creates an even greater risk when society's capital stock is not increasing as is the case at this very moment. Factoring in this dynamic, financial engineering creates an environment very similar to playing poker with either a set-limit pot or a shrinking pot. A game where more and more players are unable to stay in the game due to greater and greater losses. Unless the pot is replenished and more players are willing or able to join the game, Wall Street is actually trading its way to its own demise. Something we have already written of. Counterparty risk in financial markets is increasing dramatically as I type this. All at a time when major financial firms have re-entered the risk trade in a big way. Many people think Wall Street has won and will return to the status quo because of the money they are minting today. Paul Wilmott, one of the world's best known financial engineers, remarked of this some months ago. We wrote that Wilmott was completely wrong and this fact clearly indicated Wilmott did not understand the unsustainable dynamics of Frankenstein finance he helped create. Indeed Wall Street has won nothing. They are literally creating their own destruction without realizing it.

As we have written, Wall Street CEOs don't have any idea what their businesses are actually doing. And they are getting paid hundreds of millions of dollars to do it. Whatever "it" actually is. Case in point is that we have already seen the concentration of winnings to the top handful of firms in total derivatives. But with that also goes the concentration of risk. Now we have equity market liquidity similarly being dominated by those same firms. And, again with it the concentration of risk. What we are basically seeing is all firms are playing a similar or the same poker hand with a smaller and smaller pot. That means the game is going to get a lot more interesting. Karma has a funny way of revealing itself but I believe the financial markets are again nearing a very dangerous place without ever increasing government-provided liqudity. Liquidity needed to continue the remain in the game.

Financial engineering taught at every major MBA program in the U.S. and in Europe and practiced by every major financial firm in the U.S. and Europe is nothing more than legalized fraud. Fraud whose very foundation is to steal money from others (financial counterparties) that has the effect of creating unsustainable bubble earnings at banks. Earnings made off of the back of society through every sort of usury imaginable. The banking sector's profits are nothing more than a tax on society's productive capital. ATM fees, money management fees, derivatives trading, credit card fees, commodities investing, and on and on and on. Usurious fees for everything imaginable. All of this contributes to artificial earnings that allow financial executives to steal even more from society through hefty compensation and bonus packages. Packages that are rationalized because these firms are making huge, unsustainable profits that are actually destroying productive capital in the American economy. Profits stolen from the American people.

I doubt many people truly understood the economic consequences of the Frankenstein before us. I believe politicians were effectively being politicians - taking part in a system which encourages them to fiddle and fidget with laws and regulations so they can raise money from their corporate donors to get re-elected. In other words, most politicians are simply being greedy politicians benefiting from Corporate Personhood without an understanding of their utter stupidity and complicity in this mad house. Banksters on the other hand, they had an agenda. They knew exactly what they were doing. They were paying politicians to rig the game. They got exactly what they wanted - fraud.

Government officials need to fix the problems in our financial system and our economy instead of listening to financial lobbyists and the learned idiots running Wall Street. Every day government doesn't act contributes to greater destruction of our economy. The alternative is to be guaranteed future crises as financial engineering drains even more liquidity out of markets and the economy.

Wall Street's game is up. There is no recovery. There is no magic of financial genius. There is no brilliance of bankers minting profits. There is no genius in our Ivy League MBA programs. There is no recovery in financial earnings. There is no solvency in the banking system. There is no wonderful spirit of the American people pulling us out of this crisis.

There is only fraud and its impending doom. And it shall come to pass without serious and lasting reform. It's time to start learning from our mistakes. Mistakes contributed to by our ruling elite's "education". Or we shall be doomed to repeat them.

"The only thing that interferes with my learning is my education." -- Albert Einstein

Einstein's quote is quite appropriate to describe an intellectually deficient elitist class which continues to embrace failed ideologies (education) across a wide spectrum of issues. The greatest being a failed economic model. What is most amazing about this dynamic is that elitists are embracing ideologies which are leading to the destruction of their own prosperity. But then this dynamic has been in play throughout history countless times.

Comparatively, we have a society which generally understands these deficiencies all too well. If not by specific understanding, by a realization that government no longer works for the betterment of society. Which is why the babbling idiots in our government, our banks and our business institutions have such a low approval rating. Who's fooling whom? As Einstein would tell us, we watch and learn as truth and knowledge trumps the best education money can buy. Or maybe that is the best fraud money can buy.
posted by TimingLogic at 10:43 AM

Michigan's Manufacturing Unemployment Rate - 50 Percent?

Link here.

But it's all good. The President has just appointed the man who is going to solve all of our problems. Mr. President, I have a better idea. And it doesn't involve hiring a government bureaucrat either. Of course, therein lies the problem of bureaucrats in general. There are hundreds of millions of minds in the economy who can always come up with a better answer as to how to solve problems. My mind is hazy on this topic but I do recollect this used to be called a meritocracy based in democracy.

In order to tap into this fabric, all government needs to do is develop sound policy to incent those answers to come to fruition. It's really stupidly easy. Obviously it's not stupid enough for our Congress to understand or they would not have destroyed the laws we used to have that encouraged such behavior. Or maybe it had to do with all of that lobbyist money.
posted by TimingLogic at 9:45 AM

China Student Aspires To Be Corrupt State Official

posted by TimingLogic at 5:23 AM

Friday, September 04, 2009

Ratings Agency Lawyers Attempt The Bamboozling Bullshit Of Corporate Personhood's First Amendment Right As Defense Against Stupidity Or Fraud Or Both

Link here.

I have a better idea. An honest Constitutional lawyer or Congressperson or President take up the mantle of Constitutional Review of fraudulent Corporate Personhood granted by an ideologically-driven judicially-active Supreme Court decision. A right granted under the Constitution to reverse such acts of stupidity or fraud or both. Get rid of corporate rights and their lawyer-lobbyist cronies for bastardizing Constitutional freedoms and the majority of these messes will solve themselves. Return our government and our country to the people. Corporations aren't bad. The laws are.
posted by TimingLogic at 12:44 PM