Tuesday, June 30, 2009
Five States See Possibly Shutdowns
Now, I don't wish to see states shut down more than anyone but let's put this in perspective. We had a post some time ago where we highlighted California as an example. The state budget went from $80 odd billion in 2000-2001 to $140 odd billion in 2008-2009. What increase in services did the state offer citizens with this massive increased burden? Did your standard of living double in the last eight years to support a near doubling of taxes? Cut the budget back to levels of a few years ago and the budget problem is solved.
Threats of suspending basic services are a form of economic terrorism. Every state government has more than enough resources to meet basic services to society. Cut wages, cut workers, cut benefits, cut nonessential spending, cut new projects that don't have a two year ROI and on and on and on. The government has to join the real world. A world they created through policy. Maybe if the taste is bitter enough, we'll see a change in said policy. And, on the Federal level, there is easily a trillion dollars per year in nonessential spending, excluding stimulus, that could easily be cut. That would be spending associated with wars and international games of the state.
Madoff Gets 150 Years For Heisting $50 Billion. Wall Street Gets $12 Trillion Bailout For Far Worse Crimes.
"The British people can face peril or misfortune with fortitude and buoyancy, but they bitterly resent being deceived or finding that those responsible for their affairs are themselves dwelling in a fool's paradise." -- Winston Churchill
Indeed, timeless truths. And while those that created this crisis are trying to feed us more gruel, transparency and honesty would have prevented much, if not all of this crisis. Instead the American people are on the receiving end of a mockery of justice and democracy.
I believe the new political leadership in Washington is making a grave mistake as it relates to this crisis. In fact, I think it's arguable that political strategy mistakes are the largest Washington miscalculations made since this crisis revealed itself. And these mistakes will ultimately contribute substantially to sinking the economy even deeper into a morass.
Let me start by saying that almost all calls for justice as it pertains to this crisis have been met with political rhetoric that the problems we see today are not the result of broken laws. Or even shielding of Wall Street or Washington from accountability by invoking many absurd claims. These fallacies exist because Wall Street has paid Washington handsomely to change the laws to their favor. Indeed, there was egregious disregard for the rule of law and terrible crimes committed. But, the rule of law was mangled such that our legal system has become a mockery in many regards. Wall Street has bought and paid for legal asylum and the American people know it.
If I am any representation of the American people, and I have very mainstream political views, the government has a serious problem. I am loyal to a way of life that respects the rights of the people to rule. To our Constitution. To a government that represents the interests of its sovereign above all others. I am not loyal to anything but these ideals and that means confidence is completely lost.
I realize a new political administration does not bear primary responsibility for this crisis regardless of any ridiculous attempts to assign blame for this an inherited mess. Yet I have no desire to support a system that has bankrupted our country and destroyed millions upon millions of lives just because someone tells me it's the right thing to do. The brow beating by those with the microphone, including a relatively recent urging by JP Morgan's CEO that we should all fall in line behind this new administration contains no sense of morality or truth. At times such as this, the people must remember that being an American is to embrace ones own thoughts and views. To challenge and demand excellence in government and in leadership. To seek the truth over political ideology. To seek democratization of economic opportunity. To seek justice where injustice exists. To smite tyranny and repression. To agitate nonviolently for effective change. That is what made this country great. It is only ideals of virtue that will restore our greatness. Because it is only these ideals that will transform government and restore society's confidence. If the politicians in Washington want Americans to support a policy of sacrifice through bailouts or handouts which we are told are necessary for our future, we need a call to account.
What does that mean to me? That means we need a post 1929-type commission with broad investigative capabilities to restore confidence in our banking system and government. Something a few who understand the depths of this crisis have already demanded. A commission that has the wherewithal and legal authority to follow the money trail. To investigate wherever the trail of evidence may lead be it lobbyists, politicians, regulators, the banking industry or anyone else to get to the root of what went wrong and how. Not a witch hunt as is so popular with politicians. Not the state sponsored terror of McCarthyism. But a search for facts. For truth. For restoration of the rule of law. To find out why the safest banking system in the world was systematically dismantled over the last thirty years. To restore American virtue and values. And, to report these findings with complete transparency and without prejudice directly to the American people. And, to recommend apolitical solutions that will permanently support an environment where a few elitists can never destroy our banking system or economy ever again.
I would accept any such investigation's conclusions were the process open, transparent, free of lobbyist influence and truly apolitical. Not a process controlled by government. One independent of government. I will not rally around anything or anyone just because there is political or social pressure being exerted to do so. These rallying calls aren't calls of a free nation. Or, because we have seemingly adopted a new political ideology. As we wrote before, a new ideology solves nothing if it is also an equally failed or flawed ideology. Rallying calls around the status quo are calls of repression. Of suppression. Fall in line or be publicly ostracized or marginalized. They are patently anti-democratic.
Our new President has the power to strike a permanent blow to cronyism, corruption, backroom dealings and the seamy opaqueness of Washington in the name of The People. To become a greatest of leaders. To restore policies of economic populism. To democratize economic opportunity. To restore America to its destiny. To charter a new course of enlightenment with laws that are permanently written into our Constitution if necessary so that these crisis can never develop again. But, first, he must prove his leadership by providing an account and transparency to the American people. It won't be easy to fight the forces so entrenched in Washington and Wall Street. In fact, it will surely involve extreme risks. Yet, were he to do this and commit to economic policy changes, transparency changes into government, a sound banking system and apply the rule of law to those complicit in wrongdoing, I believe society would embrace the sacrifice needed to rebuild a nation of the people, by the people and for the people. For all people regardless of race, gender, political affiliation, personal affiliation or religious belief.
Americans never wither from a great challenge of dignity and honor. But, we must be presented that great challenge in order to accept it. To date we have not been presented any such challenge.
Until the American people see a call to account, there remains a serious political problem in Washington. Politicians are going to run into a tremendous amount of push back in any efforts to accomplish anything that involves greater tyranny on the peoples of this country to save a system that has not benefited the vast majority of its citizens. Remember, it's our money, our government and our nation. It's not Washington's to give. It's ours to give and the President's to lead simply because we allow him to serve at our discretion.
Where is the justice? Where is the protection of the just? Where is the desire to identify the causes of this crisis and permanently resolve them to the satisfaction of a nation?
Monday, June 29, 2009
China - Bubble Of Belief
Let's Meet All Of Angelo Mozillo's Secret Friends In Congress7:41 AM links to this post
Sunday, June 28, 2009
Max Keiser - Goldman Sachs Extorting Money From The American People
Max Baucus Loves Lobbyists And His Health Care "Reform" Draft Shows It
More gruel for the American people. More party favors for Max's buddies. Hey Max. Would you be willing to have all future conversations with lobbyists take place in your office and be taped? Then have these conversations uploaded to Youtube for the American people to watch? You know, since you are a public servant who serves at the pleasure of the American people. And, obviously because lobbyists really care about our country. I guess just like those same lobbyists representing corrupt foreign dictatorships, communist countries and oil fiefdoms that teach American hatred in madrassas. They all hire American lobbyists to do their bidding to our government as well.
Speak of pleasure. I bet you experience lots of it given the influence of the finance industry in the healthcare reform legislation you are chairing. I am sure any videotaping and transparency would be a mere formality since you obviously have our best interests at heart in healthcare and all of your other endeavors as Senate Finance Committee chair.
It's good to see Senator Baucus is following in the footsteps of other esteemed Senate chairmen. Like former Senate Banking Committee chairman Phil "I destroyed the banking system" Gramm, who worked so well with lobbyists on behalf of the American people. You remember Gramm. We incessantly ranted over the last four years about the overturning of Glass-Steagall courtesy of Mr. Gramm and the esteemed President Clinton. I would like to personally thank the lobbyists on this one. For destroying our banking system. Don't worry. You'll really love this one before the party is over.
As I type this I am watching Mitt Romney, the world's biggest political idiot, tell us the economy is going to turn soon. Just like the private equity firms he represented so well that as an industry are now imploding. Hopefully, we will elect his ego as President in 2012.
Friday, June 26, 2009
The Wall Street Bubble Mafia - How Goldman Sachs Took Over Washington By Engineering Every Major Market Manipulation Since The Great Depression
When the world was partying hard three years ago, we wrote that historically Goldman's perceived brilliance was tied to impending doom. And, we have railed on just about every manipulation that Taibbi has written of in this article. And we did so well before the bubble popped. A time when most no one would listen and most even discounted any validity of our remarks. Will they listen to Taibbi now? Let's hope so because we won't get any reality from the mainstream media. If you want to understand what is really going on, turn off the television, chuck the radio blow hards and burn the mainstream magazines. It's time to reign in Washington and Wall Street corruption.
Agrium's Takeover Of CF
See you in bankruptcy court.
Russian Bank Bailout Coming
Thursday, June 25, 2009
Michael Jackson Dead At 50
Michael Jackson played as great a role in shaping American culture as any person in the last one hundred years. An immensely talented artist has passed away at a very, very young age.
The Fallacy of Special Drawing Rights Or BRIC-Specific Currencies Replacing The Dollar Is A Pipe Dream
I just took a spin around the blogosphere for the first time in a while. Lo and behold I see many of the squirrels have been busy with their nutty hypotheses. BRIC countries replacing the dollar by trading amongst themselves using their own currencies or Special Drawing Rights (SDRs) of the IMF? You have got to be kidding me. Who cares? WHO CARES!
First of all, none of these bloggers have ever heard of IMF special drawing rights until a month or so ago. Now they are out with their batty hypotheses.
The SDR replacing the dollar as the world's new currency? Uh, don't think so. Do you think it really matters that all of these countries are attempting to supplement dollars in their trade? These countries are all going back to the economic Stone Age anyway. They can lob SDRs or Yuan or Rubles or Rupees back and forth all day long. It matters not. Additionally, $300 trillion of debt exists in the global economy. A vast amount of it is dollar denominated. And what may I ask are these debt holders going to use to service that debt? SDRs? Rubles? Yuan? Is that a joke? Excuse me sir but would you take pumpkin seeds in return for my loan payoff?
We could easily see a change in how global commerce is carried out but it surely won't be by using Yuan and it won't be mandated by Russia or China. Nothing will happen without the consent of the United States and Europe. Don't get caught up in the hysteria.
More Sleazeball Activity By The Banksters - Attempt To Thwart Populist Overreaction
All of these problems would be resolved in the future by 1) Overturning the legal sham of corporate personhood and the legalized bribery of our politicians that goes with it. 2) Doing away with a private banking system that puts profits before the public good. 3) Have complete transparency into Washington so we know what sneaky politicians are doing to our economy. 4) Re-regulating banking to the level seen after the Great Depression so these scamsters are not able to gamble with society's savings.
See any of these issues being queued up in Washington? Not a single one.
Wednesday, June 24, 2009
Deciphering The Shape Of The Economic Recovery
I had no idea who Simon Johnson was until this crisis unfolded (former chief economist of the IMF) but he has earned my respect by being hypercritical of the corruption and cronyism in our economic policies and politics since. But at 6:50 of the video link Simon is asked about the possibility of an outcome which looks like the lightning bolt in the AC/DC Highway to Hell album made during the recession of 1979. In other words, collapse followed by apparent recovery and collapse again. (The infamous Elliott Wave ABC pattern) Simon laughs that possibility off as seemingly impossible. Really? That's exactly what is going to happen. Collapse followed by an introduction of substantial liquidity in the global market followed by another collapse.
Simon, you need to scream louder for economic reforms if you don't want to look back on that video with horror.
Banksters Take $125 Million More From Taxpayers In General Motors "Advisory Fees"
Shoichiro Toyoda Ridicules Toyota Management - Change Or Die
Now honorary chairman Toyoda is speaking out about many of Toyota's strategy failures we have talked about on here. Toyota's crisis is a study in hubris and the globalization of a management that chucked its conservative well-proven ideals. Frankly, to a certain extent, it failed because its management became too Americanized. Not in the sense that Americans were running the company but in the sense that the business mumbo jumbo taught in American universities and adopted by many American businesses started to infiltrate Toyota. Ironically, it seems as though our businesses were better off before we had professionally trained management heading many of our firms. But then America didn't become the world's mightiest industrial nation through the group think taught in our business schools. It did so because we embraced entrepreneurialism, creativity, individuality and individual freedoms.
American companies pioneered the management disciplines which made Toyota successful. Something we have talked of on here. We also wrote that Ford, as an example, was coming full circle by embracing the Toyota way that was ironically based on the Ford way of one hundred years ago. We'll see more of this across economics and business as time goes by - relearning the lost art of successful business management.
We'll see it because we must. Timeless ideals of success will be forced back upon society and a new generation that will learn to replace the horrendous mistakes of this generation. Just like post 1929 when a new generation had change thrust upon it whether it wanted change or not. Off the top of my head I can't recall whom, but I believe it was Schumpeter who hypothesized substantial economic change could never be instituted until the current generation was out of power. I believe there is ample evidence this is indeed a key determinant of economic calamities. This is why I continually harp that we should not be listening to anyone in charge of business or politics for ideas out of this crisis. Yet, they have nearly exclusive access to the microphone. They are the voices the President is relying on. It's the faulty ideology of these fools that landed us in this crisis. That means society has two choices. 1) Live through this hell for another ten or so years while we try every worthless idea a generation of economic dunces wants to use to resuscitate economic growth or 2) Boot their asses out of office and positions of authority and replace them with a generation not beholden to economic witchcraft.
Change or die. I guarantee you Toyota understands the stakes and unlike Wall Street as an example, they will change of their own free will. Change or die. I guarantee you the majority of American people get it as well. The winds of change are blowing and the politicians are still living in their bubble. For now.
Tuesday, June 23, 2009
Potash - Fertilizer Or More Baloney? Part Deux
One of the greatest Wall Street Ponzi schemes this cycle were fertilizer producers and agricultural commodities. Everyone on Wall Street was pumping these stocks like there was no tomorrow. Everyone. We had a prior critical post on Potash by the same title when exuberance was coursing through the financial system. Since then the stock has imploded yet is now up substantially off of that implosion low. Now it's time for a follow up or part two post.
Buy fertilizer stocks and pump up the commodities associated with their production and voila! You have the makings of completely artificial and unsustainable earnings. Couple that with the momentum and quantitative "factors" clowns running most hedge funds and you've got yourself enough fuel to ram these stocks to the heavens regardless of reality. Unfortunately, the slide for Potash, as an example, was a brutal one. It has fallen from about $250 to $45. The Fed's liquidity rampage lifted the price to back over $100 again. But, this is purely Wall Street gamesmanship and not the least reflective of fundamentals.
If you bought Potash anywhere near peak earnings, don't worry. You might have an opportunity to make your money back some time around 2050. That's not a joke. While commodities were making these moon shots, I wrote on here that they were discounting fundamentals for decades to come. I believe it was up to thirty years of cash flow discounting that we wrote of. Frankly, any Wall Streeter who recommended these stocks in the last few years doesn't deserve a job managing other people's money. Ironically, the market will probably make that very decision as the finance industry implodes.
Early this year I actually saw a CNBC commentator remark that fertilizer was the new gold. Ah, the kiss of buffooneryism touches another supposed asset class.
So let's talk about something that is a lost art in the world of quantitative factors, hedge funds, Frankenstein finance and general Wall Street blabbering. It's called fundamental analysis. You remember fundamentals? It's what would have scared anyone into a bunker looking at discounted cash flows on Potash or any untold number of commodity stocks this past cycle. It's what would have kept Ben Graham miles away from these Ponzi schemes. It's what the world is witnessing now. But you never once heard any of this in the press. And you don't hear it now as Wall Street plows back into these same schemes.
Ironically, a return to fundamentals will soon be driving the market for fertilizer. I grew up on a farm so I'm a bona fide hick from the sticks. We really aren't quite as dull-witted as many in the media would make us out to be. But for those seeking validation, I do admit to watching Hee Haw while growing up. But, I was forced to watch it because my grandparents made me. Ugh!
I still keep in touch with a few farmers. Farmers that run pretty sophisticated operations. You know, they add and subtract in between watching Hee Haw. They also use GPS mapping systems to calculate fertilizer loads, rainfall, crop yields, etc. and use the agriculture futures market to hedge their yields & lock in production profits. Well, at least they used to before Wall Street started scheming in these markets. Many farmers now won't touch the futures market for the very use it was intended for because Wall Street's commodities "takeover" distorts the ability of the market to be used for business purposes.
Anyway, do you know what they told me a few months ago? Between the genetically modified seed companies which have cornered the seed market (anti-competitive monopolistic business practices) and the outrageously high prices for fertilizers, the profits derived from farming are just about nonexistent. And depending on the debt load of farmers, profits have turned into substantially upside down losses. Couple that with restricted credit and falling land prices and we are likely headed for a major uptick in agriculture-related bankruptcies and losses. (So much for Jim Rogers's repeated remarks about how much he still likes agriculture commodities. Has Rogers actually been right on anything after writing that book? Hot on China, hot on the collapse of the dollar, hot on agriculture commodities, hot on inflation and on and on and on. All wrong. Can I get a job that pays me millions? Where countless people repeatedly line up to hear what I have to say even though I am continually wrong? I can be as wrong as anyone. I promise.)
Some might say this environment will also provide fuel for increasing agricultural prices to relieve possible shortfalls in production or upside down market pricing structures. But, this argument fails to take into account the reality of boom and bust cycles so prevalent in commodities. Take out the financial manipulation of commodities by Wall Street and what are the chances hundreds of millions of people around the globe now either unemployed or living on subsistent wages are going to absorb higher food prices? In other words, to spur substantial product demand at substantial higher levels? The greater reality is that we now see the potential macro environment developing for a future famines as millions struggle for their very existence. Additionally, because of the economic dynamics highlighted above, we now see a potential for a drop in food production caused by the banksters. Or, as a farmer taught me as a child, you can't bleed a turnip. A timelessly prescient economic maxim lost by the never-ending pump on Wall Street.
We are now in a period that is going to test the economic maxim of income inelasticity of demand for basic foodstuffs. In the real world, there is no demand when there is no money. Instead there is malnutrition and starvation. Something I think could become epidemic in emerging markets. The pricing models of fertilizer and genetically modified seed providers have to adjust much further. Or, as I see it, even collapse. Whether that is today or a month from now or a year from now, it's basic math. And, that will lead to further erosion of profit margins in the agricultural commodities business.
So, is fertilizer really the new gold? A fool and his money.........
Monday, June 22, 2009
For the one thousandth time, Wall Street still doesn't get it. Game over. Russia's economy is most likely to collapse along with all other emerging markets.
Sunday, June 21, 2009
Goldman Sachs Flips American Citizens The Bird - Karma Is Ultimately A Bitch
Let's see. TARP bailouts. AIG counterparty bailouts. General backstopping of financial assets by the Federal Reserve bailout. Charter to become a Federal Bank bailout. Ability to now issue debt backed by the American people bailout. No re-regulation of financial speculation of trading with society's money bailout. Making profits in commodities and thereby taking money from the world's people via higher prices caused by speculating bailout. Minting money on America's unprecedented issuance of debt bailout. What did I miss?
If any American citizen who has lost his or her job, their house and any other significant economically-induced losses and they had received these types of government bailouts, they would be living large in retirement. Yet, I believe a plausible argument can still be made that Goldman Sachs will ultimately fail.
Keep paying out those bonuses Lloyd. That drain on retained earnings will never be missed. Haha. You'll have even less capital needed to ultimately save your company. Karma is a bitch.
I'm starting to wonder if some of the conspiracy theories are true and if Lloyd Blankfein is in fact Damien Thorn.
More Economic "Black Shoots"
By the way, those who cite Smoot-Hawley as a cause of the Great Depression are historical revisionists. Or just plain uneducated. I had this disagreement with a Wall Street talking head some time ago. One who has been wrong on nearly every call in the last three years but remains a favorite guest on the Ponzi television channel.
Once again, globalization is dead and nationalism will return. Most likely with a vengeance. All we need to do is watch and wait. Our expected outcomes will unfold right before our eyes.
Friday, June 19, 2009
Where The Hell Is Matt?
Thursday, June 18, 2009
Geithner Defends Plan To Give Federal Reserve More Power - Who Really Cares What Geithner Thinks? Seriously.
What Geithner thinks is really irrelevant. Ultimately the American people will probably be voting in a new administration to clean up the messes created by every administration since Carter and including Carter, who by the way really started the dismantling of our financial system. I know many like to blame the start of this on Reagan but this is a duopoly and if I objectively evaluate both parties, I have the give the worst grade to Democratic Presidents. Although they are truly both the same group of jackals.
Scientists Uncover The Gift Of Sight12:07 PM links to this post
Financial Regulation Draft
I Robust Supervision and Regulation
II Comprehensive Regulation
III Protect Consumers and Investors from Banksters
IV Provide Government Tools to Manage Crisis
V Raise International Regulation and Cooperation
Now, just looking at these five major outlines, I almost want to throw up in my mouth. In fact, I just did. You mean to tell me after 250 years, three hundred million citizens and a $14 trillion economy, we don't have any of this taken care of? Only the government could come up with a new agency to protect people from government policy re item III. I think we might just be able to accomplish the same thing by getting rid of a few government agencies.
Over the last fifteen years or so I have gone from having reasonable confidence in government providing some services and little confidence in other areas of policy to complete loss of confidence in government's ability to do anything. Well, almost anything. I'm still quite confident I'll get my mail and my auto registration.
I seriously doubt we will get any substantial economic or regulatory change until we see an utter collapse that wakes these profligate swine from their favorite games - playing with other people's money, preening for the camera and getting plenty of money from lobbyists. Sharpen your pencils for 2010 and 2012 because it's already time for a new election and new faces which will serve the people of this country. I am now writing off the politicians we just elected last year.
I remain confident of our downside target for the S&P.
New Financial Regulation Is Watered Down Gruel
This is the kind of intellectually lazy reporting that really gets my ire. The greatest financial reforms since the Great Depression? Is that a joke? Wall Street dismantled the reforms of FDR and these proposed regulations don't even begin to get us anywhere near back to neutral. The new administration appears too worried about consensus rather than ramrodding through the changes necessary to re-regulate our financial sector. Or maybe the politicians are too beholden to the billions and billions of dollars thrown at them by Wall Street. Regardless, it's now apparent the only way we will get true reform is by witnessing even greater crises.
Wednesday, June 17, 2009
The Wall Street Tax On America - Screwing Our Municipalities
I am just getting this up but it was a front page article on The Bond Buyer link a week ago. At a time when municipalities are under tremendous strain, it's good to know we can count on Wall Street to chip in and effectively extort more money from the American people by shafting municipalities. Not only that but the Federal regulators seemingly endorse it. I just can't wait for the Fed to be granted greater regulatory control. That'll be such a winner.
The Wall Street Tax On America - More Scheming In The Oil Markets
The chance that we are seeing Peak Oil at this very moment is completely ridiculous. While Wall Street was shoving commodities to the moon, we said this would end in a commodities bust and we are well on our way. if I have offended your Peak Oil instincts, then I have accomplished my objective. How many times in history has the vast preponderance of people on this planet accurately predicted the future as is the near universal case with Peak Oil today? How about never.
I don't know if I will be blogging by the time this happens, but I will tell you right now that I will go so far as to state that oil will very likely be less than $15 a barrel by the time we get out of this mess. And that means the asshats on Wall Street are likely to once again get their head handed to them for trading in commodity markets with our money. And anyone who understands anything about the futures and derivatives market knows that it is a zero sum game. So, when Wall Street speculates with our money and loses, we are required to bail them out. It's legalized stealing, as is the actual act of making money off of the world's consumers of energy and commodities. Wanna bet that won't happen again?
Last week the American Trucking Association joined seventy nine other trade associations seeking full transparency into commodity markets all while Wall Street seems hell bent on destroying whatever there is left of American industry. With the blessing of Washington politicians. Nearly a year after this crisis hit full bloom, we aren't even close to doing anything to curb Wall Street's predatory activities. Where is our government?
Tuesday, June 16, 2009
Wall Street Has Unwittingly Sealed Its Own Fate With The TARP Repayments
Mark that date and those comments because if there is anyone more lost in the wilderness as a Treasury Secretary than Hank Paulson, it surely must be Timothy Geithner. The link to that post ridiculously comes from FinancialStability.gov - a web site that espouses financial oversight, stability and transparency. The Big Lie remains in full force. The ability to politicians to talk their way out of this situation has passed. Now it's time to walk the talk. We need some true leadership in Washington. Web sites with hollow rhetoric about the rule of law and nobility when what we see is corruption and cronyism won't solve anything.
We can be assured Wall Street and Washington have no idea what storms brew before them. Neither saw this crisis coming. Nary a single person on Wall Street that I am aware of wrote of a coming credit crunch or liquidity shocks. Ken Lewis, the CEO of Bank of America, just told us again late last week that no one could have seen this coming. And with those words, Ken Lewis is uttering the very future without even realizing it. But this time will likely be different - market forces will more than likely bury attempts to save the economy once the great satan has gained critical mass once again. It will. We foretold of the last crisis and the next crisis is in the making . And just as we foretold before the last crisis, there will likely be no time for policy makers to react.
Last week ten banks were given the all-clear to repay the TARP funds. With that I believe it's appropriate from much of my quantitative work to put many of these institutions on some sort of high risk watch. I wrote a week or so ago that I believed any Wall Street banks repaying TARP assets have a high probability of failure be it market-based or receivership. And, I believe this extremely under appreciated risk is so great that I'm moving it to a headline post. Most specifically I am very concerned with firms that are reliant on a substantial amount of Frankenstein finance and trading for their profits.
Even though I haven't shown any of my most proprietary analytical work on here, all of my posts are based on data. And that is why our macro calls have probably been the best in the blogosphere and better than any economist I am aware of. There is an incredible amount of hard work and thought that went into those analytics. Not opinion which is always free and easy. I don't really care about opinion. Opinions are everywhere. Opinions have cost me dearly and I learned from those mistakes. Fox News, CNBC, Time magazine, Politico, The Huffington Post or the local barber shop. There are thousands upon thousands of people willing to share their opinion. Data, if interpreted accurately, doesn't lie. Only people and their opinions do. And that is really what it comes down to. Interpretation. Because every person on earth has access to the same market, economic and trading data that I do. And only accurate interpretation of what the world is telling us separates those who will keep their money from those who will lose their money.
On that note, I am going to show you some very telling data that lends substantial credence to this post. Data that you won't see anywhere else. And I do mean no where else. It will change the way you look at this crisis whether you are a bull or a bear or just plain confused. I don't know if I will post it in July or August but it will get posted in that time frame. In the mean time, enjoy the return of Pax Globalia.
Monday, June 15, 2009
European Payrolls Are Crashing
Remember, we were a very early voice, probably the first voice in the financial blogosphere, concerned about a possible failure of the European Union. This was at a time when Federal Reserve actions were considered laughable by many. Although the Federal Reserve policy has actually become dubious on many levels since its initial responses to this crisis. We now see the Federal Reserve is attempting to bail out "chosen" corporations instead of advocating policy of saving the general market, the interests of the American people and the core of the U.S. financial system.
Even many bears were pointing to the Euro as a sound currency and the ECB as a purveyor of model central bank policy comparative to the Federal Reserve. The financial bloggers and pundits advocating this view were numerous. Even a favorite of mine, Marc Faber, was behind this farcical position. Indeed it was and is farcical. (A little of Marc's European elitism showing through eh? Sometimes Europeans just can't help themselves when it comes to talking about the dumb Americans.)
Destructive forces are still building in the European Union. And I still believe a crisis and unwinding of the EU remains a substantial possibility.
Sunday, June 14, 2009
The Political Pigs In Britain Have Been Feeding At The Trough Of Gluttony At The Expense Of Its People
The Telegraph has a slew of articles highlighting the rampant and massive corruption that is pervasive in the British government. The real question is what don't we know and will never know. How this behavior has impacted society across a wide range of topics not directly reported on. That includes policy decisions and corrupt economic cronyism which keeps the Union Jack-boot of tyranny on the people. I suppose whatever those secrets might be, they would be classified as heinous.
There are more than a fair share of seamy similarities to the U.S. Although in the U.S. such behavior has been deemed legal through the concept of corporate personhood and the subsequent legalized bribery of our government. Bribery at the expense of its people.
Corporate personhood is something we have railed against before. If our society is to truly return to one of moral superiority, we must vanquish this ethical bankruptcy which is a jack boot of tyranny on the neck of the sovereign people of this country.
Volatility Continues To Metastasize Around The Globe
(I had lunch with a friend on Friday. A gentleman from a storied Wall Street firm joined us. His firm is incredibly bullish on emerging markets once again. And I do mean incredibly. This confirms the bullishness in the Wall Street survey we cited a few weeks ago. This clearly differs substantially from our position since starting this blog. But that should be no surprise. Wall Street still doesn't get it. They will. When blood is running in the streets. Let's just hope this is a metaphorical event.)
Saturday, June 13, 2009
Support The Federal Reserve Transparency Act
I really don't have a beef with the Federal Reserve as I have stated before. I have a beef with a private banking system that creates a self-fulfilling circle of corruption in Washington. It would be pretty hard for a government banking system to be bribing itself to lobby for the destruction and tyranny of the American economy as happens with private bankster-ing.
Anyhow, bill HR1207 which would open the Fed to auditing by the Congress is floating around Washington. I have signed a petition to "encourage" lawmakers to support the bill and I would encourage you to Google "petition" and "HR1207" to sign up as well. Or to write your Congressperson to demand accountability and transparency of the Federal Reserve. Your voice is the voice of change and it alone will change our country. That's right. You!
Sunlight and transparency along with an engaged populace aware of the seamy corruption in Washington would have literally kept all of the crises we see today from developing in the first place. It's time the Federal Reserve and Washington politicians serve the true source of power in the United States - We The People. And they will only do so if our voice is so loud that conservatives, liberals and moderates all cumulatively join forces to demand accountability and change. Or frankly, create the change ourselves.
Below is a nice video explaining the basics of what the bill intends to accomplish.
Friday, June 12, 2009
Italian Authorities Stop Two Japanese Men Carrying $134 Billion of Treasuries In A Briefcase
??? "Power tends to corrupt, and absolute power corrupts absolutely. Great men are almost always bad men." -- John Emerich Edward Dalberg Acton ???
Equity Market Volume Is Pathetic - The Air Is Getting Mighty Thin Up There
Looking at the Market Profile and Volume at Price, decision support tools we discussed quite a few years ago, we see the first level of significantly strong support is around 800 on the S&P.
Tuesday, June 09, 2009
Penn Jillete - Is The New President Skidding Or Crashing? More Pointedly, Will President Obama Be A Modern Day Herbert Hoover?
I'm sure some will have an emotional response to this post because it involves the polity. Yet this post is based on reason, not emotion. In fact, as I have noted, I like President Obama. But that doesn't mean he or his team have any greater skill than President Bush's team when it comes to economic policy. In fact, the new administration is generally continuing failed economic policies from the last administration. This really isn't surprising because modern economic ideology generally has no party affiliation. Instead it has a class affiliation. Politically there may be perceived differences on the role of government but not actual economic ideology. And please don't buy into the political rhetoric associating causation with correlation - the finger pointing back and forth between political parties. Economic effects from political factors are often not felt for years or even decades. In many ways President Clinton did more to systemically harm the American economy than President Bush regardless of the remarks of stuttering political stooges engaged in the blame game. Although I would classify both as two of the worst Presidents in our history from a factual economic policy analysis.
For those of you who don't know Penn, he is an entertainer and comedian. Because we are indeed living through a great tragic comedy, Penn's article was a good foundation for what is to follow. If you don't want to read the article, Penn basically uses humor to remark about our new President's intellectual prowess. And because of his perceived brilliance many people are willing to place their faith in any policy he may propose.
On that note, many in today's society have what I would classify as a clear infatuation with President Obama. That infatuation is global in nature. There is a substantial belief amongst many that the new President is going to save society from this economic environment. To fix what ails us. That all we needed to do was remove the prior dunces from office and we would surely see a better world emerge. For lack of a better term I would classify this as a sort of "messiah syndrome". Even as adults, in times of great distress, society often seeks solutions in the form of a leadership figure. We effectively seek the protection and direction of our parents. A timeless fault of the human condition from which we all suffer. This deference to leadership has often been a very dangerous and ill-founded emotional response. President Obama fills that role on some level - he's bright, he's analytical, he ran on a platform of uniting the country and he speaks authoritatively.
Many literally hang on his every word for some proof our future will be brighter. We see it everywhere in the press and in the blogosphere. And we see it in the consumer and business confidence numbers rising rapidly. I see this as absolutely no different than Wall Street's infatuation with the Federal Reserve. When the U.S. economy was beginning to slow, the bulls (most of Wall Street at the time) were bleating that the Fed was going to save the economy. It was pervasive. Now it seems almost unbelievable to recount any such enthusiasm for the Federal Reserve because the crisis has become so deep and the Federal Reserve has become a pariah on many levels. That's why we documented that enthusiasm in a post at that time. And that is why I am documenting this enthusiasm for the new President now. Because I believe this too shall pass.
Ironically economists are almost always unprepared to evaluate psychological and social factors. Often I wonder why a heavy dose of sociology and psychology isn't part of economics curriculum. If it were, we would have substantially superior economists. And, most people who are currently economists would have either found the curriculum to be unappealing or would have flunked out of such a curriculum. And, that reason in itself is a major contributor to why the economics profession is filled with so much incompetence. Economics is a social science yet as a PhD in economics once told me, we generally feel most comfortable hiding in our offices. The pockets of brilliance in the profession are in spite of much of the mythology taught at most institutions. In other words, superior success in the field is due to the achievement of a superior individual as opposed to inferior curriculum and failed theory.
Let's look at some historical context. It was 1928 when Herbert Hoover was elected President of the United States. Contrary to many accounts, the 1920s were not "roaring" for everyone. In fact, the environment was much like the last eight years. Therefore, the mood amongst many was very similar to the 2008 election in the sense that many in the country were already marginalized economically. Obviously the stock market had not collapsed as it has today but underlying fundamentals shared many substantial similarities.
Most people today probably don't realize President Hoover was an engineer. While engineering doesn't have the same mystique in today's America, in the 1920s it was held in very high esteem as the U.S. was the global engineering and industrial powerhouse. There had never been a mightier industrial nation in the history of humankind. In other words, engineers were often viewed with a unique mystique as the world's messiahs or problem solvers. My point is that there was a conscious knowledge of Hoover's perceived intellectual abilities and his pedigree as a problem solver. (Unlike today where that esteem has been nearly completely obliterated. By the way, if you are a young adult, it's time to be an engineer again. The worm has turned.) The enthusiasm for Hoover parallels nearly perfectly with the enthusiasm for an intellectual and reasoned President Obama. And for exactly the same reasons.
In 1929 there was chatter by many in society that America had finally elected a reasoned intellectual who would solve its problems. Just as we hear today. Yet from a historical perspective it's pretty well accepted that Hoover was one of this country's worst Presidents. Is the label as 'worst' appropriate or was his Presidency preordained by exogenous circumstances? I would argue both to some degree without writing a book about why. Hoover policy response was generally abysmal. Then there was the profligate foolishness of the Federal Reserve. But mostly the completely criminal behavior on Wall Street. Other similar parallels to today that contributed to somewhat of a preordained Hoover administration. But, here is a key point to remember. Hoover's economic policy decisions were driven by generally accepted economic ideology of the day. And so were the actions of the Federal Reserve and Wall Street. Today we similarly see politically-driven economic responses that are also generally accepted economic ideology. Ideology that has been built up in large part from ex post facto analysis of the Great Depression. In other words Hoover and Obama again are both beholden to existing economic polity. Learned idiots as I would classify them. (Not the Presidents but the economic ideology their advisors and the country's leaders are beholden to.)
To that point, President Obama's main economic policy team are supposedly experts on the Great Depression. Much of their expertise has no foundation in any remote view of science and, in fact, much of their economic perspective is utter nonsense. Were many of these beliefs subjected to public discourse and debate in society, most of their positions would be exposed to be absurd. Frankly, the economic team in the White House bears an eerily similar resemblance to what we experienced over the last eight years. And it has the potential to be worse. This is substantially important not only because the government, for the first time in my life, has now become the economy but for another substantial reason. That is President Obama has started confidently remarking on economic policy to a degree that he is now staking his reputation on specific claims. Two glaring examples are his remark that it may now be a good time to buy stocks and his remarks at the G20 conference that their combined efforts mark the turning point for this crisis. The press and society will not forget these remarks and it sets the President up for a potential public confidence crisis in the future. This same environment unfolded with President Hoover's administration who proclaimed the crisis was over on numerous occasions. And because these turning points didn't materialize, Hoover's administration eventually lost the confidence of the country.
Let's make something very clear as it pertains to politics and economics. Political leadership does not have a systemic process to analyze complex systems such as the global economy. Hence, their analysis and policy is always fraught with substantial risk and erroneous conclusions often based on what feels right. Or what policy will positively impact beholden political interests. In normal economic periods, this may be quite insignificant. But in a very unique period when the government has become the economy and is mortgaging our future to enact said policy, those erroneous conclusions have the potential to be catastrophic in scale.
Now let's take a detour for a moment into leadership. I have a relatively unique perspective on leadership having dealt with so many leaders across a wide spectrum of businesses. One becomes somewhat of an expert on leadership qualities after working with hundreds of personalities in leadership positions. Additionally, I have probably had just about all of the leadership training any single person can possibly absorb. Not necessarily beneficial in my estimation. The net is that I understand the realities of prevailing thoughts on leadership. (Much of it nonexistent as we have highlighted in numerous posts on a vacuum in leadership across America today.) So I want to tie a few thoughts on leadership into the role of the President as it pertains to this crisis.
"A leader is best when people barely know he exits. When his work is done, his aim fulfilled, they will say, 'We did it ourselves.'." - Lao Tzu
I have used this quote in reference to leadership in the past. Mostly because it is probably the most concise and complete perspective on leadership ever uttered.
I believe the greatest economic impact the office of the President can have is to inspire a nation to do 'great things'. And then to give the people the tools necessary to accomplish great things. That's it. Nothing more. Truly great leaders knew this well before any advent of MBA programs teaching failed leadership and authors pumping the next great management method. Of course, for the lowly price of $29.95 at Amazon.com. Leadership is a qualitative art as timeless as humanity. So simple it sounds ludicrous on some level. But then who would sell all of those books and seminars on the next great thing in leadership with a single sentence uttered a millennium ago? Yet this is not the policy leadership we have seen with any recent President including Obama.
In my experience, greatly accomplished people, not to be confused with great leaders, are often more inclined to overstep their abilities by attempting to personally undertake too many 'great things' themselves rather than giving others the tools and inspiring them to achieve. (In this case that would be society.) This particular quality of overstepping abilities is an incredibly positive human trait as it pertains to personal accomplishment and overachievement. Yet it is instead a critical fault when applied to the role of leadership. I would argue the very basis of all unsuccessful leadership has its foundation in this fault. The only question is whether these failures are altruistic or maliciously intended. In other words a benevolent leader or a ruthless tyrant. We see both in business and in politics. Yet one can look throughout history to apply this standard to nearly all failed leadership. Effective leadership is really much about faith. Faith that if a leader can provide an environment facilitating success that the people will respond and do great things. In other words, faith that inspired individuals regardless of class or education or measured intellect can and do accomplish great acts. Greater than any one person could ever imagine. Greater than any single President or leader could ever accomplish. Exponentially greater.
You may infer from my statements that I believe the traditional measures of personal accomplishment and intelligence used to fill most leadership roles are generally irrelevant determinants when it comes to the qualitative factors associated with great leadership. It's also why your boss at work is highly likely to be thought of unkindly by many. Most often the wrong benchmarks are used as a promotional guide when it comes to positions of leadership. So rather than hierarchical positions being filled with leadership they are most often filled with authority. And no individual feels more of an authority than one who has been personally successful. Yet, we have put forth an argument that the skills of individual success are often counterproductive to great leadership. Or at a minimum are not key determinants of great leadership. We as people clearly understand that authority and leadership are almost always diametrically opposed. Hence why most leadership is failed leadership.
What I am effectively stating is the position of Presidency is far greater than any one individual could ever be. And to be successful in that role is to realize this very fact. Because positions of great leadership almost invariably involve people who clearly do not recognize this, their failures aren't apparent until after major policy snafus have already been set in motion. Major policy snafus supported by the prevailing economic ideology of the time. Such was the case with Hoover. Such will apparently also be the case with Obama. Or at least from what we see to date.
So from a social mood perspective, we now we see many Democrats gloating that the Republican party has been completely marginalized. And it has. Many even stating we may not see the party survive as a national entity. That may be true but I doubt it. Instead they are likely to wonder in the wilderness while they tranform themselves as we have already discussed. What I find most ironic is the party I believe could fracture would indeed by the Democratic party. The party that is incredibly confident it has won most political prizes for the foreseeable future.
So while many are now predicting an Obama Presidency similar to Roosevelt's, I would argue a different potential exists. That is, the Republican party has been marginalized and appears in no immediate throws of recovery. The American people voted for the Democratic party to achieve populist economic change. Yet what we are seeing is that policy will almost certainly throw the country into a deeper economic morass. So, I would argue the logical conclusion is a splinter in the Democratic party in 2012 that would potentially create a new party in line with the will of the American people. And the will of the American people is rapidly changing to be substantially more economically progressive and inclusive. And, that means a new economically progressive party could emerge in the United States.
There are some people citing that both American political parties are in serious trouble. And, I agree. All of the trouble is a result of failed economic ideology. This is all conjecture at this point. But it is conjecture with some historical perspective. Hoover and the Republican party lost the country's confidence post 1929 so the Democrats became a dominant party. In today's society, the Republican party has again lost the confidence of the country. But at the same time, if the Democratic party loses the public's confidence, we would be more inclined to see a new party emerge. One I would expect to be much more economically progressive as social moods and trends in the country change. If something similar to this happens, it will be almost exclusively because President Obama has bet his Presidency on failed economic ideology of the day. Just as happened with Herbert Hoover.
So is history repeating itself comparative to Herbert Hoover? An intellectually capable man yet abject failure as a leader? We shall see. But eighty years later, I find the context of Penn's comments and the economic similarities quite interesting.
Monday, June 08, 2009
Britain Is In The Midst Of Political Crisis
I will make a few comments as it pertains to our theme of expanding volatility. For the first time in the history of the world, society has an instantaneous ability to communicate across the globe. And to be able to do so well outside of the ability of the power structure to contain it. The internet has become a great equalizer in the struggle for freedom and liberty. For that reason, we see continued efforts to try to regulate it or control the internet.
Remember that great social change is a recursive process. In other words, it starts as a seed germinated by a select few. King, Gandhi, Mandela, Anthony, Jesus Christ and others. So the spark of volatility has the potential to ignite like gasoline across the globe. Don't think every government on earth doesn't realize this. I am not surprised coverage of the building crisis in the U.K. is getting little attention in the U.S.
Sunday, June 07, 2009
"The Banks Run The Place (Your Government)"
If we want our government back, we are going to have to bust the power elite corruption monopoly in Washington. The corrupt business interests are so confident we either can't or won't do it that they are giving us the middle finger in broad daylight. That includes more than banks.
Move Over Wal-Mart. Welcome To The McDonald's Economy
It's okay when main street is impacted with such economic realities but when the elitists on Wall Street are impacted, we'll see how long we go without calls for change in ideology.
I mean no disrespect to anyone who works at McDonald's. First of all, McDonald's runs one hell of an operation. If our government were run like McDonald's we wouldn't be in this mess. Second, I am an alumnus of the food service industry as is a tremendous amount of the population. Third, many in society have been left with no alternative but to take whatever job is available. Fourth, many of the most successful people in our country served a stint at McDonald's.
But, in the end this is not the type of employment that is going to rebuild the American economy. And, the misguided belief of many current politicians and business leaders that we need to send more people to college to compete in the global economy is completely ridiculous and a total mistruth on so many levels.
The Winds Of Economic Volatility Are Rising
Saturday, June 06, 2009
This graphic from the New York Times is of the top 100 Supercomputers installed across the world. It has been quite a long time since I have commented on U.S. technology leadership and the fear mongering that the world is passing us by. A ridiculous perspective that was fueled in part by Tom Friedman's erroneous best-selling propaganda pamphlet titled The World is Flat and reports of quadrillions of engineers and scientists graduating in China and India. This is something else we refuted with the Duke University study that showed such data to be a complete farce. And, with a McKinsey study that concluded most scientists and engineers from India and China weren't properly equipped or trained to compete in a global economy. Something some of my friends still heavily involved in the basic sciences confirm.
This has absolutely nothing to do with India or China or anyone else. But instead it is fear mongering by the mainstream press reminiscent of similar ridiculous notions so popular during the Cold War. The Russians are coming! The Russians are coming! The power elite both in the U.S. and the Soviet Union benefited from this favorite game of the state. Did anyone in the mainstream media ever think to question the self-serving forces needed to establish and maintain an external enemy to promulgate substantial military spending?
Not only does the U.S. dominate the global economy with the largest number of supercomputers but most the of the installations across the globe are designed by American firms. And, those that aren't rely substantially on American developed technology. Supercomputing is a barometer of basic research and sciences across a substantially wide array of economic data points including nuclear energy development, various military applications, biosciences, manufacturing, product development, infrastructure development, the study of space, atmospheric research, transportation development, energy research and on and on.
The United States is far from dead. And, in fact as I have said repeatedly, it will lead the world out of this crisis. The only question is when.
Click on the graphic to be taken to the Times for a larger graphic.
Friday, June 05, 2009
Five Year Treasury Notes Are Screaming Today2:28 PM links to this post
World Environmental Day Premiere Of Home
Today Home, a documentary by environmental activitist and humanitarian Yann Arthus-Bertrand, premieres in 127 countries. The documentary centers on humanity's growing impact on the planet. In the U.S. it will be shown on the National Geographic channel, in select movie theaters and on the web. This ties into our discussions about sustainable economics which will be a substantial economic driver at some point in the future. Probably at least a decade from today but in its various forms, it will almost assuredly be a driver of tens of millions of jobs in the U.S. alone touching everything from healthcare to capital equipment to software to homebuilding to transportation to energy to chemicals and on and on.
Thursday, June 04, 2009
Stephen Roach On The Global Economy
I really don't look to Roach to make timing calls on the economy or even that he is necessarily right any more than he is wrong. Sometimes when embedded in the machine, it's harder to be objective or to see beyond the bubble. But, one thing I can always count on with Roach is an unvarnished perspective and his own thoughts rather than a regurgitation of the same safe remarks handed around by most economists.
What you won't hear from Roach is the pablum being passed around about second derivatives and third derivatives and green shoots. In fact he rails on this gibberish. I mean really. It's ridiculous. I don't even think most people who are quoting this stuff could actually calculate a second or third derivative. It's herd behavior. And as George Carlin famously said, I like people except when there are more than say three of them together. Then I don't like them anymore. I would classify this as the madness of crowds. (He also said he only likes people in short bursts.) I wish I could find the video on Youtube to link to because it's hilarious.
Here's the link to his Bloomberg audio interview.
The Savants Of CNBC Tutor Us On Inflation
Francis's inaccurate understanding of fundamentals is pervasive in the financial industry. It's no surprise that the other four people on this panel were deer in the headlights before this crisis.
The Banking Index Is At Key Support
With liquidity headed in the wrong direction as we showed in a post last week, the banks will likely have a hard time moving higher until more constructive fundamentals develop. Not to mention the substantial new equity issuances we talked about in yesterday's post that is surely acting as an anchor as well.
Twenty Years Later - The Murders Of Tiananmen Square
Wednesday, June 03, 2009
Timely Ramblings On GM, Program Trading And The Demise Of Wall Street
One must remember that futures driven rallies also involve a fair amount of gamesmanship. As we have seen for quite some time. If the economy is sound, money is flowing into the cash markets. Traders, ie gamblers, are bouncing the markets at the open as we saw on Monday with the market up 200 points soon after the open. Remember though, that the market has rallied should be of no surprise with Wall Street awash in our money. It allows them to start gambling in markets again just as they were doing up until this crisis stopped them.
Obviously any time Wall Street can rally the market they will. But, are there also other factors driving this rally. It should be apparent that the bond markets aren't necessarily a friendly place to be right now. At least for corporations attempting to issue new debt. First there is competition for limited capital with government issuances. Second Treasuries are backing up and that means higher yielding corporate bonds aren't very appealing as an issuance vehicle to weakened financial firms. (That's being kind. How is Citi, as an example, going to repay debt issued at 8-10% when their loan spreads are substantially less than that? They can't. So they must gamble to make up the spread. And pray they are successful. That's why oil prices and financial markets are once again exhibiting tremendous lack of regard for risk. At your expense of course.) It's also why many are issuing more stock.
So, could Wall Street possibly be driving equities higher in order to be able to successfully issue more shares in lieu of more debt? Debt to pay back the TARP? Sure they could. And that would be par for the course. I don't think it is a primary driver but we have been writing on here for years that these firms are trading against their clients and the American people in financial markets. It may be really hard to believe but these firms truly care little about you and me. All they need is our savings so they have plenty of money to gamble with. The money these firms have made trading far outweighs any fees they make running your money. Do you think Goldman Sachs really cares about a client that may bring in a few thousand dollars a year in fees when they can make tens of billions of dollars trading oil? Effectively stealing from society by doing so. So, in this liquidity-driven rally, do we see Wall Street profligacy back in play? Monday after the close American Express and JP Morgan announced new stock offerings to raise capital to pay back the government. How much easier is it to raise that money with their stocks at current levels instead of when they were all headed for zero just a few months ago? By the way, all of this new supply of stock is really good for the market. Just watch. You'll see.
I'll slide a final comment in before closing. This crisis is still metastasizing. ie, The patient (the global economy) is getting sicker by the day. There are no debates on whether this is a bear market rally or a new bull market. There is only a lack of lucidity and truth amongst those who believe this crisis has passed. We wrote on here a month or so ago that the next major low for stocks could be more than a year away. As we wrote stocks could generally trend higher for quite some time. Or, given the tremendous strains on the global financial system, we could see a major correction soon. None of this has any impact on truth. I didn't write that we were going to see liquidity shocks or a credit crunch when the living world had never even heard of those terms because I gleaned any useful information from the stock market or the swill fed to us by the financial media.
I think some people are losing their marbles because of price action in many financial markets. Someone sent me a link yesterday from a well-followed blogger, one who has been very bearish, who wrote this week that the global economy could be overheating. You have got to be kidding me. The only thing overheating is my spaghetti leftovers in the microwave. And hopefully the public's enthusiasm for constructive economic change.
As major Wall Street firms are in a mad rush to return the TARP money, and Washington is sitting on its hands rather than deal with true market reform, I now believe there is a reasonable probability all major Wall Street firms returning the TARP money will ultimately fail. Fail is a broad word. Fail could mean forcibly broken up after future crises or could mean just plain fail given the enormity of resources to save these firms from future crises. I realize this may sound absolutely ridiculous but is it? We have already seen that these monopolies are cumulatively the same entity acting in unison. ie, There is no diversity in counterparty exposure to risk, in strategy or execution. One could easily look at all of these firms as divisions of the same company from a risk profile. Because of that lack of diversity in strategy or exposure to risk, there is no safety in any counterparty. They are all lobbing the badminton shuttlecock back and forth in a great scheme that I believe is going to fail - if one fails, they all either fail or all must be bailed out. Again. Let's be very clear. Every one of these firms would be gone today were it not for government handouts to either them directly or their counterparties. As Wall Street firms continue to engage in completely irresponsible financial activities, very destructive forces are continuing to build on their balance sheets, in their strategies and in the economy. Yet it is apparent most banksters believe they have passed this crisis with their terrorist tactics of stealing money from the American people in a moment of fear. Now with their anxious desire to give back TARP money, there will be absolutely no future political will (because politicians will be booted out of office by the people) and little Federal Reserve ability to shoot trillions of more bullets to save them should another crisis arise at some time in the future. While it is true the Fed's balance sheet is theoretically limitless, the market demands limits. And, at some point they are going to be tested.
In other words, I believe the market could very well resolve substantial aberrations to the economy that politicians have no desire to address - amongst other things that being Wall Street. And that lack of desire has nothing to do with what is best for the American economy or the people our government is supposed to represent. It is purely because of Washington's reliance on Wall Street money for their own personal gain and an arrogance built up over a generation of failed ideology. So while many are telling us this crisis has passed, I now believe we could actually see the failure of every major Wall Street firm before this environment resolves itself. It's not a prediction. Just an observation that I believe demands substantially more concern than anyone seems to be willing to consider. Park that notion away for a while as we watch the global economy continue its journey down the path of unrelenting and uncontrollable change.