Sunday, August 30, 2009
Friday, August 28, 2009
Hungry For Change? Go See The Movie Food Inc.
We have talked of this concern before but it is such a key point that I want to repeat it for new readers. Science has achieved just enough knowledge where it now has an ability to create drastic unintended consequences in our food products and our ecosystem. Yet there clearly isn't a general respect for the fact that humanity truly lacks the scientific knowledge that is foundational for this type of engineering, let alone for any unintended consequences. In other words, science in the hands of profit seekers, when it comes to changing the earth's biology, creates risk of unquantifiable proportions. It makes failed science in the hands of profit we now see on Wall Street, aka Frankenstein finance, completely trivial by comparison. We see the abject failure of science as it pertains to finance, what would the same dynamics look like when applied to our ecosystem? I think horrific is a word which has reasonable potential.
Most people have no idea how science has impacted the food they eat. And as a society, most of us cannot afford to pay 2-3x the price of readily available food to ensure it is natural and free of the corporate world's attempt to monopolize food by genetically modifying it, patenting it or pumping its DNA full of chemicals or altering DNA with unknown consequences. In fact, the criminal manipulation of the United States' patent process is the only way patenting food is even possible. Not only is this criminal but it is a form of economic tyranny and recognized as such by government until the recent corporatization of Washington politicians. Food was never patentable until recent corruption for the very reason of economic tyranny. The entire consumer protection and government regulatory process involved in this topic is absolutely corrupt. For this reason, we should be even more concerned about the safety of our ecosystem. The process is clearly not being handled in the best interests of society. It is being handled in the best interests of corporate money and the benefit of an influential greedy few.
Ironically, this dynamic is really no different than economics, also governed by the laws of nature. When we leave decision making for society to a handful of elitist bureaucrats (lack of biodiversity in ideas) instead of the diversity of thought from a free society, we end up with economic stagnation and eventual collapse. Collapse due to the disease of sameness of thought of elitist boobs intent on imparting their learned Ivy League wisdom (aka sameness or group think) on the remainder of us poor, stupid dolts. This dynamic is always in effect when we see the collapse of civilizations - lack of biodiversity.
It's obvious many people are starting to support local growers, more responsible growing methods and a reduction in chemicals used to grow our food. This as people come to realize knowledge and truth over media manipulation. Additionally, supporting local growers makes tremendous economic sense. They spend money back into the local community thus supporting local population economics, they reduce the tremendous costs of factory farming supply chains and most local farmers are substantially more responsive to consumer demands than monolithic corporations. And it defeats the corporate lobbyists which have paid substantial sums of money to government officials in an attempt to keep genetically modified labeling off of our food packaging and to run roughshod over the best interests of society.
Go see Food Inc. Educate yourself on the topic of genetically modified foods. I would also highly recommend the documentary The Future of Food which is an incredible documentary which also focuses on the massive fraud and corruption of our government agencies in this process. And the horrific process by which some of these foods have been developed and approved.
Changing the world starts one person at a time. And a key is knowledge and truth. Something the mainstream media and our government don't seem to care about at this moment in time. The knowledge is out there.
Thursday, August 27, 2009
Are Politics In Japan A Sign Of Things To Come In The United States?
Japan is obviously well ahead of the U.S. in dealing with its economic crisis. Theirs has lasted a complete generation. But theirs was also very different. There was an uneasy but growing perspective in Japan that the economy had finally started to show sustainable growth in the 2004-2007 time frame. We now know this is not the case. And it's quite apparent people in Japan are just about fed up with the existing political apparatus. Since Prime Minister Koizumi retired, they have sacked leader after leader. Four prime ministers in four years to be exact. (Likely soon to be five in five years.) Now it appears Prime Minister Aso is close to getting drop-kicked into political pergatory. Regardless, it is an upstart political party that is affecting change in Japan. Sound familiar?
This would be the first time in most of our life times that Japan's pro-business Liberal Democratic Party has lost a major national election involving the future of the prime minister. (Similar to recent events in Mexico where one party rule has finally been defeated.) And that would play quite nicely with our post earlier this year highlighting the potential for a splinter from the Democratic party winning the U.S.'s 2012 Presidential election. Or, at the minimum, some outcomes that are extremely unexpected by America's political elites.
Let's be clear about something here. I hear the argument time and again that pro-business is the only logical stance our government can take because without being pro-business there would be no jobs. This is a complete fallacy. In fact reality is just the opposite. Being pro-business destroys economic opportunity. Pro-business government creates a very unhealthy dynamic of the blending of power between the ruling elite and their corrupt intertwined relationships with business. The revolving door of corruption between business and politics and the seamy favoritism or cronyism that crowds out a society of meritocracy. We have highlighted Mexico as being a never-ending example of this dynamic. The political-business apparatus is heavily influenced by a handful of rich families which essentially control the country. This dynamic keeps the jack boot of tyranny on the economic opportunity for the hard-working people of Mexico through affecting policy decisions benefiting a very few. This corruption is the most significant driver for immigration across the American border. Were I Mexican, I would be the first in line to leave the country. If American politicians were really serious about immigration reform with Mexico, they would demand political reform in Mexico. And they have all of the levers to accomplish it. Without the United States, Mexico would see widespread chaos and a collapse under its corrupt political structure. In fact, with the American economy unable to prop up a corrupt apparatus in Mexico, that's exactly what we see today.
The distinction we need to make is that America was not founded on a pro-business government. Nor was our wealth created by pro-business policies. We did not become the greatest economic miracle in history with pro-business government. These are lies of the mind perpetuated by a belief system. A belief system reinforced by corruption in our society today.
We talked specifically about policies and ideals that made American great incessantly over the years. You might wish to look back over the summer to my titled 4th of July Tribute to get a better sense as it pertains to this post. But, what made America great was government policy that was pro-market. Pro-market is pro-meritocracy. That is definitely not pro-business. Pro-markets is a populist policy. In fact, when Federal Reserve policies turned radically pro-business, we went from a tone of supportive of saving the banking system to unsupportive of bailouts for well-connected businesses at the expense of saving the overall banking system. This pro-business policy is actually contributing to the destruction of our banking system. Of healthy banks that are being infected with unhealthy policy dynamics. We became extremely critical of a policy that is rationalized as being necessary. The Federal Reserve just can't let mega institutions fail and cause an economic collapse but they could easily remove these sources of systemic risk from the banking sector via an orderly bankruptcy and, where appropriate, a breakup, removal of failed management and a reintroduction into the private markets as smaller component firms.
How ironic it would be were Japan's pro-business party to lose this election and our pro-business parties were also to lose for the first time in modern history.
On the note of pro-business, banking monopoly and winds of political change in the air, let's talk about another form of monopoly in America. That would be political parties. We need to bust up the political monopoly of two parties just as we need to bust up any other monopoly. But, to do it we need a grass roots populist movement just like what is happening in Japan.
The two party system limits the debate in this country and the free flow of ideas. It's no different than a bank monopoly or an monopoly in automobiles or computers or any other dislocation in the economy. Frankly, the two party system is completely anti-democratic. That is why there is some evidence Thomas Jefferson wanted to ban political parties. Can you imagine how different our leadership would be with no party affiliation? To in fact, be elected based on merit rather than political connections granting them access to major corporate funding and money granted by political parties. Throw in publicly funded elections and we have an election process based on a meritocracy where stooges with big party money would be unable to gain a disproportionate advantage. Where ideas in Congress would need to be debated on merit as opposed to being pushed or hushed by the gatekeeper party stooges. Voting blocks would need to be formed based on debating specific issues instead of falling in line behind partisan party stooges. It would be ...... democratic.
Wednesday, August 26, 2009
A Quick Remark About The Passing Of Ted Kennedy
Stephen Roach - The Case Against Bernanke's Reappointment
Roach, always one to impart his crusty sardonic wit, quips "It is as if a doctor guilty of malpractice is being given credit for inventing a miracle cure.". I would actually go farther and state it is as if a doctor who has infected a patient with a life-threatening disease was given the Nobel Prize for inventing its miracle cure.
Ironically, Bernanke will surely have more future crises to deal with because of his support for failed ideologies. Who better to deal with the incompetence of these ideologies than the incompetence which endorsed them? Well I suppose someone disagreed with this perspective:
"We can't solve problems by using the same kind of thinking we used when we created them." -- Albert Einstein
The Oil-Natural Gas Ratio At Record High
Ratios are often used to anecdotally determine imbalances in financial markets. We've talked about this in pairs trading posts, the oil-semiconductor ratio, etc. One we have not talked about is the oil-natural gas ratio which is at a record high. Record may be a misnomer but the dynamics are well out of whack. This supports our position that oil is substantially overvalued and is eventually going to bust. Of course, the converse could be argued that natural gas has bottomed. Yet there is no fundamental dynamic which will cause natural gas to rise. That includes upcoming winter demand. We have record natural gas stocks, ample supply and weak demand. Even the seasonal winter dynamic of natural gas is suspect this year.
Japan's Exports Down 36% In July
Tuesday, August 25, 2009
U.S. District Judge Cracks The Whip On Federal Reserve Transparency
China's Next Tipping Point - Tighter Capital Requirements?
Just as the Chinese economy appears to be showing signs of trouble again one famous barker, mostly famous for losing as much as he makes, is now goading anyone bearish on China. Conversely, anyone reading the remarks on this blog would not have lost a single cent in the China or commodities or banking collapsing.
China's new attempts to reign in the banks could very well put the final nail in China's economy and with it, start the early process of taking down its banking system. That is, if the communists truly enforce their plans to tighten capital requirements. Eventually this shall happen regardless but in 2009 we have heard countless conflicting remarks from different party officials.
We'll end with a final remark as it pertains to global financial markets and China. What we see today is that most global markets are trading off of China's markets using government-provided liquidity. Many in the market are back to talking about sentiment, short ratios and other tools which gamblers often used to divine the future of our financial monster. These are games that only work when the markets are adequately liquidifed. These data points failed in 2008 and we wrote they would fail years before. So why do I mention this? Well, let's revisit a comment I made on here well before the world financial markets collapsed. That is, Wall Street will push any market as far as they can for as long as they can. And how do they know if they are right or wrong? Only if and when something breaks. And that is what happened in the last financial market collapse. All was wonderful just months before. Even though the seeds of collapse have been building for years. In other words, divining the future of this crisis will not be accomplished by embracing more financial lunacy.
Most financial and business professionals are again embracing mistruths similar to those held before the 2007 and 2008 collapses in various markets. There is a lot yet to break in the global economy. And we are most certainly not through with liquidity shocks in the global financial Frankenstein that elitists are so sure they have saved.
Party hard! Of course, always do so with someone else's money.
Sunday, August 23, 2009
Dennis Gartman Starts First Commodities Hedge Fund - The Commodities Bust Is Likely Close To Entering A New Downward Phase
Dennis thinks the hedge fund industry has bottomed and plans to take advantage of this fact by starting a new commodities hedge fund. The financial system and the global economy remains in very serious crisis with a temporary reprieve given by global liquidity injections. The hedge fund industry bust is not over. Far from it. Neither are Wall Street's problems.
I consider this announcement to be another anecdotal data point supportive of the commodities bust being close to entering a new downward phase. A position validated by fundamentals - we have excess commodity production and supply coming out of our ears. A dynamic we wrote about before the commodities collapse. A dynamic that is substantially worse as I type this. Frankenstein finance cannot win against fundamentals. Ultimately the two must meet in the market place.
What's going to happen to all of that oil owned by JP Morgan, Goldman Sachs and Morgan Stanley when people realize China's economy isn't coming back and neither is their insatiable demand for commodities? You remember all of that oil Wall Street is floating around on rented tankers? Or all of the copper warehoused by hedge funds. Or, or or.
Good luck Dennis. You'll need it.
Saturday, August 22, 2009
Larry Flynt Writes One Of The Most Eloquent Editorials Of This Crisis
One of the unintended consequences of trying to sweep this financial fraud under the rug is that President Obama's political advisors have set him up for devastating political failure. I am extremely confident the public outrage over the health care debate is an unintended consequence of not dealing with mounting crises in finance, employment, personal bankruptcy laws, lobbying, banking bailouts, gambling with our savings, poorly crafted trade agreements, Washington corruption, political elite profligacy and on and on and on. All issues the President promised to address during the election.
Many of the status quo partisans simply view people showing up at health care forums as political chicanery by the Republicans. Sure the Republicans are trying to stir the pot. But Americans aren't shifting their support from one party to the other. They are shifting their support from the status quo. If Congresspersons were to hold town hall meetings on any topic listed above or dozens of others, the ire would be equally vitriolic. Americans simply do not trust Washington elites. Why should they? Politicians generally have no sense of what it truly means to be a public servant or to be accountable.
The prospects for a potential dark horse candidate or third political party are lining up quite nicely for 2012's Presidential election. The only way I will change my perspectives on this topic is if we see an epiphany in Washington. That only has some chance of coming to pass if a handful of events occur such as substantial friction in global politics that unites the country, another complete economic collapse followed by a newly emboldened reformist President or some equally significant event. Interestingly, there are a substantial number of events that could turn the political mood. But we measure Washington by their actions not their words.
For me, now is a very interesting time to witness the polity and their responses to this economic crisis. Do they understand the ramifications of today's crisis? Do they intuitively seize the moment realizing the tremendous opportunity that exists? Or are they completely clueless as to the changes taking place around them? Not just in the U.S. but around the world.
From a sociological or socially anthropologic perspective, I believe President Obama needs to make the jump to becoming a leader for my views on 2012 to change. He is very young and politically inexperienced (ie Seemingly believes appeasement means your political opponents, both domestic and global, will eventually appreciate your good deeds. A naive perspective with no foundation rooted in human psychology. People seeking power are generally not altruistic. Yet we see this position embraced by many leaders generation after generation. Neville Chamberlain was a perfect example of such naivety and his political opponents both domestically and internationally buried him quicker than you can say buried him.) so he could still be getting his political legs beneath him. But he won't get any help from his political party let alone opposing politicians. Nor will he get much, if any, help from his staff.
It takes a very unique person to sense a tremendous change in trend then stand against the tide and keep from being drowned in the process. President Obama obviously has the ability but does he have the will? The will to deal with isolation? The will to deal with chaos? The will to deal with radical transformation? The will to deal with radical elements in society wishing to see his failure? The will to deal with radical elements wishing to see any attempts at change be a failure? To deal with the massive wall of money against change. All p0litical emotions and cheerleading aside, to date the reasoned answer is clearly no. In the future....?
It's important to remember politics is a brutal game played often by brutal people. George Washington put it best with his quote of government. And from it we can infer the same description of the politicians who are part of the process. Politics is a game of power and control unless checked by the soveriegn of any country.
“Government is not reason. It is not eloquence. Government is force; like fire it is a dangerous servant and a fearful master.” -- George Washington
Ajay Bhatt Intel Commercial
Friday, August 21, 2009
Mexico Legalizes Drug Possession
If we completely decriminalized substances such as marijuana and cocaine in reasonable quantities, we would save billions upon billions of wasted money. And we wouldn't need to send our military into other countries to fight drug wars. Nor would we have to spend billions aiding other countries in their fight as it pertains to U.S. demand.
I seriously doubt the entire population is going to start snorting lines of cocaine. And if they did, we could reconsider legalization. There comes a point in time when society needs to either determine if the never-ending mound of arbitrary laws are necessary or do we really believe that most everyone in society is capable of making their own personal decisions. Do we need father (the government) to always be ready to scold us for our deeds? More laws are not the answer to every perceived issue. People are generally responsible without someone else hovering over them to ensure it. I think we call that self-determination and freedom.
Plus, we could grow and process the product here in the U.S. and put foreign competition out of business. I'm only sort of kidding when I say that.
Private Equity Threatens Pensions
The status quo is still pumping the same game. The American people aren't playing that game anymore. For those who still believe in the status quo, watch and learn. By the way, for any compulsive Wall Street gamblers wishing to bet on the new game, it's a surety the new game's winners will be the American people. How do I know this? Because just like the old game was rigged by the status quo, the new game is also rigged by We the People.
Iceland's Economic Collapse Due To Privatization Of Banking And The Subsequent Fraud?
Interestingly, it appears Iceland is attempting to do a root cause analysis so as to ensure the proper reforms are instituted, to prosecute fraud and to learn from their mistakes. This only happened after the people of Iceland sacked their government. We see a similar pattern globally. That is, politicians are attempting to sweep it all under the rug in hopes it will all just go away. Possibly because the trail leads us right back to politicians? I know I am in the substantial minority within the financial blogosphere in my support of public banking, but private banking is the scourge of humanity. And, we'll eventually talk about why. And why private banking's shortcomings cannot be resolved to anything purporting to be democratic. My problem isn't with the Federal Reserve, it is the scourge of private banking. It seems Iceland had a public banking system that was working quite well until special interests decided to trash it -they deregulated their banking system and followed the European Union's model. Isn't that rich? The blind leading the blind. What would prompt a prosperous country to deregulate their banking system?
If nothing else, many functions of banking should be public only. People who talk about government takeover of banking as socialism are generally blowhards who can't defend such a ridiculous claim beyond their one-liner picked up from an equally uninformed loon. Let alone articulate either our Constitution's perspective on money or any reasoned understanding of the role of banking in a democratic society. Banking does not exist to terrorize and tyrannize a democratic society. I'm all for what works to expand democratic institutions and transparency in our society. I could care less if they are defined by capitalism or voodooism. Too many people confuse capitalism, simply a loosely defined economic model, with democracy. Democracy does not require capitalism. And as we have highlighted numerous times, the Nazis and the communists in China love capitalism. Capitalism somehow doesn't define freedom by any stretch of the imagination. If capitalism works for society as a whole, that's great. If capitalism intertwined with something else works better, or if something totally yet defined works better, that's fine by me. By the way, our banking isn't capitalistic at all. It hasn't been since at least 1913 when special interests gained control and created a monopoly on capital.
Thursday, August 20, 2009
Does The United States Government Use The Threat Of Terrorism To Manipulate Its Citizens?
“When the tyrant has disposed of foreign enemies by conquest or treaty and there is nothing to fear from them, then he is always stirring up some war or other, in order that the people may require a leader.” -- Plato
Hahaha. That quote is over two thousand years old. Are politicians timeless or what?
Six Lobbyists Per Lawmaker Line Up To Grease Politicians On Health Care Reform
In other words, never trust a greased politician with reforming anything and never trust a politician-lobbying bankster with your money.
“Whenever you have a big piece of legislation like this, it’s like ringing the dinner bell for K Street,” said Bill Allison, a senior fellow at the Sunlight Foundation, a Washington-based watchdog group, referring to the street in the capital where many lobbying firms have offices."
I seem to be on a pig theme here in the last few posts. So why not continue it? The dinner bell remark reminds me of calling pigs to the trough as a young boy. Yes, farmers actually do call animals for those who grew up in different landscape. We also called cattle. The cattle call we used was the word sook repeated over and over. Even though I learned this from someone who spoke German growing up, I discovered as an adult that the call was Scottish and had its roots in the original settlement of America in the 1700's. Something I suspect very few people on this earth know. I bring this seemingly useless point up because it is anything but. I find it rather pensive that much of our legacy as a people is being lost due to the Orwellian corporatization of society. In this case due to the dying family farm at the expense of the corporate food machine. On a more constructive note, I sense a substantial realization amongst many that we need to reclaim our history and who we are as humanity. To embrace our cultural diversity and our great histories that define much of who we are. To embrace our naturally inquisitive and intuitive self as we come to realize the often shallow existence that so many societies around the world now define as success. To realize that something is wrong with the values embraced by our leaders today. That something is, in fact, wrong with our leaders. They lack a sense of humanism. I believe this trend will continue to gain momentum as many realize much of what we now define as success is determined to be anything but. Part of a social change being impacted significantly by this crisis. And I believe it will have an enormous impact on future economics. In other words, the metaphysical search for quality. (By the way, I can't express in words how much I recommend this book. Or the fact that you will have to read it countless times to release the significance of its message.) Anyhow, there are plenty of pigs in the K Street bubble. I wonder if I stood on K Street and wound up my old pig-calling skills if I could call them to come running. Sooey! Sooey! Pig! Pig! Pig!
Wednesday, August 19, 2009
Housewives And Pig Farmers In China Hoard Copper
By the time this crisis is over, I'd guess those pigs will be worth more than that piece of paper from Harvard. In fact, I wouldn't be surprised to see many of those Harvard MBAs have a future lifestyle similar to pig farmers. Or pigs.
Wall Street Is Back To Its Same Old Heist Tactics
Is the fact that commodity traders are now an emergency hire for the banksters an anecdotal sign of commodities again topping?
Germany And France Exit Recession. Unrelated Story Reports Pigs Seen Flying Over Berlin.
Some time ago we put up a lengthy post on coming economic crises in Germany and the corresponding dynamics that could develop within the European Union. At that time we highlighted the statistic below. That is foreign orders for investment goods - a proxy for the future of economic development. The savants in the financial community and on Wall Street have declared this crisis over. Mostly because the world's politicians have spent tens of trillions of dollars they don't have. A favorite game of all politicians. Especially those who often speak of fiscal restraint. This is surely a sign of the coming economic golden age if I ever saw one.
What is the outcome to all of this profligacy? Restarting the credit engines to pile on even more debt the world cannot afford. So, how has this translated into demand for sustainable investment? From the August statistics just reported, we see a marked improvement. We have gone from a complete bust in Germany's foreign orders for investment goods to just a complete implosion. Implosion is better than bust any day of the week.
Love the hairdo. The color goes well with your skin tone. The global economy is broken. It isn't coming back. Maybe it's time to finance another few hundred thousand cars in the cash for clunkers program so we can create even more future defaults. Love ya babe! Call me. MWAH! MWAH!
Tuesday, August 18, 2009
ProPublica And Sunlight Foundation Seek To Bring Transparency To The Corruption Of Foreign Lobbying
Oh I exaggerate you say. Oh really? The Democratic Republic of Congo is considered the rape capital of the world. As estimated half a million women and children have been raped over years of ethnic cleansing. Not to mention the more than five million people killed in this conflict that extends from the original Rwandan ethnic massacres. This is a great crime against humanity that the world's governments have really done little to stop this endless butchering, even though many humanitarian firms have pleaded for something, anything to be done. Why don't you check the lobbying status of the DRC in Washington? You might be surprised. Murderers, thugs, rapists and all orders of human and civil rights abusers is being nothing more than forthright. And what policy proof do you have that your life is worth any more than the victims of this crisis? Bankers get trillions in bailouts while Washington policy has destroyed much of our economic opportunity. Mostly because of lobbyist efforts for sure. In some twisted way, this and many other crises in and outside of the U.S. is anecdotal proof that there is little, if any, moral authority left in Washington.
Now ProPublica leads the charge in some attempt to shed light on this matter of great corruption.
Congress Is Out Of Control On Cap And Trade Legislation
Reason and rationality are irrelevant when dealing with lobbyists of Wall Street firms greasing politicians so we can "casino-ize" even more of our economy. As Timothy Geithner so eloquently states, a healthy banking system is a requirement for economic recovery. What's more healthy for Wall Street than greasing politicians?
Cap and trade is another Wall Street scam that will kill jobs unnecessarily. If the world wants to trim pollution, there are countless ways to accomplish that feat. We don't need Wall Street traders ripping off society to get there.
Chile Reports A Collapse In Demand For Copper - Its Primary Export
So, curiously, has anyone wondered what is driving supposed economic growth in the global economy if demand for commodities has fallen so substantially? It's a trick question. The answer is obviously debt generally for the sake of debt as opposed to providing any sustainable economic vibrancy. Paper, scissors, rock. Game over. Central bankers and politicians lose. Volatility wins.
Just As The Carnival Barkers Ramp Up The Bullish China Rhetoric Again, The Shanghai Composite Breaks Sharply.
Two weeks ago in our post on the continued metastasizing of the crisis in China we wrote "The fact that the Shanghai Index was down 8% at its peak on Wednesday is no coincidence. This is not the behavior of a new bull market......liquidity is draining out of the Chinese economy at a rapid clip."
That was on the 31st of July. Funny how that worked out now isn't it? I'm sure the topic of our post and the subsequent actions of the Shanghai index were merely coincidental. It just so happens many China shills, including three of my favorites - Jim Rogers, Jim Cramer and Peter Schiff - were out around the time of that post talking very bullishly about China. (Strange bedfellows Schiff and Cramer) In addition to our China post, in the last few weeks we wrote "I suspect what we might be seeing is again another rotation (out of commodities and into technology) similar to the one we talked about before the market collapse. Is there finally a growing realization by some smarter money that we are going to see a commodities bust?"
In less than two weeks the Shanghai Composite is down a cool 20% and commodity stocks are taking huge losses. Anyone investing based on the recent barking over China lost three to four years worth of returns in two weeks. That's a faster rate of decline than the collapse in the S&P last September.
I have heard all types of rationalizations for yesterday's weakness in China. That includes relatively meaningless data points such as too many IPOs, new brokerage accounts declining, etc. It is fundamentals that have been and will continue to shake the world. Not how many investors are opening new trading accounts. This is noise perpetuated by people who have no idea what is going on.
Monday, August 17, 2009
A Well Underreported Story Of Globalization - Widespread Pollution, Corruption And Disease
The benefits gained by these practices of corruption are substantially greater than any possible wage arbitrage. For wages must also be calculated with the additional costs of a wider supply chain costs and potential for lost improvements gained by instituting an often semi-slave labor workforce. Add in comparable protection laws and the cost of labor arbitraging most assuredly would have a negative ROI in most or all circumstances. Something lean experts could have easily told us. Something we wrote of when the mass media and financial community were telling us more lies - that American or European firms could not compete due to higher wages. Obviously, these statements were made out of ignorance or with a hidden agenda or both. But then what does Wall Street know about running a business? This is a major reason why politicians should not be meddling in economic trade but should instead be focused on protections for citizens.
As we wrote in our manufacturing series quite a few years ago, paying marginal wages does not provide a sustainable comparative advantage in manufacturing for many reasons. If nothing else, as Shigeo Shingo and others have taught us, the art of continuous improvement and operational excellence is predicated on a highly-trained workforce capable of identifying and instituting said practices and their improvements.
American Death Panel
Saturday, August 15, 2009
The End Of Wall Street
"I’d never taken an accounting course, never run a business, never even had savings of my own to manage. I stumbled into a job at Salomon Brothers in 1985 and stumbled out much richer three years later, and even though I wrote a book about the experience, the whole thing still strikes me as preposterous—which is one of the reasons the money was so easy to walk away from. I figured the situation was unsustainable. Sooner rather than later, someone was going to identify me, along with a lot of people more or less like me, as a fraud. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people’s money, would be expelled from finance."
Friday, August 14, 2009
"US Treasury Secretary Timothy Geithner said the Obama administration wouldn't allow Wall Street to return to such old habits as taking on excessive risk, and that plans to overhaul financial-market regulation were on track," The Wall Street Journal reported.
Mr. Geithner pushed back against criticism that Wall Street, which is returning to profitability, is also returning to business as usual, in an interview with the newspaper.
"I don't think the financial system is reverting to past practice, and we won't let that happen," Mr. Geithner said. "The big banks are running with much less leverage now, much more conservative liquidity cushions, there's been a significant shrinking of their balance sheets, getting rid of bad assets and cleaning up. And the weakest parts of the system don't exist anymore."
Some banks, including those that received government bailout money, are earning record profits, increasing pay and ramping up risk. Goldman Sachs Group Inc., for instance, recently recorded its most profitable quarter ever and boosted its degree of risk-taking as measured by how much money it could lose in a single day. Mr. Geithner said a functioning and profitable financial system was a "necessary precondition to a stronger economy."
I simply cannot believe this is the head of the United States Treasury. One of the two most important financial jobs on earth. I would rather have the local high school football coach running Treasury. At least we could appeal to some intuitive sense of reason instead of this incessant mindless babbling.
These statements are utterly without any fact at all. There are so many fallacies in Geithner's remarks that is shows he has no comprehension of what risk is. But then, why should that surprise us? He presided over the New York Federal Reserve as Wall Street's chief regulator with a haze and stupor unmatched in America's history.
Let's take a very simple and obvious example. Just one of dozens on a wide array of fallacies in his position. The top handful of major Wall Street firms have a cumulative total of $200 trillion in derivatives on their books. Do I really need to say anything else? Leverage is irrelevant. I mean seriously folks. That means the counterparty to risk for any single one of these firms can be defined by the four or five remaining firms. We know this because there are only a handful of players in the game.
If I am an automobile insurer, I have to achieve some critical mass of cars insured to be able to manage my risk at a price attractive to the market. In other words, I can't run a competitive and successful auto insurance company by insuring five cars. Similarly, Wall Street banks cannot manage its derivatives risk by trading with four other firms. It is preposterous. It is simply a matter of time until we have an auto accident and the insurance company collapses.
Similarly, it is simply a matter of time until we see more bad bets on Wall Street. It matters not if these bad bets are derivatives or commercial real estate or bond market trading or equity market trading or any other scams our banking system is now involved in. If derivatives were actually used as insurance, which was the rational for their existence, then we would need to see the global economy embrace them as a form of risk management. Not five or six firms. There is no counterparty. There is only a pool of risk. That pool is Wall Street. That the concentration of derivatives exists within a handful of firms simply proves that they are not being used to manage risk at all. They never were. That was a lie. We know it was a lie because were they to be used as insurance they would be regulated by the insurance industry or would be adopted for the meaningful production of capital in the economy. Not pushing paper. Instead they are simply used as a form of gambling to steal from counterparties. That's it. That's quite obvious. Wall Street lawyers wrote the legislation allowing this scam.
These banks are making huge bets capable of bringing down the entire financial system. And they surely don't measure any type of risk with any intelligence as Geithner would have us believe. All we need is to see one bet go bad and Wall Street will collapse. And I can assure you bets will go bad. Statistically, they must. All we do now is wait.
Timothy Geithner should resign so we can get someone into Treasury that has some modicum of competence to revamp the financial system.
As The Crisis Metastasizes, California Luxury Hotels And Resorts Are Heading Towards Bankruptcy
All the more reason for a more democratic and flatter organizational model. Where leaders are replaced with facilitators. Where organizational constructs are created to facilitate the development of every individual in the organization and not just those deemed strategic, ie management. Where a system of constructive conflict is embraced to hone the blade of great strategy and execution. But I am not talking about a corporation. I am talking about American society. About the way democracy must work to be successful. Of course, this is also sound business management. A lost art practiced by a very few great firms. I have worked with countless firms, most of whom eschew such best practices. Instead I am talking about not giving a handful of people nearly complete control in any organizational construct. Even if by deference. People who are most often clearly flawed by greed and personal avarice at the expense of society's best interests. I can't overemphasize the importance of these dynamics in this crisis. It is a substantially key component to the collapse we are experiencing. Something you will absolutely not hear in the media or in the economics community. Mostly because they are indeed all part of the problem.
We have remarked before that this is the cycle that America's most successful unwind. Most Americans have been unwinding on some level for decades. Now we see the top ten to twenty percent of Americans suffering. And we can expect this trend to continue. Even anecdotal statistics such as insider buying and selling, used to determine the market mood, has become irrelevant. Insiders have been selling this entire rally. The largest rally since the age of Elmer Fuddstone. Not because they are somehow brilliant and see the future as many people continue to cite. Businesses are nearly universally bullish about the future as we recently highlighted. A near 90% bullish perspective on the future. We have clearly debunked that myth numerous times. But because they are unwinding to survive. They are forced to sell even as equity prices move higher.
Welcome to the new world. The real world. The world of truth. That our leadership is in fact lacking in the basic qualities of leadership. The very reason we see tremendous anger and bitterness at the town hall meetings as we highlighted yesterday. The media and leadership want to marginalize this dissent. Why wouldn't they? Their beliefs support an ideology that they know best and everyone else should fall into line. The American people clearly understand the leadership void. It is the very reason consumer sentiment polls aren't improving. The very reason why political polls are at record lows. The very reason why someone espousing substantial change was elected President. The world is going to become much, much worse as our leadership embraces the status quo in an attempt to save an economic ideology they falsely believe served them so well. That very irony will continue to ensure the global economy's collapse. Their collapse.
Second Look At Five Year Treasuries
(This snapshot was taken a few days ago and the five year rate continues to move down.)
Thursday, August 13, 2009
Town Hall Meetings Over Health Care Reform Peddled By Politicians And Lobbyists Reveals A Far Deeper Crisis - The Confidence Game Is Over
Well, to the good Senator's remarks, what is representative of America? Are you representative of America? Is a Congress with the lowest approval rating in history representative of America? Is the $3 billion dollars Wall Street lobbyists have pumped into politicians pockets in the last ten years representative of America? I know one thing. We have three hundred million people with every particular view imaginable in this country and as long as they aren't breaking any laws, who's to say what is "representative"? There is no "representative of America". Maybe we should all be like Senator Specter and bob our heads up and down when politicians speak.
The reality is there are only citizens expressing their opinions or concerns. When we get into witch hunting and mob frenzy stirred by twisted lies that government storm troopers are going to come and tell grandma that it's time to die, that isn't part of public discourse and debate but then I'm not really sure how that is any different than what politicians embrace in their seamy relationships with lobbyists. No two people are likely to agree on every single detail of any topic but it is quite obvious Senator Specter is out of touch with reality as are most politicians. And that is his biggest problem. It is Washington's biggest problem. The ruckus in these town hall meetings has a deeper meaning - American people don't generally trust anything going on in Washington. And why should they? If government doesn't work for the betterment of society, what particular reason should anyone now trust a politician on any issue including health care reform?
In my estimation, the fact that members of Congress feel as though they are being accosted by constituents on the health care debate is really a reflection of the fact that Congress has forgotten that is is accountable to the sovereign. And they aren't used to being challenged by their bosses. There may be a small group of radicals telling constituents that we are going to have health care death squads but I don't see any large scale efforts of such insanity gaining traction. The mainstream media wants us all to believe everyone expressing dissent is an idiot. The reality is politicians are getting exactly what they deserve. That is a reprimand from management for their profligacy and utter incompetence in managing our affairs.
This short clip is a prime example of the incompetence surrounding health care reform. A constituent asks a simple question to Arlen Specter and Kathleen Sebelius and gets what I would classify as ridiculous and, frankly, boneheaded answers that simply reinforce valid concerns. A citizen asks how a Congress that really doesn't understand health care can be trusted to make the right decisions on such an important issue. I think that's a pretty fair question given Sebelius wouldn't want me performing brain surgery on her should she need it. And I don't want her telling me how health care should be reformed because she doesn't know any more about health care than I know about brain surgery. Sebelius answers that she has never been part of Congress. And what's your point? Then she goes on to say that she has never seen people work so hard. (Congress) That's great but what does that have to do with the question? Sebelius is a politician not a health care expert. I'm sure the people in the Soviet Politburo worked hard as well. (I'm just making a point. I'm not comparing the Congress to the Politburo. It's obvious this Congress is worse.) Then Specter remarks that there are 1,000 page bills that have to be acted on very quickly. This idiotic remark simply proves concerns about Washington are accurate. Politicians have their own little club with its ridiculous rules that have no relevance to doing what's right but instead doing whatever is expedient to a broken process. Does any politician really think anyone in America cares of Congress has a 1,000 page bill and a short time to read it? Then it's obvious every 1,000 page bill should be vetoed because if the process is too short to understand it, then Congress is doing nothing more than passing bad legislation. But then we knew that. That's how they have destroyed our economy and our banking system. Fix the process so you can actually have an intelligent review of the bills instead of passing legislation you can't even read or understand. Either that or resign.
Unqualified subject matter experts, ie politicians, under the influence of money-toting corporate lobbyists should not be leading any effort to overhaul our health care system. If politicians are serious about reform, then have a logical apolitical process. We have a dozen major health care plans around the world to benchmark. Where is the benchmarking? Incredibly there isn't any. That is completely unacceptable. A few years ago Taiwan benchmarked global health care systems and the deemed the U.S. system not even worth of consideration because it was so bad. I saw the interview with a Taiwan official and he literally laughed when asked why they didn't look at America's health care system. And now the same parties influencing the existing system are deciding on a new system? Why not turn the process over to a special committee of nonpartisan subject matter experts as we highlighted before. This is not a methodical process managed by experts. This is a process dictated by monied interests. That nearly guarantees us any plan will either be bad, awful or terrible.
To label anyone who dissents as a troublemaker is really an attempt at marginalizing dissent. Hooting and howling at politicians as we see in this session is not lacking it manners. It is letting our elected representatives experience our displeasure and that we do not trust their generally vacuous remarks. Has anyone ever seen British parliament operate? There's plenty of hooting and howling.
The people of this country generally want health care reform. The polls show it is clearly so. But, when it is being decided by cronyism and corruption, the American people are surely going to have a reaction based on lack of trust or suspicion. As they should. As they do.
Government has proven for a long time it is not to be trusted. Should government reform itself and actually prove it desires to do what it in the best interests of the people, then confidence in government will return. The bond of trust is broken. The confidence game is over. The sooner politicians realize this, the quicker we can get down to business of restoring trust through actionable change across a wide multitude of government policy. A good start would be to repeal corporate personhood, ban associated corporate lobbying and mandate publicly funded elections not controlled by any particular party and monied lobbyists. Of course, there is another potential outcome as well. That many of these life-long politicians won't have a job in the future. I can find nothing more American than that.
Wednesday, August 12, 2009
Our Prediction Is Right On Course - CNBC Viewership Is Collapsing
One can surmise many reasons why viewership is down but many viewers are concentrated within the business and financial community. I tend to believe viewership is down due to systemic incompetence but to each his or her own. Personally, I don't believe most professionals turn the channel on to learn anything. (What are we going to learn from Erin Burnett or Dennis Kneale?) It's just to have the drone of noise in the background should some breaking event occur.
Every once in a while there is a guest who might have something intelligent to say. Buffet or someone similar. So, I'd rate some minuscule percentage of air time as worthwhile.
We have remarked for years that by the time this crisis is over Mad Money will be off the air. And given this crisis is being drawn out by government attempts to deter a complete global collapse, it will be very difficult for CNBC to continue to operate in the red for years to come. The ad bubble is taking its toll on CNBC as well. And CNBC's parent company, GE, has its own financial crisis due to its mismanagement.
At some point in time someone in the economy will realize that wealth is not created by pumping stocks to astronomical levels and pushing paper back and forth. By that time the "investor class" will more than likely cease to exist. Then we can finally get back to fixing the economy instead of erroneously focusing on what financial markets are doing or what Trish Regan is wearing.
Nomi Prins On Goldman's Unsustainable Business Model
I have written this no less than a dozen times in the last few months but there are clearly quantifiable reasons to believe these banks are not safe investments nor do they have a handle on their exposure to risk. Economic risk is increasing and that means their risk profiles are considerably underappreciated. There is every reason to believe future Wall Street bailouts will be necessary as the global crisis metastasizes.
Break up these incredible risks to the economy, risks to society's savings and even risks to our political structure. Most importantly, monopoly banks restrict the free flow of capital in the economy. This reduces economic opportunity for everyone.
Tuesday, August 11, 2009
An Icon Of Civil Rights Eunice Kennedy Shriver Dies At 88
GM's Volt To Get 230 Miles Per Gallon......Sort Of.
The biggest problem with the Volt as we have remarked before is the anticipated price tag - $40-45K. This is not a mainstream product unless GM somehow subsidizes the purchase or maintains some special program for the battery packs. It's just too expensive. That said, this is a rolling testbed of sorts and is a very important product for the auto industry. If nothing else, it will allow engineers to capture real-world feedback on a nontraditional powertrain. This could lead to further advances and improvements in coming years. (That's why I call it a rolling testbed.)
The Cruze will be a more important model for GM given its expected price tag is around $19K and it is expected to achieve mileage similar to the Prius in a standard nonhybrid powertrain. (Dependent somewhat on whether it employs HCCI in early models.)
SpaceWeather.com Perseid Meteor Shower Tonight1:28 PM links to this post
Quick Comments About The Markets. Was July 13th A Turning Date?
We finally got a futures-driven rally on Friday that was not confirmed by the cash market. We posted that very remark at 2:45 on Friday. Given I was typing that well before 2:45, one might surmise it is somewhat possible to anticipate high probability moves in the market on a shorter-term basis given since about 2:00 on Friday until today we have lost all of Friday's upside move. That move was a high probability reversal day of some sort. Those can be anywhere from a few days, ie giving back a short term move, to the start of something more substantial. The key to making money in markets is to listen what the market is telling you right now and not anticipating anything it isn't telling you. In other words, trying to predict what the market will do too far in advance without supporting data. And while I throw up charts on here, I really don't use charts for anything other than anecdotally supportive art work. They are simply decision support tools to other more substantial analysis.
I do find it interesting that July 13th, the start of this ramrod higher was a Fibonacci time zone 89 days from the March low. 89 is a very key Fibonacci number for its involvement in the development of recurring sequences or cycles. In other words, potentially the start of a downward cycle circumvented by market shenanigans? Let's play a little voodoo and see if this rally gets clobbered and if July 13th was really a turning point of a market correction. In other words, a feint higher to cause hyperventilation in the likes of Abby Joseph Cohen and Jim Cramer.
Regardless, at some point Wall Street's ability to manipulate the market will cease. It's pretty much impossible to predict when that will be without a crystal ball but the time is coming. Friday's false break to the upside may have been a sign that supply and demand characteristics are weakening.
Monday, August 10, 2009
Terrorism In The Health Care Debate
Debating health care reform on its merit is a worthy endeavor. Arguing against a particular type of health care is anyone's prerogative. But it seems terrorist tactics are being used to hijack any type of meaningful debate and instill a irrational fear in senior citizens. We are in a war in this country. A war to save our society from those who would rather see it destroyed if it is not of their liking. Intolerant neoliberal and radical elements be they corporations or individuals.
We the People. A more perfect Union. Promote the general Welfare. According to our Constitution, being an American does not mean screwing over anyone and everyone simply because you can. It doesn't mean a dog-eat-dog world where those who are most lucky, most politically connected or most willing to jam a stick in their fellow man's eye are the only winners of society's wealth. Our Constitution contains an implied sacrifice on some level to promote the well being of everyone. The alternative would be a lawless society with either no government or a broken government. With no rule of law. Indeed that is what we are seeing today on many levels. How's it working for you?
Top In The Five Year Treasuries Forming? Is Risk Aversion Returning?
Did Ben Bernanke ever address the dynamic of the entire world trying to stimulate their economies at the same time in his post mortem of the Great Depression and how to prevent a recurrence? Don't think so. Eventually, we will see rates rise and fall based on too much competition for too little capital. In other words, as we have noted repeatedly, globalization is dead and the world is moving to a self-funding economic model. Just because no one is talking about this dynamic doesn't mean it isn't going to happen. It most certainly will. Very bad news for emerging markets and their partners in crime, Wall Street. First we have to watch the stimulating race to the bottom of the barrel play out.
Some financial bloggers have cited the Great Depression as an analogy to show interest rates are going to remain low for decades. Faulty analysis. The U.S. was awash with capital at that time. If the U.S. is not inclined to change the dynamics of globalization or its economic model proactively, they will need to attract capital to run enormous deficits.
The yield on five year Treasuries pressed substantially lower from the stock market peak in June. This was a flight to safety rather than the future debt dynamics we expect to see. Some trading firms obviously saw financial markets were starting to tighten again. Many firms still have ample liquidity so they jammed the shorts off of the July low in equities. This low also corresponded to a low in the five year Treasury rates as well. Obviously a trading dynamic.
It now looks as though the five year market might be setting up for a double top or at least some kind of top with a bearish rising wedge formation off of the July low. Obviously this is anecdotal pattern analysis confirmed by a view of supporting fundamentals including a dollar that has been spiking in the last few days. That chart too looks like a bottoming pattern as the five year appears as a topping pattern.
As we have remarked often, these patterns may or may not resolve themselves in an expected fashion but the dynamics are lining up for a higher probability of some kind of confirmation. Traders often make patterns self-fulfilling when everyone is watching the same pattern develop rather than some underlying force of nature. Although I am confident many of those exist in economics and human behavior as well.
By the way, if we can divine anything from the five year market, we might be inclined to assume most of the risk trade plowed back into equities in late May and early June. It just so happens this was the top in the equity market. In other words, it's quite possible that most money was allocated well too late to take advantage of any equity market upside. And given we are only fifty S&P points higher since then, we might be inclined to worry that there is a lot of money that is going to get fleeced if the market doesn't make substantially higher highs before any type of future economic or financial crises.
“Cerberus did not have a clue about the automotive industry. I don’t think anything could have been worse.”
“It’s hard to believe that any of these firms — including Cerberus — will be viewed as patriots in 10 years,” said John Rogers, a private equity analyst at Moody's Investors Service, “because I don’t think their impact on any of these companies will be seen as so positive for the overall economy."
Patriots? Are you kidding me? Private equity's crony relationship with Wall Street was instrumental in the crisis we see today. In fact this destructive relationship goes back decades.
Sunday, August 09, 2009
A Reality-Based Perspective On Friday's "Improving" Employment Numbers - Things Are Worsening More Slowly10:37 AM links to this post
Saturday, August 08, 2009
Procter & Gamble Hit By Price Conscious Consumers
Kroger makes it clear they are going to mercilessly drive name brand product prices down with a surge in their private label business.
I have heard quite a few remarks of shock regarding P&G's weak results. Consumers are trading down. Over the last few years we have highlighted numerous times that the aspirational consumer market is going to be a very difficult one. More recently eight months ago we posted the remark above in a post where we anticipated a brand name price squeeze by private label brands and aggressive retailers.
This isn't rocket science. When people are either unemployed, underemployed or concerned about their future, they are a lot less likely to pay a 50-100% premium for branded goods and services. Private label brands and retailers see price gouging by branded products as an opportunity to take market share. And often there is a marginal or nonexistent delta in product quality.
P&G's Lafley may just be the best CEO in the S&P 500 but I don't think he can master alchemy. I doubt this is a one time event. More likely it is a new reality for years to come.