Saturday, October 31, 2009

Washington Piggery Continues As The Lobbyist Bubble Grows - Change You Can Believe In

posted by TimingLogic at 3:37 PM links to this post

Steve Rattner On The Auto Bailouts

I'm not going to spend a lot of time on this post because Steve Rattner's remarks are much more worthwhile. We have written extensively about the auto industry on here over the years. Most of our remarks have turned out to be spot on. As an engineer, as someone who has extensive experience in business process, in benchmarking, in management consulting, I have a firm understanding of the auto business and what ails them. Some of that ailment is a result of poor government policy, some because of a combative nature of the UAW and some because of failed economic ideology. But the vast majority of the failures of the American auto industry are because of horrible, insular management. In fact, horrible management led to the combative nature of the UAW. As we have remarked before, unions are simply market responses to hegemonic authority and concentration of power. It's the same dynamic response to tyranny that led to the concept of democracy.

By the way, Edmonds came out this week and said the government's Cash for Clunkers program likely cost $24,000 per vehicle. We used a lower figure in our napkin analysis based on the feedback of a Ford executive but regardless, the outcome is the same. Taxpayers were paying GM to build cars. For free. A general truth is that if government officials knew how to run a business and do so successfully, they would be running a business. I think this data point helps substantiate this fact. It's also why the home buyers tax credit is going to turn out to be a major flop.

Anyway, some interesting feedback from Rattner below.



posted by TimingLogic at 9:42 AM links to this post

Galleon Paid Hundreds Of Millions Annually For Information

Well, this Galleon probe has turned into a doozy. Supposedly the firm spent $250 million - often much more - annually, obtaining information that would give it and edge. Information not available to the general public. This is reminiscent of the time leading up to the collapse in the Great Depression where manipulators of stock pools and bucket shops scammed investors. Wall Street's fraud is endless and just about the only constant fixture in American history. Its power and corruption needs to be busted up. Forever. As we have highlighted before, a distributed electronic capital model would serve democracy substantially more efficiently. And take the innovation and creation away from capital gatekeepers on Wall Street and put it into the hands of those who deserve it - the creators of capital.

This mess highlights how important transparency is. As we have remarked many times on here, companies like Goldman Sachs, Citi and others were not successful because they were brilliant, they were successful because they rigged the game.

When anyone pays government officials millions of dollars to nearly guarantee the outcome by rigging rules to manipulate markets, be it Wall Street or defense contractors or insurance companies, you are going to make money. And loads of it. At the same time, you are taking away competition and economic vibrancy. Why? Because you are in the market before the general public and even competitors realize the rules to the game. Or you are forcing competitors out. As the other participants catch on to the rules and seek to participate, you can always be at least one step ahead and leave your competitors holding the bag. I view this as the dynamic that was in play which took down Merrill Lynch, Bear Stearns and Lehman. Goldman was the leader in the game of many exotic debt instruments which took down Wall Street. Other firms were trying to follow the leaders. By the time these firms were heavily into the game, some of the other firms were already on the opposite side of many trades. It wasn't brilliance which put them on the opposite side of the game. It was because this is a rigged scam.

We need complete transparency into markets and Washington. Our economy will eventually heal itself when this dynamic is dealt with.
posted by TimingLogic at 8:31 AM links to this post

Friday, October 30, 2009

Key China Box Index Drops First Time Since June

posted by TimingLogic at 12:18 PM links to this post

Why Do We Need A Central Bank?

Well, the main reason we needed a central bank is to fund wars. It's no coincidence the Europeans created both the central bank and perfected repressive colonialism and empire. They go together like peanut butter and chocolate. Coincidentally the Federal Reserve's creation happened just as World War I broke out. Or maybe not so coincidentally since the winds of war were in the air at the time of the Federal Reserve's creation.

The United States profited handsomely by extending credit to European countries during WWI so they could pound each other into oblivion. None to ironically, there were substantial problems with mass desertions in WWI. It's easier to sell a war when you are able to make your enemy out to be evil or if they actually are evil such as Hitler was. WWI had relatives and neighbors killing each other for no good reason other than some fat ass sitting on a throne told people it was necessary. Not generally a motivating factor to encourage voluntary assignment to die. War is an old man's game where young men die. I have a better idea. Let's let those who start wars lead us into battle. The majority of conflict would be eradicated given most old men are better at killing other people's children than facing death themselves.

The U.S. extension of credit to Europe had multiple beneficial effects. One, American businesses profited by selling the Europeans armaments and supplies. This made American businessmen rich and provided American jobs. Two, by the Europeans blowing each other to smithereens, that left economic domination exclusively to the United States as the economy of these countries was left in shambles. And thirdly, we could manipulate the Europeans because they were indebted to us at the end of the war. All of this had an effect of continuing our economic and political domination. And, of course, allowing the U.S. to rise to become the global military superpower. I'm sure none of this ever crossed the mind of any political leaders. Rather war is always a matter of good vanquishing evil.

Of course, look what Wall Street will do for a few billion dollars. Imagine what impact on the human psyche a few trillion dollars has. In today's world it is unsustainable military spending that is bankrupting the U.S.

..........War is the common harvest of all those who participate in the division and expenditure of public money, in all countries. It is the art of conquering at home; the object of it is an increase of revenue; and as revenue cannot be increased without taxes, a pretense must be made for expenditure. In reviewing the history of the English Government, its wars and its taxes, a bystander, not blinded by prejudice nor warped by interest, would declare that taxes were not raised to carry on wars, but that wars were raised to carry on taxes..........

.............Every war terminates with an addition of taxes, and consequently with an addition of revenue; and in any event of war, in the manner they are now commenced and concluded, the power and interest of Governments are increased. War, therefore, from its productiveness, as it easily furnishes the pretense of necessity for taxes and appointments to places and offices, becomes a principal part of the system of old Governments; and to establish any mode to abolish war, however advantageous it might be to Nations, would be to take from such Government the most lucrative of its branches................


As many great minds have noted, war is the health of the state. War on drugs, War on terror, War on crime, War on poverty ...... Curiously, where is the war on the tyranny of wars? On the suffering of innocent people? And where is the war on unemployment in the U.S.? It seems the military contractors and banksters won that war long ago. Apparently the unemployed in the U.S. is the enemy combatant in that war.

Anyway, this was just a mini rant leading into an interesting article at public broadcasting. I would argue that many of the points made in this article are really begging the question of why do we need private banking? Localized public banking would serve the community, local development and employment. And it would not only be capitalistic but unlike private banking, it would be democratic. And because it would be public, its operation would be completely controlled by a democratic society. Isn't it time we marry all of capitalism with democratic principals? Oh the horror of such a concept. It would mean elitists would be held accountable to democratic ideals instead of their often feudalistic tyranny imposed on society by many sociopathic CEOs and Wall Streeters.

As a final note, as I've said before, I'm not so much against a central bank as I am against the source of government spending and our national banking system being private. It should be public. If private financial institutions want to compete with a public banking system, that's fine by me. That happens in countless countries throughout the world.
posted by TimingLogic at 11:26 AM links to this post

Thursday, October 29, 2009

New American Economic Winds Of Change Are Growing - President Obama Sees Worst Approval Rating Drop In 50 Years

As we have discussed, one needs to focus on psychology, sociology and human behavior to glean the future of economics in times such as this. There are very, very substantial social changes that are going to impact the future economy.

A perfect example is that the U.S. has generally relied on trickle down economics for the past thirty plus years. In order to keep this scheme going, it was mandatory for the banking system to extend credit to lower and middle-class Americans as the economy continually lost more and more vibrancy due to this ideology. This extension of credit coupled with lost economic opportunity ultimately translated into wealth being continually sucked out of the vast majority of American households. This is the reason why we have such concentration of wealth in the U.S.. Not because the wealthy are brilliant. Not because they invented new sources of capital creation. But because they took it. Obviously there are exceptions to this rule as legitimate capital forming businesses continued to operate and to be created. Remember Ross Perot's famous remark from the early 90's. A cassandra ahead of his time. The Republican and Democratic stooges running the Bush and Clinton camps marginalized Perot as a crackpot. The reality is quite different.

Conversely, the Wall Street Journal reported a few days ago that this extension of credit to middle class and underprivileged Americans as the "Democratization of Credit". That's really quite hilarious were it not so utterly vile and a complete lie. This dynamic did not serve democracy at all. It served the policies which concentrated wealth in the hands of a very few. What they called the democratization of credit is nothing more than wholesale usury and corruption of the American economy. The Wall Street Journal's article, were it accurate, should have read "The Slow Decay of the American Economy Required Access to Easy Credit By Underprivileged Americans". More lies, damn lies and statistics from the mainstream media.

This and other substantial social dynamics are going to drive future economics in the United States. Period. In the end, I could really care less about capacity utilization or jobless claims. They are truly irrelevant. Instead I really watch for validation of the social dynamics that are building beneath the radar of the mainstream media and our Washington overlords. This drop in Presidential approval ratings indeed is one of those data points. Curiously, I wonder how many people polled would respond that we have a Constitutional representative government? Do you feel like Washington generally represents you? Your family? Your country?

This economy is not coming back regardless of Wall Street and political cheerleading to the contrary. Restarting the credit engine to pile more debt onto a broken economic model is not a recovery. It's a lie in both morality and truth that will reveal itself in due time. We are going to see a new economic model unfold. And the people of the United States will drive it. Not politicians. Not the President. Not business. Not Wall Street. These pawns will all play a role in fulfilling the will of the people either constructively or destructively but the driver for change will be society. The sovereign. It will be the janitor, the bus driver, the construction worker, the doctor, the engineer, the teacher, the mothers and fathers of children. It will not be the Washington elites who created this mess. Politicians and Wall Street still don't get it. They are spending billions upon billions of dollars in a propaganda barrage in an attempt to drown out change but all of the money in the world can't save Washington from change. A first sign of this social change was that neither Obama nor McCain were the big money favorites of either political engine - a point we have highlighted before. Regardless of the countless dollars spent to prop up the party-favored stooges, they lost. Now the tremendous enthusiasm for a new President seeking change has seen unprecedented drops. Not statistical anomalies or generally cyclical approval ratings seen during a President's four year term.

A President with high unemployment numbers doesn't have any other problem. Period. And I think we can be assured that even higher unemployment is around the corner. Possibly substantially higher. Counting those who have already been marginalized or who are just scraping by and you have a very substantial amount of the American population that is very unsettled. And very unhappy with the status quo. Some studies show more than one out of three people either are underemployed or unemployed or have a close relative who is. Watching Washington dither is not an option for most Americans. (Let me insert a remark here. I chose dither last week while outlining this post before Dick Cheney accused President Obama of dither. And while I personally have a high disdain for Dick, I am not changing my use of dither to accommodate him.) And dithering is the normal in Washington. Anyone attracted to politics for power or acceptance, as are many, are almost always psychologically predisposed to never make a decision. Why? Any decision threatens a potential constituency, their re-election and ultimately the emotional acceptance they so crave by seeking public office in the first place. Ah, but a leader understands times such as this and that making bold decisions actually leads to acceptance.

Because of these psychological dynamics, Washington is by definition a leaderless vacuum. We need virtuous leadership. Someone to institute sound policy on behalf of the people. And fast. President Obama may be a virtuous person but he has shown no desire or ability to be a great leader.

This drop in the President's approval rating was easily anticipated - earlier this year the President's approval rating dropped from about sixty percent to the mid thirties in a few of the Midwestern states. An unprecedented drop in such a short period of time. This drop isn't about health care reform, right wing radicals planting lies about the President or racially driven as some would have us believe. That's preposterous. A racist does not approve of a President then six months later determine they don't approve of his leadership. The press and supporters of this administration are having a field day attempting to marginalize dissent. Dissent that is so necessary to a functioning democracy. There may be radical or racially-motivated elements out there, and there may be many of them, but comparatively they are a very small measurement of the electorate. To label those who are concerned about the obvious Washington corruption, the loss of jobs, our national sovereignty and a government that doesn't serve the will of the people serves only the purpose of the elite and those wishing to maintain political power. This political finger pointing and labeling is utterly offensive on every level. It denigrates the intelligence and virtues of most Americans. Americans of all walks of life, race, creed and beliefs share similar virtues and concerns. People who want economic opportunity, want corruption cleaned up and want a government reflecting core human virtues. And they don't want to hear excuses about why a President who has been in office for close to a year hasn't done a thing to address any major issues but instead is perpetuating the same behavior. If this President were to embrace a virtuous populist agenda, his approval ratings would soar.

This dynamic adds more validation to post earlier this year comparing President Obama to President Hoover. Intellectually brilliant men but failed leaders who don't grasp the concept that great Presidents empower society to do great things and provide the enablement for this to happen. Both men are beholden to the status quo in economic ideology, the entrenched political stooges and failed policy. Given my voluminous posts on empowerment, I obviously don't believe we need government-run jobs programs. Or that the government must step in and spend because the private sector won't. These are lies. And we'll flatten them like a pancake in the future.

Finally, even if government wants to play a larger role in the economy, big business should be excluded from any economic stimulus. That is, unless it represents systemic risks. And even then involvement of the people should be limited and protected by government. To date, all stimulus has gone to big business. All of it. Large corporations employ many people but they have been a net destroyer of jobs for forty years. Why would they change that forty year trend and start hiring Americans after receiving our money as stimulus? An absurdity. Additionally, allowing them to run roughshod over the economy kills new business investment and innovation. And it kills debate in Washington where they spend money to marginalize dissent or new ideas of governance. Big business kills the proper functioning of a democracy. Purchasing favors from politicians is killing our economy and our democracy.

The winds of change are in the air. And the future is going to be substantially different than any of the Wall Street or Washington elite believe.

Link here.
posted by TimingLogic at 1:23 PM links to this post

Wednesday, October 28, 2009

Marc Faber - Invest In Emerging Markets Because The Dollar Is Going To Zero

As we have been writing for years, I do agree with Marc that the world is going to go boom. But, we disagree on the dynamics of how that will happen. Regardless, Marc is always entertaining and unvarnished. Why would this interview be any different?

link here.
posted by TimingLogic at 3:46 PM links to this post

New Mortgage Applications Crater

posted by TimingLogic at 12:02 PM links to this post

Frankenstein Lives - Global Synchronized Boom

I randomly picked a handful of equity markets around the world to include in this post. All of these markets collapsed simultaneously last year then had the same reactionary lows last year. And then on March 10th, had the same rally low. All have the exact same rally patterns since. And all are driven by very tight volatility rallies.

If this doesn't concern you, well .........

Just as we said before the 2008 collapse, all financial markets and assets would sell off simultaneously. The concept of asset diversification was and remains a ruse. And those remarks were justly accurate. The same dynamic exists today.

Before the collapse in 2008 we wrote about Wall Street and hedge fund comparatives to 1929 stock pools and the associated effects of manipulation, momentum trading and piling on to create equity and commodity bubbles, we wrote of the fact that program trading accounted for massive volume on the exchanges and the still unreported fact that on foreign exchanges much of the trading is from outside of the country, ie American and European hedge funds and banks. Now much of these remarks are finally being reported in the press. And rightly so. The only problem is that they are being written as a post mortem. And they will most certainly be reported again after the next post mortem. These dynamics and more are contributing to perfectly correlated global markets.

Anyone trying to reason this market with comments about the "market" anticipating an economic recovery, or the market is fairly valued at a certain price or the market is anticipating a future earnings projection is missing the entire forest through the trees. Entire.

The only thing world financial markets are telling us is that the horror of Frankenstein lives. Absolutely nothing has changed. Risks are higher than at any time in my life. The new global synchronized boom will again be followed by another global synchronized bust.


Ireland
Israel
Germany
Spain
South Korea
Mexico
Brazil
posted by TimingLogic at 10:38 AM links to this post

Tuesday, October 27, 2009

Timothy Geithner, His Replacement At The New York Fed, Goldman Sachs And The Seamy World Of Opacity

I'm glad transparency into government is such a high priority for our captors.

Geithner is the perfect political stooge. I wonder where a poll would put his approval ratings? Somewhere close to King George I would suppose.
posted by TimingLogic at 1:18 PM links to this post

Another Look At The Nasdaq Transports And Dow Theory

The NTI is a substantially more representative look at reality comparative to the very narrowly focused and improperly focused Dow Transports. Dow Theory holds weight because it was representative of the railroad business in the United States. Now the Dow Transports are comprised of a handful of companies, many of which have little to do with transportation in the American industrial economy. As we have highlighted previously, the NTI is a far better representation of the underlying economy. Noticeably, it rallied a little over a month off of the March low in what has been a liquidity-driven eight month rally.

Except for a minor breakout which has now failed, at least for now, the NTI has done nothing for six months. NTI firms are not highly liquid and don't have large derivatives markets associated with them, ie Wall Street and hedge funds won't seek them out as a trade => They are far less prone to manipulation by Frankenstein finance and Wall Street mobsters.

These are firms whose stock results more appropriately reflect the reality of fundamentals and are drive more by the underlying economy and long term investors seeking value or investment sustainability. Huh? I know those terms mean nothing anymore but eventually they will mean everything.

On a final note, I'm a big believer in three wave counts for corrections. (As highlighted below) Whether they are usable as an investment tool is highly dubious but I do believe there is a recurring pattern of a correction's initial pulse, followed by a countertrend move then a final pulse. Notice I said three wave counts for a correction. By correction I mean a move counter to the prevailing trend. In other words, in a bear market, a rally such as we have seen in the last eight months, is a correction - common sense but counterintuitive. That is, unless you believe we are in a bull market.
posted by TimingLogic at 12:45 PM links to this post

Our Annual Repost Of The Top 41 Untruths Perpetuated By Wall Street

I have posted this in the last three Octobers. These are major themes we have written about extensively so I decided to put them into my list of untruths. When this was first posted, we were still in a bull market so obviously they were generally considered to be views of a crackpot by our fearless leaders on Wall Street and many global bulls who happened to also be American economy and dollar bears.

All of these untruths have proven to be accurate or there are seeds still building in their development. Since we are far from out of this crisis, none of my perspectives on these issues have changed. And many are still considered to be crackpot views.

If nothing else, this is a reminder of the constant lies and media manipulation that are so easily forgotten. As an example, it's pretty hard to remember the incessant babble on CNBC about how much global liquidity existed. And how bullish that was for the future. Even though we were writing of coming liquidity shocks.

Top 41 Untruths Perpetrated by Wall Street
  1. We will get a healthy and much needed 10% correction and restart the second phase of a multi-year bull market
  2. Buy this dip because because earnings were great
  3. There is too much global liquidity for the markets to go down
  4. Interest rates must go up to kill the commodity run, inflation and the global equity markets
  5. China is an economic miracle
  6. The 21st century is the Asian century
  7. The U.S. (and I guess by implication all democracies) has lost its economic leadership
  8. The stock market is cheap
  9. Risk management.....Well, need I say more
  10. Continued globalization is a foregone conclusion
  11. Emerging markets and (Brazil, Russia, India, China) are a safe havens while the U.S. economy and dollar craters
  12. American manufacturers cannot compete and offshoring or doom is inevitable
  13. The dollar is doomed because America is a land of spend happy dunces
  14. Capital equipment spending will rise from the ashes and drive us to a new bull run
  15. The Federal Reserve will save the economy and by implication the stock market when they cut rates
  16. Financials are defensive stocks because they pay a dividend
  17. Defensive stocks are a great investment in any coming market decline
  18. Inflation is out of control and interest rates must go higher
  19. This has been the best global growth story ever and it's unstoppable
  20. The American consumer and the housing market are the major concerns behind a recession. (They are symptoms.)
  21. Oil is at a permanently high plateau
  22. Commodities are in a twenty year bull market (Maybe many years of yo-yo action)
  23. The rest of the world will pull the global economy through US weakness
  24. Global companies get more than half of their earnings overseas and that makes them a great investment
  25. There is always a bull market somewhere. (Yeah, and it will likely be in the U.S. dollar comparatively)
  26. Sentiment is too bearish for the market to sell off
  27. The U.S. doesn't drive the global economy any more
  28. Markets must exhibit mania and blow off to have a peak (That's double speak for people who don't know what's going on and they need a sign from God to see a market topping)
  29. The Federal Reserve is printing money (Total baloney)
  30. Alan Greenspan caused all of this (Although he didn't help)
  31. Goldman Sachs is a great investment
  32. This can't be a top because Goldman is levered to the hilt
  33. Wall Street is smart money
  34. It is different this time
  35. The real estate slow down will be contained
  36. The US is a service economy and manufacturing doesn't matter anymore
  37. The consumer loves high gasoline prices (or more eloquently spoken by Wall Street as high oil prices haven't hurt the consumer)
  38. Unemployment is at 4.5% and by implication the economy is great
  39. Apple and Google are the next great thing and deserve their stratospheric valuations (As I said before, I'd rather own all of the equities in Thailand than Google for the same sum of money.)
  40. The Fed equity valuation model tells us the market is very undervalued
  41. This final one is for emphasis and has actually been discussed above: the dollar will crater if the Fed cuts rates.
posted by TimingLogic at 5:55 AM links to this post

Monday, October 26, 2009

Teddy Forstmann On This Crisis

Some of the old timers on Wall Street understand the severity of what is happening on Wall Street. Not all of them are incessant cheerleaders of this sham either. Most people who realize what is going on seem to generally avoid the media. Yet we need successful business executives, politicians and public servants to speak out against these crises in order to impact change. We need leadership from people that large swaths of society trusts. This includes people like Paul Volcker, Colin Powell, Warren Buffett and others.

Teddy Forstmann is one of those names within the financial community. He corroborates everything we have talked about on here for years from government complicity to the extreme risk-taking that will bring down Wall Street and our banking system again. This is a good interview even if Wall Street pumper Charlie Gasparino is giving it. (It's hilarious that Gasparino criticized bloggers writing of coming crises as idiots and ran down bearish guests on CNBC as know-nothings while he pumped the brilliance of Wall Street charlatans. Then he turned around after the crisis had already happened and wrote a book condemning Wall Street. The reality is Gasparino was a cheerleader who didn't see any of this coming but now we are supposed to buy his book telling us how this crisis happened? Typical CNBC.)
posted by TimingLogic at 1:38 PM links to this post

Dow Goes Dumpster Diving - Drops 200 Points In One Hour

Market behavior has changes substantially since mid-September. A point we have made in a few posts. And now a very wild swing in less than an hour. A wild dump on the close one day last week. A coincidence? Irrelevant? November might be very interesting.
posted by TimingLogic at 12:05 PM links to this post

The U.S. Government's Debt Shell Game

Update: The link to the WSJ article below was broken. I re-linked to the article. I believe the article's content is free which is why I linked to it. If you cannot view the content, go to Google and type in "Preventing the Next Financial Crisis Wall Street Journal" and the article will pop up with full readability. A dirty little secret about the WSJ - content driven by a Google search is often free. If you go directly to the WSJ website, that same content requires a subscription. So, if you know the title of an article on WSJ.com but you don't have a subscription, you can often go to Google, do a search and read the content at no-charge. Obviously there is a reason for that. They are trying to drive Google traffic to WSJ.com

We have written about this quite a few times in the last year. I believe the first time was around last December when we wrote that the government was bailing out insolvent banks and these banks were turning around and bailing out an insolvent government. Most recently we remarked that this dynamic was probably a major contributor to why big banks are not being broken up. That the government needs these big banks to keep buying their debt.

Allan's remarks aren't getting a lot of mainstream traction but this is nothing more than a shell game. In fact, he really doesn't go far enough in explaining the dynamic and its consequences. The mega banks were insolvent and needed a bailout from the government, then the government is insolvent and needs the bailed out financial firms to buy its massive new issuances of debt to fund its wars, stimulus, global meddling, etc. Ha ha ha. (That's a nervous laugh not a jovial laugh.) I think we used to call this a pyramid scheme.

Mega banks serve the needs of the state. Community banks serve the needs of the people and a functioning society. If I draw this as a Venn diagram or write it as Boolean equations, we can logically conclude the state is not serving the needs of a functioning society. What a surprise.

It's good to be the king. Not much longer though.
posted by TimingLogic at 11:25 AM links to this post

Sandy Weill, The Godfather Of Glass Steagal's Destruction, Gives Watered Down Plan To Overhaul Financial System

I can't believe the Wall Street Journal would even print this story. To me, this article is so off base it appears to be driven by conflicts of interest, a desire to save his legacy, a lack of understanding of risk or some combination of the three. Years ago when the world was partying hard and we were expressing concern over our banking system, we linked to the PBS documentary highlighting the fall Glass Steagal. Citigroup, now a zombie bank and a major reason why the American people are holding trillions of dollars in future obligations to Wall Street's sham, was part of a cabal spending hundreds of millions of dollars lobbying Congress to overturn this Great Depression era law.

(Here's the link again if you want to toss your lunch.)

After 12 attempts in 25 years, Congress finally repeals Glass-Steagall, rewarding financial companies for more than 20 years and $300 million worth of lobbying efforts. Supporters hail the change as the long-overdue demise of a Depression-era relic...............

On Oct. 22, (1999) Weill and John Reed issue a statement congratulating Congress and President Clinton, including 19 administration officials and lawmakers by name. The House and Senate approve a final version of the bill on Nov. 4, and Clinton signs it into law later that month.

Just days after the administration (including the Treasury Department) agrees to support the repeal, Treasury Secretary Robert Rubin, the former co-chairman of a major Wall Street investment bank, Goldman Sachs, raises eyebrows by accepting a top job at Citigroup as Weill's chief lieutenant...............
posted by TimingLogic at 8:49 AM links to this post

Sunday, October 25, 2009

Lawrence Summers Sticks Foot Squarely In His Mouth And Simultaneously Up The Average American's Derriere

"Just as in war, there are unintended victims so, too, in economic rescues, there are unintended beneficiaries." -- Larry Summers, economic adviser to the President

Unfortunately, the primary source of this remark is the Wall Street Journal and to read the entire article requires subscription so I won't link to it. Now I like Larry Summers as someone who is a very capable thinker, but I think the evidence seems to be growing that big Lar played a crucial role in building this crisis through his role within the Clinton administration. Then, as did Robert Rubin, he left and went to work for firms who benefited for their ideological policy of deregulating and destroying our banking system. At best I'd call that cronyism. At worst I'd call it something worse. Maybe even corruption. Inquiring minds would like to know.

This remark given in a speech last week should be getting way more play within the media. Unintended beneficiaries? Are you kidding? Banks are the beneficiary of $12+ trillion dollars in taxpayer bailouts. Unintended? How unintended is $12+ trillion? Did you unintendedly get $12 trillion?

Summers goes on to remark that it's natural that some people will get rich as the economy recovers. Yeah, I think that would be the people who were paid $12+ trillion. Summers' remarks are completely morally bankrupt. Banks are still insolvent and Wall Street crooksters are paying themselves hundreds of billions of dollars?

The White House has blood on their hands. In fact, they are bathing in it.
posted by TimingLogic at 12:27 PM links to this post

China's Economic Growth Is Smoking Hot

Now obviously we continually question the data coming out of China. For God's sake, the country is run by communists. China's economic growth is coming in very hot. Is the number real? Well, there are two ways to look at this. One, China's ministry of propaganda is cleansing the data because in a communist state, power and control must be projected both internally and externally. Fear and terror is the source of the state's power. Without terror, does anyone really believe a one million man army could take away God-given dignity and basic rights of 1.3 billion people? On the other hand, we see China has deployed the greatest known stimulus plan in history and is extending credit at a dizzying pace never before seen. So, could the economy be growing at 9%? Sure it could. In the end, does it really matter? How much more bad can bad get?
posted by TimingLogic at 5:32 AM links to this post

Friday, October 23, 2009

Are Our FDIC Deposits Safe And Will The FDIC Run Out Of Money?

As a follow up to my remarks of a little over a week ago, we are going to look into the FDIC. I want to make a few comments first because the blogosphere in particular is full of people who have dedicated a substantial amount of brain waves highlighting the crisis of funding at the FDIC and how it is eventually going to turn into a major crisis. I first have to warn you that there are many very, very complicated mathematical formulas and compound sentences in here. Along with a few dangling participles. You might have to take a refresher course in third grade comprehension before you continue with this very, very complicated topic.

The concern about the FDIC reminds me of a scene in one of the Indiana Jones movies. Indiana is met in the street by a formidable adversary who draws a sword and goes about impressing onlookers with his tremendous display of swordsmanship. It appears as though Indiana is completely doomed and about to lose his life or limb. But then what happens? All of a sudden Indiana pulls out a gun and without expression nonchalantly shoots his adversary dead. Almost as if it were an afterthought. He shrugs it off and continues about his merry way. And that is what we are going to do today. After all of the debates and intellectually-reasoned arguments of why we should fear the fate of the FDIC, we're going to pull out a gun and shoot the arguments for what they are - lots of hype without merit just like the swordsman.

I have had this discussion with more than a few people offline over the last year or so. People are concerned that they will lose their money if the government is insolvent and cannot replenish the FDIC. Well, the government is in serious straights and most certainly will have a funding crisis. The ability of the government to fund its empire of global meddling is bankrupting the country but FDIC insured deposits are a separate issue.

Typically, the FDIC uses bank fees to fund their insurance pool for insured accounts. This approach should be a constant reminder to banks that their mistakes have a price. That pool is running low because of a reasonably large number of bank failures. (Obviously no where near the Great Depression levels. At least not yet.)

If the FDIC is ever in a position where it cannot raise enough fees from banks to keep their insurance fund solvent, I'm not sure what they will do but I can tell you exactly what they can do. It involves some very complex mathematical formulas, lots of time consuming calculations and countless hours of detailed analysis by a roomful of analysts of the intellectual caliber of Albert Einstein. Okay are you ready? They should print it. And you should write Sheila Bair, Ben Bernanke, President Obama and even that toady Timothy Geithner to tell them to print it. In fact, it would be criminal were the FDIC to ever borrow money from the private market, ie issue new government debt, were its funds ever depleted. New debt to replace money that already exists? Lunacy. Were we to see a terrible banking calamity, all the government would need to do is print the replacement money. It's simply replacing existing savings. Because a bank fails doesn't mean FDIC insured savings must disappear. Even if the FDIC funds are spent.

This is not profligacy, it's not illegal, it won't cause inflation, it won't hurt government bond holders, it won't destroy the dollar or any other fear-mongering statements that can be dreamed up.

The concept of federally insured savings is so that our money will be safe in times of crisis. Print the replacement money. That is society's savings. I didn't use my savings to invest in risky schemes or failed trading strategies or derivatives. Or loan my money to speculators or unsound business ideas. Banks did that. My savings are not owned by any bank and are not part of any bankruptcy proceedings other than my own. My savings are mine and they are federally insured to be safe from criminal banksters, fraud, banking crises and poor business decisions by banks or borrowers.

One of the greatest crimes against the American people happened under the Herbert "I helped create the Great Depression" Hoover administration. Before Roosevelt was elected and saved us from neoliberal economic ideology that ironically also caused our current crisis courtesy of the same neoliberal economics and America's greatest central banking buffoon Alan Greenspan. (That Frontline special I remarked of earlier this week was absolutely abhorrent - indicting Congress, the Clinton administration and Greenspan as complete dolts. Something we now all know.) Anyway the Hoover administration adhered to a concept that is now embraced by some of these fringe interpretations of economics shared by many modern0day Hoover-ites. That is, the only way the economy will cleanse itself is to let the system collapse. Or let the chips fall where they may. This is the ideology of the mathematically challenged. It is apparent anyone with this perspective doesn't understand either complex systems or gaming theory. Otherwise they would disavow such lunacy. And there are some very prominent financial bloggers who believe and perpetuate this gibberish. Bad debts need to be taken care of but this can be handled by any number of actions. None of which involve letting the system collapse or the chips fall where they may. We have criticized this lunacy numerous times. It's the same argument that regulation doesn't work. Or markets are self-regulating as Alan Greenspan argued. In fact, re Frontline, Greenspan argued that fraud should not be regulated. In my opinion, if the Frontline story is based in fact, Greenspan has a primary role in the fraud and ultimate collapse of Wall Street.

Anyway at the onset of economic crisis post 1929 we saw some of this "let the chips fall where they may so the system will cleanse itself" in action when neither the Federal Reserve nor Hoover's administration did anything as banks started failing. Eventually upwards of five thousand banks failed. Before Washington clowns knew what was happening, it was too late. The crisis had metastasized well beyond their worst fears and we were in the greatest crisis in America's history. It was too late to reverse any damage. Maybe they didn't cause the crisis but they didn't do anything to ameliorate the situation either. Along with those thousands of bank failures went the savings of innocent, hard working Americans. Why? Because the neoliberal Hoover-ites (I would classify them in the same category of what we now see as modern-day radical interpretations of Austrian economics.) running the country thought that the system needed to cleanse itself and we'd soon be back to normal. How'd that work out for you? I bet Herbie would do things a little differently next time.

So, what would the Great Depression have been like were the Federal Reserve to have guaranteed people's savings and printed their lost savings as banks failed? Who knows. I don't have the statistics of how much of society's savings was lost. That time would have been horrible regardless but we do know it that were much of society's savings not lost, it would have made some constructive impact on the crisis comparative to sitting back and letting the world collapse. There's some great merit to many concepts in Austrian economics. But there are a lot of fools who have no idea what they are talking about espousing radical interpretations that are pure nonsense.

Our savings should be protected at all cost. Federally insured deposits need to be federally insured. I could care less about troubled banks themselves. Sell them off, let them fail, sell their assets or close them. And if necessary through some course of emerging crisis, the FDIC should bump the limits on savings accounts if that is needed to ensure stability.

There are people in prison who are guilty of much less than what many politicians and central bankers did before and during the Great Depression. And ironically, even after witnessing such lunacy, eighty years later many of these beliefs are still clung to by neoliberal nuts.
posted by TimingLogic at 5:32 AM links to this post

Thursday, October 22, 2009

White House Says Economic Stimulus Has Already Had Biggest Impact

and the future impact will decline into next year. $787 billion stimulus - $194 billion spent = a lot more money to be spent. Can anyone please describe Romer's remarks to me in simple logical terms?

I have no confidence that Christina Romer could tell me which way north is anyway. She's a little like Paul Krugman telling us government's massive debt is saving us from another depression. Government could save us from a depression but not by racking up more debt for wars and banker bailouts.

By the way, what exactly has $194 billion done for you? I didn't get any of it. It hasn't kept people in their homes. Did it go to underprivileged families to pay for rent or meals or health care? I think what it did was allow state and local governments to keep from prudently assigning dollars to necessary government services and cutting unnecessary services and expenses like the rest of us have had to.
posted by TimingLogic at 6:33 PM links to this post

Need A Credit Card? How About 79.9% Interest Rates?

The Gambino crime family would blush. Usury used to be punishable by death. And usury was defined by any interest above typically 7 or 8%. I vote we bring back this law.

Remember, this is courtesy of your government which allows this heinous activity.
posted by TimingLogic at 2:21 PM links to this post

The Rigged Health Insurance Game Is Over

How health insurance companies were ever exempted from anti-trust rules is beyond me. But, the party is surely ending now that the eyes of all Americans are focused on the often heinous acts of these firms. I'm not sure exactly how any of this will turn out but the days of health insurance CEOs making $500 million while denying coverage, canceling policies and essentially in some worst case situations killing people is over. It's time for a little healthy competition.

This brings up a point a friend and I were discussing the other day. Companies are not good or bad. We don't assign human qualities to them. They are just companies. They simply do whatever the laws allow them to do in the name of conducting business. It is government's responsibility to make sure society benefits from the laws created to regulate business. So the tyranny of health insurance companies we see today is the sole responsibility of government which created the laws and allows such tyranny. If government feels as though the only way to enforce morality on insurance company executives is by providing a public health insurance option, well, that's ridiculous. If the United States ends up with a public health insurance option, there could be worse solutions. Like nothing being done. But to enforce morality of the insurance company executives, all they need to do is change the rules to the game.
posted by TimingLogic at 11:49 AM links to this post

The U.S. Government Used Psychological Operations On The American Public

Unless you live in a cave, you now realize the massive Iraq war commentary on nearly every television channel perpetrated by former generals and military officials was a fraud. It came out last year that the government paid all of these spokespeople for their "supportive" role. But, now a legitimate news source is going a step further. It is stating the U.S. government attempted Orwellian manipulation of its people using psychological operations - propaganda - intended for our enemies.

Our government seems unwilling to tell the truth about anything. We have a government that uses national security as a reason to classify documents which should be available under the Freedom of Information Act- because they don't want the public to know what dirty little games they play. A government that believes it is above the law and above the sovereign for whom they work. A government that is not accountable to the people who elect them.

Washington is morally bankrupt. And it is not just as it pertains to this economic crisis. If you aren't already, it's time to get active in politics. Write your Congressional representatives. Vote. Be an agent for change. For a government that serves the people of this country in a completely transparent manner. People often feel helpless but that is ridiculous. We have the power of revolution at the voting booth. Our future is what we make of it.

Declassified talking points for paid military analysts here.
posted by TimingLogic at 10:18 AM links to this post

Dark Pools To Be Regulated

During the height of the boom, we talked about dark pools and the seamy reason for their existence. I received a few remarks from Wall Street professionals that I obviously didn't know what I was talking about. I guess the SEC doesn't either. The corruption on Wall Street is systemic and massive.
posted by TimingLogic at 9:37 AM links to this post

Florida's Unemployed Hits Record

Link here.

During the mid 90's I spent much of my time in Miami. In 2006 a friend sent me the real estate listings of a few condos they were looking at. Coincidentally, one was in the same building as one I was considering a decade before. The asking price had increased almost 400%. Anyone who has been to Miami in recent years knows that the new high-rise condos, hotels and land redevelopment has been nothing short of astonishing. Truly the greatest land boom in its history. Much greater than the one in the 1920s before the Great Depression. Yes, we have seen this game before. As my link in the Columbus Day post cited, history is indeed a weapon. Politicians and Wall Street can line up their lies but I can find substantial historical comparatives to everything we see today. They were lying then as well. A timeless characteristic of a politician is to realize every time their lips move, something dubious is happening. Most likely spin.

At one time I saw a statistic that 17 years of condo supply were either in the process of being built or were planned to be built in the Miami area. I have no idea how this statistic resolved itself with actual units built but I do know many new high-rise buildings are near empty. A friend told me just a few weeks ago that when they look out their window at night some of the new high-rise's on Brickell, a stretch of beautiful high-rise condo buildings has three or four lights on. It's a 50 story building.

"With over twenty-five Brickell condo towers currently completed and ten more planned or under construction, Brickell Avenue has reached a "tipping point" or critical mass to become the most desirable residential neighborhood in Miami."

Miami Beach in particular has gone through boom and bust cycles before. In fact, less than twenty years ago, the city of Miami Beach was falling apart. The Fountainbleu (Where they shot the Bond movie Goldfinger, Eden Roc and others fell into disrepair. Miami Beach's South Beach area had more boarded up store fronts than it did stores. In fact, driving through the area, it looked more like an art deco tenement until revitalization started in the early 1990s.

Miami's real estate market became a magnet for Europeans and South Americans looking to play the weak dollar trade and purchase vacation homes this past cycle. That party is over. Now what? Well, cycles of boom are followed by cycles of bust. Will we get to the point where South Beach properties are again boarded up and the U.S.'s premiere warm weather playground again looks like a tenement? Well, that's really up to the economic policy decided in Washington. But, I wouldn't want to be betting on the Florida economy or sweeping in to buy distressed real estate only to find out there is no recovery. And, there is a lot of big money purchasing distressed real estate right now. They are likely to be punished mercilessly. We wrote on here three or four years ago that real estate isn't likely to recover for a few decades. A fool and his money soon part ways................

As I said on here four years ago, were I to buy real estate anywhere in the world, it would be downtown Detroit, Michigan. End of the world pricing is built into that economy and the skyline is battered. And while it may seem completely hopeless today with neighborhoods crumbling, rampant crime and houses selling for less than $20,000, I believe Detroit is far from dead. But for now, Michigan's unemployed just hit a record as well.
posted by TimingLogic at 9:00 AM links to this post

Wednesday, October 21, 2009

Diet And Depression - Maintaining Balance During Stressful Times

I'm a big fan of Mark Sisson's work. I subscribe to his free newsletter and have generally embraced a similar lifestyle and diet for much of my adult life with noticeable changes in my health and well-being versus when I stray.

Anyway, in today's environment there are tremendous stresses on our emotional well-being from worries over work to the economy and the demands a challenging environment place on our families. I would encourage you to read Mark's most recent post on Diet and Depression. We are finding out more and more how some processed foods and the modern convenience-diet is impacting our physical and emotional health.
posted by TimingLogic at 4:33 PM links to this post

Paul Volcker Is Spot On. Ban Derivatives And Risky Schemes From Institutions Entrusted With Protecting Society's Savings

“The banks are there to serve the public,” Mr. Volcker said, “and that is what they should concentrate on. These other activities create conflicts of interest. They create risks, and if you try to control the risks with supervision, that just creates friction and difficulties” and ultimately fails.

We rambled and ranted incessantly on here about the conflicts of interest and the coming doom of our banking system before this crisis developed. Since then, we have stated explicitly that derivatives and gambling with society's money need to be banned from our banking system. Period. Mr. Volcker is spot on. The only reason these reforms are not being considered is because of corruption. That's it. It's not about morality or virtue or democracy or concern for the common good. You remember the common good? It's explicitly stated in our Constitution.
posted by TimingLogic at 2:07 PM links to this post

How Big Business And Big Government Steal Your Money

I thought since many would consider my last post to come from a liberal partisan source, I would also give equal billing to the same topic discussed by a very conservative partisan source. But....this is not a three minute Youtube video. It's an hour long presentation. The first five minutes are very worthwhile.

The reality is all people in the United States, regardless of political affiliations, values or beliefs have a common interest in this topic. I will say that the speaker in this video highly underestimates the cost of this dynamic. The cost is not so much consumer prices as it is lost trillions of dollars in economic vibrancy and loss of economic opportunity for millions upon millions of Americans.

People have started repudiating partisan politics and started thinking for themselves. And that means there is a commonality in virtues and ideals. For whatever our differences as a diverse people, we all generally share the same virtues. Corruption is corruption. Fair is fair.
posted by TimingLogic at 1:08 PM links to this post

It's Time To Marginalize The U.S. Chamber Of Commerce For Marginalizing America With Its Corporate Personhood Supported Activism

Don't get too hung up on the political messages intertwined with facts on this video. This isn't about buying American. It's about restoring economic dynamism to the American economy by shutting down the voices of mega firms drowning out innovation. The reality is the U.S. Chamber of Commerce does not represent small business, the democratically-driven engine of American ingenuity and economic dynamism. The Chamber is a massive lobbyist in Washington pumping hundreds of millions of dollars into political coffers in the name of mega corporations. This is an attempt to drown out competition and new business creation to serve the stifling policies of mega firms at the expense of society. This is counter to the concept of localization or supporting local business which is a very necessary dynamic for sustainable economics. I believe the U.S. Chamber of Commerce is anything but good for the American economy. It serves monopoly mega businesses which should never exist in the first place.

Link here.
posted by TimingLogic at 11:37 AM links to this post

Finally Some Honesty

The White House's political handlers will probably be on television trying to spin this before the day is up. Vice President Biden didn't mean that we were in a depression. He meant it felt like a depression for those out of work.

I didn't see this live so I can only image the TV host's remarks at the end. I suppose he's one of the savants who believes the world is just fine.
posted by TimingLogic at 10:30 AM links to this post

Unprecedented Corruption Through Usury And Tyranny Continues Unabated

Link here. And what do the children with limited economic opportunity in Compton, California or Youngstown, Ohio receive in return? Economic opportunity, might I add, limited by economic ideology that enriches Wall Street at the expense of society. Why they get the bill, of course.

This is far and away the greatest crisis in American history. We need public banking. And maybe even more importantly, we need to break up the political party monopoly run by corrupt stooges. Stooges have have encouraged this economic terrorism in our economy.

It's interesting to see that the President is on a fundraiser on Wall Street asking for more political money at the time we are supposed to be reforming the financial system and hopefully corporate governance. How much fundraising money would you suppose the President could raise were he to drive home tough financial reform? How about none.

Change you can believe in?
Ha ha ha.
posted by TimingLogic at 7:43 AM links to this post

Tuesday, October 20, 2009

Frontline : The Warning

I usually highlight Frontline documentaries on here since they tend to be good to excellent works of journalism. My dates were off so I had this post slated for next week. The documetary actually starts tonight. That's no big deal because like most Frontline stories, this should be available to view directly from the web.

Many wouldn't be surprised that the seeds for this crisis have been building for a long time. Probably at least 20 years. Some dynamics such as the Nixon move to devalue the dollar by ditching the gold standard goes back 40 years. To believe this crisis is going to be over in six month, as most on Wall Street would have us believe, is preposterous and an outright lie on many levels. Yet were the truth to be told, there is a possibility this country would have a crisis in government with a collapse in confidence. So we play the happy game instead of being honest. Americans can take the truth. On many levels, they already know.

This Frontline documentary is supposedly going to take a look back at many destructive seeds planted by the Clinton administration. It is my perspective that Bill Clinton was most likely the worst President in American history for his many destructive economic policies passed in the early to mid 90s followed by the culmination of the repeal of Glass-Steagall in 1999. A far cry from the consensus of many liberals that Bill Clinton was a great President with minor character flaws.
posted by TimingLogic at 8:07 PM links to this post

Steel Production Capacity In China For 2009 To Grow By More Than Entire Production Capacity For 20 Of World's 40 Largest Steel Producing Countries

That is 20 of the 40 largest steel producing country capacity.......combined. How many bridges to nowhere are they planning to build? Booyah! Link here.
posted by TimingLogic at 11:13 AM links to this post

Signs Of Global Economic Recovery - Steel Production In World's Second Largest Producer Country Hits Forty Year Low

NOT! Link here.
posted by TimingLogic at 11:01 AM links to this post

Global Finance - The Future Of Doom

I would encourage everyone to listen to Lori Wallach on just how corrupt global finance truly is. And how much more corrupt the U.S. politicians really want it to become regardless of what comes out of their lips. This is a very, very, very serious issue. And it is just not the U.S. In fact, Lori remarks how the European banks and political leaders are leading the charge in many respects. Another repudiation of the generally-held belief that this crisis is U.S.-centric. And re-regulation of finance in the U.S. is utter bullshit. The crooks are writing our legislation and the future regulation being considered may be even more unstable. It has become apparent that on most issues President Obama is simply President Bush with a better delivery. If you like neoliberalism as an economic and financial policy, then you have to be one happy camper. All of this is going to take care of itself in a very unpleasant manner.

People really need to think well beyond the obvious debt dilemma of the U.S. to understand how completely shambled the world economy is. The signs of the future are everywhere. From our incessant predictions of a collapse of China, to our predictions of a banking crisis in Russia, to our concerns of meltdowns in Europe, to concerns over the future of the European Union, to the increase in Special Drawing Rights at the IMF, to our writings of a coming collapse in emerging markets on and on and on. Our countless rantings over the years are very unique in their scope and granularity. That's because instead of learning mindless theory out of a Harvard textbook, we were focused on a science-based approach of reality.

These G20 meetings referenced by Lori are nothing more than tea parties for economic idiots. Since when are politicians able to discern what is best for six billion people? Since they have become our overlords. We will eventually experience another global meltdown of some sorts. An unwinding of tremendous global complexity is in the cards. Not just financial complexity either. Remember our posts on possible global supply chain shocks.

As we have stated, we are going back to a self-funded world. Globalization is dead. Global finance is dead. The current economic model is dead.
posted by TimingLogic at 9:27 AM links to this post

The S&P's Low Volatility Ascent - It's An Illusion To Believe Markets Can Be Tamed

We showed a similar pattern with Apple some weeks ago. This is a terribly bearish chart formation. The only question is how bearish.

Some chart formations are more reliable than others. A rising wedge is a reasonably reliable formation for what it reveals is a low volatility, highly controlled ascent. This is reminiscent of the 2003-2007 bull market where Wall Street was able to control volatility temporarily. As we stated re the same dynamic before the 2008 collapse, volatility simply cannot be tamed. And Wall Street is employing the same failed strategies which ultimately led to the debacle last year.

We just hit a major Fibonacci turning point before the last minor correction and another very major turning point is almost upon us. Additionally, it was not a coincidence that we recently remarked one of my trading algorithms did not issue a new buy signal off of the last minor correction as it had after every minor correction off of the March low. In other words, market dynamics have changed. Will that be temporary?

I have another chart which goes with this one and I'll try to get it up this week but I have many posts that are already backed up so we'll just have to play it by ear.

posted by TimingLogic at 5:43 AM links to this post

Monday, October 19, 2009

This Morning Ben Bernanke Tells Us Asia Appears To Be Leading The Global Recovery

And their stimulus appears to be working. Unfortunately, one has to be able to take remarks that are senseless and separate them from remarks that are prescient. And to understand the dynamics of why. Funny that Bernanke was capitulating on his ability to stop the downward pressure on the dollar as we were bullish on the dollar last fall. And just as Bernanke remarked that he lost control of the dollar on the way down, he'll be completely unable to control it if it reverses. Which I expect.

Similarly just as Bernanke remarks constructively on Asia this morning, we highlight a post on the collapse of China.

As I have remarked, I actually like Bernanke. I think he's a genuine bureaucrat who believes he is doing the right thing. That said, he did pull the U.S. economy back from the edge of what would have been complete collapse. Maybe that collapse would not have happened in the first place were it not for the Federal Reserve but that places too much emphasis on the Fed and not enough on the real crises in the economy. Crises caused by politicians.
posted by TimingLogic at 11:01 AM links to this post

Friday, October 16, 2009

China's Auto Sales Rise 78% - The Doom Meter Is Pegged On Extreme Warning, Complete Failure Dead Ahead

As we highlighted earlier this week, central bankers around the world are unwittingly creating or at least contributing to the next liquidity crisis via their activities. So, let's take a moment to look at another future contributor to that dynamic. China. We were a lone voice in our concern over China before the Chinese stock market collapse. Today there are some willing to acknowledge that China is in a bubble. Yet that bubble is often compared to the bubble in U.S. housing or stocks. Not even close. I doubt very many people truly appreciates the scope of horror that is China. They will. Only when they see it. Until then, my remarks will simply be those of a cassandra who maybe luckily called the Chinese stock market bubble.

But first we must cheer the continued incredible economic growth in China as proven by the auto sales report this week. People who focus on the American economy this cycle are missing the biggest global economic bubble in history. The future is going to be very different than almost anyone imagines. The U.S. can easily get out of their crisis in a relatively short period of time. It's only a matter of political will. We'll eventually tear down many walls built by many bears who have been heretofore correct on their assessment of the American economy. We have obviously been correct as well but too many bears have well too many blind spots in their understanding of this crisis and how to overcome it. Maybe I do as well but I can easily discount every single bearish argument for perpetual economic doom in the U.S. And do so with some very easy solutions. Unfortunately, those solutions will never be considered until doom is upon us. Already we see a political establishment who generally believes the economy is on the mend. That means most politicians are back to their favorite games of collecting lobbyist money with one hand and holding babies with the other.

Our premise remains that emerging markets are going to collapse and China remains the biggest crisis in the world. And while many people point to statistics like the one in the title of this post as proof of China's emergence and future economic dominance, it's simply more of the same learned idiots who generally know literally nothing about many words which pass their lips.

Anyone who understands basic economics knows when the capital goods sectors are in recession, money flows to the consumer sector - something we highlighted on within months of starting this blog. It's not very reassuring that nary a single economist has mentioned this dynamic regarding the economy in China. The vast majority of economists and financial wizards simply do not understand economics - an affirmation of Pareto's Principle and/or the Peter Principle, both of which we have written of on here over the years.

So.....Here's a real winner. While the mainstream media pumps this auto statistic and many other data points as proof of the coming Asian century and the strength of the Chinese economy, let's look at reality. The capital goods sectors in China have imploded. Over ten thousand factories have closed. Most likely thousands, if not tens of thousands more than that. It's impossible to get clean data out of a communist country. South Korean firms alone have shuttered over five thousand Chinese factories so reality is likely to be in the tens of thousands.

In order to keep it's economy from completely collapsing, China is extending never before seen credit growth into its consumer sector hence the absolutely surreal auto sales growth over the last half a year => autos are consumer goods. Let's put this another way. The enormous size of China's auto sales growth is in fact a validation of just how bad the Chinese economy really is. Huh? You read that right. In order to keep its economy from completely collapsing, China's very, very small consumer sector must run like gerbils in a cage at speeds never before seen to absorb the massive economic losses from the capital goods sectors. Never before seen. Ever. In the history of mankind. I am not exaggerating. China simply cannot ever balance this equation. Ever. We have talked about the dynamic of a nearly nonexistent consumer sector in China as a huge and growing problem for ages but it falls upon deaf ears as yammering sycophants from Goldman Sachs, McKinsey and others participating in the greater fool scheme blabber about the rise of China. Collapse is imminent.

You won't read any of this elsewhere. That's because the world of economics and finance is in a perpetual haze of lunacy. And as a commenter in our last dollar post noted, you surely won't be reading this from the hazy lunatics at HSBC. They were still pumping the Asian century just this last week.

So.....I wonder how long $2 trillion in currency reserves will last when China is making very high risk loans of truly "junk" quality at a $1.5 trillion dollar a year clip? With an honest GDP of probably $2 trillion. This on top of a decade of already bad loans festering within the Chinese banking system.

This is one area distinct area where I have highlighted differences in my perspective with those of Marc Faber. Marc is clearly not looking at the entirety of the data and interpreting it accurately. The Asian century is a fantasy made up by Wall Street pinheads and a pliant media. And so is the perceived safety of collective currency reserves held around the world. Something we wrote of regarding Russia in advance of its collapse and again as it pertains to China in countless posts. But, then none of this is new in any of our discussions. Just a rehash for new readers.

I can't wait to see the Fed trying to issue central bank liquidity swaps with the central bank of China as they did with other nations during the 2008 collapse. Ha ha ha. That act, were it attempted, would likely be the final nail in the coffin of the Federal Reserve or private banking in the U.S. or both courtesy of a populist mob. Seriously, I fully expect the U.S. and the Federal Reserve will clearly let China choke on its own vomit before this would ever happen. And choke they most likely will.

The world continues to become more and more interesting. And even though it may not appear so on the surface, all of our anticipated outcomes are working quite nicely towards their destination.

As we have repeated time and again over the last four years, the entire world will literally shudder and shake when this cycle ends.

But remember above all, the yuan is going to replace the dollar as the world's reserve currency. And China is going to inherit the economic mantle from the U.S. It's so completely obvious. As obvious as a collapse in the dollar. We highlighted price data confirming our anticipated deflation out of China right before its market again started its downward trend a few months ago. Wait till China panics and tries to produce its way out of this crisis using any forms of export subsidies and manipulation it can muster. It's nearing the time for another yuan devaluation. Just in time to reward foreign purchasers of newly minted China bonds. All of these dynamics will make global politics really interesting.

Maximum U.S. exposure to China? Wall Street and American multi-nationals - another substantial reason why anti-trust regulations should have been enforced. American multi-nationals are almost all monopolies as are all Wall Street banks. No American firm would be disproportionately exposed to China or any risk-laden market were anti-trust regulation enforced. We've seen Federal Reserve bailout after bailout of mega American banks involved in emerging market risky schemes over the decades. Never on a scale anywhere near that involving exposure to China.

Unlike others who believe the Fed can manufacture a devaluing of the dollar for benefit of "inflating" their way out of this crisis, contrarily I believe the Federal Reserve has lost complete control of the dollar and as any ability as lender of last resort to a global economy. Those who view monetary policy of the U.S. in a vacuum are missing a much larger impact placed on the dollar being the world's reserve currency. Because the world is focused on the U.S., the next crisis will catch everyone off guard if it comes from abroad or because of global dynamics. Being caught off guard includes Wall Street.

Party hard. The world is not as it seems. And it most definitely isn't as the media, politicians or Wall Street would have us believe.

China's auto sales up 78% story link here.

And the future of China's auto sales can be gleaned from this story here.
posted by TimingLogic at 5:32 AM links to this post

Thursday, October 15, 2009

Blood Sucking Lobbyists Converge On Washington To Shape Financial Reform

posted by TimingLogic at 6:07 PM links to this post

Administration Fights To Protect Secret Propaganda Budget

Score one for the tin foil hats. George Orwell would be proud.

posted by TimingLogic at 11:45 AM links to this post

Foreclosures Hit Record In Third Quarter

posted by TimingLogic at 11:36 AM links to this post

The Goldman Sach's Steps To Billionaire Success

Let's celebrate Goldman Sach's enormous profits, almost exclusively achieved by extremely risky schemes with taxpayer money, with a look at how we too can replicate such success.

But first, Dylan Ratigan told us yesterday that Wall Street is expected to pay out $140 billion in compensation for playing Ponzinomics with our money and our economy. If we had a public banking system, none of this tax on capital would exist. And all of these profits are nothing more than a tax on capital. And as such, they are killing our economy. Were we to have a public banking system, any profits could be funneled into health care or to rebuild our country or into scientific research benefiting society or education our countless other beneficial endeavors.

A public banking system would be serving the purpose banking is meant to serve in a democratic society. That is, to increase the capital stock of society. That includes investment in underprivileged citizens who are completely marginalized by public banking. A dynamic which clearly perpetuates chronic poverty amongst a class of society while other undeserving taxes on capital like private equity squander our wealth on financial games and extort billions of dollars out of the economy in the process.

Public banking is the scourge of humanity. Anyone who believes our finances would be better served in the hands of private bankers in lieu of very strict Constitutional controls and substantial transparency of a well-designed public banking system, which democratically serves society, is perpetuating an ideology not backed by any sound reason. By the way, our calls for a public banking system are rather interesting given Marc Faber's comments that India's central bank may be the only competent central bank on earth. Guess what? India's banking system is generally a public one. Coincidence? I think not. This decision was made out of virtue not at the hand of a lobbyist toting billions of dollars. Maybe our politicians should read the Bhagavad Gita before contemplating financial reforms.

How can one not become more galvanized for transformational change by the sheer crookedness of how this crisis has been handled and by the magnitude of suffering we see because of it? Absolutely heinous examples of greed while a substantial number of people in the America are unable to provide shelter or basic services to their families. Wall Street is completely morally bankrupt. The fact that our politicians are relying on lobbyists from the financial sector to determine the future of financial regulation, trade, health care and a substantial other of self-serving issues, seems to me to be no less than treason. If not legally, then surely morally.

Corporate personhood absolutely must be revoked as an absolutely corrupt interpretation of our Constitution. It's time for a Constitutional review striking down this particular instance of judicial activism from the Supreme Court. Activism clearly not intended in the checks and balances of our system of governance.

posted by TimingLogic at 10:37 AM links to this post

Why Haven't We Seen Any Financial Reform? Maybe Because The Government Decision Makers Are All Former Bankers With An Allegiance To A Failed Ideology

There's surely nothing wrong with working for a bank or Wall Street. But, over the last few decades Wall Street has more and more become a leech on society. Draining capital rather than supporting the creation of it. So, now when we need government to step up and restore the role of our financial system, instead absolutely nothing has changed. Why? Because the vast majority of people working on Wall Street truly have no clue what their role in society is other than to line their own pockets with money. And that in itself has a self-fulfilling prophecy by attracting people who often have no other goals. So, when these people are hired into the Treasury what would we expect to see? Support of the system which served their personal desires all too well.

Why not hire a Jesuit priest to or a Buddhist monk to run Treasury? Seriously, I would much rather have a kindergarten teacher running Treasury. Why? Because I know anyone who is a kindergarten teacher is almost assuredly not driven by greed and would most certainly have some virtuous qualities. Not to say Wall Street and virtue are mutually exclusive. But Wall Street executives are beholden to a failed system and I honestly don't believe the vast majority have any conscious realization that our system needs to be transformed. There are enough public servants in Treasury to assist anyone in making reasonably appropriate decisions if heads of Treasury departments were willing to listen to them. Instead our government policy makers continue to perpetuate an elitist class which is self-serving by handing jobs to friends and associates who are qualified. Wink, wink.

Link here.
posted by TimingLogic at 9:20 AM links to this post

Wednesday, October 14, 2009

Robert Reich - The Audacity Of Greed : How Private Health Insurers Just Blew Their Cover

I still haven't put of my post on how I believe health care should be reformed but I will get it up. I think you'll be very, very surprised at the common sense of how easy reform could be. And how it would drive substantial new innovation into the economy. Maybe I'll try to type it up this weekend. In the mean time, here's Robert Reich's commentary.
posted by TimingLogic at 4:21 PM links to this post

JP Morgan's Profits Are The Largest Theft In The History Of Mankind

posted by TimingLogic at 4:13 PM links to this post

SEC Dragging Its Feet But To Eventually To Look At High Frequency Trading After Banning Legalized Theft Of Flash Trading

Link here.

Of course, one of the "experts" cited in the article thinks high frequency trading is just right. You know, like the porridge in Goldilocks and the Three Bears. So how many of you have access to the floor of the New York Stock Exchange where you are able to plunk down a computer capable of high frequency trading? Of course it's just right. Explain it to an average American and I'm sure all of them would know intuitively in their gut it was perfectly fair.

I wonder how many people have given thought to a particular dynamic driving all of this? The NYSE used to be a not-for-profit corporation. Then guess what? John Thain, yes that John Thain who used millions of shareholder dollars to remodel his Merrill Lynch office with extravagance reminiscent of the gilded age, became boss man of the NYSE when he left, you guessed it, Goldman Sachs. Mr. John, as we'll call him since he spent what? $35,000 on a commode for his office, then proceeded to make the NYSE a for-profit public corporation. Now with the insatiable desire for profits, the NYSE would be open to manipulation by large financial firms. Just like the manipulation of Congress in their desire for profits. So, I wonder who initiated these discussions of high frequency trading and flash trading? Possibly firms such as Goldman Sachs?

How much foresight might have been given to this type of effort? Was the NYSE targeted to be made a for-profit corporation by Wall Street firms because they could then use asymmetric access to information to heist money from other investors and society? It is this very dynamic that has allowed them to purchase nearly guaranteed outcomes via lobbying our government to the tune of billions of dollars. Unfortunately since government is blocking any investigation into these crises, we can only guess. But it's a plausible guess.

Interestingly, a newer article has come out since I tagged the first one for post. 36% of attendees to a Frankenstein finance event believe high frequency trading could present a risk to the stability of financial markets. The other 64% were asleep at their desks. And 70% of attendees believe the SEC is also sleeping at their desk in reference to high frequency trading. The other 30% are minting profits courtesy of the SEC's sleeping habits or are busy assisting Congress to ensure the SEC remains asleep at their desk.
posted by TimingLogic at 2:38 PM links to this post

Nuclear Battery With The Potential To Exceed One Million Times Power Density Of Existing Chemical Counterparts

This is why politicians should stay out of picking technology winners and losers or trying to "manage" innovation in the economy. Did a politician dream this up? In fact, were politicians determining what technology should power batteries or cars or anything else, we'd likely be riding in a horse and buggy. What has any politician added to the capital stock of society? Ever?

Politicians meddling in our economy means solutions to problems will be political instead of based on merit. And please, I don't care how smart some people believe any politician is. No politician is ever smarter than an open market where 300 million people's ideas can compete based on merit. You remember merit? How about we bring back merit. Except we do it for everyone this time.

How many great new ideas are out there stagnating because merit has been thrown out the window? How many people are labeled as lazy or unwilling to work by cronyism and corruption yet these people are really just marginalized because merit and hard work aren't valued by cronyism? How many heads of household are denied an ability to earn a decent wage because cronyism and corruption has decided their fate?

We don't need any more Harvard or Yale educated elites trying to manage the economy. It is exactly this very reason why we are in this crisis. The President and our elected servants are not our lords. They do not have magical powers of decision-making or superior intellect. Politicians aka servants should be seeking to restore the democracy they were elected to serve and defend. They should be seeking to unleash democratic merit onto the market by vanquishing corruption and cronyism in our government and in our economy. Instead they are perpetuating it at every turn. They'll look mighty stoic as they go down with the ship.

Link here.
posted by TimingLogic at 7:02 AM links to this post

Tuesday, October 13, 2009

Letter From Congressman Grayson - Stop Bernanke's Reappointment Until We Know Where Our Money Went

Congressman Alan Grayson is someone who obviously understands the populist outrage at Washington and he is channeling it for his personal gain. There's absolutely nothing wrong with that. That is how our political process should work were it not for the fact that monied interests have corrupted that process. I thought Grayson's letter was worthwhile so I'm posting snippets of it on here. I would encourage you to go to UnmaskTheFed.com and contact your Senator as the Congressman implores us to do.

Last week, Ron Paul and I sent a letter to the Senate Banking Committee about the Chairman of the Federal Reserve, Ben Bernanke.

Before he is confirmed for a second term, we think the Senate and American public should know who got the $2 trillion the Federal Reserve has lent out over the last two years. Only then will the Senate be able to judge whether he should keep his job.

It's important that the Senate hear from you. That's why we've launched UnmaskTheFed.com, an easy online tool to let you contact your Senators.

Visit UnmaskTheFed.com and ask your Senators to vote NO on Ben Bernanke's confirmation until the Federal Reserve comes clean on what it has done with OUR money.

It would simply be unreasonable for the Committee to confirm Bernanke to another term given how little is known about what he has actually done. Remember, Ben Bernanke didn't see the crisis coming and has added $1.2 trillion to the Fed's balance sheet through covert bailouts..................

....................It's the Senate's responsibility under the Constitution to properly question and debate any of the President's nominees. Without these documents, I don't see any way they can live up to that responsibility. Help me make sure they do.
posted by TimingLogic at 5:00 PM links to this post