Guest Post: Savings Vs. Profits

The bad news is that the earnings recession is far from over. Earnings and businesses in general will have to adapt to the new economic landscape of savings. That means cost-cutting, streamlining, wage deflation, unemployment, capital destruction and margin-squeeze across the board.

The good news is that the macro economy – despite many government efforts to stop this process – is now finally on its course towards a long-term, sustainable equilibrium. We will return with more details later on how such an equilibrium might look.

Guest Post: A Grand Unified Theory Of Market Manipulation

There is much speculation and anecdotal information regarding the rally that began March 6 2009, which have suggested the gains are the result of massive manipulation on the part of the Federal Reserve (FR) and the large institutions that dominate Treasury securities dealing, program trading and the derivatives markets. Traders have reported that traditional indicators and metrics used for market analysis stopped working for periods of time or altogether, and that correlations among markets have been erratic and quick to change. Record program trading by Goldman Sachs as reported by the NYSE, heightened focus on high frequency trading (HFT), outsized profits by the large and well-connected banks, along with unprecedented intervention by the FR in the markets only fuel the manipulation speculation.

Guest Post: Dr. Blankfein, Or: How I Learned To Stop Worrying And Love Goldman Sachs

The Financial Crisis was a Hoax. The global casino is open again.

No worries!  You actually believed there was a problem when Paulson and Bernanke threatened Congress last year with Martial Law; to blast the U.S. economy back to the 16th century; to crash the market unless ransom was paid requiring each American to fork over $100,000, give or take, dollars in impossible-to-payback future loans today to add to the hundreds of thousands each American already owes forever.

HAHAHA. It's all good, bro.

Frontrunning: August 3

• Goldman Sachs' reputation tarnished (FT)
• HFT Recap:
  • Paul Krugman - Rewarding bad actors (NYT)
  • RIse of hte machines (Economist)
  • Countering High-Frequency Trading (Strategic Reasoning)
  • Tradeanator 2: Settlement Day (YouTube)
• Wall Street profits from trades with the Fed (FT)

Daily Highlights: 8.03.09

• Asian stocks rise, as Mitsubishi UFJ leads banks higher; Nissan advances.
• Bank, auto shares jump in Japan; Topix hits 9-month high but Nikkei fractionally lower.
• Britain's manufacturing sector grew in July; pound rallies on the news.
• Cash for Clunkers program could end unless Senate approves $2B in addln funding.
• China's Manufacturing grows in July as lending, stimulus counter slump in exports.
• China shares hit 14-month high as surveys show manufacturing is expanding.

On The Triviality Of Campaign Promises And "Letting The Process Work Its Way Through"

Some more memorable blue pill moments brought to you courtesy of Washington D.C.

Weekend Reading

• More on GDP:
  • GDP Report is just plain wrong (Chris Martenson)
  • Wacky waving inflatable arm-flailing GDP report (Melting Pot Project)
  • Been down long long it looks like up (Econbrowser, h/t Paul)
  • Falling Imports versus falling Exports (Ritholtz)
• The next brewing scandal: Chase serves itself first in mortgage mods; MBS bond holders up in ARMs (DebtWire, h/t Paul) - "You have Barney Frank and the government raising all this noise about hedge funds and investors, and you have Chase … taking half the borrowers’ interest payment each month"
• Who is Capco? (NYT)