Archive - Sep 16, 2013

The always-truthful and ever-trustworthy Tokyo Electric Power Co. has released a statement that says "Typhoon Man-Yi caused no major damage at Fukushima." That's great news - if it's true - but the follow-up to that is perhaps a little more concerning. As Kyodo News reports, TEPCO has released the excess rainwater, that has collected between the barriers around radioactive storage tanks, into the ocean. We are reassured though, as officials stated that the level of radioactive substances in the accumulated rainwater was below allowable limits at 30 becquerels per liter (except The Tokyo Times reports some was emitting 170,000 becquerals per liter). All good then...

As more details emerge about today's suspected Washington Naval Base shooter, we find something else curious. AFP reports that Aaron Alexis had been working as a defense IT subcontractor for computer giant Hewlett Packard, according company officials said. Aaron Alexis, a former naval reservist, had been employed by a firm working on an HP contract to upgrade equipment used by the US Navy and Marine Corps, HP spokesman Michael Thacker said in an email. "Aaron Alexis was an employee of a company called 'The Experts,' a subcontractor to an HP Enterprise Services contract to refresh equipment used on the Navy Marine Corps Intranet (NMCI) network."

A decisive tipping point in the evolution of American capitalism and democracy - the triumph of crony capitalism - took place on October 3, 2008. That was the day of the forced march approval on Capitol Hill of the $700 billion TARP (Troubled Asset Relief Program) bill to bail out Wall Street. This spasm of financial market intervention, including multi-trillion-dollar support lines provided to the big banks and financial companies by the Federal Reserve, was but the latest brick in the foundation of a fundamentally anti-capitalist régime known as “Too Big to Fail” (TBTF). It had been under construction for many decades, but now there was no turning back. The Wall Street bailouts of 2008 shattered what little remained of the old-time fiscal rules. There was no longer any pretense that the free market should determine winners and losers and that tapping the public treasury requires proof of compelling societal benefit.

Seth Klarman's Baupost Group will be returning money to investors at year-end. As II Alpha reports, though the amount has yet to be determined, this would be only the second time the hedge fund has returned money in the firm's 31-year history. With the world of asset managers, as we recently noted, increasingly become herd-like beta-chasers, it seems Klarman - just as he noted earlier in the year - will return capital unless investment opportunities dramatically increased - and that hasn't happened.

One would think Laura Dimon, the daughter of one James Dimon, would be on familiar terms with such concepts as bonds, capital structure and finance (especially the more arcane substrata thereof). After all the father of the graduate from the Columbia School of Journalism (author of such previous pieces as "The Last Office Taboo for Women: Doing Your Business at Work" which examines "the lengths women go to avoid getting caught in the stall") is none other than the CEO of the largest bank in the US, best-known for such "one-time items" as constantly recurring legal charges associated with financial innovation gone horribly wrong (today's rumor of a $750MM settlement over the bank's London-based prop trading group being a case in point). As it turns out, one may be mistaken...

Now the Apple-Gold relationship is just getting silly...

The number whispered on Wall Street is $10 billion (or $14-$15 if you ask The Saudis), but potential investors in the micro-blogger’s IPO will need more to go on than simple valuation math and guided judgment.  As ConvergEx's Nick Colas notes, Tech firms are particularly dependent on innovation and human capital for their viability. So while Twitter may come out with a double-digit billion dollar IPO, Colas points out the most important question – Is it actually worth buying there?  The bottom line to the success of thriving tech companies (historically names such as Amazon, Google and Apple) is that they consistently and reliably build products that people want to purchase and use.  Colas explores multiple avenues to determine whether Twitter has the engine to do this, or whether it could emerge more “Groupon” than “Google” in the public company tech arena – and the answer lies in how you weigh the pros and cons of our top 10 points related to the social network’s IPO.

"Right now, people continue to believe that the same idiots that created all of these problems, namely the central banks, are going to somehow get us out of it with the exact same policies that got us into it," is the subtle manner in which the outspoken Bill Fleckenstein describes the 'fantasy' in which most Americans live during this wide-reaching interview. "We’ve had so much artificial stimulus, and we’ve misallocated so much capital;" he adds, warning that Americans "believe in the lunatics at the Fed, and the rest of the Western world is that way (as well)." His conclusion is clear, "as the fantasy dies, then they will understand the need to own gold," and if the Fed tapers and is forced to un-Taper, "more people will see that the Fed is trapped."

Amid the 100 year anniversary of the creation of the Federal Reserve, it is absolutely imperative that the American people understand that the Fed is at the very heart of our economic problems.  It is a system of money that was created by the bankers and that operates for the benefit of the bankers.  The American people like to think that we have a "democratic system", but there is nothing "democratic" about the Federal Reserve.  Unelected, unaccountable central planners from a private central bank run our financial system and manage our economy.  There is a reason why financial markets respond with a yawn when Barack Obama says something about the economy, but they swing wildly whenever Federal Reserve Chairman Ben Bernanke opens his mouth.  The Federal Reserve has far more power over the U.S. economy than anyone else does by a huge margin.  The Fed is the biggest Ponzi scheme in the history of the world, and if the American people truly understood how it really works, they would be screaming for it to be abolished immediately.  The following are 25 fast facts about the Federal Reserve that everyone should know...

No, it wasn't Larry Summers...

Until now, there was mostly speculation and conjecture that among the Syrian "rebel" parties assisted by the Obama administration and the west in their attempt to overthrow Assad, are various groups either supported or comprising of factions consisting of Al Qaeda, Jihadists and other extremist Islamic group. That speculation is now fact according to extracts from a British defense study published in Monday's Daily Telegraph, according to which Jihadists and members of hardline Islamist groups make up almost half of forces fighting against Syrian President Bashar al-Assad. As AFP reported, the analysis by defense consultancy IHS Jane's, due to be published in full later this week, puts the number of rebel forces at around 100,000. And half of this number are combatants on an ideological crusade against the west, who are partially or fully affiliated with Al Qaeda, and who will always seek a sponsor when carrying out whatever military operation is most profitable at any given moment. With Made In The USA weapons that is.

We have discussed RINs a number of times in the past year - pointing out the surge in the price of these ethanol credit-related derivatives and how they are the gas-market's four-letter word. As we explain below, the NY Times notes that the recent surge in the price of this little-known financial instrument - which was in large part responsible for the rise in the price of gas at the pump - could have been manipulated by JPMorgan's alleged stockpiling. As they note, the market in ethanol credits is exactly the kind Wall Street loves: opaque, lightly regulated and potentially very lucrative; and the ability for a major player to build a stockpile of these credits (effectively cornering the market) is relatively straightforward given the lack of detailed regulation. As Senator Thomas A. Coburn, Republican of Oklahoma, notes "When you see something change as rapidly as this, somebody’s hoarding them, somebody’s buying them, somebody’s making big bucks."

First, Summers steps away; Second, Geithner politely declines; and now - just as his odds of becoming the next Fed Head begin to rise, Donald Kohn drops the following headline bomb-shells at a Brookings' event this morning

KOHN: BAIL-IN NEEDED TO PROTECT FINANCIAL SYSTEM FROM TOO BIG TO FAIL FIRMS
KOHN: VERY EASY MONETARY POLICY CAN CREATE DANGEROUS RISKS
Kohn: Problems can arise when one policy [monetary or financial regulation] is leaning so hard in one direction

That should be enough to effectively remove himself from the running... It seems we are back to the lowest common denominator Fed-head - so much for American exceptionalism again.

It is very easy to begin taking the whole of the world terribly serious, and forget the legitimate absurdity inherent in our culture... look at it for a moment, and ask yourself, what in the hell, exactly, are we doing? We've always tried to maintain at least a moderate sense of humor in our writing, but even we are finding it more and more difficult to simply laugh.  Even in the worst of times, humor is precious.  It is an exceedingly valuable tool in waking up the masses, and sometimes a thousand verifiable facts might not have the same effect as a single enlightened joke.

Below is the latest summary of today's tragic mass shooting at the Washington Navy Yards which has led to 13 deaths so far.