This page has been archived and commenting is disabled.
Observations On Financial Heroin From Don Coxe
More lucid insight from the brilliant mind of Don Coxe, who this month focuses on Ben Bernanke's one and only specialty: the soothing short-term affect on pre-terminal symptoms of addictive, and very deadly, financial heroin.
On those who dispense heroing to soothe the symptoms, and on those who actually make things better.
If Ben the Heroin Hero stops the infusions in time, he will deserve to be mentioned in the same breath as Paul Volcker—a real hero….
Because he will have done the brave thing—at the risk of the loss of his job and of the Fed’s independence.
Already the Pelosi Congress is considering legislation that would (1) subject Fed monetary policies to review by the Congressional Budget Office, and (2) strip the Fed of its supervisory authority over financial institutions, handing that power to a new agency created by Congress—presumably in the image of its Creator. The same politicians who applauded so vigorously as Fannie and Freddie debased the lending requirements for mortgages and expanded their balance sheets so recklessly, now seek to apply that expertise to supervision of the entire banking system.
Last week, Volcker, the man who has done more than anyone in modern history to design and deliver sound regulation to international banking, told a London audience what he thought was good and what was bad about today’s banks.
Volcker said the “single most important contribution” they’ve made in the last 25 years was introducing ATMs. ATMs meet, he said, the test of being “useful.” Apart from that, he had nothing good to say about commercial banks that behaved as investment banks. He agreed with the head of Britain’s Financial Service Authority that such banks are “socially useless.” He said derivatives, such as credit swaps and collateralized debt obligations, had taken the economy “right to the brink of disaster.” He noted that the economy had grown faster during the 1960s when such instruments didn’t exist.
One shocked member of his fi nancial audience challenged his dismissal of modern finance, and the magisterial Volcker huffed, “You can innovate as much as you like, but do it within a structure that doesn’t put the whole economy at risk.” He reiterated his support of Soros’ view that “proprietary trading should be pushed out of investment banks to hedge funds where it belongs.”
On weapons of financial mass destruction:
Volcker is right. The collateralized debt obligations, collateralized mortgage-back securities, and other computer-spawned complexities and playthings were not the solutions to basic needs in the economy, but to unslaked greeds on Wall Street. Without them, banks would have had no choice but to continue to devote their capital and talents to meeting real needs from businesses and consumers, and there would have been no crisis, no crash, and no recession.
Bernanke would doubtless concur, although he doesn’t dare say so in public. He is engaged in a multi-trillion-dollar rescue operation to save the global economy from collapsing under the weight of toxic derivatives and bad trading bets.
When will he take the risk of stemming the heroin flow?
As the 1970s demonstrated, the longer central banks wait to scale back on above-trend money growth, the worse the ensuing infl ation—even when the economy slides back into recession. It would seem that the appropriate year-end advice for levered bettors on US stocks and corporate bonds is, “Enjoy yourself, it’s later than you think.”
Lots has been spent: yet it is seemingly never enough:
After previous deep recessions, the snapbacks were dramatic, as inventory liquidation turned to inventory accumulation, and layoffs turned to callbacks. Despite all those trillions spent and all that monetary stimulus, the US economy has moved only from the critical care ward to the ambulatory convalescent wing.
With winter coming on, Bernanke, Obama & Co. could soon be of the same view as the despairing Lady Macbeth: “Nought’s had; all’s spent.”
And how to invest in the face of an endless bubble:
In brief, as long as you don’t try to delude yourself that you’re a value investor when you’re buying the typical non-commodity and cyclical components of the S&P or the Russell 2000, you can console yourself in the knowledge that this particular bubble may not be ready to burst for some months.
However, the amount of Bernanke pumping needed to keep it afloat is increasing, which suggests even he can’t keep this bubble alive much longer if the real economy fails to take wing. Despite a huge upside breakout of the Monetary Base in the past two months, the S&P has moved up just a tad. Even that move is suspect, because it has been accompanied by a plunge in short sales of non-financial stocks, and lackluster volumes.
Today's must read
h/t Mike
»
- 7914 reads
- Printer-friendly version
- Send to friend
- advertisements -
Harvard Swaps Now Toxic
http://www.bloomberg.com/apps/news?pid=20601087&sid=aHQ2Xh55jI.Q
Speaking of financial heroin and
not tracking underlying assets,
here's news on the UUP Double Dollar ETF...
Dollar ETF Issuing More Shares as Demand Soars MARKET, STOCK MARKET, DOLLAR, CURRENCY, UUP, POWERSHARES DB US DOLLAR INDEX BULLISH FUND Reuters | 18 Dec 2009 | 02:09 PM ETThe PowerShares DB US Dollar Index Bullish Fund is seeking to issue 240 million new shares to keep up with demand from investors betting the U.S. currency will continue to rally.
Volume in the exchange traded fund, which tracks the U.S. dollar, has spiked sharply in recent days.
Also known as the UUP fund , the ETF has rallied nearly 5 percent since late October and has coincided with a bout of strength in the U.S. dollar index, which has added 4.4 percent over the same time.
The US dollar, seen as a safe haven by investors, is now at a 3-1/2 month high to a basket of currencies after having slumped 12.6 percent since hitting a peak in early March when aversion to riskier assets was at a high.
"There has been a pretty good uptick (in the fund's volume) lately," said Tom Lydon, President of Global Investment Trends in Newport Beach, California. "There are many thinking that the dollar may have hit a low."
"(The fund) is still below its 200-day moving average, I would say that would be a major bullish sign for the dollar if it went above," he said.
Some analysts point to concern over the strength of the economic recovery in Europe as well as increased optimism in the United States as underlying causes behind the dollar's recent strength.
Trading in the fund was briefly halted on Friday while DB Commodity Services, a subsidiary of Deutsche Bank AG, announced it had lodged the request to issue shares with regulators.
URL: http://www.cnbc.com/id/34481606/
"Despite a huge upside breakout of the Monetary Base in the past two months, the S&P has moved up just a tad."
Even though there has been a high increase in the monetary base, credit is contracting, many real assets such as real estate are still falling and there is no job growth. Creating a huge amount of money that the banks either buy Treasuries or place with the Fed is not actually putting more money into the economy, and as equities should be a reflection of either asset appreciation or earnings, it seems hard for the S&P to break the 1120 resistance without a great deal of assistance, even with these light volumes.
dispense heroing
magnificent!
The only thing wrong with drugs is that sooner or later you have to come down. Don't ask me why, that's just the way it is. The crash can happen for any number of reasons......or because of a black swan. You can keep on speculating in this market, but my advice echoes Rothschild's, "The secret to my investing strategy is that I always sold too early."
The financial system Bernanke is shooting up is about to go to jail.....where not even methadone nor suboxone are allowed for heroin withdrawal. It'll be cold turkey for every investment except physical PMs.
"The only thing wrong with drugs is that sooner or later you have to come down."
The other thing wrong with drugs is they build a tolerance. So Bennie has to dispense mo' heroine and mo' heroine to get the same financial high... it all ends badly when Jamie Dimon OD's on the last fix...
So, if the Fed charges you zero percent interest on USA dollars it loans you, then those dollars are a better deal for you, and therefore you are willing to pay more for them, and therefore UUP is going up in price? Sounds like an ARM mortgage. If the ARM mortgage charges you artificially low interest rates for the first few years, you might as well get as big an ARM as you can, and try to remember to flip the house before the inevitable large later interest rates kick in, so that you don't go bankrupt then.
I like your ideas and thoughts. by chat sohbet Greetigns..
While I agree with much of this, I think it is far too upbeat and optimistic. It seems to me that there is an underlying assumption that prudent investors can relatively easily coast through the coming financial meltdown. That the US economy (and society) is increasingly faster flushing down the drain is pretty much a given. But it will NOT be business as normal for the rest of the world. Certainly NOT for Canada, although I am convinced that we will fare better than a lot of countries.
Everything I have heard or seen or read in these past months suggests that the United States, Great Britian, the European Union, China, etc. have not realistically faced up to the hard decisions yet that are going to have to be made.
What the world needs right now is a half a dozen (probably more) carismatic leaders of the caliber of Nelson Mandela with the support of numerous professionally competent support personel with high moral & ethicial standards. And the support personel are there. I see some of them.
In your United States, one such individual who has certainly impressed me is William Black. Put him in charge of reforming your financial systems. As for who will spearhead the change in the United States, if he in the public eye yet, I don't see him yet.
Your current snake oil salesman, slick and articulate and carismatic as he is, is NOT the one.
Does it seem to you that right now everyone who thinks they see the coming Tusanami is holding their breath? Just waiting for the initial signs, knowing that is coming. Feeling powerless to stop it or divert it.
It feels that way to me.
7 days until Christmas, 13 until the end of the year.
I HOPE that the future will improve.
I believe it will eventually , if not (probably not) for us, then for our grandchildren.
What's coming is GLOBAL, no one will be untouched.
I have the feeling we're almost at the top of the mountain, but look the wheels are starting to slip back and. . . .
In the end, there were 2 options left. Do nothing and collapse into the black hole of deflation or feed it and grow, hopefully stopping it before the supernova of hyperinflation.
The key is keeping everyone in a state of suspended disbelief. Much like a James Bond movie. You forget that most of what you see is impossible because you are enjoying the ride and don't want to think too hard. The hypnosis will be broken when they try to fly a helicopter upside down (or run out of popcorn).
The interesting thing about black holes is that when they form, there is typically a shock wave which blows off the bulk of the star's mass prior to the contraction that ultimately leads to passing the Schwarzchild radius - in essence, the outer shell causes the core to bounce violently then implode, and it's the density of the resulting implosion that is responsible for the superhigh densities necessary to form such a black hole. Of course, from the outside, you get what amounts to a hyperinflationary explosion, and it's only after the debris clears (and the jets form) that you can actually tell that the star's ripped a hole in space.
What I find so disturbing about macroeconomics is that it's parallels to astronomy is disturbingly strong. There are times that I feel we've only just noticed that the universe has effectively frozen in time looking skyward, and with awful realization we've slipped past the event horizon without being aware of the fact - and the only thing we have to look forward to is being torn about by gravitational forces.
+1000000
If there is a currency traders here,can you explain the following?.Usually,when currency's b interest rate is higher than curreny's a,then currency b futures are higher than cash rates. But I am noticig that this is not the case with AUD/USD. The future AUD is= or even < than the current exchange rate,despite the much higher Austaralian interest rates. Any body with info on this would be appreciated...
The dollar rally I forecast, continues to trend up (although overbought now after it's big run.)
Daily charts of key equity indexes are still showing symptoms of breaking down.
http://www.zerohedge.com/forum/market-outlook-0
http://www.southparkstudios.com/clips/155898
"Chasing the Dragon" has worked well for numerous ambitious individuals: Kurt Cobain, Layne Staley, Shannon Hoon, Andrew Wood, Phil Anselmo... wait, Phil lived.
can you allwo printing of the document, please. thanks
Financial Heroin: The song Needle and Spoon from the album Raw Sienna by Savoy Brown:
Some say I am a wise man,
Some say I am a fool
But I need a little something to keep my cool
I sleep with the sun and I rise with the moon
but I feel alright with my needle and spoon.
Only one thing that worries my mind,
the stuff can kill you and seems unkind.
If you are married you can divorce your wife,
but when you are married to H you are married for LIFE!!
We can thank Alan Greenspan for getting us hooked on H. Now with rates at zero, we continue to punish savers (the non users) at the expense of the banks (the drug pushers).We delude ourselves into thinking everything is ok because we prevented asset prices from crashing to quickly (the high)but at the expense of future growth (their goes the neighborhood!!). Last but not least, now that drug pusher bank infested private sector over indebted consumer is finally trying to delever, the govt is jumping in and transfering the risk for all of us to suffer together.
Great album by the way . 1970 classic -
Volker talks symptoms like all the others w/ zero reference to the real cause, fatal demographics, understood perfectly by bankers cashing out by all means possible, fraud being the most effective method condoned & encouraged by complicit regulators/gov etc.
Coxe mentions it once in relationship to 3rd worlds. useless farts.
"hey there's a credit vacuum coming down the pike, let's steal everything we can & smash the rest to smithereens. that'll teach the fuckers what happens when they stop borrowing our ponzi counterfeit interest-bearing shit because we overloaded them".
an alien watching proceedings from Venus might come to the conclusion within the Anglosphere Canada, Oz & NZ will be spared to a degree as UK & US self-impale for political exigency as obliged by the pyramid people's dictat to preserve oil reserves.
FreddyInBangkok,
My wife and I used to live in Bangkok, and I am continuing to build my network of financially aware/employed denizens of said fair metropolis for if/when we are able to return. It's awfully cold in Toronto, and there is little doubt that Asia will be the epicenter of global finance once this deflationary/inflationary spiral runs its course. How might we connect outside of this forum?
Continue to de leverage as fast as you are able to.
Once the interest rates start to rise, your debts (If any) will be impossible.
ATM's were a Drug when I was young, easy cash all the time. However Fees were the cats meow to the bank. I finally bought a vault and store monthly cash inside it. That eliminated ATM's and thier associated bleeding of fees.
Lots has been spent and, yes, it is never enough. Yet, there always seems to be a practically unlimited of money available to create, to spend. The barrel bottom should have been scraped long ago.
Canada and Australia have home bubbles, Coxe is not addressing this at all and is recomending over weighting there.
ALL risk assets around the world are over valued and will fall. Nowhere to run.
Are we expecting a 97 year-old man [The Fed] on life support to jump out of bed and run a 2:30 Boston Marathon - you think?
The bottom-o-the barrel was scraped long ago, but with lax credit and cards for everyone the spending continued. I saw this at least a decade ago, working couple, nice cloths, two bmw's a house with no furnishings selling a pile of grandma's Fiesta dishes layed out on the floor....WTF? They needed the cash...
And in the last 10 years it's only gotten worse....on a grander scale. Too many people with 72 month loans on cars / trucks / SUV's they didn't need and couldn't afford. Too much living beyond your means.
Can't read Don Coxe's new report.
Can you help, please?
It’s a interesting news,i like it.Additionally,wellcome to my website prettyboots.org ,here are so many UGGS On Sale such as:UGG Elsey wedge|UGG Elsey wedge black|UGG Elsey wedge chestnut|UGG Elsey wedge espresso|UGG Langley|UGG Langley black|UGG Langley chestnut|UGG Lo Pro Button|UGG Lo Pro Button black|UGG Lo Pro Button blue|UGG Lo Pro Button cream|UGG Mayfaire|UGG Mayfaire black|UGG Mayfaire chestnut|UGG Mayfaire chocolate|UGG Mayfaire sand|UGG Mayfaire red|UGG Nightfall|UGG Nightfall black|UGG Nightfall chestnut|UGG Nightfall chocolate|UGG Nightfall sand|UGG Sundance II|UGG Sundance II black|UGG Sundance II chestnut|UGG Sundance II chocolate|UGG Sundance II sand|UGG Ultimate Bind|UGG Ultimate Bind black|UGG Ultimate Bind chestnut|UGG Ultimate Bind chocolate|UGG Ultimate Bind sand|UGG Ultra Short|UGG Ultra Short chocolate|UGG Ultra Short sand|UGG Ultra Short black|UGG Ultra Tall|UGG Ultra Tall chestnut|UGG Ultra Tall sand|UGG Ultra Tall balck|UGG Ultra Tall chocolate|UGG Suede|UGG Suede black|UGG Suede chestnut|UGG Suede sand|UGG upside|UGG upside black|UGG upside chestnut|UGG upside mocha|UGG Roxy Tall|UGG Roxy Tall black|UGG Roxy Tall chestnut|UGG Roxy Tall chocolate|UGG Roxy Tall sand|UGG seline|UGG seline black|UGG seline chestnut|UGG Corinth Boots|UGG Liberty|UGG Liberty black|UGG Liberty cigar|UGG Highkoo|UGG Highkoo amber brown|UGG Highkoo espresso|UGG Highkoo grey|UGG Highkoo black|UGG Knightsbridge|UGG Knightsbridge black|UGG Knightsbridge chestnut|UGG Knightsbridge grey|UGG Knightsbridge sand|UGG Knightsbridge chocolate|UGG Adirondack|UGG Adirondack brown|UGG Adirondack chocolate|UGG Suburb Crochet|UGG Suburb Crochet black|UGG Suburb Crochet chestnut|UGG Suburb Crochet chocolate|UGG Suburb Crochet grey|UGG Suburb Crochet white|UGG Kensington|UGG Kensington black|UGG Kensington chestnut|UGG Roseberry|UGG Roseberry black|UGG Roseberry sand|UGG Gaviota|UGG Gaviota black|UGG Gaviota chestnut|UGG Gaviota chocolate|UGG Desoto|UGG Desoto black|UGG Desoto chestnut|UGG Desoto chocolate|UGG Brookfield Tall|UGG Brookfield Tall black|UGG Brookfield Tall chocolate|UGG Gissella|UGG Gissella black|UGG Gissella chestnut|UGG Gissella espresso|UGG Payton|UGG Payton black|UGG Payton chestnut|UGG Payton red|UGG Bailey Button Triplet|UGG Bailey Button Triplet black|UGG Bailey Button Triplet chestnut|UGG Bailey Button Triplet chocolate|UGG Bailey Button Triplet grey|UGG Bailey Button Triplet sand|There are so much style of cheap uggs for sale ,so once you go to my website you will be very surprise.
ply all kinds of cosmetic bags. We could also supply the diaper bags, so we could be called the diaper bag manufacturer, diaper bag supplier and diaper bag factory.