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Open Thread
Due to an intensive travel schedule over the next 24 hours, posting will be limited (and if prior travel experience is any indication, Greece riots over the next week may be anticipated). Please consider this thread open to mock, ridicule, debase and taunt the now completed Stress Farce, as well as to brainstorm anything and everything else that may be of interest.
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No more QE...
The FED is simply a costume... one that is ready for retirement. You don't stuff something full of shit unless you're planning on throwing it away. The best assets remaining (i.e. those that are not offloaded to GSEs) will be offloaded to the club at firesale prices. The costume will be burned in effigy in front of all the lemmings. While at the same time, the men behind the mask will be stitching a new costume... very similar to the old, but just enough disguised to gain acceptance. And we're off.
Ben is pushing rope. Bush threw out stimulus payments to test the waters. QE 1.0 was enough to positively remove all doubt that the contraction is here, in earnest, and no amount of monetary policy is going to create organic growth... while at the same time, being large enough for many of the fattest hogs to get what they needed from the trough to withstand the coming winter. Think of it like the fattening of a buck before the rut. (not sure if the amount didnt end up falling short given the degree of contraction in the economy, but that doesn't really matter).
The question will be whether we agree to abide by the debts thrown upon us against our consent. QE is out... it's now either austerity or repudiation. My guess is that, in the end, repudiation will be easy because of the domino effect. Why would it be hard for us to tell a beaten down opponent to go fuck itself? What is a bad credit score in a world of worthless debtors? By the time we get around to making the decision, the landscape will have changed, and many of our nightmares will have rung true. (this is why the present situation is so perilous, because the fears we had in 2008 have all come to fruition... and the plausible deniability driving our actions has given way to certain fear... panic is next...)
When every time the FED/adiministration/congress (all tied at the hip) tries stimulative efforts (payday loans) the cost for everyone's day to day living jumps in direct proportion, it won't take a rocket surgeon to figure out we need to try something different... When TARP was passed, the country was overwhelmingly against it... do you think we changed our mind after ben's complete failure? they won't try it again. They'll raise the debt ceiling, but it will not be enough to do any meaningful QE... just enough to keep us going with a slight haircut.
We're dipping our toes in an icecold lake when we're forced to swim in it for a few decades... jump in already... might as well get used to it.
now there's an interesting angle... it makes some of their more recent decisions (soaking up all the toxic MBS, etc.) seem somewhat rational.
we've been conditioned to believe the fed is indestructible and want to remain that way... but this theory is contrary to most contemporary amerikan theatre, where the hero usually survives through the credits. hmmm.
would the fed actually take this one for the team?
nahhhh. interesting thought, though.
the only way i could really see something like this being viable with the PTB is if they had a bigger/badder 'fed' in the background - a 'global-fed' sort of thing...
They don't have a choice. The FED had a limited lifespan. They all have. It cooked the golden goose and has used up all the ammunition in its quiver. Now it only serves as a bartering tool, symbolizing all that is wrong with our former selves and being the perfect scapegoat. It will be demolished at our behest and, just like clamoring for change so desperately we forgot to ponder who we were electing, we will not even bother to see where its assets are drained (they can even pay fair market value in the future and come out like bandits, depending on the pain of deleveraging between now and then, and how will we designate our masters as villains if they are paying fmv?).
This is not a new revelation. There had previously been some talk of the FED being effectively insolvent (on this board). The backing of the GSEs with an unlimited checkbook helped alleviate that problem, but did not eliminate it. The FED's balance sheet is chock full of bullshit. It will find a new home at a much lower price and some hogs get to cherry pick the corpse. The GSEs got the worst of the worst.
You presume this whole thing is going to stay together long enough for the governments of the world to unite in some semblance of universally accepted governance. It will not. There are too many plates for monetary policy to spin and, like dominoes, will all come crashing down shortly. Literally, every day we face certain annihilation. We are on the precipice of a single event that will become the popularly categorized "cause" of our deeper depression. Day by day, the sharks are getting left with less and less other fish to eat.
The FED will take one for the team, because it is the symbol of what was wrong with our previous paradigm and, ultimately, that was its design all along (or at least since TARP was announced). Its destruction will not only be a diversion from bringing its puppeteers to justice, but it will also quench our thirst for blood of some sort. It will be jettisoned by the elite like a rocket ship jettisons an empty fuselage. It was, is, and always will be simply a vehicle to plunder. It is not the plunderer. Not even all its principal actors are the plunderers, as many, like everyone else in government (yes, the FED is the government despite technical arguments attempted to be made to the contrary, which attempt to put form over substance) have been captured by the elite. The FED is one of the last bargaining chips that will be thrown to us... and we might even get some meat left on the bones... but only enough to quench our appetite long enough for our masters to escape again.
paradigm shift for me.
i've always been a 'watch the other hand' sort of person with these folks, and your spin on it is intriguing.
in the sense that i assume(d) they are 'controlling' it all, and intentional about it, you are correct in assessing my (mis)perceptions.
"for our masters to escape again" *implies* that sort of intentionality... but if the game is as chaotic and happenstance driven as you imply, that is very unnerving.
if they *are* merely throwing bones behind them to buy just enough time to distract the mobs as they duck into the shadows and regroup again... that means nobody is *really* driving... (it sure feels that way...)
do you think the markets (local, but esp. international) could comprehend/survive the end of that 'pillar of stability' called the US-FRB? it would certainly qualify as a notable distraction ("watch the other hand"...)
most interesting post/thread i've read in a long while... and FWIW, most of ZH is pretty damned interesting.
tnx for your thoughts.
You have to understand this is a constant struggle throughout the ages. There have been FEDs before it. The reason we keep tugging at the line is that we are simply prone to moments of weakness. Once our generation dies out and our know it all descendants decide to reinvent the wheel, they will buy a few decades until their credit collapse. The temptation is not only diligent, but vigilant and relentless... our discipline, not so much.
People have the wrong ideas about what limited liability organizations are... they're just abstractions utilized by the owners to squeeze profits without risking annihilation. The FED is no different. Generally, there is a sort of normal withdrawal and payout to the owners and top tier participants. However, that is not the case here (probably not for decades), especially since TARP. Effectively, the panic button has been pressed and the life rafts are being manned. There is a mad dash to draw out as much as possible. The entities fail but their profiteers survive, albeit with some battle scars. The FED is no different. Sure, many are bolstering cash reserves in the entities, but they're hedging both ways (one way, reconstruction, being on someone else's dime, ours). The more money distributed, the less at risk on judgment day. This has been going on for a long time... it's how the wealth gap got so large. The FED is slightly different in that, more recently, it acted as an insurance company for the TBTF, paying off their losing bets.
But no, I do not believe you need to worry about a unified world government (it already exists anyway). The express slavery of humankind is not going to happen this time. The energy and resources needed to do so proved to be too large. Our Congress is now passing laws that will soon have no enforcers.
Finally, someone who understands economics!
Bingo.
Who is short everything next week?
Around mid-week you should be able to short everything and go fishing.
what do you mean Ben's money moves 'didn't work' ???
you seem to think everyone is on the same team
B9K9 : I get the feeling that the Fed now knows that what they are doing has no hope of working, but they are relying on the fact that there is a time delay between the doing of it anyway, and being caught out as failing. It helps when you can lie/manipulate economic statistics.
When you know you are going to fail, sometimes that enables you to try something SO outlandish that it actually unexpectedly succeeds. Could this be the case here? It might buy them some time - a few years - maybe?
In 2007 I thought I was awakened from a lifelong financial slumber and thought I saw the light of day. However, now I'm not sure if I'm still in some strange, surreal "alice in wonderland" dream. What is real? What I thought I'd learned I now really question. Perhaps reality is what "they" say it is and I'm better off to plug back into the matrix and stop mind fu#king myself. Seems to work for the rest of America and apparently, judging from the EU test results, for the rest of the world as well. If my government buys equities and is committed to see inflation and asset appreciation, why shouldn't I go along?
In 2008, I sure didn't see this thing playing out like this and doubt many of us did. However, we seem on the verge of another melt up next week (judging from Copper, Shanghai, sitting on resistance in so many indexes). A little push from an urgent buyer in pre-market coupled w/ ZIRP 4eva...and voila, we are off to the races again.
Anybody have a reason this won't work? Why we shouldn't turn bullish given we cross the 200dma in the next couple of days (maybe today)?
I see the point you're trying to make... But I believe it would be "narrow in lens" to automatically interpret a move above 200dma as saying the Titanic rudders missed the iceberg (or the hull was spared)...
If you're looking at 2008, as a reference? First of all... In a late July timeframe you're still talking a PRE CHINA OLYMPICS period... Perhaps a silly reference, but, commodity wise TRUST ME, NOTHING was going to collapse before that spectacle was pulled off... (of course, notwithstanding Lehman, things unraveled shortly thereafter - conveniently in line with the Obama [Roman pillar] speech at the DNC in Denver)... Point is... It takes awhile even for the Titanic to sink...
If you want to use straight TECHNICALS... Then perhaps 2004 is a better example (where a DARK CROSS, then GOLDEN CROSS occurred as well)...
After that was navigated, the markets rallied for 3 straight years on blissfully low volatility...
So I think one has to ask themselves if we are in the same situation now as 2004...
- 5% unemployment
- tax cuts "going into" effect (not being taken off the table)
- rising home prices
- HELOCS as far as the eye could see
- pre any kind of QE
- 100x leverage in the system
- utter trust in everything
Now, in 2010, that we have done a DARK CROSS... Can we do a GOLDEN CROSS? When ECRI just ticked to -10.5 today?... Everything and everyone on the ropes?...
Answer: SURE!
But do you want to bet on that?
Now THAT'S saying a lot.
</sarcasm>
My friend comrade Tyler Durdenovich, take care, come back with renewed vigor to uncover the financial vices of this decadent capitalist society. The people and workers all depend on your hard work. Long live the revolution!
LOL, "stress farce", what did you expect? There is a coordinated effort to reflate risk assets and inflate the global economy. Period. As for Greece, austerity has killed the spirit of many citizens there, and even luxury villas in Mykonos are not renting as easily this summer. Let me help you de-stress...
that place is bad-fucking-ass - i'd dodge a few anarchists and molotov cocktails to shack up there for a week
I am waiting to buy it for a few million drachmas...lol..I wish!
What I want to know is are it's energy needs supplied by CHINESE SOLARS?
AAAAAAAAAAHAHAHAHAHAAHA
Well DONE SIR!
/(hat tip)
Beautiful! After a few dozen Ouzo's even I would forget about the March jobs report.
Nice Leo. The Last of Sheila?
http://www.imdb.com/video/screenplay/vi2790522905/ 2:56
Tv's are inadequate
I'll buy it. I need some place to keep my dogs.
Fucking SPX gaps down 4 points and falls to 91 and an hour later we're at 1102 and ramping. Fuck this.
Not to worry my fellow poster, soon all lies will be uncovered, all manipulations proofed, and the bright light if equality among peoples of the earth will come true. A fraternity among all workers will reign, and the imperialistic evils that invaded Iraq, Afghanistan, South Korea, etc, will be crushed to their bones. Lenin's dream will become real, once again, but this time we have learnt how to beat capitalism: it's as simple as let them collapse...
Did you forget to put on your gasmask before deployment?
Here's one for you, commie bastard! ;)
http://www.youtube.com/watch?v=vdYwfDaAHVs
Sure, sure. Gotta sell some soap & than there's that club business we don't talk about. Wear that new party shirt, the one that I.D.'s you as Canuck. Remember -
They’re rioting in Africa (whistling)
They’re starving in Spain (whistling)
There’s hurricanes in Flo-ri-da (whistling)
And Texas needs rain.
The whole world is festering with unhappy souls
The French hate the Germans, the Germans hate the Poles
Italians hate Yugoslavs, South Africans hate the Dutch
AND I DON’T LIKE ANYBODY VERY MUCH!!
But we can be tranquil and thankful and proud
For man’s been endowed with a mushroom-shaped cloud
And we know for certain that some lovely day Someone will set the
spark off
AND WE WILL ALL BE BLOWN AWAY!!
They’re rioting in Africa (whistling)
There’s strife in Iran
What nature doesn’t so to us
Will be done by our fellow "man"
(Merry Minuet)
puffer, well done.
Kingston Trio--great stuff!
Weeeeee! Open Thread!
Put your pants back on...
just a thought re the rating agencies, and the new FinReg bullet re liability for bad ratings in future. who wants to make me a price that Uncle Warren has sidled up to Moody's and said 'boys, put a big liability premium into your future pricing ... while I siphen it off you via my new improved insurance for rating agency cock ups special teaser introductory discount (double premium) offer'...
Did everyone see this article on ETF's in Bloomberg?
ETFs Imperil Commodity Investors When Contango Conspires With Pre-Rolling By Peter Robison, Asjylyn Loder and Alan Bjerga - Jul 22, 2010Tuckwell rolled out Gold Bullion Securities in 2003 before going on to make a swap agreement for oil ETF shares with Royal Dutch Shell. Source: ETF Securities Ltd via Bloomberg
Chart: Commodity CasinoRouwenhorst co-published a paper,funded in part by AIG, arguing that an investment in a broad commodity index would have brought about the same return as stocks from 1959 to 2004, and would often rise when stocks fall. Source: SummerHaven Investment via Bloomberg
Airlines have to set aside cash to hedge against sharper ups and downs in oil prices, according to Airtran CEO Bob Fornaro who says "This has been very, very good for Wall Street." Photographer: Chris Rank/AirTran via Bloomberg
Like so many investors in the spring of 2009, Gordon Wolf needed to dig out of a hole.
A 68-year-old psychologist in Napa, California, Wolf was a buy-and-hold sort of guy, yet the nest egg he had entrusted to his broker at Merrill Lynch was suddenly down by more than 50 percent.
The broker had invested much of it in a range of exchange- traded funds, or ETFs, a relatively new financial innovation that was replacing mutual funds in the hearts and portfolios of many investors. An ETF, which can be bought or sold like a stock, attempts to track the price of a particular basket of assets -- tech stocks, for instance, or high-yield bonds, or commodities ranging from wheat to gold to oil to natural gas.
The commodity ETFs were supposed to offer a hedge against equity losses, but in the crash of 2008 everything fell in tandem. Now it was early 2009, and Wolf was watching oil fall to $34 a barrel. That had to be an opportunity, he figured, so he called his Merrill broker and asked about the U.S. Oil Fund, an ETF designed to track the price of light, sweet crude. “This seems to be something good,” Wolf told the broker, and had him buy about $10,000 of USO.
Going Down
What happened next didn’t make sense. Wolf watched oil go up as predicted, yet USO kept going down. In February 2009, for example, crude rose 7.4 percent while USO fell 7.4 percent. What was going on? Wolf logged on to Seeking Alpha, a financial blog, and searched for USO. He found plenty of angry discussion about the fund -- lots of people were losing lots of money, because thousands of American investors had seen the same sort of opportunity Wolf had.
By the end of 2009, they had a record $277 billion invested in commodity ETFs and other securities linked to raw materials - - a 50-fold jump from $5.5 billion a decade earlier, according to Barclays Capital. During that time, Wall Street had transformed the reputation of commodities from a hyper-volatile investment that can steal your shirt to a booster for battered portfolios, something that rose when stocks fell and hedged against inflation, Bloomberg Businessweek reports in its July 26 issue. People who would never think of buying a tanker of crude or a silo of wheat could now put both commodities in their 401(k)s. Suddenly everybody was a speculator.
And some were losing big. The commodity ETFs weren’t living up to their hype, and the reason had to do with a word Wolf had never heard before. As he browsed the blogs, he says, “I’m seeing people talking about something called contango. Nobody would define it.” Wolf called his broker and asked about contango.
‘Rigged Game’
“I don’t know what it is,” he replied. He called his other broker, at Charles Schwab. “He didn’t know either,” Wolf says. “He said he’d ask around.” Weeks later, after Wolf educated himself, he fired his Merrill broker and pulled out his money. (Merrill and Schwab declined to comment.) By then he had lost $2,500 on USO. “If it wasn’t a rigged game,” he says, “I could figure it out. But it is a rigged game.”
Contango is a word traders use to describe a specific market condition, when contracts for future delivery of a commodity are more expensive than near-term contracts for the same stuff. It is common in commodity markets, though as Wolf and other investors learned, it can spell doom for commodity ETFs.
Futures Roll
When the futures contracts that commodity funds own are about to expire, fund managers have to sell them and buy new ones; otherwise they would have to take delivery of billions of dollars’ worth of raw materials. When they buy the more expensive contracts -- more expensive thanks to contango -- they lose money for their investors. Contango eats a fund’s seed corn, chewing away its value.
Here’s an example. The Standard & Poor’s Goldman Sachs Commodity Index (S&P GSCI), which tracks 24 raw materials, is the basis for as much as $80 billion of investment. Managers of funds linked to the index, created by Goldman in 1991, have to buy their next-month futures contracts between the fifth and the ninth business day of each month.
During that period in May, fund managers sold contracts for June delivery of crude oil priced at $75.67 a barrel, on average, according to data compiled by Bloomberg. Managers replacing those futures with July contracts had to pay $79.68. After the roll period ended, the July contract fell back to $75.43. For each of the thousands of contracts, in other words, managers paid $4 for nothing -- and the value of their funds dropped accordingly.
Dumb Money
Contango isn’t the only reason commodity ETFs make lousy buy-and-hold investments. Professional futures traders exploit the ETFs’ monthly rolls to make easy profits at the little guy’s expense. Unlike ETF managers, the professionals don’t trade at set times. They can buy the next month ahead of the big programmed rolls to drive up the price, or sell before the ETF, pushing down the price investors get paid for expiring futures. The strategy is called pre-rolling.
“I make a living off the dumb money,” says Emil van Essen, founder of an eponymous commodity trading company in Chicago. Van Essen developed software that predicts and profits from pre-rolling. “These index funds get eaten alive by people like me,” he says.
A look at 10 well-known funds based on commodity futures found that, since inception, all 10 have trailed the performance of their underlying raw materials, according to Bloomberg data. The biggest oil ETF, the U.S. Oil Fund, which Wolf bought and which now has $1.9 billion invested in it, has dropped 50 percent since it started in April 2006 -- even as crude oil climbed 11 percent.
Gas Fund
The $2.7 billion U.S. Natural Gas Fund, offered by the same company, has plummeted 85 percent since its launch in April 2007 -- more than double the 40 percent decline in natural gas. Deutsche Bank’s PowerShares DB Agriculture Fund has eked out a 3 percent total return since January 2007, while the weighted average of its commodity components has risen 19 percent.
To be sure, those spot prices -- reported on cable business channels and other outlets -- set an unreachable benchmark. If investors try to match the spot market using ETFs, they can get killed by contango. If they dodge contango by buying physical commodities instead, they must pay heavy storage costs that can easily turn gains to losses.
Investment Allure
The allure of commodity investment has hit even the most sophisticated investors. The California Public Employees’ Retirement System, the largest public pension in the U.S., has lost almost 15 percent of an $842 million investment in commodity futures since 2007, according to its latest filings, depriving it of income at a time when it has sought taxpayer money to cover retiree benefits. It defends the investment as insurance that will pay off in the event of inflation.
Just as they did with subprime mortgage-backed securities, Wall Street banks are transferring wealth from their clients to their trading desks. “You walk into a casino, you expect to lose money,” says Greg Forero, former director of commodities trading at UBS. “It’s the same with these products. You’re playing a game with a very high rake, a very high house advantage, and you’re not the house.”
Selling commodity investments has long required training in the futures markets. Selling commodity ETFs doesn’t, says Michael Frankfurter, managing director of Cervino Capital Management, a commodity trading adviser in Los Angeles.
Salesmen Unleashed
Turning commodity futures into securities unleashed a much larger sales force -- stockbrokers selling a product many of them didn’t understand, he says. Passive buy-and-hold investors at one point in mid-2008 held the equivalent of three years of production of soft red winter wheat. Wall Street’s success in attracting those buyers boosted demand for futures contracts, which helped determine what consumers would pay for baked goods.
Wheat prices jumped 52 percent in early 2008, setting records before plunging again, and sugar more than doubled last year even as the economy slowed, forcing Reinwald’s Bakery in Huntington, New York, to fire five of its 32 employees. “You try and budget to make money, but that’s becoming impossible to predict,” says owner Richard Reinwald, chairman of the Retail Bakers of America.
Cocoa futures reached a 30-year high early this year because of speculators, according to Juergen Steinemann, chief executive officer of the world’s largest maker of bulk chocolate, Zurich-based Barry Callebaut. At the airport, the new $25 charge for checking a suitcase exists partly because airlines have to set aside cash to hedge against sharper ups and downs in oil prices, says Bob Fornaro, CEO of AirTran Holdings. “This has been very, very good for Wall Street,” he says.
No Guarantees
Sponsors of commodity ETFs and similar investments -- including Deutsche Bank AG, Barclays, and UBS -- warn of the risks in their prospectuses. Those banks declined to comment, but defenders say it’s unfair to single out returns over any specific time period. “Diversification doesn’t mean you’re always going to be up, but you spread the risk differently,” says Kevin Rich, a former Deutsche Bank executive who developed the first futures-based commodity ETFs in the U.S.
Not every trader is comfortable with what Wall Street has done. Forero, 36, became director of commodities trading at UBS in 2007. A New Yorker whose father was Colombian consul to the U.S., he began his career at JPMorgan Securities, then worked a series of energy-trading jobs before landing at UBS’s securities division in Stamford, Connecticut, where the Swiss bank operates one of the world’s largest trading floors. UBS had bought Enron’s energy desk, so Forero sat among veterans of the disgraced company.
Earning Commissions
UBS sold notes linked to futures and earned commissions handling the monthly roll for clients such as USO, Forero says, adding that he didn’t do the roll himself. (“That was a different group,” he says.)
In January 2009, stung by subprime losses that forced a Swiss government bailout, UBS shut its energy desk. Forero and his wife had a newborn daughter and a $1.2 million Colonial in Norwalk, Connecticut. With no job, Forero holed up in his home office, sifting through data with a Hewlett-Packard scientific calculator. He became convinced that the products UBS had sold were hurting investors and disrupting supply and demand for basic commodities.
“I’ve always been a little naïve, and maybe I still am,” he says. “But how can the government allow that? People in our industry talk about it -- everybody knows about it. This has to come to light.” UBS spokesman Doug Morris declined to comment.
Basement Revelation
Bob Greer spent long days during the mid-1970s in the basement of a public library in Tulsa, going through rolls of microfilm. He painstakingly copied commodity prices onto yellow legal pads, then tallied them up on a handheld calculator -- piecing together the first investable commodities index. An economist and mathematician with a Stanford University MBA, Greer had worked at a commodities brokerage in Dallas, where he got the idea that raw materials might belong in investment portfolios, alongside stocks and bonds.
Greer’s work in the library basement led to the 1978 publication of his first article on buy-and-hold commodity investing in the Journal of Portfolio Management. “Conservative Commodities: A Key Inflation Hedge” outlined the benefits of passive, unleveraged, long-only bets on raw materials. The idea didn’t catch on, and Greer went into commercial real estate.
At the time, everyone knew someone who had gone broke betting on soybeans, or a gold bug who hoarded coins against catastrophe, he says. Commodity investing wasn’t respectable. “People did not believe that the words ‘commodity’ and ‘investment’ belonged in the same sentence,” says Greer, now 63 and an executive vice-president at Pimco in Newport Beach, California.
Goldman Launch
Greer had long since given up on his idea by 1991, when Goldman launched its benchmark commodity index and began selling swaps that tracked it to institutional investors. Two years later, Daiwa Securities hired him to create an index based on the one he had dreamed up in Tulsa. Commodities investing was catching on, and Greer says a breakthrough came when the tech bubble burst in 2000.
By 2002, when the Standard & Poor’s 500-stock index plunged 25 percent, investors were desperate for alternatives. That year, Pimco hired Greer to start its Commodity RealReturn Strategy Fund. The actively managed fund has returned more than 200 percent since its debut.
ETF Pioneer
While Greer was launching his fund, a natural resources consultant in Australia, Graham Tuckwell, was developing the first commodity ETFs. Tuckwell had worked for Salomon Brothers, Credit Suisse First Boston, and Normandy Mining, Australia’s largest gold producer; by 2002 he was working with the Australian Gold Council, looking for a way to encourage gold investing.
An acquaintance mentioned an oddball product: wine securities. They were “funny little things,” Tuckwell says, that allowed cases of a particular vintage to be traded on a stock exchange. He decided his fund would work the same way. Instead of cases of wine, the shares would be backed by gold bars stored in a vault.
Tuckwell’s innovation, rolled out in 2003 and then called Gold Bullion Securities, soon became a hit, and in April 2004 a contact at Royal Dutch approached him with a question: Could he do for oil what he had done for gold? “An oil refinery takes an enormous amount of working capital because you have all this crude oil sitting there,” Tuckwell says. He went to Shell and suggested a product that would help the company make money from the crude it keeps in storage.
Shell Deal
Backing the oil ETF shares with the physical commodity proved unwieldy. Gold was compact and easily stored in a vault; oil was in depots, pipelines, and tankers all over the world. Instead, Tuckwell’s London firm, ETF Securities, entered into a swap agreement with Shell.
Tuckwell used investors’ money to buy contracts from Shell, and Shell gave them the same return as crude oil, based on the price of Brent crude futures. Since the oil ETF started trading in London in 2005, Brent has risen 30 percent; the fund has dropped 27 percent. The risks are clearly outlined in the prospectus, Tuckwell says, and anyone who doesn’t understand the product first shouldn’t buy it.
Pitching Commodities
Banks used new academic research to pitch commodities as a safe way to diversify. In one 2004 presentation, Heather Shemilt, then a managing director and now a partner at Goldman, called the strategy “the portfolio enhancer.” That same year two professors, Gary B. Gorton of the Wharton School and K. Geert Rouwen-horst of Yale University, published a paper, funded in part by American International Group Inc., which argued that an investment in a broad commodity index would have brought about the same return as stocks from 1959 to 2004, and would often rise when stocks fall.
Under the crystal chandeliers of San Francisco’s Palace Hotel in June 2005, Rouwenhorst presented his findings to more than 100 investment pros; Shemilt also appeared, alongside managers from Barclays and AIG. After the talk, many in the audience had the same question: How do I do this?
Barclays, Goldman, AIG, and other firms had developed ways to help them do it -- several types of investments based on futures contracts, which had been used for almost 150 years to arrange the price and delivery of a given commodity at a specified place and date. These products remained the province of wealthy investors. In 2004, however, Deutsche Bank’s Rich devised a commodity ETF that opened the door to retail investors when it launched two years later.
Rule Obstacle
There was an obstacle: The U.S. Commodity Futures Trading Commission, a regulatory board created in 1974 after a runup in grain prices, required buyers of certain commodity investments to sign a statement saying they understood the risks. The banks argued that it would be impossible to collect so many thousands of signatures for a product designed to trade like a stock.
In 2005, Deutsche Bank lawyer Greg Collett, who had worked at the CFTC from 1998 to 1999, helped persuade the commission to waive the rule and let funds replace it with their prospectus. That would provide adequate warning, the CFTC concluded. Collett says he believed the fund “democratized” commodity investing.
Rich started attending National Grain & Feed Association conferences to introduce ETF investors to the traditional players, such as farmers and silo operators. One conference featured a boat ride up the Illinois River to visit a grain depot, giving Rich a chance to explain his new ETFs to old- school grain traders. “They were a bit suspicious,” he says.
Aluminum Warehouses
These days, the Wall Street banks are more like those grain traders than you might think. They have equipped themselves to take delivery of raw materials when they choose to, so they can wait for the commodity price to rise without having to roll contracts, giving them another advantage over ETF investors. Goldman owns a global network of aluminum warehouses.
Morgan Stanley chartered more tankers than Chevron last year, according to shipbroker Poten & Partners. And JPMorgan Chase hired a supertanker to store heating oil off Malta last year, likely earning returns of better than 50 percent in six months, says oil economist Philip Verleger. “Many, many firms did this,” he adds, explaining that ETF investors created this “profitable, risk-free arbitrage opportunity” when they plowed into commodities. Futures are bilateral; if someone’s buying, someone else is selling. “And the only way to attract sellers is to offer them a bigger profit,” Verleger says. “So, ironically, passive investors have been sowing the seeds of their own defeat” -- and contributing to the contango that does in their funds.
‘Over-Marketed’
Even the former Deutsche Bank lawyer who helped open the floodgates now says something has gone wrong. “Like most things on Wall Street, they have been over-marketed,” Collett says. “The complications have been glossed over. I’m not sure the people marketing them even understand the complications, and that’s a shame.” Collett left Deutsche in 2008 and is pursuing a career as a stand-up comic in New York.
If you’re going to serve as de facto spokesman for the commodity ETF industry, it probably helps to have played college rugby. John Hyland is the chief investment officer of U.S. Commodities Funds, the Alameda, California, company that manages USO and its sister fund, U.S. Natural Gas. Majoring in political science at the University of California at Berkeley in the late 1970s, Hyland played the rugby position called hooker, which requires toughness and fancy footwork to jerk the ball out of the scrum. “My wife calls me the human battering ram,” he says. For the past year he’s been trying to keep his funds out of a regulatory pileup.
Fresh to Commodities
Hyland, 51, had never managed commodities before he joined U.S. Commodity Funds LLC in 2005. He had been in the investment business for 20 years -- running portfolios and mutual funds -- before he teamed up with U.S. Commodity CEO Nicholas Gerber. In 2006, as Gerber and Hyland were trying to win approval from the Securities and Exchange Commission for the U.S. Oil Fund, the fund’s prospectus hit the desk of Dan McCabe, then CEO of Bear Hunter Structured Products, which was to be the fund’s first specialist. McCabe recalls immediately spotting how traders would pick USO apart.
“Anybody who looked at it prior knew exactly what would happen,” McCabe says. “From a trading side -- and I spent most of my life trading -- I would say, ‘Wow, what a great opportunity.’”
After Hyland’s oil and natural gas funds surged in 2008 and 2009, he found himself in the crosshairs of the CFTC, which was holding hearings on energy speculation in the wake of $147-a- barrel oil. CFTC Chairman Gary Gensler began calling for limits on the number of energy contracts a single trader can hold. As Hyland’s ETFs became poster children for the problem, Hyland became their most vocal advocate.
California Crude
At an ETF conference in Boca Raton, Florida, in January, he showed up with bottles of Merlot stamped with the company logo and the words “California Crude.” The chances of pre-rolling his funds, he maintains, are “historically a 50-50 crapshoot” -- a view many traders reject. His funds track daily moves in futures prices, he continues, because spot prices are impossible to capture unless you store fuel yourself. “I don’t think the products are flawed,” he says. “They do what they say they’re supposed to do.”
On Feb. 6, 2009 -- to cite one example -- USO did what McCabe guessed it might. It gave traders an opportunity to profit at the expense of the fund’s investors, McCabe says. With oil prices near their lowest in more than four years, long-term investors like Wolf had flocked to the fund; its monthly roll, taking place that day, had grown so large that it represented financial contracts for almost 78 million barrels of oil, roughly four times the amount of oil the U.S. consumes in a single day.
Widening Spread
On Feb. 6, the price spread between expiring crude oil futures and those for the following month widened by $1.39 a barrel, or 30 percent, to $5.98. The price jump was so extreme that the CFTC announced an investigation within weeks, saying it “takes seriously issues surrounding price movements in our nation’s vital energy markets.”
In the midst of the price swing, according to an account released by the CFTC in April, a Morgan Stanley trader made a secret deal with a broker at UBS, acting on behalf of USO. Around noon, Morgan Stanley agreed to buy 33,110 of the fund’s expiring March contracts and sell it April contracts, the CFTC said. The Morgan Stanley trader asked UBS to keep the trade quiet -- a violation of New York Mercantile Exchange (Nymex) rules -- until after the 2:30 p.m. close of trading that day.
Secret Deal
The secret deal was breathtakingly large, equivalent to 12 percent of March futures on the Nymex. At the end of the day, USO and its investors lost because of the extreme contango: They could afford fewer of the more expensive April futures than they had in March, Forero says after analyzing Bloomberg data. Buying the same amount of oil would have cost $466 million more, he estimates. “You can either get screwed out of money or you can get screwed out of product,” he says. “They had to pay more for effectively the same barrels.”
The CFTC told the oil fund it may be held “vicariously liable” for UBS’s actions, according to a March filing with the SEC. Hyland says he knew nothing about the deal. In April the CFTC ordered a $14 million civil fine for Morgan Stanley and $200,000 for UBS for failing to report the trade as required. The CFTC declined to explain how it arrived at the amounts or to disclose Morgan Stanley’s profit. “Morgan Stanley fully cooperated with the CFTC and is pleased to have reached a resolution with our regulator,” says company spokeswoman Jennifer Sala. “This matter concerned an isolated request by a former Morgan Stanley trader.”
Revealing Risks
Without knowing Morgan Stanley’s trades, Hyland says, it’s hard to determine whether the bank’s actions harmed investors. “The best that you can do as the provider of investment products is lay out, in as much detail as you think people can absorb, the hows, the whys, and the risks,” he says. Page five of the fund’s 86-page prospectus includes this disclaimer: “The price relationship between the near month contract to expire and the next month contract to expire _ will vary and may impact both the total return over time _ as well as the degree to which its total return tracks other crude oil price indices’ total returns.”
Hyland’s other main fund, U.S. Natural Gas (UNG), got so big last year that at its peak it owned the equivalent of 86 percent of the near-month natural gas contracts on the Nymex. As natural gas prices fell into the basement -- traders call the notoriously volatile market “The Widowmaker” -- UNG fell with them, and when gas prices rallied, UNG did not.
Regulator Concerns
The fund’s growth raised concerns among regulators at the CFTC, which last year began debating position limits; it will revisit the issue this year. The fund grew so large it had to freeze its position and start buying over-the-counter derivatives -- unregulated contracts tied to gas prices -- instead of futures. Hyland told the CFTC last year that it was “gibberish” to say UNG had any effect on natural gas prices.
The financial reform bill President Barack Obama signed on July 21 includes a few provisions that may help the CFTC address the commodity ETF mess. The new regulations enhance the CFTC’s ability to prosecute trading abuses, and set position limits on over-the-counter swaps, like those UNG has been buying. How much the new law will help remains to be seen, says Jill E. Sommers, one of the agency’s five commissioners, because Congress still needs to appropriate funds and write guidelines for implementation and enforcement. “We’ll need additional dollars to carry this out,” she says, adding that it’s too early to say whether the CFTC has the authority needed to crack down on pre- rolling. “We’re at the beginning of the rule-writing process, so it’s premature to say whether additional authority is going to be needed,” she says.
Supersized Role
By requiring the commission to impose caps on energy trading within a year, the rules may limit the size of some funds. It does nothing to directly address the market impact of the funds, says CFTC commissioner Bart Chilton. He likens ETF investors’ supersized role to the one Tom Hanks played in the 1988 film Big -- a little boy in a man’s body. “The dynamics of the market have changed so dramatically over the last several years with this new influx of capital that is massive in size and passive in strategy,” Chilton says. “That has had an impact that wasn’t anticipated.”
The CFTC’s explicit responsibility is to guard against commodity market distortions, not to look out for ETF investors like Gordon Wolf. “We are concerned about both,” says Sommers. Adds Gensler: “The CFTC is aggressively using its authority to police the markets for fraud, manipulation, and other abuses. Investors also should fully research any products before they buy.” As Hyland likes to point out, the risks are described in each fund’s prospectus. Now investors are learning what those words actually mean.
Great...
I can't wait for the CFTC to start trying to "solve" the "problem of contango". Gensler and crew sure do know how to fix things. Wall street investors finally get a lesson in economics and instead of learning why they are wrong, we'll get lobbyists petitioning for a ban on so called "pre-rolling". This is why I keep shaking my head at people that insist on getting involved with commodity ETF's. They deserve the fruits of all the due dilligence they haven't done.
That said.. a link would've sufficed instead of the whole article
ya UNG is like candy from a babby.... retail= retarded
Nice
Didn't read the whole article, just the part about USO, as i'm familiar with them. The guy didn't do his due dilligence. I looked at USO hardcore when oil was going berzerk in 05 and onward and i determined that USL was a better option since it 'solved' some of the contango/backwardization(sp?) issues by purchasing contracts that were dated further out.
Ta. Commodity ETF's should be banned. Start with GLD.
If you are a betting person, right now is the best time to place your bet; short or long.
Come on Tyler, you can tell us... are you going to be a guest star in one of the CNBS programs in the next 24 hours? Are you teaming up with Hugh Hendry vs Krugman and J Sacks on a round table? Have I ruined the surprise???
Actually, say hi to Max Keiser for us ! ;-)
Comrades, do not dis-pare yet, the market will tank end of day, we have out algos ready for that, expect 900 end of July. Keep selling the index!
At last, another seller.
Everything?...
A Facebook poll:
Do you think that economic conditions in the country as a whole are getting better or getting worse?
About the same 34%
Getting Worse 47%
Getting better 19%
one would expect the younger generation to be rather optimistic... given the "recovery" is real, since young usually more optimistic than old.
As a young person I'd say we are more realist than optimistic in this specific instance, and also with young people unemployment so high not sure your conclusion is valid.
It must be demoralizing for parents of Ivy League gradutes when they move back home jobless. I graduated biz school in time for the 1987 crash but that was a lark compared to today. I could job-hunt during the day and load trucks for Teamster wages at night. No such back-up earning sources today. Young people should be outraged at what has been done to our economy. Where is the ANGER!
Being a young person + Immigrant.
I kind of like the way it is. There is definitely anger, but it is not the explosive kind. The reason that is good news is that, anger of that sort dissipates quickly at the first sight of a solution (even a partial one).
The anger we have today is much more ingrained. It's slow to build up, but once it reaches that point, its not physically possible to stop it.
That is the mood and the direction. And I kind of like it.
Being vented at all the "newbs", "dipshits" and "u fukcing fagg0t!"s on xbox live.
Where is the ANGER!
They don't know enough to be angry. A college education these days ain't all it's cracked up to be.
I read some place that the US Senate + House isn't as stupid as we make them out to be.
They just happen to make sure their actions favor those who provide them with the money spigot.
Part of all the consequences of Central Banking, and centralization of power the fathers warned about. The actions of these college goers won't change anything. It is not up to them. There are people whose very job is to do what is expected of the college going people. I know there will be a time, when patience runs out but at least november has to be given a chance. If that doesn't work out - well you will have people jumped up on coffee and ipa-DUH's ready to let 'er rip.
When you ain't got anything to lose....
The 'young' are unemployed disproportionally to their elders in many cases...why do you think their doing surveys on FB while their friends are at work?
I would just like to say that I think summer is a particularly difficult time to trade/invest. Price movements are rapid, large, and unpredictable. Usually, fading today will profit tomorrow.
But the ides of September/October loom....
Anybody can live on a credit card just as long as they keep raising the limit...It's nothing but a trap that nobody seems to understand. While we continue to borrow and spend our creditors are buying up all the natural resources so that when the time comes to cap the limit and call the loans we will have limited means to pay it back. It's that simple! And we are the biggest suckers they could have ever imagined!
The truth is that by almost any measure, we are in worse economic condition than we were right before the beginning of the Great Depression. We have been living way beyond our means and the debts we have been piling up are clearly not anywhere close to sustainable.
http://theeconomiccollapseblog.com/wp-content/uploads/2010/07/Total-US-Debt-As-A-Percentage-Of-GDP.jpg
News just out -
Bernanke Relents
Admits that Keynesian Econ is fiction;
we're broke;
the printing presses burned up at midnight;
a spindly little man with green eye shades who knows only three words will arrive from China in the morning saying,
"You Pay Now!"
You see what happens when you go on vacation?
Oh,
don't forget those single serving condiments for your single serving friends
Yo TD, pick me up a six pack of these while you're traveling. I got plenty of Bernanke toilet paper to spare.
http://www.msnbc.msn.com/id/38376048/ns/us_news-weird_news
Nice to see some Queen City action on here, compadre. (I'm an EastSider)
Yeah, name gives my location away but gotta let the powers that be know even the hillbillies are onto their game.
Nati native, born in Colerain and grew up in Fairfield. Holding down the fort on the Kentucky side of the river currently.
Cue mexican gringo accent..........
.....Er' Amigo$$............. PA$$ tha tequila around...........
http://www.ultimate-brands.co.uk/images/tres_sombreros_tequila_small.jpg
.......am rais'n a toast to Da results of tha stra$$ Da.......
http://www.legaljuice.com/burp%20belch%20funny.gif
..........bUUUUUrrrrrp........te$ts.
thx.. needed a laugh
Forget Greece. Greece is no longer the focal point.
Make a trip to Hungary.
A country and currency that's no longer backed by the IMF.
A right wing nationalist movement speaking to the hearts of Hungarians and addressing the real issue that led to the global financial meltdown.
That's where you can feel the pulse of resistance to global debt enslavement.
http://www.youtube.com/watch?v=dHlgO5EeqN4&feature=player_embedded
1m 22s is relevant
My iPad is leaving me litle time for my iPhone. And my iPod is starting to feel redundant. Life sure can be confusing...
I blame Steve Jobs for the drop in consumer confidence last week. People just donT know what to buy (iphone, ipad, ipod...). So many options and so many colours... He should tell customers what to use, how to grabb it, when to use, which device to use... Now that iphone 4 is fine (it is you that dont know how to handle the device), consumer confidence will skyrocket to 99%, since this is the only thing being purchased nowadays.
So true. We jumped S.J. to the front of the replacement liver line. The least he can do in return is provide a road-map on what iCrap to buy and how to allocate your time amonst them. And if the Government-Central Bank Cabal will just subsidize the iCrap for the ever growing masses of the strucurally unemployed we can keep the peace while we slowly sell our assets to the Communist Chinese. How hard is all that?
Safe journey TD. Unless you're headed to Bohemian Grove, in which case, spill the beans! jk
1150 here we come. Sure feels a lot like last July heading into fall.
1097 to follow right?
It's a "magic number" after all...
Tyler, are you taking Marla or will you have to get your own beers? (Easy, Marla!...down, girl, down!...only kidding)
Have a good one tyler
A friend of mine, Shelton (aka 4409) was holding a fraud sign in front of a photo radar van yesterday in Arizona and when he went to leave 3 undercover cop cars pulled him over, impounded his vehicle and took him to jail.
We are asking his supporters to help with donations to cover the bail which was $1,250 Any donation $20 and over receives a copy of his new documentary just released "Christian Zionism" The Tragedy and the Turning. Please help! We are $235 shy of his bail.
http://www.youtube.com/watch?v=o7QhAO682pY
http://www.formula4409.com/
show me papers bich.
....and an original signed effin embossed birth cert. And your latest I.Q. test results.
Who wastes their time protesting speed cameras?
Yeah, I didn't want to say anything, but who is producing videos and can't come up with with the last $235 on $1,200 bail. I'm all for exposing the "man," but come on dude - don't do the crime if you can't pay the fine.
Oh my ... this is the funniest post of the open thread
Friday, August 6, two weeks from now.
Jobs report shows US economy still not creating jobs. U-3 unemployment keeps above 9% for the 15th straight month.
S&P 500 reaches 1500 points.
Don't forget fed Z-1 report showing consumer credit contraction.
Here's my two cents, and that's really all it's worth -
1. The EU FinMins have pushed all in. They know they are bluffing, and even know that we know it. The capital raise number was just absurdly low. There's little incentive for the collective market to BK the banks, since that would lead to a collapse of the system. There is the Prisoner's Dilemma that each individual may act to pull their money out - which could create a Tipping Point.
2. The capital raise number was so low, because the FinMins know there is no money out there to re-capitalize the banks except for more printed EU money. Only state owned banks and Cajas were tagged - and the Cajas already have an established fund. Yes, it's worse than anyone actually thinks it is (except for ZH'ers).
3. There's not that much political cohesion. A couple of select banks were picked as sacrificial lambs, but each country appears to have defended their banks through the process.
4. There is wide collusion in propping up the markets - why did GE raise their dividend 10 minutes after the release of the results? Why not when they announced earnings just a few days ago? It creates a positive headline for the weekend - "Corporate leaders confident to raise dividends and buy back stocks" to counter the stress tests. Just like the GS settlement announcement overwhelmed the FinReg signing in the CNBC/Bloomberg nightly shows.
It's sort of like watching the video of WTC 7 fall. Changes everything. Just don't know how it will end. How long can the collective Ponzi scheme/fractional reserve system last? How much wealth can the CB's capture from the middle class? Will there ever be a wake up call? Or just another war to gloss it over? Less faith today than yesterday, but also less confidence in knowing how it will end.
GE is the US version of a national champion - Div based on better capital results - lol
Remember the WFC dividend raise? http://seekingalpha.com/article/85420-wells-fargo-raises-dividend-stock-jumps-32
TD, I am new here today. I would let down my hair for you if you told me your time zone. thanks in advance, F O R E.
for you reading pleasure:
IDIOT SIGHTING
We had to have the garage door repaired. The Sears repairman told us that one of our problems was that we did not have a 'large' enough motor on the opener. I thought for a minute, and said that we had the largest one Sears made at that time, a 1/2 horsepower. He shook his head and said, "Lady, you need a 1/4 horsepower." I responded that 1/2 was larger than 1/4. He said, "NO, it's not. Four is larger than two." We haven't used Sears repair since.
IDIOT SIGHTING:
My daughter and I went through the McDonald's take-out window and I gave the clerk a $5 bill. Our total was $4.25, so I also handed her a quarter. She said, "You gave me too much money." I said, "Yes I know, but this way you can just give me a dollar bill back." She sighed and went to get the manager who asked me to repeat my request. I did so, and he handed me back the quarter, and said "We're sorry but we cannot do that kind of thing." The clerk then proceeded to give me back $1 and 75 cents in change.
IDIOT SIGHTING:
I live in a semi-rural area We recently had a new neighbor call the local township administrative office to request the removal of the DEER CROSSING sign on our road. The reason: "Too many deer are being hit by cars out here! I don't think this is a good place for them to be crossing anymore." From Kingman, KS.
IDIOT SIGHTING IN FOOD SERVICE:
My daughter went to a local Taco Bell and ordered a taco. She asked the person behind the counter for 'minimal lettuce.' He said he was sorry, but they only had iceberg lettuce.
From Kansas City IDIOT SIGHTING:
I was at the airport, checking in at the gate when an airport employee asked, "Has anyone put anything in your baggage without your knowledge?" To which I replied, "If it was without my knowledge, how would I know?" He smiled knowingly and nodded, "That's why we ask."
Happened in Birmingham, Ala. IDIOT SIGHTING:
The stop-light on the corner buzzes when it's safe to cross the street. I was crossing with an intellectually challenged co-worker of mine. She asked if I knew what the buzzer was for. I explained that it signals blind people when the light is red. Appalled, she responded, "What on earth are blind people doing driving? She was a probation officer in Wichita, KS.
IDIOT SIGHTING:
I attended a "good-bye" luncheon for an old and dear co-worker. She was leaving the company due to 'downsizing.' Our manager commented cheerfully, "This is fun. We should do this more often." Not another word was spoken. We all just looked at each other with that "deer-in-the-headlights" stare. This was a lunch at Texas Instruments.
IDIOT SIGHTING:
I work with an individual who plugged her power strip back into itself and for the sake of her life, couldn't understand why her system would not turn on. A deputy with the Dallas County Sheriff's office, no less.
IDIOT SIGHTING:
When my husband and I arrived at an automobile dealership to pick up our car, we were told the keys had been locked in it. We went to the service department and found a mechanic working feverishly to unlock the driver side door. As I watched from the passenger side, I instinctively tried the door handle and discovered that it was unlocked. "Hey," I announced to the technician, "It's open!" His reply, "I know. I already got that side." This was at the Ford dealership in Canton, MS.
I love this one!: When I left Hawaii and was transferred to FL, I still had the Hawaiian plates on my car, as my car was shipped from Hawaii . I was parking somewhere (I can't remember) and a guy asked me "Wow, you drove from Hawaii to here?" I looked at him and quickly said "Yep. I took the Hawaii/San Francisco Bridge." He nodded his head and said "Cool!" STAY ALERT! They walk among us. and they VOTE. and they REPRODUCE
Great stuff. Thanks.
I liked the McDonald's story the best. Just classic...
Yeah.. I've gotten that blank stare before when trying to make the money exchange easier... LOL
The worst of it is, this clerk was overthinking the problem. All she had to do was punch in "Tendered 5.25" on her terminal and the screen would say "Change 1.00."
Back in the '80s I was an assistant manager at KFC. One day the power went out on the cash registers and we had the cashiers using pocket calculators. They would add up the orders, write down the total, multiply by 6% (sales tax) and then add the two numbers together for the total.
I told one that she could simply add up the items and multiply by 1.06 to get the total. She said she didn't understand. I tried to explain the principle but ended up telling her that it didn't matter if she understood, she should just add up the items and multiply by 1.06. She said she couldn't do it. So I had to take the orders from there out.
/facepalmed on the garage door one.
Had a sales representative explain to me the working components of a computer, all of which were wrong. Just nodded my head in agreement to get the hell out of there.
...and possibly will run for office in November.
I can't match your Hawaii story, but I used to have a college-styled "Starfleet University" decal on my back window. A gas jockey in Chicago asked, in all seriousness, where it was. When I said San Francisco he nodded sagely and said "cool."
Well it will be someday, right?
Well give your ID card to the border guard.
Yeah your alias says youre Capt. Jean-Luc Picard
Of the United Federation of Planets
`Cuz he won`t speak English anyway
Everybody knows that the world is full of stupid people...
Max Hunter
https://secure.wikimedia.org/wikipedia/en/wiki/The_Marching_Morons
The population problemThere are three million highbred elite and five billion morons. The "average" IQ is 45. (In the real world, an IQ score of 100 is both average, or mean, and median, by definition.) Several generations before the onset in the story, the small number of remaining 100-and-higher-IQ technocrats, after being ignored by the general public about the impending population problem, banded together to preserve the human race. The elite work feverishly like slaves in order to keep the morons productive.
The elite have had little success in solving The Problem (PopProb) for several reasons: 1) The morons must be managed, or else there will be chaos, and inevitably there would be five hundred million tons of rotting flesh left over; 2) it is not possible to sterilize all of the morons, as there are not nearly enough elite to do the job; and 3) propaganda against large families isn't working because every biological drive is towards fertility (the story predates the development of hormonal contraception).
The elite had tried everything rational to solve the population problem, but the problem could not be solved rationally. The solution required a way of thinking that no longer existed—Barlow's "vicious self-interest" and knowledge of the distant history.
http://www.youtube.com/watch?v=rN7pkFNEg5c
The Wire - Bunk's interrogation techniqueshttp://www.youtube.com/watch?v=LYgKmOJT_gM&feature=PlayList&p=7076CE9D18...
The Wire - Season One Opening Scenehttp://www.youtube.com/watch?v=B5WrQ9gdF6s
Joe Vs. Deer High QualityStupid Americans, a classic.
http://www.youtube.com/watch?v=C6r1IcY1pv0
I wonder how many banks will get the wrecking ball this weekend.
caterillar should be up after hours on the news
caterillar should be up after hours on the news
Do you think caterillar should be up after hours on the news?
Caterpillar should be up after hours on the news.
my source said nine banks were on the chopping block for today. they told me this three weeks ago too. very currious to see if they were right.
I thought the unwritten limit was 5, including 2 in Atlanta.
- July 23, 2010:
PR-169-2010 South Valley Bank & Trust, Klamath Falls, Oregon, Assumes All of the Deposits of Home Valley Bank, Cave Junction, Oregon- July 23, 2010:
PR-168-2010 Plaza Bank, Irvine, California, Assumes All of the Deposits of SouthwestUSA Bank, Las Vegas, Nevada- July 23, 2010:
PR-167-2010 Roundbank, Waseca, Minnesota, Assumes All of the Deposits of Community Security Bank, New Prague, Minnesota- July 23, 2010:
PR-166-2010 The Bennington State Bank, Salina, Kansas, Assumes All of the Deposits of Thunder Bank, Sylvan Grove, Kansas- July 23, 2010:
PR-165-2010 First Citizens Bank and Trust Company, Inc., Columbia, South Carolina, Assumes All of the Deposits of Williamsburg First National Bank, Kingstree, South Carolina- July 23, 2010:
PR-164-2010 Renasant Bank, Tupelo, Mississippi, Assumes All of the Deposits of Crescent Bank and Trust Company, Jasper, GeorgiaPR-163-2010 Iberiabank, Lafayette, Louisiana, Assumes All of the Deposits of Sterling
Bank, Lantana, Florida
Looks like 7. ALL OVER THE COUNTRY. Weird.
a Jim Cramer ad? in ZH? HA HA HA
You've been visiting naughty URLs my friend... those ads are based on your browsing history...
I'm getting the Cramer ones too. How much porn does a guy have to surf to get the 40 year old cougar ads back?
A Skeleton in Barney Frank's Closet 19. Time Magazine. 1989
Barney + Gay Prostitution always makes for a great reading.
[Snippet]
"At the least, Frank's judgment was appallingly naive. After an initial encounter in which he paid Steve Gobie $80 for sex, the Congressman says he tried to lift the younger man out of drugs and prostitution by hiring him to run errands. He wrote letters to Gobie's probation officer and paid his psychiatric bills. He allowed Gobie the use of a car and sometimes his apartment when he was out of town."
http://www.time.com/time/magazine/article/0,9171,958598,00.html
Under Congressional Ethics rules, the $80 for sex is just reclassified as constituent dinner expenses, "Dinner in Dupont Circle".
Nothing to see there. Or at least I hope not.
I'm railing on Barney Fwank today:
Another gem, courtesy of Massachusetts 4th District Representative Barney Frank [in office for 29 years]
ENDA: The ‘Transgender Bathrooms for Businesses’ Bill
H.R. 2015 Would Force a Gender Confusion Revolution on U.S. Businesses
This is one of the most perverse applications of “civil rights” to date – and it’s headed straight for your business if you have 15 or more employees. What female employee wants to share the company restroom with a big-boned man claiming to be “transitioning” to “womanhood”? Will companies have to build “transgender male” and “transgender female” restrooms (or “Designated GLBT Restrooms”) to accommodate the various “orientations” and avoid government prosecution?
http://americansfortruth.com/news/enda-the-transgender-bathrooms-for-bus...
HAHAHAHAHHHHHHHHHHHHHHHHHHHHHHHAHAHAHHAHAHAHAHAHA
BurritoGas
https://secure.wikimedia.org/wikipedia/en/wiki/Alcee_Hastings
ImpeachmentIn 1981, Hastings was charged with accepting a $150,000 bribe in exchange for a lenient sentence and a return of seized assets for 21 counts of racketeering by Frank and Thomas Romano, and of perjury in his testimony about the case. He was acquitted by a jury after his alleged co-conspirator, William Borders, refused to testify in court (resulting in a jail sentence for Borders).
In 1988, the Democratic-controlled U.S. House of Representatives took up the case, and Hastings was impeached for bribery and perjury by a vote of 413-3. He was then convicted in 1989 by the United States Senate, becoming the sixth federal judge in the history of the United States to be removed from office by the Senate. The vote on the first article was 69 for and 26 opposed, providing two votes more than the two-thirds of those present that were needed to convict. The first article accused the judge of conspiracy. Conviction on any single article was enough to remove the judge from office. The Senate vote cut across party lines, with U.S. Senator Patrick J. Leahy, Democrat of Vermont voting to convict his fellow party member, and U.S. Senator Arlen Specter voting to acquit.[1]
The Senate had the option to forbid Hastings from ever seeking federal office again, but did not do so. Alleged co-conspirator, attorney William Borders went to jail again for refusing to testify in the impeachment proceedings, but was later given a full pardon by President Bill Clinton on his last day in office.[2]
Hastings filed suit in federal court claiming that his impeachment trial was invalid because he was tried by a Senate committee, not in front of the full Senate, and that he had been acquitted in a criminal trial. Judge Stanley Sporkin ruled in favor of Hastings, remanding the case back to the Senate, but stayed his ruling pending the outcome of an appeal to the Supreme Court in a similar case regarding Judge Walter Nixon, who had also been impeached and removed.[3]
Sporkin found some "crucial distinctions"[4] between Nixon's case and Hastings's, specifically, that Nixon had been convicted criminally, and that Hastings was not found guilty by two-thirds of the committee who actually "tried" his impeachment in the Senate. He further added that Hastings had a right to trial by the full Senate.
The Supreme Court, however, ruled in Nixon v. United States that the federal courts have no jurisdiction over Senate impeachment matters, so Sporkin's ruling was vacated and Hastings's conviction and removal were upheld.
http://www.bostonherald.com/track/inside_track/view.bg?articleid=1269698
Sen. John Kerry, who has repeatedly voted to raise taxes while in Congress, dodged a whopping six-figure state tax bill on his new multimillion-dollar yacht by mooring her in Newport, R.I.
Isabel - Kerry’s luxe, 76-foot New Zealand-built Friendship sloop with an Edwardian-style, glossy varnished teak interior, two VIP main cabins and a pilothouse fitted with a wet bar and cold wine storage - was designed by Rhode Island boat designer Ted Fontaine.
But instead of berthing the vessel in Nantucket, where the senator summers with the missus, Teresa Heinz, Isabel’s hailing port is listed as “Newport” on her stern.
Could the reason be that the Ocean State repealed its Boat Sales and Use Tax back in 1993, making the tiny state to the south a haven - like the Cayman Islands, Bermuda and Nassau - for tax-skirting luxury yacht owners?
Cash-strapped Massachusetts still collects a 6.25 percent sales tax and an annual excise tax on yachts. Sources say Isabel sold for something in the neighborhood of $7 million, meaning Kerry saved approximately $437,500 in sales tax and an annual excise tax of about $70,000.
The banks probably helped Frank again with this bill After all it is really a derivative option when you think about it. BF can go jack his mule in a a urinal while being douched from behind.
May the Farce be with ye lad.
Remember, this is your life ending one day at a time.
T-minus 2 hours and 20 minutes until 4:20...
Everyone, have a good one.
Go ahead and hate your neighbor; go ahead and cheat a friend.
Do it in the name of heaven; you can justify it in the end.
There won't be any trumpets blowin' come the judgment day
On the bloody morning after, one tin soldier rides away
maybe ZH needs a sister website based around Billy Jack.
Billy Jack on Crack ???
http://www.liveleak.com/user/BILLYJACKONCRACK
http://www.liveleak.com/view?i=79b_1279771388
California city managers making half a million plus with annual pensions in $400-$600K range. Greeece's... err America's new monied elite after investment bankers. Why anyone bothers to take risks in the private sector anymore is beyond me. Public work my friend, the path to generational wealth.
http://www.fundmymutualfund.com/2010/07/california-city-seeks-dismissal-of.html
The officials include Chief Administrative Officer Robert Rizzo, who earns $787,637 a year — nearly twice the pay of President Barack Obama — for overseeing one of the poorest towns in Los Angeles County. The others are Assistant City Manager Angela Spaccia, who makes $376,288 a year, and Police Chief Randy Adams, whose annual salary of $457,000 is 50 percent more than that of Los Angeles Police Chief Charlie Beck.
Ridiculous, these people are robbing that city blind!
They are robbing a Blind City !
Kittens play.
more like robbing it into sight (and anger). Blind no more.
incredibly disgusting.
banksters own government
and they are criminals
this will end in armageddon so long as they have this power to rape the world in broad daylight
Stay positive ZH er's.
Don't let the idiots get you down.
Watch TV for entertainment only no news here.
Not to get too philisophical, but how will this all end?
A war? Or will it be Global Debt enslavement?
Is default realy an option? Because I'm really starting to lose it. The phrase "Dont Fuck with Mr. Zero" is starting to have more meaning to me lately. If the money is fake, can't that in some way make the sovergeign debt fake too? Can't we just call "olly olly oxenfree " and cancel each other's debt? Maybe a clearinghouse to figure out who owes who the most (probably China) and then we all basically say "Sorry" really really sincerely and default?
Were pushing the outside of the envelope Chuck.
If you have the right stuff, learn Chinese...
Yea I'm curioous too, and although I'm still quite bearish about things, all the doom and gloom about failed bond auctions has yet to transpire, rates are low, gold and silver are affordable, stocks seem to have put in a short term low at 1020 s&p, earnings were mixed but not terrible, unemployment is bad but who the hell cares if you can borrow to keep these people on life support indefinitely, and to top it off the sovereign debt issue looks to have been written off, the states issue pops up every now and again but I thought California was broke come the end of May? Theses were the arrows in my bearish quivver but all the warnings I give to family and friends are met with these sorts of rebuttles. My point then, is it really that bad? Or are we/I a bit overly bearish?
beware the sneaker wave.
http://en.wikipedia.org/wiki/Sneaker_wave
Backatcha...
http://www.youtube.com/watch?v=rK0LWsEcSjM
wow. that lost me a couple hours sir. . . (mouse.click.repeat.)
http://www.youtube.com/watch?v=YLlg9LMPwnE&feature=related
no idea how I ended up "here," but hope you enjoy something new to you?
http://www.youtube.com/watch?v=QP_yUd_elcA&feature=related
(wink)
You're asking the wrong question. This does not end, like a dog endlessly chasing his tail.
In the near to mid term, we will begin the deleveraging process of the public (welcome to the party motherfuckers). There will be plenty of kicking and screaming along the way (desperate attempts to raise taxes, etc.), but like their private brethren, the public workers will get the ol' pinkslip too. Ultimately, we will default on their retirements and the general obligations to all citizens. Local governmental services will be abandoned. We will leave no domestic debt safe from default.
During this time, the money saved by most private organizations will be for naught. They will finally hit the wall when there is no fat nor even muscle left to cut. They will become immobile in a hostile world. The rising input costs due to monetary insanity will not be able to be passed along to consumers, leaving some businesses to simply shut the doors rather than toil away in a lengthy deleveraging process.
The public and private aspects will see saw in a vicious feedback loop.
Ultimately, in the aftermath, local and regional robber barons will re-emerge. From the carcasses of faceless corporations, the puppetmasters will emerge to claim their thrones. We will have new masters. These masters will laughably do away with virtually every aspect of our former bureaucracy, including the protections for the minority. We will all have stronger backs and fear the crack of the whip.
Eventually, the pressure will become too great and we will reach a boiling point... a point in which we can no longer tolerate our oppression and the opulence of our keepers. At this point, we will arise and begin the collective bargaining phase. Our overlords will capitulate on a minor issue and each side will declare victory. In the end, it will be the victory of the worker, as the worker will then begin nipping away at the productive capacity of his master, then more productive fellow worker, eventually demanding payment for crossing his arms.
Although there will be cycles within cycles and ebb and flow between the parties, eventually the weight of the collective will be too heavy of a burden for the barons (and productive). In order to protect themselves, they will devise new organizations, which create a barrier to liability for the freshly implemented laws and other protections to the worker. By this time, the death bell shall already have been rung, the writing on the wall. The complexity of the system will thereafter weigh so heavily nary a soul will be able to see further than his nose and know more than his cubicle, much of it actually brought about by the barons, having captured the political class.
The barons will have implemented measures to ensure the perpetual indebtedness of the masses, a stealth tax to the unwary, shackles to the knowing, barriers to entry for the combative. By the time it is determined their intentions are dishonest, it will have been too late to change the outcome. Soon, the collective bargains they have made and affixed to the barons will all be washed off, like a pig in a rain storm. The toils of their lives will be destroyed in a brilliant moment of collective realization. But before and after, there will be the pain of deleveraging.
You want to know how it will end? Where it started...
I can't find my crystal ball -- I know it is around here somewhere. The Magic 8 Ball just keeps saying "Ask again later."
More proof of Boob_flation! It's growing and going global. Watch as a female reporter discusses the phenomenon (confirms that what you see on CNBS is no accident) http://www.msnbc.msn.com/id/21134540/vp/38381964#38381964
Wow.... and our very own Robotrader called it first. Who knew?
Man, how do you get that research job? I'm proud to be an Australian!
Growth hormones in the diet bitchez.
Holy @#$%. I can't tell parody from intentional reporting any more.
This AMAZON intraday is just ridiculous and criminal... We have no market anymore, just some robots trading enriching the riches of wall street. Tired of this market... of all this fucking lies. Here in Portugal, the bank that had a rumour that was in very bad shape in stress tests was the better...
fuck bankers.
What's up with this last minute sell off? Was there some news to warrant it, or just profit taking?
Was there a reason for the ramp up 1pm? There is no reason to most market moves lately.
(Please don't say Genzyme acquisition, it was not that relevant).
I wonder how much taxpayer money was used at 33 Liberty to hold the market at 1100?
normally i would add, the most stupid farmers have the biggest potatoes, or, leave the carrott to the rabbitt, but this time, i really believe the most suitable translation would be schizophrenic as far as euroland is concerned regarding this useless stresstest
I WILL arise and go now, and go to Innisfree, And a small cabin build there, of clay and wattles made; Nine bean rows will I have there, a hive for the honey bee, And live alone in the bee-loud glade. And I shall have some peace there, for peace comes dropping slow, 5 Dropping from the veils of the morning to where the cricket sings; There midnight's all a glimmer, and noon a purple glow, And evening full of the linnet's wings. I will arise and go now, for always night and day I hear lake water lapping with low sounds by the shore; 10 While I stand on the roadway, or on the pavements gray, I hear it in the deep heart's core. 44. The Lake Isle of InnisfreeJudy Collins did an excellent rendition of that poem as a song.
The man was a verbal tosser - I had to listen to his innane verbal masturbation for years in school.
Yeats was a hollow man with vain second rate aesthetic ideals.
Americans of Irish extraction idolize Yeats (pronounced Yates in America). I prefer Larkin.
deleted
Complete manipulation at end of the day to maintain 1100 level.......which means nothing at this point........it's just a very corrupt casino....
No, a casino is a joint where you can go to place bets...this is a fucking scam.
someone just e-mailed me this
Pay czar chose not to go after $1.6B in bank pay.
Feinberg didn't go after $1.6B in executives' pay, says their shame is penalty enoughhttp://finance.yahoo.com/news/Pay-czar-chose-not-to-go-apf-1817820185.html?x=0&sec=topStories&pos=2&asset=&ccode
Holy Shet!
How much is this guy paid of taxpayer money, to tell everyone the obvious. He did nothing that could not already be gleamed from the Internet.
So much fucking corruption.
Watching this pretzel logic bastard right now !
What a bunch of crap. No claw backs BUT in the future we can break pay contracts???????
It's official, We are Russia !
"It won't affect companies' ability to attract talent."
Really???? Fuck you douchebag.
Beneficiary? Canadian and european trading firms when the circus leaves town.
Does this remind anyone else of some @#$%head rich kid getting caught and doled out a punishment by his disappointed father?
Let us calculate the shame, shall we?
AMZN gets official "Miracle Stock of the Day" status on that comeback on a big earnings miss.
Prime example of a manipulated stock market.
The real market was the sell off because AMZN is becoming increasingly irrelevant in an economy that cannot afford to shop either online or off-.
But the farce has to be kept up.
I honestly don't know anyone in my widest circle of friends who is shopping like they used to. Nobody is participating in the economy except to buy whatever the most essential items are.