David Stockman, author of The Great Deformation, summarizes the last quarter century thus: What has been growing is the wealth of the rich, the remit of the state, the girth of Wall Street, the debt burden of the people, the prosperity of the beltway and the sway of the three great branches of government - that is, the warfare state, the welfare state and the central bank...
What is flailing is the vast expanse of the Main Street economy where the great majority have experienced stagnant living standards, rising job insecurity, failure to accumulate material savings, rapidly approach old age and the certainty of a Hobbesian future where, inexorably, taxes will rise and social benefits will be cut...
He calls this condition "Sundown in America".
The last 4 days have seen the price of protection against a default on US Treasuries spike by the most in 4 years. While USA CDS trade on both a default and devaluation basis (as well as technical issues related to which Treasury is cheapest to deliver) this spike to 5-month highs (from what was extremely high levels of complacency) is very notable in light of today's Kocherlakota "whatever it takes" speech. While still well off 2011's debt ceiling debacle panic highs, this move does suggest more than just the politicians are worried about a technical default occurring on US debt. By way of comparison, Germany trades at 23bps and Japan at 61bps against USA's 32bps. But there is a way to trade the debt-ceiling debacle that doesn't invlove leveraged speculation in credit derivatives...
Let us not forget where and when this vast unending clusterfuck reached terminal velocity...
Confirming, once again, that without fail Wall Street executives tend to have irreconcilable sociopathic tendencies in addition to delusions of grandure, AIG's Bob Benmosche found himself promptly under fire from all sides following his interview with the WSJ (reported here) in which he said that outrage over banker bonuses "was intended to stir public anger, to get everybody out there with their pitch forks and their hangman nooses, and all that - sort of like what we did in the Deep South. And I think it was just as bad and just as wrong." There were two main differences: this time around, to pretty much everyone's disappointment, there were no actual lynchings or even anyone going to prison. But more importantly, racial hatred and lynchings in the "deep south" were generally irrational and without reason, which is certainly more than can be said about a banker uberclass that would not exist if it wasn't for taxpayers saving their ungrateful offshore bank accounts. In other words, the hatred at the likes of Benmosche is certainly warranted. Which, together with Elijah Cummings promptly demanding his resignation, is why in less than a day the CEO found himself apologizing for a "poor choice of words."
When we pointed out AIG CEO Benmosche's somewhat disconnected-from-reality comments comparing banker-treatment to lynchings of black people in the deep south, we suspected there would be fallout. Sure enough, none other than Rep. Elijah Cummings (among the leading investigators into the 2008 excesses that led to AIG's bailout) has called for Benmosche to "resign his position as CEO immediately." Cummings stated: “As the leading critic of AIG’s lavish spending before and after its taxpayer funded bailout - and as the son of sharecroppers who actually experienced lynchings in their communities - I find it unbelievably appalling that Mr. Benmosche equates the violent repression of the African American people with congressional efforts to prevent the waste of taxpayer dollars..." We await the "...out of context..." retractions tomorrow...
As if you needed any more evidence of how disconnected, entitled, irrational and sociopathic the heads of financial firms in America are these days, along comes AIG’s CEO Robert Benmosche to dispel any lingering doubts. In a highly disturbing interview with the Wall Street Journal, Mr. Benmosche compares the murder of black people in the deep south based on racial prejudice and hate to the vast majority of Americans expressing disgust with the fact that Wall Street decided to suspend capitalism when it was in their best interests in order to give themselves trillions of dollars. He actually compares an environment where the rule of law was often completely suspended to allow the murder of a disenfranchised racial group, to widespread public anger about the suspension of the rule of law to benefit the wealthiest, most connected people in the nation.
While the commemoration of the 5 year anniversary of the start of the Great Financial Crisis is slowing but surely fading, another just as important anniversary is revealed when one goes back not 5 but 15 years into the past, specifically to September 23, 1998. On that day, the policy that came to define the New Normal more than any other, namely the bailout of those deemed Too Big To Fail, a/k/a throwing good (private or taxpayer) money after bad was enshrined by Wall Street as the official canon when faced with a situation where capitalism, namely failure, is seen as Too Dangerous To Succeed. This was first known as the Greenspan Put, subsequently the Bernanke Put, and its current iteration is best known as the Global Central Banker All-In Systemic Put. We sow the seeds of bailing out insolvent financial corporations to this day, when instead of making them smaller and breaking them up, they are rewarded by becoming even bigger, even more systemics, and even Too Bigger To Fail, and their employees are paid ever greater record bonuses.
A decisive tipping point in the evolution of American capitalism and democracy - the triumph of crony capitalism - took place on October 3, 2008. That was the day of the forced march approval on Capitol Hill of the $700 billion TARP (Troubled Asset Relief Program) bill to bail out Wall Street. This spasm of financial market intervention, including multi-trillion-dollar support lines provided to the big banks and financial companies by the Federal Reserve, was but the latest brick in the foundation of a fundamentally anti-capitalist régime known as “Too Big to Fail” (TBTF). It had been under construction for many decades, but now there was no turning back. The Wall Street bailouts of 2008 shattered what little remained of the old-time fiscal rules. There was no longer any pretense that the free market should determine winners and losers and that tapping the public treasury requires proof of compelling societal benefit.
- Merkel Blames SPD’s Schroeder for Letting Greece Into Euro (BBG)
- U.S. Bank Legal Bills Exceed $100 Billion (BBG)
- U.K. to Request U.N. Action to Protect Syrians From Chemical Weapons (WSJ) - and Russia to veto any decision
- U.N. inspectors in new Syria mission as West prepares to strike (Reuters)
- Emerging-Market Rout Intensifies on Syria Jitters (WSJ)
- Rebels Without a Leader Show Limit to U.S. Role in Syria War (BBG)
- Anger at IRS Powers Tea-Party Comeback (WSJ)
- China has much at risk but no reach in Middle East (Reuters)
- 'London Whale' Penalties Put at $500 Million to $600 Million (WSJ)
- U.S. lawmaker says 'compelling' evidence of Syrian chemical attack (Reuters)
- Bankers Brace for Fed Wind-Down (WSJ)
- A Veteran Saudi Power Player Works To Build Support to Topple Assad (WSJ)
- Gunmen shoot at weapons experts' vehicle in Damascus: U.N (Reuters) - as long as it's not drones
- ECB Council Members Split in Jackson Hole Over Rate Cuts (BBG)
- Fed Officials Rebuff Coordination Calls as QE Taper Looms (BBG)
- As Egyptians Ignore Curfew, Talk of a U.S.-Brotherhood Conspiracy (NYT)
- Pipeline-Capacity Squeeze Reroutes Crude Oil (WSJ)
- Lawmakers Probe Willful Abuses of Power by NSA Analysts (BBG)
- Indictments Expected in Alleged Trading Code Theft (WSJ)
- India’s ONGC takes Africa gasfield stake (FT)
- Capital Flight Drains Reserves as Rupee, Rupiah Fall (BBG)
- Banks scale back rates business (FT)
It's a Carl iCahn world, and 13-Fs are nothing more than 45 day old tweets. Also, with Ben Bernanke Chief Risk Manager of the developed world, there is absolutely no point to be invested in hedge funds (why - there is simply no risk, until Ben loses control, then no amount of hedging will help anyone), and as such what "hedge" funds are buying is irrelevant. But since the cottage industry of alphacloners still exists, here, via RanSquawk and Fly, is the full June 30 holding recap of the usual suspects.
- Vocal billionaire activist IRR - 150x: Icahn bought $1 billion of AAPL stock, seeks $150 billion buyback (BBG)
- BlackBerry Said to Have Sought Buyers Since 2012 (BBG) - for a phone or the entire company?
- IPhone Fingerprint Reader Talk Boosting Biometric Stocks (BBG) - also, the NSA will need to grow its Utah data center
- UPS Jet Crashes in Birmingham, Ala. (WSJ)
- America's Farm-Labor Pool Is Graying (WSJ)
- Hong Kong Lowers Storm Signal as Typhoon Closes on China (BBG)
- Indian submarine explodes in Mumbai port (FT)
- BofA Banker Sued by Regulator Later Joined Fannie Mae (BBG)
- Software that hijacks visits to YouTube uncovered (FT)
- Chinese Billionaire Huang Readies Iceland Bid on Power Shift (BBG)
- China to launch fresh pharmaceutical bribery probe (Reuters)
- Defeat at J.C. Penney Hurts Ackman as Performance Trails (BBG)
This insane world was created through decades of bad decisions, believing in false prophets, choosing current consumption over sustainable long-term savings based growth, electing corruptible men who promised voters entitlements that were mathematically impossible to deliver, the disintegration of a sense of civic and community obligation and a gradual degradation of the national intelligence and character. There is a common denominator in all the bubbles created over the last century – Wall Street bankers and their puppets at the Federal Reserve. Fractional reserve banking, control of a fiat currency by a privately owned central bank, and an economy dependent upon ever increasing levels of debt are nothing more than ingredients of a Ponzi scheme that will ultimately implode and destroy the worldwide financial system. Since 1913 we have been enduring the largest fraud and embezzlement scheme in world history, but the law of diminishing returns is revealing the plot and illuminating the culprits. Bernanke and his cronies have proven themselves to be highly educated one trick pony protectors of the status quo. Bernanke will eventually roll craps. When he does, the collapse will be epic and 2008 will seem like a walk in the park.
We do not inhabit a “normal” economy. We live in a financialised world in which our banks cannot be trusted, our politicians cannot be trusted, our money cannot be trusted, and – not least thanks to ongoing spasms of QE and expectations of much more of the same – our markets cannot be trusted. At some point (though the timing is impossible to predict), asset markets that cannot be pumped artificially any higher will start moving, under the forces of inevitable gravitation, lower.
Greed; corporate arrogance; lobbying influence; excessive leverage; accounting tricks to hide debt; lack of transparency; off balance sheet obligations; mark to market accounting; short-term focus on profit to drive compensation; failure of corporate governance; as well as auditors, analysts, rating agencies and regulators who were either lax, ignorant or complicit. This laundry list of causes has often been used to describe what went wrong in the credit crunch crisis of 2008-2010. Actually these terms were equally used to describe what went wrong with Enron more than twenty years ago. Both crises resulted in what at the time was the biggest bankruptcy in U.S. history — Enron in December 2001 and Lehman Brothers in September 2008. Naturally, this leads to the question that despite all the righteous indignation in the wake of Enron's failure did we really learn or change anything?