U.S. JUDGE SAYS EX-AIG CEO GREENBERG SHOULD BE PERMITTED TO DEPOSE FED CHAIRMAN BERNANKE OVER INSURER'S BAILOUT -- COURT RULING; U.S. COURT OF FEDERAL CLAIMS JUDGE THOMAS WHEELER SAYS THERE ARE "EXTRAORDINARY CIRCUMSTANCES" FOR TAKING OF BERNANKE'S DEPOSITION
Too bad Bernanke's predecessor, who is just as culpable for the AIG collapse and bailout, won't be sitting next to the Chairsatan or else we would very soon have a great reason to roll out the following image:
- Detroit ‘Gut Kick’ Poses New Test for Long Suffering City (BBG)
- Florida lawmakers urge overhaul of 'Stand Your Ground' law (Reuters)
- Investors pour huge sums into US equity funds (FT)
- Snowden Standoff Threatens Obama-Putin Moscow Summit (BBG)
- China, U.S. companies' great hope, now a drag (Reuters)
- Morgan Stanley stock traders rebuild burned bridges (Reuters)
- Huawei spied for China, claims ex-CIA head Michael Hayden (FT)
- Gorilla Flipping Homes as Rebound Revives Rapid Trades (BBG)
- BRICS joint action at G20 summit may be wishful thinking (Reuters)
Lets face it, shysters exist....it's our job to ensure we stay well clear of them. Here are some RED FLAGS to look out for!
- MSM discovers that soaring dollar hurts corporate profits: P&G to Apple Hurt by Strong Dollar Keep S&P 500 Profits in Check (BBG)
- China Posts Surprise Drop in Exports (WSJ) - lol: "surprise"
- Plan Reins In Biggest Banks (WSJ)
- European Commission Seeks Authority to Wind Down Banks (WSJ) - and Germany just says 9
- U.S. Banks Seen Freezing Payouts as Harsher Leverage Rules Loom (BBG)
- Brussels sets up clash with Berlin over banks (FT)
- EU to Toughen Creditor-Loss Rules at Failing Banks From August (BBG) - or September, or October, but definitely November... 2023
- China's crude, iron ore imports falter as demand cools (Reuters)
- Obama pushes economic case for immigration as House eyes next steps (Reuters)
Today, something happened that has not happened since the Lehman collapse: the 1 Month Gold Forward Offered (GOFO) rate turned negative, from 0.015% to -0.065%, for the first time in nearly 5 years, or technically since just after the Lehman bankruptcy precipitated AIG bailout in November 2011. And if one looks at the 3 Month GOFO, which also turned shockingly negative overnight from 0.05% to -0.03%, one has to go back all the way to the 1999 Washington Agreement on gold, to find the last time that particular GOFO rate was negative.
Barry Ritholtz is convinced that once the current short-term bounce is over with, the recent cyclical bear market in gold will resume. The reality is of course that neither Mr. Ritholtz, nor anyone else actually knows the future. Therefore, he cannot know whether the bear market is or isn't over. However, judging from the remainder of his post, he actually seems to think that the secular bull market in gold is over. In our opinion there is no evidence for that, and we will explain below why we think that he and others in the long term bear camp are wrong. Further below is the evidence marshaled by Mr. Ritholtz (actually, apart from the technical analysis he provides, it isn't really evidence at all – it reads like an unsupported opinion). Sure enough, gold has no yield, no conference calls, and no income statements (paraphrasing Jim Grant). That is actually the beauty of it. But that does not mean it 'has no fundamentals', nor does it means that it 'cannot be an investment'. We comment on his article (and its errors) further below.
- Fashionable 'Risk Parity' Funds Hit Hard (WSJ)
- No 1997 Asian Crisis Return as China Trembles (BBG)
- Greece Faces Collapse of Second Key Privatization (FT)
- China Bad-Loan Alarm Sounded by Record Bank Spread Jump (BBG)
- Iranian official signals no scaling back in nuclear activity (Reuters)
- Asmussen Says Any QE Discussions at ECB Not Policy Relevant (BBG)
- Flat Japanese consumer prices aid Kuroda (FT)
- Vietnam Devalues Dong for First Time Since ’11 to Boost Reserves (BBG)
- World Bank Sees ‘Vulnerable’ Food System on Climate Change (BBG)
- Fed big-hitters seek to quash QE fears (FT)
- EU Leaders Set to Slow Support for Ailing Banks (BBG)
Following the 'coup' that led to JPMorgan's Matt Zames running the TBAC (and implicitly the US Treasury and Fed if one were inclined to believe that is where the real smarts are), it seems Goldman Sachs has once again been out-'vampire-squid'-ed as Jacob Frenkel - Chairman of JPMorgan Chase International - is set to take back the reins of the Bank of Israel.
Claiming that enough time had surely passed since they last caused a global economic meltdown, top executives from the U.S. financial sector told reporters Monday that they are just about ready to completely destroy the world again. Representatives from all major banking and investment institutions cited recent increases in consumer spending, rebounding home prices, and a stabilizing unemployment rate as confirmation that the time had once again come to inflict another round of catastrophic financial losses on individuals and businesses worldwide. “It’s been about five or six years since we last crippled every major market on the planet, so it seems like the time is right for us to get back out there and start ruining the lives of billions of people again,” said Goldman Sachs CEO Lloyd Blankfein. “We gave it some time and let everyone get a little comfortable, and now we’re looking to get back on the old horse, shatter some consumer confidence, and flat-out kill any optimism for a stable global economy for years to come.”
The market is having a difficult time trying to figure out what Fannie is worth these days.
- National Security Advisor Tom Donilon resigning, to be replaced by Susan Rice - Obama announcement to follow
- Japan's Abe targets income gains in growth strategy (Reuters), Abe unveils ‘third arrow’ reforms (FT) - generates market laughter and stock crash
- Amazon set to sell $800m in ads (FT) - personal tracking cookie data is valuable
- 60 percent of Americans say the country is on the wrong track (BBG) and yet have rarely been more optimistic
- Jefferson County, Creditors Reach Deal to End Bankruptcy (BBG)
- Turks clash with police despite deputy PM's apology (Reuters)
- Rural US shrinks as young flee for the cities (FT)
- Australia holds steady on rate but may ease later (MW)
- The Wonk With the Ear of Chinese President Xi Jinping (WSJ)
- Syrian army captures strategic border town of Qusair (Reuters)
- Whale of a Trade Revealed at Biggest U.S. Bank With Best Control (BBG)
- ECB backs away from use of ‘big bazooka’ to boost credit (FT)
- Turkish unions join fierce protests in which two have died (Reuters)
- Europe Floods Wreak Havoc (WSJ)
- Beheadings by Syrian Rebels Add to Atrocities, UN Says (BBG)
- RBA Sees Further Rate-Cut Scope as Aussie Remains High (BBG)
- China’s ‘great power’ call to the US could stir friction (FT)
- J.C. Penney Continuing Ron Johnson’s Vision on the Cheap (BBG)
Fractional reserve banking is unlike most other businesses. It's not just because its product is money. It's because banks can manufacture their product out of thin air. Under the bygone rules of free market capitalism, only one thing kept banks from creating an infinite amount of money, and that was fear of failure. Periodic bank failures remind depositors of the connection between risk and reward. What is not widely appreciated is that the ensuing government bailouts allowed an underlying shadow banking system to not only survive but grow even larger. To the frustration of Keynesians, and despite an unprecedented Quantitative Easing (QE) by the Federal Reserve, conventional commercial banks have broken with custom and have amassed almost $2 trillion in excess reserves they are reluctant to lend as they scramble to digest all the bad loans still on their books. So most of the money manufactured today is actually being created by the shadow banks. But shadow banks do not generally make commercial loans. Rather, they use the money they manufacture to fund proprietary trading operations in repos and derivatives. No one knows when the bubble will pop, but when it does a donnybrook is going to break out over that thin wedge of collateral whose ownership is spread across counterparties around the world, each looking for relief from their own judges, politicians, bureaucrats, and taxpayers.
- BIS lays out "simple" plan for how to handle bank failures (Reuters) - Are we still holding our breath on Basel III?
- Deficit Deal Even Less Likely - Improving U.S. Fiscal Health Eases Pressure for a 'Grand Bargain' Amid Gridlock (WSJ)
- IRS Faulted on Conference Spending (WSJ)
- Deadly MERS-CoV virus spreads to Italy (CNN)
- Turkish PM Erdogan calls for calm after days of protests (Reuters)
- Financial system ‘waiting for next crisis’ (FT)
- Russia to send nuclear submarines to southern seas (Reuters)
- China Nuclear Stockpile Grows as India Matches Pakistan Rise (BBG)
Just three weeks ago we noted Apollo Group's Leon Black's comment that his firm was "selling everything not nailed down," and that he sees "the market is pricey... in our view, priced for perfection." It seems he is not alone in the 'buy-low-sell-high' crowd. If wonderful times are ahead for U.S. financial markets, then why is so much of the smart money heading for the exits? Does it make sense for insiders to be getting out of stocks and real estate if prices are just going to continue to go up?