The rock is reality. The squishy place is the illusion that pervasive racketeering is an okay replacement for an economy. The essence of racketeering is the use of dishonest schemes to get money, often (but not always) employing coercion to make it work. Some rackets can function on the sheer cluelessness of the victim(s).
There are a couple of disturbing points that came out of her take on bubbles and the rationale behind not tapering a mere 10 or 15 Billion dollars given the monthly commitment of 85 Billion in Fed Purchases every month.
Since the Financial Crisis erupted in 2007, the US Federal Reserve has engaged in dozens of interventions/ bailouts to try and prop up the financial system. Now, I realize that everyone knows the Fed is “printing money.” However, when you look at the list of bailouts/ money pumps it’s absolutely staggering how much money the Fed has thrown around.
- China to Ease One-Child Policy (WSJ), China announces major economic and social reforms (Reuters)
- Consumers line up for launch of PlayStation 4 (USAToday)
- Trust frays between Obama, Democrats (Politico)
- Yellen Stands by Fed Strategy (Hilsenrath)
- Hero to zero? Philippine president feels typhoon backlash (Reuters)
- Brussels warns Spain and Italy on budgets (FT)
- Moody’s Downgrades Four U.S. Banks on Federal Support Review (BBG)
- CIA's Financial Spying Bags Data on Americans (WSJ)
- Germany Digs In Against Risk Sharing in EU Bank-Failure Plan (BBG)
- Bill Gates wants Norway's $800 billion fund to spend more in Africa, Asia (RTRS)
Here is a summary of the key stock additions, sales, initiations and liquidations conducted by the most prominent US hedge funds in the third quarter.
- China premier warns against loose money policies (Reuters)
- Brussels forecasts tepid Eurozone growth (FT)
- SAC Case Began With Informant’s Tips on Cohen, Rajaratnam (BBG)
- Dirty Munich Home’s Nazi Loot Estimated at $1.35 Billion (BBG)
- Mortar hits Vatican embassy in Damascus, no casualties (Reuters)
- India Launches Mars Mission (WSJ)
- Lael Brainard to leave Treasury, heading to Fed (FT)
- U.S. Takes Aim at 'Forced' Insurance (WSJ)
- Wife of Jeff Bezos attacks book about Amazon (FT)
- Fall of Brazil’s Batista embarrasses President Dilma Rousseff (FT)
- The One Thing People Still Really Like About BlackBerry (BusinessWeek)
- US admits surveillance on foreign governments ‘reached too far’ (FT)
- He must be so proud: Obama halted NSA spying on IMF and World Bank headquarters (RTRS)
- Obamacare website gets new tech experts; oversight pressure grows (Reuters)
- R.B.S. to Split Off $61 Billion in Loans Into Internal ‘Bad Bank’ (NYT)
- Draghi’s Deflation Risk Complicates Recovery (BBG)
- Abenomics: Nissan slashes full-year profit forecast 15% (FT)
- Credit Suisse Dismisses London Trader Over 'Unusual Trading' Losses (WSJ)
- RBS avoids break-up with 38 billion pounds 'internal bad bank' (Reuters)
- Twitter Said to Attract More Than Enough Interest for IPO (BBG)
I present to you a video in which POTUS Barack Obama could learn much from the wisdom of 16-year-old Pakistani teenager Malala Yousafzai.
Ye Gods! Even that discredited old hack, Alan Greenspan ? the man who bears as much responsibility as anyone for the hypertrophy of state- supported finance and thus for the havoc it continues to wreak ? is at it, trying to tell us that because of a low ‘equity premium’ (read: ludicrously intervention?depressed bond yields), the ‘momentum’ of stocks ‘is still relativel. Such a market is therefore likely to suck everyone in to its last, Plinian updraft no matter how stretched everything becomes and no matter how great the risk of being cast into perdition in the pyroclastic collapse to come.
What politicians want from their regulatory efforts is a world of pure beta and zero alpha. This is the ultimate “level playing field”, where no one knows anything that everyone else doesn’t also know. The presumption within regulatory bodies today is that you must be cheating if you are generating alpha. How’s that? Alpha generation requires private information. Private information, however acquired, is defined as insider information. Insider information is cheating. Thus, alpha generation is cheating. QED. Why would politicians want an alpha-free market? Because a “fair” market with a “level playing field” is an enormously popular Narrative for every US Attorney who wants to be Attorney General, every Attorney General who wants to be Governor, and every Governor who wants to be President … which is to say all US Attorneys and all Attorneys General and all Governors. Because criminalizing private information in public markets ensures a steady stream of rich criminals for show trials in the future. Because the political stability of the American regime depends on a widely dispersed, non-zero-sum price appreciation of all financial assets – beta – not the concentrated, zero-sum price appreciation of idiosyncratic securities. Because public confidence in the government’s control of public institutions like the market must be restored at all costs, even if that confidence is misplaced and even if the side-effects of that restoration are immense.
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...