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?
- Low Wages Work Against Jobs Optimism (WSJ)
- Tourre’s Junior Staff Defense Seen Leading to Trial Loss (BBG)
- Russia gives Snowden asylum, Obama-Putin summit in doubt (Reuters)
- Fortress to Blackstone Say Now Is Time to Sell on Surge (BBG)
- Brazil backs IMF aid for Greece and recalls representative (FT), previously Brazil refused to back new IMF aid for Greece, says billions at risk (Reuters)
- Google unveils latest challenger to iPhone (FT)
- Swaps Probe Finds Banks Manipulated Rate at Expense of Retirees (BBG)
- Academics square up in fight for Fed (FT)
- Potash Turmoil Threatens England’s First Mine in Forty Years (BBG)
- Dell Deal Close but Not Final (WSJ)
Here We Go Again: Step Aside RMBS, Rent-Backed Securities Are Here, And With Them The Beginning Of The EndSubmitted by Tyler Durden on 07/30/2013 17:03 -0400
Earlier today, when we reported that median asking rents in the US had just hit an all time high, we had a thought: how long until the hedge funds that also double down as landlords decide to bypass the simple collection the rental cash flows, and instead collateralize the actual underlying "securities"? One look at the chart below - which compares the median asking "for sale" price in black and the median rent in red - shows why. The last time there was a great divergence (to the benefit of housing), Wall Street spawned an entire Residential Mortgage-Backed Securities industry where Paulson, Goldman willing sellers would package mortgages, often-times synthetically, slice them up in tranches of assorted riskiness, and sell them to willing idiots yield-starved buyers. As everyone knows, that particular securitization bubble ended with the bankruptcy of Lehman, the bailout of AIG and the near collapse of the financial system. As it turns out, the answer to our original question was "a few hours" because securitizations are back, baby, and this time they are scarier and riskier than ever.
When Bad Government Policy Leads to Bad Results, the Government Manipulates the Data … Instead of Changing PolicySubmitted by George Washington on 07/30/2013 15:09 -0400
Problem ... What Problem?
- "Ooops": Barclays reveals £12.8bn balance sheet hole (FT), Barclays Bows to Pressure With Share Sale (WSJ)
- Bank of Italy Inspecting Top Lenders' Books (WSJ)
- Obama to propose 'grand bargain' on corporate tax rate, infrastructure (Reuters)
- China injects funds into money markets, quelling fears (FT)
- Berlusconi faces verdict that could endanger Italian government (Reuters)
- Shale Threatens Saudi Economy, Warns Prince Alwaleed (WSJ)
- Qatar Finds Revolution Abroad Not as Easy as Stock Picks (BBG)
- Cities Begin Hiring Again (WSJ) - not to mention filing for bankruptcy
- Big Question Hangs Over Small-Caps (WSJ)
- China Politburo Pledges to Press On With Restructuring Economy (BBG)
- Bank Revenues Surge on Trading Over What Fed Will Do (BBG)
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.