What is the Fallout of the Ambac Bankruptcy on the Investment Banking Industry? Robo-signing Conspiracy Theory Grows Some BallsSubmitted by Reggie Middleton on 11/15/2010 14:20 -0500
The fallout from Ambac's bankruptcy is not necessarily what many may think. The robo-signing plaintiffs and associated lawsuits will now get to see what happens when the spurned money of the big boys joins the fray!
I pity the fool!
This isn’t about jobs at all. It’s about power. It’s about who is going to dictate policy to the rest of the world. Bernanke wants emerging markets to bear the costs of a financial crisis that originated on Wall Street and was nurtured every step of the way by the easy money policies of the Federal Reserve.
The Economy Will Not Recover Until the Economic Criminals are Prosecuted, and There Are Real Investigations Into 9/11 and Other Government FailuresSubmitted by George Washington on 11/14/2010 07:25 -0500
If we don't prosecute the criminals, our economy will NEVER recover
An interesting development for the biggest market event of the year for US capital markets, the GM IPO, which is supposed to start trading next Thursday (why else would Brian Sach have a POMO every day next week) is the news out of Dow Jones that Goldman Sachs will close its books for GM share allocation on Friday at noon. Dow Jones takes this as an indication of massive demand. Perhaps, although with Goldman third row in the bracket, below MS, JPM, BofA, Citi, Barclays, Credit Suisse and Deutsche, they hardly had a big allocation to fill. More likely, this is merely a way to snub the government and demonstrate that unlike the other banks (none of whom are closing books early) it has done its job the fastest and the most efficient. That said, should Brian Sack not be able to contain the suddenly very jittery market, we would not be too surprised to see someone pulling the "market conditions" cop out card over the next week.
China Wants World To Believe Inflation Jumped By 4.4%, In Line With Shadow Expectations, Fastest Fake Price Growth In Two YearsSubmitted by Tyler Durden on 11/10/2010 22:02 -0500
That China somehow magically pulled a 4.4% inflation number for October out of its hat is not surprising. After all this is precisely the number that the "local market" was expecting as there are no secrets in China, even if the Bloomberg surveyed Keynesian fundamentalists-cum-economists end up being "pleasantly surprised." Yet none of this is at all relevant: now even Credit Suisse's Sean Keane (see below) is openly ridiculing the magic 8-ball that the Chinese department of truth is. The only open question is whether this acceleration in the economy to a two year high will lead to a rate hike. And the answer, as Bank of America says, is no. Which means a whole of nothing is about to happen as a result of this latest non-news which just confirms that China's economy is telegraphed to be overheating at precisely the rate that its politburo has determined is just right.
Steve Keen has long been one of the most accurate economic prognosticators. This, and the fact that he does not conform to the prevalent mold of economic thinking, has made him, and his blog Debt Watch, one of Zero Hedge's must reads. Today, as part of Chris Martenson's recently launched "Straight Talk" series, Keen answers a variety of questions on the economy, and demonstrates why at the end of the day it is "all about the debt" and why deleveraging is the primary force that the Fed has to battle, and the only important outcome for the future of capital markets is whether the Fed's response will be too much (hyperinflation), or too little (deflationary crunch).
Last week's Op-Ed du semaine was Ben Bernanke's WaPo glowing endorsement of the Fed market put, whose sole purpose was to remind stocks, which ended up drooping on the day QE2 was announced, that Bernanke will stop at nothing to achieve his now primary goal (as loosely interpreted under the Fed's broad, and unsupervisable, mandate) - surging stock prices. This week, however, may likely belong to Fed Board Governor, and former member of the President's working group on capital markets, Kevin Warsh. In an Op-ed just released in the WSJ, Warsh, whose series of accomplishments include being the youngest ever appointee to the Fed BOD at 35, and being married to Jane Lauder of Estee Lauder fame, writes "Lower risk-free rates and higher equity prices—if sustained—could
strengthen household and business balance sheets, and raise confidence
in the strength of the economy. But if the recent weakness in the
dollar, run-up in commodity prices, and other forward-looking indicators
are sustained and passed along into final prices, the Fed's price
stability objective might no longer be a compelling policy rationale. In
such a case—even with the unemployment rate still high—we would have
cause to consider the path of policy. This is truer still if inflation
expectations increase materially." Translation: if gold continues to exhibit a beta > 1 w/r/t ES, then we are screwed, and all Fed policies will have failed. Elsewhere, look for most commodities to open limit up again tomorrow for the nth day in a row as inflation expectations continue to "increase materially" and more and more Fed members understand just what Warsh is saying.
One of the most serious condemnations of the race to the currency bottom to date comes not come from some peripheral media, but from the head of the World Bank itself, who in a just released Op-Ed in the Financial Times says that since the system of floating currencies established by the 1971 Bretton Woods II system, has broken down, it is time to look to a new international system of commerce, one which "should also consider employing gold as an international reference point
of market expectations about inflation, deflation and future currency
values." In other words, welcome back gold standard 2. Of course, this proposal will never attain more than a casual academic reference, as even a partial gold standard will immediately establish a lower bound on how much any given monetary authority can debase its (and, by retaliation, others') currencies. What, however, if very curious, is why this proposal is being floated precisely 3 short days after the Fed has launched its most ambitious attempt to reflate global asset prices and devalue fiat paper. And as is well-known, the IMF has also been quietly proposing a return to an ven more powerful version of the SDR.... Just what will take for the scales to tip, and for the dollar to remain a reserve currency just in retrospect.
Contrary to convention wisdom, while Irish bond yields were surging to all time highs, the local population was not merrily drinking itself into oblivion, but was taking matters into its own hands. So far every bankrupt European government has at least managed to get its population on the streets, to protest something, and in the case of Greece, caused Waddell and Reed to sell a few SPOOS leading to the biggest crash in capital markets history. Only the most bankrupt nation of all, the United States, continues to see its 300+ million cowering at home, watching sitcom reruns.
In a word - skeptical: "There is a growing hope that the Tea Party has tapped a raw nerve and will serve as a lightning rod for change. And change is needed in a really big way when one considers the financial strains that mandatory entitlements, such as Social Security, will pose as the demographics, in terms of an ever-higher dependency ratio, ascends further. These mounting “locked in” fiscal costs have to be addressed as do the $3.5 trillion of actuarially unfunded state/local government pension plans. Social contracts will have to be re-written — perhaps with implications for contracts with bondholders. But hope is never a good strategy. Results are what matter. It took two full years for the Reagan rally to really take hold. An economy growing at a 7% clip in the aftermath of the 1980-82 malaise and an unemployment rate that came crashing down more 300 basis points from the highs certainly helped. So, while there is hope that the stage is being set for meaningful political change in 2012 (where the Republicans stand a very good chance of reclaiming BOTH the House and the Senate) the near-term outlook is muddled. Investors should not lose sight of the fact that the recovery is so listless that we are only one negative shock away from tilting the economy back into contraction mode." David Rosenberg
Let us think tactically about where we are, where we want to go and how best to get there, shall we?
Created by The Applied Finance Group, The Economic Margin (EM) Framework was developed to evaluate corporate performance from an economic cash flow perspective and is an alternative to accounting-based valuation metrics. EM measures the return a company earns above or below its cost of capital and provides a more complete view of a company’s underlying economic strength.
Nicholas Colas On Why The "Keith Richards" Stock Market May Presage A Return To Old School InvestingSubmitted by Tyler Durden on 11/01/2010 22:35 -0500
BNY's always informative and entertaining Nicholas Colas has a habit of seeing the silver lining, when others only see a putrid and radioactive mushroom cloud. And in this case, we do tend to agree with him... somewhat: when looking at the transformation currently gripping stock markets, instead of taking either extreme, Colas takes the Keith Richards path: adapt and survive (instead of fading away). And in surviving, the market may just return to that “old school” model of stock picking, and thus, fundamentally based stock trading, something which all investors and market participants lament and remember fondly as a bygone era before the Fed decided to take control of the entire capital market. However, where we are far less sanguine, is that for Colas' prediction to come true, it would necessarily (and sufficiently) require the removal of the Fed and its tentacular influence on stocks. And thus the question: can the existing stock market model survive an overhaul in which the underlying economic model reverts back from a central banking primed fiat system, to some "other" form of sound monetary decision making. That, we do not know.
At 8PM EST tonight the EUR/USD cross sold off 80pips in seconds only to rebound 60pips. Is this another mini flash crash causing ripples through the fx markets with HFT's going haywire? DXY spiked to 77.30. At what point are market regulators going to realize this gambling house is broken and there is no longer any creditability in capital markets?