• Tim Knight from...
    12/21/2014 - 09:37
    The five remaining equity bears on Earth are all saying the same thing: "We'll get 'em in 2015." To which I ask: why? What's going to change?

Henry Paulson

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Frontrunning: October 7





  • Liberian Rubber Farm Becomes Sanctuary Against Ebola (WSJ)
  • The World’s Most Powerful Central Banker: Janet Who? (BBG)
  • Islamic State moves into south west of Syrian Kurdish town (Reuters)
  • Waldorf to Be Biggest Chinese Property Purchase in U.S. (BBG)
  • Spain Seeks People in Contact With Ebola-Infected Nurse (BBG)
  • Hong Kong protests at crossroads as traffic, frustration pile up (Reuters)
  • Immigration: Grim Caseload at the Border (WSJ)
  • China Cuts Thousands of ‘Phantom’ Workers From State Payroll (BBG)
  • U.S., U.K. Regulators Push to Settle Deutsche Bank Libor Case This Year (WSJ)
  • Wall Street Moles Go to NY’s Top Cop, Spurning SEC Cash (BBG)
  • Pimco's outflow headaches only just beginning (Reuters)
  • Japan Lawmakers Flag Need for Exit Strategy as Yen Falls (BBG)
 
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The Greatest Propaganda Coup Of Our Time?





There’s good propaganda and bad propaganda. Bad propaganda is generally crude, amateurish Judy Miller “mobile weapons lab-type” nonsense that figures that people are so stupid they’ll believe anything that appears in “the paper of record.” Good propaganda, on the other hand, uses factual, sometimes documented material in a coordinated campaign with the other major media to cobble-together a narrative that is credible, but false. The so called Fed’s transcripts, which were released last week, fall into the latter category... But while the conversations between the members are accurately recorded, they don’t tell the gist of the story or provide the context that’s needed to grasp the bigger picture. Instead, they’re used to portray the members of the Fed as affable, well-meaning bunglers who did the best they could in ‘very trying circumstances’. While this is effective propaganda, it’s basically a lie, mainly because it diverts attention from the Fed’s role in crashing the financial system, preventing the remedies that were needed from being implemented (nationalizing the giant Wall Street banks), and coercing Congress into approving gigantic, economy-killing bailouts which shifted trillions of dollars to insolvent financial institutions that should have been euthanized.  What I’m saying is that the Fed’s transcripts are, perhaps, the greatest propaganda coup of our time.

 
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Guest Post: What If There's A Recession In 2014?





If policymakers were gunfighters, they’d be out of bullets: They have run out of effective policy tools to improve the economy.

So the question is simple: If there is a recession in 2014, and policymakers are out of bullets, how will it play out across the American economy?

 
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Walmart's Now Ex-CEO To Pocket $113 Million Pension, 6182 Times Greater Than Average WMT Worker's 401(k) Balance





Moments ago, as we reported, the CEO of Walmart, Mike Duke, retired. And while he will hardly pocket quite as much as Hank Paulson, his departure may raise even more eyebrows as his retirement package, to which he is now entitled, is a whopping $113 million, or about 6,182 times greater than the average 401(k) balance of a typical Wal-Mart worker according to a NerdWallet analysis. Naturally, this is orders of magnitude greater than the already debatable ratio of CEO compensation, which was $20.7 million in 2012, or about 305 times more than the average Walmart manager, and 836 more than the take home of the median Walmart worker.

 
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12 Ominous Warnings Of What A US Default Would Mean For The Global Economy





As we have discussed previously, the "partial government shutdown" that we are experiencing right now is pretty much a non-event - especially with the un-furloughing of The Pentagon.  Yeah, some national parks are shut down and some federal workers will have their checks delayed, but it is not the end of the world.  In fact, only about 17% of the federal government is actually shut down at the moment.  This "shutdown" could continue for many more weeks and it would not affect the global economy too much. On the other hand, if the debt ceiling deadline (approximately October 17th) passes without an agreement that would be extremely dangerous. A U.S. debt default that lasts for more than a couple of days could potentially cause a financial crash that would make 2008 look like a Sunday picnic. If a debt default were to happen before the end of this year, that would bring a tremendous amount of future economic pain into the here and now, and the consequences would likely be far greater than any of us could possibly imagine.

 
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Why Obama Allowed Bailouts Without Indictments





"The government’s bailout plan destroyed capitalism. In a capitalist system, those who stood to gain–and already made off with large gains—would have to bear the risk. The bailouts represented a corruption of capitalism. Crony capitalism violates the spirit of democracy established by the Founding Fathers of the republic known as the United States." - Janet Tavakoli

All of the suffering and hardships the majority of Americans are experiencing today are directly related to the coup pulled off by the crony financial oligarchs in the fall of 2008, and all of the media and political minions that helped them do it. People realize we have become a Banana Republic and they have now lost all hope.

 
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Hank "World Should Prepare For New Financial Crisis" Paulson Versus Jim "0% Chance" Gorman





Five years after the financial crisis former Treasury Secretary Henry Paulson says "the world shouold prepare for a new financial crisis" in tomorrow's Handelsblatt newspaper. His view, based on the "unacceptable" nature of too-big-to-fail banks and the lack of reform of the GSEs and the shadow-banking industry, stands in direct opposition to the leader of one of those TBTF banks. James 'not Jim' Gorman, CEO of Morgan Stanley, told Charlie Rose last week that "the probability of [it] happening again in our lifetime is as close to zero as I could imagine." Who would you trust?

 
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Hank Paulson Burned As Another Electric Car Maker Goes Up In Flames





It would appear that (apart from Tesla, for now) that any thing related to electric cars is going up in flames. From Fisker's fubar (and blowing all that hard-earned government funding) and Chevy's Volt dysphoria to A-123 Systems (the Lithium-Ion battery-maker) and now Coda - which Yahoo Finance notes was among an emerging crop of California startups seeking to build emission-free electric cars three years ago. After selling just 100 of its $37,250 five-passenger vehicles, Coda filed Chapter 11 today taking a few well-known investors with it. On the bright side, the government was not involved (from what we can tell), but on the even brighter side, none other than former US Treasury Secretary Hank Paulson was among those burned by the company going up in flames (as was Harbinger's Phil Falcone).

 
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Guest Post: We've Dug A Pretty Damn Big Hole For Ourselves





“Recovery” has become the shibboleth constantly invoked by people running things after the crisis of 2008. Unfortunately, no such recovery was underway. It was papered over by the twin Federal Reserve policies of quantitative easing and financial repression – a combination of the nation’s central bank loaning vast new amounts of money into existence at ultra-low interest rates (hardly any interest to pay back) and creating steady monetary inflation to reduce the burden of existing debt by shrinking the dollar value of the debt. The program was a racket in the sense that it was fundamentally dishonest. The presumed purpose of these shenanigans from the point of view of the Federal Reserve and the White House was to keep the financial system stable and afloat, and therefore to keep “normal” American daily life going. Unfortunately, it was based on the unreal assumption that the financial norms of, say, 2006 could be ginned back up again, and this premise was just inconsistent with the reality of a post-Peak-Cheap-Oil world. Unfortunately, there was no organized counter-view to this wishful thinking anywhere within the boundaries of the political establishment.

 
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The Oddacity Of Hype - Geithner's "Behind The Scenes" Book Coming In 2014





The long-awaited tell-all is coming soon to an ebook near you soon - well in 2014. AP reports that none other than 'Turbo' Tim Geithner has an agreement with Crown Publishers (Random House) to publish his 'behind-the-scenes' account of the financial crisis. From his tenure at the NYFRB to his stint under Obama's wing, we can't wait for all the gossip - ...and then I said, "yes sir, whatever you want sir..." As Crown adds in its PR, "Secretary Geithner will chronicle how decisions were made during the most harrowing moments of the crisis, when policy makers faced a fog of uncertainty, risked catastrophic outcomes, and had no institutional memory or recent precedent to guide them." Should be a thriller... as he answers the all-important question of why (or not) but rest comfortably as he intends to "provide a 'playbook' that future policy makers can draw on." Given the success of Obama's odyssey, we humbly suggest Tim title the as-yet-untitled book, 'The Oddacity Of Hype'.

 
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Kashkari Resigns Amid 'Spotty' Fund Performance, Heads Back To Public Office





The ex-back of the envelope TARP calculation "chump" become wood-chopper, turned equity portfolio manager has gone full circle and decided his time is better spent serving the public good once again. As the WSJ reports, Neel Kashkari is considering running for office in California. The napkin-laden chrome-dome has seen his funds suffer from spotty performance since their launch - all underperforming the benchmarks. We can't help but think the timing of his announcement odd given his love affair with Apple and tonight's collapse but that would be harsh judgment on the always self-denigrating 39 year-old. Of course, we will hear the impressive nature of him leaving a well-paid job to run for office as his patriotism runs wild; we are less 'believer'. Still, managing to have your name turned into a noun and a verb is no easy task...

 
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MERSy Christmas Everyone!





In the end, it was the banksters they chose, and thanks to your government, you got hosed.

 
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On Political Brinksmanship And Stock Market 'Vigilantes'





Despite the hope of the last day or two, policymakers remain, we suggest, as far apart as they ever have, with 'no news' simply that. An oversold bounce does not a fiscal cliff fix, and as BofAML's Michael Hanson suggests in his 'brief history of brinksmanship': "one lesson from the recent past is that market reaction has been an important mechanism to reaching compromise and forcing action." Unfortunately, he adds, as we have been quite vociferous about, that "history also shows that the equity markets have to sell off sharply before policy makers listen to the 'stock market vigilantes'." With some politicians still thinking going over the cliff might be their best strategy, it could once again take a sharp market sell-off to focus the minds of the negotiating parties. If we actually manage to go over the cliff, even if only for a brief period of time, a repeat of the TARP sell-off seems only too probable.

 
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This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied - The Sequel





Two years ago, in January 2010, Zero Hedge wrote "This Is The Government: Your Legal Right To Redeem Your Money Market Account Has Been Denied" which became one of our most read stories of the year. The reason? Perhaps something to do with an implicit attempt at capital controls by the government on one of the primary forms of cash aggregation available: $2.7 trillion in US money market funds. The proximal catalyst back then were new proposed regulations seeking to pull one of these three core pillars (these being no volatility, instantaneous liquidity, and redeemability) from the foundation of the entire money market industry, by changing the primary assumptions of the key Money Market Rule 2a-7. A key proposal would give money market fund managers the option to "suspend redemptions to allow for the orderly liquidation of fund assets." In other words: an attempt to prevent money market runs (the same thing that crushed Lehman when the Reserve Fund broke the buck). This idea, which previously had been implicitly backed by the all important Group of 30 which is basically the shadow central planners of the world (don't believe us? check out the roster of current members), did not get too far, and was quickly forgotten. Until today, when the New York Fed decided to bring it back from the dead by publishing "The Minimum Balance At Risk: A Proposal to Mitigate the Systemic Risks Posed by Money Market FUnds". Now it is well known that any attempt to prevent a bank runs achieves nothing but merely accelerating just that (as Europe recently learned). But this coming from central planners - who never can accurately predict a rational response - is not surprising. What is surprising is that this proposal is reincarnated now. The question becomes: why now? What does the Fed know about market liquidity conditions that it does not want to share, and more importantly, is the Fed seeing a rapid deterioration in liquidity conditions in the future, that may and/or will prompt retail investors to pull their money in another Lehman-like bank run repeat?

 
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Futures Brokerage PFG Best Freezes Accounts Following Discovery Of Accounting Irregularity





Update 2: Russ Wasendorf Sr., the founder and CEO of PFGBest, reportedly attempted to commit suicide this morning outside the corporate headquarters in rural Cedar Falls, company officials confirmed Monday afternoon.

Update: PFGBest had $400MM in customer segregated funds at the end of April. Is JPMorgan about to "discover" another $400 million in Q2 "profits"?

Just out from futures broker PFG Best to clients, where the owner's suicide attempt apparently has led to a whole new MF Global spin off.

Due to a recent emergency involving Russell R. Wasendorf, Sr., a suicide attempt, some accounting irregularities are being investigated regarding company accounts.  PFGBEST is wholly owned by Mr. Wasendorf.  Therefore, the NFA and other officials have put all funds on hold, and PFGBEST is in liquidation-only status with our clearing FCM.  What this means is no customers are able to trade except to liquidate positions. Until further notice, PFGBEST is not authorized to release any funds.  We will update you as any new procedures are stipulated and with any further information as it becomes available.

... And just as the public trust was storming back into the capital markets.

 
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