Mars

A few weeks ago, Hinde Capital's Ben Davies delivered a terrific speech to the The Committee for Monetary Research & Education in which the asset manager presented his insight on not only the futility of linear forecasting, on the flawed assumptions of economists, and on the very errors in the current monetary system, but went on to suggest several "Variant Themes" which put him at odds with the consensus, chief among them being of course his views on the monetary system and gold (both discussed repeatedly before on Zero Hedge), but also on specific socio-political and economic catalysts when looking at the future. Among these are : 1) "Japanese stocks are the most unloved in the world. Small-cap stocks in Japan will skyrocket in years to come, but then they would, as I see hyperinflation there in the next five years", 2) "The Swiss Franc as a bastion of safety is a fallacy. They too are debasing their currency", 3) "Turkey: the Ottoman Empire will return. Great enduring demographics and entrepreneurial spirit", and 4) "Mongolia will surpass Japan in GDP on a PPP basis." Aside from his recommendations, which may well be right or wrong, the epistemological basis of Davies view is a must read for any participant in what is becoming an increasingly chaotic, full of noise and reflexive market, in order to get a grasp of what may truly be relevant for creating, and influencing, correct opinions.

JPMorgan Chase's CEO says the bank has stopped using the electronic mortgage tracking system used by major financial institutions. Lawyers have argued in court proceedings that the system is unable to accurately prove ownership of mortgages. And after the effective foreclosure moratorium is about to cripple the RMBS market, here comes the collapse in CMBS.

Then they got cute and produced either the actual note, a copy of the note or a forged note, or an assignment or a fabricated assignment from a party who at best had dubious rights to ownership of the loan to another party who had equally dubious rights, neither of whom parted with any cash to fund either the loan or the transfer of the obligation. . . .

Got any better ideas?

The U.S. Federal Reserve, which is in charge of the world’s reserve currency has gone completely and totally insane. Every time the stock market is down 2 points some maniac academic with a printing press delivers a speech about how much money they are going to print, basically daring anyone to short or sell the market. No one is smart enough to know how much QE is priced into the market, is it $500B? $1 trillion? $3 trillion? No one knows, but what we all do know is that the Fed through its non-stop yapping has now set up the ultimate moral hazard in financial markets. It doesn’t matter if all of the economic data miraculously comes in extraordinarily bullish over the next three weeks. The markets have put the Fed into the biggest box they have ever been in. They must do QE2 at this point and they probably have to do it big. The problem is, with the equity market up at the levels it is I don’t think ANY amount of QE2 will cause a rally. In fact, this might be the biggest “sell the news” event in the history of the stock market. If you are smart you will take appropriate actions while you can and sell to someone with less of a clue (believe me there are plenty out there). - Mike Krieger

What Wall Street bears no relationship to any longer is its primary mission in the U.S. economy: to be a fair and efficient allocator of capital to worthy businesses and innovators to propel job growth while also providing a medium for allowing investors to buy or sell stocks and bonds of those businesses at a fair price.

Here is how you kill two birds with one stone, all the while confirming that Europe has been about a step away from a full collapse. Greece, which like Ireland, has been unable to peddle its bonds to anyone now that Bunds spreads are back to all time record levels, has just seen the last white knight of the Keynesian system come to its rescue: China. As Bloomberg reports, the European lender of last resort is no longer the ECB: "China has already bought and holds its Greek bonds,” Wen
said in joint comments with Papandreou today, which were carried
live on state-run ET-1 television. “It commits, very
positively, to buy new bonds to be issued by Greece." Yet herein lies the rub: in exchange for the Chinese last-ditch rescue financing, which by the way is so transparent that everybody, except maybe for the Norwegian wealth fund will see right through it, Greece, in what is an almost identical replica of the Petrobras shell game, will use the money to turn around and buy Chinese ships. "Wen said a $5 billion shipping fund will be set up to
tighten relations between the countries’ two maritime industries
and facilitate the sale of Chinese vessels to Greeks." Truly brilliant what Keynesians will come up with in the last days of a collapsing economic religion.

• Vacations now over, Greek labor union schedules next all day strike for October 7 - set your $0.01 stub quotes accordingly
• ECB Steps Up Its Bond Buys Amid Worries (WSJ)
• ECB Sterilizes €61.5 Billion in sovereign bond purchases, purchases €323 million of bonds last week (Market News)
• Which of course leads to... Ireland Sells 1.5 Billion Euros in Debt as Borrowing Costs Rise (Bloomberg)
• And to...Greek Sovereign Default Would Be a `Tragedy,' Papandreou Says (Bloomberg)
• Former Officials Oppose US Renminbi Bill (FT)
• Putting your money to work just 2 days a month: To make a lot of money in the stock market this year, all you had to do was invest on just the first two days of every month. And get the hell out of the market every other day (NY Post)
• Obama Says China's Growth is 'Good for US' (China Daily)
• Chris Whalen: Double dip or global deflation? (Reuters)
• From former Bernanke collaborator Vince Reinhardt: Getting Lehman Profoundly Wrong, The bankruptcy of Lehman Brothers is widely misunderstood: We have inverted a morality tale about individual recklessness to become one about collective culpability through inaction. (The American)

Mr. Geithner is either outright insane or a total liar. Neither of those are welcome realizations, though I doubt they are news to anyone with a working brain. However, for the sake of manners, I'll simply assume Mr Geithner is outright insane, in which case I am indeed, quite honored to be invited to his recovery... I only wish he'd mentioned the planet where it was taking place.

As if one needed additional fears about the Chinese bubble popping, with overnight reports that various Chinese provinces are rising minimum wages to quell social unrest, following last night's surprising decline in the China PMI, here comes CEBM with a very scary outlook on China trade in general, and exports in particular. Well, if nothing else it will sure help the US push its world's worst trade deficit a little higher now that it will have much less to import. From the report: "Our CEBM China export leading indicator has already peaked, indicating that China’s exports are likely to peak soon. Our export model suggests that China’s exports may decelerate from 3Q due to weakening domestic and foreign demand." And here are some bad news for Obama's plan to double US exports in the next 5 years: "As the government has unofficially adopted normalization strategy away from the stimulus we are likely to see property, infrastructure, and manufacturing investments lose steam in the second half. The deceleration of FAI may put downward pressure on China’s imports." Have no fear - with its record budget spending, NASA will soon discover intelligent and wealth life on Mars, which will be more than glad to import all of America's financial innovation and three other things we export.

"We know that Tony Hayward is leaving his position and he will introduce his successor," Igor Sechin told reporters ahead of a meeting with Hayward. Sechin, who is deputy prime minister and board chairman at Russia's biggest oil company, Rosneft, was responding to a question asking about the subject matter of the meeting.

And an immediate refutation from BP: "BP spokeswoman Carolyn Copland in London said the report 'is definitely not correct.'"

It’s generally understood by all that something that’s taken by force has much less value compared to the same thing given freely and willingly. Never again consider yourself powerless when it’s clear you posses something of such immense power and wealth that it’s constantly being manipulated and seduced from your hands.

As we continue our exploration of our individual and collective insanity, we spend some time examining that lovable megalomaniac ego inside each of us, why and where it all went wrong, the sliding scale of insanity with lots of finger pointing, how we certify our madness for comfort and support, our mental toxic waste dumps and the first sighting of light at the end of the tunnel. Or is that just the crazy train express to DC? Here’s one car wreck we can all safely examine as we drive by in our economic suicide machine.

The WSJ issues an amusing hit piece on why gold is nothing but a "Ponzi Scheme", ignoring the fact that by its definition the stock market is precisely the very same. Either way, since we are seeing no let up in the currency debasement department of Central Banks, and gold continuing to trade near record highs, it is a good thing to occasionally have a shake out of the weak hands. After all it will merely provide far better entry prices for countries like Russia, which as we disclosed recently, have been buying up all the IMF has to sell in the open market. At the end of the day - the opinion of Brett Arends or of David Einhorn, David Rosenberg, Jim Rickards, Eric Sprott, and, oh yeah, John Paulson.

There is a lot of “noise” being tossed out by the politicos and their preferred pundits about how the U.S. economy is on the mend. Thus it is important to try and separate fact from fiction about where things really stand.