The 2011 changes by the FDIC to the safe harbor for "true sales" may have been the end of "Too Big To Fail."
I really need to stop being so pessimistic. I’m getting richer by the day. My home value is rising at a rate of 1% per month according to the National Association of Realtors. At that rate, my house will be worth $1 million in less than 10 years. Every mainstream media newspaper, magazine, and news channel is telling me the “strong” housing recovery is propelling the economy and creating millions of new jobs. Keynesian economists, Wall Street bankers, government apparatchiks and housing trade organizations are all in agreement that the wealth effect from rising home prices will be the jumpstart our economy needs to get back to the glory days of 2005. Who am I to argue with such honorable men with degrees from Ivy League schools and a track record of unquestioned accuracy as we can see in the chart below? These are the facts. But why trust facts when you can believe Baghdad Ben and the NAR? It’s always the best time to buy.
When Moody's downgraded the UK's sovereign credit rating last week it was something of an anti-climax. The ratings agencies long ago lost what little credibility they ever had. Being downgraded by Moody's is like being called a moron by a moron; ask anyone who has ever set foot in a bond dealing room - the ratings agencies are always behind the curve. The UK has been on the skids, credit-wise, for years. Britain's debt to GDP has gone through the roof. We, and generations to come, will be left with the reckoning. Nobody believes that bonds are an objective reflection of economic reality. The game is rigged, and everybody knows it. But the Moody's downgrade should serve as a piercing smoke alarm to anybody still naive enough to be holding these instruments of value destruction. Get out now while the going is good.
The British (and now Europe-wide) scandal of corporations selling horse meat as beef is emblematic of many of the problems with big, unwieldy systems. The similarity between horse meat and subprime have already been noted - just as with subprime, complicated, impersonal systems have bred fraud. Similarly, in an equally sprawling and disconnected system — the global food supply chain — anonymity has bred irresponsibility once again. Retailers claim to have been misled. Meat processors and food manufacturers claim to have been misled too. But somewhere along the line, someone is lying. I am coming to believe very strongly that as this century continues, and as systemic interconnectivity and complexity increases, we will see many more horse meat and subprime style scandals exploiting the anonymity of big systems.
While Moody's slipped over 20% when the DoJ announced its cajillion dollar lawsuit against S&P for knowing the crisis was coming but not telling anyone, it later bounced back over 10% as investors believed the non-US-downgrading rating agency (that happened to be owned by Buffett) was too-big-to-jail. After-hours today, Reuters is reporting that the Justice Department and multiple states are discussing also suing Moody's Corp for defrauding investors, according to people familiar with the matter, but any such move will likely wait until a similar lawsuit against rival Standard and Poor's is tested in the courts. The stock is trading down 3% after-hours as sources (not authorized to speak publicly) added "don't think Moody's is off the hook." We can't help but think about the pending sequester-delaying deficit spike as perhaps, to appear impartial, the DoJ will keep the threat of a lawsuit against Moody's alive... during the entire period when the US may and should be downgraded.
Unfortunately, the spectacular rise of Wall Street’s securitization machine will likely forever frustrate attempts to ascertain the extent to which the Fed is responsible for what happened to the U.S. housing market and financial system in 2008. After all, it wouldn’t be fair to short sell (no pun intended) all the Special Purpose Vehicle sponsors, CDO asset managers, investors, and ratings agencies who, for at least five years, worked so hard to collapse the system.
The globalists have stretched the whole of the world thin. They have removed almost every pillar of support from the edifice around us, and like a giant game of Jenga, are waiting for the final piece to be removed, causing the teetering structure to crumble. Once this calamity occurs, they will call it a random act of fate, or a mathematical inevitability of an overly complex system. They will say that they are not to blame. That we were in the midst of “recovery”. That they could not have seen it coming. Their solution will be predictable. They will state that in order to avoid such future destruction, the global framework must be “simplified”, and what better way to simplify the world than to end national sovereignty, dissolve all borders, and centralize nation states under a single economic and political ideal?
Prior to the crisis, the 29 largest global banks benefitted from just over one notch of uplift from the ratings agencies due to expectations of state support. Today, those same global leviathans benefit from around three notches of implied support. Expectations of state support have risen threefold since the crisis began. This translates into a large implicit subsidy to the world’s biggest banks in the form of lower funding costs and higher profits. Prior to the crisis, this amounted to tens of billions of dollars each year. Today, it is hundreds of billions. Too-big-to-fail is far from gone.
It’s all a money game on Wall Street.
There are very few free lunches in the world, there will be some costs or unintended consequences of this newfound commitment towards a weaker Yen.
How To Profit From The Impending Bursting Of The Education Bubble, pt 2 - "Knowledge How" & Diplomas As Fictitious AssetsSubmitted by Reggie Middleton on 01/07/2013 11:52 -0500
A complete & thorough explanation of how many (if not most) levered college diplomas are overvalued assets with fictitious values - that's including you too HBS and the ivy league! No wonder the education bubble in the US is about to collapse.
How To Profit From The Impending Bursting Of The Education Bubble, pt 1 - A Bubble Bigger Than SubprimeSubmitted by Reggie Middleton on 01/03/2013 13:55 -0500
Truly ironic - anyone receiving a REAL business/finance education would be able to run these rudimentary calculations themselves, thereby invalidating the very diploma they are seeking
The fiscal cliff deal appears to be a done deal and markets have reacted accordingly (although President Obama is apparently awaiting a photo-op later today to sign it). However, the deal leaves a large number of loose ends that ensure high drama for the next two months on the US fiscal front. The immediate impact of all the loose ends and deadlines may be smaller than the Dec 31 fiscal cliff, but all of these loose ends are important and could lead to short-term price action. Several of them are very important for the long run USD outlook as well.
The divergence between consumers and producers within the real economy that has stumped economists for the better part of 2012 can, at least in part, be attributed to the Fiscal Cliff; but the anticipatory effects of the Fiscal Cliff on the United States of America evidently began with American politicians, and probably for the worse, that is where it will end. The division that has plagued Washington has grown starker in recent years, and the divergence between consumers and producers as a result of divided leadership stands as a testament to the irresponsibility of those sent to Washington D.C. to serve their country. These divergences cannot last forever, and depending on the events of the next couple weeks, the United States is due for a reversion to the mean. The direction of that reversion - either production up to meet consumption or consumption down to meet production and confirm a recession within the United States - is wholly on the shoulders of the politicians in Washington D.C.