Wall Street Journal
Rand Paul Explains What The Dollar Is Backed By: "Used Car Loans, Bad Home Loans, Distressed Assets And Derivatives"Submitted by Tyler Durden on 02/07/2015 23:05 -0400
Having recently exposed the mainstream media's lack of objectivity in "slanted and distorted" interviews, Rand Paul has turned his focus to another staple of the status quo - his father's arch-nemesis, The Fed. As WSJ reports, Sen. Rand Paul unleashed a blistering attack on the Federal Reserve in Iowa on Fridasy evening, calling for an audit of the institution’s books and blaming it for fueling income inequality. "Once upon a time, your dollar was as good as gold," he explained, adding "then for many decades, they said your dollar was backed by the full faith and credit of government." Do you know what it’s backed by now? "Used car loans, bad home loans, distressed assets and derivatives."
The phony 5.7% domestic unemployment rate reported yesterday has nothing to do with full employment. The relevant number in the report is that there are still 101 million working age Americans who do not have jobs, and only 45 million of them are on OASI retirement benefits. And that says nothing about the tens of millions of job holders who are employed far less than a full 40 hour work week. In short, there is a surfeit of available labor at home and abroad, meaning 3-4% wage gains are not coming down the pike any time soon or ever. So if that’s what the Fed is waiting for - then the so-called “lift-off” may not be coming even this year. And in any event, the trivial 25 bps increases in the funds rate that may eventually come have nothing to do with interest rate “normalization” or the return of honest price discovery in the casino. And that suits the needs of the Wall Street gamblers just fine.
There’s a fairly easy way to tell if a firm is a marketing firm or an investment firm. Do you see its advertising on buses, cabs and posters? Do they have a practically limitless range of funds? This is not to denigrate marketing firms entirely. But as the financial markets lurch between unprecedented bouts of bad policy, and achieve valuations that we strongly suspect are unlikely to persist, it may be worthwhile to consider the motives of the people charged with managing your money. Are they asset managers, or asset gatherers?
Marc Faber warned at the weekend that 2015 may be the year that investors will lose confidence in central banks and that investors will “suddenly realise what a scam that central banking is”.
Despite having Goldman Sachs CEO Lloyd Blankfein as an investor and being Bill and Hillary Clinton's son-in-law, Marc Mezvinsky (and two former colleagues from Goldman Sachs who manage Eaglevale Partners hedge fund) told investors in a letter sent last week they had been "incorrect" on Greece, helping produce losses for the firm’s main fund during two of the past three years. By 'incorrect' Chelsea Clinton's husband means the Eaglevale fund focused on Greece lost a stunning 48% last year and, as The Wall Street Journal reports, is impacting the overall returns of the roughly $400 million fund which has spent 27 of its 34 months in operation below its "high-water mark."
For anyone who has traded RadioShack's bonds or stocks over the last decade or so, the constant threat of an LBO has been the bane of any fundamental analysis as one Credit Suisse memorably described it as "a company in a virtual state of constant collapse." It appears, with multiple default notices this week and the news that NYSE will suspend/delist trading in the ever-on-the-block company, that the 'LBO rumor' threat is over. With several firms (Sprint, Sanpower, and Amazon) mulling post-bankruptcy purchases, the concept of a pre-petition savior appears dead in the water...
"This is going to hurt, no question," fears a landowner in Santa Barbara with a dozen oil wells. Layoffs are "kind of like a death in the family," exclaims a geophysicist in the Permian Basin. Houstonians were hoping for a hiccup, says one restauranteir, but now "they're getting more cautious." As WSJ reports, rumor is becoming reality across America as "unambiguously good" news of low oil prices turns from a trickle to a deluge of job losses and insecurity. Cutbacks aren’t yet reflected in broad data on employment, home sales or tax collections. But fallout is beginning to affect people, starting with the legions working as suppliers to the energy industry.
A lot of ultra-rich people are quietly preparing to “bug out” when the time comes. They are buying survival properties, they are buying farms in far away countries and they are buying deep underground bunkers. In fact, a prominent insider at the World Economic Forum in Davos, Switzerland says that “very powerful people are telling us they’re scared." So what do they know?
This week's Economic Policy Institute's report, leverages the fashionable, French economist Piketty's statistics, in order to illustrate how well the "top 1%" are doing in each of the 50 states. The report is provokingly titled: "The Increasingly Unequal States of America". But the report creates distortions in the truth. An important matter affecting hundreds of millions should also include a straight acknowledgement of probability theory (involving large sample sizes). The most liberal people suggest that even thinking about this math is unnecessary. Perhaps any glorification of wrongs that need to be righted, justifies the means that it would take to get there. Over time this can conflate math ideas with one's ideological bias.
When Eric Holder announced his resignation, many breathed a sigh of relief thinking it can’t get much worse, but not so fast. The authoritarian streak and rampant cronyism of the Obama administration is a well oiled machine. You didn’t think you’d get off that easily did you? Enter Loretta Lynch.
The Treasury-created market has benefited a few savvy investors, while saddling taxpayers with a loss. The Treasury, which has held 185 auctions to date, said it has raised about $3 billion on TARP investments that were originally valued at $3.8 billion, for a loss of $800 million at the auctions. The Treasury “set up this market where investors could come in quickly and flip and profit,” said Christy Romero, TARP’s special inspector general, in an interview. Three private funds have won almost half the shares available at auction, often netting either a profit on paper or on the resale, according to SIGTARP. “As a banker I was happy, but as a taxpayer I was not at all happy,” said Chief Financial Officer Donald Boyer. “The discount came out of taxpayers’ pockets.”
Forget rate hikes… an entire generation of investors and money managers (anyone under the age of 55) has been investing in an era in which risk has generally gotten cheaper and cheaper. What happens when the bond bubble bursts?
2014 was "relatively easier," as the pre-determined pace of tapering had The Fed on auto-pilot last year. However, as WSJ's Jon Hilsenrath warns, Janet Yellen ’s job is about to get harder. Hinting that The FOMC is likely to remain "patient" in deciding when to start raising short-term interest rates later this year (and markets have started to price in lower for longer-er following recent macro weakness domestically and abroad). Juxtaposed against a mixed picture of the economy is concerns of being boxed in at ZIRP should another economic downturn arrive. However, as III Associates notes, it is the communications challenge for The Fed that is most problematic, "it has been nine years since the last rate hike, and I’d estimate about a third of those working on trading floors have never witnessed one."
The Japanese fire at the Europeans. The Europeans fire at the Japanese & Chinese. The Chinese fire scattershot at everybody else in Asia. England & America prep to teach those they consider muppets not to play with guns. It's World War Money, if you know what I mean...
In the three years since Bryan Stockton took over as CEO of Mattel, the company's revenues have tumbled and debt load has soared over 30% as - despite share buyback bonanzas, the stock price has greatly rotated to unchanged since Jan 2012 when he took over. However, what is most important about today's "resignation" is it accompanied dramatic guide down on earnings as, among other things, Barbie doll sales collapsed 21% in Q3. So the question now is, will every retail 'miss' be accompanied by a CEO 'execution' or is this widespread weakness - despite the unambiguously good low oil price tax cut - merely transitory and Q1 will be awesome...?