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The "American Exceptionalism" Paradigm Is Broken

Tyler Durden's picture




 

By Jeff Snider, President & CIO, Atlantic Capital Management

There Is Little "Value" Under Untenable Circumstances

Even now, in the third year of the recovery without a recovery, there is still a good deal of mystery as to why and how US investors should be wary of Europe.  The intentional opacity of the global banking/financial system contributes to this effect, but all that is taking place in Spain and Italy will directly impact US asset prices at some point.  The biggest lesson of the Great Depression was supposed to be limiting the spread of “contagion” through bond market prices, yet the modern interbank wholesale money system of securitization and financialization has gone far beyond what they ever dreamed possible in the 1930’s.  The connections between Spanish insolvency and the fallacy of the US dollar safe haven have never been greater, and given the propensity of sovereign euro debt to act as a global catalyst, it pays to at least review why US stock investors should be extremely mindful of monetary flows in seemingly unrelated global pockets. 

On one side of the Atlantic, there is the “bull” case for US stocks as a safe haven from the European turmoil, particularly since stocks are supposedly cheap compared to corporate earnings (more on this below).  On the European side, there remains faith in policymakers to finally coalesce around a workable and serious solution.  But that faith misses what might be the unmovable object in this financial equation, just as the irresistible force of contagion is unleashed, again. 

The real worry about the Spanish banks, as it has always been, is not even solvency, per se, it is that 1930’s-style contagion of pricing.  With Greek debt, Eurozone banks were afforded the margin to at least unload or even sit tight and take their mark-to-market losses; it was never going to rise to a fatal amount.  But Spanish and Italian sovereign and bank debt remains embedded within Euro banks, particularly those in France.  These are bonds that are, from what I have seen and given how this unraveled with Greece, currently embedded within "bank books" - not "trading books" - which means free from mark-to-market losses.  OECD sovereign debt itself is still considered risk free, and thus not applicable in a mark-to-market structure.  That is, until a market "event" which forces banks to recognize and legitimize any impairments.  That is the fear of Spain, as a restructuring event akin to Greece would probably destroy several large institutions (how close were we on December 8, 2011?) under the weight of previously "undisclosed" losses that are currently tucked away in “bank books” everywhere.  It has been amazing over the past four years just how assets go from perfectly fine, valued at or near par, to serious other-than-temporary-impairments overnight.

The more likely it appears that Spain needs to restructure, the more likely the Eurozone banking system ends up taking these large embedded, but still unmarked, losses.  As far as Spanish banks, we know that they are overexposed to the sovereign, including being over-represented in the LTRO's, so we need only go back in time to see what prices they were likely buying at.  We also have some idea as to the extent to which the Spanish banks are still holding local RMBS (and especially CMBS of land developers) unmarked in their bank books through institutions that have already been “outed” in failure.  Bankia's EUR5bn capital shortfall quickly turned into EUR9bn and then EUR15bn on the way to EUR19bn.  Those bailout losses are unmarked assets that are getting "reviewed" by the national “receiver” - thus the company's small posted profit for 2011 is completely reversed into a multi-billion euro loss on a mark-to-market, ex post facto basis.  Bankia is/was a conglomeration of 7 previous regional cajas, so it is not likely unique and therefore gives us some insight into the intentionally opaque world of Eurozone banking in 2012.  What we need to know now is the proximate cause of Bankia's fall - a loss of retail deposits or no access to repo funding (because there was no unencumbered/quality collateral left to be pledged at acceptable terms).

What is driving fear here is not whether Europe can solve its debt problems, but how to do so without bankrupting large swaths of its own banking system.  Even if Spain had the leeway to restructure its debt, it would still not be enough since losses at Spanish (and other) banks would be catastrophic, and would be spread throughout the global system.  Thus the game has been played out at the ECB of trying to get sovereign bonds to float at "reasonable" levels (the SMP purchases, LTRO's), while bailing out each country to avoid a restructure that triggers mark-to-market. That process has always been finite, and was even intended to be due to the overconfidence of policymakers in the efficacy of their own policies and interventions.  The question for them was how much growth they could “engineer” and how much bank capital breathing room would follow before that shelf-life expired.  As that over-confidence has faded into the reality of the structural economic overhang and very real re-recession (even in the core; see Holland), market gullibility has fallen in proportion.  Just in these past two weekends we have seen a Spanish bank “bailout” and the “right” Greek election result, but no massive relief rallies in both credit and equities.  If anything, credit markets are marginally worse, at best no better (see Swiss bond yields).

This is a complete change, ominously, from the 2011 pattern.  The market is very fickle right now with how it is reacting to the same old playbook.  What worked well in stoking investor gullibility last year, providing breathing room then, does not seem to possess the same type of market magic.  There have been no two-standard deviation up days in concurrence with each “positive” event.

As all this unfolds in Europe, the calls of US decoupling and the safe haven of US stocks grow louder.  Yet, it would be a huge mistake to forget that the "safe haven" of the US stock market has experienced at least an 18% decline in each of the past four years, largely as a result of the dollar overhang/dollar shortage.  Euro-based banks’ modus operandi has been "hub and spoke" for more than two decades, meaning that they have gathered local deposits in their domestic areas, swapped them for dollars (creating the dollar shortage/crowded trade) and investing those phantom eurodollars in US dollar-denominated assets (they were a major source of housing bubble credit, and the shortage of dollars due to the hub and spoke was why the Fed was forced into the dollar swap business in 2008, and again in 2011/12).  The dollar overhang has been problematic in the breakdown of the interbank wholesale money markets as institutions find themselves periodically unable to easily rollover that dollar shortage.  As that inability to find dollar financing rises systemically, banks are pushed into a forced short covering of the dollar swaps/shorts (the dollar rises not in a flight to safety, but a short covering rally), including the wholesale selling of dollar denominated assets.

In the Spring of 2012, however, the dollar rollover problem may be intersecting with local deposit funding means.  If retail deposits are fleeing from afflicted institutions, that “spoke” issue will put even greater pressure on the “hub”.  No one knows just how big the dollar shortage is, but even the IMF has estimated that it is likely greater than $2 trillion (with upper bound estimates of $6.5 trillion).  In a crowded trade, that is a hell of a lot of marginal selling pressure into what conventional wisdom says is a “safe haven”. 

The optimistic, bull case always falls back on company earnings, but market earnings, in and of themselves, do not drive markets.  Earnings do drive individual stock prices, but I do think there is a fallacy of composition here (and I hate the fallacy of composition usage in economics).  Market prices are driven by the supply of money related to psychology.  For example, at the last bear market nadir, in April 1980, the PE on the S&P 500 was 6.79.  As late as 1973, the market PE was 18+.  Over the intervening seven years, earnings on the S&P 500 grew 135%.  Nominal prices over the same period fell 12% (including that pretty severe correction in 1974).  The rise in corporate earnings was no protection against conspiring economic forces; in this case inflation.  You can actually extend this analysis backward to 1971, the PE-apex for the decade, and even to 1961 and the cycle PE peak (22.5x).  Despite a very good economic run in the 1960's, including corporate earnings, at best the market PE fell slightly throughout the decade (or at a more exaggerated pace, dependent on your start date and end date). 

Close to the bottom of the 1937-38 re-depression, the market's PE had risen to 20x.  Over the next four years of turmoil, largely unrelated to the global economy as it somewhat recovered (including the Keynesian uber dream of government spending for large scale war), the market PE fell to 7.69 in 1942, despite the fact that earnings rose 62%. 

Earnings are secondary considerations to investors' collective perceptions of getting paid for the risk of holding equities, and that risk perception is, historically speaking, largely unrelated to earnings fundamentals themselves (the converse is true for rising market PE's where earnings largely do not keep pace - the dot-com bubble, for example, had little to do with corporate earnings growth). 

Currently, despite the overall move of the market higher since 2009, markets are more concerned with factors independent of earnings, namely gaming monetary intervention episodes.  That non-fundamental driving factor is balanced by the potential psychological parameters that "council" avoiding US stocks, especially the four straight years of large systemic declines (this massive volatility is very much on par with inflation of the late 1970's in terms of the psychology of investor avoidance of stocks).  Add in the demographic shift to usage of retirement assets (particularly as that shift is being forced by the lack of wage income) and we really do not need double-digit inflation to see a single-digit PE in US stocks, perhaps even a sustained low multiple. 

The evolution of investor perceptions of financial risk is really just the continuation of the secular bear market process that began twelve years ago.  Everything that has happened in the financial sphere during this run is but a reminder that long-term risk prospects are not on the side of simply holding equities.

So the intersection of that long-term trend with the analysis of this bear market rally is the point at which all this monetary intervention reaches that inevitable shelf-life.  The near-term bear market rally succumbs to the longer-term bear market gravity at some point, and I think there are any number of candidates in this discussion alone to demonstrate such an inflection (especially, again, the seeming change of asset markets to accept these policy interventions at face value - that is the essence of what this bear market rally has been and it seems to be reversing before our eyes).  For the market to keep moving higher, to get to 1600 on the S&P 500, for example, will require, in my opinion, full removal of all economic (statistical estimates of unemployment below 7.5% on a sustainable trajectory lower) and financial uncertainty (stable funding regimes).  Or hyperinflation.

We "enjoyed" the past three decades of eurozone dollar creation (the London hub of the eurodollar market), now we (US dollar assets) are stuck with the millstone of euro problems.  Earnings growth or strength in US companies simply will not mitigate against this potential wholly unrelated selling pressure, particularly since strength of earnings has been little comfort in each of the past two years.  Add to that the fact that the very investors that would be buyers of stock fundamentals are exactly the ones that are exiting due to demographics and a plain lack of funds.

Outside of the financial sphere, the real economy is less and less a source of comfort, though mainstream economists will remain optimistic all the way to the end.  Just as they were convinced the recovery was finally at hand in early 2012 (for the third time in as many years), they will remain stalwart optimists adhering to the textbook principles of monetary “science”.  One of these days low interest rates will work since that is Chapter 1, Page 1 of the monetary handbook.  As the Beveridge Curve and Okun’s Law undergo significant revisions (http://www.zerohedge.com/news/guest-post-its-far-deeper-broken-okun), perhaps the monetary handbook will get a rewrite in the face of the epic failure of Extend and Pretend.  In the real world, however, the uncomfortable payroll report for May has been matched by an almost universal downward trend in the real economy from the US to Europe to China.  The latest JOLTS survey merely confirms the unexpected deterioration in growth prospects; right on schedule.

If we put all of this together, we are seeing a warning signal, a confluence of trends that portends an abnormal summer.  In the context of the post-crisis, volatile markets of the non-existent recovery, that is saying something.  In the context of financial risk, optimists are simply betting on reflation through monetary intervention overcoming the financial gravity of a continuously contagion-prone system that cannot seem to find sufficient quality collateral despite the trillions in fresh government borrowing globally.  The financial risks to asset prices in so many markets are tied directly to the utter chaos and mess of the intractable problem of euro bank symbiosis to their local governments because financial markets still largely operate under textbook economic and financial assumptions.  This is also true, to a large extent, of investor expectations of asset prices and financial risks.

The revaluation that is underway now is beyond the simple scope of corporate earnings valuations, going to the very core of the system itself.  Just like the equity pricing regime (and investor expectations for equity assets) needs to adjust to the twelve-year-old bear market reality, pricing within the global banking system as a whole needs to adjust to the reality that the artificial growth of the economic textbook is not replicable.  The economic truth of 2012 is that much of the science of economics, and the foundation that gives to finance and financial pricing, was a temporal anomaly befitting only those specific conditions of that bygone era.  In other words, the entire financial world needs to reset itself outside the paradigm of pre-2008.  The secular bear market in US equities is one strand of this changing landscape, perhaps the first stirring of the collapse of the activist central bank experiment.

In the end, the potential selling pressure of the dollar shortage is irresistible, no matter how “cheap” stock prices are to earnings, but none of it may matter in the grander scheme of a dramatic reset to the global system.  The inability of that global system to escape this critical state, to simply move beyond crisis and function “normally” again, demonstrates conclusively, in my opinion, the foundational transformation that is still taking place well beyond the stock bear.  Everything is a locked feedback loop of negative pressures in this age, no matter how much we want to see “value” where and how it used to exist.  Paradigm shifts are rarely orderly, but there are warning signs.

 

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Wed, 06/20/2012 - 20:56 | 2545671 westboundnup
westboundnup's picture

0.0

Wed, 06/20/2012 - 21:11 | 2545699 veyron
veyron's picture

America, Fuck Yeah!

Thu, 06/21/2012 - 00:09 | 2545979 Ignatius
Ignatius's picture

"American Exceptionalism" died when it became clear that torture is acceptable. 

Our economic exceptionalism is/was born of an ideology ready to exploit any and all of the vast resource wealth that blessed this land (or your land, as the case may be).

Thu, 06/21/2012 - 04:06 | 2546167 jeff montanye
jeff montanye's picture

or is it really that torture came to be unacceptable to a significant enough segment of the intelligentsia, the scales fell from its eyes and the reality of the bipartisan police state was seen clearly for the first time?  and with that realization, so died the myth of american exceptionalism (always a hard sell to the slaves, "indians", chinese-americans, filipinos, labor organizers, japanese-americans, social agitators, indo-chinese etc.).

Thu, 06/21/2012 - 08:09 | 2546270 falak pema
falak pema's picture

national exceptionalism of any nation or empire has associated with it the inexorabe laws of hegemony :

1° Manifest Destiny, aka natural justice of victors.

2° Hegemonial recurrent blackmail : "we are making you an offer you can't refuse".

3° Bogey man recurrent tactics : Heretics, Injuns, Niggers, Commies, Sand Niggers, Terrorists. Never human beings who may have cultural and mindset values of their own, including simple patriotism and decency. Patriotism and decency belong to no nation or ethnic group. Thats a fact of history and anthropology.

As an American woman Eleanor Roosevelt bequeathed to the world a value system that is the civilization arrow of the age : universal human rights. If the American nation cannot live with that simple value system, it will never refind its exceptionalism as it will stay in the 1, 2, 3, mindset stages that pre-armageddon and holocaust days have bequeathed to the homo sapiens. 

We do not want to go back there, whatever be the form of political framework for future governance; nation-state, regional states, or world government. 

Human rights and human duties that this entails in return, within the rule of law accepted by all, is the way to go irrespective of the political shell that provides a temporal housing to the most vibrant thing on the planet : the human individual. 

Wed, 06/20/2012 - 21:16 | 2545712 vast-dom
vast-dom's picture

i've been calling for a massive reset for quite a while. but that has been predicated on arcane and irrelevant things like fundamentals, P/E, and other nonsense. thanks to central planning more at meddling, this is the longest bout of financial market crash drawn out constipation....when this vile mother blows it will be something.....the question is how much longer can this putrid shit not be eliminated......¿....?.....

 

let me tell you about the recovery........sound of violent urgent BM.....

Thu, 06/21/2012 - 07:55 | 2546370 goldfish1
goldfish1's picture

Speaking of BM's

Billionaire Koch brothers plan secret convention here

http://www.utsandiego.com/news/2012/jun/20/billionaire-koch-brothers-pla...

Wed, 06/20/2012 - 21:45 | 2545768 live free
live free's picture

Excuse me... I personally did not "enjoy" the 30 years of what you talk about... I'm f*cked because I'm young enough not to have gotten in on the ride you muse about.  I'm on the other end.  Thank you.

 

Wed, 06/20/2012 - 21:58 | 2545804 CClarity
CClarity's picture

OT kinda - but if Larry Ellison can buy Lanai, Hawaiian island, or at least can buy 98% of it, should Greece, Spain, and Italy be selling some islands?  Difficult for Cyprus I suppose, but  . . . . ?

 

Thu, 06/21/2012 - 07:47 | 2546342 goldfish1
goldfish1's picture

should Greece, Spain, and Italy be selling some islands?

Thought that WAS the plan.


Wed, 06/20/2012 - 22:53 | 2545902 4horse
4horse's picture

American Exceptionalism

Excuse me... but you're never young enough not to have gotten in on this ride  .  .  .

David Sassoon was born in Baghdad, Iran in 1792. His father, Saleh Sassoon, was a wealthy banker and the treasurer to Ahmet Pasha, the governor of Baghdad. (Thus making him the "court Jew" ? a highly influential position.) In 1829 Ahmet was overthrown due to corruption and the Sassoon family fled to Bombay, India. This was the strategic trade route to interior India and the gateway to the Far East. In a brief time the British government granted Sassoon "monopoly rights" to all manufacture of cotton goods, silk and most important of all ? Opium ? then the most addictive drug in the world!

The Jewish Encyclopedia of 1905, states that Sassoon expanded his opium trade into China and Japan. He placed his eight sons in charge of the various major opium exchanges in China. According to the 1944 Jewish Encyclopedia: "He employed only Jews in his business, and wherever he sent them he built synagogues and schools for them. He imported whole families of fellow Jews...and put them to work."

Sassoon's sons were busy pushing this mind?destroying drug in Canton, China. Between 1830 ? 1831 they trafficked 18,956 chests of opium earning millions of dollars. Part of the profits went to Queen Victoria and the British government. In the year 1836 the trade increased to over 30,000 chests and drug addiction in coastal cities became endemic. In 1839, the Manchu Emperor ordered that it be stopped. He named the Commissioner of Canton, Lin Tse?hsu, to lead a campaign against opium.

Lin seized 2,000 chests of Sassoon opium and threw it into the river. An outraged David Sassoon demanded that Great Britain retaliate. Thus, the Opium Wars began with the British Army fighting as mercenaries of the Sassoon's. They attacked cities and blockaded ports. The Chinese Army, decimated by 10 years of rampant opium addiction, proved no match for the British Army. The war ended in 1839 with the signing of "The Treaty of Nanking."

This included provisions especially designed to guarantee the Sassoon's the right to enslave an entire population with opium. The "peace treaty" included these provisions: "1) Full legalization of the opium trade in China, 2) compensation from the opium stockpiles confiscated by Lin of 2 million pounds, 3) territorial sovereignty for the British Crown over several designated offshore islands.

. . . Thus, China not only had to pay Sassoon the cost of his dumped opium but reimburse England an unheard sum of 21 million pounds for the cost of the war! This gave the Sassoon's monopoly rights to distribute opium in port cities. However, even this was not good enough and Sassoon demanded the right to sell opium throughout the nation . . .

. . . In the new "Peace Treaty" of October 25, 1860, the British were assigned rights to vastly expanded opium trade covering seven?eights of China, which brought in over 20 million pounds in 1864 alone. In that year, the Sassoon's imported 58,681 chests of opium and by 1880 it had skyrocketed to 105,508 chests making the Sassoon's the richest Jews in the world. England was given the Hong Kong peninsula as a colony and large sections of Amoy, Canton, Foochow, Ningpo and Shanghai. The Sassoon's were now licensing opium dens in each British occupied area with large fees being collected by their Jewish agents. Sassoon would not allow any other race to engage in "the Jews business."
http://www.israelect.com/reference/WillieMartin/Sassoon_Family.htm

the ride of your life cont'd  .  .  .

The Russell, Coolidge, DeLeino, Forbes and Perkins families became fabulously rich smuggling Opium aboard their speedy Clipper ships into China. In 1820 Samuel Russell bought out the Perkins syndicate and ran the Opium smuggling operation with his partner Warren DeLeino Jr. who was the grandfather of President Franklin Delano Roosevelt.

Britain had finally found a commodity that China would take – Opium. Imported from India, just a few chests at first, and then thousands. When the Chinese authorities tried to stop the Opium trade, the British sent in their Gunboats. After nearly 20 years of turmoil the treaty of Tien-Tsin in 1858 not only allowed Opium to be imported, but handed over China's ports and all her International trade to Western control.

After the war, Opium poured into China on an even greater scale and her Emperors were powerless to stop it.

In 1842, the British stole Hong Kong from China in an Opium drug-deal called the treaty of Nanking. The Russell family who controlled the US arm of the Rothschild drug smuggling operation, set up the Skull and Bones fraternity at Yale University. America's big money families formed the fraternity's inner power circle. Taft, Russell, Schiff, Haremon, Bush, Warburg, Guggenheim, Rockefeller, Stemson, Weighouser, Vanderbilt, Goodyear and Pillsbury were all members.

These families intermarried over the generations to form America's big money aristocracy. Skull and bones member Alfonso Taft catapulted his son William Taft right into the top job at the White House. President Taft's 17th. Amendment to the US Constitution guaranteed the right of big-money insiders to hand-pick Senators and buy control of the US Senate . . .
http://www.jubilee2012.50webs.com/the_house_of_rothschild.htm

 

and where she stops, who could've known . . .

Thu, 06/21/2012 - 06:23 | 2546235 falak pema
falak pema's picture

did the Sassoons know how to play the Bassoon, instrument of powerful evocative magnitude capable of creating an ambiance of opium that even Sherlock Holmes would have trouble resisting. 

Then there is Vidal Sassoon who just died on may 9 2012. He was the Uk's greatest barber during a half century. He even gave the barbie dolls a shampoo. The Barber of London outshone the Barber of Seville as his Nancy Kwan hairstyles were the rage amongst cinema celebraties. 

What a Sassoon does with a pair of scissors is an art in itself, that no opium addict can resist. Its part of the jet-set hi-life and take five culture of NY/WS. Viva Sassoon and Bassoon! 

Vidal Sassoon - Wikipedia, the free encyclopedia

Bassoon - Wikipedia, the free encyclopedia

Thu, 06/21/2012 - 08:02 | 2546387 Bob
Bob's picture

I heard that the family bassoon business was commandeered by the Indian Exceptionalism branch of the family, leaving the poor relations to concentrate on Tuvon Throat Singing, which was ultimately perfected in Hollywood USA by a well-known experimental particle physicist:

http://www.youtube.com/watch?v=t-RsB4a4ogc

Thu, 06/21/2012 - 07:51 | 2546352 goldfish1
goldfish1's picture

Very interesting.

17th Amendment to the US Constitution:

Clause 1. The Senate of the United States shall be composed of two Senators from each State, elected by the people thereof, for six years; and each Senator shall have one vote. The electors in each State shall have the qualifications requisite for electors of the most numerous branch of the State legislatures.

Clause 2. When vacancies happen in the representation of any State in the Senate, the executive authority of each State shall issue writs of election to fill such vacancies: Provided That the legislature of any State may empower the executive thereof to make temporary appointments until the people fill the vacancies by election as the legislature may direct.


Wed, 06/20/2012 - 22:21 | 2545851 Salah
Salah's picture

Dump that Cold War fossil, the Outer Space Treaty of 1967, and go back to the Moon with national sovereign power (treaty prohibits).  Tell the rest of the world to fuck off if they object, but "come on down" if they want to invest on our terms....same as the Pacific Railroad Acts of 1863-69.  

But we have no politicos with balls these days...that's sooooo passe.  Just wait, 'Girl World' is drawing to a close; 'Boy World' is just itching to return; same as 1927.     

Wed, 06/20/2012 - 22:25 | 2545858 tempo
tempo's picture

America has exceptional entitlements and insane political system that will not work long term

Wed, 06/20/2012 - 21:00 | 2545677 CrashisOptimistic
CrashisOptimistic's picture

Worthless.

Wed, 06/20/2012 - 21:08 | 2545688 LetThemEatRand
LetThemEatRand's picture

The insiders are starting to signal the end of Obama.  Welcome Mr. O'Romney.

Wed, 06/20/2012 - 21:12 | 2545701 A Lunatic
A Lunatic's picture

At least Uncle Mittens (unlike the author) understands the philosophy of American Exceptionalism.

Wed, 06/20/2012 - 21:29 | 2545737 LetThemEatRand
LetThemEatRand's picture

We have indeed generated exceptional wealth for a few hundred assholes that run the world, including America.  Good for us.

Wed, 06/20/2012 - 21:56 | 2545798 A Lunatic
A Lunatic's picture

I believe Romney to be a raging Neocon masquerading as a placebo for an ailing America..............if that helps any. American Exceptionalism, historically, pertains to the ideology that America is Gods gift to the world, our shit don't stink, and if you don't like it we will be there shortly to free the shit out of you. I'm not sure where that is addressed in this article...........perhaps I missed it.

Wed, 06/20/2012 - 22:04 | 2545818 LetThemEatRand
LetThemEatRand's picture

Sybil?

Wed, 06/20/2012 - 22:33 | 2545873 A Lunatic
A Lunatic's picture

The author wasted ten minutes of my life with an American Exceptionslism headline that rambles on about Spanish banks, Euro problems, monetary interventions, and U.S. stock prices.

Thu, 06/21/2012 - 03:25 | 2546151 Neoisolationist
Neoisolationist's picture

I disagree with your definition of American Exceptionalism. Comes down just to this: if you have limited government, the common man has to step up and more on his own (liberty and its corollary, responsibility for ones' own actions). When it is allowed to work, it tends to lead to a self-reinforcing virtuous cycle.

I'm a Ron Paul guy in principal, but I think Romney will do fine. The private equity/governor experience is what the country needs. We're not going to fix our problems in a single electoral cycle or presidency. Our problems took 100 years to create, and will probably a take a generation to fix. Romney is a step in the right direction. And yes, the country is definitely ailing. =)

Thu, 06/21/2012 - 07:31 | 2546321 Disenchanted
Disenchanted's picture

 

 

 

"Romney is a step in the right direction."

 

Jesus wept.

Thu, 06/21/2012 - 08:21 | 2546438 Bob
Bob's picture

Yes, what America lacks is the inspirational example of a self-made man who walks the walk of the American job creator:

 

http://www.villagevoice.com/2012-04-18/news/Mitt-Romney-american-parasite/

Shifting from Ron Paul to neocon Rmoney makes perfect sense in an imperfect world?

Wed, 06/20/2012 - 21:53 | 2545790 brettd
brettd's picture

That team's going to have their hands full come January.  

Thu, 06/21/2012 - 07:54 | 2546363 goldfish1
goldfish1's picture

 Conan had the five little Mittens on the show last night.

Wed, 06/20/2012 - 21:08 | 2545693 lolmao500
lolmao500's picture

Don't worry, Obamuh and Mittens will save everyone.

Wed, 06/20/2012 - 21:10 | 2545696 A Lunatic
A Lunatic's picture

Here's my two cents: If you can't eat it, polish it, shoot it, drink it, hold it, drive it, fly it, or fuck it........it's a piss poor investment.

Wed, 06/20/2012 - 22:03 | 2545814 Bollixed
Bollixed's picture

An old saying,,,If it flys, floats, or fucks...rent it.

Wed, 06/20/2012 - 21:19 | 2545719 toady
toady's picture

At least I'M still exceptional!

Wed, 06/20/2012 - 21:20 | 2545725 Poor Grogman
Poor Grogman's picture

The debate has moved on.

It is now a case of everyone gaming the system until it dies.

Hey it worked for the Romans, why work your life away or fight to defend the system when you can simply vote yourself a greater slice of the pie. (or stand aside as many of the Romans did while the barbarians take out your friendly ruling oligarchs)

Human nature is not to toil away for everyone else's benefit but simply to get on with ones Own life in ones own way.

The world is running out of willing dupes.

Hopefully the last dupes (Germany?) will give up soon.

Then everyone can stop living in a real life zombie-economics experiment.

Wed, 06/20/2012 - 21:52 | 2545783 world_debt_slave
world_debt_slave's picture

Theme Song to Mighty Mouse

http://www.youtube.com/watch?v=BdIev12fCPs

Wed, 06/20/2012 - 21:55 | 2545784 Plumplechook
Plumplechook's picture

Exceptional, in that:

  • The US can boast of an income disparity that rivals many third-world countries. On the GINI scale, we are right down with Iran and Bulgaria. (CIA World Fact book). 
  • Exceptional in that it continues to maintain hundreds of military bases around the world – many whose very presence inspires anti-American hatred.
  • Exceptional in that it Is willing to waste billons of dollars in the Middle East (Iraq – Israel – Afghanistan) on the false premise of “Democracy,” but denies free health care for American children.
  • Exceptional in that it embraces an impotent government that has allowed corporate America to export hundreds of wealth producing jobs to sweat shop labor camps in Asia and Latin America. There is a reason Apple stock is at $600 a share, and that APPL has more ready cash than many sovereign nations.
  • Exceptional in that, although its own infrastructure is in disarray and decline it wastes billions supporting corrupt Middle and East Asian regimes; Examples, Iraq; Afghanistan; Israel; Pakistan, Egypt and Qatar. This, while our own cities rot in decay.
  • Exceptional in that it spends more money on the criminal justice system (including incarceration) than on education. Nationwide by a factor of ten to one from the public purse.
  • Exceptional in that most of the advanced Northern European nations provide universal health care, the US stands aside on this moral issue, citing individual responsibility and that old rubric, too much government.
  • Exceptional, in spite of the fact that is (or was) the world’s leading banking and investment center and financial power, it did, by legislation, free the “dogs of greed” with the repeal of the “Glass Steagall Act” of the Thirties – leading to the financial rape of working class Americans, throwing tens-of-thousands out of hearth and home.
  • Exceptional in that it can boast the highest gun death rate of any western nation. Period. Right between the Philippines and Mexico. Eight times higher than any other industrialized nation.
  • Exceptional because, although possessing the world’s highest-ranked institutions of higher learning, only half of American graduates are finding work commensurate with their degree levels. Additionally, many are saddled with unreasonable education loans. Loans, which question the cost-benefit ratio. 
  • Lastly, the American military has been consciously allowed to be degraded into a quasi-mercenary, kill for hire machine. A murder machine that no longer represents our citizen-soldier; a constitutionally mandated organization representing American values. No, today it is a financial / politically driven organization – bending to the will of un-elected bankers and bureaucrats.


Wed, 06/20/2012 - 22:52 | 2545901 Acorn10012
Acorn10012's picture

Nothing's free. If you want it for someone else, then open your wallet.

Wed, 06/20/2012 - 21:52 | 2545785 Abner Doon
Abner Doon's picture
Information recieved by U.S. House Committee on Financial Services member, US Congressman Brad Miller, who also serves on the Congressional Financial Markets Caucus, on George Hartzman's Wells Fargo Whistleblower case http://hartzman.blogspot.com/2012/06/information-recieved-by-us-congressman_20.html

 

How many posts does it take
to get to the middle of a tootsi pop?

 

I am looking for some coverage from Zero Hedge,
sometime soon,
please.

 

gh

 

 

Wed, 06/20/2012 - 22:15 | 2545839 Ranger4564
Ranger4564's picture

tips [ at ] zerohedge.com

 

http://www.zerohedge.com/news/how-readtip-zero-hedge-without-attracting-...

 

Might help, if you can do that.

Thu, 06/21/2012 - 06:23 | 2546236 Benjamin Glutton
Benjamin Glutton's picture

and a good time was had by all...

 

What Wells Fargo Doesn’t Want You To Know

Last week, I realized I had enough of Wells Fargo’s attempt to spin bullshit into Egyptian cotton and decided it was time to speak up.

Wells Fargo spokesman Oscar Suris basically called former Wells Fargo Superstar, Beth Jacobson a liar for the testimony she gave in the Baltimore “Ghetto Loans” lawsuit against Wells Fargo when she stated, “There was always a big financial incentive to make a subprime loan wherever one could,” 

Since they took TARP money in 2008, Wells Fargo has continually denied they ever wrote sub-prime loans.  Anyone who worked in lending during the boom knew this was total bullshit and would roll their eyes whenever we heard it.  Now, Wells Fargo is changing their story.  Last week, Suris told the Washington Post that sub-prime was only 10% of Well Fargo’s business while he was trying desperately to debunk Beth Jacobson’s testimony,

(Wells Fargo) spokesman Oscar Suris flatly denied Jacobson’s testimony. He said the bank never made “no doc” mortgages or predatory loans that kept homeowners from paying down principal. An internal review of a sample of the subprime mortgages Jacobson approved found that almost all of the borrowers would not have qualified for traditional loans. And, he said, prime-loan officers had quotas to meet as well — only a few could have made more money referring clients to Jacobson.

Her declaration proves that she violated several company policies, Suris said. According to Wells Fargo, Jacobson was more like a technical glitch than a cog in a well-oiled machine. Back then, only 10 percent of the company’s mortgage business was subprime, he said.

Sub-prime loans that were a lucrative business for Wells Fargo because they reaped huge profits with little fallout by dumping these loans on the secondary market to mortgage-backed securities Trusts controlled by Lehman Brothers, Goldman Sachs, Bear-Stearns and Deutsche Bank and as any in the business can tell you it comprised more like 40-50% of their business.  Originators were rewarded for doing so as Beth Jacobson pointed out in the Washington Post,  ”all-expenses-paid trips to Cancun and the Bahamas, where the likes of Aerosmith and Jimmy Buffett performed for employees…”

I can tell you that on the wholesale lending side we were also enticed with “special perks” by lenders.  Both Wells Fargo and Countrywide aggresively enticed us to write large volumes of sub-prime loans.  Where Wells Fargo offered their retail loan officers trips to family friendly 5-Star Caribbean resorts, the perks we received on the wholesale lending side more resembled a Hunter S. Thompson novel filled with naked women, booze and drugs.

read on.

http://www.mfi-miami.com/2012/06/whistles-were-the-only-thing-not-being-...

Wed, 06/20/2012 - 21:53 | 2545786 reader2010
reader2010's picture

Got Gold?

Wed, 06/20/2012 - 21:53 | 2545791 williambanzai7
williambanzai7's picture

It is curious though that the hunt for yield has suddenly rendered the Maidenlane Asset dump enticing for the squids and others.

Wed, 06/20/2012 - 22:00 | 2545807 Boilermaker
Boilermaker's picture

Here comes more ZH red meat for the Amerikkka clan.

Why even pollute this otherwise great site with this shit?  Can we follow this up with an "Amerikkkans are fatties"?

Wed, 06/20/2012 - 22:01 | 2545809 lsbumblebee
lsbumblebee's picture

Price discovery is dead.

Enjoy some Edie Sedgwick.

http://www.youtube.com/watch?v=xCCYzguINN8

Wed, 06/20/2012 - 22:08 | 2545828 disabledvet
disabledvet's picture

I don't recall reading in my econ textbooks "how a Fed Chairman can create a Financial Loveboat of Liquidity" however...gadzooks!...i think our current one has done it! With equities having doubled and Treasuries still surging "WTF are the TPTB complaining about here?" I mean WTF? "Start handing out the cabbage phuckers."
Now on a lighter note:
http://www.youtube.com/watch?v=vTK0hr5oAOk&feature=player_detailpage
Hell Bernanke even looks like Captain Steubing. And is that Barak Obama serving the drinks? The doctor is clearly Treasury Secretary Geithner. Clearly the Cruise Director is Michelle. Fred Grandy's gotta be CIA. He looks sneaky.

Wed, 06/20/2012 - 22:31 | 2545865 lsbumblebee
lsbumblebee's picture

Lauren Tewes. I remember a few wet dreams with her on Fantasy Island. This episode stars Jimmy J.J. Walker the dynomite kid AND Bonnie Franklin. Production costs must have been exorbitant.

Wed, 06/20/2012 - 23:53 | 2545969 The Big Ching-aso
The Big Ching-aso's picture

 

 

I had it worse.  She was the college girlfriend of my best friend's brother and was over his place all the time.  It was torture.

Wed, 06/20/2012 - 22:12 | 2545835 Yohimbo
Yohimbo's picture

exceptional at producing bullshit

Wed, 06/20/2012 - 22:27 | 2545863 q99x2
q99x2's picture

Things would be much better if each state in the US were its own Nation. The larger the country the worse the consequences of central planning. Estonia with a population of 1.1 million is the country most financially responsible in Europe. Big might be better for monopolies but not for Nations.

Thu, 06/21/2012 - 02:28 | 2546119 Lednbrass
Lednbrass's picture

I think more realistic would be a break into several smaller nations.  However it works out, its an absurdity to consider the US a homegenous entity. The divisions are no less deep than Europe,the only difference here is that people who have different cultures and hate each other speak the same language and use the same "money".

Thu, 06/21/2012 - 12:36 | 2547625 Bohm Squad
Bohm Squad's picture

I always believed Texas would "go first".

Wed, 06/20/2012 - 22:32 | 2545868 lolmao500
lolmao500's picture

Pelosi to the rescue!

http://www.huffingtonpost.com/2012/06/20/nancy-pelosi-obama-debt-crisis_...

Pelosi : Obama should declare debt ceiling unconstitutional

Nancy Pelosi Says Obama Should Use Constitution To Avert Debt Crisis

House Minority Leader Nancy Pelosi (D-Calif.) said Wednesday that President Barack Obama should use the 14th Amendment to declare the debt ceiling unconstitutional in the event that Congress hurtles toward another debt showdown.

"I'm a big fan of the Constitution," Pelosi said during a discussion on raising the debt ceiling in a sit-down with reporters. "The credit validity of the United States shall not be in question."

Asked if she expected Obama to use the 14th Amendment as a last resort for avoiding a debt default and other economic consequences, something the president said was not an option during last year's debt stand-off, Pelosi shrugged.

"I don't have any idea. But I think he should. I think he should," she said.

The Democratic leader privately endorsed the concept to members of her caucus during last summer's debate. As Congress inched closer to default, progressive Democrats increasingly called on Obama to use the constitutional option as an 11th-hour solution to averting a crisis. In the end, he never did.

Can't she be transferred to a mental institution? She's obviously senile and doesn't have the mental capacity to take care of herself.

Wed, 06/20/2012 - 22:52 | 2545903 r00t61
r00t61's picture

Pelosi's knowledge of the Constitution is on par with GWB's ability to pronounce difficult words, like "strategery" and "nucular."

Personally, I want Congress to declare gravity unConstitutional.  Gravity kills so many people every year, including children.

Won't someone please think of the children?

Wed, 06/20/2012 - 23:07 | 2545922 JustACitizen
JustACitizen's picture

What!?! And miss out on the fun of another round of clown car olympics? All of the assholes posturing? (that is both sides all of you left and right true believers)

Then, when whatever shitty deal is struck (guaranteed to screw the ordinary non 1% taxpayer) we can watch the joke that is the credit rating agencies put on their kabuki dance.

Really - we cannot deprive Fox and MSN-BS et al of all of these opportunities before the corporate pac money starts really rolling in.

Thu, 06/21/2012 - 00:14 | 2545985 adr
adr's picture

That is all well and good other than the FACT the 14th amendment does not give Obama the power to do that. How long hasit bee since the congress has passed a budget? Obama's entire term...

I think congress and the presidency should require a constitution test every year. If you fail you get executed on the steps of the capital building for treason. How can you swear to uphold the Constitution if you don't know what is in it?

Treason? Yes, for if you pass a law that circumvents the governing document of the USA, you commited treason.

Thu, 06/21/2012 - 01:56 | 2546096 SoCalBusted
SoCalBusted's picture

Thanks for the summary.  I never click on huffpost links.

Thu, 06/21/2012 - 01:56 | 2546097 OneTinSoldier66
OneTinSoldier66's picture

Obviously Nancy Pelosi believes...

 

Debt is Wealth

Wed, 06/20/2012 - 22:55 | 2545899 worbsid
worbsid's picture

America is exceptional. There is no place this large that has so many physical assets. Rainfall, fresh water, minerals, lumber, on and on. Of course like any other physical asset, they are being used up and screwed up due to mismanagement. There is still a lot here in America. 

 

Now about Americans, we had some good basic laws that allowed the development of the physical assets of America by almost anyone exceptional who came here. There is case after cast of rags to riches throughout our history. Those basic laws have been so diluted to be almost meaningless. This did not change the 'Golden Rule' that whoever has the gold rules. But is does make the process of rags to riches more difficult. Especially when it comes to public office. This in turn dilutes the basic laws further. 

There is still room for the exceptional people to succeed in many fields but that does not raise the exceptional average. We are fortunate that our average new immigrants are somewhat brighter and harder working than immigrants of a few years ago. Unfortunately we are seeing the average of those who have been here since birth going the other way … me, me, me generation after generation is less exceptional.

No one has an answer; it is much to complex and complexity by itself is a large part of the problems we all face. One thing about it though, another Carrington Event will quickly level the playing field. We all were eating and living pretty well until Thanksgiving. 

Thu, 06/21/2012 - 00:19 | 2545987 ebworthen
ebworthen's picture

The moral contract has been irrevocably broken.

Exceptional Amurikans have no where to go; their ablities and talents are spit upon for quarterly returns, offshored jobs, confiscated assets, Wall Street legerdemain and bonuses, banker hegemony, and legislative and judicial tyranny.

It is simple; individual rights, property rights, non-punitive taxation and returns for savers, investors, and the productive.

The U.S.S.A. has devolved into a cesspool of crony capitalism married to "progressive" socialism where parasites are rewarded and the decent, honest, and productive citizen is punished and robbed.

Kill the Beast.

Wed, 06/20/2012 - 23:03 | 2545917 proLiberty
proLiberty's picture

The first paradigm that has failed is the very idea of what, exactly, is the meaning of money?

Most college students take classes from instructors who only know Keynesian Economics.   But this theory turns reality upside down and inside out, turning debt into an asset and proposing that government has the power to seize and allocate all private wealth and income.  It destroys economic calcuation via destroying the time value of money.  

Business leaders collude with government to make perfect the mirage of fiat money and government control of both the quantity and its time value.   People who are good at playing the crony game become heroes and get long guest host spots on CNBC.   Retired GE CEO Jack Welch is a perfect example, given how many jobs GE has moved to China while accepting tremendous government tax concessions, credits and subsidies.

The factor that set Americans apart was their understanding of and defense of liberty.  Socialism destroys that.  Euorope behaves the way it does because of its socialist heart.  Indeed, the Treaty of Lisbon specifies that Europe rejects capitalism and instead has a "social market economy".   As Americans are willing to trade liberty for socialism they become no better than any other socialist, of which the world is full of.

 

Thu, 06/21/2012 - 00:43 | 2546028 adr
adr's picture

When liabilities can be marked as assets, and debt marked as income. What system do we have?

When a company can book future sales as profit now, how is the system nothing but a lie?

Seriously, I am not in debt under corporate accounting rules by borrowing $150k for a house, I have $150k in assets to borrow against.

Wed, 06/20/2012 - 23:06 | 2545921 KowPie
KowPie's picture

Transfer her to a pine box 6' underground.

Wed, 06/20/2012 - 23:35 | 2545955 Manthong
Manthong's picture

You need a stake and a bonfire..

you're not supposed to bury witches.

Thu, 06/21/2012 - 00:12 | 2545982 ebworthen
ebworthen's picture

Fuck the markets and the ponzi scheme of crony capitalism wed to socialist central banker planning and theft.

Tear it down, tear it all down.

Thu, 06/21/2012 - 00:13 | 2545984 janus
janus's picture

awesome...just awesome.

1.6180339887499...

janus

Thu, 06/21/2012 - 00:20 | 2545990 Mike Cowan
Mike Cowan's picture

More useless information.

Thu, 06/21/2012 - 00:36 | 2546016 q99x2
q99x2's picture

Do not enter the future.

Thu, 06/21/2012 - 00:37 | 2546021 mammoth mo
mammoth mo's picture

Much has been missed.

America is running head first to digital money.  Digital money ensures greater control. Once America goes digital the world will soon follow.  Once everyone is digital minimum wage world scales can be enacted.  Labor across the world will be paid similarly.  America's standard of living is based upon imbalances in what we get paid for Labor versus other parts of the world.  Once a factory worker in Indiana starts getting paid what a factory worker in Indonesia is making that standard of living is gone.

Not just factory workers either - witness the outsourcing of engineering to India that was all the rage.  In the future - it will all be done over the internet by a company paying a set price whether it is in Tennessee or Tahiti.  The business model that has allowed America to become great faces Japan like stagnation at its best and cliff diving collapse at its worst.  Bet on printing to infinity and stagnation.

No growth - part time jobs for most -huge profits for the 1%.

And then it will get real ugly.

 

 

 

 

 

Thu, 06/21/2012 - 00:38 | 2546023 adr
adr's picture

What if corporate earnings are complete bullshit? What if they are nothing more than a figment of an accountant's imagination?

I am far more willing to believe that some accountant added column A to column B and called it profit, than most of these corporations actually sold 50% of what they claim.

Reported retail sales are impossible if you use anything that resembles logic. However if you look at retail sales as a function of one shadow corporation selling to another under the cover of a overseeing corporate conglomerate, then yes it is possible to record the reported sales, even if nothing is actually sold to a consumer.

Is it possible for a vendor to sell $100 million in inventory to a retailer and book the profit, yet not actually sell almost any merchandise to a consumer? Could that vendor take back the unsold merchandise using a different division of the company, say an outlet, and write the invetory off as a loss to save on taxes? Then have the inventory shipped back to the vendor to be sold again to the same mass retailer, since the product didn't change, to be booked as another sale?

You have three friends. You have a rock that the other guys really like and each of you have $10. Guy 1 gives you $10 for the rock, guy 2 buys the rock from him for $10, guy 3 pays guy 2 $10, and then you buy the rock back from guy 3. Everyone has $10 again and you have the rock. In reality the finaincial and economic situtation is unchaged from the start. However, on the books $40 of economic activity took place even though only 1 item worth $10 was ever sold. You could make the case under accounting principles that 4 items worth $10 were sold, yet reality proves different. Repeating the trade allows even greater activity to be recorded even if no more inventory is actually produced.

I argue this slight of hand is responsible for at least 50% of reported sales and the resulting corporate earnings. There is a reason why retail stores and the company on the door are listed as seperate corporations on the corporate books.

Thu, 06/21/2012 - 02:31 | 2546121 AurorusBorealus
AurorusBorealus's picture

This is the most intelligent article that I have read in quite some time.

Thu, 06/21/2012 - 06:49 | 2546258 sangell
sangell's picture

Jeff Snider occasionally posts thought provoking pieces over at RealClearMarkets.com.

Well worth your time to look them up there. Fewer teenagers and morons marring the site with idiotic comments.

Thu, 06/21/2012 - 03:12 | 2546140 Crassus
Crassus's picture

My version of American Exceptionalism is laying a naked and dewy Debbie Wasserman Schultz on a silky Kashmiri rug high atop a Konregal summit. There to run my sanguinary fingers through her blonde, Top Ramen hair and anoint her with sandalwood oil as we break all the paradigms. Our words winding like strands of hot butterscotch sauce.

Thu, 06/21/2012 - 06:41 | 2546234 virgilcaine
virgilcaine's picture

For the time being it is ALL about Spain..the 10 yr bond and its Banks.  America is the 'Today show'.. noone cares about it,, replaced by the "Idol".

America. deindustrialized 30 Yrs ago with high debt and no growth. The EU (and the Brics) were supposed to be the next Economic marvel which is why they are REALLY panicking right now.

Greenspan is on Blmberg radio.. he just won't die or go away. ever.  When he does they will have a statue of him made up as to remember/pay hommage to him.

Thu, 06/21/2012 - 07:25 | 2546305 giggler123
giggler123's picture

American Exceptionalism never existed, accept perhaps in Amerian minds, all of which are now changing.  As far as the rest of the world are concerned you're just a load of old convict's from the UK and continue to be so with your foreign policies.

Thu, 06/21/2012 - 08:43 | 2546492 WmMcK
WmMcK's picture

As far as the rest of the world are concerned you're just a load of old convict's --

Same could be said of the Aussies. Plural not possessive.

Thu, 06/21/2012 - 10:11 | 2546904 roadhazard
roadhazard's picture

In the 17/1800's  the American Privateers Assoc. was the largest in the world.

 

arrrrgh

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