Washington D.C.

"When I was chairman, more than one legislator accused me and my colleagues on the Fed’s policy-setting Federal Open Market Committee of “throwing seniors under the bus” (to use the words of one senator) by keeping interest rates low. The legislators were concerned about retirees living off their savings and able to obtain only very low rates of return on those savings. I was concerned about those seniors as well."

- Ben Bernanke first blog post

Unless We Learn Our History, We're Doomed to Repeat It

A five sigma event signifies extreme conditions, or an extremely rare occurrence. To bring this discussion from sports and weather to the financial world, we can relate a 5 sigma event to the stock market. Since 1975 the largest annual S&P 500 gain and loss were 34% and -38% respectively. A 5 sigma move would equate to an annual gain or loss of 91%. With a grasp of the rarity of a 5 sigma occurrence, let us now consider the yield spread, or difference, in bond yields between Germany and The United States. As shown in graph #1 below German ten year bunds yield 0.19% (19 one-hundredths of one percent) and the U.S. ten year note yields 1.92%, resulting in a 1.73% yield spread. This is the widest that spread has been in 30 years.

Did you know that the Russians have a massive underground complex in the Ural mountains that has been estimated to be approximately 400 square miles in size?  In other words, it is roughly as big as the area inside the Washington D.C. beltway.  Back in the 1990s, the Clinton administration was deeply concerned about the construction of this enormous complex deep inside Yamantau mountain, but they could never seem to get any straight answers from the Russians.  The command center for this complex is rumored to be 3,000 feet directly straight down from the summit of this giant rock quartz mountain.  And of course U.S. military officials will admit that there are dozens of other similar sites throughout Russia, although most of them are thought to be quite a bit smaller.  But that is not all that the Russians have been up to.

Some people never learn. Even though we’ve experienced two horrific stock market crashes in the last fifteen years, with losses of 40% to 80%, the professional monkeys posing as investment experts ignore facts, history, and common sense. Will the Ivy League MBA’s heed these warnings? Not a chance. They think they are the smartest guys in the room.

Basically, investing in the gold/silver shares has been a waste of time and money for the last 17 years. If you had told me that when The Café opened for business in September of 1998, I would have said, "No Way!" … especially since gold went from below $300 back then to $1900+ and silver was below $4, and would rise to $49+..

If you believe that ignorance is bliss, you might not want to read this article.

As part of Obama's most reent push to change the bankruptcy law and promote legislation that facilitates the reduction or outright forgiveness of student debt, the White House provided a full state-by-state breakdown of where the 43.2 million borrowers on the hook for some $1.135 trillion in student loans. Here are the results...

"There are gaps of months and months and months," exclaims Rep. Trey Gowdy (who leads the committee investigating Hillary Clinton's handling of the Benghazi attack in September 2012) as the 'transparent' release of Clinton's email includes no emails at all from a seemingly critical Tripoli visit (where she has been photographed using her Blackberry). Gowdy ranted on CBS "Face The Nation" yesterday that "it strains credibility to believe if you’re on your way to Libya to discuss Libyan policy that there is not a single document to turn over to Congress." Clinton, for now, is staying very quiet on this matter...

To some (mostly those in the 1-10% wealth bucket) the main event today is the iWatch unveiling. To others (mostly those not in the 1-10% wealth bucket) it is the Eurogroup meeting in which the fate of Greece will be discussed and perhaps decided. One thing is certain: virtually nobody will care when the Fed's Mester and Kocherlakota speak later today as the Fed is now - supposedly - set to hike no matter what. Here is what the other main events are for the balance of the week.

It has been a while since we have seen the USDJPY rampathon push US equities higher, so in a day dominated by central banks (first the BOE momentarily), and then the ECB's much anticipated announcement of the actual QE launch at the Draghi press conference at 1:30pm CET (taking place, ironically enough, in the place that was the blueprint for the Eurozone's capital controls, Cyprus), it only makes sense that after weeks of stage fright, the USDJPY algos reminded the world they are alive and well, and proceeded to ramp the key FX pair above 120, even though the currency that everyone will be talking about today is the Euro, hugging 1.10 as of this moment, but the real question is what happens after Draghi gives the asset buying green light: has all of Q€ been priced in already in FX, and will the EURUSD resume its surge higher, or is parity next stop?

In a 'ripped from The Onion'-esque headline, WSJ reports that David Petraeus - the former director of the US Central Intelligence Agency - will plead guilty to a charge of mishandling classified information. The reitred military general, whose career was cut short by a very public affair with his biographer, reached a plea deal over sharing unauthorized information with her, in order to avoid an embarrassing trial. To summarize, the man trusted with all of the America's most secret secrets just plead guilty to pillow-talk-sharing of classified information...

With Philly Fed's 10th president, Charles Plosser retiring effective March 1, 2015, algos were wondering if he would be replaced with another former Goldman partner, or if his seat would be filled with yet another academic. The answer, as the Pgilly Fed reported moments ago, is the latter. Meet the new president of the Philly Fed: Patrick T. Harker, 56, currently president of the University of Delaware, former dean of the Wharton School at UPenn, and a member of the Philadelphia Fed's board of directors. His career academic background: Harker has a Ph.D. in civil and urban engineering, a master's degree in economics, and an M.S.E. and B.S.E. in civil engineering from the University of Pennsylvania. Wait, so no econ PhD? There may be some hope yet...

Under normal circumstances, after 2008's conflagration of the calamitous collateralizations, we shouldn’t have seen such irrational, reckless, greedy behavior from Wall Street for another generation. But, Wall Street didn’t have to accept the consequences of their actions. They were bailed out and further enriched by their puppets at the Federal Reserve, the lackey politicians they installed in Washington D.C., and on the backs of honest, hard-working, tax paying Americans. The lesson they learned was they could continue to take excessive, reckless, unregulated risks without concern for losses, downside, or consequences.