goldman sachs

goldman sachs

Guest Post: George Osborne And Big Banks

The Telegraph reports that George Osborne thinks big banks are good for society. Why would Osborne want to see more of something which requires government bailouts to subsist? Because that is the reality of a large, interconnective banking system filled with large, powerful interconnected banks. Under a free market system (i.e. no bailouts) the brutal liquidation resulting from the crash of a too-big-to-fail megabank would serve as a warning sign. Large interconnective banks would be tarnished as a risky counterparty. In the system we have (and the system Japan has lived with for the last twenty years) bailouts prevent liquidation, there are no real disincentives (after all capitalism without failure is like religion without sin — it doesn’t work), and the bailed-out too-big-to-fail banks become liquidity sucking zombies hooked on bailouts and injections.

Key Events In The Shortened Week

With Thanksgiving this Thursday, trading desks will be empty on Wednesday afternoon and remain so until next Monday. So even though it is a holiday shortened week, here are the main things to expect in the next 5 days: Bank of Japan meeting, the European Council meeting and the Eurogroup meeting. Key data releases include European and Chinese Flash PMIs.

Frontrunning: November 19

  • Israel Ready to Invade Gaza If Cease-Fire Efforts Fail (Bloomberg)
  • Petraeus: A Phony Hero for a Phony War (NYT)
  • IMF'S Lagarde says Greek deal should be "rooted in reality" (Reuters) "rooted" or "roofied"? And where was it until now?
  • ECB's Asmussen says Greece to need aid beyond 2014 (AP)
  • EU makes budget plans without (FT)
  • Japanese Poll Shows LDP Advantage Ahead of Election (WSJ)
  • Shanghai Composite Dips Below, Regains 2,000 Level (Bloomberg)
  • Bond investor takes big punt on Ireland (FT)
  • Noda defends BoJ’s independence (FT) Indewhatnow?
  • Inaba Says BOJ Could Ease More If Government Reins in Debt (Bloomberg) Actually it's the other way around
  • Miles Says Bank of England Can Do More If U.K. Slump Persists (Bloomberg) So much for the end of QE
  • US tax breaks worth $150bn face axe (FT)

Chart Of The Day: The World's Scariest Divergence

We like to keep our charts just simple enough that a PhD in Economics can understand them; and so we present what must be the scariest chart in the world for much of the developing (and for that matter developed) world. Demand for food is rising inexorably (as is the demand for fuel) but at the same time supply is falling rapidly as the availability of arable land per capita plunges. Perhaps this (along with central bank liquidity spillovers) explains the 'paradigm' shift in staple prices. Food for thought? (pun intended)

The Hostess Liquidation: A Curious Cast Of Characters As The Twinkie Tumbles

Perhaps one of the most interesting aspects of the just announced Hostess liquidation, one that will be largely debated and discussed in the media, or maybe not at all, is the curious cast of characters and the peculiar history of this particular bankruptcy. Some may not be aware that the company's Chapter 11 (or colloquially known as 22) bankruptcy filing this January, which today became a Chapter 7 liquidation, was the second one in the company's recent history, with Hostess, previously Interstate Bakeries, emerging from its previous protracted multi-year bankruptcy in 2009. What is curious is that its emergence had all the drama of a anti-Mitt Romney PAC funded thriller, with a PE firm, in this case Ripplewood holdings, injecting $130 million in order to obtain equity control of Hostess as it was emerging last time. There were also more hedge funds, investment banks, strategic buyers, politicians involved in this particular story than one can shake a deep fried numismatic value Twinkie at. More importantly, however, as America has been habituated following the last season of the reality TV show known as the presidential election, if Private Equity then "bad." Only this time there is a twist: because it wasn't really PE that was the pure evil in the Obama long-term campaign, it was associating PE with Republicans, and thus: with jobs outsourcing. And here comes the Hostess twist: because Tim Collins of Ripplewood, was a prominent Democrat, a position which allowed him to get involved in the first bankruptcy process in the first place, due to his proximity with the Teamsters' long-term heartthrob Dick Gephardt (whose consulting group just happens to also be an equity owner of Hostess). In other words, the traditional republican-cum-PE scapegoating strategy here will be a tough one to pull off since the narrative collapses when considering that it was a Democrat who rescued the firm, only to see it implode in a trainwreck that has resulted in the liquidation of a legendary brand, and 18,500 layoffs.

Meet The New China - Same As The Old China?

Just before the US election, we laid out the details and implications of the 'other' major 'election' occurring in the world - that of China's Supreme Leader of Awesomeness. Last night the details were announced of the makeup of the new Politburo Standing Committee. As Bloomberg notes, the panel - the most powerful decision-making body in China - was reduced from nine to seven members and will be led (unsurprisingly) by Xi Jinping. Perhaps, in a lesson for our own politicians, the 'new' committee is 'bipartisan' with five members from Xi Jinping's own Jiang Zemin faction and two members from Hu Jintao's faction (more a balance of reformers and reactionaries). But, in a similar vein to the US, as The Diplomat's David Cohen notes,"If Xi is to achieve even the economic policy goals that already appear to enjoy consensus support in Beijing, he will need to find ways of overcoming some of the largest entrenched interest groups in contemporary China.  To do so, he may have to set about creating new entrenched interest groups."

Frontrunning: November 15

  • Wal-Mart misses topline expectations: Revenue $113.93bn, Exp $114.89bn, Sees full year EPS $4.88-$4.93, Exp. $4.94, Unveils new FCPA allegations; Stock down nearly 4%
  • China chooses conservative new leaders (FT)
  • Eurozone falls back into recession (FT)
  • Moody’s to Assess U.K.’s Aaa Rating in 2013 Amid Slowing Economy (Bloomberg)
  • Another bailout is imminent: FHA Nears Need for Taxpayer Funds (WSJ)
  • Hamas chief vows to keep up "resistance" after Jaabari killed (Reuters)
  • Obama calls for rich to pay more, keep middle-class cuts (Reuters)
  • Obama Undecided on FBI's Petraeus Probe (WSJ)
  • Battle lines drawn over “growth revenue” in fiscal cliff talks (Reuters)
  • Rajoy’s Path to Bailout Clears as EU Endorses Austerity (Bloomberg)
  • Zhou Seen Leaving PBOC as China Picks New Economic Chiefs (Bloomberg)
  • Russia warns of tough response to U.S. human rights bill (Reuters)
  • Japan Opposition Leader Ups Pressure on Central Bank (WSJ)
  • Zhou Seen Leaving PBOC as China Picks New Economic Chiefs (Bloomberg)

House Republicans Find Corzine Guilty Of MF Global Collapse, Missing Funds; Democrats Refuse To Endorse Findings

It appears that these days not even the Corzining of client money can happen without it being split across furiously polarized party lines. As it turns out hours ago, the Committee on House Financial Services released an advance glimpse into a report to be released in its entirety tomorrow, which puts the blame for the collapse of not only MF Global, but also the disappearance of millions in client money, right where it belongs: the firm's then CEO Jon Corzine. Yet that Corzine corzined millions, leaving clients scrambling in bankruptcy court in an attempt to recover what should have been segregated money from the very beginning, and also just happened to blow up one of the 21 Fed-anointed Primary Dealers, is not surprising: this has been long known by everyone. Those who need a refresher are urged to recall the Honorable's testimony before the House... or maybe not: after all it is not as if Corzine himself could recall a whole lot. Where it gets interesting is that the former Democratic governor, and senator, not to mention primary bundler for president Obama, is, in the eyes of the members of the committee, innocent: All the democrats on the Investigations Subcommittee refused to sign off on the findings, meaning that to them, Corzine is completely innocent. That this is purely a political move is glaringly obvious. It is also abhorrent, because as long as political ideology gets in the way of pursuing and imposing justice, the Banana States of America will remain just that.

Frontrunning: November 14

  • Don't jump to conclusions over general, Pentagon chief says (Reuters)
  • Bad times for generals: Pentagon demotes 4-star General Ward (Reuters)
  • Investors Pay to Lend Germany Money (WSJ)
  • Noda will no longer be watching... watching: Japan PM honors pledge with December 16 vote date, to lose job (Reuters)
  • New China leadership takes shape (FT)
  • Hispanic Workers Lack Education as Numbers Grow in U.S. (Bloomberg)
  • Quest for EU single bank supervisor stumbles (FT)
  • Anti-austerity strikes sweep Europe (Reuters)
  • Amazon faces new obstacles in fight for holiday dollars (Reuters)
  • SEC Expands Knight Probe (WSJ)
  • Singapore’s Casinos Lose Luster as Gaming Revenue Decline (Bloomberg)
  • Amid Petraeus sex scandal, Air Force to release abuse report (Reuters)
  • Geithner’s Money Fund Overhaul Push Sparks New Opposition (Bloomberg)
GoldCore's picture

 

Silver remains the most under appreciated and under reported on asset in the world despite continuing positive fundamentals.

The Telegraph published an unusually bullish article on silver yesterday which suggests that silver might rise by over five times in the next few years. 

Emma Wall interviews fund manager Ian Williams who says that "silver is about to enter a sustained bull market that will take the price from the current level of $32 an ounce to $165 an ounce and we expect this price to be hit at the end of October 2015."

 

Guest Post: Real Danger Of “Obamacare”: Insurance Company Takeover Of Health Care

Now that The Show is over, we are left with the equivalent of a Sunday morning hangover following a binge of promises and lies. After the Supreme Court upheld the PPACA, a spate of mergers rippled through the managed health care realm, to ostensibly cope with smaller profit margins and  ‘compliance costs.’  But really, it’s because each firm wants to corner as much as possible of the market, in as many states as it can, to garner more premiums and control more disbursements and prices at the upcoming insurance ‘exchanges.’ Meanwhile the more hospitals are viewed as profit centers, the more their Chairmen will cut costs to maximize returns, and not care quality. They will seeks ways to sell underperforming assets, programs or services and reduce the number of nonessential employees, burdening those that remain. And if insurance companies can manage doctors directly, they can control not just costs, but treatment – our treatment. It’s not an imaginary government takeover anyone should fear; but a very real, here-and-now insurance company takeover, to which no one in Washington is paying attention.