Ben Bernanke

I continue to believe that the large difference between the valuation of WFC and C is actually about right and is a function of the high-risk business model at C.  Say what you want about the piles of cash, Dick Bove, C has a gross yield on lending assets that is more than 350bp above the industry average, a function of a subprime internal default target for the average customer.  This is a deliberate business model choice and one that, frankly, makes it hard for me to justify buying C. 

All you need to read.

Are the markets already front running a potential announcement of a third round of Quantitative Easing (QE 3)?   Maybe so.  We had expected QE3 at the end of last summer as the economy weakened substantially from the impact of the Japanese earthquake/debt ceiling debate/Eurozone crisis trifecta.  However, with political pressures running high due to the raging battle in Congress raising the debt ceiling there was little support from the public for further intervention.  Furthermore, with inflation, as measured by CPI, already outside of the Fed's comfort zone, the Fed opted to institute "Operation Twist" (O.T.) instead. With the Euro-Crisis on the broiler, another debt ceiling debate approaching, the U.S. economy struggling along as Europe slips into a recession and corporate earnings being revised down there are plenty of reasons for stocks to decline in price.  Yet, they have continued to inch up.  With short interest on stocks having plunged in recent weeks it certainly sounds like the markets are betting on something happening and soon.

I’ve received a number of emails regarding the fact that stocks continue to rally despite Europe being on the verge of Collapse. Once again, investors are forgetting that stocks are the most clueless asset class on the planet.

Indeed, here are three reasons why this latest stock market rally isn’t to be trusted.

We have now entered the fifth year of this Fourth Turning Crisis. George Washington and his troops were barely holding on at Valley Forge during the fifth year of the American Revolution Fourth Turning. By year five of the Civil War Fourth Turning 700,000 Americans were dead, the South left in ruins, a President assassinated and a military victory attained that felt like defeat. By the fifth year of the Great Depression/World War II Fourth Turning, FDR’s New Deal was in place and Adolf Hitler had been democratically elected and was formulating big plans for his Third Reich. The insight from prior Fourth Turnings that applies to 2012 is that things will not improve. They call it a Crisis because the risk of calamity is constant. There is zero percent chance that 2012 will result in a recovery and return to normalcy. Not one of the issues that caused our economic collapse has been solved. The “solutions” implemented since 2008 have exacerbated the problems of debt, civic decay and global disorder. The choices we make as a nation in 2012 will determine the future course of this Fourth Turning. If we fail in our duty, this Fourth Turning could go catastrophically wrong. I pray we choose wisely. Have a great 2012.

These are not mega trends, but they will prove to be important.

When it comes to corruption, cronyism and general muppetry in Washington D.C., the only real question is 'where does one start?' Yet one has to start somewhere to conclude with a list of the ten most corrupt and despicable marionettes in D.C. Which is precisely what JudicialWatch has done in its annual compilation of the "Top 10 Most Corrupt Politicians in Washington D.C." for 2011. And confirming what everyone knows, that both the left and right are merely irrelevant names for the same general social affliction, or should we call it by its true name - wealth pillage - the split is even between democrats and republicans. In no particular order, the winners of 2011 are...

The year is just a few hours old, we already have a stink.

Continuing our tradition of listing what according to Zero Hedge readers were the key news events of the year for the third year in a row (2009 and 2010 can be found here and here), we present, as is now customary, the most popular posts of the year as determined by the number of page views, or said otherwise - by the readers themselves. So without further ado, here are this year's top 20.

Dr. Ben Bernanke went to school and never left. He is an academic who has never worked in the private sector yet controls the fate of trillions of Dollars, Euros, Yens and Pounds. Today he is smiling. Dr. Marc Faber also went to school, but he didn’t stick around. He has worked exclusively in the private sector and today is considered one of the most prescient investors on the planet. Today he is also smiling. To better appreciate all the smiling, one must understand exactly what happened or better still, what didn’t happen in Brussels last week. In the eyes of Dr. Bernanke and Dr. Faber, the historic 17th emergency summit meeting by the Europeans to solve their money problems went off without a hitch. Not only did the Euro-Elite fail to resolve their debt crisis, they failed miserably at even coming close to recognizing the problem. It’s this distinct lack of recognition that is turning frowns into smiles. Dr. Bernanke is smiling of course because he is a money printer. The continuing inability of the Euro-Elite to solve their problems virtually guarantees a 2012 recession in the Old World. In return, this will also create a recession in the US which will provide plenty of excuses for Mr. Bernanke to once again print money under the guise of QE3. Dr. Faber’s uncanny ability to understand the big picture and foresee the response from financial markets allowed him to predict the 1987 crash, the 2008-09 crash, and the resulting 2009 stock market rally. Dr. Faber is smiling today not because he agrees with Dr. Bernanke’s fondness for money printing, but rather because the global financial system is developing exactly as he has envisioned. This vision of course is a money maker for both him and his clients.

Just in case the general population was getting accustomed to the image of a demonic creature from the depths of hell every time the name "Chairsatan" was invoked in impolite conversation, here comes Jon Hilsenrath via the WSJ's blog, to attempt to humanize the man who together with 9 other academics who have no real world experience, runs the world out of a private (and locked) conference room in the Marriner Eccles building. So lest someone expect pentagrams to accompany today's FOMC statement, coupled with Bernanke breathing fire and smelling of sulfur at the next Fed conference, here is WSJ's Jon to put a humanly halo around the printer operator himself...

Ready to be disappointed by the Chairman announcing a whole lot of nothing, but doing it in a very Greenspanesque manner? Here it is: the live webcast from the Bernanke press conference which is about to begin.

Bernanke will testify before the Joint Economic Committee today to offer his outlook on the state of the economy, governmental financial policy, and federal spending priorities. Last time he testified on the Hill, the Fed Chairman said the U.S. economy was showing signs of a "self-sustaining recovery" but cautioned that another four to five years may pass before unemployment levels fall to historic norms.  Presenting the semi-annual Monetary Policy Report provides an opportunity for the Fed to update its view on the economic outlook directly to Congress. Watch out for any notable keywords such as "QE3-XXX", "Keynesian Paradise", "Turboprint", "Hyperinflation" and last but not least "Gold is money."

Note to the future participants of Bretton Woods III – fiat currencies can only be floated with extremely tight and transparent banking laws, nothing like what we have today and this includes central banks. And if you decide to go down the gold standard path, same thing applies, transparency and low leverage are keys to long-term stability. Banks should operate like utilities with tremendous amounts of transparency, low levels of leverage and huge limitations on market size; read: granularity. How we are stumbling around today with the same banks that almost crashed in 2008 with even greater market shares and low-visibility accounting is beyond my understanding. Read the quote above to understand why the status quo is so eager to defeat anything that would reign in these black holes. It was as true then as it is today.

Texas Governor Rick Perry suggested in Iowa today that should Bernanke "print more money" before the election that it would be treason. Treason is a capital offense.

Speaking just now in Iowa, Perry said, “If this guy prints more money between now and the election, I dunno what y’all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in history is almost treasonous in my opinion.” Treason is a capital offense.