Freddie Mac

How Socialism Destroyed Puerto Rico, And Why More Defaults Are Looming

With Puerto Rico missing a payment on a bond overnight "due to non-appropriation of funds" but denying that this constitutes anything close to a default, the territory may be about to retake the limelight as Greece is now "fixed." As Peter Schiff explains, this is far from over... As in Greece, the Puerto Rican economy has been destroyed by its participation in an unrealistic monetary system that it does not control and the failure of domestic politicians to confront their own insolvency. But the damage done to the Puerto Rican economy by the United States has been far more debilitating than whatever damage the European Union has inflicted on Greece. In fact, the lessons we should be learning in Puerto Rico, most notably how socialistic labor and tax policies can devastate an economy, should serve as a wake up call to those advocating prescribing the same for the mainland. 

Organized Plunder, a.k.a. The State

Businesses usually begin as productive enterprises. But almost all have zombie tendencies. Once they reach a certain size, they recognize that the best investment they can make is in politics. They hire lobbyists. They pay crony politicians. In return, government enacts rules and regulations to stifle competition. But as with so many of its activities, government succeeds when it fails. As a new industry arises, the money still flows from the cronies, while the feds get a piece of action from the new enterprises, too. And households? They grouse and groan. But the masses usually love government. They think business people are greedy SOBs. But they often hold the fellows who run the government racket in the same exalted category as saints, TV stars, and sports heroes. Don’t believe it?

Cronyism Pays: Eric Holder Triumphantly Returns To Law Firm That Lobbies For Banks

After failing to criminally prosecute any of the financial firms responsible for the market collapse in 2008, former Attorney General Eric Holder is returning to Covington & Burling, a corporate law firm known for serving Wall Street clients. The move completes one of the more troubling trips through the revolving door for a cabinet secretary. Holder worked at Covington from 2001 right up to being sworn in as attorney general in Feburary 2009. And Covington literally kept an office empty for him, awaiting his return. When the firm moved to a new building last year, it kept an 11th-story corner office reserved for Holder.

The Bush Family Goes "All In" For Number Three (With The Help Of Its Bankers)

It’s happening. As expected, dynastic politics is prevailing in campaign 2016. After a tease about as long as Hillary’s, Jeb Bush (aka Jeb!) officially announced his presidential bid last week. Ultimately, the two of them will fight it out for the White House, while the nation’s wealthiest influencers will back their ludicrously expensive gambit. And here’s a hint: don’t bet on Jeb not to make it through the Republican gauntlet of 12 candidates (so far). After all, the really big money’s behind him.

Credit Market Warning

There are large signs of stress now present in the credit markets. You might not know it from today's multi-generationally low interest rates, but other key measures such as liquidity and volatility are flashing worrying signs. While some may hope that rising yields are signaling a return to more rapid economic growth, or at least that the fear of outright deflation has lessened, the more likely explanation is that something is wrong and it’s about to get... wronger.

Geopolitics Will Trump Economics In Greece

Whatever the eventual financial costs to EU taxpayers of a Greek default, the political costs of a Greek exit are likely to be seen as unacceptable. Most likely the EU will allow a covert Greek default, disguised for the time being by extended repayment schedules, bogus refinancing formulae and possible delayed haircuts as bonds mature. They may insist that such moves are not a technical default. Despite that absurdity, our obedient press corps may even concur with such a characterization, and investors may be so thrilled that a relief rally occurs in stocks and bonds. Extend and pretend will once again be the only acceptable manner to confront our intractable problems.

Frontrunning: June 17

  • Greek central bank issues 'Grexit' warning if aid talks fail (Reuters)
  • Kerry says 'patience wearing thin' on Syria's Assad (Reuters)
  • Juncker accuses Athens of misleading Greek people (FT)
  • Al Qaeda kills two Saudis accused of spying for America (Reuters)
  • Hedge-Fund Bet Hits Pensions (WSJ)
  • ‘Flash Crash’ Trader Navinder Sarao Worked With Fund Network Now Under Investigation (WSJ)
  • 'Me? Rich?' U.S. presidential hopefuls play middle-class card (Reuters)
  • You’ve Been Warned: Central Bankers Turning Less Market-Friendly (BBG)

How Jamie Dimon Became A Billionaire

Two years ago, bank analyst Mike Mayo asked JPM chief Jamie Dimon a simple question: why should affluent customers not pick UBS over JPM due to a mismatch in capital ratios, to which Dimon's response was even simpler: "that's why I'm richer than you." To which we then added: "No logic, no rationale: all about the bottom line, which to Jamie at least is all that matters. The bottom line was indeed all, because as Bloomberg calculated overnight, over the past several years, Jamie Dimon quietly became not just "richer than you", but "much" richer: his net worth is now well over $1 billion!

Housing Recovery - Real Or Memorex

The rising risk to the housing recovery story lies in the Fed's ability to continue to keep interest rates suppressed. It is important to remember that individuals "buy payments" rather than houses. With each tick higher in mortgage rates so goes the monthly mortgage payment. With wages remaining suppressed, 1 out of 3 Americans no longer counted as part of the work force or drawing on a Federal subsidy, the pool of potential buyers remains tightly constrained. While there are many hopes pinned on the housing recovery as a "driver" of economic growth in 2015 and beyond - the lack of recovery in the home ownership data suggests otherwise.