Archive for June, 2009

The holes in Obama’s financial regulation plan

Tuesday, June 30th, 2009

Full story here. From Ralph Nader.

“It’s good that Barack Obama is an agile basketball player because on financial regulatory reform he’s having to straddle an ever-widening chasm between his words and his deeds.

Obama said: “Millions of Americans who have worked hard and behaved responsibility have seen their life dreams eroded by the irresponsibility of others and by the failure of their government to provide adequate oversight. Our entire economy has been undermined by that failure.”

“Over the past two decades, we have seen, time and again, cycles of precipitous booms and busts. In each case, millions of people have had their lives profoundly disrupted by developments in the financial system, most severely in our recent crisis.”

Strong words, even though he didn’t include “corporate crime, fraud and abuse” to replace the euphemism “irresponsibility.” One would think that his 88 page reform proposal to Congress would be up to his words. Instead he provides Washington aspirins for Wall Street brain cancer. (more…)

Debt deflation arrives

Tuesday, June 30th, 2009

Full story here. From Michael Hudson at CounterPunch.org.

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“Happy-face media reporting of economic news is providing the usual upbeat spin on Friday’s debt-deflation statistics. The Commerce Department’s National Income and Product Accounts (NIPA) for May show that U.S. “savings” are now absorbing 6.9 percent of income.

I put the word “savings” in quotation marks because this 6.9 per cent is not what most people think of as savings. It is not money in the bank to draw out in rainy-day emergencies like losing one’s job, as thousands are every day. The statistic means that 6.9 per cent of national income is being earmarked to pay down debt – the highest savings rate in 15 years, up from actually negative rates (living on borrowed credit) just a few years ago. The only way in which these savings are “money in the bank” is that they are being paid by consumers to their banks and credit card companies. (more…)

Ups and Downs of Money Supply Growth

Monday, June 29th, 2009

Full story here. From The Mogambo Guru at DailyReckoning.com.

“I usually have a get “prepared” to visit John Williams at his famous shadowstats.com site so that I am “feeling no pain,” and this time I was happy I was, as his headline was “Inflation, Money Supply, GDP, Unemployment and the Dollar – Alternate Data Series”.

As for inflation, his calculation of the Consumer Price Index “reflects the CPI as if it were calculated using the methodologies in place in 1980”, which I note is back when inflation was a measurement of the change in prices of things that you buy, and not, as it is now after the villainous Alan Greenspan and Michael Boskin came up with their ludicrous “hedonic” measurements of inflation with which to disguise it. (more…)

Fed as policeman for economy – a big mistake

Monday, June 29th, 2009

Full story here.

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“Economy in a shambles, Growth not in the equation, Fed stifles US Treasury, More powers for Fed not the answer, more ponzi schemes before the courts, real GDP shrinking this year, More power for failed regulators a serious suggestion
As you have already seen this is a worldwide depression and no one will escape. Europe’s economy is already in a shambles as is the US economy. Inflation will rage all over the world, because every nation has created massive amounts of money and credit as demanded by US and British elitists. They have all overmedicated the patient. As the Broadway hit play of many years ago told us, we are going to have to go through a “Period of Adjustment.” Some nations will get off easier than others. There will be no decoupling and many nations could have revolutions. (more…)

The coming economic apocalypse

Monday, June 29th, 2009

Full story here.

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“Astonishing to me is the fact that no one seems to understand the ultimate result of the current policies and practices of Washington D.C. and the Federal Reserve Bank, the Fed. I have studied our economic situation for about 3 hours per day for the last 8 months and conclude we are bankrupt. Think about the facts.

Certainly most of the automobile industry, the airlines, 37 out of 50 states, are bankrupt. The lending industry, Fannie Mae, Freddie Mac are bankrupt. Insurance giant AIG, bankrupt. The Pension Benefit Guarantee Corporation, or PBGC, the Federal Deposit Insurance Corporation, or FDIC, Social Security including Medicare and Medicaid are rapidly approaching insolvency. (more…)

Death by a thousand cuts

Friday, June 19th, 2009

Full story here from The Golden Jackass.

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“…China is directing their mountain of reserves away from acquired mining firms and toward managed hedge funds. This is a new direction for Beijing, clearly in response to the refusal by Rio Tinto to permit a $19 billion stake from the Chinese aluminum giant Chinalco. They were frustrated and angered by the other refusal with the failed Unocal dea in 2005. Clearly, whether stated openly or not, the Chinese are thwarted by USGovt and UKGovt hidden leaders from investing in strategic firms. From their point of view, tarnished by ill feelings, their money is good for credit supply but not good for commodity supply lines. So China will continue its pursuit of significant interests in commodity firms, both metals and energy related, and will amplify the pressures by taking scattered interests in hedge funds.” (more…)

G-2 is the wrong number

Thursday, June 18th, 2009

The fifth piece in a series by Henry CK Liu of asiatimes.com. Here are links to parts one, two, three and four. This is a cheap and fulfilling education in finance and geopolitics, take advantage of it.

“As former US National Security Advisor Zbigniew Brzezinski’s “Group of Two” (or G-2) concept of a US-China convergence in geopolitical interests is not yet official US policy, China is likely to merely keep monitoring signs of its evolution in US policymaking without direct formal official response, while exploiting the concept’s diplomatic possibilities for improving bilateral relations.

Although China desires well-deserved recognition of it as a world power by the sole remaining superpower, albeit one that is fading, a G-2 in the context of hawkish realpolitik generally associated with Brzezinski’s world view would go against China’s long-standing preference for multilateralism that would allow it to form bilateral partnerships and special relations around the globe and to participate as an independent power in regional organizations. (more…)

The mental nature of the credit crisis

Wednesday, June 17th, 2009

Article from Dailyreckoning.com.

“Yesterday, the Dow fell 187 points. Oil slipped to $70. The dollar rose to $1.37. And gold lost another $12 – to $928.

Asked about the rally on Wall Street, Barron’s latest Roundtable panel had various views about how far and how fast it would take us. But all were sure of one thing: the worst is over. We will not go below the lows set this past March. (more…)

High frequency trading roundtable

Wednesday, June 17th, 2009

Full post here from Joe Saluzzi at Themis Trading.

“I attended a roundtable discussion this morning titled “High Frequency Trading: The New World Order”. In case you are not familiar with the subject, high frequency trading is the hottest thing in the equity market right now. Over 60% of equity volume comes from the high frequency traders (HFT). Basically, HFT’s are computers that execute trades with extremely low latency. They live in a world of milliseconds. If your computer takes more than 50 milliseconds to execute, then you are a dinosaur in this business. The panel at this roundtable was comprised of 2 brokers that sponsor access to HFT’s, one exchange rep that courts the HFT’s and one option market representative. Here are my notes: (more…)

TARP is beyond Supreme Court’s authority

Wednesday, June 17th, 2009

I missed this one last week, my apologies. From Zero Hedge.

“SCOTUS blog reporting that according to a response filed by the Solicitor General Elena Kagan on behalf of the United States of America, no court, not even the Supreme Court, has an authority to rule on the applicability of the TARP funds, previously designated exclusively for financial company bail outs, for the Chrysler case.

The Obama Administration argued Monday that no court, including the Supreme Court, has the authority to hear a challenge by Indiana benefit plans to the role the U.S. Treasury played in the Chrysler rescue, including the use of “bailout” (TARP) funds. The Indiana debt holders, U.S. Solicitor General Elena Kagan wrote, simply have no right to raise that issue, thus putting it out of the reach of the courts.

Although arguing that the courts may not rule on the validity of Treasury’s decision to shore up a new Chrysler company with funds from the Troubled Assets Relief Program, the Solicitor General did argue that those funds may go to a troubled auto company, and not just to banks or other regular financial institutions.

Convenient – so if not the highest judicial institution in the US can decide on what the proper venue for TARP utilization is, does that mean that Geithner and Obama are now completely above the law in terms of how they burn taxpayer cash. Of course, the SCOTUS decision is a moot point – nobody dares to stand in front of the Obama juggernaut at this point. However, this chain of events will inevitably set off a precedent of unintended consequences for not just domestic, but also foreign lenders, when it comes to investing into any US companies, especially ones deemed to be added next on the Too Big To Fail bandwagon.

In this sense, the US will be forced to provide unlimited DIP funding as industry after industry discovers it is insolvent and the whole debate over whether the current economic crunch is liquidity driven, is concluded in favor of the rational minds, and lenders discover they have no recourse, not even with the Supreme Court Of The U.S.”

If you want to get into the merits of standing in this case, you can go here, there and everywhere. Personally, I find it a potential creepy precedent, like those wretched “signing statements”. Banana dictatorship alert! What’s worse is that it’s not even warm enough for decent bananas…