This post was published at World Alternative Media
This post was published at World Alternative Media
December 16, 2017 is the tenth anniversary of the modern Tea Party. That fact will surprise many laypersons who uncritically accept the mainstream narrative that the Tea Party began on February 19, 2009 when Rick Santelli, live on CNBC from the Chicago Mercantile Exchange (CME), declared a rebellion against “socialism” one month into the Obama administration.
But wait a minute: Rick Santelli on establishment NBC lighting the spark of an anti-establishment rebellion? An uprising over mere proposed Obama bailouts of mortgage holders coming four months after silence over (if not a defense of) George W. Bush’s $700 billion TARP bailout of Wall Street?
If the mainstream narrative seems fishy, that is because it is. What really happened ten years ago and how was the Tea Party transformed from a libertarian grass-roots movement to today’s controlled (and just-about dead) establishment version? What are some of the lessons that can be learned?
This post was published at Ludwig von Mises Institute on 12/18/2017.
Some of the same warning signs that emerged before the 1929 to 1933 market crash, the tech mania crash of 2000, and the epic Wall Street meltdown of 2008 are flashing red.
If you have significant amounts of your 401(k) invested in equity mutual funds (that is, those invested in stocks), it’s time to take an objective appraisal of today’s market versus historic benchmarks.
This is also a good time to remember that markets have lost as much as 50 percent of their value from peak to trough in the last 20 years. If that’s more pain than you’re prepared to suffer, it may be time to trim back your exposure.
We’ll get to the specifics on today’s market shortly, but first some necessary background.
In the market crash of 1929 to 1933, the stock market lost 90 percent of its value. It did not return to the level of 1929 until 1954 – a quarter of a century later.
There is some basis to speculate that the bear market of October 2007 to March 2009, which included the epic Wall Street crash of 2008, would have produced far more serious pain than the 50 percent retracement in the S&P 500 that did occur – perhaps pain on the level of 1929 to 1933 – had it not been for the secret $16 trillion in almost zero-interest loans that the Federal Reserve Bank of New York sluiced into the major brokerage firms on Wall Street – which was on top of the hundreds of billions of dollars in bailout funds that were authorized by Congress.
This post was published at Wall Street On Parade By Pam Martens and Russ Marte.
Has the light come on yet?
Why do you think the US Congress passed the Sexual Assault Taxpayer Bailout Act by unanimous vote in 1995 — and Bill Clinton signed it? Why has it not been repealed — and in fact, even today there is no bill on the floor of either House or Senate to repeal it, nor has Trump called for it to be repealed and stated he will refuse to sign any other bill (which is within his power) until it is?
The Hollyweird cabal’s escapades are not just limited to harassment. We all know about the Michael Jackson allegations. Then there’s Epstein — and his connections to both the entertainment and political “industries.” Epstein, I remind you, was convicted and yet of all the people who I’ve ever read about being convicted of that sort of offense he’s the only one who was basically given a slap on the wrist instead of decades in prison.
Worse, all of the others connected to him were not pursued. At all. Herr Clinton was of course one of those persons but hardly the only one. Number of prosecutions of those others? Zero.
So let’s ask the inconvenient question: Is all of this in the political and media sphere nothing more or less than a monstrous blackmail scheme and that is why it never came out until it suddenly was forced into the public eye by some damning revelations that could not be silenced once they got circulating on Social Media?
This post was published at Market-Ticker on 2017-12-07.
The term ‘Greenspan Put’ was coined after the stock market crash of 1987 and the subsequent bailout of Long Term Capital Management in 1998. The Fed under Chairman Alan Greenspan lowered interest rates following the fabled event of default and life continued.
The idea of the Greenspan Put was that lower interest rates would cure the market’s woes. Unfortunately, the FOMC has since fallen into a pattern whereby longer periods of low or even zero interest rates are used to address yesterday’s errors, but this action also leads us into tomorrow’s financial excess. As one observer on Twitter noted in an exchange with Minneapolis Fed President Neel Kashkari:
‘Central Bankers are much like the US Forest Service of old. Always trying to manage ‘nature’ and put out the little brush fires of the capitalist system, while they seem incapable of recognizing they are the root cause of major conflagrations as a result.’
When the Federal Open Market Committee briefly allowed interest rates to rise above 6% in 2000, the US financial system nearly seized up. Long-time readers of The Institutional Risk Analyst recall that Citigroup (C) reported an anomalous spike in loan defaults that sent regulators scrambling for cover. The FOMC dropped interest rates at the start of 2001 – nine months before the 911 terrorist attacks – and kept the proverbial pedal to the metal until June of 2004.
This post was published at Zero Hedge on Nov 27, 2017.
Since its financial meltdown in 2008 and unprecedented bailout by the U. S. taxpayer, Citigroup (parent of Citibank) has been repeatedly charged by its Federal regulators with odious crimes against its pooled mortgage investors, credit card and banking customers, student loan borrowers, and for its foreclosure frauds. It has paid billions of dollars in fines for its past misdeeds while new charges pile up. In 2015, it became an admitted felon for participating in rigging foreign exchange markets. In short, Citigroup is a lawbreaking recidivist. If it were a mere human, it would be serving a long prison term. Instead, its fines for charges of egregious acts are getting smaller, not larger.
Last Tuesday, the Consumer Financial Protection Bureau (CFPB), which typically has a good track record of holding the big Wall Street banks accountable for their misdeeds, imposed an unusually feeble fine against Citibank for a litany of abuses against student loan borrowers. The CFPB ordered Citi to pay $3.75 million in restitution and to pay a $2.75 million fine. When combined with the fact that the CFPB did not make Citibank admit to the charges, this amounts to a slap on the wrist to a serial lawbreaker. (See Citigroup/Citibank’s history of misconduct below.)
Adding further insult to the American public, the Board of Directors of Citigroup has kept the same CEO in place for more than five years as these serial abuses of the public trust piled up. Michael Corbat has been CEO of Citigroup since October 2012.
This post was published at Wall Street On Parade on November 27, 2017.
This is a syndicated repost courtesy of Credit Bubble Bulletin . To view original, click here. Reposted with permission.
November 15 – Bloomberg (Nishant Kumar and Suzy Waite): ‘Hedge-fund manager David Einhorn said the problems that caused the global financial crisis a decade ago still haven’t been resolved. ‘Have we learned our lesson? It depends what the lesson was…’ Einhorn said he identified several issues at the time of the crisis, including the fact that institutions that could have gone under were deemed too big to fail. The scarcity of major credit-rating agencies was and remains a factor, Einhorn said, while problems in the derivatives market ‘could have been dealt with differently.’ And in the ‘so-called structured-credit market, risk was transferred, but not really being transferred, and not properly valued.’ ‘If you took all of the obvious problems from the financial crisis, we kind of solved none of them,’ Einhorn said… Instead, the world ‘went the bailout route.’ ‘We sweep as much under the rug as we can and move on as quickly as we can,’ he said.’
October 12 – ANSA: ‘European Central Bank President Mario Draghi defended quantitative easing at a conference with former Fed chief Ben Bernanke, saying the policy had helped create seven million jobs in four years. Bernanke chided the idea that QE distorted the markets, saying ‘It’s not clear what that means’.’
Once you provide a benefit it’s just very difficult to take it way. This sure seems to have become a bigger and more complex issue than it had been in the past. Taking away benefits is certainly front and center in contentious Washington with tax and healthcare reform. It is fundamental to the dilemma confronting central bankers these days.
This post was published at Wall Street Examiner on November 18, 2017.
Henkel Garcia U, Andres Bello Catholic University (UCAB)
Venezuela, the South American country convulsed by economic and humanitarian catastrophe, has defaulted on some of its debt after missing an interest payment due in October.
Even as investors meet in Caracas to discuss restructuring US$60 billion in foreign debt, the country is in urgent need of international financial assistance.
Yet few nations are rushing in to offer financial assistance to the ailing country. Under the authoritarian regime of Nicols Maduro, Venezuela is isolated in Latin America, and the United States, Canada, and the European Union have all imposed sanctions against Venezuelan officials. Maduro has at times suggested he would not even accept humanitarian aid.
Still, no indebted nation is totally alone in this world. As a financial analyst, I know there are always international players who see opportunity in the problems of others. And for Venezuela, my home country, all hope of a bailout rests with China, Russia, and the International Monetary Fund.
Will they do anything to help?
This post was published at FinancialSense on THE CONVERSATION /1/15/2017.
One of the most popular JPMorgan analysts, traders and commentators, Jan Loeys, head of global asset strategy and author of the weekly “The JPMorgan View” piece is moving on (to a different, non-client facing part of the company), and is using his last weekly address to JPM clients to recap the main lessons he has learned over his 30 year career.
For those carbon-based traders who still trade on the basis of fundamental analysis, inductive reasoning, and discounting, and forecasting the future – instead of merely relying on the fastest laser-based algos to react to the news or hoping for central bank bailouts – we have excerpted the entire piece, and are excited to note that while Loeys may be leaving, he will be replaced by two of our favorite JPM analysts and commentators, Nikos Panigirtzoglou and Marko Kolanovic, who under John Normand will take over as JPM’s new Cross-Asset Strategy team.
So, without further ado, here is the latest, and last, from JPM’s Jan Loeys, explaining “What have I learned?” after 30 years of doing this…
What have I learned?
How to forecast markets?
The theory and empirical literature of Finance are the best starting point as they deal directly with asset prices. Next are macro economics and statistics. Markets are not Math or Engineering, but a forever learning and adapting system with all of us observing and participating from the inside. Quantitative techniques are indispensable, though, to deal with the complexity of financial instruments and the overload of information we face. Empirical evidence counts for more than theory, but you need theory to constrain empirical searchers and avoid spurious correlations.
This post was published at Zero Hedge on Nov 12, 2017.
‘We had a banking crisis, a fiscal crisis and we spent lot of the tax-payers’ money – in the wrong way, in my opinion – to save the banks’ outgoing Eurogroup head Jeroen Dijsselbloem said adding ‘so that the people criticizing us and saying that everything was being done for the benefit of the banks were to some extent right.’
As KeepTalkingGreece.com reports, Dijsselbloem was responding to a question posed by leftist MEP Nikos Chountis during a session at the European Parliament’s Employment and Social Affairs Committee on Thursday.
‘This is valid for the banks of all our countries. Everywhere in Europe banks were saved at taxpayers’ cost,’ he underlined. ‘This was the reason for banking union and the introduction of higher standards, better supervision and a reform and rescue framework when banks have losses,’ he said stressing ‘precisely so that we don’t find ourselves in that situation again.’
This post was published at Zero Hedge on Nov 10, 2017.
Over the past year we have provided extensive coverage of what will likely be the biggest, most politically charged, and most significant financial crisis facing the aging U. S. population: a multi-trillion pension storm, which was recently dubbed “one of the most heated battles of a lifetime” by John Mauldin. The reason, in a nutshell, why the US public pension problem has stumped so many professionals is simple: for lack of a better word, it is an unsustainable Ponzi scheme, in which satisfying accrued pension and retirement obligations requires not only a constant inflow of new money, but also fixed income returns, typically in the 6%+ range, which are virtually unfeasible in a world where global debt/GDP is in the 300%+ range. Which is why we, and many others, have long speculated that it is only a matter of time before the matter receives political attention, and ultimately, a taxpayer bailout.
That moment may be imminent. According to Pensions and Investments magazine, Democratic Senator Sherrod Brown from Ohio plans to introduce legislation that would allow struggling multiemployer pension funds to borrow from the U. S. Treasury to remain solvent.
The bill, which is co-sponsored by another Democrat, Rep. Tim Ryan, also of Ohio, could be introduced as soon as this week or shortly after. It would create a new office within the Treasury Department called the Pension Rehabilitation Administration. The funds would come from the sale of Treasury-issued bonds to financial institutions. The pension funds could borrow for 30 years at low interest rates. The one, and painfully amusing, restriction for borrowers is “they could not make risky investments”, which of course will be promptly circumvented in hopes of generating outsized returns and repaying the Treasury’s “bailout” loan, ultimately leading to massive losses on what is effectively a taxpayer-funded pension bailout.
This post was published at Zero Hedge on Nov 9, 2017.
According to the now publicly available transcript of the testimony that former U. S. Treasury Secretary Robert Rubin gave before the Financial Crisis Inquiry Commission (FCIC) on March 11, 2010, he was not put under oath, despite the fact that the bank at which he had served as Chairman of its Executive Committee for a decade, Citigroup, stood at the center of the financial crisis and received the largest taxpayer bailout in U. S. history.
The fact that Rubin was not put under oath might have had something to do with the fact that he showed up with a team of six lawyers from two of the most powerful corporate law firms in America: Paul, Weiss, Rifkind, Wharton & Garrison and Williams & Connolly. One of Rubin’s lawyers from Paul, Weiss was Brad Karp, the lawyer who has gotten Citigroup out of serial fraud charges in the past.
As one reads the transcript, it becomes alarmingly apparent that a man making $15 million a year at Citigroup for almost a decade has not involved himself in very many intricate details of how the firm is being run or has a very selective memory. (Rubin gave up his $14 million annual bonus when the bank was blowing up during the financial crisis but kept his $1 million salary. According to widely circulated estimates, Rubin’s total compensation for his decade at Citigroup was over $120 million, for a job which he concedes included no operational role and with just two secretaries reporting to him.)
To many of the questions posed by Tom Greene, Executive Director of the FCIC, Rubin responded ‘I don’t remember.’ Rubin used that phrase 41 times during the interview.
At one point, Rubin’s own lawyer, Brad Karp, appears to nudge Rubin on his failing memory. Greene asks Rubin if he attended a tutorial for the Board of Directors on September 17, 2007 on the risk environment. Rubin answers as follows: ‘It is interesting. I don’t remember either going or not going.’ Karp then says to Rubin: ‘Bob, they have the minutes of this meeting.’
This post was published at Wall Street On Parade on November 8, 2017.
Wishful thinking may not be enough.
The financial markets have been exceedingly calm in Italy of late. At the end of October the government was able to sell 2.5 billion of 10-year debt at auction at a yield of 1.86%, the lowest since last December – an incredible feat for a country that four months ago witnessed a major bank bailout and two bank resolutions, and that has so much public debt that it spends 70 billion a year to service it, the world’s third-highest.
And there’s the ECB’s recent decision to slash its bond buying from roughly 60 billion a month to 30 billion as of Jan 1, 2018. Then there’s the over 432 billion of Target 2 debt the government owes the ECB, the growing likelihood of political instability as elections approach in 2018, the recent referendums for greater fiscal and political autonomy in Lombardy and Veneto and serious unresolved issues in the banking sector.
Monte dei Paschi di Siena may still be alive as a bank, but it’s not out of the woods. Last week its stock resumed trading after ten months of being suspended from Italy’s benchmark index, the FTSE MBE. Shares opened on Wednesday at 4.10, then rose 28% to 5.26. But it didn’t stick. On Friday, shares closed at 4.58.
It’s a far cry from the 6.49 a share the Italian government paid in August when it injected 3.85 billion into the bank to keep it alive. It spent another 1.5 billion shielding some of the bank’s junior bondholders, whose debt was converted into equity. As part of the rescue, the Tuscan bank was forced to present a plan to cut 5,500 jobs and close 600 branches until 2021, in addition to transferring 28,600 million euros in unproductive loans and divesting non-strategic assets. Investors clearly have their doubts.
This post was published at Wolf Street on Nov 5, 2017.
Matthew Garrahan dropped a bigger bombshell in the Financial Times yesterday than even he realizes. Garrahan named the law firm that had crafted a gag order in 1998 to silence two women from ever speaking about their encounters with Harvey Weinstein. One woman, Zelda Perkins, was an assistant to Weinstein in London and charged him with egregious sexual harassment. The other unnamed female colleague charged Weinstein with sexual assault. The two were paid $125,000 each and given an iron-clad gag order. The terms of the gag order were so confidential that the women were not even allowed to have a full copy of what they had agreed to, just a summary of some of its terms.
The law firm representing Weinstein with the settlements and gag orders (officially called non-disclosure agreements) was Allen & Overy – the London derivatives powerhouse that also signed off on the Structured Investment Vehicles (SIVs) that played a significant role in helping to blow up Citigroup in 2008, resulting in the largest taxpayer bailout of a bank in financial history.
In 2007, according to Standard & Poor’s Structured Finance research reports, Citigroup was managing the following Structured Investment Vehicles that were incorporated in the Cayman Islands and not consolidated on Citigroup’s balance sheet: Centauri Corp., Beta Finance Corp., Sedna Finance Corp., Five Finance Corp., and Dorada Corp. In addition, according to press reports, Citigroup had created two more SIVs in 2006: Zela Finance Corp. and Vetra Finance Corp. The SIVs contained approximately $80 billion of mostly toxic debt, much of which ended up back on Citigroup’s balance sheet. Allen & Overy was the London counsel to Citigroup on these SIVs.
You don’t have to take our word for this. One of Allen & Overy’s own lawyers actually bragged on the law firm’s website about the key role it played in the ‘fascinating time’ of the financial crisis – the most devastating economic collapse since the Great Depression that left millions of Americans out of work and foreclosure notices on their front door.
This post was published at Wall Street On Parade on October 24, 2017.
Over the past month, with little media attention, both Citigroup and Merrill Lynch have received fines from regulatory bodies for failure to properly report their trading in derivatives – an opaque trading arena that played a significant role in bringing down both firms during the financial crisis. As reported by the Government Accountability Office (GAO) in 2011, Citigroup received $2.5 trillion in cumulative, secret low cost loans from the Federal Reserve during the 2007-2010 financial crisis while Merrill received $1.9 trillion. These loans, many at almost zero interest rates, were made without the authorization or awareness of Congress. (See GAO chart below.) The loans to the two firms were on top of the publicly disclosed and Congress-approved TARP bailout funds.
Significant portions of the money loaned to Citigroup and Merrill Lynch were authorized by the Federal Reserve to be funneled to the broker-dealer subsidiaries of the firms in London – where it found its way into pursuits that remain undisclosed to this day. The GAO noted in its report:
‘…without more complete documentation, how assistance to these broker-dealer subsidiaries satisfied the statutory requirements for using this authority remains unclear. Moreover, without more complete public disclosure of the basis for these actions, these decisions may not be subject to an appropriate level of transparency and accountability.’
This post was published at Wall Street On Parade By Pam Martens and Russ Marte.
With the world’s focus falling on Beijing this week, where president Xi Jinping give a glowing account of China’s future during the 19th Party Congress, boasting that ‘the banner of scientific socialism with Chinese characteristics is now flying high and proud for all to see,” not all are impressed by China’s vision of the world in which China sees itself as increasingly taking over from the US as the world’s superpower. And it’s not just stories about China’s neverending behind the scenes bailouts of anything that may telegraph a hard landing for the economy (as decribed in “China’s Government Is Expected To Buy 24% Of All Residential Real Estate For Sale In 2017“); it’s the country’s entire financial system, which Kyle Bass has been shorting for nearly two years now but which he has failed to recognize now holds the entire world hostage: if it goes, so does the global financial system, unleashing a worldwide depression the likes of which have not been seen.
Here is Eric Peters, CIO of One River Asset Mgmt, explaining why everyone is wrong about the $35 trillion Chinese financial system, and yet how Beijing has figured out a way to become a parasite on the global financial system, resulting in an outcome in which “we’re willing participants in our own demise.”
Excerpted from One River’s latest Weekend Notes:
This post was published at Zero Hedge on Oct 22, 2017.
Back in March, we explained why the “fate of the world economy is in the hands of China’s housing bubble.” The answer was simple: for the Chinese population, and growing middle class, to keep spending vibrant and borrowing elevated, it had to feel comfortable and confident that its wealth will keep rising. However, unlike the US where the stock market is the ultimate barometer of the confidence boosting “wealth effect”, in China it has always been about housing: three quarters of Chinese household assets are parked in real estate, compared to only 28% in the US with the remainder invested financial assets.
This post was published at Zero Hedge on Oct 21, 2017.
Apparently Treasury Secretary, ex-Goldman Sachs banker Steven Mnuchin, has threatened Congress with stock crash if Congress didn’t pass a tax reform Bill. His reason is that the stock market surge since the election was based on the hopes of a big tax cut. This reminded me of 2008, when then-Treasury Secretary, former Goldman Sachs CEO, Henry Paulson, and Fed Chairman, Ben Bernanke, paraded in front of Congress and threatened a complete systemic collapse if Congress didn’t authorize an $800 billion bailout of the biggest banks.
The U. S. financial system is experiencing an asset ‘bubble’ that is unprecedented in history. This is a bubble that has been fueled by an unprecedented amount of Central Bank money printing and credit creation. As you are well aware, the Fed printed more than $4 trillion dollars of currency that was used to buy Treasury bonds and mortgage securities. But it has also enabled an unprecedented amount of credit creation. This credit availability has further fueled the rampant inflation in asset prices – specifically stocks, bonds and housing, the price of which now exceeds the levels seen in 2008 right before the great financial crisis.
However, you might not be aware that western Central Banks outside of the U. S. continue printing money that is being used to buy stocks and risky bonds. The Bank of Japan now owns more than 75% of that nation’s stock ETFs. The Swiss National Bank holds over $80 billion worth of U. S. stocks, $17 billion of which were purchased in 2017. The European Central Bank, in addition to buying member country sovereign-issued debt is now buying corporate bonds, some of which are non-investment grade.
This post was published at Investment Research Dynamics on October 19, 2017.