naked capitalism Mon 2009-11-30 13:46 EST
Daniel Gross points out that part of the reason that the American stock markets are going up even though unemployment is rising and the real economy suffering is because multinational corporations headquartered in the U.S. are experiencing strong sales abroad...
Guest Post; naked capitalism; reasons; rising; Soars; stock market; unemployment.
Thu 2009-11-19 19:43 EST
Dr. Willem Buiter of the London School of Economics, and advisor to the Bank of England, has written a somewhat astonishing broadsheet attacking of all things, gold. I have enjoyed his writing in the past. And although he does tend to cultivate and relish the aura of eccentric maverick, it is generally appealing, and his writing has been pertinent and reasoned, if unconventional. That is what makes this latest piece so unusual. It is a diatribe, more emotional than factual, with gaping holes in theoretical underpinnings and historical example.
Jesse's Café Américain; likely gold; mysteriously; remains; Willem Buiter Apparently.
naked capitalism Thu 2009-11-19 10:41 EST
It had generally been assumed that the AIG payouts of 100% on credit swaps (when the insurer was under water and bankrupt companies do not satisfy their obligations in full) was the result of some gap in oversight plus traders at AIG exercising discretion (they were unhappy about bonus rows and had reason to curry favor with dealers, who were potential employers). The article makes clear that AIG had been negotiating to settle on the swaps prior to getting aid from the government, and was seeking a 40% discount. The Fed might not have gotten that much of a discount, but there was clearly no need to pay out at par. This massive backdoor subsidy to the likes of Goldman, DeutscheBank was authorized by Geithner while he was at the New York Fed.
Thu 2009-11-19 10:09 EST
WaMu suffered through not one but two bank runs in its final months. The first run was many times larger than the run that felled California lender IndyMac in July 2008, though neither shareholders nor the public knew about it. WaMu survived that run, and the second run was tapering off when regulators moved in and shut the bank, citing the run as the reason. In addition, WaMu's top executives, led by CEO Alan Fishman, were trying to sell the bank after federal regulators imposed a deadline, only to discover that they were being undermined by those same regulators, executives say. The government's plan to seize the bank, if it became known beforehand, would cause potential buyers to immediately cool their heels, because buying after a government takeover would be a lot cheaper than even the desperate private purchase deal that Fishman was seeking.
downfall; Puget Sound Business Journal; Seattle; Washington Mutual.
Jesse's Café Américain Tue 2009-11-03 20:15 EST
The theory of a short squeeze in Eurodollars which we had first put forward last year "The Dollar Rally and Deflationary Imbalances in the US Dollar Holdings of Overseas Banks" seems to be confirmed by this paper from the NY Federal Reserve bank, and the latest figures on cross border currency transactions from the BIS...the latest data from BIS shows that the dollar rally tracked the acquisition of eurodollars with a significant correlation...But much of the European outrage, as least, was in feeling that they had been 'set up' by the very banks that had sold them the foully rated instruments in the first place. A classic face ripping, as they say at Wall and Broad. And this similar to the reason is why the Chinese government declared that its own institutions could walk away from derivatives arrangements that had been sold to them by the Wall Street wiseguys under false pretenses. US towns and states are not so fortunate it appears...The foreign banks have now unwound a significant amount of the dodgy US dollar financial assets that caused the short squeeze through their fraudulent valuations.
2008; Bull Markets; consequences; Dollar Rally; fraud; Jesse's Café Américain.
Jesse's Café Américain Tue 2009-11-03 20:12 EST
...The current state of economics is most remarkable for its arrogant complacency in the face of two failed bubbles, a near systemic failure, a pseudo-scientific perversion of mathematics exposed, and an incredible capacity for spin and self-delusion. The people wish to believe, and Wall Street and the government economists are all too willing to tell them whatever they wish to hear, for a variety of motives. And there is an army of salesmen and lobbyists and econo-whores touting this fraud around the clock...There are good reasons for this failure of American "monetary capitalism," and it has to do with an oversized financial sector and a surplus of white collar crime that both distort and drain the productive economy. The current approach is to pump money into a failed system without attempting to reform it, to fix its fundamental flaws, to make an honest accounting of the results. The result are serial bubbles and the foundation for long duration zombie economy with a grinding stagflation that may morph into a currency crisis and the fall and reissuance of the dollar, as we saw with the Russian rouble. It will stretch the political fabric of the US to the breaking point. This is how oligarchies and their empires fall.
banks failed; CIT; deck; gold shines; Jesse's Café Américain; packaged bankruptcies.
naked capitalism Tue 2009-10-27 11:49 EDT
Gretchen Morgenson: One surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn't proved its claim to a delinquent borrower's home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. Edward Harrison: I see this as a watershed case in jurisprudence surrounding mortgage-related bankruptcies and foreclosures. The reason this is huge is that it echoes the case in Kansas...what legal rights do lenders or their agents have in foreclosure in the new byzantine world of securitized mortgages. In the New York case the judge nixed the entire claim as the mortgagee could not prove it had legal claim to the mortgage note...PHH and MERS, the two lender agents in each cases, are not the actual owners of the mortgages. They are the agents of the mortgagees. This is why these cases have a lot to do with securitization.
court; foreclosure claims entirely; judge; naked capitalism; nixing lenders; Wow.
zero hedge Fri 2009-10-23 19:30 EDT
What a difference twenty years makes. The man whose actions basically lead to the eradication of the American middle class in its aspirational pursuit of buying massive SUVs, Prada bags, and 3rd investment properties, compliments of cheap credit, in order to appear ever so much like the upper class yet ultimately drowning itself in debt, Alan Greenspan, is probably the most critical reason why America's debt service will be nearly 90% of GDP within several decades. The adoption of his actions by the current deranged operator of the reserve currency printing press, is merely a continuation of a multiple decade long process of keeping inflation contained at the expense of devaluing the US currency, as the global liquidity pyramid recently hit one quadrillion, and continues to grow exponentially, yet...
Alan Greenspan; FDIC's Depleted Deposit Insurance Fund; funds; monetize; Stern Opponent; Zero Hedge.
naked capitalism Fri 2009-10-23 09:20 EDT
Paul Volcker wants to roll the clock back and restore Glass Steagall, the 1933 rule that separated commercial banking from investment banking, but Team Obama is politely ignoring him. Mervyn King, the Governor of the Bank of England, is giving a more strident version of the same message...I think Volcker is wrong, but not for reasons one might expect...The problem is that we have had a thirty year growth in securitization. A lot of activities that were once done strictly on bank balance sheets are merely originated by banks and are sold into capital markets...you could in theory go back to having much more on balance sheet intermediation (finance speak for ``dial the clock back 35 years and have banks keep pretty much all their loans''). Conceptually, that is a tidy solution, but it has a massive flaw: it would take a simply enormous amount of equity to provide enough equity to all those banks with their vastly bigger balance sheets. We're having enough trouble recapitalizing the banking system we have...I have yet to see anything even remotely approaching a realistic discussion of how to deal with too big too fail firms, and we have been at this for months. My knowledge of the industry is not fully current, but even so, the difficulties are far greater than I have seen acknowledged anywhere. That pretty much guarantees none of the proposals are serious, and nothing will be done on this front. That further implies the system will have to break down catastrophically before anything effective can be done. I really hope I am wrong on this one.
Glass Steagall; Mervyn King; naked capitalism; Paul Volcker; Real TBTF Problem.
zero hedge Wed 2009-10-14 12:12 EDT
...The big question mark at the end of August is when the U.S. International Reserve Position increased by almost 50%. The reason for this: a near quintupling of S.D.R. holdings on the U.S. balance sheet in the span of one week... By purchasing $40 billion in SDRs virtually overnight, what the Fed has done is to increase the value of the entire basket pro-rata, while in the process reducing the actual value of the dollar (which is a weighted constituent of the SDR basket). This was an operation to reduce the dollar's value: pure and simple. In many ways it explains why the DXY has continued its straight one way decline since the beginning of September, when many pundits assumed the market was finally going to tank on profit taking after Labor day. By performing this dollar adverse transaction, the Fed sent a loud and clear signal what the Fed was going to do going forward vis-a-vis the i) dollar and ii) its derivative, the stock market.
August; Folding; U.S. SDR Holdings Increase; weekly; Zero Hedge.
Blog entry Tue 2009-10-13 20:30 EDT
The renomination of Ben Bernanke as chairman of the Federal Reserve should not be rubber-stamped by the Senate until Bernanke and the Fed are more transparent and accountable to the public, says a growing coalition of activists roused by Reps. Alan Grayson and Ron Paul, who have asked the Senate to put a hold on Bernanke's nomination...all it takes is for one member of the Senate to object to moving Bernanke's nomination to the floor of the Senate. The tactic of placing a hold on a Senate nomination has been frequently used by Republicans against Obama administration appointees for for less consequential reasons than what is happening with trillions of taxpayer dollars in the name of staving off the next Great Depression. What's unclear is whether a member of Congress will be bold enough to stand up to Wall Street and to what William Greider calls "the temple."
Thu 2009-10-08 17:10 EDT
Can Iceland and Latvia pay the foreign debts run up by a fairly narrow layer of their population? The European Union and International Monetary Fund have told them to replace private debts with public obligations, and to pay by raising taxes, slashing public spending and obliging citizens to deplete their savings. Resentment is growing not only toward those who ran up these debts -- Iceland's bankrupt Kaupthing and Landsbanki with its Icesave accounts, and heavily debt-leveraged property owners and privatizers in the Baltics and Central Europe -- but also toward the neoliberal foreign advisors and creditors who pressured these governments to sell off the banks and public infrastructure to insiders. Support in Iceland for joining the EU has fallen to just over a third of the population, while Latvia's Harmony Center party, the first since independence to include a large segment of the Russian-speaking population, has gained a majority in Riga and is becoming the most popular national party. Popular protests in both countries have triggered rising political pressure to limit the debt burden to a reasonable ability to pay...
Jesse's Café Américain Sat 2009-09-19 16:53 EDT
We have been trying to calculate a new lower bound for the dollar decline from the charts. Reason tells us that at some point the dollar decline and economic imbalances may lead to a devaluation of the dollar.
Dollar devaluation; Dollar Long Term Chart; Jesse's Café Américain; Scenarios.
Bruce Krasting Sat 2009-09-12 12:10 EDT
The Social Security Trust Fund reported an August net deficit of $5.865 Billion. This is the largest monthly deficit in nineteen years...This deficit is now the seventh in the past twelve months. That pace has never been seen before...Social Security is the mother of all systemic risks. Even the debate on this topic brings risk. It will expose an additional $7 trillion unfunded liability. Another reason for holders of dollars to worry.
Minyanville Fri 2009-09-04 19:31 EDT
I'll be staying away from this market for now. However, beware that if hurricane season isn't disruptive and the winter is mild, we can probably expect a major decline in NG prices all along the curve early next year as inventory levels are near record highs and available storage is virtually tapped out. This could devastate the natural gas producer stocks...Many investors think that various natural gas plays in the master limited partnerships (MLP) field (pipelines, processors, etc.) are immune to fluctuations in the price of natural gas. In the short term, this may be true in many cases depending on the type of contracts. However, it's not true in the medium term. I'd be wary of this space at this time as any sort of alteration in pricing of contracts will almost certainly elicit cuts in distributions to shareholders. And since virtually all owners of these stocks buy them for the distributions, any cuts in distributions will likely devastate the share prices -- far beyond what would be theoretically warranted.
Jesse's Café Américain Fri 2009-09-04 19:00 EDT
1. Seasonality 2. Continuing Risks in the Financial System 3. Moral Hazard: Tipping Point In Confidence From Over a Decade of Monetary and Regulatory Policy Errors 4. Blowback from Banking Frauds on the Rest of World 5. A Failure in Political Leadership to Deliver Essential Reforms
