The Wall Street Examiner Tue 2009-10-06 09:27 EDT

From Black Scholes to Black Holes (part 4- Finance)

...the problems associated with mortgage finance pale in comparison to those associated with derivatives. Warren Buffett famously called these securities financial weapons of mass destruction, but I think he understated the problem. These securities are far worse- a Ponzi scheme even Carlo wouldn't have dreamed of. We can choose to fire a WMD, but these securities have taken on a life of their own and they will, in my view, drag everything financially tied to them into oblivion- into a black hole...In the end the remaining banks will merge into one and money, instead of light, would never be able to escape as the fallacy of netting benefits- the assumption that they are all similarly valued- is exposed.

Black Holes; Black Scholes; finance; Part 4; Wall Street Examiner.

Tue 2009-09-29 11:33 EDT

How Bad Will It Get?

Mike Whitney, CounterPunch

In the two years since the crisis began, neither the Fed nor policymakers at the Treasury have taken steps to remove toxic assets from banks balance sheets. The main arteries for credit still remain clogged despite the fact that the Bernanke has added nearly $900 billion in excess reserves to the banking system. Consumers continue to reduce their borrowing despite historically low interest rates and the banks are still hoarding capital to pay off losses from non performing loans and bad assets. Changes in the Financial Accounting Standards Board (FASB) rules for mark-to-market accounting of assets have made it easier for underwater banks to hide their red ink, but, eventually, the losses have to be reported. The wave of banks failures is just now beginning to accelerate. It should persist into 2011. The system is gravely under-capitalized and at risk...The economy cannot recover without a strong consumer. But consumers and households have suffered massive losses and are deeply in debt. Credit lines have been reduced and, for many, the only source of revenue is the weekly paycheck...The current recession has exposed the fault-lines dividing the classes in the US. Neither party represents working people. Both the Democrats and the Republicans are supportive of "social engineering for the rich"; regressive taxation and economic policies which shift a greater portion of the wealth to the richest Americans. The question of inequality, which has grown to levels not seen since the Gilded Age, will dominate the national conversation as the recession deepens and more people slip from the ranks of the middle class...After Obama's stimulus runs out, consumer spending will again sputter and the economy will slide back into recession.

bad.

Tue 2009-09-29 11:14 EDT

Take This Monetary System, Please - Up and Down Wall Street Daily - Barrons.com

RANDALL W. FORSYTH

The current exchange-rate regime can't go on, but what's the alternative?...As long as China's currency remains joined at the hip to the dollar, the impact of the dollar's weakness ironically is felt more outside the U.S. than within its borders. And to keep that exchange rate stable requires China to continue to accumulate U.S. assets, notwithstanding that nation's vocal complaints about American deficits that it is compelled to fund. [reserve currency]

Barrons; com; monetary System; please; take; Wall Street Daily.

Jesse's Café Américain Sun 2009-09-20 11:07 EDT

Stock Market Rally: Shenanigans Abounding

Jesse

...The US markets in general have every mark of a maturing Ponzi scheme...Bonds, stocks, metals, sugar, cocoa, and oil are all moving higher, while the dollar sinks. Is the dollar funding a new carry trade?...We remain guardedly 'optimistic' on the markets for next year ONLY because of the Fed's and Treasury's willingness to continue to debase the dollar to cover the massive unrealized losses in the banks' portfolios, even as they return to manipulating markets in business as usual. Inflation is good for financial assets, and we think another bubble is in the cards, at least for now given Obama's unwillingness to reform, unless some exogenous event or actor intervenes...

Jesse's Café Américain; Shenanigans Abounding; stock market rally.

naked capitalism Sun 2009-09-20 09:48 EDT

Guest Post: ``Assessing the Recent Performance of the Fed''

Richard Alford, former economist at the New York Fed

...the current Fed: 1) actively promoted the asset bubbles which precipitated the most costly business downturn since the Great depression; 2) passively sat by ignoring its regulatory and supervisory responsibilities allowing the growth of imbalances that led to the worst business downturn since the Great depression...the economic and financial imbalances that built up between 2000 and 2007 will generate the opportunity costs in terms of lost output and idle and misallocated resources that will exceed the costs inherent in the economic and financial imbalances reflected in the most expensive anti-inflation fight ever fought by the Fed (1980-1983). The US financial system remains on life support. Furthermore, the Fed has played a part in allocating credit and in engineering redistributions of wealth on a scale that is likely to on the same scale as the redistribution of wealth from the household sector to government during the inflation ridden 1970s. The independence of the Fed has been compromised. Many in the Congress want to audit the Fed and limit its ability to make loans in future emergencies. The Fed is seen by many as an agency of the Treasury.

assessment; Fed; Guest Post; naked capitalism; recent perform.

zero hedge Thu 2009-09-17 09:42 EDT

Excess Liquidity Game Is Coming To An End

David Rosenberg notes M1, M2 and MZM have commenced contracting at an alarming rate: M1 fell 1.0% in the August 24th week and over the past four weeks is down at a 6.5% annual rate. M2 has contracted in each of the past four weeks too and over that time has slipped at a 12.2% annualized pace, which is a near-record decline. We see the same trend in the broad MZM money measure -- off at a 15.8% annual rate over the past month. Bank credit also remains in a fundamental downtrend -- contracting at an epic 9% annualized pace over the past four weeks. So for the first time in the post-WWII era, we have deflation in credit, wages and rents, and from our lens this is a toxic brew that in the end will ensure that the focus on capital preservation and income orientation will be the winning strategy over a strict reliance on capital appreciation.

comes; ending; Excess liquidity game; Zero Hedge.

naked capitalism Sun 2009-09-13 15:59 EDT

Another Lehman Mess: No One Can Run the Software

Lehman's global derivatives book included contracts with a notional face value of $39,000bn and deals with 8,000 different counterparties when it went bust. The derivatives business was actually split into multiple strands, backed up by between 20 and 30 different systems. Once it went bankrupt, the staff who supported these systems "evaporated"...The more time goes by, the less insight remains in terms of the people who staffed those systems...Many previously hidden costs of running a derivatives business, including technology support of multiple disjointed systems, can no longer be discounted.

Lehman Mess; naked capitalism; running; software.

Jesse's Café Américain Sun 2009-09-13 12:28 EDT

H&S Top and "Iron Cross" on Weekly Dollar Chart Targets 66

Jesse

The weekly chart on the US Dollar Index has rather awful technicals, as it has dropped to a recent low, and set the 'iron cross' in the moving averages that is generally the hallmark of a sustained decline...The ultimate objective of this formation remains 66. It is difficult to square this with a technical outlook that includes a major decline in the US equity indices, since the pairs have been running inversely, that is, dollar down, and stocks up.

H; Iron Cross; Jesse's Café Américain; s Top; Weekly Dollar Chart Targets 66.

Asia Times Online Sun 2009-09-13 10:25 EDT

THE BEAR'S LAIR : Possible October surprises

Martin Hutchinson

The inflation that might be expected in the United States from unprecedented expansionary monetary policies has failed to appear, while huge budget deficits have yet to produce higher interest rates. Far from being signs of a new economic paradigm, this merely means new bubbles are forming...Commodities and gold therefore are the destination of this year's hot money and are forming the new bubble...a fair-sized bubble has developed in the T-bond market...however...a modest resurgence in US inflation or difficulty in a long dated T-bond auction could cause confidence to flee the Treasury bond market and yields to leap uncontrollably upwards...the long-term costs of excessively cheap money are beginning to be seen in the US economy itself. By allowing money to remain so cheap for so long, and by running incessant payments deficits, the United States has surrendered the advantage of its superior long-established capital base, narrowing its capital cost advantage over emerging markets and exporting that capital to countries with less profligate approaches. Huge budget deficits, themselves worsening the trade deficit, merely export yet more US capital to the surplus nations. That makes it inevitable that the years ahead, in which the United States will no longer enjoy a capital advantage over its lower-wage competitors, will see highly unpleasant declines in US living standards.

Asia Times Online; BEAR'S LAIR; Possible October surprises.

ClubOrlov Wed 2009-08-26 15:25 EDT

Local food: success is 100% possible

kollapsnik

This is a guest post from Tim, a city planner from sunny Moncton, NB. Tim has spent some time looking into the viability of local, small scale agriculture, and has come up with some results that give us every reason to be optimistic regarding our ability to feed ourselves through our individual and neighborhood-scale efforts, even as the systems of large-scale, industrial agriculture and food delivery unravel due to a combination of high input costs, epic droughts brought on by accelerating climate change, and a shortage of credit caused by the financial collapse. The remaining challenge is start doing it quickly enough: this summer, that is. "Russian households (inclusive of both urban and rural) collectively grow 92% of country's potatoes on their garden-plots, the size of which is typically...

100; ClubOrlov; local food; possible; Success.

Fri 2009-01-16 00:00 EST

naked capitalism: Is Bush Tanking Stocks to Grab the Remaining $350 Billion TARP?

350; Bush Tanking Stocks; grabs; naked capitalism; remains; TARP.

Mon 2008-12-08 00:00 EST

Looming Inflation a Matter of Fact, or Faith? | The Wall Street Examiner

``I dont think its prudent to automatically assume that any of this will result in inflation at any time in the forseeable future. We remain in a deflationary debt collapse, and until I see evidence that this slide is beginning to reverse, I want no part of any major committment to an inflation trade''

fact; Faithful; Looming Inflation; matter; Wall Street Examiner.

Sun 2008-11-23 00:00 EST

Michael Hudson: Bankers Shake Down Congress and the G-20

(CounterPunch); ``all markets are planned, and have been ever since calendars were developed...Most market structures throughout history have been organized in a way that provides the vested interests with a free lunch. This remains the essence of post-feudal capitalism or as some have expressed it, corporativism.''

Bankers Shake; Congress; G-20; Michael Hudson.

Tue 2008-08-26 00:00 EDT

The End of the Beginning -- Developments in the Credit Crisis

The End of the Beginning - Developments in the Credit Crisis, by Satyajit Das (Prudent Bear); 2008-05-27; ``limited recognition of the massive de-leveraging of the global financial system that is under way.'' ``The banking systems ability to supply credit is significantly impaired and will remain so for the foreseeable future.'' ``Changes in financial markets will have a significant impact on many companies that now rely on financial engineering rather than real engineering'' Das proposes: ``holdings and values of risky assets held by banks and investment banks must be accurately determined...Risky assets must be valued on a hold-to-maturity basis...Mark-to-market accounting should be suspended...Capital levels should be set on a bank-by-bank basis by regulators...Capital requirements should be eased...government [should] guarantee of all major bank liabilities''

Begins; credit crisis; develop; ending.

Tue 2008-08-19 00:00 EDT

Minyanville -

NEWS & VIEWS-A Tale of Two Markets, Part 3, by Bennet Sedacca; "spreads in the credit markets are at historically wide levels and show no signs of tightening"; AIG "just one of scores of companies that cannot finance themselves"; "stocks remain...as over-valued as I have seen in many years"

Minyanville.

Mon 2008-03-31 00:00 EDT

BBC NEWS | Middle East | Iraqi cleric calls off militias

raqi Shia cleric Moqtada Sadr has ordered his fighters off the streets of Basra and other cities; Mehdi Army will remain intact

BBC News; Iraqi cleric calls; Middle East; militia.