hooligan

The Fed and Fannie Mae: Throwing Money Down a Black Hole

please stop all this doomsaying. I hate the truth if it means that 15% of the economy has ripped off the 85% of us who have played by the rules. the implication is clear, the Fed is broken, the stimulus is broken and the banks lie (pun intended) right at the core of the problem. looks like we need fraudie and funny to take over fha and the entire federal reserving system if housing is so important to the economy. I dont think housing is that important. I think new mortgage banks are more important, wipe the slate clean and reset everyones mortgage clock with interest rates that are preset and fall as mortgage equity increases/LTV's decrease. Oh and no banks involved in the mortgage market, whatsoever, and no private valuers or private realtors either, since they were and are still part o the scam. switch to housing being adminstered owned or rented by a new state government/non political agency. screw banks, screw valuers, screw estate agents and screw congress!

Where's the Outrage at the Banks?

a palmer jr... banks are smarter than you because a) they are more leveraged with only 10% down on a leveraged balance sheet, compared to your balance sheet of a whopping 50% of equity on your mortgage. They pay the CD rate or Fed rate of 0.6% or 0.25% and lend to you at the mortgage rate of 5%. So did you get the math? The banks are smart, they have equity of 9-1 which they still leverage 3 times, the banks borrow at zero...you are dumb, because you have equity of 50% and pay 5%. Let's all ask ourselves exactly why anyone even needs a bank. Getting a few people together would bring borrowing rates down and interest rates up to around 3%. Why play the ponzi, shell game, corrupt poltician/regulator/ce... bank/investment bank (which is not really an investment bank cos we made them all banks, well except GS who we made the Feds bank)?

Where's the Outrage at the Banks?

so when is politics going to take a hand? when is the treasury and the fed going to serve the people and not merely facilitate the transfer of generational tax to bankers bonuses? lest we forget, the bankers themselves pay tax on their massive bonuses dont they? bankers are doing what the rules let them do, and if that means stupid tax payers elect stupid politicians with iqs in direct opposition to the bankers who snake oil them with a story of "too big to fail" and "you cant let the banking system collapse or the economy will collapse" then in the words of the prophet "you get the government you deserve". Ergo, the vast majority of people are better off being stupid and ripped off. Now that makes me angry, but that is the truth. We are gullible, powerless and born to be victims of smarter bankers. I think we should all go to hold hand sessions for rape victims to understand how we can move on with our lives.

Pension Apprehension

my apologies, please read 20 years in this sentence "pot can buy 200x5 = 10% of current salary per annum for 10 years"

Pension Apprehension

To me this article has all the hallmarks of manic depression. But then perhaps, that's where we are headed. Pensions represent an attainable outcome that continues to be thwarted by poor legislation. There is only a small amount of return required to deliver a pension pot that is sufficient to provide a comfortable retirement for all. Self funded also. It is grossly unfair ro charge consumers with the label of stupidity in allocating assets. To accuse consumers in this way reflects a callous assumption that consumers choose to lose money in the long term. This is patently false. What we are dealing with is the hiding place provided by "the long term" and a system that seeks to chip away at a sensible 3% real return with taxes, management fees, advisory fees and all the little costs hidden by the corruption we have seen in stock exchange charges, brokerage fees etc etc. I think it is offensive to posit that individuals do not deserve an economy that provides a 3% real return on a 5% savings rate. Think of this number. You cointribute the 40 year average savings rate of 5% of salary, to provide for 20 years of retirement. The numbers without any return or inflation adjustment, mean that an individual can save a pot of 200% of current salary. That pot can buy 200x5 = 10% of current salary per annum for 10 years. The economic system should be able to increase that number by 3% real, to quadruple that pot with investment returns (around that..rule of 72 says that 3% will compound todouble in 24 years, so poetic license here). This means that the pension will be 40% of salary. Starting salaries are small, but nonetheless, play with the savings rate, the investment return and then consider this. The system has delivered a massive fraud to all savers into 401k's and companies with defined benefit schemes equal to the shortfall in a "common sense" expectation of a reasonable pension with reasonable assumptions. The Fed has instituted a collosal political view by penalising those in age cohorts who have recently retired and who will retire in the next five years by adopting a zero interest rate policy. It is representing (without due democratic process) either by accident or design, a borrowing community of people who have demonstrated profligate behaviour and is punishing all those who have exhibited prudent behavior. The average consumer is not a masochist or stupid, the average consumer has been cheated and is being visited a collosal fraud by blinkered, ivory towered regulators and government officals.To

Colonial Bank Failure Highlights the Problem

Blog talk that gets painfully close to armed rebellion? hmmmm..well, hopefully it wont come to that, introducing a shoot on sight attitude is unlikely to be disciminatory or contained to just those bankers or government bankers or bank governmenters. Protecting your wealth with a gun is maybe more a propos. Though the Federal system would take a dim view of anyone who refuses to pay taxes, this is a quick way to stop the haemorrhaging of the cabal of Fed/Government/Banks. Given that we live in civilised society, this refusal to pay taxes should take the form of taxes to local communities first, then to states and only then to the Government. With a clear message to investors in Government debt that Federal tax is a privilege granted by communities and states and not a right of politicians to promise. So the end of the Government debt market and financing in its current form and the end of the Federal Reserve system of bank support also. More autonomy for local areas. Seems to me that Federalism is a luxury that will always be abused by those seated at the top table. We can then rebuild accountability at the regulator level, after all, aren't they liable for all bank losses from bad loans? What else are they there for? Local communities could be limited in size to say 10 million or thereabouts, much like the smaller European countries and then better laws that prevent recurrence of Iceland and Ireland excesses, since these are manifest and obvious.

Coming Soon: Banking Crisis of Historic Proportions

Money in the bank or not, good question. Cash (bank notes) to be a stroe of wealth. Cash is more secure than bank notes, but pictures of the wheelbarrows in Zimbabwe are a bit of a nightmare!. How to preserve value? Well make an assumption about the poltical will and ability to either punish wrongdoers or continue to make 95% of the economy poorer by subsidising the 5% who rip the 95% off. There is slack, but if you see another 3-5 years of 10-15% Government deficits without reform, then the 5% will I suspect have brought down the entire productive sector. I think the zombie banks in Japan have now infected the economy and created zombie corporations. Japan can't grow and leads our demographic. The knee jerk reaction would be to look for an escape route in another country. For me, the solution lies in the focus on subsituting assets for the cash I have, in assets that will replace cash outgoings later. I will be looking at using the share market as proxy for utility bills, food, water, personal security, holidays and healthcare. I am pretty sure my pension plan won't provide this bias, but if I can redeploy cash assets directly (small farm with secure water access, methane bio fuel, guns, time shares and a doctor who will work for produce) I will. The preservation of value can not be clearly identified with the "bastardisation" of the economy by macro policies that favour an elite. Have to look to things like this.

Coming Soon: Banking Crisis of Historic Proportions

From a trading perspective I can see that it is appropriate to get in ahead of a Government that is subsidising bad performance and punishing good performance. The failure of the democratic process to allow the will of the majority to hold sway over the vested interests who continue to "game" the system is disappointing to say the least. There is a "truth" that is avoided by all the intervention that the Fed, the politicians and the gamesters (who are transferring tax payers dollars directly to their own pockets) because it is either too easy to avoid the truth, or because they dont understand what the truth is. The truth is that if intervention created jobs and unemplyment we would have been doing it for decades. It doesn't work and never has. Intervention is a communist ideal. The subsidy of a favoured cabal that has not only transferred wealth from the economy to the cabal by charging exhorbitant fees and transaction costs, but can't even preserve the very wealth it transferred. The banking model has not failed, what has failed is the willingness to prosecute because of fear and lack of ability to see crime. Intervention by subidising bad banking practise and exploitation will lead to failure, as it always has and always will. Intervention to prosecute those who have profited from malpracise in the past and a culture of of fair play is the way forward. Anyone who thinks that win/lose for a zero sum game is the way forward does not believe in the evolution of our civilisation and democratic process. Win/win for an overall increase in economic rent is also the way forward.

Was the AIG Bailout a Goldman Bailout by Proxy?

so we know that GS got 100cents inthe dollar on its AIG exposure while everyone else got 13 cents. looks to me that GS had to bemade whole. Also..it seems to me that everyone thinks they would be better off without GS around. So let;s see if Goldmans extracts cash of $13bn i.r.o of the $52bn pay off..whilst everyone else gets 13c out of the other $39bn then GS has been paid 87c per dollar more than anyone else. This is fraud. Also..if 13 billion would break GS and presumably GS had other risks too, who else did they "game" with this size of exposure that we aren't hering about. Maybe GS had borrowed from the Government or the other legalised price rigger, the Fed, in transactions that a tax payer would never in a million years be allowed to do. Exactly why are certain people entitled to push around trillions while no-one else is, when they cannot demonstrate value creation..it is not value creation to transfer taxpayer money to a failed institution.

Jobless Recovery: Fasten Your Seatbelts

Thought provoking indeed. Here’s three of mine.
1. Interest rates 2. The current state of default/bankruptcy that exists for the US Government and 3. Waste
1. The level of interest rates.
Does the default rate only ever correlate to the interest rate, i.e. it is causal, and hence why monetarists believe that monetary policy works? And/or are different interest rates and the supply of money a condition based on the expected real economic growth rate and opportunity costs of holding money instead of investing it, for different qualities of borrower? If all that needed to be done to rescue the economy was to increase debt and reduce interest rates then the implied causal link is that the size of the economy and the levels of default/hardship faced by its citizens are solely determined by politicians and central banks. How absurd is it that central banks tour the country with the message that quantitative easing is being employed because without it, everyone would suffer?
2. The "right" level of output.
It can be argued that in the last twenty years we have seen two revolutions. One was the Telecom/Media/Technology of the internet bubble and the other the financial derivative bubble (to include swaps and securitizations). There are three measures of GDP output; Income, Expenditure and Production. These are presumably both negative for Income and Production and massively positive for Expenditure, if you include Govt/Fed/State deficit increases as part of expenditure. I agree that an economy that has emerged from a bubble has to return to the state that existed prior to the bubble, except for "normal" growth in unaffected areas. Since the economy did not contract following the bursting of the TMT/.com/Internet bubble, one could assume that the level of the economy operating between 1990 and 1998 is as good a proxy as any for the economic bottom. That leaves around a decade of growth based on the financial derivative bubble. The effect of leverage doesn't matter in this sense, since all we need to do is return to 1998 GDP dollars to find the base that represents the removal of the cancerous growth since then. So, does this mean that where economic growth of around 3% per annum for ten years (and growing) represents an output gap that must be filled? Does this mean that a central bank should provide triage to an economy to recover this output gap by printing money? Depends if you are a communist/socialist or a free marketer I think.
3. Sovereign Default, National Debt, Wasted money and On-going Waste.
The National Debt has a ceiling set by congress that bares little or no relation to the change in size of the debt. The political machinery approves the debt accumulation ex-post, in the full knowledge that ex-ante estimates are different and much larger. The US Government will be in full default on its obligations, not when determined by politicians or central banks, but when the interest repayments on this debt exceed possible taxes. Official debt is probably around $12 trillion plus net liabilities of Agencies (such as the Fed, Freddie and Fannie) of a further $10-12 trillion. Total $24 trillion. The Government takes around $1 trillion per annum in taxes, so a key assumption of a nominal 5% interest rate, for an economy returned to normal, points to current default AT THE CURRENT TIME. ($24trillion x 5% = $1.2 trillion per annum). Taxes can be raised of course, but we know that this can reduce the overall tax take in depressed times such as these. Note also that this reflects the fact that the Administration has a rapidly diminishing to zero discretion in taxes collected.
Given than half of all tax dollars goes on the Pentagon and that this is spent on "colonial activities" abroad, this expenditure is an immediate drain on the economy. So this Administration knows that it will take half of tax payers money and give it away to foreign economies or blow it up. This is waste and is simply not discussed anywhere. The size of the issue facing the derivatives sector is magnified by this waste.

GE Results Validate Theory: Severe Economic Contraction

Thought provoking indeed.
1. The level of interest rates.
Does the default rate only ever correlate to the interest rate, i.e. it is causal, hence why monetarists believe that monetary policy works? And/or are different interest rates and the supply of money a condition based on the expected real economic growth rate and opportunity costs of holding money instead of investing it, for different qualities of borrower? If all that needed to be done to rescue the economy was to increase debt and reduce interest rates then the implied causal link is that the size of the economy and the levels of default/hgardship faced by its citizens are solely determined by politicians and central banks. How absurd is it that central banks tour the country with the message that quantitative easing is being employed because without it, everyone would suffer?
2. The "right" level of output.
It can be argued that in the last twenty years we have seen two revolutions. One was the Telecom/Media/Technology of the internet bubble and the other the financial derivative bubble (to include swaps and securitizations). There are three measures of GDP output. Income, Expenditure and Production. These are presumably either negative for Income and Production and massively positive for Expenditure, if you include Govt/Fed/State deficit increases as part of expenditure. I agree that an economy that has emerged from a bubble has to return to the state that existed prior to the bubble, except for "normal" growth in unaffected areas. Since the economy did not contract following the bursting of the TMT/.com/Internet bubble, one could assume that the level of the economy operating between 1990 and 1998, is as good a proxy as any for the economic bottom. That leaves around a decade of growth based on the financial derivative bubble. The effect of leverage doesn't matter in this sense, since all we need to do is return to 1998 GDP dollars to find the base that represents the removal of the cancerous growth since then. So, does this mean that where economic growth of around 3% per annum for ten years (and growing) represents an output gap that must be filled? Does this mean that a central bank should provide triage to an economy to recover this output gap by printing money? Depends if you are a communist/socialist or a free marketer I think.
3. Sovereign Default, National Debt, Wasted money and On-going Waste.
The National Debt has a ceiling set by congress that bares little or no relation to the change in size of the debt. The political machinery approves the debt accumulation ex-post, inthe full knwoledge that ex-ante estimates are different and much larger. The US Government will be in full default on its obligations, not when determined by polticians or central banks, but when the interest repayments on this debt exceed possible taxes. Official debt is probably around $12 trillion plus net liabilities of Agencies (such as the Fed, Freddie and Fannie) of a further $10-12 trillion. Total $24 trillion. The Government takes around $1 trillion per annum in taxes, so a key assumption of a nominal 5% interest rate, for an economy returned to normal, points to current default AT THE CURRENT TIME. ($24trillion x 5% = $1.2 trillion per annum). Taxes can be raised of course, but we know that this can reduce the overall tax take in depressed times such as these. Note also that this reflects the fact that the Administration has a rapidly diminishing to zero discretion in taxes collected.
Wasted money and on-going waste. Given than half of all tax dollars goes on the Pentagon and that this is spent on "colonial activities" abroad, this expenditure is an immediate drain on the economy. So this Administration knows that it will take half of tax payers money and give it away to foreeign economies or blow it up. This is waste and is simply not discussed anywhere. The size of the issue facing the derivatives sector is magnified by this waste.

JP Morgan: High Frequency Trading a Form of Parasitic Market Making

sometimes one wonders whether our forefathers had the right of it in having single capacity trading. Brokers could only introduce deals to price makers (who had no other access to transactions). Here we have miniscule volumes affecting collosal market caps. The solution is either to revert back (with better technology) hence marginalising those who have no interest in the market other than to "bully it". Completely contra to efficient markets I know, but how about this as an alternative. Let the next price = the weighted average of previous market cap and deal cap, either when the bid is given or the offer is paid. At least use this as a price discovery principle. Might even work for TBS (toxic backed securities) too.

Farewell, TED Spread… See You Again, Soon?

Hah, a rising tide lifts all ships. The TED spread is lower because the Fed is now more risky than it has ever been, not because default risk has reduced amongst LIBOR type banks. It is entirely logical for the spread to contract when the Government finances all "junk" banks with Fed money. At the moment the credibility of the Fed is intact because the tax payer is not rioting from the crimes inflicted by the transfer of the taxpayers wealth direct to the banking system. Let's see what happens when unemployment hits 15% and 90% of americans living on less than $100,000 find themselves 10% worse off as a direct result of this wealth transfer in the next two years. New "clean" banks are needed, not this tainted corrupt rubbish bleeding the still profitable majority of the economy dry. The Fed can manipulate the short end, especially when the Government uses the "Paulson" approach of last October/November. In the end though, 50 unelected decision makers in a cartel of the Fed/Treasury will come a cropper. And not a moment too soon. The Fed is dead, and so are the banks on the ED side of the equation. A small margin between corpses does not change the fact they have expired.

Alternative Bailout Plan: Good and Bad Ideas

This is getting pretty tedious. A recovery in the stock market on news that politicians come up with a deal that targets no-one but the people who caused the mess in the first place. World leader (also politicians) screaming for american politicians to pass the bill, as if they have any business interfering in the sovereignty of another nation or have any idea what the bill is targeting. Make no mistake, a guarantee by the government or a mark to whatever I please accounting switch is tantamount to tax-payer lending money (via a deposit placed with a bank) and then saying "hey I guarantee that you will pay me back my own money" ..what a crock. Of course, politicians are way too smart to see through that one. That is what the markets are for. Markets kill off malpractise, systematic abuses and false prophets and create new ones that are better and fairer. Ignroing the market forces correctly stating vlaue is pure communism. Who on earth gave a bunch of soon to be has-been politicians the right to pledge tax-payers own money for what they have already earned?

Who Is For and Against the $700 Billion Bailout?

Here's a back to basics solution and ya boo sucks to anyone who believes that giving drugs to an addict for a year is a great idea!
1. Propping up a failed model is stupid, so start a new one. Take all banks assets onto the Government balance sheet, while a better model is constructed.
2. Make the production of all goods sold in the USA subject to the same workplace standard applied to US goods, with a Federal body (quarterly inspections by different staff members) obligatory.
Ok that fixes the drug and the drug dealer. Next comes rehab.
3. Make individual and company borrowing restrictions the same. There is no reason why a vehicle should have laxer standards than are applied to an indidividual.
4. Cut defence spending by 75%, particualrly on hardware that is of dubious use. So eliminate all spending that doesnt have a purpose. It may not have escaped everyones attention, but before we all forget, the pentagon spends as much as this bail out EVERY YEAR.
5. Set the maximum borrowing amount to the combination of three times income for any individual or company.
6. Stop ratign agencies being paid by the borrowers they rate and make the BIS or IMF insure against downgrades.
7. To fix the MBS problem, break up all the pools into individual mortgages and then re-bundle them.
8. Do no not offer any refinance to mortgage defaulters unless those NOT in default have the same terms applied to their mortgages OR other households are offered thechance to give their existing homes in exchange for the over specified and expensive homes (why should a defaulter have a better home than a non defaulter). This would migrate and give main street the chance for a property upgrade to clear modern houses and put defaulters in worse quality homes.
9. Re-start a mass immigration policy to target 3-5 million migrants entering the economy.
10. Spend 700 billion on broad economy employment programs in infrastructure to rival the standardsbeing put in place in China and Qatar right now.