LBX's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/280409/comments http://seekingalpha.com/article/155156-monetizing-the-debt-my-response-to-zero-hedge?source=feed#comment-624195 624195 There is a bit of incongruity to this line of argument that there is "no collusion" between 17 primary brokers and the Federal Reserve.

By American jurisprudence's standard of legal proof, conspiracies are extremely difficult to prove and rarely done so in a court of law in America.

Cases of price fixing are, for the same reason, difficult to prove because it is virtually impossible to prove that a specific meeting occurred with the intent and the act of agreement to set prices.

However, in the real world, outside of legal standards of proof beyond a reasonable doubt, it is widely known that price fixing, collusion, and conspiracies happen regularly.

In fact, it is impossible to be in a senior position of ANY industry or trade group without knowing about the tacit agreements and "codes of conduct" that are, for all practical purposes, collusive behavior.

Look at the cases which are public:

It is standard operating procedures that financial institutions who purchase securities from each other have "repurchase" agreements that are triggered if the securities did not perform to expectation. These agreements are both formal, as well as informal and is standard with virtually any dealer on Wall Street.

Such agreements do not have to be "public" - especially if a party is so big and powerful that the other party cannot be without their business. The very threat of a cut off of future business is sufficient to enforce a "repurchase" when things go sour regardless of whether a formal agreement or conspiracy exist.

While it is a huge leap to go from this to suggest that the Federal Reserve have a "repurchase" agreement with 17 primary dealers --- which Zero Hedge may have claimed, it is not beyond reason or common sense to see that the feds and the 17 primary dealers are mutually dependent on each other --- and on the Treasury. There is every incentive and logic to have these parties "scratch each others' backs".

In fact, given the tightness of linkages between the Feds, Treasury, and the Dealers --- a time honored relationship between the sovereign and its financiers that predate the founding of the United States ---- it would be fantastic to suggest that such closely knit, mutual aid understandings do not exist.

I would go so far as to say that it is the exception, rather than the norm, for a relatively responsible large sovereign to not have such a close and mutually beneficial relationship.

Sure, relations can sour between an irresponsible regime (e.g. Zimbabwe) and its bankers, but between a major OECD nation and its banker? Or between the United States and its bankers? Not likely.

IIf the presumption is that such a close, mutually beneficial and dependent relationship exist, then it is not a far stretch to see the Federal reserve coming in to backstop their primary dealers ---- regardless of whether a formal agreement, a priori, exist.

Indeed, a series of precedents where the Feds have come in and backstopped the primary dealers would have created such an expectation, without the primary dealers and the Feds or Treasury every meeting and discussing such a thing either formally or informally.

The question still becomes: did this occur? And if it did, what was the reasons it did?

That is a question for economic historians, perhaps 50 years in the future when the issues are sufficient remote and the participants willing to break their silence.

Unless a "Mark Feld", or deep throat were to emerge.


]]> Mon, 10 Aug 2009 20:53:37 -0400 There is a bit of incongruity to this line of argument that there is "no collusion" between 17 primary brokers and the Federal Reserve.

By American jurisprudence's standard of legal proof, conspiracies are extremely difficult to prove and rarely done so in a court of law in America.

Cases of price fixing are, for the same reason, difficult to prove because it is virtually impossible to prove that a specific meeting occurred with the intent and the act of agreement to set prices.

However, in the real world, outside of legal standards of proof beyond a reasonable doubt, it is widely known that price fixing, collusion, and conspiracies happen regularly.

In fact, it is impossible to be in a senior position of ANY industry or trade group without knowing about the tacit agreements and "codes of conduct" that are, for all practical purposes, collusive behavior.

Look at the cases which are public:

It is standard operating procedures that financial institutions who purchase securities from each other have "repurchase" agreements that are triggered if the securities did not perform to expectation. These agreements are both formal, as well as informal and is standard with virtually any dealer on Wall Street.

Such agreements do not have to be "public" - especially if a party is so big and powerful that the other party cannot be without their business. The very threat of a cut off of future business is sufficient to enforce a "repurchase" when things go sour regardless of whether a formal agreement or conspiracy exist.

While it is a huge leap to go from this to suggest that the Federal Reserve have a "repurchase" agreement with 17 primary dealers --- which Zero Hedge may have claimed, it is not beyond reason or common sense to see that the feds and the 17 primary dealers are mutually dependent on each other --- and on the Treasury. There is every incentive and logic to have these parties "scratch each others' backs".

In fact, given the tightness of linkages between the Feds, Treasury, and the Dealers --- a time honored relationship between the sovereign and its financiers that predate the founding of the United States ---- it would be fantastic to suggest that such closely knit, mutual aid understandings do not exist.

I would go so far as to say that it is the exception, rather than the norm, for a relatively responsible large sovereign to not have such a close and mutually beneficial relationship.

Sure, relations can sour between an irresponsible regime (e.g. Zimbabwe) and its bankers, but between a major OECD nation and its banker? Or between the United States and its bankers? Not likely.

IIf the presumption is that such a close, mutually beneficial and dependent relationship exist, then it is not a far stretch to see the Federal reserve coming in to backstop their primary dealers ---- regardless of whether a formal agreement, a priori, exist.

Indeed, a series of precedents where the Feds have come in and backstopped the primary dealers would have created such an expectation, without the primary dealers and the Feds or Treasury every meeting and discussing such a thing either formally or informally.

The question still becomes: did this occur? And if it did, what was the reasons it did?

That is a question for economic historians, perhaps 50 years in the future when the issues are sufficient remote and the participants willing to break their silence.

Unless a "Mark Feld", or deep throat were to emerge.


]]> http://seekingalpha.com/news/market_currents/post/19998?source=feed#comment-429237 429237 How is it going to help when GM have a negative net worth?]]> Tue, 17 Mar 2009 11:32:14 -0400 How is it going to help when GM have a negative net worth?]]> http://seekingalpha.com/article/125835-alarm-bells-at-ibm?source=feed#comment-427295 427295 The problem is cash flow drying up...]]> Mon, 16 Mar 2009 07:57:11 -0400 The problem is cash flow drying up...]]> http://seekingalpha.com/article/126087-aig-suddenly-takes-the-full-disclosure-route?source=feed#comment-427281 427281 Uncle Ben and Uncle Tim, I am a poor poverty stricken speculator who owes more than 50% more on the 3 houses I bought on no money down loans.

I also owe $$$ on my credit cards, have an upside down car loan/

Beside that, I have a student loan for a PhD degree from MIT in economics with no hope of getting a job in this climate.

My counterparties include the US Government, Freddie Mae and Fannie Mae, Bank of America and Citibank, among others.

You can't allow me to go under!

It would cause the counterparties to be insolvent, and also have the spectacle of a newly minted PhD in economics from MIT to be visibly out of a job and unemployed.

Bail me out, now. Or else.]]> Mon, 16 Mar 2009 07:32:17 -0400 Uncle Ben and Uncle Tim, I am a poor poverty stricken speculator who owes more than 50% more on the 3 houses I bought on no money down loans.

I also owe $$$ on my credit cards, have an upside down car loan/

Beside that, I have a student loan for a PhD degree from MIT in economics with no hope of getting a job in this climate.

My counterparties include the US Government, Freddie Mae and Fannie Mae, Bank of America and Citibank, among others.

You can't allow me to go under!

It would cause the counterparties to be insolvent, and also have the spectacle of a newly minted PhD in economics from MIT to be visibly out of a job and unemployed.

Bail me out, now. Or else.]]> http://seekingalpha.com/article/126087-aig-suddenly-takes-the-full-disclosure-route?source=feed#comment-427280 427280 Uncle Ben and Uncle Tim, I am a poor poverty stricken speculator who owes more than 50% more on the 3 houses I bought on no money down loans.

I also owe $$$ on my credit cards, have an upside down car loan/

Beside that, I have a student loan for a PhD degree from MIT in economics with no hope of getting a job in this climate.

My counterparties include the US Government, Freddie Mae and Fannie Mae, Bank of America and Citibank, among others.

You can't allow me to go under!

It would cause the counterparties to be insolvent, and also have the spectacle of a newly minted PhD in economics from MIT to be visibly out of a job and unemployed.

Bail me out, now. Or else.]]> Mon, 16 Mar 2009 07:31:51 -0400 Uncle Ben and Uncle Tim, I am a poor poverty stricken speculator who owes more than 50% more on the 3 houses I bought on no money down loans.

I also owe $$$ on my credit cards, have an upside down car loan/

Beside that, I have a student loan for a PhD degree from MIT in economics with no hope of getting a job in this climate.

My counterparties include the US Government, Freddie Mae and Fannie Mae, Bank of America and Citibank, among others.

You can't allow me to go under!

It would cause the counterparties to be insolvent, and also have the spectacle of a newly minted PhD in economics from MIT to be visibly out of a job and unemployed.

Bail me out, now. Or else.]]> http://seekingalpha.com/news/market_currents/post/19831?source=feed#comment-427061 427061 As unemployment pick up, will Avon be the target of EEOC action aimed at getting men hired in proportion to the population?

Avon Man calling!]]> Sun, 15 Mar 2009 22:09:23 -0400 As unemployment pick up, will Avon be the target of EEOC action aimed at getting men hired in proportion to the population?

Avon Man calling!]]> http://seekingalpha.com/news/market_currents/post/19832?source=feed#comment-427049 427049 A long way from the bottom.

The unwinding of the bubble is still taking its time, with many corporations holding onto people when they should be terminating them to match costs with demand.

The second shockwave, in the form of a return to higher commodity prices, is just beginning.

Perhaps in another 3 years, there will be a bottom that is conclusively established.

]]> Sun, 15 Mar 2009 21:51:49 -0400 A long way from the bottom.

The unwinding of the bubble is still taking its time, with many corporations holding onto people when they should be terminating them to match costs with demand.

The second shockwave, in the form of a return to higher commodity prices, is just beginning.

Perhaps in another 3 years, there will be a bottom that is conclusively established.

]]> http://seekingalpha.com/article/125956-treasury-still-going-nowhere?source=feed#comment-426605 426605
This headline is misleading.

The treasury is being emptied pretty good by the Administration.

As fast as the US can borrow, and as fast as the money can be ladled out to the bailout recipients.

Why is there not a ban on lobbying of the US Government by bailout recipients, or for that matter, candidates?

]]> Sun, 15 Mar 2009 13:09:19 -0400
This headline is misleading.

The treasury is being emptied pretty good by the Administration.

As fast as the US can borrow, and as fast as the money can be ladled out to the bailout recipients.

Why is there not a ban on lobbying of the US Government by bailout recipients, or for that matter, candidates?

]]> http://seekingalpha.com/article/125956-treasury-still-going-nowhere?source=feed#comment-426604 426604
This headline is misleading.

The treasury is being emptied pretty good by the Administration.

As fast as the US can borrow, and as fast as the money can be ladled out to the bailout recipients.

Why is there not a ban on lobbying of the US Government by bailout recipients, or for that matter, candidates?

]]> Sun, 15 Mar 2009 13:09:06 -0400
This headline is misleading.

The treasury is being emptied pretty good by the Administration.

As fast as the US can borrow, and as fast as the money can be ladled out to the bailout recipients.

Why is there not a ban on lobbying of the US Government by bailout recipients, or for that matter, candidates?

]]> http://seekingalpha.com/article/125945-why-economists-have-downgraded-obama-to-bush-plus?source=feed#comment-426596 426596 This Administration is on track for the fastest plunge from close to 70% approval to single digits.

]]> Sun, 15 Mar 2009 13:05:50 -0400 This Administration is on track for the fastest plunge from close to 70% approval to single digits.

]]> http://seekingalpha.com/article/110512-madoff-scandal-where-was-the-sec?source=feed#comment-328384 328384 The current SEC Chairman cannot be solely to blame for a scam that occurred over decades.

American's entire financial structure and institutions, including the regulatory agencies, are clearly not up to the job of limiting the risk and fallout from systemic failures.

]]> Sat, 13 Dec 2008 14:34:54 -0500 The current SEC Chairman cannot be solely to blame for a scam that occurred over decades.

American's entire financial structure and institutions, including the regulatory agencies, are clearly not up to the job of limiting the risk and fallout from systemic failures.

]]> http://seekingalpha.com/article/108836-nortel-hangs-for-sale-sign-on-calgary-campus?source=feed#comment-319296 319296 Um.... you mean "for rent"?

Who is going to buy that place in this market?

Or... should we say, it is already pretty rent when Nortel was in it?

]]> Tue, 02 Dec 2008 18:59:41 -0500 Um.... you mean "for rent"?

Who is going to buy that place in this market?

Or... should we say, it is already pretty rent when Nortel was in it?

]]> http://seekingalpha.com/news/market_currents/post/12256?source=feed#comment-316781 316781
Like the teams that went to Mumbai.

All they have to do is to take KPMG's senior partners hostage, and then promise to make them into solvent unless they found the deal solvent.]]> Fri, 28 Nov 2008 12:20:21 -0500
Like the teams that went to Mumbai.

All they have to do is to take KPMG's senior partners hostage, and then promise to make them into solvent unless they found the deal solvent.]]> http://seekingalpha.com/article/107263-six-myths-about-the-big-three?source=feed#comment-311518 311518 No doubt these 3 CEOs shouldn't fly on a scheduled airline flight - after all - by the time you add the expense of body guards, the 20 assistants that they bring along, the extra seats on the left and right for their brief case (can't expect them to work with one seat), and so on, they might as well have flown on their own jet.

Can you imagine what Northwest Airlines would have charged for in flight service of congac, caviar, and wine? Just the checked baggage surcharge would wipe out any cost savings.

Perhaps the final lesson that Detroit CEOs need to take from their Japanese counterparts is how to handle a similar crisis at a Japanese company.

Seppuku in front of Congress.]]> Fri, 21 Nov 2008 08:00:12 -0500 No doubt these 3 CEOs shouldn't fly on a scheduled airline flight - after all - by the time you add the expense of body guards, the 20 assistants that they bring along, the extra seats on the left and right for their brief case (can't expect them to work with one seat), and so on, they might as well have flown on their own jet.

Can you imagine what Northwest Airlines would have charged for in flight service of congac, caviar, and wine? Just the checked baggage surcharge would wipe out any cost savings.

Perhaps the final lesson that Detroit CEOs need to take from their Japanese counterparts is how to handle a similar crisis at a Japanese company.

Seppuku in front of Congress.]]> http://seekingalpha.com/news/market_currents/post/11523?source=feed#comment-308277 308277
Watch what happens to the default rates when unemployment hits 10+%.

Whats more, most credit card companies failed to price in the consequences of default rates being triggered on many / or all of a holder's accounts simultaneously, at which point, what was a manageable problem (e.g. 15-19% interest) becomes an unmanageable one at 30+% interest.

If the cards are close to the limit, the credit line is quickly exhausted, and the whole thing blows up, leading to predictable outcomes of default.

From a systems perspective, once these issues arise on a significant number of cards, the default rate can spike very quickly.]]> Mon, 17 Nov 2008 16:59:14 -0500
Watch what happens to the default rates when unemployment hits 10+%.

Whats more, most credit card companies failed to price in the consequences of default rates being triggered on many / or all of a holder's accounts simultaneously, at which point, what was a manageable problem (e.g. 15-19% interest) becomes an unmanageable one at 30+% interest.

If the cards are close to the limit, the credit line is quickly exhausted, and the whole thing blows up, leading to predictable outcomes of default.

From a systems perspective, once these issues arise on a significant number of cards, the default rate can spike very quickly.]]> http://seekingalpha.com/article/100100-baltic-dry-shipping-index-if-it-really-is-a-proxy-for-the-economy-we-re-in-trouble?source=feed#comment-283460 283460 The real trouble is in China.

That is what Baltic Dry is really telling us.

Chinese demand is imploding.]]> Thu, 16 Oct 2008 02:03:54 -0400 The real trouble is in China.

That is what Baltic Dry is really telling us.

Chinese demand is imploding.]]> http://seekingalpha.com/article/60593-baltic-dry-freight-index-indicates-impending-recession?source=feed#comment-283455 283455 I don't think people get it.

The crash is caused by a massive decline in Chinese domestic AND international demand for manufactures.

Chinese power generation (read coal) is up a miserly 3% in Sept. YOY. That is blamed on Olympics, etc. but it is far too big a drop to be just blamed on that --- Chinese businesses and consumers are cutting back consumption of electricity big time. It was growing at 11-15% a year since 2002.

There is a huge glut of real estate (residential, commercial, industrial) in China that is causing construction to grind to a halt (unless it is reconstruction in Szechuan). The core issue for residential is that most of the apartments in big cities are way beyond the local populations income to own, so they were bought as speculative investments who have now disappeared with prices imploding. Industrial real estate --- tons of empty factories as the export business caves.

This means lots less need for iron ore (rebar, structural steel, etc.), copper, aluminum, (wiring), cement (clinker), etc. Prices of steel on the Chinese market is caving, as is the price of copper, etc.

China is not going to stop importing iron ore, but they sure can halt demand growth for a while.

The bottom line is that shipping rates will fall through the floor now that capacity has overwhelmed demand (which caved).



]]> Thu, 16 Oct 2008 01:34:29 -0400 I don't think people get it.

The crash is caused by a massive decline in Chinese domestic AND international demand for manufactures.

Chinese power generation (read coal) is up a miserly 3% in Sept. YOY. That is blamed on Olympics, etc. but it is far too big a drop to be just blamed on that --- Chinese businesses and consumers are cutting back consumption of electricity big time. It was growing at 11-15% a year since 2002.

There is a huge glut of real estate (residential, commercial, industrial) in China that is causing construction to grind to a halt (unless it is reconstruction in Szechuan). The core issue for residential is that most of the apartments in big cities are way beyond the local populations income to own, so they were bought as speculative investments who have now disappeared with prices imploding. Industrial real estate --- tons of empty factories as the export business caves.

This means lots less need for iron ore (rebar, structural steel, etc.), copper, aluminum, (wiring), cement (clinker), etc. Prices of steel on the Chinese market is caving, as is the price of copper, etc.

China is not going to stop importing iron ore, but they sure can halt demand growth for a while.

The bottom line is that shipping rates will fall through the floor now that capacity has overwhelmed demand (which caved).



]]>