LILA RAJIVA: The Mind-Body Politic
Individuals Not Ideologies
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Archive for October, 2009
The Easter Bunny On the DTCC
From Bob O’Brien’s “Sanity Check,” a succinct account of why the “fail to deliver” problem is a big and serious one:
• The DTCC, via Cede & Co., is the registered owner of all shares held in “Street Name,” which are all shares in margin accounts.
• Margin accounts represent the bulk of independent investor account types.
• Registered owners are free to use their “property” as collateral for loans or debt.
• It is unknown what, if any, loans or debts are collateralized by the stock “owned” by the DTCC.
• The DTCC’s “Stock Borrow Program” lends shares to be delivered to buyers, if sellers fail to deliver.
• The Stock Borrow Program is operated on the honor system, and is anonymous.
• It allows one genuine share to be lent multiple times, leaving a string of markers/IOUs in the share’s wake.
• This creates a systemic risk for the stock market, as more markers are in investor accounts, falsely represented as shares, than shares actually authorized by the companies.
• These markers are freely traded and treated by the system as real, resulting in a large secondary market of counterfeit shares – resulting in depressed stock prices.
• With paper certificates being eliminated – by the DTCC – there is no way to confirm that a share is genuine, versus a bogus marker.
• There is nothing to stop your broker from taking your money, and merely representing to you that you bought shares, without ever actually buying them. You have no way of knowing the difference, barring demanding paper certificates for your property.
• Only a handful of people on the planet understand all this.
• In the end, it is simple – Wall Street is printing shares electronically, investors are paying real money for those bogus shares, and the whole thing is predicated on the idea that few will ever understand what is being done, or bother to check.
• This represents a hidden tax on investors and the economy.
• It is, for the most part, illegal.
• It is being kept secret by the DTCC and the SEC, who are terrified of systemic collapse, and a complete loss of investor confidence, should all the facts become known.
• All the facts are becoming known.Does this sound complicated? It’s not.
Anecdote: a few years ago, in my neighborhood, a retired lady of some means was going around badgering strangers and friends for loans. She was reputed to own a few homes, so many people obliged. Then it turned out that the titles of the houses had been promised out several times over. Which meant that the lenders hadn’t received the collateral they thought they had when they gave her their money. Which meant that if she didn’t pay, they would have nothing to go after in court. Which is precisely what happened.
That, crudely, is what naked short-selling - and indeed. the whole derivative scam - amounts to. It multiplies claims on value, thereby bleeding value from those who legitimately hold it, because they paid money for it, to others who didn’t pay anything real, but traded one “counterfeit” claim for another.
And of course, on a larger scale, that’s what the paper money regime is too. It’s a multiplication of claims on a fixed store of value, which has the effect of diluting and eventually erasing that value.
We’ve been hit by a triple quadruple whammy of essentially the same type of fraud: fractional banking, excessive creation of money, abusive derivatives, and naked short-selling.
SEC Chief Khuzami On Muckety
Former federal prosecutor and Deutsche Bank general counsel Robert Khuzami was appointed chief of the SEC on March 30, 2009. Here’s his bio.
Traveling, Taibbi, and Tares Amid the Wheat (Update)
Update 2 (October 25): Links have been added and some comments on them in the main blog post, in addition to the earlier update with Olagues’ comment.
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By the way, I notice Matt Taibbi’s new True Slant post, as well as his earlier Rolling Stone piece, get around to Pete Peterson’s influence….
Hmmm.. Didn’t we tell everyone to take a look at Peterson and Blackstone and Black Rock..when was it..way back in April this year?
http://mindbodypolitic.com/2009/04/28/pete-petersons-not-so-clean-crusade-against-entitlements/
Not bad for an obscure blog, whose tips just happen to show up months before they’re broken by gonzo journalists…..
Other complaints about Taibbi’s loose sourcing:
*An anonymous poster points out how much of Taibbi’s work is simply lifted without full credit from Deep Capture’s research (Judd Bagley and Mark Mitchell are the two researchers there).
*Robert Wenzel has pointed out his own extended piece, “Does Goldman Rule the World?” written in 2007.
*An options blog points out that Taibbi has lifted his material from there, as well (link below).
*Other Goldman Sachs blogs make the same claim and New York Magazine asks if Taibbi just summarized about 100 years of Goldman conspiracy theory and added some crude language…
Note: this itself is misleading.
There are no “hundred years of Goldman conspiracy” - the first criticism of Goldman on trader boards that I saw was around 2003 fall, 2004 and I believe they may have been links taken from this site, Catbird Seat, although I am not entirely sure.
The links suggested extensive fraud and manipulation. I think I was the first person to put that into an extended piece in 2006. (I’ve already posted on how Taibbi “bubble” thesis looks like a cropped version of the argument from my 2006 pieces, “Why It’s Time to Sell Goldman” and from my 2008 pieces, “Paulson Putsch” and “Three-Card Capitalists.”
Far from being a brilliant or original investigator, Taibbi is a colorful and sometimes misleading retailer of other people’s leads and ideas who adds the footnotes and the “I was there” element that investigative journalism reveres…and needs. Which is OK and on the whole useful - we won’t pull up the wheat in that field of tares…
(I’ll discuss the dangers and limitations of “smoking gun” journalism another time).
So long as Taibbi doesn’t muddy up the story with too many of the usual half-wit mantras of the cultural establishment, he’s helping the debate….
The more serious gaps - in relation to 9-11 - can always be countered by bloggers.
(And in time, Taibbi might “break” the 9-11 story too. Hope he gives Dr. Griffin a footnote when he comes around to that).
At one point in Matt’s article he writes:
“Here’s how naked short-selling works: Imagine you travel to a small foreign island on vacation. Instead of going to an exchange office in your hotel to turn your dollars into Island Rubles, the country instead gives you a small printing press and makes you a deal: Print as many Island Rubles as you like, then on the way out of the country you can settle your account. So you take your printing press, print out gigantic quantities of Rubles and start buying goods and services. Before long, the cash you’ve churned out floods the market, and the currency’s value plummets. Do this long enough and you’ll crack the currency entirely; the loaf of bread that cost the equivalent of one American dollar the day you arrived now costs less than a cent.
With prices completely depressed, you keep printing money and buy everything of value — homes, cars, priceless works of art. You then load it all into a cargo ship and head home. On the way out of the country, you have to settle your account with the currency office. But the Island Rubles you printed are now worthless, so it takes just a handful of U.S. dollars to settle your debt. Arriving home with your cargo ship, you sell all the island riches you bought at a discount and make a fortune.”
If you go to this article from Deep Capture http://www.deepcapture.com/the-simple-metaphorical-explanation/ and read it, Matt’s example, though summarized, is awfully similar to the one written at Deep Capture. Now, I do not know whether Matt gave credit to the author who wrote the article but I could not find any mention of the person within Matt’s article. If Matt did not give credit, then there is a case for plagiarism.
For those who don’t know, plagiarism is defined as the “unauthorized use or close imitation of the language and thoughts of another author and the representation of them as one’s own original work.” (Source: http://dictionary.reference.com/browse/plagiarism)
I hope this is taken seriously and my worries refuted. Matt authors great articles but this does not mean that he stands above honest journalistic integrity.
Regards,
Anon*******************************************
My Comment:
When I have more time, I will try to put the pattern of plagiarism in the American media into a larger context….and show just what it cost the country and why the media has very little moral ground to stand on when condemning the bankers. And that includes many of the alternative sites too…
Indeed, at some point, I would like to undertake a bear raid of my own - on the English language media. I include not just the establishment print and TV outlets, but the blogosphere, wiki, alternative press, and the like, which are supposed to be so free of manipulation.
Bagley’s (and Mitchell’s) admirable work at Patrick Byrne’s Deep Capture blog only touches the tip of the iceberg. For a quick recap of Byrne’s position on naked short-selling and his ideological orientation, here’s a video of an interview with him.
I add it, because of Olagues’ comments (see comments below). I assume that Olagues comes from a libertarian position that’s more to the right than Byrne’s. Example: Byrne seems to be involved with school-choice activism with the widow of Milton Friedman.
Update One (Sunday, October 25):
Former options market-maker John Olagues posts a comment below, with a link, which I will add here.
At first glance, his analysis seems to support my own conclusion that the Fed and the major banks were involved. (I have also blogged last year that I believe that LIBOR was manipulated).
I need to research Olagues’ piece a bit more to verify the reliability.
Max Keiser On Wall Street Suicide Bombers
Keiser’s image of speculators as suicide bombers has been used by a number of people. But parts of his argument sounds strange to me. The well-connected banks are “blowing up” other banks through speculation, so as to drive the dollar higher?
Undoubtedly the dollar is being manipulated and the banks will make money off of it, but blaming speculation alone is too easy a game and it will lead to the wrong remedies.
While speculation undoubtedly exacerbated the crisis and pushed the market over, speculators can only undermine fundamental weakness.
The housing bubble collapsed because the mania exhausted itself and the underlying loans were bad. Speculators didn’t make the bad loans. Mortgage lenders and banks did that.
Speculators didn’t certify the derivatives based on them were great. The ratings agencies did that.
Speculators didn’t hold a gun to home owners and tell them to buy. Greenspan encouraged them - though even he didn’t hold any guns to their head.
Speculators didn’t look the other way when numbers of professionals complained to the regulators. The SEC did that.
Speculators didn’t publish fulsome flattery of Greenspan and Summers and Rubin and Paulson. Magazines - including Vanity Fair and Time and the New York Times and the Wall Street Journal did that.
Speculators didn’t bestow degrees and honors on these charlatans. The universities and prize committees did that.
Speculators didn’t attack anyone who criticized them or called them into question. Partisans did that.
Speculators didn’t rewrite history and ignore the scores of right-libertarians at Mises, Lew Rockwell and other libertarian sites who foresaw this and warned repeatedly to rein in monetary debasement. Left-liberal academics and journalists did that.
Speculators didn’t rah-rah for war and the expansion of the corporate state and police laws so dissidence became difficult. Right-conservatives and neocons did that.
Speculators didn’t attack anyone who argued for generosity, or self-restraint, or humility, temperance, or any moral virtue. Libertines and anti-religious bigots did that.
Speculators didn’t bribe Congressmen to pass bad legislation. Lobbyists did that.
Speculators didn’t swallow propaganda whole sale and follow the line of least resistance. Lazy consumers and the public did that……
Ergo - Goldman Sachs is a fairly accurate reflection of the kind of society we’ve become. Laws aren’t going to change that. Political and public culture has to change.
The Devious Web (Correction)…
I notice that Gary Weiss commented on Patrick Byrne’ post on this blog, describing the post as a sample of obsessive behavior about naked short selling.
I have nothing to say to that, except that people who’ve had to battle a number of foes can sometimes become what’s called hypervigilant. I’ve certainly had the experience.
But that’s not my point here. I bring up the post only because Weiss writes like someone who’d never come across me before, duly (and snarkily) noting the “obscurity” of this blog. Well and good. No offense taken. We like our obscurity…it keeps us meek. And we’re told the meek will inherit the earth…or at least, what’s left of it after our oligarchs finish raping it.
However, I bring this up not to air any wound to my amour propre but because Judd Bagley, the main reporter at award-winning business blog Deep Capture, has accused Weiss of using sock puppets on wiki, and has posted screen shots to prove it. [It's not germane to this tale that too uses sock-puppets].
One of Weiss’s alleged sock-puppets on wiki, says , goes by the name, MantanMoreland (other names used there and elsewhere include Samiharris - at wiki - and Tom Sykes - at Daily Kos and other places).
Now, it so happens that when I was trying to get rid of my web-stalker, Tony R, I ran into someone called Mantanmoreland on the message boards that he haunted. Was this Weiss? Or was it someone else? You judge.
Correction: I have crossed out the section below where I have incorrectly identified Tony R as someone by the name of Villasenor, whose postings/m.o. seemed similar to me on many counts. He has denied it (see comment section). My post resumes after the crossed out section.
Interestingly, Ry__s also claims he is not Ry__s.[However, V doesn't deny that - like R__s he uses multiple aliases, some very similar, frequents the same message boards, and attacks similar things].Fair enough. I’ve added a correction. It makes no difference to my claim about R__ls or about Mantanmoreland, only it leaves me still in the dark who this person Ry__ls is.
Since the suit lists multiple aliases for him and some of these aliases resemble the multiple aliases that R___ls uses, their targets are similar, and their venues and forums often identical, it is an understandable error, if it’s one.
In any case, I will use R__ls name and strike through V’s, to avoid giving offense/slandering the wrong person….although it’s clear that neither of these two mind slandering other people.I’ve no axe to grind in the matter.
To recap: Vis a one-time stock-dealer who was fined by the NASD. He’s also a small-time racketeer (http://mindbodypolitic.com/2009/09/27/blogger-credibility/e http://listsearches.rootsweb.com/th/read/ARIZONA/2005-06/1118951523) and a former groupie of securities fraudster, Amr Elgindy and his Anthony Pacific site. (http://siliconinvestor.advfn.com/readmsg.aspx?msgid=22945870). In whatever time is left over from that, he’s given to web stalking and harassing, for instance, of a (http://siliconinvestor.advfn.com/readmsg.aspx?msgid=15095618mber)Just to be clear, I am agnostic about the merits of any of his claims about, who might be doing something illegal, for all I know. I mention this just to show that has a history of this sort of thing.
[With no cause at all, Tony R has also libeled Georgetown University professor, James Angel, because of a financial film he made that that didn’t conform to his ideas (as far as I recall the subject).
Anyway, I approached a number of of sites (such as, Indymedia, KYCNews, and the SEC complaints board) to have them remove Tony R’s libels and to find out how to make him desist. It turned out he was in Guatemala, so it would be hard for me to do anything legally about him. I was also told he was likely to just switch aliases and ratchet up the harassment, if I went after him. In fact, whenever I mentioned his most common alias name, Tony R, he would show up like lightning on this board and spam me (that’s why I’m not using his complete name).
Now here’s the interesting part. While I was trying to find out more about Ry__s, I came across an irate exchange between him (under one of his many aliases http://www.chillingeffects.org/uncat/notice.cgi?NoticeID=1748) and someone called Mantanmoreland. Note: it was on a message-board (not on wiki).
I wrote to Mantanmoreland (it was in February 2008), asking if he knew anything more about Tony R. and we went back and forth about it for some two weeks, exchanging around two dozen emails, most of which I still have. Those emails went under my name. In them I explained that I’d become the unwitting target of this Tony R, solely because I’d been hired to write a book with the president of a company that Tony R. was fixated about.
Here’s my question. Deep Capture says unequivocally that Mantanmoreland is Gary Weiss. Weiss denies it equally flatly. Now, I exchanged dozens of emails only a year ago with Mantanmoreland about a situation that he could hardly forget, since he had his gripe with Tony R too. But Weiss’ recent blog post seems to indicate that he has no idea who I am.
That leaves only one possibility. Either Weiss or Bagley is in error (to put it as mildly as possible)…
Which is it? And what would that mean? And does that have anything to do with the recent (thwarted) attempt to delete my wiki page?
Added: As a matter of fact, by assessing the various reactions to this post (who posted, where and on what forums), I clarified the answer to the above question to my satisfaction…
DTCC Conflicts Of Interest Include Ties With Penson, Goldman
More digging about Penson turns up a number of ties with regulators (this is probably par for the course, and not surprising). Penson Worldwide’s board of directors includes one David Kelly, who until 2000 was President of the National Securities Clearing Corporation, as well as Vice Chairman of DTCC.
More on DTCC here at Financial Wire, May 11, 2004
cited at Deep Capture.(Lila : The DTCC is the Depository Trust and Clearing Corporation, not the Depository Trust Company, as indicated in the article)
“The Depository Trust Company (DTC) is a member of the U.S. Federal Reserve System, a limited-purpose trust company under New York State banking law and a registered clearing agency with the SEC. The depository supposedly brings efficiency to the securities industry by retaining custody of some 2 million securities issues, effectively “dematerializing” most of them so that they exist only as electronic files rather than as countless pieces of paper. The depository also provides the services necessary for the maintenance of the securities it has in “custody.”
The largely unregulated DTC has become something of a defacto Czar presiding over the entire U.S. markets system, wielding more day-to-day influence and control than the SEC, the NASD and NASDAQ combined. And, as the SEC’s June 4 ruling indicates, its monopoly over the electronic trading system appears even to be protected.
How entrenched is the Depository Trust and Clearing Corp.? It’s two preferred shareholders are the New York Stock Exchange and the NASD, a regulatory agency that also owns the NASDAQ (OTCBB: NDAQ) and the embattled American Stock Exchange! Regulators, regulate thyself?
In an era when corporate governance is the primary interest for the SEC and state regulators, the DTCC is hardly a role model. Its 21 directors represent a virtual litany of conflict:
They include Bradley Abelow, Managing Director, Goldman Sachs (NYSE: GS); Jonathan E. Beyman, Chief Information Officer, Lehman Brothers (NYSE: LEH); Frank J. Bisignano, Chief Administrative Officer and Senior Executive Vice President, Citigroup / Solomon Smith Barney’s Corporate Investment Bank (NYSE: C); Michael C. Bodson, Managing Director, Morgan Stanley (NYSE: MWD); Gary Bullock, Global Head of Logistics, Infrastructure, UBS Investment Bank (NYSE: UBS); Stephen P. Casper, Managing Director and Chief Operating Officer, Fischer Francis Trees & Watts, Inc.; Jill M. Considine,Chairman, President & Chief Executive Officer, The Depository Trust & Clearing Corporation (DTCC);
Also, Paul F. Costello, President, Business Services Group, Wachovia Securities (NYSE: WB); John W. Cummings, Senior Vice President & Head of Global Technology & Services, Merrill Lynch & Co. (NYSE: MER); Donald F. Donahue, Chief Operating Officer, The Depository Trust & Clearing Corporation (DTCC); Norman Eaker, General Partner, Edward Jones; George Hrabovsky, President, Alliance Global Investors Service; Catherine R. Kinney, President and Co-Chief Operating Officer, New York Stock Exchange; Thomas J. McCrossan, Executive Vice President, State Street Corporation (NYSE: STT); Eileen K. Murray, Managing Director, Credit Suisse First Boston (NYSE: CSR); James P. Palermo, Vice Chairman, Mellon Financial Corporation (NYSE: MEL); Thomas J. Perna, Senior Executive Vice President, Financial Companies Services Sector of The Bank of New York (NYSE: BNY); Ronald Purpora, Chief Executive Officer, Garban LLC; Douglas Shulman, President, Regulatory Services and Operations, NASD; and Thompson M. Swayne, Executive Vice President, JPMorgan Chase (NYSE: JPM).”
No More Muddle-Through Economy
“I firmly believe we will see a double-dip recession within another 18 months (at the most). Stock markets drop on average about 40% in a recession. Adjust your portfolios accordingly.”
– John Mauldin, Thoughts from the Front Line (http://www.frontlinethoughts.com/pdf/mwo101609.pdf)
My Comment:
I find it pretty interesting that John Mauldin, who’s always argued that we’d “muddle through” somehow (http://www.safehaven.com/article-9542.htm), has now changed his position in view of the facts (an admirable quality). In the latest edition of his very popular and always informative newsletter, Thoughts from the Front Line, he argues that things are much worse than he’d ever anticipated.
I find it even more interesting that Mauldin will be down in Uruguay, speaking to various groups and that he has a partner based in Uruguay. He writes:
“I will be going to South America at the end of next week, to Buenos Aires, Montevideo, Sao Paulo and Rio. I will be speaking in those cities and traveling with my new Latin American partner, Enrique Fynn of Fynn Capital (based in Uruguay).”
He’s not the only one. I’ve noted a number of libertarian (and other) financial advisors down here. A sign of the times.
Rewriting of History Underway
Taibbi on the tea-parties, being sloppy with his facts again, all in the name of rhetoric:
“It’s amazing, literally amazing to me, that it wasn’t until Obama pushed through a package containing a massive public works package and significant homeowner aid that conservatives took to the streets. In other words, it wasn’t until taxes turned into construction jobs and mortgage relief that working and middle-class Americans decided to protest. I didn’t see anyone on the street when we forked over billions of dollars to help JP Morgan Chase buy Bear Stearns. And I didn’t see anyone on the street when Hank Paulson forked over $45 more billion to help Bank of America buy Merrill Lynch, a company run at the time by one of the world’s biggest assholes, John Thain. Moreover I didn’t see any street protests when the government agreed to soak up hundreds of billions in “troubled assets” from Citigroup, a company that just months later would lend out a jet furnished with pillows upholstered with Hermes scarves to former chief Sandy Weill so that he could vacation in Mexico over Christmas.”
My Comment:
Er, Matt. It was the Dems who rolled over for the bail-outs. It was the Republicans, the Southern Republicans, who stymied it first time round…until they had their arms twisted.
Before you got your consciousness raised on the subject several years late, it was right libertarians who were objecting most strongly to the financializing of the economy…..
The Penson video post wasn’t as big a deal as it was made out to be, to my mind. But this post and his debate on 9-11 with David Griffin (at Alternet) do betray some ignorance…
Update:
Louis Proyect has a review of “Dime’s Worth of Difference” (Cockburn and St. Clair) that has a precis that will disabuse anyone inclined to believe the Democrats are more people-friendly than the Republicans…
Billionaire Nabbed In Largest Hedge Insider Scheme
In the news (:http://www.bloomberg.com/apps/news?pid=20601087&sid=asliefsvW5Zc)
“Oct. 16 (Bloomberg) — Raj Rajaratnam, the billionaire founder of Galleon Group, and ex-directors at a Bear Stearns Cos. hedge fund were among six people charged in a $20 million insider trading scheme federal prosecutors called the biggest ever involving hedge funds.
Also accused were Rajiv Goel, who worked at Intel Capital as a director in strategic investments, Anil Kumar, who worked as a director at McKinsey & Co., and IBM Corp. executive Robert Moffat. The former officials at Bear Stearns Asset Management are Danielle Chiesi and Mark Kurland, who were affiliated with the firm’s New Castle Partners, which managed about $1 billion.
“The defendants operated in a world of, you scratch my back, I’ll scratch your back,” U.S. Attorney Preet Bharara in Manhattan said at a press conference today. “Greed, sometimes, is not good.”
My Comment
The biggest hedge scam - there you go. Anything Westerners can do, Easterners can do better. We’re not going to settle for any penny-ante crime anymore. Now you know how at least one South Asian billionaire got rich so fast. Nothing like having an edge…
What’s interesting is that this is the first time that the Fed’s used wire-tapping to target insider trading on Wall Street. Until now that tool has been the reserve of organized crime and drug cases.
Fraud On the Run: Goldman Cop On SEC Beat (ROTFLOL)
In the news, to be filed under - What parallel universe does New York live in?:
“Oct. 16 (Bloomberg) — The U.S. Securities and Exchange Commission named Adam Storch, a 29-year-old from Goldman Sachs Group Inc.’s business intelligence unit, as the enforcement division’s first chief operating officer.
Storch, who joined the SEC Oct. 13, was named to the newly created post of managing executive in the enforcement unit, charged with making the division more efficient, the SEC said today in a statement. At New York-based Goldman Sachs, he had worked since 2004 in a unit at that reviewed contracts and transactions for signs of fraud.”
My Comment:
Personally, I’ve come to nurse a kind of contemptuous respect for, an appalled amusement at Goldman Sachs. It’s the contrarian in me.
In-your-face-corrupt, shameless, self-promoting, out-of-touch, sanctimonious, and bottomlessly greedy - It’s a firm made for our times…
If Goldman Sachs didn’t exist, we’d have to invent it.
Mid-East, Europe, Africa Securitizations Will Deteriorate More, Says Moody’s
From the Global Arab Network:
“The performance of many asset classes in the Europe, Middle East and Africa (EMEA) securitisation sector will continue to deteriorate throughout the rest of the year and into 2011, says Moody’s Investors Service in a new Special Report. The report examines the prospects of recovery for international securitisation in several asset classes and geographies: EMEA Auto ABS, UK Credit Card ABS, UK Non-Conforming RMBS, Spanish ABS and RMBS, Asia Pacific ABS and Global Derivatives. The rating agency expects performance volatility and uncertainty to decline in the coming months, although it cautions that a drop is predicated on achieving some level of economic moderation if not slight improvement, combined with the seasoning of securitised loan portfolios.
Moody’s says that although GDP growth is expected to turn positive in many countries in EMEA later this year or in early 2010, employment and home prices will continue to deteriorate well into 2010, which will lead to securitised loan losses remaining at elevated levels throughout 2011 and 2012.”
Goldman Joins Dollar Bashing
From Business Insider:
“The dollar will weaken to $1.55 versus the euro in three and six months, the bank said, revising previous forecasts of $1.45 for both periods. The U.S. currency, which has fallen versus all of the 16 most-traded currencies this year, will recover to $1.35 in 12 months, Goldman Sachs said”
Alexander Cockburn On the Ethics of Gotcha Journalism
Alexander Cockburn on the reality of tell-all journalism:
“Dempster, a public-school boy in the twilight of Great Britain, is franker than many of his American counterparts about the realities of the trade: that almost all journalism in the end is gossip, and that the handmaidens of gossip are treachery, envy, and spite; that while many journalists may prattle on about the public’s right to know, they are in their bones talking about their own need to tell.”
Milton Nascimento Sings “Cacador De Mim”
Brazil’s Milton Nascimento Sings Cacador De Mim (I, The Hunter of Myself)Prechter On the Falling Money Supply
Robert Prechter on the falling monetary base:
“As a consequence of the lack of demand for loans, the unwillingness of banks to lend money, and subsequent response of U.S. monetary policy, effective U.S. monetary policy is one of tightening. That lack of growth in the U.S. money that followed from all this will ultimately have an impact on financial markets, the value of the U.S. dollar in the short-term, and the price of $Gold. Further, inflation is not likely to flow from this monetary policy, and deflation is again a risk. Importantly, the consequences of this situation may not be that of the broad consensus.
With no growth in the quantity of U.S. dollars since February, the dollar is becoming rarer relative to other currencies. Ultimately, unless corrected, the value of the U.S. dollar should rise in the short-term. Such an event might come as a surprise to those plunging into Gold and Silver on the back of margin debt.”
Consensus Tip Is Cash, Gold, and Commodity/Oil Stocks
A summation of the inflation-deflation debate, and some practical advice arising from it:
“The pair trade of being long gold and short equities that has worked since 2000, might have a few more years to go, especially if equities get more headwind from multiple-contraction and government interfering in the economy. But in the long-run, time is against that trade too, since equities have the income component. So, one might not short the lower-multiple or certain consumer-staples and commodity-related stocks. Without shorting, being long the latter stocks, being long gold, and having some cash (1/3 each) is probably the common-sense approach, and with a little luck, one can deploy the cash in the next “deflationary” wave should it occur.”
My Comment:
One third-gold looks awfully high to me, but only if you’re buying now. If you’ve been holding for years, take your bow. I’m assuming this division doesn’t include people’s homes. Otherwise, surely, paid-up real estate is a secure asset and a potentially income producing one as well.
I’d rewrite this: One third in your paid up house, a farm or income property of some kind. Another third in diversified currencies or in your currency of choice, either as cash or perhaps even in some select funds - though I’ve never held funds and wonder if they perform like the currency itself. My sense is they don’t. The last third in precious metals, commodities, water, and energy ETF’s, or if you’re knowledgeable enough, stocks. Here too, the funds don’t perform like the underlying commodity at all, USO being a case in point.
Correction: (October 27): Rereading this, it sound like I am recommending ETF’s for all the last part. I don’t. I recommend ETF’s for water and energy, because for the average person it’s easiest to buy that way. You should get physical gold for the long haul, and maybe an ETF to trade - which, is the question.
Costs of Baucus Health Care Bill
From The New York Times:
“The Congressional Budget Office said the bill would cost $829 billion over 10 years. The costs include $345 billion for the expansion of Medicaid and $461 billion for subsidies to help lower-income people buy insurance.
The budget office said the costs would be completely offset by new fees and taxes and by cutbacks in Medicare, so federal budget deficits in the next 10 years would be $81 billion lower than now projected.”
My Comment:
As these are official figures, we can count on their being low-balled.
Again, this adds more detail to my continual drum-beat on this blog that insurance is the heart of the problem. From AIG, to the reinsurance industry, to the WTC attacks, to health insurance, to securities risk insurance, to the new “impact-of-financial-crises-on-poor-people-in-the-third-world- insurance ” (bet you hadn’t heard of that one, but it’s in the works) that pretends to help people by taking the risk out of life.
That’s like drugging yourself to take the pain out of burning, and then cozying up next to a fire. It’s no more than cushioning the downside of bad economic or personal behavior. Which inevitably means - surprise - more bad economic or personal behavior. And then finally when the majority turn into bad actors, even the good actors have to go bad to keep up…..
We don’t need more government intervention in insurance. We need less of it. We need small, voluntary insurance pools. Pared down. Local. Community-based and private. As many and as various as possible, competing against each other. With strict safe-guards to prevent them becoming a racket for lobbyists, drug companies, doctors, and lawyers. Take away the cookie-jar and you’ll get rid of the sticky fingers.
Indian Gold Demand Halved From Last Year
Indian gold demand has perked up with the fall, looking forward to the Hindu light festival, Diwali, that takes place around now. But experts say that demand is down this year overall.
From The Singapore Business Times:
“India is the world’s largest consumer of gold, importing 400-800 tonnes of gold a year, according to various trade body estimates. But this year, high prices and the global economic meltdown have taken a toll on demand.
Ms Bhat [a top official of HDFC Bank] said that total imports at the end of this year could be half that of last year. World Gold Council’s (WGC) data shows that India imported 712.6 tonnes of gold last year.
HDFC is one of the 23 banks licensed to import gold and sell to traders and jewellers. Trade sources put it neck-and-neck with ICICI Bank for top position in the retail bullion segment, and one of the top 10 in the wholesale segment.”
– “India Awash In Foreign Investment” (October 15, 2009)
My Comment:
Note: ICICI Bank is the same bank that uses Penson Financial Services, as I blogged before. That’s the Penson that denies that its software is shown in the video posted by Matt Taibbi last week. The video supposedly shows software that enables naked shorting.
Pentagon Runs the US, Seeks Eurasian Domination
From John Pilger:
“Obama’s “showdown” with Iran has another agenda. On both sides of the Atlantic the media have been tasked with preparing the public for endless war. The US/Nato commander General Stanley McChrystal says 500,000 troops will be required in Afghanistan over five years, according to America’s NBC. The goal is control of the “strategic prize” of the gas and oilfields of the Caspian Sea, central Asia, the Gulf and Iran – in other words, Eurasia. But the war is opposed by 69 per cent of the British public, 57 per cent of the US public and almost every other human being. Convincing “us” that Iran is the new demon will not be easy. McChrystal’s spurious claim that Iran “is reportedly training fighters for certain Taliban groups” is as desperate as Brown’s pathetic echo of “a line in the sand”.
During the Bush years, according to the great whistleblower Daniel Ellsberg, a military coup took place in the US, and the Pentagon is now ascendant in every area of American foreign policy. A measure of its control is the number of wars of aggression being waged simultaneously and the adoption of a “first-strike” doctrine that has lowered the threshold on nuclear weapons, together with the blurring of the distinction between nuclear and conventional weapons.All this mocks Obama’s media rhetoric about “a world without nuclear weapons”. In fact, he is the Pentagon’s most important acquisition. His acquiescence with its demand that he keep on Bush’s secretary of “defence” and arch war-maker, Robert Gates, is unique in US history. He has proved his worth with escalated wars from south Asia to the Horn of Africa. Like Bush’s America, Obama’s America is run by some very dangerous people. We have a right to be warned. When will those paid to keep the record straight do their job?”
My Comment:
When? When they’ve done taken care of the truly dangerous folk. You know, Sarah Palin, Alex Jones, Lyndon LaRouche, assorted tea-partiers, home-schooling anti-vaccination moms, and anyone else who doesn’t snap their heels together and shoot off a stiff-armed salute fast enough to suit the oligarchs.
And then people wonder why, for a large part of the public, the media is the enemy.
Our Moments of Peace…
Peace is that brief glorious moment in history when everybody stands around reloading.
–Source Unknown
More Ramblings on the Rambla
Maybe it’s because the market is making me queasy, I didn’t watch the action today.
I know gold has broken out, to all appearances, but over the last several years, appearances have been knocked out of the ring more than once.
Walking Montevideo’s streets - even in the rain (and it’s been raining the past day or so) - takes my mind off all the feverish commentary from gold bugs and bashers - the sum total of which spells WE DON’T KNOW.
In the next few weeks, the break-out will either be confirmed or dispelled and then the lucky soothsayers will pat themselves on the back (and why not?), declare their genius, and make the rounds of the talking shows as the new Merlins of the Market. Reporters will get to shoot off snappy little missives about equities “plunging” or “soaring” or “sliding.” Each time the reason will be different. In between, we will have the entertainment of trying to pin the tail on the billion dollar donkey - Goldman Sachs. The donkey will kick occasionally and poor Matt Taibbi will get custard in his face for trying to educate the masses. And so it goes on.
Gold was said to be following the equity market and moving against the dollar. But then today the markets went to 10,000 and gold stumbled a bit, while the dollar index stayed low (mid 75’s). If gold is the new money, that makes sense. It stayed down, like the dollar. What drives it? I’d say speculation, right now. When equities look solid, gold slips, along with money. At least, that’s my five minutes worth of tea-leaf reading. Tomorrow, gold will move against money, and then we can all go back to the old refrain about inflation expectations driving gold.
Onto other things.
Who said Montevideo was cheap? It’s not, though I hear Brazil is more expensive. A young pharmacist, struggling alone on the street with his three month year old daughter and my bad Spanish, gave me the lowdown. His electric bill was around $US200/mth. That’s for a man, his wife and two children. His food bill runs to about $US200/mth. His gas bill was around $US50. That’s the same or a bit more than many families in the US. And in Uruguay, $US500-$1000/mth is a good salary. So food is really about three times more expensive than in the US.
People are careful with the lights. Which I’m used to, from India. Last night, my landlady Gabriela was groaning about the German woman who lived in my room last year. She ran a hot shower three times a day and used the hair dryer incessantly. Gaby said she was going to switch to gas to heat the water. Gas is cheaper here. She goes through 2-3 cans of gas a month for her space heaters and it comes to about a thousand pesos a month.
Montevideo has enough of a gay culture that someone can run a hotel catering to male couples, impeccably maintained and done up. Exposed brick, walls with stenciled designs, ikebana, polished wood, a flower garden, a kennel, and a tub on the terrace. It charges $50 a day for a couple, breakfast included. A good business.
Revitalize the inner cities? Just drop a squadron of gays into them.
Why Would Iran Need Nuclear Power?
And over at the Washington Times, Jeffrey Kuhner asks an incredible question (October 4, 2009):
“Mr. Ahmadinejad insists Tehran only wants atomic energy for “peaceful purposes.” Yet, he cannot answer one simple question: Why does a country with the world’s second-largest natural gas reserves and third-largest oil supply need domestic nuclear power?
The answer, Mr. Kuhner, is to avoid the fate of Iraq.
IMF - New Global Savior Of Last Resort
At Dealbreaker, Greg Michaels asks an important question:
“A day after people threw both questions and shoes at IMF chief Dominique Strauss-Kahn, he said that the organization’s new mandate is to be the global lender of last resort.
The international monetary system must be more stable, and anchored by a global lender of last resort,” he said, outlining his vision for the IMF.
So now we’re going to have the IMF there to cushion the world from another near economic meltdown. It’s a simple as that. Problem solved. What could possibly go wrong.”
Martin Hutchinson On Disaster Rising..
Hedge funds are increasingly moving out of trading in futures to directly investing in physical commodities, increasing the possibility of a dangerous shortage of those commodities:
“Only when the gold price breaks definitively downwards, dropping 25% or more from its high, will policymakers know that they have succeeded in breaking the commodity investment mania. Such a development is however likely to occur only after a definitive crack in government bond markets, forcing policymakers to address their gigantic budget deficits as a matter of urgency.
Given the predilections of today’s policymakers, it is unfortunately unlikely that they will tighten monetary policy sufficiently to break the commodity flight, whatever the gold price does. Instead, led by the determined Keynesians of the International Monetary Fund, they are much more likely to attempt to control the gold price itself, either surreptitiously by selling off massive quantities of the world’s gold reserves, or openly by imposing limits on gold futures trading and possibly, like Franklin Roosevelt in 1933, making it illegal for ordinary individuals to own gold or to buy gold futures.
That will of course only make matters worse; it would be equivalent to trying to avoid a speeding ticket by smashing the car’s speedometer. Manipulating the gold price to pretend that liquidity is not excessive does not stop liquidity from being excessive. Nor does it lead any but the stupidest institutional investor to believe that his urge to invest in physical commodities is misguided. Rather, it will cause commodities investment to be carried out through shell companies in tax havens, away from regulators’ radar screens. The effect on global supply chains will be equally damaging, but policymakers will no longer have a straightforward way of determining how to avoid the resulting economic depression.
I wrote last week that tightening liquidity directly by entering into a central bank “exit strategy” is dangerous. However , the Financial Time’s story itself and the gold price breakthrough have significantly increased the size of the hike in interest rates necessary to halt the flight to commodities.
Time is short and the probability of disaster is rising.”
India’s Second Biggest Bank Tied Up With Penson Financial
An interesting India connection with Penson, the clearing house and broker-dealer alleged by Matt Taibbi to have trading software that lets facilitates naked short selling (note: this is from October 2007):
“ICICIdirect.com, the online broking arm of ICICI Securities, today launched its overseas trading service that will allow its resident Indian customers to buy and sell equities across 13 US stock exchanges, including NYSE and Nasdaq.
ICICIdirect.com has tied up with Penson Financial Services, the fourth largest clearing and broker-dealer company in the US, as its overseas trading partner. Penson Financial Services handles about 10,00,000 settlements everyday and has over $6.8 billion in assets, including customer assets.”
The Goldman Conspiracy - An Odd Story
My September 2008 piece in Lew Rockwell, the Paulson Putsch, had a very interesting history I’ve often thought about.
Unlike my other pieces, it wasn’t linked…and kind of “faded.” It ended up on a website called “assassinated press.” Why the difference? Because it went to Counterpunch, a left wing site. It got reprinted a lot. A week later, Gretchen Morgenson, broke her story about Blankfein (Goldman CEO) sitting in on the AIG bail-out proceedings with Geithner and Paulson (if I have that right). Now, Morgenson, as far as I know, has never written on Goldman (correction: I should say, on the corruption of Goldman) before. I’m pretty certain she got the lead from my piece, as my piece was the only one then to make the connection.
What’s interesting is that only a week or so earlier I’d written a piece on the AIG-Goldman link that got traction.
The week after, it hit me that the bail-out proposal was the culmination of Goldman’s history of criminality, which I’d already researched in 2006 for another book. I hastily put together what was relevant, and sent Lew Rockwell the piece, “The Paulson Putsch,” which is basically Taibbi’s whole recent Goldman thesis in Rolling Stone and elsewhere in a nutshell. I figured people would follow up on it.
But, as I said, unlike the AIG-Goldman piece (Lipstick on an AIG), this one simply got ignored. Too conspiratorial? I don’t know. No more than Taibbi’s - which is kosher enough now for Amy Goodman, bless her heart, to think about.
Anyway, among the many appreciative readers (including Carl Sagan’s son and some well-placed businessmen) who wrote to me, there were a couple of southerners who said they would fax it to everyone they knew in public office. And indeed they did. The next day, A couple of days later on Saturday, I kid you not, Newt Gingrich, who until then had been very deferential toward Treasury Sec. Paulson on TV shows, comes out and calls Paulson “unamerican”. Then, a day or two later, he reverses course and says he’s a patriot. I wish I’d been able to tape the show and I wonder if someone has the show on file somewhere. It was very bizarre and apart from my own glee at having what I thought was a bit of impact on the debate (even if completely unacknowledged), I’ve gone back over and over and tried to figure out what that reversal meant. I’m recalling it entirely from memory now.
Here’s the Paulson Putsch (Sept. 2008):
It covers Goldman’s prior history, naked short selling, the SEC, Rubin, Goldman’s derivative packaging, and and is Taibbi’s recent pieces in a nutshell. Now here’s Amy Goodman’s interview of Taibbi over his Goldman conspiracy piece.And here’s his Rolling Stone piece, The Great American Bubble Machine.
I’m also fairly certain that MT’s naked short-selling interest is recent. I note that it followed blog posts of mine on Deep Capture. - that may (or may not) be coincidental.
Mind you, I’m glad Taibbi at least knows a story when he sees one. Popularizing the story is important, no doubt of it. He deserves credit for having that much clarity and courage.
But it’s as important to note what parts of the story he misses out: those are 9-11, the Federal Reserve, interest rate manipulation, gold. And since this is the smoke and mirrors that is the US media, that is precisely the heart of the story.
Beating the drum about Goldman Sachs (and why not JP Morgan?) a year after strikes me a lot like a story of the dollar collapse showing up on the cover of Time. It means the horse has already bolted. And someone is looking hard in an empty stable.
Chinese Levered Bets Fuel Gold Price…
The gold price popped up to a new high above 1060, after Monday’s holiday. It’s apparently become the favored speculative play in China:
“Chinese investors are [also] placing leveraged bets,” says Wei Gu, a blogger for Reuters in Beijing.
“Leverage is not allowed in China’s stock market, so people eager to maximize their returns have flocked to gold trading.”
The People’s Bank of China recently vowed to continue with what it called an “appropriately loose monetary policy,” holding interest rates at record lows.
Xinye Bank, which trades through the Shanghai Gold Exchange, grew its client gold dealing three times over during the first half of ‘09, trading $3bn worth of contracts.
“Customers are allowed to borrow as much as 90% of the value of the gold contracts they buy,” says Wei.Noting that several large hedge funds and other speculative players are now seeking to buy physical commodities outright – and thus avoid the “position limits” imposed by US regulators on energy and raw material derivatives – “The gold price is available to show policymakers whether their monetary policy is appropriate,” writes Martin Hutchinson at Prudent Bear.”More by Adrian Ash at Bullion Vault, via Goldseek.
More On the Penson Video..and the Penson Denial (Work In Progress)
Update: Please check this post for Byrne’s and Bagley’s later comments.
Here’s Penson Financial Services Letter To SEC “Penson’s letter calling the video a hoax or worse.
Update (Tuesday, Oct 13)
The Penson letter (dated October 6) calls Taibbi an “apparent freelance blogger”. This strikes me as odd. They couldn’t be bothered to figure out his credentials first, before attacking him?
The video they reference first is the October 5 video on True Slant, where Taibbi now blogs.They then cite this youtube video, dated October 1, as the source: http://www.youtube.com/watch?v=pKQdQ0T9IkE. It’s titled “Penson Approves Billion Share Naked Short” and the source is listed on Youtube as Naked Short Sales
Here’s the next version (dated October 2 ) cited in the letter, which has CITI as the stock being sold
http://www.youtube.com/watch?v=rXIZZOwaiCM&NR=1It’s titled “thetrade” and the source is given as TrueSlant (Taibbi’s blog)
In the October 1 video, the company to whom the shares belong is anonymous, the timestamp in the locate prompt is 10:57:08 and there is an 8 preceding the multiple zeros (?)
In the October 2nd version, the anonymous company is now Citi, it’s a Level II trading station, and the time-stamp on the locate is 10:57:00 (it’s blurred so I could be mistaken) and there is no preceding number for the locate size. I notice everyone refers to the figure as tens of billions, but if there were 9 zeros that would be unitary billions. So perhaps, it is 10 zeros.
I’m sure I’ve missed a lot of stuff….or misunderstood. But trading platforms look very different, and I’m not familiar with this one. Professional traders who’ve used a lot of trading software might be able to make a better judgment.
Aha - maybe here’s why it didn’t look like an order entry in that screen, this blogger says its an entry of an audit trail point asking who the stock was borrowed from, how much, and when - to prevent naked short-selling.
I don’t think this entirely blows away Taibbi, as some think, though it does show haste and sloppiness.
The letter is signed by Penson’s Associate General Counsel, Tim Wise, and it’s addressed to the SEC
and FINRA.Update (Tuesday, Oct 13)
The video is described at length on a lot of sites (Taibbi’s, Clusterstock, Megan McArdle).
I still can’t read the pop-up that’s supposed to show that the order was canceled
(Update: this is the second order, the one that’s irrelevant to the locate, according to Taibbi’s second post).To make it clear, there are two orders shown on the video, as best as I understand it. The first one is for 100 shares for a short sale, which is rejected at first, because the shares are hard to locate (that’s at the start of the clip). This leads to a prompt that the trader fills out, supposedly asking for a locate of the shares, which is given in a multiple of billion (?) - I couldn’t catch all the zeros - 9 or 10, I think. This is the locate which Taibbi says is shady, since the company’s float is for 5.5 billion.
Then there is a trade (which Taibbi says is irrelevant), whose actual size on the top left of the screen goes from 100 to 1000 to 9000 - (that’s the second trade that has the pop-up) - that’s rejected.
I fail to understand why the tape wasn’t cut after the locate, if that was the main point.
Frankly, I can’t make out whether the video shows what Taibbi says it does or not, and I can’t read the (irrelevant) pop-up.
Taibbi does back-track, but rather unconvincingly, because the text of what he wrote at True Slant certainly implies that the sale (and not just the locate) was of multi-billion shares, even if that was not his wording. The video is titled that way too.
If the locate is the issue, why not title and cut the video that way?Here is Taibbi’s original post:
“To disguise the identity of the trader, I’ve blocked out the first number in the sequence. But you can see that the number is in the tens of billions of shares. Now, the float for BANK X that day was only five and a half billion, meaning there were only five and a half billion BANK X shares in circulation. Without disclosing the actual number, I can tell you that the customer asked for a locate of shares in an amount that was at least five times the number of BANK X shares actually in circulation. Such a locate, in other words, could not possibly be filled.
:17 At seventeen seconds, at the bottom, you see that the firm Penson has now approved the trade and” located” the multibillion amount of shares. The trade goes through.”
Here is Taibbi back-tracking:
“Business Insider writer John Carney here seems to have read my recent post on Penson and taken from that that I was reporting that someone had executed a short sale of tens of billions of shares in a company whose float was only five and a half billion. This would, indeed, be ridiculous. Except that is not at all what I reported.
What I published was a tape of a trader asking for a locate of tens of billions of shares. It is the size of the locate, and the speed with which it is approved that is the issue, not the trade. The actual trade, if Carney had bothered to read the text, was only for 100 shares.
Carney then goes on to claim in another post that the “system” worked because a second trade was rejected at :27 on the tape. But this is a second trade for a larger amount of shares that was rejected not because of the locate but because the trader in question had insufficient funds in his account to make the short sale. It has nothing to do with the locate and is completely irrelevant to the story.”
My Comment:
Well, maybe so. But even if Taibbi himself wasn’t confused about what the video showed, the clip and his original commentary were misleading. Possibly, when he was writing in haste, he forgot that the sale was only for 100 shares and misspoke. In that case, he can hardly blame anyone else for misreading.
I’ll dig around to find out what Penson’s trading platform looks like and whether a locate of that size and speed is possible or impossible. So far this post was the most informative.
So much for the dangers of insta-punditry….ORIGINAL POST:
This is one of several versions of a video supposedly showing a short-sale through Penson that’s the source of the trouble.
I’ll be back later to find other versions of the video. (Update: I still haven’t found any of these other versions. There’s supposed to be one with Citi as the stock located)To recap, Matt Taibbi says it shows naked shorting, John Carney (of Clusterstock) says it shows the system worked as it should, Penson denies (sort of) that the video is its.For a more detailed recap, see this long, dismissive blog post by Megan McArdle at The Atlantic.
There’s a little pop-up box about 25-26 seconds into the tape that for the life of me I couldn’t quite read. If I find a way to do that, I’ll comment on the video, but otherwise, I’ll pass…
(Penson holds one of my very diminished IRA’s, so I’m all agog if it happens to be connected to the Mafia - in this case, the Genovese mafia….)
Here’s the money part from Deep Capture on Penson:
“This is rather important, because Deep Capture has reviewed evidence showing that little Penson Financial and one other relatively unknown firm were by far the biggest traders in financial stocks in the first nine months of last year, handling more than 80 percent of volume. To repeat, Penson Financial, a little firm in Dallas, Texas, and one other relatively small firm handled by far the biggest volume of trading in the stock of all those big banks that collapsed last year, leading to the worst financial crisis since the Great Depression. When it came to clearing trades in financial stocks, Penson was bigger than Goldman, bigger than Merrill, bigger than every major brokerage on Wall Street.
We do not know for certain that the trading through Penson was naked short-selling. We know only that naked short selling accounted for much of the overall trading last fall in companies like Lehman Brothers. And we know that a preponderance of the overall trading went through Penson. Perhaps Penson carefully weeded out the naked short-sellers, in which case it handled almost all of the trading in financial stocks except for naked short selling. But if Taibbi’s video is any indication, Penson was certainly willing to locate stock that did not exist.
If I have anything to add to Taibbi’s terrific reporting, it is this: Penson Financial’s vice president in charge of stock clearing (that is, the head of the division that appears to have located stock that did not exist) is a man named Christopher Sandel. From 1985 to 1995, Sandel was a top executive at Adler Coleman, best known for being the clearing firm to the Genovese Mafia.”
And this, also from Deep Capture:
“In the letter, Penson Financial, which was fined in 2006 for naked short selling, promises that it does not engage in naked short selling”
OK. Here are the basic points in Penson’s letter denying naked short selling (as recapped at Clusterstock):
* “”The purpose of this letter is to inform you of an apparent hoax and unsupported accusation of a violation of Regulation SHO by Penson.”
* “The purpose of this letter is to inform you that Taibbi’s post is based on false information.”
* “While we are uncertain whether Taibbi’s article is the result of a hoax or something more deliberate…”
* “”There was no locate at the time of the video”
My Comment:
Carney seems to find this convincing. I don’t.
Why does Penson call this an “apparent hoax,” instead of an outright hoax? Is that just caution?
What does the phrase “something more deliberate” mean, and why use it at all?
“At the time of video” is pure legalese. There could have been a locate at any other time, then?
I don’t know about the video - I couldn’t read the pop-up and there are different versions out there.
But this letter smells fishy…Carney writes:
“For us the clincher is the fact that Penson wrote the letter to the SEC. If they were a guilty party, they would have to be absolutely insane to do this.”
My Comment:
Well, no. Not if the SEC is thoroughly in bed with companies like Penson. Then of course Penson wouldn’t mind the SEC being alerted.
This piece in Investment News adds that Taibbi was given the video last week and hasn’t responded to the Penson letter. Penson denies that the trading platform shown in the video is theirs, and they say there was no locate of that stock in their records.
In one version of the video, the stock located is Citigroup, Penson said (as of now, I haven’t found that video).
Now, here is Gary Weiss, responding to the comment on Penson’s mob ties, from his own past research on the subject. The plot certainly thickens:
“1. Adler Coleman cleared trades for a rotten brokerage named Hanover Sterling, and, as I reported a good 13 years ago in a Business Week cover story, The Mob on Wall Street, Hanover was connected to the Genovese crime family. But it’s nonsense to claim that Adler “cleared” for the Genoveses, and there’s no evidence tying Adler to the Mafia.
2. Sandel is not in charge of stock clearing at Penson. He left that position two years ago. See this press release.”
Lucy Komisar On Off-Shore Havens
From The Komisar Scoop, veteran investigative journalist Lucy Komisar - who was way ahead of the pack in her unraveling of the financial underworld - gives us a glimpse at a major hub of financial crime - off-shores havens:
“Secrecy havens have 1.2 percent of the world’s population and hold 26 percent of the world’s wealth, including 31 percent of the net profits of U.S. multinationals. According to Merrill Lynch & Gemini Consulting’s “World Wealth Report” for 2000, one third of the wealth of the world’s “high net-worth individuals” (as banks like to call them), nearly $6 trillion out of $17.5 trillion, may now be held offshore. Some $3 trillion is in deposits in tax haven banks and the rest is in securities held by IBCs and trusts.
Experts believe that as much as half the world’s capital flows through offshore centers. The International Monetary Fund (IMF) said that between $600 billion and $1.5 trillion of illicit money is laundered annually, equal to 2 percent to 5 percent of global economic output. These offshore centers awash in money are the hub of a colossal, underground network of crime, fraud, and corruption.”
My Comment:
Komisar, of course, is unreservedly for banking transparency. As a libertarian, however, I find this very problematic. It’s true that crooks abuse banking secrecy. But practically any rule is liable to abuse.
The conclusion isn’t to demand more banking transparency. Considering the volume of transactions in the markets, that would effectively mean more governmental authority. More governmental authority means less government transparency - which means we’ve substituted a gain of transparency in one area for a loss in another.
The logical conclusion is to remove the incentive for secrecy - which is taxation. Reduce taxation, and fewer corporations would be hiding money. The fewer groups with off-shore accounts, the easier to monitor secret transactions that seem to be criminal without harming the privacy of non-criminal secret accounts.
Why would non-criminals not want their financial transactions transparent?
1. Defense against litigation (deep-pockets often attract abusive lawsuits)
2. Claims from unscrupulous family members or business associates
3. Abuse by the government for political reasons; abuse by enemies and political partisans
4. Defense against other kinds of crimeAnother libertarian approach would be to decriminalize drugs and end the Federal government’s corrupt pursuit of drug dealers. Instead, focus on the easier task - address the addictive demand for drugs.
Simon Johnson On Why the Risk Models Duped the Bankers
A good analysis by Simon Johnson at Baseline Strategy, on why VaR (Value at Risk), a measure that was supposed to model risk but proved worthless, was preferred to more common-sense approaches:
“Given that everyone is agreeing sophisticated risk models are worthless in crises, it seems particularly remarkable that regulators allowed some banks to use their in-house models in determining their own capital requirements – since one of the purposes of capital requirements is precisely to provide a cushion that protects banks (and their creditors, and taxpayers) in the event of a crisis. The obvious solution is that regulators should rely on cruder constraints, such as an absolute limit on leverage that banks cannot arbitrage around (one of the recommendations of Treasury’s recent white paper on capital requirements, which we discussed here), or periodic stress tests that estimate how bank asset portfolios will perform in a real crisis.
But there is a more interesting question to ask as well: why did VaR become so popular? It’s important to remember that competition among models is shaped by the human beings who create and use them, and those human beings have their own incentives.
David Colander made this point about economic models: the sociology of the economics profession gave preference to elegant mathematical models that could describe the world using the smallest number of parameters. “Common sense does not advance one very far within the economics profession,” he says.A similar point can be made about VaR models. Sure, maybe all the financial professionals who design and work with VaR know about its shortcomings, both mathematical and practical. But nevertheless, using VaR brought concrete benefits to specific actors in the banking world. If common sense would lead a risk manager to crack down on a trader taking large, risky bets, then the trader is better off if the risk manager uses VaR instead.
Not only that, but imagine the situation of the chief risk manager of a bank in, say, 2004. As Andrew Lo has argued, if he attempted to reduce his bank’s exposure to structured securities such as CDOs, he would be out of a job; VaR gave him a handy tool to rationalize a situation that defied common sense but that made his bosses only too happy. And at the top levels, CEOs and directors who probably did not understand the shortcomings of VaR were biased in its favor because it told them a story they wanted to hear.“
My Comment:
Of course, that is precisely the theme of “Mobs, Messiahs, and Markets.” The banking industry (and the real estate industry and the regulators and the buyers) were fooled, because - to a greater or lesser degree - most of them wanted to be fooled. Their own self-interest found it useful.
Mundus vult decipi. The world wants to be deceived.
Johnson being ex of the IMF (now housing the new global regulatory regime) is drawing the conclusion from this that you need to have tougher regulations. That leaves unsaid the “who will regulate the regulators” part of the equation. And even more importantly, it ignores the more fundamental problem of what drove this kind of speculative behavior, in the first place. The real problem is cheap money, not regulations, per se. Which takes you back to the Federal Reserve, rather than to the regulators or the banking industry.….. which goes back to fractional banking and the globalist cabal….which goes back to the whole world government project….which goes back to…well, you tell me, where that goes back to.
But you’ll never hear that from anyone in the MSM.
Taibbi’s Penson Video..(Correction)
Correction:
(10/12/09, Monday)I should have said “allegedly faked” video. I stand corrected. No weasel words, Mr. Byrne (see Byrne’s comment below).
I often post stories on which I have no comment or opinion one way or other, because I haven’t followed them, but think readers might like to. In my last several posts, in fact, I defended Deepcapture’s, Taibbi’s, and Zerohedge’s work, in spite of occasional alleged or real errors.
But the reason I linked to Wenzel’s blog is because Wenzel’s post is pretty funnily written, and I don’t follow Taibbi, except occasionally. I didn’t like his attacks on David Griffin, where he exposed himself as somewhat ignorant. Taibbi also doesn’t attribute people (apparently others have that complaint too). But arrogance and ignorance in one area don’t equate to being incorrect in another.
I’ll add a separate post with the rather long back and forth between Taibbi and his various critics and defenders. I went by Penson’s dismissal of the video, but I’ve since noted that Penson has some history that is troubling and tends to makes its dismissal less credible.
So what else might be construed as “weasel-worded” in my recent blogging?
Perhaps my rather neutral approach to the Byrne vs. Weiss feud, still going strong. Well, I’m neutral about it - who stalked whom, etc. etc. - because I don’t know the ins and outs of it. I had my own experience of being harassed, and can barely keep up with the details of that, let alone someone else’s stalking experience.
I also don’t know which of the two abuses of the market - “stock pumping and money laundering” (criticized by the Wall Street “captured” media) or “naked-shorting” (criticized by Byrne, Davidson “ “Bob O’Brien,” and many others, including Taibbi) - is the more momentous.
As a libertarian, I think naked-shorting is, but that’s only my opinion. Which is why I’ve been neutral. My sense is both abuses are real and extensive.
Likewise, I really don’t know enough about what the SEC’s investigation of Overstock is about. Could it be punitive?
Quite likely, given all we know about the SEC. But does that mean everything else the SEC does is incorrect? Unlikely.
Does that mean what Byrne wrote about “naked short selling” is incorrect? No.
Final point. I tend not to like shrill personal attacks.
That’s a deferral to civility and complexity, not weasel-wordedness.
ORIGINAL POST:
On Matt Taibbi getting suckered by a “faked” (quotes added for now) naked shorting video:
“Carney is a sharp guy, and he has Taibbi nailed on this one, but, I repeat, naked short selling, like a lot of Wall Street, is a very complex game. Carney in some of his other posts suggests there is nothing wrong with naked short-selling, he is off on that one. Some of it can be justified as simple market maker operations, but some of it is major league abuse by very clever insiders, which is the point Taibbi is taking, but doesn’t have the knowledge to back up properly.
Anyway, once you sit down an analyze the entire naked short selling thing, you realize that the bad naked short selling would go away if the SEC would stop issuing regulations that protect the bad guys. Basic common sense and commercial law would put an end to the bad naked short selling, real fast.
Bad naked short selling exists because there is a power source to manipulate, in this case the SEC, and the bad guys are running circles around the SEC.
What you want to understand naked short sales for yourself? Well pull up a chair, give yourself five hours and read this. It’s a great first step.
But, I tell you, it will be much more fun watching Taibbi attempt to pull the bayonet out of his brain.”
More by Robert Wenzel, at Economic Policy Journal.
Ahmadinejad Calls MSM More Dangerous Than Nuclear Weapons
From OpEd News:
“Ahmadinejad warned that the mainstream media in the West has grown to become more dangerous and more threatening than any chemical or nuclear weapons.
“The media campaign has turned into a full-fledged war. I believe the West’s abundant arsenals of chemical and nuclear weapons are there to deceive and intimidate,” he said.
According to President Ahmadinejad, unbiased media does not exist in the West. “Claims of freedom of press are all lies, each and every one of the western media outlets serve the interests and policies of their states,” he said.“When I was in New York for the General Assembly, I was interviewed by several news networks, all of which asked the exact same set of questions,” he said.
“I asked them how can you call yourself an independent media, when all the questions you are asking me have been clearly dictated by your governments. Which one of these questions are posed in the interest of your people?” he noted.My Comment:
I can’t speak to Ahamadinjad’s other positions. But on the media, he is one hundred percent correct. Mind control is a bigger threat than climate change…or the bankers…or anything else, since it’s fundamental to all of them - hence this blog.
Mexican-Swissie Trade Flashing Red Signals
This is an interesting piece from the end of August, published at Seeking Alpha, by Wayne Corbitt:
“In the chart below, I have plotted a spread between FXM (Mexican Peso - a riskier currency) and FXF (Swiss Franc - a more stable, defensive currency). When the black line is rising, money is flowing into the peso more than the franc, which is a sign that traders are embracing risk. When the black line is falling, more money is flowing into the franc and away from the peso, which says that traders are moving away from risk. I have also plotted the MSCI World Index [MSWORLD] as the red dashed line to show world equity performance in relation to the currency spread.Notice back in November/December 2008 (on the left side of the chart) how MSWORLD rallied while traders were moving away from risk in the currency markets. That party lasted about six weeks before the move away from risk caught up to equities. MSWORLD subsequently dropped 28% to its March low.
Following the volatility surrounding the March low, the spread and MSWORLD got back in synch in early July and moved higher together. Since early August, however, the spread and MSWORLD have been diverging badly, demonstrating that risk is once again being taken off the table. This is saying that the world-wide liquidity driven rally may be near its end.
When equities rise while traders are moving away from risk, there is not enough fuel in the tank to support prices at very extended levels. This is one more warning sign that must be heeded.”
My Comment:
This is a very interesting piece, but I must confess I’m in two minds about things.
On the one hand, I do believe that all the fundamentals, and many technical factors, call for a correction in the market rally (a bear rally) - and a substantial one. I think “green shoots” is simply PR.
On the other hand, there are other technical and economic data that are promising. And I think the powers-that-be are fundamentally committed to pushing up stocks.So which of these two sides wins?
It’s a tug-of-war, with deflationists generally on the side of a negative outlook on equities going forward. I’m on that side, but I’m also not a theorist. And I have a suspicion of theories in this environment. I’d rather look at things and figure out how I want to position myself for the next 3 months going forward. Sometimes that works out, and sometimes not.
So, I can feel negative about the economic picture and still see why some people like Jim Grant and Marc Faber seem to feel investing in stocks makes sense over the next three years. I’m wondering if there isn’t so much concerted effort being put into this that the market might indeed be propped up further, despite the problems in the commercial real estate sector.
(By the way, in one extended analysis of the credibility of prognosticators, Faber is ahead of the pack, being right a bit more than half the time; Peter Schiff and Robert Prechter were pretty low down, being wrong more often than not, and considerably wrong). So you can be a pretty smart macro analyst (like Prechter) but be a pretty bad financial adviser.
Indian Flooding Caused by Climate Change?
The recent severe flooding in India has displaced millions of people, killed hundred, and seem to be a sinister portent of worse to come, in a country that already has a full plate of problems. Time Magazine, of course, tells us it’s due to climate change. How far that is true or not, I don’t know, but it’s also clear that government inefficiency (there is no systematic method of water storage), the destruction of small-scale farming leading to soil erosion, practices of deforestation by developers and nomadic herdsmen, have contributed a lot. However, I suspect there’s more to the story than meets the eye. When something shows up on a Time magazine cover in this way, whatever the merits of the issue, it’s usually been harnessed into state propaganda. Tell-tale signs of that may be the fact that the climate change expert quoted is a government outfit (IPCC), not an academic one, and that the ubiquitous Peterson Institute is also in the picture. Also connected to the Peterson Institute is Nandan Nilekani, ex-CEO of Infosys (India’s Microsoft), now the head of the Indian government effort to create a biometric ID (about which I blogged here).
More digging warranted….
From Time Magazine:
“Although flooding has recently become commonplace in India - in 2008, over 3 million people were displaced when the Kosi river in Bihar burst its banks - but this year’s deluge came as a shock because if followed a protracted drought, and a monsoon season branded a dud by the authorities. To experts who’ve tracked the effects of climate change, however, the flooding came as no surprise. In its fourth assessment report in 2007, the Inter- Government Panel on Climate Change (IPCC) predicted that more extreme droughts, floods, and storms, would become commonplace in the future, and that these intense weather conditions would follow in close succession to each other, often in the same areas. ….Meager monsoons mean meager crops, and meager income, for Indian farmers. This year alone, the loss to crop yields and property in the two states has totaled almost $7 million. Dr. William Cline, a senior fellow at the Center for Global Development (CGD) and the Peterson Institute for International Economics says that of all the potential damage that could occur from climate change, damage to agriculture is likely to be the most devastating. “In the southern parts of India, damage will be substantial and similar to that in other countries also located close to the equator,” he says. “In these locations, where temperatures are already at high levels, an increase in temperature will surpass crop tolerance levels.”
Already, food shortages have become a major concern for the government, as the retail prices of vegetables shoot up. Damage to the onion crop in the recent floods, for example, saw the vegetable’s price double within days.”- More at Time Magazine.
Gold Commentary
I read this recently in a gold newsletter:
“More importantly, if I own gold, a peasant buying gold in China can directly affect the value of my holdings through the increase in demand when he buys it in his local village since we are both holding the same thing!”
Well, these are sweet thought to gold bugs, but the vast majority of peasants and rural workers in China can’t afford anything beyond subsistence. Gold may benefit from middle and upper class savings. But I am not sure Indian demand can keep up with the prices.
Tips for Buying Property In a Foreign Country
Having now lived in about a dozen countries (counting living as spending more time than a couple of weeks), and having window-shopped for property in all of them, here are a few things that I’ve learned.
1. Property websites differ widely. In some, the offerings are updated regularly and reflect current prices. Others are dated. Some carry photos for years after the property has been sold. So, if you write and don’t get an answer fairly promptly, move on.
2. Make a phone call whenever you can. Many sellers don’t take emails seriously. Or they’re tired of long explanations to scores of strangers who aren’t really interested. After the first few emails, get on the phone and talk to the owner or the broker.
3. Ask questions. But don’t ask just about what you’re interested in. Ask macro questions about the area, the market, other cities, demographics, employment.
4. Don’t ask so many questions that you don’t have time to listen to what the broker is telling you. Good brokers have a wide knowledge of the market and even a casual phrase can save you hours of research on your own. Tap into professional knowledge whenever you can.
5. Don’t reveal too much of your own plans. It’s premature and can sabotage your ability to negotiate (this is often hard for me, being a rather open person). On the other hand, being too cagey provokes caginess in others too.
6. Don’t assume anything. Sometimes working directly with the owner does save you money. Sometimes, it can end up being costlier. Brokered properties are not necessarily more expensive. Brokers often have a better idea of a good sale price than owners. Many an owner has put his house on the market at an inflated price only to have it sit there for months. Then he has to reduce the price, and by then, the market has moved on.
7. Don’t be pressured into buying. If the broker has other offers coming in, don’t rush to beat them. Offer what you think you’re willing to pay, and if someone else offers more, then that’s the way the game went. There’ll be another chance some where else.
8. When you have done your research long enough, make your move. Endlessly nitpicking something is a dead-end. There’s likely to be some draw-back to buying any piece of property. You get the architecture you want, but along with it comes plumbing problems; the location with good rental returns might not have as good capital appreciation as the location with the good rentals; the glorious facade might open into a boxy lay-out; you love the terrace, but the bathrooms are pokey. That’s life.
9. Read up on real estate procedure and verify with locals exactly what needs to be done at each step. It would be a shame to lose a property because you didn’t get a piece of paper right.
10. Be very clear about your goals. Are you buying it for rent or for profit or because you always wanted to own a piece of beautiful architecture?
11. Be very clear about your feelings. Some people might be willing to lose money fixing an old building. Would you? On the other hand, would you enjoy owning something cheaper and plainer in a frumpy area? Only you know your tolerance level for different things.
Obama Wins Nobel for Bankster Bail-Outs and Af-Pak Bombing
“President Barack Obama won the 2009 Nobel Peace Prize on Friday for “his extraordinary efforts to strengthen international diplomacy and cooperation between peoples,” the Norwegian Nobel Committee said, citing his outreach to the Muslim world and attempts to curb nuclear proliferation.
The stunning choice made Obama the third sitting U.S. president to win the Nobel Peace Prize and shocked Nobel observers because Obama took office less than two weeks before the Feb. 1 nomination deadline. Obama’s name had been mentioned in speculation before the award but many Nobel watchers believed it was too early to award the president.”
My Comment:
Considering that Henry Kissinger has a Nobel prize, this is quite in tradition for the misnamed Nobel prize - a highly political award. Maybe some of the Swedish banks that got into trouble in Latvia are greatful for the Obama team’s globalization of QE (Quantitative Easing), after their lending spree in Latvia.
And nuclear disarmament? After two weeks in office?
Even the report displays skepticism:
“Rather than recognizing concrete achievement, the 2009 prize appeared intended to support initiatives that have yet to bear fruit: reducing the world stock of nuclear arms, easing American conflicts with Muslim nations and strengthening the U.S. role in combating climate change.”
In short, it’s an astute, if blatant, piece of public relations.
Some questions for the Nobel Laureate:
Question: Is the US Govt. going to lay down most of its nuclear weapons? Or is it going to make nominal reductions, while using that to prevent any other country gaining even a single weapon?
Question: Is the US Govt. going to reduce surveillance, quit bombing in South Asia, and threatening Iran?
Question: Is the US Govt. going to modulate its own life-style of excessive consumption (subsidized by US tax-payers and artificially cheap interest rates that effectively rob savers all over the globe) or is it going to be lecturing other countries on how to live frugally after a half century of reckless living?
(more later)
No Check Points in Heaven
Palestinian activist Ramzy Baroud writes about his father’s struggles, and eventual death, in Gaza:
“My father’s reputation as an intellectual, his obsession with Russian literature, and his endless support of fellow refugees brought him untold trouble with the Israeli authorities, who retaliated by denying him the right to leave Gaza.
His severe asthma, which he developed as a teenager was compounded by lack of adequate medical facilities. Yet, despite daily coughing streaks and constantly gasping for breath, he relentlessly negotiated his way through life for the sake of his family. On one hand, he refused to work as a cheap labourer in Israel. “Life itself is not worth a shred of one’s dignity,” he insisted. On the other, with all borders sealed except that with Israel, he still needed a way to bring in an income. He would buy cheap clothes, shoes, used TVs, and other miscellaneous goods, and find a way to transport and sell them in the camp. He invested everything he made to ensure that his sons and daughter could receive a good education, an arduous mission in a place like Gaza.
But when the Palestinian uprising of 1987 exploded, and our camp became a battleground between stone-throwers and the Israeli army, mere survival became Dad’s new obsession. Our house was the closest to the Red Square, arbitrarily named for the blood spilled there, and also bordered the ‘Martyrs’ Graveyard’. How can a father adequately protect his family in such surroundings? Israeli soldiers stormed our house hundreds of times; it was always him who somehow held them back, begging for his children’s safety, as we huddled in a dark room awaiting our fate. “You will understand when you have your own children,” he told my older brothers as they protested his allowing the soldiers to slap his face. Our ‘freedom-fighting’ dad struggled to explain how love for his children could surpass his own pride. He grew in my eyes that day.
It’s been fourteen years since I last saw my father. As none of his children had access to isolated Gaza, he was left alone to fend for himself. We tried to help as much as we could, but what use is money without access to medicine? In our last talk he said he feared he would die before seeing my children, but I promised that I would find a way. I failed.”
Berlusconi Immunity Thrown Out by Constitutional Court
Italy’s top court, the Constitutional Court, has thrown out a law granting immunity from prosecution to the president, Silvio Berlusconi:
“The law overturned Wednesday was pushed through by Berlusconi’s conservative coalition in 2008 when he faced separate trials in Milan for corruption and tax fraud tied to his Mediaset broadcasting empire. It granted immunity from prosecution while in office to the country’s four top office holders — the premier, the president of the republic and the two parliament speakers.
The proceedings against Berlusconi were suspended as a result of the law, drawing accusations that it was tailor-made for the premier.
The corruption trial is particularly threatening because, in the meantime, the premier’s co-defendant has been convicted of accepting a bribe to lie in court to protect Berlusconi in another case.
Still, even if convicted, the premier would not be obliged to resign and could simply appeal, as sentences in Italy are usually not served until all avenues of appeal are exhausted.”
Bank Chief Admits He Didn’t Know…
John Thain now admits no one at Merrill had any idea what their CDOs (collateralized debt obligations) were worth. They created them on computer programs. Not only was the global economy rear-ended by a bunch of greedy corporate hacks, it turns out they were too dumb to know what they were doing and too reckless and arrogant to ask. It’s bad enough being scammed by psychopaths. It really hurts to be scammed by morons.
“We think it’s good news that Thain is now emphasizing the knowledge problem when it came to banking–highly paid, well-educated people at the top of their field just didn’t understand the credit derivative products they were buying and selling. This is important as much of our financial reform seems to ignore this problem, focusing instead on fixing incentives in compensation.
It also undermines the idea that the Fed–or any other regulator–will be able to properly assess the risk of these kinds of derivatives.”
My Comment:
I’ve always suspected this, because in graduate school one of my close friends was working on a PhD in finance (where he’d ended up after starting out in mathematics). He was very smart and believed that you could quantify decision- making at all levels. He wanted to turn the social sciences into the hard sciences. We had passionate arguments about this, since I thought the hard sciences were a very faulty (if useful) model for the arts and humanities. I was flabbergasted to find out one day that he didn’t understand what a mortgage was - he lived in such a rarefied world of theory and had been a student for so long. It wasn’t that he lacked empathy or emotions. He didn’t. What he lacked was any experience of the practical world. [He ended up becoming a trader for JP Morgan and had an office at the World Trade Center. Fortunately he wasn't in on 9-11].
GOLD: IMPORTANT: Watch the Prices Not the Theories…
My position is that the dollar bear is being over-hyped (despite the bad fundamentals) and manipulated, and as a consequence, I’ve been a dollar contrarian. I still kick myself for selling my initial gold long position way back in 2006 (I bought some in 2004) and then never regaining it because I was still convinced it would go lower. It did, but I wasn’t paying attention when it did. In trading, you can’t go long stretches doing other things and not watching the prices. The bullion banks both short and go long gold, in ways calculated to pick the pockets of the naive. Here’s a good analysis by Stewart Thomson at 321gold:
“The key point is that the US dollar bear market is now entering the stage of a publicly recognized and PROMOTED bear market. As of right NOW, you will start to hear from business owner investor acquaintances about the US dollar bear market. These idiots will parrot the Bloomberg stories, nodding their heads up and down, completely ignoring the fact that the dollar is down about 35% from the highs set about 7 yrs ago. NOW they show up and notice there’s a problem with the US dollar? We are in the later, most horrific stage of the US dollar bear market. The stage where the banksters begin buying USD with their infinitely deep pockets, while the institutions and public bail in terror and accelerate their doomed-to-fail leveraged carry trade scheme. Soon the banksters will be selling OTC derivatives on the US buck shorts, collecting, fees and interest before finally burning the thing into the ground via a new gold standard that will end the US dollar short party like a tomato hitting a cement wall.
15. It’s very important to stay focused on what the charts are indicating and buying gold weakness and selling gold strength only. This is the largest bankster play ever, as they load up on the US dollars sold by the bustout dollar bag holders worldwide who follow the bankster propaganda that the USD is “finished for the long term.”
16. We even have the head of the World Bank calling the USD a sell now, 7 years after the top. Then he says, “by the way, I’ve bankrupted the entire world bank, but I know the US Dollar is now in a bear market, 7 years after the top.” Gee, I wonder why his bank is worthless. He says what he’s paid to say to create WORLDWIDE panic and hysteria concerning the USD. The banksters are ready for the next stage of profit booking on their giant gold long positions as part of their plan to take over the major holdings of the US dollar.
17. They are looking to create fear in the US dollar market, and succeeding tremendously in terms of time and in terms of volume of fear. All it takes is for a tiny portion of the US dollars to make their way towards the gold market, a tiny portion of allocation by the institutions, and you have immediate mindblowing volatility in the gold market. There are hundreds of institutional traders handling vastly more money than that held by all the GCMs. If you are shorting gold, you must be prepared to handle price moves of $100, even $200 during a single day’s trading.
18. My strongest suggestion if you ARE short gold, is that you move towards trades drastically smaller than you are trading now. Few investors alive today understand what is coming in the gold market. The gold community has called almost every single top and bottom wrong. There’s one thing not a single person in the gold community has called wrong: The Big Picture. That makes you smarter in many ways that 99% of the world’s largest money managers. Take your credit. It is due.
19. Once the banksters have pointed terrified institutions towards gold, they will then seek to alternate bullish and bearish news to create massive whipsaw action. The banksters’ “grand slam” will be announcing that the “recovery” was in fact a warm-up act for their Trillion Dollar OTCD Main Act. “OTCD” being Over-The-Counter Derivatives. Once the economy is announced to be imploding via a truckload of new multi trillion dollar OTCD failures, the US Dollar bear market will not reverse. It will accelerate at hyperspeed. Gold’s rise will create terror amongst institutional investors that financial Armageddon is upon them. They understand full well what happens to gold if they all charge in at the same time. Many will turn to gold stocks to appear less panicked than they are.
20. There will be no “gold rush” for the public. They will be too busy screaming for President Obama to print more money to save them from the financial black hole they are in. In the meantime, it is more important that you continue to watch the charts for REAL overbought and oversold conditions. Don’t tell yourself excuses to buy or sell gold when the clear picture on the charts is not what you are pretending it is, what you want it to be.
21. I’ve heard a million reasons from many investors WHY gold will go up or down for the next leg. Who cares. Place your buys and sells in response to whether it IS up or down. All else will fail you….”
Ron Paul: Fractional Banking Finances War…
*”Paul makes it clear that the Fed isn’t the whole problem. It’s just one part of a system that first went wrong with the introduction of fractional reserve banking centuries ago (banks used to be warehouses, storing depositors’ money for a fee), followed by the spread of European central banks (really just scams to allow a few elite bankers and politicians to expand their own power at the expense of everyone else) and then, finally, the introduction of fiat currency, which freed governments to expand spending and borrowing without regard to, well, anything. The problem, in short, is the whole of modern banking and finance.
*The middle part of the book features transcripts of Congressman Paul grilling Fed chairmen Greenspan and Bernanke. Some of these transcripts date back to the early Reagan era, which means that for going on three decades Paul has been fighting this fight, and slamming into the same brick wall. The Chairmen feel no need to explain themselves to a lowly congressman, and respond with a mixture of lies and obfuscation that apparently fooled most of Washington. The generally-respectful Paul even refers to Greenspan as “pathetic” after one especially dishonest piece of testimony. Less charitable readers will, by the end of this section, want to take a congressional microphone and beat Greenspan and Bernanke senseless.
*Fractional reserve banking and fiat currency make war easier. Back when a ruler needed actual gold to field an army, invading a neighbor required some serious forethought. But once a dictator (or the world’s policeman) could just print a few billion pieces of paper and order some new tanks, “defending the national interest” got a whole lot easier. Hence the bloodbath of the 20th century, and perhaps the mess of the coming decade.
*Paul knows all the major sound money/Austrian economics classics, and he cites them liberally. The “recommended reading” list contains a year’s worth of serious research.
*Though he continues to fight, he’s not optimistic about averting the coming train wreck, which he refers to as the “BIG ONE”.
Libertarian Living: Neuroeconomics and Cooperation
“The Science and Ethics of Cooperation,” by Michael Townsey, Prout Institute:
“The cooperative system is fundamental to the organization and structure of a Prout (the Progressive Utilization Theory) economy. It is an expression of economic democracy in action - cooperative enterprises give workers the right of capital ownership, collective management and all the associated benefits, such as profit sharing.[i] Prabhat Ranjan Sarkar, the propounder of Prout, goes further and argues that an egalitarian society is actually not possible without a commitment to the cooperative system.[ii] The commitment is not just to an economic order but also to a cooperative ethic and culture. This essay explores some of the scientific evidence that humans have a predisposition to cooperation and in particular to economic cooperation. The evidence comes from a new and exciting field of research known as neuro-economics. We then turn to those insights provided by sociological studies.
Neuro-economics
Neuro-economics is the study of the neuro-physiological underpinnings of economic decision making. The field is new and providing unexpected insights into human economic behavior. Classical economic theory requires individuals to make complex calculations to maximize their personal advantage or utility. Utility, however, is a strangely ambiguous concept. On the one hand it is given a numerical value which implies the counting of something but on the other it is entirely abstract and not anchored to anything in the real world that can be counted. The advent of neurophysiology led to the idea that utility was really a surrogate for some chemical currency inside the brain, with most interest focused on serotonin molecules because these are known to be responsible for the experience of pleasure.
It turns out that a wide range of molecules of emotion[iii] impinge on the mental cost-benefit calculations that are supposed to take place inside the brain and they have unexpected effects. For example, in a ’sharing experiment’, person A was asked to share a sum of money with person B. These experiments demonstrated behavior inconsistent with neoclassical theory. People appear to put a high value on fairness. In a follow up experiment, persons A and B were placed in the same experimental scenario as before, but they were (unknowingly) given an intranasal administration of oxytocin. Oxytocin is a neuropeptide that plays a key role in social attachment and affiliation in animals and causes a substantial increase in trust in humans. In these experiments the effect of oxytocin was to increase the amount of money that A gives B. The experimenters concluded that “oxytocin may be part of the human physiology that motivates cooperation.”[iv] It is worth adding that such hormone-mediated interactions are not confined to human relationships but are also likely to be involved in human-animal relationships.[v]
Oxytocin is not the only neuro-chemical to promote cooperation. Recent observations of bonobo monkeys in the jungles of the Congo reveal fascinating contrasts with chimpanzees.[vi] Bonobos are matriarchal and show little aggression compared to the patriarchal chimps. Chimps respond to strangers with aggression, while bonobos demonstrate curiosity. When under stress, chimp tribes degenerate into fighting while bonobos respond to stress by engaging in collective sexual activity. Scientists have concluded that bonobos demonstrate higher levels of trust both with each other and with strangers. Of most interest, however, from a neuro-economics point of view, is the ability of the monkeys to perform a simple task requiring cooperation in retrieving some bananas that are out of reach. Although both species are intelligent enough to work out a solution (for example, by one climbing on the shoulders of the other or by one holding a ladder for the other), the chimps fail because they cannot trust one another. On the other hand, bonobos have no trouble cooperating to retrieve the bananas.[vii]“
Gulf Arabs to Move Out of Petro-Dollar (Updated)
Update:
I’m adding my comment at the top here after watching this puzzling day. Gold shot up to new highs over $1040 (and not just in the US but elsewhere). Is this the bull break-out the bugs have been waiting for? Maybe. Central bankers and officials from the Gulf states came out to pooh-pooh the story, but it couldn’t be put back in the box.
My puzzlement is this: If gold is soaring because of this “revelation” of the dollar’s death - then why did the dollar itself sink only modestly (at least, as I write).
I note also that the stock market recovered some of its ground. That might have something to do with the Australian Reserve Bank announcing a tighter policy, quite unexpectedly, and in apparent belief that the recovery is real, never mind Joseph Stiglitz, George Soros, Marc Faber, Jim Rogers, and other no-longer-strange bedfellows who think the opposite.
V-shaped, U-shaped, Square-root shaped, or corkscrewed, the recovery isn’t your grandfather’s recovery, that’s for sure. And someone is trying to make a silk purse out of this sow’s ear. That skepticism leads me to wonder whether this very convenient rumor, which coincides with the IMF meeting in Istanbul, might be a certain kind of saber rattling in anticipation of negotiations - except that these very public meetings are never where anything substantial takes place any way. (So says Simon Johnson in a recent blog post). But the IMF is selling gold, we know, and we know also that it wants to make sure it doesn’t hit the markets too hard when it does. Could this little upswing be helpful toward that end? Probably. Could this rumor - widely denounced as insubstantial - have something to do with that? Perhaps.
In the news, the Independent’s Robert Fisk reports on the coming fall of the petro-dollar:
“In a graphic illustration of the new world order, Arab states have launched secret moves with China, Russia and France to stop using the US currency for oil trading
In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.
Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.
The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.”
China Saved Brazilian Economy, Says Brazilian Economist
From the Brunei Times:
“In Latin America, IMF economists said the crisis is affecting countries differently depending on whether, like Mexico, they are more closely tied to the US or, like Brazil, they have more links with China.
“If it was not for China we wouldn’t have seen positive growth in the second quarter in Brazil,” Ilan Goldfajn, chief economist at Brazilian bank Itau Unibanco, said at an IMF-organised conference in Istanbul. He said the world would now start to “rebalance towards Asia”.
