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Posts tagged ‘TARP Funds’

The derivatives market : April 2010

 

A major crisis is building in the derivatives market yet a cabal on Wall Street is blocking the formation of a clearing house that could stop the next financial meltdown, a senior official with the Kauffman Foundation said on Tuesday…

The need for disclosure in the swap markets is enormous, yet the will to act is missing because of a small cadre of special interests, said Harold Bradley, who oversees almost $2 billion in assets as chief investment officer at Kauffman…

“I believe we are in a cabal. There are five or six players only who are engaged and dominant in this marketplace and apparently they own the regulatory apparatus,” he said. “Everybody is afraid to regulate them.”…

U.S. and European officials are trying to craft new rules to regulate the $450 trillion private derivatives market in broad efforts to avoid another financial crisis…

Bradley said those efforts fall short…

Instead, he said regulators have found a boogeyman in high-frequency trading, which has taken the focus off the highly levered derivatives market…” (Emphasis added.)

“Wall Street cabal seen derailing serious swap reform”
Herbert Lash, 3/30/10
http://www.reuters.com/article/idUSTRE62T5RD20100331

“The dollar-based monetary system is no longer adequate for a larger and more integrated world economy…

Prominent developing economies are increasingly demanding to be included in any multilateral dialogue that aims to shape the new economic order…”

“Beyond the Dollar: Rethinking the International Monetary System”
The Chatham House Report, March 2010

The Federal Deposit Insurance Corp. is trying to encourage public retirement funds that control more than $2 trillion to buy all or part of failed lenders, taking a more direct role in propping up the banking system…

Direct investments may allow funds such as those in Oregon, New Jersey and California to cut fees for private-equity managers, and the agency to get better prices for distressed assets, the people said. They declined to be identified because talks with regulators are confidential…

Oregon’s retirement fund may contribute $100 million as regulators seek “the support of state pension funds to solve the crisis surrounding ongoing bank failures”… New Jersey’s fund may also participate…

The FDIC shuttered 140 lenders last year and expects the tally may be higher in 2010… Pension funds, whose 100 largest members manage $2.4 trillion, could provide capital to acquire deposits and outstanding loans from collapsed banks

Investing in distressed banks doesn’t always pay off, as the U.S. Treasury Department learned with the Troubled Asset Relief Program. At least 60 lenders skipped some of their promised dividends to the TARP fund

…The California Public Employees’ Retirement System, the largest U.S. public pension fund, said in a Feb. 16 presentation that one of its goals is to increase its “co-investments” in transactions alongside money managers…

Known as Calpers, the pension fund plans to “explore unique structures with select general partners”…” (Emphasis added.)

“Failed Banks May Get Pension-Fund Backing as FDIC Seeks Cash”
Dakin Campbell, Bloomberg BusinessWeek, 3/8/10

“Alfredo Ley, founder of Ley Investor B.V., an investment management and research firm in the Netherlands, yesterday published a fascinating review of a 1989 academic paper written by the great rationalizer of surreptitious government intervention in the gold market, former Harvard professor and former U.S. Treasury Secretary Lawrence H. Summers, now director of President Obama’s National Economic Council…

Ley’s review of that paper, headlined “From the Horse’s Mouth: Lawrence Summers on Market Manipulation in Times of Crisis,” construes the paper as an argument for government to respond to financial crises by propping up asset prices and rigging currency exchange rates, presumably also largely surreptitiously…”

“More advocacy by Obama’s top economist for sneaky market rigging”
The GATA Dispatch, 3/27/10

The Threat to Wealth, including a Threat to that (formerly most sacrosanct) category, Pensions, is just beginning, though the Markets now appear to have calmed. But that calm is The Eye of a Market Hurricane which began in 2008, and The Eye is slowly but inexorably moving.

The Megabankers have apparently encouraged FDIC’s push to use Pension Fund Assets to buy often-still-Toxic “Assets” of Failed or Failing Banks. If that Push is successful, it would result in yet another massive benefit to Megabankers.

It would remove failed or failing Assets from the banking system (to the detriment of Pensions) and leave the mega-Bankers in a position to acquire the still-performing Assets in that System “on the cheap”.

It would not be the first such acquisition nor would it likely be the last.

Deepcaster and others reported recently on a similar Mega-Bank-generated Plan to force Pension Funds to Buy U.S. Treasuries – not such a good idea in light of the U.S.A.’s prospective (by 2028) $20 Trillion plus National Debt and $100 Trillion plus downstream unfunded liabilities, for Social Security, Medicare, etc. Given this Reality it is highly likely long-term U.S. Treasuries will decline in value over the next few years.

And Deepcaster’s Long-standing claim that one goal of the Mega-Bank led Cartel’s* ‘End Game’ is the Destruction of the U.S. Dollar, is supported by the Chatham House Report referred to above which serves as a Trial Balloon. And as the degradation of the purchasing Power of the U.S. Dollar proceeds, what happens to the value of the Dollar-denominated Assets. The Answer is unfortunately clear.

The foregoing are just three more examples of the potential appropriation of Citizen Investor Assets, just as the 2008-2009 Market Crash resulted in a massive Wealth Transfer (of some $11.9 Trillion in gain(!) in the six months of July through December, 2008 – the six months encompassing the Market Crash when Investors world-wide were losing Trillions). Verify this Gain for yourself at the Central Banker’s Bank’s own website – http://www.bis.org, Path: statistics>derivatives>Table 19.

If the Investor/citizens of the U.S.A. (and nations around the world) do not stop the Musical Chairs-like “Game” of Bailouts of and Asset Grabs by the Mega-Banks in which Investor/Citizen/Retiree/Taxpayer Assets are appropriated one by one, then all will ultimately share impoverishment.

One step to stop the grab is to Audit and then Abolish the private for-profit Fed, leader of the Cartel.*

Despite the Hot Air from Washington, DC, it looks as if the chances for passage of Real Financial Reform Bills – including Rep. Ron Paul’s Audit and Abolish The Fed bills – are slim to none in this session.

Indeed, the simple solution to the “Too Big to Fail” problem is not receiving serious consideration in Washington, DC – yet. That would be, of course, to break up the Mega-Institutions and parcel out their Assets and functions to regional and state Banks.

Official Numbers       vs.      Real Numbers

Annual Consumer Price Inflation reported March 18, 2010
2.14%                              9.39% (annualized March 2010 Rate)

U.S. Unemployment reported March 5, 2010
9.7%                               21.6%

U.S. GDP Annual Growth/Decline reported March 26, 2010
0.06%                              -4.62%

Significantly, last week’s weak Bond Auction (resulting in a spike in rates) and the release of figures showing February was the worst month for new House sales ever, show that Main Stream financial Media Happy Talk about the Bullish Equities Markets and “Recovering Economy” is just so much hot air.

Sooner rather than later, these Realities are going to rear their ugly heads in an Equities Market Takedown. Facilitating that Market Takedown is the fact that Equities Markets are generally considerably overvalued, with the S&P P/E Ratio at about 23 to one.

Some of you will remember the period leading up to the Market Crash of 1987. For months, the Fundamentals and Technicals deteriorated while the Equities Markets continue to rise.

The same was true of the period leading up to the Internet Bubble Burst of 2000. The bubble “should” have burst earlier than it did. But the shorts had to wait for months before profiting.

In our view, a similar situation exists today. The Stimulus Bills plus positive Main Stream Media “spin” plus Cartel Intervention have created a “Sugar High” in the Markets. But it is highly unlikely it will last.

And it is important to note that: Market Crashes and Takedowns typically strike suddenly, before one has time to “get short, or exit longs”.

Thus, in our view we are in the Calm Eye of the Markets’ Hurricane, but that Eye is slowly, but inexorably moving. We shall soon be in the Hurricane again.

Will The Cartel employ a chunk of the $437 Trillion in dark OTC Interest Rate Contract Derivatives they have available for Market Control to fuel another Bond Rally soon?.

“We Must Break Up Big Banks and End Too-Big-to-Fail, Says Simon Johnson”
Tech Ticker – Yahoo, 4/1/10

source link see full article: http://www.financialsense.com/fsu/editorials/deepcaster/2010/0401.html

Copyright © 2010 DeepCaster LLC

Market Up-Date January 2010

Quarterly Market Brief & Stock Pick

Sent to me by  Chris  at  www.wealthbuilder.ie

 
 

The market is currently trying to find its bearings after the spectacular run up since March 2009.

 
 

On a weekly chart the Dow Industrials and Dow Transports both indicate a definite technical consolidation line being formed. The longer the averages remain in their respective November and December ranges the more the the market will discount the March rise and focus on the new support point. According to Hamilton the greater the duration of this “line of consolidation” the more significant the direction of the trend on “breakout.” On probability the market will move North, once the earnings season indicates there are no major surprises in the offing. However, how quickly the averages approach previous highs is anyones guess but price movement is bound to be choppy due to all of the following:

 
 

A:              Will future earnings eventually justify such rich valuations.

B:              When rates start rising will the hikes be benign or aggressive due to explosive inflation.

C:              Will the Real Estate, Financial & Banking sectors “tank” on rate hikes.

D:              When will unemployment stabilise and improve.

E:              Has the market discounted tax hikes.

 
 

As always the market must try to discount such uncertainty but given the mix I see above average risk in the martket given the weak underlying fundamentals.Therefore I am happy to advise clients to hold onto their fabulous 2009 gains and await a clearer economic tablet or a powerful technical indicator.

 
 

Some folk recommend Gold or Silver but again I see major institutional manipulation which makes a traders life a misery. Trading gold makes good fundamental sense but in actuality the technical picture has been muddied by paper gold in the form of ETFs, so I have moved on.

 
 

The situation since March provides all the emanations that TARP funds found a home in equities. In other words the fix was in. The wonderful gains thus far have given “banks” great profits to repay congress borrowed funds. I use the word bank with great delicacy because they are in effect derivitave traders. For this reason the TARP funds were not used to “stimulate” the real economy and therefore cannot be found in credit card account funding or car finance deals or property mortgages or business overdrafts (no that would be too much work and risk). The funds are in hyper leveraged instruments, cross purchased. Thus this is a synthetic bull run, hence the spectacular market rise.
The sooner congress realises this the sooner the true American economy can regenerate. When will it be accepted in honour and faith that the key to recovery was, is, and will be small enterprise. History educates that small entrepreneurs create 80% of ALL NEW JOBS in America. Support them and all will go well.
Ignore them and a double dip
correction will prove inevitable due
to sustained high unemployment.

 
 

I don’t know if any of you noticed but over the Christmas, during a 7 day period, short term interest rates shot up 600% from .01% to .07% and long term rates jumped 25%. In the first days of the new year they were pulled back but short rates are sill up 200%.  This volality indicates the fact that the FED has a major job on its hands holding the “balanced quantatitative easing” story together. A lot is riding on the holding of rates down and if anyone drops the PR ball there will be hell to pay. Ergo the market is risky until the jobs situation shows definite unmanipulated improvement.

 
 

 
 

 
 

 
 

Stock Pick:

RDSA: Royal Dutch Shell plc.

 
 

Royal Dutch has regained about half of the ground lost since their 2008 peak, supported by a partial recovery in oil prices.

 
 

The refining, chemicals and natural gas lines have not snapped back as quickly as the oil pumpimg business.
However, efficiency measures have been implemented and Shell is targeting a return to growth before too long.

 
 

Expansion is on track for the oil and gas exploration business in 2011, when a couple of extra large gas projects in Qatar are due to come on stream.
These top quality ADRs should appeal to conservative investors. While the issue is untimely strong dividend income underpins the good long-term total return potential that we envision.

 
 

Fundamentals:

Dividend Yield:                                  5.5%

Financial strength:              A++

PE Ratio:                            11.0

Return On Cap:                            12.5%             

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