What is truth?

Posts tagged ‘Wall Street’

Geithner Joins the Wall Street Party

By Staff Report at the Daily Bell

Geithner is a prototypical technocrat in a tradition that stretches back, unfortunately, to Alexander Hamilton. In fact, one could characterize Geithner as a kind of Hamilton-on-steroids. There really wasn’t anything Geithner was shy about doing when it came to wielding federal power. He expected that fedgov was the market’s dominant entity and that the US Treasury, Wall Street and the Federal Reserve would all work together as one single unit. With this in mind, the catastrophe of 2008-2009 was gradually lessened and the financial industry was “stabilized.” In fact, what this basically entailed was printing trillions of dollars to buttress banks’ bottom lines. This did little or nothing for the “real” economy, but people like Geithner are taught that the real economy is merely an appendage of the financial one. And so, Geithner did as he was asked to do. He made sure of the solvency of Wall Street and of the City and having done this for four years – and no doubt seeing that the situation was deteriorating further – he decided to head for the exit. He has moved on to take the presidency of a white shoe Wall Street firm specializing in start-up investments. It is his first “private sector” job, we’re told, but one he will be good at because of his work ethic and “commitment to leadership.” Others have a somewhat different opinion, as we can see from this article at Bloomberg: Why People Are Mad at Tim Geithner for Jumping Into Private Equity … I’ll admit to being a bit surprised to learn that former Treasury Secretary Timothy Geithner has agreed to become president of the private equity firm Warburg Pincus. On the one hand, it shouldn’t come as a shock that a guy with perhaps a deeper understanding than anyone else of how markets, government, and the economy interact should decide to apply those talents to making money. On the other hand, the news did surprise a lot of people who expected Geithner to become a university president or the head of an NGO or some other eminent non-Wall Street position –

See more at: http://www.thedailybell.com/news-analysis/34761/Geithner-Joins-the-Wall-Street-Party/#sthash.1Ubb2Y76.dpuf

Billion-Trillion Derivatives Market! … Reform or a Blowup?

Derivatives Reform on the Ropes …


 New rules to regulate derivatives, adopted last week by the Commodity Futures Trading Commission, are a victory for Wall Street and a setback for financial reform. They may also signal worse things to come … The regulations, required under the Dodd-Frank reform law, are intended to impose transparency and competition on the notoriously opaque multitrillion-dollar market for derivatives, which is dominated by five banks: JPMorgan Chase, Goldman Sachs, Bank of America, Citigroup and Morgan Stanley. – New York Times


Dominant Social Theme: We have this billion trillion market under control. Don’t worry.

Free-Market Analysis: Derivatives reform? We hardly think so …

First of all, nobody knows how big the derivatives market is and no one knows how many dollars are at risk. Those involved in making the regulations are also the largest players in the market. Whatever “reform” is being worked out will benefit those who are part of the industry.


Here’s how Wikipedia describes a derivative:

A derivative is a financial instrument which derives its value from the value of underlying entities such as an asset, index, or interest rate–it has no intrinsic value in itself. Derivative transactions include a variety of financial contracts, including structured debt obligations and deposits, swaps, futures, options, caps, floors, collars, forwards, and various combinations of these…………………………..

full article at source: http://www.thedailybell.com/30657/Billion-Trillion-Derivatives-Market–Reform-or-a-Blowup

Stock Market Extreme Euphoria Tops

By: Zeal_LLC

The levitating stock markets continue to  seductively entrance traders, powering to new nominal record highs day after  day after day.  No one believes a  meaningful selloff is even possible anymore, thanks to the vast deluge of  central-bank monetary inflation.  Sheer  euphoria has set in as all perception of risk has vanished.  This makes these stock markets  extraordinarily dangerous, they are truly at topping extremes.

As of Wednesday, the flagship S&P 500 stock index (SPX) had rallied to new nominal record highs in 11 of the past 13 trading days. It blasted 4.8% higher over this short span. If sustained for an entire year, this blistering rate of ascent would nearly double the stock markets! This latest euphoric surge extended the cyclical stock bull that was born way back in March 2009 to a massive 145.2% gain over 50.2 months.

This move, particularly the one-sided 22.6%  melt-up in the last 6 months, has bred unmistakable euphoria.  Wall Street  vehemently tries to deny this truth, but the definition of euphoria is “a  feeling of great happiness or well-being, a feeling of great elation”.  Does that not describe the outlook for the  stock markets today?  There are no bears  left, everyone is incredibly bullish  and expects no material selloffs.

Normal healthy bull markets climb a literal  “wall of worry”, traders are always anxious about some catalyst arising that  will spark a sharp selloff.  But not  today.  The markets have run up for so  long with nary a hiccup that traders no longer believe significant selloffs are  even possible.  They expect any selling  to be met with immediate buying, effectively backstopped by the Fed’s  unprecedented QE3 debt monetization.

All news is being interpreted as bullish today, thanks to the Fed manipulating the markets. If it ramps up QE3, then there will be more freshly conjured money pouring into stocks. If it instead tapers QE3, then the underlying US economy must be improving so cash on the sidelines will return. And of course any poor economic news is seen as forcing the Fed to keep aggressively monetizing debt, again bullish for stocks.

But all markets flow and ebb.  Prices rising and falling is the natural order of  things.  This is because nearly all  short-term price action is driven by the perpetually warring emotions of greed  and fear.  These are mutually exclusive,  so prevailing market sentiment swings back and forth between them like a great  pendulum.  Excessive greed is followed by  excessive fear, as the markets always ultimately balance out.

Euphoria, which is built on rampant greed,  is the most tell-tale sign of a major topping underway.  Traders no longer worry about anything, so their  greed drives them to buy every trivial dip.   This pushes markets higher and higher regardless of newsflow until  everyone interested in buying in anytime soon has already bought in.  That leaves only sellers, so the great  sentiment pendulum starts swinging back.

I suspect that very peak-euphoria moment is  here, when the SPX’s anomalous uptrend suddenly reverses.  Contrary to popular belief, this doesn’t  require a news catalyst.  Once all  available near-term buyers are sucked in, sellers assume control by  default.  Most bull markets top without  any crisis or even bad news to spark  the initial selling!  And that quickly  feeds on itself as late buyers rush to cut their losses.

Pretty much every technical or sentimental  indicator you want to look at these days confirms the euphoria blinding stock  traders.  Last week I focused on the  excessive valuations, stocks are very expensive so the  foolish traders chasing this topping are buying high.  This week I’m examining psychology, the extraordinary  greed and complacency driven by a one-sided melt-up.  And its resulting overboughtness.

This first chart looks at the benchmark  S&P 500 in blue and its definitive sentiment gauge, the VIX  implied-volatility index, in red.  The  span encompasses the SPX’s entire mighty cyclical bull market since March  2009

full article at source: http://www.marketoracle.co.uk/Article40502.html

All I Want For Christmas Is The Truth

“Eyes blinded by the fog of things
cannot see truth. Ears deafened by the din of things
cannot hear truth.
Brains bewildered by the whirl of thingscannot think truth.
Hearts deadened by the weight of things
cannot feel truth.
Throats choked by the dust of things
cannot speak truth.”
― Harald Bell Wright – The Uncrowned King


I consider myself a seeker of truth. It isn’t easy finding it in todays’ world. In an alternate version of the famous scene from A Few Good Men, I picture myself telling Turbo Tax Timmy Geithner that I want the truth and his angry truthful response:

“Son, we live in a world that has Wall Street banks, and those banks have to be guarded by puppet politicians in Washington D.C. with lobbyist written laws and Madison Avenue PR maggots with media propaganda. Who’s gonna do it? You? You, Representative Paul? I have a greater responsibility than you could possibly fathom. You weep for the average middle class American family, and you curse the ruling oligarchs. You have that luxury. You have the luxury of not knowing what I know. That the death of the American middle class, while tragic, probably saved the bonuses of thousands of Wall Street bankers. And my existence, while grotesque and incomprehensible to you, increases the wealth of these same bankers who destroyed the worldwide economic system in 2008. You don’t want the truth because deep down in places you don’t talk about in the food bank line, you want me on Wall Street, you need me on Wall Street. We use words like derivative, fiscal stimulus, quantitative easing. We use these words as the backbone of a life spent syphoning off the wealth of the nation. You use them as a punch line. I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very debt that I provide, and then questions the manner in which I provide it. I would rather you just said thank you, and went on your way, Otherwise, I suggest you pick up 1000 shares of Apple, and hope our high frequency trading supercomputers can ramp the market for a while longer. Either way, I don’t give a damn what you think you are entitled to.”

I find myself more amazed than ever at the ability of those in power to lie, misinform and obfuscate the truth, while millions of Americans willfully choose to be ignorant of the truth and yearn to be misled. It’s a match made in heaven. Acknowledging the truth of our society’s descent from a country of hard working, self-reliant, charitable, civic minded citizens into the abyss of entitled, dependent, greedy, materialistic consumers is unacceptable to the slave owners and the slaves. We can’t handle the truth because that would require critical thought, hard choices, sacrifice, and dealing with the reality of an unsustainable economic and societal model.

It’s much easier to believe the big lies that allow us to sleep at night. The concept of lying to the masses and using propaganda techniques to manipulate and form public opinion really took hold in the 1920s and have been perfected by the powerful ruling elite that control the reins of finance, government and mass media.

full article at source: http://www.marketoracle.co.uk/Article37862.html

The Scam Wall Street Learned From the Mafia

Bottom of Wall Street from FDR

Bottom of Wall Street from FDR (Photo credit: SheepGuardingLlama)

Someday, it will go down in history as the first trial of the modern American mafia. Of course, you won’t hear the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that. If you heard about it at all, you’re probably either in the municipal bond business or married to an antitrust lawyer. Even then, all you probably heard was that a threesome of bit players on Wall Street got convicted of obscure antitrust violations in one of the most inscrutable, jargon-packed legal snoozefests since the government’s massive case against Microsoft in the Nineties – not exactly the thrilling courtroom drama offered by the famed trials of old-school mobsters like Al Capone or Anthony “Tony Ducks” Corallo.

But this just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.

The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America. The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from “virtually every state, district and territory in the United States,” according to one settlement. And they did it so cleverly that the victims never even knew they were being ­cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.

Read more: http://www.rollingstone.com/politics/news/the-scam-wall-street-learned-from-the-mafia-20120620#ixzz1zVO8EeYj

Why Jamie Dimon’s $2 Billion Gambling Loss Will NOT Speed Financial Reform

President Barack Obama addresses reporters abo...

President Barack Obama addresses reporters about the economy and the need for financial reform in the Diplomatic Reception Room of the White House on February 25, 2009. (Photo credit: Wikipedia)


Among the more laughable  features of  commentaries on Jamie Dimon’s recently revealed $2 billion (at least) gambling losses are earnest pronouncements that the debacle will stymie the efforts by Dimon and Wall Street in general to further deregulate the financial industry.

A scheduled vote this coming Thursday in the House Agriculture Committee should reassure Wall Street that nothing has changed.

The vote in question will be on H.R. 1838, the “Swaps Bailout Prevention Act” as  exclusively reported here back in February.  The bill nullifies one of the few positive contributions of the Dodd Frank reform act, the so-called Lincoln Rule banning any federally insured institution, such as JPMorgan, from trading derivatives, thereby forcing them to set up separately funded subsidiaries for such trading.  H.R. 1838 now enjoys bi-partisan support, has already been endorsed by the Financial Services Committee (agriculture has historic jurisdiction regarding derivatives) and will quite likely proceed on its merry way toward full enactment.

full article at source: http://www.counterpunch.org/


by Golem XIV

A horrid thought has been incubating for the last few days.

I don’t know how many of you know much about Vulture Funds, what they do and how they do it, but it forms the basis of my horrid thought.

Nations issue debt. After it is bought, it often gets re-sold on what is called the secondary market. The price of debt on the secondary market changes much as stock prices change. The market is big.

When a nation looks like it might default the price of its debt begins to sink. What was bought for full price is offered for sale at a reduced price – say 60 cents on the dollar. Buyers and sellers have to decide if they think the nation will proceed to default or avoid it. The decision is, sell now and accept a loss but avoid a potentially larger loss later, or buy now at a discount and if the nation avoids default, profit as the value of that cheaply bought debt recovers its original value.

But then there are the vulture funds. They follow a quite different path. They are creatures of the law not of finance and there are not many. One of the biggest, most notorious and best connected is Elliot Associates of Manhattan. They have very close links with the Republican Party and to Mitt Romney in particular ( They are large donors to his campaign). Another is FG Capital management. These companies are financial companies all founded and largely owned by Wall Street  lawyers. FG Capital Management was founded by a former Morgan Stanley consultant.

Vulture funds buy the bonds others have given up on. They buy what is often referred to as ‘distressed debt’. That is debt that has been defaulted upon and is, for the ordinary bond manager, worthless. The vulture buys it and then sues the defaulting nation. It is a very specialized area of the law and of finance. As an IMF study from 2003 said of vulture funds,

“Investors in this market posses specialized knowledge of bankruptcy law and international litigation and are willing to hold out for many years before seeing any recovery”

full article at source: http://www.golemxiv.co.uk/author/golem-xiv/

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