Another meltdown day in Europe with US markets closed. I wonder if the traders coming back from the Labor Day weekend would like to get in the way of this train.

A few interesting reads from the weekend:

[URL]http://www.washingtonpost.com/breakawaywealth[/URL]

An big feature on how the top 0.1% has captured most of the gains in the past decade and the US is becoming more and more unequal. A lot of chartporn as well.

[QUOTE][INDENT]“Here’s one financial figure some big U.S. companies would rather keep secret: how much more their chief executive makes than the typical worker. Now a group backed by 81 major companies — including McDonald’s, Lowe’s, General Dynamics, American Airlines, IBM and General Mills — is lobbying against new rules that would force disclosure of that comparison.
The lobbying effort began more than a year ago. It involved some of the biggest names in corporate America and meetings with members of both parties on the House Financial Services Committee and Senate banking committee. The companies and their Republican allies in Congress call comparisons between the chief and everyone else in the company “useless.”
But some Democrats and investors say the information should be issued to highlight the growing income disparity in the United States. They add that opponents of disclosure merely want to hide the outrageous scale of executive pay packages.”
[/INDENT][/QUOTE]

[URL="http://www.nytimes.com/2011/09/04/opinion/sunday/jobs-will-follow-a-strengthening-of-the-middle-class.html"]The Limping Middle Class[/URL]
ROBERT B. REICH

[QUOTE] When so much income goes to the top, the middle class doesn’t have enough purchasing power to keep the economy going without sinking ever more deeply into debt — which, as we’ve seen, ends badly. An economy so dependent on the spending of a few is also prone to great booms and busts. The rich splurge and speculate when their savings are doing well. But when the values of their assets tumble, they pull back. That can lead to wild gyrations. Sound familiar?
The economy won’t really bounce back until America’s surge toward inequality is reversed. Even if by some miracle President Obama gets support for a second big stimulus while Ben S. Bernanke’s Fed keeps interest rates near zero, neither will do the trick without a middle class capable of spending. Pump-priming works only when a well contains enough water.
[/QUOTE]

Monster chartporn which is too big for the forum software:
[URL]http://www.nytimes.com/imagepages/2011/09/04/opinion/04reich-graphic.html?ref=sunday[/URL]

[QUOTE=Fusion_power;270867]Re taxes and spin, the difference between a piece of half-raw castrated bull meat and a sizzling hot juicy rib-eye steak is just a matter of semantics.[/QUOTE]

When it comes to meat, there's more than meets the [rib] eye. In this case, when discussing taxes or regulation, it's the sizzle that is being sold (and chuck eye in place of rib eye).

It is easy to point out anecdotal evidence that reducing taxes or easing regulation leads to economic growth, however, one can see this as a form of inverted populism and hence becomes noise when debating a proper balance between taxes and spending (T and G) and the extent and stringency of regulation. In the above examples, the PR of some companies fits hand in glove with the populist shouting of some naive politicians and poisons the discourse that attract engaged citizens.

I don't doubt that reducing taxes and regulation leads to increased profitability but that is only in the short run (looking at it from a purely microeconomic viewpoint of a single firm). Taxes and regulation exist so that externalities be taken into account as part of sustained long run economic growth. When companies like KO, GE and others spin their financial data (if indeed true), it's worse than spitting in the face of the public. It's a money shot.

Republicans: Anti Education, Anti Science
 

[QUOTE=imwithid;270929]

<snip>

.[/QUOTE]

In typical Republitard fashion Bachmann shows how Republicans maintain
power: Keep their constituents ignorant.

[url]http://politicalticker.blogs.cnn.com/2011/09/05/bachmann-why-is-there-a-department-of-education/?iref=obnetwork[/url]


"Painting herself as a "constitutional conservative" Minnesota Rep. Michele Bachmann told
Sen. Jim DeMint's forum Monday that if elected president she would look to get rid of
the Department of Education, among other things."


If one looks at the states where Republitards have control one sees a
pattern: They are the least educated states in the country.

And still no criminal prosecutions:
 

[QUOTE=R.D. Silverman;270951]

<snip>

.[/QUOTE]

What happened to our criminal statutes regarding fraud?

[url]http://www.huffingtonpost.com/2011/09/06/us-banks-reportedly-offer_n_950026.html?icid=maing-grid7%7Cmain5%7Cdl2%7Csec3_lnk1%7C92953[/url]

[QUOTE=R.D. Silverman;270951]"Painting herself as a "constitutional conservative" Minnesota Rep. Michele Bachmann told
Sen. Jim DeMint's forum Monday that if elected president she would look to get rid of
the Department of Education, among other things."

If one looks at the states where Republitards have control one sees a
pattern: They are the least educated states in the country.[/QUOTE]

I think her point is that states should have more autonomy WRT education. The problem (as I see it), is that federal mandates can be a hindrance to good education. For example, did the No Child Left Behind Act improve the level of education or did it significantly impact the cost of education without improving it?

BTW, I'm not saying that is her point. Maybe her end goal is to eliminate public education.

[QUOTE=rogue;270973]I think her point is that states should have more autonomy WRT education. The problem (as I see it), is that federal mandates can be a hindrance to good education. For example, did the No Child Left Behind Act improve the level of education or did it significantly impact the cost of education without improving it?

BTW, I'm not saying that is her point. Maybe her end goal is to eliminate public education.[/QUOTE]

In her case "state autonomy" means that states should be allowed to
put prayer and other religious instruction into their schools. As Perry
indicated, Texas is still teaching creationism despite the Supreme Court
ruling from Pennsylvania.

[QUOTE=R.D. Silverman;270975]In her case "state autonomy" means that states should be allowed to
put prayer and other religious instruction into their schools. As Perry
indicated, Texas is still teaching creationism despite the Supreme Court
ruling from Pennsylvania.[/QUOTE]

Add on:

She and the rest of the Republitards would be quite happy turning the
U.S. into a Christian version of Saudi Arabia: A Christian Theocracy in
which rights under the law were determined by religious views.

Meanwhile in Europe, Merkel`s governing coalition [url=http://www.reuters.com/article/2011/09/04/us-germany-election-idUSTRE78318220110904]suffered another embarrassing loss[/url] last week in regional elections; markets are pricing in a hard default by Greece in the coming year; Italy has already abandoned most of its recent promises of austerity; and ECB crook-in-chief Trichet, after loading up on another gigantic wad in toxic PIIGS bonds over the past month, is once again warning the same PIIGS to "get their fiscal houses in order", or similar nonsense. Nonsense, because as long as Trichet keeps bailing `em out by gobbling up their crap sovereign debt issuance, PIIGS politicians have no incentive to risk riots in the streets by doing what Trichet asks.

(Aside: Belgium appears to need adding to the PIIGS, so the snarky-acronym squad at ZeroHedge [url=http://www.zerohedge.com/news/big-pis-ceo-europes-most-troubled-bank-dexia-quits-contagion-tsunami-sweeps-over-belgium]has coined an updated one[/url]: BIG PIS, apparently in reference to [url=http://en.wikipedia.org/wiki/Manneken_Pis]the famous statue[/url] in Brussels...And while perusing the Wikipage on the Manneken Pis, I noted with interest that the common legend about the little Dutch boy plugging the leaking dike with his finger has a Belgian analog, with a "look ma - no hands!" twist.)

[b]DAX Deep in Bear-Market Territory:[/b]

Germany`s DAX (which generally has been the strongest of the major European indices due to the strength of the export and manufacturing-led economic recovery Germany had in the past 2 years) [url=http://chart.finance.yahoo.com/z?s=^GDAXI&t=5y&q=l&l=on&z=l&a=v&p=s&lang=en-US&region=US]is now down over 30% from its post-crisis highs[/url], and has lost over half the rebound-rally increase it experienced since its early-2009 trough.


[b]Currency Wars: SNB Invokes the Nuclear Option:[/b]

And after many failed (meaning: costly and producing only short-lived results) currency interventions over the past [url=http://chart.finance.yahoo.com/z?s=FXF&t=5y&q=l&l=on&z=l&a=v&p=s&lang=en-US&region=US]several years[/url], the Swiss National Bank today [url=http://globaleconomicanalysis.blogspot.com/2011/09/switzerland-to-buy-foreign-currency-in.html]pulled out the nuclear option and pegged[/url] (in effect committed to as much money-printing as needed to sustain the peg) the CHF to the Euro at a stated maximum ratio of 1.2 CHF/Euro. The result was a rather drastic move in the currency - the recent sharp upward stair-step moves illustrated in the same 5-day chart have been a result of markets fleeing the Euro to the (formerly) safe haven of the Swiss Franc. ZeroHedge`s Bruce Krasting has a nice review of the likely implications of the SNB`s unilateral move [url=http://www.zerohedge.com/contributed/swiss-move]here[/url]. Note the following 5-day chart is the CHF priced in USD which does not show precisely where the SNB's peg is, but it captures the wild moves well enough:

[QUOTE=garo;270901][URL="http://www.nytimes.com/2011/09/04/opinion/sunday/jobs-will-follow-a-strengthening-of-the-middle-class.html"]The Limping Middle Class[/URL]
ROBERT B. REICH[/QUOTE]

Reich`s dubbing the 3 decades leading up to the present (beginning roughly with Reagan/Thatcher and trickle-down economics) as the "Great Regression" is very apt. Note that while I agree with Reich in associating the beginning of the dating scheme with Reagan, the failure to address the ever-growing wealth inequity since then has been thoroughly bipartisan. While in the U.S. the Republicans have been most shamelessly the Party of the Rich, the Dems are similarly TPOTR in deed and whence they obtain most of their campaign financing, merely less so in word. The Reps are bald-faced advocates of welfare for the rich, whereas the Dems are perhaps less cynical, but more clueless, insofar as they try to mitigate the effects of the ever-growing wealth disparity (which the policies of both major parties help to create and sustain) via increased social-welfare spending. But that requires ever-larger deficits to maintain because the broad middle-class wage base supporting the bulk of government revenues keeps shrinking, again due to the ever-larger gulf between have and have-not.

I view the ongoing financial crisis and hollowing-out of the U.S. productive economy as being very much "the ultimate triumph of Reaganomics".

In forum-local micro-economic news, I see forum owner/operator Mike (a.k.a. Xyzzy) is down to [url=http://mersenneforum.org/showthread.php?p=270907#post270907]less than one month`s ISP charges[/url] worth of donation money ... I have suggested to him to simply issue some sovereign debt and tell the ECB that we face imminent default and economic catastrophe unless they buy our bonds, but he suffers from a mysterious ailment known in the medical community as "pride" which apparently keeps him from taking me up on my ECB-bailout suggestion.

So please forgive him for his intransigence and [url=http://mersenneforum.org/donate.htm]making a small donation[/url]. (Or a frickin` huge one, if you want to act as mersenneforum`s own "Uncle Warren" Buffett (but in a more-altruistic sense).

[QUOTE=rogue;270973]I think her point is that states should have more autonomy WRT education. The problem (as I see it), is that federal mandates can be a hindrance to good education. For example, did the No Child Left Behind Act improve the level of education or did it significantly impact the cost of education without improving it?[/QUOTE]No Child Left Behind was a REPUBLICAN invention!

(So much for Republican claims to want states to have more autonomy. They're quite willing to ram things down states' throats when they want to.)

[quote]Maybe her end goal is to eliminate public education.[/quote]Oh, of course it is!

Thanks very much for the reminder. I have donated a sum equal to ten cents per post that I've made - it's probably less than 10% of what I've spent on electricity running things for mersenneforum, and I quite like the idea of thinking that you shouldn't make a post that isn't worth ten cents.

To retain context for this thread, I'll claim that I've made it out of the money I made over the last three years by repeatedly betting that Barclays would be bailed out.

[b]Followup on Robert Reich`s economic-inequality piece:[/b]

One more note about the Robert Reich "Inequality" piece discussed in several recent posts: It occurred to me this morning that Reich specifically did not exempt his former boss, President Clinton, from the "3 decades of the Great Regression" theme. That is fair, because especially on the financialization-of-the-economy and financial-deregulatory fronts, Clinton acted exactly like the stereotypical Republican would have: In other words, he bought the Kool-Aid being peddled by Greenspan and the financial lobby. Clinton did not compound his misjudgments there via warmongering and tax-slashing like his successor did, but nonetheless, he is not blameless for his part in continuing the ruinous hollow-shell-economy trend that has brought the U.S. and the world economy to the brink.

On a more-partisan (but humorous) notes, Reich`s latest blog entry is a "preview" of tonight`s Republican presidential-candidate debate:
[quote]Nonetheless, listen tonight (if you can bear it) for anything other than standard Republican boilerplate since the 1920s — a wistful desire to return to the era of President William McKinley, when the federal government was small, the Fed and the IRS had yet to be invented, state laws determined worker safety and hours, evolution was still considered contentious, immigrants were almost all European, big corporations and robber barons ran the government, the poor were desperate, and the rich were lived like old-world aristocrats.

[b]In the late 1950s and 1960s, the Republican Party had a brief flirtation with the twentieth century[/b]. Mark Hatfield of Oregon, Jacob Javits and Nelson Rockefeller of New York, Margaret Chase Smith of Maine, and presidents Dwight Eisenhower and Richard Nixon lent their support to such leftist adventures as Medicare and a clean environment. Eisenhower pushed for the greatest public-works project in the history of the United States — the National Defense Highway Act, which linked the nation together with four-lane (and occasionally six-lane) Interstate highways. The GOP also supported a large expansion of federally-supported higher education. And to many Republicans at the time, a marginal income tax rate of more than 70 percent on top incomes was not repugnant.[/quote]
[i]My Comment:[/i] Well, at least on the "big corporations and robber barons ran the government, the poor were desperate, and the rich were lived like old-world aristocrats" issues the country is already in the "gilded age" (allegedly) desired by the GOP.


[b]German Court Rules EFSF/Bailouts Legal But Hurdles Remain[/b]

[url=http://www.zerohedge.com/news/explaining-german-constitutional-court-ruling]German Court Rules EFSF/Bailouts Legal But Hurdles Remain[/url]
[quote]As expected, the Court ruled that the eurozone bailouts are compatible with German Basic Law, since, according to the Court, they do not provide an excessive burden on the German budget, do not constitute a significant transfer of power away from the Bundestag nor impact negatively on the euro’s purchasing power, as had been suggested by the claimants. However, the Court also gave the Bundestag’s Budget Committee an effective veto over future activation of the eurozone’s bailout fund, the EFSF, and reinforced German constitutional restrictions on the introduction of Eurobonds.

[European reformist think tank] Open Europe Economic Analyst Raoul Ruparel said,

“Giving the Bundestag’s Budget Committee the final say over the use of the bailout fund is welcome from a democratic point of view, but will add another element of uncertainty to the eurozone crisis. However, so far the Budget Committee has consistently taken the government line on the bailout, albeit reluctantly, and it remains to be seen whether it dares to exercise its new power. The calls for the whole Bundestag to have a greater say in the dispersion of financial aid are, therefore, likely to continue.”

“The ruling also seems to further entrench the German government position that Eurobonds are a no-go, by warning that Germany should not assume other countries’ liabilities. However, the wording used by the Court also seems to suggest that joint debt in the eurozone could be constitutionally allowed if it involved a stronger German say over other member states’ fiscal policies. This could set Europe up for a major clash of national democracies in future, should Eurobonds be deemed necessary to hold the Single Currency together in the long term.”

“Controversially, the Court did not give an opinion on the legality of the ECB’s bond purchase programme – despite the potential implications this programme has on price stability and the ECB’s independence. This unsettling question is likely to resurface in future.”[/quote]
[i]My Comment:[/i] Sounds to me like the German Constitutional Court (Bundesverfassungsgericht - gotta love that Germanic word-concatenation) desired to not rock the boat with their ruling - basically they punted on all the substantive issues.


[b]Perspective on the SNB currency peg[/b]

[i]Die Welt[/i] has an article on the SNB`s drastic meassure of a Swiss-Franc peg, including an interesting historical perspective, specifically the parallels with the 1978 post-oil-shock SNB intervention to keep the CHF in check versus the Deutschmark. For our non-erman-speaking readership, the title/subheading translate as "Swiss pull out the currency cudgel: The national bank resorts to drastic measures and pegs the Franc to the Euro. This is intended to stop the upward flight of the domestic currency"; Google Translate should do an adequate rough job on the content. (I just tried GT on the title, it renders it as [i]"Swiss get the currency club out: The National Bank does to drastic measures and binds the Franks to the euro. So shall the height of the flight's motto must be stopped"[/i], so try not to giggle while reading the auto-translation):

[url=http://www.welt.de/finanzen/article13588888/Schweizer-holen-die-Waehrungskeule-heraus.html]Schweizer holen die Währungskeule heraus[/url]: [i]Die Nationalbank greift zu drastischen Mitteln und bindet den Franken an den Euro. So soll der Höhenflug der eigenen Devise gestoppt werden.[/i]


[b]Bernanke's Waterloo[/b]

Mish has an excellent Austrian-economic analysis of the abject failure of central-bank (mainly U.S. Fed, but also elsewhere) monetary policy to stimulate consumer demand, and pronounces Bernanke`s "student of history" grade as "fail" - Good stuff:

[url=http://globaleconomicanalysis.blogspot.com/2011/09/bernankes-waterloo-midst-of.html]Bernanke's Waterloo; Midst of Deflationary Collapse or Brink of Inflationary Disaster? 12 Specific Recommendations[/url]
[quote]In typical recessionary periods past, the Fed has been able to lower interest rates and stimulate demand for credit. Demand for credit ultimately stimulates broad economic activity via an increase in aggregate demand. But in deleveraging cycles as opposed to typical business cycles, interest rates can fall to zero and still not positively influence demand for credit. This is exactly what has occurred in the current cycle. You may remember from our discussions over the years we asked one question again and again, "is this a business cycle or a credit cycle?" The only borrower of substance in the current cycle has been the Federal Government, yet we are currently reaching the limits of Government balance sheet expansion tolerance, as clearly witnessed by the debt ceiling melodrama. This has only served to weaken the US as a credit. Again, the inability to generate demand for credit by almost any means (and in our present circumstance historic means) is simply a classic fingerprint of a generational deleveraging cycle.
[b]
Bernanke No Student of History
[/b]
Never in modern history have we faced the type of domestic labor market circumstances we face today. As we've tried to describe, monetary policy is powerless to change this. If Mr. Bernanke was the true student of history he would fully realize exactly the circumstances we've described. It's not that we don't have precedent. The US in the 1930's and Japan over the last two decades are the model. Looking at the Depression years and claiming the issue was that the Fed was not loose enough misses the key fingerprint character points of a generational deleveraging cycle completely. Again, the refusal of Bernanke and friends to even acknowledge Austrian or Kondratieff economic constructs has been and will continue to be their policy making downfall. Who knows, maybe all of this will find its way into the economics textbooks of tomorrow. Let's hope so anyway for future generations. But as the old market saying goes, people don't repeat the mistakes of their parents, they repeat the mistakes of their grandparents.[/quote]
[i]My Comment:[/i] Some other insightful quotables from the above Mish article roundup:
[quote]
This morning, in the aftermath of Fed Chairman Ben Bernanke’s speech on Friday, the editorial page of the Wall Street Journal noted, “Mr. Bernanke also lectured that ‘U.S. fiscal policy must be placed on a sustainable path,’ though not by cutting spending in the short-term. So the Fed chief joins the Keynesian queue of spending St. Augustines – Lord, make us fiscally chaste, but not yet.”
...
After 11 years of declining social mood, the notion that further monetary stimulus has limited use is hardly a surprise. As I have cautioned so many times, [u]when it comes to the consumer it is not the depth of a recession that matters, but rather its length[/u]. And while for policymakers and financiers this may feel like a three-year-old recession (and for some even just a three-week-old recession!), for the American consumer this is a decade-old recession that has deteriorated well into a depression.[/quote]

The Solyndra Story Gets Curioser and Curioser
 

Some very interesting developments in the story of now-bankrupt solartech startup Solyndra in the past several days. The "mystery" here relates to how the government`s massive $500-million-plus stake in the firm - which based on relative size and the fact that is taxpayer-funded, always stands to get paid back first in the event of bankruptcy of this kind of venture - somehow ended up being subordinate to a private investment in the form by a prominent Obama backer. ZeroHedge has a nice roundup with links:

[url=http://www.zerohedge.com/news/bankrupt-obama-stimulus-darling-raided-feds]Bankrupt Obama Stimulus Darling Raided By Feds[/url]
[quote]After [url=http://www.blogger.com/posts.g?blogID=7673190716670613299]breaking the story[/url] of Solyndra`s shady taxpayer funded practices (which were not enough to stave off bankruptcy, and yet another confirmation that government stimulus in the form of subsidies is virtually always an epic failure), Bruce Krasting [url=http://www.zerohedge.com/contributed/solyndra-obama-connection]subsequently delved[/url] into the one entity that somehow had managed to get priority interest to subordinated government loans to the tune of $528 million in government funding: Argonaut Ventures, and specifically one George Kaiser who just happens to be a material fund-raiser for the president. And while it is not known yet whether the embedded improprieties in this peculiar relationship will end Obama`s chances for reelection, things are starting to stink. Because as [url=http://www.bloomberg.com/news/2011-09-08/solyndra-s-california-headquarters-raided-by-fbi-agency-spokeswoman-says.html]Bloomberg reports[/url], as of a few hours ago, the company`s headquarters was raided by the Feds. While at this point they are certainly looking for signs of criminal malfeasance by management, it won`t be long before they put two and two together and decided to analyze the logic behind the funding, and why it is that an Obama-favored person will get his money out first while US taxpayers will likely suffer a total wash.[/quote]
[i]My Comment:[/i] Here are a few snips from the [url=http://www.zerohedge.com/contributed/solyndra-obama-connection]investigative piece[/url] on the Solyndra/Argonaut/Obama/Kaiser connection by ZH`s Bruce Krasting yesterday:
[quote](Oklahoma oil billionaire George) Kaiser is an important link in this story. He is also a very big fund-raiser for Obama. He is often referred to as a "Bundler". In this case that means he encouraged/pushed others to put up money for the big O’s campaign.

The [url=http://www.tulsaworld.com/business/article.aspx?subjectid=52&articleid=20110907_52_E1_CUTLIN372219]Tulsa World[/url] filed a story Re the Kaiser connection earlier today. (What better place to get the news than a home town paper). Quotes from the TW article:
[i]
The bankruptcy filing indicates that Argonaut Ventures, an investment arm of the Tulsa-based foundation, holds almost 39 percent of Solyndra`s parent, 360 Solar Degree Holdings Inc.
[/i]
Okay, so who is behind Argonaut Ventures?
[i]
In an emailed statement to the Tulsa World, a representative of the George Kaiser Family Foundation said the organization made the investment through Argonaut.
[/i]
So the family foundation was the source of the money that got Solyndra going. But George Kaiser tried to distance himself from this very ugly story. A quote from a Kaiser "spokesperson":
[i]
"George Kaiser is not an investor in Solyndra and did not participate in any discussions with the U.S. government regarding the loan".
[/i]
Interesting that Kaiser is doing his level best to distance himself from the stink. But it does not work for me:
[i]
George Kaiser is chairman of BOK Financial Corp. and owner of Kaiser-Francis Oil Co. Argonaut is headed by Steve Mitchell, who also served on Solyndra`s board of directors.
[/i]
So Kaiser wants us to believe that the Family Foundation he runs invested some $300mm of the families "excess cash" and he did not really know about it. The guy who is running the family’s investments (Steve Mitchell) is also sitting on the board at Solyndra. And we are supposed to believe that George Kaiser was just a passive investor? [b]Not a chance.[/b]

We have Mr. Kaiser on the record on this. Again, his words:
[i]
"George Kaiser did not participate in any discussions with the U.S. government regarding the loan".
[/i]
He never spoke to Obama about this? Not even once? Not even when Obama went (twice) to the company’s manufacturing offices in PA and CA? I don’t believe that denial.

There is one very slippery fact that I am wondering about. It has to do with [b]subordination[/b]. This a legal issue on who gets paid first in a bankruptcy. In all cases the equity is last on the list. But that is not the situation with Solyndra/Kaiser. From Bloomberg:
[i]
In February, Solyndra and its lenders reorganized the company’s debts, putting the U.S. loan behind $69.3 million owed to other lenders, including an affiliate of Solyndra’s biggest shareholder, Argonaut Ventures.
[/i]
[b]This kind of stuff is not supposed to happen[/b]. The equity interest of the Kaiser family got a preference as to the right of repayment from Solyndra. Kaiser got in front of the line. He got in front of the US Government’s $528mm IOU from Solyndra. Kaiser got in front of the interests of the American taxpayer. There had to be some very serious arm-twisting going on in the background to achieve this feat.
.
I’ve looked at the BK filings. The company is going to sell its assets in an effort to pay of all creditors. The question is who gets paid first and what are the liquidation proceeds.

Solyndra had lousy technology. There are tons of flat panel manufactures left standing. Whatever Solyndra has for sale is not going to be worth much. I’m guessing around 20 cents on the dollar from book. The company has listed $859mm of assets. By my calculation the cash value will be under $200mm.

There are employee claims that come first. Next in line come trade creditors. Then comes the senior unsecured debt owed to Argonaut. The lawyers (There are a ton of big shots already involved) will get their pound of flesh. That leaves next to nothing for Uncle Sam. The taxpayers are going to take it in the ear for $400-500 million.

This story will hound Obama. His campaign got big bucks from a guy who ended up costing the Feds a very big penny. This is a story that could drag Obama down. He either has to step up and explain how this could have happened or he can say nothing. He has to provide some clarity on the George Kaiser connection. If he chooses to keep mum on this mess he will have to face Congressional hearings for the next 18 months. There will be a story in the paper every week or so. The Republicans will see to it. [b]This is a story that could turn an election[/b].[/quote]
[i]My Comment:[/i] Looking after the interests of Oklahoma oil billionaires ... Obama joined the wrong party, he should be running as a Republican.

[QUOTE=ewmayer;271227]Some very interesting developments in the story of now-bankrupt solartech startup Solyndra in the past several days. The "mystery" here relates to how the government`s massive $500-million-plus stake in the firm - which based on relative size and the fact that is taxpayer-funded, always stands to get paid back first in the event of bankruptcy of this kind of venture - somehow ended up being subordinate to a private investment in the form by a prominent Obama backer.[/quote]

More interesting yet, the FBI has now raided the joint:
[URL="http://www.businessweek.com/news/2011-09-08/fbi-raids-bankrupt-solyndra-as-lawmakers-question-finances.html"]FBI Raids Bankrupt Solyndra as Lawmakers Question Finances[/URL] I decided to punt on selecting a choice quote; both smelly business and spin abound.

This Mercury News article has better information on the raid and mentions DOE efforts to restructure the debt and monitor the company.
[URL="http://www.mercurynews.com/ci_18851389?source=most_emailed"]FBI agents search Solyndra's Fremont headquarters[/URL]

Talkin 'bout dat jobs kreayshunn, peeps
 

And on a lighter note:

[url=http://www.zerohedge.com/news/obamas-speech-ali-g-style]Obama's Speech: Ali G Style[/url]

I knew Google Translate had an “English to Elmer Fudd” option…did not know about the “English to [url=http://www.amazon.com/Ali-Show-Compleet-Seereez/dp/B000JBXH82]Ali G[/url]” option. ☺

[QUOTE=only_human;271228]More interesting yet, the FBI has now raided the joint:
[URL="http://www.businessweek.com/news/2011-09-08/fbi-raids-bankrupt-solyndra-as-lawmakers-question-finances.html"]FBI Raids Bankrupt Solyndra as Lawmakers Question Finances[/URL] I decided to punt on selecting a choice quote; both smelly business and spin abound.

This Mercury News article has better information on the raid and mentions DOE efforts to restructure the debt and monitor the company.
[URL="http://www.mercurynews.com/ci_18851389?source=most_emailed"]FBI agents search Solyndra's Fremont headquarters[/URL][/QUOTE]

Give me a better president than THIS!!!!!!!!
(How, I don't know!)

[QUOTE=Christenson;271233]Give me a better president than THIS!!!!!!!!
(How, I don't know!)[/QUOTE]

Looks like your alternatives are going include some folks who "don't believe in this whole 'science' cult" and whose idea of "reproductive choice" is "should I indoctrinate 10 foster children in evangelical Christian dogma, or 20?"

Rumors of bad-news-coming-this-weekend weighed on markets today...say bye-bye to Wednesday`s "Europe is saved! Part XXV1" rally. Obama`s "big, bold, beautiful, bodacious jobs plan" (suuuuuuuuuuuuuuure it's already paid for, Mr. President - If you just ignore the 'costs' part of it) looks DOA. While it's sorta-good that at least the tax cuts he proposed were tipped more toward the lower-end than the rich, is slashing Social Security pay-ins and thus making SS even more insolvent a good idea? Overall, the speech sounded more like re-election positioning "I can beat the other party over the head for a whole year for not immediately rushing to implement my BBBBJL" than like he really believed what he was saying. And all those "roads and bridges in need of repair and potholes needing to be filled" - didn't those get fixed with the first ginormous stimulus package?

Funny to look at a DJIA chart for today (below)...if you look at the little move in the last half-hour you'd swear there was some exogenous force trying very, very hard to nudge the index to close just above 11,000 ... alas, 'twas not to be. (Those "key psychological levels" are quite key, psychologically speaking, you know.)

Have a good weekend, all ... I may go watch "The Debt", heard it's quite good. Steven Soderberg's latest, [url=http://www.imdb.com/title/tt1598778/]Contagion[/url], is the kind of material that too often gets put into the wrong hands, but in the present incarnation looks promising. (Though I'll wait to hear some first-hand commentary from friends who go see it).

Here the promised DJIA chart:

Stark's resignation was the first blow for the Euro this morning which was followed by chatter of imminent Greek default. Then there were rumours that the German govt. was taking steps to ensure that German banks would be protected in the event of a Greek default this weekend. The Euro has collapsed in 10 days from 1.454 to 1.366. The endgame is near.

OK, how does an individual win the endgame?

You don't. This is where a long-standing myth is busted and the fate of the individual becomes tied to that of the society he or she is part of.

[QUOTE=garo;271394]You don't. This is where a long-standing myth is busted and the fate of the individual becomes tied to that of the society he or she is part of.[/QUOTE]

Let's rephrase the question slightly then: How does an individual optimize his or her endgame, beyond preserving the ability to work and any job he or she may have? How to maximise the local effects of any savings?

[QUOTE=garo;271394]You don't. This is where a long-standing myth is busted and the fate of the individual becomes tied to that of the society he or she is part of.[/QUOTE]Same conclusion WOPR reached in "War Games":

"A strange game. The only winning move is not to play."

Look, I know I'm going to lose something, we all are.....the question is how to minimize losses, since not playing (for example, by killing myself) isn't on my list of options. And I have this funny little bank account with a little bit of savings in it -- I want to maximise that. No, it's not with BoA...it's with someone else.

If it's about to become worthless, I might as well spend it now...or possibly join everyone else in owing a bunch of $$, because I'll be able to pay them off soon with much cheaper $$. 10 grand would make a nice GIMPs computer farm, don't you think?

[QUOTE=Christenson;271420]Look, I know I'm going to lose something, we all are.....the question is how to minimize losses, since not playing (for example, by killing myself) isn't on my list of options. And I have this funny little bank account with a little bit of savings in it -- I want to maximise that. No, it's not with BoA...it's with someone else.

If it's about to become worthless, I might as well spend it now...or possibly join everyone else in owing a bunch of $$, because I'll be able to pay them off soon with much cheaper $$. 10 grand would make a nice GIMPs computer farm, don't you think?[/QUOTE]Diversify as much as you are able. Some things will do better than others. If you've no idea which are going to be worse than other things, spreading your bets mean you don't lose as much if you get unlucky. Admittedly, you don't gain as much if you get lucky.

It's what I've been doing in recent times.

Paul

OK, roll back the clock..it's 1990, you are in Japan...what was the BEST way to invest money? What was the BEST way to get or keep a job?

[QUOTE=Christenson;271451]OK, roll back the clock..it's 1990, you are in Japan...what was the BEST way to invest money? What was the BEST way to get or keep a job?[/QUOTE]Exactly what I said before: diversify.

Learn new skills and put them into practice. Meet people who work in fields different from your own --- network, in the sociological sense. Publicise your achievements and capabilities.


Paul

Amid all the emotionally-laden 9/11 reminiscences in the US media the past few days (which I've been doing my best to avoid, but it's impossible to not catch a random snip at least a half-dozen times a day if one wishes to leave the house and see other humans), I've heard precious little about the ongoing ruinous (and largely self-inflicted economic damage in the decade since by the "lapel-pin patriots" in the MSM.

The local paper had a piece about the effects on air traffic out of San Jose metro airport - the quote that really grabbed me was the last bit of the article:

[url=http://www.mercurynews.com/sept-11/ci_18853226]New normal in post-9/11 aviation turns friendly skies into fortress in the clouds[/url][quote]Rules of engagement at the airport are always changing. Just this week, Homeland Security Secretary Janet Napolitano said she expected improvements in screening technology to do away with the hated requirement to remove shoes. However, it will take more than that to restore the friendly skies of pre-9/11 America.

[u]George Donohue was the Federal Aviation Administration official who devised the screening system that was hurried into airports after the attacks.[/u] Now a critic of what he calls "security theater," he said most the system's current defenses are designed to stop "the stupid terrorist."

He no longer flies commercially if he can avoid it.

"I hate it now," he said. "It's like entering a police state."[/quote]

And popular editorial cartoonist Mike Luckovich [url=http://blogs.ajc.com/mike-luckovich/files/2011/09/mike09112011B.jpg]echoes the sentiment.[/url]

There was an amusing op-ed by NYT opinion columnist Gail Collins reprinted over the weekend in the local paper - see if you can spot the non sequitur:

[url=http://www.nytimes.com/2011/09/08/opinion/debating-with-the-stars.html?_r=1]Debating With the Stars[/url]
[quote]The Republican nominating campaign has thus far been one long primal scream from party members desperate to avoid making Romney their nominee. Really, they will look at anybody. Remember the Donald Trump moment? Michele Bachmann, Front-Runner? Who knows where their glazed eyes will turn next? Rudy Giuliani is now running around saying that he might get in the race “if I think we are truly desperate.”

Which they would really, really, really have to be.

The current front-running Mitt Alternative is Rick Perry, possibly the first major presidential candidate opposed to the direct election of U.S. senators since the advent of the Bull Moose Party. He did not do anything superweird at his maiden presidential debate, unless you count bouncing up and down and cocking his head a lot. Or claiming that the reason a quarter of the Texas population has no health insurance is because of government interference.

And Romney cleaned Perry’s clock on Social Security. Young Americans, if you dream of someday running for president, try not to write any books calling Social Security a Ponzi scheme.[/quote]
I`ve heard similar variants on this theme which start with Perry`s skepticism vis-a-vis evolution and global warming (indeed ludicrous) and segue into a similar "...and let`s not even talk about Perry`s views on Social Security."

For readers (especially non-U.S. readers), the bit about "Romney cleaned Perry’s clock" refers to Mitt Romney taking Perry to task about Perry`s claim that Social Security is "a Ponzi scheme". That scored Romney some cheap PR points with progressives and SS recipients who have a vested interest in believing SS is a well-run social-safety-net program. So the easy way to belittle Perry`s take on Social Security is to lump it with his genuinely nutty statements on no small number of other issues.

Except that - darn facts, they can be such stubborn things - on this particular issue Perry happens to be correct: As run for at least the past 30 years and in its resulting current state, Social Security really *is* a Ponzi scheme. Bruce Krasting [url=http://www.zerohedge.com/contributed/social-security-ponzi-%E2%80%93-i-think-so]explains[/url]:
[quote]I’ve looked up a few definitions of what a Ponzi scheme is. This one is from an excellent source. The Securities and Exchange Commission defines a Ponzi as:
[i]
A Ponzi scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors.
[/i]
Does Social Security constitute a Ponzi based on that definition? I think it does.[/quote]

-------------------------

European markets hit again today, but here in the U.S., timely late-afternoon rumors of China bailing out Italy (yes, you read that right), ludicrous as they obviously were, sufficed to provide the cover for the oh-so-frequent last-hour market ramp-job. A ZeroHedge reader traced the rumors to "well-placed" sources:
[i]
The Financial Times has reported that there were unidentified Italian officials who had claimed that "those-a Chinese, they-a wanna a buya our bonds and stocks and every-a-ting-a." We wish to emphasize that this report was filed based on anonymous tips placed by untraceable cellular phones from men with very thick Italian accents claiming that our reporters should "just-a trust-a us, capeche?"
[/i]
And the HFTs are clearly good at capeche-ing:

[QUOTE=Christenson;271451]OK, roll back the clock..it's 1990, you are in Japan...what was the BEST way to invest money? What was the BEST way to get or keep a job?[/QUOTE]

If you're in Japan, you get your job the year after graduating from university and you stay in it until you retire; with the big conglomerates, job security is still essentially perfect.

As for investment, basically you invested outside Japan; go for the US until the dot com bubble, take it out and keep it under the sink, back in on 9/15/01 and out in 2007. From about mid-2007, keeping the money in a bank in Japan wasn't a bad idea, at least if you like buying things that are priced in dollars - your yen buy nearly twice as many dollars now as they did then.

But hindsight is an unrealistically good investment measure, and the problem is that the world, rather than just Japan, is entering a zero-return state. And diversifying outside the world is quite difficult.

Buying the dips, like most other strategies, works until it doesn't; I've lost more on the stock market since July than I've received in my pay packets this year.

A solar-roofing firm in my area is using an interesting anti-Wall-Street angle in their latest TV ad:

[url=http://www.youtube.com/watch?v=KDvCf1V7fPc&feature=youtube_gdata]PetersenDean: "The financial markets are just nuts"[/url]


And speaking of putting one's money in places where it will do good, last week`s "support your local prime-number-related forum" donation drive was a [url=http://mersenneforum.org/showpost.php?p=271544&postcount=57]resounding success[/url]. Thanks to all the MET2011 readers who helped buy Our Dear Forum another year`s worth of bandwidth - you know who you are.

[QUOTE=fivemack;271568]
<snip>
But hindsight is an unrealistically good investment measure, and the problem is that the world, rather than just Japan, is entering a zero-return state. And diversifying outside the world is quite difficult.
[/QUOTE]

Of course hindsight is too good an investment strategy to be true....and in this case, since I can't find a stock market on Mars, the strategy *really* doesn't work. Suppose I had had to keep my money in Japan, what would have been best? (Or, for that matter, suppose we are talking Weimar, Germany...these politicos are just nutty enough) [proving Godwin's Law].

I think the problem with answering your question is that thirty-year-old financial data is weird and specialist and generally confined to people who think they could make money out of it and are therefore prepared to pay for it; I can't even find what would be the least much that would do, a list of market caps of the largest Japanese companies of 1990. I wouldn't be surprised if Toyota and Nikon had grown since then, but nor would I be surprised if they had shrunk.

I have written to the Japanese embassy in London, but I doubt I'll get anything useful.

In early Weimar the issue was hyperinflation, and the strategy that worked best was basically day-trading; turn money into shares in companies that sold basic commodities which people would keep buying even as their money inflated away. But hyperinflation really isn't a worry at the moment. Later on, the very best investment was convincing your second cousin in New York to claim to be your first cousin and sponsor you to get to America - but again, in a world-scale low-growth environment, there's no very useful equivalent to New York.

The Economist's Big Mac index suggests that there are few substantially-undervalued currencies at the moment, though that Brazil, Argentina, Sweden and Switzerland are significantly overvalued.

We have a series of misleading economic factors playing into the market. There is an ongoing sense that Italy and Spain will eventually have to bite the bullet and request an ECB bailout. Greece is still widely believed to be on the verge of default. This will continue to spin like an out of balance wheel until something happens to tip the cart. The problem is that the market is so jittery that just about anything could trigger a mass sell off of Euro denominated securities, especially bank oriented securities.

Obama has proposed a sweeping stimulus program entirely funded by raising taxes. I'm pretty much ok with the tax increases given where they will fall, but don't expect any stimulus effort to be effective other than in the short term. For this reason, I object to his plan. I would rather see more effort made toward opening up manufacturing capacity, especially entrepreneurial, since it gives the maximum economic benefit. No amount of stimulus will be effective until the U.S. economic house is in better order.

Buffet's purchase of Bank Of America preferred stock may stabilize the stock for a time, but the underlying risk associated with mortgage based securities is just too high to justify any ownership at this time. I think this may even wind up being one of Warren's rare missteps. Not necessarily a loss, but given the situation, not something he will make money on either.

The current market reminds me of 1987..... sans a fundamentally sound economy.

DarJones

Remember Monday`s late-afternoon market-levitating "China to bail out Europe" rumor-rally? Predictably, it was a all a bunch of (strategically timed and 'leaked') hooey:

[url=http://globaleconomicanalysis.blogspot.com/2011/09/china-premier-wen-jiabao-dampens.html]China Premier Wen Jiabao Dampens Speculation on China Saving Europe with Statement "Debt-Laden Economies Must First Put Their Own Houses in Order"[/url]

Oh wait, just as I was typing the above I saw that the same rumor is back on:

[url=http://www.zerohedge.com/news/china-storms-back-put-things-back-order-says-willing-buy-debt-crisis-nations]China Storms Back To Put Things Back In Order, Says Willing To Buy Debt Of Crisis Nations[/url]

Oh wait, Chinese Premier Wen Jiabao made statements nixing the "we pay top Yuan for PIIGS paper" rumors. "We need a new rumor!", cry the markets. Oh wait, here`s one - let`s just re-float some BS about the [url=http://globaleconomicanalysis.blogspot.com/2011/09/stocks-rally-on-dead-on-arrival.html]dead-on-arrival "Eurobonds" bailout scheme[/url].

Party like it`s 1929...or 1987...or 1999...or 2008. "Greecefire is contained", risk-on, build your financial house out of BRICs, said the 3 little PIIGS.

On a humorous note, TheOatmeal.com explains [url=http://theoatmeal.com/pl/senior_year/economics]the credit-based economy[/url].

[Edit: The one about [url=http://s3.amazonaws.com/theoatmeal-img/comics/senior_year/science.png]english vs metric units[/url] is pretty funny, too.]

All my machining is in thousandths; I can't do science except in metric....

OK, this is becoming like predicting finding the next mersenne prime....it's coming, it's coming, now WHEN?

[QUOTE=ewmayer;268734]Amid all the market turmoil, the NYT has this hopeful article, which could be retitled: "Don`t worry about your retirement nest egg having lost 20% of its value - you stand to save a few dollars a week at the gas pump!":

[url=http://www.nytimes.com/2011/08/09/business/as-markets-reel-consumers-get-a-break-on-gas-prices.html?ref=business]Their Stock Portfolios May Be Bleeding, but Consumers Get a Break on Gas Prices[/url]: [i]Hidden in the market’s fear dynamic is that oil prices have dropped precipitously. But whether consumers and businesses will spend that freed-up cash is a question mark.[/i]
[quote]As a result, drivers could see a gallon of regular gasoline selling for a national average of as little as $3.25 next month, a drop of more than 40 cents from current levels, according to economists.[/quote]
[i]My Comment:[/i] So far, gas at my trusty local Valero station is down a massive - brace yourself - $0.04 in the past month, roughly 1%. And you said oil was down how much?[/QUOTE]

Well, that hoped-for drop in gas prices spectacularly failed to materialize - Quite the opposite, in fact {But hope springs eternal - this article again has an oh-so-optimistic tone]:

[url=http://www.mercurynews.com/traffic/ci_18895873]Gas prices leveling off after latest jump, may even drop a bit[/url]
[quote]Bay Area drivers who fumed at the gas pump over the past month as prices jumped 12 cents higher and teetered on the $4 mark can mellow out a little bit: The price spikes have leveled off for now.

And prices may start to go down.

"In the next few weeks, we'll be going to the winter blend of gas and that typically means prices come down a little bit," said Matt Skryja, AAA Northern California spokesman.

The state average for a gallon of regular, unleaded gasoline is $3.95, up 17 cents since last month's AAA report on Aug. 9. That's 93 cents higher than California's average price this date last year, Skryja said.
...
There are a lot of things going on when it comes to oil and gas," Skryja said. "The big question is why the big jump in California? In many metro areas, there were double-digit increases."

More demand for gas around Labor Day weekend, the traditional end of summer for many families who head to the lake or the mountains one last time, and "some refinery" issues are behind the recent jump in prices, Skryja said.[/quote]
[i]My Comment:[/i] The article does not delve into the huge divergence between oil and gasoline prices over the past few months. Suuuuuuuuuuuuuure there are "a lot of things going on when it comes to oil and gas" ... not including "price gouging", apparently. Never that...

-----------------------

Mish presents some options for the fate of the Eurozone, including the interesting one of the fiscally stronger countries such as Germany and the Netherlands leaving the Euro:

[url=http://globaleconomicanalysis.blogspot.com/2011/09/eurozone-breakup-logistics-never.html]Eurozone Breakup Logistics (Never Believe Anything Until It's Officially Denied)[/url]
[quote]This is why I think [former head of the Federation of German Industries Hans-Olaf] Henkel’s proposal makes sense. Rather than have Spain leave the euro, Germany can leave the euro. The new German currency would automatically appreciate and the euro would depreciate, but without the terrible debt dynamics, the adjustment in the currency value would be much closer to the theoretically correct adjustment. The relative adjustment would probably be in the 20% range rather than in the 50% range.

Of course German banks would still have a problem. Their deposits would be in the form of the new German currency, and a lot of their loans – all those to Spain, for example – would be in the depreciating euro, and so they would take large losses. But at least the losses will be less – and more importantly the process will be more orderly – than if Spain simply leaves the euro and defaults.

One way or the other Germany is going to take a pretty big hit. It is a complete waste of time trying to figure out how to avoid it. It would be far more constructive to resolve the problem as quickly as possible in as orderly a manner as possible, and as any good Minskyite would tell you, that means we have to pay special attention to the balance sheet dynamics. That’s why I think Henkel’s proposal is an interesting one.

Of course the really interesting thing about Henkel’s proposal (at least to me) is to figure out what decision France would make if something like this happened. If France remained within the euro (i.e. “peripheral” Europe in Henkel’s scenario), the possibility of a United States of Europe would be forever dashed, but it would almost certainly be replaced with a two-entity Europe – the United States of Germany and the United States of France, or perhaps, for those who like 19th Century monetary history, the new Zollverein and the new Latin Union.[/quote]


[url=http://www.nytimes.com/2011/09/15/us/politics/democrats-in-congress-balking-at-obamas-jobs-bill.html?ref=jennifersteinhauer]Some Democrats Are Balking at Obama’s Jobs Bill[/url]: [i]President Obama anticipated Republican resistance to his jobs program, but he is now meeting increasing pushback from his own party. Many Congressional Democrats, smarting from the fallout over the 2009 stimulus bill, say there is little chance they will be able to support the bill as a single entity, citing an array of elements they cannot abide.[/i]
[quote]“I think the American people are very skeptical of big pieces of legislation,” Senator Bob Casey, a Democrat from Pennsylvania, said in an interview Wednesday, joining a growing chorus of Democrats who prefer an à la carte version of the bill despite White House resistance to that approach. “For that reason alone I think we should break it up.”

Senator Harry Reid of Nevada, the majority leader, has said he will put the bill on the legislative calendar but has declined to say when. He almost certainly will push the bill — which Mr. Obama urged Congress to pass “right now!” — until after his chamber’s recess at the end of the month; Mr. Reid has set votes on disaster aid, extensions for the Federal Aviation Administration and a short-term spending plan ahead of the jobs bill.

Republicans have focused their attack on the tax increases that would help pay for the spending components of the bill. But Democrats, as is their wont, are divided over their objections, which stem from Mr. Obama’s sinking popularity in polls, parochial concerns and the party’s chronic inability to unite around a legislative initiative, even in the face of Republican opposition.
[u]
Some are unhappy about the specific types of companies, particularly the oil industry, that would lose tax benefits. “I have said for months that I am not supporting a repeal of tax cuts for the oil industry unless there are other industries that contribute,” said Senator Mary L. Landrieu of Louisiana.[/u][/quote]
[i]My Comment:[/i] See, it`s not about jobs for Americans or party loyalty - It`s (as always) about goodies for one`s major campaign contributors.


[url=http://www.nytimes.com/2011/09/16/us/politics/suskinds-confidence-men-details-recession-dissension.html?ref=business]Book Details Dissension in Obama Economic Team[/url]: [i]A new book claims that President Obama’s response to the economic crisis was hampered by a White House economic staff plagued by internal rivalries, a domineering chief adviser and a Treasury secretary who dragged his feet on enforcing decisions with which he disagreed.[/i]
[quote]The book, by Ron Suskind, a former Wall Street Journal reporter, quotes White House documents that say Mr. Obama’s decisions were routinely “re-litigated” by the chairman of the National Economic Council, Lawrence H. Summers. Some decisions, including one to overhaul the debt-ridden Citibank, were carried out sluggishly or not at all by a resistant Treasury secretary, Timothy F. Geithner, according to the book.

Mr. Suskind quotes from two memos for the president in which Pete Rouse, a senior White House aide, wrote, “There is deep dissatisfaction within the economic team with what is perceived as Larry’s imperious and heavy-handed direction of the economic policy process.”

A copy of the book, “Confidence Men: Wall Street, Washington, and the Education of a President,” published by HarperCollins, was obtained by The New York Times before it officially goes on sale on Tuesday. The White House declined to comment on Mr. Suskind’s account, which he said was based on interviews with more than 200 people, including the president.

The book offers a portrait of a White House operating under intense pressure as it dealt with a cascade of crises, from insolvent banks to collapsing carmakers. And it details the rivalries among figures around the president, including Mr. Summers; Mr. Geithner; the former chief of staff, Rahm Emanuel; and the budget director, Peter R. Orszag.

In this rough-and-tumble environment, the book reports, female staff members often felt bruised. At a dinner with Mr. Obama in November 2009, several top female aides — including Anita Dunn, who was the communications director, and Christina Romer, the chairwoman of the Council of Economic Advisers — told the president about being talked over in meetings by male colleagues or cut out altogether.
...
In the book, Mr. Geithner denies that he obstructed any presidential directive. A senior Treasury official said a government restructuring of Citibank would have occurred only if the Treasury had been left with a significant ownership stake in the bank after it emerged from a financial stress test.[/quote]
[i]My Comment:[/i] Right: Geithner never "obstructed" any presidential directives...he simply ignored the ones he disagreed with.

S.S. Netflix Busily Rearranges the Deck Chairs
 

[url=http://mediadecoder.blogs.nytimes.com/2011/09/19/netflix-strategy-prompts-backlash/?partner=yahoofinance]Netflix Strategy Prompts Backlash[/url]
[quote]Netflix, the company that changed the way tens of millions of people watch films and TV shows, is quickly discovering that there’s a
downside to having cultivated such a passionate fan base.

All those customers who appreciate low prices, innovative products and rapid customer service? When they feel slighted, they can sign out just as fast as they signed up.

On Monday many Netflix customers derided the company’s plan — announced unexpectedly late on Sunday night — to split into two separate businesses, one for Internet streaming and one for DVDs by mail. They mocked the new name of the DVD company, Qwikster, and predicted its demise. And they wondered why Netflix’s chief executive, Reed Hastings, [url=http://blog.netflix.com/2011/09/explanation-and-some-reflections.html]http://blog.netflix.com/2011/09/explanation-and-some-reflections.html]was apologizing[/url] for “arrogance” — but not for disrupting a service that they adore.

“I have a feeling the apologies are just beginning,” said Mike Gordon, the chief executive of Group Gordon, a corporate and crisis public relations firm in New York. “They’re catching customers off-guard by making huge changes and not providing a lot of explanation for them. It’s been handled poorly.”[/quote]
[i]My Comment:[/i] "Qwikster"? Are you effing kidding me?? I couldn`t come up with a more phony sarcastic imitation of a "WayKewl" name for a Streaming-pile-of-crap web service if you asked me to. (Ha, maybe they'll end up getting sued by Nestle over their use of a name that sounds too close to that chocolate-milk-bunny-mascot stuff). NFLX (or was that "QWIX"?) stock nosedived 25% last week, got pummeled again today, has given up a full year`s worth of straight-up-ramp-job gains. As for the CEO "eating humble pie", well, read on:
[quote]The separation announcement was the latest in a series of back-to-back blows for Netflix, which rolled out an unpopular new pricing scheme earlier in the summer, apparently causing about a million of its 25 million customers in the United States to cancel the service. It was as if Netflix had fumbled the process then and could not figure out how to recover.

The company’s stock, which tumbled more than 25 percent last week after revising upward its expected number of subscriber defections, dropped another 4 percent on Monday.

In a letter posted on the Netflix Web site late Sunday night, Mr. Hastings apologized for the way he handled recent changes in pricing and subscription services. “I messed up,” Mr. Hastings said. “I owe everyone an explanation.”[/quote]
[i]My Comment:[/i] "But instead of explaining anything, allow me to compound my recent mis-steps with a horribly misguided attempt at rebranding."

Recent Netflix [url=http://finance.yahoo.com/q/it?s=NFLX+Insider+Transactions]insider stock transactions[/url] (click the link to see the full list, of which I reproduce just the tip if the iceberg) tell a distinctly one-sided tale:

[QUOTE=ewmayer;]

Recent Netflix [url=http://finance.yahoo.com/q/it?s=NFLX+Insider+Transactions]insider stock transactions[/url] (click the link to see the full list, of which I reproduce just the tip if the iceberg) tell a distinctly one-sided tale:[/QUOTE]

As I have said before: We should pass a law that ALL compensation at
a publicly traded company should be via salary. No stock grants, no
stock options, nothing. And a bound should be placed on all salaries:
The maximum should be no more than (say) 40x the median.

Mish has a story roundup on what appears to be an accelerating bank run in Europe:

[url=http://globaleconomicanalysis.blogspot.com/2011/09/euro-flight-continues-lloyds-of-london.html]Lloyd’s of London Pulls Euro Bank Deposits; Siemens Pulls €500 Million from French Bank[/url]

-----------------------------

[url=http://www.nytimes.com/2011/09/21/business/sec-refers-ex-counsels-actions-on-madoff-to-justice-dept.html?ref=business]S.E.C. Hid Its Lawyer’s Madoff Ties[/url]: [i]A conflict-of-interest case involving David M. Becker, the former general counsel of the Securities and Exchange Commission, is being referred to the Department of Justice for a possible criminal investigation.[/i]
[quote]After Bernard L. Madoff’s giant Ponzi scheme was revealed, the Securities and Exchange Commission went to great lengths to make sure that none of its employees working on the case posed a conflict of interest, barring anyone who had accepted gifts or attended a Madoff wedding.

But as a new report made clear on Tuesday, one top official received a pass: David M. Becker, the S.E.C.’s general counsel, who went on to recommend how the scheme’s victims would be compensated, despite his family’s $2 million inheritance from a Madoff account.

Mr. Becker’s actions were referred by H. David Kotz, the inspector general of the S.E.C., to the Justice Department, on the advice of the Office of Government Ethics, which oversees the ethics of the executive branch of government.

The report by Mr. Kotz provides fresh details about the weakness of the agency’s ethics office and reveals that none of its commissioners, except for Mary L. Schapiro, its chairwoman, had been advised of Mr. Becker’s conflict.

[u]It says Ms. Schapiro agreed with a decision to keep Mr. Becker from testifying before Congress, where he would have disclosed his financial interest in the Madoff account.[/u]
...
Mr. Becker’s lawyer, William R. Baker III, said in a statement that the report confirmed that [u]Mr. Becker had notified seven senior S.E.C. officials about his late mother’s Madoff account, including Ms. Schapiro and the agency’s designated ethics officer.

“The inspector general concluded that ‘none of these individuals recognized a conflict or took any action to suggest that Becker consider recusing himself from the Madoff liquidation,’“[/u] wrote Mr. Baker, a lawyer at Latham & Watkins who worked at the S.E.C. for 15 years, working alongside Mr. Becker at times.[/quote]
[i]My Comment:[/i] Got that? None of the seven senior S.E.C. officials informed about what was obviously, massively, flagrantly a conflict of interest "recognized" it as such. This would a "shock and surprise" story if it weren`t so incredibly obvious that the SEC, except for the occasional "big show" prosecution (latest installment of that was the Galleon hedge-fund case), is there to serve and protect its Wall Street masters. And it neatly parallels the Madoff scandal itself, where credible evidence had been forwarded to the agency for years which, had it been followed up on by even a semi-competent investigator, would have quickly revealed what was obviously, massively, flagrantly a huge Ponzi scheme. But, again S.E.C. officials "didn't recognize" an issue worth following up on.

And speaking of Ponzi schemes, this next one is Internet-Poker-related:

[url=http://www.nytimes.com/2011/09/21/business/poker-site-misused-players-money-us-says.html?ref=business]Poker Web Site Cheated Users, U.S. Suit Says[/url]: [i]Federal prosecutors who blocked three poker sites in April said Full Tilt Poker had been improperly paying out money from customer accounts to the company’s owners.[/i]
[quote]The millions of people who signed up for a Web site called Full Tilt Poker knew they were there to gamble. But it turns out they were taking on far more risk than they realized, even when they had no chips on the virtual table.

That is the essence of a civil complaint that federal prosecutors filed on Tuesday. It asserts that players around the world entrusted Full Tilt with $390 million in gambling money, and that the company promised to keep those funds in secure accounts. In reality, prosecutors found, the money wasn’t there; instead, much of it had been transferred to the owners and management of Full Tilt, some of whom were themselves among the most prominent and popular poker players in the world.

“Full Tilt was not a legitimate poker company but a global Ponzi scheme,” said Preet S. Bharara, the United States attorney for the Southern District of New York in Manhattan, whose office filed the complaint on Tuesday. [/quote]
[i]My Comment:[/i] George, you`ve been a staunch advocate of Internet poker ... ever do business with this outfit?

[QUOTE=ewmayer;272276]And speaking of Ponzi schemes, this next one is Internet-Poker-related:

[url=http://www.nytimes.com/2011/09/21/business/poker-site-misused-players-money-us-says.html?ref=business]Poker Web Site Cheated Users, U.S. Suit Says[/url]: [i]Federal prosecutors who blocked three poker sites in April said Full Tilt Poker had been improperly paying out money from customer accounts to the company’s owners.[/i]

[i]My Comment:[/i] George, you`ve been a staunch advocate of Internet poker ... ever do business with this outfit?[/QUOTE]

I've seen their ads on TV.

[QUOTE=ewmayer;272276]George, you`ve been a staunch advocate of Internet poker ... ever do business with this outfit?[/QUOTE]

I'm a staunch advocate of the government not telling me how to run my private life.

I stand to lose $250 of "entertainment money". This points out the need to regulate rather than ban online gambling. It would create U.S. jobs, protect consumers from shady operators, and generate tax revenues. Its a win-win-win.

Looks like the Fed's "big announcement" of QE3, a.k.a. "Operation Twist" ($400Bln sell-short-duration paper and buy the long in order to force long-bond rates down even further), which the markets had already baked in in the "but we need much more than that" sense fell rather flat. If Bernanke wants to goose equity prices he's just gonna have to resort to old-fashioned "buy everything via the NYFed prop-trading operation" market manipulation. Or maybe start doing with mortgages like they do with the TBTF banks: Start *paying* interest on people`s mortgage debt, i.e. force mortgage rates to go negative. That could work...


TheOatmeal.com explains the recent moves by Netflix, in pictures:

[url]http://theoatmeal.com/comics/netflix[/url]

[QUOTE=Prime95;272284]I'm a staunch advocate of the government not telling me how to run my private life.

I stand to lose $250 of "entertainment money". This points out the need to regulate rather than ban online gambling. It would create U.S. jobs, protect consumers from shady operators, and generate tax revenues. Its a win-win-win.[/QUOTE]

Of course it is. To all except the right wing retarded religious hypocrites
who disparage 'gambling' while running weekly bingo games in their church.

[QUOTE=ewmayer;272301]Looks like the Fed's "big announcement" of QE3, a.k.a. "Operation Twist" ($400Bln sell-short-duration paper and buy the long in order to force long-bond rates down even further), which the markets had already baked in in the "but we need much more than that" sense fell rather flat. If Bernanke wants to goose equity prices he's just gonna have to resort to old-fashioned "buy everything via the NYFed prop-trading operation" market manipulation. Or maybe start doing with mortgages like they do with the TBTF banks: Start *paying* interest on people`s mortgage debt, i.e. force mortgage rates to go negative. That could work...


TheOatmeal.com explains the recent moves by Netflix, in pictures:

[url]http://theoatmeal.com/comics/netflix[/url][/QUOTE]

Any guesses as to what the (very) recent congressional shenanigans
will do to the market? Republitards are refusing to finance continued
government operations as long as the Demotwits insist on including
disaster cleanup money for recent hurricanes...... The government will
shut down at the end of next week if a continuing resolution is not
passed. I'd LOVE to see it happen. Then we can watch all the fun and
fallout from the finger pointing and blame games.

I'd love to see more market panic and a further 10% "correction" over this
nonsense.

[QUOTE=R.D. Silverman;272319]I'd love to see more market panic and a further 10% "correction" over this nonsense.[/QUOTE]

I wish I could buy puts on "congressional bipartisanship"...or buy shares of "government fecklessness".

But at least it promises to provide no small amount of merriment to those who hve learned to appreciate it purely for entertainment value - it's theater, after all. If it only weren't such *expensive* theater...

Fugly day in global markets ... "there is no recovery" seems to be finally penetrating the skulls of the financial-market bubbleheads.

Denninger has a pair of quality blog posts today:

This starts with the myth of "consumer and corporate deleveraging" which was allegedly occurring in the past 3 years and (again allegedly) setting the stage for long-term economic improvement:

[url=http://market-ticker.org/akcs-www?post=194631]Welcome To The Collapse Of 2011[/url]


This one has some sound advice about getting the economy back on sound footing which is usre to be ignored by its target audience - I quote only the trailing 2 paragraphs about 2 distinctly different forms of "sound money" systems, one a "sound fiat+credit" system (which resembles our current credit-based economy but with actual sound lending practices), the other a more-restrictive "hard money" system of the kind advocated by Mish and presidential candidate Ron Paul. Interesting stuff:

[url=http://market-ticker.org/akcs-www?post=194638]On Bernanke's Folly[/url]: [i]I've been asked a few times by email and in posts on the forum the following question: Were I Ben Bernanke, what would I do?[/i]
[quote]...
Monetary policy in a debt-based currency world is pretty simple; it's a function of mathematics. The growth of money and credit cannot exceed the growth in the economy in the intermediate term. The mathematical law of exponents mandates that this be the case if you want a stable monetary and economic system. Since debt is tied to currency and debt repayment takes place over time you can run short-term differences if necessary to buffer shocks - but you cannot continually expand credit and money (summed) faster than production.

This, incidentally, is the essence of the FOMC's actual charter - but it has been intentionally and willfully ignored.

In a non-debt-bearing currency system the requirements are much more strict. In such a system money and credit (summed) must match production in the present tense. This means that during economic slowdowns you must withdraw money and credit from the system, or you get immediate inflation ("stagflation"), which is insanely destructive. It also means you must "deficit spend" during expansions! This policy is politically difficult to implement as when the economy slows there are always screams for "more drugs!" to buffer the pain. In a debt-based system over the short term you can provide some accommodation. In a non-debt-based system you cannot without immediate monetary damage.[/quote]
[i]My Comment:[/i] I omitted the various text special effects KD is overly fond of from the quoted snip - for the original "you must listen to me!" version see the full post.

The stock market took another dive today. This is getting to be almost monotonous. Thursday we slide 300 to 500 points, Friday most of it is recovered. What this choppiness masks is the underlying fragile economy where nobody is borrowing and very few are spending.

A very pessimistic look at market trends would presume this is a prelude to another dive within the next few weeks. I dunno what an optimist would presume, they seem to rare oonts these days.

Has anyone noticed the share price of GM? I seem to remember that the U.S. Gov owned quite a bit of the post BK company. Are we still holding this bag?

DarJones

Why doesn't everyone realize that all these things we worry about are self-imposed and only mean what we, for all intents and purposes, force them to mean? The stock market is only bad because people get scared when they don't have to let it happen because that fear is controllable. The economy goes up and down due to mostly the fears and irrationality of people when things don't go the way we've set things up as some idea of how they "should" go. I can't be the only one to find all this ultimately absurd, right? We're basically screwing ourselves on purpose without realizing it because we can't stay calm due to these imposed definitions and circumstances that we could actually change completely in reality if people would wake up and realize it and do it all at once. The ultimate reason anything actually goes wrong outside of natural disasters is generally because of some stupid human behavior that was avoidable.

[QUOTE=Jwb52z;272471]Why doesn't everyone realize that all these things we worry about are self-imposed and only mean what we, for all intents and purposes, force them to mean? The stock market is only bad because people get scared when they don't have to let it happen because that fear is controllable. The economy goes up and down due to mostly the fears and irrationality of people when things don't go the way we've set things up as some idea of how they "should" go. I can't be the only one to find all this ultimately absurd, right?[/QUOTE]

There is some truth to what you say, but there are also very real consequences of these "imaginary demons". For example: The government works very hard to get most people to put significant chunks of their retirement nest eggs into equities. Partly as a consequence of tens of millions of baby boomers - even with their relatively paltry savings habits relative to preceding generations - plowing their 401(k)s into the sock market and partly due to 3 decades of fake wealth and unsustainable demand resulting from a historically large credit expansion, we had a 3-decade bull market because all that money (real and 'fake', i.e. borrowed into existence) chasing a less-readily-expandable pool of real assets (businesses and their imputed wealth creation capacity) drove stock prices relentlessly upward. Until "peak credit" was reached around 2007, that is. Now the dual credit and stock-price bubbles must necessarily deflate, but all that fake wealth evaporating has very real effects on the folks who were counting on it to be there for them when needed, and basing real day-to-day economic, career and lifestyle decisions on its existence.

And while I have frequently expressed amusement at the irrational disconnect between the equity markets and the 'real' economy during the entirety of the bogus 'recovery' of the past 3 years, it seems to me that the current market downturn reflects the long-awaited re-correlation of the markets with reality, i.e. the realization by even the most-delusional bubbleheads that nothing of what ails us has been fixed, and the past 3 years have been nothing more than a giant, futile, expensive can-kicking exercise.

----------------------------

And speaking of bubbles, gold and silver crashing *hard* this week. Haven't looked over there yet today, but I bet ZeroHedge is screeching louder than ever about "silver price manipulation." I like that site in general, but they have a curious blindness about their own their pet bubble-assets.

[QUOTE=ewmayer;272542]There is some truth to what you say, but there are also very real consequences of these "imaginary demons". For example: The government works very hard to get most people to put significant chunks of their retirement nest eggs into equities. Partly as a consequence of tens of millions of baby boomers - even with their relatively paltry savings habits relative to preceding generations - plowing their 401(k)s into the sock market and partly due to 3 decades of fake wealth and unsustainable demand resulting from a historically large credit expansion, we had a 3-decade bull market because all that money (real and 'fake', i.e. borrowed into existence) chasing a less-readily-expandable pool of real assets (businesses and their imputed wealth creation capacity) drove stock prices relentlessly upward. Until "peak credit" was reached around 2007, that is. Now the dual credit and stock-price bubbles must necessarily deflate, but all that fake wealth evaporating has very real effects on the folks who were counting on it to be there for them when needed, and basing real day-to-day economic, career and lifestyle decisions on its existence.

And while I have frequently expressed amusement at the irrational disconnect between the equity markets and the 'real' economy during the entirety of the bogus 'recovery' of the past 3 years, it seems to me that the current market downturn reflects the long-awaited re-correlation of the markets with reality, i.e. the realization by even the most-delusional bubbleheads that nothing of what ails us has been fixed, and the past 3 years have been nothing more than a giant, futile, expensive can-kicking exercise. These systems we set up are for expediting things and usefulness. They shouldn't be used forever just because they were set up once. When they stop working or become awful for the majority of the populace, they should be revamped from the ground up getting rid of all the crap bits and not allowing them to happen twice.

----------------------------

And speaking of bubbles, gold and silver crashing *hard* this week. Haven't looked over there yet today, but I bet ZeroHedge is screeching louder than ever about "silver price manipulation." I like that site in general, but they have a curious blindness about their own their pet bubble-assets.[/QUOTE]That's why it's awful because we should know it was all fake and stupidly self-imposed. The fact that we somehow willingly let it be the way it is simply because it's been that way for a long time or that's what we have lived with is insane. These problems could go away very quickly if we, as a whole, were willing to just stop believing they were real and change things back. If it is truly not real, then we are, or at least should be, obliged, or even obligated, to stop behaving as if it is real and do something else better if we really want to fix things. It's all just an insane asinine mess that is unnecessary.

We are probably due a bounce here but I suspect it will be weak (1150-1200 would be my guess) and the market will roll over again. I expect us to go below 1000 in the S&P this year before the Santa rally gives us a positive December.

Gold and silver's plunge is severe but that's what it does. I remember being invested in gold - through a double leveraged ETN no less - in Sept/Oct 2008 and it was like having a root canal without anesthetic. $60-$70 dollar drops in a day. Thankfully, this time I bought some puts when Gold was at $1900. I'll be a buyer of Gold at 1450 or thereabout but after the crazy run this summer it had to go down. At this point, crazy as it sounds, being in USD cash is probably the safest investment for the next 6-12 months.

The piigs are squealing and grunting tonight. The major plan of the moment is to raise the european bailout fund aka the EFSF to 2 Trillion and to cut Greek sovereign debt in half. Roughly speaking, that means a write down of Greek debt to the tune of about $250 billion. And like it or not, it means a haircut for investors. The market is going to have a heyday with this one.

What is triggering this overt action? Simple, Italy and Spain are sweating as their borrowing costs go through the roof. Is 2 Trillion enough? I posted on 2011/08/04 that it would take about 3.5 Trillion euros to get the bailout fund big enough to be meaningful. I stand by that position. Raising the bar to 2 Trillion is just an incremental step.

Pop some popcorn, get something to drink, prop your feet up, intermission is over and the show is about to resume.

DarJones

[b]Ambrose Evans-Pritchard Loses His Mind[/b]

[url=http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8788138/Geithner-Plan-for-Europe-is-last-chance-to-avoid-global-catastrophe.html]Geithner Plan for Europe is last chance to avoid global catastrophe[/url]
[quote]Europe, the G20, and the global authorities have one last chance to contain the EMU debt crisis with a nuclear solution or abdicate responsibility and watch as the world slides into depression, [u]endangering the benign but fragile order that has taken shape over the last three decades[/u]. [/quote]
[i]My Comment:[/i] "Benign" ... if you consider willfully offshoring much of the developed world`s productive-economic capacity in order to dodge environmental and labor laws, allowing those overseeing the scheme to get hugely rich, and papering over the accompanying destruction of the wage base of the lower 4 quintiles of the economy by selling them into lifelong debt-servitude "benign", then yes, I suppose the "new world Ponzi-financial order" that has grown so rampantly over the past 30 years is "benign".
[quote]"The threat of cascading default, bank runs, and catastrophic risk must be taken off the table," said US Treasury Secretary Tim Geithner over the weekend.

"Sovereign and banking stresses in Europe are the most serious risk now confronting the world economy. Decisions cannot wait until the crisis gets more severe."

Euroland's dysfunctional arrangements are no longer a local affair. As the European Central Bank's Jean-Claude Trichet said in Washington, EMU is at the epicentre of a global sovereign debt crisis that risks engulfing all, and is more intractable than 2008 because governments themselves are now crippled.

China, India, Brazil and the world's rising powers will not escape lightly this time if leaders let events spiral out of control. European banks have lent $3.4 trillion to emerging markets (BIS data), or three quarters of external loans to these countries.

The International Monetary Fund warned last week that emerging markets face the risk of "sharp reversals" or even a "sudden stop" if there is further spill-over from Europe. This comes at a time when Asia and parts of Latin America are already in the topping phase of a credit boom, one of epic proportions in China where loans have doubled to almost 200pc of GDP over the last five years.[/quote]
[i]My Comment:[/i] do I detect a common theme underlying all the admittedly-dire issues? Credit bubbles ... crippling debt ... excessive leverage ... Ok, so the problem is "too much debt" - and at the epicenter of the storm is the banks which profited so handsomely from 30 years of exponential debt growth, and the governments which aided them in the scheme and watched happily as the epic debt explosion masqueraded as "economic growth".
[quote]The reserve powers would be well advised to pull out all the stops to save Europe and its banking system. Together they hold $10 trillion in foreign bonds. If they agreed to rotate just 4pc of these holdings ($400bn) into Spanish, Italian, and Belgian debt over the next two years, they could offer a soothing balm. None has yet risen to the challenge. It is `sauve qui peut', with no evidence of G20 leadership in sight. [/quote]
Sorry, Ambrose, no amount of "soothing balm" (better-known as "stealth taxation via currency debasement") is going to actually fix the problem. The U.S. has thrown trillions at its version of the problem, and fixed exactly NOTHING thereby. And given that the backers of the EFSF are now throwing around numbers in the 2-trillion-Euro range to "contain Spain and Italy as well". 400 Bln isn`t even going to be close.
[quote]Once again, the US has had to take charge. The multi-trillion package now taking shape for Euroland was largely concocted in Washington, in cahoots with the European Commission, and is being imposed on Germany by the full force of American diplomacy.

It is an ugly and twisted set of proposals, devised to accommodate Berlin's refusal to accept fiscal union, Eurobonds, and an EU treasury. But at least it is big.

The EU's €440bn bail-out fund (EFSF) will be "leveraged" from €440bn to €2 trillion to cope with Italy and Spain. The fund will assume an "equity" stake of 20pc or so in holdings of EMU debt, supported by loans of 80pc from the European Central Bank. [/quote]
Right - so "more leverage" and more of the same kind of "nuclear option" bank bailouts that worked so well in the U.S. are now being prescribed for Europe by those legendary financial quacksalvers, Messrs Geithner and Bernanke. Yes, I feel much better about this already.
[quote]Even if the €2 trillion "Geithner Plan" does get off the ground, it can do no more than buy time - not to be sneezed at, for sure. [/quote]
Aha, so more can-kicking is prescribed...If I`m not permitted to sneeze at it, may I be permitted to spit on it or urinate in its general direction?
[quote]The root of the euro crisis is a 30pc intra-EMU currency misalignment between North and South. That structural flaw cannot be solved with debt guarantees or bank rescues.

Nor can this gap in competitiveness be bridged by austerity alone, by pushing Club Med deeper into debt-deflation and perma-slump. Such a strategy must slowly eat away at Italian and Spanish society, undercutting the whole purpose of the EU Project. It would ultimately risk trapping them in a debt spiral as well, leading to colossal losses for Germany in the end.

The Geithner Plan must be accompanied by a monetary blitz, since the fiscal card is largely exhausted and Germany refuses to lower its savings rate to rebalance the EMU system. The only plausible option is for the ECB to let rip with unsterilized bond purchases on a mass scale, with a treaty change in the bank's mandate to target jobs and growth.[/quote]
So the solution for "lack of competitiveness" in the Club Med countries is to punish those "evil Germans who resist becoming debt slaves like the rest of us" ... That will address the competitiveness issue how? Or is it the proposed "money-printing blitz" which is supposed to magically make the PIIGS competitive? Call me dense, but I`m not seeing the connection between the problem and the proposed solution here.
[quote]This would weaken the euro, giving a lifeline to southern manufacturers competing with China. It would engineer an inflationary mini-boom in Germany, forcing up relative German costs within EMU. That would be the beginning of a solution, albeit a bad one.[/quote]
"Competing with China" is something the PIIGS can only dream of doing, as long as their economies are so grossly distorted by an oversized non-productive government sector. Until those economies drastically downsize their parasitic components and actually invest in goods-producing sectors, "southern manufacturing" will alas remain largely an oxymoron. But I`m sure Germans share AEP's wistfulness for those good old "inflationary mini-boom" times of Weimar and post-WW2, when people's lives were so wonderfully repurposed by having their life`s savings destroyed. Yep, them was good times ... just me and my wheelbarrow full of cash, on the way to the Biergarten to buy a beer. (If I wanted a pretzel with that I of course needed to make a second trip).
[quote]Sorry Deutschland. History has conspired against you, again. You must sign away €2 trillion, and debauch your central bank, and accept 5pc inflation, or be blamed for Götterdämmerung. It is not fair but that is what monetary union always meant. Didn't they tell you? [/quote]
Said the guy from the country that did all it could to have it both ways - benefit from the monetary integration of its mainland neighbors while blowing its own credit bubble and working-calls wage-base destruction. "Get the guys who actually invested in their manufacturing economy and did not run up the national credit card to the tune of several GDP multiples to pay for it."

Also, Ambrose conveniently forgets that the Germans already went through a severe period of austerity and what they refer to as "Budgetsanierung" as a result of re-integrating the former Eastern Germany. "Punish the prudent" - Why does that sound so sickeningly familiar? Well, if the prudent stand for this, they deserve everything that`s coming to them as a result.

What happened to the auditors?
 

The mortgage debacle is arguably starting to wind down. It absorbed hundreds of billions of taxpayer dollars that are being quietly disposed of in the hands of Fannie and Freddie. There is some serious sleight of hand involved in the process given the myria-billions that were pumped into the economy by the feds either borrowed or created like magic. The article linked below should be viewed by Ewmayer as proof that at least a few sacrificial goats were convicted.

[QUOTE]The fraud began in 2002 and took multiple forms until Taylor Bean collapsed two years ago. The Ocala-based company shut down after federal agents raided its headquarters in August 2009, which led to the failure of Alabama-based Colonial Bank — the sixth-largest bank failure in U.S. history.

At its peak, Taylor Bean had about 2,500 employees and had originated some $30 billion in loans as of 2009.

Seven Taylor Bean executives were convicted of federal criminal charges, including former chairman Lee B. Farkas, who was sentenced in June to 30 years in federal prison. Federal prosecutors called the criminal case one of the most significant to arise out of the nation's financial meltdown.[/QUOTE]

[url]http://moneywatch.bnet.com/economic-news/news/deloitte-sued-for-76b-in-mortgage-fraud-case/6304537/[/url]

But this brings on a question. What happened to the auditors? Why didn't the auditors of these huge banking organizations raise flags and blow whistles years ago? And why aren't the auditors being held accountable? Read the article for one bit of grandstanding and denial. You don't have to look far to find out that the auditors are highly conflicted. Who pays for the auditing? Who would benefit by having a good audit? Let me see.... "your books look good this year, here is our bill". That is just as bad as the ratings companies that are paid by the companies they rate.

DarJones

Arthur Andersen, anyone?

White collar fraud
 

[url]http://whitecollarfraud.blogspot.com/2011/09/were-groupons-and-overstocks-management.html[/url]


Money shot:

[QUOTE] Last week, Groupon [URL="http://blogs.smeal.psu.edu/grumpyoldaccountants/archives/327"]restated[/URL] its financial reports to comply with revenue accounting rules as called for by Ketz and Catanach. The company revised its reported 2009 revenues from $30.5 million to $14.5 million and its 2010 revenues from $713.4 million to $312.9 million – no small potatoes!

Why did Groupon’s CFO and its auditors at Ernst and Young (the third [URL="http://goingconcern.com/2011/03/top-100-accounting-firms-list-looks-very-familiar/"]largest[/URL] accounting firm in the world) miss revenue accounting violations? Ketz and Catanach did not have access to company management or its books and records. They found GAAP violations from merely reading financial reports filed with the S.E.C. in anticipation of the company’s initial public offering. They compared the company’s revenue accounting disclosures with applicable accounting rules and found material misstatements in violation of GAAP. Were Groupon’s management and its auditors stupid? [/QUOTE]

Re. Groupon: Fellow DotBomb 2.0 IPO wannabe Zynga is engaging in similarly creative accounting:

[url=http://www.traderdaily.com/08/accounting-questions-market-timing-delay-zynga-ipo/]Accounting Questions, Market Timing Delay Zynga IPO[/url]
[quote]A sign of the times? Mere overreaction? Either way, news that Zynga, the company behind popular online games such as FarmVille and CityVille, might delay its initial public offering had Silicon Valley and the press abuzz on Monday.

The New York Post reported that the company said in a Securities and Exchange Commission filing that the offering, originally scheduled for as soon as possible or early September, could be delayed.

One reason Wall Street might be in a tizzy over the delayed Zynga IPO is because this is one of the more widely anticipated tech public offerings. No, Zynga won’t be par with Facebook, but it is probably in the realm of Groupon in terms of offering size and demand. A $2 billion IPO from Zynga could value the company at $15 billion to $20 billion, plus Zynga said it is already profitable, as Trader Daily noted last month.

But is the delay of Zynga’s IPO really any big deal? The late August/early September time frame isn’t traditionally active in terms of IPOs. After all, bankers need to get in one last weekend at the Hamptons. Plus, an October offering makes a lot of sense, as CNN Money points out.

On the other hand, it’s important to note why Zynga’s Morgan Stanley-led IPO might be shelved for a little while. Citing unidentified sources, CNBC reported that the fine folks at the SEC are asking Zynga for more clarity on the company’s accounting metrics. At issue are “bookings,” which Zynga describes in a recent document as the total revenue from the sale of virtual goods in games or advertising that Zynga would have reaped if it could have recorded all the proceeds immediately, according to CNBC. Problem is, bookings aren’t part of generally accepted accounting principles.

Groupon previously garnered headlines for irking the SEC with its own use of a questionable accounting metric. The coupon company said earlier this month that it would ditch that methodology, which didn’t include marketing costs.[/quote]
Of course Morgan Stanley has vast experience with fraudulently-overvalued IPOs - [url=http://blogs.wsj.com/deals/2011/08/05/linkedin-ipo-bankers-hit-downgrade-button/]remember LinkedIn[/url]? (Which MS downgraded not long after co-IPO-underwriting.)

-----------------------

Nice rundown on the "leveraged EuroTarp" proposal for taking the existing EFSF and "multiplying its potency using the magic of leverage":

[url=http://www.zerohedge.com/news/guest-post-euro-tarp-why-it-will-be-screaming-failure]Euro Tarp - Why It Will Be A Screaming Failure[/url]
[quote]The EFSF fund has already committed to providing emergency loans to Ireland, Portugal and Greece – the worst bets on the table. It is expected to provide over 100 million euros ($134.9 million) in additional funding for a Greek bailout. According to some estimates after those loans, the fund will be down to about 295 billion euros ($400 billion), So we assume they take roughly $200 billion or so from the European Financial Stability Facility to fund the special purpose vehicle.

$200 billion is not NEARLY enough to solve the problems that Europe faces so the SPV will likely, as suggested by Tim Geithner, be levered up to 9x its capital giving the this vehicle about $1.8 Trillion to work with. The SPV, as stated will take the PIIGS debt in and the banks will get EIB paper which they can then use as collateral to get liquidity from the ECB. Doesn’t this sound a lot like the “good bank/bad bank” solution that Lehman tried to sell?

Yes, the EIB paper is of stronger credit – barely - than the PIIGS paper but you are still left with the fact that broke countries are taking in debt from countries that cannot pay their debts, issuing a SPV to sell to other broke banks so that they can use it as collateral to borrow money after it has been leveraged 9x. 9x times a problem doesn’t make the problem smaller does it? What could possibly go wrong?[/quote]

"Euro even bigger Idiot than I thought"
 

An amusing "EuroZone Crisis NewsBlather" video clip to start your weekend off right:

[url=http://globaleconomicanalysis.blogspot.com/2011/09/peter-oborne-idiot-comments-prompts-eu.html] Peter Oborne 'Idiot' Comments Prompts EU Spokesman To Storm Off Newsnight[/url]


Bloomberg's Jonathan Weil has a funny (and very handy "Eurozone bailout language translation guide":

[url=http://www.bloomberg.com/news/2011-09-29/what-europe-leaders-mean-when-their-lips-move-commentary-by-jonathan-weil.html]What Europe’s Leaders Mean When Their Mouths Move[/url]: [i]The error most Americans make when trying to understand the European debt crisis is this: They fail to realize that the euro isn’t just a doomed currency, but a language unto itself. [/i]
[quote]To truly see the meaning of the seismic events rapidly reshaping Europe, you must know what the following 10 Euro terms of art mean in plain American English:

1. Finance ministry: A house of worship where government leaders go to pray for bailouts, economic miracles, panaceas and other forms of divine intervention.

How to use in a sentence: Officials at the Greek Finance Ministry said they remain hopeful the country will receive its next batch of rescue loans in time to avoid a cataclysmic default.

2. Coordinated: Chaotic, unfocused, brain-dead, paralyzed to the point of nonexistence; even in its best moments resembling a hopeless klutz.

Example: Finance ministers from the Group of 20 nations last week said they were “committed to a strong and coordinated international response to address the renewed challenges facing the global economy.”

3. Firewall: A partition made of fireproof material to prevent the spread of flames from one place to another. Of no use in containing a financial crisis, except as vague public- relations catnip for readers of news articles who can’t tell the difference between napalm and a 10-year bond.

Usage: U.S. Treasury Secretary Timothy Geithner, who is fluent in both Euro and Mandarin, last weekend urged euro-area nations “to create a firewall against further contagion.”

4. Contagion: A financially transmitted psychiatric condition, marked by intense fear of losing everything. Only known treatments in use at the moment are firewalls, rather than anything that actually works.

5. Peripheral country: A core, indispensable member of the European Union. Related word: Sovereign, meaning German or subservient to Germany.

Example: “Although some peripheral countries in Europe continue to experience acute pressure on their sovereign debts, the risk of a broader contagion throughout the area did not materialize,” Italy’s finance minister, Giulio Tremonti, said April 16, four months before Europe’s central bank rescued Italy via large, open-market purchases of Italian government bonds.

6. Stability mechanism: A wooden paddle ball, mainly used for contests between office workers to see how many times they can bounce the little rubber ball off the paddle without missing; also advertised as a cure-all device for comatose economies.

Usage: The European Stability Mechanism, due to take effect in 2013 as a permanent successor to the region’s current bailout fund, will have a “lasting, stabilizing, confidence-creating function,” German Finance Minister Wolfgang Schaeuble told reporters on Sept. 24.

7. TORRP: The much-awaited European version of TARP. Abbreviation derived from the second letter of each of the following countries’ names: Italy, Portugal, Ireland, Greece and Spain.

Rumored to stand for Troubled Obligation Relief Relief Program, providing relief from the relief. In fact, it stands for nothing in particular, like other government institutions. Unlike the U.S. Troubled Asset Relief Program, any TORRP money distributed to European banks is guaranteed never to be repaid.

8. Controlled default: The act of telling another country’s government that it’s OK to stiff most creditors, and then watching with morbid fascination to see if the global banking system falls apart. Originally an aviation term used to describe the final landing of the Hindenburg, which crashed all by itself without taking any other zeppelins with it.

9. Recapitalize: To transfer money from a country’s middle- class taxpayers to an insolvent bank -- in essence, a bribe to bondholders and senior management -- as a way of ensuring that the wealthy don’t rise up and oust the government.

Related term: Austerity. As in, an economic-stimulus program that involves doing exactly the same thing, except the money comes from the citizens of a different country, such as Greece, who are left to subsist on a diet of untreated water and surplus rice.

Usage: “More banks may need to be recapitalized,” European Union Competition Commissioner Joaquin Almunia said Sept. 20 at a press conference in Brussels. “That’s why it’s so important to solve the sovereign-debt crisis without a delay.”

10. Covered-bond purchase program: Forget it, way too complicated to explain here.

Just remember this. The EU and its member nations’ finance ministries are proceeding with their coordinated efforts to erect firewalls, and will never permit contagion to spread beyond the euro area’s peripheral countries. Remain calm. All is well. Everything is under control. [/quote]
[i]My Comment:[/i] The full article has many useful embedded links, including one to a similar glossary Weil previously published, the Goldman Sachs dictionary. And keep in mind the famous aphorism by Herr Von Bismarck [at least so I'm told - precise attribution woulkd be appreciated], "Believe nothing until it is officially denied".

[QUOTE=ewmayer;273082]An amusing "EuroZone Crisis NewsBlather" video clip to start your weekend off right:

[url=http://globaleconomicanalysis.blogspot.com/2011/09/peter-oborne-idiot-comments-prompts-eu.html] Peter Oborne 'Idiot' Comments Prompts EU Spokesman To Storm Off Newsnight[/url]


Bloomberg's Jonathan Weil has a funny (and very handy "Eurozone bailout language translation guide":

[url=http://www.bloomberg.com/news/2011-09-29/what-europe-leaders-mean-when-their-lips-move-commentary-by-jonathan-weil.html]What Europe’s Leaders Mean When Their Mouths Move[/url]: [i]The error most Americans make when trying to understand the European debt crisis is this: They fail to realize that the euro isn’t just a doomed currency, but a language unto itself. [/i]

[i]My Comment:[/i] The full article has many useful embedded links, including one to a similar glossary Weil previously published, the Goldman Sachs dictionary. And keep in mind the famous aphorism by Herr Von Bismarck [at least so I'm told - precise attribution woulkd be appreciated], "Believe nothing until it is officially denied".[/QUOTE]From [url]http://www.angelfire.com/or/truthfinder/wisequote.html[/url] [quote]
"Never believe in anything until it has been officially denied" Otto von Bismarck, 1815-1898

"Believe nothing until it has been officially denied" (1956) Claud Cockburn

"Nobody believes a rumor here until it's officially denied" Edward Cheyfitz, Washington D.C.

"Believe nothing merely because you have been told it" Buddha[/quote]

And note that it's "von Bismarck". I'm surprised a German speaker would make that typo ...


Paul

The news today is a surprising hodgepodge. A noted think tank announced that a recession is incipient and unavoidable. This seems to come as a surprise to some blatter heads in Washington. Another blatter head wants to borrow up to $2 Trillion for infrastructure spending in the U.S. and would leverage public money to do so. This would be along the lines of the European proposal of public funding for a special bank to the tune of 10% of the projected cost followed by issuing bonds and selling them to the private sector for the remaining 90% of the cost. The "beauty" of this arrangement is that it only adds a few $ per year to the deficit. Yeah, right, we need to discuss this bridge I own......

Across the pond, acknowledgement is finally being made that the systemic problems in Greece are far greater than Greece cares to admit. 8 billion more euros in October, but within the next 3 years, they need another 150 billion minimum. A few Germans are openly suggesting that Greece needs to wash its underwear out somewhere outside the EU. Greece is an open pit for money and that won't change any time soon. Italy and Spain look to be near the same condition.

DarJones

[QUOTE=Fusion_power;273220]The news today is a surprising hodgepodge. A noted think tank announced that a recession is incipient and unavoidable. This seems to come as a surprise to some blatter heads in Washington. Another blatter head wants to borrow up to $2 Trillion for infrastructure spending in the U.S. and would leverage public money to do so. This would be along the lines of the European proposal of public funding for a special bank to the tune of 10% of the projected cost followed by issuing bonds and selling them to the private sector for the remaining 90% of the cost. The "beauty" of this arrangement is that it only adds a few $ per year to the deficit. Yeah, right, we need to discuss this bridge I own......

Across the pond, acknowledgement is finally being made that the systemic problems in Greece are far greater than Greece cares to admit. 8 billion more euros in October, but within the next 3 years, they need another 150 billion minimum. A few Germans are openly suggesting that Greece needs to wash its underwear out somewhere outside the EU. Greece is an open pit for money and that won't change any time soon. Italy and Spain look to be near the same condition.

DarJones[/QUOTE]
Now why does *any* of this surprise you?:smile:

OK, now for my next economics history question, seeking guidance for the crystal ball: Not too long ago, 1970s, a number of central american, south american, and african economies were in similar straights, owed a lot of $$ abroad. How did that money get repaid or not?

And what is Greece planning on exporting?

Peter Oborne or Paxman (the moderator) didn't exactly cover themselves with glory here. You may disagree with someone's views. But calling them an idiot on live TV is just bad behaviour.

Greek Bailout
 

[QUOTE=Fusion_power;273220]The news today is a surprising hodgepodge. A noted think tank announced that a recession is incipient and unavoidable.

<snip>
Across the pond, acknowledgement is finally being made that the systemic problems in Greece are far greater than Greece cares to admit. 8 billion more euros in October, but within the next 3 years, they need another 150 billion minimum. A few Germans are openly suggesting that Greece needs to wash its underwear out somewhere outside the EU. Greece is an open pit for money and that won't change any time soon. Italy and Spain look to be near the same condition.

DarJones[/QUOTE]

The following essay might be of interest:

[url]http://www.cnn.com/2011/10/03/opinion/frum-europe-high-stakes/index.html?hpt=hp_t1[/url]

Banks/Bond Holder Haircut?
 

[QUOTE=Fusion_power;273220]
Across the pond, acknowledgement is finally being made that the systemic problems in Greece are far greater than Greece cares to admit. 8 billion more euros in October,

<snip>

DarJones[/QUOTE]

Here, we are still over-leveraged. The Huffington Post has an essay suggesting that debt-relief by banks (and their bond holders) is a solution.
I don't buy it:

[url]http://www.huffingtonpost.com/2011/10/03/debt-relief-haircut-economists_n_991909.html?1317645340&icid=maing-grid7%7Cmain5%7Cdl16%7Csec3_lnk2%7C100956[/url]


The best thing to do about unemployment is to provoke the DECISION
MAKERS. Make it in the personal best interest of senior management to
stop the layoffs and start hiring. Congress could start by insisting that
any layoffs in a public company over (say) the next 2-3 years be done
FROM THE TOP DOWN. Senior management claims they deserve their
high salaries/perks/benefits/stock grants/bonuses because it is their
job to see that their company does well. If layoffs are needed, it is a strong
indication that they HAVE NOT DONE THEIR JOBS. They should bear the
burden of the layoffs. Similarly, we should require that U.S. companies
hire one U.S. worker for every overseas worker that they hire. Or
(even better IMO) place a very strong limit on compensation in U.S.
companies until they do hire.

Let's get people back to work.

There are no rogue traders, there are only rogue banks
 

Barry Ritholtz has a nice commentary on the latest "rogue trader" incident (this one at UBS) in a recent Sunday edition of the Washington Post:

[url=http://www.ritholtz.com/blog/2011/10/there-are-no-rogue-traders-there-are-only-rogue-banks/]There are no rogue traders, there are only rogue banks[/url]


[b]California breaks from 50-state probe into mortgage lenders[/b]

[url=http://latimesblogs.latimes.com/money_co/2011/09/california-atty-gen-kamala-harris-breaks-from-national-foreclosure-probe.html]California breaks from 50-state probe into mortgage lenders[/url]
[quote]California Atty. Gen. Kamala Harris will no longer take part in a national foreclosure probe of some of the nation's biggest banks, which are accused of pervasive misconduct in dealing with troubled homeowners.

Harris removed herself from talks by a coalition of state attorneys general and federal agencies investigating abusive foreclosure practices because the nation's five largest mortgage servicers were not offering California homeowners relief commensurate to what people in the state had suffered, Harris told The Times on Friday.

The big banks were also demanding to be granted overly broad immunity from legal claims that could potentially derail further investigations into Wall Street's role in the mortgage meltdown, Harris said.
...
The removal of California from the discussions is a major blow to fraying efforts by the coalition, which has been trying to strike a settlement deal with the big banks for months. The move by Harris to reject the settlement talks is also a key departure from efforts by the Obama administration, which has been pushing for a fast resolution to the so-called robo-signing scandal that erupted last year.

“This whole concept of a settlement on foreclosure abuse is probably dead,” said Christopher Whalen, the founder of Institutional Risk Analytics. “Nobody in their right mind is going to opt into a settlement right now.”

For California homeowners, the move means the probable end of an opportunity for relatively quick relief stemming from revelations last year that banks improperly foreclosed on troubled borrowers. Key reforms to mortgage-servicing and foreclosure practices pushed by the attorneys general may also be delayed.

Harris has faced increasing pressure in recent weeks from inside and outside the state to reject any deal that was considered too weak, particularly as the foreclosure crisis in the Golden State appears to be worsening.

Among the states with the highest foreclosure rates, California led the pack in new foreclosure proceedings last month, with an increase of 55% over July, according to data from Irvine-based RealtyTrac. Metro areas in the inland parts of California posted big jumps in August, with Riverside and San Bernardino counties soaring 68%, Bakersfield 44% and Modesto 57%.

In rejecting the 50-state talks, California also widens the riff [sic] among law enforcement officials nationwide over the best approach to pursuing banks for mortgage misdeeds.

New York Atty. Gen. Eric Schneiderman, who was originally part of the 50-state negotiations, has launched a wide-ranging investigation into Wall Street's role in the mortgage meltdown - focusing on the efforts to bundle low-quality mortgages into sophisticated bonds.

Schneiderman has been highly critical of the proposed 50-state settlement and expressed concern that his counterparts in other states may let the banks off too lightly and provide immunity from other efforts to bring them to account for misdeeds. Schneiderman has also won support from attorneys general in Delaware, Nevada, Massachusetts, Kentucky and Minnesota, some of whom have launched their own investigations.

A spokesman for Schneiderman, Danny Kanner, welcomed Harris's move.

“Attorney General Schneiderman looks forward to his continued work with Attorney General Harris and his other state and federal counterparts to ensure those responsible for the mortgage crisis are held accountable and homeowners who are suffering receive meaningful relief,” said Kanner.[/quote]
[i]My Comment:[/i] Another red-letter day for many of the biggest TBTF banks again today:

Citigroup -9.8%
BofA -9.6%
Credit Suisse -7.7%
Morgan Stanley -7.7%,
UBS -7.6%
Royal Bank of Scotland -6.6%
Deutsche Bank -5.1%
JPMorgan Chase -4.9%
Goldman sachs -4.7%
BNP Paribas -4.6%
Wells Fargo -3.9%

Did I miss any major TBTF movers? I have only a tiny position in FAZ (3X inverse-leveraged ETF which shorts the Russell 1000 Financial Services Index, and which is +13.3% today) but used last week`s early-week mini-rally to reestablish some targeted shorts (none in the financials, as it happens), closed most of those out last Friday for a nice gain, letting a small one continue to to ride. Of course I missed the trade-of-a-lifetime Big Short of the year so far, which is the collapse of Netflix shares, partly because I decided to heed the advice of a friend who said he knew that NFLX had all "these exclusive deals with Hollywood studios for content" in their pipeline, and partly because market reaction to the company`s major subscription prie-hike a few months back was mostly neutral - until Netflix released the next batch of subscriber-number data, which are a closely guarded secret until released. Ah well, live and learn - and I did still make a decent chunk of change off shorting NFLX, just not the 50-100x jackpot trade that might have been. Rest assured, there will be others.

I couldn't resist....:smile:
[QUOTE]
Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous
[/QUOTE]

I am somewhat confused by the speech that my country's Chancellor gave today, in which he said that the UK Government was prepared to buy the corporate bonds of small and medium companies. I would have said that issuing corporate bonds was pretty much the definition of a large company.

[QUOTE=xilman;273142]From [url]http://www.angelfire.com/or/truthfinder/wisequote.html[/url]

And note that it's "von Bismarck". I'm surprised a German speaker would make that typo ...[/QUOTE]

I admit my personal convention of capitalizing "Von" when this kind of "of" surname is used sans first name makes me a bit of an oddball. But I have my reasons for doing so:

1. Although born in German-speaking Europe, I have spent over 80% of my life in the U.S., hence many conventions that seem "perfectly normal" to lifelong German speakers strike me as odd. One example of this is the German national silliness of saying 2-digit numbers in last-digit-first fashion. That is not only bizarre (goes against order of digit significance) but also error-prone and inefficient because it means that when trasncribing numbers - and Germans like to break long digit strings into pairs, so the problem gets magnified in that context - one must mentally or in writing "buffer" the input, in case the latest digit turns out to be the trailing one of a pair. Saying 83 as "Achtzig drei" will sound wacky to the German ear, but if (say) I'm in a life-or-death situation where one person is trying to communicate a crucial 2-digit datum (say distance from a known reference point of a party needing rescuing) to another over an interrupt-prone channel and only manages to get in one digit before the line gets interrupted, would those on the receiving end be better served by getting the "achtzig" or the "drei und"?

2. In tbe case of "von" vs "Von", it's fine to use lowercase in the context of the full name ("Werner von Braun") but seems weird to me to do when just the last name-pair is used, because e.g. in reading "...da kam in unsere Richtung von...", using the lowercase convention the next word could be a name ("...von Braun") or, say, a direction ("...von der Strasse"). Again this leads to the need for mental buffering of the input, whereas if one use the "Von" convention, it`s obvious that a name is involved.

3. In the recent "science news" discussion about particle/wave duality, I saw a lot of references to "De Broglie" (with or withough the space), and no one seemed bothered by that. I`m just being consistent in my usage of "of" surnames.

[QUOTE=fivemack;273334]I am somewhat confused by the speech that my country's Chancellor gave today, in which he said that the UK Government was prepared to buy the corporate bonds of small and medium companies. I would have said that issuing corporate bonds was pretty much the definition of a large company.[/QUOTE]

Would that be Von Bismarck or someone else? :)

[QUOTE=ewmayer;273413]
1. Although born in German-speaking Europe, I have spent over 80% of my life in the U.S., hence many conventions that seem "perfectly normal" to lifelong German speakers strike me as odd. One example of this is the German national silliness of saying 2-digit numbers in last-digit-first fashion. That is not only bizarre (goes against order of digit significance) but also error-prone and inefficient because it means that when trasncribing numbers - and Germans like to break long digit strings into pairs, so the problem gets magnified in that context - one must mentally or in writing "buffer" the input, in case the latest digit turns out to be the trailing one of a pair. Saying 83 as "Achtzig drei" will sound wacky to the German ear, but if (say) I'm in a life-or-death situation where one person is trying to communicate a crucial 2-digit datum (say distance from a known reference point of a party needing rescuing) to another over an interrupt-prone channel and only manages to get in one digit before the line gets interrupted, would those on the receiving end be better served by getting the "achtzig" or the "drei und"?[/quote]I agree completely.

Personally, I'd say "acht drei" but then again in English I'd say "eight three" in such life-or-death circumstances. I'd also use the international standard alphabet Alpha, Bravo, Charlie, Delta, Echo. Foxtrot, ...

In a previous life I was head-honcho for a CERT (OxCERT to be precise) where I learned to specify dates as, for instance, 2011 October 4th rather than any local convention such as 10-4-2011 or 4-10-2011 which are intrinsically ambiguous to an international audience. Likewise, I'd always specify the time as 17:22:39 UTC rather than 6:22 pm (which is what it is here at the moment) or 12:22 EST (because both the US and Australia, at least, have a timezone named "EST") even if the event in question had US timestamps (though as a convenience to the reader I'd say "17:22:39 UTC == 13:22:29 EDT in the US).

The US middle-endian style for specifying dates seems to me to be bizarre but then I'm a European and prefer strictly big-endian or little-endian representations.

I also try to use "de Broglie" (and "ffrench" for an English example) but confess that I sometimes fail to live up to my standards.

OK, so I'm a pedant. I can live with that.

Paul

[b]Economic Bust Hits Australia[/b]

[url=http://globaleconomicanalysis.blogspot.com/2011/10/australia-central-bank-signals-rate-cut.html]Economic Bust Hits Australia[/url]


[b]Belgium's Largest Lender About to Become First Casualty of Greek Default[/b]

[url=http://globaleconomicanalysis.blogspot.com/2011/10/dexia-belgiums-largest-lender-about-to.html]Dexia, Belgium's Largest Lender About to Become First Casualty of Greek Default; Emergency Meeting to Split Bank Now in Progress[/url]
[quote]In recent (and totally useless) "stress-free" tests, Dexia passed with flying colors. Dexia passed those tests only because the tests did not include any writedowns of Greek debt. Tonight, an emergency board meeting is underway because Dexia is massively undercapitalized as a result of its Greek bond position.

Please consider [url=http://www.businessweek.com/news/2011-10-03/dexia-board-said-to-meet-as-sovereign-debt-crisis-curbs-funding.html]Dexia Board Said to Meet as Sovereign Debt Crisis Curbs Funding[/url]
[i]...
“Dexia is an extremely complicated file,” said Benoit Petrarque, an Amsterdam-based analyst at Kepler Capital Markets with a “hold” rating on the shares. “The fact that two countries are involved, both under pressure from rating agencies, makes it even more difficult. [u]We are not in 2008 anymore, when you could just inject multibillions of cash[/u].”
In September 2008, France and Belgium led the first rescue of Dexia, buying a combined 3 billion euros of stock. The bank’s existing shareholders, which include Caisse des Depots et Consignations and Belgium’s Holding Communal SA, provided an additional 3 billion euros.

Less than a month later, Dexia also obtained as much as 150 billion euros of debt guarantees from France, Belgium and Luxembourg, of which it tapped a maximum of about 96 billion euros in May 2009. The bank stopped issuing government-backed debt in June 2010. It still had 29 billion euros outstanding at the end of last month.[/i]

Euronews provides additional details in [url=http://www.euronews.net/2011/10/03/dexia-dragged-down-by-greek-debt-worries/]Dexia dragged down by Greek debt worries[/url]

[i][u]The French and Belgian government will do the right thing to support bank Dexia in the current turbulent markets[/u]. So said the Belgian Finance Minister Didier Reynders.

It is now looking more likely that Dexia’s state shareholders will have to consider a second bailout of taxpayers’ money.

Dexia is not the only European bank facing a need for capital as regulations become tougher, profits sag and lenders face losses on sovereign bonds if the euro zone crisis isn’t resolved.

Banks face a 148 billion euro capital shortfall under a base case and a 227 billion shortfall under a stressed scenario, according to analysts at JPMorgan, who say Unicredit , Deutsche Bank, Lloyds, Societe Generale and Barclays each face a deficit of over seven billion euros under its stressed scenario.[/i][/quote]
[i]My Comment:[/i] Contrast the "you must bail us out" stance of the Belgian Finance Minister against the "We are not in 2008 anymore" attitude of the Amsterdam analyst.

Also note the numbers: The "worst-case" scenario described by the JPMorgan analysts is a little over 200 billion Euros for *all* the bamks - But Dexia alone needed a lifeline of similar size back in 2008.

[b]Late Afternoon Market Boner Alert[/b]

Reader caption contest for this one: Provide a suitable rational-market-commentary-sounding caption-conclusion to accompany the following DJIA daily chart:

"After being in red for nearly the entire session, U.S. equity market staged a dramatic late-day comeback on news that __________________"

[QUOTE=ewmayer;273432]
"After being in red for nearly the entire session, U.S. equity market staged a dramatic late-day comeback on news that __________________"[/QUOTE]... any further drop would satisfy the formal definition of a bear market.

[QUOTE=ewmayer;273432][B]Late Afternoon Market Boner Alert[/B]

Reader caption contest for this one: Provide a suitable rational-market-commentary-sounding caption-conclusion to accompany the following DJIA daily chart:

"After being in red for nearly the entire session, U.S. equity market staged a dramatic late-day comeback on news that __________________"[/QUOTE]

A new bailout package was announced for Dexia.....:no:

[QUOTE=ewmayer;273432][b]Late Afternoon Market Boner Alert[/b]

Reader caption contest for this one: Provide a suitable rational-market-commentary-sounding caption-conclusion to accompany the following DJIA daily chart:

"After being in red for nearly the entire session, U.S. equity market staged a dramatic late-day comeback on news that __________________"[/QUOTE]

Greece has not yet defaulted.



Would anyone care to start a betting pool? "At what level will the DOW
bottom out" (or Nasdaq/S&P etc?).

[QUOTE]Bernanke was categorical in defending the Fed's record of price stability in recent decades. He noted inflation has averaged 2.0 percent during his tenure and blamed regulatory failures, not excessively low rates, for the financial crisis.[/QUOTE]
[url]http://news.yahoo.com/u-close-faltering-fed-ready-act-bernanke-065154564.html[/url]

You might read the above to mean that Bernanke does not accept Fed responsibility for the financial meltdown. This is pure misdirection and spin. The entire housing bubble was a direct result of the easy money Greenspan years. Granted there were regulatory failures, but Ben can't dodge this one entirely.

DarJones

[QUOTE=cheesehead;273440]... any further drop would satisfy the formal definition of a bear market.[/QUOTE]

That seems as good a "reason" as any. :)

Mish weighs in on the topic:

[url=http://globaleconomicanalysis.blogspot.com/2011/10/viral-nonsense-about-what-caused.html]Viral Nonsense About What Caused Tuesday's Rally[/url]
[quote]No fewer than a half-a-dozen sites featured or repeated a silly story about Tuesday's late rally that propelled the S&P 500 up 45 points in an hour. I am commenting because of all the emails I received on the idea.

Supposedly the Financial Times article [url=http://www.ft.com/cms/s/0/b1219a20-eeab-11e0-959a-00144feab49a.html#axzz1ZiWIQHqN]EU ministers look at bank aid plans[/url] triggered the rally.

[i][excerpt snipped][/i]

This is a case of looking for a cause and finding one.

The most likely explanation of this rally is purely technical. Support was breached, no more sellers stepped in and a short-covering rally from deeply-oversold commenced as bears covered. If you prefer, "short-term psychology changed for unattributable reasons"

It is highly doubtful this all happened because of non-statements with no details from Olli Rehn. Rather, Rehn just happened to be spouting nonsense right as the market was ready to reverse on short-covering.

It is a mistake to look for an immediate explanation for every market move. Sometimes the explanation will not come for days (then be attributed to something else), and sometimes there really is no explanation other than short-term psychology changed.

When everyone starts fishing for answers, someone will find one, no matter how silly, and the story gets repeated everywhere.[/quote]
[i]My Comment:[/i] It is certainly possible that a by-then large preponderance of short-sellers, seeing that the market seemed disinclined to drop further on the day, decided to take profits toward the end of the session. If too many shorts decide to cover at once that can lead to this sort of thing - it`s the short-side analog of a "stop-loss cascade" on the long side. Since the exchanges don`t divulge *who* is buying and selling (unless they are investigating anomalous market action or are served with a legal subpoena), we`ll probably never know who (or what, if it was an HFT algo) started the late-day buying frenzy.

In any event, it`s this sort of thing that makes me very glad I "sold too soon" (i.e. closed 90% of my short positions) last Friday, while they were still well in the money. To give you an idea how quickly things can move in option-land: One batch of puts I bought for $0.50 on 9/27, sold 70% of last Friday (4 days later) for $1.95, that contract last traded today at $0.36, i.e. down nearly 30% from my purchase price and down over 80% relative to my Friday-sell price. (And tbat`s not counting bid/ask spreads and transaction costs, which are much steeper for options than regular stocks, ETFs or mutual funds.)

Given the insane volatility and high expense, "why on earth would anyone play that game?" is a valid question. "I'm a compulsive gambler and need to be dragged physically away from the gaming table" is one possible answer. Another is that I consider current conditions to be as far removed from the "buy and hold" market everyone was conditioned to believe in as "normal" during most of the last 3 decades as one can get, so AFAIC the investment choices are (1) Don`t play (i.e. stay in cash, preferably US$-denominated), or (2) Put a limited amount of "I can afford to lose this" capital to work in selected options or leveraged-ETF plays, with a time horizon matching the volatility and "decay rate" of the asset class chosen. Having learned the hard way that shorting financials puts one on the opposite side of the trade from some very powerful interests (including the governments and central banks of the world), I like shorting tech-bubble stocks (a natural fit since I work in tech), others like to play commodities, gold miners, what have you. If you choose (2), find a smallish asset class you can afford (in time-terms) to follow reasonably closely, and for which you have developed a good "feel". And, like the referee says to the pugilists immediately prior to commencement of the boxing match, "protect yourself at all times". (Limit your risk exposure, be ready to eat a small loss before it turns into a big one, don`t get too greedy when it comes to take some profits, etc).

Tonight the B of E announced Quantitative Easing to the tune of 75 billion pounds.

[url]http://www.bbc.co.uk/news/business-15196078[/url]

My guess is that it won't take long for Bernanke to announce that the U.S. needs further stimulus and that he will inject another $500 billion to juice up the economy. Never mind the inflationary effects, there is no inflation. Or is there?

This is based on a 2 year time frame. The last time I looked, a loaf of bread had increased by 24% at a local store. The price of just about any kind of meat has increased by about 30% for chicken, 25% to 70% for beef, and 20% for pork. Fish is not up as much except farm raised which is being affected by the price of feed. The items we all have to buy are the items that have increased in price. The discretionary items like autos, appliances, and similar items have been more or less stagnant over the same time frame.

Let me put this in a different perspective. Average wages have not just been stagnant, they have SHRUNK over the last 2 years. Cost of necessities like food have increased. This is putting a squeeze on the lower income brackets pushing more people into poverty. Why would anyone expect that people would spend money in this environment? More important, why borrow money given the economic malaise we are in.

DarJones

[B]Fitch Downgrades Spain[/B]

Fitch [URL="http://www.bloomberg.com/news/2011-10-07/spain-credit-rating-cut-two-levels-by-fitch-as-europe-debt-crisis-spreads.html"]downgraded Spanish debt[/URL] 2 notches this morning:
[quote]Spain had its credit rating cut two levels by Fitch Ratings, which cited the “intensification” of the euro crisis, slower Spanish growth and regional finances as risks to the nation’s debt outlook.

Fitch cut its rating to AA- from AA+, the company said in a statement today from London. The outlook is negative. Fitch cited similar reasons for also downgrading Italy one level to A+, while maintaining Portugal at BBB-, saying it would complete a review of that ranking in the fourth quarter.[/quote][I]My Comment:[/I] Here is [URL="http://globaleconomicanalysis.blogspot.com/2011/10/spains-net-foreign-debt-exceeds-one.html"]Mish on Spain`s crushing debt load[/URL]

B-but, we were being told just a year ago that Soain`s debt was "far lower" than that of its fellow little PIIGS.

[B]Occupy Wall Street[/B]

OWS is [URL="http://www.nytimes.com/2011/10/07/opinion/krugman-confronting-the-malefactors.html?_r=1&ref=opinion"]less a coherent "movement"[/URL] than a collective "enough!" by the huddled masses of all poltical stripes who have been victimized by the Great Financialization of American life. Karl Denninger has a post from a fellow libertarian which describes it nicely:
[quote]You know what the "Occupy Wall Street" movement is?

It is all the things that were in the original Tea Party, but were steadily ignored as the TP became a Republican booster club.

The Tea Party is a contradiction. They want a balanced budget, but they also want the US military to intervene everywhere. Obamacare is a dirty word, but don’t dare touch social security or medicare. Individual rights are important too, but don't push it too far. After all, republicans came up with today's policies.

There are a few nuts in the OWS crowd, but [U]from what I hear "Occupy Wall Street" is about bringing the fraudsters to justice[/U]. Its about changing the banker/government dynamic that runs this country. It's about free markets. It's about ending endless debt. It's about stopping the wars. It's about the rule of law. It's about the libertarian soul of America.

Since the TP lost the focus of addressing the root problems of America, they remain unresolved.

It’s sad, really. The TP talks about sewer legislation, redistricting, and supporting House Speaker Boehner's plan to add $2 trillion in debt, while the real issue is Congress has spent more than it takes in, and the costs of the promises outweigh the means to pay them. In the process, you and I are less free than we used to be.

There was no place left for folks to go.[/quote][B]All You Need to Know About the European Bank "Stress Tests"[/B]

ZH has a hilarious posting illustrating the bad joke which was the Euro-bank "stress tests" - Check out whose Tier1 capitalization "performed best under the adverse scenario":

[URL="http://www.zerohedge.com/news/epic-grotesquely-surreal-friday-humor"]Epic, Grotesquely Surreal Friday Humor[/URL]


Have a good weekend, all - I leave you with a quote from the late [URL="http://en.wikipedia.org/wiki/Steve_Jobs"]Steve Jobs[/URL], dating from the early 1980s, when Jobs was trying to recruit [URL="http://en.wikipedia.org/wiki/John_Sculley"]John Sculley[/URL], who was at the time the president of PepsiCo, to come help him run Apple Computer:

[I]"Do you want to sell sugar water for the rest of your life or come with me and change the world?"[/I]

Of course that proved to be a "careful what you wish for" moment for Jobs, as Sculley and the Apple board ousted Jobs from Apple a few years later. (Based on Jobs` bizarre antics at the time I can`t say I blame them). It is well-known that subsequent to his ouster, Jobs sold all but 1 of his shares in Apple, keeping the 1 so he would continue to receive the annual report. (Had he kept his original stake, it would have been worth ~$35 billion today). As a result, most Jobs` net worth at the time of his death was in fact a result of his sale of Pixar (which he acquired for just $5 million) to Disney in 2006 for $7.4 billion. But for Jobs it was [URL="http://never about the money"]never about the money[/URL]:

[I]"Being the richest man in the cemetery doesn't matter to me … Going to bed at night saying we've done something wonderful … that's what matters to me," said Jobs in a 1993 interview with the Wall Street Journal.[/I]

[QUOTE=ewmayer;273720]

[B]Occupy Wall Street[/B]

OWS is [URL="http://www.nytimes.com/2011/10/07/opinion/krugman-confronting-the-malefactors.html?_r=1&ref=opinion"]less a coherent "movement"[/URL] than a collective "enough!" by the huddled masses of all poltical stripes who have been victimized by the Great Financialization of American life. Karl Denninger has a post from a fellow libertarian which describes it nicely:

[/QUOTE]I've been warily watching news of OWS to see how much airheadedness it (*ahem*) incorporates. I pleasantly note that there seems to be some substance to it.

Here's another take, from Reason Magazine:

"Occupy Wall Street: Beyond the Caricatures

Outsiders are criticizing a heterodox movement that they choose not to understand."

[URL]http://reason.com/archives/2011/10/07/occupy-wall-street-beyond-the[/URL]

[quote=Michael Tracy]It's very easy to decree from afar that the Occupy Wall Street demonstrators flooding Lower Manhattan right now are there for no other reason than to recite hackneyed leftist bombast. Indeed, without interviewing a single attendee, [URL="http://t.co/wu5DFz31"][I]National Review[/I] editor Rich Lowry[/URL] determined that the thousands who have flocked to Liberty Plaza in recent weeks are nothing more than a "woolly-headed horde" spouting "juvenile rabble."

I strongly disagree. By and large, the folks I've spoken to have not come off as "woolly-headed" in the slightest. On Wednesday, for instance, I chatted with Jack Zwaan, a self-described "Tea Party Libertarian" and Ron Paul supporter who had flown in from Little Rock, Arkansas, to attend the demonstration. Zwaan wielded a humongous Gadsden flag—yes, the kind of flag commonly seen at Tea Party protests.

While there's no question that the Occupy movement has an ethereally left-leaning tilt—and to be sure, the appearance of traditional unions can make that tilt more pronounced—all the [URL="http://www.youtube.com/watch?v=uZmPWcLQ1Mk&feature=youtube_gdata_player"] "End the Fed" advocates[/URL],[URL="http://american-rattlesnake.org/2011/10/occupy-wall-street-observations/"]Ron Paul supporters[/URL], Internet freedom activists, and even some [URL="http://www.youtube.com/watch?feature=player_embedded&v=Tp-eapYpL8c"] who identify[/URL] as "Tea Party Patriots" in the mix make this phenomena difficult to characterize with pithy soundbites.

. . .[/quote]

Mr Cheesehead:
A sample of one? Let's sample 2^43,112,609-1, a flamboyant attendee at the GIMPS rally, and see how mamy mersenne primes it makes us think there might be, or how easy it is to find them.....

As Ernst is making clear, the level of gamesmanship on wall street, with no positive effect o nthe economy (Wall street has positive effects on the economy when it makes it possible for organisations to borrow money they expect to repay and do something productivel with), is at a level not seen since 1929, or possibly since the dutch tulip craze.
The distortions of the so-called markets, including continuance of obvriously bankrupt banks, is simply amazing.

Occupy wall Street is a response to that. Hopefully we don't have that "back to the supposedly golden past which was simple like my childhood" of the tea party mixed in too much.

[QUOTE=Christenson;273783]Mr Cheesehead:
A sample of one?[/QUOTE]?

[QUOTE=cheesehead;273821]?[/QUOTE]
[QUOTE]
On Wednesday, for instance, I chatted with Jack Zwaan, a self-described "Tea Party Libertarian" and Ron Paul supporter who had flown in from Little Rock, Arkansas, to attend the demonstration.
[/QUOTE]
This comes to me as a sample of one....

Dexia, the numbers don't add up.
 

News today is full of purported plans to break up Belgium's Dexia bank. While the overall plan seems to be rational, there are numbers that need to be clarified. The plan involves selling off healthy assets for cash, absorbing some units into French banks, nationalizing the main bank into Belgium, and placing toxic assets in a "bad" bank.

The first significant item the reports bring out is that Belgium belongs right in there with the piigs. If you rank them in debt/GDP order, it would be Greece, Italy, Belgium, Ireland, Spain, and Portugal. Maybe now we should start calling them the "bigpigs" though that would involve adding another country to make up the second G.

The second significant item is that Dexia's exposure to credit risk totals $700 Billion. Of that total, approximately $200 Billion is significantly at risk. Of that amount, $12 Billion is weak sovereign nation debt, aka Greece and probably some in Spain and several of the other piigs and $7 Billion is from exposure to the U.S. mortgage market. Now if you do the math, Dexia is NOT collapsing over $12 Billion in sovereign nation debt. Dexia is not collapsing over $7 Billion in U.S. MBS. Dexia is collapsing because they have $180 billion in assets that are so seriously devalued as to become WORTHLESS. Ask yourself what these assets are?

The third significant item is that Dexia has a major French presence and France can't wait to absorb them into existing French banking entities. This smacks heavily of the same mindset that got Countrywide, Merrill Lynch, etc. absorbed into U.S. banking entities. I question the legitimacy of such an action.

[url]http://news.yahoo.com/france-belgium-set-finalize-dexia-break-053508357.html[/url]

The fourth significant item is .... Dexia is first, who goes next? Please note the emphasis. We have up to now been dealing with sovereign nations that are on the verge of default. Now we have huge banking operations that suddenly are bankrupt and having to be broken up and sold off. Dexia was considered among the strongest banks in Europe. If it was strongest, what does that tell you about the other big banking entities?

DarJones

Dexia was not considered among the strongest banks in Europe. It has been a weak bank for over a year now.

[QUOTE=Christenson;273840]This comes to me as a sample of one....[/QUOTE]... perhaps because of ignoring the sentence preceding your short selection: "By and large, the [U]folks[/U] I've spoken to have not come off as "woolly-headed" in the slightest." (Note the plural.)

... or of not bothering to actually read any more of the two-page article than the short portion I quoted? (I did put an ellipsis at the end of what I quoted, signalling that there was more in the actual article.)

Later on the first page, the author quotes four more participants ([I]not counting[/I] Ron Paul or Mayor Bloomberg). Did you read those?

Did you follow either of the article's links to YouTube, or to another Internet article with both photos and quotes of participants?

... or are you implying that [i]I[/i] formed my opinion based on only the short portion of the article that I quoted?

Mea Culpa...
 

Carlessness strikes!!!:blush:

Markets rallying hugely today on the latest "hopeful quotes pointing to decisive action soon - stay tuned for details which will likely be lacking" blather from European heads of state:

[url=http://www.bloomberg.com/news/2011-10-09/merkel-sarkozy-pledge-bank-recapitalization-in-crisis-plan-due-this-month.html]Merkel, Sarkozy Pledge Bank Recapitalization[/url]
[quote]Angela Merkel and Nicolas Sarkozy, racing to stamp out the euro debt crisis threatening to engulf the financial system, gave themselves three weeks to devise a plan to recapitalize banks, get Greece on the right track and fix Europe’s economic governance.

[u]“By the end of the month, we will have responded to the crisis issue and to the vision issue,”[/u] the French president said in Berlin yesterday at a joint briefing with the German chancellor before they dined at her office.[/quote]
[i]My Comment:[/i] [In your best Money-Python [url=http://www.youtube.com/watch?v=9V7zbWNznbs]taunting-French-knnniggits[/url] accent] [i]"Ah, yeah - you know, we gonna feex dat whole 'Your-o-peen debt crisees' deal and Ah gonna show you mah pocket bazooka stuffed full-a da 'vision' you been buggin` me about, OK, mon amis?" added Mr. Sarkozy, testily. When another reporter raised her hand to ask a question, Mr. Sarkozy, visibly angry, said peremptorily, "I don't want to talk to you no more, you empty headed animal food trough wiper. I fart in your general direction. Your mother was a hamster and your father smelt of elderberries", and then stormed off, leaving a trail of paper-clutching aides and astonished reporters in his wake.

[b]In Kodak's troubles, a snapshot of an icon's fall[/b]

[url=http://www.contracostatimes.com/news/ci_19058200?source=rss]In Kodak's troubles, a snapshot of an icon's fall[/url]: [i]ROCHESTER, N.Y. -- Buffeted by foreign competition, then blindsided by a digital revolution, photography icon Eastman Kodak is fighting for survival after a quarter-century of failed efforts to find its focus.[/i]
[quote]131-year-old company that turned picture-taking into a hobby for the masses and became singularly synonymous with capturing memories has tried to bat down sudden talk of bankruptcy. But concern about its grim prospects has hit fever pitch after it enlisted a legal adviser to explore ways to revive its sagging fortunes.

The collapse of such a legendary brand would not only reverberate through American business, but would also have a profound cultural effect on generations worldwide who took their first snapshots with film cameras bearing the unmistakable yellow-and-red K logo.

"You could look up and see that yellow sign all over the world -- no matter where you went, people depended on that for their memory-recording," said photography writer John Larish, who worked for Kodak in the 1980s as a senior market-intelligence analyst.

"With the advent of digital or even cellphone cameras, Kodak wasn't in the game," he said. "I see the company now as something we will write about in history books."

Already jittery shareholders were rattled late last month when word leaked out that Kodak has hired Jones Day, a law firm that dispenses advice on bankruptcies and other restructuring options. Its stock, which topped $94 in 1997, skidded to an all-time low of 78 cents a share.

After markets closed Sept. 30, Kodak insisted in a statement that it had no intention of filing for bankruptcy protection and described Jones Day as one of several advisers helping its management close out a stumbling, decade-long drive to recast itself as a digital photography and printing powerhouse. Its stock rebounded Thursday to $1.45.

But investor alarm about whether it has the financial wherewithal to complete its turnaround is raising the seemingly inescapable specter of job cuts -- and the threat of extinction. Kodak has already sliced its global payroll to 18,800 from a peak of 145,300 in 1988, and its hometown rolls to 7,100 from 60,400 in 1982. Employees say they're even more scared than usual that the latest crisis could sink careers that somehow dodged decades of cutbacks. [/quote]
[i]My Comment:[/i] But it`s not just old-tech dinosaurs like Kodak which are victims of the rapid pace of change in the broader wired/digital universe...as I write this, Sprint/Nextel looks be on the ropes, as well, having suffered a series of major mis-steps which are now being compounded by a cash crunch just as corporate credit markets are seizing up. To think how immensely cheaper it would have been to raise cash in the corporate-debt markets a year ago, when even junk-bond yields were unbelievably low as everyone and their brother was yield-chasing with reckless abandon.

[b]And speaking of "missing the window":[/b]

[url=http://www.mercurynews.com/top-stories/ci_19080252]Netflix kills plan to split off DVD rentals[/url]
[quote]NEW YORK -- Netflix generates more head-scratching plot twists than a cheap B-movie.

On Monday, the company said it would reverse a previously announced decision to put its DVD-by-mail and Internet streaming services on separate websites, a plan that was widely derided by Netflix subscribers.

People will be able to use both services under one account and one password, CEO Reed Hastings said Monday in a blog post.

Netflix Inc., however, plans to stick to pricing plans introduced in June, which means subscribers are now paying separately for streaming service and mailed DVDs. That change amounted to a price increase for most subscribers.

Investors saw the reversal as an Oscar-worthy move, sending the stock up $7.68, or 6.6 percent, to $124.89 in midmorning trading after rising as high as $128.50.[/quote]
[i]My Comment:[/i] “OK, so we changed our mind about making you manage 2 separate accounts in place of the 1 you used to have … but we’re gonna charge you the new, higher rate for the privilege. Are we customer-friendly, or what?”

I sense this is too little, too late – a tremendous amount of customer-loss and horrible-PR damage has already been done, and others (e.g. Dish) are aggressively moving into the DVD-by-mail+streaming-download space, and are specifically targeting a price point similar to what NFLX used to charge.

And the Academy appears to be re-thinking that "Oscar-worthy move": NFLX has since sold off hard, now down below $110, which is more than 7% *below* its Friday close.

[url=http://www.washingtonpost.com/business/economy/companies-use-fuzzy-math-in-job-claims-candidates-still-buy-in/2011/10/07/gIQAqoYBbL_story.html]Companies use fuzzy math in job claims; candidates still buy in[/url]
[quote]In [url=http://www.api.org/aboutapi/ads/upload/Million_Jobs_Radio_9-2-11.mp3]an ad[/url] that has blanketed radio airwaves in the Washington region, a woman’s voice gently intones, “Imagine .?.?. one million new jobs.”

“One million new American jobs,” echoes a man. “One million new opportunities to build a career,” says the woman.

“Support a family.”

“Follow your dreams.”

And where will these “one million new jobs” come from? By expanding oil and gas drilling and building new pipelines, says the American Petroleum Institute, an industry lobbying group that paid for the ad campaign, which also has featured in newspapers, on television and on Metro platforms.

Oil companies aren’t the only ones promising jobs if Washington gives them their way. A wide array of businesses are saying they can help solve the country’s unemployment crisis if only the government would roll back some regulations, approve their big mergers or lower their taxes.

Yet the industry often touts debatable jobs numbers. Mergers between big companies, for instance, tend to result in layoffs rather than new positions overall. And a closer look shows that API’s ads exaggerate the effect that looser drilling policies would have on employment; more than half of its projected job growth would come between 2015 and 2030.

Nonetheless, some policymakers and presidential candidates have cited these statistics as they echo companies’ claims about creating jobs.[/quote]
Hey, never let "ugly subjective facts" get in the way of a good narrative, I say.
[quote]“We just learned today that if the federal government would pull back on all of the regulatory restrictions on American energy production, we could see 1.2 million jobs created in the United States,” Rep. Michele Bachmann (Minn.) said at a Sep. 7 Republican presidential debate.[/quote]
Never mind that most of those will be related to toxic spill cleanup - a job is a job, let`s not get distracted by arcane details, OK?
[quote]In a letter last month to the Justice Department, 100 lawmakers defended the merger between AT&T and T-Mobile, repeating the companies’ argument that the government’s lawsuit to stop the deal on antitrust grounds would “thwart job creation and economic growth.”

And a central element in the economic plans of other Republican presidential candidates, such as Mitt Romney and Rick Perry, is to roll back “job-killing” regulations to spur hiring.

“It’s really hard if you’re against regulation to let a good crisis go to waste, and right now we have high unemployment,” said Roger Noll, an economics professor at Stanford University and co-director of the school’s program on regulatory policy. “You can use the current economic condition as a Trojan horse.”

The horses come in different shapes. The coal industry is running ads that show working people weighed down by regulation-filled briefcases being violently thrown from broncos in a rodeo. A new study commissioned by environmental groups, however, says that regulation of coal ash disposal would actually create jobs.

Other company numbers also become fuzzy upon examination.

Big company mergers are widely known to lead to job losses in the short term as firms seek savings, or “synergies” in merger jargon. But that has not stopped AT&T and Capital One, whose proposed mergers have raised antitrust scrutiny, from saying that their acquisitions will result in more jobs.

AT&T has been running a television ad showing its employees hard at work and consumers enjoying their wireless phones and tablets. The ad says that if the merger with T-Mobile is approved, AT&T will bring back 5,000 jobs that were outsourced overseas. It also says the merger will create investment in broadband that would create “as many as 96,000 jobs.”

The latter number comes from a study by the Economic Policy Institute looking at the employment benefits of the $8 billion AT&T has promised to plow into broadband investment should the deal be approved in court. EPI concluded that such an investment would yield 55,000 to 96,000 new jobs over seven years.

In "One Million Jobs", the American Petroleum Institute, an industry lobbying group, gives its take on how to create one million jobs.

In this TV spot, AT&T claims that its proposed merger with T-Mobile will create more jobs. But the EPI study does not address whether the merger would ultimately result in more jobs — after factoring in potential layoffs.

AT&T has said it expects to save $3 billion annually from the deal but has not explained whether that would include job cuts. An AT&T spokesperson said that the company expects to keep all of its call-center jobs and that most of the reduction in the company’s workforce would come from attrition rather than layoffs.[/quote]
[i]My Comment:[/i] [i]"Of course we`re moving the call centers to India, but current call-center employees will be encouraged to uproot their families and move there as well, where admittedly their wages will be slashed by 90%, but you can buy a lot more with a dollar in India than you can in the U.S., so their purchasing power will actually skyrocket! We are doing our U.S. employees a favor by giving them a new life in a high-growth economic boom zone. We should be applauded for our altruism here, folks."[/i]

The article uses the word “debatable” to describe the jobs claims – I think that is a synonym for “laughably, hilariously overstated”. Oh, wait – you got the number right but the sign wring? Well, clearly that’s a mistake anyone could make.


And a little humor to lighten your day, involving a famous long-running American newspaper reader-humor contest:

[url=http://en.wikipedia.org/wiki/The_Style_Invitational]Wikipedia: The Washington Post Style Invitational[/url]
[quote]The Style Invitational kicked off in March 1993 by asking readers to come up with a less offensive name for the Washington Redskins. The winner, published two weeks later, was Douglas R. Miller, with the entry "The Baltimore Redskins. No, don't move the team, just let Baltimore deal with it." He won a Timex watch like the one President Bill Clinton wore at the time, and apparently never entered again, as he wanted to retire undefeated. The second week's contest was to replace the state of Maryland's slogan "Manly deeds, Womanly words" and yielded up such responses as "Maryland - Home to its residents" and winner "Maryland - Wait! We can explain!" by Oslo. He won an as yet unpurchased large kitschy crab sculpture/decoration, but traded it for a Timex watch like the one President Bill Clinton wore at the time. Another early contest asked entrants to help choose a better nickname for Washington, D.C., to replace "A Capital City". Exemplifying the S.I.'s irreverence, the winning entry was "A Work-Free Drug Place".[/quote]

A Silicon Valley resident describes why he joined OWS - I could not have said it better myself:

[url=www.mercurynews.com/opinion/ci_19083951]David Smathers Moore: Let down by Obama, people seeking change flock to the 'Occupy' movement[/url]
[quote]In October 2008, my wife and I loaded our 6-month-old baby into her car seat and drove six hours to Reno. As 40-something new parents, a weekend road trip to walk precincts for a presidential candidate was not convenient or easy. But when we arrived at the staging ground for volunteers, we were rewarded by an inspiring sight: The line to sign in snaked through a parking lot the length of two football fields. Barack Obama's candidacy had inspired a lot of people to participate in their democracy.

What I most liked about Obama was the independence and intelligence reflected in his position, taken five years earlier when it was not politically expedient, to oppose the Iraq invasion plans well before they had been put into motion. In 2008, as a terrifying financial crisis was unfolding, Obama seemed to have the combination of sound judgment and courage that our country needed in the White House. It seemed reasonable to hope that he might become an FDR-for-our-time who would hold people accountable and get us back on a path toward shared prosperity.

But [u]three years later, not one executive from a major firm involved in the 2008 disaster has been prosecuted. On the contrary, Obama hailed the CEO of the firm that most personified the abuses -- Goldman Sachs -- as a "savvy businessman." But the rest of us continue to be punished for their crimes. We are losing homes, watching our retirements vaporize and struggling with long-term unemployment.[/u]

And those least responsible, the young, will ultimately pay the most.

To lead us forward, Obama also needed to explain to the country how wealth and power had become more and more concentrated over several decades and how that trend had reached a critical point at which it was cannibalizing our economy and corrupting our democracy. He needed to put forth a vision for how we would take our country back from the 1 percent that has only continued to amass wealth and power. But such leadership never materialized.

So a few weeks ago, my wife, daughter and I set out on another civic journey. This time the little one was riding her trike as we walked to a park in our neighborhood where about 80 people came together to form Occupy San Jose, a local affiliate of the Occupy Wall Street movement. Similar organizations are popping up in cities across the country. A group of De Anza College students facilitated the process as we self-organized into committees to carry out a long-standing American tradition: taking a direct nonviolent stand for justice when the ordinary mechanisms of politics and accountability have failed.

The Occupy Wall Street movement is leaderless and to date has not formulated specific demands. This is pure brilliance because our first task, in my view, is simply to name publicly what many of us have felt privately: that the system itself has been hijacked. We are coming out of the woodwork and connecting with each other in a regenerative democratic process. As we collectively find our voice and our numbers grow, concrete solutions will eventually emerge. Such is our civic faith.

So if you are angry that the big financial institutions gambled away trillions of dollars only to be bailed out by us, the taxpayers, without any real accountability for their actions, then you are a part of this movement. If it doesn't sit right with you that wealth continues to be concentrated in fewer and fewer hands and that corporations now have more political power than we the people, then I will see you down at City Hall plaza.

[i]
DAVID SMATHERS MOORE lives with his wife and daughter in downtown San Jose. He wrote this for this newspaper.[/i][/quote]

[url=http://globaleconomicanalysis.blogspot.com/2011/10/harrisburg-pennsylvania-files-for.html]Pennsylvania State Capital Files for Bankruptcy[/url]
[quote]Harrisburg, Pennsylvania, facing a state takeover of its finances, filed for bankruptcy protection after failing to pay the debt on a trash-to-energy incinerator.

The council made its 4-3 decision against the advice of a city attorney who said the panel did not follow proper procedure. It was the ninth bankruptcy filing this year by a municipal-bond issuer, according to James Spiotto, a partner at Chapman & Cutler in Chicago who tracks such cases.

“This was a last resort,” Mark D. Schwartz, the council’s Bryn Mawr-based lawyer, said after he faxed the documents to a federal court yesterday. “They’re at their wits’ end.”

Harrisburg would be the biggest city bankruptcy since Vallejo, California, filed in 2008, according to a ranking by Municipal Market Advisors, a research firm in Concord, Massachusetts. Municipalities across the nation have been battered by the financial crisis. Harrisburg’s filing came less than a month after Alabama’s Jefferson County Commission voted to try to avert what would the nation’s biggest municipal bankruptcy, and nine months after Vallejo emerged.

While Chapter 9 bankruptcy, named for the section of federal law that governs insolvent municipalities, would mean the loss of state aid under a law passed in June, it would be better than pain caused by a state-imposed recovery plan, said Councilwoman Susan Brown-Wilson.

“We’re not incompetent,” Brown-Wilson said. “We’re just not going to let you run us over with the train anymore.”[/quote]


[b]Bond Markets Flashing Warning Signals[/b]

Lee Adler, the long-time eagle-eyed (pardon das pun, bitte) treasury-debt-market guru of the online [i]Wall Street Examiner[/i] has a piece out noting some very unusual recent action in USGB markets:

[url=www.zerohedge.com/contributed/threads-foreboding-tapestry]Threads In A Foreboding Tapestry[/url]
[quote]Ironically, the US bond market was rescued by the European sovereign debt and bank meltdown, so it appeared for a while that Dr. Bernankenstein might be right and his monster experiment would be vivified on its own. The European panic triggered massive capital flight that ended up, where else, flooding into the US, mostly into purchases of Treasuries. Not only could the monster walk on its own, it could actually fly! Once again the Treasury market benefited benefited from an unusual subsidy, this one driven by fear. Bond prices flew into the stratosphere with yields sinking to record lows.

About 6 weeks ago, something changed. [Foreign Central Banks] not only slowed their buying of Treasuries, they stopped altogether, reversed course and actually began selling them. Three weeks ago their selling reached a level that I characterized in my weekly Treasury update for subscribers as "dumping." It was simply unprecedented. I opined that this could be the beginning of the end of the Treasury bull market, in spite of any effect that the Fed's new Operation Twist might have.

In fact, I expected that effect to be nil, and it has been. If anything, the announcement of Operation Twist, where the Fed offered to buy long term Treasuries from the Primary Dealers while simultaneously selling them short term paper, rang a bell for some investors. The Fed's announcement told them that the time had come to sell their long term paper. If the Fed was buying, they decided that they would be glad to sell. Today, the yield on the 10 year Treasury note rose to 2.16%. That's up an astonishing 44 basis points since last Thursday's open.

Every other day, the Treasuries open on a huge gap. They are trading more like pork bellies than stodgy government bonds. Worst of all, the yield on the 10 year is up approximately 45 basis points since the low in yield reached the day after the Fed announced Operation Twist. Bernanke has egg all over his face. The man simply does not understand financial markets. And this move does not look like a fluke. As a result of today's market, the yield on the 10 year has broken out of an intermediate term base. Unless yields pull back immediately, the implication is that the intermediate term target is 2.50. Meanwhile, Bernanke had assured investors that long term yields would fall as a result of his doing the Twist.

Apparently, the FCBs were among those who took the Fed's announcement as a sell signal. They are selling at the heaviest pace in the 9 years that I have been tracking this data. Normally, prior to the last 5 weeks, the instances when they were actually net sellers were few and far between. What has been going on here lately is no less than a sea change.

Making matters worse is that the Primary Dealers have also become massive sellers of Treasuries and all manner of fixed income paper in recent weeks. This chart of the Primary Dealer fixed income holdings is posted weekly in the Wall Street Examiner Professional Edition Fed Report. This data is released with a 10 day lag, so we only have data through September 28, but given the market action this week, this trend is certainly continuing.

The dealers appear to be in trouble. They began selling off their fixed income paper of all types in early September. That accelerated to what I can only characterize as wholesale dumping in the weeks ended September 21 and 28. It is no coincidence that those where the weeks where we began to see yields reverse from their record run.

These are troubling developments, not just for their implications for the bond market, but for what they imply about the health of the backbone of the US financial system--the Fed's Primary Dealer (PD) network. If the Fed is the head, these guys are the spinal cord. Isolating on just their corporate bond holdings the picture becomes even more troubling. If major corporations are supposedly doing so well and their balance sheets are in such great shape, why did the PDs not accumulate their fixed income securities throughout the equities bull market of 2009 and 2010? And especially why have they been frantically dumping their corporate holdings since June?

Something is rotten here. These are signs of major systemic stress.[/quote]
[i]My Comment:[/i] One wonders if the above-described bond-market signals will prove a more-reliable indicator of systemic (di)stress than last year's "Hindenburg Omen". The latter was based on equity markets, which can act bizarrely enough even absent massive distortions resulting from government intervention and ongoing HFT-price-manipulation attempts, whereas the (much larger and sober-minded) bond markets should serve as better coal-mine canaries. But like the stock markets, the bond markets are also currently the subject of unprecedented (at least in the pre-2008-crisis sense) government and central-bank interventions, so we shall see.

Meanwhile, the 2-week-long short-covering-fueled ramp in US and European equity markets lives for another day ... up and up and up it goes, when `twill reverse, nobody knows. (But there appears to be a bit of last-gaspishness about the rally this week). Mish notes that markets appear to be liking the latest "nothing is fixed, but everything will be solved soon, once we find a magic solution" [url=http://globaleconomicanalysis.blogspot.com/2011/10/france-will-not-uses-efsf-to.html]news out of Europe[/url].

Denninger (in between rants) has a pair of quality posts this weekend:

This first one gets a bit technical, but is a great example of application of conservation laws in the modern-monetary-system context:

[URL="http://market-ticker.org/akcs-www?post=196363"]The $3.3 Trillion Bank Bailout[/URL]

The next one is a reply to a truly bizarre (but apparently widely circulating) right-wing meme that by way of the 2008 government TARP bailouts (quote is KD's words) "The banks were "extorted" into taking money by an overbearing government, and but for that extortion they would have all been just fine":

[URL="http://market-ticker.org/akcs-www?post=196348"]TARP, Revisited[/URL]
[quote]It's July 2008. You are a "TBTF" bank CEO. You've been running a 30 year ponzi scheme using ever-increasing amounts of debt while GDP has languished in roughly the same place for the last two decades in terms of numerical growth. In the 3rd Quarter of 2007, when the S&P 500 hits 1576 and the DOW tops, the economy put about six times the amount of debt into the system as there was GDP growth, and at that point GDP had started to roll over. It had an obvious geometric progression look to it but only a few people in the blogosphere had been hollering about it. You wondered how much longer it was going to be before the people woke up.

Over the next three quarters from the 3Q 2007 GDP has actually gone negative. Debt demand has cratered and is down by almost 50%. The handwriting is on the wall; credit creation is going to go negative too.

You have tens of trillions of dollars in credit instruments on and off your balance sheet and things are looking pretty bad. You're getting pestered by people who see the credit contraction and start asking if you're good for those swaps, and the credit default swaps on your bank are blowing out. They have a point too: If credit demand actually goes negative, you're dead. You're geared at 30:1 which means you can only lose $3 out of every $100 of alleged "value" of your assets before you're broke. The collateral calls alone on the more than $30 trillion in swaps are enough to kill your capital several times over should this occur.

See, that's the nature of a pyramid. It all looks ok right up until demand starts to reverse. Then it works in reverse, just like it did on the way up. What made you $30 for every $1 of actual capital you had now loses $30 for every dollar of capital. Attempting to fire-sale assets to avoid the disaster simply tells everyone in the market you're busted and they'll pile in short, destroying your stock price and further widening the CDS. Too much of that and what you're trying to prevent will happen anyway.

Your morning includes one less coffee as you don't need any more jitters than you already have, and your evenings have an extra scotch or two before going to bed.

Then the phone rings. It's one of your Vice-Presidents; he is responsible for, among other things, your repo desk. One of your traders just came into his office and is as white as a ghost: Lehman has no collateral - they're bankrupt.

You collapse into your chair, dropping your coffee mug on the marble floor, which shatters into a hundred pieces. If your repo desk knows this so does the NY Fed, headed by Tim Geithner. That means Bernanke knows. It also means every other firm on the street knows. You look at the CDS for Lehman on your Bloomberg and shudder.

The very nightmare that has woken you almost nightly for six months has begun.

Note this well: It's July 31st 2008, or quite some time before anyone else outside of "TBTF" banks will know Lehman is about to fail. Oh sure, there have been rumors since Bear went down, but that's all they've been. Lehman's stock is trading at $17, and has been reasonably stable for a couple of weeks. It was as low as $12 two weeks previous and looked like it was headed to zero, but then stabilized and recovered by almost 50%. CNBC is chattering on a daily basis of rumors of all sorts but the market has actually been improving for a bit in tone. The VIX, which was just shy of 31 two weeks ago, is now trading at 23.

You thought maybe - just maybe - it was going to be ok.

Now you know factually that it's not.

You call your equity desk and ask them to start quietly shorting Lehman's stock. Not in size - you don't want anyone to figure out what's going on "outside" of those who already know. You figure that everyone else in the TBTF club knows this too; there's no way they couldn't. But you're cautious - while you know how much trouble you're in if credit demand doesn't turn around fast you also know that Fuld had dinner with Paulson in April - just three months ago and that there were rumors flying around that Paulson "loved" their capital raise. It didn't make sense that in just three months they had no collateral for a routine overnight repo transaction!

The rest of the world will not know, of course, for a while yet that Lehman has effectively already detonated. In fact for the entire next month the S&P 500 will actually trade up about ten points, from 1267 to 1277 in a choppy, directionless pattern.

During the next month credit demand doesn't move much.

Then "it" happens. Lehman files.

Suddenly the collateral calls begin in earnest. Credit demand takes another leg down and GDP prints negative. You're now in the hole and there's no way out. The only good news is that everyone else in the TBTF club is in there with you - hundreds of trillions of dollars of swaps, from interest rate to CDS to god-knows-what-else that was bespoke by this person or that, and they all want collateral as your credit condition is wildly deteriorating and your own CDS quote looks like the peak of Mt. Everest on the upside. Your stock price is falling like a stone and the bond desk is telling you they're getting bid lists by the dozens from people trying to liquidate to save themselves but there are no bids at any price.

In the middle of all this you get called to Treasury for a meeting. TARP has just passed and Hank and Ben want to talk with you and the rest of the TBTF CEOs. You have your assistant call the hanger and get the jet ready.

When you arrive you figure you're being nationalized. You're done and you know it. There's nowhere for you to go; there's no bid at any price for some of your assets and for those where you can get a bid the loss will wipe you out. You have CDS on some of your exposure but you're pretty sure the counterparties don't have the money -- after all, you know you can't cover everything you wrote if push comes to shove. The simple fact is that an exponential contraction of credit demand into 30:1 leverage is not survivable. You can protest all you want, but it doesn't matter; the math is going to win as the collateral calls will eventually chew up all your cash while the ratings agencies ratchet you down. With only $3 of capital behind every $100 on your book there's just no way to make the math work, the bond market is effectively shuttered with the door bricked over and trying to raise equity capital into a crashing stock market is a fools game. Even if you could get an offering off, which you can't, the interest rate on bonds would be north of 10% and the dilution on a stock offering would be hideous, never mind that you simply couldn't raise enough money going that route. The bottom line is this: There's no way to make money when you have to borrow at that price, and all banks borrow in order to lend.

When you get to DC Hank and Ben are in the room and they're smiling. You figure that the call to the board is going to end with you sending your assistant in to start boxing up your office, but when you all get there the mood is a bit different.[/quote]

Super post by Karl and a nice antidote to the shit that the likes of Andrew Sorkin have been putting out.

If I have distilled that correctly, it means the TBTF banks have transferred 3.3 Billion in toxic mortgages to Fannie Mae and/or Freddie Mac. Anyone care to bet that they transferred them at full value?

DarJones

[QUOTE=Fusion_power;275476]If I have distilled that correctly, it means the TBTF banks have transferred 3.3 Billion in toxic mortgages to Fannie Mae and/or Freddie Mac. Anyone care to bet that they transferred them at full value?

DarJones[/QUOTE]
Only if I can bet a bridge in Brooklyn, made by none other than the great John Roebling himself, and often offered for sale.....

[QUOTE=Fusion_power;275476]If I have distilled that correctly, it means the TBTF banks have transferred 3.3 Billion in toxic mortgages to Fannie Mae and/or Freddie Mac. Anyone care to bet that they transferred them at full value?

DarJones[/QUOTE]Billion, Trillion; Tragedies and statistics.