Mystery Economic Theater 2010

[R.D. Silverman]

Originally Posted by Calvin Culus

Any successful trader will tell you that bullying the market is a recipe for disaster. From an interview with Bruce Kovner:

http://books.google.com/books?id=jNG7r-Ul7jwC&pg=PA69

Eventually the manipulator will run out of cash and the problem solves itself. Your homework for today is to learn that any attempt to regulate markets is always an attempt to manipulate markets. Any society that fails to realize this is doomed because of regulation, not inspite of regulation.

ROTFLMA.

[ewmayer]

Originally Posted by R.D. Silverman

But this is exactly the problem. And I see enforcement as being
impossible/totally impractical.

It's not just that the abuse results in market manipulation. If the
manipulation only affected other speculators, it would not be so bad.

But the manipulation also affects consumers and the rest of the public who
are not directly involved in the market. Look at what speculation/manipulation
of oil futures does at the gas pump just to cite one example.

Disagree - prior to the Gramm-led "modernization" of the commodities markets, abuses were much less widespread. To use the example of oil markets - just require futures trading to be matched against actual delivery-taking on a quarterly or yearly basis. If at the end of the year it turns out you took delivery of less than [insert minimum required fraction here] of the contracts you traded in, you get a hefty fine for speculation, with repeated violations getting you banned entirely.

Similar with naked shorting - simply require large traders in puts to demonstrate that there was actual borrow-of-shares involved.

To my mind, the biggest problem (and this is just as bad under the current administration as it was under the last one) is not that the rules are nonenforceable, but rather that they are not being aggressively enforced. You don't need to catch all crooks to provide a deterrent effect, but do you do need to catch a decent number, and actually punish the proven-to-be-guilty, to an extent that they cough up all of their ill-gotten gains and enough on top of that to really sting. If I know that even if I get cuaght I'm going to get a slap on the wrist, why would I be deterred? Classic example: former Countrywide CEO Angelo "Orange-glo" Mozilo recently paid a $5m fine for some of the crap he pulled. Pretty hefty, eh? Well, not really, because he made hundreds of millions from engaging in mass mortgage fraud, and got to keep nearly all of it. Same goes for the many thousands of other Wall Street, mortgage-industry and ratings-agency crooks who helped bring us the great crash of 2008. Not *one* of the big fish has been held accountable, and only a handful of little fish.

(Note that Bernie Madoff was not involved in the RE-bubble crookery, though the increased scrutiny that resulted from the 2008 meltdown may have helped convince the government to actually look into his "business model", over a decade after they got their first credible evidence that he was running a Ponzi from whistleblower Harry Markopolous).

As S&L-era prosecutor william Black recently wrote, "control fraud is only made worse by forbearance". Control fraud being what Big Finance is engaged in, and forbearance being the official policy of our federal government in the matter.

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

Note to Calvin Culus: You're lucky Bob is Irish, otherwise he might have taken umbrage about your jew-finance comment.

[Calvin Culus]

http://en.wikipedia.org/wiki/Walras'_law

A direct consequence is that if a society cannot balance its budget then at least one other market will not be in equilibrium either. The attempt to manipulate the market for labor by increasing the deficit illustrates just how ignorant the public is and how unfit its elected officials are to successfully govern our society.

[Fusion_power]

funny how mephitis megachiroptera gets into the fray..... again.

[ewmayer]

Mass student protests against set-to-skyrocket fees by college students in Britain yesterday ... Irish bond spreads topped 7% today, meaning the country is effectively shut out of the bond-markets and will most likely need an ECB rescue in the coming months ... and China reported an "official" inflation rate of 4.4%, which - shock and surprise - exactly matched the official expectations, but is probably at least 10x lower than the real figure, based on boots-on-the-ground-level reports from that credit-bubble-ridden nation. Oh my, it`s gonna be ugly when that one eventually bursts.


Cisco shares got hammered after hours yesterday (and shockingly, are still down 15% as I write this ... daily Fed-sponsored "wealth effect supporting" ramp job apparently has not yet begun) on a rather grim earnings forecast - this is Denninger`s "margin compression" in action. I guess we now know why corporate insider selling-to-buying ratios have broken all records the past few months, even as the market has hit 2-year highs. Mish comments at length - pay special attention to the data about cable TV subscriptions in there:

Congratulations to Cisco Insiders for Dumping 6,620,750 Shares, 60% of Holdings in 6 Months; Cisco CEO Whines about Taxes; Is Chambers Worth a Dime?: [Cisco's huge earnings warning] may portend the end of the ramp in capital spending on technology by corporations. If so, what's left of the recovery (if anything) is all on the backs of consumers.

[R.D. Silverman]

Originally Posted by ewmayer

Mass student protests against set-to-skyrocket fees by college students in Britain yesterday ... Irish bond spreads topped 7% today, meaning the country is effectively shut out of the bond-markets and will most likely need an ECB rescue in the coming months ... and China reported an "official" inflation rate of 4.4%, which - shock and surprise - exactly matched the official expectations, but is probably at least 10x lower than the real figure, based on boots-on-the-ground-level reports from that credit-bubble-ridden nation. Oh my, it`s gonna be ugly when that one eventually bursts.


Cisco shares got hammered after hours yesterday (and shockingly, are still down 15% as I write this ... daily Fed-sponsored "wealth effect supporting" ramp job apparently has not yet begun) on a rather grim earnings forecast - this is Denninger`s "margin compression" in action. I guess we now know why corporate insider selling-to-buying ratios have broken all records the past few months, even as the market has hit 2-year highs. Mish comments at length - pay special attention to the data about cable TV subscriptions in there:

Congratulations to Cisco Insiders for Dumping 6,620,750 Shares, 60% of Holdings in 6 Months; Cisco CEO Whines about Taxes; Is Chambers Worth a Dime?: [Cisco's huge earnings warning] may portend the end of the ramp in capital spending on technology by corporations. If so, what's left of the recovery (if anything) is all on the backs of consumers.

And of course none of the insiders who dumped all this equity will ever
be prosecuted for insider trading...... (further illustrating my previous point
about manipulations and inability to prosecute).

The Mish article is dead on.

Congress needs to do something about out-of-control senior executives.
They are quite literally looting the companies that they run.
Control needs to be returned to stockholders. We need laws preventing
U.S. corporations sending $$ and jobs overseas. We need to close
tax loopholes for large U.S. corporations...

All of this has the proverbial snowball's chance. The Demotwits could not
get it done while they had control, and now that the Republitards have
control, there is even less chance.

[xilman]

Originally Posted by ewmayer

Mass student protests against set-to-skyrocket fees by college students in Britain yesterday.

Students have almost always been revolting. The surprise is how docile they've been in the last few years.

Paul

[R.D. Silverman]

Originally Posted by xilman

Students have almost always been revolting.

Paul

Maybe they should bathe more often???

[ewmayer]

The WSJ`s Real Time Economics blog has the number of the day:

$10.2 Trillion in Global Borrowing: Next year, fifteen major developed-country governments, including the U.S., Japan, the U.K., Spain and Greece, will have to raise some $10.2 trillion to repay maturing bonds and finance their budget deficits, according to estimates from the International Monetary Fund. That’s up 7% from this year, and equals 27% of their combined annual economic output.

My Comment: BTW, "repay maturing bonds" in this manner is also called "roll over one`s maturing debt", or more succinctly, "keep the debt ponzi scam going for another year." The article goes on to note that the U.S. is the worst offender in terms of debt-rollover-as-percent-of-GDP, ranking "ahead" even of countries like Greece.


Matt Taibbi Blows the Lid Off the Florida Foreclosure Mills:

...Especially interesting is how the Florida courts are complicit in this mass deprivation of homeowner legal rights and trampling of centuries-old property law:

Matt Taibbi: Courts Helping Banks Screw Over Homeowners: Retired judges are rushing through complex cases to speed foreclosures in Florida

The foreclosure lawyers down in Jacksonville had warned me, but I was skeptical. They told me the state of Florida had created a special super-high-speed housing court with a specific mandate to rubber-stamp the legally dicey foreclosures by corporate mortgage pushers like Deutsche Bank and JP Morgan Chase. This "rocket docket," as it is called in town, is presided over by retired judges who seem to have no clue about the insanely complex financial instruments they are ruling on — securitized mortgages and labyrinthine derivative deals of a type that didn`t even exist when most of them were active members of the bench. Their stated mission isn`t to decide right and wrong, but to clear cases and blast human beings out of their homes with ultimate velocity. They certainly have no incentive to penetrate the profound criminal mysteries of the great American mortgage bubble of the 2000s, perhaps the most complex Ponzi scheme in human history — an epic mountain range of corporate fraud in which Wall Street megabanks conspired first to collect huge numbers of subprime mortgages, then to unload them on unsuspecting third parties like pensions, trade unions and insurance companies (and, ultimately, you and me, as taxpayers) in the guise of AAA-rated investments.
...
The rocket docket wasn`t created to investigate any of that. It exists to launder the crime and bury the evidence by speeding thousands of fraudulent and predatory loans to the ends of their life cycles, so that the houses attached to them can be sold again with clean paperwork. The judges, in fact, openly admit that their primary mission is not justice but speed. One Jacksonville judge, the Honorable A.C. Soud, even told a local newspaper that his goal is to resolve 25 cases per hour. Given the way the system is rigged, that means His Honor could well be throwing one ass on the street every 2.4 minutes.

Foreclosure lawyers told me one other thing about the rocket docket. The hearings, they said, aren`t exactly public. "The judges might give you a hard time about watching," one lawyer warned. "They`re not exactly anxious for people to know about this stuff." Inwardly, I laughed at this — it sounded like typical activist paranoia. The notion that a judge would try to prevent any citizen, much less a member of the media, from watching an open civil hearing sounded ridiculous. Fucked-up as everyone knows the state of Florida is, it couldn`t be that bad. It isn`t Indonesia. Right?

Well, not quite. When I went to sit in on Judge Soud`s courtroom in downtown Jacksonville, I was treated to an intimate, and at times breathtaking, education in the horror of the foreclosure crisis, which is rapidly emerging as the even scarier sequel to the financial meltdown of 2008: Invasion of the Home Snatchers II. In Las Vegas, one in 25 homes is now in foreclosure. In Fort Myers, Florida, one in 35. In September, lenders nationwide took over a rec­ord 102,134 properties; that same month, more than a third of all home sales were distressed properties. All told, some 820,000 Americans have already lost their homes this year, and another 1 million currently face foreclosure.

My Comment: And here is Taibbi`s as-usual scathing take on the fraud and systemic greed undergirding the whole affair:

Throughout the mounting catastrophe, however, many Americans have been slow to comprehend the true nature of the mortgage disaster. They seemed to have grasped just two things about the crisis: One, a lot of people are getting their houses foreclosed on. Two, some of the banks doing the foreclosing seem to have misplaced their paperwork.

For most people, the former bit about homeowners not paying their damn bills is the important part, while the latter, about the sudden and strange inability of the world`s biggest and wealthiest banks to keep proper records, is incidental. Just a little office sloppiness, and who cares? Those deadbeat homeowners still owe the money, right? "They had it coming to them," is how a bartender at the Jacksonville airport put it to me.

But in reality, it`s the unpaid bills that are incidental and the lost paperwork that matters. It turns out that underneath that little iceberg tip of exposed evidence lies a fraud so gigantic that it literally cannot be contemplated by our leaders, for fear of admitting that our entire financial system is corrupted to its core — with our great banks and even our government coffers backed not by real wealth but by vast landfills of deceptively generated and essentially worthless mortgage-backed assets.

You`ve heard of Too Big to Fail — the foreclosure crisis is Too Big for Fraud. Think of the Bernie Madoff scam, only replicated tens of thousands of times over, infecting every corner of the financial universe. The underlying crime is so pervasive, we simply can`t admit to it — and so we are working feverishly to rubber-stamp the problem away, in sordid little backrooms in cities like Jacksonville, behind doors that shouldn`t be, but often are, closed.

And that`s just the economic side of the story. The moral angle to the foreclosure crisis — and, of course, in capitalism we`re not supposed to be concerned with the moral stuff, but let`s mention it anyway — shows a culture that is slowly giving in to a futuristic nightmare ideology of computerized greed and unchecked financial violence. The monster in the foreclosure crisis has no face and no brain. The mortgages that are being foreclosed upon have no real owners. The lawyers bringing the cases to evict the humans have no real clients. It is complete and absolute legal and economic chaos. No single limb of this vast man-­eating thing knows what the other is doing, which makes it nearly impossible to combat — and scary as hell to watch.
...
When I arrive, Judge Soud and the lawyers are already arguing a foreclosure case; at a break in the action, I slip into the chamber with a legal-aid attorney who`s accompanying me and sit down. The judge eyes me anxiously, then proceeds. He clears his throat, and then it`s ready, set, fraud!

Judge Soud seems to have no clue that the files he is processing at a breakneck pace are stuffed with fraudulent claims and outright lies. "We have not encountered any fraud yet," he recently told a local newspaper. "If we encountered fraud, it would go to [the state attorney], I can tell you that." But the very first case I see in his court is riddled with fraud.

[only_human]

Originally Posted by ewmayer

My Comment: And here is Taibbi`s as-usual scathing take on the fraud and systemic greed undergirding the whole affair:

I've seen some interesting articles lately about the foreclosure beast but haven't organized anything. Robo-signing is some kind of scandal that I haven't looked into as yet. Another intriguing article that I read, somewhat unrelated, was about adverse possession.

added: there is a lot to all of this. I don't remember where I read it (perhaps here), but I read about a collector that used fake courtrooms and fake judges with fake rulings to fool some s.o.b.s. And somewhere I read about some new tricks that lawyers are coming up with to be paid with all this insolvency and delinquency -- something about 2nd mortgages being created to pay the lawyers and some legal house receiving hundreds of payments of $500 or so per month from clients.

I've looked a bit more. So much of this is in Florida. Some of what I read about some adverse possession being run larger scale with renters or such (the word escapes me at the moment -- Grounds watchmen who pay instead of being paid), was in Florida. So is that rocket docket court article ewmeyer mentions. The court is one corner of the triangle, the document mills another. I like this article I just read: Inside a Florida Robo-Signing Document Assembly Line: http://www.dailyfinance.com/story/re...line/19709219/

[Fusion_power]

Ewmayer, That article is long on innuendo and short on facts. Reading your writing over the last 3 years has converted me into a sceptic and a pessimist of epic proportions. I want to see facts, not innuendo. He doesn't even bother to explain what is wrong with the mortgages, just says they are bogus, fraudulent, lies, etc. That does NOT cut it.

DarJones