Tag Archives: Wall Street

Charles Hugh Smith ~ We’ve Habituated To A Rigged, Fraudulent Market

“Fraud generates risk, and risk eventually breaks out in the “safest” parts of the financial plumbing, the ones nobody gives a second thought to because they’re “low risk.”” – C H Smith

CharlesHughSmithLet’s go all the way back to the last time a central banker actually spoke the truth in public: December 5, 1996, 18 long years ago. It was on that day that Federal Reserve Chair Alan Greenspan gave a typically dry speech that hinted stocks could actually become overvalued (gasp!) due to irrational exuberance and subsequently plummet when rational valuations returned:


Clearly, sustained low inflation implies less uncertainty about the future, and lower risk premiums imply higher prices of stocks and other earning assets. We can see that in the inverse relationship exhibited by price/earnings ratios and the rate of inflation in the past. But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan over the past decade?

Global stock markets promptly sold off hard at the shocking revelation that stocks might actually become subject to unexpected and prolonged contractions. This sharp reaction to a fundamental truth about markets–that they are prone to the irrational exuberance of participants, and the computer trading programs keyed to this momentum magnify the irrationality–caused central bankers to avoid any upsetting truth from then on. Continue reading

Mike Krieger ~ Wall Street Moves To Put Taxpayers On The Hook For Derivatives Trades

“Fortunately, that bill never made it to a vote on the Senate floor, but now Wall Street is trying to sneak it into a bill needed to keep the government running. You can’t make this stuff up.” – M Krieger

Wall Street has for some time attempted to put taxpayers on the hook for its derivatives trades. I highlighted this a year ago in the post: Citigroup Written Legislation Moves Through the House of Representatives. Here’s an excerpt:

Five years after the Wall Street coup of 2008, it appears the U.S. House of Representatives is as bought and paid for as ever. We heard about the Citigroup crafted legislation currently being pushed through Congress back in May when Mother Jones reported on it. Fortunately, they included the following image in their article:


Unsurprisingly, the main backer of the bill is notorious Wall Street lackey Jim Himes (D-Conn.), a former Goldman Sachs employee who has discovered lobbyist payoffs can be just as lucrative as a career in financial services. The last time Mr. Himes made an appearance on these pages was in March 2013 in my piece: Congress Moves to DEREGULATE Wall Street.

Continue reading

Charles Hugh Smith ~ The Oil-Drenched Black Swan, Part 4: The Head-Fake Disruption Ahead

“Add these factors up and we conclude there is no visible price limit on oil after supply falters.” – C H Smith

CharlesHughSmithI’ve been discussing the concept of an Oil Head-Fake since 2008, most recently in The Oil Head-Fake: The Illusion that Lower Oil Prices Are Positive (September 29, 2014)

Oil: One Last Head-Fake? (May 9, 2008)

The basic idea is straightforward: as global demand slackens, oil producers are incapable of reducing supply due to their dependence on oil revenues. This leads to oversupply which further depresses prices, to the point that marginal wells are shut off and costly exploration-development projects are shelved.

This process is far from orderly, as the low prices destabilize oil-dependent governments and regions. Geopolitical turmoil is only half the story; the immense mountain of debt that’s been built on the collateral of oil collapses as cash-starved borrowers default on bonds and loans. This meltdown of oil-based debt then destabilizes an increasingly fragile global financial system. Continue reading

Simon Black ~ Five Complete Lies About America’s New $18 Trillion Debt Level

Bottom line: this is not a consequence-free environment.” – S Black

18TrillionUSDebtSantiago, Chile –  On October 22, 1981, the government of the United States of America accumulated an astounding $1 TRILLION in debt.

At that point, it had taken the country 74,984 days (more than 205 years) to accumulate its first trillion in debt.

It would take less than five years to accumulate its second trillion.

And as the US government just hit $18 trillion in debt on Friday afternoon, it has taken a measly 403 days to accumulate its most recent trillion.

There’s so much misinformation and propaganda about this; let’s examine some of the biggest lies out there about the US debt:

1) “They can get it under control.”

What a massive lie. Politicians have been saying for decades that they’re going to cut spending and get the debt under control. Continue reading

Charles Hugh Smith ~ The Oil-Drenched Black Swan, Part 2: The Financialization of Oil

“All the analysts chortling over the “equivalent of a tax break” for consumers are about to be buried by an avalanche of defaults and crushing losses as the chickens of financializing oil come home to roost.” – C H Smith

CharlesHughSmithThe pundits crowing about the stimulus effect of lower oil prices on consumers are missing the real story, which is the financialization of oil. Financialization is another word that is often bandied about without the benefit of a definition.

Here is my definition:

Financialization is the mass commodification of debt and debt-based financial instruments collaterized by previously low-risk assets, a pyramiding of risk and speculative gains that is only possible in a massive expansion of low-cost credit and leverage.

That is a mouthful, so let’s break it into bite-sized chunks.

Home mortgages are a good example of how financialization increases financial profits by jacking up risk and distributing it to suckers who don’t recognize the potential for collapse and staggering losses.

In the good old days, home mortgages were safe and dull: banks and savings and loans issued the mortgages and kept the loans on their books, earning a stable return for the 30 years of the mortgage’s term.

Then the financialization machine appeared on the horizon and revolutionized the home mortgage business to increase profits. The first step was to generate entire new families of mortgages with higher profit margins than conventional mortgages. These included no-down payment mortgages (liar loans), no-interest-for-the-first-few-years mortgages, adjustable-rate mortgages, home equity lines of credit, and so on.

This broadening of options and risks greatly expanded the pool of people who qualified for a mortgage. In the old days, only those with sterling credit qualified for a home mortgage. In the financialized realm, almost anyone with a pulse could qualify for one exotic mortgage or another. Continue reading

Lawrence E. Rafferty ~ Corporate Greed

“. . . large corporations that in many cases do not pay any taxes, will get 2/3rds of the tax breaks outlined in the legislation, including fossil fuel corporations, at the expense of clean energy.” – L E Rafferty

DeptOfUSTreasuryNow that we have celebrated Thanksgiving, I was struck by the news that Congress is considering legislation that would grant large tax breaks to corporate citizens and actually remove tax breaks for the poor and the middle class.

‘ “This Congress seems willing to give huge tax cuts to big businesses—who are already doing better than ever—but somehow can’t prevent tax increases on 50 million working Americans that will occur when expansions of the Earned Income Tax Credit and Child Tax Credit expire,” Harry Stein, the Associate Director for Fiscal Policy at American Progress Action Fund, told ThinkProgress. “This is a great deal for CEOs and a terrible deal for struggling families.”’ Nation of Change

One of the most amazing aspects of the proposed legislation is that it was reached as a compromise between Republicans and Democrats in the Senate.  In light of the hug tax breaks for corporations, one is left wondering, just what did the poor and the middle class get in this “compromise”? The answer to that question is, not much. Continue reading

Pam Martens ~ Hitting Post-Crisis Lows: Oil, Global Bond Yields, Fed Credibility On Rate Hike

“The collapse in benchmark interest rates, the collapse in industrial commodity prices is the markets’ way of screaming that there’s a serious slowdown looming on the not-too-distant horizon. Is the Fed so insulated in its own data cocoon that it ignores market signals? Does it genuinely believe that the U.S. can remain an oasis of economic stability despite the economic headwinds facing Europe, China and Japan?” – P Martens

Bankster_WhyIsEveryoneAngryIf there’s a robust recovery in the U.S., somebody forgot to tell the commodities market, and the U.S. Treasury market, and holiday shoppers.

Crude oil plunged over 10 percent on Friday, following an OPEC decision to keep output at 30 million barrels a day. Both West Texas Intermediate (WTI), the U.S. domestic crude and Brent, the international benchmark, traded lower overnight at prices not seen since 2009 – in the midst of the financial crisis. Both WTI and Brent are now under $70 a barrel, seeing a decline of 38 percent this year with a loss of 18 percent in just November.

One might attempt to chalk up the plunge in oil prices to a situation unique to OPEC overproduction or supply coming from U.S. and Canadian shale production were it not for other economic indicators also flashing red.

The Bloomberg Commodity Index of 22 raw materials has lost 10 percent this year and is also back to levels last seen in 2009 in the midst of economic chaos stemming from the Wall Street collapse. Continue reading

Ellen Brown ~ New G20 Rules: Cyprus-Style Bail-Ins To Take Deposits AND Pensions

“Rather than having their assets sold off and closing their doors, as happens to lesser bankrupt businesses in a capitalist economy, “zombie” banks are to be kept alive and open for business at all costs – and the costs are again to be to borne by us.” – E Brown

EllenBrown2On the weekend of November 16th, the G20 leaders whisked into Brisbane, posed for their photo ops, approved some proposals, made a show of roundly disapproving of Russian President Vladimir Putin, and whisked out again. It was all so fast, they may not have known what they were endorsing when they rubber-stamped the Financial Stability Board’s “Adequacy of Loss-Absorbing Capacity of Global Systemically Important Banks in Resolution,” which completely changes the rules of banking.

Russell Napier, writing in ZeroHedge, called it “the day money died.” In any case, it may have been the day deposits died as money. Unlike coins and paper bills, which cannot be written down or given a “haircut,” says Napier, deposits are now “just part of commercial banks’ capital structure.” That means they can be “bailed in” or confiscated to save the megabanks from derivative bets gone wrong.

Rather than reining in the massive and risky derivatives casino, the new rules prioritize the payment of banks’ derivatives obligations to each other, ahead of everyone else. That includes not only depositors, public and private, but the pension funds that are the target market for the latest bail-in play, called “bail-inable” bonds.

“Bail in” has been sold as avoiding future government bailouts and eliminating too big to fail (TBTF). But it actually institutionalizes TBTF, since the big banks are kept in business by expropriating the funds of their creditors.

It is a neat solution for bankers and politicians, who don’t want to have to deal with another messy banking crisis and are happy to see it disposed of by statute. But a bail-in could have worse consequences than a bailout for the public. If your taxes go up, you will probably still be able to pay the bills. If your bank account or pension gets wiped out, you could wind up in the street or sharing food with your pets. Continue reading

Wealth Watchman ~ Stack & Attack The Rigged System [Video]

Annihilate the Vampiric Bankers With physical Silver & Gold.

SF Source SGTreport.com  Nov 30 2014