Archive for the ‘Wall Street’ tag
Welcome to the Bullshit Era
In the old days, policy used to have at least some potential to become reality, but it’s becoming increasingly clear that in America at least, those days are over. Nothing anybody seems to suggest from the President on downwards seems to mean a hill of beans anymore. It’s as if the country is set on a course for planet “slow decline into mediocrity” (or worse) and there’s not a damn thing anyone can do about it. All this despite some soaring rhetoric from the President, and plenty of hot air from just about everyone else.
Here’s a rundown of the current bullshitian landscape.
Jobs.
Anyone who thinks a $30-40bn Jobs bill is going to pass without being watered down to meaninglessness is dreaming. And it’s not certain why it will fare any better than the $800bn dollar stimulus package which was supposed to rebuild the economy and create, yes, that’s right. Jobs. The problems that the US economy is facing are profound and structural. Just throwing money at the problem without deep and lasting changes to – industrial, fiscal, and budgetary policy – sorry about the ‘P word’ again – needs to rethink very, very quickly. We don’t make stuff here. Some people suggest that manufacturing in the US isn’t “cost effective”, but my question is this. Why is it cost-effective in Germany?
Any-way, moving on to…
Wall Street
The President talks a great game about beating up onWall Street, especially now he’s been sobered up to the problem by the Massachusetts debacle. But it’s a tad too late. In January of 2009 the banks were still sinking in the quicksand. That’s the time to make them an offer they can’t refuse. After we’ve pulled them out, and they’ve put on fresh $500 shirts is not the time to be making a deal with them. And yet this is what we did. We had our boot on their necks and we blew our chance to make the single most destructive force in this country pay. And now, in the cold light of day, is anyone in the 41 strong Republican Senate caucus going to vote for meaningful financial reform? Uhh, Nope. Will Wall Street be constrained from ruining the nation again? Nope.
Healthcare
What was once a burning need is now a footnote that’s about to be buried ahead of the mid term elections. The Democrats thought that Healthcare reform was a winner, but after being thoroughly outmaneuvered by GOP demagoguery that idea is now going the way of another smart idea…
Stopping Global Warming.
Let’s get this straight. The world is waiting for America to get its act together on controlling greenhouse gases. But is 41 strong Republican Senate caucus going to vote fr meaningful climate legislation? Uhh, Nope. It will die.
Education
Ah, what’s the point. Nobody cares.
Finally, on domestic policy, my personal favorite…
High Speed Trains
California just got $2bn dollars of Federal Stimulus funding to build a high speed train network. Sounds great, right? Except for the fact that the total bill (and that’s before the usual corruption, incompetence, delays and overruns) is $42 billion. Chances of this happening in a state with a perennial budget crisis? Nil.
Moving abroad now…
Iraq
At a certain point in time, the United States is going to have to face the rather unpleasant moment when our last grunt gets on the last transport plane out of Baghdad Airport. Cue the bombs. Cue the resurgence of the insurgents and the reemergence of the Mahdi Army. Hello, reality.
Afghanistan
One day conference in London. Karzai tells us he’s going to end corruption and undo a millennia’s worth of being a basketcase that’s swallowed up empires, as well as buying off the Taliban recruits without guaranteeing their protection. He’s got 18 months before the troops we’re about to land there ship out. You do the math.
Iran
Sanctions work. And if you believe that, you think Sarah Palin is a closet liberal. Will the winner of the Nobel Peace Prize in 2009 be able to justify NOT attacking Iran’s nuclear facilities? Unlikely.
Haiti
Will the outpouring of aid from Americans be matched by a long-term commitment to fix Haiti? Watch the BS flow. Ain’t nothing gonna change in Haiti.
So you see, on just about every front, there’s an awful lot of talk about how we’re going to fix things.
And then there’s reality.
Welcome to the Bullshit Era.
AIG. Was the Bailout From Hell a Mistake?
AIG = Ask an Idiot and Get
The word du jour right now is “rathole”, a rather ugly expletive that equates to plughole, drain, succubus, and other such unpleasantries. It may however be too polite a phrase for what is going on right now with the bailout of AIG, the government’s new pet project that looks like it’s going to hand the downpayment on fixing the nation’s health care shambles to Goldman Sachs and their ilk.
Just like everyone else in this country, I’m spitting with fury at the idea that the government is handing over money to keep these clowns out of the poorhouse. The bonuses should have been blocked way before they went public, and the fact that the President is being exposed to ye olde “What did you know and when did you know it?” game only eight weeks into his administration does not bode well.
Then there’s the irksome question of whether the meeting where it was decided to keep AIG alive in September of last year was actually a little joke played on us by Goldman Sachs. (After all the key people around that table were Paulson, ex-boss of GS, Blankenfein, current boss of GS, and Tim “someone put me out of my misery now” Geithner). We’ve known for years that Goldmans was a class above every other investment bank, but their ability to game the system seems utterly unparalleled now.
Finally, there’s this little nugget. We were told that if we’d let AIG die the global banking system would have collapsed. That the $1.6 trillion in Credit Default Swaps (CDSs) that they sold to the world’s top financial institutions who’d sunk their dough into those toxic assets would suddenly go away, leaving them totally exposed, and toppling like dominoes. Makes sense, right? I mean, if the insurance company backing those toxic assets goes belly up then the world’s banks are left holding the bag. Stands to reason.
Or does it? With the caveat that I really don’t know what I’m talking about, I’m not so sure. And here’s why. Read the rest of this entry »
The AIG Gravy Train – It Just Keeps Getting Worse
when the insurers need insuring to insure the economy doesn't go totally belly up, that's what i call insurance
Joe Nocera of the New York Times wrote a great post today which adds more grist to the mill on the price discovery issue relating to AIG’s credit default swaps (CDSs). Not only does the government end up propping up the most destructive derivative behavior around, but it does so while allowing AIG to maintain the confidentiality of their shady transactions.
And guess who that protects? You’re spot on. It shields AIG’s counterparties, banks, investors, and lenders who were looking for a way to ‘insure’ themselves on the quiet while they pigged out at the trough just before the fall. Nocera makes the point that this doesn’t sit well with the President’s call for transparency and he’s right. But it’s yet another example of the contradictions that Obama seems to be displaying. High principle on the one hand and almost Bush-like duplicity with the status-quo on the other. It’s becoming increasingly clear that Tim Geithner is lurching from crisis to crisis just like his predecessor. But the situation is far worse now. Paulson was a stooge and everyone knew it, a placeholder and agent for the Street. Geithner is supposed to know better. But he doesn’t seem to be able to escape the shackles of hide-bound “group-think”. Wasn’t the President supposed to put a stop to this kind of thinking?
Some Bailouts Are Big Gifts. Some Bailouts Are Bad Loans.
Maybe it’s the rise of the Internet that did it, but there are an awful lot of lemmings in the fourth estate these days. Once the zeitgeist gets hold of a word it’s everywhere fast. That’s especially true of catch-all terms that lose their meaning the moment anyone begins to dig even a tiny bit deeper into a story.
Take the term “Bailout”.
In economic terms it means ‘assistance to a financial or other institution in distress’. But assistance can mean anything from a loan that nobody else will give with very stringent terms to a total and utter gift.
There have been a ton of bailouts in the last few months. We don’t have to list them all, we’re just going to focus on two ‘institutions’, Citigroup and the Big Three Auto manufacturers.
Let’s look at what these two have in common. Both of them are vast with global reach and influence. Both of them made awful business decisions in the short, medium and long term that led them to the brink of collapse.
Now let’s look at what people perceive they have in common, namely that both are “too big to fail”, another term of limited meaning. Citigroup is too big to fail because of the depth of its interconnected interests throughout the financial world. The Auto Industry is too big to fail because whole regions of the country depend on it for their economic welfare.
Finally let’s examine where they are different. Citigroup is a financial institution that buys and sells assets with client and depositor funds. It employs in the region 300,000 people worldwide. The Auto industry makes cars and trucks, is the backbone of US manufacturing and directly and indirectly employs around three million Americans.
It’s a tribute to how well the Finance, Insurance, Real Estate or FIRE sector has sold itself over the last twenty years of the Reagan Revolution that a bloated, shapeless and rudderless behemoth of a bank should be regarded so highly, while the jewel of America’s industrial crown should be treated as if it’s already on the scrapheap.
That contrast is perfectly reflected in the way that the United States Congress and the Administration has handled the ‘bailouts’ to Citigroup and the Auto Industry. Read the rest of this entry »
The Fix Is In – Part Two
it's always xmas on wall street
Today, a distinguished board of economists said the country had been in a recession since December ‘07, a statement that normally the markets would have discounted, because, yeah, like we knew that. But no, the market’s took a massive swoon, again, giving back all the hard earned gains of the past week’s rally.
Call it rank cynicism, but it just can’t be helped. It’s just too tempting a thought not to consider all this just a tad convenient. Last week the long guys had a party to celebrate a completely predictable new Secretary of the Treasury. This week the toilet beckons because we were told what we already know, and the short guys make a bomb. Coincidence? Perhaps. But if there was collusion between the traders, who after all work either a drink after work or a few desks apart, one could hardly be surprised. After all they’re just trying to make a buck or two with someone else’s money. Right?
The Fix is In – The Long and the Short Of Wall Street
Another bumper day on the Street. The Government bails out another basket case bank. Everything’s right with the world. Hurrah! Yet again, Wall Street proves it’s an utterly amoral, self-interested, club that has nothing whatsoever to do with you and me.
panic on wall street. or not.
Massive market volatility, huge gains on the basis of nothing, followed by huge losses and back to gains. Is there a pattern to all this? Not on the surface, at least. The press loves reasons, and tacks on some or other reason for that day’s movements. Recession indicators, new appointment at Treasury, another baby for Angelina and Brad.
But maybe something else is in play too, something mysterious, something very, very fishy.
Traders either go “long” hoping a stock will rise, or they go “short” on borrowed stock hoping the stock will drop and they get to keep the difference on the sale. Long traders and short traders are not in competition, but supposing they were, even in some unspoken way, in collusion. Wall Street traders aren’t known for their mild-mannered approach to business, so could be…
Let’s Talk About “The System”
hi, i'm the system
Back in the eighties there was an awful lot of talk about the nefarious “system”, a deep and dark conspiracy of the powerful to keep down the powerless. Before resentment became a tool of the right, it was a clarion call of the unreconstructed left, a youthful, incoherent, but somehow meaningful rallying cry that drove many a drunken, sophomoric conversation. You don’t hear too much about “The System” these days. Nobody seemed to care anymore, when “The System” was delivering them flat screen TVs and great opportunities to flip condos.
But it seems to me that it’s time to revive talk about “The System” because it’s become very clear what it is.
Undiluted socialism for the rich and influential, and the legal and enforcement system to protect it. Read the rest of this entry »
How About Them 401k’s
We think it’s going to continue to go lower. We don’t think people are scared enough. They’re just not showing enough fear. People are numb to this, they’re almost immune to it.
So says Ryan Detrick of Schaeffer’s Investment Research, as quoted in Today’s NYT. Just another analyst on just another day of carnage in the American Markets.
omg we're screwed
With stocks down well over 40% from the year’s highs, most people have stopped even looking at their 401k statements. That’s not a bad idea. I mean what are you going to do. Cash out? You’d be taking a massive hit on the price and tax too. And where are you going to put the money you have left? In T-bills? In Art? In a Bugatti Royale? In a safe at home?
You’ve got no choice but to take the hit. And that’s the last piece of good news left on Wall Street these days. We were sold this genius idea of 401k retirement accounts, which went into effect in January 1980. Brought to us, like many other Wall Street friendly ideas by the counter-intuitive Carter Administration (more on the Reagonomic Carterites in another post), they were an instant hit – just in time for the Reagan not quite so revolutionary Revolution.
The Inherent Wisdom of Sheep
central casting
“I have no idea”, said one JP Morgan Chase economist today when asked by the New York Times why the Dow shot up over 550 points on the same day yet more recession indicators piled on. That seems to be the best response under the circumstances, but it belies a more serious problem. For years, we’ve been told to trust the market, to listen to the market. We were told that the market has an inherent wisdom.
The inherent wisdom of sheep more like.
Someone decided that the rally was due and bought. Someone else said “things are bottoming out”, and he told his mates. His mates told their mates, and they all got back in to earn some bucks with someone elses tired, downtrodden money. The herd mentality is not a signifier of great intelligence – quite the opposite. And this level of absurd, illogical, delusional volatility is a signal of worse to come. So please, for once and for all, let’s stop listening to the market – oh, and enough of those images of Wall Street traders watching the screens with panic and despair on their faces.
If I could earn a Euro for every time one of those…
Paulson – The Man With The Plan
Man With Plan
After nationalizing Fannie and Freddie, then letting Lehman Brothers die for no apparent reason, then bailing out AIG to the tune of $85 billion (now around $150 billion but who’s counting), Hank Paulson sat back to watch the credit markets unfreeze. But instead they just froze up some more.
Hank was totally bummed. “This job totally sucks”.
“The credit freeze just keeps on freezing”, he said to his posse of former Goldman Sachs hacks. “What the frick do I do?”
“You need one big plan”, said Neel Cash and Carry, “not just a whole bunch of little plans stuck together”. Hank nodded furiously. “Yes, yes, that’s right”. After scribbling a few notes on the back of a dry cleaning bill he looked up. “I’ve got it”. Read the rest of this entry »