Saturday, June 9, 2012

Spain Pain; Obama’s Funny Economics; JP Morgan’s Big Fine; Bernanke Passes the Baton

Spain Pain
Spain, it turns out,  is another Greece when all is said and done. The reports out today say Spain as agreed on 100-billion Euros in EU aid to shore up its banks. This is being depicted as an “unconditional” bailout.  Spain has really been flirting with a near death experience, but to suggest that this mega loan will come without conditions is the height of tomfoolery. What loan comes with no conditions? lol. If anyone can do an unconditional loan to drag me out of near insolvency due to medical bills, I’m all ears! rofl. This is akin to a TRILLION dollar bailout in the U.S. when you gauge the size of the amount of aid that the Spain banks need in relation to the size of the top TBTF banks of the U.S. Details will be forthcoming in the days ahead on what the actual terms are. Hint: Spain will be oppressed and has sold its soul making the giant error of paying off old debts and liabilities in exchange for new debt. Nothing stays swept under the rug forever. A key stumbling block to this is the European Stability Mechanism (ESM) which still needs German ratification, which may or may not happen in the days ahead. German will get to bear the brunt of funding this loan. The U.S., since the IMF is involved, is also going to be close buddies with Spain as well. 

Barry O Just Doesn’t Know
Switching from the ridiculous to the ridiculous. Let’s just nip something in the bud right away. Barack Obama would like us to believe, as proclaimed on the campaign trail during the past week, that the financial ills started in Europe and that Europe is to blame for the present woeful state of the financial markets, labor market, real estate etc. To set the record straight – a refresher: The Lehman collapse in 2008 which got the ball rolling in earnest was an American financial entity – not European. The 2008 debacle actually has its roots in the subprime collapse that really took off in late 20006/2007. The dominoes that continue to fall to this day started to fall in the U.S. first. I repeat, Lehman was not a European bank. Lehman, et al actually were conduits to European banks who bought U.S. AAA rated CDO paper which ultimately blew up. Certainly Euro banks are not completely blameless because they failed to use their better judgment and fell for the phony sales come on from their U.S. counterparts and some European banking entities got into the packaging of the flawed CDOs; however, the worthless, phony paper was born here and exported overseas.  And to think, the financial terrorists who propelled the market over the edge in 2008 are by and large still around today and no doubt profiting from the present market chaos. What does this say about Barry O? He is, at best, in a state of major cognitive dissonance.

JP Morgan
Speaking of chaos. Let’s talk about the King of Chaos in the markets – JP Morgue as some call it. I like to call them JP Moron. This little story passed virtually unnoticed on the Reuters Wire late Friday morning:
(Reuters) – JPMorgan executed ‘wash trades’ on 10 separate occasions in U.S. crude oil and gasoline futures in the first half of last year in an effort to manage position limits, CME Group said in a disciplinary notice on Friday.
CME, which operates the New York Mercantile Exchange, ordered JPMorgan to pay a fine of $30,000.
“On 10 separate occasions between January 1, 2011, and June 30, 2011, in an effort to manage position limits, traders employed by JPM executed block trades between separate legal entities with the same beneficial owner in WTI or Gasoline during the last three days prior to expiration of the particular contract,” the notice said, referring to West Texas Intermediate (WTI), the main U.S. crude oil future.
“The (NYMEX Business Conduct Committee) Panel also found that in each of these 10 instances, the trader was the sole decision maker for both the buy and sell side of the trade.”
As part of the settlement, JPMorgan “neither admitted nor denied the rule violations,” the notice said.
Jim again: That’s actually a doozy of a little story. First, the $30,000 fine. What a joke, since JPM paid out $30 bln in comp last year we’re talking a millionth of a penny on the dollar in “fines”. Why is this a significant little story?  What JP Morgan was doing was conducting fraudulent wash trading.  As the article states, JPM “was the sole decision market for both the buy and sell side of the trade”. In other words, so much for the idea of market perfection where there is always someone else on the other side of the trade. JP Morgan was trading with itself.
And people wonder why I rail against the banking system? Some were offended that I call Dimon pond scum. Each time I write about Morgan, I regret that I called Dimon pond scum since I am offending pond scum which actually has a useful and important existence within the ecosystem.
Oh and it was pure coincidence, I’m sure, that this took place in early 2011. Far be it from moi to suggest that JPM was trying to manage losses in other markets at the time (like the exploding silver market in which JPM was massively short, lol).  Oh, the Chicago Merc (CME) by “fining” JPM 30 grand, essentially chose to look the other way. It is this pattern of wide ranging abuse that can have consequences far beyond what is seen on the surface. It is this pattern of abuse that makes me wonder if there is any real distinction between the trader/speculator and a so called investor since all are cast into a net of corrupt practices that originates from the top.
The natural tendency would be to short the daylights out of JP Moron, but if they can buy and sell stock in their own phony market where they are on both sides of the trade, why chance it?
I wonder if Jamie Dimon will remain ceo of Chase for very much longer?

Barry O Private Vs Public Sector
This is an interesting bit of Chartology…

Joe Weisenthal crunches the numbers: private-sector profits & investment ARE doing fine. Great actually.

Weisenthal is clever, but lacks experience. In many ways the corpratists are doing fine as demonstrated by those charts. To what extent that prosperity is extended to rank and file, or to society overall is debatable.  What his series of charts fail to show is a misery index component. Are you better off now than 4 years ago, or even 8 or 12 years ago? Weisenthal could have included a chart of the record level of food stamp use, or the record level of disability aid being disbursed by the government. Oh, wait, even though those charts show parabolic growth, the severe upward slope in dependency on government benefits rates as a the wrong type of growth, or a big FAIL.
Overall, Obama sounds out of key by the talking about fine areas of the economy when the overall macro picture is messy: 

Obama Walks Back: ‘The Economy Is Not Doing Fine’

It didn’t take long for the Big O to reverse course, because (gratuitous political jab here) he has no real convictions that harmonize well with whatever is buzzing around in his head, or with the body politic. He’s a big thin skinned zero who remains true to one thing: the polls. Can you say narcissist – thought ya could (in my best Mr. Rogers voice).   

Ben S. Bernanke
Master of the financial universe Ben Bernanke spoke during the past week. He’s pretending to play coy with the markets – as if he has it all under control. That sent gold from a $1640 peak during the past week to a finish for the August futures contract at $1591 on Friday.  There were a few big takeaways from his remarks. To paraphrase, he told lawmakers that the Fed has done its share of the job, and now Congress needs to act in a fiscally prudent way. That means we are all screwed. Both sides of the aisle want to propagate their spending agendas which end up boiling down to Big Government just with a different emphasis between the parties. There is only one party in D.C. It is the party of BIG GOVERNMENT.  While it is all well and good that Bernanke is suggesting that CONgress do its job and tilt itself toward fiscal rectitude, Bernanke, through his modern technology known as the printing press has lulled Congress out of any sense of duty to be responsible since the printing has been there to make up for ongoing budget shortfalls. For Bernanke to be calling on our elected representatives to actually do something constructive now is coming a bit late in the game. In the end, Benny will have no choice but to turn the printing press back on.
Bernanke also uttered this quote. “No risk that JPMorgan is in danger”. This is what he said of the subprime part of the bond market when it started to collapse.  Bernanke has an uncanny track record for being wronger than wrong. But that’s what comes with economic academia. The consensus doesn’t catch on until the house is fully ablaze ignoring any sort of preceding smoke. I’ve got a box of Girl Scout cookies in the freezer for anyone who can tell me when the consensus of economists has predicted recession beforehand. Just in case my kids ate them, I have some cans of chick peas (great on salads) as an alternate prize.  

The other day I wondered aloud if Bernanke may actually have it out for Obama. The Daily Worker of Cable TV, PMS-NBC, has caught on to this suspicion.  Greenspan whether, or not by design, let George HW go down in flames in ‘92 with a cautious interest stance (yes back in the day when there were actually interest rates that savers could benefit from); though that picture is somewhat muddled by the spoiler kooky guy Ross Perot. And of course George HW didn’t come across as the brightest bulb when he marveled at supermarket scanning technology, and he was also downright weird with his New World Order talk.  But still I wonder what good Bernanke’s hand sitting will do for Barry O.

Is Ben Bernanke trying to get Mitt Romney elected president?     

That wind bag guest, Peter Schiff, is half right. We certainly don’t need more funny money, but Schiff forgets that QE provides an illusory bump to the stock market which is what many people, by looking mostly at the Dow, see as a key gauge of their future wealth since a healthy Dow to the masses means that perhaps their 401ks are rising. HaHa, the joke’s on them. If No QE comes along this month, it certainly won’t be coming along in September, or October and that would mean a languishing stock market.
The S&P, Dow, etc., are managing to hold up on the notion that Bernanke’s hand may be forced. The next Fed meeting will be a week from Tuesday and then no meeting until July 31st/Aug 1.  The June meeting comes at a remarkable time, given that Greek elections are slated for the Sunday before.
I’ve oft state in this space that going with some amount of portfolio holding in gold is a guard against the financially unthinkable happening (ie. A sudden system reset). When you look at JP Morgan and the complicity of its family and friends, or that state of Europe, or the lack of leadership in Washington (and I think Romney will be as big government as Obama and George W. not much to be happy about in terms of poll choices but we could still use a fresh face at 1600 PA Ave) I just don’t understand the aversion that people have to gold. Oh, wait, I do. The current financial Ponzi masters are doing everything that they can to sully the reputation of gold. I’m amazed that so many are so easily fooled.

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