Wednesday, October 31, 2012

Truth In Media? Is Another Government Bailout Coming?

Anyone besides me ready for this election to be over so we don't have to listen to the incessant and vile barrage of SuperPAC-sponsored campaign ads?  If I hear that commercial about Romney helping to bury some boy scout one more time I might jump out the window...I've said here before and I'll always maintain that the Citizens United v. Federal Election Commission Supreme Court decision has buried democracy and buried this country for the 99%'ers.

The corporate earnings charade has become so over-spun by the media that now it's impossible to tell what's real and what's fiction by looking at the headlines.  Today was a prime example when Mastercard released its quarterly earnings (this is so completely surreal that you can't make it up):

Headline from CNBC:  "MasterCard revenue misses for second time as consumer spending slows"  Here's the LINK

Headline from Reuters:  "MasterCard profit beats as consumers feel more confident"  Here's the LINK

What the hell?  Which headline are we supposed to believe?  I don't have time to go through Mastercard's numbers, but my bet would be that the Company utilized several non-cash GAAP accounting manipulations to produce a net income that "beat" expectations in order to off-set the revenue expectations disappointment.  Typical of the insidious fraud that has completely infected our financial system.

I wanted to point out the gigantic white elephant sitting out there in connection with Hurricane Tropical Storm Sandy that I have not seen mentioned anywhere.  First, let me say that both FoxNews and CNN shamelessly and horrifically over-hyped and over-promoted this storm for the sake of generating viewers.  To be sure, lower Manhattan suffered some pretty serious damage, as did the coastline of New Jersey.  But friends of mine living in NYC were actually at work yesterday (midtown/uptown).  And a friend/colleague who lives/works in Annapolis (eastern shoreline of Maryland) reported this morning that other than a brief blackout, his property was unscathed.

My fear is that, with the rapidly escalating estimated costs from damage to buildings and homes along the New Jersey, NY coastal areas, the Government may use this event as another chance to bail out insurance companies and big banks.  Sounds like a massive stealth bailout of New Jersey is being tee'd up.  It's the only reason I can see that NJ Governor Chris Christie is sucking up to the Democratic POTUS.

Let me explain.  The big property and casualty insurance companies will likely be on the hook for somewhere between $50-100 billion in damages.  You can be certain that they've laid off a good portion of this risk via OTC derivatives, with the big banks and hedge funds as counterparties.  When a hedge fund is a counterparty, by virtue of the 5-10x leverage extended to hedge funds by the big banks, it basically means the big banks are the ultimate counterparties to risks taken on by big hedge funds (if a hedge fund defaults on a big trade, the bank becomes the owner of the trade).

You can sure that if it looks like there will be a financial hurricane caused by Sandy, the Government will be there to monetize the situation, much like it did in 2008.  $50-100 billion in actual damages can potentially translate into the 5-10 times that amount by "virtue" of derivatives.  Given that the structural problems that took down the financial system in 2008 are actually worse now, the financial system would not be able to withstand the body blow of a $100 billion dollar counter-party derivatives default.  We'll see how this unfolds, but my bet would be that the Taxpayer bears the brunt of the expense from Sandy.


  1. Morgan Creek Chief's Fund Of Funds Gates Redemptions

    A fund of hedge funds run by Morgan Creek Capital Management founder Mark Yusko has imposed withdrawal restrictions after investors yanked nearly a quarter of its assets.

    The Endowment Fund, which Yusko set up in 2003—before he left the University of North Carolina at Chapel Hill's endowment—with Salient Partners, told clients on Friday that it would gate redemptions. Investors will now be allowed to withdraw only a limited amount of money each quarter from the $3.3 billion fund, which has seen more than $1 billion in redemptions this year.

    In a letter to investors, Endowment Fund said the temporary move would reduce the amount investors can withdraw each quarter to 5% of assets, half of the previous level.

    While many hedge funds and funds of funds imposed gates during the financial crisis, the Endowment Fund's move is among the first to come after that crisis, according to The New York Times.

    If you free the $, you can't fee the $.

  2. Dave, your comments on Sandy are totally ridiculous and grossly ill-informed. Please stick to writing about PM's.

    1. Call 'em as I see 'em. Was on the phone yesterday with two different friends who live in NYC - one lives in midtown. Chatting live as I write this in an internet chat room with my friend in Anapolis.

      I didn't say there was wasn't a lot of damage. What I said was that Fox and CNN tried to make it sound like atmospheric armegeddon and Obamma will use it as an excuse to monetize insurance company and big bank liabilities. Hell Goldman Sachs never even lost its power and it's right at the tip of Manhattan.

    2. Goldman sachs never lost their power so it wasn't much of a storm. Sorry I couldn't comment sooner but I got my power back yesterday and my internet today. Five trees knocked down and lucky none hit my house. I think over 100 people died and thousands are now homeless. Whole sections of Queens, Brooklyn and Staten Island under water. Tunnels still flooded. Still no school in CT and there are literarly some schools not there anymore in NY. But not much of a storm as long as Goldman Sachs has their power.

  3. The next "Frankenstorm" to hit New York will be financial.

    The destructive whirlwind that hits New York in 2013 will be a financial Frankenstorm.

    Four years of glorious central-planning "extend and pretend" have enriched the political and financial Aristocracies, and imbued them with a bubble-era hubris that they have indeed gotten away with murder: the $6 trillion the Federal government borrowed over the past four years, the Fed's $2 trillion in fresh cash, the Fed's $16 trillion bailout of the banking sector and various perception management manipulations have righted the storm-tossed ship. All those with power in 2008 remain in power and all those with outsized wealth in 2008 still hold their outsized wealth.

    The global tsunami of borrowed and printed money lifted the water-logged dinghies of the debt-serfs enough to give them hope of better times; meanwhile, their adjusted income has declined 8%: they are poorer while the neofeudal Aristocracy is much wealthier: same as it ever was, right?

    Except the financial tides and winds have shifted, and the linearity of central planning is about to be disrupted by nonlinear, positive-feedback storms. Let's list a few of the major storms brewing:

  4. One Year Later - Santelli Rips Apart 'Connected' Corzine

    There remains more than $1.6 billion of customer funds unaccounted for and whether you believe PwC (as Forbes notes) were duped or not, one year on from MFGlobal, one thing is for sure - there is no more hated character in the pits of Chicago than Jon Corzine. CNBC's Rick Santelli says it all in this blockbuster rant against the incredible reality that this 'connected' individual has got away with monetary murder. Must watch - but beware your blood pressure... as he concludes "we haven't heard the end of this - Chicago will find the answers!"

    1. The Case Against Corzine

      The Case Against Corzine

      As the one year anniversary of the MF Global Bankruptcy is upon us, the WSJ has now joined the NY Times in writing a ‘woe is me’ piece on behalf of Jon Corzine. The WSJ continues bemoaning the pitiable situation of “restlessness and frustration” of the former CEO of Goldman Sachs, former Governor of New Jersey, and former Senator from New Jersey who apparently isn’t content with being “confident about the likelihood that he will avoid any criminal charges related to MF Global.” Corzine is still estimated to be worth several hundred million dollars despite presiding over the failure of the largest non-bank commodity broker where $1.6 billion in customer money was stolen. I cry for him, I really do.

      Trying to portray Corzine as being focused on mundane things like finding a job rather than worried about doing jail time for his obvious crimes appears to be another prong of Corzine’s attorneys’ use of the Chewbacca Defense, along with saying that the fraud charges “Make No Sense,” because the money “Vaporized” and he had no motive since he had a de minimis portion of his net worth invested in MF Global stock. However, proving Corzine committed fraud and perjury would be relatively simple for any motivated prosecutor. Since the Department of Justice clearly is not motivated to prosecute Corzine after he bundled $500,000+ in campaign contributions to their boss, I provide this quick and easy guide for any ambitious state prosecutor to bring charges themselves:

  5. As a matter of law, Citizens United was correctly decided. You may not like the result, but that's life.

    1. Ummm, I need to go over it again with a fine tooth comb to present why it was nothing more than Kangaroo Court decision decided by the Kangaroos who are owned by the extremely wealthy interests in this country, but I don't have time. It most certainly was not correctly decided. It was a very loose, reckless and insidious interpretation of the Constitution. Kind of like justifying Obammacare by saying the individual requirement is "a tax." Inhale that bong hit a little deeper and hold it in a little longer...It was a rigged SCOTUS that decided that case. It completely handed our system of Government to the large corporations and the extraordinarily wealthy.

    2. Foreign-connected PACs figure big in US elections, campaign watchdogs say

      Subsidiaries of firms from Spain to Singapore are shelling out millions on Republican and Democratic election campaigns.

      BOSTON, Mass. — Global corporations from Spain to Ireland to Singapore are spending millions to influence the outcome of the high-stakes US presidential and congressional elections.
      Records show that scores of banks, liquor manufacturers and telecom companies outside the United States have directed $12.8 million in political action committee (PAC) money to the 2012 US elections so far — and likely much higher amounts through other means that are not traceable.

      As unsavory as PAC, Super PAC and corporate employee donations may seem, one thing they have going for them is they are visible to the public. This is not the case for large amounts of “shadow money” streaming into the 2012 elections from corporate treasuries and the uber-rich, and funneled through groups and trade associations. This money does not have to be disclosed. The Center for Responsive Politics estimates that about $200 million in cloaked money has been spent on advertisements to support or attack the presidential candidates.
      “We don't know where it is coming from. There is a big black hole here. History shows if there is a black hole it will be used,” Holman said. “It is outrageous that we allow a CEO to dip into the company till and spend the money on elections and not tell anyone.”
      Critics say that since the Citizens United ruling, the door is wide open to non-US companies and individuals who want to try and sway the upcoming US elections by funneling “shadow money” through different groups. By law, their money can’t be used to buy political ads. But it can be used for office expenses and staff salaries.

    3. Essay: The One Percent Court

      During the Gilded Age the identity of the justices changed, but the Court’s romance with big business flourished. Reformist efforts to reconcile democracy and industrialism were generally rebuffed. The Court endowed corporations with personhood under the Fifth and Fourteenth amendments — which guarantee the rights to liberty, property and due process—and interpreted the commerce clause so as to strike down legislation that tried to inflict on capitalism such “socialistic” and un-American horrors as forbidding the employment of small children in factories. The Court also looked unfavorably on limiting work hours in especially grueling or dangerous and disease-causing jobs; on breaking up the powerful trusts that steamrollered small competitors out of existence; on taxing incomes progressively; and on the right of workers to organize and strike. The Court’s mantra became “Just say no” to anything that smacked of progressive reform — including efforts to ameliorate the real-life misery of everyday people. By the turn of the twentieth century, populist and progressive forces were calling in vain for constitutional amendments or new legislation to end judicial review, but the majority on the Court remained hostile to democracy.
      Even the national emergency of the Great Depression did not budge the Court’s majority, which began to invalidate the building blocks of the New Deal. But fortune and a Democratic landslide in 1936 broke the Court’s blockade. After Roosevelt tried and failed to add six extra justices, a series of resignations and deaths created vacancies that he quickly exploited. Eventually, in his twelve years in office, Roosevelt named not six but eight new justices. After almost 130 years of shielding those whom Roosevelt dubbed “economic royalists” from the effects of human suffering and popular discontent, the Court swung left, where it more or less stayed for some four decades, including eight years of Republican administrations.

      The right-wing counterrevolution promoted by Reagan set out to remake the judiciary in its own image. By now, it has almost completely succeeded. One evident proof of its achievement is the tendency of the Roberts Court to affirm the rights of property and organized wealth—especially of corporations—over the individual or the public interest in almost any contest with regulators or victims of abuse. Now, with its Citizens United decision, which virtually permits corporations to buy the government they desire through an election process incredibly and needlessly voracious for money, the Court has given a jet-powered boost to the move toward plutocratic control over our lives and fortunes.

    4. The Dark Money Shuffle

      And so, dark money is flowing through our airwaves in the form of political ads that purport to be “social welfare” expenditures—and avoiding transparency and accountability in the process. “The C4 is the untold story of this election,” says Melanie Sloan, executive director of the nonpartisan Citizens for Responsibility and Ethics in Washington. “I imagine that even more money will be raised by the C4s than super PACs … There’s probably hundreds of millions of corporate dollars being funneled into these C4s to influence elections, and Americans have no idea.”

      Of course, we still don’t know where a lot of 501(c)s’ money is coming from. But we got a brief glimpse when, in its 2011 lobbyist filings, Aetna did something it didn’t have to do: t disclosed $7.8 million in payments to the American Action Network and the U.S. Chamber of Commerce, a non-profit, non-disclosing trade association that generally aligns with the GOP.
      This anonymity is surely appealing to corporations that don’t want to potentially alienate half their customer base, despite the unfettered political freedom of speech given to businesses by Citizens United. But it also appeals to individual donors as well. Foster Friess, the Wyoming businessman who gave more than $300,000 to Rick Santorum’s presidential bid, has said he now prefers to donate through C4s to reduce public scrutiny. “If you give to a C4, it doesn’t get disclosed,” Friess told BuzzFeed in June. “So if I give money to various organizations, no one knows what I am giving. Even my wife won’t know.”

      There are many more donors like Aetna and Friess—but unless the law is changed, we will probably never know their names. Says Trevor Potter, president of the Campaign Legal Center and former chairman of the FEC and general counsel of the McCain campaign, “You almost have to wonder what they were smoking when Kennedy wrote that for the first time corporate money would be allowed in federal elections but voters will know who is paying for the advertising.”

    5. Revolt of the Rich

      After the 2008 collapse, the worst since the Great Depression, the rich, rather than having the modesty to temper their demands, this time have made the calculated bet that they are politically invulnerable—Wall Street moguls angrily and successfully rejected executive-compensation limits even for banks that had been bailed out by taxpayer funds. And what I saw in Congress after the 2008 crash confirms what economist Simon Johnson has said: that Wall Street, and behind it the commanding heights of power that control Wall Street, has seized the policy-making apparatus in Washington. Both parties are in thrall to what our great-grandparents would have called the Money Power. One party is furtive and hypocritical in its money chase; the other enthusiastically embraces it as the embodiment of the American Way. The Citizens United Supreme Court decision of two years ago would certainly elicit a response from the 19th-century populists similar to their 1892 Omaha platform. It called out the highest court, along with the rest of the political apparatus, as rotted by money.

      We meet in the midst of a nation brought to the verge of moral, political, and material ruin. Corruption dominates the ballot-box, the Legislatures, the Congress, and touches even the ermine of the bench. The people are demoralized. … The newspapers are largely subsidized or muzzled, public opinion silenced, business prostrated, homes covered with mortgages, labor impoverished, and the land concentrating in the hands of capitalists. The urban workmen are denied the right to organize for self-protection, imported pauperized labor beats down their wages. … The fruits of the toil of millions are boldly stolen to build up colossal fortunes for a few, unprecedented in the history of mankind, and the possessors of these, in turn, despise the Republic and endanger liberty. From the same prolific womb of governmental injustice we breed the two great classes—tramps and millionaires.

    6. Dave, I'm sorry you're against free speech in America, but Citizen's United was correctly decided. You would prohibit people from speaking because they voluntarily form a group to promote a political message. Histrionics about Obamacare and the wealthy are not legal arguments.

    7. Histrionics? LOL. Better use Merriam-Webster before you throw around multi-syllabic words. Better study ConLaw before you regurgitate the mindless babble you hear on Fox News.

    8. Prima facie, it would appear that Citizens (please note: do not use an apostrophe in the case reference as you have above) is a direct and proper upholding of the 1st Amendment. To be sure, I do not oppose the original intent of the litigation, which was to permit the airing of an anti-Hilary Clinton video.

      HOWEVER, if anyone looks at the extension and application of Citizens as it enables wealthy individuals and corporations to engage in unfair electioneering, then we can see how it enables the wealthy to use money to influence the outcome of elections. The ability to do so has been shot down many times by courts at all levels.

      The current SCOTUS took this case well beyond the scope of the original court case and used it as an opportunity to change the law and open the door to give wealthy individuals and corporations the ability to buy elections.

      I'm sorry if you can't see or understand this, but it helps immensely if you research something beyond what you hear on Hannity or O'Reilly.

  6. Ned Naylor-Leyland: If Your Gold Reserves Are at the BOE or NY Fed, You Have No Chance of Getting Out With Any Metal!


  7. Thomson Reuters investigates foreign exchange client

    (Reuters) - Thomson Reuters Corp is investigating whether one of its currency trading customers gained an unfair advantage when making high speed foreign exchange trades on its platform.

    Lucid Markets, a privately held electronic trading firm registered in Great Britain, may have benefited from trades using several connections on the Thomson Reuters Matching platform.

    "As the operator of one of the largest FX dealing communities, providing a level and fair playing field for the community is paramount," said a Thomson Reuters spokeswoman.

    The spokeswoman confirmed that an investigation was initiated when Thomson Reuters became aware of the issue, saying, "Thomson Reuters takes any accusations seriously and uses all the tools at its disposal to enforce its rules." She declined to provide further details as the investigation has not yet concluded.

  8. It Begins: Ecuador Demands Repatriation Of One Third Of Its Gold Holdings

    It appears that the story, which has refused to go away, was not covered sufficiently fast, and precisely the worst case scenario - at least for the "asset-lite" status quo - is slowly but surely starting to materialize. From Bloomberg:

    Ecuador’s government wants the nation’s banks to repatriate about one third of their foreign holdings to support national growth, the head of the country’s tax agency said.

    Carlos Carrasco, director of the tax agency known as the SRI, said today that Ecuador’s lenders could repatriate about $1.7 billion and still fulfill obligations to international clients. Carrasco spoke at a congressional hearing in Quito on a government proposal to raise taxes on banks to finance cash subsidies to the South American nation’s poor.

    So yesterday: Germany... today: Ecuador... tomorrow: the World?

    Because while Ecuador, with its 26.3 tonnes of gold, may be small in the grand scheme of gold things, all it takes is for more and more banks to join the bandwagon and demand delivery in kind from official repositories (i.e., New York and London), and the myth that is the overcollateralization of hard money by central banks will promptly come to an abrupt, bitter and, likely, quite violent end.

  9. Jim Willie: Central Bank Gold Rehypothecation Scandal to Take Gold to $5,000/oz

    A nasty Golden Harp could soon have its cords plucked, with the resonance working to shake loose the bankster cover of improper illicit duplicitous and probably highly illegal usage of Allocated Gold Accounts. When diverse scattered accounts are pilfered and depleted without authorization in Switzerland, resulting in several multi-$billion class action lawsuits in Zurich, all kept dutifully out of the news, that is one thing. But when a few key official government gold accounts are ransacked in systematic fashion from established trusted locations, defying and betraying the trust of the German Govt and other national governments, that is quite another. To be sure, the system can tolerate ransacking and replacing with scurried harried efforts the Venezuelan gold account like in 2011. The media told the story with creativity and aplomb, avoiding the truth, inventing a tale, but finding a credible pile of dung to feed the public, which swallowed it whole.

  10. In regard to your title question: Yes.
    In regard to the general topic, why would you believe ANYTHING you read from anything other than the handful of sources you hold to be true ??
    And I do mean a dwindling handful, as they are bought off one by one with diminishing bribe paper? We live in a time where people must read many things "between the lines" and colate all this propaganda, misinformation and CONfidence fodder to critically disect what is true from what is herd feed.
    Take comfort then in the knowledge that soon it will require gold to fund the bribe, and at least there will be some industry and scredibility to the motive.