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
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.