The rally in stock markets around the world is mainly due to liquidity injected by various central banks around the world.
From FT Alphaville:
We assume the recent equities rally is a function of central banks’ various liquidity ops. Cash is being forced into the system, in one way or another, and it’s finding its way into the equities markets. The question is, will that be able to continue? Or will we soon be reverting back to its historical trend?
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( 3 / 30 )Via ABC News:
A new study shows that the states that consume the most porn tend to be more conservative and religious than states with lower levels of consumption.....
Eight of the top 10 pornography consuming states gave their electoral votes to John McCain in last year's presidential election – Florida and Hawaii were the exceptions. While six out of the lowest 10 favoured Barack Obama.
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( 2.9 / 147 )Latest hue and cry in America: huge bonuses to Wall Street executives when their companies fell apart, taking the world financial system down with them.
Wall Street executives paid themselves 18.4 billion in bonuses in 2008. Nobody cared how much they paid themselves as long as they got the money from their coffers. This time it happened at the same time they were begging the tax payers to bail them out with hundreds of billions of dollars. President Obama weighed in. "That is the height of irresponsibility. It is shameful." Some say it is Obama's rare but organic anger and some say it is a 'calculated' expression of outrage by the President.
I am not a big fan of India's Economic Times. But there is a good article in this rag on this subject: For CEOs, thirst for bonuses may be in their DNA. Excerpts:
"People don't become head of Merrill Lynch without having a certain sense of self-importance. Once they arrive at that position, they have all kinds of toadies tell them what geniuses they are, then of course they begin to feel their lifelong feelings of self-importance have been confirmed," said Charles Goodstein, a psychoanalyst and professor at New York University School of Medicine.
More than this article, I like the way another blogger drew a parallel between this monomaniacal bunch with another set of goons we know. The politicians. Excerpts from Jesse's article: Are we ready for market capitalism?
Defenders of executive perks say generous compensation is needed to retain talent. (Generous, not extravagant. There is a direct proportion between the emptiness of the suit and the extravagance of the trappings. There are only a few Steve Jobs; most of the others are verbally adept, highly cunning, political animals. For the most part it is the myth of the "Great Man." A surprisingly large number of them are frauds. The problem is the system does not manage them, eliminate them. It pays for the office, not for the performance. - Jesse)
...
"While Wall Street melted down, top executives believed that, unlike the rest of the country, they still deserved huge bonuses," Cuomo said. (And Congress took increasing pay raises, and a private pension system, and superior healthcare, while the median wage stagnated and the middle class dwindled - Jesse)
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( 2.9 / 153 )
Nobody in the right mind can defend RamaLinga Raju's transgressions at Satyam. But it is appalling to me to listen to the scapegoating hue-and-cry by the very criminals who perpetuated a system that allowed Ramalinga Raju to do what he did. The pillars of this corrupt system are none other than: a) the regulators who were asleep at the switch and/or corrupt,
b) politicians who were either oblivious to the obvious or complicit in crime, and
c) not to mention - the Wall Street types who are crying foul at the scale of Satyam scandal
Piling on to Ramalinga Raju as an evil mastermind of this crime by these very criminals is abhorring. Everybody knows the scale and magnitude of the corruption by Indian politicians. If the public shows half as much outrage at these politicians, India would be a lot better off today.
American politicians are no better. They need the lobbyist money to get reelected. At the behest of these lobbyists, the pols turned the other way while the Wall Street shadow banks and regular banks leveraged their balance sheets up to fatten the executive pay and bonus at the expense of bank balance sheet and prudence in lending.
Now SEC is "investigating" Satyam. Where the hell they were when alarm bells were sounded on Bernard Madoff?
The analysts on Wall Street and Dalal Street are "outraged" at "Satyam" scandal. You may be surprised to know that many of these analysts know the fact that many of the companies they cover lie on their earning and still recommend buying their shares anyway. Their mantra is, "we don't care if you lie, just don't get caught doing it."
Several analysts knew the fact that major investment banks, Citi, Lehman, Bear Sterns, Morgan Stanley, Goldman Sachs, and Merrill Lynch have been lying on their earnings reports. They recommend buying these stocks anyway.
In 2008 there were many outrageous stories of greed and corruption that happened at Wall Street. This latest scandal at Merrill Lynch is another jaw-dropper. The Telegraph reports
Merrill's move took as much as $4 billion out of the bank days before it became part of Bank of America, which last week said it would get $20 billion from the US Treasury.
Merrill paid out an estimated $3 billion to $4 billion in bonuses in December. In previous years, the bank is said to have paid annual bonuses in January or February.
The total compensation bill at Merrill last year is said to have been around $15 billion, a sum reported to be only 6 per cent lower than in 2007.
Of that, between $3 billion and $4 billion is said to have been handed out in bonuses in late December, after the Bank of America takeover had been confirmed. The merger took effect on January 1.
What is a sure-fire way to flush tax payer's money down the toilet? Literally? How about a $35,000 "Commode on Legs" bought by Merrill Lynch's then CEO with company money?
The cost of his office renovations exceeds $1 million. Here is what he bought.
1) $2,700 for six wall sconces.
2) $5,000 for a mirror in his private dining room.
3) $11,000 for fabric for a "Roman Shade.”
4) $13,000 for a chandelier in the private dining room.
5) $15,000 for a sofa.
6) $16,000 for a "custom coffee table.”
7) $18,000 for a “George IV Desk.”
8) $25,000 for a "mahogany pedestal table.”
9) $28,000 for four pairs of curtains.
10) $35,000 for something called a "commode on legs.”
11) $37,000 for six chairs in his private dining room.
12) $68,000 for a "19th Century Credenza" in his office.
13) $87,000 for a pair of guest chairs.
14) $87,000 for an area rug in Thain's conference room and another area rug for $44,000.
15) $230,000 to his driver for one year’s work.
16) $800,000 to hire celebrity designer Michael Smith, who is currently redesigning the White House for the Obama family for just $100,000.
However, the commode on legs is not literally a commode. It is a piece of furniture, like this one.
Neverthless, the commode has become quite a metaphor for the excessive greed and arrogance of Wall Street. After all, in the end the Street had to rely on tax payer's money to bail them out and found a way to flush their money down the toilet.
Before you get tempted to lynch Ramalinga Raju, who - no doubt - deserves a lot of blame, keep in mind that it is a systemic problem. And what RamalingaRaju did pales in comparison to greed and corruption of Indian politicians and the Wall Street tycoons.
India always had its abundant share of corruption and scandals. But, this Satyam scandal has American brand written all over it. As one satirical website aptly called it, America now outsourcing its fraud.
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( 2.9 / 149 )
Almost a year ago, on January 31, 2008 I picked Obama to the next president of the United States. It is THE reality today.
Congratulations, Mr. President Obama. My own expectations of you are modest. Please don't screw this opportunity.
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( 3 / 132 )
[Apologies for not posting in a long time. I got tied-up with a bunch of things, though unimportant ones.]
These are the quotes of Thomas Jefferson, one of the founding fathers and former presidents of America. So true - as proven by contemporary events.
The democracy will cease to exist when you take away from those who are willing to work and give to those who would not. [The brightest and best are attracted towards financial sector, which should be the economic cart, not the horse. For these bright minds, millions of dollars for a few days of speculation is more enticing than a 'may be' million dollars in salary in a decade.]
It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world. [Ever since Regan start exploding the national debt, this country was set on a destructive path of making the future generations pay for the spending of the current generation.]
I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.. [Bank bailouts and more bailouts.]
In light of the present financial crisis, the most important of all the quotes by Jefferson is this one, which he said in 1802:
'I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered
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( 2.9 / 106 )I wish all of you a happy and prosperous new year.
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( 1.4 / 281 )I regularly follow Mark Hanson's (known as Mr. Mortgage) blog to get a heads-up on mortgage related news before they become news. Mark is a veteran in mortgage "industry" and he writes the blog as a public service. In his latest piece he write in his latest piece: Morgan Stanley - It’s Big Part in the Great Housing/Mortgage Crisis
Where does the blame for the mortgage and housing crisis lie? That is the big debate still raging. I receive hundreds of emails each week and a year ago everyone blamed the home owner. Now after two years of constant lies and discovery, things have changed considerably.
Most are finally coming around to understand the truth — that the greater housing and mortgage crisis is not a result of millions of borrowers going wild, buying beyond their means blinded by greed. Nor was it caused by some massive consumer driven multi-year mortgage fraud era where everyone lied to buy a home. Gangs of mortgage brokers who cruised the streets with loan applications and pens in hand recruiting straw buyers to steal homes didn’t cause it either. And before you even think it…SHORT SELLERS ARE TO TO BLAME EITHER. This crisis was caused by fraud alright - but not by the consumer or loan officer to any great degree.
The greatest real estate bubble of all time was only able to occur because of the unregulated investment and commercial banks’ insatiable thirst for parts for their Frankenstein securities. As parts ran low when housing stretched or interest rates rose to levels that made the asset class unaffordable every few months, the constant re-engineering of loan programs focusing on low monthly payments and the elimination of income and assets as a variable brought affordability back in check. This continually repeated for years until virtually anyone with a heartbeat and a hand needed to sign the loan documents were active participants in the market. By turning a blind eye, regulators endorsed their actions.
The banking sector apologists are not going to agree with or like what mark has to say. But it is a must read if you want to understand the root causes of the mortgage finance crisis.
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( 3 / 66 )
Cartoon Courtesy: BlueWire Studio
Al Quieda and the 9/11 terrorists have an ideology that is rooted in religious fundamentalism. They experimented it on the United States by only means they can - acts of terrorism which destroyed buildings, ships and killed people.
Dick Cheney, George Bush and the Neocons friends of Bush administration have used America and the world as a lab to test their political ideology with devastating effects in the form of Iraq war.
Alan Greenspan, the man in charge of the Federal Reserve Board for 18 years, also believed in an ideology called "unregulated free markets" - an ideology emanated from the pen of Ayn Rand. In his recent testimony to the Congress, he admitted that there is a "flaw" in his assumption that corporations in a free market will not act in a self-harming way. His reasons for lowering interest rates at the first sight of every problem is lack of inflation. Some argue if the inflation numbers were in fact cooked by the Government to fleece the retirees from getting Social Security hike.
The Greenspan's Fed never considered asset inflation s a form of inflation. Why would he? Asset inflation produced growth while the inflation in goods and services appeared to be contained. Rise in home values, stock portfolios creates the illusion of wealth. So, people dug more into debt - like borrowing against their home-equity to pay for an expensive vacation or a big-screen TV.
The asset bubbles popped one in 2000 and the bigger one in 2007. The pop in 2000 is picnic one beach compared to the one we are experiencing.
Enter Helicopter Ben. He wants to print and print and print. This is what he said in 2002:
Today an ounce of gold sells for $300, more or less. Now suppose that a modern alchemist solves his subject's oldest problem by finding a way to produce unlimited amounts of new gold at essentially no cost. Moreover, his invention is widely publicized and scientifically verified, and he announces his intention to begin massive production of gold within days. What would happen to the price of gold? Presumably, the potentially unlimited supply of cheap gold would cause the market price of gold to plummet. Indeed, if the market for gold is to any degree efficient, the price of gold would collapse immediately after the announcement of the invention, before the alchemist had produced and marketed a single ounce of yellow metal.
What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.
Greenspan has had his chance to experiment with his voodoo economic theories on American and world population. Now it is Bernanke turn to experiment with us guinea pigs. Bernanke's intent is clear - inflate the heck out of this deflationary cycle. A lot of people give a lot of credibility and credit (no pun intended) to the Fed and the tools in their arsenal. To me the Fed itself is a big tool. The Alan Greenspan’s Fed, in which Bernanke is a part of, didn’t see this OBVIOUS thing coming. People who believe that Bernanke studied great depression and hence he can prevent one might as well be better of believing Santa. If he really studied GD, he should have prevented it because, for many who have half-knowledge of GD this is all too familiar. Bernanke should have raised hell to raise interest rates in 2003 and prevented this. Armed only with publicly available data, if I was smart enough to short home builders in 2005 and make a profit, I am sure Bernanke should have known more. He has access to more data. He didn’t act then. He is reacting now.
IMHO Greenspan and Bernake will go down in history as the pair that ruined America. BTW, My animosity for Greenspan’s reckless policies is not new. It is more than 10 years old.
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( 3 / 52 )Since yesterday you might have heard a lot about Federal Reserve Board's new Zero Interest Rate Policy (ZIRP). I just have two comments on this:
Comment 1: This is a war on those who save, play by the rules, live within their means, and are retired.
Comment 2:
What does a zero interest rate policy along with the fiscal stimulus (infrastructure spending) plan to be announced by Obama mean to you? Watch this video (I don't agree with a lot of things in the video - but it is what the Obama administration is trying accomplish with the plan.)
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( 2.9 / 55 )Ouch. This is a must watch.
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( 2.9 / 40 )
"For this Christmas, I don't want any toys. I want you to get my parents a job and help us get our house back. Also, bring us some warm clothes."-Signed, a little kid
(NECN) - Adults are not the only ones who stress over the current financial situation in America. Shopping mall Santas are not hearing the typical gift requests from children this year.
One Santa said that a few kids asked him to get their parent's a job, or for money to buy their house back.
Workers at Operation Santa Claus, which handles letters bound for the North Pole, said that requests for toys have given way to personal care items and warm clothing.
[Source: NECN - Economy inspires concerned Santa letters]
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( 2.9 / 53 )With the terrorist attack in Mumbai dominating the news lately, I cannot help but see some terrorism parallels in other walks of life.
The 9/11 attackers only learned how to fly an airplane, and they didn't care how to land the plane. Their intention was to crash into buildings. They succeeded in destroying a few buildings and killing a few thousand and shattering the lives of some 10s of thousands of citizens.
We have financial "experts" who only knew how to float toxic debt as "investments" and not know how to handle when reality (a.k.a. common sense) hits, thereby running their institutions to the ground. These financial terrorists, as I would like to call them, are trained in floating crap as investment and are armed with unchecked greed. They too have a strong commitment to an ideology of "free-markets" and "deregulation" and a belief in a world where the reality is only a special case.
We also have politicians who are good at just getting elected, but know jack about governing and allowed the country to be run into ground. All they did is consolidate their power, yield to special interest or, worse, even take the country to war with a commitment to an ideology, a la, the terrorists. I call them the political terrorists (may be the best term to describe the pols is "accomplices"), who caused enormous damage to the lives of millions of people by being derelict at their duties.
-When real terrorists strike, the worst that can happen is a few citizens die and the families of the dead left behind suffer.
-When financial terror strikes, people may not die in thousands. It could be much worse for millions - they could be living a life with their dignity dead. Imagine a single mother turning to prostitution to feed herself and her kid because she lost her job, and life savings.
-When politicians screw-up, the worst that can happen is complete lack of trust in the very fabric of our democracy - the government of the people, by the people and for the people. That is the beginning of a much bigger problems such as a social unrest.
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( 2.4 / 64 )When something bothers me a lot and I can't do much about it, or what I do doesn't make any difference, I refocus on things on which I have control. So, I will ignore commenting on this news.
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( 2.9 / 52 )The total of US government backed pledges aiming to save capitalism from itself by destroying it is now pegged at $8,5 trillion. Yes, $8.5 trillion. As the saying goes, inflation is easy to deal with than deflation. There is no argument about that. May be the right thing to do at this time is to inflate this economy as much as possible (read: print money). In doing so, Paulson and Co are trying to emulate a contemporary economic model in response to this crisis - that of Zimbabwe's.
Several years ago I made a friend on a financial bulletin-board I participated regularly. His name is Heinz Blasnik - from Austria. He is an amazing guy. He has the financial history of entire world on his fingertips. These days he has his own blog and posts there occasionally. I read his blog to learn from the master. His latest piece (Spitting in the wind, Zimbabwe, and Baghdad Hank's financial perpetuum mobile) on the US Feds and the Treasury Department's response to the financial crisis a blast. He concludes his piece with this picture and the caption.
Going shopping in Zimbabwe
(Photo credit: Tsvangirayi Mukwazhi / AP):
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