Listen to Mini Me Neil Kashkari aka the “700 billion $ man” former head of TARP declare that politicians and Wall Street banksters that got us into this mess are “patriots”. Yes, these greed mongers who gambled and lost OPM (other people’s money) and used more OPM via the taxpayer to cover their asses from their vast losses are patriots (like a 20 yr. old serviceman dodging bullets in Iraq). The Armed Forces service people are the patriots, not the banksters (as a former Marine I take offense to his statement). The politicians who bailed out the banksters that got us into this mess aren’t patriots. How dare he say such a thing when there is a war and people are dying in Iraq. Politicians maintaining power status quo and doing their job now deserves the Medal of Honor. Wall Street banksters making millions in annual salaries, greasing the palms of politicians, while collapsing the financial system are very patriotic. How dare he say this when there are people in Iraq (like it or not, but they are there) risking their lives so wall street banksters can be “patriots” and receive lavish salaries and bonuses for losing money. What heroes they are. They all deserve monuments.
Indeed Kashkari “the patriot” did win huge Shrimpton points for admitting that all the banks needed the bailout $ (he still looks like mini me though). All the big banks blew up including Goldman Sachs (GS). All the banks still have toxic crap assets on and off the balance sheet. If fundamental economic reality had any correlation to the stock market, the S&P/DOW would be not at the current 10K levels. What the stock market has going for it is economic and Accounting reality takes a back seat to “better than expected, less worse, better than revised downward what was expected before” Wall Street and CNBC pump (in addition to the FED trading desk S&P market manipulation. More on that later).
http://www.wallstreetwrath.com/2009/10/dont-get-high-on-your-own-supply.html
Kashkari made a point (though it will never be heeded) that banksters should show some restraint and sensitivity from their smugness that they deserve their bonuses. They certainly don’t deserve bonuses. Banksters blew the system up. Shrimpton is tired of the threats: “bail us out or else the system will collapse!” or “keep bailing us out and pay us lavish bonuses for losing money at our own casino or all the ‘talent’ will leave to go offshore for we are monkeys pushing keyboards*. So give us taxpayer money or we will walk!”
Where will they go? I say let the ‘talent’ that collapsed the system go. Let them go offshore (or wherever they threaten to go). Notice it’s never said where exactly as they are veil threats to scare politicians (you know the patriots) to give them what they want (taxpayer money). Will they go to a foreign bank? Don’t think so as they are in the same trouble as the US banks. Who buys these puny threats? Answer: the ‘patriotic’ politicians. With CNBC pump constantly praising the importance of wall street and how awesome they are, the sheeple ultimately buy in also. Indeed America needs more keyboard pushing wall street monkeys*. They are more important to society than Oncologists (CNBC would have you think so).
*Shrimpton is regrettably a keyboard pushing monkey but I’m 100% independent and not asking for, or getting, any free taxpayer bailout money.
Kashkari claiming he took a pay cut because he’s a patriot? Not so fast! Both he and Hank Paulson sold their Goldman Sachs stock near the top and paid no capital gains taxes on it because they went to work for the government. This saved them tens of millions of dollars. The patriot Kashkari and Paulson made $ by working for the government because they had no tax bill. FORTUNE magazine: “One fringe benefit was the capital gains tax exemption given to federal appointees who have to sell holdings before they take office: When Paulson sold his $500 million of Goldman Sachs stock, he saved tens of millions of dollars.” They knew they were selling the top of the market.
Enough with the self-congratulating patriotism. Paulson was the CEO of GS and he and Kashkari knew intimately it was a pressure cooker about to explode. He escaped unscathed. Kashkari and Paulson worked for treasury for a couple of years saving millions in taxes and we should thank them for saving the wall street status quo? Those patriots! Of course they will say “see we fixed it! The S&P is up 60% (from FED manipulation) while unemployment only grows. Real people in the real world (non NYC Wall Street) get laid off and don’t get bonuses, neither should the clown banksters.
Note to Wall Street: have respect for the real patriots and stop being so smug. Mini me should spend a day in Iraq for calling himself a patriot when he used a tax dodging scheme selling GS at the top and going to work for the government. They KNEW it was all going to crap. They save millions in taxes. He made $ working for the government in tax savings alone. Now both he and Paulson will write books and go on the lecture circuit and make more millions (Paulson in fact has a book deal). What a patriotic pay cut they took for America! Don’t be fooled by more Wall Street lies. And recognize how corrupt these guys are. The Fed is their partner. They blew it all up and they still want bonuses. Why should they be rewarded? Kashkari says Wall Street should show restraint yet he still wants his club to be overpaid by not wanting the government to regulate pay. Talking like a true politician out of both sides of his mouth.
Watch the video before CNBC takes it down b/c Shrimpton and CNBC don’t like each other. I’m loathing sending wallstreetwrath.com readers to CNBC’s site.
http://www.cnbc.com/id/15840232?video=1301951033&play=1
Wednesday, October 21, 2009
Monday, October 19, 2009
The Tail Wags the Dog
The basis for the movements of all prices (regardless of what is being priced) is derived from the precepts of supply and demand. Oil prices are derived from the demand for oil then, right? However, this hasn’t really been the case as oil prices are being driven by another factor. What has driven the price of oil has not been the demand for the actual barrel of oil so much but demand for the oil Futures Contract.
Oversimplifying for brevity so you get a primer on oil and futures: there are 3 parties: 1) manufacturers/producers, 2) buyers (users, consumers), and 3) speculators. Manufacturers and consumers have opposite price risk.
Manufacturers Exxon (XOM), Chevron (CVX), ConocoPhillips (COP), Hess (HES) find/make the oil to sell it. Their risk and worry is the price of oil decreasing. Naturally these companies wouldn’t care if oil prices went to $500 per barrel as they would have richer profits the more they could sell their oil for.
Oil consumers buy oil to actually use it. You buy oil/gasoline to drive. Refiners, Sunoco (SUN), Tesoro (TSO), Valero (VLO) buy oil and transform it into gas to sell to you. Municipalities buy oil indirectly to repave roads because asphalt is a byproduct of oil. A large industrial company like DuPont (DD) buys oil to as a raw material (burns Natural Gas) so they can make plastics etc. Their risk and worry is the price of oil increasing. As they are buying oil they don’t worry that the price could go down as it would be cheaper for them to buy (good) but if oil goes up they have to pay more (bad).
The producers and buyers have opposite risks and worries. One party’s worry is the price of what they sell decreases. The other worries about prices going up of what they buy. They therefore must hedge in the futures market to offset their risk by doing the opposite of where they are sitting. The oil producer is holding oil (long oil), the worry/risk is prices go down as they will have to sell their oil for less and make less profit. Everyone must hedge in order to make a profit and smooth out the fluctuating price of oil. Producers therefore short oil futures (opposite of where they are sitting) in the event oil prices go down. The money they make shorting oil futures will offset the loss they have by selling their oil at cheaper prices. Hopefully the hedge will perfectly more or less make up for money lost on the other side. If oil prices increase they lose on the shorting of futures but they make up for it by being able to sell oil for more. This is the hedge; the futures contract and the price they sell the oil for wash each other out (but profit is still made in the sale of the barrel of oil but the risk of loss is eliminated). Their profits are made in selling the oil for more than their cost of ‘manufacturing’. They need to make a profit but can’t risk selling oil for less than what it costs them, so they must hedge.
Conversely industrial oil consumers will hedge their price risk (oil increasing in price) by doing the opposite of their position. Since they have no oil (their position is not owning oil) they buy oil Futures Contracts (go long) in the event that oil prices increase. They will pay more for the oil barrel but the higher price they pay will be made up by the profit made in the futures contract. If oil prices drop they pay less for the barrel but they lose money in the long futures contract (one washes the other out netting zero) but the original profit from their business is still achieved. Hedging essentially removes risks of fluctuating prices of the raw material that is being bought or sold by both parties.
Enter the speculator. His role is to add liquidity (greater volume of trading), price discovery and more efficient pricing, all which can possibly reduce volatility in prices. They take risks that hedgers want to reduce.
On appearance the speculator is the secondary player to the producers and buyers. This is the way it’s supposed to be, but isn’t necessarily. The speculators are running the show now.
If an entity (consumers, industries) need a million barrels of oil they would bid up the prices accordingly to feed their need for use. Prices would adjust accordingly to the demand for oil usage. However there is another driver of the price of oil that has a correlation to the use of oil but has a stronger correlation to money itself. Oil isn’t traded cash for an actual oil barrel but trades via a derivative (Futures Contract). The derivative is what’s now driving the price of oil, not the demand for oil itself. The futures contract should, in a perfect world (which we don’t live in), match the demand for oil consumption, but in reality it really doesn’t necessarily.
The demand is for the financial instrument Futures Contract (to make money), not the actual underlying commodity. The price of oil is up nearly 100% since February. Has demand to consume oil at every level really gone up this much? But the demand for the Futures Contract to make money never went out of fashion (and yes this demand did go up.) The tail is wagging the dog. The demand for oil consumption should be the main factor in the price. The main factor now in the price of oil is the demand for the piece of paper futures contract. Speculators have demand for the paper contract not the actual barrel of oil. The price of the paper derivative will in the short-medium term drive up the price of the actual oil. How is this possible? Speculators need only put up a fraction (margin) to control vast quantities of oil. The possibility to make fortunes in oil speculation is tremendous. Hedge Funds, newly created commodity Index Funds, Proprietary Trading desks, all want in the game to make big money trading oil contracts. Nowhere in that list was anyone who’s actually making, buying, or hedging actual crude oil.
Two years ago oil went to $147. The myth was surely sold to the world the price was because of global demand. Yes, global demand for the Futures contract drove prices this high. Speculators drove oil prices that high and pushed it as far as they could go. There was some correlation to the demand for the oil barrel but it’s the demand from Hedge Funds, Wall St proprietary trading desks, traders on the NYMEX, and money managers that drove prices this high. It was a commodities bubble. Most people have already forgotten this 2 years later. Just as there was demand to buy homes to make money than to actually have a roof over one’s head, there was demand to buy oil futures to make money rather than use or hedge oil. The demand wasn’t for actual use of the house or oil, but the demand was to make money speculating/gambling in prices going up making the buyer rich. If the demand was just for actual utility, home prices would not have skyrocketed to the where they did.
The demand to make money will always surpass the demand for the actual utility of the good itself. If the demand for oil was just for industrial use and consumers, oil prices would have never gone to $147. Sure, oil prices would have increased as there was economic growth and China had demand, but the demand for the chance to make money on oil far surpassed the demand for oil to drive to Bed Bath and Beyond to buy scented candles. If demand for housing was so people could have a roof over their heads and own instead of renting, home prices never would have gone to the levels they did. Home prices went to the levels they did as it was driven by speculation and the desire to get rich fast from buyers. History has shown the demand to get rich fast will always be greater and drive prices more than then actual utility demand.
There was, and is, an insatiable demand to make money trading oil Futures Contracts and energy stocks that exceeded the real demand to consume oil.
If people are hungry and starving they will have the increased demand to purchase food. The amount of food available will be a significant factor in the price they pay. But if there was a way they could make money speculating/gambling on food prices (like a contract) this need and greed to make money will far surpass the hunger in their stomach. That alone would drive food prices far higher than people’s need to satisfy hunger.
Say there was a pastrami sandwich contract. People can only eat so many sandwiches just as people and industries can only consume so much oil. With no pastrami sandwich contracts you would just go buy enough sandwiches until you aren’t hungry anymore and the price would be relative to how many people are hungry for the sandwich. Now say you could sit at a computer and ‘trade’ this phantom sandwich instrument (derivative) that gave you the chance (as in a game of chance) to make money (just like what a casino chip can do for you in Vegas). All of a sudden pastrami sandwich prices would fluctuate from people gambling on the sandwich contract. Oil prices blasted higher from people gambling on the oil contracts. This pastrami sandwich contract would trade wildly as people are buying a delegate of the sandwich not so they could someday buy the sandwich to eat it, but just to move the paper back and forth in the hopes of making money on it. This wild speculative trading would drive up the cost of the sandwich at the store greater than people’s hunger would. Given the resources (margin to trade) people’s desire for money will drive prices far more than the actual need for the product itself. The demand to make money is greater than the demand to satisfy hunger in this example. The demand to make money in oil trading was, and remains, larger than the demand to consume oil.
Speculation drives a significant portion of prices and this can’t be underestimated. Naturally the oil industry told you differently saying oil prices at $147 were from “global demand” and the outrageously high prices were legitimate and reasonable. Just like the NAR (National Association of Realtors) told you home prices were from actual demand for housing and speculation never entered the equation. NAR said they aren’t building more land and the oil industry posited that we are running out of oil. The point is the industry trade group will always sell the myth to drive prices higher. The pastrami sandwich lobby will tell you that the entrancing pastramapus (where pastrami comes from) is soon to be an endangered species just so the price of pastrami would be driven higher.
Learn to read between the lines and who is telling you the reasons why prices can only continue higher. CNBC and Wall Street will always tell you that stock prices can only continue higher and the lofty prices are legitimate. They said this at DOW 14K. The NAR said the same for home prices. The oil industry said the same for oil prices. In this example pastrami prices would be outrageously high from speculating on the sandwich contract and the industry trade group selling the myth that prices can only continue higher. It will always be this way.
Oversimplifying for brevity so you get a primer on oil and futures: there are 3 parties: 1) manufacturers/producers, 2) buyers (users, consumers), and 3) speculators. Manufacturers and consumers have opposite price risk.
Manufacturers Exxon (XOM), Chevron (CVX), ConocoPhillips (COP), Hess (HES) find/make the oil to sell it. Their risk and worry is the price of oil decreasing. Naturally these companies wouldn’t care if oil prices went to $500 per barrel as they would have richer profits the more they could sell their oil for.
Oil consumers buy oil to actually use it. You buy oil/gasoline to drive. Refiners, Sunoco (SUN), Tesoro (TSO), Valero (VLO) buy oil and transform it into gas to sell to you. Municipalities buy oil indirectly to repave roads because asphalt is a byproduct of oil. A large industrial company like DuPont (DD) buys oil to as a raw material (burns Natural Gas) so they can make plastics etc. Their risk and worry is the price of oil increasing. As they are buying oil they don’t worry that the price could go down as it would be cheaper for them to buy (good) but if oil goes up they have to pay more (bad).
The producers and buyers have opposite risks and worries. One party’s worry is the price of what they sell decreases. The other worries about prices going up of what they buy. They therefore must hedge in the futures market to offset their risk by doing the opposite of where they are sitting. The oil producer is holding oil (long oil), the worry/risk is prices go down as they will have to sell their oil for less and make less profit. Everyone must hedge in order to make a profit and smooth out the fluctuating price of oil. Producers therefore short oil futures (opposite of where they are sitting) in the event oil prices go down. The money they make shorting oil futures will offset the loss they have by selling their oil at cheaper prices. Hopefully the hedge will perfectly more or less make up for money lost on the other side. If oil prices increase they lose on the shorting of futures but they make up for it by being able to sell oil for more. This is the hedge; the futures contract and the price they sell the oil for wash each other out (but profit is still made in the sale of the barrel of oil but the risk of loss is eliminated). Their profits are made in selling the oil for more than their cost of ‘manufacturing’. They need to make a profit but can’t risk selling oil for less than what it costs them, so they must hedge.
Conversely industrial oil consumers will hedge their price risk (oil increasing in price) by doing the opposite of their position. Since they have no oil (their position is not owning oil) they buy oil Futures Contracts (go long) in the event that oil prices increase. They will pay more for the oil barrel but the higher price they pay will be made up by the profit made in the futures contract. If oil prices drop they pay less for the barrel but they lose money in the long futures contract (one washes the other out netting zero) but the original profit from their business is still achieved. Hedging essentially removes risks of fluctuating prices of the raw material that is being bought or sold by both parties.
Enter the speculator. His role is to add liquidity (greater volume of trading), price discovery and more efficient pricing, all which can possibly reduce volatility in prices. They take risks that hedgers want to reduce.
On appearance the speculator is the secondary player to the producers and buyers. This is the way it’s supposed to be, but isn’t necessarily. The speculators are running the show now.
How prices are driven.
If an entity (consumers, industries) need a million barrels of oil they would bid up the prices accordingly to feed their need for use. Prices would adjust accordingly to the demand for oil usage. However there is another driver of the price of oil that has a correlation to the use of oil but has a stronger correlation to money itself. Oil isn’t traded cash for an actual oil barrel but trades via a derivative (Futures Contract). The derivative is what’s now driving the price of oil, not the demand for oil itself. The futures contract should, in a perfect world (which we don’t live in), match the demand for oil consumption, but in reality it really doesn’t necessarily.
The demand is for the financial instrument Futures Contract (to make money), not the actual underlying commodity. The price of oil is up nearly 100% since February. Has demand to consume oil at every level really gone up this much? But the demand for the Futures Contract to make money never went out of fashion (and yes this demand did go up.) The tail is wagging the dog. The demand for oil consumption should be the main factor in the price. The main factor now in the price of oil is the demand for the piece of paper futures contract. Speculators have demand for the paper contract not the actual barrel of oil. The price of the paper derivative will in the short-medium term drive up the price of the actual oil. How is this possible? Speculators need only put up a fraction (margin) to control vast quantities of oil. The possibility to make fortunes in oil speculation is tremendous. Hedge Funds, newly created commodity Index Funds, Proprietary Trading desks, all want in the game to make big money trading oil contracts. Nowhere in that list was anyone who’s actually making, buying, or hedging actual crude oil.
Two years ago oil went to $147. The myth was surely sold to the world the price was because of global demand. Yes, global demand for the Futures contract drove prices this high. Speculators drove oil prices that high and pushed it as far as they could go. There was some correlation to the demand for the oil barrel but it’s the demand from Hedge Funds, Wall St proprietary trading desks, traders on the NYMEX, and money managers that drove prices this high. It was a commodities bubble. Most people have already forgotten this 2 years later. Just as there was demand to buy homes to make money than to actually have a roof over one’s head, there was demand to buy oil futures to make money rather than use or hedge oil. The demand wasn’t for actual use of the house or oil, but the demand was to make money speculating/gambling in prices going up making the buyer rich. If the demand was just for actual utility, home prices would not have skyrocketed to the where they did.
The demand to make money will always surpass the demand for the actual utility of the good itself. If the demand for oil was just for industrial use and consumers, oil prices would have never gone to $147. Sure, oil prices would have increased as there was economic growth and China had demand, but the demand for the chance to make money on oil far surpassed the demand for oil to drive to Bed Bath and Beyond to buy scented candles. If demand for housing was so people could have a roof over their heads and own instead of renting, home prices never would have gone to the levels they did. Home prices went to the levels they did as it was driven by speculation and the desire to get rich fast from buyers. History has shown the demand to get rich fast will always be greater and drive prices more than then actual utility demand.
There was, and is, an insatiable demand to make money trading oil Futures Contracts and energy stocks that exceeded the real demand to consume oil.
If people are hungry and starving they will have the increased demand to purchase food. The amount of food available will be a significant factor in the price they pay. But if there was a way they could make money speculating/gambling on food prices (like a contract) this need and greed to make money will far surpass the hunger in their stomach. That alone would drive food prices far higher than people’s need to satisfy hunger.
Say there was a pastrami sandwich contract. People can only eat so many sandwiches just as people and industries can only consume so much oil. With no pastrami sandwich contracts you would just go buy enough sandwiches until you aren’t hungry anymore and the price would be relative to how many people are hungry for the sandwich. Now say you could sit at a computer and ‘trade’ this phantom sandwich instrument (derivative) that gave you the chance (as in a game of chance) to make money (just like what a casino chip can do for you in Vegas). All of a sudden pastrami sandwich prices would fluctuate from people gambling on the sandwich contract. Oil prices blasted higher from people gambling on the oil contracts. This pastrami sandwich contract would trade wildly as people are buying a delegate of the sandwich not so they could someday buy the sandwich to eat it, but just to move the paper back and forth in the hopes of making money on it. This wild speculative trading would drive up the cost of the sandwich at the store greater than people’s hunger would. Given the resources (margin to trade) people’s desire for money will drive prices far more than the actual need for the product itself. The demand to make money is greater than the demand to satisfy hunger in this example. The demand to make money in oil trading was, and remains, larger than the demand to consume oil.
Speculation drives a significant portion of prices and this can’t be underestimated. Naturally the oil industry told you differently saying oil prices at $147 were from “global demand” and the outrageously high prices were legitimate and reasonable. Just like the NAR (National Association of Realtors) told you home prices were from actual demand for housing and speculation never entered the equation. NAR said they aren’t building more land and the oil industry posited that we are running out of oil. The point is the industry trade group will always sell the myth to drive prices higher. The pastrami sandwich lobby will tell you that the entrancing pastramapus (where pastrami comes from) is soon to be an endangered species just so the price of pastrami would be driven higher.
Learn to read between the lines and who is telling you the reasons why prices can only continue higher. CNBC and Wall Street will always tell you that stock prices can only continue higher and the lofty prices are legitimate. They said this at DOW 14K. The NAR said the same for home prices. The oil industry said the same for oil prices. In this example pastrami prices would be outrageously high from speculating on the sandwich contract and the industry trade group selling the myth that prices can only continue higher. It will always be this way.
Thursday, October 15, 2009
Don't Get High on Your Own Supply
Put on your party hats, 10k on the way! Oh, we are here already, whatever. So if you invested in the stock market a decade ago you are at the same place you are now.
You made some dividends and got a lifetime of stress from losses and volatility. Was it worth it? You probably would have made more in bank CDs without the stress. They (Wall St, FED , Gov, media) don’t want you to question this concept at all. They want you to think ‘buy and hold’ is a sure fire way to make money so management fees are collected in the meantime. You gained the big goose egg 0, but Wall St DOW 10k shirt and put on your camouflage and let’s step back into the jungle and face reality so money can be made.
I hope wallstreetwrath.com readers recognize that Madoff would still be in business right now were it not for that ‘blip’ in the DOW to 6,500. He absolutely would be. The other Ponzi masters (Wall Street banksters) are still in business because they were bailed out by the government and the FED . This is the only reason why Goldman Sachs (GS) and the other banksters are still in business playing the ponzi game.
Wall Street banks pretty much all failed just like Madoff but were bailed out of their trading and business losses. Both were caught with their pants down. Madoff didn’t have any trading losses (he never actually traded). With the possible exception (not much) of JP Morgan (JPM ), Wall St
Wall St Banksters are still in business because they were bailed out. Yes this includes Government Sachs. So don’t be fooled by CNBC marketing pump as the smartest guys in the room. GS blew up. They weren’t hedged. Who was GS’ counterparty to their AIG trade? AIG was bailed out in order to bail out Goldman Sachs (who is essentially a government contractor now).
When GS (and others) failed the government instantly changed the rules making it a bank holding company. So where are the retail branches of Goldman Sachs for me to open my savings account? Where are the GS tellers giving me a roll of quarters to do laundry? Now that GS is bailed out and back to its highs there is talk of changing it back to an Investment Bank so the stock can go higher! When GS fails (along with the rest), losses are socialized by backing up their toxic ‘assets’ by the government. An Investment Bank isn’t under the FDIC for that pot of money, but a commercial bank is. The minute banks are ‘profitable’ (after a bailout, baloney accounting, and run-up in the stock) change the rules back to an Investment Bank and give it more valuation in the market. So it’s the free market when it works for them, and when it doesn’t, it’s no longer a free market. The USA
What’s the definition of a fall guy? A patsy who gets the blame and takes the ‘perp walk’ so the people can believe that justice was served so the scam can continue. The patsy is always part of a bigger picture and takes the blame for the others so the corruption can go on (Lee Harvey Oswald). Just like Enron was the fall guy patsy of the .com era, Madoff is for the subprime era.
I guess Enron was the only company to use phony baloney accounting? Not so fast. Essentially Enron accounting is not only alive and well in banks (and has been post Enron) but this bogus accounting is sanctioned by the US Government! With the ‘relaxation’ of mark to market (FASB 157) banks (GS, MS, BAC , C, WFC ) can pretty much make up what their garbage assets are worth.
Enron off balance sheet accounting: this was actually continuing post Enron and long before the subprime debacle and the FASB 157 suspension (Off Balance Sheet Accounting never really disappeared). Enron was the fall guy and ever since many financial companies have off balance sheet accounting (exactly as Enron did). American Express (AXP ), Capitol One (COF ) have off balance sheet accounting. Off Balance Sheet Accounting shouldn’t exist at all! Was nothing learned from Enron? Evidently not. Here is Goldman’s CEO speaking of this specifically (remember he’s the CEO. He will be the ultimate pumper of his company and will blow sunshine up yer arse saying only wonderful things of his outfit. Know how to read between the lines).
Off balance sheet accounting shouldn’t exist period. It seems to persist so Financial Statements look nicer (and we must have this). Madoff, was singled out (a good thing) so other scamsters could continue scamming (a bad thing). Just like other companies continued with off balance sheet accounting post Enron there are other ponzi's out there continuing post Madoff. Namely, the US
Madoff was pulling a scam for decades. If the market didn’t collapse to the extent that it did, Madoff would be right now on his yacht and not getting gang-banged in the prison shower (hopefully he is). He’d be still around, what a thought.
Wednesday, October 14, 2009
Retail Reality
Consumer spending is 2/3 of economy. This implies that nearly 70% of the United States economy is dependent on people shopping. Consumer’s actions affect nearly entirely what happens to the overall economy. They (FED, Wall Street, Washington D.C., CNBC), will do and say anything to promote people to spend, preferably on nonsense discretionary crap, to help boost the weak economy and take us out of recession.
How will people en masse increasingly spend when unemployment is at a 27 year high? As a logical investor with critical reasoning, ask yourself: will people spend on essential items (food, toothpaste, shampoo, gasoline, diapers) or will they spend more or reduce spending on non-essential discretionary goods (scented candles, new wardrobes, a 5th sweater, redecorating living rooms, a 3rd plasma TV, new towels and sheets, fine wines, margarita mixers)? Prudently, people with jobs will cutback on spending in the event they may lose their job. I doubt the unemployed will be shopping for scented candles and a pewter incense holder for the newly redecorated guest bedroom.
My question is how is Tiffany (TIF), Urban Outfitters (URBN) very near its all-time high (in this economy!), Kohl’s (KSS), Abercrombie and Fitch (ANF), Target (TGT), Nike (NKE), Under Armour (UA), The Gap (GPS), Starbucks (SBUX), Retail Holders ETF (RTH) all at new 52 week highs? This isn’t even a comprehensive list. Why are Wal-Mart (WMT) and McDonald’s (MCD) not at the same 52 week highs (I ask this question rhetorically)? Note the former list of 52 week high stocks sell primarily discretionary non-essential goods (scented candles as I will say to characterize unnecessary crap that people don’t need to drop a dime on). Both WMT and MCD sell more essential products priced at value for the consumer. The former stock list has the antithesis of this: all goods priced at premium margins selling crap (scented candles) that people don’t require. Wal-Mart for instance sells groceries (essential goods) and MCD won’t rip you off to have a meal or coffee. Both WMT and MCD were at their 52 week highs when the DOW was nearly 1,000 points lower than it is now. Why? Because Wall Street sentiment was that MCD and WMT are recessionary stocks that will do better in a recession as people will have less money and buy only what they need with some possible limited discretion spending (loose fun spending) at a WMT and eat out at a McDonald’s. As both offer value people with less money will go there as they are watching their pennies. But now that we are out of recession as Elmer FED Ben Bernake (Pancke) said
http://www.wallstreetwrath.com/2009/10/double-dipstick-recession.html
people just have endless amounts of money to spend (I suppose from all the unemployment checks) that they no longer need the value offerings at WMT or MCD, but they can now pay up for high margin goodies like $25 t-shirts from Cambodia and a scented candle at Urban Outfitters.
Billy Ray Valentine joked: “Hey I don’t need to pay a fair price, I’m rich b/c the DOW went up and this makes me feel good so I think I’m rich, so I can go to Tiffany’s and buy a diamond while wearing my True Religion Jeans (TRLG) (also at a 52 week high and near its all-time high), in my new Nike’s and a Cambodian flannel shirt that cost $60 bucks at ANF, while drinking a not so fairly priced Starbucks coffee. I just love my Saturday’s! Only the hoi polloi go to Wal-Mart and eat at MCD.” Presumably the stock market says at 27 year record unemployment the opposite of what is logical is true. People are so wealthy from the wealth effect of the S&P 500 that they can afford to go back to their reckless spending habits and buy crap they certainly don’t need. It is the American way after all. Yuck, and this is why I live in Turks and Caicos.
Someone explain to Shrimpton the newly minted Wall St. myth they are selling of the jobless recovery. Are these people spending or are they going to spend?
http://www.businessweek.com/magazine/content/09_42/b4151032038302.htm?chan=magazine+channel_top+stories
How is the retail index back to where it was? Market manipulation (you will see a theme of this on wallstreetwrath.com and just how the Fed does this will be explained). So if the retail stocks are up people will presumably spend more? Feel good so go shop at Tiffany’s and Kohl’s because the stock prices are up? How is this rational and possible? As unemployment is increases to 27 year highs people are spending as much as they were last year or even 2 years ago (at the market and economic peak)? The ‘resilient consumer’ as CNBC touts about 800x per day? The “resilient” American consumer is like the Michael Phelps of spending with endless endurance and speed to generate cash to spend as fast as that guy swims. I guess the unemployed have more time to shop as they aren’t at work. Are you spending as much as you were before? This is yet another example of how the stock market has a loose correlation to the realities of the economy.
Read these reports that are slightly more tied to reality because they aren't from a Wall Street Investment Bank. I would consider these fairly accurate reports as they are from Marcus and Millichap (the largest commercial real estate service firm in the nation). Where is all the retail spending here? Clearly the data from a not so much Wall Street source confounds what the stock market is saying. And by the way, in both these reports this is where the wealthy are. So if the rich aren't shopping to support the retail rents, who is shopping? Teenagers?
(copy and paste in a new window toolbar)
http://www.marcusmillichap.com/aboutus/viewNews.asp?CID=5006
http://www.marcusmillichap.com/aboutus/viewNews.asp?CID=5007
How does the illogical prevail? It always will in a fixed game. This will be explained more in a later article (how the market is rigged and fixed) and why what doesn’t make sense predominates the stock market.
But for now, downward pressure on WMT and MCD stock prices gives the illusion that the economy’s great and full of abondanza. If these stocks were at 52 week highs, as they were when the DOW and S&P 500 were lower, it would mean the economy isn’t so hot. Wall St. current sentiment is such that WMT and MCD stock prices perform better when the economy is in worse shape. The illusion that the economy is in better shape must prevail so these stocks will have down pressure on them. Therefore, when the arbitrary sentiment of fundamental logic finally hits the stock market, WMT and MCD will then be appreciated by Wall St. and the stock prices will act accordingly. When it’s again realized the economy isn’t in great shape these defensive names should hold up or decline less than the others, if not go back to their prior highs. Being defensive is a more conservative play right now given how far and how fast the market has run. And yes, I know that conservative is an anathema to Wall Street.
How will people en masse increasingly spend when unemployment is at a 27 year high? As a logical investor with critical reasoning, ask yourself: will people spend on essential items (food, toothpaste, shampoo, gasoline, diapers) or will they spend more or reduce spending on non-essential discretionary goods (scented candles, new wardrobes, a 5th sweater, redecorating living rooms, a 3rd plasma TV, new towels and sheets, fine wines, margarita mixers)? Prudently, people with jobs will cutback on spending in the event they may lose their job. I doubt the unemployed will be shopping for scented candles and a pewter incense holder for the newly redecorated guest bedroom.
My question is how is Tiffany (TIF), Urban Outfitters (URBN) very near its all-time high (in this economy!), Kohl’s (KSS), Abercrombie and Fitch (ANF), Target (TGT), Nike (NKE), Under Armour (UA), The Gap (GPS), Starbucks (SBUX), Retail Holders ETF (RTH) all at new 52 week highs? This isn’t even a comprehensive list. Why are Wal-Mart (WMT) and McDonald’s (MCD) not at the same 52 week highs (I ask this question rhetorically)? Note the former list of 52 week high stocks sell primarily discretionary non-essential goods (scented candles as I will say to characterize unnecessary crap that people don’t need to drop a dime on). Both WMT and MCD sell more essential products priced at value for the consumer. The former stock list has the antithesis of this: all goods priced at premium margins selling crap (scented candles) that people don’t require. Wal-Mart for instance sells groceries (essential goods) and MCD won’t rip you off to have a meal or coffee. Both WMT and MCD were at their 52 week highs when the DOW was nearly 1,000 points lower than it is now. Why? Because Wall Street sentiment was that MCD and WMT are recessionary stocks that will do better in a recession as people will have less money and buy only what they need with some possible limited discretion spending (loose fun spending) at a WMT and eat out at a McDonald’s. As both offer value people with less money will go there as they are watching their pennies. But now that we are out of recession as Elmer FED Ben Bernake (Pancke) said
http://www.wallstreetwrath.com/2009/10/double-dipstick-recession.html
people just have endless amounts of money to spend (I suppose from all the unemployment checks) that they no longer need the value offerings at WMT or MCD, but they can now pay up for high margin goodies like $25 t-shirts from Cambodia and a scented candle at Urban Outfitters.
Billy Ray Valentine joked: “Hey I don’t need to pay a fair price, I’m rich b/c the DOW went up and this makes me feel good so I think I’m rich, so I can go to Tiffany’s and buy a diamond while wearing my True Religion Jeans (TRLG) (also at a 52 week high and near its all-time high), in my new Nike’s and a Cambodian flannel shirt that cost $60 bucks at ANF, while drinking a not so fairly priced Starbucks coffee. I just love my Saturday’s! Only the hoi polloi go to Wal-Mart and eat at MCD.” Presumably the stock market says at 27 year record unemployment the opposite of what is logical is true. People are so wealthy from the wealth effect of the S&P 500 that they can afford to go back to their reckless spending habits and buy crap they certainly don’t need. It is the American way after all. Yuck, and this is why I live in Turks and Caicos.
Someone explain to Shrimpton the newly minted Wall St. myth they are selling of the jobless recovery. Are these people spending or are they going to spend?
http://www.businessweek.com/magazine/content/09_42/b4151032038302.htm?chan=magazine+channel_top+stories
How is the retail index back to where it was? Market manipulation (you will see a theme of this on wallstreetwrath.com and just how the Fed does this will be explained). So if the retail stocks are up people will presumably spend more? Feel good so go shop at Tiffany’s and Kohl’s because the stock prices are up? How is this rational and possible? As unemployment is increases to 27 year highs people are spending as much as they were last year or even 2 years ago (at the market and economic peak)? The ‘resilient consumer’ as CNBC touts about 800x per day? The “resilient” American consumer is like the Michael Phelps of spending with endless endurance and speed to generate cash to spend as fast as that guy swims. I guess the unemployed have more time to shop as they aren’t at work. Are you spending as much as you were before? This is yet another example of how the stock market has a loose correlation to the realities of the economy.
Read these reports that are slightly more tied to reality because they aren't from a Wall Street Investment Bank. I would consider these fairly accurate reports as they are from Marcus and Millichap (the largest commercial real estate service firm in the nation). Where is all the retail spending here? Clearly the data from a not so much Wall Street source confounds what the stock market is saying. And by the way, in both these reports this is where the wealthy are. So if the rich aren't shopping to support the retail rents, who is shopping? Teenagers?
(copy and paste in a new window toolbar)
http://www.marcusmillichap.com/aboutus/viewNews.asp?CID=5006
http://www.marcusmillichap.com/aboutus/viewNews.asp?CID=5007
How does the illogical prevail? It always will in a fixed game. This will be explained more in a later article (how the market is rigged and fixed) and why what doesn’t make sense predominates the stock market.
But for now, downward pressure on WMT and MCD stock prices gives the illusion that the economy’s great and full of abondanza. If these stocks were at 52 week highs, as they were when the DOW and S&P 500 were lower, it would mean the economy isn’t so hot. Wall St. current sentiment is such that WMT and MCD stock prices perform better when the economy is in worse shape. The illusion that the economy is in better shape must prevail so these stocks will have down pressure on them. Therefore, when the arbitrary sentiment of fundamental logic finally hits the stock market, WMT and MCD will then be appreciated by Wall St. and the stock prices will act accordingly. When it’s again realized the economy isn’t in great shape these defensive names should hold up or decline less than the others, if not go back to their prior highs. Being defensive is a more conservative play right now given how far and how fast the market has run. And yes, I know that conservative is an anathema to Wall Street.
Wednesday, October 7, 2009
Elmer Fed hunting taxpayers
The Egghead Rides Again
Visiting
I think Judge Smails’ displeasure stemmed from an unfair system that gave up on the free market as there was no legal ‘due process’ in the system. For more in depth study of the illegal actions of the FED:
http://works.bepress.com/chad_emerson/5/
All the money printing and debt will force the
D.C. has now forever gotten its hands into
Friday, October 2, 2009
Double Dipstick Recession
Double secret probation. We never left the last recession (does anyone with any critical thought really think so?). According to the punditry the last recession ended 2 weeks ago when Ben Pancke (duchebag) said so. Hmm ok, and Chicago is hosting the next Olympics, and a flying monkey just flew out of my ass. Sorry I didn’t get the memo that we were in a boom economy from March to Oct 1 (what a coincidence the same time the DOW rallied). Just because the stock market is up 50+%, thanks to incredible market manipulation (that’s for another article), doesn’t mean the economy is in tact or mean beans for the guy in the unemployment line. Now unemployment is 9.8% which is at a 27 year high (this is reported unemployment that doesn’t include people no longer eligible for unemployment checks or the vast number of people still looking for a job). Clearly the reported employment number grossly understates the real number of those unemployed. The unemployment number is far higher than 9.8%. Wow government data that is manipulated caca, who’d have thunk it?
The worst unemployment in 27 years and the recession is over? I think another flying monkey flew just out of my ass again. Who are they kidding? So now coincidentally (uh huh) as the DOW is rolling over the old threats return: bail us out and give us more money or else we will re-enter the recession (aka 'double dip' when we never left in the first place)! You know the recession that ended 2 weeks ago. The threat is when the government money truck stops backing up, the economy can’t subsist on its own and will deteriorate. This is yet another threat to keep the government stimulus stimulating. They are already preparing for the next round of bailouts and stimulus and everyone has their hand out (General Motors, Wall Street banks anyone?). And who doesn’t like getting stimulated? I know I do and do so at least once per day.
The implications of this are dramatic. The Government’s absolute refusal to allow a free market economy guarantees that the financial disasters we experienced will return (making matters worse). In addition, the same corrupt fools who broke the rules and got us into this mess are being rewarded and still in charge. Oh that is except for Bank of America's Ken Lewis (duchebag) who gets $125 million and a gold watch (and probably a steak dinner) for leaving the helm of BofA (BAC). I’m so glad he paid $50 Billion for Merrill Lynch who lost $15 Billion in the 4th qtr. last year alone! Wow, do the math: at that rate in a year they could lose $60 Billion. Too bad it wasn’t the other way around. Pay $50 Billion for an entity that loses 30% of what you paid in 3 months time. Merrill Lynch loses money faster than Michael Phelps swims. What an astute purchase. Then there was Lewis’ genius move buying Countrywide for what was it? 4.1Billion. Lewis severely overpaid (shareholder’s money) for both these virtual companies. Lewis should have consulted with one of his better BofA traders who (if he were a good Trader) could have told him: “wait Kenny, don’t be a stupid jackass moron! Why on earth would you buy Merrill Lynch for $29 per share when the stock is trading at under $12? Merrill is going down the toilet, the stock is a total POS (trader speak for piece of $hit) turd burglar. Kenny don’t be a duchebag, wait until Merrill goes to $2 per share and then buy the joint for $5. I’m the trader Kenny, this is the way it will play out.” Honestly, I Nick Shrimpton saw this so no one at Bank of America (BAC) did? Or Ken Lewis could have consulted with (at a lunch meeting at Applebee’s) any grandma who’s a regular at the swap meets who would have said “Kenny, don’t be a jackass moron! This is junk you are buying (Merrill and Countrywide), just like the crap junk I buy on eBay and at the swap meet; you can haggle with these fools! Stop being a duchebag Kenny! Come back next Sunday when the price is lower. I do this all the time at the swap meet and end up negotiating and always getting a better price, you can to. I’m an old grandma who doesn’t know much about stocks, but I know garage sales. If the price is $11.70 per share why not wait and come back when the price is at $5 and buy it.”
$125 Million for such a blunder? And where is this money coming from? BofA is BK, they have no money. This is TARP and shareholder money. If a small businessperson made a screw up in their business they would not be so fortunate. Why should Lewis get so much cheddar? He has been paid sufficiently well already. As of April 30th 2008 he made $165 Million for the prior 5 years service ($33 million per year aint too shabby). I think he extracted enough money from the shareholders and now taxpayers.
Kenny should have had the lunch meeting at Applebee’s.
The worst unemployment in 27 years and the recession is over? I think another flying monkey flew just out of my ass again. Who are they kidding? So now coincidentally (uh huh) as the DOW is rolling over the old threats return: bail us out and give us more money or else we will re-enter the recession (aka 'double dip' when we never left in the first place)! You know the recession that ended 2 weeks ago. The threat is when the government money truck stops backing up, the economy can’t subsist on its own and will deteriorate. This is yet another threat to keep the government stimulus stimulating. They are already preparing for the next round of bailouts and stimulus and everyone has their hand out (General Motors, Wall Street banks anyone?). And who doesn’t like getting stimulated? I know I do and do so at least once per day.
The implications of this are dramatic. The Government’s absolute refusal to allow a free market economy guarantees that the financial disasters we experienced will return (making matters worse). In addition, the same corrupt fools who broke the rules and got us into this mess are being rewarded and still in charge. Oh that is except for Bank of America's Ken Lewis (duchebag) who gets $125 million and a gold watch (and probably a steak dinner) for leaving the helm of BofA (BAC). I’m so glad he paid $50 Billion for Merrill Lynch who lost $15 Billion in the 4th qtr. last year alone! Wow, do the math: at that rate in a year they could lose $60 Billion. Too bad it wasn’t the other way around. Pay $50 Billion for an entity that loses 30% of what you paid in 3 months time. Merrill Lynch loses money faster than Michael Phelps swims. What an astute purchase. Then there was Lewis’ genius move buying Countrywide for what was it? 4.1Billion. Lewis severely overpaid (shareholder’s money) for both these virtual companies. Lewis should have consulted with one of his better BofA traders who (if he were a good Trader) could have told him: “wait Kenny, don’t be a stupid jackass moron! Why on earth would you buy Merrill Lynch for $29 per share when the stock is trading at under $12? Merrill is going down the toilet, the stock is a total POS (trader speak for piece of $hit) turd burglar. Kenny don’t be a duchebag, wait until Merrill goes to $2 per share and then buy the joint for $5. I’m the trader Kenny, this is the way it will play out.” Honestly, I Nick Shrimpton saw this so no one at Bank of America (BAC) did? Or Ken Lewis could have consulted with (at a lunch meeting at Applebee’s) any grandma who’s a regular at the swap meets who would have said “Kenny, don’t be a jackass moron! This is junk you are buying (Merrill and Countrywide), just like the crap junk I buy on eBay and at the swap meet; you can haggle with these fools! Stop being a duchebag Kenny! Come back next Sunday when the price is lower. I do this all the time at the swap meet and end up negotiating and always getting a better price, you can to. I’m an old grandma who doesn’t know much about stocks, but I know garage sales. If the price is $11.70 per share why not wait and come back when the price is at $5 and buy it.”
$125 Million for such a blunder? And where is this money coming from? BofA is BK, they have no money. This is TARP and shareholder money. If a small businessperson made a screw up in their business they would not be so fortunate. Why should Lewis get so much cheddar? He has been paid sufficiently well already. As of April 30th 2008 he made $165 Million for the prior 5 years service ($33 million per year aint too shabby). I think he extracted enough money from the shareholders and now taxpayers.
Kenny should have had the lunch meeting at Applebee’s.
Thursday, October 1, 2009
Why the Market tanked today
Besides the obvious the market is waaay overbought. The powers that be; the FED, and Wall Street collusion (big banks in the oligopoly working closely with the FED) require people to be forced into buying Bonds.
The FED is does a high-wire balancing act between propping up the DOW (how they do this will be explained in another article) and keeping rates low (by allowing the DOW to drop so people are forced into buying bonds). The FED needs rates to be low as Mortgage rates are tied to the 10yr bond. Low mortgage rates = people are more likely to buy overpriced homes. People buy more homes = good for the economy. Low rates = hides inflation that we all know exists (FED can't have inflation as it shows the world they are failing at doing their supposed job). If rates increased (or bonds sold off) it would kill the housing market that much more and the FED can't have this. The FED absolutely refuses to allow this to be a free market economy, so they will do all they can to get people to buy bonds so rates remain low (bond prices and interest rates are inversely correlated).
Unremarkably bonds rallied hard today as the market collapsed. The FED was very pleased with this (as they helped orchestrate it). The market has run up plenty to give the sheeple the illusion the economy is strong (yeah right) so they need interest rates as low as possible to keep mortgage rates low as possible so sheeple get excited into buying homes which are still grossly overpriced. With the help of the NAR, the view is the entire economy rests on the US housing market, so the FED will do all it can to support it. The FED won't raise rates before 2010 (probably 2011), if at all (like Japan). So the bond market will remain strong (to keep rates down). At some point the FED will revisit the balancing act to prop the DOW back up to keep the sheeple in line and happy.
The FED is does a high-wire balancing act between propping up the DOW (how they do this will be explained in another article) and keeping rates low (by allowing the DOW to drop so people are forced into buying bonds). The FED needs rates to be low as Mortgage rates are tied to the 10yr bond. Low mortgage rates = people are more likely to buy overpriced homes. People buy more homes = good for the economy. Low rates = hides inflation that we all know exists (FED can't have inflation as it shows the world they are failing at doing their supposed job). If rates increased (or bonds sold off) it would kill the housing market that much more and the FED can't have this. The FED absolutely refuses to allow this to be a free market economy, so they will do all they can to get people to buy bonds so rates remain low (bond prices and interest rates are inversely correlated).
Unremarkably bonds rallied hard today as the market collapsed. The FED was very pleased with this (as they helped orchestrate it). The market has run up plenty to give the sheeple the illusion the economy is strong (yeah right) so they need interest rates as low as possible to keep mortgage rates low as possible so sheeple get excited into buying homes which are still grossly overpriced. With the help of the NAR, the view is the entire economy rests on the US housing market, so the FED will do all it can to support it. The FED won't raise rates before 2010 (probably 2011), if at all (like Japan). So the bond market will remain strong (to keep rates down). At some point the FED will revisit the balancing act to prop the DOW back up to keep the sheeple in line and happy.
Ben Pancke (Bernake) talking jibberish again
Pancke doing a dog and pony show for congress today and congress gets tv air time to sound important for their constituents telling us nothing that we don't already know.
GM sales down only 45% this month, but "in line with estimates" (so this must be a good thing)
All a gov't ponzi scheme... cash for clunkers, cash for home buyers, cash for appliances...
How about cash for cocaine and whores?
GM sales down only 45% this month, but "in line with estimates" (so this must be a good thing)
All a gov't ponzi scheme... cash for clunkers, cash for home buyers, cash for appliances...
How about cash for cocaine and whores?
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