Posts Tagged ‘finance’

Yes, Toto, we’re in a brave new swirl.

January 28, 2018

Today while perusing a post on the Seeking Alpha financial network I came across what appears to be a very sensible explanation of what we see in the world of finance and business today.

This no-nonsense analysis is occasionally echoed by other writers on the SA site, most notably Mr. David Stockman, former budget director for President Reagan.

He was a high-flyer back in the day, the pre-Greenspan days.

But here I make reference to a different contrarian analyst, Mark A. Grant,  upon whose article I stumbled upon this morning.

  https://seekingalpha.com/article/4140703-universe-edge-restaurant?sht=p3a1ld&shu=8wcf#comment-77507865

From a distance, I’ve been following the contrarian school of thought ever since the fall of ’08. I say “from a distance” because I am neither an economist, nor a significant investor. I am a mere citizen who happens to be a consumer, an American, an author and a semi-retired person, age 66.

This contrarian school of alarmist financial analysis generally demonstrates a perpetual amazement; their astonishment revolves around the credit-mongering house-of-cards built by the central bankers of our preset world (the Fed, EuroCBank, Bank of Japan, People’s Bank of Japan, etc.). It’s not that the contrarians have much respect for of the central bankers’ delicate arrangement of interlocking currencies and trade incentives; rather, their astonishment arises from the mystery of why it has not yet fallen apart and produced a new crash.

You see, this new international construct is not founded upon traditional economics, but rather (as it appears to this layman) upon that (at the time) new-kid-on-the-block upstart school founded in the 1930’s by Mr. Keynes; it’s all about governments and banks perpetually tweaking national/international money spigots to produce certain desired effects.

Our current zombified house-of-cards scenario has been at work for a decade or so now, ever since the crash of ’08, with its aftermath of Great Recession or great whatever-it-is.

Getting back to the source of this present article: This morning I was reading Mr. Grant’s take on the present situation and comparing it for the umpteenth time to the contrarian undertow that continues to make perfect sense. This bearish complaint corner has been going on for so long I’m beginning to wonder if the fiat-wielding central bankers have actually managed to change, by their manipulations, the fundamental nature of money.

Maybe we actually are now in a brave new world where the old rules of debit/credit will never again apply.

With all these electrons flying around the planet–all these monetized digital representations of presumed wealth and bank-enabled assets–haven’t we truly ditched the old gold-backed world of currencies-dollars, pounds, francs, marks, drachmas, denarii, Euros, rubles, shekels, yen, yuan, SDRs and zlotys?

Could Bitcoin and such be nothing more than a flash-in-pan death-throes sparkle signifying the end of our great age of post-BrettonWoods expansion? 

Might this extended wave of central banks’ Quantitative Easing actually turn out to be the debt-driven tidal wave that propels us into a land that prime forgot, where all the rules and practices of days gone by are tossed aside forever in the liquidity flood and trash heap of history?

ShipWrek

We’re getting to a precarious place now where the only solution will be to tear up the score-cards, balance sheets, and start over. The central governments of the world are forever indebted to the central banks of the world. It certainly seems that way to this observer. I’ll be surprised if we ever get back to what Mr. Smith called “the wealth of nations.”

We ain’t in Kansas any more, Toto. Exactly where we have landed is unclear. And it just might be that tapping our ruby-slippered heels of old-school analysis are gone with the wind.

When this whirlwind of fiat-instruments does wind down to a dull roar and all the chips fall where they may, who/what institutional entities  will have wrangled control of the new asset-spewing beast? Whatever that entity turns out to be–it (they) will be in a position to dole out the newly-zombified assets to the world’s surviving movers and shakers. I guess most of us out here in lala land will be quakin’ in our boots.

As for us commoners, we may all of us have to settle for a mere meal-ticket while the big chips get re-assigned.

A meal-ticket  on a card or a chip, of course.

What troubles me is: what new rules or allegiances will be demanded by the powers–that-be?

What will it cost us, John Doe/Jane Smith, to even get in the game?

King of Soul

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Dark Rivers of Dark Money

April 5, 2016

Seismic moneyanamis hit the fan in a big way in Panama two days ago. Multiple georlnalists are reporting that massive dark rivers of dark money have been detected bubbling to the surface in that central American domain. Surreptitious sources indicate that the ultimate origin of these fluidizing liquidities may be the Dark Side of the Moon, an area of high-flying international magnaminity heretofore undetectable to the common man. To this present time in our planetary history, only one witness of this phenom has ever been reported– a shadowy figure known to some money-watchers as Pink Floyd.

If these reports are confirmed, it could be that  how the money world really works will at last be known, according to Tom OnPointe.

Geornalists pouring over the erstwile infamous Panama Papers in a sort of secret cave in London have detected vast streams of dark money sloshing beneath the streets of London, in the sewers of Paris, and beneath the mysteriously enigmatic monoliths of Moscow. Entry points for these large liquidities have been traced to specific hotspots in the British Virgin Islands, Cayman Islands, Switzerland and now, for the first time we can remember, Panama.

But hey, the Dark Rivers of Panama have been showing signs of volatility for a long time– since even before Teddy Roosevelt led an exhibition to that star-cross’d country to recover a failed French experiment in canal-building. Boldly sporting a Panama hat, ole rough-ridin’ Teddy went down there in 1904 and established yankee hegemony over the sluggish Panama Canal project; he assured the world that within a few years  the Atlantic and Pacific liquidities would be flowing freely.

Thank our lucky stars, in the 1914 wake of the completed Panama Canal development, vast volumes of worldly goods began floating uninterruptedly from the east ocean to the west ocean and vice-versa for lo these many years. And you know how human beings are in a situation like that. Wherever you’ve got vast volumes of worldly goods barging past each other going both ways, you’re bound to have vast volumes of financial liquidities flowing as well.

Thanks to the ICIJ, we now know that vast portfolios of them insinuated assets are subterranean, which is to say under-the-radar liquidities swishing ever’wheres from Delaware to Doha to Dubrovnik– 11 million documents worth, they’re reporting, revealing trillions of terabytes of wealth hidden between the slipstreaming electrons of international excessive exuberance, implicating perhaps 689 corporations who are no doubt knowingly transferring magnanimous wealth from them that don’t have it to them that do, which is to say like maybe from Lucknow to London or Newark to New York.

Which is to say, like it’s always been. Rich get richer; poor get poorer. But now on an international scale.

We have obtained photographic evidence of an allegedly rich nation sucking the monetary life out of a poor country. Apparently this is nothing new on the face of the earth.

Devouring

So the best the thing a man or woman can do is get him/herself a little back 40 or .40 of terra firma for his family so’s he can do a little something with it in case something unforeseen happens or the big bad wolf decides to float in and do business on a liquiditous stream of financial privilege.

News at 11.

Glass Chimera

Bankers, Banksters, Bernanke, Black and Beethoven

November 8, 2015

How’s a fellow to make sense of it all? Who you gonna call? Who you gonna believe? What’s the world coming to? What’s it to ya? and Who’s in charge here?

I’ve been trying to figure out a few things about our financial system.

TheFed

About a week ago I loaded Ben Bernanke’s book, Courage to Act, and have been reading what the former Chairman of the Federal Reserve has to say about those events of 2007-8 that brought this country to its money-grubbing knees.

http://www.amazon.com/The-Courage-Act-Memoir-Aftermath-ebook/dp/B00TIZFP0I

Now about a quarter of the way through Bernanke’s explanation of things, I must say I like the guy. He has a personal mission to bring more transparency to that enigmatic institution known to us as the Federal Reserve. I think he really wants regular folks to understand our financial system and the function of the central bank which, having been founded by Congress in 1913, tries to keep a rein on the nation’s banking system so it doesn’t become a runaway horse.

Nevertheless, the System did morph into a kind of bucking bronco back in the fall of 2008. The crash and crisis of that time may have seemed quite sudden to many of us, but in fact the collapse of Wall Street et al during September-October of that year was the culmination of a bunch of misadventures and misdeeds that had begun a year or two or more before it all came crashing down.

I vividly remember, during that time seven years ago, sitting in my car in a parking lot, a few minutes before 8 am when I would enter my day-job, and hearing on the car-radio with dread or fascination about the demise of such formerly venerable institutions as Lehman Brothers, Washington Mutual, Bank of America, Wachovia, Countrywide, Golden West,  AIG, Fannie, Freddie, even General Motors, and then about how Hank Paulson and Wall Street and the Fed, Bernanke and the President and Congress would deal with the degenerating situation by instituting TARP which was rejected by our Representatives and Senators before it was passed and implemented a week later after Hank and Larry and Tim put the fear of god in the legislators’ minds or whatever it was they told them to convince them that they should loan the distressed banks $767 billion so the whole dam bailiwick wouldn’t fall apart and drag us into another Depression, or so they said.

The world was changing. Have you ever watched the world changing? It is an awesome thing, to see history being made.

What a time a time oh what a time it was. . . a time of innocence (lost), a time of confidences (lost forever), as Paul Simon once sang. Oh what a time it was. Eventually the dust settled and the country lapsed back into normalcy or something like it but not really.

Things were different after that. You know what I’m talking about. . . the Great Recession, everybody and their brother deleveraging, budgets tightening, layoffs and downsizing, fading into perpetual “jobless recovery” with wage deflation, rising unemployment, then descending unemployment but with more part-timing and less money. . . stock-crunchers and media fixated on monthly numbers from the Fed, the gov, BLS, etc, a languid economy generating fewer jobs, then a few more jobs, then leveling out and stabilizing and lapsing into destagulation and blah blah blah. . .

And it was about that time, or actually a year of three later by n’ by, that the Occupy Wall Street crowd came along.

My wife and I visited our son in Seattle during fall or early winter of 2011. I woke up one morning and strolled down Pike Street. I stopped at the Westlake Center and entered a Starbucks where I settled in for a while. I was observing through the large glass storefront, the Occupiers who had gathered across the street in Westlake Park.

After a while I noticed among all those protesters, many of whom were carrying signs (mostly say hooray for our side) . .here comes an especially noticeable fellow with a sign. He was tall, scruffy, with a long beard. He looked like the classic cartoon image of the street-corner doomsday prophet, and his sign said:

“Jail for Banksters”

Well that’s interesting.

Now, yesterday, November 7 2015, I recalled having seen that fellow and his sign, and I was thinking about what his sign said.

I had been reading Uncle Ben’s very informative book–his plainly-written, quite “transparent” explanation of what had happened back in ’08, when the low quality of vast numbers of subprime mortgage loans catapulted those same home-loans into default, and subsequently cast a ubiquitous monkey wrench into the vastly complex financial machinery of sliced/diced tranches of mortgage-backed-securities and collateralized debt obligations and credit default swaps, etc etc  and then wall street came crashing down and all the Fed’s horses and all the Treasury’s men couldn’t put humpty dumpty together again (not for a while anyway) and the world changed forever, or so it seemed at the time and for quite a long time after that, even until now.

Yesterday, I had made note of this sentence from Ben Bernanke’s book:

“As the chain from borrower to broker to originator to securitizer to investor grew longer , accountability for the quality of the underlying mortgages became more and more diffused.”

And I was wondering, if the accountability had become more and more diffused, then who was responsible for this mess?

My own personal answer to that question is: Human nature, collectively. Shit happens.

Not everyone sees it that way, though. Some folks feel the need to investigate, litigate, prosecute, execute, and. . . as the protester’s sign said, send the “banksters” to jail.

So here I was yesterday, having taken a break from reading Uncle Ben’s book, and I was fiddling around online when I landed upon an interview that Chris Martenson did with Bill Black.

http://www.peakprosperity.com/podcast/95125/bill-black-why-banksters-winning

Now Bill is well-informed fellow; he’s an academic like Ben Bernanke, but from a totally different perspective than Ben’s. Bill is a regulator, investigator, earth-shaker, litigator who is crowing that Eric Holder,  former Attorney General and head of the U.S. Department of Justice, should have prosecuted the banksters for their corruptive abuse of the system. In his interview with Chris that I listened to yesterday, Bill Black said:

“Every dollar by which you inflate an asset inflates capital by a dollar and creates an additional dollar you can steal. . . they lied and they lied to the extent of trillions of dollars. They lied and made stuff that was really in the trade, right. So the bankers are actually calling these things toxic in their internal memorandum. And they are simultaneously rated Triple A, which is supposed to mean that they are equivalent to United States Treasury and are “risk free” by which they mean credit risk.”

Furthermore, whistle-blowing Bill Black says that culpability for the crash also includes the Fed’s complicity, when Bill says:

“You say Bank of America has got 50 billion of these things. They sell them to Fannie/Freddie.

Next thing we know, Black Rock is in there with the Federal Reserve helping the Federal Reserve decide which tranches of MBS to go out and buy. And the Federal Reserve vacuums up 1.25 trillion or thereabouts of these mortgage backed security pieces of paper. Here is the question. What is the chance that the Fed preferentially or accidentally (but I am going to think preferentially) went out and vacuumed up some of the worst of these things so that they could die quietly on its balance sheet rather than do damage to bank balance sheets?

So Black is implying that Bernanke shares some of the blame for the Crash of ’08.

But in my reading of Uncle Ben’s version, I see a very smart man, an honest man, who was trying to do his job–that job to which he had been appointed by the President and approved by the Congress of the United States. He was striving, as best he could, trying to stop the nation’s calamitous slide into financial oblivion. Ben writes:

 “Just as the bank runs of the panic of 1907 amplified losses suffered by a handful of stock speculators into a national credit crisis and recession, the panic in the short-term funding markets that began in August 2007 would ultimately transform a ‘correction’ in the sublime mortgage market into a much greater crisis in the global financial system and global economy.”

From Chairman Ben Bernanke’s perspective, he was doing his job– using every tool in his Reserve tool-chest  to arrest to the “panic” that would eventually impose a “much greater crisis” in the global financial system and global economy.

You can’t blame a fellow for trying to do his job. And that’s how I make sense of it all. I try to do my job, while I see everyone else doing theirs, and that’s what makes the productive world go around.

Although, every now and then shit does happen. Then, as Schumpeter said. . . it is creative destruction, and somebody’s got to clean up the mess. Jobs for everybody, cleaning up the mess from places high and low. And then reconstructing it all, a vicious (or inevitable) cycle. It’s been going on for 10,000 years. But now with hi-tech, everything goes faster and faster, until it grinds again to a screeching halt and. . . can you hear it? The music of the ages.

https://www.youtube.com/watch?v=TEbyBINYBfo

Glass half-Full

BRICs in search of mortar

October 1, 2015

When Pat and I were raising our three kids we attended at least 12 graduations that I can remember.

The first round of matriculations came after each one completed kindergarten. Those first three ceremonies were joyous events for us young parents.

The next round was celebrated after each child finished 8th grade. With educational goals moving right along, we were again so very happy, as were the emerging adolescents.

The high school ceremonies were, of course, a biggie, in all three instances. Each young scholar’s participation signified, within those symbolic processions, certifiable progress toward educational and life goals.

The crown jewels for our young adults and for us proud parents were the three college graduations, with one at Duke and two at University of North Carolina.

What a grand preparation for our offspring in their proficiencies to go forth in technified 21st-century world!

In every one of those symbolic processions through which our young ones paraded with their classmates up to a podium where they received diplomas, very graduate had a flat item mounted on their head. Hanging from that flat item was a tassel.

The mortar board.

Each young person sauntered forth into our world of work, information and progress, with a mortar board upon their head.

What is a mortar board?

In the oldest sense of this phrase, a mortar board is a flat, hand-held board; it is used to carry a small amount of mixed “mud” (mortar). The actual mortar board, in the real world of constructing walls and buildings, has, attached to it on its underside, a hand-sized vertical handle that enables the bricklayer to carry the board and its mortar payload easily. The worker can then move from one position to the next while carrying an amount of mortar suitable for efficient work in   joining masonry blocks and/or bricks together as a constructed wall.

In the symbolic universe of education, however, a “mortar board” upon the graduate’s head signifies that the person is equipped to build structures of a different kind.

With the competencies acquired through education, the graduate can, metaphorically, build progress, prosperity, businesses profitable or non-profit,, institutions, knowledge bases, etc.

I was thinking about the mortar board this morning. I was considering its meaning as a symbol, as I have just explained to you. . . but also as an actual implement of constructive work in the real world of building houses. My thirty+ years in construction provided many occasions in which I literally carried a mortar board for hours at a time, while constructing house foundations.

Then this morning, while reading about some new developments in the world of finance and investments, I thought about mortar boards of the metaphorical meaning, which is why I write to you now. There is something interesting going on in the world now, pertaining to mortar boards.

What I read that is so fascinating is an article that I came across in an online news source, Deutsche Welle, that I had never seen before today:

http://www.dw.com/en/brics-nations-launch-new-bank-currency-pool/a-18574402

I gather from reading it that the BRIC (Brazil, Russia, India, China) are gathering resources to fund an investment bank for purposes of financing infrastructure in their countries and also in the “emerging” countries.

If this banking alliance is successful, there will be in the future at least a certain amount–if not a huge amount–of divergence from those countries’ heretofore dependence on the West’s (USA, German, British, French) banking powerhouses, not to mention their central banks and international largesse like IMF and so forth.

I mean, there it is right there in the pic on the Deutsche Welle site: Putin of Russia, Modi of India, Xi of China, Rousseff of Brazil, gathered with many other national leaders in Ufa, Russia to lay foundations for the BRICs to get new “mortar” supplies for laying their necessary infrastructures in days to come.

Watch out, WallStreet!

Watch out, City!

Your days of hegemony in world finance and dollar dominance may be numbered.

These (formerly-called) Developing nations are now in the forefront of development and they need tools for constructing their infrastructure-deficient economies.

Wall Street’s obsession with high-frequency trading and risk-averse bubbly speculation is becoming more and more irrelevant in a bold new world of expanding overseas financial needs– Markets that are populated by young people–far more young people demographically than we have here in the good ole US of A.

Millions of young people with mortar boards in their hands and on their heads, applying for money mortar to construct sturdy infrastructural walls in which their own institutions will supply credit and new opportunities to initiate and develop new wealth.

Not old Western wealth recycled.

King Dollar, step aside! The handwriting for national developments across the world is on the wall. You are being challenged by the 4 R’s: rubles, rupees, reáls, renminbi and probably eventually SDRs.

Better read what those hands are writing on their freshly-mortared walls!

 

Glass half-Full

The Economist Illumination

April 13, 2014

I never really understood much about international finance and economics until this morning, when I read a special, long article in this week’s The Economist. In the printed edition, the text begins on page 49; it is entitled The slumps that shaped modern finance.

I’ve been subscribing to, and reading, that “newspaper” (as their editors call it, while we Americans think of it as a magazine) for several years. But I have always labored to figure out what the hell they are writing about. In surveying many past issues, I have contented myself merely to check out the obituary, which is always on the last page. Then I would thumb through in a backwards, right to left, fashion to glean a little from what’s going on in the literary and arts world.

Perhaps my years of reading The Economist with so little comprehension have prepared me, unbeknownst to my cognitive mind, for the light-bulb moment I had this morning while reading their concise, 6-page history of financial crises. Be that as it may, the light of understanding finally shone in my head when I read, on pages 51-52, their explanation of the Panic of 1857.

“I think I understand . . .” Joni Mitchell had sung long ago, “fear is like a wilder land.”

Long story short, when investors think they are going to lose a lot of money they are overtaken with Fear, so they go hog-wild. Maybe that means the bulls retreat while the bears gather, but the hogs go crazy destroying the place.

Or, as the ’60s radicals use to call them, the “pigs.”

But I wouldn’t call anybody a pig. Maybe . . . a walrus.

Anyway, here is what’s interesting about the Panic of 1857: America was at that time an “emerging nation” that had expanded its explorative and technological frontiers beyond its ability to keep all the accounts straight and well-balanced. Consequently, the Brit financiers panicked, and all the money people around the world followed suit, including us.

Today, the shoe is on the other foot. We Americans are like the well-established powerhouse that the Brits were in the 19th century, while today’s “emerging” powers, the so-called BRICs and a few others, are in a position similar position to where we were in 1857, or 1907, or 1937.

Maybe the other shoe is about to drop, maybe not.

If you want to know something about how this plays out historically, I recommend you check it out. If you want to read it online, here it is: http://www.economist.com/

Smoke 

Trying to understand complicated stuff

October 6, 2012

Give me a good, old fashioned rest period any day.

That is to say: a dot, at the end of a sentence, so my overworked brain can rest before going on.

Just give me, please, a momentary neuron break so my cognitive brain cells can catch up to what my eyes are gathering.

For I am a tired, weary reader, among the huddled, online masses yearning to be free from confusion.

I have noticed, you see, a certain confusing tendency these days among bloggers, authors, journalists, commenters and other keyboard-tapping idea-flingers. This lamentable tendency is a neglect of periods. People nowadays whack out lengthy run-on phrases and clauses, strung together without the little dots that give us pause.  And yea, I say unto thee, sometimes they do it  even without commas!

This trend confuses me when I am reading and trying to understand messages that people have posted on the ubiquitous little backlit screens that you see everywhere.

It especially baffles me when I’m reading comments that are whacked out by opinionated internet denizens as they respond to the polarizing rhetoric of other internet denizens about the controversial issues of our day like politics religion and how much money should be printed and whether parents should be given choice for their children’s schools and how Congress should spend our tax money and whether Mitt’s comment about the 47% was appropriate and how the President does or does not use a telemprompter and the price of labor in China and the price of tea in Berkeley and the the price of education in Chicago and Milton Friedman’s influence and Paul Krugman’s dogma and and so forth and so on.

Rampant ideas, I say. Ideas are running rampant, without punctuation to separate, sharpen, and clarify them.

Yesterday I was reading a book, an actual, long, chapter by chapter  book, although not a printed one. It was my on my Kindle.

There  I was reading Sheila Bair’s excellent, very informative book, Bull by the Horns,  when, in chapter 9, I came across this sentence:

“But probably the biggest problem related to a fairly technical provision of bankruptcy law that gave all of Lehman’s derivative counterparties the right to cancel their contracts and liquidate any collateral Lehman had posted with them.”

This problem that Ms. Bair is describing is a troublesome one with which our bankers and lawyers were dealing, back in the fall of 2008.

And it is complicated, but I do think it is important that we citizens of this free republic understand the problem.

So I decided to demonstrate, using that sentence as an example, how multi-layered explanations can be made simpler, and thus easier to understand. The first principle is: write shorter sentences.

See if my  version isn’t a little a little easier to comprehend:

But probably the biggest problem related to a fairly technical provision of bankruptcy law. That provision gave to all of Lehman’s derivative counterparties the right to cancel their contracts, and to liquidate any collateral Lehman had posted with them.

Notice the period after the word law. This period helps me, the reader, for two reasons. One reason is that it gives my brain a little neuron break before engaging the next sentence, which is long, multi-layered, and laced with two-dollar words like derivative and counterparties. The second reason that the period helps me is: it clarifies the function of the verb related.

The inquisitive mind wants to know, you see, whether that word related  will prove to be the predicate of the sentence, or if it is being set up as a participle in a subordinate clause to modify the noun problem. However, my re-written version simplifies the reader’s dilemma by inserting a period, thus ending the sentence after the word law. This shortening effect enables the reader to solve his/her syntactical dilemma early on, instead of having the related question suspended all the way through such dense verbiage as derivatives, counter parties, contracts, collateral and so forth.

Another simplification I added to Ms. Bair’s original text was an insertion of the preposition to, in front of the phrase all of Lehman’s derivative counterparties. This identifies all (of Lehman’s derivative counterparties) as an indirect object instead of a direct object in the sentence. The counterparties are receiving something, that something being the right to cancel their contracts. And that right is more easily understand now as the direct object (whatever is being received) in the sentence. Furthermore, a second right that the counterparties receive is the right of liquidationSo my version inserts the preposition to a second times, rendering to liquidate.

 

I am not criticizing Sheila Bair’s writing style, nor her book, which I highly recommend. We citizens of a free, democratic republic should be informed about the problems that so easily inflict widespread financial cataclysm upon us.  Ms. Bair’s unique perspective as Director of Federal Deposit Insurance Corporation during the tumultuous years 2006-2011 is quite an eye-opener.

To further reinforce this last point, I leave you with this passage from Bull by the Horns, from the first page of Sheila’s chapter 9, which she named Bailing out the Boneheads:

“Lehman’s balance sheet was nontransparent to the market, primarily because of accounting rules that allowed Lehman to hold complex mortgage-related investments at valuations that bore no reality to their true worth.”

And therein lies the real problem of trying to understand complicated stuff.

Glass half-Full