Consider the article, "Problems with the Use of Student Test Scores to Evaluate Teachers", co-Authored by Scholars Convened by The Economic Policy Institute, August 29th, 2010. The quality of the scholars and analysis seems to be very high, and the conclusion is that "value added" methodology is inaccurate and inappropriate for teacher evaluation.
Further, before becoming involved in public education, I saw this method applied in a manufacturing company where it belongs, but applied wrongly (to evaluate people) even there, and it proved to be an utter failure. My experience taught me that it needs to be applied very carefully even in its proper realm which is to inanimate objects in manufacturing, and I can think of an almost endless number of reasons why it would fail the way it is applied in education.
As a former engineer, I had to ask myself, why a manufacturing industry methodology was being applied to people in education, and why have public education and teachers unions been getting so publicly attacked for the past five years or more by politicians and the major media? The "value-added" method was used as a very public method of rating teachers within the Los Angeles Unified School District, for example, when the Los Angeles Times published teachers names along with a rating based on this method.
This article, "Charter schools and the attack on public education", by Sarah Knopp, ISR Issue 62, November–December 2008, sheds some light on that question, I think. Knopp, a teacher, a public education advocate, and a union advocate explains who and what the teacher unions are fighting. Read it, and judge for yourself. I think you will find that she really is defending the idea that public education is a public good, and that public good is under attack.
For a broad brush picture of what is happening, please read, "Higher Education Under Attack: An Interview With Henry A. Giroux", by C. Cryn Johannsen, Margins of Everyday Life, April 22, 2011. I couldn't agree more with Giroux, when he wrote "What is distinctive about the U.S. is that higher education is under attack not because it is failing but because it is public. It is now considered dangerous because it has the potential to function as a site where a culture of questioning can operate, the imagination can blossom, and difficult questions can be openly debated and critically engaged. Hence, many conservatives see higher education as a threat to their reactionary and corporate oriented interests and would like to defund higher education, privatize it, eliminate tenure, and define the working conditions of faculty to something resembling the labor practices of Walmart workers."
Now, don't get hung up on Giroux's use of the term "conservatives", if you or your parents happen to think of yourselves as "conservative", because when people like Giroux use that term, they are not referring to people like your parents, mine, or you or me. They really mean something like "the US oligarchs", and those people are really apolitical in terms of traditional political ideologies. However, most people think every CEO of a Fortune 500 company is a Republican, and every Republican is a traditional conservative, whereas nothing could be farther from the truth.
To put what is happening with our school systems countrywide in perspective, it is necessary to paint an even broader brush picture of what is happening in US politics and economics. I'll make this as brief as I can and try to get to the point, but it is hard to be brief and do much explaining. I'll try, though.
Part of the reason I turned from engineering to education twelve years ago was the sorry state of the US aerospace industry, but it was also due to the military-like structure of large corporations where most engineers like me worked. It wasn't as if I understood why or thought very much about why large corporations involved in manufacturing or product design were structured along military lines, but I knew and experienced how they were, and I really didn't much like being "an Army sergeant" or "corporate samurai" so to speak.
After leaving engineering, education seemed like a refuge to me, in a way. For a while, I worked on a plan to develop math teaching software, but working full time and raising a family made it rather difficult to be an entrepreneur. However, I learned something from working on another project with my friend, and that was how military and Government funding and military organization came dominate almost every aspect of science and technology in corporations and universities during the US mobilization for WWII. K12 education, however, was basically untouched and control remained with the States and local school boards.
Even today, K12 is still funded almost entirely by the States, and local school boards retain control despite a trickle of Federal grants and funding. That is changing with "No Child Left Behind", which was devised by a rather unsuccessful businessman in Texas by the name of George W. Bush and reflects the corporate business management philosophy. I've had 12 years to experience its transition into public education.
Here's the obvious reason why it stinks. Well, it's obvious if you've worked for large manufacturing companies and taught high school, and I have done both. Public education is essentially a social program, socialism in fact, always has been. It never has been a "for profit" activity. It's purpose was, in the past, to produce "good US citizens", able to read, write, and think for themselves. What are the purposes of a military or corporate organization? Sure, the military is about fighting and a corporation is about making a profit, but in more general terms they are very much alike insofar as they use people. Basically, the military and corporations are designed to obtain their members obedience to tasks that serve the military leader's or business owner's objectives. That is entirely different than education, which is supposed to be about students learning: how to think, question, and be creative, for themselves and for their own purposes.
Military and corporate organization and leadership are fundamentally incompatible with education's goal of producing good citizen's who can think for themselves, decide for themselves what is right and what is wrong, and decide for themselves what kind of country and Government they want.
Now, read this, and consider what educators and all citizens are up against, "How Wall Street Thieves, Led by Goldman Sachs, Took Down the Global Economy -- Their Outsized Influence Must be Stopped", by Les Leopold, April 25, 2011. Other sources of information on the same topic include the series of articles by Matt Taibbi in Rolling Stone and anything written since about 2007 by William Black. Dig into this in just a little depth, and you will find that there is no bottom to the unprosecuted corruption that exists in the US of today. The largest banks, the military-industrial complex, and the Federal Government are now essentially like one giant corporate conglomerate.
I think the U.S. at this time is well along the way to mature corporate-Government fascism, in a position not so different than Germany before Hitler. We are also undergoing a national bankruptcy just like Germany before Hitler, and wealth inequality is at the same extreme as it was on the eve of the 1930s Great Depression. Labor participation in unions is at a low not seen since the same point in time. Unlike the Great Depression, however, power is not falling away from financial and corporate interests due to business bankruptcies and bank failures. Unlike the Great Depression, Government is not finding ways to better the lives of everyone. Instead, Government, the Treasury, and the Federal Reserve have colluded with the largest banks and corporations to indemnify the failures of the very richest financiers and businessmen, to bring about the greatest wealth transfer in history from the general public to the architects of the financial crisis, and to ensure that credit continues to flow to the largest banks, corporations, and CEOs but not to small banks or small businesses. An all-encompassing regulatory apparatus for the financial sector is being developed to bring control over all banking-monetary-financial activity, the financial equivalent of the Department of Homeland Security.
Our history is playing out like the history of every powerful expansionist government of the past: like Rome, like Britain, like Germany, etc. At some point, a small number of people control nearly all the money, assets, government itself, and the people. When this happens, there is no meaningful democratic element in society any more that is capable of influencing government. There are only super-rich aristocratic rulers, their officials and functionaries, and the people subject to their rule. The last time this happened in the US, we got the Great Depression, but the oligarchs of the day could not completely control the banking crisis, the Government, or the people, and the oligarchs lost wealth and power. Today, the oligarchs are securely in the driver's seat. During 2007-2009, it wasn't clear it would turn out this way, but now it is clear.
What does this super-rich, class of self-styled U.S. aristocrats apparently want? If they are judged by their actions, they want: more power, more money, and more control. How are they getting it? By shaping public opinion via the wholly owned major media instead of responding to public opinion. By destroying the middle class, eliminating unions, bringing the military/corporate model to education, cutting social programs, by telling Government to ratify whatever laws corporations desire. By employing the US military to serve as their global police force, to protect their business interests, to topple foreign governments and occupy foreign countries, anyone who gets in the way basically. By having the Federal Reserve Bank supply unlimited credit at 0% interest to the largest banks, so they can lend it back to the US Government at interest to be collected from the people by the IRS, by supplying credit only to the largest, most favored corporations, and all this done at the expense of every citizen's private savings. By establishing a federal police-state type of organization (Homeland Security) with the right to spy on (warrantless wiretapping), or question anyone at any time (federal agents with self-written warrants), or detain people indefinitely without trial (anyone can be accused of being a terrorist; proof need not be disclosed), no judicial authorization required. An American Gestapo. And, they are getting it.
We are now engaged in three wars the public do not want (counting Libya), and the average American isn't complaining much, or I should say, he doesn't really understand real politics or economics (as opposed to high school history textbooks) well enough to complain, and he doesn't understand politics well enough to complain effectively. He/she is mostly reduced to being a spectator, expects someone to "do something" and is easily led by the nose. Every crisis is used by our leaders to justify leading us farther along the road to fascism. All that is needed in the near future to complete the descent of the US into fascism is a crisis big enough to spawn a dictator, someone to declare that U.S. problems are so severe that only a "strong leader" can save us. To at least one well-known public figure the picture I paint is not the future, but the present.
In Germany before Hitler, the crisis was economic failure, hyperinflation of the currency. In the US today, we are also on the verge of hyperinflation and an even greater collapse of the domestic US economy than we had from 2007-2009. The Federal Reserve has trebled the monetary base in about 2 1/2 years. China, Japan, and Pimco are all selling U.S. Treasuries. The dollar is falling in value. Hyperinflation is a real possibility, soon. If we do get hyperinflation, power will almost certainly centralize even more in the U.S.
What will happen to public education? Well, without a healthy economy and a Government committed to the "socialist" ideal of public education as a public good, a good education will become a privilege of the rich and the poor will get the military-corporate model education, where students are trained to perform tasks that require obedience to direction above all else.
To some extent, we already have that now, but it can get much, much worse.
Thursday, April 28, 2011
Sunday, October 10, 2010
Bankers May be Hoist with their Own Petard
Ellen Brown, my beloved angel of mercy to the indebted, herald and, hopefully, harbinger of doom to the banking industry, explains the bankers' current woes in, "Homeowners’ Rebellion: Could 62 Million Homes Be Foreclosure-Proof?". This spells D-I-S-A-S-T-E-R for the boys in pin-striped suits, and I say it couldn't happen to a nicer bunch of guys.
Speculation in Mortgage-Backed Securities (MBS), which were bundles of mortgages, was the main cause of the financial crash of 2008. MBSs changed hands frequently, and the companies who profited from mortgage payments were often not the same parties that negotiated the loans. The Mortgage Electronic Registration System (MERS), a company that serves as the mortgagee of record for many lenders, allowed properties to change hands without the necessity of recording each transfer.
MERS was convenient for the mortgage industry, but lawyers are now questioning the legality of its operations, and courts are beginning to rule that its operations were illegal with respect to mortgage ownership. The test of its legality is taking place in the current home foreclosure industry. To foreclose on real property, the plaintiff must be able to establish the chain of title. But MERS has acknowledged, and recent cases have held, that MERS is a mere “nominee”, not the true owner. Recent court opinions stress that this is not just a technicality; it is a substantive failure, a failure that is fatal to the plaintiff’s ability to foreclose.
The latest of these court decisions ocurred in California on May 20, 2010, in the case, In re Walker, Case no. 10-21656-E–11. The court ruled that MERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank (C) could not collect on its claim. The judge ruled:
Lawyers elsewhere are becoming energized by such rulings. In an ongoing Nevada class action, Lopez vs. Executive Trustee Services, et al., the plaintiffs' lawyer alleges:
For today, at least, I take back every nasty, lawyer joke I've ever told. For more information, read:
http://4closurefraud.org/
http://www.godlikeproductions.com/forum1/message1166628/pg1
http://dailypaul.com/node/145709
http://www.nakedcapitalism.com/2010/10/debunking-banks-procedural-problems-defense-on-the-foreclosure-crisis.html
http://all247news.com/foreclosure-freeze-pnc-financial-services-suspends-sale-of-foreclosed-homes/6353/
http://dealbook.blogs.nytimes.com/2010/10/08/flawed-foreclosures-thwart-home-sales/
http://webcache.googleusercontent.com/search?q=cache:41nOy-YouOsJ:michiganloanhomeinc.com/2130/mers-65-million-titles-clouded/+mers+clouded+title&cd=6&hl=en&ct=clnk&gl=us&client=safari
http://www.huffingtonpost.com/dylan-ratigan/property-rights-gone-wron_b_754586.html
http://www.rawstory.com/rs/2010/10/jp-morgan-thug-breaks-home-foreclosed/
http://www.marketoracle.co.uk/Article23276.html
http://www.huffingtonpost.com/iris-martin/homeowners-the-courtroom-_b_751675.html
http://www.reuters.com/article/idUSTRE6954A320101006
http://www.campaignforliberty.com/#38774
http://www.bloomberg.com/news/2010-10-06/jpmorgan-bank-of-america-face-hydra-of-state-foreclosure-investigations.html
http://news.firedoglake.com/2010/10/05/foreclosure-fraud-caused-by-lenders-not-
http://www.heraldtribune.com/article/20101004/ARTICLE/10041051/2416/NEWS
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/05/AR2010100503969.html?hpid=topnews
http://www.bloomberg.com/news/2010-10-04/citigroup-ally-sued-by-homeowners-alleging-racketeering-over-mortgages.html
http://thepennsylvaniaprogressive.com/showDiary.do;jsessionid=25F530EF82FA3C4CD242627CD300347F?diaryId=2794
http://usawatchdog.com/could-foreclosure-fraud-cause-another-banking-meltdown/
http://www.creditslips.org/creditslips/2010/09/wrongful-foreclosures-and-clouded-title.html
http://market-ticker.org/akcs-www?post=168090
http://www.nytimes.com/2010/10/03/business/economy/03foreclose.html?_r=1
http://www.nakedcapitalism.com/2010/10/homes-in-florida-seized-without-notice-of-foreclosure-suspicously-large-number-of-the-dog-ate-my-summons-filings.html
http://www.nakedcapitalism.com/2010/10/4closurefraud-posts-docx-mortgage-document-fabrication-price-sheet.html
http://www.truth-out.org/shock-therapy-wall-street-jpmorgan-suspends-56000-foreclosures-gmac-and-boa-many-more63803
http://www.newdeal20.org/2010/09/29/why-we-should-be-mad-as-hell-about-floridas-foreclosures-21962/
http://www.bloomberg.com/news/2010-09-29/ambac-sues-countrywide-over-mortgage-backed-securities.html
"Over 62 million mortgages are now held in the name of MERS, an electronic recording system devised by and for the convenience of the mortgage industry. A California bankruptcy court, following landmark cases in other jurisdictions, recently held that this electronic shortcut makes it impossible for banks to establish their ownership of property titles — and therefore to foreclose on mortgaged properties. The logical result could be 62 million homes that are foreclosure-proof."
Speculation in Mortgage-Backed Securities (MBS), which were bundles of mortgages, was the main cause of the financial crash of 2008. MBSs changed hands frequently, and the companies who profited from mortgage payments were often not the same parties that negotiated the loans. The Mortgage Electronic Registration System (MERS), a company that serves as the mortgagee of record for many lenders, allowed properties to change hands without the necessity of recording each transfer.
MERS was convenient for the mortgage industry, but lawyers are now questioning the legality of its operations, and courts are beginning to rule that its operations were illegal with respect to mortgage ownership. The test of its legality is taking place in the current home foreclosure industry. To foreclose on real property, the plaintiff must be able to establish the chain of title. But MERS has acknowledged, and recent cases have held, that MERS is a mere “nominee”, not the true owner. Recent court opinions stress that this is not just a technicality; it is a substantive failure, a failure that is fatal to the plaintiff’s ability to foreclose.
The latest of these court decisions ocurred in California on May 20, 2010, in the case, In re Walker, Case no. 10-21656-E–11. The court ruled that MERS could not foreclose because it was a mere nominee; and that as a result, plaintiff Citibank (C) could not collect on its claim. The judge ruled:
"Since no evidence of MERS’ ownership of the underlying note has been offered, and other courts have concluded that MERS does not own the underlying notes, this court is convinced that MERS had no interest it could transfer to Citibank. Since MERS did not own the underlying note, it could not transfer the beneficial interest of the Deed of Trust to another. Any attempt to transfer the beneficial interest of a trust deed without ownership of the underlying note is void under California law."
Lawyers elsewhere are becoming energized by such rulings. In an ongoing Nevada class action, Lopez vs. Executive Trustee Services, et al., the plaintiffs' lawyer alleges:
"Before MERS, it would not have been possible for mortgages with no market value ... to be sold at a profit or collateralized and sold as mortgage-backed securities. Before MERS, it would not have been possible for the Defendant banks and AIG (AIG) to conceal from government regulators the extent of risk of financial losses those entities faced from the predatory origination of residential loans and the fraudulent re-sale and securitization of those otherwise non-marketable loans. Before MERS, the actual beneficiary of every Deed of Trust on every parcel in the United States and the State of Nevada could be readily ascertained by merely reviewing the public records at the local recorder’s office where documents reflecting any ownership interest in real property are kept...
After MERS, the servicing rights were transferred after the origination of the loan to an entity so large that communication with the servicer became difficult if not impossible... The servicer was interested in only one thing – making a profit from the foreclosure of the borrower’s residence – so that the entire predatory cycle of fraudulent origination, resale, and securitization of yet another predatory loan could occur again. This is the legacy of MERS, and the entire scheme was predicated upon the fraudulent designation of MERS as the "beneficiary" under millions of deeds of trust in Nevada and other states."
For today, at least, I take back every nasty, lawyer joke I've ever told. For more information, read:
http://4closurefraud.org/
http://www.godlikeproductions.com/forum1/message1166628/pg1
http://dailypaul.com/node/145709
http://www.nakedcapitalism.com/2010/10/debunking-banks-procedural-problems-defense-on-the-foreclosure-crisis.html
http://all247news.com/foreclosure-freeze-pnc-financial-services-suspends-sale-of-foreclosed-homes/6353/
http://dealbook.blogs.nytimes.com/2010/10/08/flawed-foreclosures-thwart-home-sales/
http://webcache.googleusercontent.com/search?q=cache:41nOy-YouOsJ:michiganloanhomeinc.com/2130/mers-65-million-titles-clouded/+mers+clouded+title&cd=6&hl=en&ct=clnk&gl=us&client=safari
http://www.huffingtonpost.com/dylan-ratigan/property-rights-gone-wron_b_754586.html
http://www.rawstory.com/rs/2010/10/jp-morgan-thug-breaks-home-foreclosed/
http://www.marketoracle.co.uk/Article23276.html
http://www.huffingtonpost.com/iris-martin/homeowners-the-courtroom-_b_751675.html
http://www.reuters.com/article/idUSTRE6954A320101006
http://www.campaignforliberty.com/#38774
http://www.bloomberg.com/news/2010-10-06/jpmorgan-bank-of-america-face-hydra-of-state-foreclosure-investigations.html
http://news.firedoglake.com/2010/10/05/foreclosure-fraud-caused-by-lenders-not-
http://www.heraldtribune.com/article/20101004/ARTICLE/10041051/2416/NEWS
http://www.washingtonpost.com/wp-dyn/content/article/2010/10/05/AR2010100503969.html?hpid=topnews
http://www.bloomberg.com/news/2010-10-04/citigroup-ally-sued-by-homeowners-alleging-racketeering-over-mortgages.html
http://thepennsylvaniaprogressive.com/showDiary.do;jsessionid=25F530EF82FA3C4CD242627CD300347F?diaryId=2794
http://usawatchdog.com/could-foreclosure-fraud-cause-another-banking-meltdown/
http://www.creditslips.org/creditslips/2010/09/wrongful-foreclosures-and-clouded-title.html
http://market-ticker.org/akcs-www?post=168090
http://www.nytimes.com/2010/10/03/business/economy/03foreclose.html?_r=1
http://www.nakedcapitalism.com/2010/10/homes-in-florida-seized-without-notice-of-foreclosure-suspicously-large-number-of-the-dog-ate-my-summons-filings.html
http://www.nakedcapitalism.com/2010/10/4closurefraud-posts-docx-mortgage-document-fabrication-price-sheet.html
http://www.truth-out.org/shock-therapy-wall-street-jpmorgan-suspends-56000-foreclosures-gmac-and-boa-many-more63803
http://www.newdeal20.org/2010/09/29/why-we-should-be-mad-as-hell-about-floridas-foreclosures-21962/
http://www.bloomberg.com/news/2010-09-29/ambac-sues-countrywide-over-mortgage-backed-securities.html
Tuesday, August 3, 2010
Two Economies = Class Warfare
Our problem, basically, is that we have a very distorted economy in the sense that there has been a significant recovery in a limited area of the economy amongst high-income individuals who have just had $800 billion added to their 401(k)s and are spending it and are carrying what consumption there is. Large banks, who are doing much better, and large corporations are in excellent shape. The rest of the economy, small business, small banks, and a very large part of the labor force is mired in tragic, long-term unemployment. The tension between the two is pulling the economy apart. The average of those two is what we are looking at (when we examine national economic statistics), but they are fundamentally two separate types of economy.
It's funny (or not) how often I've said much the same thing, along with facts and arguments to back them up, and had to endure pained looks and tired sighs from friends and family alike. “He's starting in on the economy and politics again. Run for it!” Who's gonna believe a fifty-something public school math teacher?
But, in walks the eighty-something, Yoda-like, former Fed Chairman, who is famous for having once said, 'I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said', and against all odds, he says something particularly clear. And all of a sudden, it's news you can believe in!
Yes, Greenspan actually said that first paragraph not me. Ooh, how does it feel to learn those were not my words, but the words of the “Maestro” himself? That is the feeling that comes when you realize that much of what you consider to be you using your own judgment is merely Pavlovian Conditioning.
Believe it or not, it was true before the Maestro said it. You just weren't thinking for yourself.
It's funny (or not) how often I've said much the same thing, along with facts and arguments to back them up, and had to endure pained looks and tired sighs from friends and family alike. “He's starting in on the economy and politics again. Run for it!” Who's gonna believe a fifty-something public school math teacher?
But, in walks the eighty-something, Yoda-like, former Fed Chairman, who is famous for having once said, 'I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said', and against all odds, he says something particularly clear. And all of a sudden, it's news you can believe in!
Yes, Greenspan actually said that first paragraph not me. Ooh, how does it feel to learn those were not my words, but the words of the “Maestro” himself? That is the feeling that comes when you realize that much of what you consider to be you using your own judgment is merely Pavlovian Conditioning.
Believe it or not, it was true before the Maestro said it. You just weren't thinking for yourself.
Saturday, May 15, 2010
Why "Playing the Market" Might be More Like Playing Roulette Than You Think
If phrases such as "free markets" and "level playing field" resonate with you, you might want to dig a little into deeper into the hows, whys, and what-fors of the big stock exchanges. It seems that while a whole generation of offspring of "The Greatest Generation" were growing up, a few were intent on turning those exchanges into the equivalent of Las Vegas slots or roulette, a guaranteed losing proposition for most "investors" (chumps).
In the early days of the Wall Street trend to involve Main Street in investing in stocks (playing the market), access to the market was not the simple matter it is today. The easy money was made by brokers (salesmen) of all stripes for facilitating individual stock trade transactions. Over time, brokers morphed into "advisors" (salesmen) whose advice was designed to channel investors (chumps) money into products with the highest sales commissions. While the advent of computerized trading did lower transaction costs, flash trading and front running allowed the firms with the best computers and programmers to skim a steady percentage of all transactions without a visible charge on the customer's bill.
Flashing trading and front running are not the same, but they both have essentially the same effect. They give the big financial players the edge of being able to look at your cards before they place their bets. Even more alarming, according to some who know the capabilities of these high speed trading programs programs, they are capable of doing more than skimming a few pennies from each of millions of transactions. Supposedly, the big players can manipulate individual stocks and whole markets up and down or engineer sharp crashes and reversals.
That last point is worth elaborating upon. Suppose you are the type who is naturally skeptical of claims that Wall Street is capable of using its high speed trading programs to manipulate the broad stock market averages, and you begin to tune out at the mere mention of the "Plunge Prevention Team". Consider this, by various accounts high speed trading makes up 50-75% of ALL trading on the major exchanges. Does that suggest it is at least, possible?
Now, let's examine a number of possible explanations for the recent minutes-long 1,000 point plunge in the DOW. Mainstream media immediately seized upon the notion that a "fat fingered" trade was responsible, meaning that at least in concept if not in exact detail, someone might have erroneously entered a sell order of a billion of something instead of a million. That idea has been discounted lately, no such fat fingered trade being found. A few large stock sell orders, a large E-mini futures trade, and an anomaly in the Japanese currency market have been identified, but apparently all of these were parts of legitimate trading or hedging activities.
So, a fat fingered trade did not trigger the plunge. Other explanations offered are that current high speed computer trading algorithms are so prevalent and so twitchy that a few large legitimate trades can crash the market in minutes, or a few large high speed computer traders are so influential that they can plan and execute a market take-down whenever they want. Right now, the buzz seems to be all about the first explanation, and discussion revolves around ways to implement additional market "safeguards" to prevent this from happening again, as if the plunge was similar to a car accident, and what the stock market exchanges really need are more "seat belts" and "air bags".
Here's where this gets good, or at least I think so. What's the difference between a few well placed trades crashing the market because high speed trading makes the market twitchy and a few large high speed traders being able to crash the market? Isn't the glaringly obvious plain fact really this, that Mr. Market has just demonstrated beyond a shadow of a doubt that high speed computer trading is responsible for an unprecedented high speed plunge and recovery? If high speed trading CAN do this, even if this incident occurred by accident, hasn't the capability to do this by design just been proven? And, if it CAN be done, do you really think no large high speed trader, such as Goldman would dare do it? Haven't the Goldman leadership already proven they have balls the size of planets?
OK, OK, you just cannot bring yourself to believe the broad market averages are being manipulated. The 1,000 point plunge is and always will be simply an "accident" or an "anomaly" in your mind, an "accident" of some kind. What would be the cause of the worst possible stock market accident you can imagine? Suppose the $700 trillion derivatives market "blows-up" suddenly, whatever that means. I think it means a large move in currency or bond markets causes a number of BIG derivative contract defaults, and because there isn't enough money in the world for counter-parties to pay off in such an event, a series of cascading defaults would occur.
Do you really think you can trade more intelligently and nimbly than Goldman Sachs high speed trading programs and get out of the way of such a disaster before Goldman does? That idea triggered a memory in my engineer's mind, that instead of trying to calibrate a model of a dynamic system by direct calculation, it can be far easier and more accurate to simply shock it and record how it reacts. Did Goldman or some other big trader simply ping the system by pulling or delaying thousands of buy orders across the board and initiating that 1,000 point drop in order to calibrate their trading programs? If so, could the timing have possibly been any better, when Congress was meeting concerning the Goldman Sachs investigation and Fed audit bill? Could this have been both a test of the market and a threat to Congress?
Read the claims and judge for yourself whether they are credible or not. If they are, do you really wish to play poker with players who can peek at your cards or determine in advance the cards you will be dealt? If so, you might do well to go to Las Vegas instead. At least there you will score free drinks while throwing away your money.
Wall Street and the World of Flash Stock Trades, by Ned Potter, July 29, 2009
Front Running, Wikipedia
Computerized Front Running: Another Goldman-Dominated Fraud, by Ellen Brown, April 21, 2010
Computers, Not Human Error, Likely Caused Market Meltdown, CNBC, May 07, 2010
Surge of Computer Selling After Apparent Glitch Sends Stocks Plunging, by Nelson Schwartz and Louise Story, May 6, 2010
Stock Market Time Bomb?, by Arnaud deBorchgrave, May 10, 2010
High Frequency Terrorism: How the Big Banks and Federal Reserve Maintained Their Death Grip Over the United States, by David DeGraw & Max Keiser, May 11, 2010
The May 6 Stock Market Crash Revisited, by Pam Martens, May 12, 2010
In the early days of the Wall Street trend to involve Main Street in investing in stocks (playing the market), access to the market was not the simple matter it is today. The easy money was made by brokers (salesmen) of all stripes for facilitating individual stock trade transactions. Over time, brokers morphed into "advisors" (salesmen) whose advice was designed to channel investors (chumps) money into products with the highest sales commissions. While the advent of computerized trading did lower transaction costs, flash trading and front running allowed the firms with the best computers and programmers to skim a steady percentage of all transactions without a visible charge on the customer's bill.
Flashing trading and front running are not the same, but they both have essentially the same effect. They give the big financial players the edge of being able to look at your cards before they place their bets. Even more alarming, according to some who know the capabilities of these high speed trading programs programs, they are capable of doing more than skimming a few pennies from each of millions of transactions. Supposedly, the big players can manipulate individual stocks and whole markets up and down or engineer sharp crashes and reversals.
That last point is worth elaborating upon. Suppose you are the type who is naturally skeptical of claims that Wall Street is capable of using its high speed trading programs to manipulate the broad stock market averages, and you begin to tune out at the mere mention of the "Plunge Prevention Team". Consider this, by various accounts high speed trading makes up 50-75% of ALL trading on the major exchanges. Does that suggest it is at least, possible?
Now, let's examine a number of possible explanations for the recent minutes-long 1,000 point plunge in the DOW. Mainstream media immediately seized upon the notion that a "fat fingered" trade was responsible, meaning that at least in concept if not in exact detail, someone might have erroneously entered a sell order of a billion of something instead of a million. That idea has been discounted lately, no such fat fingered trade being found. A few large stock sell orders, a large E-mini futures trade, and an anomaly in the Japanese currency market have been identified, but apparently all of these were parts of legitimate trading or hedging activities.
So, a fat fingered trade did not trigger the plunge. Other explanations offered are that current high speed computer trading algorithms are so prevalent and so twitchy that a few large legitimate trades can crash the market in minutes, or a few large high speed computer traders are so influential that they can plan and execute a market take-down whenever they want. Right now, the buzz seems to be all about the first explanation, and discussion revolves around ways to implement additional market "safeguards" to prevent this from happening again, as if the plunge was similar to a car accident, and what the stock market exchanges really need are more "seat belts" and "air bags".
Here's where this gets good, or at least I think so. What's the difference between a few well placed trades crashing the market because high speed trading makes the market twitchy and a few large high speed traders being able to crash the market? Isn't the glaringly obvious plain fact really this, that Mr. Market has just demonstrated beyond a shadow of a doubt that high speed computer trading is responsible for an unprecedented high speed plunge and recovery? If high speed trading CAN do this, even if this incident occurred by accident, hasn't the capability to do this by design just been proven? And, if it CAN be done, do you really think no large high speed trader, such as Goldman would dare do it? Haven't the Goldman leadership already proven they have balls the size of planets?
OK, OK, you just cannot bring yourself to believe the broad market averages are being manipulated. The 1,000 point plunge is and always will be simply an "accident" or an "anomaly" in your mind, an "accident" of some kind. What would be the cause of the worst possible stock market accident you can imagine? Suppose the $700 trillion derivatives market "blows-up" suddenly, whatever that means. I think it means a large move in currency or bond markets causes a number of BIG derivative contract defaults, and because there isn't enough money in the world for counter-parties to pay off in such an event, a series of cascading defaults would occur.
Do you really think you can trade more intelligently and nimbly than Goldman Sachs high speed trading programs and get out of the way of such a disaster before Goldman does? That idea triggered a memory in my engineer's mind, that instead of trying to calibrate a model of a dynamic system by direct calculation, it can be far easier and more accurate to simply shock it and record how it reacts. Did Goldman or some other big trader simply ping the system by pulling or delaying thousands of buy orders across the board and initiating that 1,000 point drop in order to calibrate their trading programs? If so, could the timing have possibly been any better, when Congress was meeting concerning the Goldman Sachs investigation and Fed audit bill? Could this have been both a test of the market and a threat to Congress?
Read the claims and judge for yourself whether they are credible or not. If they are, do you really wish to play poker with players who can peek at your cards or determine in advance the cards you will be dealt? If so, you might do well to go to Las Vegas instead. At least there you will score free drinks while throwing away your money.
Wall Street and the World of Flash Stock Trades, by Ned Potter, July 29, 2009
Front Running, Wikipedia
Computerized Front Running: Another Goldman-Dominated Fraud, by Ellen Brown, April 21, 2010
Computers, Not Human Error, Likely Caused Market Meltdown, CNBC, May 07, 2010
Surge of Computer Selling After Apparent Glitch Sends Stocks Plunging, by Nelson Schwartz and Louise Story, May 6, 2010
Stock Market Time Bomb?, by Arnaud deBorchgrave, May 10, 2010
High Frequency Terrorism: How the Big Banks and Federal Reserve Maintained Their Death Grip Over the United States, by David DeGraw & Max Keiser, May 11, 2010
The May 6 Stock Market Crash Revisited, by Pam Martens, May 12, 2010
Saturday, May 8, 2010
Was I Dreaming, or Did the Dow Drop a Grand When I Blinked on Thursday?
Again, it's been a while since I've posted. This endless bear market rally with near-zero volatility and low volume has been mesmerizing. Yet, I've maintained a skeptical attitude and about five months ago began buying puts on the S&P500 at 1100. It's taken much longer than expected but perhaps the action this past week is saying the accounting-rule-change-driven relief rally top is finally history.
The 998 point intra-day drop in the Dow over a few minutes, Thursday, is already beginning to fade from public memory ("...move on folks, nuthin' to see, nuthin' to see. Don't try connecting the dots. Nuthin' to with Greece, debt, or anything fundamental. Just a wee omputer-trading glitch.").
Instead of focusing on that singular event, I'm posting another big picture piece on the excessively indebted US and world economic systems. It might appear that I post nothing but bad news, but keep in mind that you receive little but good news from the mainstream media, and my intent is to present information that properly rounds out the picture.
The biggest economic problems in the world today are: debt, debt, and debt. Understand that, and you can begin to understand something of “modern” economics. However, to fully understand the terrible state of the economy today, you also need to understand how the source of practically all money is debt, in the form of bank credit, and the simple facts that we are all made prisoners of this monetary system by the legal tender law and the non-existence of alternative money.
It is not my intent to explain the mechanics of that system here. Suffice it to say that as long as you operate within the system, you being robbed directly by inflation and also by taxation on illusory inflation-profits, and the markets you try to “invest” in to protect your savings and generate real profits over and above inflation are being manipulated and gamed by the big financial players. Even your federal, state, and local governments are being manipulated and gamed by these same players.
The end game comes when the public and governments can absorb no more credit. The mathematics of repayment of principle plus interest then dictate that there shall be outright individual, business, and government failures. This is not even a zero sum game. The mathematics dictates that there shall not just be relative winners and losers, but there shall be failures, bankruptcies, and abject poverty.
These results are not an absolutely necessary part of the human condition but they are absolutely a result of the present less-than-zero-sum monetary system. What would you think of parents having four children and telling them there is enough food for all, but they plan to starve one child to death just to make life a bit more competitive? It's an admittedly gross and imperfect analogy but it's something like that.
Let's survey the past two and a half months to see how this 400-year-old mature monetary system is working out. If at the end of your reading, you still think that you can “play the markets” in stocks or bonds, without understanding banking, credit, and debt, well, good luck. You will need an abundance of it.
The Sovereign Debt Disaster, by Egon von Greyerz, February 23, 2010
Buffet's Partner Says America is Finished, February 23, 2010
Sultans of Swap: Explaining $605 Trillion in Derivatives, by Gordon T. Long, February 24, 2010
Nearly 25% of All Mortgages Are Underwater, by Les Christie, February 24, 2010
Sovereign Debt Follies, “It Has Taught Us Nothing”, by Bob Hoye, February 25, 2010
Bernanke Delivers Blunt Warning on US Debt, by Patrice Hill, February 25, 2010
Massive Bank Failures Due, by Charlotte Cuthbertson, February 25, 2010
California is a Greater Risk than Greece, Warns JP Morgan Chief, by James Quinn, February 26, 2010
A Quick Tour of Hyper Inflation and Its Consequences for America, by John Silveira, March 1, 2010
The Real Cause of Hyperinflation, by Jordan Roy-Byrne, CMT, March 2, 2010
Indonesian Mob Wants Blood After Treasury Secretary Spends a Fortune Bailing Out Banks, by Gus Lubin, March 3, 2010
Signs of the Tmes, by Bob Hoye, March 4, 2010
Unemployment, by Howard S. Katz, March 8, 2010
Why California is Doomed, by Charles Hugh Smith, March 9, 2010
Tedbits 2010 Outlook. When Hope Turns to Fear, Part IV, by Ty Andros, March 12, 2010
Eurozone Could Risk 'Sovereign Debt Explosion', by Ambrose Evans-Pritchard, March 12, 2010
The Complete Guide to Toxic Mortgages and the Housing Situation of California, March 13, 2010
Unemployment (continued), by Howard S. Katz, March 15, 2010
The Spectre of Financial Armageddon – Health Care and Federal Debt in the United States, by Michael E. Chernew, Phd, Katherine Braiker, Phd, and John Hsu, MD, MBA, MSCE, March 17, 2010
The Ruins of Detroit, The Off-Shored Economy, by Paul Craig Roberts, March 17, 2010
Watch the Bond Market, Not Bank Lending or Velocity, Jordan Roy-Byrne, March 19, 2010
In the Shadow of the Castle, by David Galland, March 19, 2010
Healthcare Bill to Cause U.S. Hyperinflation by 2015, March 20, 2010
The Most Important Chart of the Century, by Nathan Martin, March 20, 2010
Debtor Nation, by James Turk, March 22, 2010
U.S. States May be the Next Dominoes to Topple, by Boyd Ermin, March 23, 2010
Tedbits 2010 Outlook, When Hope Turns to Fear, Part V, by Ty Andros, March 26, 2010
It is a pressure cooker waiting to explode! Similar “Recovery” rally as in 1929/1930, March 28, 2010
The Municipal Market, by Rick Bookstaber, April 4, 2010
Sovereign Debt Crisis at “Boiling Point”, Warns Bank for International Settlements, by Ambrose Evans-Pritchard, April 8, 2010
Extend and Pretend: Manufacturing a Minsky Melt-Up!, by Gordon T. Long, April 12, 2010
Extend and Pretend, by John P. Hussman, Phd, April 12, 2010
Yes, 47% of Households Owe No Taxes. Look Closer. By David Leonhardt, April 13, 2010
12 Reasons Why Millions Of Americans Are Incredibly Angry About The State Of The U.S. Economy, by Michael Snyder, April 13, 2010
Extend and Pretend: An Accounting Driven Recovery, by Gordon T Long, April 14, 2010
The Global Economic Crisis: Riots, Rebellion, and Revolution. When Empire Hits Home. By Andrew Gavin Marshall, April 14, 2010
Princely Finance and Taxation (Our Annual Tax Number), by Bob Hoye, Institutional Advisors, Apr 15, 2010
Invisible Leverage, by Howard Hill, April 20, 2010
Second Wave of Financial Crisis, by Jim Bianco, April 21, 2010
Collapse of the Standard of Living in the USA. Studies Reveal Declining Living Standards and Increasing Anger, by Hiram Lee, April 24, 2010
The Feds Hollowing Out of U.S. Banks, Daniel Amerman, CFA, April 29, 2010
John Williams: A Hyper-Inflationary Great Depression Is Coming, April 30, 2010
Greenspan Wanted Housing Bubble Dissent Kept Secret, May 3, 2010
The Mother of All Bubbles. Huge National Debts Could Push Euro Zone into Bankruptcy. May 3, 2010
Violating the No Ponzi Condition, by John P. Hussman, Phd, May 3, 2010
Scary Chart, May 4, 2010
The Canary is Dead, by Greg Hunter, May 7, 2010
The 998 point intra-day drop in the Dow over a few minutes, Thursday, is already beginning to fade from public memory ("...move on folks, nuthin' to see, nuthin' to see. Don't try connecting the dots. Nuthin' to with Greece, debt, or anything fundamental. Just a wee omputer-trading glitch.").
Instead of focusing on that singular event, I'm posting another big picture piece on the excessively indebted US and world economic systems. It might appear that I post nothing but bad news, but keep in mind that you receive little but good news from the mainstream media, and my intent is to present information that properly rounds out the picture.
The biggest economic problems in the world today are: debt, debt, and debt. Understand that, and you can begin to understand something of “modern” economics. However, to fully understand the terrible state of the economy today, you also need to understand how the source of practically all money is debt, in the form of bank credit, and the simple facts that we are all made prisoners of this monetary system by the legal tender law and the non-existence of alternative money.
It is not my intent to explain the mechanics of that system here. Suffice it to say that as long as you operate within the system, you being robbed directly by inflation and also by taxation on illusory inflation-profits, and the markets you try to “invest” in to protect your savings and generate real profits over and above inflation are being manipulated and gamed by the big financial players. Even your federal, state, and local governments are being manipulated and gamed by these same players.
The end game comes when the public and governments can absorb no more credit. The mathematics of repayment of principle plus interest then dictate that there shall be outright individual, business, and government failures. This is not even a zero sum game. The mathematics dictates that there shall not just be relative winners and losers, but there shall be failures, bankruptcies, and abject poverty.
These results are not an absolutely necessary part of the human condition but they are absolutely a result of the present less-than-zero-sum monetary system. What would you think of parents having four children and telling them there is enough food for all, but they plan to starve one child to death just to make life a bit more competitive? It's an admittedly gross and imperfect analogy but it's something like that.
Let's survey the past two and a half months to see how this 400-year-old mature monetary system is working out. If at the end of your reading, you still think that you can “play the markets” in stocks or bonds, without understanding banking, credit, and debt, well, good luck. You will need an abundance of it.
The Sovereign Debt Disaster, by Egon von Greyerz, February 23, 2010
Buffet's Partner Says America is Finished, February 23, 2010
Sultans of Swap: Explaining $605 Trillion in Derivatives, by Gordon T. Long, February 24, 2010
Nearly 25% of All Mortgages Are Underwater, by Les Christie, February 24, 2010
Sovereign Debt Follies, “It Has Taught Us Nothing”, by Bob Hoye, February 25, 2010
Bernanke Delivers Blunt Warning on US Debt, by Patrice Hill, February 25, 2010
Massive Bank Failures Due, by Charlotte Cuthbertson, February 25, 2010
California is a Greater Risk than Greece, Warns JP Morgan Chief, by James Quinn, February 26, 2010
A Quick Tour of Hyper Inflation and Its Consequences for America, by John Silveira, March 1, 2010
The Real Cause of Hyperinflation, by Jordan Roy-Byrne, CMT, March 2, 2010
Indonesian Mob Wants Blood After Treasury Secretary Spends a Fortune Bailing Out Banks, by Gus Lubin, March 3, 2010
Signs of the Tmes, by Bob Hoye, March 4, 2010
Unemployment, by Howard S. Katz, March 8, 2010
Why California is Doomed, by Charles Hugh Smith, March 9, 2010
Tedbits 2010 Outlook. When Hope Turns to Fear, Part IV, by Ty Andros, March 12, 2010
Eurozone Could Risk 'Sovereign Debt Explosion', by Ambrose Evans-Pritchard, March 12, 2010
The Complete Guide to Toxic Mortgages and the Housing Situation of California, March 13, 2010
Unemployment (continued), by Howard S. Katz, March 15, 2010
The Spectre of Financial Armageddon – Health Care and Federal Debt in the United States, by Michael E. Chernew, Phd, Katherine Braiker, Phd, and John Hsu, MD, MBA, MSCE, March 17, 2010
The Ruins of Detroit, The Off-Shored Economy, by Paul Craig Roberts, March 17, 2010
Watch the Bond Market, Not Bank Lending or Velocity, Jordan Roy-Byrne, March 19, 2010
In the Shadow of the Castle, by David Galland, March 19, 2010
Healthcare Bill to Cause U.S. Hyperinflation by 2015, March 20, 2010
The Most Important Chart of the Century, by Nathan Martin, March 20, 2010
Debtor Nation, by James Turk, March 22, 2010
U.S. States May be the Next Dominoes to Topple, by Boyd Ermin, March 23, 2010
Tedbits 2010 Outlook, When Hope Turns to Fear, Part V, by Ty Andros, March 26, 2010
It is a pressure cooker waiting to explode! Similar “Recovery” rally as in 1929/1930, March 28, 2010
The Municipal Market, by Rick Bookstaber, April 4, 2010
Sovereign Debt Crisis at “Boiling Point”, Warns Bank for International Settlements, by Ambrose Evans-Pritchard, April 8, 2010
Extend and Pretend: Manufacturing a Minsky Melt-Up!, by Gordon T. Long, April 12, 2010
Extend and Pretend, by John P. Hussman, Phd, April 12, 2010
Yes, 47% of Households Owe No Taxes. Look Closer. By David Leonhardt, April 13, 2010
12 Reasons Why Millions Of Americans Are Incredibly Angry About The State Of The U.S. Economy, by Michael Snyder, April 13, 2010
Extend and Pretend: An Accounting Driven Recovery, by Gordon T Long, April 14, 2010
The Global Economic Crisis: Riots, Rebellion, and Revolution. When Empire Hits Home. By Andrew Gavin Marshall, April 14, 2010
Princely Finance and Taxation (Our Annual Tax Number), by Bob Hoye, Institutional Advisors, Apr 15, 2010
Invisible Leverage, by Howard Hill, April 20, 2010
Second Wave of Financial Crisis, by Jim Bianco, April 21, 2010
Collapse of the Standard of Living in the USA. Studies Reveal Declining Living Standards and Increasing Anger, by Hiram Lee, April 24, 2010
The Feds Hollowing Out of U.S. Banks, Daniel Amerman, CFA, April 29, 2010
John Williams: A Hyper-Inflationary Great Depression Is Coming, April 30, 2010
Greenspan Wanted Housing Bubble Dissent Kept Secret, May 3, 2010
The Mother of All Bubbles. Huge National Debts Could Push Euro Zone into Bankruptcy. May 3, 2010
Violating the No Ponzi Condition, by John P. Hussman, Phd, May 3, 2010
Scary Chart, May 4, 2010
The Canary is Dead, by Greg Hunter, May 7, 2010
Sunday, March 7, 2010
Debt, Credit, Inflation, Deflation, the Banks, the Dollar, and Markets - The Big Ugly Picture
It's been a while since I've posted. Maybe you thought I went back to sleep but no, I've just been reading and following the markets. When I read, I'm very still and sometimes appear to be dozing, but that is an illusion soon dispelled after a tap on the shoulder sparks me into a flurry of clever sayings, such as, "What the xxxx! What do you mean by sneaking up on me like that? What time is it? Xxxx, I think I'm supposed to be somewhere," and such.
Where was I? Oh, yeah. I've been meaning for some time to post a significant big picture piece on the monetary system, including the problems of: debt, credit, inflation, deflation, who's behind our financial problems (no secret there - it's the banks), and what it implies about the dollar and markets - dangerous times ahead. That covers a lot of ground, but thankfully there are writers willing to address bad news, even if very few are to be found within the mainstream media.
The articles that follow, especially the first two and the fourth, are very broad brush and cover much of the aforementioned ground. In the week ahead, I'll try to update this piece with commentary about each article and maybe add an article or two more. Even with their arrangement in simple chronological order, their titles provide a fairly clear indication of the big picture.
Inflation / Deflation, Credit Bubble, and the Fed, undated
Economic Black Hole: 20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover, undated
The Feds Were Quick To Bail Out Their Friends At The Big Banks But Are Letting All The Small Banks Die Like Dogs undated
20 Reasons Global Debt Time Bomb Explodes Soon - Which trigger will ignite the Great Depression II?, by Paul B. Farrell, February 2, 2010
Rosenberg: Forget The "Flat" Pending Home Sales Number, Here's The Real Disaster, by Vince Veneziani, February 3, 2010
How to invest for a global-debt-bomb explosion - Prepare for an Apocalyptic Anarchy Ending Wall Street's Toxic Capitalism, by Paul B. Farrell February 9, 2010
Depression 2010 - Western Fiat-Money Finished?, Wednesday, February 10, 2010
Sovereign Alchemy Will Fail, February 11th, 2010 by Egon von Greyerz
Two Possible Paths With the Same Endpoint, February 12, 2010
US Debt Will Keep Growing Even With Recovery - US Debt Will Soon be Unsustainable Without Higher Taxes and Spending Cuts, Even With Recovery, by Tom Raum, February 14, 2010
Disillusioned Bayh advocates electoral “shock” to broken system, February 16, 2010
State and Federal Borrowing Is Crowding Out Everyone Else, Feb 22, 2010
Bullish a Year Ago, Robert Prechter Now Sees "the Biggest Bubble in History", by Aaron Task, February 24, 2010
Will the US Devalue the Dollar?, by Darryl Robert Schoon, Mar 3, 2010
Where was I? Oh, yeah. I've been meaning for some time to post a significant big picture piece on the monetary system, including the problems of: debt, credit, inflation, deflation, who's behind our financial problems (no secret there - it's the banks), and what it implies about the dollar and markets - dangerous times ahead. That covers a lot of ground, but thankfully there are writers willing to address bad news, even if very few are to be found within the mainstream media.
The articles that follow, especially the first two and the fourth, are very broad brush and cover much of the aforementioned ground. In the week ahead, I'll try to update this piece with commentary about each article and maybe add an article or two more. Even with their arrangement in simple chronological order, their titles provide a fairly clear indication of the big picture.
Inflation / Deflation, Credit Bubble, and the Fed, undated
Economic Black Hole: 20 Reasons Why The U.S. Economy Is Dying And Is Simply Not Going To Recover, undated
The Feds Were Quick To Bail Out Their Friends At The Big Banks But Are Letting All The Small Banks Die Like Dogs undated
20 Reasons Global Debt Time Bomb Explodes Soon - Which trigger will ignite the Great Depression II?, by Paul B. Farrell, February 2, 2010
Rosenberg: Forget The "Flat" Pending Home Sales Number, Here's The Real Disaster, by Vince Veneziani, February 3, 2010
How to invest for a global-debt-bomb explosion - Prepare for an Apocalyptic Anarchy Ending Wall Street's Toxic Capitalism, by Paul B. Farrell February 9, 2010
Depression 2010 - Western Fiat-Money Finished?, Wednesday, February 10, 2010
Sovereign Alchemy Will Fail, February 11th, 2010 by Egon von Greyerz
Two Possible Paths With the Same Endpoint, February 12, 2010
US Debt Will Keep Growing Even With Recovery - US Debt Will Soon be Unsustainable Without Higher Taxes and Spending Cuts, Even With Recovery, by Tom Raum, February 14, 2010
Disillusioned Bayh advocates electoral “shock” to broken system, February 16, 2010
State and Federal Borrowing Is Crowding Out Everyone Else, Feb 22, 2010
Bullish a Year Ago, Robert Prechter Now Sees "the Biggest Bubble in History", by Aaron Task, February 24, 2010
Will the US Devalue the Dollar?, by Darryl Robert Schoon, Mar 3, 2010
Sunday, February 14, 2010
How are Markets, the Economy, and Your Dollars Doing?
On January 24th, Clive Maund warned of a potentially "Black Monday" type drop looming in the S&500 Index after the failure of its abortive run up to 115. More interesting perhaps, depending on how much cash you hold, was his second chart showing the S&P500 denominated in Euros instead of dollars. For those unaccustomed to thinking in terms of foreign currencies, a chart of US stock prices denominated in Euros will have the same shape as a chart denominated in US dollars, provided that the dollar/Euro exchange rate does not change. But, if the dollar falls in price versus the Euro, the dollar will buy fewer Euros, meaning a US stock will also buy fewer Euros, and a US stock prices chart denominated in Euros will have smaller rises and larger drops in comparison with a chart denominated in dollars. Accordingly, as the S&P500 recovered from its recent March low, its gain seemed remarkable in terms of US dollars. Over the same time, however, the US dollar was falling against the Euro, making the gain not so remarkable after all when viewed in terms of Euros.
Note, the entire rise shown in the first chart is reflected in the last 1/12th of the second chart, from March, 2009 to date. Not as impressive as a stock chart denominated in dollars. But, there is a nice little run-up at the very end of the chart from 7 to 8 on the y-axis. The very recent sharp reversal and run-up in the dollar against the Euro during as the S&P500 fell sharply from 115 would seem to explain that.
Clive's third and fourth charts show Goldman Sachs and JPMorgan falling sharply at the same time as the S&P500 on high volume.
On February 1, Clive repeated his warning in a longer piece with updated S&P500 and Goldman Sachs charts and more charts, including the: $Gold Index, $HUI Index, USD Index, $Copper Index, and $WTIC (Light Crude Oil) Index charts. Markets could be on the verge of repeating last year's crash or worse.
UPDATE TO ARTICLE
On February 15th, Clive posted a "Gold Market Update" on the 321Gold Website (one of my favorites). The articles Clive publishes publicly come out a few days after he publishes them for his paid subscribers. This article was originally dated February 13th. His latest opinion is that the recent corrective phase in gold is over, and we are on the verge of another big run-up in gold. He might be right, however, I would still advise caution. Clive tends to get over-optimistic and over-enthusiastic about gold sometimes. Also, he is a practitioner of "technical-analysis", the method of divining the future from the stock chart itself. While the stock chart itself can provide useful information about timing short-term and sometimes intermediate-term buys and sells, it cannot reliably predict more than that. If the Dow, S&P500, and NASDAQ head south, they will drag precious metals stocks and the metals prices themselves with them, no matter what the precious metals technical analysis says. One way to play this is to buy several gold and silver stocks, and hedge them all by also buying SPY (S&P500) put options.
END OF UPDATE
On February 7th, Bob Chapman touched on a wide variety of issues pertinent to Gold, Silver, the Econonmy, and More, including: the upcoming second wave of mortgage defaults, the real unemployment rate, foreign buying of US Treasuries and Agency bonds, a hint that the Government is planning for some kind of forced retirement plan where citizens would be required to exchange some part of their retirement savings for a Government guaranteed annuity, the role Paul Volcker might play in helping return the financial sector to some semblance of former normalcy, financial industry front running, the increases in the national and Federal Reserve debts, and on the "bright side", mention of an uptick in mortgage applications and a slowdown in job losses.
Recently, Daniel Amerman, addressed the issue of inflation versus deflation in this article, "Containing Inflation Via Unlimited Money Creation: The Fed's Strategy". Currently and for quite some time, two camps have been debating this issue of whether the current monetary system will suffer a deflationary depression or a hyperinflationary depression.
In a deflationary depression, debt is repaid or defaulted upon resulting in wave after wave of bank failures and a contracting money supply but the currency does not fail; the dollar becomes more valuable. In a hyperinflationary depression, expansion of the money supply and leads to runaway inflation and failure of the currency, because the dollar eventually loses all value.
The reason people are arguing about which way the monetary system and economy will go - deflation or inflation - is that the Government and the Fed have propped up the financial sector by exchanging Government and Fed debt instruments for bad assets belonging to the big banks, Government Sponsored Enterprises (GSEs - think Fannie Mae, Freddie Mac, etc) and Wall Street firms. On paper, these exchanges led to large increases in the money supply leading many people to think that high inflation is right around the corner. At the same time, banks have been reluctant to lend, and borrowers have been reluctant to borrow and spend, meaning the new money has not found its way into the general economy in a big way ... yet. While this money sits in the coffers of the big banks, businesses and people are trying to pay off existing debt, that extinguishes money, and is deflationary. So, at the same time inflationary forces are at work, deflationary forces are also at work and opinions vary as to which forces will predominate and when.
Daniel explains how the Fed and Ben Bernanke are handling their part in this story. In short, Ben Bernanke thinks he has a strategy that will allow him to control the vasts sums of money created by the Fed, prevent its escape into the general economy, and thereby prevent hyperinflation. Daniel explains the risks of Ben's plan and begs to differ. In my opinion, this is an area where I don't think the future is ordained yet, and future decisions that will be made by the Fed and our Government might well determine the outcome. I think the best plan is to hedge your bets no matter which way you think the dollar is going, but you should read the article to understand the economic and political issues better.
While obviously not a total secret, the opening of this article, Secret Summit of Top Bankers, by George Lekakis and Fleur Leyden from the Herald Sun, February 06, 2010, pretty much explains its importance:
The significance of this meeting in light of recent news, the apparent topping behavior of stock markets, and the recent sharp drops should be obvious. The banking elite are very concerned about how to manage the looming crisis should markets take a another dive like they did last year. If all was well in the financial world, a meeting such as this would not be taking place.
My favorite quote concerning "secret meetings" like this goes, "If you are trying to find a cure for cancer, you do it with the lights on." In other words, if you are truly engaged in activities that will benefit all of society, wouldn't you want everyone to be aware of your good deeds? Call me a cynic, but in my opinion the central banking elite are meeting to figure out how to save their bacon, not mine or yours.
Note, the entire rise shown in the first chart is reflected in the last 1/12th of the second chart, from March, 2009 to date. Not as impressive as a stock chart denominated in dollars. But, there is a nice little run-up at the very end of the chart from 7 to 8 on the y-axis. The very recent sharp reversal and run-up in the dollar against the Euro during as the S&P500 fell sharply from 115 would seem to explain that.
Clive's third and fourth charts show Goldman Sachs and JPMorgan falling sharply at the same time as the S&P500 on high volume.
On February 1, Clive repeated his warning in a longer piece with updated S&P500 and Goldman Sachs charts and more charts, including the: $Gold Index, $HUI Index, USD Index, $Copper Index, and $WTIC (Light Crude Oil) Index charts. Markets could be on the verge of repeating last year's crash or worse.
UPDATE TO ARTICLE
On February 15th, Clive posted a "Gold Market Update" on the 321Gold Website (one of my favorites). The articles Clive publishes publicly come out a few days after he publishes them for his paid subscribers. This article was originally dated February 13th. His latest opinion is that the recent corrective phase in gold is over, and we are on the verge of another big run-up in gold. He might be right, however, I would still advise caution. Clive tends to get over-optimistic and over-enthusiastic about gold sometimes. Also, he is a practitioner of "technical-analysis", the method of divining the future from the stock chart itself. While the stock chart itself can provide useful information about timing short-term and sometimes intermediate-term buys and sells, it cannot reliably predict more than that. If the Dow, S&P500, and NASDAQ head south, they will drag precious metals stocks and the metals prices themselves with them, no matter what the precious metals technical analysis says. One way to play this is to buy several gold and silver stocks, and hedge them all by also buying SPY (S&P500) put options.
END OF UPDATE
On February 7th, Bob Chapman touched on a wide variety of issues pertinent to Gold, Silver, the Econonmy, and More, including: the upcoming second wave of mortgage defaults, the real unemployment rate, foreign buying of US Treasuries and Agency bonds, a hint that the Government is planning for some kind of forced retirement plan where citizens would be required to exchange some part of their retirement savings for a Government guaranteed annuity, the role Paul Volcker might play in helping return the financial sector to some semblance of former normalcy, financial industry front running, the increases in the national and Federal Reserve debts, and on the "bright side", mention of an uptick in mortgage applications and a slowdown in job losses.
Recently, Daniel Amerman, addressed the issue of inflation versus deflation in this article, "Containing Inflation Via Unlimited Money Creation: The Fed's Strategy". Currently and for quite some time, two camps have been debating this issue of whether the current monetary system will suffer a deflationary depression or a hyperinflationary depression.
In a deflationary depression, debt is repaid or defaulted upon resulting in wave after wave of bank failures and a contracting money supply but the currency does not fail; the dollar becomes more valuable. In a hyperinflationary depression, expansion of the money supply and leads to runaway inflation and failure of the currency, because the dollar eventually loses all value.
The reason people are arguing about which way the monetary system and economy will go - deflation or inflation - is that the Government and the Fed have propped up the financial sector by exchanging Government and Fed debt instruments for bad assets belonging to the big banks, Government Sponsored Enterprises (GSEs - think Fannie Mae, Freddie Mac, etc) and Wall Street firms. On paper, these exchanges led to large increases in the money supply leading many people to think that high inflation is right around the corner. At the same time, banks have been reluctant to lend, and borrowers have been reluctant to borrow and spend, meaning the new money has not found its way into the general economy in a big way ... yet. While this money sits in the coffers of the big banks, businesses and people are trying to pay off existing debt, that extinguishes money, and is deflationary. So, at the same time inflationary forces are at work, deflationary forces are also at work and opinions vary as to which forces will predominate and when.
Daniel explains how the Fed and Ben Bernanke are handling their part in this story. In short, Ben Bernanke thinks he has a strategy that will allow him to control the vasts sums of money created by the Fed, prevent its escape into the general economy, and thereby prevent hyperinflation. Daniel explains the risks of Ben's plan and begs to differ. In my opinion, this is an area where I don't think the future is ordained yet, and future decisions that will be made by the Fed and our Government might well determine the outcome. I think the best plan is to hedge your bets no matter which way you think the dollar is going, but you should read the article to understand the economic and political issues better.
While obviously not a total secret, the opening of this article, Secret Summit of Top Bankers, by George Lekakis and Fleur Leyden from the Herald Sun, February 06, 2010, pretty much explains its importance:
"The world's top central bankers began arriving in Australia yesterday as renewed fears about the strength of the global economic recovery gripped world share markets. Representatives from 24 central banks and monetary authorities including the US Federal Reserve and European Central Bank landed in Sydney to meet tomorrow at a secret location, the Herald Sun reports. Organised by the Bank for International Settlements last year, the two-day talks are shrouded in secrecy with high-level security believed to have been invoked by law enforcement agencies. The event will be dominated by Asian delegations and is expected to include governors of the Peoples Bank of China, the Bank of Japan and the Reserve Bank of India. The arrival of the high-powered gathering coincided with a fresh meltdown on world sharemarkets, sparked by renewed concerns about global growth and sovereign debt."
The significance of this meeting in light of recent news, the apparent topping behavior of stock markets, and the recent sharp drops should be obvious. The banking elite are very concerned about how to manage the looming crisis should markets take a another dive like they did last year. If all was well in the financial world, a meeting such as this would not be taking place.
My favorite quote concerning "secret meetings" like this goes, "If you are trying to find a cure for cancer, you do it with the lights on." In other words, if you are truly engaged in activities that will benefit all of society, wouldn't you want everyone to be aware of your good deeds? Call me a cynic, but in my opinion the central banking elite are meeting to figure out how to save their bacon, not mine or yours.
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