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The more things change in the USA casino capitalism the more they stay the same

Cruise to Frugality Island for stock holding  401K Lemmings

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Insufficient Retirement Funds as Immanent Problem of Neoliberal Regime Neoliberal Attacks on Social Security Financial Sector Induced Systemic Instability of Economy  USA-Russia Gas War Paper oil, Minsky financial instability hypothesis and casino capitalism Productivity Myths and Rising labor costs hypocrisy Fudged Employment Statistics: Birth-death adjustment scam
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Financial Humor Bulletin, 2008 Financial Humor Bulletin, 2009 Financial Humor Bulletin, 2010 Financial Humor Bulletin, 2011 Financial Humor Bulletin, 2012 Financial Humor Etc

“When the capital development of a country becomes a by-product
of the activities of a casino, the job is likely to be ill-done.”

John Maynard Keynes

"Life is a school of probabilities."

Walter Bagehot

Neoliberal economics (aka casino capitalism) function from one crash to another. Risk is pervasively underpriced under neoliberal system, resulting in bubbles small and large which hit the economy periodically. The problem are not strictly economical or political. it is  ideological as in "greed is good" slogan.  Like a country which adopted a certain religion follows a certain path, the USA behaviour after adoption of neoliberalism somewhat correlate with the behaviour of alcoholic who decided to booze himself to death. The difference is that debt is used instead of booze.

Hypertrophied role of financial sector under neoliberalism introduces strong positive feedback look into the economic system making the whole system unstable. Any attempts to put some sand into the wheels in the form of increasing transaction costs or jailing some overzealous bankers or hedge fund managers are blocked by political power of financial oligarchy, which is the actual ruling class under neoliberalism for ordinary investor (who are dragged into stock market by his/her 401K) this in for a very bumpy ride. I managed to observe just two two financial crashed under liberalism (in 2000 and 2008) out of probably four (Savings and loan crisis was probably the first neoliberal crisis). The next crash is given, taking into account that hypertrophied role of financial sector did not changes neither after dot-com crisis of 200-2002 not after 2008 crisis (it is unclear when and if it ended; in any case it was long getting the name of "Great Recession").

Timing of the next crisis is anybody's guess but it might well be closer then we assume. As Mark Twain aptly observed: "A thing long expected takes the form of the unexpected when at last it comes" ;-):

This morning that meant a stream of thoughts triggered by Paul Krugman’s most recent op-ed, particularly this:

Most of all, the vast riches being earned — or maybe that should be “earned” — in our bloated financial industry undermined our sense of reality and degraded our judgment.

Think of the way almost everyone important missed the warning signs of an impending crisis. How was that possible? How, for example, could Alan Greenspan have declared, just a few years ago, that “the financial system as a whole has become more resilient” — thanks to derivatives, no less? The answer, I believe, is that there’s an innate tendency on the part of even the elite to idolize men who are making a lot of money, and assume that they know what they’re doing.

As most 401K investors are brainwashing into being "over bullish", this page is strongly bearish in "perma-bear" fashion in order to serve as an antidote to "Barrons" style cheerleading. Funny, but this page is accessed mostly during periods of economic uncertainty. At least this was the case during the last two financial crisis(2000 and 2008). No so much during good times: the number of visits drops to below 1K a month.

When will the next crash occur ?

There is no doubt that it will occur. But the question is whether the market in 2021 is ripe to the crash?  If the answer is yes, you better trip your stock holdings. Especially if you are over 60 and has sizable 401K savings.

Can the stock market go another 20-50% up. No double it can. But a more interesting question is: "Can it go down 50%?" from the current level.  The situation when some financial assets are grossly overvalued is called a bubble. Few understand that bubbles are not accident or the result of actions of "evil does" but a logical development of investing in financial  capitalism, which logically creates so called "Minsky moment".  See also  a book “Boom and Bust- A Global History of Financial Bubbles,” by William Quinn and John Turner of Queen’s University Belfast in Northern Ireland.  Rather than regarding overvalued assets as a bubble, the authors view them as a fire.  “Boom and Bust” looks closely at 300 years’ worth of market manias using the metaphor of “the fire triangle.” (oxygen, fuel and heat). Remove one factor, and you can prevent or put out a fire.

The key lesson of previous bubbles is that financial markets, however, can easily heat up fivefold or even 10-fold and then collapse at least 50% in a flash, burning millions of speculators and sometimes charring entire economies. Here is one review from Amazon:

Trey Shipp, 5.0 out of 5 stars The 3 elements you need for a bubble
Reviewed in the United States on December 26, 2020. Verified Purchase

Quinn and Turner prefer to use the analogy of a "fire" to describe speculative bubbles. A fire is "destructive, self-perpetuating and difficult to control once it begins." And just as a fire needs oxygen, fuel, and heat, a speculative bubble needs assets that are easy to trade (i.e., oxygen), plenty of money and credit (fuel), and speculation (heat). It also needs a spark, which usually comes from government action or new technology.

The authors describe how these key elements played out in 11 speculative booms since the 1700s:
• French Mississippi Bubble (1719 to 1720)
• British South Sea Bubble (1719 to 1720)
• British Emerging Market Mines Bubble (1824 to 1826)
• U.K. Railway Mania (1844 to1846)
• Australian Land Boom (1886 to 1893)
• The U.K. Bicycle Mania (1895 to 1898)
• U.S. Roaring Twenties (1920 to 1931)
• Japanese stock and real estate bubble (1985 to 1992)
• U.S. Dot-Com Bubble (1995 to 2001)
• U.S. and European Subprime Bubble (2003 to 2010)
• the 2007 and 2015 Chinese stock bubbles.

Some of the many interesting facts they uncover include:

• The word "bubble" originated from Shakespeare in the 'All the world's a stage' speech from his comedy "As You Like It." He uses 'bubble' to mean "fragile, empty or worthless, just like a soap bubble." Beginning in 1719, with the South Sea Bubble, writers like Daniel Defoe and Jonathan Swift used "bubble" to describe new companies that were worthless.

• Charles Mackay's 1841 book "Extraordinary Popular Delusions and the Madness of Crowds", which gives a vivid account of the foolish speculation during the South Sea Bubble, is mostly fiction: almost none of the anecdotes can be substantiated.

• In 2008 The Economist described the British Railway Mania as "arguably the greatest bubble in history."

• During the British Railway Mania of 1848, railway shares rose from constituting 23 percent of total stock market value to 71 percent. So many new speculators began buying railway stocks that 15 new stock exchanges opened in England during the mania to meet the demand. (Half of them shut down when the mania ended.)

• Fueling the railway bubble was the Bank of England's low discount rate. At 2.5 percent in 1844, it was the lowest it had ever been in the 150 years of the bank's history. Investors bought railway stocks to earn a higher yield.

• The Japanese government deliberately sparked the land and stock bubbles during the late 1980s to create a boom. Japan lowered interest rates, gave tax breaks to real estate developers, and allowed banks to accept land as collateral, which increased the amount of lending they could do, which was usually plowed back into more land and stocks.

• The authors believe that the Dot-com bubble during the late 1990s had many good economic benefits, despite the 8-month recession that followed it. The bubble directed a lot of money into innovative companies and motivated smart entrepreneurs to create new companies. It also supplied the capital needed to build internet communications, which have been so critical for our lives today.

• Between 2000 and 2008 in both Ireland and Spain, more than one new home was built for every new inhabitant in the country.

• In the U.K., the bank Northern Rock marketed "Together mortgages," which allowed individuals to borrow up to 125 percent of their home value, targeting borrowers who could not afford to buy a home or even furnish it.

• The Chinese stock market bubbles resembled the South Sea and Mississippi bubbles of 1720, where the bubbles were created deliberately to offload government debt onto stockholders.

The main lesson from the book is that while bubbles can be blurry during the heat and smoke of a speculative fire, we should look for three key elements: asset marketability, speculation, and leverage.

In proportion to market size—which weights giant tech stocks heavily—the companies in the S&P 500 recently traded at 21 times expected earnings over the next 12 months, according to Matarin Capital Management, an investment firm in New York. That’s about 24% higher than their average over the past quarter-century.  This can go higher (probably to mid 30th) or crash to Earth.


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[Apr 09, 2021] Inflation is different for different income stratas of the US population with poor hit much harder then the rich

Apr 09, 2021 | www.zerohedge.com

For low-income Americans, it has been a double-whammy of job losses (the total number of Americans receiving jobless benefits from the government has basically stagnated for the last four months)...

Source: Bloomberg

...and significant increases in the costs of living.

As Bloomberg reports , while the headline consumer inflation rate in the U.S. remains subdued, at 1.7% - but it masks large differences in what people actually buy .

If you like to eat, food-price inflation is running at more than double the headline rate , and staples like household cleaning products have also climbed.

Source: Bloomberg

if you drive a car, gas prices have soared in recent months...

Source: Bloomberg

All of which might explain why confidence among the lowest income Americans is lagging significantly (because groceries or gas take up a bigger share of their monthly shopping basket than is the case for wealthier households, and they're items that can't easily be deferred or substituted )...

Source: Bloomberg

An analysis by Bloomberg Economics , which reweighted consumer-price baskets based on the spending habits of different income groups, found that the richest Americans are experiencing the lowest level of inflation .

As Bloomberg 's Andrew Husby points out:

"On average, higher-income households spend a smaller fraction of their budgets on food, medical care, and rent, all categories that have seen faster inflation than the headline in recent years, and 2020 in particular."

The question of who exactly gets hurt most by higher prices could become more urgently concerning as most economists - and even The Fed itself - expect inflation to accelerate in the next 12 months.

"The food price story and inflation story are important to the issue of equality," says Carmen Reinhart, the World Bank's chief economist.

"It's a shock that has very uneven effects."

So, in summary, The Fed is telling Americans - ignore "transitory" spikes in non-core inflation (such as food and energy), it's just temporary and base-effect-driven (oh and we have the "tools" to manage it). However, despite all The Fed's pandering and virtue-signaling about "equity" and "fairness", it is precisely this segment of the costs of living that is crushing most of the long-suffering low-income population ($1400 checks or not) .

And now all eyes will be on this morning's PPI print which is expected to surge to +3.8% YoY.

[Apr 09, 2021] Inflation might be the way out of the debt crisis

Highly recommended!
An interesting headline from Financial Times
Apr 09, 2021 | finance.yahoo.com
Pascal Blanqué Wed, April 7, 2021, 8:00 PM

Bond markets are firmly in the driving seat. For too long, inflation has disappeared from investors' radar. The key ones include a hostile environment for trade and globalisation, business and labour support public programmes and the extraordinary debt burden fuelled by the pandemic. These are set to create a turning point in the current market regime before long.

[Apr 09, 2021] A modest suggestion for semi-vacant malls

Apr 09, 2021 | www.zerohedge.com

Cock Strong 38 minutes ago

Bezos notches another $100 billion.

Mando Ramos 7 minutes ago (Edited)

My simple solution is to turn the vacant malls into giant marijuana growing operations,and huge meth labs,and use the revenue from the meth and weed sales to balance the Federal budget..As an additional plus,you put the Mexican drug cartels out of business,which can't be a bad thing,either

FurnitureFireSale 26 minutes ago

The smile on the side of the Prime trucks looks like a big wang (Bezos's?) saying "F-U, take THIS!" to all the small businesses. Once you see it, you cannot unsee it.

Puppyteethofdeath 14 minutes ago

Turn them into homeless shelters.

744,000 Americans filed for 1st time unemployment last week.

Every week the numbers are the same.

no cents at all 5 minutes ago

Yet mall property owners and their ilk have equity prices in the stratosphere. Same with cruise lines. A mystery. (Although doesn't take scooby doo to understand why)

is scooby canceled yet?

aarockstar 7 minutes ago

A 60 year retail experiment goes bust...

[Apr 09, 2021] Over the past decade, corporations have benefitted at the expense of labor to an unprecedented degree. This is already leading to serious, "political problems," of the sort predicted by Warren Buffett 20 years ago

Apr 09, 2021 | www.zerohedge.com

...Part of the runup in stock prices over the past year is due to the rebound in earnings we will see over the next few quarters. However, now that interest rates, oil prices and the dollar index have each been rising for some time, earnings growth will almost certainly peak and rollover next year, falling back into negative territory. As the stock market discounts fundamentals roughly 18 months into the future, according to Stan Druckenmiller, this bearish reversal in fundamentals could begin to affect stock prices relatively soon.

Longer-term there is a very real risk to record-high corporate profit margins. Over the past decade, corporations have benefitted at the expense of labor to an unprecedented degree. This is already leading to serious, "political problems," of the sort predicted by Warren Buffett 20 years ago. The current administration appears to view rectifying this situation as its primary mandate and will, apparently, go about fulfilling it by, among other things, raising corporate income taxes and boosting a jobs market already showing signs of overheating.

Finally, as Mehul Daya has demonstrated, history shows that rising interest rates regularly act as a bearish catalyst for both markets and the economy. To the extent that low interest rates and easy money have encouraged and incentivized the unprecedented amount of leverage supporting risk assets today, the reversal in rates, which is already more dramatic than anything we have seen in decades, threatens to reveal just how fragile markets and the economy have now become.

For the rest of the chart book and a more detailed discussion of these issues, check out the interview, scheduled to be released tomorrow, at MacroVoices.com .

[Apr 09, 2021] US yields are heading lower, the US dollar is heading down, and US stocks are heading up, in a continuation of their own long-running impossible dream

Apr 09, 2021 | www.zerohedge.com

That seems to be the mood music at the White House; and the IMF; and the World Bank; and the Fed, and in fact most central banks. All of them are busy building back better-ly. Ambitious global tax plans are on the table to wipe tax havens off them; US spending plans are being pushed; and Treasury Secretary Yellen is talking about "labor vs. capital": perhaps she will soon add "M > C > MP > C+ > M+" to underline how the economy actually works, which none of the neoclassical models at the Treasury or the Fed do?

Regardless, US yields are heading lower, the US dollar is heading down, and US stocks are heading up, in a continuation of their own long-running impossible dream . Let me tell you a tall tale: perhaps just one man is ultimately responsible for that right now - US Democrat Senator Joe Manchin. He appears on what some might see as an anti -quixotic quest that may stop the White House from tilting at any windmills (or solar panels or broader "infrastructure").

Senator Manchin yesterday reaffirmed via a Washington Post op-ed that he will not back proposed changes to the Senate filibuster rule (" I have said it before and will say it again to remove any shred of doubt: There is no circumstance in which I will vote to eliminate or weaken the filibuste r") or support " shortcutting the legislative process through budget reconciliation ." Both of those statements, if not negotiating positions, will prove to be giants obstructing the path of President Biden's domestic agenda. It doesn't mean nothing will get done – but it means nothing like what some people were recently thinking was going to get done now will.

If so, as stocks and bonds ebulliently suggest, there is still a white knight to save us, however : those plodding Sancho Panzas turned would-be dashing Dons, our central banks . It is they who will continue to chase their own impossible dream of saving the world via yield curve manipulation and junk asset purchases without lancing price-discovery and capitalism at the same time. On a related note, Fed Chair Powell spoke yesterday against a backdrop of supply-chain stresses that mean Americans can't get ketchup to go with their fries , and explained he isn't worried about inflation, but infections. As I keep repeating, this stance is only logically consistent if one really *is* thinking about labour vs. capital: but Fed policy cannot deal with that populist 'red' issue any more than it can with a popular red condiment. It's all fiscal and political-economy, which seems a dream too far at the moment.

Some might think it remarkable that the fate of the US economy, and hence the world economy, can really turn on the actions of just one man. Welcome to the absurdity of real life. As Cervantes noted: "When life itself seems lunatic, who knows where madness lies? Perhaps to be too practical is madness. To surrender dreams -- this may be madness. Too much sanity may be madness -- and maddest of all: to see life as it is, and not as it should be!" At least Manchin was elected. By contrast, who elected central banks? (On which, what happens if the US, or anywhere, elects an administration which wants to move away from a green economy when their "independent" central bank has pledged to support the transition towards one? Has anyone thought about that, or are we all too busy singing from the same hymn sheet to suppose it could ever happen?)

[Apr 09, 2021] Tech boost lifts S P to record as U.S. Treasury yields retreat

Apr 09, 2021 | finance.yahoo.com

Interesting combination: Rise of fear in bond market along with rising recklessness in stoack markets

10-year U.S. Treasury note fall as low as 1.628% for a second straight day as it continues to back away from a 14-month high of 1.776% hit in late March.

...

The recent pullback in yields has helped high growth names such as those in the technology sector, the best performing sector on the day, while megacap stocks such as Apple , Microsoft and Amazon were the biggest boosts to the S&P 500.

The gains have also sent the tech-heavy Nasdaq to a seven-week high and within 2% of its February 12 record closing high.

The Russell 1000 growth index, which consists of tech-related stocks, gained 1.05%, while its value counterpart , comprising mostly financials and energy names, slipped 0.11%.

[Apr 09, 2021] Mall Vacancy Rate Hits Another Record High by Daphne Howland

The situation with office and retail space after COVID-19 is simply bad. There will be no return to previous state. And this situation generall reflact that general situation in the US economy/ In this sense stock market is completely detached from reality, fueled by speculation and 401K inflows. The latter makes passivly managed funds like based on S&P500 index yet another Ponzi scheme.
Apr 09, 2021 | www.zerohedge.com

By Daphne Howland of RetailDive ,

Summary:

... " Both office and retail are going through a structural change that will continue to cause many firms to look closely at their respective footprints," LaSalvia said . "As their leases expire, it is likely some will move or downsize, putting further downward pressure on rents and vacancy rates through this year and into 2022."

The fate of malls is the most dire. Retailers were already shrinking their footprints, especially at malls, well before the pandemic. The flight of anchors has also picked up, as department stores like Nordstrom and Macy's increasingly shy away from the mall. Since the start of the pandemic, with retail businesses scrutinizing their store productivity more closely than ever, much power has shifted away from landlords , which are making more concessions to lease terms.

..."[R] etail is slogging through the evolutionary process that started well before the pandemic," LaSalvia said . "Malls are of more concern than neighborhood centers, but even then, it is unlikely that we will close down every single mall in the US."


9.1ontherichterscale 34 minutes ago (Edited)

Who wants to go to a mall to be immersed in all sorts of diversity?

Malls were nice in the 1980s.

SMC 13 minutes ago

Strength through diversity expects that each human will on average, provide their best and not be silenced or restrained by expectations of physical and/or intellectual equality.

Our ancestors fought and bled so all citizens are free men and women. The virtual chains some citizens wear today are of their own making. If they are not tossed aside, tomorrow they may real for all.

FurnitureFireSale 30 minutes ago

I don't feel like dealing with hood rats. Most of America feels the same way, I suspect.

PGR88 26 minutes ago (Edited)

Our local mega-mall, when it was functioning "normally" a decade ago, needed an actual army of hired security on Thursday/Friday/Saturdays to manage the local hood rats who crossed the highway from the ghetto, to prevent them from tearing the place apart.

CheapBastard 25 minutes ago

Mall vacancies and business closures all time high under Biden.

Fact Checked : True ✔️

yerfej 11 minutes ago

Sometimes reality bites.

homeskillet 17 minutes ago

The Malls will also be listed as a Covid fatality, but they had many other underlying causes... like a motorcycle accident being listed as a Covid fatality.

itstippy 23 minutes ago

The big mall in Madison, WI (East Towne Mall) has been dying for a couple decades now, but all kinds of Big Box stores and chain restaraunts around it have been thriving. As mall traffic diminished every year, Gander Mountain, Cabellas, Target, and many others built giant retail outlets in the same area stealing the mall's business. Dozens of chain restaraunts moved in too. Traffic was busy, busy.

Now the entire area, mall and surrounding retail, is dying. It started before the Covid-19 retail catastrophe and I doubt it will reverse. People sit at home, buy stuff from Amazon, buy food from Go Grub, and get social interaction on Twitter & Facebook.

The mall has nothing left but a Sunglasses Hut and a store that sells cinnamon sticky buns.

arby63 29 minutes ago

Too much has changed for traditional malls to survive. I cannot imagine a solid path forward.

adr 25 minutes ago (Edited)

You can go to what was one of the busy high end malls outside Boston, and see half of it empty.

The stores that are open only allow five to eight customers in at a time, and have a ten minute time limit for you to spend inside. Stores worth going to have lines of people outside. You are also pretty much forced to buy something, otherwise the people waiting in line scream at you for wasting their time.

The food courts are open, but only for takeout. You can't sit in the mall and eat.

It is just about the worst experience you can have. Then you can't even go to a bar, because all bars in Massachusetts are still closed. You can only get alcohol if you are eating food.

Cock Strong 38 minutes ago

Bezos notches another $100 billion.

[Apr 09, 2021] US Bonds Aren't Giving Investors The Returns They Once Did. Here's Why by Jack Pitcher and Christopher Cannon

Apr 09, 2021 | www.bloomberg.com
American savers could once count on bonds to provide meaningful returns with modest risk. Not anymore.

More than a decade of easy money has kept the U.S. economy afloat in times of crisis and fueled an unprecedented boom in financial markets.

But it's also created a whole new series of risks, especially for savers.

Where there was once a vast pool of safe debt in which they could park their cash and count on annual payouts of 5% or more -- comfortably above inflation -- today there's little more than a puddle, and a shrinking one at that. In fact, never has the amount of new government and corporate debt paying even modest yields been so minuscule.

Institutional investors and savers looking for a 5% annual interest rate had plenty of new bond and loan offerings rated BB and above to choose from prior to the 2008 financial crisis. These included debt from government-sponsored mortgage-loan companies like Fannie Mae and Freddie Mac.

$932.6B

580 parent issuers

Rating:

BB

BBB

A

AA

AAA

$84.0B

Federal National Mortgage

Association

(Fannie Mae)

$179.4B

Federal Home Loan Banks

$85.2B

Federal Home Loan Mortgage Corp

(Freddie Mac)

By 2019, after a decade in which the Federal Reserve kept benchmark rates near zero, the pool had shrunk dramatically, despite the fact that issuance of new debt was near record levels. Debt rated A or above paying 5% virtually disappeared, leaving the vast majority of such offerings rated in the lowest tier of investment-grade, or worse.

$333.0B

301 parent issuers

$7.5B

Altice USA Inc

$11.7B

◀ The Walt Disney Company

Now, after the Fed's unprecedented intervention in bond markets drove rates down even further in the pandemic, finding anything paying more than 5% has become difficult, except for investors willing to dip into the riskiest parts of the junk-bond market. While cheap borrowing costs have been a boon for corporate America, the same can't be said for money managers that need to generate returns that match their long-term obligations.

$131.7B

138 parent issuers

$23.9B

Petroleos Mexicanos

The repercussions -- for pension managers, endowments, insurance companies and 70 million baby boomers starting their retirements -- are vast. Sure, yields aren't negative like in much of Europe, but many are nonetheless being forced to, as legendary investor Warren Buffett recently put it , "juice the pathetic returns now available by shifting their purchases to obligations backed by shaky borrowers."

Others may choose to heed the advice of Ray Dalio, the founder of hedge fund giant Bridgewater Associates, who now recommends avoiding the U.S. bond market entirely and focusing on higher-returning, non-debt investments.

Junk's Rock-Bottom Rates
The average yield on bonds rated BB and lower recently fell to a record low.

Average yield

12%

Covid-19

Recession

10

8

6

3.89%

4

2011

2013

2015

2017

2019

2021

While the potential payout is greater, such moves also carry significant risk, especially for groups previously accustomed to holding only the safest assets.

It's possible that as savers push deeper into lower-rated debt, equities and more esoteric markets, the reckoning never comes.

But most know that's ultimately unlikely.

"It's a struggle that all of the public pension plans have been facing for a number of years -- there are some solutions, and there are some hope and pray trades," said Steve Willer, who helps manage $21 billion as deputy chief investment officer at the Kentucky Public Pensions Authority, which has lowered certain return targets amid the changing investment environment. "People are having to be more creative in looking at different segments of the debt market. That comes with different risks."

Source: Bloomberg compilation of government and corporate dollar-denominated bond and loan offerings with a yield of 5% or more at issue and at least one BB- or higher rating from S&P Global Ratings, Moody's Investors Service or Fitch Ratings. Issuance is for the six months ended March 31. Debt amounts are aggregated by issuer and ratings tier. Data includes debt issued in exchange for older bonds and notes linked to currencies that may yield more than traditional securities.

Editors: Boris Korby, Natalie Harrison and Alex Tribou

[Apr 09, 2021] Ethnicity Is a Bad, Often Destructive, Reason to Hire

Highly recommended!
Apr 08, 2021 | www.wsj.com

Judge James C. Ho is absolutely correct to imply it is profoundly offensive to be offered opportunity based on race rather than merit (" Notable & Quotable: Judges ," March 27).

When I was approaching graduation and beginning my job search, a friend of the family, who was Jewish himself, approached me with an opportunity. His accounting firm, one of the "Big Eight" firms, had inquired if he knew any young Jewish accountants it could hire because it didn't have any Jews working in the firm. The family friend told me this was a wonderful opportunity and that I would be made partner and become prosperous. He was shocked when I responded no, and asked why. I told him if I accepted this offer, I would never know if I was successful because I was Jewish or because I was talented and skilled.

I have never once regretted my decision.

[Apr 08, 2021] There is no inflation, it is just that everything costs more.

Apr 08, 2021 | www.wsj.com


B
BA Byron SUBSCRIBER 1 day ago @ Anthony

Economists: " There is no inflation, it is just that everything costs more. "

[Apr 08, 2021] The derivatives, options, swaps, margin investing are effective instruments to skim the cream and leave the traditional investors to sit on the foam

Apr 08, 2021 | www.wsj.com

C Charles Bromley SUBSCRIBER 16 hours ago The old joke: There are two steps that can be taken to be absolutely sure of making $1M on Wall Street. First Step......start with $2M...... R Richard Hightower SUBSCRIBER 23 hours ago At some point the revelation will be clear, in all probability after the fact, that the trade Archegos had on, in one variant or the other, is the same trade that is on in every corner of the markets, and on a global basis. The "trade" is simple and works like magic to its practitioners, some of whom are quite unwitting.

The underlying is an asset class steadily rising in price devoid of valuation consideration , levered by leverage upon leverage, and contingent upon low and lower rates - financing rates, carrying costs, discount rate assumptions, and market derived interest rates. If rates are low and lower, bravo. If rates rise, the trade unwinds.

The unwind has already started, slowly at first and then spectacularly.

It will truly be a Minsky Moment, with a Dornbusch footnote. Look it up.

Like thumb_up 17 Reply Share link Report A Anin Nathan SUBSCRIBER 1 day ago The derivatives, options, swaps, margin investing are effective instruments to skim the cream and leave the traditional investors to sit on the foam. You may hate to hear that, but that is how the system works. Like thumb_up 8 Reply Share link Report J John Goldin SUBSCRIBER 1 day ago Interesting how everyone frets about "unsophisticated" individual investors distorting the market, while so called "sophisticated" investors are the ones with much higher leverage. Individuals levering up is a risky personal choice. Multi-billion dollar hedge funds levering up 10x (or more) is a systemic risk.

[Apr 08, 2021] Excessive leverage is a sign of coming Minsky moment

Highly recommended!
Low interests rate fuel stock bubble
Notable quotes:
"... That was up 49% from one year earlier, the fastest annual increase since 2007, during the frothy period before the 2008 financial crisis. Before that, the last time investor borrowings had grown so rapidly was during the dot-com bubble in 1999. ..."
"... Significant increases in value without corresponding increases in earnings is the sign of a bubble. The entire S&P 500 has been significantly overvalued for several years now. The cyclically adjusted PE ratio is several times it's historical mean. Historically markets have ALWAYS reverted back to the mean. ..."
Apr 07, 2021 | www.wsj.com

Originally from: Investors Big and Small Are Driving Stock Gains By Alexander Osipovich and David Benoit

As of late February, investors had borrowed a record $814 billion against their portfolios, according to data from the Financial Industry Regulatory Authority, Wall Street's self-regulatory arm. That was up 49% from one year earlier, the fastest annual increase since 2007, during the frothy period before the 2008 financial crisis. Before that, the last time investor borrowings had grown so rapidly was during the dot-com bubble in 1999.

... some analysts say run-ups in margin debt contribute to bubbles, and they fear that today's levels of borrowing will hurt investors if the market has a downturn.

... Leverage combined with internet hype can be dangerous, the Commodity Futures Trading Commission said in a notice to investors Tuesday.

...It is unclear how many other investment firms have obtained Archegos-style levels of leverage. Little disclosure is required in the market for total return swaps, which Wall Street banks privately tailor for clients.


Like thumb_up 1 Reply Share link Report P Peter Hayes SUBSCRIBER 8 hours ago (Edited) In the year prior to CoVid the S&P grew 21%, from 2,775 to 3,380, meaning it already factored in robust future growth. It plummeted to 2,305 in March 2020, and has since rebounded to 4,080. Are we saying the economy is 20% better than it was right before CoVid? Are we kidding ourselves? While things in general are much better than they were last summer, there are still huge segments of the economy which have been utterly devastated by the shutdowns, i.e. commercial real estate, tourism, hospitality and restaurant industries, and countless mom-and-pop businesses. The hot housing market masks the huge number of mortgages which have been forbeared since April 2020, and will continue so to the end of this year. There's going to be a day of reckoning for all this, probably sooner than later. The S&P should probably be in the range of 3,000 right now, not 4,000, meaning it's at least 33% overvalued. Like thumb_up 1 Reply Share link Report K Kim Jady SUBSCRIBER 9 hours ago Remember the Duke brothers in Trading Places? "Margin call gentlemen." ike thumb_up 3 Reply Share link Report B Bill Payne SUBSCRIBER 10 hours ago Only one thing gives a stock any value; the underlying company's ability to generate an income stream into the future. If the price/earnings ratio increases significantly it means that the stock is increasing in value for some reason other than earnings. There is no valid reason for the stock price to increase other than through increased earnings. Significant increases in value without corresponding increases in earnings is the sign of a bubble. The entire S&P 500 has been significantly overvalued for several years now. The cyclically adjusted PE ratio is several times it's historical mean. Historically markets have ALWAYS reverted back to the mean. Even though the Fed has kept the market artificially propped up there will be a massive correction coming at some time probably followed by a recession. Historically it has always worked this way. We had better watch out. It's not only limited to one sector of the market like it was in 1999 or 2008. It's the entire market. A ANDREW BLENCOWE SUBSCRIBER 12 hours ago 1927 returns

Benjamin Strong cut the Fed's discount rate 0.5% in 1927

So -- it would appear -- the world is currently two years away from its 1929
Like thumb_up Reply Share link Report K Kamalesh Banerjee SUBSCRIBER 17 hours ago (Edited) The total market capitalization of the US stock market now is about $41 trillion (that is trillion with a t). Total margin debt of $ 814 billion is not a large percentage of the total market cap (under 2%). Thus it is misleading to say that margin debt is fueling the bull market. Yes, some investors (individuals and hedge funds) may be over leveraged but the market as a whole is not. Some pockets of the market are frothy but the market as a whole is not. This is not the roaring 1920s. - yet! Like thumb_up 2 Reply Share link Report P Paul Smith SUBSCRIBER 9 hours ago (Edited) Interesting! Curious what it was prior to great depression and great recession, and if similar why was margin blamed, to a great extent, for great depression? EDIT a quick read indicates in 1928 margin of 2 to 1 was allowed, and many margin calls wiped people out resulting in a spiralling downward of share prices. So seems that margin issue perhaps causes an outsize amount of market risk despite it's low overall percent. Like thumb_up Reply Share link Report MARK JURECKI MARK JURECKI SUBSCRIBER 8 hours ago That's an astute observation. The potential damage of widespread margin calls is the destruction of the 'buy side' of stock transactions.

The Great Depression was sometimes described as a failure of the Demand Side. Deflation causing potential investors to hold onto cash and wait for a better deal. Quashing the market. R Richard Hightower SUBSCRIBER 23 hours ago At some point the revelation will be clear, in all probability after the fact, that the trade Archegos had on, in one variant or the other, is the same trade that is on in every corner of the markets, and on a global basis. The "trade" is simple and works like magic to its practitioners, some of whom are quite unwitting. The underlying is an asset class steadily rising in price devoid of valuation consideration , levered by leverage upon leverage, and contingent upon low and lower rates - financing rates, carrying costs, discount rate assumptions, and market derived interest rates. If rates are low and lower, bravo. If rates rise, the trade unwinds.

The unwind has already started, slowly at first and then spectacularly.

It will truly be a Minsky Moment, with a Dornbusch footnote. Look it up. Like thumb_up Reply Share link Report P PJ L SUBSCRIBER 1 day ago Stocks are up and everyone is buying on margin to get in on the unprecedented bull market, more millionaires are being created than ever in the entirety of history.

in the fanatical exuberance disconnected to reality, Every company begins overproducing goods to fill a demand because look how high the market is! We're in an economic boom, everyone is going to buy OUR stuff. Make more!

Credit is so cheap, you're missing out if you don't lever up and get in on all this sweet action...

Sound familiar? Oh wait that's what led to the crash of 1929 and the great depression thereafter...

[Apr 08, 2021] There is never just one rat in the basement

At the same time "the market can stay irrational longer than you can stay solvent"
Apr 08, 2021 | www.wsj.com
C C Cook SUBSCRIBER 1 day ago The unanswered question is not if there are a lot of other Archegos, no doubt there are. But what are the big banks going to do? When one bank gets burned and execs fired, other bank execs and investors get nervous. Maybe unwind similar investor deals. Maybe quickly.

There is never just one rat in the basement... K Kevin H SUBSCRIBER 1 day ago The argument we hear as every bubble inflates is that "this time is different". Perhaps the reason each bubble deflates is different, but irrational investor psychology seems to be the driving force behind each lap on the rollercoaster.

Admittedly, the search for yield of any kind has forced many investors to stay more heavily in the market than they might otherwise consider doing. While risk free (or close to risk free) returns are usually at least somewhat uninspiring, they're virtually non-existent right now.

So, the search for any type of yield could be fueling the market's fire for at least a while longer. Even with that said, the wildly speculative behavior I'm seeing lately does make me a bit nervous.

It reminds me of the dot com era, and the housing bubble... both were times when people repeatedly reassured each other with the thought that "it's different, this time". J James Webb SUBSCRIBER 1 day ago John, an old market saying I'm sure you're familiar with, "the market can stay irrational longer than you can stay solvent."

Plus identifying market tops are far more difficult than identifying market bottoms. March 2020 was EASY!

A crash will come. This year? Next year? 5 years from now? 20 years from now?

I've gone through four crashes in my life. 1987, 2001, 2008, 2020. 1974 was also during my life but way before I even knew what the stock market was.

The 1987 and 2020 were very short lived, deep and scary, but were over very quickly. 2001 and 2008 were scary and felt never ending.

Pick an allocation, rebalance and live life. When a crash comes, BUY! B BA Byron SUBSCRIBER 1 day ago @ LANCE

Because most people see an insane increases in the market as a wonderful thing, rather than a worrisome trend. They congratulate themselves for buying high in a bull market and they never learn from their mistakes - because they refuse to admit they made any. It is always those greedy "others" who did this to them.

It goes like this:
Bull market = " Buy! I'm a genius! "
Bear market = " Sell! Bad luck! "

Rinse wash repeat.

"Investors should remember that excitement and expenses are their enemies. And if they insist on trying to time their participation in equities, they should try to be fearful when others are greedy and greedy when others are fearful. " - Warren Buffett
Like thumb_up 2 Reply Share link Report

[Apr 08, 2021] This totally looks like 1929 all over again

Apr 08, 2021 | www.wsj.com

B Bill Hestir SUBSCRIBER 1 day ago Stocks Soar As Bank Aid Ends Fear of Money Panic
By W. A. Lyon in the New York Herald Tribune on March 28, 1929

The stock market strode out from under the shadow of a panic in call money that so lately threatened, but was revived in all its old strength yesterday.

Assured that the New York banks were ready with their boundless resources to prevent a money crisis, the public and the professional trader set out to repair the damage done to prices on Monday and the major part of Tuesday.

Stocks in the aggregate, though bucking a 15 per cent rate for loans, enjoyed the greatest advance they have known in a single day in the last two years. Not even the surging bull markets of the memorable year 1928 saw such a day of heavy buying. Like thumb_up 8 Reply Share link Report P Peter Hayes SUBSCRIBER 1 day ago This totally looks like 1929 all over again. Maybe we'll even see "Bidenvilles" popping up at some future date.

[Apr 08, 2021] Financial crises get triggered about every 10 years -- Archegos might be right on time by Paul Brandus Paul Brandus Financial crises are never quite the same. During the late 1980s, nearly a third of the nation's savings and loan associations failed, ending with a taxpayer bailout -- in 2021 terms -- of about $265 billion. In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- Financial crises are never quite the same. During the late 1980s, nearly a third of the nation's savings and loan associations failed, ending with a taxpayer bailout -- in 2021 terms -- of about $265 billion. In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- In 1997-1998, financial crises in Asia and Russia led to the near meltdown of the largest hedge fund in the U.S. -- Long-Term Capital Management (LTCM). Its reach and operating practices were such that Federal Reserve Chairman Alan Greenspan said that when LTCM failed, "he had never seen anything in his lifetime that compared to the terror" he felt. LTCM was deemed "too big to fail," and he engineered a bailout by 14 major U.S. financial institutions. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data.

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Here's the potential danger. Family offices generally aren't regulated. The 1940 Investment Advisers Act says firms with 15 clients or fewer don't have to register with the Securities and Exchange Commission. What this means is that trillions of dollars are in play and no one can really say who's running the money, what it's invested in, how much leverage is being used, and what kind of counterparty risk may exist. (Counterparty risk is the probability that one party involved in a financial transaction could default on a contractual obligation to someone else.)

This appears to be the case with Archegos. The firm bet heavily on certain Chinese stocks, including e-commerce player Vipshop Holdings Ltd. VIPS, -1.59% , U.S.-listed Chinese tutoring company GSX Techedu Inc. GSX, -3.81% and U.S. media companies ViacomCBS Inc. VIAC, -3.65% and Discovery Inc. DISCA, -3.48% , among others. Share prices have tumbled lately, sparking large sales -- some $30 billion -- by Archegos.

The problem is that only about a third of that, or $10 billion, was its own money. We now know that Archegos worked with some of the biggest names on Wall Street, including Credit Suisse Group AG CS, +0.74% , UBS Group AG UBS, -0.18% , Goldman Sachs Group Inc. GS, +1.41% , Morgan Stanley MS, +1.47% , Deutsche Bank AG DB, -0.88% and Nomura Holdings Inc. NMR, -1.30% .

But since family offices are largely allowed to operate unregulated, who's to say how much money is really involved here and what the extent of market risk is? My colleague Mark DeCambre reported last week that Archegos' true exposures to bad trades could actually be closer to $100 billion .

Danger of counterparty risk

This is where counterparty risk comes in. As Archegos' bets went south, the above banks -- looking at losses of their own -- hit the firm with margin calls. Deutsche quickly dumped about $4 billion in holdings, while Goldman and Morgan Stanley are also said to have unwound their positions, perhaps limiting their downside.

So is this a financial crisis? It doesn't appear to be. Even so, the Securities and Exchange Commission has opened a preliminary investigation into Archegos and its founder, Bill Hwang.

One peer, Tom Lee, the research chief of Fundstrat Global Advisors, calls Hwang one of the "top 10 of the best investment minds" he knows.

But federal regulators may have a lesser opinion. In 2012, Hwang's former hedge fund, Tiger Asia Management, pleaded guilty and paid more than $60 million in penalties after it was accused of trading on illegal tips about Chinese banks. The SEC banned Hwang from managing money on behalf of clients -- essentially booting him from the hedge fund industry. So Hwang opened Archegos, and again, family offices aren't generally aren't regulated.

Yellen on the case

This issue is on Treasury Secretary Janet Yellen's radar. She said last week that greater oversight of these private corners of the financial industry is needed. The Financial Stability Oversight Council (FSOC), which she oversees, has revived a task force to help agencies better "share data, identify risks and work to strengthen our financial system."

Most financial crises end up with American taxpayers getting stuck with the tab. Gains belong to the risk-takers. But losses -- they belong to us. To paraphrase Abe Lincoln, family offices -- a multi-trillion dollar industry largely allowed to operate in the shadows in a global financial system that is more intertwined than ever -- are of the super-wealthy, by the super-wealthy and for the super-wealthy. And no one else.

The Archegos collapse may or may not be the beginning of yet another financial crisis. But who's to say what thousands of other family offices are doing with their trillions, and whether similar problems could blow up?

[Apr 08, 2021] As Meme Stock Mania Fizzles, Wall Street Sees 'Big Reckoning' - Articles - Advisor Perspectives

Apr 08, 2021 | www.advisorperspectives.com

As Meme Stock Mania Fizzles, Wall Street Sees 'Big Reckoning' by Bailey Lipschultz , 4/6/21

The day-trading Reddit crowd turned the first quarter of 2021 into one of the wildest periods of stock market mania in modern history. Books -- plural -- will undoubtedly be dedicated to the topic in years to come.

But after these small-time speculators banded together to drive up dozens of obscure stocks by hundreds or even thousands of percent -- and in the process burned a few hedge-fund barons betting on declines -- the movement appears to be petering out. An index that tracks 37 of the most popular meme stocks -- 37 of the 50 that Robinhood Markets banned clients from trading during the height of the frenzy -- is essentially unchanged over the past two months after soaring nearly 150% in January.

Talk to Wall Street veterans and they'll tell you that this flat-lining is the beginning of what will be an inexorable move downward in these stocks.

https://a99dc3c35fcc43a213aef0858d659f0e.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

It's not so much about the poor fundamentals of the companies. At least not in the short term. The day-trading zealots have shown a surprising ability to ignore those facts. It's more that as the pandemic slowly winds down and the economy starts to open up, many of them will leave their homes and start going back into offices and out to restaurants and embarking on trips near and far. And as they do, they may stop obsessing about their Robinhood accounts.

Their collective sway on the meme-stock universe, in other words, will wane.

"People are going to be doing other things," said Matt Maley, chief market strategist at Miller Tabak + Co. There will be a "big reckoning" at some point, he said. "There's no question in my mind."

https://a99dc3c35fcc43a213aef0858d659f0e.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Of course, the Wall Street set has, broadly speaking, misread the Reddit crowd for weeks earlier this quarter, and it's possible their analysis is wrong again now. Preliminary data, though, suggests they're right.

Recent reports suggest vaccinated Americans are planning long-awaited vacations with searches for " Google flights " reaching a peak popularity score of 100 this week, according to a Google Trends tracker. The opposite is being seen for terms like " stock trading " and " investing " which have plunged, Google Trends shows.

"The stimulus check impact on retail trading is waning," said Edward Moya, senior market analyst at Oanda. "Many Americans are looking to go big on attending sporting events, traveling across the country, vacationing, visiting family and friends, and revamping wardrobes before going out to restaurants, pubs and returning to the office."

Gamestop Juggernaut

Video-game retailer GameStop Corp. became the poster child for retail traders looking to rage against the hedge fund elite. However, the stock's 2,460% roller coaster alongside other favorites touted on Reddit's WallStreetBets thread caused as much pain as it did joy.

The stock's more than 900% surge this year has drawn a wary eye from the Wall Street analysts that follow it. The average 12-month price target implies the stock will lose more than three-quarters of its value from current levels. Only Jefferies holds a price target near Thursday's $191.45 close and that call came with the warning that shares are "subject to volatility beyond fundamentals."

https://a99dc3c35fcc43a213aef0858d659f0e.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

But any sense of GameStop trading on fundamentals has been ignored since it first captivated Wall Street and Reddit users in the back half of January. Bulls are more than happy to tout their bets on forums as a move to stick it to short sellers as they buy into a company rebirth delivered by activist investor Ryan Cohen.

Given AMC Entertainment Holdings Inc.'s position as a movie theater many Americans went to at some point, it's not a complete surprise as to why Reddit users rushed to the company's aide. #SaveAMC trended on Twitter and amateur investors appeared more than happy to fight against Wall Street's skeptics despite most movie theaters being closed due to the ongoing pandemic.

The chain's latest rally came amid plans to continue reopening cinemas, however, Wall Street is skeptical. None of the nine analysts tracking the company rate it a buy and the average price target implies the stock will lose 63% of its value in the coming year.

Retail euphoria leaked over to a broader range of securities from cult-favorites like Bitcoin, Tesla Inc., and the ARK Innovation ETF to smaller companies like the clothing retailer Express Inc. Chinese tech company The9 Limited is among the group's best performers this year with an 860% surge.

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The company's rally has been fueled by recent moves to ride the Bitcoin wave alongside peers like Future FinTech Group Inc. and Ault Global Holdings Inc.

Zomedica Corp., a small-cap animal health company, has become a cult favorite among retail investors chasing stocks with low share prices. The Ann Arbor, Michigan-based company started the year worth less than a quarter, but had soared as high as $2.91.

Trading volume of the company has accelerated this year with an average of 174 million shares changing hands per session, more than four times the average over the course of 2020. A mention from Tiger King's Carole Baskin helped it go viral in mid-January.

Bloomberg News provided this article. For more articles like this please visit bloomberg.com .

Read more articles by Bailey Lipschultz


[Apr 08, 2021] How We Work Vaporized Billions of Investor Wealth

Apr 08, 2021 | www.advisorperspectives.com

The good news is that you can obtain the historical perspective missing from Billion Dollar Loser with a reading list that is every bit as much fun . Start with The Smartest Guys in the Room by Bethany McLean and Peter Elkind, the story of the Enron con. Then travel back into the Roaring Twenties with Frederick Lewis Allen's description of Samuel Insull's electrical utility empire in The Lords of Creation , then finish up with Edward Chancellor's nonpareil Devil Take the Hindmost , which describes Neumann's most remote business ancestors, John Blunt of the South Sea Company and the nineteenth century English railway titan, George Hudson. Finally, for sheer moral turpitude, nothing beats John Carreyrou's exposition of the Elizabeth Holmes/Theranos disaster, Bad Blood .

Not only will you be entertained, but the WeWork, Enron, Insull, Hudson, Blunt, and Holmes narratives will alert you to the signs of impending catastrophe: lofty rhetoric, millennial predictions, and public adulation that almost inevitably give rise to overweening hubris. With luck you'll be able to immunize your portfolios against the siren song of the never-ending parade of entrepreneurial heroes served up by your colleagues, your clients, and a breathless financial press.

Elon Musk and TSLA, anyone?

William J. Bernstein is a neurologist, co-founder of Efficient Frontier Advisors, an investment management firm, and has written several titles on finance and economic history. He has contributed to the peer-reviewed finance literature and has written for several national publications, including Money Magazine and The Wall Street Journal. He has produced several finance titles, and four volumes of history, The Birth of Plenty, A Splendid Exchange, Masters of the Word, and The Delusions of Crowds about, respectively, the economic growth inflection of the early 19th century, the history of world trade, the effects of access to technology on human relations and politics, and financial and religious mass manias. He was also the 2017 winner of the James R. Vertin Award from CFA Institute.

[Apr 08, 2021] The Next "Minsky Moment" Is Inevitable by Lance Roberts

Images removed. See the original for the full text.
Feb 18, 2020 | www.advisorperspectives.com
by Lance Roberts of Real Investment Advice , 2/18/20

In 2007, I was at a conference where Paul McCulley, who was with PIMCO at the time, was discussing the idea of a "Minsky Moment." At that time, this idea fell on "deaf ears" as the markets, and economy, were in full swing.

However, it wasn't too long before the 2008 "Financial Crisis" brought the "Minsky Moment" thesis to the forefront. What was revealed, of course, was the dangers of profligacy which resulted in the triggering of a wave of margin calls, a massive selloff in assets to cover debts, and higher default rates.

So, what exactly is a "Minskey Moment?"

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Economist Hyman Minsky argued that the economic cycle is driven more by surges in the banking system, and in the supply of credit than by the relationship which is traditionally thought more important, between companies and workers in the labor market.

In other words, during periods of bullish speculation, if they last long enough, the excesses generated by reckless, speculative, activity will eventually lead to a crisis. Of course, the longer the speculation occurs, the more severe the crisis will be.

Hyman Minsky argued there is an inherent instability in financial markets. He postulated that an abnormally long bullish economic growth cycle would spur an asymmetric rise in market speculation which would eventually result in market instability and collapse. A "Minsky Moment" crisis follows a prolonged period of bullish speculation which is also associated with high amounts of debt taken on by both retail and institutional investors.

One way to look at "leverage," as it relates to the financial markets, is through "margin debt," and in particular, the level of "free cash" investors have to deploy. In periods of "high speculation," investors are likely to be levered (borrow money) to invest, which leaves them with "negative" cash balances.

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While margin balances did decline in 2018, as the markets fell due to the Federal Reserve hiking rates and reducing their balance sheet, it is notable that current levels of "leverage" are still excessively higher than they were either in 1999, or 2007.

This is also seen by looking at the S&P 500 versus the growth rate of margin debt.

The mainstream analysis dismisses margin debt under the assumption that it is the reflection of "bullish attitudes" in the market. Leverage fuels the market rise. In the early stages of an advance, this is correct. However, in the later stages of an advance, when bullish optimism and speculative behaviors are at the peaks, leverage has a "dark side" to it. As I discussed previously:

"At some point, a reversion process will take hold. It is when investor 'psychology ' collides with 'leverage and the problems associated with market liquidity. It will be the equivalent of striking a match, lighting a stick of dynamite, and throwing it into a tanker full of gasoline."

That moment is the "Minsky Moment."

As noted, these reversion of "bullish excess" are not a new thing. In the book, " The Cost of Capitalism, " Robert Barbera's discussed previous periods in history:

The last five major global cyclical events were the early 1990s recession -- largely occasioned by the U.S. Savings & Loan crisis, the collapse of Japan Inc. after the stock market crash of 1990, the Asian crisis of the mid-1990s, the fabulous technology boom/bust cycle at the turn of the millennium and the unprecedented rise and then collapse for U.S. residential real estate in 2007-2008.

All five episodes delivered recessions, either global or regional. In no case was there as significant prior acceleration of wages and general prices. In each case, an investment boom and an associated asset market ran to improbably heights and then collapsed. From 1945 to 1985 there was no recession caused by the instability of investment prompted by financial speculation -- and since 1985 there has been no recession that has not been caused by these factors.

Read that last sentence again.

Interestingly, it was post-1970 the Federal Reserve became active in trying to control interest rates and inflation through monetary policy.

As noted in "The Fed & The Stability Instability Paradox:"

"In the U.S., the Federal Reserve has been the catalyst behind every preceding financial event since they became 'active,' monetarily policy-wise, in the late 70's. As shown in the chart below, when the Fed has lifted the short-term lending rates to a level higher than the 2-year rate, bad 'stuff' has historically followed."

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The Fed Is Doing It Again

As noted above, "Minsky Moment" crises occur because investors, engaging in excessively aggressive speculation, take on additional credit risk during prosperous times, or bull markets. The longer a bull market lasts, the more investors borrow to try and capitalize on market moves.

However, it hasn't just been investors tapping into debt to capitalize on the bull market advance, but corporations have gorged on debt for unproductive spending, dividend issuance, and share buybacks. As I noted in last week's MacroView :

"Since the economy is driven by consumption, and theoretically, companies should be taking on debt for productive purposes to meet rising demand, analyzing corporate debt relative to underlying economic growth gives us a view on leverage levels."

"The problem with debt, of course, is it is leverage that has to be serviced by underlying cash flows of the business. While asset prices have surged to historic highs, corporate profits for the entirety of U.S. business have remained flat since 2014. Such doesn't suggest the addition of leverage is being done to 'grow' profits, but rather to 'sustain' them."

Over the last decade, the Federal Reserve's ongoing liquidity interventions, zero interest-rates, and maintaining extremely "accommodative" policies, has led to substantial increases in speculative investment. Such was driven by the belief that if "something breaks," the Fed will be there to fix to it.

Despite a decade long economic expansion, record stock market prices, and record low unemployment, the Fed continues to support financial speculation through ongoing interventions.

John Authers recently penned an excellent piece on this issue for Bloomberg:

"Why does liquidity look quite so bullish? As ever, we can thank central banks and particularly the Federal Reserve. Twelve months ago, the U.S. central bank intended to restrict liquidity steadily by shrinking the assets on its balance sheet on "auto-pilot." That changed, though. It reversed course and then cut rates three times. And most importantly, it started to build its balance sheet again in an attempt to shore up the repo market -- which banks use to access short-term finance -- when it suddenly froze up in September. In terms of the increase in U.S. liquidity over 12 months, by CrossBorder's measures, this was the biggest liquidity boost ever:"

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While John believes we are early in the global liquidity cycle, I personally am not so sure given the magnitude of the increase Central Bank balance sheets over the last decade.

Currently, global Central Bank balance sheets have grown from roughly $5 Trillion in 2007, to $21 Trillion currently. In other words, Central Bank balance sheets are equivalent to the size of the entire U.S. economy.

In 2007, the global stock market capitalization was $65 Trillion. In 2019, the global stock market capitalization hit $85 Trillion, which was an increase of $20 Trillion, or roughly equivalent to the expansion of the Central Bank balance sheets.

In the U.S., there has been a clear correlation between the Fed's balance sheet expansions, and speculative risk-taking in the financial markets.

Is Another Minsky Moment Looming?

The International Monetary Fund (IMF) has been issuing global warnings of high debt levels and slowing global economic growth, which has the potential to result in Minsky Moment crises around the globe.

While this has not come to fruition yet, the warning signs are there. Globally, there is roughly $15 Trillion in negative-yielding debt with asset prices fundamentally detached for corporate profitability, and excessive valuations on multiple levels.

As Desmond Lachman wrote:

"How else can one explain that the risky U.S. leveraged loan market has increased to more than $1.3 trillion and that the size of today's global leveraged loan market is some two and a half times the size of the U.S. subprime market in 2008? Or how else can one explain that in 2017 Argentina was able to place a 100-year bond? Or that European high yield borrowers can place their debt at negative interest rates? Or that as dysfunctional and heavily indebted government as that of Italy can borrow at a lower interest rate than that of the United States? Or that the government of Greece can borrow at negative interest rates?

These are all clear indications that speculative excess is present in the markets currently.

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However, there is one other prime ingredient needed to complete the environment for a "Minsky Moment" to occur.

That ingredient is complacency.

Yet despite the clearest signs that global credit has been grossly misallocated and that global credit risk has been seriously mispriced, both markets and policymakers seem to be remarkably sanguine. It would seem that the furthest thing from their minds is that once again we could experience a Minsky moment involving a violent repricing of risky assets that could cause real strains in the financial markets."

Desmond is correct. Currently, despite record asset prices, leverage, debt, combined with slowing economic growth, the level of complacency is extraordinarily high. Given that no one currently believes another "credit-related crisis" can occur is what is needed to allow one to happen.

Professor Minsky taught that markets have short memories, and that they repeatedly delude themselves into believing that this time will be different. Sadly, judging by today's market exuberance in the face of mounting economic and political risks, once again, Minsky is likely to be proved correct.

At this point in the cycle, the next "Minsky Moment" is inevitable.

All that is missing is the catalyst to start the ball rolling.

An unexpected recession would more than likely due to trick.

Lance Roberts is a Chief Portfolio Strategist/Economist for RIA Advisors . He is also the host of " The Lance Roberts Podcast " and Chief Editor of the " Real Investment Advice " website and author of " Real Investment Daily " blog and "Real Investment Report". Follow Lance on Facebook , Twitter , Linked-In and YouTube

© Real Investment Advice

© Real Investment Advice

[Apr 08, 2021] The Minsky Moment- Why Stability Leads To Panic And What To Do About It by John Jennings

Jan 04, 2021 | www.forbes.com

GETTY

We all know that the economy moves in cycles; boom is followed by bust is followed by boom seemingly forever. A question we'd all like the answer to is: "Where are we now in the cycle?" Economist Hyman Minsky's "financial instability hypothesis" helps answer this question.

Classical Economics Assumes the Market is Fundamentally Stable

An assumption underlying classical economic theory is that the economy is fundamentally stable and seeks equilibrium. The theory holds that as excesses occur, rational market actors see the excesses and act to make money or avoid losing it, and thereby move the economy back toward equilibrium.

According to this theory, bubbles and crashes are caused by external shocks to the economy such as disease, wars, and technological discoveries. While external shocks, such as the OPEC oil embargo of the 1970s or the current pandemic, certainly have significant economic effects, they don't adequately explain the sequence of booms and busts that we have seen. The dotcom bust of 2000 and the financial crisis of 2008 weren't caused by external shocks; they illustrate that the economy is not fundamentally stable.

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https://18a6d127e285c2024e5eafff212be843.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html Minsky Proposed that the Market is Fundamentally Unstable

Hyman Minsky was an economist at Washington University in St. Louis from 1965 to 1990. He proposed a theory he labeled the financial instability hypothesis, which holds that the economy creates its own bubbles and crashes. The gist of his theory is that stable economies sow the seeds of their own destruction because stability, seeming safe, encourages people to take risks. That risk-taking creates financial instability that eventually results in panic and crisis.

Unfortunately, during his lifetime, neither Minsky nor his hypothesis was taken seriously. He died in 1996, before the dotcom bubble and the Great Recession, both of which gave credence to his ideas. His theory is now accepted as a primary explanation for the boom-and-bust cycles in the economy.

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The financial instability hypothesis is rooted in swings between excessive risk-taking and the panic that follows when the risk-taking overheats and the economy collapses. Increased risk in the economy can be seen in the terms on which debt is incurred. Minsky hypothesized three stages of lending he dubbed hedge, speculative, and Ponzi.

During the hedge stage, lenders and borrowers are cautious because of the losses they incurred in the prior recession. Borrowers are wary of leverage, and lenders make loans in modest amounts with stringent credit requirements. During this stage, the amount of debt in the system is reasonable.

In the following speculative stage, market participants become more confident of a recovery. Borrowers take on greater amounts of debt, and the economy begins to boom. Lenders grant credit based on ever-lower standards, assuming that asset prices will continue to rise. During this stage, borrowers can cover the interest on the loans, but become less able to repay the principal.

By the final Ponzi stage, lenders and borrowers have forgotten the lessons of the prior crisis. Everyone is sure that asset prices will continue to rise, and debt is granted with repayments based on that assumption. The economy becomes over-leveraged; debt and risk-taking have created a financial house of cards.

Finally, a "Minsky Moment" -- as the Paul McCulley of PIMCO dubbed it -- occurs. Market insiders take profits, everyone panics, and a crash ensues before the cycle starts over.

The key insight of Minsky's model is that stability itself is destabilizing (see figure below) because during times of economic stability, healthy investments lead to speculative euphoria, increasing financial leverage, and over-extending debt, eventually resulting in a Minsky Moment, which leads to a recession or even a financial crisis.

The economy moves from stability to instability, through periods of displacement, boom, euphoria, profit taking and panic.

Minsky's Cycle of the Economy

IMAGE SOURCE: THE ST. LOUIS TRUST COMPANY

Paradoxically, Minsky's hypothesis teaches us that the time of greatest investment risk is when everything seems good, and investing is actually least risky when, as Baron Rothschild once put it, there is "blood in the streets."

How Minsky Can Help Us Be Better Investors

Minsky's financial instability hypothesis is an essential mental model for us to have in our toolkit. Each cycle has its own characteristics and length. Euphoria and panic can both last longer than we might expect. And outside shocks such as a pandemic or geopolitical events can have big effects as well. So, we can't predict with precision when the economy will transition from one part of the cycle to the next.

But knowing roughly where we are in the cycle can inform good strategies for investors and business owners. As the economy and markets move from boom to euphoria, it's essential to have a healthy margin of safety in the form of cash and high-quality bonds. Smart businesses will increase their cash to shore up liquidity and resist the temptation to take on more debt. Then when the profit-taking and panic occur, they can redeploy their safety margin into bargain-priced risk assets.

The most important lesson to take from Minsky's hypothesis is not to get caught up in the fear that comes with the panicky part of the cycle, or the greed that accompanies the euphoria. While it's not possible to accurately time the tops and bottoms of the market, knowing roughly where we are in the cycle may help you stick with your investment strategy and avoid following the herd at full speed into a bust.

https://buy.tinypass.com/checkout/template/cacheableShow?aid=Yj2fRrCPpu&templateId=OTXWKFJL53QM&templateVariantId=OTVHN4ZSSNY5S&offerId=fakeOfferId&experienceId=EXWS41VWG3FD&iframeId=offer_6f89429c2a934bc2daf2-0&displayMode=inline Twitter or LinkedIn . Check out my website . John Jennings John Jennings

I am the chief strategist and president at The St. Louis Trust Company , a multi-family office and boutique trust company that serves wealthy families across the U.S.

[Apr 08, 2021] Minsky Moment' Hangs Over World Swimming in Debt: QuickTake Q A by Enda Curran

Talk about Minsky moment started in 2017 and as of 2021 the bubble did not burst. Warning from Keynes to short sellers: Market can stay irrational longer then you can stay solvent.
Oct 25, 2017 | www.bloomberg.com
The mere mention of a "Minsky moment" -- a sudden crash of markets and economies that are hooked on debt -- is enough to send shudders through policy makers. The theory stems from the work of Hyman Minsky, a U.S. economist who specialized in how excessive borrowing fuels financial instability. Record debt levels around the world, coupled with sky-high financial market valuations, have kept Minsky's theory prominent, drawing warnings from the International Monetary Fund and others. Before taking over the U.S. Federal Reserve, Janet Yellen described his work as " required reading ." 1. What makes a Minsky moment?

The term refers to the end stage of a prolonged period of economic prosperity that has encouraged investors to take on excessive risk, to the point where lending exceeds what borrowers can pay off. At that point, Minsky wrote, there's an increase in "speculative and Ponzi finance." When a destabilizing event as simple as an increase in interest rates occurs, investors are forced to sell assets to raise money to repay loans. That in turn sends markets into a spiral amid a demand for cash. There have been attempts to distinguish between a Minsky moment and a Minsky process that leads up to it. To continue reading

[Apr 08, 2021] 'We're seeing widespread frothiness, bubbles, risk-taking and leverage,' warns 'Dr. Doom' on state of stock-market

Apr 08, 2021 | www.marketwatch.com

Roubini said that a climb above 2% for the benchmark 10-year Treasury note TMUBMUSD10Y, 1.628% , which is used to set rates from everything from mortgages to auto loans, could foster further investor blowups.

Rising yields have propelled investors to sell more speculative wagers because higher yields imply that borrowing costs are also climbing for investors, making such speculative wagers less economically attractive.

Known as "Dr. Doom" in some circles for his bearish predictions, Roubini has been persistently downbeat on his outlook for markets and the economy since the pandemic took hold in earnest in the U.S. last year. Last year, he said that the V-shaped bounce "is becoming a U, and the U could become a W if we don't find a vaccine and don't have enough stimulus."

[Apr 08, 2021] US corporate debt now exceeds $22 Trillion. A significant portion of this debt is used to buy back stock

Apr 08, 2021 | www.wsj.com

Like thumb_up 10 Reply Share link Report S Sandeep Jain SUBSCRIBER 1 day ago This article is missing the whale in the stock markets. Individuals borrowing Billions on margins is insignificant compared to corporations borrowing in the Trillions. US corporate debt now exceeds $22 Trillion. A significant portion of this debt is used to buy back stock.

[Apr 08, 2021] Inside players can use cheap money from the Fed to lever up 10, 20 times as Archegos did

Apr 08, 2021 | www.wsj.com

C C Cook SUBSCRIBER 17 hours ago ....inside players can use cheap money from the Fed to lever up 10, 20 times as Archegos did. Where is the SEC? Where are the banking regulators? Are those investors/speculators that much smarter than all the Ivy lawyers working in the government?

The Hedges have paid off the DNC to keep the government at bay and the tax preferences safe. Look who funded Hillary and Biden campaigns.

[Apr 07, 2021] Jamie Dimon in the eyes of ZH crowd

Such comments were definitely impossible before 2007. The level of vitriol is simply incredible. That spells trouble...
Apr 07, 2021 | www.zerohedge.com

10 hours ago

Jamie has Jerome's phone number.

That makes Jamie brilliant. play_arrow 5 play_arrow 1


zorrosgato 10 hours ago

"flush with savings"

HA!

Yen Cross 10 hours ago

Jack, ****, Dimon? Which one was it Z/H Google moderator?

I donate at Christmas.

Basil 20 minutes ago

whats gone wrong is the cancer of progressiveism. wokeism, social justice nonsense.

Gadbous 29 minutes ago

Don't you want to just slap these people?

MuleRider 18 minutes ago

You misspelled decapitate.

GrandTheftOtto 2 hours ago

"It was a year in which each of usfaced difficult personal challenges"

boundless hypocrisy...

Mr. Rude Dog 2 hours ago remove link

" Americans know that something has gone terribly wrong, and they blame this country's leadership: the elite, the powerful, the decision makers - in government, in business and in civic society," he wrote.

"This is completely appropriate, for who else should take the blame?"

Lets see if he projects the problem back on the citizens...Let's see what happens.

"But populism is not policy, and we cannot let it drive another round of poor planning and bad leadership that will simply make our country's situation worse."

I knew the so called elites could not take the blame... You know populism always makes bad decisions with the economy, our monetary system, our infrastructure and just managing our tax money in general...Yes I knew Jamie could not take the blame..LOL.!!!!

QE4MeASAP 2 hours ago

So Dimon is giving the state of the union instead of Biden?

Budnacho 2 hours ago

Jamie Dimon....Friend of the Little Guy....

Tomsawyer2112 PREMIUM 11 hours ago

He doesn't believe a word of what he just said. But he knows that if he wants his bank to continue to be an extension of the government and curry favor then he needs to tow the line. I am sure he also has his eye on a future role as Fed Lead or US Treasurer but might be tough since he's not a diversity candidate.

oknow 2 hours ago

Someone turn off his mike, dont need your sorry *** confession

Just confiscate his wealth and make him do 9 to 5 jobs for the rest of his life.

ChromeRobot 9 hours ago remove link

This guy is a rarity in the banking industry. He's a billionaire. Running a bank I was often told in my early years in finance was foolproof. Everybody needs money and they have it. Hard to fk up. Somehow this "titan" has gamed it to do really well doing something incredibly easy. Positioning yourself to be a SIFI helps too! Too big to fail has it's perks.

a drink before the war 10 hours ago

What Jamie is really saying without saying it is " I get paid in stock options however since the pandemic JPM and other banks haven't been allowed to do stock buy back but come June we get back to the NORMAL and with the FED printing money and giving it to us we going to talk this stock WAY up no matter what because I got almost two years of stock options I gotta get paid for!"

lay_arrow 2
archipusz 10 hours ago

If you want to get to the top, you must speak the party line narrative.

The truth is something different altogether.

Eddie Haskell 10 hours ago

If you want to be a state-approved oligarch you've gotta suck the right dickie. Good job.

Detective Miller 38 minutes ago

"Jaimie Tells Bagholders To 'Buy Buy Buy!!!'"

Onthebeach6 38 minutes ago

The US is addicted to helicoptor money.

The world looks fine to an addict until the supply is cut off.

sbin 41 minutes ago

Jimmy going to lock himself in jail and forfeit his assets?

34k of jerkoff.

Nuk Soo Kow 2 hours ago

How magnanimous of Jamie to blame elitists and civic "leaders" for the structural problems in America. It was the banksters that pushed NAFTA and helped China engineer it's currency against the dollar, which led to massive outflows of productive capital. It was the banksters via the use of financial legerdemain who engineered the collapse in 2008 (not to mention every other banking panic and collapse prior to). It's high time to throw out this den of vipers once and for all.

Nature_Boy_Wooooo 2 hours ago

He lost me at.....

We need more cheap immigrant labor...... housing is unaffordable for many.

No **** moron!......you suppressed our wages and increased demand for housing.

PT 10 hours ago remove link

I always consult the fox when I want to know about the state of the hen house.

QuiteShocking 10 hours ago

Economic boom?? Is really just trying to get back to where we were previously before the pandemic hit with things opening back up etc... More people have been working from home so different spending patterns are developing.. but could change... Supply chain chaos makes it seem like shortages and inflation etc... It may only last through 2023?? but with Dems in charge this is not a given with their anti business slant??

same2u 11 hours ago

UBI for the rich= stock market...

Hope Copy 3 hours ago (Edited)

Jamie knows that the core of Crypto is at the CIA and that the pseudo Republic has far to much Fascist politics at the core .. There has been a competitive failure at most all levels of the government in recent times with a 'winner take all' at the cost of keeping competitive practices alive (not to mention kickbacks).. Of course China is laughing even though they have a history of cutting corners (and outright fraud) in every economic sector.

Mario Landavoz 20 minutes ago

Banker. That's all ya need to know.

Just a Little Froth in the Market 40 minutes ago

But the CEO was very candid about China...

"China's leaders believe America is in decline... The Chinese see an America that is losing ground in technology, infrastructure and education – a nation torn and crippled . . . and a country unable to coordinate government policies (fiscal, monetary, industrial, regulatory) in any coherent way to accomplish national goals

This is correct.

Joe A 55 minutes ago

He is just mocking and taking a piss at everybody. That America is such a mess is because of people like him with his scorched earth robber baron rogue capitalism. But there is a way to redeem yourselves. Just make all your assets available to the American people. And oh, blow your own brain out.

Abi Normal 3 hours ago remove link

What else is he supposed to say? As long as things don't go bad for Jamie it's cool.

OrazioGentile 3 hours ago

The Banksters, after years of mismanagement, borderline fraud, and endless bailouts now see that investments in unicorn startups, selling mindless BS to each other, and the quick buck lead to a burned out husk called America?!? Now?!? Let all of them live in the great paradise called the Cayman Islands that they helped build and see how far they get selling "capital instruments" to each other. The last 20 years have taught most Americans that hard work is meaningless to get ahead IMHO.

[Apr 07, 2021] Jamie Dimon: "This boom could easily run into 2023 because all the spending could extend well into 2023."

When did market cheerleading became the key responsibility of all key executives in major banks?
Apr 07, 2021 | www.zerohedge.com

Bay of Pigs 9 hours ago

Legs Dimon has always been a serial liar.

He's incapable of being honest.

One Moment Please 9 hours ago

My neighbors and I are not experiencing any of this 'economic boom' he speaks of.

Maybe we abide in some mysterious economic dead zone?

Mr..Lucky 10 hours ago

"Stock prices have reached what looks like a permanently high plateau," Yale economist Irving Fisher.

[Apr 07, 2021] JPMorgan's Dimon Admits -Something Has Gone Terribly Wrong- In America... And China Knows It

Neoliberalism is what is wrong with Amerca, but Fimon would never admit that.
Apr 07, 2021 | www.zerohedge.com

As his bank tries to offload big blocks of Manhattan real estate , JPMorgan CEO Jamie Dimon proclaimed in his latest annual letter to shareholders, published Wednesday morning, that the economic expansion in the US could run through 2023, which would justify lofty equity valuations which recently pushed the S&P 500 north of 4K.

And the CEO who once called for the US to raise taxes on the rich and adopt more explicitly socialist policies to expand access to higher education, housing and child care, praised the federal government's response to the economic crisis caused by the COVID pandemic. Consumers who are now flush with savings will help drive an economic boom, Dimon wrote in his 34K-word missive.

"I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the US economy will likely boom," Dimon said.

"This boom could easily run into 2023 because all the spending could extend well into 2023."

"Ascertaining the quality of the government's spending will take years, Dimon said, but he has little doubt that "spent wisely, it will create more economic opportunity for everyone," he said.

Although equity valuations are already "quite high", Dimon aid a multi-year boom may help to justify current levels, because markets are pricing in economic growth and excess savings that may soon be poured into the market.

https://platform.twitter.com/embed/Tweet.html?dnt=false&embedId=twitter-widget-0&features=eyJ0ZndfZXhwZXJpbWVudHNfY29va2llX2V4cGlyYXRpb24iOnsiYnVja2V0IjoxMjA5NjAwLCJ2ZXJzaW9uIjpudWxsfSwidGZ3X2hvcml6b25fdHdlZXRfZW1iZWRfOTU1NSI6eyJidWNrZXQiOiJodGUiLCJ2ZXJzaW9uIjpudWxsfX0%3D&frame=false&hideCard=false&hideThread=false&id=1379743600460894212&lang=en&origin=https%3A%2F%2Fwww.zerohedge.com%2Fmarkets%2Fjp-morgans-dimon-says-economic-boom-could-justify-lofty-stock-valuations-lasting-through&sessionId=8417802b6e5c6a22d7fec2cfb0a1f13788060f75&siteScreenName=zerohedge&theme=light&widgetsVersion=1ead0c7%3A1617660954974&width=550px

Dimon, who built the biggest and most profitable bank in the US, warned shareholders in his industry that disruption by big tech had finally arrived, as shadow lenders have gained ground, having the benefit of being unconstrained by strict capital requirements that have forced big banks to hold more capital in reserve.

"Banks have enormous competitive threats - from virtually every angle," Dimon said.

"Fintech and Big Tech are here big time!"

Echoing Jerome Powell and other senior Fed officials, Dimon offered an oblique reference to "froth and speculation" in the market, but didn't point to any specific areas he saw as threats. He also offered some thoughts on yields and the inflation outlook that, unlike comments from Jerome Powell, raised the possibility that the rise in inflation might be more than "transitory."

"Conversely, in this boom scenario it's hard to justify the price of US debt (most people consider the 10-year bond as the key reference point for US debt)," Dimon said.

"This is because of two factors: first, the huge supply of debt that needs to be absorbed, and second, the not-unreasonable possibility that an increase in inflation will not be just temporary."

Speaking of government spending, Dimon wrote about the need for more infrastructure spending roughly one week after President Biden laid out his sweeping infrastructure plan in Pittsburgh last week.

"We need to properly invest, on an ongoing basis, in modernizing infrastructure," Dimon wrote.

"Virtually everyone agrees that we have done a woefully inadequate job investing in our infrastructure – from highways, ports and water systems to airport modernization and other projects. One study examined the effect of poor infrastructure on efficiency (for example, poorly constructed highways, congested airports with antiquated air traffic control systems, aging electrical grids and old water pipes) and concluded this could all be costing us hundreds of billions of dollars per year."

However, while Dimon said he's bullish about the future of the US, some challenges remain, including our increasingly polarized society. In closing, he wrote: "While I have a deep and abiding faith in the United States of America and its extraordinary resiliency and capabilities, we do not have a divine right to success. Our challenges are significant, and we should not assume they will take care of themselves. Let us all do what we can to strengthen our exceptional union."


jamesblazen62 10 hours ago remove link

Dimon knows massive deficit spending can't and won't continue forever. The short-term earnings benefit is more than offset by the long-term damage to the nation's balance sheet.

He doesn't care. Cheerlead the cocaine high and leave the consequences to somebody else.

same2u 10 hours ago

Stock market is the food stamps program and UBI for the rich....

And they had it better than ever before over the past 40 years...

Working is for fools...

Brazillionaire 28 minutes ago

Our leaders should be selected from an acceptable pool of globalist elite, that's all. Hard to understand why the proles would see the need to question that. Seems easy enough to understand. <s>

GreatUncle 32 minutes ago

He does say it eloquently ... Although equity valuations are already "quite high"

Just means more 0's added to the number keep 'em coming now where is my stimmy check because I want to see the more 0's added to that too.

Then he says populism on the left or right should not be allowed to drive policy ... in other words left and right ...

"you ain't getting what you want so screw you."

Lordflin 10 hours ago

How these demonic creatures can talk about an economic boom on one hand, and continuing lock downs of the economy with the other is a marvel...

They really believe they control the narrative with their media and their celebrity...

Sadly, in some parts of the country they still do...

In others the anger is building to an explosive level...

gatorengineer 10 hours ago

I don't see any anger just sorrow and misery here in pa

Rise Of The Machines 9 hours ago

Take the FED away and show me the boom!

yogibear 9 hours ago

Dimon is a bankster/crook, why believe anything he says?

artless 1 hour ago

Well as much as I despise Dimon as a criminal he is the smartest bankster out there and he does tend to get some things correct like the idea that there will be a boom and it will last until 2023 or so. That is very likely. Of course the comedown from that high will probably be extraordinarily horrible but...as the say hedge accordingly.

No way they will let the thing crash just too soon. Gotta cement the new regime and make the sheeple think all is going well and that THIS time the folks in charge REALLY care about them and are working in there interests. There is still a ton of wealth to be extracted from the country-trillions of dollars yet and these parasites are not going to end their program just yet and miss out on that. I mean, what's M1 these days again? We are in full fledged LaLa land.

You have to read all of it and parse out the stuff that indicates his and the rest of the bankster crowd's intentions then work off that.

But otherwise, yes, Jamie Dimon should be strung up from the street posts.

FiscalBatman 1 hour ago

Of course the economy will "expand" through 2023. They did everlasting damage with the lockdowns. It has nowhere to go but up, for now. Until it implodes.

Peak Finance 2 hours ago remove link

Didn't even read his non-sense

remember this guy would literally be a dour-faced walmart greeter if not for the bailouts

this "master of the universe" has no clothes and clay feet

OldNewB 1 hour ago

Give a man a gun and he can rob a bank.

Give a man a bank and he can rob the world.

MommickedDingbatter 1 hour ago

Fed member bank( JPM for one) gets money for next to nil at a key stroke, loans out said money to XYZ small bank. As an asset, now loans out said money to hedge fund FUD. As another asset, lends again to 3rd world country in a derivative contract. Meanwhile, flipping it over in an overnight swap. How this hasn't exploded is beyond comprehension.

LJC 9 hours ago

"And then finally, when there's nothing left, when you can't borrow another buck from the bank or buy another case of booze, you bust the joint out. You light a match"

Goodfellas

Bdubs 9 hours ago

I'm with you... at least in feudal societies, the landed aristocracy has skin in the game, will saddle up and lead their regiment into the fray.

Dimon and ilk have an air of vulture.

efrustrated 2 hours ago

Dear Mr. Dimon,

You are the living embodiment of everything that has gone wrong with the American economy.

Yours,

The rest of the world.

Drink Feck Arse Girls @ edifice 1 hour ago

" China's leaders believe America is in decline..."

China's leaders might be correct.

2banana 10 hours ago remove link

So the $1 Trillion in obama "shovel ready jobs" was a sham? Who knew?

"We need to properly invest, on an ongoing basis, in modernizing infrastructure," Dimon wrote. "Virtually everyone agrees that we have done a woefully inadequate job investing in our infrastructure – from highways, ports and water systems to airport modernization and other projects.

Be of Good Cheer 10 hours ago

Who is the "everyone"? Who decided that our infrastructure needed more money? This sounds like COVID rationalizing all over again. I think our roads and bridges are fine enough, at least the ones I travel. Stop spending.

Buzz-Kill 9 hours ago

Infrastructure Con Job: Only 10% of Bidens stimulus will go into this category.

The other 90% goes into Green New Deal & Reparations Projects.

But, don't tell anyone the truth about the new scam.

Globalistsaretrash 53 minutes ago remove link

America is in decline due to people like Dimon .

PGR88 1 hour ago

Dimon says that America's oligarchs and politicians are to blame for intense polarization - with no sense of irony whatsoever.

MontCar PREMIUM 1 hour ago

While the music's playing ya gotta get up n dance. When it stops, turn out the lights.

yerfej 2 hours ago

A society cannot succeed when it doesn't enforce the rules on half the people because of some level of wealth or cult affiliation. People who visit the US are astonished at the number of brain dead idioyts wandering around, they should be in zoo's. Although its as bad in France. When society hands out unlimited free shyyyit with nothing asked in return it gets the quality of fhreaks the US now produces.

Zeus123 9 hours ago

Is this Jamie Dude HIGH?

ChromeRobot 9 hours ago

High on himself. He'll do whatever is necessary to make money for his sleazeball bank.

toady 1 hour ago

"We need to properly invest, on an ongoing basis, in modernizing infrastructure," Dimon wrote.

The first thing that needs to happen is the definition of "infrastructure"... Dimon goes on and on about planes, trains, and automobiles, while Bribe'm's "infrastructure" bill plows trillions into his cronies pockets, then throws 10 or 20 billion at "racist highways".

se48s2t8sn 1 hour ago

Jamie Dimon doesn't understand how hated he is.

t0mmyBerg 1 hour ago

Dimon supports the same policies that have killed America. Trading with China ==> the hollowing out of the economy, massive financialization of the economy ==> unproductive debt, skewing of law favoring big business over small

ThomasJefferson69 2 hours ago

States "excess savings" and then " 30% of Americans don't have enough savings to deal with unexpected expenses that total as little as $400" This dumbass can't remember the lies he starts with.

onemorething 2 hours ago (Edited)

JPMorgan's Dimon Admits " Something Has Gone Terribly Wrong " In America...

some people stole something

John Pierpont Morgan has been dead for 108 years but he still keeps ******* us over.

Jamie Dimon saying Something Has Gone Terribly Wrong, is like Captain Renault decrying gambling in Casablanca.

(((here are your winnings, sir)))

Francis Uwood 2 hours ago

How about a wealth tax on people like Dimon and Bezos. They are all for increasing taxes but their wealth is not based on their salaries. How about a wealth tax on their assets.

JoePesci 2 hours ago (Edited)

**** yeah, I'm thinking 95% on everything above $1Billion dollars. Nobody is worth more than that. You get a billion dollars you can use your time to do things other than accumulate wealth, which at that point you will only continue to do so at the destruction of everyone else.

ChromeRobot 9 hours ago remove link

Jamie D comes on tv and smiles I reach back to make sure I still have my wallet. It's a reflex.

Machido 32 minutes ago (Edited)

35 K words. Another 'Das Kapital'

These guys manipulated markets to get where they are, Now they are all invoking socialism/communism so they can take charge of looting whats left.

shepnkc PREMIUM 1 hour ago remove link

Always trying to pump the markets....probably hasn't gotten all his shorts in place yet....

Evil-Edward-Hyde 2 hours ago

Dimon says somethings wrong in the USA

I don't think the Mega Banks like Chase Bank had anything to do with that 😂

Look in the Mirror Mr Dimon .

radical-extremist 2 hours ago

Jamie Dimon has as much authority to weigh in on the Socio-political issues of our time as does the CEO of Coke or Delta Airlines or MLB. Stay in your lane banker boy.

Verrick 2 hours ago

Although equity valuations are already "quite high", Dimon aid a multi-year boom may help to justify current levels, because markets are pricing in economic growth and excess savings that may soon be poured into the market.

"Quite high" phhh. You sir, are quite high

mickeydouglas 2 hours ago

Jamie Dimon was the butt boy of Sandy Weill, the man who destroyed the US economy so he could acquire Citigroup.

Herdee 5 hours ago (Edited) remove link

This guy is nothing but a f * c king crook and a gangster. They just paid a fine of a BILLION dollars for manipulating the Gold Market. And they even give time for this shyster to even speak?

jamesblazen62 10 hours ago remove link

Dimon is in greed's grasp and he can't escape. He's had 2 brushes with death (cancer and emergency heart surgery). You'd think a billionaire with more money than he can ever need or want has something better to do in his life than conniving for more money and playing big corporate games of manipulation and deceit.

Evil-Edward-Hyde 50 minutes ago

J P Morgan is a crime Syndicate.

They constantly Break the Laws.

No Problem for Them,

They Just Pay The Fines.

Their secret is they make much much more money on the scam did they have to pay in fines.

FiscalBatman 1 hour ago remove link

It's amazing how out of touch these guys are. They just don't get it. Dimon will be swaying back and forth with the rest of them at this rate

newworldorder 1 hour ago (Edited)

The US Political class is not investing Govt funds, to bolster America and Americans, - the are however investing in WOKEISM, EQUITY AND DIVERSITY, based on skill color, gender and sexual orientation.

Truce 1 hour ago remove link

Rich man tells nation: if you all work together really well you can make me richer.

Tomdelay 1 hour ago

'And, I've been a big supporter of all the radical Lefties in the Dem party. My tribe contributes 50% of the annual budget of the DNC & me & my banking Zionists at the Fed have been steadily undermining the USA for over 100 years. So if you believe a word of the BS I just laid on you, then you haven't been paying attention and deserve the servitude or death that awaits you.'

Rubicon727 2 hours ago

The monster problem in the US is: people like Dimon, and all the other ultra-rich-multi-billionaires who have absolute power. THEY ARE THE PROBLEM and have been since the early 1990s.

Leroy Whitby 2 hours ago (Edited)

Biden's infrastructure plan is a tax hike plus

  • USD 180bln for research and development (ONE HUNDRED EIGHTY BILLION fluffy accounting Bull$#!+)

  • USD 85bln for public transit (probably Bull$#!+)

  • USD 80bln for Amtrak and freight rail (Bull$#!+ and Berkshire Hathaway)

  • USD 174bln to encourage EVs via tax credits and other incentives to companies that make EV batteries in the US instead of China (ONE HUNDRED SEVENTY FOUR BILLION pretend to compete with China while taking their bribes Bull$#!+)

  • USD 100bln for broadband (tech sector Bull$#!+)

  • USD 300bln to promote advanced manufacturing (THREE HUNDRED BILLION Elon Musk type with a dash of hypocrisy Bull$#!+)

  • USD 400bln spending on in-home care (FOUR HUNDRED BILLION socialist wet fantasy level Bull$#!+)

  • USD 46bln in fed procurement programs for government agencies to buy fleets of EVs (environmental crazy type Bull$#!+)

  • USD 35bln in R&D programs for cutting-edge, new technologies (Elon Musk squared level Bull$#!+)

  • USD 50bln in dedicated investments to improve infrastructure resilience (probably Bull$#!+)

  • USD 16bln program intended to help fossil fuel workers transition to new work (Bull$#!+ from the government teat)

  • USD 10bln for a new "Civilian Climate Corps." (stinking piles of utter Bull$#!+)

Anything left for roads and bridges and airports after the ONE TRILLION spent on home care, EV's, and research?

Bay of Pigs 9 hours ago

Legs Dimon has always been a serial liar.

He's incapable of being honest.

One Moment Please 9 hours ago

My neighbors and I are not experiencing any of this 'economic boom' he speaks of.

Maybe we abide in some mysterious economic dead zone?

Mr..Lucky 10 hours ago

"Stock prices have reached what looks like a permanently high plateau," Yale economist Irving Fisher.

[Apr 07, 2021] A Gigantic Clusterf*k -- How Morgan Stanley Avoided $10BN In Archegos Losses By Selling First

Apr 07, 2021 | www.zerohedge.com

One week ago, in our initial take on the biggest hedge fund collapse since LTCM, we explained that - in our view - the catalyst for the failure of the Archegos hedge fund, which had as much as 10x leverage allowing it to hold some $100BN in positions, was Morgan Stanley and Goldman breaking ranks with their fellow prime brokers, and sparking the biggest margin call since Lehman and AIG.

Turns out we were right.

In the most detailed account yet of what happened in the fateful 24 hours between March 25 and 26, when many - but not all - of Archegos' big prime brokers starting dumping blocks of Bill Hwang's margined stock, CNBC's Hugh Son writes that "the night before the Archegos Capital story burst into public view late last month, the fund's biggest prime broker quietly unloaded some of its risky positions to hedge funds, people with knowledge of the trades told CNBC."

That prime broker was Morgan Stanley and to avoid what could have been up to $10 billion in losses, the bank sold about $5 billion in shares from Archegos' holdings in media and Chinese tech names to a small group of hedge funds late Thursday, March 25, roughly around the time a last ditch negotiation between prime brokers including Credit Suisse failed to reach a compromise to avoid a firesale.

Morgan Stanley's scramble to "be first" is a previously unreported detail that shows the extraordinary steps some banks took to protect themselves from incurring losses from a client's meltdown. The moves, Son reports, benefited Morgan Stanley, while banks that were slow to react such as Credit Suisse and Nomura have seen billions in losses and widespread C-Suite layoffs. Credit Suisse said Tuesday that it took a $4.7 billion hit after unwinding losing Archegos positions; the firm also cut its dividend and halted share buybacks.

It was also not previously known that Morgan Stanley had the blessing of Archegos itself to shop around its stock late Thursday. The bank offered the shares at a discount, telling the hedge funds that they were part of a margin call that could prevent the collapse of an unnamed client.

Alas, all those hedge funds that bought Archegos holdings late on Thursday are now deep underwater on their positions. That's because Morgan Stanley had information it didn't share with the stock buyers: as CNBC details, the basket of shares it was selling, comprised of eight or so names including Baidu and Tencent Music, was merely the opening salvo of an unprecedented wave of tens of billions of dollars in sales by Morgan Stanley and other investment banks starting the very next day.

And now, it is Morgan Stanley's other clients - those who bought the Archegos positions when approched by the mega broker - that are furious at the bank for having been betrayed and not receiving that crucial context, according to one of the people familiar with the trades. The hedge funds learned later in press reports that Hwang and his prime brokers convened Thursday night to attempt an orderly unwind of his positions, a task which we reported last week proved to be impossible especially once word of the conclave got out.

That means that at least some bankers at Morgan Stanley knew the extent of the selling that was likely and that Hwang's firm was unlikely to be saved, CNBC's sources claim. And, as we explained one week ago in " Goldman And Morgan Stanley Broke Ranks ", it was that knowledge that helped Morgan Stanley and rival Goldman Sachs avoid losses because the firms quickly disposed of shares tied to Archegos.

Morgan Stanley had another reason why it had to be first, smartest or cheat: it was the biggest holder of the top ten stocks traded by Archegos at the end of 2020 with about $18 billion in positions overall, its prime broker going crazy in how much leverage it allowed Hwang to put on via Total Return Swaps. Credit Suisse was the second most exposed with about $10 billion, these sources noted. According to CNBC, that means that Morgan Stanley could've faced roughly $10 billion in losses had it not acted quickly.

"I think it was an ' oh shit ' moment where Morgan was looking at potentially $10 billion in losses on their book alone, and they had to move risk fast," the person with knowledge said. Meanwhile, for those who missed it, this is how Credit Suisse lost $4.7 billion .

And while Goldman's sale of $10.5 billion in Archegos-related stock on Friday, March 26 was widely reported after the bank blasted emails to a broad list of clients, Morgan Stanley's move the night before went unreported until now because the bank dealt with fewer than a half-dozen hedge funds, allowing the transactions to remain hidden.

Needless to say, all those hegde funds would like nothing more than inflicting major pain on James Godman's bank, although in retrospect, their losses are their own fault: the clients which comprise a subgenre of hedge funds dubbed "equity capital markets strategies," don't have views on the merits of individual stocks. Instead, they'll purchase blocks of stock from big prime brokers like Morgan Stanley and others when the discount is deep enough, usually to unwind the trades over time.

Alas, that deep discount would prove to get much more deep in coming days.

After Morgan Stanley and Goldman sold the first blocks of shares with the consent of Archegos, the floodgates opened. Prime brokers including Morgan Stanley and Credit Suisse then exercised their rights under default, seizing the firm's collateral and launching a full blown firesale on Friday as CNBC details:

In a wild session for stocks on that Friday in late March came another twist: Some of the hedge fund investors who had participated in the Thursday sales also bought more stock from Goldman, which came later to market at prices that were 5% to 20% below the Morgan Stanley sales. While these positions were deeply underwater that day, several names including Baidu and Tencent rebounded, allowing hedge funds to unload positions for a profit.

"It was a gigantic clusterf--- of five different banks trying to unwind billions of dollars at risk at the same time, not talking to each other, trading at wherever prices were advantageous to themselves," one industry source said.

While Morgan Stanley exited most Archegos positions by Friday, March 26 it had one last holding: 45 million shares of ViacomCBS, which it shopped to clients on Sunday. The bank's delayed disposal of Viacom shares has sparked questions and speculation that it held onto the stock because it wanted a secondary offering run by Morgan Stanley the week before to close. A clusterfuck indeed.

Yet in a repeat Wall Street irony, while many funds are furious at Morgan Stanley they will get over it quick: as CNBC concludes, despite leaving some of its hedge fund clients feeling less-than-thrilled, Morgan Stanley isn't likely to lose them over the Archegos episode because the funds want access to shares of hot IPOs that Morgan Stanley, as the top banker to the U.S. tech industry, can dole out.

In other words, half Boiler Room, half Margin Call.... which is a good excuse as any for us to end with one of the best Wall Street movie clips in the past decade, one which in 2011 predicted with uncanny accuracy everything that would happen to Archegos and its prime brokers...



delta0ne 16 hours ago (Edited)

if this isn't the most obvious case for Insider Trading to avoid big losses than I don't know what Insider trading is.

The difference is some boys are allowed to do it, while the rest aren't.

sabaj49 15 hours ago

all those hedge funds that bought Archegos holdings late on Thursday are now deep underwater on their positions.

isn't that called insider trading and ripe for lawsuits against the MORGAN STANLEY

should be as they WITHHELD VITAL INFORMATION

hey it's not that big risk - we just need to raise more CASH FOR COLLATERAL

of course we didn't mention other 10 banksters needing to unload same

Paul Bunyan 10 hours ago

Sold $10B of bad investments hours before the margin call. If that's not an inside track I don't know what is. Not sure what you do for a living yuri, but it ain't trading.

overbet 13 hours ago

Inside information has nothing to do with order flow knowledge.

Paul Bunyan 10 hours ago (Edited) remove link

Bro you think MS figured out what hours before a margin call? Order flow knowledge? Do you think the traders are rain man? They aren't. They are coked out frat boys trying to get any advantage they can, and Wall Street leaks like a sieve.

Simple1 13 hours ago

The bankers are the law, they run the government, the markets and print your money.

2+2 ≠ 5 10 hours ago

Morgan Stanley did a classic pump n' dump with the hedge fund monies!

JR Wirth 14 hours ago

Morgan Stanley was smart. The fine will be about 500m, the settlements will be about $ 2 Billion. They saved 7.5 billion that night.

BorisTheBlade 7 hours ago remove link

I wouldn't be surprised if they came up with a similar back-of-the-envelope guesstimate hours prior at the board meeting.

The Ordinal Numbers PREMIUM 15 hours ago

And people wonder why we clap when we hear of bankers jumping from buildings.....

Chipper609 15 hours ago

Much like a bank run....if there is a line....you're too late.

Stackers 16 hours ago remove link

" They dont lose money. They dont care if everyone else does, but they dont lose money "

~Will Emmerson

jamesblazen62 15 hours ago

A gigantic cluster**** that sent the market to all-time highs.

Overpowered By Funk 15 hours ago

Serious Alice in Wonderland **** going on these days.

pashley1411 14 hours ago (Edited)

When facing 11 digit losses; lawyers are cheap, politicians cheaper.

gunner1867 15 hours ago (Edited)

Why would those clients continue to do business with Morgan Stanley. MS had to know it was the beginning of the selling and not a "clean up" situation. They decided that reputation was less important than money.

beaker 15 hours ago

Hence the truth in the term, "No honor amongst thieves."

GRDguy 9 hours ago

Sociopathic financiers will gang up when it benefits them, but rip each others' face off when need be. Easy to do when there's no empath nor conscience. Just be first. The movie Margin Call is classic.

mjl975 12 hours ago

Dear lord..how can you risk $10 billion on any one customer..let alone one with the history of Hwang/Archegos

spanish inquisition 15 hours ago remove link

This was a controlled demolition . I am guessing they figured out the scam and that it was going to collapse. All that is left is to create an official narrative.

It was also not previously known that Morgan Stanley had the blessing of Archegos itself to shop around its stock late Thursday.

anti-bolshevik 15 hours ago

It was also not previously known that Morgan Stanley had the blessing of Archegos itself to shop around its stock late Thursday.

Wait a minute, and this is the salient point here:

Was Archegos the Stock Owner or were these Security-based Swaps (SBS) / Total Return Swaps (TRS) with Morgan Stanley as the Counterparty? Morgan also granted leverage to Archegos??

x_Maurizio 15 hours ago

And therefore the SP500 soared 130 pts...

tobagocat 4 hours ago

Cracks are beginning to appear in this fraud we call a financial system. Counterfeiting and rigging are losing their effect. Illusion soon to turn into reality...look out below

Enraged 8 hours ago

How were they able to avoid the loss?

James Gorman, the Chairman and CEO of Morgan Stanley, is on the board or directors for the New York Federal Reserve. https://www.newyorkfed.org/aboutthefed/org_nydirectors.html

Joebloinvestor2 15 hours ago

Kinda neat when the bankers screw each other.

Due diligence?

HA!

Tomdelay 15 hours ago

unprotected sex...

Flynt2142ahh 11 hours ago (Edited)

Long story short, Banks and risk managers learned nothing from the financial crisis ....

Meanwhile the SEC is monitoring reddit and Congress was calling diamond hands to testify cuz wrong folks made money. House of cards.

Just_Sayin_To_Save_Ya 13 hours ago (Edited)

SEC is happily and conviniently turning blind eyes to whole Archegos saga. Archegos was actually created and sponsored by MS & other criminal banks, is quite obvious. The Archegos entiry is to trade off books and off market in a black box. Now if you think, FED is doing the same thro these banks and playing in this markets.

The problem is, no body can invoke margin call on FED. Not main street, not wall street not precious metals or commodities or bonds or $. They all are in together to squeeze out little guys and make them work for that retirement dream :) LOL.

Sound of the Suburbs 5 hours ago

Why is it so easy for bankers to make lots of money?

Banks create money out of nothing.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

Bankers get to create money out of nothing, through bank loans, and get to charge interest on it.

What could possibly go wrong?

Bankers do need to ensure the vast majority of that money gets paid back, and this is where they get into serious trouble.

Banking requires prudent lending.

Sound of the Suburbs 5 hours ago remove link

Why is neoclassical economics so dangerous to the financial system?

We never did learn as much as we should have done from 1929.

Neoclassical economics produces ponzi schemes of inflated prices.

When they collapse it feeds back into the financial system.

Neoclassical economics still has its 1920's problems.

What's wrong with neoclassical economics?

  1. It makes you think you are creating wealth by inflating asset prices
  2. Bank credit flows into inflating asset prices, debt rises faster than GDP and you eventually get a financial crisis.
  3. No one notices the private debt building up in the economy as neoclassical economics doesn't consider debt.

What is the fundamental flaw in the free market theory of neoclassical economics?

The University of Chicago worked that out in the 1930s after last time.

Banks can inflate asset prices with the money they create from bank loans.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

Henry Simons and Irving Fisher supported the Chicago Plan to take away the bankers ability to create money.

"Simons envisioned banks that would have a choice of two types of holdings: long-term bonds and cash. Simultaneously, they would hold increased reserves, up to 100%. Simons saw this as beneficial in that its ultimate consequences would be the prevention of "bank-financed inflation of securities and real estate" through the leveraged creation of secondary forms of money."

https://www.newworldencyclopedia.org/entry/Henry_Calvert_Simons

Margin lending had inflated the US stock market to ridiculous levels.

Richard Vague had noticed real estate lending balloon from 5 trillion to 10 trillion from 2001 – 2007 and went back to look at the data before 1929.

Real estate lending was actually the biggest problem lending category leading to 1929.

The IMF re-visited the Chicago plan after 2008.

https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

Existing financial assets, e.g. real estate, stocks and other financial assets, are traded and bank credit is used to fund the transfers. This inflates the price.

You end up with a ponzi scheme of inflated asset prices that will collapse and feed back into the financial system.

At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.

The use of neoclassical economics and the belief in free markets, made them think that inflated asset prices represented real wealth accumulation.

1929 – Wakey, wakey time

Why did it cause the US financial system to collapse in 1929?

Bankers get to create money out of nothing, through bank loans, and get to charge interest on it.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

What could possibly go wrong?

Bankers do need to ensure the vast majority of that money gets paid back, and this is where they get into serious trouble.

Banking requires prudent lending.

If someone can't repay a loan, they need to repossess that asset and sell it to recoup that money. If they use bank loans to inflate asset prices they get into a world of trouble when those asset prices collapse.

As the real estate and stock market collapsed the banks became insolvent as their assets didn't cover their liabilities.

They could no longer repossess and sell those assets to cover the outstanding loans and they do need to get most of the money they lend out back again to balance their books.

The banks become insolvent and collapsed, along with the US economy.

When banks have been lending to inflate asset prices the financial system is in a precarious state and can easily collapse.

What was the ponzi scheme of inflated asset prices that collapsed in Japan in 1991?

Japanese real estate.

They avoided a Great Depression by saving the banks.

They killed growth for the next 30 years by leaving the debt in place.

https://www.youtube.com/watch?v=8YTyJzmiHGk

What was the ponzi scheme of inflated asset prices that collapsed in 2008?

"It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents Bankers, Nomi Prins.

They avoided a Great Depression by saving the banks.

They left Western economies struggling by leaving the debt in place, just like Japan.

It's not as bad as Japan as we didn't let asset prices crash in the West, but it is this problem has made our economies so sluggish since 2008.

The last lamb to the slaughter, India

They had created a ponzi scheme of inflated asset prices in real estate, but it collapsed.

https://www.wsj.com/articles/indias-ghost-towns-saddle-middle-class-with-debtand-broken-dreams-11579189678

Now they need to recapitalize their banks.

Their financial system is in a bad way, recovery isn't going to be easy.

marketneutraldecor 10 hours ago remove link

"Meanwhile, for those who missed it, this is how Credit Suisse lost $4.7 billion .". C'mon translation:

For those who weren't utter fuqing complete squmbag pieces of shilt.....

gcjohns1971 14 hours ago

If you are a Globally Systemically Important Bank, nothing is illegal, it seems.

Cash Is King 13 hours ago

Or a Biden.

Gringo Viejo 16 hours ago

I'm a techno dinosaur and don't have the necessary skills. Would someone please cut and paste

"It Do Go Down" from YouTube. Perfect place for it.

Rev Winton Dupree 15 hours ago

https://youtu.be/DYzT-Pk6Ogw

Propaganda Ripper 7 hours ago (Edited)

The movie Margin Call is first and foremost the story of what happened in 2008 when investment banks unloaded on their unsuspecting clients Mortgage Backed Securities they knew had become worthless.

ToSoft4Truth 13 hours ago

The Big Short (2015) - Brownfield Fund and Scion Capital unload short positions [HD 1080p]

https://www.youtube.com/watch?v=ktGarjZC8E8

[Apr 07, 2021] UBS Predicts 80,000 More Retail Stores Will Close In Five Years

Notable quotes:
"... Lasser said that equates to approximately 59 square feet of shopping center space per U.S. household, less than 62 square feet in 2010. That number is expected to plunge by 2026 as online shopping dominates. ..."
"... UBS estimates 9% of all retail stores will shutter operations by 2026, or about 80,000 retail stores. ..."
"... The bankster crash took tons of auto dealerships with it too. Very little is rising to replace any of it, unless it can be tied to an overpriced underdelivering data-mined subscription. ..."
Apr 06, 2021 | www.zerohedge.com

The retail apocalypse has been well documented for readers (see: here & here & here ) over the years as tens of thousands of brick and mortar stores nationwide have shuttered their doors. The problem today - is that millions of jobs lost during the pandemic are never coming back - in a consumer-based economy - this sets up for even more store closures.

UBS analyst Michael Lasser told clients this week that a whopping 80,000 retail stores are estimated to close in the next five years as the virus pandemic has deeply scarred the economy and resulted in a permanent shift in how consumers shop, that is, online .

"An enduring legacy of the pandemic is that online penetration rose sharply ," wrote Lasser.

"We expect that it will continue to increase, which will drive further rationalization of retail stores , especially as some of the unique support measures from the government subside," he said.

UBS found at the end of 2020, there were 115,000 shopping malls, compared with 112,000 in 2010 and 90,000 in 2000.

Lasser said that equates to approximately 59 square feet of shopping center space per U.S. household, less than 62 square feet in 2010. That number is expected to plunge by 2026 as online shopping dominates.

UBS estimates 9% of all retail stores will shutter operations by 2026, or about 80,000 retail stores.

Lasser assumes during this period that e-commerce sales will jump to 27% of total retail sales by then, up from 18% today.

UBS said many retail stores have been on life support following cheap government loans and a supercharged consumer via stimulus checks . The short-term artificial boost will be short-lived, which will lead to even more store closures.

Many of the closures will be retailers who sell clothing and accessories. UBS believes 21,000 closures from this industry will be by 2026. Office supplies and sporting goods businesses are other retailers that will be hit hard.

The good news is that auto parts, home improvement, and grocery retailing will be less susceptible to the retail apocalypse.

However, there is more bad news. The labor market recovery is not robust. The economy is still short 8 million jobs and 19 million people are collecting some form of unemployment insurance . This is a large swath of the population who have fallen into financial hardships and are increasingly unlikely to return to their jobs (and thus, absent UBI, in a vicious cycle can no longer spend like pre-COVID times). play_arrow

RKDS 38 minutes ago (Edited)

Not surprising. The feeling I've been getting more and more is that civilization is receding. My town had a KMart for most, if not all, of my life. After the Jamesway next town over closed, decades ago, it was the only general merchandise store for 20 miles in either direction. Now it's gone. Schools, grocery stores, power plants, gas stations, you name it, it's closing.

So many stores I used to shop in are gone, general and specialty. The toy stores are all gone. Best Buy is the last (lousy) electronics retailer standing.

Books, forget about it, may as well go to the library. Art/craft stores are mostly gone except I guess Michaels which was always the weakest selection.

Want to rent a movie? Too bad. Almost as hard to go watch a movie with so many theatres having gone under even before the plandemic. Put together a computer or buy software? You're joking, right?

When that WSB bubble bursts, GameStop will be a dead man walking.

Sears and JCP locations sit idle everywhere. Not even sure where I'd buy shoes/sneakers if I had to go to a store. The bankster crash took tons of auto dealerships with it too. Very little is rising to replace any of it, unless it can be tied to an overpriced underdelivering data-mined subscription.

I used to have to order specialty items online. Now it's like everything is online or bust. Even Target and Walmart don't bother to stock their shelves most of the time. Then we've got that clown of a postmaster general going "herp derp I's gon' raise da' prices cuz I's don't gots no udder ideas!1" Everything in this country is engineered to maximize problems for working people.

[Apr 07, 2021] A significant stock market consolidation may only be months away - Deutsche Bank

Apr 06, 2021 | finance.yahoo.com

More content below Brian Sozzi · Editor-at-Large

Nothing has been able to shake the new bull market in recent weeks -- not a still elevated 10-year Treasury yield or threats of higher taxes on the wealthy and corporations by the Biden administration.

But the one thing that has powered the S&P 500 beyond a record 4,000 -- data that indicates a strong post COVID-19 economic recovery is rapidly building -- may turn out to ruin the rally. And it could play out within three months, warns widely followed Deutsche Bank Chief Strategist Binky Chadha.

"Very near term, we expect equities to continue to be well supported by the acceleration in macro growth, and see buying by systematic strategies and buybacks driving a grind higher. But we expect a significant consolidation (-6% to -10%) as growth peaks over the next three months," Chadha wrote in a new research note on Tuesday.

Chadha calls out peaking ISM data -- which has been coming in hot of late -- as the potential trigger point for a steep market pullback.

"Our house economics forecast implies a flattening out of the ISMs at elevated levels beginning in Q2 (64) and continuing into Q3 (63). There are a number of considerations though that suggest the monthly ISMs peak more sharply over the next three months and slow in keeping with the historical inverted-V shaped pattern. We look for discretionary investor equity positioning to be pared with a peak in the ISMs and do not expect retail to buy the dip. We then see equities rallying back as our baseline remains for strong growth but only a gradual and modest rise in inflation," explains Chadha.

Thus far, investors are hardly positioned for any sizable spring/early summer swoon in stocks -- with good reason as the economic data has been impressive.

The U.S. economy created 916,000 jobs in March , the Bureau of Labor Statistics reported last week. That crushed Wall Street estimates for a 660,000 increase. The gain has some economic forecasters telling Yahoo Finance Live the economy could be on the verge of creating a million jobs a month very soon.

Nothing has been able to shake the new bull market in recent weeks -- not a still elevated 10-year Treasury yield or threats of higher taxes on the wealthy and corporations by the Biden administration.

But the one thing that has powered the S&P 500 beyond a record 4,000 -- data that indicates a strong post COVID-19 economic recovery is rapidly building -- may turn out to ruin the rally. And it could play out within three months, warns widely followed Deutsche Bank Chief Strategist Binky Chadha.

"Very near term, we expect equities to continue to be well supported by the acceleration in macro growth, and see buying by systematic strategies and buybacks driving a grind higher. But we expect a significant consolidation (-6% to -10%) as growth peaks over the next three months," Chadha wrote in a new research note on Tuesday.

Chadha calls out peaking ISM data -- which has been coming in hot of late -- as the potential trigger point for a steep market pullback.

"Our house economics forecast implies a flattening out of the ISMs at elevated levels beginning in Q2 (64) and continuing into Q3 (63). There are a number of considerations though that suggest the monthly ISMs peak more sharply over the next three months and slow in keeping with the historical inverted-V shaped pattern. We look for discretionary investor equity positioning to be pared with a peak in the ISMs and do not expect retail to buy the dip. We then see equities rallying back as our baseline remains for strong growth but only a gradual and modest rise in inflation," explains Chadha.

Thus far, investors are hardly positioned for any sizable spring/early summer swoon in stocks -- with good reason as the economic data has been impressive.

The U.S. economy created 916,000 jobs in March , the Bureau of Labor Statistics reported last week. That crushed Wall Street estimates for a 660,000 increase. The gain has some economic forecasters telling Yahoo Finance Live the economy could be on the verge of creating a million jobs a month very soon.

Meanwhile, data from IHS Markit and the Institute for Supply Management on activity in the services sector on Monday blew the doors off analyst estimates as the ISM's activity index surged to a record high, as Yahoo Finance's Myles Udland wrote in the Morning Brief newsletter. IHS Markit's reading was the best in seven years, noted Udland.

And last but not least, corporate profit estimates for the first quarter have continued to trend noticeably higher amid the acceleration in economic data.

But if economic data moderates as Chadha expects, the stock market could lose a key catalyst. That's not lost by Chadha's peers on Wall Street.

"Our view coming into 2021 was that earnings will drive markets higher and valuations will take a backseat, and actually be flat to down for the year. But the good news is actually starting to get priced in here, and we think it's going to become more challenging for investors and trickier," said Saira Malik, global equities chief investment officer and global portfolio manager at Nuveen...

[Apr 06, 2021] UBS Predicts 80,000 More Retail Stores Will Close In Five Years

Apr 06, 2021 | www.zerohedge.com

archipusz 1 hour ago

Market surges on 80,000 retail outlet closings optimism.

[Apr 06, 2021] House prices are seriously insane. Even my kind of crappy little place went up $85k on zillow in the last two months!

Apr 06, 2021 | www.zerohedge.com

Handful of Dust

House prices are seriously insane. Even my kind of crappy little place went up $85k on zillow in the last two months!

The only people I see buying are people from out of state (mostly Calif, NY and Oregon---unfortunately) and local government employees who never missed a paycheck during this entire ****show.

The people selling are private sector economic losers who are down sizing. Even the Family Doc down the street is selling his business is so slow because people are afraid to sit in an office+insurance reimbursements are down.

The entire USA economy is now more topsy turvey then ever in my life time.

[Apr 06, 2021] IMF Lifts Global Growth Forecast, Warns of Diverging Rebound by Eric Martin

That will probably sustain stock bubble for longer...
Apr 06, 2021 | www.bloomberg.com

The International Monetary Fund upgraded its global economic growth forecast for the second time in three months, while warning about widening inequality and a divergence between advanced and lesser-developed economies.

The global economy will expand 6% this year, up from the 5.5% pace estimated in January, the IMF said in its World Economic Outlook published on Tuesday. That would be the most in four decades of data, coming after a 3.3% contraction last year that was the worst peacetime decline since the Great Depression.

[Apr 05, 2021] Financial crises get triggered about every 10 years -- Archegos might be right on time by 14 major U.S. financial institutions. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. Exactly a decade later, too much leverage by some of those very institutions, and the bursting of a U.S. real estate bubble, led to the near collapse of the U.S. financial system. Once again, big banks were deemed too big to fail and taxpayers came to the rescue. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. The trend? Every 10 years or so, and they all look different. Are we in the early stages of a new crisis now, with the blowup at the family office Archegos Capital Management LP? A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data. A family office, for the uninitiated, is a private wealth management vehicle for the ultra-wealthy. Here's what I mean by ultra-wealthy: Consulting firm EY estimates there are some 10,000 family offices globally, but manage, says a separate estimate by market research firm Campden Research, nearly $6 trillion. That $6 trillion is likely far higher now given that it's based on 2019 data.

www.wsj.com

Here's the potential danger. Family offices generally aren't regulated. The 1940 Investment Advisers Act says firms with 15 clients or fewer don't have to register with the Securities and Exchange Commission. What this means is that trillions of dollars are in play and no one can really say who's running the money, what it's invested in, how much leverage is being used, and what kind of counterparty risk may exist. (Counterparty risk is the probability that one party involved in a financial transaction could default on a contractual obligation to someone else.)

This appears to be the case with Archegos. The firm bet heavily on certain Chinese stocks, including e-commerce player Vipshop Holdings Ltd. VIPS, -1.19% , U.S.-listed Chinese tutoring company GSX Techedu Inc. GSX, -10.63% and U.S. media companies ViacomCBS Inc. VIAC, -3.90% and Discovery Inc. DISCA, -3.86% , among others. Share prices have tumbled lately, sparking large sales -- some $30 billion -- by Archegos.

The problem is that only about a third of that, or $10 billion, was its own money. We now know that Archegos worked with some of the biggest names on Wall Street, including Credit Suisse Group AG CS, +1.59% , UBS Group AG UBS, +1.01% , Goldman Sachs Group Inc. GS, -1.25% , Morgan Stanley MS, -0.28% , Deutsche Bank AG DB, +0.74% and Nomura Holdings Inc. NMR, +1.87% .

But since family offices are largely allowed to operate unregulated, who's to say how much money is really involved here and what the extent of market risk is? My colleague Mark DeCambre reported last week that Archegos' true exposures to bad trades could actually be closer to $100 billion .

Danger of counterparty risk

This is where counterparty risk comes in. As Archegos' bets went south, the above banks -- looking at losses of their own -- hit the firm with margin calls. Deutsche quickly dumped about $4 billion in holdings, while Goldman and Morgan Stanley are also said to have unwound their positions, perhaps limiting their downside.

So is this a financial crisis? It doesn't appear to be. Even so, the Securities and Exchange Commission has opened a preliminary investigation into Archegos and its founder, Bill Hwang.

One peer, Tom Lee, the research chief of Fundstrat Global Advisors, calls Hwang one of the "top 10 of the best investment minds" he knows.

But federal regulators may have a lesser opinion. In 2012, Hwang's former hedge fund, Tiger Asia Management, pleaded guilty and paid more than $60 million in penalties after it was accused of trading on illegal tips about Chinese banks. The SEC banned Hwang from managing money on behalf of clients -- essentially booting him from the hedge fund industry. So Hwang opened Archegos, and again, family offices aren't generally aren't regulated.

Yellen on the case

This issue is on Treasury Secretary Janet Yellen's radar. She said last week that greater oversight of these private corners of the financial industry is needed. The Financial Stability Oversight Council (FSOC), which she oversees, has revived a task force to help agencies better "share data, identify risks and work to strengthen our financial system."

Most financial crises end up with American taxpayers getting stuck with the tab. Gains belong to the risk-takers. But losses -- they belong to us. To paraphrase Abe Lincoln, family offices -- a multi-trillion dollar industry largely allowed to operate in the shadows in a global financial system that is more intertwined than ever -- are of the super-wealthy, by the super-wealthy and for the super-wealthy. And no one else.

The Archegos collapse may or may not be the beginning of yet another financial crisis. But who's to say what thousands of other family offices are doing with their trillions, and whether similar problems could blow up?

[Apr 05, 2021] According to John Kenneth Galbraith, financial memory is usually about 20 years, then lessons need to be re-learned the hard way

Apr 05, 2021 | www.wsj.com

M Michael OFarrell SUBSCRIBER 3 hours ago Biden, or whoever is actually in charge, is giving this country away. It will the younger generation that will pay the price. Like thumb_up 6 Reply Share link Report M Mark A. Rosasco SUBSCRIBER 3 hours ago "A whole generation with a new explanation" , history definitely rhymes.

According to John Kenneth Galbraith, financial memory is usually about 20 years, then lessons need to be re-leaned the hard way, either with financial euphoria or I would say with tax polices that promote economic growth. J John Augsbury SUBSCRIBER 4 hours ago It is regrettable that Biden has done less than nothing to bring the country together. Biden has allowed Nancy Pelosi and Chuck Schumer to set their own agendas and leadership seems to come from back rooms. Main Stream Media provide nothing but a cheer leading section or cover for the illegal immigration crisis. Like thumb_up Reply Share link Report S Sharif Ahmed SUBSCRIBER 4 hours ago "he doesn't have a mandate .... no, he doesn't have a mandate... no mandate....no..," the conservative muttered as he stared blankly at the asylum walls.

Another 'no mandate' article from the people who continue to disregard a 7 million vote thrashing. We'll be forced to read these for years to come I guess.

Like thumb_up 3 Reply Share link Report Andrew Colin Andrew Colin SUBSCRIBER 4 hours ago When they decided to count those *7 million at 4am is when things get sticky Sharif.

Sadly these fringe ideas this joke of a president is pushing will never be mainstream, no matter how many times the media tells us that they are. D Daniel Altorfer SUBSCRIBER 3 hours ago Biden has been a life long salaried public tax absorber for 50 years with nothing to show for it. Maybe your vote is the real comedy here. Like thumb_up 12 Reply Share link Report John Briscoe John Briscoe SUBSCRIBER 4 hours ago This whole piece is an admission that Republicans have lost any credibility with US Citizens aged less than 60 years. Like thumb_up 7 Reply Share link Report D Daniel Whitworth SUBSCRIBER 4 hours ago I am under 60 years old and am now a Republican; formerly a Democrat. I challenge your assessment.
Like thumb_up 19 Reply Share link Report Andrew Colin Andrew Colin SUBSCRIBER 4 hours ago Former Dem, under 40, now a Repub, will never vote Dem again after the handling of COVID-19 and the woke mob.

In fairness I don't typically side with Facebook and corporate America on fringe ideas, but rather actual progressive ideas.

You couldnt be more wrong in your assessment. The Dem party is a collection of underemployed social media addicts that are typically obese and unhappy... if we want to be accurate. Like thumb_up Reply Share link Report C C F ETTER SUBSCRIBER 4 hours ago

The Bolsheviks, a tiny but ferociously focused minority, proceeded in this way in 1917.
Those who don't know their history are doomed to repeat it. Like thumb_up 14 Reply Share link Report J JOHN OWEN SUBSCRIBER 4 hours ago The Bolsheviks led to the rise of Stalin. Like thumb_up 13 Reply Share link Report M Mary Rhee SUBSCRIBER 5 hours ago I just finished reading "I chose Freedom," by Victor Kravchenko, published in 1946. He writes about his eventual repudiation of the Communist system and his escape to the west. Like so many young idealists, he was an ardent believer in the teachings of Lenin, Marx, and Stalin--until he saw the evils of collectivization and the subsequent starvation of the peasants, the lying of the press, and the State's justification of brutality and often murder for "the higher good." In our country today, some of these same tactics are being implemented. True, they are being implemented on a lesser scale than Victor Kravchenko experienced, but the seeds of totalitarianism are being groomed, fostered, and even praised by today's extreme Left. We need to stop this brainwashing. Granted, the extreme Right has its flaws, too, but they don't control the press, universities, or Silicon Valley. Both parties need to dump their extremists so that we can get our country back. Like thumb_up 3 Reply Share link Report C C F ETTER SUBSCRIBER 4 hours ago It wasn't stolen. It was manipulated. Manipulated by the press, by social media, the FDA, the FBI and our intelligence 'professionals' of the past and present and Covid was the blessing bequeathed upon the Democratic Party by the Chinese communists. S Susan Lynch-Smith SUBSCRIBER 4 hours ago Also, news media with their selective coverings, especially with Hunter Biden and Biden himself, of whom is an idiot. But wait, we the people are the idiots as it is a runaway train now with you do not speak out unless it is for the administration and the left-wing ideologies.

[Apr 05, 2021] Only the Retired Professors Dare to Speak Out Freely

Apr 05, 2021 | www.wsj.com

Over the months there have been letters to the editor regarding academia. April 4, 2021 2:59 pm ET

Listen to this article 1 minute 00:00 / 00:37 1x

Over the months there have been letters to the editor regarding academia, "Academic Freedom Long Ago Withered Away" (Letters, March 5) being a case in point. I find it interesting that for the most part they are written by professors emeriti or retired academics, not active ones with a job to lose. This is very telling in and of itself.

Kenneth White

Chicago


[Apr 04, 2021] Predicting The Next Crash

Apr 04, 2021 | www.zerohedge.com

David Zeiler's post ("How We Know Stock Market Crash Is Coming") was one of several crash predictions in the first quarter of 2021. And yet, the first day of the second quarter ended with the S&P 500 breaking through 4,000 to close at an all-time high of 4,019.87. Rounding up, that's four thousand twenty reasons to ignore permabears . It's one thing to hedge against downside risk - we've been big advocates of that (more on that below) - but betting on a collapse because you're negative about politics or the government is a recipe for losing money.

There were certainly reasons to be cautious at the end of last year - there always are. But if you bet against the market and the dollar and bet on gold then, you've taken L's on all three since.

The Markets Versus The Real World

Markets impact the real world and vice-versa. George Soros spends lots of words explaining this under his theory of " reflexivity ", but it's easier to explain with a couple of examples. The real world impacting the market is an easy one: Russia invaded Finland in 1939, and Finish bonds tanked. But markets impact the real world too. A recent example was the WallStreetBets crowd bidding up the price of AMC shares. That enabled AMC to float a secondary offering, raising money to keep the theater chain in business. Thanks to a bunch of Robinhood traders, movie theaters stayed open in the real world.

Although markets and the real world impact each other to some extent, markets are not the real world. A lot of negative things that happen in the real world have no impact on the market, and vice-versa. For example, we've written recently about the anarcho-tyranny in America's cities, and how depraved teens murdered an immigrant working a sub-minimum wage in our capital. Terrible stuff, but it has no impact on the stock market, and another new high in the S&P 500 won't impact it either.

Japan As Another Example

Japan offers another example of the distinction between markets and the real world. In February, the Nikkei 225, Japan's main stock index, crossed above the 30,000 level for the first time since 1990. For thirty years, Japanese stocks went nowhere, but that doesn't mean Japan went nowhere. They kept improving their enviable country. Compare, for instance, their bullet train network in 1990...

To their network in 2020.


Lost in translation 10 hours ago

Stop investing; instead, cash out, go Galt.

Stop supporting a system that hates you and wants you dead.

Orlov warned us ...

philipat 5 hours ago

I really like Orlov, he makes some very smart observations. One of his most brilliant I thought was to point out that " A large part of the US economy depends on selling over-priced services to ourselves, which ultimately doesn't amount to much ". How very true..

philipat 13 hours ago

2020 GAAP Earnings have a forward P/E of 40X. That's unprecedented and absurd, especially since there is no recovery and the economy will collapse after the "stimulus" ends.

Agreed about Silver, especially now FINALLY more people have understoof what a scam the paper PM derivatives "markets" are and are buying physical. It's collapsing at the edges, with the Perth Mint leading the way in exposed fraud!!

Automatic Choke PREMIUM 8 hours ago (Edited)

ok. an interesting read, though, is "This Time Its Different". a very thorough evaluation of all financial crises since the stone age. they ask the question, "is it possible to borrow your way out of a debt crisis?" spoiler: "no".

your argument says that the fed must keep spiking the punchbowl harder and harder to keep the party going. i don't disagree. i only claim that there is a limit, and all of history agrees.

(edit) by the way...how old are you? i was around when people were buying home mortgages at 18%, and it wasn't pretty.

philipat 5 hours ago (Edited)

I think the Fed has nothing left. All it can do is jawbone and QE (Or QE in the slightly different form of YCC). And it will until it collpases or there is the reset - whichever comes first. The economy started turnong down in 4Q2018 and became noticeable in Sept 2019 with the Repo events. Well before Covid, which is just the excuse and cover for many things. So if Covid goes away, as soon as the "stimulus" ends, the economy will turn down again.

I'm old enough to remember that too. But luckily never had a mortgage. Moved around the world with MNCs and had accommodation paid for until I designed and built my own place in the tropics and by then was able to pay cash.

[Apr 03, 2021] Using religion as smoke screen to cover blatant greed and avoiding regulation

Abuse of "Family office" was the only invention of Bill Hwang. and he was not the first to exploit this loophole to accumulate unsustainable level of leverage.
Apr 03, 2021 | finance.yahoo.com

Christian Capitalist

One of them walks for hours through New York's Central Park listening to recordings of the Bible and embraces a new, 21st-century vision of an age-old ideal: that of a modern Christian capitalist, a financial speculator for Christ, who seeks to make money in God's name and then use it to further the faith. A generous benefactor to a range of unglamorous, mostly conservative Christian causes, this Hwang eschews the trappings of extravagant wealth, rides the bus, flies commercial and lives in what is, by billionaire standards, humble surroundings in suburban New Jersey.

That same Bill Hwang, it turns out, is also a backer of one of Wall Street's hottest hands of late, Cathie Wood of Ark Investments. Like Hwang, Wood is known to hold Bible study meetings and figures into what some refer to as the "faith in finance" movement.

And here, at last, is where the Bill Hwangs collide. The fortune he amassed under the noses of major banks and financial regulators was far bigger and riskier than almost anyone might have thought possible -- and these riches were pulled together with head-snapping speed. In fact, it was perhaps one of the greatest accumulations of private wealth in the history of modern finance.

And Hwang lost it all even faster.

... ... ...

But before the next success, Tiger Asia ran into more trouble -- this time, trouble big enough to bring Hwang's days as a hedge fund manager to an end.

When Tiger Asia pleaded guilty to wire fraud in 2012, the SEC said the firm used inside information to trade in shares of two Chinese banks. Hwang and his firm ended up paying $60 million to settle the criminal and civil charges. The SEC banned him from managing outside money and Hong Kong authorities prohibited him from trading there for four years (the ban ended in 2018).

Shut out of hedge funds, Hwang opened Archegos, a family office. The firm, which recently employed some 50 people, initially occupied space in the Renzo Piano-designed headquarters of the New York Times. Today it's based further uptown, by Columbus Circle, sharing its address with the Grace & Mercy Foundation.

"My journey really began when I was having a lot of problems in our business about five or six years ago," Hwang said in a 2017 video. "And I knew one thing, that this was a situation where money and connections couldn't really help. But somehow I was reminded I had to go to the words of the God."

That belief helped Hwang rebuild his financial empire at dizzying speed as banks loaned him billions of dollars to ratchet up his bets that unraveled spectacularly as the financial firms panicked. What ensued was one of the greatest margin calls of all time, pushing his giant portfolio into liquidation. Some of the banks may end up with combined losses of as much as $10 billion, according to analysts at JPMorgan Chase & Co.

... ... ...

Doug Birdsall, honorary co-chairman of the Lausanne Movement, a global group that seeks to mobilize evangelical leaders, said Hwang always likes to think big. When he met with him to discuss a new 30-story building in New York for the American Bible Society, Hwang said, "Why build 30 stories? Build it 66 stories high. There are 66 books in the bible."

Before so much went so wrong so fast, Archegos appeared to be ramping up. A year ago, Hwang petitioned the SEC to let him work or run a broker-dealer; the SEC agreed.

It's impossible to say where Bill Hwang, the hard-charging financial speculator, ends, and Bill Hwang, the Christian evangelist and philanthropist, begins. People who know him say the one is inseparable from the other. Despite brushes with regulators, staggering trading losses and the question swirling around his market dealings, they say Hwang often speaks of bridging God and mammon, of bringing Christian teaching to the money-centric world of Wall Street.

[Apr 03, 2021] Manhattan Office Supply Skyrockets To Three Decade High - ZeroHedge

Apr 03, 2021 | www.zerohedge.com

BY TYLER DURDEN FRIDAY, APR 02, 2021 - 07:00 PM

Whether "working from home" is a temporary fad or a permanent "new normal" remains to be seen; what becomes more evident is the mounting supply glut of corporate space in Manhattan, according to Bloomberg , citing a new report from real estate firm Savills.

Savills said the amount of office space available in Manhattan is at a three-decade high. The report, released on Thursday, said the availability rate soared to 17.2% in the first quarter. The rise in the rate was primarily due to a massive surge in sublease space, which now stands at 22 million square feet, or 62% higher than 2019 levels.

"Abundant short- and long-term options are driving price reductions," Savills noted. "Many owners are proposing historically aggressive rates, concessions, and flexibility to secure tenants amid so much competition."

Savills said rents fell for the fifth consecutive quarter to around $76.27 a square foot, down 9% from a year earlier. These cheaper rents are creating a massive opportunity for companies who want to enter the city.

Desperate landlords were offering generous concessions for long-term leases at newly constructed buildings: "Average tenant improvement allowances jumped 16% and free rent surged 17% to an average of 13.5 months. The tenant-friendly market is expected to last for at least the next 12 to 18 months," Savills said.

The Manhattan office market continues to struggle more than one year after the pandemic hit, which has emptied Manhattan's skyscrapers. And since most employees are still working from home, just around 24.21% of workers in the New York metropolitan area were back at their desks as of this week.

Even with the vaccine rollout now reaching 100 million Americans, companies are still opting for "hybrid" work as remote working dominates .

In a past report, Jim Wenk, a vice chairman at Savills North America, said commercial real estate in the borough will have a "very choppy period for the foreseeable future."

A recent survey from the Partnership for New York City found 66% of Manhattan's most prominent employers would allow employees to work under hybrid work arrangements, meaning they would Manhattan's most prominent employers.

As more proof the work environment is rapidly changing, major magazine publisher Conde Nast (who owns brands such as ARS Technica, GQ, Teen Vogue, The New Yorker, Vanity Fair, Vogue, Wired, among other popular magazines) is a major anchor tenant in the new World Trade Center, recently skipped out on rent as it asked for rent discounts and a reduction in square footage.

Last month, JP Morgan was reportedly looking to sublet hundreds of thousands of square feet at 4 New York Plaza in the financial district and 5 Manhattan West in the Hudson Yards area.

To make matters worse, Hudson Yards, a massive complex on Manhattan's Far West Side with condos, office space, and retailers built over an enormous railroad yard had investors panic because the company refuse d to open its books. The combination of work-at-home and folks moving to suburbs has left Hudson Yards and other places across the borough a 'ghost town.'

This all suggests that the virus pandemic has brought years of technological change to the work model that has possibly made companies more productive and cut costs as employees work from home or adopt a hybrid work model. Without office workers returning to the borough, there can't be a robust recovery in the near term.

[Apr 03, 2021] Inflation Is Coming. Why it Could Be Here to Stay by Jacob Sonenshine

Apr 01, 2021 | www.marketwatch.com

...Economists do expect inflation to rise to above 2% as more states reopen and then stay there. And the St. Louis Fed is forecasting a 2.35% rate for the next 10 years.

...China's economy has dynamics that could raise the U.S. inflation rate over time. Key to the argument are China's aging population and the value of the country's currency, the Yuan. First, age. Today, the average age in China is 38, the same as in the U.S. By 2040, though, the number skyrockets to 47 in China and dips to 37 here.

The shift means fewer Chinese workers and upward pressure on pay. Higher wages probably would cause Chinese manufacturers to raise prices of exports, which could be passed onto American consumers.

Now, the Yuan. The currency bottomed at 7.12 per dollar in late 2019 after a more than five-year down-trend. China wants a weaker currency so its exports are more competitive -- cheaper -- for global buyers. Since the end of 2019, the Yuan has risen to 6.50 per dollar. If the trend continues, U.S. importers might raise prices because the cost of their imports are higher.

"Over the next decade, Asia's growth will slow dramatically, its wages will rise, its factories will close, its surpluses will melt and its currencies will rise sharply," wrote Vincent Deluard, global macro strategist at StoneX in a note. "For the rest of the world, this will be a massive and unexpected inflationary shock."

[Apr 03, 2021] World Economy Risks 'Dangerously Diverging' Even as Growth Booms

One in six restaurants in the USA permanently closed during the pandemic. So the return to normal for in this area is impossible.
Universities, health clubs, all kind of training schools also will suffer permanent decline.
Fed might partially lose the control of rates and inflation will start showing its ugly head.
Apr 03, 2021 | finance.yahoo.com

By 2024 world output will still be 3% lower than was projected before the pandemic, with countries reliant on tourism and services suffering the most, according to the IMF.

... "The Biden stimulus is a two edged sword," said former IMF chief economist Maury Obstfeld, who is a now senior fellow at the Peterson Institute for International Economics in Washington. Rising U.S. long-term interest rates "tighten global financial conditions.

[Apr 02, 2021] Who's Hiring And Who's Firing

Apr 02, 2021 | www.zerohedge.com

Not only was the March payrolls report a blockbuster, golidlocks number, much higher than expected but not too high to spark immediate reflation/hike fears thanks to subdued wage inflation, job growth in March was also widespread unlike February, where 75% of all new jobs were waiters and bartenders . By contrast, in March the largest gains occurring across most industries with the bulk taking place in leisure and hospitality, public and private education, and construction.

Here is a full breakdown:

It's hardly a surprise that with the US reopening, the one industry seeing the biggest hiring remains leisure and hospitality where jobs rose by 280,000, as pandemic-related restrictions eased in many parts of the country, with nearly two-thirds of the increase in "food services and drinking places", i.e., waiters and bartenders, which added +176,000 jobs in March.

And another notable change was in the total number of government workers, which surged by 136K in March, reversing the 90K drop in February, as a result of 49.6K state education workers and 76K local government education workers added thanks to the reopening of schools around the country.

Here is a visual breakdown of all the March job changes:

Finally, courtesy of Bloomberg , below are the industries with the highest and lowest rates of employment growth for the most recent month.


7 play_arrow


Jack Offelday 1 hour ago

The "V" recovery. Where Food Service jobs are the new "Golden Age".

Creamaster 47 minutes ago (Edited)

My wife is a nurse in an outpatient office under a large hospital umbrella here. Normally these outpatient spots go within days to a week.

Currently they have 2 openings they have been trying to fill for a few months now. Combine that with the fact my wife got 3 years worth of raises in a single shot, recently and out of the blue for no reason, tells me the hospitla is really screwed trying to fill nursing spots.

After this pandemic crap, it has likely scared alot of people away from entering healthcare, and if a nurse was on the fence about retirement , likely decided to call it quits after all this BS.

newworldorder 45 minutes ago

There are an estimated, 30 million illegals currently in the USA waiting legalization.

WHEN legalization happens, they will bring into the USA (by historical averages,) another 60 to 90 million of their family members in 10 years.

And all of them US Minority workers, by current US Diversity Laws, - same as all Black Americans.

[Apr 02, 2021] Higher Interest Rates Won't Kill the Bull Market, but This Could by Al Root

Stocks are essentially traded as private fiat currencies, supported only by market sentiment . So issuing a new stock usually drives them down.
Apr 02, 2021 | www.barrons.com

There's a saying that bull markets climb a wall of worry.

Investors are always looking for something to go wrong when things are going right. With stocks at or near all-time highs, investors have begun to fret over higher interest rates and their potentially negative impact on economic growth, coming inflation and what higher rates portend for stock-market valuations.

Higher rates, however, probably won't kill the bull market. Corporate management teams might do that all on their own. New stock sales by companies already flush with cash is sending a coded message to investors that things might be as good as they get.

Interest rates are always a concern for the market and the overall economy. Higher interest rates make everything more expensive including home mortgages and car payments. It also makes it harder to start and grow businesses.

For the market, higher interest rates tend to depress price-to-earnings multiples. The reason is, essentially, math. If investors can make more interest on their bonds, they demand more return from stocks. Higher returns tomorrow means paying less for stocks today.

Here's the thing. Inflation isn't running wild. The yield on the 10-year Treasury bond is about 1.7%, up from recent lows, but lower than where yields finished 2019. That isn't a high enough rate to choke off economic growth. At 3% and higher, the oxygen intake could start to get cut off.

Inflation expectations aren't out of line with history either. Inflation expectations can be measured by the difference in traditional government bonds yields and the yield on government inflation protected securities. Essentially, the face value of an inflation protected bond goes up by the consumer price index. The difference in yield between the traditional bond and the inflation protected bond is the level of inflation required to make an investor the same return on both.

Today, the 10-year yield is at roughly 1.7%. The 10-year inflation protected yield is negative 0.7%. So inflation has to average about 2.4% for both bond holders to get the same return.

Investors should watch out for inflation, but they should be more concerned with recent stock sales by companies flush with cash.

[Apr 02, 2021] Rising yields and S P500 ar 4000

Apr 02, 2021 | www.wsj.com

While a robust domestic recovery is great news for corporate profits, it might not be for stock prices if bond yields keep climbing -- especially technology stocks, which have proven to be especially sensitive to yields recently. Back in December when vaccine and stimulus plans were known, economists thought that the 10 year note's yield would be 1.08% in June. It jumped to 1.72% on Friday in response to the jobs report. Some forecasters see it topping 2% this year for the first time since the summer of 2019.

That would be no yield of dreams for stock bulls.

[Apr 02, 2021] The Twilight-Zone Economy Alternate-Reality Equity Markets - ZeroHedge

Highly recommended!
Apr 02, 2021 | www.zerohedge.com

The Twilight-Zone Economy & Alternate-Reality Equity Markets BY TYLER DURDEN FRIDAY, APR 02, 2021 - 09:00 AM

Authored by Patrick Hill via RealInvestmentAdvice.com,

"It is a dimension as vast as space and as timeless as infinity. It is the middle ground between light and shadow, between science (reality) and superstition (bubbles), and it lies between the pit of man's fears and the summit of his knowledge (fundamentals). This is the dimension of (economic) imagination. It is an area which we call The Twilight Zone."

- Rod Serling, introduction to the TV series, 1959 [our comments in ( )]

Our economy has entered the twilight zone. Today, economic leaders base policies on a hoped-for utopia with bubbles called 'growing markets' and greed termed 'good valuations'. The twilight zone economy is a place where fundamentals have disappeared. It is a utopian world of no moral hazard for business, financial or economic mistakes. In the last year, the Federal Reserve has injected over $4.1T into the banking, hedge fund, Wall Street complex of the financial elite. Vast injections of dollars have sent stock valuations to record highs. Yet, the pandemic-driven economy is real for 19M Americans out of work, others who lost 540,000 loved ones, and millions carrying housing debt due to missed rent and house payments.

Policymakers Disconnected From the Real Economy

Yet, policymakers continue to become further disconnected from the real economy where people work and spend. These leaders imagine an economy of full employment forever, risk assets continually rising in price (not value) with virtually no market corrections. It is an economic wonderland for corporations to use low-cost debt to finance infinite profits and stock buybacks. Wall Street is only too pleased to hype this corporate financial engineering. Goldman Sachs forecasts a GDP surge to 8% in the 4th quarter of this year due to the $1.9T American Rescue Bill. Bond king Bill Gross predicts interest rates surge to 3 – 4 % by year end. Does all this monetary and fiscal stimulus result in a healthy solid economy or the most catastrophic inflationary bubble in modern times ? Our post identifies the dimensions of the Twilight Zone Economy.

Astronomical Public Debt Drags Growth

The country is drowning in low-interest debt. But, this liquidity 'soma' drug is putting investors to sleep, thinking everything will be ok. Now, public debt is at levels not seen since WWII and projected to go to 200% of GDP by 2051.

Source: CBO, The Daily Shot – 3/15/21

During WWII, debt supported production capacity for building weapons, planes, and infrastructure to support the war effort. When the war was over, the US was the only major economy intact, leading to a high growth productive economy. The investment in productive industries increased the standard of living for most Americans.

Sources: Blackrock, IMF, OECD, The Daily Shot – 3/15/21

Are the present monetary debt and fiscal stimulus programs of relief payments resulting in productive investment? This chart, by Lance Roberts, shows how increasing public debt has resulted in a continuing decline in real economic growth.

Source: RIA, Lance Roberts, 3/17/21

Public debt not used for solid investments in infrastructure, basic research for innovation, or productivity has resulted in an ever-growing debt level to achieve a continuing decline in economic growth. This cycle of low-cost ballooning debt to finance debt service and transfer payments will likely result in economic stagnation or worse.

Negative Yielding Debt Triggers Speculation

Sovereign negative-yielding debt reached a record high of $17.8T last month. Thus, a massive level of worldwide debt is not repaying the entire principal to debt holders. Correlated to soaring negative-yielding debt is the meteoric rise of trader speculation in Bitcoin and other cryptocurrencies.

Sources: Daily Feather, Bloomberg – 3/22/21

Such parabolic moves in debt and speculative digital currencies like Bitcoin are candidates for a significant reversion in value at some date in the near future.

Equity Markets Are In An Alternate Reality

Why is a firm like Tesla valued at the same level as the next six largest car companies or the oil industry's total market capitalization? Isn't Tesla's valuation in the economic twilight zone? Analysts value Tesla at $1M per vehicle produced versus GM at $5000 per vehicle. While VW is building six battery factories in the EU, and vows by 2025 to produce over 1.2M EVs in 2022, matching Tesla's total output. VW has now taken over the dominant market share in Europe and is opening EV plants in Asia and North America.

There are 15 major car manufacturers, including GM, Ford, Toyota, Honda, Nissan, BMW, Mercedes, investing billions into EV production plants and battery facilities. Tesla may have a first-mover advantage in the EV market, but it may wind up like Yahoo, losing out to Google in the internet search sector. The following chart shows S&P valuations at Dotcom Crash levels in 2000.

Source: Topdown Charts, Refinitiv Datastream. – 3/17/21

The following chart shows the record valuation of stocks as a percentage of GDP back to 1952!

Sources: Charles Schwab, Bloomberg – 12/31/20

Traders are using ever-increasing levels of margin to buy stocks. Corporate executives with record levels of cash are resuming stock buybacks as the Dow and S&P continue to set new record highs. Yet, corporate sales and economic fundamentals don't support this extreme valuation case.

This chart from Real Investment Advisors notes the divergence of stock valuations growing to 164% versus corporate sales growth of 42% and GDP growth at 22% since 2007.

Source: Real Investment Advisors – 3/20/21

Investors, executives, and the Federal Reserve are addicted to low-interest rates. And just like physical addiction, the time will come when the zero-interest economic drug won't work anymore, and withdrawal sets in spiraling into a market crash.

Bubbles Bubbles Everywhere

Another sign of an alternative reality is bubbles in non-financial markets. For example, Christie's just sold a digital work of art by an artist known as Beepie for $69.3M with a non-fungible (exchangeable) token (NFT) when the bidding started at just $100. NFT collectible prices have sky rocked, providing the buyer with ownership rights indicating their purchase is authentic. Beepi knows he's riding a soaring market, observing, 'Absolutely it's a bubble, to be honest."

An NFT buyer purchased 351 Top NBA Shot videos for $5,000 last January in the video clip market. Based on social media chatter, Momentranks.com values the videos at $67,000 today. Sneaker reselling has soared as the collectible marketplace, StockX, announced that Nike Dunks sold for $33,400 two months ago. StockX disclosed that a Tom Brady rookie trading card sold for a record $1.3M in January. Even innocuous things like Twitter CEO Jack Dorsey's first tweet sold for $2.9M. Venture capitalists Marc Andreessen and Ben Horowitz note what motivates mania buyers at a collectible forum:

Andreessen: "A big part of the entire point of life is aesthetics. The way that we live and the design of things around us and artistic creativity."

Horowitz: "It's a feeling. You're buying a feeling. And what's that worth?"

Writer Ben Carlson notes in his analysis of bubble markets that:

"We're emotional. We lead with our feelings. We're superstitious."

Superstition is a characteristic of the Twilight Zone Economy.

Core City Life Is Changed Forever

Many think life will go back to the way things were in February 2020. We disagree. Life has changed forever in America. The lack of commuters changes core city life where they are the heartbeat of neighborhoods surrounded by office towers. Millions of small businesses and restaurants dependent on commuter patronage are scrambling to survive. When they had the opportunity, millions of workers worked from home and found they could perform successfully remotely. Hundreds of thousands of workers left cities to move to another less costly city or region. Some analysts think 99% of commuters will come back to city offices.

Yet, surveys show that from 20 – 25 % of professionals in dense city centers like New York and San Francisco want to work from home at least 3 – 4 days a week or work from home full time. Based on remote worker management experience companies are restructuring their reporting hierarchy. Global corporations to startups are moving to a distributed worker organization, further flattening the reporting structure for improved performance and business agility.

The lack of office workers leaves 20% of offices in core cities vacant, putting banks and commercial office space landlords at risk for billions of dollars in lease income. Plus, small businesses in these core cities have lost 50- 60% of their sales. Business owners hold billions of dollars in lease debt which must be paid off even after 80% of commuters return. Innovative new small businesses and restaurants will emerge to support these commuters. Plus, new attractions and business models will bring back visitors crucial for the leisure and hospitality sectors.

Millions of Workers Are Long Term Unemployed

About 19M workers collect continuing unemployment, of which 39.5% have been unemployed over 27 weeks. These permanently unemployed workers will have a difficult time finding their next job. While Indeed reports that job openings are up 3.7 % from January 2020, millions of workers are still unemployed. Many of these workers do not have the job skills to be hired for many new manufacturing and services jobs. Bank of America completed an analysis of unemployment pre – COVID to the trajectory of employment post COVID showing a lingering decline in the labor force.

Sources: Bank of America, CBO, Zerohedge, Real Investment Advisors – 2/12/21

The BofA analysis shows a permanent loss of employment in labor force size in Phase 3 of the recovery. The reality of the economy that workers and consumers will likely live in is an economy of debt dragging economic growth with poor job prospects. Job prospects for millions of workers will be limited by their lack of marketable skills. A major workforce segment faces a long financial recovery time from either the loss of their business or job. Lack of consumer spending by the permanently unemployed will slow the recovery.

Corporate Executives Join In the Party

In the 1950s, CEO pay to average worker pay was 50 times. Today, CEO pay is 350 times average worker pay, with Wall Street applauding stock buybacks totaling 1.4T in 2019. While buybacks fell to $450B in 2020, Bloomberg forecasts stock buybacks to resume $150B per quarter in 2021. Stock buybacks create overvalued markets. Ned Davis Research estimates the SPX as overvalued by at least 20% due to stock buybacks distorting prices in 2019. A company gooses prices by using cash to purchase shares in the open market, thereby reducing the stock pool for public investors. If demand stays the same, prices go up.

Yet, the company has not increased in substantive value. Many executives used low-cost debt to make stock purchases that saddle the company with major debt obligations. Executives must refinance these debt obligation or pay them off in the near future. In January 2020, corporate debt hit a 30-year record 49% of GDP, while interest rates were low. Fitch forecasts a jump in corporate loan defaults in 2021 to 8 – 9% from a 2020 default range of 5 – 6%.

Sources: Fitch Ratings, Vuk Vukovic – 9/22/20

A significant default storm looms in the coming years as interest rates rise.

Another cash flow squeeze is developing in profit margins. Prices paid for goods and services are increasing at a rate far faster than corporations can raise end customer prices in the following chart.

Sources: Mizuho Securities, The Federal Reserve Bank of Philadelphia, The Daily Shot – 3/19/21

Note the gap between prices paid and prices received in 2009 just before the 2009 fall. A similar cash flow squeeze seems to be strengthening.

Policy Makers Are Missing Solid Economic Landmarks

To pilot a ship along a coast and into a safe harbor, a captain needs recognizable landmarks and beacons. Our policy – captains are in a twilight zone fog. Many key economic indicators do not actually measure what policymakers tell us they do. Stock earnings per share reports are financially manipulated by stock buybacks misleading investors as to the actual earnings per share compared to pre-buybacks. The Fed holds interest rates artificially low with the resulting liquidity injections distorting debt markets. Unemployment rates are not accurate when the Bureau of Labor Statistics shows a rate of 6.7%. But, according to state unemployment reports, 19M workers are on continuing unemployment. Thus, the unemployment rate is more like 12.6%.

The Fed's inflation consumer price index figures exclude 'volatile energy and food prices, which are expenses consumers experience every day. Since the federal government in 1999 changed to a 'consumer lifestyle buying pattern' approach rather than a standard price comparison, inflation has consistently been under-reported. In 1998 the Bureau of Labor Statistics shifted to an 'owner equivalent rental cost' for homeownership. Using the Case-Shiller Home Price Index since 2019 shows the BLS OER-based approach understates CPI dramatically at 1.0% vs. the Case-Shiller model at 2.5%.

Industry Research On The Real Economy Is More Accurate

Chapwood Investments publishes a biannual index including 50 cities comparing consumer goods and services prices on 500 consumer items. Their analysis showed the top ten cities in the US with an average inflation rate of 10% in the second half of 2020. A marketing industry research firm compared price changes for 220 often purchased consumer products at Target and Walmart comparing 2018 to 2019 prices on average, the increase was 5 – 6% for both stores. Corporate marketing executives must have accurate information to make reasonable sales forecasts and plans for investment. Our policy leaders can learn from their example.

The Way Out of the Twilight Zone

To leave the Twilight Zone grip requires policymakers to recognize financial and real economy fundamentals. They need to drop the no economic pain utopia model. Policymakers need to get real with their statistics and tracking systems to base their policy initiatives on the real economy. Analysts need to use fundamentals for stock market and financial valuations. The Fed should stop rescuing failing hedge funds, zombie companies and end the addiction to low-cost debt. Washington can start paying for new spending programs with increased focused taxes, ending government waste and lower spending. The focus needs to be on a monetary and fiscal set of policies sustaining entrepreneurship, hard work, and allowing the economic consequences of business failure to run their course.

To avoid the inevitable market crash, these programs need to be phased in over several years to allow for investors, executives, and consumers to make adjustments to their portfolios. It is as if economic leaders have sent investors up an infinite 'wall of price' like a free solo climber, with no safety rope leaving them to the inevitable fate of fundamental economic gravity .


takeaction 3 hours ago (Edited)

I stopped right here...

" who lost 540,000 loved ones "

People die every day...and it is NOT from the scamdemic...

In regards to this economy...with Biden being propped up, the printing will not stop...

So watch asset prices continue to explode. Don't short anything right now.

There will be a time to short...but IMO not now..you will get crushed.

mrktwtch2 PREMIUM 3 hours ago remove link

I live in a small suburb north of Chicago in the county of mchery il we r 12 miles south of the Wisconsin border..my wife paid 139k for her town home in 2002 it went down to 78k during the crash but now its worth 195..since the joggers burned the cities down everyone is trying to move out of the city..strange times indeed

USAllDay 3 hours ago

The stupidity is just getting started. Yield curve control, price fixing, never ending eviction and foreclosure moratorium extensions, constant stimulus for fat alcoholic/meth addicted "single mothers". The collapse will be beautiful. Nothing this dirty should exist.

SMC 27 minutes ago

The thing we can do is enjoy every day to the fullest and not help them peddle their idiocy and fear.

If we are right, they are destroying themselves.

Mathematics, Physics and Chemistry may be "*-ist" but they combined with staying in shape, focus and dedication are key to our survival.

Prepare. Learn. Train. Prevail.

[Apr 02, 2021] But let's be reasonable - how is it possible to have 700K - 800K initial jobless claims every week and create nearly a million new jobs?

If we are to believe authorities the USA. added 916K jobs in March, and the official unemployment rate is at 6% (note the word official; the current official U6 unemployment rate as of March 2021 is 10.70%; so the real number is probably much higher than 10%)
Apr 02, 2021 | www.zerohedge.com

variousmarkets PREMIUM 3 minutes ago

I spent the last 2 weeks digging into the numbers - especially timing of the surveys and data collection. I get the fact that weekly claims don't reflect new hires. I also realize that monthly data is collected over a brief timeframe - just a few days - and that the calculations are seasonally adjusted.

But let's be reasonable - how is it possible to have 700K - 800K initial jobless claims every week and create nearly a million new jobs?

Does anyone really believe any of these numbers?

Globalistsaretrash 1 minute ago

Yes, at least half the sheep population think they are real. It's insane how dumb people are today.

[Apr 02, 2021] 'The world will never be the same-' Coursera CEO on learning post pandemic

Apr 02, 2021 | finance.yahoo.com

'The world will never be the same:' Coursera CEO on learning post pandemic Reggie Wade · Writer Fri, April 2, 2021, 12:43 PM More content below More content below ^IXIC +1.76% COUR +1.73%

The online learning platform Coursera ( COUR ) saw a big pop following its Nasdaq ( ^IXIC ) debut this week. Coursera revenue was up 60% last year, and CEO Jeff Maggioncalda predicts online learning is here to stay even after the pandemic eventually winds down.

"The world needs more access to high-quality learning. ... There will be a new normal that emerges. We don't know what that will look like either in terms of how we work remotely versus in an office and how we will learn online and also on campus. But it's pretty clear that the world will never be the same again and that online learning will be a big part of it," he told Yahoo Finance Live.

"So we really think about the long term, all the structural reasons why people will need to learn continuously through their lives to learn new skills as the world goes more digital," he said.

Dec 27, 2019 Mountain View / CA / USA - Coursera headquarters in Silicon Valley; Coursera is an American online learning platform that offers massive open online courses, specializations, and degrees

One area that Coursera is looking to expand is its degree and certification programs. Maggioncalda tells Yahoo Finance that the company can use technology to shake up traditional degree offerings.

"What we've seen for centuries is that college degrees are the most meaningful, recognized learning credential that there is, and the credential type hasn't really innovated that much over the last period of history. We think with technology, the ability to create not only degrees but other types of credentials," he said.

"It will be a portfolio of credentials. We believe that will serve lifelong learning needs in a world where people need to keep learning, even as they're working," he added.

[Apr 01, 2021] Archegos Blowup Puts Spotlight on Gaps in Swap Regulation

Apr 01, 2021 | www.wsj.com

Former regulators and financial-reform advocates say one rule change, in particular, could have prevented the debacle : requiring greater disclosures of the bets that investors such as Archegos place on companies using swaps.

[Apr 01, 2021] Amazon, Stock Compensation Equity Valuation

Apr 01, 2021 | www.zerohedge.com

Submitted by Jim Rocchio of Kailash Concepts

Bloomberg News recently published an article, Amazon Fights Union Drive With Fact-Free Bombast , discussing Amazon's alleged use of misinformation to prevent employees from unionizing. In the same manner Kailash recused itself from having a "bull" or "bear" thesis on Bitcoin, we will recuse ourselves from any discussion of unions. What we would like to draw our readers' attention to however is the method by which Amazon pays many senior executives. In the Bloomberg article it noted that the former head of Amazon's logistics business was awarded stock compensation worth $160 million dollars.

In the wake of the scandals that occurred during the financially profligate dot.com bubble, rule FAS123 was passed requiring stock compensation be expensed in a company's income statement. In papers written both in the professional and academic worlds, Kailash has used Amazon as an example of how cash flow accounting contradicts the intent of FAS123. The Kailash note found here showed how Amazon's well explained and GAAP compliant use of lease and stock comp accounting could potentially cause confusion among analysts. Kailash's academic expert on stock compensation put his work, Stock Compensation Expense, Cash Flows and Inflated Valuations through peer review. His work made it painfully clear that this GAAP compliant accounting method diminished the information value of traditional calculations of free cash flows.


[Apr 01, 2021] Some investors or managers are losing sight of reality and sustainable value-at-risk levels.

Apr 01, 2021 | www.zerohedge.com

Authored by Vassilis Karamanis, FX and rates strategist who writes for Bloomberg

Albert Einstein is widely credited as saying that insanity is doing the same thing over and over again and expecting a different result. The phrase keeps coming to my mind as I read story after story on the Archegos Capital Management saga and look at a series of charts on the euro. At first, the two might seem unrelated, but they both hold relevant lessons about market complacency.

The story reads as expected -- or feared: The firm, little known outside finance circles, had amassed tens of billions of dollars in stocks bets, much of it using opaque derivatives and borrowed funds, including some giant bets on a small group of equities. And then it all went awry.

The acronym LTCM doesn't mean much, it seems, to some market participants. Common sense either. Maybe Margin Call, J.C. Chandor's 2011 movie, should be trending in streaming services, serving as a healthy reminder.

Those of us who still remember the spectacular collapse of the U.S. hedge fund Long-Term Capital Management in the late 1990s though are probably asking ourselves how this happened again.

Was it a regulatory issue, a market inherently at fault or just human nature? Will the story simply be forgotten again, especially given the few signs of lasting damage on markets? Or maybe we are all grown ups now and can move on quietly and in peace instead of obsessing over every set back. At least until the next tail risk comes knocking on our door, that is.

So what does the euro have to do with any of this?

It's not that there is a secret correlation with stocks that unveiled itself amid the Archegos turmoil. But I'd argue that there's a link. And it's that some investors or managers are losing sight of reality and sustainable value-at-risk levels.

The common currency hit its lowest level in nearly five months today. Fair enough, right? The yield on 10-year U.S. notes reached its highest level since January 2020 Tuesday, and is now just a whisker away from halving its decline since 2018, so it makes sense for the dollar to keep applying pressure on euro bulls.


Darth Vader 5 hours ago

I think it's unfair to mix Albert Einstein up with these grubby little thieves.

The game is rigged and they're picking winners and losers. Best not to play their game.

Misesmissesme 5 hours ago

I think these fit better:

Only two things are infinite, the universe and human stupidity, and I'm not sure about the former. A Einstein

The difference between genius and stupidity is that genius has its limits. A Einstein

OrazioGentile 5 hours ago

Still waiting for a movie on the collapse of Bear Stearns or Lehmann- fact I'm sure will be loads more entertaining than fiction!

[Apr 01, 2021] There Are Still Over 18 Million Americans Getting Government Jobless Benefits

Apr 01, 2021 | www.zerohedge.com

After mixed messages in last week's claims data (low initial claims, record high pandemic continuing claims), analysts expected a further fall in first time jobless benefit seekers but were disappointed as claims rose from 684k the previous week to 719k last week.

... Total return swaps are brokered by Wall Street banks. They provide investors with exposure to the profits or losses of stocks or other assets, without the investor actually holding the underlying shares. Archegos's strategy backfired in recent weeks after ViacomCBS and other stocks sold off. Mr. Hwang's firm was unable to meet its obligations to its banking partners, which in turn liquidated large chunks of stock they had amassed to underpin the trades. Among the banks now facing steep losses are Credit Suisse Group AG and Nomura Holdings Inc.

[Apr 01, 2021] Archegos's Collapse Is a Wakeup Call for Regulators

Apr 01, 2021 | www.wsj.com

...history shows that one messy unwind can easily spread. The U.S. Office of Financial Research finds that the ten largest hedge funds were leveraged far more heavily than the next 40 largest funds, as of June. And many family offices may not be counted in these statistics at all, which mostly rely on disclosure forms they are able to avoid.

There are some obvious responses for regulators, such as mandating disclosure of the total return swaps that allowed Archegos to build big positions out of the public eye. But there are no easy answers to the wider challenge of overseeing leverage within the broadest financial complex when debt is almost free.

The system has held up under the latest strain, but this isn't a victory. Archegos means one who leads the way. Regulators must do what they can to ensure as few as possible follow.

Write to Rochelle Toplensky at rochelle.toplensky@wsj.com and Telis Demos at telis.demos@wsj.com

[Apr 01, 2021] Deutsche Bank Dodged Archegos Hit With Quick $4 Billion Sale - Bloomberg

Apr 01, 2021 | www.bloomberg.com

Swiss rival Credit Suisse expects a hit in the billions of dollars from Archegos, people with knowledge of the matter have said, while Nomura Holdings Inc. has signaled it may lose as much as $2 billion. Analysts at JPMorgan Chase & Co. estimate the Archegos blowup may cause as much as $10 billion of combined losses for banks.

David Herro, chief investment officer of Harris Associates -- one of Credit Suisse's biggest shareholders -- said on Bloomberg Television on Wednesday that the Archegos incident was a "wake-up call" for Credit Suisse and should lead to sweeping changes to its culture and oversight practices.

Shares of Credit Suisse tumbled 21% this week on concern over the size of its potential Archegos hit. Deutsche Bank is down 2.9%.

[Apr 01, 2021] Riskiest U.S. Junk Bonds Are Outperforming Just About Everything - Bloomberg

Apr 01, 2021 | www.bloomberg.com

...High-yield bonds rated in the CCC tier, usually the lowest-graded bonds that trade, gained 3.58% year-to-date, according to Bloomberg Barclays index total return data. They performed better than leveraged loans, which saw returns of 1.78%, and high-grade bonds, which posted a 4.65% loss. They outperformed mortgage bonds and Treasuries too.

The higher coupons that the securities pay can offer insulation against the sting of rising yields. CCC notes average coupons of 7.7%, compared with 5.9% for high yield debt overall and 3.7% for investment-grade corporate notes, according to Bloomberg Barclays index data.

"The lower quality trade still has some legs," said Scott Kimball, co-head of U.S. fixed income at BMO Global Asset Management. "Investors typically look to high-yield securities, particularly CCCs, when yields are on the rise. Now, we see record positive revisions for U.S. growth by economists being further boosted by record fiscal stimulus expectations."

[Mar 31, 2021] Looks like Goldman and Morgan managed to sell thier shares in Archegos meltdown first as usual pushing other clients under the bus: Billions in Secret Derivatives at Center of Archegos Blowup

Casino capitalism is the fertile ground for the most sleazy types of speculators. The stock market has become a giant slot machine financed by 401K lemmings. The marks here are 401K investors.
Excessive leverage is a immanent feature of the pre-collapse stage of Minsky cycle. So those who argue that we are close to another crash get some additional confirmation due to this event. The Masters of the Universe rediscovered the hidden areas of huge risk, and like in 2008 are afraid but can't and do not want to anything.
TBTF such as Goldman and Morgan aid the most sleazy types as they bring outsized profits for them. So this a catch 22 as Goldman and other TBFT controls SEC not the other way around.
It would be prudent to view banksters as a special type of mafia and treat accordingly and prohibit for them serving in government. But this is impossible under neoliberal as financial oligarchy has all political power.
The question is: Is there another fund that's larger, that's more leveraged with the same characteristics that could prove to be a more systemic event? That's the major concern right now." Wall Street's hottest trades such as pure-tech plays and high-flying tech/media like the ones bet on by Hwang -- could be unwound. The Hwang blowup wakes up investors to the realization that many parts of the market are overvalued and it's time to sell -- and quickly as yields are going up. For the the FAANGS, the Tesla's out there -- the fundamentals don't support the stock. So it would be logical to a large correction.
Notable quotes:
"... The idea that one firm can quietly amass outsized positions through the use of derivatives could set off another wave of criticism directed against loosely regulated firms that have the power to destabilize markets. ..."
Mar 31, 2021 | finance.yahoo.com

Much of the leverage used by Hwang's Archegos Capital Management was provided by banks including Nomura Holdings Inc. and Credit Suisse Group AG through swaps and so-called contracts-for-difference, according to people with direct knowledge of the deals. It means Archegos may never actually have owned most of the underlying securities -- if any at all.

While investors who own a stake of more than 5% in a U.S.-listed company usually have to disclose their holdings and subsequent transactions, that's not the case with positions built through the type of derivatives apparently used by Archegos. The products, which are transacted off exchanges, allow managers like Hwang to amass exposure to publicly-traded companies without having to declare it.

The swift unwinding of Archegos has reverberated across the globe, after banks such as Goldman Sachs Group Inc. and Morgan Stanley forced Hwang's firm to sell billions of dollars in investments accumulated through highly leveraged bets. The selloff roiled stocks from Baidu Inc. to ViacomCBS Inc., and prompted Nomura and Credit Suisse to disclose that they face potentially significant losses on their exposure.

One reason for the widening fallout is the borrowed funds that investors use to magnify their bets: a margin call occurs when the market goes against a large, leveraged position, forcing the hedge fund to deposit more cash or securities with its broker to cover any losses. Archegos was probably required to deposit only a small percentage of the total value of trades.

The chain of events set off by this massive unwinding is yet another reminder of the role that hedge funds play in the global capital markets. A hedge fund short squeeze during a Reddit-fueled frenzy for Gamestop Corp. and other shares earlier this year spurred a $6 billion loss for Gabe Plotkin's Melvin Capital and sparked scrutiny from U.S. regulators and politicians.


The idea that one firm can quietly amass outsized positions through the use of derivatives could set off another wave of criticism directed against loosely regulated firms that have the power to destabilize markets.


Bob 2 days ago This is another major reminder that the stock market is not as rational as we want to believe. A small group of very large, leveraged funds can have far more impact on the market than dozens or hundreds of well thought out and researched programs. Sigh. Take your lumps and move on. Hasso 2 days ago 2008 - Hwang's Tiger Asia suffered losses from the Volkswagen short, 2012 - Hwang's Tiger Asia paid $44M to settle insider trading charges, banned 2014- Hong Kong fined him $5.3M & banned him for four years. 2021 - And here we are again.
Tyrone 2 days ago Gee, Credit Suisse involved in sleezy investments. Again. I'm shocked, just shocked!
Manohar 2 days ago Banks haven't learnt anything yet...you know why? Because its other people's money and the no one gets prosecuted when they are caught with hand in the cookie jar.
killer klown 2 days ago it's a sign that the market and it's regulators have learned nothing.........to even pretend that a penny difference in assumed earnings versus actual earnings using the GAAP accounting (which itself says it's not exact but generally accepted accounting principles)moves a stock is in itself a joke, this situation of a BIG BLACK BOX calls for the complete dismantle of the derivatives market which was created to lay off risk. Bill Hawng should be FLAT Broke his possesions seized, The board of Credit Suisse and Nomura et all should be unemployed as of 8:31 this morning. But they won't and it's only going to happen again and again.
Amvet 2 days ago Market manipulators have a free rein in the USA. Are politicians also involved? Reply 16 3 George 2 days ago Just amazing how some of the world's most sleazy characters have access to cosmic sums of money and remain under the radar and legal(???). Then nothing seems to happen except that loads of other folk get burned while they move on to the next bright idea. Reply 13 1 Rick 2 days ago So clearly limiting those who can purchase these to exclude amateur players has not been successful. Recklessness is not limited to amateurs. Mr. H. 2 days ago In 2008 high finance was playing very high risk games with clients money at the undefined edge between legal and illegal. A bunch of firms went away along with many billions of dollars because a bunch of players were playing CYA. They came up with the term "too big to fail" when they were picking winners and losers. "too big to fail" is is fetid bovine excrement. The SEC, that is the administrative government, was not doing its job! There were many questions about government employee competence to do those jobs. The government should have let the market place pick the winners and losers, then the government should have prosecuted everyone who failed to perform their fiduciary duty and set a major precedent about high risk play with other people's money; keep it legal or go to jail and lose your shirt. That is what should happen this time too! Noone 2 days ago Almost like something that is so dangerous and risky to both the market AND the "investor" that retail traders ARE BANNED from doing it should.. idk.. BE ILLEGAL FOR EVERYONE? Useless SEC. Do your job right.
Philip 2 days ago Ironic that Hedge Funds are the most unhedged game going.... Dan 1 day ago The managers of these HFs lack morality, they steal from other companies because they believe in their twisted little minds if they set up a system whereby they can trade in dark pools with illegal naked shorting, counterfeit shares and stock manipulation under the radar -- it makes the crime okay. All of this criminality is been done with the aid of supplementary leverage ratio (SLR) If they can manage to bankrupt the company they short with Government SLR they end up paying no tax and pocket the money GME/AMC and more for example.. Bingo the most audacious robbery attempt in the history of the state. Oh boys did they fail, wow what a spectacular failure. Now they have to deleverage destabilizing the entire market. Do these HF managers rank their values differently to the moral code we all live by? Obviously they do! There's no doubt they'll get lots of time to think about their behaviour when they're in the slammer. Each case will have to be evaluated on its own merit at some stage of course. On the face of it, all indications points to a tradeoff that benefits themselves at the disadvantaging of other. Sad for them! I rest my case!
Jodes 1 day ago The spikes in shares like ROKU, BIDU, SHOP and many more have huge parabolic spikes at the top accounting for the disfunctional market as we were seeing it at the top. They had huge buy orders to artificially spike the prices keep them up and then experts come in after and raise price targets and put a BUY rating on the stock. Then get retail to buy in and then drop them like a rock. Greedy and dispicibale. All probably done for a huge bonus. While retail suffers for their greed.
Vince 2 days ago More than 100 Trillion (with a T) are moving around the world in Derivatives each and every day., some say closer to 200 Trillion! You figure it our when THAT bubble bursts! Reply 2 1 SniffMopWho 2 days ago Interesting how these guys make millions and billions, just by pressing keys on a keyboard.
... 2 days ago More sleaze trying to bring down the market by making risky bets with swaps and derivatives, yet the regulators are caught asleep again. Just more proof of incompetence by Biden and his hired idiots at the SEC.

[Mar 31, 2021] Us market collapsed in March2020, but nobody has courage to admit that.

Mar 31, 2021 | www.unz.com

anon [406] Disclaimer , says:

[Mar 31, 2021] Citadel and friends have shorted the treasury bond market to oblivion using the repo market.

Mar 31, 2021 | www.zerohedge.com

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Crash Overide 2 hours ago (Edited)

Speaking of treasuries... and Citadel, I thought it was an interesting read.

TL;DR- Citadel and friends have shorted the treasury bond market to oblivion using the repo market. Citadel owns a company called Palafox Trading and uses them to EXCLUSIVELY short & trade treasury securities. Palafox manages one fund for Citadel - the Citadel Global Fixed Income Master Fund LTD. Total assets over $123 BILLION and 80% are owned by offshore investors in the Cayman Islands. Their reverse repo agreements are ENTIRELY rehypothecated and they CANNOT pay off their own repo agreements until someone pays them, first. The ENTIRE global financial economy is modeled after a fractional reserve system that is beginning to experience THE MOTHER OF ALL MARGIN CALLS.

THIS is why the DTC and FICC are requiring an increase in SLR deposits. The madness has officially come full circle.

tnorth 4 hours ago

another month of completely rigged 'markets'

mtl4 4 hours ago remove link

Music is still playing, make sure you have a chair when it stops

this_circus_is_no_fun 1 hour ago remove link

Consider these two points:

  1. Treasuries are claimed to be backed by the "full faith and credit of the United States".
  2. In Q1, Treasuries suffer their biggest loss in 40 years.
y_arrow
Kreditanstalt 1 hour ago (Edited)

I've always wondered why seemingly contradictory and uncorrelated assets and asset classes alternately "soar" and "plunge" on different days, usually in random conjunction with others...

It seems so counterintuitively...MECHANICAL...or theory-driven, rather than rational "investing".

Almost like random BETTING

[Mar 31, 2021] Treasuries Suffer Biggest Loss In Over 40 Years

Mar 31, 2021 | www.zerohedge.com

S&P gained over 6% as Treasury's total return fell over 4%...

Energy stocks soared 30% in Q1 (after rising 26% in Q4) and Tech underwhelmed (but was still higher in Q1...

brian91145 4 hours ago

TOTAL FRAUD FUELED BY DEBT!

[Mar 30, 2021] SEC role in the Archegos collapse: this time excessive leverage was hidden under family office scheme which means that SEC learned nothing from 2008 and is completely hijacked by banksters

This is first of all about the corruption of SEC. all this hacking of financil system in not new. So the failure to prevent it is the failure of regulation.
Mar 30, 2021 | finance.yahoo.com
One of World's Greatest Hidden Fortunes Is Wiped Out in Days
More content below More content below VIACA +4.87% GSX +4.75% Katherine Burton and Tom Maloney Tue, March 30, 2021, 8:29 AM More content below More content below VIACA +4.87% GSX +4.75%

(Bloomberg) --

From his perch high above Midtown Manhattan, just across from Carnegie Hall, Bill Hwang was quietly building one of the world's greatest fortunes.

Even on Wall Street, few ever noticed him -- until suddenly, everyone did.

Hwang and his private investment firm, Archegos Capital Management, are now at the center of one of the biggest margin calls of all time -- a multibillion-dollar fiasco involving secretive market bets that were dangerously leveraged and unwound in a blink.

Hwang's most recent ascent can be pieced together from stocks dumped by banks in recent days -- ViacomCBS Inc., Discovery Inc. GSX Techedu Inc., Baidu Inc. -- all of which had soared this year, sometimes confounding traders who couldn't fathom why.

One part of Hwang's portfolio, which has been traded in blocks since Friday by Goldman Sachs Group Inc., Morgan Stanley and Wells Fargo & Co., was worth almost $40 billion last week. Bankers reckon that Archegos's net capital -- essentially Hwang's wealth -- had reached north of $10 billion. And as disposals keep emerging, estimates of his firm's total positions keep climbing: tens of billions, $50 billion, even more than $100 billion.

It evaporated in mere days.

"I've never seen anything like this -- how quiet it was, how concentrated, and how fast it disappeared," said Mike Novogratz, a career macro investor and former partner at Goldman Sachs who's been trading since 1994. "This has to be one of the single greatest losses of personal wealth in history."

Late Monday in New York, Archegos broke days of silence on the episode.

"This is a challenging time for the family office of Archegos Capital Management, our partners and employees," Karen Kessler, a spokesperson for the firm, said in an emailed statement. "All plans are being discussed as Mr. Hwang and the team determine the best path forward."

The cascade of trading losses has reverberated from New York to Zurich to Tokyo and beyond, and leaves myriad unanswered questions, including the big one: How could someone take such big risks, facilitated by so many banks, under the noses of regulators the world over?


part of the answer is that Hwang set up as a family office with limited oversight and then employed financial derivatives to amass big stakes in companies without ever having to disclose them. Another part is that global banks embraced him as a lucrative customer, despite a record of insider trading and attempted market manipulation that drove him out of the hedge fund business a decade ago.

A disciple of hedge-fund legend Julian Robertson, Sung Kook "Bill" Hwang shuttered Tiger Asia Management and Tiger Asia Partners after settling an SEC civil lawsuit in 2012 accusing them of insider trading and manipulating Chinese banks stocks. Hwang and the firms paid $44 million, and he agreed to be barred from the investment advisory industry.

He soon opened Archegos -- Greek for "one who leads the way" -- and structured it as a family office.

Family offices that exclusively manage one fortune are generally exempt from registering as investment advisers with the U.S. Securities and Exchange Commission. So they don't have to disclose their owners, executives or how much they manage -- rules designed to protect outsiders who invest in a fund. That approach makes sense for small family offices, but if they swell to the size of a hedge fund whale they can still pose risks, this time to outsiders in the broader market.

"This does raise questions about the regulation of family offices once again," said Tyler Gellasch, a former SEC aide who now runs the Healthy Markets trade group. "The question is if it's just friends and family why do we care? The answer is that they can have significant market impacts, and the SEC's regulatory regime even after Dodd-Frank doesn't clearly reflect that."

Valuable Customer

Archegos established trading partnerships with firms including Nomura Holdings Inc., Morgan Stanley, Deutsche Bank AG and Credit Suisse Group AG. For a time after the SEC case, Goldman refused to do business with him on compliance grounds, but relented as rivals profited by meeting his needs.

The full picture of his holdings is still emerging, and it's not clear what positions derailed, or what hedges he had set up.

One reason is that Hwang never filed a 13F report of his holdings, which every investment manager holding more than $100 million in U.S. equities must fill out at the end of each quarter. That's because he appears to have structured his trades using total return swaps, essentially putting the positions on the banks' balance sheets. Swaps also enable investors to add a lot of leverage to a portfolio.

Morgan Stanley and Goldman Sachs, for instance, are listed as the largest holders of GSX Techedu, a Chinese online tutoring company that's been repeatedly targeted by short sellers. Banks may own shares for a variety of reasons that include hedging swap exposures from trades with their customers.

'Unhappy Investors'

Goldman increased its position 54% in January, according to regulatory filings. Overall, banks reported holding at least 68% of GSX's outstanding shares, according to a Bloomberg analysis of filings. Banks held at least 40% of IQIYI Inc, a Chinese video entertainment company, and 29% of ViacomCBS -- all of which Archegos had bet on big.

"I'm sure there are a number of really unhappy investors who have bought those names over the last couple of weeks," and now regret it, Doug Cifu, chief executive officer of electronic-trading firm Virtu Financial Inc., said Monday in an interview on Bloomberg TV. He predicted regulators will examine whether "there should be more transparency and disclosure by a family office."

Without the need to market his fund to external investors, Hwang's strategies and performance remained secret from the outside world. Even as his fortune swelled, the 50-something kept a low profile. Despite once working for Robertson's Tiger Management, he wasn't well-known on Wall Street or in New York social circles.

Hwang is a trustee of the Fuller Theology Seminary, and co-founder of the Grace and Mercy Foundation, whose mission is to serve the poor and oppressed. The foundation had assets approaching $500 million at the end of 2018, according to its latest filing.

"It's not all about the money, you know," he said in a rare interview with a Fuller Institute executive in 2018, in which he spoke about his calling as an investor and his Christian faith. "It's about the long term, and God certainly has a long-term view."

... ... ...

"You have to wonder who else is out there with one of these invisible fortunes," said Novogratz. "The psychology of all that leverage with no risk management, it's almost nihilism."

[Mar 30, 2021] A Very Surprised JPMorgan Calculates The Damage From The Archegos Collapse

Mar 30, 2021 | www.zerohedge.com

BY TYLER DURDEN TUESDAY, MAR 30, 2021 - 12:37 PM

Unlike the devastating London Whale debacle in 2012, which was all JPMorgan eventually drawn and quartered quite theatrically before Congress (and was a clear explanation of how banks used Fed reserves to manipulate markets, something most market participants had no idea was possible), this time JPMorgan was nowhere to be found in the aftermath of the historic margin call that destroyed hedge fund Archegos. Which is may explain why JPMorgan bank analyst Kian Abouhossein admits he is quite " puzzled" by the recent fallout from the Archegos implosion (or maybe JPM simply was not a Prime Broker of the notorious Tiger cub), which however does not prevent him from trying to calculate the capital at risk from the Archegos collapse.

In a note published this morning, Kian writes after Nomura yesterday confirmed (at least) a $2Nn potential claim and fellow Japanese bank Mitsubishi UFJ Securities Holdings announcing today of another potential $300MM loss - which as the JPM strategist admits " for a likely non-material PB player is surprising to us" – JPMorgan now expects losses well beyond normal unwinding scenario for the industry : and explains that it now sees "the losses as very material in relation to lending exposure for a business that is mark-to-market and holds liquid collateral" and makes Nomura's indication of potentially losing $2bn and press speculation of CSG $3-4bn losses "as not an unlikely outcome" according to the JPM strategist.

So why is JPM surprised?

Because as Abouhossein writes, " in normal circumstances... we would have suspected industry losses of $2.5-5bn. We now suspect losses in the range of $5-10bn ." In other words, JPM has doubled its max loss estimate to as much as $10BN, a number which could yet rise.

To get there, JPM estimates that Archegos was highly leveraged at 5-8x (i.e. $50-80bn of exposure for $10bn of equity ) - using Total Return Swaps and Certificates for Difference to lever up so massively as we discussed yesterday - and it was this use of equity-swaps tha "tincreased the inability of PBs to see the concentration risk in holdings within the hedge fund in question."

Even so, Kian admits that he remains " puzzled why Credit Suisse (CSG) and Nomura have been unable to unwind all their positions at this point – as we would expect to get an announcement as soon as this is the case, on the scale of potential losses (especially in the case of CSG which hasn't provided numerical impact)" although we have gotten some headlines suggesting the total loss could be as big as $7 billion.

That said the JPM analyst expects full disclosure by the end of the week at the latest from CSG and would keep an eye on credit agencies statements as well. And in the harshest slam of JPM's competitors, Kian says he suspects "potentially poor risk mgmt being an issue here considering i) late unwinding, and ii) possibly significant more leverage than for GS/MS similar exposures."

Alternatively, one could argue that it was Goldman and Morgan Stanley who rushed to break ranks with the syndicate of Prime Brokers and started dumping blocks of Archegos shares for one reason or another on Friday morning as we detailed yesterday, which meant that while they suffered the least losses, those banks - like CS, Nomura and Wells - which were slow to start selling, would end up with the largest losses (for more see " How Goldman And Morgan Stanley Broke Ranks And Triggered The Biggest Margin Call Since Lehman ").

Source: @KennethDredd

In terms of actual loss estimates with an empahsis on Credit Suisse which so far appears to be the hardest hit, here is a breakdown from JPMorgan of what is known:

In terms of capital at risk, based on press articles, Credit Suisse seems to have bigger issues than Nomura assuming press speculation of $3-4bn are correct and Grensill could potentially lead to additional litigation cost of $1-3bn. In the case of Nomura, JPM has reduced the share buyback for FY2020 from ¥75 billion to ¥10 billion; if the press speculation losses are correct, it would expect CS at a minimum will have to cancel its share buyback for 2021, preserving the dividend and we assume no buyback for the next 2 years assuming Basel 4 implementation as of Jan 2023.

Assuming no RWA growth vs. YE2020 levels, JPM calculates that CS can absorb a max. one-time pre-tax hit of c$4.5b n (CHF 4.2bn) for Archegos which post-tax is 116bps of CET1 capital offset by 32bps of Retained earnings (1Q Net Income less 1Q dividend accrual of CHF 0.2bn and share buyback of CHF 0.3bn completed YTD) and still reach 12% by end of 1Q 21 which is seen as an acceptable level for S/Hs under Basel 3 – with further hits to come (see below). The minimum CET1 requirement is 10% and every additional $1bn pre-tax hit is 26bps of CET1 capital based on YE2020 RWAs and hence "any hits beyond $5bn pre-tax from Archegos will call into question the capital position in our view", JPM warns.

Separately, Bloomberg adds that March's blowups may - in addition to wiping out more than a year of profits for the bank and threaten its stock buyback plans - also add add to the reputational hit from the other missteps by bank CEO Thomas Gottstein. With the shares posting the only decline among Europe's major banks in 2021 and a new chairman starting next month, Chief Executive Officer Thomas Gottstein is facing questions over whether he and risk chief Lara Warner have a handle on the bank's exposures.

"Risk control at every level in this bank must be examined and changes made where there are deficiencies," David Herro, chief investment officer at Harris Associates, one of the biggest investors in the bank, said in an email. "But I state the obvious?"

As Bloomberg further notes, the hits from Archegos and Greensill have spoiled a plan by Gottstein to start the year with a clean slate.

The CEO late last year wrote down the value of the bank's stake in hedge fund York Capital and took a hit related to a long-standing legal case into residential mortgage-backed securities, dealing the bank its first quarterly loss in three years. The crises have more than overshadowed its best start to the year in a decade.

"While all four events appear idiosyncratic in nature, it inevitably has led investors to question the strategic decision making at CS and the risk culture of the firm," Andrew Coombs, a Citi bank analyst wrote Tuesday.

While Credit Suisse has not quantified the full damage yet, and has merely said that it faces "highly significant" losses tied to Archegos, Berenberg analysts pegged the hit at 3 billion Swiss francs, on top of 500 million francs from the Greensill issues.

* * *

Finally, JPM tries to answer a key question for many investors, namely what has happened with holdings (as speculated in the press ) of Archegos Capital?

As Kian writes, the share price of Arhcegos Capital linked stocks fell by -39% on avg. since the beginning of last week. According to press reports (Bloomberg), Archegos Capital was forced to sell large shareholdings in eight online and entertainment companies ( GSX Techedu, ViacomCBS, Discovery, iQIYI, Tencent Music, Vipshop, Baidu, Farfetch) to cover potential losses after some positions moved against the fund. Once Archegos Captial failed to meet its margin commitments, the sell-off intensified further as banks started offloading via sizeable block trades the holdings posted by the fund as collateral, prompting more declines.

Based on the latest publicly available disclosure the banks with the largest exposure to the mentioned companies were Morgan Stanley, Credit Suisse, Goldman Sachs, Nomura and to a lesser extent UBS and DB (more details below). On Friday alone, both ViacomCBS and Discovery saw their largest ever daily decline, with each falling by more than -27%. Traded volumes for the eight companies peaked on Friday with daily volumes being on avg. more than 13x the 90 days moving average. The sell-off continued on Monday 29th with the aforementioned stocks falling further -6% on average.

Based on latest available public filings, JPM calculates that the banks which had the largest holdings in the eight Archegos Capital-linked stocks mentioned by the press were Morgan Stanley, Credit Suisse, Goldman Sachs and Nomura. Morgan Stanley exposure was relatively broad based with 5%+ holdings in all but one companies and with 10%+ stake in both GSX Techedu and iQIYI. Credit Suisse exposure was also broad based with holdings in all but one companies and with the largest exposure being its 9% stake in Discovery. Goldman Sachs exposure was mainly concentrated in GSX Techedu (22% stake), while Nomura had exposure in all but one companies and a relatively large holding of 7% in GSX Techedu. Other banks such as Bank of America, Citi, UBS, Deutsche and Barclays also had holdings above 2% in some the mentioned companies (mainly GSX Techedu and Discovery).

Finally, courtesy of JPM, here is a summary of all the latest publicly available information disclosing what exposure each bank may have had - and still has - to Archegos:

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Calculus99 4 hours ago (Edited)

If you listen to the corporate ******** from ALL of these firms, they'll all say the same crap -

"We employ the some of the smartest guys in finance as well as run cutting edge risk management systems so as to protect our shareholders and (cliche) stake holders."

Then something like this happens, ie you let a degen gambler margin up xfold in a highly charged and volatile market betting on some of the riskiest go-go stocks.

Any old non-smartest guy with a $10 Casio calculator could have predicted the massive risks they were taking and the probable fallout.

Smartest guys?

Cutting edge risk management?

Their words aren't even worth a penny...

bonsai_king 3 hours ago

Thats just what they post online.

In the real world, its all backroom deals, tit for tat, exchange of favors kind of BS.

Do you actually think anyone involved lost their personal fortunes?

101 years and counting 3 hours ago

if you're running JPM or GS, etc....why wouldnt you leverage everything to the top? if you go boom, Jerome will save you. afterall, if you dont save us, the "World will end".

john milton 3 hours ago

This is it in banking, sometimes you win big time and got your big bonuses, sometimes you lose big time and taxpayers pay your bonuses.

ssgredux 4 hours ago

Wait till JPM hears about JPM's exposure to derivatives...

highwaytoserfdom 2 hours ago

4th Q is out what is 60 T among friends? Good read scare number what just started to wade through the FX credit are most the one thing that got me was the metals and size... https://www.occ.gov/publications-and-resources/publications/quarterly-report-on-bank-trading-and-derivatives-activities/files/q4-2020-derivatives-quarterly.html

STP 2 hours ago

I love the OCC Quarterly. You have to go all the way to the back, to see the good stuff. GS is leveraged, waaay beyond everybody else!

Kefeer 3 hours ago remove link

Banking crisis, artificial chip shortages, artificial price manipulation of oil , artificial wuhan-flu war, with artificial experimental injections, artificial everything - even the clouds above.

What is the plan with all these working together and add the artificial dementia installed President and you have the recipe for something huge??? ....

ssgredux 4 hours ago

Incoming CNBC headline

"Archegos ... yada yada ... Jim Cramer ... yada yada ... SYSTEMIC RISK ... yada yada ... Jerome Powell contacted ... yada yada ... $100 billion bank bailout ... yada yada"

1980XLS 4 hours ago

So glad these casinos have Gubmnt subsidized, FDIC insurance.

Great Iota 59 minutes ago (Edited)

Save this post ...

The "Damage" from the Archegos collapse will be a nano piss drop in a rain compared to the damage from the upcoming cryptocurrency collapse.

Bitcoin alone could cause quadrillion USD damage when you count the worthless underlining asset plus the 100X derivatives. I'm surprised that governments and its citizens have embraced this worthless asset. 1000 Years from know we will be teaching about the "Bitcoin Blowup".

What can cause Bitcoin to go worthless? Lots!

1 - No real need (only purpose is its a Ponzi Scheme designed to increase in value).
2 - Unrecoverable (lost your account, password, or remote drive? your SOL)
3 - Uninsurable (no one can return your Bitcoin to you)
4 - Open to program hacks
5 - Not backed by anything
6 - Needs electricity and internet.
7 - Can never be a useful currency

You people have all gone mad!

stop_the_fraud 43 minutes ago

Saved and archived.

Great Iota 30 minutes ago

I'm hoping that the only reason the global leaders are allowing Bitcoin is so it can mop up the trillions of paper being added to the system to save the system without creating inflation. At the end of the day, it gives avenue for abusive money printing without inflating a real asset that people need.

Can you imagine if all the money flowing into crypto was going into housing or food? Look at the stock market bubble caused by all the low interest money flowing into it.

This madness will end when the fed tightens or the global economy collapse (one will happen for sure).

Cheap Chinese Crap 5 minutes ago remove link

You're crazy. There's nothing wrong with treating an IOU from some anonymous guy on the Internet as a cash substitute.

Lef-ty PREMIUM 2 hours ago

Just another reason to make the banks smaller. How about no derivatives trading other than a hedge book. Synthetic positions should be part of 5% disclosure rule. The fact that no one knew what was happening is just another warning signal. lay_arrow

highwaytoserfdom 3 hours ago (Edited)

Bring in Kenny Griffin and Bernake from Citadel to front run the whole market... ROFLMAO While at it bring in Peter Griffin, and Lois; Meg, Chris, and Stewie and Brian. heck bring in all Quahog, Rhode Island.. Wait a second Gina M. Raimondo Secretary of Commerce jeez did not think it could get much worse that Wilber but one of the granny culling governors (oh yea those machines flipped votes) ..medical murder scam plan demonic reset....

LMAO--------> Look MAO CIA globalony..

Bill of Rights 3 hours ago

The same JPM thats dumping Commercial and Residential Real Estate at a massive clip, that JPM?

Ozarkian 3 hours ago

10x Leverage caused the 1929 crash. History repeats.

RevIdahoSpud3 1 hour ago

I have just lived through the 2nd Major Coup in my lifetime as a U S Born citizezn. The first for me was JFK's assassination by government insiders. The Second was the 2020 election with the lunatic Biden installed (not elected) as president of the U S Corporation. Before that may have been the establishing of the Fed Reserve in 1913 but I wasn't alive yet. Others may have been WWI, WWII, Viet Nam...and how many others such as 911 and the Patriot Act.

I mention because we are supposed to read news of the banking industry, trade agreements, border breaches and hundreds of other topics that are supposed to be events of the day? Spontaneous and not preplanned as if these events have any relevance to a freeman's life.

Since the Trump coup, there is nothing really noteworthy that the deep state cycles as news. It's all smoke and mirrors. Perhaps it is to the 'players', the top 1% who battle each other for world domain in a global chess game who actually care as they seem to be the ones with something at stake. Their vast fortunes and their need for more.

At the bottom of the totem it's all irrelevant. This level is just survival of the fittest. News, fake news, and irrelevant news has no impact on reality.

And yet, how many people dwell/devote their lives and time to being abreast of Meghan and Harry, Congress, Goldman Sachs, Tesla, Climate cooling/heating, racism, discrimination, womyns rights... . Such as waste!

denker 2 hours ago

RWA growth ► Risk Weighted Average Growth
CET1 ► Common Equity Tier 1
CSG ► Credit Suisse Group
$300MM ► $300 million
$2Nn ► fark knows?
PB player ► Primary Broker player?
GS/MS ► Goldman Sachs and Morgan Stanley
S/Hs under Basel 3 ► Share Holders under Basel 3

Cheap Chinese Crap 4 minutes ago

That's 2 nanu-nanus. Mork's account got hacked.

ponchoramic 2 hours ago

Daily Reminder; The financialization of everything sucked the life out of real capitalism and everything you see right now is a product of that life sucking parisitical scheme.

King of Ruperts Land 2 hours ago (Edited)

Don't worry, be happy.

Secret Weapon 3 hours ago

Greedy parasites getting their balls kicked in. Very fun to watch.

scoop2020 3 hours ago

I would imagine all the big losers are putting their numbers out there so they can take them to the bankruptcy courts and claim GS and MS had privilege(by selling before the news came out) and try and claw back there benefits. Never brag about dodging a bullet. It only pisses off the people who didn't dodge the bullet.

NuYawkFrankie 4 hours ago (Edited)

It's this kind of reckless gambling suggests that we leaned nothing from the Long Term Capital Management fiasco

zob2020 4 hours ago

Time to ban asset management and speculation for the same company?

archipusz 4 hours ago

The gov't will take care of it.

They wouldn't take care of robinhood's traders buying gme, but they'll take care of this to make sure hedge funds can keep trading. Y'see, hedge funds are important.

ted41776 4 hours ago

once they were deemed institutions too big to fail and too big to jail they became the government

there is nothing they won't get away with now

naro 1 hour ago

There has never been so much margin debt in the history of America, because interest rates are so low that it seems like almost free money, and that is exactly what led to the Market collapse on 1929

Nuxx PREMIUM 3 hours ago

If this had everything to make a LTCM or Lehmann 2.0, how convenient that a ship got stuck in the mud last week and had everybody and their mother looking towards Egypt whilst Goldman Sachs and Morgan Stanley unloaded their cargo in the meantime.

tunetopper 3 hours ago

What is the limitation of Friends and Family on Family Offices?

Why did Soros, Cohen, Tudor Jones, Druckenmuller, and Hwang all get an exemption out of Dodd-frank in 2019.

Omphalos of Delphi 3 hours ago

Don't worry. The Federal Reserve is bailing out the pedophiles while you schmucks get stuck with the bag-o-crap. Here are some stocks rallying hard on the face of 700.000 a week unemployment claims

Olaf Myfrenzargay 4 hours ago

Total return swaps should be banned outright.

jack-of-all-trades 29 minutes ago remove link

Just to add to JPM analyst's comments. It's all pure speculation but...

Other Archegos' equity swaps were most likely linked to the Viacom swaps via standard legal arrangements (cross default-like). E.g. if Archegos' were to fail on its obligations to the counterparty on one swap, the counterparty gets the right to terminate other outstanding swaps with Archegos and sell its underlying hedges in the open market. This is done firstly to eliminate/reduce counterparty's risk exposure to Archegos and, secondly, offset any losses the counterparty would incur on Viacom with [hopefully] gains on other swaps outstanding or, if no gains, reduce its hedge unwind losses.

Any PB service provider to Archegos knew with 100% certainty early last week that Archegos would not have a penny left to settle any arising swap liquidation losses/claims to it the moment Archegos failed to meet its ViacomCBS margin call(s). MS and GS PB desks knew that, as the US houses, their ECM desks were best positioned to find buyers for ViacomCBS compared to CS/UBS, not to mention DB and Japanese houses that have no real ability in most of those names. Coincidentally, it's wrong to refer to the group of these banks as a "syndicate".
It's likely that many of these PB desks knew other and coordinated things on regular basis but there certainly wasn't any legal arrangement/obligation among these banks to coordinate liquidation of any of their Archegos swap hedges. Their decision-making was straight-forward -- GS/MS, with the best chance to get out unscathed (lower Archegos exposure, better ECM teams) -- didn't dither and headed for the exit ASAP. For CS (and perhaps UBS/DB), it was more complicated -- not as well-placed to find buyers for ViacomCBS stock yet with [much] larger exposures, they probably tried to coordinate the fire sale but quickly realised that they would not be the first out the door and ultimately got stuck in the doorframe. For the Japanese houses, the situation was worse -- without their own ECM teams, they depended on other banks to place large CBSViacom blocks -- a mission impossible under the circumstances.

With regards to the huge size of these losses... everyone must be stunned:

  1. The market has been bullish up until now, despite the recent rollover of top speculative names like TSLA and other techs and yield rises in longer dated Treasuries -- the mood is nothing like 2007-08;
  2. Granted, the stock trading volumes since the GFC time in 2008 have been massively diluted with the high-speed/algorithmic trading, short-gamma [index] ETFs hedging, etc, etc -- these trading flows are not "real", so to speak. But everyone's market risk people must have known (or reasonably guessed) how to tweak their risk models for the above.... Guess they were wrong!!!

It's safe to assume that the terms of every single one of the PB (and not PB) equity swaps/CFDs/"whatevers" out there will be scrutinised, re-assessed, and renegotiated when and if possible.

The silver lining to this cloud is that it happened while the sun is still shining, relatively speaking.

[Mar 30, 2021] Guys, guys, we were not lying, the economic boom is coming! In fact, it's more than coming, it's "looming"!

Mar 30, 2021 | www.moonofalabama.org

vk , Mar 30 2021 15:46 utc | 12

Millions might miss out on looming economic boom

Guys, guys, we were not lying, the economic boom is coming! In fact, it's more than coming, it's "looming"!

It's just that most of you won't see it or feel it.

[Mar 29, 2021] What's ahead for the all-time high stock market

Mar 29, 2021 | finance.yahoo.com

... Elevated valuations is probably the biggest source of consternation for investors.

... Barclays sees limited upside in the near term. The firm has a 4,000 year-end target for the S&P, which suggests less than a 1% gain from Friday's close.

...All that said, it can be treacherous to make big bets on what may happen in the short-term. You never know when some unexpected market rocking event emerges like a single ship running aground disrupting global trade or a big hedge fund liquidating causing all sorts of dislocations in the market.

[Mar 29, 2021] Hedge fund blowup sends shockwaves through Wall Street and the City

Mar 29, 2021 | finance.yahoo.com

A little known hedge fund that blew up last week has sent shockwaves through the world of investment banking.

Shares in Credit Suisse ( CSGN.SW ) and Nomura ( 8604.T ) sunk over 10% on Monday after both warned they faced potentially billions in losses linked to hedge fund Archegos Capital.

Banks that worked with Archegos and lent it money to buy shares were scrambling to offload Archegos' investments after a handful of risky bets made by the hedge fund went bad. The rush to exit these positions hit public shares prices, leaving banks with huge losses.

Hedge funds typically borrow money from banks to invest, a process known as margin trading. This allows funds to leverage up the cash they hold and increase their positions -- potentially earning far greater returns if their bets come good. However, it also means hedge funds can theoretically lose more money than they hold in client funds.

If trades made on margin turn sour, banks will ask a client to put up more money as collateral to limit potential losses. This process is known as a margin call.

Archegos faced margin calls on its positions last week but failed to provide extra cash. As a result, banks began selling off stocks held on the hedge fund's behalf -- a fire sale known in the City as liquidating positions. The business press reported on Friday that Goldman Sachs ( GS ) and Morgan Stanley ( MS ) were selling huge chunks of shares in businesses including ViacomCBS ( VIAC ), Discovery ( DISCA ) and Chinese stocks Baidu ( BIDU ) and Tencent Music ( TME ). The block sales are estimated to be worth around $20bn (£14.5bn), according to the Financial Times .

Shares in Credit Suisse sunk after it warned of 'significant losses' linked to the blow up at Archegos Capital. Photo: Fabrice Coffrini/AFP via Getty Images

A little known hedge fund that blew up last week has sent shockwaves through the world of investment banking.

Shares in Credit Suisse ( CSGN.SW ) and Nomura ( 8604.T ) sunk over 10% on Monday after both warned they faced potentially billions in losses linked to hedge fund Archegos Capital.

Banks that worked with Archegos and lent it money to buy shares were scrambling to offload Archegos' investments after a handful of risky bets made by the hedge fund went bad. The rush to exit these positions hit public shares prices, leaving banks with huge losses.

Hedge funds typically borrow money from banks to invest, a process known as margin trading. This allows funds to leverage up the cash they hold and increase their positions -- potentially earning far greater returns if their bets come good. However, it also means hedge funds can theoretically lose more money than they hold in client funds.

If trades made on margin turn sour, banks will ask a client to put up more money as collateral to limit potential losses. This process is known as a margin call.

Archegos faced margin calls on its positions last week but failed to provide extra cash. As a result, banks began selling off stocks held on the hedge fund's behalf -- a fire sale known in the City as liquidating positions. The business press reported on Friday that Goldman Sachs ( GS ) and Morgan Stanley ( MS ) were selling huge chunks of shares in businesses including ViacomCBS ( VIAC ), Discovery ( DISCA ) and Chinese stocks Baidu ( BIDU ) and Tencent Music ( TME ). The block sales are estimated to be worth around $20bn (£14.5bn), according to the Financial Times .

"Things started going wrong for Archegos when shares of companies such as Viacom started to slide mid-last week," said Michael Brown, a senior market analyst at Caxton Business. "It was at that point that margins were called, and couldn't be provided, hence the block sales seen Friday."

A fire sale can have a negative impact on stock prices and shares in both ViacomCBS and Discovery sunk 27% on Friday. Banks therefore risked making less back from the sales than they lent to clients to fund the investments.

Credit Suisse on Monday warned it was facing "highly significant" losses linked to Archegos that could be "material to our first quarter results".

The Swiss lender didn't name Archegos but said: "A significant US-based hedge fund defaulted on margin calls made last week by Credit Suisse and certain other banks."

Credit Suisse said it was "in the process" of selling shares held by Archegos. The bank said it was "premature" to estimate how much it would likely lose from the crisis.

"We intend to provide an update on this matter in due course," Credit Suisse said.

Shares sunk 13.4% in Zurich.

"One would assume that, judging by the size of positions sold, the 'game is up' for Archegos," Brown said.

He said it was "unlikely" that Archegos would pose a systemic risk to the financial system. Neil Wilson, chief market analyst at Markets.com, said the hedge fund "appears to have been too concentrated in a number of risky stocks."

A hedge fund blow up is relatively unusual and Archegos' undoing has raised concerns that other funds could find themselves in similar positions.

"Block equity-trades stemming from margin-calls on Archegos will have sent the market's spidey senses a tingle," said Bill Blain, a senior strategist at Shard Capital. "Who is next?"

Alex Harvey, a portfolio manager at Momentum, said: "We tend to find out after the event that other funds get caught up as sometimes hedge funds may be crowded into similar trades."

"When we look at this and think about the GameStop saga and the decline in Tesla as two examples -- what we're seeing are more and more pockets of very unusual trading activity in some stocks," he said. "You worry that this sort of frothy trading activity in turn creates pockets of distress among investors and banks that leads to larger unwinds and losses for financials."

[Mar 28, 2021] Medicaid Enrollment Grew -30% Year-Over-Year

Mar 28, 2021 | angrybearblog.com

run75441 | March 27, 2021 7:55 pm

HEALTHCARE

Medicaid expansion enrollment grew nearly 30% year-over-year in 19-state sample, Andrew Sprung, XPOSTFACTOID, March 17, 2021

An update on Medicaid expansion enrollment growth since the pandemic struck. Below is a sampling of 19 expansion states through January of this year, and 14 states through February.

Maintaining the assumption, explained here , "relatively slow growth in California would push the national total down by about 2.5 percentage points." These tallies still point to year-over-year enrollment growth of approximately 30% from February 2020 to February 2021.

If that's right, then Medicaid enrollment among those rendered eligible by ACA expansion criteria (adults with income up to 138% FPL) may exceed 19 million nationally and may be pushing 20 million. Assuming the sampling of a bit more than a third of total expansion enrollment represents all expansion states more or less and again accounting for slower growth in California.

[Mar 28, 2021] One year later, unemployment insurance claims remain sky-high

Notable quotes:
"... Last week was the 53rd straight week total initial claims were greater than the second-worst week of the Great Recession. (If that comparison is restricted to regular state claims -- because we didn't have PUA in the Great Recession -- initial claims are still greater than the 14th worst week of the Great Recession.) ..."
Mar 28, 2021 | www.epi.org

One year ago this week, when the first sky-high unemployment insurance (UI) claims data of the pandemic were released, I said " I have been a labor economist for a very long time and have never seen anything like this ." But in the weeks that followed, things got worse before they got better -- and we are not out of the woods yet. Last week -- the week ending March 20, 2021 -- another 926,000 people applied for UI. This included 684,000 people who applied for regular state UI and 242,000 who applied for Pandemic Unemployment Assistance (PUA), the federal program for workers who are not eligible for regular unemployment insurance, like gig workers.

Last week was the 53rd straight week total initial claims were greater than the second-worst week of the Great Recession. (If that comparison is restricted to regular state claims -- because we didn't have PUA in the Great Recession -- initial claims are still greater than the 14th worst week of the Great Recession.)

Figure A shows continuing claims in all programs over time (the latest data for this are for March 6). Continuing claims are currently nearly 17 million above where they were a year ago, just before the virus hit.

FIGURE A Continuing unemployment claims in all programs, March 23, 2019–March 6, 2021 *Use caution interpreting trends over time because of reporting issues (see below)*
Date Regular state UI PEUC PUA Other programs (mostly EB and STC)
2019-03-23 1,905,627 31,510
2019-03-30 1,858,954 31,446
2019-04-06 1,727,261 30,454
2019-04-13 1,700,689 30,404
2019-04-20 1,645,387 28,281
2019-04-27 1,630,382 29,795
2019-05-04 1,536,652 27,937
2019-05-11 1,540,486 28,727
2019-05-18 1,506,501 27,949
2019-05-25 1,519,345 26,263
2019-06-01 1,535,572 26,905
2019-06-08 1,520,520 25,694
2019-06-15 1,556,252 26,057
2019-06-22 1,586,714 25,409
2019-06-29 1,608,769 23,926
2019-07-06 1,700,329 25,630
2019-07-13 1,694,876 27,169
2019-07-20 1,676,883 30,390
2019-07-27 1,662,427 28,319
2019-08-03 1,676,979 27,403
2019-08-10 1,616,985 27,330
2019-08-17 1,613,394 26,234
2019-08-24 1,564,203 27,253
2019-08-31 1,473,997 25,003
2019-09-07 1,462,776 25,909
2019-09-14 1,397,267 26,699
2019-09-21 1,380,668 26,641
2019-09-28 1,390,061 25,460
2019-10-05 1,366,978 26,977
2019-10-12 1,384,208 27,501
2019-10-19 1,416,816 28,088
2019-10-26 1,420,918 28,576
2019-11-02 1,447,411 29,080
2019-11-09 1,457,789 30,024
2019-11-16 1,541,860 31,593
2019-11-23 1,505,742 29,499
2019-11-30 1,752,141 30,315
2019-12-07 1,725,237 32,895
2019-12-14 1,796,247 31,893
2019-12-21 1,773,949 29,888
2019-12-28 2,143,802 32,517
2020-01-04 2,245,684 32,520
2020-01-11 2,137,910 33,882
2020-01-18 2,075,857 32,625
2020-01-25 2,148,764 35,828
2020-02-01 2,084,204 33,884
2020-02-08 2,095,001 35,605
2020-02-15 2,057,774 34,683
2020-02-22 2,101,301 35,440
2020-02-29 2,054,129 33,053
2020-03-07 1,973,560 32,803
2020-03-14 2,071,070 34,149
2020-03-21 3,410,969 36,758
2020-03-28 8,158,043 0 52,494 48,963
2020-04-04 12,444,309 3,802 69,537 64,201
2020-04-11 16,249,334 31,426 216,481 89,915
2020-04-18 17,756,054 63,720 1,172,238 116,162
2020-04-25 21,723,230 91,724 3,629,986 158,031
2020-05-02 20,823,294 173,760 6,361,532 175,289
2020-05-09 22,725,217 252,257 8,120,137 216,576
2020-05-16 18,791,926 252,952 11,281,930 226,164
2020-05-23 19,022,578 546,065 10,010,509 247,595
2020-05-30 18,548,442 1,121,306 9,597,884 259,499
2020-06-06 18,330,293 885,802 11,359,389 325,282
2020-06-13 17,552,371 783,999 13,093,382 336,537
2020-06-20 17,316,689 867,675 14,203,555 392,042
2020-06-27 16,410,059 956,849 12,308,450 373,841
2020-07-04 17,188,908 964,744 13,549,797 495,296
2020-07-11 16,221,070 1,016,882 13,326,206 513,141
2020-07-18 16,691,210 1,122,677 13,259,954 518,584
2020-07-25 15,700,971 1,193,198 10,984,864 609,328
2020-08-01 15,112,240 1,262,021 11,504,089 433,416
2020-08-08 14,098,536 1,376,738 11,221,790 549,603
2020-08-15 13,792,016 1,381,317 13,841,939 469,028
2020-08-22 13,067,660 1,434,638 15,164,498 523,430
2020-08-29 13,283,721 1,547,611 14,786,785 490,514
2020-09-05 12,373,201 1,630,711 11,808,368 529,220
2020-09-12 12,363,489 1,832,754 12,153,925 510,610
2020-09-19 11,561,158 1,989,499 10,686,922 589,652
2020-09-26 10,172,332 2,824,685 10,978,217 579,582
2020-10-03 8,952,580 3,334,878 10,450,384 668,691
2020-10-10 8,038,175 3,711,089 10,622,725 615,066
2020-10-17 7,436,321 3,983,613 9,332,610 778,746
2020-10-24 6,837,941 4,143,389 9,433,127 746,403
2020-10-31 6,452,002 4,376,847 8,681,647 806,430
2020-11-07 6,037,690 4,509,284 9,147,753 757,496
2020-11-14 5,890,220 4,569,016 8,869,502 834,740
2020-11-21 5,213,781 4,532,876 8,555,763 741,078
2020-11-28 5,766,130 4,801,408 9,244,556 834,685
2020-12-05 5,457,941 4,793,230 9,271,112 841,463
2020-12-12 5,393,839 4,810,334 8,453,940 937,972
2020-12-19 5,205,841 4,491,413 8,383,387 1,070,810
2020-12-26 5,347,440 4,166,261 7,442,888 1,450,438
2021-01-02 5,727,359 3,026,952 5,707,397 1,526,887
2021-01-09 5,446,993 3,863,008 7,334,682 1,638,247
2021-01-16 5,188,211 3,604,894 7,218,801 1,826,573
2021-01-23 5,156,985 4,779,341 7,943,448 1,785,954
2021-01-30 5,003,178 4,062,189 7,685,857 1,590,360
2021-02-06 4,934,269 5,067,523 7,520,114 1,523,394
2021-02-13 4,794,195 4,468,389 7,329,172 1,437,170
2021-02-20 4,808,623 5,456,080 8,387,696 1,465,769
2021-02-27 4,457,888 4,816,523 7,616,593 1,237,929
2021-03-06 4,458,888 5,551,215 7,735,491 1,207,201

Other programs (mostly EB and STC) PUA PEUC Regular state UI Jul 2019 Jan 2020 Jul 2020 Jan 2021 0 10,000,000 20,000,000 30,000,000 40,000,000 Chart Data Caution: Trends over time in PUA claims may be distorted because when an individual is owed retroactive payments, some states report all retroactive PUA claims during the week the individual received their payment.

Click here for notes.

Source: U.S. Employment and Training Administration, Initial Claims [ICSA], retrieved from Department of Labor (DOL), https://oui.doleta.gov/unemploy/docs/persons.xls and https://www.dol.gov/ui/data.pdf , March 25, 2021. Share Tweet Embed Download image

The good news in all of this is Congress's passage of the sweeping $1.9 trillion relief and recovery package. It is both providing crucial support to millions of working families and setting the stage for a robust recovery. One big concern, however, is that the bill's UI provisions are set to expire the first week in September, when, even in the best–case scenario, they will still be needed. By then, Congress needs to have put in place long-run UI reforms that include automatic triggers based on economic conditions.

[Mar 28, 2021] Seconding Paul Krugman- inflationary pressures will be a transient phenomenon in 2021 (will they cause a recession in 2022)

Krugman is is barking on the wrong tree. The question right now is not wage inflation but the inflation due to weakening dollar as purchases of Treasuries by foreign buyers weakened. That what probably caused the spike on 10 year Treasuries yield.
Without foreign buyers of the US debt the deficit spending does not work. So it is quite possible that this time inflationary pressures will come from the weakening of the status of the dollar as the world reserve currency. As along the this status is unchallenged the USA will be OK. If dollar is challenged the USA will experience the Seneca cliff.
Paul Krugman argues once's again this morning that any increase in inflation this year as part of a post-pandemic boom will be transitory:
Mar 28, 2021 | angrybearblog.com

Paul Krugman

A few months of rising prices won't mean the 70s are back

I agree. I want to elaborate on one point he hasn't emphasized; namely, you can't have a wage-price inflationary spiral if wages don't participate!

To make my point, let me show you three graphs below, covering wages and prices in three different periods: (l) the inflationary 1960s and '70's, (2) the disinflationary
Reagan-era 1980s and early '90's, and (3) the low inflation period of the late 1990s to the present.

In addition to the YoY% change in CPI, I also show CPI less energy (gold), better to show oil shocks, and also that it takes about a year for inflation in energy prices to filter through to inflation in other items.

Also, hourly wages were greatly affected (depressed) by the entry of 10,000,000's of women into the workforce between the 1960s and mid-1990s. This increased median household income, which would be the better metric, but since that statistic is only released once a year, I've approximated its impact by adding 1% to the YoY% change in average hourly wages (light blue).

Here are the three graphs:

... ... ...

[Mar 28, 2021] Krugman Dismisses 1970s-Style Inflation, With Faith in Fed by Julia Fanzeres

Are FED pushing on the string?
Mar 19, 2021 | finance.yahoo.com

"It took really more than a decade of screwing things up -- year after year -- to get to that pass, and I don't think we're going to do that again," Krugman said of the inflation scourge of the 1970s to early 1980s. He spoke in an interview with David Westin for Bloomberg Television's "Wall Street Week" to be broadcast Friday.

...The worst-case scenario out of the fiscal stimulus package would be a transitory spike in consumer prices as was seen early in the Korean War, Krugman said. The relief bill is "definitely significant stimulus but not wildly inflationary stimulus," he said.

...Economists predict that the core inflation measure tied to consumer spending that the Fed uses in its forecasts will remain under 2% this year and next, a Bloomberg survey shows. A different gauge, the consumer price index is seen at 2.4% in 2021 and 2.2% next year. The CPI peaked at over 13% in 1980.

The risk is that policy makers are "fighting the last war" -- countering the undershooting of the 2% inflation target and limited fiscal measures taken after the 2007-09 financial crisis, the economists said.

Even so, he argued that "redistributionist" aspects of the pandemic-relief package will reduce the need for the Fed to keep monetary stimulus too strong for too long in order to address pockets of high unemployment. Fed Chair Jerome Powell has repeatedly said the central bank wants to see very broad strengthening in the labor market, not just a drop in the national jobless rate.

"It's not silly to think that there might be some inflationary pressure" from the fiscal package, Krugman said. But it was designed less as stimulus than as a relief plan, he said.

[Mar 28, 2021] Need Amid Plenty- Richest US Counties Are Overwhelmed by Surge in Child Hunger

Mar 28, 2021 | www.nakedcapitalism.com

The financial fallout of covid-19 has pushed child hunger to record levels. The need has been dire since the pandemic began and highlights the gaps in the nation's safety net.

While every U.S. county has seen hunger rates rise, the steepest jumps have been in some of the wealthiest counties, where overall affluence obscures the tenuous finances of low-wage workers. Such sudden and unprecedented surges in hunger have overwhelmed many rich communities, which weren't nearly as ready to cope as places that have long dealt with poverty and were already equipped with robust, organized charitable food networks.

Data from the anti-hunger advocacy group Feeding America and the U.S. Census Bureau shows that counties seeing the largest estimated increases in child food insecurity in 2020 compared with 2018 generally have much higher median household incomes than counties with the smallest increases. In Bergen, where the median household income is $101,144, child hunger is estimated to have risen by 136%, compared with 47% nationally.

That doesn't mean affluent counties have the greatest portion of hungry kids. An estimated 17% of children in Bergen face hunger, compared with a national average of around 25%.

But help is often harder to find in wealthier places. Missouri's affluent St. Charles County, north of St. Louis, population 402,000, has seen child hunger rise by 69% and has 20 sites distributing food from the St. Louis Area Foodbank. The city of St. Louis, pop. 311,000, has seen child hunger rise by 36% and has 100 sites.

"There's a huge variation in how different places are prepared or not prepared to deal with this and how they've struggled to address it," said Erica Kenney , assistant professor of public health nutrition at Harvard University. "The charitable food system has been very strained by this."

Eleni Towns, associate director of the No Kid Hungry campaign , said the pandemic "undid a decade's worth of progress" on reducing food insecurity, which last year threatened at least 15 million kids.

And while President Joe Biden's covid relief plan, which he signed into law March 11, promises to help with anti-poverty measures such as monthly payments to families of up to $300 per child this year, it's unclear how far the recently passed legislation will go toward addressing hunger.

"It's definitely a step in the right direction," said Marlene Schwartz , director of the Rudd Center for Food Policy and Obesity at the University of Connecticut. "But it's hard to know what the impact is going to be."


Randall Flagg , March 28, 2021 at 8:12 am

Let's just keep spending all that money on our misadventures around the world though. I believe in a strong defense but just that, defense. I would like to hear the warmongers justify the ridiculous amounts of money spent on that, yet we can take care of our own to a basic minimum. What the hell happened to this country over the years

Massinissa , March 28, 2021 at 8:30 am

"What the hell happened to this country over the years "

4 to 5 decades of neoliberalism will do that. Its like the nation-state equivalent of being addicted to a drug. Makes you feel better in the short term: Reagan America worked great! In the 80s. Long term everything gets screwed over, health wise.

JBird4049 , March 28, 2021 at 5:36 pm

Ronnie Raygun was patriotic meth. The only good thing he did as the President was getting the number of American and Soviet nuclear warheads reduced.

mrsyk , March 28, 2021 at 8:34 am

Nothing says "Third World!" like 25% child food insecurity rate.

roxan , March 28, 2021 at 8:44 am

Typical banana republic, spending on war and ridiculous, dysfunctional but grandiose weapons, usually shown off in parades – lorded over by a rich oligarchy – while people starve and live in hovels. However, a healthy well-fed population is the source of a nation's strength, so we are well on the way to fading into a has-been.

Bob Hertz , March 28, 2021 at 9:14 am

Here is the real problem .

"Sierra had to leave her Amazon warehouse job when the kids' school went remote, and Morales stopped driving for Uber when trips became scarce and he feared getting covid on top of his asthma".

In other words, our skimpy unemployment insurance systems in man states, plus gaps in the pandemic special relief, plus the insufferable arrogance of closing the schools with no financial relief for parents, and here we are.

Thanks for posting, this is indeed a tragedy.

The Rev Kev , March 28, 2021 at 10:21 am

Sorry guys but this is Failed Nation stuff. I am one of those that happen to believe that it is the most fundamental duty of a State to protect children and pregnant women. Anything after that is a bonus if not an embellishment. America is not only the wealthiest country in the world but is also the wealthiest in history. And yet child hunger is tolerated. And just to add the bread slices to this s*** sandwich, there are about 800 billionaires in the US at the moment. How many of them could wake up one day and say to themselves: 'You know what? I am going to abolish child hunger in America with my money and be remembered forever and even have statues raised to myself!' But it never happens.

tegnost , March 28, 2021 at 11:01 am

America's incredible success is going to require americans to have a vastly reduced standard of living to the point that they are equally as poverty stricken as the poors the world over. Globalisation really makes any other out come unfair, and we must globalize. Everyone being a poverty stricken gig worker is the plan. Here in this case an amazon worker and an uber driver, on the dole. In reality, I think the biden admin has just dusted off the plans that were to be unleashed under hillary, that's one of the reasons it all seems so ham handed. The TPP was going to keep the world in our orbit and create supra national barriers to autonomy in order to stop what is in fact happening now where they are free to choose between china/russia and the US. From this perspective trump really screwed the plans of the despicables.

Synoia , March 28, 2021 at 11:56 am

America's incredible past success .

1. It in the past
2. It was built on predation against the British Empire

Who needs a German Enemy with friends who help with lend-lease, Cancel the German War debt, and not their "allies." Combined with subverting the British Empires rule with a twisted version of self-rule – Governance dependent on not having US Sanctions, aka imperialism absent responsibility.

This after dispossession the local US natives of the ancestral lands by force, and tricky legalities.

tegnost , March 28, 2021 at 12:10 pm

I agree that it's in the past but people ordering their entire life from amazon that I know think this is the beginning of our incredible greatness.

The S , March 28, 2021 at 1:45 pm

It's not a failed nation, it's how the US was always designed to work. It might have had some good years of P.R. and marketing after WWII but it was always a lie. The Constitution was written by a bunch of wealthy slavers that hated commoners and feared economic democracy and popular governance. The US became the wealthiest country by starving kids and killing people the world over; it was forced into a bit of wealth distribution for a few decades by multi-state steel strikes, the Bonus Army, armed miners unions, tenants unions, the Farmers Holiday movement, and the contrast of a Soviet Union that was advancing by leaps and bounds economically while the US festered in a depression. But whether it was the indigenous, the slaves, the Filipinos, the Haitians, the Chinese, the Nicaraguans, the Mexicans, the Hondurans, the Iranians, the Guatemalans, the Chileans, the Koreans, the Vietnamese, the Laotians, the Cambodians, the Russians, the Iraqis, the Libyans, the Syrians, or it's own citizens, the US has always killed for money. If it runs out of places to take over and expand it'll just starve the kids at home to make a buck. It'll charge the poor overdraft fees for having no money then chalk that up as a financial service. It'll have its state security forces kill you for a traffic stop and then beat every citizen en masse that dares to object. It'll cannibalize the very infrastructure and fabric of society and hand it over to oligarchs and private equity. It'll give all the wealth to people who charge usury and own embroidered pieces of paper but who don't actually do anything useful or necessary. And the marks that watch US movies and television and news will believe that the US is somehow benevolent and that they can somehow bend the will of the rapacious through the very electoralism that the wealthy designed to keep the poor from having a say.

Starving children. Children in concentration camps. Children forced into schools during a plague. These aren't 'oopsies.' This is how the country is set up to run. Look at how much money the wealthy gained by letting a pandemic run wild. Look at how the entire investment class should have gone bankrupt in 2008 but instead workers were fired from jobs and cast out of their homes by the millions. Now the kids of those sacrificed are starving right next to the wealthy that should have gone bust. The affluent are literally taking food out of kids mouths because they won't let their precious stocks or real estate go down in price one iota. The only good thing about kids starving in wealthy districts is that a Robin Hood won't have to go to far to find money to give to those kids.

drumlin woodchuckles , March 28, 2021 at 4:50 pm

The 800 billionaires consider child hunger in America to be one of their greatest achievements.

The child hunger in America problem won't be solved until the 800 billionaires and all their ideological supporters and economic servants have been " rounded up and exterminated", so to speak.

Maritimer , March 28, 2021 at 4:19 pm

Thank you, Palaver. All "food" is not equal. Nutrition should be the emphasis.

In my jurisdiction, the Food Bank Industry encourages donations of packaged, processed, industrialized "food". For example, fifty pounds of oats gives much more nutrition bang for the buck than the equivalent $$$ amount of Conglomerate Cereals.

At my Conglomerate Stupormarket, they have a bin for unthinking donors to drop in "food" that was bought in the Stupor. I've seen poptarts, jars of frosting, jello, etc. all sorts of "food". And why do I think the Stupormarket just recycles a lot of this stuff back onto their shelves, making a huge profit?

Next time you donate, check out what your Food Bank is actually peddling and who runs it. Food Banks have become a huge Industry and we know what happens to huge Industries.

Louis Fyne , March 28, 2021 at 4:47 pm

My mother gives rides to some of her friends (without expectation of any compensation cuz friendship). In return, some of the friends give random items from their weekly food bank allotment.

the food is shelf-stable processed items with produce and baked goods nearing expiration from the local gourmet independent chain and the local Whole Foods.

Manslow's hierarchy of needs applies obviously and the food banks do truly heroic deeds daily, but long-term people can't live healthy lives eating boxed Mac 'n Cheese, PBJ sandwiches and organic cookies every single day.

I say expand WIC spending and eligibility, but as I'm not too familiar with that program, dunno if that'll do any good.

[Mar 28, 2021] In the USA, the top one percent of household net worth starts at $11,099,166

Mar 28, 2021 | www.unz.com

J , says: March 27, 2021 at 6:23 am GMT • 1.6 days ago

@anonymous

In the USA, the top one percent of household net worth starts at $11,099,166.

It is seems improbable that the commenter achieved that goal. May be he is thinking of 1% of Indonesia or Philippines. The reference to tenant farmers also appears to indicate a country like that. Retiring to live in the Indonesian countryside is not my idea of a good old age. Correct me please if I am wrong.

[Mar 28, 2021] The one good thing about bringing back neoclassical economics. We know what led to Wall Street Crash in 1929. The same mistakes have been repeated globally.

Mar 28, 2021 | www.nakedcapitalism.com

Sound of the Suburbs , March 27, 2021 at 3:45 pm

The one good thing about bringing back neoclassical economics.
We know what led to Wall Street Crash in 1929. The same mistakes have been repeated globally.

At 25.30 mins you can see the super imposed private debt-to-GDP ratios.

https://www.youtube.com/watch?v=vAStZJCKmbU&list=PLmtuEaMvhDZZQLxg24CAiFgZYldtoCR-R&index=6

No one realises the problems that are building up in the economy as they use an economics that doesn't look at debt, neoclassical economics.

As you head towards the financial crisis, the economy booms due to the money creation of unproductive bank lending, as it did in the 1920s in the US.

https://www.bankofengland.co.uk/-/media/boe/files/quarterly-bulletin/2014/money-creation-in-the-modern-economy.pdf

The financial crisis appears to come out of a clear blue sky when you use an economics that doesn't consider debt, like neoclassical economics, as it did in 1929.

1929 – US

1991 – Japan

2008 – US, UK and Euro-zone

The PBoC saw the Chinese Minsky Moment coming and you can too by looking at the chart above. The Chinese were lucky; it was very late in the day. Everyone has made the same mistake; only the Chinese worked out what the problem was.

Sound of the Suburbs , March 28, 2021 at 4:24 am

The Chinese don't seem too worried about the competition.

Putin and Xi are jealous of Wall Street.
No matter how hard they try, they have never been able to inflict the same level of damage to the West, Wall Street managed in 2008.

The Chinese know what to look out for to spot a financial crisis coming. They look for the problems brewing in private debt and inflated asset prices.
This nice Chinese chap tried to warn the Americans the US stock markets was at 1929 levels at Davos 2018.
https://www.youtube.com/watch?v=1WOs6S0VrlA
We know what a correction from 1929 levels looks like.
We have seen it before.

"They've done it again, I can't believe my luck. US stock markets are at 1929 levels, this isn't going to end well" president Xi
Xi has probably rung Putin up to tell him the good news.
I bet they had a right old laugh.

Luckily for the Chinese, the Americans have no idea what they are doing.
The Chinese have been making all the classic mistakes of neoclassical economics, but have been learning from them to ensure they don't make the same mistakes again.
We haven't been doing this in the West.

At the end of the 1920s, the US was a ponzi scheme of inflated asset prices.
The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth.
1929 – Wakey, wakey time

The use of neoclassical economics, and the belief in free markets, made them think that inflated asset prices represented real wealth, but it didn't.
It didn't then, and it doesn't now.

What was the ponzi scheme of inflated asset prices that collapsed in 2008?
"It's nearly $14 trillion pyramid of super leveraged toxic assets was built on the back of $1.4 trillion of US sub-prime loans, and dispersed throughout the world" All the Presidents Bankers, Nomi Prins.
It wasn't real wealth, just a ponzi scheme of inflated asset prices.

Real estate – the wealth is there and then it's gone.
1990s – UK, US (S&L), Canada (Toronto), Scandinavia, Japan, Philippines, Thailand
2000s – Iceland, Dubai, US (2008), Vietnam
2010s – Ireland, Spain, Greece, India
It wasn't real wealth, just a ponzi scheme of inflated asset prices.

It's been the same since Tulip Mania.
You can inflate asset prices, keeping them inflated is the hard bit.

Sound of the Suburbs , March 28, 2021 at 8:29 am

The battle of ideas.
Keynesian capitalism won the battle against Russian communism.

The Americans could clearly demonstrate the average American was much better off than their Russian counterparts.

Today's opioid addicted specimens might have struggled.

It was much easier for the Americans to win the war of ideas last time. This time they could be in trouble.

Look at the great system we've developed to concentrate wealth with the 1%.

http://static5.businessinsider.com/image/557ef766ecad04fe50a257cd-960/screen shot 2015-06-15 at 11.28.56 am.png

It's not quite the same, is it?

Sound of the Suburbs , March 28, 2021 at 8:30 am

Oh yeah, we had a system like that where all the wealth stayed at the top. We called it Feudalism. The Americans are progressing in the reverse direction.

drumlin woodchuckles , March 28, 2021 at 3:05 pm

Perhaps certain counter-Feudalist towns, cities, communities, etc. should study up on how certain Free Towns and Free Republics survived in Europe during the Feudalist Period. And try to set themselves up as the Free Towns, Free Cities, Free Republics in the midst of a future Feudalist America.

Phil in KC , March 28, 2021 at 3:59 pm

Thank you, RMO, you summarized US-Russian relations from 1991 to the start of the Putin era much better than me. We really missed an opportunity to integrate the Russians into the US-EU alliance (such as it was), especially with regard to NATO.

Bush Jr. compounded this failure by mistaking Putin for an ally in the war against terror, thinking that our concerns in the middle east paralleled Putin's affairs in Chechen. They could have, but didn't. Putin was a more strategic thinker.

My sense is that Putin played a waiting game for much of the first two decades of this century...

Phil in KC , March 28, 2021 at 4:01 pm

Sensible proposal once we codify and make manifest modern serfdom and indentured servitude (i.e. debt slavery). Shouldn't be too hard.

[Mar 28, 2021] February personal income and spending decline

Mar 28, 2021 | angrybearblog.com

NewDealdemocrat | March 27, 2021 9:23 am

US ECONOMICS US/GLOBAL ECONOMICS February personal income and spending decline : the back end of January stimulus payments

Last month I wrote that the:

"report on January personal income and spending shows just how important the stimulus packages enacted by the federal government both last spring and last month have been to sustaining the economy."

The truth of that was confirmed on the back end in this morning's report for February, in which January's 10% increase in income was followed by a -7.1% decrease (red). January's increase of 3.4% in spending was also partially reversed by a -1.0% decrease in February (blue):

... ... ...

Employment is down over 5% since last February, while production is down 4%. Meanwhile, income is down only 2.5%, and real sales have actually increased by nearly 5%! Most recently, in the combined two-month period since December, two of the series – payrolls and real sales – have increased, while the other two – industrial production and income less government payments – have declined.

Since the Big Texas Freeze impacted probably substantially impacted all of these, the underlying situation is presumably better.

[Mar 28, 2021] Bubble Deniers Abound to Dismiss Valuation Metrics One by One by Vildana Hajric , Claire Ballentine , Lu Wang

Notable quotes:
"... How convinced should anyone be when dismissing the message of metrics like these? To be sure, both the market and economy are in uncharted waters. It's possible -- perhaps likely -- that old standards don't apply when something as random as a virus is behind the stress. At the same time, many a portfolio has been squandered through complacency. Market veterans always warn of fortunes lost by investors who became seduced by talk of new rules and paradigms. ..."
"... At 35, the CAPE is at its highest since the early 2000s. ..."
"... Another indicator raising eyebrows is called Tobin's Q. The ratio -- which was developed in 1969 by Nobel Prize-winning economist James Tobin -- compares market value to the adjusted net worth of companies. It's showing a reading just shy of a peak reached in 2000. T ..."
"... the signal sent by the "Buffett Indicator," a ratio of the total market capitalization of U.S. stocks divided by gross domestic product. ..."
"... Still, it's hard to ignore the risks to underlying assumptions. While rock-bottom rates underpin many of the arguments, this year has shown that the Fed still is willing to let longer-term interest rates run higher. And betting on huge upside earnings surprises is risky too -- it's rare to see a 16% beat historically. Before last year, earnings had exceeded estimates by an average 3% a quarter since 2015. ..."
"... "This happens in every bubble," said Bill Callahan, an investment strategist at Schroders. "It's: 'Don't think about the traditional value metrics, we have a new one.' It's: 'Imagine if everyone did XYZ, how big this company could be.'" ..."
"... To Scott Knapp, chief market strategist of CUNA Mutual Group, abandoning standard valuation measures because the environment has changed places investors in "pretty sketchy territory." Talk of watershed moments rendering traditional metric irrelevant as a signal, he says. "That's usually an indication we're trying to justify something," he said. ..."
Mar 287, 2021 | www.bloomberg.com

March 27, 2021

Everywhere you look, there's a valuation lens that makes stocks look frothy. Also everywhere you look is someone saying don't worry about it.

The so-called Buffett Indicator . Tobin's Q. The S&P 500's forward P/E. These and others show the market at stretched levels, sometimes extremely so. Yet many market-watchers argue they can be ignored, because this time really is different. The rationale? Everything from Federal Reserve largesse to vaccines promising a quick recovery.

How convinced should anyone be when dismissing the message of metrics like these? To be sure, both the market and economy are in uncharted waters. It's possible -- perhaps likely -- that old standards don't apply when something as random as a virus is behind the stress. At the same time, many a portfolio has been squandered through complacency. Market veterans always warn of fortunes lost by investors who became seduced by talk of new rules and paradigms.

"Every time markets hit new highs, every time markets get frothy, there are always some talking heads that argue: 'It's different,'" said Don Calcagni, chief investment officer of Mercer Advisors . "We just know from centuries of market history that that can't happen in perpetuity. It's just the delusion of crowds, people get excited. We want to believe."

relates to Bubble Deniers Abound to Dismiss Valuation Metrics One by One

Source: Robert Shiller's website

Robert Shiller is no apologist. The Yale University professor is famous in investing circles for unpopular valuation warnings that came true during the dot-com and housing bubbles. One tool on which he based the calls is his cyclically adjusted price-earnings ratio that includes the last 10 years of earnings.

While it's flashing warnings again, not even Shiller is sure he buys it. At 35, the CAPE is at its highest since the early 2000s. If that period of exuberance is excluded, it clocks in at its highest-ever reading. Yet in a recent post , Shiller wrote that "with interest rates low and likely to stay there, equities will continue to look attractive, particularly when compared to bonds."

Another indicator raising eyebrows is called Tobin's Q. The ratio -- which was developed in 1969 by Nobel Prize-winning economist James Tobin -- compares market value to the adjusted net worth of companies. It's showing a reading just shy of a peak reached in 2000. To Ned Davis, it's a valuation chart worth being wary about. Still, while the indicator is roughly 40% above its long-term trend, "there may be an upward bias on the ratio from technological change in the economy," wrote the Wall Street veteran who founded his namesake firm.

Persuasive arguments also exist for discounting the signal sent by the "Buffett Indicator," a ratio of the total market capitalization of U.S. stocks divided by gross domestic product. While it recently reached its highest-ever reading above its long-term trend, the methodology fails to take into consideration that companies are more profitable than they've ever been, according to Jeff Schulze, investment strategist at ClearBridge Investments.

"It's looked extended really for the past decade, yet you've had one of the best bull markets in U.S. history," he said. "That's going to continue to be a metric that does not adequately capture the market's potential."

At Goldman Sachs Group Inc., strategists argue that however high P/Es are, the absence of significant leverage outside the private sector or a late-cycle economic boom points to low risk of an imminent bubble burst. While people are shoveling money into stocks at rates that have signaled exuberance in the past, risk appetite is rebounding after a prolonged period of aversion, according to the strategists, who also cite low interest rates.

"Today is a very different situation -- I don't think we've got a broad bubble," Peter Oppenheimer, chief global equity strategist at the firm, said in a recent interview on Bloomberg Television. "Given the level of real rates, where they are, it's still likely to be broadly supportive for equities versus bonds."

Another rationale employed to dismiss certain valuation metrics is the earnings cycle. Corporate America is just emerging from a recession, with profits forecast to stage a strong comeback. The strong outlook for profits is why many investors are giving similarly stretched valuations the benefit of the doubt. Trading at 32 times reported earnings, the S&P 500 looks quite expensive, but with income forecast to jump 24% to $173 a share this year, the multiple drops to about 23.

The valuation case becomes more favorable should business leaders continue to blow past expectations. For instance, if this year's earnings come in at 16% above analyst estimates, as they did for the previous quarter, that'd imply a price-earnings ratio of less than 20. While that exceeds the five-year average of 18, Ed Yardeni is not troubled by what he calls "the New Abnormal."

"Valuation multiples are likely to remain elevated around current elevated levels because fiscal and monetary policies continue to flood the financial markets with so much free money," said the founder of Yardeni Research Inc. He predicts the S&P 500 will finish the year at 4,300, about an 8% gain from current levels.

Still, it's hard to ignore the risks to underlying assumptions. While rock-bottom rates underpin many of the arguments, this year has shown that the Fed still is willing to let longer-term interest rates run higher. And betting on huge upside earnings surprises is risky too -- it's rare to see a 16% beat historically. Before last year, earnings had exceeded estimates by an average 3% a quarter since 2015.

"This happens in every bubble," said Bill Callahan, an investment strategist at Schroders. "It's: 'Don't think about the traditional value metrics, we have a new one.' It's: 'Imagine if everyone did XYZ, how big this company could be.'"

Returns of 2%

Valuations are never useful market-timing tools because expensive stocks can get more expensive, as was the case during the Internet bubble. Yet viewed through a long-term lens, valuations do matter. That is, the more over-valued the market is, the lower the future returns. According to a study by Bank of America strategists led by Savita Subramanian, things like price-earnings ratios could explain 80% of the S&P 500's returns during the subsequent 10 years. The current valuation framework implies an increase of just 2% a year over the next decade, their model shows.

To Scott Knapp, chief market strategist of CUNA Mutual Group, abandoning standard valuation measures because the environment has changed places investors in "pretty sketchy territory." Talk of watershed moments rendering traditional metric irrelevant as a signal, he says. "That's usually an indication we're trying to justify something," he said.

[Mar 28, 2021] Willful Blindness - Wash and Rinse in Metals and Stocks

Mar 28, 2021 | jessescrossroadscafe.blogspot.com


"In a community where the primary concern is making money, one of the necessary rules is to live and let live. To speak out against madness may be to ruin those who have succumbed to it. So the wise in Wall Street are nearly always silent. The foolish thus have the field to themselves."

John Kenneth Galbraith, The Great Crash of 1929

"Foolishness is a more dangerous enemy of the good than malice. One may protest against evil; it can be exposed and, if need be, prevented by use of force. Evil always carries within itself the germ of its own subversion in that it leaves behind in human beings at least a sense of unease.

In conversation with them, one virtually feels that one is dealing not at all with a person, but with slogans, catchwords and the like that have taken possession of them. They are under a spell, blinded, misused, and abused in their very being."

Dietrich Bonhoeffer, Prisoner for God: Letters and Papers from Prison

"The ideal subject of totalitarian rule is not the convinced Nazi or the dedicated communist, but people for whom the distinction between fact and fiction, true and false, no longer exists."

Hannah Arendt, The Origins of Totalitarianism

"When we trade the effort of doubt and debate for the ease of blind faith, we become gullible and exposed, passive and irresponsible observers of our own lives. Worse still, we leave ourselves wide open to those who profit by influencing our behavior, our thinking, and our choices. At that moment, our agency in our own lives is in jeopardy."

Margaret Heffernan

Today was a general wash and rinse in the markets.

Wax on, wax off.

If you look at the charts you will see the deep plunges in the early trading hours in stocks and the metals, especially silver.

Simply put, it is called running the stops.

This is not 'the government' doing this.

These are the monstrous financial entities that we have allowed lax regulation and years of propagandizing to create, in the biggest Banks and hedge funds.

Most will run back to the familiar sources of their ideological addiction, the so-called 'news sites' that thrive on the internet and alternative radio funded by the oligarchs.

If you are one of those who cannot wait to run back to your familiar ideological watering hole to relieve the tension of thought, you might just be one of the willfully blind and lost.

Truth is more palatable to the sick at heart when it has been twisted out of shape.

The good news perhaps is that a cleaning out like this often proceeds a resumption of a move higher.

First they kick off the riff raff. Oh, certainly that does not include you, but those others, right?

Or not. It is not easy to think like a criminal when you are not privy to the same jealously guarded information and perverse perspective on life.

On the lighter side I have experienced no side effects from the first dose of the Coronavirus vaccine which I had the other day.

Let's see if the second shot has the same results.

The whole experience reminded me of 'Sabin Oral Sunday' back in 1960. I don't recall any anti-vaxxer or ideologically driven whack-a-doodlism back then, but I was too young to care. And polio shots were no fun. But it beat doing time in an iron lung.

And the band played on.

Have a pleasant evening.

[Mar 28, 2021] Real unemployment is double the 'official' unemployment rate

Notable quotes:
"... The Globe and Mail ..."
"... The Globe and Mail ..."
"... The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China ..."
Mar 28, 2021 | systemicdisorder.wordpress.com

How many people are really out of work? The answer is surprisingly difficult to ascertain. For reasons that are likely ideological at least in part, official unemployment figures greatly under-report the true number of people lacking necessary full-time work.

That the "reserve army of labor" is quite large goes a long way toward explaining the persistence of stagnant wages in an era of increasing productivity.

How large? Across North America, Europe and Australia, the real unemployment rate is approximately double the "official" unemployment rate.

The "official" unemployment rate in the United States, for example, was 5.5 percent for February 2015. That is the figure that is widely reported. But the U.S. Bureau of Labor Statistics keeps track of various other unemployment rates, the most pertinent being its "U-6" figure. The U-6 unemployment rate includes all who are counted as unemployed in the "official" rate, plus discouraged workers, the total of those employed part time but not able to secure full-time work and all persons marginally attached to the labor force (those who wish to work but have given up). The actual U.S. unemployment rate for February 2015, therefore, is 11 percent .

Share of wages, 1950-2014 Canada makes it much more difficult to know its real unemployment rate. The official Canadian unemployment rate for February was 6.8 percent, a slight increase from January that Statistics Canada attributes to "more people search[ing] for work." The official measurement in Canada, as in the U.S., European Union and Australia, mirrors the official standard for measuring employment defined by the International Labour Organization -- those not working at all and who are "actively looking for work." (The ILO is an agency of the United Nations.)

Statistics Canada's closest measure toward counting full unemployment is its R8 statistic, but the R8 counts people in part-time work, including those wanting full-time work, as "full-time equivalents," thus underestimating the number of under-employed by hundreds of thousands, according to an analysis by The Globe and Mail . There are further hundreds of thousands not counted because they do not meet the criteria for "looking for work." Thus The Globe and Mail analysis estimates Canada's real unemployment rate for 2012 was 14.2 percent rather than the official 7.2 percent. Thus Canada's true current unemployment rate today is likely about 14 percent.

Everywhere you look, more are out of work

The gap is nearly as large in Europe as in North America. The official European Union unemployment rate was 9.8 percent in January 2015 . The European Union's Eurostat service requires some digging to find out the actual unemployment rate, requiring adding up different parameters. Under-employed workers and discouraged workers comprise four percent of the E.U. workforce each, and if we add the one percent of those seeking work but not immediately available, that pushes the actual unemployment rate to about 19 percent.

The same pattern holds for Australia. The Australia Bureau of Statistics revealed that its measure of "extended labour force under-utilisation" -- this includes "discouraged" jobseekers, the "underemployed" and those who want to start work within a month, but cannot begin immediately -- was 13.1 percent in August 2012 (the latest for which I can find), in contrast to the "official," and far more widely reported, unemployment rate of five percent at the time.

Concomitant with these sobering statistics is the length of time people are out of work. In the European Union, for example, the long-term unemployment rate -- defined as the number of people out of work for at least 12 months -- doubled from 2008 to 2013 . The number of U.S. workers unemployed for six months or longer more than tripled from 2007 to 2013.

Thanks to the specter of chronic high unemployment, and capitalists' ability to transfer jobs overseas as "free trade" rules become more draconian, it comes as little surprise that the share of gross domestic income going to wages has declined steadily. In the U.S., the share has declined from 51.5 percent in 1970 to about 42 percent. But even that decline likely understates the amount of compensation going to working people because almost all gains in recent decades has gone to the top one percent.

Around the world, worker productivity has risen over the past four decades while wages have been nearly flat. Simply put, we'd all be making much more money if wages had merely kept pace with increased productivity.

Insecure work is the global norm

The increased ability of capital to move at will around the world has done much to exacerbate these trends. The desire of capitalists to depress wages to buoy profitability is a driving force behind their push for governments to adopt "free trade" deals that accelerate the movement of production to low-wage, regulation-free countries. On a global basis, those with steady employment are actually a minority of the world's workers.

Using International Labour Organization figures as a starting point, professors John Bellamy Foster and Robert McChesney calculate that the "global reserve army of labor" -- workers who are underemployed, unemployed or "vulnerably employed" (including informal workers) -- totals 2.4 billion. In contrast, the world's wage workers total 1.4 billion -- far less! Writing in their book The Endless Crisis: How Monopoly-Finance Capital Produces Stagnation and Upheaval from the USA to China , they write:

"It is the existence of a reserve army that in its maximum extent is more than 70 percent larger than the active labor army that serves to restrain wages globally, and particularly in poorer countries. Indeed, most of this reserve army is located in the underdeveloped countries of the world, though its growth can be seen today in the rich countries as well." [page 145]

The earliest countries that adopted capitalism could "export" their "excess" population though mass emigration. From 1820 to 1915, Professors Foster and McChesney write, more than 50 million people left Europe for the "new world." But there are no longer such places for developing countries to send the people for whom capitalism at home can not supply employment. Not even a seven percent growth rate for 50 years across the entire global South could absorb more than a third of the peasantry leaving the countryside for cities, they write. Such a sustained growth rate is extremely unlikely.

As with the growing environmental crisis, these mounting economic problems are functions of the need for ceaseless growth. Once again, infinite growth is not possible on a finite planet, especially one that is approaching its limits. Worse, to keep the system functioning at all, the planned obsolescence of consumer products necessary to continually stimulate household spending accelerates the exploitation of natural resources at unsustainable rates and all this unnecessary consumption produces pollution increasingly stressing the environment.

Humanity is currently consuming the equivalent of one and a half earths , according to the non-profit group Global Footprint Network. A separate report by WWF–World Wide Fund For Nature in collaboration with the Zoological Society of London and Global Footprint Network, calculates that the Middle East/Central Asia, Asia-Pacific, North America and European Union regions are each consuming about double their regional biocapacity.

We have only one Earth. And that one Earth is in the grips of a system that takes at a pace that, unless reversed, will leave it a wrecked hulk while throwing ever more people into poverty and immiseration. That this can go on indefinitely is the biggest fantasy.

[Mar 28, 2021] D.C. spent around $30,115 per pupil in 2016-17, while in 2017-18, nearby Arlington County was expected to spend $19,340,

Mar 28, 2021 | www.unz.com

Seamus , says: March 25, 2021 at 8:32 pm GMT • 2.8 days ago

"Underfunded" is a euphemism for "have students with low test scores." E.g., "Washington D.C.'s underfunded schools."

D.C. spent around $30,115 per pupil in 2016-17, while in 2017-18, nearby Arlington County was expected to spend $19,340, the City of Falls Church to spend $18,219; the City of Alexandria, $17,099; Montgomery County, $16,030; Fairfax County, $14,767; Prince George's County, $13,816; Loudoun County, $13,688; City of Manassas, $12,846; City of Manassas Park, $11,242; and Prince William County, $11,222.

But I suppose those are hate facts.

https://townhall.com/columnists/terryjeffrey/2020/09/16/washington-dc-public-schools-spend-30k-per-student-23-of-8th-graders-proficient-in-reading-n2576265

https://www.insidenova.com/news/arlington/for-good-or-ill-arlington-per-student-spending-again-tops-region/article_0f441fe4-cef5-11e7-b4d4-cf5ac038e374.html

[Mar 28, 2021] You know how we raised black test scores to the level demanded? We fudged the numbers

Mar 28, 2021 | www.unz.com

Anonymous [369] Disclaimer , says: March 25, 2021 at 11:18 am GMT • 3.2 days ago

"Underfunded" is a euphemism for "have students with low test scores." E.g., "Washington D.C.'s underfunded schools." Presumably, it means "underfunded relative to some theoretical amount of money, such as a gajillion dollars, that would be sufficient to raise these students' test scores to average."

My dad was a school administrator in one of the top county public school systems in the country. A politically deep-blue part of the country. He retired in the early '80's. I remember him telling me once after he retired that his school(s) would get constant demands from the school board to raise black (not many Hispanics then) test scores. He said the school(s) focused all kinds of resources on black students which yielded no appreciable results. He then said, "You know how we raised black test scores to the level demanded? We fudged the numbers."

[Mar 27, 2021] It is not just Jens Quisling, half (or more) of the European political elite are USA proxies. China stated that it will forego the benefits of trade if sanctions regime persists and doesn't care if the EU's dire economic condition worsens

Mar 27, 2021 | www.moonofalabama.org

karlof1 , Mar 24 2021 22:11 utc | 56

The EUP is cutting its own throat trying to bully China. I see the move was made as soon as Blinken arrived and began spreading lies about both Russia and China. I know China and Russia would like these rogue nations to uphold their honor by obeying the UN Charter, but it seems too many have caught the Outlaw US Empire's disease and now want to return to their Colonial ways. If the EUP ends up trashing the Comprehensive Agreement on Investment (CAI) with China, many individual European nations are going to be very angry. China won't mind if that's what the EUP does as is explained here :

"After China announced sanctions on 10 individuals and four entities from the EU as a countermove to EU's unilateral sanctions against China, some people from the EU reacted strongly, claiming China's countermeasures were "unacceptable." The European Parliament canceled a meeting on Tuesday to discuss the Comprehensive Agreement on Investment (CAI) with China. Some members of the European Parliament warned that the lifting of Chinese sanctions should be a condition to promote talks on CAI. Voices that support to block the agreement in an attempt to punish China have been hyped by some anti-China forces.

"Yet those forces should be told that the CAI between China and the EU is mutually beneficial, rather than a gift from the EU to China. If the European Parliament wants to obstruct the deal, taking it as a bargaining chip in interactions with China, it should first reach a consensus among European countries. If they all agree, let's just take it as negotiations between China and the EU never took place last year. But don't blackmail China with the case. China despises such ugly deeds."

China's saying essentially that it will forego the benefits of trade if it isn't properly respected and doesn't care if the EU's dire economic condition worsens because it can't stand up for itself in the face of the world's #1 Bully, which is exactly the same line Russia has taken.

Lurk , Mar 25 2021 1:33 utc | 74

@Norwegian | Mar 24 2021 21:19 utc | 46

It is not just Jens Quisling, half (or more) of the European political elite are USA proxies.

Take for example the European green parties.

I am pretty sure that the Dutch green party is at its core a NATO/military intelligence operation. It was created as a merger of three parties, all of whom had a distinct pacifist and socialist signature. The new party, GroenLinks ("GreenLeft") has forgotten all of that and has limited itself to churning out Big Climate slogans. The party leader is an obviously hollow puppet in the image of Justin Trudeau. His opinions are handed to him by advisors in the shade.

A few years ago, an MP for GroenLinks, Mariko Peters was enthousiastically promoting more military missions in Afghanistan. She was also a board member of the "Atlantische Commissie", the local Dutch chapter of the Atlantic Treaty Organisation (the USA chapter is the more well-known Atlantic Council). If you study her antics and associations more closely, it is pretty obvious that there is nothing green or left about this lady and that she is an obvious atlanticist diplomat/spy type.

Currently, there are no political parties in the Netherlands that are critical of NATO. This used to be very different not even a very long time ago.

About the German green party I know a bit less, but I trust well-informed members of the CDU when they point out the NATO dirt on Die Grüne:
Green Party is an 'arm of the US elites' & doesn't care about German interests – Merkel's ally to RT

What the article does not mention is the association, reputedly for a six-figure salary) of former Grüne luminary Joschka Fisher to the Nabucco pipeline project (competing with ns2). Fischer is also a member of the council on foreign relations and a founding member even of the European chapter ECFR.

[Mar 27, 2021] I have been surprised by the explosion in the numbers of people locally living in cars and vans lately

Notable quotes:
"... freedom is material: a human being must be free from material privation, here and now, in life (and not in the mythical afterlife of reincarnation) in order to be really free. In other words, freedom from need is true freedom. ..."
Mar 27, 2021 | www.moonofalabama.org

vk , Mar 24 2021 17:07 utc | 3

Health is primary indicator of people's happy life: Xi

Marx's concept of freedom is completely different from the liberal or pre-liberal concepts of freedom. For Marx, freedom is material: a human being must be free from material privation, here and now, in life (and not in the mythical afterlife of reincarnation) in order to be really free. In other words, freedom from need is true freedom.

Human beings can only be materially free. Don't fall for the moral victories of liberalism, the snake oil salesmen's promise of a spot in Paradise from the Abrahamics or the nihilist bullshittery from the Buddhists et al.


William Gruff , Mar 24 2021 17:47 utc | 6

vk @3

Excellent point by vk here. Despite sometimes pretending to myself that I am a Buddhist (I am really good at meditating!), real freedom is being free from need. Abstract and metaphysical "freedoms" are luxuries of the wealthy that few under the thumb of the empire can afford.

I have been surprised by the explosion in the numbers of people locally living in cars and vans lately. I guess from my Buddhist perspective they have been freed from the attachment to a residence. Who could have guessed that capitalism would be such a good teacher of the path to enlightenment?

karlof1 , Mar 24 2021 21:30 utc | 50

John @44--

It's freedom from Want. The Four Freedoms as articulated by FDR in 1941 were:

1.Freedom of speech
2.Freedom of worship
3.Freedom from want
4.Freedom from fear

Earlier this year on the 80th anniversary of FDR's speech, I wrote a series of comments on the topic. They remain the four main tasks needing to be accomplished for the Common Man to be genuinely free. At the time, they were to be the main goals of WW2; goals that were further articulated by Henry Wallace in 1942 & '43 in his speeches and writings. Currently, several nations have accomplished those four goals; none of them is a NATO/Neoliberal nation however.

[Mar 27, 2021] Retirees who pay the most in taxes make only $36,000 a year on average, study finds

Mar 27, 2021 | finance.yahoo.com

Stephanie Asymkos · Reporter Fri, March 26, 2021, 1:54 PM

Retirees who have the most money pay the most in taxes, according to a recent working paper , but they're not necessarily rich.

"Most of the tax burden is carried by the top quintile of households," Anqi Chen , co-author and assistant director of savings research at the Center for Retirement Research at Boston College, told Yahoo Money. But "it's important to keep in mind that when we think about the top quintile of households -- the top 20% -- they're not the super wealthy."

Read more: Here's how to get your retirement savings back on track

Those in the highest quintile are mostly married couples with average combined Social Security benefits of $50,900, 401(k)/IRA balances of $325,400, and financial wealth of $441,400. When annuitized, those assets and retirement accounts earn account holders roughly $3,000 per month -- or $36,000 per year -- ostensibly making them middle-income earners, Chen said.

"That's some money but not a ton of money," Chen said, "and these households will have to pay about 11% [in taxes]."

(Photo: Getty)

The highest quintile pays 11.3% on their retirement income, while the top 5% is taxed at 16.4%, and the top 1% is taxed at 22.7%, according to the analysis. Overall, retired households pay 6% in federal and state taxes on their income.

Researchers used income data from 3,419 individuals and 1,907 households included in the Health and Retirement Study, a nationally representative longitudinal survey of older Americans. The analysis assumes the retirees follow the required minimum distributions for their retirement accounts and consume only interest and dividends from their assets.

Read more: Ask the expert: How to build an emergency fund after the pandemic

The heavy tax burden carried by well-off retirees demonstrates that even those who enter their golden years with the most money are still short on savings, an ongoing problem for many Americans. Roughly 40% of the top quintile of savers are at risk of maintaining their standard of living, meaning "taxes will make the goal even more difficult to attain," the study said.

For the majority of retired households, "taxes are negligible," Chen said, paying 0% to 1.9%. But they are far from lucky.

Those in the "bottom two-thirds of the income distribution don't have a lot in financial assets" that yield material income in retirement, she added.

Yahoo Money sister site Cashay has a weekly newsletter.

Stephanie is a reporter for Yahoo Money and Cashay , a new personal finance website. Follow her on Twitter @SJAsymkos .

[Mar 27, 2021] S P 500 returns to a record high and that's a problem

The USA remains is secular stagnation mode caused by neoliberalization of the economy and 2008 financial crisis. Nothing can change that.
When Microsoft and Facebook are called high growth stock the question arise about the sanity of the author. How they can achieve high growth? Facebook user base probably might even shrink, not expand due to negative publicity as being a surveillance company and more and more obnoxious censorship.
Microsoft achieved dominance in desktop long ago and with PC sales basically stagnant how it can grow in its key market? Connections to PRISM also do not help.
Wall Street speculated on the identity of the mysterious seller behind the massive $10.5 billion in block trades executed on Friday by Goldman Sachs Group Inc. The question is why did these block trades occur? Does one firm know something others don't or were they somehow forced to cut risk? Read More: 'Unprecedented'- Wall Street Ponders Goldman's Block-Trade Spree
Mar 27, 2021 | finance.yahoo.com

Much of the stock market's recent turbulence has been an after-effect of movements in the bond market, where Treasury yields have been largely climbing since last autumn. Higher yields can make investors less willing to pay high prices for stocks, with companies seen as the most expensive taking the most pain. Companies that ask their investors to wait many years for the payoff of big profit growth have also been hit hard.

The yield on the 10-year Treasury rose to 1.67% from 1.61% late Thursday. But that's still below where it was last week, when it rose above 1.70% and touched its highest level since before the pandemic began.

The higher yields helped lift stocks of banks, in part because higher interest rates allow them to make bigger profits from making loans. Financial stocks also got a boost after the Federal Reserve said it will soon allow banks to resume buying back their own stock and to send bigger dividend payments to shareholders. The Fed restricted such moves last summer to force banks to hold onto cash cushions amid the coronavirus-caused recession.

Some of Friday's biggest gains came from energy stocks, which benefited from a $2.41 rise in the price of U.S. oil, settling at $60.97 per barrel.

... ... ...

President Joe Biden is pushing for big spending on the nation's infrastructure , as many past presidents have done to little effect. "Whether or not it happens or doesn't happen, the market feels like there's more of a possibility that it will happen," Plumb said.

... high-growth stocks were turning in a mixed performance on Friday. Apple rose 0.5%, but only after swinging between gains and losses numerous times through the day. Microsoft rallied 1.8%, and Facebook climbed 1.5%, but Tesla dropped 3.4%.

[Mar 27, 2021] After shedding 140,000 jobs in December, the economy added back just 50,000 jobs in January.

Mar 27, 2021 | www.vox.com

In the background is a continuing stark economic situation in the US : After shedding 140,000 jobs in December, the economy added back just 50,000 jobs in January. The country is still short 10 million jobs from where it was pre-pandemic, and some 4 million workers have dropped out of the workforce. In that context, it's hard to gauge just how much to worry about overshooting it on the response.

[Mar 27, 2021] As 30-year yield rises foreigners shun new US debt

The Asia times article did it connect the dots for me. china especially is not buying US bonds anymore. Hence low demand for it , causing the yields to ride to attract buyers.
Mar 27, 2021 | asiatimes.com

The 30-year Treasury yield has climbed all the way back to its 2019 level, mainly because inflation expectations built into the yield have risen to the highest level since 2014. A US government deficit equal to 20% of GDP, a falling dollar and rising commodity prices mean more inflation in the future.

The Federal Reserve bought most of the Treasury debt issued in the past year, and will have to buy most of the Treasury debt issued during the coming year, as Bridgewater's Ray Dalio told the China Economic Forum on Sunday.

Unlike the period after the 2009 crash, when foreigners financed roughly half of the US government deficit, foreigners haven't increased their holdings of US debt during the past twelve months.

Dalio, one of the world's most successful investors, warns that they might start to sell the debt they already own. "The situation is bearish for the dollar," Dalio concluded.

As the late Herbert Stein said, anything that can't go on forever won't.

Budan University Professor Bai Gang told China's Observer website last week: "For the past year, the US has continued to issue more currency to ease its internal situation. The pressure will eventually seriously damage the status of the US dollar as the core currency in the international payment system."

[Mar 26, 2021] Media Momo Meltdown, Small Caps SPACs Slammed As Bonds The Buck Bounce - ZeroHedge

Mar 26, 2021 | www.zerohedge.com

Cathie Wood had another bad week with ARKK down almost 10% to its lowest weekly close since early November ...

It wasn't just US tech, there was a major liquidation in a number of China tech stocks this week...

And media stocks were monkeyhammered (this was the biggest weekly drop in media stocks since March 2020) ...

This all had the smell of a major media/tech fund liquidation. ViacomCBS was a total shitshow...

Momentum stocks melted down...

Source: Bloomberg

SPACs dumped...

Source: Bloomberg

On the week, Staples outperformed as Discretionary dumped and Energy stocks changed their mind faster than Fauci...

Treasury yields were lower across the curve this week led by the long-end... Is the pullback in Small Caps relative to Big-Tech implying that rates have peaked for now? 1.60% remains a key level for 10Y yields...


NightWriter 5 hours ago

We're starting to see bad news causing price drops as opposed to 2020 where the worst thing imaginable caused more bull runs. If there's some really bad news this weekend, the market could open up to a new low.

Peak Finance 4 hours ago (Edited)

I expect a flip back to bad news = good market news

word is they going to rig the UE this coming month to some crazy + millions of jobs to make biden look good just like they did for O, same tricks messing with the "no logner in workforce" numbers to up the employment rate

which is NOT going to have the effect on the market they think it will

SuperareDolo 2 hours ago

I concluded after Bernanke's printing that the market is able to see alpha (which security is more valuable than another), but blind to beta (the valuation of the whole market). It can judge one against another, but is incapable of reacting to overall valuations. Those are a factor only of how much money is in the financial system. And there's too much.

Iskiab 1 hour ago (Edited)

Well bad news is good news sorta isn't it. Bad economic news means more QE in a situation where it won't help that much keeping the gravy train going.

I would be careful around momentum stocks. Any deviation from the trendline will be a big buy signal for algos, they're trained to look for opportunities and ride upward momentum, then get out faster if things go bad. If it diverges much from the old trend line they might buy en mass and see if it can create any momentum.

CheapBastard 5 hours ago (Edited) remove link

Dow soars 450 points!

Greatest recover eva!

ok, now get back in the food line for your bowl of soup.

Keltner Channel Surf 4 hours ago remove link

More than half a dozen indices/sectors I follow had very odd charts for the bulk of the day, VERY tightly wound with suppressed vertical action well into the post-lunch period. If you think of a tug-of-war game at company picnics that sits at a stalemate until one side gains the edge, it always snaps hard in one direction.

The amplitude of most Daily candles wasn't terribly out of line with stronger days the past few weeks -- but the irregular concentration of orders in time certainly was.

If I had to guess, the news of large liquidations may have torqued the spring to a near black hole density, as machines were spooked (or, more likely, thwarted) by unusual order patterns, then when the liquidations ended with prices well below VWAP, we break with speed as most machines end Friday's flat, and the bias starting yesterday afternoon was a weekly reversion back up.

As I've said before, when less active larger players suddenly become active, more active daily algos, which control things 80% of the time, see their impact muted or overrun. But these little devils don't EVER stop so, like a Roomba robot vacuum that hits an obstacle, once the path is clear, it mindlessly goes where it planned. Again, this is your market on drugs (or computers).

[Mar 26, 2021] S P 500 And US Economy Face Seismic Shifts From Joe Biden And The Federal Reserve

The UBS economics team holds the out-of-consensus view that annual core PCE inflation won't exceed the Fed's 2% target until 2024. And what will happen with S&P500 if inflation brakes 3% barrier in late 2021 or 2022. Pumping money into stock market is a Ponzi scheme by definition so at one point mistki moment might arrive.
Mar 26, 2021 | www.investors.com

Biden hailed the new law's focus on growing the economy "from the bottom up and the middle out," after decades of supply-side, or "trickle down" tax policies. It "changes the paradigm" for the first time since President Johnson's Great Society programs, he said.

But the last time free-spending, inflation-permissive "regime shifts for fiscal and monetary policymakers" coincided, wrote Deutsche Bank economists David Folkerts-Landau and Peter Hooper, "such shifts touched off a sustained surge in inflation in the U.S.," beginning in 1966.

Growth in core prices, which exclude food and energy, jumped from well under 2% in 1965 to nearly 3.5% in 1966 and approached 5% by late 1968, Deutsche Bank noted. Inflation remained elevated into the early 1970s, even before an oil shock hit in 1973. The pickup was broad-based, but health care inflation played a key role, going from less than 3% to nearly 7% by early 1967.

The S&P 500 suffered through a bear market in 1966. Another 19-month bear market began in late 1968. The Dow Jones made a major top in January 1966. It would take the Dow Jones until 1982 to finally break through that ceiling for good.


What Is Inflation And Why Does It Matter To The Fed -- And You?


Outlook For Inflation, Federal Reserve Policy

Almost everyone expects a notable pickup in inflation this year -- including the Fed. Monetary policymakers expect the personal consumption expenditures (PCE) price index to rise 2.4% this year. That's vs. 1.5% in the 12 months through January.

Fed Chair Jerome Powell said March 17 that the Fed will discount this year's jump in prices as a transitory bounce from pandemic-induced weakness. What happens in 2022 will be key. Fed projections show inflation easing back to 2%. But if pressures don't ease, the Fed will have to reassess its 2024 timetable for the cycle's first rate hike.

It's easy to see how Fed projections might understate next year's inflation. Policymakers likely are not factoring in any impact from the Democrats' next massive spending package.

Subdued health care prices might help keep inflation in check, depending on what Congress does. A 2% hike in Medicare reimbursements is scheduled to lapse in April, but lawmakers appear set to extend it. A 3.75% increase in Medicare fees for physicians could end in January, Deutsche Bank said.

Democrats also are eyeing spending curbs to help pay for their infrastructure package. Letting Medicare negotiate prescription drug prices is high on the list of options.

Longer term, the inflation outlook may depend on whether a post-pandemic productivity boom offsets upward price pressure as globalization backslides.

10-Year Treasury Yield Surges On U.S. Economy Growth Outlook

This week, the 10-year Treasury yield has eased to 1.66%, after hitting 1.75% last week, the highest of the Covid era. Still, the 10-year yield is up 66 basis points since Jan. 5.

Financial market pricing now indicates an expectation that inflation will average 2.35% over the coming decade. That's the difference between the 10-year Treasury yield and the -0.69% yield on 10-year Treasury Inflation-Protected Securities, or TIPS.

"Negative real yields seem highly incongruous with the robust economic growth in train," Moody's Analytics chief economist Mark Zandi wrote. As real yields rebound, Zandi sees the 10-year Treasury yield reaching 2% by year end, 2.5% in 2022 and 3% by late 2023.

What Do Taxes, Interest Rates Mean For S&P 500?

As the new fiscal and monetary policy regime takes hold, investors will have a lot to process. If the era of too-little inflation and ultralow interest rates is drawing to an end, but earnings growth surges as the economy catches fire, what will that mean for the S&P 500? And how might tax hikes affect stock prices?

... ... ...

The UBS economics team holds the out-of-consensus view that annual core PCE inflation won't exceed the Fed's 2% target until 2024. Chief U.S. economist Seth Carpenter expects the new stimulus checks to be largely saved. The next fiscal package might likewise have a "muted" bang for the buck, while adding just $600 billion to the federal deficit.

... ... ...

Interest Rates: Parker finds that a 50-basis-point rise in the 10-year Treasury yield compresses price-earnings multiples by six-tenths of a point. Based on the S&P 500's current forward earnings multiple of about 21.5, that would equate to about a 3% decline in the S&P 500.

Capital Gains Taxes: Biden has proposed hiking the capital gains tax rate from 20% to 39.6% for high earners. Parker figures that could slice 1.5 points off the S&P 500 P/E multiple, potentially a 7% hit. However, UBS expects that not quite half the tax plan will become law.

Parker arrives at a 19.5 forward earnings multiple for the S&P 500. That also factors in some compression because the fiscal boost to earnings is bound to slacken...

[Mar 26, 2021] Dow and S P 500 Close at Records as Oil Prices Rise

Mar 26, 2021 | finance.yahoo.com

Teresa Rivas Fri, March 26, 2021, 4:31 PM

Global stocks are higher as a positive session on Wall Street inspires investors. Oil prices rise as the crucial Suez Canal waterway remains blocked.

[Mar 26, 2021] Absurd NFT PRices Expose a Global Financial House of Cards - ZeroHedge

Mar 26, 2021 | www.zerohedge.com


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Absurd NFT PRices Expose a Global Financial House of Cards BY SKWEALTHACADEMY FRIDAY, MAR 26, 2021 - 5:59

The insanity of absurd NFT prices reveals the fraud of the global currency system. The pricing for assets worldwide has gone insane at a time when the vast majority of the world's population became poorer, not wealthier, over the past 12 months due to the global economic lockdowns. As an example, there was an article in the Philadelphia Inquirer the other day of a cassette tape of hip hop icon Nas's Illmatic album selling for $13,999 . Not a CD, but a cassette tape. A rectangular piece of cardboard, known as an NBA trading card, for star Luka Doncic's rookie trading card, recently auctioned for $4.6M. Luka Doncic is not a star that played in 1925, and for this reason, his rookie card is worth so much. Luka Doncic entered the NBA in the 2018-19 season, less than three years ago. Nostalgic or collector items are simply selling for insane price because, in my opinion, wealthy people have captured so much of the world's wealth through a global currency system designed and engineered to produce this end result, that they have no better use for their money than to pay $14,000 for a music item that the vast majority of people do not even have the necessary hardware to actually play and to pay more than $4.5M for a piece of cardboard. Anyone that truly understands the difference between a sound and an unsound monetary system realizes that the likelihood, under a sound monetary system, of people paying exorbitant prices for the types of assets and NFTs described above would be a fraction of the probability at which they are occurring today.

Banksy, a UK-based street artist infamous for mocking the very wealthy people that pay millions for his artwork, even titling a piece "Morons" which depicted an art auction with a framed picture of the words "I can't believe you morons actually buy this shit". Instead of being offended by the artist's mockery, someone paid nearly 44,000 pounds for it and it recently sold for nearly 10 times the original purchase price when the piece was destroyed and the act of destruction was turned into an NFT. By the way Banksy also sold a very simple drawing of a girl with a red balloon that was mounted inside a frame in which he had hidden a shredder. After it sold for $1.4M, Banksy remotely activated the hidden shredder and shredded his artwork into thin strips as perhaps "revenge" against the idiocy of narcissistic, wealthy art collectors that can't find any better use of their money than purchasing stencil created art for which no rational person would ever pay $1.4M. To demonstrate the idiocy of the art world, Sotheby's immediately coined the shredding of the art piece as "the first work in history ever created during a live auction", which art collectors worldwide seemed to accept, and thereby increased the value of the destroyed piece of art to perhaps as high as double the original auction price at the current time and avoiding a more rational valuation for the art piece to near zero.

I once read a book called the $12M Stuffed Shark, in which the author revealed that US hedge fund manager Steve Cohen paid $12M to an artist to kill a shark and put it in a vat of plexiglass sealed formaldehyde that he could display in the foyer of his house and basically concluded, after a careful introspection into the art world, that pieces of art like pyramids built from tiny Godiva chocolates and stainless-steel colored balloon animals ($58M or more) would be priced at whatever price dealers could convince the dumbest rich person it was worth. Certainly this conclusion seemed to be supported when someone purchased an "art installation" of a banana taped to the wall with duct tape at a Miami Beach art gallery for $120,000 at the end of 2019 . When people conclude that the best use for $5M or $58M is to buy a piece of cardboard or a steel balloon animal during a period in which Rome is burning (i.e. exploding homelessness numbers in Los Angeles nearing 70,000 as evidenced here and here ), either this is a sign of the fraud of the monetary system, the decline of civilization, or both. If you have ever lived in Los Angeles, as I have, and watch the video referenced in the second link, you will find it astonishing that massive homeless encampments have sprung up throughout Los Angeles in areas that prior to recent years, had no homelessness. (depending on the social media platform you may be watching this on, the soaring prices for which art that I consider to be the lowest form of art that many do not even consider as art is selling for such absurd prices, including NFTs that I will soon discuss, is certainly reflective of the rapid decline of civilization.

This rapid decline of civilization is also reflected in the fact that giant titans of the tech world and social media platforms continue to promote and push the most morally reprehensible content to the top positions of success on their platforms. When popular YouTube Logan Paul visited the "suicide forest" in Japan and found a dead body hanging from the tree, he filmed it and mocked the dead person and YouTube quickly promoted his video as one of their top trending videos on their entire platform for 24 hours, until Logan Paul, not YouTube executives, deleted the video due to the outrage it provoked. Another popular YouTuber, David Dobrik, has had many of his reprehensible videos monetize bullying and belittling of others, often promoted on YouTube among the top trending videos. Recently Dobrik came under fire for allegedly monetizing a video of an actual rape on his channel, and he was roundly mocked when his initial apology consisted of trying to blame the rape victim, who was allegedly underage and too drunk to consent to sex. In his "apology", Dobrik stated he always gains consent for his videos, but sometimes people he victimizes consent at first but then change their minds later, and that is why it appears in many of his videos that he is monetizing morally reprehensible behavior. In any event, YouTube executives allegedly allowed such morally and cowardly behavior to be monetized to massive sums of income for such YouTubers and seem to be more focused on demonetizing anyone that challenges a narrative, true or false, forwarded by the oligarchs.

And as ludicrous as are the prices paid for some of the assets I've mentioned above, the level of insanity paid for NFTs, in my opinion, are at an even exponentially higher level. For those of you that may not know what are NFTs, Non-Fungible Tokens are unique blockchain-based digital assets that represent an increasing number of commodities, from art and real estate to collectibles like sports trading cards. One platform, Original Protocol, recently auctioned off the world's first NFT music album by American DJ 3LAU. Collectively, the artist's fanbase paid out more than $11 million for 33 NFTs contained on 3LAU's album Ultraviolet. In this case, since musicians are routinely ripped off by giant record labels and often have such suffocating, unfair contracts that make it near impossible to earn any significant income from album releases, the digitization of music in the form of NFTs that allow musicians to control their income is a wonderful aspect of the new digital economy of NFTs.

The Non-Fungibility of NFTs and Most Cryptocurrencies Disqualify Them for Use in Financial Derivative Currency Swaps

NFTs sell digital representations of items, including some that used to be represented in the physical world, like trading cards and pieces of art. As is the case in the fine art world, an NFT's price is the highest price you can convince someone to pay for it, a pool of clients that often overlaps with the over indulgent, narcissistic people that comprise the bidders for modern art pieces that sell for millions of dollars. Perhaps the most amazing quality of NFTs is that they actually have a more meaningful value than any cryptocurrency not backed by any type of hard asset. For example, bitcoin is a digital asset, but one would be hard pressed to describe its intrinsic value. One cannot say its fungibility is its price because its price is denominated in fiat currencies with intrinsic values of near zero. Furthermore, for those that constantly and very wrongly argue that non hard-asset backed cryptocurrencies are sound money, if bankers truly believed that bitcoin even remotely qualified as sound money, they would have zero problem offering currency swap derivative contracts between any fiat currency and bitcoin.

Yet, there is not a single corporation in the entire world that has a currency swap that hedges their corporate cash treasury holdings with bitcoin. You can never have any type of financial contract without unlimited risk if it is denominated in bitcoin in which both parties realistically have no idea of the price range of that currency for the maturity of that contract. No rational party will lock themselves into a contract in which a currency presents unlimited risk to them. The simple understanding of why there are no derivative currency swaps or hedging contracts denominated in bitcoin should easily explain to any rational person the very reason why BTC is not considered as sound money by a single banker in the entire world. On the contrary, even as volatile in price as gold and silver may be, gold and silver mining companies routinely hedge their inventory risk and their revenue risk of yet-to-be-mined gold and silver ounces by establishing open positions of gold and silver futures contracts years into the future.

You can't argue that BTC's intrinsic value is the block of the blockchain that records the transaction, because whether that block is used to record an NFT, BTC, or ownership of real estate, a photo or song, the price represented by that block could possibly vary from just a few dollars to several million dollars. So the blockchain has no intrinsic value either. However, with NFTs, its value, is more uniquely determinable than the block upon which a bitcoin transaction is stored that records the price of bitcoin, because that value is simply the highest price willing to be paid by all available bidders at any given time. If there are no available bidders willing to bid on a particular NFT for weeks or perhaps months on end, then one can assume the price of that NFT, even if the last paid price was $100,000, is likely zero. But even if there is one available bidder for that NFT at a price of $1,000,000 then the market price of that NFT is $1M. Though one may state that the bidding mechanism is much more controlled in BTC markets and that BTC could never be priced at zero or $1M per BTC in such a cavalier manner that mimics the pricing of NFTs, the similarities between the pricing mechanisms based upon lack of fungibility should not be ignored when considering the inherent risk imbedded in the price of BTC in its near $60,000 per coin current price. You will either understand this risk and behave accordingly, or ignore this risk and likely expose yourself to strong downside risk in the future at some point that should be expected but will remain unexpected to those that cannot, or will not, accept this existing risk.

The five biggest whales that own BTC in order from top to bottom, are believed to be as follows: (1) The collective of institutions/people called Satoshi Nakamoto; (2) The FBI; (3) The Winklevoss Twins; (4) Micree Zhan; and (5) Jihan Wu. Other notable owners among the top 10 BTC whales are Huobi, Tim Draper and the North Korean State. In 2017, Bloomberg reported that only 1,000 people owned 40% of all BTC in the entire world. Given that in the past two years, it has been reported that the top whales had been cornering the BTC market and increasing their market share, it would not be surprising if they had increased their market share to 50% or perhaps even higher by 2021. In any event, this translates into 0.00012658% of the world's population likely controlling majority ownership of BTC. I don't know of any world in which such a statistic does not translate into enormous risk.

Unanswered Questions

But fungibility is what reveals why cryptocurrencies like BTC and NFTs cannot ever qualify as sound money. For those that don't understand why sound money needs to be a fungible asset, take gold for example. Fungibility essentially means that money should never vary in its qualitative properties but only its quantitative properties. All gold has electroconductivity properties no matter its form. Electroconductivity is an intrinsic quality of gold. Because all purified four nine gold has the same density, the same volume will always be measured by the exact same weight in grams, again another fungible quality of gold. However, depending on how paper gold futures markets are being manipulated and the date, that same gram of gold will vary wildly in fiat currency price. Fiat currency price, thus can never be the quantitative property used to value gold. Weight is the constant that should be used for gold's value when it is to be used as sound money, because this quantitative property is always unwavering, always constant no matter if one is using gold as money in Moscow, Capetown, Montevideo, Santiago, Montreal, Phoenix, Miami, Mogadishu, Kiev, Paris, Heidelberg, Reykjavik, Chiangmai, or Seoul.

What quantitative property of bitcoin that is consistent and always the same across all uses? This is a question without an answer. For this same reason, NFTs could never serve as sound money either. No matter the latest fiat currency price paid for a Banksy "Morons" drawing set on fire, how can one determine the exchange rate for this NFT and an NFT representing a Mark Cuban tweet. Should the Banksy NFT be priced 10 million times higher than a Mark Cuban tweet NFT? Is an NBA TopShot NFT worth 1/1000 the price of a Banksy burning piece of art NFT? And even though NFTs have more uniqueness than say, a satoshi of BTC, because price assigned to that uniqueness is entirely subjective, the uniqueness leaves it no more fit to use as sound money than a cryptocurrency that has no backing of a hard asset. Miami-based art collector Pablo Rodriguez-Fraile proved the absurd pricing mechanism for NFT when he recently sold an NFT that he acquired for $66,666 in October, a 10-second computer-generated video clip of a slogan-covered giant Donald Trump created by digital artist Beeple , for mor than 100 times his original cost at $6.6M.

The last point of irony in the BTC is the solution to the unsound global fiat currency system narrative is that many HODLers of BTC are well aware of the oligarch's use of their power consolidation strategy of (1) Create a crisis; (2) Present the solution to the artificially created crisis; and (3) Implement the solution to consolidate power, yet will never give any type of consideration to the possibility of how perfectly the creation of BTC, in response to the 2008 global financial crisis, fits this exact historical narrative that oligarchs have repeatedly implemented, instead choosing to believe that BTC is the special unique exception to this oft-deployed strategy.

This despite, three US employees of the Central Bank, Galina Hale, Marianna Kudlyak, and Patrick Shultz, and one US university professor, Arvind Krishnamurthy, admitting that the premise I presented to my social media followers in December of 2017, when BTC hit $20,000, that the introduction of the US bitcoin futures market was going to be used to slash the BTC price drastically, essentially writing the premise for the referenced US Central Banker paper five months before it was written. In that paper, titled "How Futures Changed Bitcoin Prices", the four authors basically echoed my premise, and stated,

"We suggest that the rapid rise of the price of bitcoin and its decline following issuance of futures on the CME is consistent with pricing dynamics suggested elsewhere in financial theory and with previously observed trading behavior. Namely, optimists bid up the price before financial instruments are available to short the market (Fostel and Geanakoplos 2012). Once derivatives markets become sufficiently deep, short-selling pressure from pessimists leads to a sharp decline in value. While we understand some of the factors that play a role in determining the long-run price of bitcoin, our understanding of the transactional benefits of bitcoin is too imprecise to quantify this long-run price. But as speculative dynamics disappear from the bitcoin market, the transactional benefits are likely to be the factor that will drive valuation."

While they did not name the players in the BTC futures markets that drove BTC prices downward from $20,000 to $3,000 in 2018, the implication is that Central Bankers were involved in this downward spiral. And if Central Bankers were involved in this downward spiral, the downward price spiral would of course, been far easier to execute, if Central Bankers were also among the members of the collective that constitutes the largest BTC whale, Satoshi Nakamoto. Even though these dots, though purely speculative, are clearly possible, most every BTC HODLer that is confident in the achievement of end-year $300,000 BTC prices or higher, will never consider this possibility, even for a nanosecond, despite heavy suggestions of three US Central Bank employees that Central Bankers were involved in the 2018 BTC price crash. But if one did, as is the rational and logical thing to do, then one would have far greater difficulties distinguishing the mechanisms that set the price for NFTs and BTC. And as the introduction of the first BTC ETFs seem to be on the near horizon now, one would be smart to heed the lessons learned after trading of BTC futures was introduced at the end of 2017. Subscribe to my youtube channel here , to my free newsletter here , to my podcast here , and to learn more about bonus content delivered to skwealthacademy patreons every week, click here , and to download the skwealthacademy fact sheet, click here .

[Mar 26, 2021] A Structurally Deficient US Economy Will Soon Implode Again

Feb 23, 2021 | maalamalama.com

... On December 7, 2009, I sent out a warning from our Managing Director, J. Kim, to thousands of people via email about the deterioration of the global economy...

...J. Kim: "Despite the weapons of mass financial destruction that bankers have created and governments worldwide have coddled and shielded from proper regulation, the majority of people still incredibly do not understand the crime syndicate-like relationships among governments, corporations and banks. The public sees that the US markets are up a little over 10% this year and many are duped into believing that that the stock market performance means that the economy is recovering. And this belief is reinforced by idiot talking heads on TV like Jim Cramer that do nothing but misinform people. Sure, US markets have now risen by more than 36.79% since they crashed in 2008, a figure that sounds impressive on the surface level. Then combine this impressive sounding figure with US Fed Reserve Chairman Ben Bernanke's national appearance on 60 Minutes, when he lies to the nation about inflation rates and about continuing to create more money out of thin air, and you have millions more that are converted into sheeple. How do I know? Because I talk almost every month to people in the US that tell me they believe the economy is recovering. So when people believe that inflation is still less than 2% because the Fed tells them to believe this, they look at a near 37% gain in the US markets in the last two years and believe that they have made substantial recovery in their pensions and IRAs and consequently believe the economy must be recovering as well! (by comparison, J. Kim's Crisis Investment Opportunities newsletter(that he published back then) has returned more than 105.25% over the same time period, clobbering the S&P 500's 36.79% return, and yielding very substantial REAL gains, even after the inflationary monetary effects of the US Federal Reserve's schemes)."

James C : "So besides the government and bankers deliberately keeping people in the dark, why else do you think some, or even many, people believe the economy is recovering?"

J. Kim: "First of all, the Federal Reserve's insane POMO (Permanent Open Market Operation) schemes this year (2010) are largely responsible for propping up the US market this year. In 2009, when I stated that the US would experience significant economic shocks in 2010 and 2011, I did not yet know the duration of the Fed's POMO operations and how insane they were going to be. Although daily POMOs had already reached upwards of $6 billion and $7 billion per day as of mid-2009 (just for US Treasuries, but up to multiples of these figures when including US Treasuries and other debt-related financial products), many had speculated that the POMOs would soon end. Obviously, with projected cumulative POMOs of nearly $1,000,000,000,000 just between November 2010 and June 2011 (again just for US Treasuries), the Fed Reserve POMO scheme not only did not end, but it received an injection of steroids in 2010. So POMOs that were used to buy future contracts of US market indexes is a major factor that has kept the US market afloat at this juncture and may continue to keep it afloat for several more months. Rising stock markets have no correlation to a strong economy anymore due to scams run by Central Banks and due to gains that largely occur due to the devaluing currencies that these markets are denominated in . The best performing stock market of the past decade has been the Zimbabwe stock market. Still, it's irrelevant if you made a quadrillion Zimbabwe dollar profit investing in the Zimbabwe stock market, as by 2008, a loaf of bread would have cost you 1.6 trillion Zimbabwe dollars."

James C: "If the economy is really not recovering, then can you explain what is really going on?"

J. Kim: "Let me explain what is really going on with the economy with the following disaster analogy. In June of 1995, the Sampoong department store, a five-story building with four basement levels, suddenly collapsed in Seoul, South Korea, tragically killing 501 people and injuring 937 others. When the Sampoong department store was constructed, the owners, due to a desire to cut costs, made several fatal decisions. First, they decided to cut away a number of support columns in the original blueprint in order to install escalators. Secondly, in order to cut costs, the owners shrunk the original width of the support columns from the required 80cms to only 60 cms, an inadequate width to support the load of the building. In addition, the original blueprint called for only a four-story building but the owners built an additional fifth story that housed a restaurant with a very heavy heated concrete base that quadrupled the load of the original building design.

Two months before the building collapsed, worrisome cracks appeared in the ceiling of the south wing's floor. On the day of the collapse, cracks as wide as 10 centimeters appeared in the top floors of the building five hours before the building collapsed, but the owners hid this information from its patrons and refused to shut down and/or evacuate the building as they did not want to lose its daily revenue. When it became clear that the building was going to collapse, senior executives of the department store fled without warning any of the patrons still inside the building. An alarm to evacuate the building was only sounded when the building started to make loud cracking sounds, just 7 minutes before its collapse at 5:57 PM despite signs of an imminent collapse being clearly visible more than five hours prior. City officials Lee Chung-Woo and Hwang Chol-Min, in charge of overseeing the construction of the building, were responsible with concealing the illegal changes to the original blueprint designs and were later charged with and convicted of bribery."

"Amazingly, the above story serves as nearly a perfect analogy for the US economy. The government and bankers laud a rising stock market as proof that the economy is recovering. They go on record stating that inflation is less than 2% when in reality it is more than four times higher. They state unemployment is less than 10% when it is nearly 23% [Editor's Note: These statistics all apply to the year in which this original interview was conducted, 2010]. Thus, to many people, the economy appears as the Sampoong department store's exterior appeared to the public right before its collapse, structurally sound and with a solid exterior. This is the reason why 40,000 people a day visited the department store despite its fatal structural integrity problems. The government and bankers are just like the Sampoong department store owners, actively concealing all warning signs from the public and selling them an illusion that all is okay when instead, the economy is heading for collapse. Just as the Sampoong department store owners constructed a crappy building destined to collapse due to excessive greed, bankers with the help of government officials, constructed dozens of financial derivative products destined to collapse due to their excessive greed as well."

"The US regulators that also see the impending cracks in the economy, are just like Lee Chung-Woo and Hwang Chol-Min. They receive inordinate pressure and bribes from the bankers to look the other way and keep the public in the dark about the impending doom that is coming. In the case of the Sampoong disaster, when the contractors refused to continue work on the building when the owners changed structural regulations that endangered the integrity of the building, the owners fired the contractors and hired ones that would cut corners. US regulators that are honest and that try to protect the American public, like Brooksley Born, received the same fate as the original Sampoong contractors and are also fired or forced to resign. When the entire system is corrupt, even the rare good person can't save disasters from happening. Thus, the public is none-the-better-off despite the presence of regulators that are supposed to protect the public's interests and safety, but in reality, protect the greed and profits of companies that exploit the public's interests."

"And finally, the economy itself is like Sampoong's interior. It is replete with cracks and fractures that warn us of the disaster ahead. But even so, a large percentage of the masses still remains ignorant because the banker/corporate/government three-headed monster keeps the people's vision in a tunnel by pummeling the public with a constant stream of propaganda on MSNBC, newspapers, and financial talk shows. In Seoul, Sampoong's owners distracted the public's attention away from the developing disaster with stores fully of luxury goods. So when the US economy finally experiences shocks in the future more disastrous than those in 2008, as was the case with the Sampoong department store collapse, many will believe that now warning signs had existed despite the evidence that exists to the contrary today. And I'm quite certain the media, just as they did in 2008, will stupidly ask the same questions they did back then, such as "How did this happen?" when in fact, all the answers stare them in the face right now. With the Fed's POMO schemes, regulators that aid and abet fraud, and governments and bankers that conceal truth from the public, the combined effect of these actions is just to delay disaster for another year or two. So that is why I say now that disaster will visit the US sometime between 2011-2013."

[Mar 26, 2021] The Most Important Thing to Understand About the Ongoing Global Economic Crisis

Mar 26, 2021 | maalamalama.com

... As I already stated above, anyone that has a rudimentary understanding of real finance (meaning finance as it operates in the real world, not finance as taught in MBA programs) already understood that Central Bankers' massive provisions of liquidity in the overnight repo market pointed to US banks being undercapitalized in cash

... in my referenced April 2020 article above, I only explained why it was necessary for Central Bankers to keep interest rates extremely low, and I had not yet realized, as we were only a few weeks into a global economic lockdown that was promised to last only a few weeks, that the global economic destruction caused by lockdowns would be the mechanism used to achieve this goal of keeping interest rates extremely low. In other words, only in hindsight, a few months into the lockdown, did I connect the dots myself and understand why it was necessary to keep the economic lockdowns going forever, which is also why I stated at the end of 2020 that only the extremely naïve and foolish believe that the bankers and politicians would end the lockdowns in the New Year, as the problem I explained in April 2020 that needs to be managed to avoid meltdown of the global financial system still very much exists in March of 2021.

[Mar 26, 2021] US Corporate Junk Bond Yields Warning of Trouble Ahead

Mar 22, 2021 | maalamalama.com

I often look at rising US corporate junk bond yields after long periods of decline as the proverbial "canary in the coal mine" to predict major trouble ahead in global stock markets.

As you can see, US corporate junk bond yields have just started to rise after nearly a full year of plunging yields. Is the rise enough to spark concern? In my opinion, the rise in yields is not significant enough to yet spark major concern, but if they break 5.0% then at this point, I will dive deeper into the muck to see what I can find.

So stay tuned, and if you have not yet subscribed to my free newsletter, please do so at the link at the top of this page.

[Mar 26, 2021] Treasury Markets Calm, but Investors Anticipate a Rate Rise Soon by Paul J. Davies

Higher inflation in any country is typically currency negative. Fears of rampant inflation in the US have gone unfulfilled for years. the current level of deficit spending raises the question whether some sort of existential crisis for the dollar is in the books. In 2020 the US budget deficit hit 14.9% of GDP , the highest level since 1945. FEd now owns around 22% of the US beft -- in essence, one branch of the government buys debt from the another part of government. This might be a bad news for stocks, bonds and the dollar. The demand for Treasuries from private investors, including foreign buyers, appears to have weakened recently.
Trust in government statistics, especially such measures as inflation and unemployment hit new low (see comnets below) and that also spell troble in the long run.
Under neoliberalism financial oligarchy dominates and labor reduced to the role of "debt slaves" and lacks any wage bargaining power. So the main danger is deficits and eroding trust in the US economy which supports the role of dollar as world reserve currency. US foreign policy and sanctions encourages "flight from dollar" for Russia and China.
Notable quotes:
"... the difference between longer-term and shorter-term yields remains far greater in real yields than in nominal yields. This difference over time, known as the yield curve, illustrates how much investors expect interest rates to rise in the future: A steep curve equals more rate rises. ..."
"... For normal Treasury yields, that five-year to 10-year gap was 0.798 percentage points, up from 0.550 percentage points at the end of 2020 ..."
"... Seems like a very effective way to "tax" 401k money indirectly. ..."
Mar 25, 2021 | www.wsj.com
...

The Fed reiterated last week that its rate-setting committee doesn't expect to increase interest rates until after 2023. However, investors predict that it will, according to Sebastien Galy, senior macro strategist at Nordea Asset Management.

... the difference between longer-term and shorter-term yields remains far greater in real yields than in nominal yields. This difference over time, known as the yield curve, illustrates how much investors expect interest rates to rise in the future: A steep curve equals more rate rises.

... For normal Treasury yields, that five-year to 10-year gap was 0.798 percentage points, up from 0.550 percentage points at the end of 2020 .

... ... ...

Some investors also fear that a sharper rise in interest rates later will be more destabilizing for other assets such as stocks or riskier corporate debt...

... ... ...

Harold Begzos Harold Begzos SUBSCRIBER 1 week ago The value of fiat currency is only as good as the government that prints the paper. We are managing the dollar like a Caudillo running a banana republic. The U.S. is experiencing a sugar high. When the sugar runs out the crash will cause harm for the next decade. A Andy Kives SUBSCRIBER 1 week ago One of my many price increases this year was this morning from my metal and plastic container wholesaler, who I buy a few hundred thousand pieces from annually. Prices are only going up 10-26% in April.

What inflation? Like thumb_up 3 Share link Report S Susan Croxton SUBSCRIBER 1 week ago (Edited) The dollar tanked under Trump, like he wanted Like thumb_up Share link Report G Gerald Garibaldi SUBSCRIBER 1 week ago (Edited) My grandmother was a deft investor, and her credo when investing was always "Don't ignore what's around you." I'm not her equal, but what's around me doesn't seem to be middle/working class families and people gearing up to shoot their stimulus wad on new TV sets and sunglasses. I think growth will after a short spirt, disappoint. And inflation will hit like a tsunami. EU is not following our example, by the way. Most inflation will be imported. 1 Share link Report J John Harris SUBSCRIBER 1 week ago (Edited) An included modest understatement of the year:

"The flip side of this exceptionalism is a growing fear of higher inflation that could eventually reverse the dollar's fortunes, according to some investors."
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John Harris SUBSCRIBER 1 week ago (Edited) Duh --
Did anybody look at M2 ?? Austin Lowrie Austin Lowrie SUBSCRIBER 1 week ago The currency debasement will continue, until morale improves.... Like thumb_up 5 Share link Report I Ivaylo Ivanov SUBSCRIBER 1 week ago The article misses an important component of the equation. Various estimates suggest about half of all US cash in circulation, about $700-800 billion, circulates outside US borders. The trigger of a run on the dollar (a collapse, really) might be these holders, not foreign governments. The moment they realize they are holding increasingly worthless money they will try to dump it. Often ordinary people figure out the worthlessness of a currency much faster than governments.

M1 (hot money) has increased by 70% in 12 months. The question is how fast people realize what that means.
Like thumb_up Share link Report Frank Mostek Frank Mostek SUBSCRIBER 1 week ago If you drive car, own a home, require healthcare, have kids and eat - you have noticed plenty of inflation... L Lester Brown SUBSCRIBER 1 week ago Makes you realize how slanted the CPI measurement is. 1.4% in 2020 - my a $$!! B Brett M SUBSCRIBER 1 week ago go through the exercise of reconstructing the CPI with research online. I did. It won't take you long to see that there is no component less than 2%. you will find edu costs +5% annully for years, medical costs +4% annually for years. 2 Share link Report B bruce strong SUBSCRIBER 1 week ago So the Federal debt as a percentage of GDP was about 30% in 2001 and it's now around 100%. Seems we are living way beyond our means and this can only lead to trouble in the coming years. The only question is will Congress do anything to stop the spending? Forget about worrying about inflation as it;s the least of our concerns. p 5 Share link Report Frank Mostek Frank Mostek SUBSCRIBER 1 week ago I think it around 130% now...
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Ted Terry SUBSCRIBER 1 week ago Apparently the Business Kids are surprised at the strength of the dollar but knowledgeable readers are not that surprised. The Dollar competes against the Euro and look at where the EU is. They are squabbling at each other over their ineffective response to the virus and their economies are struggling to break back to normal. I'm not sure where the Dollar is with respect to the Pound but the Brits too are still more virus bound than we are.
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bruce strong SUBSCRIBER 1 week ago Japan's been running with a debt load of over 200% and the Yen has held up quite well. 2 Share link Report S Stephen S S Hyde SUBSCRIBER 1 week ago "The U.S. has a big advantage because the dollar is the world's most commonly used currency."

This both understates and buries the lede on this seemingly granitic foundation of a fiscal/monetary system that has allowed us to get away with simultaneously lowering taxes, explosively expanding borrowings, creating the money to cover it, and then lending it to ourselves. (Eat your heart out, Argentina.)

Unfortunately, having the world's reserve currency is not a skyhook, as our British cousins learned with their once indomitable Sterling. Like thumb_up 23 Share link Report I Ivaylo Ivanov SUBSCRIBER 1 week ago If you do everything in your power to debase your currency foreigners eventually notice. It will take one big player noticing to bring down the house (of cards). In the 60-s and the gold backed dollar it was de Gaulle. It will be interesting to see who will jump the gun this time around. 3 Share link Report S Stephen S S Hyde SUBSCRIBER 1 week ago You obviously have an informed sense of history. The dollar's gold backing had been increasingly precarious but relatively stable until de Gaulle pulled the fatal trigger. David Van Wie David Van Wie SUBSCRIBER 1 week ago

Fears of rampant inflation have gone unfulfilled for years. The U.S. has had low and stable inflation for nearly three decades.
Indeed. That point can't be emphasized enough. Said differently: for all of our research, economic theories and modeling, we still don't understand what causes inflation in our economy.

Is it caused by massive amounts of deficit spending? Nope. We've had lots of that and no serious inflation. Higher taxes? Lower taxes? No and no. What about high or low trade deficits? Sorry, try again. No correlations here.

I could go on, but you get my point. All of the things forecasters such as myself rely on to model inflation all sound like they should be predictive, but they aren't. Intuition creates cognitive bias, which in turn leads to bad trades that don't work.

We won't figure out what's going on until about 6-12 months after inflation restarts, unfortunately. Then, everyone will have known it all along! Just don't ask to see their old forecasts. Like thumb_up 15 Share link Report S Stephen S S Hyde SUBSCRIBER 1 week ago Great comment, Mr. Van Wie. On top of your point (or underneath it) is the tendency for complex systems to fail not gradually, but suddenly and catastrophically. Think the Great Depression, the Soviet Union, the Great Credit Crunch, and Long Term Capital Management (talk about a moniker to challenge the gods!). I don't know when, how, or why, but I think our lifetimes will witness the opportunity to dig through the ruins of a once magnificent edifice built on sand. Like thumb_up 10 Share link Report B Brett M SUBSCRIBER 1 week ago Yes but your whole basis is on the government orgs giving your inflation information [% year over year ] are telling the truth. They are not. Like thumb_up Share link Report J Domingo J Domingo SUBSCRIBER 1 week ago Everyone is worried about inflation except the Fed.

Which is why everyone is worried about inflation except the Fed. Like thumb_up 21 Share link Report I Ivaylo Ivanov SUBSCRIBER 1 week ago

Everyone is worried about inflation except the Fed.
Which is why everyone should be very worried about inflation. The seeming carelessness of the Fed is the best indication inflation will get out of hand. Like thumb_up 3 Share link Report Stuart Young Stuart Young SUBSCRIBER 1 week ago With the government pumping trillions of dollars into the economy, anyone who chooses to ignore serious inflation problems is just fooling themselves. Like thumb_up 11 Share link Report A Anne T SUBSCRIBER 1 week ago Not an investment expert here at all.

But anyone with a mind knows where the Biden-Harris Administration is going and it's worse than route Obama-Biden took us on.

Seems Democrats still refuse to stop themselves from getting in the way of a budding recovery.

And learned nothing between 2009-2020. Like thumb_up 6 Share link Report P Paul Kaufmann SUBSCRIBER 1 week ago Did you happen to notice the debt/gdp graph in the article? The slope in the past 4 years is so great that it is almost uncalculable...infinite. Like thumb_up Share link Report A Anne T SUBSCRIBER 1 week ago Yes I did.
From 2008-1016 it soared from 40% to 76% where it pretty much stayed until the Covid stimulus of 2020. Like thumb_up Share link Report H H S Howell SUBSCRIBER 1 week ago We are already in an inflationary spiral. Don't rely on gov figures, just take a trip to the local hardware or grocery store. In the past the danger of big socialist government was Tax and Spend, today it is Print and Spend resulting in an enormous escalation of Debt (the largest in the world).

China officially holds $1.1 trillion of our debt, but actually much more when counting Hong Kong, other regions of China. Should China sell (debt dump) their US bonds, it would have the destabilizing effect of lower bond prices and higher yields, devaluation of the dollar, higher cost of servicing our debt and a stock market crash. J Jeffrey Cunningham SUBSCRIBER 1 week ago Seems like a very effective way to "tax" 401k money indirectly. thumb_up Share link Report P Peter Sherman SUBSCRIBER 1 week ago Bond investors are selling.
The Unholy Marriage of the Federal Reserve and Treasury allowing for the implementation of MMT ( Magic Money Tree ) probably create high inflation .

Given the rotten value in bonds now ( negative real yield) and rising odds of higher inflation, expect to see more selling.
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Brett M SUBSCRIBER 1 week ago (Edited) I read a quote in an article one time

"until the bond market rebels"

It means people become like me - refusing to own US treasuries nor USA bonds. The only exception is a 529 account I have which limits choices.

If people became like me relatively fast, investors sell bonds off, interest rates shoot through the roof as the USA gov loses control of their puppet show. Then the government defaults - and rather quickly, say within a year after.

I personally believe that USA government debt is worthless. I am a big fan of gold right now.
If China ever moved toward being a reformed country that didn't have George Orwell cameras in every alley, field and wooded grove, then the dollar would plummet. If there was another country that was not pathetic financially I would move my money there.

[Mar 26, 2021] This Bull Market Has a Troubling Reliance on Speculation - WSJ by James Mackintosh March 25, 2021 9:42 am ET Listen to this article 6 minutes 00:00 / 06:06 1x Earnings, valuation and rampant speculation have all played a role in the extraordinary bull market that began a year ago this week. The latest combination of the three has a troubling reliance on the speculative element. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. Earnings, valuation and rampant speculation have all played a role in the extraordinary bull market that began a year ago this week. The latest combination of the three has a troubling reliance on the speculative element. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. A broad framework for thinking about stocks can be derived from the late economist Hyman Minsky's three stages of debt. In the first stage, borrowers take on only what they can afford to repay in full from their earnings by the time the debt matures; a standard mortgage works like this. U.S. 10-year Treasury yield Source: Tullett Prebon As of March 24 % Pre-pandemic peak of S&P 500 2020 '21 0.25 0.50 0.75 1.00 1.25 1.50 1.75 2.00 S&P 500 forward price/earnings ratio Source: Refinitiv Note: Weekly data S&P 500 peak 2020 '21 12 14 16 18 20 22 24 The parallel in the stock market is stocks going up when earnings -- or rather the expectation of earnings, since the market looks ahead -- go up. There is a risk of course, just as there is with debt: The earnings might not appear, and the stock goes back down. But earnings offer the least risky form of gains, and one that we should welcome as obviously justified. From the low in the summer, 2020 earnings forecasts jumped more than 10%, and expectations for this year rose more than 8%. Stocks responded. In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The parallel in the stock market is stocks going up when earnings -- or rather the expectation of earnings, since the market looks ahead -- go up. There is a risk of course, just as there is with debt: The earnings might not appear, and the stock goes back down. But earnings offer the least risky form of gains, and one that we should welcome as obviously justified. From the low in the summer, 2020 earnings forecasts jumped more than 10%, and expectations for this year rose more than 8%. Stocks responded. In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's second stage, borrowers plan only to repay the interest, and refinance when the main debt is due to be repaid; much company debt works like this. It is taken out with a plan to roll it over indefinitely. Interest rates matter a lot: If they go down when the company needs to refinance, it will pay less. The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The equity parallel is to gains in valuation due to lower long-term rates. As with corporate debt, this is entirely justified and sustainable so long as rates stay low, because future earnings are now more appealing. The danger is that rates rise, in which case the stock might be hit no matter how earnings pan out. A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the A big chunk of the gains in stocks in the past year came from the sharply lower rates in the first response to the pandemic when the Federal Reserve flooded the system with money. Price-to-forward-earnings multiples soared. From the S&P 500's low on March 23 to the end of June, the market went from 14 to more than 21 times estimated earnings 12 months ahead, even as those estimated earnings fell amid lockdown gloom. The yield on the 10-year Treasury, already down sharply from mid-February's high, fell further as stocks rebounded. In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the In Minsky's third phase, borrowers take loans where they can't afford to pay either the interest or principal from income, in the hope of capital gains big enough to make up the gap. Land speculators are a prime example. The parallel in the stock market is the The parallel in the stock market is the The parallel in the stock market is the hunt for the greater fool . Sure, GameStop < shares bear no relation to the reality < of the company, but I can make money from buying an overpriced stock if I can find someone willing to pay even more because they "like the stock." Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks Wild bets became obvious this year, as newcomers armed with stimulus, or "stimmy," checks drove up the price of many tiny stocks, penny shares and those popular on Reddit discussion boards. Speculative bets such as the solar and ARK ETFs rallied up until mid-February, long after growth stocks peaked in August Price performance Source: FactSet *Russell 1000 indexes As of March 25, 7:02 p.m. ET % Invesco Solar Value* ARK Innovation Growth* Sept. 2020 '21 -25 0 25 50 75 100 125 The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. The concern for investors: How much of the market's gain is thanks to this pure speculation, and how much to the justifiable gains of the improving economy and low rates? If too much comes from speculation, the danger is that we run out of greater fools and prices quickly drop back. me title= A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. A look at how stocks moved through the pandemic suggests earnings and bond yields are still much more important than the gambling element for the market as a whole, but is still troubling. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. From the S&P peak in mid-February to the end of June, the story was of cratering earnings partly offset by higher valuations. The S&P was down 8%. Earnings forecasts for 12 months ahead fell 20%, while with 10-year yields down almost a full percentage point, valuations were up from a precrisis high of 19 times forecast earnings (itself the highest since the aftermath of the dot-com bubble) to 21 times. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%. Growth stocks -- based on the Russell 1000 index of larger companies -- were slightly up, because they benefit most from falling bond yields, having more of their earnings far in the future. Cheap value stocks, which benefit less, were down 18%.
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Since June the story has reversed. Earnings forecasts have soared, and this year's earnings predictions are now back up to match where 2020 earnings were expected to be before the recession. The bond yield has leapt almost a full percentage point, and is higher than it was last February.

Yet, since June, the market's overall valuation is slightly up, and growth stocks are up 23%. Sure, cheap value stocks responded as expected, rising almost a third and beating growth stocks. But if a lower bond yield justified the rise in valuations, a higher bond yield ought to mean lower valuations, and probably outright lower prices for growth stocks.

me title=

This is concerning but, directionally at least, is explained by the oddity of August, when bond yields rose alongside valuation multiples and the biggest technology stocks leapt in price . Measure it from the end of August, instead of the end of June, and valuations have dropped a bit as bond yields have risen.

But the fall isn't enough to provide much comfort, and worse is that the highly speculative stocks popular with many individual traders bucked the trend. Notable themes including electric cars, hydrogen, SPACs and wind and solar power went into ludicrous mode until the middle of February this year, when the rise in bond yields accelerated and the speculative stocks fell back some.

Share prices propelled more by earnings expectations than bond yields is healthy, while speculation is -- by its nature -- fickle, and so a poor basis for holding on to a stock for long. My hope is that the contribution of pure gambling to the overall level of the market is relatively small. But it is hard to explain why stocks should be so much higher than before the pandemic panic when the earnings outlook is worse and bond yields are back to where they were.

Write to James Mackintosh at James.Mackintosh@wsj.com

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the March 26, 2021, print edition as 'This Bull Market Has A Gambling Problem.'

[Mar 24, 2021] VTIP - Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares

Mar 24, 2021 | finance.yahoo.com

The investment seeks to track the performance of the Bloomberg Barclays U.S. Treasury Inflation-Protected Securities (TIPS) 0-5 Year Index. The index is a market-capitalization-weighted index that includes all inflation-protected public obligations issued by the U.S. Treasury with remaining maturities of less than 5 years. The manager attempts to replicate the target index by investing all, or substantially all, of its assets in the securities that make up the index, holding each security in approximately the same proportion as its weighting in the index.

Vanguard Short-Term Inflation-Protected Securities Index Fund ETF Shares (VTIP) NasdaqGS - NasdaqGS Real Time Price. Currency in USD Add to watchlist
51.69 +0.13 (+0.25%) At close: 4:00PM EDT

51.66 -0.03 (-0.06%)

After hours: 4:21PM EDT

[Mar 24, 2021] Fed's Bullard sees inflation at 2.5% this year, easing only slightly in 2022

Mar 24, 2021 | www.reuters.com

WASHINGTON (Reuters) - Inflation will hit 2.5% this year and not fall much in 2022, which the Federal Reserve should welcome as a way to reaffirm the central bank's inflation target, St. Louis Federal Reserve Bank President James Bullard said on Tuesday.

" I am not seeing the inflation rate come down very much in 2022 ... maybe just slightly, " Bullard said in comments that placed him among the more aggressive Fed officials in terms of willingness to see inflation move higher this year and remain there without raising interest rates.

"Part of the goal is to take the increase in inflation that we have this year penciled in and allow some of that to move through to inflation expectations," and keep them cemented at the Fed's 2% inflation target.

[Mar 24, 2021] US Inflation Rate by Year- 1929 - 2023

The real inflation for the past 20 years was probably around 5%: that buypoer of$100 dinimisnes by 50% in 20 years. In some areas like education and healthcare much faster that that. In some areas slower then that. Official inflation was around half of that (and this discrepancy is systemic -- due to the desire of any regime based of fiat currency to underestimate inflation and thus diminish additional payment to Social Security and other linked to inflation budget items) . Thanks to a massive federal deficit inflation might pick up.
Higher inflation in 2021-2023 is now the consensus,
Mar 24, 2021 | www.thebalance.com
Year Inflation Rate YOY Fed Funds Rate* Business Cycle (GDP Growth) Events Affecting Inflation
... ... ... ... ...
2000 3.4% 6.50% Expansion (4.1%) Tech bubble burst
2001 1.6% 1.75% March peak, Nov. trough (1.0%) Bush tax cut, 9/11 attacks
2002 2.4% 1.25% Expansion (1.7%) War on Terror
2003 1.9% 1.00% Expansion (2.9%) JGTRRA
2004 3.3% 2.25% Expansion (3.8%)
2005 3.4% 4.25% Expansion (3.5%) Katrina, Bankruptcy Act
2006 2.5% 5.25% Expansion (2.9%) Bernanke became Fed Chair
2007 4.1% 4.25% Dec peak (1.9%) Bank crisis
2008 0.1% 0.25% Contraction (-0.1%) Financial crisis
2009 2.7% 0.25% June trough (-2.5%) ARRA
2010 1.5% 0.25% Expansion (2.6%) ACA, Dodd-Frank Act
2011 3.0% 0.25% Expansion (1.6%) Debt ceiling crisis
2012 1.7% 0.25% Expansion (2.2%)
2013 1.5% 0.25% Expansion (1.8%) Government shutdown. Sequestration
2014 0.8% 0.25% Expansion (2.5%) QE ends
2015 0.7% 0.50% Expansion (3.1%) Deflation in oil and gas prices
2016 2.1% 0.75% Expansion (1.7%)
2017 2.1% 1.50% Expansion (2.3%) Core inflation rate 1.7%
2018 1.9% 2.50% Expansion (3.0%) Core rate 2.2%
2019 2.3% 1.75% Expansion (2.2%) Core rate 2.3%
2020 1.2% 0.25% Contraction (-2.4%) Forecast: Core rate 1.4%
Impact of COVID
2021 1.8% 0.25% Expansion (4.2%) Forecast: Core rate is 1.8%
2022 1.9% 0.25% Expansion
(3.2%)
Forecast: Core rate is 1.9%
2023 2.0% 0.25% Expansion (2.4%) Forecast: Core rate is 2.0%

[Mar 24, 2021] Powell Says Rise in Long-Term Bond Yields Reflects Economic Optimism

Higher interest rates means higher interest payment of the new government debt. The USA can't afford this so FED probably will try to suppress rate.
Mar 24, 2021 | www.wsj.com

"The Fed has signaled that its dovish monetary policy is here indefinitely," Mr. Toomey said, noting a recent uptick in commodity prices and a brightening outlook for economic growth. "I worry that the Fed will be behind the curve when inflation picks up."

Mr. Powell, however, reiterated that he doesn't expect supply-chain bottlenecks or an expected surge in consumer demand later this year as the economy reopens to change in long-term price trends. The Fed generally doesn't alter its policies in response to temporary price pressures.

"In the near term, we do expect, as many forecasters do, that there will be some upward pressure on prices," Mr. Powell said. "Long term we think that the inflation dynamics that we've seen around the world for a quarter of a century are essentially intact. We've got a world that's short of demand with very low inflation and we think that those dynamics haven't gone away overnight and won't."

Sen. Richard Shelby (R., Ala.) pressed Ms. Yellen on her changing views on the risks of high and rising federal debt. Government red ink has swelled over the past year as economic activity stalled and Congress ramped up spending to combat the pandemic.

[Mar 24, 2021] No Inflation Panic Yet, but There Is Concern

Mar 24, 2021 | www.wsj.com

John Gimmy Chesapeake City, Md

. Alan S. Blinder is correct that with the slack in the economy and high unemployment there is no risk of wage inflation (" There's No Need to Panic About a Little Inflation ," op-ed, March 16).

... ... ...

Lloyd B. Thomas, Ph.D. University of Missouri Columbia, Mo.

The Federal Reserve is capable of nipping any surge of inflation, but it has made clear it will be behind the curve as inflation rises. It has announced that it will not boost interest rates until it is confident we have reached full employment and until inflation substantially exceeds 2% annually for a considerable period.

Ed Kah, l Woodside , Calif,

The Fed's "foresight" in the 1970s sleepwalked us over 10 years into 14.5% inflation, 18.5% mortgage rates, 7.5% unemployment and a severe recession in 1980. The Fed's repression of interest rates has already inflated asset prices. It is now favoring spending that will move the national debt held by the public toward 150% of GDP if the Democrats keep passing multitrillion-dollar stimulus spending bills in a fast recovering economy.

The big risk comes when interest rates regress to higher historic averages that increase the cost of government debt. Even a very small rise in short-term rates shook the markets recently. The Fed should at the very least hedge this risk by lengthening the maturity of most government debt. They should also caution Congress about the sorry history of countries whose debt exceeds GDP.

Jacob R. Borden , P.E. Trine University, Angola, Ind.

Prof. Blinder uses macroeconomic anecdotes to argue that upward of 4% inflation is no big deal. But it is a big deal when you recognize that inflation is a tax on the accumulation of wealth. Sen. Elizabeth Warren must be smiling.

Even worse, inflation is a regressive tax on wealth. The professional class is already shifting assets to protect against inflationary headwinds. Mary B. Flyover, on the other hand, has few such assets and instead spends relatively more of her money on fuel and groceries, the very elements missing from Mr. Blinder's preferred measure of inflation.

Every year, inflation saps the spending power of a dollar earned, putting future savings further out of reach for people already being left behind. What little savings is available is largely in checking and savings accounts that don't even keep up with current inflation, let alone just a little more. Then add the compounding impact of inflated incomes on inflated tax bills. Once 4% inflation is baked in, Ms. Flyover's tax bill will be forever higher, while her purchasing power will trend ever lower.

Thomas Porth, Hockessin, Del.

The facts that Prof. Blinder doesn't cite are what worry me. When I studied economics at Princeton in 1981 (using Prof. Blinder's textbook), the yield on the 10-year Treasury stood at 14% as of the end of December, while the CPI-U inflation rate stood at 8.9%. The real risk-free rate of return was therefore a positive 5.1% or so. In contrast, today the CPI-U stands at 1.7% (March 10), while the yield on the 10-year Treasury stands at 1.71% (March 18), for a real risk-free rate of return of what is effectively zero.

me title=

Even relying on current measures of inflation, the real rate of return has dropped from positive 5.1% in 1981 to zero or, let's be serious, less than zero today (when I am retired). Sorry, Prof. Blinder, but I'm starting to panic.

Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Appeared in the March 23, 2021, print edition.

[Mar 24, 2021] S P 500 And US Economy Face Seismic Shifts From Joe Biden And The Federal Reserve

The Federal Reserve's $3.4 trillion in asset purchases and the roughly $4.5 trillion in Covid recovery funds Congress approved in 2020 largely succeeded in [reventing the 2020 recession hitting the stock market. Unemployment increased to the recession level and will stay at this level.
S&P 500 Thrived During Federal Reserve's Low-Rate Regime. This regime by-and-large ended.
Almost everyone expects a notable pickup in inflation this year -- including the Fed. Monetary policymakers expect the personal consumption expenditures (PCE) price index to rise 2.4% this year. That's vs. 1.5% in the 12 months through January. The 10-year yield is up 66 basis points since Jan. 5.
Mar 24, 2021 | www.investors.com

Now, as President Joe Biden gets ready to tee up another massive spending package focused on infrastructure, Wall Street is weighing what unleashed fiscal policy might mean for interest rates, tax rates and stock prices.

The implications are magnified by the Federal Reserve's recent about-face on inflation , from standing on guard against it to trying to stoke it. The combination of easy fiscal and monetary policy may lift the Dow Jones and S&P 500 in the near term. Yet some on Wall Street think it could mean lower returns in the future.

The seismic shifts in fiscal and monetary policy are drawing comparisons to another old-economy moment: the latter half of the 1960s. That era was marked by strong economic growth. But it also brought rising inflation -- and a long-term stock market top.

S&P 500 Hits Highs While Techs Slip

The Dow Jones and S&P 500 index rallied to new highs this month, though they have pulled back modestly in recent days. The Nasdaq remains 9% off its Feb. 16 peak, selling off this week What ails big techs that dominate the Nasdaq, like Apple stock, Amazon.com ( AMZN ) and highly valued growth names such as Tesla ( TSLA )?

Tech giants are no longer are the only game in town given the bullish outlook for cyclical and value stocks. Meanwhile, the surge in Treasury yields has led stock market strategists to rethink growth stock valuations -- and much more.

...If not for Jan. 5, the latest round of fiscal stimulus might have been $1.25 trillion smaller -- like the $600 billion package pitched by moderate GOP senators.

The Democrats' bill went well beyond $1,400 stimulus checks, emergency jobless aid and funds for Covid vaccines and testing. Washington also will send $580 billion to state and local governments. That "is significantly higher than the estimated $85 billion net budget shortfall facing state and local governments," wrote Moody's Analytics economist Bernard Yaros.

...

Biden also promised "historic investments in infrastructure, manufacturing, innovation, research and development, and clean energy." These more tangible investments, however, would involve a one-time appropriation that could be financed with deficits.

The Biden campaign's plan to spend $2 trillion on green-tinted infrastructure over four years will likely serve as a starting point. The whole package could add up to $4 trillion, Goldman Sachs estimates.

[Mar 24, 2021] This rotation has benefitted the value and cyclical sectors, like industrials (XLI), energy (XLE) and financial (XLF) stocks

Money started flowing out of technology stocks that led the market higher for much of the last year. The sharp increase in bond yields in recent weeks has taken the steam out of technology stocks
Despite FED cheerleading of stock market money managers are betting that inflation will climb sharply, and could spur the central bank to raise interest rates or pare back bond purchases.
Mar 24, 2021 | finance.yahoo.com

This rotation has benefitted the value and cyclical sectors, like industrials ( XLI ), energy ( XLE ) and financial ( XLF ) stocks -- which have all outperformed this year. Meanwhile, defensive sectors, like consumer staples ( XLP ), health care ( XLV ) and utilities ( XLU ) have been the worst performers.

Tech ( XLK ) is the fourth biggest sector laggard this year, as attention (and money) has shifted from the high-growth names like Peloton ( PTON ) and Zoom ( ZM ) to the less sexy names that are more likely to benefit from a recovery, like Caterpillar ( CAT ), American Airlines ( AAL ) and Goldman Sachs ( GS ).

A record 52% of those surveyed by BofA now think we'll see more of the same over the next year -- that value will outperform growth.

...if bond yields simply climb higher, problems emerge for the entire market when the moves in the bonds are too rapid or disorderly. The pace of the rise or fall in yields matters.


[Mar 24, 2021] On Jerome Powell pronouncements

Mar 24, 2021 | www.wsj.com

P Paul Avila SUBSCRIBER 8 hours ago U.S. stocks edged higher Wednesday as investors awaited more testimony from Federal Reserve Chairman Jerome Powell.

Good grief. Is there any way his subordinates could prevent that? Perhaps lock him in a supply closet until the market closes? Every time he opens his pie hole, I lose money. W Will Bee SUBSCRIBER 8 hours ago Actually I suspect we are waiting for all the FED and Treasury "people" to stop jawboning us so Markets can assimilate their irrelevance

[Mar 24, 2021] Bubble watch: Record Number of U.S. Homes Selling for More than Asking Price

Mar 24, 2021 | www.mansionglobal.com

Sellers got more than they listed for in 36% of deals in February, according to Redfin

... the median home price of U.S. residences rose 14.4% last month, to $336,200, compared to the same time the previous year, the data showed. That marks the biggest jump since July 2013.

[Mar 24, 2021] BlackRock, others' risks should be studied, 'systemic' tag may not be best- Yellen

Mar.24 -- Senator Elizabeth Warren (D-MA) asks Treasury Secretary Janet Yellen if she would direct the Financial Stability Oversight Council (FSOC) to consider designating BlackRock as a firm whose failure could threaten the financial system.
Mar 24, 2021 | finance.yahoo.com

(Reuters) - Treasury Secretary Janet Yellen said on Wednesday it is important to "look carefully" at systemic risks posed by asset managers, including BlackRock Inc, but said designating them as systematically important financial institutions may not be the right approach.

Yellen's remarks came in response to questions from Senator Elizabeth Warren, a longtime Wall Street critic, who demanded to know why BlackRock and other large asset managers had not been added to the list of designated institutions.

"I believe it is important to look very carefully at the risks posed by the asset management industry, including BlackRock and other firms," Yellen, who as Treasury secretary, chairs the Financial Stability Oversight Council (FSOC), which is charged with making such designations.

"FSOC began to do that, I believe, in 2016 and 2017, but the risks it focused on were ones having to do with open-end mutual funds that can experience massive withdrawals and be forced to sell off assets that could create fire sales. That is actually a risk we saw materialize last spring in March," she said.

In 2014, BlackRock and other asset managers won a battle in their fight against tighter regulation when a panel of top financial regulators agreed to revamp their review of asset-management firms to focus on potentially risky products and activities rather than individual firms.

"I think that with respect to asset management, rather than focus on designation of companies, I think it is important to focus on an activity like that and consider what the appropriate restrictions are," Yellen said.

"The past two administrations in the US, and numerous global regulators, have studied our industry for a decade and concluded that asset managers should be regulated differently from banks, with the primary focus being on the industry's products and services," BlackRock said in a statement.


[Mar 24, 2021] If we look back at the last four recessions the yield curve steepened every time- Citi U.S. Wealth Mngt-

Mar 24, 2021 | finance.yahoo.com

[Mar 23, 2021] The Collapse Of Greensill- 'Unwise Enablers' A Dearth Of Due Diligence - ZeroHedge

How many additional Greenville exists?
Mar 23, 2021 | www.zerohedge.com

The collapse of Greensill involved a predicable cast of unwise enablers, but it should serve as a warning to the growing number of Alternative Asset buyers on the dangers of complex deals which promise much but deliver less. Due diligence is critical in the highly illiquid alternatives sector.

You really can't make it up when it comes to the collapse of supply chain charlatan Greensill. I suspect it will make a great film It should also send a judder down our spines, reminding us things are seldom what they seem in complex structured finance:

At least former UK premier David Cameron will be happy. A majority comprising Tory MPs on the UK's Treasury Select Committee blocked an inquiry into Greensill yesterday on the basis it may be politically influenced. The fact Call-Me-Dave was texting chancellor Rishi Sunak pleading for GFC to be a special case for Covid Bailout loans says it all about the dangers of lobbying. The SNP will be equally delighted at the lack of scrutiny of dodgy dealings up in the Highlands.

The Greensill collapse is unlikely to be the last time financial chicanery is exposed as sham. And that is why holders of European Alternatives and Asset backed transactions should be nervous. The lessons of the Greensill deals are multiple:

Let's review the unfolding Greensill mess:

There over 1000 holders of the $10 bln plus of defaulted Greensill investment structures packaged and issued by Credit Suisse – which marketed them as ultra-safe secured investments. Under the law, what the holders recover on these deals will rather depend on how much the administrator and the courts can jemmy out of Sanjay Gupta's dead-firm walking ; steel and commodities business GFC Alliance. (I have no hesitation in saying GFC will go to the wall – there can't be a single sane financial firm on the planet willing to finance them as the story of its' Greensill relationship emerges and its connected in-house banking arrangements become clearer – although, apparently, a state rescue is under consideration to save jobs.)

Investors will be lucky to see much more than the 30% recovery already in the pot from non-Gupta related investments in the Greensill funds – but Credit Suisse may decide to make its investors good. The reputational damage of seeing their private and investment banking clients clobbered for their stupidity, which would negate their private banking brand, may mean it's worth taking the hit. No wonder CS staff are very grumpy about their bonuses.

Successful financial scams require willing participants. All the usual fools are there in the mix.

Yet again the German regulator missed what was going on in Greensill's German bank and its exposures to Gupta. The team at Credit Suisse who agreed to warehouse Greensill originated "future receivables" and sell them as pristine secured assets have a limited shelf life. The insurance broker who managed to convince an insurance fund the underlyings were AAA quality looks vulnerable. Or what about the sales teams in Morgan Stanley who actually marketed the deals. Yet again Softbank is in the frame after it invested in excess of $1.5 bln at a $4-7 bln valuation, hailing Greensill as a leading Finech, when the actual truth is that its high-tech driven lending algos were nothing more than basic Excel spread sheets.

Greensill's financial magic was little more than sheer chutzpah – being able to persuade investors that the dull old low margin conservative business of factoring – short-term secured lending against invoices and accounts receivable, was something incredibly clever, undervalued and able to generate huge returns based on unique proprietary tech.

Greensill deals went further. Rather than just factoring Gupta's bills to suppliers and its invoices, the firm conjured up "future receivables" – pledging the company's expected future earnings for lending now. That's not necessarily a bad thing – its basic credit – but it only works if these earnings were completely predictable like obligated mortgage payments. What Greensill was doing was lending on future earnings on very volatile commodities. Remember – oil prices went negative in 2020.

In return for funding challenging names we know Greensill took divots out these clients. It made over £36 mm financing Gupta's deals in Scotland, and an amazing $108mm in fees from the $850mm Bluestone coal deals in the US – for which it is now being taken to court. All these fees gave Lex Greensill the wherewithal for his private Air Greensill fleet – but didn't make the financings any safer.

Any smart investors would probably have asked questions – but what's not to like about a deal that's secured on receivables, offers a high coupon, is wrapped with an insurance package from reputable insurer and involves major investment firms like Credit Suisse banking them, and Morgan Stanley marketing them?

One question is how did Greensill get away with it so long?

It was clear as early as 2017 there were major issues with some of the supply chain financing deals Greensill was putting together. The following year a major Swiss investment group, GAM, blew up when deals a leading fund manager had bet the shop on were questioned internally. A review by external investigators discovered a lack of information and documentation on a whole series of Greensill deals. They questioned how due diligence was done on the deals. The fund manager was suspended and later dismissed – triggering a redemption run on the fund. The whistle-blower was also shown the door on the back of massive client exits.

GAM invested in the funds because it's very hard to turn down the promise of a low risk / high return deal that promised so much more than the tiny yields available in conventional credit markets.

Despite the events at GAM, Credit Suisse went on to package $10 bln plus of Greensill deals. It was all done with an insurance wrap from a single name put them in its safe bucket. I know other insurance firms refused the deals. The trigger for the collapse of the Greensill scam was the withdrawl of that critical insurance – causing Credit Suisse to stop. Greensill has known for a year Tokyo Marine (which sacked the underwriter involved) would not renew and had been unable to find alternative cover.

Perhaps Credit Suisse bought the story and Softbank link that Greensill was a remarkable new Fintech with the Midas touch of changing dull, conservative factoring into a money machine? All that glitters is not gold.

One of the major developing themes in markets has been a shift from financial assets – which are seriously mispriced due to monetary distortion and financial asset inflation – into real assets, the so-called alternatives market. Alternative because they are not stocks or bonds, but cash flows and real assets. The collapse of Greensill will heighten awareness of due diligence risks in these non-standard, off-market, asset backed alternatives. Alternative asset holders will be looking at holdings for what else might be wobbly.

For instance, I might urge them not to be hypnotised by the assumptions underlying a well-known fund investing in music royalties, the basis of which is also being questioned by analysts. (I certainly won't mention the fund by name as the manager is a well-known litigant.) I have no reason to believe or disbelieve what analysts, the FT and a US investment bank have said about it overpaying for assets or questioning the valuation hikes it puts on future revenues when it acquires catalogues. Personally I like music assets, know their value, and, given certain circumstances the fund in question might come good. Equally.. it might not.

To understand how these deals works its critical to understand exactly what's occurring within the structures – how real are the assets, how the cash flows, how its accounted, and where it goes. That's why having top notch accountants and lawyers is such an important requirement for any deal. However, if they are working in the interests of the issuers and bankers – then investors are the likely patsies. There is a real difference between the way US and European Asset Backed deals are structured – basically US deals are transparent. European deals tend to be opaque.

Alternative deals based on real assets and tangible cash flows are often, but not always, decorrelated from distorted financial assets, allowing low risk deals to yield better long- term returns. They tick can the box in terms of risk vs return and provide significant diversification away from conventional markets. The major negative is there is little pretence they will be liquid assets. If you want to sell – even in good markets it will not be easy.

The only way you should participate in Alternative type deals is by knowing exactly what's going on. And – yes, my day job is Head of Alternative Assets. Happy to discuss in depth any time.

[Mar 22, 2021] How to Collect $1.4 Trillion in Unpaid Taxes: Wealthy Americans are concealing large amounts of income from the I.R.S. There is a straightforward corrective.

Mar 22, 2021 | www.nytimes.com

Most tax havens are either American possessions or British possessions. Then there are the tax havens that are firmly under American geopolitical control (Switzerland, Monaco, Luxembourg, Ireland). Then there is the State of Delaware (of which the present POTUS is from). There are no tax havens under the control of an enemy of the West.

The USA should stop with that charade. If it wanted to curb on tax evasion, it would've already done so decades ago.

Capitalism is value that self-valorises. The rich must get richer and the poor must get poorer over the long term. That's how a healthy capitalist system operates. To try to claim USD 1.4 trillion from their bourgeoisie is not how the American Empire should work. This is a desperate attempt of the American Federal State to survive.

[Mar 22, 2021] Goldman -- There Is No Bubble, There Is No Bubble, There Is No Bubble

Mar 22, 2021 | www.zerohedge.com

When the most respected bank in the US feels compelled to publish A 42-page "guide to bubbles and why we are not in one" in response to what is a clear outpouring of client concerns that we are, in fact, in one we repsectfully leave it up to readers to read between the lines and reach the obvious conclusion.

We say that because reading Goldman's actual lines is quite painful: in his (futile) attempt to convince the bank's clients that US stocks are not, in fact, in a bubble, Goldman strategist Peter Oppenheimer writes that "in recent weeks there have been growing concerns about a bubble building up in the equity market and across financial markets in general" before eventually concluding that "while there are pockets of excessive valuations in equities, and parts of the market are justifiably de-rating as interest rates adjust, in our assessment only a few of these common characteristics are currently present or being partially met. Importantly, the absence of significant leverage (outside of the government sector) and the early stage of the cycle suggest that the risks of an imminent bubble with systemic risks to the financial system and economies is relatively low."

... ... ...

But wait, it gets even dumber, because in the very next attempt to refute the existence of a bubble, Goldman says that there are only "a few" consistent hallmarks of financial bubbles, with the majority "characterized by many, if not most, of the following":

  1. Excessive price appreciation & extreme valuations

  2. New valuation approaches justified

  3. Increased market concentration

  4. Frantic speculation and investor flows

  5. Easy credit, low rates & rising leverage

  6. Booming corporate activity

  7. New Era narrative and technology innovations

  8. Late Cycle economic boom

  9. The emergence of accounting scandals and irregularities

Hilariously, despite admitting that there are bubble signs of 7 out of 9 categories, Goldman claims there has been no emergence of accounting scandals and irregularities..

... ... ...

If we had to summarize Goldman's thesis it would be that while pockets of exuberance and excessive price rises increase, they do not necessarily mean that a broader and systemically dangerous bubble is forming more broadly.

In any case, it was around point that we gave up on reading more of this drivel, and sent our condolences to the junior analysts who had to work a soul-crushing 100 hours a week (even though there are millions of 25-year-olds who would kill to work 200 hour weeks for half the pay of a Goldman analyst) to put this together.

ay_arrow

JohnGaltsChild 6 hours ago remove link

There is no bubble.

Biden won fair and square.

There is no crisis at the border.

The government never surveils private citizens.

Critical race theory is not racist.

I'm a mindless robot.

Im4truth4all 6 hours ago

Add:

Epstein committed suicide.

The FBI is committed to truth and integrity.

The Supreme Court is committed to truth and integrity.

The democrat/marxists tell no lies.

And the list goes on ad infinitum.

stop_the_fraud 6 hours ago

Bitcoin is the new world currency.

Gold is a worthless pet rock.

EV's are the future.

JohnGaltsChild 6 hours ago

"Who are you going to believe, me or your own eyes?"

Groucho Marx

Art_Vandelay 7 hours ago (Edited)

When the most respected bank in the US.

Respected by whom, again?

Buzz-Kill 6 hours ago (Edited)

Operated by FED thieves, with politicians close behind.

khakuda 6 hours ago (Edited) remove link

Go back to 1999 and you will see all of the street brokers saying the same thing. It's different this time is basically what they are saying, which is what one always hears during bubbles.

And the accounting irregularities usually appear after the decline when they can no longer be hidden...think Madoff or Lehman.

Victory_Rossi 6 hours ago

I don't know why anyone would do business with Goldman at all. Even if you're greedy as fvkc and think you'll be the special one that GS doesn't screw over, why take a chance? It's like the parable of the scorpion or snake - you know what they are so why'd you pick it up. Good luck Muppets!! You're going to need it.

Im4truth4all 6 hours ago remove link

"If you repeat a lie often enough, people will believe it, and you will even come to believe it yourself." - Joseph Goebbels

Art_Vandelay 6 hours ago

Is Goldman getting into the comedy business now? I was sort of laughing at their analysis the whole way through.

Watching in Baltimore 6 hours ago

"I have no fears for the future of our country. It is bright with hope."

Herbert Hoover, March 4, 1929

Death2Fiat 6 hours ago

Take a look at the Fed's M* monetary base charts.

It's straight up. 90 degree angle all the way up.

Great Iota 5 hours ago (Edited)

No Bubble? I couldn't find a single stock that was worth investing (value). Think this was the first time in 25 years that it has happened. All equity is either losing money per share or for every $100 you invest, you make between .001 cent to $3.50.

I remember the days when you expected companies to earn $10 to $20 per $100 depending on industry.

Now, you got virtual intangible assets like Bitcoin, which is a total scam, its not a currency, has no real use, and is an exact definition of a Ponzi scheme. Brilliant idiots who collect billions from the government for having a green company and at the same time invests billions in a Ponzi scheme that consumes ridiculous amount of energy.

in 3 months, Bitcoin will undo all the green initiatives the democrats has pushed for in the last 20 years. Grats morons!

No one knows how to calculate energy use?

cooll 7 hours ago

Goldman = contrarian indicator.

YesWeKahn 6 hours ago

Sure, based on goldman's logics, not only there is no bubble, this is actually a multi generational bottom, they should sell all their other assets and buy stocks.

[Mar 22, 2021] The sugar rush economy by Michael Roberts

Mar 22, 2021 | thenextrecession.wordpress.com

Last week the US Federal Reserve raised its growth forecasts for the US economy for this year and next. Fed officials now reckon the US economy with expand in real terms by 6.5%, the fastest pace since 1984, a few years after the slump of 1980-2. This is a significant rise from the Fed's previous forecast. Also, the unemployment rate is expected to drop to just 4.5% by year-end, while the inflation rate ticks up to 2.2%, above the official target rate set by the Fed.

Driving this new optimism on growth is the fast roll-out of vaccines to protect Americans from COVID-19 plus the huge fiscal stimulus package put through Congress that most mainstream forecasters expect to add at least 1% point to economic growth and bring down unemployment.

But Fed chair Jay Powell made it clear that the Fed had no intention of raising its target interest rate until 2023 at the earliest even if inflation accelerates. He wants to see the unemployment rate drop to 3.5% and inflation averaging 2% or so. He would tolerate the economy "running hot" until that happens because he reckons that any rise in inflation would be transitory.

The implication of Powell's view was that the US economy was going to have a 'sugar rush' from the fiscal stimulus and from the 'pent-up' demand of consumers with cash savings ready to spend on restaurants, leisure, travel etc once the pandemic restrictions were relaxed. But as every parent knows, giving a child too much sugar leads to a rush of energy. And then comes the letdown and sleep. That is what Powell worries about, namely that after this burst of energy on the 'sugar high' of government paychecks and restaurants meals, the US economy will slip back into the low growth trajectory that applied before the pandemic slump.

Powell is also concerned about a potential relapse in the fight against the virus and expects fiscal support from the stimulus starting to fade next year and worries that the labour market will continue to struggle. So he expects 'core inflation' (excluding food and energy prices) will fall back to 2 per cent next year and 2.1 per cent in 2023. So no inflationary spiral.

It is significant that the long-term growth forecast by the Fed is just 1.8% a year, which is hardly any higher than average real GDP growth of 1.7% since the end of the Great Recession and before the pandemic.

This implies that the Fed reckons the US economy is going to drop back to the rate of growth experienced in the Long Depression since 2009, and the 'sugar rush' is just that.

What this also implies is that contrary to the views of the Keynesians, the multiplier effect of the fiscal stimulus will soon dissipate and then the US economy will depend, not on consumers' pent-up demand but on the willingness and ability of the capitalist sector to invest.