Friday, December 3, 2010
Here's how it happens. They call this "quantitative easing".
1) The big banks buy the US debt. The Fed calls them "primary dealers", but they are the same "too big to fail" banks that we were forced to bail out. The banks draw interest from the US treasury -- OUR tax money.
2) The bailed-out banks then "park" the treasuries at the Fed.
3) After a few days or weeks, the banks "sell" the treasuries to the Fed.
4) The Fed gives them cash for those treasuries. But the banks continue to draw the interest.
5) The banks buy stocks, commodities, and more treasuries with the cash. Prices go forever higher.
The Fed swears that this is prosperity. It's really just permanent debt and high inflation!
Is there any difference between this process and the Fed just printing more dollars to buy the debt? Here's the slight difference:
If they just "monetize the debt", the debts are paid off and no one gets the interest. If they use quantitative easing, WE pay taxes to pay INTEREST on the debt! It's the same thing, except that the banks get paid hundreds of billions in interest payments every year from OUR pockets. This is their compensation for creating trillions in bad debt, taking undue risk, and sticking it to the taxpayers? They get bailed out of the mistakes, and PAID to do it?
So why not just monetize the debt? At least that way, we don't have to pay $300 billion in interest every year! This proves that the Fed's real razon d'etre is to keep us permanently in debt and pay the banks, NOT to create jobs or grow the economy.
Thursday, December 2, 2010
by John Hussman of Hussman Funds:
"If you have bad banks then you very urgently want to clean up your banks because bad banks go only one way: they get worse. In the end every bank is a fiscal problem. When you have bad banks, it is in a political environment where it is totally understood that the government is going to bail them out in the end. And that's why they are so bad, and that's why they get worse. So cleaning up the banks is an essential counterpart of any attempt to have a well functioning economy. It is a counterpart of any attempt to have a dull, uninteresting macroeconomy. And there is no excuse to do it slowly because it is very expensive to postpone the cleanup. There is no technical issue in doing the cleanup. It's mostly to decide to start to grow up and stop the mess."
by John Hussman:
When we analyze historical relationships between economic and financial variables, it's important to examine the data for "outliers" that significantly depart from typical behavior. Very often, these outliers are corrected over time in a way that creates profit opportunities. In the office, we usually refer to these observations as being "outside the oval," because they diverge from the cluster that describes the majority of the data.
Wednesday, December 1, 2010
Tuesday, November 30, 2010
but stocks are rising following the open anyway. The Fed is money printing again today.
from Fox Business:
Monday, November 29, 2010
Stocks just went positive (not shown in this chart). The world, especially Europe, is in meltdown, but stocks are a good buy anyway. With SPY trading at a 45.6 P/E and yield at a paltry 2%, Wall Street is happy!
Futures have turned decidedly bearish before the open. This from Marketwatch:
Madrid and Lisbon led European stocks lower, while the Irish and Greek markets were the only ones managing to eke out gains.
The Stoxx Europe 600 index /quotes/comstock/22c!sxxp (ST:STOXX600 264.58, -2.02, -0.76%) opened higher but slipped into the red two hours into the session. In recent trading, it was down 0.6% to 265.03. The index lost 1.1% last week.
Of the main indexes in the region, France’s CAC-40 index /quotes/comstock/30t!i:px1 (FR:PX1 3,683, -45.93, -1.23%) fell 0.8% to 3,759.04, the U.K.’s FTSE 100 index /quotes/comstock/23i!i:ukx (UK:UKX 5,613, -55.21, -0.97%) slipped 0.4% to 5,649.26, and Germany’s DAX 30 index /quotes/comstock/30p!dax (DX:DAX 6,767, -82.42, -1.20%) declined 0.7% at 6,803.90.
Initially, all these indexes rallied after European Union finance ministers Sunday endorsed a bailout package for Ireland. The package includes €10 billion for immediate recapitalization measures, €25 billion on a contingency basis for the banking system and €50 billion to cover budget-financing needs.
But as Monday’s session progressed, attention shifted to the fact that some issues were still not sorted out by the measures announced.
“The news yesterday, on the whole, was more positive than negative. The obvious measure aimed at stabilizing the market was the fast-forwarding of the debt-restructuring mechanism,” said Elisabeth Afseth, fixed-income analyst at Evolution Securities.
The details of the mechanism were previously set to be discussed in mid December.
Afseth noted, however, that whether a country is deemed solvent or not will need to be a unanimous decision, and thus open to political pressures. She also said that existing bond holders “could face losses if a country is deemed insolvent in the post mid-2013 world.”
In the current context, “you’d be struggling to find anyone to put a lot of money into a fund that invests in peripheral markets. At the moment a low return from safe assets seems pretty desirable,” she said.
Auto stocks were at the forefront of the decline Monday, with shares of Daimler AG /quotes/comstock/11e!fdai (DE:DAI 50.40, -0.93, -1.81%) down 2.1% in Germany and Peugeot SA /quotes/comstock/24s!e:ug (FR:UG 29.66, -0.80, -2.61%) down 1.7% in Paris.
The telecoms sector also came under pressure, with Vodafone Group /quotes/comstock/23s!a:vod (UK:VOD 162.00, -3.30, -1.10%) /quotes/comstock/15*!vod/quotes/nls/vod (VOD 25.31, -0.62, -2.39%) and Telefonica SA /quotes/comstock/06x!e:tef (ES:TEF 16.75, -0.22, -1.27%) /quotes/comstock/13*!tef/quotes/nls/tef (TEF 65.85, -1.31, -1.95%) both down around 1%.
Financial weaken againWhile many financial stocks initially got a lift from the Irish rescue package, particularly in the U.K. and in peripheral markets, only a handful remained higher in late morning.
In France, BNP Paribas SA /quotes/comstock/24s!e:bnp (FR:BNP 47.53, -1.22, -2.50%) fell 2.5% and Credit Agricole SA /quotes/comstock/24s!e:aca (FR:ACA 9.83, -0.24, -2.35%) lost 1.1%. In Germany, Commerzbank AG /quotes/comstock/11e!fcbk (DE:CBK 5.74, -0.07, -1.17%) declined 1%.
It was a more cheerful day in Ireland, where the ISEQ index /quotes/comstock/30q!ieop (XX:IEOP 2,685, +18.27, +0.69%) rose 0.7% to 2,685.32, boosted by a 21% gain for Bank of Ireland /quotes/comstock/13*!ire/quotes/nls/ire (IRE 1.72, +0.28, +19.44%) /quotes/comstock/30b!bir (IE:BIR 0.32, +0.06, +21.21%) and a 8% jump for Allied Irish Banks PLC /quotes/comstock/13*!aib/quotes/nls/aib (AIB 1.03, +0.08, +8.78%) /quotes/comstock/30b!aib (IE:AIB 0.37, +0.03, +9.36%) .
In a regulatory statement, Bank of Ireland said it would seek to raise €2.2 billion in capital by Feb. 28, via “internal capital management initiatives, support from existing shareholders and other capital market sources.”
Shares of Irish Life & Permanent Group Holdings surged 53% in Dublin trading.
In the U.K. shares of financial institutions with a large exposure to Irish sovereign debt also got a lift. Royal Bank of Scotland Group /quotes/comstock/23s!a:rbs (UK:RBS 38.70, +0.01, +0.03%) /quotes/comstock/13*!rbs/quotes/nls/rbs (RBS 12.03, -0.04, -0.33%) , in particular, was buoyed by the rescue deal, gaining around 1%.
In Spain, the IBEX 35 index /quotes/comstock/20r!i:ib (XX:IBEX 9,397, -150.20, -1.57%) lost 1% to 9,448.60, as Banco Bilbao Vizcaya Argentaria SA /quotes/comstock/13*!bbva/quotes/nls/bbva (BBVA 9.62, -0.70, -6.78%) /quotes/comstock/06x!e:bbva (ES:BBVA 7.39, -0.16, -2.16%) fell 1.6%.
Portugal’s PSI 20 index /quotes/comstock/30t!i:psi20 (XX:PSI20 7,489, -92.65, -1.22%) slumped 1%.