“Philadelphia Federal Reserve President Charles Plosser is “very worried” about the potential for unintended consequences of the Fed’s massive quantitative easing program. Plosser told CNBC that the U.S. was still suffering from “lasting effects” of the recession and “may never return” to its previous growth rates – and warned that policy should not bet on growth returning to previous rates, saying it could be “many, many years”. Here is a direct video link.
Waiting for speculative fevers to break in financial markets can feel like running up a steep hill in the dark. You know the peak is ahead, you know the downhill stretch with feel like heaven on the other side, but you have no idea how much further you have to endure to successfully stay on course and conquer the summit. It is a mental test that the majority of our peers and other market participants fail miserably every 5 year cycle, as they race confidently ahead near market tops only to fall many years behind in the mean reversion on the other side of every peak.
Yesterday in a moment of rare candor, Dallas Fed President Richard Fisher noted concern over what he called the “eye-popping levels” of some stock market metrics today that have not been seen since the “dot-com boom of the late 90′s”. Ah yes 1999, I remember it well, the euphoria was practically unanimous. The analysts, business leaders and finance types all agreed: computers had revolutionized the global economy and a “brilliant” interventionist Fed under Maestro Greenspan, had abolished the business cycle and would never let stocks and high yield bond prices go down again… It was a heady time indeed. Precisely why it set up for the second most spectacular capital drubbing in market history (second only to the crash of 1929).
And yet, if one imagined that two 50%+ capital wipe outs in just the past 14 years since 2000 might still be in memory, you’d be wrong. Today’s bulls are stampeding more confidently than in 2000 or 2007. As shown in the chart below, bearish sentiment is now at the lowest levels recorded in more than 25 years. Bears today are practically extinct.
Either the bulls are right and this time is different at long last, or the mean reversion on the other side of this spectacular summit in asset prices is likely to bring generational investment opportunity to those brave souls who can retain mental strength, stay liquid, avoid the madness of the crowd and achieve their just rewards on the other side of the summit once more.
The Russian government collects 52% of its revenue from oil and gas taxes, and about 50% of the population are heavily dependent on government transfer payments for their sustenance. Under Putin, the Russian economy has not diversified but remains a nation dependent on petroleum exports.
The trouble is that oil prices above $100 a barrel are considered necessary in order to sustain Russia’s current income needs, and looking forward, a triple-digit-price for oil is suspect. As shown in the chart below, WTI was $12 a barrel in 1999 before the credit bubble boom began, and long term secular support remains in the $55 area, some 50% below current levels.
As Tom Friedman reminded this week: Putin is long oil, but short history: Why Putin doesn’t respect us”
“Putin is now fighting human nature among his own young people and his neighbors — who both want more E.U. and less Putinism. To put it in market terms, Putin is long oil and short history. He has made himself steadily richer and Russia steadily more reliant on natural resources rather than its human ones. History will not be kind to him — especially if energy prices ever collapse.
The cyclical downtrend in the US dollar–starting from the Tech bust in 2000 all the way to the credit/commodities bubble bust in 2008-11–bestowed an embarrassment of oil riches on the Russian government(and other commodity-focused exporters). But times are changing and the price of hydro-carbons appears garishly high today amid a secular backdrop of still weak global demand following the credit bubble bust; the prospects of a strengthening US dollar as QE-belief retreats and Emerging Markets implode; a slowly spreading clamp down on what has been rampant commodity price-fixing by large financial intermediaries the past few years; and against all naysayers–the rise of alternative energy in a hundred different forms. See It’s Time to Drive Russia Bankrupt–Again, for some interesting historical insights on how the strong dollar policy of the 1990′s helped to speed Soviet Russia’s collapse in 1991.
And one more game changer…technological innovation finds inspiration in high fuel prices, pollution and climate change. The cars of the future don’t run on petrol. They charge on solar panels, and they look like this. This technology is already here. Driving one proves an epiphany for even the most committed skeptics.
Jon Stewart sheds some humor on the Bitcoin phenomenon: “It is the Tamagotchi of currency…It’s a proud moment when a little baby currency takes its first steps…towards full-on corruption”.
But Stewart also correctly points out that Bitcoin has nothing on some of the frauds perpetrated by the big banks the past few years. Here is a direct video link available on The Comedy Network in Canada.
Just because we’ve had a system of central banking for 100 years doesn’t mean we ought to. In fact, it’s starting to look like central banks do more harm than good. From obscuring the true cost of credit to causing confusion about good investments, central bankers end up papering over economic problems. And when they send the wrong messages to savers and consumers trying to coordinate their plans, boom and bust cycles lengthen and worsen. Here is the direct video link.
Corruption in developing and newly industrialized countries has been greatly aided the past many years by the financialization of the global economy which has funded an unethical, extractive, destructive spending addiction in the west.
“Those who spend more than they earn need to maintain excellent relations with their bankers. Over the past few decades, North American governments have become increasingly dependent on the kindness of lenders. Such support now forms the bedrock of our incredibly indebted nations. Spend-thrift leaders are repeatedly elected to help the masses spend our way to prosperity. The majority is evidently not keen on electing fiscal restraint. A leader who suggests a life of restraint and paying down debt is, so far, unlikely to win the popular vote. The financial machine provides the products and the funding to support the vision of the have-mores. And so the vested interests favor the continued borrowing and spending today without worrying about tomorrow.” – Juggling Dynamite (2007) p. 70.
“The center of Russian corruption is in British tax havens, London property, Swiss banks, Austrian banks accounts and property all over the European Union…Russian corruption works like this, huge amounts of money, billions and billions are extracted out of the Russian budget and Russian State companies and brought to the west to be “secured.” Over the past 10 years, Putin has watched how western Europe elites desperate for money in an era of low growth have been willing to launder this money and this has convinced him that Europe will do absolutely nothing to kill the Oligarch golden goose that feeds them…Putin sees that today the west has the morality of a Hedge Fund, make money and move it off shore.”
“Fragile Empire” Author Ben Judah and Bloomberg Contributing Editor Richard Falkenrath discuss the Russian and Ukrainian standoff.”Here is a direct video link.
“Russia has been showing the world glistening scenes of the Winter Olympics. It’s a rare opportunity to brighten a national image that often skates on the thin ice of corruption. One authority estimates that 20 percent of the Russian economy is skimmed by graft and a lot of that by government officials. It may be that no one knows more about this than American-born businessman Bill Browder.
Browder tells a story of thievery, vengeance and death worthy of a Russian novel. He’s a thorn in the side of Vladimir Putin and he has torn a rift between Moscow and Washington. When you hear what he has to say about Russia you’ll know why Russia thinks of Bill Browder as an enemy of the state.” Here is a direct video link.
Wolfgang Beltracchi fooled the experts for decades in an art scam that netted him and his partners millions of dollars. Many art experts acknowledge he is the most successful art forger in this and, perhaps, any other time in history. Here is a direct video link.
There are mountains of evidence that investment banks and other participants have been price-fixing, hoarding, trading on non-public information,front-running, pumping and dumping pretty much every financial asset and market on the earth over the past several years. I have no doubt they have been up to the same antics in the gold market as well.
Trouble is most market participants have a long-side bias: they only complain about manipulation when the assets they hold drop in value. They never complain when asset prices surge in value courtesy of the exact same culprits and activities; and yet high price is the very essence of investment risk. When Gold was $1900 and silver near $50, one didn’t hear the precious metal chorus screaming about manipulation then. Oh no, at that point, after prices had soared 660% over 10 years, precious metals bugs were delighted to explain the rational reasons for all those gains and many more that they predicted. All very justified fundamentals according to them. But after prices plunged into the 1100′s in 2013, why then it was all about routing out the evil “manipulators” they alleged were causing the downside.
We are reminded of President Hoover’s call for investigation by the Senate into the short-sellers he admonished as having caused the crash of 1929, but with no similar inquiry requested about all the risk-sellers who pumped asset markets to financially suicidal levels leading up to the crash. Human behavior is nothing if not predictable…
The London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say. Here is a direct video link.
Years of evidence and negotiated admissions on rampant money laundering, price fixing, insider trading, breach of trust and epic financial plundering of households, pensions, cities, states, trusts and foundations have all, so far, been widely tolerated. But incontrovertible evidence of flagrantly facilitating and profiting from systemic tax evasion may finally be a step too far… After all, it did take proof of tax evasion to finally jail Al Capone. It also took admission of tax evasion by Charles Mitchell under cross-examination by Ferdinand Pecora in 1933 to finally knock the head of City Bank from his undeserved position of privilege and reverence in American society. The statements by Credit Suisse today feigning remorse and insisting that the actors involved were rogue or fringe is utterly laughable on the evidence of secret elevators, offices and clandestine meetings with hundreds of bank officers over many years.
Another possible chink in the normal political forbearance on financial crimes, is that today’s hearing on the criminal activities of Credit Suisse is not taking place before the heavily funded, cozy colleagues on the Senate Banking and Finance Committee, but rather before the Permanent Subcommittee on Investigations, Homeland Security and Governmental affairs Committee. We shall see…
No one should be under any misunderstanding: rampant financial crimes are one of the most dominant issues undermining Homeland Security in our time.
Sen. Carl Levin (D-MI) held a Homeland Security and Governmental Affairs Subcommittee on Permanent Investigations hearing on offshore tax evasion. Witnesses included officials from Credit Suisse Group AG and the Justice Department. Watch it live here.
As you listen to the session, keep in mind, that no effective or serious cross-examination can take place unless the questioners have already done their research in advance and know in detail the answers to the questions they put forth in the public hearing. Only in this way is it possible to hold witnesses accountable and elicit meaningful answers from those who routinely feign lack of direct knowledge on the topics in question. Senators who ask open questions and use the hearing to “learn” about the actors and events are useless at uncovering truth in this forum.
“An explosive critique about the investment industry: provocative and well worth reading.” Financial Post
“Juggling Dynamite, #1 pick for best new books about money and markets.” Money Sense
“Park manages to not only explain finances well for the average person, she also manages to entertain and educate, while cutting through the clutter of information she knows every investor faces.” Toronto Sun