Juggling Dynamite

“The government is reportedly close to filing charges in the largest institutional insider-trading investigation in history.
According to initial reports, the investigation could ensnare Wall Street's biggest names: Goldman Sachs, SAC Capital, Wellington, Jennison, MFS Global, Maverick, Citadel, and others. (Here's a who's who of who might get nailed.)
The investigation reportedly focuses on “expert networks” — consulting firms that pay industry participants to share insights and information with investors. Professional investors use these networks to gather information about real-time business conditions and trends in various industries (as well as, sometimes, information that could likely be characterized as “inside” information in any other context).
No matter where the investigation ends up, the government will likely present it as a huge step toward making the market “fair” for small investors. And the same small investors will likely view it as confirmation that the “game is rigged.”

I strongly disagree with Henry Blodget here in his conclusion that markets are corrupt so individual investors should not try to trade against the “insiders” but rather just passively hold the market indices and hope for the best. Excuse me? If the game is rigged such that free markets are not free, transparent, fair legitimate places to invest then we should just throw ourselves helplessly into harm's way and let the crooks toss around our life savings as they wish?
I have some other ideas, how about:
• Honest, ethical leaders step forward with some strength of character and do the right thing at long last.
• Stop taking hush money from the banksters and their lobbyists.
• Ban high frequency trading where a few gamblers use our public free markets as their own personal slot machines.
• Restore the Glass-Steagall divisions between banks and broker/dealers, so that product-pumpers can stop calling their long-always sales pitch “financial advice”.
• Stop bailing out the reckless risk-takers and their employers as they predictably crash and burn.
• Arrest and prosecute the insider traders with every letter of our law.
• Announce a new zero-tolerance policy for anyone found breaking the laws.
• Put the offenders in jail for terms commensurate with the size of their theft just as we do with fraud offenders and thieves in all other segments of our society.

The battle between currencies and countries is intensifying with news of the latest rate hike in China strategically announced just as Fed Chairman Bernanke is doing the speaking circuit trying to defend his plan for QE2 to the angered international community.
The People’s Bank of China yesterday ordered a 50 basis point increase in the amount of money that lenders must set aside, two days after the cabinet announced measures to tackle inflation. Stocks and oil fell on the central bank announcement, highlighting concern that Chinese efforts to cool the nation’s fastest rise in consumer prices in two years will cause growth to falter.
Speculative capital has flooded into emerging economies over the past 18 months intensifying since August with the US Fed's announcement of plans to add another $600 billion of “liquidity” to the global financial system. Excess liquidity has caused dramatic spikes in commodity prices around the globe over the past year and this is causing crippling inflation to the cost of basic necessities everywhere. In developing countries like China civil unrest looms where household incomes are too modest to absorb the increased living costs.
Two good interviews today explain the tensions now building over these issues between the key global players:
See: Gordon Chang, author and China analyst: on the US China outlook
and Analyst Keith McCullough on Bernanke, China
One thing seems very clear: China needs to slow inflation and stem the threat of its billowing asset bubbles. They will do this at the expense of growth. Those banking on China to backstop global growth over the next couple of years will just have to dial down their expectations.

Further attempts at intervention have only increased the magnitude of the problems with sovereign debt. He says, “Now you have a bunch of super sovereigns— the IMF, the EU, the eurozone—bailing out these sovereigns.”
Essentially, the super-sovereigns underwrite sovereign debt—increasing the scale and concentrating the problems. Roubini characterizes super-sovereign intervention as merely kicking the can down the road: “There's not going to be anyone coming from Mars or the moon to bail out the IMF or the Eurozone…So at some point you need restructuring. At some point you need the creditors of the banks to take a hit —otherwise you put all this debt on the balance sheet of government. And then you break the back of government—and then government is insolvent.”