Monday, April 26, 2010

Stop Insulting Pirates!

I am not one for "political correctness" in speech but if I were a pirate, I would take offense at this report on The Borrowitz Report (note: I shortened it up a bit for posting)

NORFOLK, VIRGINIA (The Borowitz Report) - Eleven indicted Somali pirates dropped a bombshell in a U.S. court today, revealing that their entire piracy operation is a subsidiary of banking giant Goldman Sachs ... The pirate ... elaborated on the nature of the Somalis' work for Goldman, explaining that the pirates forcibly attacked ships that Goldman had already shorted." ... The pirate acknowledged that they merged their operations with Goldman in late 2008 to take advantage of the more relaxed regulations governing bankers as opposed to pirates, "plus to get our share of the bailout money." In the aftermath of the shocking revelations, government prosecutors were scrambling to see if they still had a case against the Somali pirates, who would now be treated as bankers in the eyes of the law." There are lots of laws that could bring these guys down if they were, in fact, pirates," one government source said. "But if they're bankers, our hands are tied."

I wonder if Borowitz is his real name... "borrow wits"?

I might add that if the Pirates do take bailout money that they infact will become government controlled at which time they must be considered Privateers not pirates. My guess is that their salaries will be capped as well. I hope they know what they are getting into.

Friday, April 16, 2010

Goldman Sachs - Old News

The recent actions against GS is about old news. The NYTIMES wrote about it last December:
http://www.nytimes.com/2009/12/24/business/24trading.html?_r=3&pagewanted=1

This is really old new because by the time it gets through the editors of a major newspaper, especially one so linked to the US Government like the NYT, you know that the story has been verified multiple independent times and was probably several months old by the time they printed it.

"Keep moving folks, nothing to see here".

So why did it take so long for the SEC to charge Goldman Sachs? One of two reasons: (1) They are not as good as NYT and most of the blogosphere at getting the facts or (2) The government needs everyone distracted for awhile.

What Goldman Sachs did may have been immoral by someone's standards but it certainly wasn't illegal under US Law. The process of packaging Collateralized Debt Obligations and then laying off the risk with Credit Default Swaps is also very old news.

Listen for the lie.

Notice that the drumbeat in the press is about how many pension funds were hurt because they invested in GS debt based special purpose vehicles that were destined to collapse. Notice how many pensions, mostly government pensions, at all levels of government are underfunded. Notice that GS made a deal with the devil in utilizing taxpayer funds to prop up their profits. Notice that AIG (the provider of Credit Defaul Swaps)to GS was nationalized in a blatantly illegal transaction executed by the New York Federal Reserve (under Timmy G) who later had to become Treasury Secretary in order to keep to truth buried. Recognize that none of these transactions could be accomplished without detection by GS the company or because of near incestous relationships in the fraternity of Goldman Sachs employees who now either work in government, the media or run their own hedge funds.

So to keep the real bad stuff secret, Goldman will take the fall. Like GM shareholders, GS shareholders will get financially hurt. GS will pay the government large sums of money which the government will use to prop up failing pension funds. Since GS got tons of money either directly from the government programs, near 0% interest rate loans from the Fed AND AIG insurance payments that are all funded by the US taxpayer; we have another example of pending redistribution of wealth from the tax payer to just about everyone else aforementioned above.

"Keep moving folks, nothing to see here". "The show is over; move along now".

Wednesday, April 14, 2010

It’s A Show About Nothing – Tribute to Seinfeld

There is no reason to worry if Greece defaults on its debt. Did you worry when Iceland and Zimbabwe were collapsing recently? Did you know that countries throughout history have defaulted on their debt and nothing bad happened? Did you know that even states of the USA have defaulted on their debt and nothing bad happened?

When General Motors corporation defaulted on its debt to its bond holders recently did anything bad happen? When Lehman Bros collapsed and its obligations defaulted, did anything bad happen?

If you want to know why, watch this Youtube clip from an episode of Seinfeld.



You see my dear readers we are engaged in a show about nothing. Banks around the world create money that they don’t have via fractional reserve banking. And where do they get the fractional amounts upon which to leverage? They get it from their Central Banks who create money out of thin air.

When you default on debt you cause money to disappear that was never there in the first place. It’s a show about nothing. For more proof, what this:


Monday, April 12, 2010

From BTQ PDQ

For those that are acronym challenged, the title means from Billions to Trillions to Quadrillions Pretty Damn Quick.

I must admit that I am part of the problem. I am a derivatives trader. Rather than buy real gold like the guys on TV, I buy and sell GLD. GLD is an Exchange Traded Fund which is nothing more than a proxy for the price of gold slightly discounted for expenses. A derivative is anything that you can speculate on that is a "proxy" for the real thing.

The great thing about derivatives is that you can leverage them up 10X, 100X, 1000X if you wanted to. So I could sell 100X more GLD contracts than I have gold in my vault to cover the contracts. This is allowed because your derivative contract is a financial claim on the gold but it is not a physical claim. In the event everyone tries to lay claim all at once, I simply default. If everyone tries to sell their contracts all at once, the price goes to zero.

In the end, I still have your money and you got nothing.

I was deeply concerned about total, global derivative contracts about this time last year when I published this post. But things have gotten much better as total exposure has dropped from $1.4Quadrillion to just over $1.0Quadrillion.


Remember when a billion was a lot. Remember how easy it became to start saying a trillion?

Math note: A Quadrillion is 1,000 trillions.


Now I present you with a similar table that has been updated since my last post. Please keep in mind that 100% default on all derivatives is very unlikely. However, what if 10% went bad?






Thursday, April 08, 2010

How Eileen Became Bob

This is not a transgender discussion. Having said this, I most likely lost 50% of my audience already as they just clicked "next blog".

Recently I wrote that you and I can't make easy money in the market. The video is here.

We are all handicapped with one short leg. I am Eileen. We all are Eileen. None of us can stand straight. The individual investor is a "wobbly" lot.

Central banks of various countries, who can simply print money and either give it to banks or buy market futures, are impacting markets. This forces us to follow a "false herd", our short, twisted and withered leg was cut off. We transformed from Eileen to Peg.

This week I talked to a really smart man about investing. He was a professor, technician but mostly he was a Quant. He didn't like PEG and I asked him, Why? His equations dazzled me into the realization that-- the reason I get 2 stock picks wrong for every 3; is because I am lucky.

Based on the "corrected PEG", I should be 100% wrong all of the time! This, my dear readers, requires some analysis of the broader market because I cannot be that wrong, could I? Or that lucky?

Therefore, I further applied his modifed PEG to about 50 of the more popular stocks based on volume traded. And you know what? They all stink! And if this guy is right, we are going to lose more than a leg. We are going to lose both of our legs and both of our arms.

Do you know what you call the guy with no arms and no legs? His name is Matt. Matt lies at your doorstep. Matt is the guy that everyone steps on and cleans their shoes. Eileen became Peg and Peg became Matt.

But we are not done.

You see after all the money printing, it seems that we must take more money from the people and give it to the governments. But the governments are not keeping the money because they are obligated to the people who are printing the money. So the money is returning to the rightful owners-- the people that printed it in the first place. So the story goes that more taxes are needed. And not just for the rich, but for everyone. Here comes the national sales tax or a VAT.

So let's take Matt, the poor unfortunate door rug with no arms and no legs and toss him into the toilet. For you see, the guy with no arms and legs that is now floating in the water is not called Matt, he is now called Bob [Define Bob: a small float usually made of cork; attached to a fishing line].

So now that we are all bobbing, please.... no one flush!

Thomas Jefferson once said, "The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin [coin = gold in the early 19th century]. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered."

Friday, April 02, 2010

Check your country's bank statement

I live in the USA and always check my country's bank statement. You should check your country's bank statement too, to see how things are going. This is the US statement as of 31MAR2010.



https://www.fms.treas.gov/fmsweb/viewDTSFiles?dir=w&fname=10033100.pdf



If you don't know what the line items mean, you should. After all, it is your money.



One particularly important segment is Table III - C Debt Subject to Limit. Think of it as the self-imposed credit line established by the government. Unlike you and me, when the government reaches its debt limit it simply votes to increase the limit. In the US, this was done on 12FEB2010.


The point -- On average, the USG borrows $152B every month, which means that in roughly 10 months it will once again be bumping up against the debt ceiling.

But then again, it is only debt if you plan to pay it back. Right?

Do you think the Citizens of the PIIGS are checking their country's bank statements?