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How the COVID-19 Bailout Gave Wall Street a No-Lose Casino

How the COVID-19 Bailout Gave Wall Street a No-Lose Casino

While ordinary Americans face record unemployment and loss, the COVID-19 bailout has saved the very rich

taibbi, covid-19 bailout, Illustration by Victor Juhasz

This story appears in the June 2020 print edition of Rolling Stone.

In late April Marko Kolanovic, a financial analyst for JPMorgan Chase, wrote to clients with good news. Pandemic aside, investors should expect stock prices in S&P 500 companies to return to record numbers some time early next year!

“The S&P 500 should attain previous all-time highs,” Kolanovic wrote, “if the monetary measures are sustained.”

The key part of this phrase was the last bit, “if the monetary measures are sustained.” In countries that did not have a Federal Reserve Bank shooting a bazooka of cash daily at Wall Street, Kolanovic suggested the coronavirus would result in a 30 percent decline in the present value of earnings.

In other words, without intervention by the Federal Reserve, the United States in the coronavirus era would be looking at a Depression-level contraction.

Assuming the Fed bazooka keeps firing, however, a large portion of the investor class is already on a road leading back to champagne and confetti. And that, as Robert Frost would say, has made all the difference.

On the road more traveled, on the real side of the coronavirus economy, the pain has been historic. As of this writing, 30 million people have filed jobless claims during the COVID-19 crisis, and millions have lost their employer-based insurance.

At least one in three can’t make their rent, millions more can’t afford groceries, and workers in supermarkets, medical clinics, warehouses, and other professions are now in a macabre race to see if they’ll turn blue and die before corporate employers decide to slash their salaries or retirement benefits — which has already happened to front-line caregivers in some cities.

…click on the above link to read the rest of the article…

Congress Sets Up Taxpayers to Eat $454 Billion of Wall Street’s Losses, Where is the Outrage?

Congress Sets Up Taxpayers to Eat $454 Billion of Wall Street’s Losses, Where is the Outrage?

Photograph by Nathaniel St. Clair

Beginning on March 24 of this year, Larry Kudlow, the White House Economic Advisor, began to roll out the most deviously designed bailout of Wall Street in the history of America. After the Federal Reserve’s secret $29 trillion bailout of Wall Street from 2007 to 2010, and the exposure of that by a government audit and in-depth report by the Levy Economics Institute in 2011, Kudlow was going to have to come up with a brilliant strategy to sell another multi-trillion-dollar Wall Street bailout to the American people.

The scheme was brilliant (in an evil genius sort of way) and audacious in employing an Orwellian form of reverse-speak. The plan to bail out Wall Street would be sold to the American people as a rescue of “Main Street.” It was critical, however, that all of the officials speaking to the media repeat the words “Main Street” over and over.

It was decided that Larry Kudlow would first announce the plan at the White House press briefing on March 24 followed by an unprecedented appearance of Fed Chairman Jerome Powell on the Today show on March 26.

This is how Kudlow explained the program that was going to be tucked into the stimulus legislation known as the CARES Act at the White House press briefing on March 24:

Kudlow: “This package will be the single largest Main Street assistance program in the history of the United States. Phase Two delivered the sick leave for individuals, hourly workers, families and so forth. Phase Three – a significant package for small businesses, loan guarantees will be included. We’re gonna take out expenses and lost revenues…And, finally, I want to mention the Treasury’s Exchange Stabilization Fund. That will be replenished.

…click on the above link to read the rest of the article…

Fed Cut Back on Helicopter Money for Wall Street & the Wealthy

Fed Cut Back on Helicopter Money for Wall Street & the Wealthy

Tapered QE-4 Further, Still Hasn’t Bought Junk Bonds or ETFs, Was Just Jawboning.

Total assets on the Fed’s balance sheet rose by $205 billion during the week ending April 22, to $6.57 trillion. Since the week ending March 11, when the bailout of the Everything Bubble and its holders began, the Fed has printed $2.26 trillion.

But the $205 billion increase was the smallest increase since the mega-bailout began with its Sunday March 15 announcement. The Fed is tapering its purchases of Treasury securities and mortgage-backed securities (MBS). Repurchase agreements (repos) are falling into disuse. Lending to Special Purposes Vehicles (SPVs) has leveled off. And foreign central bank liquidity swaps, after having spiked initially, only ticked up by a small-ish amount.

The sharply reduced increases confirm that the Fed is following its various announcements over the past two years that during the next crisis – namely now – it would front-load the bailout QE and after the initial blast would then taper it out of existence, rather than let it drag out for years.

This concept was further confirmed by Fed Chair Jerome Powell on April 10 when he said that the Fed would pack away its emergency tools when “private markets and institutions are once again able to perform their vital functions of channeling credit and supporting economic growth.”

Overall, the Fed has cut the big QE purchases by 65% since the peak week (week ending April 1, $586 billion), to $205 billion:

Purchases of Treasury securities get slashed.

The Fed added $120 billion of Treasury securities to its balance sheet, the smallest amount since this began, down 67% from the $362 billion it had added during the peak week:

…click on the above link to read the rest of the article…

Disunited States: Government Failure to Address Coronavirus is Sparking a Mutual Aid Revolution

Disunited States: Government Failure to Address Coronavirus is Sparking a Mutual Aid Revolution

As state and local authorities struggle and the federal government focus on saving Wall Street, a volunteer-driven mutual aid revolution is taking hold in disenfranchised communities across America.

I‘m not from DC, but I live here. I’m now a part of this living, breathing being that is a city. This city. It helps me to think of cities that way, even ones that I don’t fully feel at home in – like a body. And I’m like a blood transfusion. I know this isn’t my city, my body, but it’s where my life flows now, and so I best flow with it. This body holds me – it is my literal and figurative structure. I am one of the millions of cells rushing through the veins of this place, and although I’m a relative newcomer, I can feel that this body is not well. I can feel that familiar illness – it’s the same as any city I’ve ever lived in..

Every body is weakened and bowed under the weight of capitalism. Yet, there is a new illness – one that found a foothold in our immunocompromised bones and at the same time exposes the severity of that underlying sickness so old it’s etched in our souls.

Now, with the renewed vigor of a body on high alert, cells rush in symbiotic aid to save each other. A new fever awakens dormant fighters and engages new ones. The city pulses with ancient knowledge and emergent ideas.

…click on the above link to read the rest of the article…

The very complex Jigsaw

The very complex Jigsaw

Blain’s Morning Porridge – 14 April 2020.

“If you try to take a cat apart to see how it works, the first thing you will have is a non-working cat.”

On Thursday I posted a note on the Fed doing exactly what I predicted – a programme to buy high-yield junk. A sniffy Wall Street trader called me an imbecile – which is quite a big word for a Wall St trader. He told me the Fed is not buying junk bonds, just ETFs related to junk and levered finance. He yelled at me to get it right. Really..? Go figure. Same difference. Its detail. I confidently predict the Central Banks will be buying equity ETFs soon enough – which is buying equity. End of. 

*********

After a glorious 4 days Easter staycation over the best April weekend in history, do I feel refreshed enough to face another week in markets? As analysts simultaneously forecast global depression and record stock markets by year end, are we are into the realms of financial insanity? I have some seriously dark dystopian forebodings about where this could go…. 

Get over it… Smile.

But before we talk ourselves into giving up.. REMEMBER – things are never as bad as you fear they might be. (It doesn’t mean they are looking particularly good either.) If you are prepared for the worst, then you are less likely to be disappointed if it happens…  

Work out why the market is fooling itself. Markets are scared of change, with a default position things will revert to “as-they-were.” This time they will not. There are a number of dangerous narratives playing out in markets at present – all of which expect things to revert to “same-as”. 

…click on the above link to read the rest of the article…

Takeover

Takeover

We can’t print ourselves out of this crisis again, but that isn’t stopping the Federal Reserve from trying. Thursday’s intervention program, the latest in a string of panic moves to keep the financial system afloat, constitutes a complete takeover attempt of the market ecosphere, only the buying of stocks directly is last missing piece of eventual complete central bank control of equity markets. But seizing control of the bond market is the nearest equivalent step.

Not only that, the Fed is buying junk corporate debt propping up companies that should be let to fail as Chamath Palihapitiya pointed out poignantly this week. But not this Fed, no, with its actions it is again setting up the economy for yet another slower growth recovery, financed by even more debt.

QE doesn’t produce growth, that is the established track record:

Nobody wants to talk about the consequences to come following this crisis, but that doesn’t mean the consequences won’t be a real and present reality.

No, the Fed, while trying to save the world, is once again engaged in vastly distorting asset prices from the fundamental reality of the economy. It is in essence again laying the foundation for the next bubble, while the bursting of this bubble has yet to be fully priced in.

Even the Wall Street Editorial Board has made it perfectly clear what this is all about:


The @WSJ Editorial Board tells you what the new price distortion is all about: Save Wall Street and the top 1% and hope for trickle down economics later:https://www.wsj.com/articles/the-feds-main-street-mistake-11586474912 …

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Asset price inflation to save markets in the hopes of trickle down growth to come.

Absurd.

The message the Fed is again is sending is to invite reckless behavior on the side of investors, the same reckless, TINA, fueled behavior that got us the bubble blow-off top in February.

…click on the above link to read the rest of the article…

Wall Street Has Now Morphed Into A Full Blown Soviet Sausage Factory

Wall Street Has Now Morphed Into A Full Blown Soviet Sausage Factory

To paraphrase the police officer who told me my old neighborhood had burned down during the 2017 NorCal fires,  “the markets are no more.”

After the Fed announced it is bailing out junk bonds today,  Wall Street has now morphed into a full-blown  “Soviet Sausage Factory.

Jay Powell probably had no choice and needed to blunt the blow of another 6 million-plus print of new unemployment claims but isn’t Socialism and state intervention dandy?

We can understand providing support to local and state municipalities,  now strapped with severe cash flow problems as their tax revenues have gone to near zero,  but junk?

Employment

You know, like many of the same companies that levered up to buy back shares while shitting all over their employees or, say, the wildcat and shale-oil drillers?   Even Jed Clampett and Ellie May understood Texas Tea is risky business.  Come on, man.

Chapter 11 and debt restructurings are not only the right thing to do but the only thing to do lest we lose an entire generation to stagflation and a zombie economy.  That’s probably the best case unless the economy miraculously snaps back, which assumes the economy was structurally sound before the virus took it out.   We seriously doubt that.

Here’s to hoping the bailouts are just a bridge to a major economic restructuring with the long-needed structural reforms.

Waste Of Time

There’s no sense in wasting time analyzing the markets anymore.

We will sit on cash and gold, hope and pray the virus soon passes, and try and tune out this shit show until the major political dislocation that is surely coming on the other side.

…click on the above link to read the rest of the article…

How black swans are shaping planet panic

How black swans are shaping planet panic

A case can be made that the current financial panic will only subside when the ultimate black swan – Covid-19 – is contained. 

Is the planet under the spell of a pair of black swans – a Wall Street meltdown, caused by an alleged oil war between Russia and the House of Saud, plus the uncontrolled spread of Covid-19 – leading to an all-out “cross-asset pandemonium” as billed by Nomura?   

Or, as German analyst Peter Spengler suggests, whatever the averted climax in the Strait of Hormuz has not brought about so far “might now come through market forces”?

Let’s start with what really happened after five hours of relatively polite discussions last Friday in Vienna. What turned into a de facto OPEC+ meltdown was quite the game-changing plot twist.

OPEC+ includes Russia, Kazakhstan and Azerbaijan. Essentially, after enduring years of OPEC price-fixing – the result of relentless US pressure over Saudi Arabia – while patiently rebuilding its foreign exchange reserves, Moscow saw the perfect window of opportunity to strike, targeting the US shale industry.

Shares of some of these US producers plunged as much as 50% on “Black Monday.” They simply cannot survive with a barrel of oil in the $30s – and that’s where this is going. After all these companies are drowning in debt. 

A $30 barrel of oil has to be seen as a precious gift/stimulus package for a global economy in turmoil – especially from the point of view of oil importers and consumers. This is what Russia made possible.

And the stimulus may last for a while. Russia’s National Wealth Fund has made it clear it has enough reserves (over $150 billion) to cover a budget deficit from six to ten years – even with oil at $25 a barrel. Goldman Sachs has already gamed a possible Brent crude at $20 a barrel.

…click on the above link to read the rest of the article…

MARKET MAYHEM: Silver Eagle Sales Surge While U.S. Shale Energy Stocks Get Crushed

MARKET MAYHEM: Silver Eagle Sales Surge While U.S. Shale Energy Stocks Get Crushed

Black Monday hit Wall Street in a BIG BLOODY WAY today.  With oil being the main driver of the economy, U.S shale stocks lost nearly half of their value… IN ONE SINGLE DAY.  That’s correct, the average decline from eight of the top U.S. shale companies saw their stock prices decimated by 48%.  While the energy stocks lost almost 50% of their value today, the precious metals held up rather nicely.

Gold closed up about 0.4%, while silver declined 1.9%.  Of course, not all precious metals investors are happy with the silver price action.  I see some people complaining that silver is selling off with the markets, and it isn’t a good investment.  I wouldn’t be so pessimistic on silver because it takes time for the fundamentals to kick in.

For example, the U.S. Mint sold another 670,000 Silver Eagles over the past three days since it published its last update showing 675,000 sold. So, the total as of March 9th is 1,345,000 Silver Eagles sold versus 650,000 for February:

It’s been quite a long time since the U.S. Mint sold 1.3 million Silver Eagles in the first week in a month. Thus, this provides an indicator that precious metals investors are concerned with the Global Contagion and are once again buying Silver Eagles in larger volumes.  While this increased buying won’t impact the silver price currently, it shows us that investors have ramped up physical silver bullion purchases to protect wealth during a time of extreme market mayhem.  And I believe, the worst is yet to come.

Shale Oil & Gas Stocks Destroyed On Bloody Monday

…click on the above link to read the rest of the article…

Monetary Looting

Monetary Looting

The United States has historically bragged about its free and transparent markets. But what the Fed is doing today is pulling a dark curtain around the financing of this so-called free and transparent market. The public has no idea which Wall Street firms have received this $3 trillion or why they can’t borrow it elsewhere. This kind of obfuscation by the Federal Reserve could actually stimulate distrust in the U.S. banking system. The Fed admitted as much in its most recent Federal Open Market Committee (FOMC) minutes, writing that participation in the Fed’s loan program “could become stigmatized.”

– Wall Street on ParadeIs the Fed’s $3 Trillion in Loans to Trading Houses on Wall Street Legal?

The business model of Wall Street is fraud.
– Bernie Sanders

Financial services as currently structured is the most pernicious, predatory and corrupt industry on earth. Moreover, it’s the deliberately complex and opaque nature of the industry which then limits public debate when some problem arises and governments and central banks are called upon to take emergency measures to “save the system,” which is just a euphemism for enormous sums of corporate welfare being funneled to people and institutions who couldn’t survive otherwise.

It is systemic looting on a massive scale and the primary patrons of this ongoing and seemingly endless scheme are central banks. In the U.S. this means the Federal Reserve, which recently came back into the “market” with enormous new interventions in both the repo market and via renewed balance sheet expansion. I’ve read many of the smart takes on the repo crisis and still don’t feel confident I know precisely what’s going on. This is intentional.

…click on the above link to read the rest of the article…

Personal Politics, Public Impeachment, Persuasion and Post-Apocalyptic Planning

Personal Politics, Public Impeachment, Persuasion and Post-Apocalyptic Planning

One of my primary concerns regarding the forthcoming economic chaos and societal breakdown is that there will be nowhere to run and nowhere to hide. As normalcy bias evaporates like tears on dehydrated sunken cheeks, hungry neighbors and pre-collapse friends and acquaintances will soon assimilate into zombie hoards and come knocking like its Halloween.

What are you going to do? Shoot them?

Regardless, saying “I told you so” or “I tried to warn you, but you didn’t listen” will not be an effective deterrent. Furthermore, the resultant chaos will also deliver local strongmen and gangs ready to thieve and plunder amidst widespread violence and starvation.

In such a scenario, any lone bananas are sure to be skinned.

Are you ready?

Because very few will have the opportunity to bug out to a remote location and surprisingly, an isolated cabin in the woods, or a fenced-off hidden homestead in a rural area may not be best after all.  Take it from Fernando Ferfal Aguirre, who survived the economic collapse in Argentina.  In his book, “Surviving the Economic Collapse”, he described geographic areas as like organisms dying; where the extremities perish first. Aguirre identifies the urban areas as the safer places to work, trade, and live; with the rural areas as targets for roving gangs to raid and set up camp out of the reach of city services, police, and fire departments.

Therefore, since we know the endgame, what if we could parlay that into building trust with others now?   Perhaps entire regions could be fortified in a balkanized America, simply by reorganizing current civil administrations.  All that would be required would be for the heads of select institutions and agencies to work in coordination, quickly, and decisively as the proverbial excrement collides into the whirling flabellum. Roving bands, gangs, cartels, and feral feds, might then decide to move on to easier targets.

 …click on the above link to read the rest of the article…

The Globalists Have Declared War On Your Savings

The Globalists Have Declared War On Your Savings


The globalists are coming for your savings in order to “save” the economy. 

When any one of the plethora of bubbles burst – pick your poison – and the next financial crisis impacts Wall Street and Main Street, how will the central banks and federal governments react? They have fired all their unconventional rounds of bullets, from subzero interest rates to vast money-printing. One other proposal could conceivably be giving your deposits a haircut, much like what occurred in Cyprus following the recession. This dyspeptic vision is not hyperbole nor is it paranoia – the tariffs have raised the price of tinfoil! It is unfolding right now as our globalist overlords are executing, or at least entertaining, fiscal and monetary measures to confiscate your wealth – directly or indirectly.

Plugging Holes In Swiss Cheese

Switzerland is one of the few European nations to record a federal budget surplus. The budget for the fiscal year 2020 will record a $615 million surplus, despite imposing pension and tax reforms that slashed revenues and raised spending. The Swiss government is handcuffed by a so-called debt brake, a balanced-budget amendment that mandates the budget to be in balance throughout the business cycle. This policy has decreased the debt-to-gross domestic product ratio to nearly 25%.

Although national debt levels are still at multi-decade highs, the fact that the government is taking red ink seriously should be music to the ears of fiscal conservatives. But to others, it is headache-inducing.

The Organisation for Economic Cooperation and Development (OECD) published a new report that lamented on the nation’s unwillingness to spend like some of its European partners. Authors stated that the Swiss are saving too much and spending too little, despite possessing the third-highest gross domestic product (GDP) per capita of all OECD members. It asserted that policymakers could “increase expenditures” within the debt brake framework that “would serve monetary policy, and economic and social positive impact.”

 …click on the above link to read the rest of the article…

Peter Schiff: The Party Is Over

Peter Schiff: The Party Is Over

As Peter Schiff put it in his podcast, if the first trading day of the fourth quarter was a sign of things to come, bulls on Wall Street are in for a rough end to the year. In fact, Peter said the party is over and you don’t want to be the last one to leave. 

The Dow was down 343.7 points and the Nasdaq shed 90 on a day that started out all sunshine and roses.

For a couple of days, the economic news wasn’t quite as bad as it could have been, or maybe some of the numbers actually were a little better or beat the numbers, and I think there was some idea that, hey, maybe the economy is not as bad as some people had feared, but then reality reared its ugly head at 10 a.m. when we got the ISM Manufacturing numbers.”

US manufacturing dove to a 10-year low. The ISM index of national factory activity dropped 1.3 points to 47.8 in September. That was the lowest number since June 2009 – as the US economy was emerging from the Great Recession. A reading below 50 signals manufacturing is contracting. The weak September number follows on the heels of a 49.1 print in August. Analysts had expected a bounce-back to 50.

Yet Donald Trump wants us to believe we have the greatest economy ever. How do we have the greatest economy ever when we have one of the worst manufacturing economies ever? Especially when it was manufacturing that was supposed to ‘Make America Great Again.’”

Instead, we’re back where we were during the Great Recession. Peter said the only thing this economy really has going for it is massive deficit spending.

 …click on the above link to read the rest of the article…

Hong King Kong

Hong King Kong

Of course the notion of addressing Hong Kong has been in my mind for a while, but it’s a bit of a moving target: things change all the time, and seemingly on the fly. However, with today’s fresh developments, it seems silly to wait any longer. Hong Kong Civic party lawmaker Dennis Kwok yesterday expressed the reason way better than I could:

As I said time and again, the use of troops in Hong Kong will be the end of Hong Kong, and I would warn against any such move on the part of the central people’s government.”

He said that before today’s arrests -and subsequent release on bail- of a handful of alleged protest leaders Joshua Wong, Andy Chan, and Agnes Chow. Who, if you read between the lines, didn’t lead much of anything; they may be figure-heads, but that’s not the same thing. The protests are either lacking leaders or everyone’s a leader, depending on who you ask. So why arrest them to begin with? You tell me.

What I did find enlightening was Reuters’ report yesterday on Beijing having rejected Hong Kong Chief Executive Carrie Lam’s (how is CEO a political function?) proposal to communicate with the protesters and perhaps allow some concessions to their demands. I know it’s only one source, but it appears quite feasible.

Carrie Lam is between a rock and a hard place, and she admits it -at least according to the Reuters piece-, though not to the protesters. Beijing is in exactly such a spot, but won’t admit it, ever. And that right there is Hong Kong’s main issue.

China Rejected Hong Kong Plan To Appease Protesters 

 …click on the above link to read the rest of the article…

Lacalle: A Day Of Reckoning Looms For The Global Economy

Lacalle: A Day Of Reckoning Looms For The Global Economy

European and Asian economic data is deteriorating, says economist and author Daniel Lacalle.

“I’d call right now the day of reckoning,” Lacalle says, in this video excerpt of our soon-to-be released podcast In The Arena.

 “The entire message from mainstream consensus is ‘Yes there was a global slowdown,’ but using the trade war as an excuse.”

Lacalle argues that the global growth slowdown has absolutely nothing to do with the trade war and says the trend in economic data around the world suggests Wall Street estimates for global growth are still too high.

“We’re now in the reality check period,” Lacalle says.

“Now, the risk of recession is starting to build up.”

Olduvai IV: Courage
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Olduvai II: Exodus
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