tag:blogger.com,1999:blog-46053427465775130152024-03-19T06:47:01.076-04:00Au ContrarianFrederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comBlogger223125tag:blogger.com,1999:blog-4605342746577513015.post-36435876919468777042014-09-19T17:36:00.000-04:002014-09-19T20:13:18.094-04:00Anything Goes - Again<span style="font-family: Arial, sans-serif; font-size: 10pt;">Frederick J. Sheehan Jr. is
a consultant to institutional investors. He advises on asset allocation,
portfolio risk management, and asset strategies to meet long-term liability
commitments. He is an advisor to investment firms and endowments. He is
the author of <em><span style="font-family: "Arial","sans-serif";"><a href="http://r20.rs6.net/tn.jsp?e=001d7JOj1txo66h_WL0yaw7vI6lRWS_RaB-pZcBomANI_Tg4oAYGUeDSdPzv5GzUk-Y5xOk3CVttVZJvYHM9T_CexMqqLTbdVR8fYdFUMg2ChF5-E-Gsvm5SioaaxPDYiILOMb82pcuP0eirvgpz9ZCeSzUBauhSM7lke1T3aJ6WFCDrZpsy2T6dnjUC35URORw6PmVCen_6jQiOvPnhiWNj8e3PQT_gGp-5FfHV73vMbkXjh6NP8Mh6pwgayKYIb0Stwizydv-CNk_A6EIBT7FlpedfiuLWFymvrbz0nrJyC2wFF3_SQGRmw==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left
a Legacy of Recession</span></a></span></em> (McGraw-Hill, 2009) and is
currently working on a book about Ben Bernanke. He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001d7JOj1txo66h_WL0yaw7vI6lRWS_RaB-pZcBomANI_Tg4oAYGUeDSdPzv5GzUk-Y5xOk3CVttVb_FwpoKQ5ZXa7CECwZri_zupLCRm12YXFLC4ihK4s9SpX3Ne1LTNYS" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">www.AuContrarian.com</span></a>.</span><br />
<span style="font-family: Arial, sans-serif; font-size: 10pt;"><br /></span>
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<span style="font-size: large;"><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Lee Thomas Smith, National Association of Building Owners and Contractors
annual convention, 1926</span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
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<br /></div>
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<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">So intense was real estate speculation in 1925, one-eighth of the national
economy was devoted to building in 1925. [This was also true of the property
mania in 1890. - FJS] "Buildings were being put up through the endeavors
of bond houses to sell bonds, whether the buildings were needed or not. During
1925, $675,000,000 of real estate bonds were sold in this country... an
increase of more than 1,000 per cent in the last five years."<o:p></o:p></span></span></div>
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<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"><br />
<o:p></o:p></span></span></div>
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<span style="font-size: large;"><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">A celebrity economist who anticipated CNBC, 1927: </span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
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<br /></div>
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<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> "Now you can't have any exhaustion of credit in this country
under the Federal Reserve Act; you have got 100% reserve at all times... <i>Under
the Federal Reserve Act the United States has an absolutely unlimited supply of
credit, smashing all the cycle theories.</i> The United States is in a <i>new
era</i> and only a student of the Federal Reserve System, the greatest the
world has ever seen, will understand." [My italics - FJS]<o:p></o:p></span></span></div>
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<span style="font-size: large;"><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Professor Joseph Lawrence, star economics professor at Princeton
University, 1929</span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">: <o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">"The consensus of millions of people whose judgments decide the price
levels in the stock market tells us that these stocks are not overvalued....Who
then are these men with such a universal wisdom that it gives them the right to
veto the judgment of this intelligent multitude?"<o:p></o:p></span></span></div>
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<span style="font-size: large;"><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Financial World, April 29, 1929</span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">:<o:p></o:p></span></span></div>
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<br /></div>
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<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">"It may be well again to stress the all-important point that the
Federal Reserve has in its power to change interest rates downward at any time
it sees fit to do so and thus to stimulate business."<o:p></o:p></span></span></div>
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<br /></div>
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<span style="font-size: large;"><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Miller Huggins, New York Yankees manager, May 14, 1929</span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"><br />
<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">"I don't think the Yanks are going to catch the Athletics.... They've
been getting fairly high salaries and they've taken a lot of money out of
baseball, a whole lot of money. They have stock market investments and these
investments are giving them excellent returns at the moment. When they pick up
a newspaper now, they turn to the financial page first and the sports page
later. These things aren't good for a club...." <o:p></o:p></span></span></div>
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<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"><br />
<o:p></o:p></span></span></div>
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<span style="font-size: large;"><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">FJS</span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
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<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">It has been estimated that corporations (including U.S. Steel, General
Motors, AT&T, and Standard Oil of New Jersey) had lent $5 billion to New
York Stock Exchange purchases by September 1929. They were drawn to the call
loan market as rates rose to 10%. In consequence, total securities loans rose
from $12.4 billion on October 3, 1928 to $16.9 billion a year later. To
appreciate the magnitude in relation to the economy, the gross domestic product
in 1929 was $104 billion. Even though only 2.5 million Americans owned shares,
a disproportionate concentration of funds had been directed at the stock
market.<o:p></o:p></span></span></div>
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<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"><br />
<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">New York Times</span></u></i><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">, September 6, 1929: "Fisher Denies
Crash is Due"</span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">:<o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">"The present high level of stock prices are...largely brought about
through ...investment diversification made possible to the investor by
investment trusts." [Economists seem never to learn that what they call
diversification is usually a concentration of leveraged speculation. - FJS]<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"><br />
<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">New York Times</span></u></i><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">, September 6, 1929: "Brokerage
Office Set Up On Pebble Beach Golf Course":</span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"><br />
<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">"Golf enthusiasts who are following the course of the national amateur
championship at Pebble Beach, Cal., may watch the stock market while keeping up
with the play. A temporary brokerage office, housed in a tent...has been
established by the firm of E.F. Hutton & Co.... The temporary office has
had a lively bit of business from the crowd following the players and from some
of the players, too, many of whom are ardent followers of market quotations."<o:p></o:p></span></span></div>
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<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"><br />
<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">New York Times, </span></u></i><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">September 9, 1929 (probably written by
Alexander Dana Noyes):</span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"><br />
<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">There were numerous "considerations now which must nowadays modify
ideas about the future. One is the power and protective resources of the
Federal Reserve."<o:p></o:p></span></span></div>
<div align="center" style="margin-bottom: .0001pt; margin: 0in; text-align: center;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">FLAPPERS <o:p></o:p></span></span></div>
<div align="center" style="margin-bottom: .0001pt; margin: 0in; text-align: center;">
<br /></div>
<div align="center" style="margin-bottom: .0001pt; margin: 0in; text-align: center;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"><img border="0" height="170" hspace="5" id="_x0000_i1025" name="ACCOUNT.IMAGE.41" src="https://origin.ih.constantcontact.com/fs102/1102078752130/img/41.jpg" vspace="5" width="400" /><o:p></o:p></span></span></div>
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<span lang="EN"><span style="font-size: large;"><br />
<o:p></o:p></span></span></div>
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<span lang="EN"><span style="font-size: large;"><br />
<o:p></o:p></span></span></div>
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<span style="font-size: large;"><i><u><span lang="EN">New Yorker</span></u></i><u><span lang="EN">, October 12,
1929</span></u><span lang="EN">:<o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">"[M]any contractors of estimable standing are ready to take over the
"secondary financing" of not-too-large operations, meaning they will
put up most of the cash necessary to complete the building, over and above what
the first mortgage provides. They do this in order to keep their operation from
falling apart. This loan for the building, which is really a second mortgage,
is discounted at some 'big, friendly bank', so that the contractor's money is
not tied up after all..."<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"><br />
<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Business Week, October 19, 1929</span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">:<o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">"There is...reassurance that, in the fact that, should business show
any further signs of fatigue, the banking system is in a good position now to
administer any needed tonic from its excellent Reserve system." <o:p></o:p></span></span></div>
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<br /></div>
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<span style="font-size: large;"><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Lewis Mumford, 1930</span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">"Among the many blessings of the Depression, one must count the
diminution of such opportunities." [Skyscrapers. FJS] <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><i><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">The New Republic</span></u></i><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">, 1932</span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">:<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">"[W]inter evenings were cruelly revealing, for when the sun set before
the close of daily business it was all too apparent how many of these towers
stood 'black and untenanted against the stars...With some few exceptions, the
newest New York may be described as a sixty-story city unoccupied above the
twentieth floor."<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><i><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">New York Times</span></u></i><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">, August 21, 1934 "The Future of the
Skyscraper": </span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">"Even before the great crash and great depression the skyscraper was
under suspicion from the standpoint of sound economics.</span><span lang="EN" style="color: navy; font-family: 'Lucida Sans Unicode', sans-serif;">"</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="color: navy; font-family: 'Lucida Sans Unicode', sans-serif;"><br />
</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Cole Porter (1934) "Anything Goes":</span></u><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">If driving fast cars you like,<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">If low bars you like,<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">If old hymns you like,<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">If bare limbs you like,<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">If Mae West you like,<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">Or me undressed you like,<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">Why, nobody will oppose!<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">When ev'ry night, <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">The set that's smart, <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">Is intruding in nudist parties in studios, Anything goes!<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">Porter was writing about a
different decade. </span></span>Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.com0tag:blogger.com,1999:blog-4605342746577513015.post-34330440067269543502014-09-12T16:29:00.001-04:002014-09-12T16:29:37.064-04:00Tail Risk<span style="font-family: Arial, sans-serif; font-size: 10pt;">Frederick J. Sheehan Jr. is
a consultant to institutional investors. He advises on asset allocation,
portfolio risk management, and asset strategies to meet long-term liability
commitments. He is an advisor to investment firms and endowments. He is
the author of <em><span style="font-family: "Arial","sans-serif";"><a href="http://r20.rs6.net/tn.jsp?e=001tdgAg4_UbgNiO7cd2J48bDnux8hFerPoTf1fylapQ5Hr_59sKIgHKbUkky2OOcF5HRX5bxl2TCTWx9mHwtq5gWzq5d7v_VxJ42TpJ60GKqpkmJcPfJ_f67PHkn1_Qr0RgjDyaWM7F1NSx7EnRsxnJBuhRMtpTicqB4LZgVx6CA2EFfVvqCHJ81HoOhSM6rWjC-PcgpB0_F2X-u_UwSBUumnWAALbmEZsbAQBwkT4e5gj-rMuuXJWPTlQY5KCNaHaFojF9oAL4CJWRjjc9wThxcfZSagmvUwwP0lswGqDDqUfSF6bLn83Lw==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left
a Legacy of Recession</span></a></span></em> (McGraw-Hill, 2009) and is
currently working on a book about Ben Bernanke. He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001tdgAg4_UbgNiO7cd2J48bDnux8hFerPoTf1fylapQ5Hr_59sKIgHKbUkky2OOcF5HRX5bxl2TCTS7GSaGN3qL5BGHkrPqu5EaZ21qv_4Cu0WwWSfz-4lbZkfYH7Q3SH-" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">www.AuContrarian.com</span></a>.</span><br />
<span style="font-family: Arial, sans-serif; font-size: 10pt;"><br /></span>
<div class="MsoNormal">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif; font-size: 11pt;"> </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> In a
recent memo to Oaktree Capital clients, Chairman Howard Marks writes about
"the time I spent advising a sovereign wealth fund about how to organize
for the next thirty years. My presentation was built significantly around my
conviction that risk can't be quantified <i>a priori</i>. Another of their
advisors, a professor from a business school north of New York, insisted it
can. This is something I prefer not to debate, especially with people who're
sure they have the answer but haven't bet much money on it."<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">This is an excellent illustration of the
investment mind today. It treasures mathematical models that produce certainty.
The finance professor is talking through his hat, but he need not fear an
academic challenge. This is what the tenured teach and, alas, what students
take to their jobs.</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Businesses and investment funds are managed
in the belief that risk - which is in the future (there is no risk to what has
already happened) - can be captured down to the last dollar by a professor's
model. A problem here, for those who have not spent time within this world, is
they do not believe it. They cannot really accept that a highly acclaimed asset
manager is confined - and generally, content to be confined - within the
parameters as described. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Since it is difficult, if not impossible, to
convince a sensible person this is really how institutional money decisions are
made, the following question may help: "Do they - the professors, the
CFOs, the investment managers, the Federal Reserve, for that matter, which is
similarly attired - really<i> believe</i> they can know the future with such
impossible precision, or, do they conduct their operations within such
parameters because they <i>want to believe</i> they are authorities of the
future?" The latter possibility is more believable. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Since this is the accepted method of managing
businesses and funds, the allocation of resources and investments runs through
the same pipe. When asset markets are flooded with artificial dollars, as is
the case today, allocations rise (no one wants to be left out), fill the tank,
spill in all directions, without regard for academic and central banking
assurances, until they mock the gods. "All correlations go to one,"
wrote Marty Fridson, currently CIO at Lehmann, Livian, Fridson Advisors LLC</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">.<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Fridson made that statement about Long-Term
Capital Management's mistaken models that engulfed world finance in 1998. Here
we are, nearly 20 years later. That lesson has been ignored. World finance is
far more leveraged and vulnerable than then. It is, to a degree, understandable
why professors and central bankers are immune to reality. As Howard Marks
wrote, they "haven't bet much money on it." That is not true for
companies and investors. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div align="center">
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<div align="center" class="MsoNormal" style="text-align: center;">
<span style="font-size: large;"><img border="0" height="264" id="_x0000_i1025" name="ACCOUNT.IMAGE.36" src="https://origin.ih.constantcontact.com/fs102/1102078752130/img/36.jpg" width="384" /><o:p></o:p></span></div>
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<div align="center" class="MsoNormal" style="text-align: center;">
<span style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">"UNSINKABLE"<o:p></o:p></span></span></div>
</td>
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<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">The fact that the institutional world
measures and applies risk incorrectly leaves corporate managers and investors
vulnerable. The real risk, which was probably the first thought of the sensible
person, is described by Howard Marks as a "permanent loss from which there
won't be a rebound." </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Yes. Finally, a statement that makes sense. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Marks offers his explanation for why
academics (and the CFOs and CIOs they taught), are walking hand-in-hand to the
graveyard: "Volatility is the academic's choice for defining and measuring
risk. I think this is the case largely because volatility is quantifiable and
thus usable in the calculations and models of modern finance theory. In [Marks'
book,<i> The Most Important Thing</i>] I called it 'machinable.'" Our
world loves machines to make decisions, or has given up fighting them.</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">The past two decades' APA (Asset Price
Administration) has instilled an assumption in those who continue to run with
the markets there is no such thing as a permanent loss. The S&P 500 fell
54% from 2007 to 2009. Today, it's higher than ever, and rising.</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">There are millions of Americans who have
suffered permanent losses and will never recover. They bought the dot.com
bubble, or a no-no-no mortgage, or had to sell their stocks in 2008 to make
sure they could pay their bills. To rub their noses in the dirt, their interest
rates have been confiscated on what savings may remain. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">The risk of permanent loss is often called
"tail risk." Joe Calandro and I have written about tail risk in the
attached paper: <b> </b>"<u><a href="http://r20.rs6.net/tn.jsp?e=001tdgAg4_UbgNiO7cd2J48bDnux8hFerPoTf1fylapQ5Hr_59sKIgHKbUkky2OOcF5HRX5bxl2TCTS7GSaGN3qL5BGHkrPqu5EaZ21qv_4Cu2bYeRYi7AqWPtkK6dUkzJYxx9h4KK5Ta0=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Investment,
Corporate Risk Management, and Tail Risk</span></a></u>." It was published
in the July 2014 <i>Gloom, Boom and Doom Report</i>. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Of infinitely greater importance, we describe
how we manage a company's or fund's tail risk, which we are glad to discuss
with potential customers. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<span lang="EN" style="font-family: 'Times New Roman', serif;"><span style="font-size: large;"> </span></span>Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.com0tag:blogger.com,1999:blog-4605342746577513015.post-4073662841234848412014-09-06T18:37:00.000-04:002014-09-06T18:38:09.209-04:00What Does the Media Do?<div style="font-family: Arial, Helvetica, sans-serif;">
<span style="font-size: 10pt;">Frederick J. Sheehan is the author of <a href="http://r20.rs6.net/tn.jsp?e=001mkf0AIgM9uvO4OQZMWgBSe70XO6jIscWRsu6QbzszBiLmbZ1BeSi1avYjbyvPEarPsh3taTNeRiAYlbf1yBPSUdQJ7kRjXP02KnJRX4bs55VLlw9h-pkfDr88duNs1WBGPVkCwyBEgAr3tYX5W3BUQOwugEuEq0WWCPrZnTchotMGTwClAHp4FHuIpvHsPgAKZScEEoLOlwEdsTdeiAAaFCwKlZL4cq8fGG17IVnE90LakP8WIfbTj6xknT0miiB0m8HczYPZ2SfVnXX-jDlwgZbuVdv-KwgAZRVRwLaeohlEDfwtOQEb1kOo6laQo4UiZBPEnJmVChNRcLHXLmApd7mf1zDknIb2fLsqGGrbi4=" linktype="1" shape="rect" style="color: black;" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001mkf0AIgM9uvO4OQZMWgBSe70XO6jIscWRsu6QbzszBiLmbZ1BeSi1avYjbyvPEarPsh3taTNeRiAYlbf1yBPSUdQJ7kRjXP02KnJRX4bs55VLlw9h-pkfDr88duNs1WBGPVkCwyBEgAr3tYX5W3BUQOwugEuEq0WWCPrZnTchotMGTwClAHp4FHuIpvHsPgAKZScEEoLOlwEdsTdeiAAaFCwKlZL4cq8fGG17IVnE90LakP8WIfbTj6xknT0miiB0m8HczYPZ2SfVnXX-jDlwgZbuVdv-KwgAZRVRwLaeohlEDfwtOQEb1kOo6laQo4UiZBPEnJmVChNRcLHXLmApd7mf1zDknIb2fLsqGGrbi4=" track="on">Panderer to Power: The Untold
Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of
Recession</a> (McGraw-Hill, 2009), which was translated and republished in
Chinese (2014). He is researching a book about Ben Bernanke. </span><span style="font-size: 10pt;">He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001mkf0AIgM9uvO4OQZMWgBSe70XO6jIscWRsu6QbzszBiLmbZ1BeSi1avYjbyvPEarPsh3taTNeRgqAQe-MCTAcmEjkYc8Djtkd5z_cADitXM=" linktype="1" shape="rect" style="color: black;" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001mkf0AIgM9uvO4OQZMWgBSe70XO6jIscWRsu6QbzszBiLmbZ1BeSi1avYjbyvPEarPsh3taTNeRgqAQe-MCTAcmEjkYc8Djtkd5z_cADitXM=" track="on">www.AuContrarian.com</a>.</span></div>
<div style="font-family: Arial, Helvetica, sans-serif;">
<span style="font-size: 10pt;"><br /></span></div>
<table border="0" cellpadding="5" cellspacing="0" id="content_LETTER.BLOCK4" style="margin: 0px; width: 100%px;" tabindex="0">
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<span style="font-size: 11pt;"> </span><span style="font-size: large;"> What do reporters do all day? In "Exclusive!" "Shocking!" "Extra, Read
All About It!" breaking news, <a href="http://r20.rs6.net/tn.jsp?e=001mkf0AIgM9uvO4OQZMWgBSe70XO6jIscWRsu6QbzszBiLmbZ1BeSi1avYjbyvPEarPsh3taTNeRiUiOjS2AHZzuH4APgwl17OUjsNkpzA9WeRyobfzfdgjA==" linktype="1" shape="rect" style="color: black;" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001mkf0AIgM9uvO4OQZMWgBSe70XO6jIscWRsu6QbzszBiLmbZ1BeSi1avYjbyvPEarPsh3taTNeRiUiOjS2AHZzuH4APgwl17OUjsNkpzA9WeRyobfzfdgjA==" track="on">AuContrarian.com </a> published
the damning testimony of (in 2008 - in all cases) Treasury Secretary Hank
Paulson, Federal Reserve Chairman Ben S. Bernanke, and New York Federal Reserve
President Timothy Geithner in "<a href="http://r20.rs6.net/tn.jsp?e=001mkf0AIgM9uvO4OQZMWgBSe70XO6jIscWRsu6QbzszBiLmbZ1BeSi1avYjbyvPEarPsh3taTNeRg_w2xEda6dk57mPeHXclkztE1Sc0wGnkaGBABAQfA7L1T-S1eBqMBIGVOZbV44r8qlKpxjqVcZMQsxaWsVwRl38BX8WSAboJNYB1xNGLPDJw==" linktype="1" shape="rect" style="color: black;" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001mkf0AIgM9uvO4OQZMWgBSe70XO6jIscWRsu6QbzszBiLmbZ1BeSi1avYjbyvPEarPsh3taTNeRg_w2xEda6dk57mPeHXclkztE1Sc0wGnkaGBABAQfA7L1T-S1eBqMBIGVOZbV44r8qlKpxjqVcZMQsxaWsVwRl38BX8WSAboJNYB1xNGLPDJw==" track="on">Sell Financial Stocks - and
Bonds</a><span style="text-decoration: underline;">"</span> (September 5, 2014).
Quoting from their own words, from the "The Plaintiff's Corrected Proposed
Finding of Fact," in <i>Starr International Co. v.
United States,</i>the trio broke the law when they
nationalized AIG, and, showed they had no idea what they were
doing.</span></div>
<br />
<span style="font-size: large;">
Now, those conclusions are opinion. And as stated in <b>"</b>Sell Financial
Stocks - and Bonds" the evidence is the "Plaintiff's case, of course, and
protests will be aired on the witness stand starting in late September." (The
upcoming trial is discussed in the article.) </span><br />
<br />
<span style="font-size: large;">
The question of the day is: why hasn't a media organization written about this?
A search through Google, etc. came up with nothing. That is not definitive, but
if one media outlet gets hold of an important story, the others follow.
</span><br />
<br />
<span style="font-size: large;">
The <i>Wall Street Journal</i> published a story on August 26, 2014, which made
it plain the "The Plaintiff's Corrected Proposed Finding of Fact" was in the
public domain. From the story: Mr. Bernanke is quoted making the statement in a
document filed on August 22 with the U.S. Court of Federal Claims as part of a
lawsuit linked to the 2008 government bailout of insurance giant
AIG."</span><br />
<br />
<span style="font-size: large;">
The Bernanke quote was his standard: "I stopped the worst financial crisis since
[fill in the blank]." He has lived off this assertion since 2009, never
providing evidence. Bernanke's quotes are from - you may have guessed - page one
of the document. </span><br />
<br />
<span style="font-size: large;">
Why didn't anyone read through the 99 pages? Page one was the least newsworthy
of all. Why didn't other media outlets display even a modicum of their
self-acclaimed "investigative journalism" and call court? Will they cover the
trial? <i>Starr International Co. v. United States</i> is set to start September
29.</span></td></tr>
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Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.com0tag:blogger.com,1999:blog-4605342746577513015.post-78573836431422289232014-09-05T20:40:00.000-04:002014-09-05T20:40:55.733-04:00Sell Financial Stocks - and Bonds<span style="font-family: Arial, sans-serif; font-size: 10pt;">Frederick J. Sheehan is the
author of <a href="http://r20.rs6.net/tn.jsp?e=001aH6wtYzchCZdfa31BoNODQtHgwRW7rh8m6qcbtSaHvlYVTtFiCF-E_TnWezFs3zioa80Ij4YeKQUQ-G4wAa3P-Y6uxgvWj--H_ulcOLpe4aHASlZUbxEUsOl60qiZoNx8Ho7EUY-9f-u2z_6rUsYQLMiGPRHzVYngXLugKkgxQGXU7ROhKYf49QtToXWfVj1CfPvkide7u-3IVAs3mvJvKvXOzc-UYKARXAl9vBfOaMuJUOY2kr-fxXgefOEoszU6N5P9FPgEgXe7rPmBEuWzFIJgE5tYGCkf7bfMkONf8v7_YOWDc512k_tcfEjdEJQyPXWAcpec4VJ-sEvfq2A4KqSL-4Nmk69TUatFwv4b6M=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a
Legacy of Recession</span></a> (McGraw-Hill, 2009), which was translated
and republished in Chinese (2014). He is researching a book about Ben Bernanke.
He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001aH6wtYzchCZdfa31BoNODQtHgwRW7rh8m6qcbtSaHvlYVTtFiCF-E_TnWezFs3zioa80Ij4YeKST-viQ_HKgAArNiO5jXmO4wcczduLsAGM=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">www.AuContrarian.com</span></a>.</span><br />
<span style="font-family: Arial, sans-serif; font-size: 10pt;"><br /></span>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><i><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">RESERVE YOUR SEATS: On August 26, 2014, for what seems the fiftieth time,
the U.S. Court of Federal Claims rejected the U.S. government's attempt to extinguish
Starr International Co. v. United States. Judge Thomas Wheeler said the case
brought by Hank Greenberg's AIG (specifically, Starr International Co., which
owned 12.5% of the shares on September 15, 2008) will go to trial on September
29, 2014. Wheeler stated: "The complexity of the submissions and the
factual disagreements strongly point to the need for a trial." According
to Reuters, "a U.S. Department of Justice spokeswoman declined to
comment." On the other hand, David Boies, the Attorney of Record from
Boies, Schiller & Flexner, LLP, representing Starr International, did
comment: "The decision speaks for itself." Former AIG Chairman Hank
Greenberg has sued the U.S. government for $25 billion as compensation for the
shares owned by Starr International. According to Reuters, "The trial is
expected to last six weeks.")</span></i><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">: The news sounds
reassuring: "<span class="focusparagraph">U.S. bank regulators plan to adopt
rules on [September 3, 2014] forcing big banks to hold more assets that they
could sell easily in a credit crunch, a requirement that is closely linked to
the experience of the 2007-2009 financial crisis." It is possible the </span>rules
will work.</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> However,
no formula will capture rising or falling confidence in a financial company at
some future date. We are vectoring towards another 2008. Confidence, on the
part government and Federal Reserve officials, financial institutions, and the
public, are intertwined. When financial institutions are afraid to lend to each
other liquid assets will be held for dear life. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> There
are two topics in store. First, changes to financial institution bankruptcy law
may prompt a bank run. Second, depositions in Starr International Company, Inc.
v. United States [the AIG lawsuit - see: "<u><a href="http://r20.rs6.net/tn.jsp?e=001aH6wtYzchCZdfa31BoNODQtHgwRW7rh8m6qcbtSaHvlYVTtFiCF-E_TnWezFs3zioa80Ij4YeKRmMljdKf-uTd5NyrqbmHar8h53CwjgQhk7Qc5R4POVceagsWrrDn1ynfe8vq2aavjtKvfJ7-vo8JORwWV95KMxdqQ4JwbX-ElkShF7AL1FCY13lyDsvBtI" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">David
Boies vs. Citizen Ben S. Bernanke</span></a></u>," and "<u><a href="http://r20.rs6.net/tn.jsp?e=001aH6wtYzchCZdfa31BoNODQtHgwRW7rh8m6qcbtSaHvlYVTtFiCF-E_TnWezFs3zioa80Ij4YeKRmMljdKf-uTd5NyrqbmHar8h53CwjgQhk7Qc5R4POVce6XDG-VCXAOuwtbjE5RRXT0NAnwS0d-GVBBLQI3nR-oM-3vRb9f0JwxyyJqUK_Qpw==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">The
Professor Who Did Not Save the World</span></a></u>"] should awaken
investors to our "policy makers" disintegration when we needed a
leader. (It is significant when the bureaucratic meritocracy rose to positions
of leadership, it changed its role to that of "policymakers." That it
did not and does not want to lead is the reason it is spent.) </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> In the
discussion about financial institution bankruptcy (topic number one), it is
well to keep in mind consequences are magnified by topic number two. As a
footnote, it is inconceivable the government and Fed models, such as those used
to calculate the September 3, 2014, bank liquidity rules, include an
exponential factor that kicks in when the combined worries of a Dodd-Frank
"call" and a heavy-handed government rescue mission hit
simultaneously.</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> The
changes to financial firm bankruptcy are not new. They are part of the
Dodd-Frank legislation. After taking a poll (of three) it was agreed investors
and bank depositors are not conscious of the changes. ("Conscious of"
- banks may have sent notices, 10Ks and certainly security offerings served notice,
but memories fade.) </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Since this is not new, a summary will be
brief. It is also a transcription of Paul Singer's description at the <i>Grant's
Interest Rate Observer</i> conference in April 2012. Singer is CEO of Elliot
Management Corporation and a lawyer. He explained: "Dodd-Frank radically
changed bankruptcy law to enable the FDIC to seize financial companies which
are thought to be in danger of default. Prior law for decades required, of
course, actual default or a voluntary filing by management. The seizure process
in Dodd-Frank takes two - count them - two days, and is essentially
unreviewable and unappealable. The FDIC is also ordered, pursuant to
Dodd-Frank, to toss out management and seek damages from people, including
third parties, who are 'responsible' for the financial condition of the
troubled company. It also enables the FDIC to transfer assets willy-nilly out
of the corporate entities where they reside, thus making the analysis of one's
counterparty impossible, and to discriminate among classes of creditors
similarly situated if the FDIC thinks it will fulfill some higher good.... Thus
creditors, counterparties, clearing customers and trading partners of financial
companies which become troubled, post Dodd-Frank, have only one rational response
to potential trouble or perceived trouble, given the opacity and leverage I
have mentioned before: instantly stop trading, sell claims, pull assets,
basically run for the hills." </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> Now, for
the bad news: The depositions in Starr International v. United States show a
government that did not wait for Dodd and Frank to muster 10,000 pages (and
counting) of bureaucratic snooping. In the pinch, Secretary of the Treasury
Hank Paulson, Fed Chairman Ben Bernanke and (then) New York Federal Reserve President
Tim Geithner acted willier and nillier than (we may hope) the FDIC will behave,
and<i> without </i>legal authority (as you will read below), during the 2008
financial crisis. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">The public view was described last week by
Reuters: "The bailout saved AIG from [the possibility of] filing for
bankruptcy. The Federal government took 92% of AIG's shares in return for $152
billion that the Fed and Treasury eventually pumped into the insurer."
[Bracketed comment in Reuters dispatch added. - FJS]</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Reading "The Plaintiff's Corrected
Proposed Finding of Fact," it looks as though the bailout <i>forced</i>
AIG into an <i>unnecessary</i> bankruptcy; hence the bracketed insertion in the
Reuters description above. This is the Plaintiff's case, of course, and
protests will be aired on the witness stand starting in late September. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Note #1: the wording from the <i>Finding of
Fact </i>is sometimes what a layman may call "telegraphic;" I have
left it as is. Note #2: Only a handful of the <i>Findings of Facts</i> are
discussed below. There are well over 100. The legal case may address
others. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Returning to the scene of the confusion,
then-New York Federal Reserve President Tim Geithner described the drama (in
deposition) on September 15, 2008: "Of the twenty-five largest financial
institutions at the start of 2008, thirteen had either failed (Lehman, WaMu),
received government help to avoid failure (Fannie, Freddie, AIG, Citi, BofA),
merged to avoid failure (Countrywide, Bear, Merrill, Wachovia), or transformed
their business structure to avoid failure (Morgan Stanley,
Goldman.)" </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">The United States (as stated in the lawsuit)
would not hear of outside parties that were willing to bridge or supply capital
needed by AIG. Quoting the <i>Finding of Fact</i>: "Sovereign wealth
funds, including the Government of Singapore Investment Corporation (GIC) and
the Chinese Investment Corporation (CIC) expressed interest in investing in
AIG."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Specifically, "The Chinese Investment
Corporation (CIC) expressed interest in investing in AIG. Defendant discouraged
the CIC and representatives of the Chinese Government from assisting AIG. At
12:25 p.m. on September 16, 2008, [it was relayed to Secretary of the Treasury
Hank Paulson].... CIC was 'prepared to make a big investment in AIG, but would
need Hank to call [Chinese Vice Premier] Wang Qishan.' The Chinese 'were
actually willing to put up a little bit<i> more </i>than the total amount of
money required for AIG.'" [Italics added. - FJS] </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> "On
September 16, 2008, [Under Secretary of International Affairs David] McCormick
spoke to Paulson about the Chinese interest in investing in AIG. McCormick then
told [Taiya] Smith [Paulson's deputy chief of staff and executive secretary]
that Treasury "did not want the Chinese coming in at this point in time on
AIG."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">"Later that day, Smith met with Chinese
Government officials in California during Joint Commission on Commerce and
Trade in Yorba Linda, California. During that meeting, 'all [the Chinese
officials] wanted to talk about was AIG.' Smith spent one or two hours
explaining what was happening with AIG. She conveyed the message that Treasury
did<i> not</i> want the Chinese to invest in AIG." [Italics added - FJS] </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Senator Hillary Clinton took time off from her
presidential campaign to save the floundering insurance company: ""On
September 17, 2008, United States Senator Hillary Clinton called Paulson
"on behalf of Mickey Kantor, who had served as Commerce secretary in the
Clinton administration and now represented a group of Middle Eastern investors.
These investors, Hillary said, wanted to buy AIG. 'Maybe the government doesn't
have to do anything,' she said.'" Paulson told Senator Clinton, 'this was
impossible unless the investors had a big balance sheet and the wherewithal to
guarantee all of AIG's liabilities.'"</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Since the price of oil was descending from
its recent high of $150 a barrel, it was worth investigating whether they had
"a big balance sheet." As for "the wherewithal to guarantee all
of AIG's liabilities," Paulson had no idea what the liabilities were worth
- he could not explain to counsel why the government seized AIG: "Paulson:
The 'taking of equity in companies that receive government assistance' is 'a
punitive condition.'"<br />
</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
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<span style="color: navy; font-family: Arial, sans-serif;"><span style="font-size: x-small;">Treasury
Secretary Hank Paulson</span></span><span style="font-size: large;"><o:p></o:p></span></div>
</td>
</tr>
</tbody></table>
</div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Several outside parties were calculating
values, but from the evidence, no one within "The United States" did
so. None of the witnesses could tell David Boies where the "79.9% of AIG
shareholder's equity" - the original figure wrought - came from.
(Geithner: "I am not certain I understand the reason why it was not more
than that. I don't know why it was not less than that." Paulson: "I
didn't focus on how that number was determined, although I clearly focused on
the number and remember discussing it." FRBNY: "did not conduct an
independent analysis regarding the appropriate terms for Government assistance
to AIG." Bernanke: A. "I don't know." Bernanke left as he
entered - a space-cadet, paper-shuffler.) </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">There were, however, several parties that
calculated the value of "AIG," from different perspectives and for
different reason. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">For instance: "According to BlackRock,
an independent advisor working on behalf of AIG, 'Collateral posted to
counterparties under the CDS in the portfolio is over $29 billion, far in
excess of the projected net cash flows in <span class="highlightselected">Black</span>Rock's
stress case.' BlackRock estimated that AIG's projected net cash flows for the
life of the CDS contracts, discounted at LIBOR, ranged between negative $7.3
billion in a base case and negative $15.2 billion in a stress case."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Also, "New York State Superintendent of
Insurance <span class="highlightselected">Dina</span>llo testified that even 'if
there had been a run on the securities lending program with <i>no </i>Federal
rescue, our detailed analysis indicates that the AIG life insurance companies
would <i>not</i> have been insolvent'" [Italics added. - FJS] </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">In addition: "KKR's [Kohlberg, Kravis -
FJS] Derrick Maughan provided sworn testimony that if 'AIG, the company, or the
Fed as lender of last resort, had wished they could have stabilized the company
through Government invention support [sic], and then introduced private
capital.'" </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">There were other avenues offered to prevent
AIG's nationalization: "BlackRock 'presented three <span class="highlightselected">option</span>s for FRBNY to consider.... [This
included] counterparties cancelling their credit default swaps and selling the
underlying CDOs to an FRBNY-financed SPV, for total consideration of par,
comprised of previously posted collateral, cash, and mezzanine note in the
SPV'; the obligation to perform under the credit default swaps 'transferred
from AIG to an SPV guaranteed by the FRBNY'; and creation of an 'SPV to
purchase the underlying CDOs from AIGFP's counterparties, in connection with a
termination of the related credit default swaps'" </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Apparently, no option matched
nationalization. New York State was ready to save AIG. "Around noon on
September 15, 2008, New York Governor David Paterson announced that he had
'directed' the New York State Insurance Department to permit AIG to access
approximately $20 billion in liquid assets from certain AIG insurance
subsidiaries. He also urged the federal government to be involved in some type
of arrangement, whereby AIG would have the necessary resources and bridge loans
to tide AIG over until it could resolve its liquidity problems."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">"On September 16, 2008, <span class="highlightselected0">Dina</span>llo reiterated Governor Paterson's offer to
allow AIG to upstream $20 billion from its insurance subsidiaries. Geithner
responded, "No, we're good." As a result, Dinallo was 'led to believe
definitively that we were no longer part of the fix.'" "Good" at
<i>what?</i></span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">If you ever watched Chairman Bernanke brush
aside Congressional inquiries about the Federal Reserve exceeding its authority
during testimony, he would invoke Section 13(3) of the Federal Reserve Act.
This always shut the congressman up, even though, on at least two occasions, he
leaned back for a Fed staff member to remind him the number of the section:
"13(3)."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">In the <i>Finding of Fact,</i> Paulson and
Geithner are quoted far more than Bernanke except for some hysterical
recollections, including: "September and October of 2008 was the worst
financial crisis in global history, including the Great Depression." That
could be true, but is a wild assertion without support (which Bernanke has
never in his life supplied), a successful tactic that guided <i>Time</i>
magazine to name him Thing of the Year. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> On the
other hand, Tim Geithner offered a more convincing assessment, that
"2008" was "the worst financial crisis since the Great
Depression." Chairman Bernanke accomplished a rare feat. He was a less
reliable witness than Tim Geithner. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Another example of Bernanke's fevered
understanding: "Of the 13 most important financial institutions in the
United States, 12 were at risk of failure within a period of a week or
two." He said this at least once before, when he testified during the FCIC
investigation. After the FCIC transcript was released, it was noted this was a
ridiculous comment. Yet, he persists. If the government approached every
financial institution's potential insolvency as it did AIG, the government
would have owned 6,000 banks in three days' time. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">One finding<i> </i>shows AIG's
nationalization - the government acquiring equity ownership from shareholders -
was an <i>ad lib</i> operation by the trio. The finding states: "The
Federal Reserve had no authority to purchase or hold equity," the facts
include (there are many more):</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Geithner: "Under section 13(3) of the Federal Reserve Act, the Fed is
prohibited from taking equity or unsecured debt positions in a firm".</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Bernanke: "The Federal Reserve is authorized under the Federal Reserve
Act to extend credit in various forms, but is not authorized to purchase equity
securities of financial institutions."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Bernanke: "We had only one tool, and that tool was the ability of the
Federal Reserve under 13(3) authority to lend money against collateral. Not to
put capital into a company but only to lend against collateral."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Paulson, referring to the Federal Reserve: "They legally couldn't do
preferred. They legally could only make a loan."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> "FRBNY General Counsel Thomas Baxter wrote to Federal Reserve
General Counsel Scott Alvarez confirming "we agree that there is no
power" for the Federal Reserve "to hold AIG shares."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">"FRBNY's independent auditor Deloitte: "FRBNY cannot legally
control a commercial company, and therefore it is not appropriate for them to
consolidate an entity it cannot legally own."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Another Finding eliminates the only other <i>legal</i>
conduit for AIG's nationalization. "In September 2008, Treasury had no
authority to purchase or hold equity." Some of the many facts that confirm
Bernanke, Paulson, and Geithner broke the law. Nay, they trampled our
protection from tyranny with jackboots. Facts follow: </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">"The "Treasury Department as of September of 2008 had no
budgetary authority to invest in equities, securities of any financial
institution."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">"FRBNY counsel to Federal Reserve Board officials on September 17,
2008, concerning 'Issues with regard to the NY Fed/Treasury's equity
participation in AIG,' Treasury 'consider[s] themselves legally unable to
assume ownership. This leaves the NYFed as Treasury's place to house the equity
position.'"</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">"September 17, 2008 report of Treasury's external counsel at Wachtell:
'Treasury legal is telling, as per doj, that they cannot hold voting
shares.'"</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">"TARP Chief Investment Officer Jim Lambright: In 'September when the
Fed extended the credit facility, the government didn't have an equity
tool.'"</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">"Board of Governors Legal Division: "'We understand that the
Treasury lacks the legal authority to hold directly voting stock of AIG.'"</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">"Paulson: 'Q. And prior to TARP's approval, Treasury did not have the
authority to purchase equity, either. Right?</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> A. Correct.'" </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">
Given the cleavage from reason by our policy makers (one last, irresistible
Fact<i>: </i>no one from AIG was allowed in the room during its
nationalization), consider: (1) interests you may hold in financial
institutions and (2) Paul Singer's description of the now <i>legal</i> means to
redistribute those interests. Financial firms are more leveraged than is
generally understood. Sell their securities.</span></span>Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.com0tag:blogger.com,1999:blog-4605342746577513015.post-30863250193288046552014-08-29T09:24:00.004-04:002014-08-29T09:52:16.396-04:00Handing Out Money<span style="font-family: Arial, sans-serif; font-size: 10pt;">Frederick J. Sheehan is the
author of <a href="http://r20.rs6.net/tn.jsp?e=001wl98NZlfo-nZy2WtWdR5dANiu0QhcYUZKdnNJ_RyORb9RsmnqAw7s9UoltnLsvx-7corUaQkZljHuhMCEEfTg5SHqViqx08w2HH70U3SHt_ZISwNHgQLAa4uoyL1hGOOOpPbhXDA6c0lQ7fMwBoZXDYbAZt7DxNIRrEhxzmTaQPuinNaYlrkV7Z8-sfnHc8VQXLfD_QrWr4UYiMBjUZ8UhHMG0wPk_60_8WlBlxlVEWnlRh-HnpsgYXwiVKQiQxbk8ozaKfmmvqhjX-Z6LDH9CW8zfHmbFA9bmewAh_vnv0Wh7ehp6k01wqR6gI00TBEcFvyUCTT5gadDch2a0Qv4ayid11Z-qMewWo4_A2HpHk=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a
Legacy of Recession</span></a> (McGraw-Hill, 2009), which was translated
and republished in Chinese (2014). He is researching a book about Ben Bernanke.
He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001wl98NZlfo-nZy2WtWdR5dANiu0QhcYUZKdnNJ_RyORb9RsmnqAw7s9UoltnLsvx-7corUaQkZlj8KKwYspwaAXNZEf6yyVfZYE8yZkdqRaU=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">www.AuContrarian.com</span></a>.</span><br />
<span style="font-family: Arial, sans-serif; font-size: 10pt;"><br /></span>
<br />
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">To be clear on the main point of "<u><a href="http://r20.rs6.net/tn.jsp?e=001wl98NZlfo-nZy2WtWdR5dANiu0QhcYUZKdnNJ_RyORb9RsmnqAw7s9UoltnLsvx-7corUaQkZliPFviszSP_nYrgHp0emTD-1VHZYI_xOO3BS2NTlgTCNKONeihjxJ8v6Cc0pe_lFnGGnHWerGPapsUBr2mzXU8TgzCHnsb1Qig=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">The
Killing Fields</span></a></u>": The world's central banks have been
working for well over a year on handing out money to the people. Their
intention is to avoid the intermediate step of operating through commercial
banks. The Federal Reserve, for example, generates (through electronic dollar
credits to the banks) "money" (as the word is used today) in
operations between the New York Fed and the primary dealers. After these
electronic dollars are credited to banks, the money does not always get lent
out or go where the central banks would like. The central banks are trying to
get legislation that will permit direct currency transfers to the people. </span></span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.com0tag:blogger.com,1999:blog-4605342746577513015.post-46444635197872796032014-08-28T09:33:00.000-04:002014-08-29T08:48:35.085-04:00The Killing Fields<span style="font-family: Arial, sans-serif; font-size: 10pt;">Frederick J. Sheehan is the
author of <a href="http://r20.rs6.net/tn.jsp?e=001zsxt17CPenKDR0YFa1Aefu5e_OOvFoMBnWzsrHQvtdP_uOxRxXQ6KglJyCQjTa9bDPfu-4mQBQxefZN1eX4ZrT5fS8Odifqex_JbibZOzVf6BB8xz5awyWamBz5yDiLkyginNhiv3CmL4KyfC_9Tio7bu2_jOvKZY-LWqZVKCvC-jDjYCmviFvxuWa8ZE6dKK3HRBnqxjhpKFNnAjJfJgxAAYbqjT44-26XCJLNy93_0VlpSj6yNbhs23xZph-t7RAnmE-vNYc79_rg0ndt8GJdxWCgKlI1ijLcOSvkIgk-VOtRUlv83skBIcfFVKiIBZX-g3SeibEd5KTIV7EyoiI1NMKj8lpeVs73rOIWFNzA=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a
Legacy of Recession</span></a> (McGraw-Hill, 2009), which was translated
and republished in Chinese (2014). He is researching a book about Ben Bernanke.
He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001zsxt17CPenKDR0YFa1Aefu5e_OOvFoMBnWzsrHQvtdP_uOxRxXQ6KglJyCQjTa9bDPfu-4mQBQx0V-yeyis_Xsvmd-dUBwZcAgpb-g6hwxo=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">www.AuContrarian.com</span></a>.</span><br />
<span style="font-family: Arial, sans-serif; font-size: 10pt;"><br /></span>
<br />
<div class="MsoNormal">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif; font-size: 11pt;"> </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> The house organ for the Council of Foreign Relations, <i>Foreign
Affairs</i>, has published its final solution under the title: "Print Less
and Transfer More: Why Central Banks Should Give Money directly to the
People." Written under the names Mark Blyth and Eric Lonergan, but
trumpeting the establishment voice of, say, Martin Wolf, they state:<em><span style="font-family: "Lucida Sans Unicode","sans-serif";"> "</span></em>It's
well past time, then, for U.S. policymakers - as well as their counterparts in
other developed countries - to consider a version of Friedman's
helicopter drops.... Many in the private sector don't want to take out any more
loans; they believe their debt levels are already too high. That's especially
bad news for central bankers: when households and businesses refuse to rapidly
increase their borrowing, monetary policy can't do much to increase their
spending.... Governments must do better. Rather than trying to spur
private-sector spending through asset purchases or interest-rate changes,
central banks, such as the Fed, should hand consumers cash directly.... The
transfers wouldn't cause damaging inflation, and few doubt that they would
work. The only real question is why no government has tried them."<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> This is a fairly standard view
among celebrity economists these days, possibly worth commemorating since
the CFR has joined the deluge, although, there are adult members of the CFR who
should denounce this position. Money printing by Bernanke and kin has
been <i>ad hoc </i>from the beginning, as the ecstatic and clairvoyant
Bürgermeisteramt made clear when ZIRP besotted the world (see: "<u><a href="http://r20.rs6.net/tn.jsp?e=001zsxt17CPenKDR0YFa1Aefu5e_OOvFoMBnWzsrHQvtdP_uOxRxXQ6KglJyCQjTa9bDPfu-4mQBQyLgC7GBxOPtI_rmH1NFQsVD2MDWvlyshIhawnoh_7qAq00AL_0gf-B-k8Peu1J1Qiu_HIQYg7EomLqPy0ag-EsYZOXbAjY23EnRl0ipvIuMw==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Meet
Your Investment Manager</span></a></u>").<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> That
"few doubt [handing out money] would work" is true within academia
and has-been institutions. History has recorded the contrary. Chase van der
Roehr, writing in the August 19, 2014, edition of <i>Bloomberg Briefs</i>, noted
"it now takes $37,403 added to the Fed's balance sheet to stimulate the
creation of a new job. That number stood at $7,600 in August 2008 and has
deteriorated steadily ever since." <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> The
median new job pays much less, so the $37,403-to-1 ratio, after being adjusted
for a constant quality, is infinite. "[F]ew doubt that they would
work" since those polled are entirely ignorant of all but each others'
opinions. <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> Printing
money has never worked, the grander the scale the worse the calamity. The
French state in 1790 was falling deeper into debt. The Assembly first
confiscated Church property, found itself deeper in debt, authorized a 400
million <i>assignat </i>print, with a pledge that no more currency would be
issued. The poor grew poorer, starved, and cries of "We need more
money!" elicited another 800 million <i>assignats. </i>This ended in
collapse, including the redemptive pleasure of Assemblymen rolled on tumbrels
through the streets of Paris to their end.<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> Germany
in the early 1920s suffered central banker Rudolf Haverstein's delusion. As
jobs disappeared along with food, Haverstein worked the presses to death.
(Ludwig von Mises recalled hearing "the heavy drone of the Austrian Bank's
printing presses which were running incessantly day and night to produce new
bank notes in Vienna." Austria was following Germany's lead; a temptation
it still suffered from in the 1930s.) <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">The historian Alan Bullock wrote: "[The
inflation] had the effect, which is the unique quality of economic catastrophe,
of reaching down and touching every single member of the community in a way in
which no political event can. The savings of the middle classes and working
classes were wiped out at a single blow with a ruthlessness which no revolution
could ever equal..."<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">Today, Japan's fascinating yen-printing
campaign imitates the same blue print. It is ending with the people unable to
pay for food; or much else; Nissan, Toyota, and Honda moving to Mexico; so
eliciting hysterical government responses. Bloomberg reporter Katsuyo Kuwako
captured the moment in "Japanese Women Armed with Chainsaws Head to the
Hills under Abe's Plan." Kuwako reported Comrade "Junko Otsuka quit
her job in Tokyo and headed for the woods, swapping a computer for a bush
cutter and her air-conditioned office for the side of a mountain. She was part
of a new wave of women taking forestry jobs, the result of economic, social and
environmental policies sprouting in Prime Minister Shinzo Abe's Japan.
Otsuka... said she's fine with the 20 percent pay cut to be the first female
logger at Tokyo Chainsaws.... [Abe] set a goal of... revitalizing regional
economies and enhancing women's roles."<br />
<o:p></o:p></span></span></div>
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<span style="font-size: large;"><img border="0" height="294" id="_x0000_i1025" name="ACCOUNT.IMAGE.34" src="https://origin.ih.constantcontact.com/fs102/1102078752130/img/34.jpg" width="217" /><o:p></o:p></span></div>
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<td style="padding: .75pt .75pt .75pt .75pt;"><div align="center" class="MsoNormal" style="text-align: center;">
<span style="font-family: 'Lucida Sans Unicode', sans-serif;">Adam Posen - <br />
Heavyweight Inflationist</span><span style="font-size: large;"><o:p></o:p></span></div>
</td>
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</div>
<div class="MsoNormal">
<span lang="EN"><span style="font-size: large;">
<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">Japanese economic policy is dictated from the
United States. Maybe it should not be a surprise to read Junko's elation at a
20% pay cut to "[enhance] women's roles." After all, somehow the
Conference Board was able to report U.S. consumer confidence is at a
seven-year-high on August 26, 2014. Adam Posen, quad-author along with Ben S.
Bernanke of <i>Inflation Targeting: Lessons from the International Experience</i>,
is truly a man of the moment as money experiments go extraterrestrial. Posen
was quoted in "<u><a href="http://r20.rs6.net/tn.jsp?e=001zsxt17CPenKDR0YFa1Aefu5e_OOvFoMBnWzsrHQvtdP_uOxRxXQ6KglJyCQjTa9bDPfu-4mQBQyLgC7GBxOPtI_rmH1NFQsVD2MDWvlyshIhawnoh_7qAh4Mi4JQIOwP-8Pe88tE8sBt6yQiYf_JN4OjQyGAWPI9mzxRHRg8DU8=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">We Are
All Lab Rats Now</span></a></u>" featured in "<u><a href="http://r20.rs6.net/tn.jsp?e=001zsxt17CPenKDR0YFa1Aefu5e_OOvFoMBnWzsrHQvtdP_uOxRxXQ6KglJyCQjTa9bDPfu-4mQBQyLgC7GBxOPtI_rmH1NFQsVD2MDWvlyshIhawnoh_7qAiVOh4TuxH6CW508xDV16pqB0-tgnPKRQ2PXER6LFBAvviDkf6dUe34=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">May
2014: Crematorium</span></a></u>" (earlier visage and caption thrown in
for free). Lord Circumference harassed <i>Financial Times</i> readers in March
with his Trotskyite reforms in Japan: "Increasing female labour
force participation is the right priority for structural reform. At least three
million women who could work are neither in employment nor looking for a job. A
few million more are squandering their capabilities in limited
roles...." <o:p></o:p></span></span></div>
<div align="center" style="margin-bottom: .0001pt; margin: 0in; text-align: center; text-indent: .5in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> <o:p></o:p></span></span></div>
<div align="center">
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="float: left; margin-right: 1em; text-align: left;"><tbody>
<tr><td style="text-align: center;"><img border="0" height="244" id="_x0000_i1026" name="ACCOUNT.IMAGE.33" src="https://origin.ih.constantcontact.com/fs102/1102078752130/img/33.jpg" style="margin-left: auto; margin-right: auto;" width="400" /></td></tr>
<tr><td class="tr-caption" style="text-align: center;"><span style="font-family: 'Lucida Sans Unicode', sans-serif; font-size: small;">Comrade Lara - Not so fine with Lenin's 20 percent cut.</span></td></tr>
</tbody></table>
<span style="font-size: large;"><o:p></o:p></span></div>
</td>
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<td style="padding: .75pt .75pt .75pt .75pt;"><div align="center" class="MsoNormal" style="text-align: center;">
<br /></div>
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</div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif; font-size: large;">Repeating the conclusion of
"Meet Your Investment Manager," this crowd has so bungled every
decision the possibility rises that a run-for-the-exits will be halted by
markets being closed. If so, that would be trial-and-error too, as we saw in
2008. It is important to develop a strategy that can respond as circumstances
change to preserve assets.</span><span lang="EN" style="color: #333333; font-family: 'Lucida Sans Unicode', sans-serif; font-size: large;"> </span></div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.com0tag:blogger.com,1999:blog-4605342746577513015.post-53817241196088589442014-08-20T09:43:00.000-04:002014-08-28T08:34:31.789-04:00Meet Your Investment Manager<span style="font-family: Arial, sans-serif; font-size: 10pt;">Frederick J. Sheehan is the
author of <a href="http://r20.rs6.net/tn.jsp?e=001YtOmfqXvG_R_9d7sGZA8JTMmCFBMnSr09B7LyYeu-OjLKaRuHRU96hFK3O0dMZrv-JR_oOq17ko5EC0qgkNJaJtUuMqL9cv7CGyF628A-v57M_HVyVaSLMb9LcHcxKQgVBq3b1KOOrPv4r6fghfEjuh0PkiuUYJt49S_FNGQY7yx68NJ9QyFADyaKN9wM-femlC1-DM_RraK0GwcjIHJMe7akhdRKtCrGAYclqRGjQd8t2-DQND-iIkMgiQvIhPcRWvkdKz5zlpEQJVKtKezDdn-OnTB4lZrllKZg6La8WHSH9AO2nNwfBsF2oLvsJ6tBIZjvaPhDoDeCrycRPee-rWk9x-Rx2oZL6SiGjlq2vw=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a
Legacy of Recession</span></a> (McGraw-Hill, 2009), which was translated
and republished in Chinese (2014). He is researching a book about Ben Bernanke.
He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001YtOmfqXvG_R_9d7sGZA8JTMmCFBMnSr09B7LyYeu-OjLKaRuHRU96hFK3O0dMZrv-JR_oOq17koBUutc0mgEw5V7HOdpbnfE0_sOhQFOg4w=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">www.AuContrarian.com</span></a>.</span><br />
<span style="font-family: Arial, sans-serif; font-size: 10pt;"><br /></span>
<br />
<div style="margin-bottom: .0001pt; margin: 0in;">
<div class="MsoNormal">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif; font-size: 11pt;"> </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> There is
little else left in the asset-pricing world than central bankers. The
redoubtable Ben Hunt, chief risk officer at Salient investment managers ($20
billion under management), wrote on David Stockman's Contra Corner:
"I've spent the past few weeks meeting Salient clients and partners across
the country.... When I had conversations [with clients and partners] six months
ago, I would get a fair amount of resistance to the notion that narratives
dominate markets and that we're in an Emperor's New Clothes world.
Today, everyone believes that market price levels are largely driven
by monetary policy and that we are being played by politicians and central
bankers using their words for effect rather than direct communication. No one
requires convincing that markets are unsupported by real world economic
activity. Everyone believes that this will all end badly, and the only real
question is when."<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">This might be referred to as<b> </b>"<u><a href="http://r20.rs6.net/tn.jsp?e=001YtOmfqXvG_R_9d7sGZA8JTMmCFBMnSr09B7LyYeu-OjLKaRuHRU96hFK3O0dMZrv-JR_oOq17kpW-oTegbcyZPv5QPcdTrjo9c5yNHFJ1QrAzpxtUQakCdHrSuEvZ_69KOyb7rzYMXiSVIYyzKEJhp5xOmQOlpVro4l3bBYj3svx0Ic1qqT53Q==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">End-of
the-Cycle Mispricing</span></a></u>, but, what a cycle! End-of-the-Cycle
Mispricing discussed the derangement of prices, in all assets. Money managers
as a whole have not considered protection for their funds when everyone runs
for the door at once. The "catastrophic bond" paper linked to the
discussion was specific, but, there are plenty of avenues to construct such
protection.</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">What follows is a transcription of just how
ignorant, moreover, willingly ignorant, and, it may be, enthusiastically
ignorant, was the Bernanke Fed when it decided that holding interest rates at
zero percent would be its policy. Before plunging through the looking glass,
here is the conclusion: If ever there was a time to protect one's assets from
further FOMC derangement, this is it. If you do not (and cannot) design a
Personal Protection Plan, buy cash, gold nuggets, and silver eagles. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 45.0pt; margin-right: 0in; margin-top: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Reading the transcript from the December
15-16, 2008, FOMC meeting, it is clear the Federal Open Market Committee was
embarking on its zero-interest rate policy (ZIRP - which is still all we've
got) as an experiment. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">By way of background, the FOMC had cut the
Fed funds rate cut from 5.25% on June 29, 2006 to 1.00% on October 29, 2008.
Most of reduction had been over the previous few months as the pillars fell:
Bear Stearns, Merrill Lynch, Lehman Brothers, Goldman Sachs, and Morgan
Stanley. The last two converted to commercial banks and received government
protection as well as deposit-taking authorization.</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">The December meeting addressed whether the
funds rate should be cut to zero (ZIRP), or, to some halfway house. As has been
true throughout Bernanke's chairmanship, the 284-page debate could only have
been held in the Eccles Building. The funds rate had been trading below the
declared rate for a couple of months. One can only imagine the ecstasy at the
Fed on December 12, 2008, when the funds rate traded at 0.00%: the
"zero-bound." This had been Professor Bernanke's ad pitch since the
early 1990s.</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Two members of the Committee stand out as
particularly itchy to get on with it, Chairman Bernanke and (then) San
Francisco Federal Reserve President Janet Yellen. Bernanke broke with precedent
by speaking first. Normally, the Chairman opens with a few remarks but waits
until all FOMC members (plus non-voting regional presidents) have voiced their
opinions before holding forth. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> In
synopsis, there was no debate, <i>not</i> because fed funds were trading at
zero already. The FOMC was discussing Fed policy. In Bernanke's words:
"[W]e are at a historic juncture.... [o]f necessity, moving towards new
approaches.... [T]his is a work in progress." One might wonder if the Fed
chairman had created the "necessity" so that he could breathlessly
declare this "historic juncture," and he could experiment with his
textbook diagrams: His "work in progress." </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> Through
his great experiment, Bernanke seems not to have blanched at heaving new
innovations from the Eccles Building without knowing what might follow. At the
October 28-29, FOMC meeting, about three weeks after the Fed first paid banks
interest on their reserves, Federal Reserve Governor Elizabeth Duke reported:
"I asked [the banks] specifically this question about interest rates on
reserves, and every single one of them said: 'We haven't had time to even focus
on it. We don't even know what's going on with that.'" Bernanke responded:
"Learning theory in practice. Thank you very much." </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> You may
remember the many borrowing windows opened by the Fed in 2008. The transcript
shows there was little coherence to these conduits. At the December meeting,
Bernanke said: "We have adopted a series of programs, all of which involve
some type of lending or asset purchase.... [of] which even I do not know all of
the acronyms anymore." Anymore? A viewer of Bernanke during Senate
testimony would question whether he knew what they did to begin with. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">St. Louis Federal Reserve President James
Bullard lamented later in the same meeting: "I would like to see us work
harder, maybe much harder, on the metrics for success of these facilities [the
various borrowing windows - FJS] and perhaps rework or discontinue facilities
that may not be meeting expectations.... Frankly, I am not sure in all cases
what the purpose of the programs is. We have a lot of them out there. We have
ideas. We should quantify that. We should be assessing, and then we should turn
around and say, 'This one is working. This one is not working.' I would like to
see a lot more in that direction. I understand that we haven't done it so
far...." The Bernanke Fed tendency might be summed: "Assess the
facilities? Why bother? Open another one."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Everyone had their say at the December
meeting, During the Greenspan and Bernanke pontificates, members who disagreed
with the FOMC vote were talking to a wall. In the meeting under discussion, the
topic was whether to confiscate the People's interest rates (and interest
earnings) or not. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">The chairman opened: "I'd like to ask
your indulgence. There's an awful lot here, and I'd like to go first this time
and try to clear out some underbrush and to lay down some issues in the hope
that it will perhaps focus our discussion a bit more." The message is
unmistakable: the FOMC would vote to ZIRP the American people. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: 12.0pt; margin-left: 0in; margin-right: 0in; margin-top: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">There were several members who contested
ZIRP. The FOMC member chosen for exposition here is St. Louis Federal Reserve
President James Bullard. This choice is two-fold. His concerns were worries a
college professor might express, one who talked about - in fact, Bernanke hid
behind - models, the "literature," and theory. Bullard has also been
selected since he holds the bone fides Bernanke cherishes. Bullard's papers
have been published in the <i>American Economic Review</i>, <i>Journal of
Monetary Economics</i>, <i>Macroeconomic Dynamics</i>, and <i>Journal of Money,
Credit, and Banking</i>. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">The St. Louis Fed president explained his
demurral: "I do not find the Reifschneider-Williams paper, which I know
carries some weight around here, very compelling, so let me give the brief
reasons behind that. For one thing, you are taking a model and you are
extrapolating far outside the experience on which the model is based. That
might be a first pass, but that is probably not a good way to make policy, and
I wouldn't base policy on something like that."</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">What (you may not have the slightest interest
in knowing), is the Reifschneider-Williams paper? David Reifschneider and John
C. Williams wrote a paper in 2000, "Three Lessons for Monetary Policy in a
Low-Inflation Era." The paper describes "limits to policy
accommodation attributable to the lower bound on rates." The person who
described the paper in that phrase will be identified later, though anyone
who's been around the past few years probably has a hunch. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">The second of Bullard's concerns: "There
are also important nonlinearities. This whole debate is about nonlinearities as
you get to the zero bound, and in my view, they are not taken into account
appropriately in this analysis. You have households and businesses that are
going to understand very well that there is a zero bound. It has been widely discussed
for the past year. They are going to take this into account when they are
making their decisions, so you have to incorporate that into the analysis. That
is a tall order-there are papers around that try to do that, and many other
assumptions have to go into that." </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">The fellow who has been widely published on
macroeconomic matters went on: "The third thing I think is important is
that, in other contexts, gradualism or policy inertia is actually celebrated as
an important part of a successful, optimal monetary policy. Mike Woodford, in
particular, has papers on optimal monetary policy inertia, and many others have
worked on it. In those papers, it is all about making your actions gradual and
making sure that they convey some benefit to the equilibrium that you will
get.</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">"All of a sudden, in this particular
analysis, when you are facing a zero bound, that [taking a gradual, deliberate
approach towards a zero percent interest rate - FJS] goes out the window, and I
don't think that it is taken into account appropriately in the analysis. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">"Also, it is thrown out the window
exactly at a time when you might think that the inertia and the gradualism are
most important, which would be in time of crisis when you want to steer the
ship in a steady way." Yes, you might think. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">Bullard had plenty more to say at the
December 2008 meeting. Others who zapped ZIRP were Dallas Federal Reserve
President Richard Fisher, Philadelphia President Charles Plosser, and Richmond
President Jeffrey Lacker. One of Plosser's many admonitions: "We still do
not understand why having interest rates on reserves isn't working to keep the
funds rate at its target, and there may well be unintended consequences of
moving our target to zero, beyond those well articulated in the Board's staff
notes." Plosser's audience had no interest in whether FOMC steps actually
worked or not. Bernanke had already said, regarding Governor Duke's lack of
knowledge by the banks: "Learning theory in practice. Thank you very
much." </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">I could probably list another hundred -
certainly at least fifty - other objections stated at that meeting against
establishing a zero-interest rate policy. Today, at least a thousand problems
created by ZIRP are throttling us. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;">There is not the slightest chance Chairman Yellen
will lift rates. The market will do that. Yellen, then San Francisco Federal
Reserve President, did not acknowledge any reason to deliberate over ZIRP:
"I see few advantages to gradualism, and certainly whenever we approach
the zero bound, I think the funds rate target should be quickly reduced toward
zero. [Outside of the Eccles Building, it was 0.00% - FJS] As to the level of
the lower bound, my default position is that we should move the target funds
rate all the way to zero because that would provide the most macroeconomic
stimulus." From current speeches, it is obvious she still believes
that final sentence. </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> The
answer to the pop quiz: Who said the Reifschneider-Williams paper describes
"limits to policy accommodation attributable to the lower bound on
rates?" Nobody. That is footnote number 24 to Ben S. Bernanke's speech on
August 31, 2012, at Jackson Hole, Wyoming, "Monetary Policy since the
Onset of the Crisis." He committed murder in his footnotes to speeches. The
claim to which he attached the footnote is as improbable as he is, and Bernanke
is abusing the paper (as Bullard warned the FOMC) by extrapolating its
conclusions to a situation (ZIRP) which is "far outside the experience on
which the model is based" to bilge his way past the crowd at Jackson Hole.
That is never hard to do. Some investment manager.</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> </span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"> Given
the FOMC's ad lib policymaking, it is difficult to believe they have any idea
what to do when - yes, when - the run on the markets start, other than to close
markets. This is the time to construct an avenue of personal protection.</span><span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><o:p></o:p></span></span></div>
<br />
<div class="MsoNormal">
<span lang="EN"><span style="font-size: large;"> </span><o:p></o:p></span></div>
</div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.com0tag:blogger.com,1999:blog-4605342746577513015.post-10098968492721298102014-08-12T09:20:00.000-04:002014-08-12T09:20:03.025-04:00End-of-the-Cycle Mispricing<span style="font-family: Arial, sans-serif; font-size: 10pt;">Frederick J. Sheehan is the
author of <a href="http://r20.rs6.net/tn.jsp?e=001u9dhnGBe5jlvmbwfydmjCqBchyeDYYv8QC8QBmnNJ3jLISyOjUOs18NFEPcOrKvMHMi0oYJGP6B3xCdUIzeD8wjq4Cs95Gi-fxY2sQ9a_BEVAP9Wj1mIMw3iv_tw2gFEvMfkwNxsi06cpHj5V6innyoVyaV2bYJTcdoj9krHrCl17ezvLdwi8xsrUsFxSiBY37Wq2924EMoh0B3GfzpsUY5Gwq90z2yT-GF6FaApBnS4tOv7eGPIUAVj4e0sdAaqtLVUQzfe-AMSQpdrFZmwe3ZoPrbDcSDpmKDtXki4wD_2aZ5ylHiKnB0XTY6NQa6IvnDeRw4QeMF5co4uuU3vVr_jDTvA1_W_fKrlaDzSYxs=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a
Legacy of Recession</span></a> (McGraw-Hill, 2009), which was translated
and republished in Chinese (2014). He is researching a book about Ben Bernanke.
He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001u9dhnGBe5jlvmbwfydmjCqBchyeDYYv8QC8QBmnNJ3jLISyOjUOs18NFEPcOrKvMHMi0oYJGP6AR6mHILJguAyo4nQVnTw0dfyN2-fduwZQ=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">www.AuContrarian.com</span></a>.</span><br />
<span style="font-family: Arial, sans-serif; font-size: 10pt;"><br /></span>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">The attachment is to a paper Joe Calandro and
I wrote for the November 2013 <i>Gloom, Doom & Boom Report.</i><b>
</b><a href="http://www.aucontrarian.com/cat_bonds.pdf" target="_blank">"CatastropheInsured: Cat Bonds,"</a> discusses the money-making potential of a
specific cat(astrophe) bond strategy. Such an investment appeals to a small
audience but the characteristics apply broadly. <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">
"What is the price?" should be fundamental to investment decisions.
We know that is often not the case. A fund manager who invests in small-cap
stocks must buy small-cap stocks. Managers are usually permitted the
alternative of holding money in cash, but are wary of doing so. Relative
performance is the manager's calling. <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> The
qualification (above) of a "specific" cat bond strategy is in
response to the question: "What is the price?" The answer, at times:
"Not what it is should be." Catastrophe insurance is being mispriced,
which is not a surprise in the current environment when anything goes. In
"soft" markets, insurers cover catastrophe-exposed insurance polices
at too low a price. In the cat bond area, there is too little on-the-ground
understanding of the insurers' property and financial exposures when a
catastrophe hits. Even more so, since catastrophes can come in pairs (e.g.,
hurricanes and financial panics).<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> After
selling property insurance to businesses or homeowners (for instance), insurers
(or, their investment bankers) bundle the policies into cat bonds as a form of
reinsurance. This is meant to be similar to the process of securitizing
mortgages or auto loans. Cat bonds have been sold for quite awhile, but it is
only in the past couple of years that volume has skyrocketed. We know what
happened when mortgage-backed securities boomed up until 2007. In general,
investment mangers did not study the quality of the mortgages or the
composition of the securities. Those who did crunch the numbers either stayed
away or employed strategies to short the securities. <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> In
defense of the investment managers who did not understand the mortgage
securities, to do so required a tremendous amount of work and hiring
specialists. For the most part, investors relied on the resourceful credit
agencies that stamped sub-prime securities as AAA. So too, with cat bonds,
where there is no substitute for exposure identification, cycle management, and
contract documentation. <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> We are
seeing a replay of 2007 across the investment spectrum. It is not a surprise
that a burgeoning class of securitized liabilities has been bought by mutual
funds and hedge funds. They zip cat bonds through their bond models and buy. <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;"> It will
be interesting to see how this turns out.*<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: 'Lucida Sans Unicode', sans-serif;"><span style="font-size: large;">*In the spirit, if not the orbit, of Arthur Balfour, who, when signing the
so-called Balfour Declaration of 1917, promising a homeland in Palestine for
the Jews, commented: "I have no idea what the result will be, but I am
certain that it will lead to a very interesting situation." <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN"><span style="font-size: large;"> </span></span><span style="font-size: large;"> </span></div>
<br />
<div align="center" class="MsoNormal" style="text-align: center;">
<span lang="EN"><a href="http://www.aucontrarian.com/cat_bonds.pdf" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;"><span style="font-size: large;">Click here to read "Catastrophe Insured: Cat Bonds"</span></span></a><o:p></o:p></span></div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.com0tag:blogger.com,1999:blog-4605342746577513015.post-89277548015035511142014-07-26T10:51:00.001-04:002014-07-26T10:52:00.952-04:00No Decency<span style="font-family: Arial, Helvetica, sans-serif; font-size: 10pt;">Frederick J. Sheehan is the
author of <a href="http://r20.rs6.net/tn.jsp?e=001jm-EFmnz6NwEAVDVaM4LML5ssmbtZwF2Bdh_m2wCz9nDAMn8O077cpaRvIXo8J4-sziqRjlVXT_SKZPsQVOf0Sqjiv5xJPblzgfJDdXRWYDwVozNO6Lyr80rnZOdSCeJXf167VJnKVPGSm97J7FtTR6kirRrbSdQmdD27SmSGtVfnF5bjngAJVUungFi9Bzv7dHlKr1H24FwAl0E5JC_emLQSCDsf-qYmGyzebct3ruYMbA8sLbw__RpoMYac8tx05g9oBUXhbRMag0z1bo65yZnErxJG3dPX-xXOnX4iR_hLjzt9AKfMEUmcMSDwx3AxFl2_UL_gJd1aOttBSfJu1UQr1UyGjyEJsNZ18tLQg0=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a
Legacy of Recession</span></a> (McGraw-Hill, 2009), which was translated
and republished in Chinese (2014). He is researching a book about Ben Bernanke.
He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001jm-EFmnz6NwEAVDVaM4LML5ssmbtZwF2Bdh_m2wCz9nDAMn8O077cpaRvIXo8J4-sziqRjlVXT8BlsRVAYhDJlaBMtL5VKw-6SXzcIDFiYk=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">www.AuContrarian.com</span></a>.</span><br />
<span style="font-family: Arial, Helvetica, sans-serif;"><span style="font-size: 10pt;"><br /></span>
</span><br />
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><i><span lang="EN">MarketWatch</span></i><span lang="EN"> should be ashamed of
itself. In a July 24, 2014, interview, Mephistopheles was treated with the
respect due a senior statesman, when he should have been asked: "Have you
no sense of decency sir, at long last? Have you left no sense of decency?"
</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">
The answer, of course, is "no," though Greenspan does not understand
that. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
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<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">
Left on our own, some comments <i>MarketWatch </i>should have mutilated.
Greenspan is quoted in italics: </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><i><span lang="EN">"[N] o central bank can be
oblivious to what is happening, not only in credit markets, which is, of
course, the Fed's fundamental mandate...."</span></i><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Greenspan did not
state just what the Fed's mandate concerning credit might be. Of course, he
wanted to leave <i>MarketWatch</i> readers with the impression that prudence is
paramount, and that "The Greatest Central Banker who Ever Lived"
(Alan Blinder, Princeton economics professor; Federal Reserve, rag-sheet
propagandist), established the industry standard. From the time Greenspan was
named Federal Reserve chairman until he left office, the nation's debt rose
from $10.8 billion to $41.0 billion. It had risen to a level at which it was
unserviceable. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><i><span lang="EN">"Without asset-market
surveillance, you do not have an integrated view of how the economy
works."</span></i><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Chairman Greenspan
would not allow the FOMC to discuss asset prices. By the mid- to late-1990s,
there were many FOMC members who raised the topic of runaway asset prices,
including stocks, houses, booming housing debt that was boosting those prices,
and out-of-control consumer spending. The most persistent critic was Jerry
Jordan, president of the Cleveland Fed. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">At the December 16,
1997 FOMC meeting, Jordan said: "Some Board members referred earlier to
the dichotomy between the prices of services and the price of goods. That
clearly is the case, but the notion of dichotomy also has to be applied in the
case of asset prices....I was reading some material about the operations of the
FOMC in the early 1930s." That material has been annihilated by the
so-called academics.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Jordan concluded, the
Fed's myopic concentration in the 1920s on a steady price level of goods and
services was wrong: "I think it's a useful reminder of what can go wrong
if we are too narrow in thinking about the words 'inflation' and
'deflation'....What do we mean by the word 'inflation?' Clearly, it cannot
refer simply to the current price of goods..." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Greenspan ignored
Jordan's observation. Later in the meeting, Greenspan thought that
"[s]omething very different is happening.... [W]e keep getting reams of
ever lower CPI readings that seem outrageous in the context of clearly
accelerating wages and an ever-tighter labor market...I was startled by this
morning's CPI report. We cannot keep getting such numbers and continue to say
that inflation is about to rise." Jordan had just told Greenspan that
inflation was out of control: it was Microsoft rather than Mayonnaise that was
inflating. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><i><span lang="EN">"How to respond to asset-price
change is a legitimate issue. But not to monitor it, I think, is clearly a
mistake."</span></i><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">
In 1998, Chairman Greenspan told the FOMC, in effect, there would be no further
discussion about rising asset prices. He declared asset prices could no longer
be mentioned at meetings: "I have concluded that in the broader sense we
have to stay with our fundamental central bank goal, namely to stabilize
product price levels."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">In fact, excesses
outside the Eccles Building were not dissimilar to those today. Jerry Jordan,
at a 1998 FOMC meeting: "Bankers complain a lot that pension funds and
insurance companies are doing deals that no sensible banker would be willing to
consider."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Greenspan's rationale
was nonsense: "I do know that the presumption we have discussed in the
last year or so that we can effectively manage a bubble is probably based on a
lack of humility. <i>As I've said before,</i> a bubble is perceivable only in
retrospect." My italics. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN" style="font-family: Arial, Helvetica, sans-serif;">Greenspan had never
said "a bubble is only", etc., anywhere, to any audience. His
declaration was accepted immediately. The mental incapacity of this generation
of economists is evident in the fact this position would become known as the
"Greenspan Doctrine," and accepted by central banks, academic
economists, and the media.<br /></span></span></div>
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"> Okay, let's end with a
laugh. Alan Greenspan in a commencement address (institution withheld to spare
humiliation) on May 15, 2005: "I do not deny that many appear to have succeeded
in a material way by cutting corners and manipulating associates, both in their
professional and personal lives. But material success is possible in this
world, and far more satisfying, when it comes without exploiting others. The
true measure of a career is to be content, even proud, that you succeeded
through your own endeavors without leaving a trail of casualties in your
wake."</span>Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-13231577777245583072014-07-24T10:38:00.000-04:002014-07-24T10:38:20.817-04:00Where to Invest: With Macroinvestors or Macroeconomists? <span style="font-family: Arial, sans-serif; font-size: 10pt;">Frederick J. Sheehan is the
author of <a href="http://r20.rs6.net/tn.jsp?e=001VDSgybfuM5zuPZwAxv2kBVgTIst82w9ALgAs0wq8yt0X9S0kxWc_CTDCV_97GiQUbV-jC3ijsqxz27tB2MVTzX5keBKkk0pSMcesdSDWTWJBIpnZhZeaMRiFOtPCINGE6SXwXDh6A8cavP9v8QPJsbaUD6kp6-98NGd7ME-aV3UAMZqR47CBCJ4inlG5ef2WYgmzjDyKv8BuzJhB-4BccLQ5BTdwz32O_piC8wxB3rqmciCnlSw_BKRuRrq5ct3pR72QJ1IVI_o555PhytaVPU1fmSE0hPsmFQwBIiOSDmNpefkUjTorCOMIILcGRU8ZcKBnzBX-bKURX9EdFqP5qxhtTbvmMrPvnwhG16dlBNk=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left
a Legacy of Recession</span></a> (McGraw-Hill, 2009), which was translated
and republished in Chinese (2014). He is researching a book about Ben Bernanke.
He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001VDSgybfuM5zuPZwAxv2kBVgTIst82w9ALgAs0wq8yt0X9S0kxWc_CTDCV_97GiQUbV-jC3ijsqzpUY20wEZJvm1n_vFwaPcUWGuHRWuQKx8=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">www.AuContrarian.com</span></a>.</span><br />
<span style="font-family: Arial, sans-serif; font-size: 10pt;"><br /></span>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;"> Stanley Druckenmiller, the justly renowned investor, spoke at the Delivering
Alpha conference on Wednesday, July 16, 2014. Quoting Druckenmiller: "As a
macro investor, my job for 30 years was to anticipate changes in the economic
trends that were not expected by others - and therefore not yet reflected in securities
prices. I certainly made my share of mistakes over the years, but I was
fortunate enough to make outsized gains a number of times when we had different
views from various central banks."<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">
Druckenmiller went on to discuss, among much else that deserves reading, how
the Fed's emergency 1.0% fed funds rate in 2003-2004 defied conditions observed
by him and his colleagues at Duquesne Capital. Where was the emergency? In
short: "[W]e were confident the Fed was making a mistake, but we were much
less confident in how it would manifest itself. However, our assessment by
mid-2005 that the Fed was fueling an unsustainable housing Bubble, with dire
repercussions for the greater economy, allowed our investors to profit
handsomely as the financial crisis unfolded."<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">
Today, Federal Reserve Chairman Janet Yellen sounds more preposterous every
time she opens her mouth. Last week, maybe it was two weeks ago, she offered
America a sector analysis, proposing that small-cap and biotech stocks look
overpriced. A few days later, ECB President Mario Draghi offered his opinion of
no widespread asset bubbles, although some markets looked "frothy." <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">
It has been less than a decade since Fed chairman Greenspan declared there was
no housing bubble, though he saw signs of "froth." His weasel act
warranted derision, which is just what it received, such as in the <i>Economist's</i>
headline: "Frenzied Froth" (May 28, 2005). Draghi is acclaimed for
his well-tailored suits but they stink of old mothballs. He's a botoxed
Greenspan. <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">
The two of them - that would be Yellen and Draghi - have decided to let markets
take their course, now that the Fed and ECB have used every possible mechanism
to create mispricings in all markets. They will administer regulatory measures,
if necessary. <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">
The only such declaration of any use would be to administer the two of them,
along with their supercilious staffs, out of existence. Instead, the average
person who reads newspapers that include even a moderate degree of financial
reporting knows multiple crashes are building. <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">The all-star break results are in. That is, the
announcements of how first-half 2014 security issues compare to earlier years.
We can congratulate ourselves. Never before has the world shown such
indulgence, intemperateness, and unconscionable underwriting as in 2014. <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">"Megadeals... helped push the number of debt sales
by highly rated companies in the U.S. to record levels in the first half of the
year. These companies sold about $642 billion of debt." That
"outstrips the previous record set in 2009, when $612 billion of bonds was
sold..." (<i>Wall Street Journal</i>, July 1, 2014) Aside from the
probable default rate (where are you now, TXU?), megadeals are no friend to the
workers.<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">"As investors scour the landscape for income, the first
half of the year saw record amounts of new corporate bond issuance as well as
record issuance of collateralized loan obligations. CLOs are securitized
vehicles that invest in bank loans made to junk-rated companies, first pooling
the loans and then dividing them into tranches to be sold to investors at
varying levels of income and risk.... The $58 billion of CLO issuance in the
first half of this year puts 2014 on pace to top $100 billion and break the
previous single-year issuance record...set in 2007." (<i>Wall Street
Journal</i>, July 2, 2014) Pension plans and insurance companies are large
buyers of such attempts to increase yield; an attempt to reinstitute the yield
confiscated by the same central banks that have now declared their forbearance
in monitoring default-prone issues. <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">Doug Noland, manager of the Prudent Bear Fund, in his <a href="http://r20.rs6.net/tn.jsp?e=001VDSgybfuM5zuPZwAxv2kBVgTIst82w9ALgAs0wq8yt0X9S0kxWc_CTDCV_97GiQUbV-jC3ijsqzMvdvMkKYozvQJd-j_3CKYXZuQddOI3Uw6IG_WC94oV1lNIJJFLx9epCok_6Y7iaaURBZl06iasg==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Credit
Bubble Bulletin,</span></a> written on July 11, 2014, analyzed the seven-year
itch, under the appropriate title: "2014 vs. 2007": <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">"From my perspective, 2014 and 2007 share troubling
similarities. Both periods feature overheated securities markets, replete with
the rapid issuance of securities at inflated valuations. Both are characterized
by investor exuberance in the face of deteriorating fundamentals - and in both
cases central bank policymaking was fundamental to heavily distorted market
risk perceptions. It's no coincidence that today's overheated backdrop - record
securities issuance and meager risk premiums/record high prices - readily
garner statistical comparison to 2007. <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">"This year's booming M&A market has posted the
strongest activity since 2007. Second quarter global M&A volume of $1.06
trillion was up 72% from the year ago period. Here at home, M&A more than
doubled year-on-year to $473 billion, pushing record first-half volume to $749
billion. The proliferation of deals was fueled by the loosest credit conditions
in years. First-half global corporate bond issuance hit an all-time high $2.29
trillion. A record $286 billion of junk bonds were issued globally, as average
junk yields traded to the lowest level ever. At $642 billion, first-half U.S.
investment-grade company bond sales easily posted an all-time high. The first
six months of 2014 also saw record issuance of collateralized loan obligations
(CLOs). A record number of global IPOs were sold in the first half, with $90.6
billion of offerings 54% above comparable 2013. Led by technology and
biotechnology issues, U.S. IPO sales enjoyed the strongest first-half since the
height of the technology bubble back in 2000. According to Dealogic,
year-to-date total global sales of corporate stock and equity-linked securities
reached an unmatched $510 billion, outpacing 2007's record pace."<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-family: Verdana, sans-serif;"><span style="font-size: large;">It is certain such frivolities are "not yet
reflected in securities prices."</span><span style="font-size: 11pt;"><o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: Verdana, sans-serif;"> <o:p></o:p></span></div>
<span lang="EN" style="font-family: Verdana, sans-serif; font-size: 12pt;"> </span>Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-23108442526362800702014-07-14T22:14:00.000-04:002014-07-14T22:14:03.688-04:00The Old Regime and the French Revolution <span style="font-family: Arial, sans-serif; font-size: 10pt;">Frederick J. Sheehan is the
author of <a href="http://r20.rs6.net/tn.jsp?e=001KM4YnpYU1LMZbetMfp3-oTJGqoxnstFnUIOerrDksAoK1xq6dC0FIb-IJCs9boiV2Djejo7ewLw62XYhQqO3kCztf7UTpqK-2UMXRW3U2GUG5zHuEakXWsBRR16Vu710kjcSaDrYjwetrLfBnlpdfhNO1U9lvo5Rc846BwsmxJc-wq9dts4K2uycKa6wjpTzJ_-Rj9qFivrspPECUETcHmqL2JxBFenUKbmVhw7Jrxvm9gk8s2k6hmK-ninbCxdOxE1aGzqIBvbvjt2ZIQzFsP5_-amewoD2DqkZvqGS87ZUbLGRXwEOxN3_DDGAbBP-JnLLKowPoWZJqaSFeGqYoIsnjbHX1ZU8UMsUvjMHDzo=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left
a Legacy of Recession</span></a> (McGraw-Hill, 2009), which was translated
and republished in Chinese (2014). He is researching a book about Ben Bernanke.</span><br />
<span style="font-family: Arial, sans-serif; font-size: 10pt;"><br /></span>
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<br /></div>
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<span lang="EN"> <span style="font-size: large;">
</span></span><span style="font-size: large;"><span lang="EN">On this 225<sup>th</sup> anniversary of liberté, égalit́́e, and
fraternité, Alexis de Tocqueville's <i>The Old Regime and the French
Revolution (L'Ancien régime et la revolution)</i>, published in 1856, is, if
not as invigorating as <i>La Marseillaise</i>, a worthy reflection upon
Bastille Day. Following are some excerpts from Chapter eight, which carries the
subtitle: "How, given the facts set forth in the preceding chapters, the
Revolution was a foregone conclusion": </span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">
My object in this final chapter is to bring together some of those aspects of
the old régime which were depicted piecemeal in the foregoing pages and to
show how the Revolution was their natural, indeed inevitable, outcome. </span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">
When we remember it was in France that the feudal system, while retaining the
characteristics which made it so irksome to, and much resented by, the masses,
had most completely discarded all that could benefit or protect them, we may
feel less surprise at the fact that France was the place of origin of the
revolt destined so violently to sweep away the last vestiges of that ancient
European institution. </span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">
Similarly, if we observe how the nobility after having lost their political
rights and ceased, to a greater extent than in any other land of feudal Europe,
to act as leaders of the people had nevertheless not only retained but greatly
increased their fiscal immunities and the advantages accruing to them
individually; and if we also note how, while ceasing to be a ruling class, they
had remained a privileged, closed group, less and less (as I have pointed out)
an aristocracy and more and more a caste - if we bear these facts in mind, it
is easy to see why the privileges enjoyed by this small section of the
community seemed so unwarranted and so odious to the French people and why they
developed that intense jealousy of the "upper class" which rankles
still today.</span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">
Finally, when we remember that the nobility had deliberately cut itself off
both from the middle class and from the peasantry (whose former affection it
had alienated) and had thus become a foreign body in the State: ostensibly the
high command of a great army, but actually a corps of officers without troops
to follow them - when we keep this in mind, we can easily see why the French
nobility, after having so far weathered every storm, was stricken down in a
single night.</span><span lang="EN"><o:p></o:p></span></span></div>
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<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">
I have shown how the monarchical government, after abolishing provincial
independence and replacing local authorities by its nominees in three quarters
of the country, had brought under its direct management all public business,
even the most trivial. I have also shown how, owing to the centralization of
power, Paris, which had until now been merely the capital city, had come to
dominate France - or, rather, to embody in itself the whole kingdom. These two
circumstance, peculiar to France, suffice to explain why it was that an
uprising of the people could overwhelm so abruptly and decisively a monarchy
that for so many centuries had successfully withstood so many onslaughts and,
on the eve of the downfall, seemed inexpugnable, even to the men who were about
to destroy it....</span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
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<span style="font-size: large;"><span lang="EN">
Since no free institutions and, as a result, no experienced and political
parties existed any longer in France, and since in the absence of any political
groups of this sort the guidance of public opinion, when its first stirrings
made themselves felt, came entirely into the hands of the philosophers, that is
to say, the intellectuals, it was only to be expected that the directives of
the Revolution should take the form of abstract principles, highly generalized
theories, and that political realities would be largely overlooked. Thus,
instead of attacking only such laws as seemed objectionable, the idea developed
that<i> all</i> laws indiscriminately must be abolished and a wholly new system
of government, sponsored by these writers, should replace the ancient French
constitution.</span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">
Moreover, since the Church was so closely bound up with the ancient
institutions now to be swept away, it was inevitable that the Revolution, in
overthrowing the civil power, should assail the established revolution. As a
result, the leaders of the movement, shaking off the controls that religion,
law, and custom once had exercised, gave free reign to imagination and indulged
in acts of outrageousness that took the whole world by surprise. Nevertheless,
anyone who had closely studied the condition of the country at the time might
well have guessed that there was no enormity, no form of violence from which
these men would shrink....</span><span lang="EN"><o:p></o:p></span></span></div>
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<span lang="EN"><span style="font-size: large;">
But when the virile generation which had launched the Revolution had perished
or (as usually befalls a generation engaging in such ventures) its first fine
energy had dwindled; and when, as was to be expected after a spell of anarchy and
"popular" dictatorship, the ideal of freedom had lost much of its
appeal and the nation, at a loss where to turn, began to cast about for a
master - under these circumstances the stage was set for a return to one-man
government....</span></span><span lang="EN"><o:p></o:p></span></div>
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<div class="separator" style="clear: both; text-align: center;">
<span lang="EN" style="font-family: 'Times New Roman', serif; font-size: 12pt; margin-left: 1em; margin-right: 1em;"> <img border="0" height="305" hspace="5" id="_x0000_i1025" name="ACCOUNT.IMAGE.22" src="https://origin.ih.constantcontact.com/fs102/1102078752130/img/22.jpg" vspace="5" width="201" /></span></div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-6988183900702317762014-07-09T09:41:00.000-04:002014-07-09T21:27:11.661-04:00June 2014 - Noise<div style="font-family: Arial, Helvetica, sans-serif;">
<span style="font-size: 10pt;">Frederick J. Sheehan is the author of <a href="http://r20.rs6.net/tn.jsp?e=001yjXLMDpRxc7isrhRcIS8_ZdcyKbcjQaY9S3MVEi4ZyDtujwYKfzRt8UGt8NdJ5r1BDprcYNWML7C33hQMawr1lFFeuMGxTfrVmadyLB1tUBcsna86DKvv-JwD1RfW4Z8aDilT8i-HbxAn300JMYUkZiejlDoH_TN9yWYoX9BJtOEdi0yvMMB2o6UgiH_LgrbVH7Fe0qKuFLjoohmwdIm7GBXl_K5u9v-Iuq3aRZqzeZS_oi5nzjawxGF9Plb28h6qIo0IkYe9XFmMBFiXdRXCooceeMUy5VaLcIOtAEf5EgNe_-dpFnPd_Kp3GpchU1xDS-SdWl4abDpFA_fpeenhJ01Ed9LHrXutUuG4_89xdQ=" linktype="1" shape="rect" style="color: black;" target="_blank" track="on">Panderer to Power: The Untold
Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of
Recession</a> (McGraw-Hill, 2009), which was translated and republished in
Chinese (2014). He is researching a book about Ben Bernanke. </span><span style="font-size: 10pt;">He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001yjXLMDpRxc7isrhRcIS8_ZdcyKbcjQaY9S3MVEi4ZyDtujwYKfzRt8UGt8NdJ5r1BDprcYNWML4lh3QeKVYVJn5UJ4U9Oe631LMIws4PyCg=" linktype="1" shape="rect" style="color: black;" target="_blank" track="on">www.AuContrarian.com</a>.</span></div>
<div style="text-indent: 0.5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><br /></span></div>
<div style="text-indent: 0.5in;">
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">On June 18, 2014, and
July 2, 2014, Federal Reserve Chairman Janet Yellen announced her bureaucracy
will let inflation do its own thing. She is steadfast in her determination to
meet the Fed's dual mandates under the Bernanke-Yellen dispensation, that is,
she will not interfere with either the central bank-induced asset or price
inflations. </span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">A discussion of asset
inflation will follow, with a quick note first about the June 18 press
conference. Yellen stated: "Let me just say inflation continues to run
well below our objective." This was not true. The Fed's measurement for
inflation (Personal Consumption Expenditure) was 1.6% in May (1.8% in June,
announced after this press conference.) By every other measure, inflation is
above 2.0%. The <i>all-items</i>, PCE price index, published by the Dallas Fed,
rose at a 2.8% annual pace in May. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">But enough for the
numbers. Yellen also said on June 18: "[T]he Committee remains mindful
that inflation running persistently below its objective could pose risk to
economic performance." This is central-banker talk for inflating at any
rate. When the Fed chief was queried about current inflation measures in the
danger zone, she said that is "noise." To another press-conference
question about inflation, she dismissed these signs as "noisy." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">The Rt. Rev. Ronald
Knox </span><span lang="EN" style="color: #1e1e1e;">compared a politician to a baby. Both are "a loud noise at one end
with no sense of responsibility at the other" </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">It is true that,
having achieved this advanced stage of mayhem among economic, financial, and
price relationships, Yellen cannot manage a modest adjustment. The shift of
costs and prices to a semblance of balance will be chaotic. </span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN"> July 2, 2014,
will be recorded as the date Janet Yellen announced she would not stand in the
way of asset bubbles. This was baked in the cake. She had made this clear for
the longest time, but the headlines finally caught up to her long-held stand. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN"> Chair Yellen spoke on July 2 at an IMF function in Washington, DC. She
declared: "Because a resilient financial system can withstand unexpected
developments, identifications of bubbles is less critical." On March 23,
2010, Yellen identified asset prices as the cause of the recession. ("It
was housing, of course, that led the economy down.") In the summer of
2014, she is still saying it will be years before the American economy recovers
from the housing collapse. Go figure.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Bloomberg's headline
captured the essence: "Yellen Says Rate Policy Shouldn't Change over
Stability Concerns." The <i>Wall Street Journal </i>announced on July 3,
2014: "Yellen Affirms Low-Rate Tack." The story opened: "Janet
Yellen pushed back strongly against the notion the central bank should consider
raising interest rates to avoid fueling future financial crises, in her most
detailed and forceful comments on financial stability since taking the Federal
Reserve's helm in February." The <i>New York Times</i> spread the same
message on July 3: "Janet Yellen Signals She Won't Raise Rates to Fight
Bubbles" </span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">It was 15 years ago,
on June 17, 1999, when Federal Reserve Chairman Alan Greenspan told a
dumbstruck Congress the Fed was not in the asset-inflation business. Chairman
Lily Liver announced: </span><span lang="EN">"But bubbles generally
are perceptible only after the fact. To spot a bubble in advance requires a
judgment that hundreds of thousands of informed investors have it all wrong.
Betting against markets is usually precarious at best." </span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Greenspan's announcement was the forerunner to the bubble-blowing central banks
that have followed. Everybody who wanted to know was well aware Greenspan had
inflated the NASDAQ bubble. A stream of protest followed, but, as Mario Draghi
and Janet Yellen have surely noted, they will suffer no establishment criticism
for the crashes to come. Our encrusted institutions have paid and continue to
revere "Doctor Greenspan." </span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">The <i>New York Times</i> editorial page was in a tizzy the day after
Greenspan's abdication of responsibility: "The new Greenspan is brimming
with self-assurance. Let us hope the market does not test his new
confidence." The author of <a href="http://r20.rs6.net/tn.jsp?e=001yjXLMDpRxc7isrhRcIS8_ZdcyKbcjQaY9S3MVEi4ZyDtujwYKfzRt8UGt8NdJ5r1BDprcYNWML7C33hQMawr1lFFeuMGxTfrkZ5eWQaXjUtWrYz_n4yPdauem1iUzvpHCKrFUT1V9iWNKxwex24YAAOCpJ3dKEG2ZoyUn57X527k7QNt3zOuImrGOriEVic8" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left
a Legacy of Recession</span></a> continued: "If only the </span><i><span lang="EN">New York Times </span></i><span lang="EN">had brimmed
with enough self-confidence to state that the Federal Reserve chairman was
abandoning the Federal Reserve's responsibility.Maybe the </span><i><span lang="EN">Times </span></i><span lang="EN">was too stunned
for such a response. In one gulp,it learned that the Fed did not, and could
not, see the hot-air balloonit had so generously expanded - mostly with
Greenspan's hot air. Theeditors had long trusted the chairman. When Greenspan
had issued hisstock market warning in February 1997, the </span><i><span lang="EN">Times </span></i><span lang="EN">stood by
Greenspanin an editorial with the title: "Wise Warnings to Giddy
Investors.".... In the editors' words: "To ward off the bad outcome,
Mr. Greenspan gently reminded investors that stock prices fall as well as rise.
. . . He also reminded them that the Fed will not shrink from raising interest
rates - which will draw money out of stocks." The 1997 <i>Times </i>editorial
went on to remind readers that those on Wall Street who "contend that the
American economy is heading toward unprecedented prosperity" lack
perspective: "like any story that says the future will be unlike the past,
the predictions are probably wrong.".... Between May 29 and June 29, 1999
(the month leading up to the June 29-30, 1999, FOMC meeting), the </span><i><span lang="EN">New York Times </span></i><span lang="EN">discussed
the stock market bubble in 10 separate articles. (A headline on May 30:
"Pop! Goes the Bubble.") The word </span><i><span lang="EN">bubble </span></i><span lang="EN">was used only once at the June 29-30 [FOMC]
conclave. The stock market was mentioned 21 times at this meeting."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Here we are again, but the argument that followed Greenspan's disclosure will
probably be absent. In August 1999, the Authorities even deemed it necessary to
drag an unknown economics professor to its annual Jackson Hole love-in where he
obligingly delivered a fourth-rate but fawning speech that dismissed central
banks from asset bubble responsibility. That fourth-rate professor was Ben
Bernanke. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">To close out the earlier episode, there had been considerable angst at FOMC
meetings in 1997 and 1998 about the stock market bubble. After the February
1997 warning (not as well known, but more direct, than his December 1996
"Irrational Exuberance" speech), he never uttered a word of caution
about stocks again. Behind closed doors, several members of the FOMC continued
to warn about NASDAQ indulgence. Jerry Jordan, the Cleveland Fed President, was
a persistent critic. He kept discussing books he recently read about the 1920s
and the need to evaluate asset as well as price bubbles. Greenspan put a stop
to that at the December 1998 FOMC meeting, ordering the Committee to not
mention asset bubbles again. It didn't. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Yellen's disavowal was every bit as disgraceful as Greenspan's. On July 2,
Yellen admitted to </span><span lang="EN">"pockets of increased risk taking" However, she
also stated: "I do not presently see a need for monetary policy to
deviate... to address financial stability concerns..." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">To this point, one
might think she was still on top of "financial stability concerns"
since the Fed saw "pockets" of problems. She explained an
"increased focus on financial stability risks is appropriate," but
the potential costs of diminishing economic performance "is likely to be
too great" to give such risks "a role in monetary decisions, at least
most of the time." In other words, to raise short-term interest rates by 0.5%
would so destabilize the economy, Yellen has decided to sit back, let the asset
bubbles burst, then blame the bankers, speculators, and home-buyers who should
have known better.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">After the deluge,
Yellen will be called before some committee, and state, as she did in her
confirmation hearing as Federal Reserve governor in 2010: "We failed
completely to understand the complexity of what the impact of the decline - the
national decline - in housing prices would be in the financial system. We saw a
number of different things and we failed to connect the dots. We failed to
understand just how seriously the mortgage standards, the underwriting
standards, had declined, what had happened with the complexity of
securitization and the risks that were building in the financial system around
that."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Right out of the box,
she should have been stopped by a committee member. "Why did you need to
understand "complexity"? This is the camouflage of economists who
huddle in damp caves worshipping moldy mathematical equations within a
degenerating field freed from matter. This is the language of
anti-matter."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Janet Yellen was a
Federal Reserve governor from 1994 to 1997. She was president of the San
Francisco Federal Reserve district from June 14, 2004 until 2010. She was then
appointed to the Federal Reserve Board of Governors in Washington and succeeded
Ben Bernanke as chairman on February 1, 2014. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">On May 1, 2014, Janet
Yellen described her time at the San Francisco Fed to a conference of community
banks: "As you may know, before I rejoined the Federal Reserve Board as
Vice Chair in 2010, I had the privilege of serving for six years as president
and chief executive of the Federal Reserve Bank of San Francisco. The 12th
district is the largest of the Fed's districts, covering nine western states,
and it is home to a significant number of community banks, the majority of
which are supervised by the San Francisco Fed directly or indirectly through
bank holding companies. Community bankers helped me, when I served as
president, to take the pulse of the local economy and also to understand how
regulatory and policy decisions in Washington affect financial institutions of
different sizes and types, sometimes in very different ways. During the
financial crisis, I saw firsthand the challenges that community banks faced in
a crisis they did little to cause, and I have felt strongly ever since that the
Fed must do what it can to ensure that the actions taken following the crisis
do not place undue burdens on your institutions."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">No mention of the
elephant in the room she ignored, but, in the media discussion after she had
been nominated for the chairmanship, Yellen was made out to be the Fed
personage who was right on top of the housing bubble. In addition to the
glowing tributes in the <i>Times </i>and<i> Journal</i>, were the Hallelujah
bouquets tossed by worthies. On September 29, 2013, Alan Blinder, a professor
at Princeton, which says it all, wrote in the <i>Wall Street Journal</i>:
"She warned as early as 2005, that the titanic real-estate market was
headed to an iceberg." This is a dubious claim, which we may pursue
another time. But - let's assume she did foresee the iceberg - other than to
other academic economists, that makes her subsequent catatonic response all the
more reason to <i>know</i> she was unfit for the chairmanship, since, even
accepting Blinder's construction, she held the catbird's view from San
Francisco and did nothing. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">The
"complexity" she refers to was simple to understand. The San
Francisco Fed is responsible for banking in the western states, California,
Arizona, and Nevada among them. Between July 2002 and July 2005, the number of
houses built in Phoenix doubled. The number of new houses increased in Las
Vegas by 53% between August 2004 and July 2005. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">The median price for
an existing, single-family house in California rose from $237,060 in 2000 to
$542,720 in 2005. Over 20% of those who bought houses between 2003 and 2005
devoted over one half of their earnings to mortgage payments. One of the more
recent innovations was the "interest-only" mortgage. The buyer might
be able to delay principal payments for the first 10 years. These were
dangerous instruments. There was general agreement to that assessment in 2002,
when only 2% of California mortgages were interest only. Under Janet Yellen's
supervision, they could not be sold fast enough. By early 2004, the proportion
exceeded 47%. By the second half of 2004, that rose to 67% of all California
residential mortgages. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN-GB">At the time of
Yellen's "warning," house prices were out of reach, so the terms were
relaxed. The "2 and 28" mortgage - a two-year "teaser" rate
that adjusted ("reset") for the next 28 years - was booming. From
$220 billion in two-year ARMS in 2003, the volume rose to $440 billion in 2005.
Consumer credit (excluding mortgage payments) had risen from $1.3 trillion in
1998 to $2.36 trillion by 2006: an average of $21,000 per household. More
Americans were living on home-equity withdrawal. They were liquefying their
equity and monetizing the proceeds. American wages rose a total of $27.5
billion in 2005. Homeowners withdrew $800 billion of equity from their houses -
equal to a 13% pay raise. This is the income that allowed Americans to buy (in
a way) higher priced houses and empty the shelves at Home Depot. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN-GB">The most
spectacular mortgage factories were in the heart of San Francisco President
Janet Yellen's district. </span><span lang="EN">We can look at a single town. Irvine,
California had been an engine for American "growth," to which Yellen
pays homage - no matter the source. New Century of Irvine, the second largest
subprime lender in 2005 ($35 billion) closed its doors in March 2007. Option
One of Irvine, the fourth largest ($29 billion), also failed. Irvine was home
to Ameriquest, the ninth largest sub-prime lender in 2005 ($19 billion in
volume). Ameriquest paid a $325 million fine for unsavory practices. It no
longer exists. By the time it went to court, its founder, Ronald Arnall, also
founder of Long Beach Savings and Loan in 1980 (another story some may remember),
had taken his post as U.S. ambassador to the Netherlands. Arnall was a large
fundraiser for Bush the Younger. Arnall had spun off another portion of Long
Beach Savings and Loan to Washington Mutual. This became Washington Mutual's
subprime lending arm. New Century, Option One and Ameriquest sold $83 billion
of subprime loans in 2005. All of America bought $161 billion worth of
mortgages in 1992. Yellen, being a bureaucrat, would protest she had no
jurisdiction over these mortgage factories. So what? Their very presence pushed
banks into bad businesses, and she did have authority over Angelo Mozilo's
Countrywide Bank as well as Wells Fargo. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">From Yellen's May 1,
2014, speech ("before I rejoined the Federal Reserve Board as Vice Chair
in 2010, I had the privilege of serving for six years as president and chief
executive of the Federal Reserve Bank of San Francisco") she mentioned how
"[c]ommunity bankers helped me, when I served as president, to take the
pulse of the local economy." Assuming that was so, her decision to
continue her career in central banking betrays an inability to assess her own
limitations.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">By April 2008, more
than 1,000 houses in California and were auctioned every weekday. Not too far
from her San Francisco office was Merced, California. It had been a
house-trading casino for out-of-town investors. They sometimes bought two
houses at a time and prices rose 30% a year. By June 2008, it had one of the
highest foreclosure rates in the country. Harwinder Sharma bought a new house "in
a beautiful neighborhood, surrounded by other homes with landscaped front
yards." By 2008, the Merced native was "ringed by vacant lots and
empty houses, and the neighborhood [was] overrun by dry weeds and brush."
Developers built nearly 4,400 new houses in Merced. Three-quarters of the
houses were in foreclosure in August 2008.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">In San Jose,
California, Shawn Forgaard, a 37-year-old software engineer, bought one house
for his family and nine for investment. The clock ran out on his
negative-amortization loans in May 2008: "Everyone stumbles...I'm
confident our lives will be much, much richer as a result." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">By 2008, the Los
Angeles Police Department's Real Estate Fraud Squad fought an uphill battle
with professional squatters who moved from one abandoned house to another,
posed as tenants, and demanded cash payments from the banks before they would
leave. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">In Beverly Hills, Ed
McMahon defaulted on his house. In Encino, Michael Jackson's Neverland
was foreclosed upon on February 26, 2008. In Hollywood, Jose Conseco lost
his house, declaring: "It didn't make financial sense for me to keep
paying for a mortgage on a home that was basically owned by someone else."
Conseco was better equipped than the pinheads who constructed probabilities for
mortgage securities. America had changed: Losing ones house used to be
shameful, a disgrace; now it was recommended. The YouWalkAway.com website
offered guidelines on how to stay in the house for eight months "payment
free (after the owner had stopped paying) and then "walk away without
owing a penny." Another novelty of this cycle were the evictees who
"stripped out appliances, punched holes in the wall, dumped paint on
carpets and... locked their pets inside to wreak further havoc."
Real-estate agents estimated that about half of foreclosed properties to be
sold by mortgage companies nationwide had "substantial" damage. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">In the east-most
suburbs of Los Angeles, the Inland Empire, "you think you're staring at a
ghost exurb." One in every 43 houses faced foreclosure in May 2008. More
than 500,000 people had moved to the Inland Empire (Riverside, San Bernardino)
during the previous five years. Now it was home to "infested swimming
pools, fetid and green...choked with algae. Thousands of people have walked
away without even draining the water. Mosquito control agents now patrol these
murky pools..." "Mosquito fish" were "well suited for a
prolonged housing slump. Hardy creatures with big appetites, they can survive
in oxygen-depleted swimming pools for many months, eating up to 500 larvae a
day..." We're lucky the housing bust didn't cause a bubonic plague.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">In San Diego, a
developer offered a special deal: "buy one, get one free."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Maricopa, Arizona is
40 miles south of Phoenix. It had a population of 600 in the early 1990s and a
one-room school house. Then, the developers arrived. Construction crews raised
blocks of identical houses (14,000 houses in all), "because it was more
efficient to build with as little variation as possible. They built sidewalks
on only one side of the street to save money." By 2005, inductees moved to
Maricopa at the rate of three per hour. More than one-third of the mortgages
were subprime. By 2008, houses traded like CDOs: there were no offers. No
schools have been built. At rush hour, the single road to and from Phoenix was
a parking lot. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">In Las Vegas, Eve
Mazzarella and Steven Grimm were charged with bank fraud. Banks lent them $107
million; they bought 277 houses and made a $15 million profit. Their scheme was
not particularly conspicuous: The FBI established a special task force in Las
Vegas because the size, scale and sophistication of such schemes had grown to
monstrous proportions.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Banks offered occupants
$1,000 if they moved out without "trash[ing] the house." This was in
March 2008, when anger was still in the first inning. A daughter of Bruce Toll,
co-founder of Toll Brothers walked away from her purchase agreement. Toll
Brothers (the corporation) announced it was pursuing its "rights under the
agreement of sale." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">If Yellen is correct,
and there are only "pockets" of asset bubbles, then America is
wearing a clown suit. Yield spreads on junk bonds are at all-time lows, as with
leveraged loans, and just about any other bond category. Exactly as in 2007,
this has not inhibited issuance. Instead, the Fed-led asset bubble has called
into existence weird and amazing nooses. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">To the detached
observer, the channels of security issuance are teeming with sewerage.
Bloomberg noted the development with a June 17 headline:
"Sewerage-to-Fertilizer Plan Shows No Junk Bonds Stink." It went on
to describe "the malodorous" offering by the Orange County Industrial
Development Authority (in Florida, not the one made famous by Robert Citron)
which is offering the $62 million certifiably junk bond. Bloomberg quoted Tom
Metzold, co-director of municipal bonds at Eaton Vance in Boston:
"This is like the worst of the worst... yet investors will probably buy
it.... When too much money chases too few bonds, deals come to market that have
no right coming to market. The risk-reward profile is so out of balance, it's
nuts."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div class="MsoNormal">
<span lang="EN"><span style="font-family: Arial, Helvetica, sans-serif; font-size: large;">In the same
spirit, on June 9, Bloomberg investigated the hot car-loan market. "In response
to rising default rates on subprime U.S. auto loans, bond investors are
deciding the best thing to do is pile into securities backed by them." On
the supply side: "With rates near 0%, credit card companies are happy to
lower standards and lend."<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Let's not forget Yellen keeps touting
regulatory oversight as the magic solution to unseemly markets. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Recent fixed-income
offerings include homeless-shelter bonds, meteor bonds, car-rental bonds (these
"obscure asset-backed securities bundle together cash flows from auto
leases"), and burrito bonds (that offer "two vouchers for free
burritos if you [lend] ... $848"). The most prolific money gatherer among
municipal bond ETFs in 2014 has been Market Vectors High Yield Municipal Index
(HYD), which has received over $100 million of inflows this year. It was
thrashed last week after some Puerto Rican problem</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Zero-Hedge reported
from down south: "Bond Bubble Goes Full-er Retard: 4x Oversubscribed
Kenyan Bond Orderbook is 20% of Country's GDP" (June 17, 2014). "An
indication of just how off the charts the 2014 edition of the full retard bond
bubble is comes from Kenya, which priced a debut $2bn eurobond yesterday and in
the process managed to break the record for the largest debut for an African
country in the sovereign bond market..... According to the FT, the orderbook
was more than four times oversubscribed which is roughly equivalent to around
20% of the country's GDP according to Bloomberg data. Plus - in Kenya - 49
people were killed on a beach north of Mombasa on Sunday, June 16." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">The incident happened the day before the offering. There is a fair chance
buyers did not know about the 49 deaths at a beach resort. There is also a good
chance the majority could not locate Kenya on a map, <i>if </i>they even know
Kenya is a country. A flashback: one that demonstrates how far the financial
economy has distanced itself from the real economy. In January 2008, Standard
& Poor's rated Kazakhstan's credit even though Kazakhstan had no debt. Why?
It attracted a healthy credit-default swap trade. Again, for what purpose? An
e-mail seemed as plausible as any: "I doubt the buyers of this thing are
even aware there is no debt to insure. Nor do they care. It's just an exotic
casino game to have a go at." Reuters posted occasional updates on the
credit-default swaps: "Kazakhstan 5-Yr CDS [spreads] Hit Record
High." Traders discussed this untoward development; explanations included
problems with the credit crunch in emerging markets and with Kazak politics.
The issues are also perplexing since CDS reference a real bond, but in the
midst of such disarray, then and now, that may have slipped by the legal
departments. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN" style="font-weight: normal;">Stock
offerings are also problematic, including Fantex Vernon Davis (Fantex:
VNDSL), which is trading at $11.20. ($10.50 last week.) <i>Marketwatch</i>
posts its percent rise at "infinity." Vernon Davis is a receiver for
the San Francisco 49ers. A quick check shows he is currently holding out for a
better contract, adding octane to this infinity-chasing stock. For the wary,
something called the "Fathead Vernon Davis" sells for $99.99 at
Dick's Sporting Goods.</span><span lang="EN"><o:p></o:p></span></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN" style="font-weight: normal;"> </span><span lang="EN"><o:p></o:p></span></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN" style="font-weight: normal;">Uber,
the limo-hailing app, was valued at $17 billion upon its June IPO. The U.S.
taxi industry receives $11 billion in sales a year. </span><span lang="EN"><o:p></o:p></span></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN" style="font-weight: normal;"> </span><span lang="EN"><o:p></o:p></span></span></h1>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">I received a note,
after writing about the art market: "Reading your discussion of
modern "art" as collateral reminds me of a conversation I had in
Japan in 1986. I was based in Tokyo and handling distribution for a
software company. I met a young banker for one of my distributors who was
applying to MIT Sloan. He proudly told me how the bank had loaned an exec
several million dollars to buy a coveted golf membership. Of course the
loan was secured by .... the golf membership. A few years later neither the
loan nor the collateral was worth much." We may have already passed
this point. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">It is interesting
that news stories about market developments routinely indict the Fed for the
excesses, even as Yellen distances herself from responsibility:</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Bloomberg: June 27:
"Companies are on a borrowing binge that's only accelerating, with
investment-grade bond sales poised for a new record year. No one seems to be
too concerned because... central banks across the globe are working hard to
keep suppressing borrowing costs.... Buyers still can't get enough. Investors
are now demanding about the smallest premium over benchmark rates to own the
debt since 2007, according to Bank of America Merrill Lynch index data."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Bloomberg: June 3: "Bond investors who see no end to the financial
repression that's pushed yields to record lows are piling even more money into
notes of the riskiest companies, wagering that central banks will keep propping
them up. "</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Bloomberg: June
16:"The boom in fixed-income derivatives trading is exposing a hidden risk
in debt markets around the world: the inability of investors to buy and sell
bonds. While futures trading of 10-year Treasuries is close to an all-time
high, bond-market volume for some maturities has fallen a third in the past
year. In Japan's $9.6 trillion debt market, the benchmark note didn't trade
until midday on two days last week. As a lack of liquidity in Italy caused
transaction costs in the world's third-largest sovereign bond market to jump
last month, [this] propelled an eightfold surge in Italian futures by relying
more on derivatives. The shift reflects an unintended consequence wrought by
central banks. Inefficiencies in the $100 trillion market for bonds may make
investors more vulnerable to losses when yields rise from historical lows. The
worry is that when investors try to exit their positions, 'there may be some
kind of squeeze.' That concern has caused investors to pour into derivatives,
which are contracts based on underlying assets that can provide the same
exposure without tying up as much capital." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div class="MsoNormal">
<span lang="EN"><span style="font-family: Arial, Helvetica, sans-serif; font-size: large;">The
"inefficiencies in the $100 trillion market [that] may make investors more
vulnerable to losses," have escaped former Fed Chairman Ben Bernanke, who
had inflated the Federal Reserve balance sheet to 70-to-1 against stated
capital by November 2013. In at least one of his $250,000 diners with hedge
fund managers, the galloping gourmet claimed the Fed does not have to reduce
its balance sheet by "one dime." He never was much of one for details. <o:p></o:p></span></span></div>
<div style="line-height: 12.0pt; margin-bottom: .0001pt; margin: 0in; text-align: justify; text-indent: .5in;">
<br /></div>
<div class="MsoNormal">
<span lang="EN"><span style="font-family: Arial, Helvetica, sans-serif; font-size: large;">The
inefficiencies have not escaped all the central banks. From The King Report,
June 23: "Central banks are planning to cut their exposure to longer-term
debt to protect themselves from losses.... The survey of 69 central bank reserve
managers, polled in May by [Central Banking Publications] and HSBC, suggested
many have already started moving into riskier assets, such as equities."
From the same day's King Report: "The [Japanese] Government Pension Fund
and other public pension plans sold about [$17.4 billion] more in Japanese
bonds than they bought in the first three months of the year..."<o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">Back in the Home
Land, the <i>Financial Times</i> reported on June 16, 2014, that "Federal
Reserve officials have discussed imposing exit fees on bond funds to avert a
potential run by investors, underlining regulators' concern about the
vulnerability of the $10 trillion corporate bond market. Officials are
concerned that bond-fund investors, as with bank depositors, can withdraw their
money on demand...." This is not a problem whipped up by some Fed
staffers. From Bloomberg, June 23: "It's never been easier for individuals
to enter some of the most esoteric debt markets. Wall Street's biggest firms
are worried that it'll be just as simple for them to leave. Investors have
piled more than $900 billion into taxable bond funds since the 2008 financial
crisis, buying stock-like shares of mutual and exchange-traded funds to gain
access to infrequently-traded markets.... [A]nalysts at JPMorgan Chase & Co.
are focusing on the problems that individual investors could cause by yanking
money from funds.... 'In extremis, this could force a closing of the primary
market and have serious economic impact.'"</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Arial, Helvetica, sans-serif; font-size: large;"><span lang="EN">At a press conference
two days later, Federal Reserve Chairman Janet Yellen was asked about this
initiative and she claimed not to know anything about it. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
</div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN"><span style="font-family: Arial, Helvetica, sans-serif; font-size: large;">There are times to step aside, as best as one can (no easy task). This is
one. </span></span><span lang="EN"><o:p></o:p></span></div>
</div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.com0tag:blogger.com,1999:blog-4605342746577513015.post-52716051908946800242014-06-20T10:49:00.001-04:002014-06-20T13:28:37.367-04:00 The Full Yellen<span style="font-family: Arial, sans-serif; font-size: 10pt;">Frederick J. Sheehan is the
author of <a href="http://r20.rs6.net/tn.jsp?e=001UbpDr5ZCUhlS8pBozQEanO96AkaHog1mZMgUuGkmWU3WaQ-70Yf8sLTH8O4qH38nvFLjAWeyB8r_FE19HFLmE9FS8hpruQgOQpLnnv2-jdnxObLdTVfjBJjWVcr3M6mJUF1RZoqG5kIEMCvOScn77Hh1iCuq40qSjEOD2bqXehT6dWi8CVoHC2EETmeuMSkhGhqswck9oa4AIsdFNEYJJZjBEWvZWE8FF0PYYiE-eI2q2yHIpaSUdpQ2Aq0788sveGuOmwr9kyLG3IEpoGVE8V7H9amWTdkf92tzfwjrr2k74SpPdBSvoRdxWM_O6IIJw8cLqJZI3d2Prg5ay692p9GkNMfY2gU7tbRM9yxf774=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a
Legacy of Recession</span></a> (McGraw-Hill, 2009), which was translated
and republished in Chinese (2014). He is researching a book about Ben Bernanke.
He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001UbpDr5ZCUhlS8pBozQEanO96AkaHog1mZMgUuGkmWU3WaQ-70Yf8sLTH8O4qH38nvFLjAWeyB8rNCQ-FOel7r52Izg50TsjP_nYNeHZj3-A=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">www.AuContrarian.com</span></a>.</span><br />
<span style="font-family: Arial, sans-serif; font-size: 10pt;"><br /></span>
<br />
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;"> </span><span style="font-size: large;"><span lang="EN"> As always, there was plenty of talk after Federal Reserve Chairman
Janet Yellen held a press conference yesterday, June 18, 2014. Complaints are
heard she said nothing of substance, which is true. To what the Fed might do,
Yellen answered, "It depends."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">
In fact, there is no question what Janet Yellen will do. The Yellen Fed will
inflate until the markets tell the Fed what to do. The-then Vice Chair recited
all one needs to know on March 4, 2013, in "<a href="http://r20.rs6.net/tn.jsp?e=001UbpDr5ZCUhlS8pBozQEanO96AkaHog1mZMgUuGkmWU3WaQ-70Yf8sLTH8O4qH38nvFLjAWeyB8okLGunzOs1yuacE7POYB3tvu1HRGqcgQXVFU0k6S7247mUkHzheBIbf1u2PmPrEw_ArKxbgfvgtO7HbQp6XsJDYNUB2EZuvEg=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Challenges
Confronting Monetary Policy.</span></a>"</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">In miniature: </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"I'll begin with the Committee's
forward guidance for the federal funds rate. The FOMC has employed such forward
guidance since 2003 but has relied more heavily on it since December 2008, when
the target for the federal funds rate was reduced to its effective lower bound.
In current circumstances, forward guidance can lower private-sector
expectations regarding the future path of short-term rates, thereby reducing
longer-term interest rates on a wide range of debt instruments and also raising
asset prices, leading to more accommodative financial conditions. In addition,
given the FOMC's stated intention to sell assets only after the federal funds
rate target is increased, any outward shift in the expected date of liftoff for
the federal funds rate suggests that the Federal Reserve will be holding a
large stock of assets on its balance sheet longer, which should work to further
increase accommodation. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"Starting in March 2009, the
FOMC's postmeeting statements noted that 'economic conditions are likely to warrant
exceptionally low levels of the federal funds rate for an extended period,' and
in November of the same year added 'low rates of resource utilization, subdued
inflation trends, and stable inflation expectations' as<a href="https://www.blogger.com/null" name="f8" shape="rect">
justification for this stance." </a> In August 2011, the Committee
substituted 'at least through mid-2013' for the words "for an extended
period." This date was moved further into the future several times, most
recently last September, when it was shifted to mid-2015. Also in September,
the Committee changed the language related to that commitment, dropping the
reference to 'low rates of resource utilization and a subdued outlook for
inflation.' Instead, it emphasized that 'a highly accommodative stance of
monetary policy will remain appropriate for a considerable time after the
economic recovery strengthens,' clarifying the Committee's intention to
continue to provide support well into the recovery. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"Finally, last December, the
Committee recast its forward guidance for the federal funds rate by specifying
a set of quantitative economic conditions that would warrant holding the
federal funds rate at the effective lower bound. Specifically, the Committee
anticipates that exceptionally low levels for the federal funds rate will be
appropriate 'at least as long as the unemployment rate remains above 6-1/2
percent, inflation between one and two years ahead is projected to be no more
than a half percentage point above the Committee's 2 percent longer-run goal,
and longer-term inflation expectation<a href="https://www.blogger.com/null" name="f12" shape="rect">s continue to be
well anchored.'"</a></span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"....[T]he Committee could decide
to defer action even after the unemployment rate has declined below 6-1/2
percent if inflation is running and expected to continue at a rate
significantly below the Committee's 2 percent objective. Alternatively, the
Committee might judge that the unemployment rate significantly understates the
actual degree of labor market slack. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"....A considerable body of
research suggests that, in normal times, the evolution of the federal funds
rate target can be reasonably well described by some variant of the widely
known Taylor rule. Rules of this type have been shown to work quite well
as guidelines for policy under normal conditions, and they are familiar to
market participants, helping them judge how short-term rates are likely to
respond to changing economic conditions.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"The current situation, however,
is abnormal in two important and related ways. First, in the aftermath of the
financial crisis, there has been an unusually large and persistent shortfall in
aggregate demand. Second, use of the federal funds rate has been constrained by
the effective lower bound so that monetary policy has been unable to provide as
much accommodation as conventional policy rules suggest would be appropriate,
given the weakness in aggregate demand. I've previously argued that, in such
circumstances, optimal policy prescriptions for the federal funds rate's path
diverge notably from those of standard rules. For example, David
Reifschneider and John Williams have shown that when policy is constrained by
the effective lower bound, policymakers can achieve superior economic outcomes
by committing to keep the federal funds rate lower for longer than would be
called for by the interest rate rules that serve as reasonably reliable guides
for monetary policy in more normal times. Committing to keep the federal
funds rate lower for longer helps bring down longer-term interest rates
immediately and thereby helps compensate for the inability of policymakers to
lower short-term rates as much as simple rules would call for. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"I view the Committee's current
rate guidance as embodying exactly such a "lower for longer"
commitment...." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><br /></span></div>
<span style="font-size: large;"><br /></span>
<br />
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: large;">
Federal Reserve Chairman Janet Yellen will inflate to infinity since her mind
is incapable of grappling with an alternative. </span><span lang="EN"><o:p></o:p></span></div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.com0tag:blogger.com,1999:blog-4605342746577513015.post-31390797097263724972014-06-16T10:07:00.000-04:002014-06-16T10:07:26.473-04:00Princeton Abuses Volcker's Trust<span style="font-family: Arial, sans-serif; font-size: 10pt;">Frederick J. Sheehan is the
author of <a href="http://r20.rs6.net/tn.jsp?e=001yxW5hYmlJzxSew7RmEXpFz57lVIpr-AnIvkrldvLNd-droGESzjHgDBVZJhGNymg8zSTdYjm1Df-1eFgGnTytsNAuwDM_e1d4BuRhjH4PuCGt2y98JHgC29v21hwrCe8R5YcHUDqY_fAqOoyRQlY7J_nSmwuK01k9OvhzIp7JscReWfG3kqrcvAgtieqz2nBHA5z7YAUUi-KcCDxl-QKLDdhXmkfffu0D-AjZQoO_jsHtkBjbRPZKb08-W2r3Zc0rNXI_chUkwxxhOXhvGgpBAsBzAjXgewJCxrDokOZy7zI-LjKfdZFwciQ-cgWvkUc8rEaH11JooTE_i8tdYD5XPK7LFEg0c8ENUHhEu0yMYI=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a
Legacy of Recession</span></a> (McGraw-Hill, 2009), which was translated
and republished in Chinese (2014). He is researching a book about Ben Bernanke.
He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001yxW5hYmlJzxSew7RmEXpFz57lVIpr-AnIvkrldvLNd-droGESzjHgDBVZJhGNymg8zSTdYjm1DdQiNMLAlxpe9NCmNS8J9bAZVwRipmlXCM=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">www.AuContrarian.com</span></a>.</span><br />
<span style="font-family: Arial, sans-serif; font-size: 10pt;"><br /></span>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Former Federal
Reserve Chairman Paul Volcker (Princeton '49) returned to campus on May 30,
2014. He was treading in the devil's den and has been treated accordingly. It
is the homeport of Alan Blinder, Paul Krugman, Ben Bernanke and an arsenal of
other pint-sized sophists. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">The <i>Daily
Princetonian</i>, the campus newspaper, put words in Volcker's mouth that
betray his trust and align him with the sorry characters whose contortions he
despises. In a dialogue quoted by the <i>Daily Princetonian</i>. [All bold
throughout is mine - FJS] the paper claims Volcker said: "The
responsibility of any central bank is price stability. I was at the helm at
that time. <b>Price stability is two percent inflation</b>, which we can't
closely control anyway. They ought to make sure that they are making policies
that are convincing to the public and to the markets that they're not going to
tolerate inflation.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Price stability is <b>zero
percent</b> and Paul Volcker has consistently made this clear. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Quoting from "<u><a href="http://r20.rs6.net/tn.jsp?e=001yxW5hYmlJzxSew7RmEXpFz57lVIpr-AnIvkrldvLNd-droGESzjHgDBVZJhGNymg8zSTdYjm1DdUgYJ0zVWgmbaZ0xaDE9zkZyMS9srDcIZwmU1BQtlEPNzr8Usds-N9XJDzDsQsWDzE_7d5UBim_HruhON3noUEmw-0JXFN3ZRXHspL5gTyDw==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Transparency
has Landed</span></a></u>":</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"At the spring 2006 Grant's
Interest Rate Observer Conference, Volcker told the audience the upstarts were
a puzzle to him: '<b>A great mantra of central bankers these days is 'inflation
targeting.</b>' I don't understand that nomenclature. I didn't think central
bankers were in the business of targeting inflation. I thought we were supposed
to be targeting stability. We all say we are in favor of stability. <b>You hear
these speeches, Bernanke saying 'We are in favor of stability. That is why we
are targeting inflation.' There is a certain semantic problem for me in that
connection</b>. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"Volcker went on to say he had
returned from a central bankers' synod in Frankfurt, Germany. <b>On the topic
of inflation targeting, he believes he was the only dissenter in the room:</b>
'The debate was me on one side and all of the central bankers on the other
side.' It was explained to Volcker 'the importance of inflation targeting was
to never go above that. There was an ironclad agreement to keep the inflation
rate below that or below the target.'</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"Volcker also told his audience:
"I can remember my old professors at Harvard, in 1951 or so, saying a
little inflation is a good thing. 'We don't want very much, but 2% is
good.'" </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Paul Volcker
continues to punish "inflation targeting." On April 19, 2009, the <i>Wall
Street Journal</i> published: "Kohn, Volcker Go Toe-to-Toe on Inflation
Target." Donald Kohn was Vice Chairman of the Federal Reserve Board at the
time. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">From the <i>Journal</i>:
</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"Federal Reserve Vice Chairman
Donald Kohn's question-and-answer session at a Vanderbilt University conference
Saturday was going as countless others surely have in his years as a top policy
maker. Until Paul Volcker raised his hand. Then, Kohn was grilled over the
Fed's apparent effort to convey that it considers a roughly 2% inflation rate
to be appropriate for the economy in the long term... </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN"> </span><span lang="EN">"I don't get it," Volcker said,
leading to a lively back and forth between the two central-bank heavyweights.
</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"By setting 2% as an inflation
objective, the Fed is 'telling people in a generation they're going to be
losing half their purchasing power,' Volcker said. And if 2% is the best
inflation rate, and the economic recovery lags, does that mean that 3% becomes
the ideal rate, he asked.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN"><br />
[Interrupting the <i>Journal's</i> account - from Federal Reserve Chairman
William McChesney Martin half a century earlier, speaking to the Senate: <strong>"[Two]
percent in a year</strong> may not seem startling, in fact, during the past
year average prices have increased by more than 2 percent - but this concept of
creeping inflation implies that a price rise of this kind would be expected to
continue indefinitely. According to those who espouse this view, rising prices
would then be the normal expectation and the Federal Reserve accordingly<strong>
would no longer strive to keep the value of money</strong><b> stable</b> but
would simply try to temper the rate of depreciation. Business and business
decisions would be made in light of this prospect." Our so-called economists
can not argue against this point, so, they ignore it. This is simple
mathematics.] </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">"Kohn responded that by aiming at
2%, 'you have a little more room in nominal interest rates ... to react to an
adverse shock to the economy.'" </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">Not able to argue against simple math,
the so-called economists have conjured this entirely specious bogeyman, the
wiggle room to fight "adverse shock," that Federal Reserve Chairmen
Martin and Volcker, who ran the shop through such horrors, knew was and is a fiction
conjured by Inflationists. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">At Princeton, Paul
Volcker directed his attention to the so-called economic professors: </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">Daily Princetonian: "And does
high inflation matter as long as it's expected?"</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">Paul Volcker: "It sure does, if
the market's <b>stable</b>. And if it is expected, then everyone adjusts, and
it doesn't do you any good. <b>The responsibility of the government is to have
a stable currency.</b> This kind of stuff that you're being taught at Princeton
disturbs me. Your teachers must be telling you that if you've got expected
inflation, then everybody adjusts and then it's OK. Is that what they're
telling you? Where did the question come from?"</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Paul Volcker will now
be cited in economic papers as stating: "Price stability is two percent
inflation." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">To see how this
works, we have the hot-off-the-press IMF Working Paper: "The Case for a
Long-Run Inflation Target of Four Percent," by Lawrence Ball, June 2014.
Whoever Lawrence Ball might be, this paper is the instrument of Olivier
Blanchard, Chief Economist of the IMF, who has sought a 4% "inflation
target" to produce "stable ..." for years. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Following is the
sequence of Ball's contrivance: </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">"Once inflation
reached 4%, Volcker and his colleagues did not try to reduce it further." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Later in the paper,
Ball drew on that sentence to claim the following: "Why do today's central
bankers oppose 4% inflation when Paul Volcker did not?" </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Then, by way of those
two claims, Ball writes: "It was only around 1990 that central banks began
to target inflation rates of 2% or less." In other words, 4% was OK with
Volcker in the 1980s; it was only in the next decade central bankers decided
they should target a lower rate.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Then, of course, Ball
(Blanchard) makes the contrafactual claim: "In the United States, a four
percent inflation target would have dampened the Great Recession of
2008-9."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">This entire paper is
anti-factual, from the very start. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">In place of Ball's
(really Blanchard's) sweeping claims, the following is from the FOMC
transcript, at Paul Volcker's final meeting as Fed chairman, on July 7, 1987.
The staff forecast (at the beginning of the meeting) was of a 4.0% to 4.5%
inflation rate, with worries the rate was trending higher. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Federal Reserve
Governor Wayne Angell mentioned "one can have very modest inflation - less
than 4 percent; that's very plausible.". Chairman Volcker grumbled:
"Barely less than 4 percent." Volcker went on to say, "the
recent evidence is not very good in terms of what is happening in prices...And
a lot of hard work will come unwound."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<span style="font-size: large;"><span lang="EN" style="font-family: 'Times New Roman', serif;">Paul Volcker opposed any
inflation from 1987 up to the moment. These wicked men in positions of
authority are destroying the public's trust. Paul Volcker manned the Fed in
1979 at such a moment and he restored public faith in American institutions.
The so-called economists have destroyed the world economy beyond any
possibility of such a restoration today.</span><span lang="EN" style="font-family: 'Times New Roman', serif;"> </span></span>Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-65678670544042448402014-06-13T22:42:00.000-04:002014-06-13T22:43:28.422-04:00Greenspan in China: Not the Opera (Yet)<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><i><span lang="EN">Panderer to Power: The Untold Story of
How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession </span></i><span lang="EN">has been
translated into Chinese. Mr. <b>Fan Zhiqiang,</b></span></span><span style="color: black; font-family: Times New Roman; font-size: x-small;"><span lang="EN" style="font-size: 11pt;"> </span></span><span style="font-family: Times New Roman;"><span style="font-size: large;">the Assistant Researcher and Program Official of Fudan
University, and the Professional Translator and
Interpreter</span></span><span style="font-size: large;"> </span><span style="font-size: large;">at Fudan University in
China translated </span><i style="font-size: x-large;">Panderer</i><span style="font-size: large;">. He asked me to write an article about
Greenspan, which is below.</span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">
I wrote an introduction to the Chinese translation that can be <a href="http://r20.rs6.net/tn.jsp?e=001p_mpTICNHxbqWCS6L5zML4MviLibTwZ9Kxl1A6meaF5-NrBxm3Lg_JySNBY0rqq44P-yOKm5qeDN2AOaiY4_pjNHICBO3m9VW1RerdkbL7-0LnIh1fC75bKE4GzRwB9SEI1Symfz5bTkE0dHLSuPAcWOPltqc_vnn-i036pS86gOp_MapjCIcj-deH6mB-RL" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">read
here</span></a>.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN"> </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Mr. Fan
Zhiqiang wrote to me in May 2014: </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">"I am happy to
tell you that, on the website of <b>Fudan University Press,</b>a comprehensive
academic publishing house of key importance in China and in the World, you can
find the announcement and linkage of the Chinese version of your wonderful book
<i>Panderer to Power</i> through <a href="http://r20.rs6.net/tn.jsp?e=001p_mpTICNHxbqWCS6L5zML4MviLibTwZ9Kxl1A6meaF5-NrBxm3Lg_JySNBY0rqq44P-yOKm5qeDGwtEewe9TTEBQNqrxwe9u4EyWjFWwjPz9QWNedsldgBHwdMwAj8LcEkb5whbDeaS2G0o_nIjkxMlQUAxaaPjI" shape="rect" target="_blank" title="blocked::http://www.fudanpress.com/root/showdetail.asp?bookid=9349"><span style="color: #0563c1;">http://www.fudanpress.com/root/showdetail.asp?bookid=9349</span></a>.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">
"On May 12, I sent two of my translation books with my
signatures to your home. You may receive them within a few weeks. Both books
are published by Fudan University Press. One book is my translation of Mark
Twain's short stories. It is <b>jointly recommended by Mr. Mo Yan, the Winner
of 2012 Nobel Prize in Literature</b>, and other literature figures. [Received.
- editor] </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">"Prof. <b>BA
Shusong, the Chief Economist of China Banking Association</b>, is very famous
in the financial and economics circle and the world at large. His <b>Sina Weibo
(microblog)</b> <a href="http://r20.rs6.net/tn.jsp?e=001p_mpTICNHxbqWCS6L5zML4MviLibTwZ9Kxl1A6meaF5-NrBxm3Lg_JySNBY0rqq44P-yOKm5qeDNms917xL0M-_sITxttn3fKXPX0DUJd6IYblWlVkAPItJ1t7602C-g3NtXLTMgiSFeNmcnh5JXxOjztvxiQ34AI2mf5CNKqLM=" shape="rect" target="_blank"><span style="color: windowtext;">http://blog.sina.com.cn/s/blog_12b97ea6a0101ffqj.html#bsh-24-407900519</span></a>)
has more than 7 million fans. [Exceeds the number of <b>AuContrarian</b> fans
by over 6.9 million. - editor] Fortunately, Prof. BA Shusong has kindly
recommended my translation of <i>Panderer to Power</i> on his Sina Weibo. [This
exceeds the number of professors in the United States who wrote about <i>Panderer
to Power</i> on their websites, or anywhere else, by exactly - one. FJS] </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">"Some Chinese
websites are also publishing the book reviews of my Chinese version of your <i>Panderer
to Power. </i>For example, the <b>website of the famous Phoenix TV, a
subsidiary of US News Corporation</b>, published some comments on this book on
May 11, 2014. (Please log onto <a href="http://r20.rs6.net/tn.jsp?e=001p_mpTICNHxbqWCS6L5zML4MviLibTwZ9Kxl1A6meaF5-NrBxm3Lg_JySNBY0rqq44P-yOKm5qeAHjWJKk8-MNYv5DVw_p_krKQVRpDMSPmHFF91M3WeEsEVFS7YA5N29B_CF540Z7p98A8kTvvkQmA==" shape="rect" target="_blank" title="blocked::http://news.ifeng.com/a/20140511/40244287_0.shtml">http://news.ifeng.com/a/20140511/40244287_0.shtml</a>)</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">"Currently, it
is selling well on <b>Amazon China</b>. It was ranked No. 18 in the economics
section last week [Two weeks ago now. - FJS] according to the website <a href="http://r20.rs6.net/tn.jsp?e=001p_mpTICNHxbqWCS6L5zML4MviLibTwZ9Kxl1A6meaF5-NrBxm3Lg_JySNBY0rqq44P-yOKm5qeCEpjcplP3sXQrk8B-cFVv1s8P-eRjo6CE=" shape="rect" target="_blank"><span style="color: windowtext;">http://www.amazon.cn</span></a>.
Interested readers can buy this book through the following linkage: <a href="http://r20.rs6.net/tn.jsp?e=001p_mpTICNHxbqWCS6L5zML4MviLibTwZ9Kxl1A6meaF5-NrBxm3Lg_JySNBY0rqq44P-yOKm5qeCEpjcplP3sXQrk8B-cFVv1CdBmzPQmnY2t7v0XmtEES_Mbd7lcq6kSlxwXqHXxvEWS9q0ARgltT2avB_eEp4B2d4Z4l-nCjUWBwYLVy2VCIsNRhx0gIUu5yur_14LmdxnBKifj5Cjj2Gxge5smEhbsZl7HhfoFVybeGOqiRowdumwnm-OkxMgRL_dBMNbBlWsCE935efBLZXoPaIK1uFvx2mebZXFwV0QYJWFTvxkinNyI7eZnc5I7e8l7E_LJ6NPae7U18RKAcPT1d5FAMN-zIBb0YeJsQoYOUwd4ug-fW7TYulRd07yC30jm7X03Bg_RUp-OocpljBYO6a5ZL4OiDfZqAmB_C2wGNpTXUVGu7gbLHOjbAUm-PW8kyg86PG1viE3ehsY_4TTWqbejmg3hcpUxRt_yQN4tb6rLL5tx6m0Vv_sDVPCeMEStSYpEc5Ry_g4Pf1Jz0FM3_a90MhNR7aAx4665o870sl3TZwd05_mf-Ssxgza7sYxpaCg0NnHpVP_VvB-9ZXvLUkrg-JjKm9WuPBaADDmta76s77qshUti14wfnJjhPabI4Y-YY_5UbOvtCipgtLv9xHU7-Y2v0Nxuk9YTFwW9kV9ic_aKTPG8FolOlcBXYKzRGncKoBvov7l4owsr9eMYF8wv8LEMiap4yer0ODma6kHWBL2GNp1qo1pDjJ4MVBFpRaCmsTI=" shape="rect" target="_blank">http://www.amazon.cn/<span lang="EN-US" style="font-family: "PMingLiU","serif"; mso-bidi-font-family: PMingLiU;">权力掮客玩转华盛顿和华尔街的格林斯潘弗雷德里克</span>·<span lang="EN-US" style="font-family: "MS Mincho"; mso-bidi-font-family: "MS Mincho";">希恩</span>/dp/B00KCENMUO/ref=sr_1_1?ie=UTF8&qid=1401109079&sr=8-1&keywords=<span lang="EN-US" style="font-family: "PMingLiU","serif"; mso-bidi-font-family: PMingLiU;">权力掮客</span></a>"</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">That's the end the
good news. I will send a separate "Amazon page" that links to Amazon
China. Whether or not you plan to buy a Chinese edition of Panderer, it's
interesting to see. At least, to me. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Now to You-Know-Who: <br />
<br />
</span><span lang="EN"><o:p></o:p></span></span></div>
<div align="center" class="MsoNormal" style="text-align: center;">
<span style="font-size: large;"><b><span lang="EN">Greenspan in China</span></b><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">This book is about
the influence of Alan Greenspan. Specifically, <i>Panderer to Power: The Untold
Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession
</i>explains how Alan Greenspan was able, when he was chairman of the Federal
Reserve Board, to twist finance and the minds of the average American. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">I am not writing here
about the life of Alan Greenspan. For this article, I discuss the great
influence Alan Greenspan - through the central bank - had over Americans.
Secondarily, this is the story of how concentrated power in a few men's hands
helped only a few people. Alan Greenspan's decisions made the average person
poorer. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">A question the reader
may ask, upon reading this article, is why I have not written about the time <i>after</i>
Alan Greenspan left the Federal Reserve in January 2006. There is not room to
discuss Federal Reserve Chairmen Ben Bernanke and Janet Yellen, here. But, all
that they have done - to the United States and the rest of the world - was set
in motion by Alan Greenspan. Financial, economic, and social turmoil that has
gotten worse during the Bernanke and Yellen chairmanships finds its source in
the actions and words of Alan Greenspan </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-size: large;"><span lang="EN">
The Federal Reserve is the central bank in the United States. It sets the monetary
policy of the U.S. Since the U.S. dollar is still the currency in which most of
world trade is conducted, every other central bank in the world is restricted
in its ability to conduct a national monetary policy, <i>when</i> the Federal
Reserve is run by a reckless chairman. Under Alan Greenspan, who was Federal
Reserve chairman from 1987 to 2006, the Federal Reserve consistently held
interest rates too low by pumping more dollars into the economy than were
needed to conduct business. Some of the "extra" dollars flowed
overseas, which is how Alan Greenspan restricted the ability of central banks,
including China's, to do what it thought was the best policy for the country. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Until 1971, central
banks could not decide, by themselves or among themselves, what the world's
interest rates would be. The gold standard prohibited a handful of men (they
were all men at the time) from sitting around a conference table with such
power over the average person's life. On August 15, 1971, President Richard
Nixon announced the United States would no longer redeem currencies presented
to the United States Treasury in return for a specific amount of gold. The
result of August 15, 1971- both in the United States and abroad - was to create
tremendous distortions. (This is a necessary simplification of both the
"gold standard" and of "August 15, 1971," given the length
of this article.) </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">The 1970s was a
decade of high inflation. Once President Nixon had freed the Federal Reserve
from the discipline of a gold standard, the Fed started "making up"
monetary policy. This caused turmoil during the 1970s. The currencies (of the
United States, the European countries, and Japan) swung violently in relation
to each other as did interest rates, unemployment, and prices. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">These distortions
were reduced in the 1980s. They were not eliminated, but economists in the
United States took advantage of the average person's ignorance by saying over
and over that Paul Volcker (who was Federal Reserve Chairman from 1979 to 1987)
had "gotten rid of inflation." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">The American economists
have erased William McChesney Martin from history. Martin was the Federal
Reserve chairman from 1951 to 1970. In the 1950s, he faced increasing pressures
from university economists (mostly at Harvard) who said "the United States
economy needs to have inflation so that we can have full employment and we can
compete with other countries."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Martin said
"No." He fought the politicians, Senators, and Congressmen who wanted
the Federal Reserve to produce inflation. The Inflationists had decided the
U.S. economy needed prices to rise at a rate of 2% a year. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Why did they want
inflation at all? Because, in the short-term, if a central bank "prints
extra dollars," the politicians can use the inflated number of dollars to
spend money they would not otherwise have. This is known in the United States
as politicians "buying votes." That is not always what they are
doing. Politicians sometimes have a genuine interest in helping the people.
But, creating dollars from nothing only works in the short-term. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">On August 13, 1957,
Chairman Martin testified before the Senate Committee on Finance. Regarding the
target of a 2% institutionalized inflation rate, Martin said: "[Two]
percent may not seem startling [but] the price level would double every 35
years and the value of the dollar would be cut in half each generation. Losses
would be inflicted on millions of people, pensioners...all who have fixed
incomes.... [T]hose who would turn out to have savings in their old age would
tend to be the slick and the clever...."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Martin told the
Senators the person most likely to be injured in the inflationary cycle was the
"'hardworking and thrifty...little man' on fixed income who could protect
neither his income nor the value of his savings." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">In <i>Panderer to
Power</i>, my book about Alan Greenspan, I show how the slick and the clever
were able to concentrate and leverage paper assets over the next half-century.
No one did more to launch the slick-and-the-clever into isolated comfort,
secluded from the average American, than Alan Greenspan.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Back when William
McChesney Martin argued against the proposed 2% inflation target, he stated:
"There is no validity whatsoever that any inflation, once accepted, can be
confined to moderate proportions." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Martin said, at a
different hearing: "We are dealing with waste and extravagance,
incompetency and inefficiency, the only way we have in a free society is to
take losses from time to time. This is the loss economy as well as the profit
economy." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">That is one of the
greatest problems today, engendered by interest rates that have been too low
since the early Greenspan Years. Incompetency and waste go on and on,
subsidized by price fixing. One form of price fixing when Alan Greenspan was
chairman was to push and hold interest rates at much too low a rate. This
allowed companies to borrow money when they should have gone out of business.
By not going out of business, they made it harder for well managed companies to
earn enough money to grow, to hire more workers, or to stay in business,
themselves. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Also, by holding
interest rates too low, people were able to borrow when they did not have the
ability to pay back the loan. Alan Greenspan coaxed millions of people who
should not have bought houses into doing so. He did this to keep the U.S.
economy operating at a faster pace than it could have without the Greenspan
Fed's manipulative policies. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">The years since Alan
Greenspan started pushing interest rates too low have been very inflationary.
American economists say: "There has been no inflation." Recently,
these very well paid economists have claimed "inflation is too low." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">This is not true for
two reasons. First, the prices the average person pays (for food, gas, a
doctor, a house: the things they need) have risen much faster than their wages
have risen. That is what matters. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-size: large;"><span lang="EN">Second, prices of
assets, including stocks, bonds, houses, and commodities have risen to a
tremendous degree since Alan Greenspan became Federal Reserve chairman. Most of
these assets are owned by a small part of the American population. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<br />
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN"><span style="font-size: large;">This is not only true
in the United States, of course. There are many other reasons for the
financial, economic, and social turmoil of 2014. Without understanding the
Federal Reserve's role under Alan Greenspan in "creating" false and
distorted living standards, studies about the destruction of the monetary unit
(the dollar) and of family life in America and elsewhere ignore the elephant in
the middle of the room. </span></span><span lang="EN"><o:p></o:p></span></div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-2768310635937418172014-06-13T22:39:00.000-04:002014-06-13T22:39:05.397-04:00Greenspan Panders to Amazon.China<span style="font-size: large;"><span style="font-family: Arial;">Frederick J. Sheehan is the author of <a href="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcLnmn5uykQgnMie1uq9aa_h_h8FhzRwX_NcKK0G9cnj7Sz8ii-fwg1uWSzSBYtchwDXV2vj-jrittY6lFMTQsqPWoI9H51kCVVukjn7LOwIv9SMEvfj2dwt8cONizgS9n8Ke7Oqbos3ecmJAbABnVr3nT5LuE3oNTP_HsBB0Da_plwMFAHIIUZtfGrOJUjKQxwh_7uTTAQ28naxcXBBBkNaSZOGj4ZCiVDk_msm8hheA==" linktype="1" shape="rect" style="color: black;" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcLnmn5uykQgnMie1uq9aa_h_h8FhzRwX_NcKK0G9cnj7Sz8ii-fwg1uWSzSBYtchwDXV2vj-jrittY6lFMTQsqPWoI9H51kCVVukjn7LOwIv9SMEvfj2dwt8cONizgS9n8Ke7Oqbos3ecmJAbABnVr3nT5LuE3oNTP_HsBB0Da_plwMFAHIIUZtfGrOJUjKQxwh_7uTTAQ28naxcXBBBkNaSZOGj4ZCiVDk_msm8hheA==" track="on">Panderer to Power: The Untold
Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession
</a>(McGraw-Hill, 2009) and co-author, with
William A. Fleckenstein of <a href="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcLnmn5uykQgnMie1uq9aa_DifMBfvhirQIofeUgmGo99qkP9vuRf4SwLK4T5i5a_qq9AzoGqjuEIzHxZHi5itIi3nkHhBbcbCNDAPa5de0rs57t3EI7N0wWKWgcAdfGVqizIuedtDlSv8T7ZFvEbOnmYYDyn2M8Q3Ah5yRZsujlUFemaI8Mg5sCovk_mLotJu1DpwuttSOFuL9dBMm8MCIH1Har7yLyiyIoNeTy7SLga_ynSwra6RFQBlJ1inihcQ=" linktype="1" shape="rect" style="color: black;" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcLnmn5uykQgnMie1uq9aa_DifMBfvhirQIofeUgmGo99qkP9vuRf4SwLK4T5i5a_qq9AzoGqjuEIzHxZHi5itIi3nkHhBbcbCNDAPa5de0rs57t3EI7N0wWKWgcAdfGVqizIuedtDlSv8T7ZFvEbOnmYYDyn2M8Q3Ah5yRZsujlUFemaI8Mg5sCovk_mLotJu1DpwuttSOFuL9dBMm8MCIH1Har7yLyiyIoNeTy7SLga_ynSwra6RFQBlJ1inihcQ=" track="on">Greenspan's Bubbles: The Age of
Ignorance at the Federal Reserve.</a> He is researching a book about Ben
Bernanke. </span><span style="font-family: Verdana, sans-serif;">He
writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcvXW7dSIKNhXNfLIzP0QLgAq6R9M527yM=" linktype="1" shape="rect" style="color: black;" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcvXW7dSIKNhXNfLIzP0QLgAq6R9M527yM=" track="on">www.AuContrarian.com</a>.</span><span style="font-family: Verdana, sans-serif;"> </span></span><br />
<span style="font-family: Verdana, sans-serif;"><span style="font-size: large;"><br /></span></span>
<span style="font-size: large;"><span lang="EN">The following was written by Mr. Fan Zhigiang,
</span>the Assistant Researcher and Program
Official of Fudan University, and the Professional Translator and
Interpreter at Fudan University in China,
who translated <i>Panderer</i><span lang="EN">,
sent me the link to <i>Panderer to Power: The Untold Story of How Alan Greenspan
Enriched Wall Street and Left a Legacy of Recession: </i></span> </span><br />
<br />
<div style="margin: 0in 0in 0pt; text-indent: 0.5in;">
<span style="font-size: large;">"I am happy to tell you that, on the website of <b>Fudan University Press,</b>a comprehensive
academic publishing house of key importance in China and in the World, you can find the announcement and linkage of the Chinese
version of your wonderful book <i>Panderer to Power</i> through <a href="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcgZ_ZZjMBuH-MCXwIJshAYmxiPfl6XZs-_ubZTLhSgFIDzmxbGJksmAzqesVsyqGTZBGazGBVF7t9lhCLasGl7" shape="rect" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcgZ_ZZjMBuH-MCXwIJshAYmxiPfl6XZs-_ubZTLhSgFIDzmxbGJksmAzqesVsyqGTZBGazGBVF7t9lhCLasGl7
http://www.fudanpress.com/root/showdetail.asp?bookid=9349 blocked::http://www.fudanpress.com/root/showdetail.asp?bookid=9349"><span style="color: #0563c1;" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcgZ_ZZjMBuH-MCXwIJshAYmxiPfl6XZs-_ubZTLhSgFIDzmxbGJksmAzqesVsyqGTZBGazGBVF7t9lhCLasGl7
http://www.fudanpress.com/root/showdetail.asp?bookid=9349">http://www.fudanpress.com/root/showdetail.asp?bookid=9349</span></a>.</span></div>
<div style="margin: 0in 0in 0pt; text-indent: 0.5in;">
<br /></div>
<div style="margin: 0in 0in 0pt;">
<span style="font-size: large;"> "On May
12, I sent two of my translation books with my signatures to your home. You may
receive them within a few weeks. Both books are published by Fudan University
Press. One book is my translation of Mark Twain's short stories. It is jointly
<b>recommended by Mr. Mo Yan, the Winner of 2012 Nobel Prize in Literature</b>,
and other literature figures.</span></div>
<div style="margin: 0in 0in 0pt;">
<br /></div>
<div style="text-indent: 0.5in;">
<span style="font-size: large;">"Prof. <b>BA Shusong, the Chief Economist of China
Banking Association</b>, is very famous in the financial and economics circle
and the world at large. His <b>Sina Weibo (microblog)</b> <a href="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BffRh_nsS_j2JfPPj5AuEZVVr7_uhjobC__M_P05W4Fa4HQhSPZN6BryED25cGJ-70Hz0W_6IjUmaZGja_abXCbbvl7htFpuhU=" shape="rect" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BffRh_nsS_j2JfPPj5AuEZVVr7_uhjobC__M_P05W4Fa4HQhSPZN6BryED25cGJ-70Hz0W_6IjUmaZGja_abXCbbvl7htFpuhU=
http://blog.sina.com.cn/s/blog_12b97ea6a0101ffqj.html#bsh-24-407900519"><span style="color: windowtext;" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BffRh_nsS_j2JfPPj5AuEZVVr7_uhjobC__M_P05W4Fa4HQhSPZN6BryED25cGJ-70Hz0W_6IjUmaZGja_abXCbbvl7htFpuhU=
http://blog.sina.com.cn/s/blog_12b97ea6a0101ffqj.html#bsh-24-407900519">http://blog.sina.com.cn/s/blog_12b97ea6a0101ffqj.html#bsh-24-407900519</span></a>)
has more than 7 million fans. Fortunately, Prof. BA Shusong has kindly
recommended my translation of <i>Panderer to Power</i> on his Sina
Weibo.</span></div>
<br />
<div style="text-indent: 0.5in;">
<span style="font-size: large;">"Some Chinese websites are also publishing the book
reviews of my Chinese version of your <i>Panderer to Power. </i>For example, the
<b>website of the famous Phoenix TV, a subsidiary of US News Corporation</b>,
published some comments on this book on May 11, 2014. (Please log onto <a href="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BeeXDcfXUFGdj1lZKRjDv8TXi4dcSD4GmcfUt5P8Ix-P4vocOooJNHFBxeTcZHUsL7ZHKaDqJc6Ww==" shape="rect" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BeeXDcfXUFGdj1lZKRjDv8TXi4dcSD4GmcfUt5P8Ix-P4vocOooJNHFBxeTcZHUsL7ZHKaDqJc6Ww==
http://news.ifeng.com/a/20140511/40244287_0.shtml blocked::http://news.ifeng.com/a/20140511/40244287_0.shtml">http://news.ifeng.com/a/20140511/40244287_0.shtml</a>)</span></div>
<div style="text-indent: 0.5in;">
<br /></div>
<div align="center" style="text-align: center;">
<br /></div>
<div align="left">
<span style="font-size: large;">"Currently, it is selling well on</span></div>
<div align="left">
<span style="font-size: large;"><b>Amazon China</b>. It was ranked No.
18 in the economics section last week according to the website <a href="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcLnmn5uykQgnO9HmCLrItelqvvzhOou3Q=" shape="rect" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcLnmn5uykQgnO9HmCLrItelqvvzhOou3Q=
http://www.amazon.cn/"><span style="color: windowtext;" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcLnmn5uykQgnO9HmCLrItelqvvzhOou3Q=
http://www.amazon.cn/">http://www.amazon.cn</span></a>. Interested readers
can buy this book through the following linkage: <a href="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcLnmn5uykQgnO9HmCLrIteIvJvnWH-4Xipt3ZVsjdG_DoEed9VulbVAe1WAWPq6x__f6yn4GfWCs8L9Fa1gM3zUgKbQ3EywaTfg4X6rkG9CjiGugELktAK9l3eXH-2Im1Y3nGqqQCz_iqns0MWQfIe4zu9a082to5T3lKVBhNyYyx3jsw_LkVEXBC81uevl2xv0vuUoknuniHunZW_tSzo8TIsGCkmpi9Cv_7P8CRwdhQ5aNI80Cy2mMHJXpTsf17Y-ClcqO7m_saD_9DlAebP6UNKrCkIyM380B2ptvX0aMrCdaZPP-FDD--FG3kqDwG-_HFSjuFbzSJ7Am_5fidl0FzQ3Uv-PIdJ32SPdFPXRoVl9B4Q4lwJt-IHzWK9AjFv4E1xi_rGRJoobSvJ_Hdj6zbIsY-yq4XtYbzYojqTxT_QaKzJuhK9qkJoq54r2FzyW5Y0KItUlEuj0K5Ag-us_p8uOY4DPDTRyZkahINKG1BgL7tE6CHN2FRQg-HaWoyovk0jQfSNYOKZ2vJ6owmCoO0t3qoS1bYXvfVdHdAtbmTl0xlLj68Q1FdOxO4W5w4pCT0Dh50JxxtwYqGURL6Erq5cYbph5UxtLyqEM2vjTPsxSulvF616QK9Nix9kI_0t1TIW1M2HsHnqKC4FjA3GLrYMzh6_bnyW8dq6hOz24ljr_6oCLisXY_jQuV4FTVPYXBkVTo5OoOVkl4uD_Uki1Qs11QD9vBhs6ZriZ-V36A==" shape="rect" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcLnmn5uykQgnO9HmCLrIteIvJvnWH-4Xipt3ZVsjdG_DoEed9VulbVAe1WAWPq6x__f6yn4GfWCs8L9Fa1gM3zUgKbQ3EywaTfg4X6rkG9CjiGugELktAK9l3eXH-2Im1Y3nGqqQCz_iqns0MWQfIe4zu9a082to5T3lKVBhNyYyx3jsw_LkVEXBC81uevl2xv0vuUoknuniHunZW_tSzo8TIsGCkmpi9Cv_7P8CRwdhQ5aNI80Cy2mMHJXpTsf17Y-ClcqO7m_saD_9DlAebP6UNKrCkIyM380B2ptvX0aMrCdaZPP-FDD--FG3kqDwG-_HFSjuFbzSJ7Am_5fidl0FzQ3Uv-PIdJ32SPdFPXRoVl9B4Q4lwJt-IHzWK9AjFv4E1xi_rGRJoobSvJ_Hdj6zbIsY-yq4XtYbzYojqTxT_QaKzJuhK9qkJoq54r2FzyW5Y0KItUlEuj0K5Ag-us_p8uOY4DPDTRyZkahINKG1BgL7tE6CHN2FRQg-HaWoyovk0jQfSNYOKZ2vJ6owmCoO0t3qoS1bYXvfVdHdAtbmTl0xlLj68Q1FdOxO4W5w4pCT0Dh50JxxtwYqGURL6Erq5cYbph5UxtLyqEM2vjTPsxSulvF616QK9Nix9kI_0t1TIW1M2HsHnqKC4FjA3GLrYMzh6_bnyW8dq6hOz24ljr_6oCLisXY_jQuV4FTVPYXBkVTo5OoOVkl4uD_Uki1Qs11QD9vBhs6ZriZ-V36A==
http://www.amazon.cn/权力掮客%20玩转华盛顿和华尔街的格林斯潘弗雷德里克·希恩/dp/B00KCENMUO/ref=sr_1_1?ie=UTF8&qid=1401109079&sr=8-1&keywords=权力掮客">http://www.amazon.cn/<span lang="ZH-CN" style="font-family: SimSun;" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcLnmn5uykQgnO9HmCLrIteIvJvnWH-4Xipt3ZVsjdG_DoEed9VulbVAe1WAWPq6x__f6yn4GfWCs8L9Fa1gM3zUgKbQ3EywaTfg4X6rkG9CjiGugELktAK9l3eXH-2Im1Y3nGqqQCz_iqns0MWQfIe4zu9a082to5T3lKVBhNyYyx3jsw_LkVEXBC81uevl2xv0vuUoknuniHunZW_tSzo8TIsGCkmpi9Cv_7P8CRwdhQ5aNI80Cy2mMHJXpTsf17Y-ClcqO7m_saD_9DlAebP6UNKrCkIyM380B2ptvX0aMrCdaZPP-FDD--FG3kqDwG-_HFSjuFbzSJ7Am_5fidl0FzQ3Uv-PIdJ32SPdFPXRoVl9B4Q4lwJt-IHzWK9AjFv4E1xi_rGRJoobSvJ_Hdj6zbIsY-yq4XtYbzYojqTxT_QaKzJuhK9qkJoq54r2FzyW5Y0KItUlEuj0K5Ag-us_p8uOY4DPDTRyZkahINKG1BgL7tE6CHN2FRQg-HaWoyovk0jQfSNYOKZ2vJ6owmCoO0t3qoS1bYXvfVdHdAtbmTl0xlLj68Q1FdOxO4W5w4pCT0Dh50JxxtwYqGURL6Erq5cYbph5UxtLyqEM2vjTPsxSulvF616QK9Nix9kI_0t1TIW1M2HsHnqKC4FjA3GLrYMzh6_bnyW8dq6hOz24ljr_6oCLisXY_jQuV4FTVPYXBkVTo5OoOVkl4uD_Uki1Qs11QD9vBhs6ZriZ-V36A==
http://www.amazon.cn/权力掮客%20玩转华盛顿和华尔街的格林斯潘弗雷德里克·希恩/dp/B00KCENMUO/ref=sr_1_1?ie=UTF8&qid=1401109079&sr=8-1&keywords=权力掮客">权力掮客</span><span lang="ZH-CN" style="font-family: SimSun;" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcLnmn5uykQgnO9HmCLrIteIvJvnWH-4Xipt3ZVsjdG_DoEed9VulbVAe1WAWPq6x__f6yn4GfWCs8L9Fa1gM3zUgKbQ3EywaTfg4X6rkG9CjiGugELktAK9l3eXH-2Im1Y3nGqqQCz_iqns0MWQfIe4zu9a082to5T3lKVBhNyYyx3jsw_LkVEXBC81uevl2xv0vuUoknuniHunZW_tSzo8TIsGCkmpi9Cv_7P8CRwdhQ5aNI80Cy2mMHJXpTsf17Y-ClcqO7m_saD_9DlAebP6UNKrCkIyM380B2ptvX0aMrCdaZPP-FDD--FG3kqDwG-_HFSjuFbzSJ7Am_5fidl0FzQ3Uv-PIdJ32SPdFPXRoVl9B4Q4lwJt-IHzWK9AjFv4E1xi_rGRJoobSvJ_Hdj6zbIsY-yq4XtYbzYojqTxT_QaKzJuhK9qkJoq54r2FzyW5Y0KItUlEuj0K5Ag-us_p8uOY4DPDTRyZkahINKG1BgL7tE6CHN2FRQg-HaWoyovk0jQfSNYOKZ2vJ6owmCoO0t3qoS1bYXvfVdHdAtbmTl0xlLj68Q1FdOxO4W5w4pCT0Dh50JxxtwYqGURL6Erq5cYbph5UxtLyqEM2vjTPsxSulvF616QK9Nix9kI_0t1TIW1M2HsHnqKC4FjA3GLrYMzh6_bnyW8dq6hOz24ljr_6oCLisXY_jQuV4FTVPYXBkVTo5OoOVkl4uD_Uki1Qs11QD9vBhs6ZriZ-V36A==
http://www.amazon.cn/权力掮客%20玩转华盛顿和华尔街的格林斯潘弗雷德里克·希恩/dp/B00KCENMUO/ref=sr_1_1?ie=UTF8&qid=1401109079&sr=8-1&keywords=权力掮客">玩转华盛顿和华尔街的格林斯潘弗雷德里克</span>·<span lang="ZH-CN" style="font-family: SimSun;" title="http://r20.rs6.net/tn.jsp?e=001d5lg9_HLR9Iq8Sq2dT8iXII-rE24HyOk56IhEaTbAAoT9GjIgUQ_3OSU5tFJTDoMemuoNf8z9BcLnmn5uykQgnO9HmCLrIteIvJvnWH-4Xipt3ZVsjdG_DoEed9VulbVAe1WAWPq6x__f6yn4GfWCs8L9Fa1gM3zUgKbQ3EywaTfg4X6rkG9CjiGugELktAK9l3eXH-2Im1Y3nGqqQCz_iqns0MWQfIe4zu9a082to5T3lKVBhNyYyx3jsw_LkVEXBC81uevl2xv0vuUoknuniHunZW_tSzo8TIsGCkmpi9Cv_7P8CRwdhQ5aNI80Cy2mMHJXpTsf17Y-ClcqO7m_saD_9DlAebP6UNKrCkIyM380B2ptvX0aMrCdaZPP-FDD--FG3kqDwG-_HFSjuFbzSJ7Am_5fidl0FzQ3Uv-PIdJ32SPdFPXRoVl9B4Q4lwJt-IHzWK9AjFv4E1xi_rGRJoobSvJ_Hdj6zbIsY-yq4XtYbzYojqTxT_QaKzJuhK9qkJoq54r2FzyW5Y0KItUlEuj0K5Ag-us_p8uOY4DPDTRyZkahINKG1BgL7tE6CHN2FRQg-HaWoyovk0jQfSNYOKZ2vJ6owmCoO0t3qoS1bYXvfVdHdAtbmTl0xlLj68Q1FdOxO4W5w4pCT0Dh50JxxtwYqGURL6Erq5cYbph5UxtLyqEM2vjTPsxSulvF616QK9Nix9kI_0t1TIW1M2HsHnqKC4FjA3GLrYMzh6_bnyW8dq6hOz24ljr_6oCLisXY_jQuV4FTVPYXBkVTo5OoOVkl4uD_Uki1Qs11QD9vBhs6ZriZ-V36A==
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<img border="0" hspace="5" name="ACCOUNT.IMAGE.21" src="https://origin.ih.constantcontact.com/fs102/1102078752130/img/21.png" style="font-size: 10pt;" vspace="5" width="578" /><span style="font-size: 10pt; text-align: center;"> </span>
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Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-46983202821627964202014-06-09T10:01:00.002-04:002014-06-09T10:01:43.937-04:00May 2014 - Crematorium <div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Arial, sans-serif; font-size: 10pt;">Frederick J. Sheehan is the
author of <a href="http://r20.rs6.net/tn.jsp?e=001iyYGG2Tr8IP09M0RwHeGibV7QET1UCTPrGFeOYgxfHLJXEby0SCZ9dGjZel6_UF2aPxucdnE1ykCIqLm-enpxprdZbCbXX42Y8retYc18OII5NWohX9NXRh9-yRUF_DpchkWcy8-btyr1esOJ4AyeCUMpJQbYZfJoM1GR8N5P-ciAJBjjx_edQckX3lNE5Jx5l-jidaZCkm0bawdpG0_qSi0rpQpvxupCczxu3j6-zy4Hmy-UKYvb_E3EyXqPdF-7I3T29KrV0QV3Mwk0AWyAo2SDTMR1oTQM6TScsm3L9SxkRw9f5lyfbb7NkjoXT8NpwmFwFaGWaonLm48onmMVJ2ZUUu5-KBMNdnVUgUd-eg=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a
Legacy of Recession</span></a> (McGraw-Hill, 2009), which was translated
and republished in Chinese (2014). He is researching a book about Ben Bernanke.
</span><span style="font-family: Verdana, sans-serif; font-size: 10pt;">He writes a blog at <a href="http://r20.rs6.net/tn.jsp?e=001iyYGG2Tr8IP09M0RwHeGibV7QET1UCTPrGFeOYgxfHLJXEby0SCZ9dGjZel6_UF2aPxucdnE1ymlP0eV0sSLSIkcuLyVAWZYVwdT5-MzS7Y=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">www.AuContrarian.com</span></a>. </span><o:p></o:p></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Verdana, sans-serif;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">"Groups of women were crushing each other..., a real mob, more brutal
for covetousness....the furnace-like heat with which the shop was ablaze came
above all from the selling, from the bustle at the counters... There was
the continuous roar of the machine at work, of customers crowding into the
departments, dazzled by the merchandise and then propelled towards the
cash-desk. And it was all regulated and organized with the remorselessness of a
machine: the vast horde of women were as if caught in the wheels of an
inevitable force."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 2.0in; margin-right: 0in; margin-top: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Émile Zola: <i>The</i> <i>Ladies' Paradise </i>(1883)</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN"> The
furnace-like roar to prevent financial immolation must move faster all the
time. The <i>Wall Street Journal </i>reported in April that "Xie
Daoliang's business survives by trading almost exclusively in a virtual
currency, but not by choice. Mr. Xie makes bulldozer treads and other parts for
heavy machinery. These days, when he makes a sale he seldom gets paid in cash.
Instead, he gets a piece of paper with a value printed on it and a promise from
a bank that it will pay at an arranged point in the future. In China's economic
slowdown, businesses are having troubles paying suppliers, and banks are
getting shy about lending, so cash is scarce. The notes-a form of IOUs known as
acceptance drafts - are increasingly being used instead, and Mr. Xie says they
really get around... 'At the moment, there's no cash. It's all just bills,'
says Mr. Xie... 'It's unreasonable.' Acceptance drafts, which are similar to
postdated checks but are guaranteed by a bank or state-owned enterprise, have
been a fixture of trade in China for years. But corporate treasurers, chief
financial officers, people at small loan firms and analysts say that as the
economy slows, cutting into companies' sales, the bills are being passed around
more and more. Driving the exchange of paper, analysts say, is an
unwillingness, or inability, by banks to meet demand for cash loans, especially
from smaller companies. 'The credit transmission mechanism is breaking, or even
broken,' said Leland Miller, president of the China Beige Book, a quarterly
survey of Chinese businesses and banks. 'Firms are having a difficult time
getting access to funding, and for small firms it's extraordinarily
difficult.'"</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">A "credit
transmission mechanism [that] is breaking, or even broken," is no way to
run a financial economy. A constant infusion, whirling at a faster pace,
sustains the world's flagging non-financial economy. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Two weeks before the
stock market crash in 1929, the <i>New Yorker</i> described to its readers the
feverish levels of real-estate speculation and desperation: "[M]any
contractors of estimable standing are ready to take over the 'secondary
financing' of not-too-large operations, meaning they will put up most of the
cash necessary to complete the building, over and above what the first mortgage
provides. They do this in order to keep their operation from falling apart.
This loan for the building, which is really a second mortgage, is discounted at
some 'big, friendly bank', so that the contractor's money is not tied up after
all..." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Without further
knowledge it is not possible to know the terms under which the big, friendly
bank made the loan. What was the collateral? It is almost certain the
collateral booked by the bank received less scrutiny than in 1925 or 1935. The
loan for the building (which may never have been built) was expected to move
off the books at a profit and at a speed that would prevent the censure of an
internal or external audit. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Regarding Mr. Xie's
cashless world; it is in a fix: "Trouble in Chinese property also has
implications for the country's financial system, in particular the shadow
banking sector, which has lent huge amounts to developers and relies on
highly-priced land for collateral... In an indication of just how exposed
China's economy is to a property downturn, Moody's... estimates that the
building, sale and outfitting of apartments accounted for 23% of Chinese gross
domestic product in 2013." (<i>Financial Times</i>, May 13, 2014)</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">The October 1929
furnace-like roar was past the commercial building credit peak (though, not
past the building peak.) Sources from the time can be contradictory, but
support that conclusion. Estimates showed $675,000,000 of real estate bonds had
been sold in the United States in 1925. That was "an increase of more than
1,000 per cent since 1920." Later, calculations would show $54 million
were issued in 1921, $752 million in 1925 and $833 million in 1928 - the peak:
before $395 million in 1929. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">When mortgage-making
was accelerating in 2005, faster securitization and deal-making prevented the
"real" economy from collapsing. The real economy was missing all the
fun. The Bank for International Settlements (BIS - the central bankers' central
bank) made this clear in a 1993 report: "Financial liberalization,
innovation and other structural changes in the 1980s created an environment in
which excess liquidity and credit were channeled to specific groups and
markets. These include large institutions, high-income earners and wealthy
individuals, who responded to the incentives associated with the changes. These
groups borrowed to accumulate assets in global markets - such as real estate,
corporate equities, art, commodities, silver and gold - where the excess credit
was apparently recycled several times over."</span></span><span style="font-family: Times, 'Times New Roman', serif; font-size: large; text-indent: 0.5in;"><br /> On
Nov. 12, 2013, in London, "Francis Bacon's three-paneled painting 'Three
Studies of Lucian Freud' became the most expensive work of art ever sold at
auction on Tuesday when it soared to $142.4 million at Christie's." Two
days later, in New York, Andy Warhol" set a new all-time record in the
pop-artist field, when his "Silver Car Crash (Double Disaster)" sold
at NYC auction for $105 million.</span><span style="font-family: Times, 'Times New Roman', serif; font-size: large; text-indent: 0.5in;"><br /> On
the same day, Narayana Kocherlakota, President of Federal Reserve Bank of
Minneapolis spoke on his home turf. He did his best to boost Christie's stock
price: "The Federal Open Market Committee is currently buying $85 billion
of long-term assets per month. Recently, there has been an ongoing public
conversation about the possibility that the FOMC might reduce its current flow
of long-term asset purchases over the next year. The FOMC's asset purchases
push down long-term interest rates, and encourage consumers to spend...."
Kocherlakota lost the $85 billion battle. When the stock market falls 20%, the
FOMC will double the wager.</span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">E</span><span lang="EN">ight days after Kocherlakota fired his salvo
at battered consumers, he fired his top two researchers for speaking the truth.
That was the indictment of the <i>Minneapolis Star Tribune</i>: "President
Narayana Kocherlakota fires his best economists because they spoke the
truth." The newspaper reported: "The departing economists are Patrick
Kehoe and Ellen McGrattan, both highly regarded researchers with long tenures
in Minneapolis." (From <i>Bloomberg Economic Briefs</i>: "Minneapolis
Fed departing economists Patrick Kehoe and Ellen McGrattan collaborated on a
2008 Minneapolis Fed paper that challenged the efficacy of New Keynesian models
in conducting monetary policy analysis. 'Some macroeconomists think that New
Keynesian models are on the verge of being useful for quarter-to-quarter
quantitative policy advice. We do not. We argue that the shocks in these models
are dubiously structural and show that many of the features of the model as
well as the implications due to these features are inconsistent with
microeconomic evidence. These arguments lead us to conclude that New Keynesian
models are not yet useful for policy analysis.'")</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN"> Given
the brittle state of finance, it is less perplexing - still, indictable, but
less perplexing - that, three days after Kocherlakota's reckless statement,
Chicago Fed President Charlie Evans announced the "Federal Reserve should
step outside its comfort zone and take a few chances." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">The tinder could go up in a flash. In 2012, Miami
property developer Martin Marquiles found a big, friendly bank to lend $80
million for a construction loan. His 24-story condominium project ("The
Bellini") was backed by 59 paintings (the usual: Jackson Pollack, Mark
Rothko, Jasper Johns). That was two years ago. "[T]oday, the list of
accepted collateral has expanded," reports the <i>Wall Street Journal</i>.
"Steve McQueen motorbikes, Fender guitars... even super yachts and
high-speed aircraft have raced onto the list." Luxury watches, jewelry,
bottles of rare wine are "being [promoted as collateral]... by banks and
auction houses." A Bank of America "credit executive" (name
withheld to avoid future embarrassment) turns this collateral into "loans
[that] can range from $3 million to $56 million in value." This is going
to turn out well, for someone, not for the Bank of America. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Those planning to sell heirlooms should not tarry. The
mushroom cloud may keep spreading, but, if past is prologue, when finance
stops, the price for stuff vanishes. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">On September 26, 2008 - a little over
a week after the Lehman failure - the <i>Journal</i> reported: "Wall
Street's Woes Hit Highest End." Today, as in 2008, the lower end of the
housing market had already come undone. "For months, as housing
values were falling for midsize ranch houses in Stockton, Calif., and Las Vegas
high-rises, sales of high-end properties in financial centers like London, New
York and San Francisco continued to percolate along. But that was before
last week, when turmoil in the credit markets brought down Lehman Brothers
Holdings and imperiled thousands of high-paying jobs. While those rare
properties priced at $20 million or more are still holding up, there are signs
that the crisis is exacerbating a downturn that was already plaguing properties
in the $2 million to $10 million range, a market often sought by Wall Street
workers, Since last Thursday, there have been 200 price cuts on properties
listed at less than $10 million on Manhattan's Upper East Side or Upper West
Side - a 17% jump from the week before. Deanna Kory, a broker with New
York-based Corcoran Group who's handling nearly two-dozen properties priced
between $2 million and $10 million, says her showings are down by about 40% in
the last two weeks compared to the same time last year. A slew of new buildings
set to open in the next year will only increase supply."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">At the infamous
September 16, 2008, FOMC gathering, Federal Reserve economist Dave Stockton
presented the house view: "I don't think we've seen a significant change in
the basic outlook. "We're still expecting a very gradual pickup in GDP
growth over the next year." "I don't really have anything useful
to say about the economic consequences of the financial developments of the
past few days." If the meeting is not infamous yet, it will be. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">By January 2009, New
York was going dark - literally. Half the Broadway theatres <i>were</i> dark by
the end of January. Upper end restaurants closed. If not for the Federal
Reserve's miracle madness in March 2009 - who knows how far this would have
gone? The next time around, we may find out. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Ben S. Bernanke assumed the Federal Reserve throne in
January 2006. He was worse than useless. Worse, for one thing - and this is
only one of 6,000 reasons - his fabricated reconstruction of the 2008
financial meltdown was exactly bureaucratic: take no blame, take more control
"so it will not happen again," and build the bureaucracy that did not
need to be rebuilt. "If we only had more regulation" he whined. Now
we have it. "If only Bernanke listened to the bureaucracy that existed in
2006, the bust never would have occurred," should be the message on placards
in front of the Eccles building. (Granted, these would be huge placards.
Concision may follow.) The Comptroller of the Currency calculated that
credit risk rose for 5% of the banks making leveraged loans in 2005. In 2006,
it rose for 69% of banks in the market. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Since Bernanke ignored the regulators, he might, at
least, have read a newspaper. Banks did as they pleased, which is to say, their
own pursuits developed in an <i>ad hoc</i> nature second only to the Federal
Reserve's<i> ad hoc </i>policy. "If borrowers and lenders alike agree the
corporate debt boom can't last, why isn't anyone stopping it?" On March
28, 2007, the <i>Wall Street Journal</i> answered its own question:
"Hedge-fund managers, buyout artists, and bankers get paid for short-term
performance. The long-term consequences of their actions are, conveniently,
someone else's problem. People inside the big banks.... don't want to get
caught missing the next big deal. Their banks, and their own bonuses, might
suffer. So they ply ahead." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">A 2004 OFHEO report cited a "March 1999 memorandum
from an employee in the Controller's Department [that] described the benefits
of a particular brand of software for modeling amortization, noting the
software allowed a user to 'manipulate factors to produce an array of recognition
streams,' which 'strengthens the earnings management that is necessary when
dealing with a volatile book of business.'" </span><span lang="EN" style="color: #111111;">The models purchased by Fannie Mae were corrupt. Given
how models are worshipped, it's a wonder they weren't thrown in jail for bogus
bonuses paid at Fannie Mae.</span></span><span style="font-family: Times, 'Times New Roman', serif; font-size: large; text-indent: 0.5in;"><br /> In
2014, New York real estate is moving faster than Florida swamps in 1925. The
velocity of collateral is stationed at the upper end. Day-trading is back. A
family townhouse in Bedford-Stuyvesant (Brooklyn) was sold for $1.2 million on
February 21, 2014 and re-sold one week later for $1.85 million. House sales in
the Hamptons rose 52% in the first quarter of 2014 (from the first quarter of
2013 - when "the worst winter of the millennium" was not an excuse).
The '$5 million and above' trades rose from eight to 37. On May 21,
24/7wallst.com published: "The 10 Best Cities to Flip a House."</span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Bigger and faster deals must get bigger and faster. Real
estate must accelerate. (Really, the paper - mortgages and their securitization,
is what must accelerate. There do not have to be any houses at all, and,
someday, we may just find the paper market was so detached from wood and brick,
that was largely true. Someday, the world will be astonished at what it did not
want to know in 2014.) </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Fifty-billion dollar deals are not exceptional anymore,
except to all the employees who get laid off to pay down the acquired debt. On
May 21, 2014, Tom Keene at Bloomberg, asked Ellen Zentner, an economist at
Morgan Stanley: "</span><span lang="EN">We continue to see M&A frenzy. All this transactional
stuff we're seeing, is this good?" Zentner responded: "I think
everyone wants to see increased M&A activity. It's signs of a healthy
market."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Everyone, at least in the Morgan Stanley M&A department.
Those falling out of the real economy may disagree. That would include the
employees who will soon be looking for work after the shuttering of 300
Blockbuster, 300 Sears, 225 Staples, 223 Barnes & Noble, 200 Radio Shack,
180 Abercrombie & Fitch, 175 Aeropostale, 155 Sbarro, 150 American Eagle,
150 Rent-A-Center, 145 Brown shoes/ Famous Shoes stores.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">In May 2014, Federal Reserve Chairman Janet Yellen
delivered an unspeakable graduation address to the NYU seniors at Yankee
Stadium. According to MarketWatch, most of the graduates had never heard of the
Governor, one graduate telling the reporter she was being very offensive to ask
such a question, which is just <i>sooo</i> 2014. In other developments on the
campus, the Harvard Corporation was one of the few to display leadership
(again, in 2014) when it prevented graduates' from holding their satanic black
mass in Memorial Hall. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Instead Janet Yellen held a Black Mass at Yankee Stadium,
extolling the heroism of the Galloping Gourmet, Ben Bernanke, who in Yellen's
fantasy: "demonstrated such courage... [H]e took courageous actions that
were unprecedented in ambition and scope. [Bernanke's actions <i>were</i> "unprecedented
in ambition and scope." - FJS] He faced relentless criticism, personal
threats, and the certainty that history would judge him harshly if he was
wrong." Oh it will, Janet, and you are doing just what is required to
clarify History's ambiguities. Keep pushing the huddled masses to spend and
speculate on markets rigged by the Federal Reserve for the one percent. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Keynesian economics
did not go far when it was first peddled to the public in the mid-1930s. In <i>Frozen
Desire</i>, James Buchan wrote, at the heart of Keynes' <i>General Theory</i>,
"the old private virtues (prudence, thrift, kindness) are public
vices." Keynes, like most reformers, grew to loath the people he had
decided to reform. His Holiness discovered the unwashed were hopeless. Despite
Keynes' instructions in <i>The General Theory</i>, the public still wanted to
make money and save. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">The lifelong currency
speculator asserted: "The love of money as a possession....is a somewhat
disgusting morbidity, one of those semi-criminal, semi-pathological
propensities which one hands over with a shudder to the specialists in mental
disease." From the autobiography of Felix Somary, <i>The Raven of Zurich</i>:
"Keynes biographer praises him for his prescience about the coming crash.
I could quite clearly prove the opposite. ...Keynes, who was even then a widely
praised individual, made an odd impression on me. He expressed contempt for economics
as a science, and for individual economists, not excluding himself; but was
obviously very proud of his talents as a speculator."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Buchan went on to
express his own confusion: "I don't know which is preferable: to ignore
the avarice that is the chief feature of modern society, or to wish it away! In
attempting to restore the ethical component to political economy, Keynes turned
virtue on its head: his economics are a sort of Black Mass." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN"> There is
no hiding from the Keynesian Black Mass. In Europe, ECB President Mario Draghi
played with his puppets before declaring credit-loosening commandments in early
June. Martin Wolf, the predictable establishment mouthpiece at the <i>Financial
Times,</i> wrote "Time for Draghi to Open the Sluice," on May 14.
Paul Krugman told "a gathering of the European Central Bank's top
researchers and policy makers" on May 26, 2014, the "the ECB
and other banks around the world need to raise the inflation targets they have
clung to since the 1990s. At 2%, those goals are too low...." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">This odious performance was matched at a Cleveland Fed
jamboree where Adam Posen, currently head of the Peterson Institute, formerly a
member of the Bank of England's Monetary Policy Committee, declared that
concern about potential central-bank produced inflation is 'unnecessary
hand-wringing.' Posen then boasted: "I'm not worried that there is
an imminent financial stability problem for the U.S.,' Posen added. 'Once
you've had a bubble, you are less likely to have one soon afterward."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN"> Playing
Tweedledee to Tweedledum, another Too-Large-to-Think economist, Larry Summers,
announced in November 2013 "the economy lately hasn't shown an ability to
grow without bubbles (quoting Bloomberg): 'It has been a long time since we
have had rapid, healthy growth in the country.'" He went on to say his was
"not an argument for bubbles," but, "it was time to change the
framework." He offered nothing in this regard, so effectively said we need
to pile bubbles upon bubbles and see what happens. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">In the same talk, he threw another bowl of pasta against
the wall: "On the question of whether the Fed stepping up and providing
liquidity when no one else would was the right thing to do, I think historians
are going to judge that about 98 to 2." The ratio is probably correct, but
not in the direction Summers thinks. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">On May 15, 2014, Summers was quoted by <i>Fortune</i> magazine
in "a packed auditorium of hedge fund industry professionals at SALT, the
annual industry confab." The phlebotomizing policymaker claimed:
"Low interest rates could become a source of instability down the
road." One might wonder why he used the future tense. <i>Fortune</i> continued:
What's more, Summers said that the Fed's policies are likely making the income
inequality problem in the U.S. worse, by helping wealthy Americans who hold the
majority of stocks, more than the rest of the country. 'A policy that works by
pumping up asset prices is not going to be egalitarian,' said Summers."
Did anyone ask about the 98 to 2 call? Had Summers recently read the 1993 BIS
Report? </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">So which is it? Do we want bubbles? Do we have bubbles?
Are they good or bad? It depends on the day and audience. On </span><span lang="EN-GB">November 6, 2013, Jeffrey Lacker, Richmond
Federal Reserve President was quoted in The King Report: "The rich are
increasingly likely to remain rich, and the poor are increasingly likely to
remain poor." Janet Yellen seemed to acknowledge this when on March 31,
2014, The Great Labor Economist told an audience in Chicago of "</span><span lang="EN">the courage and determination of the
people" who have suffered "the past six years. [These] have been
difficult for many Americans, but the hardships faced by some have shattered
lives and families. Too many people know firsthand how devastating it is to
lose a job at which you had succeeded and be unable to find another.... . And
yet many of those who have suffered the most find the will to keep
trying."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">It would be more shattering and devastating if the 99%
understood how the Fed's money-printing is the central reason they suffer. After
years of zero-percent interest, family incomes continue to decline; pensions
are imperiled by "going out on the risk curve" to earn a return;
savers have been squashed; life insurance, long important to family stability
in the West, is being extinguished; endowments, the same.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Galling is how the apparatchiks of poverty are cashing
in. Bernanke and his $250,000 dinners with hedge fund managers. Krugman, so
casually upping a fabricated 2% inflation "goal," and paid so well
for it. Martin Wolf may or many not be getting rich, but he was handed the 2014
Overseas Press Club Award a couple of weeks before his ECB-approved "Time
for Draghi to Open the Sluice" headline. These awards are soccer trophies
inside the hive of accepted opinion. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Adam Posen is President of the Peterson Institute. He
gouges on the fatted calf bequeathed by Pete Peterson, who established the
Institute as a platform for sound finance. Posen, speaking on CNBC in January,
bragged that Federal Reserve Chairman William McChesney Martin (1951-1970)
employed similar measures to Quantitative Easing during his tenure. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">There could not be two more dissimilar approaches to
monetary policy. Posen wrote (in <i>Challenge</i>, July/August 2008) inflation
rates of "4, 5, or 6 percent a year, say, will [not] hurt growth. It is
just not there in the data." He went on to say researchers have found once
"you get to an annual inflation rate of 10 percent - some would say 8
percent, some people would say 12 percent," you "begin to see
significant negative effects on growth."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">On August 13, 1957, William McChesney Martin was dead set
against a positive inflation rate to promote growth. Martin told the Senate
Banking Committee that the person most likely to be injured in the inflationary
cycle was <i>the 'hardworking and thrifty...little man</i>' on fixed income who
could protect neither his income nor the value of his savings. Often, he was
also the unemployed victim of the collapse." As different groups struggle
to insulate themselves from the loss of purchasing power, 'fundamental faith in
the fairness of our institutions and our government deteriorates." </span><span lang="EN"><o:p></o:p></span></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;">Adam
Posen - Heavyweight Inflationist<o:p></o:p></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">In the February 25,
2014, <i>Financial Times</i>, Adam Posen, co-author with Ben S. Bernanke of <i>Inflation
Targeting: Lessons from the International Experience</i> expressed his pleasure
with "Abenomics": "Abe Has Good Medicine but Japan Needs a
Stronger Dose." The heavyweight economist offered his blessing: "Japan's
recovery program is showing promising early results." Posen warned though,
more inflation was needed: "[E]conomic reform programmes fail to
deliver.... when policy makers failed to recognize the risk of persistent
deflation. Arguably, it has been the case with U.S. fiscal policy since the
2009 stimulus."<br />
<br />
</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">More and more. The
Federal Reserve's balance sheet has grown from $850 billion in mid-2007 to $4.3
trillion on June 4, 2014. Arguably, at least Posen is arguing, it should
be $10 trillion today. The nearly $4.0 trillion increase over seven years
approximates the amount of U.S. Treasury- and mortgage-securities the Fed has
removed from the market (without looking further at refinancings, for
instance). The lack of "liquid" Treasuries has caused no end of
trouble, such as poorer quality collateral (the Fed loves talking about the
liquidity it supplies to the market). The relentless otherworldliness of such
policymakers falls on the masses to bear. <br />
<br />
</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Posen's Japan (which
does what American economists tell it to do) continues to target an inflation
rate of 2%. This, in a country where more elderly than babies wear diapers. On
May 29, 2014, Japan announced its annualized inflation rate at 3.2%. Ten-year
bonds yield less than 0.60%. For those still young enough to work, wages have
fallen22months in a row. Since 1997, the average, annual, Japanese salary has
fallen by the equivalent of $6,700. <br />
<br />
</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Bernanke-Posen
inflation-targeting is worse for the retired. On June 5, in "Abenomics
Spells Most Misery Since '81 as Retiree Skimps on Meat" Bloomberg reported
that Mieko Tatsunami is "making due by halving the amount of meat I serve
and add vegetables.....The price of everything we eat on a daily basis is going
up." Trotsky produced similar results in the Ukraine.<br />
<br />
</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">On June 28, 1978, Federal Reserve Board Member Henry C.
Wallich addressed a graduating class, not too far from Yankee Stadium, at
Fordham University. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Inflation was on everyone's mind and Wallich was
forthcoming. "Inflation," he informed the young and idealistic
graduates, "is a means by which the strong can more effectively exploit
the weak. The strategically positioned and well-organized can gain at the
expense of the unorganized and aged."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN"> How is
this so? Wallich explained inflation "is technically an economic problem.
I mean the breakdown of our standards of measuring economic values, as a
consequence of inflation." The strong are smart enough to understand that
inflation "introduces an element of deceit into our economic
dealings." Contracts are no longer made to "be kept in terms of
constant values" but, one party understands this better than the other.
Contracts during a period of inflation are made with monetary terms
"unpredictably shifting measures of weight, time or space..."</span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN"> Among
the losers is labor. "Inflation becomes a means of exploiting labor's
money illusion." Among the winners, from the mouth of this public servant,
is government. "It allows the politician to make promises that cannot be
met in real terms, because, as the government overspends trying to keep those
promises, the value of those benefits shrinks." This creates a
"diminishing ability of households to provide privately for the future....
One may ask whether it is not an essential attribute of a civilized society to
be able to make that kind of provision for the future." Wallich went on to
emphasize "the increasing uncertainty in providing privately for the
future pushes people who are seeking security toward the government." (And
so, the public panic concerning Social Security and health insurance today.) </span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN"> At the
same time, inflation "creates a vacuum in the private sector into which
the government moves." He worried that the consequences of the inflation
would be "a shift into the third dimension, away from democracy and toward
authoritarianism." Wallich's question was more than theoretical; he grew
up in the German, Post-World-War-I hyperinflation, which wiped out the middle
class. </span><span lang="EN"><o:p></o:p></span></span></div>
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<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">
On May 20, 2014, Philadelphia Fed President Charles Plosser described the
calculus of the world economy through which the "accumulat[ion of] assets
in global markets... is concentrated" in a few hands "where the
excess [is] recycled several times. In Plosser's words: "[C]entral banks
have become highly interventionist in their efforts to manipulate asset prices
and financial markets in general.... This approach has continued well past the
end of the financial crisis..... [W]e have created an environment in which 'it
is all about the Fed.' Market participants focus entirely too much on how the
central bank may tweak its policy, and central bankers have become too
sensitive and desirous of managing prices in the financial world.... If
financial market participants believe that their success depends primarily on
the next decisions of monetary policymakers rather than on economic
fundamentals... And if central banks do not limit their interventionist strategies...they
will simply encourage the financial markets to ignore fundamentals and to focus
instead on the next actions of the central bank." </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Finance should not be important in the lives of most
people. In 1950, the Bureau for Economic Analysis calculated the percentage of
the U.S. economy engaged in finance was 9%. There is practically no decision in
our lives that does not involve finance today. In 1950, the extent of most
Americans' financial dealings were their passbook savings account and house mortgage.
Today the average person has been dragooned into money-dealing to survive. </span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<h1 style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN" style="font-weight: normal;">The concentration
builds with remorselessness beyond the comprehension of those who fuel it. We
get hit with it everyday, often, the Know-it-alls effectively throwing up their
hands in an "it's beyond me" attitude: </span><span lang="EN"><o:p></o:p></span></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN" style="font-weight: normal;"> </span><span lang="EN"><o:p></o:p></span></span></h1>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">May 28, 2014.<cite> BusinessWeek</cite><cite><span style="font-style: normal;"> Headline: Headline: "</span></cite>Fed's
Junk-Loan Caution Spurs Creative Accounting Alchemy" Story: "Lenders
are increasingly allowing junk-rated borrowers to adjust their earnings to make
them look more creditworthy as U.S. regulators increase pressure on banks to
refrain from underwriting too-risky deals. Such tweaks, which are permissible
under more and more credit agreements, can help companies stay in compliance
with their loan terms or to raise debt. More than half of loans this year for
issuers backed by private-equity firms allow them to boost earnings by an
unlimited amount through projected cost savings from acquisitions and '<u>any
other action contemplated by the borrower</u>,' said Vince Pisano, an analyst
at Xtract Research LLC, citing a sample he's reviewed."<br />
<br />
May 30, 2014. <i>Bloomberg Economic Briefs</i>:</span><span lang="EN" style="color: blue;"> "</span><span lang="EN">The New York
Fed's Liberty Street Economics blog takes a look at rising household debt.
'According to our February 2014 survey, 51 percent of the high-risk borrowers
have maxed out a credit card in the past year, compared with less than 20
percent for the lower-risk groups.'"<br />
<br />
June 2, 2014. Bloomberg: Story: "Unstoppable $100 Trillion Bond Market
Renders Models Useless" Headline: "If the insatiable demand for bonds
has upended the models you use to value them, you're not alone. Just last
month, researchers at the Federal Reserve Bank of New York retooled a gauge of
relative yields on Treasuries, casting aside three decades of data that
incorporated estimates for market rates from professional forecasters."</span><span lang="EN"> <o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN"><br />
June 4, 2014.<i> Bloomberg Economic Briefs</i>: ""Princeton
Professors Markus K Brunnermeier and Yuliy Sannikov, writing for Vox,</span><span lang="EN"> take a look at the
transmission of monetary policy through asset-backedsecuritization. "Euro
zone monetary policy transmission is broken. A key aspectof this is the failure
of credit to get to small and medium enterprises, and consumers.This column
uses the 'I theory of money' to diagnosis the problem andpropose 'prudently
designed' asset-backed securitization as the cure.""</span><span lang="EN"><br />
<br />
</span><span lang="EN">June 4, 2014. (This was released just prior
to ECB President Mario Draghi's announcement of looser ECB monetary terms)
William H. Buiter: The Simple Analytics of Helicopter Money: Why It Works -
Always. From the CEPR abstract: "A helicopter drop of money is a
permanent/irreversible increase in the nominal stock of fiat base money with a
zero nominal interest rate, which respects the intertemporal budget constraint
of the consolidated Central Bank and fiscal authority/Treasury - the
State."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">Buiter, the Dutch-American- Bank of England Bank Monetary
Policy Committee member-Citigroup-skirt chasing-monetary nut, was discussed in"<a href="http://r20.rs6.net/tn.jsp?e=001iyYGG2Tr8IP09M0RwHeGibV7QET1UCTPrGFeOYgxfHLJXEby0SCZ9dGjZel6_UF2aPxucdnE1ynaX8ZHJbwGt0Dw4G3qk-QS4gtgtCqqlIobwBwWXautX-quM5b3V1s9aQaF7IhqOKxrfrCwQ6Dp3_PE-RVu-NVwxB0GbnxXdHI=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Going
Digital.</span></a>" </span><span lang="EN"><o:p></o:p></span></span></div>
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<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">June 6, 2014. <i>Bloomberg News Briefs</i>: "</span><span lang="EN">A National Bureau of
Economic Research working paper quantifies the lasting harm to the U.S. economy
from the financial crisis: 'In 2013, output was 13 percent below its trend path
from 1990 through 2007. Part of this shortfall - 2.2 percentage points out of
the 13 - was the result of lingering slackness in the labor market in the form
of abnormal unemployment and substandard weekly hours of work. The single
biggest contributor was a shortfall in business capital, which accounted for
3.9 percentage points.'"</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span style="font-family: Times, Times New Roman, serif; font-size: large;"><span lang="EN">June 6, 2012.Fox News, GRAZ, Austria -
"A devastating fire which gutted a crematorium in southern Austria was
caused by an obese woman's excessive body fat blocking an air filter, Austrian
public broadcaster ORF reported. The fire occurred at the facility in the city
of Graz in mid-April. Firefighters had trouble extinguishing the blaze due to a
thick layer of insulation lining the crematorium's walls. Austrian officials
investigating the fire found that it was caused by the burning body of the
440-pound woman. The obese corpse reportedly led to overheating in the
crematorium's filter system, triggering the blaze. Other recent fires caused by
the burning of obese bodies were reported in Germany and Switzerland. Former
Graz city fire chief Otto Widetschek said special crematoria for obese people
should be set up in Austria to deal with the potential dangers of cremating
obese bodies. 'In Switzerland, there is now a special crematorium for
XXL-bodies,' he told ORF earlier this week.'"</span><span lang="EN"><o:p></o:p></span></span></div>
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Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-47265657838712738782014-06-05T08:51:00.000-04:002014-06-06T15:31:03.822-04:00The Battle of Midway <span style="font-family: Arial, sans-serif;">Frederick J. Sheehan is the
author of <a href="http://r20.rs6.net/tn.jsp?e=001Y3l4RHrI31IdVvBrMYlCFmNQUlQNXvsT_vVjkSI5Dv7PoB1xXkU-XrfhTWDp2VDmC-ZGa_BsHzdGPi9sIDBVaNqD-4CN_hegrF0KToSiWCTxHLk78MxZjQLvKN7sU-dX8SvH9-dCsjTFO_POadeTn-DaEPeHxP9lJQAVvL7isXHrDyERb593r511mC4S4MPVDnZV7D2hYC51kb4bMgxv9eSRfNEWxIPCYrKmSZFh9MYHQQvIS-DFtjV7ElXsAt6lr0fUjh6c-kTfnBQJ0VK6FLSJ-J1iVijK0Mz3C6ccXDJDIlEvz_eO7kafC0EJ0nsxhb-9Bxhj48XG9SmhGOE9-vjU0tEYgjdReSuLQHnFJpY=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Panderer
to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a
Legacy of Recession</span></a> (McGraw-Hill, 2009), which was translated
and republished in Chinese (2014). He is researching a book about Ben
Bernanke. </span><br />
<span style="font-size: large;"><span style="font-family: Arial, sans-serif;"><br /></span>
</span><br />
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN"> </span><span lang="EN">The Battle of
Midway was fought 72 years ago, from June 4, 1942 to June 7, 1942. Air strikes
from U.S. aircraft carriers maimed beyond repair the four Japanese aircraft
carriers. The Japanese fleet, and Japan, never recovered. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN"> </span><span lang="EN">Less than six
months earlier, on December 7, 1941, the Japanese attack swept across the
Pacific. Franklin Roosevelt, in his "Day of Infamy" speech, told the
damage: </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><i><span lang="EN">"Yesterday, Dec. 7, 1941 - a date which will live in
infamy - the United States of America was suddenly and deliberately attacked by
naval and air forces of the Empire of Japan.... The attack yesterday on the
Hawaiian islands has caused severe damage to American naval and military
forces. Very many American lives have been lost. In addition, American ships
have been reported torpedoed on the high seas between San Francisco and
Honolulu. Yesterday, the Japanese government also launched an attack against
Malaya. Last night, Japanese forces attacked Hong Kong. Last night, Japanese
forces attacked Guam. Last night, Japanese forces attacked the Philippine
Islands. Last night, the Japanese attacked Wake Island. This morning, the
Japanese attacked Midway Island. Japan has, therefore, undertaken a surprise
offensive extending throughout the Pacific area."</span></i><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN">
Less than six months later, over a course of a few minutes, three of the four
Japanese aircraft carriers were sinking. A fourth Japanese carrier was
irreparably injured soon after. All four gargled then sank to the ocean floor. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN">
The Battle of Midway is an important moment in history. What happened, of
course, stands on its own. It is also good to remind ourselves the course of
history can change fast. Some historians, by no means all, contend the Japanese
lost the war within those five or six minutes when aircraft from the USS
Enterprise, USS Yorktown, and USS Hornet commenced their fatal on the Akagi,
Kaga, Soryu, and Hiryu. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN">
The contention, which is supported by evidence, describes the impossibility of
the Japanese industrial capacity to compete with American steel, tank,
aircraft, and ship construction. (Within five miles of where I grew up,
between 1942 and 1945, one shipyard built 92 battleships, aircraft carriers,
heavy cruisers, light cruisers, and destroyers. Five miles to the south,
between 1942 and 1945, another shipyard built over 250 naval ships.)</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN">
The argument of a decisive Japanese loss is well received by minds trained in
the twentieth century. But, it does not weigh human potentiality. It is true
the Japanese fleet never again held supremacy, if supremacy, it was: the Battle
of Midway showed that military supremacy over the oceans now was in the air,
not on ships. Today, maybe, we are to be menaced by the Age of Drones, which
would be a short hop from the Death of the Age of Economists. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN"> </span><span lang="EN">It is true
Japanese industry did not measure up to American production. But to stop here
is to abide by the economic, deterministic, GDP-worshipping, data junkyard that
ignores history. It died, and Marxism died, at the Battle of the Marne, when
not one worker of the world crossed lines to fight alongside his German or
British contemporary. In an important book, <i>The End of Economic Man: The
Origins of Totalitarianism</i>, written in 1933 and published in 1939, Peter
Drucker wrote the lowest floor sweeper at Rolls-Royce joined with the owners to
fight the against the workers of the Kaiser. Economic man was finished; always
a fantasy, it ignored the rise of Nationalism as the most potent nineteenth-century
evolution. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN"> </span><span lang="EN">The Battle of
Midway teaches the wish must be met by the will. The speed at which the U.S.
fleet was resurrected at Pearl Harbor is still astonishing to contemplate.
Another example was the enormous aircraft production in Germany in 1944 and
1945. Figures are not at hand, but German cities were ashen cemeteries at the
same time German workers (not many young, or even middle-aged, men) built
aircraft at such at a tremendous pace. This production was a demonstration of
will. Perhaps - only perhaps - the wish was not accompanied by the will in
Japanese production, starting in 1942.</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 22.5pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN"> </span><span lang="EN">The senior
Japanese naval leaders misjudged the American naval forces approaching off
Midway Atoll. The Japanese leaders' calculations were by no means
unsophisticated. They were wrong. We can say with a high degree of assurance no
Japanese naval leader, in preparation for battle, stated he was "100%
sure" of the outcome. We can say, with a slightly lower degree of assurance,
if a Japanese naval leader had made such a claim, he would have been launched
as the first Kamikaze missionary upon the USS Yorktown. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN"> </span><span lang="EN">Other than
the Emperor and a few senior military leaders, the Japanese people believed
they had won a great military victory at Midway. What happened when the
Japanese people found out otherwise, of Midway and much else? They had been
lied to, used, violated, lost their homes, marriages, and careers, when they
had been drawn into a nationalistic fervor, believing their leaders and they
were of a piece? </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN"> </span><span lang="EN">Today, across
the globe, the wish our so-called leaders are<i> not </i>lying to us, will be
100% correct over events of which they are "100% sure," will be
regarded, in time, as a catastrophic miscalculation by the human race. In the
instant of recognition: what price gold? </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN"> </span><span lang="EN">As a
footnote, the death of Winston Churchill's daughter, Lady Soames (Mary
Churchill), on May 31, 2014, who was a friend, can at least be remembered here
with Churchill's instruction, in 1939, that every graduate of the British
Officers' Candidate School be given a copy of Peter Drucker's book,<i>
The</i> <i>End of Economic Man: The Origins of Totalitarianism </i>(packaged
with a copy of <i>Alice in Wonderland). </i>Drucker could not find a
publisher until that year, even though he wrote it when Herr Hitler took charge
in 1933. In Drucker's 1969 words, "[i]t was far too 'extreme' in its
conclusions: that Hitler's anti-Semitism would be propelled by its inner logic
towards the 'ultimate solution' of killing all the Jews; that the huge armies
of Western Europe would not offer effective resistance to the Germans; or that
Stalin would end up signing a pact with Hitler."</span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN"> </span><span lang="EN">Drucker wrote
in a 1994 "Introduction" that, even in the 1970s, "the book was
pointedly ignored by the scholarly community." It remains one of Drucker's
least-known books. Academics would still ignore the book today, if they knew
about it. Some may think it remarkable, some may know it is always the case, a
book that could so penetrate the mind of 1933, explaining the process by which
minds evolved over the next few years, would have no audience with academia,
regressed, as it has, to a state of infantilism, in 2014. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN"> </span><span lang="EN">In one of
Winston Churchill's best-remembered speeches, he stated: "If we fail, then
the whole world, including the United States, including all that we have known
and cared for, will sink into the abyss of a new Dark Age, made more sinister,
and perhaps more protracted, by the lights of perverted science." That
speech was delivered in 1940, a year after Churchill ordered every British
officer's kit include Drucker's book, no doubt intending they understood what
they were defending and against what they were fighting. (No, it wasn't the
British Empire.) </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><span lang="EN"> Churchill's
foresight of a "<i>new</i> Dark Age," made "<i>more</i>
sinister," and "<i>more protracted</i>," by the "lights of
p<i>erverted </i>science" can be seen in letters he wrote in the 1890s.
Peering ahead at such an age may be why he understood so early the danger of
Hitler to Europe, and to the human race. He might not be surprised at the
anti-human Age of Drones or by the dreary Age of Economists. </span><span lang="EN"><o:p></o:p></span></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 0pt; margin-right: 0in; margin-top: 0in;">
<span style="font-size: large;"><br /></span></div>
<span lang="EN" style="font-family: 'Times New Roman', serif; font-size: large;">
I doubt Mary Soames knew to what extent her world was being
twisted by perverted policymakers who pretend they control six billion souls
through a mathematical model. One can only estimate how any human being may
react upon learning the workings of sinister minds, but, may I hazard: it may
have killed her.</span>Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-27761342767009781632014-05-22T07:50:00.000-04:002014-05-23T19:13:19.384-04:00Bernanke Money-Grubs From the .01%<div class="MsoNormal">
<span style="font-family: Verdana, sans-serif; font-size: 10pt;">Frederick J. Sheehan is
the author of <a href="http://r20.rs6.net/tn.jsp?e=001yYXz--Zmbq9awXXmJ2CBFZES2wVRcDlEvykMJs6BEFhqL20-OzyE8lKlvcRI6ZdSLwprO_HOpdXmdKHuvjx4DhWZoJ9F-72r0QOUcIsU5-8fBlFrVTFmgxCH3FDN5BjFvmNcSyUBjpIImufz__ylboGmuIvjGHK0RyDQlZ6DmDexkY3xL9seOgaOBa9XiO3c9cJa5Qm5YeKWvhapgw98JI_E9etxwceKGsmQwRIJHRvExiHXzpNzKPmbo5eWgVycGoYfNKoW735yWvpQVQ-DIaKa08ofZbG-mxTkgnBA2tKoYBjNJ94l6mZjfxu7IXyz31sll7HFQR6Jstl8GonnbAEddECMGcabguULSi1AK8U=" shape="rect" target="_blank">Panderer to Power: The Untold Story of How Alan
Greenspan Enriched Wall Street and Left a Legacy of Recession </a> (McGraw-Hill,
2009), which was published in Chinese in 2014. He is working on a book about
Ben Bernanke. See more at: <a href="http://www.aucontrarian.com/">http://www.aucontrarian.com</a><o:p></o:p></span></div>
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><br /></span>
<br />
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">"[Bernanke] gave this stuff out
[inside information -FJS], but I didn't realize what he was saying at the time,
so I didn't do a great trade." </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 1.0in; margin-right: 0in; margin-top: 0in;">
<span lang="EN" style="font-size: 11pt;">Hedge-fund manager David Tepper, after paying $200,000 to
take former Federal Reserve Chairman Ben S. Bernanke to dinner, quoted in the <i>New
York Times</i>, May 21, 2014</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 1.0in; margin-right: 0in; margin-top: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 1.0in; margin-right: 0in; margin-top: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
Ben S. Bernanke continues to be a man of his times. His mind never looks
backward or forward. It is as if every day is complete within itself, with no
attachment to precedent; no past, no record, no history, and, in the future, he
will bear no responsibility. Some precedent may be helpful to critique former
Federal Reserve Chairman Ben S. Bernanke's current escapade. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">After Paul Volcker
stepped down from the chairmanship in 1987, he made one, solitary public
comment that could in any way be deemed a comment on the Federal Reserve. (It
was a defense of the new Fed chairman, Alan Greenspan, who had raised interest
rates shortly before the 1987 stock-market crash.) Volcker held his tongue for
12 years, until 1999. Then, and only then, he simply could not remain silent
while Greenspan sweet-talked Americans into buying NASDAQ shares at 200 times
earnings. </span><span lang="EN" style="font-family: Minion-Regular; font-size: 11pt;">On May 14, 1999, the former Federal Reserve
chairman spoke at the Kogod School of Business commencement at American University:
"The fate of the world is dependent on the stock market, whose growth is
dependent on about 50 stocks, half of which have never reported any
earnings."</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Volcker's observation
was obvious at the time but, as usual, the Inner Sanctum never let the public
in on the fix. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">After Alan Greenspan
resigned in 2006, he behaved just as we expected. From <i>Panderer to Power</i>:
</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">"On February 12,
2006, two weeks after Chairman Greenspan retired, he received $250,000 to speak
at a dinner Lehman Brothers' hosted for hedge-fund managers. The <i>New York Post</i>
reported Lehman paid $100,000 more than Greenspan's 'customary speaking
fee' of $150,000. It was a surprise to many he spoke at all. Caroline Baum
commented on Bloomberg: "At a minimum, Greenspan evinced bad judgment by
not letting time pass before reasserting himself. His refusal to cede the
limelight gracefully...left a bad taste in people's mouths." That he spoke
publicly, and for money, was undignified. This reflected solely on Greenspan.
Worse, he was interfering with the Bernanke Fed. He told the hedge-fund
managers that short-term interest rates would have to rise. The next day, they
did....</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">"[C]entral
bankers took their gloves off. Mervyn King, Governor of the Bank of England
(and former colleague of Ben Bernanke at MIT) announced: 'I'll only say
that I am very grateful to Eddie George [King's predecessor] that he has not
been in the newspapers and on radio all the time commenting on what the
monetary policy committee is doing. In due course I will ensure I do exactly
the same thing.'"</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">It will be
interesting if Mervyn King reprimands his former cellmate from M.I.T. He may.
King has been one of the few central bankers who admits central banks played a
part in the "the worst financial crisis in global history, including the
Great Depression" [B. Bernanke to the FCIC in 2009. This declaration
reminded the Committee "back off, I saved the word" - FJS] </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">The media has decided
Bernanke is "in play." This is a matter of personal perception,
ratcheted by a <i>New York Times</i> story on Thursday, May 20, 2014. The title
is telling: "After the Fed, Bernanke Offers His Wisdom for a Big
Fee." </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">The title itself is a
message. "Open season" on Bernanke is now permitted. Elizabeth Warren
explained this distinction in her recent book, <i>A Fighting Chance</i>. Warren
is now a senator from Massachusetts. At the time of the incident she recalls,
Warren was poking holes in the Old Boys impregnable frat house. Larry Summers
decided to sit her down. Warren writes in <i>A Fighting Chance</i>: "He
teed it up this way: I had a choice.... I could be an insider or I could be an
outsider. Outsiders can say whatever they want. But people on the inside don't
listen to them. Insiders, however, get lots of access and a chance to push
their ideas. People -- powerful people -- listen to what they have to say. But
insiders also understand one unbreakable rule: They don't criticize other
insiders."</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
Permitting the possibility a <i>Times</i> editor was asleep at the wheel,
Bernanke has lost protection. He would be the second insider cut loose in the
past two weeks. On Monday, May 12, 2014, James Freeman teed up Timmy Geithner's
new book, <i>Stress Test </i>in the<i> Wall Street Journal. </i>Freeman is the
deputy editor of the<i> Journal's</i> editorial page. In the world Summers
described, the<i> Journal</i> would hire an outsider to toss Geithner onto the
ash heap of history. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
The <i>New York Times</i> and the <i>Wall Street Journal</i> will always
protect their own interests, first. The <i>Times</i>, for instance, was
an early advocate for U.S. military operations in Vietnam. That changed</span><span lang="EN" style="color: navy; font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN;">.</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
The <i>Times</i> lashing lacks historical perspective. It states: "Mr.
Bernanke is following a well-trodden path that his predecessor, Alan Greenspan,
and other Washington policymakers have taken." This is recent, though.
Certainly, getting paid $200,000 to $400,000 for dinner, night after night, is
new. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
Particularly revolting is Bernanke selling himself (being a family publication,
a more accurate verb lies dormant) to the .01%. For appearance sake alone, such
blatant money-grubbing offers grist to those who see the Federal Reserve as
hostage to banking interests. Similarly, claims of "Federal Reserve
independence" and other antiseptic nonsense will lose credence to a
jaundiced eye.</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">A perceptive
Congressman who sits on the Financial Services Committee may wish Bernanke was
still in the penalty box. For instance, Jim Bunning long retired now, could be
his party's pick, after, of course, finance and the economy come unplugged.
(Any day now. You heard it here first, and second, and third...)</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">On December 9, 2009,
Bunning let loose on the prof: "How can you regulate systemic risk when
you are the systemic risk?" This is funny, but also every word is true,
including "you" - <i>not,</i> the "Fed," the
"FOMC," the "literature" - and "the" - not, his
model or his (non)-theory. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
Should some Congressman decide to subpoena the Richard Whitney of 2014, this is
the time to gather C-Span clips for a presidential run in 2016. The following
background may help. It addresses Bernanke's complete lack of understanding -
despite his responsibility - for money-printing without license. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">"Using high leverage to improve
corporate performance is much like encouraging safe driving by putting a
dagger, pointed at the driver's chest, in every car's steering wheel; it may
improve driving but may lead to disaster during a snowstorm."</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
Ben S. Bernanke, 1990</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">Bloomberg headline: "Bernanke,
Kohn Pledge Fed to Withdraw Credit When Crisis Ends"</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">April 9, 2009</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">From the April 9, 2009, Bloomberg
story: "Bernanke's speech yesterday detailed steps that the Fed can
take to remove that liquidity, including soaking up cash by the issuance of
special bills." </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<i><span lang="EN" style="font-size: 11pt;">Special bills?!?</span></i><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<i><u><span lang="EN" style="font-size: 11pt;">60 Minutes,</span></u></i><u><span lang="EN" style="font-size: 11pt;"> March 2009: </span></u><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<i><span lang="EN" style="font-size: 11pt;">60 Minutes</span></i><span lang="EN" style="font-size: 11pt;"> voiceover:
"That makes it all the more outrageous when he hears of financial firms
handing out perks and bonuses after they've taken bailout money."</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">Bernanke: "The era of the high
living, this is over now. And that they need to be responsible and use the
money constructively.... [Bankers need to] have a reasonable sense of humility
based on what's happened in the past 18 months." </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<i><u><span lang="EN" style="font-size: 11pt;">60 Minutes,</span></u></i><u><span lang="EN" style="font-size: 11pt;"> December 5,
2010:</span></u><span lang="EN" style="font-size: 11pt;"> </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<i><span lang="EN" style="font-size: 11pt;">60 MINUTES</span></i><span lang="EN" style="font-size: 11pt;">: "</span><span lang="EN">You have what degree of
confidence in your ability to control this?" <o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN"><br /></span>
<br />
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN">
BERNANKE: "One hundred percent."</span><br />
<span lang="EN" style="font-size: 11pt; font-weight: normal;">MarketWatch
headline: SHE FOUGHT WALL STREET, AND NOW SHE'S OFF TO JAIL: OPINION: UNLIKE
CEO'S, THIS 'OCCUPY' PROTESTOR COULDN"T AVOID PROSECUTION. by David
Weidner: "Cecily McMillan was sentenced yesterday to 90 days in prison for
assaulting a police officer who was trying to clear Zuccotti Park in lower
Manhattan, where Occupy Wall Street protesters had gathered. McMillan, 25,
denied the second-degree assault charge."</span><br />
<br />
<span lang="EN" style="font-size: 11pt; font-weight: normal;">
May 20, 2014</span><br />
<br />
<span lang="EN" style="font-size: 11pt; font-weight: normal;">To add a populist
tone, which Ben Bernanke is so generously encouraging: Nor could Cecily
McMillan afford to have dinner with the central banker, which, in any case is
most useful to hedge-fund managers such as David Tepper, who paid himself over
$3 billion in 2013. </span><br />
<br /></div>
</div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">"With all due respect, US policy
is clueless. It's not that the Americans haven't pumped enough liquidity into
the market. Now to say let's pump more into the market is not going to
solve their problems." </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Wolfgang Schäuble,
German finance minister, Financial Times, November 5, 2010</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">"We are learning by doing."
(Or, something similar) </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
Ben S. Bernanke, lecture at George Washington University, March 2012</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<u><span lang="EN" style="font-size: 11pt;">Testimony before Senate Banking
Committee, February 2013 </span></u><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">SENATOR TOOMEY: "What would the
impact be of actually having to liquidate a big portion of your holdings on the
bond market, on the equity markets?</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">CHAIRMAN BERNANKE: "We don't
anticipate having to do that." </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">SENATOR TOOMEY: "Not ever?!"</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">[Bernanke went on to confirm "not
ever." - FJS] </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">"First, innovation, almost by
definition, involves ideas that no one has yet had, which means <u>that
forecasts of future technological change can be, and often are, wildly
wrong."</u></span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Ben S. Bernanke, May
18, 2013: </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">"[N]<u>ot only are scientific and
technical innovation themselves inherently hard to predict</u>, so are the
long-run practical consequences of innovation for our economy and our daily
lives."</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Ben S. Bernanke, May
18, 2013</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">"THE FED HAS NO ENDGAME,"
MSM headline, November 4, 2013 </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="line-height: 12.0pt; margin-bottom: .0001pt; margin: 0in; text-align: justify;">
<div style="text-align: left;">
<span lang="EN" style="font-size: 11pt;">"A brief
update on the bloated condition of the Federal Reserve's balance sheet. At
present, the Fed holds $3.84 trillion in assets, with capital of just $54.86
billion, putting the Fed at 70-to-1 leverage against its stated capital. Given
the relatively long maturity of Fed asset holdings, even a 20 basis point
increase in interest rates effectively wipes out the Fed's capital. With the
present 10-year Treasury yield already above the weighted average yield at
which the Fed established its holdings, this is not a negligible
consideration."</span><span lang="EN"><o:p></o:p></span></div>
</div>
<div style="line-height: 12.0pt; margin-bottom: .0001pt; margin: 0in; text-align: justify;">
<div style="text-align: left;">
<span lang="EN" style="font-size: 11pt;">
John Hussman, November 5, 2013</span><span lang="EN"><o:p></o:p></span></div>
</div>
<div style="line-height: 12.0pt; margin-bottom: .0001pt; margin: 0in; text-align: justify;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">"Larry Summers is worried that
the Federal Reserves' efforts to stimulate the economy could end up doing damage.
'Low interest rates could become a source of instability down the road,' said
Summers....What's more, Summers said that the Fed's policies are likely making
the income inequality problem in the U.S. worse, by helping wealthy Americans
who hold the majority of stocks, more than the rest of the country. 'A policy
that works by pumping up asset prices is not going to be egalitarian,' said
Summers."</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<i><span lang="EN" style="font-size: 11pt;">
Fortune</span></i><span lang="EN" style="font-size: 11pt;">, May 15, 2014. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">Not in the short-term, Larry. </span><span lang="EN"><o:p></o:p></span></div>
<div style="line-height: 12.0pt; margin-bottom: .0001pt; margin: 0in; text-align: justify;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<u><span lang="EN" style="font-size: 11pt;">LIFE GOES ON OUTSIDE THE ECCLES
BUILDING</span></u><span lang="EN" style="font-size: 11pt;">: </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">"Pininterst, Uber - $10 billion
is the new $1 billion." </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
May 20, 2014 </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">"Anton Purisima has filed a
lawsuit in a Manhattan court for two undecillion dollars. 'The sum,
written as two followed by thirty-six zeros, is likely a new record for a
demand in a lawsuit, the <a href="http://r20.rs6.net/tn.jsp?e=001yYXz--Zmbq9awXXmJ2CBFZES2wVRcDlEvykMJs6BEFhqL20-OzyE8lKlvcRI6ZdSLwprO_HOpdVbj2_ADj9CZNkcSK9pA3enhFwTkKpDp4vnR1vlCehb274eEFFngn6XoA22fFqwfMHMpdzGS4a8Ef8m7BwFgt73-NweUW7c2AOmdsRtrsEehkggGKGxo8us" shape="rect" target="_blank" title="http://nypost.com/2014/05/16/man-suing-almost-everyone-for-all-the-money-on-earth/"><i><span style="color: black;">New York Post</span></i></a>
says.' It's also more money than even exists in the world by a long shot, <i><span style="color: black;"><a href="http://r20.rs6.net/tn.jsp?e=001yYXz--Zmbq9awXXmJ2CBFZES2wVRcDlEvykMJs6BEFhqL20-OzyE8lKlvcRI6ZdSLwprO_HOpdV4JIK2jwMQYchHcz7b7hBBY2Dszfl7yCxlzpGkxyAu-24BD-hzD3NugZ-tjGjAJ37FNdfJ-InC01cVd1yQdDMnA_lcZiTVHYRu9GMsk32A6w==" shape="rect" target="_blank" title="http://gothamist.com/2014/05/17/manhattan_man_files_lawsuit_seeking.php#.">Gothamist</a> </span></i>notes." </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
May 20, 2014 </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN">Not for long, <i>Gothamist</i>.<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN">"60 Minutes" March 2009 </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">"If you had a message for the
American people in this interview what would that be?" </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">Bernanke: "...I'd say first of
all the Federal Reserve is here and is going to do everything possible to
support the economy." </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
March 2009</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<br />
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">Hi ho, silver. </span><span lang="EN"><o:p></o:p></span></div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-84492845103790878182014-05-15T11:20:00.002-04:002014-05-16T10:54:29.202-04:00Confusion<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">Frederick J. Sheehan is the author of </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><a href="http://r20.rs6.net/tn.jsp?e=001vv9kjRSuZzFx1qFLP39Nwqv5G6qqDaj3-OWRmHtp46qTi3YQpQA-UcTfOfoJC897JEXeo20pwddXCsxBvJ_wvALjOASz05YJA3VRcNxoopN_M1dwDZAjKkXpRbekd2-AKggm9JvJfF77tinzvfWy_2ALFDQ7W5Ae97f4Q97BSWe00_NH1VSz_-Z_I9mCe7lfQex3eqlG0RXw-s4jTR69yWTMgn8UeOeGw4A2eSk2sz4tItnIiH5yXhdJrwsO36Qre3CNM45ydDai9UbQIOfhgRadVzvMZtd2Nk7YXwa2Z8E8WsrCjF2T_NdVU9KeCpZmXSS4I540jQPAe7VWwzh-teIVlTTQTEF7orJTThgMLVA=" shape="rect" target="_blank"><span style="color: #000d74; font-family: "Arial","sans-serif"; font-size: 10.0pt;">Panderer to Power: The Untold Story of How Alan Greenspan
Enriched Wall Street and Left a Legacy of Recession </span></a></span><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"> (McGraw-Hill, 2009) and "<a href="http://r20.rs6.net/tn.jsp?e=001vv9kjRSuZzFx1qFLP39Nwqv5G6qqDaj3-OWRmHtp46qTi3YQpQA-UcTfOfoJC897JEXeo20pwdcL5_ChxBYycHvt8_y2m3KaWczz9pTJTT-IVUzCnS5glwaA5MeNaT0KntLnwVLDz8fXpkQ5xy_J2Q==" linktype="link" shape="rect" target="_blank" track="on"><span style="color: #000d74;">The
Coming Collapse of the Municipal Bond Market</span></a>" (Aucontrarian.com, 2009</span><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">)</span><br />
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><br /></span>
<br />
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">The Producer
Price Index for April was released May 14, 2014. The one-month change was
+0.6%, after it rose 0.5% in March (revised to that figure in the April
report). Foods rose 2.7% (+1.1% in March). In "All the Junk Food You Love
is Pricier This Year," Max Nisen writes on <i>Quartz</i>: "Chipotle's
[Grill - CMG: NYSE] food prices were up 34.5% last quarter in total, with big
increases in [beef, cheese, avocado, and pork]." Chipotle's CFO John
Hurtung laments: "While we want to remain accessible to our customers,
we're at a point where we need to pass along these rapidly rising costs."
Chipotle's stock price was $505 at the close on May 14, 2014, up from $49 at
the great liftoff on March 9, 2009.</span><span lang="EN"><o:p></o:p></span></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
Nisen went on to report McDonald's "has already boosted prices. McDonald's
CFO Peter Bensen suspects: "[Y]ou do see franchisees generally around the
industry, not just McDonald's, anticipating some of these higher input costs."
Nisen went on to discuss higher prices at Taco Bell, Pizza Hut, KFC (Kentucky
Fried Chicken to those over 50: it was the Chipotle Grill or Facebook of the
Go-Go Years) and Pepsi. Pepsi CEO Indra Noori discussed the situation as
unintelligibly as possible: "The strength of our brands is clear in our
ability to achieve consistent net price realization." Whatever that means,
family incomes are falling (See "<u><a href="http://r20.rs6.net/tn.jsp?e=001vv9kjRSuZzFx1qFLP39Nwqv5G6qqDaj3-OWRmHtp46qTi3YQpQA-UcTfOfoJC897JEXeo20pwdcqr5qtVto0PJieVFoa05VgM66bLpdVpX3KsZ0FGl_XfzddF3gbpC2su7tx0VHixXf_E8bz_iW-JrtLX-Wuu8unJ9CPPlBhmX5LEToX4CYgwQ==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">April
2014 -Castles in the Air</span></a></u>" and "<u><a href="http://r20.rs6.net/tn.jsp?e=001vv9kjRSuZzFx1qFLP39Nwqv5G6qqDaj3-OWRmHtp46qTi3YQpQA-UcTfOfoJC897JEXeo20pwdcqr5qtVto0PJieVFoa05VgM66bLpdVpX3KsZ0FGl_XfzddF3gbpC2s9bLNpNJ1Pu9dtgZ3aqLHKM2di_g7yPEdLhbf01AsZRE=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">The
Bed-Pan Economy</span></a></u>"). It seems doubtful Pepsi's stock price
will benefit, but analysts, accountants and public-relation experts are very
well paid. </span><span lang="EN"><o:p></o:p></span></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">At the same
time, U.S. Treasury yields are falling. From over 2.7% in late April, the
10-year Treasury closed at 2.53% on May 14, 2014. The <i>Wall Street Journal</i>
commenced its front page dissection on May 15, 2014: "Global bond rates
dropped to their lowest levels of the year Wednesday, as central bankers
signaled their determination to jolt the world's largest economies out of their
malaise. Investors piled into U.S., German, and British government bonds-used
to price everything from mortgages to car loans-driving down their yields. The
yield on the 10-year U.S. Treasury dropped to as low as 2.523%, its lowest
level in more than six months. In Germany, 10-year bund yields fell to their
lowest point in a year. The <i>Journal</i>'s headline was "Nervous
Investors Pile Into Bonds."</span><span lang="EN"><o:p></o:p></span></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Note the
"central bankers" comment. Only 9% of Americans knew who the Federal
Reserve chairman was in 1979. These temporary celebrities' [redundant - ed.]
determination for the masses to believe "inflation is too low" knows
no limits. They are determined to prevent "deflation." Whether they
believe that or not, all of the tendencies: among central bankers, the media,
and Wall Street, will foster this myth. Martin Wolf wrote another irresponsible
mandate in the <i>Financial Times</i> on May 14, 2014 with the headline:
"Time for Draghi to Open the Sluice." The top of the front page of
the same edition drew readers to the column: "Time for Draghi to Pull Out
Another Bazooka," Martin Wolf, page 9.</span></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">It is said,
and with truth, that "stocks always get it last." Meaning, watch the
bond markets for signs of change. That phrase circulated before bond markets
were policy tools of central planners. At least part of the reason - I think
most of the reason - the 10-year bond yield has fallen is due to short
covering. One of the most widespread tactics in recent months has been to hold
long positions in riskier bonds while adding protection by shorting Treasuries.</span><span lang="EN"><o:p></o:p></span></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Treasuries
are hard to come by. The Federal Reserve's various QE (i.e. money printing: in
which the money is credited to banks in exchange for the banks' U.S. Treasury
and MBS holdings) programs have made certain maturities hard to come by. For
instance, in 2011, the Federal Reserve held 24% of the 10-30 year U.S.
Treasuries. On December 31, 2013 it held 46%. </span><span lang="EN"><o:p></o:p></span></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">A bond
manager who is watching and worried that other bond managers may cover their
short positions (they have to buy the Treasuries they had previously sold),
contributes to the downward momentum in yields by reducing exposure to a
Treasury rally (by buying). Falling yields signal the opposite change to the
actual and immediate problem of price inflation everywhere.</span><span lang="EN"><o:p></o:p></span></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">If the
downward momentum in short-covering really takes wind, the 10-year could fall
below 2.0%, for a long enough time to buy or refinance a mortgage before the
great inflation grows obvious.</span><span lang="EN"><o:p></o:p></span></div>
<br />
<div class="bodypg1mir" style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-32907702548212640122014-05-12T07:02:00.000-04:002014-05-16T11:02:38.832-04:00The Bed-Pan Economy <span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">Frederick J. Sheehan is the author of </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><a href="http://r20.rs6.net/tn.jsp?e=001EZ3xFzlU8tfuGzCHeu9rtRXVGbrPsuVJ2iBgAUiVrEIk7q8lAVwkjHUPf6pqDTqTWDedjcw49-_vQWhVWbNnk7FExgDi9if7sylGI-zxGasFPaOPir4X1rncFUaDZS6J194nvfIr45eB_5OsUewkYrpuvewbcFjH8DkaGfmfZKXk7U9NwWQVyQfxysWGAx9VyXtQtcUSYxhLRbdoPK4oL2rvTuZDZ7CYjmXfqdHP9sDE9f47Nyx0Vk5Qy1-CBAiHp8kipT1Bcb-QdYObMQo4mjh7IsZXd3SIUSywCL074c9t3fv-2w0PM2fuAtmNYqYW2uLDVLmMbrcs_Vy0WXs_DIY5_dNx5Hhzz32MM3crUv4=" shape="rect" target="_blank"><span style="color: #000d74; font-family: "Arial","sans-serif"; font-size: 10.0pt;">Panderer to Power: The Untold Story of How Alan Greenspan
Enriched Wall Street and Left a Legacy of Recession </span></a></span><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"> (McGraw-Hill, 2009) and "<a href="http://r20.rs6.net/tn.jsp?e=001EZ3xFzlU8tfuGzCHeu9rtRXVGbrPsuVJ2iBgAUiVrEIk7q8lAVwkjHUPf6pqDTqTWDedjcw49-_Aow92VR5jj6lrJfpaiIT8JHESzRUQHJADs5yQ6PZB-Lt_wjBAOXHJcLVjPO6WzyKE18LowL2-9g==" linktype="link" shape="rect" target="_blank" track="on"><span style="color: #000d74;">The
Coming Collapse of the Municipal Bond Market</span></a>" (Aucontrarian.com, 2009</span><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">)</span><br />
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><br /></span>
<br />
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt; font-weight: normal;">Data
portrayed in the "Employment in Total Non-Farm" payroll (NFP) chart
is used by central bankers and Wall Street strategists to assert economic
strength. They either think the trend demonstrates morning in America, or, they
know otherwise, but cannot fashion anything better.</span><span lang="EN"><o:p></o:p></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt; font-weight: normal;"> </span><span lang="EN"><o:p></o:p></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt; font-weight: normal;">The
Federal Reserve chairman, probably any Fedhead for that matter, whip off
cheerleading spiels supported by numbers that make no reference to historical
comparison. For that matter, they use numbers that make no reference to other numbers,
and numbers without reference have no meaning. Fed chair Yellen recklessly
disregarded context in her March 31, 2014 speech in Chicago: "Since the
unemployment rate peaked at 10 percent in October 2009, the economy has added
more than 7-1/2 million jobs and the unemployment rate has fallen more than 3
percentage points to 6.7 percent. That progress has been gradual but remarkably
steady - February [2014] was the 41st consecutive month of payroll growth, one
of the longest stretches ever."</span><span lang="EN"><o:p></o:p></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt; font-weight: normal;"> </span><span lang="EN"><o:p></o:p></span></h1>
<h1 align="center" style="margin-bottom: .0001pt; margin: 0in; text-align: center;">
<span lang="EN" style="font-size: 11pt; font-weight: normal;"> <img border="0" height="312" hspace="5" id="_x0000_i1025" name="ACCOUNT.IMAGE.17" src="https://origin.ih.constantcontact.com/fs102/1102078752130/img/17.jpg" vspace="5" width="400" /></span><span lang="EN"><o:p></o:p></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><span lang="EN"><o:p></o:p></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt; font-weight: normal;">Yellen's
data, in reference, offers no promise of recovery. There have been no jobs
"added" since the unemployment bottom in 2009. Yellen is spoken of as
a "great labor economist." She either knows her statement is
misleading, or, she is demonstrating how little economists know. It was not too
long ago Simple Ben was ordained "the Greatest Economist of the Greatest
Depression," after which, he ushered us into The Great Recession and
created The Protracted Depression. </span><span lang="EN"><o:p></o:p></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt; font-weight: normal;"> </span><span lang="EN"><o:p></o:p></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt; font-weight: normal;">In
"<u><a href="http://r20.rs6.net/tn.jsp?e=001EZ3xFzlU8tfuGzCHeu9rtRXVGbrPsuVJ2iBgAUiVrEIk7q8lAVwkjHUPf6pqDTqTWDedjcw49-8zKnFkv_MroZjvRFEpOowwO5jOmrSBNXG0qmgMsLeT662LRo_1zuPwUA6bQczcLGKwwd76gPeXo_sFhTxK-4ckTeTHlAYVekZzeH1n4smLwA==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">April
2014 - Castles in the Air</span></a></u>," I wrote the "span from
December 2007 to March 2014 is 75 months. Seventy-five months after jobs peaked
in 1990 (as we entered the 1900-1991 recession), there were 10 million <i>net</i>
new jobs. Seventy-five months after the post-2000 job peak, there were five
million <i>net</i> new jobs. In March 2014, we are still half-a-million jobs
south of the zero bound."</span><span lang="EN"><o:p></o:p></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt; font-weight: normal;"> </span><span lang="EN"><o:p></o:p></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt; font-weight: normal;">More
important is whether jobs can support a family. The nearby "Breadwinner
Economy" chart is designed for this purpose. The chart is from David
Stockman's ContraCorner website as is the discussion of what constitutes a
breadwinner job in "<u><a href="http://r20.rs6.net/tn.jsp?e=001EZ3xFzlU8tfuGzCHeu9rtRXVGbrPsuVJ2iBgAUiVrEIk7q8lAVwkjHUPf6pqDTqTWDedjcw49-_8l1ccyV5Yh0gim9n139B7A7OKCIAoBszVLsR1mQ_txRQTP0V4Bhk5ZK0mITusaYMJDM3dzdMyyeeFGOQeNKb_ttp03BvAiB5LZaOiOroAYCIZ0KdL6DL-4fnoty8W70JETqjo3Vv6Bw==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">The
Born Again Jobs Scam: The Ugly Truth Behind 'Jobs Friday,</span></a></u>'"
and "<u><a href="http://r20.rs6.net/tn.jsp?e=001EZ3xFzlU8tfuGzCHeu9rtRXVGbrPsuVJ2iBgAUiVrEIk7q8lAVwkjHUPf6pqDTqTWDedjcw49-_8l1ccyV5Yh0gim9n139B7A7OKCIAoBszVLsR1mQ_txRQTP0V4Bhk5ZK0mITusaYMJDM3dzdMyyaQ14GwVBiIV4DKEOwkrRJHsL-MM2oww_zF2J1HHK-fEISXmAjrrK6vJbJDOBnjpzA==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">The
Fed's Labor Market Delusion</span></a></u>."</span><span lang="EN" style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><span lang="EN"><o:p></o:p></span></h1>
<div class="MsoNormal">
<br /></div>
<h1 align="center" style="margin-bottom: .0001pt; margin: 0in; text-align: center;">
<span lang="EN" style="font-family: Arial, sans-serif; font-size: 11pt;"> <img border="0" height="273" hspace="5" id="_x0000_i1026" name="ACCOUNT.IMAGE.18" src="https://origin.ih.constantcontact.com/fs102/1102078752130/img/18.jpg" vspace="5" width="400" /></span><span lang="EN"><o:p></o:p></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Arial, sans-serif; font-size: 11pt;"> </span><span lang="EN" style="font-size: 11pt; font-weight: normal;"> </span><span lang="EN"><o:p></o:p></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt; font-weight: normal;">Only
one aspect of the delusion will be discussed here. This is the quality of
breadwinner jobs created since NASDAQ 5000. As such, this does not directly
address the problems of those who have lost an $80,000 job for $40,000
employment, the long-term unemployed, the part-time employed, and the
misleading data that accompanies headline news. For instance, people who work
one hour a week are counted as "part-time workers" in U.S. government
data. </span><span lang="EN"><o:p></o:p></span></h1>
<h1 style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt; font-weight: normal;"> </span><span lang="EN"><o:p></o:p></span></h1>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">From "<u><a href="http://r20.rs6.net/tn.jsp?e=001EZ3xFzlU8tfuGzCHeu9rtRXVGbrPsuVJ2iBgAUiVrEIk7q8lAVwkjHUPf6pqDTqTWDedjcw49-8zKnFkv_MroZjvRFEpOowwO5jOmrSBNXG0qmgMsLeT662LRo_1zuPwUA6bQczcLGKwwd76gPeXo_sFhTxK-4ckTeTHlAYVekZzeH1n4smLwA==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">April
2014 - Castles in the Air</span></a></u>":"The Greenspan NASDAQ
Bubble peaked in 2000 and breadwinner jobs reached 72.7 million. After
Greenspan and Bernanke artificially revved up the mortgage-finance economy
through 2007, jobs topped out at 71.9 million in December 2007. By June 2009,
the deflated mortgage bubble had cost five million jobs: there were 66.2
million NFP workers in June 2009. By March 2014, there were 68.3 million
breadwinner jobs, 3.6 million fewer than in December 2007, a level achieved
during the second Clinton Administration. The quality within the breadwinner
industries has deteriorated significantly and the population has grown."</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">A major change in the
composition of breadwinner jobs since 2000 has been the shift from production
to service. More specifically, jobs from the goods-producing economy
(manufacturing, construction, mining, and energy) have declined from 24,627,000
in January 2000 to 18,941,000 in March 2014. The largest relative growth of
jobs has been within the Health, Education, and Social Services (HES) area.
From 24,382,000 jobs in January 2000, HES jobs have sprouted to 31,505,000 in
March 2014. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Goods-producing jobs
pay much better than those within health, education, and human services. HES
jobs are highly dependent on fiscal solvency, with the exception of hospital
employment which is vulnerable when the government loses its exorbitant
privilege of funding its promises for free. Less hospitals, 75% of the revenue
supporting these jobs comes from local, state, and federal funding. The average
pay within the HES assembly is $35,000. Yellen is not going to achieve
"escape velocity" without HES employees shuffling their accounts
faster than Charles Ponzi. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
Even given the deep contraction in 2009, the re-emergence of HES positions is
much slower than the years leading up to the Greenspan Famine. From January
2000 to December 2007, 4.8 million, or 51,000 HES jobs, were added each month.
Since the bottom of the Great Recession (stage 1 in Bernanke's Protracted
Depression), 1.5 million, or, 26,000 jobs have been added each month.
"Restored," not "added," which is Yellen's claim.
(Breadwinner jobs also include "Core Government" employment, which
excludes Post Office and Education. There were around 11 million in 2007 and in
2014. Uncle Sam's workers receive around $60,000 on average.)</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;"> </span><span lang="EN"><o:p></o:p></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-size: 11pt;">Jobs clawed back within the HES sectors are inferior to
those before. By and large, the jobs have not been among doctors, skilled
nurses, or medical technicians. About 80% of them - 1.2 million - fall within
the Bed-Pan Economy: home-health aids, day-care workers, and nursing-home
staff.<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">The April employment
numbers released on May 2, 2014, were greeted warmly. Front-page headlines from
the <i>Wall Street Journa</i>l ("Job Growth Gathers Steam") and <i>Financial
Times</i> ("U.S. Jobs Growth Exceeds Expectations") were as untutored
as Chairman Yellen's claims. </span><span lang="EN"><o:p></o:p></span></div>
<br />
<div style="margin-bottom: .0001pt; margin-bottom: 0in; margin-left: 22.5pt; margin-right: 0in; margin-top: 0in;">
<br /></div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-9688274818342908812014-05-06T21:14:00.000-04:002014-05-06T21:14:24.716-04:00April 2014 - Castles in the Air<div id="preview">
<span style="font-family: 'Arial', ' Helvetica', ' sans-serif'; font-size: 10pt;">Frederick
J. Sheehan is the author of </span><a href="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7le6vzjSbchBaWYD1J-aT2mEpNqgrQpvhA35nJugcO6POIYgY1FhD4l4lhkZ2FWGwg0irHY3TguSGJPqNC3Qup2LU0WIs5lltYgIucVf-zITS6RYVTvIA3gUgC015spQmD9L8-1BEwW1MpRLRwKVSa7xxJCvV_tv5VIILpuHM0JFUFpTRxRIlQRtwPH7al0ghS76RVJqYqhuugSqlDT00HOl1C6sQZZ9xvT163RYPkYSeJKqKM-5RPDFfGvx289lzQMB8e07Ij7CKcCDx6_xdgOdvNGWu1c5FRw=" shape="rect" style="color: #000d74; font-family: 'Arial', ' Helvetica', ' sans-serif'; font-size: 10pt;" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7le6vzjSbchBaWYD1J-aT2mEpNqgrQpvhA35nJugcO6POIYgY1FhD4l4lhkZ2FWGwg0irHY3TguSGJPqNC3Qup2LU0WIs5lltYgIucVf-zITS6RYVTvIA3gUgC015spQmD9L8-1BEwW1MpRLRwKVSa7xxJCvV_tv5VIILpuHM0JFUFpTRxRIlQRtwPH7al0ghS76RVJqYqhuugSqlDT00HOl1C6sQZZ9xvT163RYPkYSeJKqKM-5RPDFfGvx289lzQMB8e07Ij7CKcCDx6_xdgOdvNGWu1c5FRw=">Panderer to Power: The Untold Story of How Alan
Greenspan Enriched Wall Street and Left a Legacy of Recession </a><span style="font-family: 'Arial', ' Helvetica', ' sans-serif'; font-size: 10pt;"> (McGraw-Hill,
2009) and "<span style="font-family: 'Arial', 'sans-serif';"><a href="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7ldD3uTKSBByKrZ3XWC1DUNZp5SuH3lKJ0rYjQwraR3B1S8WALXQQOQ0rt76kDK6iiUHFQtCI4y-Ag==" linktype="link" shape="rect" style="color: #000d74;" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7ldD3uTKSBByKrZ3XWC1DUNZp5SuH3lKJ0rYjQwraR3B1S8WALXQQOQ0rt76kDK6iiUHFQtCI4y-Ag==" track="on">The Coming Collapse of the
Municipal <span title="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7ldD3uTKSBByKrZ3XWC1DUNZp5SuH3lKJ0rYjQwraR3B1S8WALXQQOQ0rt76kDK6iiUHFQtCI4y-Ag==">Bond</span> Market</a>" (Aucontrarian.com, 2009</span><span style="font-family: 'Times New Roman';">)</span></span></div>
<div id="preview">
<span style="font-family: 'Arial', ' Helvetica', ' sans-serif'; font-size: 10pt;"><span style="font-family: 'Times New Roman';"><br /></span></span></div>
<div id="preview">
<span style="font-size: 11pt;"> The word "bubble" is suffering from overuse.
Still, with money for nothing inflating markets around the world, we are seeing
how prices inflate to enormous proportions where the prospect of pushing those
prices even higher draws a crowd. When such artificial stimulants to bond,
mortgage and tea-cup enthusiasm reaches a peak, the switch from green to red is
often quick. </span><br />
<br />
<span style="font-size: 11pt;"> A reminder comes by way of "Run, Run, Run,
Was the Financial Crisis Panic over Institution Runs Justified?" by Vern
McKinley. Published on April 10, 2014, by the Cato Institute, McKinley writes:
"Countrywide's [a premier sub-prime lender when the going was good - FJS]
second-quarter 2007 financial results indicated no significant weaknesses and
the major rating agencies assigned it strong ratings with a stable outlook.
[Although, a <i>MarketWatch</i> headline on July 24, 2007: "U.S. Stocks Close
Sharply Off on Credit Woes, Dow Slides 226 points; Countrywide Says Risks Extend
Beyond Subprime." This is a reminder that "the market" quickly forgets what it
does not want to know, as we see on May 1, 2014. - FJS] </span><br />
<br />
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">"This calm changed dramatically on August 2, 2007, as
Countrywide was unable to roll over its commercial paper or borrow in the repo
market.... On August 14, Countrywide released its July operational results,
reporting that foreclosures and delinquencies were up and that loan production
had fallen by 14% during the preceding month.... On August 15... a Merrill Lynch
analyst switched Countrywide from a "buy" to a "sell" rating.... [T]hat led to a
<i>Los Angeles Times</i> article that [Angelo] Mozilo [CEO of Countrywide]
blamed for causing the run that ensued.... One customer pulled $500,000 from a
Countrywide Bank branch... 'It's because of the fear of bankruptcy.... I don't
care if it's FDIC-insured - I want out.'"</span></div>
<br />
<span style="font-size: 11pt;"> Countrywide follows a pattern seen dozens of
times over the past twenty years. The quality of loans had fallen off a cliff
but the economists, the brokerage houses, and - of course - the Federal Reserve
- were in the dark. The stock market played the schizophrenic, "Oh, No!" and
"Good thing that's Over!" game. It peaked in October 2007. The catalyst for
collapse was "loan production had fallen by 14%." Even the <i>carpe diem</i>
frat boys on TV know the deteriorating quality of loans will not cause a ruckus
as long as the <i>percentage </i>of missed payments and defaults does not rise.
But, once Countrywide & friends could no longer feed the fast, rising<i>
rate</i> of new loan production, the façade was near its end. The combination of
more defaults and lower production is soon impossible to hide. </span><br />
<br />
<span style="font-size: 11pt;"> The FOMC (Federal Open Market Committee,
where monetary policy is set) had talked about houses at its meeting on March
27-28, 2006. Federal Reserve Chairman Ben S. Bernanke reminded the anointed:
"residential housing is, of course, only about 6 percent of GDP." We can read,
actually see, inside the professor's mind, since it is so simple: He is looking
at a pie chart of the GDP, with slices of red, magenta, honeydew, and fern. The
residential housing slice is a thin one, and, as his sort is programmed to
regurgitate, isolated from the others. Any ambitious student at Princeton or the
FOMC knows "6%" is the "A" response. Lights out. </span><br />
<br />
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">At the December 2006 meeting, reclining even deeper into
his barcalounger, the most prominent cheerleader for the Great Moderation was
tranquil. He tossed manufacturing sectors, including furniture and appliances
into his splendid-isolation view, since "this is about 15 percent of the economy
compared with 85 percent of the economy." The 85 percent was another world.
</span></div>
<br />
<span style="font-size: 11pt;"> Bernanke went on in this vein through 2007,
not taking the time to bone up on inevitable cross currents that accelerate when
recognition and margin calls lead the man at the bank to declare "I want out."
</span><br />
<br />
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">A sample of the commotion after Countrywide's August 15,
2007, hiccup follows; showing how quickly an accumulation of accepted beliefs
vanish in a credit collapse:</span></div>
<br />
<span style="font-size: 11pt;">Aug. 15, 2007</span><span style="font-size: 11pt;">
(Bloomberg) POOLE SAYS "REAL ECONOMY"UNHURT BY SUBPRIME COLLAPSE</span><br />
<br />
<span style="font-size: 11pt;">Aug. 16 (Bloomberg) - "Investors are scooping up U.S.
Treasury bills like few times in history as an expanding credit crunch makes it
hard for companies to roll over short-term debt. The yield on the three-month
Treasury bill fell 0.54 percentage point yesterday to 4.09 percent, the lowest
since 2005. It was the biggest single-day decline since Oct. 13, 1989, when the
Dow Jones Industrial Average tumbled 6.9 percent...."</span><br />
<br />
<span style="font-size: 11pt;">Aug. 16 (Thomson Financial) PAULSON SEES MARKET TURMOIL
STALLING U.S. GROWTH, BUT NO RECESSION - "U.S. Treasury Secretary Henry Paulson
said... the financial system and economy are 'strong enough to absorb the
losses.... <b>'[L]ooking over periods of stress that I've seen, this is the
strongest global economy we've had,' he said</b>." </span><br />
<br />
<div class="NormalWeb1" style="margin: 0pt;">
<span style="font-family: 'Times New Roman', serif; font-size: 11pt;">Aug. 17 (Boston
Globe) "First Magnus Financial Corp., based in Tucson, which purchases mortgages
from loan brokers and is one of the 10 largest mortgage wholesalers in New
England, yesterday said it would no longer fund new loans...."</span></div>
<div class="NormalWeb1" style="margin: 0pt;">
<br /></div>
<div class="NormalWeb1" style="margin: 0pt;">
<span style="font-family: 'Times New Roman', serif; font-size: 11pt;">Aug. 21 (Reuters)
- MARSH: MANY CLAIMS LOOM IN THE SUBPRIME CRISIS "</span><span style="font-family: 'Times New Roman', serif; font-size: 11pt;">Marsh Inc., the
world's largest insurance broker and risk adviser, yesterday warned financial
institutions they may face more claims as a result of the subprime mortgage
crisis...."</span></div>
<div class="NormalWeb1" style="margin: 0pt;">
<br /></div>
<div class="NormalWeb1" style="margin: 0pt;">
<span style="font-family: 'Times New Roman', serif; font-size: 11pt;">Aug. 21
(Bloomberg) "COMERCIAL PAPER ROILS BORROWERS WITH $550 BILLION COMING DUE
"Ottimo Funding LLC, whose name is Italian for 'excellent, has the highest
possible credit rating and doesn't own subprime mortgage bonds. That made no
difference to investors who refused to buy Ottimo's $3 billion of short-term
debt this month as losses on home loans to risky borrowers infect the global
credit markets. 'It's pretty much a straight contagion,' said George Marshman,
chief investment officer of Stamford, Connecticut- based Aladdin Capital
Management, which oversees about $20 billion, including Ottimo."</span></div>
<div class="NormalWeb1" style="margin: 0pt;">
<br /></div>
<div class="NormalWeb1" style="margin: 0pt;">
<span style="font-family: 'Times New Roman', serif; font-size: 11pt;">Aug. 21 (Fortune)
CAPITAL ONE AND THE MORTGAGE DOMINO EFFECT "Capital One's shuttered GreenPoint
Mortgage is the latest mortgage banking explosion to bump Wall Street's panic
meter up a notch." </span></div>
<div class="NormalWeb1" style="margin: 0pt;">
<br /></div>
<div class="NormalWeb1" style="margin: 0pt;">
<span style="font-family: 'Times New Roman', serif; font-size: 11pt;">Aug 21 (Los
Angeles Times) "THE NUMBER OF U.S. HOMES FACING FORECLOSURE SURGED 58 PERCENT IN
THE FIRST SIX MONTHS OF THE YEAR...."</span></div>
<div class="NormalWeb1" style="margin: 0pt;">
<br /></div>
<div class="NormalWeb1" style="margin: 0pt;">
<span style="font-family: 'Times New Roman', serif; font-size: 11pt;">Aug. 22 -
(Reuters) "TIGHTENING GLOBAL CREDIT MARKETS HAVE TAKEN A TOLL ON U.S.
MORTGAGE-BACKED SECURITIES ISSUED BY FANNIE MAE AND FREDDIE Mac...." </span></div>
<div class="NormalWeb1" style="margin: 0pt;">
<br /></div>
<div class="NormalWeb1" style="margin: 0pt;">
<span style="font-family: 'Times New Roman', serif; font-size: 11pt;">Aug 22 - (AP)
MONEY MARKET FUNDS FACE PRESSURE AMID BROADER UNEASE ABOUT CREDIT "The market
turmoil of the past month spawned by growing credit market problems is spilling
over to money market funds...." </span></div>
<div class="NormalWeb1" style="margin: 0pt;">
<br /></div>
<div class="NormalWeb7" style="margin-bottom: 0pt;">
<span style="font-family: 'Times New Roman','serif'; font-size: 11pt;">Aug. 22
(Bloomberg) DEVELOPER'S BIG MANHATTAN MOVE FACES A CREDIT SQEEZE "Harry
Macklowe, the New York developer, was flying high in February when he decided to
buy a portfolio of prime Midtown Manhattan office towers for nearly $7 billion,
using only $50 million of his own money.... </span><span style="display: none; font-family: 'Times New Roman', serif; font-size: 11pt;">Skip
to next paragraph</span><span style="font-family: 'Times New Roman','serif'; font-size: 11pt;">His 2003
purchase of the <a href="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7lfAFGSi60wK-xemb_78kTDAmDbodES6jmRqYdnHOC2SSm-sC_RrS1Ktf1BVgwiGJBhJBESQzh1n38HwHoAd2g5tOszis-f7el-hPPn5ft_tO-LBAH2IBtWMIDcU4lA3_Ha2xLSlFaRO5bs_JE0etI1tH0-MEG_xoMg=" shape="rect" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7lfAFGSi60wK-xemb_78kTDAmDbodES6jmRqYdnHOC2SSm-sC_RrS1Ktf1BVgwiGJBhJBESQzh1n38HwHoAd2g5tOszis-f7el-hPPn5ft_tO-LBAH2IBtWMIDcU4lA3_Ha2xLSlFaRO5bs_JE0etI1tH0-MEG_xoMg=
More information about General Motors Corporation"><span style="color: windowtext; text-decoration: none;" title="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7lfAFGSi60wK-xemb_78kTDAmDbodES6jmRqYdnHOC2SSm-sC_RrS1Ktf1BVgwiGJBhJBESQzh1n38HwHoAd2g5tOszis-f7el-hPPn5ft_tO-LBAH2IBtWMIDcU4lA3_Ha2xLSlFaRO5bs_JE0etI1tH0-MEG_xoMg=">General Motors</span></a>
Building on 59th Street and Fifth Avenue for $1.4 billion, though derided at the
time as reckless, had been vindicated as the value of the building soared,
enhancing Mr. Macklowe's reputation as a visionary tycoon.... But as the crisis
over subprime residential mortgages spills over into other real estate sectors,
causing a severe tightening of credit, there is widespread talk in the industry
that Mr. Macklowe is in deep trouble, so much so that he could lose control not
only of the newly acquired portfolio but also the G.M. Building and other
properties that were used as collateral for short-term debt that must be repaid
six months from now."</span></div>
<div class="NormalWeb1" style="margin: 0pt;">
<br /></div>
<div class="NormalWeb1" style="margin: 0pt;">
<span style="font-family: 'Times New Roman', serif; font-size: 11pt;">Aug. 22
(Bloomberg) - TOLL BROTHERS INC. THE LARGEST U.S. LUXURY HOMEBUILDER, SAID
THIRD-QUARTER PROFITS FELL 85 PERCENT" </span></div>
<div class="NormalWeb1" style="margin: 0pt;">
<br /></div>
<div class="NormalWeb1" style="margin: 0pt;">
<span style="font-family: 'Times New Roman', serif; font-size: 11pt;">Aug. 22
(TheStreet.com) IS WAMU THE NEXT COUNRTRYWIDE?</span></div>
<br />
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">Specifically stated in the travails of Harry Macklowe,
but running through the other dislocations mentioned, is collateral. With
Macklowe, it is collateral in the literal sense. Given the turmoil after August
15, 2007, lenders marked down the value of Macklowe's assets that stood behind
his borrowings. As a hunch, his assets were additionally discounted because
"</span><span style="font-size: 11pt;">he decided to buy a portfolio of prime
Midtown Manhattan office towers for nearly $7 billion, using only $50 million of
his own money." In other words, when the reliable but jury-rigged,
"Greenspan/Bernanke put" becomes unhinged, the (downward) revaluation of
collateral is not a cold, hard calculation, but, "I want out," on the lenders
part. </span></div>
<div align="center" style="text-align: center; text-indent: 36pt;">
<span style="font-size: 11pt;"> </span><img border="0" height="283" hspace="5" name="ACCOUNT.IMAGE.15" src="https://origin.ih.constantcontact.com/fs102/1102078752130/img/15.jpg" style="font-size: 11pt; text-indent: 36pt;" vspace="5" width="187" /></div>
<div align="center" style="text-align: center; text-indent: 36pt;">
<span style="font-family: Arial, sans-serif; font-size: 8pt; text-indent: 36pt;">D</span><span style="font-family: Arial, sans-serif; font-size: 8pt; text-indent: 36pt;">on
Hogan Charles/The New York Times</span></div>
<div style="text-indent: 36pt;">
<br /></div>
<div align="center" style="text-align: center; text-indent: 36pt;">
<span style="font-size: 11pt;">Harry Macklowe - August 22,
2007</span></div>
<div style="text-indent: 36pt;">
<br /></div>
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">The FOMC chatted about their </span><span style="font-size: 11pt;">magenta and honeydew economy deep into 2008. Federal
Reserve Chairman Ben S. Bernanke told an audience of economists on June 9, 2008:
"The risk that the economy has entered a substantial downturn appears to have
diminished over the past month or so." The recently released 2008 FOMC
transcripts show Ben & Co. were not putting on a brave face. They really
believed this stuff. </span></div>
<div style="text-indent: 36pt;">
<br /></div>
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">A handful of district <i>presidents</i> operated with a
full seabag, and could see the 6% of GDP was not separate from the professor's
textbook, FOMC-Approved economy. ("Yes, Ben, 6%. Another "A".)</span></div>
<div style="text-indent: 36pt;">
<br /></div>
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">The lethargy is worse in 2014. Old hands on the Federal
Reserve staff who dealt in markets have retired. The professors' minds are more
constipated than ever. Federal Reserve Chairwoman Janet Yellen sounds like Alan
Greenspan in 2005 - or 1995: The Fed is lifting the stock market, the housing
market, and the consequent "channel" from those to consumer spending will fuel
"escape velocity." </span></div>
<div style="text-indent: 36pt;">
<br /></div>
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">She could not be more wrong. Consumers are not in a
position to increase credit. The Greenspan leveraging of America could only
happen once. An <i>extraordinary</i> supplement of consumer spending and credit
is needed to save the Holy GDP. Consumer credit debt rose from 105% to 117%
during the first Reagan Administration (1980-1985) to 205% in 2007. Total credit
(business, household, financial, and government) rose from 150% to 350% of GDP.
This will not rise to 500%. </span></div>
<div style="text-indent: 36pt;">
<br /></div>
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">Yellen cannot think differently. Federal Reserve policy
will </span><span style="font-size: 11pt;">"encourage consumers to spend and
businesses to invest, to promote a recovery in the housing market, and to put
more people to work." (Janet Yellen, March 31, 2014, National Interagency
Community Reinvestment Conference, Chicago, Ill) In the same speech: "We are
trying to help families afford things they need so that greater spending can
drive job creation and even more spending, thereby strengthening the recovery."
The Fed believes the "Wealth Effect" from rising asset prices is the "Channel"
to GDP "Escape Velocity." (The first thing we do is kill their vocabulary.)
</span></div>
<div style="text-indent: 36pt;">
<br /></div>
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">This channel has never worked as they claim. Michael
Feroli, chief U.S. economist at J.P. Morgan, calculates the amount of acquired
wealth spent by consumers was 3.8% from 1952 through 2009. That is 3.8 cents of
every additional dollar in "wealth." (Another word economists have mangled.)
Since 2009, Feroli calculates households have spent 1.9 cents of each
incremental dollar, half the historical average. Feroli also found that
withdrawal of home equity has been negative for the past five years.</span></div>
<div style="text-indent: 36pt;">
<br /></div>
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">Yellen toted her "wealth" channel to Congressman Frank
Lucas on February 11, 2014: "I would agree that one of the channels by which
monetary policy works is asset prices, and we have been trying to push down
interest rates, particularly longer-term interest rates. Those rates do matter
to the valuation of all assets, both [<i>Sic</i>] stocks, houses, and land
prices. And so I think it is fair to say that our monetary policy has had an
effect of boosting asset prices."</span></div>
<br />
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">Yellen's theoretical world not only lacks a theory but
is at odds with reality. Maybe the Fed can claim a partial victory: the U.S.
Census median price for new homes sold in March 2014 rose 13.3% from a year
earlier and reached a new record high of $290,000. As one might guess, sales
have fallen. </span></div>
<div style="text-indent: 36pt;">
<br /></div>
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">Redfin, a real-estate brokerage firm, calculates house
sales have collapsed in 2013's most effervescent Arizona and California housing
markets. In Phoenix, inventories rose 42.7% from March 2013 but sales fell
17.4%. Redfin describes what eludes Yellen: "Someone who purchased a $350,000
home in Riverside [CA] in March 2013 with a twenty percent down payment and a
30-year fixed mortgage rate of 3.4% would have a monthly mortgage payment of
$1,241. But with prices up 19.6%, the same home would now cost $418,600. At the
current mortgage rate of 4.33%, the monthly mortgage payment on that home is now
$1,663, a 34% jump from a year ago."</span></div>
<br />
<span style="font-size: 11pt;"> California Association of Realtors Chief
Economist Leslie Appleton-Young recently warned: "Housing affordability is
really taking a bite out of the market. We haven't seen this issue since 2007."
This is a remarkable comparison, given that, just seven years earlier,
California housing was collapsing faster than London during the Blitz. In
October 2007, California Association of Realtors Chief Economist Leslie
Appleton-Young announced: "The impact of the credit crunch spread throughout all
tiers of the market in September." California statewide median home prices had
sunk $58,140 from September 2006 and statewide home sales fell 39% from the year
before. The California Association of Realtors "Unsold Inventory Index"
increased to 16.6 months, double the level in March 2007. It had been 6.4 months
in September 2006. San Francisco Bay Area sales fell 46% over the past year;
High Desert sales were 63% lower. (In December 2003, California Association of
Realtors Chief Economist Leslie Appleton-Young told her audience the chronic
shortage of homes for sale coupled with attractively low mortgage rates would
keep the pressure on buyers: "The message is 'Boy, this is the time,' Young
said. 'It doesn't look like the situation is going to change any time
soon.'")</span><br />
<br />
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">The rate of home ownership in the United States just
fell to the lowest level since 1995: 64.8%. It is not a coincidence that
then-Fed Chairman Alan Greenspan started confiscating our interest rates around
that time, partly to goose the housing market. He had enjoined Fannie Mae and
Freddie Mac to turn their mortgage regurgitations into assembly lines, to
quicken the pace of credit flows since the economy was moving to China.
</span></div>
<br />
<span style="font-size: 11pt;"> At the July 1995 FOMC meeting, Greenspan
expounded on mortgage growth and the GDP: "[M]ortgage applications for
purchasing new and existing homes have been moving up....The home builders data
clearly indicate that things are moving. This is important not only because of
the importance of the residential construction sector, but also because history
suggests that motor vehicle sales and some parts of the residential building
industry move together. If there is firmness in the home building area it has to
exert, if history is any guide, some upward movement in the motor vehicle area,
which would be very useful." Especially useful to a public servant whose annual
review consists of the percentage increase to GDP. </span><br />
<br />
<span style="font-size: 11pt;"> The ownership rate of houses peaked at 69.2%
in 2004. The mad rush into home mortgages was only possible through the Fed's
perpetual perversion of interest rates. When interest rates are too low, the
riffraff banned from Vegas hangs a "Loans" shingle in the pool hall. </span><br />
<br />
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">It appears Chairman Yellen came close to admitting low
rates had destroyed balance in the housing market in her February 2014 meeting
with the Congressmen. This is gathered from the phrasing of a question by
Representative Patrick Murphy: </span></div>
<br />
<span style="font-size: 11pt;">MURPHY: "The collapse of the housing bubble and
resulting financial crisis devastated the global economy and cost Americans $17
trillion worth of wealth. Many of us assign responsibility for low interest
rates and lax capital and leverage standards to the Federal Reserve and then
Chairman Greenspan. While I do not believe the Fed caused the crisis, [Come on,
Murph! Let it fly! - FJS] its policies certainly helped fuel the Bubble. In June
2009, you said that higher short-term interest rates might have slowed the
unsustainable increase in housing prices. With the benefit of hindsight, would
measures to slow the housing bubble have been appropriate?"<br /><br />YELLEN: "....
[P]olicies to have addressed the factors that led to that Bubble would certainly
have been desirable. I think a major failure there was in regulation and in
supervision, and not just in monetary policy." </span><br />
<br />
<span style="font-size: 11pt;"> The bureaucrat's utopia. New and more
regulation. </span><br />
<br />
<span style="font-size: 11pt;"> The housing market is not hitting a single
cylinder. The Fed cut mortgage rates from 6.5% to 3.3% over five years. Around
80% of mortgage originations are refinancings, not money-purchase mortgages. And
now, that has dried up, for the simple arithmetic Redfin described in the
Riverside, California market. </span><br />
<br />
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">The combination of higher payments (delinquencies rise)
and lower volume is similar to when Countrywide's loan production sank in the
summer of 2007. Mortgage originations from the four big banks (Wells Fargo, Bank
of America, J.P.MorganChase, Citi) averaged $300 billion a quarter from 2010
through 2013 (average of $1.2 trillion each year, $300 billion a quarter). They
fell to $67 billion in the first quarter of 2014. Total mortgage-backed security
(MBS) issuance has fallen from $185 billion in June 2013 to $87.2 billion March
2014. </span></div>
<div style="text-indent: 36pt;">
<br /></div>
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">This is bad for collateral. When credit expands beyond
its capacity to fund positive-return projects, asset quality deteriorates This
is a dangerous moment: asset prices must not fall, and acceptable collateral
must rise at a faster rate, not fall by $98 billion a month, as MBS
securitization has since June 2013. </span></div>
<div style="text-indent: 36pt;">
<br /></div>
<span style="font-size: 11pt;"> House sales affirm life is good at the top.
The bottom is getting worse. The National Association of Realtors (NAR) existing
home sales data for March 2014 calculates number of houses sold for below
$100,000 fell 17% year over year. Those between $100,000 and $250,000, fell 10%.
House sales for prices above $1 million rose 14.8% in February 2014 and 7.8% in
March 2014. Vacation home sales rose 30% in 2013, from 553,000 in 2012 to
717,000 in 2013. </span><br />
<span style="font-size: 11pt;">
</span><br />
<h1 style="margin: 0pt;">
<span style="font-size: 11pt; font-weight: normal;"> Spending at the top
must not slacken. Hermès has stationed a baseball glove in its window - with a
sales tag of $14,100. To the question, "Why so expensive?" <i>MarketWatch</i>
was reminded the mitt is "absolutely top-grade." The Ritz-Carlton in Chicago
offers a $100 grilled cheese sandwich, stuffed with 40-year-old aged Wisconsin
cheddar that's been "infused with 24K gold flakes." New asset classes include
old cars. Classic Auto Funds Limited (CAF) is "launching several investment
partnerships using collectable cars as the hard asset." Fund CAF/1 is already up
and running, or, at least, in storage: with a 1971 Ferrari Dino 246 GT and a
1964 Maserati Mistral 3.5. The investment partners (conjecture comes from how
this ended in 2007) will turn this asset into (discounted) collateral. The
investors will then use the borrowed money to buy Facebook shares (passé as that
may be) or to bid against Chinese businessman Liu Yiqian, who bought a fifteenth
century porcelain cup at Southeby's in Hong Kong for $36 million. Also recalling
2007: how will this collateral look to the lender in a panic? The larger point
here is that collateral's velocity cannot slow down, from fatigue or concern.
The imaginary value behind assets must keep rising, or all will fall.
</span></h1>
<h1 style="margin: 0pt;">
<span style="font-size: 11pt; font-weight: normal;"> </span></h1>
<h1 style="margin: 0pt;">
<span style="font-size: 11pt;"> </span><span style="font-size: 11pt; font-weight: normal;">Federal Reserve Chairman Janet
Yellen came to the job touted as a "great labor economist." She betrayed an
untutored knowledge of labor data during a speech in Chicago on March 31, 2014:
"Since the unemployment rate peaked at 10 percent in October 2009, the economy
has added more than 7-1/2 million jobs and the unemployment rate has fallen more
than 3 percentage points to 6.7 percent. That progress has been gradual but
remarkably steady--February was the 41st consecutive month of payroll growth,
one of the longest stretches ever."</span></h1>
<h1 style="margin: 0pt;">
<span style="font-size: 11pt; font-weight: normal;"> </span></h1>
<span style="font-size: 11pt;"><b> </b></span><span style="font-size: 11pt;">What jobs have been created during those 41 months? Not
the sort that can pay for a house. Before looking at the poor quality, the
quantity is absent. Yellen is looking for a renaissance when there are fewer
payroll (NFP: non-farm payroll) workers than in 2007. </span><br />
<br />
<span style="font-size: 11pt;"> In "<span style="text-decoration: underline;"><a href="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7lfz2oQpWwGZCfccIy6vplTziayBu6sKmZzCeVGiCIqx37K8NnlRiJX7pBpmJB7ZZYyuX7UOjfRGiqXWXAzMlGsj07uDcw84uGt5SGwC8xSIYEzL-EaUXDt5P4kSClVBF4x2tgGkQHFH7Q==" linktype="1" shape="rect" style="color: black;" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7lfz2oQpWwGZCfccIy6vplTziayBu6sKmZzCeVGiCIqx37K8NnlRiJX7pBpmJB7ZZYyuX7UOjfRGiqXWXAzMlGsj07uDcw84uGt5SGwC8xSIYEzL-EaUXDt5P4kSClVBF4x2tgGkQHFH7Q==" track="on">The Born Again Jobs Scam: The
Ugly Truth Behind 'Jobs Friday,</a></span>'" David Stockman writes on his
ContraCorner website there were 138.4 million NFP jobs in December 2007. In
March 2014, the total was 137.9 million. There are 500,000 fewer payroll workers
today. </span><br />
<br />
<span style="font-size: 11pt;"> The span from December 2007 to March 2014 is
75 months. Seventy-five months after jobs peaked in 1990 (as we entered the
1900-1991 recession), there were 10 million <i>net</i> new jobs. Seventy-five
months after the post-2000 job peak, there were five million <i>net</i> new
jobs. In March 2014, we are still half-a-million jobs south of the zero bound.
</span><br />
<br />
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">Stockman makes the distinction of "breadwinner jobs."
Breadwinner jobs produce annual pay of about $45,000. "<span style="text-decoration: underline;">The Born Again Jobs Scam</span>," lists the
breadwinner-job industries and income data as calculated by the Bureau of Labor
Statistics. </span></div>
<div style="text-indent: 36pt;">
<br /></div>
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">It is assumed here that only those with breadwinner jobs
can buy a house. Short of that, there are methods to finagle a house through
student loan and the used-car loan markets, but that is limited.</span></div>
<br />
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">The Greenspan NASDAQ Bubble peaked in 2000 and
breadwinner jobs reached 72.7 million. After Greenspan and Bernanke artificially
revved up the mortgage-finance economy through 2007, jobs topped out at 71.9
million in December 2007. By June 2009, the deflated mortgage bubble had cost
five million jobs: there were 66.2 million NFP workers in June 2009. By March
2014, there were 68.3 million breadwinner jobs, 3.6 million fewer than in
December 2007, a level achieved during the second Clinton Administration. The
quality within the breadwinner industries has deteriorated significantly and the
population has grown.</span></div>
<br />
<span style="font-size: 11pt;"> Ben Bernanke's "six percent" also failed
because his approach was wholly abstract. Construction and its financing had
lost its mind. Today, again, grandiosity is the rule.</span><br />
<br />
<h1 style="margin: 0pt; text-indent: 36pt;">
<span style="font-size: 11pt; font-weight: normal;">Hudson Yards, on New York's West
Side, is the largest such development in Manhattan since Rockefeller Center in
the 1930s. Residential towers at 15 Hudson Yards and 35 Hudson Yards will rise
910 feet, with 70 floors of "unobstructed views of the of the city and Hudson
River.... 15 Hudson Yards will be the ideal place for New York's creative
visionaries to live." A search for a perfect resident at 35 Hudson Yards was
unavailing. </span></h1>
<h1 style="margin: 0pt; text-indent: 36pt;">
<span style="font-size: 11pt; font-weight: normal;"> </span></h1>
<h1 style="margin: 0pt; text-indent: 36pt;">
<span style="font-size: 11pt; font-weight: normal;">The 52-story South Tower will be
the first to soar. That in itself is commonplace. It is when one reads "it is to
become the home of the luxury handbag maker Coach," tentatively named "Coach
Tower," that securitization of vintage cars looks relatively sane. The
Masterplan, on Hudson Yards' promotion website, expects 17,440,000 square feet
of office, residential, hotels, shops on 28 acres. </span></h1>
<h1 style="margin: 0pt; text-indent: 36pt;">
<span style="font-size: 11pt; font-weight: normal;"> </span></h1>
<h1 style="margin: 0pt; text-indent: 36pt;">
<span style="font-size: 11pt; font-weight: normal;">When Mayor Bloomberg launched the
Hudson Yards initiative, he compared it to Canary Wharf's influence in London.
This may not be the most encouraging comparison, at least for the builders,
since Canary Wharf crushed the Reichmann Family (Olympia & York), and its
creditors, with $20 billion of unpaid bills when it filed for bankruptcy.
</span></h1>
<h1 style="margin: 0pt; text-indent: 36pt;">
<span style="font-size: 11pt; font-weight: normal;"> </span></h1>
<div style="text-indent: 36pt;">
<span style="font-size: 11pt;">As to London, the glass cube tower invasion rises as one
of the most celebrated skyline additions in decades goes broke. On April 25,
2014, the Gherkin Building was placed in receivership. The following paragraph
from <i>Realty Today</i> just about sums up the derangement of minds and finance
in 2007: "</span><span style="font-size: 11pt;">VG Immobilien purchased the
building in 2007 from architects Norman + Foster [Always a red flag for
extravagance - FJS] for $1 billion. The Germany-based realty firm financed the
deal through a loan, part of which was in Swiss Francs. The currency has gained
about 63 percent on the dollar in the last seven years, which ballooned the debt
price to a point that it breached levels of debt allowed to be held in the
country, reports Bloomberg."</span></div>
<div style="text-indent: 36pt;">
<br /></div>
<h1 style="margin: 0pt; text-indent: 36pt;">
<span style="font-size: 11pt; font-weight: normal;">Another cautionary comparison lies
partially built but wholly insolvent in Seoul, South Korea. "Dream Hub," a
proposed 138-acre building project, midwifed by former Seoul Mayor Oh Se-Hoon
(this was to be his ticket to the presidency), has entered bankruptcy. Sparing
the details reported by the <i>Wall Street Journal </i>(which published "just
the tip of the iceberg"), six years after groundbreaking, the anticipated
150-story, 2,181-foot-tall skyscraper is stillborn, and Oh Se-Hoon will not
comment on his foregone objective to turn Seoul "into a center of global
commerce."</span></h1>
<h1 style="margin: 0pt; text-indent: 36pt;">
<span style="font-size: 11pt; font-weight: normal;"> </span></h1>
<h1 style="margin: 0pt; text-indent: 36pt;">
<span style="font-size: 11pt; font-weight: normal;">Boston Properties has acquired the
groundbreaking (on March 27, 2013) Salesforce Tower in San Francisco. The 1,070
foot, 61-floor tower (expected completion in 2017) will rise 200 feet above
Transamerica Pyramid, currently the tallest building in San Francisco, and the
west coast. It will "eventually be eclipsed in height by the <a href="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7lc-w6YH3MAbHlsdngg8AkM9lgH6w47q7QXVNVRyDfEZqnb4Fxfo5OV7jTN8qdlSMXenIgKNcucv3KmGY1RmNq_QswngXcjjfHOrq8I4Ohlp7wyKjZzFqtpNgDFSziSc65U=" shape="rect" target="_blank" title="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7lc-w6YH3MAbHlsdngg8AkM9lgH6w47q7QXVNVRyDfEZqnb4Fxfo5OV7jTN8qdlSMXenIgKNcucv3KmGY1RmNq_QswngXcjjfHOrq8I4Ohlp7wyKjZzFqtpNgDFSziSc65U="><span style="color: black;" title="http://r20.rs6.net/tn.jsp?e=001xeB_ZbkFDRpQyDJMiH6gxt4eSWZXQ_0e6B3mcPG-AyBFAcqOozteG4WkU_HdfMO7EIKGIcFH7lc-w6YH3MAbHlsdngg8AkM9lgH6w47q7QXVNVRyDfEZqnb4Fxfo5OV7jTN8qdlSMXenIgKNcucv3KmGY1RmNq_QswngXcjjfHOrq8I4Ohlp7wyKjZzFqtpNgDFSziSc65U=">73-story Wilshire Grand</span></a> in Los Angeles."
Originally contracted on "spec," meaning the builder did not have a substantial
tenant at the outset, Salesforce will rent 700,000 square feet in its namesake
skyscraper. Mayor Lee of San Francisco commented: "It's not just about an
expanding company. It's about a company that has faith in our city and is
demonstrating that. And has faith in the kind of values we try to teach our kids
about giving back." </span></h1>
<h1 style="margin: 0pt; text-indent: 36pt;">
<span style="font-size: 11pt; font-weight: normal;"> </span></h1>
<h1 style="margin: 0pt; text-indent: 36pt;">
<span style="font-size: 11pt; font-weight: normal;">These mayors. ("Boston Mayor Martin
Walsh said [in late April] he wants to make his city the tech capital of the
world.... And he's "not afraid to build a skyscraper for [high-tech] workforce
housing.") What does that mean? A case might be made that Boston Properties is
the model of faith and charity. Salesforce "had operating losses of $35 million,
$111 million, and $286 million the past 3 years? (Yes, the losses are
increasing in size.) On top of that, CRM has net debt of over $1 billion on
their balance sheet." (Thank you, Kevin Duffy at Bearing Asset Management) San
Francisco as a whole is grossly overrun by social media operations at
unsustainable rents that have a whiff of Webvan, the San Francisco Internet
grocer that went public in 2000, broke in 2001, after placing a $1 billion order
with Bechtel to build grocery warehouses.</span></h1>
<h1 style="margin: 0pt; text-indent: 36pt;">
<span style="font-size: 11pt; font-weight: normal;"> </span></h1>
<div style="margin: 0pt;">
<span style="font-size: 11pt;"> Despite
mounting evidence the house and skyscraper markets are long in the tooth, they
continue to rise. Harry Macklowe, undeterred after losing the GM Building (and
seven others following the 2007 credit crunch), received FAA approval to build
"the tallest residential tower in the western hemisphere." If all goes as
planned (it is under construction), the 95-story apartment house, at 432 Park
Avenue, will glower down upon Central Park, with "[p]rices at the proposed
1,396-foot tall skyscraper start[ing] at $20 million for three-bedroom units
with libraries. Full-floor penthouses with 360-degree views cost up to $95
million. A one-bedroom can be had for close to $7 million." Harry "Macklowe
claims he has already sold one-third of the 123 units, but [CORE broker Jarrod
Guy Randolph] worried about pricing."</span></div>
<div style="margin: 0pt;">
<br /></div>
<div style="margin: 0pt;">
<span style="font-size: 11pt;"> Come on,
Jarrod. Follow Harry. He didn't even graduate from college. Parents and students
paying extortionist tuitions, take note. </span></div>
<div style="margin: 0pt;">
<br /></div>
<div align="center" style="margin: 0pt; text-align: center;">
<span style="font-size: 11pt;"> <img border="0" height="182" hspace="5" name="ACCOUNT.IMAGE.16" src="https://origin.ih.constantcontact.com/fs102/1102078752130/img/16.jpg" vspace="5" width="258" /> </span></div>
<div align="center" style="margin: 0pt; text-align: center;">
<br /></div>
<div align="center" style="margin: 0pt; text-align: center;">
<span style="font-size: 11pt;">Vision of 432 Park Avenue: Monument to </span></div>
<div align="center" style="margin: 0pt; text-align: center;">
<span style="font-size: 11pt;">the Bernanke/Yellen Zero-Bound</span></div>
</div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-47762822938702508802014-04-26T08:49:00.001-04:002014-04-26T08:49:38.077-04:00All The News That's Fit To Print - in 2014 <span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">Frederick J. Sheehan is the author of </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><a href="http://r20.rs6.net/tn.jsp?e=001NP32KB9bfJYX_ptWoapizpy7uGMxduFBexCdwaEIEa0NibZn-KtBhwd8ZO_P_R23NZb_KmlyuTP5GbTSrbcarkk3l2QVsDr9vJJN5XVZ4ZFgUb8Fwme4apVjOahL4F5Lx70x81X9rZVAhXpdzsA32rRwEf1QyuqoZgfrH8EibIPbcugZ90_GEuMmalWpilDrKZbXZa3kzzDs6Lm0-YBxjwFg8d_CwU0nIHY-cx6IfMqqtakT4tYuHEnPsoumM8KRqYCGlN3jvF0EhiWV-SvLFEMO7rWM-xxanAl7EqjpN32Pehj7j6Xs0O80-nC7Q6zEIrfGn8KtKC_xWy_hRWVCdwBB5q6TsviBCh4icae0UWg=" shape="rect" target="_blank"><span style="color: #000d74; font-family: "Arial","sans-serif"; font-size: 10.0pt;">Panderer to Power: The Untold Story of How Alan Greenspan
Enriched Wall Street and Left a Legacy of Recession </span></a></span><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"> (McGraw-Hill, 2009) and "<a href="http://r20.rs6.net/tn.jsp?e=001NP32KB9bfJYX_ptWoapizpy7uGMxduFBexCdwaEIEa0NibZn-KtBhwd8ZO_P_R23NZb_KmlyuTOXpfg5Ywdry-LsMGQmOy3fQd4JZbM2ojqtmVmCS_6dh43utpp5aq7Uwovt9OtN3gCVbuQBjbjHMw==" linktype="link" shape="rect" target="_blank" track="on"><span style="color: #000d74;">The
Coming Collapse of the Municipal Bond Market</span></a>" (Aucontrarian.com, 2009</span><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">)</span><br />
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><br /></span>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">The most astounding rubbish is spoken
every day by central bankers and other commentators who hold a monopoly on what
the public at large knows. Most of the <i>New York Times</i> column
(below) in 1929 fits today and is worth more refection than the next hundred speeches
by Federal Reserve Chairman Janet Yellen. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">To fill in some
background to the <i>Times</i> article (many of these financial mutations have
parallels in 2014 - and growing more so by the day), bank customers, both
individuals and corporations, instructed the banks to lend their deposits to
the call loan market. It has been estimated that corporations (including U.S.
Steel, General Motors, AT&T, and Standard Oil of New Jersey) had lent $5
billion to New York Stock Exchange purchases by September 1929. These parties
were drawn to the call loan market as rates rose to 10%. In consequence, total
securities loans rose from $12.4 billion on October 3, 1928 to $16.9 billion a
year later. As a reference, GDP in the United States, not yet calculated but
estimated in retrospect, reached $99 billion in 1929.</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">One sentence in the <i>Times
</i>article below requires discussion: "<i>Barring the Wall Street money
rates, everything seemed to be going well up to the middle of September</i>."
This may have been true, but the call-loan market did warn of severe
distortions. This is always easy to say in retrospect. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Just a word on that.
Financial calamities usually happen in busy times. It's hard to know how much
weight to place on specific developments. There's a <i>je ne c'est quoi</i> in
the air, that, by its very nature, leaves people "bewildered," as the
<i>New York Times</i> proposes below. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">The "call
money" distortions of today (see chart at bottom) terrifies some, but not
many. Of course, the Federal Reserve (in 2014) has confiscated interest rates,
which offer warnings and restrict the flow of lending into an overheated
market. This is one more reason central-banking policy is an attack upon
humanity. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">New issues of
securities averaged $5.8 billion between 1924 and 1928; issuance was $11.6
billion in 1929, a record that stood until the 1960s. Common stock issuance in
1929 was 10 times the average volume of 1924-1928. More ominously, the new
issues in 1929 were dominated by investment trusts; these vehicles raised money
- not to produce anything - but to buy common stocks. To add to the fire,
investment trusts generally bought equity participation in companies on margin.
With practically no money down, it is no wonder that new issues of common
stocks in the month of September 1929 exceeded any previous year, except for
1928. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">The <i>New York Times</i>,
December 30, 1929, "Financial Markets" column: "Financial
Markets: The Ending of a Remarkable Year - How it Appears in Retrospect": </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">The year that ends
tomorrow is regarded now, and will be considered in all future financial
reminiscence, with very much mingled feelings. Even the nation-wide speculating
public, which has taken its losses, and at least in outward semblance, learned
its lesson, will hardly end the year without a sense of bewilderment. Barring
the Wall Street money rates, everything seemed to be going well up to the
middle of September. Stocks should go higher when business prosperity increases
in a striking way, and trade activity, even in the usually dull midsummer
months, had reached a magnitude never witnessed in that season.</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">If prices for
industrial products were not rising, profits were. The predicted increase of
industrial company dividends had been realized. Few disturbing incidents had
occurred in company finance, to suggest that the upward trend of earnings and
dividends would not continue indefinitely. Yet this was the very moment
selected by fate for a crash in Stock Exchange values quite unprecedented in
history. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">By people more
familiar with past financial history than the outside public of 1929 has shown
itself to be, it might be answered that it is precisely in such an hour of
seemingly impregnable prosperity that the worst of our older financial crises
have occurred. The disastrous deflation of 1920 began on the markets at a time
when consuming power was apparently inexhaustible, when visible evidence
appeared to be at hand that supplies were inadequate to meet demand. Long after
1907 it was angrily asserted that the October panic of that year could not have
been a reasonable occurrence, considering the immense activity of trade and the
very large company earnings which had prevailed in the preceding nine months. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">The economic
explanation of the seeming paradox, however, assigns the great increase of
financial or industrial activity, just before the breakdown, as itself the
cause for the collapse. On every occasion of the kind, abnormal stringency in
the money market had warned, long before the 'panic month,' that credit was
overstrained. When, in the face of that condition, activities of general trade
or on the Stock Exchange were greatly increased and with them the demand for
credit, the breaking-point was reached</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Such contributory
influences as withdrawal of foreign capital from Wall Street, last September
and in 1907, were merely incidents. On none of these occasions did either Wall
Street or the banks recognize at the time how extremely bad the situation had
already grown; the most energetic effort had been directed to concealing or
disguising its precarious nature. But the crash, when it came, was always
violent in proportion to the extent by which previous speculation had
over-stepped the mark. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">In one respect the
history of 1929 resembles that of 1920. The two years differ, in that the
panicky collapse of nine years ago came in the immediate sequence to inflation
of commodity values, whereas last Autumn's breakdown followed inflation of
values only on the Stock Exchange. Otherwise the analogy is close. The
preceding speculation had on both occasions been built on the basis of pure
illusion; in each year the whole country seemed to be deluded into the notion
that a new economic era had arrived, in which all old-fashioned economic axioms
might be safely disregarded. In both 1929 and 1920 prices had been carried to
previously unimagined heights. In both, it was insisted up to the last (even by
serious businessmen), that they were destined to go vastly higher. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">As a quite inevitable
result, the forced readjustment when it came was more sweepingly violent on
each occasion than financial imagination had considered possible. Last autumn's
50 percent decline in the average price of stocks surpassed all precedent; yet
the average fall of 43 percent in average prices of commodities, between the
middle of 1920 and the end of 1921, was almost equally unparalleled. If it
seemed, last August, that the price of General Electric, for instance, could
not conceivably fall 58 per cent in three months, so it was inconceivable in
May of 1920 that wheat would in the next 18 months fall 70 per cent, to less
than its pre-war average price. But the reckoning in both years measured with
inexorable accuracy the scope of previous excesses. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;"> <img border="0" height="287" hspace="5" id="_x0000_i1025" name="ACCOUNT.IMAGE.14" src="https://origin.ih.constantcontact.com/fs102/1102078752130/img/14.jpg" vspace="5" width="400" /></span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN">
<o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN">Source: dshort.com<o:p></o:p></span></div>
<span lang="EN" style="font-family: 'Times New Roman', serif; font-size: 12pt;"> </span>Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-59391904437417956602014-04-23T08:24:00.000-04:002014-04-23T08:27:54.497-04:00The Shoe Dropped. What's Next?<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">Frederick J. Sheehan is the author of </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><a href="http://r20.rs6.net/tn.jsp?e=001Ecf8EHFxJuwADxXcrlGO42HiMbmdvOtNs8fjwHJkKTAunT_3zaW5ZGQmAPt_NXe-DObuJsoigv1-An3OvVM9T0HCjz8YCkWAoIXqHdd9MYm7AGfHmSncqHDW39vUch08akH399Vj8daUXtoGf6OYflndyHN0STqVjQL5jIeEZF4Lz7nDisfrmYOuoD6k5J7mIts4SZgxIunfZie4v8lfImgfXAQpnOX3G8rZCpYzGU2yLUg3gU-hgqp4tON17tn9ZG2i8vTTblXxIKNXiy1B9a-A1EoBEcp5mwWdr-K6iRFzXSMWTSegJnTsY5iYoQca9i2uIjRCgloSB-HyQ-Bd2b4Tbl8I7T6xGBl-wSuarYc=" shape="rect" target="_blank"><span style="color: #000d74; font-family: "Arial","sans-serif"; font-size: 10.0pt;">Panderer to Power: The Untold Story of How Alan Greenspan
Enriched Wall Street and Left a Legacy of Recession </span></a></span><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"> (McGraw-Hill, 2009) and "<a href="http://r20.rs6.net/tn.jsp?e=001Ecf8EHFxJuwADxXcrlGO42HiMbmdvOtNs8fjwHJkKTAunT_3zaW5ZGQmAPt_NXe-DObuJsoigv2R_y1dm6c_8_2aNtVMUeWr4D163wQnwL4gieSqAfS_Na1zYAQuTtPefvCbxuqrhanKiwQXkkuFtg==" linktype="link" shape="rect" target="_blank" track="on"><span style="color: #000d74;">The
Coming Collapse of the Municipal Bond Market</span></a>" (Aucontrarian.com, 2009</span><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">)</span><br />
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><br /></span>
<br />
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">A persistent presumption here is the
limit to U.S. government bond issuance <i>that</i> (important qualification
coming) can be traded at government-manufactured rates. "<u><a href="http://r20.rs6.net/tn.jsp?e=001Ecf8EHFxJuwADxXcrlGO42HiMbmdvOtNs8fjwHJkKTAunT_3zaW5ZGQmAPt_NXe-DObuJsoigv2R_y1dm6c_8_2aNtVMUeWr9OAHM1PJTPsW9nw53pVZEdfybHLs4eDvVGVuRi7v2XxYkcA1Lymz4cQT5863g1dilYwQgXTkP4x22A5XpK3hkw==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">March
2014 - One Month Closer</span></a></u>," issued the reminder: "Bond
yields, across the spectrum, have fallen from 4.8% to 2%. In an open market,
bond investors handicap their purchases according to a calculated risk. This is
a rigged market, though. The rising quantity has produced worse quality, but
central planners disguise that fact." The conclusion to<b> </b>"<a href="http://r20.rs6.net/tn.jsp?e=001Ecf8EHFxJuwADxXcrlGO42HiMbmdvOtNs8fjwHJkKTAunT_3zaW5ZGQmAPt_NXe-DObuJsoigv2R_y1dm6c_8_2aNtVMUeWr9OAHM1PJTPsW9nw53pVZEVEydWQNw_FlC62mNMfqyVWaj8fJkEk5R7VRMjJT0-3CrXtvfEp_1Pwb795wqcY4mA==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">The
Economist's Sell Signal,</span></a>" (November 30, 2013) proposed a
shorthand approach to investing as we approach the inevitable moment when
non-government market participants say "enough": "The <i>Economist's</i>
article was unbalanced, sloppy, and abandoned by the starting team: much like
the world's markets. A suggestion for current asset allocation: where would you
want your money today if you knew interest rates will rise by 4.0%
tomorrow?" </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="boxtextnews" style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
In spectacular fashion, markets did say "enough" in Japan last week.
Yet, interest rates did not move. Recall "important qualification
coming" in the paragraph above. On Monday, April 14, 2014, and, into
Tuesday, April 15, 2014, there was not a single bid for the Japanese 10-year
bond. John Rubino, at DollarCollapse.com, in "<u><a href="http://r20.rs6.net/tn.jsp?e=001Ecf8EHFxJuwADxXcrlGO42HiMbmdvOtNs8fjwHJkKTAunT_3zaW5ZGQmAPt_NXe-DObuJsoigv3-zzCq627ZJue7I02rQmXP0nch0l35wvKnVT72z8m_10zaLTwkQ3ASyPZMNllyDtzgwtP00_oUysxy1eihirwo" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Amazing
Story from Japan</span></a></u>," quotes Reuters: "The Bank of
Japan's massive purchases of government debt hit a milestone this week, sucking
liquidity out of the market to such an extent that the benchmark 10-year bond
went untraded for more than a day...." Rates did not move because, for
every 10-year Japanese government bond seeking a purchaser, the Bank of Japan
created electronic yen (it "printed money") and paid exactly the
price necessary to hold the 10-year rate at 0.6%. The looming question is how
long the Bank of Japan (or, in an entirely imaginable similar situation, the
Federal Reserve) will continue printing (electronically crediting yen or
dollars to the seller) when the market decides: "I'm outta' here!"</span><span lang="EN"><o:p></o:p></span></div>
<div class="boxtextnews" style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="boxtextnews" style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
The Japanese experiment, described and condemned in<b> </b>"<u><a href="http://r20.rs6.net/tn.jsp?e=001Ecf8EHFxJuwADxXcrlGO42HiMbmdvOtNs8fjwHJkKTAunT_3zaW5ZGQmAPt_NXe-DObuJsoigv3Cz5TZn_UulWIyr03Co23y2bSGLiYWp6gCSRvQFAzZHWHmz__j8xYvVUy04x6T4m0CRLkB4X77Zbupu1HQbH7ieoJWM9g22AE=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">We Are
All Lab Rats Now</span></a></u>," is an exaggerated form of the Federal
Reserve's extermination program. Keep in mind how Fed officials brag of their
successful "liquidity" apparatus in light of the overdrive, Bank of
Japan, balance-sheet expansion. Since March 2013, the BoJ balance sheet has
blossomed from ¥125 trillion ($1.23 trillion) to ¥200 trillion ($1.96 trillion)
of Japanese government bonds. Bank of Japan Governor Haruhiko Kuroda, more
recently labeled Hari Kari Kuroda (that is: here and now) received carte
blanche authority to inflate Japanese prices. Inflation is "gaining
traction" as economists say, but the results have been exactly and
completely in contradiction to Kuroda's promises. </span><span lang="EN"><o:p></o:p></span></div>
<div class="boxtextnews" style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div class="boxtextnews" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">A year into
the Kuroda regime, the Bank of Japan has strangled markets. Quoting Rubino:
"The fall in market liquidity looks set to intensify as the BoJ has vowed
to continue its aggressive buying for at least another year, with market
players expecting it to expand its easing some time later this year.... The
increasing dominance of the BoJ in the market [has] resulted in a shortage of
tradable bonds in the market, reducing trading flows between market players.
Brokers are reluctant to go short, fearing that they cannot buy back when they
want. On the other hand, few investors are willing to chase prices higher, when
the 10-year bonds yield about 0.6%."</span><span lang="EN"><o:p></o:p></span></div>
<div class="boxtextnews" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div class="boxtextnews" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Kuroda must
think this is a dream come true - the boost to inflation-traction he is
supplying by printing enough money to prevent yields on $10 trillion worth of
Japanese government bonds from rising. He now holds 20% of Japanese government
bonds.</span><span lang="EN"><o:p></o:p></span></div>
<div class="boxtextnews" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div class="boxtextnews" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Richard
Fisher, President of the Dallas Fed, delivered a presentation in his district
on April 16, 2014. Slide number six is appropriate to the current discussion.
There is no transcript to this talk on the Dallas Fed website. The title may be
ironic or sarcastic, evidence suggested below:</span><span lang="EN"><o:p></o:p></span></div>
<div class="boxtextnews" style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Arial, sans-serif; font-size: 11pt;">"The
U.S. Credit Markets Are Awash in Liquidity"</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Arial, sans-serif; font-size: 11pt;">* As
of March 2014, the Fed's par holdings of fixed-rate MBS [mortgage-backed
securities - FJS] exceeded 30 percent of the outstanding stock of those
securities. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Arial, sans-serif; font-size: 11pt;">*The
Fed owns just shy of 24 percent of the stock of Treasury coupon securities.
[The BoJ only holds 20% - FJS] </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Arial, sans-serif; font-size: 11pt;">*
Having purchased Treasuries further out on the yield curve, and done so in
size, the Fed has driven nominal interest rates across the credit spectrum to
lows not seen in over a half century.</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-family: Arial, sans-serif; font-size: 11pt;">*
This has allowed U.S. businesses to restructure their balance sheets and
creatively manage their earnings. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<u><span lang="EN" style="font-family: Arial, sans-serif; font-size: 10pt;">Source:
Federal Reserve Bank of Dallas</span></u><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">On the final point,
Fisher has criticized Federal Reserve interest-rate suppression for suctioning
capital towards wasteful and misleading operations. Misleading have been the
operating-earnings charades (one-time write-offs, every quarter) and
substitution of debt for equity to boost stock-option payouts. The April 22,
2013,<b> </b><u><a href="http://r20.rs6.net/tn.jsp?e=001Ecf8EHFxJuwADxXcrlGO42HiMbmdvOtNs8fjwHJkKTAunT_3zaW5ZGQmAPt_NXe-DObuJsoigv0Rb5YYQmslXT4yc8qHoo1MW85u6pmWC60_S1H8sBKduQ==" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">King
Report</span></a></u> states "since 2009, total revenue growth [of S&P
500 companies] has grown by just 31% while profits have skyrocketed by
253%." Thus, evidence (as promised) that Richard Fisher may not have
discussed Fed interference with equanimity.</span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">The Dallas Fed
president is unique, among FOMC members. He actually managed money, including
distressed debt, so knows cycles cannot be avoided. Suppression of cycles
distorts markets. Market suppression inevitably leads to panic. "<u><a href="http://r20.rs6.net/tn.jsp?e=001Ecf8EHFxJuwADxXcrlGO42HiMbmdvOtNs8fjwHJkKTAunT_3zaW5ZGQmAPt_NXe-DObuJsoigv2R_y1dm6c_8_2aNtVMUeWr9OAHM1PJTPsW9nw53pVZEVEydWQNw_Fl4XIdEk9KkeQokssDw0zSE5FxlRxOV-ilo5yrPoR6eaQ=" linktype="1" shape="rect" target="_blank" track="on"><span style="color: black;">Going
for Broke</span></a></u>" (January 30, 2013) laid out how the Greenspan
Fed advertised its liquidity prowess, which inevitably turned into its
opposite: "When 'ample liquidity' is the rationalization for participating
in detached markets, you can depend upon it: the liquidity will not be there
when it is needed most. Following the Long-Term Capital Management hullabaloo
in 1998, Marty Fridson, then at Merrill Lynch, now proprietor of FridsonVision
LLC, etched this identity in granite: "[LTCM] forgot that in times of
panic, all correlations go to one.'"</span><span style="font-size: 11pt; text-indent: 0.5in;"><br /><br /> <span style="font-family: Times New Roman, serif;">Federal Reserve Chairman Janet Yellen
can really test her "Communications in Monetary Policy" thesis when
all government and mortgage bondholders seek dollar redemption as correlations
are moving towards one.</span></span></div>
Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.comtag:blogger.com,1999:blog-4605342746577513015.post-71570675943070400152014-04-16T09:47:00.003-04:002014-04-16T09:47:54.546-04:00 Helping the Fellow Out<span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">Frederick J. Sheehan is the author of </span><span style="font-family: "Times New Roman","serif"; font-size: 12.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><a href="http://r20.rs6.net/tn.jsp?e=001Pey5iYOFQZKr_6kRbatjZ99AuOJpDgukR8IoDwrFwlLTdLXMbmlhJNaXEwUBN16E5Q6zeeD8mXsSReqMCIMZPWTqEo8cpe2vg0VQ8rhfk9uDsTaiBSTkbuQYI_9FoC7gab2jjBNo13UtqidH5eXDximsgwkWnratANYmr_kQwW1_ONsowtQZ_qgTirMMcFbawIr_B4qOAUUMj0W4irusIiTPPkpw1vcT4f5Yv_YCS56oeVa8BsetNyflZmZUIbOhexa2aPfDvOIij8ikAiLZ4ZF8gfAv-PWwPA9Nq2oyAbQb5rL8NlgVQQRTwM86G2ijSQKcYAjuAxWrang7s_q2jedTaa2dYopKcccDnovu8rc=" shape="rect" target="_blank"><span style="color: #000d74; font-family: "Arial","sans-serif"; font-size: 10.0pt;">Panderer to Power: The Untold Story of How Alan Greenspan
Enriched Wall Street and Left a Legacy of Recession </span></a></span><span style="font-family: "Arial","sans-serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"> (McGraw-Hill, 2009) and "<a href="http://r20.rs6.net/tn.jsp?e=001Pey5iYOFQZKr_6kRbatjZ99AuOJpDgukR8IoDwrFwlLTdLXMbmlhJNaXEwUBN16E5Q6zeeD8mXtNir8yRv96edxKV3jCfahGcU68AuG4FpqM_xEK2PVEPmSremFMcJXuxM5Qacatvw2NRiwTl9OUAQ==" linktype="link" shape="rect" target="_blank" track="on"><span style="color: #000d74;">The
Coming Collapse of the Municipal Bond Market</span></a>" (Aucontrarian.com, 2009</span><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">)</span><br />
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;"><br /></span>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">After biotech stocks hiccupped on
Thursday, April 11, 2014, ISI analyst Mark Schenebaum told the world:
"Horrible day in biotech. I'm frankly at a loss for an explanation. And
it's my job to know why. [The reason he gets paid the big bucks - FJS.]
Schenebaum "has been following the sector since 2000," but maybe
spent too much time golfing. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: 3.0pt; margin-left: 0in; margin-right: 0in; margin-top: 2.0pt;">
<b><span lang="EN" style="font-family: Arial, sans-serif; font-size: 10pt;"> </span></b><b><span lang="EN" style="font-family: Arial, sans-serif;">NASDAQ
2000: To the Brink and Back</span></b><span lang="EN"><o:p></o:p></span></div>
<table border="0" cellpadding="0" cellspacing="0" class="MsoNormalTable" style="border-collapse: collapse; margin-left: .2in; mso-padding-alt: 0in 0in 0in 0in; mso-yfti-tbllook: 1184; padding: px; table-layout: px;">
<tbody>
<tr>
<td style="border-bottom: double windowtext 1.5pt; border: none; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<br /></div>
</td>
<td style="border-bottom: double windowtext 1.5pt; border: none; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div align="center" style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt; text-align: center;">
<b><span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">Closing Price</span></b><o:p></o:p></div>
</td>
<td style="border-bottom: double windowtext 1.5pt; border: none; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div align="center" style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt; text-align: center;">
<b><span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">Point Change</span></b><o:p></o:p></div>
</td>
<td style="border-bottom: double windowtext 1.5pt; border: none; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div align="center" style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt; text-align: center;">
<b><span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">Percent Change</span></b><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 10</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">5048</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+182</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+1.7%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 13</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4907</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-141</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-2.8%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 14</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4706</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-201</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-4.1%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 15</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4582</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-124</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-2.6%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 16</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4717</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+135</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+2.9%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 17</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4798</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+81</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+1.7%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 20</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4610</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-188</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-3.9%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 21</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4711</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+101</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+2.3%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 22</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4864</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+153</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+3.2%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 23</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4940</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+76</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+1.6%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 24</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4963</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+23</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+0.5%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 27</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4958</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-5</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-0.1%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 28</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4833</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-125</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-2.5%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 29</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4644</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-189</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-3.9%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 30</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4457</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-186</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-4.0%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">March 31</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4572</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+115</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+2.5%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">April 3</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4223</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-349</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-7.6%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">April 4</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4148</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-75</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-1.8%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">April 5</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4169</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-21</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+0.5%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">April 6</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4267</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+98</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+2.3%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">April 7</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4446</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+179</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+4.1%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">April 10</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4188</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-258</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-5.8%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">April 11</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">4055</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-133</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-3.2%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">April 12</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">3769</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-286</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-7.1%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">April 13</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">3676</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-93</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-2.4%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">April 14</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">3321</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-355</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">-9.6%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">April 17</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">3539</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+218</span><o:p></o:p></div>
</td>
<td style="background-repeat: initial initial; background: #E5E5E5; padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+6.6%</span><o:p></o:p></div>
</td>
</tr>
<tr>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 45.0pt;" valign="top" width="60">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">April 18</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">3793</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 58.5pt;" valign="top" width="78">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+254</span><o:p></o:p></div>
</td>
<td style="padding: 0in 5.4pt 0in 5.4pt; width: 76.5pt;" valign="top" width="102">
<div style="margin-bottom: 1.0pt; margin-left: 0in; margin-right: 0in; margin-top: 1.0pt;">
<span style="font-family: 'Arial Narrow', sans-serif; font-size: 9pt;">+7.4%</span><o:p></o:p></div>
</td>
</tr>
</tbody></table>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<u><span lang="EN" style="font-family: Arial, sans-serif; font-size: 10pt;">Source:
<i>John Hancock Quarterly Market Review and Outlook</i>, July 3, 2000,
Frederick J. Sheehan, Andrea Whalen</span></u><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Schenebaum is not
alone. "Biotech Rout Perplexes Analysts," ran the <i>Wall Street
Journal</i> headline. On April 10, the NASDAQ Biotechnology Index (NBI) fell 5.6%.
The day before, it rose 4.1%. This is familiar ground. The NASDAQ (composite)
chart from early 2000 - "The NASDAQ - To the Brink and Back" - shows
many days a believer found encouragement to plunge on, but this was not the
wise course. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
Dr. Joseph Lawler, Senior Managing Partner at Merus Capital Management, told a <i>Grant's
Interest Rate Observer</i> conference audience (April 8, 2014) the NBI trades
at 42 times reported earnings. To arrive at that multiple, several leaky
faucets need to be plugged. Removing the contrivances, including losses, the
NBI is poised at 2,200 times current earnings. The NBI market capitalization is
greater than the domestic automobile and aerospace industries added together. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">Speculators want to
make money. They buy what is going up. If it keeps going up, they buy more of
it. They may "climb the wall of worry," as the saying goes, but get
used to that. More savers decide they need to gamble so that they can eat, so
jump in. The increasing participation is common to market excesses. Then more
savers stare at the cat food in the cupboard and climb aboard. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
Leverage contributes to the rising tide. Glenn Holderreed at Quacera L.L.C. in
Sacramento, California reported on April 6, 2014, New York Stock Exchange
margin debt is close to $500 billion. This is well above the highs in 2000 and
2007, after adjusting for price inflation. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">
It is often said how much faster a bull market dives than the time it took to
rise. The reason involves panic, or a synonym of that. There is also a
mechanical reason. It resides somewhere in our minds but the mechanism is worth
repeating after a period of relative calm. From the April 6, 2014, <i>Quacera
Chronicle</i>: "When setting up a margin account with a stock brokerage,
the typical maximum for margin debt is 50% of the value of the account. In
order to prevent a margin call (a request to raise collateral* in the account),
the margin debt must remain below a specified percentage level of the total
account balance, known as the minimum margin requirement. If stock prices fall
the brokerage insists the margin debt be reduced, either by putting up
additional money or selling stocks.... Unfortunately [for the margined punter
in bio or Tesla - FJS] brokerage firms and banks want margin calls (demand for
debt payments) paid on the same day." A brother-in-law broker might
"want" and wait, for the rest, without payment, their stocks are
sold. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<span lang="EN" style="font-size: 11pt;">*<u>Collateral</u>: There is probably
no part of what remains of the so-called financial system that is more an
illusion than collateral. The central banks have taken possession of government
and agency securities that are ranked at or near the top in the hierarchy. </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in;">
<br /></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<span lang="EN" style="font-size: 11pt;">At the most basic
level of collateral, we can wonder until Doomsday why the United States
government has refused to return the German government's gold stored in New
York. In January 2013, Germany demanded the U.S return 300 tons of the 1,500
tons it keeps stored at the New York Federal Reserve. At last count, the U.S.
has returned three (3) tons. As a working assumption, the U.S. government
cannot return it. It therefore does what it can to drive the price of gold
down. A few minutes after Ukrainians and Russians (or their proxies) started
shooting this morning, April 15, 2014, gold opened for trading in New York.
Almost immediately, "over half a billion dollars of notional... gold
futures contracts" were dumped. "This smashed gold futures down over
$12 instantaneously, breaking below the 200 [day moving average] and triggered
the futures exchange to halt trading in the precious metals for 10
seconds." (Zero Hedge) </span><span lang="EN"><o:p></o:p></span></div>
<div style="margin-bottom: .0001pt; margin: 0in; text-indent: .5in;">
<br /></div>
<span lang="EN" style="font-family: 'Times New Roman', serif; font-size: 11pt;">It does not pay (over time,
one must add) to mess with mother nature. Nothing is worse (in the long run)
than attempting to destroy the very roots of money. For at least 5,000
years, money has been an immovable object planted in bedrock to protect the
people from the folly and vanity of human weakness. To cripple gold's function
destabilizes the financial ecosystem at every level. Witchcraft hexes on
currencies,</span><span lang="EN" style="font-family: 'Times New Roman', serif; font-size: 12pt;"> through money markets,
bonds, common stocks, and uncommon stocks including the never-never,
nothing-nothing, gossip and Peeping Tom shares as well as the medicine man
miracle cures begs for annihilation.</span>Frederick Sheehanhttp://www.blogger.com/profile/13535601728606338227noreply@blogger.com