Bad News Bearers Swat Stocks
October 2, 2007
Elaine Meinel Supkis
Yesterday's bad news was supposed to be good news because it meant the Crash of 2007 would not happen and it was all an illusion and the banking crisis is over even though the dollar continues to fall against the euro and other currencies except for the yen, of course. I also discover a new thing: the SEC wants to regulate hedge funds more and this is ticking them all off and they are pouring money into DC to prevent taxing them at their offshore havens and preventing them from in general, acting like pirates. And hedge funds are suing Hedge Fund Implode-O-Meter. It is dangerous, poking around the affairs of these guys. Oh, and the Europeans admit they tried to manipulate gold prices last summer.
As far as the world's biggest bond investors are concerned, the Federal Reserve is failing to restore confidence in the U.S. credit markets.Pacific Investment Management Co., TIAA-CREF and Insight Investment Management say the central bank's decision to lower the overnight lending rate between banks by half a percentage point last month won't prevent the economy from slowing or corporate defaults from increasing. Lehman Brothers Holdings Inc. strategists say last month's rally in high-yield corporate bonds, the biggest since 2003, may fizzle by year-end.
So, either the world's biggest bond investors read all of us non-mainstream news services or they have brains or both. They are still being way too nice. The Fed isn't just failing to restore confindence, the Fed is giving anyone with half a brain, total fear! We warned the Fed to not do what they decided to do. The bond market has been warped badly by the problems caused by several major industrial/economic leaders/consumers misstating inflation. The world's #1 economy which happens to also be the world's #1 energy importer, has decided that energy isn't part of any inflation calculations. This jaw-dropping economic sleigh of hand by our magicians in the Federal Reserve has created a monster. The accumulative gap grows each year. If the gap is off by around 2% a year in actual inflation, over 10 years, this is a 20% difference between reality and fantasy. Over 20 years, it is a 40% difference!
Since many of the nations with trade surpluses with us such as Mexico, Canada, Saudi Arabia, etc, sell us energy, this differential hits them directly in the wallet. It is a sly sleigh of hand which allows us to remove other forms of inflation by basically stealing from their FOREX reserves of dollars AND pay with dollars that decrease in value unless they immediately turn around and shovel it back here. They do this and this is what is one of the many gears in our economy. But since our war in Iraq, the world price of energy has climbed faster and faster so our Federal Reserve cheats harder and harder.
So we get this two-headed beast: a declining dollar and declining interest rates. A neat trick, I would say. And one that is causing a terrible thing to grow in the dark: huge speculative bubbles are broiling up and then popping all over the planet and in every imaginable financial/asset instrument including most importantly, debt accumulation.
Instead of talking about this and then doing something which I would suggest would be to tax energy so we cut down on our energy consumption coupled with strengthening the dollar and increasing interest rates to at least 15% so we can begin to encourage NON-SPECULATIVE savings and this will be a depression/recession. But we can't escape this! The more we twist and turn, the more the Fed plays the present game, the longer the Fed waits to accurately gage inflation, the longer and uglier this depression will be.
No one wants a depression except for the Liberal Democrat Party which has raised taxes on consumption and did every possible measure to create and then enforce, a depression. And of course, the fact that our #2 trad partner is doing this is affecting us. It is intimately intertwined with our struggle to pretend we don't need to save or to keep interest rates above inflation since Japan has low rates. And Japan's need to hold dollars in a huge FOREX reserve to keep the yen weak has meant that they could keep their rates super-low but the US has virtually no FOREX reserves of other countries' currencies and so we cling to Japan in the hope their 0% inflation will rub off on our wild spending, wild speculating economy.
From Bloomberg:
About three-quarters of 30 fund managers who oversee $1.25 trillion expect a hedge fund or credit market blowup in the ``near future,'' according to a survey by Jersey City, New Jersey-based research firm Ried, Thunberg & Co. dated Oct. 1.
I wonder why Bloomberg didn't put that frightening statement up in their headlines? Are they afraid of the results? Right now, the speculators are having a spectacular party. 
Stocks are going down today on a boatload of obviously bad news except for the Sallie Mae revival. The speculators who want to get their demon claws on our children's university loans want to tap into that because you can't declare bankruptcy no matter how bad things get! It is a scandal, this forcing of our children into paying for their educations and seeing the bills for this go up and up and up and it lets the richer children go to school without hazard but people like my own children must start off life deep in debt? A shame that is linked to our nation not handing out any healthcare to anyone without a job that offers it.
All of us players in real estate in the past have watched the real estate mess unravel and it is annoying to all of us to see the professionals lie and lie and lie some more. Just two days ago, there were happy headlines claiming the worst was over when it is painfully obvious that the real estate bust has barely begun! So each month, the bad news gets worse. Stocks drop and then more nostrums are applied and more lies are told and the speculators grab more loans and bid up stocks again: this is IDENTICAL to late 1928 to early 1929. Including setting records as the stocks soar while savings flounder further.
Then there is the news in Europe: the Russian Bear, eager to teach Europe a lesson in Realpolitik, is again flexing its claws on Europe's throat. All Europe has to do is be nice to Russia, to join Russia in various diplomatic ventures like PROTECTING IRAN KITTY, just for example! But no, Europe is going even more into the US/UK all war all the time camp and is arming madly for WWIII and so Russia has to teach them a lesson in who will get hurt and how.
I will assist: Russia will win these battles for raw dominance. Why? Because Europe is divided and weak and deep in debt and Russia is no longer divided, it is very large, extremely united and not in debt! Russia went bankrupt 10 years ago and now is stronger for it. The US can do this too but remember the price: loss of empire. And loss of many other things including citizens starving to death. But out of this, Russia has grown strong and has even stronger allies: China, just for example. So the economic condition of Europe will worsen if they don't rush to Moscow and kiss Putin very generously and smile when he says, 'Jump.'
The little scheme for making a new pipeline by passing Russia is a failure. Remember: pipelines are very easy to attack.
THE dominoes are toppling. What began as a credit crunch has turned into a dollar crunch. We are witnessing a run on the world's paramount reserve currency, an event that occurs twice a century or so, and never with a benign outcome. The US dollar has fallen through parity against the Canadian dollar and plummeted to all-time lows against a basket of currencies. This is dangerous. None of the mature economic blocs seems able to take the strain, let alone step in to restore order.Ultimately, Europe and Japan are in worse shape than the US. A mood of sauve qui peut is taking hold.
OK: the writer of this article doesn't read this news service here! Japan is not in worse shape than the US. Not at all. The have the world's biggest trade surplus profit last year. This is now vanishing due to the high cost of energy and this goes back to the Horns of Dilemma: if Japan gets lots of dollars, it buys less and less energy and Japan hates using yen as a currency so they hate using it to buy oil but Iran is making them do this...yikes...hahaha. But Japan has to destroy the US in order to make lots of money so they love the trade problems we have and they make them worse and they lend us lots of cheap money while holding dollars so the yen can be cheaper than the dollar no matter how low the dollar falls only Iran wants yen for oil for political reasons, very clever, that cat! Sigh. On it goes: the system as we set it up, in nearly all particulars, drives us straight onto many Horns of Dilemma. We are now surrounded by a herd of Horny critters which are closing in on us for this is the nature of such beasts: they go forwards until they impale someone.
The Telegraph:
"Central banks have been forced to choose between global recession or sacrificing control of gold, and have chosen the perceived lesser of two evils," said Citigroup in a fresh report."We believe that the policy resolution to the credit crunch will take the form of a massive, extended 'Reflationary Rescue', in a new cycle of global credit creation and competititive currency devaluations. This could take gold to $1,000 an ounce, or higher."
The report's authors, John Hill and Graham Wark, say the avalanche of central bank bullion sales earlier this year was "clearly timed to cap the gold price".
Congratulations, all gold bug sites online! We were right! I wrote about how first, the bankers in Europe all claimed that gold was no longer needed as a counterweight to fiat paper currencies. Then they began selling like mad and for a brief while, the price of gold went down. Maybe the people who lost on gold deals can now sue the central banks of Europe? A class action suit? Supposedly, we are in a free trade open market! But of course, the G7 Dwarves conspire all the time. Ask the Dragon. They even conspire to accuse the Dragon of China of conspiracy! Hahaha. I've done countless cartoons about this silly game.
But the attempt at devaluing gold was a cold-blooded attack on anyone trying to escape the fiat system run by the conspiring G7 nations who need to herd everyone into the corall filled with Horns of Dilemmas. Just like when the Fed tried this from 1969-1972, all the banks did was deplete their gold reserves. Now we will see a classic commodity bubble based on gold as it rises past $1,000 an ounce.
I wrote in the past how all depressions spawn gold rushes. We can see why this is going to happen yet again. It is no coincidence that the '49ers followed right on the heels of the depression/crash of 1848. The Alaskan Gold Rush was right on the heels of the stock market tanking in the 1890's. The 1904 crash caused Britain to attack South Africa for newly-discovered gold there.
The Telegraph:
Until now, the euro has served as the "anti-dollar", the default choice for Asians and petrodollar powers wary of US assets. This cannot last.A rate of $1.43 (it was 83 cents in 2000) will combine, after a one-year lag, with deflating property bubbles in the Club Med bloc to cause a crisis in 2008. It will then become clear that the needs of the Germanic and Latin zones are incompatible and that a coin with no treasury, debt union, or polity to back it up cannot displace the dollar — if it survives at all.
Why is the euro shooting up? I would suggest this is due to the dollar collapsing vis a vis oil. If anyone is doing business in Europe and has fistfuls of euros, they will spend it on oil since this eliminates all oil inflation. I can think of two countries doing this because it makes a lot of sense: China and Japan! Oh, the doors this opens in the mind!
Both hold US dollars in their FOREX reserves to keep up the value of the dollar but this is not working when buying OIL so they take their euros they both collect in Europe and use THEM! Aha! Someone else is using euros in a creative way: Russia. Like the US, Europe has lost control of their currency. They collectively hold nearly half a trillion in FOREX reserves but they also hold several more trillion in sovereign debts! The G7 together are sitting on well over half of all world sovereign debts. China's debts are less than a quarter of what they hold in their FOREX reserves. This means they are running on a different system from the US and Europe and this also means they can leverage or move currency values much easier since they have this huge surplus.
Like Saudi Arabia, surpluses matter and gives them a thing we call 'power'. The US has less leverage and less power the more we mess around, lying about real inflation, lying about our currency and spending beyond our means.
From the Telegraph:
Large parts of the global credit system are still shut. The $2.2 trillion market for commercial paper has shrunk by $368bn over the past seven weeks as lenders refuse to roll over loans. The $2.5 trillion market for "structured finance" remains frozen.
So, the Telegraph basically says, the crisis is NOT over. The problems are NOT solved. The dropping of interest rates in the US or in the future, in Europe or England will NOT fix this. Japan can't drop rates lower so they are already trapped in their depression finances and can only move up and this would kill the 'carry trade' but dropping rates in Europe and America and the other Commonwealth (sic) nations will all cause the same thing: this will collapse and only China has the real reserves to handily survive this collapse intact!
Most Americans oppose fully funding President Bush's $190 billion request for the wars in Iraq and Afghanistan, and a sizable majority support an expansion of a children's health insurance bill he has promised to veto, putting Bush and many congressional Republicans on the wrong side of public opinion on upcoming foreign and domestic policy battles.
The new Washington Post-ABC News poll also shows deep dissatisfaction with the president and with Congress. Bush's approval rating stands at 33 percent, equal to his career low in Post-ABC polls. And just 29 percent approve of the job Congress is doing, its lowest approval rating in this poll since November 1995, when Republicans controlled both the House and Senate. It also represents a 14-point drop since Democrats took control in January.
We continue to spend far over our budget limits. Congress doesn't even bother making much noise, they just rise the sovereign debts higher and we have the highest on earth, next is England with extremely high sovereign debt (time to tax those offshore islands owned by the Queen, guys!). The US is over $10 trillion and England is around $9 trillion. This is unsustainable. The hapless, helpless US citizens have about as much control over their military budget as the people of Burma have over the military junta that savages them and murders peaceful demonstrators and Buddhist priests.
We can't stop them! This bill that is a bill for our children to pay, was nearly totally passed except for a few brave souls, two of whom are running for President and are virtually never mentioned in the news.
The "no" votes in the House, all cast by anti-war members, came from one Republican, Ron Paul of Texas, and 13 Democrats: Oregon's Earl Blumenauer, Missouri's William Clay, Minnesota's Keith Ellison, California's Bob Filner, Massachusetts' Barney Frank, New York's Maurice Hinchey, Ohio's Dennis Kucinich, Washington's Jim McDermott, New Jersey's Donald Payne, California's Barbara Lee, Maxine Waters, Diane Watson and Lynn Woolsey.That means that, of the 2008 presidential candidates, only Republican Paul and Democrat Kucinich voted against giving the Bush administration a dramatic - if not particularly well publicized - infusion of new money for the war.
Note the line, 'if not particularily well publicized.' And pray, who refuses to publicize things? Oh yes, our dear demented media! The same guys who pretend to be the eyes and ears of America but are actually the butt. The US is not serious about evading the future bankruptcy of America. We imagine that gross world debt can rise from $44 trillion to $444 trillion and this is all numbers, all Weimarian numbers that can be added like so many zeros to anything including our joint, collective bank accounts. Why have interest rates? Why have budgets? Why not just make up money as we need it and then fling it at the Chinese Dragon? Then we can make it vanish by going bankrupt!
Generally speaking, when this happens, the people holding the loans come and evict one from house and home. And we imagine we can defy China when the Dragon comes to collect from us. Which is why depressions caused by imperial overspending leads to world wars.
Global hedge-fund assets climbed 19 percent to about $2.5 trillion in the six months to July, before the subprime mortgage crisis in the U.S. sparked turmoil in capital markets, a HedgeFund Intelligence survey showed.Managers looking after more than $1 billion increased 6 percent to 372, according to the review of about 5,000 funds. The `Billion Dollar Club' members oversee about 75 percent of the industry's total assets, the survey found.
``While these figures are only to July, and don't yet take account of the turbulence the industry endured in August, they indicate an industry still in robust health,'' Neil Wilson, managing director of HedgeFund Intelligence in London, said in an e-mailed statement today.
Implode-O-Meter is being sued by hell hounds. They hate having us discuss their bone-filled caves and I notice that one hell hound has gotten Google to eliminate my cartoons which used to appear all over the place. Thank you, Google. Bow-wow-wow. I am used to being censored. This is why I don't use Blogspot, for example. This is why no major media hosts me or helps me or talks to me anymore. HAHAHA.
So it goes: anyone seriously interfering with the money side of destroying America is censored or chased down. Anyone alerting citizens to dangers are thrown off of cliffs. Most people keep their heads down and hope that a million lawyers with nothing better to do, don't attack them for using the First Amendment to the Constitution, that dead document our Supreme Court regularily shreds.
The 6% increase in hell hound feeding frenzies is just another bit of the global speculative bubble that is trying to make money via various schemes, tricks and evasive, occult ways that we are not supposed to figure out or stop. But stop, they must!
From Reuters via a hedge fund news service:
The hedge fund industry's rapid growth rate of recent years looks unlikely to change markedly, despite poor performance from some funds in this summer's market turbulence, Man Group's chief executive told Reuters."I'd say there is no current indication that industry growth rates will materially change," Peter Clarke, chief executive of the world's largest listed hedge fund firm, said in an interview on the sidelines of a Reuters-hosted event in London on Monday.
"I can only speak for Man Group ... (in that) we have not seen significant rates of redemptions. We continue to see institutional appetite for products."
Clarke's comments come after a tough August for the booming hedge fund industry -- which has the ability to make money in all market conditions -- as a surge in U.S. subprime defaults led to widespread global market volatility.
The money from all those 401k plans still pours in because there are still Americans with jobs. But these funds MUST make more than the rate of real inflation and they certainly are not doing this at all. Real inflation is well over 5%. And the Fed is dropping their rates below 5% so there is a problem here. Normally, one puts excess money into risky ventures but the majority of savings into secure bonds but you can't do this if the secure bonds struggle to make 2/3rds or less the rate of inflation so everyone has to hand over important savings to speculators!
Here is a hedge fund I stumbled across while researching this story:
At TURN KEY HEDGE FUNDS, INC. we answer the question of how to start a Hedge Fund?We believe that there should be an easy way for a successful trader and broker to set up a Hedge Fund of their own. The process of starting a Hedge Fund and operating the fund should allow the successful trader or broker to concentrate on what he or she does best, buying and selling securities. At the same time, it should allow for a turnkey back office that operates in such a way as to permit the Hedge Fund trader or broker (the Fund Manager) to maintain personal control over the general operations while not having the responsibility for the day to day operations. While these services are available in the traditional sense by large law firms, accounting firms and consulting firms, they are not reasonably available to the successful trader or broker seeking to launch his or her own Hedge Fund using a smaller existing client base. Now, there is a solution.
It is TURN KEY HEDGE FUNDS, INC. TURN KEY HEDGE FUNDS, INC. allows the successful trader or broker to become a Hedge Fund manager at a fraction of the traditional start-up costs and further provides continuing back office support (Hedge Fund Administration). Now, you can launch your own fund!
This is an annoying feature on all their web pages:
Obviously, they have problems with running their web page. Not very inspiring. I would suggest they fix this glitch only they might sue me for talking about things like 'If you want people to think you are ept, don't be inept.' Or some such.
Maybe we should set up a hedge fund! We could call it, 'A Fool And His Money Will Part' LLP. On a related page to this hedge fund school is a link to a hedge fund organization that is very steamed about proposed SEC rules. From the private equity fund organization, O'Melveny & Myers LLP:
January 19, 2007SEC Proposes New Rules Regulating Fund Advisers
On December 27, 2006, the SEC published a new proposed anti-fraud rule (Rule 206(4)-8) and proposed accredited investors rules (Rule 509 and Rule 216) in order to provide more protection to investors in "pooled investment vehicles" such as private equity funds and hedge funds. The anti-fraud rule would prohibit fund advisers from making false or misleading statements to, or otherwise defrauding, existing or prospective investors in pooled investment vehicles. Proposed rules 509 and 216 would raise the thresholds for accredited investors by introducing a new concept of "accredited natural person".
Just like the media didn't talk much about most of our government elected officials voting totally opposite from the wishes of the majority of voters, so this little affair didn't make much news and I watch the news closely. So I thought we ought to check out this business. I would love to see the SEC prevent hedge fund fraud. Right now, they have 'traders' who are all sorts of people and I happen to know how they are hired because I know some of these people. Namely, drinking buddies in college, frat buddies, girl friends, etc. There is no certificate that says, 'Bachelor of Hell Hounding'.
Here is the SEC paperwork for these proposed rules that still aren't being implimented.
I went off to Google to see if they had much of anything there and there wasn't much. Mostly, there were on the main page of Google, a raft of URLS of various hedge fund organizations and such, warning each other to hammer the government and to send in a flotilla of lawyers sailing on 'So Sue Me' ships to bag anyone trying impose rules on their activities. 
They are certainly busy this season. I wonder if they are handing over much of the many millions Hillary is raising? They need protection! More protection! No cops! No laws! Yohoho and a bottle of Rothschild's 1969 Vintage Wine!
From the Private(er) Equity Council:
We urge the Commission to continue to provide appropriate exceptions for pool employees and to recognize both the greater sophistication of pool employees who qualify as “accredited investors”2 (as compared to all “accredited investors” generally) and the importance that employee investment programs play in fostering employee ownership and aligning interests.
We believe that with respect to pool employees, the existing “accredited investor” standard is effective in ensuring that pool employees have the knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of an investment in a pooled vehicle, given their inherent knowledge, relationship and access regarding the sponsor of the fund. Pool employees who currently qualify as “accredited investors” should, by virtue of their special relationship, access and knowledge with respect to the pooled vehicle and their sufficient ability to bear the financial risks associated with an investment therein, be recognized to possess the necessary level of sophistication for purposes of the federal securities laws and therefore be permitted to continue to invest in employer-sponsored funds.
A general rule of thumb: few laws or regulations are passed during speculative bubbles. Many are broken, in fact. Everyone rejoices until the inevitable crash then many more rules and regulations are imposed yet again and everyone swears they won't be pirates anymore nor drink and invest at the same time.
Of course, I checked out ~Implode-O-Meter~.
Looks like they are collecting money for impending litigation.
Well, they don't need to sue me! No blood in this turnip! (All I own is linguistics. Yup, all your words are belong to me!) My worn-out underwear, they can have.
Posted by: blues | October 03, 2007 at 12:36 AM
Hi! Elaine can you give me some hints where you get charts/data to create them? I have tried IMF and some other institutions but they all have subscriptions.
Gasper
Posted by: Gasper | October 03, 2007 at 07:06 AM
Today, Bush vetoed a bill that would allow an additional 4 million children to have health insurance. He said it cost too much.
When I read on to see what this staggering sum must be, it turned out to be 35 billion over 5 years, or about two months in Iraq based on the latest emergency requests for more money.
"Heartless" does not even come close to describing Bush. Evil is a better word, but the timid Democrats cannot muster the courage to say it. What strange times we live in.
Posted by: DeVaul | October 03, 2007 at 12:30 PM
DeVaul,
You are aware that the S-CHIP bill would have extended Government-paid health care to children of parents who make up to $85,000, right?!
It's called socialism. It's not a good thing. Too bad the asshole Democrats put their screwed-up ideology ahead of the needs of the truly poor. If they really wanted to help "poor children," they would not have deliberately passed a bill they knew Bush would have to veto to try to save a little face with fiscal conservatives.
Again, I say, BOTH SIDES SUCK. The various partisans here need to really take some time to let this fact soak in. BOTH SIDES are complete CRAP.
Posted by: John | October 12, 2007 at 02:19 AM
Two parents earning $45 K each and having 2 children and both parents having no health insurnce= financial disaster.
Health insurance for families has been vanishing, John. It used to be more universal. Now it is being withdrawn. So yes, families with that income level and no insurance ARE in financial trouble!
Posted by: Elaine Meinel Supkis | October 12, 2007 at 10:44 AM
No, John, I did not know the income limits, but it also depends on where you live and what the cost of living there is. Are these children in rural Mississippi? Or are they in downtown New York?
Otherwise, it would not surprise me if the Democrats did play political games. I noticed that neither side explained exactly who this bill would cover, where, and why.
Even if it does cover middle class children, I would rather pay for that than more dead soldiers being flown in from Iraq.
Healthcare makes a nation strong. Dead men make it weak.
Posted by: DeVaul | October 12, 2007 at 11:14 AM
Repeatedly obtaining advances, payday loans, etc can cost you a lot of money if you extended your pay off date numerous times or if you continually borrow against your next pay check. If a short term pay day loan is the best choice for you, you can be approved and can have the amount deposited into your checking account - sometimes as soon as the very same day you apply. http://advancemagnumcash.pixieinfo.com/
Posted by: John | October 29, 2007 at 04:05 AM