Forums (http://www.elitetrader.com/vb/index.php)
- Economics (http://www.elitetrader.com/vb/forumdisplay.php?forumid=43)
-- CNBC and Economic Damage Control (http://www.elitetrader.com/vb/showthread.php?threadid=131887)
CNBC and Economic Damage Control
.
July 16, 2008
SouthAmerica: About one hour ago I was watching CNBC – Power lunch and their talking heads were in full Damage Control Mode.
I wonder if investors heard their misinformation on that program and lost a lot of money if they could sue that cable company for broadcasting misinformation that caused people to lose their shirt.
Can CNBC be held liable for broadcasting misinformation to their audience?
They had a segment where they were trying to Debunk the possibility that we are in the early stages of a depression here in the USA.
For all practical purposes the run on the banks started with Bear Stearns, now it is the turn of IndyMac (technically the second-largest bank failure ever, second to Continental Illinois) then Lehman Brothers probably it will be the next large casualty. After that there are about 1,000 other banks around the United States in the edge of the abyss and ready to go under at any time.
Misinformation is all around us and the US government is on the top of the list about giving useless economic information that people use it as if it was worth anything, then they are surprised when things go wrong when they use these information to make actual financial decisions.
Basically the GPD figures are inflated, the real unemployment is at least 3 times the figure that they report on a monthly basis (as if you by under reporting they would make the problem to go away), the official inflation figures it is a joke and also away under reported (in the inflation figure they have been playing games with the way to figure out that number to show a lower figure than the actual inflation affecting the daily lives of most people in the US).
We have discussed these subjects on the threads below:
The US economy and the real GDP
http://www.elitetrader.com/vb/showt...threadid=126048
The US dollar and the biggest default in history
http://www.elitetrader.com/vb/showt...ent#post1893607
Last night on the Charlie Rose Show an expert about the environment that gives his expert advice to the large auto makers in the United States, and he said that one year from now we will have only two major American car makers in the US and that one of the current auto makers in the US is going to file for bankruptcy in the next 12 months affecting the lives of at least 1 million Americans with all the ramifications of such demise.
The entire airline industry is in trouble, major trouble like never before because of the price of gas, and in the coming months things are going to get even worse because the American people are going to cut on their air traveling plans because of economic reasons.
The people on CNBC keep painting a rosy picture for the US economy, which I am sure is far from the reality of what is happening.
Today CNBC has become just a damage control arm of the US government and they spread misinformation about the state of the US economy.
It is like being in the Titanic when that ship hit the iceberg and CNBC is saying to the passenger don’t worry about because the ocean is not that deep here anyway and please go inside and enjoy your trip.
.
Save yourself a lot of aggravation.....don't watch it!!
Re: CNBC and Economic Damage Control
Quote from southamerica:
For all practical purposes the run on the banks started with Bear Stearns, now it is the turn of IndyMac (technically the second-largest bank failure ever, second to Continental Illinois) then Lehman Brothers probably it will be the next large casualty. After that there are about 1,000 other banks around the United States in the edge of the abyss and ready to go under at any time.
Misinformation is all around us . . .
Re: Re: CNBC and Economic Damage Control
Quote from Landis82:
Can you please provide specific data to back up your claims above regarding the 1,000 banks in the U.S. that are ready to go under at any time?
And your here bashing CNBC for misinformation?
.
Now is Now: Save yourself a lot of aggravation.....don't watch it!!
****
July 16, 2008
SouthAmerica: Some times they interview some guests that are worth watching it such as Warren Buffett, Paul Volcker, Paul Krugman, George Soros, Stephen Roach, and a few others.
But half the time the talking heads and many of their guests on CNBC sound like just damage control and nothing else.
At least I can see through it, but millions of people might buy their bullshit and end up losing tons of money.
*****
Landis82: Can you please provide specific data to back up your claims above regarding the 1,000 banks in the U.S. that are ready to go under at any time?
*****
SouthAmerica: I heard on Bloomberg News the other day, some fellow was being interviewed about the current banking crisis and he was commenting on how the crisis was spreading to little banks around the country very fast and he was showing how the banks were having trouble raising new money in the current borrowing crisis, and how their portfolios were getting sour with commercial loans going bad. He said that hundreds of local banks around the US got caught on this Perfect Storm.
And now with GM having a complete restructuring and one of the 3 major US car manufacturers going out of business in the coming months this is going to have a major ripple effect in the US economy and it will affect many communities when other business also would have to go into bankruptcy. Now all this negative stuff keeps feeding into itself and making matters even worse.
But if you prefer the listen to the rosy scenary painted by CNBC please don’t listen to me and listen to them and start bottom fishing in this crazy market. I don’t care if you lose your shirt on your investments.
Many smart people who work for the large Foreign Sovereignty Funds thought that they were picking up bargains here in the US market, and a year later look at them after their investments lost half of their value.
The one good thing about the stock market is that you always find some fool that listen to the wrong advice at the wrong time. Good luck to you.
.
Quote from Landis82:
Can you please provide specific data to back up your claims above regarding the 1,000 banks in the U.S. that are ready to go under at any time?
Quote from southamerica:
I heard on Bloomberg News the other day, some fellow was being interviewed about the current banking crisis and he was commenting on how the crisis was spreading to little banks around the country very fast and he was showing how the banks were having trouble raising new money in the current borrowing crisis, and how their portfolios were getting sour with commercial loans going bad. He said that hundreds of local banks around the US got caught on this Perfect Storm.
yes, think Southamerica over-stated the problem, tho was it 700
i heard were 'at risk' or 76 ? however:
"During the savings-and-loan crisis (1986-95), 2,377 banks failed, representing 67% of
the 3,559 bank failures from 1934 through May 2008. At the peak of the crisis (1988-89)
1,004 banks failed, a rate of one failure every 1.38 days."
http://www.usnews.com/articles/busi...k-failures.html
oh and cnbc, i watch BNN the Canadian equivalent which i much
prefer, not because of the extra Ca content rather there's none
of those annoying sound effects, distracting visuals and interviews
that continue for many minutes rather the seconds given to guests
of cnbc - do guests on cnbc pay to appear ?
.
GTS: He references something he heard from "some fellow" and turned that into a talking point about 1,000 banks ready to go under.
*****
SouthAmerica: It was some analyst specialized on the banking area. I did not catch his name I just listed what he was saying because he was painting a bleak picture for hundreds of local banks from around the US.
He said all these banks had been caught in this Perfect Storm and possibly a large number of them were not going to be able to survive.
Let's check a year from now if that fellow was right on his assessment of the banking industry around the US.
I am not a banking analyst I am just mentioning what I heard on the radio,
but I assume that Bloomberg news interview people with the right credentials.
If you think that the current credit crisis has reached only the major banks then good for you.
Maybe you are reacting the way you did is because you assumed that I said that 1,000 banks are going to fail in the near future.
By if you go back to my posting and read it again I said that the bank analyst said there are 1,000 bank that are at the edge of the abyss and many of these banks are not going to make it.
He did not give an actual estimate of how many of these banks are going to go out of business - who knows how many of them are going to fall into the abyss.
But I can tell you one thing the more banks goes out of business such is the case of IndyMac and people keep watching on television these long lines of people trying to get their money out.
The Panic can spread to other banks that might had the chance to survive on this tough environment, but any rumor or God knows what can trigger a run on the bank.
I just hope that most of these banks that are at the edge of the abyss are insured by the FDIC - at least the depositors don't lose all their money.
And since so many banks are in trouble around the US the FDIC will need to increase the insurance premium for these banks making the matter even worse for these institutions that are in the border line of going broke.
.
.
July 16, 2008
SouthAmerica: I just read an email that I received from RGE Monitor saying media alert with the following info:
I have heard Professor Roubini being interviewed on Bloomberg News a number of times and I also have read some of his articles over time – I am aware that we are in the same wavelength for a long time regarding our economic forecasts of the US economy. I always enjoy listening to what he has to say.
I may not have credibility with some of you guys even after all this time. That is fine with me, and my record based on my articles speaks for itself.
But Professor Roubini has the credentials and the track record that should demand some respect from you guys and here is what he has to say:
****
RGE Monitor MEDIA ALERT: Nouriel Roubini predicts the worst financial crisis since the Great Depression and the worst U.S. Recession in the last few decades.
New York, July 15, 2008- In a series of recent writings on the RGE Monitor Nouriel Roubini – Chairman of RGE Monitor and Professor of Economics at the NYU Stern School of Business - has argued that the U.S. is experiencing its worst financial crisis since the Great Depression and will undergo its worst recession in the last few decades. His analysis leads to the following conclusions:
· This is by far the worst financial crisis since the Great Depression
· Hundreds of small banks with massive exposure to real estate (the average small bank has 67% of its assets in real estate) will go bust
· Dozens of large regional/national banks (a’ la IndyMac) are also bankrupt given their extreme exposure to real estate and will also go bust
· Some major money center banks are also semi-insolvent and while they are deemed too big to fail their rescue with FDIC money will be extremely costly.
· In a few years time there will be no major independent broker dealers as their business model (securitization, slice & dice and transfer of toxic credit risk and piling fees upon fees rather than earning income from holding credit risk) is bust and the risk of a bank-like run on their very short term liquid liabilities is a fundamental flaw in their structure (i.e. the four remaining U.S. big brokers dealers will either go bust or will have to be merged with traditional commercial banks). Firms that borrow liquid and short, highly leverage themselves and lend in longer term and illiquid ways (i.e. most of the shadow banking system) cannot survive without formal deposit insurance and formal permanent lender of last resort support from the central bank.
· The FDIC that has already depleted 10% of its funds in the rescue of IndyMac alone will run out of funds and will have to be recapitalized by Congress as its insurance premia were woefully insufficient to cover the hole from the biggest banking crisis since the Great Depression
· Fannie and Freddie are insolvent and the Treasury bailout plan (the mother of all moral hazard bailout) is socialism for the rich, the well connected and Wall Street; it is the continuation of a corrupt system where profits are privatized and losses are socialized. Instead of wiping out shareholders of the two GSEs, replacing corrupt and incompetent managers and forcing a haircut on the claims of the creditors/bondholders such a plan bails out shareholders, managers and creditors at a massive cost to U.S. taxpayers.
· This financial crisis will imply credit losses of at least $1 trillion and more likely $2 trillion.
· This is not just a subprime mortgage crisis; this is the crisis of an entire subprime financial system: losses are spreading from subprime to near prime and prime mortgages; to commercial real estate; to unsecured consumer credit (credit cards, student loans, auto loans); to leveraged loans that financed reckless debt-laden LBOs; to muni bonds that will go bust as hundred of municipalities will go bust; to industrial and commercial loans; to corporate bonds whose default rate will jump from close to 0% to over 10%; to CDSs where $62 trillion of nominal protection sits on top an outstanding stock of only $6 trillion of bonds and where counterparty risk – and the collapse of many counterparties – will lead to a systemic collapse of this market.
· This will be the most severe U.S. recession in decades with the U.S. consumer being on the ropes and faltering big time as soon as the temporary effect of the tax rebates will fade out by mid-summer (July). This U.S. consumer is shopped out, saving less, debt burdened and being hammered by falling home prices, falling equity prices, falling jobs and incomes, rising inflation and rising oil and energy prices. This will be a long, ugly and nasty U-shaped recession lasting 12 to 18 months, not the mild 6 month V-shaped recession that the delusional consensus expects.
· Equity prices in the US and abroad will go much deeper in bear territory. In a typical US recession equity prices fall by an average of 28% relative to the peak. But this is not a typical US recession; it is rather a severe one associated with a severe financial crisis. Thus, equity prices will fall by about 40% relative to their peak. So, we are only barely mid-way in the meltdown of stock markets.
· The rest of the world will not decouple from the US recession and from the US financial meltdown; it will re-couple big time. Already 12 major economies are on the way to a recessionary hard landing; while the rest of the world will experience a severe growth slowdown only one step removed from a global recession. Given this sharp global economic slowdown oil, energy and commodity prices will fall 20 to 30% from their recent bubbly peaks.
· The current U.S recession and sharp global economic slowdown is combining the worst of the oil shocks of the 1970s with the worst of the asset/credit bust shocks (and ensuing credit crunch and investment busts) of 1990-91 and 2001: like in 1973 and 1979 we are facing a stagflationary shock to oil, energy and other commodity prices that by itself may tip many oil importing countries into a sharp slowdown or an outright recession. Also, like 1990-91 and 2001 we are now facing another asset bubble and credit bubble gone bust big time: the housing and overall household credit boom of the last seven years has now gone bust in the same way as the 1980s housing bubble and 1990s tech bubble went bust in 1990 and in 2000 triggering recessions. And a similar housing/asset/credit bubble is going bust in other countries – U.K., Spain, Ireland, Italy, Portugal, etc. – leading to a risk of a hard landing in these economies.
· But over time inflation will be the last problem that the Fed will have to face as a severe US recession and global slowdown will lead to a sharp reduction in inflationary pressures in the U.S.: slack in goods markets with demand falling below supply will reduce pricing power of firms; slack in labor markets with unemployment rising will reduce wage pressures and labor costs pressures; a fall in commodity prices of the order of 20-30% will further reduce inflationary pressure. The Fed will have to cut the Fed Funds rate much more – as severe downside risks to growth and to financial stability will dominate any short-term upward inflationary pressures. Leaving aside the risk of a collapse of the US dollar given this easier monetary policy the Fed Funds rate may end up being closer to 0% than 1% by the end of this financial disaster and severe recession cycle.
· The Bretton Woods 2 regime of fixed exchange rates to the US dollar and/or heavily managed exchange will unravel – as the first Bretton Woods regimes did in the early 1970s – as US twin deficits, recession, financial crisis and rising commodity and goods inflation in emerging market economies will destroy the basis for it existence.
· Thus, the scenario of 12 steps to a financial disaster that I outlined in my February 2008 paper is unfolding as predicted. If anything financial conditions are now much worse than they were at the previous peak of this financial crisis, i.e. in mid-march of 2008.
.
Quote from GTS:
Translation - southamerica made up the "about 1,000 other banks around the United States in the edge of the abyss and ready to go under at any time" stat.
He references something he heard from "some fellow" and turned that into a talking point about 1,000 banks ready to go under.
And this from the same person that complains about misinformation. Pot Kettle Black.
.
Landis82: This guy South America is a joke.
*****
SouthAmerica: I am a joke and you are the person who thinks that he knows exactly which banks are going to fail in the coming months.
I don’t care how many banks you have on your list.
When the average American starts seen lines of people on television of people trying to get their money from a failing bank it does not matter the size of the bank. After a while people starts to Panic and they stop trusting even a bank that had the chance to survive the credit crunch.
If your bank is one of the 107 banks on your list then it is time to play safe. It is better to be safe than sorry later on.
I remember seeing on the BBC News the same type of run on the bank in Argentina a few years ago and afterwards people being interviewed saying that they were sorry they did not react quick enough when they had the chance to do it.
I know we have the FDIC here in the US and so on, but even then it is a hassle to get your money back from the government during such a crisis.
And after the Panic gets out of control what good is going to be the list that you have shown on your posting?
And if the media gets hold of a story of someone who commits suicide because of the money he/she lost during the run on the bank, if the bank is not insured by the FDIC then memories of the Great Depression would be all over the news feeding the negative news like never before.
But you are very smart, or at least you think you are, and you have figured out all the possible angles to the coming banking crisis, and you also have all the right answers.
Good for you.
.
Ummm, if you were familiar with the FDIC you would know that it is NOT a hassle to get your money back during a crisis.
Quote from southamerica:
I know we have the FDIC here in the US and so on, but even then it is a hassle to get your money back from the government during such a crisis.
Quote from Roubini about brokerage firms....
In a few years time there will be no major independent broker dealers as their business model (securitization, slice & dice and transfer of toxic credit risk and piling fees upon fees rather than earning income from holding credit risk) is bust and the risk of a bank-like run on their very short term liquid liabilities is a fundamental flaw in their structure (i.e. the four remaining U.S. big brokers dealers will either go bust or will have to be merged with traditional commercial banks). Firms that borrow liquid and short, highly leverage themselves and lend in longer term and illiquid ways (i.e. most of the shadow banking system) cannot survive without formal deposit insurance and formal permanent lender of last resort support from the central bank.
...............................................................................................
These firms have been through quite a few phases....
......................................................
Remember Merrill Lynch Pierce Fenner & Smith
Bullish On America
.....................................................
EF Hutton
When Hutton Talks, people listen
....................................................
Smith Barney
We make money the old fashion way, we earn it...
.......................................................
They went through all this because of the money to be made on tranferring names on a security name. Electronic direct access can do this now for almost nothing.
..............................................................
Nowadays......they got into widely distributed, nonaccountable passed on grayly priced securities....created funny money bonuses from third tier in house evaluation...called the Paulson way to profitability....game over....
............................................................
Because of legal largesse...the ipo business is moving to other exchanges....
..........................................................
Because of legal largesse.....trading volume is building to
non US domiciled electronic exchanges....
...........................................................
Company research has always been a spanking boy in the way of profits....thus was moved out or compromised a long time ago...
..........................................................
So just where is brokerage firm money going to come from ?
........................................................
__________________
libertad
.
October 1, 2008
SouthAmerica: I did watch CNBC TV for a few minutes this morning they were interviewing 3 fellows about the Wall Street bailout – one of the fellows was George Magnus.
He was saying that the global economy is declining into a global recession.
Then the CNBC anchorwoman mentioned how many countries around the world were fine and she mentioned that the Brazilian economy is expected to grow in 2009 at 5.5 rate.
She was not aware that there are new estimates regarding the Brazilian economy and the growth rate for 2009 has been revised from 5.5 to 3.3
Basically the growth rate for the Brazilian economy has been cut in half because of the global economic slowdown.
According to CNBC TV the economic growth of many countries for 2009, that is no longer there including in Brazil, is part of the optimistic scenario that is going to help the US economy in 2009.
On the other hand, last night Charlie Rose interviewed Mort Zuckerman and Andrew Ross Sorkin and both of them gave an excellent overview of the current state of the real estate market in the United States and its prospects for the coming years, and also of the economic scenario of the US economy for 2009 and beyond.
These guys gave a very credible forecast for the US economy and the limited benefit that the Wall Street bailout is going to have on the unfreezing of the US financial markets.
Basically the Wall Street bailout is not going to fix much of anything regarding the problems that are at the core of this massive US financial and economic crisis.
*****
I also watched for a few minutes some clown being interviewed on Bloomberg television (another Wall Street mouth piece) and this fellow was in favor of passing some kind of bailout and the reasons for the bailout is:
1) I hope we are doing the right thing.
2) I hope we have the right people to implement the bailout.
3) After the bailout is approved I hope they do the right thing.
Basically this guy was all wishful thinking and nothing more.
Let's pass the bailout and hope for the best.
I was thinking this moron is a good representation of the majority of talking heads on TV that are trying to sell this Wall Street bailout to the public.
.
.
October 3, 2008
SouthAmerica: Yesterday morning I was watching CNBC and its major effort to scare the American people into supporting the Wall Street bailout bill.
CNBC used to be the free market economy champion – now CNBC is the government intervention champion and also the company nationalization champion.
Today there is no US government bailout small enough that CNBC does not support.
I don’t know why CNBC decided to leave 100 percent out of the discussions one of the major players for this Wall Street bailout to be able to go forward. – I wonder why representatives of China and Japan’s government are not participating on all these bailout discussions since at the end of the day they are the ones who are really going to finance the entire fiasco.
I can imagine what is going through the minds of Asians central bankers and Finance Ministers as they watch this Wall Street Bill get even bigger than before in LaLaLand..
Ah, Ah, Ah – Americans think Asians are real Fools.
.
.
October 4, 2008
SouthAmerica: I just posted the following on the Charlie Rose Show comment section regarding his appearance on CNBC to promote Warren Buffett’s opinions.
Here is the info that I posted on the CRS:
Reply to Tabs – This comments section is an outlet for viewers of The Charlie Rose to exchange opinions about the guests that appear on that show on a daily basis. I doubt that Charlie Rose himself reads these comments, he must be a very busy man and he probably has one assistant that reads the information on a daily basis and just let Charlie know if the viewers liked the interview or not.
Regarding the $ 850 billion dollar Swindle that Congress just approved I understand that the world are full of fools that is why the United States has been able to waste 89 percent of world savings year after year but now the free lunch is about to end and the world is in the process of realizing that the US dollar is as good as Confetti and is becoming very fast a worthless currency.
I advised my readers on Brazzil magazine about 4 years ago for them to move their assets from US dollar to euros or a more sound currency at that time Brazilians had close to $ 200 billion dollars invested in US dollar assets. Since then the US dollar lost 40 percent against the real the Brazilian currency, and the US dollar also lost a lot of value against the euro.
Now talking about a currency that is turning into Confetti as Mr. Buffett says. One of the few people in the financial world that I still trusted was Warren Buffett, someone who I have been following his investments activities since 1969 when I started working for Mr. John M. Templeton.
After the latest interview of Warren Buffett by Charlie Rose I lost that trust that I used to have regarding Warren Buffett, and I am sure that many intelligent people around the country also lost trust on Mr. Buffett on that particular evening.
It is no coincidence that Mr. Buffett is the richest man in the United States and during the interview with Charlie Rose he did not beat around the bush since he was straightforward about what he had on his mind, he showed to me that he is a self-serving man that does not miss a great opportunity to make lots of money. Mr. Buffett suggested during the interview that Congress give a blank check to his friend Secretary of Treasury Paulson regarding the $ 850 billion Wall Street bailout.
Since Mr. Buffett has a lot of cash and the right connections he would be first in line to dig through the toxic waste and get some valuable stuff that is buried on this toxic financial mess. I am sure Mr. Buffett is going to come up ahead on his search for a quick killing.
Now that the Wall Street bailout has passed in Congress after Mr. Buffett makes a ton of money from his self-serving advise on The Charlie Rose Show people can’t accuse him of being just a self-serving old billionaire and nothing else.
This is a capitalist country and the richest man in the land is making a hard sell on a popular TV show for Congress to pass a bailout that would help him make a ton of money. He was there to help scare to death the politicians into passing a bailout that he would be one of the major beneficiaries. He was there to promote his self-interest and nothing else.
What surprised me was Charlie Rose’s appearance on CNBC the Wall Street TV channel in the next morning to promote Warren Buffett’s self-interest position regarding the Wall Street bailout. Usually people get a commission to do this kind of stuff.
The Warren Buffett interview on The Charlie Rose Show instead of giving Americans a sense of trust in the American financial system, the interview put the spotlight on what is wrong with the American system; greed beyond limits and nothing else.
Warren Buffett has become a very big disappointment to me since I used to look at him as a symbol of integrity, as someone who you could trust, as someone highly ethical and so forth. And I just realized that it was a misperception, an illusion, and a wake up call.
.
.
October 6, 2008
SouthAmerica: I was watching CNBC TV and their talking heads were trying to spin every way they could for people to go back into the market.
Basically, only idiots would invest their money right now since the market is heading South and nobody have any idea where the bottom is regarding the current stock market MELTDOWN.
The market is littered with nuclear mine fields called “DERIVATIVES” and these devices are exploding all over the place, but nobody can get even an estimate of the carnage that these devices are going to inflict in the financial institutions, and also on regular corporations.
Here is only one example of what is in store for companies around the world.
When the new earnings season starts the new estimates are going to be full of surprises, but Real bad surprises – the type of surprise that the stock market does not like it.
Not little surprises, real big surprises as in the case of Sadia – they lost almost $ 500 million dollars in Derivatives and Lehman Brothers.
You can bet that the major American corporations are also going to disclose that they incurred a massive amount of losses in the derivatives market.
********
September 26, 2008
Sadia shares plunge 28 pct on Lehman, derivatives collapse (guardian.co.uk)
Shares of Brazil's largest poultry and pork processor Sadia plunged on Friday after the company reported serious losses due to forward derivatives positions taken on the currency exchange markets…
Sadia said it had 760 million reais in losses (US$ 410 million) due to foreign exchange positions and Lehman Brothers Holding Inc bonds. That was more than the 689 million real profit the company had in 2007.
.
.
October 7, 2008
SouthAmerica: Today I was watching CNBC TV for a few minutes in the morning, and a group of talking heads were discussing the growth in the U.S. GDP in the coming year.
I don’t know why these guys don’t understand that – not only the financial markets is going through deleveraging, but also the U.S. GDP. I guess that is a hard concept for people to understand.
Kevin Phillips mentioned on his book that over the last five years, financial services has reached a swollen 20-21% of U.S. GDP -- the largest sector of the private economy and that translates into approximately $ 3 trillion dollars worth of GDP.
The US government claims a GDP of around $ 14 trillion dollars, if we adjust it for the Fairy Tale figures added to this number – Paul Krugman calculates that it is at least 15 percent = $ 2.1 trillion – and if we adjust the financial services section for the current deleveraging that is underway in the US financial sector then that number probably will be closer to $ 1 trillion dollars worth of GDP.
If we make the following adjustments and don’t even consider that the rest of the U.S. economy it is shrinking by the day and is getting into a very deep recession (and the real estate sector of the economy which has represented a real engine of US economic growth for many years is no longer there, since the US has a very large inventory of available real estate around the country – then we come to the conclusion that the U.S. GDP should be lower than $ 10 trillion dollars and still declining even further. And I would not be surprised to find out that today after all these adjustments are taken in consideration the real U.S. GDP is around $ 9 trillion dollars.
If that is the case then Defense spending in the United States is completely out of line and it is hurting the future of the US economy - and in economic terms the United States has turned itself into just a dying Soviet Union.
And these guys at CNBC are talking about a U.S. GDP that is going to grow on top of the Phantom number of $ 14 trillion dollars.
Talking about misinformation: The Financial mainstream media makes Americans and investor think that the U.S. economy is at least 40 percent bigger than the U.S. economy really is.
No wonder the entire U.S. financial system is collapsing and completely out of touch with reality.
Then if you adjust the earnings and its potential for the future then the entire financial system in the United States is inflated by at least another 30 percent, even if the market is already pricing earnings from future years on today’s prices.
Today all the U.S. stock market averages still are inflated by at least 30 percent or even more.
*****
The Washington Post published an article on May 18, 2008 by author Kevin Phillips “The Old Titans All Collapsed. Is the U.S. Next?”
He said the following on that article: “In the United States, the financial services sector passed manufacturing as a component of the GDP in the mid-1990s. But market enthusiasm seems to have blocked any debate over this worrying change: In the 1970s, manufacturing occupied 25 percent of GDP and financial services just 12 percent, but by 2003-06, finance enjoyed 20-21 percent, and manufacturing had shriveled to 12 percent.
The downside is that the final four or five percentage points of financial-sector GDP expansion in the 1990s and 2000s involved mischief and self-dealing: the exotic mortgage boom, the reckless bundling of loans into securities and other innovations better left to casinos.
*****
Part 1 of 2
.
.
Part 2 of 2
I had posted this information on this forum in April 2008:
April 30, 2008
SouthAmerica: I was watching CNBC around 8:30 AM when the US Government released the GDP figures for the 1st Q 2008.
I found interesting all the discussions on that television show about such meaningless information.
A few days ago I was talking with a friend of mine that has traveled all over the world and have seen the economy of most countries first hand and he also has a solid knowledge of economics. We were talking about the latest book by Kevin Phillips and also about his article on Harper’s magazine and we both agree that most of the information published by the US government has become completely meaningless including the GDP figures. Today April 30, 2008 the US government has just released the latest GDP figures and the US Government claims that the current-dollar GDP = US$14.2 trillion.
My friend and I believe that after you adjust this fairy tale figure the real GDP of the US economy might be on the range of US$ 9 to US$ 10 trillion – the difference between these figures are all the meanings adjustments that they make to inflate the GDP figures calculated by the US Government to show a better performance and a larger economy than the reality.
http://www.elitetrader.com/vb/showt...threadid=126048
*****
April 22, 2008
SouthAmerica: …The world of illusion has worked well for Wall Street and also for the United States economy for a number of decades and people from around the world also have been rushing with their money and they want to participate on this massive economic illusion; as we can see by foreign lending and investments that continues to come in into the US even when these foreigners start losing their shirt as soon as the money arrives in the US.
Americans should be glad that there are so many naďve suckers around the world who believe on the illusion at hand.
Yesterday I bought a copy of the May issue of Harper’s magazine after reading a terrific article by Kevin Phillips “Why the economy is worse than we know.”
Here is what Paul Krugman (one of a hand full of economists that I respect) said on his NYT column on April 11, 2008: “Have you seen the awesome article by Kevin Phillips in the latest Harpers: “Numbers Racket — Why the economy is worse than we know. ...”
Here are some excerpts from "Numbers Racket: Why the economy is worse than we know" by Kevin Phillips, from the May 2008 issue of Harper’s Magazine:
“…The effect, over the past twenty-five years, has been to create a false sense of economic achievement and rectitude, allowing us to maintain artificially low interest rates, massive government borrowings, and a dangerous reliance on mortgage and financial debt even as real economic growth has been slower than claimed. If Washington’s harping on weapons of mass destruction was essential to buoy public support for the invasion of Iraq, the use of deceptive statistics has played its own vital role in convincing many Americans that the U.S. economy is stronger, fairer, more productive, more dominant, and richer with opportunities than it actually is.
…The truth, though it would not exactly set Americans free, would at least open a window to wider economic and political understanding. Readers should ask themselves how much angrier the electorate might be if the media, over the past five years, had been citing 8 percent unemployment (instead of 5 percent), 5 percent inflation (instead of 2 percent), and average annual growth in the 1 percent range (instead of the 3-4 percent range). We might ponder as well who profits from a low-growth US economy hidden under statistical camouflage. Might it be Washington politicos and affluent elites, anxious to mislead voters, coddle the financial markets, and tamp down expensive cost-of-living increases for wages and pensions?
Let me stipulate: the deception arose gradually, at no stage stemming from any concerted or cynical scheme. There was no grand conspiracy, just accumulating opportunisms. As we will see, the political blame for the slow, piecemeal distortion is bipartisan--both Democratic and Republican administrations had a hand in the abetting of political dishonesty, reckless debt, and a casino-like financial sector. To see how, we must revisit forty years of economic and statistical dissembling.
…The GDP has been subject to many further fiddles, the most manipulatable of which are the adjustments made for the presumed starting up and ending of businesses (the “birth/death of businesses” equation) and the amounts that the Bureau of Economic Analysis “imputes” to nationwide personal income data (known as phantom income boosters, or imputations; for example, the imputed income from living in one’s own home, or the benefit one receives from a free checking account…). During 2007, believe it or not, imputed income accounted for some 15 percent of GDP.
…"...if you were to peel back the changes that were made in the Consumer Price Index (the inflation rate) going back to the Carter years, you'd see that the CPI would now be 3.5 to 4 percent higher -- meaning that, because of lost CPI increases, Social Security checks would be 70 percent greater than they currently are.
…The real numbers, to most economically minded Americans, would be a face full of cold water. Based the criteria in place a quarter centruy ago, today's U.S. unemployment rate is somewhere between 9 and 12 percent; the inflation rate is as high as 7 or even 10 percent; economic growth since the recession of 2001 has been mediocre, despite a huge surge in the wealth and incomes of the superrich, and we are falling back into recession. If what we have been sold in recent years has been delusional "Pollyanna Creep," what we really need today is a picture of our economy ex-distortion. For what it would reveal is a nation in deep difficulty not just domestically but globally.
Undermeasurement of inflation, in particular, hangs over our heads like a guillotine. To acknowledge it would send interest rates climbing, and thereby would endanger the viability of the massive buildup of public and private debt (from less then $11 trillion in 1987 to $49 trillion last year) that props up the American economy. Moreover, the rising cost of pensions, benefits, borrowing, and interest payments -- all indexed or related to inflation -- could join with the cost of financial bailouts to overwhelm the federal budget. As inflation and interest rates have been kept artificially suppressed, the United States has been indentured to its volatile financial sector, with its predilection for leverage and risky buccaneering.
Arguably, the unraveling has already begun. As Robert Hardaway, a professor at the University at Denver, pointed out last September, the subprime crisis "can be directly traced back to the (1983) Bureau of Labor Statistics decision to exclude the price of housing from the Consumer Price Index...With the illusion of low inflation inducing lenders to offer 6 percent loans, not only speculation run rampant on the expectation of ever-rising home prices, but home buyers by the millions have been tricked into buying homes even though they only qualified for the teaser rates." Were mainstream interest rates to jump into the 7 to 9 percent range -- which could happen if inflation were to spur new concern -- both Washington and Wall Street would be walking in quicksand. The make-believe economy of the past two decades, with its asset bubbles, massive borrowing, and rampant data distortion, would be in serious jeopardy. The U.S. dollar, off more than 40 percent against the euro since 2002, could slip down and even rockier slope.
The credit markets are fearful, and the financial markets are nervous. If gloom continues, our humbugged nation many truly regret losing sight of history, risk, and common sense.”
Source: http://harpers.org/archive/2008/05/0082023
.
.
October 9, 2008
SouthAmerica: No wonder Warren Buffett invested a few billion US dollars in Goldman Sacks then he became part of the hard sell for the $ 700 billion dollars Wall Street Bailout – And Wareen Buffett recommended on the Charlie Rose Show that Congress give a blank check for his long time friend from Goldman Sacks Treasury Secretary Paulson.
Since the world markets are in complete turmoil and in the middle of a major crisis of confidence these ……… to inspire confidence, as soon as the bailout were approved by Congress Secretary Paulson announced that one of his old cronies from Goldman Sacks was going to be the person assigned to distribute the loot.
Last night I was watching the Lou Dobbs show on CNN and he mentioned that AIG was getting another $ 38 billion dollars from the US government on top of the other $ 85 billion that AIG got just a few days ago.
Lou Dobbs also mentioned that AIG has become just a past through vehicle and the money goes from the US government to AIG and to Goldman Sacks. Basically this is the ultimate in conflict of interest and lack of transparency.
Then everybody wonders why the entire US financial system still is frozen and nobody trusts anyone else? It could be that the reason is because the shenanigans by major Wall Street is continuing in full force.
With the first loan the US government had acquired 79 percent of AIG, with the new loan arrangement the US government should own 100 percent of AIG.
Now that AIG belongs 100 percent to the US government then Treasury Secretary Paulson has the authority of selling the profitable parts of AIG to Warren Buffett for a song.
To build the trust in the US financial system the US government should comply with all the changes in accounting rules as requested by the rocket scientists of Wall Street and help Wall Street by making official the distorted information that they want to add to their financial. That would represent a big step in the wrong direction and would help magnify the Panic that is already underway.
The world is watching the United States reach a new level of deception and stupidity and how to destroy the entire global financial system.
************
Fed grants AIG $37.8 billion loan
Associated Press - Thursday October 9, 2008
By Ieva M. Augstums, AP Business Writer
Fed grants AIG $37.8 billion loan besides one made last month to giant insurer
CHARLOTTE, N.C. (AP) -- The Federal Reserve on Wednesday agreed to provide insurance giant American International Group Inc. with a loan of up to $37.8 billion, on top of one made to the troubled company last month.
Under the new program, the Federal Reserve Bank of New York will borrow up to $37.8 billion in investment-grade, fixed income securities from AIG in return for cash collateral. These securities were previously lent by AIG's insurance company subsidiaries to third parties.
The arrangement will help AIG secure funds on an as-needed basis, the New York-based insurer said in a statement.
As of Monday, about $37.2 billion of securities were available for loans under AIG's securities lending program.
On the brink of failure last month, AIG was bailed out when the government offered it an $85 billion loan during the ongoing credit crisis that saw Lehman Brothers Holdings Inc. file for bankruptcy protection and the sale of Merrill Lynch & Co. to Bank of America Corp. In return for the two-year loan, the government received warrants to purchase up to 79.9 percent of AIG.
As of Sept. 30, AIG had drawn $61 billion on the credit facility, of which about $54 billion has gone toward its securities lending and AIG's financial products area. The rest of the money has been for other liquidity needs amid an "unprecedented" freezing of credit markets, Chief Executive Edward Liddy said last week.
Last week, AIG said it would sell off a number of business units to pay off its massive government loan. The company didn't specifically disclose all the assets it would sell or the expected prices from the sales. However, the New York-based insurer said it plans to retain its U.S. property and casualty and foreign general insurance businesses, and also plans to retain an ownership interest in its foreign life insurance operations.
The deal for the additional Fed loan comes as AIG has been castigated by lawmakers and the White House for spending hundreds of thousands of dollars on a posh California retreat just days after getting the federal bailout.
Lawmakers investigating AIG's meltdown said they were enraged that executives of AIG's main U.S. life insurance subsidiary spent $440,000 on the retreat, complete with spa treatments, banquets and golf outings. White House press secretary Dana Perino on Wednesday called the event "despicable."
AIG issued a statement Wednesday saying that the "business event" was planned months before the Sept. 16 bailout and that it was held for top-producing independent life insurance agents, not AIG employees. Of the 100 attendees, only 10 worked for the AIG unit hosting the event, it said.
The insurer said its Chief Executive Edward Liddy sent a letter to Treasury Secretary Henry Paulson "clarifying the circumstances" of the event. In the letter Liddy assured Paulson that AIG is "reevaluating the costs of all aspects of our operations in light of the new circumstances in which we are all operating."
Shares of AIG closed down 32 cents, or
9.1 percent, to $3.19 in trading Wednesday.
Source: http://biz.yahoo.com/ap/081009/fed_aig.html
.
Hey, how's that Brazilian stock market doing? 
Quote from GTS:
Hey, how's that Brazilian stock market doing?
__________________
Interact and react with total freedom, heeding your full responsibility and consequences of all your actions with (hopefully) increasingly wisdom.
.
October 9, 2008
SouthAmerica: I was watching CNBC cable and they were discussing about General Motors (GM) stock. Today that stock reached a new low of $ 5.41 per share and its market cap was around $ 3 billion dollars.
Americans think that they are good at innovation, but here is an example of a missed opportunity in using innovation to fix many problems at the same time.
The US government under the leadership of Comrades Ben S. Bernanke, Henry Paulson, and George W. Bush are consolidating the US economy under one umbrella.
They still are doing even that on their incompetent ways.
The talking heads at CNBC are saying that the entire financial market is looking for safety under the US government umbrella.
The question is: Why the federal government lent $ 15 billion dollars to General Motors (GM) instead of nationalizing that company and buying the outstanding shares for about $ 3 billion dollars?
That strategy would also resolve another major problem at the General Motors Corporation since after the US government nationalization of that company then they could transfer GM’s pension obligations to the Pension Guaranty Benefits Corp. (PBGC) and that would have solved another major problem for that corporation.
In the GM bailout alone the US government wasted at least an extra $ 10 billion dollars of taxpayers money. And we all know that GM is coming back for more in the future.
After they buy and consolidate the GM, and Ford corporations the US government can change the name of the new dinosaur to American Motors.
Comrades Ben S. Bernanke, and Henry Paulson could use the same strategy with Ford, Morgan Stanley, Bank of America and many other American companies.
*****
Americans want to rebuild trust in the US financial system, and here are a few things that they can do immediately to provide more accurate information to for the market players.
1) Since nobody trusts the US financial system anymore, then I don’t know why the mainstream media don’t put the spotlight on the US GDP figure, the US government publishes all the time some meaningless figure that somebody dreams up in Washington D.C. of around $ 14.5 trillion dollars.
After you adjust that figure by the percentage of garbage that they add to that figure which some prominent economists say should be at least 15 to 20 percent of the official figure that the US government publishes on a regular basis. After you clean up the official GDP figure then you end up with a more realistic figure around $ 9 trillion dollars.
2) Wall Street and the US financial system are desperate and they want to adopt right now the WorldCom type of General Unacceptable Accounting Principles (GUAP) – The type of accounting principles designed to deceive, and distort financial information.
Do you remember when the stock of WorldCom was trading close to $ 50 dollars per share and then collapsed in a short time close to nothing and eventually WorldCom went out of business? Just to give you an example what the financial companies here in the United States have in mind, they want to keep carrying their WorldCom type of investments at the higher value, and they don’t want to write off into their profit and loss statement the loss associated with the decline in value of the WorldCom type of investment – just in case the WorldCom investment rise from the dead.
That is their thinking about a lot of garbage that they are carrying on their financials right now. Their excuse is that if they write off all these losses then this would have a negative impact on their earnings and also would reduce the market value of their stocks on the open market.
******
The US government also needs desperately to use this emergency strategy:
There’s one thing that the US government should be doing right now, they should be preparing a package to request the International Monetary Fund (IMF) for a loan to rescue the US government, and the US economy.
As part of the new agreement with the IMF the US government should start thinking about changing its currency with the “NEW U.S. DOLLAR”
To convert the current U.S. Dollar to the New U.S. Dollar the US government should use the ratio of $ 100 old US dollar = N$ 1 US dollar.
That would give the people the impression that the New US Dollar still worth something, and it would help restore some confidence in the value of the US currency.
.
.
October 17, 2008
SouthAmerica: I was just turned the TV on to CNBC to check the market averages and they started talking about an article by Warren Buffett that was published on The New York Times today.
First, Mr. Buffett’s credibility has been evaporating during this current financial crisis, he has become just a mouth piece for the $ 700 billion dollars bailout, and in favor of giving Treasury Secretary Paulson a blank check, and he is involved in all kinds of self-interest deals related with all the activities that is going on related to this bailout.
The hard sell about buying real estate toxic assets that he gave on The Charlie Rose Show, was just a bait and switch game, and he is a major shareholder of Wells Fargo a company that has been fighting with Citigroup to get the carcass of what is left of Wachovia. He is also a close advisor to California’s Governor Arnold Schwarzenegger who is trying to get a piece of the action on this bailout mess with the help from – you guessed right – Goldman Sacks.
He is connected with the Goldman Sacks crowd in many ways (Paulson and his cronies) including his old friendship with Treasury Secretary Paulson.
Mr. Warren Buffett went from being the worshiped “Oracle from Omaha” to becoming today just the “Wheel and Deal” old man of Omaha.
It is interesting how he timed his little article that was published today October 17, 2008 on The New York Times, and this date falls right at the time when the stock market really have its down turns during the traditional American season for market crashes such as:
The crash on October 19, 1987, a date that is also known as Black Monday, was the climactic culmination of a market decline that had begun five days before on October 14th.
October 24 (known as Black Thursday) was the first in a number of increasingly shocking market drops that was followed swiftly by Black Monday on October 28 and Black Tuesday on October 29. The most famous crash happened on October 29, 1929.
The talking heads of CNBC mentioned that on this article on The New York Times Mr. Buffett says that he is buying some stocks for his private account.
Why the private account?
Because he can buy just a few hundred thousand dollars of stock (any stock) and he still can claim that he was buying stock at this time of blood on the street.
Mark Haines one of the CNBC commentators said that in other market down turns when Mr. Buffett also came out and wrote an article for The New York Times on both occasions he was 3 months and 6 months ahead of the stock market bottom. That means that in six months the Dow Jones can be hitting bottom.
How do you fell if you buy stock today on the recommendation of Warren Buffett and the Dow goes down another 2,000 points from the current level?
If we consider all the turmoil going on right now in the global financial markets, please don’t be surprised if we see the Dow Jones around the 7,000 levels in the near future.
Please keep in mind about Mr. Buffett’s opinions today, he is just a self-serving very rich old man and his opinions come attached with a lot of self-interest. And at this time we need to take his opinion with a grain of salt.
.
SouthAmerica.
Stocktrader is an extreme
You're an extreme.
But you're both equally stupid.
Go to Cuba and sell your ass to the politburo, loser.
.
Oktiri: SouthAmerica.
Stocktrader is an extreme
You're an extreme.
But you're both equally stupid.
*****
October 17, 2008
SouthAmerica: I am giving my opinion about what I expect is going to happen in the stock market in the near future.
Since you think my opinion is stupid then it will be easy for us to check it out. All we need is a little of patience and we can check back on the following dates.
Right now the Dow Jones is at 8,963.
If you think I am a loser then let’s check back at which level the Dow is going to be on the following dates: January 31, 2009 and April 30, 2009.
As of October 17, 2008 - Dow Jones = 8,963
As of January 31, 2009 – Dow Jones = ?
As of April 30, 2009 – Dow Jones = ?
By the way, what you are going to find out is that my posting was not as stupid as you think.
I hope you are following Mr. Buffett’s suggestion and you are investing all your money today to take advantage of this on going market decline.
.
.
October 17, 2008
SouthAmerica: Reply to Oktiri
I checked the Dow a few minutes ago and the market was up over 200 points.
This is what we call a “Suckers Rally” and the smart money is probably shorting stock at the expense of suckers such as you.
I would not be surprised that Warren Buffett is giving a pep talk to the market to be able to unload some of the investments that he want to unload from his portfolio.
I would not be surprised also to find out in the future that the stock that he mentioned that he is buying right now are stocks such as Petrobras.
.
You're not worthy of my time.
I'm adding you to my ignore list, fucktard.
.
October 18, 2008
SouthAmerica: I had posted also on the PBS - Washington Week Forum the information that I posted on this forum about Warren Buffett.
An old member of the PBS forum - a college history and economics professor - we had discussed many subjects over the years and now he was surprised by my posting about Warren Buffett, and here is my response to that fellow. By the way, my screen name on that forum is Brazil.
**********
October 18, 2008
Brazil: Reply to Sir Scud
I have been an admirer of Warren Buffett since 1969 when I started working for John M. Templeton. And here is what I wrote a few years ago about these outstanding men and posted it here on this website, and latter I also posted it on the Elite Trader Forum.
For many years I did work with an exceptional group of people at Templeton, Dobrow & Vance (TDV) and learned Mr. Templeton’s philosophy from this group of people who had been working for Mr. Templeton for a long time. This was before Mr. Templeton built his mutual funds empire. He had only the Templeton Growth Fund a fund he had started in 1954.
This friend of mine I met him when both of us were working for John Templeton’s company in the early 1970’s – my friend had been a financial analyst for John Templeton for the last 25 years – that was before John Templeton moved to the Bahamas and his mutual fund empire was moved to Florida.
John Templeton’s company had been located in Englewood, NJ for a long time – and Mr. Templeton was the president, and Colonel Donald Liddell was the chairman of the board.
I was a very young man at that time, but Mr. Templeton was nice to me because he knew that I had just come from Brazil and he found my country very interesting.
I spent a lot of time with this group over the years even after I left that company I stayed in contact with some of these very close associates of Mr. Templeton and though these guys I knew everything that was happening regarding Mr. Templeton.
I got to know very well besides Mr. Templeton, Mr. Donald Liddell the Chairman of TDV, and these two men were a symbol of integrity, ethics, honesty, trust, and basically they don’t have too many people like that in America business anymore
I heard stories how other unscrupulous businessman had made offers to Mr. Templeton and he declined every time – he refused to do any type of business that was not 100 percent legal, ethical, and he did it with the highest level of integrity. He did everything by the book. But Mr. Liddell made a big impression on me.
At that time I was finishing high school and started going to college, but for some reason these old guys invited me to go to lunch with them almost on a daily basis – there were 5 or 6 of them and they were financial analysts or investment counselors for their private accounts – all of them had graduated from Princeton or Yale University and my friend had graduated with an engineering degree from Cornell University. These guys were a bunch of very smart fellows and all of them were millionaire. But for some reason that group did not mind that a 18-year-old kid tag along for lunch with them almost on a daily basis.
But the person that I want to mention is Colonel Liddell (people called him Colonel Liddell because he had been a Colonel in the US army during world war II) – Colonel Liddell was a brilliant investment counselor and he did handle the investment account of many famous people at that time – Colonel Liddell also was on the board of directors of close to 50 different companies. He was one of the closest friends of Mr. John Templeton, and he used to go and spend his vacation with Mr. Templeton on his Bahamas mansion.
But what I remember the most about Colonel Liddell was his sense and practice of ethics and integrity, because today it is rare to find people in the investment world with that same high standard of ethics and integrity of people such as Colonel Liddell and also John Templeton.
Today most people in Wall Street would laugh of Colonel Liddell, with few exceptions such as Warren Buffet and a few others – But here is a lesson from Colonel Liddell to the new generation:
Colonel Liddell had a major investment in a bank here in New Jersey and he also was a member of the board of directors of that bank – and over the years he invested the money of many of the clients that he handled their investment account on the stock of that bank – and over the years his clients did very well with their investments.
But in the late 1970’s and early 1980’s that bank started having financial problems and the stock started declining accordingly. Here comes the ultimate ethics and integrity lesson: Colonel Liddell wrote a memo and he sent to all his accounts saying that the bank had financial problems and that Colonel Liddell was going to sell his financial position on that bank – but before he did that he wanted to give a chance for all the people who he had invested their money in that stock for them to get out of that stock before he sold his position.
By doing that Colonel Liddell lost a few extra million dollars of his own money, but he felt the obligation to let the other people sell their stock positions before he sold his.
Since then when hear people talk about honesty, ethics and integrity the first person that comes to mind it is the name of Colonel Donald Liddell because he did practice all these virtues in real life.
*****
As I mentioned above I have been an admirer of Mr. Buffett for almost 40 years, and I thought he was in the same league with Mr. Templeton – a similar investment philosophy, a similar outstanding investment record, a very high level of integrity, and I thought these were men of outstanding character who were beyond reproach.
Since I knew Mr. Templeton so well over the years I am almost sure that he would not have gone to the Charlie Rose Show to support the $ 700 billion dollars Wall Street bailout. He had an aversion to government intrusion in the private sector.
I know Mr. Templeton would be in shock today with the massive nationalization of US companies, and heavy US government intervention against the workings of a free market economy that is underway in the United States.
I am sure that he would not be a supporter of the Wall Street bailout since that would go completely against his investment and economic philosophy.
No wonder we have a crisis of trust in the banking system and financial market, with so much US government intervention making an effort to keep the distortions in the US market from adjusting itself and finding a new equilibrium and the real prices deflated from the artificial bubbles, and artificial thinking.
Here is what I mean by a conflicts of interest by Mr. Buffett:
I mentioned on the above posting about Mr. Buffett’s relationship with Treasury Secretary Paulson, and his new investment in Goldman Sacks on the days prior to the approval of the bailout that Mr. Buffett was lobbying for it on the Charlie Rose Show.
Berkshire Hathaway, Inc. is the top institutional holder of Wells Fargo & Company stock. As of June 30, 2008 Berkshire Hathaway owned 9 percent or 290,654,868 shares of common stock of Wells Fargo valued at $ 7 billion dollars.
On this new US government welfare program for the major US banks the Wells Fargo bank is getting $ 25 billion dollars (including $ 5 billion dollars that was going to Wachovia now part of Wells Fargo)
Two weeks ago the Goldman Sacks investment banking company turned itself into a banking holding company just in time to qualify for this new US government welfare program, and they are going to receive $ 10 billion dollars.
In just these two companies that Mr. Buffett has interests worth about $ 10 billion dollars – combined these 2 companies are receiving from the US government welfare program for the rich – a handout to the tune of $ 30 billion dollars.
The latest issue of Business Week magazine dated October 27, 2008 has a table listing all the major banks that are receiving this handout from the US government and they list also the amount of the welfare check that each bank is going to receive.
I am sure that Mr. John M. Templeton wouldn’t have involved himself in such a scheme completely full of conflicts of interest, and he also wouldn’t have sold his soul and his credibility for a fist full of dollars.
.
October 18, 2008
SouthAmerica: Regarding the above posting.
Wrong info:
In just these two companies that Mr. Buffett has interests worth about $ 10 billion dollars – combined these 2 companies are receiving from the US government welfare program for the rich – a handout to the tune of $ 30 billion dollars.
*****
Correct info:
In just these two companies that Mr. Buffett has interests worth about $ 10 billion dollars ( Wells Fargo $ 7 billion dollars and Goldman Sacks $ 3 billion dollars) – combined these 2 companies are going to receive from the US government welfare program for the rich a handout to the tune of $ 35 billion dollars. (Wells Fargo $ 25 billion dollars and Goldman Sacks $ 10 billion dollars)
.
Buffett considers this "free money".
Buffett also knows that at the end of the day, there will be a lot fewer big banks remaining.....but his will be among them.....and they will make "above normal" profits in the future because a lot of competition will have been eliminated.....
All in all....a win win for Buffett and his clients.....
Society will pay up for banking in the future because of diminished competition....
That is of course if things remain relatively the same....
Which it will not....
..................................................
With so many developing markets even further under water than the US.....I am certain that Templeton would be averaging stocks for the next 24+ months.....
Both Templeton and Buffett have long term views.....and both know/knew when to enter.......and have/had a lot of patience....
There are several companies whose stock do not even reflect the cash they hold.....Templeton would love this....
__________________
libertad
.
October 18, 2008
SouthAmerica: Reply to Libertad
You are right.
Mr. Templeton would be in haven right now with the current state of all stock markets around the world. From his perspective he would be looking into the future and he probably would be investing at the right time in places such as China since their stock market has been down by 70 percent – Russia also is down 70 percent – Brazil is down 56 percent - and he was a master anyway and he would know where to find value, and he would be aware of which companies were ready for him to pick them up at bargain prices.
I have a feeling that he would be avoiding the United States stock market like the plague. Because he would recognize that the days of an international monetary system based on the US dollar would be over very soon – because we have reached the end of the line for the US dollar as the major reserve currency around the world.
He would hate to invest in a country that has nationalized its largest insurance company (AIG), its largest mortgage companies (Fannie/Freddie), partly nationalized its nine major banks and its only 2 remaining investment banks turned into banking holding companies. A country stuck into 2 wars (Iraq and Afghanistan) that are costing a fortune and with no prospects of an end in sight. A country that already has $ 10 trillion dollars in cumulative debt and on top of that it has added to that figure another $ 2.3 trillion dollars in debt in just a matter of months. A government that will be running based on deficit spending to the tune of $ 1 trillion dollars per year for many years to come. A country that its government is giving government guarantees estimated in the trillions of US dollars as if there were no cost attached to that. A country that is completely out of control and started believing for many years now that the credit of the US government is infinite and have been acting accordingly to this belief.
He was always looking into the future and he would have grasped that the US economy is shrinking in terms of the global economy and that the United States is losing very fast the special status that the US economy had in global affairs in the last 65 years including the special role that the US dollar has played in the international monetary system.
He would be aware that the free market economy that the United States used to have is in critical condition and if wasn’t for the massive Panic US government nationalizations that we had in a very short period of time then the entire system would have collapsed into a massive financial and economic meltdown.
He also would have grasped that the current massive US government intervention in the workings of a free market economy and massive nationalizations would just keep a very sick patient from dying a sudden death, but these government interventions would prevent the system from healing itself and from getting rid of the sick parts of the US financial and economic system.
This massive US government intervention, nationalization, and all kinds of US Panic government guarantees is just a band aid to keep the entire system artificially alive and full of all kinds of distortions – no wonder the US banks don't trust one another.
Contrary to what Mr. Buffett said yesterday that he would be investing here in the United States right now, I am sure that Mr. Templeton would be concentrating his investing around the world where he would know how to find the real golden nuggets of the future.
I don’t know if he would be buying right now, or if he would wait a while longer when stocks around the world could be even cheaper than today. I am sure that he would know when was the right time to start buying again.
.
Seems to me that the Colonel that you so admired is a typical example of wall street insiders taking care of their own and screw the little guy. If that wasn't insider trading what was it?
.
Heypa: Seems to me that the Colonel that you so admired is a typical example of wall street insiders taking care of their own and screw the little guy. If that wasn't insider trading what was it?
*****
October 18, 2008
SouthAmerica: The difference between what Mr. Liddell did and what usually goes on in Wall Street is that Mr. Liddell gave a chance for all the people who he had advised about buying that bank stock – and people had done very well over the years until the bank got in trouble – he gave a chance for all these people to sell their stock before he sold his position – and because he acted that way he lost a lot of money in that stock, millions of dollars. He acted like a Captain the last one to leave the sinking ship.
The usual way most Wall Street executives have been acting for a long time – they tell the public how the company is doing well and how people don’t have anything to worry about, as a matter of fact he would suggest that people should invest more money on this company that is doing very well, but in the meantime this executive is selling his shares on this company as fast as he can before people can figure out what is really going on.
If you consider Mr. Liddell a insider trader then he is the type of person who gives inside trading information that makes him lose millions of dollars. And if we had more insider traders like Mr. Liddell then we would have a much healthy stock market in the US and people would trust the system.
Mr. Liddell probably said on his memo to his clients that he recommended that they sell the shares of this particular bank, and he also said that he had a large position and he would wait to sell his holdings until all his clients who wanted to sell that stock would have the chance to go ahead a dispose of that investment.
I am not sure if that would be considered to be insider trading, since he probably told his clients that he also had shares on that company when his clients bought the stock, and now he was just letting them know that he was selling his position on that stock at this time.
.
Words to rationalize by. He advised his friends to get out before he initiated an action he knew would impact the share price adversely. Whether he personally gained or lost is immaterial.
The uninformed public lost! His friends didn't. If that wasn't an illegal action it should have been!
.
October 19, 2008
SouthAmerica: Mr. Liddell had told his clients that he would wait them to sell their holdings before he started selling his position.
When his clients started selling it became public information that the bank was in financial trouble, and the public also started unloading their shares, but Mr. Liddell waited until all his clients had sold all the stock that they had, until finally he sold his position. But by that time the stock had become almost worthless and he took a beaten on that investment. He lost millions of dollars, but he kept his word and he was the last one to leave the sinking ship.
I don’t know anyone in this day and age that would do today what Mr. Liddell did at that time. Today the executives of most corporations would deceive everybody as long as they could to give them time to unload their position on the stock before everybody else.
Mr. Liddell was not the type of person who traded on inside information. He had been working very closely with Mr. Templeton for decades and these guys were too smart and they did a fantastic job themselves without the need of any inside information.
.
Southamerica you make no sense. Buffett's interests are known. The price and conditions of his most recent investments are known. It's pretty above board.
Considering he did buy into these companies it stands to reason he thinks it is a good time to buy. Now he can publicly say nothing or say it is a good time to buy. You think it is preferable he said nothing? But wouldn't that be the same thing as Col. Liddell not saying anything?
Your hurl brickbats at someone willing to put their name on the line in the name of another august investor who is no longer around. You may have associated with Templeton but you are no Templeton.
.
Part 1 of 3
Capablanca: Southamerica you make no sense. Buffett's interests are known. The price and conditions of his most recent investments are known. It's pretty above board.
Considering he did buy into these companies it stands to reason he thinks it is a good time to buy. Now he can publicly say nothing or say it is a good time to buy. You think it is preferable he said nothing? But wouldn't that be the same thing as Col. Liddell not saying anything?
Your hurl brickbats at someone willing to put their name on the line in the name of another august investor who is no longer around. You may have associated with Templeton but you are no Templeton.
*****
October 20, 2008
SouthAmerica: First I had the honor to work for Mr. Templeton for a few years, and being associated with many of his associates for a long time. I know what kind people Mr. Templeton and Mr. Liddell were regarding their integrity, high character, high moral, ethics, honesty, basically we don’t have too many people like that around anymore, and I am just disappointed because until recently I thought Mr. Warren Buffett also belonged to this very special dying breed
Colonel Liddell would never put himself in a million years in the position that Warren Buffett finds himself today regarding his connections with the Treasury Secretary Paulson, Goldman Sachs, the Wells Fargo/Wachovia deals, and the handouts that the Us government gave to these corporations.
John M. Templeton was unique and the smartest man that I ever met. To achieve the legend status that Mr. Templeton has achieved you need a winning track record of over 50 years in the investment field with constant and spectacular results, and as far as I am aware of the only other person who is in the same league with Mr. Templeton it is Mr. Warren Buffett - and George Soros.
But I know enough about Mr. Templeton’s investment philosophy to tell you at least 3 things for sure:
1) Mr. Templeton was always looking for bargains. He was a bargain hunter, and the real bargains today people can find it in stock exchanges around the world, such as in China, Russia, and Brazil.
2) He hated government intervention of any kind because that distorted the workings of the free market, and prevented the system from adjusting itself.
3) The massive US government nationalization of private companies as we just had in the United States in recent months would drive Mr. Templeton out of the US market at the speed of light. And on top of that with all the US government interventions in all kinds of ways in the US financial markets he would move most of his investments out of such a market because he knew that these interventions would cause all kinds of distortions and would create an artificial market full of worthless information, and worthless financial valuations.
*****
I already had connected the dots and I had a very good understanding about the dirty business that is going on in Washington regarding the current financial crisis.
But today when I was reading the main story on the business section of Sunday edition of The New York Times “The Guys From ‘Government Sachs’” - there was one thought that came to my mind, there is only two words that could summarize that article in a nutshell: Widespread Collusion.
The world has a complete lack of trust in the US financial markets right now, and after reading The New York Times article where they exposed the widespread collusion that is going on regarding Goldman Sachs and the US government officials during the current financial crisis – if there are any honest people working for the US government today then this is the time for them to rise to the occasion and start a major investigation about the role that Goldman Sachs and its cronies played in the demise of Lehman Brothers.
In my opinion, the US government should stop investigating right now Lehman Brothers former chief executive Richard S. Fuld Jr., and they should put all the resources available and start investigating the role that Goldman Sachs and its network of alumnus played regarding the bankruptcy of Lehman Brothers which cause a chain reaction of financial events around the world.
As The New York Times article said: “THIS summer, as he fought for the survival of Lehman Brothers, Richard S. Fuld Jr., its chief executive, made a final plea to regulators to turn his investment bank into a bank holding company, which would allow it to receive constant access to federal funding.
Timothy F. Geithner, the president of the Federal Reserve Bank of New York, told him no, according to a former Lehman executive who requested anonymity because of continuing investigations of the firm’s demise. Its options exhausted, Lehman filed for bankruptcy in mid-September.
… Mr. Geithner, 47, played a pivotal role in the decision to let Lehman die and to bail out A.I.G. A 20-year public servant, he has never worked in the financial sector.… After working at the New York consulting firm Kissinger Associates, Mr. Geithner landed at the Treasury Department in 1988, eventually catching the eye of Robert E. Rubin, Goldman’s former co-chairman. Mr. Rubin, who became Treasury secretary in 1995, kept Mr. Geithner at his side through several international meltdowns, including the Russian credit crisis in the late 1990s.
Today when I was talking about this The New York Times article with a friend of mine, he asked me what I thought about this article? I told him that after reading this article there is only one conclusion that you can get from all this information: it seems to me that these guys are operating just like a Mafia.
It looks even more suspicious today why the US government did not rescue Lehman Brothers and a few days latter they rescued AIG.
Was that a way for Goldman Sachs to eliminate their direct competition?
*****
Collusion: A secret agreement between two or more parties for a fraudulent, illegal, or deceitful purpose.
*****
“The Guys From ‘Government Sachs’”
By JULIE CRESWELL and BEN WHITE
Published: October 19, 2008
The New York Times
THIS summer, when the Treasury secretary, Henry M. Paulson Jr., sought help navigating the Wall Street meltdown, he turned to his old firm, Goldman Sachs, snagging a handful of former bankers and other experts in corporate restructurings.
In September, after the government bailed out the American International Group, the faltering insurance giant, for $85 billion, Mr. Paulson helped select a director from Goldman’s own board to lead A.I.G.
And earlier this month, when Mr. Paulson needed someone to oversee the government’s proposed $ 700 billion bailout fund, he again recruited someone with a Goldman pedigree, giving the post to a 35-year-old former investment banker who, before coming to the Treasury Department, had little background in housing finance.
Indeed, Goldman’s presence in the department and around the federal response to the financial crisis is so ubiquitous that other bankers and competitors have given the star-studded firm a new nickname: Government Sachs.
The power and influence that Goldman wields at the nexus of politics and finance is no accident. Long regarded as the savviest and most admired firm among the ranks — now decimated — of Wall Street investment banks, it has a history and culture of encouraging its partners to take leadership roles in public service.
It is a widely held view within the bank that no matter how much money you pile up, you are not a true Goldman star until you make your mark in the political sphere. While Goldman sees this as little more than giving back to the financial world, outside executives and analysts wonder about potential conflicts of interest presented by the firm’s unique perch.
They note that decisions that Mr. Paulson and other Goldman alumni make at Treasury directly affect the firm’s own fortunes. They also question why Goldman, which with other firms may have helped fuel the financial crisis through the use of exotic securities, has such a strong hand in trying to resolve the problem.
The very scale of the financial calamity and the historic government response to it have spawned a host of other questions about Goldman’s role.
Analysts wonder why Mr. Paulson hasn’t hired more individuals from other banks to limit the appearance that the Treasury Department has become a de facto Goldman division. Others ask whose interests Mr. Paulson and his coterie of former Goldman executives have in mind: those overseeing tottering financial services firms, or average homeowners squeezed by the crisis?
Still others question whether Goldman alumni leading the federal bailout have the breadth and depth of experience needed to tackle financial problems of such complexity — and whether Mr. Paulson has cast his net widely enough to ensure that innovative responses are pursued.
“He’s brought on people who have the same life experiences and ideologies as he does,” said William K. Black, an associate professor of law and economics at the University of Missouri and counsel to the Federal Home Loan Bank Board during the savings and loan crisis of the 1980s. “These people were trained by Paulson, evaluated by Paulson so their mind-set is not just shaped in generalized group think — it’s specific Paulson group think.”
Not so fast, say Goldman’s supporters. They vehemently dismiss suggestions that Mr. Paulson’s team would elevate Goldman’s interests above those of other banks, homeowners and taxpayers. Such chatter, they say, is a paranoid theory peddled, almost always anonymously, by less successful rivals. Just add black helicopters, they joke.
.
.
Part 2 of 3
“There is no conspiracy,” said Donald C. Langevoort, a law professor at Georgetown University. “Clearly if time were not a problem, you would have a committee of independent people vetting all of the potential conflicts, responding to questions whether someone ought to be involved with a particular aspect or project or not because of relationships with a former firm — but those things do take time and can’t be imposed in an emergency situation.”
In fact, Goldman’s admirers say, the firm’s ranks should be praised, not criticized, for taking a leadership role in the crisis. “There are people at Goldman Sachs making no money, living at hotels, trying to save the financial world,” said Jes Staley, the head of JP Morgan Chase’s asset management division.
“To indict Goldman Sachs for the people helping out Washington is wrong.”
Goldman concurs. “We’re proud of our alumni, but frankly, when they work in the public sector, their presence is more of a negative than a positive for us in terms of winning business,” said Lucas Van Praag, a spokesman for Goldman. “There is no mileage for them in giving Goldman Sachs the corporate equivalent of most-favored-nation status.”
MR. PAULSON himself landed atop Treasury because of a Goldman tie. Joshua B. Bolten, a former Goldman executive and President Bush’s chief of staff, helped recruit him to the post in 2006.
Some analysts say that given the pressures Mr. Paulson faced creating a SWAT team to address the financial crisis, it was only natural for him to turn to his former firm for a capable battery.
And if there is one thing Goldman has, it is an imposing army of top-of-their-class, up-before-dawn über-achievers. The most prominent former Goldman banker now working for Mr. Paulson at Treasury is also perhaps the most unlikely.
*****
Picture: Joshua B. Bolten, top, a former Goldman executive, is President Bush’s chief of staff. Stephen Friedman, a former chairman of Goldman, is chairman of the New York Fed. This fall, as part of its bailout, the government put Edward M. Liddy, then a Goldman director, in charge of A.I.G.
*****
Neel T. Kashkari arrived in Washington in 2006 after spending two years as a low-level technology investment banker for Goldman in San Francisco, where he advised start-up computer security companies. Before joining Goldman, Mr. Kashkari, who has two engineering degrees in addition to an M.B.A. from the Wharton School of the University of Pennsylvania, worked on satellite projects for TRW, the space company that now belongs to Northrop Grumman.
He was originally appointed to oversee a $700 billion fund that Mr. Paulson orchestrated to buy toxic and complex bank assets, but the role evolved as his boss decided to invest taxpayer money directly in troubled financial institutions.
Mr. Kashkari, who met Mr. Paulson only briefly before going to the Treasury Department, is also in charge of selecting the staff to run the bailout program. One of his early picks was Reuben Jeffrey, a former Goldman executive, to serve as interim chief investment officer.
Mr. Kashkari is considered highly intelligent and talented. He has also been Mr. Paulson’s right-hand man — and constant public shadow — during the financial crisis.
He played a main role in the emergency sale of Bear Stearns to JP Morgan Chase in March, sitting in a Park Avenue conference room as details of the acquisition were hammered out. He often exited the room to funnel information to Mr. Paulson about the progress.
Despite Mr. Kashkari’s talents in deal-making, there are widespread questions about whether he has the experience or expertise to manage such a project.
“Mr. Kashkari may be the most brilliant, talented person in the United States, but the optics of putting a 35-year-old Paulson protégé in charge of what, at least at one point, was supposed to be the most important part of the recovery effort are just very damaging,” said Michael Greenberger, a University of Maryland law professor and a former senior official with the Commodity Futures Trading Commission.
“The American people are fed up with Wall Street, and there are plenty of people around who could have been brought in here to offer broader judgment on these problems,” Mr. Greenberger added. “All wisdom about financial matters does not reside on Wall Street.”
Mr. Kashkari won’t directly manage the bailout fund. More than 200 firms submitted bids to oversee pieces of the program, and Treasury has winnowed the list to fewer than 10 and could announce the results as early as this week. Goldman submitted a bid but offered to provide its services gratis. While Mr. Kashkari is playing a prominent public role, other Goldman alumni dominate Mr. Paulson’s inner sanctum.
The A-team includes Dan Jester, a former strategic officer for Goldman who has been involved in most of Treasury’s recent initiatives, especially the government takeover of the mortgage giants Fannie Mae and Freddie Mac. Mr. Jester has also been central to the effort to inject capital into banks, a list that includes Goldman.
Another central player is Steve Shafran, who grew close to Mr. Paulson in the 1990s while working in Goldman’s private equity business in Asia. Initially focused on student loan problems, Mr. Shafran quickly became involved in Treasury’s initiative to guarantee money market funds, among other things.
Mr. Shafran, who retired from Goldman in 2000, had settled with his family in Ketchum, Idaho, where he joined the city council. Baird Gourlay, the council president, said he had spoken a couple of times with Mr. Shafran since he returned to Washington last year.
“He was initially working on the student loan part of the problem,” Mr. Gourlay said. “But as things started falling apart, he said Paulson was relying on him more and more.”
The Treasury Department said Mr. Shafran and the other former Goldman executives were unavailable for comment.
Other prominent former Goldman executives now at Treasury include Kendrick R. Wilson III, a seasoned adviser to chief executives of the nation’s biggest banks. Mr. Wilson, an unpaid adviser, mainly spends his time working his ample contact list of bank chiefs to apprise them of possible Treasury plans and gauge reaction.
Another Goldman veteran, Edward C. Forst, served briefly as an adviser to Mr. Paulson on setting up the bailout fund but has since left to return to his post as executive vice president of Harvard. Robert K. Steel, a former vice chairman at Goldman, was tapped to look at ways to shore up Fannie Mae and Freddie Mac. Mr. Steel left Treasury to become chief executive of Wachovia this summer before the government took over the entities.
Treasury officials acknowledge that former Goldman executives have played an enormous role in responding to the current crisis. But they also note that many other top Treasury Department officials with no ties to Goldman are doing significant work, often without notice. This group includes David G. Nason, a senior adviser to Mr. Paulson and a former Securities and Exchange Commission official.
Robert F. Hoyt, general counsel at Treasury, has also worked around the clock in recent weeks to make sure the department’s unprecedented moves pass legal muster. Michele Davis is a Capitol Hill veteran and Treasury policy director. None of them are Goldmanites.
“Secretary Paulson has a deep bench of seasoned financial policy experts with varied experience,” said Jennifer Zuccarelli, a spokeswoman for the Treasury. “Bringing additional expertise to bear at times like these is clearly in the taxpayers’ and the U.S. economy’s best interests.”
While many Wall Streeters have made the trek to Washington, there is no question that the axis of power at the Treasury Department tilts toward Goldman. That has led some to assume that the interests of the bank, and Wall Street more broadly, are the first priority. There is also the question of whether the department’s actions benefit the personal finances of the former Goldman executives and their friends.
“To the extent that they have a portfolio or blind trust that holds Goldman Sachs stock, they have conflicts,” said James K. Galbraith, a professor of government and business relations at the University of Texas. “To the extent that they have ties and alumni loyalty or friendships with people that are still there, they have potential conflicts.”
Mr. Paulson, Mr. Kashkari and Mr. Shafran no longer own any Goldman shares. It is unclear whether Mr. Jester or Mr. Wilson does because, according to the Treasury Department, they were hired as contractors and are not required to disclose their financial holdings.
For every naysayer, meanwhile, there is also a Goldman defender who says the bank’s alumni are doing what they have done since the days when Sidney Weinberg ran the bank in the 1930s and urged his bankers to give generously to charities and volunteer for public service.
“I give Hank credit for attracting so many talented people. None of these guys need to do this,” said Barry Volpert, a managing director at Crestview Partners and a former co-chief operating officer of Goldman’s private equity business. “They’re not getting paid. They’re killing themselves.
They haven’t seen their families for months. The idea that there’s some sort of cabal or conflict here is nonsense.”
.
.
Part 3 of 3
In fact, say some Goldman executives, the perception of a conflict of interest has actually cost them opportunities in the crisis. For instance, Goldman wasn’t allowed to examine the books of Bear Stearns when regulators were orchestrating an emergency sale of the faltering investment bank.
THIS summer, as he fought for the survival of Lehman Brothers, Richard S. Fuld Jr., its chief executive, made a final plea to regulators to turn his investment bank into a bank holding company, which would allow it to receive constant access to federal funding.
Timothy F. Geithner, the president of the Federal Reserve Bank of New York, told him no, according to a former Lehman executive who requested anonymity because of continuing investigations of the firm’s demise. Its options exhausted, Lehman filed for bankruptcy in mid-September.
One week later, Goldman and Morgan Stanley were designated bank holding companies.
“That was our idea three months ago, and they wouldn’t let us do it,” said a former senior Lehman executive who requested anonymity because he was not authorized to comment publicly. “But when Goldman got in trouble, they did it right away. No one could believe it.”
The New York Fed, which declined to comment, has become, after Treasury, the favorite target for Goldman conspiracy theorists. As the most powerful regional member of the Federal Reserve system, and based in the nation’s financial capital, it has been a driving force in efforts to shore up the flailing financial system.
Mr. Geithner, 47, played a pivotal role in the decision to let Lehman die and to bail out A.I.G. A 20-year public servant, he has never worked in the financial sector. Some analysts say that has left him reliant on Wall Street chiefs to guide his thinking and that Goldman alumni have figured prominently in his ascent.
After working at the New York consulting firm Kissinger Associates, Mr. Geithner landed at the Treasury Department in 1988, eventually catching the eye of Robert E. Rubin, Goldman’s former co-chairman. Mr. Rubin, who became Treasury secretary in 1995, kept Mr. Geithner at his side through several international meltdowns, including the Russian credit crisis in the late 1990s.
Mr. Rubin, now senior counselor at Citigroup, declined to comment.
A few years later, in 2003, Mr. Geithner was named president of the New York Fed. Leading the search committee was Pete G. Peterson, the former head of Lehman Brothers and the senior chairman of the private equity firm Blackstone. Among those on an outside advisory committee were the former Fed chairman Paul A. Volcker; the former A.I.G. chief executive Maurice R. Greenberg; and John C. Whitehead, a former co-chairman of Goldman.
The board of the New York Fed is led by Stephen Friedman, a former chairman of Goldman. He is a “Class C” director, meaning that he was appointed by the board to represent the public.
Mr. Friedman, who wears many hats, including that of chairman of the President’s Foreign Intelligence Advisory Board, did not return calls for comment.
During his tenure, Mr. Geithner has turned to Goldman in filling important positions or to handle special projects. He hired a former Goldman economist, William C. Dudley, to oversee the New York Fed unit that buys and sells government securities. He also tapped E. Gerald Corrigan, a well-regarded Goldman managing director and former New York Fed president, to reconvene a group to analyze risk on Wall Street.
Some people say that all of these Goldman ties to the New York Fed are simply too close for comfort. “It’s grotesque,” said Christopher Whalen, a managing partner at Institutional Risk Analytics and a critic of the Fed. “And it’s done without apology.”
A person familiar with Mr. Geithner’s thinking who was not authorized to speak publicly said that there was “no secret handshake” between the New York Fed and Goldman, describing such speculation as a conspiracy theory.
Furthermore, others say, it makes sense that Goldman would have a presence in organizations like the New York Fed.
“This is a very small, close-knit world. The fact that all of the major financial services firms, investment banking firms are in New York City means that when work is to be done, you’re going to be dealing with one of these guys,” said Mr. Langevoort at Georgetown. “The work of selecting the head of the New York Fed or a blue-ribbon commission — any of that sort of work — is going to involve a standard cast of characters.”
Being inside may not curry special favor anyway, some people note. Even though Mr. Fuld served on the board of the New York Fed, his proximity to federal power didn’t spare Lehman from bankruptcy.
But when bankruptcy loomed for A.I.G. — a collapse regulators feared would take down the entire financial system — federal officials found themselves once again turning to someone who had a Goldman connection. Once the government decided to grant A.I.G., the largest insurance company, an $85 billion lifeline (which has since grown to about $122 billion) to prevent a collapse, regulators, including Mr. Paulson and Mr. Geithner, wanted new executive blood at the top.
They picked Edward M. Liddy, the former C.E.O. of the insurer Allstate. Mr. Liddy had been a Goldman director since 2003 — he resigned after taking the A.I.G. job — and was chairman of the audit committee. (Another former Goldman executive, Suzanne Nora Johnson, was named to the A.I.G. board this summer.)
Like many Wall Street firms, Goldman also had financial ties to A.I.G. It was the insurer’s largest trading partner, with exposure to $20 billion in credit derivatives, and could have faced losses had A.I.G. collapsed. Goldman has said repeatedly that its exposure to A.I.G. was “immaterial” and that the $20 billion was hedged so completely that it would have insulated the firm from significant losses.
As the financial crisis has taken on a more global cast in recent weeks, Mr. Paulson has sat across the table from former Goldman colleagues, including Robert B. Zoellick, now president of the World Bank; Mario Draghi, president of the international group of regulators called the Financial Stability Forum; and Mark J. Carney, the governor of the Bank of Canada.
BUT Mr. Paulson’s home team is still what draws the most scrutiny. “Paulson put Goldman people into these positions at Treasury because these are the people he knows and there are no constraints on him not to do so,” Mr. Whalen says. “The appearance of conflict of interest is everywhere, and that used to be enough. However, we’ve decided to dispense with the basic principles of checks and balances and our ethical standards in times of crisis.”
Ultimately, analysts say, the actions of Mr. Paulson and his alumni club may come under more study.
“I suspect the conduct of Goldman Sachs and other bankers in the rescue will be a background theme, if not a highlighted theme, as Congress decides how much regulation, how much control and frankly, how punitive to be with respect to the financial services industry,” said Mr. Langevoort at Georgetown. “The settling up is going to come in Congress next spring.”
Source: http://www.nytimes.com/2008/10/19/b...cse&oref=slogin
.
.
October 26, 2008
SouthAmerica: I wonder if we are going to have on this coming week the most exciting week in Wall Street history. Maybe it will become known as the “Panic Week”.
This is the traditional month and the favorite week that Americans love to commemorate with major stock market crashes. This is the time when Panic spiral out of control and all hell will break lose, and the entire herd starts moving in a very dangerous stampede
This week we have the potential to achieve new historic days that will be remembered in the future by names such as “Black Monday”, “Black Tuesday”, “Black Wednesday”, Black Thursday”, and “Black Friday”.
If the carnage gets out of hand during this week then the US government can throw the towel and close the stock market and the banking system for a few days, and at the same time they would be sending a message to the rest of the world that the US stock market liquidity was just another myth that is also gone.
I wonder if the people who watch CNBC television channel on a regular basis – if these people have realized that CBNC has become just a cheerleading group of people trying to prop up the stock market with a lot of wishful thinking and nothing else.
I guess the central banks from around the world are going to coordinate an interest rate cut in the coming days on their desperate pursuit of a quick fix or just trying to buy some time before most people realizes the reality of all the bad news that is coming regarding their economies and Panic sets in, and finally we have a real stock market meltdown.
On CNBC it is always time to buy – buy, buy, buy – it does not matter what the economic reality is in the United States. The Dow has gone from 14,000 to 8,000 in the last years and at CNBC it was always time to buy.
If you followed the advice given by the usual suspects on CNBC then you probably would have lost your shirt by now.
I am sure that the talking heads at CNBC are going to give all kinds of good advice this entire week how the stock market has finally reached bottom and it is time to buy. Every time the stock market reaches a new low and you keep losing your shirt.
Let’s see if in between stock market crashes they can muster in Wall Street another “Suckers Rally”.
Fasten your seat belts because this week will be a roller coaster ride as never seen before.
Some key words to keep in mind at all times during this week:
Panic, Free Fall, Nightmare, Shock, Stampede, and Meltdown
.
.
October 29, 2008
SouthAmerica: This smells to me as a “Sukers Rally” and nothing else when you consider what is in store for the US dollar in the near future.
I still think the US stock market is going to test the 7,000 level in the coming months.
Only fools don’t understand that the current strength of the US dollar has been caused by hedge funds, mutual funds, pension funds, insurance companies and all kinds of financial institutions selling a large part of their positions on foreign markets including the emerging market economies to cover their margin calls and redemptions from their customers here in the United States.
Since December 31, 2007 Bovespa in Brazil lost 50 percent of its value mostly because of this Panic in the US financial markets and as this outflow of hot money was flowing out of Brazil they created a temporary demand for the US dollar and the real was devalued accordingly.
That is another prove of how the “hot money” flowing around the world can devastate your economy in a very short period of time.
The United States government financial position right now is close to become just a "Junk" rating for all practical purposes.
In a matter of months the US government cumulative debt has gone from $ 10 trillion dollars to approximately $ 13 trillion dollars and growing.
If you consider that the real US GDP is around $ 10 trillion dollars and not the wishful thinking figure of $ 14 trillion then you start realizing the deep trouble that is just ahead for the US economy.
The US government is in the process of nationalizing half of the private sector of the US economy and it is hard for anyone to figure out right now how much these new assets are worth that have been acquired by the US government since they are mostly from collapsing institutions such as Fannie and Freddie, AIG, GM, Ford, Chrysler, and many more.
With everything that is happening around the world in the financial markets and its impact on the economies of many countries - only real FOOLS would think that the US stock market has reached its bottom and it is not to going to continue its decline in the coming months.
.
.
March 2, 2009
SouthAmerica: I can’t believe a company managed by Warren Buffet the earnings would be down by 96 percent.
I still have a lot of respect for Warren Buffet and his long-term investment track record, but at this stage of the game I would not be surprised if he has started to lose his “Midas Touch.”
It is hard for most ageing superstars to know when it is time to leave the game…
In the case of Warren Buffet I still have a soft spot and affection for the old man.
*****
As I mentioned above I have been an admirer of Mr. Buffett for almost 40 years…
http://www.elitetrader.com/vb/showt...et&pagenumber=5
*****
October 17, 2008
SouthAmerica: I was just turned the TV on to CNBC to check the market averages and they started talking about an article by Warren Buffett that was published on The New York Times today.
First, Mr. Buffett’s credibility has been evaporating during this current financial crisis, he has become just a mouth piece for the $ 700 billion dollars bailout, and in favor of giving Treasury Secretary Paulson a blank check, and he is involved in all kinds of self-interest deals related with all the activities that is going on related to this bailout…
http://www.elitetrader.com/vb/showt...et&pagenumber=4
.
.
Dennis Kneale of CNBC’s “Power Lunch” comes across most of the time as a child having a temper tantrum.
I don’t know why CNBC is keeping that guy as one of their talking heads since he is a very irritating person every time he opens his mouth about anything?
.
Quote from southamerica:
.
Dennis Kneale of CNBC’s “Power Lunch” comes across most of the time as a child having a temper tantrum.
I don’t know why CNBC is keeping that guy as one of their talking heads since he is a very irritating person every time he opens his mouth about anything?
.
fox has already proven they can say what ever the hell they want
http://www.relfe.com/media_can_legally_lie.html
All times are GMT. The time now is 04:16 AM.