Drudge Condi Rice Poll For VP: So-Called Conservatives Doubling Down On Liberalism

NY Fed Study Shows S&P 500 Near 600 Subtracting Fed Interventions Since 1994

Many have been thinking and some have been saying for quite some time now that assets are egregiously overvalued because of Federal Reserve policy which manipulates the cost of money, the problem with which is that this short-circuits the process of price discovery.

Barry Ritholtz is especially famous with me because he came out at a critical time and wrote that perhaps the most important investing lesson you can learn is "don't fight the Fed".

Now we have proof of this of a sort from the NY Fed itself, showing that minus Fed witching-hour moves in the markets, the Standard and Poor's 500 index would stand nearer 600 today instead of 1300.

The almost laughable story is here:

The FOMC has released eight announcements a year at 2:15 ET since 1994. The study took the gains in the SP 500 from 2 pm the day before the announcement to 2 pm the day of the statement and subtracted that market move from the SP 500’s total return over that time span.

Without the gains in anticipation of a positive Fed action, the SP 500 would stand at just 600 today, rather than above 1300.


575 looks as good to me now as it did in August 2011, here.

"We're going to get a recovery, because the amount of deficit spending taking place, a corpse would sit up."

"We're going to get a recovery, because the amount of deficit spending taking place, a corpse would sit up."

-- Martin Walker, May 2009

About 42 Percent Of Today's $10.2 Trillion Mortgage Market Is Still Private Label

That's the story from Diana Olick at CNBC.com, here:

Government-backed mortgages (Fannie Mae, Freddie Mac, Ginnie Mae) accounted for 58 percent of the $10.179 trillion U.S. mortgage market as of the end of March, 2012, according to data compiled by Inside Mortgage Finance. 

Private-label mortgage-backed securities (MBS) investors held 10 percent and banks/other financial institutions held 32 percent.  It’s that non-government, 42 percent of the market that is having the most trouble refinancing due to poor credit scores and negative equity. Lenders and investors are particularly risk-averse these days.

Mish Admits The Hard Lesson Of Fighting The Fed And Global Central Banking

It's always refreshing to read someone who admits to being wrong. That is a person who is open to the world and learns from it, and that is a person you want to read because you can learn something too.

Here's Mish:

I surely underestimated the effect of global coordinated liquidity move[s] by central bankers virtually everywhere (US, EU, UK, China, Australia, Canada, etc.). The result was we had a 10-year stock market rally in three years. ... [But t]he fact of the matter is Fed tail-chasing policies combined with fractional reserve lending and moral-hazard bailouts have amplified the crest and trough of every boom and bust.

Mish admits he can't predict the next bust which will be a doosie, but he's flat-out asserting we're already in a recession for one key reason: 

Fiscal stimulus from Congress is not coming.

The significance of that must not be ignored, as many of us ignored its opposite back in May 2009 as told by Martin Walker of UPI:

"We're going to get a recovery, because the amount of deficit spending taking place, a corpse would sit up."

Keep your powder dry.

Glass-Steagall Was An Expression Of Hierarchical System Modularity

That is the unstated conclusion of Mark Buchanan's "Living Cells Show How to Fix the Financial System" for Bloomberg.com here:

In “The Architecture of Complexity,” an extraordinarily original paper published 50 years ago, the economist, psychologist and artificial-intelligence pioneer Herbert Simon asked the question, Why does nature so consistently organize itself into hierarchies? Why, that is, are so many of its creations designed as systems of systems? ...

Both high concentration and high interconnectedness contribute to an “everything is linked to everything” outcome that is the very opposite of modularity, and a likely recipe for instability. Financial engineering should learn to avoid this architecture, just as surely as biology has.

Abandoning Glass-Steagall in 1999 was obviously not a milestone of evolutionary progress.

Milos Forman Isn't Just Skilled At Movies, But Also At Disinformation

Gee, I wonder where he could possibly have learned about disinformation techniques?

In concert with The New York Times, here, Milos Forman offers up a little disinformation on behalf of the regime, which couldn't possibly come close to qualifying as socialist or even militant, no:

"What we need is not to strive for a perfect social justice — which never existed and never will — but for social harmony. Harmony in music is, by its nature, exhilarating and soothing. In an orchestra, the different players and instruments perform together, in support of an overall melody."

Sure, sure:

"A new dawn of American leadership is at hand. To those who would tear this world down - we will defeat you."

"Our union can be perfected. And what we have already achieved gives us hope for what we can and must achieve tomorrow."

-- Barack Obama, 4 November 2008 (here)

As Ever, Monetarists Blame Savers For Depression Instead Of Themselves

So Martin Wolf, here:

In 2007, US gross private borrowing was 29 percent of GDP. In 2009, 2010 and 2011, however, it was negative.

Above all, private sectors are running large surpluses of income over spending. In the U.S., the financial balance of the private sector turned from a deficit of 2.4 percent of GDP in the third quarter of 2007 to a surplus of 8.2 percent in the second quarter of 2009. This massive shift would surely have caused a huge depression if the government had been unwilling to run offsetting fiscal deficits. That is how the depression was contained. ...

Austerity should follow a strong recovery, not proceed [sic] it.

Should! What a crock!

Private actors in every economy everywhere work every day year in and year out in the hope that they will and the belief that they can save enough to enjoy and care for themselves and their families, but governments never save a damn thing, not even in the good times, which is why citizens hate taxes.

The promise of the time value of money leads the wise always to save, and when they cannot save to economize. Truly exceptional individuals always do both, but neither idea can even be found in the track record of governments.

Think of it as a form of bipolar disorder writ large. The whole world is suffering from it.

"Liberalism is a mental disorder."

-- Michael Savage

Remember People! Only An Ultra-Conservative Losing Would Be A GOP Debacle!

A Mitt Romney loss? Well, that wouldn't be a debacle; that would be just a loss.

So said David Frum, spokesman for the non-Tea-Party-type Republican, last October, here:

Back-to-back losses under John McCain in 2008 and Mitt Romney in 2012 will open the way to an ultra-conservative nominee in 2016 -- and a true party debacle.

It's just like Keynesianism, see. If massive spending doesn't succeed, it's because we didn't spend enough. How do we know that? Well, we failed, so we didn't spend enough.

Faith is by definition not falsifiable.

Thars Gold In Them Thar Landfills

As told here:

Each year 320 tons of gold and more than 7,500 tons of silver are used in the manufacture of iPads, Samsung Galaxy Tabs, notebooks, PCs, smartphones and more. Recovering that metal when the device is discarded could be worth $21 billion a year.

New York Fed's Geithner Knew All About Libor Irregularities In 2008

So says a story, here:

According to the calendar of then New York Fed President, Timothy Geithner, who is now U.S. Treasury Secretary, it even held a "Fixing LIBOR" meeting between 2:30-3:00 pm on April 28, 2008. At least eight senior Fed staffers were invited. ...

Darrell Duffie, a Stanford University finance professor who has followed the Libor issue for several years, said that he believed regulators were "on the case reasonably quickly" after questions were raised in 2008.

"It appears that some regulators, at least at the New York Fed, indeed knew there was a problem at that time. New York Fed staff have subsequently presented some very good research on the likely level of distortions in Libor reporting," Duffie said. "I am surprised, however, that the various regulators in the U.S. and UK took this long to identify and act on the misbehavior."

Just 64.3 Percent Of Labor Force Is Working, A Level We Left Behind In 1985

Chart and data here.

Thomas Sowell for Investors.com puts that into perspective, here:

"During this administration, the proportion of the working-age population that has a job has fallen to the lowest level in decades. The official unemployment rate does not count the millions of people who have simply given up looking for a job.

"If everybody gave up looking for a job, the official unemployment rate would fall to zero. But that would hardly mean that the problem was solved or that the 'stimulus' worked. Creating particular jobs does not mean a net increase in jobs."

Libor Scandal Is A Ridiculous Witch Hunt By Hypocritical Governments

So says Guy Spier for CNBC here:

[T]his seems like a ridiculous witch hunt to me, and there is an atmosphere of “shoot first, ask questions later”, which is unwarranted, and is ultimately highly destructive to London . . ..

I find the hypocrisy to be massive: There are the Bank of England, the Fed and other central banks who, in cahoots with their respective treasuries are massively and successfully manipulating interest rates via quantitative easing — something which comes at very high and real cost to those members of society who were parsimonious spenders, and who saved up money for a rainy day, who are now earning pittance on their savings.

And these most responsible members of society are extremely ill-served by ... self-serving and bloated governments ... which ... for far too long, they have been living beyond their means and ... borrow too much.

ObamaCare Creates Not Just Harm, But Havoc For Jobs

Strong words from hedge fund manager Dennis Gartman of The Gartman Letter, quoted here:

"Governments can, at best, try to do little if any harm to the economic environment, and this administration is not only creating harm, it is creating havoc with its health care bill which has jeopardized any hopes for material increases in jobs on the part of private industry until the elections are held and either the current regime is retained or a new regime takes its place. This is the harsh reality of the moment."

Libor Shmibor: If Anyone's Been Manipulating Interest Rates, It's The West

Not just one fine formulation about our banking problems from Nicole Gelinas, reminiscent of Ambrose Evans-Pritchard's picturesque "debt draws forward prosperity", but two in one column just loaded with even more good sense (emphases added in red):

If the West had let markets work in the years leading up to 2008 and beyond, there’d be no need to get rid of this crop of bad actors. When bubble-era banks went out of business because of their disastrous mistakes and mischief, they would have taken their failed leadership with them.

Yes, a few firms did fail, but not enough to change the institutional culture of Wall Street and the City (London’s financial district). Instead, institutions that should have gone under, including the Royal Bank of Scotland, have forged ahead, dragging problems that should have been solved by now into the future and harming economic growth. ...

[I]f anyone has been manipulating interest rates to pretend that everything is A-OK, it’s Western governments. In recent years, central banks in America and Britain (and in Europe) have bought hundreds of billions’ worth of bonds in an effort to keep global interest rates low, financial firms afloat, and middle-class borrowers placated. 

Why Would Anyone Tell You Their Secrets To Financial Success On A Blog?

For the same reason a guy on the radio who says he even wrote a book about how his trading secrets made him $1.9 million in just a few short years wants you to sign up for his advice now.

Good stuff from Noah Smith, here:

If the writers of Zero Hedge really knew some information that could allow them to beat the market, why in God's name would they tell it to you? If they had half a brain, they'd just keep the info to themselves, trade on it, and make a profit! Maybe then, after they had made their profit, they'd release the news to the public (and collect ad revenue), but by then the news would be worthless. Financial news sites, you should realize, are not in the business of giving you insider tips out of the goodness of their hearts.

Still Waiting For That Job . . . Three And A Half Years Later

They're Angry With Obama In Anchorage

Hey, take a number. Osama bin Laden quit trying to kill the president because the line was too long.

Story here.

In The Realm Of Domestic Policy, Obama Has Arrogated To Himself Unprecedented Power

So observes the very clever Kimberley Strassel, for The Wall Street Journal, here, where you will find a veritable litany of President Obama's imperial transgressions, in contrast to Pres. Bush's somewhat more muted sins, which were restricted for the most part to constitutionally prescribed executive functions:

Ah, yes. The "imperial presidency" of George W. Bush was a favorite judgment of the left about our 43rd president's conduct in war, wiretapping and detentions. Yet say this about Mr. Bush: His aggressive reading of executive authority was limited to the area where presidents are at their core power—the commander-in-chief function.

Ah, no. Ms. Strassel provides no accounting of Bush's penchant for an excessive number of signing statements on legislative points with which he disagreed. Well, yeah, at least Bush didn't go around the Congress as Obama has done, but still he laid the groundwork, the ethos, in the Executive Branch to do what Obama has done.

There it hangs, suspended in space, that trimming suggestion of "core power". It's not as if, on any objective reading of the constitution, that the executive should be the subject of ruminations about its core powers vs. its peripheral powers. All the branches have well-defined powers. The problem has been, perhaps now more so than heretofore, that the executive's imperial tendencies have occupied center stage in competition with a judiciary wont to legislate from the bench. Left hopelessly behind and co-opted have been the people, whose representatives are too few and too divided to present a true image of the country in the halls of power.

The US House has become more of a cheering section than a countervailing weight in the government, mostly because one of the unintended consequences of stopping its enlargement according to population growth in the 1920s meant that it inevitably became the creature of other interests, usually executive interests in the age of the worship of the blended strongman. Hence America's almost insane preoccupation with who will be the next president while no one knows the name of their Congressman.

The way forward to remedy some, but by no means all, of America's most acute problems is to let the people have their say for a change. We must enlarge the US House of Representatives and make the other branches compete for power and influence once again, not simply take it while so few people are watching.

Global Central Banks Go Hyper-Monetarist But Re-Recession Goes Unimpeded

So says Jeffrey Snider, here:

Yesterday the ECB relented on interest rates, reducing both its benchmark rate and its deposit rate (to 0.00%), bowing to the reality that Europe's hoped-for economic progress is now firmly in reverse. In addition to the ECB's action, the Bank of England increased its quantitative easing program by £50 billion in an effort to pull the UK out of its own sharp and persistent re-recession. Even the People's Bank of China got into the monetary act by reducing its benchmark bank lending rate (the 7-day repo rate on reserve payments, the RRR) and continuing its reverse repo operations.

These measures follow closely the intentional reductions in collateral acceptance parameters at the ECB and the Bank of England from just a few weeks ago. And just before that, the Federal Reserve pledged to keep its Operation Twist program going, extending the maturity of its US treasury portfolio still further. Most significant, however, may have been the first officially sanctioned instance of negative interest rates. The Danish central bank reduced the certificate of deposit rate to -0.20%, commenting that this was a "good problem" to have. In doing so, the Danes have confirmed that money continues to flow out of the European periphery and into the so-called "core" that apparently includes Denmark.

Central banks continue to employ "monetary stimulus" in unconventional ways, through unprecedented means and taken to unbelievable levels. And the arc of re-recession continues and spreads unimpeded.