Janet Yellen's Fool's Errand: Finding A Way To Fix What's Supposedly Fixed

Everybody believes the financial crisis is over, but apparently Janet Yellen does not. She's more right than she knows, but that's a sign of something into which angels fear to look. This could be rough.

Quoted here:

Yellen said regulators must focus on ways to prevent another financial crisis. She spoke via video to a financial markets conference sponsored by the Fed's Atlanta regional bank.

"In 2007 and 2008, short-term creditors ran from firms such as Northern Rock, Bear Stearns and Lehman Brothers and from money market mutual funds and asset-backed commercial paper programs," she said. "Together, these runs were the primary engine of a financial crisis from which the United States and the global economy have yet to fully recover."

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Regulators specialize in keeping capitalism from cleansing itself through failure. According to this line of thinking, recessions are personae non gratae, and depression doesn't even exist as a conceptual category of the contemporary period. If one occurs, they call it something, anything, else, as in "The Great Recession". Bankruptcy? Fuhgeddaboutit. Until these are welcomed once again, that is, until reality penetrates into the penumbra of the reigning ideology, the zombie economics of the last 14 years are here to stay, or perhaps worse, and we shall continue to walk in the darkness.

Why Obama Should Not Be President: Even Recreational Pot Use Alters The Brain, Emotions and Motivation

It took Obama three days to respond to the Christmas Day bombing attempt by Abdulmutallab over Detroit. The New York Times noted his odd unresponsiveness several times in the article cited below. If you wonder why Obama's done nothing about the jobs and GDP crises, perhaps now you do.

The pot study story is here:

The 20 pot users in the study, ages 18 to 25, said they smoked marijuana an average of about four days a week, for an average total of about 11 joints. Half of them smoked fewer than six joints a week. Researchers scanned their brains and compared the results to those of 20 non-users who were matched for age, sex and other traits.

The results showed differences in two brain areas associated with emotion and motivation - the amygdala and the nucleus accumbens. Users showed higher density than non-users, as well as differences in shape of those areas. Both differences were more pronounced in those who reported smoking more marijuana.

See here for the New York Times report on December 28, 2009, three days after the bombing attempt on the Christmas Day flight bound for Detroit:

Mr. Obama, making his first public comments since the episode, said he had ordered his national security team “to keep up the pressure” on terrorists. ... Although he had been out of sight for three days, he assured Americans he was on top of the situation. ... The visual contrast of a president on vacation while there was anxiety about air travel also drew fire. Although aides issued statements describing conference calls with counterterrorism advisers, pictures of passengers enduring tougher airport screening were juxtaposed with reports of the president picnicking at the beach and playing sports. Representative Peter T. King of New York, the ranking Republican on the House Homeland Security Committee, criticized Mr. Obama’s silence Monday before the president’s statement. “We’re now, what, 72 hours into this and the president’s not spoken, the vice president’s not spoken, the attorney general’s not spoken and Janet Napolitano has now told two different stories in two days,” he said on Fox News. “First, she said everything worked; now she said it didn’t.”

Global banking crisis: How to be profitable when you can't do it the old fashioned way

Fire your workforce.

EU banks cut 80k positions in 2013 according to this story:

Spurred into action by falling revenue, mounting losses and the need to convince regulators they are no longer "too big to fail", banks across the globe have shrunk radically since the 2008 collapse of U.S. bank Lehman Brothers sparked the financial crisis. ... Europe's 30 largest banks by market value cut staff by 80,000 in 2013, calculations by Reuters based on their year-end statements showed. ... [I]n its heyday of 2008 . . . the 25 of the top 30 banks with comparable figures employed about 252,000 more than the 1.7 million they do today. 

Construction is almost complete on the new Obama presidential library

h/t Theo

Fair value of the S&P500 in early April: 1033

Doug Short, here:

The regression trendline drawn through the data clarifies the secular pattern of variance from the trend — those multi-year periods when the market trades above and below trend. That regression slope, incidentally, represents an annualized growth rate of 1.75%.

The peak in 2000 marked an unprecedented 150% overshooting of the trend — nearly double the overshoot in 1929. The index had been above trend for two decades, with one exception: it dipped about 12% below trend briefly in March of 2009. But at the beginning of April 2014, it is 80% above trend, up from 76% above trend the month before. In sharp contrast, the major troughs of the past saw declines in excess of 50% below the trend. If the current S&P 500 were sitting squarely on the regression, it would be around the 1033 level. If the index should decline over the next few years to a level comparable to previous major bottoms, it would fall to the vicinity of 500.

Click the link for his charts.

Beware of Greeks bearing gifts . . . of yield

Greece ranks 2nd worst for debt/gdp.

Cyrus Sanati for Fortune here recaps the recent history of the Greek debacle and the success this week of its auction of intermediate term bonds paying just 4.75%:

Thursday's debt offering only illustrates the severity at which the global junk debt bubble has grown and how desperate investors have become in their futile search for yield. Investors have no real confidence in Greece or Europe. Either they have lost their minds or they view Greece as some sort of momentum play in which they will try to cash out right before the bottom falls out of the market. Europe remains an economic basket case, and Greece continues to be the weakest link in a brittle chain.

Food prices are up 9.52% in the last four years, average hourly earnings just 8.28%

And it's gotten worse in March as reported here:

U.S. producer prices recorded their largest increase in nine months in March as the cost of food and services rose, pointing to some pockets of inflation at the factory gate. ... Food prices jumped 1.1 percent, the largest increase since May, after rising 0.6 percent in February. ... Food prices have now risen for a third straight month, in part reflecting a drought in the West.

On top of that, average hourly earnings dropped a penny.

New Yorkers Rejected For Jury Trial Of Occupy Wall Street Protester

Most of the prospective jurors for a trial of an Occupy Wall Street protester accused of felony assault of a policeman are being rejected because they admit they hate what OWS stands for. Another number hates the cops. I think they just hate jury duty for this malcontent, a female, who appears to be being made an example of rather than a truly violent criminal.

The UK Guardian has the story here.

Meanwhile the crazies at Naked Capitalism still fly their OWS sash proudly if not loudly on the upper right of their page even today by the way. But the top story there when you search for "Occupy Wall Street" is dated December 2012. Yves Smith apparently doesn't feel compelled to use a post label so-named to help you find out why you should support this cause.

A 20% correction from the current S&P500 high of 1890.90 would be . . .

. . . 378.18 points! Or 1512.72 on the index.

Bank mergers have doubled annually since 2009 as Dodd-Frank and now new capital rules begin to bite

The Wall Street Journal reports here:

More small banks are selling themselves, and executives say Washington regulations are a big reason why. ... In all, there were 204 bank mergers in 2013 in which the target bank had less than $1 billion in assets, according to financial-research firm SNL Financial. That is about the same as the 206 in 2012 and up significantly from 102 in 2009, before Dodd-Frank was passed in 2010. As recently as 2011, the number was 130. ... Many bankers think smaller banks now must have at least $1 billion in assets to cope with the increased regulatory burden. ... One issue some small banks say they are having a big problem with is the Consumer Financial Protection Bureau's new "qualified mortgage" rules, or QM, which require lenders to make sure borrowers can afford the mortgages they take out. Some banks say following the rules, which took effect in January, has been complicated and time-consuming.

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New capital rules being phased in between now and 2018 will require the largest banks to boost capital to 5% of assets from 3% and include risk assets in the calculations according to the New York Times, here:

Under the rule, banks with over $700 billion in assets will have to raise their capital, measured by the leverage ratio, to 5 percent of their overall assets. The ratio will have to be 6 percent at the banks’ federally insured banking subsidiaries, where many of their riskiest activities are. ... Senator Sherrod Brown, Democrat of Ohio, who has introduced a bill with Senator David Vitter, Republican of Louisiana, that envisions higher leverage ratios than those approved on Tuesday, said, “Today’s rule is a major step forward, but we can and must do more.”

Light on Mars

Pretty dang weird: Rover captures light emanating from the surface of Mars.

Story here.

Osama bin Laden is dead and so are 13 GM car owners

Michiganders in particular remain in denial about the GM bailouts.

Jim Geraghty here for National Review throws some cold water in our faces:

GM continued to make cars with a life-threatening defect during the era of government ownership. Joe Biden liked to boast, “Osama bin Laden is dead and GM is alive!” Indeed he is dead, and so are 13 people who were involved in car accidents linked to a defective ignition switch. ...

The New York Times reported that engineers at GM reviewed data in the black boxes of Chevrolet Cobalts at a meeting on May 15, 2009, and confirmed that the potentially fatal defect existed in hundreds of thousands of cars. The Obama administration and GM’s management finalized the terms of the bailout at the end of that month. It’s not yet clear who at GM knew this shocking and scandalous information, but at least some GM employees knew they were selling dangerous cars at the precise moment they were asking for taxpayer money to stay in business. ...

[T]he Obama administration’s Departments of Transportation and Justice came down like a ton of bricks on a Japanese automaker about unproven allegations of defects, while the government-owned American company continued to make and sell cars with proven potentially fatal defects, even after the chief of the NHTSA’s Defects Assessment Division twice proposed investigations.

The U.S. government sold its last shares of GM stock in December 2013; some have asked whether the government did so knowing the recall would be announced in February 2014. 

Grand Rapids, Michigan, Ann Arbor and Detroit make top 10 snowiest list

View the full list here.

Will The Phenomenal Gains In The S&P500 Since March 2009 To Date Be Cut In Half By 2019?

John Hussman, here:

Though we don’t have a 10-year figure for actual returns since 2009, investors should also notice that the improved valuations evident in 2009 will indeed have been followed by a decade of 10% S&P 500 total returns even if the total returns for the market over the coming 5 years are somewhat negative (which we view as likely).

The annual real gain for each of the almost five years to date is just under 20%, so a 10% annual return for each of the ten years in the period implies forfeiting half of what has already been made in the next five years.

Hussman has previously indicated that the vast majority of investors is likely to ride the coming decline all the way to the bottom.

Rahm Emanuel Obviously Hasn't Seen The Map Of Middle Class Destruction In Chicago

Rahm Emanuel, quoted here in The New Republic:

"We have very strong middle-class neighborhoods. ... Rather than the exodus of middle-class families to the suburbs, we have reentry into the city. We are at an incredible moment that is actually not momentary."

A time-lapse map of Chicago's disappearing middle class can be seen here.

This is what happens to big cities run by Democrats. Chicago is on its way to becoming Detroit.

2013 was a narrowly "oil investing" year based on the gold/oil ratio

The cumulative average price of gold in 2013 (London fix) was $1411.23 and the average price of Illinois Basin crude was $89.84, yielding a gold/oil ratio of 15.7, a narrowly "oil investing" year.

Gold fell $500 in price in 2013, from about $1700 to $1200.

6 million people aged 25-54 need to be working and can't

Not only did total private employment collapse by 6 million under Obama over the 16 months after his 2008 election, today 6 million people aged 25-54 who used to be working prior to the recession no longer do.

If there's been any recovery for this age group, it's that we're back to only November 2009 levels after four+ years, recovering about 2 million at work from the beginning of 2011 to now.

Think about these people: 2 million lost their jobs from November 2009 to the end of 2010. That's not Bush's fault. That's Obama's fault. And no matter who you blame for this mess, Obama has been a complete failure restoring work to America's core employment class.

The number of participating institutions in the FDIC has dropped over 32% since the year 2000

Between October 2000 and the close of 2013, FDIC insured institutions have dropped from 10,101 to 6,812, a decline of 3,289 or 32.6%.

Of those, 521 were outright bank failures, 497 of which occurred from February 2, 2007 to February 28, 2014. Before that there were just 24 failures going back to October 2000.

The cost of the 497 failures to the FDIC's Deposit Insurance Fund has been $89.26 billion.

The failure of IndyMac Bank FSB of Pasadena, CA in July 2008 was the costliest to the FDIC: $13.2 billion.

BankUnited FSB of Coral Gables, FL was a distant second at $5.9 billion in May 2009.

Colonial Bank of Montgomery, AL cost the FDIC $4.5 billion in August 2009.

WesternBank Puerto Rico cost the FDIC $3.2 billion in April 2010.

And rounding out the top five is Amtrust Bank of Cleveland, OH which cost the FDIC $2.97 billion when it failed in December 2009.

An ambassador is dead under Hillary Clinton's tenure at State, and now $6 billion is missing

Reported here:

The State Department misplaced and lost some $6 billion due to the improper filing of contracts during the past six years, mainly during the tenure of former Secretary of State Hilary Clinton, according to a newly released Inspector General report. The $6 billion in unaccounted funds poses a “significant financial risk and demonstrates a lack of internal control over the Department’s contract actions,” according to the report.

Maybe someone should subpoena Huma Abedin about this.

Climate-change activists are exasperated beyond endurance by the gullibility of the people

So says Clive Crook for Bloombergview here.

It illustrates a more general point, that the vision of the anointed is always frustrated by the lumpenproletariat. The elites' response to them is sometimes hyperbolic, as in Lenin's recourse to a vanguard to foist the revolution on a less than enthusiastic population, or as in a certain Penn State climate scientist's recourse to the courts to shut down his critics.

Old Clive doesn't mention those, but he does mention Secretary of State John Kerry's kooky statements, and adds this:

[T]his cause isn't advanced by exaggerating what is known in order to scare people into action, nor by denouncing everybody who disagrees with such proposals as evil or idiotic.

The scientists themselves -- some of them, at least -- are partly to blame. They chose to become political advocates, no doubt out of a sincere belief that policies needed to change a lot and at once. But scientist-advocates can't expect to be seen as objective or disinterested. Once they're suspected of spinning the science or opining on questions outside their area of expertise, as political advocacy is bound to require, they lose authority.

I'd say Clive is definitely showing signs of mellowing since his association with Bloomberg. Before that he seemed less temperate, although too temperate for Paul Krugman.

The incremental change of good old Fabian socialism is what Clive seems to have settled on, as has Obama after an early explosion of revolutionary zeal in 2008 when the realities of office overwhelmed everything.

Fortunately for those of us who disagree about the climate alarums, the John Kerrys and Penn Staters don't seem to have received the memo and keep doing everything to hurt their cause.