Financial topics

[jcsok]

Here's an interesting view of where we are related to John's contention of reversion to the mean of stock prices.

May 1, 2011

http://dshort.com/

[John]

Marketpsych fear index 'crashing'


http://www.marketpsych.com/


In 2007, I wrote several articles on the Marketpsych Fear Index. The
graph above shows the "fear index" in blue on the left scale and the
Nasdaq 100 market index in red and green on the right scale. The
index measures fear by an algorithm that analyzes the prevalence
of "fear words" in U.S. financial news.

What this shows is that the fear index is falling to its lowest
level in well over a year. I guess what this means is that
investors have no fear whatsoever, and they see no obstacles
to plowing into the market.

I've noticed this in other ways. One of the main things is that
bond yields in Greece, Ireland and Portugal are spiking way, way,
way higher than they did in Greece last May, the time of the
bailout, but nobody seems concerned today. The huge spike in
the graph above is the Greek crisis.


** MarketPsych investor fear index forecasts sharply increased market turbulence.
** http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e071103b#e071103b

** More on the Marketpsych "Fear Index"
** http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e070918#e070918

** By one measure, investors are getting increasingly anxious and worried
** http://www.generationaldynamics.com/cgi-bin/D.PL?xct=gd.e070913#e070913

John

[Higgenbotham]

http://ex-skf.blogspot.com/2011/04/fuku ... -jnti.html

The truth about Fukushima is starting to dribble out (I think). I base this account as being true on the fact that my brother in law was a technician at a nuclear power plant and he's been reading the news and telling us what it means as far as the actual conditions that are occuring, and it's all turned out to be exactly as he's predicted so far (meaning the news has followed exactly as he said it would). He knows this because he was trained in whatever emergency measures would be required in response to certain conditions such as a fuel rod meltdown. That was contrary to everything I thought I knew about nuclear power plant construction (that, unlike Chernobyl, these plants were constructed with multiple layers of containment and therefore any leakage of radiation would be minimal).

The implications being something John mentioned awhile back, that investors wouldn't panic on the news of Fukushima (and they didn't), but instead on the realization that Japan won't be rebuilt.

[Higgenbotham]

Experts painted similar scenarios in testimony before a September 2010 informal meeting of the House Committee on Homeland Security. These experts were unanimous in their opinion that a hostile foreign entity could crash the U.S. financial markets. And to do so, it would most likely engage in manipulative trading through one of several shady brokerages that offer platforms – such as dark pools or so-called “sponsored access” – that enable miscreant financial operators to trade in anonymity.

http://www.deepcapture.com/the-miscrean ... errorists/

As we've been saying for a long time, and further down in this investigation it is stated, the synthetic CDOs were deliberately created to self destruct. I would say there are many layers of truth in something as complex as this financial crisis, and the idea that a hostile foreign entity can crash the US financial markets can be true only because the system is internally unsound and corrupt to begin with. It's not a primary cause as parasites only feed on a vulnerable host and, as I pointed out yesterday, we have plenty of internal parasites who created these vulnerabilities and have been methodically feeding on a fundamentally unsound and corrupt system they helped create through lobbying efforts. You can't amass tens of billions without a systemic and fundamentally harmful money drain from the productive. Higher taxes on the rich are not the answer; the elimination of the systemic money drain is the answer. Juxtaposed with this article, the parallels to the 14th Century banking crisis become more apparent.

Here's a pretty good "cliff notes" version I just found:

http://intellibriefs.blogspot.com/2008/ ... risis.html

In Florence the totality of the burden was shifted to the surrounding countryside, whose landowners and peasants finally had to sell everything to the bankers.

Because of that, the primary production of food for example, went down, so the global players of the Middle Ages switched to more distant markets in Flanders or made good profits through the import of grain, the export of which they had bought at a low price from the cash-strapped King of Naples. That at some time they would perish, together with the common weal which they had looted as much as they could, didn't occur to even the most clever bankers - then as today.

As an afterthought, something that should probably be mentioned here is that literal comparisons shouldn't necessarily be made between the economy of the Middle Ages and that of today.

For example, we might rewrite the above to apply to today's situation as,

"In the US, the totality of the burden was shifted away from the corporate financial sector to the public sector through bailouts financed by government borrowing and to private individuals through quantitatve easing, which indirectly taxed the working class most harshly via higher food and energy costs...

Because of that, the primary production of manufactured goods for example, went down, and the global transnational corporations switched to more distant markets or made good profits through the import of manufactured goods produced in low wage countries outside the US....."

[OLD1953]

You just have to read this. Especially John.

http://www.forbes.com/forbes/2011/0509/ ... tcommented

It's so - - - typical. 50 t0 1 leverage. Is there any sane comment I can make that doesn't involve cursing?

[John]

I had lunch with an old family friend today. She's a real estate
broker who's fallen on VERY hard times. She asked me the same
question about five times during the conversation: "Won't the economy
get much better now that bin Laden has been killed?" She asked the
same thing over and over. I felt that I was really crushing her
dreams by telling her that he has nothing to do with it.

I've been wondering all week why there's been such explosive
exuberance over the killing of bin Laden. I mean, I'm happy to see
him killed as well, but I thought the giddy celebratory atmosphere was
over the top. I think this may be the explanation -- that there's a
general feeling that the worst is over, now that bin Laden is dead.

This also relates to the generally nationalistic feeling that I've
written about before. I've mentioned that the popularity of Donald
Trump can be attributed, in my opinion, to his highly nationalistic
statements. People are willing to grasp onto almost anyone or
anything that might make them feel good and end the pain, no matter
how irrational the connection is. That's why this is such a dangerous
era.

> You just have to read this. Especially John.

> http://www.forbes.com/forbes/2011/0509/ ... atale.html
>
> It's so - - - typical. 50 t0 1 leverage. Is there any sane comment
> I can make that doesn't involve cursing?

It also feels good and ends the pain (for a few seconds, anyway)
to hope that people like this are finally going to jail, where
they belong.

John

[vincecate]

It also feels good and ends the pain (for a few seconds, anyway)
to hope that people like this are finally going to jail, where
they belong.

Of the thousands of people that each made millions of dollars using fraud, I am only aware of Madoff going to jail. In the Savings and Loan crisis there were many many people who went to jail for fraud. This crisis was far bigger and there was far more fraud (the lier's loans were filled out by people at the bank who knew what to put down to make them look good). The link below gets you to someone who prosecuted people in the savings and loan crisis and has a good understanding of what happened this time.

http://gonzalolira.blogspot.com/2011/05 ... -ever.html

[Higgenbotham]

This candid interview with one of the world's foremost derivatives experts, former employee to major banks and now a consultant, is chock full of "on the ground" facts and insights. Link didn't work but it's the first Das interview.

http://fcic.law.stanford.edu/resource/interviews

[Higgenbotham]

In 2007 the Markit ABX Index was the canary in the coal mine (that was discussed in the above Das interview too).

The Financial Times reports that there is a frenzy to create synthetic junk bonds, ostensibly to satisfy the desire of yield-hungry investors. Any time you see a lot of long money flowing into synthetic assets rather than real economy uses, it’s a sign that Keynes’ casino is open for business (”When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done.”)

The author compare this development to that of the asset backed securities CDO market, one of our betes noirs which blew up spectacularly in the crisis. There are some similarities and differences.

http://www.nakedcapitalism.com/2011/03/ ... bonds.html

[Higgenbotham]

More on fraud from another expert in the field of derivatives. She says derivatives are being used to transfer wealth to the rich.

http://www.youtube.com/watch?v=JwXxrhP0ZDI

http://www.youtube.com/watch?v=cCkTfRp1KJ0

Her biography: http://www.tavakolistructuredfinance.com/biography.html

It's interesting to get the take on generational fraud from experts in the field of derivatives, today's financial weapons of mass destruction.