Saturday, April 16, 2011

Cleaning up the Drug Money

Watch the full episode. See more Need To Know.

Face it our government is as corrupt as they come. Frank Lucus in the American Gangster documentary showed that heroin was smuggled in mass quantities during the Vietnam War with the CIA owned airlines named Air America. Yes, Air America is the name of Senator Al Franken's radio station before it went bankrupt. The drugs were flown in to the United States military air bases. I'm sure the same thing is happening today in Afghanistan.

Friday, April 15, 2011


Was the E-Trade baby trading during the flash crash?

Tuesday, April 12, 2011

Most Compelling Part of Matt Taibbi's Article

You really can't make this stuff up. Excerpt from article: Even more disturbing, the major stakeholder in the Bahrain bank is none other than the Central Bank of Libya, which owns 59 percent of the operation. In fact, the Bahrain bank just received a special exemption from the U.S. Treasury to prevent its assets from being frozen in accord with economic sanctions. That's right: Muammar Qaddafi received more than 70 loans from the Federal Reserve, along with the Real Housewives of Wall Street. Perhaps the most irritating facet of all of these transactions is the fact that hundreds of millions of Fed dollars were given out to hedge funds and other investors with addresses in the Cayman Islands. Many of those addresses belong to companies with American affiliations — including prominent Wall Street names like Pimco, Blackstone and . . . Christy Mack. Yes, even Waterfall TALF Opportunity is an offshore company. It's one thing for the federal government to look the other way when Wall Street hotshots evade U.S. taxes by registering their investment companies in the Cayman Islands. But subsidizing tax evasion? Giving it a federal bailout? What the fuck?

WOW TALF Loans for the Rich Wallstreet CEOs Wives to buy Mansions

A lawyer friend of mine wanted to get a small 100k to 200k to start his own law firm with a few other partners and was denied by a few banks. Eventually one of the partners could only get 100k equity line with his house as collateral. It's not like my buddy doesn't having a history of earning money in his law practice. I guess if you're in bed with government you can get a loan to buy almost anything without producing squat. TALF, Term Asset Backed Lending Facility, I've got an old lawnmower which I VALUE AT 2 MILLION, can I get a loan for 10 million. These people live in a complete fantasy land. Kudos to Matt Tiabbi from Rolling Stone for calling the bankers out once again. The Real Housewives of Wall Street: Look Who's Cashing In On the Bailout Why is the Federal Reserve forking over $220 million in bailout money to the wives of two Morgan Stanley bigwigs? From Rolling Stone Magazine In August 2009, John Mack, at the time still the CEO of Morgan Stanley, made an interesting life decision. Despite the fact that he was earning the comparatively low salary of just $800,000, and had refused to give himself a bonus in the midst of the financial crisis, Mack decided to buy himself a gorgeous piece of property — a 107-year-old limestone carriage house on the Upper BeerEast Side of New York, complete with an indoor 12-car garage, that had just been sold by the prestigious Mellon family for $13.5 million. Either Mack had plenty of cash on hand to close the deal, or he got some help from his wife, Christy, who apparently bought the house with him. The Macks make for an interesting couple. John, a Lebanese-American nicknamed "Mack the Knife" for his legendary passion for firing people, has one of the most recognizable faces on Wall Street, physically resembling a crumpled, half-burned baked potato with a pair of overturned furry horseshoes for eyebrows. Christy is thin, blond and rich — a sort of still-awake Sunny von Bulow with hobbies. Her major philanthropic passion is endowments for alternative medicine, and she has attained the level of master at Reiki, the Japanese practice of "palm healing." The only other notable fact on her public résumé is that her sister was married to Charlie Rose. It's hard to imagine a pair of people you would less want to hand a giant welfare check to — yet that's exactly what the Fed did. Just two months before the Macks bought their fancy carriage house in Manhattan, Christy and her pal Susan launched their investment initiative called Waterfall TALF. Neither seems to have any experience whatsoever in finance, beyond Susan's penchant for dabbling in thoroughbred racehorses. But with an upfront investment of $15 million, they quickly received $220 million in cash from the Fed, most of which they used to purchase student loans and commercial mortgages. The loans were set up so that Christy and Susan would keep 100 percent of any gains on the deals, while the Fed and the Treasury (read: the taxpayer) would eat 90 percent of the losses. Given out as part of a bailout program ostensibly designed to help ordinary people by kick-starting consumer lending, the deals were a classic heads-I-win, tails-you-lose investment. So how did the government come to address a financial crisis caused by the collapse of a residential-mortgage bubble by giving the wives of a couple of Morgan Stanley bigwigs free money to make essentially risk-free investments in student loans and commercial real estate? The answer is: by degrees. The history of the bailout era reads like one of those awful stories about what happens when a long-dormant criminal compulsion goes unchecked. The Peeping Tom next door stares through a few bathroom windows, doesn't get caught, and decides to break in and steal a pair of panties. Next thing you know, he's upgraded to homemade dungeons, tri-state serial rampages and throwing cheerleaders into a panel truck. The impetus for this sudden manic expansion of the bailouts was a masterful bluff by Wall Street executives. Once the money started flowing from the Federal Reserve, the executives began moaning to their buddies at the Fed, claiming that they were suddenly afraid of investing in anything — student loans, car notes, you name it — unless their profits were guaranteed by the state. "You ever watch soccer, where the guy rolls six times to get a yellow card?" says William Black, a former federal bank regulator who teaches economics and law at the University of Missouri. "That's what this is. If you have power and connections, they will give you a freebie deal — if you're good at whining." This is where TALF fits into the bailout picture. Created just after Barack Obama's election in November 2008, the program's ostensible justification was to spur more consumer lending, which had dried up in the midst of the financial crisis. But instead of lending directly to car buyers and credit-card holders and students — that would have been socialism! — the Fed handed out a trillion dollars to banks and hedge funds, almost interest-free. In other words, the government lent taxpayer money to the same assholes who caused the crisis, so that they could then lend that money back out on the market virtually risk-free, at an enormous profit. Cue your Billy Mays voice, because wait, there's more! A key aspect of TALF is that the Fed doles out the money through what are known as non-recourse loans. Essentially, this means that if you don't pay the Fed back, it's no big deal. The mechanism works like this: Hedge Fund Goon borrows, say, $100 million from the Fed to buy crappy loans, which are then transferred to the Fed as collateral. If Hedge Fund Goon decides not to repay that $100 million, the Fed simply keeps its pile of crappy securities and calls everything even. This is the deal of a lifetime. Think about it: You borrow millions, buy a bunch of crap securities and stash them on the Fed's books. If the securities lose money, you leave them on the Fed's lap and the public eats the loss. But if they make money, you take them back, cash them in and repay the funds you borrowed from the Fed. "Remember that crazy guy in the commercials who ran around covered in dollar bills shouting, 'The government is giving out free money!' " says Black. "As crazy as he was, this is making it real." Read rest of the article at Rolling Stone's website

Monday, April 11, 2011

Clarifying the Obvious, Adam Smith and The Wealth of Nations Revisited

Total Goods and Services Produced = Total Money and Credit in Circulation multiplied by the Velocity of the Money and Credit circulating between the people chasing those goods. Assuming the goods and services remain constant and a government inflates the currency and credit in circulation then logically the the price of the goods and services will go up. It is not that the goods and services become more valuable it's that the currency those goods and services are denominated in become worth less. Many textbooks define inflation as a a monetary phenomenon of rising prices. In our scientific world I don't know why more people don't question this definition. It's not that the cart is put before the horse in this definition, it's like the cart is just magically wanded into existence. In reality a countries central bank turns on the credit currency faucet which leads to the inflation or increase in price of the goods and services produced. A perfect example of this is the price of oil today. Oil is priced in US dollars so as the Federal Reserve papers over the bankers bad debts by buying toxic assets which is referred to as "quantitative easing" through indirect debt monetization. When the Federal Reserve has the faucet open you'll see rising prices in stocks, bonds, commodities, wages, home values, ect. I ask you is anyone recieving more credit cards in the mail? Yes a government can determine what is legal tender but if the government plans to devalue a currency via fiscal deficits without balanced budgets then it should be no surprise that gold and silver will rise in price as a store of purchasing power.

Real Money is Gold, Silver, and Oil, Not Paper

I found these two illustrations interesting given that the countries of the world are revisiting the Brenton Woods agreement. On August 15th of 1971 the United States president at the time Richard Nixon closed the gold reserve window. This meant that foriegn holders of US currency could no longer get their paper currency swapped with physical gold. After 1971 the paper money supply and people's attitudes toward debt have gone through the roof. Hopefully the world always has faith in the US dollar because things will get ugly if the world doesn't.

Where will the Price of Oil Go?

Nobody really knows where the price of a barrel of crude oil will go to. I find it amusing that people rely on what somebody says to determine a trading strategy. Once you expose yourself to the consequences of uncertainty by entering a trade then all you can do is manage risk and determine where you will take a loss if the trade goes against you or where you will move your stop if the trade goes in your favor. Yes if you are a longer term trader then you can gain expectancy bias by getting a win rate % that is positive by backtesting your datasets. Remember you can have a win rate % of 30% but if your average win is $3 versus an average loss of $1 then you still make money. Fundamentally if the Federal Reserve continues it's electronic money printing then commodities like oil will continue to move higher. This has been the case for the last decade on the average. I posted the dollar index chart and a chart of crude oil to illustrate my point. My guess is that oil will go back and retest its 2008 high of $147 a barrel. I believe oil will go even higher. The market will work this out on a daily basis and it will be reflected in price. A man's idea can't be quantified but price of a commodity like gold, silver, and oil can be. The trend is your friend and these commodities are all moving upward.