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HomeHealth Care Reform or Merely Another Redistribution Program
Posted by Larry Doyle on November 9th, 2009 8:49 AM |
Why is an ever increasing percentage of the American public getting angry?
In my opinion, more and more Americans are not only questioning but now realizing that they are largely disenfranchised. How so? Seemingly each and every program emanating from Washington is merely another form of income and wealth redistribution.
Make no mistake, the redistribution is running in both directions; that is, to the large monied interests on Wall Street and those who are increasingly dependent on Washington’s welfare and largesse. While funds are flowing in both directions, America’s great middle class feels more squeezed and screwed than at any point in their lifetime. We witness this reality again in Congress’ passage of its health-care reform legislation late on Saturday night.
While the health-care legislation will continue to be hotly debated, I view it as another government program imposing on the lives of those who have worked tirelessly to make this country great. Clearly, people are passionate on both sides of the health-care debate but ultimately this so called reform is merely another form of rationing and redistribution. Is that what America truly wants? I think not. Washington’s Democratic establishment will pass this bill at their political peril. They know it.
Arrogance comes in many forms, but ultimately I believe the height of arrogance is willful blindness. I see a lot of that in Washington these days.
LD
No Quarter Radio’s Sense on Cents with Larry Doyle Welcomes Keith Fitz-Gerald
Posted by Larry Doyle on November 8th, 2009 1:10 PM |
UPDATE: This episode of NQR’s Sense on Cents with Larry Doyle has concluded. You can listen to a recording of the episode in its entirety by clicking the play button on the audio player provided below. Once the audio begins, you can advance or rewind to any portion of the episode by clicking at any point along the play bar.
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Who would have projected the twists and turns we have experienced on our global economic landscape? Who would have forecasted the ups and downs in the markets? Who has the global perspective to project where our economies and markets are headed? While the future is always uncertain, experience is always the best teacher. Where can one turn to gain riveting insights and perspectives from some of the sharpest minds in the market today?
Welcome to No Quarter Radio’s Sense on Cents with Larry Doyle as I welcome Keith Fitz-Gerald to my show this Sunday evening November 8th at 8pm. So, who is Keith Fitz-Gerald? From Keith’s own website, we learn:
When Keith speaks, savvy investors listen. He is one of the few to correctly call the dot.bomb collapse in 2000, the cyclical recovery in 2003 and the credit crisis in 2007 – a full year in advance. He’s got one of the best documented (and most accurate) predictive records in the business. (more…)
November 7, 2009: Month to Date Market Review
Posted by Larry Doyle on November 7th, 2009 8:39 AM |
Unemployment hits 10.2% and every self-respecting economist knows it is heading higher.
Does anybody want to ask Tim Geithner if he wants to review the rigor and integrity of the Bank Stress Tests conducted last Spring? What were the assumptions used for the Unemployment Rate? For those who care to review the premises of the long ago but now forgotten Bank Stress tests, I submit from the FDIC, FAQs-Supervisory Capital Assessment Program. In regard to the assumptions used for unemployment:
2009 Base Case 8.4%
2009 Adverse Case 8.9%2010 Base Case 8.8%
2010 Adverse Case 10.3%
Garbage in, garbage out. We are now within .1% of the more adverse unemployment case for NEXT year. Not that it might matter given the fact that the liquidity experiment undertaken by the Fed and Treasury is bubbling up in asset valuations while neglecting Main Street’s economic plight. That said, I would once again question as I did last April, “Bank Stress Tests: Major Sham??”
What are the implications for sham transactions? Subsequent misallocation of funds in order to cover and disguise the initial sham. I am not stating that government officials are stealing, although I’m not stating that they’re not. I am stating that there is little doubt that future funds continue to get redirected into organizations (banks, Freddie, Fannie) and programs the health of which were not accurately represented to the American public. (more…)
Neither a Buyer Nor Seller Be
Posted by Larry Doyle on November 6th, 2009 1:18 PM |
What does it all mean?
Observing the market’s muted reaction to the Unemployment Report this morning makes me think of a phrase not popular on Wall Street. That phrase, ‘neither a buyer nor seller be’ sends a mixed message bordering on indifference as to market activity.
Why are so many market participants not involved or less caring of the daily price action? I would put forth the following reasons:
1. Overriding concern with trying to get their own financial house in order.
2. A general level of disbelief in the integrity of certain market structures (for example, high frequency trading activities).
3. ‘Don’t fight the Fed’ meaning when the Federal Reserve is actively involved in the market, as they are now, it is never prudent to take the other side of the Fed’s trades.
4. Limited trust in the financial regulatory oversight of Wall Street.
5. Limited trust in the statistics being put forth from Washington. For example, questioning the integrity of the 640k figure of jobs saved or created by the Obama administration.
Add it all up and what is an individual to do?
Neither a buyer nor seller be….
What do you think?
LD
Unemployment Report: November 6, 2009
Posted by Larry Doyle on November 6th, 2009 8:55 AM |
The widely anticipated November Unemployment Report covering the month of October was just released. Let’s dive right in and take a look at the numbers . . .
I. UNEMPLOYMENT RATE
July: 9.5%
August: 9.4%
September: 9.7%
October: 9.8%
– November Consensus Expectation: 9.9%
– November Actual:10.2% !!!!
>> LD’s comments: this is the shocker and will get all the play. This rate is especially damaging because the participation rate declined. That drop would help the unemployment rate, all other things being equal. The fact that the rate jumped to 10.2% is an indication that job losses jumped much more than otherwise expected with a loss 558k jobs. The underemployment rate (U-6 rate) is 17.5%!!
II. NON-FARM PAYROLL (click here for definition of this term)
July: initial loss of 467k initially revised to a loss of 443k and now revised to a loss of 463k
August: initial loss of 247k revised to a loss of 276k, further revised to -304k
September: initial loss of 216k, revised to a loss of 201k, revised to a loss of 154k
October: a loss of 263k, revised to a loss of 219k
– November Consensus Expectation: loss of 175k
– November Actual: a loss of 190k with revisions of +91k to prior months
>> LD’s comments: this month’s print is slightly worse than expected, but given the revisions the overall non-farm payroll could be spun in a somewhat positive fashion. In my opinion, there has been massaging of these numbers for many months and dare I say market participants are questioning the integrity of the reports. Recall that the birth-death model has likely overestimated job creation by upwards of 800k jobs. More of the same here? Perhaps, if not likely. Temporary workers did increase by 36k jobs.
III. AVERAGE HOURLY EARNINGS
July: 0.0%
August: +.2% revised to +.3
September: came in at .3 but then revised to .4%
October: .1%
– November Consensus Expectation: +.1%
– November Actual:+.3%
>>LD’s comment: a positive for those working, but in conjunction with no movement in the hourly workweek this is muted.
IV. AVERAGE HOURLY WORKWEEK
July: 33.0 hours
August: 33.1 hours
September: 33.1 hours
October: 33.0 hours
– November Consensus Expectation: 33.0 hours
– November Actual:33.0 hours
>> LD’s comments: no indication here of any strength. This number rests at a low going back to 1964.
V. FURTHER COLOR
It’s all about the headline print of 10.2%. That number will spook consumers and keep Consumer Confidence under pressure. The Fed will clearly remain on hold for as extended as extended can be. I expect this report will cause Washington to talk about the need for another stimulus package.
VI. MARKET REACTION
At 8:10am:
2yr Tsy: .89%
10yr Tsy: 3.52%
S&P 500 Futures: +2
DJIA Futures: +14
U. S. Dollar Index: 75.78
At 8:50am, Post-Report:
2yr Tsy: .85%
10yr Tsy: 3.47%
S&P 500 Futures: -8
DJIA Futures: -68
U.S. Dollar Index: 75.86
Questions, comments, constructive criticisms always encouraged and appreciated.
If you like what you see here, please subscribe to all my work here at Sense on Cents via e-mail subscription, an RSS feed, Twitter, or Facebook. All the links are on every page.
Thanks.
LD
IASB at Odds with FASB on ‘Extend and Pretend’
Posted by Larry Doyle on November 5th, 2009 3:15 PM |
Extend and pretend!!
What is that? In large measure, accounting practices for financial institutions in the United States promote practices which ‘extend’ the terms of the loan or asset while ‘pretending’ as to the real value of that loan or asset.
Regardless of what one thinks about the integrity of these business and accounting practices, the fact of the matter is they are prevalent in our financial industry today.
As I referenced in writing about the Financial Accounting Standards Board (FASB) yesterday, I believe this board felt emasculated in having the relaxation of the fair value mark-to-market rammed down its throat by Wall Street and Congress.
There is another accounting board which has a decidedly different take on the accounting of financial assets. Who might that be? Let me introduce you to the International Accounting Standards Board, otherwise known as the IASB. (more…)
Retaining Risk on Wall Street: Necessary but Painful
Posted by Larry Doyle on November 5th, 2009 1:03 PM |
How did Wall Street lead the United States economy into the ditch?
The pure ‘originate to distribute’ model employed on Wall Street spelled the death knell for Wall Street and our economy.
I addressed how firms won under that originate to distribute model in a commentary from November 12, 2008, “The Wall Street Model Is Broken….and Won’t Soon Be Fixed!!”:
At the turn of the century, the Wall Street model was a pure “originate to distribute” model with little to no residual risk on behalf of the originators or underwriters. When there is no residual risk, those who “WIN” are the players that can purely process the most volume. Well, how does one get volume? Lower the credit standards, put fewer restrictions on borrowers, little to no covenants (NINA Loans: no income, no asset check). WOW!!! What were we thinking?? Well, Wall St. felt, “let’s worry about it tomorrow or maybe not at all because we are making too much money today.”
Tomorrow has arrived and Wall Street must now deal with the concept of retaining risk in their loan originations. The topic of ‘risk retention’ has been bandied about over the course of the year, but it was ratcheted up dramatically in a recent meeting of the House Financial Services Committee and U.S. Treasury on October 27th.
What came out of that meeting has potentially dramatic implications for the entire spectrum of loan origination, securitization, and distribution businesses on Wall Street and their subsequent impact on Main Street. Let’s navigate. (more…)
Goldman Sachs ‘Shooting Fish in a Barrel’
Posted by Larry Doyle on November 5th, 2009 9:37 AM |
Those who take risk do not always win. A variety of mathematical models dealing with risk address and negate the chance of almost uniform success by one party. While those on Wall Street would promote the overwhelming risks in the industry, I would maintain that Wall Street circa 2009 is not in the risk business. How so? Let’s review results from the firm regarded as the best at managing risk, that is Goldman Sachs.
The Financial Times provides insights into the Goldman Sachs ‘casino’ in writing this morning, Goldman Benefits From Trading Bonanza:
Traders at Goldman Sachs recorded only one daily loss in the third quarter, highlighting the trading bonanza sweeping Wall Street as central banks continue to pump billions of dollars into the financial system.
The performance – revealed on Wednesday in a regulatory filing – compares with two losing trading days in the previous quarter and confirms that the authorities’ drive to revive markets after the crisis is yielding huge windfalls for some banks.
Before the crisis, banks regularly recorded trading losses on several days in a quarter.
Goldman made more than $100m in profits on 36 of the 65 days in the three months to September and recorded more than $50m in profit on more than eight out of 10 trading days, the filing shows.
To lose money on a total of only three days over the last two quarters defies rules of logic, assuming that markets are free, fair, and balanced. Even in Vegas the house doesn’t win at that rate. The question begs then as to the nature of the supposed risks being taken by Goldman and every other Wall Street firm. Beyond the risks, we also need to question the very nature of the markets themselves. When a firm makes money 98% to 99% of the time, don’t tell me they’re taking risk. They are doing nothing more than ‘shooting fish in a barrel.’ How so? (more…)
How Will The Fed Exit ‘Hell’?
Posted by Larry Doyle on November 4th, 2009 3:06 PM |
None other than Meredith Whitney, the top rated bank analyst on Wall Street, characterized the Federal Reserve’s quantitative easing program to purchase mortgage-backed securities (MBS) as a ‘deal with the devil.’ Can the Federal Reserve sneak out of hell without disturbing the other residents? Can the Federal Reserve regain its stature of credibility and independence in the face of such massive government intervention and Wall Street influence? The challenge embedded in communicating how the Fed will ‘exit hell’ will be the single greatest determinant of economic and market direction over the next six months.
Did we catch a peek into those depths of hell today given the release of the most recent Federal Reserve policy statement?
What did we learn? (more…)
