Sense on Cents

Janet Napolitano Should Listen to Larry Johnson

Posted by Larry Doyle on December 29th, 2009 10:46 AM |

The mission of Sense on Cents is to help people navigate the economic landscape. Proper navigation requires a full understanding of risk. What are the risks in our economy, political process, investments, the world?

Make no mistake, the global risks of terrorism have an enormous impact on our global economy. No individual today understands the risks of terrorism more than my friend Larry Johnson, who runs the political blog No Quarter USA. Larry has appeared on several radio and television news shows over the last couple of days to speak about the attempted Christmas Day bombing of Northwest Flight # 253 by Umar Farouk Abdulmutallab.

Given Larry’s extensive background in counterterrorism (he was Deputy Director of Counterterrorism for the State Department), I strongly encourage everyone to listen to his comments.

Thank you Larry for providing such expert professional opinions. Janet Napolitano, Secretary of the Department of Homeland Security, would do well to follow your lead.

A big thank you to C.S. for putting together the following video clips. The first clip is from Larry Johnson’s appearance on last night’s 7PM broadcast of CNN Tonight:

The next video clips are from Larry Johnson’s appearance on last night’s Larry King Live show.

Part I

Part II

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Auction Rate Security Anxiety Continues

Posted by Larry Doyle on December 29th, 2009 10:03 AM |

Still they wait.

$150 billion dollars.

Thousands of investors unable to access THEIR funds frozen in Wall Street’s greatest fraud, that is the world of auction-rate securities.

While an initial court ruling against Union Bank of Switzerland defined the sales and distribution of auction-rate securities as a fraud, recent court rulings have shifted the burden of responsibility onto investors.

When I worked on Wall Street, I was never involved directly or indirectly with the sales or trading of auction-rate securities. That said, I understand full well the explicit and implicit guarantees that brokers and salespeople made in distributing this product. The fact that those entities which distributed ARS have not been held to full and total account is an unspeakable travesty. The lives of investors who have been dramatically impacted get little to no attention from the media. Shame on them.

Our federal financial regulators housed within the SEC are nowhere to be found. FINRA remains in bed with the industry and would just as soon not draw attention to its own liquidation of $647 million ARS in mid-2007 as the market was failing.

Days, weeks, months, and now years pass. Where is the justice and retribution for those ARS investors still frozen and unable to access that $150 BILLION!!! Read the rest »

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Who’s The Boss?

Posted by Larry Doyle on December 28th, 2009 12:04 PM |

I almost vomited this morning upon reading the lead article in The Wall Street Journal. The principles and values I cherish and which I believe are the keys to our long term economic prosperity are under continual siege. The American dream is under siege, as well. Our nation’s economic future has never looked so cloudy and uncertain. Why? As The WSJ writes, After the Bailouts, Washington’s the Boss:

Only as the recession recedes will it become fully evident how permanently the state’s role has expanded and whether, as a consequence, a new, hybrid strain of American capitalism is emerging.

One thing is clear: The government is a much bigger force in today’s U.S. economy than it was before the financial crisis. “The frontier between the state and market has shifted,” says Daniel Yergin, whose 1998 book “Commanding Heights” chronicled the ascent of free-market forces starting in the 1980s. “The realm of the state has been enlarged.”

Why am I so concerned? For the following reasons: Read the rest »

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Fannie and Freddie’s Blank Check Will Further Fuel America’s Rage

Posted by Larry Doyle on December 28th, 2009 8:38 AM |

I remain incensed at the sheer arrogance and brazen demeanor of the Obama administration providing a blank check on Christmas Eve to cover future losses of the failed institutions Fannie Mae and Freddie Mac. Given the fact that this check has been issued, America deserves to know what exactly it is covering. Over and above a full and total exposition of these government sponsored entities, America is in a position to demand certain retributions. Let’s bang the drum and demand some answers, including:

1. The current valuations of all of Freddie’s and Fannie’s holdings so America can fully evaluate those holdings relative to market prices.

2. The current fees being paid for all services rendered.

3. An independent audit.

4. Why aren’t these stocks delisted immediately? To allow stock in these entities to continue to trade is a total mockery of a legitimate market.

5. Clawback all bonus payments rendered to Franklin Raines, James Johnson, and Leland Brendsel, the executives at Fannie and Freddie who truly plundered these institutions. Read the rest »

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Deflation

Posted by Larry Doyle on December 27th, 2009 7:52 AM |

Although the American consumer is much more accustomed to inflation and the threat of inflation, I am increasingly convinced that the threat of deflation remains the greater challenge. This battle between macroeconomic deflationary forces versus governmental supported inflationary programs is THE ultimate issue facing our economy in 2010 and beyond.

We hear very little about deflation from Bernanke, Geithner, or other central bankers here in the United States. Why not? If they were to even bring attention to it, I think they would cause a stir and legitimize the underlying deflationary forces at work in our economy. What do we hear? Continuous platitudes about how inflation is under control. Remember that the primary mandate of the Federal Reserve is to work to achieve stable prices. How is it going about that currently? Massive federal programs including ballooning the Fed’s balance sheet to prop the economy and prices from the weight of deflationary forces. How and why have these deflationary forces developed? Excessive debt throughout large sectors of our economy. Read the rest »

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Fannie and Freddie’s Huge Christmas Bonus

Posted by Larry Doyle on December 26th, 2009 11:14 AM |

While Americans across the country hustled and bustled for last minute gifts and holiday preparations, our wizards in Washington tied a big red ribbon on a blank check made out to Freddie Mac and Fannie Mae. In the process, a future of socialized housing finance has been increasingly solidified.

Why would the Obama administration pass this blank check under the cover of darkness on December 24th? In hopes that America had just settled down for its long winter’s nap and would miss this act of pillage and plunder. The Wall Street Journal highlights this ‘blank check’ in writing, U.S. Move to Cover Fannie, Freddie Losses Stirs Controversy:

The Obama administration’s decision to cover an unlimited amount of losses at the mortgage-finance giants Fannie Mae and Freddie Mac over the next three years stirred controversy over the holiday.

The Treasury announced Thursday it was removing the caps that limited the amount of available capital to the companies to $200 billion each. Read the rest »

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Christmas 1919

Posted by Larry Doyle on December 25th, 2009 8:28 AM |

This story made such an impact on me last year, it is only fitting to run it again.

Merry Christmas, Happy Hanukkah, Happy Kwanza, or however you celebrate, Happy Holidays!!

A Christmas Tale — 1919, The Wall Street Journal, December 2008

By HANS VON SPAKOVSKY

It’s easy to complain in the midst of a stressful holiday season. But my family has a unique remedy: We remember one special Christmas in 1919 that gave us the freedom and liberty we enjoy today. This will be the 89th anniversary of the year my father celebrated Christmas Eve deep in the snow-laden woods of Russia as he fled the Communist takeover of his homeland.

When I tell people that my father was an officer in the White Army who fought the Bolsheviks in the Russian civil war, they usually look at me with disbelief, because I am only 49. But he married and started a family later in life, after he lived through both world wars.

He had been an officer in the Russian Army in World War I; after the Bolshevik putsch he ended up fighting against them in the far north of Russia. In 1919 he was close to the Arctic Circle in the port city of Arkhangelsk, where at the beginning of the year, six feet of snow fell and the temperature was regularly 30 degrees below zero. Read the rest »

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What Do You Hope to Find in Your Stocking?

Posted by Larry Doyle on December 24th, 2009 10:01 AM |

Christmas morning in the Doyle home in the ’60s and ’70s was priceless. With seven siblings (six brothers and one sister), the living room was quickly turned into a scene which could only be compared to a mini-earthquake. Throwing gift boxes across the room, quickly playing with games and toys, screaming for joy. The memories are precious.

The knitted stockings hung by the fireplace remain a prized possession. The gifts in the stockings may have been the smallest in size, but often they brought the greatest pleasure. Tickets to a college sporting event were always a hit.

After the bedlam had settled, typically around 7am, we would make a mad dash for the kitchen and Mom’s donut muffins. Pure sugar and truly awesome.

As the kid in all of us anticipates waking up on Christmas morning, I send best wishes to all the readers of Sense on Cents.

What do you hope to find in your stocking?

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Health Care Payoffs

Posted by Larry Doyle on December 23rd, 2009 12:26 PM |

Washington may think the “payoff politics as usual” is justified under the guise of working toward goals, but I would beg to differ. In my opinion, the payoffs garnered by Senators Ben Nelson (D-NE), Chris Dodd (D-CT), and Mary Landrieu (D-LA) are emblematic of the broken political process in America.

Why is it that citizens of some states are not required to pay the same freight as citizens of all other states? Why is it that citizens of some states garner ‘special’ benefits and advantages not accorded to citizens of all other states?

I do not doubt for a second that this ‘payoff politics’ has been going on for a lot longer than we may appreciate. I would also maintain that a significant portion of our fiscal and moral deficits are generated from this very approach.

The fact that representatives hold out for these payoffs and then promote them as benefiting their states should be more widely broadcast as unpatriotic and divisive.

The fact that administrations from both sides of the aisle have chosen the ‘payoff’ style of politics is merely an indication as to the lack of character, courage, and political intellect needed to craft real legislative reforms.

When the ‘for sale’ sign is constantly out, that lowest common denominator will always be reached.

If this ‘payoff politics’ is the best America has to offer, then I am increasingly concerned that our collective future will be far less than it ought to be.

Where are the real statesmen?

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The Best of Wall Street

Posted by Larry Doyle on December 23rd, 2009 9:39 AM |

Regular readers of Sense on Cents are well aware that I have not been bashful to call out the financial industry whenever or wherever I thought it was deficient. Those deficiencies have been on the regulatory front, investor protection, abusive sales practices, questionable accounting, and more. Although these shortcomings have been highlighted in the midst of the recent economic crisis, the fact is many of them have been prevalent for a protracted period. In light of that, I am often asked the question as to why I pursued a career on Wall Street? How could I reconcile working within an industry that perpetuated such shortcomings?

My answer to those who ask such questions is the following:

1. In the course of day to day activities, the rank and file on Wall Street are not truly impacted by the overarching financial regulatory system. That system clearly has a major influence on the industry, but for those who kept their nose clean the regulators were a non-event.

From my current perch, I have a dramatically different view of the regulators and am happy to expose their shortcomings.

2. I loved the challenge of the industry! How could I utilize my intellect along with my instincts to assess how the market would move? This challenge was a daily event and was unbelievably stimulating.

3. The single greatest factor which drove my career and why I loved working on Wall Street was the competition. Regardless of where I was working at the time, I so badly wanted to compete and beat my counterparts at the other shops. How did this competition play out? I wanted to develop relationships with institutional customers so that whenever they had business to transact, they felt compelled to engage me. The competition was the daily adrenaline. There was nothing like it. The competition and results were only rewarding from the standpoint that my core values of honesty and integrity were never compromised.

I loved it.

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