Sense on Cents

Just How Sorry is Goldman Sachs?

Posted by Larry Doyle on November 17th, 2009 7:47 PM |

Goldman Sachs CEO Lloyd Blankfein

Mea culpa, mea culpa, mea maxima culpa . . .

It is not everyday that the head of a major Wall Street bank issues an unsolicited and unspecified apology. In fact, in my 23 years on Wall Street I do not ever recall a Wall Street CEO issuing an apology in the manner that Lloyd Blankfein did today. What did Blankfein say? From a Bloomberg report, Goldman, Buffett Establish $500 Million Small-Business Program:

Blankfein, speaking at a conference today sponsored by Directorship magazine, apologized for Goldman Sachs’s role in some of the activities that led to the financial crisis, without providing specifics.

“We participated in things that were clearly wrong and we have reason to regret and we apologize for them,” Blankfein said at the New York event. The magazine named him its CEO of the year.

Wait a second. Blankfein admits that Goldman participated in activities that led to the crisis? Get Lloyd back in here and ask him for specifics. Read the rest »

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Danielle Park Provides More Sense on Cents

Posted by Larry Doyle on November 17th, 2009 2:30 PM |

My interview with Danielle Park this past Sunday evening on No Quarter Radio’s Sense on Cents with Larry Doyle was a gem. I have received countless messages of thanks for bringing the wisdom of Danielle Park to bear on the readers and listeners at Sense on Cents.

For those who missed the live interview, I strongly recommend listening to the audiotape. In the same spirit, high five to VD for bringing to my attention a recent MoneyShow.com interview with Danielle. This 4-minute clip entitled, “Stock Market Not Like the 80’s & 90’s,” may only whet your appetite and have you wanting more of Danielle’s cogent insights and macro-perspective. Click on the video image below to bring you to the MoneyShow.com site where the video will automatically begin playing.

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The China Syndrome 2009

Posted by Larry Doyle on November 17th, 2009 11:53 AM |

I am typically reluctant to merely link to articles which I find extremely compelling and newsworthy. I thoroughly enjoy referencing other’s works while adding my own thoughts and perspectives. That said, every once in a while an article comes along which truly deserves to be highlighted in its entirety for its depth of detail and global perspective. I find it interesting that the article I find so compelling is produced not here in the United States, but in the United Kingdom. I thank KD for bringing it to my attention.

From the Telegraph.co.uk, China Has Now Become the Biggest Risk to the World Economy:

President Obama said before going to China this week that Asia can no longer live by shipping goods to Americans already in debt to their ears Photo: AP

“The inherent problems of the international economic system have not been fully addressed,” said China’s president Hu Jintao. Indeed not. China is still exporting overcapacity to the rest of us on a grand scale, with deflationary consequences.

While some fret about liquidity-driven inflation, Justin Lin, World Bank chief economist, said the greater danger is that record levels of idle plant almost everywhere will feed a downward spiral of job cuts and corporate busts. “I’m more worried about deflation,” he said. Read the rest »

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Has the Fed Officially Expanded Its Goals?

Posted by Larry Doyle on November 17th, 2009 9:39 AM |

Navigating the economic landscape brings us down new and varied paths. In going down these paths, will we be able to double back and return to the main road of prudent fiscal and monetary disciplines in both the public and private sector? I am not so sure. I am also not so confident that our government officials and central bankers fully appreciate the implications of their policies and statements. I saw evidence of that just yesterday. Where? How so? Let’s navigate into the domain of the Federal Reserve.

What are the stated goals of the Federal Reserve? From the Fed’s website, we learn the following:

What are the goals of U.S. monetary policy?

Monetary policy has two basic goals: to promote “maximum” sustainable output and employment and to promote “stable” prices. These goals are prescribed in a 1977 amendment to the Federal Reserve Act.

What do maximum sustainable output and employment mean?
In the long run, the amount of goods and services the economy produces (output) and the number of jobs it generates (employment) both depend on factors other than monetary policy. These factors include technology and people’s preferences for saving, risk, and work effort. So, maximum sustainable output and employment mean the levels consistent with these factors in the long run.

So that’s why the other goal is “stable prices”?
Yes. Price “stability” is basically a low-inflation environment where people and firms can make financial decisions without worrying about where prices are headed. Moreover, this is all the Fed can achieve in the long run.

Fed-watchers monitor Fed actions to detect how disciplined our central bank is in pursuing these goals. There are always those who will critique the Fed for being too hawkish or dovish in its monetary policy in pursuit of these goals. Read the rest »

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Is a Jobless Recovery a Recovery?

Posted by Larry Doyle on November 16th, 2009 2:20 PM |

: Cartoon by Steve Breen, The San Diego Union-Tribune

Jobless recovery seems to be a phrase economists and analysts are using with increasing frequency. In my opinion, this usage is akin to a drug dealer or liar repeating his rationalizations to the point where he believes his own bulls%&t.

Are we to believe this economic subterfuge? I believe the American public buys into this rationalization at our peril. Why? Let’s navigate along the most important leg of our economic landscape.

Our unemployment rate currently stands at 10.2% while the underemployment rate is 17.5%. On the heels of the unemployment report released on November 6th (see my summary here), many analysts and economists revised their projections for unemployment to 11% and some as high as 14%.

Just today, Fed Chair Ben Bernanke in a speech at the Economic Club of New York highlighted the fact that the current excess supply of labor in our economy is even worse than indicated. Ponder that for a second. The lead banker in our nation is telling us that our unemployment situation is even worse than statistics would indicate. What does that mean? Read the rest »

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Are We Having a Blowoff?

Posted by Larry Doyle on November 16th, 2009 11:24 AM |

Blowoff “If you can keep your head when all about you are losing theirs…”

Retail sales rebounded strongly this month posing a 1.4% gain. Good news, right? In an attempt to provide a degree of sanity to what has become an extremely volatile report, let’s break this report down a little bit further.

Recall that our automotive sales have bounced around tremendously over the course of the last three months due to the Cash for Clunkers program. Auto sales soared in August given Uncle Sam’s handout. Once Uncle Sam shut that spigot off, auto sales dropped like a stone in September. In October, auto sales had a respectable bounce. All this said, there is no respected economist who doubts that the Cash for Clunkers program pulled demand forward. In the process, it has skewed the overall retail sales readings. What is the American consumer doing away from the auto sector? Let’s navigate. Read the rest »

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Liu Mingkang Provides Sense on Cents

Posted by Larry Doyle on November 16th, 2009 8:21 AM |

Liu Mingkang, Chairman of China Banking Regulatory Commission

With friends like this, who needs enemies?

That trite saying is far too simplistic in defining the diverse and convoluted nature of U.S.-Chinese relations. That said, as President Obama prepares to arrive in the People’s Republic of China for the first time during his Presidency, he is faced with an extremely aggressive overture from Liu Mingkang, China’s chief banking regulator.

What does Mr. Mingkang have to say? Well, let’s just say he has a drastically different opinion on U.S. monetary and fiscal policy than his counterparts in Washington. While our wizards in Washington, Messrs. Bernanke, Geithner, and Summers would lead us to believe that the rebound in markets is a precursor to a rebound in our economy, Mr. Mingkang has a decidedly different take. The Financial Times sheds light on this topic in writing, China Says Fed Policy Threatens Recovery:

The US Federal Reserve is fueling “speculative investments” and endangering global recovery through loose monetary policy, a senior Chinese official warned just hours before President Barack Obama arrived in China for his first visit.

Liu Mingkang , China’s chief banking regulator, said the combination of a weak dollar and low interest rates had encouraged a “huge carry trade” that was having a “massive impact on global asset prices”. Read the rest »

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No Quarter Radio’s Sense on Cents with Larry Doyle Welcomes Danielle Park, Sunday Evening November 15th

Posted by Larry Doyle on November 14th, 2009 10:01 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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Our global economic landscape continues to present new twists, turns, peaks, valleys, and challenges. There are those who believe we are in the midst of a V-shaped recovery, while others see the next Great Depression right around the corner. What is one to do? Where can one turn to make sense of it all so as to most effectively ‘navigate the economic landscape?’ You have come to the right place as No Quarter Radio’s Sense on Cents with Larry Doyle Welcomes Danielle Park this Sunday evening, November 15th at 8pm EST.

Danielle Park

While many market pundits and Wall Street analysts would attempt to define the ‘rules of the game’ and inform us as to how to play, what has that approach truly ever accomplished? I strongly believe each and every individual needs to understand his own personal situation in the process of navigating one’s own personal economic landscape. To that end, I am thrilled to have Danielle Park join me this Sunday evening. Why?

Danielle brings a perspective to personal finance, the markets, and the economy that is vastly different from what we are fed by the Wall Street establishment. How so? Who is Danielle Park? Let’s go ‘north of the border’ as Danielle lives and works in Ontario, Canada. Danielle is uniquely qualified to address the challenges of our current economic turmoil. Read the rest »

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Press Release: Madoff Investors Accuse SIPC of Forcing Investors to Bail Out Wall Street

Posted by Larry Doyle on November 14th, 2009 2:07 PM |

Having interviewed noted attorney Helen Davis Chaitman on No Quarter Radio’s Sense on Cents with Larry Doyle on November 1st (a recording of that show can be heard here), I am compelled to share this press release. Investors need to fully understand and appreciate the critically important role that SIPC is supposed to fulfill and the fact that it has largely served at the behest of the industry much like its regulatory brethren at FINRA.

MADOFF VICTIMS ACCUSE SIPC OF FORCING INVESTORS TO BAIL OUT WALL STREET

Group of Madoff victims files brief saying Securities Investment Protection Corp. was grossly under funded and is defaulting on its obligations to investors

New York, NY – Lawyers representing victims of Bernie Madoff’s Ponzi scheme filed papers in federal bankruptcy court Friday charging the Securities Investment Protection Commission (SIPC) with attempting to enrich Wall Street at the expense of customers of SEC-regulated broker/dealers. The brief argues that SIPC has withheld insurance money rightfully owed to Madoff investors by using an illegal definition of “net equity,” thereby depriving investors of the $500,000 in SIPC insurance which Wall Street is obligated to pay them.

“Just as American taxpayers were required to bail out Wall Street to the tune of hundreds of billions of dollars after Wall Street recklessly brought the global economy to its knees, so to, Madoff’s destitute customers are being forced to bail out SIPC,” the brief reads. Read the rest »

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November 14, 2009: Month to Date Market Review

Posted by Larry Doyle on November 14th, 2009 7:32 AM |

Do as I say, not as I do. Why? What do I mean?

The markets in general and equities in particular were once again supported by talk rather than actual economic actions. Who was talking? What were they saying? Very simply, communication from G-20 ministers last weekend indicated strong support for ongoing fiscal stimulus. That talk drove the equity markets 2% higher on Monday of this week. On the heels of that, during the midweek we experienced Fed-speak once again indicating a strong likelihood of keeping rates at very low levels for an extended period. Markets immediately reacted by once again ratcheting higher.

I have never been fully inspired by talkers versus doers, but these are unique times . . . so let’s collectively navigate the economic landscape. If you have any questions, please do not hesitate to ask.

ECONOMIC DATA

Economic reports and developments are carrying less and less weight currently. Why? Fed policies are not going to change. That comfort level has solidified the case for those who have sold and continue to sell the U.S. dollar short and use the proceeds to buy risk-based assets, primarily equities. That said, I am compelled to report significant data as I view my mission in helping people navigate the economic landscape, not strictly trade the markets.

Of note this week, the Federal Housing Administration is likely in need of an imminent bailout from Uncle Sam as defaults on FHA-insured loans show no signs of diminishing. This potential bailout has been discounted by FHA officials ad nauseam. They have no credibility.

The University of Michigan Survey of Consumer Confidence plummeted to a level of 66% from 70. Consensus opinion had this survey bouncing back toward 72%. With no legitimate bounce or improvement in the housing or labor markets, I do not know why the survey would improve.

Let’s move along to market performance. The figures I provide are the weekly close and the month-to-date returns on a percentage basis: Read the rest »

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