A podcast is rich media, such as audio or video, distributed via RSS. Feeds like this one provide updates whenever there is new content. FeedBurner makes it easy to receive content updates in popular podcatchers.
We’ve used GoDaddy for years and it was fine for the basic domain hosting we needed. However, searching for a working discount coupon every year or so for each domain type (one discount code for .com domains, a different code for .net) just to make GoDaddy’s pricing competitive with other services was a real pain in the ass. While a few bucks may not seem like all that much, multiply that out by dozens of domains, and soon it starts to look like some serious cash.
Since last year, GoDaddy seems to have stopped issuing discount coupons for domain renewals altogether. So it finally seemed like the perfect time to check out some of the other offerings out there. Needless to say, after much research into the matter, we moved all our domains over to NameSilo. It must have ranked as one of the easiest and least painful experiences of our lives!
We were able to move all our domains in a single swoop on a Saturday, and the whole transfer process was complete within 30 minutes to an hour. For $8.99/year per domain including Icann fees, you can even get private registration included free, and you don’t have to ever deal with searching for a coupon again when it comes time to renew. Any extra months left on your domains are also transferred over (though you must wait at least 45 days before transferring if your recently extended your domain expiration date with your current registrar).
So far, we couldn’t be happier, and if you too are tired of searching for coupons and clicking through 20 screens of in-your-face ads trying to get you to “BUY MORE SHIT” before hitting the GoDaddy checkout page, you’ll definitely want to check out NameSilo.com.
To summarize, NameSilo.com offers:
Finally, while you don’t generally need coupons with NameSilo.com, you can use GOSILO to receive $1 off your first registration or transfer to compensate you for your time spent trudging through this blog post. So, just follow the directions on the NameSilo Transfer Guide, and you’ll soon be rearing to go!
For those who still can’t comprehend the meaning of ONE TRILLION DOLLARS OF DEBT (let alone $4 TRILLION in a single year), this excellent video by Tony Robbins may help simplify it for you. And moving onto politics, the following article sums up my thoughts quite eloquently…
(NYPost) “It’s good that so many Americans (and possibly non-Americans) donate money to the worthy cause of informing us how bad politicians are. .. Still, I fear all these negative ads will not be enough to counter the extremely destructive and diabolical (though luckily rare) positive ads.”
“The mere thought of one of these positive political ads chills my soul. Either there is a voiceover as the politician meets with hard-working Americans, or the politician looks directly at the camera with his soulless eyes and tells us that we can trust him to fix our problems and strengthen our nation.”
“Look at our bloated government, our countless regulations, and our military engaged in constant conflicts overseas — did we get all this because we listened to the negative ads about our politicians, or because we somehow got it in our heads that we could trust them? After every election, the negative ads stop, and we start to get that fool notion that we can rely on these people.”
“Do we need exorbitant amounts of money from unknown sources to tell us not to hug angry badgers? No, we’ve learned that by word of mouth from our friends, families and neighbors. This is how we should know not to trust politicians. .. If a politician asks for your money, don’t give it to him. And if he tries to trick you and instead asks for other people’s money so he can buy you presents, just get away from him as fast as you can. Catch a ride in a stranger’s van if you have to..”
“We also need volunteers to continue informing people how bad politicians are, even in non-election years; too many folks now have the ridiculous idea that they can trust the people running the government.”
“Many folks don’t trust politicians from one side of the aisle. It’s like they know not to trust a crack addict to watch their kids, yet don’t see anything wrong about dropping the kids off at the meth addict’s house.”
“And once we convince everyone that all politicians are bad, some will ask, ‘Then whom do I vote for?’ Smack them, because they still don’t get it. You don’t vote for any of them. It’s like having a choice of what kind of cancer to get: You’d just pick whichever
one you think you’re most likely to survive.”
“Just remember that, after that new politician takes office and says, ‘Now I’m going to work hard on our nation’s problems and get our economy and job growth going again!’ you respond: ‘Just keep your hands where I can see them, and don’t make any sudden movements or spending decisions.’ ”
America didn’t become great because of the government or its politicians.
America became great IN SPITE of them.
(TheGuardian) “The feminist collective hit the headlines when three members were arrested after an anti-Putin protest. Now they face up to seven years in jail, a prospect that has shocked and radicalised many Russians. On the eve of their trial, some of the women speak exclusively.”
“Pussy Riot aren’t just the coolest revolutionaries you’re ever likely to meet. They’re also the nicest. They’re the daughters that any parent would be proud to have. Smart, funny, sensitive, not afraid to stand up for their beliefs. One of them makes a point of telling me how ‘kindness’ is an important part of their ideology. They have also done more to expose the moral bankruptcy of the Putin regime than probably anybody else. No politician, nor journalist, nor opposition figure, nor public personality has created quite this much fuss. Nor sparked such potentially significant debate. The most amazing thing of all, perhaps – more amazing even than calling themselves feminists in the land women’s rights forgot – is that they’ve done it with art.”
” ‘We show the brutal and cruel side of the government,’ says Squirrel. ‘We don’t do something illegal. It’s not illegal, singing and saying what you think.’ .. Because they are so young. Because they have children. Because what they have done is so unimportant and silly and has all of a sudden become so huge because of this disproportionate reaction. Because it touches so strangely on so many things, and this is where it becomes an event of almost historic proportions. It touches everything: the church and the state, believers and non-believers, the judge and the tsar, and this Russian thing that never ever ends.”
“And it’s that level that is so scary, that has scared so many people across Russia. ‘The Khodorkovsky trial demonstrated that Putin would go after the oligarchs,’ says Pyotr Verzilov. It sent a very clear, unmistakable message to the oligarchs. And what the Pussy Riot trial is showing is that they’ll go after anybody. Nobody is safe.”
Hmmm… sounds like critics of the US government right here at home are also being silenced as well, not that anyone cares all that much about it (well not yet at least, until it more directly affects them)… “A political website that contained stinging criticism of the Obama administration and its handling of the Fast and Furious scandal was ordered to be shut down by the Obama campaign’s ‘Truth Team’, according to private investigator Douglas Hagmann, who was told by ISP GoDaddy his site contained information that was “maliciously harmful to individuals in the government.” — ‘Obama Truth Team’ Orders GoDaddy To Shut Down Website
“The crime in question occurred on 21 February and took precisely 51 seconds. The five women and a film team, plus various supporters and a couple of journalists, entered the Russian Orthodox Cathedral of Christ the Saviour, jumped over a gold rail, stood on the steps of the pulpit (a place where only men may stand) and performed the opening bars of a punk song. You can watch it on YouTube. It starts out as a religious hymn, then mutates into something Sex Pistols-esque, the women kneeling, genuflecting, crossing themselves, jumping up and down and, after a few seconds, being intercepted by security guards and led away.”
“After being ejected by cathedral guards, ‘the police came and they didn’t even open a case,’ says Verzilov. It was only after it appeared on YouTube under the name ‘Virgin Mary Chuck Out Putin’ and got all this attention – Patriarch Kirill watched it and, so the investigators told us, rang Putin and the head of the Moscow police – that it became this great big deal, that they decided that it was some sort of crime.”
“In the press, Patriarch Kirill, the head of the Russian Orthodox Church, called it ‘blasphemous’, saying that the church was ‘under attack’ and that ‘the devil has laughed at us’. ”
“The church’s spokesman, Vsevolod Chaplin, said: ‘God condemns what they’ve done. I’m convinced that this sin will be punished in this life and the next, God revealed this to me just like he revealed the gospels to the church. There’s only one way out: repentance.’ ”
“More than this, though, is how the church has started to act as if it is the propaganda wing of the government. Before the election, Patriarch Kirill said that it was ‘un-Christian’ to demonstrate. And then he said that Putin had been placed at the head of the government ‘by God’. No one was talking about this before. And now everybody is.”
“But the tide is turning. It’s the severity of the penalty that has shocked most Russians. Even conservative, religious Russians who thought their act was silly or offensive. Very few defendants are imprisoned pre-trial. Certainly not ones with young children accused of non-violent crimes. More than 200 well-known public people signed an open letter condemning the trial, including many Putin supporters, and another 41,000 rank-and-file Russians have added their signatures.”
“It’s extraordinary what Pussy Riot have done. How they have taken feminism to one of the most macho countries on Earth. How they have revealed the faultlines at the heart of the Russian state, the moral bankruptcy of the Putin regime. It’s hard to reconcile that with the women I met, with their skinny shoulders and thin wrists and lack of any weaponry bar guts and wit. The word absurd has been worn thin with use, but there’s no other way to describe what is happening in Russia today.”
” ‘Putin is scared of us, can you imagine?’ says Squirrel. ‘Scared of girls.’ “
” ‘The most important dictator, Putin, is really afraid of people,‘ says Squirrel. ‘More specifically, he’s afraid of Pussy Riot. Afraid of a bunch of young, positive, optimistic women unafraid to speak their minds.’ ”
As Senator Gracchus said in the movie Gladiator, “I think he knows what Rome is. Rome is the mob. Conjure magic for them and they’ll be distracted. Take away their freedom and still they’ll roar. The beating heart of Rome is not the marble of the senate, it’s the sand of the coliseum. He’ll bring them death – and they will love him for it.” Uh oh, is the mob awakening…?
(NYTimes) $GJN, “The security in question was extraordinarily complex in its name and its details, but simple in its selling points. It was marketed in $25 units, a popular price point for debtlike securities sold to individual investors, and it promised monthly interest payments for as long as 30 years, at which point the investor would get the $25 back. Those interest payments would fluctuate with interest rates on Treasury bills, but could not go below 3 percent a year or above 8 percent.”
“Wells Fargo, the bank behind the security, now says that anyone who had read the prospectus should have understood that disaster was looming in June, when news related to the security was disclosed. But that disclosure — I’ll get to the details in a minute — had the opposite effect on the market. In New York Stock Exchange trading, the price leapt higher, on heavy volume, and stayed there for weeks.”
“The price per share was $24.88 on July 12, when trading was halted as investors learned they would get just $14.69 a share. Trading never resumed. .. The difference between market expectations and realities boiled down to one fact: Wells Fargo concluded it was entitled to a payment of $10.69 a share to compensate it for the profits it would have made over the next 23 years had the security not been redeemed.”
“That was disclosed, on Page S-12 of the prospectus supplement, and investors were warned that ‘this loss could be quite substantial.’ Wells Fargo thinks that was perfectly adequate disclosure, even though no examples were given to indicate the possible magnitude of the termination payment.”
” ‘It was a very conservative security,’ said one investor, a computer science professor who lost money on an investment he had thought was ‘a very nice, Grandma type” of security.’ ”
” .. The bank had hedged its own exposure to that swap, she said, and it lost money on that hedge. “Substantially all of that payment was used in connection with unwinding hedges,” she said of the $10.97 a share Wells Fargo received. She said the ‘securities were structured to meet investor demand at the time’ they were issued, ‘and the circumstances governing termination were fully disclosed to investors.’ She added that Wells Fargo might have had to pay money to investors on the swap if it had been terminated when interest rates were high, meaning the investors could have gotten a windfall instead of large losses. That strikes me as protesting too much. Under those circumstances, JPMorgan would not have wanted to redeem its security, and would not have done so. ”
So, if rates went UP, meaning that there was almost no chance of JP Morgan calling in the security early, investors might have MADE money?! Sounds like their “hedge” was put on diametrically opposed to any common sense whatsoever.
“Ed Hall, a lawyer and blogger who has written on Strats — and who brought the security to my attention — says he thinks it is obvious that the investors had no understanding of the risks. “Wells needed to place a clear warning at the start of the prospectus, rather than buried deep in the prospectus,” he said.”
(Stocks, Bonds & Politics) “If an adequate warning had been placed in bold and large type at the beginning of the prospectus, WFC/Wachovia would not have been able to sell those certificates to the public at $25. The deal would not have gotten off the ground. There may be a statute of limitations issue, but I seriously doubt that the average individual investor could have reasonably foreseen the events that led up to their loss of capital until WFC took their money in mid-July 2012. On that issue, it is relevant that GJN was trading near $25 up to the time of its delisting.” — Wells Fargo-GJN-Securities Act of 1933
“I have committed fraud. For this I feel constant and intense guilt. .. Through a scheme of using false bank statements I have been able to embezzle millions of dollars from customer accounts at Peregrine Financial Group, Inc. The forgeries started nearly twenty years ago and have gone undetected until now. I was able to conceal my crime of forgery by being the sole individual with access to the US Bank account held by PFG. No one else in the company ever saw an actual US Bank statement. … I had no access to additional capital and I was forced into a difficult decision: Should I go out of business or cheat? I guess my ego was too big to admit failure. So I cheated, I falsified the very core of the financial documents of PFG, the Bank Statements. .. I also made forgeries of official letters and correspondence from the bank, as well as transaction confirmation statements.”
“Using a combination of Photo Shop, Excel, scanners, and both laser and ink jet printers I was able to make very convincing forgeries of nearing every document that came from the Bank. I could create forgeries very quickly so no one suspected that my forgeries were not the real thing that had just arrived in the mail.”
“When it became a common practice for Certified Auditors and the Field Auditors of the Regulators to mail Balance Confirmation Forms to Banks and other entities holding customer funds I opened a post office box. The box was originally in the name of Firstar Bank but was eventually changed to US Bank. I put the address “PO Box 706, Cedar Falls, lA 50613-0030″ on the counterfeit Bank Statements. When the auditors mailed Confirmation Forms to the Bank’s false address, I would intercept the Form, type in the amount I needed to show, forge a Bank Officer’s signature and mail it back to the Regulator or Certified Auditor.
When online Banking became prevalent I learned how to falsify online Bank Statements and the Regulators accepted them without question.”
Full PFG Affidavit (including part of the suicide note): PFG Affidavit (Scribd)
PFG once again proves that not only is the Sanctity of Segregated Funds “guideline” all but dead, but that it was really just a myth all along. Far be it for regulators to pick up a phone just once over a 20 year period and speak with an actual representative of the bank to confirm the existence of hundreds of millions of dollars.
But perhaps the most frightening thing about all these blowups using client capital, is that by the time this is all over, with so many firms secretly reaching for yield any way they can since interest rates have been stuck at 0%, how many more funds, companies, clearing firms, and brokerage houses blow up before all is said and done. And even if they get away with it for a while, I can’t imagine what hell will break loose once interest rates start climbing again in the U.S. (as they have in Greece, Italy, Spain, etc). Unfortunately, there’s still no way for the average person to tell who’s gonna get caught with their pants down once the tides turn. And while I don’t very much trust the FDIC or SIPC either (especially if many institutions all collapse simultaneously), it’s still better than nothing if regulators want to hold to the claim of actually somewhat protecting innocent customers. Just ask some of Madoff’s ex-clients.
Often times such blowups start with the coverup of a smaller loss (or some kind of “reaching for yield” or “naked hedge” scenario that backfired). The CEO figures he’ll be able to “kick the can” down the road long enough to figure out how to dig out of the hole (hey, the government does it all the time, so why can’t we all)! Perhaps he can outgrow the “discrepancy” over time and glaze it over. Such wishful thinking inevitably leads to even bigger failures and blowups (just like repeatedly lending more money to defunct countries who have absolutely no way to pay it back or even print their way out of it).
But perhaps the government can pass some new laws, rules, and regulations, and create a few new oversight bureaus, to make sure the original oversight commissions enforce the laws, rules, and regulations already in place.
So far, clients of these firms would have likely faced less risk had the government simply told them “caveat emptor”: realize that any firm where you entrust your hard-earned money could disappear with it overnight, so diversify wisely… And if you do get caught up in one of these frauds, hopefully your money went to help some other “poor” politically-connected bankster stay afloat and save the economy while you go back to eating cake…
As amazing as it is frightening, especially where personal privacy is concerned (not to mention false imprisonment)… (Gizmodo) “Within the next year or two, the U.S. Department of Homeland Security will instantly know everything about your body, clothes, and luggage with a new laser-based molecular scanner fired from 164 feet (50 meters) away. From traces of drugs or gun powder on your clothes to what you had for breakfast to the adrenaline level in your body—agents will be able to get any information they want without even touching you. And without you knowing it.”
“The machine is ten million times faster—and one million times more sensitive—than any currently available system. That means that it can be used systematically on everyone passing through airport security, not just suspect or randomly sampled people.”
“.. Genia Photonics, says that its laser scanner technology is able to ‘penetrate clothing and many other organic materials and offers spectroscopic information, especially for materials that impact safety such as explosives and pharmacological substances.’ ”
“This compact and robust laser has the ability to rapidly sweep wavelengths in any pattern and sequence. So not only can they scan everyone. They would be able to do it everywhere: the subway, a traffic light, sports events… everywhere.”
“The small, inconspicuous machine is attached to a computer running a program that will show the information in real time, from trace amounts of cocaine on your dollar bills to gunpowder residue on your shoes.”
“There has so far been no discussion about the personal rights and privacy issues involved. Which “molecular tags” will they be scanning for? Who determines them? What are the threshold levels of this scanning? If you unknowingly stepped on the butt of someone’s joint and are carrying a sugar-sized grain of cannabis like that unfortunate traveler currently in jail in Dubai, will you be arrested?”
“And, since it’s extremely portable, will this technology extend beyone the airport or border crossings and into police cars, with officers looking for people on the street with increased levels of adrenaline in their system to detain in order to prevent potential violent outbursts? And will your car be scanned at stoplights for any trace amounts of suspicious substances? Would all this information be recorded anywhere?”
(UK DailyMail) “Keith Brown, a council youth development officer, was travelling through the United Arab Emirates on his way back to England when he was stopped as he walked through Dubai’s main airport. A search by customs officials uncovered a speck of cannabis weighing just 0.003g – so small it would be invisible to the naked eye and weighing less than a grain of sugar – on the tread of one of his shoes.”
“One man has even been jailed for possession of three poppy seeds left over from a bread roll he ate at Heathrow Airport. Painkiller codeine is also banned. If suspicious of a traveller, customs officials can use high-tech equipment to uncover even the slightest trace of drugs. Mr Brown was detained and arrested in September last year and has been held in a cell with three other men in the city prison ever since.”
“A 25-year-old Briton who was found with a similar speck in one pocket as he arrived on holiday has been awaiting sentence since November. Meanwhile a Big Brother TV executive has so far been held without charge for five days after being arrested for possessing the health supplement melatonin. The authorities claim to have discovered 0.01g of hashish in his luggage.”
“Last night campaign group Fair Trials International advised visitors to Dubai and Abu Dhabi to ‘take extreme caution‘. Chief Executive Catherine Wolthuizen said: “We have seen a steep increase in such cases over the last 18 months. ‘Customs authorities are using highly sensitive new equipment to conduct extremely thorough searches on travellers and if they find any amount – no matter how minute – it will be enough to attract a mandatory four-year prison sentence.‘
Dr. Michael Burry saw the mortgage crisis coming from miles away. He was featured in Michael Lewis’ “The Big Short”, along with others who also saw the debacle coming. This year, Dr. Burry was keynote speaker at the 2012 UCLA Dept of Economics Commencement. It’s a speech well worth listening to. Dr. Burry is quite pessimistic about the future of U.S. as the debt-to-GDP ratio rises to levels higher than that of Greece. And the problems are no longer in the future, he says, but they have already begun to manifest themselves throughout society.
Perhaps most shocking to some (unless you’ve already gotten used to the TSA groping children)… he describes what happened to him after he wrote a New York Times op-ed criticizing the actions of the government and the Federal Reserve ( I Saw the Crisis Coming. Why Didn’t the Fed? – NY Times ). Within weeks all 6 of his funds were audited, he was compelled to provide Congress with every email he wrote since 2003, and the FBI showed up at his door. He wasted thousands of hours and over $1 million in legal/audit fees defending himself against a frivolous witch hunt against someone with clout who dared stand up and say “I saw it, why didn’t you?”
While not one bankster has ended up in jail, banks have collectively been given $$ TRILLIONS more of our money. And instead of consulting with truly smart and insightful people like Burry (instead of the crooked bankers themselves) as to how such events can be avoided in the future, our government offensively attacks those who predicted the crisis well in advance. Instead of seeing people like Burry as able to offer true wisdom and insight, they treat him as if he had somehow played a part in masterminding all the pervasive and massively over-leveraged mortgage fraud that went on.
Another great quote from his speech: “As it turns out, information is not perfect, volatility does not define risk, markets are not efficient, the individual is adaptable.”
As a final note, here’s another great bit of Burry’s insights I’ve kept on hand since reading “The Big Short“:
‘ In Dr. Mike Burry’s first year in business, he grappled briefly with the social dimension of running money. “Generally you don’t raise any money unless you have a good meeting with people,” he said, “and generally I don’t want to be around people. And people who are with me generally figure that out.” He went to a conference thrown by Bank of America to introduce new fund managers to wealthy investors, and those who attended figured that out. He gave a talk in which he argued that the way they measured risk was completely idiotic. They measured risk by volatility: how much a stock or bond happened to have jumped around in the past few years. Real risk was not volatility; real risk was stupid investment decisions. “By and large,” he later put it, “the wealthiest of the wealthy and their representatives have accepted that most managers are average, and the better ones are able to achieve average returns while exhibiting below-average volatility. By this logic a dollar selling for fifty cents one day, sixty cents the next day, and forty cents the next somehow becomes worth less than a dollar selling for fifty cents all three days. I would argue that the ability to buy at forty cents presents opportunity, not risk, and that the dollar is still worth a dollar.” He was greeted by silence and ate lunch alone. He sat at one of the big round tables just watching the people at the other tables happily jabber away. ‘
“Someone once told me that time was a predator that stalked us all our lives. I rather believe that time is a companion who goes with us on the journey and reminds us to cherish every moment, because it will never come again. What we leave behind is not as important as how we’ve lived.” - Captain Jean-Luc Picard, Star Trek Generations
Time is our most precious resource because it can never be regained or recovered. And the last thing we want to do is unwittingly waste our most precious asset.
James Altucher wrote some great articles on how to deal with crappy people (and internet trolls) who seek only to lure you into wasting your time, energy, and physical well-being by engaging in fruitless interactions with them. Every now and then, we all seem to unwittingly fall into this trap. I’ve summarized some of Altucher’s key points here to help you quickly realize the trap you’re falling into and plug that wasteful leak as quickly as possible.
“Emotional– If someone is a drag on me, I cut them out. If someone lifts me up, I bring them closer. Nobody is sacred here. When the plane is going down, put the oxygen mask on your face first. Family, friends, people I love – I always try to be there for them and help. But I don’t get close to anyone bringing me down. This rule can’t be broken. Energy leaks out of you if someone is draining you. And I never owe anyone an explanation. Explaining is draining.” – How to be THE LUCKIEST GUY ON THE PLANET in 4 Easy Steps
“Crappy people: People who will do you harm, no matter what you do, for no reason at all. They never will get it. They will say and do things to you and they will never ever understand how evil they are. .. And you will hate them. HATE THEM. And they knock on the door of your brain at three in the morning and they want to yell at you. And you yell back. And they yell back. And on and on. All day. All afternoon. The ongoing conversation with the shittiest people in the world. They will torture you, kill you, rape your wife and slit the thoughts out of your mind and not even care because they think they are doing the right thing . You know who I’m talking about. Because you have a good 20 or 30 of these in your life just like I do. They might even be former friends, relatives, neighbors, bureaucrats, whatever, whoever, whenever. They swoop down on your life and are just plain crappy and they won’t even know it. .. This is the worst category. I’ll tell you one more anecdote. Two seconds ago someone posted a horrible comment on my blog. I won’t repeat it. Racist, mean, rude to me, whatever. I deleted the post, blocked the user, blocked his IP address. And then I was going to send him an email telling him what I thought of him. I was angry. Then I stopped myself. You have to stop yourself.
Remember this: When you get in the mud with a pig, you get dirty and the pig gets happy.
There is only ONE only way to deal with these people in a way that will make you happier instead of sadder. ONE WAY. And it always works.
COMPLETELY IGNORE THE EVIL PEOPLE:
This isn’t easy. It’s a daily discipline. Much easier to do a 1000 pushups. I had an article recently on the Wall St Journal site that had 971 comments. No exaggeration when I say 950 of the smartest anonymous trolls on the internet called me an idiot moron and worse. I ignored all the comments. Great. I could care less. I was the winner there. ” – How to Deal With Crappy People
“Q: When is revenge justified? A: NEVER. It is never ever justified. I have had people do horrible things to me. Horrible. But lets say I have 40 years left to live on this life. Any time spent on revenge will reduce the number of happy days I have left. Not only is revenge never warranted but even thinking about it wastes brain cycles. It’s like in the above example: “Bill who?” That’s why its such a great saying, ‘the best revenge is living well.‘ I have plenty of ways to revenge the stupid, crappy people I’ve had to deal with. I’d rather walk by the Hudson River, read a book, and have a waffle. (Note: if we are talking about violence, there are proper channels for dealing with it: police, support groups, documentation, etc)” — The Crappy FAQ: All Questions Answered About Crappy People
“Time. A girl I used to date called me up crying. She said, ‘I’m fat. Everyone is ripping me off. I’m getting insomnia. And I’m going to run out of money in two years.’ She had been married to someone very successful and had two years left on her alimony payments. I said to her, ‘Well, I have the solution that will solve all of your problems.’ She wanted to know what it was. I said, ‘Stop eating at that fancy steak restaurant every night. Stop drinking until two in the morning. Stop hanging out with that same group of people you are always complaining to me about. That’s it. Then come back to me in six months I bet everything will be better.’ She said, ‘I can’t do that. My whole lifestyle depends on those things you just said. ‘So now she weighs more, has less friends, less money, and is more scared. She’s considering surgery to help with these things but I’m not sure what surgery will help. Meanwhile, she has three million dollars in the bank and is 100% convinced she is going to go broke within five years and obsessively thinks about it. Most people have no clue about time management. But the basic idea is: Avoid dinner and TV and you’ve just saved yourself 100s of hours a month. HUNDREDS! And you will lose weight, you will wake up earlier, when you have time to be creative in silence (I’m writing this at 5am).” — Get Rid of Your Bad Habits
In late 2011, once the market bounced off its early October lows, there was increasing chatter over how it’s probably too early for a real full-blown European debt crisis at that point in time, and how the “powers that be” would likely run the market higher into the new year. But, the real “tell” would be how the markets behaved come the new year, and that’s when all hell would likely break loose all over again. I too began to think that while the rest of 2011 may lead to a good bounce in the markets, early 2012 could bring back some real turmoil.
Then a thought struck me. Between all the blog posts, newspapers, and television media pundits calling for a “let’s see how January goes” moment – hey, even I myself was thinking the same thing… What if, with all of us worrying over that same possibility, January turned out just fine – a perfect “non-event”? And heck, even Ben Bernanke was probably worried about the new year, and we all know what that leads to: more cheap money and credit would likely be dumped right back into the markets at the first hint of trouble.
So as 2011 came to a close, while I did sell a few positions just in case, I decided to leave most of my longer-term positions as is. And, while hindsight is always 20/20, that did turn out to be a great decision. Of course, we never know for sure, and that’s why traders and investors must consistently practice sound risk management. One must always protect against the times we miss. And it not only serves to protect and preserve your bankroll, but it also helps provide the clarity and peace of mind necessary – an edge in itself – to properly consider and evaluate the information available to you. Worrying if your over-leveraged position might blow up in your face is not going to help you make a smart decision.
Traders and investors alike must always be open to taking every piece of relevant information into consideration, including our own preconceived notions and biases. As Ray Dalio of Bridgewater Associates once said “I constantly want to know what I don’t know. I want to know when I am wrong. And it helps when someone points it out.” While it certainly helps if someone else points it out, we can also objectively look at our own thought process, feelings, and emotions and consider how they too may be wrong or dangerously biased. This in itself becomes part of a valid trading edge. Everything counts, and we are often our own worst enemy in most endeavors we pursue. As in playing chess or poker, those players who patiently take a step back in order to “see the bigger picture” and contemplate the best moves will, in the long-run, always triumph over those less savvy players just itching to make a move.
We should always ask ourselves what do other traders think they know. What are they worried about or afraid of and to what extent? Am I starting to feel worried or nervous myself, and are these thoughts rational and based on sound reasoning? There was a great line in the movie Margin Call when CEO Tuld (played by Jeremy Irons) says “It’s not panicking if you’re the first one out the door.” Granted, no one (and no firm) should ever be leveraged to that extent in the first place, but from his “clear” perspective the mortgage game was up. And you certainly don’t want to be the one panicking out at the bottom of a move, with or without margin calls over your head.
Am I afraid that if don’t buy some stock tanking like a “falling knife” right now, I’ll miss the huge bounce coming right around the corner? Is it possible many other traders are thinking the same way? The reality is that it’s rarely “too late” to get a better price when buying into a crashing stock. When the price action settles down, stabilizes, and starts to rebound, the stock will probably still be priced below your initial entry. Sometimes our own feelings can give us strong clues as to what the “crowd” is thinking as well. There was no need to predict ahead of time that October 4th, 2011 would be the low of the last crisis and panic. However, through awareness of our own feelings, astute observation into the collective thoughts of others, and by watching the price action in relation to the current headlines, we are continually provided with clues as to what is more likely to happen next. For example, each time new headlines appeared about Greece and its debt problems, the chatter they generated seemed to lead to increasingly complacent market action and behavior. There would be short-lived dips that would quickly recover, as if no one really cared any more.
And more recently, how has the market reacted as we’re hitting new multi-year highs? Ironically, the VIX (fear) index (and even more so, the publicly traded VXX index based on the VIX futures) has been acting more fearful of a potential coming crash the higher the market goes. Markets don’t generally crash right after making new highs, unless they’ve just gone through a high-volume blow-off top. I recently read a study analyzing future market behavior when there are strong upward moves in both the VIX/VXX and the overall market in the same day. The study showed that it has lead to even stronger upward price action in the near future. And so far in 2012, that’s exactly how things have played out in the market. But human behavior is not rational, and memory of the recent volatile past is still imprinted in traders’ minds. So with each new high in the market, traders buy the VIX products expecting a crash that never materializes, and are then hit over the head with some of the highest levels of contango (the huge cost of rolling over current futures and options contracts to the next month) the VIX market has ever experienced. And of course, traders are also greeted with another leg up in the market as well. Never has it been easier for me to explain or visualize the term “climbing a wall of worry”.
In reality, it is the unexpected shocks that lead to the most “real” fear. Especially where credit and leverage is concerned, it is these quick shocks that are most likely to catch firms (such as MF Global) unprepared and caught with their pants down. But the more time that goes by with an event in the forefront, the longer the world has to deal with it, adjust by preparing for the worst, and “get used to” the new norm. Just remember back to the Japanese nuclear crisis, the BP oil spill, or even more recently, the fears over a massively understated Greek CDS credit event once the ISDA declared the Greek bond “re-pricing” a credit event. Banks, governments, and central banks have now had upwards of eight months to deal with the possibility of messy CDS defaults. While there were some pundits calling for the possibility of three trillion dollars worth of losses versus the three or so billion claimed, it was likely that “the powers that be” had all the time they needed to deal with these issues. And, believe it or not, the ISDA CDS auction also came to pass without incident. That’s not to say there aren’t plenty of roaches crawling around everywhere. But just as Countrywide Financial and Morgan Stanley were rolled into Bank of America to perhaps conceal a much worst debacle in the sub-prime mortgage market, the “powers that be” have likely had enough time to take similar measures to deal with any more potential blow-ups in the Greek bond market (well, at least for the time being).
In conclusion, always consider all the information available to you, be aware of what you don’t know, and consider where you might be flat-out wrong. Seek to develop the focus and patience to position yourself in the best possible way, as opposed to merely trying to capture the next small wiggle. Instead of missing out or being incorrectly positioned, you may provide yourself a much better chance to capture a nice chunk of the real move about to appear just around the bend.
(Josh Brown / RegisteredRep) “There are some stock market land mines that will invariably destroy anyone foolish enough to stand on them for an extended period of time. .. Until you’ve been blown up by a few of these murder holes yourself, it’s hard to recognize them. Below is a list of the dark alleys you never want to wander down for your own future financial well-being. .. These alleys are strewn with various land mines, any of which could become your very own murder hole at any time. You probably won’t listen anyway, but don’t say I didn’t warn you.”
SPACs – “According to Reuters, the last big wave of 57 SPACs that debuted at the height of the credit bubble in 2007 had raised a combined $11.3 billion. That’s a whole lot of “dumb money.” The best thing that could’ve transpired for those 57 companies would have been the return of cash that occurs when the clock runs out and a deal hasn’t been consummated. In fact, there were a few hedge funds involved with some of those SPACs that were forcing that dissolution to occur using the voting power of their stock positions. .. If it weren’t so true, it would almost be laughable how horribly and slowly these things die. And by the way, many of these SPACs have been China-related in recent years. For investors, the China-SPAC combination is like being beaten up after school and then coming home to find that your parents have moved away without telling you. .. And just so you know, the investment banks that make these stepchild IPOs are almost always connected to an aggressive brokerage sales force. How else could $100 million be raised for such a hare-brained scheme?”
Chinese Reverse Mergers – “The short sellers who have attacked and unmasked the Chinese RTO fraud machine have done investors a favor in the long run. I’ve advised people to avoid the entire China stock sector until the companies grow up a bit and start acting like professionals. After all, if the legendary John Paulson can be taken in by these charlatans, what chance do you have?”
One-Drug Biotechs – “The vast majority of drug trials fail to satisfy the FDA, and approvals are the exception, not the rule. .. If you must own biotechnology, try to go with a larger company that has several drugs on the market or in development. It may not produce a 10-fold return, but it also won’t vaporize your portfolio on an FDA setback.”
Private Placements – “So I’ll tell you what happens and what will always happen when retail brokers bring their clients private banking deals. By the time a company is desperate enough to go to broker/dealers for funds, it means that it is already at the end of its rope. The retail brokers are offered a 10 percent commission to show the deal to their clients. They are also promised warrants and stock options should the company end up going public. (It won’t.) This exorbitant compensation for the brokers is a huge red flag. .. The higher the commission or selling concession a broker is paid to sell a product, the worse that product will be for his or her clients. Brokers take note: selling a client a private placement that pays you a tenth of that money back is the same thing as telling your client to go f*%k himself. And by the way, the more interesting the company, the more dangerous the private placement offering.”
Other investor traps to watch out for:
And let’s not forget to mention double and triple ETNs (Exchange-Traded-Notes) that will evaporate your portfolio faster than you can say “WTF“?!…
(Robert Sinn) “When the economic data and financial markets soften the Fed strikes a more dovish tone, and as we saw yesterday when things improve the Fed Chairman does not mention the idea of additional stimulus and acknowledges the potential for a short term spike in inflation due to higher gasoline prices.”
Bernanke says, “Since these projections were made, gasoline prices have moved up, primarily reflecting higher global oil prices – a development that is likely to push up inflation temporarily while reducing consumers’ purchasing power.” And despite the fact that Bernanke didn’t mention “quantitative” once — here or anywhere else in his testimony — the media was quick to hype the Fed’s mere acknowledgement of “potential inflation” as a change in stance.
Full Story: Bernanke’s Poker Game (RobertSinn)
However, the majority of the mass media conveniently overlooked the real story of the day…
(WSJ) “The European Central Bank handed out €529.5 billion ($712.81 billion) in cheap, three-year loans to 800 lenders, the central bank’s latest effort to arrest a financial crisis now entering its third year.
Wednesday’s loans were on top of the €489.2 billion of similar loans the ECB dispensed to 523 banks in late December. The ECB’s goal is to help struggling banks pay off maturing debts and to coax them to lend to strained governments and customers. The takeup of this week’s loans was roughly consistent with what bankers, investors and analysts had expected.”
Full Story: ECB Gives Banks Big Dollop of Cash (WSJ)
WOW! So the same day Bernanke is noticing some possible inflation, most news sources completely overlooked one of the greatest liquidity injections ever on the very same day… And in hyping up the wrong story to “help” cover it all up, the media also gave these same banks the opportunity to park their free cash right back into the stock markets at a short-lived “NO QE3″ discount.
(Jim Sinclair) “Because of the volatility you experienced in gold today, and the absolute fact that it was an MSM cover operation of today’s covert operation, which was one of the largest injections of QE liquidity into the Euro banking system ever, you must know the facts.”
“If, in fact, what Bernanke attempted to tell the investment world today, that QE may not be necessary because of a modest improvement in the statistics of unemployment, if that was truly to be believed, then the stock market should have been off 800 points while gold was gold was down $100. Because the same thing moving the stock market is what’s moving the metals and that is pure liquidity.”
So for those of you worried about an end to quantitative easing, alleviate your fears. QE and cheap easy money for the well-connected kleptocrats is alive and well and not likely to end all that soon…
(TheReformedBroker) “When stalking a growth stock awaiting better entries or looking for new growth stock ideas, one of the best things you can do is get a hold of Wall Street’s Upgrades and Downgrades each morning. .. Typically a fast-growing company will stumble on a specious analyst downgrade and then the accumulation will resume as the institutional fans of the story get over it and come back with buy orders.”
Examples of B.S. downgrades:
“Valuation - growth stocks don’t trade on ‘valuation’, they trade on sentiment and the expectation of future earnings, see the numerous valuation-based downgrades of lululemon and Whole Foods.
Dropping Coverage - believe it or not there are institutions who will actually sell on the news that a brokerage firm is dropping or suspending coverage in a name due to an analyst leaving or something.
Channel Checks - there is only one thing sell-side analysts suck more at than tackle football and that is ‘channel checking’ – they literally cannot do it in such a way that there are actionable insights to be gleaned from it. Think about how many times you heard about strength in non-Apple tablets (there never really was any) or weakness in the iPhone 2 (also, never really happened). Channel checks are a money-loser in most cases – wait for the actual hard data, forget what people say they’ll do or think they’ll do.
Short-Term Pressures - chances are if you are interested in a growth stock investment, what happens tomorrow or the next day has little to do with anything. For example, I saw an analyst downgrade Buffalo Wild Wings, one of this moment’s greatest growth stories, because of a rise in chicken wing costs in early February. And while the analyst was correct in terms of those costs rising, it’s really a trivial, short-term matter to anyone who intends to invest in the business.
Strategic Direction - some people are meant to run businesses and others are meant to analyze and critique them. When a company announces a new strategic direction or goal, the knee-jerk Wall Street response is to cut it to neutral due to ‘uncertainty’. I have no interest in seeing sell-side analysts vote on the strategic decisions of a company – management often knows more about their market than the eggheads do.”
(DynamicDividend) “If the data I’ve collected over the last six months is any indication, a very strong case can be made for the initiation of a dividend as a signal that a stock is about to generate market-beating returns.”
“Of the 36 stocks listed, only three are currently trading lower than their final closing price prior to declaring their first payout, and only seven have been outperformed by the S&P 500 since the same announcement. The average gain by the new dividend stocks (22.75%) is an absurd 15.67% better than the average gain by the S&P 500 (7.09%) during comparable periods.”
“Some highlights include: SMF Energy gaining 182% (vs. 17% for the S&P 500), Ebix gaining 58% (vs. 12%), Intuit gaining 40% (vs. 14%), Xyratex gaining 68% (vs. 2%), and Emcor Group gaining 53% (vs. 16%). Solutia has popped 77%, thanks in large part to Eastman agreeing to pay a 42% premium for the company last week.”
DynamicDividend.com is a terrific source of all types of dividend-related news and information, including lists of “Dividend Dynamo” stocks that have had the longest run of annual consecutive dividend growth.
Stocks from List: NRGM, RRMS, ZMH, A, ESIO, CSPI, FMCN, GNE, KNSY, SOA, FBNK, GFF, IACI, NOR, LXK, PCTI, OILT, CORE, ACFN, HSNI, EME, HL, PRA, EBIX, WWAY, NICK, CECE, INTU, CGI, NMFC, KINS, DSW, FUEL, AMOT, JCOM, XRTX
(BloombergMarketsMagazine) “Cash generates minuscule returns. Commodities, especially gold, can soar or tumble in an instant. In these perplexing times, Bloomberg Markets magazine in its January issue asked 10 billionaires 14 questions covering their views on the global economy, where they see opportunities and who gave them the best advice.”
John Paul DeJoria (Primary Assets: Stakes in John Paul Mitchell Systems and Patron Spirits Co. Residence: Los Angeles Industry: Retail):
“Influential indicators? Beauty salons. Typically, customers will visit every six weeks; in downturns, that drops to every eight weeks. When the frequency starts to go up again, it indicates the economy is improving.”
“Where to park $1 million in cash? Twenty-five percent in gold, 25 percent in silver, 25 percent in NYSE blue-chip stocks that pay a dividend and 25 percent between Asian and European blue chips that pay a dividend.”
Eli Broad (Primary Assets: Investments, art Residence: Los Angeles Industries: Banking, real estate):
“Influential indicators? Consumer confidence, unemployment and political gridlock.”
“Best investing advice? Don’t bet the farm.”
“Margin in portfolio? Not in this uncertain world.”
“Where to park $1 million in cash? High-quality multinational consumer companies such as Procter & Gamble Co., Coca-Cola Co., Kraft Foods Inc. and Johnson & Johnson. (JNJ)”
Peter Hargreaves (Primary Asset: 32.2 percent of Hargreaves Lansdown Plc, the U.K.’s biggest retail broker Residence: Bristol, England Industry: Financial services):
“Fixed-income investments? German bonds for the currency play when the euro implodes”
Where to put $1 million in cash? $500,000 in Singapore dollars and $500,000 in Norwegian krone.”
“Is there a money manager you would trust with your entire portfolio? Me.”
Apparently, this is a scam that’s been going around for a couple of years now, and can be especially dangerous for unsuspecting, less computer-savvy target victims. While many of the scam reports I’ve come across seem to have targeted England and Australia, it would appear that the scammers are now targeting more Americans as well. Today, we received one such call. The scam goes as follows:
You get a call from some Indian guy with a generic name such as “Adam Smith” who explains to you in horribly broken English that he’s a registered Microsoft technician and has received a call alerting him that your IP address is the source for serious attacks on their servers due to multiple computer virus infections on your end. If you ask for any information on the source or target IP addresses involved, the person will attempt to deflect the question, and inform you that he/she is unauthorized to provide you that information!
They will proceed to try convincing you that your computer is full of viruses (based on some standard status and error messages automatically generated by your computer), and they try to get you to grant them complete access to your entire computer (passwords, credit cards, everything) via the free “Ammyy Admin” remote desktop control software. If you don’t agree to buy their crappy, useless, and thieving “support services”, they’ll use the computer access you openly granted them to screw up your computer and randomly delete stuff (watch them erasing things off the desktop in this video).
‘Nuff said… BE WARNED, ALWAYS BE WARY, and never fall for some schmuck on the phone trying to con information out of you, or get you to run any type of software on your PC.
Watch the video to see exactly how this scam plays out.
Perhaps the most frightening part of this 2006 video is that not one of these police officers objected to shooting rubber bullets at an unarmed woman’s head and laughing about it. Or if any of them did, they certainly did not feel comfortable enough to go against the majority of their fellow officers and make a point of it… And, just like my recent 2011 pre-Thanksgiving Day parade incident, I’m experiencing, hearing, and seeing more stories than ever of such treatment that don’t even involve protests or rallies (and that doesn’t even consider all the frightening TSA-abuse stories – against children no less!). It’s more about control and demoralizing compliance.
When an army goes to war, the command generally always comes up with some derogatory term to address the enemy, as it’s much easier to rape, demean, and/or kill people when you’re referring to them as “Gooks” or “Cockroaches”.
“In Rwanda they referred to Tutsis as cockroaches,” explains Omaar. “They were not human beings. This is very important to understand, very close parallels to what happened in Hitler’s Germany. ‘Don’t worry, you’re not killing humans like you. You are killing some vermin that belongs under your shoe. You’re killing cockroaches.‘ – The Few Who Stayed – Defying Genocide in Rwanda (AmericanRadioWorks)
(NYTimes) “They called people ‘animals’ and ‘savages.’ One comment said, ‘Drop a bomb and wipe them all out.‘ .. Hearing New York police officers speak publicly but candidly about one another and the people they police is rare indeed, especially with their names attached. But for a few days in September, a raw and rude conversation among officers was on Facebook for the world to see — until it vanished for unknown reasons.” – N.Y.C. Police Maligned Paradegoers on Facebook (NYTimes)
(WashingtonsBlog) “Journalists from across the spectrum have documented the militarization of police forces in the United States, including, CNN, Huffington Post, the Cato Institute, Forbes, the New York Times, Daily Kos, Esquire, The Atlantic, Salon and many others. Many police departments laugh at and harass Americans who exercise their right to free speech. Indeed – especially since police brutality against protesters has been so blatant in recent months, while no top bank executives have been prosecuted – many Americans believe that the police are protecting the bankers whose fraud brought down the economy instead of the American people.”
“Most assume that the militarization of police started after 9/11. Certainly, Dick Cheney initiated Continuity of Government Plans on September 11th that ended America’s constitutional form of government (at least for some undetermined period of time.) On that same day, a national state of emergency was declared … and that state of emergency has continuously been in effect up to today. But the militarization of police actually started long before 9/11… in the 1980s.”
“SWAT teams were originally designed to be used in violent, emergency situations like hostage takings, acts of terrorism, or bank robberies. From the late 1960s to the early 1980s, that’s primarily how they were used, and they performed marvelously. .. But beginning in the early 1980s, they’ve been increasingly used for routine warrant service in drug cases and other nonviolent crimes. And thanks to the Pentagon transfer programs, there are now a lot more of them.”
“After 9/11 the government drew up the Patriot Act within 20 days and it was passed. The Patriot Act is huge and I remember someone asking a Justice Department official how did they write such a large statute so quickly, and of course the answer was that it has been sitting in the drawers of the Justice Department for the last 20 years waiting for the event where they would pull it out.”
“The militarization of police forces throughout the United States cannot be taken in a vacuum, but is part of the ongoing drift towards a police state. The government has said for years that American citizens on U.S. soil may be targets in the war on terror, and is using anti-terrorism laws to crush dissent.
Indeed, you can be labeled as or suspected of being a terrorist simply for questioning war, protesting anything, asking questions about pollution or about Wall Street shenanigans, supporting Ron Paul, being a libertarian, holding gold, or stocking up on more than 7 days of food. Government agencies such as FEMA are allegedly teaching that the Founding Fathers should be considered terrorists. So perhaps that means that any people who like American values are ‘terrorist sympathizers’. ”
(WashingtonsBlog) “Obama Wants to Veto the Indefinite Detention Bill Because It Would Hold the U.S. to the Geneva Convention” – The Real Reason for Obama’s Threat to Veto the Indefinite Detention Bill (Hint: It’s Not to Protect Liberty)
(TheReformedBroker) “Sometimes when stocks gap down on earnings they don’t bounce – they keep going and going lower, never to be heard from again. But I knew $LULU would at least bounce, even if it eventually retests the lows from this morning where I bought in (41.75 to 42.25). This is because LULU didn’t miss earnings or revenue or guide lower for the coming quarter – it simply didn’t blow The Street away by the same magnitude that it had in prior quarters. It still grew faster than most other public retailers and it still has more room to grow than any retailer I can think of.”
“Only an imbecile looks at +30% revenue growth as a ‘disappointment’ – especially amidst a market full of other stocks that couldn’t grow their top line revenues if their lives depended on it. And the fact that LULU may not have met sell-side analyst expectations means absolutely nothing to me. Because I’ve seen this short-term myopia before back when Coach ($COH) was a young, mid cap growth story during the last recession (2002 – 2003). It would blast the Street’s stupid expectations out to Jupiter three quarters in a row and then have a quarter that was just okay. People couldn’t wait to write it off and say it was “decelerating” or had peaked. And then it would smash the numbers for another three or four quarters in a row just to piss the naysayers off.”
“Short-termism is foolish when you’re talking hyper-growth potential and a young company with nothing but room to expand. I’m not telling you LULU is cheap or ‘deserves’ a 30 multiple or blah blah blah. I’m saying that stocks don’t get punished for growing revenues at a 30% clip for long. I knew they’d bring it back simply for the fact that, well, there just aren’t any other LULUs to buy, plain and simple.”
Full Story: lululesson (TheReformedBroker)
(SacBee) “Eighty-eight-year-old retired metallurgist Bob Wallace is a self-described tinkerer, but he hardly thinks of himself as the Thomas Edison of the illegal drug world. He has nothing to hide. His product is packaged by hand in a cluttered Saratoga garage. It’s stored in a garden shed in the backyard. The whole operation is guarded by an aged, congenial dog named Buddy.”
“But federal and state drug enforcement agents are coming down hard on Wallace’s humble homemade solution he concocted to help backpackers purify water. Wallace says federal and state agents have effectively put him out of business, because authorities won’t clear the way for him to buy or sell the iodine he needs for his purification bottles. Rejected for a state permit by the Department of Justice, he is scheduled to appeal his case before an administrative judge in Sacramento next month.”
“Meanwhile, the exasperated Stanford-educated engineer and his 85-year-old girlfriend said the government – in its zeal to clamp down on meth labs – has instead stopped hikers, flood victims and others from protecting themselves against getting a really bad case of the runs.”
“.. But about four years ago, the DEA began to look closely into the product, even citing it in a position paper, and suggesting that it was being used by cranksters as well as campers. And in 2007, federal regulations were passed strictly regulating the chemical. Wallace said the new rules mandated that he had to pay a $1,200 regulatory fee, get federal and state permits, keep track of exactly who was buying his product and report anybody suspicious .”
“Wallace ignored the fee. And if they wanted a list of his customers, he fumed, all they would get would be camping equipment store managers and wholesalers.”
“In May, his Oklahoma distributor – warned by the DEA – said he could no longer send Wallace iodine. .. For Wallace to comply, the state Department of Justice fingerprinted the couple and told Wallace he needed to show them such things as a solid security system for his product . Wallace sent a photograph of Buddy sitting on the front porch. ‘These guys don’t go for my humor,’ Wallace said. ‘Cops are the most humorless knotheads on the planet.’ ”
Now granted, I understand that methamphetamines are terribly destructive (though ironically they were once legal and openly provided to soldiers by the military to help them “keep on going”). But how does imposing such outrageous regulatory restrictions on a small business (with products built in the back of someone’s garage) that sought only to help people have greater access to cheap, safe and clean drinking water, help anyone? I also understand that Brita and others may do quite a bit of lobbying (especially in California), so there’s also the possibility that some companies didn’t appreciate competition from an inexpensive self-purifying water bottle without consumables and sought to have action taken against it. And while here’s another small business destroyed, I’m sure meth labs have already secured an alternative source of iodine to continue creating their wares. Not sure how hard it would be to extract iodine from everyday table salt, but hopefully that’s not the DEA’s next target… And maybe the government can start going after some of the real thieving crooks out there like Jon Corzine and other members of the criminal banking elite who have probably turned more people towards drugs in the past few years alone than did all of Vietnam and Woodstock.
Interview with Trends Research founder Gerald Celente, who had his own six figure gold investment account completely looted by MF Global‘s chapter 11 trustees, and he is fighting to get it back. Also interesting is how certain higher-profile clients such as the Koch brothers and others clearly must have known of the cratering positions and imminent collapse of MF Global, as $$billions of dollars of accounts were “coincidentally” withdrawn just before the MF “house of cards” collapsed.
I don’t believe that people truly understand the ramifications of what has happened over at MF Global. People still seem to believe that clients who had money with MF were basically gamblers and “should have known better” by placing their money with “more secure” entities such as Interactive Brokers. That’s not to say Interactive Brokers is not secure (especially as they “seem” to practice extremely sound risk management). But what happens when one of their banks or counterparties also decides to “waive” their account holders’ rights? And what exactly would have given customers of MF any less reason to believe that MF Global would be any less secure, especially since the Federal Reserve granted them “Primary Dealer” status last year? Regulations are very strict on “segregated funds”. Those funds “should” actually be “SAFER” than a straight-up bank account (because the funds should generally be locked away at either the CME as margin or sitting in Treasury Bills so the banks can’t even lend that money out in REPO markets). If an Occupy Wall Street protester stole a sandwich, they’d probably be thrown in jail for 5 years. Jon Corzine recks New Jersey, and a year later, wrecks MF Global and steals HUNDREDS of MILLIONS from 150,000+ client accounts to cover more reckless gambling debts, and he’ll probably end up being the next secretary of the treasury. This guy should be hanged and held up to the standards of the Hammurabi Code (If a builder build a house for some one, and does not construct it properly, and the house which he built fall in and kill its owner, then that builder shall be put to death). If such a “code” were implemented, I’d bet such horrendous thefts and shenanigans would all but disappear. Instead, we have banks stealing $$BILLIONS from clients through cockamamie schemes, then paying $100 MILLION to the SEC without admitting or denying guilt while they pocket the rest, still leaving the clients/investors out most if not all of their losses. This is likely the tip of the iceberg, as there is no way to know how many other firms may have also made similarly reckless bets with client funds (or are unknowingly directly connected to others that do).
To help clarify what this really means, here is the “Safety of Funds” assertions by two reputable futures clearing firms:
(DormanTrading) “The funds in your account with Dorman are held as “Customer Segregated” funds. Our principal bank is Harris, NA, a subsidiary of BMO Financial Group of Toronto Canada. The segregated funds that Dorman holds at Harris, are primarily invested in US Treasury Bills, with the remainder in cash or deposited with the Chicago Mercantile Exchange as margin deposits. The Treasury Bills at Harris are specifically identified to Dorman and on Dorman’s books they are specifically identified to those accounts that have asked us to invest their funds.
The segregated account structure of your futures trading account protects you from suffering a loss, should your broker, your clearing firm, Dorman, or Harris file for bankruptcy. This segregated structure means that your funds on deposit are not subject to any offset, indebtedness, obligation, or the liabilities of any entity besides the customers themselves. These regulations are in place so that neither your clearing firm, Dorman, nor their bank Harris can dip into the customer segregated funds to offset losses elsewhere.” – Dorman Trading Safety of Funds
(RCG-Direct) “Pursuant to the Commodity Exchange Act and Commodity Futures Trading Commission (CFTC) regulations, Rosenthal Collins Group LLC (RCG), a Futures Commission Merchant (FCM), is required to treat all customers’ money, securities and other property received to margin, guarantee or secure futures or options on futures trades, as customer property. With regard to futures and options on futures accounts, RCG is required to account separately for and segregate customer money, securities and property and not to commingle those assets with RCG’s own operating assets. Customers’ segregated assets cannot be used to margin any other person’s trades. These segregation requirements apply to futures and options trades on exchanges located in the United States.” – Rosenthal Collins Group Customer Protection
Understanding Big Money, Banks, and the REPO Market…
(MartinArmstrong) “When you deal in REAL money, there is a problem. How do you store it? You can’t just put a billion on deposit at a bank. They will sell it every night and don’t have to tell you. If the REPO market blows up and you go to the bank and say I want my billion, they lost it, and so you turn to FDIC to collect your $100,000. Right! The ONLY way to park serious money is in treasuries.” – Will a Downgrade of USA FROM AAA Really Mean Anything? (MartinArmstrong)
(PeterBrandt) “According to the Commodity Exchange Act (the overarching law governing futures trading) customer funds at futures commission merchants ‘shall not be commingled with the funds of such commission merchant or be used to margin or guarantee the trades or contracts…of any customer or person other than the one for whom the same are held.’ CFTC Regulation 1.25 provides that:
‘No futures commission merchant and no clearing organization shall invest customer funds except in obligations of the United States, in general obligations of any State or of any political subdivision thereof, or in obligations fully guaranteed as to principal and interest by the United States. Such investments shall be made through an account or accounts used for the deposit of customer funds and proceeds from any sale of such obligations shall be re-deposited in such account or accounts.’ ” – MF Global: Proof that the U.S. government is not able or willing to protect investors (PeterBrandt)
(Barnhardt.biz) “I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.”
“I have learned over the last week that MF Global is almost certainly the mere tip of the iceberg. There is massive industry-wide exposure to European sovereign junk debt. .. I now suspect that the reason the Chicago Mercantile Exchange did not immediately step in to backstop the MFG implosion was because they knew and know that if they backstopped MFG, they would then be expected to backstop all of the other firms in the system when the failures began to cascade – and there simply isn’t that much money in the entire system. In short, the problem is a SYSTEMIC problem, not merely isolated to one firm.” – from Ann Barnhardt’s Client Letter (BCM HAS CEASED OPERATIONS), complete letter follows below…
(TheMarketTicker) “The reason they got caught is the same reason I would have gotten caught if I had been clearing through MF Global: Despite being around the markets since well before the 2000 crash and having successfully negotiated that and the 2008 mess everyone has believed, right up until MF blew up, that customer funds were in fact segregated and thus this risk would never occur. Simply put everyone has now discovered that this assumption is wrong. .. Nothing that has come out of the CME, the SEC or Washington DC that has restored my confidence that MF Global is, in fact, a one-off situation. In point of fact The Fed is now requiring margin on certain repo transactions where they never did before, implying that there may well be additional snakes in the grass and additional unrecognized and intentionally hidden risks of this sort.”
Entire Letter from Ann Barnhardt to her IBB / Commercial Hedging Clients (source: http://barnhardt.biz):
BCM HAS CEASED OPERATIONS
Posted by Ann Barnhardt – November 17, AD 2011 10:27 AM MST
Dear Clients, Industry Colleagues and Friends of Barnhardt Capital Management,
It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.
The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.
The futures markets are very highly-leveraged and thus require an exceptionally firm base upon which to function. That base was the sacrosanct segregation of customer funds from clearing firm capital, with additional emergency financial backing provided by the exchanges themselves. Up until a few weeks ago, that base existed, and had worked flawlessly. Firms came and went, with some imploding in spectacular fashion. Whenever a firm failure happened, the customer funds were intact and the exchanges would step in to backstop everything and keep customers 100% liquid – even as their clearing firm collapsed and was quickly replaced by another firm within the system.
Everything changed just a few short weeks ago. A firm, led by a crony of the Obama regime, stole all of the non-margined cash held by customers of his firm. Let’s not sugar-coat this or make this crime seem “complex” and “abstract” by drowning ourselves in six-dollar words and uber-technical jargon. Jon Corzine STOLE the customer cash at MF Global. Knowing Jon Corzine, and knowing the abject lawlessness and contempt for humanity of the Marxist Obama regime and its cronies, this is not really a surprise. What was a surprise was the reaction of the exchanges and regulators. Their reaction has been to take a bad situation and make it orders of magnitude worse. Specifically, they froze customers out of their accounts WHILE THE MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate. This is unfathomable. The risk exposure precedent that has been set is completely intolerable and has destroyed the entire industry paradigm. No informed person can continue to engage these markets, and no moral person can continue to broker or facilitate customer engagement in what is now a massive game of Russian Roulette.
I have learned over the last week that MF Global is almost certainly the mere tip of the iceberg. There is massive industry-wide exposure to European sovereign junk debt. While other firms may not be as heavily leveraged as Corzine had MFG leveraged, and it is now thought that MFG’s leverage may have been in excess of 100:1, they are still suicidally leveraged and will likely stand massive, unmeetable collateral calls in the coming days and weeks as Europe inevitably collapses. I now suspect that the reason the Chicago Mercantile Exchange did not immediately step in to backstop the MFG implosion was because they knew and know that if they backstopped MFG, they would then be expected to backstop all of the other firms in the system when the failures began to cascade – and there simply isn’t that much money in the entire system. In short, the problem is a SYSTEMIC problem, not merely isolated to one firm.
Perhaps the most ominous dynamic that I have yet heard of in regards to this mess is that of the risk of potential CLAWBACK actions. For those who do not know, “clawback” is the process by which a bankruptcy trustee is legally permitted to re-seize assets that left a bankrupt entity in the time period immediately preceding the entity’s collapse. So, using the MF Global customers as an example, any funds that were withdrawn from MFG accounts in the run-up to the collapse, either because of suspicions the customer may have had about MFG from, say, watching the company’s bond yields rise sharply, or from purely organic day-to-day withdrawls, the bankruptcy trustee COULD initiate action to “clawback” those funds. As a hedge broker, this makes my blood run cold. Generally, as the markets move in favor of a hedge position and equity builds in a client’s account, that excess equity is sent back to the customer who then uses that equity to offset cash market transactions OR to pay down a revolving line of credit. Even the possibility that a customer could be penalized and additionally raped AGAIN via a clawback action after already having their customer funds stolen is simply villainous. While there has been no open indication of clawback actions being initiated by the MF Global trustee, I have been told that it is a possibility.
And so, to the very unpleasant crux of the matter. The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity. The system is no longer functioning with integrity and is suicidally risk-laden. The rule of law is non-existent, instead replaced with godless, criminal political cronyism.
Remember, derivatives contracts are NOT NECESSARY in the commodities markets. The cash commodity itself is the underlying reality and is not dependent on the futures or options markets. Many people seem to have gotten that backwards over the past decades. From Abel the animal husbandman up until the year 1964, there were no cattle futures contracts at all, and no options contracts until 1984, and yet the cash cattle markets got along just fine.
Finally, I will not, under any circumstance, consider reforming and re-opening Barnhardt Capital Management, or any other iteration of a brokerage business, until Barack Obama has been removed from office AND the government of the United States has been sufficiently reformed and repopulated so as to engender my total and complete confidence in the government, its adherence to and enforcement of the rule of law, and in its competent and just regulatory oversight of any commodities markets that may reform. So long as the government remains criminal, it would serve no purpose whatsoever to attempt to rebuild the futures industry or my firm, because in a lawless environment, the same thievery and fraud would simply happen again, and the criminals would go unpunished, sheltered by the criminal oligarchy.
To my clients, who literally TO THE MAN agreed with my assessment of the situation, and were relieved to be exiting the markets, and many whom I now suspect stayed in the markets as long as they did only out of personal loyalty to me, I can only say thank you for the honor and pleasure of serving you over these last years, with some of my clients having been with me for over twelve years. I will continue to blog at Barnhardt.biz, which will be subtly re-skinned soon, and will continue my cattle marketing consultation business. I will still be here in the office, answering my phones, with the same phone numbers. Alas, my retirement came a few years earlier than I had anticipated, but there was no possible way to continue given the inevitability of the collapse of the global financial markets, the overthrow of our government, and the resulting collapse in the rule of law.
As for me, I can only echo the words of David:
“This is the Lord’s doing; and it is wonderful in our eyes.”
With Best Regards-
Ann Barnhardt addendum: “There is some confusion as to what I (formerly) did for a living via BCM. I am not a ‘hedge fund’ or a ‘money manager’. I am an old-school commercial hedge broker specializing in CATTLE and GRAIN. Farmers, ranchers, etc. Actual hedging of actual cattle and grain using futures and options. Very old-school original.”
CBS News’ Steve Kroft reports that members of Congress can legally trade stock based on non-public information from Capitol Hill. We’ve already discussed this type of corruption in the past, and it’s great to see the issue receive so much more widespread publicity… You also see by Nancy Pelosi’s attitude how a two-tiered “Rule of Law” is practically considered a “congressional entitlement” at this point. Hint to OccupyWallStreet protesters, HERE IS YOUR REAL ONE PERCENT!!! (actually, more like the truly thieving and conniving .1% who want you to grant them even more money and power)
(CBS) “The buying and selling of stock by corporate insiders who have access to non-public information that could affect the stock price can be a criminal offense, just ask hedge fund manager Raj Rajaratnam who recently got 11 years in prison for doing it. But, congressional lawmakers have no corporate responsibilities and have long been considered exempt from insider trading laws, even though they have daily access to non-public information and plenty of opportunities to trade on it.”
“So in 2004, Baird and Congresswoman Louise Slaughter introduced the STOCK Act which would make it illegal for members of Congress to trade stocks on non-public information and require them to report their stock trades every 90 days instead of once a year. .. Kroft: How far did you get with this? Baird: We didn’t get anywhere. Just flat died. Went nowhere. Kroft: How many cosponsors did you get? Baird: I think we got six. Kroft: Six doesn’t sound like a very big amount. Baird: It’s not, Steve. You– you could have– ‘National Cherry Pie Week’ and get 100 cosponsors. When Baird finally managed to get a congressional hearing on the STOCK Act, almost no one showed up. It’s reintroduced every session, but is buried so deep in the Capitol we had trouble finding congressmen who had even heard of it.”
“And former House Speaker Nancy Pelosi and her husband have participated in at least eight IPOs. One of those came in 2008, from Visa, just as a troublesome piece of legislation that would have hurt credit card companies, began making its way through the House. Undisturbed by a potential conflict of interest the Pelosis purchased 5,000 shares of Visa at the initial price of $44 dollars. Two days later it was trading at $64. The credit card legislation never made it to the floor of the House.”
“In the past few years a whole new totally unregulated, $100 million dollar industry has grown up in Washington called political intelligence. It employs former congressmen and former staffers to scour the halls of the Capitol gathering valuable non-public information then selling it to hedge funds and traders on Wall Street who can trade on it.”
(MartinArmstrong) “Politicians everywhere are sitting on their hands because they believe that if they do nothing and maintain the status quo mixed with austerity to save the bankers somehow we will grow our way out of this one as before. The problem is they fail to distinguish between a private generated financial crisis and a Sovereign Debt Crisis where they are the problem.
The people are just not to be given a right to vote on any of this and if the system can grow out of it, in two years everyone will forget about it – that’s the plan. To clarify why I have been critical of the austerity in Greece and the property taxes, Schumpeter describes the Business Cycle as a force of Creative Destruction. These are periods of tremendous economic transition. It is one thing to impose property taxes and insist upon government reducing its work force that sound like solid conservative economic advice for Greece. However, that presumes there are private sector jobs waiting in the wings. What is taking place in Greece is that there is no private sector alternatives at this time. Laying people off is one thing. To impose then property taxes that are due irrespective of income then subjects those same people to massive waves of foreclosures for failure to pay the tax. The US Great Depression was so bad NOT because of the stock market crash, but (1) the sovereign debt crisis that wiped out savings and reduced capital in the USA contributing to over 3000 bank failures, and (2) the Dust Bowl that eliminated agrarian jobs when agriculture accounted for 40% of the civil work force resulting in the ‘hobo’ lifestyle. It was WWII that provided the ‘transition’ reducing unemployment and transformed farmers into skilled labor. The Great Depression after the Panic of 1857 was followed 4 years later by the US Civil War, which was also the ‘transition’ at that time relieving unemployment.
Today, there is no plan. There is no transition, only austerity. The politicians are doing NOTHING whatsoever for any reforms they reject because it would change the way they have been doing business since WWII. Italy’s debt is bigger than Spain, Portugal, and Greece combined. It is too big to be bailed out and there is no PLAN B to even address what happens if sitting on their hands blows up in everyone’s face? Stay away from ALL government debt! This is a wave of Creative Destruction. We are in a transition to a completely new world ahead.”
(MartinArmstrong) “Government Is Living in a State of Denial. They speak, see & hear nothing of a debt crisis. .. Italy is the third largest bond issuer and nobody in government has figured out that this a Sovereign Debt Crisis yet? What Government FAILS to understand is they are the PROBLEM!
Because government is the PROBLEM, they live in a state of denial and cannot correct the situation for they cannot objectively look at themselves. Instead, they attack the people. Fannie Mae asks for $7.8bn as losses continue. Morgan Stanley has been accused over mortgage bond issues and MF Global goes bust exposing the truth that SEC & CFTC never audit the NY banks and are incapable of detecting that they may be trading with client’s money.
.. the whole theory upon which the banking system has been constructed is unsound. Banks take short-term and demand deposits and lend long-term. When a financial crisis unfolds, a run on banks emerges because people want their money. Since the bank’s obligations are short-term to demand but their assets are loans of medium to long-term, they don’t have the cash and fail. For you see, banks were not supposed to lend out your money. .. Banks began as merely a place to store your assets. They were not intended to lend your money out to someone else. When they realized they could make profit doing so, the scam eventually became the standard operational procedure. Formulae were then devised to calculate at any one time how much ‘reserves’ did they have to retain for normal operations. That was worked out with experience settling on 6%. So if they retained 6% of deposits as cash, they could cover normal business withdrawals with no problem. The problem became during a crisis and everyone wanted their cash and the bank simply does not have that cash and you end up with a bank run. It is ironic that what began as a scam simply became institutionalized. This is WHY the entire financial system is dependent upon CONFIDENCE!
What is unraveling even more quickly is the fear that banks will be hit with panic runs because of their holdings in sovereign debt. After a 50% haircut in Greek bonds, now it has become trendy not only to sell Italian bonds but also to publicly announce they have done so to try to maintain CONFIDENCE of their depositors. The very reason politicians have suppressed the right of the people to vote and have forced austerity upon the people, has been to maintain the confidence of their bankers. But in the end game, the bankers exist based upon the confidence of the people in their sound management of their deposits.
.. The people may be shut out of the polls denied democracy when it is needed most, but the FREE MARKETS will respond as capital votes in its own self-interest that does not match the political nonsense.
SEQUENCE OF AN ECONOMIC PANDEMIC
At first blush, how capital responds depends entirely upon the (1) monetary system and (2) the freedom of capital movement. In a closed economy, the first reaction is to buy ALL tangible assets. These tend to be everything from durable commodities (metals), art, coins, stamps, and gold (assuming it is not a gold standard of some sort). This is the category I refer to as ‘moveable assets’. The second tier of assets tend to be real estate that I refer to as ‘fixed non-movable assets’ meaning their value is limited to the territorial jurisdiction of the nation. In a non-communist nation, stocks and corporate bonds will also attract capital as a safe place to park funds. In an open-economy where capital is free to leave, then the first blush is to FLEE to a different land in which case the local assets, including stocks and corporate bonds, will initially crash. This is typically indicated most pronouncedly in the collapse of the local currency against world currencies or in this case rise in the dollar vs decline in euro. They eventually swing back ONLY after the crisis manifests in a new currency or a debased/devaluation of the local currency takes place. The capital-flows will the swing back in the opposite direction.
Under today’s circumstances, the first blush response will be for capital to flee Europe and run to the United States as a safe port parking in US government paper. This is likely to further the deflationary effects within the United States by ensuring interest rates remain low as they did during the Great Depression for the same reason. However, banks are living off of the largest spreads perhaps in modern history so while rates of interest on cash will decline further and move in real terms NEGATIVE after inflation, banks should NOT be expected to lend money more easily. They will maintain their huge profit margins. Therefore, the first blush of the Sovereign Debt Crisis in an open society tends to be currency based rather than even movable assets.
During the inflationary boom into 1929, gold declined in purchasing power for assets were rising against gold. During the collapse, the value of money rose (gold) as assets declined. Under a gold standard, the value of gold in fact DECLINES with inflation and RISES with deflation.
So for now, we are in the first blush mode where capital will fee to the dollar rather than assets and that may confuse the hell out of a lot of people. Therefore, under the current conditions, gold need not rise on the first blush for the bulk of capital will flee to the dollar. On the second swing where capital flees all currency, then we will see the Private vs Public assets manifest meaning they will rise as expressed in terms of currency.”
(JonStewart) “Politician Jon Corzine saw Lehman Brothers as a cautionary tale; financial firm honcho Jon Corzine saw it as a dare.”
I don’t always agree with Jon Stewart, but he’s pretty much got it right on the money on this one…
(TheMarketTicker) “Let us remember that MF Global was just added to the primary dealer list in 2010! The bankruptcy does raise questions, however, about how the Fed picks the primary dealers — especially since MF Global was one of four firms added to the ranks after new, more stringent requirements were put in effect in 2010.”
(PeterBrandt) “The media is missing the real story in the sad saga of MF Global. The story is not the big bet in Europe by MF Global that went south. The story is not the risk-taking ways of Jon Corzine.
The real story is the ineptness of federal regulators (so, what’s new). The real story is that speculators may end up holding an empty bag right under the noses of the U.S. government regulators responsible for their protection. The present administration appears unwilling to step up to the plate. The Obama administration bailed out AIG, Deutsche Bank, Fannie, Freddie and a whole bunch of other crooks along the way. But when it comes to protecting the integrity of futures markets, the powers that be (or should be) are MIA.
If segregated account holders of MF Global are stiffed it will be the end of market integrity as we know it. Free market lovers everywhere, do NOT under-emphasize the importance of this matter. The MF Global situation could be the leak in the dike that will flood the financial system as we know it. If segregated account holders in a federally regulated market are not protected, what is next?”
(PeterBrandt) “Futures markets and futures commission merchants (FCMs) are supposed to be highly regulated by the Commodity Futures Trading Commission (CFTC). If MF Global’s seg customers are not fully protected, it would be the equivalent of, let’s say, depositors of Chase bank or customers of Fidelity not being protected.
The failure of MF Global’s segregated account to be made whole would be the biggest financial disaster since 1929 and would spell the end of the futures industry as we know it. Folks in the financial industry should take this matter seriously — very seriously. Do not underestimate the importance of this matter.”
Full Story: MF Global — 2011′s version of 1929 (PeterBrandt)
(Interloper) “Mr. Achuthan has been arguably the most accurate economic forecaster over the past five years and perhaps more importantly, is apparently using new analytical techniques and indicators – his emphasis on short and long-leading economic indicators is an excellent example. As he noted this morning, he was virtually alone among prominent economists in predicting a slowdown for the latter half of 2011, even if his predicted official recession has yet to become evident.”
” .. Achuthan presented his view that despite recent stronger data a US recession was still on tap, followed by Steve Liesman (fairly) asking ‘What about recent stronger GDP and consumer spending data’, followed by Achuthan saying that it didn’t matter because there is contagion in the data whereby more indicators were turning negative, followed by Liesman asking (again fairly) ‘like what’, and Achuthan responding something like ‘it doesn’t matter what, it matters how many‘. .. Liesman continued to badger his guest with ‘what do investors do today?’ ”
“.. Achuthan, in other words, is telling investors you something you will not hear from any employee of a brokerage or investment bank (well, maybe SocGen): wait.”
“.. My real issue is with those who will complain, ‘Why would I listen to that guy? He can’t even tell me which indicator he’s basing his conclusion on’. These people want THE ANSWER, stated bluntly, with conviction. To these people I respond; there is nothing you should be more afraid of than a market pundit who is certain.”
“Certainty is a tremendous marketing tool but there is a reason that the ‘con‘ in con man is short for confidence. Remember that it would only take one highly-leveraged trade to make someone wealthy enough to never work again. This implies that if the ‘certain’ dude (and its 99% of the time a dude) was really 100% sure, they would be leveraged 200-1 on the trade and, if it were successful, you’d never see them again outside of Saint Tropez-situated photos in celebrity magazines. In truth they are not sure – it’s a marketing gimmick to attract your investment dollars.”
“We are naturally attracted to certainty and we want to believe that someone has the answer because psychologically the random nature of markets is repellent. But in the end it is most often a trap and all investors should remember what a portfolio manager once told me: ‘People don’t like to hear it but we are in the probability game, not the certainty game.’ ”
(GlobeInvestor) “ETNs expose investors to the risk of losing all or most of their principal. That’s because ETNs are set up as unsecured, long-term debt obligations of the issuer, Ms. Pelant explains. ETF investors don’t face the same default risk because ETFs own a pro rata stake in a basket of stocks, bonds, or derivatives held by a custodian in trust and legally separate from the issuer, she says.”
“When Morgan Stanley’s viability came under question in September , its family of Market Vectors ETNs sold off dramatically. ‘The Market Vectors Remnimbi/USD ETN (CNY) plunged more than 25 per cent versus a 1-per-cent drop in a comparable ETF,’ observes Greg Newton, a veteran financial journalist who writes the NakedShorts blog.”
However, if the ETFs don’t actually hold the securities that make up the fund, and instead use synthetics or swaps rather than physicals, investors may also be exposed to much more credit and counter-party risk than they realize. And as Jeffrey Gundlach discussed at the recent DoubleLine Luncheon at the New York Yacht Club, “Never, ever take counterparty risk. It is the one risk you are almost never rewarded for taking. Unless you are running $800 billion dollars, there is no need to use swaps, synthetics or baskets – trade cash markets and avoid any trades that require a counterparty.”
(HistorySquared) “In light of the counter party risks inherent in ETFs, especially those that use synthetic swaps rather than the physicals, there might be an inexpensive way to express a bearish view on some of the European banks.
For example, in 2008 Lehman Brothers had several failed ETNs. ‘The three ETNs were Opta Lehman Commodity, Agriculture and Private Equity. In September 2008, these ETNs halted trading when Lehman Brothers failed. Currently, the final results are being sorted out, but it appears that Lehman ETN holders will receive 2 cents on the dollar from their original investment.’ ”
These are some clever lower-risk trading ideas for expressing a bearish view on the future solvency of a particular counterparty:
“Perhaps there are some far OTM options on some of the Socgen ETFs that are worth a look . Or a less risky trade could be long an ETF with physicals underlying the ETF that is issued by a more secure bank, and short the highly correlated Socgen ETFs. A potentially catastrophic event could be triggered by Deutsche Banks popular x-trackers.”
Full Story: ETFs as Tail Risk Trades (HistorySquared)
(Bloomberg) “ETFs that use swaps to clone stock, bond or currency returns have been criticized by regulators and firms including Fidelity Investors, which say clients risk losing money should the banks writing the derivatives become insolvent. Outflows from Lyxor are another blow to Societe Generale, France’s second-largest bank, whose shares have tumbled this year as the escalating sovereign-debt crisis squeezes lenders’ funding.
‘It’s an issue of counterparty risk related to the financial health of the backing bank,’ said Jose Garcia Zarate, an ETF analyst at Morningstar Inc. in London. ‘Fears over synthetic replication have been building up, and at the same time, fears of banks’ peripheral-debt exposure have grown. Put those two together: bingo!’ ” — Swap ETFs, Lyxor Have Record Outflows (Bloomberg)