Archive for September, 2012

Our March Toward Economic Socialism

53 | By Shah Gilani

Have you noticed that the world is on a creeping – some (that would be me) would say cascading – slide into socialism?

It started with one giant step in the direction of economic socialism.

Economic socialism is specifically the shared risk the public has been yoked into pulling on behalf of banks.

The unmistakable and indelible footprints of socialism’s latest forward march have been made by collectivist central bankers, pushed ineluctably forward (at least that’s the direction for them) by their constituents, the bankers of the world.

The bankers’ jackboots are filled with stinking feet itching from the fungus of greed. And sadly, the sole of those boots bears the unmistakable “Made in America” stamp.

What’s flooded into all those succeeding footprints is the stagnant future we all face. The march towards global hegemony of bankers’ birthrights makes that evident.

It’s not ironic that bankers espouse capitalist, free-market doctrines, but under cover of their ostensible handlers – their central bankers – prosper and propagate behind a Marshall Plan whose manifesto is socialized risk; it’s sickening.

The moral hazard of socialized risk, of economic socialism, is unfettered.

The United States let the biggest banks in America get bigger. We let them bridle us, saddle us, and ride us into the ground. And they are all bigger now.

How can there be any free market discipline if there is no free market? How can moral hazard be corralled if there are no fences around the risks banks are allowed to take, given their size and power?

We’re facing QE4ever (that’s quantitative easing) on account of the banks being subject to lawsuits and an attack on their capital.

Oh, you didn’t get that?

Here’s the real reason we have stimulus to the nth degree here in America…

The Truth About Opinions (and Yesterday’s Blog)

37 | By Shah Gilani

Thank you, thank you, thank you, all of you who posted comments on yesterday’s “I’m All for Opinions, But This Stinks.”

You are passionate and patriotic, and most of you have very strong opinions. And I respect that! I love all of you, because you are engaged. We, you and I, all of us, we are conversing, we are being heard, we are making ourselves “cause in the matter.”

Now, what was I up to yesterday?

Yesterday’s blog was an exercise (a couple of you actually got that). It was hard to construct, but I think I hit my mark because hundreds of you joined in – just as I had hoped.

I was hoping that you would have an opinion about an opinion piece – mine – whose premise began by saying opinions that aren’t based on facts are too often “lies presented as absolutes,” and from there went on (without any facts) to level my opinion about a movie that I claimed bastardized the truth for the sake of a political agenda, because, in my opinion, it was nothing more than an opinion masquerading as a bunch of facts.

Get it?

So… what was the exercise?

I wanted to see what your reactions would be.

Would you believe me that my opinion was a fact, just because I prefaced my opinion with some diatribe about me being the truth seeker? Would you see that I presented a “fact” (that the movie wasn’t factual) without any facts? Would you take a side in the political debate, based on the movie, or based on what you thought about Obama, or what you thought I was saying, or what you thought I believed? Would you present your arguments with facts of your own? Would you get the irony in it, which is that we all have opinions and are far too often too opinionated because our predispositions, our “always already listening” mechanisms override our pursuit of objectivity.

You did great.

You overwhelmingly bashed me – something like 98% you, as one commentator tallied. And I deserved it.

Those of you who were taken aback that I would knock the movie without addressing anything specifically wrong in the movie – you were right. I had no right to level my opinion without backing it up in any way.

But here’s the thing. Because I didn’t back up my opinion about the movie, because I didn’t address anything specific, or state my case constructively in any objective manner, many, most of you, formed an opinion about me. You couldn’t help it. Right?

Opinions beget opinions. Opinions are subject to opinions. And if the facts aren’t openly debated, as to lay bare the sometimes two lenses that facts are subject to being viewed through, we have little choice but to revert to our predisposed positions on the things we think we know or are passionate about.

So, here’s a representative comment, from a subscriber named Ken, about what I said yesterday.

Take a look.

I’m All for Opinions, But This Stinks

207 | By Shah Gilani

It’s impossible not to get caught up in the politics of politics – especially now, with six weeks to go until the U.S. election.

Everybody’s doing it.

Everybody has an opinion, and, as the saying goes, opinions are like _______ (you fill in the blank). Everybody has one, and they all stink.

I’ve got my opinions too, which means I can be a stinker, too. But regardless of where I stand on any issue, I always try and come out on the side of where the preponderance of truth resides.

The trouble with that is the “truth” isn’t always easy to discern. Far too often, the truth is nothing more than an opinion cloaked in distortion that has been manufactured to look, sound, and feel exactly like the truth.

Here’s a case in point – a movie I just saw…

Special Report: America’s Wrong Turns

40 | By admin

[Editor’s Note: Michael Muoio is an Insights & Indictments reader from Wisconsin who works as a trader and serves on various boards. Last week he submitted the original essay below in response to “Why America is in Trouble Now.” His ideas generated a lot of discussion among Shah’s readers, so today we want to share it with all of you. Enjoy.]

32 Years of Wrong Turns and Tax Amnesia

by Michael D. Muoio of Appleton, Wisconsin

As we endure the ceaseless political rhetoric surrounding our national budget and debt, I have come to the conclusion that we, as a nation, have actually chosen to put ourselves in this quasi-bankrupt insolvent position.

There are a number of critical turning points where our political and business leadership chose the wrong path – with our support.

Here are some of the major wrong turns that occurred over the last 32 years.

In 1980 we adopted “supply side economics,” also known as “trickledown economics,” and we adopted the philosophy that budgets never needed to be balanced.

The theory states that increasing the net wealth possessed by the economic elite generates the best stimulator of economic activity. These wealth-owners will invest any marginal wealth gain from tax cuts on things that increase “supply” – factories, new businesses, innovative goods and services, thus “supply side economics.”

Belief in this economic heresy continues, and many current candidates for public office actually advocate further tax cuts.

Because of this heretic belief, politically driven and popular tax cuts were put into place that were based on expanding our national debt from $907 billion in 1980 to $3 trillion in 1990 to $5 trillion in 2000 to $10 trillion in 2008 and $16 trillion in 2012. These tax cuts continue unabated and are expected to drive our national debt to $22 trillion by 2016 (or a 24-fold increase since 1980).

We also entered diabolical free trade agreements with tax incentives that encouraged manufactured product imports and job exports. In 32 years we have managed to export over 60,000 factories and over 23 million jobs. Our trade policy continues unabated.

We deregulated the financial sector and freed Wall Street to be “creative.” This permitted the destruction of $16 trillion of our collective wealth and returned us to 1992 wealth levels nationally. Financial deregulation essentially continues unabated, along with super-sized banker bonuses with no bankers in jail.

Following the 9/11 attacks, we committed over $4 trillion (off-budget) to occupy Iraq and Afghanistan. Taxes were not imposed to finance the occupation. The occupation continues with no end in sight.

We implemented Medicare Drug Plan D at an incremental cost of $180 billion a year. No taxes for this were imposed, and drug companies were not required to negotiate prices with Medicare. This mismanaged program continues and is growing.

Student loans now total over $1 trillion, as our public and private universities and colleges took advantage of the easy money available to students for education. At UW Madison, for example, resident undergraduate tuition in 1980 was $769; today it is $8,592 or an 11-fold increase. Sadly, it was reported recently that a new retiree was having their Social Security check garnished to repay student loans over 30 years old.

So are we broke? Indeed we are. And we have clearly chosen to be.

And that’s not all we’ve done wrong…

Who Says Money Can’t Buy You Love? Not the Banksters

32 | By Shah Gilani

Remember Tim Pawlenty, the former two-time Governor of Minnesota?

Remember when he made a bid for the Presidency this go-round, but bowed out after a poor showing in Iowa?

Remember that during his brief run he acted like he was a Wall Street critic, admonishing the Street to “get its snout out of the trough?” Remember that?

Remember that T.P. became national co-chair of Republican presidential candidate Mitt Romney’s run for the roses?

Do you remember that T.P. was a top contender for the V.P. slot that eventually went to Paul Ryan?

Don’t worry if you don’t remember any of that stuff about T.P. because none of his past politics matter (he’s a Republican don’t you know?) now that he has a new job.

Oh yeah, with less than 45 days before his buddy Mitt faces off against a resurgent incumbent named Obama – you  probably don’t remember because it just happened a few days ago – T.P. quit the campaign for a new gig.

You can’t blame him. Everybody loves money, and the lure of a reportedly near $2 million salary is mighty enticing. So he took the job.

Guess what he’s up to now?

Why America is in Trouble Now

99 | By Shah Gilani

There are always at least two sides to every story.

That’s true when it comes to trading (there’s always a buyer and a seller). It’s also true when it comes to politics.

But, just like in trading or investing, when it comes to politics, it’s not about being “right” or “wrong.” It’s about distilling rhetoric and opinions down to facts and figures that can then (hopefully) be more objectively observed and used to fashion compromises that lead to winning positions, financially and socially.

I try to let the facts and figures speak for themselves and peel back others’ opinions to get at what’s really happening and why.

I change my opinions all the time, whenever there are new facts that warrant consideration. But in the end, I take a stance.

I’m telling you this because I’m about to lay out some insights and some indictments regarding the economy, Wall Street, and oil, and then delve into something that’s so charged that some of you are going to flip out.

But before you do, remember, there are two sides to every story.

First up: poverty.

Just look at the numbers out this morning…

How the NYSE Gives a Head Start to the Highest Bidder

2 | By Shah Gilani

Five million dollars. That’s what the SEC just fined The New York Stock Exchange’s parent NYSE Euronext for cheating the public.

Of course, “cheating” is my word. The Exchange is not really guilty of anything anyway, according to the SEC.

We’re talking about “alleged” stuff happening, which proves that settling the matter without admitting or denying any guilt (isn’t that a Mission Impossible kind of line, like disavowing all knowledge, of anything, that might be the truth?) is proof positive once again that regulatory regurgitation is alive and well and sickening, you guessed it, the public.

If you didn’t hear, don’t feel bad. The news came out like lamb, and nobody notices a $5 million fine, anyway. Like I said, the Big Board paid a pittance for not doing anything wrong anyway, but the SEC needed some lunch money for pizza Friday, and lo and behold, the news came out on Friday, just before lunchtime.

What news, you’re still asking? Really, if you don’t know, you’re going to be mad at me for wasting your time even bringing this alleged activity up, because it didn’t really affect anybody anyway (and I have a little bridge I want to sell you).

The NYSE, by accident, of course, disadvantaged a few odd public investors when they inadvertently sent data, minor stuff, mind you, from their servers to high-paying traders at a faster pace than the public was getting the same information.

I know, what’s the big deal, right?

Why There’s No Jail Time for Wall Streeters

0 | By Shah Gilani

Editor’s Note: If yesterday’s article made you sick, you must read this. Shah’s got a stunning new report on what passes for “punishment” on Wall Street. It was published today in Money Morning and was a big hit with readers, so we wanted to share it with you.

Wall Street is a “protected” operation.

Protected means cops are aware of illegal activity, but are paid off to look the other way and even protect businesses from potential harm.

So, if you’re waiting to get back into the markets once the trash has been taken out, you’re about to find out your wait may be a lot longer than you expected.

The scheming racket that too many aspects of Wall Street have become reminds me of an old Clint Eastwood movie.

It’s the one where Dirty Harry goes into a porno shop with a hooker hotel above it and the thug behind the desk tells him, “You can’t come in here, this is a protected joint.” But Harry sets him straight. “To them you’re something,” he says, “but to me you’re just a maggot that sells dirty pictures.”

While Wall Street doesn’t sell dirty pictures, it does sell the prospect of a glossy future full of positive investment returns when their “products” are embraced, as in bought and sold – but mostly bought, for the investor’s long-term good, of course.

In Wall Street’s world, the beat cops are their regulators, including the SEC and the CFTC. Above them are the Federal Reserve and an untold number of politicians and legislators who pimp and pander on behalf of banksters by writing laws with loopholes so their donating “constituents” can always get out of jail free.

There are plenty of examples, but the mortgage-backed securities bubble and its related fallout is, to date, the biggest and most apparent example of how protected the Street is.

While obvious maggots like Bernie Madoff and Alan Stanford are thankfully rotting in jail, not a single Wall Street executive, lieutenant, or soldier responsible for the pump-and-dump mortgage-backed racket that decimated America’s most prolific dream machine and economic engine has come close to being locked up.

Don’t even get yourself started on the whole Jon Corzine of collapsed MF Global fame.

If you look up the word “protected” in the dictionary, you will see a picture of J.C. with his resume as former governor, former senator, and former head of Goldman Sachs – now that’s protected.

So, let’s just stick with the housing scheme of dreams.

Here’s the big picture…

How Our Capital Markets Got So Politicized

90 | By Shah Gilani

It’s a fact. Financial services are a huge part of the economy.

Twenty years ago, financial services accounted for somewhere between 5% and 7% of U.S. gross domestic product, depending what you include in the definition of “financial services.” By the time markets peaked, and just before the mortgage bubble burst, that number had shot up to between 17% and 20%.

What’s fascinating to me, and should be to you, is that shuffling paper for fun and outrageous earnings got as big as it did.

And just because some air in the bubble that drove a lot of those earnings gently escaped (not), that doesn’t mean the financial services machinery isn’t working overtime to pump up their earnings and profitability again. You know they’re working at it all the time.

I could go on and on about what this all means, and how problematic it is for the long term future of America, but that’s not the point of this message in a bottle.

The point is that we have become a nation of oligarchs (the powerful private interests of money men and oil men… same thing) running our government like a banana republic.

Let me show you what I mean…