Archive for September, 2013

This Could Finally End “Too Big to Fail”

51 | By Shah Gilani

Last December, Senators David Vitter (R-LA) and Sherrod Brown (D-OH) got the Senate to pass legislation (the House never took it up) to get the General Accountability Office (GAO) to examine the government “subsidy” too-big-to-fail banks enjoy.

Thankfully, the GAO, a government watchdog group, agreed to the task.

Now we’re about to get their report.

It’s coming in two parts – a “backgrounder” due out in a few weeks and the hard number calculations coming in early 2014.

I’m telling you about this now because we all need to be watching for it. While I’m sure the report won’t draw conclusions or offer solutions, let’s hope it gives the world the ammunition it needs to shoot down to size (to what would preferably be mid-tier regional bank size) the TBTF banks… so our free markets can be free at last.

The GAO report will attempt to calculate, among other benefits, the annual dollar amount the big banks “earn” as a result of government and taxpayer backstopping. Simply put, these banks are so big they would never be allowed to fail and, therefore, are considered by most depositors the safest place to park their money.

TBTF banks benefit hugely from that.

The banks use all that money to conduct their businesses, buy Congress, wage their bets, manipulate markets, pay themselves huge bonuses, pay their fines, and still have billions left over to pay shareholders fat dividends.

Click here to see how much that “subsidy” is worth to them every single year… and how I think we can end it.

The Fed’s Inability to Forecast Anything Is the Problem

45 | By Shah Gilani

Seriously, how stupid are we to trust the Federal Reserve?

Forget about Alan Greenspan and his tenure at the helm of the Federal Reserve from 1986 to 2006. There’s too much to say about how, in his Ayn Rand pointy hat (think of the Wicked Witch in “The Wizard of Oz”), he unleashed derivatives of mass destruction on the world, and kept interest rates too low for too long (some free-marketer he was) on account of the fact that his banker buddies liked low-cost financing to leverage themselves to the hilt.

Greenspan is old news. Sure he got a lot of stuff wrong, and later admitted it.

But as they say in Brooklyn, “fuggedaboutit.”

Let’s talk about Ben Bernanke and what a great job he’s done, and is doing… NOT.

First, here are some of his expert “forecasts” and how those have played out.

The Real Reason the Fed Didn’t Taper

96 | By Shah Gilani

Ben Bernanke is the don of the greatest criminal enterprise in the world.

And yesterday his made monsters, the Five Families, lined up to kiss his ring, again.

By not “tapering” or reducing the $85 billion a month ($45 billion in Treasuries and $40 billion in agency mortgage-backed securities) the Fed is buying from banks, the Fed is saying to its hit men, “We are family, and as long as Johnny Law is coming after you, we’ve got your back.”

The “legal and litigation costs” (that means lawyers and fines) racked up by America’s Five Families since the credit crisis gently (not) ushered in the Great Recession is over $103 billion, by some estimates. That doesn’t include actual losses from related activities.

The Five Families, according to the Federal Reserve, are big, very big bosses in their territories, which means America and a good part of the world.

Let’s name names… and then I’ll tell you the REAL reason the Fed didn’t taper yesterday.

Why I’m a “Reluctant Bull”

69 | By Shah Gilani

As I write this, the Dow Jones Industrial Average is up over 150 points.

I don’t get it.

I mean, I do and I don’t.

Sure, I get that Larry Summers, the perceived hawk (he supposedly wanted to start tapering sooner rather than later), teed-up by his supporters and the president to be the next Federal Reserve chairman, withdrew himself from the rat race.

So attention shifted to the supposed number two choice for the position, Janet Yellen. She’s considered a dove, and the word on her is she never met a printing press she couldn’t operate.

You can guess what happened next…

The Truth about Jon Corzine’s Defense

31 | By Shah Gilani

If it walks like a duck, quacks like a duck, and poops like a duck, it’s a duck.

Unless, of course, the duck is Jon Corzine, a man who knows how to duck being a duck.

As you may well remember, J.C. (not Jesus Christ, though there was a time…) took the helm of global financial derivatives broker MF Global in 2010 and oversaw the roasting and bankruptcy of the firm in 2011.

It took a while, but the Commodity Futures Trading Commission (CFTC) just filed suit in U.S. District Court in Manhattan this past June, claiming about $1 billion in customer money was transferred from segregated accounts at MF Global to try to prevent the company’s financial collapse. The CFTC’s 47-page complaint calls out Corzine for making decisions that put customer accounts at risk in violation of rules prohibiting such transfers.

Using customer money to essentially meet margin calls on your huge European sovereign debt bets is a regulatory no-no.

Unless you know just how to duck the charges…

The Three “Horsemen” of the Fall Congressional Session

42 | By Shah Gilani

Obfuscation is a beautiful thing. That’s when you intentionally make it hard for your audience to understand what you’re saying, so you can hide your true meaning.

So is procrastination. You know that one – it’s the practice of putting off important, unpleasant tasks until later.

And so is prestidigitation, which is, by definition: “the performance of or skill in performing magic or conjuring tricks with the hands; sleight of hand.”

If you like those three elements in your political leadership, you are in for a treat today. We’re about to see these three “horsemen” take charge again, as Congress sits down today in Capitol Hill for the start of the fall session.

Here’s what’s they have in store for you…

Q&A: September 2013

10 | By Shah Gilani

Let’s jump right in with your comments and questions on Obamacare.

Q: Why hasn’t the Republican controlled House defunded Obamacare? The House controls the purse strings of the nation. ~ Lorne D.

A: There’s a long way to go in this war, and the next step will be on the funding side of the battlefield. That’s coming shortly, as in right after November.

Q: It has been my experience that every time the government sets out to reform something it is always in favor of special interests. The people always lose. People in the middle class pay the bill and the special interests people collect. ~ Pappy

A: “Same as it ever was…”

Q: Obamacare is a train wreck by design… it was never intended to work. It is merely an intermediate step towards a single payor system. When things get bad enough, the public will turn to the government to fix this mess and the government will offer up a single payor system as the solution. Your health care will then be totally controlled by the government…. it is all about control and power. ~ Len

A: While you may be right, there may be a backdoor agenda, the truth is I can’t figure it out. I just don’t understand why the attention isn’t put on the insurance companies greasing the system that benefits them, the doctors committing fraud… in conjunction with the aiding and abetting insurance companies, and why the public is always duped so readily into believing that they are the ones who have to pay the price.

As Pappy says above, it’s always in the interest of special interests. We know that, and it is the same as it ever was. But it’s up to US – the American people – to protest and revolt if we have to. And we do have to. It’s our health, our money, our right to choose, and our right to change the government. If we want a better healthcare system, we need to start by changing our government.

Still, you can say one good thing for Obamacare… it’s going to be one of the biggest single wealth creation opportunities in decades. We’re talking trillions in new spending. Not all companies will benefit – but a select few are primed for higher returns on a scale that was simply unimaginable before this legislation was passed. My friend and colleague Keith Fitz-Gerald just released a new investor report detailing exactly which stocks will do well when Obamacare gets rolling. Click here to see that.

Now THIS next article got a lot of you talking…

Posted in Q&A