Archive for February, 2014
I’ve written and railed about rip-off student financial aid schemes here for years.
And based on all the very personal stories I’ve received, I know many of you are outraged as well – even more so because of your devastating first-hand experiences.
Make no mistake: For-profit education companies are (more often than not) “rip-off traps” which condemn unsuspecting students into indentured servitude to greedy companies’ bottom-lines.
Well, there may be a White Knight after all.
The bulls are running today, being chased by hot mergers and acquisitions news.
As I write this, the S&P 500 is at an all-time high and the Nasdaq Composite is at a 14-year high. The Dow still has a few steps to climb, but there’s a good chance it too will reach for new highs in the next few sessions.
According to Matthew Keator, the namesake at Keator Group, a wealth management firm in Lenox, Mass., “People are recognizing that while some economic data has been muted, there is still a lot of value in the market based on corporate cash positions and multiples. From a perspective of overall fundamentals, things look pretty good, especially relative to other asset classes.”
He’s right about investors recognizing value in the market, and that corporations are sitting on fat cash positions.
It’s the big hoards of cash that’s pushing mergers and acquisitions. And there’s value in the U.S. market. But that’s all relative.
As Keator points out, things look good relative to other asset classes. And he might have added that values look good here because the U.S. is the cleanest dirty shirt in the laundry.
Elsewhere around the globe, things aren’t so rosy.
The U.K. just saw a bump up in their unemployment rate, the emerging markets are struggling, China is grasping for laundry detergent to clean up its shadow banking mess, and gold — which has been rising furiously — is indicating that not everything is hunky-dory.
So if you’re heavily invested in U.S. stocks, you’re in good shape.
But there’s a lot to worry about…
When it comes to big banks’ bad behavior and the fines they pay to settle “allegations” — which are actually civil charges and which would be criminal charges if applied to any other business or in any parallel universe — things aren’t even close to what they seem.
Sure the headlines scream victory, at least monetary victory, for some ripped-off consumers, some hard-charging regulators, and our vaunted (NOT) Justice Department.
We think we hear the ching-ching of the Treasury Department’s cash registers ringing as they collect billions of dollars from miscreant, monster banks.
We think we can hear victorious regulators popping champagne corks as they celebrate settlement money coming in to prop up their budgets so they can keep going after these lawbreakers.
We think we can hear the cling-clank of consumers — who’ve been set up like bowling pins to be knocked down until the change falls out of their pockets at the feet of slobbering banksters — getting some of their stolen money back.
If that is what you think you hear, you’re tone deaf.
Here’s what’s really going on…
Here’s something you probably don’t know, and it will really tick you off.
You probably do know the biggest banks in the world have commodities businesses.
Those lines of business might include trading desks (trading everything from gold and copper to kilowatts), transportation (pipelines, railcars and tankers) and storage (warehousing) operations, mining operations, as well as production, refining and raw and finished commodity distribution operations.
What you probably don’t know is that one of the “commodities” a few of these monster banks (Goldman Sachs and Deutsche Bank) trade is…are you ready?
Okay, I’ll tell… but you won’t believe it.
In case you missed the kerfuffle last Friday, Blythe Masters, the 44 year- old, super-smart head of JPMorgan Chase’s commodities trading business, declined to sit on the CFTC’s Global Markets Committee advisory board.
This came as a big surprise.
After all, many of us following the CFTC presumed the brainy Blythe had already accepted the position after she showed up as a member of the advisory panel that is formulating the CFTC’s cross-border rules for the global derivatives market on the CFTC’s website.
While all this is certainly laughable… there’s another part of this story that is actually repulsive.
I’m talking about the man responsible for what happened last week and what a slimy, slippery regulator he has been. Worse, he’s now acting head of the CFTC.
It’s like letting a pedophile babysit your kids. It’s sickening.
Let me show you what I mean…
Earlier this year, I made you a promise that I was going to bring big profit plays your way in 2014.
In fact, I started the New Year off with two that I thought were especially opportunistic.
They’re already paying off – one in a big way – so I thought an update was in order.
That’s why today, I’m not only going to tell you how we’ve done so far…
I’m going to show you how you can capitalize further… and turn these two plays into even fatter profits.
As if banks aren’t choking us enough…
You remember Fannie Mae and Freddie Mac don’t you?
They are the two infamous Government-Sponsored Enterprises (that’s mumbo-jumbo for private corporations that have the backing of taxpayers to bail them out when their greedy managers leverage them up like balloons to generate mega bonuses for themselves) that guarantee mortgages.
They guarantee mortgages so those debt obligations can be easily packaged into mortgage-backed securities and sold to investors who want the highest yield possible with the guarantee (wink, wink) that the U.S. government won’t let them default.
Well, those investors were right.
Back in September 2008, before the credit crisis hit a crescendo, when people were defaulting left and right on their mortgage payment, and the guarantees that Freddie and Fannie issued started kicking in, the twin towers of government-sponsored greed imploded, spectacularly.
They deserved everything that hit them – after all, Freddie and Fannie had leveraged themselves up by buying over a trillion dollars of the same crap they were guaranteeing – for the yield and safety, of course.
And yet, Uncle Sam (that’s us, the taxpayers) came to the rescue.
The government put the two into a “conservatorship.” That’s a legal status (make that concept) that lets someone (or an entity) take over control of the corporations, the way a guardian might be appointed by a judge to take over the affairs of a mental person.
For all intents and purposes, this conservatorship was a de facto “nationalization.” But of course we’re a democracy and couldn’t possibly call it that.
Over time, the government–as in the Treasury Department ,as in you and I – lent the dynamic duo $190 billion to not sink into the sinkhole they created.
Okay, fast forward to today. Here’s where the story gets twice as ugly.
In fact, the latest news about Fannie Mae and Freddie Mac might even make you pop a jugular.