It’s going to make your head spin and, worse, change the way you think about what’s real in America.
Christmas came early this year, for the market that is, by way of a gift from the U.S. Bureau of Economic Analysis.
However, this branch of the U.S. Department of Commerce, didn’t put its gift under anybody’s tree. They put it over all of us.
The gift was headline news that the “third revision” of third-quarter gross domestic product (GDP) showed the U.S. economy grew at a whopping 5% annualized rate, not the 3.9% rate posted in the “second revision.”
The government of the United States will remain open for business thanks to the usual suspects in Congress being open to being bought.
Sometimes it only takes a few phone calls from a deep-pocketed giant bank CEO to remind legislators who butters their bread.
According to Sunday’s Financial Times, bread-butterer par excellence Jamie Dimon, chairman and CEO of mega-fat JPMorgan Chase & Co. (NYSE: JPM), worked the phones hard last week. He called on his legion of congressional peeps and perps to pass the $1.1 trillion spending bill as written.
Why did this patriot risk getting calluses on his fingertips for some pipsqueak legislation?
WASHINGTON, D.C. – A tense battle between warring political parties erupted in Washington yesterday when Wall Street-backed Jihadist demands surfaced in the 1,600-page omnibus spending bill – threatening to first take the U.S. House of Representatives hostage, then all of America.
Intelligence services (obviously not Washington-based) initially identified the financial terrorists as Beltway lobbyists, but later revealed them to be a Big-Bank sleeper cell embedded in God-hating Dodd-Frank legislation, universally decried by the faithful as blasphemous.
In what was meant to be a stealth operation, the plastique-laden provision inserted into the bill aiming to roll-back certain Dodd-Frank rules, instead exploded prematurely.
Too-big-too-fail banks are paying record amounts to settle mortgage-related malfeasance dating back to the financial crisis, and everyone seems to think that’s good news.
It is… and it isn’t.
Not including legal costs and other lawsuits, Bank of America Corp. just settled for $16.65 billion, which beats the previous record $13 billion JPMorgan Chase & Co. paid.
The total and final tab for both banks’ forays into the mortgage securitization sinkhole will never be known. But based on what they’ve paid out so far, their combined costs will easily exceed $100 billion.
Think about that number: $100 billion.
Don’t get me wrong. I’m happy the banks are paying up. And I’ll be sad when they’re done paying, because the damage they caused will linger for decades.
Here’s something to tick you off today, something that you may not have figured out.
Lloyds Banking Group PLC (NYSE: LYG), the United Kingdom’s biggest mortgage lender, had to pay another fine yesterday.
(Yes, Lloyds is that too-big-to-fail bank I used to work for… but that was back in the 1980s, so don’t blame me.)
That Lloyds technically failed and had to be bailed out during the financial crisis and is still about 25% owned by UK taxpayers is beside the point.
Ask Lloyds traders how they feel about being saved to die another day. If they’re honest, and a bunch of them aren’t, they might tell you they’re glad to have the chance to continue screwing whomever they can in order to pad their bonuses.
Today, I’ll tell you all about how banking is an entitlement regime. In fact, it’s kind of like its own monarchy.
Most people who are just “in the market” don’t understand high-frequency trading and dark pools. And that’s OK.
However, as I’ve been writing aboutover the past couple of years, apparently that unknowledgeable also includes people whose job it is to understand these things, including institutional money managers, brokers, investors and apparently most regulators… though I don’t buy their ignorance one bit.
My knowledge of high-frequency trading (HFT) and dark pools dates back to the late 1990s, when I was trying to figure out how to get better executions on the large trades my hedge fund was generating. I consider myself as a bit of an expert, and I got to show that off a little last week on the radio.
So, for all of you who want to know a bit more about what’s going on in the shadows, I’m going to get a little technical on you and share some of that expertise.
This won’t be boring – I can promise you that.
A lightbulb will go on inside your brains, and you’ll understand what’s really going on and how dark pools and HFT – which the Securities Exchange Commission and other regulators allow to happen – undermine markets.
Now, I’m going to flip the switch and turn that lightbulb on …
Dark pools – private markets unavailable to the public – and high-frequency trading are manipulative schemes run amok.
They weren’t always. Both were the result of unintended consequences. But that’s all behind them. In front of them now are civil and criminal lawsuits.
Late yesterday, New York State Attorney General Eric Schneiderman charged Barclays PLC with fraud over how it markets its dark pool and how it operates it.
In a press conference yesterday after the market had closed, the AG said, “Barclays dramatically increased the market share of its dark pool through a series of false statements to clients and investors about how and for whose benefit Barclays operates its dark pool. Contrary to Barclays representations that it implemented special safeguards to protect clients from aggressive or predatory high frequency traders, Barclays is accused of operating its dark pool to favor high frequency traders.”
Over the past couple of months, I’ve been sharing with you some tips about how new investors can break into the market. And I think it’s the perfect time for our next lesson – looking this time at the inextricable connection between stocks and bonds.
Although I tend to write about the stock market as if it were a singular entity, I’m usually talking about the markets in the plural. Not just the Dow, or the S&P 500, or the Nasdaq – when I’m talking about the stock market or stocks, I am talking about ALL the indexes.
But when I use the word markets, I’m talking about not just the stock market indexes but also the entire bond market.
The bond market isn’t just the U.S. Treasury bond market. The bond market is to me, and should be for you, all the different bond markets, including but not limited to Treasuries, corporates, sovereign bonds, and junk bonds.
The word markets encompasses stocks and bonds because they are inseparable. There is an immutable relationship between stocks and bonds. They are connected at the hip. From now on, you, too, should always think of markets as both the stock market and the bond market.
It’s OK to only think about stocks when you’re making stock trades, analyzing your stock positions, or just chatting about the stock market. But always keep the bond market in the back of your mind when you’re thinking about stocks. Remember the bond market when you’re listening to pundits talking about stocks and when you’re reading about stocks or the stock market.