@grandmajsilver /Risky trades and Irrational exhuberance

June 30, 2012

@grandmajsilver /

Once again the banks have made the headlines:

  • JP Morgan Chase is still counting their losses after the London Whale debacle. $ 5-9 Billion is estimated as the likely loss as Chase unwinds these trades.  Essentially, JP Morgan has been operating as a hedge fund using FDIC  insured deposits within the Bank.  Good thing no Black Swan event occurred , or the losses would have been greater.
  • Barclay’s Bank was in the London News & the Financial Times for rigging LIBOR .  Naively, I thought the rates were down because the economy was bad.   But no, the rates were set by traders  in collusion with Banker’s looking to make a sure bet on their trades?  A totally manipulated market!

To quote from the FT,  they can’t understand how this happened.  There has been an abuse of power and a sense of entitlement prevailed.  “Laws and regulators need to step in to prevent these risky trades for ever greater unattainable reward”.  Sounds like these guys are addicted to wealth.   No amount of money  is as satisfying as the first big win.  Then,  there is the insatiable quest for more, MORE.

FT comments: since these guys have no shame and don’t step down from their positions, they should be retired.  They further suggest, retiring this generation of flawed Bankers and then maybe the rest of us will be able to sleep at night.  Some comments by Philip Augar; his new book “The Greed Merchants” How Investment Bankers Played the Free Market,

  • After all of this “bad” news the hint of a minor agreement in Europe, was enough to send the stock market soaring?  Irrational exuberance ?  What made the market so giddy?  Did something really change?  Have we re-instated Glass Steagall?  Did we rein in derivative trades?  Did unemployment suddenly disappear and we have 3% unemployment?  ???

I guess, the only conclusion to be drawn was the traders have lived to trade another day!  As the kids would say YOLO!

@grandmajsilver /wp.me/ Should money Markets be Safe?

June 30, 2012

@grandmajsilver /wp.me/p2TODU-2U

New York Times 6/29/12 Floyd Norris “Funds and allies defend the buck”

  • Did you know that money market funds were not insured and could return less then a Dollar if the funds or banks were stressed?
  • Money Market funds have 2.5 Trillion Dollars in assets.  These assets may not be liquid in a crisis and the SEC proposes to make them safe.
  • The SEC has stiff opposition from the Chamber of Commerce and the Funds.  All the SEC wants is regulations in place similar to the FDIC.
  • What do you think?  Should there be new safeguards added to money market savings, too?
  • 41.7% of professionals are worried about a second banking crisis
  • Too big to fail, too big to manage and too big to regulate are equally pressing questions.

Let’s start to question, is de-regulation working for us?  Flights to safety should be safe?

Justice for whom?

June 30, 2012

Sell a fake “Babe Ruth” Mitt and you might get 20 yrs in Jail! ( Attempting to sell fake stuff is a crime.)

  • Advise the Chinese on how to make an attack helicopter (Z-10) pay a fine of  $75 million 10 yrs later and no jail time?
  • You can’t make this up (NYTimes):  Pratt and Whitney, the Canadian arm of United Technologies, was just trying to earn a “buck”.  $2 Billion was the hoped for deal, so in 2001 they advised the Chinese on how to make the attack helicopter.  After the Chinese mastered the “know how” .  They told United Technologies, they were no longer necessary.  The Chinese then went on to mass produce the Chopper themselves.

So, the next time you’re wondering how did the Chinese become so advanced in so short a period of time;  No need to wonder.  And when our tanks are shot  down with our  “own technology” , don’t be surprised.

post script: United Technologies did report their deal to the authorities in 2006.  It has taken this long to bring them to Justice?

Keeping up with the Jones’s/executive compensation

June 17, 2012

Keeping up with the Jones’s/executive compensation

That was the phrase we used as kids to describe the”gauche nouveau rich”  who could not be happy living within their means and always looked at their neighbors and wanted more, MORE!


  • See Friday/ Financial Times/ On excessive CEO salaries, a never ending spiral upwards for what has become a cliche: He makes more then me, so I have to make more, if I’m to be respected?

The consequences  of this behavior have been disastrous for shareholders and most of our Societies.  One yearns for competition and the free market.  Let’s get “real” on executive compensation.  To quote Buffett:  He supports people who like to work.  Yes, they’re well compensated, but he would expect them to come to work and love their job, whether they were well paid or not. 


  • Quoting from a not so famous person, my mother, who always said if you could buy it for money, it could be replaced.  Money was never as important as family or Community to her.

So, what happened? When did “money” become an end in itself and not the means toward “the good” life?

The CEO’s who brought down our Economy were well compensated.   Their constant quest for more, I believe,  contributed to the destruction of the middle class.  Is it time to rethink our values as a people and a country.  This is not about Party!


Look around the World/Familiar Problems

June 17, 2012

In Spain, ordinary folks lost Billions in a Bank consortium touted to be a safe haven for investors expecting to earn 7%.  Only one catch, the Banks joining together knew they were on the verge of Bankruptcy before they launched their IPO?


Unlucky, gullible investors were lured into what they believed to be a safe investment.  Now the Banks are under water, nationalized and about to be bailed out by the EU..The investors are hiring attorneys to re-claim their lost millions.  Sound familiar.

  • Where are the Regulations and Laws to protect ordinary citizens from Fraud?
  • Seems to me, it’s prudent to “clean-up” the monetary system first

Next, let’s look at the UK.  The Brits assumed if they cut government the private sector would take on the demand for jobs and services.  There’s just one problem.  There are no buyers.  There is an absence of demand, austerity has not worked.  It appears that most of the schemes(the Financial Times comment, not mine) planned won’t work either.  Since, when given the choice, banks hold on to their money.


  • I propose, let’s think small.  Start programs that put more money back into the people’s hands.  Mortgage interest reduction ?  Student loan reduction through viable programs?

Let’s stop the pain and start on the path toward uttering a “sigh of relief”.

Step back from the Brink:The Student Loan Debate

June 17, 2012

Step back from the Brink:The Student Loan Debate

Student loans exist and have become a burden to kids,  seeking jobs in a jobless society,  and to their parents who co-signed those loans.

  • I believe these were well intentioned folks wanting an  education as a path to achieve the American Dream.  That Dream collapsed along with the job market.


I’d like to present an option to this prolonged debt burden.  Especially now, with the country reeling from loss of jobs,  the Student Loan problem is in-supportable.  Why not establish a program of Community Service for all kids and especially those graduating High School?  In exchange for internships, service to the country for 2 years; whatever program makes sense, offer renumeration for Service and a deduction in real dollars on existing student loans.


This may be a way to prevent another fiscal bubble.  Plus the benefits to Society should be impressive as our young mature, work together and establish habits of Community Service?  Work for America?  Why not?

The under utilized Unemployed vs Hedge Funds

June 16, 2012

An example of inequality.
A study in contrast between those forced to take early retirement and those managing state pensions..

  • SS is reporting an increase in 200,000 more claims for benefits then anticipated.  The reason cited is “joblessness”.  Add this to the real unemployment numbers and the picture becomes more grim.  Most people don’t want to take early retirement.  They never intended to  live on SS as their sole income.  To quote from the NY Times; One woman states, ”  I really don’t enjoy living like this,  I’ve got to much to do,  still”….
  • Contrast this scenario with: the high octane hedge fund managers getting $100,000,000’s in fees for persuading public servants to leave the boring chore of pension protection and investment for life in the fast lane, replete with Lamborghini…NY Times 6/10/12  Don’t blame the hedge fund manager solely for the corruption of the system.  It takes 2 to play.  But the temptation to resist  penthouses in the sky and toys,  that would be the envy of the “devil,  are too enticing for an elected official to give up.  So he leaves his neighbors for the good life.  While his former town is left with worthless bonds and impending bankruptcy.

The Faustian Bargain again.  Short term gains while trashing “old fashioned” values.  The sense of service and allegiance to the community has been dissolved.  Corruption and gambling are creating the divide between people in this country.  It’s not Party.

We are a Country founded on the rule of Law.   Doesn’t anyone look forward to a real debate on consequences, responsibility and solutions? Please do comment.


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