“As the Fed transformed Wall Street into a casino,” wrote David Stockman, “arrangements for insider speculation took on massive size,” with “hedge fund footings” soaring from $150 billion in 1990 to $3 trillion by the 2007–2008 peak. Trading books of Wall Street banks grew even more explosively. Together, they formed “the fast money complex.”
“Who Could Trust Such A Company?” – The Big Fat Lies About Radiation Exposure Of Workers At Fukushima
The nuclear fiasco in Japan has shaken the omnipotent nuclear industry – and government agencies that aided and abetted it. Yet they still obfuscate the consequences of the triple melt-down. Latest revelation: the number of workers at the plant with cancer-inducing radiation doses in thyroid glands was eleven times higher than disclosed last December.
“A culture of dangerous greed and excessive risk-taking has taken root in the banking world,” said Senator McCain last week. Senator Warren told Wall Street, where failure has been rewarded with bailouts and record bonuses, that “Banking should be boring.” They were pitching the “21st Century Glass-Steagall Act.” Wall Street must have gotten the willies.
Contributed by John Mauldin, Mauldin Economics: “The financial markets have now seen what a world without quantitative easing is going to look like, and they don’t like what they see,” wrote credit analyst Michael Lewitt in The Credit Strategist. “The mere possibility” of an end to QE “sent credit markets to some of their biggest losses in recent history.”
CEOs have, in these crazy days of ours, one primary job, it seems: manipulating up the stock of their company. Few master this delicate art like Tesla Motors CEO Elon Musk, who took his highflyer into the stratosphere on a wing and a prayer. But why are executives worldwide wallowing behind the scenes in 2009-like gloom about the economy’s future?
By Farah Halime, Cairo: Ignore the economy at your peril. That is the lesson Arab leaders of transitional countries should learn from the Egyptian military’s removal of Mohammed Morsi from power, but one that continues to fall on deaf ears.
At first, it was just multinational drugmaker GlaxoSmithKline that allegedly paid bribes in China, including “sexual bribes,” to “government officials, medical associations, hospitals and doctors,” by using travel agencies as conduit. For a total of $489 million. Now more big drugmakers are on the hot seat for the same crimes in China – and in the US.
Contributed by Don Quijones, Spain: BBC's article about the political funding scandal gripping Spain featured a photo of hapless leader Mariano Rajoy licking his lips like a "dirty old man." It spread like wildfire across the social media, setting off a cacophony of calls for Rajoy to resign for the irreparable damage he’d done to Spain’s overseas image.
Contributed by Chriss Street: The Canadian Royal Mounties now believe that the runaway oil train that killed 15 people and left 35 missing in a Quebec town may have been an act of criminal negligence for failing to set the brakes. But the real criminal negligence is that oil from booming production in North Dakota is shipped by trains due to lack of pipelines.
Unlike mortgage equity withdrawal by households, where the cash windfall was distributed across the middle class, corporate equity withdrawal through buybacks, buyouts, and takeovers resulted in cash distributions to the very top of the economic ladder. Financial engineering: the ATM of the prosperous classes!
Contributed by John Mauldin: Investors seek that elusive substance called alpha. It’s found on the edges, away from common knowledge, but too often remains hidden. Instead they find beta, or simply what the market gives everyone. In bull markets, that can be plenty and investors feel secure. But in the secular bear cycles investing is a difficult task.
The asset bubbles the Fed’s money-printing and bond-buying binge has created are spectacular, the risk-taking on Wall Street with other people’s money a sight to behold. Big winners were mortgage Real Estate Investment Trusts – and those who got fat on extracting fees. But now the pendulum is swinging back, and the bloodletting has started.
Voestalpine, an Austrian steelmaker with 46,000 employees, saw its revenues decline by 4% last year. It blamed the “cooling down of the global economy,” and “dwindling momentum in Asia (especially China).” Now it’s under pressure to cut costs. Hence offshoring to cheap countries! China or Indonesia? Nope.
The financial crisis was brutal for Germany, but the recovery steep, and in 2011, the gloating started. They called it the German “success recipe,” a superior system that would keep the economy growing even amidst Eurozone debt-crisis mayhem. That optimism has endured, and stocks have hit new highs, but the economy has diverged sharply.
“The Fed should have been embarrassed by the M&A frenzy,” writes David Stockman. Tyco CEO Dennis Kozlowski, Wall Street’s favorite deal maker, put “the rest of the corporate deal junkies to shame.” But “the poster boy for Greenspan’s first stock market bubble and its sudden, violent demise was a wake-up call that was wholly ignored.”
In most countries, it would be an act of mind-bending chutzpah, or perhaps a display of political insanity, but in Italy it barely made ripples: for a government official, a minister no less, to declare that the country cannot pay its long overdue bills, and not for a month or two, but for the rest of this year! Due to "technical" problems.
Contributed by Jen Alic of Oilprice.com: The situation in Egypt has not been tenable since the Muslim Brotherhood and President Morsi took over, post-revolution, but now that the military has stepped in, ousted Morsi, and placed him in detention, foreign investors are celebrating – on the logic that things couldn’t get any worse, only better.
Contributed by John Mauldin, of Mauldin Economics: The Narrative of Gold is still significant, but mostly in contrast to the narrative that has assumed primacy today: the Narrative of Central Banker Omnipotence. Like all effective narratives, this one is simple: central bank policy will determine market outcomes.
By Farah Halime, Cairo: “Let us savour the moment now and worry about the future later,” some Egyptians said after the military had ousted President Morsi. But as the jubilant atmosphere of Tahrir Square fades, there is one certainty: Egypt’s economy must be made an absolute priority, or risk repeating this scenario in another 12 months.
“The Wall Street coddling monetary régime” that Greenspan institutionalized “deeply transformed M&A,” writes David Stockman. It turned a corporate business strategy into "an all-encompassing mechanism for speculative finance” that executives used to build "empires with apparent, if unsustainable, earnings growth" that ended in "spectacular crash landings."