Contributed by Chriss Street: The IRS scandal heated up when Greg Roseman, a Contracting Officer and Deputy Director of the IRS, took the Fifth to dodge questions by the House Committee on Oversight and Government Reform that wanted to determine if he fraudulently steered $500 million in IRS computer contracts to a tiny outfit fronting for IBM.
Contributed by Michael Lombardi, Profit Confidential: After the initial GDP estimates for the first quarter, optimism struck and markets rallied. Everything was headed in the right direction! But the final revision showed that the economy grew at just 1.8% – that's 25% lower than the previous estimate. Due to consumer spending and exports. And now, interest rates are rising!
Things move quickly at the G-20 when markets go south. The turmoil following Chairman Bernanke’s mere suggestion of a vague and slow taper of the Fed’s multi-year money-printing and bond-buying binge has already incited our illustrious finance gurus and central bankers at the G-20 to buckle – under the weight of the financial lobby.
“All of the checks and balances which ordinarily discipline the free market in money instruments and capital securities were being eviscerated by the Fed’s actions,” wrote David Stockman. “This kind of central bank action has pernicious consequences, however.”
The bond selloff didn’t surprise anyone. Gurus of all stripes had predicted for years that it would happen, that the ridiculously low yields the Fed was imposing weren’t sustainable – only to watch as the Fed opened the spigot even wider. Then the smart money offered a tidbit of immortal wisdom to the euphoric bondholders: “run – do not walk!” And they did.
It was the day when Private Equity firms – the smart money, the great beneficiaries of the Fed’s bond-buying binge – announced their intentions to the rest of the world. The heavy hitters were there, and they let fly some pungent words. In short, they were “selling everything that’s not nailed down.” Turns out, they weren’t kidding.
Governments, corporations, even that genius app developer in Russia have one thing in common: they want to know everything. Data is power. And money. As the Snowden debacle has shown, they’re getting there. Technologies for gathering information, then hoarding it, mining it, and using it are becoming phenomenally effective and cheap. But it’s not perfect.
Contributed by Lee Adler, of The Wall Street Examiner. The Fed, ECB, BoJ, and BoE all deal with the same banks. Of the Fed’s 21 Primary Dealers, its sole counterparties, only seven are US domiciled. Three are Canadian, eight are European, including three British banks, and three are Japanese. All of them are major players in Europe and Japan.
“The market had been taken over by white-collar financial hoodlums who needed a trading fix every day," writes David Stockman, Director of the OMB under President Reagan. "These punters and speculators were asserting an entitlement to any and all government policy actions which might be needed to keep the casino running at full tilt.”
Contributed by Don Quijones:Two weeks ago, Miguel Blesa, former president of Spanish savings bank Caja Madrid, went to jail for his role in the bank’s demise. Finally, a TBTF bank chief got nailed for his role in the financial crisis. But it was too good to be true! Now a witch hunt against the judge has begun.
In theory, the Fed could continue to print money and buy Treasuries and mortgage-backed securities, even pure junk, until the bitter end. But the bitter end would be unpleasant for those that the Fed represents – and now they’re speaking up publicly. They’re worried that their system might break down. It would threaten their empires. It would be the bitter end.
Contributed by Andrey Dashkov, Casey Research: The junior resource sector is struggling financially: as gold prices rose year after year, the price assumptions in their economic studies went higher and higher. But they were optimistic. Now that trend is coming back to bite them – as well as any investor who buys into those assumptions.
Contributed by Michael Lombardi, MBA for Profit Confidential: The US housing market recovery took it on the chin this week. While most investors were focused on the collapsing stock market, courtesy of the Fed’s announcement that it would "taper" its money-printing program later this year, bond yields rose sharply. And mortgage rates followed.
Keyhole Inc., a venture-capital funded startup, was acquired by Google in 2004. Its product became Google Earth. Its technology filtered into Google Maps and Google Mobile. One of the venture-capital investors? The CIA. It didn’t ruffle any feathers at the time. But now we have NSA leaker Edward Snowden and his media blitz.
Japan’s make-or-break economic policies have been named lovingly after Prime Minister Shinzo Abe – lovingly, because if they fail, he gets to carry an albatross called Abenomics around his neck for the rest of his life. And one of the “three arrows” of Abenomics is already headed that way: goosing the economy through a frontal attack in the Currency War.
Contributed by John Mauldin: The China effect has been fearsome, destroying jobs and shuttering factories around the world. But in China, subsidies have created enormous overcapacity, inefficiencies, a wall of debt, and other challenges.... Here are three eye-opening articles: Innovation Hurdle, China’s Ambitions in Excess, and Steelmakers Struggle to Shut Down Capacity. Plus John's excellent introduction.
Fed Chairman Bernanke and his ilk refuse to see the connection. They’re too busy ogling inflation in the US that is suspiciously low. But China has its eyes riveted on the revolt in Brazil. Like all revolts, it’s about deep-seated issues and inequalities, but the spark that lit it – after inflation had made life too expensive – was an increase in bus fares.
“We’ve intentionally blown the biggest government bond bubble in history,” confessed Andy Haldane, Director of Financial Stability at the Bank of England. The bursting of that bubble was a risk he felt “acutely.” He saw “a disorderly reversion” as the “biggest risk to global financial stability.” Seatbelts are being fastened; the clicks can be heard around the world.
Contributed by Don Quijones: Steppenwolf’s The Pusher, the opening song for the 1969 movie, Easy Rider, was about dealers who “push” tainted drugs on unsuspecting users. The pusher “don’t care if you live or if you die,” it goes. Similarly, Spanish banks pushed investment products called preferentes on unsuspecting clients.
Contributed by Christina Macpherson: According to the nuclear industry, the real hurdle to developing nuclear power isn’t cancer, birth defects, genetic instability, risks of nuclear accidents.... It’s simply overcoming the fear of radiation.