The Commission’s statutory mission is “to examine the causes, domestic andglobal, of the current financial and economic crisis in the United States.” By focusing too narrowly on U.S. regulatory policy and supervision, ignoring international parallels, emphasizing only arguments for greater regulation, failing to prioritize the causes, and failing to distinguish sufficiently between causes and effects, the majority’s report is unbalanced and leads to incorrect conclusions about what caused the crisis.Here’s a link to the full report. Dissenting views start on page 411.
I’ve formed an opinion without any scientific analysis. Because of the run up in the stock market (primarily driven by the two-pronged decline in the value of the dollar and the purchase of assets by the Federal Reserve), people are selling gold and buying equities.
To me this is very interesting because the equities are rising due to two factors that have not traditionally been drivers of the S & P 500. And gold, although it traditionally competes with interest rates, it doesn’t compete with stocks per se except as a safe haven. You would think that it would be interest rates that would drive people out of gold and into stocks, not the opportunity cost (i.e. greed) of missing out on the run up considering the short time-frame that has passed since the credit collapse. You would think that the fear component would create some balance against the greed component, but it’s not working that way. Why? Because fund managers need to provide a return to their investors and stocks are providing that return while gold is not because the Fed’s not buying gold and people don’t seem to be fearful right now. They’re hopeful. Kind of “Sputnikian.” Remember Dave says hope is not a strategy, it’s just a starting point.
Why are people not fearful? People aren’t fearful because the value of their mutual funds, retirement accounts and so forth continue to ratchet up. It’s the wealth effect excluding the housing market.
So what’s next? The stage is definitely being set for something new and exciting to happen. Obviously the global corporations have benefitted greatly from the plan and the U.S. policymakers have been successful in exporting our troubles as can be seen by the troubles all over the planet in the form of rising proportional food costs, rioting and so forth. Here’s the catch. Our stock market is being driven by global corporations whose success no longer depends on a vibrant American economy (read as jobless recovery). The Fed policies have been successful in exporting inflation and keeping a lid on everything here in the U.S. Do you see the disconnect? The trouble is overseas and our companies that make up the S & P are now operating overseas. So the whole thing becomes some sort of movie that we watch, like one of those news reels that that they used to play in movie theaters during World War II. Everything was happening overseas and you could watch it on the big screen and buy a war bond. The only difference is now it’s economic warfare where the big question is how long before the root canal of closing Egypt’s Suez Canal route.
How long before the trouble that’s brewing overseas starts affecting our investments in the corporations that are operating overseas? Or worse, how long before we start seeing spot shortages of select product (see our post on The Price Is Rice: http://tradewithdave.com/?p=4933) here in the states. I think we’re already witnessing spot “overages” of supply which have been used to mask the food inflation. You can do that with a freshman year micro-economics supply and demand curve. I think that’s what we’ve been doing with much of the hot money and because of the way the Bureau of Labor Statistics measures this stuff it’s not hitting the wire, instead it hits Costco.
Enjoy the break from fear. We wouldn’t be reading all these reports like today’s release of the FCIC, the recent reports about Citigroup (http://tradewithdave.com/?p=4760) being bust during the crisis, etc. if the national psyche wasn’t stable enough to handle it. So the price of “paper gold” (ETF’s, mining stocks, COMEX, etc.) will continue to drop, but keep a keen eye on the price of physical precious metals. If you see a decoupling between the price of paper metals and physical metals, then it’s time to make your trade.
With the price suppresion programs that the bullion banks continue to promote, anyone who ventures into this arena with a plan to measure their values in U.S. dollars should be prepared to watch their investment roller coaster in an effort to throw off small investors. Right now I think we’re heading off that first big hill that you start down right at the beginning of the roller coaster ride… click, click, click… Let’s see who grabs the safety bar in fear and who waves their hands in the air and hollers out knowing that the ride is just beginning.
Why would there be a disconnect between physical metals and paper metals? To put a finer point on it, I would suggest that the decoupling may occur between dealers who would register purchases to the level that they could be tracked (in other words, who bought gold from your company) and the looser dealers (say gray market dealers such as pawn shops, coin dealers, etc.) that would not necessarily report or keep records of who buys gold from them. That’s what you need to keep an eye on.
(note on the above video, they wouldn’t confiscate the miners, they just nationalize them)
(Dave is not a financial advisor, but he does have an internet connection and a Roku box he bought for $30 on Craig’s list because he no longer has cable.)
We know how difficult it is to maintain your patience while waiting for the full release of the FCIC report on the cause(s) of the global credit crisis of 2007-2008. The New York Times article showed us that there’s more than one way to play the blame game. In what has been described by Dave as “The Re-Distribution of Blame” inspired by Karl Marx redistribution of wealth concept as long as everyone gets a little bit of the blame you can actually chew it up and swallow the bite size pieces. You don’t have to “hide the kids, hide the wife… hide the kids, hide the wife” but you may want “hide the silver, hide the gold… hide the silver, hide the gold.” Then again, you may want to consider expatriating to “bubble territory” where it’s safer.
(special thanks to The Gregory Brothers and Auto-Tune The News for taking their fair share of the blame for the financial crisis. Maybe they will do a mix of Marx and the Manifesto because everyone knows that ideas are much catchier when you put them to music.)
In the meantime, enjoy this musical interlude while we wait for Thursday’s release of the full report.
Here’s a link to our previous posts on the subject and some detailed analysis from Barry Ritholtz at Ritholtz.com.
Here’s the story from the U.K.’s Guardian paper. The interesting thing about this is that the post that is hacked is about using peer-to-peer microfinance models for possibly funding Facebook’s initial public offering. That seems a little bit coincidental to Dave. It’s a great idea. Even more powerful would be to let people have equity in their individual directory files… then you’d really have something. It would be JoinDiaspora.com meets Kiva.org meets the FCC rule that lets you take your mobile phone # with you.
More curious about this is the significance of the leaked message relates to Muhammad Yunus and the Grameen Danone yogurt project. Here’s that story. It has a microfinance component to it. You haven’t heard the last from me on this… I’ll be back.
I don’t know if you’ve ever been to Waffle House and seen their menu for hash browns, but basically, it’s the same idea as the judge explains below. It’s amazing how many different ways they make their hash browns.
Judge James Robertson
“The issue of the president’s citizenship was raised, vetted, blogged, texted, twittered, and otherwise massaged by America’s vigilant citizenry during Mr. Obama’s two-year-campaign for the presidency, but this plaintiff wants it resolved by a court.”
The FCIC soothes the injuries resulting from our financial fall as it explains how mortgage-backed securities melted the banks “Like Icarus, they never feared flying ever closer to the sun.”
Remember the ancient story of the attempted escape of Icarus who, although warned by his father not to fly so close to the sun, ignored the wisdom of years and his wax & feather wings melted… plummeting him back to the earth.
After reading the initial summary of the report as described by the New York Times (full report to be released on Thurs.) by the Financial Crisis Inquiry Commission, although the report concludes that it was avoidable, the finger-pointing is so broad that it doesn’t leave out anyone including Dave. In the end it points not to the sun (technically one of the stars) as the cause of the meltdown, but more fittingly to what is now referred to by crisis-experts as ”Wecarus – our collective accountability” as opposed to Icarus. Allow Dave to explain. “To identify a single person, such as Icarus and to hold him accountable, could technically be viewed as hate speech,” Dave said. “You know if someone found out that an individual, say Alan Greenspan for example, or a group of individuals, say Alan Greenspan, Robert Rubin and Larry Summers, were responsible for the global financial crisis, they would probably hate those people. We can’t have that. It’s bullying,” Dave continued.
The report goes onto to support Dave’s theory of “collective accountability” and is an excellent example of how society can employ “choice architects” and still nobody get hurt as long as everybody gets hurt (top 1% excluded). The report even paraphrases Shakespeare’s “Julius Caesar,” when the author pens, “The fault lies not in the stars, but in us.” (the proverbial ”us’” not the FCIC commission members per se and a metaphorical “star”, not our sun in particular)
Technically, with the wealth effect from quantitative easing and the stock market run-up well underway, depending on how you look at the timeline, they’re may not have really been a financial crisis at all. It may all simply be a myth. According to the S & P 500 the repeal of Glass-Steagall is working according to plan.
Dave thought this issue had been put to rest by the Governor of Hawaii. I’m going to go back and read the following blog post from last week again. I might have missed something: http://tradewithdave.com/?p=4970
James Murdoch, son of News Corp’s Rupert Murdoch weighs in on their plans for the Ipad based 99 cents per week subscription to The Daily. The audio will load and a few seconds later the video will load.