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Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: roguedolphin who wrote (6740)	10/22/2007 6:54:37 PM
From: jim_p	Read Replies (1) \| Respond to of 50746

Great article!!! Jim

To: roguedolphin who wrote (6740)	10/23/2007 2:34:54 PM
From: roguedolphin	Respond to of 50746

Financial System Fatal Flaws wallstreetexaminer.com One of my readers, Bernard (comment 63 on Friday), characterized the fatal flaws of the financial system in a way that I feel underscores the issues on this blog. He cited: 1) Lack of transparency (causing total breakdown in trust) 2) Systemic faulty evaluation of credit (the credit rating process) 3) Credit insurance (underwriting with little/no reserves) 4) Tremendous leverage (consumer/business/financial debt) 5) Massive US dependence on foreign capital. I would add a sixth one to the list: that being a deliberate heavy handed attempt to manipulate and massage both economic data and markets. The first part on Ministry of Truth economic data should be clear enough to about any thinking person who has been reading my blog. Frankly I’m amazed that this would still even be a controversial claim. Still markets use this one to stage “can of worms” rallies at every opportunity However my concept of large scale market manipulation may push into tin foil hat realm, but I’ll chance that and make the charge anyway. I feel certain large and powerful financial institutions are in so far over their heads that they have literally colluded to corner key markets including the US stock market. This is akin to late stage vested interest mis-management of the Soviet economy in the late 1980s. How you may ask can this happen in a modern financial system? I will propose that if certain conditions are allowed to breed, then critical levels of collusion are even more likely to take place. Those conditions are 1. Serial Bubbles that enable the creation of huge trading markets dominated and concentrated into the hands of key players (see chart below). They literally corner and become the “market” and I use the term market loosely, as it’s really no longer a market at all, it’s a facade. 2. Serial Bubbles that allow the fatal flaws described by Bernard to infect many large trading markets. A causa remota of this is unregulated laissez faire (except when a crony needs help) wildcat finance. 3. As the fatal flaws of these infected trading markets are manifested (credit crisis, blowback) then the key players in the scheme can only defend their increasingly unstable fictitious capital turf via even more collusive cornering. Again leverage and “modern” synthetic trading (futures, options, derivatives) are used to create the kind of Hail Mary rallies we constantly see. I again offer the following as exhibit number one in terms of how deep “into it” just these five major players are. I count $4 trillion in assets, and would ask how five firms (called market participants in Paulsen Orwellian language) with about $150 billion in equity could get a hold of and control that quantity in “assets”? Which brings me full circle to the notion that this is nothing but a market cornering and manipulation scheme at this stage. It’s also the biggest gamble in the history of mankind, and something only modern Bladerunner technology makes possible. The fatal flaw of this type of scheme is that someone important in the program fails or bails. That will probably come from a secondary player not on the “list”, as increasingly this has become an all hands on deck proposition. Company Total Assets ($billions) Total Equity ($billions) Assets to Equity Equity As % Of Assets Goldman $ 943.2 $ 38.5 24.5x’s 4.1% Bear 423.3 13.3 31.8 3.1 Lehman 605.9 21.2 28.6 3.5 Merrill 1,076.0 37.6 28.6 3.5 Morgan 1,120.6 35.4 31.7 3.2 In the separate world of the real economy these modern day Jay Goulds are facing some incredible challenges to their regime. The latest serial trading Bubble has been centered around the global exporting, commodity and material boom. The problem now with that theme is that the largest buyer of these goods, the US, is cutting back in a big way. I spotted this chart from Smith Barney on transpacific intermodal volumes that that tells the tale. The downdraft is particularly acute in construction (materials) related volumes. [see link for charts] Anybody who has paid attention at all to credit conditions knows that just about everything but conforming mortgages has gone by the wayside starting in August. This has shown up as absolutely appalling sales numbers in key markets like California, where virtually the whole market has seized up. September home sales in Northern California sank to their lowest level in two decades as mortgages became harder to get, a real estate research firm said Thursday. A total of 5,014 new and resale homes and condominiums were sold last month in nine San Francisco Bay Area counties, a 40.1% drop from the same period a year earlier, according to DataQuick Information Systems. Last month was the slowest September since the firm began keeping records in 1988. Sales plunged 31.3% from August as lenders, stung by a nationwide credit crunch, put the brakes on many “jumbo” loans above the $417,000 mark. Here’s what national for sale inventory looks like. I’d have better luck carting bananas out to the street corner here in Brazil and selling them for a buck a piece against the locals as move this inventory. [see link for charts] Rogue