Dear reader, you are not going to like or agree with my market outlook, but I call 'em like the charts reveal them. For those who will mumble after reading that maybe I visited a Colorado "medicine" shop or something similar, the answer is no,...but I'd like too.
Market Internals
I start with the Transports. It is the second shoe in the Dow Theory. It was late to the market party of new highs, but it did attend in early July. This gave the overall appearance of a strong market and economy. The problem was it didn't stay long. It left immediately and the transports are down 500 points since then. Please note, it came down on high volume in this low volume market.
Speaking of volume, there is a serious disconnection between the overall market and its leaders. The starting five of the FAANG GROUP account for 25% of the market gains. This gives a misconception of the market strength. The rest of the market is quietly falling apart.
Consider MSTR:
This is an important tech stock. It was $195 on the 24th of July. Today, it is $139. This is an example of the breakdown in market internals. Remember all the hype about infrastructure and tariffs? Take a look at the steel stocks. One of the best is AK Steel. It was $9.25 in February. It was glowing not from the fires to shape steel, but the Trump inauguration. Now, it is $5.47 and falling. How about retail? It is the backbone of a consumer society. The XRT(retail)was $50 and now, it touches $39. Commercial real estate is showing strains. Look at the ETF, KIM. It was $32 and now, it touches $17. How about the auto industry? They are feeling it and this is no "it" girl. From slowing sales to delinquent buyers, the outlook isn't pretty. A huge return of leased cars won't help the picture.
King Dollar
One of the big reasons, but not mentioned in the media is the US dollar. It effects everything. There is something going down behind the scenes. The dollar touched 103 in early March. Now, it touches 92 and falling.
Part of me thinks this is a replay of the Clinton administration. He gets credit for a surplus and economic improvement. This is the shills talking, and sadly, they dominate the news. Slick "Willy" killed the dollar. This action resulted in high inflation. Yes, we sold more exports, but imports always glom exports. This social and financial engineering looks good on paper just like NAFTA until we realize that the imports have gutted industry after industry. The outlook isn't bright, unless we turn to GOLD.
For every drop in King Dollar, there is a corresponding rise in gold. At the moment, 88 cents is in play. Remember last month when I told you that a rally in the Euro was coming? The euro has risen from the talk of parity to 118 and rising. In addition, the dollar hit the "death cross" and with conviction. While the dollar walks to the place of skulls, gold hit the "golden cross." Oh, yeah, this is earnings season and the miners have been crushing more than rocks. They are over-achieving and looking real strong. The media hypes big winners, but never mention precious metal miners unless it is bad news. In this thin market, gold is acting like a growth tech stock of the 90s.
All good for precious metals. I see gold retesting $1300 and then, a move to test the last high of $1375 in July 2016. Silver needs to break $17.16 and then, we will have some action.
Good investing. Go Yanks! Go Irish! Practice those mock drafts 'cause the NFL is around the corner.
Peace.
Wednesday, August 2, 2017
Wednesday, July 26, 2017
A New Police Danger
I don't want to pick on the police because like my mother told me, "There is good and bad in everything." As for my life experience with the lawmen not to mention a few relatives, there are two types of cops. You have officers and pigs. The pigs are the thugs who shoot first and ask questions later. The problem is we don't have enough officers and it seems that the thugs are in the majority. The recent tragedies and travesties of the law to our citizens is bad enough, but the latest dictum from the US Attorney General, Jeff Sessions could germinate a seed of rebellion in our society. When you find more reasons to suppress people, there is bound to be a backlash. It is like Newton's Law, "For every action there is an equal opposite reaction."
Where's your license?
There are stories in the news and internet all the time like kids being arrested for selling lemonade in front of their home or laws not allowing garage sales. These things build up and form a poison to our emotional state. This new oppression I fear could swell within the cortex to explode with unforeseen consequences. The English taxed and the American colonist responded, "No taxation without representation!" The disease of no representation is already present in our society. Our government never does what citizens want. They condescend our thinking as "Populist."
A new thorn in our garden...
The attorney general wants police to seize cash and property during any course of action. Sessions uses a truthful logic in this approach, but he does not understand the concept of abuse. He says that he does not want drug dealers to benefit by their illegal operations. This sounds good, but this change in procedure has an underlined profit motive for the police. The cash and property that they take will be kept for their department and things like their pension.
Reality
The police have seized more property and cash than robbers. That is not a misprint. In 2014, federal law enforcement took more cash and property than crooks. State and local authorities seized untold millions more. Since 2007 the DEA(Drug Enforcement Admin.) alone has taken more than $3B in cash from people. By the way, most of these people were not even charged with a crime. How would you like to be stopped after going to your bank and then, have all your money taken from you and all the police have to say is that you were under suspicion. This is Abuse! This is Tyranny!
Where's your license?
There are stories in the news and internet all the time like kids being arrested for selling lemonade in front of their home or laws not allowing garage sales. These things build up and form a poison to our emotional state. This new oppression I fear could swell within the cortex to explode with unforeseen consequences. The English taxed and the American colonist responded, "No taxation without representation!" The disease of no representation is already present in our society. Our government never does what citizens want. They condescend our thinking as "Populist."
A new thorn in our garden...
The attorney general wants police to seize cash and property during any course of action. Sessions uses a truthful logic in this approach, but he does not understand the concept of abuse. He says that he does not want drug dealers to benefit by their illegal operations. This sounds good, but this change in procedure has an underlined profit motive for the police. The cash and property that they take will be kept for their department and things like their pension.
Reality
The police have seized more property and cash than robbers. That is not a misprint. In 2014, federal law enforcement took more cash and property than crooks. State and local authorities seized untold millions more. Since 2007 the DEA(Drug Enforcement Admin.) alone has taken more than $3B in cash from people. By the way, most of these people were not even charged with a crime. How would you like to be stopped after going to your bank and then, have all your money taken from you and all the police have to say is that you were under suspicion. This is Abuse! This is Tyranny!
Wednesday, July 19, 2017
Revisit Dow Theory Today
The first great technician in the stock market in the US has to be Charles Dow. He realized that man acted in similar fashion throughout history and the gyrations in stock prices just mirrored man's internal thinking. This concept settled on the two forces of greed and fear.
He formulated a theory that took into effect the two most important aspects of the market. In the Dow Index(became immortalized) he listed the main corporations that produced product. Yes, at one time we were a producing nation. The other index he named after its purpose: Transportation. This included mainly railroads at the time, but like his other index, companies come and go. In fact, GE is the only surviving company in the original formula.
* His first point stated that the Market discounted the future. Today, this isn't true. When Trump won the election, the Dow's futures rallied as did the market. Prices climbed 2,000 points to the Dow Index. The movement was based on favorable market policies. I wonder what Charlie would have said about that? I feel our illusion and greed has taken control of our minds over substance or earnings within the market.
*His next point stated that there are four conditions or phases in the market. Today, we use the term cycles to describe the same aspect.
His basic premise is that the market goes up.
It reaches a top.
Then, it moves downward.
Until it reaches a bottom. This leads to rising prices and the cycle begins a new.
* These cycles soon become part of a bigger picture or direction. Today, we call this a trend.
He concluded that the Primary trend is a result of fundamental aspects. This is the longer direction of the market.
*There is also a Secondary trend which could go against the primary trend or in conjunction with it. This is shorter in duration.
The action of investors causes the cycles to move within their patterns. The Bulls find reason to buy. They cause prices to rise. Other investors want to gain in the profits, and they buy too. This causes excess from the original information which caused the Bulls to buy in the first place. Today, we call this irrational exuberance. This leads to the top and the ultimate decline. It is just like they say on the old detective show, "The names have been changed(to protect the innocent), but the facts remain the same." Companies that didn't exist 100 years ago have replaced the departed, but human actions remain the same. When people buy on illusion and greed, the top has been reached. I'm seeing that in the action of the market.
With my opinion being what it is, the present market still is in sync with Dow Theory. The main point of continuing rising prices is centered upon the two indexes moving up together. At the moment both indexes are climbing to new highs, however I still say, Caveat Emptor!
With that said, look for this great other technical tool. If prices decline, follow the MACD. This oscillator index has a slow moving and fast moving price line by time duration. If the fast line crosses the slow line in a downward manner, the climb in prices is over. This is called, "The Death Cross."
He formulated a theory that took into effect the two most important aspects of the market. In the Dow Index(became immortalized) he listed the main corporations that produced product. Yes, at one time we were a producing nation. The other index he named after its purpose: Transportation. This included mainly railroads at the time, but like his other index, companies come and go. In fact, GE is the only surviving company in the original formula.
* His first point stated that the Market discounted the future. Today, this isn't true. When Trump won the election, the Dow's futures rallied as did the market. Prices climbed 2,000 points to the Dow Index. The movement was based on favorable market policies. I wonder what Charlie would have said about that? I feel our illusion and greed has taken control of our minds over substance or earnings within the market.
*His next point stated that there are four conditions or phases in the market. Today, we use the term cycles to describe the same aspect.
His basic premise is that the market goes up.
It reaches a top.
Then, it moves downward.
Until it reaches a bottom. This leads to rising prices and the cycle begins a new.
* These cycles soon become part of a bigger picture or direction. Today, we call this a trend.
He concluded that the Primary trend is a result of fundamental aspects. This is the longer direction of the market.
*There is also a Secondary trend which could go against the primary trend or in conjunction with it. This is shorter in duration.
The action of investors causes the cycles to move within their patterns. The Bulls find reason to buy. They cause prices to rise. Other investors want to gain in the profits, and they buy too. This causes excess from the original information which caused the Bulls to buy in the first place. Today, we call this irrational exuberance. This leads to the top and the ultimate decline. It is just like they say on the old detective show, "The names have been changed(to protect the innocent), but the facts remain the same." Companies that didn't exist 100 years ago have replaced the departed, but human actions remain the same. When people buy on illusion and greed, the top has been reached. I'm seeing that in the action of the market.
With my opinion being what it is, the present market still is in sync with Dow Theory. The main point of continuing rising prices is centered upon the two indexes moving up together. At the moment both indexes are climbing to new highs, however I still say, Caveat Emptor!
With that said, look for this great other technical tool. If prices decline, follow the MACD. This oscillator index has a slow moving and fast moving price line by time duration. If the fast line crosses the slow line in a downward manner, the climb in prices is over. This is called, "The Death Cross."
Wednesday, July 12, 2017
Consumerism and State Psychology
The culture to satisfy present wants over future needs is pushed by US government leaders who can get reelected on the pseudo premise that things are better under so-and-so's leadership and our standard of living is rising. The media never shows the lifestyles of foreign nations because if they revealed the truth, our standard of living has been declining for decades. DECADES! This is not a misprint. We are not only not in the top ten, but not even in the top twenty. Our government does not include items like the quality of life with clean air, safe water, good schools and crime free environment. Why would they? Because citizens would realize that their formula's for wealth does not consider those abstract points that benefit citizens. Come on! Their formula considers credit which is debt, a positive. It is why we have a Flint, Michigan, Chesapeake Bay, Louisiana salt-water intrusions and many, many other violations of our environment. The news bytes that we receive never have follow up unless it is a murder or some other ugly sensationalist news item. It is no wonder then, when municipal workers go on strike, these same leaders would promise anything to end the disturbance, least they suffer a failed reelection like the Mayor of New York, John Lindsay, who failed to remove snow in a influential borough. The psychology to spend now and let somebody else worry about it, is the mainstay for reelection. The consumerism of politics. However, this policy is not only bad for individuals and unsustainable because that someday will come. It is now on hand for our states.
Many state budgets came due for July first and like I have been saying for the longest time, bond holders cross their fingers at the end of each month. Now, the meme is spreading to municipal workers. Eleven states failed to develop their budget on time and since they have to balance their budgets by law, phony accounting comes into play. The main point of contention in almost every state is pension funds. There are four states, Connecticut, New Jersey, Kentucky and Illinois who are seriously deficient in funding. They were in the news last week and they will be in the news many, many more times. The problem is contagious and like I predicted in my yearly forecast, six states raised their taxes on gasoline. Unlike cities and territories, states cannot move to bankruptcy court. If they can get their fellow corrupt leaders in Congress to change the law, municipal workers can forget their pension, period. As it stands, they still can default. The last state to default was Arkansas back in the Great Depression.
The new poster boy whose rooster is calling is Illinois. Things have gotten so bad in the land of Lincoln that they had to suspend their lottery sales in Mega Millions and Powerball due to a lack of funding. This is unbelievable since the state makes $90 million profit on lottery sales. There are $15 billion in unpaid bills and with late fees and interest, you can add another $800 million.
What's their solution?
Debt! They issued $25B worth of new debt, raised taxes and corporate levies. This is what you do when you spend $6B more than you take in. At the moment the rating services have threatened to downgrade their status to JUNK! This would be a first. The market says there is no panic, but you can't see their hands behind their back with fingers crossed.
Many states develop "creative" ideas to cover their liabilities. California is borrowing form their investment fund to cover bills. New Jersey is thinking of directly transferring lottery sales to fund their pension plan. Let's hope people keep buying their dream with lottery tickets and maybe, the state will open the beaches again. Then again, if debt and taxes are the only solution, people can move and their goes your tax revenue and lottery buyers. Is it too late to remind these clueless fools what my mother use to say, "Save for a rainy day?"
Many state budgets came due for July first and like I have been saying for the longest time, bond holders cross their fingers at the end of each month. Now, the meme is spreading to municipal workers. Eleven states failed to develop their budget on time and since they have to balance their budgets by law, phony accounting comes into play. The main point of contention in almost every state is pension funds. There are four states, Connecticut, New Jersey, Kentucky and Illinois who are seriously deficient in funding. They were in the news last week and they will be in the news many, many more times. The problem is contagious and like I predicted in my yearly forecast, six states raised their taxes on gasoline. Unlike cities and territories, states cannot move to bankruptcy court. If they can get their fellow corrupt leaders in Congress to change the law, municipal workers can forget their pension, period. As it stands, they still can default. The last state to default was Arkansas back in the Great Depression.
The new poster boy whose rooster is calling is Illinois. Things have gotten so bad in the land of Lincoln that they had to suspend their lottery sales in Mega Millions and Powerball due to a lack of funding. This is unbelievable since the state makes $90 million profit on lottery sales. There are $15 billion in unpaid bills and with late fees and interest, you can add another $800 million.
What's their solution?
Debt! They issued $25B worth of new debt, raised taxes and corporate levies. This is what you do when you spend $6B more than you take in. At the moment the rating services have threatened to downgrade their status to JUNK! This would be a first. The market says there is no panic, but you can't see their hands behind their back with fingers crossed.
Many states develop "creative" ideas to cover their liabilities. California is borrowing form their investment fund to cover bills. New Jersey is thinking of directly transferring lottery sales to fund their pension plan. Let's hope people keep buying their dream with lottery tickets and maybe, the state will open the beaches again. Then again, if debt and taxes are the only solution, people can move and their goes your tax revenue and lottery buyers. Is it too late to remind these clueless fools what my mother use to say, "Save for a rainy day?"
Tuesday, July 4, 2017
A Fool and His Money
"... That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, ..."
- The Declaration of Independence, July 4, 1776
Our so-called leaders are definitely the fools, but sadly, they are wasting our money. In our specialized society, which means that if you are not specialized in a field, they can exclude you. This my friends is pure BS! But hey, we can talk about these so-called experts = free speech.
The best example in the best of the worst is the US military. They like to lay claim to being the best in the world, a superpower and all the media that they can buy. History tells a different tale.
Civil War
How many general did Lincoln go through to find Grant? More than the denomination of his currency.
WWI
After the "Great War" Billy Mitchell gave the Navy the idea for an aircraft carrier. "We would be the strongest navy," he said. They told him to take a hike and behind his back, called him an idiot.
Vietnam
After ten years of fighting the VC, the military still did not know that Charley was hiding underground in a tunnel complex the whole time. So much for the intelligence of our intelligence and our experts in the military. Let's bomb Laos! Remember that?
Today
We take Iraq only to give it to ISIS. How long have we been in Afghanistan?
I rest my case.
The problem is these exclusive institutions are really bureaucracies. They are only in it for themselves. Dear reader, if we get pushed into a war by these war mongers, they will draft everyone and the sad part is that these people will be in command. Consider just last week, the Navy pushed the USS Gerald R. Ford into the water. It is neither ready nor finished. It needs more work (read money) to its already $2.4 billion over budget. The Navy don't care. They will just increase the budget like we breathed air. It gets worse and when you spend $12.9 B and not done that is saying something.
The aircraft carrier won't meet structural tests which means more money down the drain and the best the navy can hope for is deployment by 2019, possibly later.
Just one mistake, you say. The list could fill a book. The Navy is pushing for another carrier and I hate that JFK gets his name tagged to it. They are pushing the carrier ahead of schedule for 2019. however this carrier calls for gadgets that are not even invented yet. This implies change in design which backs up the schedule and raises the cost. But hey, I'm not a specialist.
The only voice of reason has been the GAO (General Accounting Office). They warned the Navy back in 2007 of the problems with the Ford carrier in design and cost overruns. In another report in 2015 the GAO told the Navy that nuclear carriers have a disconnect between design and "wishful" features. I say there is a disconnect between reality and the Navy.
Aircraft Carriers
are obsolete! What worked 70 years ago, is out of date. Its time has passed!
With today's tracking devices, smart bombs, drones and tactical missiles, a small PT size boat filled with uranium tipped torpedoes could sink a carrier on the cheap. They will be floating graves with 5.000 sailors, hundreds of jet fliers and planes, and all those resources built into it and one smart bomb to sink it. The only ships the Navy should be building is submarines, but I'm not a specialist.
How about the Littoral Combat Ship? Again, insufficient design with cost overruns and yet, the Navy pushes ahead with orders for 12 more of these frigates by 2019.
It is not just the Navy, but the alpha spender itself, the Pentagon. It orders F-35s and pilots pass out and crash them due to a lack of oxygen, The cost? Hidden and what we do know is through the roof. As for Lockheed, Boeing and all the others, their shares continue to climb. They hire more retired officers who use to put those same jet fighters to tests to determine their reliability. Its an inside game like with the Fed and Treasury. The treasury sells and the Fed buys. The officers pass the planes and they get rewarded with easy desk jobs with big paychecks. Where is the responsibility to the people?
The GAO says there are many deficiencies which will drive up the cost another 38% to its already over budget costs. Superpower? No: Just a big, wasteful super-spender, and a destroyer not the boat, but of lives and resources. A nation is only as strong as its people. Today we celebrate our independence, but with one in four in poverty, our people are in disharmony. Our nation is composed of a government that is a plutocracy of rich people in disguised of a democracy. It is an elitist by money not ability government that does very little for its citizens.
- The Declaration of Independence, July 4, 1776
Our so-called leaders are definitely the fools, but sadly, they are wasting our money. In our specialized society, which means that if you are not specialized in a field, they can exclude you. This my friends is pure BS! But hey, we can talk about these so-called experts = free speech.
The best example in the best of the worst is the US military. They like to lay claim to being the best in the world, a superpower and all the media that they can buy. History tells a different tale.
Civil War
How many general did Lincoln go through to find Grant? More than the denomination of his currency.
WWI
After the "Great War" Billy Mitchell gave the Navy the idea for an aircraft carrier. "We would be the strongest navy," he said. They told him to take a hike and behind his back, called him an idiot.
Vietnam
After ten years of fighting the VC, the military still did not know that Charley was hiding underground in a tunnel complex the whole time. So much for the intelligence of our intelligence and our experts in the military. Let's bomb Laos! Remember that?
Today
We take Iraq only to give it to ISIS. How long have we been in Afghanistan?
I rest my case.
The problem is these exclusive institutions are really bureaucracies. They are only in it for themselves. Dear reader, if we get pushed into a war by these war mongers, they will draft everyone and the sad part is that these people will be in command. Consider just last week, the Navy pushed the USS Gerald R. Ford into the water. It is neither ready nor finished. It needs more work (read money) to its already $2.4 billion over budget. The Navy don't care. They will just increase the budget like we breathed air. It gets worse and when you spend $12.9 B and not done that is saying something.
The aircraft carrier won't meet structural tests which means more money down the drain and the best the navy can hope for is deployment by 2019, possibly later.
Just one mistake, you say. The list could fill a book. The Navy is pushing for another carrier and I hate that JFK gets his name tagged to it. They are pushing the carrier ahead of schedule for 2019. however this carrier calls for gadgets that are not even invented yet. This implies change in design which backs up the schedule and raises the cost. But hey, I'm not a specialist.
The only voice of reason has been the GAO (General Accounting Office). They warned the Navy back in 2007 of the problems with the Ford carrier in design and cost overruns. In another report in 2015 the GAO told the Navy that nuclear carriers have a disconnect between design and "wishful" features. I say there is a disconnect between reality and the Navy.
Aircraft Carriers
are obsolete! What worked 70 years ago, is out of date. Its time has passed!
With today's tracking devices, smart bombs, drones and tactical missiles, a small PT size boat filled with uranium tipped torpedoes could sink a carrier on the cheap. They will be floating graves with 5.000 sailors, hundreds of jet fliers and planes, and all those resources built into it and one smart bomb to sink it. The only ships the Navy should be building is submarines, but I'm not a specialist.
How about the Littoral Combat Ship? Again, insufficient design with cost overruns and yet, the Navy pushes ahead with orders for 12 more of these frigates by 2019.
It is not just the Navy, but the alpha spender itself, the Pentagon. It orders F-35s and pilots pass out and crash them due to a lack of oxygen, The cost? Hidden and what we do know is through the roof. As for Lockheed, Boeing and all the others, their shares continue to climb. They hire more retired officers who use to put those same jet fighters to tests to determine their reliability. Its an inside game like with the Fed and Treasury. The treasury sells and the Fed buys. The officers pass the planes and they get rewarded with easy desk jobs with big paychecks. Where is the responsibility to the people?
The GAO says there are many deficiencies which will drive up the cost another 38% to its already over budget costs. Superpower? No: Just a big, wasteful super-spender, and a destroyer not the boat, but of lives and resources. A nation is only as strong as its people. Today we celebrate our independence, but with one in four in poverty, our people are in disharmony. Our nation is composed of a government that is a plutocracy of rich people in disguised of a democracy. It is an elitist by money not ability government that does very little for its citizens.
Wednesday, June 28, 2017
Banking Crisis: How It Happens...and It Will
I don't make amendments, but this is HUGE!
"...another financial crisis not likely in our lifetime."
- Janet Yellen (06/27/2017)
Now, I predict that we will get one and possibly in one year or less.
- And the men who spurred us on
Sit in judgment of all wrong
They decide and the shotgun sings the song
...Meet the new boss
...Same as the old boss
...Then, I'll get on my knees and pray
...We don't get fooled again.
- The Who
The Who say it more clearly, although Pink Floyd had the beat in Another Brick in the Wall. Where I'm going is the dangerous path that our so-called leaders are directing our banking system and economy. Of course, banking lobbyists did whisper in their ears.
How Does a Banking Crisis Begin?
After it happens, all the pundits say, "I told you so," but these are the same dudes who now tell you that this will help both banking and the economy.
The first brick is the dismantling of Dodd-Frank. Not that Dodd-Frank was any model for banking stability. It is just the good stuff that banks want to eliminate like the Volcker Rule.
The next brick is the so-called stress tests for banks. In the past week all 34 large institutions passed the test, but so the public will be fooled, the Fed says, "Now, there is a second part." This is the point that the lobbyist wanted all along. When the banks pass this part of the stress, they will be allowed to pay or hike their dividends and also to buy back shares, giving their retirement options more wealth.
The third brick is being set by President Trump. He wants to "free-up" $2 trillion for the banks, so they can make more loans to stimulate the economy. It sounds good except the technique is to lower banks capital reserves which puts them in a dangerous position between greed and responsibility. They always choose greed. When you consider the state of retail(brick and mortar) and all their debt and you add the oil industry with all their billions in debt, weakening capital reserves is asking for trouble. Oh, I almost forgot. The rising delinquencies of auto loans to which many were purchased with student loans. The more one thinks about our banking industry, the more worries come to mind.
The next brick is already passed by the House Republicans. It awaits action in the Senate. It is called, Choice Finance. In it, a provision (orderly liquidation authority) allows banks to stop them from being dismantled if they do not have sufficient funds to met their obligations. The banks want to utilize the "bail-in." This means that they can seize our deposits to use as their funds to keep operating. This is corruption!
Of course, it doesn't matter if Choice Finance passes because Papa Fed always has the banks back. I guess it is not whether we get fooled again because we do know. It is just that our so-called democracy doesn't give us a say, to which gives me an idea for a song, "When Will They Do What's Right?"
"...another financial crisis not likely in our lifetime."
- Janet Yellen (06/27/2017)
Now, I predict that we will get one and possibly in one year or less.
- And the men who spurred us on
Sit in judgment of all wrong
They decide and the shotgun sings the song
...Meet the new boss
...Same as the old boss
...Then, I'll get on my knees and pray
...We don't get fooled again.
- The Who
The Who say it more clearly, although Pink Floyd had the beat in Another Brick in the Wall. Where I'm going is the dangerous path that our so-called leaders are directing our banking system and economy. Of course, banking lobbyists did whisper in their ears.
How Does a Banking Crisis Begin?
After it happens, all the pundits say, "I told you so," but these are the same dudes who now tell you that this will help both banking and the economy.
The first brick is the dismantling of Dodd-Frank. Not that Dodd-Frank was any model for banking stability. It is just the good stuff that banks want to eliminate like the Volcker Rule.
The next brick is the so-called stress tests for banks. In the past week all 34 large institutions passed the test, but so the public will be fooled, the Fed says, "Now, there is a second part." This is the point that the lobbyist wanted all along. When the banks pass this part of the stress, they will be allowed to pay or hike their dividends and also to buy back shares, giving their retirement options more wealth.
The third brick is being set by President Trump. He wants to "free-up" $2 trillion for the banks, so they can make more loans to stimulate the economy. It sounds good except the technique is to lower banks capital reserves which puts them in a dangerous position between greed and responsibility. They always choose greed. When you consider the state of retail(brick and mortar) and all their debt and you add the oil industry with all their billions in debt, weakening capital reserves is asking for trouble. Oh, I almost forgot. The rising delinquencies of auto loans to which many were purchased with student loans. The more one thinks about our banking industry, the more worries come to mind.
The next brick is already passed by the House Republicans. It awaits action in the Senate. It is called, Choice Finance. In it, a provision (orderly liquidation authority) allows banks to stop them from being dismantled if they do not have sufficient funds to met their obligations. The banks want to utilize the "bail-in." This means that they can seize our deposits to use as their funds to keep operating. This is corruption!
Of course, it doesn't matter if Choice Finance passes because Papa Fed always has the banks back. I guess it is not whether we get fooled again because we do know. It is just that our so-called democracy doesn't give us a say, to which gives me an idea for a song, "When Will They Do What's Right?"
Wednesday, June 21, 2017
New Obstacle for Banking
It is easy to criticize our banks. They constantly seek ways to get a piece of our piggy bank dollars that they hold in their vaults. We forget that they have many costs in providing branch outlets that are close to our homes. My personal beliefs is that banks should be regulated like utilities and that could help in protecting them from being themselves. Wherever you stand with your feelings about our banking industry, the bottom line is that they are needed.
They have survived and they generally oppose all types of regulation. For example, they originally opposed the FDIC. Now, they realize what a great economic addition this was for our society and the health of their industry. We no longer have runs on our banks. I should add a disclaimer to that because some people can't leave well enough alone. I will get to that in a moment.
If one would check the stock prices of publically traded bank shares since the economic crisis of 2008, one would see that the banking industry as a whole is doing fine and dandy. Again, CEOs of individual banks will complain, but they make money hand over fist.
As stated, they have survived the recession of 2008, co-existed with Dodd-Frank and managed in this low interest rate environment, but now, a new obstacle is appearing on the horizon in a report from the Financial Times by Ben McLannahan.
Tech Loans
The leader in this new competition for loans is none other than Amazon. They started quietly, but they now hold a portfolio of $3 billion in loans. They are not alone. Pay Pal and Square are also making loans. The first question one would ask is can they do this? They are not chartered like banks, but they found a loophole. They are not creating money which banks do and use for such purposes. They are using their own money like a personal loan that you make with your cousin or uncle.
Now, the total amount of money is very small, but keep this aspect in mind.
Once Upon A Time...
retail laughed at the $18 stock of a startup named Amazon that entered retail with books online. Can you see where this is going? Some tech companies have more money sitting offshore than GDP of countries. This could be a serious obstacle for the banking industry in the future and I did not even mention the competition from online banks like Soft Bank. There is also another danger for the banking industry and this one is also seriously dangerous for you and me. Republicans, I told you before, you can never trust them, are seeking to pass a new banking rule and law called Choice Finance.
OLA
The bill would do away with OLA (orderly liquidation authority) which is the dissolving of a bank that has insufficient funds to operate by the FDIC agency. This is BAD, very BAD. This is how you start runs on banks because not only is there no mechanism to dissolve the bank, but another feature would allow banks to seize your money to recapitalize itself and stay in business. The bill has passed the House, but hopefully, won't pass the Senate. In another sad state of affairs, the bill would override an executive order from President Trump who now says that he will sign the bill if passed...And the Beat Goes On.
They have survived and they generally oppose all types of regulation. For example, they originally opposed the FDIC. Now, they realize what a great economic addition this was for our society and the health of their industry. We no longer have runs on our banks. I should add a disclaimer to that because some people can't leave well enough alone. I will get to that in a moment.
If one would check the stock prices of publically traded bank shares since the economic crisis of 2008, one would see that the banking industry as a whole is doing fine and dandy. Again, CEOs of individual banks will complain, but they make money hand over fist.
As stated, they have survived the recession of 2008, co-existed with Dodd-Frank and managed in this low interest rate environment, but now, a new obstacle is appearing on the horizon in a report from the Financial Times by Ben McLannahan.
Tech Loans
The leader in this new competition for loans is none other than Amazon. They started quietly, but they now hold a portfolio of $3 billion in loans. They are not alone. Pay Pal and Square are also making loans. The first question one would ask is can they do this? They are not chartered like banks, but they found a loophole. They are not creating money which banks do and use for such purposes. They are using their own money like a personal loan that you make with your cousin or uncle.
Now, the total amount of money is very small, but keep this aspect in mind.
Once Upon A Time...
retail laughed at the $18 stock of a startup named Amazon that entered retail with books online. Can you see where this is going? Some tech companies have more money sitting offshore than GDP of countries. This could be a serious obstacle for the banking industry in the future and I did not even mention the competition from online banks like Soft Bank. There is also another danger for the banking industry and this one is also seriously dangerous for you and me. Republicans, I told you before, you can never trust them, are seeking to pass a new banking rule and law called Choice Finance.
OLA
The bill would do away with OLA (orderly liquidation authority) which is the dissolving of a bank that has insufficient funds to operate by the FDIC agency. This is BAD, very BAD. This is how you start runs on banks because not only is there no mechanism to dissolve the bank, but another feature would allow banks to seize your money to recapitalize itself and stay in business. The bill has passed the House, but hopefully, won't pass the Senate. In another sad state of affairs, the bill would override an executive order from President Trump who now says that he will sign the bill if passed...And the Beat Goes On.
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