The blog post accusing Longtop Financial Technologies Ltd. (LFT) of fraud appeared April 26.

The Hong Kong-based maker of financial software, whose 2007 initial public offering was underwritten by Goldman Sachs Group Inc. (GS) and Deutsche Bank AG (DBK) and which had 11 analyst “buy” ratings, was no match for investor skepticism. Shares slumped 31 percent in a two-day rout that left them at the lowest since March 2009. Yesterday, a day after Nasdaq trading was suspended, the company announced it wouldn’t file financial statements on May 23 as previously planned. It didn’t set a new date.

Longtop’s slide suggests that short-sellers’ allegations of accounting irregularities at smaller Chinese companies that bought their way into U.S. listings are now dragging down the market for larger Chinese IPOs. Renren Inc., a Beijing-based social-networking company, and the 11 other firms that completed offerings in New York this year posted an average offer-to-date loss of 6.3 percent compared with a 5.9 percent gain from all U.S. IPOs, according to data compiled by Bloomberg.

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From: Global Economic Trend Analysis

I received an email today from TrimTabs regarding their Consumer Spendables Index and a new measure called Dependency Ratio II

The Consumer Spendables Index consists of three components.

1. Cash Extracted from Real Estate
2. After Tax Income from Other Sources
3. After Tax Income from Wages and Salaries

click on chart for sharper image
If you see a “+” sign click a second time for higher resolution without further increasing the size.

TrimTabs reports …

The Federal Reserve discontinued its data on cash-outs in Q3 2008, but we use another source of refinancing data from Freddie Mac to estimate cash-outs and thus consumer spendables.

According to the Fed, cash-outs peaked at $804 billion in the four quarters ended in Q2 2006 (we refer to four-quarter periods to smooth quarterly volatility). At that time, cash-outs were equal to 13.6% of the $5.9 trillion in after-tax income. We estimate that cash-outs amounted to only $62 billion in the four quarters ended in April, down $742 billion, or 92.2%, from the peak.

Consumer spendables peaked at $7.06 trillion in the four quarters ended in Q4 2007, more than a year after cash-outs began to decline. Then consumer spendables began to decrease, bottoming at $6.06 trillion in Q2 2010. In the past year, consumer spendables rose an estimated $245 billion, or 4.0%, to $6.31 trillion. This increase is not impressive given that it was accompanied by the payroll tax cut and $1.5 trillion in federal deficit spending.

Note that the recession ended in the second quarter of 2009. The Consumer Spendables Index is below that point now. Moreover, it has taken three full years (12 quarters) for the Wages and Salaries component to match the pre-recession high.

This is in spite of record amounts of fiscal stimulus by Congress, and record amounts of liquidity maneuvers including two rounds of Quantitative Easing by the Fed.

TrimTabs Dependency Ratio II

TrimTabs is alarmed by the rapid rise in government benefits and has a new calculation to measure consumer dependency on government.

From TrimTabs ….

We have been alarmed at the rapid growth in government social programs. Several months ago, we introduced the TrimTabs Dependency Ratio, which compares income from government social benefits to income from wages and salaries. The ratio increased from 9% in 1960 to 36% in March.

We are introducing the TrimTabs Dependency Ratio II, which adds income from government wages and salaries to income from government social benefits and compares it to income from wages and salaries. This modified ratio rose to 66% in March, from 33% in 1960 and 45% in 2000.

The principal driver of the increase in TrimTabs Dependency Ratio is the rapid rise in government wages and salaries and social benefits over the past decade. From 2000 to 2010 private sector wages and salaries grew 29%, whereas government wages and salaries plus social benefits grew 89%, nearly three times the growth rate of private sector wages and salaries.

The government is playing an increasingly dominant role in the economy by borrowing massive sums to fund social welfare programs. This borrowing is financially unsound if not morally wrong. Instead of creating new wealth, it is simply piling more debt on an economy with the same capacity. At some point, the carrying capacity of the economy will be exhausted. We believe the economy is at or near that point.

Read the rest here.

School is in session.

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Aside from the $1 million bail he had to post for an alleged attempted rape, he also has to pay $200,00″ per month for armed guards to be posted outside of his door.

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Michael Collins is out.

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Due to various allegations of fraud, investors are pumping and dumping Chinese related shares with reckless abandon. Here are some weekly percentage moves that would drive any investor crazy.

No. Ticker 1-week Return % Change Industry
1 LONG 80.85 4.77 Chinese Burritos
2 FFHL 36.68 7.43 Chinese Burritos
3 DATE 33.83 19.17 Chinese Burritos
4 NEWN 26.87 -5.48 Chinese Burritos
5 CISG 23.02 -0.06 Chinese Burritos
6 QIHU 12.60 3.96 Chinese Burritos
7 ATAI 12.15 -0.29 Chinese Burritos
8 SINA 10.17 -0.32 Chinese Burritos
9 DHRM 9.25 0.00 Chinese Burritos
————————————————————
No. Ticker 1-week Return % Change Industry
1 JGBO -36.22 -2.78 Chinese Burritos
2 CCSC -27.84 3.59 Chinese Burritos
3 SIHI -27.81 -4.55 Chinese Burritos
4 BSPM -24.73 -2.84 Chinese Burritos
5 TPI -24.49 -2.13 Chinese Burritos
6 YONG -22.22 6.25 Chinese Burritos
7 FXCM -21.82 0.96 Chinese Burritos
8 CCIH -18.88 -7.34 Chinese Burritos
9 VIT -18.44 0.16 Chinese Burritos
10 GRRF -17.80 1.20 Chinese Burritos
11 HEAT -17.21 -4.86 Chinese Burritos
12 NQ -17.20 2.67 Chinese Burritos
13 CHBT -16.96 -9.53 Chinese Burritos
14 CYD -14.72 -13.92 Chinese Burritos
15 CIS -14.29 1.69 Chinese Burritos
16 COGO -14.08 -3.34 Chinese Burritos
17 RCON -13.44 -1.83 Chinese Burritos
18 ALN -13.27 -4.39 Chinese Burritos
19 CNET -13.21 -10.85 Chinese Burritos
20 BORN -13.19 -7.56 Chinese Burritos
21 KONG -12.50 5.50 Chinese Burritos
22 CHLN -12.33 1.08 Chinese Burritos
23 CHC -12.27 -3.59 Chinese Burritos
24 HSFT -11.72 0.67 Chinese Burritos
25 CTFO -10.69 0.00 Chinese Burritos

“The U.S. government is following in the footsteps of Rome, running the same sort of government pension scheme that led to that empire’s decline, according to culty analyst Martin Armstrong.

Armstrong says that Rome offered pensions to its military forces in exchange for their service. As Rome became less stable, it was forced to pay its troops more for their service.

From Martin Armstrong:

The greater the threat of political instability, the higher the military pay rose. This expanded the cost of government and facilitated a spiral of inflation forcing the government to debase the coinage to increase the money supply. The Decline & Fall of Rome was driven by the UNFUNDED guarantee of PENSIONS and like social security today, there was nothing actually put aside. It was always assumed that the state would be able to fund its promises.

During the Republican days, 25 denarii paid 52 percent of the cost of his family’s annual needs for grain. By the 3rd century AD, it would take 6,000 denarii to create the same standard of living. Inflation was the RESULT, not the SOURCE, which was the fiscal mismanagement of Rome.

Rome’s decision to continue to grow the size of pensions without funding them eventually resulted in rapid inflation and devaluation of its silver currency, and he argues that it the guaranteed government pensions were designed to entice people into the military.

Note the rapid expansion of the size of Rome’s military, and then its fall.”

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“The situation in Europe is deteriorating today, with yields on fringe eurozone debt spiking and the price of CDS rising.

Fitch just announced that a Greek debt restructuring would be considered a default, while simultaneously downgrading the country’s debt. French Finance Minister Christiane Lagarde has said Greece is in danger of default, and needs to do more before it gets more bailout funds, according to Bloomberg. Lagarde, and France, were previously believed to be willing to give Greece more aid now.

Ireland‘s ability to sell its sovereign debt is “elusive” and the country needs a new plan to deal with its crisis, according to the IMF. IMF officials are calling on the EU to adopt a more aggressive approach over dealing with the country’s banking sector, including more ECB financing.

The comments have sent Irish CDS prices up 13 bps to 640, according to Bloomberg.”

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“LONDON (Reuters) – Oil fell sharply on Friday with U.S. light crude tumbling more than $2 toward $96 per barrel as the dollar rose and investors worried about the outlook for global growth and about the health of the euro zone.

The euro fell against the dollar as wariness about disagreements on how to tackle Greece’s debt and ahead of a Spanish regional elections caused investors to cut back bullish euro bets before the weekend.

The dollar, which often moves inversely to commodities because oil and other raw materials are priced in the U.S. currency, rose around 0.6 percent against a basket of currencies.

U.S. light crude oil futures for June, which were due to expire later on Friday, were trading around $96.40 per barrel, down $2.04 by 1400 GMT, after hitting an intra-day high of $99.60.

Brent crude for July dropped $2.12 to $109.30.

“The dollar is stronger against the euro — largely on concerns about the Spanish elections with fears local municipalities will be forced to reveal how much debt they have,” said Edward Meir, senior commodities analyst at brokers MF Global in Connecticut.

“Overall, the downtrend remains very much intact in oil.” ”

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“LONDON (Reuters) – Shares in commodities trading group Glencore fell below their issue price of 530 pence on Friday, the second day of conditional trading, as investors fretted over its valuation.

At around 1220 GMT, Glencore was trading in unofficial grey market trade at 525 pence, down 0.9 percent. It was underperforming a modest 0.3 percent rise in the FTSE index and in the broad mining sector.

The shares closed on Thursday at 530 pence, exactly flat on a debut price in the middle of its indicated range.

“Basically the valuation looks a little bit rich. They worked very hard to get a favorable price and one could argue the only reason it was up yesterday was support from the sponsoring banks,” analyst Nik Stanojevic at Brewin Dolphin said.

“I think the market feels the same way. It wasn’t as if they sold this thing really cheaply with the expectation it would go up 50 percent on the first day.”

Unconditional trading begins on Tuesday in London, where Glencore’s offer of up to $11 billion is set to be the largest listing on record, and Wednesday in Hong Kong.

Glencore, the world’s largest diversified commodities trader, has said there was strong demand for its stock and had enough buyers to cover its offering of up to $11 billion within hours of starting the sale process earlier this month.”

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• “Reporting from Washington—Battle lines in federal debt talks sharpened markedly Thursday when the Senate’s top Democrat rejected a proposal for $2 trillion in budget cuts as demanded by House Speaker John A. Boehner, saying any cuts must be accompanied by action on closing tax loopholes.
• “You can’t do $2 trillion just in cuts,” Senate Majority Leader Harry Reid (D-Nev.) said in an interview in his Capitol office. “There has to be a mix of spending cuts, including defense. There has to be a more fair apportionment of tax policy in this country.” “
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“Toxic pesticides from GM food crops found in unborn babies

Toxic pesticides which are implanted into genetically modified food crops have lodged in the blood of pregnant women and their unborn babies, research shows.”

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Another brilliant article by Mr. Jim Jubak, an absolute must read.

Here’s a quote from it:

At the end of April, gasoline sold for $3.03 a gallon in Moscow. When there was any to sell. Beginning in February, gas stations across Russia started to experience shortages. That’s a direct result of investigations launched by Prime Minister Vladimir Putin into steep price increases in gasoline. With the government cracking down on rising prices, effectively capping gasoline at a time when world oil prices had soared, Russian oil producers and refiners had started to ship more gasoline overseas. Prices for gasoline and diesel in Russia in March were $70 to $150 lower per metric ton than on world export markets, according to the Jonathan Muir, the CFO of the TNK-BP joint venture. The company, Muir said, would have earned $54 million more in the first quarter if it had exported the gasoline it instead sold in Russia.

So guess what? Russian refiners started to do just that — and fuel shortages emerged first in the country’s more remote areas, such as Siberia and the southern Altai region, and then in urban areas such as St. Petersburg. In the Altai, more than 700 gas stations have closed. In the Siberian city of Tomsk, gas stations limited customers, even city buses, to 25 liters a day. Because city buses need 80 to 100 liters a day to operate, you won’t be surprised if I tell you that 20% of buses didn’t run on April 28.

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“Did you ever have one of those days where you just feel like watching a movie or perhaps checking out a preview?

I feel like today, a Friday in the latter part of May, is one of those days.

I am guessing that market activity may be muted so let’s go into our “archives” for a clip in which numerous questions posed by an attorney bringing suit against Wall Street’s self-regulator, the head of the Madoff Investors Coalition, and yours truly with an attempted rejoinder by former SEC chair Harvey Pitt are on display. The bulk of the questions raised in this clip are key points in the aforementioned suit, voluminous details of which are included in this compendium, Amerivet Securities v FINRA.

Be careful not to spill your popcorn or your soda because some of what you may see and hear during this 18 minute clip might truly disturb you.

I know it disturbs me and upwards of 70% of the FINRA member firms which during the 2010 FINRA Annual Meeting voted for the very transparency I called for in this clip.

In the inimitable words of Warner Wolf, ‘let’s go to the videotape’ embedded in my commentary from September 15, 2009,

On the heels of President Obama’s speech on Wall Street in which he called for meaningful financial regulatory reform, I welcome submitting to him and the American public the following video clips. These clips are from Fox Business News “America’s Nightly Scoreboard” with David Asman on September 3rd.

While President Obama and Congress may believe financial regulatory reform needs to focus on the SEC, the Federal Reserve and assorted other governmental agencies, I would remind the President and his Congressional colleagues that Wall Street is regulated not only by the SEC but to a great extent by the self-regulatory organization known as FINRA (Financial Industry Regulatory Authority).

This discussion on “America’s Nightly Scoreboard” is separated into two parts.

Highlights from the videos include:

1. Richard Greenfield, an attorney representing Amerivet Securities, makes the claim that FINRA under the leadership of Mary Schapiro failed to protect investors.

2. Former SEC chair Harvey Pitt defends Shapiro and FINRA

3. Greenfield indicates that a FINRA insider claims FINRA invested in Madoff!!

4. In Part II of the video clips, your host here at Sense on Cents joins the panel and provides details as to why FINRA, via its parent the NASD, did have responsibility to oversee Madoff. I also comment on the nature of the relationship between Wall Street and Washington, FINRA’s investment and timely liquidation of its Auction-Rate Securities position, and the need for total transparency at FINRA.

4. Head of the Madoff Victims Coalition for Investor Protection, Ronnie Sue Ambrosino, weighs in that the entire regulatory structure from the SEC to FINRA to SIPC (Securities Investor Protection Corporation) have failed to protect investors.

In my humble opinion, the conclusion of this show highlights the screaming need for FINRA to open its books and records for a full and thorough independent analysis and review. In so doing, hopefully investors specifically and the American public at large can regain a degree of confidence in the badly shattered Wall Street regulatory process.

If you care about the markets and our country, I beseech you to watch this 18 minute video in its entirety.

Thoughts, comments, questions always welcome and appreciated.

LD

PART I”

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