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Yearly Archives: 2014

Janet Yellen in Her Own Words

“Janet Yellen was confirmed today as the first woman to lead the U.S. Federal Reserve — becoming one of the most powerful people in global finance and the top regulator in the U.S. financial system.

The Center for Public Integrity spoke to Yellen in June about her views on bank regulation and supervision. The incoming Fed chairwoman appears to be someone who will be tougher than her predecessor when it comes to financial oversight.

When it comes to monetary policy by contrast, Yellen is known as a “dove,” someone who favors lowering interest rates to help boost job growth at the risk of allowing some inflation.

Here are a few key quotes from Yellen during the past year — fromspeeches, interviews and her nomination hearing — that show where she stands on a variety of issues.

On Fed policy: 

“I would be strongly committed to working with the FOMC to continue promoting a robust economic recovery … I consider it imperative that we do what we can to promote a very strong recovery.”

On unemployment: 

“About 36 percent of those unemployed have been unemployed for more than six months. This is a very unprecedented situation. We know that those long spells of unemployment are particularly painful for households, impose great hardships and costs on those without work, on the marriages of those who suffer these long unemployment spells and on their families.”

On financial stability:

“One of our top priorities is ramping up and monitoring of the financial system as a whole to detect financial stability risks. That’s something we weren’t doing on an adequate basis before the crisis.”

“We cannot rule out the possibility that monetary policy might have to do something related to financial stability … Monetary policy could be creating financial risk, even while we’re trying to achieve other concrete goals … We need to know what those risks are.’’

On mega-bank regulation….”

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Individual Stock Ownership Hits Fresh All Time Highs

“……Stocks experienced a notable jump to a 68% allocation from just 64% in November.  Bond holdings were down 2% to just 15% and cash holdings were down 2% to 16.5%.

Historically, stocks have averaged a 60% allocation…..”

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The Billion Dollar Club is All the Rage

“More and more young technology companies are achieving a $1 billion valuation, but not all of them are destined to become the next Google or Facebook.

The billion-dollar club is expanding even faster than at the peak of the dot-com bubble, The New York Times reports.

In 2011 through 2013, at least 34 investments were made valuing companies at $1 billion or more, compared with 16 from 1998 through 2000, according to Dow Jones VentureSource data cited by The Times.

One problem child is Fab.com, which sells clothes and home wares online, The Times notes. The company’s early strong growth drew renowned venture capital investors such as Andreessen Horowitz.

And a $150 million investment in June valued the company at $1 billion. But that didn’t last. Financial problems hit, and the company unloaded hundreds of workers.

Tales like Fab.com have some experts concerned that another technology bubble is brewing.

“Where we are today, I don’t see where the values are coming from based upon any judicious or even very optimistic view of a company’s future cash flow and revenue,” Brian Hamilton, chairman of Sageworks, which analyzes the financial conditions of private companies, tells The Times….”

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The F Bomb Hits Missouri


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A Word From Rand Paul

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What Does a Nominal New High in the Stock Market Mean in the Real World?

“The rise in equities does not mean stocks “buy” more commodities in the real world–they buy less.

If the new highs in the Dow Jones Industrial Average (DJIA) are so wonderful, why does one share of the Dow-30 buy less than it did 14 years ago? What does a nominal new high in the stock market mean in the real world? The only way to know is to ask if the purchasing power of a share of the Dow buys more than it did when the Dow was at lower levels.

If one share of the Dow (defined as one share of each of the constituent 30 companies) buys less than it did when the Dow was as lower levels, the nominal new high is a mirage in terms of increased purchasing power of equities.

Another way of assessing the real-world impact of a nominal new high in equities is to perform a relative strength analysis: did equities outperform essential commodities, or did equities underperform these essentials? If the Dow underperformed, then a new high is an illusion: if equities buy less stuff in the real world, the nominal new high is misleading.

Longtime correspondent Harun I. recently shared a series of charts which reveals what’s real and what’s false about nominal new highs in the Dow:


Wonderful post, What’s Real? What’s Fake? (December 16, 2013). Below you will find some charts that may answer: What is real?RS charts are not new to us, but they need constant study. Nobody eats, clothes, shelters, heats their shelter or fills their gas tank with equity shares. Therefore, when we convert those shares to currency in order to purchase things that are generally useful, their real value is revealed. Purchasing power cannot be faked.

There are several questions that can be explored, however, today I wish to point out the most obvious.

The trend in commodities relative equities over the period ranging from 1970-2000 was down. This indicated that the Dow outperformed commodities, or put another way, was able to purchase more per unit during this time. It is useful to remember that, as you and many others have pointed out, that during this time debt expanded as well. Two wage earners were required per household to produce a standard of living that once required only one wage earner. This effectively was a 50% loss of purchasing power.

However, the fact that household debt expanded to the extent that it has in order to maintain a particular standard of living with even two wage earners suggests an even greater decline in net purchasing power. But I digress.

The downtrend lines drawn on the charts below indicate secular trends that were in place for approximately a thirty year period, much like the decline in interest rates. With equities at new nominal highs, there are many who argue that the worst is behind us.

However, as I point out on the first chart (Gold/Dow Ratio), the amount of debt that created the secular bull market previously is dwarfed by the amount of debt that it has taken to create what may be a normal correction in what appears to be a secular bear phase. Despite new historic nominal highs, despite parabolic increases in public debt, not one chart displayed indicates the Dow as having recovered its purchasing power which peaked roughly in 1999.

If we are to believe that the worst is over, we must at the very least answer a few basic questions…..”

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The G20’s Brand New Bag: FATCA

“Socialist luminaries and international bureaucrats at various outfits funded primarily by U.S. taxpayers are seizing on a “devastating” new American taxation scheme, known as the Foreign Account Tax Compliance Act, or FATCA, to help foist a radical tax information-sharing regime on the world. The repercussions for Americans and people around the globe — especially when it comes to financial privacy and economic freedom — will be crushing, experts argue. Analysts say the end goal, meanwhile, is the creation of a planetary taxation authority.

Leading the charge to create the new global tax regime is the Group of 20 (G-20), a coalition of governments and brutal dictatorships that are in the process of building what virtually every major media outlet recently described as a “New World Order.” Top officials in the outfit, which includes the ruthless Communist regime ruling mainland China, among other barbaric autocracies, publicly announced a plot in recent years to share financial data and more on all citizens with each other. The goal, for now: extract as much wealth as possible.

To implement what critics call their nightmarish vision of a “World Tax Organization” — supposedly aimed at stopping tax evasion — the G-20 asked the United Nations-linked Organization for Economic Co-operation and Development (OECD) to take the lead. The widely criticized “cartel” of tax-hungry politicians, infamous primarily for fanatical efforts to crush national sovereignty and for bullying jurisdictions with relatively low taxes into surrendering their competitive advantage, is now working to develop the taxation regime and prod its member governments into adopting it. …”

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Is it Time to Dump Banks Stocks Like Some Billionaires Have Been Doing?

“Jan. 6, 2014 7:52 p.m. ET


The trading boom that helped reshape global investment banks over the past decade is sputtering, raising fears that one of Wall Street’s biggest profit engines is in peril.

Executives have warned that lackluster markets could lead to year-over-year declines in fixed-income, commodities and currency trading revenue when banks begin reporting fourth-quarter results next week. That would mark the fourth consecutive drop and the 11th in the past 16 quarters.

Few corners of banks’ trading operations have escaped the slump. A 10-year commodities rally has fizzled, while foreign-exchange trading volume has fallen sharply from its 2008 peak. Since the financial crisis, investors have eschewed exotic fixed-income securities in favor of low-risk government bonds, which are less profitable for banks, and overall trading volumes have dipped.

A rash of new regulations, meanwhile, have prompted Wall Street firms to exit from once-lucrative businesses such as energy trading and storing and transporting physical commodities.

The slump has gone on so long that some observers are beginning to question whether it is part of an ordinary down cycle or a more permanent shift.

“I think it is worrying,” said Oppenheimer analyst Chris Kotowski, who expected trading revenue to have hit bottom and stabilized by now. “You can’t turn around a fundamental trend…if that’s what this is.”

Mr. Kotowski cited the big transformations that have rocked global markets in the past few years, such as new technologies. Those advances have helped level the playing field by allowing institutions to make some trades on their own, reducing the amount banks bring in for matching up orders.

For Goldman Sachs Group Inc., fixed-income, currency and commodities trading historically has been a crucial profit engine. Yet the New York investment bank is expected to post a 21% decline in trading revenue….”

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European Inflation Numbers Create Worry Over Deflation

“Is Europe heading towards deflation?

That’s been a hot topic of conversation lately and fresh numbers just out from Eurostat should add to the concern.

Check out the trends of both CPI and core CPI (excluding food, energy, alcohol, and tobacco). The inflation numbers are a steady march downward. Core is actually at its lowest reading yet.

The big fear in Europe used to be that the economy would collapse.

Now the big fear is that Europe is going to become Japan, an economic bloc mired in deflation and horrible growth….”

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An Open Message to Law Enforcement

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“Number Of Officers Killed In The Line Of Duty Drops To 50-Year Low While

Number Of Citizens Killed By Cops Remains Unchanged”

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Will 2014 Be the Year of the Bear?

“U.S. stocks can’t go straight up forever. And if the end of QE1 and QE2 taught investors anything, the market could suffer a significant correction this year as the Federal Reserve starts dialing back its stimulus.

That view comes courtesy of Peter Boockvar, managing director and chief market analyst at the Lindsey Group, who on Thursday predicted the S&P 500 could drop 15% to 20% in 2014 and finish the year between 1550 and 1600.

The S&P 500 opened the year down 0.6% at 1837. The index surged 30% last year, its best performance since 1997.

In his morning missive, Mr. Boockvar laid out a bearish thesis for stocks while noting the eventual end of the Fed’s quantitative easing, or QE, will lead to a rocky road ahead for investors.

“QE doesn’t create a safer world, it is just a temporary high and the danger always comes on the flip side as previously seen,” he says. “Let’s be honest, we are in an investing world that none of us has ever seen before with central banks around the world being aggressive in concert on a scale never seen.

“These are not normal times where the ordinary analysis of company fundamentals and the economic and earnings outlook are the main drivers.”

In 2013, most Wall Street strategists including Mr. Boockvar was surprised by the strength of the stock-market rally. At the start of last year, a group of strategists predicted the S&P 500 would gain 8.2% in 2013, far lower than what the rally ultimately achieved.

At that time, Mr. Boockvar also incorrectly called for a mid-single-digit return. Now, he acknowledges how far out on a limb his call is in relation to what other strategists are predicting.

“It’s blasphemy, I know, to call for a down year,” he says. “I already hear the heckling and the perma bear calls as I did in ’06 and ’07.”

But Mr. Boockvar can’t get past the fact that stocks suffered significant pullbacks the past two times the Fed pulled back the punch bowl. He finds it hard to figure why this time would be any different.

He says stocks are in a “Fed-induced bubble” which has manifested in the Treasury market and has filtered through to other markets.

“Higher prices for stocks, junk debt, paintings, wine, cars, comic books and NYC high end apartments are just by-products of the mispricing of the cost of money,” he says. “We are, however, finishing 2013 with the bond bubble showing signs of leaking air as evidenced by the sharp rise in yields across the curve notwithstanding the Fed’s hope.”

Higher interest rates in 2014 could act as “a major headwind for stocks,” he says. “When bubbles burst, there is no place to hide other than in cash which conversely and positively provides dry powder to take advantage of better values.”

Other market watchers share similar assessment….”

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El-Erian: Dysfunctional Congress May Trip Up Growth

“Economic growth will speed up this year to the 2.25-2.75 percent range, but the business expansion is endangered by a dysfunctional and divided Congress, says Pimco CEO Mohamed El-Erian.

“The American economy will improve in 2014, creating more jobs and boosting wages. That is the good news,” El-Erian writes on Politico.

“The bad news is that, rather than serve as a springboard for even better performance down the road, this improvement could lull Congress into a false sense of security and continued inaction on key economic legislation,” he says.

And what would that mean for the economy?

“Should this occur, the multi-year outcome could be an even longer (as well as unnecessary) period of below-potential national prosperity, excessive income and wealth inequalities and greater political polarization,” El-Erian writes….”

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Fun With Drones

“Drones will soon be buzzing over every city in America.

As reported by the New York Times on December 30:

The agency picked six institutions to operate test locations, which will explore how to set safety standards, train and certify ground-based pilots, ensure that the aircraft will operate safely even if radio links are lost and, most important, how to replace the traditional method for avoiding collisions. Integrating the aircraft into the nation’s airspace, set by Congress for 2015, will be phased in gradually.

While the Times article reports only on the proliferation and imminent launch of sorties of surveillance drones (that is, unarmed aerial vehicles), comments made by Attorney General Eric Holder make it easy to foresee the day when drones armed with deadly missiles are carrying out strikes similar to those that have killed so many in the Middle East and North Africa.

In March 2013, CNN reported, “Attorney General Eric Holder is not entirely ruling out a scenario under which a drone strike would be ordered against Americans on U.S. soil.” Such an admission is startling given the massacres that are almost commonplace in Yemen, Pakistan, and other alleged hotspots for “militant” activity.

In fact, the information reported by the New York Times, put in the context of Holder’s prediction, wouldn’t be as frightening if the drone operations to which Americans (and the world) have become accustomed weren’t so deadly. As The New Americanreported recently:

The U.S. government on December 12 “mistakenly” murdered 15 people attending a wedding in Yemen.

Citing “local security authorities,” Reuters reports that the families celebrating the wedding “were killed in an air strike after their party was mistaken for an al-Qaida convoy.”….”

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Documentary: Consumed

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