Posts Tagged ‘federal reserve

17
May
10

good schtuff from dr. paul

if only all his TV appearences were this concise…..

14
May
10

finally someone breaks down how banks make money in 2010

anybody that could get a deal like this could make millions overnight….

“The latest quarterly reports from the big Wall Street banks revealed a startling fact: None of the big four banks had a single day in the quarter in which they lost money trading.
For the 63 straight trading days in Q1, in other words, Goldman Sachs (GS), JP Morgan (JPM), Bank of America (BAC), and Citigroup (C) made money trading for their own accounts.
Trading, of course, is supposed to be a risky business: You win some, you lose some. That’s how traders justify their gargantuan bonuses–their jobs are so risky that they deserve to be paid millions for protecting their firms’ precious capital. (Of course, the only thing that happens if traders fail to protect that capital is that taxpayers bail out the bank and the traders are paid huge “retention” bonuses to prevent them from leaving to trade somewhere else, but that’s a different story).
But these days, trading isn’t risky at all. In fact, it’s safer than walking down the street.
Why?
Because the US government is lending money to the big banks at near-zero interest rates. And the banks are then turning around and lending that money back to the US government at 3%-4% interest rates, making 3%+ on the spread. What’s more, the banks are leveraging this trade, borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets. Which means the banks can turn relatively small amounts of equity into huge profits–by borrowing from the taxpayer and then lending back to the taxpayer.
Why is the US government still lending banks money at near-zero interest rates? Ostensibly, for the same reason that the government bailed out the banks in the first place: So the banks will lend money to small businesses, big businesses, and other participants in the “real economy.”
But the banks aren’t lending money to the real economy: Private sector lending has fallen off a cliff.
And one reason private sector lending has fallen off a cliff is that lending money to the private sector is risky. Lending money to the government, meanwhile, is nearly risk-free. So the banks are just lending money back to the government (by scarfing up US Treasuries), collecting a nearly risk-free 3% spread, and then leveraging up this bet 10-15 times.

Image: St Louis Fed
THAT’s how the big banks made money 63 days in a row. Importantly, doing this required no special genius: If you had the good fortune of working at a big bank, you would be making money every day, too. And then you’d get to take half of that money home as a bonus!
No wonder everyone wants to work on Wall Street.
The government’s zero-interest-rate policy, in other words, is the biggest Wall Street subsidy yet. So far, it has done little to increase the supply of credit in the real economy. But it has hosed responsible people who lived within their means and are now earning next-to-nothing on their savings. It has also allowed the big Wall Street banks to print money to offset all the dumb bets that brought the financial system to the brink of collapse two years ago. And it has fattened Wall Street bonus pools to record levels again.

Read more: http://www.businessinsider.com/henry-blodget-wall-street-2010-5#ixzz0nrYBA1Tn

13
May
10

this gold bull market is a sign of our JOKE equity markets…

pointed this out months ago that gold has outperformed S&P500 for last 10 years…Gold is NOT productive and can’t be considered a good sign for our future.

from: http://www.businessinsider.com/is-the-sp-as-measured-in-gold-the-ultimate-sign-of-the-feds-bluff-being-called-2010-5

23
Apr
10

new uber-counterfeit-proof $100 bill a sign of dollar’s strength?

the Chinese must have requested the new Benjamin as they buy a lot of these :).

the more i hear about how much Asia relys on US cash to run their economies (everyone knows what stuff costs when its all priced in US dollars), the more i think the dollar crashing conspiracies are bunk in short term.
Vodpod videos no longer available.

18
Apr
10

john paulson

glimpse of hedge fund manager who masterminded the now-infamous goldman “abacus” ‘giant ball of crap’ bond.

18
Apr
10

best explanation yet of goldman SCAM

ratigan continues to get ‘jerry maguire’ moments handed to him like softballs throughout this sh$tshow….
Vodpod videos no longer available.


banks broken up by summer and dow 9000? Vodpod videos no longer available.

17
Apr
10

matt taibbi on “giant ball of crap” & goldman fraud charges

07
Apr
10

jim grant on greenspan’s ‘cop-out’ testimony

from: http://www.businessinsider.com/jim-grant-alan-greenspan-2010-4

07
Mar
10

inflation of stocks argument by don luskin

excerpt: 

04
Mar
10

great article on early-adopter hedge fund guy who made millions off real estate bubble

excerpt:

It surprised him that Deutsche Bank didn’t seem to care which bonds he picked to bet against. From their point of view, so far as he could tell, all subprime-mortgage bonds were the same. The price of insurance was driven not by any independent analysis but by the ratings placed on the bond by Moody’s and Standard & Poor’s. If he wanted to buy insurance on the supposedly riskless triple-A-rated tranche, he might pay 20 basis points (0.20 percent); on the riskier, A-rated tranches, he might pay 50 basis points (0.50 percent); and on the even less safe, triple-B-rated tranches, 200 basis points—that is, 2 percent. (A basis point is one-hundredth of one percentage point.) The triple-B-rated tranches—the ones that would be worth zero if the underlying mortgage pool experienced a loss of just 7 percent—were what he was after. He felt this to be a very conservative bet, which he was able, through analysis, to turn into even more of a sure thing. Anyone who even glanced at the prospectuses could see that there were many critical differences between one triple-B bond and the next—the percentage of interest-only loans contained in their underlying pool of mortgages, for example. He set out to cherry-pick the absolute worst ones and was a bit worried that the investment banks would catch on to just how much he knew about specific mortgage bonds, and adjust their prices.

Once again they shocked and delighted him: Goldman Sachs e-mailed him a great long list of crappy mortgage bonds to choose from. “This was shocking to me, actually,” he says. “They were all priced according to the lowest rating from one of the big-three ratings agencies.” He could pick from the list without alerting them to the depth of his knowledge. It was as if you could buy flood insurance on the house in the valley for the same price as flood insurance on the house on the mountaintop.

The market made no sense, but that didn’t stop other Wall Street firms from jumping into it, in part because Mike Burry was pestering them. For weeks he hounded Bank of America until they agreed to sell him $5 million in credit-default swaps. Twenty minutes after they sent their e-mail confirming the trade, they received another back from Burry: “So can we do another?” In a few weeks Mike Burry bought several hundred million dollars in credit-default swaps from half a dozen banks, in chunks of $5 million. None of the sellers appeared to care very much which bonds they were insuring. He found one mortgage pool that was 100 percent floating-rate negative-amortizing mortgages—where the borrowers could choose the option of not paying any interest at all and simply accumulate a bigger and bigger debt until, presumably, they defaulted on it. Goldman Sachs not only sold him insurance on the pool but sent him a little note congratulating him on being the first person, on Wall Street or off, ever to buy insurance on that particular item. “I’m educating the experts here,” Burry crowed in an e-mail.

http://www.vanityfair.com/business/features/2010/04/wall-street-excerpt-201004?printable=true




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