Pay and Deregulation in the US Financial Industry

"It is no exaggeration to say that since the 1980s, much of the global financial sector has become criminalised, creating an industry culture that tolerates or even encourages systematic fraud.   The behaviour that caused the mortgage bubble and financial crisis of 2008 was a natural outcome and continuation of this pattern, rather than some kind of economic accident."

Charles H. Ferguson


“Thus did a handful of rapacious citizens come to control all that was worth controlling in America. Thus was the savage and stupid and entirely inappropriate and unnecessary and humorless American class system created. Honest, industrious, peaceful citizens were classed as bloodsuckers, if they asked to be paid a living wage.

And they saw that praise was reserved henceforth for those who devised means of getting paid enormously for committing crimes against which no laws had been passed. Thus the American dream turned belly up, turned green, bobbed to the scummy surface of cupidity unlimited, filled with gas, went bang in the noonday sun.”

Kurt Vonnegut, God Bless You, Mr. Rosewater


"Call me dark, but what I see here is a toxic relationship between deregulation, underpriced risk, and exorbitant, inefficient pay scales that contribute to the growth of inequality, not to mention the shampoo economy (bubble, bust, repeat)."

Jared Bernstein, A Striking Picture of Pay and Deregulation in Finance

A country foolishly deregulates the safeguards created by their forefathers, trusts to the natural goodness of those most hungry for wealth and power, and increases the incentives for enormous wealth by creating loopholes and cutting tax rates, and de-penalizing even the most shocking kinds of white collar crimes.  They recreate the mistakes of history with a wanton disregard for the consequences.

And still they wonder why.  Why do we persecute the poor, and idolize those who would rule us all, without pity or even normal cautions against crises ?  And they say, for God and freedom.

Financial corruption has twisted and perverted public policy, distorted the economy, and polluted the corridors of political and economic power with a flood of easy money.

h/t Jared Bernstein

Related:
A Brilliant Warning On Robert Rubin's Proposal to Deregulate Banks, circa 1995
Andrew Jackson Day Remembered

Gold Daily and Silver Weekly Charts - Flight To Safety

The miners continued to get pounded along with tech momentum stocks as this week turned out badly for equities overall.

Gold is still outperforming silver, and has the taste of a minor 'flight to safety' in the price action.

The Comex warehouses continue to be a foggy snoozer, and stopped contracts are a formidable percentage of the deliverable gold category.

But the Comex is a shell game, and so I am not looking for things to start there, but to perhaps surface there once they start overseas with a break in the physical deliveries chain, despite the continuing assurances from the team of Shill & Troll that it is all in your mind, and that such a thing could never happen.

Have a pleasant weekend.

 

SP 500 and NDX Futures Daily Charts - Lions and Tigers and Bears, Oh My!

The selling this week is being attributed by the pundits to 'tax selling.'

I won't debate that, but I will say that if the selling continues next week it probably is not tax related, but related to overly high valuations and a thorough wash and rinse.

The momentum stocks in tech continued to lead the way down, with JPM contributing something to the Dow Industrials (what an abomination to include JPM in the Dow Industrials) with its miss in the quarterly numbers this morning.

Unemployment claims came in low, but PPI came in a bit hot. But the selling looks more like a game of trader tag more than any reflection of fundamentals getting better or worse.

I own *no* stocks here, but I was giving it some serious thought today, miners-wise. But I decided to wait for next week.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - Gold Continues Higher

Gold led the way higher as silver is still stuck around the 20 handle.

It had the feel of a 'flight to safety' as stocks took it on the chin, including the miners.

Let's see what happens. 

 

SP 500 and NDX Futures Daily Charts - The Next Big Move Is the One To Watch

The spec dip buyers must have been piling on yesterday, and after this morning's better than expected unemployment claims number.  Because stocks got clocked, and hard, back down through near support.

It is going to take a another down move with a solid break of 1800 to get my bearish juices flowing, because for now I think that they are just playing.

The algos are just riding around, playing tag with each other, and killing any human beings that happen to wander into the markets.

Have a pleasant evening.

 

Nomi Prins - All the President's Bankers: The Hidden Alliances That Drive American Power

This is from the book summary at Amazon.com:

"Culled from original presidential archival documents, All the Presidents’ Bankers delivers an explosive account of the hundred-year interdependence between the White House and Wall Street that transcends a simple analysis of money driving politics—or greed driving bankers.

Prins ushers us into the intimate world of exclusive clubs, vacation spots, and Ivy League universities that binds presidents and financiers. She unravels the multi-generational blood, intermarriage, and protégé relationships that have confined national influence to a privileged cluster of people. These families and individuals recycle their power through elected office and private channels in Washington, DC...

Prins divulges how, through the Cold War and Vietnam era, presidents and bankers pushed America’s superpower status and expansion abroad, while promoting broadly democratic values and social welfare at home. But from the 1970s, Wall Street’s rush to secure Middle East oil profits altered the nature of political-financial alliances. Bankers’ profit motive trumped heritage and allegiance to public service, while presidents lost control over the economy—as was dramatically evident in the financial crisis of 2008."

Gold Daily and Silver Weekly Charts - Who or What Will Let the Dawg Out?

The yellow dawg (gold) is straining at the leash.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Fed Minutes and Scalded Cat Trades

The Fed minutes came out at 2 PM, and their dovish tone had stocks soaring higher, running the bears out of the new wash cycle.

Earnings will now start playing a more important role in market movements, but as I noted in the intraday commentary the HFT algos are driving a significant portion of daily stock volume. So the trade has a very technical tinge.

I hear that Goldman says that there is a 67% chance of a ten percent correction in stocks over next year.

I think if we get the right even, that ten percent is going to seem like a blip, unless the Fed pulls out all the stops to save their friends.

Bank earnings start coming in on Friday.

Have a pleasant evening.

Liz Warren Predicts the Collapse of the Middle Class in 2008

"A fascist is one whose lust for money or power is combined with such an intensity of intolerance toward those of other races, parties, classes, religions, cultures, regions or nations as to make him ruthless in his use of deceit or violence to attain his ends...

The symptoms of fascist thinking are colored by environment and adapted to immediate circumstances. But always and everywhere they can be identified by their appeal to prejudice and by the desire to play upon the fears and vanities of different groups in order to gain power...

Their final objective toward which all their deceit is directed is to capture political power so that, using the power of the state and the power of the market simultaneously, they may keep the common man in eternal subjection."

Henry A. Wallace

Certainly we can observe that the roots of the collapse go back to 1980, at least. And Warren provides the data that shows this.

What is perhaps most shocking six years later is the nonchalance with which this collapse in the grinding Great Recession is accepted as the new normal in a corporate kleptocracy. And that most meaningful reform is twisted and defeated by very well paid political interests, often to the cheers of useful idiots.

I do not think this cycle of repression has reached its zenith yet. And given historical examples I do not think it will end except in excesses which we have yet to imagine, both at home and abroad.

The Technically Driven Market: Wash and Rinse Cycles In a Trend

Hot money blunts the impact of all but the most extreme events in the real world.

Computer algorithms dominate the trading environments in volume, speed, and short term gamesmanship.  A 'random walk' my ass.

The market becomes an endless churn and burn with an upwards bias supported by the Fed's expansion of the money supply.

The market is notable for the bifurcation into professionals and marks, with the occasional warring factions between the monied interests. 

Wash, churn, rinse, repeat.

This is what I mean by 'the technically driven trade.'  It is a constant game of liar's poker in a largely lawless environment.

The moral hazard is the misallocation of capital, the misappropriation of policy money, the corrosion of the public trust and national character, and the dissipation of wealth in the occasional market breaks and collapses.

China Gold Imports Through Hong Kong

Trend?  Change?  Not possible.

No one is interested in gold.

Nothing to see here. Move along.

Chart by Data Wrangler Nick at Sharelynx.com.

Gold Daily and Silver Weekly Charts - Metals Take Back Their Levels, But Germany Can't Get Their Gold

There was no movement reported in the Comex gold warehouses yesterday.

A few more contracts stood for delivery yesterday bringing the total to 427,000 for the month.

Let's see how those contracts are resolved and what shows up in the warehouse reports.

The junior miners had a bit of a pop today.

We have a potential right shoulder forming up on the gold chart and on the silver chart as well.  In this case follow through is everything as it is not yet a confirmed formation.

The shameless shills and trashtalk trolls keep putting the worst possible interpretation they can find on even positive developments in the metals, while supposedly interjecting 'objectivity' into our expectations.  They are hardly objective and have missed every metals rally since 2000.

And on the other hand the legendary legends of legendarianism keep touting their sky high target valuations for gold and silver. 

I would settle at this point for a solid breakout from this clamp that has been placed on the precious metals for the past fourteen months, ever since the Fed had to de facto default on the return of the German gold as requested, in case you have forgotten. That must have been a real come-to-Jesus moment for the pinstripes and soft lies over elegant luncheons crowd.  

One step at a time.  Let's allow the market to have its say.  Talk is cheap, and at the end of the day performance is everything.  The fundamentals are highly positive, and remain so.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Bounce Off the Trendline

“Whatever you do, kid, never invest a penny in the stock market, because it’s run by crooks and sons of bitches.”

Ralph Madoff, father of Bernie Madoff

Alcoa kicks off earnings season after the bell.

Stocks bounced with some precision off the trendline with the momentum techs taking a bit of a lead.

Have a pleasant evening.

The Hare Psychopathy Checklist

This is from sources on the web, and is based on Robert Hare's psychopathy checklist.

1. Look for glib and superficial charm. A psychopath will also put on what professionals refer to as a 'mask of sanity' that is likable and pleasant.   It is a thin veneer.

2. Look for a grandiose self perception. Psychopaths will often believe they are smarter or more powerful than they actually are.

3. Watch for a constant need for stimulation. Stillness, quiet and reflection are not things embraced by psychopaths. They need constant entertainment and activity.

4. Determine if there is pathological lying. A psychopath will tell all sorts of lies; little white lies as well as huge stories intended to mislead. Psychopaths are gifted or dull, high functioning or low performing like other people. An untalented psychopath may harm a few; a highly talented psychopath may lay waste to nations. The difference between the psychopath and others lies in their organic lack of conscience and empathy for others. The sociopath is trained to lack empathy and conscience. The psychopath is a natural.

5. Evaluate the level of manipulation. All psychopaths are identified as cunning and able to get people to do things they might not normally do. They can use guilt, force and other methods to manipulate.

6. Look for any feelings of guilt. An absence of any guilt or remorse is a sign of psychopathy.  They will often blame the victim.

7. Consider the level of emotional response a person has. Psychopaths demonstrate shallow emotional reactions to deaths, injuries, trauma or other events that would otherwise cause a deeper response. Other people are satisfaction suppliers, nothing more.

8. Look for a lack of empathy. Psychopaths are callous and have no way of relating to others in non-exploitative ways. They may find a temporary kinship with other psychopaths and sociopaths that is strictly utilitarian and goal-oriented.

9. Psychopaths are often parasitic. They live off other people, emotionally, physically, and financially. Their modus operandi is domination and control.  They will claim to be maligned or misunderstood to gain your sympathy.

10. Look for obsessive risk taking and lack of self-control. The Hare Checklist includes three behavior indicators; poor behavior control, sexual promiscuity, and behavioral problems.

11. Psychopaths have unrealistic goals or none at all for the long term. Either there are no goals at all, or they are unattainable and based on the exaggerated sense of one's own accomplishments and abilities.

12. Psychopaths will often be shockingly impulsive or irresponsible. Their shamelessness knows no bounds. You will ask, what were they thinking? And the answer was, they weren't because they did not care.

13. A psychopath will not genuinely accept personal responsibility. A psychopath will never admit to being wrong or owning up to mistakes and errors in judgment, except as part of a manipulative ploy.   They will despise and denigrate their victims once they are done with them.  If they have any regret it is that their source of satisfaction supply has ended and they must seek another.

14. Psychopaths lack long term personal relationships. If there have been many short term marriages, broken friendships, purely transactional relationships, the chances the person is a psychopath increase. Watch especially how they treat other people in weaker positions and even animals. 

15. Psychopaths are often versatile in their criminality. Psychopaths are able to get away with a lot, and while they might sometimes get caught, the ability to be flexible and adaptable when committing crimes is indicative.

If you should find yourself in a business or personal relationship with a psychopath, the best advice is seek counseling if you need, obtain assistance if you must, and run if you can. You are a diffused and multi-faceted person with many interests. A psychopath is powerfully focused on obtaining what he wishes from others, without many prohibitions or distractions. Avoidance is the best policy. Long term confinement is their best treatment.

I do not think the repetitive sociopathic behaviours and psychopathic tendencies of the Roman imperial leadership to be accidental. The mad emperors kept recurring because they were the creatures of what that culture had become, and they stood as emblems at its apex.

Men are social animals, and can go mad in groups, as well as alone. Psychopathy can be the black hole at the center of a whole galaxy of madness and sociopathy under the right conditions, and the results can be flamboyantly destructive, as we most recently saw in several places during the 20th century. 

The psychopaths can thrive anywhere that deception is an advantage, but their prime hunting ground is a system in crisis, a manageable chaos lacking transparency, a well defined rule of law, and effective enforcement of behaviour.

Gold Daily and Silver Weekly Charts - Winning!!

"It is not so much anymore that the public does not trust their brokers. They do not trust the markets, the exchanges, or the regulators either. And why should they, given our showing the past few years?

To the public the financial markets may increasingly seem like a casino, except that the casino is more transparent and simpler to understand...

It is vitally important that we bring an end to this crisis of trust before it spreads any further. That we bring back order, fair dealing, and trust in the marketplace. The financial markets of ... the world's developed countries are at a turning point."

Thomas Peterffy, Founder Interactive Brokers

Technology is not the problem. Not at all. Technology is merely another tool, another means by which a financial system grown corrupt and wildly self-serving and pathologically deceptive can seek its own destruction through unbridled greed.

The US financial system is a disgrace, and the technology is just another instrument of their control frauds.  Thomas Peterffy, like too many others in that system, is too close to see the problem. It is a culture of criminality that keeps defeating those who would save it.  And it is spiraling out of control.

When the next break in confidence comes that cuts to the heart of the monetary system, they will act surprised, just as they did when the financial crisis brought the commercial credit system to the brink.  MF Global was a microcosm of the astonishingly frail nature of their pyramids of wealth.

Gold and silver were under some modest pressure today after the run they had on Friday.

There is still little substantial movement in the warehouses and a daily trickle of those standing for delivery on the April contract.

For those fans amongst us, the season premiere of Game of Thrones was last night, and off cable watchers swarmed the 'HBO TO GO' application bringing it to its knees for a time.

I am also informed by my studious children that George R. R. Martin has 'leaked' a new chapter from the much awaited Book Six for those who arereading the books on his website.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Rinse Cycle May Be Almost Done

Stocks continued to decline on mediocre economic news and international jitters. VIX rose a bit as shown on the chart below.

Even with the declines, led by the momentum stocks which are the agitator in the wash cycle, we are falling back to the lower bound of the upward trend channel.

I think that if this is going to be a major correction, which it is not yet but is still possible, we will have to see some serious support levels below here break down.

I would look at the techs to lead and SP to confirm downwards if this correction turns into something more significant.   And alternatively,  the SP to lead a rally back up with the techs confirming if that should happen instead.

Although it may look good, this market is like a piece of fruit going bad from within:  soft, unpalatable, and infested with vermin.

But for now this looks like a thorough rinse after a first quarter washing.

Have a pleasant evening.

Remembering the 46th Anniversary of Martin Luther King's Last Public Words

“The tyrant dies and his rule is over;  the martyr dies and his rule begins.”

Søren Kierkegaard

Martin Luther King gave this speech on 3 April 1968 at the Church of God in Christ, in Memphis, Tennessee.
 

On 4 April 1968, Dr. Martin Luther King, Jr. was assassinated.

"O Jerusalem, Jerusalem, you who kill the prophets and abuse those whom God has sent as messengers to you.

How often I have longed to gather your children together, as a hen gathers her young under her wings. But you would not let me.

As you willed, your house is now yours— but is made desolate.’”

Gold Daily and Silver Weekly Charts - Pop Go the Weasels - Thank You To Zerohedge et al.

Stocks dumped hard on post end of quarter selling, even though the economic news was not too hot and not too cold.

The metals came roaring off their oversold conditions with gold leading the push higher.

There was little activity in the Comex gold warehouse, and a few more traders stood for delivery.

I explained again the other day that not all those who stop a futures contract for delivery actually end up taking the physical gold. And further, if they do take it, that may not be reflected immediately in the warehouse report, because they take the title to the gold if you will, but may not move it or change its status right away. So we can see a lag, or even nothing.

But again, as I seemingly have to say again and again, the Comex setting gold prices is the tail wagging the dog. It is just that the tail is easier to see.

Gold is moving from West to East, and the glimpses we get of that trade confirms its size. And I think we understand why it is moving, because a great change is taking place in the world's thinking on international currencies.

It appears that the currency war may be heating up on a number of fronts:  Russia Prepares To Attack the Petrodollar. If someone is going to attack something, why would they preannounce it? Most likely in response to the threat of increased sanctions I would imagine. The US has expressed its displeasure that Russia is crafting a bilateral trade deal with Iran, and has threatened additional sanctions if they break the embargo on that country.

There are some increased international tensions certainly, and some of the most recent movement in gold, which is outpacing silver, *might* be due to a flight to safety or supply pressures in the markets where physical supply really makes a difference. 

This is playing out and we have to be patient in watching it, and try not to fill in the blanks too aggressively with what can be or might be. But as for what is, I think we have a decent idea of the longer term reasons why things are happening the way that they are.

I have included a special thanks to Zerohedge and the other bloggers in my stock market commentary today.  I started to thank ZH for publishing an interesting stock valuation chart from JPM, and then I started thinking about all the other sites I look at every day, and felt a need to just say 'thank you.'  They are included in my blogroll, and there are quite a few.  You can scroll down or simply click here for the stock market comments. 

It is easy for us to criticize each other, and find those areas where we might disagree, often on details and interpretations.   But I think we can all agree that without the internet, and the bloggers and columnists who work long hours for relatively little reward, the void created in the news by the mainstream media would be even more intimidating and daunting than it already is.

Have a pleasant weekend.  Spring is in the air.