Category Archives: US Finance

The truth about Quantitative Easing . . .

From the Wall Street Journal:

“There’s a real question as to whether the massive bond-buying program known as quantitative easing was worth the cost, former Federal Reserve official Andrew Huszar said Tuesday. Huszar, a senior fellow at Rutgers Business School and a former managing director at Morgan Stanley, noted a few of the program’s unintended effects.

 Huszar apologized for his role in QE in a Wall Street Journal op-ed published Monday.
‘I can only say: I’m sorry, America,” he wrote. “The central bank continues to spin QE as a tool for helping Main Street. But I’ve come to recognize the program for what it really is: the greatest backdoor Wall Street bailout of all time.’”
From centernewsnetwork.com:
It was also a back door bailout of the Blue State political machine. Quantitative Easing was intended to bail out the insolvent Blue State public pension funds which require high rates of return from Wall Street in order to pay otherwise unsustainable benefits to public union pensioners and Democrat politicians. The stock market as it now exists has absolutely nothing to do with the “real” economy of goods, services and most importantly, jobs and income.”

 

No one loses money by saving it . . .

No one ever went broke by simply saving money as opposed to investing it.

We are constantly instructed by expert financial advisors that we are losing money by saving it in a federally insured account rather than investing it with an expert financial advisor:

“While interest rates have risen on home and car loans over the last year, interest paid on saving accounts has fallen to miniscule levels. And when inflation is factored in, you lost money on that six-month CD or money-market account . . . For instance, say your money has been in an interest-paying checking account, a money-market account, a savings account or a six-month CD. You’ve lost money, Bond says, even though your balances are slightly rising.”

These experts are confusing value with money. Inflation and low interest rates on savings account may reduce the value of my saved money but I still have my money. On the other hand, many clients of these expert financial advisors lose both value and their money by following expert investment advice.

 

I may be losing value by saving my money but I am not losing my money.

Wall Street: Crony Capitalists know nothing more than how to access inside information . . .

A Center reporter recently spent some time with a friend from high school who had gone to Columbia University and from there to Wall Street and, ultimately, to management of a hedge fund. The hedge fund manager had retired “early” as a multi-millionaire “master of the universe.”

Strangely, after a couple of days of somewhat intense political/business discussions, it was apparent to our reporter that his Wall Street friend had no more idea as to what stock or company would do well than the reporter or anyone else. What our “master of the universe” did know, however, was the phone numbers of his Ivy League friends and classmates who were high officers in government and business and who had access to inside information the rest of us lack.

And so we see a hedge fund financial wizard who engineered billions in profits from the issuance of collateralized debt obligations (CDO’s) testify in federal court that he is “not sure” what the industry-wide acronym CDO stands for.

 And we see one of Wall Street’s most prominent hedge funds hire a provably corrupt “Ivy League” trader whose primary qualification is his past membership in an “insider trading group” at his previous firm.

 And, finally, we see the indictment of that prominent hedge fund, SAC Capital Advisors, on federal charges involving insider trading that was “substantial, pervasive and on a scale without known precedent in hedge fund history.”

 And the Fed continues to pump $85 billion a month into this sewer.

Detroit: Profligacy has consequences; we’ll all pay for Detroit . . .

centernewsnetwork.com:

As most of us know, actions have consequences. The potentates of Detroit have ignored the inevitable consequences of their fiscal and moral profligacy for over forty years. Now the rest of us will pay the bill in one way another, whether through state and federal bailouts or through higher municipal and state borrowing costs. The architects of the disaster will pay no price, rather, most will collect lucrative pensions.

Emergency Manager Kevyn Orr’s plan to suspend payments on $2 billion of Detroit’s debt threatens a basic tenet of the $3.7 trillion municipal market: that states and cities will raise taxes as high as needed to avoid default . . .

“It definitely sets a precedent, and there’s definitely going to be a penalty going forward for the city and the state,” said Dan Solender, director of munis at Lord Abbett & Co. in Jersey City, New Jersey. The company oversees $19.5 billion of local debt.

Free enterprise “rewards value” not greed . . .

Representative Paul Ryan:

“Free enterprise doesn’t reward greed,” said Ryan. “It rewards value — because competition checks greed. And there’s no greater opportunity for greed than government cronyism. Greed knows how to exploit the books of regulations and the whims of bureaucrats. It knows how to navigate the halls of power. So if we’re concerned about greed, we shouldn’t give it more opportunities to grow.”

First secure the Detroit city borders so they don’t destroy the rest of the USA . . .

Emergency Manager Kevyn Orr says the city of Detroit’s cash-flow crisis makes it “insolvent” and unable to borrow more money to mask over debts being made worse by skipping millions in payments for retiree pensions and health care.

The report hints that city employees who were not hit by last year’s wage reductions could face pay cuts in the near future and that Wall Street bondholders will be asked to take a haircut to relieve a city that shelled out $133 million in debt payments last year on a $1.23 billion budget.

The emergency manager’s spokesman put the city’s predicament in more blunt terms. “We’re going to be out of money by the end of the year,” Nowling said Sunday. “If all we did was collect taxes and pay our debt, we couldn’t pay it off in 20 years. That’s the situation that we’re in now.”

From The Detroit News

“Wall Street” now just another US Government Agency . . .

Gallup:
“Just over half of Americans, 52%, now say they personally, or jointly with a spouse, have stock market investments. That is one percentage point below last year’s figure, making it the lowest in Gallup’s 15-year trend.”

The Gallup survey shows stock ownership by individual Americans at a 15 year low. The market is a rigged game dominated by two factors: Insider-information based instantaneous electronic trading and massive unfunded “purchases” of US Treasury bonds and Fannie Mae mortgage-backed securities by the Federal Reserve which simply prints money for the “purchases.”

A primary purpose of the Fed’s Wall Street purchases is to iflate market returns to allow the various States’ retirement system investments to meet public employee (union) pension payout obligations. The end-game won’t be pretty!