Financial News

[Balta1701]

I'm fine with most of those things stopping in exchange for lessening our government's ownership of our lives. No one is entitled to what someone else has earned. The fact that this is now considered some kind of horrible thing goes against everything the United States is supposed to be about. To hear the idea that people have money they aren't giving away being some sort of evil is just wrong. We aren't supposed to live in a society where we declare war against success and work ethic, but today those things have become a bad thing. War has been declared against the wealthy, or even moderately successful in this country.

I read this 3 or 4 times before I realized why it bothered me so much.

 

I could make almost this exact same set of statements, with a few words changed, and apply it to Goldman Sachs/Bank of America/everyone else on Wall Street, and have it be completely accurate.

 

I'm fine with most of those things stopping in exchange for lessening the financial industry's ownership of our lives. No one is entitled to what someone else has earned. The fact that this is now considered some kind of horrible thing goes against everything the United States is supposed to be about. We aren't supposed to live in a society where we declare war against success and work ethic, but today those things have become a bad thing. War has been declared against anyone who doesn't have enormous wealth, who has to earn their living based on something other than financial chicanery.

[StrangeSox]

No one is entitled to what someone else has earned. The fact that this is now considered some kind of horrible thing goes against everything the United States is supposed to be about. To hear the idea that people have money they aren't giving away being some sort of evil is just wrong. We aren't supposed to live in a society where we declare war against success and work ethic, but today those things have become a bad thing. War has been declared against the wealthy, or even moderately successful in this country.

 

 

 

[StrangeSox]

So if the majority of the country wants to cut taxes and cut gov't spending the gov't is obligated to listen to what its' citizens want? Is that how it's working?

More or less, in a Republic. Be sure to check those polls on taxes for the wealthy, there's overwhelming support!

 

But my contention was with ss2k5's claims to why the US exists.

[southsider2k5]

More or less, in a Republic. Be sure to check those polls on taxes for the wealthy, there's overwhelming support!

 

But my contention was with ss2k5's claims to why the US exists.

 

This country wasn't founded on individual freedom, but indentured servitude to a socialistic government? Damn. I must have failed history and never realized it.

[StrangeSox]

This country wasn't founded on individual freedom, but indentured servitude to a socialistic government? Damn. I must have failed history and never realized it.

 

This country wasn't founded on individual freedom, no. See: blacks, women, Indians.

 

But more seriously, this country wasn't founded on Capitalism and rejection of the concept of social contract. It was founded at a time when a majority of the population wasn't dependent on employment by corporate entities that remove all liability from their owners and are treated literally as equals to real people. To claim an opinion of the founding philosophy on modern finance capitalism (or, conversely, on modern social democracies) is a meaningless and fallacious appeal to tradition and a deified group of individuals. More importantly, there's no reason everything must remain beholden to 17th and 18th century political and philosophical ideals, be they real or mythical.

Edited September 22, 2011 by StrangeSox

[southsider2k5]

This country wasn't founded on individual freedom, no. See: blacks, women, Indians.

 

But more seriously, this country wasn't founded on Capitalism and rejection of the concept of social contract. It was founded at a time when a majority of the population wasn't dependent on employment by corporate entities that remove all liability from their owners and are treated literally as equals to real people. To claim an opinion of the founding philosophy on modern finance capitalism (or, conversely, on modern social democracies) is a meaningless and fallacious appeal to tradition and a deified group of individuals. More importantly, there's no reason everything must remain beholden to 17th and 18th century political and philosophical ideals, be they real or mythical.

 

This country was founded on individual freedom. Changing that based on recent history is an attempt to undercut those founding principles, especially when it is in favor of enslaving generations to the government.

[StrangeSox]

Claiming that this country was founded on "individual freedom" in an attempt to justify modern capitalism and nonsense claims that social programs are "enslavement to the government" is just ridiculous.

[StrangeSox]

Hell, Paine advocated for a land-tax on property owners in order to fund a basic income guarantee. Even in the 1700's they recognized the importance of economic agency and the perils of being dependent on private employers for subsistence. Madison worried explicitly about the influence business owners would have over policy, since employees would be compelled to vote in ways that offered policies most favorable to the business.

[southsider2k5]

Hell, Paine advocated for a land-tax on property owners in order to fund a basic income guarantee. Even in the 1700's they recognized the importance of economic agency and the perils of being dependent on private employers for subsistence. Madison worried explicitly about the influence business owners would have over policy, since employees would be compelled to vote in ways that offered policies most favorable to the business.

 

I forgot no one advocated on behalf of making sure the government didn't gain too much power.

[StrangeSox]

I forgot no one advocated on behalf of making sure the government didn't gain too much power.

 

Sure, many were concerned about that. And just as many were concerned about individual freedom, they recognized that a system that created dependence on wealthy land-owners could also limit the freedom and agency of the lower classes.

 

Mixed in with this whole appeal to "what the founders wanted!!!" is the assumption that social programs are 'enslavement' instead of empowerment.

[southsider2k5]

Sure, many were concerned about that. And just as many were concerned about individual freedom, they recognized that a system that created dependence on wealthy land-owners could also limit the freedom and agency of the lower classes.

 

Mixed in with this whole appeal to "what the founders wanted!!!" is the assumption that social programs are 'enslavement' instead of empowerment.

 

If they believed any different, why didn't they create a strong central government, instead of one as absolutely weak as possible?

[southsider2k5]

In other news, stocks are down almost 500 points now, with oil testing $80 a brl, gas futures down over 10 cents a gallon, Gold down $70 an OZ, and the dollar up about 2% now.

[Jenksismyhero]

Didn't know where to put this really, but it's finance related:

 

http://money.cnn.com/2011/09/21/pf/cost_ra...child/index.htm

 

Holy balls kids are expensive.

[southsider2k5]

111 of the SP 500 have hit 52 week lows today.

[NorthSideSox72]

Call me an optimist, but there is this one shiny thing I keep thinking about with this recession. Take a look at some of the factors that caused it, in no particular order...

 

--Housing market crash... equity bubble developed, for multiple reasons, pick your poison - too many risky loans, unfounded valuations, government policy pushing the envelope too far, rise in speculative market action, etc. Loss of equity and bad/risky loans causes cascade effect that kills the market in pretty much every way. Now have 3+ years of falling prices, only recent uptick in home sales levels but still very weak, housing contracting jobs lost in a big way, and a still-large but now healthily-moving foreclosure and empty home backlog.

 

--Swaps and the Toxic Unwind... the swaps market was allowed to fester virtually unregulated and without reasonable and enforced accounting standards, which eventually resulted in a catastrophic domino effect in the markets that took down Lehman and a bunch of others, and caused a general nightmare in that area. New rules went into place, clearing houses are popping up, and more rules are pending to keep OTC derivatives under control, but there is still a lot of vague, pending stuff hanging out there.

 

--The decade of government overspending for no reason... From 2001-2009, the federal government took a surplus, and despite no particularly huge economic downturn to address, went on an absurd spending binge, mostly on wars and tax cuts primarily for the rich, creating massive deficits and additions to the debt. So when the economy really did tank and the government needed bandwidth to work with, none was there, and when ObamaCo added $1T in only partially effective stimulus and the wars continued, things got worse. Now we have the tea party saying cut everything, the Dems saying we need a giant stimulus, and moderates fed up in general with the now absurdly adverserial situation in Congress.

 

--Various improper trading events... the bad mix of proprietary and retail trading caused a multitide of snake oil sales and the invitable collapses afterwards, further adding to market problems. Some of these events were per se illegal to begin with, but poor regulation and compliance allowed them... others were finding cracks in the armor and exploiting them. New rules are pending, and again, vague.

 

--High Frequency Trading comes into vogue... HFT isn't evil per se, but it's emergence in larger scale has undoubtedly caused problems in the markets. Volatility spikes are far more dramatic caused fear runs, mistakes made by systems cause other issues, and the connection of market movement to fundamentals has been seriously compromised. Some new rules in this areas are already in effect, others to come. But this disconnect with fundamental trading has caused the markets to no longer act as economic indicators in the same way, and have contributed in part fo the vanishing of wealth.

 

--European debt crisis... Various Euro countries are struck by a still-evolving wave of government financial distress, particularly in some of the already-weak economies of Italy, Greece, Portugal and Spain. We've all seen what problems this causes, and Europe is in some trouble.

 

--US debt rating and health debacles... As the swaps and mortgage markets raced out of control, the analysis of and grading of debt became a near-joke. Securitized debt was sold off haphazardly and with no real expectation of true valuation, mortgage debt was treated as something it wasn't, etc. This caused a huge wave of problems in the debt markets that not only caused market chaos and an array of lawsuits and bankruptcies, but also major issues at ratings agencies.

 

--Internet proliferation of real time media... Panic and fear cause much bigger changes in consumer sentiment than positive things. And the internet in all it's glory now allows for, and in fact via the MSM often encourages, off-the-cuff reactions to events that lead to panic and irrational decision-making. I realize some people will not agree that this was a major player, but I think that consumer sentiment and spending are an awfully important piece of the economy, and they are undoubtedly effected by the encouragement of short term views.

 

--Absurd rising of health care costs... the cost of health care has gone up in the past decade at a rate far outstripping other markets. Lots of reasons for it, but ultimately, it is not sustainable, and it is gouging a lot of people.

 

Those are just some of the big factors in what caused the downfall. So why do I have some optimism, you ask? Well I have very little in the short term, but long term, I have a lot, because we've effectively pulled back the curtain on some pretty big elephants in the room. Many of these have been developing for a long time, make no mistake - Obama didn't do all this Bush didn't do all this Clinton didn't do all this, etc. They were there but the general public was blissfully ignorant. No more.

 

So we're addressing things, if not in an ideal way. To wit...

 

--The housing market has been bouncing around something like a bottom for months or a year now, with prices declining but much less sharply, existing home sales increasing as prices drop, foreclosures coming off the books faster, and new homes still staying very low. Combined with rock bottom mortgage rates, the setup is ripe now for a healthy, if long term, recovery (unlike the fake recovery caused by the tax breaks in 2009 and 2010).

 

--One way or another, the swaps market as it exists today in a pure one-to-one format uncleared, will become an exception to the rule. In order to use them safely and efficiently, the rules are going to make it pretty much guaranteed that the majority of that market will use the ICE and/or CME clearing houses, and some of the attached matching engines. This significantly mitigates the risks that were present before. Also, new accounting rules will be part of the still-pending rule sets being solidified by the reg agencies.

 

--Government spending is certainly being looked at, deeply. Now, IMO some of the extremities in this discussion are outright insane, but the fact that we are having the discussion and doing things about it, to me signals a good thing - that the American public is starting to become aware of the picture. And though some argue that some of the short term efforts, either stimulus or cutting, will harm the recovery, in the long term there is a lot to gain in getting things under control.

 

--New rules to avoid improper trading are coming into play, slowly. Look at the UBS situation - that was against multiple rules internal and regulatory, but happened anyway, which is scary... but the fact that it was against the rules helped keep it from getting to be bigger, and even more importantly, the loss isn't taken by the market here - it is taken by UBS. Why is this important? Because it provides an object lesson to the banks about risk, and what will inevitably follow is these large IB's changing the way they audit and monitor activity. This is a good thing, in the long run.

 

--HFT is going to come under new scrutiny. Rules allowing special access to trade data are changing and restricting, rules about dark pools will take away many of the anonymous cloaks, and new rules on trade and order box stuffing will cause penalties. All this won't prevent HFT, but what it will do is focus it in a way that makes it less of an unchecked nightmare for the long term investors.

 

--Europe, well, not so sure what will happen there. This is one I am not terribly optimistic about, other than the fact that it has shown the EU some of the dangers they failed to consider before, and I am quite sure they will make changes as a result to prevent this in the future. Short term aspects are still scary though.

 

--US debt ratings agencies lost a lot of client confidence pretty quickly, and for their own survival, they will get their s*** together. They have to to survive. People will be much more cautious trading securitized debt, due to the fears associated with recent events. This should give the whole market a calmer approach.

 

--Real time news of everything is still awfully scary. But I hear more and more, people getting a better understanding of what all the information means, and I believe that society in this country, in its own fitful and partial way, will eventually see enough B.S. that some people will start making themselves more informed. Information is power, the recent age is one where too many just read the first page. Time to read a few chapters in, and I think that starts to happen. Call me crazy.

 

--Health care costs won't keep going up this much more than inflation, because there is still enough free market that it will come into check. This will happen regardless of government action. The massive Health Care bill had some good things in it too, but also some bad things. Watch for more legislation and rules changes in the coming decade, to get it better as we get a handle on it, though just like the CongressCare bill, it will be some steps forward and some back. The catch here though, is the baby boomer wave beginning to hit. This will make things difficult.

 

 

So even though all these huge problems came to a head in 2007-2009, they are all being improved, if not in an ideal way. By hitting these major problems that have been persisting for decades, we are finally fixing the problem that need to be fixed. Long term, this is good, even if there are going to be multiple years of pain in the short term.

 

Finally to end my longest post ever in here, this is a list of my biggest fears right now, and some of the things I think we can do to remedy things...

 

--Europe is a scary thing to me, not just the problems the individual countries are facing, but the way the countries are interacting. I don't honestly have much of an idea of the outcome, but it will probably get a lot worse before it gets better.

 

--The health care stuff will, IMO, get better, but will it get better fast enough to deal with the baby boomer wave?

 

--I think the single biggest problem in Congress and DC isn't the gutter politics going on... it is about money. It is about the rich helping the rich, and the recent SCOTUS decision and lack of real campaign finance reform make things worse. The wolf is in the hen house - people with money get elected, so why would they change anything? I am not sure how this situation is resolved, unless the people who vote start paying more attention and getting more involved.

 

Some Solutions...

 

--The banks are talking about absurdly low mortgage and business loan rates, and yet, lending is just too constrained. We went from an environment where someone with weak credit who makes 30k a year could buy a 500k house with zero down, to an environment where anyone without platinum credit and high income can't get a mortgage even with 10 or 20% down. Reality needs to be between. Banks are hoarding cash and not lending. Congress and Obama can absolutely do things to help this situation: they can stop paying interest on bank reserves, they provide limited debt guarantees for the tweener credit folks (not bad credit, but good credit just not spectacular, like small businesses), and they can set a boundary around what new rules will be enacted short term and get them solidifed in a hurry.

 

--Campaign finance absolutely needs addressing, and the idea that a corporation is a person is an absurd idea that should scare everyone who isn't a CEO. People need to know this, see it, and act on it. This has to be a rally cry.

 

--The US will simply not be able to compete globally on a level like they did in the 90's, unless they get OUT FRONT on technology. In order to do that, Congress needs to not only focus what funding they can on seeding these areas, but also need to set up the rules around loans, import/export, and patents in a way that encourages it. This is key.

 

--Congress must not give up on health care reform. HCA was a first volley, now we need to fix and improve upon it, and keep going. I've posted before what my plan would be for this.

 

--Education up through high school needs to not be the enemy - they need to be supported and nurtured. The more educated our citizenry, the better we can compete in business, and the better decisions we make politicaly. And college costs are getting absurd - the state universities have unique opportunities here to use lower tuitions to compete with similar institutions. Not sure how to get that ball rolling, but it can be done.

 

--Deficits absolutely need to be addressed, but I agree with SS2K5 that now is not the time to be cutting spending. Work instead to better focus what we're spending it on.

 

--Finally, for the love of God, get us off oil as soon as possible. There are so many positive effects from this - long term cheaper energy, better health for ourselves and the environment, national security enhancements, new industries and jobs. Get it done.

 

 

If you actually read my entire post, I applaud you. This is where we need to go, and this is also why I think we're going to be in good shape in five years, give or take three. But it's going to hurt like hell for a while.

 

[StrangeSox]

If they believed any different, why didn't they create a strong central government, instead of one as absolutely weak as possible?

 

"They" were not a monotonous group. "They" tried a weak federal government at first and it failed, so the Federalists argued for a stronger one (and won).

 

And, again, who cares? We're not beholden to late-18th century political philosophy, aside from what is written in the Constitution and the laws they created.

[southsider2k5]

"They" were not a monotonous group. "They" tried a weak federal government at first and it failed, so the Federalists argued for a stronger one (and won).

 

And, again, who cares? We're not beholden to late-18th century political philosophy, aside from what is written in the Constitution and the laws they created.

 

Of course we aren't... Because that would severely weaken the central government and increase individual freedoms.

[StrangeSox]

It's pretty sweet that they expressly set up their governing document to allow changes and expressed, over and over, the problems with static, unresponsive governments.

 

Removing economic agency and increasing dependence on an aristocracy doesn't actually increase individuals freedoms.What is one to do when you must earn a wage to survive, but there are no jobs available?

[southsider2k5]

It's pretty sweet that they expressly set up their governing document to allow changes and expressed, over and over, the problems with static, unresponsive governments.

 

Removing economic agency and increasing dependence on an aristocracy doesn't actually increase individuals freedoms.What is one to do when you must earn a wage to survive, but there are no jobs available?

 

Obvious the answer is to punish the greedy bastards who do have jobs.

 

[NorthSideSox72]

I just posted what amounts to my manifest about the economy, and no one even responded.

 

I guess I should know not to post a dissertation in here anyway. Not sure what came over me, that was meant to be a short post, and I just kept writing (waiting on a job running).

 

[StrangeSox]

I just posted what amounts to my manifest about the economy, and no one even responded.

 

I guess I should know not to post a dissertation in here anyway. Not sure what came over me, that was meant to be a short post, and I just kept writing (waiting on a job running).

 

I looked through the first ~1/2 already, the diagnosis part, and didn't find anything I disagreed with.

[StrangeSox]

Read the rest, again, nothing I really disagree with in there. I'll admit that my understanding of things like high-frequency trading is based solely on Frontline specials, though. I do recall them interviewing one company who had been in the business for a while and never had one month where the profits weren't higher than the previous month. It seems absurd on its face and IIRC it now dominates the trade volume. "The markets" have just become algorithm outputs.

[StrangeSox]

Obvious the answer is to punish the greedy bastards who do have jobs.

 

That's actually a serious question and the biggest bug in capitalism. We require people to work for a wage in order to provide for their family, but many willing individuals cannot find employment while factories sit shuttered and wealth continues to be accumulated by a small percentage of people.

 

That doesn't mean market economies are bad or that we need to replace capitalism with Communism, but it is a legitimate concern that needs to be addressed.

[southsider2k5]

That's actually a serious question and the biggest bug in capitalism. We require people to work for a wage in order to provide for their family, but many willing individuals cannot find employment while factories sit shuttered and wealth continues to be accumulated by a small percentage of people.

 

That doesn't mean market economies are bad or that we need to replace capitalism with Communism, but it is a legitimate concern that needs to be addressed.

 

The biggest problem is that the government has become just another greedy corporation with record earnings. The issue is that their earnings are contra-normal beta. Just like those greedy bastard banks who leveraged themselves for horrible profits, the government has leveraged itself by getting into a situation where they also have massive obligations which they can no longer afford.

 

So in essence the times government was actually supposed to be able to step in at (well at least since the FDRing of the economy to be ultimately dependent on the government) it can't. If government would not try to infiltrate behavoir, and instead function as an actual safety net, like it was actually intended to be when these programs were set up, they might have the ability to actually function when we need it.

[southsider2k5]

Looks like we will finish above the 10719 August low, which is a good fundemental sign.