Financial News

[NorthSideSox72]

Published UE rate drops from 9.0% to 8.6%. 125,000 jobs added is the official number, below ADP's estimate... but, previous months were revised up yet again. Part of the UE drop - approximately half if you extrapolate out the numbers - was due to about 300k people dropping out of the UE category for various reasons other than a new job (stopped looking, retired early, etc.). But even half that, 0.2%, is still something.

 

Economists now talking, with all the US news recently and the Euro crisis leaning more towards stabilization, and the US economy "turning a corner". Still not seeing profound growth, but we are going from weak growth, to moderate growth.

 

[max power]

Those two are polar opposites in terms of effect on currency value and assessed risk levels. One uses real money, the other creates new money. Adding money to the supply is accretive, it absolutely has an effect on the fair value of the currency - but of course no makret correction occurred because no one knew about it.

Not in terms of the market's perception. Whether money is added or created money can be added, that would be viewed as negative to the currencies' value.

 

That's all I've been saying. No one knew about it, and now its back to how it was before they knew about it.

Edited December 2, 2011 by MAX

[Balta1701]

And finally, I sure as hell don't like that the banks were able to access that kind of capital and put the entire country at that level of risk, with apparently no negative consequences.

 

And even if you think this was necessary, how is it I am the only one who seems to see what this revelation means to the status of US currency and our foreign-held debt???

Well, first, you're 100% right on the first part. There should have been negative consequences for the financial industry, but we all know that can't happen.

 

And second, this revelation shows that the Federal Reserve will act as a lender of last resort during a crisis and will protect the American System from collapse at all costs. That is a much more important statement than a worry that the Federal Reserve will suddenly decide to stop fighting inflation.

[max power]

Food for thought regarding the 7.7 trillion - - -

 

Some have explained it as a way for the banks to return to normalcy. The argument is that banks would no longer move funds between each other due to overwhelming concerns at the time. So the Fed stepped in and dealt with each bank separately to encourage trust. The claim is that the fed basically functioned act as an intermediary.The 'loans' were paid back very quickly, so the debt was merely a short term liquidity solution. Not sure how much truth there is to that, but it contrasts sharply with the situation going on in the eurozone. These countries are incurring real debt, also in the trillions, that will take decades (in some cases) to pay off.

 

[NorthSideSox72]

Food for thought regarding the 7.7 trillion - - -

 

Some have explained it as a way for the banks to return to normalcy. The argument is that banks would no longer move funds between each other due to overwhelming concerns at the time. So the Fed stepped in and dealt with each bank separately to encourage trust. The claim is that the fed basically functioned act as an intermediary.The 'loans' were paid back very quickly, so the debt was merely a short term liquidity solution. Not sure how much truth there is to that, but it contrasts sharply with the situation going on in the eurozone. These countries are incurring real debt, also in the trillions, that will take decades (in some cases) to pay off.

Doesn't really make sense. Because if these were just interbank loans, then it should result in a $7.7T negative net effect. The net effect should be near-zero. So I don't believe that at all.

 

Also, I still think you and Balta are understanding what I was getting at earlier. Right now, the money is flattened and gone. Then it, it wasn't. The effect on currency fundamentally, purely based on basic math, should currently be zero. But currency, like debt obligations across borders, is valued in significant part on risk. Think of this (admittedly imperfect) analogy... you are sitting at a poker table with a bunch of rich guys, and looked at video of the games later. One guy put extra chips on the table from his pocket that he didn't have before, to make it look like he was stronger than he was. He never actually played them out, but it did have an effect on the game. And more importantly, it has a serious effect on how you see him the next time you play.

 

This story is starting to get a little more traction in the press now, as it should.

[max power]

At your first thought, I found myself wondering the same thing. I'm assume you made a typo should/shouldn't.

 

To your second point I fully understood what you were getting at. I traded forex for about five years before moving into other markets so I have some familiarity with currency markets. My argument is - to stick with the analogy - that you knew he had a habit of doing that with the chips already. Or at the very least, you knew he was the type to pull such a move.

Edited December 6, 2011 by MAX

[max power]

Then again, knowing something is going to happen apparently doesn't mean its fully priced into the market. Look at this mornings news. 15 euro zone countries were put on credit watch. This should come as a surprise to no one. And yet fundamentalists will claim it moved the market. The timing of the move and announcement certainly suggest it did.

Edited December 6, 2011 by MAX

[StrangeSox]

An Overview of Growing Income

Inequalities in OECD Countries:

Main Findings

 

This overview summarises the key findings of the analytical chapters of this report.

It sketches a brief portrait of increasing income inequality in OECD countries and

the potential driving forces behind it. It reviews changes in these driving forces and

examines their relative impact on inequality. In particular, it looks at the role of

globalisation and technological changes, regulatory reforms in labour and product

markets, changing household structures, and changes in tax and benefit

regulations. It assesses what governments can do about increasing inequality and

concludes by examining possible specific policy avenues.

[StrangeSox]

The euro zone’s terrible mistake

 

The FT is reporting today that the new fiscal rules for the EU “include a commitment not to force private sector bondholders to take losses on any future eurozone bail-outs”. If this principle really does get enshrined into some new treaty, it will be one of the most fiscally insane derelictions of statesmanship the world has seen — but it certainly helps explain the short-term rally that we saw today in Italian government debt.

 

Are we really going to repeat — on a much larger scale — the very same mistake that Ireland made? Does no one in Europe realize that this is the single worst thing they can do?

Edited December 6, 2011 by StrangeSox

[mr_genius]

WSJ is reporting it now costs $400 per gallon to get fuel into Afghanistan. What a waste. The economy is in the tank and the US government is just wasting money on this crap.

[Balta1701]

WSJ is reporting it now costs $400 per gallon to get fuel into Afghanistan. What a waste. The economy is in the tank and the US government is just wasting money on this crap.

Clearly then congress's response should be to keep trying to stop the military from adopting clean energy technology, because that money is going where it belongs now.

[mr_genius]

Clearly then congress's response should be to keep trying to stop the military from adopting clean energy technology, because that money is going where it belongs now.

 

Balta, it costs 100 million dollars to get a solar panel into Afghanistan.

[Balta1701]

Balta, it costs 100 million dollars to get a solar panel into Afghanistan.

Plus they kill a kitten.

[southsider2k5]

Stories of the day... Corzine (D) has no idea where the money is, and he is really, really sorry (serious LOL there) and apparently at some point Biden called Corzine for advice on how to save the economy. No word on whether he took it or not, but seeing as the US is dumping money into Europe, the answer seems to be at least a solid maybe.

[southsider2k5]

Corzine testimony

 

http://agriculture.house.gov/pdf/hearings/Corzine111208.pdf

[Rex Kickass]

Stories of the day... Corzine (D) has no idea where the money is, and he is really, really sorry (serious LOL there) and apparently at some point Biden called Corzine for advice on how to save the economy. No word on whether he took it or not, but seeing as the US is dumping money into Europe, the answer seems to be at least a solid maybe.

 

Corzine did the very same things as a CEO that he said should be regulated out of existence as a Senator and Governor. [To be read in the sarcasm color since I'm color blind]Sometimes I wonder if he did these things at MF Global on purpose, to prove a point.[/ color]

[southsider2k5]

Apparently Corzine is trying to hide behind a misunderstanding of what he said. He is claiming that he said "we have to fix this", which apparently he is going to try to claim someone else misunderstood as "steal all of the customers money and use it to cover our asses".

 

That, my friends, it total bulls***. There is no chance someone would read that out of Corzines statement without there being a damned good reason for it. The entire industry knows that segregated funds is the line you do not cross. Even if an employee thought that statement meant use segregated funds, they would have asked 5 different times "do you mean to use customer funds?". They wouldn't take that vague of a statement as an order. It is impossible. It would be like the President saying "we have to fix this" about an incident with a foreign country to mean that they, by themselves, should launch a nuclear attack on that country, without questioning the order.

[mr_genius]

Corzine did the very same things as a CEO that he said should be regulated out of existence as a Senator and Governor. [To be read in the sarcasm color since I'm color blind]Sometimes I wonder if he did these things at MF Global on purpose, to prove a point.[/ color]

 

if you actually believe that....

[Rex Kickass]

if you actually believe that....

Of course I don't believe that. I did believe in a lot of the things he said as a Senator and as a Governor. That's why this whole thing is kinda painful to me. Because his actions are roughly the opposite of the policies he espoused.

[caulfield12]

http://dealbook.nytimes.com/2011/12/11/a-r...-on-a-panic/?hp

 

On Corzine, MF Global, Chicago trading desk, etc.

[Balta1701]

I really have no idea how to interpret most of what is written here, but a summary version seems to suggest that MF GLobal was legally allowed to use client funds as collateral on various bets, even if they're technically still keeping things "Segregated" in some sense. Someone please rewrite this if I've completely misread it.

[StrangeSox]

Finally, A Rich American Destroys The Fiction That Rich People Create The Jobs

 

Now, of course entrepreneurs are an important part of the company-creation process. And so are investors, who risk capital in the hope of earning returns. But, ultimately, whether a new company continues growing and creates permanent jobs is a function of the demand for the company's products, not the entrepreneur or the investor capital. Suggesting that "rich entrepreneurs" create the jobs, therefore, Hanauer observes, is like suggesting that squirrels create evolution.

 

UPDATE: This article stuck a nerve, spawning vehement agreement and disagreement. The two smartest arguments made by those who believe that rich people DO create the jobs are that 1) the success of Silicon Valley is proof that entrepreurs and investors create millions of jobs, and 2) brilliant entrepreneurs like Steve Jobs create demand out of thin air by inventing products people didn't know they wanted. These arguments sound seductive and persuasive, but they're wrong. Click this follow-up to see why: No, Entrepreneurs Like Steve Jobs Do Not "Create Jobs" By Inventing Products Like The iPhone

SEE ALSO: The Truth About Tax Rates: Rich People Have Rarely Had It So Good

[NorthSideSox72]

I really have no idea how to interpret most of what is written here, but a summary version seems to suggest that MF GLobal was legally allowed to use client funds as collateral on various bets, even if they're technically still keeping things "Segregated" in some sense. Someone please rewrite this if I've completely misread it.

We discussed this shortly after it went down - the modified CFTC rule allowing segregated futures funds to be re-bet on foreign securities may indeed be at the heart of the matter.

 

This gives me a thread idea...

 

[StrangeSox]

This gives me a thread idea...

 

Ways in which our broken financial system more closely resembles a casino?

[bmags]

I'm not invested in them, but I'm a big fan of starbucks' new rollouts.