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When the Hammer Meets the Nail
By David Glenn Cox
Wall Street is up, up, up! All is well in the kingdom of the damned; the dollar has risen the most since 2008. Of course it isn’t because the dollar is doing so well, it is that the euro is doing so poorly. But Wall Street lives on the philosophy of "Your loss is our gain!" A meteor striking Los Angeles and killing millions would be viewed on Wall Street as “Buy Caterpillar stock and stocks in casket companies!” or “Funeral home stocks undervalued.”
Wall Street has always lived in the shadows of the South Sea Bubble. Stock jobbers and speculators are presented to the public as serious, well-educated and well-dressed men and women, but they operate out of greed and greed alone. They live to game the system. Wall Street is a gaming casino where the dealers try to help the players cheat the house because the dealers are paid by the players and not the house.
During the 1920s everyone was encouraged to buy stocks because the market was going up, up, up! Who encouraged the public, so naive, to think that fortune awaited them on Wall Street? Wall Street did. Newspaper reporters were paid under the table, sometimes $300, for a story about great things happening at RCA or Union Pacific Railroad. RCA might be at 20 on the exchange but the big money boys got in at 16. The story comes out of great things going on at RCA and suddenly the stock jumps to 23. Then another story comes out, “Big Doings at RCA Cause Stock to Soar!” The lemmings pile in screaming, “Buy RCA,” and the stock jumps to 26 and the big money boys begin to sell RCA.
They sell slowly at first to keep the ruse going a while longer, but then RCA dips to 25, then 23, and then back down to 20. The lemmings got fleeced and the big money boys got fat and it was all quite legal, until that Communist Roosevelt took over and ruined all the fun. It was called pump and dump and today it's called insider trading. There are thousands of variations on the theme or scheme and they are hard to catch unless someone squeals.
Deregulation of Wall Street has been no different than laying off bank guards to save the bank money and leaving the vault door open in the name of efficiency.
March 27 (Bloomberg) -- "U.S. stocks rose for a fourth week, sending the Standard & Poor’s 500 index to its longest winning streak since August, on speculation the economy is recovering from the worst contraction since the 1930s. Retailers and homebuilders including RadioShack Corp. and Lennar Corp. led gains as reports showed growing demand for steel and semiconductors, Europe moved closer to resolving Greece’s financial crisis and the U.S. economy expanded at the fastest rate in six years. Citigroup Inc. jumped 11 percent after analyst Dick Bove told Bloomberg News that bank shares may quadruple by 2012 and people familiar with the matter said the government plans an orderly sale of its stake."
Home builders? That’s odd, new home sales for February were the worst on record, the worst ever. A quick Google search will tell you about the rising demand for steel, and in short, it ain’t happening no place around here! Ditto for semiconductors. As I continued reading I fell upon this tidbit, “RadioShack, a consumer-electronics chain, rallied 7.1 percent after the New York Post said it may sell itself for as much as $3 billion.” RadioShack stock isn’t going up because they are selling more remote-controlled toy cars or mother boards, it's selling more stock!
Citigroup is in a category all by itself as it is/was one of the most troubled banks. From a low of $2.25 it has recovered to $4.27 per share after once selling around $30.00 a share less than two years ago. Citi lost $6.4 billion last year and in its most recent quarter it lost $7.77 billion.
“Citigroup Inc. jumped 11 percent after analyst Dick Bove told Bloomberg News that bank shares may quadruple by 2012 and people familiar with the matter said the government plans an orderly sale of its stake.”
Did he say the value of the shares would quadruple? Or did he say that the volume of shares would quadruple?
Remember when the mortgage crisis first began how the professional bankers blamed consumers for buying the products that the banks were selling? It is always someone else’s fault. So ask yourself, if you’re a Wall Street banker and you look around at the American domestic economy saying, “If I can borrow a million dollars from the Federal Reserve for one quarter of one percent, where should I invest it?”
“China’s property prices rose 10.7 percent last month, the fastest pace in almost two years, fueling concern that record lending and inflows of capital from abroad are creating asset bubbles in the world’s third-biggest economy.”
Inflows of capital from abroad, huh? I wonder who they’re talking about?
“Former Federal Reserve Chairman Alan Greenspan yesterday said there are 'bubbles' in China, without indicating whether they were in property and stocks.”
“We have to closely monitor China’s asset bubbles,” Liu Mingkang, chairman of the China Banking Regulatory Commission, said yesterday at a conference in Beijing. "Property prices have changed quite a lot in the past five years."
“The regulator’s latest order underlines concerns that banks may be at risk from companies that are speculatively raising capital backed by property investments. "Banks must carry out serious examinations of developers that are repeatedly using the same pieces of land as collateral for loans," the regulator said in the statement.”
“We should take out the baseball bat on Paul Krugman -- I mean I think that the advice is completely wrong,” Paul Roach said in a Bloomberg Television interview in Beijing when asked about Krugman’s call, characterized as akin to taking a baseball bat to China. “We’re lashing out at China rather than tending to our own business, which is raising U.S. savings,” said Morgan Stanley's Asia Chairman about Krugman’s call to allow the yuan to rise in value to prevent a bubble.
If you look at it all in context, it is the outsourcing of the old pump and dump. A repeat of the mortgage meltdown, China-style. Wall Street takes other people’s US dollars and moves them overseas to where regulations are lax and regulators are pliable. In China it’s let the good times roll as the economy expands by double digits. But you know how this story ends, don’t you?
It is China that is buying most of the Treasury Bills printed by the Treasury and paying interest far greater than the quarter of a percent paid by Wall Street bankers. For the banks it’s a steal yourself rich scenario where they can’t lose, only you or we can. When the hammer meets the nail all bets are off. As the old saying goes, “No bucks, no Buck Rogers.” The bankers will pocket their loot and shrug their shoulders. They will point fingers and blame the failure on Chinese regulators for not watching them closer as they game the system. Game the system here, there and everywhere, a dangerous game indeed. Leaving behind an American economy devoid of wealth and devoid of foreign investors
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