Why an out of Touch Wall Street Refuses to Die

While the historic shift of wealth continues at the hands of the most sophisticated  thieves (Investment Bankers), their game is becoming more and more diabolical. All the talk in financial circles now is about how Goldman Sachs used the most sophisticated technology of the future costing millions to make split second trades and beat out the smaller firms who are using outdated 2009 technology (how un-cool). The record profits that GS reported a few weeks ago fly in the face of the most distressing economic data since the Great
Depression. Their use of continually advancing technology (a hallmark of an innovative post-industrial economy) to advance unsound trading principals is paramount to industrial terrorism.

Up until the end of the 1980’s stock prices used to be representative of productive economic output, an enterprise value system  built on strong foundation of accountability which meant that Wall Street only rallied when the rest of the economy did. For most of the 90’s investment bankers were hatching diabolical systemic plans in dark rooms to make Wall Street “DE-COUPLE” from the real economy to minimize the need for accountability and in the process decouple from any relationship representing real economic output. Below
is a sample representation of the brazen, decoupled SPIN that Wall Street puts on REAL ECONOMIC DATA to insure their continued manipulation of investors large and small. This is not a joke. All you need to do is listen to CNBC for 15
minutes and see this pathology that has become a whole new language. The list is from a post on the blog Seeking Alpha. Never a dull day on Wall Street.

UNEMPLOYMENT @ 9% = BETTER THAN EXPECTED
UNEMPLOYMENT @ 10% = DOW SOARS
UNEMPLOYMENT @ 11% = GREEN SHOOT RALLY
UNEMPLOYMENT @ 12% = ALREADY FACTORED IN
UNEMPLOYMENT = 35% = DOW DROPS 100 POINTS
****
HOUSING PRICE DROP 1% = RECESSION ENDING
HOUSING COLLAPSES = GREEN SHOOT
HOUSING FALLS 20% = STABILIZATION
12% MORTGAGE DELINQUENCY = GOOD FOR STOCKS
HUNDREDS OF THOUSANDS OF MORTGAGES UNDERWATER = HOUSING BOTTOMED
****
GM CHAPTER 11 = PRICED IN
125K+ JOBS LOST FROM GM CHAPTER 11 = PRICED IN
AMERICAN AUTO INDUSTRY BANKRUPT = GOOD THING

****

GOVERNMENT SPENDS 1 TRILLION OF OUR DOLLARS = STIMULUS
NORTH KOREA FIRES NUKE = RALLY
ISRAEL BOMBS IRAN = 30 MINUTE END OF DAY RALLY
WORLD EXPLODES = ASIA RALLIES

****

NO JOBS ARE CREATED = RECESSION ALMOST OVER
U.S. DEBT OVERWHELMING = TOO BUSY RALLYING TO CARE
CONSUMER STOPS SPENDING = RETAIL RALLY

****

BANKS ARE INSOLVENT = SIGNS OF STABILIZATION
BANKS PASS SCAM STRESS TESTS = HUUUUUUUUGE RALLY
BANKS “ONLY NEED 75 BILLION” = OUT OF THE WOODS
BANKS PASS A REAL STRESS TEST = NEVER WOULD HAPPEN
BANKS PAY BACK TARP = LATE DAY SURGE
BANKS CAN’T PAY BACK TARP = EARLY MORNING SURGE

****

CALIFORNIA BANKRUPT = THE WORST IS OVER

****

DOLLAR RISES = RALLY
DOLLAR CRASHES = RALLY
INFLATION = BULL MARKET
DEFLATION = BULL MARKET CONTINUES
REFLATION = MASSIVE SHORT COVERING RALLY
GOLD RISES = STOCKS RALLY
GOLD FALLS = STOCKS RALLY BIG

****

BANKS’ FAKE EARNINGS = SIGNS OF STABILIZATION
COMMERCIAL REAL ESTATE STABILIZING = 1000 POINT RALLY
COMMERCIAL REAL ESTATE CRASHING = STOCKS SHAKE IT OFF TO RALLY
CONSUMER INSOLVENT = CONSUMER IS SPENDING

****

OIL @ 50 = BULL RALLY
OIL @ 60 = GREEN SHOOT
OIL @ 100 = IMPORTANT RECOVERY SIGN
OIL @ 20 = TAX BREAK

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All the Shoots Are Brown

The newest buzz phrase on Wall Street is “Green Shoots”.  Green shoots here and green shoots there and all one has to do is wait a day and watch them turn brown never to see the light of day again. So, why has there been so many false signs of economic recovery? The short answer is because we’ve exhausted the heck out of our business models. And what models they’ve been. It seems  that in a systemic act of defiance the global economy looked at what a business sustainability models looked like, and went out and did exactly the opposite. This past decade will be remembered as the debt decade during which the Bigger is Better pathology combined with the lack of rules on debt repayment to cause the unprecedented collapse of capitalism in its current form. A bigger and better chrome-plated Hummer to replace your regular Hummer? No Problem. A bigger and better McMansion to replace your regular 5,000 square foot home? No Problem. A bigger credit card with a lower interest rate? No Problem. A bigger mortgage to refinance and buy the gold plated Hummer to replace the chrome one? No problem. You can’t pay for any of it now? NO PROBLEM! Honestly, how did we ever expect to sustain such vicious cycle of debt without any accountability what so ever.

In years past, such conspicuous consumption would have never been possible as the institutions that lend the money held the borrower responsible at one point.   But, this time around there was a completely new lending philosophy created by Wall Street that took from grandma, China and Dubai equally, and because no one was watching, it made outrageous promises on returns and took hefty fees for itself. This new model wasn’t concerned about paying grandma back because in a style 10 times more sophisticated than that of Madoff it used money from China to pay her off and with a straight face called the whole scheme “securitization”.

This went on for years. Meanwhile both consumers and producers got used to receiving “securitized” money without ever having to prove the need for it, which made them all lazy, fat, and complacent. Yes, subservient hosts to a killer parasite that infected almost all who used it.   So why are all the shoots brown? Two reasons:

1.       The green seen by analysts is fuzz growing on dying hosts, and like any parasite once the host is dead, the parasite turns brown the next day.

2.       The brain of this comatose patient who was created out of greed registers occasional electric activity and analysts exploit the heck out of it trying to convince us that he/she will walk again.

What Wall Street and the economists of today don’t understand is that in order for  “Green Shoots” to grow into sustainable plants, you have to take the time to plant and nurture the seeds first and not be the plant thief on the observation deck waiting to cut down the harvest that never came.

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This is the Way US Manufacturing Ends…Not with a Bang but a Whimper

If President Obama were anything like FDR, he would have urgently taken to the airwaves today with his address to America sounding something like this:

“June 1, 2009 – A date which will live in infamy- Yesterday, the Nation buried an American Giant which alone is responsible for pioneering the modern industrial era…. But in the day where financial engineering has long taken over from industrial engineering, there will be little lamenting on the streets of America. Instead, there’s an eerily devilish dance taking place upon the grave of General Motors by its bondholders, for their derivative bets have paid off by sending this giant to its grave. These  out of control charlatans will soon announce record profits for themselves with the blood of tens of thousands of families on their hands…”

If you would indulge me a bit further, an FDR-like Obama would conclude….

“Today, America has lost its moral compass. On Wall Street, the rich hires the intelligent to export the job of the poor.  Then turns these same toxic tools against that very ladder that got us here. Today, I’m announcing the end of Wall Street as we know it. There will be no more flooding of America with cheap money and watching it become complaisant and bet on its failure. Today, I’m outlawing the entire practice of option trading from all stock exchanges and placing hedge funds under heavy regulation. The creation of financial derivatives of all kinds will be outlawed as well. There will be no more betting that urges us to fail so the few can collect Trillions from the hard earned wages of the many.  How many more American Icons would have to fall before Wall Street wakes up to its evil ways…..”

Much more would have been said, but this is 2009, and leaders fear the consequences of straight talk and the media that would have covered the event suffers from 2 things: 1. It is owned by Wall Street, and 2. It suffers from the worst case of Attention Deficit Disorder.

The legacy of GM is so intertwined with that of its founder Alfred P. Sloan, a genius MIT engineer and one of the pioneers of the American Industrial business model. So much so that MIT, Stanford and The London School of Business created their business programs based on his teachings. He is also known for having pioneered modern corporate finance. Things like rate of return (ROR) and return on investment (ROI)  are  standard parts of Finance 101 in every business school in the world today. But,what made Mr. Sloan unique, in my opinion, was that he never boasted about any of his accomplishments. For years he lived in the same apartment in NYC just a few blocks away from his office. When he’d visit Detroit, he would stay in a “sleeping room” upstairs at GM’s corporate offices. This is how good leaders are made to be great.  When GM filed for bankruptcy yesterday, the legend of Alfred P. Sloan and the story of American industrial innovation came to an end.

Yes, on this day after we buried what once was the biggest industrial giant in the world, the streets were eerily quiet. America has slowly been lulled to its own industrial death, and we’re too numb or too dumb to do anything about it.

Yes, on the day we buried GM, The Dow Jones went up 221 points and two Giants who shaped America’s twentieth century; Franklin Delano Roosevelt, and Alfred P. Sloan were turning in their graves. This is the way America’s manufacturing world ends. Not with bang but a whimper.

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