Bill Gross thinks conditions are ripe for a liquidity crisis, and he points a finger at his old firm for its potential to be at the center of the storm.» Read More
In an article in today's Financial Times, Portuguese finance Minister Fernando Teixeira dos Santos was discussing the implications of the current simultaneous credit crises in Greece, Portugal, and Ireland.
In reference to the broader framework of the problems faced in Europe today he said the following:
Despite a huge program by the Federal Reserve intended to provide monetary stimulus to the economy, Nouriel Roubini doesn't think we need to worry about inflation.
In fact, he argues that people who take the position that the Fed should curtail its easing policies do not really understand inflation.
In the first two parts of my interview with economist Nouriel Roubini we discussed two issues: Why Professor Roubini believes a gold standard is no longer a viable option for modern economies, and second why monetary easing is a necessary evil .
So let's take a deeper look at Roubini's theory of inflation.
Let's begin with what seems to be the principal conclusion of Roubini's argument. Simply put: "Inflation is not the problem."
Why does he believe that to be true?
You remember those frightening videos of the McDonald’s hamburgers that sat on a plate in the open air for weeks and weeks but never rotted?
Well, it turns out that a lot of people were drawing exactly the wrong conclusion from the videos. Far from demonstrating that there was something queer about a McDonald’s hamburger—too much salt, too many preservatives, genetic modifications—the video was demonstrating that a McDonald’s burger is pretty much like any other burger.
First, for those of you who haven’t seen it yet, here’s the one of the more famous McDonald’s hamburger videos.
At half past noon today,NASA is scheduled to hold a press conference to discuss the discovery of “an exceptional object in our cosmic neighborhood.”
Now that object is likely just an inanimate thingy hurtling through space. But what if it is something else entirely—a spacecraft containing extraterrestrial biological entities. You know, aliens.
What’s the trade on First Contact with aliens? My initial thoughts turn on two subjects—tech companies and minerals.
Let’s start with tech. It seems likely that any extraterrestrial biological entities—EBEs, for short—capable of reaching the earth would be technologically far more advanced than us. This could undermine existing tech giants that depend on trademarked technology to generate profits. Their tech could rapidly become outdated once EBE tech is introduced. So, we guess, short big tech in case of First Contact.
Last week we noted that opponents of MERS are already gearing up to fight what they see as a government rescue of the fraud-enabling database banks used to facilitate mortgage transfers as part of the securitization process.
Although there’s not yet any explicit campaign underway to lift the threat of catastrophic legal risk to MERS, at least some of the opposition is convinced a legislative rescue is underway.
What’s more, they are convinced that without Congressional action, MERS would not only lose its credibility—but would be snuffed out altogether by the judiciary.
Let’s start by saying that we’re not convinced that courts will destroy MERS. Even though it has suffered some legal setbacks, it has a long history of satisfying courts about its legitimacy. What’s more, courts are much more practical than they are often given credit for. It seems unlikely that they’d throw such a vast and important part of the financial system—3 out of five mortgages in the US are part of MERS—into chaos.
Congress is back in session this week and there are two weighty issues for them to tackle: whether to extend the Bush tax cuts and the deficit reduction from the President's bipartisan National Commission on Fiscal Responsibility and Reform. The political rhetoric has already heated up. Fingers are pointing and heels are being dug into slippery slopes.
If Americans were "sending a message to Washinton" in the midterm elections, the message has been scrambled. The conservative Tea Partying wing of the GOP, believing Americans have voted for change, read it as a message for smaller government, less spending, and smaller deficits. Others say voters were demanding government solutions to unemployment. Still others think Americans were just voting against Wall Street.
One of my close contacts who knows very well the process in which tough economic decisions are made and the ramifications of standing his ground is Larry Lindsey, President and Chief Executive Officer of The Lindsey Group. Lindsey, a former director of the National Economic Council and assistant to the president on economic policy for the U.S. President George W. Bush, was one of the key players in Bush's $1.35 trillion tax cut plan. He called it an "insurance policy" against an economic downturn. Lindsey left the White House in December of 2002 after he estimated the price tag of the Iraq war could reach $200 billion.
Even though Lindsey left "politics" doesn't mean his economic opinons aren't sought out. The Obama White House contacted Lindsey to get his original thoughts on the $800 billion stimulus package. He told them the size of the package was right, but the allocation of where the money would be spent was not. Lindsey called the results of the stimulus an"absolute disaster" because the money appropriated went to areas that had little benefit to the economy or job-creation.
Goldman Delayed in Attempt to Repay Buffet?(CNBC via Reuters) Goldman Sachs has apparently hit a snag with the Fed in its bid to repay Berkshire Hathaway's $5 billion investment. The delay may be related to the Fed's unwillingness to allow Goldman to make adjustments to its capital levels before allowing other banks the same opportunity. Goldman Sachs is paying a burdensome 10 percent annually on the debt — and would presumably wish to replace it with funding at a better rate, now that the debt markets have unfrozen and financing costs have dropped dramatically.
The latest issue of Rolling Stone is out with a devastating portrait by Matt Taibbi of the foreclosure process in Florida . If it pierces the public consciousness the way Taibbi’s articles on AIG and Goldman Sachs did, it could be a game-changer.
The set-up is pretty simple. Taibbi goes down to Florida and sits in on one of the make-shift foreclosure courts Florida has set up to deal with the enormous volume of foreclosure cases in the state. It’s really just a small conference room run by a formerly retired judge who has been brought on to speed through foreclosures.
Taibbi discovers far worse than sloppy paperwork on the part of banks—although he discovers plenty of that too. He discovers that the foreclosure process is heavily skewed to favor the banks. If a homeowner doesn’t show up to defend himself or herself, the judge issues the foreclosure order. If the bank fails to send a representative, he just pushes back the date. When a bank submits a trail of ownership of the mortgage note that makes no sense, it just comes back later with a different set of ownership documents.
The backlash over Amazon selling "The Pedophile's Guide to Love and Pleasure" shows no signs of dying down, even after the company apparently pulled the controversial book from circulation.
CNBC has obtained links from child safety organizations who have searched the website on what would be considered more morally reprehensible content.
General Motors IPO Oversubscribed—By a Six Fold (CNBC via Reuters) There is once again something to feel good about in Detroit: Investors submitted orders for $60 billion of GM common stock—although General Motors only filed with regulators to sell about $10 billion in equity. The article goes on to say: " The robust demand suggests that GM's IPO will likely price around the top end of the $26 to $29 per share range and that the full overallotment option—additional shares underwriters can sell to help stabilize the stock after it begins trading—will be exercised, the sources said." Is it too late to hope that the old adage "What's good for General Motors is good for the country" still holds true?
Nobel Prize-winning economist Robert Shiller says that his key valuation indicator is flashing warning signs.
The Fed is in the early stages of an analysis on changes in bond market liquidity, amid signs that liquidity may be less resilient than in past.
Janus Capital acquired a majority interest in Kapstream Capital and said Kapstream's Palghat will support Bill Gross as co-portfolio manager of the Janus Global Unconstrained Bond strategy.