2/16/12…what a revoltin’ development…

…as Chester A. Riley (William Bendix) would have said (to those of you old enough to remember him)…imagine we finally get back to average volume and not only is it a down day but volatility rose sharply to the highest levels since January 17th! what’s a mother to do? Meanwhile, commodities were up…Gold $1728.10 +$10.40; Crude $101.80 +$1.06. This as the Dow fell 0.8% and the worst performer, Transports, shed 2% of its value. Financials were off just 0.2%, best of the bunch BUT in most actives: BofA -2.5% (-2.5% since last Wednesday even with a 3.6% gain that day); Citi -1.1% (also off 4% despite a 3.5% gain a week ago Wednesday).

On the news the other night was an interview with the head of one of the largest corrugated box manufacturers in the country. 90-95% of everything sold is in corrugated boxes. They are running 24/7 BUT have hired no employees and he said if business had picked up they would have bought more machines and hired people to operate them. He has serious doubts about the strength of the recovery.

Thanks to those of you who wrote yesterday. TB didn’t know how that one would be received but it doesn’t matter…those who believe either the Dems or GOP are going to save America are smoking rope! To those of you who keep chanting “anyone but Obama” – TB repeats: be careful what you wish for.

What TB wants is a Congress that can work together…be respectful of the OFFICE of President…work for the people and cut the crap with lobbyists and other special interest groups. Time is in short supply.

TB just finished reading an interview with Lacy Hunt, who he knew as economist for Carroll, McEntee and McGinley, years ago, and is now working with another associate from TB ‘s United California Bank days, Van Hoisington…a portfolio manager who shuns stocks and invests strictly in U.S. treasuries. Rather than being negative on the outlook for bonds they are constructive based on a country lacking discipline…but still better than Europe which buys us some time. But without a sane government we will waste that time and the debt situation will only get better.

Hunt, like Carmen Reinhart and Ken Rogoff, knows we have to change our habits…but the consumer is the one who got nailed at the expense of the wealthiest Americans.

How so? For thirty years ’real income’ of individuals has declined…that is working individuals and it is about to get worse as companies pay less for employees in the better paying jobs in manufacturing.  Meanwhile, supply-side economics has rewarded the wealthy and high income earners who do little to enhance the economy…yet give them incredible tax breaks. Now we have high debt, unsustainable in the long run…and surging due to the lower GDP growth that has been with us since 2008. But all solutions TB reads say we have to cut the deficit…everyone must share the pain…but wait haven’t the vast majority of Americans already suffered the pain caused by reckless financial engineering with flawed bonus systems. They have not paid a price…and won’t. It sickens TB to see this and the way the financial sector continues to get what it wants, including defanging regulatory reform at the expense of those who know what is needed, like Brooksley Born, and Sheila Bair, while making a mockery of the honest Paul Volcker.

Thank you Reagan for ‘too big to fail’ and all those who (many for selfish reasons), stripped us of Glass-Steagall protections while not providing adequate regulation and cut budgets of the regulators. Free- market capitalism has become a myth…when in fact it is crony-capitalism, which is not capitalism at all.

To those of you who believe stocks will continue to rise…there are some very responsible people out there like Hunt who believe we will be in recession before the year is out. All this while they fiddle inside the beltway…we are told that we are seeing the destruction of America…we are…at the hands of those who claim to champion it.

Consider this: look what is happening in Greece now…riots as people protest austerity…we already saw Occupy Wall Street and TB doesn’t believe it is dead…it will be back but the only hope is that there is a real leader out there…can you name one? Sadly, TB can’t…other than Volcker who is too old to lead. He did it once and saved us from ourselves and he could do it again…isn’t there someone out there?

Have a great day!




  1. Yarnman said

    TB–It was interesting that, in the same interview, Hunt overlooked Ronald Reagan’s rescue of Continental Illinois, which, like Chrysler (which he did mention), set the pattern for public funds protecting bad management in very large industrial and financial companies.–Yarnman

    • traderbill said

      Yes, I have frequently referred to this as the beginning of Too Big to Fail, and created eight big banks which was further compounded by erasing Glass-Steagall!
      Note Reagan did this over the objection and warning from Don Regan, much as John Reed is trying to do now. You have to listen to Moyer’s interview! Did you mean Reed when you said Hunt? TB

  2. Yarnman said

    TB-Nope, I meant Hunt. I believe that many GOP types overlook Ronald Reagan’s complicty in Continental Illinois, just as many Dems overlook Clinton’s and Rubin’s roles in repealing Glass-Steagall. As a practical matter, it may have become too difficult, not to mention too dangerous, to break up the big banks. Senator Dorgan had two amendments that didn’t pass, nevertheless, that should be reconsidered. I quote from his remarks with Moyer: “I tried to pass some legislation in Dodd-Frank that says if you are too big to fail, you’re too damn big, and you should be broken up. I tried to pass legislation to say it shall be illegal to have naked credit default swaps. You’ve got to have an insurable interest.” Dorgan was the Cassandra who argued against repealing Glass-Steagall. He’s one of the heroes in my book.–Yarnman

    • traderbill said

      Had Reagan taken Don Regan’s advice there would be no ‘too big to fail.’ By bailing out Continental, deposits at the top eight banks soared as they were considered riskless globally (Continental was number 8 at that time). Furthermore, at that time there were few off balance sheet liabilities at the big banks. My how they grew and how lax the regulators…especially the Fed became…not only in examinations but in required capital. Listen to Bill Moyers interview with John Reed on billmoyers.com and learn the true story of how Glass-Steagall was blown to bits. It is shocking, and yes, Dorgan was the only one who voiced warnings while those who should have set up safety requirements failed miserably.

      William Donaldson, then SEC Chairman, tried to set up random audits of the big banks, but his successor Chris Cox (arguably the worst SEC chairman of all time) did not order even one audit of a major bank. The system is broke.

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