Wholesale Food Price Jumped Most in 26 Years, But No, There Is No Inflation!

Wholesale food price jumped 2.4% in March, the biggest jump in 26 years, due to 49% rise in vegetables. But don't worry, we don't have inflation, we are told. Excluding the "volatile" food and energy cost, the wholesale inflation (Producer Price Index, or PPI) in March was mere 0.7%.

Wholesale prices rise in March as food costs jump
(4/22/2010 AP via Yahoo Finance)

"WASHINGTON (AP) -- Wholesale prices rose more than expected last month as food prices surged by the most in 26 years. But excluding food and energy, prices were nearly flat.

"The Labor Department said the Producer Price Index rose by 0.7 percent in March, compared to analysts' forecasts of a 0.4 percent rise. A rise in gas prices also helped push up the index.

"Still, there was little sign of budding inflation in the report. Excluding volatile food and energy costs, wholesale prices rose by 0.1 percent, matching analysts' expectations.

"Food prices jumped by 2.4 percent in March, the most since January 1984. Vegetable prices soared by more than 49 percent, the most in 15 years. A cold snap wiped out much of Florida's tomato and other vegetable crops at the beginning of this year.

"Gasoline prices rose 2.1 percent, the department said, the fifth rise in six months.

"In the past year, wholesale prices are up 6 percent, with much of that increase driven by higher oil and other commodity prices. But the core index, which excludes food and energy, rose only 0.9 percent." [The article continues.]

Well, for struggling families in the US, all that they purchase with their money may be food and gas. It's very small comfort to be told that we don't have inflation if food and energy are excluded from the calculation.

In the meantime, the president of the US of A is busy hyping Value Added Tax for his ever-increasing programs and initiatives so that we can forever stagnate like Europe, and the increasingly bold (to the point of being obnoxious) government union workers demanding that the income tax be raised so that they can keep their jobs with generous benefits.

And the tax-paying public will simply roll over and surrender to their demands. Or will they?

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Obama Slams Wall Street, but What About His Own Government?

He has the audacity to criticize and vilify Wall Street, while his government continues to issue a tremendous amount of debt securities that get dumped on the entire world, further burdening the US taxpayers whom he claims he is helping.

I was just incensed to read this article ("Obama slams Wall Street ways while asking for support", 4/22/2010 AP via Yahoo Finance). Instead of counter-argument (the article has raised my blood pressure too much), I will reproduce my blog entry. To me, this is far more obscene than Wall Street supposedly bilking billions from investors. This guy (and his government) is bilking $500 to $700 billion every single month (or literally creating that money out of thin air, if you prefer), while still blaming his predecessor. Next week is another "selling a boatload of notes and bonds" week, which happens twice a month.

The US government issues debts for its ever-increasing new spendings, whether it's a new offensive in Afghanistan or new bureaucracy at some agencies and departments , and to retire old debts. Instead of paying the creditors back, it issues them the new debts. To the tune of hundreds of billions of dollars every month. It is a ponzi scheme, but since it's the government doing it, no one is behind bars.

So here's the entry on Treasury Auction Watch. Total amount for the week, including short-term bills, will probably exceed $200 billion, as the current total does not include 4-week bill and possibly another CMB for the Federal Reserve.

CMB stands for cash management bill, and SOMA stands for System Open Market Account at the Federal Reserve New York. SFP stands for Supplementary Financing Program created in September 17, 2008 (the day ) to give money to the Federal Reserve to do whatever the Fed thinks necessary to support whatever market (we don't know how they have spent their money):

The US Treasury Department will auction the following Treasury securities for the week of April 26, 2010.

Monday April 26, 2010

• 13-week bill: $24 billion (drop of $1 billion from this week)
• 26-week bill: $25 billion (same as this week)
• 5-year TIPS: $11 billion (issued once a year, with reopening in 6 months)
  

Tuesday April 27, 2010

• 4-week bill: TBD ($18 billion this week)
  
• 2-year note: $44 billion (same as last month)
  

Wednesday April 28, 2010

• 56-day CMB*: not scheduled yet (under SFP* to be used solely by the Federal Reserve; if there's an auction for this security, it will be the 10th straight week of issuing CMB under SFP)
• 5-year note: $42 billion (same as last month)
  

Thursday April 29, 2010

• 7-year note: $32 billion (same as last month)
  

Total for the week: $178 billion

• Bills: $ 49 billion (excluding 4-week bill, CMB)
  
• Notes and bonds: $129 billion
  

Total for April 2010 so far: $434 billion

• Bills: $360 billion
• Notes and bonds: $74 billion

Additional Purchase by SOMA for April 2010 so far: $21.432 billion

• Bills: $16.01 billion
• Notes and bonds: $5.422 billion

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This Sinking Feeling of Falling, Failing, Things Getting Out of Control

I have this slight but very distinct feeling that things are getting out of control again in slow motion.

The last time I felt that way was in February 2009 when the then-newly-elected president of the US was threatening "catastrophe" if we didn't support his stimulus bill; before that, in September / October 2008. I don't think I need to remind the readers what happened in that month, but here's a refresher just in case (it's the last of 4-part series).

Greedy (and money-starved) government officials around the world are welcoming the new IMF proposal for the "FAT" - that is, Financial Activity Tax, on top of the tax that they want to slap on financial institutions (defined very broadly).

British Prime Minister Gordon Brown, who sold UK's gold reserve at a decade low as Chancellor of Exchequer against opposition from Bank of England (to the Rothchilds, as rumor goes), says he was shocked by the "moral bankruptcy" of Goldman Sachs. (Really. I didn't know a politician like him could be shocked by anything immoral.)

In the US, a former President says that to be against the government policies and actions is an act of sedition. (He said that on April 19, the anniversary of Oklahoma City bombing and the fiery end to the siege of Branch Davidians in Waco, Texas.)

EPA is having a contest to choose the best video commercial that promotes the idea that more government regulations is good for us. They call it "environmental justice".

Where does this almost blind faith in the government come from, of all place in America? (Why did the colonists bother fighting the Brits and German mercenaries for independence?)

SEC sues the largest corporate donor to Obama's presidential campaign on an Op-Ex day, wrecking havoc in the stock market. (And here I naively thought the agency is supposed to regulate the financial markets so that things move in an orderly manner.)

The Treasury Department keeps on selling (well, it has no choice, really) short-term bills and longer-term notes and bonds from Monday to Thursday, every single week. Since the beginning of this year, there has been a noticeable drop in Indirect Bidders (that include foreign central banks) and a corresponding increase in Direct Bidders (no one knows exactly who they are, because the Treasury Dept doesn't tell you), leading many to speculate it is a backdoor monetizing operation by the Federal Reserve.

Speaking of the Federal Reserve, the Treasury has been raising $25 billion for the Federal Reserve every single week since February. This week will mark the 9th consecutive week. I haven't figured out yet where this money has been going. If and when I do, I will let you know.

The health care insurance "reform", aka ObamaCare, has been passed and signed into law against the majority of Americans who still believes it is a bad idea. But more bad ideas are in the pipeline:

-- The financial "reform" bill that will create $50 billion slush fund managed by (hold your breath) FDIC to perpetually bail out financial institutions, and will put the Federal Reserve in charge of "protecting" consumers (such a cynical joke);

-- The cap and trade bill to supposedly combat "global warming" whether it is happening or not, which will burden the American families with added tax of $2000 per year (and probably way more).

A California Congresswoman wants the federal government to make "whole" the investments in complex structured financial products (i.e. derivatives) by the municipal governments in her district. So the US taxpayers get to pay for the stupid investment decisions made by city, county, state bureaucrats.

An EU Commissioner declares vacationing is a human right, and wants EU taxpayers to subsidize vacations for low-income people.

The president of the US taunts people who don't agree with him, and tell them they should be thankful of the many tax cuts he created. (What tax cut?)

A volcano in Iceland erupts, and the entire Europe reacts as if it is another swine flu pandemic. Oh we are so scared. And as expected, someone has to ask if it was caused by "global warming". (It is a revenge of Icelanders against Brits and Dutch.)

The US Congress wants to prohibit banks from dealing with financial derivatives. Who would be put in charge to determine the so-called risk? Some sort of government council? Or the Federal Reserve, whose chairman is on record saying he didn't see any of it (financial crisis of the past 2 years, that is) coming. Now that would surely solve the problem, wouldn't it?

Paul Volcker mentioned it recently, and now his boss openly promotes it: VAT. And since his need for money is so gargantuan and ever growing (see how much Treasury is raising every single week on my other blog) I doubt that there would be much of an offsetting decrease in income tax. The deficit has never been reduced by increased tax. What do politicians do when they have more money from more tax? They spend it, and find more ways to spend more. Duh.

Pentagon (not Israel) is mulling the military option against Iran.

The world cannot survive such insanity very long. I don't think I can, either.

How about you?

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SEC May Not Have A Case Against GS?

CNBC reports that Paolo Pellegrini, John Paulson's associate, testified to the government that he informed ACA Management (the one who assembled the Abacus CDO in question) that his firm would be shorting (betting against) it.

Testimony Could Undercut SEC Charge Against Goldman
(4/21/2010 CNBC)

"The government has testimony from a Paulson & Co. official that could contradict its own claims against Goldman Sachs, CNBC has learned.

"Paolo Pellegrini told the government that he informed ACA Management that Paulson intended to bet against, or short, a portfolio of mortgages ACA was assembling.

"If true, the testimony would go directly against government claims that ACA did not know Paulson was hoping the collateralized debt obligations would fail, and subvert charges that Goldman breached its duty by not informing ACA of Paulson's position.

"CNBC has examined documents in which a government official asked Pellegrini whether he informed ACA CDO manager Laura Schwartz about Paulson's position in the portfolio, named Abacus 2007-AC1.

""Did you tell her that you were interested in taking a short position in Abacus?" a government official asked Pellegrini, referring to the name of the CDO portfolio.

""Yes, that was the purpose of the meeting," Pellegrini responded." [The article continues.]

CNBC, a financial news network, is unabashedly pro-Wall Street, particularly Goldman Sachs. But if Pelligrini did tell ACA of his firm's intent, and the government didn't even mention that in the complaint, the SEC's case does look weak.

CNBC's Steve Liesman in the accompanying video to the article says Pellegrini told the government that he shared with ACA the outline of how his firm picked the underlying mortgage securities - with low FICO scores and high loan-to-value ratios.

If ACA (who assembled the CDO), the rating agencies (who slapped AAA-rating), and the investors (British and German, by the way) thought the CDO with that kind of profile was a good investment, they have zero sympathy from me.

I suppose the SEC could still say that Goldman Sachs didn't tell the investors that someone was taking the short side, even if Paulson's firm did tell ACA who assembled the CDO.

What I find much more troubling and what's hardly reported so far is the way CDS (credit default swaps) on debt securities are priced and indexed. But that will be another post.

So what is the point of the SEC's lawsuit against Goldman Sachs?

It has surely made this guy happy, among so many, that the justice is finally being done. Praised be the government.

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Amazon Fights for Customers' Privacy and Rights Against N. Carolina Taxmen

Amazon fights demand for customer records
(Declan McCullagh, 4/19/2010 CNET News)

"Amazon.com filed a lawsuit on Monday to fend off a sweeping demand from North Carolina's tax collectors: detailed records including names and addresses of customers and information about exactly what they purchased.

"The lawsuit says the demand violates the privacy and First Amendment rights of Amazon's customers. North Carolina's Department of Revenue had ordered the online retailer to provide full details on nearly 50 million purchases made by state residents between 2003 and 2010.

"Amazon is asking a federal judge in Seattle to rule that the demand is illegal, and left open the possibility of requesting a preliminary injunction against North Carolina's tax collectors.

""The best-case scenario for customers would be where the North Carolina Department of Revenue withdraws their demand because they recognize that it violates the privacy rights of North Carolina residents," Amazon spokesperson Mary Osako told CNET." [The article continues.]

Support Amazon, buy from them. Better yet, buy from Amazon through my blog!

By the way, Google has started to post the number of government requests worldwide for censorship and for turning over the personal information of Google's users, at www.google.com/governmentrequests.

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GOP Is Suspicious of SEC's Timing Against Goldman Sachs

Darrell Issa, the top Republican in the House Oversight Committee, wants to know how and why the SEC's civil charges against Goldman Sachs happened the way it happened.

GOP seeks SEC records on Goldman (Mike Allen, 4/20/2010 Politico)

"Rep. Darrell Issa, the top Republican on the House Oversight committee, is demanding a slew of documents from the Securities and Exchange Commission, asserting that the timing of civil charges against Goldman Sachs raises “serious questions about the commission’s independence and impartiality.”

"Issa’s letter, addressed to SEC Chairwoman Mary Schapiro and signed by eight other House Republicans, asks whether the commission had any contact about the case, prior to its public release, with White House aides, Democratic Party committee officials, or members of Congress or their staff.

"“[W]e are concerned that politics have unduly influenced the decision and timing of the commission’s controversial enforcement action against Goldman,” Issa writes.

"Issa implied that the timing was a bit too convenient, saying President Barack Obama’s push on Wall Street reform “neatly coincided with the commission’s announcement of the suit.”" [The article continues.]

How "coincidental" was it? The letter says the following:

--The Commission approved the Goldman suit in a vote that spit along party lines – a rare occurrence for approvals of enforcement litigation.

--Before the Commission had released its announcement, the New York Times published on its website a story describing the suit.

--Less than half an hour after the Times story’s publication, Organizing for America, the successor organization to Obama for America and now a project of the Democratic National Committee (“DNC”), sent millions of supporters an e-mail message from President Obama urging support for “Wall Street Reform.”

--Within hours, the Democratic National Committee had purchased AdWords advertising from Google, Inc. The DNC’s Google campaign fundraising advertisement, headed “Fight Wall Street Greed,” appeared whenever a user ran a Google search for the phrase “Goldman Sachs SEC.” It read, “Help Pres. Obama Reform Wall Street and Create Jobs. Families First!” and included a link to www.BarackObama.com, the website of Organizing for America.

--Democrats in Congress and the Administration have heralded the Commission’s suit against Goldman as a welcome boost to their case for the legislation.

--Members of the media have already begun to question the timing of the Commission’s suit and the actions of the Democratic National Committee.

Oh nothing but just coincidence, says the White House press secretary, who is reportedly very keen on becoming the lead political strategist for Obama.

The 2nd point above was what tanked the shares of Goldman Sachs and the whole stock market on an option expiration day (which tends to be volatile even without any news).

How the hell did these two New York Times reporters (this and this) get the SEC announcement before it was released?

The 3rd point is also interesting, as I remember seeing a message on a stock message board urging people to support President Obama in his financial reform bill to punish Wall Street. And the poster didn't even know what's in the bill.

Not that I am a fan of the Vampire Squid, aka Goldman Sachs, but a contrarian in me is suspicious when things are choreographed in-your-face manner like this in order to force you to think in a certain way and no other (which has been the case since the days of George W. Bush, and hasn't changed one iota - actually it has gotten worse). I have to say I'm more than annoyed as a trader because they pulled this stunt on an op-ex day.

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SEC Vote on Goldman Sachs Was 3-2

along partylines.

Two Democrats voted for suing Goldman, two Republicans against, and the chairman sided with Dems. On that news, Goldman Sachs' shares turned up, and ended the day in a positive territory taking the other financials and the general market with them.

For more, here's from Bloomberg.

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Financial "Reform" Bill Is Just Another Tax Bill

for the general public to help out big investors (including Goldman Sachs).

SEC announcing civil charges against Goldman Sachs on Op-Ex (option expiration) day which tanked the stocks across the board, as President Obama pushes for his financial reform bill.

The move was so in-your-face and transparent it is not very hard for pundits to come up with a headline like this:

Wall Street suspects Goldman charges 'not coincidental' to financial reform effort (4/16/2010 New York Post), or;

Goldman Sachs case could help Obama shift voter anger (4/18/2010 LA Times)

as Obama threatens another catastrophe unless his financial reform bill passes:

Obama: Fresh crisis without new financial rules (4/17/2010 AP via My Way News)

If you think you heard something like that before, you did. This president said it would be "catastrophe" if his $800-plus billion so-called stimulus bill didn't pass in February 2009. Well, the catastrophe continues on job creation front, which this bill was supposed to be about. It has added to already catastrophic public debt. (See the debt clock ticking on this blog, upper lefthand corner.)

"..."Opposing reform will leave taxpayers on the hook if a crisis like this ever happens again," the president said", according to the above AP article.

Ummm, Mr. President, have you read what Chris Dodd wrote in that bill? The so-called reform will keep taxpayers on the hook for permanent bailout, by creating the $50 billion fund to dismantle "too big to fail" firms in an orderly manner so that the creditors get their money back. Just like Goldman did on credit default swaps it purchased from AIG. And who will those creditors be? They are likely to be big banks, hedge funds, pension funds, private equity groups - i.e. big boys.

Means for orderly dissolution already exists, and it's called bankruptcy. But no, that won't do, because in bankruptcy the creditors will lose some money! Can't have that!

So, my personal take remains that this move by SEC against the biggest corporate donor to the Obama campaign (GS) is to promote the administration's push for their "financial reform" by creating a perfect boogieman (who will likely to benefit from the "reform") to deflect the public's attention, when in fact this financial reform bill is yet another scheme to defraud US taxpayers who will be forced to fund the perpetual bailout in one form or another. Part of it may be increased and/or new tax (or "fees" if they prefer), part of it will be indirect, such as added fees passed on by the financial institutions who will be required to pay for the bailout fund.

If you think the financial institutions as defined by the bill are banks only, you will be in for a surprise. The definition of financial institutions is so broad it could include manufacturing companies who extend credit to customers (auto companies, big IT infra companies come to mind; basically the same companies that were considered "financial" and were protected from short selling, back when the market was rapidly deteriorating in September 2008). It will be another added cost to those businesses. Do you think it will encourage more hiring?

Just like the stimulus bill that hasn't stimulated, various job bills (that secure jobs for public workers), the health insurance "reform" bill, this financial "reform" bill is basically a tax bill. Beneficiaries? Who do you guess will benefit from increased tax?

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Pentagon Is Mulling Military Option Against Iran

from Reuters AlertNet:

US strike could delay Iran nuclear program-Mullen
(4/18/2010 Reuters AlertNet)

"NEW YORK, April 18 (Reuters) - The nation's top military officer said on Sunday that a U.S. strike against Iran would go "a long way" to delaying its nuclear program but that he considered doing so his "last option" right now.

""Military options would go a long way to delaying it," Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, told reporters after speaking at a forum at Columbia University in New York.

""That's not my call. That's going to be the president's call," he added. "But from my perspective ... the last option is to strike right now." (Reporting by Adam Entous; Editing by Jackie Frank)"

Got oil? Got gold?

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Did Goldman Sachs Short Itself and Short the Market?

Rumors were circling today. If it did, that's chutzpah at its best (or worst, depending on your perspective). If GS the Vampire Squid is going down, everybody else is going down!

And they did, big time. Major US indices may have bounced back and ended with 1.6% loss at most (S&P500), but individual stocks in the indices went down much, much more, regardless of whether they are financial stocks or not.

Did Goldman Short Itself, Reuters Reports Goldman Was Told In Advance It Faced SEC Action (4/16/2010 Zero Hedge)

"Time for the SEC to take a look at what bets Goldman's prop desk, and material affiliates as well as hedge funds that are close to Goldman's flow traders, were taking on Goldman's stock over the past few days. If indeed Goldman shorted itself, bought SPY puts, bought octuple leveraged negative financial ETFs, or something else of the sort, on material non-public information, it would be time to shut the firm down." [Emphasis is original.]

And:

Talk From The Pits: Goldman Sold 1,000 Large S&Ps Earlier (4/16/2010 Zero Hedge)

"From the open outcry pits:

Goldman sold 1,000 big SP today over 1,200.00. Was it just a hedge because they
KNEW the SEC would do nail them to the cross? Is that insider trading? Who knows
how many tens of thousands they sold in the ES?

"We can hope the SEC still hasn't blocked Zero Hedge and is reading these very pertinent questions. "

For more on what the SEC's action on an Op-Ex cay did to the market, GS share price, and April option prices (someone made an immoral amount of money), take a look at my trading blog.

(And oh BTW, Mercury Retrograde starts on April 17 at Taurus, the bull.)

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Just In: SEC Charges Goldman with Fraud Over CDO

Just broke on CNBC apparently. (I heard it on a stock message board.)

SEC Charges Goldman Sachs With Fraud On Subprime Mortgages (4/16/2010 Business Insider)

"This just broke on CNBC, and the NYT has a huge story about this already....

"Goldman Sachs, which emerged relatively unscathed from the financial crisis, was accused of securities fraud in a civil suit filed Friday by the Securities and Exchange Commission, which claims the bank created and sold a mortgage investment that was secretly devised to fail.

"The move marks the first time that regulators have taken action against a Wall Street deal that helped investors capitalize on the collapse of the housing market. Goldman itself profited by betting against the very mortgage investments that it sold to its customers."

For more on Goldman Sachs (and others) structuring CDOs that they designed specifically to fail, read here, here, here.

And this is what the news did to the stock market the moment it broke:

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PIMCO's Bill Gross: Real Estate Could Beat Stocks, Bonds

PIMCO's Bill Gross says both residential and commercial real estate markets are reaching a bottom, and may be a better bet than stocks and bonds.

He is the one (I think) who started the "new normal" concept to describe the new, post-crisis economic and financial reality of low growth and low return. He was also the first one to call on the federal government to support mortgage-backed securities issued by Fannie Mae and Freddie Mac. The government did, to whom Mr. Gross sold his vast holdings that he had amassed. I believe he did the same with his Treasury securities holding.

(His monthly Investment Outlook on PIMCO's site is well worth reading, by the way. On this blog I have a link to PIMCO's market commentary page under "Market / Economic News, Analysis, Commentary" section - scroll down the left column.)

When he says something, I listen, as he always seems to be one step ahead of everyone else when it comes to investment.

Real Estate Could Beat Stocks, Bonds: Gross (4/15/2010 CNBC)

"Real estate is nearing a bottom and eventually could be a better bet for investors than stocks or bonds, Pimco's Bill Gross told CNBC.

"Both commercial and residential real estate are reaching a bottoming point and possibly even prepared to turn higher, said Gross, CIO of Pacific Investment Management Co., or PIMCO, the world's largest bond fund.

"With stocks likely to return 5 to 6 percent and bonds 3 to 4 percent, he said, investors would be wise to start looking at real estate opportunities.

""Ultimately the riskier assets will be the less the risky assets," he said. "I wouldn't suggest moving into those particular sectors at the moment but ultimately risk and reward go together."

"Lower debt and better lending rates will make real estate attractive, he added." [The article continues.]

However, when he says publicly that the real estate market is poised for better return, he has probably invested in real estate at a very attractive price and he is quite ready to sell it to you.

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UK Telegraph: Japan Mulls Monetization of Debt, Yen Devaluation

The true believer of Keynesianism sallies forth to where no other developed country has gone before. (Not after the World War II, that is.)

UK Telegraph's Ambrose Evans-Pritchard reports that the Democratic Party of Japan (DPJ) has drafted a bill that will require the Bank of Japan to monetize the government debt, set the "inflation target" at 2%, and devalue Japanese yen by 30%. And they call it a radical thinking.

Japan mulls monetisation of public debt and yen devaluation
(Ambrose Evans-Pritchard, 4/14/2010 Telegraph)

"A draft by 130 lawmakers from premier Yukio Hatoyama’s Democratic Party of Japan said the country needs a radical shift towards growth policies, calling for an inflation target above 2pc. The exchange rate should be steered to ¥120 against the dollar, from the current ¥90.

"Shizuka Kamei, financial affairs minister [and former policeman], said the central bank must monetise government debt to support the market for state bonds and prevent deflation becoming deeply lodged in the economy.

"The Bank of Japan’s governor, Masaaki Shirakawa, told lawmakers that it would illegal [sic] to fund state spending by printing money. “History has proven that central banks directly buying government securities caused severe inflation and dealt a blow to the economy. The BoJ is now providing adequate funds,” he said." [The article continues.]

The BoJ governor is right. This is crazy.

Japan's industrial output is on the upswing, so is the housing market. Stronger economies in Asia are revaluing their currencies upward against the basket of major currencies (China, Singapore). And Japan wants to debase their currency to cause inflation.

As if inflation is the sign of strength. Japan may not have had a significant inflation in its lost two decades, but it hasn't really had a significant deflation either. Monetary base has been stable, and price of goods and services has been stable. However, since the government takes away more from its citizens - increased taxes, increased national health care insurance premiums that hit pensioners particularly hard, the average Japanese do not have a sense that they are enjoying extra purchasing power.

The so-called "structural reform" by the previous administration under Prime Minister Koizumi has all but destroyed the employment safety net. Japanese saving rate has plummeted from high teens to low single digits, not because of higher spending but because of lower income. Now the Hatoyama administration wants to further destroy the savings (or what's left of them) of the citizens by debauching the currency intentionally.

Ever patient and philosophical, the Japanese would probably say "Shoganai (nothing we can do about it)" and accept their lot.

I hope they are buying gold and silver while yen is still strong.

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Rasmussen Poll: Ron Paul 41% Obama 42% in 2012 Matchup

a virtual tie.

Election 2012: Barack Obama 42%, Ron Paul 41%
(4/14/2010 Rasmussen Reports)

"Pit maverick Republican Congressman Ron Paul against President Obama in a hypothetical 2012 election match-up, and the race is – virtually dead even.

"A new Rasmussen Reports national telephone survey of likely voters finds Obama with 42% support and Paul with 41% of the vote. Eleven percent (11%) prefer some other candidate, and six percent (6%) are undecided."

The Political Class is a totally different story. According to the poll, 58% of Main Street voters prefer Ron Paul, while 95% of the Political Class prefer Obama.

Not surprisingly, the Republicans seem to have mixed feelings about Ron Paul. The Republican Party establishment have been trying to marginalize and ridicule Ron Paul (and his ever-growing supporters) for a long time.

What's interesting though is this: Significant chunk of Republicans haven't decided what to think of him.

"Twenty-six percent (26%) of GOP voters think Paul shares the values of most Republican voters throughout the nation, but 25% disagree. Forty-nine percent (49%) are not sure.

"Similarly, 27% of Republicans see Paul as a divisive force in the party, while 30% view him as a new direction for the GOP. Forty-two percent (42%) aren’t sure."

The Republican Party leadership must be scared.

A 19-year-old college student whose political role model is Ron Paul has become the new mayor of a Wisconsin town, with a solid support from townfolks fed up with their city council not listening to them and wasting money on projects no one wants.

Maybe, just maybe, a change (a real one) is afoot.

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CDOs and Mel Brooks

Huffington Post's David Fiderer, who has written detailed, well-researched posts on the events that led to the September/October 2008 financial near-meltdown, tells us that CDOs that may have helped crash the housing market which in turn crashed the financial markets which then crashed the global economy has a lot in common with Mel Brooks' classic - "Springtime for Hitler", a play within a play.

What's the common thread here? Both were designed to fail. ("Springtime for Hitler" succeeded, much to the chagrin of the producers. So they had to bomb the theater.)

Do Business Schools See Why CDOs Are Compared to "Springtime for Hitler"? (David Fiderer, 4/12/2010 Huffington Post)

"The Magnetar Trade was taught in the best business schools long before This American Life likened it to "Springtime for Hitler."

"For those unfamiliar with the fraudulent scheme portrayed in Mel Brooks' classic movie and Broadway musical, The Producers, "Springtime for Hitler" was an enterprise specifically designed to fail. It was a play thought to be so insipidly tasteless that it would close on opening night, so the investors, who laid out cash far in excess of the play's actual production costs, would never question where all the money went.

"New reporting in ProPublica offers hard evidence that Magnetar, a hedge fund group based in Chicago, had designed a series of subprime mezzanine CDOs that were all but guaranteed to fail. Magnetar made a bundle by doubling down on bets that its own CDOs, and similar financial instruments, would fail. This idea was not unique to Magnetar. Hedge fund manager John Paulson pursued the exact same investment strategy. The Magnetar story was first reported in the Wall Street Journal back on January 14, 2008, one day before John Paulson put Alan Greenspan on his payroll." [The article continues.]

So what's the big deal? John Paulson did it. Goldman Sachs did it. Why can't they?

The big deal to me is that this story has had hardly any traction in the mainstream media. That these big-shot bankers and fund managers deliberately created financial vehicles that had no intrinsic value for the express purpose of letting them fail. Or worse, making it sure they fail so they could profit. In the process, they at least aggravated the collapse of the housing market if not downright triggered it.

Now, many of the same savvy fund managers have bought up distressed mortgage-backed securities on the cheap, the same securities that they helped tank in price. They are waiting, for now. You can bet they are not waiting for the turnaround of the housing market. They are waiting for the federal government to make them "whole".

The federal government is beyond broke at this point. (See the debt clock on the upper left corner of this blog.) Who's going to pay to make rich investors and fund managers "whole"? Taxpayers, including those distressed homeowners who will be losing their homes.

It's such a comedy, if you are not party to it. Outdoing even Mel Brooks.

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OT: Apple iSpecs?

I've been waiting for a decent pullback on AAPL (that's the stock symbol for Apple Inc., who launched its latest "i" - iPad) so that I can buy in. In the past, the stock usually had a significant pullback after the company actually started selling its much-hyped product. I was waiting for $225, but I have a feeling I may not see that price anytime soon. Just a hunch, and this:

iSpecs: Apple eyes up 3D future with projection glasses that will play films on the move (4/12/2010 Mail Online UK)

"Apple could soon be venturing into the world of 3D, after they filed a patent application for electronic spectacles that would show films on the move.

"The head-mounted gadget would have a slot for an Apple iPhone or iPod.

"A special 'smart' lens in the device, nicknamed iSpecs by gadget fans, would project the images from the screen so they could be viewed comfortably.

"The lens would be able to split the image into two different frames creating a 3D effect. This could be used to watch blockbusters such as Avatar and Alice in Wonderland.

"The application explained the form would allow the user to 'relax while viewing image based content on the head-mounted device because he does not have to hold onto the portable electronic device.'

"The gizmo would also be fitted with a camera to stream video from the outside world. Infrared sensors embedded in the frames would detect if anyone approached the wearer, and the real-time video would pop up on a screen inside the glasses." [The article continues.]

In other words, the wearer of this device would perceive the real world through the camera and sensors, not with his own eyes and senses. It is getting too creepy for a Luddite like myself (though Matrix remains my favorite movie...). Or I should say the future as described by Neal Stephenson is finally arriving.

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Paul Krugman Strikes Again

Speaking of inflation, New York Times columnist Paul Krugman is one of the pundits calling for more inflation as something good.

I simply don't have stamina this morning to pick apart his strange and simplistic (and often inaccurate) argument, so I will link two articles, one by Peter Schiff on his April 9 Op-Ed on the need for the government to inflate more, and another by Bill Anderson on today's Op-Ed on the need for the government to basically micromanage who gets what money (fresh off the government press) to achieve the noble goal of "protecting consumers".

Krugman Strikes Again (Peter Schiff, 4/12/2010 Euro Pacific Capital via Lewrockwell.com)

Regulate Inflation? I Don't Think So! (Bill Anderson, 4/12/2010 Krugman-in-Wonderland)

Taken together, the Nobel laureate columnist is strongly advocating more government-induced inflation which is good for the debtor government and destructive to citizens, and more government regulation which will further restrict the flow of capital, bloodline of a free market. I don't understand his blind faith in all things "government", the benevolent and omniscient dictator who knows what's good for you and me.

He is (or was, at least) also a staunch defender of Fannie and Freddie; "Fannie and Freddie can’t be allowed to fail", he opined back in July 2008.

I was totally at a loss when he once said people should buy cheap houses in middle-of-nowhere inland suburban sprawl, instead of buying houses in pricier neighborhood. To him, it was irrational that people wanted to live in nicer neighborhoods, paying more for the housing.

Russians must be really shaking their heads. (And Swedes, too.)

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We Need A Little Inflation, Media Pundits Say

I say we've had more than enough inflation over the past 100 years.

The Bureau of Labor Statistics (BLS) has a cute little java application called "CPI Inflation Calculator".

We've been assured by the Federal Reserve chairmen (both Alan and Ben) and by the government statisticians in the Bureau that price inflation in the US is very mild; that there's no reason to worry about runaway price inflation; that it is price deflation we should fear. Obliging MSM says what we need is a little inflation and it's a good thing for a debtor country like the US.

Students of Austrian economics say that price inflation is the inevitable result of monetary inflation. Under Chairman Bernanke, the Federal Reserve doubled the monetary base in the process of supporting the financial market. This elevated monetary base hasn't resulted in elevated money supply, as banks continue to hoard, not lend. Not yet, and not unless they are forced to.

So, all is well then?

Not really. Let's now use the BLS's nifty java app to see how much today's $1000 is worth in different years past...

$1000 in 2010 is worth:

• $989.83 in 2009 dollars;
• $901.08 in 2005 dollars;
• $794.50 in 2000 dollars;
• $703.14 in 1995 dollars;
• $603.02 in 1990 dollars;
• $380.18 in 1980 dollars;
• $186.86 in 1971 dollar, when Nixon unilaterally abolished dollar-gold convertibility (Nixon Shock);
• $45.68 in 1913 dollar, the year the Federal Reserve was born.

US dollar has lost over 95% of purchasing power in 100 years; the bulk of that loss has occurred after the Nixon Shock.

For more on different inflation rates and their impact on the purchasing power of the dollar, check out my post from last year.

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Max Keiser Interviewed by Helen Skopis of Athens International Radio

on April 9, 2010, on Greek debt crisis and IMF.

Max Keiser is basically saying that the Greek sovereign debt crisis and the Euro currency tumble that ensued was "manufactured" so that the European Central Bank would be discredited and Euro wouldn't dethrone US dollar as world reserve currency. By who? The Federal Reserve, Wall Street banks, UK banks and Bank of England.

Keiser calls it "financial terrorism". He's urging Greek people to stand up and take back their sovereignty. [That would mean pulling out of the European Union.]

Commenting on Greece's upcoming short-term debt auction, he says the outcome of the auction has nothing to do with the market force. It has to do with whether the Greek government "gives up" and cedes control to IMF. If it does, the auction will go well, according to Keiser. It is 100% political, he says. Political operatives using market to impose economic and political dictatorship.

People should not be paying for bankers' mistakes, but people have been made to, all over the world. Thus the No-Pay Movement he mentions in the interview, which is from Matt Taibbi's article.

(Long time ago I wrote a term paper in Development Economics class in my B-school discussing IMF's role in developing countries. In it, I said IMF was a distortion and should be abolished. I got C.)

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East Coast Wants To Kill Silicon Valley Entrepreneurism

As always. This time, they will attempt with "Friend of Angelo" Chris Dodd's 1,300-page financial so-called "reform" bill, which already passed the Senate Banking Committee and now is being pushed through the Senate with hardly anyone paying attention as the stock market continues its melt-up. Financial firms' stocks are leading the way.

Among many other things to hate in the Dodd bill, the bill will require startups to register with the SEC before it attempts to raise funds, and wait for 4 months while the SEC review the application. Investors, who wants to fund these startups, will have to have more than $2.3 million net worth, or more than $450,000 annual income.

In startups, 4 months is an eternity these days.

If you have some brilliant idea and want to run with it, you can't, if the bill becomes the law. You have to apply to an agency under the jurisdiction of the US federal government - an agency who turned a blind eye to Madoff's ponzi, who is yet to do anything about high-frequency trading (or fleecing the investors) by the large Wall Street banks and hedge funds not to mention naked short selling, leveraged financial derivatives, etc.

If you want to invest in someone else's brilliant idea but your net worth is less than $2.3 million, you can't.

It looks like yet another form of restriction of capital flow, which is vital for a free market to function. The federal government wants to control that flow as it sees appropriate, which, in my wild guess, differs radically from what entrepreneurs and investors have in mind.

And yet another way to kill the goose that lays golden eggs.

For more, check out this article: Dodd's Financial Reform Bill Makes the Angels Cry (4/1/2010 Reason.com)

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