Tuesday, October 18, 2011

Morning Update/ Market Thread 10/18 - Winds of Change Edition…

Good Morning,

Equity futures are slightly lower this morning with the dollar higher, bonds higher, oil higher, gold & silver lower, and food commodities lower.

The slide in the futures began right after the bell yesterday on IBM’s Q3 report which came up short on revenues. There are a couple of clear trends I’m noticing with the reports, one is that “earnings” are coming up usually close to expectations, but revenues are not. How’s that possible? In comes the second trend, and that is one of more accounting tricks – banks in particular are playing so many games it’s hard to track, a new one this quarter seems to be that when a bank’s CDS is under pressure in a negative way (higher interest rates for them) that said bank (JPMorgan in particular) is then able to magically turn that pressure into an accounting gain!? It represented nearly 30% of JPM’s “earnings.”

This morning we then learn that Bank of America (BAC) is joining into the shell game that Citi and JPM are already playing by ILLEGALLY moving “bad assets” into a shell company. This game is illegal, it is FRAUD, it always has been until just recently when the government has given their approval to do so because, you know, they don’t want their biggest financial supporters to go under – that would be “bad” for the economy (good for the economy in my book):
Bank of America Said to Split Regulators Over Shifting Merrill Derivatives

Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation.

The Federal Reserve and Federal Deposit Insurance Corp. disagree over the transfers, which are being requested by counterparties, said the people, who asked to remain anonymous because they weren’t authorized to speak publicly. The Fed has signaled that it favors moving the derivatives to give relief to the bank holding company, while the FDIC, which would have to pay off depositors in the event of a bank failure, is objecting, said the people. The bank doesn’t believe regulatory approval is needed, said people with knowledge of its position.

Three years after taxpayers rescued some of the biggest U.S. lenders, regulators are grappling with how to protect FDIC- insured bank accounts from risks generated by investment-banking operations. Bank of America, which got a $45 billion bailout during the financial crisis, had $1.04 trillion in deposits as of midyear, ranking it second among U.S. firms.

“The concern is that there is always an enormous temptation to dump the losers on the insured institution,” said William Black, professor of economics and law at the University of Missouri-Kansas City and a former bank regulator. “We should have fairly tight restrictions on that.”

What the banks are doing is dumping bad assets not only into shell corporations but they are dumping them into the biggest shell dumping grounds of them all, Freddie and Fannie. The banks are making bad loans with money from nothing, then moving the garbage off their books to appear healthy themselves, while putting the taxpayer on the hook for their mistakes – but we already know that, don’t we?

What many are overlooking is that the banks, meanwhile, have stuffed their coffers full of “Excess Reserves,” to the tune of $1.6 Trillion!

In September, 2008, Hank Paulson, former Goldman Sachs CEO and then Treasurer turned chief criminal of the United States, wanted and then got the “Fed” to begin paying the banks for any “excess” reserves they hold! Where does the money to pay them come from? Why YOU, of course. And just look at “excess reserves” today.

Now let’s get a few things straight about this $1.6 trillion that is just sitting there with you paying the banks interest… The banks have never had any (to mention) real reserves – they have generated so much debt that they have saturated the planet. Because they were so successful at saturating the planet, they have destroyed their own lending model – there are now so few qualified borrows because of saturation that they have a difficult time just taking in deposits and then lending at a profit. Besides, why pay depositors their pittance .25% when they can make money from nothing to lend anyway and then offload their horror show onto Freddie and Fannie and now their other shell corporations?

Talk about broken, the money system and the rule-of-law in the United States are so far gone it’s not even funny. What’s more, just turn on the television and you will see “analysts” proclaim that there’s never been a better time to own bank stocks, “They’re cheap!” Only problem is that they are nothing but giant leverage and fraud baskets that the winds of change are about to sweep clean.

Of course I tell it like it is, if you want to hear the PC version, Meredith Whitney is smoother:

Many people worry about that $1.6 trillion in “excess reserves.” They worry that it’s going to come flooding into the economy at some point and cause hyperinflation. Well, let’s examine what a bank really can do with all that money – they can’t lend it because they saturated everyone with debt already and the populace can’t service still more debt. Hmmm, that’s a problem. But what they could do is use it to buy up cheap assets and strip the poor saps of America of the rest of their belongings… hmmm. But if they did that then they may not be properly capitalized, so what’s a poor, poor bank to do?

If I had my way, I’d force out the leverage and bad debts during a special bankruptcy procedure, and I’d use a big portion of that money to buy back U.S. treasuries or Fannie, Freddie debts – of course that won’t even scratch the surface, but the purveyors of fraud should not be allowed off the hook that they created, and when the winds of change sweep them from power, they should not be allowed to abscond with their loot, certainly they should not be paid off – that is a part of restoring the natural rule-of-law.

This morning the PPI came in hotter than expected, remember that the PPI leads the CPI, both are dramatically understated, and right now the PPI year over year is running at 7.0%! Heck 2% will destroy a money system and nation in short order, what’s happening now is just criminal:
Headline inflation in September surged at the producer level while the core rate nudged up. Producer prices jumped 0.8 percent in September, following no change in August. The September number was much higher than analysts' projection forecast for a 0.3 percent boost. Turning to major components, energy rebounded 2.3 percent after falling 1.0 percent in August. Gasoline gained 4.2 percent, following a 1.0 percent decrease the prior month. Food costs slowed to a still warm 0.6 percent rise after surging 1.1 percent in August.

At the core level, PPI inflation posted a 0.2 percent rise, compared to a 0.1 percent increase in August. The median market forecast called for an increase of 0.1 percent. In September, one-third of the advance can be traced to prices for light motor trucks, which rose 0.6 percent.

For the overall PPI, the year-ago pace in September came in at 7.0 percent, compared to 6.5 percent in August (seasonally adjusted). The core rate in September held steady at 2.5 percent. On a not seasonally adjusted basis for September, the year-ago headline PPI was up 6.9 percent while the core was up 2.5 percent.

On the news, equity futures edged down. Treasury yields were little changed with traders still focusing on less robust GDP growth in China. The latest PPI data indicate that underlying inflation is not yet easing as soon as the Fed had hoped despite recent softness in commodities prices. This likely will heighten the internal Fed debate over the costs and benefits of additional easing.

Just as a reminder, here’s what’s happening to base money, and gee, look at the coincidence with “excess reserves!”

But wait! There’s more!

Now let’s look at the effects of that wonderful “fed” tinkering on the unemployed, think that’s a coincidence?

Isn’t it great having a few private individuals control the production of your money? You know they pay you with a certificate of DEBT? And that the money you earn they make you pay them interest on it? LOL, are we gullible or what? Can I offer you gold as money? LOL, of course they control the majority of the gold too, and control is the key word as they use it to control you with it too (this is Ron Paul’s Achilles).

As far as the “markets” go, they are nothing but a rigged and manipulated casino arm of the private banks. Again I encourage people not to feed the animals, move your money into a local bank or credit union and stop playing in their casino.

Last night I helped a small group of people form up their town’s version of “Occupy.” It is nice to see average and conservative people begin to get it. I can tell you that a few years ago when I was giving seminars on this subject almost no one had any knowledge and they certainly didn’t get it or want to hear it. Last night, I’m pleased to report, they all were knowledgeable and they all got it.

I think there is a seismic shift underway – people where living a false storyline, when that storyline began to crumble they didn’t know how to react, they were in shock and they certainly didn’t accept that the world they believed in wasn’t real.

But now they know that storyline was a fantasy, a lie, and now they want and are going to create the winds of change necessary to sweep the fraud clean – that means that there is a power and control shift of huge proportions in progress. The majority don’t realize it yet, but the power they desire will be obtained when they restore the power of money creation to where it rightly belongs – the people.