Mizuho President Busted For Giving Loans To Yakuza, Apologizes

While the biggest problem facing US bands is lack of demand (and supply, since it is far more profitable for banks to “invest” reserves in risk assets using excess deposits as initial margin) for loans, Japan doesn’t have such a problem. At least not, when the loans are made to “gangsters” such as the Yakuza. AFP reports that executives at Mizuho Financial Group, one of Japan’s largest banks, knew the firm was doing business with gangsters but failed to stop it, a panel said Monday, as Japan’s finance minister slammed the banking giant over the affair.

The bank has been in the public spotlight since it emerged last month that it processed hundreds of loans worth about $2 million for the country’s notorious Yakuza crime syndicates. And while in the US the punishment for banks caught in criminal behavior is a simple slap on the wrist and a settlement paid using TARP money, in Japan bank CEO still have some semblance of honor. Bloomberg adds that in the aftermath of the revelations, Mizuho’s president Yasuhiro Sato will give up six months of pay ahead of more penalties, and will resign his Chairmanship at Mizuho Bank while keeping the post at the parent company. Some 52 other current executives will also be penalized.

More:

Sato bowed in apology at a news briefing in Tokyo, hours after submitting a report to the Financial Services Agency outlining measures such as database sharing and the addition of an outside director to prevent further transactions with yakuza crime syndicates. Lawyers commissioned by Mizuho to investigate the loans earlier said the bank’s shortcomings stemmed from lax internal controls rather than attempts to mislead regulators.

 

“Mizuho’s internal punishment won’t be negative for the share price as Sato remains president,” said Takehito Yamanaka, an analyst at Credit Suisse Group AG in Tokyo. “We still need to pay careful attention to whether the FSA will hand down any additional severe punishment.”

 

Sato, 61, who has driven measures designed to improve management at Mizuho since taking the post in June 2011, said he didn’t consider stepping down even while acknowledging the incident dented his authority.

 

“Mizuho’s top management including myself deeply regret this issue,” he said. “My leadership was severely hurt, but I don’t think it’s impossible to recover.”

 

The lender failed to act on 200 million yen ($2 million) in about 230 transactions with members of crime groups through its Orient Corp. (8585) affiliate, the agency said on Sept. 27. There may have been about 460 transactions initially, Sato said yesterday, without giving a yen amount.

And so on.

While it is a given that banks will continue to engage inwhatever activities provide them with marginal revenue, criminal or otherwise, perhaps the most jarring news in the above story is that the once proud Japanese Yakuza was forced to seek a paltry $2 million in 230 transactions, or about $10k per loan. If there is any better indication of just how bad the Japanese economy is, than the local mob being forced to seek bank loans, we have yet to hear it.

Finally, Japanese banks handing over loans to the mob is hardly as bad as the US, where considering the government has contemplated launching RICO cases against not just one or two US banks, the banks are the mob.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/XRMnAoJRJTc/story01.htm Tyler Durden

Financial Markets: Negating the Laws of Gravity

Usually what goes up normally ends up coming back down to Earth with a damn great thud. Well, that was long ago with good old Isaac Newton and the apple story. Apple might well be part of the story these days as an example of things that are going up but that have ascended so high for the moment that they have almost vanished from sight. But, there is simply no reason to defy the laws of Newton on Gravity. Negating the laws of gravity in such a way as to turn Newton on his own head is exactly what the stock market is doing right now. Antigravity might not exist in the real world but there is a theory that is refuted by the Gravity Establishment as to the means of blocking gravity effects on bodies. Have the stock markets and the financial wizards just put that into practice and is there some way of explaining why the stock market has increased yet again with no apparent reason?

When there’s good news these days the financial markets increase. When there’s bad news it just does the same. The laws of cause and effect, the theories of rising and falling? They don’t hold anymore, apparently. You can change the text-book baloney and learn how things really work today. Increase in the markets happen whatever you do.


DJIA and Market Reaction?

  • Yet again the Dow Jones Industrial Average increased on Friday 25th Octoberclosing up (with an increase of 0.4%).
  • That’s the 11th time in a row out of the last 13 trading days.
  • It seems like this is becoming the norm.
  • The DJIA had already increased 11 times in a row out of 12 trading sessions inSeptember 2013.
  • Is this a taste of things to come?
  • All of that in October has been right in the midst of the US federal-government shutdown fiasco and the dire figures that have just been released on unemployment in the country.
  • The official figure for unemployment in the USA has dropped to 7.2% (with a reduction in unemployment of 148, 000), but that’s only because there are people that are so discouraged from actually seeking employment that they have been dropped from the figures.
  • Real unemployment is double that figure today, but governments will never talk about real unemployment figures.
  • It wouldn’t do to sap the moral of the people would it too much; better to stuff the growing unemployed numbers behind some other less-important problem like what a neutered male Portuguese-Water dog might be up to in the gardens of some house along Pennsylvania Avenue.
  • Jobs haven’t been created any more than the Federal Reserve’s efforts on Quantitative Easing have done anything to improve the stability of the US economy.
  • The agreement between the Republicans and the Democrats is only temporary and will by January 2014 end up on the political and economic agenda once again.

The financial markets are therefore increasing with no real apparent reason to do so. Where’s the justification and are they defying the laws that have been established for decades now? Once upon a time bad news in politics and economic turmoil meant a crash. Now, it seems as if whatever happens, the stock prices just rise and carry on rising.The financial markets are disconnected from the reality of the economy and on a drip feed direct-line into the Federal Reserve these days. It won’t take too much analysis to see that it’s when the financial markets become isolated from reality. The financial markets are suffering from a depersonalization disorder and that spells trouble: Bubble Trouble!

How wrong could the Federal Reserve have been pumping $85 billion a month into the economy (or rather giving it to the banks to play on the stock markets with and then strike it rich)? How on earth was it possible to imagine that if you give someone such a sum that they will hand some of it out to the people down below? Ben Bernanke threatened in veiled false promises to throw us the money from his helicopter. We never even saw it before it got carried away in thebanksters’ wind. It was just a lot of hot air, wasn’t it?

The market is supposed to reflect the buyers demand for a share and the availability of that stock on the market. But, the prices are too high and way above what they should be simply because the economy is not sustaining the increases in prices of shares today. The growth of the economy is so slow; it’s almost non-existent. How is it possible for a share price to be maintained if the economy is not increasing too?

  • Apple’s shares are valued at 13 times more than the profits that are generated by the company’s annual earnings per share today.
  • Google is valued at 28.4 times its earnings.
  • Facebook is way ahead and stands at 229 times its share earnings.
  • That’s a price-earnings ratio that is out of control today and they are just a few of the examples.

The US financial markets are surfing on a wave; but usually waves end up breaking and they come crashing down too. The smile will be wiped off the face of the financiers. The only question is when exactly that will end up happening. It would certainly be worth our while to cash in now and take the winnings and to certainly go elsewhere rather than invest in the Federal Reserve’s self-created bubble. It can only spell trouble, with or without Bernanke’s help.

Defying or negating the laws of gravity is impossible. You might be able to create a shield to block it and it might just be that sort of thing that has happened with the QE-injections of unconventional monetary policies. Bring on the loose money…forever! May the increases commence (yet again) on the stock markets!

hould we get rid of the rating agencies? Rate them yourself!

Originally posted: Financial Markets: Negating the Laws of Gravity

 

You might also enjoy:Blatant Housing-Bubble: Stating the Obvious | Let’s Downgrade S&P, Moody’s and Fitch For Once | US Still Living on Borrowed Time | (In)Direct Slavery: We’re All Guilty | The Nobel Prize: Do We Have to Agree? | Revolution Costs | Petrol Increase because Traders Can’t Read | Darfur: The Land of Gold(s) | Obamacare: I’ve Started So I’ll Finish | USA: Uncle Sam is Dead | Where Washington Should Go for Money: Havens | Sugar Rush is on | Human Capital: Switzerland or Yemen? | Crisis is Literal Kiss of Death | Qatar’s Slave Trade Death Toll | Lew’s Illusions | Wal-Mart: Unpatriotic or Lying Through Their Teeth? Food: Walking the Breadline | Obama NOT Worst President in reply to Obama: Worst President in US History? | Obama’s Corporate Grand Bargain Death of the Dollar | Joseph Stiglitz was Right: Suicide | China Injects Cash in Bid to Improve Liquidity

Technical Analysis: Bear Expanding Triangle | Bull Expanding Triangle | Bull Falling Wedge Bear Rising Wedge High & Tight Flag


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/7UW0gxC1XhY/story01.htm Pivotfarm

Would You Buy This Business?

 

I have a business I would like to sell you.

 

Let’s run over the numbers first.

 

First and foremost, I have to be honest, this business has not implemented a budget in five years. I know that seems like an insane way to run a business, but I can assure you that management is comprised of highly intelligent, ethical people.

 

These folks would never take advantage of shareholders. They’re all highly educated. And their corporate presentations and conference calls are extremely well written. Trust me, they know what they’re doing.

 

Having said that I also need to disclose that this business hasn’t been growing much at all. Indeed, it hasn’t even maintained annual growth of 3% in the last five years. On top of this, management has been caught fudging the company’s financials by several outside auditors. An honest assessment of its topline shows zero growth for the last few years.

 

I know I mentioned before that management are highly ethical. I can assure you they have a good reason to overstate their growth numbers: if the numbers reflected reality, they’d all be fired! We can’t have that can we? So they just “massage” things a bit to make the company’s growth look better than it is and to downplay the rise in costs that are squeezing its margins.

 

Speaking of which, this company isn’t profitable. In fact, it hasn’t been profitable for five years… actually it has only been profitable a few years out of the last five decades. And those years were “profitable” based on some really massaged numbers.

 

I know this sounds strange, but those honest folks in management think the best means for this company to grow is to spend way more than the company makes in its topline revenues. Sounds weird, I know. But again, these are very intelligent and ethical people. And none of the analysts covering the company ever ask about this. So what’s the problem?

 

Oh, and I almost forgot, the company has debt. A lot of it. Currently its debt is running north of 100% of its total market cap. Of course, this is based on some unusual accounting practices. If this company actually followed GAAP accounting rule for its pension expenses its debt load if over 400% of its market cap.

 

So, would you like to buy this business? How much would you pay for it?

 

I understand, you’d like to do some more due diligence. Ok, I’ll give you its stock symbol. Do you have a pen and paper ready? Ok, the stock symbol is:

 

USA.

 

For a FREE Special Report outlining how to protect your portfolio a market collapse, swing by: http://phoenixcapitalmarketing.com/special-reports.html

 

Best Regards,

 

Phoenix Capital Research

 

 

 

 

 

 

 

 


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/t78QIXtuu78/story01.htm Phoenix Capital Research

False Alarm: Obama Will Continue Spying On “Allies” After All

In a dramatic change of events that is a) sure to not win the administration any goodwill point with the citizens of the free, or enslaved, world or their insolvent leaders so desperately reliant on the US for day to day funding, and b) will confirm the state of complete policy chaos that is at the core of the Obama administration’s handling of the ObamaPhone spygate (where for some reason the fact that the US spied on foreigners, as it should, has taken far more precedence over the NSA intercepting and recording each and every domestic communication, with neither checks nor balances), the earlier reported news originating from the Chair of the Senate Intelligence Committee Dianne Feinstein, who said that “the White House has informed me that collection on our allies will not continue, which I support” was a fabrication.

Instead, as The Hill reported shortly thereafter,  “A senior administration official on Monday rejected Intelligence Committee Chairwoman Diane Feinstein’s claim that the U.S. has halted intelligence collection against its allies. In a statement released earlier Monday, the California Democrat said that the White House “has informed me that collection on our allies will not continue.”  But the administration official called that statement “not accurate.” In other words, the situation surrounding Obama’s global Watergate hotel, has devolved to a state where the executive and the Chair of the Legislative’s intelligence committee are not even able to communicate in order to get their story straight about lying what the US will and won’t do in the future. Because, needless to say, any promise that the US won’t do what it obviously will continue doing as there is absolutely no downside to doing so, is merely the latest lie in long and illustrious chain of seasonally adjusted truths.

From The Hill:

While we have made some individual changes, which I cannot detail, we have not made across the board changes in policy like, for example, terminating intelligence collection that might be aimed at all allies,” the administration official said.

And then the confusion and backtracking began:

After the administration’s statement, a spokesman for Feinstein clarified that the senator intended to say that the U.S. was ceasing “collection on foreign allied leaders.”

 

Feinstein also said that it was her understanding President Obama “was not aware” the U.S. had been monitoring the cellphone of German Chancellor Angela Merkel. The Wall Street Journal reported Sunday that Obama first learned of the program, which apparently began in 2002, during an internal audit of intelligence practices this summer.

Why do we know Obama is “not” lying? Because he had no comment.

In an interview Monday afternoon with Fusion, the president refused to comment when asked about when he became aware of the surveillance.

What we do know, is that Obama no longer has a direct feed to Merkel’s cell phone. Whatever that means:

The administration has announced at least one determination, however. White House press secretary Jay Carney said last week that Obama assured Merkel in a private phone conversation that the administration was not currently monitoring her cell phone, nor would they do so in the future.

All the BS aside, in retrospect if indeed the NSA, being a government agency, does its job with the “efficiency” with which the government makes up lies on the fly, then there is absolutely nothing to worry about. For either the allies of the US, as long as that special status continues, or the billions of electronic communications intercepted among US citizens each day.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/oKytwnbHVg4/story01.htm Tyler Durden

False Alarm: Obama Will Continue Spying On "Allies" After All

In a dramatic change of events that is a) sure to not win the administration any goodwill point with the citizens of the free, or enslaved, world or their insolvent leaders so desperately reliant on the US for day to day funding, and b) will confirm the state of complete policy chaos that is at the core of the Obama administration’s handling of the ObamaPhone spygate (where for some reason the fact that the US spied on foreigners, as it should, has taken far more precedence over the NSA intercepting and recording each and every domestic communication, with neither checks nor balances), the earlier reported news originating from the Chair of the Senate Intelligence Committee Dianne Feinstein, who said that “the White House has informed me that collection on our allies will not continue, which I support” was a fabrication.

Instead, as The Hill reported shortly thereafter,  “A senior administration official on Monday rejected Intelligence Committee Chairwoman Diane Feinstein’s claim that the U.S. has halted intelligence collection against its allies. In a statement released earlier Monday, the California Democrat said that the White House “has informed me that collection on our allies will not continue.”  But the administration official called that statement “not accurate.” In other words, the situation surrounding Obama’s global Watergate hotel, has devolved to a state where the executive and the Chair of the Legislative’s intelligence committee are not even able to communicate in order to get their story straight about lying what the US will and won’t do in the future. Because, needless to say, any promise that the US won’t do what it obviously will continue doing as there is absolutely no downside to doing so, is merely the latest lie in long and illustrious chain of seasonally adjusted truths.

From The Hill:

While we have made some individual changes, which I cannot detail, we have not made across the board changes in policy like, for example, terminating intelligence collection that might be aimed at all allies,” the administration official said.

And then the confusion and backtracking began:

After the administration’s statement, a spokesman for Feinstein clarified that the senator intended to say that the U.S. was ceasing “collection on foreign allied leaders.”

 

Feinstein also said that it was her understanding President Obama “was not aware” the U.S. had been monitoring the cellphone of German Chancellor Angela Merkel. The Wall Street Journal reported Sunday that Obama first learned of the program, which apparently began in 2002, during an internal audit of intelligence practices this summer.

Why do we know Obama is “not” lying? Because he had no comment.

In an interview Monday afternoon with Fusion, the president refused to comment when asked about when he became aware of the surveillance.

What we do know, is that Obama no longer has a direct feed to Merkel’s cell phone. Whatever that means:

The administration has announced at least one determination, however. White House press secretary Jay Carney said last week that Obama assured Merkel in a private phone conversation that the administration was not currently monitoring her cell phone, nor would they do so in the future.

All the BS aside, in retrospect if indeed the NSA, being a government agency, does its job with the “efficiency” with which the government makes up lies on the fly, then there is absolutely nothing to worry about. For either the allies of the US, as long as that special status continues, or the billions of electronic communications intercepted among US citizens each day.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/oKytwnbHVg4/story01.htm Tyler Durden

Abenomics One Year Later

One year later and due mainly to the fact the Japanese stock market has risen an astounding 70% year-over-year, talking-heads, politicians, and central bankers proclaim Abe’s trip into the monetary policy black hole as a success (it would seem on that basis that the head of Venezuela’s “central bank” deserves a Nobel prize). Abe has managed to devalue his nation’s currency by 25.5% against the USD in that time and the price of Japanese government bonds (despite some early teething trouble with the government’s repressive activity) is practically unchanged up 0.75% on the year. But away from the ‘market’, Job creation remains stifled, inflation is rising (but thanks to import prices) and wages languish down 0.9% as the trade balance is collapsing.

 

Tonight provided another example of Abenomics failure to spur real growth… Jobs-to-Applicants ratio rose at the slowest pace since Abe started and missed expectations by the most in a year…

 

One thing is for sure – dueling QEs between Japan and the USA make for highly correlated FX and equity market co-movements…

 

Still believe its all about the fundamentals… and not just a marginally levered carry trade’s flows?

 

As FT’s Gavyn Davies notes,

A year later, some progress has been made, but crucial issues have been ducked and much greater challenges lie ahead.

 

The new administration under Mr Abe immediately fired the first and easiest of his three “arrows” (see David Pilling), a dramatic expansion in the BoJ balance sheet that will be maintained until inflation reaches 2 per cent. The second arrow, a temporary fiscal support programme, has also been implemented.

 

The third arrow, structural reform, has not even been removed from its quiver. And by far the most difficult task of all, now being termed the fourth arrow, stretches far into the future. That arrow is the tax increase needed to attain long term fiscal sustainability.

 

…the rise in the Nikkei has had positive wealth effects on consumption, so the central bank can claim some of the credit for the recovery.

 

 

More important for the long term strategy, inflation has broken into positive territory after many years below zero. Unfortunately, much of this change has been due to the rise in import prices, which will be a one-off boost unless wages rise in response, which they are not yet doing. Core inflation is barely at zero.

 

 

Without significant structural reforms, the markets may focus their attention back onto the sustainability of fiscal policy, which is very far from being fully addressed. In fact, when combined with the ageing of the population, this is by a long distance the most intractable problem which Japan faces.

 

 

The great unknown for Mr Abe and his successors is whether this fiscal tightening can be accomplished without tipping the economy back into recession. If not, the future may eventually hold further monetisation of the debt, with an even bigger devaluation and much higher inflation. Mr Abe cannot continue to rely on only one of his three arrows if he wants Japan to avoid that fate.


    

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/8q_yYYs1Rgo/story01.htm Tyler Durden

Nobel Prize Winner: Bubbles Don’t Exist

Submitted by Doug French via Casey Research,

No wonder investors don't take economists seriously. Or if they do, they shouldn't. Since Richard Nixon interrupted Hoss and Little Joe on a Sunday night in August 1971, it's been one boom and bust after another. But don't tell that to the latest Nobel Prize co-winner, Eugene Fama, the founder of the efficient-market hypothesis.

The efficient-market hypothesis asserts that financial markets are "informationally efficient," claiming one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis.

"Fama's research at the end of the 1960s and the beginning of the 1970s showed how incredibly difficult it is to beat the market, and how incredibly difficult it is to predict how share prices will develop in a day's or a week's time," said Peter Englund, secretary of the committee that awards the Nobel Prize in Economic Sciences. "That shows that there is no point for the common person to get involved in share analysis. It's much better to invest in a broadly composed portfolio of shares."

Fama is not just a Nobel laureate. He also co-authored the textbook, The Theory of Finance, with another Nobel winner, Merton H. Miller. He won the 2005 Deutsche Bank Prize in Financial Economics as well as the 2008 Morgan Stanley-American Finance Association Award. He is seriously a big deal in the economics world.

So if Fama has it right, investors should just throw in the towel, shove their money into index funds, and blissfully wait until they need the money. Before you do that, read what Fama had to say about the 2008 financial crisis.

The New Yorker's John Cassidy asked Fama how he thought the efficient-market hypothesis had held up during the recent financial crisis. The new Nobel laureate responded:

"I think it did quite well in this episode. Prices started to decline in advance of when people recognized that it was a recession and then continued to decline. There was nothing unusual about that. That was exactly what you would expect if markets were efficient."

When Cassidy mentioned the credit bubble that led to the housing bubble and ultimate bust, the famed professor said:

"I don't even know what that means. People who get credit have to get it from somewhere. Does a credit bubble mean that people save too much during that period? I don't know what a credit bubble means. I don't even know what a bubble means. These words have become popular. I don't think they have any meaning."

No matter the facts, Fama has his story and he's sticking to it.

"I think most bubbles are 20/20 hindsight," Fama told Cassidy. When asked to clarify whether he thought bubbles could exist, Fama answered, "They have to be predictable phenomena."

The rest of us, who lived through the tech and real estate booms while Fama was locked in his ivory tower, know that in a boom people go crazy. There's a reason the other term for bubble is mania. According to Webster's, "mania" is defined in an individual as an "excitement of psychotic proportions manifested by mental and physical hyperactivity, disorganization of behavior, and elevation of mood."

Financial bubbles have occurred for centuries. In January 1637, the price of the common Witte Croonen tulip bulb rose 26 times, only to crash to 1/20th of its peak price a week later.

Eighty years later in France, John Law flooded the French economy with paper money and shares of the Mississippi Company. The public went wild for stock in a company that had no real assets. The shares rose twentyfold in a year, only to crash. Law, a hero in the boom, was run out of France in disgrace.

At the same time across the channel, the British public bid up South Sea Company shares from ?300 to ?1,000 in a matter of weeks. Even the brilliant Sir Isaac Newton was caught up in the frenzy. He got in early and sold early. But he then jumped back in near the top and went broke in the crash.

In the modern era, booms and busts are too numerous to count: Japanese stocks and property, real estate (multiple times), stocks, commodities, stocks again, farmland (multiple times), and art are just a few. Yet the newest co-Nobelist denies the existence of booms and busts and advises you to put your money in index funds and hope for the best.

However, investor returns have not been the best. The last complete calendar decade for stocks ending in 2009 was the worst in history. The Wall Street Journal reported, "Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade."

When you adjust that for inflation, the results were even worse, with the S&P 500 losing an average of 3.3% per year.

This decade, stocks have been on a tear—as have bonds, farmland, and art. At first glance, it's nonsensical that the price of virtually everything is rising. But when you remember that the Federal Reserve's cheap money has flooded Wall Street but hasn't come close to Main Street, it becomes clear. The money has to go somewhere.

If Fama were correct, there would be no legendary investors like Doug Casey or Rick Rule. There would be no opportunities for ten-baggers and twenty-baggers in resource stocks.

Fama is like the economist in the old joke who sees a hundred-dollar bill on the ground but doesn't pick it up. "Why didn't you pick it up?" a friend asks. The economist replies, "It's impossible—a hundred-dollar bill would have already been picked up by now."

Of course savvy investors know there are hundred-dollar bills to be picked up in the market. With tax-selling season upon us, now is the time to be shopping for bargains.

Doug's friend Rick Rule often says, "You can either be a contrarian or a victim." Taking Fama's advice will make you a victim. The path to wealth is to run against the herd, not with it.

Learn how to be a contrarian… how to make handsome gains from the best precious metals, energy, and technology stocks… how to find investment opportunities even in the most unlikely places… how to recognize profitable trends before they start. Read all this and more in our free daily e-letter, the Casey Daily Dispatchclick here to get it now.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zCgBL1j-Lws/story01.htm Tyler Durden

Nobel Prize Winner: Bubbles Don't Exist

Submitted by Doug French via Casey Research,

No wonder investors don't take economists seriously. Or if they do, they shouldn't. Since Richard Nixon interrupted Hoss and Little Joe on a Sunday night in August 1971, it's been one boom and bust after another. But don't tell that to the latest Nobel Prize co-winner, Eugene Fama, the founder of the efficient-market hypothesis.

The efficient-market hypothesis asserts that financial markets are "informationally efficient," claiming one cannot consistently achieve returns in excess of average market returns on a risk-adjusted basis.

"Fama's research at the end of the 1960s and the beginning of the 1970s showed how incredibly difficult it is to beat the market, and how incredibly difficult it is to predict how share prices will develop in a day's or a week's time," said Peter Englund, secretary of the committee that awards the Nobel Prize in Economic Sciences. "That shows that there is no point for the common person to get involved in share analysis. It's much better to invest in a broadly composed portfolio of shares."

Fama is not just a Nobel laureate. He also co-authored the textbook, The Theory of Finance, with another Nobel winner, Merton H. Miller. He won the 2005 Deutsche Bank Prize in Financial Economics as well as the 2008 Morgan Stanley-American Finance Association Award. He is seriously a big deal in the economics world.

So if Fama has it right, investors should just throw in the towel, shove their money into index funds, and blissfully wait until they need the money. Before you do that, read what Fama had to say about the 2008 financial crisis.

The New Yorker's John Cassidy asked Fama how he thought the efficient-market hypothesis had held up during the recent financial crisis. The new Nobel laureate responded:

"I think it did quite well in this episode. Prices started to decline in advance of when people recognized that it was a recession and then continued to decline. There was nothing unusual about that. That was exactly what you would expect if markets were efficient."

When Cassidy mentioned the credit bubble that led to the housing bubble and ultimate bust, the famed professor said:

"I don't even know what that means. People who get credit have to get it from somewhere. Does a credit bubble mean that people save too much during that period? I don't know what a credit bubble means. I don't even know what a bubble means. These words have become popular. I don't think they have any meaning."

No matter the facts, Fama has his story and he's sticking to it.

"I think most bubbles are 20/20 hindsight," Fama told Cassidy. When asked to clarify whether he thought bubbles could exist, Fama answered, "They have to be predictable phenomena."

The rest of us, who lived through the tech and real estate booms while Fama was locked in his ivory tower, know that in a boom people go crazy. There's a reason the other term for bubble is mania. According to Webster's, "mania" is defined in an individual as an "excitement of psychotic proportions manifested by mental and physical hyperactivity, disorganization of behavior, and elevation of mood."

Financial bubbles have occurred for centuries. In January 1637, the price of the common Witte Croonen tulip bulb rose 26 times, only to crash to 1/20th of its peak price a week later.

Eighty years later in France, John Law flooded the French economy with paper money and shares of the Mississippi Company. The public went wild for stock in a company that had no real assets. The shares rose twentyfold in a year, only to crash. Law, a hero in the boom, was run out of France in disgrace.

At the same time across the channel, the British public bid up South Sea Company shares from ?300 to ?1,000 in a matter of weeks. Even the brilliant Sir Isaac Newton was caught up in the frenzy. He got in early and sold early. But he then jumped back in near the top and went broke in the crash.

In the modern era, booms and busts are too numerous to count: Japanese stocks and property, real estate (multiple times), stocks, commodities, stocks again, farmland (multiple times), and art are just a few. Yet the newest co-Nobelist denies the existence of booms and busts and advises you to put your money in index funds and hope for the best.

However, investor returns have not been the best. The last complete calendar decade for stocks ending in 2009 was the worst in history. The Wall Street Journal reported, "Since the end of 1999, stocks traded on the New York Stock Exchange have lost an average of 0.5% a year thanks to the twin bear markets this decade."

When you adjust that for inflation, the results were even worse, with the S&P 500 losing an average of 3.3% per year.

This decade, stocks have been on a tear—as have bonds, farmland, and art. At first glance, it's nonsensical that the price of virtually everything is rising. But when you remember that the Federal Reserve's cheap money has flooded Wall Street but hasn't come close to Main Street, it becomes clear. The money has to go somewhere.

If Fama were correct, there would be no legendary investors like Doug Casey or Rick Rule. There would be no opportunities for ten-baggers and twenty-baggers in resource stocks.

Fama is like the economist in the old joke who sees a hundred-dollar bill on the ground but doesn't pick it up. "Why didn't you pick it up?" a friend asks. The economist replies, "It's impossible—a hundred-dollar bill would have already been picked up by now."

Of course savvy investors know there are hundred-dollar bills to be picked up in the market. With tax-selling season upon us, now is the time to be shopping for bargains.

Doug's friend Rick Rule often says, "You can either be a contrarian or a victim." Taking Fama's advice will make you a victim. The path to wealth is to run against the herd, not with it.

Learn how to be a contrarian… how to make handsome gains from the best precious metals, energy, and technology stocks… how to find investment opportunities even in the most unlikely places… how to recognize profitable trends before they start. Read all this and more in our free daily e-letter, the Casey Daily Dispatchclick here to get it now.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/zCgBL1j-Lws/story01.htm Tyler Durden

As Obama Asks If He “Should Be Worried” About Bitcoin, ATMs Arrive In 5 Canadian Cities

The world's first Bitcoin ATM will be ready for use this week at a coffee shop in Vancouver, Canada. Created by Las Vegas based Robocoin, the new ATM in Vancouver will allow users to turn bitcoins directly into Canadian dollars, or turn Canadian dollars into bitcoins. As The Telegraph reports, the ATM first scans the user's palm to ensure security and transfers are limited to CAD$3,000 per day. Until now, the currency existed only on the web but the introduction of these ATMs brings bitcoin-as-cash usage closer.

 

The Bitcoin ATM Promo…

 

The Bitcoin ATM in action…

 

Via CBC,

Bitcoiniacs says it has ordered five Bitcoin kiosks from a Las Vegas-based company called RoboCoin… and will be rolled out starting this week in Vancouver…

 

Four more kiosks will arrive in December and although their locations are not yet certain, Bitcoiniacs says it's eyeing major Canadian cities such as Toronto, Montreal, Calgary and Ottawa

 

"Basically, it just make it easier for people to buy and sell Bitcoins and hopefully will drive the adoption of Bitcoin, and make it more accessible for people," says Mitchell Demeter, the 27-year-old owner of Bitcoiniacs.

 

 

Currently, acquiring Bitcoins is often done through an exchange, an arduous process that requires users to jump through several hoops, including linking their bank account to the exchange and sending in paperwork to verify their identity.

 

 

The RoboCoin kiosks are expected to make the process of buying and selling Bitcoins much easier says Jordan Kelley, the company's chief executive.

 

"Our goal is to make Bitcoin truly grandma-friendly," says Kelley.

 

 

Using a kiosk means you don't have to wait to verify your account on an exchange or hand cash to a stranger, says Kelley. It also makes Bitcoins more accessible to people by adding an element of legitimacy and increases liquidity in the market.

 

 

RoboCoin plans to ship out 10 to 15 kiosks to customers before the end of the year. The first one will go to Bitcoiniacs, says Kelley.

 

Demeter says many Bitcoin startups are gravitating to Canada because the Financial Transactions and Reports Analysis Centre of Canada — also known as FINTRAC — aren't as strict as regulators in the U.S.

 

"It's a lot more open up here, that's for sure," says Demeter.

 

Those last two paragraphs/comments are especially notable in light of President Obama asking Eric Schmidt if "Bitcoin is anything he has to worry about?"

 

Via Mike Krieger of Liberty Blitzkrieg blog,

Here’s a story recently related to me by a guest at a White House dinner, which included Google’s Eric Schmidt: The president, whose most important job is surely to protect the integrity of the monetary system, smugly asked Schmidt if Bitcoin, one of many growing challenges to currency hegemony, was anything he had to worry about.

 

– From a USA Today article titled: How CEOs are Clueless About Technology

If the above is accurate (and I have no reason to suspect it isn’t), it is priceless information on so many levels. First of all, rather than ask about Bitcoin in an inquisitive manner free of prejudice as a enlightened leader surely would, Obama is merely primatively wondering if he needs to “worry about it.”

Actually Barry, if you had any sense and foresight whatsoever you would be looking at it as a great opportunity. An opportunity for the nation to lead the way in growing the Bitcoin economy and shed the archaic, feudalistic monetary system we are currently enslaved under. However, since you work directly for the oligarch money manipulators themselevs, you are clearly and disastrously unable to see things in a more productive and beneficial way.

Second, as I highlighted earlier this year, Eric Schmidt had no clue what Bitcoin was when Julian Assange first mentioned it to him in a lengthy interview in 2011. The initial exchange went as follows:

Assange: On the publishing end, the magnet links and so on are starting to come up. There’s also a very nice little paper that I’ve seen in relation to Bitcoin, that… you know about Bitcoin?

 

Schmidt: No.

 

Assange: Okay, Bitcoin is something that evolved out of the cypherpunks a couple of years ago, and it is an alternative… it is a stateless currency.

So Obama is asking Schmidt for his advice about Bitcoin, when Schmidt had no idea what it was two years after it had been created and released into the wild. One bureaucratic control-freak asking another for advice. What could possibly go wrong?

More from the USA Today article:

The president surely believes his important expertise is in matters of policy, law and political machinations. But he is, too, the chief executive of the U.S. government, with its increasing dependence on digital performance. And, in that area, he seems a near-illiterate, or at least a big boob.

 

An older establishment that still regards technology as a back-office function, or infrastructure issue, or buyable skill set, vs. an emerging native digital establishment that sees technology as an end in itself, serving a customer base with ever-higher technology expectations and standards.

 

It is certainly a pertinent question: If the government can’t run an e-commerce website, how in the world can it process all the data that they are supposedly sweeping up to spy on outlaws and citizens?

 

Non-tech people, no matter their good intentions, can’t do tech, at least never as well as tech people do it. This is something ever-more evident to people steeped in daily digital life, as most Americans are. It is less clear to CEOs, many of whom are somehow still uncertain in their digital habits and reflexes.

Let’s just hope these clowns don’t grasp Bitcoin until it’s already way too late…which fortunately it may already be.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/6qz4w8pUljw/story01.htm Tyler Durden

As Obama Asks If He "Should Be Worried" About Bitcoin, ATMs Arrive In 5 Canadian Cities

The world's first Bitcoin ATM will be ready for use this week at a coffee shop in Vancouver, Canada. Created by Las Vegas based Robocoin, the new ATM in Vancouver will allow users to turn bitcoins directly into Canadian dollars, or turn Canadian dollars into bitcoins. As The Telegraph reports, the ATM first scans the user's palm to ensure security and transfers are limited to CAD$3,000 per day. Until now, the currency existed only on the web but the introduction of these ATMs brings bitcoin-as-cash usage closer.

 

The Bitcoin ATM Promo…

 

The Bitcoin ATM in action…

 

Via CBC,

Bitcoiniacs says it has ordered five Bitcoin kiosks from a Las Vegas-based company called RoboCoin… and will be rolled out starting this week in Vancouver…

 

Four more kiosks will arrive in December and although their locations are not yet certain, Bitcoiniacs says it's eyeing major Canadian cities such as Toronto, Montreal, Calgary and Ottawa

 

"Basically, it just make it easier for people to buy and sell Bitcoins and hopefully will drive the adoption of Bitcoin, and make it more accessible for people," says Mitchell Demeter, the 27-year-old owner of Bitcoiniacs.

 

 

Currently, acquiring Bitcoins is often done through an exchange, an arduous process that requires users to jump through several hoops, including linking their bank account to the exchange and sending in paperwork to verify their identity.

 

 

The RoboCoin kiosks are expected to make the process of buying and selling Bitcoins much easier says Jordan Kelley, the company's chief executive.

 

"Our goal is to make Bitcoin truly grandma-friendly," says Kelley.

 

 

Using a kiosk means you don't have to wait to verify your account on an exchange or hand cash to a stranger, says Kelley. It also makes Bitcoins more accessible to people by adding an element of legitimacy and increases liquidity in the market.

 

 

RoboCoin plans to ship out 10 to 15 kiosks to customers before the end of the year. The first one will go to Bitcoiniacs, says Kelley.

 

Demeter says many Bitcoin startups are gravitating to Canada because the Financial Transactions and Reports Analysis Centre of Canada — also known as FINTRAC — aren't as strict as regulators in the U.S.

 

"It's a lot more open up here, that's for sure," says Demeter.

 

Those last two paragraphs/comments are especially notable in light of President Obama asking Eric Schmidt if "Bitcoin is anything he has to worry about?"

 

Via Mike Krieger of Liberty Blitzkrieg blog,

Here’s a story recently related to me by a guest at a White House dinner, which included Google’s Eric Schmidt: The president, whose most important job is surely to protect the integrity of the monetary system, smugly asked Schmidt if Bitcoin, one of many growing challenges to currency hegemony, was anything he had to worry about.

 

– From a USA Today article titled: How CEOs are Clueless About Technology

If the above is accurate (and I have no reason to suspect it isn’t), it is priceless information on so many levels. First of all, rather than ask about Bitcoin in an inquisitive manner free of prejudice as a enlightened leader surely would, Obama is merely primatively wondering if he needs to “worry about it.”

Actually Barry, if you had any sense and foresight whatsoever you would be looking at it as a great opportunity. An opportunity for the nation to lead the way in growing the Bitcoin economy and shed the archaic, feudalistic monetary system we are currently enslaved under. However, since you work directly for the oligarch money manipulators themselevs, you are clearly and disastrously unable to see things in a more productive and beneficial way.

Second, as I highlighted earlier this year, Eric Schmidt had no clue what Bitcoin was when Julian Assange first mentioned it to him in a lengthy interview in 2011. The initial exchange went as follows:

Assange: On the publishing end, the magnet links and so on are starting to come up. There’s also a very nice little paper that I’ve seen in relation to Bitcoin, that… you know about Bitcoin?

 

Schmidt: No.

 

Assange: Okay, Bitcoin is something that evolved out of the cypherpunks a couple of years ago, and it is an alternative… it is a stateless currency.

So Obama is asking Schmidt for his advice about Bitcoin, when Schmidt had no idea what it was two years after it had been created and released into the wild. One bureaucratic control-freak asking another for advice. What could possibly go wrong?

More from the USA Today article:

The president surely believes his important expertise is in matters of policy, law and political machinations. But he is, too, the chief executive of the U.S. government, with its increasing dependence on digital performance. And, in that area, he seems a near-illiterate, or at least a big boob.

 

An older establishment that still regards technology as a back-office function, or infrastructure issue, or buyable skill set, vs. an emerging native digital establishment that sees technology as an end in itself, serving a customer base with ever-higher technology expectations and standards.

 

It is certainly a pertinent question: If the government can’t run an e-commerce website, how in the world can it process all the data that they are supposedly sweeping up to spy on outlaws and citizens?

 

Non-tech people, no matter their good intentions, can’t do tech, at least never as well as tech people do it. This is something ever-more evident to people steeped in daily digital life, as most Americans are. It is less clear to CEOs, many of whom are somehow still uncertai
n in their digital habits and reflexes.

Let’s just hope these clowns don’t grasp Bitcoin until it’s already way too late…which fortunately it may already be.


    



via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/6qz4w8pUljw/story01.htm Tyler Durden