Category: zerohedge

Courtesy of the revelations over the past year, one thing has been settled: the statement “Wall Street Manipulated Everything” is no longer in the conspiracy theorist’s arsenal: it is now part of the factually accepted vernacular. And to summarize just how, who and where this manipulation takes places is the following series of charts from Bloomberg demonstrating Wall Street at its best – breaking the rules and making a killing.

Foreign Exchanges

Regulators are looking into whether currency traders have conspired through instant messages to manipulate foreign exchange rates. The currency rates are used to calculate the value of stock and bond indexes.

 

Energy Trading

Banks have been accused of manipulating energy markets in California and other states.

 

Libor

Since early 2008 banks have been caught up in investigations and litigation over alleged manipulations of Libor.

 

Mortgages

Banks have been accused of improper foreclosure practices, selling bonds backed by shoddy mortgages, and misleading investors about the quality of the loans.

 

* * *

And in the latest news on manipulation, according to the FT, “The UK’s financial regulator is probing the use of private accounts by foreign exchange traders amid allegations they traded their own money ahead of clients orders, in a serious twist in the global probe into possible currency market manipulation. The Financial Conduct Authority has asked several banks to investigate whether traders used undeclared personal accounts, two people close to the situation said.”

Investors and foreign exchange traders have been speculating for a while that less scrupulous colleagues might have used private accounts at spread betting firms to gain advantages from their inside knowledge.

 

Hiding personal accounts is viewed as a clear breach of the rules. “If someone was [using a PA] to sell or buy ahead of the fix, I have no sympathy for him,” said one trader.

 

Personal accounts – or “PAs”, as traders call them – generally have to be declared to the bank and usually to a trader’s boss. Each individual trade then also has to be declared – often through an automatic email that is sent out when a trade is made.

 

Regulators are focusing their investigations on possible manipulation of a crucial benchmark, the 4pm WM/Reuters fix, in an affair that is echoing the Libor benchmark rate-rigging scandal.

Guess what they are going to find…

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

Submitted by Ron Paul via The Free Foundation blog,

Last Thursday the Senate Banking Committee held hearings on Janet Yellen’s nomination as Federal Reserve Board Chairman. As expected, Ms. Yellen indicated that she would continue the Fed’s “quantitative easing” (QE) polices, despite QE’s failure to improve the economy. Coincidentally, two days before the Yellen hearings, Andrew Huszar, an ex-Fed official, publicly apologized to the American people for his role in QE. Mr. Huszar called QE “the greatest backdoor Wall Street bailout of all time.”

As recently as five years ago, it would have been unheard of for a Wall Street insider and former Fed official to speak so bluntly about how the Fed acts as a reverse Robin Hood. But a quick glance at the latest unemployment numbers shows that QE is not benefiting the average American. It is increasingly obvious that the Fed’s post-2008 policies of bailouts, money printing, and bond buying benefited the big banks and the politically-connected investment firms. QE is such a blatant example of crony capitalism that it makes Solyndra look like a shining example of a pure free market!

It would be a mistake to think that QE is the first time the Fed’s policies have benefited the well-to-do at the expense of the average American. The Fed’s polices have always benefited crony capitalists and big spending politicians at the expense of the average American.

By manipulating the money supply and the interest rate, Federal Reserve polices create inflation and thereby erode the value of the currency. Since the Federal Reserve opened its doors one hundred years ago, the dollar has lost over 95 percent of its purchasing power —that’s right, today you need $23.70 to buy what one dollar bought in 1913!

As pointed out by the economists of the Austrian School, the creation of new money does not impact everyone equally. The well-connected benefit from inflation, as they receive the newly-created money first, before general price increases have spread through the economy. It is obvious, then, that middle- and working-class Americans are hardest hit by the rising level of prices.

Congress also benefits from the devaluation of the currency, as it allows them to increase welfare- and warfare-spending without directly taxing the people. Instead, the increase is only felt via the hidden “inflation tax.” I have often said that the inflation tax is one of the worst taxes because it is hidden and because it is regressive. Of course, there is a limit to how long the Fed can facilitate big government spending without causing an economic crisis.

Far from promoting a sound economy for all, the Federal Reserve is the main cause of the boom-and-bust economy, as well as the leading facilitator of big government and crony capitalism. Fortunately, in recent years more Americans have become aware of how the Fed is impacting their lives. These Americans have joined efforts to educate their fellow citizens on the dangers of the Federal Reserve and have joined efforts to bring transparency to the Federal Reserve by passing the Audit the Fed bill.

Auditing the Fed is an excellent first step toward restoring a monetary policy that works for the benefit of the American people, not the special interests. Another important step is to repeal legal tender laws that restrict the ability of the people to use the currency of their choice. This would allow Americans to protect themselves from the effects of the Fed’s polices. Auditing and ending the Fed, and allowing Americans to use the currency of their choice, must be a priority for anyone serious about restoring peace, prosperity, and liberty.

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

Submitted by Ron Paul via The Free Foundation blog,

Last Thursday the Senate Banking Committee held hearings on Janet Yellen’s nomination as Federal Reserve Board Chairman. As expected, Ms. Yellen indicated that she would continue the Fed’s “quantitative easing” (QE) polices, despite QE’s failure to improve the economy. Coincidentally, two days before the Yellen hearings, Andrew Huszar, an ex-Fed official, publicly apologized to the American people for his role in QE. Mr. Huszar called QE “the greatest backdoor Wall Street bailout of all time.”

As recently as five years ago, it would have been unheard of for a Wall Street insider and former Fed official to speak so bluntly about how the Fed acts as a reverse Robin Hood. But a quick glance at the latest unemployment numbers shows that QE is not benefiting the average American. It is increasingly obvious that the Fed’s post-2008 policies of bailouts, money printing, and bond buying benefited the big banks and the politically-connected investment firms. QE is such a blatant example of crony capitalism that it makes Solyndra look like a shining example of a pure free market!

It would be a mistake to think that QE is the first time the Fed’s policies have benefited the well-to-do at the expense of the average American. The Fed’s polices have always benefited crony capitalists and big spending politicians at the expense of the average American.

By manipulating the money supply and the interest rate, Federal Reserve polices create inflation and thereby erode the value of the currency. Since the Federal Reserve opened its doors one hundred years ago, the dollar has lost over 95 percent of its purchasing power —that’s right, today you need $23.70 to buy what one dollar bought in 1913!

As pointed out by the economists of the Austrian School, the creation of new money does not impact everyone equally. The well-connected benefit from inflation, as they receive the newly-created money first, before general price increases have spread through the economy. It is obvious, then, that middle- and working-class Americans are hardest hit by the rising level of prices.

Congress also benefits from the devaluation of the currency, as it allows them to increase welfare- and warfare-spending without directly taxing the people. Instead, the increase is only felt via the hidden “inflation tax.” I have often said that the inflation tax is one of the worst taxes because it is hidden and because it is regressive. Of course, there is a limit to how long the Fed can facilitate big government spending without causing an economic crisis.

Far from promoting a sound economy for all, the Federal Reserve is the main cause of the boom-and-bust economy, as well as the leading facilitator of big government and crony capitalism. Fortunately, in recent years more Americans have become aware of how the Fed is impacting their lives. These Americans have joined efforts to educate their fellow citizens on the dangers of the Federal Reserve and have joined efforts to bring transparency to the Federal Reserve by passing the Audit the Fed bill.

Auditing the Fed is an excellent first step toward restoring a monetary policy that works for the benefit of the American people, not the special interests. Another important step is to repeal legal tender laws that restrict the ability of the people to use the currency of their choice. This would allow Americans to protect themselves from the effects of the Fed’s polices. Auditing and ending the Fed, and allowing Americans to use the currency of their choice, must be a priority for anyone serious about restoring peace, prosperity, and liberty.

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

While we could (and have) show a plethora of charts of the trends of earnings, revenues, and macro data, the following ‘summary’ of Q3 earnings from Thomson One says it all… As far as pre-announcements, the 9.2x negative-to-positive is the “largest negative guidance on record” – five words, every bull should just ignore…

 

 

(h/t @Not_Jim_Cramer)

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/P6Mq71CSXaE/story01.htm Tyler Durden

Farewell Mareeaah. The Money Honey who epitomized CNBC in its high flying (pardon the pun) years when it was actually a source of useful information, has just marked the nadir of the TV station which in the past five years rebranded itself stock market propaganda central, and whose viewership plunged appropriately to a 20 year low as we recently reported.  As Drudge reports, Bartiromo whose contact is up, is moving to Fox Business.

From Drudge:

DRUDGE has learned that Maria Bartiromo is jumping to FOX BUSINESS NETWORK with an announcement expected sometime soon. Sources close to the situation say there have been ongoing conversations throughout the Fall. The new deal calls for Bartiromo to anchor a daily market hours program on FOX BUSINESS. Insiders say there will be a role on FOXNEWS as well… DEVELOPING…

To be sure, this is hardly a surprise. News of her imminent contract expiration came a few months ago…

CNBC’s No. 1 star, Maria “Money Honey” Bartiromo, with her hefty five-year contract set to expire late this year, is in play and is shopping herself around to rival networks, sources familiar with the situation tell The Post.

 

Bartiromo, 45, whose hustle and knack for landing exclusive interviews with newsmakers hasn’t been able to stem the steady decline in ratings for CNBC overall and her show in particular, is taking advantage of an open “negotiating window” and has talked to Fox Business Network and CNN, among others, sources said.

 

The business TV dynamo reached out and hired mega-talent agency CAA earlier this year. She is working with the agency’s boss, Richard Lovett, considered one of the top TV and Hollywood agents, and Olivia Metzger, a former CNBC talent scout, who heads CAA’s Big Apple office.

 

The Brooklyn-born Bartiromo famously was the first woman to report live from the floor of the New York Stock Exchange. She has been with CNBC since 1993 and is said to earn between $2 million and $3 million a year.

 

A spokeswoman for FBN said: “There are no serious discussions going on.” CNN had no comment. A spokesman for CNBC said: “She is under contract with CNBC.”

 

Reached Friday as she was flying back from Lake Tahoe, where she reported from the American Century Celebrity Golf Tournament, Bartiromo, in an email, told The Post: “I don’t have any comment on anything right now.”

 

The intrepid brunette referred further questions to CAA.

And it appears CNBC decided not to renew. As for FBN, the discussions appear to have been serious.

Our only question: is that other symbol of the old school CNBC, Joe Kernen, set to follow her through the exit door?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/OH4LmC_wPQQ/story01.htm Tyler Durden

Moments ago, the following news broke across various news feeds:

BREAKING: Princeton U. to distribute meningitis vaccine not approved in the US to halt campus outbreak.

— NBCWashington (@nbcwashington) November 18, 2013

This is great news. But we wonder: considering the list of such prominent Econ department graduates as:

• Ben Bernanke – professor of economics and public affairs, Chairman of the Federal Reserve Board
• Paul Krugman – professor of economics, New York Times columnist,
  winner of the John Bates Clark Medal, Nobel Prize in economics (2008)
• Alan Blinder- Vice Chairman of the Federal Reserve Board, 1994–96

… couldn’t this vaccine have been distributed some years earlier?

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/mRtBhP4Dung/story01.htm Tyler Durden

Submitted by Shawn Brown of SBrown & Asscociates,

The Senate Banking Committee’s confirmation hearing for current Vice-Chair of the Federal Reserve began with Janet Yellen delivering prepared remarks.  Most observers likely tuned out well before the completion of the 2 ½ hours meeting to decide whether Yellen was worthy to succeed outgoing Chair Ben Bernanke and ascend to the top spot at the Fed. With the ongoing debacle of the Affordable Health Care website handcuffing Democrats, tough questions about QE, ZIRP, the oft talked about Taper and the possibility of reducing the Fed’s gargantuan $4 trillion balance sheet were verboten.  That left Republicans to address the elephant(s) in the room.  Predictably, it took nearly the entire hearing until a Senator from Nebraska offered his views about the damage being done by the various fiscal and monetary machinations undertaken to combat the Great Recession.  

What happened, beginning just after the 2 hour point of the meeting, was both remarkable and revealing.   Senator Mike Johanns, who won’t seek reelection, began by thanking Dr. Yellen for stopping by his office prior to the confirmation hearing.  Yellen appeared startled when Johanns suggests that he “would like to continue, if I could with a few questions along the lines of what we talked about in my office.”   Senator Johanns said,

“I found your testimony about asset bubbles to be interesting, just before the Chairman turned to me, I looked at where the Dow was at, it’s about 15,850.  An economy that quite honestly most everybody would recognize has too much unemployment, an economy where people continue to struggle, an economy where it’s kind of hard to see where the growth is going to be.  We are now starting to see real estate bidding wars just like the old days…

 

Dr. Yellen I kind of look at these factors and I think I could go on and on with some other items and I must admit, what am I missing here?  I see asset bubbles and I think if you were to announce today that over the next 24 months you are going to bring that balance sheet down from $4 trillion to zero or $1 trillion, I think if you even said over the next 4 years we’re going to bring it down from $4trillion to zero you would see how big those asset bubbles are, wouldn’t you agree with me on that?”

For obvious reasons, Dr. Yellen doesn’t want any part of a discussion that might include the mention of slowing the $85 billion per month of asset purchases and therefore any talk of a normalization of the Fed’s balance sheet is out of the question.  Logically, Yellen decides to check her notes and offer that housing is rebounding in only the hardest hit markets like Las Vegas, Phoenix and her part of the country (San Francisco Bay Area) where a substantial fraction of borrowers were/are underwater.  Whether she is waiting for her confirmation to tackle questions related to exiting QE, normalizing interest rates and ultimately reducing the Fed’s balance sheet remains to be seen but Senator Johanns decided to press for more disclosure.

“Dr. Yellen, here is what I would offer and I think you would agree with me although you probably won’t want to agree with me in a public hearing setting.  But if I think if I were to say to you why don’t you announce today that you are going to draw this down over the next 24 months from $4 trillion to zero, I think you would see the impact of your policies on the value of real estate all across the United States not just in the hardest hit areas.  I think the real estate that I own and others own would go down in value.  I also think that the stock market would have the same sort of reaction that it has had when Chairman Bernanke just suggested that there might be a phase down here.

 

Here’s what I’m saying, I think the economy has gotten used to the sugar that you put out there and I just worry that we are on a sugar high and that is a very dangerous thing for the little person out there who is just trying to pay the bills and maybe put a buck away for retirement.  The last thing I will say, the flip side of your policies that you are advocating for are very, very hard on certain segments of our society.  You know, explain to the Senior Citizen who is just hoping that CD will earn some money so they don’t have to dig into the principal what impact you’re having on a policy that says for as far as the eye can see or foreseeable future keep interest rates low, they are hurt by that policy.”

Yellen’s candid admission was alarming, “I agree and I understand that savers are hurt by this policy (ZIRP, emphasis mine)… it is important to recognize that savers wear a lot of different hats, they play many different roles in the economy.”   Yellen invokes the spirit of the 35^th President of the United States in her response to Senator Johanns’ accusations that Fed policies are robbing savers and Seniors, “They may be retirees who are hoping to get part-time work in order to supplement their income.  They may be people who have children who are out of work and who are suffering because of that or grandchildren who are going to college and coming out of college and hope to be able to put their skills to work…When those people who worry about our policies, thinking about themselves as savers, taking into account the broader array of interests they have even though they may harm them in that respect are broadly beneficial to them as I believe they are to all Americans.”

JFK, at his inauguration in 1961 said, “Ask not what your country can do for you but what you can do for your country.”  Janet Yellen is almost certainly going to be the next Chair of the Federal Reserve, her comments about self-sacrifice, especially for savers and Seniors should sound an alarm that something terrible this way comes. 

 

 

forward to 2:08:30 to watch this must see segment most missed.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/0KzeQZitbkM/story01.htm Tyler Durden

We’ve repeatedly documented that military waste and fraud are the core problems with the U.S. economy.

For example, we’ve noted that we wouldn’t be in this crisis of hitting the debt ceiling in the first place if we hadn’t spent so much money on unnecessary wars … which are horrible for the economy.

But it goes far beyond actual fighting.  We could easily slash the military and security budget without reducing our national security.

For example, homeland security agencies wasted money on seminars like “Did Jesus Die for Klingons Too?” and training for a “zombie apocalypse” instead of actually focusing on anti-terror efforts.

Republican Senator Tom Coburn notes that the Department of Defense can reduce $67.9 billion over 10 years by eliminating the non-defense programs that have found their way into the budget for the Department of Defense.

BusinessWeek and Bloomberg point out that we could slash military spending without harming our national security. Indeed, we could slash boondoggles that even the generals don’t want.

BusinessWeek provides a list of cost-cutting measures which will not undermine national security. American Conservative does the same.

Moreover, we’ve shown that the military wastes and “loses” (cough) trillions of dollars.  See this, this, this, this, this, this, this, this, this, this, this and this.

The former Secretary of Defense acknowledged in May 2012 that the DOD “is the only major federal agency that cannot pass an audit today.”  The Pentagon will not be ready for an audit for another five years, according to Panetta.

Reuters quantifies these numbers today:

The Pentagon is the only federal agency that has not complied with a law that requires annual audits of all government departments. That means that the $8.5 trillion in taxpayer money doled out by Congress to the Pentagon since 1996, the first year it was supposed to be audited, has never been accounted for. That sum exceeds the value of China’s economic output last year.

Bonus: 

Bill Clinton On NSA Spying: “We Are On The Verge Of Having The Worst Of All Worlds: We’ll Have No Security And No Privacy”

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/I_k0pjIQJ78/story01.htm George Washington

What Carl giveth, Carl can taketh away. We have warned for a month that credit markets have been decompressing (amid saturation) even as stocks went only one way. The S&P has hit almost its LABIA-based Fed fair-value and VIX/VXV hit extreme complacency levels so we were primed for a fall so it's ironic that Icahn pricked the bubble (at least for one day). More ironic still was CNBC's dismissal of his warning "as he is not a market timer" – when they wait with baited breath for his next 'buy AAPL' tweet. Bill Dudley's economic bullishness (and hawkish policy talk) also weighed on stocks. Credit was weak from the start – even as equities broke to new records; Treasury yields slid all day (with a small bounce higher after Europe closed). The USD's early weakness retraced to unch by teh close – rallying from the US open (but EURJPY was a big driver of weakness in stocks). Commodities did not bounce – all flushed lower around the European close and never recovered as stockd dumped.

 

No Dear today… but close… (as the NASDAQ test up towards 4000 – managing  3999.47 – before tumbling in its high-beta way…

 

Credit has been flashing warnings for a while that the game (in the short term at least) is up…

 

But of course, today's drop in the context of the last month is hardly death for equities – though given our context of a never-falling market, it is a shock…

 

Spot the difference – Icahn's honesty tanked EURJPY (carry) and thus stocks declined…

 

FX markets were a roundabot with Europe selling the USD and US buying it…

 

Treasuries were a one-way street lower in yield (with a bounce at the European close)

 

Commodities rallied into the US open and European close then tumbled and flatlined all afternoon (even as USD rose and stocks slid)…

 

VIX bounced notably back above 13%

 

Charts: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/CS6RyXNdPAo/story01.htm Tyler Durden

Back in August, we joked that in the Tesla press-release the one most often used word was Non-GAAP (43 times). Conveniently, we provided a word cloud of the company’s Q2 release for the visual learners to grasp just this:

That TESLA’s earnings were an epic non-GAAP adjustment joke was only further cemented by the fact that the company itself provided a bridge between its GAAP and Non-GAAP earnings.

Of course, back then TSLA stock was merely the latest bubble frenzy so pointing out the obvious: namely that the realty behind the numbers presented for public consumption was far uglier than most expected.

Now, the euphoria is over and  the story is different, as not only has the company’s self-reported and erroneous record of making the safest car in the world gone up in flames, but the momentum appears terminally broken and following today’s most recent 11% drop, TSLA stock could soon be headed for double digit territory again.

More importantly, however, the end of the momentum story means that those who care about such anachronisms as fundamentals can once again look beneath the hood of TSLA to get the true story of what is really going.

There, with the help of Bloomberg’s forensic accounting sleuth Jonathan Weil one uncovers nothing but cockroaches.

From Weil:

Most companies that play the non-GAAP game goose their numbers by excluding expenses. Tesla does this, too. It backs out stock-based compensation, for example. But the biggest kick to its non-GAAP earnings comes from an increase in top-line revenue.

 

The company reported third-quarter non-GAAP revenue of $602.6 million, which was about 40 percent more than its GAAP revenue. It achieved such a boost by transforming $171.2 million of liabilities into sales.

 

Here’s how it worked. In April, Tesla started a new financing program under which customers have the option to sell their vehicles back to the company after three years for guaranteed minimum amounts. The accounting rules say Tesla can’t recognize all of the revenue immediately in those instances and must account for such transactions as leases. So after Tesla takes customers’ cash, it records liabilities for “deferred revenue” and “resale value guarantee” on its balance sheet.

 

Mahoney noted two main problems with including so much of those amounts in non-GAAP revenue. Some customers wouldn’t have chosen Tesla cars were it not for the financing program. So the non-GAAP revenue isn’t comparable to Tesla’s sales before the program began, and it may overstate the true growth and demand. Plus, by adding back the resale-value guarantee, the company “assumes that nobody is going to return the vehicle, for purposes of the non-GAAP revenue,” he said.

 

Lots of companies use gimmicky benchmarks in their earnings releases. What makes Tesla special is that it behaves as if it doesn’t know the proper way to present its non-GAAP numbers. In an ironic twist, two attorneys at Wilson Sonsini Goodrich & Rosati, which helped take Tesla public in 2010, penned a lengthy article in 2008 explaining the legal requirements and best practices for earnings releases; it’s still on the law firm’s website.

 

“GAAP comparison numbers in an earnings release must be set forth with equal or greater prominence to the non-GAAP numbers,” attorneys Steven Bochner and Richard Cameron Blake wrote. “For instance, if an issuer announces GAAP and non-GAAP earnings per share in its press release, it should report the GAAP earnings per share prior to the non-GAAP earnings per share.”

 

The bigger concern here should be what some investors call the “cockroach theory”: Where there is one problem, there probably are more. Tesla has disclosed compliance failures before. In March, its management concluded that Tesla’s ‘‘internal control over financial reporting was ineffective as of Dec. 31, 2012.’’ Its auditor, PricewaterhouseCoopers LLP, concurred. In a related matter, Tesla had to restate its cash-flow numbers for much of 2011 and 2012. In its latest quarterly report, filed last week, Tesla said its controls still weren’t effective as of Sept. 30. 

Because the only thing better than one flaming cockroach are many flaming cockroaches.

Weil’s conclusion:

None of these flubs has been especially damaging. Yet taken together, they suggest a company that lacks basic skills in accounting and disclosure, which could be a serious problem for a young manufacturer with a $17 billion stock-market value that loses money and trades for 9.5 times its revenue for the past four quarters. The next time Tesla messes up because of poor controls, the consequences could be worse.

 

As Tesla said in its latest annual report: ‘‘If we are unable to assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion on the effectiveness of our internal controls, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on the price of our common stock.’’

Oh well, at least the fully spontaneously combusted Tesla Model S (because the safest car in the world is never expected do something as silly as run over a metal object while on the road) makes for a very handy, if slightly smoldering, paperweight.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Wdoq6Tcxejg/story01.htm Tyler Durden