Tuesday, September 02, 2014

Insiders Are Selling Stocks While Companies Are Borrowing Money To Buy Stocks. Profits Are 'Dodgy' & Capital Investment For The Future Is Not Happening. Charles Hugh Smith Makes A Good, But Brief Argument That Corporate America Is Being Hollowed Out. See His Comments & Try To Dispute His Point:
Things Are Not Nearly As
Strong As They Think They Are
"The hollowing out of corporate strengths to enable short-term profiteering by the handful at the top leads to systemic fragility .. 
Where is the data showing insiders buying hand over fist at these valuations? Insider selling has been raising red flags since March 2014: In-the-know insiders are dumping stocks ..
Where is the data proving Corporate America isn't borrowing billions of dollars and using the nearly-free money to buy back shares? Buying back shares reduces the float (stocks available for purchase by the public), reducing supply and creating demand which pushes prices higher
Stocks’ Biggest Gains Are an Inside Job Companies spent $598.1 billion on stock buybacks last year. That was the second highest annual total in history
Where is the data showing Corporate America has added jobs?
Who actually creates jobs: Start-ups, small businesses or big corporations?
No shock is needed to bring down these fragile corporate structures: existing debt and the slightest tremor of global recession will be enough to topple the rickety facade." 
- Charles Hugh Smith*
link here to Smith's Comments
An Economist Walks Into a Bar
Monday Night Special
Robert Litan explores the surprising role economists have played in the development of the internet economy -- & quite possibly your love life .. As an economist & attorney, Litan has had nearly four decades of experience in the worlds of the law, economic research and policy, and as an executive in the private, public & government sectors .. he has directed economic research at 3 major organizations .. his most recent book, The Trillion Dollar Economists will be published this month .. 16 minutes
Chapter 8 Of 
Berkshire Beyond Buffett: 
Free Download
The following is an excerpt from Chapter 8, Autonomy, from Lawrence Cunningham’s upcoming book, Berkshire Beyond Buffett: The Enduring Value of Values; the full text of the chapter, which considers the case for Berkshire’s distinctive trust-based model of corporate governance .. "Berkshire corporate policy strikes a balance between autonomy and authority. Buffett issues written instructions every two years that reflect the balance. The missive states the mandates Berkshire places on subsidiary CEOs: (1) guard Berkshire’s reputation; (2) report bad news early; (3) confer about post-retirement benefit changes and large capital expenditures (including acquisitions, which are encouraged); (4) adopt a fifty-year time horizon; (5) refer any opportunities for a Berkshire acquisition to Omaha; and (6) submit written successor recommendations. Otherwise, Berkshire stresses that managers were chosen because of their excellence and are urged to act on that excellence .. Berkshire’s approach is so unusual that the occasional crises that result provoke public debate about which is better in corporate culture: Berkshire’s model of autonomy-and-trust or the more common approach of command-and-control. Few episodes have been more wrenching and instructive for Berkshire culture than when David L. Sokol, an esteemed senior executive with his hand in many Berkshire subsidiaries, was suspected of insider trading in an acquisition candidate’s stock."
LINK HERE to download the chapter
Warren Buffett's 23 Most Brilliant 
Insights About Investing
Always have lots of liquidity: "I have pledged – to you, the rating agencies and myself – to always run Berkshire with more than ample cash. We never want to count on the kindness of strangers in order to meet tomorrow’s obligations. When forced to choose, I will not trade even a night’s sleep for the chance of extra profits."
LINK HERE to the 23 Slides
Primer On The
Shadow Banking System
Financial Sense special educational segment provides insight & clarity on what the shadow banking system is, who runs it, who are the players, what the risks are, how it relates to the international monetary system .. Laura Kodres from the IMF answers questions .. advises to pay close attention to whether or not the risks of shadow banking are dangerous when they contribute to excessive credit growth .. "One needs to be very flexible and consistent about monitoring the actual products that are being innovated or coming out of these institutions, how they're being used, why they're being used, and who they're being used by. ...And I would leave your listeners with the notion that it's really important to pay attention to people who have lived through past crises. It's amazing how many pieces of wisdom and knowledge they have lived through earlier crises and they can see the connections between what happened this time and what happened in 1998 or what happened in 1994 and so on. So keeping these people in the room and keeping their histories and their insights alive are an important element in preventing future mistakes from happening."
LINK HERE to the transcript
Gold Seasonality Chart Points 
to Strong Gains September
through February
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Ambrose Evans-Pritchard 
Interview
McAlvany Commentary with our favorite 'doomsday' journalist - discussion on the euro zone crisis from a European perspective .. NNOO on all issues .. 50 minutes
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Federal Reserve May Be
Down To Its Last Bullet
WHERE DOES THE FEDERAL RESERVE GET THE AUTHORITY
TO DO AS IT HAS DONE?
THAT IS THE WRONG QUESTION. THE RIGHT QUESTION IS
WHO HAS THE POWER TO STOP IT?
Ellen Brown*: The recent essay in Foreign Affairs recommending the Federal Reserve do a money drop directly on the 99%: "When an article appears in Foreign Affairs, the mouthpiece of the policy-setting Council on Foreign Relations, recommending that the Federal Reserve do a money drop directly on the 99%, you know the central bank must be down to its last bullet." .. On the Federal Reserve: "The Fed, however, is 'independent.' At least, it is independent of government. It marches to the drum of Wall Street, but it does not need to ask permission from voters or legislators before it acts. It is basically a dictatorship. The Fed did not ask permission before it advanced $85 billion to buy an 80% equity stake in an insurance company (AIG), or issued over $24 trillion in very-low-interest credit to bail out the banks, or issued trillions of dollars in those glorified 'open market operations' called quantitative easing. As noted in an opinion piece in the Atlantic titled How Dare the Fed Buy AIG: It’s probable that they don’t actually have the legal right to do anything like this. Their authority is this: who’s going to stop them? No one wants to take on responsibility for this mess themselves."
LINK HERE to the essay
"Forget All The Happy Talk"
"The Economy Has Severe Trouble"
Economist John Williams says forget all the happy talk about the improving U.S. economy: "The economy is in severe trouble .. When you see a contraction as we had in the first quarter, given all the upside biases that the government puts into the series, you know the economy is in serious trouble. The second quarter was reported at 4% (GDP). They revised it up to 4.2%. That is not much of a revision, and it is barely significant when you consider there is a margin of error plus or minus three and a half percentage points. Early numbers we have seen on the third quarter suggests that the third quarter is going to be weaker. The numbers for the second quarter . . . do not support 4% growth. There is no way that is happening." .. on the macro view: "Everything the Fed has been doing to pump this extraordinary amount of liquidity into the system has been aimed at propping up the banks .. The banks are still in trouble. From here on in, it’s going to get worse, and as it does, the Fed is going to have to pump more liquidity into the system .. They will use the poor economy as a political shield. As the economy turns down." .. On the issue of bank bail-ins, will they happen? Williams thinks no, they will not happen as he thinks the Fed will just keep printing money to keep the banks afloat .. NNOO .. 28 minutes

Financial Repression Is 
The Only Solution 
(From The Fed & The Government's Perspective)
How will these U.S. budget deficits be financed when the present budget debates cause such Congressional wrangling & gridlock? Financial Repression is in preparation for the inevitable that is now clearly visible.
- Gordon T Long*
The Current Speed of
Global Growth Comes
With A Major Problem
Economist Stephen Roach* says the global economy is growing, but not by much .. "Collectively, the annual growth rate in the major developed economies averaged a little less than 0.7% in the first half of 2014 .. America’s paltry 1% growth led the way, while Japan and Europe, whose combined GDP is roughly equal to that of the U.S. in purchasing-power-parity terms, recorded no better than a 0.3% increase."
link here to the article
Steve Keen* on
The Euro Debt Crisis
Describing himself as a "long-term critic of conventional economic thought", Economist Steve Keen* worries about the prospects for economic growth in Europe, given the approach being emphasized in Europe as deleveraging both the private sector & the public sector concurrently .. Keen advocates a modern-day version of a debt-jubilee for cancelling "unpayable" debt .. 4 minutes

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Europe Has A Fantastic
Bond Bubble
How The Central Banks 
Have Unleashed Monumental Speculation
"Capitalism gets into deep trouble when the price of financial assets becomes completely disconnected from economic reality and common sense. What ensues is rampant speculation in which financial gamblers careen from one hot money play to the next, leaving the financial system distorted and unstable—a proverbial train wreck waiting to happen .. That’s where we are now. And nowhere is this more evident than in the absurd run-up in the price of European sovereign debt since the Euro-crisis peaked in mid-2012 .. This means that leveraged speculators—-and they are all leveraged on repo or similar forms of hypothecated borrowings—-have made a killing, harvesting triple-digit gains on the thin slice of non-borrowed capital they actually have at risk in these carry trades .. Not only did the resulting combo of a rising euro and soaring peripheral bond prices result in a tsunami of hot money into the euro markets, but it also laid the planking for today’s pathetic excuse that Europe is suffering from an economic affliction that can only be solved with an even more fantastic increase in ECB monetary intervention—-even beyond the financial repression it has in place today including negative deposit rates."
- David Stockman*
LINK HERE to the essay
Chinese Were First
On Many Inventions,
But Lost Momentum
In his latest letter, Tim Price lists the many inventions to which the Chinese were well ahead of the West, in many cases by centuries of time beforehand: the invention of the printing press, paper, toilet paper, the seed drill, the fishing reel, matches, the magnetic compass, playing cards, the toothbrush & the wheelbarrow .. How did a society apparently so dynamic and innovative by comparison with the West then enter a centuries’ long decline ? Niall Ferguson, in his excellent book Civilization puts forward 6 'identifiably novel complexes of institutions and associated ideas and behaviors' that account for the cultural & economic outperformance of the West between, say, the 16th & 20 centuries: Competition, Science, Property rights, Medicine, The consumer society, The work ethic .. Tim Price emphasizes how the West has lots its vitality & belief in these 6 areas .. "If the West wishes to regain its economic vigor versus Asia, it would do well to remember what made it so culturally and economically exceptional in the first place."
LINK HERE to the PDF
Gen X, Millennials & 
Their Parents Are Screwed 
By U.S. Social Security
Will The U.S. Destroy Its Currency To Meet The Obligations?
The U.S. social security system for American retirees is estimated to go bankrupt within 16 years .. this is a transcript on this subject between Kurt Wallace & Charles Goyette, author of The Dollar Meltdown .. Goyette: "They are in a word, well they’re screwed, basically. Not only are they not going to get social security that they’re paying in for but the demographics of social security are shifting so badly .. Well even in 1945 there were 42 people paying in to the social security Ponzi scheme for every retiree. Well, you can float a game like that for a long time, you know .. But that number is going down and Generation X is in the crosshairs. I mean today from 42 people paying in for every recipient after WWII were down today to 2.9 maybe even a little lower than that as we speak. 2.9 people paying into social security for every retiree. In the next 15 years or so that’ll be down to 2 workers for every retiree .. So, not only have these people been loaded with a lifetime of debt that they will be struggling under but now you know for every two of them is going to be expected to support the retirement of one of the wealthiest generations in history. And ultimately Kurt, ultimately where we’re headed is one worker per retiree. So, what they have created for us is nothing short of a demographic war. I mean these people are not going to put up with it .. The only means that the government has of meeting these obligations is basically involves the destruction of the currency."
LINK HERE to the transcript
Derivatives Guru 
Janet Tavakoli
Discusses the derivative risks on this BBC podcast .. can we be confident that new rules for banks are keeping us safe? .. begins at approximately minute 7:20, for about 7 minutes - NOTE: click on "LISTEN NOW 18 MIN" above "Bringing Russia To Heel" (1 September is the date of the broadcast)
LINK HERE to the BBC podcast
"We Live In Exceptionally 
Interesting Times"
The Amphora Report's John Butler discusses 1 - the Launch of the BRICS Development Bank (fascinating discussion on the global geo-political developments), 2- the Sino-Russia energy deal & 3- the Ukraine crisis .. 20 minutes

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Monday, September 01, 2014

John Butler - Part 1 
The Dollar Reserve Equilibrium 
Is Breaking Down"
John Butler - Part 2 
The Real Earthquake 
In Financial Markets 
Is Yet To Come
Discussion on some of the major aspects of international affairs as they relate to the sphere of finance .. focus on the U.S.$ & the challenges that may arise if China would back the yuan with gold. Butler: if gold would be remonetized in a historical proper fashion, its price would be a lot higher .. part 2 on the collapse of the paper gold market; the prospect of trading nations refusing paper money in exchange for their exports; why the euro was perhaps in principal a fine idea, but won't survive in its current form .. a few months ago, but still relevant .. 20 minutes each piece