The Market Ticker - Other Voices

Janet Is On It Again (Sovereign CDS)

nospam@example.com (Karl Denninger) — Mon, 08 Mar 2010 10:43:00 -0500

Congress should act immediately to abolish credit default swaps on the United States, because these derivatives will foment distortions in global currencies and gold. Failure to act now will only mean the U.S. will be forced to act after these "financial weapons of mass destruction" levy heavy casualties. These obligations now settle in euros, but the end game is to settle them in gold. This is so ripe for speculative manipulation that you might as well cover the U.S. map with a bull's-eye.

She then continues with information I was unaware of:

U.S. credit default swaps currently trade in euros. After all, if the U.S. defaults, who will want payment in devalued U.S. dollars? The euro recently weakened relative to the dollar, and market participants are calling for contracts that require payment in gold. If they get their way, speculators on the winning side of a price move will demand collateral paid in gold.

WHAT?!

OK, that's enough.

Congress must ban all credit derivatives that are not:

Sold over an insured interest, that is, if you don't own the bond you can't buy the "insurance" AND
Are not sold by an entity with proved, marked to market night ability to cover each and every contract sold.

That is, these things must be treated as insurance and regulated as insurance.

What we have now are literal hundreds of trillions of dollars of fraudulent paper contracts to pay a sum that the writer does not have, written for speculative (or worse, regulatory avoidance) rather than hedging purposes. These contracts are destabilizing, they are impossible to perform on without government backstop (as we saw with AIG) they are being sold at dramatically less than their true economic value (otherwise we wouldn't have had to bail out AIG) and they're being sold and used for either speculative purpose or worse, as a means of fraudulently avoiding regulatory constraints.

Congress must act to stop this crap now.

Janet Hits It Out Of The Park (Again)

nospam@example.com (Karl Denninger) — Thu, 04 Mar 2010 11:18:06 -0500

In Huffington Post.....

Wall Street got bonuses, taxpayers paid the bill, America got a deep recession, and the world got the worst financial crisis in history. Financial holocaust deniers obstruct solutions that can help prevent the next crisis and would stick taxpayers with the bill again.

Yep.... listen to the shills try to deflect the voice of reason....

Disgusting, isn't it?

Tell their advertisers what you think. It's the only way to be sure....

60 Minutes - Yes, It Was All A Scam

nospam@example.com (Karl Denninger) — Tue, 16 Feb 2010 13:33:00 -0500

Watch CBS News Videos Online

Janet Tavakoli appears 9:20 into this clip, which is worth watching in full. Here is part of what she said, along with a bit more...

Poking through the wreckage, many experts believe the root cause was a perfect storm: a monsoon of gullibility colliding with a tidal wave of greed.

"This was a massive Ponzi scheme. And it's the biggest crime against the American economy in our lifetimes, in fact, ever," analyst Janet Tavakoli explained.

Tavakoli is an analyst specializing in derivatives, the exotic financial instruments at the heart of the meltdown. She argues that the bad mortgage loans that fueled the crisis were repackaged by investment banks, sliced into increasingly complex derivatives and resold to other investors, even though the underlying mortgages were often virtually worthless.

"You had various traders buying each others' products to artificially keep the prices up so that the bubble didn't collapse," she told Safer.

Not only that. But the mortgage derivatives being traded were so mind-numbingly complicated, nobody understood them fully. Certainly not the pigeons: the buyers at banks, mutual funds, pension funds and insurance companies who wound up holding a bag full of worthless paper.

"But these guys are smart guys. They're all graduates of the finest business school, correct?" Safer asked.

"Yes. If they were gullible, they're sophisticated investors. So they can't really go back to the investment banks that sold them this product and say, 'We've been had.' Because they held themselves out to be experts in these kinds of securities," Tavakoli replied.

All of which proves that whether you're on Wall Street or Main Street, brain power is no defense against con men. In fact, smart guys may be the biggest suckers of all.

JT Note:

Also from the interview: “’We wouldn't want to live in a world where we couldn't be conned because in effect we would then be living in a world where we mistrusted or refused to trust anyone. So this is the price we pay,’ [Ricky] Jay said.”

I agree with Mr. Jay. Who would want to live in a world like that? But equally, who would want to live in a world where trusting hardworking taxpayers are unprotected by government so they become the easy prey of exploiters? That’s why we have laws. That way, we can remedy wrongs and make criminals pay the price. It’s time to put that theory into practice.

Here's the unasked question though (except by Janet!) - conning people is still against the law! How comes we don't see anyone being perp-walked among all those who conned these "wise men"?

AGAIN: WHERE ARE THE DAMN COPS?

Geithner Must Go

nospam@example.com (Karl Denninger) — Mon, 11 Jan 2010 18:12:06 -0500

I couldn't say it better myself.....

Visit msnbc.com for breaking news, world news, and news about the economy

Dylan Ratigan Reams Ed Perlmutter

nospam@example.com (Karl Denninger) — Tue, 15 Dec 2009 12:47:00 -0500

I wish I could embed this...... but you'll have to have a look over at the link.

Ratigan is taking no prisoners.

He's calling out exactly what I have said about derivatives and windfall state support to the banks - "inadvertent" profits my ass, this was all intentional!

It's about damn time to hear this sort of thing on mainstream TV.

Update: Here's the embed...

Visit msnbc.com for breaking news, world news, and news about the economy

Hoh Hoh: Tavakoli On Buffett

nospam@example.com (Karl Denninger) — Mon, 23 Nov 2009 11:36:00 -0500

Ed: I'd like to observe that not all that long ago, I went after Warren and got a rather stern "rebuke" of sorts from Janet, who engaged with me (via email) in a quite-spirited defense of Mr. Buffett.

My, how the worm turns.... welcome to the conclusion I reached months ago Janet.... I still love 'ya!

Warren Buffett, Stop Using My Credit Card! (pdf)

TSF – Opinion Commentary – November 23, 2009

By Janet Tavakoli

I like Warren Buffett. I even wrote a book about the financial crisis contrasting his principles of prudent finance with recent excessive leverage, bad lending, and malfeasance (Dear Mr. Buffett). Buffett is not a regulator, an altruist, a consumer advocate, or an elected official. As CEO and largest shareholder of Berkshire Hathaway, his goal is to maximize shareholder value.

U.S. capitalism has morphed into a financial oligarchy. If Buffett’s choice is between getting along in the financial community or the public interest, public interest loses. But he didn’t cause our financial crisis, and he spoke out in advance about excessive leverage and bad lending. The financial markets are now wildly distorted. Others have funding advantages Buffett can only dream about, so he exploits an advantage when it becomes available.

I have been a trenchant critic of rampant financial malfeasance, and Buffett has only wished me well and told me to “keep writing.” For my part, I try to keep in mind that we view the world through different lenses.

(Click the link above for the rest... it's worth it.)

ROFL!! Saturday Night Live

nospam@example.com (Karl Denninger) — Sun, 22 Nov 2009 11:46:32 -0500