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Wall Street on the Lam

Slashing executive salaries, bonuses and perks at the seven bailed-out companies that gorged most gluttonously at the public trough is emotionally satisfying, but it shouldn’t be. It’s like arresting jaywalkers while ignoring the bank robbery that’s happening in broad daylight down the block.

Don’t get me wrong. The Obama administration’s “pay czar,” Kenneth Feinberg, is right to put a lid on compensation at the Not-So-Magnificent Seven: Citigroup, Bank of America, General Motors, Chrysler, GMAC, Chrysler Financial and the unforgettable AIG.

Twenty-five of the biggest earners at each of those firms will have their overall compensation cut roughly in half, and most of that will come as restricted company stock, not cash. This means that what they ultimately reap, when they are eventually allowed to sell the stock, will depend on how well the company performs — which will depend on how well the executives do their jobs.

Tying pay to performance: What a concept.

Feinberg even muscled outgoing Bank of America chief executive Kenneth Lewis into accepting no pay or bonus for this year. But Lewis will still have an estimated $70 million retirement package to keep him warm at night, so hold your tears.

It’s nice to know that there must be some pooh-bah at B of A, Citigroup or AIG who will have to live without the new $90,000 Porsche Panamera he was planning to buy. But Feinberg’s writ of imperial decree doesn’t extend beyond those seven companies, and the rest of Wall Street gives no indication of remotely understanding what the big deal is about compensation.

Goldman Sachs, for example, has a bonus pool this year of at least $16 billion and perhaps as much as $23 billion.

But all this is just a sideshow. The main event is the limited, far-too-modest attempt by the Obama administration and Congress to curb the irresponsible Wall Street practices that led to the financial meltdown — and, if unaddressed, will lead inexorably to the next crisis.

Deregulation allowed the financial marketplace to devolve from an institution that served the overall economy — by allocating capital most efficiently to the companies that could put it to best use — into an institution whose primary mission was to serve itself.

The vast over-the-counter trade in instruments known as derivatives, nominally worth a staggering $600 trillion worldwide, is largely an exercise in make-believe. Firms make highly leveraged investments in exotic securities whose true value is opaque. Then they hedge these investments by buying insurance against potential losses, although the insurer doesn’t have a fraction of the money it would need to make good on all its promises.

All this investing and hedging generate huge transaction fees and big profits, which can be skimmed off the top each year.

Everything’s fine, until there’s some disruption in the real economy — a downturn in the housing market, say. If the disruption is severe enough, the web of make-believe deals starts to unravel. At which point the government steps in and bails everybody out.

Capping salaries and bonuses is fine. But we need to pay attention to the guys in ski masks with bulging bags of money slung over their shoulders. They’re about to jump into the getaway car.

The Death of American Capitalism?

ARROYO GRANDE, Calif. (MarketWatch) — Jack Bogle published “The Battle for the Soul of Capitalism” four years ago. The battle’s over. The sequel should be titled: “Capitalism Died a Lost Soul.” Worse, we’ve lost “America’s Soul.” And worldwide the consequences will be catastrophic.

That’s why a man like Hong Kong’s contrarian economist Marc Faber warns in his Doom, Boom & Gloom Report: “The future will be a total disaster, with a collapse of our capitalistic system as we know it today.”

No, not just another meltdown, another bear market recession like the one recently triggered by Wall Street’s “too-greedy-to-fail” banks. Faber is warning that the entire system of capitalism will collapse. Get it? The engine driving the great “American Economic Empire” for 233 years will collapse, a total disaster, a destiny we created.

You know something’s very wrong: A year ago “too-greedy-to-fail” banks were insolvent, in a near-death experience. Now, magically they’re back to business as usual, arrogant, pocketing outrageous bonuses while Main Street sacrifices, and unemployment and foreclosures continue rising as tight credit, inflation and skyrocketing Federal debt are killing taxpayers.

Yes, Wall Street has lost its moral compass. They created the mess, now, like vultures, they’re capitalizing on the carcass. They have lost all sense of fiduciary duty, ethical responsibility and public obligation.

Capitalism has been the engine driving America and the global economies for over two centuries. Faber predicts its collapse will trigger global “wars, massive government-debt defaults, and the impoverishment of large segments of Western society.” Faber knows that capitalism is not working, capitalism has peaked, and the collapse of capitalism is “inevitable.”

When? He hesitates: “But what I don’t know is whether this final collapse, which is inevitable, will occur tomorrow, or in five or 10 years, and whether it will occur with the Dow at 100,000 and gold at $50,000 per ounce or even confiscated, or with the Dow at 3,000 and gold at $1,000.” But the end is inevitable, a historical imperative.

While the timing may be uncertain, the trigger is certain. Societies collapse because they fail to plan ahead, cannot act fast enough when a catastrophic crisis hits. Think “Black Swan” and read evolutionary biologist Jared Diamond’s “Collapse: How Societies Choose to Fail or Succeed.”

A crisis hits. We act surprised. Shouldn’t. But it’s too late: “Civilizations share a sharp curve of decline. Indeed, a society’s demise may begin only a decade or two after it reaches its peak population, wealth and power.”

“How are you so sure about this final collapse?” The answer: “Of all the questions I have about the future, this is the easiest one to answer. Once a society becomes successful it becomes arrogant, righteous, overconfident, corrupt, and decadent … overspends … costly wars … wealth inequity and social tensions increase; and society enters a secular decline.” Success makes us our own worst enemy.

Quoting 18th century Scottish historian Alexander Fraser Tytler: “The average life span of the world’s greatest civilizations has been 200 years” progressing from “bondage to spiritual faith … to great courage … to liberty … to abundance … to selfishness … to complacency … to apathy … to dependence and … back into bondage!”

15 more clues capitalism lost its soul … is a disaster waiting to happen

Much more evidence litters the battlefield:

1. Wall Street wealth now calls the shots in Congress, the White House
2. America’s top 1% own more than 90% of America’s wealth
3. The average worker’s income has declined in three decades while CEO compensation exploded over ten times
4. The Fed is now the ‘fourth branch of government’ operating autonomously, secretly printing money at will
5. Since Goldman and Morgan became bank holding companies, all banks are back gambling with taxpayer bailout money plus retail customer deposits
6. Bill Gross warns of a “new normal” with slow growth, low earnings and stock prices
7. While the White House’s chief economist retorts with hype of a recovery unimpeded by the “new normal”
8. Wall Street’s high-frequency junkies make billions trading zombie stocks like AIG, FNMA, FMAC that have no fundamental value beyond a Treasury guarantee
9. 401(k)s have lost 26.7% of their value in the past decade
10. Oil and energy costs will skyrocket
11. Foreign nations and sovereign funds have started dumping dollars, signaling the end of the dollar as the world’s reserve currency
12. In two years federal debt exploded from $11.2 to $23.7 trillion
13. New financial reforms will do little to prevent the next meltdown
14. The “forever war” between Western and Islamic fundamentalists will widen
15. As will environmental threats and unfunded entitlements

“America Capitalism” is a “Lost Soul” … we’ve lost our moral compass … the coming collapse is the end of an “inevitable” historical cycle stalking all great empires to their graves. Downsize your lifestyle expectations, trust no one, not even media.

Is Capitalism a Love Story or Nightmare?

Many Americans think that Capitalism and Democracy are the same thing.  This is simply not true.

Michael Moore has proven again and again that he has a remarkable feel for where the zeitgeist is heading. He’s like a zeitgeist divining rod.

Roger and Me was way ahead of the curve on the collapse of the auto-industry. Fahrenheit 9/11 was way ahead of the curve on the collapse of the house of cards the Bush administration used to lead us to war in Iraq. Sicko was way ahead of the curve on the collapse of the US health care system. And now with his new movie Capitalism: A Love Story he is riding the wave of the collapse of trust in our country’s financial system.

The film, which opens in New York and Los Angeles on Wednesday, and all across the country on October 2nd, is a withering indictment of the current economic order, covering everything from Wall Street’s casino mentality to for-profit prisons, from Goldman Sachs’ sway in Washington to the poverty-level pay of many airline pilots, from the tidal wave of foreclosures to the tragic consequences of runaway greed.

The film also turns the spotlight on some underreported gems: an internal Citibank report happily declaring America a “plutonomy,” with 1 percent of the population controlling 95 percent of the wealth; an expose of “dead peasant” insurance policies that have companies cashing in on the untimely deaths of their employees; and amazing footage of FDR, found buried in a film archive and not seen in decades, calling for a Second Bill of Rights that would guarantee all Americans a useful job, a decent home, adequate health care, and a good education.

In capitalism as envisioned by its leading lights, including Adam Smith and Alfred Marshall, you need a moral foundation in order for free markets to work. And when a company fails, it fails. It doesn’t get bailed out using trillions of dollars of taxpayer money. What we have right now is Corporatism. It’s welfare for the rich. It’s the government picking winners and losers. It’s Wall Street having their taxpayer-funded cake and eating it too. It’s socialized losses and privatized gains.

While unfurling yellow crime scene tape in front of a “too big to fail” bank, he became aware of a group of New York’s finest approaching him. Moore has a long history of dealing with policemen and security guards trying to shut him down, but in this case he knew he was, however temporarily, defacing private property. And his shooting schedule didn’t leave room for a detour to the local jail. So, as the lead officer came closer, Moore tried to deflect him, saying: “Just doing a little comedy here, officer. I’ll be gone in a minute, and will clean up before I go.”

The officer looked at him for a moment, then leaned in: “Take all the time you need.” He nodded to the bank and said, “These guys wiped out a lot of our Police Pension Funds.” The officer turned and slowly headed back to his squad car. Moore wanted to put the moment in his film, but realized it could cost the cop his job, and decided to leave it out. “When they’ve lost the police,” he told me, “you know they’re in trouble.”

Show Me the Deal

FRANK: The opportunities come as people start to really feel pain. There’s still shock, but I don’t think the actual pain has really set in. I think there will be good deals come this fall? It’s like a sneeze. It’s still getting there.

ANGLES: But isn’t this broad-based downturn so much different than the last one? Then, people were saying the Internet was over. Internet advertising was a fraud. No one’s saying that now.

FRANK: That was really a stock downturn. Everybody’s stocks were in the toilet and no one could get free money any more for your Pets.coms. It was just a stock play, all driven by The Greater Fool. That was then. In some respects, that is replaying now. People are not in a rush to spend, and I don’t think it’s going to snap back.  It’s harder for people to raise money.

Unless the Dow goes back to 14,000, which it won’t, people will start to realize, by this fall, that this stuff is not bouncing back. The economy is not going well, and we’re going to see some serious panic selling set in and it’s going to create huge opportunity.

ANGLES: So what should people do?

FRANK: The name of the game right now is to keep your cash close. So if you’ve got cash and a good opportunity comes along, you can go for it. Look for distressed situations. But for now, save. There will come a time to spend, based on the prices that I’m seeing.

ANGLES: Isn’t one reason that prices of domains are not aligned with the economy because, no matter how hard people try, there’s not a liquid aftermarket?

FRANK: Exactly. And that’s a blessing and a curse. You can go in and buy names way below true value because not everyone knows about it. On the other hand, there’s no liquidity and names go for too much.

ANGLES: Have you been buying many names?

FRANK: We’ve been buying names the whole way. We’re buying a lot less now then we used to. We saw Gocart.com come down the chute a while back and we were hemming and hawing, should we? We came up with a sensible number and it went for three times that, over $90,000.

ANGLES: Wow.

FRANK: Right. And it’s not just gocarts.com. It’s everywhere right now.

ANGLES: Fair enough, but isn’t it in your best interest to say domains are expensive now? Whereas a few of years ago, when VCs and big money guys were prowling in the space, it was in your advantage to talk about how much names are worth?

FRANK: That statement is true, but I never felt that good “talking my own book,” because firstly people see through that, and, secondly, I’d feel terrible if somebody reads something I write, acts on it and fails. Total bad karma.

The truth is that today, while plenty of people expect way too much, some names are valued fairly, and others are cheap. But collections of portfolios still sell at a fairly large discount to intrinsic value because there are very few people who can hold each name to the light and correctly assign a fair value to each, so the PPC value of the collection becomes it’s default value (it meets GAAP rules and seems sensible) but that massively undersells the break-up value of most portfolios.  The breakup value flows to the buyer for free.

ANGLES: But who’s buying giant portfolios these days?

FRANK: Nobody. A great deal of this is moot because there are no corporate or equity buyers today—when most of the publishing world and corporate-America and the equity and investment shops are trying to keep their head above water and survive the worst global downturn in 80 years.

ANGLES: But isn’t that shortsighted? Don’t we all now know and accept that more advertising is migrating to the Web and that prices and payouts are just that things are down because the economy is a mess?

FRANK: That’s true. And you have a dominant marketplace, Google, which performs exceedingly well and could pay out much more. The next nearest market place, Yahoo, cannot pay out as well. Google knows that, so it pays out a lot less than it could, and so that’s just the way it is.

What you need is a disruptive force – or a series of disruptive forces – to come along and create another ad market place and create some competition. You can’t have a marketplace where the entire domain world is parked on Yahoo and Google and the power rests with the publisher, but that’s what we have.

13. Isn’t part of the problem that, in so many cases, there’s really no way to value a name in so many cases? That it’s really not like real estate because so often comps don’t exist?

FRANK: Yes but real-world comps exist. Take any name—and I’m pulling this out of the air—“Hair Styles” (actually, my wife just suggested it). There may be ZERO comparables for hair and hairstyle related names, but we know that a cut costs $15 at Supercuts and $600 at the Christophe Salon in Beverly Hills, then I know that products range from $15 to $100s, I know that a monthly rent or an ad in a national magazine can cost thousands or tens of thousands, so with that sort of back-of-the-envelop-thinking, and without much effort, I can set a floor of ten or twenty thousand dollars for the name.

That’s a price I’d consider paying, that would make it worthwhile to part with the cash and carry the name.

Then you have external factors such as competitors and other hair companies who may be willing to buy the name and relatively quickly you can see how something with no obvious comparables can still have a high market value.

There are always traffic that the name gets but we rarely actually price these into the value of the name. Traffic is just the bonus for owning the name.

Modern Day Government Subsisdized Loansharks

Where is the help for the hard working men and women that helped to build and maintain this great country of ours?

US banks stand to collect a record $38.5bn in fees for customer overdrafts this year, with the bulk of the revenue coming from the most financially stretched consumers amid the deepest recession since the 1930s, according to research. The fees are nearly double those reported in 2000.

The finding is likely to increase public hostility towards the financial sector, which has been under political pressure to ease the burden on consumers by increasing credit availability and lending more fairly after being bailed out by taxpayers.

The median bank overdraft fee has this year rose from $25 to $26, according to Moebs, the first time it has gone up in a recession for more than 40 years.

“Banks are returning to a fee-driven model and overdraft fees are the mother lode,” said Mike Moebs, the company’s founder.

Overdraft fees accounted for more than three-quarters of service fees charged on customer deposits, he said.

The most cash-strapped customers are the hardest hit by such fees, with 90 per cent of overdraft revenues coming from 10 per cent of the 130m checking accounts in the US. Regular use of overdrafts is most common among consumers with low credit scores, Moebs discovered.

How much is Joe American, used to being middle class,  expected to suffer?

We are all getting tired of being raped by the so called suffering financial institutions in this country and the Fed.

Yet they somehow find the funds to pay out billions in exorbitant  bonuses, while denying credit to the businesses that can help get America and the GDP moving more positive.

Maybe it’s time for the average consumer to pay cash or put it away, like the old days on layaway.

I’m thinking that we all have responsibility in this crisis, but many of us are also getting tired of being plugged in the ass dry.  Cash is king for now and if you can’t afford to pay cash maybe it’s more of a want than a need. To be truthful I’m looking forward to a simper, kinder, and more loving America.

Ironically it seems like those who are most affected by the economy,  are also the same families and individuals who are best coping with our current economic crisis.

If this is capitalism, then I suppose I’m guilty of being a socialist.

I believe in the fair and equitable distribution of wealth.  The hypocrisy in this nation never ceases to amaze me.  We claim to be a God Fearing and loving Nation, yet we turn a blind eye to those who can’t take care of themselves.  Unless they are in the womb, then after they are born they are on their own.

The real travesty of justice, is that this country has more than enough resources to take care of everyone.  The elite 1% could still have their 24K gold plated fixtures on their G550′s and mega yachts.  They just need to pay more taxes.

Is anyone else tired of seeing  the rich housewives of  New York, New Jersey, and California  paying more for a purse then it would cost a family of four to pay for health care in the U.S?

Not too mention the state of CA is going broke.  They are issuing IOU’s to pay bills.  Does anyone besides me see a problem with that.  Why should we continue to subsidize the rich when they are more than capable of paying their fair share of taxes?

We are spending hundreds of billions if not trillions fighting wars in Afghanistan and Iraq.  Mostly for the protection of an antiquated fuel source called oil and the cheap economy it supports.

Don’t kid yourself, we are not spending billions in Iraq and Afghanistan to save humanity and the democratic/capitalistic way of life, or in a futile attempt to eradicate opium.  It’s all about fossil fuels and the upcoming energy wars.

The Afghans have been living in turmoil for 30 years or more.  Most of them are illiterate which makes the dissemination of information difficult if not very improbable.

Afghanistan brought down the U.S.S.R. with our help in the 80′s.  They may very well do the same to to the United States of America,  maybe this time with Russia and China’s help.   Unless cooler and more intelligent heads prevail, I fear we are heading down that very road.

The U.S.S.R didn’t get it, until it was too late.  Hopefully we can and history doesn’t repeat itself again.  It’s about time that we got over ourselves and realized just because we have the most nukes doesn’t give us the right to be the worlds bully and police force.  Maybe someday we can really give peace a try.

The Afghanistan war will cost us much more than the Vietnam War, both in human and monetary cost.  Do we even have proof that they are enemies?  Or are they for the most part poor illiterate uneducated farmers trying to provide for their families.

These are people that have known nothing but war for over 30 years, are we really that arrogant to think we can win this war?  Let’s face the truth, most American have no idea of the true horrors of war.  It’s become something we put on a balance sheet.

If we learn nothing from the past,  I Pray that we can learn quite quickly that we will never win in Afghanistan.  Look what it did to the Russians and the empires before them.  Afghanistan brought down the Soviet Union and it will do the same to us if we don’t learn from past mistakes.   The U.S simply cannot afford to be the world’s policeman at this time.

Bottom line most middle class Americans are living on borrowed time.  Once the credit is exhausted shit will really begin to hit the fan.

How much more are the working men and women of this great country supposed to endure?  All the while the fat cats of Wall St. grow richer at the taxpayers expense.

Why do we think that as Americans we have the right to tell the rest of the world how to live and run their governments, when we can barely run our own country?

Maybe it’s time for us to get our own country into better fiscal shape, before we take on the world.

The Romans thought they had a good plan too,  until they realized it was too late.

Let’s hope that the United States of America doesn’t have to make the same mistakes by spreading our military strength too thin, until we realize it is economically and politically unsustainable.

He truly is the spirit of Detroit

Music Videos – Kid Rock – American Badass (Uncensored)

An eye opening video by our own politicians.  See what is really going on within the Federal Reserve.