A Conversation About Payroll Data That You Never Saw On CNBC
by Robert E. Bronson, III
Bronson Capital Markets Research

~~~~

Joereal at CNBC: We’re very pleased today to introduce Constant Pangloss for his take on today’s payroll data report.

Pangloss: Thank you, Joereal. I’m delighted to be here. Today’s report was just outstanding! To be factual, July’s loss of jobs was 44% less than June’s jobs loss and a huge 64% less than the biggest jobs loss in February! This “green shoot” is proof positive that the recession has nearly, if not already, ended, which is confirmed by today’s breakout bull market rally to a new intraday high at 1018 for the S&P 500!

Joereal: Did you notice that the 9.4% unemployment rate from the household survey would have been 9.7% rather than 9.4%, if some 422,000 unemployed people had not left the labor force during the four weeks prior to the survey, many of them so discouraged that they did not look for work because they know there are no jobs for them?

Or that the seasonal adjustment of the payroll data artificially created 28,000 jobs in the auto industry, when, in fact, automakers cut 8,600 jobs, so that the reported 247,000 jobs lost in July were really closer to 285,000 jobs or 15% worse than reported?

Pangloss: I’ll take your word for it, Joreal, but I find that hyper-technical, and in any case, it doesn’t change the solid uptrend of “green shoots” in the payroll data because of the current administration’s stimulus and their other constructive interventions.

…..

Read the rest of the post on The Big Picture

No related posts.

The story starts of when Dover joins the medium sized bank Vandebro (ABN AMORO) in the credit department. The book then goes on to tell the tale of him rising to the top of the credit derivatives game and moving on to Originator (Goldman Sachs) and ending his career close to the peak of the Credit Crunch at Irwin May (Morgan Stanley).

The book show the evolution of the credit markets and other capital markets from the view of a insider as well as showing the evolution of Andrew Dover from a mild mannered man of the British middle class to a cocky and arrogant investment banker and member of the $1 buck club (earning more than $1 million in total compensation for one year). The insight into the creation of the credit products being constructed is easy to understand and for those that may not be familiar with finance at all a helpful glossary is included at the back of the book. The reasoning for the creation of these products is also explained and is sound and valid up to the point where it gets to CDOs squared and cubed, then Dover starts to question the validity of what he is doing but refrains from being the one to scream fire at the money making factory even though everything was on fire and burning down.

This book is a great read for anyone looking to get a bit of insider information about the development in credit markets which did much is pushing the global financial markets over the edge and plunged us into the current financial crisis.

Related posts from the blog:

1. CTRL+ALT+DEL Credit Card
2. Article of the week (20/2009): My Personal Credit Crisis
3. When Markets Collide

http://www.youtube.com/watch?v=CXFEBbPIEOI

‘Nigel,

I have got to say that I think you have been rather less than even-handed in the way that you handled our small disagreement last week about how employees should conduct themselves in (and out of) the workplace. And being placed on suspension by that sycophantic loser in HR was just too much; if he was just a bit taller, I would have punched him!

Before I go to the expense of hiring a lawyer (again), I thought that it would make sense to send you a brief e-mail outlining the events as seen from my viewpoint, which will hopefully result in me being restored to my position as Head of Commodities Trading.

Let me start by confirming that you were correct that I misled you when I claimed my recent two-week unauthorized leave of absence was caused by me going down with the H1N1 flu virus; there was no virus and there was no quarantine. Having said that, and in my defence, I did have a very heavy cold. And, although I know that it looks bad that I returned to the office with what appeared to be a healthy sun-tan, I am disappointed that you chose not to accept my explanation that I had simply fallen asleep while under a sun-bed.

I would also like to point out that I do fully understand the firm’s expenses policy, and would like to restate that the bill, resulting from the recent bash I organised for my team and a few clients at that adult entertainment club, was not paid for out of our TARP pot – it came from the internal ‘errors and omissions’ account which was set-up for this purpose. I would also like to reassure you that I paid out of my own pocket for the services of Benny (‘the Giant’), the midget who turned-up to provide the dwarf-tossing entertainment; I even picked up the tab for his hospital care following his unfortunate accident at the party. In hindsight, I do accept, however, that I probably shouldn’t have hired that elephant from the circus. Having said this, it was hardly my fault that the animal was old and very short-sighted. And Benny was asking for it by sitting down on his break so close to the beast.

I’d also like to clear up the matter of me trading over my limits and mispricing my asset book. Let me first point out that, when I did this and made a shed-load of money a couple of years back, you promoted me. It seems a bit harsh, then, to use this against me now, just because I got caught short with that oil hedge and lost $564m. OK, I admit that hiding these losses was a bit silly, but it’s not my fault that those dumb-asses in Compliance took 9 months to uncover what I had done – that should not be held against ME.

Anyway, now that I’ve been able to clarify the key points, I trust that we can get back to normal. Unfortunately, I won’t be able to return to the office for at least 3 weeks, as I promised Benny I’d take him to Thailand for some fun (the ladyboys apparently get-off big time on midgets over there. And Benny is so excited, he seems almost to have forgot that he got squashed by the elephant). Oh, and if you need a proper tally of my trading book for the auditors, it’s hidden in a file on my computer. The file’s called ‘Losses’, and the password is ‘Bonus’.

See you soon.

Yours,

Dan’

Related posts from the blog:

1. Financial Humor – May 2009
2. Financial Humor #2 – March 2009
3. Financial Humor – April 2009

- Goldman Trading-Code Investment Put at Risk by Theft (Bloomberg)
- Sergio Posts Bond As Toxic Code Percolates In Cyberspace And Allows “Market Manipulation” (Zero Hedge)
- Breaking: FBI Arrest Opens Goldman-Sachs’ Pandora’s Box (Daily Kos)
- Goldman Code Theft BOMBSHELL? (Karl Denninger)
- Intraday Observations (Zero Hedge)
- “Incredibly Shrinking Liquidity” as Goldman Flushed Quant Trading (Daily Kos)
- The Goldman Sachs Tax (The Big Picture)

What is the inference of potentially illegality here?

FROM THE BIG PICTURE

“That Goldman Sachs may just possibly have used security access codes and built a system to acquire trading information PRIOR to transaction commit time points at NYSE.

The profitability of this split-second information advantage would have been and could have been extraordinary. Observed yielding profits at $100,000,000 a day. [summary to address complaints with respect to complexity.]

GS has special access inside the system from its status assisting the Working Group on Financial Markets (colloquially the Plunge Protection Team) created by Presidential Order two decades ago. GC also acts as Special Liquidity Provider for NYSE.

With 60% dominance of NYSE program trading, what’s good for Goldman defines what shows as overall market performance.”

This week I also wanted to share Michael Lewis’s article on AIG’s (AIG FP’s) Joseph Cassano in the latest issue of Vanity Fair titled: “The Man Who Crashed The World” [PDF via The Big Picture]. I’ve previously pointed out Tim Rayment’s article on Joseph Cassano but just to stress his importance to the current financial crisis I’d like to share this one as well. Following is a small excerpt:

Six months ago, I received an odd phone call from a man named Jake DeSantis at A.I.G. Financial Products—the infamous unit of the doomed insurance company, staffed by expensively educated, highly paid traders, whose financial ineptitude is widely suspected of costing the U.S. taxpayer $182.5 billion and counting. At the time A.I.G. F.P.’s losses were reported, it became known that a handful of traders in this curious unit had sold trillions of dollars of credit-default swaps (essentially unregulated insurance policies) on piles of U.S. subprime mortgages, but its employees hadn’t yet become the leading examples of Wall Street greed. And so this was before Jake DeSantis and his colleagues found themselves suburban-Connecticut outcasts, before their first death threats, before the House of Representatives passed a bill because of them (taxing 90 percent of their large bonuses), before New York attorney general Andrew Cuomo announced he was going after their paychecks, and before Iowa senator Charles Grassley said that A.I.G.’s leaders should follow the Japanese example and “either do one of two things, resign or go commit suicide.”

……

[READ THE REST]

Runner-ups:
- Mass grave of skeletons spewing forth from Kaupthing’s closet
- What if the Fed were a Bank?
- Ron Paul Is Right! We Should Audit the Fed
- The Wall Street White House
- How Iceland’s Lawyers Enabled Fraud

Related posts from the blog:

1. Article of the week (27/2009): Goldman Sachs: The Great American Bubble Machine
2. Articles of the week (17/2009): Investment Strategies That Work
3. Article of the week (25/2009): Have stock markets run away from reality?

The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled-dry American empire, reads like a Who’s Who of Goldman Sachs graduates.

By now, most of us know the major players. As George Bush’s last Treasury secretary, former Goldman CEO Henry Paulson was the architect of the bailout, a suspiciously self-serving plan to funnel trillions of Your Dollars to a handful of his old friends on Wall Street. Robert Rubin, Bill Clinton’s former Treasury secretary, spent 26 years at Goldman before becoming chairman of Citi-group – which in turn got a $300 billion taxpayer bailout from Paulson. There’s John Thain, the asshole chief of Merrill Lynch who bought an $87,000 area rug for his office as his company was imploding; a former GoIdman banker, Thain enjoyed a multibillion-dollar handout from Paulson, who used billions in taxpayer funds to help Bank of America rescue Thain’s sorry company. And Robert Steel, the former Goldmanite head of Wachovia, scored himself and his fellow executives $225 million in golden-parachute payments as his bank was self-destructing. There’s Joshua Bolten, Bush’s chief of staff during the bailout, and Mark Patterson, the current Treasury chief of staff, who was a Goldman lobbyist just a year ago, and Ed Liddy, the former Goldman director whom Paulson put in charge of bailed-out insurance giant AIG, which forked over $13 billion to Goldman after Liddy came on board. The heads ofthe Canadian and Italian national banks are Goldman alums, as is the head of the World Bank, the head of the New York Stock Exchange. the last two heads of the Federal Reserve Bank ofNew York – which, incidentally, is now in charge of overseeing Goldman – not to mention …

But then, any attempt to construct a narrative around all the former Goldmanites in influential positions quickly becomes an absurd and pointless exercise, like trying to make a list of everything. What you need to know is the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain – an extremely unfortunate loophole in the system of Western democratic capitalism, which never foresaw that in a society governed passively by free markets and free elections, organized greed always defeats disorganized democracy.”

……

[READ THE REST]

Here is a video intreview with Mr. Taibbi:

Runner-ups:
- Did the Sons Know?
- He’s Got Gamma
- Mass grave of skeletons spewing forth from Kaupthing’s closet

Related posts from the blog:

1. Article of the week (28/2009): Goldman Trading-Code Investment Put at Risk by Theft
2. Article of the week (23/2009): The Crisis and How to Deal with It
3. Article of the week (24/2009): Billionaire Tax Felon Says UBS Lied in Pledge to Report to IRS

It has all the makings of a classic B movie scene. A gunman puts a pistol to the victim’s forehead, and the screen fades to black before a loud bang is heard. A forensic specialist who traces the bullet’s trajectory would see it traversing the brain’s prefrontal cortex—a central site for processing decisions. The few survivors of usually fatal injuries to this brain region should not be surprised to find their personalities dramatically altered. In one of the most cited case histories in all of neurology, Phineas Gage, a 19th-century railroad worker, had his prefrontal cortex penetrated by an iron rod; he lived to tell the tale but could no longer make sensible decisions. Cocaine addicts may actually self-inflict similar damage. The resulting dysfunction may cause even abstaining addicts to crave the drug any time, say, the thudding bass of a techno tune reminds them of when they were stoned.

Even people who do not use illicit drugs or get shot in the head have to contend with the
reality that some of the decisions cooked up by the brain’s frontal lobes may lead them astray. A specific site within the prefrontal cortex, the ventromedial prefrontal cortex (VMPFC) is, in fact, among the suspects in the colossal global economic implosion that has recently rocked the globe.

The VMPFC turns out to be a central location for what economists call “money illusion.” The illusion occurs when people ignore obvious information about the distorting effects of inflation on a purchase and, in an irrational leap, decide that the thing is worth much more than it really is. Money illusion may convince prospective buyers that a house is always a great investment because of the misbegotten perception that prices inexorably rise. Robert J. Shiller, a professor of economics at Yale University, contends that the faulty logic of money illusion contributed to the housing bubble: “Since people are likely to remember the price they paid for their house from many years ago but remember few other prices from then, they have the mistaken impression that home prices have gone up more than other prices, giving a mistakenly exaggerated impression of the investment potential of houses.”

……

[READ THE REST]

Runner-ups:
- Over-the-Counter Derivatives: Modernizing Oversight
- The 7 Habits of Highly Suspicious Hedge Funds

Related posts from the blog:

1. Article of the week (14/2009): My Manhattan Project
2. Article of the week (13/2009): The Big Takeover
3. Article of the week (22/2009): Rising Interest Rates Finally Start to Matter

The predictions of the members of the Barron’s mid-year Roundtable discussion over the weekend were in agreement that the March lows of the stock markets would not be broken. This reminded me of one of the famous “Investment Rules” of Bob Farrell, legendary former chief stock market analyst at Merrill Lynch. Rule # 9 stated: “When all the experts and forecasts agree, something else is going to happen.”

Meanwhile, many stock markets yesterday registered their worst single-session percentage losses in a month. Commodities also faced heavy profit-taking, but government bonds rallied and the US dollar strengthened against a basket of currencies. “We could be seeing one of those occasional all-change signals in short-term trends,” said David Fuller (Fullermoney).

Richard Russell, veteran writer of the daily Dow Theory Letters, commented on Monday: “I’m of the opinion that this bear market rally is in the process of topping out. When a counter-trend rally tops out within an ongoing primary bear market, the odds are that the stock market will break to new lows during the period ahead. That means that the stock market will break below its March 9 lows in coming weeks. A violation of the March 9 lows would be a shocker to most investors, and it would be a forecast of an even worse economy coming up.”

As mentioned on Sunday, the S&P 500 had recently been mapping out a trading range between 925 and 950, as shown in the chart below. Yesterday’s close of 924 took the Index below the bottom of the range. As stock markets have started to show exhaustion (also seen from the low volume characterizing the last few days’ increases), the odds are that this could be more than a “false alarm”.

……

[READ THE REST]

Runner-ups:
- Wall Street’s Toxic Message
- Proposed Changes in Federal Regulation of the Financial Industry

Related posts from the blog:

1. Article of the week (24/2009): Billionaire Tax Felon Says UBS Lied in Pledge to Report to IRS
2. Article of the week (23/2009): The Crisis and How to Deal with It
3. Article of the week (28/2009): Goldman Trading-Code Investment Put at Risk by Theft

California billionaire Igor Olenicoff had already invested $200 million with UBS AG in 2001 when his Swiss bankers ushered him to an underground vault in Geneva.

Olenicoff, a real estate developer with a taste for yachts and Russian art, saw floor upon floor of safe-deposit boxes. His private banker, Bradley Birkenfeld, and a colleague showed Olenicoff his own space for valuables.

“They said, ‘Whatever you want — corporate stock, cash, gold, silver — put it in here,’” says Olenicoff, 66, at the Newport Beach, California, headquarters of Olen Properties Corp., the company he founded in 1973. “It was that aura of legitimacy and secrecy. They say, ‘We’re the world’s largest wealth manager,’ so how do you question?”

Birkenfeld, 44, had spent years wooing Olenicoff, visiting his homes in Laguna Beach, California, and Lighthouse Point, Florida; cruising on his 147-foot (45-meter) yacht to Mayan ruins in Honduras; and flying on his Cessna Citation II jet.

Four years later, both men are admitted felons. Since December 2007, the billionaire and his banker have pleaded guilty to tax crimes.

The court cases open a door on the normally secretive world of dummy companies, offshore havens and phony financial filings that wealthy Americans often use to avoid paying U.S. taxes. President Barack Obama has proposed to end such tax breaks for U.S.-based multinational corporations and individuals within a decade.

‘Obligation of Citizenship’

“Most Americans meet their responsibilities because they understand it’s an obligation of citizenship,” Obama said on May 4. “Yet there are others who are shirking theirs. We shouldn’t let some citizens dodge their responsibilities, while ordinary Americans pick up the slack. Unfortunately, that’s exactly what we’re doing.”

The Olenicoff and Birkenfeld cases come amid a widening U.S. crackdown on offshore firms that cater to wealthy Americans. U.S. Senator Carl Levin, a Michigan Democrat, estimates the cost in unpaid taxes to the U.S. Treasury is $100 billion a year.

With evidence from the Olenicoff case and cooperation from Birkenfeld, U.S. prosecutors have been able to penetrate the veil of financial invisibility that Switzerland guards as a national treasure.

To avoid immediate prosecution, UBS, Switzerland’s second- largest bank by stock market value, behind Credit Suisse Group AG, agreed on Feb. 18 to pay the U.S. $780 million.

It renewed a pledge to stop unlicensed recruiting of customers in the U.S. and agreed to cooperate with investigators during 18 months of probation. The bank admitted in court that it had helped American clients dodge taxes from 2000 to 2007.

52,000 UBS Accounts

The bank turned over information on more than 250 customers — an unprecedented breach of Switzerland’s bulwark of secrecy. The U.S. Internal Revenue Service is suing UBS in federal court in Miami to get the names of 52,000 American account holders who may have broken U.S. tax laws.

UBS is fighting back. The bank said in April 30 court filings that the U.S. efforts would force bank employees to violate Swiss criminal laws barring disclosure of secret account information. The Swiss government says the U.S. is trampling on its sovereignty.

If the bank fails to convince a federal judge that it shouldn’t turn over the names to the IRS, the court can fine UBS for civil contempt. The Justice Department, under the deferred- prosecution agreement, could seek criminal indictment of the bank, says tax attorney Robert Fink of Kostelanetz & Fink LLP in New York.

……

[READ THE REST]

Runner-ups:
- Poking Holes in a Theory on Markets
- ‘It’s time to enshrine Hank Paulson as national hero’ WTF?
- Fed Emails Bash BofA Chief in Tussle Over Merrill Deal
- RNC: What A Bunch Of Fools

Related posts from the blog:

1. Article of the week (20/2009): My Personal Credit Crisis
2. Article of the week (23/2009): The Crisis and How to Deal with It
3. Article of the week (21/2009): Joseph Cassano: the man with the trillion-dollar price on his head

Jeff Madrick: It was six months ago now that the Lehman debacle occurred, that AIG was rescued, that Bank of America bought Merrill Lynch; it was about six months ago that the TARP funds started being distributed. The economy was doing fairly poorly in much of 2008, and then fell off a cliff in the last quarter of 2008 and into 2009, shrinking at a 6 percent annual rate—an extraordinary drop in our national income. It is now by some very important measures the worst economic recession in the post–World War II era. Employment has dropped faster than ever before in this space of time.

We have a three-front problem: a housing market that went crazy as the housing bubble burst; a credit crisis, the most severe we’ve known since the early 1930s; and now a sharp drop in demand for goods and services and capital investment, leading to a severe recession. What gives us the jitters is that all of these are related. We have seen some deceleration in the rate of economic decline, and many people are saying that “green shoots” are showing. What is the actual state of the economy, and do we need a serious mid-course correction on the part of the Obama administration?

Bill Bradley: How far are we along in a recovery? When the market price of Citicorp drops from 60 to 1, and then comes back to 3, I don’t think that’s a recovery. Warren Buffett buys Goldman Sachs, and after he buys, the price drops 45 to 50 percent, and if he’s going to break even on the investment he’s got to earn 9 percent for the next twelve years, I don’t think that’s a recovery. The administration has put in place measures that, if they were to work, could offer some hope.

What I’d like to suggest is that if they don’t work, there’s an alternative. The national government has now made about $12.7 trillion in guarantees and commitments to the US financial sector, and we’ve already spent a little over $4 trillion in this crisis. Some institutions such as Citicorp, for example, received about $60 billion in direct assistance, and $340 billion in guarantees. So US taxpayers are into Citicorp for around $400 billion. If we look out to June, July, and if we see that the PPIP [Public-Private Investment Program, created by Treasury Secretary Timothy Geithner] is not succeeding, that the bank assets aren’t being bought at levels that they should be bought from the books of banks, then there is an alternative.

……[READ THE REST]

Runner-ups:
- Reagan Did It by Paul Krugman
- Profits and Balance Sheet Developments at U.S. Commercial Banks in 2008
- JPMorgan Hires Supertanker for Storage, Brokers Say
- Plan to Help Banks Clear Their Books Is Halted

Related posts from the blog:

1. Article of the week (20/2009): My Personal Credit Crisis
2. Article of the week (13/2009): The Big Takeover
3. Article of the week (21/2009): Joseph Cassano: the man with the trillion-dollar price on his head

This week’s article is Joseph Cassano: the man with the trillion-dollar price on his head by Tim Rayment in The Sunday Times. Following is a small excerpt and link to the print friendly version of the article. I recommend reading the print friendly version since it’s easier to read instead of having to continuously load a new page:

They were frightened for a long time, then suddenly they were angry. For millions of Americans, anxiety about a jobless, debt-laden future turned to disbelief when it emerged that AIG, the company at the centre of the world’s financial crisis, was handing out £300m in bonuses. It was the superpower’s Sir Fred moment. Just as Britain reacted with fury to the disclosure that Sir Fred Goodwin’s pension pot had been doubled as his bank neared collapse, so the US was shocked. The death threats came soon after. “I want them dead!” said one of a stream of messages that caused AIG staff to travel in pairs, park in well-lit areas, and dial 911 if followed. “I want their spouses dead! I want their children dead! I want their children’s children dead! I want the earth upon which they have walked salted so nothing will ever grow again!”

This was one of the greatest bailouts in history, after the biggest corporate loss in history, during the most serious challenge to world stability since the 1962 Cuban missile crisis. And here was AIG, the recipient of so much taxpayers’ money that the cheques exceed the value of the gold reserves in Fort Knox, paying bonuses to the very people who engineered the catastrophe.

Protesters toured the posh houses on Long Island Sound, an estuary northeast of New York City, with letters for AIG executives describing the plight of homeowners. But they were in the wrong place. Because the man who knows most about AIG’s troubles lives in a stucco-fronted house 3,000 miles away. Some call him Patient Zero: the virus that infected the world financial system was transmitted from a genteel square near Harrods. If you wait patiently in Knights-bridge you will see him, and he appears not to be a risk-taking type. He puts on his red crash helmet and cycles greenly off across the city, politely declining to comment on global calamities. This does not look like a person waiting at the curtains for the arrival of the FBI.

Can one man in London really be to blame for the collapse of capitalism?

……

Runner-ups:
- Potential Funding Worries Send Shudder Through Markets
- Sold To You, SUCKA!
- Do Be Wary of Green Shoots

Related posts from the blog:

1. Article of the week (14/2009): My Manhattan Project
2. Article of the week (20/2009): My Personal Credit Crisis
3. Article of the week (23/2009): The Crisis and How to Deal with It