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Tuesday, October 26, 2010

The More That Things Change The More They Stay The Same...

The way the news comes on the economic front these days at dizzying speed it is enough to overload and boggle the mind. On a daily basis we hear about a scandal, bank failure, flash crash, quantatitive easing, “mortgagegate”, regulation, tax increases, recovery, no recovery, job losses, job creation and the list is endless.  It is hard to make heads or tails of what is going on.  Today I want to look at couple items in the vein of can you really have confidence in the markets or government based upon readily accessible information. Daily we have stories popping up pointing out both the problems and corruption in the aforementioned areas; so who do you trust? The key is to think for yourself and form your own opinions based upon what you know and if you don’t know about the specific area research is required. It takes time and thought to read between the lines of what is reported, however, it will be your savior over the long run. You must always think for yourself and question what you read, don’t just take everything at face value. The reason you must question is that the news sources that we are exposed to are all biased to shape the readers view; gone are the days when journalism was unbiased providing just the who, what, where, when, and why.

The first item I want to discuss dates back to my blog post entitled,” Unintended Consequences Galore”  which was related to the report being presented by the SEC with the intent of bringing confidence to the markets in the aftermath of the “Flash Crash”.  I had argued that the report would not inspire the desired confidence and did nothing to address the issues regarding high frequency trading or algorithmic trading; as a result nothing will have truly changed in the market. In the time since the SEC report announcement has transpired the markets have risen, yet the small investor that it was targeting to shore up has continued to plow more money in to bonds (MOAB). In fact an article appeared on yahoo finance that has an analyst who is making the claim that the market is just high speed guys chasing each other rather than a true rally; it is a pretty good short read you can find here and it goes along with my point.

In a related item, not even a month after the unintended consequences post comes a Reuters article, “CTFC takes aim at “runaway robotic trades”:Chilton”. The gist of the article is Bart Chilton, who is a genuinely concerned CTFC regulator, talks about holding the algorithmic trading companies accountable, since it has cost people money and obviously added to the sapping of investor confidence in fair markets.(emphasis mine). This seems like just another example of MOPE as opposed to any real action taking place, listen carefully can you hear the Goldman boys or Morgan guys shaking in their boots over this…no …I did not think so. Now while Chilton is as I mentioned a good guy, the CTFC appears to move to protect the investment markets from rigged or unfair practices at the blazing fast pace of a snail stuck frozen to a block of ice . How long has the CTFC been reviewing the manipulation on the short side of commodities? The CTFC held hearings and took public comments and much discussion has taken place, but the action on this has been taking place at such a glacial place that an entire solar system starting from hydrogen gas cloud could have formed already. In other words, from the CTFC perspective they are saying; yes there is a problem and we hear you maybe we will get to it or not as we would not want to actually stick our necks out and fix anything. Now this has to inspire market confidence. As the title of this post implies the more that things change the more they stay the same.

The next item up is an article courtesy of Bloomberg, “Treasury Shields Citigroup as Deletions Undercut Disclosure”. Back in January of 2009 a Bloomberg reporter, who has subsequently passed away, named Mark Pittman filed a FOIA(Freedom of information act) request for documents pertaining to what the $300 plus Billion in Citicorp securities the US Government backstopped. Well thanks to our new transparent government it took a new and improved 20 months to get the materials, which I guess is better than the prior timeframes? The information, which one would normally assume pertains to investments of one form or another held by Citi don’t require “eyes only” top secret security clearance to view. The resulting data dump from the FOIA request was 560 pages of various emails like something out of Clancy novel.  The Treasury must have bought stock in Sanford the maker of black sharpies as the majority of all the emails were blacked out. Was it really necessary to black all this information out? Who is being served here Wall Street or the people whose money is doing the heavy lifting, the US Taxpayer. It is called the Freedom of Information Act for a reason, but I guess that does not apply to Wall Street or the Treasury. What information could have been in there that would compromise national security or did Citi take such risks that they are truly belly up and being protected because they did some illegal activities? I wish I knew the answer but either way we are paying for it but no one is accountable, and this is all taking place even after the President’s pledge for more transparent government. I would view this as a black eye in the trust department. As the saying goes”the more that things change the more they stay the same”.

It is the continual barrage of stories and events like these that are undermining not only investor confidence but confidence in the system itself. The tide on all this corruption is changing slowly and has given rise to the Tea Party, which the Left and the Mainstream Media summarily dismiss as kooks or haters; a similar method the Goebbels would have used to discredit something that shines the light of day where it is unwanted. I am not saying that I endorse the Tea Party but you can plainly see what has given it birth and continues to fuel its growth regardless of the media’s continual attempts to report its premature death. Just a few minutes ago I was notified of a Rasmussen poll showing only 14% Prefer Government-regulated Economy Over Free Market, so there is hope yet that we have not completely slid off the cliff to socialism, but time will tell.

All the American people want is for their leaders to come clean at this point. The American people know it is bad but they are being kept in the dark as to how bad it is and how bad it could get. The failure to clean up the improprieties and cover up malfeasance in the markets is like continuing to blow up a balloon beyond the point of its elastic capability. America was based upon the idea of a fair shake to succeed or fail based upon one’s merits and yes sometimes luck, but not favor one group at the expense of another. Corruption and the move away from out roots has been the way for the last 40 or so years…The more that things change the more they stay the same, until they don’t!

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