Tag Archives: Wall Street

Liars, Gamblers, and Suckers.

I just finished reading a piece by Goldman Sachs urging investors to charge into the housing market.

Here is what they said back in March of 2012:

Headline reads: The housing recovery will have to wait a little bit longer. Goldman Sachs just pushed back its estimated date of the bottom.

In December 2011 G-Sax published a new house price model for 147 metro areas that pointed to a decline of around 3% from mid-2011 through mid-2012 before stabilizing in the year thereafter. Since publication of the model–which was based on Case-Shiller house price data up to 2011Q2–the decline in house prices has reaccelerated slightly. In today’s (February 29) comment they updated their forecast in light of this and also used the opportunity to make a couple of technical changes to the model.

They now project that house prices will decline by around 3% from 2011Q3 until 2012Q3, and by an additional 1% in the year thereafter. As a result, the expected bottom in house prices is pushed out from end-2012 to mid-2013. Although the house price outlook has weakened very slightly, they go on to say that they believe that the house price bottom remains in sight.

That was in March, after predicting that we would hit the “bottom” in 3Q12. Here is what they said on Monday of this week. Headline: Goldman Sachs predicting ‘strong’ U.S. housing recovery. Construction up, existing home sale supply down.

Article goes on to say that U.S. home builders are an attractive investment as the housing market starts a “strong” recovery that may drive a surge in new-home sales, Goldman Sachs Group Inc. said in a report Monday.

Housing has a “long list of positives,” including rising prices, job growth, supportive government policies and a decline in the so-called shadow inventory of homes, Goldman Sachs analysts Joshua Pollard and Anto Savarirajan wrote in a note to clients. They raised their rating on the homebuilding industry to attractive from neutral.

As a gentle reminder, these are the same people (different suits) who urged investors to buy Collateral Default Obligations and Credit Default Swaps back in 2007. Anything sound familiar here?

For those not punch-drunk on Wall Street’s propaganda, here is what is actually going to happen:

Housing will not hit bottom until somewhere north of 2015. Why? Banks are holding a ton of shadow inventory that they dare not release to the market for fear of creating insane downward pressure on pricing. In addition, there are still tons (millions) of homes crawling their way through the foreclosure process. Are there pockets of good news? Of course. Just like the fact that not everybody lost their asses in the real estate or stock markets since 2008, there are real estate markets like Pebble Beach and San Francisco and Long Island that are still holding prices up. But, the real real estate market is in the crapper and will stay that way or get worse in the coming months.

Until the November U.S. presidential elections of this year, there will be a deceptive calm before the storm, as every major economy plagued with severe fiscal problems continues to kick the can down the road. Come 2013, there will be a convergence of several major negative metrics.

These include the worsening Eurozone debt crisis, leading to the exit of Greece from the monetary union. China will face a hard economic landing, and the United States — its economic growth and job creation performance already anemic — will face a very high probability of a renewed economic recession, particularly in a political environment favoring austerity.

In addition to those economic factors, there is one other element in the turbulent brew that comprises my prediction of a perfect economic storm in 2013: Iran. If the Iranian nuclear issue is not resolved peacefully, which at present seems highly doubtful, there is a high probability of a military conflict occurring in the region, which will add further strains upon the global economy, particularly if oil prices spike to highly elevated levels.

I am not alone in this view. A guy who got it right the last time has the exact same predictions for 2013. Nouriel Roubini, or Dr. Doom, has issued a characteristically gloom-laden warning about likely economic trends for 2013. Unlike the pontificators among the politicians, Wall Street glad-handlers and central bankers, Roubini’s analysis of future economic trends does have the virtue of reasoned logic as opposed to overly-optimistic rhetoric. Nouriel Roubini’s record in predicting future trends impacting the global economy and financial system has been inherently more reliable than the forecasts offered by the U.S. Federal Reserve, as well as by the policymakers in America and Europe.

He emerged in the months prior to the global financial and economic crisis that erupted in the fall of 2008, warning of a deadly convergence of troubling economic and financial dangers.

Roubini’s prediction that the contraction in housing prices in the U.S. housing market would metastasize into a devastating financial hurricane seemed so incomprehensively dire, the pundits and eternal optimists on Wall Street wrote him off. Was it because they insist on driving markets in spite of the realities before them? Do they care, as long as they are betting on the right side of the dice? Don’t forget, those traders who touted CDOs and CDSs were making a killing on insuring against their performance.

Will you listen to Goldman Sachs or Nouriel Roubini?

 

 

 

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A Martian Class in Presidential Politics.

Let’s just say for shits and giggles, that I have no dog in the Presidential hunt and that I think that Bush and Obama both made fine Presidents.

Let’s also say that I just dropped in from Mars and heard a bunch of people in a crowd complaining about how terrible Obama has been as President, and how he is a big government socialist, can’t create private sector jobs, is destroying the country and our future by raising our national debt to historic levels, and has created an environment where both business and Wall Street are suffering.

Then someone rushed out of the crowd and showed me these charts:

In this chart, the blue line is state government employment. The green line is local government employment. And the red line is private employment. Bush is on the left, Obama is on the right:

private sector bush obama

As you can see, under Obama, private employment snapped back much better than it did during Bush’s first year.

State and local government employment, however, fell much harder under Obama than it did under Bush.

This is of course, exactly the opposite of the big government socialist stereotype that the Obama economy is portrayed as, but hey.

And here, just for the hell of it, is the same chart but with the performance of the S&P 500 (in orange) during each period:

image

Here’s a chart with the National Debt growth in it, represented by the black line. As you can see, the national debt has grown a little bit faster under Obama, but hardly any faster than under Bush, and the trajectory is almost identical:

image

Class over.


Greece Is Lost, And So Is Europe.

There was much hoopla and relief on Wall Street and in European markets today as it appeared that Greece got some religion and voted a conservative party in to power.

A party who has contended that they would support the austerity requirements of the latest round of bailouts and keep Greece in the Union. So, to many investors, the European financial crisis appeared to have been abated for at least the time being, and maybe everything will turn out alright after all.

Here is the truth. Greece will be forced to return to the drachma and devalue, and the default will cause bank runs and money flowing into Germany and the United States as the only viable safe haven bets.  It doesn’t matter which party wins. Greece will default because there is no other choice regardless of anyone’s politics.

It will hit the European Central Bank, the banks on the other side of the derivatives contracts, all of the Greek banks who are really in default at present and being carried by Europe as well as the nation, and the Greek default will spread the infection in many places that we cannot imagine because so much is hidden and tucked away in the European financial system.

Not unlike, I suppose, Nouriel Roubini, the New York University economist, who said the subprime-debt sky was falling for a long time before it fell, I have been hammering this message home since early January.

Greece cannot afford to pay off their regional debt, and various schemes to avoid the bad guys from taking over will not work nor will the attempt to roll the problem over to the rest of Europe by Germany succeed.

One thing is for sure. The Germans will not allow their cost of funding to rise or their standard of living to decline to help the nations that have gotten themselves in trouble.

As a result, Europe is headed for a bad recession with lots of shocks to the system, and it will happen in the next four months unless there is debt forgiveness, or Europe keeps handing them money like they are a ward of the state. Neither is likely to happen.


Pennsylvania Fearmongers Attack Crowdfunding.

Hopping Mad as Commissioners Go Over the Line.

This is a re-post by David Drake of LDJ Capital & The Soho Loft.

A shocking press release hit the net last week, purportedly from the Pennsylvania Securities Commission. The link to the “advisory” goes to http://www.psc.state.pa.us, but that site doesn’t seem to host a copy. Even so, if the press release is accurate, it amounts to an unfair characterization of the JOBS Act and new Crowdfunding regulations.

Crowdfunding under the Act is portrayed as creating a Wild West style free-for-all that will attract fraud and con artists of all stripes. They cite the current lack of hard and fast rules to govern the sector and then assume no rules will be in place before next year’s launch. That’s nuts.

Here’s a typical quote:

Commissioner Steven Irwin summarized, “The way the new law was written, it’s pretty much ‘Buyer beware.'” He added, “It’s not that we don’t need new incentives to attract more investments in startup companies. It’s just that the lax oversight implicit in the new law is likely to attract people trying to game the system and scam people out of their hard-earned money.”

Excuse me?  RocketHub has had zero fraud incidents since launch in 2009. 

The plain fact is that we do need a new structure to help start-ups. Crowdfunding and micro-financing is an ideal way for new investors to participate and energize our sluggish economy. Small entrepreneurs find themselves shut out of the game. A game that already has its critics.

Take a look at the analysis of VC opportunities as they exist now – you have the WSJ exposing a scheme where GP’s rake in the major profits while late-comers to an investment bear the burden of more risk and lower rewards.

A history of overblowing risks!

It seems the PASC takes their watchdog role very seriously. They did a similar warning back in 2010, only then it was another piece of federal legislation: PA Regulators Warn: Investor Scams, Like Flu Virus, Will Mutate to Adapt to New Federal Financial Reform Bill. Here are some of the entries on their top ten list of investment traps then: ETFs, forex, gold and precious metals, “green” investments, and oil and gas.

It seems their motto is, “panic first.” And that may be their charge. After all, as a state run commission, they should have one eye on regulations and another looking out for scofflaws. But this latest hit piece goes too far.

Of course there needs to be rule-making to regulate the Crowdfunding market. Everyone agrees on that.

Of course disclosure and investor protections have to be front and center.

And read what Pennsylvania Securities Commission Chairman Robert Lam had to say in their Spring Bulletin: “The Internet is a powerhouse, and maybe – just maybe – Crowdfunding will be a good thing once it matures and we have some ground rules in place.” Somehow Mr. Lam moved from cautious optimism to fear monger – while the rules are still being written at the SEC. At the risk of being repetitive – That’s nuts.

Our real concern isn’t about one small department in one state. Our concern is that this mischaracterization of Crowdfunding will catch on without those in authority positions doing their homework. Crowdfunding is worthwhile and it offers something no other framework can – access to funding for those too small to interest VC players.

Good ideas and good companies deserve a chance to present their case to the public, and the public deserves a chance to reap the rewards.

A turf war between federal and state regulators shouldn’t have the ability to libel an entire market. Should it?

One editorial comment: The very essence of crowdfunding, aka the crowd, is the built-in protector acting on behalf of all the investors, aka the crowd. The crowd will quickly, in fact virtually instantly, call out the fraudsters and the system gamers before any crowdfunded offering gets off the ground. Um, that is the whole idea behind crowds.

So, my question is, would you rather place your $100 in the hands of a Wall Street banker to invest in, I dunno, Proctor and Gamble? Or, would you rather place it in the hands of the next Facebook, with the support of 1,999 others (aka a crowd)?


Facebook’s IPO, The JOBS Act, and Why You Should Care.

This great post by my buddy, Dara Albright, founder of NowStreet LLC, really distills the essence of the JOBS act and its potential impact on fat cat investor domination of our capital markets.

I am dismayed by the number of pundits, legislators and organizations, claiming to be “small investor advocates”, who misrepresent the JOBS Act as another piece of legislation favoring the Wall Street establishment.

The truth is the JOBS Act invites competition from both smaller financial service firms and investors which will in turn de-monopolize our capital markets and take control away from the self-serving supersized financial conglomerates.

I feel compelled to set the record straight, for the people of this nation deserve to know who really has their best interests at heart.

First of all, the JOBS Act is not a bill to appease Goldman Sachs or to help the rich get richer. It is a bill that serves regular hardworking Americans who, for nearly 80 years, have not had the same investing liberties as wealthy Americans. Deemed by the Government as not sophisticated enough to understand private company investing, small retail investors have been legally prohibited from putting their money into some of today’s hottest growth companies.

Instead, they are forced to sit on the sidelines and wait until these companies complete their IPO. Unfortunately, because companies are no longer going public in the earlier stages of their growth cycle, smaller investors can do nothing but watch these companies increase in value from afar. All the while angels, VCs and accredited (aka rich) investors reap all of the appreciation during a company’s climb to the public markets. Maybe someone can explain to me the logic behind laws that permit average citizens to purchase stocks only when “sophisticated” investors are ready to dump them.

Personally, I think it is an abuse of power for Government to dictate how we deploy the money that we earned through our own labors. Unless Government gave us that money, it should not have any discretion over how we spend it. We should have the freedom to invest our money in a risky start-up or use it to buy 64 ounces of a diabetes-inducing soft drink. Hell, we should be able to burn it if we so desire. Why is it only acceptable for the Government to squander our money?

Fortunately the JOBS Act has been signed into law and will soon democratize the investing process. But for some inexplicable reason, big government enthusiasts are pointing to Facebook’s unsuccessful IPO as an excuse to disparage this legislation. This is not only dangerously irresponsible, but appallingly disingenuous. The hypocrisy is simply shameless. Case in point, I recently learned that the same organization insisting it fights for fairness in the financial system is actually campaigning to have the net worth and income minimums for accredited investors increased. This will do nothing but widen the level of inequality.

I agree that Facebook’s IPO epitomizes the great injustice in our capital markets, but more importantly, it demonstrates just how disgusted smaller investors have become with it. Facebook (NASDAQ: FB) is down nearly 30% off its IPO price of $38 mainly because smaller investors have refused to support it. The crowd is telling us loud and clear that they are no longer willing to be the “exit strategy” for the privileged. Until smaller investors are afforded equal growth opportunities, our capital markets will continue to deteriorate.

The chart below should serve as the “poster child” for investor discrimination: 

Investor Independence Day cannot come soon enough.

About NowStreet, a truly great organization with our interests at heart:

Symbolizing the capital markets of tomorrow and the hope for a more prosperous economic future, NowStreet is known in various financial circles for its commitment to repairing a damaged capital markets system with the inclusion of a private company marketplace (PCM) that encourages long-term growth investing while facilitating capital formation, small business expansion, innovation and job creation. Through its media, event production and consulting divisions, NowStreet continues to pioneer a number of cutting-edge products, services and event platforms designed to enlighten the financial and business communities and help them capitalize in a new markets paradigm. NowStreet is a leading provider of analysis and insight into the private company marketplace, including the legislation and innovation fueling it. Based on an original hypothesis that directly correlates advancements in mass communications with stock market growth, NowStreet highlights the dynamic economic impact of a purely growth marketplace rising during the most ground-breaking period of mass media and regulatory reform. For additional information, please visit http://nowstreetjournal.com.


$2 Billion? Chump Change. Jamie Dimon Has Real Problems Now.

The US Federal Reserve has just released data that shows mind-boggling trade positions that JP Morgan has taken in synthetic credit indices, an extremely haphazard class of derivative, also known as Credit Default Swaps (CDS).

Um, try $100 Billion worth; an increase from a net long notional of $10 Billion at the end of 4Q11, to $84 Billion by the end of 1Q12.

All banks are required to report quarterly on these things and JP Morgan’s position in CDS has jumped eight-fold in under 6 months. This may raise additional concerns about JP Morgan’s investment strategy in synthetic products.

In investment-grade CDS with a maturity of one-year or less, JPMorgan‘s net short position exploded  from $3.6 billion notional at the end of September 2011 to $54 billion at the end of the first quarter.

Over the same period, JPMorgan’s long position in investment grade CDS with a maturity of more than five years leapt five times from $24 billion to $102 billion (see chart). They are either really, really smart, or really, really, stupid. If it’s the latter, guess who bails them out?

“I don’t care how big a bank you are, that’s still a big move,” said one seasoned credit analyst.

JPMorgan’s chief executive Jamie Dimon said his firm began closely examining the CIO’s (Chief Investment Officer) controversial trading strategy in closer detail when large mark-to-market losses – put at $2 billion by Dimon during an analyst call on May 10 – started appearing in the second quarter.

Dimon has since tried to balance his exposures by flipping positions in long, high-yield CDS and short positions in investment-grade CDS, but the crazed selling of these CDS positions is eerily reminiscent of the final hours of Lehman Brothers.

People will question senior JP Morgan management signing off on a trading strategy that vastly increased the banks’ exposure to a worsening credit environment at a time when other banks were battening down the hatches. In dramatic contrast to JPMorgan, the Fed data show ALL other major US banks (GSax, Citi, B of A, Morgan Stanley) maintaining large short positions in investment-grade credit in expectation of a continuation of the rocky credit environment persisting throughout the second half of 2011.

The figures underscore JPMorgan’s failure to act at an earlier stage, given the large concentrations of risk it was accumulating, as well as the inability of regulators to discern abnormal trading patterns among the piles of data banks already reported to them. Shame on the SEC … again.

On the day (May 10th) that the $2 Billion loss story broke, that morning’s The Gartman Letter, market commentator Dennis Gartman wrote:

“The press conference… caught everyone a bit off guard and does raise all sorts of flags and does indeed cause us to remind ourselves that “there is never just one cockroach;”          however, if the losses sustained are held to what was reported yesterday afternoon, then we must remember that this is isolated; that it shall be a loss of only 30 cents/share; that Jamie Dimon’s pristine reputation has been irreparably sullied; that the Left shall use this as an excuse for even more onerous over-sight of the banking/broking businesses of the nation, but the nation is not in jeopardy and we shall all go on.”

IF … “the losses sustained are held to what was reported … .”.

Should be an interesting couple of weeks on Wall Street.


The Wrong Day to Quit Sniffing Glue or to Make Your IPO Debut.

And now, with permission from my buddy Dara Albright, Founder of NowStreet Journal, we have her insight to the FB IPO:

Some call it a cultural phenomenon. Others label it a colossal waste of time. No matter the sentiment, all attention was on Facebook’s IPO entrance on Friday. Well, except for NASDAQ, who was too focused on repairing its malfunctioning technology, oh, and the European Union, who was busy worrying about its looming financial collapse.

Instead of skyrocketing, as was widely predicted among analysts on the Street, Facebook closed up a mere $0.23 cents, not even gaining 1%. News circulated during the day that even Facebook’s bankers had to jump in and support the stock from breaking its offering price. A far cry from LinkedIn’s IPO entrance, almost exactly one year ago, which nearly tripled its offering price during its first trading day.

The most anticipated IPO of the decade and largest technology offering in history had a less than stellar IPO debut. Yikes. What does this say about America’s capital markets? What does this mean for its economic future?

If we’ve learned anything today, it’s that timing is everything and no one, not even Wall Street’s finest, can predict the ideal day to go public. Sometimes you just “pick the wrong day to quit amphetamines”. But, bankers can sometimes price an offering correctly. And this was one of those times. Had Facebook’s stock price shot through the roof, Friday’s headlines would have read something like, “Once Again Wall Street Bankers Underprice a Deal & Screw the Issuer”.

Facebook’s underwriters should be commended. But I do not want to give them too much praise for fear it will go to their heads and result in the creation of yet another destructive derivatives product. “There’s no reason to become alarmed, and we hope you’ll enjoy the rest of your flight. By the way, is there anyone on board who knows how to fly a plane?” Sorry, once you start quoting the movie, “Airplane”, it is almost impossible to stop.

Facebook’s lackluster IPO performance also affirmed what we all know but most don’t like to confront – the public markets are significantly broken. It is challenging for companies to thrive in a trader-centric marketplace where fundamentals are rendered practically meaningless and company stock prices are at the mercy of extraneous events. Last week, Europe sneezed and Facebook caught the flu.

Unfortunately for Facebook, not too many traders came to the realization that Europe’s bleak financial future and rising unemployment actually benefit Facebook’s business. Look how many more jobless people will now have time for Facebooking. Does anyone see the irony here?

Facebook, say goodbye to the autonomy of the private markets. Now, instead of being valued on your own merits, you’ll be assessed based on the accomplishments and failures of those who have nothing to do with you, subject to the second-by-second mood swings of those judging you. Welcome to public market hell where you will now be viewed as a ticker symbol as opposed to the global innovator you are.

Don’t worry, “FB”, many considered the IPO of “GOOG” to have been a great disappointment too. Contrary to “GOOG”, at least you were not forced to slash the price and size of your offering. And remember Webvan’s hot IPO? Its stock price more than doubled during its first trading day. Perspective.

So just where was Facebook’s aftermarket love on Friday? This leads me to the final and most important lesson of the day. Even the most grandiose of companies have trouble thriving in a marketplace that lacks the aftermarket support derived from long-term investors who are more interested in funding companies rather than trading tickers. These long-term investors are a company’s clients, its customers, its users, its partners and its supporters. In Facebook’s case, they are the 900 million across the globe sharing updates, photos and videos every day. If each user bought just one share of FB, it would equate to $34.2 billion in pent up demand.

I don’t doubt that Facebook will ultimately achieve success in the public markets. It is one of maybe a handful of companies on the planet, including AAPL and GOOG, who can provide its own aftermarket support by harnessing the crowd. According to Gene Massey, CEO of MediaShares and leading expert in Direct Registration methods, “Once Facebook has been public for 12 months, it can offer a direct stock purchase option to its massive user base. By doing so, it will not only gain stock support, but Facebook will also add valuable shareholder demographics to its existing database enabling it to become the world’s most powerful marketing and fulfillment company in history.”

Unfortunately, the vast majority of companies entering the treacherous public markets do not have a support group of 900 million. Unless something is done to fix the aftermarket deficit, more and more publicly traded companies will find themselves dying a slow painful death. This will only result in additional long-term investors fleeing the public markets in search of greater stock appreciation.

The fact is the mass exodus has already begun. The fastest growing companies no longer reside on NASDAQ. They are found in the rapidly expanding marketplace for private company stock (PCM).

Facebook has inspired a new generation of social businesses poised to capitalize off its extraordinary media platform. Many of these micro and small cap companies are already enjoying spectacular revenue growth. Historically, most of these companies would have been public at this point in their life cycle, creating wealth for public market investors. However, it makes no fiscal sense for these companies to be public today.

These private companies are all thriving, in part, because their investors consist of long-term shareholders who believe in their products, their businesses and their visions. Don’t all companies deserve the right to attract investors whose interests are more aligned with their own? Shouldn’t all investors have the opportunity to invest prior to a company’s greatest growth spurt? Shouldn’t all investors have the freedom to invest their own money as they see fit?

224 days, 16 hours, 38 minutes, 16 seconds until the democratization of the US capital markets.


Thanks, Mr. Dimon.

Jamie Dimon has allowed us to witness an object demonstration of why Wall Street does, in fact, need to be regulated. Thank you, Jamie.

I hate to beat up on Jamie Dimon so badly, especially since I don’t know him personally and I’m sure he is a fine fellow, but as Bill Maher would say, hey, they give you the comedy lines and you just have to take it, right?

Any honest evaluation of the facts would conclude that JPMorgan, to its — and Jamie Dimon’s  — credit, did manage to avoid many of the bad investments that brought other banks to their knees in the 2007-2008 contagion.

His demonstration of sound judgment and careful planning gave Jamie the role of class valedictorian in Wall Street’s war to delay, and/or repeal the righteous pile of financial reform crawling its way through Congress and occasionally spewing watered-down effluence like the Dodd-Frank bill.

Mr. Dimon has been particularly open in his opposition to the so-called Volcker Rule, which would prevent banks with government-guaranteed deposits from engaging in “proprietary trading,” (basically speculating with depositors’ money). Why? Because everything at JP Morgan Chase is under control and we don’t need no stinking badges, thank you very much.

Until last week maybe. A minor screw-up. $2 Billion in trading losses. Well, there are really no excuses as Jamie said, but hey, they’re human. They make mistakes too. Still, no reason to lose our minds and start regulating like crazy; after all, it WAS their money, right? Well, not exactly. It turns out that the bank’s “money” is in fact money backed by taxpayer’s guarantees.

We know from history that banking has always been subject to  destructive panics, that occasionally threaten to bring down the entire financial system. In spite of arm-chair economists like Mitt Romney and Newt Gingrich and perhaps especially our buddy, Paul Ryan, bad banking is not always the result of government intervention or the meddling liberal fools in Congress.

In the golden ages of American Capitalism, between 1700 and 1840, or between 1890 and 1929, we had minimal government and no Fed (to speak of) and yet, we still managed a financial panic roughly once every six years. Some of them real beauts.

After the greatest depression in our history, our Congressional leaders arrived at a reasonable solution that seemed to work really well for the next 60 years or so. We implemented systems of guarantees and oversight that protected both the citizen depositors and the government who guaranteed those deposits. Deposits were insured, so that panic resulting from the perception of a failing bank was limited, and banks were prevented from gambling and abusing the privilege they enjoyed from those insured deposits, guaranteed by taxpayers.

The significance of those regulations prevented banks, holding government-guaranteed deposits, from engaging in high-risk market speculation. Speculation in investment products like CMOs and CDO tranches and Knock Out Straddles.

What? You didn’t have any Knock Out Straddles? Lehman Bothers did.

But, I guess we really didn’t like financial stability. Or, we all saw a movie in 1987 called Wall Street and decided that being Master of the Universe would be pretty cool. Jamie Dimon certainly thought so. He was 31 when that movie came out. Not surprisingly, all of these new forms of banking without government guarantees became the rage, while 50 years of banking regulation was over-turned (by a Democrat by the way) and banks were allowed to take on increasing risks. We, the people, got exactly what we deserved.

It is mind-blowing to me that we have to debate and argue about whether we should restore the safeguards that brought us 50 years without a major banking panic. We, the people who got shafted by the bankers, their lobbyists and the politicians they bankroll, have to cajole our Congressmen to re-instate the Glass-Steagall act of 1933? After we allowed those very same bankers to be bailed out by our own tax dollars? Why?

We are the same people, at least 48-50% of us, who want to cast a vote for a guy who has promised to repeal Dodd-Frank and any other banking regulations that come down the pipe? Really?

We can thank Jamie and JP Morgan for shining a spotlight on the reasons we need to tighten regulations on banks, but it really won’t do any good as long as we continue to pretend that none of this matters. Or, that we can’t make a difference. Or, that it’s all too weird and hard to understand and the banks won’t really do anything that stupid again, would they?

You may not be able to fix it, but with one vote, you could make it worse.


Get A Job. Sha-na-na-na. Sha-na-na-na-NA.

The weak job numbers are there for a reason: There are NO jobs!

And when I go back to the house
I hear the woman’s mouth
Preaching and a crying,
Tell me that I’m lying ’bout a job

For the second month in a row, there are no jobs. This unsettles both the White House and Wall Street. Why? I don’t know. It would appear they both live in this fantasy world where everything will be all right again just as soon as this economy gets going. Well, guess what? The economy has been going for months and still there is no job growth.

The reason for that is best illustrated by this fact: In 1950, it took 30,000 people to produce 5 million tons of steel. Today, it takes 5,000 people to produce 7.5 million tons of steel. Which part of that doesn’t Wall Street and the White House get?

The numbers are just stupid. More gist for the fantasy mill. In April, employment grew by just 115,000. That followed a disappointing job gain in March. Together, the March and April average was only about half the 250,000 jobs added monthly in December, January and February. Half of a WHOLE QUARTER.

The real reason: “For the last couple of months we have a situation where the unemployment rate is still declining, but that’s because people are leaving the workforce,” says Gary Burtless, a labor economist at the Brookings Institution. He says it’s usually good news when the unemployment rate drops, because lots of people are getting hired, but that wasn’t the case in April.

Some people might have left the workforce because they reached retirement age, and it’s possible they weren’t replaced by young people, who may have decided to stay in school because the job market is still dicey. Or, because WE DON”T NEED PEOPLE TO DO THOSE JOBS ANYMORE!

“I’ve been feeling very dejected and depressed,” says one woman who has stopped looking for work. She’s 61 years old and she kept being told that “Someone else was getting chosen because they fit the culture better and I recently realized that that was code for I’m older and it doesn’t fit the image that they want to project,” she says. My shocked face goes here.

“It was somewhat humiliating and very depressing,” she says. “It was a shock to realize this isn’t working, because I tend to push on and push through and last week when I just decided to stop, it was an emotional change for me. I realized I have just given up.”

Repeat this story about 500,000 times and you have today’s job market. Here’s the nasty combo:

  1. Workforce is in their 50’s and 60’s – nobody wants to hire – benefits too costly – undesired optics – businesses want young and vital, not old and tired
  2. Skilled jobs are now automated – factory as well as service force
  3. Competition for unskilled jobs is from workforce in their 20’s – mostly college degreed job seekers willing to trade down through the job types
  4. Only turnover in public sector jobs are pensioners with contracts too expensive to replace
  5. Same story in private sector union jobs – no replacement workers
  6. Housing market stalled for like, … ever, depressing related construction, engineering, architectural, building supply, manual labor and maintenance jobs
  7. No credit for small to medium business, so no business expansion jobs
  8. Austerity, coupled with high gas prices subtracts spending on tourism, so no seasonal  tourist industry jobs
  9. Home grown austerity measures focused on discretionary spending, so no restaurant, entertainment, upgrade on existing appliance, auto, home improvement related service sector jobs
  10. Even Microsoft, who used to create 6 service sector jobs in and around Redmond for every employee hired, now creates only 1, as employee benefits are substantially reduced

All of those jobs that we fantasize about are simply never going to come back. That’s why people have stopped looking. The “people stop looking for work” bubble is huge and growing. As Paul Krugman said yesterday, unless we can kick this economy into a much higher gear and forget all about the negatives related to unemployment and the workforce and austerity, we are on a path to become the Greece of the New World.

Of course, my solution is always around initiatives like Crowdfunding and Startup University, which have the greatest chance of creating NEW employment of anything we have done so far. But, the Obama White House still hasn’t called.