Stocks hold modest gains into the final hour on little significant news. Since Monday the DOW is up about 30 points or ¼% while the NASDAQ has gained some 35 points or 1.5%. The ECRI Weekly Leading Index snapped a string of gains falling last week to 131.9 as the smoothed annualized growth rate fell .3 points to 13.6.
The parade of executive incompetence continues with those over at Fannie Mae declaring that of course nobody could see the real estate bust coming and the reason Fannie Mae got into a pickle was because the were tricked by Wall Street into trying to keep up with the Joneses. Of course the admission that they were dangerously incompetent didn’t stop them from getting obscene compensation packages.
The Wall Street Journal is out with a piece showing that Primary Dealer Banks including Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc. and others have been engaging in a fairly consistent strategy over the last 5-quarters, takes us back to the 4th quarter of 2008 at the height of the panic, to understate their debt levels by an average of 42% per quarter. Lehman Brothers was playing a similar game called Repo 105, a strategy that was instrumental in its failure and in the Fed’s refusal to bail it out.
If a bank can manipulate its debt levels in a manner such as this not only does it fool the regulators into thinking that it is stronger financially than it really is but it allows the bank to gamble more money in the casino due to the fact that it holds less in reserves. Increasing its risk of failure in the process, but then when you have the government in your back pocket, your too big to fail and own Congress you don’t have to worry about risk and failure of your business model because the taxpayers have and will bail you out.
The biggest jump, 9.1%, in March retail sales figures, according to the ICSC in over a decade has the cheerleaders exclaiming that consumers are back, the recession is over and party like its 1999. While good news and suggesting that consumers are finally starting to spend more the data has to be carefully considered as it was unduly influenced by the Easter Holiday. Same store sales comparisons have been skewed by store closing and bankruptcies. Further the year ago comparisons are extremely weak. That said the data does seem to be improving even though I still have serious doubts about its sustainability.
Hi and welcome to The Profit Motive, I’m your host Caleb Lawrence. Once upon a time in America the media acted as the watchdog of the corporations and the state. In the modern era it’s all about ratings and profits, opinion has been substituted for news and frequently is presented as fact. Much like my daily radio show on KPIG 107.5 FM in Santa Cruz California and KPYG FM 94.9 Cayucos/San Luis Obispo California. A thousand Blogs were able to spot the current problems and many began discussing it years before it reached crises proportions. While there were exceptions, and these exceptions are becoming more common, the mainstream media failed to get it and largely continue to do so.
