Thursday, April 22, 2010

Wholesale Food Price Jumped Most in 26 Years, But No, There Is No Inflation!

Wholesale food price jumped 2.4% in March, the biggest jump in 26 years, due to 49% rise in vegetables. But don't worry, we don't have inflation, we are told. Excluding the "volatile" food and energy cost, the wholesale inflation (Producer Price Index, or PPI) in March was mere 0.7%.

Wholesale prices rise in March as food costs jump
(4/22/2010 AP via Yahoo Finance)

"WASHINGTON (AP) -- Wholesale prices rose more than expected last month as food prices surged by the most in 26 years. But excluding food and energy, prices were nearly flat.

"The Labor Department said the Producer Price Index rose by 0.7 percent in March, compared to analysts' forecasts of a 0.4 percent rise. A rise in gas prices also helped push up the index.

"Still, there was little sign of budding inflation in the report. Excluding volatile food and energy costs, wholesale prices rose by 0.1 percent, matching analysts' expectations.

"Food prices jumped by 2.4 percent in March, the most since January 1984. Vegetable prices soared by more than 49 percent, the most in 15 years. A cold snap wiped out much of Florida's tomato and other vegetable crops at the beginning of this year.

"Gasoline prices rose 2.1 percent, the department said, the fifth rise in six months.

"In the past year, wholesale prices are up 6 percent, with much of that increase driven by higher oil and other commodity prices. But the core index, which excludes food and energy, rose only 0.9 percent." [The article continues.]

Well, for struggling families in the US, all that they purchase with their money may be food and gas. It's very small comfort to be told that we don't have inflation if food and energy are excluded from the calculation.

In the meantime, the president of the US of A is busy hyping Value Added Tax for his ever-increasing programs and initiatives so that we can forever stagnate like Europe, and the increasingly bold (to the point of being obnoxious) government union workers demanding that the income tax be raised so that they can keep their jobs with generous benefits.

And the tax-paying public will simply roll over and surrender to their demands. Or will they?

Obama Slams Wall Street, but What About His Own Government?

He has the audacity to criticize and vilify Wall Street, while his government continues to issue a tremendous amount of debt securities that get dumped on the entire world, further burdening the US taxpayers whom he claims he is helping.

I was just incensed to read this article ("Obama slams Wall Street ways while asking for support", 4/22/2010 AP via Yahoo Finance). Instead of counter-argument (the article has raised my blood pressure too much), I will reproduce my blog entry. To me, this is far more obscene than Wall Street supposedly bilking billions from investors. This guy (and his government) is bilking $500 to $700 billion every single month (or literally creating that money out of thin air, if you prefer), while still blaming his predecessor. Next week is another "selling a boatload of notes and bonds" week, which happens twice a month.

The US government issues debts for its ever-increasing new spendings, whether it's a new offensive in Afghanistan or new bureaucracy at some agencies and departments , and to retire old debts. Instead of paying the creditors back, it issues them the new debts. To the tune of hundreds of billions of dollars every month. It is a ponzi scheme, but since it's the government doing it, no one is behind bars.

So here's the entry on Treasury Auction Watch. Total amount for the week, including short-term bills, will probably exceed $200 billion, as the current total does not include 4-week bill and possibly another CMB for the Federal Reserve.

CMB stands for cash management bill, and SOMA stands for System Open Market Account at the Federal Reserve New York. SFP stands for Supplementary Financing Program created in September 17, 2008 (the day ) to give money to the Federal Reserve to do whatever the Fed thinks necessary to support whatever market (we don't know how they have spent their money):

The US Treasury Department will auction the following Treasury securities for the week of April 26, 2010.

Monday April 26, 2010

  • 13-week bill: $24 billion (drop of $1 billion from this week)
  • 26-week bill: $25 billion (same as this week)
  • 5-year TIPS: $11 billion (issued once a year, with reopening in 6 months)
Tuesday April 27, 2010
  • 4-week bill: TBD ($18 billion this week)
  • 2-year note: $44 billion (same as last month)
Wednesday April 28, 2010
  • 56-day CMB*: not scheduled yet (under SFP* to be used solely by the Federal Reserve; if there's an auction for this security, it will be the 10th straight week of issuing CMB under SFP)
  • 5-year note: $42 billion (same as last month)
Thursday April 29, 2010
  • 7-year note: $32 billion (same as last month)
Total for the week: $178 billion
  • Bills: $ 49 billion (excluding 4-week bill, CMB)
  • Notes and bonds: $129 billion
Total for April 2010 so far: $434 billion
  • Bills: $360 billion
  • Notes and bonds: $74 billion
Additional Purchase by SOMA for April 2010 so far: $21.432 billion
  • Bills: $16.01 billion
  • Notes and bonds: $5.422 billion

Wednesday, April 21, 2010

This Sinking Feeling of Falling, Failing, Things Getting Out of Control

I have this slight but very distinct feeling that things are getting out of control again in slow motion.

The last time I felt that way was in February 2009 when the then-newly-elected president of the US was threatening "catastrophe" if we didn't support his stimulus bill; before that, in September / October 2008. I don't think I need to remind the readers what happened in that month, but here's a refresher just in case (it's the last of 4-part series).

Greedy (and money-starved) government officials around the world are welcoming the new IMF proposal for the "FAT" - that is, Financial Activity Tax, on top of the tax that they want to slap on financial institutions (defined very broadly).

British Prime Minister Gordon Brown, who sold UK's gold reserve at a decade low as Chancellor of Exchequer against opposition from Bank of England (to the Rothchilds, as rumor goes), says he was shocked by the "moral bankruptcy" of Goldman Sachs. (Really. I didn't know a politician like him could be shocked by anything immoral.)

In the US, a former President says that to be against the government policies and actions is an act of sedition. (He said that on April 19, the anniversary of Oklahoma City bombing and the fiery end to the siege of Branch Davidians in Waco, Texas.)

EPA is having a contest to choose the best video commercial that promotes the idea that more government regulations is good for us. They call it "environmental justice".

Where does this almost blind faith in the government come from, of all place in America? (Why did the colonists bother fighting the Brits and German mercenaries for independence?)

SEC sues the largest corporate donor to Obama's presidential campaign on an Op-Ex day, wrecking havoc in the stock market. (And here I naively thought the agency is supposed to regulate the financial markets so that things move in an orderly manner.)

The Treasury Department keeps on selling (well, it has no choice, really) short-term bills and longer-term notes and bonds from Monday to Thursday, every single week. Since the beginning of this year, there has been a noticeable drop in Indirect Bidders (that include foreign central banks) and a corresponding increase in Direct Bidders (no one knows exactly who they are, because the Treasury Dept doesn't tell you), leading many to speculate it is a backdoor monetizing operation by the Federal Reserve.

Speaking of the Federal Reserve, the Treasury has been raising $25 billion for the Federal Reserve every single week since February. This week will mark the 9th consecutive week. I haven't figured out yet where this money has been going. If and when I do, I will let you know.

The health care insurance "reform", aka ObamaCare, has been passed and signed into law against the majority of Americans who still believes it is a bad idea. But more bad ideas are in the pipeline:

-- The financial "reform" bill that will create $50 billion slush fund managed by (hold your breath) FDIC to perpetually bail out financial institutions, and will put the Federal Reserve in charge of "protecting" consumers (such a cynical joke);

-- The cap and trade bill to supposedly combat "global warming" whether it is happening or not, which will burden the American families with added tax of $2000 per year (and probably way more).

A California Congresswoman wants the federal government to make "whole" the investments in complex structured financial products (i.e. derivatives) by the municipal governments in her district. So the US taxpayers get to pay for the stupid investment decisions made by city, county, state bureaucrats.

An EU Commissioner declares vacationing is a human right, and wants EU taxpayers to subsidize vacations for low-income people.

The president of the US taunts people who don't agree with him, and tell them they should be thankful of the many tax cuts he created. (What tax cut?)

A volcano in Iceland erupts, and the entire Europe reacts as if it is another swine flu pandemic. Oh we are so scared. And as expected, someone has to ask if it was caused by "global warming". (It is a revenge of Icelanders against Brits and Dutch.)

The US Congress wants to prohibit banks from dealing with financial derivatives. Who would be put in charge to determine the so-called risk? Some sort of government council? Or the Federal Reserve, whose chairman is on record saying he didn't see any of it (financial crisis of the past 2 years, that is) coming. Now that would surely solve the problem, wouldn't it?

Paul Volcker mentioned it recently, and now his boss openly promotes it: VAT. And since his need for money is so gargantuan and ever growing (see how much Treasury is raising every single week on my other blog) I doubt that there would be much of an offsetting decrease in income tax. The deficit has never been reduced by increased tax. What do politicians do when they have more money from more tax? They spend it, and find more ways to spend more. Duh.

Pentagon (not Israel) is mulling the military option against Iran.

The world cannot survive such insanity very long. I don't think I can, either.

How about you?

SEC May Not Have A Case Against GS?

CNBC reports that Paolo Pellegrini, John Paulson's associate, testified to the government that he informed ACA Management (the one who assembled the Abacus CDO in question) that his firm would be shorting (betting against) it.

Testimony Could Undercut SEC Charge Against Goldman
(4/21/2010 CNBC)

"The government has testimony from a Paulson & Co. official that could contradict its own claims against Goldman Sachs, CNBC has learned.

"Paolo Pellegrini told the government that he informed ACA Management that Paulson intended to bet against, or short, a portfolio of mortgages ACA was assembling.

"If true, the testimony would go directly against government claims that ACA did not know Paulson was hoping the collateralized debt obligations would fail, and subvert charges that Goldman breached its duty by not informing ACA of Paulson's position.

"CNBC has examined documents in which a government official asked Pellegrini whether he informed ACA CDO manager Laura Schwartz about Paulson's position in the portfolio, named Abacus 2007-AC1.

""Did you tell her that you were interested in taking a short position in Abacus?" a government official asked Pellegrini, referring to the name of the CDO portfolio.

""Yes, that was the purpose of the meeting," Pellegrini responded." [The article continues.]

CNBC, a financial news network, is unabashedly pro-Wall Street, particularly Goldman Sachs. But if Pelligrini did tell ACA of his firm's intent, and the government didn't even mention that in the complaint, the SEC's case does look weak.

CNBC's Steve Liesman in the accompanying video to the article says Pellegrini told the government that he shared with ACA the outline of how his firm picked the underlying mortgage securities - with low FICO scores and high loan-to-value ratios.

If ACA (who assembled the CDO), the rating agencies (who slapped AAA-rating), and the investors (British and German, by the way) thought the CDO with that kind of profile was a good investment, they have zero sympathy from me.

I suppose the SEC could still say that Goldman Sachs didn't tell the investors that someone was taking the short side, even if Paulson's firm did tell ACA who assembled the CDO.

What I find much more troubling and what's hardly reported so far is the way CDS (credit default swaps) on debt securities are priced and indexed. But that will be another post.

So what is the point of the SEC's lawsuit against Goldman Sachs?

It has surely made this guy happy, among so many, that the justice is finally being done. Praised be the government.

Tuesday, April 20, 2010

Amazon Fights for Customers' Privacy and Rights Against N. Carolina Taxmen

Amazon fights demand for customer records
(Declan McCullagh, 4/19/2010 CNET News)

" filed a lawsuit on Monday to fend off a sweeping demand from North Carolina's tax collectors: detailed records including names and addresses of customers and information about exactly what they purchased.

"The lawsuit says the demand violates the privacy and First Amendment rights of Amazon's customers. North Carolina's Department of Revenue had ordered the online retailer to provide full details on nearly 50 million purchases made by state residents between 2003 and 2010.

"Amazon is asking a federal judge in Seattle to rule that the demand is illegal, and left open the possibility of requesting a preliminary injunction against North Carolina's tax collectors.

""The best-case scenario for customers would be where the North Carolina Department of Revenue withdraws their demand because they recognize that it violates the privacy rights of North Carolina residents," Amazon spokesperson Mary Osako told CNET." [The article continues.]

Support Amazon, buy from them. Better yet, buy from Amazon through my blog!

By the way, Google has started to post the number of government requests worldwide for censorship and for turning over the personal information of Google's users, at

GOP Is Suspicious of SEC's Timing Against Goldman Sachs

Darrell Issa, the top Republican in the House Oversight Committee, wants to know how and why the SEC's civil charges against Goldman Sachs happened the way it happened.

GOP seeks SEC records on Goldman (Mike Allen, 4/20/2010 Politico)

"Rep. Darrell Issa, the top Republican on the House Oversight committee, is demanding a slew of documents from the Securities and Exchange Commission, asserting that the timing of civil charges against Goldman Sachs raises “serious questions about the commission’s independence and impartiality.”

"Issa’s letter, addressed to SEC Chairwoman Mary Schapiro and signed by eight other House Republicans, asks whether the commission had any contact about the case, prior to its public release, with White House aides, Democratic Party committee officials, or members of Congress or their staff.

"“[W]e are concerned that politics have unduly influenced the decision and timing of the commission’s controversial enforcement action against Goldman,” Issa writes.

"Issa implied that the timing was a bit too convenient, saying President Barack Obama’s push on Wall Street reform “neatly coincided with the commission’s announcement of the suit.”" [The article continues.]

How "coincidental" was it? The letter says the following:

--The Commission approved the Goldman suit in a vote that spit along party lines – a rare occurrence for approvals of enforcement litigation.

--Before the Commission had released its announcement, the New York Times published on its website a story describing the suit.

--Less than half an hour after the Times story’s publication, Organizing for America, the successor organization to Obama for America and now a project of the Democratic National Committee (“DNC”), sent millions of supporters an e-mail message from President Obama urging support for “Wall Street Reform.”

--Within hours, the Democratic National Committee had purchased AdWords advertising from Google, Inc. The DNC’s Google campaign fundraising advertisement, headed “Fight Wall Street Greed,” appeared whenever a user ran a Google search for the phrase “Goldman Sachs SEC.” It read, “Help Pres. Obama Reform Wall Street and Create Jobs. Families First!” and included a link to, the website of Organizing for America.

--Democrats in Congress and the Administration have heralded the Commission’s suit against Goldman as a welcome boost to their case for the legislation.

--Members of the media have already begun to question the timing of the Commission’s suit and the actions of the Democratic National Committee.

Oh nothing but just coincidence, says the White House press secretary, who is reportedly very keen on becoming the lead political strategist for Obama.

The 2nd point above was what tanked the shares of Goldman Sachs and the whole stock market on an option expiration day (which tends to be volatile even without any news).

How the hell did these two New York Times reporters (this and this) get the SEC announcement before it was released?

The 3rd point is also interesting, as I remember seeing a message on a stock message board urging people to support President Obama in his financial reform bill to punish Wall Street. And the poster didn't even know what's in the bill.

Not that I am a fan of the Vampire Squid, aka Goldman Sachs, but a contrarian in me is suspicious when things are choreographed in-your-face manner like this in order to force you to think in a certain way and no other (which has been the case since the days of George W. Bush, and hasn't changed one iota - actually it has gotten worse). I have to say I'm more than annoyed as a trader because they pulled this stunt on an op-ex day.

Monday, April 19, 2010

SEC Vote on Goldman Sachs Was 3-2

along partylines.

Two Democrats voted for suing Goldman, two Republicans against, and the chairman sided with Dems. On that news, Goldman Sachs' shares turned up, and ended the day in a positive territory taking the other financials and the general market with them.

For more, here's from Bloomberg.

Sunday, April 18, 2010

Financial "Reform" Bill Is Just Another Tax Bill

for the general public to help out big investors (including Goldman Sachs).

SEC announcing civil charges against Goldman Sachs on Op-Ex (option expiration) day which tanked the stocks across the board, as President Obama pushes for his financial reform bill.

The move was so in-your-face and transparent it is not very hard for pundits to come up with a headline like this:

Wall Street suspects Goldman charges 'not coincidental' to financial reform effort (4/16/2010 New York Post), or;

Goldman Sachs case could help Obama shift voter anger (4/18/2010 LA Times)

as Obama threatens another catastrophe unless his financial reform bill passes:

Obama: Fresh crisis without new financial rules (4/17/2010 AP via My Way News)

If you think you heard something like that before, you did. This president said it would be "catastrophe" if his $800-plus billion so-called stimulus bill didn't pass in February 2009. Well, the catastrophe continues on job creation front, which this bill was supposed to be about. It has added to already catastrophic public debt. (See the debt clock ticking on this blog, upper lefthand corner.)

"..."Opposing reform will leave taxpayers on the hook if a crisis like this ever happens again," the president said", according to the above AP article.

Ummm, Mr. President, have you read what Chris Dodd wrote in that bill? The so-called reform will keep taxpayers on the hook for permanent bailout, by creating the $50 billion fund to dismantle "too big to fail" firms in an orderly manner so that the creditors get their money back. Just like Goldman did on credit default swaps it purchased from AIG. And who will those creditors be? They are likely to be big banks, hedge funds, pension funds, private equity groups - i.e. big boys.

Means for orderly dissolution already exists, and it's called bankruptcy. But no, that won't do, because in bankruptcy the creditors will lose some money! Can't have that!

So, my personal take remains that this move by SEC against the biggest corporate donor to the Obama campaign (GS) is to promote the administration's push for their "financial reform" by creating a perfect boogieman (who will likely to benefit from the "reform") to deflect the public's attention, when in fact this financial reform bill is yet another scheme to defraud US taxpayers who will be forced to fund the perpetual bailout in one form or another. Part of it may be increased and/or new tax (or "fees" if they prefer), part of it will be indirect, such as added fees passed on by the financial institutions who will be required to pay for the bailout fund.

If you think the financial institutions as defined by the bill are banks only, you will be in for a surprise. The definition of financial institutions is so broad it could include manufacturing companies who extend credit to customers (auto companies, big IT infra companies come to mind; basically the same companies that were considered "financial" and were protected from short selling, back when the market was rapidly deteriorating in September 2008). It will be another added cost to those businesses. Do you think it will encourage more hiring?

Just like the stimulus bill that hasn't stimulated, various job bills (that secure jobs for public workers), the health insurance "reform" bill, this financial "reform" bill is basically a tax bill. Beneficiaries? Who do you guess will benefit from increased tax?

Pentagon Is Mulling Military Option Against Iran

from Reuters AlertNet:

US strike could delay Iran nuclear program-Mullen
(4/18/2010 Reuters AlertNet)

"NEW YORK, April 18 (Reuters) - The nation's top military officer said on Sunday that a U.S. strike against Iran would go "a long way" to delaying its nuclear program but that he considered doing so his "last option" right now.

""Military options would go a long way to delaying it," Admiral Mike Mullen, chairman of the Joint Chiefs of Staff, told reporters after speaking at a forum at Columbia University in New York.

""That's not my call. That's going to be the president's call," he added. "But from my perspective ... the last option is to strike right now." (Reporting by Adam Entous; Editing by Jackie Frank)"

Got oil? Got gold?