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Israel Discount Bank
13 марта 2013, 02:48

Bill Frezza: Too-big-to-fail Banks Will Kill the Global Economy

There are not many things on which Harvard professor-turned-Massachusetts Senator Elizabeth Warren (D-MA) and I agree. Yet, to her credit, she has been sounding the alarm about the threat that "Too Big To Fail" (TBTF) banks represent to our economy. However, that is where our agreement ends. Like most progressives, she vastly overestimates the efficacy and wisdom of regulatory bodies that invariably become captive to the corporations they are supposed to regulate as that great revolving door refreshes the influence of crony capitalists regardless of who is voted into office. In fact, the regulatory policies she proposes would increase the TBTF behemoths' threat to the economy by further entrenching the alliance of Wall Street bankers, the Fed, the Treasury Department, the White House, and congressional enablers from both parties that brought us to this point. Until we figure out how to unravel this single biggest threat to our prosperity, the best we can hope for the next time the TBTF house of cards comes tumbling down is for the ensuing violence and privation to be contained long enough to avoid the emergence of totalitarian regimes both here and around the world. Sound apocalyptic? Think our problems can be solved with a regulatory nip here and a fiscal tuck there? Believe that our fiscal and monetary challenges can be overcome if we just get "the rich" to pay their "fair share?" If you answered "yes" to any of the above, then you are part of the problem, playing into the hands of the interests you believe you can control through the ballot box. Because the people who are driving this particular runway train never have to run for office. Let's take it from the top. 1) The global currency system is headed for collapse. This will be unlike any currency collapse we have ever seen. It will not be geographically containable, and will leave no safe havens. For the first time in history, central banks around the world are debauching their currencies in unison. Even the normally prudent Swiss are so afraid of the threat currency appreciation poses to their export industries that they have joined the madness. Stable exchange rates and the fact that Consumer Price Index (CPI)-based measures of inflation remain muted have calmed alarm bells. Meanwhile, the swelling asset bubble created by this unprecedented monetary expansion is being explained away -- and in some quarters even welcomed -- as some sort of stimulus-driven economic recovery. Hurrah, look at the booming stock market! Look at rising housing prices! Look at the expansion of consumer credit! Keynesianism works! The so-called "wealth effect" will awaken animal spirits and kindle aggregate demand, which will revive the real economy, backfilling the value already priced into the stock market. Real economic growth will return, mass unemployment will abate, and all will be forgiven. Unless it doesn't. And to date, it hasn't. The remedy for that? Print even more money! 2) The perceived elimination of counterparty risk is financial crack cocaine. The subprime mortgage meltdown gave us fair warning of what happens when investors believe they will be protected by government intervention when parties with whom they do business fail. The most egregious case is the backdoor bailout of Goldman Sachs and others through AIG, whose debts from reckless derivatives trading were paid out to creditors by U.S. taxpayers at 100 cents on the dollar. By refusing to allow AIG, Fannie Mae, Freddie Mac, and other failed financial institutions on the losing side of subprime mortgage bets to go through normal bankruptcy (which would have paid off creditors at pennies on the dollar), Washington was essentially telling the financial institutions on the winning side of those bets that they never have to hedge or discount their positions for counterparty risk. This has profound consequences on trading behavior, as it distorts the incentives that should inform institutional risk management. Individual traders' winning positions can grow without bound, matched by losing positions held by counterparties. Meanwhile, no parties have to worry about which side they will end up on because Uncle Sam will be there with a bailout, either way. And the bonus band plays on. 3) There is no safe exit from ZIRP. Future historians will puzzle in amazement about how otherwise sophisticated people allowed the entire global monetary system to come crashing down because some Princeton professor got his hands on a printing press. Fed Chairman Ben Bernanke's unshakable commitment to a Zero Interest Rate Policy (ZIRP) has impoverished savers, driven investors dangerously out along the risk curve, and baked a ticking time bomb into the federal budget cake. The last feat is quite an accomplishment considering we haven't even had a federal budget for almost four years. But when and if Congress finally does its constitutional duty, the Fed cannot even contemplate a return of real interest rates to historical norms because interest payments on the federal debt compounded at 4 or 5 percent will be fatal. And so, our money printing policy is in a Red Queen's race where, "It takes all the running you can do to keep in the same place. If you want to get somewhere else, you must run at least twice as fast!" There is only one way for this race to end. We have seen it in the Weimar Republic and, more recently, Zimbabwe. 4) We only await our Archduke Ferdinand moment. No one knows what will trigger the panic that wipes away the unfounded confidence upon which our entire fractional reserve banking system is perched. Will it be the inevitable exit of Greece from the euro? Sovereign debt repudiation by Prime Minister Beppe Grillo? An Iranian nuclear weapons test that draws a military response from Israel, followed by a seize-up of oil markets? There are so many potential triggers to choose from. We will know that the moment is near when the smart money starts heading for the sidelines, to be followed by everyone else. Except that it is always too late for everyone else. By the time global equity markets finish imploding over a few days of carnage, the well-connected insiders that caused the mess will be licking their chops totaling up their short positions, safe in the belief that when their counterparties go down, governments will somehow make good with yet another round of freshly printed money. Whether this is provided through bailouts or nationalization is immaterial. The damage will have been done. What happens next? That is impossible to call. No one can predict what the collapse of the TBTF banking system will lead to when impoverished people in country after country begin clamoring to be rescued by a man on a horse.

Выбор редакции
13 марта 2013, 02:48

Bill Frezza: Too-big-to-fail Banks Will Kill the Global Economy

There are not many things on which Harvard professor-turned-Massachusetts Senator Elizabeth Warren (D-MA) and I agree. Yet, to her credit, she has been sounding the alarm about the threat that "Too Big To Fail" (TBTF) banks represent to our economy. However, that is where our agreement ends. Like most progressives, she vastly overestimates the efficacy and wisdom of regulatory bodies that invariably become captive to the corporations they are supposed to regulate as that great revolving door refreshes the influence of crony capitalists regardless of who is voted into office. In fact, the regulatory policies she proposes would increase the TBTF behemoths' threat to the economy by further entrenching the alliance of Wall Street bankers, the Fed, the Treasury Department, the White House, and congressional enablers from both parties that brought us to this point. Until we figure out how to unravel this single biggest threat to our prosperity, the best we can hope for the next time the TBTF house of cards comes tumbling down is for the ensuing violence and privation to be contained long enough to avoid the emergence of totalitarian regimes both here and around the world. Sound apocalyptic? Think our problems can be solved with a regulatory nip here and a fiscal tuck there? Believe that our fiscal and monetary challenges can be overcome if we just get "the rich" to pay their "fair share?" If you answered "yes" to any of the above, then you are part of the problem, playing into the hands of the interests you believe you can control through the ballot box. Because the people who are driving this particular runway train never have to run for office. Let's take it from the top. 1) The global currency system is headed for collapse. This will be unlike any currency collapse we have ever seen. It will not be geographically containable, and will leave no safe havens. For the first time in history, central banks around the world are debauching their currencies in unison. Even the normally prudent Swiss are so afraid of the threat currency appreciation poses to their export industries that they have joined the madness. Stable exchange rates and the fact that Consumer Price Index (CPI)-based measures of inflation remain muted have calmed alarm bells. Meanwhile, the swelling asset bubble created by this unprecedented monetary expansion is being explained away -- and in some quarters even welcomed -- as some sort of stimulus-driven economic recovery. Hurrah, look at the booming stock market! Look at rising housing prices! Look at the expansion of consumer credit! Keynesianism works! The so-called "wealth effect" will awaken animal spirits and kindle aggregate demand, which will revive the real economy, backfilling the value already priced into the stock market. Real economic growth will return, mass unemployment will abate, and all will be forgiven. Unless it doesn't. And to date, it hasn't. The remedy for that? Print even more money! 2) The perceived elimination of counterparty risk is financial crack cocaine. The subprime mortgage meltdown gave us fair warning of what happens when investors believe they will be protected by government intervention when parties with whom they do business fail. The most egregious case is the backdoor bailout of Goldman Sachs and others through AIG, whose debts from reckless derivatives trading were paid out to creditors by U.S. taxpayers at 100 cents on the dollar. By refusing to allow AIG, Fannie Mae, Freddie Mac, and other failed financial institutions on the losing side of subprime mortgage bets to go through normal bankruptcy (which would have paid off creditors at pennies on the dollar), Washington was essentially telling the financial institutions on the winning side of those bets that they never have to hedge or discount their positions for counterparty risk. This has profound consequences on trading behavior, as it distorts the incentives that should inform institutional risk management. Individual traders' winning positions can grow without bound, matched by losing positions held by counterparties. Meanwhile, no parties have to worry about which side they will end up on because Uncle Sam will be there with a bailout, either way. And the bonus band plays on. 3) There is no safe exit from ZIRP. Future historians will puzzle in amazement about how otherwise sophisticated people allowed the entire global monetary system to come crashing down because some Princeton professor got his hands on a printing press. Fed Chairman Ben Bernanke's unshakable commitment to a Zero Interest Rate Policy (ZIRP) has impoverished savers, driven investors dangerously out along the risk curve, and baked a ticking time bomb into the federal budget cake. The last feat is quite an accomplishment considering we haven't even had a federal budget for almost four years. But when and if Congress finally does its constitutional duty, the Fed cannot even contemplate a return of real interest rates to historical norms because interest payments on the federal debt compounded at 4 or 5 percent will be fatal. And so, our money printing policy is in a Red Queen's race where, "It takes all the running you can do to keep in the same place. If you want to get somewhere else, you must run at least twice as fast!" There is only one way for this race to end. We have seen it in the Weimar Republic and, more recently, Zimbabwe. 4) We only await our Archduke Ferdinand moment. No one knows what will trigger the panic that wipes away the unfounded confidence upon which our entire fractional reserve banking system is perched. Will it be the inevitable exit of Greece from the euro? Sovereign debt repudiation by Prime Minister Beppe Grillo? An Iranian nuclear weapons test that draws a military response from Israel, followed by a seize-up of oil markets? There are so many potential triggers to choose from. We will know that the moment is near when the smart money starts heading for the sidelines, to be followed by everyone else. Except that it is always too late for everyone else. By the time global equity markets finish imploding over a few days of carnage, the well-connected insiders that caused the mess will be licking their chops totaling up their short positions, safe in the belief that when their counterparties go down, governments will somehow make good with yet another round of freshly printed money. Whether this is provided through bailouts or nationalization is immaterial. The damage will have been done. What happens next? That is impossible to call. No one can predict what the collapse of the TBTF banking system will lead to when impoverished people in country after country begin clamoring to be rescued by a man on a horse.

24 октября 2012, 13:23

Израильские инвесторы оказались неудачниками

Израильские институциональные инвесторы потеряли большую часть денег, которые они вложили в группу Israel Discount Bank (IDB). Несмотря на то, что в первой половине октября акции Discount Investment Corp и облигации IDB Development Corp выросли в цене, вернуть потерянные инвестиции им все же не удастся, отмечают эксперты. ...

24 августа 2012, 16:12

Precious Metals ‘Perfect Storm’ As MSGM Risks Align

From GoldCore Precious Metals ‘Perfect Storm’ As MSGM Risks Align Today's AM fix was USD 1,666.50, EUR 1,329.16, and GBP 1,051.88 per ounce. Yesterday’s AM fix was USD 1,662.50, EUR 1,324.07and GBP 1,047.57 per ounce. Silver is trading at $30.37/oz, €24.36/oz and £19.25/oz. Platinum is trading at $1,541.00/oz, palladium at $642.50/oz and rhodium at $1,025/oz. Gold climbed $14.60 or 0.88% in New York yesterday and closed at $1,669.40. Silver surged to a high at $30.81 and finished with a gain of 2.28%. The precious metals have broken out this week with sharp gains being seen in all four precious metals. Silver as expected led the gains and surged 8.55% in the week, palladium is up 6%, platinum 5% and gold up 3%. Currency Ranked Returns – (Bloomberg) Gold gave back some gains on Friday but it’s still set for its biggest weekly rise in more than 2 months due to the very strong fundamentals. Today, US durable goods orders are published at 1230 GMT and weakness would confirm weakness in the US economy and should lead to further safe haven demand for gold. The European Central Banker is fighting to save the European fiscal union and quantitative easing seems certain in Europe.  Investors will wait to see if central bankers are coordinating their efforts and announce further QE at the same time. Reuters reported increased demand for bullion in Hong Kong with one bullion dealer reporting “purchases by investors in the physical market.” There are even signs of a pickup in physical demand in India with strong buying being done by stockists ahead of the busy marriage season. The use of the term “perfect storm” by market participants is a bit clichéd and over used at this stage however it is appropriate with regard to looking at the fundamentals driving the precious metal markets and particularly gold and silver.  GoldPrices in Dollars – (Bloomberg) All of the recent focus has been on the Fed and the will it or won’t it engage in QE3 saga. Many of us said long ago that some form of QE on a significant scale is inevitable. However, it is important to realise that the Fed is just one factor driving precious metals higher.  The Fed is not the be all and end all and while the Fed can jaw bone and manipulate prices higher and lower in the short and medium term - in the long term the free market and forces of supply and demand will dictate prices. Silver Prices in Dollars – (Bloomberg) There is a frequent tendency to over state the importance of the Fed and its policies and ignore the primary fundamentals driving the gold market which are what we have long termed the ‘MSGM’ fundamentals. As long as the MSGM fundamentals remain sound than there is little risk of gold and silver’s bull markets ending. What we term MSGM stands for macroeconomic, systemic, geopolitical and monetary risks. The precious metals medium and long term fundamentals remain bullish due to still significant macroeconomic, systemic, monetary and geopolitical risks. a) Macroeconomic risk is seen in the risk of recessions in major industrial nations with much negative data emanating from the debt laden Eurozone, UK, Japan, China and U.S. in recent days. It remains difficult to pinpoint the nature of the coming recessions and possibly a Depression and whether it will be deflationary, inflationary, stagflationary or the less likely but possible none the less ‘Black Swan’ of hyperinflation. Deflation remains the primary concern of most policy makers, politicians, bankers and investors. However, the risk of deflation is a short term one and the monetary policy response or M means that various forms of inflation remain the medium and long term threat.  b) Systemic risk remains high as little of the problems in the banking and financial system have been properly addressed and there is a real risk of another 'Lehman Brothers' moment and seizing up of the global financial system. The massive risk from the unregulated “shadow banking system” continues to be underappreciated. ‘Financial weapons of mass destruction’ in the world wide shadow banking system are now estimated at over $60 trillion in late 2011.  Globally, a study of the 11 largest national shadow banking systems found that they totalled to $50 trillion in 2007, fell to $47 trillion in 2008 but by late 2011 had climbed to $51 trillion, just over its estimated size before the crisis.  c) Geopolitical risks are elevated - particularly in the Middle East. This is seen in the serious developments in Syria and between Iran and Israel. There is the real risk of conflict and consequent affect on oil prices and global economy.  There are also simmering tensions between the U.S. and its western allies and Russia and China.  Recent days have seen massive industrial unrest in the platinum sector in South Africa, the largest producer of platinum in the world (some 80% of supply) and fifth largest gold producer. There are genuine concerns that unrest in the platinum sector could spread to the gold sector with a consequent impact on gold supply. Resource nationalism is being seen throughout the world and some developing nations look set to demand higher prices in terms of debased fiat currencies for their finite natural resources.  d) Monetary risk is high as the policy response of major central banks to the first three risks continues to be to be ultra loose monetary policies, ZIRP, NIRP, the printing and electronic creation of a tsunami of money and the debasement of currencies.  Should the MSG risk increase even further in the coming months than the central banks response will again be by monetary and further currency debasement which risks currency wars deepening. This risks the devaluation of all fiat currencies and serious inflation in the coming months and years. Cross Currency Table – (Bloomberg) Conclusion Therefore, we remain bullish in the long term and advise that investors and savers should have a healthy allocation of their wealth in gold in a portfolio to protect against the MSGM fundamental risks. However, as ever markets are unpredictable and in the short term can do anything. This is particularly the case today with financial markets seeing significant volatility. Euro/dollar has been more volatile than gold in recent days. We caution that gold could see another sharp selloff and again test the support at €1,200/oz and $1,550/oz.  If we get a sharp selloff in stock markets in the traditionally weak ‘Fall’ period, gold could also fall in the short term as speculators, hedge funds etc . liquidate positions en masse. To conclude, always keep an eye on the MSGM and fade the day to day noise in the markets. We remain bullish in the medium and long term and those who maintain an allocation to gold will be rewarded. However, we caution that there is the possibility of further weakness in the short term. This seems unlikely due to the bullish technicals having aligned with the fundamentals however “event risk” is high and it would be foolish to completely discount the risk of yet one more sell off. For breaking news and commentary on financial markets and gold, follow us on Twitter. NEWS FT: Republicans Consider Returning To Gold Standard - CNBC Gold Bulls Strongest In Nine Months As Hoard Builds - Bloomberg Gold hovers near 4-1/2 month high, Fed eyed - Reuters Britain's richest 5% gained most from quantitative easing – Bank of England – The Guardian COMMENTARY Keiser Report: Liquidity Drought – Max Keiser Gold moving to the next major target of $4,500 to $5,000 – Resource Clips Spam Saves The Day – Zero Hedge Which Country Goes Bankrupt Next? (Hint: It's Not Who You Think) – Daily Finance Indian household savings used to buy gold: RBI – Mineweb

13 августа 2012, 20:02

Bayou's Ponzi, Vodka And Cocaine, Murder, And Frontrunning The Fed's "Secret" Bond Market

Think the attempted fake suicide by Bayou Capital's Sam Israel which dominated the headlines for a few days in 2008 was strange? You ain't seen nothing yet: as the following excerpt of Octopus, The Secret Market And The World’s Wildest Con by Guy Lawson via the Daily Mail explains, that was merely the anticlimatic culmination of an amazing tale of bogus London traders, 'secret' Bond markets, frontrunning the Fed, fake CIA and MI6 spies, ponzi schemes and staged murders. Israel's trading room Some of the stunning excerpts. All of this happened. Passing through the revolving doors, Israel stepped into the quintessence of London sophistication and money.   His family had stayed at Claridge’s for generations, and Sam moved with ease and entitlement.   For nearly a century his family had traded in cocoa, coffee, sugar and rubber, and become fantastically wealthy along the way.   Israel had been running his own hedge fund, Bayou, since 1996. To begin with returns were good.   But by the time of the first audit, Israel had been forced to start falsifying Bayou’s accounts – first in a panic to cover a single bad bet on gold, then systematically to hide regular losses.   By spring 2004, Bayou was down more than $100 million.   Israel needed a game-changing trading strategy that would make him tens of millions – and he needed it fast. Renting from the Donald At home his life was in crisis. He was plagued by back problems, and prescription drugs barely dulled the pain.   Vodka and cocaine were his way of coping, and he was becoming desperate.   His wife had thrown him out of the family home and he was renting a mansion owned by Donald Trump, complete with an 800-gallon saltwater fish tank and a menagerie of rare reptiles. Frontrunning the Fed is where it's at: He’d heard about a top-secret computer programme that enabled U.S. Intelligence Services to covertly see when and where the Federal Reserve injected money into the market.   Getting his hands on the programme would allow him to stay one step ahead, Israel calculated.   And the man who could get the software was a self-professed super-spook called Robert Booth Nichols.   The pair met at Israel’s third-floor suite in Claridge’s. The fake CIA "spook" connection: Nichols was alleged to be a CIA assassin, arms dealer and mob associate, involved in almost every nefarious covert plot carried out by the U.S. government for three decades.   He said he was part of a secret organisation dubbed ‘Octopus’ because its tentacles were wrapped around every aspect of society.   In fact, Nichols was a conman, whose house of mirrors made Israel’s own Ponzi scheme – in which investors were paid returns from their own money or the money paid by subsequent investors – seem tiny in comparison.   And like an episode of Hustle, Nichols would soon spin Israel an elaborate web of lies and deceit – involving bogus banks and traders across several European cities, the Zapruder film of President Kennedy’s assassination in 1963 and even a faked death – in an attempt to swindle him out of millions of dollars. Frontrunning the Fed turns out is for amateurs: just trade in the Fed's shadow market: Nichols told Israel to forget the computer software he was after – that he could get him much better returns trading bonds in a secret market Israel would never be able to gain access to unless he had $150 million in cash.   The institutions of the modern world – the U.S. government, the Federal Reserve, the International Monetary Fund, the largest banks – were all a front, Nichols said.   To keep the market solvent, the Fed secretly issued bonds at a huge discount and they were then traded in a shadow market.   The margins were huge. But the public could never know about it or there would be widespread panic.   Israel was instantly hooked. He wanted in. Enter the MI6 A whirl of meetings followed, including one at the Grosvenor House hotel, where Israel was introduced to Nigel Finch and John Cassidy.    According to Nichols, Finch, a veteran of MI6 with a refined accent, was the key to gaining entry to the secret bond market.   He ran a fine-art store and was a fellow of the Royal Society of Arts. Cassidy, claimed Nichols, was a former CIA station chief in Hong Kong and a descendant of Butch Cassidy, the notorious outlaw of the Wild West.   Nichols, Finch and Cassidy said they had assisted wealthy people into the trades for years.   But they hadn’t been able to trade on their own account and reap the billion-dollar benefits. With Israel’s $150 million, they would at last have the chance to get into the game as principals.   They warned him, however, that simply attempting to enter the shadow market was extremely dangerous. Israel could be murdered at any moment by a rival faction. Enter the trader with the face of an alcoholic: That night, in a private dining room at the Ritz casino, sitting under crystal chandeliers, Nichols told Israel how the trades worked.   Their designated trader was Emily Hardwick, a woman in her early forties who spoke with an upper-class accent and had the blotched face of a heavy drinker.   Secrecy was paramount, Israel was told, so they met Hardwick at midnight, at the City offices of Barclays.   Encouraging a sense of paranoia, Nichols impressed on Israel the need to be vigilant.   They met often in public places, the second bench south of the U.S. Embassy in Grosvenor Square being a favourite rendezvous.   Nichols told Israel he never travelled without a gun, even in London. And this is where the story begins. Read on here.