Archive for May, 2010
In order for a financial system to be able to function properly, it is absolutely essential that the general population has faith in it. After all, who is going to want to invest in the stock market or entrust their money to big financial institutions if there is not at least the perception of honesty and fairness in the financial marketplace? For decades, the American people did have faith in Wall Street. But now that faith is being shattered by a string of recent revelations. It seems as though the rampant corruption on Wall Street is seeping up almost everywhere now. In fact, some of the things that have come out recently have been absolutely jaw-dropping. The truth is that the corruption on Wall Street is much deeper and much more systemic than most of us ever dared to imagine. As the general public digests these recent scandals, it is going to result in a tremendous loss of faith in the U.S. financial system. Once faith in a financial system is lost, it can take years or even decades to get back. So how is the U.S. financial system supposed to work properly when large numbers of people simply do not believe in it anymore?
Just consider some of the recent revelations of Wall Street corruption that have come out recently….
*Bloomberg is reporting that a massive network of big banks and financial institutions have been involved in blatant bid-rigging fraud that cost taxpayers across the U.S. billions of dollars. The U.S. Justice Department is charging that financial advisers to municipalities colluded with Bank of America, Citigroup, JPMorgan Chase, Lehman Brothers, Wachovia and 11 other banks in a conspiracy to rig bids on municipal financial instruments. Apparently what was going on was that it was decided in advance who would win the auctions of guaranteed investment contracts, which public entities purchase with the proceeds from municipal bond sales, and then other intentionally losing bids were submitted in order to make the process look competitive. The U.S. Justice Department claims that this fraud has been industry-wide and has been going on for years. In fact, at least four financial professionals have already pleaded guilty in this case.
*An industry insider has come forward with “smoking gun” evidence that some of the biggest banks have been openly and blatantly manipulating the price of gold and silver. For a time it looked like the federal government was just going to ignore all of this fraud, but after substantial public uproar some action is indeed being taken. In fact, it has been reported that federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals markets.
*New York attorney general Andrew Cuomo is investigating whether eight major Wall Street banks
purposely misled the big credit ratings agencies so that they would give their mortgage-backed securities AAA ratings that they did not deserve.
*There has been a ton of legal action surrounding mortgage-backed securities lately. For example, the Justice Department and the Securities and Exchange Commission are now investigating Morgan Stanley as part of a probe into whether Wall Street firms deliberately misled investors regarding the sale of mortgage-related securities.
*Goldman Sachs is getting most of the press about fraud in the mortgage-backed securities market these days. Of course Goldman is strenuously denying that it “bet against its clients” when it changed its position in the housing market in 2007. But we all know the truth at this point. The truth is that Goldman Sachs clearly bet against its clients and was involved in a whole lot of things that were even worse than that. Many did not think the U.S. government would dare go after Goldman, but that is what we are starting to see. U.S. federal prosecutors have opened a criminal investigation into whether Goldman Sachs or its employees committed securities fraud in connection with its trading of mortgage-backed securities, and it will be very interesting to see if anything comes of that investigation.
*But not everyone is being held accountable for their actions. The guy who helped bring down AIG is going to get off scott-free and is going to be able to keep the millions in profits that he made in the process.
*Entire U.S. cities have been victims of this rampant Wall Street fraud. In fact, it is now being alleged that the biggest banks on Wall Street are ripping off some of the largest American cities with the same kind of predatory deals that brought down the financial system in Greece.
*The really sad thing is that fraud is very, very lucrative. Executives at many of the big banks that received large amounts of money during the Wall Street bailouts are being lavished with record bonuses as millions of other average Americans continue to suffer economically. Even the CEOs of bailed-out regional banks are getting big raises. It must be really nice to be them.
So does all of this make you more likely or less likely to invest in the stock market?
Do you think that the American people can see all of this and still believe that the financial system is “fair” and “honest”?
The truth is that Wall Street is full of rip-off artists and fraudsters who don’t even try to hide their greed anymore.
It is as if a thousand junior Gordon Gekkos have been unleashed and they are all trying to be masters of the universe at any cost.
But what they are doing is ripping the heart out of the U.S. financial system.
If people lose faith in the system the system will ultimately fail.
A financial system that allows open fraud and manipulation is operating on borrowed time.
So will the rampant corruption on Wall Street now be cleaned up?
Only time will tell.
But one thing is for certain.
The American people will be watching.
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Dear Carpe Diem Readers:
I have just been made aware that some comments on certain posts might have been removed in the last few days. However, in at least several cases, I was not personally responsible for the comments being removed, so it might be a temporary Blogger issue. So just in case any of your comments have been removed inadvertently over the last few days, I apologize and will monitor the situation until it gets resolved. Under normal circumstances, fewer than 1 out every 100 comments gets removed, and in about 75% of those cases it’s a case of spam, where a comment contains a link to some commercial website that is advertising a product or service, and in the other 25% of the cases, the comment is removed for being overly offensive and insulting. But those removals are rare exceptions, and for the most part “anything goes” in the comments section. Although I don’t often respond to the comments, I do read almost all of them, and often learn from them.
Mark
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GBP/USD Stages A Corrective Rally
Earlier this week, I took note of the retracement levels of the recent down leg of the current GBP/USD bear trend. Today’s price action marks the pair’s first attempt to correct price since the GBP/USD made new lows at 1.4230. Despite cable’s big move today to the upside, it fell short of the 1.4500 whole number with the high today at 1.4465.
Studying Fibonacci lines on today’s price action, cable can correct as low as 1.4320 and still maintain the intraday up trend. I think the pair maintains a bullish bias until it corrects to the 38.2% retracement level on the daily chart.
Trade what you see, not what I think!
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Consumer products firm Clorox (CLX) has hiked it’s quarterly dividend 10% to $0.55 per share. This is another dividend hike for our non-registered portfolio. Our income from investments continues it’s climb into new records.
Lately we have recieved raises from:
Clorox
Johnson & Johnson
Procter & Gamble
Diageo
Telus
Canadian Oil Sands Trust
Sysco
and hints from…
Scotts Miracle Gro
GE
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Since I was a little kid I’ve known who Arlen Specter was. Everybody in Philly knew the man. In the 1960’s he was Philly’s tough talking district attorney. Specter had a presence. He could have been the inspiration for the DA on Law and Order. In comparison, a lot of people here don’t even know who our current district attorney is. It’s a guy named Seth Williams.
Specter didn’t grow up around here. He’s from Kansas. He talks a little bit like Jimmy Stewart – Which makes him stand out.
Politically, Specter has always been a chameleon. He was originally a Democrat who ran as a Republican for Philadelphia DA. When Arlen Specter was elected Senator in 1980 he was a liberal Republican. Now an extinct species. That was ok with most Philadelphians, because Philly is a very liberal, union dominated city. It’s like a socialist republic compared to the western part of the state.
Specter won so many elections here simply because the opposition couldn’t pin him down. Sometimes he was liberal sometimes conservative. He was a survivor, unlike his younger contemporary, Senator Rick Santorum. Santorum stuck his neck out . His right wing religious conservatism was out of step with most people in Pennsylvania. He arrogantly endorsed a bill that would have given people the freedom of investing their social security in the stock market. Then 9/11 and the internet bubble brought a bear market. And the idea was dead. – Specter must have been laughing all the way to the polls.
Everybody around here knew that Specter was a political chameleon. Nobody took his politics too seriously. They voted for him because he brought home the bacon and because he was really smart.
As the years went by Senator Specter grew arrogant. Sometimes he was ungracious. His wife Joan was a long serving Philadelphia Councilwoman. When she finally lost an election Sen. Specter blamed it on his enemies. The truth was his wife lost because she couldn’t bother with the normal constituent services like getting pot holes fixed. – She had a prominent pie baking business she operated on the side. So nobody felt sorry for her.
Most people around here have an opinion on Arlen Specter. Last week my buddy told me he was still pissed at him for coming up with the single bullet theory concerning the assassination of John Kennedy, when Specter was a young attorney, for the Warren Commission. Talk about harboring a grudge for 45 years. I told him I though the mob killed Kennedy, partly to make him feel good.
It will be interesting to see how Pennsylvania makes out with a new senator, as Arlen Specter recedes into retirement.
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Jim Cramer said on CNBC’s Fast Money that he would like to see his fans in the stocks that have a low risk. He thinks that it would be wise to sell Universal Display Corporation (NASDAQ: PANL) and buy Corning Incorporated
(NYSE: GLW). Universal Display (PANL) gained 0.56% today, while Corning (GLW) dropped 2.77%.
Cramer recommends Dendreon Corporation (NASDAQ: DNDN). He thinks this stock is highly speculative, but Dendreon (DNDN) has a vaccine for prostate cancer and Cramer thinks that it could go up to its 52 week high. Dendreon Corporation (DNDN) dropped 2.19% today.
Mr. Cramer likes Google (NASDAQ: GOOG), but he can’t recommend a company that has said no to China. He prefers Baidu, Inc.(ADR) (NASDAQ: BIDU) and Yahoo! Inc. (NASDAQ: YHOO). Google (GOOG) fell 0.79% today.
Lancaster Colony Corp. (NASDAQ: LANC) is oversold, thinks Cramer. He added that he sees a buying opportunity in this stock. LANC gained 0.92% today.
Cramer is bearish on Itau Unibanco Banco Holding SA (ADR) (NYSE: ITUB) because rates are going up in Brazil. He prefers Canadian banks and recommends Bank of Montreal (USA) (NYSE: BMO). BMO added 0.34% today, and ITUB fell 5.51%.
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The pharmaceutical industry has found a growing source of sales–the prescription of medicines, primarily used by adults in the past, to children. A portion of the sharp increase in drugs used by children last year was due to H1N1 doses. But, the majority of the “improvement” in sales was because children are being treated for [...]
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In trading on Wednesday, the iPath S&P 500 VIX Short-Term Futures ETN (VXX) is outperforming other ETFs, trading up 2.5% on the day. Also up for the day is the(…)Read the rest of Wednesday, May 19th ETF Movers: VXX, EWP, PALL, GDXJ, PSAU, EWA, IDX
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CNBC Mad Money’s Jim Cramer said in the segment of the show called Lightning Round OT that investors should not buy Amkor Technology, Inc. (NASDAQ: AMKR). He has been recommending Agilent Technologies Inc. (NYSE: A) and Teradyne, Inc. (NYSE: TER) for a while, and wants to see investors in these stocks, rather than in Amkor Technology (AMKR). Agilent (A) gained 1.62% today, while Teradyne (TER) and Amkor (AMKR) gained 0.55% and 0.76% respectively.
Cramer thinks that Compellent Technologies, Inc. (NYSE: CML) has a lot of competition, and it would be wise to sell this stock and buy Cisco Systems, Inc. (NASDAQ: CSCO). Compellent Technologies (CML) added 2.24% today, while Cisco (CSCO) dropped 0.42%.
MGM MIRAGE (NYSE: MGM) has too much debt, and Cramer doesn’t want to touch it. If investors want to be in casinos they should buy Wynn Resorts, Limited (NASDAQ: WYNN), thinks Cramer. MGM dropped 1.62% today, and WYNN fell 0.45%.
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