Wednesday, May 11, 2011

Comrades, unite against Wall Street

The oil price run up on Monday and Tuesday didn’t last and the price fell back with West Texas Intermediate trading under $99/barrel. Gasoline futures really took a beating with news that consumption fell sharply on top of already record supplies on hand. Commodities in general are going down with the USD up against the Euro by 8 cents in the past week. This is generally being blamed on Greece where there is a general strike and some minor rioting today.

But Greece is not really a significant part of the Euro zone so other things are going on. Currency traders make money on the way down as well as going up so you have some profit taking, plus the carry trade that has been borrowing at near zero interest in the US and investing overseas to get double digit returns are starting to flee back to the USD.

This movement back to the “green back” is so they don’t get caught in the pinch if the market really does collapse. Some really big hedge funds took a beating last week during the flash crash in oil, losing double digit percentages of their capital. Since they leverage 10 to 1 the market dropping 10% can wipe them out if they can’t make the margin call. When things are really volatile that isn’t as easy to do as it is to say, that’s contrary to what right wing “experts” will say when you suggest there should be regulation and higher margins.

Or better yet we could do as the noted Marxist Charles Thomas Munger said recently and eliminate 80% of what Wall Street does because it harms America (you know, make it illegal again like the old days when that pinko FDR was making the rules). Did I say Comrade Munger was a Marxist? My mistake, he’s really vice-chairman of Berkshire Hathaway Corporation (you may of heard of his partner Warren Buffet). For you right wingers, you can see a short video of his remarks at

Speaking of the lying Right wingers. Speaker Boner went down to Wall Street and gave a speech to fill them in on how the economy works. He said we need to slash government spending because it “is crowding out private investment and threatening the availability of capital” (hic) This statement must have had them rolling in the aisles.

Short term money can be had for nearly free and long term money is extremely cheap. Corporate junk bonds are selling at twice the rate of 2007 (before the crash) with a 170 billion being sold by companies in the first quarter alone and they are paying an average of only 2% interest. These are called junk bonds because nobody really expects the money to be repaid and are normally marketable only because of their high return. Two percent is not a high return, remember when passbook savings accounts paid 4%? (those now pay in the low tenths of a percent) Yeah we really have a shortage of money because of government spending we can tell from the high interest rates and that two plus trillion in cash the major corporations have on their balance sheets.

The Boner also said he’s demanding 4 trillion in spending cuts before he will agree to raising the debt ceiling. The Wall Street people in the audience didn’t tear him to shreds on the spot so they must have assumed he was lying with that statement too. But 80% of what they do on Wall Street is a lie so they are used to it.


Anonymous said...

While listening to Malloy last night he mentioned 'moving back to the greenback' which got my attention. I'm not a financial expert, but unless I'm mistaken the Greenback was the last debt free currency used during the Lincoln Admin. and what did you mean by moving back to it? Also what do you know about ICE, commodities trading, what role ICE plays, and is ICE free from US laws?