Whoa there White House horsey

OK lets see if that embeds its self into the blog.  What is the vid about? you ask.  Well its about the bank bailout, financial reform bill and you.  


First off it starts with the line that goes something like this, "if you bought your home at the top of the market, you had to read and sign "complicated" mortgage documents before you got keys to the house.  These "unintelligible" docs came from the "big" banks".  Well no they didn't.  The docs came from the shadow banking system.  The big banks bought the mortgages from these shadow banks (they are called shadow banks because they are outside the normal deposit/investment/commercial type banking establishment), packaged them up and sold the cash flow to others (pension funds, retirement funds, endowments, etc.).  Now it took time to match and package these loans into larger chunks of gooeyness, so when the music stopped, the big banks held mortgages that quickly declined in value and thus quickly destroyed the balance sheet of the banks.  So because I couldn't afford the  million dollar house on my field hand wage and the "big" banks had "complicated" (I have yet to see any mortgage document that doesn't spell out the terms of the contract in high school english) language in the mortgage contract, its now not my fault for signing a contract that I apparently couldn't understand.  Woo Hoo, off scott free again.


Now don't get me wrong, I'm all for less complicated ways of communicating ideas.  The part about simplifying the language of credit cards, student loans, etc. is defiantly a step forward, but when does the part about ending financial naiveté start.

The next part "banks will be prevented from growing so large that they put the entire economy at risk if they were to fail".  Um no.  I'm no math whiz, but what I see happening now and then is that the dangerous banks got bigger after the bailout, and this legislation does nothing to change that. JPMorgan + Bear Sterns = bigger, Bank of America + Countrywide Financial(shadow bank) + Merrill Lynch = bigger.  No where in the prostituted financial reform bill did it address the breakup of these government sponsored shotgun weddings.  In fact, the bailouts gave a competitive advantage to the TBTF banks by conferring that moniker upon them.  By being TBTF you no longer have to worry about risk, profits, customer service, etc.  All you need to focus on is getting bigger so that you become even more integrated in main street economies and more likely to be bailed out further down the road.


And finally you can rest easy by knowing nothing you did (even though the house payments constituted 120% of your monthly income) is your fault.  "you can rest a little easier knowing that your home, your family and your future will be protected from the irresponsibility of others."  When you repeat the "others" be sure to look in the mirror America.

Wow it gets even better

This is an unlocked link to the story about Russia's wheat "friend".  How much did this cost the "friend" in bribes.  I'm frankly astonished, but can't find much more on this story as of now.

So Way Way Back When....

OK maybe only a couple of hours ago I blogged about wheat and the dramatic climb in prices.  Remember I said something about shorting/selling and how some of Russia's "friends" would probably like to exit their long wheat position with a profit.  Three words + a tild + a percentage: Wheat down ~7.5% today.  Those are some good friends.

Edit see brief synopsis here

So Way Back When.....

OK so not that far back.  On June 7th I posted a chart which contained a list of different items along with their returns.  See it here.  I then expounded on sweet sugar.  Well sugar has climbed ~20%, but that isn't the real story.  The story is wheat.  Back around then, wheat was going for ~$4.45 bushel (depending on the time frame, market, etc.) and the outlook was a little gloomy for wheat prices and the farmers who grow wheat.  Well with a drought in Russia and a ban of Russian wheat exports (with a little help from some "friends"), wheat has reached new heights.  As of now, according to Bloomberg, wheat is trading at ~$7.55 - $7.70 a bushel depending on the time frame, market, etc.  That equates to a return of ~ 69% - 73%.  Not bad and quite dwarfs the return on sugar.  Let's see what happens when the "friends" of Russia decide to close out their long wheat positions and Russian exports start back up.  Can you say crash.  Can you say short. At the moment every grain elevator operator in the world is trying to get in on the action and sell at what are historic prices.  The best line I have seen regarding this shocking rise "The markets wheat themselves".

Another question to ask is "who does this affect"?  It will affect the consumer who buys the loaf of bread.  It will affect the chip manufacturer who makes the chips.  It will affect other commodities (sugar?) when the price stabilizes.

So let's say that the nightly news is all a bubble over the rapid rise in the price of bread (pun intended - I couldn't resist), along with the increase in the price of chips.  The consumer, seeing the nightly news reports with the headlines "Wheat Crisis 2010 - Is the World About To Starve?" or "What You Can Do To Protect Your Children and Widowed Mother From The Coming Wheat Crisis Catastrophe", thinks it's a valid reason for a $1.00 bag increase in their favorite chips. The consumer decides that since the chip company is not price gouging but passing along a perceived valid increase, then its not that bad to pay the extra dollar for the salty goodness.  But see, the news doesn't report when the price declines.  The chip makers count on the short attention spans of the chip addicts and slowly respond by lowering their prices gently over time until it stops at $0.50 higher than before the "wheat crisis".  The chip addict thinks its great that the price has declined, and the chip maker is happy to pocket the extra $0.50.  Hedge fund "friends" are happy that they found a way to capitalize on the suffering of millions by unloading an unprofitable position using government manipulation (bribes, payoffs, equity, etc.).  Everyone comes out happier than before. (SARCASM)

Anyway, time to end the tirade.  I received an answer to a question that has held me up, so back to reading fascinating government prose on SWPPP.

I bet walking and chewing gum will be outlawedl next.

Wow the financial IQ of this country is defiantly on a downward trend if we need to be reminded of what is and  isn't legal with respect to this list of illegal activities. **** What do you mean I can't steal someones identity and use it to buy the mansion on the hill.  I mean come on, this is a free country after all. ****  DISCLAIMER all text between the **** **** is SARCASTIC.  Where's that sarc font when I need it.