Hitting The Archives

209
Tue, Nov 22, 2011 - 9:17am

Just for fun, I though I'd hit you with a couple of archival posts this week. Going back and looking over the old "Watchtower" site can be great fun, especially with the assistance of 20/20 hindsight.

But there's also plenty to learn. Let's start with this little gem from almost a year ago. In it I discuss the circumstances that turned regular old me into The Turd. More importantly, this post contains a link to a two-segment "60 Minutes" interview of Michael Lewis, the author of "The Big Short".

First of all, if you haven't yet read "The Big Short", I strongly encourage you to do so. You should also take the time to watch both parts of the full, 23-minute video, too. Comparisons to today are valid. By 2007, 99.9% of "financial experts" thought that the status quo would continue, that AAA-rated MBS were solid investments and that selling credit default swaps was easy money. Oops. Fast forward to today. What percentage of "financial experts" think that the status quo will continue, that dollar hegemony will last forever and that the debt and deficits can be managed indefinitely? Additionally, what percentage fails or neglects to see that none of the excess from 2007 has been wrung out? The banks are still insolvent. Many are indeed worse off than they were then. Just like Michael Burry, one day soon we will all be proven prescient. Facts are facts and truth is truth. Just be patient.

Here's the link to the original but it's also c&p'd below.

https://tfmetalsreport.blogspot.com/2010/11/tipping-point.html

SUNDAY, NOVEMBER 28, 2010

The Tipping Point

I spent some time over the holiday weekend pondering what has brought me to this place, what prompted my "great awakening". Though there were many contributing factors, one of the salient events took place on Sunday, March 14, 2010. Not an event in the traditional sense, this one was simply me, in front of a TV.

After twenty years as a participant in the financial services "game", for some reason I began to feel unease with my profession in 2006. The feeling grew through 2008 as the entire world nearly melted down. It became a queasiness in 2009 as I watched Wall Street attempt to spin and deceive it's way back to credibility. It coalesced on 3/14/10 as I watched the following interview. If you have some time today, and if you can endure the Lipitor commercials that precede them, please take time to watch both parts. If you're near a bookstore, pick up a copy of "The Big Short", too. It's a great read.

https://www.cbsnews.com/video/watch/?id=6298082n&tag=contentBody;housing

For me, all the dots finally connected and the mental image I'd created of an "industry" that was, in the end, honest and beneficial came crashing down. The examples of corruption are nearly endless and I'll examine more in the days to come but, for now, let's just choose one, in ten simple steps.

1) Major TBTF bank insolvent due to overwhelming amount of underperforming and/or worthless debt.
2) Congress pressures FASB to change accounting standards thereby allowing said bank to reclassify worthless securities and loans as having some notional value.
3) Bank allowed to borrow unlimited/infinite amount of money at Fed discount window at 0.0025%.
4) Bank takes borrowed dollars and buys US Treasury bonds paying 3.0%.
5) Bank keeps spread from risk-less transaction and books this as profit.
6) Bank employees pay themselves huge bonuses commensurate with their brilliant minds.
7) CNBS begins non-stop parade of sell-side analysts who exclaim that the bank common shares are "undervalued" based upon cash flow and earnings.
8) Unwitting investors bid up shares of the still insolvent bank, perpetuating the illusion of financial health.
9) Bank "insiders" unload millions of personal shares and options to duped public.
10) Responsibility and wealth transferred. Bank executives, management and traders wealth is preserved at the expense (and loss) of the average, regular, hard-working investor.


Oh, and along the way, the Fed/Treasury benefited, too. The insolvent bank participated in a stealth form of quantitative easing. By using borrowed money from the Fed to buy treasuries, the TBTF banks create a synthetic demand for those bonds and notes, thereby keeping rates artificially low, consistent with stated Fed policy. Pretty slick, huh?

​I'm sorry to report that, in the year since I wrote that, nothing has changed. The insolvent, TBTF banks continue to borrow at 0% and use the proceeds to prop up the treasury market. They then book the risk-free spread as "profit" and celebrate their great "earnings" with lavish bonuses. Only in America...land of opportunity.

TF

​p.s. A friend sent along this link. It might be helpful in your "feast planning".

https://hoppedupblog.com/2011/11/thanksgiving-beer-pairings/

About the Author

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turd [at] tfmetalsreport [dot] com ()

  209 Comments

Drifter
Nov 22, 2011 - 9:25am

claw it back

9) Bank "insiders" unload millions of personal shares and options to duped public.
10) Responsibility and wealth transferred. Bank executives, management and traders wealth is preserved at the expense (and loss) of the average, regular, hard-working investor.

Pablo
Nov 22, 2011 - 9:27am

Thanks Mr. Ferguson, that's a good reminder

Every now and again I go look something up on the old blog, I'm so happy you've left it running for archival purposes!

Eric Original
Nov 22, 2011 - 9:31am

Financial Repression Update

A couple of updates to the Financial Repression data this morning. We are in even deeper doo doo than I thought...

https://www.tfmetalsreport.com/comment/527178#comment-527178

¤
Nov 22, 2011 - 9:32am

Thanks / I remember that post

I'm pretty sure I remember that post while I was still in the lurking phase on there. It was helpful back then and also helpful now to have it all consolidated in front of me.

I remember the day on ZH you announced you had a new blog etc. and I went there from day 1 and started following the blog. Threads like that sucked me right in and made a impact on me.

I hope this thread fires up a whole new generation of Turdites to start registering, posting and donating to this FREE site for the volumes of information made available by you and the contributions of other Turdites. (Click on a sponsor/ad banner. TFMR gets credit 4 it)

Thanks for the doing what you do TF

humbleprofits
Nov 22, 2011 - 9:32am

The Big Short

I agree with Turd, this is a fantastic book. This gem is what opened my eyes to the BS that goes on unchecked. It is easy to read and does a great job of going over the CDO and CDS markets and how they crashed the system. It is in paperback now, so not to expensive. great for a long plane ride or rainy weekend.

Caution, may want to have your favorite libation (medication) near by to quell the anger you may experience.

foggyroad
Nov 22, 2011 - 9:36am

Re normal market deflation posters yesterday

This ZH article mirrors My sentiments, as posted yesterdayhttps://www.zerohedge.com/news/gold-falls-again-options-expiry-–supported-global-debt-crisis-iranian-oil-jitters

beardeus
Nov 22, 2011 - 9:39am

Did anyone catch THIS news?!

Taken from Silver Doctor's blog,

"Sprott Asset Management Files Prospectus With SEC for $1.5 BILLION PSLV".

From the filing:

TORONTO, November 16, 2011 — Sprott Asset Management LP announces that it has filed a preliminary short form base shelf prospectus containing information relating to units of the Trust with securities commissions or similar authorities in all provinces and territories of Canada. Under the shelf prospectus, the Trust may offer from time to time during the 25 month period after a final receipt is received for the prospectus up to US$1.5 billion of units of the Trust.

https://silverdoctors.blogspot.com/2011/11/sprott-asset-management-files...

Eric Original
Nov 22, 2011 - 9:46am

Great Beer List, Turd

I'll just have one of each pleeeez

foggyroad
Nov 22, 2011 - 9:51am

Xty Movin on up

Well deserved Your contributions are well received, Thank You," O Fleet of foot" :)

ps how does one repost a previous comment?

arcticfox
Nov 22, 2011 - 9:55am

Did anyone catch THIS news?!

What has baffled me for the longest time and seems obvious and was brought up earlier is why a few well capitalized entities don't go long comex metal futures and stand for delivery(you know..sharks smelling blood and all that). Buffet started sniffing around silver and than inexplicably backed off. Still have yet to read or heard satisfactory answer for years......

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