US President Obama Joins Chorus, Warns on Wall Street’s excessive risk-taking

Remember what I earlier wrote?

The point is the IMF, like many other global political or mainstream institutions or establishments, CANNOT deny the existence of bubbles anymore. So their recourse has been to either downplay on the risks or put an escape clause to exonerate them when risks transforms into reality which is the IMF position.

Well, US President Obama seems to have joined the bandwagon of political agents decrying “excessive risk taking” (euphemism for bubbles)

From the Wall Street Journal: (bold mine)

President Barack Obama on Monday urged U.S. financial regulators to keep looking for new ways to rein in excessive risk-taking in the financial sector, possibly through compensation and additional capital rules for the biggest financial firms, a White House spokesman said.

In a meeting Monday morning at the White House, Mr. Obama urged regulators “to consider additional ways to prevent excessive risk-taking across the financial system, including as they continue to work on compensation rules and capital standards,” White House press secretary Josh Earnest said during a press briefing Monday.

No new initiatives in these areas were considered Monday; rather Mr. Obama and participants discussed the need to finish outstanding compensation rules required by the 2010 Dodd-Frank law and reviewed the current state of capital rules, according to people familiar with the meeting.

In the case of the POTUS, the admonition doesn’t seem to be about “escape valves” but about the opportunity to expand government control on the financial markets. This resonates with the call of his former chief of staff, Emanuel Rahm (now Chicago Mayor) who in 2008 said, "You never want a serious crisis to go to waste. Things that we had postponed for too long, that were long-term, are now immediate and must be dealt with. This crisis provides the opportunity for us to do things that you could not do before."

President Obama doesn’t say that such “excessive risk taking” have been products of financial repression policies that has largely benefited the US government in two ways: subsidies on public debt and government spending through suppressed interest rates and from the inflation of tax revenues that has cosmetically improved US fiscal standings. 

Nonetheless for the POTUS to implicitly raise the risk of bubbles means that politically influential elites, as I have previously discussed, appear to be apprehensive of the current developments for them to have these politicians express (on proxy) their sentiments.

Again this shows that bubbles have natural limits. And the natural limits are working their way to the mindsets of even the major beneficiaries the political agents. Changes occur at the margins.

Again as the great Austrian economist Ludwig von Mises warned: (bold mine)

But the boom cannot continue indefinitely. There are two alternatives. Either the banks continue the credit expansion without restriction and thus cause constantly mounting price increases and an ever-growing orgy of speculation, which, as in all other cases of unlimited inflation, ends in a “crack-up boom” and in a collapse of the money and credit system. Or the banks stop before this point is reached, voluntarily renounce further credit expansion and thus bring about the crisis. The depression follows in both instances.

If they mean what they say these barrage of warnings will translate to policies.

I don’t know if current global stock market developments signify a head fake or heralds the advent of the real thing…

US stocks have converged to the downside…

And so as with global stocks: MSCI World $MSWORLD, Asia ex-Japan AAXJ, Europe Stoxx600 and iShares Emerging Markets (EEM)

Is this the start of the breakdown? We’ll see.

House Representatives Votes to Sue US President Obama

More and more interesting developments evolving from wars to secession to geopolitical brinkmanship to emerging protectionism.

In the US the House of representatives has voted to authorize a lawsuit on the POTUS for alleged arbitrary use of executive power

From the Hill.com

The House voted Wednesday to rebuke President Obama by passing a resolution authorizing a lawsuit against his use of executive power.

The 225-201 vote fell along party lines, with five Republicans voting against the measure. No Democrats supported it.

The lawsuit is a direct response to GOP frustration with Obama’s wide-ranging use of executive power.

Republicans have been particularly angry over Obama’s decision to ignore several deadlines in the Affordable Care Act and his decision to defer the deportation of certain young people who illegally immigrated to the United States as children.

In the last week, lawmakers have been riled up by reports that immigration advocates and Democrats are pushing the administration to take additional executive actions to give more immigrants legal status.

Rather than seeking to impeach Obama, however, GOP leaders in the House rallied around the lawsuit as a way of bottling up grassroots anger that would not backfire on Republicans in an election year.

Will this be a post Senate 2014 election issue? Will the Senate conform?

Don’t worry be happy, stocks are bound to rise forever.

President Obama’s Small Beer Brewery at the White House

Proof of President Obama’s reported alcoholism?

From the USA Today,

The Obama administration confirmed today it has added a new facility to the White House: A small beer brewery.

Officials discussed the brewery after President Obama told some Iowa residents that he had some of its product stocked aboard the bus he's using for a three-day tour of the Hawkeye State.

"There is a home brew, if you will, at the White House," said White House spokesman Jay Carney.

It’s one thing to get enamored with beer. But it’s another thing to get addicted with the foisting of free lunch beer social policies on the public.

War on Outsourcing: The Specter of US Economic Nationalism (Protectionism)

The Malaya reports

President Aquino appears unfazed by US President Barack Obama’s endorsement of House Bill No. 3596 or "Call Center and Consumers Protection Bill" pending in the US Congress saying it may be an election-related statement.

"We have to take into account that this is an election year but at the end of the day, like any other country, the US would want to make their companies more effective, more competitive, etc. and outsourcing is one of the keys towards that," Aquino said in an ambush interview at the EXL Service Philippines Site at the Mall of Asia in Pasay City.

"At this present time, I was made to understand, that this was an issue that was brought up during the last elections in America and from that time which was four years ago and now, the situation has not changed. Perhaps there isn’t that much of a danger," Aquino said.

"I will assume that it (BPO) will continue, hopefully it will not change because that is one of our sunrise industries," he said.

Aquino said there are no plans at the moment to lobby against the passage of the bill and that he prefers to "cross the bridge" only when the bill is passed.

It’s good to know that Philippine President Noynoy Aquino recognizes what looks like an election ploy. It really takes one to know one.

But it’s unfortunate that President Aquino, beneficiary of the outsourcing boom, would remain passive on this issue. Never mind if America’s turn to protectionism might indeed harm the industry. It would seem better to be bullied into submission. Yet fawn over with plans by the US to expand military presence here.

President Aquino doesn’t seem to realize that the divide-and-conquer and class warfare strategies have been the hallmark of the Obama administration.

As Mike Brownfield of the conservative Heritage Foundation writes,

Obama enacted a purely progressive agenda with his expansion of the state under Obamacare, his trillion-dollar stimulus bill, the government takeover of the auto industry, the proliferation of regulations under the Dodd-Frank regulatory reform bill, the crony capitalism of the Solyndra scandal, and the illegal appointments to the unrestrained Consumer Financial Protection Agency and the National Labor Relations Board. The result: Some 13.1 million Americans remain unemployed, job creation has been abysmal for much of the past three years, and the President’s promise to turn around the U.S. economy has gone unfulfilled.

The difference is that Mr. Obama’s progressive agenda, during this election season, seems to have transitioned from a moderate to hard line stance.

Maybe’s this also part of the desperation to get re-elected considering the Mr. Obama’s near record low approval rating. (chart from Gallup)

Yet here is more proof of President Obama's protectionist urge.

From the Wall Street Journal,

China was dragged into the 2010 U.S. midterm elections, and President Obama is busy ensuring that it will be an even bigger political target during the 2012 campaign. In Tuesday night's State of the Union address, the President joined Republican candidate Mitt Romney in singling out China as a special trade violator.

In announcing that he will set up a new Trade Enforcement Unit to investigate "unfair trade practices in countries like China," Mr. Obama is promising to increase investigations against Chinese exporters. His Administration has so far brought five cases against China in the World Trade Organization (WTO). Late last year it began targeting China's solar industry, while last week it said it would investigate Chinese makers of wind energy towers.

By the way one looks at it, protectionism has been rearing its ugly head as politicians like President Obama and the mainstream Republican candidates appeal to the emotions of the uninformed via nationalism/patriotism to solicit for their votes.

Many are unaware that economic nationalism (or protectionism) fundamentally underpins the philosophy of war or of military conflicts. World War II, for instance has mainly been caused by rabid nationalism.

Again current events have been affirming the admonitions of the great Ludwig von Mises,

Economic nationalism is incompatible with durable peace. Yet economic nationalism is unavoidable where there is government interference with business. Protectionism is indispensable where there is no domestic free trade. Where there is government interference with business, free trade even in the short run would frustrate the aims sought by the various interventionist measures…

What generates war is the economic philosophy almost universally espoused today by governments and political parties. As this philosophy sees it, there prevail within the unhampered market economy irreconcilable conflicts between the interests of various nations. Free trade harms a nation; it brings about impoverishment. It is the duty of government to prevent the evils of free trade by trade barriers. We may, for the sake of argument, disregard the fact that protectionism also hurts the interests of the nations which resort to it. But there can be no doubt that protectionism aims at damaging the interests of foreign peoples and really does damage them. It is an illusion to assume that those injured will tolerate other nations' protectionism if they believe that they are strong enough to brush it away by the use of arms. The philosophy of protectionism is a philosophy of war.

In short the President Obama’s war on outsourcing constitutes part of what seems to be an overall protectionist agenda, which translates to a war on trade against every nationality (including the Philippines).

President Aquino should negotiate to retain and expand free markets and abide by such principles. Otherwise, perhaps Marc Faber’s prediction may come true.

President Obama Job Approval Ratings: Worst US President

From US News

President Obama's slow ride down Gallup's daily presidential job approval index has finally passed below Jimmy Carter, earning Obama the worst job approval rating of any president at this stage of his term in modern political history.

Since March, Obama's job approval rating has hovered above Carter's, considered among the 20th century's worst presidents, but today Obama's punctured Carter's dismal job approval line. On their comparison chart, Gallup put Obama's job approval rating at 43 percent compared to Carter's 51 percent.

Back in 1979, Carter was far below Obama until the Iran hostage crisis, eerily being duplicated in Tehran today with Iranian protesters storming the British embassy. The early days of the crisis helped Carter's ratings, though his failure to win the release of captured Americans, coupled with a bad economy, led to his defeat by Ronald Reagan in 1980.

According to Gallup, here are the job approval numbers for other presidents at this stage of their terms, a year before the re-election campaign:

-- Harry S. Truman: 54 percent.

-- Dwight Eisenhower: 78 percent.

-- Lyndon B. Johnson: 44 percent.

-- Richard M. Nixon: 50 percent.

-- Ronald Reagan: 54 percent.

-- George H.W. Bush: 52 percent.

-- Bill Clinton: 51 percent.

-- George W. Bush: 55 percent.

What's more, Gallup finds that Obama's overall job approval rating so far has averaged 49 percent. Only three former presidents have had a worse average rating at this stage: Carter, Ford, and Harry S. Truman. Only Truman won re-election in an anti-Congress campaign that Obama's team is using as a model.

Change we can believe in? I guess not.

Obama’s Energy Policies and Crony Capitalism

Why are oil prices high? As I have repeatedly been saying this has been because of government policies, particularly restriction to access (aside from inflationism)

From the Global Warming Policy Foundation (emphasis added) [hat tip Matt Ridley]

Harold Hamm calculates that if Washington would allow more drilling permits for oil and natural gas on federal lands and federal waters, the government could over time raise $18 trillion in royalties. That's more than the U.S. national debt.

Harold Hamm, the Oklahoma-based founder and CEO of Continental Resources, the 14th-largest oil company in America, is a man who thinks big. He came to Washington last month to spread a needed message of economic optimism: With the right set of national energy policies, the United States could be "completely energy independent by the end of the decade. We can be the Saudi Arabia of oil and natural gas in the 21st century."

"President Obama is riding the wrong horse on energy," he adds. We can't come anywhere near the scale of energy production to achieve energy independence by pouring tax dollars into "green energy" sources like wind and solar, he argues. It has to come from oil and gas.

You'd expect an oilman to make the "drill, baby, drill" pitch. But since 2005 America truly has been in the midst of a revolution in oil and natural gas, which is the nation's fastest-growing manufacturing sector. No one is more responsible for that resurgence than Mr. Hamm. He was the original discoverer of the gigantic and prolific Bakken oil fields of Montana and North Dakota that have already helped move the U.S. into third place among world oil producers.

How much oil does Bakken have? The official estimate of the U.S. Geological Survey a few years ago was between four and five billion barrels. Mr. Hamm disagrees: "No way. We estimate that the entire field, fully developed, in Bakken is 24 billion barrels."…

The White House proposal to raise $40 billion of taxes on oil and gas—by excluding those industries from credits that go to all domestic manufacturers—is also a major hindrance to exploration and drilling. "That just stops the drilling," Mr. Hamm believes. "I've seen these things come about before, like [Jimmy] Carter's windfall profits tax." He says America's rig count on active wells went from 4,500 to less than 55 in a matter of months. "That was a dumb idea. Thank God, Reagan got rid of that."

A few months ago the Obama Justice Department brought charges against Continental and six other oil companies in North Dakota for causing the death of 28 migratory birds, in violation of the Migratory Bird Act. Continental's crime was killing one bird "the size of a sparrow" in its oil pits. The charges carry criminal penalties of up to six months in jail. "It's not even a rare bird. There're jillions of them," he explains. He says that "people in North Dakota are really outraged by these legal actions," which he views as "completely discriminatory" because the feds have rarely if ever prosecuted the Obama administration's beloved wind industry, which kills hundreds of thousands of birds each year.

Obama’s policies have been designed at keeping energy prices elevated so that he can push his “green energy” projects to the benefit of his cronies, as the recent Solyndra scandal has manifested.

See video below

And more political blight from 'green energy' based crony capitalist policies are being exposed.

From Heritage Foundation,

Days before a recent deadline, the Department of Energy brazenly approved two additional loans for more than $1 billion for solar energy projects in the Obama Administration’s green jobs program. The latest ill-fated ventures include a $737 million loan guarantee to Solar Reserve for a 110-megawatt solar tower on federal land in Nevada and a $337 million guarantee for Mesquite Solar 1 to develop a 150-megawatt solar plant in Arizona.

Loan guarantees like these are destined to fail, because they are either granted to companies that could not remain viable without them or because the loan was supported by political connections; or both. This round of loans includes the latter—just as it appears Solyndra was aided.

For example, Solar Reserve lists PCG Clean Energy and Technology Fund (East) LLC as an investment partner. Ronald Pelosi, brother-in-law of the House Minority Leader Nancy Pelosi, is an executive with PCG. Another investment partner: Argonaut Private Equity, the employer of Steve Mitchell, who served on the Solyndra LLC Board of Directors.

Green energy is no more than political based redistribution. Yet as the above shows, big government or the politicization of allocation of resources results to corruption, the gaming the system, inefficiency or wastage of scarce resources and taxpayer losses.

Obama’s Foreign Policy: Judge, Jury and Executioner

Paul Craig Roberts on the assassination of Anwar Awlaki and Samir Khan

But what Awlaki did or might have done is beside the point. The US Constitution requires that even the worst murderer cannot be punished until he is convicted in a court of law. When the American Civil Liberties Union challenged in federal court Obama’s assertion that he had the power to order assassinations of American citizens, the Obama Justice (sic) Department argued that Obama’s decision to have Americans murdered was an executive power beyond the reach of the judiciary.

In a decision that sealed America’s fate, federal district court judge John Bates ignored the Constitution’s requirement that no person shall be deprived of life without due process of law and dismissed the case, saying that it was up to Congress to decide. Obama acted before an appeal could be heard, thus using Judge Bates’ acquiescence to establish the power and advance the transformation of the president into a Caesar that began under George W. Bush.

Read the rest here

Any foreigners, for whatever reason which mostly will signify as political opposition, can be labeled a ‘terrorist’, and thus, subject to unilateral summary execution.

Popularity Based Politics Equals Waking Up To Frustration

It is election season anew in the Philippines. Yet like in most democracies, elections are turning out to be merely popularity contests.

People are made to believe that alleged changes brought forth by a new leadership, rather than changes in the system, is what matters most. Candidates are chosen based on symbolism and the free goodies that they offer.

Little do the public understand, as Rev. Edmund Optiz warned that ``The state being what it is, it matters little who holds office and wields its inordinate powers. This truth is dawning on some persons today; but the general public, however disillusioned with politicians, still has faith in politics as the means of curing all the ills of society and improving the quality of life. Hopefully, people will someday realize that what counts is the overextension of state power, not who holds public office. The important thing is to refute statist ideas, whatever their guise..."

Real life experiences should serve as examples...

In the US, President Obama had been ushered in as the most popular elected president.

And as we noted in US Politics: Extrapolating Hope and Change to Presidential Term Realities, ``Yet high approval ratings tend to be followed by a collapse over the years."

It's barely been a year and as recently noted in President Obama's Popularity Falling Back To Reality, "Americans seem to be waking up to the harsh realities of life".

Hope appears as being interchanged with unmet expectations or frustrations.

Take this Bloomberg report, ``President Barack Obama’s approval rating has fallen below 50 percent for the first time in polling by Quinnipiac University as U.S. voter discontent grows over the war in Afghanistan.

``Obama’s job approval rating fell to 48 percent in the Nov. 9-16 survey of registered voters nationwide by the Hamden, Connecticut-based university, with 42 percent polled saying they disapproved of the job he is doing."

“In politics, symbols matter, and this is not a good symbol for the White House,” Peter Brown, assistant director of the Quinnipiac University Polling Institute, said in a statement."

It's not just in Quinnipiac University but also among major pollsters...

As Gallup

ZogbyRasmussenreports

Pew Research

And even in Google search trends

So while Wall Street maybe cheering on the recent gains from rising markets, such optimism isn't being translated to the main street.

Our point is: we should realize that economic freedom matters more than delusional popularity contests.

President Obama's Popularity Falling Back To Reality

In our January post US Politics: Extrapolating Hope and Change to Presidential Term Realities here is what we said,

``Yet high approval ratings tend to be followed by a collapse over the years."

This from Gallup

This from Pew ResearchFrom RassmussenReports.com

"Change we believe in" appears turning out to be-"the more things change the more they remain the same".

As H.L Mencken presciently wrote of politicians, ``These men, in point of fact, are seldom if ever moved by anything rationally describable as public spirit; there is actually no more public spirit among them than among so many burglars or street-walkers. Their purpose, first, last and all the time, is to promote their private advantage, and to that end, and that end alone, they exercise all the vast powers that are in their hands … Whatever it is they seek, whether security, greater ease, more money or more power, it has to come out of the common stock, and so it diminishes the shares of all other men. Putting a new job-holder to work decreases the wages of every wage-earner in the land … Giving a job-holder more power takes something away from the liberty of all of us .…" (emphasis added)

Americans seem to be waking up to the harsh realities of life.

Yet the higher the expectations, the greater fall.

Although with the rate the above has been going, it doesn't seem to take years-after all it's been only about 7 months!

Hedge Fund Manager Refutes President Obama

After the hedge fund industry got slammed by US President Obama, Hedge Fund manager Clifford S. Asness makes a stirring rebuttal...

From New York Times Deal Book (all bold highlight mine)

Unafraid In Greenwich Connecticut
Clifford S. Asness
Managing and Founding Principal
AQR Capital Management, LLC

The President has just harshly castigated hedge fund managers for being unwilling to take his administration’s bid for their Chrysler bonds. He called them “speculators” who were “refusing to sacrifice like everyone else” and who wanted “to hold out for the prospect of an unjustified taxpayer-funded bailout.”

The responses of hedge fund managers have been, appropriately, outrage, but generally have been anonymous for fear of going on the record against a powerful President (an exception, though still in the form of a “group letter,” was the superb note from “The Committee of Chrysler Non-TARP Lenders,” some of the points of which I echo here, and a relatively few firms, like Oppenheimer, that have publicly defended themselves). Furthermore, one by one the managers and banks are said to be caving to the President’s wishes out of justifiable fear.

I run an approximately twenty billion dollar money management firm that offers hedge funds as well as public mutual funds and unhedged traditional investments. My company is not involved in the Chrysler situation, but I am still aghast at the President’s comments (of course, these are my own views, not those of my company). Furthermore, for some reason I was not born with the common sense to keep it to myself, though my title should more accurately be called “Not Afraid Enough” as I am indeed fearful writing this… It’s really a bad idea to speak out.

Angering the President is a mistake, and my views will annoy half my clients. I hope my clients will understand that I’m entitled to my voice and to speak it loudly, just as they are in this great country. I hope they will also like that I do not think I have the right to intentionally “sacrifice” their money without their permission.

Here’s a shock. When hedge funds, pension funds, mutual funds, and individuals, including very sweet grandmothers, lend their money they expect to get it back. However, they know, or should know, they take the risk of not being paid back. But if such a bad event happens, it usually does not result in a complete loss. A firm in bankruptcy still has assets. It’s not always a pretty process. Bankruptcy court is about figuring out how to most fairly divvy up the remaining assets based on who is owed what and whose contracts come first.

The process already has built-in partial protections for employees and pensions, and can set lenders’ contracts aside in order to help the company survive, all of which are the rules of the game lenders know before they lend. But, without this recovery process nobody would lend to risky borrowers. Essentially, lenders accept less than shareholders (means bonds return less than stocks) in good times only because they get more than shareholders in bad times.

The above is how it works in America, or how it’s supposed to work. The President and his team sought to avoid having Chrysler go through this process, proposing their own plan for reorganizing the company and partially paying off Chrysler’s creditors. Some bondholders thought this plan unfair. Specifically, they thought it unfairly favored the United Auto Workers, and unfairly paid bondholders less than they would get in bankruptcy court. So, they said no to the plan and decided, as is their right, to take their chances in the bankruptcy process. But, as his quotes above show, the President thought they were being unpatriotic or worse.

Let’s be clear, it is the job and obligation of all investment managers, including hedge fund managers, to get their clients the most return they can. They are allowed to be charitable with their own money, and many are spectacularly so, but if they give away their clients’ money to share in the “sacrifice,” they are stealing. Clients of hedge funds include, among others, pension funds of all kinds of workers, unionized and not.

The managers have a fiduciary obligation to look after their clients’ money as best they can, not to support the President, nor to oppose him, nor otherwise advance their personal political views. That’s how the system works. If you hired an investment professional and he could preserve more of your money in a financial disaster, but instead he decided to spend it on the UAW so you could “share in the sacrifice,” you would not be happy.

Let’s quickly review a few side issues.

The President’s attempted diktat takes money from bondholders and gives it to a labor union that delivers money and votes for him. Why is he not calling on his party to “sacrifice” some campaign contributions, and votes, for the greater good? Shaking down lenders for the benefit of political donors is recycled corruption and abuse of power.

Let’s also mention only in passing the irony of this same President begging hedge funds to borrow more to purchase other troubled securities. That he expects them to do so when he has already shown what happens if they ask for their money to be repaid fairly would be amusing if not so dangerous. That hedge funds might not participate in these programs because of fear of getting sucked into some toxic demagoguery that ends in arbitrary punishment for trying to work with the Treasury is distressing. Some useful programs, like those designed to help finance consumer loans, won’t work because of this irresponsible hectoring.

Last but not least, the President screaming that the hedge funds are looking for an unjustified taxpayer-funded bailout is the big lie writ large. Find me a hedge fund that has been bailed out. Find me a hedge fund, even a failed one, that has asked for one. In fact, it was only because hedge funds have not taken government funds that they could stand up to this bullying.

The TARP recipients had no choice but to go along. The hedge funds were singled out only because they are unpopular, not because they behaved any differently from any other ethical manager of other people’s money. The President’s comments here are backwards and libelous. Yet, somehow I don’t think the hedge funds will be following ACORN’s lead and trucking in a bunch of paid professional protesters soon. Hedge funds really need a community organizer.

This is America. We have a free enterprise system that has worked spectacularly for us for two hundred-plus years. When it fails it fixes itself. Most importantly, it is not an owned lackey of the Oval Office to be scolded for disobedience by the President.

I am ready for my “personalized” tax rate now.