Financial Wisdom By Kalidas

Like a potential good stock that could yield profit and dividend, Americans trusted Barack Obama and elected him as President on his promise of “Change”. In stock market, the investors usually buy on rumor and sell on fact. That rule still applies to the President elect. Barack Obama is beginning to recede on his promise to change.

He is no longer a dashing flawless speaker. He is intermittent, evasive, confused and disenchanted. Instead of adopting change that he had promised, he is following the same beaten path as his predecessors, counting on old guards in Clinton Administration for his new cabinet. It looks like that Bill Clinton is having paramount influence on Barack Obama. Will he be the proxy of Bill Clinton the way George W. Bush was for his mentor father, former President George Henry Bush?

Change? What Change? Obama is beginning to ask himself while facing hard reality.  Mr. Obama, you had a safe journey in the space so far. Now face the hostile home for a change. Welcome back to this planet.

From whatever we hear and see from his utterances in print and media, he seems to be making startling beginning. It seems that he was during campaign guided on economic front by Robert Rubin, former Treasury Secretary, now with Citigroup, who is the most dangerous man around in the United States.

Rubin was wholesale destructive. He destabilized and eventually destroyed the Glass Steagall Act, 1933 during Clinton Administration. He saw it as an impediment to the merger of Citi Bank and Travelers group. Rubin therefore unduly influenced or advised  President Clinton to approve the abolition of the 65 years old law that finally sow the seeds of today’s sub-prime related crisis, where banking, securities and insurance businesses could be conducted by a single institution.

This was what exactly opposed by the Glass Seagall Act, 1933 formulated  under President Roosevelt Administration that separated the business of Banking, Insurance and Securities for common good to avoid the conflict of interest. The integration of Commercial banking, Insurance and Securities business earlier had caused massive stock market crash in 1930s and saw closing down of over 4000 Banks, Security houses and Insurance companies that resulted into deeply recessed depression. Had that act survived today, we would not have seen today’s crisis in Banking, Investment banking (securities) and Insurance world.

Almost all these troubled banks, brokers and insurance companies today are engaged in concurrent banking, insurance and securities business. No one knows who should control whom. SEC would consider banking as FED job, FED will consider derivatives as SEC job and SEC will consider banking default as FDIC job. It finally turns out to be no one’s job. Rubin also objected to CFTC (Chicago Futures and Trade Commission) role to oversee the “derivative trades” and legally removed their authority with the help of Alan Greenspan, then FED Chairman. These very derivatives are the crux of the present day problems.

Rubin created the web of non accountability, a specialization of his parent firm – Goldman Sachs. Paulson, also from same firm, recently followed it up while seeking $700 billions from the Senate on one condition – he would not be accountable or obliged to make any disclosure.

Non-accountability has gained momentum – from a few billions to $ 700 billions. Bernanke perfected it with massive $ 2000 billions or 2 trillions of infusion in the name of easing credit crunch!

Is it not silly that while both Paulson and Bernanke were soliciting Senate’s authority for $ 350 billions of TARP funds in first installment, Bernanke alone was distributing largesse of $ 2 trillions ($2000 billions) without seeking any authority from anywhere! When Bloomberg asked for the details of the distribution, the Fed did not even bother to reply under the weil of secrecy and national security. Now Bloomberg is filing a lawsuit under Freedom of Information Act.

Even the husky voiced Senator Barney Frank expressed dis-satisfaction at the use (or misuse or abuse) of $ 350 billions that evaporated in just under 30 days. California fire, my dear Barney, California wild fire!

President Bush was non-plus. In 8 years, he knew only three things – Iraq (Saddam Hussein), 911 (Twin Towers) and Afghanistan (Osama Bin Laden). In his quest for Middle East and Afghanistan, he forgot the map of the United States. While he went on terrorizing Middle East with Patriot missiles, his financial team of Paulson and Bernanke invented and practiced home grown terrorism on the Senators, Representatives, Senate, the House Banking Committee, the President and the American people.

It was a classic act of “Green” blackmail. “You do this else these terrible consequences will follow. Don’t blame us we did not warn you.” was the kind of address they gave to the Senators who were stunned as if they were observing a few minutes silence in deferential respect to the departed soul.

LTCM was destroyed by John Meriwether, former executive of Salomon Brothers. Rubin therefore started hating the Russians who brought about LTCM debacle. LTCM (that lost $1 trillions in derivatives, officially $ 4 billions as its own capital) was covertly encouraged by Rubin with remote control. This is why he helped organize its rescue when so many skeletons were about to come out in the open.

Warren Buffett, who took over Salomon Brothers in 1987 with great fanfare as great financial bargain, finally got rid of it when it was sold to Travelers Group in 1997. Travelers Group then merged with Citi Bank to become a Citigroup.

In similar fashion, he was seen to fondle Enron to manipulate the oil and gas prices in the world market through paper trading. Citigroup and JPMS actively supported him by financing Enron’s oil and gas related deals. When he saw the oil bets going against, he quietly resigned without attracting any notice.

No one asked him why did he resign? Not even his ardent admirer, Bill Clinton, then President, who crowned him as the greatest Treasury Secretary ever since Alexander Hamilton. (1789~95)

All bad companies promoted or rescued during Rubin’s regime, finally converged into Citigroup. Rubin then eased himself out of his position as Treasury Secretary into $115 Millions a year job at Citigroup to cover his tracts relating to dubious assets followed by newly developing bad asset – Enron. Citigroup and JP Morgan Chase (JPMC), who financed Enron, sold everywhere its spurious bonds similar to sub prime bonds and CDO/CDS derivatives of today, and got into hot trouble losing several billions. 

During  his tenure at Citigroup, he managed to settle Enron related lawsuits by defraying $ 2 billions to Investors in 2005 followed by recent settlements of $ 1.67 billions claim of the creditors. He also oversaw the $2.5 billions of Worldcom related settlement by Citigroup to irate investors and creditors. In short, it appears that he deliberately went there to cover all his tracts at fat fees of $ 100 Million plus per year.

In less than 5 years of Rubin’s Co-Chairmanship, after eating almost $500 Millions of salary as a parasite, Citigroup lost $ 70 billions in cash ($50 billions before + $17 billions in the from of taking over liabilities of its subsidiaries in the form Structured Investment Vehicles). He also forced (persuaded) the Fed to guarantee its lousy and worthless portfolio of $ 360 billions, presumably in the form of CDO (Collateralized Debt Obligations) CDS (Credit Default Swaps) or CLN (Credit Linked Notes). In short, he managed to persuade his compatriot Hank Paulson and Ben Bernanke to spend $ 430 billions of known figures to finance Citigroup. How many of $ 2 trillions additional largesse was given away by bearded Bernanke are still not counted.

And what did the Citigroup do with $430 Billions? It fired 75,000 employees. In short, the Fed and Treasury gave away $5.74 million to Citigroup for firing each employee. It will cost the State additional $4.5 billions towards unemployment allowance and lost taxes of $ 1.5 billions had these employees remained employed and paid taxes.

Rubin followed the doctrine or mantra of strong dollar policy to manipulate the world market. He was in fact strongly suspected to be instrumental in causing Asian Crisis when Euro was about to be borne. He did not want Asian nations to shift their reserve lying with FED to Euro. He therefore appear to have destroyed Asian currencies with the help of two renowned Hedge Fund managers – George Soros and Julian Robertson. What you see today of strong dollar in spite of gigantic troubles are the “ditto” measures adopted by him during Clinton Administration. This time, his other colleague from Goldman Sachs, Hank Paulson is doing that dirty job.

Rubin was clever enough to remain always in the background, allowing pawn players to do the dirty jobs on the foreground. In the event of troubles breaking out, he was always there on crime scene like a forensic expert searching for clues with intent to search and destroy whatever remaining hints floating around that might point fingers at him later.

Obama was looking at the same old Rubin during campaign for economic guidance which was the first disastrous mistake he was making in the dressing room before going to play his first game at the White House on January 20, 2009.

Obama appointed his formidable opponent Hillary Clinton as Secretary of State. She is a hawk whereas Obama himself is a Dow. There is no matching chemistry. She will wage war with anyone – a female replica of George Bush – completely opposite character of her affable spouse Bill Clinton.

The internationally acclaimed and a rational person could have been former Secretary of State – Gen Colin Powell who is highly respected by almost all leaders, friends and foes, around the world. Obama missed him in his first baseball shot. He sacrificed Gen Powell in an act of balancing colors to avoid pointed fingers – his first grave mistake on foreign policy front even before he took over the office. It may be argued that Gen Powell was ineligible as Republican. However, Gen. Powell voted for him and also officially endorsed his candidature. There are no official restrictions to such appointment except in party politics,

Just as President Bush inherited the caucus team of Dick Cheney (Vice President), Don Rumsfeld (former Defense Secretary), Greenspan and other dumb heads from his father Sr. George H Bush, President elect Obama is following the same pattern by inheriting the legacy of Bill Clinton. Change? What Change? There is no change – same dud and dirty politics.

And here comes another firm. Goldman Sachs. Entire Fed and Treasury buildings are infested with the mammals from Goldman Sachs. Robert Rubin belonged to that clan. Hank Paulson also belongs to same clan. Neel Kashkari also comes from same place. It is Goldman who is calling the shots for over 15 years of America’s mismanagement of economy. Many of the Anchors of business channels have GS stamp on their butts.

The entire policy appears to be conceptualized in Goldman HQ, politicized at the Treasury, monetized at Fed, and finally sold like Sub Prime assets through massive publicity in perfect harmony and orchestration via business channels manned by trusted friends who were once upon a time were with Goldman Sachs. 

Obama is now trying to pump in another $ 1 trillion into infrastructure spending, after massive $ 2 trillions influx into the system by the gang of Bernanke and Paulson. He is also hell bent on reducing taxes on individuals.

Never did he answer nor did anyone ask, how was he going to bring in income while spending on all fronts and destroying America at the speed of Katrina.

The whole nation has become a typified New Orleans where stupefied corpses are found every where in immediate aftermath.

Obama has given first glimpses of his carefully nurtured personality. When the “red blood” is oozing through the main street and Wall Street, he is talking nonsense about the “green air” exhorting all 3 Auto manufacturers to invent green cars.

It will be years before those Auto makers would turn their cars green, provided they exist. The immediate priority is to take them out of deep trouble and rejuvenate demand for their products by any means. For instance, He could announce impending immediate policy directive to all government departments to use only those vehicles made by 3 US auto makers for about 2 years temporarily.

That will give breathing time to Auto makers who need demand for their goods, not bail out funds which will be exhausted in no time if there were no demand for their vehicles. They could restart the plants and job firings will be halted immediately. In fact, it will start creating jobs in auto sectors and its ancillaries sending positive feelers all around in the period gloom and doom.

His currently reflected priorities are not of the becoming of a great leader about to sit on the coveted throne at the White House. He has demonstrated so far that he is neither a leader seeking “Change” nor a “Santa Clause” willing to part acceptable gifts – JOBS – to American Citizens on the eve of Christmas. Only a day before, an unemployed youth started firing in California and killed 9 peoples on the spot. This is only a beginning.

The only thing that changed during last 52 days of post election process is - his name. He has decided to use his middle name while taking oath at the White House. He is now Barack Hussein Obama about to stride into White House (Obama is a Christian, not Muslim). What is he trying to do by changing his well known name by including “Hussein” in the middle? Pacify Arabs and Islamic nations that a mixed secular name is going to lead America in future? If he had used “Hussein” as his middle name during campaign, I am 100% sure that he would have lost the election in most disastrous fashion. He does not have the mandate from the people to use his “Hussein” brand.

If name change were to usher in the dramatic change in the economy, George Bush would be left wondering why not he thought of it while facing disaster after disaster at home and overseas during 8 years of his ignominious presidency.

Obama is therefore showing the sure sign of just another “mediocre” at the White House!

The crisis is so acute that there were reports that “US military was preparing for domestic disturbance”  Click here for Newsmaxx Report. With guns being freely licensed through out the United States, the nation is sitting on a huge volcano about to erupt. After years of practice of firing billions of bullets in other countries during last 60 years, US Military Commanders will have uphill battle back home for the first time firing for a change at their own people.

Will Barack Hussein Obama be the last ruling President of the beautiful nation once upon a time called “United States of America”? Don’t be surprised. It happened to USSR in recent past. It could happen again, this time in America for a change. Is this the CHANGE he was talking about? 

And the distraught investor, Warren Buffet will be awaiting the final verdict from his city – Omaha, after investing $ 8 billions in Goldman Sachs and General Electric at the instance of Hank Paulson, who will no longer be around after 20th January, 2009

Obama, Osama and Omaha – what a rhyme in the American politics and finances!

Let us prepare ourselves for the “Great Royal Circus” in Washington. The curtain will be lifted on 20th January, 2009. It will be a battle royal in the far flung Afghanistan and Iraq – Obama vs. Osama.

Poor Lady Liberty must have been tired holding the torch for so long in the middle of the sea. It is time to find new home, she must be murmuring. Where, she does not know.

Kalidas, Hong Kong
Ref: 0812-020 of 2008/12/26

http://www.anilselarka.com

A true nature of a person or nation comes to the fore, when it comes under extreme duress. A bankrupt person, corporation or a nation tries very hard to project itself as a person of extra ordinary means, contrary to facts, figures and market rumors, and go on shopping spree

This is why billions of dollars are being paid by one bankrupt bank or corporation to the other in take over process lasting only a few hours. No due diligence, no submission of bid to the board, No minority interest, no news out – just black out.

Today’s scenario reflects “blind game”. No one knows about self or other party. The suitor does not know what he has, and the target does not know what it is worth. The vultures circling on the prey, ask for $700 billions with no questions asked. With worsening scenario being played out every day, no one in right mind will ever buy US dollar. Look at the box under Dollar Up and consider the following:

• Fannie/Freddie Mae got $200 Bln,
• AIG $85 Bln,
• JP Morgan got $59 billions ($30 Bln for taking over Bear Sterns and $29 Bln given to Bear Stearns itself),
• Washington Mutual Bank (WaMu) was given $230 Bln in last 3 months, all zero now,
• $673 Blns flooded into the market on Dow’s fateful day losing 778 points, and
• Billions of others not yet declared but given to host of banks, brokers and investment banks.
• $700 billions are now planned to be spent to buy the rotten and Zero value assets of the bankrupt banks.
• Bernanke opened up the empty treasury and also opened up largest currency printing press in the world, working 247365 or 24 x 7 x 365 (24 hours a day, 7 days a week and all 365 days a year) Never before in the history of United States, the dollar was printed with such intensity and also disappearing with the speed of hurricane category 6 into a giant black hole

No foreigner in right frame of his mind would at this point of time buy US dollar against his own currency, be it Euro, Pounds, Yen, Yuan, Aussie Dollar or any damn local currency.

With Dow falling, bonds collapsing, properties dumping, interbank dealing sine die, who is buying the US dollar? Why Euro, the most suitable alternative currency for US dollar is falling, when it should have gone to almost magic 2.00 figure? If any foreigner wants to buy stocks or bonds or $ class assets, he has to sell his own currency and buy $. Then only $ could go up. But when the foreigners are not buying $, in fact, they are dumping dollar assets, who is buying this bankrupt dollar in that case?

About 10 years ago, whenever Dow rose, dollar also used to rise, because foreigners have to buy $ first before buying stocks or bonds. For the last 5 years, especially in last 3 years, dollar is falling while the Dow and Bond rising. This means that there is no demand for $ from overseas, it is only from within. The dollar so printed by FED is being used to manage (or manipulate) various sensitive commodities like Oil and other foreign currencies like Euro.

Who is Buying Dollars, Why and How?

Of course, the Americans by themselves. Not the ordinary resident Americans. They are just naïve and innocent law abiding citizens. The crooks are in the corporate world. Some US institutions, in US and newly floated off shore corporate entities, under the ostensible authority from US administration, are now buying US$ index and shorting Oil (Light Sweet grade) heavily on NYMEX. They appear to have been commissioned to search and destroy the vicious circle of oil price rise which is the major cause of inflation.

This is similar to the practice being adopted during the days of Clinton Administration when the Rupert Rubin was the Treasury Secretary. He was a proponent of strong dollar policy, and during his administration, the Asian crisis unfolded, Enron was created and busted, LTCM with over $1 trillions of exposure to the market was bankrupted. His policies and practice were known as “Rubinomics”. He engineered the rescue package for LTCM with the help of 14 local and foreign banks and brokers, raising $3.6 billion initially to $26 Billions progressively according to market rumors.

After 12 months, this group was disbanded saying that the problem was resolved. Even the best fund manager in the world, can not generate the return of $ 1 trillions or $1000 billions with meager $26 billions of fresh capital, that is, whopping 3846% return annualized. Show me a single fund manager in the world, including George Soros and Julian Robertson (now dead). The losses of $ 1 trillion are still in the system under various names and disguises.

However, both future contracts are subject to physical delivery. So on settlement day, these contracts are reversed by covering the short position in oil, and liquidating the long position in $. This is why during September settlement, there was vicious move to cover the “oil shorts” against $ index, with the result that oil prices spiked up by over $25 in a single day, and dollar slumped against the major constituent currencies like Euro. The contracts were rolled over to October/November by selling the Oil futures again, and buying the $ index. Euro weakened on the following day of its steep rise due to such roll over, and oil fell from $130 to $106 again in just under 2 days.

Another ENRON in the making, this time 20 times larger…In short, Rubinomics is back. The banks used in these cases appear to be same old players who were and are close to the US administration – CITI, JPMC and BOA. The brokers are also same as before, Goldman Sachs except Salomon Brothers this time which has been bankrupted before in LTCM saga.

The similar situation will develop again with OPEC starting to control the spot market by curtailing production. They already reduced by 500,000 barrels per day. At least that part can not be controlled by the US institutions.

Both Rupert Rubin, former Treasury Secretary and Hank (Henry) Paulson, present Treasury Secretary, who just got the blanket authority to spend $ 700 billions whenever and wherever he wants with no questions asked or for any sort of accountability, are from the only surviving Broker – Goldman Sachs. It is obvious that part of this loot will go to his former colleague to cause the collapse of Oil prices and Euro, British Pounds, Commodity currencies like Aussie dollar, South African Rand, Canadian dollars and Russian ruble. This strategy was employed before while engineering Asian Monetary Crisis.

Myth & Reality of Oil Prices…

When the giant economy in corporate world or Central Banks (Fed in USA) or Treasury department, became very creative (manipulative in layman’s terms) in accounting, and they in the name of “financial engineering” go on inventing methods or products and use any means.

It may be noted that –

• Oil prices started falling from July onwards. US$ too started climbing from July Onwards
• The oil prices fall and dollar climbs (euro, GBP, Yen, etc falls) in beginning of the month
• The position reverses on settlement day due to physical settlement requirements
• This is why there was sharpest rise in Oil by $25 in a day, and $ fall steeply same way
• After roll over into November settlement, the oil prices fell again and US$ rose
• Many honest people believe that rise in oil prices Vs dollar was due to rising demand of oil from emerging economies like China and India. They also believed that recent fall in oil prices were due to fears of recession and demand destruction. These are naïve and puritan people who believe that the world is as pure as gold
• In reality, we are living in a murky world. No real demand or supply – just paper trading of derivatives and futures – that determine the prices. The entire dollar and oil market is dominated by powerful nations in the Middle East and United States.
• Off shore entities may have been used in more than 50% of cases to avoid any scrutiny. The funding of $ index is arranged by 3 of top 5 banks in United States

Only yesterday, the strongman Arnold Schwarzenegger, the Governor of California, having found his budget delayed for several days, raised a demand of $7 billions before Paulson who has $700 billions in his kitty now.

He will ask – why would not you give me $7 billions for the worthy cause of managing my sunny state, when you are trying to pump in 100 times more into the bankrupt banks and brokers? If you can print $700 billions for them, why not print $300 billions more for the states for much desirable cause?

Kalidas, Hong Kong
6-Oct-2008