Insurance, insurance, insurance...the scam of our age

Many economic realities have been masked by the illusion of safety and protection...we need health insurance, life insurance, portfolio insurance, credit insurance, pet insurance, municipal bond insurance, liability insurance, default insurance, insurance on life insurance, market insurance, derived insurance, money market insurance, FDIC insurance, insurance on insurance (reinsurance), options on securities, options on derivatives of securities and we need it all to somehow lower the cost and risk of anything that we are considering doing or procuring.

The reality of life is that there are no free exchanges and as Warren Buffett demonstrated with his testimony regarding the ratings agencies, ratings insurance is not free either. Moody's is a schlock outfit with the intelligence of a worm or its got motivations of a snake and the ethics of an ant. If Buffett is willing to scam us with ratings and make excuses for it, what about all the other insurances he is involved with? How about all those "put" insurance contracts he wrote on the SP500 and other indexes? Are they a scam or viable? Can he actually deliver on them and does the money exist?

What about all the insurance that banks are promoting? It was just a few years ago that Lehman Brothers and almost every other investment bank was offering risk free portfolios. As it went: 'We will guarantee that you will get "X" return above "Y" and you can't lose more than "Z" on your investment'...funny how they all ended at ZERO! Most of those portfolios collapsed during the crash in 2008 and the covenants were breached. I am aware of quite a few Europeans who wanted 100% sure things who got 100% sure things - losses!

The idea of evading risk while targeting gains is the quintessential reason that people invest in hedge-funds...but isn't this a play on leverage made viable by others forms of insurance? "Why not trade leveraged short and long or better yet trade derivatives and arb anything we can get out hands on". The words "into a disaster" are the conveniently missing from that equation. But that would ruin the marketing wouldn't it.

The problem in this world is that so many people want something to be something that its not. If you are a male looking for a girl, a transvestite or mannequin should not make a viable proxy...but in the current version of reality, we are willing to entertain any proxy as long as its, accepted, popular or "doctrine". 

If we can further obfuscate a situation by insuring against any unwanted side effects, we can get rid of the problem entirely. The issue with this, is that most risk is not realistically insurable, it just transforms into another risk, usually a worse one...and in reality its cheaper not to insure and instead plan and manage appropriately. The funny thing about "risk" is that it becomes contagious in both directions. One more dangerous than the other.

Insurance is scam of both Wall Street and of Washington. Medicare, Obamacare, Social Security, FDIC, FHA, FHLN, FRE, FNM and the Fed are all examples of failed confidence games/insurance scams that end up ripping off investors and taxpayers and similarly the clients of their plans. The fact is, that when we get so sophisticated that we have to insure and we can obfuscate everything...the activity has almost always been the mask of massive fraud for hundreds of years...but these frauds have always ended the same way...the losers who issue the plans get massive bonuses and the people who buy them get ripped off when they blow up...and someone else get the bill.

There is no such thing as free lunch, yet we as a society these days, are always looking for a free one...we try to pretend that there is a way that someone else can be responsible for OUR problems. That argument does not hold water and I am personally tired of it.

Nearly every-time we take on some credit or leverage, we buy, are required to buy or need to rationalize the risk by buying some sort of insurance. So, how this seems to work, is that whenever we commit to pay some interest on something, we need to pay more interest to someone else. That's a lot of interest and its parasitic when all is said and done. Ironically, it has made us more vulnerable rather than secure. That did not work with AIG, MBIA or Ambac and CDO and other structured products without exceptional efforts by government. Will it work with Goldman Tax and JP Morgan now that these companies essentially buying and selling insurance? Don't bet on it. The feeling of being safe, while it may be nice, is artificial and fosters complacency rather than solid/proactive business decisions and does not offer a foundation on which success can be built!

No serious and productive person relies on someone else to bail them out when they do not produce, nor should they expect someone else to produce for them... it is an organic process. Living and succeeding are based on balance...not ignorance or obfuscation. Things do not get better when you ignore them...nor do they get better when you pretend they are something else. What we have been doing as a society is pretending that money as, illusion, doctrine or debt is ok. That government lies are ok, insurance as a proxy for solvency is ok and that money is real when someone is willing to insure it.

This is why the financial system is not just a place to win or lose...its a representation of the values of society as a whole. Those values are very compromised. They are unrealistic and inappropriate. They are endorsed by the president and his henchmen, but that will not make them successful...and therein lies the problem. At some point "crap" smells like "crap", looks like "crap" and finally when the secret sauce is gone... it is "crap" and can not be called anything else.

Most massive collpases in history have been related to the idea that somehow we can insure against them and somehow use alchemy to turn something worthless (or worse) into "gold". It has never worked, and now, in my opinion, the insurance parasite and the financial ponzi scheme that is built on it is trying to play its trump card...insunace.

Ironically, insurance is the most expensive ever at a time when it can be least afforded...and this applies to most products...including the ridiculous Obamacare venture. The only products for which insurance is affordable, are the ones the Fed is protecting...(remember  Maiden Lane assets (I mean liabilities)) owned by it or the banks that are on the "favorite list".

The jig is up, derivatives will lose leverage,  insurance will lose relevance, and with the collapse in leverage, the money supply will contract way further than the 40% contraction it has made over the last year. Asset values will have to adjust to real values that are not representations of viability due to insurance backing them or credit available to purchase them.

Its a sad story...but insurance is a parasite and creates huge opportunities for malfeasance while contributing little to negative value to society at best. Ironically, banks as regulated by the fed, and the central banks themselves are not storehouses of our money or value, but they are manipulators of insurance trying to use legal camouflage to sell us something we don't need.

World ending and recovering...which one is it?

The chart affirms my previous statements...the 10 year treasury hit highs in 2008 on sheer panic. It has traded very technically and just broke out over a cycle - this puts it in trend mode if that 121 22/32 holds. But what the market is not reflecting is panic. What we are seeing is de-leveraging. Expect de-leveraging to continue and make market dynamics to continue to be unpredictable. 

Why not rally on terrible jobs data based on clearly fraudulent/optimistically biased government statistics published at the most optimistic values possible and constantly revised downward, GDP, ISM, Jobs, Housing - you name it and the government is publishing the best numbers they can imagine and subsequently revising them down for several months or quarters thereafter. Notice they never understate any numbers and subsequently revise them upwards. The numbers are singularly too optimistic...everytime. This kind of consistent distortion has all the probabilities of 4 major banks not having a single losing trading day in 63 trading days without priority dealings involved.

The distortion is a coordinated effort. Coordinated by whom? By the same guys who think Maiden Lane Holdings portfolio of bankrupt Bear Stearns hotel assets can be marked as worth 67 billion dollars - fully 6 billion higher than the initial overstated number they say it was worth when they took the assets on. JP Morgan would have nothing to do with these assets and many of them are in receivership, yet the regulator is totally fine overstating their values...who is directing the charade? The fed of course...and Obama and congress are all beholden to these guys...

The same authenticity being applied to data is currently being applied to market prices...I mean non-market prices (not to mention OpEd pieces). It is not making things better either.

Live from Bernakejing, China...its a new data manipulation

Who do they think they are fooling? Is the market really that insane that it will get more confidence from a number that makes absolutely no sense? BDI is a great way to gauge china. Shipping rates have dropped nearly 60% over the time that china reports 10.3% growth. There IS a reason for that...its called "no exports". There is also a reason that the shipbreaker business is swamped - companies are dismantling ships they don't need...and most of the rest of them are sitting idle waiting for the off chance that somebody wants a delivery from China for something that is not an imaginary town funded with not imaginary credit in an imaginary economy. Now I know what Timmy Geithner and Bernake think they can accomplish at these G20 conspiriatory meetings.

Can someone please explain to me how a country with billions of people can grow at 10% in the middle of a depression? Even US banks with free money and congress in their pockets can't do it - but a country with billions of people and crashed export demand can actually come up with a growth number most companies in the world would be happy to have right now.

More lies = more lies and less confidence...any way you try to look at it I can not come up with one good way to spin this...I am sure that JPM will have a way and probably made a lot of money on that imaginary 10.3% growth china had on its imaginary balance sheet. More fundamentals we can rely on - amazing!

Audit the Fed - dead...till the next time

Corruption is alive and well in Washington.

Audit the fed - dead...or will the dead cat bounce bring it back

When the DOW falls 2,000 points the pressure on the Fed will start to heat up again...for now Bernake and cohorts have used the process of printing money to buy votes, power and legislation. It is not compliant with the foundations of this republic. The reality is that in any most legal jurisdictions it would be called criminal and be a punishable offense. However, finance is government and most of the officials in government work for finance driven causes since the payoff they get is apparently free money that makes them look good to their constituents. This money is provided at the behest of the Fed and large financial institutions regardless of the liabilities and imbalances it creates.

Structural blackmail is alive and well.

The Fed and PPT is F**Ked

Obama loves the Fed and Benake...as I said before government in general has been bought and paid by the Fed and their cronies. Please see my previous post on the subject: Votes for sale

90+ years of financial abuse and nothings changed

Since 1913 our governmental system has been controlled by finance...after the meltdown and clear demonstartion of the hypocrisy of the system, reforms have been made, prognostications prognosticated and guarantees made...the irony is NOTHING's CHANGED!

Bail out whom?...not us...not definitely not us...the Fed is not involved in any bailouts

Votes for sale

In case you want to know who voted for this crony capitalist and "trade your vote for Fed and bank payola" bill, I am including a complete list for the record of who the losers are who supposedly are running our country and trading votes for money.

I simply can not believe that the FED is now SO DAMNED POWERFUL. Where in the real world could you blow up the banking system, crash the economy and kill the currency all at the same time and use that resume to get vastly more power? You can't. There's your answer. In the real world if you had that resume, it would be good if you could print money out of thin air, because you definitely would have to buy your votes and credibility.

“The recession we’re emerging from was primarily caused by a lack of responsibility and accountability from Wall Street to Washington. That’s why I made passage of Wall Street reform one of my top priorities as president, so that a crisis like this does not happen again.” - President Barak Obama

There are many problems with the above statement. One of the most blatant is the most surreptitious, especially coming from a guy who classifies as "from Washington" himself and who is owned by the finance community more than any other. Ironically, the main little problem with Obama's statement above is simply manipulation and fraud by both Wall Street and Washington. This bill is a great example of that. Additionally, if you want to refer to the problem with the words "irresponsible" or "lack of responsibility" - great - that's not much different than manipulation or fraud. Way to go Mr. Obama, suck up to your buddie, I mean boss, Bernake. As a side note, the reference to the recession that we are emerging from will be another anachronism for a president already prone for such things.

None of this bodes well for the stock markets throughout the world aside for a potential pop...a drop looks much more probable when frauds like this are conducted in the open and promoted as sound, honest and productive legislation.

Below is a list of the politicians that are for sale and a few who are not:

More fraud from the regulators

“We are seeing light at the end of the tunnel,” Sheila C. Bair, the head of the F.D.I.C., said in a recent interview.

If you believe that I have a bridge I would like to sell you.

• In April, Thomas H. Lee Partners spent $134.7 million for a minority stake in Sterling Financial, a lender based in Spokane, Wash., that has been hobbled by bad real estate loans.  

• More recently, Gerald J. Ford, the billionaire investor who made a fortune during thesavings and loan crisis, invested $500 million for a 91 percent stake in Pacific Capital Bancorp of Santa Barbara, Calif. The bank had been trading at around $4. Mr. Ford paid 20 cents a share. 

• When it bought three banks in April, TD Bank agreed to swallow a bigger share of their future losses than is typical in an F.D.I.C.-assisted deal. On Monday, TD paid a mere 20 cents a share for South Financial. Although the F.D.I.C did not provide any aid, TD did get some federal help. The Treasury Department agreed to sell $347 million of South Financial preferred shares and warrants for a bargain-basement price of $130.6 million. 

• “Without a doubt, there is more confidence than a few months ago,” said Bharat B. Masrani, the head of TD Bank’s United States operations. “There is more transparency and confidence in the ultimate losses of these institutions.”  

• Andrew Williams, a Treasury spokesman, said that it had agreed to the discount, as in previous deals, to “minimize or eliminate our chances of incurring further losses” on its investment in the bank.

This sounds like an interesting scam...what else will they offer to support these deals? what prevents these investors from claiming that the Treasury and FDIC sold them a bill of goods? Not much. Expect to see this get very complicated.

The Fed got what it wanted...now will we get manic monday on a friday

Similar to the trading session during last vote to break up the big banks, we had a crash. Today we have a financial overhaul bill and we have another crash on a two day level rather than in one day. The Fed got what it wanted, just like the banks and the fed did two weeks ago, I wonder if they will provide the liquidity to manipulate the markets again now (like they did two weeks ago) that they are more powerful and corrupt than ever!

My take on this situation is that it is very sad and amazingly corrupt. There is no question that Ben Bernake and his minions at his buddy banks did an absolutely amazing job of lobbying...if they were in jail where they belong they would not be able to have successfully manipulated the votes so powerfully.