Independent Fiduciary Consultant, Economics and Financial Ethics

One who intends to leave others better off for his having existed.


Goldman Sach's Leading Indicator Swirlogram = Slowdown worse than last month

Hong Kong

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CBS MarketWatch Editor; "The stock market ditched Wall Street years ago."

"The masters of the universe, like the Giants and Jets, now scrimmage across the Hudson River in New Jersey—their trading these days done almost entirely by computers piping algorithmic playbooks into a fortress of servers in Mahwah and other competing exchanges nearby.

The small squads of human traders who remain on the floor at 11 Wall Street, the New York Stock Exchange’s Teddy Roosevelt-era headquarters, are (for the most part) just playing fantasy football.

Yet just as the Big Apple’s football teams kept their New York names after wedding themselves to the Garden State, the financial industry, investors and the media continue to pretend that the Big Board is where the action is. We need to end this fiction.

How much actual trading is done at 11 Wall Street?

“It’s pretty darn close to zero,” said Eric Scott Hunsader, founder of market-data provider Nanex. “Even that is pushing it, because they don’t make markets, the guys in the jackets. They might say they do, but they don’t.”

...The Big Board is now little more than a Big Tent for a phony media circus of photo-ops and cable-news talking heads. P.T. Barnum couldn’t draw the crowds Jack Ma did last month when he clanged the bell to kick off Alibaba’s IPO. The only things exchanged on the floor, however, were camera flashes, sound bites, and high-fives. relying on trading-floor photos, we have been distorting the truth rather than reporting it."


"Deadline looms for charter schools to submit contract info"

"[September 30, 2014] is the deadline for charter schools to comply with a public record directive from the North Carolina Department of Public Instruction.

Last month DPI told charters they must submit information on the private companies they contract with to run the schools and the people the companies employ in the schools, including duties and salary information for those employees...

The NC Office of Charter Schools says [leland-based Charter Day School, Inc., which uses the services of Roger Bacon Academy] has also not submitted the information yet to the state."
Baker (Charter School Profiteer) Mitchell's Pat McCrory Campaign Contribution

Charter school legislation awaiting Pat McCrory's consent or veto, 
appears to allow Baker Mitchell, who contributed $8,000 to Pat McCrory,
to keep Mitchell's taxpayer funded personal profit secret.


Governor McCrory received a 09/04/2012 contribution 
from Thomas Jefferson Classical Academy' Joseph Maimone
who was appointed to the Charter Advisory Board
by Governor Pat McCrory

"...What is important now is whether McCrory signs the bill, Hartzman said...

The governor originally said he would veto a charter school bill 
that did not require disclosure of how public money is spent.

N&R Editorial Board

Two of N.C. Senate leader Phil Berger’s appointments to the state Charter School Advisory Board resigned this week after several people complained that they had conflicts of interest.

Governor McCrory also received $4000 
from Charter and Private School board member/operator Robert Luddy on 04/25/2012
before Luddy contributed $50,000 to a PAC
supporting Phil Berger Jr.

The latest complaint, filed Monday by local blogger and activist George Hartzman, said Berger had a conflict of interest when he pushed for Senate Bill 793, which shields salaries of some charter school employees from public inspection.

...Paul Norcross and Baker Mitchell..., who both have ties to North Carolina charter schools, sent Berger letters of resignation on Wednesday.

Mitchell, who heads charter schools in Leland, did not respond to requests for comment.

Governor McCrory received a 03/16/2012 contribution 
from Chair of the Board of Pinnacle Classical Academy's Debbie Clary
who serves on the NC Alliance for Public Charter Schools
with Baker Mitchell and Phil Berger Jr.

SB 793, which now awaits Gov. Pat McCrory’s signature, would shield from the public the employee salaries of for-profit companies that manage charter schools.

Govenor McCrory also received a 10/31/2012 contribution 
from Greensboro Academy Vice President Alan Hawkes,
who Phil Berger Sr. appointed to the Charter Advisory Board

Hartzman said that Phil Berger’s son, Phil Berger Jr., would stand to benefit from that loophole as a member of the board of directors for Providence Charter High, a Rockingham County charter school.

Governor McCrory received a 03/13/2012 contribution 
from Providence Charter High School's Phil Berger Jr.,
a taxpayer funded District Attorney
who serves on the NC Alliance for Public Charter Schools
with Baker Mitchell.

...If McCrory fails to veto the bill, Phil Berger Jr. “would be able to take an income from a charter school without anyone knowing about it,” Hartzman said.
Someone should remind the state legislature that charter schools are public schools.

How about it, Governor?

Republican legislators need a reminder after sending a charter school bill to Gov. Pat McCrory this week. It excuses for-profit companies that operate charter schools from disclosing employees’ salaries...

$500 for MCCRORY ON 09/07/2011

Charter schools are public. They receive tax dollars. So, they should be held to the same open records standards and nondiscrimination requirements as traditional public schools.

Charter school management apparently has become a lucrative business...

...When it comes to how much for-private charter school companies pay their executives, there is currently no right to know.

The legislature ...appointed charter school advocates and operators to the state’s charter school advisory board. When vested interests are put in charge, the need for transparency is obvious.

...The governor originally said he would veto a charter school bill that did not require disclosure of how public money is spent. His office now says it is studying the legal implications of the bill’s language. McCrory should reject efforts to treat charter schools as if they are private, for-profit companies that can use tax dollars any way they like...

All public schools must be fair and accountable to everyone.

News Observer on McCrory and Charter School Bill 793 and Phil Berger

Phil Berger Conflict of Interest Recusal Call; NC Bill SB 793 on Charter School Transparency 

Phil Berger Jr's Norcross' Phoenix Academy "management contract" request and conflict of interest

Paul Norcross' no-bid contract for himself paid for with taxpayer money?

Paul Norcross, apparently appointed to board by Phil Berger, denied charter school due to "conflict of interest"

N.C Alliance for Public Charter Schools Board of Directors; Phil Berger Jr. and Paul Norcross

The charter school issue not reported before the Walker Berger election

Phil Berger Jr. fellow board member under investigation by the U.S. Dept. of Education

From the meeting minutes when Phil Berger Jr. got his charter school approved

Is this what Phil Berger Jr's big financial backers want with Jr in DC?

Quarter End Federal Reserve Provided Window Dressing for the Too Big to Fails

"Regarding the operation to be conducted on Tuesday, September 30, 2014, the Desk will conduct the operation several hours earlier than usual, from 8:00 to 8:30 a.m. (Eastern Time).  All other terms of the exercise will remain the same.

This change only applies to the operation conducted on September 30, 2014. The operations conducted from Monday, September 22, to Monday, September 29, and those conducted on and after Wednesday, October 1, will be conducted at the previous time of 12:45 to 1:15 p.m.  Any future changes to these operations will be announced with at least one business day’s prior notice on the New York Fed’s website.

As an operational readiness exercise, this work is a matter of prudent advance planning by the Federal Reserve. These operations do not represent a change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future."

"Repo 105 is a repurchase agreement which results in an accounting maneuver
where a short-term loan is classified as a sale.

The cash obtained through this "sale" is then used to pay down debt,
allowing the company to appear to reduce its leverage
by temporarily paying down liabilities
—just long enough to reflect on the company's published balance sheet.

After the company's financial reports are published,
the company borrows cash and repurchases its original assets.

Repo 105 was used by investment bank Lehman Brothers three times...

...Lehman's auditors, Ernst & Young, were aware of this questionable classification.

...the auditors said that the transactions were accounted for in line
with Generally Accepted Accounting Principles.

However, New York attorney general Andrew Cuomo
filed charges against Ernst & Young in December 2010,
alleging that the firm "substantially assisted... a massive accounting fraud"
by approving the accounting treatment.

The Wall Street Journal drew attention to the increasing levels of fees
that Ernst & Young had been paid by Lehmans from 2001 to 2008.

...the Securities and Exchange Commission (SEC) sent letters to chief financial officers
of nearly two dozen large financial and insurance companies
asking about their firms' use of repurchase agreements,
including the number and amount of such agreements that qualify for sales accounting,
and detailed analysis of why such transactions can be treated as sales."


"S.E.C. examiners, working during the watch of Christopher Cox as S.E.C. commissioner,
apparently saw nothing wrong with Repo 105. now appears that the federal government itself
either didn’t appreciate the significance of what it saw...

Or perhaps they did appreciate the significance
and blessed the now-suspect accounting anyway.

...the S.E.C. and other government regulators
were fully aware of the Repo 105 shenanigans for nearly six months
prior to Lehman’s collapse."

What does a popped real estate bubble look like?


"Walking straight in a hall of mirrors" and "pretend-and-extend"

"'s getting more and more difficult to find ways of writing about everything going on in the world.

Not because there's a shortage of things to write about -- wars, propaganda, fraud, Ebola -- but because most of the negative news and major world events we see around us are symptoms of the disease, not the disease itself.

...When the price of money itself is distorted, then all prices are merely derivative works of that primary distortion... a world where the central banks have distorted, if not utterly flattened, the all important relationship between prices, risk, and reality, what good does it do to seek some sort of meaning in the new temporary arrangement of things?

If risk has been taken from where it belongs and instead shuffled onto central bank balance sheets, or allowed to be hidden by new and accommodating accounting tricks, has it really disappeared? In my world, risk is like energy: it can neither be created nor destroyed, only transformed or transferred.

...we are on an unsustainable course...

...the collective debt of the developed economies has surpassed the $100 trillion mark -- which is a colossal bet that the future economy will not only be larger than it is currently, but exponentially larger.

These debts are showing no signs of slowing down. Indeed, the world's central banks are doing everything in their considerable monetary power to goose them higher, even if this means printing money out of thin air and buying the debt themselves.

Along with this, the demographics of most developed economies will be drawing upon badly-underfunded pension and entitlement accounts -- most of which are literally nothing more substantial than empty political promises made many years ago.

...Anything that can't go on forever, won't.  We know, financially speaking, that a great number of nations are utterly insolvent no matter how much the accounting is distorted. ...there's really no point in worrying about the combined $100 trillion shortfall in Social Security and Medicare, because it simply won't be paid.

...The promised entitlements dwarf our ability to fund them many times over. ...there's no plan at all for reconciling the forced continuation of borrowing at a faster rate than the economy can (or likely will be able to) grow.

The phrase that comes to mind is 'winging it.'

The wonder of it all is that people still turn to the same trusted sources for guidance and as a place to put their trust.

...If the captains supposed to be guiding this ship are using charts that ignore what lies beneath the waterline, then you can be sure that sooner or later the ship is going to strike something hard and founder.
‘Interest on debt grows without rain’

Yiddish proverb

This proverb explains most of what goes on in policy circles these days. We are now watching Extend-and-Pretend, Episode VI: Promises for improvement amid ever growing debt levels.

...pretend to have a credible plan, but never address the structural problems and simply buy more time....

...The EU, IMF and World Bank will need to pretend they agree or accept the weaker data, which has to mean bigger deficits.

It’s a tiresome exercise to watch denial-in-action as EU governments and other policymakers try to make something so obviously unpalatable go down easy in their internal reporting.

It’s obvious that buying more time (extending) is always the number one priority, followed by projecting (pretending) that forward looking growth will reach an ever-higher trajectory in order to make the budget fit within the supposed constraints...

Such behaviour would cost you your job in the private sector, but in the economic model of 2014, which reminds us more of the Soviet Union than a market based economy, it’s par for the course. But, many would protest, it would be even worse if we hadn’t done so much to “save the system”, right?

...Negative productivity, capital flight and a system built on protecting the elite is failing.

...we are speeding towards the inflection point at which debt becomes harder to service because pretend-and-extend policy making has created a depression in investment and consumption.

...The new reality is that we currently stand face-to-face with the very deflation risk that just about everyone denied could ever happen when Q1 outlooks were written.

...the US, China and Europe are all headed for another Minsky moment: the point in debt inflation where the cash generated by assets is insufficient to service the debt taken on to acquire the asset.

...the only way to grow an economy without productivity growth is to do so temporarily through the use of debt...

...The developed economies are growing old in demographic terms, but we’re still not wise enough to realise that our current model is a Ponzi scheme rushing toward its inevitable Minsky moment. No serious policymaker or central banker is talking about the truth told by simple maths and hoping that things turn out well.

Hope is not good policy and it belongs in church,
not in the real economy."


The Editors at Bloomberg; "How Eric Holder Failed the Economy"

"Attorney General Eric Holder, ...will probably be remembered above all for something he didn't do: prosecute top executives for their role in the 2008 financial crisis.

...Fearing a repeat of the Arthur Andersen debacle, prosecutors were careful to leave companies standing, even as they extracted tens of billions of dollars from banks for transgressions ranging from mortgage-related fraud to laundering money for drug cartels. "Some of these institutions have become too large,” Holder famously said in 2013 Senate testimony. "It has an inhibiting impact on our ability to bring resolutions that I think would be more appropriate."

The inhibition was understandable. Yet it arose because, under Holder's leadership, prosecutors lost sight of what mattered most: holding individuals, not companies, accountable for crimes. Of 21 separate actions against major financial companies from 2009 through May 2014, only eight were accompanied by charges against individuals, and none of them were high-level executives...

Could it be that nobody went to prison because no crimes were committed? This seems unlikely, at the very least. As we've noted before, more than 1,000 people were charged after the savings-and-loan bust of the 1980s, and more than 100 company officers and directors served prison terms. The accounting and other corporate scandals of the early 2000s led to criminal charges against at least 30 top-level executives, most of whom were convicted or pleaded guilty.

Failing to pursue individuals has sent executives the message that if they commit crimes, the worst that can happen is they'll lose their jobs and shareholders will have to pay up. This undermines the finance industry, and capitalism more broadly, by supporting the perception that Wall Street is a den of iniquity whose leaders operate with impunity. It fuels contempt for the country's politicians and the rule of law as well -- suggesting that the former are for hire and that the latter is a sham..."


"Investors pay exorbitant [401k] investment fees"

"...Bogle’s math is persuasive.

Bogle described a hypothetical 30-year-old investor who earns $30,000 a year and receives 3% annual raises. If that worker saved 10% of his salary every year in actively managed stock funds, and earned a nominal 7% annual return, he’d have $561,000 at age 70, But if he were to plow the same 10% per year into index funds, he would amass $927,000 – or 65% more.

...Bogle said: “A person saving for retirement who chooses low-cost investments could have a standard of living throughout retirement more than 65% higher than that of a comparable investor in high-cost investments.”

...compared with index funds, actively managed funds also charge higher investment management fees, known as expense ratios. Bogle assumed that those expenses accounted for about one percentage point of the cost difference between actively managed funds and index funds.

There are less obvious costs to active management, too, including the drag on returns when managers hold cash in a rising stock market and the trading costs managers incur when buying and selling stocks to juice returns.

In Bogle’s ideal world, he said, all 401(k) plans would be fully indexed. Standing in the way of that vision are “lobbyists for mutual fund managers and industry associations,” said Bogle, who also recommends that Congress require the mutual fund industry to assume a “fiduciary duty,” on behalf of 401(k) participants. Such a requirement would effectively compel fund managers to keep their fees as low as possible."


Securities Fraud and Perjury via the Wells Fargo Wachovia Merger

Wachovia was was the fourth-largest bank holding company in the United States before its acquisition by Wells Fargo on December 31, 2008.

In negotiations and litigation before, during and after the closing of the merger deal, both Wachovia and Wells Fargo failed to disclose massive credit lines with the Federal Reserve via the Term Auction Facility, which could have affected the merger's negotiated terms.

On December 22, 2008, Wachovia borrowed $10 billion at 0.528% from the Federal Reserve for 17 days with $76.280 billion in Unencumbered Collateral representing an undisclosed credit line with the Fed, none of which was disclosed to Wachovia's shareholders or the public before and after the merger with Wells Fargo. (Loan maturity - January 8, 2009, after the merger)

On February 26, 2008, Wells Fargo borrowed $10 billion at 0.42% from the Federal Reserve for 84 days with $56.796 billion  in Unencumbered Collateral representing an undisclosed credit line with the Fed, none of which was disclosed to Wells Fargo's shareholders or the public before and after the merger with Wachovia. (Loan maturity - February 26, 2009, after the merger)

Some Wachovia shareholders initiated litigation within which Wachovia and Wells Fargo didn't disclose the Federal Reserve Term Auction Facility credit lines.

I believe the North Carolina Business Court, where shareholder initiated merger related proceedings  took place, was misled by Wells Fargo and Wachovia.

$WFC CEO Stumpf and Chair Kovacevich Securities Fraud and Insider Trading

Wachovia CEO Robert Steel's Securities Fraud and Insider Trading

JPM CEO Jamie Dimon Securities Fraud and Insider Trading

Citibank CEO Vikram Pandit Securities Fraud and Insider Trading   

For the 400,000 plus Wells Fargo clients being lied to on their "Envision" retirement plans

BB&T CEO Kelly King and CFO Daryl Bible Securities Fraud

Bank of America Insider Trading and Securities Fraud

SEC Whistleblower Evidence