They are at it again...They've never stopped. The carpet bombing of opportunity leaves some gems on the surface that were once pigeonholed away in her basement. Instead of a fresh landscape unfolding with each new day they keep drawing our attention to a the past best left behind. In this way, fertile fields of new challenges, new conceptual and technological tools available in our toolboxes, and a gem or two on the surface all escape our sight.


Speaking of little gems, JPMorgan was a little sloppy on some of its paperwork. Corporate paper as they call it and lost 2 or 3 billion of it. They refer to it as "Investment Grade", that means its rated by someone they hire but it doesn't say how high :) Who wants to bet on a scale of 1 to 12, it was a 4,  like our mortgage instruments that went poof? Story goes they may have hedged this with securities they call High Yield. Sounds nice too huh? Another name for high yield Securities are also called junk bonds. They figured one would go up if the other went down.


They didn't. A hedge package like this sounds bad enough, but they didn't really hedge junk with junk with just fancy names. They insured it. Thats another name for a scrap of paper.  They trades these scraps of paper which they called insurance contracts. By themselves they are worth no more than your credit card contract, They are only secured by each other if they behave properly. Garbage stands behind junk and beckons to us to look at them as an investment.

• SENATOR MENENDEZ: Mr. Curry, I want to ask you about JP Morgan losing $2 billion and possibly more. Since the OCC, who is a primary regulator of JP Morgan and the OCC has a well-deserved reputation for being too cozy with the banks that it regulates, and I know that you just got to your new position so you have an opportunity here to decide what the OCC does in the future. 

• SENATOR MENENDEZ (at time code 00:00:34): What I don’t want to see is a repeat of 2008. I know that you know a free market is essential to our very economic vitality, but there’s a difference between a free market and free-for-all market. And in 2008 what we obviously came to the conclusion of was the consequences of a free-for-all market where the decisions of large financial institutions became the collective risk of an entire country even though they weren’t part of making those investments and other decisions and then all of us had to pay. Paramus Post 

The world shook and for a moment. As this announcement unfolded, 1 trillion dollars in market value was taken out of the world economy. How much was profit taking? Something sets it off every summer.

Within a week of the disclosure, the losses surged, surpassing the bank’s initial $2 billion estimate by at least $1 billion. The losses gained momentum as hedge funds and other investors took advantage of JPMorgan’s distress, fueling faster deterioration in the underlying credit market positions held by the bank. NYT 6/4/12
Now, after disclosing the trading loss and watching the bank’s market value drop by more than $25 billion, those officials are expected to follow one of the group’s recommendations, strengthening the board panel that oversees risk. NYT 6/4/12  New York Times/ JP Morgan 

$25 billion pops up a lot.  In 2008 JP received $25 billion under the federal bailout package.  In February 2012, Jp was party to a 26 billion dollar settlement for foreclosure abuse. People that lost their homes each receive $2000 dollars. Somehow they got a hold of MF Globals customers assets to the tune of  $1.6 billion. JPMorgan paid $1.9 billion to the F.D.I.C. to acquire all of Washinton Mutual.  According to Washington Mutual Inc.'s 2007 SEC filing, the holding company held assets valued at $327.9 billion. As if that wasn't a good enough deal they got to clear stock and bond holders from their liabilities column to the tune of $31 billion. And it was JP Morgan Chase that allowed Bernie Madoff to steal $18 billion. One one day alone. $313 million passed through JPMorgan Chase in the form of 318 sub  $1 million transactions. Bernie paid back JP almost about a quarter billion before his bust.
JP Morgan Chase is the pinnacle of American Banking. Our No.1. Who needs more bank regulation with white knights like JPMC leading us out of disasters of their own making? Not America and certainly not them, or so they say. 


A check of SEC enforcement actions shows they are still a decade behind. They seem to put together several busts a day but when you look at them its easy to see why Wall Street continues in its corruption. They are up against firms with a a hundred times more money. They are trying to hold back a high tides advance by kicking at the tops of the foam. New laws like Glass-Steagal, Dodd-Frank and Volker need passed and enforced now more than ever but without money for enforcement the SEC can only be washed out to sea. I would enjoy seeing some spent there.

From the SEC strategic plan:

   This Strategic Plan is ambitious. Through the activities described, we are committing ourselves to even stronger enforcement of our securities laws; even more focus on fair and transparent markets; even tougher oversight of those market participants that are registered with the Commission; even higher quality investor-oriented information; and even more effective use of our own resources. 

   Successful implementation of this Plan will require two things. First, internally, we must continue to drive ourselves as hard as possible. We must maintain our investor-first focus, and must continue to look for ways to build our expertise while also increasing our effectiveness. Second, we must have access to sufficient resources to hire the necessary staff, obtain the necessary expertise, and secure the necessary technology. As is more fully described in the “Resources” section of the Plan, adequate budgets, over the long run are essential.

   The Plan also outlines specific performance metrics. Many of the measures reflect new and innovative approaches for gauging how we are doing as an agency. Collectively, these measures take a much broader view of the work of the agency and the impact it has in fulfilling its mission. We will track our performance against these metrics, and report annually on how we are doing.

SEC strategic Plan



Perhaps the fines are inconvenient. For their involvement with Lehman $20 million.  Gas exploration 72 million. Iran, Cuba and Sudan trade sanction violations $88 million, $8 million for mixing funds in London. “JPMorgan breached the contract over and over again,” the arbitrators said in a 72-page decision. $384 million settlement. $74 million fine in Alabama for bribery. Several million dollar fines but my favorite is the 30,000 dollar fine for gasoline futures. They added 30% to the price of oil by making huge block trades to cover other parts of the business.  In essence they financed their mistakes with our gasoline.  Oil Futures Blocks

On Tuesday, the House Appropriations Committee released the Fiscal Year 2013 Financial Services and General Government Appropriations bill, which provides annual funding for various agencies, among them the Treasury Department, the Executive Office of the President, and the Securities and Exchange Commission. On Wednesday, during a “mark up” hearing, subcommittees agreed to regulator budget reductions with votes that divided along party lines.

The proposed bill, as initially filed, includes a total of $21.15 billion in funding for various government agencies, $376 million below last year's level.

For fiscal year 2013, the bill included $1.371 billion for the SEC --  SEC Budget Proposal

Meanwhile we strive for a cubicle, a machine or a cash registers within gasoline distance We hold our smartphones for relief and security and read headlines for signs of growth and opportunity, We scan for gems.

• "The legs of those who stood were like fence posts driven into a warm, squirming, 
  farting, sighing earth. The queer earth was a mosaic of sleepers who nestled like spoons."

• - Kurt Vonnegut, Slaughterhouse-Five, Chapter 3

Our Trash, Our Treasure

Slowly emerging, is it like the butterfly and the chrysalis, or the survivor crawling from a catastrophic wreck? Several days ago, May 23, 2012 the White House released a memorandum to create a platform for digital technologies for this  century digital government strategy. The opening paragraphs promise us the butterfly but the picture painted as rosey still bares the marks of the train-wreck that has become of our reasonable expectation of privacy.

Imagine the internet 50 years ago, Thats when our notions of privacy were originally crafted in the courts. Cars had chrome and fins. Around here smokestacks billowed. When the phone rang a piece of metal still, struck a bell. If you wanted to talk to the guys, it wasn't just legal to go to the bar and drive back, It was American as smoking a Lucky Strike. Ladies used the phone for a bit of gossip but people visted each other in homes. Face to face was how we shared ourselves with each other for the most part.

Sometimes its quite alarming when we read that peoples lives are upturned by things they do and say on the net. Party lines on our telephones are a thing of the past but in the long term our temporary privacy over telephones will look like a anomalous bump in the road. A strange distortion. While it seems our rights are being eroded, it may actually be our misperceptions fading. There was a time when one large company fought to not be broken up by antitrust laws. The telephone company sold the public that one large company could offer privacy that many small companies could not. It was not a lie. One point of contact was easier to control.

Today we have dozens of points of contact between ourselves and the people we connect with on our phones and computers. All our financial transactions leave trails now. Each one of those are third parties that may be subpoenaed or court ordered or even searched. In this country only our families and ourselves can withhold evidence or testimony against us. All these third parties have a logical and reasonable reason to share our data with law enforcement entities.

We have been in a dark age. Our notions of privacy and property are about to swap places. This is why this memorandum is important to our rights. It gives us information and direction for future growth but in these first moves out into the light from our post 911 confusion it offers us a public concept of information as property. More importantly for us it recognizes it as public property, a resource to be efficiently managed.

 Our most private concerns have the same protections as our garbage. In State versus Smith 1970, Alaska gave us this list of items of garbage that we routinely think of as private:

Trash routinely contains many personal items, including:

1. empty prescription medicine bottles, which are always labeled with the individual's name and may be labeled with the name and dosage of the drug, so that someone who searches the trash may infer the individual's medical condition. Particularly in the case of sexually-transmitted diseases or psychiatric disorder, disclosure of the individual's medical condition could cause embarrassment.
2. credit card receipts, which have the person's name and credit card data; someone who searches the trash could use these data to order merchandise by telephone
3. letters that contain confidential information on financial, political, religious, family, or romantic topics
4. empty containers of alcoholic beverages, which could be embarrassing in a town with a substantial number of people who disapprove of alcohol for religious or moral reasons
5. empty boxes for condoms, birth control pill packages, empty containers of spermicide, and other contraceptive materials that could be embarrassing, but are legal to possess and use.
6. telephone invoices, with a list of all long-distance numbers called, with the date and duration of the call
7. paper indicating membership in political or religious groups

Suspicously, this looks like the same kind of data we leave on the internet and in corporate databases when we make tranactions with them. Outside of the privacy at home we leave third party trails both in and out. The Black Bag of hidden garbage on the outside is at risk. If we use shredders the rest is untraceable after its mixed with others garbage. 

But that inbound trail left at the banks and merchants and on all those shopper convenience cards? Its lifespan is indeterminate. Its transparent baggage over our heads that helps keep us civil and compliant. It behooves society to keep us civil but imagine a lifetime of trash around your home for everyone but you to sift through.

Thats what your data looks like. The sooner we see its all public, the sooner we can regain control of our privacy. As our data becomes more and more public and accepted as public, more people can begin to act responsibly. Our privacy is not a question of our civil rights. Its about property and the data belongs to corporations and governments. Data will soon be too transparent to be taken for granted.

A Difficult Leap of Comprehension

Quote: “The conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country.”—Edward Bernays, Our current paralysis in the face of our growing revelations that we are not in charge May have had its beginnings with this relatively unknown fellow. He is probably unknown because it was expedient to keep his work out of our vision. I expect this was done by discrediting Freud and this minimalized the work Bernay did since Freud's work was his foundation.  In this video, around the 5 minute mark you'll see the beginning of dependence on American corporations for our sense of well-being.  http://www.youtube.com/watch?v=V0OrT-8gXMs  Teabaggerz should be proud of me. These shifts in consciousness of the American masses may have marked the beginning of the end of the Constitution's "government by the people and for the people."  The logic is tenuous to grasp. It seems to dissipate as it forms. I imagine that it is because of conditioning.

50/50

So how should we spend the money. You know wars are winding down. What kind of accounting should we use. Should we shuffle half our income to debt and half to economic development as Obama proposed the other day? Do we need to think a little harder?


Whats the right way to raise the rate of return?

For me the idea is simple. If you have an investment, does it grow better if you apply simple interest or compound interest. There are 5 different calculations for ROI on the Wiki.


http://en.wikipedia.org/wiki/Rate_of_return#Multiperiod_average_returns

The first one is what I'd call simple interest. Its a flat type of accounting understandable by elementary school students and the general public.

As we grow in understanding and age we get exposed to the idea of compound interest, possibly in our first algebra class in 9th or tenth grade. A little further on we learn that our earlier compound bliss was only an approximation and the concept of periods is introduced. While easy to do with a calculator, it takes some simple calc to get an accurate answer by hand. Finally the Wiki shows us Internal rate of return which takes into account cash flow.

Tbh I'm just learning about this one today.

Why can't we look at our country as an investment and try to maximizes its return? First thing I learned about compound interest was to reinvest my returns, the second thing was to payoff high interest debt. Of particular importance was to look at my interest rates. If I had debt that was costing more than my investments were growing I could actually continue to go down hill even though I was putting money in the bank.

Debt therefore was important but by comparing interest rates another idea came about if you could borrow at low rates and earn at high rates, debt could actually make money!!!

Quote:

When the cost of capital is smaller than the IRR rate , the investment is profitable, i.e., . Otherwise, the investment is not profitable

Now O laid out an idea http://youtu.be/8nIFExKIhLA?t=1m45s (4 min)

buts its way to vague but it could be the start of discussion. I'm sure you have a lot more tricky accounting up your sleeves. Whats important? Growing as a country, redistributing wealth, increasing productivity, liquidating our inventories. If you don't agree we should grow, what should we do and how?