By Pam Martens and Russ Martens: July 21, 2015 Yesterday, domestic oil (West Texas Intermediate or WTI) dipped below $50 a barrel during intraday trading, reaching a level not seen since April. Gold closed at the lowest price in five years while sugar traded at a six year low. Wheat has lost almost 9 percent since last week. The Bloomberg Commodities Index traded at a 13-year low yesterday. The selloff in commodity prices is sending the following market messages: China is highly likely overestimating its economic growth rate of 7 percent that it reported last week; despite six years of central banks’ efforts to rev up economic engines, the money isn’t reaching consumers – it’s still flowing to the one percent. The chart below showing the relapse in commodity prices and stock prices in 1937, after the Fed thought it had beaten the worst of the Great Depression, should send … Continue reading →

By Pam Martens and Russ Martens: July 20, 2015 When it comes to sleuthing out how Wall Street has gamed the laws, conned the regulators and colluded to corrupt the whole financial system, there is no one in Congress sharper-eyed or more outspoken than Senator Elizabeth Warren, who is also exceptionally well-qualified to lead this Wall Street posse. Warren was a commercial law professor at Harvard for more than 20 years. She is widely credited with facilitating the creation of the Consumer Financial Protection Bureau (CFPB) to protect consumers from the insidious rip-offs in mortgages, credit cards, student loans and other financial products. On July 7 of this year, Warren, together with fellow Senators John McCain, Bernie Sanders, Angus King, and Maria Cantwell, introduced the “21st Century Glass-Steagall Act of 2015,” (S.1709) legislation to separate insured, deposit-taking banks from Wall Street’s investment banks, brokerage firms, market makers, and hedge funds. … Continue reading →

By Pam Martens and Russ Martens: July 16, 2015  Protesters were throwing fire bombs in the streets of Athens last evening over harsh new austerity measures being imposed on Greece, where banks and the stock market remain shuttered. One third of the stocks on the Chinese stock market remain suspended from trading in an effort to avert a crash. Bloomberg Business is reporting that institutional investors are holding the highest levels of cash since shortly after the Lehman Brothers collapse in 2008. And just yesterday, America’s largest export market, Canada, slashed interest rates as its central bank announced its economy had contracted in the first two quarters of this year. The global landscape is beginning to look like the inevitable dystopian reality of a world ruled by the 1 percent. Against this backdrop, Federal Reserve Chair Janet Yellen, with her incessant chatter about raising interest rates before the year is … Continue reading →

By Pam Martens and Russ Martens: July 15, 2015 Fed Chair Janet Yellen cannot possibly be looking forward to her 10 a.m. testimony before the House Financial Services Committee today. Her last rendezvous with that Committee in February saw tempers flare and angry questioning from both Democrats and Republicans. At times in February, the typically mild-mannered Yellen answered questions curtly and at one point rolled her eyes at questioning from Congressman Scott Garrett (R-NJ). Garrett insinuated that Yellen has politicized her office by meeting so frequently with President Obama and Treasury Secretary Jack Lew. Congressman Michael Capuano (D-MA) grilled Yellen about the living wills coming out of the too-big-to-fail banks. Capuano read from a statement by FDIC Vice Chair, Thomas Hoenig, which said these living wills “provide no credible or clear path through bankruptcy that doesn’t require unrealistic assumptions and direct or indirect public support.” Capuano crisply told Yellen “if … Continue reading →

By Pam Martens: July 14, 2015  Remember the Super SIV, also known as the Master Liquidity Enhancement Conduit or MLEC? That was a 2007 scheme in the U.S. to create a toxic waste dump where banks could stuff all their bad debts and instantly repair their balance sheets. It didn’t fly, leaving the Federal Reserve, Treasury Department and Federal Deposit Insurance Corp. to come up with a raft of programs during the 2008 crisis to buy up, guarantee or ring fence hundreds of billions of dollars in bad bank debt. That effort was further enhanced with $13 trillion in secret, super cheap loans to Wall Street and foreign banks by the Federal Reserve. This produced a dystopian landscape on Wall Street, with Citigroup trading at 99 cents a share during the panic, Lehman Brothers and Bear Stearns collapsed, AIG, Fannie Mae and Freddie Mac wards of the government, and Merrill … Continue reading →

By Pam Martens and Russ Martens: July 13, 2015 Goldman Sachs is raising eyebrows on Wall Street with its unchecked bullish stance on the stock markets in China, as other major Wall Street firms issue investor cautions or take outright negative outlooks. Communist government intervention in Chinese markets is reaching unprecedented levels of meddling. Companies have been allowed to simply stop trading their shares to halt further price declines; the government has barred executives and key shareholders from selling; margin rules have been lifted; and the central bank is funneling liquidity to brokerage firms. Since the rout began in June, $3.2 trillion has been shaved from the Chinese stock market with almost 2,800 stocks down 50 percent or more according to Wind Information. Despite these obvious fault lines, Goldman Sachs has remained steadfastly bullish. But what Goldman Sachs isn’t volunteering to investors is that the company holds stakes itself in Chinese … Continue reading →

By Pam Martens and Russ Martens: July 9, 2015 Yesterday, beginning at 11:32 a.m. and for the next three hours and forty minutes, the iconic New York Stock Exchange shuttered trading in all of its listed securities. The Exchange said it had experienced an internal glitch. Unknown to most Americans, some of those shuttered stocks on the New York Stock Exchange were Chinese stocks and among the largest capitalized companies in the world. More than 100 Chinese companies trade on U.S. stock exchanges as American Depository Receipts (ADRs) and almost 200 Chinese company ADRs trade over-the-counter in the U.S. (Individual shares are referred to as ADS, American Depository Shares.) Last year, Thomson Reuters estimated the market value of Chinese companies listed on just the New York Stock Exchange and Nasdaq Stock Market at more than $1.4 trillion. With the Chinese stock market rupturing over the past week and trading in more … Continue reading →

By Pam Martens and Russ Martens: July 8, 2015  It’s starting to feel like we never actually emerged from the 2008 crisis: the U.S. government and the Federal Reserve simply threw $13 trillion at the crisis and walked away, hoping that an endless zero-interest-rate-policy (Zirp) would patch over the cracks in the global financial system. What we seem to have now is an endless series of rolling crises instead of one big global crisis. The rolling crises, from Puerto Rico to Greece to China’s stock market, all have one thing in common – the unraveling of too much debt. That could rapidly turn into a full-fledged global crisis if policymakers misdiagnose what’s happening, treating the problems as isolated crises instead of a interconnected debt hangover from the go-go years. The plunging price action in industrial commodities this week strongly suggests that debt was not sufficiently purged in the 2008-2009 economic … Continue reading →

By Pam Martens: July 7, 2015 If you happened to be sitting behind a Wall Street trading terminal on Tuesday, October 20, 1987, you are likely having heart palpitations reading about what’s currently happening in the Chinese stock market. Tuesday, October 20, 1987 was the day after Black Monday, the infamous U.S. stock market crash that shaved 22 percent off the Dow Jones Industrial Average in a single day. Only those working behind a trading terminal the day after the crash can truly appreciate the horror of having customer orders to sell their stock and having no idea as to the price at which the stock was trading despite the market being technically open for trading. On Tuesday, October 20, 1987, the U.S. stock market was less of a market and more of a crapshoot. So many stocks had been halted for trading that futures markets in Chicago had to … Continue reading →

By Pam Martens and Russ Martens: July 6, 2015 The fallout from yesterday’s Greek referendum is now spilling over into the share prices of global banking stocks in morning trading, with some down as much as 7 to 5 percent, raising the specter that if Germany doesn’t soon focus on the bigger financial stability picture, it could create more bailouts in short order. The rumored close vote by the Greek people in a referendum yesterday turned into a landslide 61 percent vote against the tough austerity measures being offered by the European Commission, the European Central Bank and the International Monetary Fund in exchange for continued loans to the struggling country. News reports since the vote indicate that German Chancellor Angela Merkel and Wolfgang Schäuble, the German Finance Minister, have no plans to quickly cave in to Greek demands for a more generous deal than the one offered prior to … Continue reading →