By Pam Martens and Russ Martens: October 31, 2022 ~ Whether your mutual fund was one of the popular 60/40 funds (60 percent equities and 40 percent bonds) or was 100 percent in equities, you’ve been battered this year. The Fed’s relentless hiking of interest rates this year beat down the market value of existing bonds because they have lower fixed rates of interest, thus making them less valuable than the newly issued bonds with higher rates of interest. Growth stocks, which have dominated the investment scene for years, were particularly crushed because growth companies need to borrow money to grow and higher interest rates mean that their cost of capital will become more expensive, thus slowing growth and hurting their earnings outlook. Another factor weighing on the negative performance of equities (stocks) is that higher interest rates pumped up the value of the U.S. dollar, hurting the earnings of U.S. … Continue reading →

By Pam Martens and Russ Martens: October 27, 2022 ~ At Fed Chair Jerome Powell’s press conference on September 21, he made a remark that went unchallenged by the bevy of reporters in attendance. Powell said this: “This is a strong, robust economy. People have savings on their balance sheet from the period when they couldn’t spend and where they were getting government transfers. There’s still very significant savings out there, although not as much at the lower end of the income spectrum — but still, some savings out there to support growth. The states are very flush with cash, so there’s good reason to think that this will continue to be a reasonably strong economy.” (See the top of page 15 of the official transcript from the Fed.) Powell’s statement stands in stark contrast to the numbers coming out of the U.S. Department of Commerce’s Bureau of Economic Analysis (BEA). … Continue reading →

By Pam Martens and Russ Martens: October 26, 2022 ~ It was a lawsuit that should have made front page headlines in every major newspaper in America and on the evening television news. Instead, as we predicted, it was quietly settled on Monday, just 10 business days before a trial was scheduled to begin. The dollar amount of the settlement was not disclosed. Yesterday, Wall Street’s paper of record, the Wall Street Journal, devoted a mere 299 words to the settlement and the details of the case. The lawsuit was filed in the federal district court for the Southern District of New York – a court system where mega Wall Street banks have a long history of evading justice. The plaintiff in the case is Shaquala Williams, an attorney and financial crimes compliance professional with more than a decade of experience at multiple global banks. The defendant is JPMorgan Chase – … Continue reading →

By Pam Martens and Russ Martens: October 25, 2022 ~ The newly installed U.K. Prime Minister, Rishi Sunak, (the third PM in seven weeks) has scrubbed his Goldman Sachs and hedge fund career from his LinkedIn profile and from his official government bio. But, unfortunately for Sunak, those careers have been assiduously chronicled in countless newspaper articles for more than a decade – and not in a good way. Sunak worked as a junior analyst at Goldman Sachs from 2001 to 2004, where part of his research involved railways. He left Goldman to obtain his MBA at Stanford University, following which he joined TCI hedge fund in 2006 as a partner and worked there until 2009, when he left to co-found the hedge fund, Theleme Partners with Patrick Degorce. Sunak worked at Theleme Partners until 2014, when he moved into conservative politics in the U.K. That’s a total of 13 years … Continue reading →

By Pam Martens and Russ Martens: October 24, 2022 ~ Last Thursday, Jeanna Smialek, who reports on the Fed for the New York Times, broke the news that the President of the St. Louis Fed, James Bullard, gave a private, invitation-only briefing on October 14 to clients of Citigroup – a Wall Street megabank that is supervised by the Fed and which received the largest bailout from the Fed from 2007 to 2010 in global banking history – a cumulative sum of $2.5 trillion in secret loans according to a government audit. Smialek noted in her article that “About 40 people attended the event, which had a formal agenda and was advertised to Citi clients.” Bullard answered questions from attendees, according to Smialek’s reporting. Bullard is a voting member of the Fed’s Federal Open Market Committee and has access to insider information on the Fed’s market-moving monetary policy actions. Bullard would … Continue reading →

By Pam Martens and Russ Martens: October 21, 2022 ~ Goodbye Liz Truss. We hardly knew ye. Yesterday, Liz Truss announced she would resign as Prime Minister of the U.K. after just 44 days in office. That’s a new one for the record books in the U.K. In her brief span in office, Truss had managed to create a financial crisis in the sovereign debt market, force a bailout by the Bank of England, trigger alarm bells about the safety of pension plans in the U.K., and fire her Finance Minister.  All of these events are interconnected. Here’s the short version: On September 23 Truss’ Finance Minister (the Chancellor of the Exchequer) Kwasi Kwarteng announced big tax cuts which had to be funded through higher government borrowing because the Truss government had no clear plan for how to pay for them. This was interpreted by debt markets to mean bigger deficits, … Continue reading →

By Pam Martens and Russ Martens: October 20, 2022 ~ Congressman Kevin McCarthy (R-CA), the former House Majority Leader, is counting the days until he might be able to return to that post if Republicans win back the House of Representatives in the November 8 election. But on Tuesday, McCarthy made himself public enemy number one to upwards of 75 percent of Americans when he told Punchbowl News that if he’s in charge there will be a rethinking of U.S. financial support for Ukraine. In the interview, McCarthy said this: “I think people are gonna be sitting in a recession and they’re not going to write a blank check to Ukraine. They just won’t do it. … It’s not a free blank check. And then there’s the things [the Biden administration] is not doing domestically. Not doing the border and people begin to weigh that. Ukraine is important, but at the … Continue reading →

By Pam Martens and Russ Martens: October 19, 2022 ~ Today, we will be asking the Senate Banking Committee, its Chair, Senator Sherrod Brown, and one of its most knowledgeable members, Senator Elizabeth Warren, to call an emergency hearing and subpoena the testimony of two brilliant researchers for the Office of Financial Research. Those researchers are Andrew Ellul and Dasol Kim. The men have done nothing wrong. In fact, they have done something courageous. They have effectively blown the whistle on how global Wall Street banks have, once again, endangered the stability of the U.S. financial system through their opaque and dangerous use of over-the-counter derivatives. Unfortunately, because of the legions of lobbyists employed by Wall Street that shape and corrupt the rules of federal bank regulators, these men are prevented from revealing the names of the most dangerous banks and their most dangerous counterparties because that information is considered restricted … Continue reading →

By Pam Martens and Russ Martens: October 18, 2022 ~ Credit Suisse presents a cautionary tale about creating so much innovation in the realm of credit derivatives that one gets named “Credit Derivatives House of the Year.” That award might sound like a good thing to traders who make their living cooking up and trading exotic derivatives but it might sound like a very bad thing to pension funds and mutual funds who own big chunks of the stock and bonds of that bank and remember how credit derivatives blew up much of Wall Street in 2008. On September 28, Risk.net named Credit Suisse the “Credit Derivatives House of the Year.” Three businesses days later, Credit Suisse saw its own Credit Default Swaps blow out to more than 300 basis points and some of its own bonds trade at 63 cents on the dollar. Simultaneously, its shares traded at an intraday … Continue reading →

By Pam Martens and Russ Martens: October 17, 2022 ~ It was one year ago that Wall Street On Parade raised a multitude of red flags about Raphael Bostic, the President of the Atlanta Fed. We have published the entirety of that article below so that our readers can see just how long it took both Bostic and the Atlanta Fed to come clean with the American people about his trading on Wall Street. On Friday, Bostic released a seven-page statement in which he owned up to the following: failing to list a multitude of trades that were conducted on his behalf by trading firms on Wall Street over a period of five years; failing to properly report income on his assets on his financial disclosure forms; trading during blackout periods when trading was barred by the Federal Reserve; providing inaccurate values on his financial disclosure forms. The upshot was that … Continue reading →