By Pam Martens and Russ Martens: September 20, 2021 ~ Global bank stocks took a bruising today as questions grow as to just how much exposure large financial institutions have to the teetering China Evergrande Group, a real estate development company in China which owes more than $300 billion in debt that it can’t repay. The Dow Jones Industrial Average shed 614.4 points by the closing bell today, or 1.78 percent, while global mega banks were down anywhere from more than 7 percent for foreign banks to more than 3 percent for U.S. mega banks. (See chart below.) A big question roiling markets is who has exposure as a counterparty to Credit Default Swaps on China Evergrande Group or other troubled Chinese companies. Where there is lack of transparency on such an issue, investors tend to sell first and ask questions later. Many of the China-related ETFs that trade in the … Continue reading →

By Pam Martens and Russ Martens: September 20, 2021 ~ Fed watchers are stunned that Fed Chair Jerome Powell thinks it is appropriate for the Fed to investigate itself following one of the most arrogant and brazen trading scandals in the history of the Fed. The focal point of that scandal is Robert S. Kaplan, the President of the Dallas Fed, who held non-public, market moving information throughout last year but nonetheless traded in and out of tens of millions of dollars of individual stocks as well as – wait for it – S&P 500 futures, an instrument used by speculators to make highly leveraged, directional bets on the market. S&P 500 futures extend the trading day to almost 24/7 from Sunday evening to Friday night. The type of trading done by Kaplan appears to be expressly prohibited by the Code of Conduct of the Dallas Fed. Appendix A on “Disqualifying … Continue reading →

By Pam Martens and Russ Martens: September 18, 2021 ~ A transaction that has been missed by major news outlets on the financial disclosure form for Dallas Fed President, Robert Kaplan, is a line item showing that Kaplan made “multiple” trades of more than $1 million in S&P 500 futures. This is a stunning revelation for a multitude of reasons. First, Kaplan’s financial disclosure form shows that he already had exposure to the S&P 500 through more than $1 million in an S&P 500 Exchange Traded Fund (ETF), which trades during regular stock market hours. Using S&P 500 futures gave Kaplan access to making directional bets on where the market would go after the stock market closed, which is typically when the Fed makes market-moving announcements. The most popular and liquid S&P 500 futures contract is the E-mini S&P 500. A person can get as much as 95 percent leverage on … Continue reading →

By Pam Martens and Russ Martens: September 17, 2021 ~ On Tuesday of this week, Bloomberg News published its umpteenth negative article on the San Francisco-headquartered bank, Wells Fargo. This time around, the article was highlighting Senator Elizabeth Warren calling for Wells Fargo to be broken up, with its federally insured bank separated from its Wall Street businesses. Bloomberg News syndicates its articles, so this story was quickly splashed all over other news outlets. And that’s the way it has been going since 2017. When Senator Warren bashes Wells Fargo, she gets lots of coverage by New York media outlets. Since March of 2018, Bloomberg News has published more than 80 negative articles on Wells Fargo with headlines like these: Wells Fargo CEO Abruptly Steps Down, Succumbing to Scandals; Wells Fargo’s CEO Disputes Claim His Bank Is Too Big to Manage; Elizabeth Warren on Wells Fargo CEO’s Departure: ‘About Damn Time’; Ex-Wells Fargo Bosses Face … Continue reading →

By Pam Martens and Russ Martens: September 16, 2021 ~ During the financial collapse of 2008, money market funds found themselves holding toxic paper that no one wanted to buy. In order to stop panic runs on money market funds, on September 19, 2008 the U.S. Treasury Department issued a statement indicating it would guarantee more than $3.5 trillion in money market funds. As COVID-19 concerns took root in March of last year and the stock market plunged, the Fed launched another bailout program for money market funds on March 18, 2020. The program was called the Money Market Mutual Fund Liquidity Facility (MMLF) and was run out of the Federal Reserve Bank of Boston. Going forward, the Fed does not want to be in the position of having to bail out more privately owned money market funds. So the Fed has been seducing money market funds and other financial institutions … Continue reading →

By Pam Martens and Russ Martens: September 15, 2021 ~ Last Tuesday, Mike Derby reported at the Wall Street Journal that the President of the Dallas Fed, Robert Kaplan, had “made multiple million-dollar-plus stock trades in 2020, according to a financial disclosure form provided by his bank.” The individual stocks included shares of Apple, Alphabet (Google), Alibaba,  Amazon, Chevron, Delta Airlines, Facebook, General Electric, Johnson and Johnson, Oracle, Tesla and numerous others. Kaplan previously spent more than two decades at Goldman Sachs, one of the largest trading houses on Wall Street, and, apparently, he thinks he still works there. Think about this for a moment. While Fed Chair Jerome Powell is repeatedly testifying to Congress last year that its every monetary move during the pandemic was on behalf of the average American, the Dallas Fed President is making million-dollar bets on big tech stocks the Justice Department is investigating for anti-trust … Continue reading →

By Pam Martens and Russ Martens: September 14, 2021 ~ The Senate Banking Committee will hold a hearing today titled “Oversight of the U.S. Securities and Exchange Commission.” The SEC needs a lot of oversight because that’s the federal agency that didn’t catch Bernie Madoff for more than four decades, despite a financial expert, Harry Markopolos, sending the SEC detailed written reports (in 2000, 2001, 2005, 2007 and 2008), making the case that Madoff was running a Ponzi scheme. The SEC was also asleep at the switch while Wall Street banks concocted their subprime debt bombs, then bet billions of dollars that they would fail while selling them to public pension funds as good investments. Those subprime bombs blew up in 2008, cratering the U.S. economy and leaving millions of innocent Americans jobless and homeless. More recently, the SEC was caught flat-footed when the family office hedge fund, Archegos Capital Management, … Continue reading →

By Pam Martens and Russ Martens: September 13, 2021 ~ Most Americans believe that the unprecedented Fed bailouts of Wall Street didn’t begin until December of 2007, on the cusp of Wall Street’s financial collapse in 2008. That’s wrong. The Fed’s first massive bailout of Wall Street started on 9/11. By the closing bell on September 10, 2001, the day before the attacks, the Nasdaq stock market was already in the midst of a full-scale implosion, having lost 66 percent of its market value and wiping out $4 trillion of wealth. The Wall Street mega banks were in the cross-hairs at the time of then New York State Attorney General Eliot Spitzer for bringing to market Initial Public Offerings of companies that the banks’ own research analysts were internally calling “crap” and “dogs” while the same banks issued buy recommendations on the “dogs” to the unknowing public. One internal email from … Continue reading →

By Pam Martens and Russ Martens: September 10, 2021 ~ On September 11, 2001 we were living in the quaint town of Garden City, Long Island, New York. The town was a 46-minute ride to Manhattan on the Long Island Rail Road. That easy proximity to the Big Apple meant that many folks in the town worked for financial firms, including those located in the World Trade Center Towers. It also meant that Garden City was among the suburban towns that suffered significant loss of life on 9/11: 23 of our residents never came home on the Long Island Rail Road that day – or any day thereafter. Almost every person in Garden City knew someone who had died: a son, a wife, a husband, a parent, a neighbor, a colleague, or a fellow church member. Our heretofore cheerful town that clipped happy faces in the shrubs in the village square … Continue reading →

By Pam Martens and Russ Martens: September 9, 2021 ~ The highly respected and closely watched Atlanta Fed’s GDPNow forecast for the third quarter has been slashed by 41 percent since August 2 – from 6.3 percent GDP growth to a tepid 3.7 percent projected GDP growth on September 2. The next update to its forecast will occur tomorrow after the Producer Price Index (PPI) is released at 10 a.m. (The GDPNow update typically occurs within a few hours of a new data release.) The Atlanta Fed’s GDPNow model is the seasonally adjusted annual rate. It comes with the following caveat: “GDPNow is not an official forecast of the Atlanta Fed. Rather, it is best viewed as a running estimate of real GDP growth based on available economic data for the current measured quarter. There are no subjective adjustments made to GDPNow – the estimate is based solely on the mathematical results … Continue reading →