Thursday, October 20, 2011

Student Loan Bubble To Exceed $1 Trillion: "It's Going To Create A Generation Of Wage Slavery" And Another Taxpayer Bailout

While one of the biggest complaints of #OccupyWallStreet protesters, and much of the balance of middle-class America, continues to be the burden of student loans, the paradox is that, as the USA Today reports once again on one of its favorite subjects, student loans are set to surpass $1 trillion in total notional for the first time in history on what appears to be relentless demand and interest for this cheap form of educational financing, making this debt burden the single largest form of consumer debt, well bigger than outstanding credit card debt, and smaller only compared to mortgage debt. "The amount of student loans taken out last year crossed the $100 billion mark for the first time and total loans outstanding will exceed $1 trillion for the first time this year. Americans now owe more on student loans than on credit cards, reports the Federal Reserve Bank of New York. Students are borrowing twice what they did a decade ago after adjusting for inflation, the College Board reports. Total outstanding debt has doubled in the past five years — a sharp contrast to consumers reducing what's owed on home loans and credit cards." What explains this insatiable demand for this kind of debt? Well, it's cheap, it's easily accessible (the collateral is education), and it is fungible - a student can take out a loan, yet use part or all of the balance for tangential purchases (that iPhone 4S sure would make me cool). But this, like every other debt, comes at a price.



Bill Gross Was Right: Fed Board Member Tarullo Calls For Restart Of MBS Monetization

When we first reported on Bill Gross' massive surge in duration and accelerated purchase of Mortgage Backed Securities a week ago, we said, "That's either what is called betting one's farm on Operation Twist, or, betting one's farm that the next thing to be purchased by the Fed in QE3 or QE4 depending on how one keeps count, will be Mortgage Backed Securities." It was the letter. Confirmation that Bill once again frontran the Fed comes courtesy of Daniel Tarullo who in a speech at Columbia University, talking about the labor market of all things, just said the following: "I believe we should move back up toward the top of the list of options the large-scale purchase of additional mortgage-backed securities (MBS), something the FOMC first did in November 2008 and then in greater amounts beginning in March 2009 in order to provide more support to mortgage lending and housing markets." And there you go: watch as the market rips on the expectation that the US will bail out China all over again. Oh wait, at this point China couldn't care less what happens to the GSEs stack. So unfortunately as can be expected, this is nothing but yet another bailout of US banks, which lately have been buying up MBS like crazy (Gross is not the only one with the hotline), and expecting to flip right back to Brian Sack: after all something has to be done to save the poor things from a total pancaking of the Treasury curve.



Explanation on Position Limits/Exemptions/Bank of America loses big case on 8.5 billion settlement/gold and silver raid

Before commencing with my commentary I would like to present to you Bart's email to me on position limits and the elimination of the phony exemptions:  (courtesy Bart Chilton) The spot month limits go into effect in 60 days after we define swaps, which we are set to do on Nov. 1st. The all month and aggregate limits (which will include swaps) is 12 months after the initial limits. We do not

Fed's Balance Sheet not growing but not shrinking much either

Trader Dan at Trader Dan's Market Views - 2 hours ago
Take a quick look at the chart below to get a sense of what is taking place as a result of the cessation of the Fed's QE2 program and the inception of its "Operation Twist". Recall that Operation Twist is nothing more than a rolling over of maturing shorter term Treasury debt into longer term Treasury debt in a deliberate attempt by the Federal Reserve to manipulate the rate of interest on the longer end of the yield curve. While I personally find the idea that a small group of individuals presumes to be able to determine the exact rate of interest to fine tune an economy and make ... more » 

Another down day for the Metals

Trader Dan at Trader Dan's Market Views - 6 hours ago
Both gold and silver continue to move lower and towards the bottom of their trading ranges. In the case of gold it dropped through $1620 and fell to just above $1600 where buyers showed up. It is currently attempting to get back over the $1620 level. Silver violated support at both $31 and then again at $30 but it did encounter some decent-sized buying just below that latter level and has bounced back above $30 as I write this. As expected, the HUI, once it sank through the support region near 520, fell all the way to the next support zone near 500 which extends down towards 490.... more » 

Mr. “Black Swan” Comments on Bankers’ Salaries

Here’s some interesting commentary from Nassim Taleb, author of “The Black Swan,” regarding the Wall Street Protest and the exorbitant salaries bankers are making at the expense of the American taxpayer.

Equity Mutual Funds See Biggest Outflow Since August Despite Market Ramp

While once upon a time, retail equity capital flows would be a perfect coincident indicator to the overall market, with any notable spike in the S&P promptly matched by inflows into domestic equity mutual funds, this is no longer the case. As ICI reports, in the week ended July 12, equity mutual funds saw their 8th consecutive outflow, amounting to $5.9 billion, the largest outflow since the debt ceiling and US downgrade fiasco in August, and a number which brings the total year to date outflow to ($99) billion. True to form, the capital rotated once again out of stock and into bonds with $4 billion in inflows for the week. More than anything this confirms that retail no longer chases day to day market performance out of a profound skepticism for market structure, and the record volatility and well-documented near 100% correlation across all asset classes has driven out all but the bravest. Unfortunately, news like this just released report by Reuters that the Nasdaq hackers from February, also "installed malicious software on the exchange's computers that allowed them to spy on scores of directors of publicly held companies, according to two people familiar with an investigation into the matter." Hardly the stuff that build up confidence in fair and efficient markets.

Fed Dollar Swap Lines With Europe Soar To $1.9 Billion, Most Since June 2010

For a week in which Europe was supposed to be healing, and certainly not provoking the curiosity of forensic capital chasers, it sure did a bad job. In the week ended October 19, the Fed disclosed that not only did it roll its $500 million 7 Day facility (at 1.08%) with the ECB, but it also entered into a new 84-Day 1.09% facility (this is about 60 bps more than 3M USD Libor, confirming just how ridiculous and meaningless the 3 month USD Libor market is). It is of course unclear which bank ends up being on the ECB's receiving end, but one thing is certain: the dollar shortage in Europe is now as bad as it was just after the first Greece insolvency, when nobody was prepared for the bank lockup that followed. Additionally, with deposit loans at the ECB soaring to €182 billion, a runrate which will promptly surpass last month's high, it is once again all too clear that there is no free liquidity in Europe, and that the thesis presented by Zero Hedge over the weekend, that the only reason for the persistent high level of the EUR is due to the sale of USD assets by French banks and subsequent FX repatriation, is what explains the ongoing schism between the European market, which is driven by wholesale asset sell offs by French banks, and the American one, which is electronically trading with 100% correlation to the EURUSD which is sending a completly false "all clear" signal to the market.

Rogue Government Traders

The reason the liberal mainstream corporate media demonized the Tea Party is because it threatens the status quo.  The reason the conservative corporate mainstream media demonizes Occupy Wall Street is because it threatens the status quo.  These are textbook divide and conquer strategies being used on the American people.  Do not fall for it.  Yesterday I read a really interesting gallup poll that stated: “Not surprisingly, Americans who consider themselves supporters of the Occupy Wall Street movement (26% of all Americans) are more likely to blame Wall Street than the federal government for the nation's economic problems. Supporters of the Tea Party movement (22% of Americans) are overwhelmingly likely to blame the government.”  What is most compelling to me is that 26%+22% = 48% so basically almost a majority.  All we need to do is teach people that Washington D.C. and Wall Street are now the same corrupt entity.  They are one gigantic rogue trader sucking the lifeblood out of America.  If we can unite these forces, which I can say with certainty agree on the important issues, we can put an end to the status quo and free ourselves of this bondage.

Phoenix Capital...
10/20/2011 - 15:58
  It’s time to settle the debate regarding Europe’s banking system. I know that the mainstream media keeps talking about another round of bailouts or an expansion to the Emergency Financial...

10/20/2011 - 15:29
No kidding this time...

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