The Sunshine Report

Category Archive: Finance

1. Wall Street Throws A Party But No Customers Show Up

   0 Post on October 26, 2011

   Imag­ine throw­ing a party for your best cus­tomers and none of them show up. What would you think about your future?

   Well, about a week ago at a Miami Beach asset-backed secu­ri­ties con­fer­ence, Wall Street pro­fes­sion­als invited their best insti­tu­tional bond cus­tomers to a cool South Beach party and almost no one showed up.

   Wall Street is loos­ing its rel­e­vance and becom­ing a dinosaur. Its busi­ness sim­ply can­not exist with­out cus­tomers. Unless it fun­da­men­tally reforms, and quickly, an entire gen­er­a­tion of bankers and finance pro­fes­sion­als will find that they are no longer rel­e­vant. [read full story]

   Posted in: BANKS, Credit Crisis, economy, Finance, Goldman Sachs, Merrill Lynch, Public Policy, REGULATION, Securitization

2. Tax Cut Proposal Kicks U.S. Workers Out Of Jobs

   0 Post on June 27, 2011

   Tax cut pro­po­nents want to encour­age domes­tic employ­ment by sub­si­diz­ing Amer­i­can com­pa­nies who employ for­eign work­ers in over­seas plants.

   Cut­ting cor­po­rate income tax on for­eign earn­ings puts com­pa­nies that keep their pro­duc­tion in Amer­ica at a com­pet­i­tive dis­ad­van­tage and encour­ages the con­tin­ued hol­low­ing out of the Amer­i­can economy.

   The sub­sidy for mov­ing pro­duc­tion over­seas has been euphemisti­cally called a “repa­tri­a­tion tax hol­i­day” but the only peo­ple who are going to get a hol­i­day are unem­ployed Amer­i­cans whose jobs will move over­seas. [read full story]

   Posted in: economy, Finance, Politics, Public Policy

3. Is Chinese Manufacturing Coming Back To The U.S.?

   0 Post on June 22, 2011

   At first I couldn’t believe my ears: a U.S. man­u­fac­turer was telling me that they were plan­ning on flee­ing the high costs of Chi­nese man­u­fac­tur­ing for the rel­a­tively lower costs of the U.S. [read full story]

   Posted in: China, Finance, Manufacturing

4. Who’s Gonna Bail Out The Fed?

   0 Post on May 22, 2011

   The Fed­eral Reserve is putting its future at risk by ignor­ing its own likely finan­cial results when it raises inter­est rates. Sim­ply put, ris­ing inter­est rates will hurt the Fed by mak­ing inter­est costs higher and asset val­ues lower.

   While the Fed isn’t like any other bank in Amer­ica, it is still sub­ject to the immutable rules of math and inter­est rate risk. If the Fed starts to earn less on its invest­ments than it pays in inter­est on its deposits, it will lose money.

   That is exactly what the Fed is fac­ing when inter­est rates rise — that it will pay more for deposits than it earns on its investments.

   Taken in iso­la­tion the Fed’s bal­ance sheet looks more like an over­lever­aged hedge fund than a shin­ing exam­ple of pru­dent risk man­age­ment. The Fed has almost no cap­i­tal to back up its big macro bet on inter­est rates and the shape of the yield curve. Higher inter­est rates or an inverted yield curve where long-term assets yield less than short-term assets will cause prob­lems. [read full story]

   Posted in: economy, Federal Reserve, Finance, Monetary Policy, Politics, Public Policy, UNITED STATES

5. Congressman Ryan, Should Predatory Pricing Cartels Really Run Health Care?

   0 Post on

   The med­ical insur­ance game is rigged. Med­ical insur­ance com­pa­nies have spe­cial legal pro­tec­tions that pro­mote anti-competitive behav­ior. Since 1944 they have been exempt from vir­tu­ally all the anti-trust laws that apply to other indus­tries and under­pin the foun­da­tion of our national economy.

   Under the terms of the insur­ance exemp­tion, health insur­ance com­pa­nies can col­lude with one another, fix prices, rig bids and form car­tels. Preda­tory pric­ing by health insur­ance com­pa­nies is OK. These prac­tices — nor­mally ille­gal under fed­eral anti-trust reg­u­la­tion— are pro­tected by law.

   Even worse, health insur­ance com­pa­nies don’t have to worry about being sued if they hurt some­one — they aren’t sub­ject to tort lia­bil­ity and as a prac­ti­cal mat­ter can’t be sued for mess­ing up a claim or deny­ing cov­er­age. [read full story]

   Posted in: economy, Finance, Fiscal Policy, Forbes, Medicare, Paul Ryan, Public Policy, REGULATION

6. Fed Has Power To Pop Commodity Bubble

   0 Post on May 9, 2011

   I don’t know about you, but I’m fed up with being a vic­tim of Wall Street spec­u­la­tors who are dri­ving food and fuel prices up through the roof. The recent plunge in com­modi­ties prices con­firms what every­one knew all the time — infla­tion is being dri­ven by com­modi­ties spec­u­la­tors who are prof­it­ing from every­one else’s col­lec­tive mis­ery. [read full story]

   Posted in: commodities, economy, Finance, Inflation, Public Policy, REGULATION

7. Headline From 2036: Banks Say ‘Drop Dead’ To White House

   0 Post on April 29, 2011

   At sep­a­rate news con­fer­ences Demo­c­ra­tic and Repub­li­can lead­ers accused each other of polit­i­cal oppor­tunism after Con­gress again failed to raise the debt ceil­ing and banks refused the President’s request to fund a gov­ern­ment bailout.

   As a result, the fed­eral gov­ern­ment shut­down that began in 2011 will con­tinue for another year. [read full story]

   Posted in: economy, Finance, Fiscal Policy, Forbes, Headlines From The Future, Monetary Policy, Paul Krugman, Public Policy

8. Gold Bugs Beware Of Fed Extermination

   0 Post on April 26, 2011

   Today I heard it again on the car radio — an adver­tise­ment claim­ing that since gold has topped $1,500 an ounce it’s a “must buy” for every respon­si­ble saver.

   If only it were true that I could pro­tect my fam­ily from eco­nomic Armaged­don by buy­ing gold.

   Unfor­tu­nately, the hard facts are that increas­ingly since 2000 gold has been the oppo­site of an infla­tion hedge. Even worse, when inter­est rates rise in response to infla­tion, gold will fall in value, and maybe by a lot.

   The his­tor­i­cal rela­tion­ship of gold to infla­tion, i.e., that it is a hedge, is no longer true. Gold has been “finan­cial­ized” by Wall Street and its price is being dri­ven by insti­tu­tional spec­u­la­tors that buy it by bor­row­ing money at near 0% inter­est. As long as inter­est rates remain low, the cost of bet­ting on gold is very low and money flows into the gold market.

   As gold prices soar indi­vid­ual investors need to beware. One day inter­est rates will start to rise and gold prices will plum­met. Inno­cent vic­tims that buy gold because of a mass mar­ket sales pitch will be sorry.

   My strong advice to read­ers is don’t be a gold bug. It’s only a mat­ter of time before the Fed exter­mi­nates you. [read full story]

   Posted in: BLS, commodities, CPI, economy, Federal Reserve, Finance, Gold, Inflation, Investments, monetary policy, Public Policy

9. Congressman Ryan, I Don’t Want To Be A Lab Rat

   0 Post on April 22, 2011

   Dear Con­gress­man Ryan,

   Please explain your Medicare plan to me and my wife. We are in our early fifties and are con­cerned about how your changes to Medicare will affect us. We know that Wash­ing­ton can seem dis­con­nected from the real world but, for peo­ple of our age, your plan to do away with Medicare is very real.

   Get­ting rid of Medicare feels like a free mar­kets exper­i­ment to us and nei­ther of us wants to be a “lab rat” for a social and eco­nomic exper­i­ment gone awry. Lab rats are usu­ally expend­able and we don’t want to be part of a dis­carded gen­er­a­tion. [read full story]

   Posted in: Finance, Fiscal Policy, Forbes, Medicare, Politics, Public Policy, REGULATION

10. LIBOR Manipulation Redux" rel="bookmark">LIBOR Manipulation Redux

    0 Post on March 25, 2011

    Back in 2008 my very first blog entry was about LIBOR and whether or not it was a real or imag­i­nary inter­est rate. Since that time I wrote another six arti­cles on the topic and got sin­gled out by the British Banker’s Asso­ci­a­tion, the pub­lish­ers of LIBOR, for spe­cial treat­ment and crit­i­cism. Start­ing about two weeks ago it […] [read full story]

    Posted in: BANKS, Finance, LIBOR