the year(2011) in Review: 1st up D Collom via Martenson

[lektrode]

figured i'd start off a 'The Year in Review' thread - will be interesting to see what we can come up with, eh? this ones a hoot:

http://www.chrismartenson.com/blog/2...d-collum/67586

skipping over a bunch of yada yada yada about his portfolio(s) - a few of the Highlights (and this guy has lots of em...) - emphasis = mine

So why do people care what an organic chemist thinks about investing, economics, monetary policy, and societal moods? I can only offer a few thoughts. For starters, in 32 years of investing I had only one year in which my total wealth decreased in nominal dollars; whatever I am doing has worked. I also ride the blogs hard, am fairly good at distilling complexity down to simplicity, seem to be a congenital contrarian, and am pretty well connected (for a chemist). I am Joe Sixpack, a 99er of sorts with a growing unease. Every year I feel like Bill Murray in ground hog day. Issues including the housing crises, hidden inflation (of a kind that even John Williams is not discussing), and interest rates have not disappeared, but I hit them hard last year and will not rehash them.
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2011 may prove to be an historical turning point. In 2008 the visionary James Grant asked “Why no outrage?” [4] In the early spring of this year I sensed rage but thought maybe it was only mine. As the year progressed, however, change was in the air and protracted social crises seemed possible. Many issues owing their origins to economics seem to be metastasizing into social movements. One senses winter is coming. With rich irony, Arabs might call it American Spring. Strauss and Howe predicted it in 1996 and would call it a Fourth Turning.
All the Devils Are Here

Look what they've done to my song, Ma.

—Melanie—

I cannot get that refrain out of my head as I watch the markets. This year the Devils brought us a wealth of nauseating and irritating stories that made you want to hurl (both lunch and laptop.) Here are some of the highlights. Others worthy of elaboration have been allocated their own subsections.

In an op-ed, Joe Nocera (author of a book bearing the title of this section) noted that one guy is in jail as a result of the entire mortgage fiasco: he lied on a liar's loan. By contrast, Gary Cohn, COO of Goldman Sachs testified to Congress under oath that Goldman went to the discount window only once, for a nominal sum when in reality Goldman went multiple times. I had occasion to ask Joe if Gary would get charged. "No." Apparently, perjury in Congress is only a crime if you are lying about baseball.

Thanks to Steve Kroft's 60 Minutes episode we found out that Congress can legally trade on all forms of insider information [5]. (It helps if you write the laws.) The frothy mix of money and politics is simply too awesome to overcome. Congress shirked its stated job of providing leadership by refusing to make even nominal budget cuts. They set up a super committee to make the cuts (and to give the lobbyists a much more focused target for their money cannons.) They failed too. I am sure the money cannons worked.

The NY Bank-Mellon (and, by the cockroach model, many more banks) got caught after a multi-decade crime spree involving back-dating of Forex trades of pension funds—that would be us folks—scalping 0.3% on every trade. I am sure they will be fined pennies on the dollar and not forced to admit guilt.

We found out this year that the SEC destroyed 18,000 files of fraud cases over many years because they were deemed "inactive", including those emanating from the Madoff case [6]. The magnitude of this blunder, a generous term for absolute corruption, can only be appreciated when you realize that all fraud cases at the SEC are inactive. David Einhorn's book (Fooling Some of the People; vide infra) includes horrifying tales of SEC corruption. I imagine Markopoulos' book about Madoff is the Bible on the subject.

There was a brief glimmer of hope. Standard and Poors grew a spine and downgraded US sovereign debt. I am not sure what rating you give to sovereign debt in which the authorities have explicitly stated that they intend to deracinate creditors with inflation, but it certainly is not AAA. Of course, the CEO of S&P was promptly fired, and, in a delicious irony, was replaced by the COO of the completely insolvent Citibank.

In a wondrous moment in journalism, Bloomberg pried over 20,000 documents from the Federal Reserve using the Freedom of Information Act (FOIA). The Federal Reserve fought the suit, but then agreed to "cooperate" with the Supreme Court's decision. How magnanimous. There emerged a cottage industry to dig nuggets from this treasure trove. We discovered, for example, that most of the $800 billion of Quantitative Easing II, money reputed to boost the US economy, went straight to European megabanks. Matt Taibbi of Rolling Stone described how a few hundred million found its way into the pockets of the wives of two Morgan Stanley executives to purchase distressed assets and shoes. The system sprang into action after Bloomberg’s score and initiated legislation that will allow the Fed to deny a document exists in an FOIA lawsuit if it should prove inconvenient. I guess that's the FODA (Freedom of Denial Act).

I thought I could get through a year without taking a whack at Alan Greenspan, but I couldn't let this one go. The Maestro announced that we should burn down houses to alleviate the supply problem. He seems to have forgotten what historians have written about Federally sponsored food destruction programs during the Depression to prop up prices as people went hungry. This clown destroyed lives. Could somebody at least put a sock in his face?

I try to stay non-partisan, but the White House deserves a little scorn. White House pressure to give solar cell company Solyndra $535 million dollars backfired when they went bankrupt. I remember seeing Obama's speeches and thinking that they were shameless infomercials. I must admit that I like having an intelligent president who formulates full sentences in real time, yet distrusted him from the start for a simple reason: Nobody comes from the Chicago political machine uncorrupted. Once elected, he filled his cabinet with establishment thugs. Chief of Staff Rahm Emanuel then left to become mayor of Chicago and was replaced with the infamous mayor Daley's son. You can’t make this stuff up.

Hank "The Hammer" Paulson has done a credible job of looking like a good guy, despite his nickname and Goldman roots. There's no way that an environmentalist and avid bird watcher could be ruthless, right? We found out, however, that Hank had tipped off a bunch of ex-Goldman hedge fund managers about what the Fed and Treasury would be doing. Of course, Hank let guys like Buffett and Gross help design bailouts and then front run them, but a bunch of hedge fund managers? They don’t even have Congressional appointments.

I would be remiss by not noting that the investment bankers got a few IPO scalps. It's nothing like the glory days, but they came out with Groupon (flush), Pandora (unobtainium-induced flush), and Zynga (nouveau flush). Buyers of GM and AIG, the newest GSEs, got pummeled with 50% losses this year. You should not buy what Wall Street sells.

Forget Bin Laden, we got Rajaratnam! What a score for the authorities—a big-time hedge fund manager making money off leaked secrets. To top it off, he's a foreigner, so we get a xenophobia boost. And now for the rest of the story. The guy who leaked the information—the guy who should be credited with a massive breach of trust—was Gupta. He's a foreigner too so why did Gupta get a pass? He works for Goldman (golf clap). One can only wonder how many more breaches of trust can occur before we simply run out of trust.

Paul Krugman knows how to make friends and influence people. He incessantly pleads for another $5 trillion dollars. Please let it go. A 2002 op-ed resurfaced in which Krugman had called for Greenspan to create a housing bubble [7]. OK. It's not a crime to be wrong (or a buffoon), but somehow they keep publishing his drivel. Krugman also suggested:

If we discovered that space aliens were planning to attack and we needed a massive buildup to counter the space alien threat and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months. [8]

Jeepers Paul: Put down the bong. This box-office-ready variant of Bastiat's "broken window fallacy" illustrates what a complete Keynesian boob he is. He also waxed philosophically about how the East Coast earthquake in August could have stimulated the economy if only it had done more damage. Why think small? How about global thermonuclear war or an extinction-event asteroid? The earthquake quote is rumored to be a fake, but how would you know? Since socks come in pairs, put one in his face too.

Buffett Takes a Bath

You should thank God [for bank bailouts]…Now, if you talk about bailouts for everybody else, there comes a place where if you just start bailing out all the individuals instead of telling them to adapt, the culture dies.

—Charlie Munger, Berkshire Hathaway—

Let 'em eat Twinkies, Charlie! (but I digress). Warren Buffett (WB) claims he decided to invest $5 billion in Bank of America while taking a bath. Total absurdity aside, the last guy who did his thinking in the bathtub single handedly destroyed the global economy with his bubbles. To pilfer Buffett's Wright Brothers logic, we should have drowned that guy, but I digress (again).

Buffett lost a little money this year—no big deal—but he took quite a metaphorical bath. WB is possibly the most famous and successful investor of the modern era—a world-class stock jobber, Master of Wall Street, and a hype machine. Come again? Yep. That sweet little old grandfather buying banks while eating ice cream in Dairy Queen in Too Big to Fail is a world-class hoser. In 2009 I caught Buffett in a big lie: he declared a bullishness for equities with interest rates in the basement, completely contradicting his 1999 article in Fortune Magazine declaring that rising interest rates cause secular bear markets in equities [9]. While pondering a blog denouncing this hypocrisy, I discovered Michael Lewis had scooped me by a mere 17 years. In 1992, Lewis’s Temptation of St. Warren excoriated WB; it’s quite a read [10]. I stole Michael’s title, wrote my blog, and moved on [11], but Buffett and the Buffettologists continue to irritate me.

This year WB denounced low taxes on billionaires. Sounds altruistic, but it leaves a bad taste given that his corporate attorneys protect him from taxation while fighting underpayment of Berkshires' taxes. (Michael Vick denounces dog fighting too.) WB also helped write bailout plans for banks (including Goldman Sachs and Wells Fargo) while scooping up shares of bank stocks (including Goldman Sachs). He’s no Martha Stewart, but this smells. WB defiantly maintains that he couldn’t care less about Berkshire’s share price, yet he spent billions buying Berkshire shares above book value, which smacks of a stock pump (and it worked). He became Obama’s BFF (best friend for you non-teenagers) and then, miraculously, two of WB's favorite companies, Wells Fargo and Moody’s, somehow managed to slither out of Federal legal actions targeting their peer banks and ratings agencies. It’s good to have friends in high places (and a reputed $10 million dollar lobbying budget.)

People around WB didn’t help his image either. His long time partner, Charlie “Let ‘Em Eat Cake” Munger, certainly displayed a tin ear with his quote. David Sokol, WB’s anointed heir apparent at Berkshire, got caught getting a little on the side to supplement his ample wealth. Of course, you can’t have Buffett’s clone look like a crook so his career at Berkshire was vaporized. Legendary hedge fund manager Michael Steinhardt beat Warren like a rented mule in a must-see interview on CNBC [12]. He said WB "conned the press", is "thoughtless", a “snow job”, and even implied dishonesty while WB’s pregnant groupie listened in stunned silence. When pressed about the Sokol affair, Steinhardt indicated that “it is not common for Buffett to get caught.”

Steinhardt also touched a topic that has me conflicted. Buffett and Gates have pooled their gargantuan empires—resources accrued from the miracles of American capitalism—into a single tax exempt organization of unprecedented scale (Catholic Church aside). One lobe of my brain says they are free to do as they please; another thinks that American capital should be plowed back into American soil for the next generation. I keep thinking about a strip-mining metaphor. In any event, a tax-exempt organization will be allocating this massive pile of capital for eternity (or maybe not). Let’s hope it does so efficiently and for good causes.

Precious Metals and Currency Wars

Gold standard supporters are lunatics and hacks

—Nouriel Roubini—

Precious metals were in a Utopian bull market for almost a decade. The early bulls lounged poolside, taking the occasional dip and enjoying returns in the high teens. It was a leisurely path to wealth. Predictably, the speculators showed up, a few at first but then in number, forcing repeated chlorine charges of the pool. The high frequency traders began playing digital Marco Polo, causing raucous turbulence. Now the market is anything but leisurely. I miss the sane days when only crazy people bought gold.

The volatility, however, is not just the traders. There were some serious shenanigans at the Chicago Mercantile Exchange (CME). They are charged with maintaining orderly markets, but apparently fell waaaay behind the curve. Five margin hikes on silver in eight days isn't orderly; it's a drive-by shooting. Just days later, the new Shanghai metals exchange jumped in with its own margin hike, triggering a 15% flash crash. Mysterious put buying on low volume in the wee hours of the morning while most of Asia was on extended vacation elicited serious gold sell offs. To ensure that commodity traders across the board got the memo, 60 million barrels of oil were released from the strategic petroleum reserve for no apparent reason. (Does anybody believe that actual oil entered the market place?) The message was clear: metals and commodity bulls will be dealt with severely. Those without a position in metals are braying that the bull market is over and have been energized by recent precipitous drops. Others see the margin hikes as an effort to allow an orderly retreat for big-money shorts. There may have been some serious collateral damage, however. I suspect that some of MF Global's problems may have started from this forced selling.

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theres lots more to this, before and after the above = well worth the read, but wanted to leave some over at martenson's place - he needs the cliks too ;)

http://www.chrismartenson.com/blog/2...d-collum/67586

methinks we ought to add to this one, eh? with the coming onslaught of "2011 in reviews" that will be popping up faster than the mushrooms in my yard...

but now, i'm gonna start getting caught up with why energy prices in hawaii are... 'higher than typical' (uh huh.. you really cant just make up stuff, right?... uh huh...)

HAPPY NEW YEAR ?

[Raz]

Re: the year(2011) in Review: 1st up D Collom via Martenson

"I try to stay non-partisan, but the White House deserves a little scorn. White House pressure to give solar cell company Solyndra $535 million dollars backfired when they went bankrupt. I remember seeing Obama's speeches and thinking that they were shameless infomercials. I must admit that I like having an intelligent president who formulates full sentences in real time, yet distrusted him from the start for a simple reason: Nobody comes from the Chicago political machine uncorrupted. Once elected, he filled his cabinet with establishment thugs. Chief of Staff Rahm Emanuel then left to become mayor of Chicago and was replaced with the infamous mayor Daley's son. You can’t make this stuff up."

I remember posting words to this effect back in 2008. (And yea, he "never heard Rev. Wrong say those things".)
Ah, but the allure of "hope and change"! What a load of crap.

Most people believe what they want to believe. Politicians know this and use it to great effect.
Unless you vote Third Party "exercising" your franchise has become a waste of time.

[wayiwalk]

Re: the year(2011) in Review: 1st up D Collom via Martenson

Thanks for posting this, it will make nice reading tonight.....it will feed my inner cynic well.

[lektrode]

Re: the year(2011) in Review: 1st up D Collom via Martenson

heres another one, from allan sloan at fortune mag:

A look back at 2011: Taxes, bailouts, and American idiots
http://finance.fortune.cnn.com/2011/...an-sloan-2011/

A look back at 2011: Taxes, bailouts, and American idiots
By Allan Sloan, senior editor-at-large December 29, 2011: 11:03 AM ET

Some stories are worth revisiting, again and again.

FORTUNE -- Different people have different year-end traditions. Mine include distributing my wife's delightful Chanukah cookies to my colleagues, and leaving singing messages to the tunes of "Jingle Bells" or "Auld Lang Syne" on my office voice mail. On the professional front, I re-read what I've written during the year, a sometimes painful exercise, own up to mistakes I haven't already corrected, and follow up on things I've previously written.

My journalistic specialty is dealing with chaos and complexity, which were in plentiful supply in 2011. In normal years, my columns are my major year-end subject. This year, though, it's three longer pieces that deal with complex and chaotic topics.

The first, published in July, discussed how the federal bailout of the financial system is actually turning a profit for taxpayers, rather than costing vast amounts of money as almost everyone, including me, assumed. My colleague Doris Burke and I researched this topic to death, because we couldn't believe what we had found, and kept looking for bailout costs that I'd missed.

This article (Surprise! The big bad bailout is paying off) drew a strong and largely negative reaction, I think largely because it upset so many preconceptions that the government is always incompetent. Besides, in a culture that's gone from speaking to shrieking, bad news is more welcome than good news.

The one valid point critics made was that if you adjust for the risk taxpayers incurred, the $40 billion profit that I estimated the bailout would yield isn't all that much. I had made that point in early versions of the article, but my editors—correctly—said it was one element too many in an already-complex piece. I wish I'd worked harder to find a way to simplify and include it.

To my surprise and amusement, Federal Reserve Chairman Ben Bernanke, whose policies I've criticized for harming prudent savers in order to bail out imprudent lenders and borrowers, cited my piece in a public hearing to rebut Rep. Ron Paul's claim that the bailout cost taxpayers tons of money. Does being cited by Bernanke mean I've gone from gadfly to Establishment? Stop the presses!

The second piece, which I wrote in August, was the polar opposite of the long-in-the-making bailout piece. I wrote this one in a rage over a weekend at a rented vacation house because I was furious about how fanatics, financial illiterates, incompetents, and cowards in Washington were screwing up our country. My bosses called it "American Idiots," and, to my surprise, put it on Fortune's cover. Unlike the bailout piece, which I had to be reminded several times that Fortune really wanted, "American Idiots" was totally my idea. I volunteered to write it—on my own time! From the beach!—because I was so angry at what I'd seen happening in Washington.

"Idiots" played prominently in both Fortune and the Washington Post, drew thousands of e-mails and comments, the biggest response I've gotten for anything I've written recently, or maybe ever. It clearly touched a nerve.

Unfortunately, the piece contained a mistake. My bailout piece stressed that TARP was only about 3% of the bailout, which I put at about $14 trillion, and that conflating TARP with the bailout was a mistake. (Given some recent Bloomberg stories, my $14 trillion may be too low). So what did I do in "American Idiots"? I conflated TARP with the bailout. Dumb, dumb, dumb. The downside of writing when I'm angry, angry, angry.

To complete my 2011 trifecta, a third long piece, which I co-wrote with Jeff Gerth of ProPublica, landed me in a public dispute with the New York Times about the income tax General Electric (GE) incurred on its $5.1 billion of U.S. profits in 2010 (The truth about GE's tax bill). I've tried to move past that navel-gazing journalist-on-journalist dispute, which I'm tired of discussing, by proposing a solution to the underlying problem: that companies don't have to disclose their U.S. income tax for a given year. I've asked the Financial Accounting Standards Board to solve this problem by requiring companies to disclose key numbers from their federal tax returns (Hey corporate America: Show us your tax returns). This has gotten some resonance—but FASB probably won't do anything unless big-time legislators or corporate chief executives demand it. Alas, that seems unlikely. Meanwhile, we'll continue debating corporate tax policy without having reliable numbers.

In September, I wrote a column using the term "ObamaCare" (The health care system of the future looks grim). When some readers complained, I dismissively told them that it didn't strike me as a derogatory term. I now realize that it was. I dislike large parts of the plan for reasons we may discuss some other time. But I shouldn't have called it ObamaCare.

The column I'm proudest of was a tribute to the late Boston banker, Arthur F.F. Snyder (A fond farewell to a bigtime banking hero). I finally got to give Art his due, almost 40 years after meeting him when our careers overlapped briefly in Detroit. He exemplified the good side of banking by making loans that helped establish companies that ultimately employed lots of people and made investors rich. It's important to remind people that bankers like Art, a wonderful and helpful and irreverent guy, existed, and are still out there. Warren Hellman of Hellman & Friedman, who died in December, was a San Francisco member of the good-banker club. May their tribe increase.

Okay, that will do it. Have a happy, healthy, peaceful, and prosperous new year. We'll reconvene in 2012.

and there's lots more via hyperlinks on this: http://finance.fortune.cnn.com/2011/...an-sloan-2011/

and for some reason(?) all of a sudden the posting machine isnt plugging in the hyperlinks embedded within the orig article as prev? - but here's aanother beauty and the ref'd "American idiots" (the .gov) who are ruining whats left of the economy:

http://finance.fortune.cnn.com/2011/...g-the-economy/