FedUpUSA

Archive for May 5th, 2010

VIX Surges for Second Day as Global Stocks Erase 2010 Advance

By Jeff Kearns and Julie Cruz

May 5 (Bloomberg) — The benchmark index for U.S. stock options rose toward a three-month high as concern about Greece’s bailout wiped out the 2010 gain for the MSCI World Index and boosted demand for contracts to protect stocks.

The VIX, as the Chicago Board Options Exchange Volatility Index is known, climbed 5.3 percent to 25.10 at 11:09 a.m. in New York. The index measures the cost of using options as insurance against losses in the Standard & Poor’s 500 Index, which lost 0.5 percent. VIX call options, used to bet that the index will rise, traded almost two-thirds of their full-day average volume in the first hour after U.S. markets opened. May 20 calls were most-active, followed by July 20 calls.

“People think the current crisis may have some legs,” Dominic Salvino, a specialist at Group One Trading, the primary market maker for VIX options, said in an interview from the CBOE floor. “It’s not just Greece.”

U.S. stocks fell, pushing the S&P 500 to its biggest two- day drop since February before paring losses, as concern grew that Europe’s government debt crisis will spread beyond Greece. Europe stocks sank for a second day, extending a two-month low.

The VStoxx Index, which measures options on the Euro Stoxx 50 Index, rose 3 percent to 34.14, the highest in 10 months.

“There continues to be a clear and present danger that the tensions could escalate into a European Monetary Union credibility crisis,” Tammo Greetfeld, a Munich-based equity strategist at UniCredit Research, wrote in a report today.

Portugal’s PSI-20 Index plunged as much as 3.3 percent today as Moody’s Investors Service placed the country’s ratings on review for possible downgrade. European Central Bank council member Axel Weber said there is a threat of “grave contagion effects” from the Greek fiscal crisis.

–Editor: Joanna Ossinger

To contact the reporters on this story: Jeff Kearns in New York at jkearns3@bloomberg.net. Julie Cruz in Frankfurt at jcruz6@bloomberg.net

Middle class getting pushed into poverty and working poor status – The cloaked recovery for the middle class. How 30 percent of the poor are unemployed.

Posted by mybudget360

Over 6.5 million of the 15 million unemployed Americans have been out of work for 27 weeks or more.  As a percent, this is the highest number of long-term unemployed we have had since the Great Depression.  What is not discussed in this recession is the working poor and middle class have taken on the burden of this financial calamity disproportionately.  We are not all in this equally.  When was the last time you heard on the mainstream press that 40 million of your fellow Americans are now receiving food assistance?  And when was the last time you heard that jobs for the middle class are still largely disappearing?  Since much of the media represents the top 1 percent they assume all is well because Wall Street has been on a record breaking bailout rally.  At the same time, we have 30 percent unemployment at the lower end of our income scale.

The lower 30 percent are seeing depression like unemployment rates:

Source:  Center for Labor Market Studies, Northeastern University

This chart really is a reflection of the current recovery.  For the bottom 40 percent, this recession is still extremely painful and realistic.  Yet the top 10 percent have an unemployment rate of 3.2 percent which isn’t necessarily a bad number.  When we break down the numbers, we realize that the middle class in this country is struggling to get by.  The 40 million on food assistance are scraping by.  The Wall Street stock market casino is merely a far away distraction to this group.  It would be one thing if the rally actually reflected a large boost in job growth in the real economy.  Yet last month a large part of the actual added jobs came from Census hiring from the government.  This is unsustainable.

If we break down the numbers further, we realize that employment is only good for the top 20 percent:

Many economists argue that a 5 percent unemployment rate is typically where a steady economy would hover around.  Yet look at the above chart.  You have to be in the top income deciles to even see this rate.  Anyone from the seventh all the way down to lowest cutoff point is feeling unemployment rates that are elevated from the “normal” point.  And part of this has to do with the top 1 percent controlling over 42 percent of all financial wealth.  While most have to work to pay their bills or stay current with their mortgage, we have a tiny percentage of our country that largely make money from watching their stock portfolio throw off dividends.  In fact, this has become a zero sum game.  The trillions in bailout money that went to Wall Street are trillions that didn’t go to creating jobs for working poor and middle class Americans.  How many jobs can you create with $13 trillion?  Apparently not many if you give Wall Street most of it.

Most of the funds have been channeled into outrageous bonuses and keeping the fragile casino going further so they don’t have to go out and actually work like most Americans.  The long-term unemployed are enormous and the below chart is incredible:

The chart just goes off the normal path in this recession because many of these jobs are gone forever.  Many of these jobs were essentially support positions for the Wall Street casino.  Now that Wall Street siphoned off enough money from the productive economy, they are now looking for other bubbles to expand.  It doesn’t matter if it comes at the expense of the working poor and middle class.  In fact, this is what they want people to believe.  They want you to believe that they barely have enough to get by yet at the same time, are able to reward each other with billion dollar bonuses each quarter now that they have taxpayer money in hand.  This kind of hypocrisy and corruption is primarily why most Americans are simply not buying the nonsense perpetrated on Wall Street any further.

And U.S. households are making due with a lot less:

“65% of American households get by with $65,000 a year or less.  This number is going to be lower once we get the 2009 Census data in September but after rising health care costs, more expensive education, and rising food costs many Americans are seeing their fixed costs go up while their wages move in the opposite direction.  But keep in mind there is a group that is actually benefitting from this entire cost cutting.  After all, the stock market isn’t up by 70+ percent by accident.”

Since the recession started, we have added close to 500,000 per month needing food assistance:

How does this translate to a recovery?  The trend hasn’t even reversed yet those on Wall Street and the mainstream press being so out of touch with most Americans thinks all is now well because their dividends are still coming in.  That is clearly not the case and we stand at a crossroads to protect the middle class.  If we allow Wall Street to operate unchecked and like a casino, we are only setting ourselves up for another financial crisis that will be coming up in a short time.  Why wouldn’t it?  We’ve been in this boom and bust casino for the last few decades and each time this happens, someone gets rich.  The Goldman Sachs case is about a hedge funder who placed a major bet that American housing would collapse and made billions off of that bet.  What did this add to our economy?  Clearly the working poor and middle class don’t find amusement that you can bet on their failure and laugh all the way to the bank.

Look, It’s an ECB Member Dissembling!

Posted by Karl Denninger

AUDIT THE FED: YOUR HELP NEEDED NOW

Posted by Karl Denninger

I have often written on this.

The Fed is trying to kill the audit provisions in the Financial Reform bill in the Senate, as I and others have written about extensively.

Please take the few minutes to read this article at Huffington Post, read my articles on this subject if you haven’t already, and then get on the phone and call your Senators today.

There is no reason that the actions of the government agencies that deal with our money should not be required to do so in a fully public and transparent form and fashion.

We now know for a fact that The Fed intentionally misled investors and the public during the housing bubble, and that they intentionally released misleading “minutes” of their meetings that did not reflect the content of the conversations actually held.

Strong, public and continuing audits would stop this abuse.

Such a law may have prevented the worst of the housing bubble and its effects.

The choice is yours folks: You can either submit to more lies and more abuse by Ben Bernanke and the rest of The Federal Reserve, or you can stand now and demand that it be stopped.

So THAT’S Who The Violent Protestors Are!

Posted by Karl Denninger

We keep hearing from the “useful idiots” in the media that the “Tea Partiers” are interested in violence.

Never mind that I’ve yet to meet a violent Tea Partier, or a bigoted one for that matter.  Having spoken now twice at Tea Parties in Niceville as well as in Tallahasse and Ft. Lauderdale, there has not only been no indication of violent tendencies (e.g. no threatening signs, nothing that could be called racist beliefs, etc) but in point of fact the speaker that drew the loudest applause in both Niceville and Ft. Lauderdale was a black American (and veteran, if it matters.)

But if you look at a different group of people who are protesting – hard-core lefties who are upset at the rule of law as passed in Arizona, you find this:

GIVE US FREE (insert the list) OR WE WILL SHOOT MORE POLICE?

If Janet Napolitano is looking for violent home-grown terrorism, the Tea Partiers aren’t the people she needs to be looking at.  It would seem to me that someone carrying a sign declaring clear intent to kill law enforcement officers would be on the top of the list, no?

Have you seen this reported in the mainstream media?

No, you have not.

Gee, I wonder why?

Update: There are reports that this photograph may have been tampered with.  I have as a consequence taken the time to examine the copy that I have under significant pixel magnification.  Here are my findings:

1. The lower part of the sign DOES show what looks to be a staple attachment to the pole, which some have said isn’t evident.  The resolution is insufficient to be CERTAIN it’s a staple, but it’s in the right place.

2. The anti-aliasing in the upper and lower signs looks to be a good match.  Also, the stylizing of the “W”s and “E”s match.  The anti-aliasing and edge noise, by the way, strongly implies that it was NOT digitally doctored.

3. The anti-aliasing and noise profile in the sign reasonably matches that in the other elements of the image.  This also implies that the image is in fact a photograph and was not tampered with.

4. The SIZE of the picture has been altered from the original.

Verdict: Inconclusive, but the sort of things that would immediately mark this as a doctored fake (e.g. someone inserting the lower panel onto someone else’s sign) are MISSING.

Attached are two snippets from some of the enhanced sections that I looked at; note the anti-aliasing is an exact match, implying strongly that either (1) the same device was responsible for ALL source images or (2) there is only one source image.  It’s not proof, but typically when someone tampers with an image using something like Photoshop the differences in anti-aliasing are instantly noticeable as the original pixel counts do not match and as such the anti-aliasing doesn’t either!

The Greeks Have Had It (Warning: Not For Kids)

Posted by Karl Denninger

Bail out the bankers and screw the population, eh?

The Greeks say no.  And they’re saying no with violence: there are now reports that banks are on fire, and three person have been killed – in a burning bank.

I haven’t and won’t advocate violent – except self-inflicted harm, of course, which is perfectly legal.  I believe the banksters who were responsible for this should choose between this:

And this:

Of course I don’t expect them to choose either, as Seppuku by any form requires honor, and that’s something that none of these pukes have.

Let me be clear: Greece’s problems didn’t just appear, and neither did those of the rest of the European States, with Spain, Portugal and even perhaps Britain not far behind Greece.  It takes both a drug pusher and drug consumer to have a flow of drugs, and as such the overconsumption of credit, the binging on “gimme that now, even though I can’t afford it”, requires both financial terrorists in the form of banksters and consumers of those “financial innovations” who are either too greedy or too ignorant to know what they’re doing.

Nonetheless, the greedy and ignorant have been punished, losing jobs and homes, along with plenty of collateral damage inflicted on those who did nothing wrong.

The banksters, on the other hand, have been bailed out and in doing so they have effectively stuck a gun up the nose of the American People, extorting the money that they required to avoid recognition of their own insolvency (for the moment anyway) by causing even more damage.

Men and women with consciences – that is, those who are not psychopaths – could not and would not do such things.

Now the people, at least to a small degree, are sending a warning in Greece: you’ve gone too far.  If the governments back off and force the banksters to eat their own cooking, then so much the better – yes, there will be pain, including pain for the population, but the banksters will get nailed too.

If, however, the banksters and their government enablers continue to push, there is risk of not just a few banks burning in Greece but all-out civil war.

It is often said that Americans will do the right thing – after we’ve exhausted all other options. 

Perhaps the same will occur in Europe.