Neil Barofsky Tells Us How The TARP Money Was Used…

August 26, 2020

* A nothing day in currencies and metals yesterday

* Traders wait for Powell’s talk on generating inflation tomorrow… 

Good Day… And a Wonderful Wednesday to you! I had a good day yesterday, and didn’t require a long nap during the day! There are days when I wake up and know that it’s going to “one of those days”, and then there are days that I wake up and say, “I’m ready!”.  Tomorrow morning I’ll have to be on the ball early, to report to the hospital for my quarterly scans… I don’t believe the scans will reveal anything I’m not aware of… So that’s how I’ll get through today and tomorrow until they post my results…  I used to have to wait a few days for results, but not any longer, they post them and send me note that they are on my account to be viewed, the same day….  I’m 2/3rd’s through the book The Sirens of Titan, which means I’m reading it too quickly! I’m not a reader that can’t put down a book, for when it’s time to quit reading, I quit… And I like to make a book last… Stevie Wonder greets me this morning with his song: Superstition…. Stevie Ray Vaughn also did a good rendition of this classic rock song…

Well… yesterday was a real nothing day in the currencies and metals… The currencies didn’t move much, and the Dollar Index went from 93.07 to 93.04, so some slippage in the dollar but nothing to write home about.  Gold lost 20-cents on the day, and Silver lost a nickel….  You know I look at the Rhodium price every day, and it always amazes me the spread in the Bid/Ask price…. For example last night the bid price was $9,700 and the Ask price was $11,700….  That’s crazy! But we are talking about a rare asset, eh?

OK… Well I’m sure that the traders are pretty well entrenched with their positions until after Fed Head Chairman Powell, will speak. Now, if you read the FWIW article on Monday this week, you’ll already know what he’s scheduled to talk about, and if you skipped over it (don’t tell me!) I can tell you that he’s expected to talk about how the Fed is going to generate inflation….  I believe he’s walking on a thin line here folks…  For if he just talks about generating inflation, and says that the Fed will allow it run hotter than the 2%, that WAS their previous target… I think it’s game on for the metals once again, and the dollar selling….  

But…. If he says something to the tune of: “We’re going to attempt to get inflation rising, but we’ll average its rise”  which would mean they’ll keep a lid on it, then l don’t think we’ll see the doors wide open for a run in Gold and Silver and the euro….  It’ll depend on how confident he makes Traders feel that the Fed can control inflation….

I think what traders should be looking at questioning him just how the Fed is going to generate this inflation? For if I were the one asking him this question, I would add a smart alec comment about “does the Fed have a private tapper in the Eccles building that allows them to turn on inflation when they want it?”  Look they’ve printed more currency than you can shake a stick at, in recent months, but…. And that’s a BIG BUT, the currency has gone to the zombie Corporations, and the Casino Banks, and that’s no way to get inflation going!

I was reading Bill Bonner’s Diary yesterday, and he was talking about something that really gets me fired up, and that is how personal people take being called a name…. When I was a kid, every kid had a name that wasn’t their Christian name!  Shoot, I had a friend in grade school that was a little overweight, and we called him Moby!  Did he bring a gun to school to shoot us?  No…. because everyone had a name! Mine was “butman”….  Did I cry and run home to mommy because someone called me a name?  Hell no, I laughed just like every young boy does when he hears the word, “butt” or “fart”….  Anyway, I don’t know how we got to where we are, but we’re here…. And while you still might be called a name, they aren’t given with heart, they’re given with hate….  I’m just saying…

OK… So the overnight markets didn’t give any indication that they are ready to trade ahead of the Fed….  So, for the most part, we’re trading in the same clothes as yesterday, so nothing ventured, nothing gained…. There was some slippage in the euro which saw Germany print a decline in their economy that’s not been seen before. And the A$ climbed back above 72-cents overnight, and this morning… The Dollar Index is the same level as yesterday… 93.07

I wrote yesterday about how the Chinese renminbi had been on the rally tracks for about a month now, which was opposite of what I thought would be going on given the so-called cold war going on between the U.S. and China….  And then later in the morning in the Greg Gonigam’s 5 Minute Forecast, he highlighted economist Nomi Prins, and her view on the recovering Chinese economy…  So, it was good timing on my part to point out the currency gains….  I’m just saying….  You know my dad told me once to make sure you blow your own horn, because you can’t depend on other people to do so…. 

I sure hope you all are paying attention at this point, because you’re sure going to be glad you were as I explain what I’m talking about here: I really don’t know where to start with this quote….  So, I’ll just blurt it out, but first I want to thank good friend Dennis Miller, for sending me this from the Burning   OK, for years now I’ve said that QE, TARP, whatever, only helped the Casino Banks…. And instead of them breaking up the Casino Banks, they’ve become even more Too Large To Fail….  OK, now that I’ve said that, let’s get to the quote…. This quote is by Neil Barofsky, who is according to Wikipedia: a partner in the Litigation Department of national law firm Jenner & Block LLP, focuses his practice on white collar investigations, complex commercial litigation, monitorships and examinerships. And at one time was the head regulator for the TARP money….  So, take in what he’s saying here folks…. And then re-read it for this is very telling about what’s going on these days…

“”The suspicions that the system is rigged in favor of the largest banks and their elites, so they play by their own set of rules to the disfavor of the taxpayers who funded their bailout, are true. It really happened. These suspicions are valid.”

Neil Barofsky, TARP Inspector General

Well, they sure aren’t suspicions any longer now are they!  This is where if I were still under the thumb of the legal and marketing people, when I was at EverBank. I would have to explain how I had been right in saying this, but couldn’t have told you  about the suspicion in the first place because I was not allowed to talk suspicions, or conspiracies…

But those days are over…. And while I hated leaving all the folks I worked with for so many years, I welcomed the opportunity to write, free and easy, once again, like I did before they decided to put the shackles on my writing!

Well, I’m minus one shiny quarter! The Current print of Consumer Confidence did not rise! It dropped from 91.7 to 84.8….  As Paul Mccartney sang with Wings, “Baby I’m amazed, Baby I’m amazed”  Wonders never cease, eh? But that didn’t stop the stock market from rising on the day….  Hmm…. The Case/ Shiller Home Price Index was flat with regards to a year on year basis…. 

Today’s Data Cupboard will begin to build to its crescendo with July prints of Durable Goods and Capital Goods Orders (CAPEX) And once again I’ll repeat what I always point out here, is that without CAPEX (capital expenditures) the economy won’t go anywhere…. Period!  I know it’s an old-timer’s look at things but these days, that’s what I am, “an old timer”….

Yesterday, I talked about the mounting delinquencies in mortgages, and the voila! prints an article with numbers! So, in July, financial firm, Black Knight reported the following: 

The number of homes with mortgage payments past due by 90 days or more rose by 376,000 in July to a total of 2.25 million. Serious mortgage delinquencies have jumped by 1.8 million since July 2019, a decade high, not seen since the last financial crisis.

I’m telling you know so maybe you’ll listen to me later, that this housing mess is going to get really ugly…  These delinquent mortgage payments are going to cause ripples that turn into huge waves…. 

To Recap… it’s as if the markets I follow, currencies and metals came to abrupt stop yesterday, when they realized that Fed Head Chairman Powell will speak tomorrow at the Jackson Hole Boondoggle, and they want to know what he has to say about inflation before they make their next moves….   So, the currencies and metals are trading in the same clothes today as yesterday, and probably tomorrow too, given Powell won’t speak until late afternoon, for us, as he’ll be on Mountain Time.  And Chuck has a time bomb that he set off with a quote from Neil Barofsky….

For What It’s Worth…  Yesterday, I went on about the Zombie Corporations, and the fact that so far in 2020 Corporate bankruptcies were mounting in numbers, and then longtime reader, Bob, sent me a link to this article on that talks about the bankruptcies, and it can be found here:

Or, here’s your snippet: “The disconnect between the all time highs in the stock market and the broader economy has never been greater (with even Janet Yellen, one of the main architects of this disconnect, agreeing), and one of the places where this chasm is most glaring, is in the staggering number of major corporations filing for bankruptcy in 2020. Indeed, this year large US corporate bankruptcy filings are running at a record pace and are set to surpass levels reached during the financial crisis in 2009 (when the S&P was far from an all time high).

According to FT calculations, as of August 17, a record 45 companies each with more than $1 billion in assets has filed for Chapter 11 this year; this compares with 38 for the same period of 2009 during the depths of the financial crisis and is more than double last year’s figure of 18 over the comparable period.

In total, 157 companies with liabilities over $50 million have filed for Chapter 11 bankruptcy this year and as we warned several months ago, many more are coming.

“We are in the first innings of this bankruptcy cycle. It will spread far across industries as we get deeper into the crisis. It’s going to be a bumpy ride,” said Ben Schlafman, chief operating officer at New Generation Research.

The spike in bankruptcies comes despite trillions of dollars in government aid to mitigate the fallout of the coronavirus pandemic on businesses, highlighting the catastrophic and lasting impact Covid-19 is having on the US economy. Or perhaps those trillions in government aid are going to the wrong recipients, and as a result companies that stand to benefit from mass defaults are now sporting record market caps. In fact, the irony is that in its pursuit to crush monopolies such as Amazon and Google, the government has made them bigger and stronger than they have ever been.”

Chuck again…  this all says the same things I’ve been saying about the status of Corporations and the Gov’t payments that went to the wrong places…. 

That’s it for today….  Well, a very boring, long game last night for my beloved Cardinals, who scored 4 runs in the 3rd inning and then never scored again and then blew the lead to lose….  I was trading emails with former Big Boss Frank Trotter this week, he is a new grandpa…. And loving it from what I could gather in the emails…  I also was trading emails with former colleague going back to Mark Twain Bank, Kathy Glowski/ Butcher….  Back in the day, when I was getting radiation on my jaw, and it was tearing up the inside of my mouth, the only thing I could put in my mouth were shakes/ malts…. And Kathy would go our of her way to bring me a Chocolate shake each day….  What a sweetheart!  Man those were some dark days, but the radiation was taking place while the Cardinals were playing in the 2011 World Series, and all that pain in my mouth didn’t stop me from going to Game 7 with my sons, and watching our beloved Cardinals win the World Series!  I forgot all about the pain in my mouth while we were hugging and jumping up and down after the win! Led Zeppelin takes us to the finish line today with their song, and Mike Meyer’s fave LZ song: Kashmir….   I hope you have a Wonderful Wednesday, and I’ll talke to you again next Monday… Please continue to Be Good To Yourself!

Chuck Butler