Tag Archives: Ponzi scheme

The Public Is Being Set Up For The Scalping Of A Lifetime

Over the last three days, we have reported that some of the most important investment voices in the world are more than a little scared about the ravenous appetite for risk playing out in the market, and the fact that they have been ignored is beyond unnerving. Central banks are driving all investment decisions, and what this implies is that they are in this trade so deeply that there is no obvious or practical exit.  Richard Brewlow via Zerohedge (link)

Zerohedge posted an essay by Bloomberg’s Richard Breslow that needs some additional commentary.  We already know that western Central Banks have been buying nearly ALL new Government bond issuance for the last 5 years.  We know that Japan’s CB admits to buying equities.  We know that the Fed sticks huge bids in the market for the S&P 500 eminis in order to trigger massive hedge fund HFT algo buy programs of the big S&P 500 contract.   I suspect that the Fed is also buying stocks, which is one of the reasons it is spending million on lobbying to prevent Congress from passing a law forcing an audit of the Fed.

It’s no secret the Fed is thus pushing up the S&P 500 to new record highs almost on a weekly basis. It has prevented the stock market from undergoing a meaningful price correction now for nearly 4 years. Concomitantly, the Fed/Government is now continuously preventing the price of gold from moving higher, although it seems to have lost all ability to push it much lower than $1150.

Meanwhile, the underlying fundamentals of the economy are deteriorating at rate that now rivals the rate at which it was deteriorating in 2008.  I just got an email from someone today who told me that financial analyst Dave Skarica has stated that all midwestern regional banks who gave out loans to U.S. shale producers do not have any loan loss reserves for when these loans go bad.  He also said that NONE of these banks have taken write downs yet on the loans that are now trading between 50 and 70 cents on the dollar in the market.  This means that $100 million loan on a bank balance sheet is worth only $50-70 million based on real market market data, yet the bank is carrying this loan at $100 million.

This situation is magnified at the at the Too Big To Fail Bank level.  Every single TBTF bank has released most of its loan loss reserves back into its income statement over the last 4 years in order to generate GAAP accounting “net income” beats of estimates.  But this is non-cash, phony money.  How about if we get to see JP Morgan’s inside books and see where it has marked unsold, unsyndicated bank loan paper to near-insolvent shale companies. I’d bet my dog’s life they have that debt marked at 100 cents on the dollar even though it’s likely worth, at most 50 cents.

The Fed has no choice but to chase the stock market higher and keep interest rates at zero. Hell, if the Fed were to let rates normalize, it would suffer huge losses on all the Treasury and mortgage debt it purchased over the last 5 years – $3.6 trillion of debt that would lose at least 5-10% of its value.  The Fed would be technically insolvent.

Central Banks and their sovereign wealth funds have become the major players dominating market activity. One central banker after another has admitted they are fixated on market reaction to their comments and actions…A wise central banker told me I should learn to live with central banks being the dominant force in the market, whether I like it or not.  – Breslow from link at the top

Note:  I disagree with Breslow’s description of the referenced central banker as being “wise.”  Ruthlessly unethical and insidiously corrupt, yes.  “Wise?”  Probably not.  

Futhermore, the only dynamic keeping most pension funds from imploding is an overexposure to the stock market that keeps going higher on manufactured monetary helium.  If the Fed were to let the stock market find it’s natural trading level, it would lose at least 50% of its value – quickly.  It would blow up countless pension funds.  The problem would be magnified by a factor 2-3x if the Fed were to let interest rates embark on true price discovery.  Pension fund fixed income holdings would plunge in value.  Pension funds would become hopelessly underfunded from their current status of being just significantly underfunded.

In other words, if the Fed were to step away from its non-stop market intervention and manipulation, the entire financial system would collapse.  At some point this entire Ponzi scheme is going implode, despite the increasingly blatant and obvious attempts by the Central Banks to keep it the steroid-addled gerbil on the wheel.

Remember Enron?  It was one big fraud, for the most part.  Almost no one saw the speed and force with which Enron was incinerated.  I was short Enron stock in the $40’s.  It dropped to the teens and I covered, thinking the worst was over.  Not too long after that Enron filed bankruptcy and was revealed to be largely an empty shell.  It had erected entire floors of energy trading desks that were only used when the Company was trying to sell stock or bonds to investors doing due diligence. It was complete lie.

Enron is a microcosmic metaphor for the entire U.S. financial and economic system. It has little substance and an unimaginable amount of fraudulence masquerading in the form of an economy.   If you were to subtract all of the fraudulent accounting, the fraudulently compiled Government economic data, all of the debt and all of the derivatives on a true mark to market basis, the United States would be nothing more than one giant version of Enron.

Most people have no clue whatsoever of the economic devastation that is coming at us down the system pipeline.  But Central Banks will eventually lose control of this insanity they have created – history has already spoken repetitively on that matter.  And certainly no one can predict the timing of when Central Bank control is lost. But when this does occur, the entire U.S. financial system will be incinerated like Enron. Only this time around everyone will be ruined, rather than just a few stupid Enron stock and bondholders.

Amazon Reports Q1 – Stock All Over The Map

Amazon stock has been hammered as much as 3.5% in after hours as it reports a first quarter net loss of 12 cents vs 2014 first quarter net income of 23 cents…But the GAAP net income number is full of misleading accounting applications.

Amazon burned through $4.3 billion of cash in Q1 2015 vs. burning through $3.5 billion in Q1 2014.  $4.3 billion represents more two-thirds of the proceeds of the money AMZN raised last in 2014 via a bond issue.  Both sales and expenses increased 15%.  But AMZN’s interest expense more than doubled to $115 million from $42 million, year over year.

Just to give you an example of how manipulated this stock is, the price jumped up to $417 from the $389 NYSE as the headlines were coming across the tape; it dropped down to $372 while I was writing this and now it’s bounced back over $400.

If this stock opens over $400 tomorrow, I recommend shorting it with both hands.   You can read my in-dept analysis of  AMZN and it’s highly misleading accounting here:  AMAZONdotCON.

I won’t have full update until the Company files is 10-Q, but if you buy my report now, you will receive the update when I add it to the existing report.

The Government Has Already Busted Through The New Debt Limit

The other day I was wondering what happened with the March 16 deadline facing the Government on its “suspended” debt ceiling limit.  March 16 had come and gone without any media fanfare.  It’s almost as if the White House demanded silence from the media on this.

So I googled the topic and found out that the debt ceiling limit was reset to $18.113 trillion. That is  $1 trillion above where the outstanding debt was one year ago.  But didn’t Obama tell us that the spending deficit in 2014 was only $483 billion?  Pourquoi?  If the amount of debt outstanding increased by a trillion, how can he claim the spending deficit was only $483 billion?  Because he is a liar.

So Congress quietly approved raising the debt ceiling limit to $18.1 trillion and now the Treasury debt outstanding has busted through that ceiling:   $18.152 trillion and counting.

For now the criminal Treasury Secretary, Jacob “Jack” Lew, is implementing a bunch of “legal” accounting moves that let him continue signing checks to pay the Government’s zealous overspending.  “Accounting moves?”  Sound more like a Ponzi scheme.  What this means is that Lew is tapping into various dedicated trusts which has meager surplus levels of cash – like the Federal pension fund and the Social Security trust – in order to pay bills.  But this avenue will hit a wall this year and then Congress will have to deal with the debt ceiling limit again.

It’s a truly sad, Orwellian state of affairs when the Government’s ability to continue issuing Congressional paychecks and welfare EBT debit cards boils down to accounting gimmicks…this country is pathetic (source: King World News):

ThisCountryIsBroke

 

 

The First Rand Gold Bond Deal Is Old Mother Hubbard’s Cupboard

The entire Anglo-European banking world continues to pile on an infinite amount of fraudulent fiat paper gold on top of an ever-shrinking pile of physical gold that is available to be delivered to the entitled buyers.  – Investment Research Dynamics

It’s a gold hypothecation Ponzi Scheme of the highest order.  The world’s first gold corporate bond deal – issued by South Africa’s FirstRand Bank (Rand Merchant Bank) is a scam.   Investor beware.

In my curiosity to confirm my suspicion that this deal was nothing but a paper Ponzi Scheme designed to redirect investor money that otherwise might have been used to buy and take delivery of actual Krugerrand gold coins into a fiat paper fraud deal, I contacted representatives of First Rand to get a term sheet so I could see how the deal was structured.   Here’s an outline of what I found and it confirms my suspicions (I’ve linked the term sheet and product pimp sheet below):

1) The investor “buys” Krugerrands from First Rand (Rand Merchant Bank) –
technically, First Rand does not send you any coins or transfer ownership
title of the coins to you. Instead…

2) The investor is issued a note which pays interest in more Krugerrands but that interest is not received by the investor until the note matures;

3) PLEASE NOTE: this bond is UNSECURED, meaning if First Rand defaults, you are
standing in line to get paid out behind secured creditors. IT ALSO MEANS THAT THE
GOLD COINS YOU PURCHASE ARE NOT PLACED IN AN ALLOCATED ACCOUNT
AND YOU WILL LIKELY NEVER SEE THOSE COINS IN THE EVENT OF DEFAULT;

4) I have serious doubts as to whether or not the Krugerrands you buy were ever in the
the possession of First Rand (Rand Merchant Bank) to begin with. This is a pure
“fractional fiat system” gold sale transaction;

5)  If and when you redeem the bonds, First Rand makes it quite cumbersome for the     investor to receive the coins. You have to notify First Rand 60 days in advance AND you have to personally travel to the Rand Refinery to PICK UP your coins.

So let’s review: You give First Rand money upfront to purchase gold coins that may or may not exist. You receive an unsecured note that bears interest.  IF you decide to redeem your note a maturity in physical coins, you have to personally travel to the Rand Refinery to get the coins.

Perhaps the worst aspect of this deal is that Rand Merchant Bank is getting  free money to use as it wishes by merely issuing an unsecured loan.  “Free” because the interest is not paid out until maturity.   At the very least this bond should bear an interest rate that reflects the subordinated, unsecured nature of the deal.  But it’s been issued under the pretense of the investor being entitled to gold coins.  Clearly this deal is neither secure nor backed by real gold.

This is a Ponzi Scheme that is designed to give Rand Merchant Bank FREE money to use as it wishes (see the term sheet), is unsecured and it was issued with the intent of NEVER having to redeem ANY of the bonds in physical gold.

TermSheet           SalesPropaganda            

Investor beware – caveat emptor – because Atlas Shrugs.

Here’s Why Amazon.com Stock Is Getting Ripped Today

AMZN is down 10% today on already  3 times higher volume than the 90-day daily average.  Amazon.com’s business model is nothing but a massive, cleverly disguised Ponzi scheme.  This is why, despite impressive sales growth every quarter, AMZN can’t make any money.  In fact, in most quarters it actually bleeds money when analyzed from a cash-in/cash-out basis.

In its earnings report yesterday, for instance, if you skip everything and zero-in on the Statement of Cash Flows, you’ll see that “Net cash provided by operations” was -$2.5 billion.  When you net out capex, Amazon burned at total of $3.5 billion in cash.  In fact, it’s projecting an operating loss for next quarter of anywhere between $55-455 million.  That will burn even more cash.  At some point it will likely have to raise more money this year.

I wrote an article detailing why I thought eventually AMZN would implode:  Is Amazon A Giant Ponzi Scheme Dressed In Drag?

The reason Amazon can’t make real money and has been suffering declining operating margins for several quarters in a row now is that, ultimately, AMZN achieves sales growth by getting a product from the factory floor to the consumer’s floor more cheaply than just about any other retailer.  I love AMZN for this reason.

But the cost of doing that is called “fulfillment.”   Jeff Bezos went to agreat effort and expense back in AMZN’s early days to make sure the accounting rules would enable him to hide this cost in the financial statements.  But as you see from the operating margin contraction over time,  which will be negative next quarter,   the Company is hitting the old “law of diminishing marginal returns” wall.

Perhaps this is why insiders have  been selling the shares vs. buying at a 3.2 million shares to zero ratio over the last 12 months.

Amazon is one of the few internet stock bubble companies that actually survived the tech stock crash of 2000.  My hat’s off to Bezos for managing that feat.  But, as the actual results of his operations show, it’s a testament more to the fact that he’s perhaps the greatest snake-oil salesman of our era rather than an accomplished business operator.   This is why the actual cash generated from the AMZN business model has been next to nothing over the past 14 years.

You can ignore reality, but you can’t ignore the consequences of reality.  Ultimately, AMZN die-hard shareholders who stick it out rather than sell now will eventually face some very unpleasant consequences – possibly as soon as this year.