Federal Reserve

Enabled By ZIRP and QE, Bankers Continue Looting Instead of Building Capital

By Lee Adler, The Wall Street Examiner: One of the purposes of the Fed’s Zero Interest Rate Policy (ZIRP) was ostensibly to allow banks to rebuild their capital through suppressed funding costs and increased profits. Theoretically that would add to their capital. But in this chart, we see that the growth rate of bank capital has fallen to zero.

Supercars In The US, Japan, and China: How QE And Corruption Boosted Sales

Supercar-makers Lamborghini, Ferrari, and Rolls-Royce are reacting to the forces whacking global markets for luxury products: a corruption crackdown in China, Abenomics in Japan, and the Fed’s money-printing in the US. The idea that sales in China, which is printing billionaires by the dozens, are crashing is a hard-to-swallow concept for the industry.

Bubble Trouble: Record Junk Bond Issuance, A Barrage Of IPOs, “Out Of Whack” Valuations, And Grim Earnings Growth

When Blackstone’s global head of private equity, Joseph Baratta, said Thursday night that “we” were “in the middle of an epic credit bubble,” the likes of which he hadn’t seen in his career, he knew whereof he spoke. Junk bond issuance hit an all-time record in September. IPOs are flying off the shelf. But earnings growth is grim – and plunging. What gives?

David Stockman: Monetary Central Planners And Financial Manias

“One of the hallmarks of financial manias is that propositions which are perfectly absurd nevertheless get widely embraced by those caught up in the excitement,” writes David Stockman – in this case, Blackstone’s LBO of Extended Stay Hotels, and its subsequent sale at a ridiculous three times replacement cost, funded by Citibank … a pre-packaged scam.

First Cracks (And Losses) In The Insane LBO Craze

It could be an aberration. Or it could be the first visible crack in the insane leveraged buyout craze that has spread across the country: JPMorgan, Bank of America, and Goldman Sachs could get hit with a loss of up to $156 million on the $780 million in junk debt they pledged to sell to fund the buyout of teen-fashion retailer rue21. With consequences for investors.

Was The Fed Scared Of This Graph?

When the Fed shied away from tapering its $85 billion a month in asset purchases, while simultaneously downgrading the economy for the third time this year, it gave the impression of being mired in fear. It has many reasons to be afraid. But one in particular.

Just Replace The Whole Kit And Caboodle With Asset Bubbles

Fed digs in its heels, refuses to taper, though it could still start later this year, soon-to-be-ex Chairman Bernanke said. It would continue doing exactly what hasn’t worked for five years, in the hope that even more of the same might finally do the trick, rather than admitting, tail between its legs, that all QE has done is create asset bubbles.

US Stocks Blind To Crashing Earnings Estimates (For Now)

Corporate revenues have been crummy all year, and earnings estimates for Q3 have come crashing down. A year ago, they were still expected to grow 15.9%, a sign of blind optimism. By Friday, they’d plunged to 4.7%. During that time, the S&P 500 soared 16.8% and the NASDAQ 19.6%. The Fed’s greatest accomplishment. But there is a corollary.