May 2015 – Page 7 – The Burning Platform

Bernanke Says “No Large Mispricings In US Securities”; These 5 Charts Say Otherwise

We all know Bennie is a financial guru. His foresight is unquestioned. He saved the world, don’t you know? His wisdom and ability to portend the future is unrivaled. Who could forget his previous market calls?

(October 20, 2005) “House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”

(January 10, 2008) “The Federal Reserve is not currently forecasting a recession.”

(March 28, 2007) “At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.”

(July, 2005) “We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.”

(February 15, 2007) “Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.”

(November 15, 2005) “With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.”

(January 18, 2008) “[The U.S. economy] has a strong labor force, excellent productivity and technology, and a deep and liquid financial market that is in the process of repairing itself.”

(May 17, 2007) “All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.”

“The GSEs are adequately capitalized. They are in no danger of failing.”

(Two months before Fannie Mae and Freddie Mac collapsed and were nationalized) “They will make it through the storm.”

(June 10, 2008) “The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

Submitted by Tyler Durden on 05/24/2015 22:28 -0400

Retired central banker, blogger, bond guru and hedge fund consultant Ben Bernanke just uttered the following total rubbish…

*BERNANKE: NO LARGE MISPRICINGS IN U.S. SECURITIES, ASSET PRICES

In an effort to save whoever it is that will pay him $250,000 next for these wise words, we offer five charts.

One of these things is not like the others…

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Stop Wasting Time!! (Cuz You’ll Be DEAD Before You Know It)

“How we spend our days is, of course, how we spend our lives.” — Annie Dillard

**How much water is left in YOUR fishbowl?**

Imagine that the moment you are born that your number of allotted years is represented as a fishbowl of water. For some, the bowl of water represents 90 or more years. Sadly, others only get a day. Most of us are allotted days somewhere in between. But, the fact of the matter is that the quantity is quite finite. In more morbid terms, we all march inexorably to our deaths from the moment we enter this world.

Now, this is a most unsettling thought! So unsettling, in fact, that most of us can’t handle it. Sure, we all know we’re going to die – in a 21st century intellectually rationalist sort of way. But, we really don’t BELIEVE it – nosiree, not with the same conviction that we believe, for example, that the sun will rise tomorrow. Seneca tells us as much when he writes;

“You live as if you would live forever; the thought of human frailty never enters your head, you never notice how much of your time is already spent.” ———— Seneca (quotes in green)

I don’t know about you … but, that pretty much sounds like me. I rarely give my fishbowl much thought.

SENECA – THE VERY RICH STOIC

Seneca states that not only do we refuse to come to terms with our very brief time on earth but, even worse, we waste away the precious little time we do possess. He goes into considerable detail showing how we shackle ourselves to our labors and our professions. He laments that we give so much of ourselves – in terms of time – to those who do nothing but waste our time. He considered it a tragedy that too many die as if they were children, never having learned to live a full life. In modern terms he would say we’re all too happy that etched on our tombstones is our greatest accomplishment; “He filled out all his expense reports on time.”

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Fed and CPI missing housing inflation yet again: The CPI is completely missing the increase in housing prices.

Guest Post by Dr. Housing Bubble

The most widely used measure for inflation is the Consumer Price Index (CPI) put out by the Bureau of Labor and Statistics (BLS). Nearly a decade ago I discussed how poorly a job the CPI did in measuring home price increases while they were happening. In fact, during the raging housing bubble the CPI only measured moderate increases in home prices. Why? The measurement looks at something called the owners’ equivalent of rent (OER) that essentially considers what your home would rent for versus your actual housing payment.

So you could be paying $3,000 in a mortgage, taxes, and insurance but the actual rent would be something like $2,000. That is a massive differential. In the LA/OC market, this measurement did a horrible job. The argument of course is that rents eventually catch up and we are seeing some of that now. Yet Fed policy and other government decisions are made on the basis of the CPI and miss big changes by years. The latest CPI report is now showing this inflation creeping in but of course, it is late once again. And this is important to address because the largest component of the CPI is housing costs.

The problem with the CPI and housing

Housing makes up over 40 percent of the CPI tool which is a by far, the biggest component. So wouldn’t you want this instrument to accurately measure home value changes? We now have plenty of tools that can give a better indicator of home price changes like the Case-Shiller Index. There has been large pressure on home prices recently thanks to many years of slow home building and a lack of inventory. We also had the interesting phenomenon of investors diving into the market since the crash and being a dominant force.

First, it might be useful to look at how the CPI is composed:

Even looking at three categories in housing, education, and healthcare we know that costs are soaring. Yet the overall CPI has showed only tiny increases in prices. This is completely off base nationally and doubly so in bubblicious markets like California where people need to move into apartments with roommates as if they were crowding into clown cars to make the rent.

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Michael Scheuer: Why Bin Laden Was Reading My Book ‘Imperial Hubris’

Guest Post by Adam Dick

From Sky News to CNN, media are asking Michael Scheuer why Osama bin Laden would have a copy of Scheuer’s book Imperial Hubris. The question arose because Scheuer’s book is included in a list of books seized in a 2011 US military raid on bin Laden’s dwelling in Abottabad, Pakistan. The list was released Wednesday by the United States Office of the Director of National Intelligence. In an interview with host J.D. Hayworth on Newsmax TV, Scheuer, who published Imperial Hubris anonymously while working at the Central Intelligence Agency (CIA), provides a particularly enlightening answer to the media’s persistent question.After deflecting Hayworth’s suggestion that bin Laden might have had a copy of Imperial Hubris because the book contains some positive comments regarding the al Qaeda leader’s bearing and capabilities, Scheuer offers instead the following reasons:

What attracted him to my book was that I had listened to what he had said for a better part of six years, and I correlated what his organization did in response to what he said they were going to do, and that was a very high correlation.

The second thing I believe that attracted him is that I wrote very clearly — and I would write it again today — that the war we’re fighting has nothing to do with women’s rights; it has nothing to do with democracy or elections or liberty or freedom, at least from the perspective of the people that declared war on us. They wouldn’t have that stuff in their own country. But what they hate of the United States is not even the American people; they hate the American government because of its interventionist policies in the Middle East, and that’s been borne out completely by all of the documents that have been released by the government since that raid. There’s not a word about the Americans are debauched, they’re sick on pornography, the women wear short skirts — none of the stuff that Mr. Bush and Mr. Obama and Mr. Clinton and Mrs. Clinton have told the American people.

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Secret Pentagon Report Reveals US “Created” ISIS As A “Tool” To Overthrow Syria’s President Assad

Submitted by Tyler Durden on 05/23/2015 20:06 -0400

From the first sudden, and quite dramatic, appearance of the fanatical Islamic group known as ISIS which was largely unheard of until a year ago, on the world’s stage and which promptly replaced the worn out and tired al Qaeda as the world’s terrorist bogeyman, we suggested that the “straight to beheading YouTube clip” purpose behind the Saudi Arabia-funded Islamic State was a simple one: use the Jihadists as the vehicle of choice to achieve a political goal: depose of Syria’s president Assad, who for years has stood in the way of a critical Qatari natural gas pipeline, one which could dethrone Russia as Europe’s dominant – and belligerent – source of energy, reaching an interim climax with the unsuccessful Mediterranean Sea military build up of 2013, which nearly resulted in quasi-world war.

The narrative and the plotline were so transparent, even Russia saw right through them. Recall from September of last year:

If the West bombs Islamic State militants in Syria without consulting Damascus, LiveLeak reports that the anti-ISIS alliance may use the occasion to launch airstrikes against President Bashar Assad’s forces, according to Russian Foreign Minister Sergey Lavrov. Clearly comprehending that Obama’s new strategy against ISIS in Syria is all about pushing the Qatar pipeline through (as was the impetus behind the 2013 intervention push), Russia is pushing back noting that the it is using ISIS as a pretext for bombing Syrian government forces and warning that “such a development would lead to a huge escalation of conflict in the Middle East and North Africa.”

But it’s one thing to speculate; it’s something entirely different to have hard proof.

And while speculation was rife that just like the CIA-funded al Qaeda had been used as a facade by the US to achieve its own geopolitical and national interests over the past two decades, so ISIS was nothing more than al Qaeda 2.0, there was no actual evidence of just this.

That may all have changed now when a declassified secret US government document obtained by the public interest law firm, Judicial Watch, shows that Western governments deliberately allied with al-Qaeda and other Islamist extremist groups to topple Syrian dictator Bashir al-Assad.

According to investigative reporter Nafeez Ahmed in Medium, the “leaked document reveals that in coordination with the Gulf states and Turkey, the West intentionally sponsored violent Islamist groups to destabilize Assad, despite anticipating that doing so could lead to the emergence of an ‘Islamic State’ in Iraq and Syria (ISIS).

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