The Week That Was

...starting one week ago:

[courtesy Boston Globe]

Quote for the Week, April 21-27, 2013

The quickest way to extreme wealth in this world is to attach oneself to giant piles of institutional money like public pension funds...[you] don't actually do anything, other than shave cuts off of other people's money.
--Matt Taibbi

Like Thoreau, But More So

"Walden Pond:  Part Deux"

Mismatch

Dzhokhar tries to ram this with a dry-docked motor boat.

And loses.

Euroskeptic Channels Lady Thatcher

[3:02]

Margaret Thatcher said it wouldn't work.

Now Nigel Farage says that it hasn't worked:

"This European Union is the new communism.  It is power without limits.  It is creating a tide of human misery, and the sooner it is swept away the better."

Farage, a member of the European Parliament and the leader of the UK Independence Party, is "looking plausibly like the heir to Thatcher."

One World

Tuesday Tune-up

Marlene Dietrich, "Lili Marleen"

Scream Tunnel 2013

No, not the one at Wellesley College.

Finish line on Boylston Street, Boston Marathon, earlier today.

Quote for the Week, April 14-20, 2013

For decades the U.S. economic growth engine that we all love to brag about has really just been an exercise in consuming stuff we didn't need with money we didn't have.  This generational trend is now in reverse and potentially so massive that it transcends monetary and fiscal policy.
--Vince Foster

Doctor's Rx For What Ails Us

Dr. Ben Carson's keynote address,
61st annual National Prayer Breakfast

Bank Q1 "Earnings" Start to Roll In

$JPM reports earnings of "Whatever the hell we thought our loans were worth March 31st + or - internal hedges being hidden somewhere"
— Jeff Macke (@JeffMacke) April 12, 2013

JPMorgan Chase has kicked off earnings season this morning with its announcement that it "made" $6.5 billion in the first quarter of 2013.  Looking under the hood, $1.2 billion of that consisted of "old" earnings retrieved from the firm's loan-loss reserve. The earning's presentation can be found at the company's website here.  Some quick observations:

• Total revenue was down $900 million (over 3%) from the year-earlier quarter (page 2).
• The Consumer and Community Banking division had revenue that was down 6% from both the prior quarter and 1Q2012 (page 4).
• The Net Interest Margin dropped another 3 basis points  from 4Q2012 (page 13).
• Net Interest Income for the fiscal year is expected to drop 1% from 2012 (page 14).
• Over $5 billion of "profits" from the last four quarters have come from the loan-loss reserve (page 19).

In sum, organic business is growing more slowly than JPM's stock price (which is down half a buck in early pre-market trading).  And how about this:  JPM's own analysts have just issued a report saying that Tier I investment banks are "un-investable"--not what the boss wants to hear.

ZeroHedge has a chart showing how our two-tier economy works these days.  Loans from JPMorgan Chase to the real economy are flat-to-declining.  Loans from depositors to JPM are burgeoning.  JPM invests the difference in the canyons of Wall Street, hidden from the light of day.  Money, like manure, works best when it is spread around--and stinks when it is piled up in one place.

[click here to enlarge]

Wells Fargo also released quarterly earnings today (summary here).  Same story as JPM:  nice bottom line, but total revenue was down $300 million year-over-year and twice that from the quarter just prior (page 2); net interest margin was down 8 bps from 4Q2012 (page 3); and in the Community Banking segment (which includes mortgage lending) revenue was down 4% YoY and 6% from the prior quarter.

In this short video [5:06] Christopher Whalen explains to Jeff Macke of Yahoo Finance why banks must shrink their businesses and why some might be getting out of mortgage lending altogether.

More From Kyle Bass

[20:01]

Kyle Bass of Hayman Capital:

"When you see things like Argentina, Greece, Cyprus, Ireland, Italy, you see how fast things go from perfectly stable to completely unstable.  In this case [Japan] I think it will happen more quickly because of the twenty-year build-up."

Needless to say, Bass is short the yen.  See the full clip for his thoughts on gold as an investment, on residential mortgage-based securities, on Fannie Mae and Freddie Mac, on near- and intermediate-term interest rates in the U.S., and more.

Tuesday Tune-up

Santana, "Samba Pa Ti"

"Riskiest Time"

[10:08]

Kyle Bass of Hayman Capital:

Now is "the riskiest time to be complacent in our generation...Investing with the traditional endowment model...is not going to work much longer...

"The insidious nature of a runaway inflation is it bankrupts the middle class.  So the poor stay poor.  The middle class--people that have had some fiscal rectitude, the doctors, the lawyers, the civil servants that have saved their money and put it in the bank--these are the people that get wiped out, or let's say severely impaired in this situation.  The wealthy that are levered with productive assets actually do the best...

"That's an awful scenario for the world to engage in."

Quote for the Week, April 7-13, 2013

I have wondered at times if some of the managed-care bureaucrats I have encountered over the years had been subjected to a bilateral hemispherectomy.  It would certainly explain some of their rulings.
--Dr. Ben Carson

Volatility is Cheap--Beware

Investors scaling back their tail-risk insurance, must mean a black swan is right around the corner-- reut.rs/10hJUlf via @reuters
— Bill Hine (@billhine) April 5, 2013

Recommended Reading

For all you history buffs:

Bob Schieffer chats with authors of new books about Coolidge, Churchill, FDR, Lindberg, Eisenhower, and Nixon.

Tuesday Tune-up

Hrysoula Stefanaki, "I Varka Gyrise Moni"

Opening Day

Getch'ur tickets heah!

America in "End-Stage Metastasis"

Former OMB Director David Stockman pulls no punches.

"The way out would be so radical it can't happen.  It would necessitate a sweeping divorce of the state and the market economy.  It would require a renunciation of crony capitalism...It would require, finally, benching the Fed's central planners, and restoring the central bank's original mission:  to provide liquidity in times of crisis but never to buy government debt or try to micromanage the economy.  Getting the Fed out of the financial markets is the only way to put free markets and genuine wealth creation back into capitalism."

Complete N.Y. Times commentary here.