By Christopher Briem, on May 31st, 2011
Not surprisingly I caught the headline in the PG looking at some national numbers on the labor force: Women lost more jobs in economic recovery.
What was that “except in Pittsburgh” thing?
Some years ago we looked as comprehensively as we could at the impact of gender in the history of Pittsburgh’s labor force, but that was all completed before the recent recession sank in; it could use updating at some point. What I am slow noticing is something pretty extraordinary. Since William Trent arrived at the point that would become Pittsburgh, the labor force of the region has has a labor force dominated by men. For a long time that was true everywhere, but the disproportion of men in the labor force persisted here long after things changed nationally. Through recent decades, Pittsburgh had a labor force more dominated by men than just about any other metro area of the continental US.
Until now?
This is what I quickly compile for the breakdown by gender of the employed workforce in the Pittsburgh MSA in recent years and the most recent data does indeed show more women workers than men. This shows the average employment by quarter for the Pittsburgh MSA broken down by gender.
So even if it is a recession impact, which is part of it, I doubt that is the big picture long-term trend we ought to take note of. The quote in the article today points out correctly that women are the majority of state and local workers. The bigger factoid is that for Pittsburgh of late, at least for non-summer months women are the majority of workers period. Even if true for just a single month, it is a shift that was once inconceivable in Pittsburgh. Wow.
By The Gold Report, on May 31st, 2011
 Gold is in the midst of a 20-year upward climb, according to The Great Super Cycle Author David Skarica. In this exclusive interview with The Gold Report, he points out the emerging market small caps that could profit from global economic swings.
The Gold Report: In a February interview with The Gold Report, you said, “We’re in the midst of a 15- to 20-year mega-supercycle for gold and gold equities.” You predicted $1,500/oz. gold prices and that gold would move higher through 2015 or 2020. Do you still believe that to be the case?
David Skarica: $1,500 was hit. Yes, nothing has changed my long-term view. These cycles usually move in 15- to 20-year periods. If you look at gold bottoming in 2001 or 1998, depending on your view, you can see we at the very least will move higher in 2013 and more probably into 2015 to 2020. The fundamentals back it up as the problems with unfunded liabilities and the U.S. deficit will continue to put long-term pressure on the dollar and upward pressure on gold.
TGR: In that interview and your book, The Great Super Cycle: Profit from the Coming Inflation Tidal Wave and Dollar Devaluation, you predicted out-of-control inflation due to pressure from overseas bond vigilantes. Do you see signs that that has begun and what does that mean for gold prices?
DS: We are seeing inflation. However, we have yet to see big spikes in interest rates. On the inflation front, the U.S. government is probably the biggest group of liars in the world when it comes to reporting inflation. If you look inside the metrics, the calculations they use are all designed to keep inflation as low as possible. Housing also has not been adjusted for the recent bust and is very over weighted in the Index. It is about the only thing not going up at the moment. In addition, the U.S. is about the only country in the world that just uses core prices. I find it interesting at the moment that everywhere in the world from China to India to the U.K. to the Eurozone is reporting higher inflation, but the U.S. has no inflation worries! Gap recently had terrible earnings due to increases in costs from commodities and costs that the Chinese had to pass on.
However, the problem on the rate front is that the Federal Reserve is manipulating the market through their QE program. They are the majority of the long-term bond market and a bit of the short-term bond market. Even when QE2 ends, they will just rotate the $1.2 trillion of securities they put into the market the past two years back into the bond market. I call it QE infinity. That money is never coming out. Now, at some point rates will spike as debt approaches near-Greece levels. However, because they have bought so many of their own bonds, it looks like reality will take longer than I initially thought to hit, but it will have an impact eventually.
TGR: What impact will economic instability in Europe, the Arab Spring and the specter of a new IMF chair have on gold prices?
DS: Firstly, let me get something out of the way. The United States is a bigger economic basket case than Europe. The entire European debt crisis is way overblown. Places like Portugal, Ireland and Greece are tiny. They would be the equivalent of Rhode Island and Alabama going under; that wouldn’t exactly take down the U.S. economy. In addition, Europe has such a bloated social welfare system that it can easily cut these expenditures. Also, Europeans, unlike Americans, are willing to pay taxes for government services. However, Europe’s policy of printing money to take care of some of these problems is another positive factor for gold.
Conflict in the Middle East is positive because gold is a flight to safety during times of turmoil. Also, problems in the Middle East cause oil to go out, which is inflationary and positive for gold.
The new IMF chair is irrelevant; one empty suit replaces another.
TGR: In recent trading, gold and the dollar both trended higher, how does that fit with your model that gold gains when the dollar tanks?
DS: Gold can trade up with the dollar. It did in 2005. The problem we have at the moment is no paper currencies are very solid. The dollar’s recent gains have more to do with Euro weakness. When people overblow the Euro debt crisis, the result is a rush to gold. The same dynamic can cause the dollar to rally up against the Euro. In the long term, the big trend for the gold cycle is the U.S. debt crisis and the printing of money to inflate its way out. Even if the dollar doesn’t eventually drop against the Euro, it will devalue against real assets such as gold, oil and other commodities.
TGR: In your blog, www.addictedtoprofits.net, you talk about the cycles that impact gold prices. Where are we in the current cycle and what can we expect next?
DS: The next part of the cycle is going to be very interesting, in my opinion. Because of the 2008 market and gold price crash the fact that everything rebounded together from 2009 to 2011, people think that gold moves with the market. However, I really think the next bear market in U.S. stocks will be caused by the weakening of the dollar and inflationary pressures. Therefore, I expect a situation where bonds go down in price, stocks overall go down in price and gold and gold stocks go up. In addition, I think that once people see that precious metals are the only game in town, this will allow the sector to attract more money.
TGR: In that February interview, you were bullish on small caps in general. What companies are you watching now in that space?
DS: I really like Tinka Resources Ltd. (TSX.V:TK; Fkft:TLD; Pksheets:TKRFF), a small exploration company in Peru that is in the midst of drilling. I was in Peru last August and met with the head geologist—a real old-school Peruvian who spent the 1980s risking his life by prospecting in the middle of a brutal revolution. Today, the stock trades around $0.50.
I also like Pebble Creek Mining Ltd. (TSX.V:PEB). They are developing their Indian copper project in the Himalayas. Things have gone slowly and they have had some management problems. However, the stock trades at $0.10 and there is virtually no downside, especially in a company that is expecting to go into production in the coming years.
TGR: You talked about Aberdeen International Inc.’s (TSX:AAB) role as a merchant bank that allows investors to have exposure to a number of gold and resource companies. Is their stock price representing their value yet?
DS: The blunt answer is no. Aberdeen continues to trade at a huge discount to their net asset value (NAV). The stock is trading at $0.80 as I write and the last report had their NAV at $1.37. So, you are getting the stock at around 60% of what it is actually worth. In addition, they recently announced a biannual dividend of $0.01 a share. That may not sound like a big deal. However at $0.80, that is a yield of 2.5%. So, you can buy a great company at a 60% discount to its NAV, which has huge upside potential and get more than what you get on 10-year U.S. Treasury bond in terms of yield.
TGR: Any other tips on companies to look at that might take advantage of the macroeconomic cycles pressuring stock prices?
DS: I would really look at Peruvian or Indian stocks here. Both have been whacked for different reasons. India gets hit because of worries over inflation and rising rates. Peru is neglected because of worries over the recent election where the socialist candidate was leading. However, it looks like Fujimori, the right-of-center, more business-friendly candidate, is now neck and neck in the runoff polls. If she wins, Peruvian stocks will probably rise quickly from their current levels.
I think one thing you have to understand is these emerging markets are growing fast and are leveraging, not deleveraging, like western economies. I was in Peru last summer and the growth there was amazing. I plan on visiting India in 2012. The India Fund (NYSE:IFN) and Ishares MSCI All Peru Capped Index Fund (MXPECAPD:EPU) are simple ways to play these economies.
At the tender age of 18, David Skarica became the youngest person on record to pass the Canadian Securities Course. Skarica, a Canadian and British citizen, is the author of Stock Market Panic! How to Prosper in the Coming Bear Market (1998), which provided thought-provoking arguments on why a great bull market would end in the most vicious bear market of all history. He is also the author of The Contrarian Who Saved the World, which explains how markets work. His new book, The Great Super Cycle: Profit from the Coming Inflation Tidal Wave and Dollar Devaluation, was published by John Wiley & Sons in November 2010.
In 1998, Skarica started Addicted to Profits, a newsletter focused on technical analysis and psychology of markets. From 2001 to 2003, Stockfocus.com ranked Addicted to Profits third out of over 300 newsletters in terms of performance. He is also the editor of Gold Stock Adviser and The International Contrarian services, which focus on gold and global investing. Dave has also been a contributing editor to Canadian MoneySaver and Investor’s Digest of Canada.
By Winton Bates, on May 31st, 2011
‘The Taskforce says that prevention is everyone’s business – and we call on the state, territory and local governments, on non-government and peak organisations, health professionals and practitioners, communities, families and on individuals to contribute towards making Australia the healthiest country by 2020.’ (Extract from ‘ Taking Preventative Action’, the federal government’s response to the Report of the National Preventative Health Taskforce).
I find the sentiments in the quoted passage objectionable for two reasons. First, preventative health care is not ‘everyone’s business’. Individual adults have primary responsibility for their own preventative health care because no-one is better able to exercise that responsibility than they are. Individuals who are persuaded that preventative health care is a collective responsibility could be expected to look increasingly to the various levels of government, non-government organisations, health professionals and practitioners, communities and families – everyone except themselves – to accept responsibility for what they eat, drink and inhale.
Second, the goal of making Australia the healthiest country by 2020 is being put forward as though it is self-evidently desirable collective good that should be pursued by any and every means available to everyone. The goal is not self-evidently desirable. Individual health is not a collective good. And the end does not justify the means that are being proposed to pursue it.
If you delve behind the spin about making Australia the healthiest country by 2020, the underlying goal seems to be to raise average life expectancy in Australia to the highest level in the world by reducing the incidence of chronic disease. What does this entail? It would be hard to object to the goal of enabling individual Australians to reduce their risk of chronic disease. The problem is that the government’s strategy is more about achieving national goals than providing better opportunities for individuals – more about behaviour modification than about ‘enabling’ individuals to reduce their health risks.
The government claims that analysis of ‘the drivers of preventable chronic disease demonstrates that a small number of modifiable risk factors are responsible for the greatest share of the burden’. The behavioural risk factors led by obesity, tobacco and alcohol apparently account for nearly one-third of Australia’s total burden of disease and injury. The chronic conditions for which some of these factors are implicated include heart disease, stroke, kidney disease, arthritis, osteoporosis, lung cancer, colorectal cancer, depression and oral health problems.
Since these risk factors stem from individual lifestyles it is obviously desirable for individuals to be aware of them. There may be a role for governments in provision of this information. Perhaps governments should also be involved in helping people in various ways to live more healthy lifestyles. It is questionable how far governments should go down this path, but it is difficult to object to modest efforts by governments to improve opportunities for people to live healthier lifestyles.
However, rather than helping people to help themselves the federal government has chosen the path of Skinnerian behaviour modification. It has chosen to drive changes in behaviour through what it describes as the ‘world’s strongest tobacco crackdown’. (This is one instance when I hope the government doesn’t actually mean what it says – some people in Bhutan have apparently been jailed recently for possession of more than small amounts of tobacco products.) The government’s strategy also involves ‘changing the culture of binge drinking’ and ‘tackling obesity’, but in this post I will focus on smoking.
Some of the tactics being used in the tobacco crackdown involve information and persuasion but there is also an element of punishment involved. The tobacco excise has been increased to over $10 for a packet of 30 cigarettes and legislation is proposed to require cigarettes to be sold in plain packaging. It seems to me that this amounts to persecution of smokers and their families. It will reduce the amount of household budgets available to be spent on other products and encourage some to avoid excise by obtaining tobacco from illegal sources.
As a former smoker, I am probably more strongly against smoking than most people who have never smoked. I encourage other people to quit smoking and discourage young people from taking up the habit. But having given up smoking several times, I know how hard this can be. Governments have no basis on which to judge that people are not in their right mind if they consider that the pleasures they might obtain from additional years of life are not worth the pain of giving up smoking.
In my view this question of whether smokers are capable of judging what is in their own best interests is at the crux of the matter. The politicians and bureaucrats who seek to modify the behaviour of smokers may see themselves as enhancing the capability of these people to have lives that they ‘have reason to value’, in accordance with well-being criteria proposed by Amartya Sen. If so, their attitudes highlight a major problem with Sen’s approach. Governments have no business deciding what kinds of lives individuals have reason to value.
Enrolling into a drug rehab program can be the hardest thing to do but it can save a life.
By B.P.T., on May 31st, 2011
At 9:00 AM EDT, the monthly S&P/Case-Shiller home price index report will be released. Given that most economists don’t expect the overall U.S. economy to improve until housing prices end their decline, the market will be watching this number closely.
At 9:45 AM EDT, the Chicago PMI Index for May will be announced. The consensus index value is 63, which is 4.6 points lower than last month, but is still well above the break-even level at 50.
At 10:00 AM EDT, the monthly report on Consumer Confidence for May will be released. The consensus index level is 66.5, which would be a 1.1 point increase from April’s number.
Also at 10:00 AM EDT, the State Street Investor Confidence Index will be released, which looks at changes in the amount of equities held in the portfolios of institutional investors.
At 3:00 PM EDT, the Farm Prices report for April will be released, giving investors and economists an indication of the direction of food prices in the coming months.
By Doug Gentry, on May 27th, 2011
So, this is cool. As reported in the Freakonomics blog, Google has a feature that allows users to correlate public patterns with search term usage. You supply data, such as initial unemployment claims, and Google will evaluate which search phrases best correlate with the data provided. Justin Wolfers reports,
I fed in the weekly numbers on initial unemployment claims—one of the most important weekly economic time series we have. The search term that is most closely correlated? Crikey, it’s “filing for unemployment.” Indeed, the correlation is an astounding 0.91.
Here’s the graph of time series on initial jobless claims and searches for “filing for unemployment”
 Google Searches and Unemployment Data
By The Energy Report, on May 27th, 2011
 Siddharth “Sid” Rajeev isn’t a miner. But in his search for value, Sid, head of research for Fundamental Research Corp. in Vancouver, digs deep into the world of small- and micro-cap stocks to find undiscovered gems. In this exclusive interview with The Energy Report, Sid drills down on some relatively unknown resource stocks he has uncovered.
The Energy Report: Sid, you’re an electrical engineer by training. How did you end up the head of research at your boutique investment bank?
Sid Rajeev: I initially worked for an engineering firm for a few years. I developed a strong interest in finance and investment analysis in those years, so I decided to pursue an MBA degree. Soon after I got my degree, I joined Fundamental Research and it’s my sixth year here. At Fundamental, we have a team of analysts, including financial analysts and geologists. We cover about 150 companies, three-quarters of which are in the natural resource sector. The rest are from agriculture, technology, aerospace and other industries.
TER: Instead of putting target prices on stocks, your firm uses a fair-value metric. Does that imply perfect pricing, a theoretical point at which there’s no upside or downside?
SR: Fair value, basically, is the intrinsic value of a stock on a particular day, which is calculated based on the stock’s fundamentals. And you’re right, essentially, it’s the point at which there’s no upside or downside.
TER: When shares reach fair value, do you recommend them as momentum plays?
SR: No, our valuation methodology is always based on fundamentals—we will not give a buy recommendation on a stock if its share price is higher than its intrinsic value. We tend to evaluate or review our valuations on a particular company every three to four months—sooner if some significant news develops.
TER: With a fundamental theory, you recommend taking money off the table when a company achieves fair value and seeking fair value in another company’s shares.
SR: Exactly.
TER: What are you trying to achieve for your clientele through your general investment theory?
SR: Our main goal at Fundamental is to bring out those underexposed small- to mid-cap companies that no one really follows—those are the companies most likely to be undervalued. Our geologists look at the technical aspects. They work in conjunction with our financial analysts to come up with the intrinsic value and a recommendation.
TER: Are you generally bullish on commodities right now and, if so, which ones?
SR: Our favorite now is uranium. We’ve been bullish on uranium for the past couple of years. Yes, the incident in Japan caused uranium to take a huge hit, along with the companies that follow or track uranium, but we believe the fundamentals of uranium are still intact. It’s still one of the cheapest and cleanest sources of power out there. Particularly when fossil fuels are at extremely high prices, we need sources like uranium going forward. Having said that, I don’t think we are going to see any spike but rather a slow and gradual recovery in uranium prices and, therefore, we believe uranium is very attractive for investors with a longer time horizon (at least 12 months).
TER: Where should investors be deploying capital?
SR: Our three top picks are Western Potash Corp. (TSX.V:WPX), Compliance Energy Corp. (TSX.V:CEC), a coal company, and Strathmore Minerals Corp. (TSX:STM; OTCQX:STHJF), a uranium company.
Western Potash is an advanced-stage exploration company with potash in Saskatchewan. We think it’s a good acquisition target.
We picked up Strathmore Minerals when it was at $0.57. It traded as high as $1.60 but, after the disaster in Japan, the stock dropped significantly and now is sitting at about $0.62. We believe uranium companies with quality assets, like Strathmore, should do well going forward.
Compliance Energy recently announced a positive feasibility study, and it should go into production in the next 24–36 months. It has a quality management team, strong cash and investments—especially its significant position in Copper Mountain Mining Corp. (TSX:CUM).
TER: Great. Any others?
SR: Rock Tech Lithium Inc. (TSX.V:RCK; OTCPK:RCKTF; Fkft:RJIA) is a very interesting company under our coverage. Its main focus is on the Georgia Lake lithium project in the Thunder Bay Mining District in Ontario. That project has a historic resource of 9.8 million tons (Mt.) at 1.18% lithium oxide. We like this company particularly because it is expected to complete several milestones in the next 6–12 months. Number one, Rock Tech is expecting to convert its historic resource to an NI 43-101-compliant resource in the next month or so. Second, the company is awaiting metallurgical test results on a 1-ton bulk sample, which will determine the recovery rates for different separation methods and also evaluate the potential to produce battery-quality lithium carbonate. Third, in addition to Georgia Lake, the company also plans to advance its recently acquired projects in Quebec, which are located close to some well-known lithium projects.
The Kapiwak project (James Bay area in Northern Quebec) is located close to a new discovery and the Lacorne project (Val d’Or) is close to a near-term producer (18–24 months). We expect this stock to move closer to our fair value estimate of $0.55 per share if these developments turn out to be positive. The current share price is $0.25.
TER: The main driver here is the growing popularity of electric cars?
SR: Exactly. We think lithium is attractive for use in electronic devices and vehicle batteries because lithium is the lightest metal in the periodic table. Lithium has the highest specific heat of any solid element. Lithium batteries also hold a charge for a long time and could be utilized to store energy from alternate sources, such as wind and solar, as the electricity production from these sources is variable.
TER: What else can we look forward to from Fundamental Research?
SR: Another company that is worth tracking is Mesa Exploration (TSX.V:MSA). It’s exploring for lithium, potash and uranium in Utah and Arizona. All the projects are in proven mining districts with accessibility and infrastructure. The company recently released an NI 43-101 technical report for its flagship Green Energy Lithium Project in Utah, where drilling is expected to begin this spring once the permits are received. Mesa also has a joint venture (JV) partnership with Passport Potash Inc. (TSX.V:PPI, OTCQX:PPRTF) on its Holbrook Basin Potash Project.
We recently picked Plains Creek Phosphate Corp. (TSX.V:PCP) and will be initiating coverage on the company shortly. It has an advanced-stage phosphate project in Guinea-Bissau in West Africa. A bankable feasibility study is expected in Q411. The company has already received a production license, and production is expected to commence in 2013. Our recommendation and rating on the company should follow in the next few weeks.
TER: Do you believe a phosphate company can grow due to the success in potash, and that it might be time for phosphate to catch up?
SR: Exactly, phosphate has the same drivers as potash. The main idea behind phosphate and potash is increasing demand for food, increasing population and diet improvement in developing economies. Also, meat consumption in developing countries is expected to significantly increase in the future, which would drive up demand for grains to be used as livestock feed. All this requires fertilizers, and that’s where potash and phosphate come in.
TER: Got it. I’ve enjoyed meeting you very much Sid. Thank you for your time today.
At Fundamental Research Corp., Sid Rajeev heads the research department, which covers over 150 small- and micro-cap companies and 15 exempt market/private issues from a broad array of industries including energy, mining, real estate and technology. He also manages the FRC list of Top Picks, which are the stocks under coverage that he has the highest conviction level about. These picks have historically helped the firm finish strong in various third party analyst performance rankings.
Sid holds a bachelor of technology degree in electronics engineering from Cochin University of Science & Technology and an MBA in finance from the University of British Columbia. He is a CFA Charterholder and has completed studies in exploration and prospecting at the British Columbia Institute of Technology.
By Christopher Briem, on May 27th, 2011
Not new, but from Zillow and via Calculated Risk is a table of negative equity in the largest real estate markets in the US.
Phoenix: 68% of all mortgages are ‘under water’ calculated as the percentage of single family homes with mortgages where the equity value less than current market value.
Pittsburgh: 6.8%.
The disparity is even wider in a real sense. I bet the proportion of properties in Phoenix that have mortgages in the first place is higher than in Pittsburgh. If true, the proportion of homes that are at risk in a financial sense is even lower here when compared to places like Phoenix. If we further compare the $ value of how much mortgages are underwater. I suspect the 6.8% of local properties are underwater in this type of calculation have total market values that are less than just the underwater amount in markets like Las Vegas. If that type of calculation were done, I bet the disparity between Phoenix and Pittsburgh could be more like 20:1.
By Ajay Shah, on May 27th, 2011
The recruitment of the IMF MD has turned into quite a controversy. For an interesting set of views, see this page on the website of The Economist. In a remarkable development, the EDs of India, China, Russia, Brazil and South Africa came out with a clear
joint statement on the silliness that is afoot.
There are four perspectives on this question which are worth noting:
- There is an obvious gap between the power structure at the IMF, which reflects the way the structure of the world economy after the Second World War, as compared with the present reality. As an example, at present, the Netherlands has 2.08% while India has 2.35%. But the Indian GDP is now $1.6 trillion while Netherlands is at half that.
- The world would benefit from a competent and capable IMF. The best man (or woman) for the job will not be obtained by having any restrictions on nationality. As an example, in today’s world, a name that leaps out to me is Stan Fischer. But he’s not European, and hence was never even considered for the top job in the last decade. (As with Montek, he is now over age 65 and is hence not eligible for the job today). Given that a large fraction of the top economists of the world are not European, this rule yields a less capable IMF.
- I feel that a quota system where the IMF MD must now be from an emerging market is as bad as a quota system where the IMF MD is only recruited from a European country. The key is to get away from all these quota systems, to only recruit the best person for the job. The emphasis should be on technical capability. The person recruited should be a technical expert and not a politican. As an example, see how in the UK, they recruited an American into their Monetary Policy Committee.
- In the standard narrative, one hears the idea that in this crisis in Europe, the Europeans are gaining from their
control of the IMF. I feel this is absolutely wrong. In the Asian crisis, it was good for Asia that the IMF was not conflicted
by considerations of domestic Asian politics. Similarly, the IMF program in India in 1981 and 1991 was uncontaminated by domestic Indian political considerations. This helped produce a technically sound program, which helped jumpstart India’s growth. It is not accidental that we see structural breaks in India’s GDP growth around these two dates.
What Europe needs most is a tough IMF, which will be a stern taskmaster, which will force difficult political choices so as to heal the economy. Economic policy in Europe today needs to be cruel to be kind. Instead, by placing a string of career politicians from France into the IMF MD’s job, the valuable role which the IMF could have played in solving the European Crisis is being negated. This damages Europe. The wise thing for Europe today is to say: Give us a tough and competent taskmaster, and let him be
anything in the world but let him not be a European politican. The biggest loser from the present arrangement is Europe.
By B.P.T., on May 27th, 2011
At 8:30 AM EDT, the monthly Personal Income and Outlays report for April will be released. The consensus for Personal Income is an increase of 0.4% over the previous month and the consensus Consumer Spending index change is an increase of 0.4%.
At 9:55 AM EDT, Consumer Sentiment for the second half of May will be announced. The consensus is that the index will be at 72.5, which is 0.1 points higher than the value reported in the first half of the month.
At 10:00 AM EDT, the value of the pending home sales index for April will be announced.
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By Bron Suchecki, on May 26th, 2011
I left this comment on the FOFOA blog:
Your point about bullion banks having the best intel is important. Bullion banks are like spiders in the center of a web. They can feel the twitching of the flies in the web and determine the mood of the market better than anyone else and often in advance of others.
For example, if Mints are starting to see an increase in demand and begin running down stocks, they will start to take delivery ex-bullion banks, who as a result now have intel that retail demand is picking up before anyone else sees it in reported coin sales.
London Banker has expressed this idea much better than me in this post:
Over the past 25 years the financial markets of the world have become highly concentrated in the intermediation of a handful of firms, and regulation has been harmonised in the interests of these few firms. …
Sadly, these few global firms have been for some time in “a conspiracy against the public”, and have subverted the organs of public governance and the infrastructure of the financial markets to their purposes. …
Four global banks are intermediaries in 85 percent of OTC derivatives transactions. The same banks dominate prime brokerage. The same banks own large equity interests in the now demutualised exchanges, clearinghouses and even warehouses of the global markets. Naturally, the same banks dominated underwriting of securitised assets. The implications have scarcely been grasped of what this portends in terms of the information asymmetries and the opportunity to manipulate markets without risk.
Each of these roles gives these few banks a view into the positions of market investors. They know who owns what, using what leverage, under what terms, and trading in which markets. Knowing that, the manipulation of prices to impoverish investors and enrich the ruling banks is child’s play with a bit of ill-transparent HFT through proprietary dealing desks and connected hedge funds aligned with the firms. …
The only resilient solution is local, transparent markets with disintermediation of the controlling banks. Eliminating the information asymetries which allow them to see everyone’s positions, leverage and trading activity – and trade and ration liquidity accordingly – would go a long way to preventing further concentration. 
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