Why Supermodel Bundchen, and Hedge Funds Dumping Dollars, China’s plan to diversify their Financial Reserves, and Free Trade, are all bound to fail

Supermodel Bundchen Joins Hedge Funds Dumping Dollars

Gisele Bundchen wants to remain the world's richest model and is insisting that she be paid in almost any currency but the U.S. dollar.


Like billionaire investors Warren Buffett and Bill Gross, the Brazilian supermodel, who Forbes magazine says earns more than anyone in her industry, is at the top of a growing list of rich people who have concluded that the currency can only depreciate because Americans led by President George W. Bush are living beyond their means.

Wait a second: America has shouldered the world’s burden, for almost a half a century, with our global military presence and protection.

We are the world’s leading purchaser of most nation’s goods and services.

Many of the workers in China and the developing third world are paid pennies per hour.

“Free Trade” is not “Open Trade.”

Global Labor Arbitrage” Dismantling America


Economists don’t seem to understand globalization, and that’s a puzzle. Referring to low foreign wages, Dartmouth’s Mr. Slaughter writes:

“Low wages do not necessarily mean low production costs abroad. This is because low wages are mainly a signal of low worker productivity. In much of the world, workers are less productive than their American counterparts because they enjoy less access to the training, tools, ideas, and broad market institutions that are the foundations of high productivity.”

Once upon a time this was true. That was when US employees, working with US capital, technology and business know-how, were producing products to compete in import and export markets against products made by foreign workers, who worked with less capital and inferior technology.

Those were the bygone days of international trade.

Today when a US multinational moves a factory from Ohio to China, the Chinese labor works with the same capital and technology that formerly employed Americans in Ohio.
The Chinese workers are no less productive. Yet, their wage is far lower.

Dartmouth’s Mr. Slaughter is wrong to attribute low Chinese wages to low productivity. The wages are low because of the enormous excess supply of labor that overhangs the Chinese labor market.


Stephen Roach is correct to differentiate between free trade and “global labor arbitrage.” US employers are substituting cheaper foreign labor for US labor in the goods and services that they supply to markets at home and abroad.


The European Union is very anti-competitive. Presumably they need to fill their respective coffers with more money from Microsoft and other of our corporations.

EU slaps Intel with formal antitrust charges


Our anti-Dumping office of the Unites States Commerce Department is flooded with actionable issues for enforcement.

United States International Trade Commission

We could simply stop purchasing China’s goods until the same, or equal amount of our goods are purchased from the Unites States. And down the International line of our trade imbalances with other nations.

We are hardly as overtly aggressive as the E.U. when it comes to alleged “Regulatory and Antitrust” adjudications.

On the surface alone, the alleged Supermodel, Gisele, really wants “Arbitrage” money paid to her, due to the exchange rate ratio, that favors the Euro.

Less one currency = More of another currency. It’s that simple. She just wants some more bucks!

Are we in a boom-bust cycle? Of course.

Our problems are structural and political, certainly the pending news of the dollar’s demise are totally premature.

From the O’Reilly Radar: Exchange Rate and Silicon Valley


What does the ever-declining value of the US dollar mean for Silicon Valley?

The US dollar has been emulating a brick lately. With housing prices plummeting, subprime fallout ongoing, and oil prices soaring, the general economic news is grim but for the occasional "the investment environment is still sound" noises.

What does this mean for Silicon Valley?

At the moment there's not a lot of effect. The valley still has critical masses of experience, capital, and enthusiasm. This means that it's a great place to start a company, turn an invention into a product, and build tomorrow's technology. The valley's investors, from angel through VC into capital markets, have so far largely been or become American. Foreign entrepreneurs are still coming to Silicon Valley to start their companies. So far, innovation has been born, bred, and retired in the US.

As the adage goes: “American catches a cold, and the world dies.”

We are among the largest monetary contributors to the United Nations, the World Bank, and other, basically, corrupt institutions.

Is the European Union similar to the United States, in that is it an integrated set of States in one Federal Liberal Democracy?

It was created with one goal in mind, as a trading and economic vehicle. But they have not integrated with each other, they are anti-competitive, they have no central army, and they certainly don’t share much alike except the Euro.


Ever Closer Union: An Introduction to European Integration


People in a national political system speak the same language, read the same newspapers, and see the same television programs. By contrast, the EU is distant, impersonal, and operates in twenty official languages; there is no European “people,” only European “peoples”; there is no common language or media. But the problem also lies in the politics of European integration. National politicians like to take the credit when things are going well in the EU and blame “Brussels” when things are going badly. Opinion polls constantly show that most Europeans appreciate the underlying advantages of European integration but are uneasy about certain EU policies and developments. Many Europeans either do not know or have forgotten how far Europe has come in the past fifty years. Regardless of the past or of people’s understanding of it, some Europeans would argue that the EU has outlived its usefulness (if it ever had any). Without doubt, some EU policies and programs are dispensable or superfluous.
No matter what side of the immigration debate you may be on—the fact is that the U.S.A. allows for massive immigration so that people may lead more productive and freer lives.
Or they wouldn’t be coming here would they?

Our Democratic set of checks and balances vis-à-vis, the Judicial, the Executive, and the Congressional, set a world example of how we keep a functioning Democracy in check.

If the people don’t want Bush, or any other Party in leadership, we are able to vote them out.
Can the people of China vote out their leaders? Due they have the Rule of Law to enforce contracts?

I am an America “Firster” and my bets are on the United States of America.

Let the World’s nations play by the rules, as well as our own institutions—the Merrill Lynch’s, the Citibank’s, the American National Trading Group’s, the Morgan Stanley’s, the PFG’s, and all of the other large New York and Chicago Financial Firms. They need to perform as they would profess we should do.

The world is perception and perception is the world. If we are perceived, and rightfully so, as not taking care of our own—we will witness more negative economic reports and news.

There are no “perfections” in improper markets by definition. But to let others benefit by our structural inequality built against ourselves is not sustainable and the people of this country will not tolerate it.

Just as perpetual war is not sustainable; neither are perpetual economic, fiscal, monetary, capital market and trade inequities.

Merrill Denies Improper Transactions


NEW YORK -- Merrill Lynch & Co. shares declined 7.9% Friday amid concerns that already deep mortgage-related losses at the investment bank may worsen.

The decline followed a report in The Wall Street Journal that the brokerage giant may have tried to delay taking losses by using off-balance-sheet transactions with hedge funds. The Securities and Exchange Commission is likely to examine the transactions, the Journal reported.
Merrill said it had "no reason to believe that any such inappropriate transactions occurred." The firm added that any such transactions "would clearly violate Merrill Lynch policy." A Merrill spokeswoman said the firm's reported asset values "reflect all of its exposures to collateralized debt obligations, regardless of how they are financed on or off the balance sheet."

Oh really?

Merrill wrote down $7.9 billion of mortgage securities and CDOs for its third quarter. The hit produced a $2.2 billion quarterly loss, and caused the exit of Chief Executive Stan O'Neal.
Deutsche Bank analyst Mike Mayo Friday downgraded Merrill's stock to "hold" from "buy," saying the firm could face $10 billion in further CDO write-downs.

We need fair and enforced transparency across the international spectrum. And we shouldn’t be doing things that are not in our own best economic interests—to be sure.

Charity, after all, starts at home.


The buck stops with us, the people, to demand political securities, and business transparency and reforms.

Our Capital Markets need More Regulation, not Less

Merrill Lynch engaged in deals with hedge funds that may have been designed to delay recognition of losses from mortgage securities. The SEC is likely to investigate. Merrill shares tumbled more than 9%.

What other skeletons are in their closet? Isn't this shameful?

We have heard so much about how our alleged dislosure law reform, made the U.S. Securities and Commodities markets "less competitive."

How Sarbanes-Oxley makes electronic startups less competitive
The legislation may have prevented accounting debacles, but it's also had a chilling and unintended consequence: reducing or eliminating the attractiveness of an IPO as a growth strategy for small electronics


Really?

Has a more transparent and accountable set of laws made the Subprime meltdown any less severe?

Has the Sarbanes-Oxley bill forced Merrill Lynch and other Financial Firms to violate regulations and to leverage themselves, and violate our trust, beyond tolerable risk levels?

Obviously, no. We need more regulation of our capital markets. Not less.

The National Futures Association alleged that Peregrine Financial Group failed to comply with their Compliance Rules.



NFA's BCC issued a Decision to Peregrine accepting Peregrine's settlement offer in which the firm neither admitted nor denied the allegations of the Complaint. The BCC ordered that Peregrine pay a $5,000 fine within thirty days of the date of the Decision. The BCC also ordered that Peregrine adopt, and submit to NFA within thirty days of the date of the Decision, procedures to ensure future compliance with NFA's Compliance Rules as they relate to the supervision of conditioned registrants. Finally, the BCC ordered that Peregrine adopt, and submit to NFA within thirty days of the Decision, procedures to ensure future compliance with all provisions of the Amended Final Order Granting Conditional Registration to Dominick Concilio.


Oh yeah, and have you head about the "Bubble Alert" that we are being warned about? Who is responsible for this mess?

So, yeah, this inflation thing is nothing to worry about. Which is why investors continue to plunk money down in hard assets and buy up dollar-denominated products like oil and gold, both of which surged again to finish another day with those “highest price since Columbus” headlines.
Both gold and oil have gained around 60% in the last two years.

A few years ago, $100-a-barrel crude oil and $1,000 gold would have seemed completely ridiculous. But the markets are on the cusp of grasping the former, and at this rate, the latter isn’t too far off. (Many will say, “c’mon, $1,000 gold is ridiculous,” but admit it - you hesitated before saying that this time.)

As the dollar continues to decline these assets get cheaper for foreigners to buy, but they’re not the only ones, considering the steady demand coming from the U.S. as well. With world economies still in reasonably solid shape, the commodity demand remains strong. “The dollar is falling and is making dollar-denominated assets cheaper so you get gold and crude going up and that’s probably going to keep going for a while,” says Patrick Kerr, president of Oilgasfutures.com, a commodity brokerage.


What he’s been hearing lately — and this might be a “bubble” alert — is that there are many fund managers discussing the idea that people are underallocated in these assets, with too much in equities and bonds. Buying in at $100 oil seems a bit foolhardy, but then again, people said that at $70 and $80 as well (which was a day or two ago, if we remember).

So, let's put this into some kind of perspective--the Financial Firms are complaining that we are not "competitive" because they are over-regulated; while at the same time they have over-leveraged themselves, violate the requisite regulatory guidelines, and expose us, average Americans, to an unprecendeted level of exposure to financial ruin, to no fault of our own.

Isn't it time to regulate the Merrill Lynch's, the Peregrine Financial Group's, the Citibank's, and the rest of the Financial Firms, with more scrutiny and regulations?

Are Financial Firms Undercapitalized?

Based on the latest financial news, including the fact that Merrill Lynch just had their worst write down ever in their history, even the SEC has questions about their alleged financial reporting:

SEC scrutinises disclosures made by Merrill Lynch

The essence of the investigation is really about the firm's disclosures about its financial position and whether they were honest and forthcoming about that, to its employees, customers, investors, and to the government.

Obviously, something is amiss with our current business climate, and the way our financial firms have betrayed our trust.

A further example of Financial Firms misleading the public includes Peregrine Financial Group, an alleged leading firm in the Futures and Commodities Industry. They were fined and found to be operating without sufficient capitalization funds and failing to notify the Commodity Futures Commission, aka the "CFTC!"

WASHINGTON -- The Commodity Futures Trading Commission (CFTC) announced today that it has issued an order instituting and simultaneously settling an administrative proceeding against Peregrine Financial Group, Inc. (Peregrine) of Chicago, Illinois. The action results from an audit by the CFTC's Division of Trading and Markets of Peregrine's financial statements as of March 26, 1999. In consenting to the order, Peregrine neither admitted nor denied the findings in the order.

Specifically, the CFTC order finds that Peregrine, a registered futures commission merchant, was under capitalized as of March 26, 1999, in violation of section 4f(b) of the Commodity Exchange Act (CEA) and CFTC regulation 1.17(a). The order also finds that Peregrine violated CFTC regulations by: 1) failing to file timely notice with the Commission that its adjusted net capital was less than the minimum required, on March 26, 1999; 2) failing to file notice that its adjusted net capital was below the early warning threshold; 3) failing to keep accurate books and records; and 4) filing with the Commission an inaccurate capital computation and statement of financial condition on its Form 1-FR-FCM as of March 26, 1999. These violations of the CEA and the CFTC's regulations occurred primarily because Peregrine improperly classified certain receivables as "current assets," according to the order.

How long will it take for us to realize that we are being taken advantage of by these large Wall Street and Chicago Financial firms? They have betrayed and continue to betray our collective trust.

On many levels.

Let's face it, they are in business for themselves; not for us. Recommending what or how much to allegedly "invest" in is inherently a conflict of interest.

They always make a commission or a fee; and we take all of the risk.

Isn't it time that the consumer take the power back from the big Financial Firms