Mish's Global Economic Trend Analysis

Raucous Caucus: Largest Missouri Caucus Shut Down Before Delegates Chosen
China Halts 10 More Airbus Orders; Global Trade Wars Not Winnable and Should Not Be Fought
Stress Test Farce Shows Bank Shares Still Are Not Cheap

Raucous Caucus: Largest Missouri Caucus Shut Down Before Delegates Chosen

Posted: 18 Mar 2012 10:04 PM PDT

Those awaiting complete returns from the Missouri caucus may be in for a long wait. The St. Charles County caucus was shut down before delegates were even chosen.

St. Louis Today reports Raucous GOP caucus in St. Peters is shut down

In St. Charles County, which was to have been the biggest single prize of the day, the caucus was shut down before delegates were chosen after a boisterous crowd objected to how the meeting was being run, including an attempted ban on videotaping. Two supporters of presidential hopeful Ron Paul were arrested.

At other caucuses, participants gathered outdoors as the appointed locations turned out to be too small to accommodate crowds or waited for hours as organizers worked through procedural questions.

Even before the day's events took a rancorous turn, state Republican officials said the winner of the caucus would not be officially known until next month. But with the confusion surrounding St. Charles, and many more delegates available in a pair of caucuses next weekend, the primary picture for Missouri may have only become murkier Saturday.

In Ballwin, participants were shut out of an appearance by White House hopeful Rick Santorum because the City Council chambers had reached its 118-person capacity.

The caucus in St. Charles County, which was held at Francis Howell North High in St. Peters, was adjourned after police said they were going to "shut us down," according to Matt Ehlen, the Republican activist who was named chairman of the meeting.

However, several individuals at the caucus said much of the consternation revolved around Ehlen himself. Ehlen became chairman after a voice vote, but the head of the county GOP organization failed to recognize any other candidate.

"All of sudden he's the chairman and the place goes nuts," said Tim Finch, a Paul supporter from Dardenne Prairie. "This is not how it's supposed to work."

Some of Paul's supporters were also irked by an announced ban on video recording, with organizers asking police to help enforce it.

When the objections reached a fever pitch, the meeting was shut down without any delegates being awarded.

I received an email from a cameraman who was arrested at the caucus for videotaping the event. Here is the footage.

Link if video does not play: Missouri Caucus Rigged Fraud

Second video showing the fraudulent selection of caucus chairman.

Link if video does not play: St. Charles MO Hijacked Caucus

Real Clear Politics now shows Missouri Caucus results moved from March 17 to April 21.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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China Halts 10 More Airbus Orders; Global Trade Wars Not Winnable and Should Not Be Fought

Posted: 18 Mar 2012 07:01 PM PDT

In retaliation for the EU's Emissions Trading Scheme, China Halts 10 More Airbus Orders

China has suspended the purchase of 10 more Airbus jets, two people familiar with the matter said on Thursday, raising the stakes in a potentially damaging trade row over European Union airline emissions charges.

The move to delay the purchase of extra A330 planes brings to $14 billion the value of European aircraft caught up in tensions over the EU's Emissions Trading Scheme, which has angered countries including China, India and the United States.

It comes amid urgent efforts to find a solution to the row, which airlines fear could provoke an aviation trade war capable of causing travel disruption and hitting air traffic rights.

The row is over a cap-and-trade scheme which could levy charges for carbon emissions for flights in and out of Europe.

Foreign governments say the EU is exceeding its legal jurisdiction by charging for an entire flight, as opposed to just the part covering European airspace.

"Aircraft sales are different from selling wine or cars, you can't switch the sales button from off to on from one day to another. A red traffic light in aircraft sales can destroy years of sales efforts and damage-repair will take years," said Rainer Ohler, head of Airbus public affairs and communications.

Trade Wars Not Winnable and Should Not Be Fought

This is exactly the kind of spat Romney is bargaining for when he threatens to label China a "currency manipulator".

China is of course a "currency manipulator". Then again the Fed is an "interest rate manipulator" hoping to sink the US dollar. The EU wants the euro to fall (just not collapse), and Japan has intervened to sink the Yen. Switzerland's central bank has intervened to suppress the value of the Swiss Franc.

In short, every major nation on the planet is manipulating currencies either directly or indirectly via interest rate policy.

Global trade wars are not winnable. If Mitt Romney is elected and he does what he says he will do, expect a devastating collapse in global trade.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Stress Test Farce Shows Bank Shares Still Are Not Cheap

Posted: 18 Mar 2012 10:19 AM PDT

Last week the Fed conducted yet another "Stress-Free" test purposely designed to conclude banks are in better shape than they really are. The parameters seemed strict.

US recession marked by a 50 percent drop in stock prices
21 percent drop in housing prices
Joblessness soaring to 13 percent
An even worse recession in Europe

15 out of 19 banks passed based on a measure of "regulatory capital". The four stress test failures are Citigroup, Ally, Suntrust and MetLife.

"In fact, despite the significant projected capital declines, 15 of the 19 bank holding companies were estimated to maintain capital ratios above all four of the regulatory minimum levels under the hypothetical stress scenario," the Fed said.

The exercise opened the door for some of the most capital-flush banks to immediately announce new or higher dividend payments to shareholders, after the Fed prevented or limited such payouts by a number of the banks last year following a similar examination.

JPMorgan Chase announced a 20 percent dividend hike and a $15 billion share buyback program, while Wells Fargo also sharply boosted its planned dividend.

Bank with Negative Tangible Equity Passes Stress Test

Anyone who can think knew in advance the stress test would be a farce, but Jonathan Weil dug up the real dirt in his Bloomberg report Class Dunce Passes Fed's Stress Test Without a Sweat.

The most important thing to understand about the Federal Reserve's latest stress tests is what they were not intended to do. Their purpose wasn't to test whether the nation's biggest banks could survive a financial blowup like that of 2008 without government assistance.

Rather, the Fed designed its tests to measure the effects a hypothetical crisis would have on banks' regulatory capital. Capital is the financial cushion a company has available to absorb future losses. While the Fed would like for us to believe that regulatory capital is the same thing, it's quite different. And too often it bears little resemblance to reality.

Citigroup Inc. (C) was deemed well capitalized under the government's methodology when it got bailed out in 2008. So was CIT Group Inc. when it filed for bankruptcy in 2009.

How stressful were the Fed's tests? One anecdote stands apart: Regions Financial Corp. (RF), which still hasn't paid back its bailout money from the Troubled Asset Relief Program, passed.

The footnotes to the company's latest financial statements tell the story. There, the Birmingham, Alabama-based lender disclosed that the loans on its books were worth $8.1 billion less than what its balance sheet said, as of Dec. 31. By comparison, the company's tangible common equity, a bare-bones measure of net worth, was $7.6 billion.

Weil went through Regions' balance sheet, using the company's own footnotes as to fair-market values of their financial assets and liabilities and concluded "Regions' tangible common equity was negative $525 million as of Dec. 31."

In short, the test was a joke, although it had its intended effect. Shares of Regions and other large banks soared, and Regions raised $900 million selling common shares on Wednesday. The company, which hasn't reported an annual profit since 2007, plans to use the money to help repay the $3.5 billion it got from the Treasury Department in 2008.

Regions probably would have failed years ago if not for its federal backstop. Instead, it now has a stock-market value of $9.1 billion. Clearly the Fed wanted it to attract new investors, and those who put fresh capital into Regions this week believe the government won't let it die. That about sums up the company's value proposition. In other words, we're all still on the hook.

Bank shares may look "cheap" but they aren't. The latest "stress-free" test by the Fed proves as much. How much longer the market lets the Fed get away with this nonsense is anyone's guess. I would have thought silly season would have been over long ago.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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Mish's Global Economic Trend Analysis

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