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The Big Picture

Macro Perspective on the Capital Markets, Economy, Geopolitics, Technology, and Digital Media

REAL Q2 GDP below forecasts but NOMINAL betterToday

Real Q2 GDP rose 2.4% vs expectations of 2.6% but Nominal GDP was better, up 4.2% vs the forecast of 3.7% as the price deflator rose 1.8%, .7% more than expected. Personal consumption rose 1.6%, which was below the expected gain of 2.4% but gross private investment rose a solid 28.8% led by a 21.9% rise in spending on equipment and software. GPI added 3.1 %pts to GDP. Also helping this component, non residential construction rose 5.2% and residential (helped by tax credit) rose by 27.9%. The rise in inventories added 1 % pt to GDP and Government spending added .9% led by Federal. Trade reduced GDP by 2.8 % pts. Real Final Sales, which takes out the impact of inventories, rose 1.3% and has been sluggish in the expansion over the past year where the 15 yr avg is 2.6%. Also included in the data are revisions for the past few yrs which saw Q1 GDP rise 3.7% instead of 2.7%. Bottom line, key contributors to Q2 GDP growth was government largesse as seen by the 4.4% gain in government spending and the large boost in residential construction mostly due to the home buying tax credit. Personal Spending was well below expectations and the rising trade deficit was also a drag. A key bright spot was the 21.9% rise in spending on equipment and software.

WSJ The Big Interview: Rahm EmanuelToday

White House Chief of Staff Rahm Emanuel characterized the relationship between the administration and the business community as “misunderstood”. In an interview with WSJ Executive Washington Editor Jerry Seib, Mr. Emanuel also defended President Obama’s job creation strategy in the face of lagging job growth.

Hank Paulson: Blame it on FHA/GSEsToday

Hank Paulson, the criminally inept Treasury Secretary who shoveled trillions of taxpayer dollars to insolvent banks, and facilitated the grand theft of some near $20 billion dollars from AIG to Goldman Sachs (where he was previously CEO), is now trying to rewrite history.

In today’s Washington Post piece, Paulson ignores facts and rewrites history, fabricating the causes of the economic collapse:

“A significant root cause of the crisis was the combined weight of government policies promoting homeownership; these are apparent in the housing GSEs, the Federal Housing Administration (FHA), the Federal Home Loan Banks, the federal tax deduction for mortgage interest and various state programs. Homeownership was overstimulated to the point that it was unsustainable and dangerous to the broader economy.”

Let us point out that through out the 20th century, interest rates stayed within a range that was realistic relative to economic growth, and that lending standards were based upon the borrowers ability to service that debt. This involved such quaint notions as income, employment, credit history, other debt servicing, and assets. Further, home loans were based on a specific LTV — meaning a down payment was required. Legitimate appraisals were done by banks that actually kept the loans on their books for 10 or 20 years — not 30 days.

None of this finds its way into Paulson’s assessment of the causal factors.

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Wyly Brothers: SEC Complaint on $550 Million FraudYesterday

This might generate a bit of buzz tomorrow via the FT:  Wyly brothers accused of MASSIVE insider scandal (how is it that the FT scoops US papers?):

This is pretty big:

SEC Indictment

SEC Announcement

Here’s the key paragraphs:

“The Wyly brothers reaped more than $550 million in undisclosed gains while sitting on corporate boards by trading stock in those public companies through hidden entities located in foreign jurisdictions to conceal their ownership and trading of those securities.

The SEC alleges that the brothers created an elaborate sham system of trusts and subsidiary companies in the Isle of Man and the Cayman Islands to sell more than $750 million worth of stock in four public companies for which they were corporate directors. They also committed an insider trading violation in one of the companies for an unlawful gain of more than $31.7 million.

If there are two bigger scumbags in the State of Texas, I am unfamiliar with them. And if the SEC allegations are true, then these two douches are going to spend most of the rest of their lives

SEC Charges Wyly Brothers With Massive FraudYesterday

Complaint below, press release after the jump

SEC Indictment Wyly Brothers

Hat tip Scott F!

SEC Charges Corporate Insider Brothers With Fraud

FOR IMMEDIATE RELEASE
2010-137

“The cloak of secrecy has been lifted from the complex web of foreign structures used by the Wylys to evade the securities laws. … ”

Lorin L. Reisner
Deputy Director
SEC Enforcement

Washington, D.C., July 29, 2010 — The Securities and Exchange Commission today charged brothers Samuel E. Wyly and Charles J. Wyly, Jr. of Dallas with violating federal securities laws governing ownership and trading of securities by corporate insiders. The Wyly brothers reaped more than $550 million in undisclosed gains while sitting on corporate boards by trading stock in those public companies through hidden entities located in foreign jurisdictions to conceal their ownership and trading of those securities.

Additional Materials
SEC Complaint
The SEC alleges that the brothers created an elaborate sham system of trusts and subsidiary companies in the Isle of Man and the Cayman Islands to sell more than $750 million worth of stock in four public companies for which they were corporate directors. They also committed an insider trading violation in one of the companies for an unla