Thursday, May 31, 2012

Did You Sell in May?

In a previous post titled Sell In May and Go Away? I warned of the market seasonality where bullishness in the beginning of the year often gives way to selling in the spring. The same post also noted insiders (who must file their intent to sell with the SEC) were lessening their buying, possibly giving a clue to early bearishness sentiment. This year that is exactly what happened.

The S&P 500 was at 1,419 on April 2nd when I posted.

It was slightly lower May 1st at 1,405.

Today, on May 31st, we're at 1,310. That's about a 7% drop in one month.

CNBC Still Bashing Gold

Simon on CNBC just reported gold's huge under performance versus stocks and that its headed for its worst year in 13 years! Wow, that sounds terrible. Why would I want to be in gold with such bad news?

Let's take a look at just how "bad" its performing:

The S&P 500 is currently up nearly 12% year to date but is down year over year by 2.3%  as represented by the exchange traded fund SPY.

How has gold done?

The gold price, as represented by the exchange traded fund GLD is UP by 6.7% year to date. Its also UP 1.4% year over year.

Is gold under performing its double digit returns of the last 12 years? Yes, so far it is, but things are getting scary again in Europe and I strongly suspect the end of year performance will be quite comfortable for those trying to protect their wealth.

I would further note that the volatility, or what we describe as risk in the investment community, has been much lower for gold. So gold has provided consistent returns without much volatility compared to the S&P 500 that is prone to wild swings.

These are the facts, but you would never know it from watching the stock cheerleaders on CNBC.

Wednesday, May 30, 2012

How Tier 1 Capital Affects Gold

Gold had been on a steady rise for years but recently topped out in August of 2011. Many have wondered why, and what this may mean for the future price of gold. I've documented several times how central banks have an interest in managing gold's ascent and occasionally knocking its price down. But there is also another factor much less sinister and it has to do with what's called Tier 1 capital requirements required by the Bank of International Settlements (BIS).

The BIS is an intergovernmental organization of central banks that fosters international cooperation between central banks. When a bank is looking "shaky" or is otherwise distressed, the BIS may require commercial banks to raise "Tier 1" capital. This capital is usually AAA rated government bonds, US Treasuries being the best example. The BIS does not currently recognize gold as a Tier 1 asset. When commercial banks are distressed (Think Geek, Italian and Spanish banks) they are forced to sell gold and buy US Treasuries or German Bunds. Knowing this might explain where some of that 5,000 tons of gold came from.

The following video from RT and feature John Butler explains this well:

To recap the important points

  • BIS does not consider gold a Tier 1 asset.
  • Banks are being forced to sell gold to raise Tier 1 assets.
  • Gold is sold to buy Treasuries.
  • Demand for Treasuries keeps interest rates low (Bond prices and yields move in opposite directions.
  • Therefore central banks likely fight gold as a Tier 1 asset to keep price support of Bonds.
  • Commercial Banks such as JP Morgan already allow gold as collateral.
Tie this back to Ron Paul who wants gold & silver to become “money” once again as a competing currency with the dollar rather than a "collectible" that is taxed as ordinary income.

The second part of the video concerns China & Japan, two countries who have not exactly enjoyed good relations for centuries making a commitment to trade with each other in Yen & Yuan/Renminbi. The two countries are moving away from the US dollar. And lest you think this doesn't much matter, consider these two countries economies are the world's second and third largest economies! Our government's massive overspending and our Federal Reserve's printing is slowly but surely destroying the dollar's place as the world's reserve currency.

What does this mean in terms of wealth preservation (The purpose of this blog!)? It means America is becoming poorer, imports will become more expensive and interest rates will at some point have to increase making the government debt even more expensive and starting us towards a death spiral where higher rates mean we are less solvent which leads to even higher rates and less solvency.

Sound familiar? It should. That's Greece today.

Monday, May 28, 2012

Gold Bifurcation

At the beginning of this year I became convinced that 2012 would likely be the year that the physical and paper gold market bifurcated into two separate markets. The gold derivatives market is about 100 times larger than the total amount of actual gold!! This means there is a game of musical chairs where 100 people think they'll have a chair when the music stops, yet only one person actually does!

When I say the market will bifurcate, its because people will gradually realize there is a difference between owning "paper gold" and real gold, and as a result will begin pricing in the difference: one with all the intrinsic value, and on with no intrinsic value.

As I pointed out May 5th of this year, The Comex, the market where gold is traded in the U.S., is dying. Volumes were declining for some time but certainly were not helped by the collapse of MF Global and theft of client segregated funds.

You may also remember from my May 3rd post that:
Once people wake up to the fact that the paper market is not even a real market, meaning it’s a false market that can never deliver the real goods, once investors realize this, that is when people will really panic....

  Swiss refiners are “working round the clock because demand for gold is so massive.”

And from earlier that same day I posted:

 This has been very effective over the last year. As I have stated in previous posts, it has also enabled China to buy huge amounts at a discount. I believe countries like China have placed a strong floor under the price, as they are buyers on every take down.

On Monday another take down was attempted.....but failed! Just how big was the trade? The Wall Street Journal reports:

The CME Group Inc.’s Comex division recorded an unusually large transaction of 7,500 gold futures during one minute of trading at 8:31 a.m. EDT. The sale took out blocks of bids as large as 84 contracts in one fell swoop and cut prices down to $1,648.80 a troy ounce. The overall transaction was worth more than $1.24 billion.

This was an ongoing theme as I noted in my January 11th post titled: China Takes Advantage of US Fed Stupidity.

With all of this in mind, I present this podcast from TF Metals report.

You can listen to it yourself here.  Its nearly an hour long but below I present the highlights and the approximate time on the pod cast so you can listen for yourself.

  • 44-min: Orgs with segregated gold accounts 3+ years are getting 2011 bars when they request their gold to be delivered, implying bankers are scrambling to find gold to deliver.
    Segregated accounts are supposed to be segregated, just like they should have been  at MF Global where $1.6 Billion "went missing". Also, this delivery issue of "new metal" for contracts that were supposed to be held is similar to what Eric Sprott had with the COMEX when he requested tons of silver for delivery for his physical silver ETF. The dates on the silver suggested it had been recently acquired to fill his delivery demand.
  •  45-min: “A large contact” involved in gold/banking says much was raided from gold banks (cartel) since Feb 29th. Contact says 5,000  metric tons was shipped East, probably to China. $260 Billion in gold bars. Meanwhile, the banks hold naked short positions (a bearish bet). These are likely Asian countries buying "cheap" gold for delivery while paper prices are held down by the Cartel.

  •  50-min: The gold required to “fill” Chavez order to return gold held in foreign vaults (of the Cartel)came from “old” sources in London & Switzerland. (The Cartel) Have “raided” allocated accounts of 20k to 40k tonnes. This is fraud. The Cartel cannot even seem to deliver even the gold that should be segregated and not lent to other institutions.
So what does this all add up to? The bullion banks do not have the gold and silver they claim to have. As Hugo Chavez and Eric Sprott discovered, when they demanded delivery, the COMEX and the Bullion Banks had to acquire the metal they should have had on hand in segregated accounts. 

Instead, the COMEX did not have the silver to deliver and had to seek out new silver to deliver. The Bullion Banks had apparently lent out (rehypothecated) Venezuela's gold and had to acquire it, (probably from Switzerland who as I noted had been "working around the clock" to meet demand) in order to deliver.

There is nowhere near enough gold to meet demand which is increasing as global financial institutions go into deeper distress and fail. Whatever the price of gold is stated to be (set by the COMEX), it means absolutely nothing. There is a paper price you can find in the paper and the REAL price being determined behind the scenes in the REAL GLOBAL MARKETS, which most of us are currently not privy to.

I've said it before; If you cannot stand in front of your gold and defend it with a gun, you don't own it.

Oh, and just to put that 5,000 tons of gold in to context, I present below the gold holdings of the top 40 countries:

Sunday, May 20, 2012

On the Road

I'm out of town this week but wanted to give readers something to ponder until I have time to write about the Facebook debacle.

Here's Chris Martenson:

People who have gold or silver, I think actually had a very rough ride over the last couple of months. A lot of them are wondering what on Earth is going on because every time you get good news, gold seems to rally along with equities, but every time there’s bad news and gold actually should be giving you some protection, it goes down the swanny.

I think the problem there is that the whole system is run by people who went to college and were taught keynesian economics. In my day, when I first went into the stock market and I enjoyed that first bull market in gold when it went from thirty-five bucks to eight-fifty, the traders and investment managers were all practical people. They all cut their teeth, all learned their trade the hard way. Some of them had degrees in college, but generally it would have been something like classics or history or something like that. If they got a degree in economics, they probably would have left because they never would have understood it in those days. But now it has changed. Everybody who is employed has a degree and if they are anything to do with investment strategy, or the investment business, it is all economics degrees. So they have been brainwashed in the keynesian thing. This sort of neoclassical approach where gold is yesterday’s story, paper money is the future. They really do believe it and it is the opinions of these people who drive the markets in the short term.

The result is that gold and silver have become very, very seriously mispriced.

More here:Chris Martenson

Wednesday, May 16, 2012

The Other Bookend to 2008 is Almost Here

 Chris Martensen is back. And he's not optimistic.

Get Ready: We’re About To Have Another 2008-Style Crisis
Well, my hat is off to the global central planners for averting the next stage of the unfolding financial crisis for as long as they have. I guess there’s some solace in having had a nice break between the events of 2008/09 and today, which afforded us all the opportunity to attend to our various preparations and enjoy our lives.
Alas, all good things come to an end, and a crisis rooted in ‘too much debt’ with a nice undercurrent of ‘persistently high and rising energy costs’ was never going to be solved by providing cheap liquidity to the largest and most reckless financial institutions. And it has not.

Forestalled is Not Foregone

The same sorts of signals that we had in 2008 are once again traipsing across my market monitors. Not precisely the same, of course, but with enough similarities that they rhyme loudly. Whereas in 2008 we saw breakdowns in the credit spreads of major financial institutions, this time we are seeing the same dynamic in the sovereign debt of the weaker European nation states.
Greece, as expected and predicted here, is a right proper mess and will have to leave the euro monetary system if it is to have any chance at recovery going forward. Yes, all those endless meetings and rumors and final agreements painfully hammered out by eurocrats over the past year are almost certainly going to be tossed, and additional losses are going to be foisted upon the hapless holders of Greek debt. My prediction is that within a year Greece will be back on the drachma, perhaps by the end of this year (2012).
Greek default spectre turns material
The weekend Greek revolt against the austerity measures imposed on its economy in return for eurozone funding has elevated the prospect of a Greek default on its debts or a chaotic exit from the eurozone.

The collapse in support for the mainstream parties that had reluctantly accepted the austerity program and the vehement opposition to the measures by the radical left party that finished the runner up in the weekend’s elections has made it almost impossible for a coalition to be formed that would persevere with the program.

It is likely new elections will have to be held next month but given the degree to which Greeks have protested against the harsh eurozone prescriptions – and the 20 per cent shrinkage in GDP and 20 per cent-plus unemployment that has accompanied them – it is improbable that Greece will continue with the reforms it agreed in return for the next $300 billion tranche of eurozone funding.

If it does walk away from that commitment there will be chaos in Greece and, to a lesser extent, elsewhere. Greece would inevitably default on its debts and could be forced to quit the eurozone.
There really is no choice for Greece but to leave the euro, and the sooner, the better. Even then, there is a lot of hardship coming their way. But in my estimation, that’s better than the imposed austerity that is a guaranteed torture chamber. The institutions that avoided taking losses on their Greek debt on the first pass through, due to their preferred status in the process (the ECB among them), are almost certainly going to eat big losses this time, perhaps a full 100% of them.
Leaving the euro is going to be quite a process, and the ripple effects are going to be large and somewhat unpredictable. I found this description of what will happen within Greece and its banking system to be well on the mark:
The instant before Greece exits it (somehow) introduces a new currency (the New Drachma or ND, say). Assume for simplicity that at the moment of its introduction the exchange rate between the ND and the euro is 1 for 1. This currency then immediately depreciates sharply vis-à-vis the euro (by 40 percent seems a reasonable point estimate). All pre-existing financial instruments and contracts under Greek law are redenominated into ND at the 1 for 1 exchange rate.

What this means is that, as soon as the possibility of a Greek exit becomes known, there will be a bank run in Greece and denial of further funding to any and all entities, private or public, through instruments and contracts under Greek law. Holders of existing euro-denominated contracts under Greek law want to avoid their conversion into ND and the subsequent sharp depreciation of the ND. The Greek banking system would be destroyed even before Greece had left the euro area.
There would remain many contracts and financial instruments involving Greek private and public entities denominated in euro (or other currencies, like the US dollar) that are not under Greek law. […] Widespread defaults seem certain.

Euro area membership is a two-sided commitment. If Greece fails to keep that commitment and exits, the remaining members also and equally fail to keep their commitment. This is not just a morality tale. It has highly practical implications. When Greece can exit, any country can exit.

As soon as Greece has exited, we expect the markets will focus on the country or countries most likely to exit next from the euro area. Any non-captive/financially sophisticated owner of a deposit account in that country (or in those countries) will withdraw his deposits from banks in countries deemed at risk - even a small risk - of exit.

Any non-captive depositor who fears a non-zero risk of the future introduction of a New Escudo, a New Punt, a New Peseta or a New Lira (to name but the most obvious candidates) would withdraw his deposits from the countries involved at the drop of a hat and deposit them in the handful of countries likely to remain in the euro area no matter what - Germany, Luxembourg, the Netherlands, Austria and Finland.

The ‘broad periphery’ and ‘soft core’ countries deemed at any risk of exit could of course start issuing deposits under English or New York law in an attempt to stop a deposit run, but even that might not be sufficient. Who wants to have their deposit tied up in litigation for months or years?
The Greek banking system will be destroyed immediately upon Greece’s exit from the euro, but the banking system there is already all but dead anyway. Best just to sweep the floor clean and start over.  The idea is easy enough to understand; if your bank is about to go under, it is best to get your money out before that happens.
The only mystery to me is why so many people have left their money in the Greek banks this long. I suppose they were waiting for a clearer signal? Well, it would seem that the signal has now been sent and received:
Greek Depositors Withdrew $898 Million From Banks Monday
Greek depositors withdrew €700 million ($898 million) from the country's banks on Monday, fueling fears of a bank run amid the growing political disarray.

With deposits falling, Greek banks become even more dependent on the European Central Bank to meet their funding needs, exposing the central bank to potentially huge losses if Greece leaves the euro area.

Monday's deposit withdrawal far outpaced Greek banks' steady decline in deposits since the start of the country's debt crisis in 2009, as depositors withdraw cash and transfer funds overseas. In the past two years, deposit outflows have generally averaged between €2 billion and €3 billion a month, though in January they topped €5 billion.

The latest data from the Greece's central bank show that total deposits held by domestic residents and companies stood at €165.36 billion in March.
Again, the real mystery to me is who still has 165 billion euros in Greek banks at this stage of the game?  Also a mystery is why Greece has not yet imposed a withdrawal moratorium and capital controls?  It is only a matter of time, perhaps days, before they do. 
Of course, it is the contagion effect that most worries the market, because the same dynamic of utter insolvency leading to the intractable nature of Greece’s dilemma applies to Spain, Portugal, and Italy.
Indeed, the market is already adjusting to this possibility, as evidenced by the spikes in the yields of those country’s bonds:
Contagion Fears Hit Markets
LONDON - Investors battered European stocks, dumped the bonds of Spain and Italy, and bid the euro down against the dollar Monday after the collapse of weekend coalition talks in Greece edged that country closer to an exit from the euro zone.
The sweeping market action dealt a blow to hopes that the damage of a Greek exit, should it occur, could be comfortably contained.

In the market carnage, Greek stocks fell to two-decade lows, and Spanish bond yields leapt to levels not seen since the panic of last November. Shares of a big Spanish lender dropped 8.9% on the Madrid bourse, pulling the benchmark index down 2.7%. The Italian market also fell 2.7%, and the euro slid to $1.2845 late Monday in London, its lowest level in four months.
The worry and the carnage are both running deep. And they should. Everything is now interlinked to such a degree that there is no possible way for a run on Greek banks or continued declines in the value of sovereign debt to be anything other than exceptionally destructive.
Everybody owes everybody, and there’s not enough productive economy to mask the insolvency of the system any longer.
We saw this as Spain’s sovereign yields vaulted, Spanish bank shares plunged, a not-so-happy linkage courtesy of the LTRO funding which enabled (and encouraged) Spanish banks to load up on Spanish debt. A virtuous circle morphed into a vicious spiral, each element weakening the other all the way down.
That the US stock market is only down less than 5% from recent highs is a testament to the power of the liquidity that the Fed and US banking system have directed at keeping things elevated. However, this cannot last, at least not without another big quantitative-easing (QE) injection from the Fed. Without such an infusion, I am calling for another 2008-2009-style market rout of at least -30% but possibly as much as -50%.

QE, stat!

The reason we need another QE injection is that the same dynamic of debt destruction is again stalking the markets. As expected, the Fed has been waiting for a clear signal that it is time for more thin-air money, and again they are going to wait too long to prevent more damage from occurring.
This time I am expecting a coordinated central bank action that will involve most or all of the major central banks of the OECD: Japan, UK, US, and Europe.
One day, we will wake up to find some global message about the need for a coordinated response to a major crisis, and each of the central banks will be issuing some massive new amount of thin-air money. Of course the programs will be called something fancy that will require shortening to an acronym and will involve buying some form of debt (sovereign debt, but maybe also bank debt), and we’ll track this via central-bank balance-sheet expansion.
Perhaps we’ll see this line go up a little steeper, or perhaps the same trajectory will be maintained a little longer:
Regardless, more printing is on the way, because the alternative is the utter collapse of the entire Western banking system. And quite probably a few governments, too.
To me, that is an unthinkable outcome, and one that I have every faith will be avoided at any every cost. It is the main reason that I am quite content to hold onto all of my gold at this juncture. Anybody selling physical gold here is either broke (and needs the money) or is just not paying attention.
To drive the point home, consider this picture posted on Zerohedge taken from a German television production purported taken of the Ministry of Finance in Athens. A picture is worth a thousand words:
By the time the Ministry of Finance is storing records in garbage bags and shopping carts, perhaps, just maybe, one might become a little concerned about loaning money to the Greek government. One hopes.
If You Think Greece is Bad
Greece, of course, is tiny compared to Spain or Italy. The situation in Spain -- which is big enough to matter -- is truly dire, very large, and getting worse.
Spain has been playing fast and loose with the numbers, and that fact has now been revealed to the world. It’s not a pretty picture.
Spain Underplaying Bank Losses Faces Ireland Fate
May 10, 2012
Spain is underestimating potential losses by its banks, ignoring the cost of souring residential mortgages, as it seeks to avoid an international rescue like the one Ireland needed to shore up its financial system.

The government has asked lenders to increase provisions for bad debt by 54 billion euros ($70 billion) to 166 billion euros. That’s enough to cover losses of about 50 percent on loans to property developers and construction firms, according to the Bank of Spain. There wouldn’t be anything left for defaults on more than 1.4 trillion euros of home loans and corporate debt.

Taking those into account, banks would need to increase provisions by as much as five times what the government says, or 270 billion euros, according to estimates by the Centre for European Policy Studies, a Brussels-based research group. Plugging that hole would increase Spain’s public debt by almost 50 percent or force it to seek a bailout, following in the footsteps of Ireland, Greece and Portugal.

“How can you only talk about one type of real estate lending when more and more loans are going bad everywhere in the economy?” said Patrick Lee, a London-based analyst covering Spanish banks for Royal Bank of Canada. “Ireland managed to turn its situation around after recognizing losses much more aggressively and thus needed a bailout. I don’t see how Spain can do it without outside support.
And this is just the losses that Spanish banks face on their real-estate portfolios. They are also now facing losses on all the Spanish sovereign debt that they bought with their LTRO funding as well. Very simply, Spain now needs a massive rescue, and soon.
Meanwhile German citizens are all done with helping their southern neighbors. Merkel has used up all of her political capital on the rescues performed to date, and it is far from clear that any more help is politically doable here. The only way that I can see such help coming is under some terms other than drawing upon the savings of Germany’s citizens. Printing, perhaps, but even that is a dicey political proposition here.
If Spain drops here, then you can just set an egg timer for when Italy will go. And then France. The dominoes will rapidly fall from there.

Why I Am Nervous These Days

In describing JPMorgan’s recent $2 billion (or is it $20 billion…or more?) trading losses and Jamie Dimon’s (the CEO of JPM) awkward explanation of how certain hedging operations went wrong, the author of this next piece asks the obvious question:
Does Jamie Dimon Even Know What Hedging Risk Is?
But wait a minute? If you’re hedging risk then the bets you make will be cancelled against your existing balance sheet. In other words, if your hedges turn out to be worthless then your initial portfolio should have gained, and if your initial portfolio falls, then your hedges will activate, limiting your losses. That is how hedging risk works. If the loss on your hedges is not being cancelled-out by gains in your initial portfolio then by definition you are not hedging risk. You are speculating.
We still don’t know the exact dimensions of JPM’s losses here (my expectation is that more bad news will follow soon enough), but we can be sure that the big banks have not learned from the mistakes of the past and are still engaged in risky practices involving derivatives.
Whatever JPM was up to (and I am still not entirely clear on what that was), it was not classic hedging, which serves to minimize losses, but something far more speculative.
The reason this gives me such cause for concern is that it once again exposes a small portion of the derivative monster that will certainly be awakened when the European situation goes into full meltdown over the Greek, then Spanish, the Portuguese, then Italian situations.
While derivatives are, in theory, a zero-sum game, and therefore could, in theory, be forgiven and forgotten in a pinch, the reality is that they’ve been used to pretend that risk did not exist and therefore losses don’t exist.
The ugly truth here is that we are at the tail end of a most unfortunate credit bubble -- four decades of global excess by the OECD countries -- and there are massive losses to account for. Just as the offsetting counterparties involved in the subprime CDO and CDS mortgage crisis did not zero out because the losses they were allegedly papering over were all too real, the same will prove true of the derivative paper allegedly covering sovereign and corporate debts.
Remember, the biggest holder of derivatives is the company that just demonstrated that it doesn’t really understand the concept of hedging.
Overall derivatives, especially interest-rate-linked derivatives, have increased by over $100 trillion since the crisis began. As JPM just evidenced, and as hinted at by the interminable hand-wringing over allowing Greece’s paltry $78 billion in credit-default swaps to be triggered, real dangers lurk here.
I wish I could analyze the situation better than the rest of the crowd that either screams catastrophe looms or coos that everything is safe, but I cannot. The situation is too opaque, too convoluted, and too complex to tease apart. I simply don’t know what the true nature of the risk really is -- and the truth is, nobody really does. You might as well ask these analysts to tell you the exact size and shape of the first ten waves that will hit Laguna Beach exactly one year from now beginning at 12:05 p.m.
Instead, what I can offer to you is the idea that instead of reducing (let alone eliminating) risk, all that derivatives have done is mask risk. This means that whatever losses are resident in a system with four decades of debt-fueled malinvestment and overconsumption are still there just waiting to be realized.
It is this certainty that the losses remain, the risk is masked, and the bets have only grown larger that makes me very nervous these days as I contemplate the possible implications and repercussions of a Greek exit from the euro.

To Sum Up Part I

Given this environment of massive, rapidly-accelerating, and obfuscated risks, the prudent among us are undoubtedly wondering, How the heck is this going to play out? And how do I prepare for it?
In Part II: What To Do When the Central Banks Blink, I lay out my forecast for how low asset prices will sink before the central banks once again attempt to ride to the rescue with gargantuan liquidity measures.
But this next time won't work as it did in 2008, in my estimation. I see central banks being near the end of their ability to influence developments at this point. More liquidity will affect different asset classes differently, and for the first time raise real (and valid) concerns about the widescale debasement we are witnessing across the world's major fiat currencies.
Putting your capital into those resources best positioned to appreciate most as the result of money printing and hold or increase their purchasing power in such an environment should be a top priority for every concerned investor.
Click here to access Part II (free executive summary; paid enrollment required for full access).

Friday, May 11, 2012

In Defense of Capitalism, Liberty & Freedom

After watching Krugman (twice) in order to write the last post I felt I needed to balance his nonsensical academic ramblings with another Nobel Prize economist who has always made sense and had a wonderful ability to cut through B.S. and define what classical liberalism was, the ability of free people to pursue their own interests without government intrusion which, just happens to benefit all of society.

In the following two videos we hear themes that sound very familiar today. In fact, if you listened with your eyes closed you might think this video is from today.

 Milton Friedman argues:

  • The Great Depression was a failure of the Federal Reserve.

  • Government should not bail out Chrysler.
  • Government is the cause of many of the regulations that kill companies like Chrysler.

  • Losses are what gets rid of bad companies.
  • The gas shortage is made in Washington.

  • Government pushing synthetic fuel (think ethanol today) is ridiculous.
  • Bankrupt companies restructure and become more efficient.

    That was from 1979. Has anything changed in 2012?

    Finally, I re-post an old cartoon and add one new one.