Revolutionary operation could 'cure' high blood pressure - Telegraph
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Sunday, December 27, 2009
Tuesday, December 22, 2009
Sunday, December 20, 2009
Market Forecast for 2010
From AlphaKing Investment Newsletter.....a depressing forecast
*******************
For 2009 we forecasted the mother of all bear market rallies, to retrace
50-63% of the losses of the bear market that began October, 2007.
Archive: http://alphaking.com/portfolios/archive/?id=727
In 2008, our Index Long/Short Portfolio earned 70%.
We will follow the major intermediate-term trend wherever it may lead.
We hope you enjoy our 2010 forecast:
Welcome to the 2010 AlphaKing forecast issue. As always, we believe strongly
that the only opinion traders and investors should be listening to when it
comes to their trading and investment decisions is that of the stock market.
We go long as intermediate rallies unfold and short as intermediate bear
corrective phases land. So please keep that in mind as you read our thoughts
on what we expect to see in 2010, as following the trends is the optimal and
safest way to make money over the long term.
2010 should be a tumultuous year as the great bear returns. We see the action
of 2009 as a bear market partial recovery bounce after the first down-leg of
the great bear ended in March, 2009. Once the current rally exhausts itself,
we expect the second down-leg of the great bear to land, and one that should
be of equal length, or longer than, the brutal swoon of October 2007-March
2009. The technical action during the recovery bounce run-up - the post March
2009 rally - speaks strongly of the rally being nothing more than a sucker
advance designed to trap the unwary into believing the bear was over and a new
bull move underway. Such action is the classic set-up to a brutal reversal of
fortunes that few are expecting. There are also a couple of major fundamental
reasons why we believe the bull case to be all bull.
1) The debt de-leveraging process is for real, persistent, and no where near
complete. For the economic recovery to stick we would need to see not only an
end to the de-leveraging process, but also a return to debt expansion, and
such a nirvana turnaround is a very long way from happening. Banks remain
unwilling to lend; the economy continues to provide too much supply; which
should all lead to more bankruptcies, more unemployment, and falling prices
till the de-leveraging process completes and the economy reaches a balance of
supply matching demand.
2) Aging baby-boomers, like banks, continue to hoard cash as they increase
savings, and remain very picky consumers, avoiding big ticket items like the
plague. Since consumers are 70% of the economy, and large ticket industries
such as automakers and homebuilders need a resumption of past buying frenzies
just to be able to stay in business, they are hardly likely to step forward to
borrow and spend on mass debt, which means, yes, it is different this time
around and the financial day of reckoning is here now that the financial
musical chair song has ended.
3) Taxes are going up next year, and way up in 2011 and beyond, while
government deficit spending increases dramatically as money is shifted from
the haves to the have nots. Rising taxes in the face of rising unemployment,
along with increased in trade protections, were hallmark of past depressions,
and repeating things over and over while expecting a different outcome is the
definition of insanity. Those who forget history are destined to repeat it.
4) Government control of the economy never works, as the 1930s US/Europe, post
1989 Japan, and entire Soviet experience can attest to. Raw capitalism where
winners can climb on the backs of the losers is the best way to grow the
economy as a whole, and if we want to be all the same then we can be, for we
can all be poor and unemployed. We live in a world where losers are not
allowed to exist, thus winners will diminish in numbers as their money is
whisked away to help the growing numbers of have nots. Since politics is a
numbers game, the dwindling number of winners will be outvoted by such a wide
margin that I’m afraid our economic fate is sealed, or soon will be, on the
backs of unintended consequences of good intentions.
So for our expectations in 2010:
1) The stock market should see a major life-changing peak, somewhere between
Dow 10,500 (here) and 12,000, and then crash and crash and crash as the March
2009 lows get taken out in a big way.
2) We should see a complete unwinding of the USD carry-trade, which we aptly
call the lemming trade. While selling US dollars to buy gold and other
commodities, as well as stocks and all things China were the major trends of
2009, next year should see the exact opposite, as the race begins to grab
dollars as the imploding debt bubble leaves too many individuals,
corporations, institutions, and countries swimming naked and overexposed to
debt backed by too little capital. Gold should get cut in half. Oil should
revisit and surpass the $35 per barrel area. China will implode, leading stock
markets around the world into a crashing retest of the March lows, which will
likely be breached by a significant margin.
3) 2010 should be the year of currency crises, with the British Pound the
crown jewel of pending disasters, with the EURO not far behind in the race to
the bottom.
4) Unemployment will rise to the very unexpected 12-14% range, creating an
“off with their heads” mentality among voters as we head into the mid-term
elections later in the year.
5) Voters will - eventually - balk at governments giving money to failing
institutions, which means some very big name financial companies will go the
way of the Dodo. AIG, Citibank, Chrysler, are sure to be in the crosshairs of
such former too-big-to-fail companies who run out of money and time, though
they will likely be the tip of a very large financial iceberg. Once one goes,
all of them will suffer a collapse as investors shoot first and ask questions
later, leaving each company struggling to show they have the means to survive.
I could go on, but basically what we are facing is the reality of what was
threatened by the 2007-2009 bear market collapse, only this time no one will
be fooled into believing anyone can save us, as the FED and government lose
all credibility as all attempts to stem the financial blood-letting fail. A
dark prediction, yes, though the good news is that eventually, once the
winners have been separated from the losers and the debt de-leveraging problem
gets defaulted away, the economy can start to grow again and the future can
once again be expected to be brighter than the past.
If the economy and financial markets want to prove this analysis flawed, and
dead wrong - which given the dark nature of our expectation we BETTER be wrong
- then we have no problem making money on the long side as we follow the stock
markets higher. As we always say, and we repeat here again, the only opinion
one should listen to is that of the stock market. Just keep in mind the
potential severity of the situation facing us I’ve just outlined if indeed the
stock market begins to slide, as failing to follow those trends could have
life changing consequences, and I don’t want any of us following those
lemmings over the day of reckoning cliff.
Now try and have a great weekend and stay away from ledges and knives!
401K investors should be invested in money market funds.
Kevin Wilde, Chief Trading Strategist, AlphaKing.com
*******************
For 2009 we forecasted the mother of all bear market rallies, to retrace
50-63% of the losses of the bear market that began October, 2007.
Archive: http://alphaking.com/portfolios/archive/?id=727
In 2008, our Index Long/Short Portfolio earned 70%.
We will follow the major intermediate-term trend wherever it may lead.
We hope you enjoy our 2010 forecast:
Welcome to the 2010 AlphaKing forecast issue. As always, we believe strongly
that the only opinion traders and investors should be listening to when it
comes to their trading and investment decisions is that of the stock market.
We go long as intermediate rallies unfold and short as intermediate bear
corrective phases land. So please keep that in mind as you read our thoughts
on what we expect to see in 2010, as following the trends is the optimal and
safest way to make money over the long term.
2010 should be a tumultuous year as the great bear returns. We see the action
of 2009 as a bear market partial recovery bounce after the first down-leg of
the great bear ended in March, 2009. Once the current rally exhausts itself,
we expect the second down-leg of the great bear to land, and one that should
be of equal length, or longer than, the brutal swoon of October 2007-March
2009. The technical action during the recovery bounce run-up - the post March
2009 rally - speaks strongly of the rally being nothing more than a sucker
advance designed to trap the unwary into believing the bear was over and a new
bull move underway. Such action is the classic set-up to a brutal reversal of
fortunes that few are expecting. There are also a couple of major fundamental
reasons why we believe the bull case to be all bull.
1) The debt de-leveraging process is for real, persistent, and no where near
complete. For the economic recovery to stick we would need to see not only an
end to the de-leveraging process, but also a return to debt expansion, and
such a nirvana turnaround is a very long way from happening. Banks remain
unwilling to lend; the economy continues to provide too much supply; which
should all lead to more bankruptcies, more unemployment, and falling prices
till the de-leveraging process completes and the economy reaches a balance of
supply matching demand.
2) Aging baby-boomers, like banks, continue to hoard cash as they increase
savings, and remain very picky consumers, avoiding big ticket items like the
plague. Since consumers are 70% of the economy, and large ticket industries
such as automakers and homebuilders need a resumption of past buying frenzies
just to be able to stay in business, they are hardly likely to step forward to
borrow and spend on mass debt, which means, yes, it is different this time
around and the financial day of reckoning is here now that the financial
musical chair song has ended.
3) Taxes are going up next year, and way up in 2011 and beyond, while
government deficit spending increases dramatically as money is shifted from
the haves to the have nots. Rising taxes in the face of rising unemployment,
along with increased in trade protections, were hallmark of past depressions,
and repeating things over and over while expecting a different outcome is the
definition of insanity. Those who forget history are destined to repeat it.
4) Government control of the economy never works, as the 1930s US/Europe, post
1989 Japan, and entire Soviet experience can attest to. Raw capitalism where
winners can climb on the backs of the losers is the best way to grow the
economy as a whole, and if we want to be all the same then we can be, for we
can all be poor and unemployed. We live in a world where losers are not
allowed to exist, thus winners will diminish in numbers as their money is
whisked away to help the growing numbers of have nots. Since politics is a
numbers game, the dwindling number of winners will be outvoted by such a wide
margin that I’m afraid our economic fate is sealed, or soon will be, on the
backs of unintended consequences of good intentions.
So for our expectations in 2010:
1) The stock market should see a major life-changing peak, somewhere between
Dow 10,500 (here) and 12,000, and then crash and crash and crash as the March
2009 lows get taken out in a big way.
2) We should see a complete unwinding of the USD carry-trade, which we aptly
call the lemming trade. While selling US dollars to buy gold and other
commodities, as well as stocks and all things China were the major trends of
2009, next year should see the exact opposite, as the race begins to grab
dollars as the imploding debt bubble leaves too many individuals,
corporations, institutions, and countries swimming naked and overexposed to
debt backed by too little capital. Gold should get cut in half. Oil should
revisit and surpass the $35 per barrel area. China will implode, leading stock
markets around the world into a crashing retest of the March lows, which will
likely be breached by a significant margin.
3) 2010 should be the year of currency crises, with the British Pound the
crown jewel of pending disasters, with the EURO not far behind in the race to
the bottom.
4) Unemployment will rise to the very unexpected 12-14% range, creating an
“off with their heads” mentality among voters as we head into the mid-term
elections later in the year.
5) Voters will - eventually - balk at governments giving money to failing
institutions, which means some very big name financial companies will go the
way of the Dodo. AIG, Citibank, Chrysler, are sure to be in the crosshairs of
such former too-big-to-fail companies who run out of money and time, though
they will likely be the tip of a very large financial iceberg. Once one goes,
all of them will suffer a collapse as investors shoot first and ask questions
later, leaving each company struggling to show they have the means to survive.
I could go on, but basically what we are facing is the reality of what was
threatened by the 2007-2009 bear market collapse, only this time no one will
be fooled into believing anyone can save us, as the FED and government lose
all credibility as all attempts to stem the financial blood-letting fail. A
dark prediction, yes, though the good news is that eventually, once the
winners have been separated from the losers and the debt de-leveraging problem
gets defaulted away, the economy can start to grow again and the future can
once again be expected to be brighter than the past.
If the economy and financial markets want to prove this analysis flawed, and
dead wrong - which given the dark nature of our expectation we BETTER be wrong
- then we have no problem making money on the long side as we follow the stock
markets higher. As we always say, and we repeat here again, the only opinion
one should listen to is that of the stock market. Just keep in mind the
potential severity of the situation facing us I’ve just outlined if indeed the
stock market begins to slide, as failing to follow those trends could have
life changing consequences, and I don’t want any of us following those
lemmings over the day of reckoning cliff.
Now try and have a great weekend and stay away from ledges and knives!
401K investors should be invested in money market funds.
Kevin Wilde, Chief Trading Strategist, AlphaKing.com
Friday, December 18, 2009
Wednesday, December 16, 2009
Friday, December 11, 2009
Wednesday, December 9, 2009
Friday, November 20, 2009
Thursday, November 19, 2009
Wednesday, November 11, 2009
Gotta Wonder ...Still Learning..
Hey!
How many months have we heard the economy is sinking, govt debt increasing / expanding, unemployment up, housing down etc??? Therefore, the stock market would be falling.
Makes sense....
However, from March 09...the market has increased significantly...and continues breaking to new highs!
Where are we? What is going on?
Gold is as well breaking to new highs?
Thinking this situation is very very different.
US$ are not worth much. Therefore the conversion to anything that is tangible (exclude US real estate - that is over priced).
Real assets - not paper
I have been sitting on the side lines....expecting a pull back.
How many months have we heard the economy is sinking, govt debt increasing / expanding, unemployment up, housing down etc??? Therefore, the stock market would be falling.
Makes sense....
However, from March 09...the market has increased significantly...and continues breaking to new highs!
Where are we? What is going on?
Gold is as well breaking to new highs?
Thinking this situation is very very different.
US$ are not worth much. Therefore the conversion to anything that is tangible (exclude US real estate - that is over priced).
Real assets - not paper
I have been sitting on the side lines....expecting a pull back.
Tuesday, November 10, 2009
Monday, November 9, 2009
Sunday, November 8, 2009
Thursday, November 5, 2009
Wednesday, November 4, 2009
Tuesday, November 3, 2009
Monday, November 2, 2009
Sunday, November 1, 2009
Saturday, October 31, 2009
Friday, October 30, 2009
Wednesday, October 28, 2009
Tuesday, October 27, 2009
Saturday, October 24, 2009
Friday, October 23, 2009
Thursday, October 22, 2009
Wednesday, October 21, 2009
Tuesday, October 20, 2009
Saturday, October 17, 2009
Friday, October 16, 2009
Tuesday, October 13, 2009
Monday, October 12, 2009
No Country for Old Jobs: 10 Charts Showing the Fragile Recovery. Home Sales, Buying versus Renting, Unemployment, and Real Economy Data. » Dr. Housing Bubble Blog
Sunday, October 11, 2009
Saturday, October 10, 2009
COT - Weekly Summary
S&P - Current- Long; Nov 2 - Bearish
Oil - Current - Flat; Oct 19 - Bearish
Gold - Current - Flat
Natural Gas - Current - Flat; Oct 19 - Bearish
Oil - Current - Flat; Oct 19 - Bearish
Gold - Current - Flat
Natural Gas - Current - Flat; Oct 19 - Bearish
Friday, October 9, 2009
Wednesday, October 7, 2009
Tuesday, October 6, 2009
Sunday, October 4, 2009
Are we heading the right way?
From Robert McHugh
https://www.technicalindicatorindex.com/Default.asp
The Labor Department reported Friday that Unemployment for September rose to 9.8 percent. One out of ten Americans who are seeking work, are out of work. If laid off full time workers settling for part-time work are included, the unemployment rate in the U.S. is now up to 17 percent. If we include discouraged workers who are no longer seeking employment (they are not included in the Labor Department's unemployment figures), then the unemployment figures rise to 10.1 percent and 17.3 percent.
The problem is getting worse, and evolving into a crisis of Family Household income. Consumers account for 70 percent of all spending, of GDP. The Labor Department reported Friday that 263,000 more people lost jobs in September, non-farm payroll job losses, but actually the number was even worse than reported because the Labor Department reduced the actual number of job losses by "let's pretend" jobs that they imagined in their deepest melatonin dreams were created, they think, by start-up businesses to the tune of 34,000. The actual number of non-farm jobs losses were 297,000 if you ignore this fantasy and get real. The U.S. needs to add 150,000 new jobs each month to simply accommodate population growth. So the short-fall from break-even in September was actually closer to half a million jobs. Even government jobs fell 53,000 in September.
At this moment, 36 million Americans are on Food Stamps. One out of every six jobs in the U.S. feeds off the Health Care Industry. One sixth of our Gross Domestic Product is spent on sickness, either prevention, detection, treatment, or insurance. Is this a formula for prosperity in any nation?
https://www.technicalindicatorindex.com/Default.asp
The Labor Department reported Friday that Unemployment for September rose to 9.8 percent. One out of ten Americans who are seeking work, are out of work. If laid off full time workers settling for part-time work are included, the unemployment rate in the U.S. is now up to 17 percent. If we include discouraged workers who are no longer seeking employment (they are not included in the Labor Department's unemployment figures), then the unemployment figures rise to 10.1 percent and 17.3 percent.
The problem is getting worse, and evolving into a crisis of Family Household income. Consumers account for 70 percent of all spending, of GDP. The Labor Department reported Friday that 263,000 more people lost jobs in September, non-farm payroll job losses, but actually the number was even worse than reported because the Labor Department reduced the actual number of job losses by "let's pretend" jobs that they imagined in their deepest melatonin dreams were created, they think, by start-up businesses to the tune of 34,000. The actual number of non-farm jobs losses were 297,000 if you ignore this fantasy and get real. The U.S. needs to add 150,000 new jobs each month to simply accommodate population growth. So the short-fall from break-even in September was actually closer to half a million jobs. Even government jobs fell 53,000 in September.
At this moment, 36 million Americans are on Food Stamps. One out of every six jobs in the U.S. feeds off the Health Care Industry. One sixth of our Gross Domestic Product is spent on sickness, either prevention, detection, treatment, or insurance. Is this a formula for prosperity in any nation?
Friday, October 2, 2009
Thursday, October 1, 2009
Wednesday, September 30, 2009
Tuesday, September 29, 2009
Sunday, September 27, 2009
Saturday, September 26, 2009
Friday, September 25, 2009
Friday, August 28, 2009
Bull's still running....
Ben Bernanke nearly collapsed a lung patting himself on the back last week at the annual Jackson Hole economic wonk confab. According to the Great One himself, it is only through the heroic efforts of the Fed and Treasury that the financial sun continues to climb above the horizon each morning.
Tuesday, August 18, 2009
Sunday, August 16, 2009
Ben is learning....
"Back in 2002, before he became chairman of the Federal Reserve, Ben Bernanke claimed that if short-term interest rates fell to zero, a central bank still had the ultimate weapon: printing money by purchasing government bonds. Having now actually tried quantitative easing himself, Mr Bernanke is discovering its limits."
― Economist Magazine August 13, 2009
― Economist Magazine August 13, 2009
Saturday, August 15, 2009
What's Next ? Inflation or Deflation or ?
There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.
- Ludwig von Mises
- Ludwig von Mises
Friday, August 14, 2009
Monday, August 10, 2009
Friday, August 7, 2009
Tuesday, August 4, 2009
Greenspan Reports that the Recovery is in progress
Collapse, I think, is now off the table,” said Alan Greenspan over the weekend, pedal to the metal. “I’m pretty sure we’ve already seen the bottom… it’s clear that we’ve turned, perhaps in the middle of last month, the middle of July.”
“I do think it is possible that we could get a second wave down,” he cautioned, literally seconds later. “But the important issue is if we don't -- and I think the probability is that we won't -- that we are close to stabilization.”
So the worst is over, unless it gets bad again.
From Agora Financial 5 min
“I do think it is possible that we could get a second wave down,” he cautioned, literally seconds later. “But the important issue is if we don't -- and I think the probability is that we won't -- that we are close to stabilization.”
So the worst is over, unless it gets bad again.
From Agora Financial 5 min
Sunday, August 2, 2009
Time to Buy?
It is amazing that anyone would go long an equity market with a reported P/E multiple of 700x but that is indeed what we have on our hands. The end of the recession and the onset of a sustainable recovery, as we saw in 2002, are not the same thing. So this could still end badly but we will await confirmation signs that this is more than a very flashy bear market rally before shifting gears.” ― David Rosenberg, Chief Economist Gluskin, Sheff in a note to clients July 31
Robert Shiller on Charlie Rose
Good interview
Robert Shiller has written a book, Animal Spirits. Looks like an interesting read, it helps explain the economy and markets.
Robert Shiller on Charlie Rose
Posted using ShareThis
Robert Shiller has written a book, Animal Spirits. Looks like an interesting read, it helps explain the economy and markets.
Robert Shiller on Charlie Rose
Posted using ShareThis
Saturday, August 1, 2009
Good Investment for now
"Until opportunities, major ones, present
themselves to me, my money is 100%
parked in bank money-market accounts."
- Irwin Yamamoto
themselves to me, my money is 100%
parked in bank money-market accounts."
- Irwin Yamamoto
The Great Reflation Experiment
From John Mauldin - July 31, 2009
By Tony Boeckh and Rob Boeckh
The Crash of 2008/9 should be seen as yet another consequence of long-term, persistent US inflationary policies. Inflation doesn't stand still. It tends to establish a self-reinforcing cycle that accelerates until the excesses in money and credit become so extreme that a correction is triggered. The bigger the inflation, the bigger the correction. Once a dependency on credit expansion is well established, correcting the underlying imbalances becomes extremely difficult. Reflation has occurred after each major correction, and this one is proving no exception. Return to discipline in the current environment would be too painful and dangerous. Once on the financial roller coaster, it is very hard to get off. Moreover, the oscillations between peaks and valleys become increasingly large and unstable.
Policymakers, money managers, and most forecasters have argued that the crash was a "black swan" event, meaning that it had an extremely low probability of occurrence. That is grossly misleading, as it implies that the crash was so far beyond the realm of normal probabilities that it was unreasonable to expect anyone to have foreseen it. That argument has been used to justify the widespread complacency that prevailed in the years leading up to the crash. Policymakers are still failing to recognize the systemic causes of the crash and seem to believe that enhanced regulation will prevent history from repeating. While it is true that regulators were asleep at the switch or looking the other way, they were not the cause.
The Debt Super Cycle
The real culprit is the US debt super cycle, which has operated for decades, mostly in a remarkably benign manner.
Link to article
By Tony Boeckh and Rob Boeckh
The Crash of 2008/9 should be seen as yet another consequence of long-term, persistent US inflationary policies. Inflation doesn't stand still. It tends to establish a self-reinforcing cycle that accelerates until the excesses in money and credit become so extreme that a correction is triggered. The bigger the inflation, the bigger the correction. Once a dependency on credit expansion is well established, correcting the underlying imbalances becomes extremely difficult. Reflation has occurred after each major correction, and this one is proving no exception. Return to discipline in the current environment would be too painful and dangerous. Once on the financial roller coaster, it is very hard to get off. Moreover, the oscillations between peaks and valleys become increasingly large and unstable.
Policymakers, money managers, and most forecasters have argued that the crash was a "black swan" event, meaning that it had an extremely low probability of occurrence. That is grossly misleading, as it implies that the crash was so far beyond the realm of normal probabilities that it was unreasonable to expect anyone to have foreseen it. That argument has been used to justify the widespread complacency that prevailed in the years leading up to the crash. Policymakers are still failing to recognize the systemic causes of the crash and seem to believe that enhanced regulation will prevent history from repeating. While it is true that regulators were asleep at the switch or looking the other way, they were not the cause.
The Debt Super Cycle
The real culprit is the US debt super cycle, which has operated for decades, mostly in a remarkably benign manner.
Link to article
Friday, July 31, 2009
Thursday, July 30, 2009
Wednesday, July 29, 2009
Tuesday, July 28, 2009
Sunday, July 26, 2009
Monday, July 20, 2009
Economist - What went wrong with Economics
From the Daily Reckoning
In the meantime, The Economist magazine, that august font of accepted wisdom, tells us "what went wrong with economics."
Nobel Prize winner Paul Krugman remarked that the learning of the past 30 years in macroeconomics was "spectacularly useless at best, and positively harmful at worst."
The Economist responds: 'What went wrong with economics?' it asks. Not much, it concludes.
Except that its most precious theories are claptrap. And its most prominent experts are nincompoops. And it helped cause the biggest economic crisis in perhaps half a century...failed to see it coming...failed to understand it...and then made it worse by offering to fix it.
Apart from that...macroeconomics is fine.
In the meantime, The Economist magazine, that august font of accepted wisdom, tells us "what went wrong with economics."
Nobel Prize winner Paul Krugman remarked that the learning of the past 30 years in macroeconomics was "spectacularly useless at best, and positively harmful at worst."
The Economist responds: 'What went wrong with economics?' it asks. Not much, it concludes.
Except that its most precious theories are claptrap. And its most prominent experts are nincompoops. And it helped cause the biggest economic crisis in perhaps half a century...failed to see it coming...failed to understand it...and then made it worse by offering to fix it.
Apart from that...macroeconomics is fine.
Sunday, July 19, 2009
Tuesday, July 14, 2009
Saturday, July 11, 2009
Oil Prices
How low can crude oil go?
After trading as high as $73 a barrel, crude oil began to buckle under pressure as the CFTC began to look into position limits that can be held by traders. Adam Hewison, Market Club, presented this one live during the Wednesday July 8, 2009 trading session.
In Adam Hewison’s new video you will see what has happened to crude oil in the last eight days. You’ll will also see what he believes will be the area that crude oil will find support.
Click here to watch this charting analysis video presented by Adam Hewison of Market Club.
Friday, July 10, 2009
Here's How Messed Up Our Financial System Is
Motley Fool
Morgan Housel
June 15, 2009
Morgan Housel
June 15, 2009
Credit default swaps (CDSes) are insurance policies on various debt products -- everything from subprime mortgages to U.S. government debt. A seller agrees to compensate a buyer if debt goes into default. It's not too different from car insurance: two parties swap risk for a premium. And just like car insurance, it can be a great tool to efficiently spread risk to those who want it from those who can't handle it. So why does Munger, Berkshire Hathaway's (NYSE: BRK-A) (NYSE: BRK-B) co-chairman, want them banned? See, in everyday life, you can't insure things you don't own. Thankfully, your neighbor can't take out homeowners insurance on your house. If the entire town could buy insurance on one house, they'd have a huge incentive to make sure it was destroyed. They'd burn it down, blow it up, bulldoze it, what have you, pocket gobs of insurance claims for their trouble, and happily move onto the next town. For good reason, laws prohibit this. With credit default swaps, there are no such laws. Investors can take out infinite amounts of insurance on debt products they don't own. This seriously distorts the motives and incentives between buyers and sellers. CDSes often don't act as insurance, but a tool to manipulate stupidly large amounts of money and rip gaping holes in the financial system, a la AIG (NYSE: AIG). The Wall Street Journal recently reported an almost comical example of this. It tells the story of a tiny Texas brokerage firm called Amherst Holdings which, likely along with other CDS underwriters, took a $27 million debt security and sold $130 million of credit default protection on it. Big banks like RBS (NYSE: RBS) JPMorgan Chase (NYSE: JPM) and Bank of America (NYSE: BAC) bought these CDSes. The debt, when reviewed, was total garbage and almost certain to default, so the banks had no problem paying up for the insurance. Now, think about this for a moment: Amherst, and likely other CDS counterparties, pocketed $130 million to insure $27 million worth of bonds. So what do you think Amherst did? Exploiting a small loophole, it used the proceeds to have the underlying bonds bought back at par, which instantly rendered the credit default swaps worthless. It was incentivized to do this because the amount it took in from CDS proceeds substantially exceeded the bond's par value, so it could burn millions of dollars buying out the bonds and still make a tidy profit. By making the bonds whole, there was zero chance of default, so Amherst's insurance obligation disappeared. Of course, there really was no insurance involved. There wasn't even an investment. As Munger notes in the opening quote, it's simply a vast, unregulated game of poker. Spun the other way, CDS buyers have an incentive to make sure underlying debt defaults. They can achieve this by buying CDSes for multiple times a company's debt load and causing a run on its assets. Indeed, this is exactly what many believe ultimately pushed Lehman Brothers into bankruptcy. In the utopic minds of those who created them, credit default swaps prevent meltdowns and mitigate risk. In reality, scarcely anything in our economy possesses a greater risk of bringing down the house. Thanks to the ability to insure debt for multiple times its value, the notional size of the CDS market is more than $38 trillion, or nearly three times U.S. GDP. That's $126,000 for every man, woman, and child in America. This is quite literally a poker game multiple times the size of the entire economy. Yet we've still done very little to fix it. CDSes are still sold, bought, and traded in staggeringly large sums based on rules dictated by those who created them. As Goldman Sachs' (NYSE: GS) annual report states, "The market for credit default swaps is relatively new, although very large, and it has proven to be extremely volatile and currently lacks a high degree of structure or transparency." Whoo-hoo! Read that quote again, remind yourself what got us here in the first place, pound your head on the table, and ask yourself why we hold frequent congressional hearings to quibble over things like executive pay, but sweep issues like credit default swaps under the table and hope they fix themselves.
Still Smart to Bet Against Treasury Bonds
From Barron's
THURSDAY, JULY 9, 2009
HULBERT ON MARKETS Though they've fallen in price, these long-term investments remain a poor choice.
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Monday, July 6, 2009
Thursday, July 2, 2009
Freedom in Honduras!!
A 'coup' in Honduras? Nonsense.
By Octavio Sánchez
Tegucigalpa, Honduras – Sometimes, the whole world prefers a lie to the truth. The White House, the United Nations, the Organization of American States, and much of the media have condemned the ouster of Honduran President Manuel Zelaya this past weekend as a coup d'état.
That is nonsense.
In fact, what happened here is nothing short of the triumph of the rule of law.
To understand recent events, you have to know a bit about Honduras's constitutional history. In 1982, my country adopted a new Constitution that enabled our orderly return to democracy after years of military rule. After more than a dozen previous constitutions, the current Constitution, at 27 years old, has endured the longest.
It has endured because it responds and adapts to changing political conditions: Of its original 379 articles, seven have been completely or partially repealed, 18 have been interpreted, and 121 have been reformed.
It also includes seven articles that cannot be repealed or amended because they address issues that are critical for us. Those unchangeable articles include the form of government; the extent of our borders; the number of years of the presidential term; two prohibitions – one with respect to reelection of presidents, the other concerning eligibility for the presidency; and one article that penalizes the abrogation of the Constitution.
During these 27 years, Honduras has dealt with its problems within the rule of law. Every successful democratic country has lived through similar periods of trial and error until they were able to forge legal frameworks that adapt to their reality. France crafted more than a dozen constitutions between 1789 and the adoption of the current one in 1958. The US Constitution has been amended 27 times since 1789. And the British – pragmatic as they are – in 900 years have made so many changes that they have never bothered to compile their Constitution into a single body of law.
Under our Constitution, what happened in Honduras this past Sunday? Soldiers arrested and sent out of the country a Honduran citizen who, the day before, through his own actions had stripped himself of the presidency.
These are the facts: On June 26, President Zelaya issued a decree ordering all government employees to take part in the "Public Opinion Poll to convene a National Constitutional Assembly." In doing so, Zelaya triggered a constitutional provision that automatically removed him from office.
Constitutional assemblies are convened to write new constitutions. When Zelaya published that decree to initiate an "opinion poll" about the possibility of convening a national assembly, he contravened the unchangeable articles of the Constitution that deal with the prohibition of reelecting a president and of extending his term. His actions showed intent.
Our Constitution takes such intent seriously. According to Article 239: "No citizen who has already served as head of the Executive Branch can be President or Vice-President. Whoever violates this law or proposes its reform [emphasis added], as well as those that support such violation directly or indirectly, will immediately cease in their functions and will be unable to hold any public office for a period of 10 years."
Notice that the article speaks about intent and that it also says "immediately" – as in "instant," as in "no trial required," as in "no impeachment needed."
Continuismo – the tendency of heads of state to extend their rule indefinitely – has been the lifeblood of Latin America's authoritarian tradition. The Constitution's provision of instant sanction might sound draconian, but every Latin American democrat knows how much of a threat to our fragile democracies continuismo presents. In Latin America, chiefs of state have often been above the law. The instant sanction of the supreme law has successfully prevented the possibility of a new Honduran continuismo.
The Supreme Court and the attorney general ordered Zelaya's arrest for disobeying several court orders compelling him to obey the Constitution. He was detained and taken to Costa Rica. Why? Congress needed time to convene and remove him from office. With him inside the country that would have been impossible. This decision was taken by the 123 (of the 128) members of Congress present that day.
Don't believe the coup myth. The Honduran military acted entirely within the bounds of the Constitution. The military gained nothing but the respect of the nation by its actions.
I am extremely proud of my compatriots. Finally, we have decided to stand up and become a country of laws, not men. From now on, here in Honduras, no one will be above the law.
Octavio Sánchez, a lawyer, is a former presidential adviser (2002-05) and minister of culture (2005-06) of the Republic of Honduras.
Wednesday, July 1, 2009
Banks or Hedge Funds
A Story within the Story
Following the collapse of the biggest credit bubble in history, there has
been no shortage of finger pointing and the hedge fund industry, which has
always had an uncanny ability to be at the wrong place at the wrong time,
has yet again been at the centre of attention. And politicians, keen to divert
attention away from themselves as the true culprits of the crisis through
years of regulatory neglect, have been quick at picking up the baton.
Admittedly, the hedge fund industry is guilty of many stupid things over
the years, but blaming it for the credit crisis is beyond pathetic and the
suggestion that increased regulation of the hedge fund industry is going to
prevent future crises is outrageously naïve.
If you prohibit private investors from investing in hedge funds which on
average use 1.5-2 times leverage but permit the same investors to invest in
banks which use 25 times leverage and which are for all intents and
purposes bankrupt, then you either don’t understand the world of finance
or you don’t want to understand. Shame on those who fall for cheap tactics
Following the collapse of the biggest credit bubble in history, there has
been no shortage of finger pointing and the hedge fund industry, which has
always had an uncanny ability to be at the wrong place at the wrong time,
has yet again been at the centre of attention. And politicians, keen to divert
attention away from themselves as the true culprits of the crisis through
years of regulatory neglect, have been quick at picking up the baton.
Admittedly, the hedge fund industry is guilty of many stupid things over
the years, but blaming it for the credit crisis is beyond pathetic and the
suggestion that increased regulation of the hedge fund industry is going to
prevent future crises is outrageously naïve.
If you prohibit private investors from investing in hedge funds which on
average use 1.5-2 times leverage but permit the same investors to invest in
banks which use 25 times leverage and which are for all intents and
purposes bankrupt, then you either don’t understand the world of finance
or you don’t want to understand. Shame on those who fall for cheap tactics
Saturday, June 13, 2009
Thursday, June 11, 2009
Canada is the Place in Live!
The Economist Intelligence Unit Poll today released the ranking of the cities in the world to live. Three Canadian cities were in the top ten! Rankings were:
Vancouver
Vienna
Melbourne
Toronto
Perth
Calgary
Helsinki
Geneva
Sydney
Zurich
Last was Harare the capital of Zimbabwe
UK cities of London was number 51 and Manchester was 46.
Maybe I need to move back to Canada!
Vancouver
Vienna
Melbourne
Toronto
Perth
Calgary
Helsinki
Geneva
Sydney
Zurich
Last was Harare the capital of Zimbabwe
UK cities of London was number 51 and Manchester was 46.
Maybe I need to move back to Canada!
Wednesday, June 10, 2009
Time to Buy REITs?
I read but did not act....recommended REITs are up 30% in a month!
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From Porter Stansberry's Investment Advisory, May 2009
Why do I think the bear market in REITs is over? Because the floodgates of new capital have opened... Sentiment and access to capital play a huge role in real estate prices. The more capital that's available, the higher prices will move. The higher prices move, the more capital becomes available – because there's more collateral. Sentiment is incredibly important to these markets because it opens the flow of new capital.
And sentiment is now completely different than it was in March. Simon Property announced another equity offering [in addition to the $500 million it raised in March] – this time $800 million in new equity. The fact that REITs have this kind of access to capital tells me the yield spread has peaked and it's time to buy REITs.
***********
From Porter Stansberry's Investment Advisory, May 2009
Why do I think the bear market in REITs is over? Because the floodgates of new capital have opened... Sentiment and access to capital play a huge role in real estate prices. The more capital that's available, the higher prices will move. The higher prices move, the more capital becomes available – because there's more collateral. Sentiment is incredibly important to these markets because it opens the flow of new capital.
And sentiment is now completely different than it was in March. Simon Property announced another equity offering [in addition to the $500 million it raised in March] – this time $800 million in new equity. The fact that REITs have this kind of access to capital tells me the yield spread has peaked and it's time to buy REITs.
Tuesday, June 9, 2009
Gold or Savings in Bank?
Investment in gold pays no interest.
Money in the bank pays almost no interest. However, governments can print money, but they can't print gold.
If the Central Banks keeps interest rates near zero for the foreseeable future, the obvious outcome is that it will take more slips of paper (dollar bills) to buy gold.
Money in the bank pays almost no interest. However, governments can print money, but they can't print gold.
If the Central Banks keeps interest rates near zero for the foreseeable future, the obvious outcome is that it will take more slips of paper (dollar bills) to buy gold.
History lesson for economists in thrall to Keynes
Very good points by Niall Ferguson regarding why interest rates will be going up.
*****************
From the FT London May 29, 2009 By Niall Ferguson May 29, 2009
On Wednesday last week, yields on 10-year US Treasuries – generally seen as the benchmark for long-term interest rates – rose above 3.73 per cent. Once upon a time that would have been considered rather low. But the financial crisis has changed all that: at the end of last year, the yield on the 10-year fell to 2.06 per cent. In other words, long-term rates have risen by 167 basis points in the space of five months. In relative terms, that represents an 81 per cent jump.
*****************
From the FT London May 29, 2009 By Niall Ferguson May 29, 2009
On Wednesday last week, yields on 10-year US Treasuries – generally seen as the benchmark for long-term interest rates – rose above 3.73 per cent. Once upon a time that would have been considered rather low. But the financial crisis has changed all that: at the end of last year, the yield on the 10-year fell to 2.06 per cent. In other words, long-term rates have risen by 167 basis points in the space of five months. In relative terms, that represents an 81 per cent jump.
Most commentators were unnerved by this development, coinciding as it did with warnings about the fiscal health of the US. For me, however, it was good news. For it settled a rather public argument between me and the Princeton economist Paul Krugman.
Thursday, June 4, 2009
Quote of the Day
"Don't tell me where your priorities are. Show me where you spend your money and I'll tell you what they are." - James W. Frick
Wednesday, June 3, 2009
Julian Robertson's Steepener Swap Play
From Market Folly - Short Treasuries and Bonds, inflation is coming. But not now, there has been a huge drop in bond prices eg 25% ytd 2009. They should be finally due for a correction.
*************
Simply put, Julian Robertson is the definition of a hedge fund legend. And, his success is noted by the fortune he has amassed as he now graces the Forbes' billionaire list. He has pioneered a successful investment methodology, he has generated outstanding returns at his famous hedge fund Tiger Management, and his influence has sprouted some of the most successful modern day hedge funds in the form of the 'Tiger Cubs.' And, most importantly, he predicted the financial crisis two and a half years ago in an interview with Value Investor Insight. When he talks, you listen.....
The sudden and rapid decline is most likely due for a correction and we do not feel that the current time is ideal to initiate a position in shorting treasuries. We would look for any sign of a rebound before putting on a new short position. That said, we still feel the move in treasuries will take many years to fully play out and this is a very long-term inflationary bet. While short-term moves like the one we've seen this year are nice, things could take much longer to play out than people realize. We consider the publication of our post on this topic to be a contrarian indicator. After all, when there are headlines saying for you to get into something after a big move has already taken place, it's time to at least take some profits. So, place your bets with caution, as you'll have plenty of time before inflation truly rears its ugly head.
*************
Simply put, Julian Robertson is the definition of a hedge fund legend. And, his success is noted by the fortune he has amassed as he now graces the Forbes' billionaire list. He has pioneered a successful investment methodology, he has generated outstanding returns at his famous hedge fund Tiger Management, and his influence has sprouted some of the most successful modern day hedge funds in the form of the 'Tiger Cubs.' And, most importantly, he predicted the financial crisis two and a half years ago in an interview with Value Investor Insight. When he talks, you listen.....
The sudden and rapid decline is most likely due for a correction and we do not feel that the current time is ideal to initiate a position in shorting treasuries. We would look for any sign of a rebound before putting on a new short position. That said, we still feel the move in treasuries will take many years to fully play out and this is a very long-term inflationary bet. While short-term moves like the one we've seen this year are nice, things could take much longer to play out than people realize. We consider the publication of our post on this topic to be a contrarian indicator. After all, when there are headlines saying for you to get into something after a big move has already taken place, it's time to at least take some profits. So, place your bets with caution, as you'll have plenty of time before inflation truly rears its ugly head.
Cinnamond Tops Bill Gross in Lone Victory for Stocks Over Bonds
From Bloomberg
Eric Cinnamond is the only diversified stock manager to beat Bill Gross’s Pimco Total Return Fund, the world’s biggest fixed-income fund.
Cinnamond said the fund excelled in 2008 because it had a cash hoard and a number of companies able to weather the economic and market slump, such as Chicago-based Oil-Dri, the world’s leading maker of cat litter.....It’s a perfect example of what we like,” he said. “It has a good balance sheet, good cash flow and it is predictable.”
Eric Cinnamond is the only diversified stock manager to beat Bill Gross’s Pimco Total Return Fund, the world’s biggest fixed-income fund.
Cinnamond said the fund excelled in 2008 because it had a cash hoard and a number of companies able to weather the economic and market slump, such as Chicago-based Oil-Dri, the world’s leading maker of cat litter.....It’s a perfect example of what we like,” he said. “It has a good balance sheet, good cash flow and it is predictable.”
Bullish Expectations Don't Bode Well for Gold
From the WSJ / Barron's.... timing is important
The buzz that that bullion will climb above $1000 an ounce could very well doom its chances. There 's talk that the price of gold bullion will once again get back to trading above the $1,000 level, where it has been three times before over the last 18 months.
Tuesday, June 2, 2009
Quote...
"Magnitude of losses and profits is purely a matter of position size. Controlling position size is
indispensable to success. Of all the traits necessary to trade successfully, this factor is the
most undervalued." - Mark Ritchie
indispensable to success. Of all the traits necessary to trade successfully, this factor is the
most undervalued." - Mark Ritchie
The report said global demand for gold rose 38 percent year-on-year to 1,016 tons, representing a 36 percent rise in value. China is the world's second largest gold consuming country after India.
China students laughed at Geithner
What was it?
U.S. Treasury Secretary Tim Geithner told a crowd of students in Beijing that the trillion dollars worth of U.S. government bonds the Chinese hold are "very safe."
The Students laughed....they know better.
U.S. Treasury Secretary Tim Geithner told a crowd of students in Beijing that the trillion dollars worth of U.S. government bonds the Chinese hold are "very safe."
The Students laughed....they know better.
Sunday, May 31, 2009
Canadian Dollar Gains Most Since 1950
I have been Long Canadian Dollar; think Canada has their affairs in much better shape than other countries (US UK), as well, Canada has the strongest banking industry. In addition, Canada has good resources. But Canada's currency suffered a bit during the recent US $ run up. However, why would one ever trade CAD for USD? USD is fundamentally unstable and in particular with what the US is doing and where it says it is going. The fundamentals are for Canada.
However, as the linked article reports a number of on Wall Street and Bay Street think the Canadian dollar is over done. But TD Securities, disagrees and thinks the Canadian dollar will be at par with the US by end of the year.
I agree with TD Securities. Canada is better managed than the US, and has stronger industry. Keep your investments in those strong resource currencies and avoid those which governments have announced QE quantitive easying (printing money).
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However, as the linked article reports a number of on Wall Street and Bay Street think the Canadian dollar is over done. But TD Securities, disagrees and thinks the Canadian dollar will be at par with the US by end of the year.
I agree with TD Securities. Canada is better managed than the US, and has stronger industry. Keep your investments in those strong resource currencies and avoid those which governments have announced QE quantitive easying (printing money).
*************
“Traders and speculators continue to push, and the U.S. dollar is so receptive to weakness that it’s an easy case to make,” said Eric Lascelles, Toronto-based chief economics and rates strategist at TD Securities Inc. “It’s the risk-appetite story right now that’s dominant.”
The loonie appreciated to C$1.0915 per U.S. dollar in Toronto yesterday, from C$1.1925 on April 30. It touched the strongest level yesterday since Oct. 6, C$1.0892. One Canadian dollar buys 91.61 U.S. cents.
Market - COT
COT reports:
S&P - Moves to Cash June 1st
Gold - Long June 1st
Oil - Long from May 25th
US Banks (BKX) - Long from May 25th
S&P - Moves to Cash June 1st
Gold - Long June 1st
Oil - Long from May 25th
US Banks (BKX) - Long from May 25th
S&P 500 Rally Is in Last Stages, Aurel Says: Technical Analysis
It does feel like the market is slowing down. Time for a correction? Maybe time to move to Cash
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May 28 (Bloomberg) -- The two-month rally in U.S. stocks is in its final stages and a correction will take place in the coming weeks, according to a technical analyst at Aurel BGC.
“The speed of the market’s gains is slower and slower,” Paris-based Alexandre Le Drogoff said in a phone interview yesterday. “Mathematical indicators are showing the market losing steam.”
Saturday, May 30, 2009
Most People do not change
Gary North writes: Most people will not change. Too radical. Not going with the flow. Not betting against the herd.
The best examples in the 20th century were Jews in Germany in 1933. They stayed. This included Jewish bankers, all of whom could have left. They thought they could deal with Hitler. They did not read Mein Kampf. They did not take it seriously.
About 7% did leave early: 38,000 out of 523,000. More left after 1938. By 1941, about 160,000 remained in Germany. Then emigration was closed by the Nazis. Earlier, it was encouraged. The data are here.At some price, almost all could have left. There were countries that would have let them in. They would have had to learn a new language. They would have arrived in poverty. But Jews had faced those options ever since the Assyrian captivity in the eighth century B.C. So what?
They all would not have escaped the Nazis. Some would have moved to other European countries that were overrun by Germany after 1939. But they could have tried to get away. They stayed. They refused to acknowledge the warning signals. "It can't be that bad." It got worse.
Jews had an answer for worrywarts. "No problem. We can handle it."
The Armenians went through the same thing. The Turkish massacres of 1895 were a foretaste. Most stayed behind. Then came the genocide of 1915.
NO PROBLEM!
Look back at the economy in October 2007. The Dow was at 14,000. The banks were booming. Real estate was down a little, but the experts gave no warning. They were wrong. All of them.
The U.S. government is running a $1.8 trillion deficit this year. Federal tax receipts are down 34%, which means that the deficit will go above $2 trillion. No one cares. No one says, "This is the end. The American economy will never again be what it was."
Think "2007." Would you have believed that Chrysler and GM were both headed for bankruptcy? In October 2007 GM shares were at $43. Now they are at $1. There was an industry called investment banking. Bear Stearns, Lehman Brothers, and Goldman Sachs were not part of the commercial banking system. To survive, a few made the transition in September 2008. Some did not make the cut.
Merrill Lynch is gone. Bank of America and Citigroup were bailed out by the government. They would have gone under. They sell for a fraction of what they did in 2007.
And what do most people say? "No problem."
There is no problem for which their answer is not "no problem."
Medicare will go bust. Social Security will go bust. "No problem."
The unemployment rate keeps rising. "No problem."
When people refuse to face reality, because reality is going to be more painful than anything they have experienced, they look for signs that the problems they cannot avoid without changing are really not that bad. They look for offsetting good news.
They think the status quo ante will return. The U.S. government is about to spend another $30 billion to buy a dead carcass of a company. It has already spent $20 billion. "No problem."
The government will let the company stiff bondholders for $27 billion in exchange for 10% of the company, 72% owned by the government and 17% by the United Auto Workers medical insurance fund. "No problem."
Bondholders were originally told that it would take a 90% vote to authorize this. The government has changed the rules. It will determine after the May 30 vote by bondholders what percentage must approve. "No problem.
The company will never return to what it was. "No problem." People will not buy as many cars as before from a company run by the government and the United Auto Workers. "No problem."
The Dow rose 100 points on the rumor that the largest bondholders will accept the deal. The deal is a disaster, but investors are in "No problem" mode. Somehow, the wipeout is less of a wipeout.
Who is going to buy a GM car instead of a Japanese car? Here is a company that is about to break its contracts with thousands of its dealers. "No problem." Yet buyers are expected to trust a GM warranty.
Oldsmobile is gone. "No problem." Pontiac is going. "No problem." Cadillac sells its cars with an ad of a flash model putting the pedal to the medal. Hot stuff! The company thinks people with money will not see through this ad. The Cadillac division has lost its way. "No problem."
The price/earnings ratio for the S&P 500 is over 120. Traditionally, 20 was regarded a sell. The investor pays $120 on the hope that the stock will retain a dollar of earnings, and pay investors some minimal percentage of these earnings as dividends. "No problem."
We are watching the investment world adopting a lemming mentality that has always produced losses. "This time it's different. No problem."
CONSUMER CONFIDENCE
The Conference Board announced that consumer confidence is up to 55. The 50 figure is neutral. Yet consumer confidence is a lagging indicator historically. When it rises, the stock market usually falls.
The indicator is a reflection on what the stock market has done recently. To use consumer confidence as a justification for buying stocks is nonsense. This is like saying, "I will buy stocks because the public is confident, which based on the fact that stocks have risen." If that strategy worked, stocks would never stop rising.
Even hard-money newsletter readers are beginning to doubt that the recent good news is in fact "less worse than expected" bad news. This is the stuff of dreams that do not come true.
Readers look at the reports, and the reports look awful: falling home prices, rising unemployment, an astronomical Federal deficit. But the media say we are close to a bottom – the bottom of a crash that none of them forecasted.
Readers think, "by the standards of late 2007, what we are seeing daily was inconceivable." Optimists speak of a slow, weak recovery. Pessimists speak of hyperinflation and depression simultaneously. But as the chorus proclaims "No problem," the public mindlessly picks up this refrain.
"We have nothing to fear but . . . fear itself!" Yet as FDR delivered those words, Hitler was consolidating power in Germany. Stalin was beginning the purges. A quarter of the U.S. work force was unemployed. But Roosevelt began the refrain: "No problem." Four years later, unemployment was still 20%. The Federal deficit had ballooned. Happy days were not here again.
Your friends don't want to hear your pessimism anymore. They don't want to change. They will refuse to change.
In 1934, Ludwig von Mises realized that Hitler, an Austrian, would seek to bring Austria under German hegemony. He warned Jewish economists to leave. They had been his students at his famous seminar in Vienna. Fritz Machlup believed him, and came to the U.S. So did Gottfried Haberler. Mises went to Switzerland as a professor, leaving his great personal library behind. He fled to the U.S. in 1940, after France had fallen. He never got a full-time teaching job again.
A few listened. Most did not. "No problem."
HEARING, THEY WILL NOT HEAR
People count the costs of making a change. This is wise. Jesus taught:
For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it? Lest haply, after he hath laid the foundation, and is not able to finish it, all that behold it begin to mock him, Saying, This man began to build, and was not able to finish. Or what king, going to make war against another king, sitteth not down first, and consulteth whether he be able with ten thousand to meet him that cometh against him with twenty thousand? Or else, while the other is yet a great way off, he sendeth an ambassage [ambassador], and desireth conditions of peace (Luke 14:28–32).
In short, count the costs. This is what people have refused to do. They have counted the cost of doing something radical. It's high. They have counted the immediate cost of doing nothing new. It seems low. They prefer doing nothing.
But what about the long term? What about:
1. Retirement (no Social Security or Medicare)
2. The Federal Deficit ($1.8 trillion this year)
3. Federal Reserve's monetary base (doubled)
4. Falling house prices
5. Rising unemployment
6. The war in Afghanistan (forever, until our defeat)
"No problem!"
How do you reason with these people? Answer: you don't, if you value your time and your privacy. If you turn out to be wrong, you will be ridiculed or at least treated as a child. If you are correct, you will be hated. You will also be hit up for money. If you are a Christian, you will be told you are heartless. You will become a line of credit for those whose mantra was "No problem!"
They don't want to change. They will not change. They will not listen to you.
And when things turn out much worse than even most newsletter writers are forecasting, you will be hated. Are you prepared for this?
Do you have a real plan to deal with what is obviously an unfolding disaster: rising government ownership, massive deficits, rising unemployment, falling house prices, busted retirement pensions, rising interest rates (falling corporate bonds), and Federal Reserve inflation on a scale never seen in American history?
Or do you think you can delay. "No problem!"
CONCLUSION
We live in today's world. It's bad, but it's not a catastrophe. We must keep our heads above water.
A Tsunami is coming. In such a scenario, you have got to get out of the water and off the beach. But few people ever do, unless they have seen a tsunami. Few have.
Allocate some percent of your wealth to tsunami-avoidance. Do it quietly. Do not discuss this with your big-mouth brother-in-law.
What do you really think is likely to happen? Not what you would prefer will happen.
Think, "General Motors in October 2007"
Think Chrysler, Merrill Lynch, and Lehman Brothers.
No one saw it coming. It came.
Problems. Big, big problems.
Friday, May 29, 2009
Green Shoots or Smoking Weed?
From Absolute Return Partners, London - A good read on asset bubbles (US government to regulate them (hey, say what?), Obama's plans, real estate, the consumer and the global economy.
Our conviction remains high that the global economy will stage a recovery later this year but, unfortunately, we remain equally convinced that this will prove temporary. The main culprit are US property prices which are doing more damage to the purchasing power of US consumers than generally perceived. The poorest two thirds of US households are effectively bankrupt and the wealthiest one third are facing substantial tax hikes. This combination is lethal for US consumer spending, and what is poisonous for US consumers is bad for the global economy. We are therefore facing several more years of sub-par economic growth unless countries with high savings such as Germany can persuade their people to spend more.
Our conviction remains high that the global economy will stage a recovery later this year but, unfortunately, we remain equally convinced that this will prove temporary. The main culprit are US property prices which are doing more damage to the purchasing power of US consumers than generally perceived. The poorest two thirds of US households are effectively bankrupt and the wealthiest one third are facing substantial tax hikes. This combination is lethal for US consumer spending, and what is poisonous for US consumers is bad for the global economy. We are therefore facing several more years of sub-par economic growth unless countries with high savings such as Germany can persuade their people to spend more.
Thursday, May 28, 2009
Moody’s Opens Pandora’s Box on AAA Debt Ratings: William Pesek
More downgrades on government debts. This time it is Japan. UK has been put on the watch list and there are loud warning about US debt levels.
So where do you invest your money?
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So where do you invest your money?
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May 26 (Bloomberg) -- The shot Standard & Poor’s put across Britain’s bow last week made headlines. An earlier one by Moody’s Investors Service deserves more attention.
Wednesday, May 27, 2009
U.S. Inflation to Approach Zimbabwe Level, Faber Says
I do not see the US (or other countries) prepared to do what they should be doing. The political leaders do not have the will, and given what we have seen in the UK and US, the leaders can not be trusted to do what is right. I have to agree with Marc Faber to an extent.....there is lots of inflation risks. The bond markets and currency markets are agreeing.
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May 27 (Bloomberg) -- The U.S. economy will enter “hyperinflation” approaching the levels in Zimbabwe because the Federal Reserve will be reluctant to raise interest rates, investor Marc Faber said.
Yield Curve Steepens to Record as Debt Sales Surge
The US is having trouble finding buyers for its debt....although the Fed is trying to support the bond market, and lower interest rates, they are failing. $300 billion of printed money does not make it. The market rules.
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May 27 (Bloomberg) -- The difference in yields between Treasury two- and 10-year notes widened to a record on concern surging sales of U.S. debt will overwhelm the Federal Reserve’s efforts to keep borrowing costs low.
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May 27 (Bloomberg) -- The difference in yields between Treasury two- and 10-year notes widened to a record on concern surging sales of U.S. debt will overwhelm the Federal Reserve’s efforts to keep borrowing costs low.
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