Thursday, May 24, 2012

Finger on the Button; Hand on the Switch

As you may have guessed, I am in many conversations everyday about finance and economics.  The most frequent question I get is, "what should I do?".   My answer is the same-- You can start by having 3 months of your financial needs in cash.

They reply, "So what, everyone on TV and every financial adviser says you need to have 3 months of expenses as an emergency fund-- tell me something I don't know".   And then I say, "you need to have these 3 months of expenses in cash in your house or some other safe, accessible place."  "Do you?"  Almost everyone says no.

Today, I offer you food for thought by looking at google search frequency.  Don't have your head in the sand.


Source: Google Trends


In case you can't read the graph, in August of 2008, before the big crash and "Lehman Weekend", the number of people searching on the term "bank run" reached its peak. Today, the number of people searching the term "bank run" has set a new peak!


Two things you need to be aware of if you are a US resident (I am unfamiliar with the laws of other countries):

(1) The Frank/Dodd Financial Regulation bill didn't regulate as much as it gave financial institutions the authority to freeze the accounts of their customers if the board of the bank felt that the institution was threatened due to a bank run. Before this law, banks could not legally freeze money market accounts. Now they can and they don't need permission to do so- only probable cause.

(2) National defense related legislation gave the president of the US authority to shut down all or portions of the Internet in the interests of national security.


That means, all it takes is a press of a button and it doesn't matter how much money you have--- if you don't have it in your hand--- it is worthless.


Fore-warned is Fore-armed.

Sunday, May 20, 2012

PeakBook goes public -- What's in a name?

Dear Readers,
I enjoyed your creativity with Mark to Market.  Most notable additions were Mark to Mother and Mark to Manure.  I just can't resist opening up a new chapter on this year's "epic fail" which is the launch of FACEBOOK managing to net 23 cents per share gain (0.6%) after the underwriters pumped nearly $2Billion in end of day trades just to keep this puppy from closing at a loss.

So here we go... tell me your favorites and add to the list!  Obviously this company was completely mis-named:


Fadebook

Fecalbook

FadBook

FailBook

FaintBook

FakeBook

FallBook

FalseBook

FarceBook

FardBook

FartBook

FearBook



FaceBad

FaceBomb

FaceBilk

FaceBale

FaceBalk

FaceBank

FaceBarf

FaceBark

FaceBarn

FaceBash

FaceBask

FaceBong

FaceBoom

FaceBust

FaceBoot

FaceBore

Saturday, May 12, 2012

Mark to Market Fun

Clearly the news this week on JPMorgan and their "mark to market" problem is not fun for them.  I wrote about the fallacy of Mark to Market back on March 4, 2009 so if you need a tutorial click here.  Shortly after my posting, the US Government relaxed Mark to Market rules and the 2009 to 2012 stock market boom fueled by 0% interest rates from the Federal Reserve ("free money") took off. 

Now MTM is back in the news -- it is very inconvenient to have report the value of your holdings based on what someone else would buy them for.  That is why Financial Institutions prefer Mark to Model... They model what they would be worth under certain conditions (mostly good conditions) and then put the financial instruments on their books at that price.  This is the imaginary number system of high finance. 

I offer some additions to Mark to Market and Mark to Model (please add your thoughts in the comments):

Mark to Mood: Valuation of the security is based on the way your feel.

Mark to Macadamia:  Valuation is based on some Nut's idea of what it is worth.

Mark to Madness: See Mark to Macadamia.

Mark to Mackerel:  Better believe in this valuation or you will be "sleeping with the fishes".

Mark to Mafia: See Mark to Mackerel.

Mark to Magic:  My fingers never left my hand while I was appraising the value.

Mark to Machete: If you really knew what this was worth you would cut off my "vitals"

Mark to Maalox:  If you really knew what this was worth you would need a big dose.

Mark to Malfeasance:  Practice only allowed at too-big-to-fail institutions.

Mark to Macadam:  Used when the value is nose diving into the tarmac.

Mark to Macumba: Requires experience in voodoo economics to use properly.

Mark to Maelstrom: Valuation based on one or more perfect storms.

Mark to Marijuana / Martini: I think this one is obvious.

Mark to Marx: Valuation is determined by a central government.

Mark to Madam: Valuation based on prior year earnings of all wall street hookers.

Mark to Morpheus:  (also known as Mark to Matrix) Take red pill and the true valuation will become clearer.

Mark to Mariachi:  The valuation is higher in South of the US Border.

Mark to Mallard: Sell this security and "duck".

And lastly my personal favorite...

Mark to Mansfield: Securities mostly likely to chart a "double top" pattern.


Tuesday, February 28, 2012

Parody: The Lord is My Shepherd

The voice of an unemployed 20+ year old with advanced educational degrees living in a certain European country that is very popular in the news these days.


"The EU is my shepherd; I shall not work.
They keepth jobs out of the hands of the people,
Which leadeth the region to class warfare and polarization.
They encourageth sloth; They leadeth the government to new heights in deficit spending.
Yea, though I walk in the shadow of Economic collapse,
I shall fear no depression: for EuroParliament is with me.
Their handouts and monetary indiscretion supplement my income.
They maintainest spending increases in the presence of insurmountable debt;
They punisheth businesses with excessive regulations;
And giveth the hard-earned fruits of labor to the unproductive.
Surely, handouts and stimulus payments shall follow all the days of their reign;
And I will stay a slave forever."

One Man Alone Speaks For The Greek People

For my dear readers from the United States, what if the Chinese government came to the US and started ordering the US President and the US Congress to take certain actions to ensure the debt the US owed China was going to be paid in full?   What if the China demanded changes in the US Constitution to ensure that those orders were fulfilled?   And, what if China inserted their own person as US President because they didn't like the one that was elected by the American people?

Seem absurd?  This is exactly what has happened to the Greek people.  The head of Greece has been inserted by the European Parliament and the debt deals being cast are requiring many changes to the Greek constitution.

In my last post I introduced you to Nigel Farage.  The UK minister to the European Parliament.  The only person I know of that still has a voice. 

Here is Nigel again speaking on behalf of the Greek people:
http://www.youtube.com/watch?v=W8Ayb8P1LbU

Make no mistake, this is not about bailing out the Greek people or the Greek Government.  This is about bailing out the people who lent money to Greece.  Go here to get a simple, easy to understand lesson:  http://www.youtube.com/watch?v=V5z0rQRdsiE

If you don't want to blame the banks who lent the money then blame the Greek politicians who indebted their country all for the sake of giving money away to their people so they could get re-elected and stay in power.  But don't blame the Greek people.

Watch this very closely because your country is next.