I am not one for "political correctness" in speech but if I were a pirate, I would take offense at this report on The Borrowitz Report (note: I shortened it up a bit for posting)
NORFOLK, VIRGINIA (The Borowitz Report) - Eleven indicted Somali pirates dropped a bombshell in a U.S. court today, revealing that their entire piracy operation is a subsidiary of banking giant Goldman Sachs ... The pirate ... elaborated on the nature of the Somalis' work for Goldman, explaining that the pirates forcibly attacked ships that Goldman had already shorted." ... The pirate acknowledged that they merged their operations with Goldman in late 2008 to take advantage of the more relaxed regulations governing bankers as opposed to pirates, "plus to get our share of the bailout money." In the aftermath of the shocking revelations, government prosecutors were scrambling to see if they still had a case against the Somali pirates, who would now be treated as bankers in the eyes of the law." There are lots of laws that could bring these guys down if they were, in fact, pirates," one government source said. "But if they're bankers, our hands are tied."
I wonder if Borowitz is his real name... "borrow wits"?
I might add that if the Pirates do take bailout money that they infact will become government controlled at which time they must be considered Privateers not pirates. My guess is that their salaries will be capped as well. I hope they know what they are getting into.
Monday, April 26, 2010
Friday, April 16, 2010
Goldman Sachs - Old News
The recent actions against GS is about old news. The NYTIMES wrote about it last December:
http://www.nytimes.com/2009/12/24/business/24trading.html?_r=3&pagewanted=1
This is really old new because by the time it gets through the editors of a major newspaper, especially one so linked to the US Government like the NYT, you know that the story has been verified multiple independent times and was probably several months old by the time they printed it.
"Keep moving folks, nothing to see here".
So why did it take so long for the SEC to charge Goldman Sachs? One of two reasons: (1) They are not as good as NYT and most of the blogosphere at getting the facts or (2) The government needs everyone distracted for awhile.
What Goldman Sachs did may have been immoral by someone's standards but it certainly wasn't illegal under US Law. The process of packaging Collateralized Debt Obligations and then laying off the risk with Credit Default Swaps is also very old news.
Listen for the lie.
Notice that the drumbeat in the press is about how many pension funds were hurt because they invested in GS debt based special purpose vehicles that were destined to collapse. Notice how many pensions, mostly government pensions, at all levels of government are underfunded. Notice that GS made a deal with the devil in utilizing taxpayer funds to prop up their profits. Notice that AIG (the provider of Credit Defaul Swaps)to GS was nationalized in a blatantly illegal transaction executed by the New York Federal Reserve (under Timmy G) who later had to become Treasury Secretary in order to keep to truth buried. Recognize that none of these transactions could be accomplished without detection by GS the company or because of near incestous relationships in the fraternity of Goldman Sachs employees who now either work in government, the media or run their own hedge funds.
So to keep the real bad stuff secret, Goldman will take the fall. Like GM shareholders, GS shareholders will get financially hurt. GS will pay the government large sums of money which the government will use to prop up failing pension funds. Since GS got tons of money either directly from the government programs, near 0% interest rate loans from the Fed AND AIG insurance payments that are all funded by the US taxpayer; we have another example of pending redistribution of wealth from the tax payer to just about everyone else aforementioned above.
"Keep moving folks, nothing to see here". "The show is over; move along now".
http://www.nytimes.com/2009/12/24/business/24trading.html?_r=3&pagewanted=1
This is really old new because by the time it gets through the editors of a major newspaper, especially one so linked to the US Government like the NYT, you know that the story has been verified multiple independent times and was probably several months old by the time they printed it.
"Keep moving folks, nothing to see here".
So why did it take so long for the SEC to charge Goldman Sachs? One of two reasons: (1) They are not as good as NYT and most of the blogosphere at getting the facts or (2) The government needs everyone distracted for awhile.
What Goldman Sachs did may have been immoral by someone's standards but it certainly wasn't illegal under US Law. The process of packaging Collateralized Debt Obligations and then laying off the risk with Credit Default Swaps is also very old news.
Listen for the lie.
Notice that the drumbeat in the press is about how many pension funds were hurt because they invested in GS debt based special purpose vehicles that were destined to collapse. Notice how many pensions, mostly government pensions, at all levels of government are underfunded. Notice that GS made a deal with the devil in utilizing taxpayer funds to prop up their profits. Notice that AIG (the provider of Credit Defaul Swaps)to GS was nationalized in a blatantly illegal transaction executed by the New York Federal Reserve (under Timmy G) who later had to become Treasury Secretary in order to keep to truth buried. Recognize that none of these transactions could be accomplished without detection by GS the company or because of near incestous relationships in the fraternity of Goldman Sachs employees who now either work in government, the media or run their own hedge funds.
So to keep the real bad stuff secret, Goldman will take the fall. Like GM shareholders, GS shareholders will get financially hurt. GS will pay the government large sums of money which the government will use to prop up failing pension funds. Since GS got tons of money either directly from the government programs, near 0% interest rate loans from the Fed AND AIG insurance payments that are all funded by the US taxpayer; we have another example of pending redistribution of wealth from the tax payer to just about everyone else aforementioned above.
"Keep moving folks, nothing to see here". "The show is over; move along now".
Wednesday, April 14, 2010
It’s A Show About Nothing – Tribute to Seinfeld
There is no reason to worry if Greece defaults on its debt. Did you worry when Iceland and Zimbabwe were collapsing recently? Did you know that countries throughout history have defaulted on their debt and nothing bad happened? Did you know that even states of the USA have defaulted on their debt and nothing bad happened?
When General Motors corporation defaulted on its debt to its bond holders recently did anything bad happen? When Lehman Bros collapsed and its obligations defaulted, did anything bad happen?
If you want to know why, watch this Youtube clip from an episode of Seinfeld.
You see my dear readers we are engaged in a show about nothing. Banks around the world create money that they don’t have via fractional reserve banking. And where do they get the fractional amounts upon which to leverage? They get it from their Central Banks who create money out of thin air.
When you default on debt you cause money to disappear that was never there in the first place. It’s a show about nothing. For more proof, what this:
When General Motors corporation defaulted on its debt to its bond holders recently did anything bad happen? When Lehman Bros collapsed and its obligations defaulted, did anything bad happen?
If you want to know why, watch this Youtube clip from an episode of Seinfeld.
You see my dear readers we are engaged in a show about nothing. Banks around the world create money that they don’t have via fractional reserve banking. And where do they get the fractional amounts upon which to leverage? They get it from their Central Banks who create money out of thin air.
When you default on debt you cause money to disappear that was never there in the first place. It’s a show about nothing. For more proof, what this:
Monday, April 12, 2010
From BTQ PDQ
For those that are acronym challenged, the title means from Billions to Trillions to Quadrillions Pretty Damn Quick.
I must admit that I am part of the problem. I am a derivatives trader. Rather than buy real gold like the guys on TV, I buy and sell GLD. GLD is an Exchange Traded Fund which is nothing more than a proxy for the price of gold slightly discounted for expenses. A derivative is anything that you can speculate on that is a "proxy" for the real thing.
The great thing about derivatives is that you can leverage them up 10X, 100X, 1000X if you wanted to. So I could sell 100X more GLD contracts than I have gold in my vault to cover the contracts. This is allowed because your derivative contract is a financial claim on the gold but it is not a physical claim. In the event everyone tries to lay claim all at once, I simply default. If everyone tries to sell their contracts all at once, the price goes to zero.
In the end, I still have your money and you got nothing.
I was deeply concerned about total, global derivative contracts about this time last year when I published this post. But things have gotten much better as total exposure has dropped from $1.4Quadrillion to just over $1.0Quadrillion.
I must admit that I am part of the problem. I am a derivatives trader. Rather than buy real gold like the guys on TV, I buy and sell GLD. GLD is an Exchange Traded Fund which is nothing more than a proxy for the price of gold slightly discounted for expenses. A derivative is anything that you can speculate on that is a "proxy" for the real thing.
The great thing about derivatives is that you can leverage them up 10X, 100X, 1000X if you wanted to. So I could sell 100X more GLD contracts than I have gold in my vault to cover the contracts. This is allowed because your derivative contract is a financial claim on the gold but it is not a physical claim. In the event everyone tries to lay claim all at once, I simply default. If everyone tries to sell their contracts all at once, the price goes to zero.
In the end, I still have your money and you got nothing.
I was deeply concerned about total, global derivative contracts about this time last year when I published this post. But things have gotten much better as total exposure has dropped from $1.4Quadrillion to just over $1.0Quadrillion.
Remember when a billion was a lot. Remember how easy it became to start saying a trillion?
Math note: A Quadrillion is 1,000 trillions.
Now I present you with a similar table that has been updated since my last post. Please keep in mind that 100% default on all derivatives is very unlikely. However, what if 10% went bad?
Thursday, April 08, 2010
How Eileen Became Bob
This is not a transgender discussion. Having said this, I most likely lost 50% of my audience already as they just clicked "next blog".
Recently I wrote that you and I can't make easy money in the market. The video is here.
We are all handicapped with one short leg. I am Eileen. We all are Eileen. None of us can stand straight. The individual investor is a "wobbly" lot.
Central banks of various countries, who can simply print money and either give it to banks or buy market futures, are impacting markets. This forces us to follow a "false herd", our short, twisted and withered leg was cut off. We transformed from Eileen to Peg.
This week I talked to a really smart man about investing. He was a professor, technician but mostly he was a Quant. He didn't like PEG and I asked him, Why? His equations dazzled me into the realization that-- the reason I get 2 stock picks wrong for every 3; is because I am lucky.
Based on the "corrected PEG", I should be 100% wrong all of the time! This, my dear readers, requires some analysis of the broader market because I cannot be that wrong, could I? Or that lucky?
Therefore, I further applied his modifed PEG to about 50 of the more popular stocks based on volume traded. And you know what? They all stink! And if this guy is right, we are going to lose more than a leg. We are going to lose both of our legs and both of our arms.
Do you know what you call the guy with no arms and no legs? His name is Matt. Matt lies at your doorstep. Matt is the guy that everyone steps on and cleans their shoes. Eileen became Peg and Peg became Matt.
But we are not done.
You see after all the money printing, it seems that we must take more money from the people and give it to the governments. But the governments are not keeping the money because they are obligated to the people who are printing the money. So the money is returning to the rightful owners-- the people that printed it in the first place. So the story goes that more taxes are needed. And not just for the rich, but for everyone. Here comes the national sales tax or a VAT.
So let's take Matt, the poor unfortunate door rug with no arms and no legs and toss him into the toilet. For you see, the guy with no arms and legs that is now floating in the water is not called Matt, he is now called Bob [Define Bob: a small float usually made of cork; attached to a fishing line].
So now that we are all bobbing, please.... no one flush!
Thomas Jefferson once said, "The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin [coin = gold in the early 19th century]. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered."
Recently I wrote that you and I can't make easy money in the market. The video is here.
We are all handicapped with one short leg. I am Eileen. We all are Eileen. None of us can stand straight. The individual investor is a "wobbly" lot.
Central banks of various countries, who can simply print money and either give it to banks or buy market futures, are impacting markets. This forces us to follow a "false herd", our short, twisted and withered leg was cut off. We transformed from Eileen to Peg.
This week I talked to a really smart man about investing. He was a professor, technician but mostly he was a Quant. He didn't like PEG and I asked him, Why? His equations dazzled me into the realization that-- the reason I get 2 stock picks wrong for every 3; is because I am lucky.
Based on the "corrected PEG", I should be 100% wrong all of the time! This, my dear readers, requires some analysis of the broader market because I cannot be that wrong, could I? Or that lucky?
Therefore, I further applied his modifed PEG to about 50 of the more popular stocks based on volume traded. And you know what? They all stink! And if this guy is right, we are going to lose more than a leg. We are going to lose both of our legs and both of our arms.
Do you know what you call the guy with no arms and no legs? His name is Matt. Matt lies at your doorstep. Matt is the guy that everyone steps on and cleans their shoes. Eileen became Peg and Peg became Matt.
But we are not done.
You see after all the money printing, it seems that we must take more money from the people and give it to the governments. But the governments are not keeping the money because they are obligated to the people who are printing the money. So the money is returning to the rightful owners-- the people that printed it in the first place. So the story goes that more taxes are needed. And not just for the rich, but for everyone. Here comes the national sales tax or a VAT.
So let's take Matt, the poor unfortunate door rug with no arms and no legs and toss him into the toilet. For you see, the guy with no arms and legs that is now floating in the water is not called Matt, he is now called Bob [Define Bob: a small float usually made of cork; attached to a fishing line].
So now that we are all bobbing, please.... no one flush!
Thomas Jefferson once said, "The central bank is an institution of the most deadly hostility existing against the Principles and form of our Constitution. I am an Enemy to all banks discounting bills or notes for anything but Coin [coin = gold in the early 19th century]. If the American People allow private banks to control the issuance of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the People of all their Property until their Children will wake up homeless on the continent their Fathers conquered."
Friday, April 02, 2010
Check your country's bank statement
I live in the USA and always check my country's bank statement. You should check your country's bank statement too, to see how things are going. This is the US statement as of 31MAR2010.
https://www.fms.treas.gov/fmsweb/viewDTSFiles?dir=w&fname=10033100.pdf
If you don't know what the line items mean, you should. After all, it is your money.
One particularly im
portant segment is Table III - C Debt Subject to Limit. Think of it as the self-imposed credit line established by the government. Unlike you and me, when the government reaches its debt limit it simply votes to increase the limit. In the US, this was done on 12FEB2010.
The point -- On average, the USG borrows $152B every month, which means that in roughly 10 months it will once again be bumping up against the debt ceiling.
But then again, it is only debt if you plan to pay it back. Right?
Do you think the Citizens of the PIIGS are checking their country's bank statements?
https://www.fms.treas.gov/fmsweb/viewDTSFiles?dir=w&fname=10033100.pdf
If you don't know what the line items mean, you should. After all, it is your money.
One particularly im
portant segment is Table III - C Debt Subject to Limit. Think of it as the self-imposed credit line established by the government. Unlike you and me, when the government reaches its debt limit it simply votes to increase the limit. In the US, this was done on 12FEB2010.The point -- On average, the USG borrows $152B every month, which means that in roughly 10 months it will once again be bumping up against the debt ceiling.
But then again, it is only debt if you plan to pay it back. Right?
Do you think the Citizens of the PIIGS are checking their country's bank statements?
Wednesday, March 31, 2010
The Three Little "F"s
I was worried about the markets today. March 31, 2010 marks the end of the US Federal Reserve's buying of mortgage backed securities-- an effort to try to stabilize the US housing market, the banking industry and keep the economy from a double dip recession. Year-to-date, the US Fed has purchased nearly $1.5Trillion in troubled mortgage backed securities.
What happened?
Good ole Fannie Mae and Freddie Mac (Government Sponsored Entities) said they will take the Fed's place and purchase MBS to keep the $5Trillion MBS market stable.
Of course no one asked where Fannie and Freddie were going to get the money to do this. After all, the FED can just print the money it wants to spend. But Fannie and Freddie rely on the US government to use US taxpayer dollars to absorb the losses.
Now maybe you understand why the following news report about certain US Government actions taken on Christmas Eve 2009 occurred:
"On Christmas Eve, Treasury's said it would allow the cap on funding commitment under agreements with the two GSEs to "increase as necessary to accommodate any cumulative reduction in net worth over the next three years." This was announced although neither firm is near the original $200 billion per institution limit established under the agreements. Total funding provided under these agreements through the third quarter has been $51 billion to Freddie Mac and $60 billion to Fannie Mae. Treasury also made the requirements to reduce the GSEs portfolios more flexible.
Treasury said it was removing the caps to "leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during this current crisis."
Hmmmmm...
What happened?
Good ole Fannie Mae and Freddie Mac (Government Sponsored Entities) said they will take the Fed's place and purchase MBS to keep the $5Trillion MBS market stable.
Of course no one asked where Fannie and Freddie were going to get the money to do this. After all, the FED can just print the money it wants to spend. But Fannie and Freddie rely on the US government to use US taxpayer dollars to absorb the losses.
Now maybe you understand why the following news report about certain US Government actions taken on Christmas Eve 2009 occurred:
"On Christmas Eve, Treasury's said it would allow the cap on funding commitment under agreements with the two GSEs to "increase as necessary to accommodate any cumulative reduction in net worth over the next three years." This was announced although neither firm is near the original $200 billion per institution limit established under the agreements. Total funding provided under these agreements through the third quarter has been $51 billion to Freddie Mac and $60 billion to Fannie Mae. Treasury also made the requirements to reduce the GSEs portfolios more flexible.
Treasury said it was removing the caps to "leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during this current crisis."
Hmmmmm...
Wednesday, March 10, 2010
Pension Confiscation and Haiti
"President Obama has announced that he will push forward with his healthcare plan. Commendably, the president has pledged to avoid adding to the deficit, promising that tax increases and spending cuts will cover the full cost of the overhaul. But one tax increase in the president’s plan spells trouble for the economy. For households with incomes above $200,000 ($250,000 for married couples), the 2.9 percent Medicare payroll tax on labor income would be extended to interest, dividends, capital gains, and profits from passive investments in partnerships and S corporations." (Associated Press 2010.03.09)
Now we could say, Good! Let's soak those rich bastards! But after the cheering and more importantly after it actually occurs, here is then what happens to the rest of us working stiffs.
(1) There is no way to safely get gains greater than 2.9% and still make a profits so conservative investing techniques slow down.
(2) Remember that the 2.9% medicare tax is in addition to any income tax applicable to the gain also, so the return needs to be well above 5% to make any money at all.
(3) To get the higher gains, the risk is too great.
(4) Investment stops by the top 1% of the country-- who do most of the investing anyway.
(5) Financial firms lay off people.
(6) Financial (brokerage) firms pay less taxes because their profits fall.
(7) Investment arms of banks close - more layoffs more decreased taxes.
(8) The value of securities fall overall because the market for securities has been destroyed.
(9) Pension plans that are holding securities find their asset balances falling below solvency levels established by the federal government.
(10) Failing pension plans are forced to turnover their assets to the US Government's Pension Benefit Guaranty Corporation resulting in benefit cuts to the affected people.
(11) The unaffected people with 401K savings find their nest eggs now having been decimated by the same events turn to the government which will require them to turn over to the government all of your savings in return for a government supplied annuity.
(12) Argentina Redux. "come to papa.".
Now we could say, Good! Let's soak those rich bastards! But after the cheering and more importantly after it actually occurs, here is then what happens to the rest of us working stiffs.
(1) There is no way to safely get gains greater than 2.9% and still make a profits so conservative investing techniques slow down.
(2) Remember that the 2.9% medicare tax is in addition to any income tax applicable to the gain also, so the return needs to be well above 5% to make any money at all.
(3) To get the higher gains, the risk is too great.
(4) Investment stops by the top 1% of the country-- who do most of the investing anyway.
(5) Financial firms lay off people.
(6) Financial (brokerage) firms pay less taxes because their profits fall.
(7) Investment arms of banks close - more layoffs more decreased taxes.
(8) The value of securities fall overall because the market for securities has been destroyed.
(9) Pension plans that are holding securities find their asset balances falling below solvency levels established by the federal government.
(10) Failing pension plans are forced to turnover their assets to the US Government's Pension Benefit Guaranty Corporation resulting in benefit cuts to the affected people.
(11) The unaffected people with 401K savings find their nest eggs now having been decimated by the same events turn to the government which will require them to turn over to the government all of your savings in return for a government supplied annuity.
(12) Argentina Redux. "come to papa.".
Sunday, February 28, 2010
I Feel Uncomfortable About This
I've had the opportunity to travel to many different countries and see what they watch on television. Unfortunately, I only speak english so much is lost in transalation but "pictures do speak a thousand words".
Here is a news clip from IRINN [IRINN stands for Islamic Republic of Iran News Network and is a full news channel, part of Islamic Republic of Iran Broadcasting corporation, headquartered in the Jame Jam Park in Tehran, Iran. The main programs are political, but sports, science and medical news programs also exist. Its language is mainly in Persian but there are special programs in English and Arabic.]
The news feed is courtesy of RIANOVOSTI [A Russian News services that provides much of its content in english]. There is no speaking so you won't need translation.
Here is a news clip from IRINN [IRINN stands for Islamic Republic of Iran News Network and is a full news channel, part of Islamic Republic of Iran Broadcasting corporation, headquartered in the Jame Jam Park in Tehran, Iran. The main programs are political, but sports, science and medical news programs also exist. Its language is mainly in Persian but there are special programs in English and Arabic.]
The news feed is courtesy of RIANOVOSTI [A Russian News services that provides much of its content in english]. There is no speaking so you won't need translation.
Tuesday, February 23, 2010
Buying Greek CDS and Watch Citicorp
Two things... really important... double check my data because I can't tell when I get a really independent, second opinion on the data or if I have a person that is simply repeating what I have already heard. Confirming sources is getting really, really difficult.
- Legislation is pending in front of the US Congress allowing money market companies to delay withdrawal requests for up to 7 days after a customer request has been entered. In addition, Citibank sent notices to customers that they are not obligated to honor customer's withdrawal requests under certain circumstances. I have seen the legislation mentioned, but I am not a Citi customer so cannot substantiate the latter. However, I firmly believe that controls are being put in place so as not to expose the banking system to the "run of withdrawals" experienced shortly after the Lehman collapse. If you don't know what I am talking about, post a comment to this post and I will re-post the links.
- If you are a bond fund holder in funds managed by companies similar to G.Sachs and Pimpco (these are only metaphors- since holdings change by the second) don't worry about any Greek Government Credit Default Swaps (CDS) held by similar institutions. The US Federal Reserve (central bank of the U.S.) has reasserted its authority to either buy Foreign Sovereign debt directly in order to provide stability to world financial markets or to buy CDS instruments from US holders. This, of course, is done at the US Taxpayer expense eventually.
So here's the tip to make money. You always need to be on both sides of any deal. For example, US Gasoline prices will be at $3.00+ within the next 6 months. If you want to hedge your increasing gasoline costs as a consumer, then you need to own some oil company investments. That way when prices do rise, and everyone is moaning, you can moan right along with them knowing all the time you are covered.
Same with Bond funds held by too big to fail financial institutions. You need to be in the game on both sides. If you are a US citizen then you are already a taxpayer and you will be bailing out everyone world wide. You must get in on the other side of this hedge. One way to do this (and I do not recommend this) is to buy foreign bond funds sponsored by too big to fail institutions knowing the Fed will bail you out at taxpayer expense when things go bad.
I know what you are thinking...this not a way to make money, this is a way to lose less than the next person. That is right. Capital preservation is about you and I meeting a hungry bear in the woods. I don't need to out run the bear. I only need to outrun you.
This means, if we are all heading towards zero, then my plan is to be the last man there. However, if we are all going higher, the I plan to be the first horse out of the gate.
Saturday, February 20, 2010
Thanks to all my readers!
Every year around my birthday, I reset the visitor counter on this site. I would like to take this time to thank my many readers around the world for their frequent visits, comments and emails (click to enlarge).
Blogging is my therapy. I feel better after I post. Please know that have tried to make the material interesting, entertaining and intellectually challenging.
United States (US) Europe (EU) Canada (CA) Belgium (BE) Germany (DE) Spain (ES) United Kingdom (GB) Australia (AU) Switzerland (CH) France (FR) Malaysia (MY) Netherlands (NL) Singapore (SG) Hong Kong (HK) Hungary (HU) Sweden (SE) Korea, Republic of (KR) India (IN) New Zealand (NZ) South Africa (ZA) Croatia (HR) Brazil (BR) Romania (RO) Jamaica (JM) Mexico (MX) Japan (JP) Chile (CL) Iraq (IQ) Poland (PL) Russian Federation (RU) Iceland (IS) Costa Rica (CR) Norway (NO) Czech Republic (CZ) Italy (IT) Dominican Republic (DO) Asia/Pacific Region (AP) Thailand (TH) Greece (GR) El Salvador (SV) China (CN)
Blogging is my therapy. I feel better after I post. Please know that have tried to make the material interesting, entertaining and intellectually challenging.In 2010, you can count on Finance, Economics and Government Policy to continue to be the predominate topics. I will try to be as global as possible. Also, I have no interest in blogging about "politics" - there are enough people doing that.
In closing, here is the visitors by country/region sorted by most visits.
One again, thanks to everyone.
United States (US) Europe (EU) Canada (CA) Belgium (BE) Germany (DE) Spain (ES) United Kingdom (GB) Australia (AU) Switzerland (CH) France (FR) Malaysia (MY) Netherlands (NL) Singapore (SG) Hong Kong (HK) Hungary (HU) Sweden (SE) Korea, Republic of (KR) India (IN) New Zealand (NZ) South Africa (ZA) Croatia (HR) Brazil (BR) Romania (RO) Jamaica (JM) Mexico (MX) Japan (JP) Chile (CL) Iraq (IQ) Poland (PL) Russian Federation (RU) Iceland (IS) Costa Rica (CR) Norway (NO) Czech Republic (CZ) Italy (IT) Dominican Republic (DO) Asia/Pacific Region (AP) Thailand (TH) Greece (GR) El Salvador (SV) China (CN)
Thursday, February 18, 2010
Some Carry on while others get Carried away
There is a delicate line between "carry on" and "carrion".
The Carry Trade is when financial institutions borrow money from the FED at like .25% and then use that money (not to make loans) but rather buy something else that has a higher yield like US Treasury Bonds. It is a way to make tons of money without risk.
Now you probably think that only the big institutions can do that but you are wrong. The common person can too! But there is a lot more risk involved. In fact, what I am going to tell you I don't recommend. So take this as an exercise in mathmatics not an a discussion about investing.
So here goes and I will use round numbers for convenience.
The Carry Trade is when financial institutions borrow money from the FED at like .25% and then use that money (not to make loans) but rather buy something else that has a higher yield like US Treasury Bonds. It is a way to make tons of money without risk.
Now you probably think that only the big institutions can do that but you are wrong. The common person can too! But there is a lot more risk involved. In fact, what I am going to tell you I don't recommend. So take this as an exercise in mathmatics not an a discussion about investing.
So here goes and I will use round numbers for convenience.
- There are 600 or so stocks traded on the New York Stock Exchange that have a dividend yield of 5% or greater.
- If you can gather up enough resources to open a brokerage account with, let's say round numbers of $100,000; A brokerage will allow you to borrow up to $500,000 or more on margin @ 1.25%.
- So let's say you buy $500,000 in stock and after a year you will have $25,000 in dividends @ 5%.
- Now you have to pay the broker back interest, so you owe them $6,235 leaving you with $18,750 in profit pre tax.
- Now current tax rate on dividends is 15% so you owe Obama $2,812.50 tax on your dividends. You do get a tax credit for your margin interest (assume 25% tax bracket) of roughly $703; so your net tax is $2,110.
- Subtract the $2,110 from your $18,750 pre-tax profit (step 4) and you get a cool $16,640 in your pocket to spend.
- Now the tricky part. The brokerage also wants their $500,000 back. If those stocks you bought with the original $500,000 tanked then you are in big financial trouble and this normally results in people jumping out of windows al a 1930.
- And that is why you never want to do this.
- Unless of course, you knew the government or the Federal Reserve were going to do their level best to ensure the stock market doesn't crash again.
The banks get away with this because they are not worried about the implications of step 7. The US government will use tax payer money to cover any losses in step 7 that they cannot absorb. That is why many free thinking people firmly believe that Washington is concerned about Wall Street and not Main Street.
This not a US phenomenom. This is being done by central banks all over the world.
Financial institutions all around the world have been taking advantage of the "carry trade" made possible by their country's central bank.
Which means they have all been buying assets to capitalize on the yield differential.
Which means all this buying has been inflating asset prices.
Which means someone at sometime will start selling.
Then they will all start selling.
What will you be doing?
What will your pension plan be doing?
Monday, February 15, 2010
China Currency Revaluation
China may revalue its currency soon. The Yuan does not float like most currencies but is rather "pegged" by the government. A 5% increase vs. the dollar is speculated- this will weaken the dollar. This is at a time when a stronger dollar will be better for the next treasury auction now that the US Government (via the executive branch) just raised the debt ceiling so the US can borrow more money.
However, a 5% increase vs. the dollar, while weakening the USD does make US exports look more attractive. That is if we were actually exporting anything anyone wanted because not much is actually manufactured here anymore. Hence, the conundrum from the state of the union speech calling for doubling US exports in 5 years. I am sure what the president meant was that we would be at 2X the amount of actual exportable products in 5 years allowing for adjustments in things we don't export anymore. This is mathematics similar to jobs created vs. jobs saved. My point being that success is defined as exporting 2X the amount of things we would of have been exporting if no action was taken. Are you following this? Cause that was the easy part.
China pegs its currency to the dollar. Why? Because that enables China to enjoy the same biased currency hedge that the US enjoys with having the dollar act as the world's reserve currency without taking accountability for being the world's reserve currency. Very clever. So why increase your currency and make your own product 5% more expensive. Doesn't that mean people will buy less Chinese goods?
Maybe. Or, maybe it doesn't matter if you buy less Chinese goods. Think about that for a moment.
Or maybe the Chinese are pressuring the EU. With the PIGS in near default (Portugal, Italy, Greece, Spain) the narrowing of the gap between Euro and Dollar is closing. Could a Yuan revaluation put so much pressure on the EU that the USG needs to bail out the EU and with what? More US Debt that is, by the way, purchased by China?
Editor's note: Keep an eye on this point. There is a growing drum beat that the EU's problems stem from Wall Street therefore the US (and therefore the US Taxpayer) is accountable to fixing any monetary problems in Europe. This is the same thing that happened when billions of US Taxpayer money was channeled to AIG only to go to EU Central banks.
Given the notion that China can now purchase US Debt in Yuan rather then dollars, this enables them to purchase 5% more of America without actually putting up any additional costs. Are you getting this? 5% is just the shot over the bow. 10% will come very fast.
Or if this happens and the US needs to float more debt then is planned and doesn't want to sell it to China, maybe the Federal Reserve can increase its purchases of US debt to keep liquidity flowing.
But does that make any sense? I mean the USG authorized the Fed to create money. The money created is given to the banks, who in turn, buy US Government debt. That is puting money from the left pocket to the right pocket and calling it a loan.
I am getting nervous that the conspiracy theorist I talked to in July of 2009 was right-- we may be at war and the matter is not made public. It may be everybody against everybody. But that is what happened monetarily just before the great depression.
=====================================================
**FLASH**: Not to freak anybody out but here is the pop up that I got right after I pushed the "PUBLISH" button on this post. Big brother is out there... no doubt. After all, if it was this easy to send me a targeted advertisement, just guess how good more motivated surveillance is!
http://finance.uncommonwisdomdaily.com/roi/war-on-the-dollar.php?sc=G100&ec=A97650&ga_campaign=uw+content+-+bernanke/obama/rwr+(a97650)&ga_adgroup=dollar-+text&ga_keyword=content&gclid=CKO8wpfH9Z8CFdRM5Qodb2ecfg
However, a 5% increase vs. the dollar, while weakening the USD does make US exports look more attractive. That is if we were actually exporting anything anyone wanted because not much is actually manufactured here anymore. Hence, the conundrum from the state of the union speech calling for doubling US exports in 5 years. I am sure what the president meant was that we would be at 2X the amount of actual exportable products in 5 years allowing for adjustments in things we don't export anymore. This is mathematics similar to jobs created vs. jobs saved. My point being that success is defined as exporting 2X the amount of things we would of have been exporting if no action was taken. Are you following this? Cause that was the easy part.
China pegs its currency to the dollar. Why? Because that enables China to enjoy the same biased currency hedge that the US enjoys with having the dollar act as the world's reserve currency without taking accountability for being the world's reserve currency. Very clever. So why increase your currency and make your own product 5% more expensive. Doesn't that mean people will buy less Chinese goods?
Maybe. Or, maybe it doesn't matter if you buy less Chinese goods. Think about that for a moment.
Or maybe the Chinese are pressuring the EU. With the PIGS in near default (Portugal, Italy, Greece, Spain) the narrowing of the gap between Euro and Dollar is closing. Could a Yuan revaluation put so much pressure on the EU that the USG needs to bail out the EU and with what? More US Debt that is, by the way, purchased by China?
Editor's note: Keep an eye on this point. There is a growing drum beat that the EU's problems stem from Wall Street therefore the US (and therefore the US Taxpayer) is accountable to fixing any monetary problems in Europe. This is the same thing that happened when billions of US Taxpayer money was channeled to AIG only to go to EU Central banks.
Given the notion that China can now purchase US Debt in Yuan rather then dollars, this enables them to purchase 5% more of America without actually putting up any additional costs. Are you getting this? 5% is just the shot over the bow. 10% will come very fast.
Or if this happens and the US needs to float more debt then is planned and doesn't want to sell it to China, maybe the Federal Reserve can increase its purchases of US debt to keep liquidity flowing.
But does that make any sense? I mean the USG authorized the Fed to create money. The money created is given to the banks, who in turn, buy US Government debt. That is puting money from the left pocket to the right pocket and calling it a loan.
I am getting nervous that the conspiracy theorist I talked to in July of 2009 was right-- we may be at war and the matter is not made public. It may be everybody against everybody. But that is what happened monetarily just before the great depression.
=====================================================
**FLASH**: Not to freak anybody out but here is the pop up that I got right after I pushed the "PUBLISH" button on this post. Big brother is out there... no doubt. After all, if it was this easy to send me a targeted advertisement, just guess how good more motivated surveillance is!
http://finance.uncommonwisdomdaily.com/roi/war-on-the-dollar.php?sc=G100&ec=A97650&ga_campaign=uw+content+-+bernanke/obama/rwr+(a97650)&ga_adgroup=dollar-+text&ga_keyword=content&gclid=CKO8wpfH9Z8CFdRM5Qodb2ecfg
Monday, February 01, 2010
Part 2: Pension Confiscation?
The first post on January 8th, 2010 is here: http://tedbits.blogspot.com/2010/01/us-government-pension-confiscation.html
The matter is now officially public.
"The Department of Labor and the Department of the Treasury (the "Agencies") are currently reviewing the rules under the Employee Retirement Income Security Act (ERISA) and the plan qualification rules under the Internal Revenue Code (Code) to determine whether, and, if so, how, the Agencies could or should enhance, by regulation or otherwise, the retirement security of participants in employer-sponsored retirement plans and in individual retirement arrangements (IRAs) by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement. The purpose of this request for information is to solicit views, suggestions and comments from plan participants, employers and other plan sponsors, plan service providers, and members of the financial community, as well as the general public, on this important issue. "
Just so you know... you can use holdings you have now to purchase an annuity to ensure an income stream. You don't need government regulation to allow you to do this nor should it require you to do this. Interesting, isn't it?
The matter is now officially public.
"The Department of Labor and the Department of the Treasury (the "Agencies") are currently reviewing the rules under the Employee Retirement Income Security Act (ERISA) and the plan qualification rules under the Internal Revenue Code (Code) to determine whether, and, if so, how, the Agencies could or should enhance, by regulation or otherwise, the retirement security of participants in employer-sponsored retirement plans and in individual retirement arrangements (IRAs) by facilitating access to, and use of, lifetime income or other arrangements designed to provide a lifetime stream of income after retirement. The purpose of this request for information is to solicit views, suggestions and comments from plan participants, employers and other plan sponsors, plan service providers, and members of the financial community, as well as the general public, on this important issue. "
Sounds benign. There is almost $4Trillion in privately held funds either in personal IRAs, 401Ks or Employer Sponsored pension funds. There are people who want to take your money and replace it with a promise. How do you feel about that?
If you would like to comment on the government plan you can email your response to:
e-ORI@dol.gov. Include RIN 1210-AB33 in the subject line of the message
If you feel uncomfortable with voicing your opinion you should reflect on why.
You can read the whole US Government Document here: http://www.zerohedge.com/sites/default/files/2010-02028_PI.pdf
Just so you know... you can use holdings you have now to purchase an annuity to ensure an income stream. You don't need government regulation to allow you to do this nor should it require you to do this. Interesting, isn't it?
Monday, January 18, 2010
Imaginary Numbers
In March of 2009, I warned of changes likely to occur in Mark to Market accounting. Well they did. The result? Bonuses at the big financial institutions skyrocketed.
Mark to Market was replaced by Mark to Model which means: build an interesting mathematical equation that calculates that your crappy toxic assets are worth more than the market value and put that concocted value on your books.
WARNING: Don't try this home. It is illegal (fraud) for anyone else to do this but a financial institution.
SECOND WARNING: I need to get a little technical for credibility...
In first quarter 2010, FASB FAS 166/167 regulations were suppose to take affect because there are more crappy, toxic assets out there owned by the banks but they are kept "off balance" sheet. Again, don't try this home.
Simply put, 166/167 says off balance sheet stuff needs to start being put "on balance sheet". No more hiding the junk. But wait! We really didn't fix the old toxic asset problem, we only changed the accounting to make it appear we are adequately capitalized! We can't take on more toxic assets into our balance sheet - DO YOU WANT ANOTHER LEHMAN WEEKEND?
Fortunately, the U S Government, took the following action in December, thus delaying any type of true up. http://www.fdic.gov/news/news/press/2009/pr09230.html
So let me make it "dirt simple":
Mark to Market was replaced by Mark to Model which means: build an interesting mathematical equation that calculates that your crappy toxic assets are worth more than the market value and put that concocted value on your books.
WARNING: Don't try this home. It is illegal (fraud) for anyone else to do this but a financial institution.
SECOND WARNING: I need to get a little technical for credibility...
In first quarter 2010, FASB FAS 166/167 regulations were suppose to take affect because there are more crappy, toxic assets out there owned by the banks but they are kept "off balance" sheet. Again, don't try this home.
Simply put, 166/167 says off balance sheet stuff needs to start being put "on balance sheet". No more hiding the junk. But wait! We really didn't fix the old toxic asset problem, we only changed the accounting to make it appear we are adequately capitalized! We can't take on more toxic assets into our balance sheet - DO YOU WANT ANOTHER LEHMAN WEEKEND?
Fortunately, the U S Government, took the following action in December, thus delaying any type of true up. http://www.fdic.gov/news/news/press/2009/pr09230.html
So let me make it "dirt simple":
- If a bank is under-capitalized it must use its profits to re-capitalize the bank and secure its health. If it does not have to use its profits for re-capitalization, it gives them to the bankers in the form of bonuses.
- Mark to Model accounting ensures that re-capitalization can be avoided thus leading to higher bonuses.
- Delay of FASB FAS 166/167 ensures that re-capitalization can be avoided thus leading to higher bonuses.
- The banks continue to borrow money from the Federal Reserve at 0% interest and invest the money in assets that yield greater than 0% thus ensuring risk less returns, higher profits, and higher bonuses.
- The bankers then save these bonuses because when all of this unwinds (and it will) the US Government isn't taking any of the blame and the bankers may suddenly find themselves facing legal problems. At which time, the bonuses will signed over to the lawyers who will represent the bankers.
Friday, January 08, 2010
US Government Pension Confiscation
The news almost slipped out today so let's see if this gets legs. If this is real, it must be done in 2010 before the November elections.
Because the US government is now insolvent --> +$70Trillion in debt and growing. Fewer want to lend it money.
The Federal Reserve was propping up the US debt auctions but its owners (remember the Federal Reserve is a privately owned institution) don't want to keep buying US debt either.
The only way to keep the game going (at least for a few more years) is for the government to confiscate every one's pension fund, 401K and IRA replacing it with a guaranteed annuity funded with (you guessed it) treasury bills.
This is probably unconstitutional due to the 4th Amendment's protection from unreasonable search and seizure. However, you will happily give all your savings to the government after they cause the next market crash. That is-- government debt will be the only thing that seems safe.
Of course it won't be because the US government has no intention of paying on this sovereign debt. Which is why no one, including the Fed, wants to buy the debt anymore.
Now, if you didn't save for your retirement or you have one of those government pensions that over promised and underfunded, don't worry. You will get to use the retirement funds of everyone else.
Because the US government is now insolvent --> +$70Trillion in debt and growing. Fewer want to lend it money.
The Federal Reserve was propping up the US debt auctions but its owners (remember the Federal Reserve is a privately owned institution) don't want to keep buying US debt either.
The only way to keep the game going (at least for a few more years) is for the government to confiscate every one's pension fund, 401K and IRA replacing it with a guaranteed annuity funded with (you guessed it) treasury bills.
This is probably unconstitutional due to the 4th Amendment's protection from unreasonable search and seizure. However, you will happily give all your savings to the government after they cause the next market crash. That is-- government debt will be the only thing that seems safe.
Of course it won't be because the US government has no intention of paying on this sovereign debt. Which is why no one, including the Fed, wants to buy the debt anymore.
Now, if you didn't save for your retirement or you have one of those government pensions that over promised and underfunded, don't worry. You will get to use the retirement funds of everyone else.
Thursday, December 31, 2009
Chinese Buying Mattresses for US Dollars
On 12/30/09 a curious thing happened-- US Treasury T-bills were auctioned at an interest rate payable of 0.0%. And if you don't find that odd, let me tell you that about $5Billion worth of these things were sold! Furthermore, this information was not considered newsworthy enough to be reported in the media.
Don't believe me? Click here: http://www.treasurydirect.gov/instit/annceresult/press/preanre/2009/R_20091230_1.pdf
Why would anyone give the US Government $5B so that they can get the same $5B back at maturity?
(1) US Citizens feeling patriotic and lending Uncle Sam some walking around scratch?
(2) Financial institutions being forced to buy T-Bills whether they want to or not?
(3) Things will be so bad in 2010 that just getting your money back will put you ahead of the game?
This is the equivalent of putting your money in a mattress.
In these times, perhaps it is best to turn to the largest single holder of US dollars and debt-- the Chinese government to see what they are doing.
Here is what I found in the WSJ (12/29/09):
"BY JAMES T. AREDDY
SHANGHAI—A group of financiers is trying to put a U.S. mattress maker now under bankruptcy-court protection into play by encouraging Chinese bidders to top an already arranged offer for Simmons Bedding Co., according to people involved in the effort."
Somehow I feel these two items are connected...
Don't believe me? Click here: http://www.treasurydirect.gov/instit/annceresult/press/preanre/2009/R_20091230_1.pdf
Why would anyone give the US Government $5B so that they can get the same $5B back at maturity?
(1) US Citizens feeling patriotic and lending Uncle Sam some walking around scratch?
(2) Financial institutions being forced to buy T-Bills whether they want to or not?
(3) Things will be so bad in 2010 that just getting your money back will put you ahead of the game?
This is the equivalent of putting your money in a mattress.
In these times, perhaps it is best to turn to the largest single holder of US dollars and debt-- the Chinese government to see what they are doing.
Here is what I found in the WSJ (12/29/09):
"BY JAMES T. AREDDY
SHANGHAI—A group of financiers is trying to put a U.S. mattress maker now under bankruptcy-court protection into play by encouraging Chinese bidders to top an already arranged offer for Simmons Bedding Co., according to people involved in the effort."
Somehow I feel these two items are connected...
Tuesday, December 29, 2009
What befalls autumn bees
In the Northeastern United States, bees get very impatient and aggressive in the autumn.
I thought they were angry for having been born just before winter -- with a very short life time left.
However, science tells us that the aggressiveness stems from a growing shortage of quality food with impending onset of cold weather. This personality change makes them more likely to sting and swarm if provoked in the smallest way.
Money is the food of governments. It is the “mother’s milk” of politics. Did you notice that governments are now acting like autumn bees? Everything is a crisis. No time to read the legislation—just pass it! The taking of money and demand for legislative financial favors is at its pinnacle. What can’t be taken from the people will be printed.
As the money supply increases, the quality (value) decreases. Like bees with no honey, governments see the end of money.
But unlike autumn bees, what will bee-fall our hive?
To learn more about bees: http://en.wikipedia.org/wiki/Bee
To lean more about governments: http://en.wikipedia.org/wiki/Atlas_shrugged
Wednesday, December 09, 2009
Where Have All The Pictures Gone?
Remember my post of March 1, 2009 showing all the media coverage of economic based social unrest? http://tedbits.blogspot.com/2009/03/coming-to-city-near-you.html
Since then there has been nothing. What do you think? Did everyone suddenly get happy? Is there Censorship? Does the press not cover riots and protests anymore?
Something happened to the people of the world during March 2009...
It is not that there aren't things for people to be upset about, they are just not taking to the streets or, if they are, the pictures aren't getting out:
2009.12.06 Radio Liberty: "Workers at Russia's Molot arms plant haven't seen their salaries in nearly six months. Unable to meet payroll, management has resorted to passing out food parcels to its increasingly angry and desperate employees." "This is partially related to the devaluation of the ruble and the accompanying rise in inflation. The buying power of workers has fallen approximately 40 percent. We don't see this situation improving."
2009.12.09 AFP: "GENEVA (AFP) – Unemployment in Switzerland soared to a five-year high ..." "The Swiss government said last week that it would halve from next year its quotas of permits for workers from outside Europe in a bid to curb unemployment."
2009.12.07 Washington, D.C. - infoZine - "The global financial crisis is having a devastating impact on families in emerging Europe and Central Asia, with the risk of the region giving back a fifth of the poverty reduction gains of the past decade, according to a new World Bank report. By 2010, there could be over 10 million more poor people in the region, and close to an additional 25 million more who were almost middle class but now just above the poverty line with the potential of losing their homes, jobs, and basic services."
2009.12.07 New York Times - "BANGALORE, India — In the United States and Europe, people worry that their well-paying, high-skill jobs will be, in a word, “Bangalored” — shipped off to India."
2009.12.08 The Vancouver Sun - "Financial markets tumbled on Tuesday as credit rating agencies slashed Greece and Dubai government-related debt and contemplated the potential debt rating downgrades of the United States and U.K., as both countries struggle to deal with large fiscal imbalances and accumulated debt that have resulted from the global crisis. "Anybody who thinks we are through this credit collapse is delusional," said David Rosenberg, chief economist and strategist at Gluskin Sheff in Toronto. "It is ongoing."
2009.12.09 Bloomberg - "Greece’s socialist government, elected in October, plans to cut the budget deficit to 9.1 percent of GDP next year from 12.7 percent this year. In contrast, Ireland’s Finance Minister Brian Lenihan will announce plans today to cut spending by 6 percent in the face of the worst recession in Ireland’s modern history." “There’s certainly an element of panic and hysteria,” said Peter Dixon, an economist at Commerzbank AG in London. “The ECB will bend over backwards to ensure that one of the countries within its orbit doesn’t default."
2009.11.07 New York Daily News - "President Obama signed a $24 billion economic stimulus bill into law... The law provides another 14 weeks of benefits to all out-of-work people who have exhausted their benefits... in states where the jobless rate is 8.5% or more get an additional six weeks. The extra 20 weeks could push the maximum a person in a high unemployment state could receive to 99 weeks, the most in history."
HERE ARE SOME PICTURES FROM THE FEDERAL RESERVE DECEMBER 2009 MARKET REPORT (Click to enlarge):
No social unrest in the US because the government continues to subsidize unemployed workers. Now you can get benefits for almost a full two years. The unemployed are staying unemployed longer than any time in US history.
Of concern is the fact that even with continued extensions of unemployment benefits, continuing claims are dropping. Since total unemployment has not improved and continuing claims are falling, this can only mean people are falling through the US social safety net.
Since then there has been nothing. What do you think? Did everyone suddenly get happy? Is there Censorship? Does the press not cover riots and protests anymore?
Something happened to the people of the world during March 2009...
It is not that there aren't things for people to be upset about, they are just not taking to the streets or, if they are, the pictures aren't getting out:
2009.12.06 Radio Liberty: "Workers at Russia's Molot arms plant haven't seen their salaries in nearly six months. Unable to meet payroll, management has resorted to passing out food parcels to its increasingly angry and desperate employees." "This is partially related to the devaluation of the ruble and the accompanying rise in inflation. The buying power of workers has fallen approximately 40 percent. We don't see this situation improving."
2009.12.09 AFP: "GENEVA (AFP) – Unemployment in Switzerland soared to a five-year high ..." "The Swiss government said last week that it would halve from next year its quotas of permits for workers from outside Europe in a bid to curb unemployment."
2009.12.07 Washington, D.C. - infoZine - "The global financial crisis is having a devastating impact on families in emerging Europe and Central Asia, with the risk of the region giving back a fifth of the poverty reduction gains of the past decade, according to a new World Bank report. By 2010, there could be over 10 million more poor people in the region, and close to an additional 25 million more who were almost middle class but now just above the poverty line with the potential of losing their homes, jobs, and basic services."
2009.12.07 New York Times - "BANGALORE, India — In the United States and Europe, people worry that their well-paying, high-skill jobs will be, in a word, “Bangalored” — shipped off to India."
2009.12.08 The Vancouver Sun - "Financial markets tumbled on Tuesday as credit rating agencies slashed Greece and Dubai government-related debt and contemplated the potential debt rating downgrades of the United States and U.K., as both countries struggle to deal with large fiscal imbalances and accumulated debt that have resulted from the global crisis. "Anybody who thinks we are through this credit collapse is delusional," said David Rosenberg, chief economist and strategist at Gluskin Sheff in Toronto. "It is ongoing."
2009.12.09 Bloomberg - "Greece’s socialist government, elected in October, plans to cut the budget deficit to 9.1 percent of GDP next year from 12.7 percent this year. In contrast, Ireland’s Finance Minister Brian Lenihan will announce plans today to cut spending by 6 percent in the face of the worst recession in Ireland’s modern history." “There’s certainly an element of panic and hysteria,” said Peter Dixon, an economist at Commerzbank AG in London. “The ECB will bend over backwards to ensure that one of the countries within its orbit doesn’t default."
2009.11.07 New York Daily News - "President Obama signed a $24 billion economic stimulus bill into law... The law provides another 14 weeks of benefits to all out-of-work people who have exhausted their benefits... in states where the jobless rate is 8.5% or more get an additional six weeks. The extra 20 weeks could push the maximum a person in a high unemployment state could receive to 99 weeks, the most in history."
HERE ARE SOME PICTURES FROM THE FEDERAL RESERVE DECEMBER 2009 MARKET REPORT (Click to enlarge):
No social unrest in the US because the government continues to subsidize unemployed workers. Now you can get benefits for almost a full two years. The unemployed are staying unemployed longer than any time in US history.
Of concern is the fact that even with continued extensions of unemployment benefits, continuing claims are dropping. Since total unemployment has not improved and continuing claims are falling, this can only mean people are falling through the US social safety net.
Tuesday, December 08, 2009
The Value of Lost Data
As quoted from the UK London Times (November 29, 2009):
"SCIENTISTS at the University of East Anglia (UEA) have admitted throwing away much of the raw temperature data on which their predictions of global warming are based. It means that other academics are not able to check basic calculations said to show a long-term rise in temperature over the past 150 years. The UEA’s Climatic Research Unit (CRU) was forced to reveal the loss following requests for the data under Freedom of Information legislation."
Fortunately, we no longer need the data because everyone accepts that global warming is occuring but the technique here can now be used in Copenhagen.
The plan is for Developed countries to emit less greenhouse gases in the future while Developing countries will be allowed to emit more. The idea being that at some point in the future, all countries will have contributed the same amout of greenhouse gases into the environment and then we will have another meeting.
Since developed countries have contributed the most green house gases and therefore have all the historical data, they will be in charge of keeping score going forward.
If, in the event Developed countries don't like the score going forward, they will simply lose their data and calculate events as they see fit.
After all, it is one of the worlds most greatest diplomats that said, "those that vote decide nothing; those that count the votes decide everything".
Look it up....
"SCIENTISTS at the University of East Anglia (UEA) have admitted throwing away much of the raw temperature data on which their predictions of global warming are based. It means that other academics are not able to check basic calculations said to show a long-term rise in temperature over the past 150 years. The UEA’s Climatic Research Unit (CRU) was forced to reveal the loss following requests for the data under Freedom of Information legislation."
Fortunately, we no longer need the data because everyone accepts that global warming is occuring but the technique here can now be used in Copenhagen.
The plan is for Developed countries to emit less greenhouse gases in the future while Developing countries will be allowed to emit more. The idea being that at some point in the future, all countries will have contributed the same amout of greenhouse gases into the environment and then we will have another meeting.
Since developed countries have contributed the most green house gases and therefore have all the historical data, they will be in charge of keeping score going forward.
If, in the event Developed countries don't like the score going forward, they will simply lose their data and calculate events as they see fit.
After all, it is one of the worlds most greatest diplomats that said, "those that vote decide nothing; those that count the votes decide everything".
Look it up....
Wednesday, December 02, 2009
How to Transfer Wealth
I just picked a bank at random and retrieved these figures for 12/1/2009:
For savers: 12 month Certificate of Deposit: 1.25 % return
For borrowers: Credit Card Interest Charged: 19.99% ; 30 Year Home Mortgage: 4.875%
20 Year Home Equity Loan: 6.49%
So it would seem banks would be lending lots of money because the rate at which they pay versus the rate at which they charge is really big. They should be making tons of money!
But they are not lending because even though the spread is huge, there is a risk free way for them to make even more money.
STEP (1): The US Federal Reserve bank creates money out of thin air and makes it available to preferred banks at near 0% interest.
STEP (2): Preferred banks borrow money from the Fed at 0%.
STEP (3): The Preferred banks use this money to buy US Treasury certificates that yield more than 0%. Example: 10yr yield is greater than 4%.
STEP (4): US government pays the interest to the preferred banks using Taxpayer dollars.
WHY BANKS DON’T LEND:
So… if you were a bank, why would you ever lend any money to individuals when you can lend it to the US government who will in turn take money from its citizens to pay you back. All this accomplished by using money that doesn’t really exist which you borrowed at 0% interest.
WHY AN ASSET BUBBLE IS FORMING:
Shaving a couple of interest points from the US government can get boring after a while. So, why not take some of that money and start buying domestic and foreign stocks. After all, the money is free and you, plus other banks, will all start buying and pump up the stock market creating a “herd mentality”. Maybe even get your friends at the FED to buy index futures with additionally manufactured dollars to really accelerate the rise in the stock markets.
WHEN WILL FED INTEREST RATES RISE?:
Never. What has been created is a massive “carry trade” at an unprecedented scale that can never be unwound. Besides, in the old days the FED raised rates so banks, in turn, would raise rates to cool down the economy by making credit tighter. Credit is already tight at 0% so there is no need to raise rates because it would have no effect.
WON’T ALL THIS MONEY CREATION CAUSE INFLATION AND REQUIRE THE FED TO RAISE RATES?:
No. We are in a well hidden deflationary spiral. As more and more individuals have less and less money because it is being taken away from them or they are jobless, local prices will fall- eventually resulting in labor rate parity world wide.
When people can’t afford things the price naturally falls. This is why the US housing market is not done falling and won’t stop until median home prices begin to align with median incomes.
Imported goods will become more expensive and therefore appear inflated but that is just currency effect without change in real prices. However, imports will slow because no one can buy them- eventually resulting in global economies becoming regional. That is- local goods, produced locally and consumed locally.
And besides, the FED is not really creating money because the money is not being allowed to fully enter the economy. We are simply point shaving here and the preferred banks only have to pay back the principle (0% interest rate effect) or even if they default- who cares the money didn't really exist in the first place!
Tuesday, November 24, 2009
My Healthcare Solution For The U.S.
I wrote this back in July and never posted it. Time to weigh in...
(A) There is nothing wrong with health care in the United States. The Healthcare debate is about money.
(B) Today in the U.S., whether you can pay for it or not, everyone gets some form of healthcare.
(C) With US population growth near zero, the healthcare costs of the U.S. will be basically flat plus inflation in the future.
(D) There are three "costs" that occur within the healthcare system that do not contribute to healing and prevention. (1) Fraud, (2) Poor Productivity, (3) Insurance Company Profits. All three of these must be eliminated which further ensures point (C) above will be true.
(E) Fraud and Poor Productivity can be eliminated through the use of Information Technology provided some effort is put into business process re-engineering.
(F) Insurance companies would be required to operate at zero profit plus investment recap for their health insurance units. They can also leverage their back office operations with their other "for profit" insurance units (auto, home, etc.) to gain some economic advantages.
Today my parents are covered by US government provided medicare and they buy additional insurance ("medicare supplement") from a private insurer to cover things that Medicare does not provide. What is wrong with that for all US citizens?
You see, if the arguments could be reduced to the facts and points above, we could make progress. But there are groups at work who are positioning the legislation such that their real agenda can be carried out later. And it is these groups for which the common citizens are most afraid and why protests are mounting:
#1) The anti-population crowd that believes there are too many people already and that death should be hastened for the unproductive and reproduction should be curtailed. Their basis lies in the belief that the planet's biggest problem is people.
#2) The anti-capitalist crowd who believes that anything that provides equal opportunity without equal outcomes must be eliminated.
#3) The anti-freedom crowd who believe that they know what is best for people and plan to use the provision or denial of healthcare to control people.
#4) The usual suspects that create massive legislative works in order to enrich themselves, their friends, or people who helped them get elected in the last election.
(A) There is nothing wrong with health care in the United States. The Healthcare debate is about money.
(B) Today in the U.S., whether you can pay for it or not, everyone gets some form of healthcare.
(C) With US population growth near zero, the healthcare costs of the U.S. will be basically flat plus inflation in the future.
(D) There are three "costs" that occur within the healthcare system that do not contribute to healing and prevention. (1) Fraud, (2) Poor Productivity, (3) Insurance Company Profits. All three of these must be eliminated which further ensures point (C) above will be true.
(E) Fraud and Poor Productivity can be eliminated through the use of Information Technology provided some effort is put into business process re-engineering.
(F) Insurance companies would be required to operate at zero profit plus investment recap for their health insurance units. They can also leverage their back office operations with their other "for profit" insurance units (auto, home, etc.) to gain some economic advantages.
(G) Since Federal and State governments of the U.S. already provide more than 50% of the health care insurance coverage already, a government provided insurance option can be provided for those not wishing to buy private insurance. Government insurance programs for the poor and aged would continue as they do today.
(H) Those who remain uninsured, consume healthcare services and then refuse to pay for those services will be pressed into community service at healthcare institutions until their debt is repaid.
(I) Businesses may provide insurance coverage for their employees and/or self-insure as a means of retaining talent.
(J) Second amendment rights will ensure the government won't ration health care because the American people won't stand for it. The politicians will lose their jobs or worse.Today my parents are covered by US government provided medicare and they buy additional insurance ("medicare supplement") from a private insurer to cover things that Medicare does not provide. What is wrong with that for all US citizens?
You see, if the arguments could be reduced to the facts and points above, we could make progress. But there are groups at work who are positioning the legislation such that their real agenda can be carried out later. And it is these groups for which the common citizens are most afraid and why protests are mounting:
#1) The anti-population crowd that believes there are too many people already and that death should be hastened for the unproductive and reproduction should be curtailed. Their basis lies in the belief that the planet's biggest problem is people.
#2) The anti-capitalist crowd who believes that anything that provides equal opportunity without equal outcomes must be eliminated.
#3) The anti-freedom crowd who believe that they know what is best for people and plan to use the provision or denial of healthcare to control people.
#4) The usual suspects that create massive legislative works in order to enrich themselves, their friends, or people who helped them get elected in the last election.
Saturday, November 07, 2009
Federal Reserve concerned about its own solvency
Took a vacation from blogging for 2 months but the latest FOMC report from the Federal Reserve has gotten me back in action. Pretty short read. The whole text can be found here: http://federalreserve.gov/newsevents/press/monetary/20091104a.htm
Federal Reserve people are like scared ducks in a pond. They look calm on the surface but underneath the water they are paddling furiously. That's why you need to really look at what they are saying in these reports because it all sounds quite benign. It isn't.
"In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010."
Agency debt is one of the reasons the financial collapse started. Agency debt is created by surrogates of the US Government created by the US Government. The US Government has taken no action AT ALL conerning US Sponsored Agencies, their policies, practices nor the legislation that mandates their actions and behavior. Everything that has caused the intial problem has continued, unabated, and even somewhat augmented by stimulus activity.
The Federal Reserve bank is basically saying in their report, "We've been buying your crap to keep you afloat. While we were risking our own solvency, you did nothing. Starting 2Q10, you are on your own".
===> If you are in the US and most of your holdings/cash are US dollars, you probably need to find an entry point to buy more gold. The price of gold is not going up. The value of the dollar is going down which makes it look like gold is expensive. We are just getting started.
Federal Reserve people are like scared ducks in a pond. They look calm on the surface but underneath the water they are paddling furiously. That's why you need to really look at what they are saying in these reports because it all sounds quite benign. It isn't.
"In order to promote a smooth transition in markets, the Committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010."
Agency debt is one of the reasons the financial collapse started. Agency debt is created by surrogates of the US Government created by the US Government. The US Government has taken no action AT ALL conerning US Sponsored Agencies, their policies, practices nor the legislation that mandates their actions and behavior. Everything that has caused the intial problem has continued, unabated, and even somewhat augmented by stimulus activity.
The Federal Reserve bank is basically saying in their report, "We've been buying your crap to keep you afloat. While we were risking our own solvency, you did nothing. Starting 2Q10, you are on your own".
===> If you are in the US and most of your holdings/cash are US dollars, you probably need to find an entry point to buy more gold. The price of gold is not going up. The value of the dollar is going down which makes it look like gold is expensive. We are just getting started.
Saturday, September 12, 2009
Connecting the Dots on Electricity
As a blogger since 2004, this is going to be my most important post. The service I try to provide you, my readers, is taking a series of complex data points and embodying them in a story that makes you think. What I offer is simple: Entertainment and Insight.
Something big is about to happen with electricity and it is going to happen soon.
I have selected 3 videos about electricity from TED.COM. Watch them in sequence and tell me if you connect the dots the way I do.
VIDEO #1:
Concept: Shai Agassi wants to put you behind the wheel of an electric car -- but he doesn't want you to sacrifice convenience (or cash) to do it.
What To Watch For: This not about an "invention". This is about a fundamentally new business model for the consumer of automobiles, the auto industry itself and the companies that provide energy.
http://www.ted.com/talks/lang/eng/shai_agassi_on_electric_cars.html
VIDEO #2:
Concept: Eric Giler has a plan to beam electric power through the air to wirelessly power your laptop or recharge your car. You may never plug in again.
What To Watch For: The live demonstration on stage. It works.
http://www.ted.com/talks/eric_giler_demos_wireless_electricity.html
VIDEO #3:
Concept: John La Grou, a long-time electronics inventor, audio designer and entrepreneur, wants to save lives and energy with a new, smarter type of electrical outlet.
What To Watch For: This is the answer to how we can consume electricity for new things (like cars) without increasing our total consumption of electricity. It works.
http://www.ted.com/talks/lang/eng/john_la_grou_plugs_smart_power_outlets_1.html
THE FUTURE IS "BRIGHT":
The last 200 years of human development has been immeasureably accelerated due to cheap and plentiful sources of energy. Cheap compared to doing the work manually or with donkeys-> 1 Barrell of oil = 5.8 million BTUs = 23,200 hours of human labor (agricultural standard). Because energy is so cheap, we have been able to do almost everything with practically nothing. This transformed modern society.
The good news is that limitless, cheap electrical power will remain with us. According to Ray Kurzweil , "We also see an exponential progression in the use of solar energy," he said. "It is doubling now every two years. Doubling every two years means multiplying by 1,000 in 20 years. At that rate we'll meet 100 percent of our energy needs in 20 years. [with solar power]"
In summary:
Something big is about to happen with electricity and it is going to happen soon.
I have selected 3 videos about electricity from TED.COM. Watch them in sequence and tell me if you connect the dots the way I do.
VIDEO #1:
Concept: Shai Agassi wants to put you behind the wheel of an electric car -- but he doesn't want you to sacrifice convenience (or cash) to do it.
What To Watch For: This not about an "invention". This is about a fundamentally new business model for the consumer of automobiles, the auto industry itself and the companies that provide energy.
http://www.ted.com/talks/lang/eng/shai_agassi_on_electric_cars.html
VIDEO #2:
Concept: Eric Giler has a plan to beam electric power through the air to wirelessly power your laptop or recharge your car. You may never plug in again.
What To Watch For: The live demonstration on stage. It works.
http://www.ted.com/talks/eric_giler_demos_wireless_electricity.html
VIDEO #3:
Concept: John La Grou, a long-time electronics inventor, audio designer and entrepreneur, wants to save lives and energy with a new, smarter type of electrical outlet.
What To Watch For: This is the answer to how we can consume electricity for new things (like cars) without increasing our total consumption of electricity. It works.
http://www.ted.com/talks/lang/eng/john_la_grou_plugs_smart_power_outlets_1.html
THE FUTURE IS "BRIGHT":
The last 200 years of human development has been immeasureably accelerated due to cheap and plentiful sources of energy. Cheap compared to doing the work manually or with donkeys-> 1 Barrell of oil = 5.8 million BTUs = 23,200 hours of human labor (agricultural standard). Because energy is so cheap, we have been able to do almost everything with practically nothing. This transformed modern society.
The good news is that limitless, cheap electrical power will remain with us. According to Ray Kurzweil , "We also see an exponential progression in the use of solar energy," he said. "It is doubling now every two years. Doubling every two years means multiplying by 1,000 in 20 years. At that rate we'll meet 100 percent of our energy needs in 20 years. [with solar power]"
In summary:
- The new business model for private transportation has been defined and some country somewhere will adopt it.
- The ability to transmit electricity wirelessly has been proven, it will now be perfected.
- The rate of progression of solar power is an exponential curve.
- Legacy forms of energy production are requiring more and more energy to produce energy due to "high grading"
- Smart outlets are a bridging technology providing safety and extraordinary savings.
Friday, September 11, 2009
My New Corvette
Probably wouldn't spend the money to own a Corvette but you must admit it is a great looking sports car with a colorful history. Because I am a US Citizen and therefore part of owner of General Motors, I will be one of the first in line to take advantage of the latest offer of a free test drive
More details coming on September 14, but here is what we know now (from above hotlink):
Details of GM's new Satisfaction Guarantee:
· Offer covers 2009 and 2010 Model Year Chevys, Buicks, GMCs and Cadillacs (except medium duty trucks)
· Customers (one per household) can return their vehicle between 31 and 60 days with less than 4,000 miles
· Customers will be informed in writing before they buy the vehicle of the terms of the Satisfaction Guarantee
· Customers must take delivery by Nov. 30
· The Satisfaction Guarantee covers the vehicle purchase price and sales tax, but not other add-ons like accessories, negative equity on a trade-in or other fees; other restrictions apply
· Leased vehicles are not included
· More details are available beginning Monday, Sept. 14, online at [Chevy][Buick][Cadillac][GMC].com/guarantee
More details coming on September 14, but here is what we know now (from above hotlink):
Details of GM's new Satisfaction Guarantee:
· Offer covers 2009 and 2010 Model Year Chevys, Buicks, GMCs and Cadillacs (except medium duty trucks)
· Customers (one per household) can return their vehicle between 31 and 60 days with less than 4,000 miles
· Customers will be informed in writing before they buy the vehicle of the terms of the Satisfaction Guarantee
· Customers must take delivery by Nov. 30
· The Satisfaction Guarantee covers the vehicle purchase price and sales tax, but not other add-ons like accessories, negative equity on a trade-in or other fees; other restrictions apply
· Leased vehicles are not included
· More details are available beginning Monday, Sept. 14, online at [Chevy][Buick][Cadillac][GMC].com/guarantee
Subscribe to:
Posts (Atom)