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Latest Comments19 Comments
The American Crisis and the Case for an Inflationary Depression
Not hardly. The collapse can be traced to the trade deficit, exacerbated by the oil bubble. With all those dollars looking for a home, we had to pretend there was value here for them to buy. So we said that homes were worth what people paid for them, even though they paid with liars' loans. Then, the AAA paper backeed by the stupid loans proved not to be AAA after all. Duh. That seized up the credit markets, and it has nothing to do with artificially low interest rates. (The flood of petrodollars looking for dollar investments guaranteed that rates would be low, whatever the Fed did.)
Bailouts Will Soon Drive the Currency Markets
The dollar may be damaged by the discovery that the Reward Points we have been distributing to our trading partners cannot be redeemed for anything worth having, but that's not a result of the Treasury printing money so much as it is the result of exporters grasping that they will not in fact get paid for what they send us. (Of course, taking into account the low marginal cost of selling stuff to us, that risk may actually prove acceptable to them...)
On Oct 15 02:30 PM Pipo wrote:
> Jim Rogers is also worried abaout massive inflation going forward.
> Commodities will excel.
>
> Visit his blog at jimrogers-investments....
Bailouts Will Soon Drive the Currency Markets
On Oct 15 01:46 PM User 30121 wrote:
> Kelly, you tried. remarkl just doesn't get it. Granted, he/she has
> faith in the system, and we "should" have that, but let's face it,
> if you buy a dog for protection, and at every opportunity to excel
> in his job to protect you, he BITES YOU, what should you think/do?
>
>
> I bet he hasn't a ounce of gold or silver in his safe! Those paper
> promises, oh well, I'm not going to beat that (very) dead horse!
>
>
> Love your posts, Kelly. Of course, you know that!
Bailouts Will Soon Drive the Currency Markets
When I say "if," I don't mean "when." I have a passle of TWM, SDS, GLD, and SLV that says I don't disagree with your prediction.
I do not agree, however, that the "fools that created this mess" are on Wall St or K Street. My first domino is the trade deficit. Given Jimmy Carter's failed attempt to wake us up from our addiction to oil, I believe that the relevant fools can be found in our bathroom mirrors. All of the mistakes of all of the subsequent fools were largely irrelevant to the big picture. Those latter fools determined which card would be pulled out of the house to trigger the collapse, but we built the house. But even if Government did not make this mess, Government may be the only one that can fix it, and pessimism about the ability of Government to get it right is certainly not without historical support.
On Oct 15 09:29 AM Kelly Lieberman wrote:
> Remarkl,
> If,If, If....I feel bad to be the one to tell you, so just reread
> your own post. The dominos are already falling and there is no way
> that the fools that created this mess are smart enough to get us
> out of it.
> It is really just that simple. You have two choices, the first is
> to put your full faith and credit (literally) in the hands of the
> criminals who created this mess or self preservation. You choose.
> There is not much time left.
Moral Hazard: The Real Culprit of the Financial Crisis
Moral hazard is an enabling condition, perhaps, but the immediate culprit is the ratings agencies who had no skin in the game: having no risk to be insured, they had no moral hazard in their decision-making process.
But the immediate cuprit is usually just the weak link in a chain that has come under tension; the tension on the chain that is the "real cause" of the crisis. In our case, the tension was the trade deficit. The deficit made it necessary for us to provide a home for the dollars we spent on imports. Where else were they going to go to make them worth having? We had to borrow them, but Pres. Clinton balanced the budget, leaving the private market to supply the paper. The rest is history. Even the burgeoning Iraq-based deficit could not keep up with the inflow of money. Only by lying about the value of collateral could we accommodate the deluge of petrodollars. So we lied. What else could we do? Conserve energy? Use natgas or nuclear energy? C'mon, this is America!
My Proposal for Improving Lending Between Banks
Nuclear energy, CNG, coal, wind, solar, etc. We need to use local energy sources to run our stuff, and we need to SELL our oil to pay for our toys.
Go back to econ 101 and study comparative advantage. In this day and age, any country that can produce oil ipso facto has a comparative advantage in oil and should export oil. Until recently, our comparative advantage was in investment grade paper - something we could produce more cheaply than just about anyone else. Now, that advantage is gone. We need to export something else, and oil is it. All we need is the brains and courage in Washington. Which is why I've loaded up on SDS and TWM.
Treasury's Actions Not in Our Best Interest
Robin Hood in Reverse: In Defense of the U.S. Taxpayer
Robin Hood in Reverse: In Defense of the U.S. Taxpayer
The issue here is not the rescue of the investment banks, per se. It is the rescue of of dollar-denominated paper as a world-wide medium of exchange. The world tolerates our trade deficit - and we can survive it - for one simple reason: the paper we give to get back the money we spend on the things we import is worth something. If our AAA paper is not reliably worth having, we won't get any of our money back to use to run our economy. So long as we need more credit than we, ourselves can provide through our savings institutions, our national creditworthiness - not just of the treasury, but of our blue-chip investment banks - is a national imperative.
Moreover, anyone who talks about "the American Taxpayer," when he means "the American-taxpayer-work... is an idiot. None of us is just a taxpayer.
There are people in this world who, if asked what they would want most in the world if they knew that an investment banker would get it double, would opt for one blind eye. And all of them are posting to blogs this week.
Did Big Oil Take Advantage of Light, Sweet Crude?
16 Stocks That Are Paying My College Tuition
Also, if you think a stock is undervalued, you need to accept that it may become more undervalued before it becomes less so. In other words, if your view is essentially contrarian, you cannot afford such tight stops, I am familiar with only one of your calls - DWSN - and all I can say is that I bought more when it dropped to near 50 and now hold above 60, whereas you sold at a loss. If you believe in your picks, you need to ride them more faithfully. Indeed, if you think they are home runs on the upside, you need to be willing to take some serious hits on the downside. Otherwise, you will stop yourself out of your best picks.
Bottom-fishing is overrated. The time to buy a stock is when you are sure it's underpriced, not when your sure it's hit bottom. Then you hold it until the market catches up with your appraisal, i.e., until owning it further will not in your opinion produce another home run from where it sits.
Why Congress Blames Index Speculators
1. Futures trading other than as a hedge is gambling. Federal law preempts state gambling laws so that these trades won't be illegal for those not hedging real obligations. This is not a moralizing quibble. The point is that the contracts are not tied to actual delivery and so are unlimited in quantity; they are not really part of the commodity market at all. Thus, any effect they have on price is too much.
2. Index investing is bad market citizenship. Stock and commodity futures markets are auctions. Unless people bid, the auction doesn't work. Index investors merely bet on how other people wil bid. But if everyone bets on the bids, no one actually bids, and the market itself is corrupted. You can save energy by riding in the slipstream of a bus, so long as the bus driver doesn't decide to ride a bike, too. Then what?
3. The logic of the corn surrogate seems off. Corn is up because oil is up, i.e., because corn's price is responding to its highest and best (economic) use as fuel. Even if there were no market in corn futures, what happens in the oil market would determine the price of corn. So there is no reason to believe that anything is learned about the effect of oil index futures on oil from the correlation or absence there of between the prices of corn index futures and corn.
Jinpan International: Increasing Transformer Demand Should Drive Growth
White House Pushes Mortgage 'Covered Bonds'
Because the whole purpose of these bonds is to increase confidence by making the IDI's/Depositors'/FDIC... assets the ultimate source of repayment, I doubt that Wall Street will find "creative ways of linking covered bond payments to the income generated by the trusts," at least not on the down side.
Is General Electric Overvalued?