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Andrew Butter  

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  • BofA: Who Held the Shotgun? [View article]
    Very nice

    Are you sure your name's not Derringer?
    Jun 22, 2009. 08:18 AM | Likes Like |Link to Comment
  • Five Points to Eliminate Confusion About the U.S. Macroeconomy [View article]
    Interested to hear your view on whether the stalled securitisation market has removed money from the system which might explain the unanticipated severity
    Jun 20, 2009. 02:47 PM | Likes Like |Link to Comment
  • Chart of the Day - Inflation Adjusted Dow [View article]
    I got a problem drawing conclusions from two pieces of data, which is what the support and resistance lines are based on.

    I also have a problem comparing data that is multiplied by an inflation index when the index before 1987 is not comparable with the inflation after 1987. Use one or the other, not both.

    There are good arguments that inflation over the past ten years would have been recorded quite a lot higher if it had been calculated the way it was before 1987, in which case your line now would I think be quite a lot lower than where you show it.

    Personally I would be much more convinced by the average line (thousands of points of data).
    Jun 20, 2009. 12:35 PM | Likes Like |Link to Comment
  • Future S&P Returns Could Be Extraordinary [View article]
    I broadly agree with your thesis.

    You might like to look at for a different angle on the same thing that gives about the same answer
    Jun 18, 2009. 07:53 AM | Likes Like |Link to Comment
  • Current Inflation Numbers Are Meaningless [View article]
    Sure - of course just because the people measuring inflation (or deflation) are playing games, on games, on games...doesn't mean that inflation (or deflation) doesn't exist.

    In USA gasoline, food, housing (i.e. house prices), automobiles, plus medical costs are all you really need to work out what's real and what not.

    That tells a totally different story
    Jun 18, 2009. 07:44 AM | Likes Like |Link to Comment
  • How a Bad Bubble Turned into a Historically Bad One [View article]
    What drove the bubble was the availability of credit costing less than the % annual increase in house prices
    Jun 18, 2009. 07:36 AM | Likes Like |Link to Comment
  • Market Outlook: Have Markets Ignored Reality? [View article]
    Farrell Law #9...well all the experts agreed that from 9th March this was a Dead Cat Bounce Sucker Rally including Nouriel Roubini, Peter Cooper and 95% of SA contributors...including you?

    Well done chaps!

    Perhaps you forgot about Farrell's Law #2.

    Eer Bear...Mmm don't hold your breath!!
    Jun 16, 2009. 02:54 PM | Likes Like |Link to Comment
  • Is the U.S. Style Securitization Model Dead? [View article]
    The way they turned those lousy loans into "gold" was the "waterfall" , it's all about LTV so if you got 100% LTV overall you can distill out 70% or so AAA - the "wrong assumption" was that house prices were going to go up forever, big picture if house prices drop less than 30% (my estimate is 40%) the AAA are safe, the point is the banks held onto the lousy stuff.

    On Jun 16 11:07 AM Leftfield wrote:

    > All that crap sold based on borrowers who couldn't pay. Leveraged
    > to who-knows-where? Without a real outing on Wall St. (which would
    > have a salutary spinoff in DC) we're just supposed to throw trillions
    > at it.
    > Nice observations.
    Jun 16, 2009. 01:36 PM | Likes Like |Link to Comment
  • Is the U.S. Style Securitization Model Dead? [View article]
    Hey thanks - brilliant was perhaps an over exaggeration but I liked candid.

    I don't understand XBRL - so does that give every transaction and easy to access data that you can use?

    On Jun 16 08:55 AM Paul Wilkinson wrote:

    > Brilliant and candid. There is a way to expose the circuits the same
    > way GAAP exposes the circuits of public companies: XBRL. Public companies
    > were slow to embrace full GAAP disclosure in the 30s and MBS makers
    > are slow to embrace full XBRL disclosure now. It will happen. The
    > question is when the golfers will let it happen.
    Jun 16, 2009. 01:31 PM | Likes Like |Link to Comment
  • Revisiting the MBS Debate (Which We Should Already Be Past) [View article]
    Nice article, broadly I agree with your sentiments, I was involved doing MBS and everyone I was involved with were very serious and very straight.

    I think you have a few things not quite right though:

    1: I'm pretty sure the stuff ML sold was CDO.

    2: Most of the stuff that got left behind with the banks was lower than AAA which gets hit first, the reason for that was they couldn't easily sell that, the demand was for AAA and better.

    3: The essential flaw that I saw then and which I believe was critical is that no one not the bankers (why should they) nor the rating agencies, really understood real estate or how to value it . When you value real estate seriously you do it three ways (a) sales comparison (price today) (b) depreciated replacement cost (that has today's land cost in so it's a hybrid) (c) income capitalization (you can do that for owner-occupied housing if you know how to do valuations), then you stand back, if all three don't give the more or less the same answer, you know you have a problem.

    The problem I saw was that the people putting the deals together got paid for success on the deals, and they didn't ask the right questions, there was only one box..."what's the value today" - if there had been a box "what will the value be in three years time", then things would have been different.

    The people who knew how to work that out reliably were not asked that question.
    Jun 12, 2009. 04:24 AM | Likes Like |Link to Comment
  • The Price of Oil: Parasite Economics Explained [View article]
    I don't agree, strategy is the job of government, take your pick on what type you like.

    Subsidising gasoline when that is not in the long term interests of ordinary Americans is crony capitalism, which in practice is not much different from Central Planning

    On Jun 01 02:32 PM iggyDalrymple wrote:

    > "Stragedy" is the job of the Central Planning Committee and its Commissar.
    Jun 3, 2009. 09:12 AM | Likes Like |Link to Comment
  • The Price of Oil: Parasite Economics Explained [View article]
    It's not about stopping rich people drive big cars, it's about stopping poor people subsidising rich people so they can drive big cars.

    On Jun 01 08:33 PM zio wrote:

    > in Italy as at today, due to taxes, we pay oil around 1.2 euro per
    > liter - that means (today exchange) 1.69$ for 0.264 gallons = 6.4$
    > per gallon (at the oil peak it was around 1.4 euro per liter).<br/>So
    > a Fiat Panda (around 20km per 1 liter = 12.43 miles for 0.254 g =
    > 48.9 miles per gallon - well less for a sport driver, but a good
    > number anyway) may be a funny small car for Americans, but for us
    > it helps saving some money.
    > By the way I can also say that 7$ per gallon do not stop SUV and
    > big cars: even with our small roads (some of our towns were built
    > for horses, not cars!), nowadays it is full of SUVs (either japanese
    > or american, and also some european stuff) and they are increasing.
    > People want to show they have a big car, I suppose. Maybe 12 euro
    > per liter ($64 per gallon) would stop some? The current price (that
    > sounds very high for you in US, don't you?) stops nothing.
    Jun 3, 2009. 09:09 AM | Likes Like |Link to Comment
  • The Price of Oil: Parasite Economics Explained [View article]
    And the reason why not and why that huge current account deficit atht might get bigger is there - is because gasoline is not taxes at a price that reflects the economic long-term costs of cheap gasoline for ordinary people in USA.

    On Jun 02 08:30 AM Old Wizard wrote:

    > Thought provoking article. One saliet point is nit treated and is
    > probably should be the driving factor in the discussion. The article
    > doesn't address the fact that the US has a negative operating cash
    > flow with the rest of the world. At 100/barrel the importation of
    > oil contrributes about a negative 500 billion dollars. We have had
    > an increasingly negative current account since 1991. We could turn
    > this trend around significantly by going to natural gas transportation.
    > Natural gas is a commodity we have in abundant supply.
    Jun 3, 2009. 09:07 AM | Likes Like |Link to Comment
  • The Price of Oil: Parasite Economics Explained [View article]
    1: Try living downtown in Lyon, London or Hong Kong, or my favorite Kelso in Scotland.

    2: I'm sure a tax on gasoline would decrease consumption.

    3: You are right, there are a lot of tax advantages living in the suburbs, people in suburbs pay the same for public utilities (roads, electricity, water) wheras it costs about five times more capex to provide this.

    4: Part of teh problem is zoning which separates work from living, there is no reason work should pollute living areas, there are solutions to that.

    On Jun 01 04:48 PM Danny Newton wrote:

    > There are substantial incentives for people to flee the cities. Taxation
    > is the biggest one. The car allows one to get lower prices on housing
    > and other aspects of living. I have lived downtown and I have ridden
    > public transit. Didn't like it. I didn't like the crime or the panhandling
    > either.
    > Even the Japanese, who have maybe the best train system in the word,
    > are riding their autos in numbers that increase every year in spite
    > of the incentives of high gas prices/taxation and cost of sheltering
    > and owning the the vehicle. The experience in Japan shows me that
    > Americans are not the only ones who enjoy the auto. Maybe it is a
    > genetic problem? The population density in Japan exceeds 40,000 per
    > square mile and no where in the US exceeds 6,000 per square mile.
    > I seriously doubt that the appetite for autos can be killed with
    > planning more dense cities.
    > Anyway, the question I would lke to ask is: How do you know that
    > increased taxation will operate to reduce oil consumption? If taxes
    > go up more in urban than rural areas, it seems that would reinforce
    > the tendancy to sprawl. The CAFE process can be connected to the
    > increase useage of vehicle miles traveled. Also, if the proplem is
    > the distance between employer and employee, why would it not be expected
    > that the employer might move to get closer to the needed demographic?
    > This has a potential for accelerating the phenomenon of city core
    > decay.
    > The current decline of Vehicle miles traveled is a combination of
    > two phenomenon, the cost of fuel and the demographic phenomenon of
    > Baby Boomer Retirements. To get the real impact of cost of oil on
    > travel, the demographic cause must be filtered out,
    > As an engineer, I hate the coupling of the words "social" and "engineering"
    > since engineering presumes the use of principles and practices that
    > are somewhat logical or statistical and designed to provide a high
    > probability of a favorable outcome. Social what ever it is with taxation
    > is more or less a crap shoot.
    > My congratulations on the parasite analogy. Only after the rats died
    > did the fleas stop carrying the plague. This time, the parasite is
    > suppose to be the smartest animal on the planet and many people love
    > this parasite.
    Jun 3, 2009. 09:05 AM | Likes Like |Link to Comment
  • The Price of Oil: Parasite Economics Explained [View article]

    I suspect Peak Oil is passed but suppliers and buyers are in denial.

    On the optimistic side it only took about 7 years after 1974 for the technology and new finds to have an effect.

    Intriguingly if the cost of oil went up (either due to constraints on supply (genuine or political) or due to a radical increase in taxation), this could stimulate investment in oil producing countries (increase GDO + jobs) and that would require less involvement from the government simply because if you can be certain of $100 to $150 oil you can get the equity and debt much easier than in the current situation where if you put more than $50 on your long-term projection, no one will take you seriously - know I put than on a projection when oil was $120 last year, and got squeezed down to $40.

    Thanks for the comment

    On Jun 01 12:27 PM John Lounsbury wrote:

    > Andrew - - -
    > I am intrigued by your ratio analogy: $2/$35 thirty years age vs.
    > $20/$350 today. I also like to use history as a reflection on the
    > present. In this case, there are three marked differences between
    > 30 years ago and now.
    > 1. We are much closer to decreasing supply constarints. Some say
    > we have reached them ("peak oil" or "peak cheap oil") already.<br/>This
    > factor could put upward pressure on the $350.
    > 2. There are possibilities of increased use of applications, in electrical
    > generation, as well as in transportation, that do not make as high
    > a use of fossil fuel combustion. Think nuclear, solar, wind, geothermal,
    > hydro (waves and tides, not only dams) for electrical generation.
    > Think electric (certainly hybrid, if not plug-in) and other energy
    > storage (e.g. Tata compressed air) for transportation.
    > 3. Non-petroleum combustible fuel sources may be more in play now
    > than 30 years ago. We are certainly closer to developing technology
    > to burn coal with carbon, sulfur and other polutant sequestering.
    > With oil in the $150 to $350 range developing these technolgies becomes
    > very profitable. Also, for the next 20 years or so, natural gas,
    > which is plentiful in North America, can provide a viable combustible
    > energy supply to transition to the future technologies. Finally,
    > low energy consumption, anaerobic alcohol production from what would
    > otherwise be bio waste may also provide a combustible fuel supplement
    > going forward.
    > Item 1 alone would make me skeptical that the near-term future upper
    > bound for oil would be $350. Items 2 and 3 will tend, in time, to
    > reduce demand for oil and may produce price stability for oil at
    > some point in the future. It will be very interesting to see how
    > these competing forces play out over the next couple of decades.
    > Andrew, good topic and good article. It should be widely read because
    > I don't think the average citizen has any grasp of the issues here.
    Jun 3, 2009. 08:58 AM | Likes Like |Link to Comment