Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
I appreciate that. Thank you.
I have nothing against the prudent use of debt. Without debt you can not have meaningful economic expansion.
But to your overall point - for around the last 40 years politicians have been buying the affection and support of voters and financing that purchase with debt. As a result we have created whole portions of our society that are 100% dependent on continued government spending.
Making this worse, is many - perhaps even a majority - of these very same politicians have never worked in the private sector. Never had to make a product someone else might want to buy. Never had to confront how much debt on your business is unsustainable.
As a result it is my belief that after a lifetime in government many of our policy makers do not understand basic economics and finance.
When they see the private sector all they see is a big whirl of cash flow and truly believe that there is no harm done in simply appropriating some of it for government use. But they don't understand that dollar taxed is a dollar taken out of circulation.
I consider myself a centrist - an archmoderate. There has to be balance in political and economic matters. Right now we are dealing with the effects of systemic imbalances that have developed over the last 40 years.
Lets just hope that the next generation of voters and politicians are more level-headed than this generation.
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
Well, as I said earlier this is a political problem now just as much if not more than it is an economic problem. Greece, Europe, the US and even China are confronting the limits not of what economic theory they have tried to embrace but how well they have embraced it.
I agree, living within your means is understood across cultures. People understand it. Families understand it. Corporations understand it. But governments often do not and the Euro governments - even Germany which was amongst the first to violate debt/GDP guidelines outlined in the Maastricht Treaty - by giving up their abilities to monetize their own debt continued to rely on deficit spending to further their own economic and political agendas.
This crisis is precisely about the over reliance on deficit spending by governments.
There is a great human tendency not to remember or to ignore that which is in conflict with the thesis underlying policy proposals and actions based upon them.
For example, you hear an awful lot of market participants say, "the trend is your friend." But they forget the second part of that phrase, "except at the end" because it tends to be in conflict with their actions at the time they are using it.
In this instance, governments have been engorging themselves with deficit spending citing established and accepted Keynesian economic thought and practice as their rationale. But what they have forgotten is that Keynes also advocated withdrawing the punch bowl during expansionary periods and reducing deficits so that policy makers are able to use the same tools again during the next downward cycle.
The trend is your friend except at the end. This is nothing more than the end of a super cycle of deficit spending that has overwhelmed everything and everyone for the last 40 years.
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
Great comment! Very impressive command of history.
What a lot of people do not now know is that this crisis is no longer purely an economic one. It is a mostly now a political one which will call all alliances and treaties to be looked at a new.
My 90 year old father, a D-Day vet who then worked on Wall St for 45 years said the other day. "It's 1945 all over again."
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
Actually... I totally understand that these are countries.
My point when I first started writing about this a year ago was that without political union you can not have monetary union. Ergo, the Euro was doomed at Maastricht.
Fiscal union or the attempts at it is at least a half-step in the right direction. Whether you can get separate countries with separate cultural and nationalist identities to voluntarily surrender their sovereignty is the big question.
But why would Brussels think that they can succeed where Napoleon, Hitler and Stalin failed? That part I have never understood.
Sometimes economics drives politics and sometimes politics drives economics. The economic arguments you articulate above make sense. But the real trick is can policy makers sell them politically.
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
Here is something I have been toying with. I see buying 10 yr bunds as a pretty easy call option on a total break up of the Euro.
Pretend for a second that you bought the negative yield bonds a weak or so ago.
Think of the negative yield as similar to the premium you would pay on the CBOE. Then the scenario plays out in one of two ways;
1. Euro stays together and you have a quantified loss and the return of 99% of your original investment back. Much better than the crapshoot in the equities market right now.
2. But if the Euro breaks up and those bonds are redenominated into DMarks then the value is probably going to go up 40-50% overnight.
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
Because that would force the policy makers to admit that their policies were abject failures and that they had to plunder the remaining national assets - the most solemn treasure - to stay solvent.
You hear a lot about market 'confidence.' Market confidence is no longer about the markets it is about political leaders. It is about having the markets validate the policies being put in place by politicians.
A few weeks ago I wrote that this had metastized from a purely financial crisis to a political one.
That is where it will remain until this resolves itself one way or another.
But governments will fall and wars break out (I am not advocating or predicting one... yet) before countries sell their gold reserves.
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
I'm beginning to see the whole crisis as an Occam's Razor vs Frankenstein's monster type decision making battle.
Dr Frankenstein and his clique are currently trying to improve on their creation of an unnatural life form - the EMU. However, they keep on running into the simple truths - Occam's Razor - of natural law. Nations with too much debt eventually run out of ways to finance themselves.
Facebook IPO: Poster Child For Next Round Of Wall Street Reform [View article]
So then you should be equally as outraged at the abandonment of the fiduciary standard as I am. Especially if you are a former compliance guy!
I was not a broker. I was a banker, a private equity investor as well as an issuer in two IPO's. I had/have my Series, 7, 24, 63, 65, 87. I have been a part of deals where SEC commission staff stated that they did not like the level of insider selling into the IPO offering so we had to cut back. I have been a part of many pricing meetings. So I may have a bit of knowledge on my own.
All I want is one set of rules for everyone. If you were in the business at the levels you say... you should want the same thing. We can piss on each others credentials till the cows come home - but there should be one set of rules regardless of the size of the offering.
The FB offering was and is a disgrace. Insiders took 57% of the proceeds at the expense of the retail investor.
One set of rules for everyone. That is all I want. That is all you should want as well.
Facebook IPO: Poster Child For Next Round Of Wall Street Reform [View article]
I can say this with complete and total confidence.
You have no idea what you are talking about.
Morgan Stanley was the lead underwriter. They have been separated from JP Morgan since 1933. There is no relation between the two.
Goldman Sachs was a member of the syndicate along with 33 other firms. What that means is that Morgan Stanley ran the deal and "allocated" shares to the 32 other members of the syndicate.
You really need to educate yourself before you come onto Seeking Alpha.
Facebook IPO: Poster Child For Next Round Of Wall Street Reform [View article]
Listen... I hope you make money on your position.
But it was overpriced relative to today's comps, it was over hyped relative to todays social media pricings and the capital markets would be a much better place if it was an even playing field.
The FB IPO was never a level playing field. Insiders know far more than the investing public regarding the future prospects of the company. That is why - in the past - they were ALWAYS subject to a 180 lock up.
Insiders took 57% of the IPO proceeds. They should have been at the back of the line not at the head.
Something is not right here. This is a long way from being over.
Facebook IPO: Poster Child For Next Round Of Wall Street Reform [View article]
Sounds as good as any. The IPO valuation never made sense to me. Which brings me back to my original point.
If the valuation was that inflated whatever happened to the fiduciary duty of the insiders and bankers? This was a true pigs at the trough moment and the market is now punishing them for it.
Facebook IPO: Poster Child For Next Round Of Wall Street Reform [View article]
I was going to cite that. But my recollection was that they went public on their own platform under ATS Rules (Alternative Trading Systems) and that they yanked it themselves.
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
I have nothing against the prudent use of debt. Without debt you can not have meaningful economic expansion.
But to your overall point - for around the last 40 years politicians have been buying the affection and support of voters and financing that purchase with debt. As a result we have created whole portions of our society that are 100% dependent on continued government spending.
Making this worse, is many - perhaps even a majority - of these very same politicians have never worked in the private sector. Never had to make a product someone else might want to buy. Never had to confront how much debt on your business is unsustainable.
As a result it is my belief that after a lifetime in government many of our policy makers do not understand basic economics and finance.
When they see the private sector all they see is a big whirl of cash flow and truly believe that there is no harm done in simply appropriating some of it for government use. But they don't understand that dollar taxed is a dollar taken out of circulation.
I consider myself a centrist - an archmoderate. There has to be balance in political and economic matters. Right now we are dealing with the effects of systemic imbalances that have developed over the last 40 years.
Lets just hope that the next generation of voters and politicians are more level-headed than this generation.
Thanks again.
RDB
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
I agree, living within your means is understood across cultures. People understand it. Families understand it. Corporations understand it. But governments often do not and the Euro governments - even Germany which was amongst the first to violate debt/GDP guidelines outlined in the Maastricht Treaty - by giving up their abilities to monetize their own debt continued to rely on deficit spending to further their own economic and political agendas.
This crisis is precisely about the over reliance on deficit spending by governments.
There is a great human tendency not to remember or to ignore that which is in conflict with the thesis underlying policy proposals and actions based upon them.
For example, you hear an awful lot of market participants say, "the trend is your friend." But they forget the second part of that phrase, "except at the end" because it tends to be in conflict with their actions at the time they are using it.
In this instance, governments have been engorging themselves with deficit spending citing established and accepted Keynesian economic thought and practice as their rationale. But what they have forgotten is that Keynes also advocated withdrawing the punch bowl during expansionary periods and reducing deficits so that policy makers are able to use the same tools again during the next downward cycle.
The trend is your friend except at the end. This is nothing more than the end of a super cycle of deficit spending that has overwhelmed everything and everyone for the last 40 years.
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
What a lot of people do not now know is that this crisis is no longer purely an economic one. It is a mostly now a political one which will call all alliances and treaties to be looked at a new.
My 90 year old father, a D-Day vet who then worked on Wall St for 45 years said the other day. "It's 1945 all over again."
He may be right.
Thanks,
RDB
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
My point when I first started writing about this a year ago was that without political union you can not have monetary union. Ergo, the Euro was doomed at Maastricht.
Fiscal union or the attempts at it is at least a half-step in the right direction. Whether you can get separate countries with separate cultural and nationalist identities to voluntarily surrender their sovereignty is the big question.
But why would Brussels think that they can succeed where Napoleon, Hitler and Stalin failed? That part I have never understood.
Sometimes economics drives politics and sometimes politics drives economics. The economic arguments you articulate above make sense. But the real trick is can policy makers sell them politically.
We'll find out soon.
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
Pretend for a second that you bought the negative yield bonds a weak or so ago.
Think of the negative yield as similar to the premium you would pay on the CBOE. Then the scenario plays out in one of two ways;
1. Euro stays together and you have a quantified loss and the return of 99% of your original investment back. Much better than the crapshoot in the equities market right now.
2. But if the Euro breaks up and those bonds are redenominated into DMarks then the value is probably going to go up 40-50% overnight.
Just a thought.
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
You hear a lot about market 'confidence.' Market confidence is no longer about the markets it is about political leaders. It is about having the markets validate the policies being put in place by politicians.
A few weeks ago I wrote that this had metastized from a purely financial crisis to a political one.
That is where it will remain until this resolves itself one way or another.
But governments will fall and wars break out (I am not advocating or predicting one... yet) before countries sell their gold reserves.
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
But Germany wins regardless. Attached is the link to something I wrote several months back. see below;
http://bit.ly/MvC40w
Cheers.
RDB
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
Oh yeah... lets not forget the amusement value of 14 zero's.
Cheers.
RDB
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
Dr Frankenstein and his clique are currently trying to improve on their creation of an unnatural life form - the EMU. However, they keep on running into the simple truths - Occam's Razor - of natural law. Nations with too much debt eventually run out of ways to finance themselves.
Italy Borrows High To Lend Low: The Fallacy Of The Spanish Bailout [View article]
100,000,000,000,000.
RDB
Facebook IPO: Poster Child For Next Round Of Wall Street Reform [View article]
I was not a broker. I was a banker, a private equity investor as well as an issuer in two IPO's. I had/have my Series, 7, 24, 63, 65, 87. I have been a part of deals where SEC commission staff stated that they did not like the level of insider selling into the IPO offering so we had to cut back. I have been a part of many pricing meetings. So I may have a bit of knowledge on my own.
All I want is one set of rules for everyone. If you were in the business at the levels you say... you should want the same thing. We can piss on each others credentials till the cows come home - but there should be one set of rules regardless of the size of the offering.
The FB offering was and is a disgrace. Insiders took 57% of the proceeds at the expense of the retail investor.
One set of rules for everyone. That is all I want. That is all you should want as well.
Respectfully,
RDB
Facebook IPO: Poster Child For Next Round Of Wall Street Reform [View article]
You have no idea what you are talking about.
Morgan Stanley was the lead underwriter. They have been separated from JP Morgan since 1933. There is no relation between the two.
Goldman Sachs was a member of the syndicate along with 33 other firms. What that means is that Morgan Stanley ran the deal and "allocated" shares to the 32 other members of the syndicate.
You really need to educate yourself before you come onto Seeking Alpha.
Best,
RDB
Facebook IPO: Poster Child For Next Round Of Wall Street Reform [View article]
But it was overpriced relative to today's comps, it was over hyped relative to todays social media pricings and the capital markets would be a much better place if it was an even playing field.
The FB IPO was never a level playing field. Insiders know far more than the investing public regarding the future prospects of the company. That is why - in the past - they were ALWAYS subject to a 180 lock up.
Insiders took 57% of the IPO proceeds. They should have been at the back of the line not at the head.
Something is not right here. This is a long way from being over.
Best,
RDB
Facebook IPO: Poster Child For Next Round Of Wall Street Reform [View article]
If the valuation was that inflated whatever happened to the fiduciary duty of the insiders and bankers? This was a true pigs at the trough moment and the market is now punishing them for it.
This is where the controversy lies going forward.
Facebook IPO: Poster Child For Next Round Of Wall Street Reform [View article]
But I could be wrong on that. Can you confirm?
Thanks