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Tom Armistead

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  • A Socratic Dialogue: Fearing the Collapse of U.S. Treasury Bond Prices [View article]
    Interest rates rise to compensate for inflation. During inflationary times the best strategy is to spend money before its purchasing power declines further.
    Jun 13 05:39 PM | 29 Likes Like |Link to Comment
  • The Leveraged Buyout Of America [View article]
    This article represents a very good counter-argument to Dick Bove's most recent fulmination, in which he characterizes efforts to regulate JP Morgan as "McCarthyism."

    Banks should be restricted to activities that help other entities create value in the real economy.

    As far as the Fed's role in this, bear in mind the Fed was conceived on Jekyll Island, as a high level conspiracy among the most prominent bankers of the day. The Fed is a non-government entity, authorized by Congress, and owned by its members, who are themselves banks. How such an institution is to operate as the primary regulator of the industry is beyond explanation. It's the fox guarding the henhouse, yet once more.

    Eileen correctly notes that the ownership of American businesses and infrastructure is being concentrated, aided by cheap money provided by the Fed.

    As a retail investor, the only answer is, to own or control as much stock in high quality US companies as possible, and just hold on for dear life while these manipulators jerk the market and the economy around like a yoyo.
    Aug 26 12:24 PM | 28 Likes Like |Link to Comment
  • The Retirement Bubble [View article]
    Perhaps a simple analogy will help you understand the point of regulating the financial system.

    Experience has shown we need police to enforce rules of the road. DWI drivers have to be arrested and have their licenses revoked or suspended. Otherwise, carnage ensues.

    In the US we have financialists who are drunk with greed, amorality and egotism. They take to the road, disregard stop signs, speed limits and road markings, and inflict financial carnage on innocent hardworking people who are dependent on the financial system and economy. Think Dick Fuld, Angelo Mozillo, Ken Lewis, Goldman Sachs, John Paulson, Magnetar, etc, etc.

    It doesn't resolve the issue to remove stop signs, eliminate speed limits, and erase road markings.

    You seem to want to blame the victims for getting in the way of this wealth destroying process that emanates from Wall Street. There many, like myself, who borrowed responsibly, paid off their mortgages, saved diligently into 401ks, etc., and have watched this country driven to the verge of a Depression by the reign of Greed and Lawlessness on Wall Street. Meanwhile our investments were halved in value, although they have since recovered somewhat. Too bad for anybody who had to draw on their retirement funds while they were deep underwater.

    As for the size of government, that depends on the services demanded by the public. Most US citizens would like to be free from the depredations of financial fraudsters, those who socialize risk and privitize profits, those who make financial bets that reference the real economy but have no direct relation to the creation of goods and services.

    Going back to the analogy, if a town or city becomes plagued by crime, the best response is to add policemen, arrest the offenders, add jails and jail keepers, and continue the process until crime is reduced to acceptable levels. That would mean a larger government, regretfully.

    Similarly, if property keeps disappearing, and bodies oozing blood keep turning up, and the offenders protest, there is no rule against what I did, guess what, you need more laws, rules and regulations, until inflicting gratuitous harm on others is illegal and results in sufficient punishment to deter the undesirable conduct. That means more laws, rules and regulations, regretfully.

    The failed institutions, the bad debts, the writeoffs, the destruction of the fruits of thrift and industry is ongoing. At least 400 people on Wall Street were well-informed enough to know that Bernie Madoff was a fraud. 400 people, maybe more. And only Harry Markopolos tries to do anything, and he's paranoid about his efforts, and with good reason. The SEC does nothing. Eventually the truth comes out. As for the feeder funds, who channeled Madoff's victims to him, they assert "we have done nothing wrong." If challenged in a court of law, they no doubt will decry the suits as frivolous and without merit, and vow to contest them vigorously.

    And so it goes. It was the ideology of deregulation that carefully removed protections that were put in place after the same excess of Financialism caused the Great Depression. Wall Street asserted that if only they were free to innovate without supervision or limitation of any kind, great prosperity would follow. Unbridled innovation gave us subprime RMBS, CDS, CDO's, CDO^2, the shadow banking system, HFT, the mini crash, naked shortselling, etc. And it gave us a financial crisis that destroyed the accumulated wealth of an entire generation.
    Oct 9 03:04 PM | 28 Likes Like |Link to Comment
  • The Leveraged Buyout Of America [View article]

    Who do the banks serve? Shareholders? Officers and Directors? Hedge Funds? Much of their compensation is from holding the hedge fund's jackets while they loot the economy and financial system.

    Please consider how shareholders of large investment banks made out during the financial crisis. They were annihilated. What went on in the big banks in no way served their shareholder's interest.

    Most of the Officers and Directors retained their ill-gotten gains. Many of them retained their positions. None went to jail.

    The same could be said for the hedge fund clients of the big banks. John Paulson still has the spoils of the Abacus transaction. So do the perpetrators of other identical scams, such as but not limited to Magnetar. The pathetic Fabrice will do time, for doing just what was expected of him. He was just a hair short on art and subtlety, to get away with it like everyone else.

    Answer, big banks take immense risks in order to collect rent off the real economy. Managament and hedge fund clients are rewarded, shareholders are raped, and the public is screwed.

    Please advance your next argument.
    Aug 26 02:14 PM | 27 Likes Like |Link to Comment
  • Approaching The Fiscal Cliff As A Nash Equilibrium [View article]

    You are placing yourself in the position of knowing what is best for the 98%. You believe they want an expensive cradle to grave security system and your wisdom is superior to theirs. Apparently you are one of the elite, and know what is best for everybody else.

    I'm one of the 98%, and I believe that the US is a democracy and we can and should have what the majority of our citizens want. I advocate a national debate that focuses on reaching a compromise on what we want from government, and how it will be paid for.

    Refusing to increase taxes for anybody, under any circumstances, is not a compromise. Refusing to accept responsiblity for eight years of spending like a drunken sailer on needless wars, tax cuts for the rich, an extraordinarily expensive prescription drug benefit as a sop to the masses and the elderly, a pork barrel homeland security apparatus, deregulation of the financial services industry to the point of causing the financial crisis, etc., is just plain cowardly, irresponsible and wrong. That's where the Republicans are coming from.

    I have never voted for a Republican for any office at the national level.
    Dec 30 08:31 AM | 26 Likes Like |Link to Comment
  • The days of economic prosperity may well be behind us, warns Northwestern University's Robert Gordon. The robust economic growth over the past 250 years may be a unique success tale for the history books, but it's not sustainable for the future. Productivity and innovation, Gordon says will eventually succumb to the headwinds of declining demographic trends, gaps in the education system, rising income inequality, globalization, declining energy/environment resources, and of course, debt. [View news story]

    Go explain your views to those who were poisoned by industrial waste at Love Canal. Or to the widows and orphans of those who were killed in a refinery blast by Tesoro, after management carefully explained how they were increasing profits by deferring maintenance, not meeting industry best practices. I could cite numerous other instances.

    One thing regulation hasn't touched, and that's financial innovation and manipulation of stocks, bonds, CDS, CDO's, commodities and futures. It was this same innovation and freedom from regulation that gave us the financial crisis and resulting deep and lingering recession.
    Sep 1 12:05 PM | 26 Likes Like |Link to Comment
  • Time for the U.S. Economy to Reindustrialize [View article]
    You are too polite in labeling GS, BAC, JPM et al as participants in a knowledge-based economy. Too much of their operations are in the fantasy land of financialsim, and too little in the prosaic world of utilitarian financial products, loans that support industry and the creation of productive assets.

    Eamonn Fingleton's "In Praise of Hard Industries, Why Manufacturing, not the Information Economy, is the Key to Future Prosperity," written in 1999, makes an extremely good case for the need for the US to retain (or rebuild) its manufacturing and industrial base.

    It also includes, in its 3rd chapter, an incisive and prescient critique of financialism. If there is one lesson coming out of the meltdown of our financial system, and any hope for constructive change, it is in the area of rebuilding a strong manufacturing capacity in the US, providng real jobs that create value.
    Nov 15 07:51 AM | 26 Likes Like |Link to Comment
  • After three "jobless recoveries" in the last twenty years, NYT's Hedrick Smith suggests it's time to take a lesson from Henry Ford. History has proven Ford's virtuous circle to be effective, and if business managers "give the middle class a better share of the nation’s economic gains... the economy will grow faster." [View news story]
    I'll tell you one thing, I'm a lot worse off than I was 12 years ago, when Bush came into office and started his campaign of dismantling regulatory protections, launching unnecessary wars, dispensing a massive prescription drug benefit, building a huge and expensive national security apparatus, and paying for it by reducing taxes on the rich.

    We tried it: deregulation and trickle down didn't work, tax cuts for the rich didn't work, spending like a drunken sailor didn't work. I've had enought of that to last me a lifetime, and won't submit to more.
    Sep 3 01:28 PM | 24 Likes Like |Link to Comment
  • Obama's Loss Is the Economy's Gain [View article]
    This is good stuff. You should sign up as a follower for CBP and then every time he puts out one of his pieces you could provide an antidote.

    And the best part is everything you say is factual, compared to his lies and distortions.
    Sep 6 09:45 PM | 24 Likes Like |Link to Comment
  • 'Sell In May And Go Away' Might Come Early This Year [View article]
    The US government was not the main cause of the crisis: the main cause was crooked banks, such as but not limited to Lehman, GS, Bear Stearns, Merrill Lynch, JPM, C, BAC, Countrywide, Indy Mac, WAMU, Ally f/k/a GMAC, etc, etc.

    The US government's contribution was a lack of prudential regulation of the banks, a stance that was driven by right wing Republican ideology as implemented by GW Bush.

    Not enough has been done to re-regulate the financial services industry, and in due course they will create another crisis.

    Rather than worry too much about old adages, the best strategy here is to watch the quality of the credit provided by banks, and the degree to which they have found means to offload the risk onto others, and to exit the market when it doesn't pass the smell test.
    Mar 12 03:15 PM | 23 Likes Like |Link to Comment
  • The Active Quest for Alpha: A Loser's Game [View article]
    It's pretty easy for me to compute the returns I received. I start with the money I put into my brokerage account in April 2001, list dates and amounts of money taken out (or added back) over the interveing years, and list the date and final balance.

    In Excel, or OpenOffice which is what I use, the function is XIRR, which gives you the internal rate of return on an irregulator stream of payments. That works out to 8.15% for the entire period, which was the lost decade for the S&P 500. It's a computation and not an estimate.

    There is no need to be condescending toward non-professionals, or to instruct us on our inablity to beat the market. My Vanguard S&P 500 Index fund has done well also, partly because I held that money in interest bearing accounts until the market was pretty well down after the tech bubble burst. By no means did I get in at the bottom, but there was enough market timing in that one move to put me well ahead of what professionals would have done for me.

    I recently did an article on the picks I wrote up for Seeking Alpha during 2010, you could check it out to see if I can beat the market or not. You could also look back at my picks during 2009 if you have any further doubts. Try looking at the prices at which I wrote articles favoring the likes of JBL or ODP, at the time, and what those stocks have hit in the two years since.

    It's really pretty simple, you buy low and sell high.
    Apr 8 07:20 PM | 23 Likes Like |Link to Comment
  • The Root Cause of the U.S. Housing Bubble Has Yet to Be Addressed [View article]
    Also missing from this discussion is a mention of the amount of fruadulent mortgages that were originated by the likes of Countrywide and ResCap and sold via securitization by making warranties and representations that they have refused to honor.

    These were 20 to 25 % of the total and were concentrated in California, Nevada, Florida, etc. It was not about the American Dream of homeownership, it was an orgy of speculation and fraud fueled by greed on Wall Street.
    May 27 03:20 PM | 23 Likes Like |Link to Comment
  • What Is Getting Hit Hardest? [View article]
    One possible explanation: there simply isn't enough investor or buy and hold money in the market, there's just a lot of momentum players bailing at the first sign of trouble, or moving along to the next play, whatever that might be.

    During 2009 I held positions in ODP, JBL and WDC. ODP doesn't have anything to recommend it long term and I sold it off early. JBL has a pretty wide range over the years and that too I sold off during 2009. These were value cases that turned into momentum situations as the rally wore on.

    WDC reported stellar results, as did STX, and both sold off on the good news. I was buying WDC Friday, still think it has value on its side.
    Jan 30 11:25 AM | 23 Likes Like |Link to Comment
  • Rising Inequality And The Economic Crisis [View article]
    The wealthy, rather than spending on goods and services that stimulate the economy, deploy their funds under the management of hedge funds, a kind of financial mercenary, who use the power of money to tax the real economy.

    The result is commodity bubbles that impose hardship on those who must meet their needs for food and fuel on reduced wages, speculative attackes on financial institutions and governments, which ultimately saddle ordinary citizens with the burden of paying off the losses, profits wrung from HFT and market manipulation that provide no funds to small and medium size businesses that need capital, etc.

    Finally wealth itself is cheap, a dollar, left in the bank at small interest, returns nothing to the saver. So wealth must be concentrated and pooled to achieve the type of financial power that enables the ongoing destabilizatoin of the economy and financial system that enriches those who attack the system.

    Have a nice evening.
    Dec 2 06:30 PM | 22 Likes Like |Link to Comment
  • Why This Rally Will Continue [View article]
    Great article, that stuff about green shoots could have been written by Chance the Gardener.
    Aug 13 09:30 AM | 22 Likes Like |Link to Comment