dieuwer's Comments

If U.S. Stopped Issuing Treasuries, Would It Go Broke?

Fri, 20 Nov 2009 23:32:28 -0500

Of course there is an exception to the rule that a sovereign which borrows in its own currency can never be forced to default: Europe.
Consider this: Greece can issue government bonds denominated in euros. It is their currency. However, since the ECB is outside the jurisdiction of the Greek government, Greece cannot just print euros to pay off debt in case of impending default.
This is a very dangerous situation that will lead to a) default, or b) break-down of the euro-zone.

On Nov 20 08:44 PM Edward Harrison wrote:

> Exactly! A sovereign which borrows in its own currency can never
> voluntarily be bankrupted. It's different for Spain, which has no
> sovereign currency.
>
> The real issues in a fiat currency regime are inflation, devaluation
> and taxation. All the talk of national bankruptcy assumes a gold
> standard environment.
>
> On Nov 20 02:57 PM Tack wrote:

The U.S. Budget Challenge in International Context

Wed, 18 Nov 2009 17:36:10 -0500

The data for Greece is incorrect.

After implementing a 2% tax on foreign purchases of equities and fixed income to slow down the appreciation of the real, Brazil plans a 1.5% tax on American Depository Receipts to keep investors from flowing out of the local market. It'll be charged to companies when they deposit the shares in the Brazilian banks making the transaction.

Wed, 18 Nov 2009 17:19:33 -0500

This move by the Brazilian government smells like protectionism. Time for the WTO to become involved.
Otherwise, the US should start taxing Brazilian banks with offices in the US.

Brazil's ETF and Economy Are Just Getting Started

Wed, 18 Nov 2009 17:12:41 -0500

I was wondering the same

Japanese Equities: An Elusive Value Trap

Mon, 16 Nov 2009 15:42:58 -0500

As long as there is a willing BOJ, prices of JGBs can stay elevated. In principle, the BOJ could announce that they will buy unlimited quantities of JGBs at par for eternity.
Therefore, it is not the price or yield of JGBs that is important, but the purchasing power of JGBs.

Why Warren Buffett Loves Wells Fargo

Mon, 16 Nov 2009 14:48:16 -0500

Technically, banks do not need private deposits to survive. Banks can borrow money from the FED for free and deposit in their own accounts, or use it to invest/speculate.

On Nov 16 01:55 PM Mark Anthony wrote:

> ...I believe, without a sound monetary system, it is impossible to have a sound banking industry. This is where we are right now. The US dollar is going to collapse to ZERO, all banks will be destroyed in the process. No one is going to leave money in a bank when hyper-inflation hits. Without depositor customers, all banks are out of business.<

Coal, Grain and Imports Make Burlington Northern Another Good Move By Buffett

Mon, 16 Nov 2009 14:43:21 -0500

SEA is not a dry shipper, it's a shipping ETF!

Coal, Grain and Imports Make Burlington Northern Another Good Move By Buffett

Fri, 13 Nov 2009 18:01:21 -0500

Mark, what do you think of SEA?

But since a lot of people now "get it", the opportunity might no longer be there.

Coal, Grain and Imports Make Burlington Northern Another Good Move By Buffett

Thu, 12 Nov 2009 21:29:17 -0500

China just announced the built of a strategic coal reserve. Buffett much be pleased with his "foresight".

Buffett's Burlington Buy Is Really a Bet on China

Thu, 12 Nov 2009 21:20:15 -0500

The bulb is now glowing extremely bright. China is planning a strategic coal reserve! And of course BNI will more than happy to rail the coal from the Midwest to Long Beach and subsequently on a ship to China. Buffett must have had Chinese insider info :)

U.S. mutual fund inflows year-to-date hit $314B in October, compared with the $154B investors yanked in 2008, according to Morningstar's monthly report (.pdf). On the month, funds gained $40B, but equity funds lost $8B - a second straight monthly decline. In fact, U.S. stock funds are off $4.4B YTD, global stock funds are up $16B, while bond funds have taken in $296B.

Thu, 12 Nov 2009 16:00:28 -0500

Pump up the bond bubble! Yay!!!

Marc Faber Is Conflicted About the Price of Gold

Thu, 12 Nov 2009 14:55:56 -0500

You take reports in news outlets about comments Marc Faber supposedly makes at face value. I find that naive, and foolish at best:

1) News outlets could abuse Marc Fabers' name to get the attention of readers, accuracy or no.
2) News outlets could quote Marc Faber correctly, but Marc Faber himself may talk his book when performing on these news outlets.
3) Marc Faber may have changed his mind in the mean time.

Personally, I do take statements Marc Faber supposedly makes in news outlets with a HUGE grain of salt. I do however value his Gloom-Boom-Doom (GBD) reports greatly.
Why? Because that is how Marc Faber makes part of his money. If he would piss-off his GBD subscribers by 'lying' in the GBD report , he would quickly loose his suscriber audience and thus a large part of his income.

Central banks say they've been snapping up dollars this week in an effort to stem its slide and hold down their currencies. While Geithner continues to pay lip service to maintaining a strong dollar, Washington has yet to take any concrete steps to stop the bleeding, which is beneficial to U.S. exports and tourism.

Thu, 12 Nov 2009 08:19:52 -0500

CORRECTION: "Central bank say they've been printing their own currency like crazy this week in an effort to stem the slide of the dollar and hold down their currencies"

Forget BRIC: Your Portfolio Needs TICK

Wed, 11 Nov 2009 19:59:25 -0500

BICK

Nissan to Build the World’s Cheapest Car

Wed, 11 Nov 2009 15:43:39 -0500

I have seen prototype cars running on compressed air. You can drive around town for several hours at 30-40 MPH without running out of "compression".
The funny part of this is that the "compressed air engine" also works under water! So if you feel like driving your car into the water, the engine will still work!

3 Reasons Not to Believe In Gold's Recent Rally

Wed, 11 Nov 2009 11:43:02 -0500

Suppose the ECB decides to HYPERINFLATE and outdo the FED. Surely, the Euro will plunge. As a result, the USD index will surge since it is nothing more than an inverse euro-index.
Do you think that gold should sell off in such a scenario? Or do you think that investors will buy gold?

Meanwhile, an unnamed IEA whistleblower says the agency - under pressure from the U.S. - is deliberately underplaying a looming shortage for fear of triggering panic buying. In 2005, IEA predicted supplies could rise to 120M b/d by 2030, but that fell to 105M last year (where it remains), and insiders believe maintaining production of even 90-95M b/d "would be impossible." Dec. crude +0.7% at $80.

Tue, 10 Nov 2009 11:08:10 -0500

I am not surprised.

WSJ.com Could Lose 25% of Its Traffic if Murdoch Blocks Google

Tue, 10 Nov 2009 11:06:32 -0500

Why pay if you can read the EXACT same "cut-copy-paste" news item on ANY other site?

Publishers Wake Up: Online Readers Are Paying You - In Attention

Tue, 10 Nov 2009 11:01:50 -0500

...additionally, most content on "news" sites is just cut-copy-paste from "news" aggregators like AP.
No need to pay News Corp if you can read the EXACT same tidbit on any other site (CBS, CNN, USATODAY, SeekingAlpha, etc.)

Home Purchase Tax Credit Extended: Is This Wise?

Mon, 09 Nov 2009 15:10:01 -0500

I don't understand what is so good about rising house prices.

1) It won't help the owner of the house when he wants to move, because the house he wants to buy has also increased in price.
2) Unless the salary of the home owner increases as well, the owner is forced to pay an increasingly larger amount of property taxes from his salary.
3) If higher house prices are due to inflation, the owner also will pay more for upkeep.

Conclusion, higher home prices without a match in higher salaries is bad.

Elliot Wave: The Dollar Is Set for a Major Rally

Mon, 09 Nov 2009 08:17:45 -0500

Prechter has an extremely bad track record. I wonder why people are still listening. Are they stupid???

Japanese Investors Saying 'No Thanks' to Government Bonds

Thu, 05 Nov 2009 15:40:58 -0500

Local deflation should be meaningless to local Japanese investors.
So what there was deflation from 1990 - 2000? Japanese could have invested in NASDAQ stock and make a 10-fold gain.
So what there supposedly is deflation since 2000 again. Japanese could have invested in gold and commodity stocks and make a fat gain.

Bank failures in 2009 roll over to 100 - for the first time since 1992 - with the closure of Partners Bank of Naples, Fla. The estimated cost to the Deposit Insurance Fund is $28.6M. Time to revisit the WSJ interactive timeline of two years of failures.

Fri, 23 Oct 2009 21:28:34 -0400

No bank failures in New England?

ETF Securities Plans a Physical Palladium ETF

Thu, 22 Oct 2009 08:49:03 -0400

Let's take the hype out of Palladium investment:

Price of Gold, Silver, and Palladium in January 2001: $255, $4.50, and $1079, respectively.
Price of Gold, Silver, and Palladium on October 21, 2009: $1058, $17.70, and $342, respectively.
Gain/Loss of investing in Gold, Silver, and Palladium over the period 2001 - 2009: 415%, 390%, and -68%, respectively.

YEAH, Palladium is a great investment...(not).

Global Markets in Review: Risky Assets Disconnect from Fundamentals

Mon, 19 Oct 2009 14:21:56 -0400

That is why it is a joke to call US Treasuries "safe". What's so safe about losing purchasing power?
Read what Einhorn has to say and LEARN: www.marketwatch.com/st...

On Oct 19 09:00 AM Moon Kil Woong wrote:

Certainly safe assets like US Treasuries don't even cover for dollar devaluation, let along current inflation and future inflation.

Global Markets in Review: Risky Assets Disconnect from Fundamentals

Sun, 18 Oct 2009 15:29:59 -0400

Yup, prices of risky assets such as 30Y T-Bonds are indeed disconnected from reality.

Banks and Delinquent Borrowers: The Chickens Are Coming Home to Roost

Wed, 14 Oct 2009 16:04:32 -0400

For example: Short SHY, buy GLD. Or use short SHY to get cheap loan.

On Oct 14 03:52 PM Mark Anthony wrote:

> Dieuwer:

> I am not a big fan of shorting anything nowadays. When you short,
> you hold a negative position of the equity you short, and a positive
> position of US dollar cash. Your cash holding should be NEGATIVE,
> not positive. Assume you short $1M worth of something and that something
> goes to zero, your initial $1M investment becomes $2M. But by then
> your $2M could only buy you a loaf of bread, on top of that you still
> need to pay the US government your "capital gain". So do you make
> money or lose money in such a case?
>
> Why would any one short anything in a hyper-inflation environment?
>
>
> On Oct 14 03:42 PM dieuwer wrote:

Banks and Delinquent Borrowers: The Chickens Are Coming Home to Roost

Wed, 14 Oct 2009 15:42:58 -0400

I'm not so sure about house prices going up. Besides, people always "conveniently forget" that it is not just the mortgage payments that have to be made. You also have to pay SKY HIGH property taxes, upkeep and insurance.
Here in Boston where I live, property taxes, upkeep and insurance is sometimes MORE than the rent! And don't forget: cash strapped local governments will INCREASE taxes on your home to pay for their lavish programs.

With respect to a cheap loan: shorting SHY would do the job?

On Oct 14 02:19 PM Mark Anthony wrote:

> Dieuwer:
>
> Good question you asked. Both answers are affirmative. Banks did
> lend $500K to people with no money down and no income. They are not
> that foolish any more. But there are still the equivalent. Let say
> I do put 20% down, it does not change my argument.
>
> Second question, who is going to lease $500K worth of gold to me?
> Gold is being leased at ridiculously low lease rate. That is a fact.
> I use my house as mortgage to lease the gold, so it is secured loan
> there is no reason why they are not willing to lease it to me. Particularly
> if I do put 20% down on the house.
>
> Your final question: "> Why would anyone lend $500K if he/she knows
> the money will be repaid with depreciated dollars? You think people
> are that stupid??"
>
> The answer is ABSOLUTELY YES. People ARE that stupid. 99% of people
> are that stupid and it is even worse than that. Look at all these
> people who buy US treasury bonds at ridiculous low yield. They know
> they will be paid back in depreciated dollar, but they put trillion
> dollars to lend the money to the US government any way. At least
> the people who lend money to allow me to buy a house at 6% interest
> rate and 20% down payment are smarter. They get paid more interest
> rate and their loans are secured by the physical house. But they,
> too, are paid back in depreciated dollar. So they too are foolish.

Banks and Delinquent Borrowers: The Chickens Are Coming Home to Roost

Wed, 14 Oct 2009 13:29:12 -0400

1) Who would be willing to lend you $500K with no money down?
2) Who would be willing to lease you $500K worth of gold?

Why would anyone lend $500K if he/she knows the money will be repaid with depreciated dollars? You think people are that stupid??

On Oct 14 01:01 PM Mark Anthony wrote:

> Even that is not true. The housing affordability has nothing to do
> with treasury bond yield. The dollar could collapse and the treasury
> bond yield can go to the moon, but you can still pretty much afford
> a decent house, if you understand that a house retains its intrinsic
> value while your debt will become worth less and less.
>
> Buy a house, rent it out. Chances are that the rent probably pays
> for the mortgage payment. From economic principle, the rent should
> ALWAYS be higher than the carrying cost of the house, otherwise there
> will be no house rental business.
>
> Alternatively, buy a house at $500K on a $500K loan. Then lease $500K
> worth of gold, using the house as mortgage. Use the gold to pay off
> the loan. And then from that point on you only needs to pay the lease
> rate of the gold. At 0.5325% one year lease rate, it costs you only
> $2662 per year, or $222 per month. How about owning a half million
> dollar house for a cost of only $222 per month?
>
> The rease rate of gold reflect the REAL interest rate, inflation
> adjusted.
>
> On Oct 14 08:34 AM Andrew Butter wrote:

Bond Expert Friday Wrap: Duration Rout

Sat, 10 Oct 2009 17:28:13 -0400

I wonder where the rate ceiling for Bernanke is (if any). 4% for a 10-Y treasury?
I asks this because I am contemplating shorting IEF or TLT. But if Bernanke monetizes "heavily" the longer durations ( to keep yields low), than it makes no sense to short.