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Amadon

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  • Banks, Collateral And Leverage [View instapost]
    More reasons why I think we will see circuit breakers popping very soon.:
    Despite signs that the economy is recovering, research firm ECRI has held to bearish predictions for the U.S. economy.

    ECRI co-founder Lakshman Achuthan spoke to Bloomberg's Tom Keene this morning to defend his recession call amid an onslaught of criticism.

    Achuthan provided a deeper look at how exactly ECRI makes its predictions, saying that it focuses on year-over-year indicators for output, employment, income and sales, and the consumer confidence index.

    In particular, he pointed to the relationship between year-over-year consumption and employment as perhaps the clearest sign that the U.S. is headed back into a recession.

    "People need to understand the sequence," he said. "I think the hope is that jobs growth will increase consumption in coming months, but in fact jobs growth follows consumption...There are many instances in which job growth precedes a recession."

    If we look at a graph of these two indicators, it is clear that past U.S. recoveries have virtually all relied on consumption growth... and that consumption growth is slowing down.

    Read more: http://read.bi/OMPDsB
    Sep 14, 2012. 12:38 PM | Likes Like |Link to Comment
  • Banks, Collateral And Leverage [View instapost]
    Thanks for your comment Tom, point well taken and I will take it to heart.
    Sep 14, 2012. 11:51 AM | Likes Like |Link to Comment
  • Banks, Collateral And Leverage [View instapost]
    10:47 AM Though the Fed didn't mention a target level for unemployment, Bill Gross suggests the bank has 7% in mind, and will buy MBS "until the cows come home." Recently making news for slashing his Treasury holdings (so far so good), Gross suggests "real assets ... gold ... a house."

    Tom, I know the old saw about "don't fight the FED", but as you know I believe the central banks are trying to reverse an ebb-tide. All of the central banks are making 'all in' bets in poker terms which means game over and someone must bust out and start the slow sad walk to the casino parking lot. I am willing to call that bet as I already have a little physical gold and a house.

    If you were advising such a deranged, inveterate, perverted client who was considering buying either TVIX or EDZ which one would you recommend for the most bang for the buck. Do you think I will get a better entry point later? There is something about this situation that reminds me about inflation and the French Revolution. We are living through historic times sir that will surely go down in the history books.
    Sep 14, 2012. 11:15 AM | Likes Like |Link to Comment
  • Banks, Collateral And Leverage [View instapost]
    I agree. I wonder about your assessment of the long term effects of your life insurance investments considering I just read this on Market Currents:
    10:18 AM The life insurance industry has its outlook cut to negative by Moody's thanks to the expectation (certainly reinforced in the last 24 hours) "that interest rates will remain in the low single digits for the next few years ... continu(ing) to erode insurers' earnings and revenues." The Fed has one word for the insurers: Leverage.
    does that change your thinking?
    Sep 14, 2012. 10:45 AM | Likes Like |Link to Comment
  • Banks, Collateral And Leverage [View instapost]
    Tom; How do you see yesterday's announcement by Dr. Ben. Is this action more to help the big banks or as he is trying to spin this to help main street. I just read Federal Reserves FAQs on Agency MBS Purchases (Text)
    http://bloom.bg/SKWlVR
    and it seems like he is saying the best way to help main street and create jobs is to give some more free money to big banks.

    I wonder if the fed is going to take 40B of toxic MBS off the books of big banks and effectively sequester it in the basement of the fed and effectively nullifying the inflation effects of the new money on the economy. He is willing to do this an unlimited number of months until all the toxic debt stinking up the balance sheets of the big banks is off loaded onto taxpayers.

    It seems to me the real plan is to devalue the dollar which he has been trying to do all along. Any thoughts?
    Sep 14, 2012. 10:03 AM | Likes Like |Link to Comment
  • Bernanke: "Monetary policy cannot cure all economic ills," he argues, before saying the FOMC is convinced further policy accommodation is necessary to bring down the unemployment rate. "The Fed will purchase assets until the economy improves." [View news story]
    The way I understand the bet is that it is basically a continuation of the bank bail out. The FED is going to start buying toxic mortgages from the big banks who are searching in vain for a bigger fool. These are going to be off-loaded on to the taxpayer. Good luck Mr. Taxpayer on collecting.

    Now that the banks have their money back at full value no doubt then they will begin to loan money to business who don't want it because they have no one with jobs and money to buy their excess inventory as it is. Tell me Dr. B how does buying toxic mortgages create jobs and improve an economy that is 70% consumer driven, when in fact the same consumers will be even poorer after having reluctantly bought up the toxic mortgages.
    Sep 13, 2012. 03:44 PM | 2 Likes Like |Link to Comment
  • Bernanke: "Monetary policy cannot cure all economic ills," he argues, before saying the FOMC is convinced further policy accommodation is necessary to bring down the unemployment rate. "The Fed will purchase assets until the economy improves." [View news story]
    Anyone familiar with the poker game known as Texas Hold'em will recognise that every central bank is making 'All In' bets here. The ECB, the Swiss, The U.S, FED, Japan, even China will have to call since everyone at the table is playing with China's money. That's what unlimited means, ALL IN, game over.

    I am also ready to go 'all in' on a bear bet that this is the prelude to the greatest financial fiasco in the history of the world but I am sort of wondering who will still be around to pay me off if I win. Who would cash me out in a world wide collapse?

    I remember the last time this happened all the floor traders were rushing about with 'sell paddles' looking for someone with a 'buy paddle' and none to be found. Scary times.
    Sep 13, 2012. 03:23 PM | 2 Likes Like |Link to Comment
  • Bernanke: "Monetary policy cannot cure all economic ills," he argues, before saying the FOMC is convinced further policy accommodation is necessary to bring down the unemployment rate. "The Fed will purchase assets until the economy improves." [View news story]
    "The Fed will purchase assets until the economy improves." Please go on sir; what will you do if the economy does not improve? What if we are in a unique economy that has negative growth as a primary feature? Such as the one described here:
    http://bit.ly/QjuXbY
    Sep 13, 2012. 02:32 PM | 1 Like Like |Link to Comment
  • Banks, Collateral And Leverage [View instapost]
    Well said sir; Obviously we here to conquer, subdue and exploit the world. Getting back to the investment topic at hand Banks, Collateral And Leverage and the basis that the US and global economies expand 2% in real terms, driven by population growth leaves me wondering if there is any limits at all considering the amazing numbers involved in compound growth. My understanding is that the 'invisible hand' of the market sends us signals concerning our progress or lack of. I just read a curious statement this morning that you may have seen also:

    "The Shiller P/E of the S&P 500 is currently 23 — 50% higher than its long-term average. The average Shiller P/E ratio since 1880 is about 15. A move back to the average would take the S&P 500 back to 930. A move to bear market low valuations would take the S&P 500 back to roughly 400. Right now, it’s 1,432." ---Dan Amoss

    "At age 65, and with my portfolio close to meeting objective, I am starting to go defensive. That includes some hedging, as well as moving cash toward 20%." ---Tom Armistead

    "At age 75, and with my cash rapidly approaching intrinsic value, I am starting to go defensive with an investment in Smith & Wesson. That includes some hedges around my property as barriers to entry, as well as moving some physical gold toward a hole in the ground in my backyard. ---Amadon
    Sep 13, 2012. 12:15 PM | 1 Like Like |Link to Comment
  • Over German objections, France is pushing Spain to seek a bailout from the EU, according to sources. French officials would like to consolidate the improvement in peripheral debt markets since late July by triggering ECB bond purchases - something that can't happen until Spain submits to a rescue and its conditions. Spain's Rajoy continues to delay. [View news story]
    WMARKW; Thanks for your comment. I have been reflecting on this myself using the analogy of the struggle for survival of the wildebeest of the Serengeti being pulled down in the jaws of a lioness as a model. The lioness in this analogy is negative world economic growth and the vultures will be Spain’s former allies and competitors. I would expect that with their competitors supervising their 'recovery' they will soon find themselves loaded up with all the toxic debt their supervisors are now sitting on and anything of value remaining in their treasury will be transferred to the accounts of the other still solvent members.

    No one is asking for my advise but I will offer it any way. If I was advising Spain or any of the other members considering such a move I would run, not walk, out of the trap and fire up my own printing press, pay my obligations with inflated currency just as our own government is doing and retain sovereignty rights.
    Sep 13, 2012. 11:15 AM | Likes Like |Link to Comment
  • Banks, Collateral And Leverage [View instapost]
    Thanks for your reply and respectful consideration of my comment. Sometimes the reaction to information which is distasteful is to disparage the messenger.

    The point I was hoping to make regarding the moral hazard issue that you often write about concerning rogue banks and corporate entities is that if we are facing natural evolutionary macroeconomic headwinds there will be increased pressure to step over the line in order to survive.

    "A rising tide lifts all boats". If that old saw is true then what happens during ebb-tide? At the root of all human activity is terraforming. Every occupation from queen to bootblack is in support of this habitat creating activity. In the past if we depleted some natural resource or if our work was interrupted by nature we moved on. It appears that we may be in a climax environment with no place left to move to and insufficient resources to maintain our current population.

    If we were to ask ourselves the question "What is the maximum sustainable human population?", Google would respond with a wide divergence of opinions. If we qualified our question to eliminate cheap safe abundant energy from the equation what would the answer be? Should we also include preservation of biological diversity and quality of life?

    At my peril, I am going to suggest that the number may be in the range of 600 million. If that number is approximately correct then it seems our terraforming business may be overstaffed by a factor of about 1000.

    As a prudent and moral accountant should we consider downsizing to save the business or risk bankruptcy and extinction on hopes of rescue through innovation, efficiencies, and quantitative easing?

    Tom; I realize the question is probably beyond my pay grade or yours. I am hoping that all of us, especially those in industry and government will begin to address the issue of what is actually transforming the world economy now.
    Sep 13, 2012. 08:21 AM | Likes Like |Link to Comment
  • Over German objections, France is pushing Spain to seek a bailout from the EU, according to sources. French officials would like to consolidate the improvement in peripheral debt markets since late July by triggering ECB bond purchases - something that can't happen until Spain submits to a rescue and its conditions. Spain's Rajoy continues to delay. [View news story]
    The Spanish 10 yr. is down to about 5.5% as a result of all the bluster and now of course Spain is in no hurry to accept the stigma of bankruptcy and supervision. I expect the rate will be over 7% in less than two weeks and they will cave in and take their turn in the barrel. Greece. Italy and Portugal will be close behind and by the time it gets to France it will practically be a badge of honour.
    http://bit.ly/PUJQkx
    Sep 12, 2012. 08:11 PM | 2 Likes Like |Link to Comment
  • Skyrocketing domestic consumption - helped along by subsidies masking the true cost - is key to Saudi Arabia maybe becoming a net importer of oil by 2030, far sooner than previously thought. The country already consumes the entirety of its gas production and is likely to imminently need new sources for that. Might this concentrate the Saudi mind on nuclear and solar energy? (previous[View news story]
    Freddy & Glenn; I fervently hope you are both right, however, I hope you will allow me to introduce a provocative argument that may rain on everyone's parade, especially in regard to expected innovation and productivity efficiencies. Here:
    http://bit.ly/QjuXbY
    and here:
    http://bit.ly/LZVYyw
    and here:
    http://bloom.bg/OHhcn5

    The sources are not your usual 'lunatic fringe'.
    Sep 12, 2012. 03:48 PM | Likes Like |Link to Comment
  • Banks, Collateral And Leverage [View instapost]
    Tom; I always enjoy your insightful articles however I wonder about your optimism that all would be well if government and business would mend their ways and return to prudent accounting practices.
    http://bit.ly/QjuXbY

    I am of the opinion that the world is in a negative growth period and this is producing a systemic problem which forces high risk on everyone.
    http://bit.ly/LZVYyw

    If in fact we are in the 'end game' then it seems that those who have the most control would get an early start on the gold rush in this real life game of 'survival'.

    I would greatly appreciate any optimism you can share with me concerning the bright future going forward from an accountants point of view.
    Sep 12, 2012. 01:41 PM | Likes Like |Link to Comment
  • Baltimore County Executive Kevin Kamenetz hopes to borrow $255M to help with the county's underfunded pension system. His plan is to borrow the money for 30 years at 4.25-4.5% and put the money in investments that earn more. Question: If there is an investment guaranteed to earn more than 4.5%, wouldn't the pension bond buyers put their money in it instead? [View news story]
    All of the democracies, primarily in the developed western markets voted themselves pension benefits during the period of extra-ordinary growth during the past 50 years which are unsustainable in a negative growth environment. That is what is happening now in the EU crisis with all of the Club Med countries resisting the 'conditions' being imposed on them. Those conditions are structural reforms involving pension benefits. Those conditions are also at work in the U.S. in a different form as we have a printing press to mask the default. Goldman Sachs projected it sometime ago in this graph.
    http://bit.ly/LZVYyw
    Sep 12, 2012. 12:50 PM | 1 Like Like |Link to Comment
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