pimpjui

Medical Reform in One Word or Less: Switzerland

Great post. The Swiss are such a small group that they can keep a lid on things. Ditto for the smaller Scandinavian countries, for example. The problem is that the US HC system, although it is designed to help sick people, has been hijacked, like every other US public program, to transfer wealth (i.e. your taxes) to various entities (e.g defense). Name one federal social program that is not either under water now, faces massive shortfalls, or is in jeopardy of being overhauled (in which case the next generations will have to deal with it). Nope, universal HC in the US will not change anything, except provide yet another mechanism to increase taxes, and subsequently funnel the money off to various boondoggles (e.g. Afghanistan).

China Urges Citizens to Buy Gold and Silver

The comments about the eventual chinese currency peg removals make sense. The only low-cost, low risk hedge is gold. About the part of encouraging chinese citizens to buy physical; that is pretty much a ponzi scheme. Step 1: the governemnt is buying gold or has already bought lots of it. Step 2: Get the largest pool of retail suckers in the world to continue to bid up the price by encouraging them to buy it with their savings. Step 3: devalue the chinese currency. Step 4: conficate chinese citizen's gold (sort of like how the USA did it in the 1930's. This will occur probably in conjunction with some economic crisis in the USA, where the chinese government can blame the barbarians for destroying their wealth; ditto for the US governemnt....they can blame the chinese for something that will require a huge government devaluation e.g. military invasion is the most probable at the moment...

Goldman Arrest Highlights Problem with IP Law

If the developer has coded the spec, he usually ends up knowing the concept better than the person who wrote the spec. He knows what works and what does not work, and why. The theoretical guy who wrote the spec can only hypothesize (until he gets some actual results). GS is going after this guy because it is about code, which can be disseminated immediately and at an exponential rate. In the next month, a sweatshop in India could be running the GS algo. The success of the GS "offspring" you mentioned may have prospered. But even rudimentary factor model analysis of returns would show strong evidence that they were just taking on credit risk and liquidity risk during an environment of easy credit. Throw on top of that that GS was probably their prime broker (and very likely seed investor), these success stories will disappear shortly. Really, offspring hedge funds were probably a lower risk source of revenue for GS that running a prop shop in house. Regarding GS itself , I am sorry, but that comany has lost all respect from an intellectual powerhouse standpoint. Bottom line: they could not take a drawdown, and had to go cap in hand to the government. GS is a now "confidence" play, not a value play.

Is Inflation a Fact… Or Just an Opinion? Part II

"The world is currently operating under a fiat currency discipline: meaning no major currency is backed by anything of real value."

You already gave us the answer. If currency debasement is the worst thing the US does, then it has very good company (e.g Switzerland).

Fiat currency is not about how much is printed. By definition, it is already worthless.

It's about confidence levels in the government that issues it. It should be painfully clear that for various reasons, most of the world still has great confidence in the US system.

The most probable inter-dependent reasons are:

1) US military might trumps all (if you can get nuked into oblivion, the expected value of your currency will be worth less than that of the nuker.)

2) US market liquidity is tops, hence the liquidity premium of the currency.

3) US market elasticity. Name one 1st world market that can drop 40% and at the same time keep the standard of living for its people at pretty much the same level. The UK is probably the only close 2nd.

Revisiting the Weimar Gold and Silver Ratio

One does not buy silver or gold as a store of wealth if he thinks that infrastructure around him (e.g. banking system, political system, legal system, etc) is stable. It is only when these systems fail, that physical gold becomes valuable as money. So if you really think the system is going to fail, then it is pointless to buy non-physical gold. These paper accounts you mentioned will vanish upon the failure of the legal system. When systems fail, particularly the legal system, self-defense becomes a requirement for holding gold. So you should first buy lots of guns, food, and a safe place to hunker down. Then, if you have anything left, buy gold, and protect it with the guns you just bought.

Lessons for the U.S. Banking Authorities

The issue of banks being nationalized or not is not really relevant to the main topic, which is: the transfer of wealth from working people to Wall Street. This is what is happening, and it's happening because that is the natural way things have worked for the history of our great nation. I can name 4 different transfers of wealth from 1970 to the present (e.g. oil crisis 1970's, S&L fiasco '80's, dot.com bust, sub-prime). If I go back to the begining of the country's history, I suspect I could find 20 or so. Today, the banker parasites will continue to milk this taxpayer cash cow for as long as they can. Nationalization has not occured becuase it would become painfully obvious that the people running the banks are doing nothing (and have been lying and/or doing something illegal). This would mean firing the parasites/criminals. When banks become nationalized, you can be rest assured that the US government will have been milked so dry, that it will be more beneficial for the banker parasites to simply quit. That's the telltale sign. Look for it. I suspect that it will occur when bankers have to accept government employee wages (i.e. nationalization), or when massive infaltion and stagnating wages (including for bankers) destroys any incentive to hang on--this is coming soon, or when it becomes obvious to the public that the bankers are doing something illegal (e.g. lying, again, about profits, etc).

Why Are Gas Prices Still So High?

Oil cost is only one factor in producing gasoline. Other activities in the refinement process probably account for the asymetric price of gasoline. That said, there are just not that many oil refiners in the USA, so some type of fiddling with refinement costs that favor the refiner is certain. Throw on top of that an oil lobby, and most of this fiddling will be deemed legal. If you want to really want to break the refiners, you have to enter that market. Considering that even at the height of the oil boom, no new refineries really opened, you can be rest assured that this price asymetry will continue.

Barron's Plan to Save the Economy - For Just $200B?

It's like this. This whole mess is not about subprime blah blah blah. Its' about transferring wealth from the working people to Wall Street (Barron's readers included). There are numerous times that this has happened throughout US and world history. This time is no different. You'll know that the transfer is over once working people in the US are taking jobs not so that they can meet a mortgage payment on worthless homes, but rather afford their next few meals for their family (which I estimate to be about 15% unemployment for bread winners). The American worker is trapped, and has nowhere to go. It's going to get ugly. Giving money to banks in any shape or form is absurd. They will just milk the system until it becomes galringly obvious that they do not do anything of value anymore.

Why Is Everyone Blaming the CEOs? It's the Government's Fault

Good article, but your main assumption needs clarity. How exactly did the government make banks or other institutions take money? For example, AIG (insurance) comes to mind. Goldman Sachs as well.

It's Not a Recession, It's Reality

You can be rest assured that, unfortunately, nothing will be done to genuinely help the people that need it most (e.g. working people), and most of the money will go to prop up the untalented parasites (i.e. Wall Street) that engineered the mess in the first place. If you need further proof, just look at where the money has gone to date. At $1 trillion +, most bad mortgages could have been simply bought up or guaranteed. Nope, call it what you want (e.g. credit crisis, toxic assets, etc), but this is just a brutish transfer of wealth to Wall Street from Main Street.

In Search of a New Hedge Fund Business Model

Any criticism about how much money someone is making from a uncoerced transaction is sour grapes and in violation of general economic theory. Let the market figure out who deserves 2/20 or whatever. If "smart money" is willing to pay and they get ripped off, over and over again, then the egg is on them. Getting ripped off also includes not being able to get your money out of a HF. Soon they will not be smart money, They will be dumb money. Generally speaking, the hedge fund industry is/will change because many HF were based on certain markets and/or strategies that depend on the existence on investment banks (e.g. exisitence of structured OTC products). In particular, people from the IB's would leave and start a HF, which in turn would make profits from specific knowledge of market inefficiencies that the bank produced (i.e banks "are" the market, and they were ripping off clients with absurdly "priced" OTC products). The HFs, were just trying to get a little bit of the action. Can't blame them. These HF types have/will die off because they don't do any thing special anymore (i.e. outdated business models). Other HFs that do something innovative will survive, and smart money will pay the market rate.

The Street Wants More Job Cuts from Microsoft

Quite laughable that banks, who are bankrupt or had to be bailed out by the government (i.e. they do not know how to run a profitable business), who don't fire enough dead weight themselves, want MSFT to get rid of people. I have never, and will never, listen to these bank analyst morons. I can't imagine anybody with half a brain would pay for their biased and inaccurate information. I suspect this is a last gasp for breath before the analysts themselves die off.

Thain's Undoing: Thinking He's Worth It

The reality is that most of these invetment banking leaders who are being bailed out by the government are:

1. Not that smart
2. Very poor investors
3. Very poor leaders/managers

These people as a group have had a relatively sweet position in society because the government has let them have access to lots of free capital in there positions as "liquidity providers" and at the same time turned a blind eye to the risks that they were taking. Understandable when this group of people are generating so much corporate tax revenue. Of course they are not generating any tax revenue now.

Not that smart. Even a 1st year finance grad student can see that their business models are overly dependent to leverage, and their risk models are bogus. I find it strange that a PhD in Electical Engineering only just a engineer when he's doing electirlcal engineering, but somehow a genius when he's doing quant finance.

Poor investors. The main problem, in the end of the day is that these pathetic "investors" can't take a drawdown on their account. Any moron can leverage up to infinity if the banking system allows it. I wish that someone would bail me out everytime I had a drawdown on my account that could break me.

Poor leaders/managers. I am pretty certain that we coud fire all of the managers of these failed institutions, and promote everyone at the same companies from the bottom up, and still not be a position any worse than now. If these "managers" are now government employees, they should get the same pay and benefits as government employees. Their modus operandi is to milk the system for as long as they can get away with it. Get rid of them, the country has nothing to lose. There are plenty of competent people who can do a better job.

The Fallacy of Floating Exchange Rates

Your hypothesis violates basic economic theory. If speculators cause prices to rise, then they must cause prices to fall. Therefore, it must have been speculators causing the yen to become weaker before, an now they are causing it to become stronger. Who are these speculators, and how do they magically, on aggregate, win all of the time? If this was such a one way bet, all speculators would pile in causing a reverse of the phenomenon.

Speculators Continue to Drive Oil Higher at Risk of Global Recession

Sort of silly hypothesis. If true, then when oil starts tanking back down to $50, then I guess it has to be them darn "speculators" as well. Oil is increasing in dollar terms because the dollar is losing its value to just about everything. The causes of this are far and wide, but most critical is the US trade balance. Simply put, America is not selling enough goods that the rest of the world wants. Hence less demand for the the dollar to pay for these things. Blaming speculators (or any other group of people) is usually a last ditch effort to divert attention away from the real cause of problems....right before the end....