Wisdom-Seeker

Total Rating:
0 / 0

34 Comments

    • Mon Mar 31st 17:47 PM | Rating: 0 0
      Commented on:
      A Far Cry from "Hooverville"
      No, blame Bush for bringing in a regulatory team that would rather look the other way than fix the obvious abuses that crept into the system over the past 7 years. You can blame Congress too, though - there's certainly going to be enough dog poop to spread around.
      View article »
    • Sat Mar 29th 17:10 PM | Rating: 0 0
      Commented on:
      U.S. Long Bonds: Be Careful, We're in Injury Time
      I'd be leery of applying _stock_ technical chart patterns and chart analysis to _bond_ ETFs. The factors that move Treasuries (and, for Goatfarmer, TIP) are not the same as those that move equities.

      Although bond yields can't stay low forever, it's historical fact that the 10-year Treasury yield did stay very low, and I think didn't cross above 5% at all from about 1930 to about 1966). The stock market of course doesn't behave like that.

      In any case, there's a significant probability of a deflationary scenario playing out (e.g. Great Depression, Japan 1990s, and plenty of other countries historically) in which case long bonds will do very well, while TIP will get crushed since the return will be exactly zero. Conversely, in an inflationary crisis, the long treasuries will get crushed (as in the 1970s) but TIP will lag since government will have strong incentives to continue to suppress the CPI readings, to avoid a medicare/social security death spiral. If you believe in inflation, equities or hard commodities could do better.
      View article »
    • Sat Mar 29th 16:45 PM | Rating: 0 0
      Commented on:
      Crises Averted, Not Crises Solved
      We don't have to just bend over and take something that we think is illegal. At some point, we have to recognize that the folks in power need some input, and exercise our First Amendment right that "Congress shall make no law ... abridging the right of the people peaceably to assemble [online!], and to petition the government for a redress of grievances."

      There's a petition circulating to get Congress to take a really close look at this deal. There will be hearings next week. Get your voice heard and help give the Senate a spine transplant! I'm not thrilled with the phrasing of the petition, but at least someone is doing something:

      financialpetition.org/...
      View article »
    • Thu Mar 27th 17:34 PM | Rating: 0 0
      Commented on:
      Where Are Treasury Securities?
      Latest H.4.1 release shows only $612 bn at the Fed now, and it's worth noting that the Fed holds in custody some $2196 bn of the foreign holdings. Also of interest is that they have some $200 bn of dollar bills (Federal Reserve Notes) sitting in inventory, but not in circulation.
      View article »
    • Thu Mar 27th 17:10 PM | Rating: 0 0
      Commented on:
      Thursday Outlook: Commodities, Emerging Markets
      Actually, one could take that paint analogy another way: the more volatility there is, the longer the "stripes" are on the charts, and the faster the paint gets used up in making the chart!
      View article »
    • Thu Mar 27th 16:59 PM | Rating: 0 0
      Commented on:
      Have Recent Crises Blown a Hole Through Modern Financial Theory?
      Phrasing the no-pricing/bad-ratings... issue in terms of information and continuity is very insightful; thanks for the article!

      But I think the prescription at the end is incorrect. Less important than building a more sophisticated academic-intellectual model is getting back to basics in the real world. The less information is needed to understand something, the more continuity of liquidity will be improved. What we need are simpler and more transparent real-world securities, so that (a) less information is required for buyers to establish pricing points, (b) it's harder to commit fraud because everyone can see what they're getting, and (c) it will be harder to lose investor confidence in the next panic. The current bubble was built on the antithesis of all three of these points, and the global investing community, having been burned badly in so many ways, is now holding Wall Street's feet to the fire until it gets what it wants. I suspect the first major financial company that "gets" this will have a huge competitive advantage for the next decade.
      View article »
    • Thu Mar 27th 16:43 PM | Rating: 0 0
      Commented on:
      Updated January '08 Case-Shiller Housing Data
      Read Ritholtz and you'll realize the Bespoke guys can't tell a "better than expected" number from a "worse than expected but spun like mad" number. An objective look at the slightly fresher but much less objectively valuable information from the Realtors *really* shows that February was *not* an improvement. The real impact of the Case-Shiller numbers is that they show the real estate crash was (still) getting worse even faster in January -- except in Boston.
      View article »
    • Tue Mar 18th 21:58 PM | Rating: 0 0
      Commented on:
      Mark to No Market
      Let's straighten out that analogy in a couple of ways:

      1) Rational Economic Actor: "Hmm, my home is declining in value. There's a recession on, and my job (and/or my spouse's job) is at risk. How am I gonna keep my house and provide for my kids if something bad happens? I better save more money and spend less."
      Net Result: Amplification of Recession (short term) as there is less borrow-and-spend and more save-and-invest. But, if the "invest" part is done wisely, the economy grows again later.

      2) Joe Six-Pack (no rich Grandpa): "Everything is more expensive! But I can't borrow any more against my house, and they won't give me any more credit cards, and I'm drowning in bills! Oh, no, I just lost my job too!" Result: either (a) default, foreclosure, and possibly homelessness, or (b) scrimp like mad and hope things get better before the Repo Men find you.

      3) Grandpa Baby-Boomer: "This new home in Florida (Arizona, Las Vegas...) is great, but that mortgage is sure costing me, and damn, those life-sustaining medicines are expensive! Social security won't cover all this! And I sure don't get much out of my pension that got frozen in the 1990s. Ack, now my 401k fund is going down! I shouldn't have retired in (1997, 1998, 1999, 2000, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008) with the market like this.... Crap, I can't even sell this damn House and get any money back! I gotta get a job! What do you mean, there aren't any jobs out there right now? I NEED A JOB!"

      Bottom Line: "Mark-to-Market&q... on that declining home price is damn real (on the margins, where it matters), not "something no one's gonna notice". It means NO MORE SPARE CASH TO BURN. It means Credit Crunched Consumer Spending is Contracting...

      This, by the way, is a vicious circle with a high risk of "lollapalooza&quo... (Charlie Munger's term for nonlinear amplification) effects. The real question that the bulls should be asking is, what emerging fundamentals will break the vicious circle? (Unfortunately, the price of oil has to be pretty damn high before a home is worth more as firewood than as a home, so that's NOT gonna be the price floor on all that surplus housing...)
      View article »
    • Fri Mar 14th 11:56 AM | Rating: 0 0
      Commented on:
      Where's the Bottom?
      Alas, with a recession now underway, household income is going to be falling right along with those home prices.

      For instance, the Michigan and Ohio markets aren't getting clobbered because the homes are too expensive ($70,000 is a recent median home price in Youngstown Ohio!); they're getting clobbered because they're on the leading wave of the recession and people don't have jobs.
      View article »
    • Fri Mar 14th 11:50 AM | Rating: 0 0
      Commented on:
      The Prius Conundrum
      The easy way to get "Green" construction is to mandate it in the building codes for new residential construction. Or for cities to make that a sticking point when a developer comes and tries to build new property. Hate to admit it, but sometimes when the people want the public interest to be satisfied, the government - at the lowest level possible and with the most democratic participation possible - might have a role to play.

      BTW, the same arguments FS made also apply for energy infrastructure (power plants, transmission lines...): there are cases where it's clearly in the public interest to go with a more expensive (short-term) option that has better long-term economics (and externals).

      The trouble in all of these cases is that once the government gets involved, they don't stop, and then all sorts of unintended consequences pop up... (And one might say the same about the Fed these past couple of weeks!)
      View article »
    • Fri Mar 14th 05:04 AM | Rating: 0 0
      Commented on:
      Bloomberg Updated Consensus Estimates Weaker Than Expected
      Who wants to bet against the claim that there's been a glaring sign error on those GDP estimates?
      View article »
    • Tue Mar 11th 09:54 AM | Rating: 0 0
      Commented on:
      Central Banks, in Panic Mode, Announce Large Auction
      All this does is postpone the inevitable. Allowing big banks to hide bad loans by taking them in temporarily as "collateral" doesn't actually solve anything. But it's nice to see that they're trying things other than simply lowering the Fed Funds Rate.
      View article »
    • Thu Mar 6th 16:55 PM | Rating: 0 0
      Commented on:
      The 10 Largest Trading Losses In History
      Also worth noting that in at least 4 of the 10 cases (Barings, Orange County, LTCM, Amaranth) the trader's organization went bankrupt as a result.

      And that with 4 of the 10 cases occurring within the last 2 years, it's clear that the organizations still haven't learned how to tame their risks, despite the 6 big cases from the 1990s.

      Which makes another reason to be fearful rather than greedy just now - with the market just a few ticks from having the bottom fall out again, the risk of another "rogue trading" scandal playing into a market panic is still there.

      P.S. If you count up the 'non-rogue' derivatives trading losses, what do you get?? :) The lower tranches of all the securitized debt vehicles are essentially derivatives too.
      View article »
    • Wed Mar 5th 01:21 AM | Rating: 0 0
      Commented on:
      Fun with Numbers: Dow 2,100 C.E.
      Buffett could have done the same thing in 1908: "Look, the Dow's only 66; if you really think it is going to go up x%/year, it would have to reach 14000 in 2008! Ha ha ha!" There's no reason why the Dow can't get into the millions (from 12,000 now), just as it reached 12,000 from 66 (or whatever) a century ago... Any long-term exponential growth will produce long-term numbers that are, well... exponentially larger!
      View article »
    • Sat Mar 1st 18:00 PM | Rating: 0 0
      Commented on:
      Why Aren't Housing Derivatives More Popular?
      Same thing here. Looked at 'em in mid 2006, and decided it wasn't worth the hassle considering the cost of the transaction, the illiquidity of the futures market, the non-specificity of the hedge (your home price isn't perfectly correlated with the metro area index) and the generic problem with futures - you have to know *when* the price will be down, and not just how far. In fact, had I bought the futures back then I'd be in the hole now, because my neighborhood has (so far) fallen less than the available metro area index predicted! As it is, there are other ways to hedge: deleverage (pay down the debt either in fact or virtually by saving money elsewhere), reduce other correlated risks (e.g. avoid bond funds, since home prices are somewhat anti-correlated with interest rates, because for most owners it's the monthly payments that have to balance), maintain adequate insurance and job stability so you can pay that mortgage down even if the price drops, and of course, for those with almost no equity to worry about: be prepared to consider walking away if you go upside-down on the home.
      View article »
Loading...
Symbols:
Authors:
Quick Links:
Contribute an Article Become a Seeking Alpha Contributor

Transcripts

More Transcripts»