mr freddo

Five Charts to Rule Them All: The Coffee House Guide to U.S. Macro Trends

You forgot to recommend Apple.

The Case for Precious Metals Is Only Getting Stronger

But wait. Ben said the recession was over. Don't you believe him? A weak recovery yes, but growth rather than contraction.

Strangely, the last time we hit full blown meltdown paranoia, the dollar rallied as treasuries became the safe haven investment. This perverse effect caused gold and silver to slump during the worst of the crisis, just when we gold investors thought it would skyrocket.

The USA is like Roger Federer. Still the champ until taken down. We are in the 5th set of this match and it looks like we have some problems ahead. But will it break the USA? Will we crumble and be replaced? Or will we be able to hold serve and muddle through?

History tells us that the champ, no matter how good, eventually gets beaten as Roger did at the US Open.

The new champ will be China. They have been able to combine strategic planning with capitalism to come out on top in the next 10 years.

If you review the events of the last 10 years in the US, you have to conclude that capitalism is a poor strategic planning mechanism. Greed creates bubbles and bubbles destroy wealth.

Look at the California Energy Crisis, the Sub Prime crisis, our energy policy (none for 25 years) and you will see a total lack of strategic vision and a reliance on greed (and Cheney) to make our decisions.

The Republican mantra of deregulation had led us to the brink of ruin.

Unfortunately, the party that replaced them in power is even more clueless as to how to run an economy. They believe, deep down, that value is created by attorneys and will create a system where attorneys thrive and entrepreneurs must find a new way to make a living because it is just too difficult to start a new company in a worker/lawyer dominated economy.

Democrats want to give it away, and anyone who has run a business knows that if you give it away, you will be gone in short order.

So I say hedge your gold, silver, Oil and Agriculture with some hot growth stocks from China.

Car Allowance Rebate System: Ford Bounces Back

I traded in my 95 Ford Explorer for a new Mercury Mariner. The new car cost me about 20k and was loaded with fun stuff like a satellite radio, nav, and back up radar.

The first lot I went to was the GM lot. I walked around the entire place looking at trucks and was left alone. Nobody came out to start the conversation. Strange.

My gut feel is that Ford is really starting to produce some interesting cars that can compete in the global marketplace.

GM is dead.

The cash for clunkers deal is a good one in that the average guy can actually claim some of the stimulus money for their own personal needs. Not that I am in favor of government handouts, but I have never seen a dollar of stimulus come back to the average consumer.

The problem with the program is that it did not go far enough. Once the billion or three is spent, will we be any better off in terms of our national consumption of gasoline? Hardly.

We have 150 million passenger cars in the United States. At 4500 per clunker, that's 666 thousand new cars with slightly better mileage. It won't make much of a difference.

What our government should do if it is serious, is offer $10,000 for clunkers traded in on cars that get at least 50 miles per gallon or run on electric power. It should fund the program with $500 billion.

When that program runs out, we should have 50 million new cars on the road that are getting 50 miles per gallon rather than 15. Instead of 150 billion gallons of fuel per year for passenger cars, we would use 115 billion gallons, a 30% reduction in gas usage.

Obama promised to get 1 million hybrids on the road by 2015 when he campaigned. A simple look at the numbers shows that the effect of 1 million hybrids is almost statistically insignificant.

Is this the change he was talking about?

For $500 billion, you would light up the midwestern states' economy like a Madam Larue pinball machine. In addition, we would be far better off strategically for the coming oil crunch and our declining usage of gasoline would send the right message to world markets and help keep the price of oil at reasonable levels for a few more years.

Sometimes you have to think big to think at all.

Washington's Dilemma: This Isn't a Recession, It's a Collapse

Americans, Californians, our problems are solvable over the long run if not in the short run.

In life, one is rewarded for creating, whether a broadway play or a big mac. Our world economy is based on the interactions of those created values. Those that create extraordinary value are rewarded extraordinarily.

In America and California, in an effort to maximize our comparative advantage, we funneled our very best and brightest minds of our generation into finance. The engineers were shunned, and engineering jobs were exported. Thus we forgot what we knew while teaching the rest of the world how to catch us quickly.

We weren't too concerned. We kept churning out new financial products and believed that the financiers are the real masters of the universe.

What we now realize is that a great deal of the growth in finance was based on false premises. 1. That you can take a basket of turds, squeeze hard, and create diamonds. 2. That you can alter the basis rules of personal finance and own a million dollar home with an income of $50 thousand a year. 3. That you can allow bankers to become salesmen and still not lose capital.

To return our state and nation to greatness, we must immediately begin to build our future businesses that will create real prosperity for the 21st century. These companies will be technologically driven, will rely on domestic employment, and will start from nothing to become dominant world beaters in 20 years. They will serve as platforms of innovation spinning off new companies and creating new markets.

These new companies will create a new class of wealthy capitalists, men and women trained to make money by taking risks, applying technology, and building strong stateside businesses that act as engines of employment for our citizens.

So let's stop whining about who is to blame. Why we failed. Why we are doomed. WA WA WA!

Let's start moving toward the solution, the answer, the bright light. Our clueless legislators, should start asking venture capitalists, entrepreneurs, scientists, and engineers what they need to get the pipeline of new companies rolling now so that we will have successful, exciting world beaters that employ our children and grandchildren.

The Coming Fiscal Train Wreck

Modern Prag

I agree with you in principal, I don't like the government any more than you do. But here in the real world we are stuck with it for the time being.

My tax ideas allow you to continue with your behavior, you just have to pay the real cost to society. Go ahead and smoke cigarettes, but don't burden society with your increased health costs. The same goes for alcohol, firearms, red meat, car exhaust, foreign wars due to gasoline, and marijuana.

Options Girl:

I like the discounts idea which is another way of taxing fat people.

Thanks for responding. I have taken a pragmatic approach to solving our problems rather than spout ideological rhetoric as is happening in California right now. Your read the article. Basically, we are screwed if we don't get moving and do something about the deficits now and into the future.

My comment was meant to get us all thinking outside the box. I chose the revenue side of the equation, the cost side has great potential as well.

The Coming Fiscal Train Wreck

We really need some "out of the box" thinking on these federal deficits.

First, Marijuana should be legalized and taxed. This is a $100 billion market nationally. We waste billions trying to enforce the law as well. Done properly, the government could clear $80 billion.

Second, increase federal taxes on cigarettes from 1$ per pack to $4 per pack, to generate $3 x 22 billion packs per year or $66 billion. Let's call it $50 billion.

We eat 66 pounds of beef per person in the USA per year. A tax of 2$ per pound of beef would provide $40 billion of revenue.

A 2$ tax on a gallon of gasoline would provide great incentive for alternative fuels while providing $250 billion per year in revenue.

We have 150 million passenger cars on the road that are being replaced on a 7 to 8 year cycle for an average of about 18 to 20 million cars per year purchased. Put a tax on all non hybrid/electric/altern... cars sold. $3000 on 15 million cars is $45 billion.

At 10 pints of spirits per person, we could generate $10 billion with a $3 tax per pint.

Firearms tax. 5 million guns x $3,000 per gun would generate
$15 billion.

While we have generated new revenues of $500 billion, we have also gone a long way to reduce the expenses of the health care system that are a result of smoking, eating red meat, living near guns, and drinking alcohol. Take these new taxes and fund medicare and social security. Increase the age for eligibility, require a significant co-pay on all medicare services.

Medicare is budgeted for $750 billion next year.

This plan doesn't get us all the way there but it is a start.

It's not the end of the world.

Chart of the Day - PE Ratio

More evidence that we are not through this crisis and may be in the midst of an enormous bear market trap.

High Insider Selling

Thanks John, that pretty much says it all about the rest of the year.

The Coming Economic Collapse, Part 3

Thank you for the grim picture, in three parts! I don't disagree with your analysis or your conclusions. But I have to ask, "Is the US really finished?"

My father in law, a Belgian, came to this country in 1950, went to school, and got a Masters in engineering. He started his own company and lived by his wits for 50 years.

I remember the discussions we would have about value. Me, the baby boomer globalist explaining that it was only necessary to have a comparative advantage (in world finance), therefore, the jobs we lost oversees weren't necessary to our prosperity. My father in law, the former resident of Nazi occupied Antwerp, telling me that when we lose manufacturing, shortly thereafter, we will forget how to make anything.

And now that has come to pass. Our highly regarded financial skills turned out to be 3 card monty skills. A lot of people made a fortune while it lasted. In the end, very little value was created.

Now we are left with the wreckage. I agree with the author that we need to get new companies started now that can produce and manufacture in the US. We need to go back to making and selling things. The shortcuts to wealth create bubbles and ultimately end in financial ruin.

The most important thing that an economy produces for its people is jobs. Jobs that not only provide a decent income, but also stimulate and provide for personal growth. Job quality. Through jobs, we create millions of success stories of fathers and mothers successfully raising the next, well educated, well mannered generation.

Leadership.

The more that is given away by the government the less I feel like working. The more taxes I have to pay, the less I care about making a lot of money. Thus the philosophy of the Democratic Party is doomed. It doesn't motivate anybody and rewards losers.

Leadership.

The Republicans should have ruled for 50 years. But they lacked leadership and descended into a pack of wolves, each ready to grab while the grabbing was good. What a shame. The basic republican philosophy of self-reliance, personal motivation, and entrepreneurship are the proper ones to ensure prosperity for all.

Venture capitalists get out there!

An Overdue Overhaul of the Securitization Industry

Bravo! You are hitting the nail squarely on the head. What is really amazing is that bankers are raising a fuss. Here's what bankers are probably really thinking:

"Bankers warned that the new rules would reduce their ridiculous bonus levels by forcing them to actually be bankers, the gatekeepers for society's precious capital, instead of snake oil salesmen."

I believe that banks should hold at least 20% of the loan. That way they would bear significant risk if the loan goes sour.

The argument that overall financing cost rise is ridiculous in light of the $10 trillion dollars we are going to end up throwing at this disaster. Did they forget about these costs?

The arrogance and stupidity of these "Bankers" is boundless. Given the mess they have created, their opinions are worth about as much as many of the loans they originated. Bupkiss!

Why the Oil Market Favors the Deepwater Subsector

I agree with mdpath. Your premise is a good one, but you did not provide any specific names. I have been looking to add to my oil positions but would like some help here as to where to invest. I like the oil services and will add some OIH to get broad exposure.

Also, what about the high yielding Canadian oil trusts like PWE and PGH? Any opinions there?

Disclosure: Long PBR, RIG, PWE, PGH.


On Jun 18 09:11 AM mdpath wrote:

> How about naming names.

Crude Oil's Long Term Fundamentals

Oil, over the long run, will be one of the best performing investments that you can make. The fundamentals, as reviewed in this well written article, point toward continued price increases on into the future. The law of supply and demand will prevail. Unless a massive find somewhere changes the supply demand equation, oil will continue to increase in value.

In the US, we are paying $3 per gallon currently for gasoline. Europeans have been paying more than double that amount for many years. With the demand from Asia growing ever stronger and new supply hard to find, oil prices will be under strong demand pressure for years to come.

Stay Away from U.S. Treasuries - Invest in Energy Stocks

It is a sad state of affairs when the most powerful country in world history has no strategic energy policy. It has been our weakness since the formation of OPEC and the 1974 embargo and yet, we have done nothing but get more addicted to oil.

Cheney did have an energy strategy. Conquer, pillage, plunder. We can see that we didn't get far with that approach.

As intelligent as Obama is, I don' t see how anyone can get excited about his goals for our nation's automobile fleet. We have 150 million passenger cars on the road. Obama's goal is to have 1 million hybrids on the road by 2015. One million out of 150 million? Less than trivial.

With our growing budget deficits, congress should pass a nationwide gas tax now of 2 to 3 dollars per gallon. With prices of 5 to 6 dollars per gallon, the market will start to work toward solutions to gasoline consumption. The money raised on the great gas tax can go to reducing our dependence on foreign oil with subsidies for electric cars.

We now own General Motors. Let's force them to start building cars that support our national strategic defense policies rather than weaken them.

Our goal should be 50 million electric/hybrid/alternate fuel cars by 2015.

Banking Crisis Not Yet Over

All banks will be under great stress for the next several years as their loans on alt-a, commercial real estate, credit cards, ARM and prime mortgages hit the fan.

In addition, they continue to carry many toxic assets at full value thanks to new rules on mark to market which state that if an asset is being held to maturity, it's value can be carried at par.

But the bankers know what it is really worth. Their weak capital structure will inhibit recovery for years to come.

Hyper-Inflation or Just Hype?

Thank you for pointing out that inflation, although greatly feared, has not reared its ugly head. Not yet anyway.

The Fed believes that inflation is a concern, but is a "down the road" problem that they can deal with. Their greatest concern is getting the economy moving again. To that end, they are handing out free money to help banks become more profitable and assist in the repair of bank balance sheets. Until banks have sufficient capital, they will be reluctant to take on new risk.

My problem with Peter Schiff is his prediction of hyper inflation. We survived inflation rates of almost 20% in the late 70's, early 80's but that was not hyper inflation. The inflation rate is bound to go up but the Fed will step in and start raising rates at that point.

My own guess is that serious inflation will occur in the 2010 -2012 timeframe. By serious, I mean in the 6 to 10% range. This will be good for the stock market as most assets except cash, will appreciate.

I am looking for a good moment to get out of cash and get my money in the ground with oil, agriculture, and precious metal ETF's. I also believe that Big Tech is a decent place to hide as these companies can pass on price increases quickly, if necessary.