Tack

Two more publishers say they may yank stories off Google's (GOOG) search engine and hand them exclusively to Microsoft's (MSFT) Bing, following Rupert Murdoch's (NWS) lead. MediaNews Group Inc., publisher of the Denver Post, plans to block Google when it starts charging readers for online content next year. And Morning News owner A.H. Belo (AHC) says it may start charging online subscription fees and block Google.

Sort of reminds me of that old cartoon with the guy pointing a revolver at his own head and saying, "don't come any closer, or I'll shoot."

Maybe the dollar bears are too bullish, Randall Forsyth says; a deflationary spiral, complete with competitive currency devaluation, contracting trade and protectionism, could make investors long for the simpler inflationary '70s.

In a deflation, prices decline, i.e., currency increases --not decreases-- in value. It's virtually impossible to have both deflation and devaluation at the same time, in terms of real purchasing power.

But, such facts aren't important in scare pieces, I suppose.

Meredith Whitney's Crystal Ball Fogs Up

Here's the contest:

In the far corner, we have Meredith Whitney putting her shiny, newly-minted reputation on the line, saying the banks are going down.

In the near corner, we have John Pauslon putting his own billions of dollars on the line, saying the banks (in particular, C & BAC) are going up.

Pick one.

Meredith Whitney's Crystal Ball Fogs Up

Andy Warhol said it best, "In the future everyone will be world famous for fifteen minutes."

The U.S. government faces a fundamental disconnect between the services they are providing and want to provide, and the additional taxes people are willing to send the government to finance those services, Miller Tabak strategist Dan Greenhaus says. And don't ignore "the damaging effect these tax policies may have on the path of consumer spending and economic growth going forward ..."

Those presently in power do not care about the impact on the economy of their policies. As long as those that they make forever dependent upon the government comprise 50.1% of the voting electorate, they don't really give a hoot about much else.

Meanwhile, the co-head of BlackRock's (BLK) Global Bond Portfolio Team, Brian Weinstein, warns deflation may still be in the cards: CPI remains "very, very close to zero," he says. "If you have another slide down in the economy, you could have negative CPI in the middle of the second quarter and into the third quarter."

That's true, only if you exclude what everybody actually spends money on, namely food and energy.

Robert Shiller wonders if the recovery is just an optimist's self-fulfilling prophecy: "After all these months, people start to think it's time for the recession to end. The very thought begins to renew confidence, and some people start spending again - in turn, generating visible signs of recovery."

Money can be and is created, at will, by governments, and always has been. It's only the velocity of that money, moving through the economy, that is controlled by individuals, and that's ultimately a result of human emotion and resultant behavior, and little else.

A Tale of Two Markets: Overvalued Stocks and the Declining Dollar

Here's the fundamental dislocation in valuations that cannot persist indefinitely, whether that measured in days, weeks or months:

A) There are low Treasury rates and each auction with high bid-to-cover ratios, indicating a robust demand for Treasuries. Robust demand for Treasuries, at the current historic low rates, is indicative of confidence in the dollar and expectation that we will persist in a sluggish recovery, or even a deflationary return to recession.

B) Gold is being bid up frantically to all-time highs and showing no signs of abating. This is indicative of expectations that the dollar will decline continuosly, producing sizable inflationary pressures and ultimately causing radical increases in Treasury (and other) lending rates.

Either Treasury buyers or gold buyers --one or the other-- are in for an unpleasant surpise.

In his weekly address, President Obama warned the U.S. should not return to credit-fueled growth, urging people to spend less and save more, while calling for a greater focus on exports to Asia. He also said it's important the upcoming jobs forum "not undertake any ill-considered decisions, particularly at a time when our resources are so limited."

"spend less and save more...."

Translation: retain more for us (the Government) to tax away

Regulators close a Commerce Bank in Fort Myers, Fla. - the year's 124th bank failure - at an estimated cost to the Deposit Insurance Fund of $23.6M.

There were over 1300 banks and S&L's closed or otherwise liquidated during the S&L crisis. The latest financial downturn has seen less than 25% of that number, to date. It does not appear that we'll get anywhere near that number, or even half.

Increasingly, the media and Internet conspire to make Americans "feel" that things are much worse than they are. This cripples the ability of many to make sensible investment decisions, but provides opportunities for those that can focus on facts, rather than emotions.


On Nov 21 05:05 AM bbro wrote:

> There is not a banking crisis...but there are banks that a going
> under
> and will be for along time most of them are small undercapitalized
>
> with low preprovision earnings....words like depression and banking
>
> crisis are serious misinformation......there are 6.7 trillion in
> loans
> in the banking system....How much that needs to be written off???
>
> Come with a number and maybe we can have a serious discussion.....

TD Ameritrade And E*Trade: Wedding Bells?

If Etrade is working itself out of its mortgage problems, which seems to be the case (heck, I'm a customer and even received a mailer from them asking if I wanted to borrow!), why on earth would management want to sell out for $3, $4, $5, or anything close?

Etrade has a far superior trading platform to Ameritrade and absent the mortgage carry should run circles around them. Just a couple years back, this firm was selling at close to $30. $3 or $4! Is this serious?

As for speculation that a deal is imminent, that, too, seems ridiculous, as the share price has spiked only about 10%, and that on a couple days of volume.

Frankly, as a very satisfied customer with integrated bank accounts, trading accounts, a credit card and a home equity line, I hope they remain independent, as I doubt I'll get as elegant an integrated set-up as I enjoy now from Etrade.

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

As long as debts are denominated in its own currency, a government can never default. That's the beauty of having a reserve currency or borrowing in your own currency, whatever it may be.

Any discussion of "IMF loans" is nonsense. The reason the IMF has made bailouts to other countries is because they borrowed money in currencies other than their own, so when their excahnage rates collapsed, they needed more dollars, euros or whatever was the basis of the loan.

Take the exchange-rate issue out of the equation and add a printing press, and technical defaults are impossible.


On Nov 20 02:33 PM tdiaz wrote:

> the debt is never meant to be paid. US is going to default, then
> recieve an IMF loan with lots of strings attached, the IMF loan will
> just serve to pay the interest owed to the fed and foreign govts.
> and the game continues on as long as governments surrender the privelege
> of printing money to bankers.

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

National debts are NEVER paid back and never have to be, as long as GDP advances, and the balances, as against total GDP, remain within reasonable ratios. (We can all debate what's reasonable.)

Just as a simplistic example, if someone is making $100K per year and has $50K of debt, they can pay that interest ad infinitum without ever paying down principal. Furthermore, if their income expands to $200K per year, then, they can even expand, not pay back, their debts and be in no worse shape than they were to begin with. Depending on the uses of the debt, they may be in better shape.

Analogously, governments can increase their debts, as long as the proportion does not overtake their ability to service the debt.

None of the above is an argument for ever-higher debt levels or to decide what ratio of debt to income is appropriate. It's merely to illustrate that national debt isn't intended to be, doesn't have to be and never will be "paid back." As long as government's income grow from growing economies, they can increase debt levels ad infinitum.


On Nov 20 01:25 PM yellowhoard wrote:

> Given the massive current and future obligations that our government
> is on the hook for, I'm not sure it matters who is printing the money.
>
>
> I like the idea, but how do we pay for 100+ trillion dollars that
> we are currently on the hook for without massive inflation and/or
> massive increases in taxes?
>
> Obviously, interest free is appealing. But, even without interest,
> we're boned.

Asset bubble warning watch: Nouriel Roubini says "there is the beginning of a bubble" and that part of a 70% jump in crude prices this year is speculative, "money chasing commodities." And Hong Kong central bank chief Norman Chan says with abundant liquidity, they face the risk that assets will become more disconnected from fundamentals.

Productivity is not the problem, it's excellent and getting better. Demand is the problem.

The better way for the Fed to justify the run-up in stock prices that's already occurred is for them to leave the extra liquidity out there, but encourage it to flow out of bank coffers and into main-street investments by 1) providing tax incentives for business and 2) taking away the profitable interest-paying parking spots that banks currently enjoy from the Fed.

We need more "velocity" of money flow, not just more quantity out there, so withdrawing funds neither improves velocity nor liquidity. Better to create policy changes which will flow some of that cash from banks back into the economy. This will also help pay for itself by improving tax revenues as business improves.

The key is to get money into the private-sector economy, not government make-work projects.


On Nov 20 12:10 PM Daniel Harrison wrote:

> Absolutely. The other problem here is that the leverage is supported
> by an increase in printed money. That's because in order to keep
> monetary policy loose, you are forced to keep printing.
>
> And here is the big problem with that policy: you leverage asset
> prices, causing price inflation, you by default cause monetary inflation
> by keeping interest rates low, and overall you eventually push prices
> up for the consumer, while putting pressure the median of the monetary
> base in the economy. In the meantime, speculators are the only actors
> in the economy who are getting richer: everyone else is struggling
> to pay the bills. In the end, the disparity between the value of
> your asset base and the price others are willing to pay for it disappears.
> That's when stock prices collapse.
>
> Here's the thing: In every game of leverage, there is ALWAYS a margin
> call. The reason brokers implement one on investors is that they
> know eventually the bank would be the one left will the bill. In
> this case, the Fed is going to be left with the margin call. In order
> to pay back the margin call, it won't be able to print more money,
> keep monetary policy any looser, and it may have to borrow at sky-high
> interest rates, pushing T-Bills up through the roof if it doesn't
> want to default.
>
> U.S. productivity has to shoot through the roof very soon in order
> to support the kind of leverage that's embedded in the economy right
> now.
>
> On Nov 20 11:49 AM tunaman4u2 wrote:

Asset bubble warning watch: Nouriel Roubini says "there is the beginning of a bubble" and that part of a 70% jump in crude prices this year is speculative, "money chasing commodities." And Hong Kong central bank chief Norman Chan says with abundant liquidity, they face the risk that assets will become more disconnected from fundamentals.

Other than brief periods of fear or recession, asset inflation is perpetual and must be so because quantities of fiat currencies increase perpetually. This to basic economics almost too simple to require an education.

I'm sure Mr. Roubini was proclaiming an asset bubble back in the '60's when gasoline went from $0.17/gallon to $0.22/gallon. I wonder how anybody made out who bet on a collapse in prices?

As long as the world operates on paper currencies, asset inflation --short of brief technical corrections-- will be inevitable and perpetual. It's been occurring for hundreds of years and isn't about to stop now (unless the world ends, of course, as in the 2012 movie).

Now, if someone wishes to bet on a complete collapse of the world system of economic exchange and a return to barter, by all means, do so, but, it's my guess that it will be a very poor bet indeed.