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JeffDB
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I'm an insurance broker who's interested in the market, economy and politics from the viewpoint of an average citizen.
My company:
Buchholz Insurance Agency
My blog:
buchholzins.com
  • Pimco's Observations As The US "Reaches The Keynesian Endpoint" - The QE2 Ponzi Scheme Is "Nothing But A Profit Illusion"
    Some excerpts from a ZeroHedge article about Bill Gross' latest broadside to the Fed's suicidal Quantitative Easing:

    http://www.zerohedge.com/article/pimcos-observations-us-reaches-keynesian-endpoint-qe2-ponzi-scheme-nothing-profit-illusion

    Once again, it is the world's biggest bond manager which either is really tempting fate by telling the truth in an increasingly more aggressive manner day after day, or is engaging in the most acute case of reverse psychology ever seen, coming out with the most critical opinion of the Fed's actions on the verge of the Fed's historic first press conference. And this one is truly a stunner, far more real than anything even Bill Gross has said in the past: "Just as Charles Ponzi needed donuts to turn back a suspicious crowd of investors, the Fed needs “donuts” in order to fill the bellies of the literally millions of investors worldwide who worry about the alarmingly large U.S. budget deficit and the impact that the U.S. debt dilemma could have on their Treasury holdings...


    Summary of "The End of QEII: It’s Time to Make the Donuts"

    • With quantitative easing the Federal Reserve has in essence picked the pockets of Treasury bond investors throughout the world.
    • Ultimately, the U.S. must own up to its past sins and let the deleveraging process play itself out.
    • The U.S. must invest in its people, its land, and its infrastructure, as well as promote free trade, to achieve economic growth rates fast enough to justify consumption levels previously supported by debt.
    Investors are no doubt worried they may have bought into an unsustainable scheme: the creation of a scourge of debt so large that the Fed itself has had to purchase the debt to keep the game going.
     
    All that the Fed has had to do thus far to keep the game going is press the “on” button to its virtual printing press, crediting the account of the U.S. Treasury. In the process, the Fed has kept the demand for U.S. Treasuries high, perhaps deceptively so, attracting with its redolence many classes of buyers, including households, banks, pension funds, insurance companies and foreign investors. Their collective buying has created what we believe to be a profit illusion with many investors mistakenly believing they can continuously reap profits from perpetually falling bond yields and rising bond prices, just as they have had opportunity to do over the past 30 years, amid the great secular bull market for Treasuries and the bond market more generally.
     
    For many reasons, this “duration tailwind” for Treasuries can’t last, particularly because the United States has reached the Keynesian Endpoint, where the last balance sheet has been tapped. In addition, with inflation expectations rising in the context of low levels of initial jobless claims, and with Federal Reserve officials themselves expressing reluctance to go beyond Quantitative Easing (QE) II, the Fed’s Treasury buying is expected to end in June, leaving others to carry the Treasury’s heavy load.
     
    The Federal Reserve’s colossal bond purchases therefore will likely, to the chagrin of millions of unsuspecting Treasury bond investors, be one of the markers for the latter stages of the bull market for Treasuries. For now, however, the Fed’s purchases have the sweet aroma of freshly baked jelly donuts and many a Treasury bond investor has been drawn to their savory, sugary, scrumptious taste. ...

    Ultimately, however, the stench of the Federal Reserve’s bond purchases will seep into the nostrils of investors all around the world when it becomes glaringly obvious to them that the Fed can’t possibly continue as the Treasury’s main source of demand.
     
    Treasury investors will also realize that not only has QE suppressed the rates they earn on their Treasury holdings, QE promotes financial and economic conditions that hurt Treasury bond holders, primarily because it boosts economic growth and inflation, resulting in confiscation of the skimpy Treasury yields they earn. Foreign investors have the added discomfort of a decline in the foreign-exchange value of the U.S. dollar. To top it off, Treasury investors face the potential for capital losses for having bought into the Fed’s scheme at prices inflated by QE, sort of like playing a game of hot potato and getting stuck with the potato when the Fed abruptly leaves the game.
     
    House of Pain
    With QEI and QEII the Federal Reserve has in essence picked the pockets of Treasury bond investors throughout the world. ...

    Ultimately, the U.S. must own up to its past sins and let the deleveraging process play itself out. It can’t pretend that previous levels of demand for goods and services can be restored simply by turning on the Fed’s printing press.
     
    The United States instead must recognize that only by increasing investment in its people, its land, and its infrastructure, as well as promoting free trade, can it achieve economic growth rates fast enough to justify consumption levels previously supported by a wing and a prayer – by debt.

     

    Apr 26 11:37 AM | Link | Comment!
  • Faber: The US will default -- Ron Paul, "There will be rioting in the streets"
    Neither Ron Paul nor Marc Faber are considered "mainstream" and yet each has a rather large following and at least the ear of many in the mainstream media.

    Both have been critical of U.S. and world economic policy for some time and have warned of dire consequences if those policies weren't rectified in relatively short order.

    Both are now ratcheting up their dire predictions. Many in the mainstream -- politicians, media, economists, businessmen and common citizens are becoming uneasy as the dire predictions appear to be playing out or at least becoming more feasible as the financial crisis continues to unfold. Marc Faber states flat out on CNBC that the the major western powers will default, including, specifically the United States:

    www.businessinsider.com/cnbc-anchors-freak-out-after-marc-faber-says-us-will-default-2010-2


    Congressman Ron Paul predicts that the Greek crisis will spread and that it can indeed spread to the United States, and that "there will be rioting in the streets.":

    www.youtube.com/watch?v=xPMI4hSMygM&feature

    No one can say the times we're living in are not interesting.

    Disclosure: No positions
    May 10 12:18 AM | Link | Comment!
  • The highest-ranked stock market timing system - So Simple
    Mark Hulbert, at the WSJ's Market Watch had a pretty interesting article this morning on "The highest-ranked stock market timing system that I monitor".  What was so amazing was how simple it is, and yet so effective, particularly for such a relatively low risk system.  Better yet, all that's required for this timing system is a calendar.

    Trading the calendar Feb. 4, 2010, 12:01 a.m. EST
    http://www.marketwatch.com/story/update-on-highest-ranked-timing-system-2010-02-04

    Bad news, investors: The highest-ranked stock market timing system that I monitor is directing investors to get completely out of stocks at the end of this week's trading.

    Don't despair too much, however. The system is also planning on getting completely back into stocks at the close of next Wednesday, February 10.

    I'm referring to the Seasonality Trading System, which was created by Norman Fosback in the early 1970s. ...
     

    What is this timing system's secret?

    The answer, it turns out, is incredibly simple: Paying attention to what day of the month it is. The system calls for being 100% in stocks at the turns of each calendar month and prior to exchange holidays. It is in cash at all other times.

    Believe it or not, that's it.

    ...

    What makes this timing system's performance so impressive is not that it is 0.6 percentage points ahead of a buy-and-hold strategy on an annualized basis (though even that puts it ahead of most market timing systems I monitor). Instead, it's a huge achievement to be able to even keep pace with the market while being in cash more than half the time.

    ...
     

    For example, for the decade ending this past December, the Seasonality Timing System beat a buy-and-hold by 4.5 percentage points per year on an annualized basis. During the decade of the 1990s, in contrast, the system lagged a buy-and-hold by 4.2 percentage points per year, and during the 1980s it beat the market by "just" 1.5 percentage points.

    To be sure, both of those earlier decades' results are still impressive, given the timing system's low risk. But, notice that, in terms of relative rather than absolute returns, the system appears to have just completed its best decade of the last three.

     





    Disclosure: no relevant positions
    Feb 05 12:27 AM | Link | Comment!
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