bearfund

436 Comments

    • ON: Sat Oct 11th 23:16 PM
      Commented on:
      Are Treasuries Losing Their Safe-Haven Luster?
      Actually, a sharp sell-off in Treasuries is a prerequisite to any recovery. The veil has been parted and the game is up; no investor is going to sink money into assets that yield less than inflation. That's what this whole "collapse" is about: the Fed dithered and dithered and refused to set interest rates at realistic levels, so eventually the market got tired of waiting and did their job for them. Corporate borrowers now have to pay reasonable prices for their money. If they don't want to pay, they can stop borrowing. We've now seen crashes in corporate bonds, CP, equities, commodities, and exotics. What we haven't seen a crash in is Treasuries. The bear leaves no stone unturned and will not leave until his destructive appetites are sated. Only when Treasuries crater will we finally be done with this part of the supercycle and ready to begin building a base for recovery. Higher interest rates will draw money out of hiding.
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    • ON: Sat Oct 11th 21:51 PM
      Commented on:
      G-7: Nothing New
      vrspace, where are you getting your numbers? The dollar has lost nearly all its value, true, but $50b in the 1930s isn't $12T. Yet. Using the 1/20.67 oz pre-1933 price against 1/850 oz today, we find that $50b then would buy you about the same quantity of goods and services as about $2T would now.

      I doubt it will take us long to get there, though.
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    • ON: Sat Oct 11th 19:25 PM
      Commented on:
      Gold Prices Keep Getting Fishier
      The dollar is a claim on the future output of the united states. At present that output is shrinking at an accelerating speed with no end in sight, and the number of dollars in existence is exploding higher as the central bank pushes on strings in a desperate attempt to stimulate ever greater indebtedness. The dollar may "soar" on various irrational trades made during this panic, but it'll come back to earth like a lead balloon upon more sober reflection. It would be a stretch to say the fundamentals are as bad as those of the ISK, but it's not even in the same league as gold.
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    • ON: Sat Oct 11th 18:45 PM
      Commented on:
      Blame Game Redux: 8 More Things to Blame for This Crisis
      "Safe" assets aren't safe, they just offer lower returns. ANY asset can go to zero. It is even possible to imagine scenarios in which gold, far and away the safest of all asset classes, is worthless. Holding short-term high grade paper will definitely lower volatility, but for most of the past decade - and still today - it pretty much guaranteed that your real return would be negative.

      The market is doing something that needed to be done a long time ago: raising interest rates in a big way. IBM just paid 7.4% to issue 10-year notes. AAA-rated GE is paying 10% on preferreds. These interest rates are starting to look almost reasonable, but there's much farther left to go. One of the worst balance sheets on the market is still paying 4.2% on 30-year paper. That must end before a recovery will be possible.

      If the government shows restraint with the printing presses (not likely) and top corporate issuers start having to pay 15% to hang short-term paper, it'll be time to consider bonds again. Until then you are not being compensated for the various risks - credit risk is actually one of the less worrying ones - and should stay in gold or, if you must be in paper, CHF and JPY. If you want some upside potential (gold never has any; its value is unchanging), short the back half of the Treasury curve. We're almost there, folks. There's only one paper asset left for the bear to ravage, one massive 10 trillion dollar bubble left to burst. Let's get that over with and then on to a slow recovery.
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    • ON: Sat Oct 11th 16:11 PM
      Commented on:
      Is Gold A Sucker's Bet?
      Just keep doing the opposite of whatever CLH does and you should be fine. He is correct that, unlike oil, gold is almost entirely useless. However, he fails to capture the one thing gold is good for: as a store of value, nothing else comes close. In particular, oil is not a store of value because its entire purpose is to be consumed. To even involve the US dollar in the conversation would be a joke.
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    • ON: Sat Oct 11th 14:41 PM
      Commented on:
      G-7: Nothing New
      This is the best possible outcome from the summit. The best government action is always no action. Anything else they do will only further accelerate the destructive firestorm of hyperinflation.
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    • ON: Fri Oct 10th 09:26 AM
      Commented on:
      Who We Should Blame for This Crisis
      Write in Ron Paul. Anything else is a vote for more of the same.
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    • ON: Fri Oct 10th 09:23 AM
      Commented on:
      Who We Should Blame for This Crisis
      pockyclips, you are denying the basic humanity of the borrowers. They are adults and have the legal and moral ability to make their own decisions. If they are inadequately proficient in finance, they can decide not to engage in financial transactions, and/or to engage advisors prior to doing so. There is no excuse for borrowing money you cannot possibly repay, just as there is no excuse for lending money to someone will be unable to repay it. To liken these human beings to inanimate vegetation is abominable. Yes, they're very, very stupid and, as a result, rather on the poor side. But still 100% human, and still 100% free people subject to the law just like everyone else.
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    • ON: Fri Oct 10th 00:27 AM
      Commented on:
      Where Are We in the Stock Market Cycle?
      Smarty_Pants, why would we rather not contemplate it? We're not holding dollars, are we? Surely not... everyone with a clue is storing his wealth in gold by now.
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    • ON: Thu Oct 9th 10:55 AM
      Commented on:
      Nouriel Roubini Predicts (Surprise!) a Long Recession
      Lawr, derivatives ARE risk spreaders. The problem isn't the derivatives themselves, it's the fact that they are being traded with so much leverage. The risk inherent in an underlying instrument is never the real problem; the largest bank in the world could have 99% of its assets in ultra-high-yield junk bonds and pose no risk whatsoever (except perhaps to its own shareholders) - as long as its capital structure consisted of 100% equity. It's always leverage that bites. And writing CDSs against a capital base only a tiny fraction of the worst-case liability was, and is, simply irresponsible. If a bank had to have $500,000 in shareholders' equity to write a $1m CDS, there would be no problem at all.

      Too many people have written about "the subprime problem" and "the Alt-A problem" and "the derivatives problem" and on and on... none of these asset classes is a problem at all. Actual losses in a typical batch of mixed subprime mortgages might be 5% - a painful loss, to be sure, but hardly the stuff of doom and gloom. This is and has always been a leverage problem, which has only started becoming clear to pundits in the past few weeks. The solution in the derivatives space, as everywhere else, is to increase margin requirements, preferably to at least 50% as it is for stocks. This same requirement should apply to all assets at all trading and lending institutions without regard for perceived risk. Because the true worst-case risk on ANY asset is a loss of 100%. That is true whether the asset is a Treasury bill, a mortgage, a junk bond, or a piece of fine art. The so-called risk-based capital requirements strategy only evaluates the probability of loss and the expected severity of loss; that is, it increases the time between extreme systemic risk events but does not eliminate them. Only a risk-management strategy that accounts properly for the fact that all assets can experience 100% losses and, in the fullness of time, will, can prevent these problems from occurring. Leverage must be restrained, and that means shrinking the money supply. Risk-taking with one's own money need not be restrained at all, and must be encouraged if sustainable growth is to occur.

      Higher margin requirements. Sound money - preferably circulating gold and silver. Equity financing, not debt. These strategies worked for centuries, and every attempt to abandon them has ended in tears. Perhaps this is just another instance of every generation needing to learn the same lesson again.
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    • ON: Thu Oct 9th 09:45 AM
      Commented on:
      Nouriel Roubini Predicts (Surprise!) a Long Recession
      The speed on the way down has been staggering. The speed on the way back up will be imperceptible. It will not be hard to miss half the recovery without even noticing that it happened, because that recovery might cover a 20-year span. Worse, extremely high inflation will make measuring the true performance of all developed-market economies very difficult (as, indeed, it has been for some time). I do not expect that it will be obvious that a recovery is underway for the better part of a decade - at least for those who measure prices and output in real terms.
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    • ON: Thu Oct 9th 09:40 AM
      Commented on:
      Deflation Changes the Rules
      That the dollar is rising against everything but the yen (and gold, of course) should give you the answer to your question. The dollar has a lower yield than every other currency except the yen (and gold, of course). What you are seeing is carry trades unwinding as traders deleverage and avoid risk. When yields get this low, fundamentals are dominated by the carry trade on weekly and even monthly charts. The same has been true of the yen for years now.
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    • ON: Thu Oct 9th 09:01 AM
      Commented on:
      Inflation Could Cure Our Economic Ills
      paultaut, I'll take bankruptcy, please. It would chasten those in power and teach the Chinese lenders an important lesson that would resonate for centuries. America would never again borrow on favourable terms, the "pax dollarium" would end, and a new, much more balanced, global power structure would emerge. The US would have to produce more and consume less, make hard choices about the type and quantity of government activity it wants and can afford, and regain the hungry, austere values that made it powerful 130 years ago. Nothing but good would come of it.

      Inflation just makes everyone poorer. Worst possible outcome.
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    • ON: Thu Oct 9th 08:52 AM
      Commented on:
      Ban on Short Sale Ends - Hold Your Breath
      All the ban on shorting has done is make it impossible for anyone to make money on downward legs, and therefore reduced the supply of capital and buying pressure. The reason stocks fall in price during bear markets isn't a flood of short selling, it's a dearth of buyers. That's why you saw so many of these issues plunge in the last weeks: no one wants to take the risk of buying. Regardless of whether shorting is prohibited, no stock will rise that does not have an excess of willing buyers. Ever. The rule was stupid and I would hope that after watching some of the worst days in history enter the books under its auspices the powers that be will take the hint and not repeat their folly.
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    • ON: Wed Oct 8th 23:52 PM
      Commented on:
      How Bad Is the Fed's Balance Sheet?
      constructe, actually given that "everyone knows" the Fed will eventually reverse their actions (I disagree), it would be a lot better for them to just do that now. Right now I, and I know many of you, have piles of gold bullion sitting in vaults and safes. Because the prevailing interest rates on currency are negative, and the government in its wisdom has decided that gold and silver will no longer circulate, that wealth is going to stay right where it is, helping no one and contributing nothing to growth. However, had the Fed raised interest rates this morning to 15% instead of cutting them to 1.5%, I would have been happy to buy some dollars and start lending at interest rates ranging from 17 to 30%. That captive wealth could be put to work. The Fed underestimates the extent to which lowering interest rates actually hinders growth in exactly this manner. It should be prohibited by law from lending money at an interest rate below the 24-month moving average of CPI increases - calculated in the original way (i.e., right now it would be about 9%).
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