Vox Rationalis

Richard Bove: Financials Are 'Trading on Fumes'

Hard to take Bov-ay anymore. He maintains his long-term buy ratings, but advocates profit-taking? Really? What was he saying about these issues last year when they were falling through these levels for the first time?

Paul Krugman says we have averted a second Great Depression, and why? The different role played by government. "Ronald Reagan was wrong: Sometimes the private sector is the problem, and government is the solution."

On Aug 10 12:25 PM CetinGoScrewYourself wrote:

> I would argue
> they went too far as opposed to arguably doing too little during
> the 30's...

Wait - there's an argument about whether the government did enough or not enough during the 1930s? Really?

> I've got a bad taste in my mouth about how they chose
> which banks would fail, and which ones were "too big to fail".

The perhaps you agree with Krugman: "You can argue (and I would) that the bailouts of financial firms could and should have been handled better, that taxpayers have paid too much and received too little. Yet it’s possible to be dissatisfied, even angry, about the way the financial bailouts have worked while acknowledging that without these bailouts things would have been much worse."

> Krugman's assumption though is that we are passed the worst...
> We have too few data points to come to such a wild conclusion as
> to say that the worst is passed us or that we have dodged a recession.

Point of fact, nobody's claiming we dodged a recession. But more importantly, if you don't think the danger of a far more significant recession/depression is lower today than it was late last year, you really don't understand what was happening then.

Paul Krugman says we have averted a second Great Depression, and why? The different role played by government. "Ronald Reagan was wrong: Sometimes the private sector is the problem, and government is the solution."

"The point is that this time, unlike in the 1930s, the government didn’t take a hands-off attitude while much of the banking system collapsed. And that’s another reason we’re not living through Great Depression II."

How can you fine folks argue that this is not true?

Dollar Has Only One Way to Go (Hint: It's Not Up)

Okay, that didn't work. If the link below works, you'll have to click "log" under the graph. If it doesn't work, look up the CPIAUCNS series.

research.stlouisfed.or...

Dollar Has Only One Way to Go (Hint: It's Not Up)

On Aug 10 06:13 AM T.Geiger wrote:

> Perhaps a more relevant graph, research.stlouisfed.or...

Nope. The monetary base is just one factor in prices, and so is not a good proxy for inflation. And again, showing growth over time on a linear scale is fundamentally dishonest or ignorant. Here's a better graph: CPI since 1913: research.stlouisfed.or...[1][id]=CPIAUCNS&s... [if it doesn't show up on a log scale, click "log" below the graph]

Dollar Has Only One Way to Go (Hint: It's Not Up)

Nothing like a linear scale to misrepresent growth over time.

Prepare for plenty of volatility and a 20-30% drop in global stocks, says Templeton's Mark Mobius. "When you have these rapid increases, almost without correction, you will definitely have a correction at some point."

Since we have never (in most lifetimes) seen a 60% drop in the stock market, isn't it possible that the "correction" is the recovery of 40% of those losses?

Dave's Top 10 Reasons This Recession Will Last Forever

"Second, it shows that McCain was wary of choosing someone who would outshine him."

Hogwash. You think he wasn't "outshined" by Palin? I can only guess at the decision-making process, but whatever it was, Palin's selection was pretty clearly the worst in anybody's memory. If Romney's there to take the point when the financial markets were grinding to a crawl, the Democrats would have been in much more trouble on that issue. Instead, McCain announced he was "suspending" his campaign so he could rush to Washington -- after sitting down with Katie Couric for a live interview during the national news. Meanwhile, Palin was in an unrecoverable flat spin for the entire campaign.

Romney will be a formidable candidate, if only the Republicans can get out of their own way.

Five Reasons the Market Could Crash This Fall

On Aug 04 09:59 AM The Goy wrote:

> I think you left out the fact that the US government is going to
> seriously raise taxes next year, so selling is going to happen this
> year.

This would make sense, except that there is likely a significant amount of capital losses carried forward from last year which will offset realized gains.

Dave's Top 10 Reasons This Recession Will Last Forever

On Aug 08 05:44 PM Teutonic Knight wrote:

> Over his first eight months in office, his priorities seemed to be
> tilted toward fulfilling his personal ideological crusade ialmost
> to the point of being doctrinal --- Stimulus, Guantanamo Bay closing,
> the Infamous Torture Memo leak, Health Care, among others.

Funny, some would characterize this as following through on issues integral to his campaign.

> I think Mitt (Romney) would be more adept in facing
> the financial crooks and the political crocodiles.

There is no doubt that McCain made an enormous mistake in his running mate selection.

Dave's Top 10 Reasons This Recession Will Last Forever

On Aug 07 05:50 PM mna wrote:

> US productivity
> has been stagnant for years thanks to inefficient allocation of resources
> to Unions (both public and private) and other special interest groups.
> The boosts in productivity of the past 20 years merely reflect the
> consumption that's been pushed forward by relentless borrowing.

1. You can't have it both ways. Either productivity's been stagnant or there have been boosts in the past 20 years.

2. Productivity is a measure of production per input unit (in this case labor). Productivity increases have no direct link to demand, but are rather a shift in the supply curve.

> This ...has been going on for decades, and was only
> able to go on for so long because the US dollar is backed by the
> rest of the world. Now that cracks have begun to appear in the dollar
> monetary regime, our days are numbered.

In what way? Sounds like you think the dollar will decline, making imports more expensive for us and our exports cheaper around the world. This would tend to increase demand for American-made goods, both domestically and internationally. The trade deficit would decline, perhaps even becoming a surplus.

What's the problem?

Dave's Top 10 Reasons This Recession Will Last Forever

Okay, so you folks didn't like my "Dave is an idiot" comment. Fine. Top 10 reasons Dave is an idiot?

1. A recession can't last forever. Eventually, the economy grinds to a complete halt. End of recession.

2. "I’m not convinced that there’s going to be another wave of innovation in the offing.” Every generation thinks this. Who was seriously thinking that nanotechnology could yield any benefits just a few decades ago? How did the ascendancy of the Internet come as a relative surprise, when the Internet itself existed for decades before it began to replace the private networks of America Online and Compuserve? It's because seeing the future is hard, and because human beings' ability to build on the works of others is incredible.

3. "the US is not getting the clever immigrants it used to." The clear indication is that Americans can not innovate. Idiocy.

4. "China will hold its own but its economy is too small to act as a locomotive for the rest of the world." No indication whatsoever that this is required.

5. "The US only can finance its nearly $2 trillion annual borrowing requirement if banks and households buy Treasury securities rather than riskier corporate securities or mortgages. If the rest of the economy starts competing with the Treasury for capital, interest rates will rise immediately and suppress economic activity."

a. There's a $2 trillion deficit THIS year. Future deficits don't approach this level.

b. The rest of the economy has ALWAYS competed with the Treasury for capital.

6. "The rest of the world is full up on US Treasury securities." Only if the trade deficit

7. "The US consumer can’t get out of a hole." CAN'T? Impossible, eh? Time is no factor here?

8. "[Retirees] savings requirements are bottomless." Yet another person who thinks that retirees as a group will suddenly become net savers, despite having greatly reduced income.

9. "Bill Clinton, the last Democratic president, thought in effect, 'Let’s get economic growth so I can tax it and pay for all my toys and games.'" Let's not forget that Clinton was the only President in the last 45 years that presided over multiple years of budget surpluses. And let's not forget that government spending increased MUCH more under Reagan and Bush II than under Clinton.

10. The entire last paragraph that ends "Obama is the first American president (with the possible exception of FDR) to actually benefit from economic weakness" is one of the most moronic statements I've read to date on seekingalpha.com. Have you not seen the polling data, indicating that as the recession continues, Obama's approval ratings decline? What is that, a statistical mirage? Obama, who you clearly find to be a consummate politician, is only re-elected if the economy improves significantly between now and 2012.

Dow Target 6,617, October 25, 2009: Here Is Why

On Aug 06 05:28 PM Jason Tillberg wrote:

> AAII listed its results of its investor sentiment survey. 50% Bullish.
> The last time they were 50% or more bullish was in May of 2008 when
> the Dow was 13,000.
> What does that tell you about the euphoria at 9260?

The answer is quite obvious: absolutely nothing.

Dave's Top 10 Reasons This Recession Will Last Forever

You forgot one: Dave is an idiot.

Why Gold Could Hit $1,300 This Year

On Aug 05 05:09 PM IT'$ OVER! wrote:

> In the 70's, the uptrend in Gold had everything to due with the US
> abandoning the gold standard and investors subsequent unease with
> that decision.

Big lesson from the 1970s: let the market determine prices. Removing the last vestiges of the gold standard allowed gold to spring to a market price, just as ending unsustainable wage and price controls contributed significantly to inflation.

> We
> will see higher inflation. The FED will enact similar interest rate
> policies to the 80's to deflate the real value of their debt, gladly
> producing nominal returns in stocks, but subsequently unhinge debt
> holders whose current holdings will devalue.

No. When the Fed increases interest rates, it does so by reducing the money supply. The high inflation of the 1970s was not, in any way, caused by high interest rates.

> Those debt holders will then cash in their dollars for hard assets,
> flooding the market even further. Fueling a run on those hard assets
> (commodities, land, equipment) and also making the USD more dilluted,
> compounging the already existing inflationary pressure.

No. This would be debt (not money) being exchanged for some other asset (not money). The effect on the money supply and prices would be nil.