dlaw

How PHEVs and EVs Will Sabotage America's Drive for Energy Independence

Whether or not the OP has a conflict of interest, he's an informed commenter on the subject.

Leaving that aside and quite apart from fundamental arguments about electric vehicles, the problem with the OP's argument is that he doesn't really don't make it.

To actually make the argument, the OP has to demonstrate that marginal dollars into PHEVs and EVs WOULD OTHERWISE BE INVESTED in boosting sales and production of efficient vehicles.

Given the highly negative reaction to the CARS program in the financial media, I'd say that's a long shot. It's reasonably clear to me that the reasonable, efficient and timely alternative to inefficient, individual, combustion vehicles has to focus on investment in and rethinking of "mass transit" systems from the ground up, emphasizing - but by no means limited to - wire-electrified vehicles.

Make wire-electrified transport in particular and "mass" transit in general more efficient and you get the biggest bang for the buck. It's just the low-hanging fruit for efficient subsidy.

After that, we have to talk mileage regulations. There's no particular reason to subsidize what you can make necessary by regulation.

Why Are Banks Holding So Many Excess Reserves?

Great article, thanks.

What Will Banks Do with Bernanke's Money?

Sorry to comment again here, but Mr. ConceptWizard has hit some nails very squarely.

I put it to readers that although there will be a bump - even a big one, as some pent-up demand busts out - lower mortgage rates will not increase net home home sales much and and I'm not sure they've even meant to. They help banks generate near-term refinancing fee income and reduce out-year interest load on the most-stable borrowers.

The stressed buyers are going to get crushed or the losses on their houses will become an enormous burden for the taxpayer if the "bad bank", banker welfare plan goes through - the GSE for banks.

New home starts tell me the story of developers who have lots on their hands trying to get rid of them and, in the process, loading the housing market with more supply.

Find me bankers who are looking to put securitizable volume of any size through the system - and then re-loan - and I'll believe Bernanke's tale of a housing recovery.

What Will Banks Do with Bernanke's Money?

Matt,

Thanks so much for the comment.

Very concisely and coherently describing Chairman Bernanke's strategy you write:

"[Bernanke] is forcing a bottom in home prices, forcing mortgage-backed securities to reprice upward on the open market, forcing mortgage rates down to 4% for at least a month or two, and unfreezing the market in mortgage backed securities allowing banks to originate more mortgages by cycling cash,"

I can only respond this way:

Well, he *think* that's what he's doing, but it has essentially no hope of success, in my view.

Mark-to-Market: The Bogeyman of the 1930s Is Back

Here's a perfect example of the nonsensical side of the "mark-to-market is to blame" argument:

"Because these accounting rules force banks to write off losses before they even happen, we lose time. This happens because markets are forward looking."

So because markets look to the future value, rather than present cash flows, we lose future value.

Either markets are intrinsically superior for pricing things or they're not. Which is it?

I suggest that proper markets - markets with exchanges and regulation that trade a relatively uniform and well-audited inventory of goods ARE superior for pricing. Fake market that foster self-dealing and information asymmetry are crap.

Shakespeare wrote: "The fault, dear Brutus, lies not in our stars, but in our selves..."

I suggest that the fault lies not in our mark-to-market, but in our market itself.

Time to Buy China, Copper, the Canadian Dollar and Oil

BRIC, hard assets/commodities, coming inflation/upturn.

This has been the trade everyone has been trying to put on since the summer and it really has not worked. Gold has kept you even, but not much better.

Theses die hard.

Buffett Closes Derivatives Contracts, Goes Back to Writing Insurance

Yeah, people know how options work, particularly people who buy and sell stocks. They also know how float works. That's why Berkshire is down today.

The problem is that Buffett isn't making money from the float. He's investing in the wrong things. He hasn't lent money. He has bought equity in companies, making himself a junior creditor at companies, some of which are in danger of going out of business altogether.

On top of that, rather than placing a bet the market isn't aware of and can't bet against - like a *real* insurance policy - he has placed a huge, very public bet. This means that options players - particularly those who took the other side - will skew the public markets against him.

Let's look at the other side of the trade: those players paied $4.9 billion and now, unlike Buffett, have a huge assett on their balance sheet. Since they are probably leveraged institutions, that asset is saving them from having to borrow money. Relieving the burden of debt is the surest and most-profitable use of money there is.

Buffett figured that the knock-down to his balance sheet would cost him nothing, therefore they were mispricing the benefit relative to him. He wouldn't need to borrow under any circumstances. And yet there he is, whining in his letter about how it's so expensive for him to borrow money.

And, Buffett completely blew the volatility calculation.

So my question would be: which calculation did he even get right on that trade?

The End of Money

Mad Hedge, I think this has very much a "toppy" feel.

If you look at the arguments for gold, there is no reason it should be going down. No reason it should go down in the foreseeable future. That is the stuff bubbles are made of - certainty.

Gold is going down. The federal government is doing all it can to inflate, but gold is going down. Down too much, the logic is destroyed and there may be panic selling. People paying $1000/oz for coins and certainty are not going to be happy at $700/oz.


On Feb 28 10:14 PM The Mad Hedge Fund Trader wrote:

> OP tf Panic buying of gold coins continues to overwhelm coins dealers
> around the world. According to the Financial Times, the US Mint sold
> 193,500 American eagles in the first seven weeks of this year, more
> than it sold in all of 2007 at prices 40% lower. Retail investors
> fleeing paper assets, like plummeting stocks and bonds, are paying
> 5% premiums over face values. The same phenomena is appearing in
> other countries were gold coins are available to the public. Does
> this have a toppy feel to it?

The End of Money

Mad Hedge, I think this has very much a "toppy" feel.

If you look at the arguments for gold, there is no reason it should be going down. No reason it should go down in the foreseeable future. That is the stuff bubbles are made of - certainty.

Gold is going down. The federal government is doing all it can to inflate, but gold is going down. Down too much, the logic is destroyed and there may be panic selling. People paying $1000/oz for coins and certainty are not going to be happy at $700/oz.


On Feb 28 10:14 PM The Mad Hedge Fund Trader wrote:

> OP tf Panic buying of gold coins continues to overwhelm coins dealers
> around the world. According to the Financial Times, the US Mint sold
> 193,500 American eagles in the first seven weeks of this year, more
> than it sold in all of 2007 at prices 40% lower. Retail investors
> fleeing paper assets, like plummeting stocks and bonds, are paying
> 5% premiums over face values. The same phenomena is appearing in
> other countries were gold coins are available to the public. Does
> this have a toppy feel to it?

Dr. Doom Responds on Wells Fargo

You forget how mainstream journalism work! The Time magazine people have no fear of an Internet smart-guy suddenly calling them on their mistakes. All they have are "editors".

It think Roublini's reputation is a little overblown and I think his analysis of the causes of the crisis are incomplete, but it's pretty clear to me that what he did was give Time a macro loss estimate and they simply spread it across the big banks evenly, which, of course, is not the way the losses will spread.

But the scary thing is that if we agree with Roubini's macro estimate (and they have been good) and Wells is going to take fewer losses, who will take more than their balance sheets are telling us?

The Benefits of This Recession

Unfortunately, this adds up to yet more undisprovable blaming of everything and everyone but the people who SOLD the real estate bubble - what might be the biggest bubble in human history. This is by no means business as usual.

The "this is just the way things work" mentality is exactly what was used to sell people houses in 2005 and sell investors bogus motgage-backed securities up until the market folded and the marketers began to choke on their own fraud. This didn't happen because Alan Greenspan refused to let things "revert to the mean". This happened because people at trusted, regulated institutions used their position of trust to make trillions of dollars in bogus financial commitments for profit.

When people saved, they were saving in lies - money for nothing. When they spent at least they were getting stuff.

The End of Money

Thanks for the comment - and all the capital letters.

Fed Watch: Will TALF Do the Job?

Awesome. Author calls it.

Folks can pretend that low-grade debt is high-grade for only so long. If that's true of government debt, it's doubly (or triply, or quadruply?) true of MBS.

Rick Santelli: Critic or P.R. Man?

Thank you all for your comments.

I just want to reiterate the point - a point that seems to get lost somehow - that bankers are in the business of judging whether the people they lend to are good risks. That's what the business of banking is. I just cannot understand why anyone would believe the lame story that the bank losses came from borrower "lies".

When you check out a borrower, you can check his employment information on any credit reporting agency. Lenders who didn't do that did not want to know. They wanted to sell MBS. Everything the banks were doing points in one direction: securities fraud. Every result of their actions is totally consistent with securities fraud.

But I guess for some people it's always going to be the government and the little guy who are to blame.

Finally, I want to make clear that obviously I don't think Bernie Madoff has taken enough resopnsibility for what he did.

But at least he admitted it.

Non-Recourse Loans: Positively Counterproductive

This is a really excellent piece. Congratulations on the clear thinking. Let's hope public policy makers are reading.