drposhmoney

9 Comments

    • Will the World's Central Banks Successfully Fight Inflation? [view article]
      The figure quoted for US oil consumption is for 2005 (20 mbpd), while the figure for China is for 2007 (7 mbpd) [factbook.com]. We know that China grew approx. 14% last year, and is currently assumed to grow at 10% for the next few years. Now, even if Chinese oil consumption rises equal to growth (it's usually higher), China's oil consumption will double within 6 years to 14 mbpd (1.1 ^ (6+1) * 7). There is not enough 'cheap' oil (light sweet crude) left in the world to supply this demand! Consequently, there is going to be an inflationary catastrophe in the manufacturing capitol of the world (China), which will induce an inflationary catastrophe in the developed world, and cause starvation in the 3rd world. The G7 central banks are simply going to lose control, and there will be a new world order, because nobody is going to be able to stop China growing at 10%, running inflation at 10-15% and buying as much oil as it wants. God knows how high the oil price is going to go! Jun 13 07:17 PM
    • OxAn Doubts BoE Claim That Subprime Losses Are Overstated [view article]
      Well, UK banks have already taken a 60 Billion hit from US subprime woes, and the fallout from UK house price falls have barely started. The UK buy-to-let bubble has been pricked by idiotic new UK laws making it a criminal offence to take a deposit and up to a $40,000 dollar fine for having more than 2 lodgers with different surnames in a house which is not registered for an annual $2,000 fee (I'm not kidding, these are new laws of the loonatic socialist government of Gordon Brown). If UK house prices fall say 20%, as our business cycle is approx. 18 months behind the US, then there is going to be a total meltdown in the UK banking system. Oh, and you need to add in all the 2 million expats in France and Spain, who have already seen up to a 30% fall in property values and are going bankrupt hand-over-fist. No wonder the BoE is trying to talk the market up, they are fully aware of the dire consequences should things get much worse. Our only hope is that the US pulls out of it's slowdown faster than currently anticipated, but in my opinion we're headed for decades of slow redistribution of wealth from West to East as the full impact of globalisation takes effect. With abysmal productivity in the UK and plummeting standards in the Higher Education system (I know because I used to work in it), the long-term outlook for the UK economy is frankly diabolical, unless there is radical political change soon to stem the rot. May 17 09:31 AM
    • Why You Should Short Companies Doing Share Buybacks [view article]
      Inflation devalues cash, so over a say 5 year timeframe, with inflation at say 3% and a marginal tax rate of 20%, your dilutive example is actually *not* dilutive at all! :-). Moreover, after 5 years, the EPS will have risen 1.038^5 = 20%, whereas if the buyback had not taken place, the cash would have devalued 1.03^5 = 16% and detracted from the 20% gain in EPS. It is nevertheless surprising that buybacks have a such a minor effect on EPS over a 5 year timeframe and perhaps explains why announced buybacks sometimes never happen. In fact, it would seem that they are more of a political statement, perhaps announced when management have no confidence in growth but are in need of something hopeful to say to investors. May 09 10:26 PM
    • Fannie Mae Conference Call Stresses the Good and the Bad [view article]
      In really *simple* terms (ignoring the new ideas and rhetoric), at the top end of their (new) range of defaults (0.17%), that's about a 15B loss on their 44B in total equity, then with a 6B dilution, that gives a book value of about $25. Given that the housing inventory tide is still going out and therefore the risk of .17% defaults may ultimately be exceeded, my guess is that we will ultimately see downside south of $25, maybe as low as $15. May 06 08:31 PM
    • 3 Reasons Why The Euro May Fall Further [view article]
      The Euro will keep rising while the Eurozone has a small current account surplus, because the Chinese will keep buying Euros until German manufacturing stalls and the Eurozone has a trade deficit in equal proportion to the US and UK. How else can China stop itself from imploding, or at least putting off the day it will eventually happen. The Yuan needs to rise to a realistic level, which is not in the interests of the super-rich in the West, although when the general populus of the West figures out what's been going on, they might have to go and hide there! Apr 28 10:10 PM
    • Bandwagon Effects in the Stock Market [view article]
      Ermmm, could it be that there are usually 1 or 2, good or bad, major items of news per day? Given that the flow of good or bad news, or good or bad reaction, is essentially random from day-to-day, I don't see how this really helps anyone to make money? For example, are we going to have an ^, v, /, \, - kind of day? All of which end in the top or bottom 10%! Looking for day-to-day patterns in any *broad* based index is pretty pointless because it's based on a random flow of news InMyHumbleOpinion. Try doing an FFT (Fast Fourier Transform) on the last 2048 days of trading on the SPX, and you won't find *any* frequencies/cycles that have *any* significance (proof enough that it's random, and that 'technical analysis' on indices is simply voodoo). The only thing you can say about indices is that they tend to have alpha-stable distributions, but if you can't calculate the parameters, that doesn't really help either. Individual companies or sectors are the only things you can trade where you've got more than half a chance of predicting the direction IMHO :-). Apr 19 08:25 PM
    • Time To Short the British Pound? [view article]
      Sterling started it's decline against the Euro when Northern Rock imploded, due to subprime in the US. This started an irrational trend that may well end up with the Pound at parity with the Euro, partially driven by the fact that the Chinese stopped lending the UK consumer money (take a look at the Yuan/GBP exchange rate) to buy artificially cheap Chinese goods. This will be excellent for the UK economy as a whole, so long as the Pound remains strong against the dollar, which I expect. There is no oversupply of property here, as per the US and Spain, and many other places, so we'll be selling lots of cheap stuff to our European friends while the Chinese keep buying Euros instead of Pounds :-). Thank you China, very helpful policy you have towards us now! :-). And if you think St. George is going to lower interest rates again, or use more taxpayers money to bail out UK banks who've been stuffed by their American friends, you've got another think coming! UK LIBOR will stay 100 bp above the base rate until UK banks are strong enough to take maximum opportunity when the upturn eventually comes. Us Brits are not as dumb as you think! :-). Apr 14 06:42 PM
    • British Ounce, U.S Dollar Toppled by Tumbling Home Prices [view article]
      The author talks about Sterling's decline because oil exports have declined a bit. However, hasn't the price more than doubled recently? And, in actual fact isn't Sterling's almost 20% decline against the Euro a kind of win-win situation, given that Sterling's secular uptrend against the dollar remains intact? We pay relatively little more for commodoties than the Eurozone, but can now sell value added products to them at an almost 20% discount? Also, it's not the British housing market that's facing a huge oversupply, you need to go to Spain for that. Probably true that a lot of Brits have mortgages on Spanish property, but when the dust settles the Pound will bounce back pretty swiftly I imagine, more is the pity! :-) Apr 13 11:58 AM
    • Why Gold is Likely to Keep Moving Higher [view article]
      Over the long term, if gold performed better than global inflation then fiat currencies would cease to function. Therefore, governments will collectively ensure that gold always underperforms global inflation (in the long run). Enough said! Apr 09 08:45 PM
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