Common_Denominator

The Dummy's Guide to the U.S. Financial Crisis

Why so many bankers went after the poisonous junk? Because that stuff had "YIELD"! When the next banker down the street is making money by buying MBS, it is difficult for other bankers to hold back, so they all jumped on it. Damn the risk, damn the prudent avenue, go after "YIELD"! Greed won out over rational thinking.

U.S. Records Another Huge Current Account Deficit

The main problem is that all of the junk mortgages were sold by banks to Freddie & Fannie. Those two outfits had orders to encourage home ownership by the poor. When government guarantees are available, Fannie & Freddie then sold those mortgages pooled together in tranches as high rated bonds.

This problem is similar to what happened in the Savings & Loan fiasco a few years back. People put money in S&L's since the government backed it up. That led to crooks operating S&L's using saver's money to be lent to their crooked friends.

Moral of the story is....the government should never give cheap guarantees to banks, S&L's, Wall street Bankers or any one else.

An Optimist Looks at the Market

An Optimist: Is a single guy looking forward to marriage.
A Pessimist: Is the married optimist.

10 Signs of a Recession

Brazil is NOT free of gasoline usage. They have a 50-50 mix of
cars running on bio-fuels and gasoline. They make the ethanol out
of sugar cane which is far more efficient than using corn. But they
have an advantage. Their climate and soil is great for sugar cane
growing. Much of US is not.

In US, to produce 1 gallon of ethanol requires 3/4 gallon of gasoline. Average car in US consumes 600 gallons of fuel/year
and that boils down to 60 gallons of ethanol per car per year.

No wonder gasoline and food prices are going through the roof.

10 Signs of a Recession

But as addendum to my post above, I will grant you that "EASY" oil
has been discovered.

OTOH countries like Iran & Venezuela are falling behind on oil production not because they are running out of oil but because of crazy dictators with harmful policies. Iran is in such bad situation, that they will soon need to import petrol in spite of sitting on one of the largest proven oil reserves in the world.

10 Signs of a Recession

Peak oil is a 100 years away at minimum. There is more oil in oil shale in US & Canada than entire oil reserves of Saudi Arabia. ANWAR has 30 years of oil at million+ barrels/day. Brazil just discovered the largest oil field in the world, although it is under sea.
Many Coastal areas have not even been explored yet much less exploited.

The stupid fact is the enviro wacko's have succeeded in making it illegal to process oil shale, drilling in ANWAR & off-shore drilling. But their time is fast coming to an end. The more pain Americans feel at the pump and the cash register, sooner they will wise up.

What a Time to Be a Value Investor

My strategy is to buy late and sell early.

Risky Waters, But Opportune Waves

Even though 20% decline is significant, what exactly is the catalyst to propel this market higher? Housing, Retail, Energy costs, Deficit gov't budgets, balance of trade, Food inflation, Iraq war, etc are all still looking ominous. Me thinks we have another 10% decline in the cards if not more.

What Recession? Disposable Income Grows

Has the increase in personal disposable income been adjusted
by inflation rate? If yes which inflation rate? Don't tell me it is the
phony CPI barfed at us by our government!

If the nominal increase is adjusted by "REAL" inflation rate, the
numbers begin to look abysmal.

Are US Inflationary Concerns Inflated?

PonchoVilla hit it on the nail....rate of change versus actual change.
When gasoline goes from $1.50 to $2.00, the rate of change is 33.3%. When gas goes from $3 to $4, the rate of change is the
same but the PAIN factor is much greater.

Note, gas has gone up much faster than wages in recent months.
So the pain is certainly felt by wage earners who did not get 33%
raise in the same time period.

Market Rallies Since the Start of the Credit Crisis

In 1990 we had no 1) Iraq war 2) Sub-Prime fiasco 3) Record debts by individuals & the government 4) No competition from Chinese manufacturing.

It is different this time.

Losing All Respect for the System

The only real and present danger to America is high taxes
which feeds the monster known as government and stifles
initiative and risk taking.

Private companies can never do serious damage since they
are faced with competition. The government monster has no
competition. It is monopoly at it's worst.

The Week Ahead: Downside Risk Waning?

In the final analysis, the reason stocks go up is because there is the reality of current and future profits. With food, energy and health care costs escalating much faster than paychecks, consumers are tapped out. And consumers drive this economy.

As for resiliency in the market, not a single bear market has gone
down in a straight line. Some of the most spectacular rallies take
place during a bear market. They are caused by bargain hunters coming in thinking this is the bottom and short sellers forced to cover.