nab2807

The Real Cost of Economic Stimulus

Well that's the whole problem of basing a system of unfunded liabilities, it gives the government too much latitude with current spending. The amount of money the government collects from SS tax exceeds the amount that is paid out in SS benefits. The difference is utilised by the government to fund its various projects and it writes a "promise" to future retirees to make good on its commitment to pay their SS benefits.

The enormous current levels of spending are therefore ultimately mortgaging the future of a whole generation and this "promise" which the government is making is looking increasingly shaky. Somewhere down the line, the government will have to either hike up taxes or decrease its promised SS benefits. The current situation is untenable and a whole generation will most likely suffer from a combination of high taxes
and poor benefits as a result.

Also the inward migration of highly skilled foreign workers into the US and other Western countries will not last for much longer. Why would a highly skilled foreign worker come to the US only to be taxed at an exorbitant rate and subsidize the current excesses of the US state.

Ultimately the path engaged by Western governments will see their empire crumble to pieces. Politicians are being short-sighted and not realising the long-term implications of their actions. Stimulus packages ignore the real problem which is excessive indebtedness followed by over-consumption. A contraction is needed so that Western nations start living within their means, it is painful but necessary!

Obama's plan to invest in infrastructure makes sense but it should not be funded out of more borrowing and taxation. Funding cuts need to be made and the elephant in the room here is the cost of the military. Take that out and the budget doesn't look so bad! For years the US government has conned its people into believing that increasing defence spending will make them "safer". All it has done is create outposts and interfere in parts of the world where the US presence is neither needed nor wanted. This has fostered an enormous amount of Anti-American sentiment across the globe, ultimately making Americans unsafe in their own country or wherever they are situated in the world.

Why Capping Pay Is Likely to Work

Well you do not need to set prices for products if they no longer exist, the likes of CDOs and CMOs serve no other purpose than to transfer risk from banks to unknowing investors.

This madness of trying to securitise everything under the sun needs to stop. I am all for a market for futures, options and even certain credit derivatives. However they should all be exchanged based and not reside in the Wild West aka the OTC market.

On Feb 04 05:00 PM Robert Perrego wrote:

> So you do not believe in the the trading function at all? How do
> you propose to set prices then?

Why Capping Pay Is Likely to Work

Sether I completely agree! How do you think i-banks make money out of "trading"? That's just a euphemism for screwing over other market players by taking advantage of informational asymmetry. Ultimately i-banks serve absolutely no economic purpose except to transfer wealth from the pockets of the consumer to that of the i-banker.

The vast majority of financial innovation such as credit and mortgage derivatives came along purely in response to finding new means of screwing people over. Once a product became sufficiently understood by market players, the margins which i-banks could charge on them shrank hence providing the incentive to create ever more complex products. This ensures that only the initiated can understand them so it's perfectly easy to embed within them massive profit margins. The average company utilising these derivatives cannot even begin to fathom the ways that they are being screwed over by i-banks.

Personally I would scrap all structured products and all derivatives should trade on exchanges with tight margins. What's so wrong with that, derivatives should be meant for risk mitigation not risk taking, leave that to the cowboys who want to do it with their own money.

I totally agree that the current incentive packages attract the wrong type of people. The average person on the street has never been on an i-bank trading floor, the animal instinct that drives these individuals is to screw over their fellow man and personally I wouldn't want to hand my money over to such a person. These "brilliant" execs have overseen this mess and have been largely powerless.

The balance of power in i-banks is not with management, it's with the sales people and traders because they are the ones who generate profit for the bank. If the exec asks them to cut down on expenses, they would say F* off because they know who pays whose wages.

If this salary cap drives away these execs, I have two words for them "good riddance"!

Of Wars and Strategic Metals

I recently bought some physical palladium through its ETF at around $300/ounce. I agree with you regarding its relative cheapness with platinum. We are already noting a shift by automakers who are looking to use palladium in place of platinum in catalytic converters as far as possible.

Palladium has a market surplus but I believe this is essentially already priced in and recent evidence has shown a gradual reduction of surplus as demand picks up.

Today we've seen the fall in oil prices bear down on the palladium price. However not factored in is the positive effect lower oil prices are likely to have on auto demand. Medium and long term palladium is definitely a good bet

Spreading Oil and Natural Gas: A Post-Labor Day Plan

Another note of concern to investors considering this trade. This is essentially a seasonality trade but remember that seasonality can be easily be trumped by overriding market sentiment.

The risk at the moment is that in the short term NG prices are likely to fall given the discovery of natural gas shale in the US.

I anticipate the spread to widen before narrowing as automakers and industrials adjust to natural gas use in place of crude.

Spreading Oil and Natural Gas: A Post-Labor Day Plan

$HARK&PAUL -

It shows that you only read the 1st 30-40 words of this piece. The whole point of this trade is that he is not taking a directional bet on NG prices but on the spread between NG and crude. You would actually be making money if crude fell to 55 as long as NG does not fall by as much! This is a relative trade so you don't care about the direction of movements as long as the spread narrows.

My only concern is that in the 1:1 spread introduces an element of directional betting on the movement of the more expensive contract i.e. in this case the downward direction of crude.

The energy equivalent trade is in effect the safer bet.