B smith

Soros Opens Position in Plains Exploration

Kind of fits with the possible obama opening up of selected US areas for drilling...

Housing in Las Vegas: 'C'mon Black!'

Some recent articles have suggested that resets will be minimally impacted due to recent dramatic drops in the index rates, which could help people with arms. Many may see decreases in rates rather than increases, unless they have a floor.

The 10yr Treasuries spiked up from 3.0 to 3.2 thursday and friday, because the fed did not signal a new buy. This says mortgage rates are due to rise, so If you are looking to buy locking in a sub 5%fixed rate, prior to possible substantial rate increases and inflation could be a good investment. I expect currency inflation with minimal asset values increasing, but paying back a loan with inflated money still makes is a good investment compared to many others, and cash could become a liability if currency inflates substantially. The whipsaw will reward those with some hard assets that float with the currency revaluation. Land, minerals, probably Oil.

Faber and Schiff: Inflation Inevitable (So Here's What to Do)

Are we then looking at the difference between currency inflation and asset inflation? Seems like inflation in the past raised the currency value of everything and leverage was your friend, paying back later with cheaper dollars. So now currency inflates, and then the challenge is to pick sectors or assets that will have liquidity and rise with it or exceed it? Will the inflation hedges of the past not work, if its just currency inflation?

Should we start differentiating and label our discussions as currency inflation which leaves out most asset inflation?

I have a small TBT position and some agg, lots of energy exposure, and way too much illiquid land. I have noticed that some big players are buying land now at 75% discounts from the peak. Its hard to that the US economy can improve much if mortgage rates and the cost of business borrowing rises substantially.
Seems like that will put the big financials back into more trouble, cause home values to stagnate or drop some more, and push business costs up. Seems like a rather flat economy for the next 10 years then while dealing with currency inflation and asset values flat or lagging the inflation of the currency. Will we be flat or declining while the country decides if we are going to re-establish incentives to take risk in creating or expanding companies that make things and create jobs, rather than exporting our environmental, litigation, tax and other impairments to growth, and continue to import products from countries that do not have such a level of impairment within their borders.

The mixed Obama message. So Obama seems to get it that GM, meaning any industrial company in the US cannot survive and grow with its current level of impairment including union wages and benefits in excess of its competition, and at the same time is for Card Check? Is the market rally based in part about his first 60 days being very Socialist, and now showing an understanding of the mathematics of manufacturing? He seems to be very talented at poker.

I can see that ag and energy, ore and copper will be re-priced at whatever the currency value is, I am unclear about other fixed assets such as land and equities that are not energy or resource based. Seems like higher long term rates will suck the life out of business growth due to operating costs and competition for capital, unless they have pricing power and can follow the currency inflation. As business grapples with the inflation can companies that provide efficiencies such as some tech be winners?

Real estate. Seems like if you can buy now with a fixed rate loan might be a good buy. But selling it later with high rates seems to be a problem unless it is median or lower price rental housing with a positive cash flow. Even then the new purchaser would have to pay the higher mortgage rates coming, so you are illiquid unless you can sell on contract. Will wages rise with inflation? so that purchasing power stays constant?

It seems like this inflation scenario is the single largest thing to plan for.

Will cash assets flip from desirable to a liability?
What about large cap stocks with big cash assets.
Will leverage become the friend again?
Cash flow, pricing power, and an asset class ability to stay equal with the price of our currency seem to be the things to look for. Resource stocks priced in Canadian or Australian dollar?

So if a company issues bonds or preferred’s now and currency inflation hits, they have purchased the money at cheaper rates and so their cash is valued lower and they can pay it back or use it and benefit.

Recent announcements of some large companies raising cash. Are they doing it for acquisitions or just to lock in rates now before they go up.

If TBT is good how about High yield corp bonds.

The Toxic Assets Plan - Yes, It's a Subsidy

So what effect on Bank stocks monday?

Quant Easing: Central Banks Unleash the 'Nuclear' Option

Excellent article. I wish there were other choices other than QE. I see that the Fed is attempting to repair, and the White house is using the "opportunity" to expand non stimulous spending, which counters the Fed's moves. This could create stalemate.. and then many of the negative scenarios which are mentioned. Not too many places to hide, investment wise or countries to live in.. that will allow many individuals to prosper.. I guess it depends on how much investment money you have in cash to invest into liquid inflation hedges..

I sense improvements.. and then I am reminded by Congressional actions.. just how little many of our elected officials know about capitalism and what is necessary to foster job creation. Should we teach capitalism and how jobs area created in a free market system work in school? If the children only learn environmentalism, who will they vote for?

Obama is such a great orator.. I think he could sell anything..
Is he steering us toward the European model.. It seems the public thinks that approach is more "fair" and is less "corporate", and there is not much media coverage that they are doing much worse than we are now.. so we are going to move toward their model? rather than return to removing many of the shackles we have placed upon US manufacturing?

The fed attempts to deal with what is now, and the Congress continues on without studying the consequences of their actions..

What does everyone think, about a return to a discussion of what it will take to stimulate job creation, rather than reaction to monthly news.

Would it be wise for the United States to reverse regulation, cap litigation awards, incentivize manufacturing again? Can we go forward with 70% of the GDP being consumer spending?
Should we debate the wisdom or consequences of the rapid increase in the cost of doing business in the US and the simultaneous opening of imports of manufactured goods?
What did we think would happen...
Is there a plan.. ? are there goals..?
I don't think confidence can return until there is a long term plan that the public is educated in.. that will actually work, and there are measurable goals in place, and we review our progress against.
Until we review how each new piece of legislation measures up against the goals and is passed only if it improves our chances of reaching the goal.

Thoughts?

General Electric: 'Buy America' Clause Severely Limits Downside Potential

How about some discussion of positive ideas to improve our economy.

We have allowed litigation, regulations, work rules, unions, taxes and a host of similar things to become greater and greater burden on the cost to produce things in the United States. At the same time we opened trade agreements, which lowered or ended import duties on the same items, with countries that had little or no regulation, cost of litigation, few or no work rules or unions, taxes, environmental considerations and on and on.

The result is you make it difficult to do business in the United States , while opening the door to business in other countries that make it easy to do business. The result, closed businesses, lost jobs, declining economy. For a short time we enjoyed the lower prices for goods and services from overseas. The trend however accelerated, and people felt that it would keep going, and that eventually we would not have enough economic energy to continue to grow and create enough wealth to have a robust economy. Add doubling energy, and gasoline prices for two years in a row and the camels back breaks.

We can try to re-invigorate housing or re-inflate other industries.. and subsidize energy alternatives, which is helpful, but in my opinion only takes care of 20% of the reasons we reached the tipping point and headed downhill.

The basic faith in the economic system of the United States will not be re-established until we 1). Discuss the reasons for the imbalance of non-free trade, and determine what we are going to do about it. 2). Discuss the cost of energy, and the market factors around supply and pricing and what we can do to create a pricing and supply situation that will provide moderate and stable energy costs, until we can get alternatives working in sufficient amounts to move away from fossil fuels.

My suggestion is that we:

a). Create a US sovereign fund to invest at low interest rates in expanding existing manufacturing or stimulating lost industries to come back to the US.

b). Examine managed economies around the world for good ideas, and unbalanced conditions and balance the playing field as a condition for free trade imports.

c). We should eliminate litigation against manufacturers or cap awards. Create a federal panel of judges to hear complaints and a set package of awards for legitimate claims. Create a 10 year package of environmental rules that will not change, and create a federal environmental board that makes citing decisions that are not subject to legal appeal or lawsuits. Put excellent knowledgeable people on these non partisan boards like we do with the federal reserve. They should be appointed and remain and not be political like current cabinet related posts. Rotate members in and out over time.

d). In order for companies to qualify for being part of this plan, they would have to agree to conditions such as executive compensation limits, green environmental standards, workers bill or rights and agree to provide stock to employees as part of their pay.

We need to do some radical changes to set America back on its feet and be self dependent.

Comments?

DryShips: The Time to Buy Is Now

Barrons reported that Samsun Logix, which DRYS renegotiated a ship purchase with, has filed for re-organization or bankruptcy due to many of their sub leased ships being returned, due to inability of the contracts to be enforced for high contract rates from the previous year.

I sold and then repurchase, so I am still long, but this is most likely the reason for todays drop.

Have not seen any comments from DRYS on the situation.

DryShips: The Time to Buy Is Now

Any comments about the impact of the Samsun Logix reorganization (bankruptcy) filing, and the impact on the ship sale, or other companies Drys has leased ships to or sold ships to?

Stimulus Watch: How the Devil Are They Going to Finance All of It?

So given that as individuals, we can be against the spending, but it looks like it is going to pass. So how should we best invest to go with the flow of the difficulties in funding the new debt? Commodities, iron ore, oil and nat gas, land? Will hard assets be revalued with the inflated dollar or some new currency, and thus remain a constant? If we experience high inflation, with high unemployment, is it dollar inflation, or materials inflation. Seems like cash then is an enemy, and we should borrow, invest in hard assets and pay back the debt with inflated dollars later?

Key Variables to Watch for in Friday's Jobs Report

Its time for a dramatic 10 year plan, throwing out what has not worked and creating a balanced plan that deals with:

1). Energy. Tax oil imports (not domestic oil) $1.00 per barrel when the price rises above $75.00 for every dollar above $75.00. Half of the revenue should go to the treasury to reduce the deficit and half to alternative energy subsidy or research.

Sell new drilling rights, and raise the per barrel share to the government on existing contracts when they renew. Create a counter force to opec with the oil consuming and importing countries OCIC. We have shown OPEC that the importing nations can or will shut down oil imports by raising interest rates and cutting demand.

We need to be energy independent within the next 10 years and get our self determination back.

2) Manufacturing.

a). Create a US sovereign fund to invest at low interest rates in expanding existing manufacturing or stimulating lost industries to come back to the US.

b). Examine managed economies around the world for good ideas, and unbalanced conditions and balance the playing field as a condition for free trade imports.

c). We should eliminate litigation against manufacturers or cap awards. Create a federal panel of judges to hear complaints and a set package of awards for legitimate claims. Create a 10 year package of environmental rules that will not change, and create a federal environmental board that makes citing decisions that are not subject to legal appeal or lawsuits. Put excellent knowledgeable people on these non partisan boards like we do with the federal reserve. They should be appointed and remain and not be political like current cabinet related posts. Rotate members in and out over time.

d). In order for companies to qualify for being part of this plan, they would have to agree to conditions such as executive compensation limits, green environmental standards, workers bill or rights and agree to provide stock to employees as part of their pay.

We need to do some radical changes to set America back on its feet and be self dependent.

These things will not be very agreeable to the left or the right.. which might mean they are good for the people.

Residential Real Estate: How Much More Pain?

Thorougbred: Please state what law, maybe its CA, but I am not aware of any U.S. law requiring municipalities to provide affordable housing.

Nationalizing Oil: Well-Intentioned, But Wrong

How about if we "nationalize" our national lands. We already own the land that leases are bid out on. A problem we have now in the U.S. is that if we drill more, it increases the world output, and if China increases imports, what have you done? Not much.

To get control back of our national resources, we might open new fields: Nat gas, oil shale, coal gasification, and require all US leases of federal land have pricing of raw product sold in the U.S. at a price determined by the department of Energy.

We then import the rest at world prices or buy contracts for futures or purchase leases from other countries and the average is the price we pay. The goal is to increase U.S. production until we are energy sufficient.

Under some kind of system like this, which is not as tied to world production or world usage, we would have more control of our future.

By the way I am a free market capitalist all the way. However I think some new ideas are needed with reference to being under the thumb of "world trade" with no restrictions to "world" pricing.

China seems to purchase mines and companies to supply their future material and commodity needs. We need to wake up and take better care of our own economic interests.

Another idea is to negotiate with China and India to set Oil import caps for those countries, under a new nafta chapter. Otherwise we can cutback usage here, and they use even more, and world prices
continue to rise. Supply will most likely not rise for some time, because it is not in the economic interests of the producers to increase production or exploration, when they can get price increases for not doing so.

And.. or we should place a tax per barrel on oil, with the goal of creating a floor under gas and oil prices, to stimulate private investment in alternative energy. Proceeds would go into research , tax credits to offset environmental energy cost requirements, and credits to low income and some moderate income rebates to cover some of the burden of higher fuel and food costs.

We also need a "national equation" that factors in things like unemployment level, oil cost, food costs, interest rates, tax rates, environmental regulation costs, etc. so we could all see what happens so each part of the equation when we change another part.
This would help lessen some of the political one issue discussions, as the impact of any policy change would show the relevant change in the other factors. An example would be if you substantially raise the environmental cost through tougher air standards, given all else equal what happens to the other factors. We could then discuss in a rational intelligent manner the expected results of making changes happen. Change is going to happen... but Do we feel lucky? Should we just change because we feel things can get no worse? Things can get a lot better.. or things can get a lot worse. Lets be careful what we change.

Of course welcoming all comments.