Isnt_It_Just_Money

Weekly Market Notes: Don't Fight the Fed

The FED has many avenues to continue QE out of the public eye. Through currency swap arrangements with the bank of England as an example, it can have a foreign CB buy US debt and vice versa. No way does QE end now.

Fed Policy at the Breaking Point

The carry trade, reinforcing a weak dollar, should have several benefits however, including reinforcing domestically produced/based goods and discouraging consumption of imported goods. The American consumer must be reigned in, one way or the other, through a weak dollar and lack of access to credit. I would expect therefore that companies with global reach should excel over domestically based small caps.

Does Wall Street Believe in the Rally?

QE by the FED will be ongoing by using currency swaps with foreign CB's and then having them buy each other's gov debt. This accounts for the $ falling, gold rising, while treasury yields remain low. What Americans have to ask themselves is, after decades of consuming more than we produce, can we get away with a free lunch for the first time in history? I think not. The only question the US gov can decide, with this monetary policy it is pursuing, is who the losers will be. Somehow I doubt it will be the rich people.

The Market, Valuation and Future Earnings

This article is another way of saying that the "PEG", P/E divided by average earning's growth over the next 10 years of the S&P, should equal 1.

The Great Recession Continues

WLI has a negative second derivative and a first derivative approaching zero (i.e. WLI looks like it wants to roll over). Does this qualify as a withering shoot (brown shoot)?

ECRI vs. Roubini, Round Two

Hey, just from a, mathematics point of view, when a curve is concave downward, it's second derivative is already negative, and the first derivative is approaching zero. Just by looking at your WLI curve, the second derivative is clearly negative and the first derivative is almost zero.

U.S. Debt May Be Next Economic Crisis

Are you saying the US has to actually produce something of value to someone else to get out of debt? That's such old school no one talks about it. We will get gov parlor tricks instead.


On Jul 06 01:34 AM derryl wrote:

> I was about to ask how a "commitment to fiscal sustainability" could
> possibly be realized in this grotesque deficit environment when Steve
> offered a couple of measures that would begin to trim the spending
> side. But I don't know. I am not convinced that there is any possible
> combination of spending cuts and revenue increases that can restore
> the US budget to a sustainable path starting from where it's at now.
>
>
> Spending cuts mean declining incomes for whoever was receiving the
> spending, which means declining income and other taxes from those
> people, and declining economic participation from those people, which
> further increases economic contraction. Tax increases which, if
> they are to lead to fiscal sustainability, must be used first to
> stop deficits and then to pay down debt, also take money out of the
> pockets of American businesses and consumers which reduces GDP.
> So the government must take an expanding share out of a shrinking
> pie in order to move toward sustainability.
>
> Unless we experience some miracle of productivity I just don't see
> how the conventional weapons of revenue hikes and spending cuts can
> realistically turn this thing around.

Q2 Earnings Will Be Better than Expected

Hmmmmmmmmm, kinda makes you wonder though why all those corporate insiders are selling...

Grim Fed Quarterly Flow of Funds Report

Social, your tax dollars are already going overseas as AIG takes US taxpayer money to pay off international banks that hold AIG written CDS's. Lol

'The Change We Need' Is in Economic Direction

I don't trust any group who has the over arching goal of "getting people to heaven" as the basis for deciding which economic model is best, although their interests may be aligned with secular interests. I also wonder about how an economic model will deal with the rather large group of people who simply can't/won't work productively. Do we let them starve?
The US has bought into the "something for nothing" economic model, which is consuming now what we should've consumed in the future, of the Reagan voodoo economic model. It proved to be too seductive and so we despoiled ourselves with it. We must undo more than a generation of wrong thinking and get back to actually making things other people want. There's no other way.


On Jan 18 09:30 AM Jan Baker wrote:

> Steven Hanson has collected practically every problematic area in
> the crisis and the political responses to it, and every bullet reaps
> comment, so I hope this thread goes on for a while. I'd like to comment
> on this particular bullet:
>
> Steve wrote: America needs the promised change – not a lot more of
> the same. We need a new economic vision. A vision where jobs are
> created and growth is not exported. A vision where credit does not
> fuel misdirected expansion. A vision where markets are stable and
> investable – and your wealth is not destroyed in a single year. A
> vision where inflation is not a consideration in retirement, and
> the government does not bankrupt its citizens to pay for its debt.

>
>
> First of all, there is a conference in April that will have representatives
> from three distinct economic platforms, distributism, socialism,
> and capitalism.Thomas Storck will speak for the distributist position.
> Dr. Charles Clark will be the speaker on democratic socialism. Michael
> Novak will be the main speaker for the democratic capitalist position.
> I do not know what definition of democratic socialism Mr. Clark will
> be using, nor Storck; Novak's positions are well known as the theology
> of present "free market" mess (it is not a free market, thus the
> quotes; a free market would be operating with the wish list outlined
> in this post, and it does not presently exist).
>
> Regardless of what definitions being used for distributism and democratic
> socialism, this conference and any others are needed to begin the
> kind of social discussion that could send us in a healthier direction,
> exactly the kind Steven describes. That this particular one is being
> organized by Catholics should not be an impediment. Because of the
> history of the Church, and because of its mission statement ("To
> get souls to heaven"), Catholic leadership at a world level have
> long discussed--prior to the birth of capitalism, even-- socially
> healthy economies, and have, since capitalism developed to its present
> chaotic death-spin, offered an alternative, simply because the present
> conditions are not condusive to getting people to heaven, but rather
> condusive to suicide, abortion, divorce, theft, and every manner
> of dissolution.
>
> The alternative stresses unqualified defense of private property,
> saying that ownership is sacred, but that the exercise of ownership
> may be influenced by the state for the common good. (That's a really
> important distinction; go an eighth of an inch over, and you've alienated
> private property, and nothing the new administration has said assures
> one that they grasp it. It's the difference between seizing someone's
> assets and increasing the taxation on, say, ownership concentrated
> over a certain level, more than four pizza shops in a chain; more
> than four hardware stores in a chain; in other words, anti-Walmart
> taxation structures which do not seize assets but might promote their
> sell-off.)
>
> A second footprint of distributism not present in some definitions
> of socialism and not present in advanced capitalism such as our own
> is the widest possible distribution of ownership--of whatever--and
> cooperatives are one such form of ownership, a kind of merge between
> the social safety net provided by socialism and the profit-making
> of capitalism. One group active now is the Center for Economic and
> Social Justice, calling interestingly for the cooperative ownership
> by all Americans of future new wealth. You can find their web page
> by googling them. There are other groups as well. There is also,
> of course, private ownership as well, but cooperatives in some modern
> form is such a fresh idea! Think of the possibilities for our impoverished
> population, to have alienable shares in say, the oil deposits not
> presently being developed, or space projects (moderated in some form
> or other; think of land ownership forms the Mexican government uses
> to protect the land distributed among their tribes, for example;
> they can't simply be sold, but they can be used as collateral on
> loans, and can be sold in some forms; I don't know if this model
> is a good one, but they are using a form of moderation, is the point).

>
>
> I've added the space projects thing. No one ever talks about space
> and energy anymore, and yet there it is, full of solar that is microwaveable
> to earth.
>
> In any case, I am delighted that Steven Hansen here has opened this
> discussion. We DO need a "new economic religion." Capitalism in its
> present form is stiffling that discussion. Other forms are out there.

>
>
> Pius XI, in a very interesting economic/theological work called Quadragesimo
> Anno, said, as a caution, that the best economic model for getting
> souls to heaven was probably the one known as "moderate socialism,"
> (I do not know that this term may be used interchangeably with "democratic
> socialism") meaning one with private ownership but a big safety net,
> savings-based economy as opposed to credit-based economy, etc.),
> but that there was one enormous problem: because the state had even
> more power in this form of government than under advanced capitalism,
> it was imperative that there be very firm social structures to guide
> this power through conscience as opposed to by legislation. There
> had to be total respect for the sanctity of the human life. There
> had to be total respect for the economic unit that is before all
> economic platforms, the natural human family. These strictures had
> to be as firm as those protecting private property. That ought to
> give us pause. It might make us consider whether we can find a new
> economic religion and keep the social mores of the present one, which
> might be characterized as a whores code in which the idea of sexual
> discipline makes some people literally froth at the mouth.
>
> Let me offer an example of what can happen when this whores code
> is applied. One of Obama's campaign promises was to begin funding
> again the UNFPA, the UN Family Planning Agency. This is under no
> particular banner except the general "sexual freedom" clause of the
> whores code. The UNFPA provides abortion kits and support personnel
> for coerced abortion and sterilization in China and Albania, for
> two that are easily investigated and are probably only two among
> others. Bush refused to fund it. Obama will keep his promise (and
> forget Tuskeegee, forget how blacks were similarly ill-used). The
> UNFPA also provides the platform for the kind of "voluntary" abortion
> and sterilization where the volunteer trades the signature on the
> consent form for food. (If this does not raise a red-flag for you,
> if you think somewhere deep down, 'listen, they're only indians,
> they're only blacks, they HAVE to stop reproducing, it's the right
> thing to do for Mother Earth,' you better take a look at what kind
> of 'liberal' you've become. Because it's an eighth of an inch over
> from fascism, did you know that?)
>
> Below is the contact form for that conference. I'll be there. (I'll
> be the grey-haired woman who looks cheerful, because getting souls
> to heaven is happy work.) It may be a bust. But we need to create
> a buzz for a new economic religion, Steven Hansen is on the money
> again, with this one.
>
> Here's the contact info, you have to make a reservation:
>
> Garden City, NY, USA. A conference hosted and sponsored by the Nassau
> Community College for Catholic Studies in Long Island, New York,
> is confirmed for April 4th, 2009 at the College Center Building.
>
> Nassau Community College
> Office of Life Long Learning
> One Education Drive
> Garden City, New York, 11530
> 1-516-572-7472.

Watch for Yourself: 60 Minutes Oil Story Was Spot On

A steep contango in the futures strip causes supply to be stored rather than available to the spot market, driving spot prices up.


On Jan 13 07:54 AM Gary Lucido wrote:

> 1) No one has ever been able to explain how speculators can influence
> spot prices without taking delivery. The reason is that they can't.
> It's an absurd assertion.
> 2) References to the volume of futures trades as "evidence" that
> speculation is driving prices is equally stupid. For every buyer
> there is a seller. The volume of sells increased at the same rate
> as the volume of buys.

Is the Long Bond Cracking?

But the puts are $4 in the money, of course they are more expensive than the calls, which are out of the money. Price doesn't tell you anything.


On Jan 04 01:41 PM QVM Group wrote:

> Isnt_It_Just_Money
>
> Your addition of volatility information is helpful, and I encourage
> investors to look at multiple dimensions of options, but I reject
> the notion that volatility is the "correct" data to interpret (and
> by implication that price is the "incorrect" data to interpret).
> There is nothing incorrect about comparing the price of two related
> securities (in this case two essentially inverse options). For our
> purposes, in this instance, price is the preferred indicator of
> what we are seeking to understand.

Is the Long Bond Cracking?

Implied volatility of the Feb ‘09 $120 put on TLT is 36% while that of the call is 33% so it is correct that the market is biased to the down side on TLT. This is the proper way to decide market bias based on option prices not "because the price of Puts is higher than the price of Calls".

Lehman CDS Datapoint of the Day

If what you say is true, a little common sense says that if only $6 bil was paid out by protection sellers, and they had to pay 92% of the value of the bonds, doesn't this impply that Lehman defaulted on only $6.5 bil of bonds? Seems awfully low to me so something is rotten in Denmark.

Which Inflation Is It Anyway?

Sorry, that last sentence should have read:

"Thus the only stuff that is going to deflate in price in America is stuff that only has local(US) demand (i.e. houses, MBS's, CDO's, gardener's wages, you get the idea).