BrunoT

NBER Eggheads Finally Proclaim a Recession

This is all based on phoney ginned up government statistics on inflation so why even bother? Google "hedonics" or "core inflation" and have a good laugh.

Moral Hazard: The Real Culprit of the Financial Crisis

This happened because of a morality problem, period. By that I mean we tolerate dishonesty, we wink at it as we fill out no doc loan applications, we smiled as our home appraiser simply matched whatever we put down as our home's value instead of giving an honest appraisal. We listened to paid liars on TV tell us everything was fine in 2006-2007 up until it wasn't. We chuckled to ourselves at what great deals we got from the contractors who used illegal labor or paid workers cash off the books, then agreed to pay them cash so they could avoid their taxes in return for a lower price. We graduate students who can't read or write or balance a checkbook, knowing we're doing them and our nation a disservice.

Think we're not a nation that tolerates dishonesty? Go flip on the radio and listen to just about any advertisement, be it for weight loss powder or get rich quick schemes. We know this dishonesty and unprincipled behavior goes on constantly in almost every phase of life, but we tolerated it. We tolerated it because we thought if it made or saved us a little extra money it would be ok. And now it's not ok.

Time Not for a Bailout, But for Nationalization

The author shows he is ignorant when he claims we "did nothing" during the great depression. Oh yeah? What are price controls and wage controls? The govn't action prolonged and deepened it.

With "experts" like this no wonder we're in deep kimchee.

If You Think the Dow Did Well Today, You're Wrong

Boy, these US stock investors are like the guy in the Monty Python and the Holy Grail movie. "I'm not dead yet". They keep taking beatings and won't give up. If being that close to complete banking collapse, or the alternative being massive govn't money printing and inflation to temporarily save them, or the spectre of massive credit default swap losses doesn't scare them out of US stocks, nothing will.

It'll take a few more wallops with the sword to finally put them out of their misery.

Funny, I recall the days when you bought a stock based on its projected future income. What a rosy picture we have ahead of us, eh? AIG, GM, FM, etc were all "screaming bargains" at one point also.

The Nuttiness of This Market

I can't understand the crazy market in the short term, but hopefully the long term macro picture that I DO understand will show out in the long run. I think that commodity markets have become yet another new "fad" like dot.com stocks and RE, except that this time it's the big boys and traders playing the game, not neophytes off the street. But you can only fool people so long. When those non-financial people DO figure it out that their currency is losing real value, that the govn't statistics are phoney, and that you can't make money owning stocks that don't make profits, there is great potential for a TSUNAMI of cash to flow into commodities as people search for something tangible in an ocean of fiat currency.

The Herd of Lemmings, Part II

My "gut" had been telling me the same thing. Nothing had changed fundamentally. Inflation still massive with more bailouts coming weekly. Unless you're in the market for a German car, I suppose.

Depression Survival Guide

While you get part of it right, the rest includes some APPALLINGLY BAD advice!

1. Put it ALL in gold/silver? No diversification at all, including foreign utility stocks, commodities, foreign hard currency mm funds, etc? That'll be great when they seize gold in the US. Or do you plan on someone keeping $2M in gold in the basement safe and scraping off a few grains to buy groceries on the black market? (because the store will be prohibited from accepting gold) I own a lot of gold myself, but any all-eggs-in-one-basket strategy is fraught with potential for disaster.

2. Don't mortgage the house? Are you crazy? One of the best money making methods during hyperinflation is to take out a FIXED RATE mortgage on your home so you can pay it back with debased dollars later. Imagine owning your home free and clear for the price of a week's pay 5 years later. Rising rates only matter if you use adjustable rate debt. Does it occur to you that someone with limited means but who is a home owner might do better to get a modest mortgage on a paid-for home and use the funds to buy gold so they'll have real income during the depression, and not just a place to sleep at night? That loan would then be paid back with debased dollars easily.

3. This advice is not only immoral (willfully not repaying a legal debt) but unwise. For the reason above your mortgage can only get cheaper in real terms if it's at a fixed rate during a period of high inflation. Better advice would be to try to re-fi into a fixed by selling off other assets to get enough equity to do so. Did you also not consider that as prices rise due to inflation, wages will also rise(though not as fast), and that inflation will cause even home prices to rise to a point where even an ARM can be managed, since most ARMS cap out eventually. So what if you are paying 12% in 3 years on your ARM if inflation has gone up 300% and your wages have doubled? Even if home prices lag, your $250K home will be worth $500K and your $270K mortgage balance will be nearly half what it was before in relative terms.

4. Wrong yet again. The best hedge against rising gas prices is OWNING IT! You'll save a few thousand a year driving your scooter (if you survive) if gas hits $5/gallon. But you'll make many many times that much if you own an oil producing asset like a royalty trust when gas prices rise that much.



I'm not qualified to write advice columns here. But neither are you, yet. You understand a few basics of the situation, but you're not in the league of the experts yet. The trouble with this sort of advice is that it can be wrong and destroy lives, rather than help them. So please be very careful about this topic, futures depend on it being correct.

Inflation vs. Interest Rates

The author lacks an understanding of inflation, mistaking its consequences for its cause. Inflation and price increases are not the same thing.

Inflation is merely too much money chasing too few goods. Oil prices go up because there is more money chasing the same amount of oil.

Supply/demand balance can cause price increases, but that is not inflation. In that case, money spent on oil would not be spent somewhere else, so prices for other items would fall. But when the supply of MONEY is increased, people can bid up the price of oil and still maintain demand for other items. That is inflation. All the other causes and effects in the column derive from the simple process of creating too much money.

"the dollar falling" is caused by our government creating too much money, via lower interest rates creating more credit or by simply printing it.

The home bubble of the past was created by the government/fed creating too much credit by lowering rates below what the market would otherwise have set them at, and failing to maintain reasonable lending standards. If suddenly a bunch of broke people with low incomes are told they can borrow $300K for a home, that will cause the price of homes to be bid up higher than otherwise. That abberation is currently unwinding itself.

But PLEASE. Rising commodity and oil prices do not CAUSE inflation, they are the RESULT of it. Until we get this straight there is no chance of solving it.

Mid-Year Report: Is a Summer Turn-around Still Possible?

It's Admiral Yamamoto, not Yakamoto. And the story of him saying that is apochryphal.

www.japan-101.com/hist...

Mid-Year Report: Is a Summer Turn-around Still Possible?

More "predictions" pulled out that are either right or wrong, yet these guys never stop trying to make short term predictions. I note how they never crow about being wrong. It's a sad profession, relying on claims of being great prognosticators to get people to use your services.

Anyway, I can tell he doesn't compltely understand gold and oil. He says gold has fallen 50% vs oil. Maybe true. But doesn't he understand that the world runs on oil, not gold, and that that fact means that while investors may want gold, the vast majority of the earth with nothing to invest wants oil NOW, and given a choice of buying gold or oil, has to buy oil now, so it will rise faster, and gold will only catch up later.

And all asset classes can be seen in short term snapshots and given a distorted meaning. Last summer he could have been crowing about US stocks with the Dow being over 14,000. That doesn't mean they'll stay there. Just as it doesn't mean the ratio of oil-gold will remain the same. Which one today has more upside potential? The one that ran up dramatically or the one that stubbornly rose much slower?

Don’t Worry About a Return to ‘70s Stagflation

I can't believe some people have the gall to write columns as if they're experts when they lack a grasp of some pretty basic stuff.

Just one example:

The reason we use less energy per unit of GDP is that we don't MAKE as much STUFF as before! We IMPORT IT! So it doesn't show up as us using oil but instead in the cost of things we import, because the costs of the people manufacturing it overseas are going up!

And the whole premise of the column...."don't worry, we sell insurance, mow lawns, and give haircuts to each other" is scarily missing the point.