Old Wizard

Charlie Gasparino: Another Crash 'Has to Happen Again'

The analysis by Gasparino is correct as far as it goes in identifying root causes, but doesn't go far enough. I also don't believe that regulations couldn't be adopted that would check the out of control " risk taking" which I would better label gambling and misrepresentation bordering on fraud. Today the banks are borrowing money from the taxpayers [ re; gov] at close to zero and then from the subset of taxpayers, those who are saving money in banks, at 1% and then lending it at 5% or greater. To make matters worse the Gov [ re: taxpayers] under the guise of getting credit flowing again buy 300b of securities from banks much of which banks had loaned to the Gov[re: taxpayers] at between 2and 3% to ensure a safe haven. In all this machination the handlers of all these transactions are profiting[ this includes the government officials as well as the "bank" officials, those in fannie may and freddie mac, past and present, and all the agents of the gov who handle the bond transactions for the Gov of which Goldman Sachs is a big player]. Then the treasury says the people should save more and wall street says that the economic recovery will occur when the consumer spends more. Anybody see any inconsistencies here. The one salient constant here is that the hardworking individual who pays one's bills saves a portion of one's income and generally keeps a positive cash flow is the loser. Now meaningful reform can occur with some simple laws1] No mortgage or loan can be sold in any form more than once 2] Commodity traders must pay at least 50 cents on the dollar on purchases. 3] hedge fund managers must pay at the individual tax rate for income tax 4] No mortgage shall be granted by any lending institution with a down payment of less than 10%. 5] Lines of credit for small businesses will not be greater than 10% of gross sales or for start ups be administered by a special officer of the bank and a pool established by the banks with .1 of 1% of their profits. 6] Credit card limits for any holder will be no more than 10% of an individual's annual income and interest rates will be no higher than 10% annually.7] Rating agencies can not be part of any other company. While these may not do it all , they would go a long way toward decreasing the gambling, exploitation and fraud we've experienced and maybe just maybe get capital to make long term investments borne of the conviction that new products and services will bring adequate returns. All the parties who are now profiting don't have enough skin in the game and until the system allows them to play[gamble] with other people's money with little skin in the game, it ain't goona get any better.

How Bloomberg Fabricates U.S. Housing Numbers

I thought that the amount of mortgage money out was about 11trillion. If the derivatives created a 30 to 1 leverage and 10% defaulted, we would have a 30 X 1.1 trillion or 33 trillion problem. What the actual default rate is now is somewhat difficult to ascertain, but let's say it's half that amount which results in 16.5 trillion. While this is not nearly what the author computes, it is still a formidable amount. While much deleveraging has already transpired by bank and financial institution failures and other losses, I believe we are bearly past the half way mark. It is not clear that the existing gov. policy will not result in much of the remaining burden being borne by the asset holdings of those in the country who retain net positive assets, whose personal cash flows are positive, and have savings. For starters, we should put a moratorium on new home and building starts, Impose financial rules which restrict any financial instrument to be based on one actual asset[ a motgage can only be sold once, eg], Make commodity buyers pay at least 50 cents on the dollar and restrict individual short sales to no more than .0001% of asset value or market cap. We need the will to fix the problem and there will be pain, but I for one think our way of life is worth saving.

George Soros: The Guru Outlook

The brilliance of liberals is an interesting topic. Forget what sample test might be used statistically. How do we measure it in the first place?. There used to be IQ tests that were reasonably reproducable, but were dropped because they were judged to not really measure true intelligence. During the campaign we were continually informed by all kinds of media outlets and political pundits of the high IQ of President Obama and Hiliary Clinton. I did find[since hiliary is old enough] that Hiliary's IQ measured to be135, certainly high. Since we never have seen Mr. Obama's school records and any other measures for comparison, I can only judge by his accomplishments. So far he has gone back or retracted many of his promises and his economic stimulus is not investing in the kinds of things that America will produce for a long time. Investments in battery's and electric cars are destined to be too late and largely directed to China and other asian countries. For those of you who believe that George Bush was not very bright, what would you think of John Kerry whose marks were lower than Bush's or Al Gore who was thrown out of at least one college before he got his degree. I guess if one asserts that liberals are smarter than everyone else, he need not present any evidence, just keep asserting it again and again until the Times makes it the subject of an above the fold front page article and then the liberals can quote the Times as the indisputable source. By the way, I am old enough to have had my IQ measured and it was higher than Hiliary's.

George Soros: The Guru Outlook

Soros is also smart enough to figure out how to pay only 15% marginal income tax rate on his earnings of well over a billion. Because he is such a contributor to the current political party in power, nobody in gov. is asking him to spread the wealth. Think of this: if he had to pay income taxes here at a marginal 35% rate, the difference would be 200m or more a year. I would like to understand the amount of money he spends annually funding liberal front organizations and liberal democratic candidates. My cut to reform the tremendous speculation and manipulation associated with oil and other commodities is to require at least 50 cents on the dollar for commodity purchases. Anyone with a large amount of capital can manipulate the commodity market by buying large amounts with relatively little cash on any rumor, real or made-up. Maybe he is a guru, but I am suspicious that he now can make his predictions come true and has learned how to play our system by controlling major media outlets, funding candidates,and front pressure groups. All this while using a loophole in our tax law to pay much less income tax. A run up in oil prices in the future is not hard to predict, when the administration refuses to back the use of natural gas-driven transportation, has no comprehensive energy policy, creates a forced march to electric cars and restricts oil and gas domestic gas and oil exploration, under the guise of global warming and environmental purity. The goals for alternate energy generation are trivial and the real impediments to these energy source insertions are environmental regulations and stalls that the gov. is doing nothing to remove. The story is much the same for nuclear power plants. How much Soros money is funding the groups who are impeding new energy sources from coming to fruition? In this environment, it's not hard to "predict" that oil and coal commodities will get more expensive. A tidbit in this vein is the Petrobras story, where Soros made a bundle, followed by our ex-im bank's 2.5 b investment which will help that state-owned company drill for oil off Brazil's coast. This somehow is ok environmentally and obviously was predictable by a guru.

A Crude 10 Year Perspective: The DJIA, Oil and Gold

Freya, I believe the reason the fed was and is buying treasuries is because banks were buying them rather than lending the money to home buyers and businesses. You need to research this yourself. A reference can be found by googling"federal reserves buying treasuries and then clicking on "economic essays Why the Federal Reserve Is Buying Treasuries" The buy was 300b! On the China Control, I was using another SA article as the source and you are probably right that China doesn't control 95% of the supply. I think that article may have used the rare earth supply as important to the battery manufacture of high powered electric cars, but since I can't find the article I'll concede the error. That said I still believe that China will dominate the market and the long term effect will be to keep us dependent on not necessarily friendly countries for our transportation energy and keep our country's current account significantly negative.

A Crude 10 Year Perspective: The DJIA, Oil and Gold

Freya, Is it your position that the larger banking world which now includes integrated financial institutions are not buying any treasuries? I said controlled by, not existing reserves ,for a reason. China and Chile are producers, while Bolivia has reserves but its ability to produce large amounts is still in development. Since China has made resource agreements with some of the other countries which are producing , have have large reserves of their own and relatively no environmental restrictions they are in a strong position. Further, they are a big lithium battery supplier now and are entering the electric car market. Compare that with the US's position. Our mine are shut, we have relatively small reserves, have adopted electric plug-in vehicles as a cog of our future transportation, energy and environmental strategy and will have to import much of the lithium to support the national policy we have adopted. Meanwhile we are borrowing large amounts of money from China, while we try to juice up a domestic battery industry. The 2.5b set of grants announced to facilitate this, was sent to a host of companies, but if one looks at where more than 50% of the money really goes one finds that it went to S. Korean, Chinese and Japanese companies.
The spread between savings account interest and treasuries interest, home mortgages interest to qualified buyers and the more risky loans represents a bonanza for the banks.This bonanza winds up being paid for in part by those folks who put their money in savings accounts and CDs, if th real inflation rate plus the decreasing value of the dollar is more than the 1% the savings accounts are yielding. BTW I don't think my comment stated that lithium was a rare earth element.

A Crude 10 Year Perspective: The DJIA, Oil and Gold

Fitz, The value of the dollar is an interesting issue. No one in the current administration wants a strong dollar. Let's look at what is the real policy. Our monetary policy is to keep the fed rate at 0, ostensibly to spur economic development, lower interest rates and create jobs. We also are insisting that stimulus is necessary and are borrowing record amounts from anyone who will lend it to us. At the same time, the treasury secretary and others are urging the public to save more. Let's look at the real policy. Banks are giving their depositors around 1% for their savings, while buying treasuries at 3.5 to 4 % and lending it to qualified home buyers at 5 to 6% and to others at higher rates. Meanwhile the Gov. piublishes reports that the underlying inflation rate is near zero or even negative. Of course this figure excludes food and energy, both of which everyone must use to live. When we look at the cost of living, which includes food,energy, increased local sales taxes and hidden taxes like tolls, etc., the real inflation rate to those who save money is 3% or more. The net result is that the savers are paying for getting the banks well and in large part for the Government's spending spree. Meanwhile, our government invests much of this borrowed money in lithium battery technology in the far east, in petrobras[through thr ex-im bank] for oil-drilling off the brazillian coast while limiting investment for new oil drilling off our coasts and keeping our lithium mines closed for environmental reasons. Given that 95% of the supply of lithium for electric car batteries is currently controlled by China our forced march to electric cars is destined to trade dependency on the mid-east to dependency on China for our transportation energy. Allowing our dollar to decrease in value further hurts the savers because their purchasing power decreases and of course allows debts incurred now to be paid back with cheaper dollars. No wonder the smart financial opportuistic people are so quick to take highly leveraged risks, especially with other people's money. For the income redistribution crowd our policy is also consistant, take real money from the savers and give it to those who either can't or won't.save. A real problem-solving energy solution which is in the economic and strategic interests of our citizens is not and, I have come to believe, never was the intent of this administration.

The U.S. Dollar and Oil: Is an Endgame Near?

Freya, I didn't see the video and just assumed the quote was essentially correct. No matter, I think the country's energy policy is stupid, muddled and because it is concentrating on the things which are too far in the future without taking care of the next 5 and 10 years, dangerous. The only reason the dollar doesn't really drop like a rock in my mind is that we have the most powerful armed forces and therefore will keep foreign investment relatively secure. Borrowing monet from potential adversaries while making investments in their economies makes absolutely no sense to me and issues like which president was the first to decrease our imported oil and why is an issue that deflects attention from the main questions: HOW WILL THE USA USA DRIVE ITS OPERATING CASH FLOW TO ZERO OR POSITIVE AND DOES OUR ENERGY POLICY SUPPORT THIS GOAL IN FIVE AND TEN YEARS?

The U.S. Dollar and Oil: Is an Endgame Near?

Hi Fitz, I agree with T Boone, we are stupid. Our energy policy was muddled before and with this group it's not only muddled, it's even more dangerous. Look at the contradictions, we are borrowing vast amounts of money from the very people who would move away from our currency, while they use our dollars to lock up basic commodity sources around the world. Instead of investing in the generation of our own new sources, we invest large amounts in things like new batteries, electric cars which depend on lithium supply most of which will come from China and south america. On top of that, more than half of our battery investments are going overseas to places like china, korea and japan who 1] currently lead in lithium battery technology and manufacture and 2] generally have much less labor cost and environmental regulation. We talk eloquently about going to alternate energy, like wind and solar but set up trivial goals with no sense of urgency, while the chinese, indians and europeans move in these directions on a large scale and we do nothing to remove the kind of destructive environmental and legal constraints that restrict a more significant progress. We watch places like france and even sweden move to increase nuclear power while we drag our feet and then we are agnostic about natural gas to drive our vehicles, a resource we have now and China doesn't. On top of not drilling for oil here on the grounds of environmental purity the ex-im bank makes a 2.5b investment in Petrobras in Brazil to drill for oil, the very country that is part of this discussion to replace the dollar as the oil currency. Not having a comprehensive energy policy is bad enough, but borrowing money from your potential adversaries to invest in activities that make them stronger, while you do things that have negligible effect on your own economy and rely increasingly on war fighting power to stay afloat is really dangerous. Falling apart economically will lead to our demise quicker than losses on the battlefield.

How Much Natural Gas Remains in the USA?

Freya, I wouldn't want to disappoint you. This article sounds like still another sky is falling. I have ben followin the price of UNG for a while, since I considered it for an investment. Recent history shows a glut of natural gas with storage capacity almost exhausted. There was even a Seeking Alpha article that cautioned people to not invest. Since then at least one new source has been discovered off Norway. I can't vouch for specific numbers, but believe that the 100 year number is more likely.

Battery Investing for Beginners, Part 2

John, The subsequent comments stenghten my assertion, I think, that China and Asia will lead in the lithium battrery race. The subsequent comments raise the environmental and raw material issues to a more formidable level than what I asserted and indirectly bring in the cost of labor as well. This is part of the reason I believe that our Government is ignoring the reality of their push to phev's, and that their investment strategy is muddled at best. It would be just another Government blunder if the deficit spending was not so great, but at worst it can be disasterous for the future well-being of our country.

Battery Investing for Beginners, Part 2

John, Thanks for the comprehensive article. I have profited from your articles in that I have a much greater appreciation of the whole energy storage evolution. I will disagree with your conclusion that the Chinese battery companies will not play a big part in our world. It is a fact that both GM and Ford are either negotiating with or have chosen asian battery makers over those in the US. Isn't it a familiar story that we invent, often start production domestically and when the product takes hold, the production goes off-shore, usually to asia or other low cost labor places where environmental and other regulations are not so stringent. As a case in point, First Solar's large production expansion has been in Malasia and off-shore. It's latest large contract is in China and the statement from the company spokesman was that such a project would not be possible in the USA because of the difficulty in tranmission and linkage to the grid.

Why Is Congress Agnostic About Natural Gas?

Adding to the above, I believe statements like it would take 9 years to build the Alaskan natural gas pipeline is subject to discussion. There are estimates that it coiuld be done in as little as three years, if it were to be made a national priority. This statement reminds me of the 8 year statement that it would take to get oil from new off-shore rigs. People located on off-shore rigs wrote on seeking alpha that it could be done in 2 to 3 years. It took between 1 and 2 years to build the empire state building and we are 8 years out from 9/11 and we haven't built the new tower. The limiting factor is not the project time, but more the political priority,perceived need and the public's knowledge of the consequences of delay that drive the required time. The Cape Wind project has been 5 years in the cycle and 50m spent and has made very questionable progress due to political/environmental opposition. It would replace about 80% of the output of a polluting oil-fired generation plant. This in spite of a significant majority approval from Cape Cod voters. I can sight other such stumbling blocks for wind and solar projects,
I am indenting so that you realize I am changing the discussion. You are aware that the port of long beach, which is a transfer point for about 60%+ of our shipments to and fro the far east has legislated that trucks coming to the port will be natural gas-driven due to the air pollution at the port. You also must be aware that IRAN is converting their automobiles and vehicles to natural gas because stategically they have to rely on overseas refineries. AT&T has announced a 600m investment for converting their trucks to natural gas. I also believe that getting natural gas from the oil sands in the US and Canada will continue for the foreeable future and the recent drop in natural gas prices has been due to a glut of this commodity here. The price approached the lowest in memory and only started to rise as producers cut back drastically. On the other side of the issue of clean coal generated diesel the time to convert or translate half of our vehicles to this fuel is not estimated by anyone and the country is not putting its investment into this fuel but rather into phevs, batteries etc. Hawaii just announced a 100m program to create electrical charging stations. In conjunction with this annoucement, a joint venture of Nissan/ Renault committed to provide automobiles consistent with these facilities. This leads me to the final point I have harped on: our investment as a country, should not be driven only by a desire to be the ideal environmentalists, but to insure that we don't perish economically by making investments in strategies that benefit other countries more than our own. When the administration talks about clean coal, can you garner from their actions or investment strategy, what timetable they are on for reducing our dependency on oil and that they see a future in hydrogen fuel. While we cancelled the fuel cell work at GM this year as impractical, Toyota launched an ad campaign that brags about its work in this area.I see no felt urency on the part of our Gov. to solve our underlying economic problem and no focus on the near term that matches that urgency except the scare tactic that global warming will bring imminent doom to the world and we the USA are the bad guys. I believe that if we don't solve our fundamental economic problems we as a country might be able to use the famous self-pitying words of Richard Nixon,'' you won't have the USA to kick around any more".

Why Is Congress Agnostic About Natural Gas?

Freya and one-eye, I thought I did answer your points with my last posts, so let me try again. First, I am not against using multiple sources of fuel for transportation. Second I am aware of the Brazilian approach and much of the claims and progress using deisel fuel, not as much on ramifications of the conversion from clean coal and indicated so in my last post. Third, I stated that if this process can as reduce our foreign oil dependency and reverse our negative operating cash flow as quickly as concentrating on the natural gas strategy, I'm all for it. Fourth, I said I believed that the clean coal strategy would face more environtmental hurdles and therefore[ not said] more regulatory obstacles. My view is that a single energy source will not yield a comprehensive energy policy. I also have indicated that the one the country is following neglects the 5 and 10 year horizon and concentrates on 15 and 20 years, a time horizon which I believe we can't wait for

Why Is Congress Agnostic About Natural Gas?

Look one eye, I don't have any axe to grind. You may very well be right about clean coal. Your own post, hoever,cites the lead other countries have in this area. While the administration talks about clean coal, I am not aware of a focused program with stretch goals and near in milestones, that its stimulus program or budget has fostered. As you have read on Seeking alpha, there are many forces in the US that think clean coal is self contradictory. I don't want to engage in this debate, because I think it deflects us from addressing the country's real problems; we are not producing enough goods and services to be economically solvent and our dependency on foreign energy is doing us in. I want to see a comprehensive energy plan with the implementation and funding details that are consistent with a sense of urgency. It should be required to produce significant impact on jobs,our economic viability and our domestic fulfilling of energy production. I am aware of our reserves of coal and don't see us abandoning it to create electricity in any scenario. I also believe that we have to address our use of oil for transportation and electric cars don't get us there soon enough nor will they help the balance of trade given where the germans,japanese and chinese are in this progression. I believe natural gas driven transportation can reduce our oil importation by 4 to 5 million barrels of oil per day in 5 years and up to 10mb in 10 years. We have manufactured buses and trucks domestically, we have 2.5 million miles of pipeline, an abundant domestic supply of natural gas to jump start this activity and the technology to convert existing vehicles. If deisel converted from coal can impact the economics, domestic production and energy dependency, quicker and as significantly then I'm for it. I think I don't have enough facts at the moment to quantify the comparison of the two approaches. I think, however, the measures of performance should be the effect on the current account, the production of american jobs for equivalent investment in 5 and 10 years.