Crocodilian's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/225115/comments http://seekingalpha.com/article/173492-apple-to-open-50-more-stores-let-s-be-careful-steve?source=feed#comment-764278 764278
Because they're _way_ better at selling Apple products than, say, Best Buy.

I was skeptical of the Apple Store idea when they rolled it out. Let's just say that they've proven that they were right.

And it makes sense to do deals on commercial real estate today, when Apple can drive a terrific bargain. Not many other companies with $20+ billion in the bank and sterling reputations are looking for retail space at the moment, are they?]]> Tue, 17 Nov 2009 16:00:24 -0500
Because they're _way_ better at selling Apple products than, say, Best Buy.

I was skeptical of the Apple Store idea when they rolled it out. Let's just say that they've proven that they were right.

And it makes sense to do deals on commercial real estate today, when Apple can drive a terrific bargain. Not many other companies with $20+ billion in the bank and sterling reputations are looking for retail space at the moment, are they?]]> http://seekingalpha.com/article/173769-christmas-comes-early-key-retailer-cds-equity-relationships?source=feed#comment-764271 764271 " I agree, sales taxes are tanking. I wouldn't believe the government spending numbers at all. It doesn't add up. This author is either banking on more lying stats or he is quite naive. "
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No, sales taxes are not "tanking". They're reported monthly, and there's no "fudge" possible-- they're real dollars being paid by real merchants against their sales tax liabilities, and they're up, year over year.

This data is reported state by state-- let's look at California:

Current sales tax data from State of California Department of Finance

2008 January through October: $6.3 Billion
2009 January through October: $6.4 Billion

So, far from "tanking" California sales taxes are up, year over year. If you look at them month by month, there's a dramatic improvement with 2009 . . . the early months were terrible, and October was pretty good, despite the expiry of the auto sales incentives.

Given that California is one of the worst-hit states economically, that should give you some confidence. You can examine the data yourself at the California Department of Finance website:
www.dof.ca.gov/HTML/FI...]]> Tue, 17 Nov 2009 15:55:10 -0500 " I agree, sales taxes are tanking. I wouldn't believe the government spending numbers at all. It doesn't add up. This author is either banking on more lying stats or he is quite naive. "
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No, sales taxes are not "tanking". They're reported monthly, and there's no "fudge" possible-- they're real dollars being paid by real merchants against their sales tax liabilities, and they're up, year over year.

This data is reported state by state-- let's look at California:

Current sales tax data from State of California Department of Finance

2008 January through October: $6.3 Billion
2009 January through October: $6.4 Billion

So, far from "tanking" California sales taxes are up, year over year. If you look at them month by month, there's a dramatic improvement with 2009 . . . the early months were terrible, and October was pretty good, despite the expiry of the auto sales incentives.

Given that California is one of the worst-hit states economically, that should give you some confidence. You can examine the data yourself at the California Department of Finance website:
www.dof.ca.gov/HTML/FI...]]> http://seekingalpha.com/article/173523-gold-the-lousy-investment-that-outperforms?source=feed#comment-762644 762644
One basic observation about gold: when it has recently _been_ a good investment-- then it usually won't be for some time again.]]> Mon, 16 Nov 2009 16:05:40 -0500
One basic observation about gold: when it has recently _been_ a good investment-- then it usually won't be for some time again.]]> http://seekingalpha.com/article/173462-saving-the-global-economy-try-a-dollar-peg-to-the-renminbi?source=feed#comment-761584 761584 ----------------------...

It is hard to see what leverage the US has to do this. We are a major debtor, facing very large continuing financing needs; this is not a position of strength.

"And we need fiscal and regulatory changes to encourage savings and investment in the United States."

The savings rate in the US has increased dramatically in the last 18 months. It has gone from negative, to positive %5-7. That's a dramatic change.

"The United States should instead establish a fixed parity for the dollar with the currencies of its largest trading partners, starting with China."

China sets the dollar renminbi rate, not us. They're sitting on about $2 Trillion in US$. We're sitting on essentially zero Renminbi reserves (the Renminbi can't be held outside of China). Exactly _how_ can we execute a Renminbi peg when we have no Renminbi to sell?]]> Mon, 16 Nov 2009 04:36:47 -0500 ----------------------...

It is hard to see what leverage the US has to do this. We are a major debtor, facing very large continuing financing needs; this is not a position of strength.

"And we need fiscal and regulatory changes to encourage savings and investment in the United States."

The savings rate in the US has increased dramatically in the last 18 months. It has gone from negative, to positive %5-7. That's a dramatic change.

"The United States should instead establish a fixed parity for the dollar with the currencies of its largest trading partners, starting with China."

China sets the dollar renminbi rate, not us. They're sitting on about $2 Trillion in US$. We're sitting on essentially zero Renminbi reserves (the Renminbi can't be held outside of China). Exactly _how_ can we execute a Renminbi peg when we have no Renminbi to sell?]]> http://seekingalpha.com/article/173298-confidence-and-trade-spin-vs-reality?source=feed#comment-760596 760596 "We're still no closer to determining a lag time though. When the quarter ends how long does a business have to submit its sales tax revenues? From what you described they make monthly prepayments but what is the deadline for the final payment of the quarter?"
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Not sure where your confusion lies. For California, the October numbers, reported in early November, are for sales in October. So the "lag" from cash register to reporting would be 35 days or so for a sale on the first of the month, to five days or so for a sale that occurred on the last day of the month.

Speaking from experience, State finance departments are highly insistent on prompt and full payment of sales tax receipts, because its an area of abuse.]]> Sat, 14 Nov 2009 20:26:51 -0500 "We're still no closer to determining a lag time though. When the quarter ends how long does a business have to submit its sales tax revenues? From what you described they make monthly prepayments but what is the deadline for the final payment of the quarter?"
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Not sure where your confusion lies. For California, the October numbers, reported in early November, are for sales in October. So the "lag" from cash register to reporting would be 35 days or so for a sale on the first of the month, to five days or so for a sale that occurred on the last day of the month.

Speaking from experience, State finance departments are highly insistent on prompt and full payment of sales tax receipts, because its an area of abuse.]]> http://seekingalpha.com/article/173298-confidence-and-trade-spin-vs-reality?source=feed#comment-759558 759558 "So, in the context of my question, how long does it take before sales tax at a cash register gets recognised as sales tax revenue by a (state) government."
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Again, its the State departments of finance that are doing the collecting and reporting-- all you're seeing at the Census is an aggregation, but the collecting methods and timeliness aren't the same.

Looking at California, if you followed the link that I provided to California Department of Finance
www.dof.ca.gov/HTML/FI...

you'd see that they're reporting monthly. The way California does it, you file a quarterly sales tax payment, but you do monthly "prepayments" (with some kind of penalty if your prepayments are too far below what you actually owe).

So the California data is monthly, and fresh: they've just reported October 2009. Looking back, I can't see that there were big revisions of quarterly over monthly data in the past.

But that's just California-- you'd have to look at other states and how they collect their data to see what they do.]]> Fri, 13 Nov 2009 20:17:55 -0500 "So, in the context of my question, how long does it take before sales tax at a cash register gets recognised as sales tax revenue by a (state) government."
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Again, its the State departments of finance that are doing the collecting and reporting-- all you're seeing at the Census is an aggregation, but the collecting methods and timeliness aren't the same.

Looking at California, if you followed the link that I provided to California Department of Finance
www.dof.ca.gov/HTML/FI...

you'd see that they're reporting monthly. The way California does it, you file a quarterly sales tax payment, but you do monthly "prepayments" (with some kind of penalty if your prepayments are too far below what you actually owe).

So the California data is monthly, and fresh: they've just reported October 2009. Looking back, I can't see that there were big revisions of quarterly over monthly data in the past.

But that's just California-- you'd have to look at other states and how they collect their data to see what they do.]]> http://seekingalpha.com/article/173298-confidence-and-trade-spin-vs-reality?source=feed#comment-759458 759458 " Thanks very much for the data and for the link. I was looking for it. You provided some useful information. What a shame that Karl could not cite an actual number or cite a URL link in his article. How useful is it if you are unable to cite numbers or provide sources. Don't talk about it if you don't have the numbers."
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Thanks, I'm a big believer in looking at the numbers. Here's a bit more from California, which has good reporting of cumulative sales tax receipts

2007 -- January to October
$6.7 Billion

2008 -- January to October
$6.3 Billion

2009 -- January to October (eg, latest data for this year)
$6.4 Billion

So, basically, 2008 was a disaster, and we've stabilized and started to increase, in sales taxes, anyway. If you look at the 2009 data by month, as the year goes on, the sales tax numbers improve.

I _am_ troubled by the personal income numbers, which still look lousy. Personal income tax was $11.3 billion YTD in 2007, its running $9.5 Billion YTD in 2009. That's a BIG drop. That said, the capital gains tax picture has to be brightening somewhat-- and you won't see that for another quarter or two (eg someone who bought Bank of America in March is sitting on giant gains-- but they don't show up as tax receipts until after he sells and pays estimated tax)]]> Fri, 13 Nov 2009 18:17:50 -0500 " Thanks very much for the data and for the link. I was looking for it. You provided some useful information. What a shame that Karl could not cite an actual number or cite a URL link in his article. How useful is it if you are unable to cite numbers or provide sources. Don't talk about it if you don't have the numbers."
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Thanks, I'm a big believer in looking at the numbers. Here's a bit more from California, which has good reporting of cumulative sales tax receipts

2007 -- January to October
$6.7 Billion

2008 -- January to October
$6.3 Billion

2009 -- January to October (eg, latest data for this year)
$6.4 Billion

So, basically, 2008 was a disaster, and we've stabilized and started to increase, in sales taxes, anyway. If you look at the 2009 data by month, as the year goes on, the sales tax numbers improve.

I _am_ troubled by the personal income numbers, which still look lousy. Personal income tax was $11.3 billion YTD in 2007, its running $9.5 Billion YTD in 2009. That's a BIG drop. That said, the capital gains tax picture has to be brightening somewhat-- and you won't see that for another quarter or two (eg someone who bought Bank of America in March is sitting on giant gains-- but they don't show up as tax receipts until after he sells and pays estimated tax)]]> http://seekingalpha.com/article/173298-confidence-and-trade-spin-vs-reality?source=feed#comment-759413 759413 What *is* the actual delay between tax collection by business and tax receipt and recognition by government (and by the census bureau). eg. do businesses report weekly, monthly quarterly?
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Sales taxes are collected by States, not by the Federals-- there is no "the government" here, there are many different governments. The Census Bureau, for example, has nothing to do with sales tax receipts.

Let's take a look at what the State of California is reporting about their sales tax receipts:

Their comment about October 2009 was
"Sales and use tax receipts were $53 million below the month’s forecast of $2.22 billion. September represents the second prepayment for third quarter taxable sales.

This is actually a _huge_ improvement from six months ago

The numbers from March 2009:
"Sales and use tax receipts were $334 million below the month's forecast of $2.688 billion."

and better than a year ago

October 2008
"Sales and use tax receipts were $212 million below the month’s forecast of $2.249 billion."

In other words, sales tax receipts are recovering to trend in California -- which is one of the hardest hit states, obviously.

All data from California Department of Finance, available here:
www.dof.ca.gov/HTML/FI...]]> Fri, 13 Nov 2009 17:43:24 -0500 What *is* the actual delay between tax collection by business and tax receipt and recognition by government (and by the census bureau). eg. do businesses report weekly, monthly quarterly?
----------------------...

Sales taxes are collected by States, not by the Federals-- there is no "the government" here, there are many different governments. The Census Bureau, for example, has nothing to do with sales tax receipts.

Let's take a look at what the State of California is reporting about their sales tax receipts:

Their comment about October 2009 was
"Sales and use tax receipts were $53 million below the month’s forecast of $2.22 billion. September represents the second prepayment for third quarter taxable sales.

This is actually a _huge_ improvement from six months ago

The numbers from March 2009:
"Sales and use tax receipts were $334 million below the month's forecast of $2.688 billion."

and better than a year ago

October 2008
"Sales and use tax receipts were $212 million below the month’s forecast of $2.249 billion."

In other words, sales tax receipts are recovering to trend in California -- which is one of the hardest hit states, obviously.

All data from California Department of Finance, available here:
www.dof.ca.gov/HTML/FI...]]> http://seekingalpha.com/article/170333-tibman-s-the-murder-of-lehman-brothers?source=feed#comment-751830 751830
Let's see: buy illiquid complex securities of doubtful quality, and leverage them 40 to 1, much of it with overnight money.

What could possibly go wrong with a plan as brilliant as that?]]> Sun, 08 Nov 2009 21:57:27 -0500
Let's see: buy illiquid complex securities of doubtful quality, and leverage them 40 to 1, much of it with overnight money.

What could possibly go wrong with a plan as brilliant as that?]]> http://seekingalpha.com/article/171549-charlie-gasparino-another-crash-has-to-happen-again?source=feed#comment-749401 749401
Sure.

"I don’t know when it’s going to happen, but if history is any guide, it has to happen again"

It will. So what?

Amid all the people being blamed, I don't see the feckless and ignorant American voter, who has consistently made clear to the people that he elects that he wants "more stuff, and someone else should pay for it, some other time, but no, not me, not now".

The root of our trouble was the collusion of voters and leaders in the biggest fudge of them all, the "implicit guarantee". What is an implicit guaranty? You think anyone would let you sign for a loan with an "implicit guarantee"? ]]> Sat, 07 Nov 2009 00:42:12 -0500
Sure.

"I don’t know when it’s going to happen, but if history is any guide, it has to happen again"

It will. So what?

Amid all the people being blamed, I don't see the feckless and ignorant American voter, who has consistently made clear to the people that he elects that he wants "more stuff, and someone else should pay for it, some other time, but no, not me, not now".

The root of our trouble was the collusion of voters and leaders in the biggest fudge of them all, the "implicit guarantee". What is an implicit guaranty? You think anyone would let you sign for a loan with an "implicit guarantee"? ]]> http://seekingalpha.com/article/171937-agency-backed-mortgage-reits-at-a-crossroads?source=feed#comment-749396 749396
Can you point to the way you look at reports to discern strategy? These are not the most transparent of entities.]]> Sat, 07 Nov 2009 00:26:21 -0500
Can you point to the way you look at reports to discern strategy? These are not the most transparent of entities.]]> http://seekingalpha.com/article/169759-inflation-by-stealth?source=feed#comment-735489 735489 "So for now, inflation is like a ninja stalking our economy. It's lurking in the shadows but can't easily be seen."
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Yes, because we're busy fighting off the far more pressing danger of a deflationary depression. Is there a risk of inflation from the measures taken to keep our economy from imploding? Sure there is: but we have good tools for fighting inflation if it occurs., and right now, we have a much more pressing problem.

The world is generally beset with too much industrial capacity, too much debt, asset prices that still look too high, and end user demand that's very suspect.

In that circumstance, the immediate risks of inflation are quite low-- what's going to drive it?

Remember, its not just money supply that determines the risk of inflation, its (money supply)*(velocity of money), which stands equal to (price of goods)*(quantity of goods). This is called the "Exchange Equation" in economics, and what it tells you is that if velocity of money has collapsed (and it has), even a large increase in money supply won't have an impact on prices.]]> Thu, 29 Oct 2009 10:57:44 -0400 "So for now, inflation is like a ninja stalking our economy. It's lurking in the shadows but can't easily be seen."
----------------------...

Yes, because we're busy fighting off the far more pressing danger of a deflationary depression. Is there a risk of inflation from the measures taken to keep our economy from imploding? Sure there is: but we have good tools for fighting inflation if it occurs., and right now, we have a much more pressing problem.

The world is generally beset with too much industrial capacity, too much debt, asset prices that still look too high, and end user demand that's very suspect.

In that circumstance, the immediate risks of inflation are quite low-- what's going to drive it?

Remember, its not just money supply that determines the risk of inflation, its (money supply)*(velocity of money), which stands equal to (price of goods)*(quantity of goods). This is called the "Exchange Equation" in economics, and what it tells you is that if velocity of money has collapsed (and it has), even a large increase in money supply won't have an impact on prices.]]> http://seekingalpha.com/article/168655-are-investors-seeking-protection-from-the-wrong-currency?source=feed#comment-731498 731498
The world is stuck with Beijing's policy preference: they want massive exports in order to sop up excess labor supply at home, and will keep their currency too cheap in order to achieve this.

So if the dollar can't fall against its Yuan peg, it will fall against the only other currency where China might sock away export revenues.]]> Mon, 26 Oct 2009 19:33:17 -0400
The world is stuck with Beijing's policy preference: they want massive exports in order to sop up excess labor supply at home, and will keep their currency too cheap in order to achieve this.

So if the dollar can't fall against its Yuan peg, it will fall against the only other currency where China might sock away export revenues.]]> http://seekingalpha.com/article/168682-spectrum-pharma-zevalin-has-blockbuster-potential?source=feed#comment-731119 731119
author writes: "If there is a SHIFT in the STANDARD OF CARE treatment for NHL, then a majority of doctors will likely implement RIT into the first-line treatment."

That's a big "if".

Oncologists use what they know. At this point, they have a good drug, which they know well. The most likely scenario for Zevalin is as a second line drug for relapsing patients. Each addition to a drug regimen adds considerably to cost and to the potential for complications. Most community oncologists avoid the the complicated multidrug protocols common at research hospitals if they can . . . in this case, they can.]]> Mon, 26 Oct 2009 14:54:09 -0400
author writes: "If there is a SHIFT in the STANDARD OF CARE treatment for NHL, then a majority of doctors will likely implement RIT into the first-line treatment."

That's a big "if".

Oncologists use what they know. At this point, they have a good drug, which they know well. The most likely scenario for Zevalin is as a second line drug for relapsing patients. Each addition to a drug regimen adds considerably to cost and to the potential for complications. Most community oncologists avoid the the complicated multidrug protocols common at research hospitals if they can . . . in this case, they can.]]> http://seekingalpha.com/article/168911-here-s-why-asia-must-eventually-ditch-the-dollar?source=feed#comment-731103 731103 ----------------------...

No, they're not. The PRC leadership has shown zero interest in losing control over their own currency. Being a reserve currency means that massive amounts are held by foreign central banks, and these foreign banks have an associated power.

The Chinese are not willing to let the Renminbi be fully convertible, much less a reserve currency.

Moreover, they're not willing to let the Renminbi float, either. Its obvious to anyone looking at purchasing power parity that the Yuan is dramatically undervalued, but the Chinese have been steadfast in preventing its appreciation. As a fully convertible currency, they'd have to let the Yuan float-- meaning the loss of millions of export jobs, a political risk they are as yet unwilling to run.]]> Mon, 26 Oct 2009 14:43:58 -0400 ----------------------...

No, they're not. The PRC leadership has shown zero interest in losing control over their own currency. Being a reserve currency means that massive amounts are held by foreign central banks, and these foreign banks have an associated power.

The Chinese are not willing to let the Renminbi be fully convertible, much less a reserve currency.

Moreover, they're not willing to let the Renminbi float, either. Its obvious to anyone looking at purchasing power parity that the Yuan is dramatically undervalued, but the Chinese have been steadfast in preventing its appreciation. As a fully convertible currency, they'd have to let the Yuan float-- meaning the loss of millions of export jobs, a political risk they are as yet unwilling to run.]]> http://seekingalpha.com/article/167840-6-dividend-stocks-for-current-income?source=feed#comment-727595 727595 MLP) and a different tax treatment (its a pass through entity).

I hold KMP, but you can't analyze their payouts as "dividends" -- they're not.]]> Fri, 23 Oct 2009 15:43:03 -0400 MLP) and a different tax treatment (its a pass through entity).

I hold KMP, but you can't analyze their payouts as "dividends" -- they're not.]]> http://seekingalpha.com/article/167781-the-return-of-japan-s-zombie-finance?source=feed#comment-723969 723969
So there's an enormous pool for savings from which the Government can borrow, and they borrow and spend, in the absence of domestic secular demand.

The entire nation is a painful irony: the "paradox of thrift" writ large. Its also worth observing that even though public indebtedness is very high, private indebtedness is quite low . . . the Japanese have essentially done what we're doing, but ten years ago.

Peak Private Indebtedness (1996)
%273 of GDP (today %113)

Peak Government Indebtedness (today)
%170 of GDP (up from %45 or so in 1996)

So private sector debt has fallen by half, and public sector debt has quadrupled (as % of GDP). ]]> Wed, 21 Oct 2009 15:26:12 -0400
So there's an enormous pool for savings from which the Government can borrow, and they borrow and spend, in the absence of domestic secular demand.

The entire nation is a painful irony: the "paradox of thrift" writ large. Its also worth observing that even though public indebtedness is very high, private indebtedness is quite low . . . the Japanese have essentially done what we're doing, but ten years ago.

Peak Private Indebtedness (1996)
%273 of GDP (today %113)

Peak Government Indebtedness (today)
%170 of GDP (up from %45 or so in 1996)

So private sector debt has fallen by half, and public sector debt has quadrupled (as % of GDP). ]]> http://seekingalpha.com/article/167745-hands-off-goldman-bonuses?source=feed#comment-723265 723265
Author Harrison doesn't do the "its very simple" punt . . . he says its complicated, which is exactly right: it is.

I would add that there's an issue here beyond fairness: efficiency. Some argue that restraints on pay and risk taking are inimical to the efficiency of the system . . . but I'd say that a system which, absent government intervention, ran itself into insolvency is inherently inefficient, and the problem is the nature of the compensation.

Goldman, and everyone else in the financial industry, is highly incentivized to see enormous leveraged bets made, bets which are so large that if they fail, they risk doing systemic damage. Their bonuses come when those bets go well . . . and everyone else picks up the tab when those bets go poorly.

It seems to me that what is needed in financial services compensation is a tax on profits that reflects that added risk that a particular activity has added to the system. A stock broker? Adds little or no risk to the system. Same with an insurance salesman, a mutual fund portfolio manager . . . but someone who constructs complex interest rates swaps (as for example, JP Morgan did for Jefferson County, Alabama) . . .this kind of financial engineering brings with it massive risks assumed by others, which should be reflected in the compensation of the financial engineers, this adjustment would make the system _more_ not less efficient (it would be "fairer" too, but that's less important)]]> Wed, 21 Oct 2009 09:09:53 -0400
Author Harrison doesn't do the "its very simple" punt . . . he says its complicated, which is exactly right: it is.

I would add that there's an issue here beyond fairness: efficiency. Some argue that restraints on pay and risk taking are inimical to the efficiency of the system . . . but I'd say that a system which, absent government intervention, ran itself into insolvency is inherently inefficient, and the problem is the nature of the compensation.

Goldman, and everyone else in the financial industry, is highly incentivized to see enormous leveraged bets made, bets which are so large that if they fail, they risk doing systemic damage. Their bonuses come when those bets go well . . . and everyone else picks up the tab when those bets go poorly.

It seems to me that what is needed in financial services compensation is a tax on profits that reflects that added risk that a particular activity has added to the system. A stock broker? Adds little or no risk to the system. Same with an insurance salesman, a mutual fund portfolio manager . . . but someone who constructs complex interest rates swaps (as for example, JP Morgan did for Jefferson County, Alabama) . . .this kind of financial engineering brings with it massive risks assumed by others, which should be reflected in the compensation of the financial engineers, this adjustment would make the system _more_ not less efficient (it would be "fairer" too, but that's less important)]]> http://seekingalpha.com/article/167225-there-is-nothing-wrong-with-price-deflation?source=feed#comment-721359 721359
Price reductions in manufactured goods due to increased productivity are almost entirely beneficial-- they represent a genuine and durable increase in national wealth.

Price declines in fixed assets both signal trouble (indicating that the market expects that their future productivity will be less than that today) and _cause_ trouble (because asset price declines can cause the real interest rates to grow to levels that will cause defaults).

Author is correct in observing that high debt levels in and of themselves are the issue today-- deflation is of little concern to a net creditor.

As it happens, the United States is a massive net debtor-- not a comfortable position in which to have a deflation. ]]> Mon, 19 Oct 2009 21:01:57 -0400
Price reductions in manufactured goods due to increased productivity are almost entirely beneficial-- they represent a genuine and durable increase in national wealth.

Price declines in fixed assets both signal trouble (indicating that the market expects that their future productivity will be less than that today) and _cause_ trouble (because asset price declines can cause the real interest rates to grow to levels that will cause defaults).

Author is correct in observing that high debt levels in and of themselves are the issue today-- deflation is of little concern to a net creditor.

As it happens, the United States is a massive net debtor-- not a comfortable position in which to have a deflation. ]]> http://seekingalpha.com/article/167338-canada-s-rising-dollar-benefits-of-a-strong-loonie?source=feed#comment-721224 721224
Canadian papers are filled with stories of the devastating effects of a strong loonie on their industrial economy. There's an interesting regional aspect to this: the Canadian oil patch is presumably content with a strong C$ . . . but that doesn't help Ontario, which is heavily dependent on manufacturing exports.]]> Mon, 19 Oct 2009 18:44:27 -0400
Canadian papers are filled with stories of the devastating effects of a strong loonie on their industrial economy. There's an interesting regional aspect to this: the Canadian oil patch is presumably content with a strong C$ . . . but that doesn't help Ontario, which is heavily dependent on manufacturing exports.]]> http://seekingalpha.com/article/165918-jim-rogers-on-the-next-10-years?source=feed#comment-720939 720939
Unfortunately, they can't.

The US, with %5 of the world's population, requires about %25 of the world's energy to live as we do. China has about %18 of the world's population . . . there simply is no way that China can come anywhere near the US consumes.

US energy consumption (2006)
334 million BTU per capita

China energy consumption (2006)
56 million BTU per capita

Because of China's giant population even small increases in per capita energy consumption will crash into supply/price constraints.]]> Mon, 19 Oct 2009 15:51:07 -0400
Unfortunately, they can't.

The US, with %5 of the world's population, requires about %25 of the world's energy to live as we do. China has about %18 of the world's population . . . there simply is no way that China can come anywhere near the US consumes.

US energy consumption (2006)
334 million BTU per capita

China energy consumption (2006)
56 million BTU per capita

Because of China's giant population even small increases in per capita energy consumption will crash into supply/price constraints.]]> http://seekingalpha.com/article/167213-barron-s-miller-time-completely-misses-the-math-and-the-mark?source=feed#comment-720162 720162
Value Trust had $20 Billion in assets in March 2007.

Value Trust has about $4 Billion in assets today.

So that %72 decline is off of a much larger amount of money, representing about $14 Billion in losses. This year's gain amounts to about $1 Billion.

Lose $14 Billion, gain $1 Billion = not so good]]> Mon, 19 Oct 2009 07:16:15 -0400
Value Trust had $20 Billion in assets in March 2007.

Value Trust has about $4 Billion in assets today.

So that %72 decline is off of a much larger amount of money, representing about $14 Billion in losses. This year's gain amounts to about $1 Billion.

Lose $14 Billion, gain $1 Billion = not so good]]> http://seekingalpha.com/article/166993-the-power-of-unintended-consequences-superfreakonomics-by-steven-d-levitt-and-stephen-j-dubner?source=feed#comment-719635 719635 "Misrepresented and or fraudulent lender's statements were produced creating false gross debt ratios and valuations.Mortgage brokers routinely misrepresented the fine print of contractual documents to the detriment of the borrower. Credit rating agencies accepted supporting documentation without making background checks"
----------------------...

Yes. This point should be underlined. We constructed a system whose rules were "write down some numbers in some boxes and the Government will guarantee you hundreds of thousands of dollars in mortgage loans. buyers and their collaborating bankers, realtors, appraisers, mortgage brokers just put down "numbers that work" in the boxes . . . since no one was checking, or had any incentive to check, it is also not surprising that many of these "numbers in boxes" turned out to be "not quite right".

In the latter part of the mortgage/real estate bubble, the extent of fraud was huge. One of the most common was "owner occupancy". Lots of speculators took "free money" in a "heads I win, tails I walk away" bet, made possible by a far-too-generous program of mortgage guarantees.

The FBI produces an annual "Mortgage Fraud Report". Read it here:
www.fbi.gov/publicatio...]]> Sun, 18 Oct 2009 15:38:19 -0400 "Misrepresented and or fraudulent lender's statements were produced creating false gross debt ratios and valuations.Mortgage brokers routinely misrepresented the fine print of contractual documents to the detriment of the borrower. Credit rating agencies accepted supporting documentation without making background checks"
----------------------...

Yes. This point should be underlined. We constructed a system whose rules were "write down some numbers in some boxes and the Government will guarantee you hundreds of thousands of dollars in mortgage loans. buyers and their collaborating bankers, realtors, appraisers, mortgage brokers just put down "numbers that work" in the boxes . . . since no one was checking, or had any incentive to check, it is also not surprising that many of these "numbers in boxes" turned out to be "not quite right".

In the latter part of the mortgage/real estate bubble, the extent of fraud was huge. One of the most common was "owner occupancy". Lots of speculators took "free money" in a "heads I win, tails I walk away" bet, made possible by a far-too-generous program of mortgage guarantees.

The FBI produces an annual "Mortgage Fraud Report". Read it here:
www.fbi.gov/publicatio...]]> http://seekingalpha.com/article/166993-the-power-of-unintended-consequences-superfreakonomics-by-steven-d-levitt-and-stephen-j-dubner?source=feed#comment-718918 718918
What's particularly bizarre about the behavior in 2002-2007 is that there was tremendous liquidity and credit availability-- without a Federal guaranty, implicit or explicit, you were still being bombarded with offers for credit cards . . . clearly, credit availability was high, without any Federal guaranty.

So for no good reason, the Federal government acted to guarantee real estate lending. Small wonder that there was a lot of it.

The tragedy of the "implicit guarantee" will haunt us for a long time, and its as clear a case of "unintended consequences" as one needs to have.]]> Sat, 17 Oct 2009 20:51:33 -0400
What's particularly bizarre about the behavior in 2002-2007 is that there was tremendous liquidity and credit availability-- without a Federal guaranty, implicit or explicit, you were still being bombarded with offers for credit cards . . . clearly, credit availability was high, without any Federal guaranty.

So for no good reason, the Federal government acted to guarantee real estate lending. Small wonder that there was a lot of it.

The tragedy of the "implicit guarantee" will haunt us for a long time, and its as clear a case of "unintended consequences" as one needs to have.]]> http://seekingalpha.com/article/166188-venture-capital-numbers-how-the-u-s-is-hurting?source=feed#comment-718088 718088
Venture investment makes sense when less risky assets are fully valued]]> Fri, 16 Oct 2009 17:21:46 -0400
Venture investment makes sense when less risky assets are fully valued]]> http://seekingalpha.com/article/165663-when-will-deflation-turn-into-inflation-and-how-quickly?source=feed#comment-710834 710834
> Dwyer is right. Deflation is a gift of higher purchasing power.

From whom to whom? "Gifts" don't come from outer space. If someone gains in an asset price deflation, someone else loses: Who?

At a macro level: What are the effects of deflation in an highly economy with too much leverage? (Hint: Very bad)]]> Fri, 09 Oct 2009 15:41:39 -0400
> Dwyer is right. Deflation is a gift of higher purchasing power.

From whom to whom? "Gifts" don't come from outer space. If someone gains in an asset price deflation, someone else loses: Who?

At a macro level: What are the effects of deflation in an highly economy with too much leverage? (Hint: Very bad)]]> http://seekingalpha.com/article/165663-when-will-deflation-turn-into-inflation-and-how-quickly?source=feed#comment-710753 710753 On Oct 09 02:10 PM Jim Dwyer wrote:
> Inflation is theft.

So is deflation a "gift"?

Prices change, in nominal terms, all the time. Its neither a gift nor theft, simply the marking to market of currency vs assets, their present value and their future perceived value.

If you object to inflation, the time to have piped up was two, three, four years ago-- the Federal Reserve and the Federal Government have very effective tools to restrain asset bubbles (higher tax rates, higher interest rates, higher reserve requirements).

Those tools are politically unpalatable (to irresponsible politicians and the dim voters they represent), so they weren't used.

Now we're where we are, with a debt burden (mostly private) vastly in excess of asset values. The mechanics of a deflationary unwind are too difficult as a logistical matter, and too destructive as a practical matter to undertake.

Inflation isn't anyone's first pick, but its what you'll get when you've got a nation that wants "less taxes and more stuff" and doesn't want to eat dirt for a decade of deflationary collapse.

So some inflation is most likely what we'll have.]]> Fri, 09 Oct 2009 14:41:49 -0400 On Oct 09 02:10 PM Jim Dwyer wrote:
> Inflation is theft.

So is deflation a "gift"?

Prices change, in nominal terms, all the time. Its neither a gift nor theft, simply the marking to market of currency vs assets, their present value and their future perceived value.

If you object to inflation, the time to have piped up was two, three, four years ago-- the Federal Reserve and the Federal Government have very effective tools to restrain asset bubbles (higher tax rates, higher interest rates, higher reserve requirements).

Those tools are politically unpalatable (to irresponsible politicians and the dim voters they represent), so they weren't used.

Now we're where we are, with a debt burden (mostly private) vastly in excess of asset values. The mechanics of a deflationary unwind are too difficult as a logistical matter, and too destructive as a practical matter to undertake.

Inflation isn't anyone's first pick, but its what you'll get when you've got a nation that wants "less taxes and more stuff" and doesn't want to eat dirt for a decade of deflationary collapse.

So some inflation is most likely what we'll have.]]> http://seekingalpha.com/article/165663-when-will-deflation-turn-into-inflation-and-how-quickly?source=feed#comment-710697 710697
How much do asset prices have to appreciate -- nominally -- to render the financial system solvent?

In a "back of the envelope" calculation, about %20-30. (Why? Its the fall of house prices by %20-30 that crashed the MBS market. If you look at short sales, %20-30 is a ballpark for the haircut that banks have to take on these properties).

Interestingly, that's about the markdown in the value of the USD vs asset based currencies we've seen this year (eg A$, C$).

So my guess (and that of the currency markets) is that we'll end up over the next few years with a nominal price rise of %20-30 in excess of base inflation. Although there's a great deal of hand wringing over this, the alternative, a deflationary depression, is far worse.

Over the last eight years, Americans spent a lot of money they didn't have, and can't now readily earn. That indebtedness can be paid off through:

A) a long, painful period of dramatically reduced consumption-- which might not even work, as it risks a deflationary spiral, and falling output
or
B) a %20-30 markdown of currency versus real assets (inflation)

Option B is better.]]> Fri, 09 Oct 2009 13:59:37 -0400
How much do asset prices have to appreciate -- nominally -- to render the financial system solvent?

In a "back of the envelope" calculation, about %20-30. (Why? Its the fall of house prices by %20-30 that crashed the MBS market. If you look at short sales, %20-30 is a ballpark for the haircut that banks have to take on these properties).

Interestingly, that's about the markdown in the value of the USD vs asset based currencies we've seen this year (eg A$, C$).

So my guess (and that of the currency markets) is that we'll end up over the next few years with a nominal price rise of %20-30 in excess of base inflation. Although there's a great deal of hand wringing over this, the alternative, a deflationary depression, is far worse.

Over the last eight years, Americans spent a lot of money they didn't have, and can't now readily earn. That indebtedness can be paid off through:

A) a long, painful period of dramatically reduced consumption-- which might not even work, as it risks a deflationary spiral, and falling output
or
B) a %20-30 markdown of currency versus real assets (inflation)

Option B is better.]]> http://seekingalpha.com/article/164785-communist-china-only-in-name?source=feed#comment-709345 709345
Like Venezuela, Putin's Russia is a place where foreign investors face a "head we take it, tails its yours" deal. BP invested heavily in oil exploration in Sakhalin, which turned out to be a terrific oil find . . . only to have the Government decide that "we'd like that, please".

Valuations will always remain low in countries where the rule of law is weak, and the state is predatory: you pay a premium for transparency and fair play, you demand a discount for political/event risk.]]> Thu, 08 Oct 2009 18:05:32 -0400
Like Venezuela, Putin's Russia is a place where foreign investors face a "head we take it, tails its yours" deal. BP invested heavily in oil exploration in Sakhalin, which turned out to be a terrific oil find . . . only to have the Government decide that "we'd like that, please".

Valuations will always remain low in countries where the rule of law is weak, and the state is predatory: you pay a premium for transparency and fair play, you demand a discount for political/event risk.]]> http://seekingalpha.com/article/165519-the-ft-s-very-peculiar-news-judgment?source=feed#comment-709316 709316
Absent something meaningful to report, why not just run the always insightful Willem Buiter's column . . . they've tucked it away as its own little blog, but its often the best thing in FT, and his taste in sources is considerably better.

One wonders which of Professor Buiter's words Sarah Palin might understand . . .]]> Thu, 08 Oct 2009 17:46:33 -0400
Absent something meaningful to report, why not just run the always insightful Willem Buiter's column . . . they've tucked it away as its own little blog, but its often the best thing in FT, and his taste in sources is considerably better.

One wonders which of Professor Buiter's words Sarah Palin might understand . . .]]>