otbricki

Is the Market Going Lower? Silly Question!

Depends on your time frame and if you believe in long term market cycles. One view is that we are in a secular bear market now, one that started in 2001. If the patterns of the past hold true, we will be in a secular bull market perhaps starting 2015 or so. That would be a damn good time to be 80% allocated to equities.

On Mar 03 04:45 PM xsellside wrote:

> A market meltdown like this begs the question, "should anyone EVER
> have a strategic asset allocation of 80% in stocks or more?" Traditional
> risk assessments of ability and willingness to take risk put many
> people in these allocations, but not one of these ‘questionnaires”
> really prepares an investor for this type of market.

The AIG Scandal

How can these people not have been in violation of Sarbanes Oxley? Why isn't being drawn and quartered one of the punishments allowed under this legislation?

Stock Market Investor Depression

There were no official government unemployment numbers during most of the Great Depression. The US government did not start keeping these numbers until 1940, so your idea that current numbers are not on the same basis is not correct since there was no basis at all during that period. Economists are aware of this issue and use the same basis to perform comparisons in their publications.

In addition the composition of the current workforce is much different than in the 1930's because of the vastly increased number of families where both husband and wife work. Dual wage earners means that unemployment rates can be higher before the same level of pain is experienced.

I agree with you about the expanding gini coefficient in America. This is a huge issue - for the past 30 something years the American worker has not participated in the growth of the economy. Several factors have gone into that - education is becoming more important to earnings potential; the tax structure is very flat, and offshore competition limits wages. It is going to be difficult to change, but making that change will be key to preserving American society as we know it today.

As to Robert Schiller's graph - you can find the data here:

www.econ.yale.edu/~shiller/data/Fig2-1....

It looks to me like we have lost about 2/3's of what is needed to bring house prices to historical levels. Another 20% drop should be enough to get to historical trend levels.

On Feb 24 04:56 PM Gene Shorts wrote:

> Blah, another milquetoast article that espouses how the magnificient
> anglo-saxon economic ethic is going to lead us out of this mess.
> I'm glad the mandatory follow-up of Warren Buffet Gospel cake-icing
> was included. This article is not based in reality. You cannot
> really compare unemployment now vs. the great depression for two
> main reasons; one being that that increases in the unemployment rate
> have not shown any indication of slowing, so it is far too premature
> to compare the two. The second is that the unemployment rate the
> BLS uses now is significantly different than that of the great depression,
> which used broader terms to quanitfy unemployment. There are some
> very big reasons why the market increase we witnessed today will
> be short-lived. Bernanke indicated that there would be no swift
> or comprehensive approach to cleaning up the balance sheets of the
> nation's largest financial institutions, and given the amount of
> sludge that continues to toxify with erosion of collateral quality
> (Robert Schiller indicated last week that home prices are only halfway
> through their descent towards baseline levels, Meredith Whitney raised
> the likelihood of a decrease in 2 trillion of consumer lending in
> 09 and the commercial real estate market shoe is on the precipice
> of dropping), the forceful approach that is required to have any
> shot of containing this crisis is not likely to be implemented.
> The argument that the American consumer is going to pull us out of
> this predicament is laughable. The American consumer has no propensity
> to spend (based on the aforementioned wealth and credit deterioration,
> as well as a nearly 100% to GDP debt load). The retrenchement that
> began late last year is likely to continue and permanently alter
> the consumption habits of this country. Also, the consumer debt
> in the US is overwhelmingly focused at the low end of the economic
> spectrum. The expanding gini coefficient of this decade equates
> to a drowning lower-middle/underclas... that had been the backbone
> of the debt ridden consumer economy. I could go on about overseas
> problems with European banks, sovereign Euro States, treasury debt
> holders/buyers, but I think I've said enough. The central tenents
> of your arguments are bunk.

Made in USA Is Alive and Well

INTC is investing 7bil USD on US manufacturing of 32nm CPUs. 0 USD overseas. While Apple and HP assemble overseas many high value components like CPUs and software are US sourced.

US military hardware spending is high tech, but only represents 100bil USD per year. Private sector is 15 times larger.

To our friend in Germany - hard to imagine that you don't see Microsoft, Boeing and Intel from time to time. So cut out the baloney.

Financial Collapse: A Lesson from the '20s

One problem that clearly exacerbated the Great Depression was that deflation made debt repayment far more difficult. This is why students of that period are so afraid that the current deflationary pressures may cause the current situation to linger.

BUT are their efforts to prevent deflation going to be counter-productive? That is the scary part - we may have stagflation or worse down the road. At least we still have Paul Voelker around. Maybe somebody will even listen to him.

Tomorrow at the White House: Pres. Obama's first "fiscal-responsibility summit." Despite the unprecedented spending spree, Obama plans to slash the deficit to $533B by the end of his term through measures including letting Bush's tax cuts for the wealthy lapse, and taxing hedge fund profits at ordinary rates.

Considering the Bush deficit is 1.3 Trillion it is quite a slash. By far the largest in history.

Meanwhile, Reps. Christopher Dodd and Barney Frank spar over the likelihood of nationalization.

These guys HAVEN'T been in power. Congress has been Republican from 1995 through 2007. Fortunately they lost their position of power, unfortunately not soon enough.

On Feb 22 10:53 AM HiSpeed wrote:

> It's amazing that these crooks remain in positions of power after
> their substantial contributions to this crises.
>
> Do we really expect that the same people who got the US into this
> crises will get us out if it?

Our Global Economy: How Credit-Crippled Eastern Europeans Can Sink Your 401k

Gold is high compared to other metals and oil right now, very risky. Much better to buy other metals like silver, platinum - much lower downside risk.

15 Notes on the Global Economy

Just to point out how wrong you really are in your posts, here is the back up on tax rates. I am assuming you live in the Netherlands because of comments you made about Dutch scenery.

GST:
US: Average 5%. Varies from 0% in some states to 10% in NY City.
Netherlands: 19%

Average Income Tax:
Netherlands: 38%
US: 28%

Gasoline:
US $0.14 / L
Netherlands $0.85 / L (+19% GST on top of that). About 7 times higher.

en.wikipedia.org/wiki/...
en.wikipedia.org/wiki/...
en.wikipedia.org/wiki/...

You also have some interesting other taxes; 1.2% on savings and investments. So if you have $1 million in savings (like many people reading here have) pay an extra $12,000 per year. WOW.

Also there is a tax for health insurance of 6.5% on the first 30,000 euro of income. Is that where your $110 euro health care payment comes from? Or is that extra?

So in the Netherlands people pay about 20% more of their income in taxes than people in the US pay.

MUCH higher taxes a popular myth? Or fact?

Definitely fact.

You really need to improve your education about the world.

> Without backing it up, User64738 knows that we have far higher taxes
> compared to the USA. That falls into the category of popular myth;
> I did think that too for a long time but most USA folks pay 30 to
> 40% taxes on their income and that is pretty much in line with over
> here.

Decoding What Gold Is Telling Us

Let's be real here. Pelosi, Reid and Frank have been members of the minority party of the House from 1995 through 2007. Anything coming out of that body of the Legislature leading up to this fiasco was approved by a Republican majority.

On Feb 20 01:31 PM 5142152-337 wrote:

> psheridan2: I agree with most of what you stated, however, GMiki
> is absolutely correct. The Wall Street CROOKS made things worse,
> after the Washington CROOKS initiated the mess. Look, if Barney
> Frank, Harry Reid, and Nancy Pelosi didn't exist, how much trouble
> would this great country be in financially? Some, to be sure, but
> not to the extent they have created this black hole.

15 Notes on the Global Economy

On Feb 20 06:43 PM Reinko wrote:

> Hi bricki;
>
> You think a few trillion of debt towards East Europe will be the
> nail in the coffin of West Europe?

No, only banks and the Euro. Western Europe will not end if the Euro does.

> Why not take a fine look at the 17 trillion US$ debt that the US
> financial sector has upon herself, link:
>
> www.federalreserve.gov...

> Look in the one before last column and scroll down to arrive at the
> nice 17 trillion of debt that, by the way, grows faster then the
> US GDP.

The vast majority of that debt is internal to the US. The US economy is many times larger and much more stable than Eastern Europe's.

Who would you rather count on, Serbia and Estonia or USA to repay debt?

> Also, just by the way, have you studied obesity rates in East Europe?
>
>
> And in West Europe?
>
> Some anecdotical fun:
>
> My ex was on a visit to the USA last Summer; never ever in her life
> she did see so many very very fat people.

Like I said it is a world wide problem. The overall rate in Europe is right now lower than the US, but it is increasing much faster than in the US.

Some countries in Europe right now have childhood obesity rates higher than the US.

> And why do you think it is so important to stress the 'reserve status'
> of the US dollar? This reserve status only makes the average US citizen
> more fat because a too highly valued currency only gives rise to
> a lazy workforce.

The productivity numbers are out there; the American worker is significantly more productive than the average European worker. I guess you should look up the facts before making up funny stories.

> Look at your auto mobile industry for an elementary example.
>
> And what about your infrastructure? Lets compare it with Europe...

The European auto industry? Really? Didn't we just have a major European auto company go bankrupt just today?

And the European Infrastructure is sadly lacking in many countries. Tell me about the infrastructure in Poland for example.

> And you healthcare costs? (My insurance is only 110 € and kids are
> free).

So you think none of your taxes go to pay for health care? What an amazing idea.

The Ecology of Investment Strategies

It applies to a lot more than markets. It is actually a statement that reveals that Mr. Buffet is aware of the meaning of precision in a scientific or mathematical context.

en.wikipedia.org/wiki/...

On Feb 19 07:17 PM E.D. Hart wrote:

> I believe it was Buffet that said something like, " I would rather
> be approximately right than precisely wrong. This applies to all
> markets.

"In the annals of CNBC cluelessness, this morning’s outburst by the channel’s Rick Santelli is up there with the worst." (Columbia Journalism Review)

I agree with Santelli that this is a horrible state of affairs, and in fact it is rewarding people who should not be rewarded.

BUT.

Are you offering an alternative to this program which will take away the damage to the overall economy? Some times you have to prescribe medicine that has undesirable side effects, and tastes really really bad.

This is the problem with Santelli. His solution is to just do nothing, to let the whole system come down around us without fighting back based on a faith that 'markets will solve the problem'. Maybe they will and maybe they won't, but a lot of pain in between might be avoided.

Liquidity and Capital Calls at the Yale Endowment

PE is just going to offer less to keep their leverage down, that is all.

Gold: The Only Remaining Bubble?

Exactly right.

1. YOUR TAXES equal what government spends. No more no less. The taxes may be deferred a bit when government borrows, but you will pay in either inflation or direct transfers. The Regan and Bush 'tax cuts' are a lie because they did not cut spending. The idea that deficits aren't important is wrong simply because government spending detracts from the private sector's freedom to allocate funds where the opportunities are.

2. The remaining argument is how big you want government to be. The correct measure of the size of government is how much government spends. Starting with Reagan Republicans have grown government just as fast as Democrats.

3. Don't neglect the effect of the end of the cold war on Clinton's results.

On Feb 19 11:55 AM Anandakos wrote:

>
> Austrian,
>
> You have slandered George HW Bush and Bill Clinton unwittingly and
> unjustly. The US government went on a THIRTY year deficit spending
> spree when Ronald Reagan cut taxes so dramatically in 1981. It is
> true that he rectified some of the shrinkage in the next two years
> with partially compensatory increases, but he set the stage for thirty
> nearly uninterrupted years of spiraling debt. Bush 41 made an attempt
> to right the ship and lost his second term, and then Clinton pumped
> more water out and lost Congress. By the end of Clinton's term --
> partially because of the DotCom boom but mostly because of the 1993
> tax increases -- the government was running an overall surplus.
> No, it hadn't gotten back to a full operating surplus as it should
> have, but it was a lot better than anything since Kennedy's term.
>
>
> People will argue forever about the proper proportion of GDP to devote
> to government activities, but one thing is not debatable: the only
> long-term (greater than 10 years' duration) debt that the government
> should accrue is for genuinely productive infrastructure investments
> and the cost of wars of defense. It's fine for it to run temporary
> (3 to 5 year) deficits during the low part of business cycles, but
> it has to liquidate the debt in the high part of the cycle.
>
> The problem is that selfish people say "we have to give the people
> their money back" in the high part of the cycle, so the debt has
> only rarely been liquidated.
>
> On Feb 18 04:14 PM austrian63 wrote: