zalo

How Does $9000 Gold Sound?

$9,000 per ounce gold sounds really dumb to me. Gold, as paper money, does not have any usage value, apart for some medical/electrical/con... usage.
On behalf of the dollar, it still is the currency of the most powerful country of the world. A currency value is based on the type of assets you can buy with it, and everybody likes the USD because you can go with USD to the US and buy pretty much everything (from shoes, to cars, to top world class education). Can you do that with the ruble, the yuan? No, you can´t. So, anything that debases the USD vs other currencies (without huge inflation in the US, which seems, for now, its not going to happen) even against gold, i would be a USD buyer for sure.

The Fed Must Be Crazy

Disagree...inflation does only come when the economy is running at levels to near full employment or high usage of installed capacity, which neither is the case now. Monetary expansion by itself is not inflationary. Furthermore, the action was pretty much predictable. Mortgage rate spreads were compressed, but with the latest run up of treasuries rates it would be increasingly difficult to take mortgage rates lower. So intervening in the government debt market was the obvious step. Besides, the Bank of England and the Bank of Japan already where purchasing their gov. debt. Lets remember that private money creation (M3) has collapsed, thus, by expanding agressively M1 the FED is looking to fill in this space. So, actually, by not doing this, the economy would undergo into deflation as the money supply was collapsing.

AIG's Blackmail Note

By paying bonuses to the team that bankrupt the company, AIG is jeopardizing its future businesses by alienating the american consumer against them.

The american government has to speed up the divestment of the company into sub-parts. The government should hold the division that generates the systemic risk, while cleaning up the other businesses. Even if these last are not sold right away, they must be separated at once and have their names changed so that they don´t carry the AIG stigma.

The systemically risky division can then be have its management reestructured. Kick out those guys that have received bonuses unappropiately.

Cramer Grilled on Jon Stewart

As in sports, politics, etc. there is good journalism and yellow journalism, and people in the street buy yellow. So Cramer is a product of what people buy and read. Don´t blame on him, he is just part of the product that people buy. I still believe that a lot of the blame of the crisis is on the whole society, lenders, borrowers, consumers, regulators, news agencies, etc. And yes, people around the country ARE guilty for taking incorrect decisions. Taking debts/mortgages that they cannot pay is their mistake. So, if the country really wants to do a "mea culpa", we all have to recognize our part of responsibility.
I think that people liked this cramer grilling because of they dislike cramer, but... cramer is not responsible for people taking bad mortgages or banks leveraging 35:1 or rating agencies asigning bad incorrect ratings to CDOs or regulators doing the worst job ever in history in overseeing the market.

Five Reasons Citi's Worth the Long Risk

Its true that Citi has a great franchise, distrubution channels, worldwide reach, top quality professionals. But all that has no value without the blood of any bank, which is capital, and the market price of the stock says that citi has not got much left. The problem is that nobody knows how much further losses they will suffer as the economy deteriorates. AIG had also the same pros as Citi (franchise, distribution, etc) and look were the stock is now. That can be Citi´s fate as well.

Eight Reasons Bank of America Is Going to $20

Think about this....the government will start running tests to all majour banks in the US to check if they need capital. This means that they will no longer react to stock price movement as they did before. Second and most importantly, this means that the government will have to say which institution is well capitalized and which is not. For those which the government say are well capitalized will have a huge run to the upside in their stock value. It is highly probable that they will say that BAC and Citi have adequate capital to support their stock value and capital base. So, be prepared for a rally in banking stocks in the next few months.

Will Lack of Accord on Stimulus Obscure Economic Lessons?

I am sick of hearing the words crisis, crash, collapse, depression, bailout, bankrupcy, etc. Pure rubbish. Isn´t there anybody that actually see value in the cheapness of the market!?, can´t anybody see that there are properties almost given out for "free"!?

Japan's 'Unimaginable' Contraction

Idea:
Instead of increasing goverment spending, a law can be passed stating that any new personal/corporate savings will be taxed. So, instead of collecting taxes and spending the money inefficiently, don´t collect extra taxes but push the people to buy what they need and want.

Another idea:
Pass a law that makes companies to pay employees in consumption certificates (i.e. 50% of the salary) that has a certain expire date.

For now, many still believe a lengthy bout of deflation is unlikely. But if consumer prices do indeed fall for a long time, the results could be disastrous for much of the stock market, analysts say.

Deflation risk is dead...look at the tip-treasury difference and the gold rally. It should be a short time before reflation policies start to kick in the real economy. There is a glut of inventories due to the consumer crunch but as soon as the inventory glut dissapears as production capacity is being shut down and consumers slowly consume the excess, inflation pressures will run their course up. I think its time to slowly start building inflation proof assets, specially as they come from deep cheapness due to the deflation speculation.

Obama and Geithner: Hoping for the Best, Or Wishful Thinking?

All this congress/obama/geithne... stuff is a political circus. A witch hunt produced to cover up the real responsibles of al this economic crash.

The first responsible is THE GOVERNMENT for failing in regulating the financial system. Isn´t the government the one who through regulation let banks to leverage up to their heads with AAA MBS? With this the government effectively delegated their responsibility on private, interested parties.

The second big responsible group are the PEOPLE who took huge, unpayable amounts of debt to buy overvalued houses. All that excess money is not in banks, that money is in hands of the previous owners of the houses or in developers. So, it is fair that the people has now to pay for their clumsy financial decisions?. Yep, they HAVE to loose their houses and they HAVE to put money to support the financial system.

Banks have also their share of fault...but they are not the only guilty ones.

But in order to win the elections, both candidates appealed to the people by blaming banks. You cannot win an election by critizicing all the people who wrongly bought a house they couldn´t afford.

Kindle 2: Still Expensive

C´mon...why buying the crappy kindle when for some bucks more you can buy a standard laptop. Though it is a nice concept to have something to read books with, it will not have anywhere near the impact of the Ipod. Why?

First of all, people still like to buy paper books because, apart from the reading amusement, books are good for shelves. People want to put them in places where they can be seen. They show who we are, what we like, what we have studied. You cannot do that with the kindle. Can you imagine a decent office without books??

Second of all, an Ipod gives you a kind of progressive, modern, young look. You don´t get that with the kindle.The ipod gives you games, and other stuff. It delivers more than music.

Third, it IS expensive. 300+ bucks is quite expensive for a black and white screen, nothing new screen. Can i read books on my laptop? Yes. So why buying the extra bulky kindle?.

Put a phone, music and a kindle together and you probably will get something. But hey, that´s a laptop.

"Yeh, I think GE should be a junk bond. But I also think the US government should be junk. I don’t pay much attention to rating agencies. The rating agencies have totally failed over the last 3-4 years to identify sick companies." - Marc Faber

A junk commentary.

"Yeh, I think GE should be a junk bond. But I also think the US government should be junk. I don’t pay much attention to rating agencies. The rating agencies have totally failed over the last 3-4 years to identify sick companies." - Marc Faber

A unk commentary.

Thinking the Impossible: Could Bank of America Go to Zero?

which means that the company accounting equity in reality is undervalued....


On Jan 29 02:05 AM zalo wrote:

> The first BIG issue to define is what is a "toxic" asset. A toxic
> asset is an asset whose expected losses makes its today´s market
> value severely below its book value in a specific institution. This
> has two important parts. First, that the value depends on EXPECTED
> losses, not realized losses. And second, that it depends on when
> and how it is being booked.
> So, a toxic asset depends on expectations and where it is sitting.
>
>
> So, saying that banks are insolvent is quite inexact because people
> are measuring balance sheets with EXPECTED losses and not realized
> losses. This is a massive accounting inconsistency. If you should
> account for EXPECTED losses, you should account also for EXPECTED
> income. If so, banks then should NPV their fees and financial margin
> and put that as equity. Some sort of similar value is generated when
> a company acquires another, mostly known as goodwill, which is the
> value of the ongoing company vs the assets and liabilities in the
> balance sheet of the acquired entity. Unfortunately, goodwill is
> not internally generated due to accounting rules.
> So, writing off expected losses should be done only if you could
> write up expected income. But that doesn´t happen.
>

Thinking the Impossible: Could Bank of America Go to Zero?

The first BIG issue to define is what is a "toxic" asset. A toxic asset is an asset whose expected losses makes its today´s market value severely below its book value in a specific institution. This has two important parts. First, that the value depends on EXPECTED losses, not realized losses. And second, that it depends on when and how it is being booked.
So, a toxic asset depends on expectations and where it is sitting.

So, saying that banks are insolvent is quite inexact because people are measuring balance sheets with EXPECTED losses and not realized losses. This is a massive accounting inconsistency. If you should account for EXPECTED losses, you should account also for EXPECTED income. If so, banks then should NPV their fees and financial margin and put that as equity. Some sort of similar value is generated when a company acquires another, mostly known as goodwill, which is the value of the ongoing company vs the assets and liabilities in the balance sheet of the acquired entity. Unfortunately, goodwill is not internally generated due to accounting rules.
So, writing off expected losses should be done only if you could write up expected income. But that doesn´t happen.