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  • Exchange-Traded Derivatives: Why Stop at CDS? [View article]

    Good points.

    One positive side to making derivatives exchange traded is that the exchange usually backs the contract performance. If you trade a futures contract (an exchange traded derivative) your actual counterparty is the exchange (read the fine print).

    You don't have any idea who took the other side of your trade, you only see a bid/ask. The exchange is legally a counterparty to both sides. If you default on payment, the exchange is going to be the one looking to collect, not the other party.

    That doesn't fix all the problems, but it does make things more transparent and less likely to blow up in your face. It's always possible to do stupid things and lose all your money as a result. (Think Hunt brothers.) That can't be stopped, but it can be made more unlikely.

    Still, I like your idea of eliminating banks altogether. It has some merit.
    Nov 5, 2008. 10:00 AM | Likes Like |Link to Comment
  • The 'Style Box' Does Investors a Disservice [View article]
    "The risk model for the investment consultants is broken. Let them find one that better reflects the way that the market works."

    This is what happens when you try to 'dumb down' a complex issue for the masses. The positive correlations are glossed over and the system is touted as robust.

    I have always felt the same problem exists in the commercial IRA/401k arena. Pick any widely used retirement account provider and you will find that the same positive correlations abound for every fund choice you are offered. There is no hope of finding 'outperformers' in a down market short of a bond fund or money market.

    The person who battles through the red tape and opens a fund family with non-correlated choices will be doing everyone a service by giving those who pay attention a chance to change allocations based on perceived market conditions.

    Vanguard, Fidelity, TRowe, and the others out there could move the retirement account world if they started offering precious metals funds, commodities funds, and inverse market Index funds as part of their retirement packages sold to corporate America.

    The advent of the ETF in these arenas has given investors a chance to outperform in personally directed accounts. What is needed now is to have these options in retirement accounts as well, IMHO.
    Nov 5, 2008. 09:39 AM | Likes Like |Link to Comment
  • The Biggest Bubble of Them All [View article]
    "The pain will come, the only question now is what form it will take."

    Why the same form it always takes. Hyperinflation.

    The FED only has two weapons: Inflation and Blarney.

    Blarney has failed to work, so inflation is the only weapon left.
    Nov 4, 2008. 04:24 PM | 2 Likes Like |Link to Comment
  • Driven to Bankruptcy [View article]
    "The weak and lazy want cradle-to-grave support from the strong who are not afraid to compete and not afraid to get paid what they are worth" - RCA

    In defense of the Joe Sixpacks out there, most of them have never been on the other side of the fence trying to figure out how to make a business turn a profit.

    They don't see the 15 hour days, seven days a week for no pay that a small business owner puts in to keep things afloat. Their world is limited to 40 hours a week at $12/hr with as little effort as possible because they think there's nothing to be gained from giving more.

    They're not dumb, they're not evil, they just don't have any experience regarding what goes into getting things to run.

    I've been there. More than 2 years at 15 hours/day, 7 days/wk, quite often at no pay. That's what it took to get our business on a solid footing. I had more days than I can remember where my only meal of the day was 4 slices of buttered bread, sometimes to save money, sometimes because I was too tired to bother making anything else. I did it because that's what it took to succeed after I decided to risk most of my life's savings in the effort.

    Now I pay people to help run things. My profits are lower, but I have more time for returning to my own career. That hard work and sacrifice in the early stages has resulted in a business that provides an income for several people where one didn't exist before and a nice profit stream to me for taking the initial risk and for keeping an eye on things now.

    If you want to complain about people who are getting unfair treatment look no further than the guy who started his own business. He's suffered more than the rest of his employees combined, but it's not likely you'll hear him whining about it or saying how unfair it was. He just did what was necessary to get ahead, like any of his employees are free to try any time they want.
    Nov 4, 2008. 04:07 PM | Likes Like |Link to Comment
  • Driven to Bankruptcy [View article]
    "Maybe greed is a problem for all the unions... for nurses, postal workers, teachers, lawyers, actors, professors, publishers, pilots, etc. If I follow your line of thought, we ought to put them all out of work and replace them with Chinese and Japanese teachers, lawyers, nurses, pilots, actors, camera men, etc." - wondergirl

    Could be. There's a reason why the only growing union lately has been the gub'mint employee union. The other unions are putting themselves out of business by demanding so much that their employers can't compete and stay afloat. Private sector union membership is down to 13% in the US, far below levels in the 50s and 60s.

    Tell me, which is better for a qualified airline pilot. Unemployment check because his union sank the airline or a job paying less than what the union demands yet much more than unemployment?

    I'm not just casting a blanket aspersion on unions as 'bad'. But there is a limit to how high you can get wages increased before the business suffers. Trying to force higher wages than the market will bear by threat of violence or gub'mint restrictions on hiring replacement workers will only harm the business to the point where it can't afford to keep the doors open.

    As for Japanese subsidies, GREAT! I'm all for them if it lowers the cost of my car purchase. Let the Japanese government spend its money so I don't have to. Those subsidies are going to be there whether we waste our money propping up a failing business or not.

    Or are you suggesting we apply tarriffs to 'even the playing field'? The only result you get for that is that ALL car prices are higher and ALL car consumers are punished to the level of incompetence of the worst run businesses. How does that help the consumer? It doesn't, it punishes the consumer to support overpaying the employees. Hardly a win-win scenario.

    Your argument about GM and F going under then Japanese raising prices is incomplete as well. If that should happen then Brazilian or German or Norweigan or English or Chinese companies would undercut the Japanese pricing and take away market share. The minute a business tries to take advantage of its customers they leave an opening for any competitor to exploit and provide a better product or service.

    The only true way to build a free market monopoly is to ALWAYS offer the best product at the lowest price. The first time you think you have all the market share and raise prices someone will figure out how to make the product and sell it for less to take away some of your customers and profit.

    Wal-Mart has become the 800 pound gorilla of retail, displacing many mom and pop type stores. Have they started jacking up prices? No. They always have and always will give their customers

    "Low prices. Always" :-)

    They know that someone will take their business away from them if they ever begin to start squeezing the customer for any more than their minimum profit margin. They have built a world wide powerhouse business on that model, unrivalled by none.

    As a result, thousands of their employees have become very wealthy through stock purchase plans, and not just executives, but truck drivers, cashiers, greeters, anyone who put in the work. Wal-Mart customers shop there because they know they can get more of the basics for their money than anywhere else and that Wal-Mart will stand behind what it sells no matter what. Wal-Mart has saved the consumer mega-millions of dollars over the years.

    Oh, and in case you weren't aware, Wal-Mart isn't unionized.
    Nov 4, 2008. 03:33 PM | 1 Like Like |Link to Comment
  • The Transition from Bear to Bull Market [View article]
    Though a bit slow in starting this is an excellent article!

    There is a great deal to be learned from studying this as a general starting point for putting money in the markets (or not).

    Great job!
    Nov 4, 2008. 02:41 PM | Likes Like |Link to Comment
  • Driven to Bankruptcy [View article]
    "The weak and lazy want cradle-to-grave support" - RCA

    I'm weak and lazy, but moonbat throws lots of peanuts so I get by. ;-)
    Nov 4, 2008. 02:15 PM | Likes Like |Link to Comment
  • Ugly Numbers [View article]
    "FED switches gears to Wimpy-nomics"

    I will gladly owe you Tuesday for a fiscal stimulus today.
    Nov 4, 2008. 02:07 PM | Likes Like |Link to Comment
  • It's a Great Time to Be an Inflationista [View article]
    You could go big time under your real name and then throw peanuts at yourself" - moonbat

    How do you think I got all those +1s? Hehehe.
    Nov 4, 2008. 01:59 PM | Likes Like |Link to Comment
  • Driven to Bankruptcy [View article]

    Good point. Same complaint does apply to overpaid executives. My only comment there is that the owners of a business should be free to overpay any of their employees if that's how they want to do business. If they overdo it they won't be able to compete and will change or fail.

    What should be forbidden is 'using' gub'mint force to provide your business an unfair competitive edge in the market, ie. tarriffs, licensing requirements, FDA approval, etc. Free competition for all and let the market decide and we'll all be much better off in the long run.

    Give libertarianism/anarchy a chance. Maybe it'd be better than what we've got, maybe not. Can't know till you try. Couldn't be much worse than what we've got now.

    Nov 4, 2008. 01:55 PM | Likes Like |Link to Comment
  • Stop Calling This a Depression [View article]

    I agree completely. Eventually inflation will return with a vengance. You can't flood the world with more paper money and not expect inflation to return.

    I just hope I can earn enough profits trading paper gold to buy a bunch more physical gold before the wheels come off in a big way.

    Looks like something is nibbling at the low gold prices today. Up around $40/oz so far.
    Nov 4, 2008. 01:42 PM | Likes Like |Link to Comment
  • Driven to Bankruptcy [View article]

    Why my brother? Familial ties with the producer might get me to buy if the prices were close, but it won't mean squat to someone from the next block over.

    If a neighborhood baker made bread to sell for $5/loaf when I could buy out of town bread for $2/loaf I'd buy from out of town. If I want to donate to the community I can take the $3 of savings and give them $2 and keep $1 myself.

    Maybe that's better for the community in total. Maybe the local baker only donates $0.75 of his time out of that extra $3 he charges me.

    Fact is that it's MY money. I can spend it any way I like regardless of what you may or may not think. Same goes for your money. I don't expect you to spend it based on what I think. Do what you want with it.

    That doesn't change the fact that an non-profitable business model can't last in a market economy. Why should the owner or employees expect to be 'given' a decent living if they can't earn it by producing something people are willing to buy at a price they are willing to pay?

    How many buggy whips did you buy last year? None? Why aren't you supporting buggy whip manufacturers? Don't they deserve to make a decent living too?
    Nov 4, 2008. 12:30 PM | 1 Like Like |Link to Comment
  • Driven to Bankruptcy [View article]
    "The gov't will have to pay for all ... (taxpayers)" - wondergirl

    The fact that our gub'mint takes and spends my income on things I would not otherwise spend it on does not make it economically viable nor something I would chose to do with my money. I have no choice as the gub'mint has made it plain that they will throw me in jail if I 'choose' not to cooperate. Extortion isn't an identifying hallmark of a free market.

    If not for unthinkable levels of debt the gub'mint would not be able to pay for all the support programs you identified. They are nothing more than gub'mint vote pandering with stolen money and hardly a good reason for continuing to support a money losing business.

    Saying the gub'mint is going to take my money and spend it anyway is not a valid reason for propping up a failing business.
    Nov 4, 2008. 12:15 PM | Likes Like |Link to Comment
  • Stop Calling This a Depression [View article]
    "Stop Calling This a Depression"

    Of course. We haven't gotten that far yet. Give it some time. shows
    1) unemployment as calculated pre-Clinton at 15%
    2) GDP growth at -3%
    3) CPI as calculated in 1990 at 13%

    Nope, not quite a depression ... yet.
    Nov 4, 2008. 11:52 AM | Likes Like |Link to Comment
  • The Economy's Worst Is Still Ahead of Us [View article]
    Let's not forget the other shoes waiting to drop:

    1) Commercial real estate
    2) Auto loans
    3) Credit card debt

    Each of these will undergo the same problems that residential real-estate is experiencing now. Expect many more Billion dollar writedowns to follow.

    "It ain't over till it's over" - Yogi Berra
    Nov 4, 2008. 11:43 AM | Likes Like |Link to Comment