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  • Treasury Secretary Speculation Heats Up [View article]
    Ron Paul for Treasury Secretary!

    He's the ONLY politician in DC that actually understands economics.

    And he's honest too, for what that matters in Washinton. It's probably a liability on second thought.

    Nov 6, 2008. 12:15 PM | Likes Like |Link to Comment
  • How Stocks Work: Four Viewpoints [View article]
    I keep thinking that some sort of estimate of inflationary rates should be included as well.

    After all, you might find an investment in Zimbabwe that had ROE of 1000%. Is that better than a 10% ROE in the US?
    Nov 6, 2008. 12:10 PM | Likes Like |Link to Comment
  • My Advice to Obama? Reverse Auctionsfor U.S. Treasury [View article]
    If it makes sense, then it's probably the LAST thing they will consider doing.
    Nov 6, 2008. 12:00 PM | Likes Like |Link to Comment
  • The Bank of England Capitulates [View article]
    When a sinking boat is half full of water it doesn't matter how many more holes you put in the hull. The water doesn't run out any faster.
    Nov 6, 2008. 11:55 AM | Likes Like |Link to Comment
  • Country Risk Datapoints of the Day [View article]
    Sadly, they just built a wall blocking our escape to Mexico.

    Ay Chihuahua!

    Implicit in that list of lowest risk is physical gold. It has no liabilities, is accepted world wide, and despite its low price in US dollars it is near all time highs priced in other currencies.
    Nov 6, 2008. 11:45 AM | Likes Like |Link to Comment
  • Forecasters See A Bear Market Till Mid-2009 [View article]
    "Forecasting" is a good way to lose money.

    It is a bear market. Expect Bear Market type stuff to continue until it stops we see a Bull Market begin.

    We ain't there yet, so take forecasts of the Bear's demise with several grains of salt.
    Nov 5, 2008. 04:32 PM | Likes Like |Link to Comment
  • Obama and Your Portfolio [View article]
    Obama's vote total it zoomed,
    For the Presidency he had been groomed,
    Soon he'll rule the bosses,
    While our stocks take the losses,
    And Mogambo says "We're Freakin' Doomed!"
    Nov 5, 2008. 04:19 PM | 1 Like Like |Link to Comment
  • Had Enough Volatility Yet? Direxion Set To Launch 3X Leveraged ETFs [View article]
    If you want 3x leverage open a futures account and buy/sell one e-mini S&P 500 for every $15,000 in your acccount.

    Nov 5, 2008. 04:04 PM | Likes Like |Link to Comment
  • Had Enough Volatility Yet? Direxion Set To Launch 3X Leveraged ETFs [View article]
    Dan: Don't get led too far astray by the numbers. The same holds true for unleveraged ETFs.

    If you lose 25% of your money, you have to gain 33% to get back to break even. Lose 50% and you need to gain 100% to break even.

    Same will be true of the leveraged ETFs, just that the swings in each direction will be larger.

    The difficult question is what happens if the underlying loses 35% of its value? Does the 3x ETF go bankrupt? Probably not. It would depend on how they implement their leverage.

    It's probably a good question to ask Direxion though.
    Nov 5, 2008. 04:00 PM | Likes Like |Link to Comment
  • Had Enough Volatility Yet? Direxion Set To Launch 3X Leveraged ETFs [View article]
    When do they start trading options on these 3x ETFs?

    Can't have too much leverage if you're right, or if you're a bank and deemed too big to fail.
    Nov 5, 2008. 03:54 PM | Likes Like |Link to Comment
  • Obama and Your Portfolio [View article]
    Three words:

    "We're Freakin' Doomed"

    (Borrowed from the Mogambo Guru without his stinkin' permission)
    Nov 5, 2008. 03:42 PM | 1 Like Like |Link to Comment
  • Financial Meltdown: The Conventional Wisdom [View article]
    It should come as no surprise that derivatives can outvalue the underlying.

    As an equivalent, think of the underlying as flipping a coin. Heads the mortgage gets paid off normally, Tails it defaults. Let's say the mortgage is for $100,000.

    If 1 million pairs of people each 'bet' $1 on the outcome, the derivatives total $1 Million.

    Even though the total of these derivatives exceeds the underlying by 10:1, the risk of large scale defaults is small. Each party can probably afford the $1 loss.

    However, if only 10 pairs of people each 'bet' the entire amount of the underlying on the outcome, then the risk of default might be much, much higher.

    Still, it's not difficult to see how $1 Million of "derivatives" might ride on the outcome of flipping a quarter. It happens all the time in a casino.

    Nov 5, 2008. 02:54 PM | Likes Like |Link to Comment
  • Can Gross World Product Shrink? [View article]
    I'm just saying that having 1/3 of an entire continent's populace die in a couple years' time from the Plague would have certainly had a negative impact on world GDP for a significant time.
    Nov 5, 2008. 02:38 PM | 1 Like Like |Link to Comment
  • Irving Fisher on Debt, Deflation, and Depression [View article]
    "borrowing at 3 to lend at 10-15" - JasonC

    Isn't this simply a repeat of what got us into this mess in the first place? Seems like a lot of borrowing at 1/2% (in Yen) and investing at 6% (overpriced mortgages) is what created the need for deflating.

    It's easy to claim people should be borrowing at 3% to earn 10% when it only takes a click of the mouse to 'create' that capital to lend.

    Under a non-fiat money economy, someone has to SAVE the money to loan out as capital by foregoing current consumtion. You can't just print it up. Capital is a tangible item. It can't be created or duplicated by decree. It represents natural resources and/or labor combined at a profit.

    Those who own it either worked for it, or owned the means of production that generated it. They aren't going to lend it out at 3% under deflationary circumstances because it is scarce and many people will be bidding to use it via higher interest rates.

    Printing fiat money and lending it out at low interest rates will only result in those funds being utilized in sub-optimal fashion and starting the boom-bust cycle over again.

    The Mise-ian solution prohibits fiat creation of capital and requires that real capital be allocated based on willingness of borrowers to pay for its use. The most productive/profitable uses will be able to pay the highest rates of interest and will therefore get access to the limited capital. This directs the limited capital to the most 'useful' activities until such time that profits allow for additional savings.

    If JasonC thinks today's capital environment is ripe for plucking he can borrow at 3% and buy some nice Zimbabwe 2 year notes paying 10,000,000%. He'll clean up.
    Nov 5, 2008. 02:32 PM | 1 Like Like |Link to Comment
  • What Dividend Yield Can, And Can't, Tell Us, Part II [View article]
    Stop word-smithing and state what you mean concisely.

    "higher yields were linked with higher returns over the next five years"

    Meaning: If you buy when yields are high, the price will tend to rise over time.

    You are espousing the purchase of stocks for capital gains via the use of dividends as an 'indicator' for when to buy, not whether your "yield" is higher.

    By definition larger dividends for the same priced stock will provide a higher yield (using the common definition instead of seeking capital gains).

    Reframe the question:

    Can I buy stocks at prices where the dividends it pays will supply my retirement income?

    If the goal is to provide an income to live on then the future price of the stock is irrelevant. If you own enough shares the dividend income will pay your bills. The only concern is the solvency of the business and the dividend levels it choses to pay.

    If you make generating a retirement income the goal, then you would want to accumulate shares when the relative dividend yield was high and trim shares when the yield was low (ie. buy some shares at low prices and sell some shares at high prices, given constant dividends). This will permit you to add shares over time buy capturing the natural price differences as capital gains and re-investing them when the prices declined again.

    This was the aim of the 'Old School' investors back in the day. Invest to provide sufficient dividend income (or bond income) for retirement without the need to deplete your capital in order to live.

    Seems we have lost sight of that in recent years, seeking only to capture capital gains instead of income flows.
    Nov 5, 2008. 12:11 PM | 1 Like Like |Link to Comment