American in Paris's Comments

Synthetic CDOs: Thoughts on Fiduciary Duty and the Victim Mindset

Sun, 27 Dec 2009 18:25:36 -0500

Kid Dynamite,

Responsibility is a two way street. If Goldman sold trash as Mercedes, then it doesn't matter whether the buyer should have recognized it was trash.

Goldman is still guilty of a moral abyss.

If a girl walks across Central Park at 2 AM and is raped, do we not pursue the perpetrator?

It strikes me as typical 'Right Wing moral black hole in the head' thinking to emphasize the 'responsibility of the buyer' but ignore the 'responsibility of the seller'.

There is no transaction without either party.

:)

If you look at the moral failures of American society, the focus should be on 'the success at all costs' mentality.

There was a time when people lived their lives with more dignity.

On Dec 27 09:48 AM Kid Dynamite wrote:

> Andrew - those are all great points. But how do they relieve the
> buyer of the CDO of their responsibility? the FACT is that the buyers
> didn't do the homework they were supposed to do before buying these
> products. again, we're not talking about retail investors who might
> reasonably not be expected to analyse the underlying components of
> structured products.
>
> they (we're talking the pension fund managers again now) were COMPLETELY
> ignorant of risk - and GS wanted to take the other side of that trade.
> Note that Felix Salmon highlighted the point that GS was doing this
> since 2004! it's not like GS sold CDO's that blew up 15 days later...
>
>
> if you want to really blame someone on the sell side, i think the
> ratings agencies are the most culpable in terms of also GROSSLY failing
> to adequately perform their duty.
>
> ps - your response is most definitely not one of an ignoramus

ETF Spotlight: SPDR Barclays Capital High Yield Bond

Sun, 27 Dec 2009 16:59:18 -0500

If Tom had done his homework and gone to the SPDRs website, he would know the current yield is not 12.2%. That figure he pulled off Yahoo Finance.

More quality, less quantity, Tom.

Nigerian national Umar Farouk Abdulmutallab is charged with trying to blow up Northwest Flight 253 en route to Detroit from Amsterdam. A preliminary analysis found the device contained PETN (pentaerythritol), a high explosive. (DOJ, charges (.pdf))

Sun, 27 Dec 2009 07:42:35 -0500

James,

You are very silly.

It was an incoming flight. No one was hurt.

How many people died during George Bush's first term in office.

Over three thousand.

I would be embarrassed to be a conservative.

On Dec 27 07:15 AM James Levy wrote:

> I am a conservative, and I am very much for government doing ONE
> BIG THING...Protect me and my family from being murdered by an Islamic
> terrorist the next time we fly. The Obama administration is not willing
> or able to do this. If our government doesn´t want to name the enemy
> for the sake of Political Correctness, and wants extend to him all
> the rights and privileges of a citizen in a US court, we are doomed
> to lose the ¨War on Terror¨..(Oh, I forgot, that is nasty Bush talk...There
> is no war..just need some police actions and lots of olive branches...And
> when we close Guantanamo, the Moslem terrorists won´t do these kind
> of things any more...)
>
> God help the Republic survive the coming years until we can throw
> these bums out in 2010 and 2012..Get involved, if you love the United
> States and freedom, vote for change from the Obama/Pelosi/Reid ¨preventive
> surrender¨ to Islamic terrorists.

Nigerian national Umar Farouk Abdulmutallab is charged with trying to blow up Northwest Flight 253 en route to Detroit from Amsterdam. A preliminary analysis found the device contained PETN (pentaerythritol), a high explosive. (DOJ, charges (.pdf))

Sun, 27 Dec 2009 07:41:04 -0500

Don't be silly. It was an incoming flight.

As an American who lives abroad, I can tell that security is extremely tight, and in fact, is a deterrent to flying.

On Dec 26 10:30 PM dondon wrote:

> This should not come as a surprise as the current administration
> thinks that there is no need for a war on terror. The fact that
> the terrorist was Muslim is not a surprise even though the current
> administration doesn't feel the need to look at young Muslim men
> as potential terrorists. This terrorist attacked failed but as long
> as we have a weak view of radical Islamic terror, we can be sure
> they will try again and at some point succeed.

Charles Hugh Smith says interest rates, artifically suppressed by the Fed and by China, are about to start rising, and will continue rising for a generation.

Sat, 26 Dec 2009 18:03:29 -0500

We would pay your way ...

You have been holding the country back for several generations.

You might like an independent Texas. You could reinstate slavery ...

On Dec 26 02:34 PM tripleblack wrote:

> LOL, if all us LIbertarians and Secessionists move to Texas...

>
> It could get interesting.

Gold and Silver Dead Cat Bounce into Resistance Levels

Sat, 26 Dec 2009 11:47:55 -0500

Hunter,

Where do you dig up this nonsense?

Take a look at the facts. Forget about what some dead white Chicago economists taught you long ago ...

Quantitative easing did not create inflation during Japan's Lost Decade. But it did reignite economic growth.

Second of all, where is all this spending growth that is going to cause hyperinflation?

It only exists in your imagination .... :)

The money velocity measures, both M1 and M2 are shrinking - negative growth.

That means your inflation forecast is dead in the water ....

Have fun on the ride down ...

On Dec 25 08:19 PM HunterGVL wrote:

> A lot of ignorant comments on here today......I am long gold, but
> currently waiting for it to decline further from here. I sold my
> mining positions when gold dropped to 1200 and will be looking to
> re-enter when the dollar tops out and then resumes it inevitable
> decline. I believe the author is of the same disposition as far as
> being long term gold, but short term neutral on gold. He is 'trading,'
> as am I. The short position in the US dollar was and still is, massive,
> and with that kind of one sided trade, the small rise in the dollar
> is not nearly enough to really shake out the shorts (my opinion of
> course). There is also the temporary possibility of sovereign defaults
> like Greece, Latvia, and several others that will give the dollar
> a short term boost as foreigners rush headlong into the (false) security
> of the dollar. I expect this 'false rush to safety,' to last until
> it doesn't. I can see the dollar rallying easily into the first quarter
> as the Bernanke QE and outright treasury buying is denied, denied,
> denied. Many unsophisticated investors want to believe everything
> is all right. They will continue to support the dollar and all falsehoods
> that help them keep believing in the golden calf. Bernanke and Geithner
> will ACTUALLY point to the false dollar strength to further the ponzi
> effect. I wouldn't be surprised to hear Obama mention the dollar's
> renewed strength in his state of the union address. Fundamentals
> are dead; the attempted fix is still in high gear. Quite frankly
> I hope they succeed tremendously in keeping the dollar rising. If
> they can artificially push the dollar up somewhere around $84, $85,
> $90?? with gold dropping into the $800s, or my fantasy -$700s?, .....
> I will be buying like a madman for the long term. The head fakes
> are almost at an end. The lies are browning at the edges. The dollar
> will continue to rise; Gold will continue to fall. So, enjoy this
> last hurrah for the dollar, quit bitching, and prepare to bet the
> farm as gold falls for a final time, below $1,000. You will likely
> never get an opportunity like this again.

Gold and Silver Dead Cat Bounce into Resistance Levels

Sat, 26 Dec 2009 11:36:24 -0500

At 1% inflation, I don't think so ...

On Dec 25 12:15 PM paxjds wrote:

> The dollars dead cat bounces will eventually cease to bounce, laws
> of physics. Then the dollar will lay there, Dead as Dead, dead, and
> dead. Better be in precious metals.
> Yours truly,
> Noah from Genesis

Gold and Silver Dead Cat Bounce into Resistance Levels

Sat, 26 Dec 2009 11:34:23 -0500

He isn't a comedian. Who needs comedians when we have the gold fanatics?

I have never seen such a silly group of wannabe investors.

There are teenagers with more sophistication and common sense than the 'dollar is doomed' crowd.

I can't wait to watch the gold investors sent to the slaughterhouse in 2010.

They will be squealing like pigs ...

On Dec 25 10:58 AM DeepValueLover wrote:

> "Dead Cat Bounce"?
>
> Are you a comedian?

Why Interest Rates Will Almost Certainly Rise in 2010

Fri, 25 Dec 2009 10:57:03 -0500

I didn't know Western Europe was Communist.

Communists are poor and live wretched lives ... f

We live better than you ...

:)

On Dec 25 10:20 AM cosmos110 wrote:

> Obama will keep the economy as best he can until he gets his Obamacare
> in place and then he'll step aside and play his fiddle while we roast.
>
> He'd love to get his Cap & Tax as well as Immigration Reform
> in place but there is only so much one Communist can do.

Global Carbon ETF Heats Up in Wake of Copenhagen

Fri, 25 Dec 2009 08:56:32 -0500

Mr. Steveig,

Your science education is clearly a disaster.

Without CO2 and methane, the Earth would be a frozen snowball.

By the way, carbon emissions trading system is modelled on a highly successful program used by the US to reduce sulfer dioxide emissions.

Second of all, the IPCC contains a lot smarter people than yourself.

:)

On Dec 25 12:30 AM steveig wrote:

> And as we can see the Emission Trading Scheme has not lowered the
> CO2 emissions one bit. This is just another mechanism for the money
> makers to increase their profits.
>
> I note with interest that in Albany NY the Regional Greenhouse Gas
> Initiative (cap & trade scheme) settled out of court a suit filed
> by three power plants. The RGGI has paid $7.7m for a two year period
> and the settlement calls for additional funds to cover them until
> 2016! That is $7.7m for just three power businesses. If this case
> was not settled, these costs would be passed on to the customers
> of the plants. Can you imagine how much your power bills are going
> up with these emission trading schemes? And this settlement doesn't
> even cover converting the power plants to greener processes. What
> the hell are we letting happen to the world? It has NEVER been proven
> that human-based CO2 is the culprit for Climate Change. How can something
> that makes up 1.3% of our atmosphere have such an alleged drastic
> result to the weather? By all means reduce pollution, but CO2 is
> not a pollutant. It is an integral part of sustaining life for the
> Earths' plants. The Intergovernmental Panel on Climate Change (IPCC)
> should be disbanded and the money that is saved be sent to developing
> countries as foreign aid, which is what the emission trading scheme
> is all about. Follow the money trail...

Success in 2010 Requires Investing in Other Countries

Fri, 25 Dec 2009 08:47:14 -0500

You already have a lot of hedge funds shorting China. If any country is experiencing a bubble now, it is China.

And one must ask oneself, should that many eggs be in a repressive country that could explode in political unrest?

The Communist party today has no ideology other than keeping themselves in power. If the economy falters at any point, the lack of political accountability could lead to unrest.

On Dec 24 01:35 PM Econ Grapher wrote:

> You raise some good points here. Emerging markets are increasingly
> becoming the growth engines of the global economy. The long term
> story for the likes of China is definitely compelling, and will become
> very interesting as moves are made to rebalance the economy over
> time (interesting in terms of longer term sustainability). But even
> the more developed countries, like Australia in particular, are on
> a far better footing than the US for example. Australia is enjoying
> relatively strong earnings performance, stock market performance,
> and has been benefiting quite well from trade with China, they've
> even started to add jobs (and not just part-time jobs). Go country
> selection!

Gold: Is It Really a Portfolio Diversifier?

Thu, 24 Dec 2009 14:24:25 -0500

No it is not true diversification. True diversification requires a zero or negative correlation with the other assets in your portfolio.

And it is not a good store of value because its value fluctuates too much.

Gold is too volatile ...

On Dec 24 03:20 AM Freya wrote:

> Gold Equities do not diversify a Portfolio of Equities, Physical
> Gold does.
>
> In the History of Stockmarkets the World over, Individual companies
> have gone Bankrupt by the thousands including Gold Equities.
>
> Physical Gold has retained Value, it has fluctuated but it has Never
> lost All of its Value. This is true diversification.

Good Riddance: MacroShares Major Metro Housing Funds Trigger Early Termination

Thu, 24 Dec 2009 14:13:32 -0500

Ron,

I give you credit for being on the right side of this issue.

But the first question I always ask is whether 'X is right because he had superior insight or because he was lucky'.

You have never really explained your objection.

Certainly Shiller's underlying idea was to create markets for trading important kinds of risks that are not covered by today's financial markets.

I can hedge stocks and bonds by buying puts or shorting or moving to cash.

But there are no markets for hedging housing prices or medical inflation or unemployment risk for that matter.

In fact, for a market economy to be efficient, it should have such markets. See the Arrow-Debreu model.

So is your issue that you do not buy Shiller's underlying idea or do accept the fundamental idea, but believe the structure of these vehicles were poorly conceived?

Lay your cards on the table ...

I would say the problem for most investors is that the Macroshares did not track the underlying index except for the termination point.

I realize now that is a killer since no one wants to wait until the termination date for that relationship to materialize.

Marc Faber's 2010 Investment Outlook

Thu, 24 Dec 2009 14:02:09 -0500

You're babbling 'PM Danield'.

The point is quite simple although you try to dance around the issue.

There is little evidence active investment works or that pundits have a real edge forecasting.

If Mr. Faber had a real edge, he wouldn't be giving interviews. He would start his own hedge and keep his opinions to himself.

The best pundits are good at weaving stories and making sense of the past.

But the future is a not deterministic function of the past. It depends on random shocks.

It takes a real sucker to believe a pundit really has superior forecasting.

The best pundits simply are good salesmen. They make lots of predictions and forecasts and then publicize their successes and quietly bury their failures.

Maybe in 20 years you will figure it out ...

On Dec 23 04:40 PM danield wrote:

> On Dec 23 02:38 PM American in Paris wrote:

5 Reasons Why the Market Is About to Change Direction

Thu, 24 Dec 2009 13:53:00 -0500

The Fed is not artificially holding down savings rate.

The saving rate is sharply up over the last two years.

No, the deficit spending is not on stocks or gold. It is going to buy goods and services.

:)

Please try to get a grip on the facts ....

On Dec 24 07:26 AM lucky lenny wrote:

> Chris, I wouldn’t count on the market coming down. Dow now around
> 10,500. The best rationale for the market continuing to go up comes
> from listening to Rush Limbaugh’s radio show. Think about it. The
> trillions of $$’s in deficit spending have to go somewhere. So the
> money is going into the stock market; gold; and other types of liquid
> assets. Especially with the Federal Reserve artificially holding
> down savings rates. As an aside, I think the trillions of debt the
> Democrats are racking up will make Barack Hussein Obama tremendously
> popular at re-election time. Obama will be like Santa Claus running
> for re-election. Except he bought all the goodies with our money;
> as we start seeing the US$ go the way of the Argentinean Peso.

Two Examples Showing Buy and Hold Must Not Necessarily Lose

Thu, 24 Dec 2009 13:28:36 -0500

Roger,

I have to be very cynical about your article.

You say you can think of lots of people who have beaten the market. Over time period? Were they using leverage? So did they beat the market on a risk adjusted basis?

Or did they did highly leverage themselves and catch a wave during one of the long periods of upward trend? It doesn't require any real intelligence or character to ride a long period of prosperity. In fact, it is the classic story of good luck.

And what is the relevant universe of investors? Survivor bias.

I suspect for every successful investor you know, you can name ten who failed miserably. Approximately 80% of all mutual funds fail to meet or exceed their benchmark each quarter. And the mutual funds that have good five year records? Well, those records don't have any predictive failure.

So why should I assume that these benchmark beating gentlemen or women are any other than mediocrities who got lucky?

They went to the right schools. Had the right connections. Got a Wall Street job as a trader with one of the dominant firms or market makers during the beginning of a bull market when assets are steadily rising ...

The average life span of a Wall Street trader is two years. And a Wall Street trader who last five years still has the probability of blowing up in the next five years as a newbie.

Same story with mutual fund managers. Past performance is not only not a guarantee of future results, it tells you nothing about future performance ...

Those are the hard statistical results ... not 'well, I know this great guy and he did better than the market last year ..."

On Dec 24 11:24 AM Roger Nusbaum wrote:

> Not a great title, the focus of this post is more about Passive versus
> Active investing.

How the Senate Bill Would Change Healthcare

Thu, 24 Dec 2009 12:49:22 -0500

I don't see how ensuring all Americans have access to health care guts your risk taking or penalizes 'gainfully employed Americans'.

So there are no working Americans who are below the poverty line?

No working Americans who are just above the poverty line and are subject to high levels of unemployment due

And let's talk about the unemployed ...

I am sure you believe that the six million unemployed today American are just a bunch of lazy bums cruising Main Street in their Cadillacs and BMWs.

You need to go over American bullshit about the lazy poor. Attitudes like yours are strikingly similar to the arrogance that Dickens ridiculed in his novels and speeches.

On Dec 24 10:39 AM Thomas Smicklas wrote:

> It is comforting to know that government will take care of practically
> my every wish.
>
> Gutting risk-taking, gainfully employed and educated citizens is
> a great plan. And as for those greedy corporations.......

Marc Faber's 2010 Investment Outlook

Thu, 24 Dec 2009 07:40:58 -0500

Because he is a good salesmen. Americans are extremely vulnerable to good salesmen.

Most mutual fund managers are rich. Yet 80% of mutual funds do worse than the market each quarter.

I have worked on Wall Street and I have seen how the system really works.

Everyone on Wall Street is a salesmen.

How do you those hedge funds collect investments. It is all a function of the image projected.

Don't be naive.

And by the way, it is not a question of being dumb.

Very few people have shown any real ability to forecast the future.

So what do they in absence of any real talent? They make lots of forecasts and one of them comes true, they broadcast it to the entire Planet.

On Dec 23 03:33 PM User 506733 wrote:

> If he's so dumb howcome he's rich?

Marc Faber's 2010 Investment Outlook

Wed, 23 Dec 2009 14:38:36 -0500

Analyste,

Try to be an analyst for a change.

Farber calling the bottom in March is irrelevant.

Show me a stastically validated track record. Not a bunch of random impressions.

Anyone can make a lot of prognostications and get lucky from time to time.

That doesn't make him anything anything other than a lucky guy.

Hint: Take all the mutual funds that have great five year track records and invest them for the next five years. Guess what? The result is always the same. Reversion to mean or worse ...

On Dec 23 01:02 PM Analyste de Boston wrote:

> Just read the INSANE illogic on forums like this:
> "I don't (and would not) subscribe to his newsletter, but a study
> of newsletters showed that from 1991 to 1996, the TOP 10 performing
> newsletter recommendations returned an annual average of 13% while
> the market returned 16%."
>
> So, what you're really saying is "Marc Faber is now wrong, because
> OTHERS who wrote newsletters 15 years ago were wrong!" Wow, that's
> some kind of irrational garbage to post online. Anywhere. You're
> brave!
>
> "Given the tone and the title of Farber's newsletter, I am willing
> to bet he did not do so well in the stock market this year. I seem
> to recall some very dire comments from him last spring, and I suspect
> he missed most of the 60%+ run up since March."
>
> You lost the bet. Marc Faber is one of the the very few on record
> calling the March 6-9th bottom WHEN IT OCCURRED. He also publicly
> called Emerging Mkts as the big sector to play. Right again. If
> you investigate even further - ya, FACT check! - you'll see he's
> correctly identified a number of other market lows & highs.
> For that, he's very highly regarded by intelligent investors....
> folks who aren't brainfarting gibberish opinion on websites like
> this.
>
> I'm sure many of Faber's specific projections over the last 30 years
> have also been "wrong" (too early, too late, partially incorrect,
> overtaken by unforeseen events, etc.), but it's absurd to imagine
> infallible gurus or to expect 100% accuracy from any PhD economist
> either. Be reasonable!
>
> Willfully ignoring those who are often right (but tell inconvenient
> truths) is not ignorance, it's sheer STUPIDITY.

The Gold Debate: Here's Why You Should Be Wary

Wed, 23 Dec 2009 11:37:30 -0500

Yes, and you will be surprised by the amount of taxes will pay. Collectibles are taxed differently than financial assets.

A store of value whose value is eroded by taxes is a not a good store of value.

:)

On Dec 22 10:56 AM Fabien Hug wrote:

> Gold can't be considered anymore as the barbaric relic it used to
> be, that's a fact. It deserves to be followed. I buy physical gold
> and silver collectible issued by the US mint or Swiss mint when I
> have extra cash. You'd be surprised at the value you can quietly
> store each time you decide not to buy an Armani suit.

Gold Price Continues Its Descent

Tue, 22 Dec 2009 12:59:33 -0500

Actually equities did much better than gold. Look at European equities or emerging markets.

On Dec 22 10:02 AM sdavid0419 wrote:

> The EOY (end of year) abra cadabra is a maneuver designed to make
> all of the phonies selling financial advice look good. The only
> way to look good this awful year was to be in gold early and to lock
> in your gains so you can report them on your EOY report. The printing
> presses can't keep up with the demand for dollars. The labor reports
> conflict. ie. new claims for unemployment are still coming in even
> if at a slightly lower rate. They keep extending benefits for political
> purposes yet they still somehow lower the total unemployment number?
> I'm still sticking with U2 those that took much lessor jobs to survive
> and those that stopped looking for work since there wasn't any in
> their locale. After they sober up from the New Year's parties GOLD
> will once again soar to new heights along with your gas and electric
> bill, your food bill, your rent, your phone bill and any other thing
> that is taking off due to the Man of the years inflationary policies!!!!!

Gold Price Continues Its Descent

Tue, 22 Dec 2009 12:58:10 -0500

JD58,

That is just plain rubbish. The purchasing power of the dollar is stable.

You are confusing reality and your dreams. They are different.

:)

On Dec 22 08:13 AM JD59 wrote:

> Everyday the fiat US dollar currency is devalued just from the increased
> interest on the US Debt of 12.152 Trillion dollars, and unfunded
> liabilities of 106 Trillion dollars. Gold & Silver are the only
> safe investment on the planet. Hecla Mining (HL) is probably the
> best precious metal miner an individual could buy today.

Japan, The U.S., And the Lost Decades

Tue, 22 Dec 2009 12:51:00 -0500

A 5% annual advantage sounds big, but buy and hold incurs lower commission charges and lower capital gains taxes.

I would not be surprised if your strategy does worse after considering the tax implications.

Your strategy is welcomed by Uncle Sam.

:)

Inflation More Likely in Germany, China than U.S., U.K.

Tue, 22 Dec 2009 07:53:20 -0500

Correct. M1 grew strongly during Japan's Lost Decade(s), but prices continue to fall.

It is an amazing and unusual example of a plunging velocity of money swamping money supply growth.

On Dec 22 06:48 AM metricon wrote:

> Japan shows that rampant money printing does not necessarily lead
> to inflation-- It could lead to long term deflation! Whether the
> same will happen in America is unknown. Americans, after all, are
> hyperconsumers, not the case with the hyper-saving Japanese. But
> as the babyboomers retire in larger numbers, and focus on saving,
> this could change the equation.

Stiglitz Suggests Another Stimulus Even Though It Hasn't Worked Yet

Tue, 22 Dec 2009 07:49:24 -0500

Without the stimulus packages, the US economy would still be shrinking.

You're letting ideology trump clear thinking.

Certainly the recovery is not being led by consumer spending.

Why Oil Is Not Safe for the Individual Investor

Tue, 22 Dec 2009 07:47:41 -0500

The problem is that there is a long term production bottleneck. Most of the great oil fields, the ones discovered in the 60s, are in decline. Mexico, North Sea, US, etc. Russia is stagnant.

Yes, you can get more oil out of existing fields using relatively new technologies, but the investments have not been made and are mammoth.

You need $70 to $100 per barrel of oil to justify these investments.

Take Russia. The Russian government estimates it will require several trillion dollars in investment just to keep their production where it is today.

Not to increase long term production, but to preserve the current plateau.

The only way to increase global aggregate oil production during the next ten years is to exploit unconventional sources. But the investments have not been made and their economics is uncertain.

Oil Price Resilience in Doubt for 2010

Tue, 22 Dec 2009 07:37:37 -0500

Same thing. An exchange rate is a relative price - the rate at which two currency are exchanged.

You're being sophistical.

On Dec 21 11:30 AM Road Runner wrote:

> The dollar is not getting stronger. It is the Euro that is getting
> weaker on speculation that Greece and other Euro zone countries may
> default on debt. When this fear and the associated currency manipulation
> (talked about last week on CNBC's Fast Money) subside, the dollar
> will continue its natural decline path. The dollar must decline
> against emerging country's currency because those countries are growing
> faster than the US.

Junk Bonds: 2010 Will Be a Challenging Year

Tue, 22 Dec 2009 07:23:03 -0500

I gently disagree ...

Yes, junk bond defaults will rise.

But are these defaults going to sharply cut into the returns on holding EMB or JNK?

Maybe it falls a percentage point or two. But is that reason to sell, pay capital gains tax, commissions, etc. ?

I doubt it.

Apha is hard. Beta is easy.

On Dec 21 09:09 PM Jimmy Lathrop wrote:

> Mr. Morris is correct. I clearly remember his article last spring/summer
> when he pointed out spreads over Treasuries were at historic highs
> and assumed an unrealistic scenario where every single issuer could
> default.
>
> We know the rest - subordinated debt issued from Ford, Genworth Financial
> and Avis Rent-A-Car were trading at around 35 cents on the dollar.
> They are now trading at 90 to 95 cents with tight bid-ask spreads.
> This is due from investors fleeing equities into bonds but unwilling
> to accept low yields and from companies taking advantage of the fragile
> credit markets to retire their debt either through drawing down on
> revolver lines of credit from banks or other measures to buy back
> their own bonds at low prices.
>
> After Labor day, high yield prices had no where else to go and have
> bobbed around a range. Volatility is reflected in wider bid-ask spreads
> for low credit companies but even corporations on the brink of bankruptcies
> are bidding more than fifty cents on the dollar which suggests demand
> outstripping supply and lowering of standards. Moreover, as the retail
> investor looks at the YTD performance of a high yield fund, money
> flows into mutual funds which are obligated to purchase high yield
> debt, which makes the supply even scarcer, a market based on investor
> inflow, not on fundamentals of the underlying companies or lien priority.
> High Yield debt is beginning to resemble an asset bubble in itself
> due to scarcity of issues and investor demand rather than fundamentals.
> A raise in interest rates would indeed push returns to zero or negative
> in some portfolios.
>
> A lot of things would have to go perfectly right - high 4Q growth,
> and moderate growth in 1Q10 and 2Q - to justify a repeat of 2009
> high yield performance. Prices may go up farther into the surge of
> January buying but from a total return perspective, as the bid-ask
> spreads widen and the number of defaults increase, and relatively
> high prices, now would be a good time to sell high, as the investing
> manual oft instructs.

Are ETFs Driving Up Gold Prices?

Mon, 21 Dec 2009 17:01:07 -0500

Depends on the standard deviation.

You give a point estimate. What is the statistical uncertainty associated with that estimate?

And by the way, how was the correlation estimate generated?

Using daily, weekly, monthly data?

It all makes a difference.

On Dec 21 08:23 AM texpat wrote:

> In an article assessing the effect of ETFs on the gold price, James
> Turk states "...from the end of last year through December 15th,
> the correlation coefficient between the price of gold and GLD’s recorded
> ownership is 0.468. In other words, their correlation is tenuous..."
>
>
> See www.fgmr.com/fractiona....

International Stock Investing: Diversified Timing on Country ETFs

Mon, 21 Dec 2009 14:45:15 -0500

This is silly. First of all, it smacks of data mining. There is no logic behind 10 month moving averages. What the author did is data mine until he found a moving average that backtests well.

Unfortunately, backtesting does not lead to superior forecasting. Probably because noise is mistaked for signal.

Second of all, placing equally weight means placing big bets on small countries like Singapore and small bets on big countries.

I really want to bet a big chunk of my portfolio on Singapore - a country that has to import its drinking water ...