Yogidad

The Recovery Was Too Expensive

Just keep buying gold I guess Dude. Many of your arguments have been addressed elsewhere and you make no response to those important points. What are your present positions? 100 percent in tea bags probably. It's always easier to point out negative possibilities.

Citigroup: A Simple Analysis of a Terribly Complex Company

Terence - I like your decision to argue that owner's should hold while others should refrain from buying C. Your instincts were correct. First: Many people holding C will realize losses or gains if they changed position. Given the dubious nature of valuation (which you concede) it may not be worthwhile to transverse the ramifications of a change in position. Second: Johnsond's comment ignores a fact of investing - especially for individual investors. Choosing to purchase a stock begins a long-term relationship that will take up your time in the future. You have now chosen to watch that stock specifically and research and read as much background as you can. Once again, given the unique factors in valuing C, one must take special note of the unique factors affecting the values, and despite the outcome of your C valuuation, it may be wise to move to stocks that don't have the valuation difficulties. I vote a strong yes on your instincts.


On Sep 04 11:57 PM Terence Chow wrote:

> Hi Johnsond,
>
> You make a very good point. Holding stock or cash should be irrelevant
> to an investment decision as you should simply move your money to
> the best return per risk investment you can find.
>
> My only caveat is that I find it odd to advise selling something
> undervalued. I'd rather wait for it to be fairly valued before I
> suggest selling it.
>
> If you are in cash however, I would suggest looking for a better
> reward/risk investment because I believe a better relationship exists
> than Citigroup at this moment.
>
> These are the reasons I have a different stance on what to do if
> you own the stock or not.
>
> However your point is still very strong and I am definitely thinking
> about changing my stance. The final argument I would have against
> it is that the vast majority of individuals who try to time the market
> are unprofitable. It is much safer to wait until Citigroup is fairly
> valued, sell it, then look for something undervalued again.
>
> Thanks for your comment though I will definitely think about that
> next time I make suggestions to people to continue holding a stock
> just because they own it and then turn around and suggest people
> who have money not to buy the stock.
>
> On Sep 04 02:54 PM johnsond wrote:

Blowing Bubbles (Part I)

It is universally agreed that this is unchartered territory. So drawing conclusions from past events requires more thought than is presented here. I find it flawed whenever someone merely points to an ideaological standpoint as their basis for a conclusion - "outdated . . . Keynesian" I can't say what is meant by that. Everyone already knows that it's going to be touch and go (even if they don't admit it). So what are you offering here?

The Fed's Bubble Trouble

I want to know whether you are actually shorting US treasuries somehow or other in the market?

Social Security: A Ponzi Scheme?

Really - where does this ridiculous outrage come from? The American taxpayer has always been on the hook for the aged who cannot finance their own retirement. The bottom line will not and never has changed whether social security exists ot not. Medicare is an obvious example of the taxpayers ongoing obligation. Social security merely supplies individual incentive during working years and increases the possibility that individuals will remain in control of their lives after retirement. Thus providing savings only because the management process is handled by the individual rather than the state. Social security is merely a segregated tax payment. It does not matter at all if social security fails because the obligations will be paid by taxes as it always has been. No one survives on social security alone now and never has.


On Dec 30 10:43 AM Guero wrote:

> Finally someone exhibiting some common sense around here.
>
> If SS is a Ponzi scheme, then by that same definition so is the stock
> market & real estate. After all, you are always looking for the
> next sucker in those places too.

In Madoff We Trust

Everyone knows the pyramid aspects of the social security system. It's taught in grade school and the commenters that say they never thought of it before - simply cannot be believed. The fact is that one way or the other the government (and therefore the taxpayers) are responsible for the welfare of the aged if they cannot pay for themselves. Social security is simply a way of creating some indivdual incentive and some individual control and autonomy in later-life - where possible. Everyone knows that the terms must be adjusted in the near future.
The only interesting part of the article is the very short discussion relating to of the stock market's similarities to a Ponzi scheme. Yes valuation bubbles are very close to a Ponzi scheme. And the lax enforcement of transparency and reporting regulations when the market is on a constant rise is fixable if we showed the will-power while the bubble is making everyone heady.

Great Depression Not Imminent, But Inevitable

The author is saying that valuations of equities and other investments (this would include real estate) are heavily inflated because of the false notion that derivatives hedged extremely speculative bets. As this notion fades, valuations will continue to plummet and less money will be thrown into markets as a more objective notion of risk takes hold. Therefore, there is still a very long way down on this basis alone. (Obviously there are a number of other reasons to predict valuation losses in the future.) The author is noting both a dramatic difference from the Great depression and how it could lead to the same place. I think this answers your question.


On Dec 17 07:49 AM Maya_ wrote:

> Silly article. One has to acknowledge that derivatives have serious
> destructive potential. But policy response is likely to contain the
> damage. As far as whether "no insurance" will cause a great depression;
> I wonder why the great depression ever got over; after all derivatives
> in its present day form are a very recent phenomenon.

Proposed Homeowner Bailout Plans are Loaded With Problems

First: Enjoyed the article and made good points. A complete discussion of the failings of the candidates' proposals would be interesting and helpful.
Also, although I like Lok Sang Ho's general notion better than the candidates', I don't think that the plan would work either. I.e., Deliver an offer based on an appropriate appraisal standard to those owners and/or banks for viable properties. A certain segement of the foreclosure market could be assisted I guess but I don't think you could get very far with alleviating the crises. The same segment would probably voluntarily refinance if reasonable rates were offerred in general and penalties and prohibitions were eliminated.

Schumer Is Way Off

Schumer is pretty much right on. The most important aspect of this bailout at this time is the LIBOR spread. Buying mortgage securities would take forever - and possibly longer - to bring those down. However, direct capitalization will remove the solvency fears that have caused the spread. The news on hedge funds that purchased the securities "distressed" at .85 to the $ is that they're holding .65 now. There is no way that a price can be put on those securities without many man hours of unraveling. Give it up - you have no idea what the problem is.

Coming Soon: The $600 Trillion Derivatives Emergency Meeting

I doubt that the derivatives market is operating on trust - if it ever did. In cases where the claiming party to the contract also owns the instrument perhaps it could be enforced as a form of insurance. Otherwise it was just money on the gambling table anyway. My understanding is that the liabilities far outweigh the actual instruments ("references"). Since it is a logical impossibility that the contracts could be universally enforced the courts should not enforce the contracts. Courts are about real things and real damages - the real economy.

Fannie and Freddie Did Not Cause This Crisis

The article said nothing about Democrat or Republican. Insiderman your comment only illuminates you and not one of the relevant issues in the article (i.e., the percentage of responsibility for the bubble attributable to Fannie and Freddie). Part of what caused the agency failures in this crisis is a lack of reasonable public discussion focused on issues placed in a proper heirarchy. These get entirley lost as commentary is devoted to rewriting the past and, in this case, rewriting an article that made a truely legitimate attempt simply to be logical and analytical. It is well known that Fannie and Freddie did not start the subprime securitized/derivative... market. The subsequent entry into that market was not necessarily a significant structural event in the chain. Ask yourself these questions: Why is blaming anyone but a member of your party so important? Why is convincing yourself and the public of the benefits of a blanket ideaology more important than fixing a world wide financial crises? Finally, how can you ignore the widely disseminated information that Fannie and Freddie were manned by members of both parties and Fannie and Freddie successfully lobbied both parties?

It's Time for the Govt. to Spell Out the Risks of Not Rescuing Financial Markets

Well everyday people all over America go to work and receive a check because the financial system works. Thousands of small businesses depend on credit in constant cycles to stay afloat. The financial system, which includes Wall Street, does have to keep functioning to keep Main Street alive. As capital retreats to safe havens it is less likely to help people stay or become employed. So, even though the plan is not much of a plan at all - the sooner the better.