SeeTheLight

Survival of the Fittest: Save Haven Investments

This article is just scary, it pays lip services to all the cons while pumping all the pros. This is article is a prime example of the fallacy of slippery slope:

en.wikipedia.org/wiki/...

Here's a consideration from a link in your rant.

"Stillwater Mining has always been a marginally profitable asset due to its environmental sensitivity and the cost of labor," said Michael Kavanagh, a metals and mining analyst at UralSib. He said Switzerland-based metals giant Xstrata and South Africa's Empala Palladium were potential buyers of Norilsk's stake.

Perhaps the Russian's are trying to sell their stake in SWC because they think it is no longer economically feasible at the current palladium prices. Let's face it, its cheaper to produce the palladium at Norilsk than with SWC. Your article only postulates on a single possibility.

A second issue. They are not going to shutdown Norilsk. To do so would effectively shutdown the company. Despite producing 45% of the worlds Palladium, the revenue derived from Palladium only makes up 10% of Norilsk's overall revenue. The majority comes ... surprise surprise from nickel. So they are not going to shutdown the mine to corner the palladium market. To do so would mean shutting down the company. Kind of hard to corner the market if you are not operating.

Third: the article then states that owning a car is a necessity. Perhaps, although many New Yorkers might disagree. Anyways assuming it is true, does your 16 year old kid require a car? Do you need to buy a new car every 2 years or can you use the car you have for longer periods.
The fact that Chevy and GM are talking merger speaks volumes to the demand destruction in the automotive industry. Arguing that a car is a necessity is like arguing that people need to wear shoes. Yes they do, but they could get by with one pair if they had to, rather than owning many pairs. The demand destruction is occurring in the discretionary car purchases, not the necessity purchases.

Look, I actually believe at some point that PGM, base metals and commodities will turn around and recover some ground (but not right away, as the deflationary pressures still outweigh the inflationary ones right now), but anyone thinking we are going to reach the bubble levels of the past year needs to take off their rose colored glasses.

This author's glasses are more red than pink.

Moody's Makes a Bad Situation Worse

I don't claim to be an expert. But the past 2 years the economy has still been growing (albeit at a slow growth rate). We are about to see major layoffs and a recession. Second of all, the housing values are still falling, anyone with balloon mortgages up for renewal are likely 100% foreclose and repos. All of this leads me to believe the delinquency rate is going to continue to grow. Your own figures show that.. 24 Billion losses to date, 38 Billion in the pipeline, and probably a bigger slice of the pie in the future. Once the introductory rates disappear, delinquency is going to accelerate. Plus the US can not keep these artificially low interest rates forever. This a foreclosure perfect storm.

The 77% delinquency rate is probably high, but at the same time I think you are severely low balling the severity. The past numbers don't imply the increased risks that are just beginning to materialize. It is getting worse, not better.

As for the downgrade. Well gosh gee, its part of the risk that you take when you invest in a company that Moody's may screw up and give a downgrade that isn't fully justified. Suck it up princess. Think that analysts don't downgrade stupidly? Of course they do. If you assume that the rating companies are perfect and aren't going to be overly cautious in this environment, well I think you might be in the wrong business. Boo hoo, I lost some money. This club is crowded, but hey come on in.

As for prosecuting or investigating, get in the litigation line-up, this crisis will keep lawyers busy for the next 20 years.

I apologize if this was a bit harsh at times, but I am really tired of people blaming pointing fingers at everyone except themselves. It was a housing bubble and you were blind to it. All these risks were there. You are responsible for your investments, not THEM (whoever you think they are). Caveat Emptor. I've lost money in this whole mess, but I know other people are greedy and unethical and are all trying to look out for #1. That is the world we live in. It will not change no matter how much regulation there is or how much you want it to be fair. I accept the blame that I am the only one truly responsible for my money. The possible criminal actions of others is just part of the risk in any investment. It is not fair but that is how it is in life.

I suggest next time you consider the counter party risk that there are shady operators out there and that there will be another scandal down the road.

Just my opinion.

Is Gold A Sucker's Bet?

The author clearly has been wrong in the past. Does that mean he's wrong again? Probability theory says yes, blind squirrel finding a nut theory says no.

To all those contrarian people who say "I'm doing the opposite of this guy because he's always wrong". I just simply say, now who is investing irrationally.

Lastly, to everyone who clearly showed that Gold has held up its value better than everything else since the 1970s, I agree with you, it has. But on the flip side of that argument, doesn't that mean that Gold is overvalued now? Simple economics 101 says that an item can not continue to grow past its true value with respect to other items. Gold is more valued than all the other goods? Why? Is more useful than it was in 1970, has there been some new SUSTAINABLE demand for it? Ponder those for a minute.

Can gold go up further? Sure, but can it go down spectacularly? Yes. I believe the risk reward on Gold is not good. With Gold you are simply betting that the system is going to fail. A possibility, but still a long shot. If the market stabilizes and the crisis relaxes, Gold will fall as people return to other investments. Someone will be left holding the bag.

Good luck all, lets see if this blind squirrel finds a nut this time. I think he will.

Akamai: Why Charge More for Streaming Video Delivery vs. HTTP Delivery?

Wow, should akamai follow the lead of all its competitors? Your "vision" seems to assume that "streaming" versus "http download" are the same and should be priced similarly. An example:

Let's say a small competitor owns a gas station and it decides to price its premium gas at the same price as its regular gas. Other stations follow suit. Should the market leader follow suit? Depends on how elastic the demand for their product is. If they have loyalty and some perceived difference then no. If is truly a commodity and people will switch to the other companies, then yes.

Akamai probably thinks that they have a perceived difference. They might be right, they might be wrong. Time will tell. I own the shares, but more because they are the market leader rather than their pricing strategy. I assume that if their pricing strategy results in declining market share they will match.

You obviously know that streaming is "more" expensive as stated in a post above, I assume since you work for streamingMedia.com that you know the benefits of streaming over HTTP delivery. I am surprised that you wouldn't realize that selling the premium product at a lower price is simply a way to try to gain market share against a market leader. Econ 101 really, a VP should know that.

Also, as a VP. I am surprised you get so easily rattled by comments to your posts, with the credentials on your bio, you'd think you'd be above a cat fight, doesn't look good on you.

Cheers.

Our Coming Depression

Heavy doom & gloom. Undoubtedly it is bad and it will get worse. America was definitely living beyond its means and will suffer the hangover of a long party. Instead of accepting the hangover after the dot com bust it kept drinking.

Yes there are parallels to the great depression, but there are some things that are different than in the past. The author notes some of them in that instead of reducing the money supply in response, it is adding more liquidity. This is unprecedented, is the author correct. I know not.

The other thing we have now that we didn't have in the past is the Internet, a grass roots method to inform the general public outside the main street media. In another Seeking Alpha article, another author talked about how financial markets and even the dollar are all based on trust. That trust has been shaken.

The fact is the only way we can truly get to a full depression is if collectively the world gets so panicked that everyone goes into a bunker and hides (the protectionism noted above).

I have no political affiliation to either American political party since I am Canadian. But the author makes the assumption that the democrats will get elected and their policies will exasperate the situation.

Personally, I see this article as irresponsible. It is well written, and has an easy to follow logic, and let's face it, it is a definite possibility. But even as it commends the American people for their reaction to the bailout bill, it condemns them to make the same mistakes of the past. Is the scenario outlined above possible? Yes, but only if everyone buys into it. Trust is key here.

I think everyone needs to accept that the party in America is over, and it will be hard. But if people irresponsibly incite panic it will be worse.

Will you lose money? Yes. But so will everyone else in the world, we will all be a little poorer (a period of deflation will occur), but if the underlying value returns it just means that everything will be cheaper and hey you might be able to buy something with a dollar then.

I commend the author for a well written article that has described accurately where we are today and the hard road ahead, but as someone who is clearly intelligent I find it hard to fathom why he would not consider the impact of his words and how they are just another irresponsible act on top of all the others.

I hope this helps those who are considering burying themselves in a storm shelter. By trying to help everyone else calm down maybe we can make sure the future is merely painful instead of catastrophic.

Time to Hoard Cash - Cramer's Mad Money (10/6/08)

Cramer is an excellent trailing indicator. If you have not already set aside some money to catch some value when the market starts to rebound, I'm not sure now is the time to do so. Can the market fall more? Of course, but the risk / reward ratio for equities is getting better each day, if you rode the market down this far why risk missing the upswing? No one wants to be that guy that times the market perfectly in reverse.

Good luck and keep your wits about you.

Bailout Bill Passes; What Happens Now?

An insightful article. But one question that concerns me with this statement:

"Looking at deflation in terms of money supply (money that is actually lent) and credit (marked to market), the proper conclusion is the bailout bill does not change the picture, and that picture remains deflation."

I'm not sure I agree with the conclusion in the short term. Here's why. You suggest the money supply has not been increased. But if the fed printing presses pay for the 700B then the money supply is increased, it buys the bad debt and allows (again in the short term) for banks to supposedly be more appropriately leveraged. Here is the question. Do the banks turn around and lend that money (increased by the money multiplier of going through the bank system). Short term that cash infusion (whether printed or by foreign investment in T-bills), will cause an increase in the money supply if the banks loan the proceeds of the sales out. Which if I recall is the intention of the bailout in the first place, allow banks to get back to lending.

Medium to Long term I agree with you, the USA is overinflated and the only way back to equilibrium is deflation (assuming the US and its citizens ever decides to pay back their debt).

I'm interested in your thoughts in response to this Michael.

Cheers.

Bailout 1.1 Passed. Will We Have to Go Back to the Well for v2.0?

A major triumph for America. With the world watching intently, it voted down the sleeker bailout 1.0 (which I thought was a poor plan but better than nothing), instead to pork it up with a bunch of crap aimed at bribing votes (which I thought they should vote down). Nice display of American hypocrisy, you can't take the bitter pill without the "sweeteners".

This will only delay the inevitable. The balance of payments has been imbalanced towards imports for a long time in the US and American have been paying it with more and more debt. Now they have chosen to run the printing presses or take more loans (god forbid they raise taxes like Canada did to get rid of its debt and deficit when their government overspent in a similar mess).

Sometimes you just have to suck it up and take responsibility for the thievery of your fellow citizens. Put them in jail, throw them out of office, but the price tag is still there and can not be paid simply by printing cash or borrowing more.

As I said, a triumph for American hypocrisy. You are committing economic suicide. Comeuppance served with a side of pork.

Do you really believe any country watching this will want to invest at anything other than loan shark terms? So it means likely short term inflationary as more dollars are printed and dumped into the economy.

Long term, deflation, the balance of payments needs to inverted. Welcome to a long recession. As for the wealth divide, it will continue. The fear of socialism is driving it. Freedom in America, what a joke. The masses have been indoctrinated to think that this slavery is a freedom of choice and that the free market will give wealth for all. God forbid we have social programs to help support the poor and middle class. That's socialism. Evil evil! Better than any dictatorship or communism could do, make the masses believe that the divide of wealth is not just acceptable its preferable.

Up until now, the free market worked for America because they were so far ahead of the world in manufacturing after WWII. That advantage is slipping each year. The more you resist reality, the bigger the hangover. USA, a country run by the socialism of money (aka lobbying), only they indoctrinate that that is the free market, and since occasionally a Bill Gates rises from the masses to join the elite, the masses think its freedom. Pipe dream for all but a select few, keeps the "dream" alive. Better than a dictatorship or communism. America is bliss.

Big Blue's Stock May Be Affected by IBM's 'Bank'

@ Is this right:

I think you might be a little confused. The 46% margin means simply that for each dollar earned in interest it only costs 56 cents to earn it. This doesn't imply that IBM is charging loans at Loan shark rates.

For example. Let's say some one buys (not leases) a mainframe for $100,000. Then they finance it at 8% per annum. IBM's server group records the $100K revenue and the financing group earns 8K revenue in the first year. Then of that 8K revenue, it costs the finance group around 4.5K to earn it (paying salaries, borrowing costs, etc.). Obviously this example is a little simplified but it should illustrate it.

Pretty sure there are no loan sharking practices here, simply making it easier to buy the mainframe. If someone wants to lease a computer and re-sell it back later... why not? And It's not like IBM is forcing them to use their financing arm, they can go to bank if they want.

Hope that helps.

Big Blue's Stock May Be Affected by IBM's 'Bank'

@ Is this right:

I think you might be a little confused. The 46% margin means simply that for each dollar earned in interest it only costs 56 cents to earn it. This doesn't imply that IBM is charging loans at Loan shark rates.

For example. Let's say some one buys (not leases) a mainframe for $100,000. Then they finance it at 8% per annum. IBM's server group records the $100K revenue and the financing group earns 8K revenue in the first year. Then of that 8K revenue, it costs the finance group around 4.5K to earn it (paying salaries, borrowing costs, etc.). Obviously this example is a little simplified but it should illustrate it.

Pretty sure there are no loan sharking practices here, simply making it easier to buy the mainframe. If someone wants to lease a computer and re-sell it back later... why not? And It's not like IBM is forcing them to use their financing arm, they can go to bank if they want.

Hope that helps.

The Economy Won't Be Ignored

Sorry when I said "smallest spending" above I meant "smallest per capita spending on government programs"

The Economy Won't Be Ignored

@ Socalism... So your recommendation is to cut taxes and cut spending more than you cut taxes? Remember the US is already running a deficit. So if your policy is to cut taxes, (which the bailout plans to do), you will need to cut spending as follows:

spending cut >= tax cut + annual deficit

Ok, I'll play along. Where to cut? Medicare - what medicare? Defence - would be nice to get the troops out of Iraq, but what about Iran's nukes, social security? - its already not enough to retire on, why not zero that out.

America already has the smallest spending of the G7 countries (yes the rest are socialist countries). But hey, perhaps the US can be run on a dollar fifty.

I think you are dreaming, cutting spending just means you end up paying for it anyways. Not in tax but the price in goods.

It really is irrelevant, either solution could work, the key being that the US can not keep running a deficit and increasing the debt.

The Economy Won't Be Ignored

Plus, the new bailout has tax breaks. So its back to the policy that got America into this mess in the first place, run up the debt, pay for it later.

Except the price tag of paying it later gets more and more expensive. Long term effect of the bailout, net negative. Sadly the original bailout was less damaging long term. But it's an election year. Throw money out the windows.

I understand you need to grease the financial engine here, but the right way was to increase taxes, not increase debt. The pass the buck policy of America continues. More credit, cheaper, bubble onward.

Fool me once shame on you, fool me twice shame on me.

Dollar Goes Down Along with Bailout Plan

Sure, let the Fed provide the liquidity, print more money. Don't raise taxes. That's what got you into this mess! Italy, Argentina, they did that, look where it go them. A devalued currency, hyperinflation, and unemployment through the stratosphere. You are not immune to this, you are not entitled to anything. All the other empires of the past thought this. Guess what, they are ancient history.

You Americans need to start saving and so does your government. Your government saves by cutting expenses and/or raising taxes. Cutting spending is basically idiocy since it will cause your economy to freeze even more (with the exception of removing your troops from Iraq). America has been living large on credit and high liquidity for years. You will pay today or tomorrow. You can not solve this by printing more money (although sadly in the real short term you need to since everyone is tightly squeezing their money right now, even as it slips away).

If this were one or two companies, no problem, let them fail and a stronger company will buy them out. There are no strong companies in America left, they are all teetering, the only somewhat strong institution left is your government. But ignorance is winning the day.

You are going to pay in higher taxes, the choice is today or tomorrow. Tomorrow will mean that your pensions, IRAs, and 401Ks, and jobs will be wiped out along side.

I know, its not your fault. The Wall Street executives and inept politicians did this. That and those crummy sub-prime homeowners. Guess what? They are Americans, its all the same problem whether you caused it or you neighbor did. If an arsonist sets your home on fire does it matter that you didn't cause it? Well guess what, America is burning. Save the blame game and the trials for later. Worry about fixing the problem now. Put out the fire first, catch the arsonist later.

Personally, it is painful for me as a Canadian, since we will suffer too, but let's be clear about one thing. Our banks are stable, our currency is stronger than ever before, and we have tons of natural resources to rely on. Similar claims can be made for Russia, OPEC, China, India and most of Europe. You Americans will suffer more than anyone else. The choice is yours.

Dollar Goes Down Along with Bailout Plan

You Americans need to look at the big picture here. You have a broken banking system, each day you waste pointing fingers is just going to exasperate the problem. Your banking system is broken, no one is lending short term, soon non-financial companies will begin to fail, not because they are bad, but they don't have enough short term cash on hand to pay their employees, suppliers, etc.

You can certainly arrest everyone one and set blame later, but just ignoring the problem will just cost you more in the end. But hey, you've been ignoring the problem for 10 years, why not keep going? Look where that got you.

Good luck with that and remember America is bliss.