Top Gun

The Fed's Bubble Trouble

The debt needs to be paid, as long as there is huge (non-treasury) debt, excess cash in the system will flow to return principal to creditors rather than to inflation. The Fed will re-inject the debt it acquired as this excess is absorbed. Very complicated, and I'm sure some bright Fed PhD has modeled the whole thing.

Increased gold prices are one way of increasing the money supply as cash is changed for gold. What we really need is for every billionaire to give 10% or so of their worth to needy people today, not as an institution. They could easy immediately put $10-20 billion back into circulation! No impact on our federal balance sheet.

Gold: Wealthy Investors Want Bars, Not Paper

people have stopped buying stuff they don't need with money they don't have because it was a bad idea in the first place,

Best statement I have heard from an internet article/blog in over one year. I have emailed writers asking them to discuss this, to no avail. The financial community does not want to discuss the fact - we have what we need, and now must reconcile the 4,000 sq ft houses, SUV's whose capacity goes unused 90% of the time, etc, etc with our actual ability to pay for them. Just let us alone! Maybe we'll find our families and manners again.

Bill Gross: Buy Early What the Government Buys Later

Ponzi being absorbed by Fed using guarantees from us. Hope these are disgourged back into the private market quickly, hopefully right after all the mortgages are refinanced and by early 2010. A lot will be swapping of bad loans for low interest good loans, there is some hopehere.

I am nauseated by everyone having anything to do with the financial industry.

Citigroup's Derivatives Reduce Bailout to a Non-Event

"Those Wall Street analysts who are recommending long-Citigroup positions should bear in mind that derivative contracts originating in the developing world are also at risk of political intervention"

Couldn't resist - You are indeed talking about the political intervention, to the tune of $8 trillion in guarantees and bailouts, offered by the US government? Perhaps we should be called the regressing world. The real risk is the day when OUR government says "enough is enough". Soon, I hope.

What Are the Chances Ukraine Just Hit the Second Great Depression?

Thank you for a great article. These help me keep my investments (currently actually more like gambling) on track. On the surface the dollar and treasuries seem expensive, but when one looks at the rest of the world, one sees that we may be in relatively better shape, and with the dollar freely tradable as an exchange currency, it may hold up for quite a while. We should wait for all the manufacturing sectors shown above to at least hit bottom before getting to assertive.

Madoff's Fraud Is Nothing Compared to the U.S. Treasury's

Unfortunately, I had the same exact thoughts yesterday.

A Long and Painful Consumer Slowdown - Barron's Interview

Guess you didn't get the memo - the real estate mega growth was caused by credit inflation and was not real growth. She was right, the powers that be manipulated us into growth. This time she realizes the Fed is doing the same thing now. What she is saying is what should happen, but as she says will be socialized away as best as our money printers can.

There is no such thing as investment any more. It's all just gambling. Some day we will invent and make new things, but that looks like a generation away.


On Dec 14 04:13 PM taojaxx wrote:

> I guess that person's track record is a good hint at the value of
> her current opinion: she's presented as bearish real estate in 2002,
> that is right ahead of one of the most bullish periods (2002/2006)
> in the history of the asset class.
> I too can predict 5 of the next 2 crisis.
> Just wonder how much she charges for the "macroeconomic research
> and commentary (she provides) to the institutional investment community".
>
> I don't mean to disparage anybody here and her guesses are probably
> as good as anybody's. What I appreciate in comments is the capacity
> to abstract from the immediacy to focus on the big picture.
> You can't do that by projecting the last five months into the coming
> five years. Mr. Market is smarter than that.
> Just my $0.02.

Bernie Madoff Comes Out of the Closet

Everyone misses the demand side point, it's not just that credit is lacking, need is lacking. As was recently said here, we have pulled forward housing, cars, etc, etc. Without need all the credit in the world will go unused! It will straighten out, and with the lack of need goes a minimal "real" hardship with what may be a severe recession. Maybe an attitude adjustment will be part of the deal, though.


On Dec 12 11:08 AM hoover wrote:

> While Reagan didn't start out advocating bubble economics, his philosophy
> of anti-regulation and free markets without oversight were begun
> and slowly took effect over the next twenty five years. Laffer,
> who had been consider a joke before the far right annointed him as
> the savior of the wealthy, became the spokesman for economic philosphy.
> Supply side economics worked for a while, until the demand side was
> decimated. Now we have conditions somewhat like we had before the
> 30's depression -- lots of supply (from all over the world) but not
> enough people with adequate credit or cash to buy the stuff.
>
> On Dec 12 09:43 AM Augustus wrote:

Greg Mankiw: Swap the Payroll Tax for a Gas Tax

Great Idea.

The Problem with GLD and SLV ETFs

Bad article. Unless you buy the gold and put it in your house, you have counter party risk. Safe deposit - bank could be closed. Own part bullion held by another, they could have a problem. Nothing is risk free, with GLD you trade liquidity for a tad bit more risk. The issuers are highly thought of, so use GLD to increase your gold exposure by maybe 5x over what you would want to hold in physical. That IS an inflation hedge, the physical gold is an armageddon hedge.

Dow Will Equal Gold in 2009

I meant $100's of billions of money supply.

Dow Will Equal Gold in 2009

The dollar remains last safe place to hold reserve wealth as worldiwde assets deflate. Once the deflation stops elsewhere, dollars will be switched back to local currencies, just at the time a bigger supply of $ hits from our absurd deficit.

I'm not convinced the main outcome is massive increase in gold prices, but other commodities should reflate, a good thing if not over done as that ensures planting and harvesting of crops. I'm sure some very smart people in our Treasury have calculated what might happen. Don't forget the last few months have destroyed $100's of millions of money supply that was erroneously deployed to pump up asset prices (houses and ABS's) just so that investment banks/realtors/mortgag... brokers could collect management fees. The bank writedowns mean the $ are no longer available, and the TARP $250B must still be raised (by debt or equity) in order to repay Uncle Sam. I think of this as a stool, where one leg was knocked out and temporarily replaced with government funds - the banks must remake the lost leg and replace it.

There is a small chance things can work out without disaster happening, but now would seem a good time to buy as much of the commodity ETF's as you can as a hedge against rising prices in the stores, and gold as an investment. It's pretty obvious, as stated above, that defaulting on our debt through inflation is the only logical outcome, and we need to convince ourselves to contribute to debt reduction by halting Social Security COLA(remember those from the 80's?) for a while, or reducing like President Reagan wanted.

Surprising Call for Return to the Gold Standard

Better idea, eliminate the Fed altogether, removing the lender of last resort and reducing the too big to fail concepts. Lenders, in a mature economy, would not feel they could take absurd risks and still be bailed out by the Fed.

No absurd leveraged(including 95%mortgages) risks, no bubbles. The need for risk taking is reduced as businesses/economies mature, but paradoxically increases as returns decrease. Until the next railroad/airplane/elec... grid/microprocessor/internet. etc., and maybe even after, we don't need the overstimulation caused by unbridled, heavily leveraged, greed. Regular greed should do pretty well, especially in an instantly connected world.

Peak Oil, Cars, and Depressions

Wow, good enunciation prudentinvestor, I didn't think anyone else "got it". Lower interest rates may be fowling up things, as those folks like me with savings hoard their cash, and dip into interest free savings to buy stuff. The Fed and investment guru's seem to think their precious credit is what's important, when it's really the needs of consumers!!! I don't need anything. My wife and I have been trying to justify buying a GM car to help out, and to use a bunch of GM points. Just don't need it, as our kids will be out in a time frame that means our current car will last, and a smaller new car won't work! Why can't companies and our government go back to meeting needs, and planning accordingly? Too much auto capacity, it just is what it is, so reduce capacity just like Pandit is doing with Citi.

Most importantly, you forgot luxury homes, and maybe just homes, in you pulled forward list!


On Nov 16 04:35 PM prudentinvestor wrote:

> Very sobering article.
>
> You state that "... basically, automobile manufacturers, in their
> drive to sell as much as possible, “brought forward” future sales
> of cars.....". But this is also true of furniture, luxury clothes,
> boats, snowmobiles, motorcycles, home remodelling, etc. Just as
> you said about cars, many people bought these things in excess of
> their normal needs and wants, just out of boredom.
>
> The reality is that the fed, like the automakers, in its eagerness
> to stimulate current demand by easy money for many years, essentially
> reduced future demand. Consumption that would have normally ocurred
> over the 20 years 1993-2013, was actually accelerated and made (by
> the fed's easy money) to occur in the 15 years 1993-2008. Now the
> normal demand that would have ocurred in the next five years, 2008-2013
> has been decimated by this artificial acceleration of consumption.

G-20’s Done: Time to Recheck Buy Signals

For those who don't believe the current administration is to blame for our mess -

Fannie/Freddie reform was proposed in 2003/4, by the appropriate house committee, except that the REPUBLICAN members shot down bringing the proposal to the floor.

Clinton left office with moderate taxes, and a $120 billion surplus

The only fascists I'm worried about over the last eight years were the republicans in Washington.

I voted for Reagan, for Bush 1 for a second term. The current group of republicans are spineless, disingenuous, and counterproductive for our country. They have destroyed America.

Good luck to the new leadership.