Trading to Win

A Bull Market That Few Are Buying

Stages of Obama:

1. Obamarama- campaign and election.

2. Obamanomics - summers, geithner, stimulus and budget. A blend of Statism and Socialism.

3. Obamageddon - 2011?

The Great Depression: Are We Fearing the Wrong Thing?

How about 1938? John Kay the British economist:

"Yet there is another, perhaps no less gloomy, way to draw parallels between the present crisis and the Great Depression. From this perspective, we are not at the start of the crisis but several years into it. The analogue of the 1929 Wall Street crash is not the 2007 credit crunch, but the bursting of the New Economy bubble in 2000. The follies of the 1990s resembled those of the 1920s, as Galbraith’s readers know. The underlying structural weaknesses of the world economy – US budget and trade deficits financed by Asian surpluses – re-emerged in 2000 after being disguised by the imaginary wealth of the New Economy.

The difference between the years after 1929 and the years after 2000 is that the policy mistakes were almost opposite. This time monetary and fiscal policies were strongly expansionary from the outset. These measures led to a wide boom in asset prices, extended unsustainable credit levels and induced further growth of the fundamentally flawed financial infrastructure on which the 1990s boom had been based.

In 1937-38, markets and business leaders came to doubt the durability of the business foundations on which partial recovery from the Great Depression had been built. In 2007-08, markets and business leaders came to doubt the durability of the financial foundations that had supported consumption and asset price growth after the New Economy fiasco.

Our capacity to learn from the Great Depression is limited because we do not know how economies would have evolved after 1938 if politics had not supervened. Life, said Kierkegaard, is understood backwards but must be lived forwards."

The Global Economy Is Like a Torn ACL

Macro,

My brother did his ACL in martial arts. He elected to exercise and strenghten his muscles rather than have an op. He went via the NHS and thus got incredibly poor treatment. I implored him to go private and see the best but he refused. He saved himself a few quid but wasted much time and took too much risk for little reward. He has not gone back to Marital Arts but he does ski with a brace. When he gets older he will probably get arthritis.

If HeliBen was serious he would start QE and flatten the yield curve so as to help mortgage refinancing, get cash to struggling homeowners and pump up the feelgood factor.

I have braced myself for this and gone long TLT.

Good luck with the knee and always get a second and third opinion, if in doubt!!!

Gordon Brown: Not My Fault

Brown admited in 2005 there was a housing bubble but did zilch to arrest the problem. His maiden budget is worth reading - he flunked his own rhetoric.

What Should Obama and Brown Discuss?

Gordon Clown will hopefully apologise for creating the Bubble of Britain. His plane will land on Ascension Island were Gordon Clown will be exiled for life.

The 'Stress Test' Challenge: Transparency and Intellectual Integrity

Hi Rakesh

Any chance you could do a piece critiquing the UK's policy of insuring c.£500 billion of rubbish assets - will it work or fail?

Thank you

The Great Awakening: Boomers, Your Crisis Has Arrived (Part 3 of 3)

Good piece James. You are right, a selfish and greedy generation are imperiling the world because of their addiction to debt. They have deformed the economy. Instead of tackling this problem and facing reality, they are hell-bent on racking up more debt. They are actually insane. They have no moral compass. I think Senator Dodd sums up America. One man is but a reflection. In the UK we have Tony Blair who lied us into a war in Iraq, good and honest people died for lies. The ruling elite, plutocracy, are destroying the fabric of liberal democracy. It is very sad. Thank you...

Roubini and Taleb, Together Again

The CNBC people are just fools. Roubini and Taleb are too polite. They should have just walked off. They are no fit to be called journalists. Maybe they should be working for the E Channel. They have no class.

Bonus Scandals Begin to Emerge

BANKSTER

A portmanteau or blend word derived from combining "banker" and "gangster."

Japan's Grim and Bear It 2009 Outlook

Hi Edward,

I am really enjoying your excellent analysis.

I hope one day you can turn your analytical mind toward Britain. There is a raging debate going on, as to whether the country is heading for an IMF bailout.

I wonder if we are heading toward an 'event horizon' were our debts are too large to roll over and service.

Thank you

Is the U.K. 'Finished'?

Rakesh,

In excess of five million workers (roughly 22% of all employees in the U.K.) earn less than $10 a day.

Do you mean $10 per hour?

Will Gordon Brown's New Bailout Save U.K. Banks?

Macro Man,

I think you are being a tad optimistic. My reasoning:

A or L

A = Argentina = Depflation.

L = Japan = Deflation.

As we enter a depression there seem to be one of two paths that we can travel. One path accepts that there has been a debt bubble, that this is the cause of the depression. The other path does not accept there was a debt bubble and that it will be policy responses that will stop a depression: Bernanke Panky is a master of the 30s and Japan’s slump, his wisdom will save us from a depression.

If you accept the L then you accept that it is better to let the market find it is price and not bailout the badly run businesses. You go cold turkey. You do not run up massive debts on the State’s balance sheet, which only leads to higher taxes. You want people to save. You want the State to cut it’s cloth, to face the new reality that the high tax take from the debt bubble is not coming back. The delusion is dead. You want the State to cut business regulations and taxes. You want all your focus on nurturing wealth creating industries that can sell their goods and services globally. You give grants to such companies.

If you accept the A then you accept that you can manipulate the price in the market and bailout badly run businesses. You put off the day of reckoning. You run massive debts on the State’s balance sheet. You want people to borrow and spend. You want the State to expand and you expect the pre-bubble days to reappear like magic. The delusion lives on. You continue to over regulate and tax business. You want all your focus on spending and piling up debt. You give money to the profligate who ran up too much debt, you start printing money.

Life in the L is like hell. Many lose their jobs and GDP collapses.

Life in the A is horrible. Many lose their jobs and GDP collapses.

L lasts three to ten years as the economy is re-engineered to sustainable wealth creating industries. House prices fall 50%+ from peak to trough, with little chance of rising for many, many, years. People start saving. Money is sound and the Pound holds up relatively well, considering the situation. With sound money the populace is able to clothe and feed themselves, the lights stay on. The State supports those in trouble. It invests in retraining.

A leads to a collapse in the Pound as the markets realise that the country can never repay interest and principal. This leads to unsound money and rising inflation as import prices explode. Interest rates need to rise but this will gut the debtors. Wage policies are enacted and a spiral of inflation takes hold. This leads to hardcore poverty for millions as the Middle Class sees it’s wealth vanish. With a collapsed currency few are able to holiday abroad. The IMF are called in and State spending is slashed.

Both A and L lead to a drop in living standards for the populace. The key plus for L is that once the pain is out of the way a new base for growth and prosperity can be engineered. The balance sheet is strong enough.

With A the balance sheet is wrecked and the Middle Class has been devastated. Argentina is a prime example of what happens when the wealth of the Middle Class is squandered.

In the L one gets a sharp painful deflationary depression.

In the A one gets a multi decade long depression that could lead to inflation = Depflation. The country becomes an Undeveloping Nation.

Our ruling elite and most of the punditocracy are taking us to A.

IMF On Lending Spree - Needs $150B, At Least

Sunty,

Spot-on.

The UK could become an Undeveloping Nation, a al Argentina.

IMF On Lending Spree - Needs $150B, At Least

Rakesh,

A few smart cookies in the UK think that the UK will end needing an IMF bailout. What are your thoughts on this happening?

Ben Stein Watch: January 11, 2009

Felix,

Could you please do an Anatole Kaletsky Watch, I'm sure the readers will find it very amusing?

Thank you