MrRoundel

Personal Responsibility and the Housing Bubble

The media is responsible to the extent that they will write anything in order to make a buck. For them it's about survival. They have no greater purpose outside of profit, like most corporations. It's people that have a big problem with what is, but should not be, a blurry line between what they need and what they want. Avarice, greed, covetous of things material, the people move towards accumulation of bigger cars, bigger houses, better spouses, in order to feel that they've somehow "arrived". Unfortunately, when so many keep their eyes on the same prize, to the possible discount and detriment of most else, they will do what they have to do to attain things. Debt is a small price to pay for the ultimate gratification.
Since the eighties it's been a commonly held belief in America, that success was judged by how much debt you had. Today, people might feel a little differently. This belief has now morphed into something more like success is judged by how much debt you had, how much crap you purchased through debt, and how much risk you transferred to the bank through non-recourse loans.
Madison Ave. is to blame because they facilitate a society that continues to be a market-driven nightmare, where modern marketing's mission is to "create demand". In times past, entrepreneurs generally identified a demand and figured out a way to supply it, or at least supply it better or for less. Today, demand is created in America more than anything else. Modern often entrepreneurs "create" something of questionable value, or figure a better way to market, come up with a catchy name, etc. to better sell some existing product. Case in point- the 70's' TigerRag(Chamois-like) to "Sham-wow". The best one yet, IMHO, is HDTV. I mean, come on, who the heck really needed a clearer T.V. picture than they had a few years ago? People pay thousands of dollars for a technology that they're being forced into with the help of the U.S. government (Digital TV mandate), and they go singing to the economic gallows of debt. Here is a product that was not good enough, on its own merits, to prompt people to part with money, or take on debt, for. Somehow the Fed's get involved and virtually mandates the technological change to a better picture for the masses.
The market-driven internet, rife with new technologies to track what people are looking at, more obnoxious but stimulating ads placed in every blinking nook and cranny is a prime offender in the needs v. wants confusion. Where it can be seen by human eyes, advertise. If they don't notice it, make it blink, or find a better way to assault the senses to force recognition not previous granted. There's getting to be little escape from it. But, that's another story/rant for another time.
The American people need to "re-recognize" the difference between what they need and what they want. America's companies must then go back to satisfying needs, not creating the weak perception of needs and confusing them with wants. If we do this, things will then get better by steady increments. A return to rational living, a return to reasonable expectations, a return to satisfaction. A return to success.

Returning to a Gold Standard Is a Bad Idea

Returning to the gold standard is an idea that has merit behind its rationale. However, in order to do this, what do you think gold would have to be valued at today? I'm sure that someone knows how much gold there is in the world, versus how many dollars. If you divide the dollars extant by ounces of gold, we'd probably have to value gold by the milligram. Being that I own some gold, this would be sort of cool, but not likely.
The growth that has taken place in the world's standard of living, especially that in America, has been build on credit and money expansion. It does seem logical to conclude that a major contraction would take place if the dollar was pegged to gold. Again, this might not be catastophic, providing gold becomes valued in the $30,000 per ounce range. I used loose numbers but based on 14,500 tons of gold extant, converted to standard ounces (I realize that troy is different), divided into an M3 number of $13.5 Trillion. I'm no expert so mess with your own numbers but that's what I come up with.

Global Stock Market Performance in 2008

Wow, I suppose that I should feel pretty good about outperforming Botswana by a few points. Of course this was mostly because my PM holdings, along with contrarian, and foreign bond funds. Hey, I'm only down around 12%. Yipee!!! Oh, I forgot to include the falling value of my house; There is that. I wonder how real estate is doing in Botswana?

Buying USO Is a No-Brainer

I believe that you are on to something. I owned USO about 1 1/2 years ago, made a little money on a trade, then bought back in and held for a little too long, giving back my profits. I never liked the fact that USO didn't offer the same type of direct commodity connection that, say,the GLD ETF does. To me, it sounded like, in buying USO, you're making bets on the success of the gamblers. I'm not sure I like that set up.


On Dec 26 02:17 AM lookbeforeUleap wrote:

> A simple warning for all who expect to make a killing going long
> on USO. I suggest you read the USO prospectus and familiarize yourselves
> with the methodology used by USO to make the Nymex contract investments,
> and the effects of contango. As the fund manager said, even if the
> price of the current month contract stabilizes at the price the previous
> month settled at, USO investors will lose 30% each month since the
> forward month contracts are all priced at over $40. The contango
> was more than $9 at the expiration of the January delivery contract
> on 12/19/08 - so if the February deliver contract simply maintains
> the $33 price that the January contract settled at, the purchaser
> of the February contract on 12/19/08 will have a loss of $9 even
> though the February delivery contract settled at the same price as
> the January delivery contract.
>
> USO sells the current month's contract and purchases the next month's
> contract 2 weeks prior to the expiration of the current month contract
> no matter what the price of the contracts, and as long as the future
> contracts are priced higher than the current month contract, that
> amount of price appreciation will never benefit the NAV of USO.
> Why do you think their are so many shorts on USO - only a fool would
> buy USO under the present conditions. Wait until the forward month
> contract prices come down, or the current month contract price stops
> dropping so precipitously, so that the contango decreases and when
> USO rolls out of the current month contract it can buy the next month's
> contract at relativley the same price or a much smaller premium.
> Until then, USO will not benefit in price appreciation and will even
> continue to lose NAV if the current month contract price simply stabilizes.

>
>

Hedge Fund Redemptions May Crash Q1 Markets

I find it hard to believe that Madoff's sons are innocent. I suppose time will tell but dad may have just taken the fall. The senior Madoff certainly has worked out less fantastic schemes. Do the apples fall so far from the tree? Call me skeptical. We'll see.

Hedge Fund Redemptions May Crash Q1 Markets

If Mr. Cooper is so sure that the hedge funds are going to be dumping MORE shares on the market in early 2009, I'm pretty scared. What scares me the most, that which is talked about the least, is that it becomes more and more undeniable that the concentration of wealth in America is way past dangerous. Most people that are invested in these funds are extremely wealthy. The institutional investors seem to representing people and entities who have also accumulated massive wealth over the past decade or two. These folks have had more money than they could spend and would put a lot of their capital in riskier ventures, in order to get higher returns, because it was was like playing with "house money". That is until that amount grew so large that they were freaking out about the numbers of zeros next to numbers in their loss column. Once they started selling, it triggered more and more selling, until the market hit it's recent bottom. I'm guessing that the hedge funds have already dumped these massive amounts of debt and equity on the market. This is what's been feeding the bear, IMHO. This concentration of wealth operates like a syndicate, or selling group. Even if it's not a concerted selling effort, they're all accepting the same economic theories, etc. This has the massive cascading effect it has, even in light of $700billion bailouts, because these uber-wealthy hedge fund investors are holding an amount of money that moves world markets more than if all the little investors and governments together works toward a common end. Too much money in the hands of too few. When they are too big, perhaps we fail?
I hope he's wrong, and that we've seen the effects of cascading hedge redemptions. Good luck to us all.