Lonestar1's Comments

Why Was the PPIP Extended Today?

Mon, 06 Apr 2009 14:51:49 -0400

AS FASB has revised MTM accounting rule, the seller side (banks) has no incentive to sell those toxic assets any more. Perhaps hedge funds know this, and thus do not want to participate. But the funniest thing is that big banks are very interested in setting up PPIP funds. I guess the end result is these guys can swap toxic assets at much higher prices ?

U.S. Treasuries: China's Dilemma

Mon, 16 Mar 2009 10:36:29 -0400

It's so sad to read this article. This is like a bad boy being caught in the middle of his misdeed, and claims he will get worse. What's the chance this boy will prosper? Zero, because evrybody will abandone him.

Bailouts, Inflation and a Golden Future

Sun, 08 Feb 2009 20:32:38 -0500

I agree that Greenspan should take the most responsibility for the problem. He could have done differently by refusing to feed the sugar-hungry Wall Street, public and politicians.

In stead, he chose to become a hero, and indulged in the construction of modern day Barbelonian Tower of debt & derivatives. Now he looks like a big joke in the financial history.

Exactly How Bad Will It Get?

Thu, 05 Feb 2009 18:52:38 -0500

The reality should be worse than shown in this article. Defaults are across board. Of all fears in the market, default is the main one. Fear of defaults freezes business activities, which in turn results in large layoffs. Things are spiriling down. Here are some examples:
---------------------
Wholesalers now would rather hold the mechandise instead of distributing to retail chains and department stores for fear of not getting paid. The larger the retail chain, the more likely it will default on payment.
----------------------
Banks would not lend due to fear of defaults of counterparties. They are households and businesses.
---------------------
No liquidity in credit market is due to fear of defaults by issuers, & defaults by trading counterparties (hedge funds and other brokers, baks etc).

Why Are Gold and the Dollar Running Together?

Sun, 01 Feb 2009 18:46:23 -0500

We have had this virtual economy for so long that runs the real risk of virtualizing our currency. The Fed actions have corrupted our sense of wealth. Getting into gold is to get back some sense of purity.

On Feb 01 03:34 PM PrudentMan, CFA wrote:

> If gold is a hedge against inflation it should be selling around
> $4,000.00 an ounce. Admittedly, I don't have a clue as to why people
> buy gold as an investment any more that Tulip Bulbs.

The End of Gold, Part Two

Sun, 01 Feb 2009 12:47:12 -0500

Although this is a little too harsh, but it's true the article does not add anything new to the discussion on gold.

Both deflation & inflation threats are real. It is economic destruction vs money printing. We are living in a warped world, in which actions of central banks are causing great confusion to our sense of wealth while asset prices are destroyed.

What else would we want to hold if it is not tangible? Gold is tangible. It is real money, pure without stains.

On Feb 01 12:10 PM aw4000 wrote:

> The author needs his head examined!

Obama's Role in the Market's Next Breakout

Sun, 01 Feb 2009 11:14:43 -0500

When would the country abandon the culture of trying to get instantaneous rewards without really hard work? Political theater can be as misleading as financial market. People still need to deal with the harsh reality for many years to come.

U.S. Domestic Debt: What Can Be Expanded, What Must Be Reduced?

Wed, 28 Jan 2009 12:37:03 -0500

The $51 trillion is definitely misleading. The net debt is definitely lower. The data is from Federal Reserve Bank Statistical Releases.

It simply adds all the debts owed by all parties. As such, as far as the net debt is concerned, some items are accounted twice.

One obvious example:
----------------------...
Approximately 1/3 of the mortgage loans are held by Freddie & Fannie. These agencies in turn finance the purchase of these assets by selling agency bonds. In this way, this 1/3 mortgages are accounted twice in the total.
----------------------...

There are several other items.

Still No Consensus on When Recession Will End

Tue, 27 Jan 2009 17:35:01 -0500

Slightly positive to flat GDP growth is possible for the 4Q2009 because the bar is set so low by 4Q2008 (-5.5% or worse). We'll see on Friday what the # is.

Velocity of money appears to be close to zero. When a bank takes back the credit lines they previous extended to some companies or individuals, does that mean the velocity is NEGATIVE in that case?

Should China Continue Propping Up the U.S. Dollar?

Tue, 27 Jan 2009 16:57:11 -0500

This has been discussed in many other boards. But nobody can name ONE concret benefits to US if China's yuan appreciate. Substantial changes in currency values is a decisive destabilizing force in globalization. China began the revaluation in July 2005, coinciding with timing of US housing's entering of bubble zone. Hot money left US and entered China in order to capture the benefits of revaluations. This continued all all the way to mid 2007 when the bubble began to bust.

Will Gold Break Its Downtrend?

Mon, 26 Jan 2009 19:38:17 -0500

To be fair, TA has its merit and frame work. But can you call this an article? I share Larry House's sentiment.

What Is the U.S. - China Economic Outlook Under Obama?

Mon, 26 Jan 2009 14:31:48 -0500

Not insightful comments.

"There are some investors thinking that China may “lead the pack” and recover faster than others (see next): I hardly think so.".

Who else would lead?
----------------------...

"The RMB 4 trillion stimulus package obviously is not enough – otherwise, why do they keep introducing supplementary packages?"

If you try to offer more insightful information, don't just read WSJ, do more research on your own. Including stimulus packages from local gov's, I estimate the total would be at least 15 trillion RMB.
-------------

"A quick solution for China, for instance, would be to introduce universal, free health insurance: that would remove the yoke of having to save in case of illness.".

It is more cultural phenomenon. Japanese saves a lot too, even though they have good healthcare. You are assuming a better healthcare would cause people to spend more and save less.

On the other hand, even though US does not have universal, free healthcare, people spend more than they have. It's cultural as well.

-------------

Those geopolitical comments are even more superfacial. Sorry to say it.

The Bullish Case for U.S. Stocks

Mon, 26 Jan 2009 09:24:25 -0500

Good article. I don't know if those bullish "strategists" on wall street even allocate 30% of their personal portfolios to stocks at this point. Only then their arguments may have some merits. They are marketers, not strategists.

Happy Days for Gold?

Sun, 25 Jan 2009 17:38:06 -0500

From a technical viewpoint, the move last week was significant in several aspects:

(1). It broke the down trendline since 7/15/08. The next resistance, as Jeff pointed out, is $92 for GLD. $92 is the trendline level since 3/15/08 (the very top). A breakout above $92 would be very very bullish for gold.

(2). Last week, gold was on its own, despite up or down move of $. This is very important.

(3). Some pullback is possible at $92, if this resistance is not impulsively taken out.

(4) My original expectation is the breakout should be in early Feb when Feb futures contract delivary requests increase more forcefully than Dec contract. Clearly if $92 is taken out impulsively, gold would entering a new territory earlier.

(5). Retracement from $92 down to $83 area would keep the bull agenda intact.
----------------------...

Above is purely chart reading.

Fundamentally, let helicopter Ben airdrop to the pockets of goldbugs.

The Great 'Fall' of China?

Sun, 25 Jan 2009 10:37:21 -0500

While many think that US will be the FIRST in and FIRST out of the crisis, it is more likely that China will be the one LAST in and FIRST out. The monetary, fiscal and currency tools are only employed at moderate levels, compared to US or Europe. They have a lot more room to maneuver than any other country. The only question is when to jump in in terms of stock investment. My own bias is the same time as in the US. i.e., sometime in the Summer.

Obama's 'Aggressive Attitude' Towards China Is Nothing New

Sun, 25 Jan 2009 10:21:40 -0500

Obama's first aggressive move would be most likely domestic. All countries are concentrating on their domestic affairs currently. While talking tough may win some media attention, implementing it would be disasterous. Why would one want to start a fight that he can not win?

Chart of the Week: Trend In Cash Holdings Beginning to Shift?

Sun, 25 Jan 2009 10:05:09 -0500

Lots of money went to bonds: corporates, munis, ABS, MBS.

Geithner on Yuan: Misstep or Warning Shot?

Sun, 25 Jan 2009 00:22:23 -0500

Your comment touched on many geopolitical issues, which indeed provide the larger background.

The US superpower status was stronger during the cold war times because Europe, Japan as well as many other nations stood firmly behind US, in the form of the large trade deficits despite the $ depeg from Gold.

The end of the cold war encouraged the US unilateralism, which was the origin of all the problems. The US interest is now challenged by all other major players, EU, Russia, China, and to a less extent by Japan and India, as well as adversaries such as Iran etc.

I don't think US can afford to lock in a bitter fight with any one of the top three, especially with China. There is a calculation that a bitter struggle with China, espcially militarily, will force both countries down to a less status, while other powers rise. Even Iraq proves to be too much.

Financially, if China dumps all the Treasuries, one can not expect Japan and Saudi to pick them up.

On Jan 24 08:49 PM rosey99 wrote:

> Agreed. In the context of the current economic situation, and the
> recent political shift in the US, "manipulation" is indeed a carefully
> chosen word. A quick look at the recent (and often contradictory)
> posturing from North Korea is also interesting in this context:
www.google.com/hostedn...
>
> www.upi.com/Top_News/2.../
>
>
> I differ with many on the subject of China's ability to significantly
> affect demand for US Treasuries, and demand for the US dollar in
> that I believe the pain would be relatively short lived. Too many
> other wealthy participants (i.e., Japan and the Saudis) would be
> more than happy to help mitigate the longer term effects as they
> depend on the US not just as a market for exports but for their defense
> as well. I could be wrong, and we really won't know unless it happens,
> but it seems to me that the economic threats of China's withdrawal
> as a US creditor are likely to be hollow, at least over the longer
> term (say, two years or so). In any event, it seems inevitable that
> China will not be in a position to finance the US at recent levels
> for much longer anyway.
> The last 10 years or so have been an anomaly in terms of US/China
> relations, based more on short term expediency than any long term
> agreement as to a vision for the economic, political, and military
> future of Asia, or the role the US thinks is appropriate for China
> globally. At their best US/China relations were never as good as
> the US relationships with Japan or Taiwan have been at their worst
> in the post-war period. We're probably about to return to a more
> normative arrangement, which is to say a more hostile one, and attempt
> to decouple our respective economies. I for one believe that internal
> political changes are lurking in the near future for China. I wish
> I knew what form they might take. I also agree that the possibility
> of military confrontation is rising somewhat, and that the potential
> for mistakes and misunderstandings leading to such a confrontation
> is apparent. I am looking for the rhetoric to heat up, and for the
> perception that "constructive engagement" with China (remember the
> 90s?) as a means of promoting human rights and democratic reform
> to steadily lose traction in US public opinion, and therefore in
> US politics. It has, after all, effectively been a failure. Though
> I doubt that it was ever a real US goal in the first place, because
> if it had worked it would have been the first time in history that
> a geopolitical rivalry were resolved through economic ties and trade.
>
> War is typically the way in which such disputes are resolved, though
> I by no means think it is at all likely, it does seem that the likelihood
> is rising. For practical reasons that have not changed since the
> 1950's the Korean peninsula remains a more reliable flash point than
> say, Taiwan.
>
> I hope it does not go that way. . .It just seems that in volatile
> times like these, the misjudgments of those in power on both sides
> have a tendency to devolve into a spiral of events that can get out
> of control. Especially when at least one of the main players, North
> Korea, is not quite under the total control of their Chinese allies.
>
>
> In short, I don't see that China really has a viable or effective
> economic card to play in the current situation, which leaves only
> the military card. It seems to me that this increases the risk of
> a mistake by either or both participants leading to a confrontation.
> Not exactly inevitable, but certainly worth watching if the current
> economic trends do not reverse, and the malaise instead deepens.
>
>
> These are certainly strange and interesting days. I'll keep my fingers
> crossed that things do not fall apart so completely, but I am appalled
> at the rapid pace with which the global economic miracle continues
> to unravel. Rapid economic degeneration is usually not a recipe for
> political stability, especially where the prevailing political apparatus
> is inflexible or has difficulty adapting.
>
> On Jan 23 10:18 AM bearfund wrote:

Apple and Google: Changing My Mind

Sat, 24 Jan 2009 23:10:45 -0500

I used to own both and unloaded them before Lehman's fall. If I am sure about the market bottom, I would take up both for short term trading. At this point, it is too early.

From a historical perspective, when a new bull market takes off, the leadership will be an entirely new group. It is quite possible that by then AAPL and GOOG may look like today's CSCO and MSFT.

Apple and Google: Changing My Mind

Sat, 24 Jan 2009 23:10:45 -0500

Annals of CDS Demonization, Michael Lewis Edition

Sat, 24 Jan 2009 17:28:01 -0500

CDS is the nightmare creation by Wall Street. Insurance companies got deep into the pile of these because they can avoid setting aside insurance reserves. Hedge funds writing of CDS is especially fraudulant, as they can not handle the liability in case default DOES occur.

I am particularly appalled by the trading of "correlation coefficients". Given time, I am sure these guys are going to trade something like "correlation of correlations", or something fancier.

Geithner on China's Currency Manipulation

Sat, 24 Jan 2009 12:34:50 -0500

The financial bubble really began in 2005 when China started the first revaluation scheme. At that point, while many, including now famous Merrill Lynch Chief Economist David Rosenberg talked about recession, the market rose to another level, and suddenly became an animal unrecognizablly wild.

Revaluation is a destabilizing force there and here. Through pegging to $, China essentially submitting its monetary policy to the Fed. In essence, it is ONE currency, but TWO countries, and TWO separate labor forces. Supposedly, the division of labor, BANKING here and MANUFACTURING there, should work well despite the separation. The problem is the manufacturing capacity in China is too large, almost unlimited, that the US extended financial pyramid to the sky in order to contain or reflect that capacity. The crumbling of both are catastrophic.

Geithner on China's Currency Manipulation

Sat, 24 Jan 2009 12:09:33 -0500

have you thought about the possibility social unrest here as well?

On Jan 24 11:55 AM hefaistos wrote:

>
> The logic is obvious: Geithner says what he says for the following
> reason: If the Chinese don’t cooperate and let the yuan devalue,
> a portion of any US stimulus is lost to higher imports. And Congress
> would be less than happy to see US tax dollars supporting CHINESE
> jobs.
> China is badly export-dependent. Now they face faltering growth and
> domestic unrest as a result. They have enough unemployment and reserve
> capacity to increase exports.

Geithner on China's Currency Manipulation

Fri, 23 Jan 2009 22:24:14 -0500

When Bernanke was asked by a Congressman how to explain to common folks the rationality of using tax payer's money to bailout banks.

Ben goes, no bailout, no lending. No lending, economy will deteriorate and jobs will disappear.

The Congressman goes, "so, no bailout, no jobs". Ben, "Yes".
-----------------
Now, bailout, no lending. More bailout, still no lending.
Jobs? We need China to revalue...

Geithner on China's Currency Manipulation

Fri, 23 Jan 2009 22:13:16 -0500

Every politician wants to look as if he is creating more jobs. Bashing on China's currency is the cheapest, and unfortunately the most popular way to create that image.

The reality is yuan revaluation destroys jobs in both countries. Not many people understand that.

Geithner on Yuan: Misstep or Warning Shot?

Fri, 23 Jan 2009 22:04:25 -0500

Clearly yuan revaluation has no benefits at all to US. It actually hurts US.

The question is why the administration continues to ask for it? Here is my conclusion.

Yuan revaluation certainly has forced many factories in China to close and unemployment to rise sharply. But it won't increase employment rate in US. The politicians continue to talk about this to create an impression that they are making a huge effort to increase jobs here. Unfortunately this is only a mirage. Nevertheless, people loves mirage for its wonderfulness.

The danger is we may get what we are asking for. Does everybody notice that the Treasury yields rose continuosly this week due to Geithner, despite the bad news from banks and stock markets. Gold has rallied strongly and ready to breakout.

On Jan 23 05:52 PM greenspam wrote:

> First, the message is targeted to China's recent attempts at bringing
> back tax subsidies and talking about devaluing the yuan. This message
> says don't go there. Its not about whether strengthening the Yuan
> will benefit the US.
> Second, even if China continued to "manage" their currency upwards,
> they would fall into "manipulator" category simply based on evidence
> that most surplus countries have had their currencies appreciate
> (the Japanese, Norwegian, Swiss). As a surplus country, Chinese currency
> should be moving upwards as well in par with the Norwegian at least
> if not the next most "manage currency" the Japanese Yen. Otherwise
> interest rates will not be useful in accurately assign cost to money
> so it goes where it needs to to solve problems.
> Third, the Fed has already indicated they will step in to purchase
> Treasuries to keep the stated and real (Libor) rates spread where
> they want it. China's ability to purchase tens of billions of debt
> per month pale to Fed's ability to step in at 10x that level.

Geithner on Yuan: Misstep or Warning Shot?

Fri, 23 Jan 2009 15:38:53 -0500

Capitalists around the world push for globalization to optimize their cost structure. They want free flow of capital without free flow of labor. It dooms to fail eventually.

US had made a great attempt to become the BANKER for the world, and direct an ever increasing proportion of the labor force to service the bankers. Unfortunately, the bankers are not only incompetent, they hide the loss and then ask tax payers to bail them out.

Geithner on Yuan: Misstep or Warning Shot?

Fri, 23 Jan 2009 11:04:17 -0500

Can anybody explain to me how Chinese currency appreciation would benefit US economically in any particular area? A thorough analysis would show NONE. 40% appreciation WILL NOT help US to rebuild manufacturing sector, while $ may spiral down.

The currency fight is an issue both sides will lose badly on eocnomic terms. You have to wonder why politicians keep pedalling this.

Geithner on Yuan: Misstep or Warning Shot?

Fri, 23 Jan 2009 09:32:57 -0500

Strong words signify a weak cause.

Gethner's comment is to please certain faction of the Congress. If China indeed let yuan appreciate 40% as some hawks demand,what would happen to the $? THE REALITY IS, $ is reversely pegged to Yuan & Yen, whcih is why it has rallied so much in the crisis and smashed all other currencies around the world.

The crisis would have a softer implication as long as China and US gets along with each other, and act together. Otherwise, we are heading to unknown unknowns.

U.S. Mint Actions Discourage Gold Ownership

Fri, 23 Jan 2009 09:17:52 -0500

Good point. Gold is beginning to break away from the $ in the past few days. Gold is setting new ecord highs in many currencies. The only thing left for new record denominated in $ is a decisive breakout technically to take out the $900 area, which I expect to occur within two weeks.

Deep inflation or hyperinflation, they all mean destruction, which implies gold will be in no man's land.

On Jan 23 05:03 AM MisterPhi wrote:

> Just returning from a rapid visit to a small branch of Raiffeisenbank
> here in Switzerland. Gold demand still continues at very high rates,
> to the point that the bank's HQ has now decided to allow the sale
> of small bars that carry only the assayer's brand and not the bank's
> seal, in order to reduce turnaround time.
> We find it particularly interesting to note that the price of gold
> has severely decorrelated from USD weakness during this past week.
> This might be *the* trigger that will cause the second gold rally
> - not in dollar terms, this time, but in other currency bases.
Studi...
>
> Mendrisio,
> Switzerland