VALUEDIV

Don't Forget the Japanese Yen

FXJ has merit, but shares problems with FXE Euro valuation basis. I am invested in FXC Canada and FXA Australia. In summary, I would say that FXJ, FXE, FXA, and FXC will ALL outperform the declining fiat dollar heading for an M1 of $7 Trillion by 2012. So I would add UDN (dollar down) to investments in 2010.

Macroeconomic Policy for a Stronger Recovery, Part 2

As a former Professor of Economics, I taught my classes back in the seventies that a majority service economy must insure that the services provide true utility (value added form) to goods. Karl Marx spoke of two models of capitalism:

MODEL ONE: {(G)-->(+U) --> ($) -->(UG)}
A worker adds utility value (+U) to raw goods (G) and is paid wages ($) to buy goods he needs (UG) to live on. Pretty simple stuff, for a major n economist!!!

MODEL TWO: {($) ---> (PG) ---> ($$)}

Use money to Protect Goods (PG) and are paid money to provide this service. Insurance and medical services certainly provide and protect. There exists a "fair balance" between the price (premium) of the service and the return. This money- to- money flow is needed to protect goods. Yep, it is ligit Hedging!

However, the system completely breaks down when in Model 2, we have:

($)-->($$)-->($$... to 1 $leverage)!

That is a pure double down PONZI scheme called the Derivatives and Hedging game gone WILD! The banks are starting to increase their Collateralized Debt ratios again from the corrected 10:1 to 20:1 today. NOTHING has changed, but it must change or we will have a financial crash once again. Regulations and job creation are BOTH needed.

Fellow economists, please pardon my KISS approach that lacks any academic rigor; but, perhaps, we make simple concepts of a functioning economy too complex. At the basis of any sound system, there must be fairness, decency, and honesty (yes, laws also) for it to thrive.

Perhaps now, you can see why I was never considered for the Nobel prize in economics, or even Peace...Prof. Dan

Two Nations: Market vs. GDP, Unemployment

It is true that one can drown in a river with an average depth of 3 feet because it is 10 feet deep in the middle! It is easy to forget the "human misery" factors buried in Statistics that may say that an economy is "partially and sometimes" good here and bad there. Unemployment of 20,000,000 Americans and the destruction of the middle class that took from 1945 to 1975 to build makes for "Hard Times".

We cannot ignore the following icebergs as we sail our economic Titanic forging full engines into the storm! To wit:
(1) The credit card default bubble is coming (2) Followed by a multi-billion dollar derivatives crash that will ensue as a result of Credit Defaults Swaps being called (3) banks are acting with a total disdain for the American worker and for America itself, risk taking multiples and hedging are back
in fashion (4) there exists no enforceable checks and balances of financial actions by "effective" regulations and (5) the American Public is as angry today as the Colonies were in 1776! Public unrest WILL develop if we do not provide immediate jobs in the infrastructure reconstruction of America. We would need steel, wood, food,...,that is stimulating to the economy especially when there are workers with wages.

The main reason no one seems to get it is that unlike the 1930's we have money that we made during the "good times" now being depleted from savings and equity on foreclosures. We still have plastic and the top 5 % echelon of our country are richer than HENRY FORD in 1920!

Please, someone say something. The Founding Fathers would have been "Mad as Hell" and would NOT TAKE IT ANYMORE. Why do we? Perhaps we are still too comfortable at this time. The rest are busy trying to find jobs and keep a roof over their heads. This is not an America we fought for. We need to agree that there is a historic change in our country's destiny. The right "to work for" happiness.

Doug Casey: Why Gold Miner Stocks Are 'Burning Matches'

Gold/Silver/Platinum/P... are my long term investments of choice in a still very dangerous U.S. and Worldwide economy. Yes the government will cause +/- swings with kneejerk reactions, but the LT trend will be UP+. Labor rates for miners and their operating costs ARE more problematic because of the Cost of Extraction and refining. To avoid that volatility, invest in Pure Plays GLD, SLV, PTM ETFs.
The level of the current Dow/NASDQ is MUCH too high considering 10 million workers unemployed and a P/E over 25 which is only sustainable during High Business/Manufacturing periods. We certainly are not in such a period of prosperity. Do not be fooled by the Big Money players who are pumping and milking this market. It cannot last. People will seek the psychological and monetary value safety of precious metals within months and over the long term.

Adding a note, watch Oil prices that move inversely to the dollar. It will have some great upswing potential with the news of the week. High dividend stocks and corporate bonds are still a good play for those seeking Income. My name is not VALUDIV or nothing! Good Investing to all.

Monday FX View: Thoughts of FOMC’s Exit Strategy Bolster Dollar

The fundamental strength of our dollars is the underlying economy and its productivity. As of this time, we are the weakest of the modern industrialized nations...where is the strength? Even in terms of Gold, we are selling and others are buying! The long term outlook for the US$ is poor. I am buying FXA (Australia), FXC, the NZ Kiwi, and FXS (Krona).
I am also LONG on gold, silver, platinum and oil.

A Derivatives Myth Exposed

As a former full professor of economics and international finance and currently owner of a successful Business Valuation and Investment business , I agree with your assessment completely in the broad sense. I say broad to cover all of the critics of your position who will claim the notional value is much less than $700,000,000,000 (yes, that's 700 Trillion American dollars on the books).

If I assume a normal distribution and use a very conservative of 5% default rate, 2 sigma of a one-sided normal distribution, that is (.05) X (7x10*8) = 35 Trillion Dollars. Using a 5 % default rate assumes that the other 95% is liquid. That is much too generous and an unrealistic number. I would be happy with a 50% derivatives liquidity that woulb be paid out. That leaves $ 350,000,000,000!

On notional value, it can be argued that it would be less! But, HOW MUCH LESS after looking at Lehman's Bothers, Bears & Sterns, BAC, CITI, and AIG? Think about this with clarity. The problem is monstrous, ominous, and unavoidable without MASSIVE government intervention and resulting control of the total world financial system. We would all be another China with government run banks.

The "chain concept" is totally accurate and a weak link makes one chain of derivatives fail completely. Recall the old adage "A weak link on the chain causes the break of the entire chain". There are billions of links in the global derivative float. Are we to believe that there is not at least one weak link in each chain from what we have already seen? Please look at and do the numbers yourselves...

The next Fed and government called meeting will be the collapse of the Derivatives Liquidity to cover financial institutions. I have NO solution to offer for that, or at least none that are acceptable to me as free (but with oversight)market advocate all of my life. There can not be sanity or a democracy without reality and truth!.

"From The People, By the People, and For the People". To protect our people. That is our credo. Where has it gone?
My country, I do cry for thee and must fall with you.

An American Veteran Of War, Vietnam, B-52 Pilot

Derivatives Still a Huge Risk - I Was Right After All

Thank you for speaking out on the unspeakable. The government and financial institutions ignore their vulnerability to derivatives with nigh a mention in the press. This will come home to roost. Liquidity is a very misunderstood term by the American public- it is a vague notion of having assets that can be sold on an open market.

The big financial institutions may be feeling their oats, but their lifeblood is in the millions on workers who produce goods and food and have to borrow and pay interest in mortgages or businesses. Their circulatory system to distribute funds are the Regional Banks who are closest to the borrowers and they are failing in record numbers (90 last week alone). When the lack of a complete financial pyramid becomes clear, the Big Boys will fail again.

That is when the Derivatives as in Bear Sterns and Lehman Brothers (RIP) will be called in. Where is there circa $500 Trillion of Liquid Assets to back these? It does not exist!
Buffett said it. Soros said it. You said it. But, who's listening- they really don't want to hear that the Monster Bubble is the Derivatives global float ready to be called in.

Keep up the crusade. I have been writing to WSJ, Forbes, Fortune, ad nauseum about the danger of Derivatives for four years. I never got a single acknowledgement. Forbes did publish a "feeble" article, but that is the response. If we repeat this mantra enough, maybe someone will hear before the imminent and certain derivatives bubble.
Best Regards from Another Voice In The Desert

Lehman Tales: One Year After, What About the Impact on Average People?

The plight of the "common working man" worldwide is a humanitarian debacle caused ny people like Larry Fink, the top "leverage king" for Blackrock Hedge Fund, who shows as much concern for them as a lizard for flies. On a financial and economic plane, the top of the pyramid is doing OK on Wall Street. The middle consisting of Regional Banks and other small lenders who are the lifeblood of small business, are failing daily at an accelerating pace (90 regional banks last week). And, the bottom third consisting of the workers with a 16.8 percent unemployment rate, are being asked to both save and spend without wages to support the fundamental economic recovery. The TARP money would have been much better spent on worker and factory recovery to make goods we can use or eat. I can't eat a derivative. Can anyone? Financial innovation? I'll take agrerian or technical innovation any day. It feeds people and creates jobs. As Bill Maher says so eloquently, "How F'd Are WE?. The answer is VERY! Bleep.

Sell in September? Time for a Reality Check

I will make my prediction for remainder of 2009 and 2010.
Given the lack of liquidity by ungrateful bailed out banks, the unemployment and resulting decreased disposible income, the foreclosure rate increasing through 2010, a derivative global float of $ 480 Trillion in the financial sector alone ( $700 Trillion total) that will be "called in for payment" as the underlying financial health is revealed, The situation is critical in September and for the next 24 months. If one must invest their cash, short commodities and financials.

Not being a doomsayer, but Realistic on VALUATION fundamentals of the market as a whole. Of course, the "day pump" will be played, but the overall TREND is DOWN.

France and Germany's Positive GDPs: Is the U.S. in the Picture?

I detect a sense of wounded American pride that Germany and France, both socialist democracies with tighter bank controls and practices, are making gradual progress out of the financial mess we created. I am an investor and a free enterprise democracy advocate, but the government cannot resort to trickle down economics again. We no longer have the underlying economic growth to support it.

We need to address job creation as strongly and as swiftly as we did with the financial institutions bailout. They do not seem very grateful for our tax dollars and have not loosened credit as of yet, and have only bolstered their balance sheets. Greed and audacity beyond imagination!

The BRS figure show our involuntary part-time employment to be higher than in any recession since 1930. There can not be any viable borrowers for bank funds without wage income from a healthy job market. Only job stimulation and wages will feed the banks and our tax coffers. Does that sound too socialist to anyone, or does it make sense.

The social stimulus approach seems to have a much better ROI than feeding the banks as we have done. As a note, they did not have to greatly modify their banking oversight because they already had more than we did. At. 20% down payment required on a mortgage says it all!

Tracking Two Depressions

Well done to point this excellent analysis to our fellow investors. It may be debated, but the facts do cause concern for the global economy that is greatly dependent upon our economic, financial, and dollar's health, especially China. China, who is a growth hope during these dire times, will be the most damaged by our $ downfall.

However there are two more immediate bubbles that are not academic data, but "real" threats to further recovery. I cite the global derivatives float waiting to demand payment for toxic asset defaults; and, the credit card debacle about to explode. From a non-academic point of view, this looks like a left jab followed by a knockout punch to the chin of any imminent recovery within the next three years.

As an old economics prof and 35 year investor, I see that we have reached a total redirection in the future of finance and business worldwide. Government bailouts and control that will endure in coming decades; and, perhaps, the way business and investment works will never be the same.

Was it the system? No, it was abuse of the financial sector in an economy formerly backed by production as a result of post-WWII "fairly valued" solid growth until 1982. Most of the growth since has been inflated by synthetic accounting. "It was GREED that killed the BEAST, not Beauty" (twist on ending line of King Kong).

God preserve America on this Fourth of July 2009, and perhaps save us from our own folly and human greed.

Better Listen What China Has to Say

A very cogent and reflective article...my sincere compliments. Long term investing is intrinsically tied to globalization and the redistribution of economic power in the world. The giant has awakened, but we should not tremble. It is a great opportunity to build a world in which war becomes unthinkable due to the intertwined supply chains of international trade and production. Dr. Krugman's hypothesis on a "natural distribution of production" on a global basis is sound and on the road to world cooperation.

The time for nation-centric economics has passed. We are simply in the birth pains. At this time, China offers the best investment opportunities, both short term with a positive growth of GNP, its growing true wealth in materials and energy, and the largest workforce in the world ready to improve their socio-economic status. China has value!

Derivatives: A $700+ Trillion Bubble Waiting to Burst

Your figures may be a tad high, but then nobody knows the exact dollars of Derivatives floating in the global economy. For certain, it is a very LARGE number in the $ Trillions. I am perplexed that I cannot get the interest of the media or other commentators to go public with this looming economic storm coming in 2010 as the latest crisis. Perhaps they are too busy on the coming Credit Card crash with 40 % default rate at this time! I will continue to write/call anyone with a large audience to sound the alarm on the Derivatives. I may fail, as I did in 1999 when I wrote to the SEC about the Dot.Com looming disaster and the reply was an arrogant "Let the Buyer Beware and do due diligence", from the office of the SEC Chairman. Most people want this crisis to go away. It is just beginning and we can only work for the "end of the beginning" before the beginning of the end", as Winston Churcill said in 1942 about WWII.

22 Dividend Stocks with Good Fundamentals

Why not combine Dividends + China 2009-2010 projected GDP growth+ stock value/growth? Some worth a look are: CEO 4.10%, CHL 3.50%, GU 6.30%, TPI 4%, WH 4.9%, SNP 2.8%. In truly high yields, the Canadian Trusts are still a good investment in Energy + Dividend: ERF 9.2%, HTE 9.5 %, LINE 13.0 %. Closed end funds like CHY and CSQ are worth a long look with dividends > 10%. Disclosure: I own LINE, CSQ, and CHY. Good Fortune to All!

Derivatives: A $700+ Trillion Bubble Waiting to Burst

A derivative can be "called in" to cover losses and the collapes AIG is a real example of the result. The derivatives threat to the world economy is both real and a looming economic global disater. I am upbeat on our determination to surmount the current financial credit crisis, but not of the longer term outlook when the CDSs have to be paid.