Patrick22

On Gold, Silver and Krugman's Misinformed Self-Congratulations

I don't think there is any reason for an ad hominem attack on Krugman. Many countries tried fiscal stimulus, many did not. Generally, the U.S. and China went for fiscal stimulus while Continental Europe did not. It will be easy enough to figure out who was right. Looking at things now, you would have to give the nod to China and the U.S. though, wouldn't you?

What's Behind This Bear Market Rally

People game sentiment surveys. Reading this site, it is obvious that most traders, if not all, are bearish and very bearish. When everyone is one way, the market goes the other. Nobody left to sell. Meanwhile, shorts cover and "the masses" continue to drip money into 401Ks and the like, creating buying pressure against no selling pressure.

When you are seeing conspiracies, you are probably wrong and behind the curve.

Five ETFs Most Investors Don't Understand

The question is whether the author meant to discuss the international REIT ETF or the Long Short Commodity fund. He had to write out the "S&P Developed Ex-U.S. Property Index Fund" part right? But then he also wrote out the description of an entirely different fund.

Diversification: It Really Doesn't Matter

Is it April 1st already? Is anyone allowed to post on this site? Look, I don't profess to be extremely knowledgeable on the topic of risk, but even I can tell you that there are different kinds. Diversification doesn't eliminate risk, it only lessens SINGLE ISSUE RISK or unsystemic risk. You cannot diversify out of the systemic risk of stocks by buying more.

Here is how diversification into the S&P 500 helps:

GM 1yr return -82%
S&P 500 1 yr return -40%

In your theory, I only hold 1 stock versus 500 (or 248) and yet I've not eliminated risk?

Or how about diversifying into TIP Bonds 50-50 (here you are diversifying SYSTEMIC risk of equities):

S&P 500 1 yr return -40%
S&P/TIP 50/50 1 yr return -22%

Come on, how about just a quick read through Investopedia? You might also want to add the term "Data Mining" to your research.

Political Partisanship or Warnings That We Should Heed?

I agree that Federal deficits are really just deferred tax increases. However, I've been arguing that for the past eight years when something should have been done. It is just at this particular moment that deficits really "don't matter" as Cheney said. My rule of thumb would be, whenever the Fed has reduced rates to zero, it is time for the Gov't to run deficits.

This is because, while deficits are deferred tax increases, it is not 1:1. Inflation and multipliers on Gov't spending effect the ratio. Debt was much higher coming out of WWII, but certainly that was money worth spending, and it didn't cripple the economy because it led to increased growth. Same with the Interstate Highway System. A huge expenditure that nobody bemoans now.

Political Partisanship or Warnings That We Should Heed?

You forgot the option of getting another job or a better job (increasing your income).

The Government can also borrow all it needs at 0-2.5% interest. I would probably take on additional leverage at those rates.

All these platitudes about government spending at this particular point in time are dumb. If there was ever a time for government spending it is now. Yes, it would have been nice if all these Republicans had stopped Bush from spending money when the economy was growing, but to cut back government spending dramatically as we head into one of the worst recessions in the last 70 years is Hoover-type dumb.


On Mar 24 01:37 PM FE812 wrote:

> I would like to take the liberty of ridiculously over-simplifying
> this situation if that's ok.
>
> If an individual or company is so indebted that they can no longer
> live as they are and continue to make payments, what do they do?
> They either cut their spending in other areas or the default on the
> debt. Why is this an impossible concept for government? I know
> they can't default on their debt etc. What about the other option
> though?
>
> I won't rule out that I'm wrong on this but from my perspective ...
> QE will only transform the costs of our debt into inflation. Either
> way the taxpayer bears the brunt. As we pay higher taxes/prices
> and roll back our lifestyles so we don't default on our private debt,
> the government continues to spend increasingly.?
>
> As I said, perhaps this is an oversimplification but it seems logical
> at it's base ...
>
> I know what I think the fix should have been six months ago but it's
> too late for that now. Here we sit ...

Is Deflation Done?

While they try and take seasonality into account, the CPI always tends to rise from Jan-April. Further, the CPI is probably the worst gauge of inflation. It neither caught the incredible price increase in housing as inflationary, nor is it accounting now for falling home prices. I don't know if the PCE deflator is any better, but I believe Bernanke thinks so. Would be more helpful to look at charts of that.

The Obama Economy's Impact on the Stock Market

Far too much of the economic and market analysis on this site lately is done from a biased viewpoint. The twists and turns being made to make a case to root for Obama's failure is clouding judgment. Another commentator today was quoting Marxists to make such a case. It is strange times when Republicans turn to Marxism.

People want to make money. That is the only reason to be reading this site. If they want political commentary, there are thousands of sites they can go and get the latest Republican propaganda. Probably the reason you are getting such strong negative feedback is because your bias is so obvious. How can anyone take you seriously when it is obvious you are not objective? Even an anti-Obama Republican would have to question your conclusion knowing it was pre-determined by your bias.

How Will This Depression Differ from Previous Ones?

There should now be a new rule: anytime anyone brings up the Soviet Union in an economic posting it should be automatically discarded. lol

"On a related matter, the government could all but eliminate unemployment during a depression by giving every unemployed person a government job, which is effectively how the Soviet Union eliminated unemployment (that, and by sending millions of people to forced labour camps). Such a massive expansion of government is our greatest fear because it would make the depression permanent."

There was a small event at the end of the 1930s, called World War II. Basically, the Gov't did give everyone a job. Millions were even working directly for the Gov't. And you know, it didn't make that Depression permanent somehow.

It's Not a Credit Crunch, It's a Deflation

How about the Feds buy 20% of all mortgages while eliminating the mortgage interest deduction. Since people with really expensive homes have a phase out and AMT elimination already, cap the buy amount at 20% of the conforming loan limit.

Of course, this benefits the better off parts of society, so we have to expand the social net to give something to the bottom. Universal health care would be easy to afford with the increased revenues from elimination of the mortgage deduction. Maybe double the bracket for the 15% tax rate too.

The End of the Credit Crisis

Well, if you pay taxes you own quite a bit of C this morning ;-) Further, if that stupid person does not foreclose, there is no sale in your neighborhood -40%. When you want to refi or HELOC for a new kitchen, you will be able to.

If you believe the scenario, and you don't own bank stocks, then you don't believe the scenario.


On Feb 27 09:41 AM joe shmoe wrote:

> So what happens to those of us who actually can afford our loans?
> We get no write down on the principal of our loans? While rising
> values of BAC C JPM would be a nice offshoot of all this, how does
> it affect those of us in the "we own no bank shares" and we won't
> see any renegotiated mortgages offered to us? Sounds like we're
> rewarding the STUPID buyer who couldn't really afford his 500k loan,
> and the STUPID banks who loaned those people too much money. Damn
> I should have bought a mansion 6 months ago, and let the gubment
> and the banks bail me out. Shucks, what was I thinking taking only
> a mortgage I could afford?

Can Homeowners Arbitrage the Mortgage Subsidy?

Nice work Retred.

This arbitrage was actually widely talked about in 2006, when muni yields had moved up and were over the mortgage rate x 72%.

One thing Retred, the premium on a muni bond is not deductible. It is a return of principle. You cannot claim a capital loss.

Should Gold Be in Your IRA? It Depends.

I doubt anyone that can deduct IRA contributions has enough of a portfolio where they would need such a large amount of gold to hedge.

So, if you can't deduct your IRA contribution, why would you put gold in? Seems to me you would be changing long term capital gains into long term earned income. You would also remove any ability to deduct capital losses. Right now, cap gains is taxed much lower than income. Unless you think that is going to flip before your retirement, it would be a dumb move.

Can Homeowners Arbitrage the Mortgage Subsidy?

I think that you are correct that the mortgage fees (especially title insurance) will make the transaction unprofitable. However, I think your analysis is off and your homeowner is not doing the correct comparison. However, if one is buying a house, the fees are being paid anyway and you have a situation where you could max the mortgage and take the cash and invest it in pre-refunded munis.

Your analysis is off because you neglect the tax benefit. However, the tax benefit is probably offset in large degree by the standard deduction. The numbers should be run. Especially if the homeowner pays property taxes and other itemized deductions that already exceed the standard deduction.

The other major problem is that you are trading guaranteed debt payments costs for a risky investment income. I don't know about the Hospital Bond, but it is not a 100% situation (it might be taxable, which is why the yield is that much higher) if its yield is 3X other comparable bonds.

The proper comparison is with Maryland pre-refunded munis coming due in 2011. These are risk-free (or as risk free as an American can get), like the debt.

A 30-yr mortgage would be dumb to use with a two-year muni. Better to get a 3/1 and use the lower interest rate. Or as someone suggested, get a 30-yr bond to match the mortgage. However, I don't believe there are 30-yr pre-funded munis, so you would be taking on risk.

The Wells Fargo / Wachovia Story from 1994 to 2012

I understand that Wachovia had a bunch of bad loans. But even if they had $500 BB of bad loans, if Wells only paid $12 BB for them, how does Wells lose more than $12 BB?