Willy Walnuts

Dubai Could Affect Ireland, Greece and More

The optimist in me hopes that Dubai is not taken as a prototype on how to deal with smaller economies struggling with debt.

Dubai was the hood ornament for the years of irrational exuberance and conspicuous consumption. It was also the beneficiary of cheap money, expensive oil, and the war on terror. There was a time when the oil rich middle east would spread their money throughout the globe, buying extravagances like sports teams, casinos, real estate, ships, and on, and on. After 9/11/2001, their money was not welcome in many parts of the world, especially the US. So, if Vegas didn't want them anymore, they built their own, only bigger and more ridiculous... and with guest workers that they can send home when they are no longer needed.

Well, that bubble has burst, but it was more like a zit (ewww!). Painful at first, but hopefully the UAE will rub some money into it so it will slowly heal and recede back into the desert.

In contrast, I also hope that while their heads got away from them, Ireland, Greece, and the others you mention, had actually been trying to build a real economy in their countries, not a playground.

Bartz on Bing Search Deal: 'Everyone Wants a Real Alternative'

I expected this sort of thing as soon as I heard Bartz was announced to run Yahoo. Unfortunately her parasitic business strategies won't work in search like it did for Autodesk and its legions of drone customers that will cough up license fees every year so they can stay in business. Yahoo users will just turn elsewhere. We are about to see an explosion in search technologies in the next few years. Microsoft sees it coming and is trying to dig in. Google knows its dominance will begin to wither and is diversifying. But with this move Yahoo is dead.


On Jul 29 04:28 PM bellandcircus.com wrote:

> Why would a company like Yahoo (seekingalpha.com/symbo...)
> had over its core business to Microsoft (seekingalpha.com/symbo...)
> at precisely the time when its cash cow (windows) is dying? This
> deal reeks!

Winter's Coming for the Boomers: Part 2

Someone explain to me why these quotes popped in my head reading this article...

"Why don't you get a job Spicoli?"
"What for?"
"You need money."
"All I need are some tasty waves, a cool buzz, and I'm fine."

"Well Stu I'll tell you, surfing's not a sport, it's a way of life, you know, it's a way of looking at that wave and saying, 'Hey bud, let's party!'"

Mr. Hand: "What are you, people? On dope?"

Nightmare on Wall Street? Upcoming Bank Earnings Could Rock World Markets

Green shoots parade marches on... the banks will report good results, but qualified with one time charges, for miscellaneous items such as TARP repayments. A whole lot of non-drama...

A Socratic Dialogue: Fearing the Collapse of U.S. Treasury Bond Prices

Don't forget the equity market...

If interest rates go up, the stock market will likely fall, thus creating demand for treasuries, putting pressure on interest rates again. Another equilibrium to consider....

If Socrates had a freezer, he could say that reinflating the economy is like filling an ice cube tray (of course they didn't have automatic ice makers back then... duh). You pour water into one cube, but it should flow until all the cubes are full. Then when the water starts to spill out, you turn off the water (or tell the slave boy to do it).

The Debt Conundrum, Part 2

Mr. Quinn, thank you for the excellent, yet bleak article. You have articulated most of my current intuitions, but the "green shoot" parade and market rallies have had me second guessing. I was certain we'd be in the midst of a major correction by now, but there are some mysterious forces at work.

Mr. Lounsbury,
"Sorry for the long rant, but education is a hot button with me. "

Don't apologize for your patriotism. For years, we have been watching the decline of our country play out in our schools. The economic crisis is only the latest reason to dismantle what is left of education in our country.
The three best tools for gaining political power are fear, greed, and ignorance. Education is the only tool to combat the effectiveness of all three. Make the people dependent on government, then they will be easy to control. There is no democracy without education, let alone competitiveness in the new global economy.

Bond Expert: Monday Wrap

Agreed, there seems quite a few out there tokin' on that pipe.

Ben and Tim have always said the biggest mistake would be to quit the QE too soon. They aren't nearly ready to even feather the brakes yet. They'll figure out some other way to appease the Chinese.

Some other observations... the equity market does not seem to be acting "normal" lately. My theory is that we just had a correction, but no one noticed. There seems to be a "big" player dumping money into equities. The market has been trying to correct for weeks, but the spikes are so sudden and broad, that it is hard not to imagine some financial engineering happening.

My guess is that at some point, likely when the debt market demand becomes intolerably weak, they will let the equity market fall and create some. If only we knew when...

Just a theory...

Bernanke on Recovery vs. Growth

Yup, we are getting inflation. The questions are when, and how much?

On Jun 03 03:14 PM tunaman4u2 wrote:

> So if we have 1 to 2% growth as the government adds 10% to its debts
> per year... are we really getting anywhere?

Why Silicon Valley Should Take Over the Auto Industry

You want people to share?

No way, my friend. People want power. They want a car with a mirror finish that can go 180 mph, traverse a rocky 25% grade, tow a boat, and can seat 8... so they can sit alone in traffic on their way to work every day.

Guilt doesn't sell... imagined power does. Whose gonna be first in line to buy a Dodge Ram with a Fiat engine? Gimme a Hemi...

I've been seeing the Teslas on the road lately... 0-60 in 3.4 sec... no gas. They are manufactured and programmed in Silicon Valley.

Make the alternative better than the original, that's the key.

Silicon Valley used to be a manufacturing center. The problem with manufacturing in the US is with environmental restrictions more than the labor. The rest of the world needs to catch up to our environmental standards to level the playing field.

The big hurdle with all electric cars is how to charge one of these in the time it takes to fill up a tank of gas. Or, the batteries have to be small enough to swap out quickly and easily at a roadside service station.

On May 31 01:44 PM User 317038 wrote:

> Every industry has a point of punctuated equilibrium, often times
> not due to new technology but because of unsustainable environment
> to support it.
>
> The migration of people from rural to urban megacomplexes around
> the world dictates rethinking how people move about. The role of
> a car in places such as Mumbai, Bejing, New York, London, Rio becomes
> less useful over time. Owning a car in such urban areas makes little
> sense if alternatives exist.
>
> The idea of car-sharing like the zipcar or more efficient mass transportation
> models require that car manufacturers rethink the dynamics of their
> markets.
>
> I foresee a situation where every driver has access to a non-fossil
> fuel local area mobile unit, perhaps electric or in the future, magnetic
> or thermoelectric power. These small "podcars" are the only vehicles
> allowed in an urban area, apart from vehicles that transport and
> distributed goods.
>
> When you want to travel to other areas, you drive your podcar to
> a rental lot where you have access to another long range vehicle
> for that longer trip.
>
> This model is less disruptive and more efficient than plowing money
> into rail or bus based transportation networks which are effective
> in peak periods but costly to run during offhours.
>
> The challenge is to convince people that owning a car that costs
> a lot of money, which travels less than 25 miles a day on average
> and tends to sit unused 80 percent of the time, is not the right
> way to ensure freedom of movement.
>
> I suspect that this experiment will find its birth in China and over
> sufficient time will transform their nascent auto industry into some
> mix of mentioned transportation models. Losing GM tomorrow is like
> losing the carriage industry when vehicles with engines replaced
> horse drawn carts. Things change and new ways appear.
>
> Goodbye GM, Chrysler, OPEL, Fiat et al. It was a good run but now
> we have to "move on".

Bond Expert: Tuesday Wrap

"What will the banks do with the influx of funds? They will intensify their search for quality assets. My source believes that many traditional bank vehicles (MBS) will become too rich and will spark a move to the Treasury market."

I was thinking the same thing... gotta love the bankers. Why not be a middleman for the Fed? Borrow at zero from the Fed and loan it back to the Treasury for an easy profit. As Dick Durbin prophesied, they will literally "own the place".

Was That the End of the Rally?

I'm new to and not very good at fibs, but this stall in the rally is starting to resemble a 38% retracement to me, which might put us in the neighborhood of S&P 580 pretty quickly. Now that's scary... please someone tell me I'm an idiot.... the bears still might get their June swoon.

On May 13 03:27 PM Whippet wrote:

> I'm in the process of making a deposit to the Bank of Gaea (if by
> that you mean a cigar box in a plastic bag underneath the northernmost
> peony in my yard). Seems like the only safe place for long term
> investments right now...
>
> The most dangerous aspect of this aggressive rally is that there
> is very little resistance downward, from a technical perspective.
> S&P ~820 may show a bit, but it's an express elevator down to
> floor 666 from there. If the brakes don't hold there...

Don't Be Fooled by Inflation

Thanks for the reply comment. I follow some of what your saying, but if you put this into balance sheet terms, your definition of growth,
"Real economic growth is increased production of venerable goods and services." is basically an expansion of Assets. Then you say that creating wealth cannot be based on credit (Liabilities) but (I'm filling in now) must be based on investment (Equity). My point was that although less good, increased production based on credit is still growth, right, according to your definition.

After a bit more pondering, I suppose a case can be made that "artificial growth" is really a net-zero concept of structural rebalancing.

I am also left wondering if real growth is even possible in a deflationary environment. Perhaps artificial growth (based on credit) is a required condition for real growth. I guess I am kind of falling into Bernanke's thinking, inflation being a requirement for growth.

We all will probably agree though that we won't be able to spend and consume our way out of this, which would be a true destruction of wealth. Expansion in credit must be used to maximize investment and increase the production of goods and services.

On May 11 09:36 AM FE812 wrote:

> While I won't assume I know exactly what Mr. Schiff was referring
> to with the "artificial vs. real growth" comment; I'm sure we can
> all make some general assumptions. Real economic growth is increased
> production of venerable goods and services.
>
> We can argue the production thing all day, but there is no denying
> the truth; trade based markets must have something to trade other
> than debt.
>
> --------------- Also ----------------
>
> While those reading articles and commenting on this site may realize
> that the "market rally" isn't real growth; the general public does
> not. The sad truth is that for the average citizen green means go,
> red means stop and Growth = DOW +200
>
> I feel like the argument being made in this article and in many of
> the comments is: While the "artificial growth" you refer to as good;
>
>
> (" If "artificial growth" leads to improving employment numbers,
> lower trade deficits, a renewed manufacturing base, higher savings
> rates, and decreased household debt, then I'll take it.")
>
> may make us feel better for a while, it isn't fixing the problem
> long term and it isn't creating real wealth (Partially because not
> everything you listed will happen. Savings rate increases would
> be great but the whole goal of all this action has been to "restart
> the credit markets").
>
> You answered your own question in quotes "artificial growth" is inherently
> ... ... artificial.
>
>
> On May 10 10:54 PM Willy Walnuts wrote:

Don't Be Fooled by Inflation

I think Mr. Bern's comments are more telling than Mr. Schiff describing the effects of entropy that are rather obvious at this point. Yes, QE leads to inflation. And, yes, the strength of developing economies is based on the fact that they are commodity driven and that they have a real need for growth.

However, I am failing to see the distinction of artificial growth and real growth in the US. Are you only referring to the stock market and investment portfolios? I don't think most people consider the stock market rally "growth". If "artificial growth" leads to improving employment numbers, lower trade deficits, a renewed manufacturing base, higher savings rates, and decreased household debt, then I'll take it. If that takes a lower value of the dollar on the forex, so be it. But of course the real question is at what cost. I think the political backlash on rampant QE will reign in Bernanke and Obama before we get into hyperinflation. And Bernanke will likely move his foot from the gas pedal to the brakes rather quickly at that point. But the choice for policy makers will be inflation or taxes, or both. Inflation is politically easiest, therefore inevitable. Some insidious tax increases like energy and vice taxes, are likely in the works as well.

But at this time, of course they don't want anyone holding cash. Invest, borrow, buy stuff, create jobs. That is what we call economic growth right?

If the stock market shows a V, but the real economy is an L, is that "artificial" growth, or just no growth?

Bond Expert: Thursday Wrap

just musing... when Geithner says, "This is just the beginning and we are going to keep working to try and make sure this financial system is in ... a strong enough position so it can provide the credit necessary for recovery," is he really talking about the banks extending credit to the Treasury?

The Treasury bails out the banks, the Fed bails out the Treasury, what's the next leg in the plan? Will the Fed require the banks to increase holdings and reserves in treasuries?

To go a bit further... what about the rumor of pensions and retirement accounts being seized? Will these become compulsory investments in treasuries?

It looks like they are going to have to do some aggressive marketing... they can't expect Ben to become the only buyer trying to keep interest rates down, while all the others fall out.

Great Recession Datapoint of the Day

If inventories have dropped, and consumer spending is up, that is great news... for China. I don't see how it helps the US much, it seems only that our trade deficit will start to rise again very soon. The dollar is still too strong to have any impact on improving our trade imbalance.

OK, maybe Walmart and some other specific plays might be a good idea on this news, but the overall rally is baffling.