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Dialectical Materialist

Dialectical Materialist
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  • Marc Faber: Equities Safer than Dollars [View article]
    You can't measure volatility by comparing something to itself. My share of stock is always worth one share of stock. My ounce of gold is always worth one ounce of gold. Do these have zero volatility too? Obviously the volatility of USD has to be in relation to something else such as other currencies, a basket of currencies, or better still, gold. Your point about volatility not equalling risk is right in so far as low volatility does not equal low risk, but it is obvious that high volatility does correspond with high risk -- at least in the short term.

    On Sep 29 01:01 PM Mark Anthony wrote:

    > What has the lowest volatility? The US dollar cash. One dollar of
    > paper money is always worth one dollar, no more and no less, the
    > volatility is ZERO. But the risk in paper money can not be higher.
    Sep 30, 2009. 10:57 PM | 2 Likes Like |Link to Comment
  • Is It Time to Recognize Reality? [View article]
    I have been struggling with the distinction between "conspiracy" and "worldview" lately. I don't think it was a conspiracy in the sense of a planned event kept by a secret cadre. But I DO believe much of what we are now suffering from is the result of a group of like minded people with a lot of power following the natural course of events in the world as they see it. Of course they would act in what they thing is their own best interests and as it happens they have no respect for or appreciation of the role of common workers in the world. Never mind that without the middle class there would be society for them strut their stuff in.

    And it is for this reason I fear the future in the hands of powerful multinational corporations (and the people who run them). They have no national allegiance and only know the profit motive. They go where labor is cheap and don't care how what they do might affect the health of the locals. They cajole and strong arm governments with threats of moving their factories and plants out of town or out of the country. They are bullies. And politicians worldwide allow themselves to be pushed around and bought out by these companies. And of course many of the more powerful politicians themselves come from and return to these companies when they are not in then government (Hank Paulson, Dick Cheney, etc.) In this view, the role of Goldman Sachs (just as an example) in the "recovery" is not so much a conspiracy as a natural result of already observable behavior. Karl Marx had it half right. He saw the problem of capital concentrations. His solution sucked, but he clearly predicted what happens when powerful money surrounds itself with it own and seeks to make more money at any cost...

    So what do we do now?

    On Sep 30 07:04 PM TeresaE wrote:
    > It IS a conspiracy and regretfully the proof will come too late to
    > do anything about it.
    Sep 30, 2009. 09:37 PM | 1 Like Like |Link to Comment
  • Why Banking Is Insolvent [View article]
    I think it is valid to ask for sources, so don't jump on me for taking issue with one thing you say:

    On Sep 29 10:58 PM Karl Liesman wrote:
    > Why do you use average instead of median?

    An average is the right form a stat. to use when trying to extrapolate a sum from a group of numbers. If I went to Vegas ten times and lost $1 nine times but lost $1million once, using the median (of 1) times the ten trips would suggest I lost $10. Using the average ($100,000) would correctly suggest my real loss was a million dollars. Since he is multiplying the avg. to produce a sum, the average is right. Nothing wrong with the methodology there.
    Sep 30, 2009. 12:17 AM | 1 Like Like |Link to Comment
  • Should You Invest in Banking Stocks? [View article]
    I agree. Even if my mortgage was underwater, the holders of the loan could still count on getting my payment every month because I will keep paying off the house until I own it (because it is my home and not an investment). Now under mark to market, they need to be concerned with the market price of my house (even though I am not selling). Is the loan worth what I will continue to pay on it every month or the value of the home which I am not selling? I agree cash flow is the more important measure of the loan value in this case -- and in many cases.

    I still think the banks have some challenges ahead, however, as I don't think all loans will perform as well as mine. Many mortgages will prove to be worth only what the homes can be sold for in foreclosure. Maybe this is a matter of bumping up a percentage of non performing loans in a formula just to be safe, or maybe that percentage shod be bumped up a lot to reflect current struggles, I don't know. And it is this not knowing that makes believe banks are hard to value right now. Things are not as bad as the "sell everything today in a depressed market" model, but they are not as good as "historical returns on loan portfolios" model either.

    On Sep 29 07:01 AM Tack wrote:

    > What was a "myth" were the contrived and manipulated "market" values
    > created by intentionally destructive, and often illegal, naked short
    > selling of debt assets, coupled with long positions in derivative
    > contracts ( insuring those same
    > debts. It's the classical valuation models, based on cashflows,
    > not imagination, that were the reality, in fact.
    > A minority of people seem to understand this, and it explains why
    > so many are confounded by the continued recovery of banks and other
    > financials.
    Sep 29, 2009. 11:18 AM | 1 Like Like |Link to Comment
  • Should You Invest in Banking Stocks? [View article]

    I am not an advisor and you didn't ask, but...

    You might consider selling half of each position now. That would lock in some gains. Then since it is an IRA you could let the rest ride for years (or decades depending on your age). I think these are tough times for all, but I do believe that "the sun will come out tomorrow" and I think anyone looking back at these prices in 10-15 years is going to chuckle (or cry) about how much money some folks could have made buying in at the level you did... The selling half is in case I'm wrong and they go to zero :)

    On Sep 28 05:54 PM Tammi wrote:

    > I do think it was a gamble..but i bought C @ 2.42 and BAC @ 4.40
    > in March. $5,000 each in my Roth IRA. Thinking they both had significant
    > bailouts and that the govt won't let them fail. Major
    > watching for best time to sell.
    Sep 29, 2009. 02:48 AM | 2 Likes Like |Link to Comment
  • Should You Invest in Banking Stocks? [View article]
    I'm not defending the article, but "mark to model" is one name given for the type of valuation that is NOT "mark to market" but is based on valuing an asset based on cash flows and other things. It is sometimes knocked as "mark to myth" or "mark to make believe" and it is the opposite of "mark to market." Just an FYI.

    This analysis is crude to be sure, but it never bothers me to see someone show an interest. I think most technical traders (even sophisticated ones or maybe especially sophisticated ones) sound a lot like astrologers as they explain the past better than predict the future, but if it works for them, that's fine with me.

    I agree with one premise of this article: It is hard to place a fair value on banks right now. There are too many unknowns. I would not risk much with financials (because I do not do a lot of high risk/high yield stuff) but lots of folks will make a lot of money betting the right way with banks. I think they will rise or fall -- I don't think they'll languish at these levels long... now I sound like the astrologer.

    On Sep 29 02:20 AM healthpicker wrote:

    > To the article writer: I think you mean mark to market "model" -
    > how does someone like you get to write stuff like this. Stimulating
    > nonesense (mainly). But I actually agree with your analysis!
    Sep 29, 2009. 02:39 AM | 6 Likes Like |Link to Comment
  • Tuesday Outlook: Commodities, Global Markets [View article]
    That memo Zero Hedge cites is fascinating, if genuine. Who actually writes "I have a secret agreement in writing" in a state memo? This reads like a bad spy novel...
    Sep 28, 2009. 11:02 PM | Likes Like |Link to Comment
  • Prepare for the Tablet Wars [View article]

    I see your point, but considering it takes energy (and trees) to make each book, and books are heavy and expensive to ship (requiring lots of fuel along the way), there is a tipping point where it
    it is more efficient (and more environmental) to read books which are electronically transmitted. I don't know exactly where that point is, and certainly many people don't read enough to justify the kindle, but some folks certainly do. (I don't know any Birkenstock wearing global warming cultists, but I think you were talking about net environmental impact...)

    On Sep 27 06:45 PM ebworthen wrote:

    > It is amusing to think of how many Birkenstock wearing - Prius driving
    > - global warming cultists will be using electricity to run mercury
    > filled tablets made of petroleum based plastic with a life expectancy
    > of 3 years to replace a printed book that could last hundreds of
    > years; and reading drivel.
    Sep 28, 2009. 10:54 AM | Likes Like |Link to Comment
  • Doug Kass: A Self-Sustaining Recovery? [View article]
    It's very funny because it is all too true. Thanks for the link.

    On Sep 25 10:34 PM JeffDB wrote:

    > Yeah, I think the Chinese are a little surprised at capitalist tastes:
    > ;)
    > On Sep 25 08:59 PM Dialectical Materialist wrote:
    Sep 26, 2009. 05:37 PM | 1 Like Like |Link to Comment
  • Bill Ackman's Pershing Square Q2 Letter: No Gold Hedge for Us [View article]
    I agree about the gold nonsense (which is to say it is nonsense not to have some), but what really struck me was his valuation of GGP based on comparison to SPG. It strikes me as a bit like doing a Woolworth's valuation with a comparison to Walmart. $0.40 a share maybe, but not $40.
    Sep 26, 2009. 02:43 AM | Likes Like |Link to Comment
  • Doug Kass: A Self-Sustaining Recovery? [View article]
    I heard an interview years ago with a Rumanian woman who wrote novels about growing up in Eastern Europe in the 1950's. She said she knew communism was doomed when she learned that the women of the Western world had a great many sanitary hygiene products to choose from, whereas the central planners had never thought to address the needs of women in a modern way (and were living as they had for 100's of years washing and re-using cotton batting). The central planners had overlooked, not some fringe group on the edge of society, but an entire HALF of the population. Her point (and I think it is a good one) was that the magic of capitalism was that it rewarded those who found better ways to address needs of people in the society. Rather than hoping someone else has your needs in mind, capitalism creates an incentive for folks to seek out and profit from unmet needs. Hence all of society is served better than central planners could ever hope to manage. (Go Capitalism).

    Unfortunately, the other extreme is that capitalism allows folks to profit from CREATING unmet needs and then fulfilling them (and the vehicle for this is obviously marketing). Hence while capitalism brings us essential hygiene products, it also brings us battery operated disposable 5 bladed razors and plug in disposable air fresheners.

    So capitalism relies on making "something others want", to be sure, but not always "something of value." And now in mature economies, capitalism seems to be suffering from a case of "what do you get the person who has everything?" syndrome. Thus we get Big Mouth BiIly,the singing bass.

    On Sep 25 03:47 PM TeresaE wrote:

    > Funny, I though capitalism was creating money by producing something
    > of value that others wanted.
    > Stupid me, I forgot that in THIS century, the way to make money was
    > to make bad bets with borrowed money. No production of anything
    > of value required.
    Sep 25, 2009. 08:59 PM | 1 Like Like |Link to Comment
  • Netflix: Shifting Demand Down the Long Tail [View article]
    I just read the link and I am blown away with how badly they missed on their analysis. Taking a 10% sample of ratings and then arguing that many of the niche offerings had no ratings at all (implying they had never been viewed) points to a real misunderstanding about the nature of niche markets. The point isn't supposed to be that a few dozen people watch the movie, love it so much that they tell their friends and so on until it becomes a top 100 offering. The point is that someone somewhere got to see a rare find and this is something they would not have been able to do 20 years ago (and the important point from the business perspective is that this customer will happily PAY for this entertainment opportunity). Chief to the academics' findings seems to be the notion that niche offerings are not very popular (...?) What part of niche did they not understand?
    Sep 25, 2009. 10:00 AM | Likes Like |Link to Comment
  • Netflix: Shifting Demand Down the Long Tail [View article]
    This is something I think a lot of folks do not understand about Netflix (and many other internet based models of things). There is a viable market in unpopular or odd offferings as long as delivery of these products can be done affordabley. In Netflix's case now (and even more so with streaming) they CAN efficiently offer a title that may have only a few thousand fans. And fringe markets are fiercly loyal (since they feel lucky to find products that cater to their tastes). So there is certainly money to be made in the tail.

    My hope is that as small market entertainment content expands on the internet (web series, semi-professional music, smart phone apps, etc.) more companies will monetize bringing rare finds to rare fans and lots of off beat stuff will find an appreciative audience (and lots of creative folks will be able to eek out a living doing something they love).

    I think Netflix understands the real possibilities of their business model and I expect they will be doing very well over the next several years.
    Sep 25, 2009. 09:38 AM | Likes Like |Link to Comment
  • Bank Reform: One Central Banker that Gets It? [View article]
    Karl L,

    You're argument is not logical. The existence of fires that burn out of control does not negate the usefulness of firefighters. What Karl is saying is that without the real threat of punishment, behavior will not change. To use your own experiment, go to a Texas prison and ask how many folks would kill IF THEY KNEW THEY COULD GET AWAY WITH IT.

    You are certainly correct that punishment does not prevent bad behavior. But lack of possibility of punishment almost guarantees it.

    You argue (rightly) that "some will risk everything for money" but what will they do for money when there is no risk involved? We need look no further than Goldman Sachs for that unfortunate answer.

    (And on a side note, I don't think Karl should work for the Borg lest he be assimilated.)

    On Sep 24 05:14 PM Karl Liesman wrote:

    > Karl says, "It has been proved through decades of sociological study
    > that only the certainty of punishment deters crime."
    > This is not true. Go to Texas and ask those on death row if they'd
    > "do it again even if they knew they would die (10 years later)?"
    > 422 executions in 25 years and there are still murders in Texas!
    > Even China executes businessmen for corporate fraud. Tough punishment
    > doesn't work. Having regulatory agencies that are on top of financial
    > instruments and statistics does. They are on top now, but the real
    > talent chooses to design the instruments, not regulate them, staying
    > 3 steps ahead.
    > It's all about money Karl. Some will risk everything for it. If
    > you actually had real financial experience you would have better
    > perspective for your articles. Your sources are mostly media based
    > which for the most part have even less financial knowledge than you
    > do! Go work for a bank and come back in a couple of years.
    Sep 25, 2009. 02:11 AM | 2 Likes Like |Link to Comment
  • Seven Points to Look For in October [View article]
    Stay in equities if you must, but tighten up your stops. If things keep rising inexplicably higher, then you haven't missed a thing... and if the other shoe does drop, you will have successfully ducked (or whatever it is you do to avoid falling shoes).
    Sep 24, 2009. 03:50 PM | 1 Like Like |Link to Comment