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  • Is The Yen Still A Sale?  [View article]
    The Yen is still a sale and probably will be for some time to come. Because the government debt in Japan is so big now that they need to start inflating it away. There is no way they can repay it now. And they can't keep borrowing for much longer either.

    According to the calculations of some financial experts, Japan is now at a point where "even if the Japanese people invested all of their assets in sovereign bonds, it would only be enough to cover 12 years of state expenditures."

    They have no choice but to start inflating Japan's debt away, because the Japanese people are running out of money to lend to their government. And borrowing from foreigners would probably raise bond interest rates so much that Japan's government won't be able to pay it.
    Feb 3, 2013. 03:21 PM | Likes Like |Link to Comment
  • Buy the Dip/Avoid Falling Knives - Which Is Right?  [View article]
    A falling knife is when you bet against the trend, hoping that it will reverse. Shorting silver now is like trying to catch a falling knife.

    And buying on the dip is when the stock is either in a trading range or up-trending.

    Whether you call it catching a falling knife or buying on the dip depends on the technical picture of the stock you are buying.
    Apr 24, 2011. 08:04 PM | 2 Likes Like |Link to Comment
  • The Unemployment Rate and Stagnating Compensation  [View article]
    The amount of compensation workers get depends not just on their productivity but also on their competition from other workers.

    If every worker becomes more productive due to use of technology. Then employers might end up with an oversupply of workers. And employers would be free to pay lower wages and benefits as a result of that.

    That's what outsourcing of work to poorer countries is all about. It's just a way to lower wages and benefits that the company has to pay to its workers.

    Wages and benefits don't depend on just one factor, such as productivity of workers. The supply of workers and the demand for workers is probably a lot more important than the productivity of workers, when it comes to compensation.
    Mar 23, 2011. 09:35 AM | 6 Likes Like |Link to Comment
  • Japan's Declining Population: A Significant Economic Problem?  [View article]
    It doesn't matter if the lenders are domestic or foreign. Because domestic lenders will flee their own currency, when their government tries to inflate its debts away.

    This is what happened in Russia and in Ukraine during 1990s. People there were using US dollar cash to trade with each other, rather than their own currency.

    And the same thing will happen in any other country in similar circumstance. Just because people own the bonds of their own government, doesn't mean that these people are stupid. Domestic lenders will flee just as fast as the foreigners will.
    Mar 20, 2011. 11:40 PM | 2 Likes Like |Link to Comment
  • PIMCO's Bill Gross Drops U.S. Treasuries Like a Bad Habit  [View article]
    It sounds like USA is now going the Japanese way. Which is a prescription for economic stagnation and ever increasing government debt.

    And the only question remains whether Americans will let their leaders lead them into a dead end situation without any good way out of it.

    The Japanese have let their leaders lead them this way. But Americans aren't Japanese. Americans have less patience and less trust in their leaders. And it still remains to be seen, whether Americans will demand change and reform or whether they will accept the situation as it's presented to them and follow their leaders without objecting too much.

    I'm sure the Fed is planning to continue its QEs without end. But chances are good that American voters will get fed up and force the US government to change its plans. And the election next year might be the beginning of that.
    Mar 19, 2011. 11:20 AM | Likes Like |Link to Comment
  • Yen Rally Continues to Defy Conventional Wisdom  [View article]
    I think the graph above shows the value of the US dollar relative to the Japanese Yen. That's why this graph goes down sharply in 1995 and stays there for a while.

    The graph goes down. But this graph actually means that the Yen went up in value relative to the US dollar.
    Mar 18, 2011. 08:23 PM | Likes Like |Link to Comment
  • Yen Rally Continues to Defy Conventional Wisdom  [View article]
    A lot of Japanese companies have subsidiaries and investments in other countries. And it makes sense for a lot of these companies to bring their foreign cash home to rebuild the damage they've suffered from the earthquake and tsunamis in Japan.

    The same thing happened in 1995 after the Kobe earthquake in Japan. The Yen went to a record high against the US dollar and stayed there for a while.

    I think the latest intervention to bring down the value of the Japanese Yen is meant to take out the speculators, who are causing too much volatility in the currency exchange rates. And the Yen will probably go higher again relative to the US dollar in a steady way, without too much volatility.

    Japan actually needs a higher Yen at this time. Because Japan needs to buy an awful lot of building materials and commodities abroad to repair and to rebuild Japan.

    And trying to stimulate Japanese exports with a lower Yen doesn't make sense at this time. Because a lot of Japanese factories have trouble fulfilling existing orders. They can't export more, even if they want to partly due to the earthquake damage and partly due to the shortage of electrical power in Japan.

    Japan has lost the electrical output from major nuclear power stations. And this isn't something they can repair overnight or even in a few weeks. They need months and even years to build new power stations.
    Mar 18, 2011. 08:09 PM | Likes Like |Link to Comment
  • Jeffrey Saut: Go Against the Hysteria  [View article]
    Saudi police were firing on Shiite protesters, who are a small minority in Saudi Arabia. They make up only 15% of the population there.

    And there is no way USA will take this matter to the UN and try to impose some kind of sanctions on the Saudi government. USA doesn't do this kind of thing to its friends, including Saudi friends.

    Which means that there are no serious political or economic implications of the current events in Saudi Arabia.
    Mar 18, 2011. 07:37 PM | Likes Like |Link to Comment
  • CEFs: Follow the NAV  [View article]
    ETJ, EXG, and ETY are mostly returning capital in their dividends, rather than paying out real income to investors.

    93.40% of ETJ dividends, 85.90% of EXG dividends, and 91.30% of ETY dividends are return of capital rather than real income. While for PGP, the return of capital is only 31.20% and the rest if real income. Which is probably why PGP is well above its NAV, while the rest are below their NAVs.

    When the fund is returning capital rather then paying out real income, then this fund is at risk of having a huge cut in its dividends in the future. And that's probably why investors are shying away from such funds.
    Feb 21, 2011. 12:29 PM | 2 Likes Like |Link to Comment
  • Manufacturing Is All About Jobs  [View article]
    The thing about free trade is that it works only when the trade is free for both goods and labor.

    Which is the case only within the country and not internationally. Both workers and goods are free to move between the states in USA, for example. But between China and USA only goods are free to move but not workers.

    International free trade is a misnomer. Because it's only half-free and half walled-off. The goods are free to move across international borders. While the workers are not free to move.

    And it's this partial freedom in international trade that creates distortions in the labor markets. Unemployed Americans aren't free to move to other countries and look for jobs there, even though they might be more efficient and more productive than other workers are.

    Other countries might have lower wages than USA has. But those other countries might also have lower income taxes and much lower living expenses, which might more than justify accepting lower wages.
    Jun 27, 2010. 08:09 AM | 2 Likes Like |Link to Comment
  • Why I Don't Like Stock Buybacks  [View article]
    Share buybacks is often an unfair way to return money to investors.

    Because when companies buy back their shares at depressed prices, then many long-term investors end up selling their shares at lower prices than they've bought at. Which results in a loss for them and not a profit.

    Only investors who stick with the company and don't sell their shares might make some profit later on, if the stock price goes back up. But even this is iffy. It all depends on the economy and the stock market conditions and not just the company itself.

    In the end, share buybacks reward stock market professionals who know best when to sell their shares. And amateur investors end up the losers, because they tend to sell their shares at depressed prices.

    Share buybacks is just another trick to reward Wall Street professionals at the expense of the rest. This is a form of corruption I'd say, because this isn't a fair way to distribute company profits among its investors.
    Jun 27, 2010. 07:32 AM | 3 Likes Like |Link to Comment
  • On the Supposedly Rational Market  [View article]
    People always try to rationalize everything they do, even when they've made a mistake and are clearly wrong.

    The word 'rational' simply means that your conclusions are based on some kind of logical reasoning. But as any logician worth his salt will tell you, logical isn't the same as true. Because logic and rationality is nothing more than a bunch of rules-based formulas for drawing conclusions from assumptions. And if your assumptions are wrong in some way, which they often are. Then very likely your conclusions will also be wrong, no matter how logical or rational your reasoning has been.

    I'd say that financial markets are always rational but they are often mistaken. Because market price movements are often based on misleading information and mistaken assumptions.
    Jun 25, 2010. 06:46 AM | 8 Likes Like |Link to Comment
  • Labor Productivity and Costs  [View article]
    If businesses can export to other countries and sell there. Then the impoverishment of US workers and their decreased spending power will be compensated for by foreign consumers and their increased buying of cheaper US goods.

    When the company is multi-national. Then it can produce in lower wage countries and sell in higher wage countries in order to make profits. While US workers are getting poorer, perhaps Chinese and Indian workers are getting richer. And at some point US made goods might become cheap enough to sell in China and India due to decreasing US wages and increasing Chinese and Indian wages.
    Jun 3, 2010. 11:06 PM | Likes Like |Link to Comment
  • Squatting Our Way to Prosperity?  [View article]
    The US government Treasury is the one who is paying for this free lunch.

    Because most of these mortgages that people are defaulting upon have been insured by Freddie Mac and Fannie Mae. These companies are now loosing tens of billions of dollars and are getting promptly reimbursed by the US Treasury. Because these companies are now owned and controlled by the US Federal government.

    This free lunch for defaulting homeowners is nothing more than another sneaky government bailout, for ordinary people this time. The government is borrowing money in financial markets and channeling this money to some people in order to stimulate consumer spending and the economy.

    This isn't an equal or fair distribution of money borrowed by the government. And that's why the government has to be sneaky about it. Or else a lot of people will be upset about not getting their share of government handouts too.
    Jun 3, 2010. 12:07 AM | Likes Like |Link to Comment
  • Prepare for an Exceedingly Treacherous Market  [View article]
    SPXU screamed almost 8% lower today.

    SPXU is a 300% leveraged ETF that tends to go down in the long run, no matter in which direction the stock market goes.

    This ETF is good only for day-trading and not much else.
    Jun 2, 2010. 11:47 PM | 4 Likes Like |Link to Comment