Adam855

Markets Are Heading Higher

At this point I think the risk is higher to the downside. This is a bear market rally, which after a crash often moves 50% higher, which we're definitely getting closer to. There are likely gains still to be made in the short term (perhaps 1-2 months left), but I'm not brave enough to chase at this point, since you never know when market psychology will turn.

ISM Index Indicates Recession Is All but Over

I'd like to see more data before drawing a firm conclusion about an end to this recession. We're in uncharted waters here.

Keeping an Eye on Lending Standards Data

Seems like it would be better long-term to balance the overly easy lending for years with an extended period of tighter lending standards.

Why Economists Should Be Rewarding Unorthodox Thinking

I'm not sure why most economists didn't see this coming.
I think the statement above that speaks about improper incentives is right on. Politicians only want to hear from economists who are saying things that fit their agenda. Followers of Keynes fit that agenda quite well, since that gives the politicians justifications for trying to "fix" economies on a macro level. Unfortunately in general those are also the same people who either completely missed the obvious excessive leverage, or were overly confident in central bank's ability to easily deal with it.

The key is to figure out ways to provide politicians with incentives to care about listening to multiple economic opinions.

The Genesis of the Financial Crisis

I agree with your conclusion that the loose monetary policies under Greenspan is at the root of this crisis.

As Fed Chairman, Greenspan had to be very careful with his words. In this video, I think he is still holding back some, but doesn't have to speak nearly as cryptically.
Reading between the lines, it seems like he does believe there's a good chance of a second dip for housing (how did he miss the first dip? No idea... ), and it was funny to watch how quickly Stephanopoulos changed the subject around that time.
He also seems to believe that the Fed will need to raise rates much sooner than currently expected, which implies that he believes a sharp recovery is imminent, and that inflationary pressures will follow rapidly.
I find this interesting since Greenspan was always much more willing to keep rates low than raise them when necessary.

Three California Muni ETFs: Value Play or Sucker’s Bet?

Pretty much all accounts state that this is a temporary fix, and they'll be back in the same budget fix again next year at the latest. Therefore, bond yields in the short to medium term (now through 1-2 years or so) are more likely to go up than down in my opinion, unless a drastic turnaround in the economy happens quickly.
With that said, I don't find 6% taxable yields particularly tempting, regardless of the possibility of default.

Five U.S. Banks Are Too Big to Exist

Figured that was coming..

If this is a lie from a single source, what is the real number, and which source should then be trusted? Also, what is the reason for telling a lie about world GDP? I'm open to new ideas, just want to hear the arguments..

On Jul 29 03:35 PM nova wrote:

> Adam855,
>
> It is of interest that all three (IMF, World Bank, and CIA) report
> to the same master.
>
> Do I trust them? Did CIA tell us truth about WMD in Iraq?

Five U.S. Banks Are Too Big to Exist

Regardless of the number, I agree in principle with your article. None of these banks should have been bailed out in any way. The only way to break people of these habits is to allow them to suffer the consequences of their folly. The response made in practice will only encourage others to do the same things in the future.

I'm generally very wary of conspiracy theories, but the way this one has gone down has made me wonder who is really in control of the US government.

On Jul 29 01:30 PM Jeff Nielson wrote:

> Adam, I have never seen estimates that high anywhere else, but I'll
> defer to your SOURCED number.
>
> However, all that does is change the ratio from 30:1 to 20:1. The
> point is that even if the ratio were only 2:1, the idea that there
> is a SIDE "business" (i.e. a high-stakes casino) run by the greediest,
> most-reckless people in the world, which is MANY times as large as
> global GDP is simply unacceptable.
>
> Playing around with the numbers has absolutely no impact on the argument
> that these oligopolies are "too big to exist".
>
> As for the comment that there is only $100 billion of "net exposure"
> in the global derivatives market, if that was TRUE, then the collapse
> of Lehman Brothers could not have possibly been the system-destroying
> event which the BANKERS claimed that it was.

Five U.S. Banks Are Too Big to Exist

I appreciate your response to my comment.

I checked around for GDP, and here are the numbers, with Wikipedia links, which are basically aggregating from 3 main published sources.

World GDP 2008- OER (official exchange rate) or nominal
IMF - $60.689 trillion
World Bank - $60.115 trillion
CIA World Factbook - $62.250 trillion

World GDP 2008 - PPP (purchasing power parity)
IMF - $68.996 trillion
World Bank - $69.687 trillion
CIA World Factbook - $69.490 trillion

en.wikipedia.org/wiki/...)
en.wikipedia.org/wiki/...)

So unless the IMF, World Bank, and CIA are all lying or grossly inaccurate in very similar ways, my figure of $50 trillion for world GDP was much closer. If you have better sources, I'd love to see them since my primary reason for reading on this site is to learn.

As for derivatives totals, I haven't looked in detail, and it's a slippery topic based on definitions/details, but would also love to see a few examples of sources.

On Jul 29 03:42 AM Jeff Nielson wrote:

> Adam, many sources have quoted the notional value of the derivatives
> market at $1 QUADRILLON or higher. And global GDP is nowhere near
> $50 trillion closer to $30 trillion.
>
> Do the math.

Why the Federal Reserve Bank Must Maintain Its Independence

I'm also terrified at the thought of the current congress taking on some of these decisions directly, though at the moment the Fed and Congress seem to be in complete agreement, which is to flood the system with as much credit as possible.

I'm definitely in favor of greater transparency for the Fed. If this private entity, owned by bankers, is going to have an incredible amount of power over citizens of this country (it's impossible to argue that it does not), then I think it easily follows that at a minimum those affected should at least know what is being done and the reasons why. Otherwise, the intentions of the Fed, and the social contract between citizen and government can very easily come into question.

As for the idea of a party other than Congress taking on an oversight or auditing role, a different public entity would have similar political pressures, and no private entity I can think of would necessarily have citizens' best interests at heart. It's an interesting idea to kick around though.

Recent events of course have very much blurred the line between public and private institutions.

One last point, which is to say that I personally don't buy that the dollar holds its esteemed position as the world's reserve currency based on the competence and independence of the Fed. The dollar became the world reserve currency based on US industrial and military might, and remains in that position still based on martial dominance, as well as the lack of any perceived stable alternatives in the world of fiat so far.

Five U.S. Banks Are Too Big to Exist

World GDP is in the ballpark of $50 trillion. Every figure I have seen for global derivatives puts those in the realm of $500-600 trillion. That would be only around 10-12 times, not 30 times world GDP. Still a staggering figure either way, but not an unimportant difference.

Can you share the source for the 30 times world GDP number? Around 30 times US GDP sounds more reasonable.

Bonds: Dropping Real Yields Indicate Inflation on Horizon

Bernanke is an academic who studied the Great Depression, and has openly admitted his flood of liquidity and loose monetary policy was heavily influenced by not wanting to make the same mistakes as the Fed in the 1929 time frame, when they tightened money supply. In addition, conventional wisdom says that in 1936-1937 the Fed made another series of errors in increasing reserve requirements while the economy was still too fragile, adding more years onto the economic malaise.

I'd be willing to bet that Bernanke is very reluctant to tighten again due to his background with the above. All of his past speeches say that he's much more willing to error on the side of inflation than deflation.

Iceland's Devaluation Succeeds: So What?

So let me get this straight... Iceland's economy is projected to shrink 7%, and they're already declaring victory? I know there are politics to play, but I think it's quite premature until a full recovery is actually complete. There are many paths from where they are, and some of them still go to hell.

"You have to certify a site as elf free before building on it!".. too funny.. :)

Volatility Comparisons of 1987-1988 vs. 2008-2009

Thanks for the great chart. It's very tough to tell if this will repeat itself in the same way, but since 1987 saw a violent crash, it's definitely worth taking a look at.

If this plays itself out similarly, this chart puts us into late October from here with a rising/stable market. There are plenty of other scenarios, but that's a feasible one over that time period.

Direct Democracy Could Be California's Undoing

They need to bite the bullet at some point and do one or a combination of the following in a permanent way:
A. Drastically reduce services
B. Raise taxes
C. Default on debt

It seems like their state constitution will also need to be altered to allow budgets to be passed by a simple majority instead of 2/3.