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  • The Hidden Cost Of Oil [View article]
    In 2001, the Saudi oil minister reckoned that the fair price of oil was around $25. Inflation adjusted, it would today be around $34. The fact that it isn't is largely to be found in the form of empty cities in China and trillions of excess liquidity elsewhere.

    There are hard times ahead for those needing $100 oil in order to stay on their tigers.
    Jul 11 11:12 AM | Likes Like |Link to Comment
  • A Vicious Cycle Fuels The Massive Student Loan Bubble [View article]
    Agreed, but education is only one of the top three GSEs, (Government Sponsored Egregencies), in the economy.
    The other two are housing and healthcare. In fact, if one subtracts the additional headcount in these three heavily subsidized fields from total employment growth over the past 25 years, national employment has been basically flat.

    The massive growth in healthcare can be directly attributed to governmental tax policy providing a "free good" to employees via employee health plan income tax exemption.
    Runaway construction was funded by ninja loans packaged into derivative bombs, still yet to explode. Whole cities stand empty in China as testimony to the appeal of this approach to avoiding mass unemployment.
    Your college cost stats speak eloquently of a new class of indentured servants being built on the backs of kids seeking a better life. That life is being realized by the successful rent-seekers in the education establishment.

    All three of these industries are built and sustained on successful lobbying of politicians on tax policy and incremental debt.

    Jul 5 12:45 PM | 4 Likes Like |Link to Comment
  • The Next Phase Of Easing Will Be 'Qualitative' - Purchasing Common Stock [View article]
    Yes, and on your next trip to the grocery store, after their purchase of all assets, you would discover the true cost of their "help": bread on sale at only a few thousand dollars per loaf and the saver class utterly destroyed.
    Jul 4 04:59 PM | Likes Like |Link to Comment
  • Week In FX Asia: China Manufacturing And Japanese Inflation Lead The Way [View article]
    I hope all keynesians are paying close attention to Abe's experiment. Inflating the national currency of this resource-poor and export-dependent country in the competitive global economy will produce two things:

    Accelerating impoverishment of an aging, shrinking middle class and defensive capital flight as it's effects become increasingly apparent to the unfortunate victims.

    Deflation doesn't necessarily lower living standards; inflation invariably does, for the producing, saving classes. Inflation always benefits the moneyed class and profligate politicians.

    Jun 27 06:40 PM | 1 Like Like |Link to Comment
  • The Signal And The Noise [View article]
    Signal to noise, indeed! I believe this article's title is an excellent analogy for what the Fed's been doing since LTCM's blow-up in 1998, namely, repeatedly swamping the global economic system with excess monetary noise every time the inevitable day of reckoning for excessive debt arrives.

    I see no way in a wage-competitive global economy for inflation to take off. This fact, compounded by the march of worker-eliminating technologies, thanks to the Fed's artificially lowered cost of capital, virtually insures the continued deflationary grinding down of the middle class.

    The 1 percenters, however, do have a huge inflationary risk: There's no safe place to put the money being garnered from the Fed's massive wealth transfer from the shrinking saver class. All alternatives look increasingly insane in advance of the coming and inevitable third bubble pop in 16 years. All of this is compliments of the Fed's gargantuan perversion of Keynesian theory.

    Since LTCM, the Fed has transitioned from recession-damping flywheel to recession-preventing money mill.
    Jun 27 01:17 PM | Likes Like |Link to Comment
  • This Is When The Bear Growls [View article]
    Hello Interesting Times,
    Thanks. Your comment is a timely reminder to be thankful for the very long list of common bad things that haven't happened to me.
    And thanks also for running a business. I firmly believe it's the only thing that actually moves national living standards anywhere. Hang in.
    Jun 21 10:16 AM | Likes Like |Link to Comment
  • Is There An Imminent Bear Market? Don't Ask [View article]
    The "market" is not climbing a wall of worry this time: It's a wall of debt.

    The combined actions of stuffing $4 Trillion into the TBTFs to be largely squandered on buy-backs and hangover postponement, along with FASB 157 suspension have sustained the illusion of Fed supremacy.

    When the break comes this time, it'll be no different than any other bubble in history except we'll have a gargantuan mountain of global debt to unwind.

    Anyone entering the Greenspan/Bernanke/Yellen casino at this point can reasonably expect breakeven returns for years. The downside is massive.
    Jun 20 10:09 AM | 2 Likes Like |Link to Comment
  • China's Imports Crash To Near Zero [View article]
    Ha! Your comment reads like a paid communist party hack's.

    Truth is: The Chinese economy is almost totally dependent on the West's continued snorting of addictive debt to sustain lifestyles beyond it's means.

    Absent Chinese peasants slaving away in monster factories and their government's continued acceptance of US government debt as if it had real future value, China would be nowhere. Ditto all centrally planned economies.
    Jun 10 10:44 PM | 3 Likes Like |Link to Comment
  • Bring Back The V; The Economy Took The Worst Case Anyway [View article]
    Thanks for an excellent analysis. The root cause and culprit lies in your final sentence, " persistent over-indebtedness."

    The steep V is analogous to a drunk's hangover. The economic intoxicant is debt.

    Herculean efforts are increasingly required to mitigate and postpone the effects of indebtedness.
    The current market tear began with suspension of FASB 157, which required quarterly public statements as to the value of assets often acquired via debt.

    And I note this morning that the Spanish Ten year bond pays the lowest yield since 1789.
    Central banks have come full circle, since David Martin's observation that their proper role was to take the punch bowl away judiciously, to purchasing economic booze on credit, ($4,000,000,000,000 this far) to continue the roaring drunk party.
    Jun 10 10:17 AM | 2 Likes Like |Link to Comment
  • The Problems Of HFT, Joe Stiglitz Edition [View article]
    Just the opposite: free markets create enormous value. HFT, by comparison, constitutes a de facto toll on the market, little different in effect from the private toll stations that dotted the Rhine river throughout the middle ages. They disappeared with the advance of civilization as it became blatantly obvious to all that they were merely barriers to trade and free market access. Ditto HFTs.

    Spreads have widened; somebody has to pay for the HFT toll shacks, made of ALUs, cache, storage, main memory, etc. this time instead of bricks and mortar.
    May 25 12:21 PM | Likes Like |Link to Comment
  • ZIRP Era In Pictures [View article]
    Very good article and compelling proof that one can in fact see a bubble in real time, if one is willing to look.
    The 5+ year Fed experiment in wealth transfer from savers continues: More saver's capital in the punchbowl to save the drunks drinking on credit, please.
    The financial services industry rent seekers have won on K street: they now own it, along with your congressmen, senators and the Fed.
    The failing Keynesian model is now being blatantly employed to repeal the recessionary half of the normal business cycle on the backs of savers.

    Financial services have grown from five percent of the economy in 1980 to almost twenty percent today. They're eventually going to own us if we don't change our economic operating model.
    The link below, by a financial services guy, of all things, is one way out.

    May 11 10:43 AM | 2 Likes Like |Link to Comment
  • Why 'Too Big To Fail' Banks Remain A Disaster Waiting To Happen [View article]
    Very timely article. The current "market" rally began in 2009 when it became obvious that the financial services lobbyist army had won the war to mark to myth versus market.

    What was to have been an emergency measure mitigating acute market disequilibrium is now in it's sixth year.

    Churchill's comment regarding the uncertainty of Soviet communist leadership seems apropos: You never knew who was in charge until a dead body was thrown from under the rug. Fasb keeps throwing 157 out at the behest of the financial services gang who now siphon off 20% of the economy.

    Some Confederate currency is now worth more than face value, 149 years after Appomattox. Is that the plan? If so, we need a new one; here's one below.
    May 2 09:47 AM | Likes Like |Link to Comment
  • The Problems Of HFT, Joe Stiglitz Edition [View article]
    Imagine ten kids tossing pennies against the wall in 1980. They're betting heads or tails, with no one gaining nor losing. Suddenly, an eleventh kid shows up wearing glasses with a high speed camera and suggests that, to make the game more interesting, bets be placed after the coins are tossed, but before they've stopped moving.
    We all know who will eventually end up with all the pennies.

    Our analogous situation since 1980: "Financial services" have grown from five percent of GDP to around twenty. The smartest kids have enlisted the computer this time, hired quants, lobbyists, etc., but the effect is the same...they're getting more and more of the economy, with no tangible societal gain to show for it other than ATM machines.

    Even more dangerous now, they've used their computer to move the market to nanosecond mode, taking the individual thinking person, the one who owns the capital, out of it.

    If it isn't stopped, come back in 25 more years and we'll find them running in femtosecond mode, selling bid-stuffing futures, front-running derivatives and politicians on an even grander scale.
    Apr 16 11:49 AM | 2 Likes Like |Link to Comment
  • Of Course The Market Is Rigged! [View article]
    Precisely, but the stage is set and I'm at a total loss as to how to prevent the debacle that's coming. Maybe that's the way we're wired: The human herd stampedes to the money, and right on over the cliff. A basic instinct that evolved in the primordial clan society to "run together for the food" is now being gamed by the smartest guys in the room using a new tool, the computer.
    An uninterrupted rising market since March 19, 2009...the very day our SEC market guardians suspended mark to market accounting, (FASB 157), and this run is ON SHRINKING VOLUME!
    The majority of the remaining volume is now Algo-driven HFT. When the computers break for the door this time, they'll likely do it in unison.
    The only source of liquidity on the planet sufficient to prevent several days of limit lock downs will be the FED. The farce will be revealed, congressional committees will be appointed, etc., etc.
    I hope they'll save taxpayer money this time by just re-running the Enron/Bernie Madoff/Lehman scripts without the endless political preening and camera strutting.
    Apr 12 10:05 AM | 3 Likes Like |Link to Comment
  • Of Course The Market Is Rigged! [View article]
    I wouldn't restrict a trader's hitting any open order, once posted, as fast as he can, just that an unfilled open order couldn't be pulled in less than ten seconds without paying a fee.
    I've been around large computers since the 60's, long before it was fashionable to no longer call them mainframes. The computers are faster now; people aren't and the quants and their geek squads are taking advantage of that fact.
    It's still front-running and bid-jacking. The amazing thing is: it's being debated.
    Apr 11 11:17 PM | 3 Likes Like |Link to Comment