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  • Federal Debt Is Not Even Close to 100% of GDP [View article]
    Uh, yes, actually total debt outstanding does matter. BECAUSE it's money we owe to ourselves and that money is only placed as part of a trust. There is a liability the government owes that is associated with those holdings. So let's look at a balance sheet. We owe ourselves money. Asset 1, Liability 1, Equity 0. We owe ourselves money placed in a trust because we owe other money. Asset 1, Liability 2, Equity is minus 1. That debt is VERY real. Not to mention we don't even have either Medicare or Social Security fully funded.
    Jun 7, 2010. 07:03 PM | 1 Like Like |Link to Comment
  • Why Bernanke Doesn’t Understand Basic Economics of Central Banking [View article]

    Banks *are too* reserve constrained by the interest rate required to get new reserves to do new lending. If no new reserves are ever supplied, interest rates to get them will go higher and eventually demand for new loans will be nonexistant because of interest rates.

    So, exactly WHO is it that doesn't understand something about the way the system works? Bernanke? Because he suggested that *if* the economy normalized and the pile of excess reserves started to decline that the Fed would have to pull reserves out of the system (ie: selling bonds in their portfolio for reserves). Of course that's what they will have to do. If they don't, then we should all know what the result of that active decision of the Fed will be.
    Dec 20, 2009. 05:09 PM | 1 Like Like |Link to Comment
  • Seven Reasons Why the Shorts Love Apple [View article]

    Perhaps if Jason actually did any research, then he would know that Apple is not a heavily shorted stock and stop himself in his tracks before writing drivel. Shorts love apple eh? Then WTF are the shorts!? It's a reported number. Good job dude!!

    Golf clap.
    Dec 18, 2009. 08:50 PM | Likes Like |Link to Comment
  • People vs. Profits: The Great Health Insurance Myth [View article]


    Actually most health insurance providers hover somewhere around an 82% cost-benefit ratio (meaning in aggregate, they pay out 82% of premiums received). Otherwise they are all lying to the SEC. The 25-30% overhead ratio you quote is just factually wrong. Since Medicare pays out much higher amounts of benefits per person (serving an older population) and Medicare recieves other benefits from government services (such as the IRS to collect premiums), exactly what the administrative overhead will be for a government run insurance plan is hard to estimate. A conservatively low estimate might be 5%. Taxes health insurance companies pay is about 3% - that needs to be replaced if you replace them. All together, we're talking about a maximum 10% difference in cost. Plus, the Medicare Trustees themselves warn that Medicare is going broke if something isn't done and no doctors nor providers have any love of Medicare either because they squeeze reimbursements just like insurance companies. Not to mention, part of the real cost of Medicare then gets shifted onto public insurance policy plans and are "invisible to Medicare", yet real nontheless.

    The reality is the soundbites are all BS. Medicine as it is structured and provided needs to be altered, so that we are managing our diseases and our health instead of waiting for bad things to happen that we know will happen. We need to get away from the local hospital model of delivering all known care to mankind, poorly; to one where people are able to recieve care from true experts who can really help people manage their care. Our nation has the highest rates of very expensive chronic diseases which dwarfs insurance industry profits - the cost of diabetes: $170 billion: 2007. The fight over insurance only needs to be about how it can be provided while eliminating conflicts of interest which are easy to see and a little retarded not to acknowledge. All insurance has a small number of people who are basically losses to insure and they will want to ditch. Universal care is possible w/o the government taking the reigns and arguing over whether we should pay for abortion, whether prayer is a reimbursable health benefit, how we should manage end of life care and whether it's a good idea for Congress to make reimbursement decisions for things like Medicare. It just takes some imagination. Actually many of the reforms seem to be going in the right direction, surprisingly.

    On Dec 15 12:17 PM Atypical wrote:

    > YoYomama: great post. The article is complete BS.
    > To those who think insurance companies do business in a reputable
    > way I suggest reading Wendell Potter, a former executive of Cigna.
    > And do you corporatist supporters know that these companies employ
    > people just to find ways to reject claims. They get bonuses on the
    > amount they "save" the company. Read their stories too. These companies
    > provide no service that is necessary to a person's healthcare. There
    > is no need for anything to be between a person and a doctor except
    > an entity that pays like the Medicare system. Its overhead is approximately
    > 3% vs. insurance companies 25-30%.
    Dec 16, 2009. 07:06 PM | 3 Likes Like |Link to Comment
  • FAS/FAZ: Dangerously Crossing the Ultimate Pairs Trade [View article]
    You will get destroyed. You can backtest this. Anyone who follows this strategy will be destroyed. I've backtested using the leveraged ETFs. This strategy is suicide.
    Apr 28, 2009. 03:23 PM | 1 Like Like |Link to Comment
  • A Guide to Hiding Toxic Assets [View article]
    Hate to point out to you that every bank is in essence net long CDS.
    Apr 2, 2009. 01:16 PM | Likes Like |Link to Comment
  • An Autopsy of the Glass-Steagall Act [View article]
    Glass Steagal is a straw man. I'd love to hear an explanation why the European banking system has never ever had such a regulation enforcing the separation of IBs and banks and does not have a history plagued by crisis.

    The reality is that the problem is one of the "shadow" banking system or "bank like entities". Glass Steagal did not have anything to do with the fact that IBs could directly securitize mortgages from mortgage brokers and sell them to institutions, hedge funds and money market funds, effectively completely bypassing the banking system. How come there is no screaming about how we needed to regulate money market funds more closely as a bank like entity, or highly leveraged institutions like GE finance? Glass Steagal did not allow GE finance to happen. Most of the bank like entities or shadow banks existed because they morphed from investment vehicles towards using short term paper to leverage returns. The world changed faster than the regulatory framework and the regulatory framework must catch up. That is not the fault of Glass-Steagal.
    Mar 31, 2009. 03:41 PM | 1 Like Like |Link to Comment
  • Ten Cars Detroit Should Copy [View article]
    You fail to grasp the problems at GM, Ford, Chrysler by simply stating the need to copy successful cars. They have a non-competitive cost structure, which forced them to attempt to compete on higher margin (ie: bigger) cars. GM has -$60 billion of shareholder equity. There are far more problems than just simply the fact that their small cars aren't competitive. The problem is they never will, unless they are fundamentally restructured.
    Mar 30, 2009. 02:28 PM | Likes Like |Link to Comment
  • What Else Are the Banks Hiding? [View article]

    Just becauase it's securitized and "off-balance sheet" doesn't mean it will come back on. You need to look at individual basis for how that will happen. Most of it won't and the the bank is not the primary beneficiary of any of it, otherwise it already would be on the balance sheet. You need to find what out is guaranteed. It is a serious oversight to simply say there are off-balance sheet entities. It doesn't remotely encompass anything close to what the real risk is.
    Mar 28, 2009. 11:39 PM | Likes Like |Link to Comment
  • Paying the AIG Bonuses - The Alternative Is Worse [View article]

    I am personally far more disturbed about the original compensation scheme given to AIGFP execs which simply gave them 30% of profits. Is it just me, or does that seem like a ridiculous compensation scheme which focuses them completely on driving whatever profit they can get, regardless of the risk which is far more relevant to the problems we have? By the time the retention bonus scheme came along, I'm pretty sure it was obvious to everyone in the division, there would be no profits for a long time within the division and the only "profit performance" that anyone would be able to measure was associated with how little can we lose? That meant, there would be very little compensation for any future work under the previous plan. If I were CEO, I would be scared they would all leave.

    Unfortunately AIG is far from the only practicioner of such compensation schemes, I think there are similarities throughout all of corporate America with the use of options, which are usually exercised and sold to cash quickly when they vest, instead of restricted stock which can force executives to keep more of their wealth in stock they can't sell. Didn't help Lehman or Bear, but at least there is a certain justice that executive wealth should get creamed if they lead their company to bankruptcy, instead of sold long ago and kept safely and diversified away. Anyone who thinks that it would be easy to simply replace the AIG team in the middle of the crisis I think is just angry and not really thinking clearly. I understand the anger, I just think it's the wrong compensation scheme to be angry about. It's the first one that helped impale the company. Those types of schemes are all over corporate america and still remain.

    I also agree, MER was far more egretious. But really, part of the problem is this is the outlet for the financial mess we're in of which we should all be angry. Because for the most part, I think this is about as much as the general public and both houses really understand about the crisis. The dudes didn't deserve the money. Unfortunately, I am disturbed by what I see as the general level of understanding about the big things about where we go from here from our parties/houses/leaders. So instead everyone focuses on what they understand.
    Mar 22, 2009. 01:36 PM | Likes Like |Link to Comment
  • What Will It Take for Faith in Financial Engineering to Wane? [View article]

    I think part of the problem is thus. Economic models exist which show clearly that expectations of price increases, can lead to further price increases (inflation) and that can be modified through interest rates, same with deflation, which provide feedback loops. However, the knuckleheads (economists) give way too much credit towards people to price assets and don't understand that asset price behave in the exact same way. So if people become habituated to price increases, they're expectations of price increases start creating a self fulfilling prophecy (ie: I will pay more today because I expect it to be much higher next year), just like the prices of stuff. But what to do? Clearly, it should not be the provence of the government or central bank to declare what prices should be and having a stated policy of "stable asset prices" is wierd and kind of socialist. However, especially when people are taking on too much debt to buy overpriced assets, there is a huge problem brewing that needs intervention.

    Mar 3, 2009. 11:16 AM | 2 Likes Like |Link to Comment
  • In Response to Ben Bernanke [View article]
    You say:
    I for one am glad he put it that way. I thought at the time we might be in a global meltdown. But everything was still working. The banks were open, the stores had lots of stuff. There were no lines or violence. The roads were full of cars. There was no evidence of a meltdown.

    HAHAHAHAHAHAHAHA!!!!! I understand not many people really understood the events of October very well. But perhaps as you say that, you don't quite realize you just don't know what to look for and understand the details of what was going on as well as Bernanke did. The fact is, all that stuff *HAS* gotten enormously better. We dodged a bevy of cannon shots in October, the result of which would have been the real end of all those things that you mention says there was no problem. By the time all of those things you mention aren't working, it's far too late. I guarantee you the tsunami was in sight.
    Feb 27, 2009. 11:14 AM | Likes Like |Link to Comment
  • Jeremy Siegel's Silly P/E [View article]

    BTW - I don't mean to say ownership. I mean to say when you own the S&P 500, your own implied PE is changing with every market wiggle of the individual shares down below because those wiggles change each indivual companies PE ratio. When you buy the S&P 500, that is effectively what you are buying and that is what Siegel is trying to show. So yes, the denominator is always changing as a buyer of the S&P 500.

    On Feb 25 06:13 PM kdo wrote:

    > Actually Siegel is right.
    > You say:
    > Earnings don't change according to market capitalization. The p/e
    > ratio is an interesting animal: the numerator changes from day to
    > day and even from second to second, while the denominator changes
    > only once a quarter. It's an indicator of how the market (the numerator)
    > is reacting to reality (the denominator). But under Siegel's method,
    > the denominator changes every second as well. And rather than dividing
    > the market by reality, we end up dividing the market by itself. Which
    > is much less useful.
    > You're ownership of those earnings is changing with every individual
    > wiggle of individual shares too. You just don't know it.
    Feb 25, 2009. 06:22 PM | Likes Like |Link to Comment
  • Jeremy Siegel's Silly P/E [View article]

    Actually Siegel is right.
    You say:

    Earnings don't change according to market capitalization. The p/e ratio is an interesting animal: the numerator changes from day to day and even from second to second, while the denominator changes only once a quarter. It's an indicator of how the market (the numerator) is reacting to reality (the denominator). But under Siegel's method, the denominator changes every second as well. And rather than dividing the market by reality, we end up dividing the market by itself. Which is much less useful.

    You're ownership of those earnings is changing with every individual wiggle of individual shares too. You just don't know it.
    Feb 25, 2009. 06:13 PM | 2 Likes Like |Link to Comment
  • Are Uninsured Bank Depositors in Danger? [View article]


    So yes, it is de jure (by law). Don't let that get in the way of unnecessarily fomenting panic by an influential writer/journalist on the subject by writing before researching. Kind of a serious issue, wouldn't you think? At least you wrote an update.

    BTW, finding that link took me 5 minutes. Good work Felix.
    Feb 15, 2009. 10:35 AM | Likes Like |Link to Comment