Quaker's Comments

How Will Markets React to a Dollar Rise?

Mon, 28 Sep 2009 08:22:20 -0400

The dollar should strenghten against the Euro now that the election is over. It will stay the same against the Yuan. That makes the yuan a defacto dollar. If the dollar weakens and commodities rise it'll collapse the Chinese ecconomy. Like the USA in 1931, China is far more affected by a commodity shortage than anyone else.

The one thing that could really cause the dollar to go up is the collapse of the Japanese economy.

The Recovery Was Too Expensive

Fri, 18 Sep 2009 11:14:19 -0400

GDP is really a money flow number. It really bears little resemblence to the economic activity going on in the country or to earnings power. This is why GDP went down so little yet personal income tax reciepts to the government went down 35%, the biggest drop in history.

Corporate taxes right now are about 8% of total spending. Personal income taxes are about 35% of spending. The rest is mostly borrowed.

Given baseline budgeting for entitlements, there's little question that Bernanke didn't really do anything other than kick the can down the road. The fact that he considers this a victory shows how shallow and bureaucratic his thinking really is.

The fact is, all we really did was hasten the collapse of the federal government. The key flaw in peoples thinking is the perception that things that change gradually will always change gradually. When this thing stops, it's going to stop like a june bug stops when it hits your windshield.

Will Chimerica's Demise Take Down Global Economy?

Tue, 15 Sep 2009 12:41:01 -0400

A better, more consise discription os the situation I haven't seen. Good writing.

I think another slant on the argument would come from a Nassim Taleb like look at biological systems.

This argument is actually an argument over the difinition of trade and a comparison to nature. If I give you a duck and you give me a chicken that's trade. If I give you a duck and you give me a paper saying I owe you a ducks worth of dollars, it ain't trade.

The "trade agreements" with China were never trade. America's main exports are scrap, royalties on US patents and trademarks and tourists changing Euro's into dollars in NY. This also ain't trade.

This system is finished because it's run it's course. Like any natural system, it doesn't need a reason to end. It doesn't necessarily need to be anybodies fault. In fact, blaming politicians gives them a significance they don't have.

Like 1940, there's a global excess of manufacturing and productive capacity. It was built based on economic assumptions that never really had a chance even if the system was run by geniuses.

Recent Oil Rally: Another Crowded Trade

Thu, 10 Sep 2009 07:41:40 -0400

I was a petroleum engineer who worked on South Ghawar field for 6 years in the 80's.

You really should stick to posting things you have a capacity to understand. Ghawar's water cut is irrelevant to the concept of peak oil.

The only thing more oversimplified than the concept of peak oil is the moronics involved in debunking it. You could fit all the knowledge of oil on financial blogs in a thimble.

Perhaps There Are Unseen Green Shoots

Sun, 19 Jul 2009 08:39:12 -0400

I believe that we're in a systemic change in currency and trade regimes worldwide, similar to that which happened in the late 20's in Germany and in 1870's in London and Amsterdam.

The changes we're going through are more historical than economic. The reason we gor into trouble was the China, Saudi trade caused an excess of dollars to enter the market and and excess of IOU's to be issued. This caused interest rates to get absurdly low and destroyed worldwide equity.

Nothing we do is going to change this until we get either a new trading regime (a replacement for fiat reserves) or we take it on the chin and write debt down 30%. In fact, both are happening. China is using the Renmimbi as a trading currency with select partners, certain commodities are not following the spot markets, (Iron ore and heavy middle eastern crude) and countries are cutting side deals with each other outside US and Euro influence.

In fact,this will be exasperated in the coming year. Why would China expose itseld to bubble prices in commodites caused by wreckless Goldman Sachs traders? Why would they expose their trade wiith Brazil to the whims of a intellectual moron like Ben Bernanke.

Most people, especially economists, lack the ability to see the world in three deminsions. Currency's are nothing other than tradable debt instruments. Throughout history tradable debt instruments have become worthless as the worlds traders shunned them. This time is no different. If the world economy is going to grow again, it's not going to do it carrying the weight of 30 trillion in loans on it'sback.

The Austrians Are Right: Consumer Demand Does Not Drive the Economy

Fri, 03 Jul 2009 13:48:32 -0400

Heavy objects don't fall at the same rate as light objects. The rate at which an object falls is based on it's size, shape and density relative to the medium it's falling in. That's why leaves sink in water and supertankers float.

The rest of your article pretty much follows the same stock blog simplicity we've come to expect out of seeking alpha.

First, farmers don't sell wheat for $100 to "millers" who sell it for $110 to "bakers. There are many ways farmers sell wheat. Some are contracted to grow by food manufacturers, some sell to grain brokers, some sell in the futures market and some silo it and sell it as the market presents itself.

If wheat was sold at a 10% markup to "millers", farmers would be billionaires. Most of this years wheat crop was sold for between 5 and $8 a bushel. There are 70 loafs of bread in a bushel of wheat. That means 3-5% of the price of a loaf of bread is wheat. The analogy isn't $100 + $110+ $120 = $330, it's 10 cents + 17 cents + $2.00 equals $ 2.27. This is why importing bread doesn't destroy GDP.

The VAST VAST majority of gdp gain in products is in the retailing. This is why free trade had such a collossal positive impact on US GDP in the last ten years.

As to the "Austrian School", ever been to Austria? I used to live there. It's a socialist shithole. The only reason it isn't bankrupt is because of German tourism.

The whole idea that production is more important than consumption to GDP growth is insane. The reason the US economy is collapsiing is because we don't have enough money to consume. Capex spending doesn't lead consumption it follows. TIf Capex and production were more important than production we wouldn't have had 3,000 dotcom failures.

AS usual, with most "studies" in economics, common sense is the first thing flushed down the crapper.

Kool-Aid and GDP: The Delusion of Economic Activity

Fri, 03 Jul 2009 13:08:16 -0400

I used to parse these insane statistics myself, until I came to the realization that they were not only a waste of time, they were really hurting my trading.

The Real Crisis Is Food: Beginning of the Bull for Agriculture

Mon, 29 Jun 2009 09:38:33 -0400

Not many people are going to listen to you.

I live in an ag area. Last year, local corn production went from 100 bu/acre to 270! IN ONE YEAR.

Even with local ethanol plants running full tilt, we had a glut of corn. Weather was excellent and new hybrid corn VASTLY exceeded expectations.

Milk prices are collapsing. Why? Demand has all but disappeared. It doesn't occur to the ag perma bulls that in recessions, people eat less. Demand for Cappucino, milk based soft drinks and processed milk products got hammered. Milk prices fell 50%.

America consumes about 1.2 trillion calories a day. For the Average American, that's about 650 bn calories more than they need or should.

On Jun 22 05:15 PM Tony Petroski wrote:

> These scare stories are always amusing. The author writes "Thus,
> since the ‘60s we’ve added roughly three billion people to the planet.
> But we’ve actually seen a decrease in food output." He then describes
> "For example, in 1985 the average Chinese consumer ate 44 pounds
> of meat per year. Today, it’s more than doubled to 110 pounds." So
> food production is both going up and going down.
>
> Global warming supposedly will cause water shortages with devasting
> effects across the planet. Now while I believe global warming is
> a fantastic hoax, if it's not, it's going to bring into play vast
> areas of land that are now too cool to reliably produce crops like
> wheat and corn and will prove to be a boon to food production.

>
> These commodity plays were out there last year. How many got suckered
> into them last year. The second time around there will be fewer suckers.
>
>
> The unreported story is the demographic collapse of the western world,
> soon-to-be-declining populations in Europe and Japan, and the recessions
> caused by reduced demand for land and commodities.

The Prospect of Deflation and What to Do About It

Sun, 28 Jun 2009 10:55:09 -0400

Food demand is collapsing.

Nusbaum on Ritholtz: A Review of 'Bailout Nation'

Sat, 20 Jun 2009 10:13:21 -0400

Having read The Black Swan more times than I want to admit to myself, I find narratives on "how we got there" a bit annoying. (Though Kudos's to Roger for a good recommendation. I'll definately take his advice and buy the book.)

Most people missed this collapse for the same reason they're going to miss the next one. To truely understand why we got where we were, you have to combine the histories of guys like Fernand Braudel, Niall Ferguson and, not to sound too ridiculous, Pat Buchanan.

Free trade doesn't work. Free trade has never worked anywhere it's been tried. Free trade combined with fractional banking is a disaster. It was a disaster in Venice, in Lisbon, in Amsterdam, in London and now in New York.

Free trade for the consuming country is nothing other than monetizing your manufacturing equity and arbitraging your labor force either overseas (as in China) or internally. (In terms of illegals) for the purpose of churning money that banks can take a small cut of.

For the record, the Fed didn't create a single nickle of reserves in the decades from 1987 to 2007. Adjusted for inflation, Fed reserves plunged. All this money was created by Saudi and Chinese central banks converting their nations excess capacity to dollars. When inflation drove prices up, the dollar trade became absurd.

Banks arebeing blamed for doing what they're designed to do. Create financial products. It's up to government to decide when a nations currency is out of control and to correct for it.

This entire escapade can be pointed directly at Bill Clinton and his side kick George Bush, who never took the time to think that maybe lobbies interests aren't the countries interests.

The next collapse is going to be in short term government securites. It's going to make the last collapse look like a walk in the park. I can assure the readers, everybodies going to miss this one also. I know this because they're already missing it.

Treasury issues $140bn in government debt of which less than 20% is bonds, half of which are simply monetized by the fed and it sends the bondmarket into a tail spin and CNBC calls it a successful auction. When we getour asses kicked this time,don't blame me.

7 Reasons Not to Buy Berkshire Hathaway

Sat, 20 Jun 2009 09:18:53 -0400

BTW, Kudo's to Hoa for his synthesis of Berkshire. Absolutely 100% correct. Only one thing to add. You don't know misery until you've had to get service from GEICO.

7 Reasons Not to Buy Berkshire Hathaway

Sat, 20 Jun 2009 09:16:21 -0400

There's really no argueing with Buffett lovers. It's a cult.

IMO, Buffet has been perfectly worthless over the last 10 years. He may have beaten the S&P 500 over the lastt en years, but any idiot could have beaten the S&P. I kicked the crap out of the S&P.

The trade since 2000 has been commodities,plain and simple. Buffet had one big play there, Petro China. I trade stocks from my sofa and I had Petro China a year before he did.

My biggest problem with Buffet is that I simply can't stand the guy. He spends his entire day looking for a camer to to get in front of. His investment philosophy is, "give me your money, you ain't getting it back".

Then there's the nauseating "Habits of a billionaire" crap he throws out. Warren drinks cokes, Warren eats hambergers, Warren doesn't tip, Warren jerks off... As Katie Couric once said,in talking about twitter. Only an idiot would care what I had for lunch.

Buffet said gold would fall. It went up 400%. Warren missed on oil. It went up 1,400%. Warren missed on agriculture. The biggest plays in the decade were Agrium, Monsanto and Mosaic.

His only major hit in this was BNI. Over the last ten years, a managed portfolio of MOS, AGU,MON, BNI and a couple oilcompanies, along with a 50% holding in ten year treasuries would have beaten Berkshires pants off at a small fraction of the downside risk.

More Signs Recession Is Running Out of Steam

Fri, 19 Jun 2009 09:24:16 -0400

Your analysis of the data is like something out of a high school paper.

New Claims are up 60% YOY. Continueing CLAIMS are down because benefits are running out. Name an industry hiring.

As to teh "leading indicators", take out the stock market advance and they're all negative. Every "advance" metric is still negative. Truck volume, trade volume, imports, exports, inventory build, mileage driven, truck milege driven, ultilty demand, capacity utilization, hotel vacancies, capex.

Most mall retailers are cutting stores and reducing capex. Companies are shifting health care budgets and cutting bonuses. Income tax revenues had record drops in April and May.

The ONLY thing going up are government statistics.

.

Ferguson or Krugman, Which One Is Right?

Tue, 09 Jun 2009 10:30:50 -0400

Neither Bernanke or Obama's "plans" had anything whatsover to do with the US economy. The primary purpose was to insure that the same 12 guys who run the world on Friday run it on Monday.

These "economic debates" are like having a wife that's a slut and debating how much she loves you. The majority of money created between 2000 and 2007 were not created by the fed, it was created by trade deficit financing. To understand the problem the US faces, neither Ferguson or Krugman has the perspective to help you.The guy to focus on is Fernand Braudel.

Obama and Bernanke's "plans" won't work because they're not designed to work. Obama's trying to control Washington. People who think politicians care about them are morons. How in the hell are you going to get an economic recovery when the people who ultimately pay the bills are up to their eyeballs in debt? To close a $3.2 trillion deficit you need $15 trillion in new GDP. This from a country where 25% of the population is negative on their house, 75% of the population is negative on their cars and ATV's and has $8,000 in unsecured debt?

The only reason we're coming out of this recession is that the government is manipulating the dog shit out of the statistics. According to last months jobs report we created 43,000 jobs in construction and 67,000 in Leasure and Hospitality.

Ifyou believe that, you deserve Krugman, Ferguson and Bernanke.

Is the Employment Picture Really Better Now than in 1933?

Tue, 09 Jun 2009 09:34:32 -0400

I live in a farm area. There are VERY few Americans working on farms. I'd estimate maybe 1 in 10 during the off season and 1 in 30 during planting and harvesting. Everybody is Mexican and Guatemalan.

I also live in the northeast. A HUGE % of the population is either retired, (early) disabled, (BS) or working for government directly or institutions funded by government.

ABC Consumer Index Posts Major Market Convergence

Wed, 03 Jun 2009 10:03:46 -0400

The consumer confidence index asks two questions. How's it going. How do you think it's going to be going in six months. Then they "average" the two numbers.

This is like averaging the height of Shaq and tatoo. Who gives a shit.

More on the VIX / Treasury Volume Index Correlation

Wed, 03 Jun 2009 09:57:34 -0400

Presumably a hellof a lot more than I have. I read the article because I track treasury volatility. There really are no trends but I think one could emerge.

In the last two weeks, we had a surge in the S&P that coincided with a drop in treasuries and a surge that coincided with a rise in treasuries. When you lose a basic correlation like interest rates and the stock markets somethings amiss.

In reality, treasury and the fed are issuing enormous amounts of very short term bills abd dabbling in the longer end. They sell 10's and 7's and buy 10's and 7's but the majority issued is between 4 weeks and two years. The volatility spikes are due to the fedtrying to go longer.

IMO, the markets are going to collapse again. This plan is based on Bernanke's ability to day trade over the next two years. I wouldn't let that idiot walk my dog. At some point the brokerages are going to tell the fed they can't support backwards auctions. When that happens you'll get a nice coherent explanation of the MOVE index.... on Good Morning America.

Consumer Confidence Index Encourages an Economic Rebound

Tue, 02 Jun 2009 10:25:01 -0400

Consumer confodenceis irrelevant.

John Hussman: Wishful Thinking

Tue, 21 Apr 2009 11:26:33 -0400

In comparing this current re/depression with that of the 30's there are actually more similarities than people realize.

First, in 1920-1929 and 2000-2007, in both cases the rich got richer and in both cases a large percentage of the people got noticeably poorer. In both cases, the total of liabilities increased across the board, but the rich grew their asset values while the poor grew wages which were destroyed by inflation.

In both cases, low capital costs and free trade made it easy to move machines and destroy equity capital. What many people viewed as "getting richer" was simply the monetizing of equity that took years to accumulate. The fact that today most of American manufacturing companies are debt bombs is hardly a coincidence.

These aren't judgements on policies, simply observations. In nature, we don't ask ourselves if a species policies caused extinctions. In business,we assume the "guiding hand" causes growth and recession.This is absurd but don't try telling that to an economists.

For myself, I see no real reason why unemployment can't go to 20%. The only real justification is that drops in the past were followed by expansions. To believe the economy is going to improve SOME INDUSTRY has to lead us out. Name it. Housing? Glut. Cars? MASSIVE Glut.

IMO, this depression will be identical to the one in 1929, only we are England this time. Our reserve currency status is over. Guess what? When the pound lost reserve status, nobody expected that either. When the guilder was replaced it happened in just two years.

There are two sides to a balance sheet. GE may have leveraged up too high but they also pissed away their equity by buying shares and paying dividends. There's little reason to believe it'll be different this time.

Saudi Khurais Field: Looks Like Easy Oil May Be Gone from Arabia, Too

Tue, 21 Apr 2009 11:02:41 -0400

I also worked in saudi for a number of years. Thanx for the input. Most of these posters are clueless.

To add to what you said, IMO, one of the reasons for spending so much money on Kurais is that it's highly likely that when Ghawar starts dropping,It'll drop very quickly. You could see drops, in fact you will see drops, like those in Canterell. Ghawar is already on secondary production.

Also, no fault to Aramco, but I monitored the wells on the periphery for years. The flood front (at least in the late 80's) was not what they thought it was. It was very erratic.

I agree about Saudi Aramco. It was run by Exxon when I was there. It's the best oil company in the world.

On Apr 17 06:45 PM happycajun wrote:

> Khurais was discovered way back in the '50s, when Aramco was trying
> to get a handle on just what they had potential-wise in the consession
> area. They were obligated to cede back to the government acreage
> over time, and so they were actively trying to determine where there
> wasn't oil so to speak. Khurais, and later Shaybah, were examples
> of fields that were high potential, but just too far from the core
> areas to justify putting in the infrastructure to fully develop when
> there was so much productive capacity to be produced at a lower marginal
> cost. Khurais was initially developed on a very limited basis solely
> to supply crude oil to the government's Riyadh refinery - Khurais
> being the closest field to that facility. In 1983, I remember when
> we tapped the 48" crude line that delivered oil to Yanbu on the Red
> Sea coast for feed to the refineries there, and for export via the
> Red Sea and Su-med pipeline in Egypt. The economics of using the
> Pipeline and tankers from Yanbu for export were inferior to using
> tankers from Ras Tanura, so there was much extra capacity (the Yanbu
> line was always justified on feeding local development on the west
> coast of Saudi and on security).
>
> The Yanbu line then was used to feed crude to Riyadh by way of the
> goverment's pipelines that previously carried Khurais production,
> and Khurais was "mothballed" for future development. It is only
> relatively recently that Khurais was properly delineated, and full
> field development undertaken. As I understand it, the formation
> oil pay is not as thick nor uniform as originally thought based on
> extrapolation from Ghawar. Ghawar has been on seawater injection
> for at least the last 25 years - my memory is a little hazy that
> far back - it is just the nature of those giant fields, you want
> to use water injection for pressure maintenance to maximize ultimate
> recovery - producing without such a mechanism with the the light
> oil in place would damage the reservoirs early on.
>
> Long story short - I don't think Saudi would be developing Khurais
> unless it needed incremental capacity to maintain max output in the
> 10 to 12 million barrel range. Ghawar has been extended by horizontal
> drilling and improved control. Khurais is by all means a giant oil
> field, but not as rich as earlier thought to be.
>
> Regards, HC

Crude Oil Bull Won't Be Easily Tamed

Mon, 23 Jun 2008 23:34:28 -0400

Demand destruction is coming from the US, not China. China now has the foreign currency reserves necessary to push the US right out of the oil market.

Demand will drop drastically in the US, probably by 5-7 million barrels per day over over the next three years. By then the Hub pricing system will be gone and the price in dollars will be irrelevant.

Hawkish Fed Needed for Bullish Dollar

Mon, 23 Jun 2008 23:19:59 -0400

I'm not sure just how relevant the Euro Dollar exchange rate is or why anybody would care. The dollar and Euro are both falling against the Yuan. It's an orchestrated move.

The real issue is not what the fed is doing it's what Treasury is doing. The amount and frequency of treasury auctions is what's going to kill the dollar. Some some idiotic interbank rate that nobody pays.

How Much Inflation Will We Have to Endure?

Sun, 15 Jun 2008 07:38:07 -0400

5 years tips lost 15% last week.

How Much Inflation Will We Have to Endure?

Sun, 15 Jun 2008 07:37:15 -0400

last week the 5 year tips lost 15%.

3 Economic Crises: My Take

Sun, 08 Jun 2008 06:19:35 -0400

I would add that, IMO, there will be a global collapse in commercial real estate. It amazes me that the same asset value lending that caused the bank collapses in the 80's is upon us again.

I suspect commercial reits will fall 50-80%.

Penn West Energy Trust: My $50 Price Target

Sat, 24 May 2008 07:46:52 -0400

I sold out of the last of my Penn West Friday. Actually, in all honesty, I bought it so long ago I can't remember what it was called then. I did have some Canetic. I had a company called Viking. This was when gas was Natty was $1/1000 cu ft.

I just wanted to write and thank you for buying my investment from me so near the peak. It's not often that you get to thank the person who catches the last wave of the bull run and nievely buys your investments at ridiculous prices.

So, again, thanx dude. Tell me you also bought that BHP BIlliton I shorted last week.

Lowe's Profit Drop Is Not That Bad

Tue, 20 May 2008 21:36:11 -0400

What goes down must go up. That's the limit of insight from todays "intelligent analyst".

America has 19 million abandoned homes. These homes are protected by fire departments and police forces. They have Schools and mini malls.

The whole idea that housing has to turn around is idiotic beyond belief. America has 141 sq ft of retail space for every man, women, child and illegal alien in the country. We have more living space per capita than the third world has PER FAMILY.

Our local Home Depot open one checkout on a saturday afternoon.

Housing will not rebound again in our lifetime.

Wal-Mart: What PR Won't Fix

Wed, 02 Apr 2008 10:40:56 -0400

I have to admit I find your article confusing. How could the driver sue for medical care payments if Wal-mart was paying them? I can see pain and suffering, but that's not what you said the suit was for.

Also, one assumption here is that Wal-mart is omnipotent. It's a LAWSUIT. They would have to WIN to get damages. If the court found the suit justified, than Wal-mart is actually the one here that's taking the high road.

A Short Comment on Shorting

Thu, 21 Feb 2008 15:04:06 -0500

I have to admit, your comments strike me as a bit odd. If you look at a chart of the DJIA over the last ten years, the general market's had 3 good years, one so so year and 6 bad years. 90% of the overall gain occurred in less than 36 months.

IMO, people who are afraid to short should invest in CD's. I don't mean this as an insult Mike and I hope you don't take it that way. Markets are designed to provide liquidity to illiquid things, not drive stock prices up. If the market goes illiquid (which it's in the process of doing as we write) all the fundamental analysis in the world isn't worth a hill of beans.

Oh and by the way, I'm up 20% YTD.

Wells Fargo's Huge Writeoff - The WaMu Angle

Wed, 28 Nov 2007 15:38:44 -0500

I have only anecdotal info on Fargo, but my former secretary used them for a mortgage. She and her husband had been bankrupt just 3 years earlier. They sold a house in Syracuse they were backwards on and bought a new house near Rochester with no money down and 125% loan to value.

I wouldn't have lent this couple a buck for a cup of coffee. They were incredibly reckless with debt. That had a summer home, a harley loan and credit cards up the ass.

Markit's equity line indices are in the toilet for a reason.