Unfaire

11 Comments

    • Bailout Bill Passes; What Happens Now? [view article]
      Mike, it is a great article.
      Here is why what you are saying is very close to what is happening.
      On average, we American are in debt (mortgage and credit cards combined) for $150,000 or so per family. The median income of American family is $50,000 before tax per year and out of that each pays about $15,000 of interest to various lenders.
      Any bank, even you, would be out of their or your mind to lend any more money to this bunch of people. I believe this is the root cause of today’s problem. We American are simply not credit worthy. It is not that banks do not want to lend. It is that more than half of us or not fit for borrowing.
      Until this situation is corrected, the Fed can print as much money as they want but no prudent banks or persons, including you and me, would be willing to lend a penny. There will be job losses and economy downturn. We need some good and cool heads to get us out of this mess.
      By the way, those investment bankers are in a bigger hole than you and I are. This $700 billion is to rescue them, not us. At least Paulson was honest at the beginning. All he said was to buy up bad credits from themselves, I mean the investment bankers. But, after the defeat of the bill in the Congress, the Democrat controlled Congress had twisted the whole thing and said this was a rescue of us average American. That scared everyone including us the voting average American and their mindless representatives. Now, just wait, we will all soon see very clearly that our tax money (whatever the government spent will eventually come out of our taxes) will be used to rescue these investment bankers with scarcely a drop trickled down to the average American.
      Oct 04 12:23 PM
    • Thursday Outlook: Commodities, Emerging Markets [view article]
      The situation we are in can be described as we American collectively are having too much debt. The teaser low or no interest loans lured us to buy the houses we cannot afford or take out secondary or other mortgages with the inflated prices of our houses. There is an estimate that the aggregate of the mortgages is 20 times the $700 billion rescue package or $14 trillion. We are also bombarded by the banks to charge on our credit cards more than we can pay back each month. The result is we together also have $2.5 trillion on our credit card balance.
      The U.S. population is about 300 million with about 100 million families. Therefore, on average, each family is in debt for about $175,000. Suppose the average mortgage annual interest charge is 7% and that part of interest comes to about $10,000 a year per household. The interest on credit card can be as much as 20% a year and that part of interest comes to about $5,000 a year per household. The median annual household income is about $50,000 BEFORE TAX out of which each household is paying about $15,000 just for the interest charge. This is simply a untenable situation. More than half of us are under crushing pressure of this debt and many have already or will go bankrupt sooner or later.
      As we get behind in our payments, the underlying securities become worthless and the banks owning them go belly up. As we cannot borrow and spent any more, businesses also go down. This is where we are today.
      We are going to see a slower household spending and business growth if not some regression of both of them in the immediate future. This is unavoidable. We American have been living beyond our means and we have to put our financial house both private and public in order. This is going to take a long time. Perhaps there will be a recession first and the inflation afterwards. We are already in a recession. We do not know how deep it will go. Inflation is inevitable because without it we cannot wipe out all this debt crushing on our shoulder. We will be out in the clear when we look at half-a-million dollar houses as very cheap just like we now look at fifty-thousand dollar houses of thirty or forth years ago as so cheap that we can pay off the mortgages very easily. I bet many of us have done so and hadn’t succumbed to the lure of second mortgages and those are the financially prudent ones and who can weather the current financial storms.
      So, what is this bail out about? Is it going to help any? As I just heard over the radio, someone said what the congress is facing now is between a bad bill and no bill at all. It is a clear choice: No Bill.
      The consequence may be an immediate disaster in the financial market. However, after that, I hope the people who are in the position of directly affecting the politics and policies will hunker down to face the reality and do some things toward addressing the real problems of today. That would be a right step.
      We are in a long haul regardless of whether the bill will pass or not.



      Oct 02 06:49 AM
    • A Bad Day, Yes, But Enough with the Hyperbole [view article]
      I have said a few days ago in a comment that historically DJI should be at about 10,000 at this time and, in some way, this is a correction of the excess in the Wall Street of the last few years. Given a historical deviation of about +/- 25% or so, DJI may move up and down around 10,000 +/- 3,000 for some times to come.
      We know that our financial situation has been worsening for years but no serious fixes have been made. And it has gotten worse in the last few weeks. The trouble started when both Fed and Treasury tried to make a “bold” move without any clear direction and created a crisis situation. When the move did not get where, the market “crashed.” What we needed were cool heads to negotiate through this financial storm with some done-to-earth measures such as Federal intervention of the bad mortgages to make both the lenders and borrowers “half whole.” Such moves would have benefited both Wall Street and Main Street. Instead, the “bold” move had the appearance (and, may be the substance) of Main Street “bailing out” the Wall Street, making lenders “whole” and borrowers “empty,” and the whole thing ended up bankrupting both of them, leading to the liquidity problems. The move was hailed as also a bail out of Main Street only after it was failed. It was a mess.
      The situation was brought to a crisis proportion by the wrong move of Fed and Treasury. Apparently the “bold” move, my guess, by the Treasury was a flop. The Congress did not help. The media were no help either. What we need now is some cool heads and cool hands to guide us through this storm. Hopefully, both the Fed and Treasury have realized that they have been “hot” headed. They should now come up with some concrete steps in the days to come. It is important that they come up with something really workable, even if it starts with a little step in the right direction. DJI may drop another 3,000 points in the mean time. However, as long as the nation as a whole is moving in the right direction, the market will recover and the nation will also recover.
      Sep 30 06:48 AM
    • The Deal's Getting Done, But Will It Work? [view article]
      I remember reading Benjamin Graham’s The Intelligent Investors many years ago and he said the stock market indices will grow at the combined rate of inflation and productivity gain. If you look at, say, Dow Jones from 1930 to today, you see it has been growing at an average of about 6.5% a year, about half of it is inflation and the other half is productivity gain in average. The market stayed between 600 and 1,000 over more than 12 years between 1966 and 1982. Then, in the next 16 years between 1982 and 1998, it made up all the losses and shot up ten-fold to 10,000, that was about 13% a year advance and about twice the historical rate. Not only that, it overshot the historical trend (which says about DJI should be about 5,500 in 1998) by a lot. If you believe in the historical trend, it says DJI should be at 10,000 at about this time. This may mean the market is simply still correcting the overshoot of the 1982~1998 era and it may hover where it is between 10,000 and 13,000 for several more years. It may rise again when it goes under the historical trend.
      This all assumes that our elected representatives and government officials behaves rationally (collectively) to rein in the excess in the Wall Street as well as to limit the money supply growth (to moderate future inflation). If they all behave properly, what happened in the last few years would be just a little blip in the long history of the market. If they don’t, we may turn ourselves into a banana republic in a big way.
      If the DJI dips below 10,000 and stays there for sometimes, there will be hardship.
      The bail out as currently structured is simply irresponsible. We do not need a bail out to save, however briefly, the failing companies whose management teams should mostly be blamed for their failure. Investors who had ignored the historic lesson should also blame themselves and should not look to the tax payers to bail them out. We need a “bail out” that channels all the reserve we have to create new jobs (highway, energy, and so on) to avert the hardship. We need a “bail out” that institutes sound regulations in the financial market to let the market behave orderly and responsibly. We need a “bail out” that places safeguards for the vast majority of investing public not to be taken by people offering too-good-to-be true investment schemes.
      Let the mismanaged companies fail. Let us think how we pilot through this troubled financial time with whatever it takes but prudently. It may take more than $700 billion. $700 billion is just a talking number. We don’t have that kind of money. Unfortunately, many of us, including those in the negotiation, think that is the money we have in pocket and will be spent one way or the other.
      Sep 28 08:59 AM
    • The Calm Before the Storm? [view article]
      If all American go to the voting booth today and vote yes or no on the Paulson plan, I bet the plan will be defeated. So, what our politicians are doing? Sep 26 05:17 PM
    • Wednesday Outlook: Commodities, Emerging Markets [view article]
      The problem I have with the current bailout plan is as follows.
      The financial institutions have knowingly (or, at least, they closed their eyes while they are doing so) lent money to people who could not afford the mortgage (who may have knowingly taken advantage of the situation or may have been lured into) to buy houses. Now, these people are bankrupt because they cannot pay their mortgages. And, these institutions are also bankrupt because of the non-performing debt. Now, here comes this bailout plan that takes the taxes paid by people, including those who owe money to these institutions, and give them to these institutions. With the new personal bankruptcy laws, these people would still have to pay up their mortgages to enrich these institutions or the bureaucracies (they never refund the tax money to the people; they only take a little less).
      This simply doesn’t make sense.
      There are two liquidity crises: One is the financial instruments that had bundled these mortgages in them had become much less valuable than their intrinsic worth and that causes these institutions to cease operation. Another is the people who are or about to be bankrupt whose rank are increasing because of the liquidity crisis of the former. They feed onto each other and thus our current financial death spiral.
      The current bailout plan may temporarily halt the former but not the latter. Eventually, the latter will come around the make the situation even worse.
      The reality is that the economy of the country as a whole would not be stabilized until the financial situation of most of these people have recovered to a level somewhat equivalent to that before they are falsely lured into buying something they could not afford. This takes a long time.
      The other reality is that $700 billion is a lot of capital to get the economy going and why should we waste them on some worthless financial papers. The sensible thing to do may be is to do nothing and let all those institutions holding these worthless financial papers to fend for themselves, even bankruptcies. Let the bankruptcy courts and the new owners of these “toxic” instruments to work out what to do with them. In the meantime, inject this $700 billion into the economy to get it going again. Just think $700 billion can pay one year’s salary to 14 million people at $50,000 each. “Helicopter” Ben should be spraying this money on the healthy companies not to the deadbeats.
      Sep 24 07:42 AM
    • Ike vs. Refining Capacity and Oil Price [view article]
      When harricanes come, refineries shut down. That means they are not using crude. The demand for crude goes down temporarily and, of course, it creates a short term over supply. Crude price falls. It is as simple as that. Sep 15 08:35 AM
    • How Low Can This Market Go? The 40 Percent Solution [view article]
      Go to Yahoo Finance and download monthly close of DJI from Jan 1930 to Jun 2008. Plot them on a semi-log chart in Excel. Get a straight trend line. You will find out that by the historical trend, DJI should be around 9,675 today. It closed today at 11,100.
      You may also notice that DJI stayed just about 1,000 for about 16 years between 1966 and 1982. You will also see a big run up of DJI in the 20 some years before 1966. Now, look at the big run up of DJI between 1982 and 1999. It is up to you to guess what is going to happen in the next decade or so. DJI hovering around 10,000? You may or may not believe in the law of average. But, no one can tell.       Jul 11 07:43 PM
    • Google Should Deliver Its YouTube Data to Viacom in Paper Form [view article]
      When Chinese government asked Google, Yahoo, and other Internet companies for the lists of users who had accessed certain websites, that ended up in certain arrests, there was a huge hue and cry, even a congressional investigation. Now, a U.S. company is asking for the same and it may ended up making certain people (this time, a very large number of people) criminals, why there is no such hue and cry? Are American people valued less than Chinese, even by ourselves? Or, are American corporations mightier than Chinese government? Jul 05 08:44 AM
    • Comparing Clinton and Bush on Income Taxes [view article]
      It is an unfaire comparison when you do not include AMT. If you do, you will find out the middle income people are paying comparatively more taxes than the both richer and poorer now than before. This is tentamont to weakening the backbone of the wellness of the American society. We have to pay taxes to keep our system running. What is important is not to waste it as well as taxing fairly. Mar 10 09:04 AM
    • Viacom Rules, Google Drools? Not So Fast [view article]
      I think Google/YouTube will be the dominant place where people will turn to. In effect, by pulling materials out from YouTube, Viacom is going to lose some exposure. I just wonder if Google people have thought about this. Most websites depend on Google to get readership. If some media companies want exposure by putting up their copyrighted materials to gain readership, aren't they using Google/YouTube as an advertising medium? If so, Google/YouTube should charge them for it instead of sharing revenue with them. I believe this will put the relationship between Google and Viacom on a completely different level. Mar 15 08:07 PM
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