unfaire

Thursday Outlook: Commodities, Global Markets

The low interest rate of the Fed is hurting the economy! And, it is drying up the liquidity! Why?
If you are a small bank and having, say, $1 million of cash, would you lend it out today knowing Fed will have to raise the interest rate sooner or later when you will be able to make a lot more money at that time? You would just sit on it and do nothing. You won't finance a mortgage at today's rate and get stuck with it for the next 10, 20, or 30 years, if you think you can get better return after the Fed has hiked the rate.
On the other hand, the big investment bank turned holding banks take this costing-almost-nothing money and churn the stock market and making a zillions of dollars.
The net result is the this low interest rate is not creating liquidity. In fact it is hurting everybody except the big banks who can trade on their on account and those who have the gull to charge 30% interest on the credit cards.

Tuesday Outlook: Commodities, Global Markets

We human being have been fighting against each other for territories, properties, powers, and sex all through down the history. We coerced, cheated, doublecrossed, murdered, whatever the ends that justified the means. It has been bloody. The stock market is the new fighting ground, only that it is bloodless on the surface. While the big boys are slugging out amongst each other making huge surges, us the little guys should try to ride the waves hopefully to make money on both the way up and the way down. You know the adage well: Only the pigs get slaughtered.

Tuesday Outlook: Commodities, Global Markets

I have been wondering how the computers or Hal 9000 whoever they are are programmed to make money on the way down. It looks like they behave crumsily in a down market than up market. We have heard so much about how to forerun a buy oder but haven't heard much about forerunning a sell order.

Wednesday Outlook: Commodities, Global Markets

My guess is that computers or Hal 9000 whoever they are are targetting someone who have to buy. That someone is probably 401k. There, money is still coming in and they have to buy something. With a thin market, Hal can nearly buy up everything before the mutual fund make their moves. With this scenario the market will keep on going up to no end until Hal is reprogrammed to make money on the way down at a certain level. DJIA at 10,000? 12,000? 14,000? Or, when we all jump in with our two feet. That is the biggest guessing game in town now. Recession is over? Who cares! Look, someone is hording all this stocks now. They just sit tight and watch their valuation go up until one day when they think enough is enough and jump out of the market for something else with better return.

Tuesday Outlook: Commodities, Global Markets

Re Ryu Mei Co:
My guess is that the market has been taken over by the news-independent (or event-independent) computer programs. These programs seem to trade "against" market movements. It means when the market (or, almost any stock) goes down, they buy. The consequence is that the market turns up. And, when the market goes up, they dump the stocks they have just bought and make an instant profit. The market then turns down. This works in "thin" market and "stabilizes" the market. The Dow Jones has been in the mid 9,000 and going nowhere for a while now. Nobody is making money except those computers.

Friday Outlook: Commodities, Global Markets

The following is just a mumbling from a stream of unconsciousness.
We had oil bust created by trading frenzy with volume far exceeded the oil inventory. Now we have option trading of all stocks with volume far exceeding the underlying stocks, not just U.S. stocks but also of stocks of the world all over through ETF and other means. Could there be a huge U.S. and world market bubble followed by a tsunami crash in not so distant future? It would take more than trillions to fix, more likely mega-trillions? Remember it was only billions just a few years ago?
With all this high frequency trading and other new market manipulations which we don’t know, has the fundamental of the market changed? May be Hal 9000 has already factored in all the technical analysis we now know and depend on and found a way to circle around us. The shares and the stocks are now just like the oil, which by the way is floating on the high seas by the boatloads, a mere trading vehicle to make money?

Friday Outlook: Commodities, Global Markets

Is our government now setting up Pimpco to be the next too-big-to fail, or rather, too-big-not-to-offend?

Thursday Outlook: Commodities, Emerging Markets

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.