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?

Commodities, Global Markets

To quote from "How I made money during the great market crash of 2008" by Jamin Chen (www.lulu.com/content/p...):

"There is no guarantee that the past will repeat itself. But, sometimes, the past is a good indication of what is to come. The past is the only information we have and it may provide us with a glimpse into the future."

Tuesday Outlook: Commodities, Global Markets

Funny that UNG is only one quarter of what it used to be but my gas heating bill for my house didn't budge a bit.

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?

Tuesday Outlook: Commodities, Emerging Markets

I am not an economist but I wholly agree with economist Rogoff. The bankers and their investors (share and bond holders) made bad investments. Many of us made bad investments in housing. We got busted. The banks and their investors should be busted. Why should we, who got busted, pay our taxes to save the banks and their investors from getting busted? It just doesn’t make sense.
There is one thing people don’t talk about it. May be it is too painful to talk about it. That is during the boom, we created a lot of money, especially in the form of credit given to subprime mortgages as well as in various derivatives derived from them. The world was afloat on cash. This certainly has created a distortion in the economic and financial situations in the whole world. As this bubble was busted, just like a balloon got busted and its air is let go, these extra money got to let go. We all are dreaming, dreaming of the fantasy world that was during the boom would come back. People talk of recovery as if that fantasy world would come back. No, recovery means returning to the world before the boom. But, even that is not possible. The boom has distorted the whole economic system of the world and we can never go back to where it was. Instead, a new world economic order has to be created.
Putting more money into the broken banks is equivalent to creating more money. It simply is not logical. After the TARP fiasco, everybody sees it now. Or, do we?
Some people say President Roosevelt did not contribute to the recover from the crash of 1920-30. It is the World War II that did it. The government created jobs including the armed services as well as all that production of arms. If you look at the Dow Jones Industrial Average (DJIA) from 1920 to 1950, you will see it clearly that the pre-crash high of DJIA was not reached until well into 1950s. So, the key to recovery is JOBS.
In fact, everybody is talking about jobs. But, nobody is doing anything about jobs. Everybody is being busy how to carve up the money to line their pockets. Pork is too kind a word for it. If they are really interested in creating jobs, why not give tax credit to all jobs. The total U. S. employment is about 150 million people. Even if you give an average of $10,000 tax credit to each job, it amounts to ONLY $1.5 trillion. I say average because we should not give millionaire or billionaire bankers any of these tax credits. We should not let business to import more cheap foreign workers at the expense of our tax money either. We should give this tax credit to any U. S. registered corporation or company, including those mom and pop shops. We should apply it to any employee who had paid the whole year of social security tax and filed income tax at the end of the year. In some way, we the tax payers will get some money back, isn’t it? How nice. At the tax time, we will be surprised because the bill won’t be $1.5 trillion, in fact much less, after collecting all the additional tax revenues and social security payments.
We should care what they do. They may make firecrackers for that matter. During the WWII, they made things that just got blown up in the battlefields, didn’t they? With lower labor cost, companies may not have to lay off as many people. Hopefully, they could use lower labor cost to create some profitable business and hence employ more people.

Thursday Outlook: Commodities, Emerging Markets

It is about time that those who initiated the bad loans (including banks) and those bought them (including banks and other investors) take their consequences instead of us tax payers bailing them out. We have had enough of this other people's money (tax payer's money in the current crises) mentality.

Tuesday Outlook: Commodities, Emerging Markets

David:
I like the way you have been doing. It is instant analysis (with years of experience and insight behind it) of what each chart presents. I am not interested in having educational blurbs in here except for some cryptic mentions of the backgrounds once in a while when necessary. Keep up the good work.
I got the sense that investors large and small are quite angry about all these bailouts and how all these politicians, both outgoing and incoming, are handling the current financial crisis, though not at the boiling point yet.

Friday Outlook: Commodities, Emerging Markets

In an up-market, mark-to-market spirals up the market. But, in a down market, when combined with margin calls, it becomes a death spiral. All collateralized debt instruments will be devalued, called, devalued, called … till it is worthless and bellied up. Regardless of how we got into the mess we are in now, it is this twins that will do us in. If we do not repeal mark-to-market immediately, we ain’t seen anything yet. Where are we now in Dante’s Inferno?

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.

Wednesday Outlook: Commodities, Emerging Markets

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.