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  • Is Inflation Next? [View article]

    "Of further note, that 'someone' can sometimes be the government itself. The Treasury can issue liabilities in the form of treasuries to a third party in exchange for cash who can then turn around and exchange the treasuries with the Fed for Fed issued liabilities. If both the Treasury and the Fed can expand their balance sheets without the need for collateral, then theoretically, the government could issue unlimited IOU's. "

    I don't believe this can happen. Naturally, the US government's ability to issue its liabilities will be restricted by the amount of tax it collects and its spending. If it isn't going to be sustainable like Greece/Portugal/Spain, private investors are not willing to accept more of the IOU's. If it purely depends on the Fed to monetize the debt, the US dollar will be significantly devalued against international currencies. The trade flow will slow to near 0 because probably few counter parties will accept US dollar as payment. That undoubtedly will result the fall of the US empire.
    Apr 24 10:25 PM | Likes Like |Link to Comment
  • Why IBM Continues To Lose Its Luster [View article]
    IBM will earn around $18 this year, possibly higher next year, so IBM is only worth PE of 10? Is that your estimate?
    Apr 24 05:32 AM | 2 Likes Like |Link to Comment
  • Is Inflation Next? [View article]

    "'someone' is willing to accept the IOU's. "

    Not true. You can ask the government of Greece or Portugal or Spain. Investors were not willing to accept their IOU's. So if the US government can't get its finance in order, it will enjoy the same treat Greece, Portugal or Spain enjoyed during the height of the European debt crisis.

    Monetizing the debt is a dangerous game to play. The US government will lose its credit with the rest of the world. The trade with the US will slow as no other country is willing to accept the US dollar and soon you will observe the fall of the US empire.
    Apr 23 09:55 PM | 1 Like Like |Link to Comment
  • Is Inflation Next? [View article]

    No. The Fed can't directly credit the US government's account, as the US government does not have an account with the Fed I believe. The Fed deals with commercial banks, not other entities directly.

    That's why the Fed bought its Treasuries from the open market instead of from the US government. The US government has to sell its Treasuries to other entities first before the Fed can buy it.
    Apr 23 09:49 PM | Likes Like |Link to Comment
  • Is Inflation Next? [View article]

    Someone can come and take your house away because the house is the collateral. As US treasuries are unsecured in nature, no creditors can take away anything from US government. At most, they can stop lending to the US government any more.

    The US government can't just issue unlimited IOU's. Every dollar of IOU's has to be bought by someone for the US government to receive the cash.
    Apr 22 10:31 PM | 4 Likes Like |Link to Comment
  • Is Inflation Next? [View article]

    Not true. The US government issues its liability as US treasuries, not US dollar. US dollar is the Fed's liability, not exactly US government's. There is nothing wrong with US government issuing new liabilities to redeem its old liabilities. Everybody is doing that when they refinance their mortgage.

    The main role of the currency(US dollar) is to act as a medium of exchange, not a store of value. There is far more wealth existing in the form of valuable assets in the US than in the form of the US dollar issued by the Fed. Whether the Fed redeems its liability or not, does not really cause any concern about the vast wealth of the US.
    Apr 21 09:57 PM | 2 Likes Like |Link to Comment
  • Is Inflation Next? [View article]

    Regarding the Fed's "free trades with willing counterparties", I doubt that the counterparties are really willing all the time. I don't think the commercial banks have the freedom to reject the reserve the Fed creates, nor have any say about the interest rate the Fed pays on excess reserve.
    Apr 18 04:01 AM | 1 Like Like |Link to Comment
  • Same Stuff, Different Year: Should Shareholders Stick With IBM? [View article]

    If the business is not going to recover, it does not matter how much cash it has. e.g. if Apple is not going to sell enough iPhones, it does not matter how much cash it has. Its value will be 0 eventually.

    Even with reduced R&D, IBM still spends significant amount on R&D. Investors have to lower their expectation that IBM will always stand in front of every technology breakthrough. The time has changed.
    Apr 17 09:07 AM | Likes Like |Link to Comment
  • Same Stuff, Different Year: Should Shareholders Stick With IBM? [View article]
    What's wrong with share repurchase? Maybe you think the share price is expensive, apparently, quite some people disagree with you.

    Maybe current profit is not the bottom. Let's assume it's half way. So is it really expensive for share repurchase?

    Unless someone is predicting the end of IBM, the share repurchase is not as bad as a lot of people claimed.
    Apr 17 05:53 AM | Likes Like |Link to Comment
  • Vale - Iron Ore Expectations Will Not Shape Its Performance [View article]
    Recent surge in the price of nickel should help too. If I am not wrong, Value is the second largest nickel producer in the world.

    For a long term investor, the short term volatility is not that significant. The rebels issue will pass, so will the president election.

    In the longer term, everything will be better instead of worse.
    Apr 14 10:28 PM | Likes Like |Link to Comment
  • China: Minsky Moment Or More Stimulus? [View article]
    What's excessive? Please define it first.

    Is 1 trillion excessive? Or is 10 trillion excessive? Or is 100 trillion excessive? What's exactly excessive?
    Mar 26 06:01 AM | 1 Like Like |Link to Comment
  • IBM's Shares Finally Break Out: Are We In For Further Gains? [View article]
    Is it possible for IBM to acquire Symantec? Currently Symantec is valued less than 15 billion, which is not a big acquisition for IBM with almost 200 billion market cap. No doubt that Symantec has a great software portfolio which is deployed in almost every large enterprise in the world. The cost of software sales and marketing is too high in Symantec, IBM can certainly help it reduce the cost with its existing software sale force.
    Mar 26 05:15 AM | Likes Like |Link to Comment
  • Staples Disaster Offers At Least The Potential For Competing Explanations [View article]
    exactly. I guess that the author ignores it because it does not serve his purpose.
    Mar 6 09:32 PM | Likes Like |Link to Comment
  • Hey, Cisco, First Things First [View article]
    Since Cisco is no longer a high-growth technology stock, it can stop giving out huge stock options for compensation. I doubt that many employees are happy when receiving those stock options.

    On the other hand, I hope Cisco issues more debt to buy back more shares at current level. Cisco does not need that much cash on its balance sheet for nothing. It would be better to return to its shareholders.
    Mar 3 03:29 AM | Likes Like |Link to Comment
  • Thoughts On Buffett's Annual Letter [View article]
    I believe that you don't understand the mechanism behind high frequency trading. It is exploiting the small misprice in different markets rather than from a value investment philosophy. High frequency trading does not compete with value investors in finding the best value in the market.

    Maybe one day when US stops behave rationally, Buffett will worry about macro in the US economy. But so far, US has been the best large economy in the world.
    Mar 2 07:26 AM | 2 Likes Like |Link to Comment