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  • The Housing Recovery: An Update [View article]
    I'm blame the regulators (not so much the banks, they get their orders from the regulators) from the perspective that the assumption that a regulatory environment will create a situation where people never make mistakes. The assumption here is that the regulators are infallable because they are given orders by infallable politicians.

    Its all a fraud. Its all vote buying by politicians that use our capital to promise things no human could ever deliver, and then they attack someone for pointing out this reality by saying that we are simply opposed to the wonderful outcomes of their good intentions.

    The only thing gov can regulate are issues with regards to force and fraud. The reason for this, is the populace can grant the gov a monopoly of force. Of course, once that grant is given, then the gov must be regulated, because if that grant of force is not controlled, then the gov will become the source of the force and fruad (like regulators whose job it is to make sure nothing ever goes wrong). If a populace could give a gov a grant of a monopoloy of market knowledge, then they could regulate markets with regards to nothing ever going wrong. However, if a populace could really legislate that good intentions should come true, then somewhere in history some group of people would already have done that.

    In order for the US gov to control the economy, the bill of rights will need to be eliminated. In fact the constitution could be boiled down to the following:

    "Whoever manages to gain power, can do whatever they want to everyone else."
    May 24, 2012. 05:56 PM | Likes Like |Link to Comment
  • Ripping The Bandage - Greece And The Eurozone [View article]
    What they don't want to admit is that they have a failed economic model. They have fallen for the fraud that the elite can manage the economy via guns in such a way so as everyone gets a "fair shot". Well that sounds nice, everyone has a different perception of what that means, thus you have to use force to stamp out any perceptions that differ from the people with the guns. The end result from this is the inability of advances in productive capacity to keep up with advances in consumption. Expenses are always ahead of income, and the result is capital erosion that leads to a receding balance sheet, or a recession. But since the elites consider themselves elite, and thus infallable, they will never admit their mistake, so they will continue to tax their people into austerity until violence finally breaks the cycle.
    May 24, 2012. 04:40 PM | 4 Likes Like |Link to Comment
  • "Sell your house ... yesterday," Gary Shilling tells Bloomberg. It will take 4 years, he says, to work off still-high inventories, during which time prices could fall another 20%. Turning to Facebook: "(It's) the end of the social media boom ... reminds me of"  [View news story]
    I wonder if people appreciate the myriad of rules and regulations that supply all sorts of subsidies for buyers of US treasuries (capital rules for banks give them a 0 risk weight-like Europe where that has worked well). If you have your money on deposit at a bank somewhere, you probably own treasuries without even realizing it. These rules create a sort of quasi second tier primary dealer network. The individual that buys treasuries outright should think about that. Buyer beware.
    May 24, 2012. 02:58 PM | Likes Like |Link to Comment
  • Europe's Pain Is America's Gain, Not Bane [View article]
    "strengthen import requirements that match our reg's"

    That's the same thing as a tax hike. Just because you raise the cost of imports, doesn't mean jobs will come back to the US. If a flat screen costs $500 now from Korea, imposing rules that raises the price to $3k whether from US or Korea doesn't mean people will keep buying flat screens at the same rate, thus producers will be indifferent as to where they produce, it just means a lot less flat screens will be bought, and thus neither Korea or the US will have those jobs.

    Its all about comparative advantage. Its about finding ways to constantly lower the cost of everything, which means that assets that can do that go up in value. In other words you stocks go up because the company has found a way to make things better and cheaper. Gov regulations are price blind. They create fix costs that have nothing to do with current technology.

    Gov regs assume the perfect product can be made for the same cost, and that gov has that knowledge and it just needs to impose that knowledge on business. This results in everything being less affordable (funny how gov always couches everything they do in "affordability" though - affordable housing that skyrockets in price -say what?), thus less and less people buy which requires less and less production which means less and less jobs.

    Ironically, part of the reason China reformed in the 70s after Mao's death, because Mao tried to get the Chinese economy to produce everything internally. They almost starved themselves to death with that strategy.

    The bottom line with trade is, the more you trade the more you have and the less you have to work, which means eventually you job will create enough capital that you can actually afford to retire at 50, becuase everything is getting so cheap, that you don't need that much in savings to live.
    May 24, 2012. 02:40 PM | Likes Like |Link to Comment
  • Europe's Pain Is America's Gain, Not Bane [View article]
    You'd have to get everyone that is currently getting a subsidy to be willing to give it up. Those folks tend to burn things down before that happens, or they pull campaign contributions from politicians that suggest the subsidies should go away.
    May 24, 2012. 12:55 PM | 2 Likes Like |Link to Comment
  • The Housing Recovery: An Update [View article]
    It was also the politicians. I was speaking to an examiner not long ago, that stated they wanted to crack down harder on CRE and A&D in 2006 instead of just issuing non-actionable guidance, but political pressure from DC was so intense that they backed off on their positions. If they had been really worth their salt, they would have set the rules in 2001. Now its too late. The target reserve ratio for the fund is 2%. They expect to reach that by 2025. They need to charge higher premiums, but that would screw with the subsidy mix and cause assets to deflate even further.

    What's really interesting is that states used to provide deposit insurance, and guess what happened? That's right, they kept going bankrupt. They create asset bubbles just like other stimulus action does, like QE or Fannie and Freddie or a CB in general can. So instead of compartmentalizing these losses to just individual states, we wound up spreading it to the whole country. The bubble these types of programs create was simply spread to everyone, and it popped just like the state ones did.
    May 24, 2012. 12:20 PM | 3 Likes Like |Link to Comment
  • The Housing Recovery: An Update [View article]
    If regulators had done their job in the past, why would there be a need to increase capital for bad loans now? There shouldn't have been any bad loans. Regulators examine banks every year, and they have call reports every quarter. How could there ever be bad loans?
    May 24, 2012. 11:37 AM | 1 Like Like |Link to Comment
  • Ripping The Bandage - Greece And The Eurozone [View article]
    Maybe there is a bunch of liquidating to meet liquidity demands. This would imply taking gains to pay off debt, which bolsters capital. Like say in a deposit run.
    May 24, 2012. 08:17 AM | 1 Like Like |Link to Comment
  • Is The Latest Euro-Scare Now Behind Us? [View article]
    "mercantilist nation Germany is"

    Adam Smith talked about this, and now Germany is living it. Smith pondered what good did a nation do itself to regulate its economy for the sake of exports, and then to measure its success by how much gold it piled up in exchange for those exports, then when it went to these other nations with whom they had exported with their gold to buy something, only to realize that they had nothing else of value to exchange for the gold. Suddenly they realized the gold was the equivalent of an account receivable that they couldn't collect on.

    Germany is finding out that you can't eat Euros the same way you can't eat gold.
    May 24, 2012. 08:05 AM | 3 Likes Like |Link to Comment
  • Ripping The Bandage - Greece And The Eurozone [View article]
    If the other EU members did manage to throw Greece out of their collective, would they not be doing that for their self-interest?
    May 24, 2012. 07:52 AM | 1 Like Like |Link to Comment
  • A Return To The Gold Standard Could Destroy The Modern Economy [View article]

    Ah, but it does work. Don't be fooled by the people claiming they want CBs for the "common good" or the "general welfare". CBs are subsidies for financial markets, plain and simple. The job of a CB is to tax the public (and all they can do is tax, they can't create capital, if they could they wouldn't need gov guns), and transfer that purchasing power from the general populace to the concentrated interests in financial markets. This is why QE results in "juice" for the markets. QE is a tax that transfers wealth from the general populace to the markets. If you recognize this pattern, then you can find ways to protect yourself. The people that advocate for CBs have done so, thus for what they are really intended to do, CBs do work.
    May 24, 2012. 07:39 AM | 1 Like Like |Link to Comment
  • Bottoming Process Or Bearish Acceleration? [View article]
    This probably won't be too different from the next Greek elections.
    May 23, 2012. 04:08 PM | Likes Like |Link to Comment
  • Europe's Pain Is America's Gain, Not Bane [View article]
    "Americans are quite capable of producing and then consuming much of what it makes. It's one of the biggest reasons why the United States has such a robust economy."

    Whoa! Talk about a lightining bolt of truth to punch holes in the whole "mercantile system" outlined in the birth of the Smithsonian world.

    You mean you don't have to export to prosper? You mean I can run an account deficit but because the dollars are still out there that its not going to mean death?

    Actually, you could be way over into import only territory, but if your knowledge about how to turn those resources into things that made your standard of living the highest in the world, then there is no reason to fret trade deficits. If your domestic industry could make things that no one else in the world could make, and couldn't afford to buy, then your local population benefits from the jobs or capital returns, and the currency that leaves the country comes back in the form of even more investment, because after all if no one else can produce like you can, then, where are they gonna go? They can't eat dollars after all, just like you can't eat gold.

    The problem comes when your consumers so desire regulatory subsidies that subsidize their consumption (labor rules, product standards, welfare, union subsidies, etc) that the opportunity for return is great enough to offset the gov gun based notes that provide more safety but of course not as much yield.

    So, China does less purchasing of US factory assets denominated in dollars and more purchasing of treas assets denominated in dollars. This drives down the cost of a gov whose basic policy is to pay people to be less productive, instead of driving down the cost of capital to people who would build factories and create new and better products. That scenario is the one the US is currently employing, and over time (decades and decades), austerity takes over (lower standards of living that what would otherwise have been possible).

    When you pay people not to work, don't be surprised when you get exactly what you pay for.
    May 23, 2012. 02:42 PM | Likes Like |Link to Comment
  • "Sell your house ... yesterday," Gary Shilling tells Bloomberg. It will take 4 years, he says, to work off still-high inventories, during which time prices could fall another 20%. Turning to Facebook: "(It's) the end of the social media boom ... reminds me of"  [View news story]
    "What will happen to housing prices when rates rise is that they'll be higher, as history has demonstrated conclusively for many, many decades"

    Wouldn't that be because in the past the economic environment was better and rates would rise because the growth in economic opportunities was faster than the growth in economic opportunity killing fiscal and monetary policies.?Therefore, a growing economy creates the scenario where the demand for capital outstrips the supply (a good thing), thus interest rates go up in an environment where people are getting jobs that mean something. So they were willing to buy houses, and as such as rates went up so did home prices.

    Also, in the past Fannie and Freddie were growing larger and larger as a percent of the mgt market since the mid 70s, so in this growth environment you also had subsidies creating additional buyers.

    I can't see either of these two factors occuring again anytime soon. So what bothers me is that the recovery in housing could occur at an anemic pace for two more decades. So for me the further out the recovery, the worse it is.

    I hope your position that the further away it is the better is wrong. Why do you say that, because I hope its not true.
    May 22, 2012. 08:44 PM | 2 Likes Like |Link to Comment
  • Stability Of The European Union (13)? (Starts March 13, 2012) Ends June 13, 2012. [View instapost]
    I just heard on a podcast with Richard W Rahn that the central bank of France has stopped publishing its balance sheet on its website.
    May 22, 2012. 05:58 PM | 7 Likes Like |Link to Comment