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jhooper

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  • 6 Reasons I Am in TBT and Cash Now [View article]
    "Interest rates are just too low for investors to continue parking their money in something that gives them virtually nothing in return."

    This seems to sound as if there is an assumption that everyone buying treasuries are retail investors. If retail investors were the only purchasers, then I would think this statement makes some sense. However, really big purchasers of treasuries look at them for entirely different reasons than the reason of having enough retirement income. There are large institutional investors (govs, banks, etc) that don't have the flexibility of retail investors, and they're play for treasuries is a levered and subsidized one. The US market for treasuries is a rigged one that bakes into the cake a demand for treasuries. There are also plenty of opportunities for flight to safety scenarios that Europe can provide, and plenty of weak economic data.

    Ultimately even govs succumb to market forces, but the US still has a mountain of wealth that we would need to burn through before we threaten our status as the highest deck on the sinking ship. If we keep on the road we are currently on, the treasury bubble would burst. However, this will probably take years instead of months. Massive QE3 could push treasury rates up, but this would be the result of a stimulus bubble, thus the rate increase would only be temporary. This could come from the ECB or the Fed. Right now, central bank stimulus is what we need to be looking for.
    Dec 23 08:30 AM | Likes Like |Link to Comment
  • Long Euro / U.S. Dollar: That Which Doesn't Kill The Euro Makes It Stronger [View article]
    For the last couple of months I have been looking for a big stimulus action, either from the Fed or from the EU. I kept thinking the EU folks might deliver, but it has been rather disappointing. We got a bunch of jawboning that, to me, suggested some sort of tighter union, but the more I thought about what they needed to do, the more I realized the obstacles they needed to overcome made the probabilities of that unifying action remote. Thus, my comments above.

    Do you know if someone from Greece can pick up and move to Germany, the same way somebody from Maine can pick up and move to California? If they can't, I would see this as something that would need to be part of their union. But, imagine, someone from Germany moving to Greece and then becoming part of their retirement system. To me that would invite immigration just for lucrative benefits. Such a scenario would break the bank even faster, and the market would force reforms on those benefits that were bleeding them dry.

    It is hurdles like this that make me doubt the type of union that would give me the sort of stimulus bubble that I was looking to play. Instead, what appears to be happening is a tightening of expenses. It is like a company that shores up its stock price (the Euro), not by growing the business, but by cutting out some expenses. The employees do without a cafeteria, free soda, a new tv for the break room, lower wages, etc. This definitely improves the stock value, but if they had found a way to grow productivity, they could have kept their perks.

    So the money availability is only one part of the equation. Money is just debt. It is a bank loan. In order to give that debt value, there must be a business plan to improve productivity. Productivity would also include the administrative structure (full union) that allows that productivity to occur. So just printing money without a business plan for productivity will just bid up existing asset prices. This is the stimulus bubble I am looking for, but without the full on union I don't think I am going to get it. And, as I said before, the hurdles they have to overcome to give me what I am looking for seem to be too high for them to overcome.

    I now see them doing baby steps centered around treaty tweaks that deal with controls over budgets. They have to be willing to endure the belt tightening. If they do, they will save the Euro, but it won't be the sudden and massive stimulus bubble I was hoping for, and they won't set their feet on a path to robust growth in the next 18 to 24 mos.
    Dec 22 11:04 AM | 2 Likes Like |Link to Comment
  • Hindenburg Omen Blog - December, 2011 - The HO Is Repaired [View instapost]
    This is EU QE. The stimulus impact will depend on how much they grow the ECBs balance sheet, and how long the advances are offered. Rember QE1 didn't do much to keep the market up, but it did slow the decline. QE2 made an impact, but it was also helped by fiscal stimulus. Monetary and fiscal stimulus are the same thing, but their impact is different because they take different routes. Overall, there was probably north of $2 trillion in stimulus over a two year period. The impact from this could be much smaller if this is all they do.

    Ultimately this is just a bank extending credit to govs. Now it is up to those govs to come up with a business plan to pay off these advances. If they don't, and defaults happen, then the ECB's capital will go negative and the sovereigns will have to tax their populaces to recapitalize it. Overall, the basic EU plan seems to be predicated on reducing expenses rather than improving revenues. In this case the expenses are the level of consumption of its populace, and their revenue would be the level of productivity of their populace. They are unwilling to deregulate their markets, and as a result they must face austerity. Based on this the stimulus effect from the ECB's effort would seem to be mild and short lived. I'd be more inclined to keep on eye on the Fed rather than the ECB. Never-the-less, is anyone tracking the size of the ECB's balance sheet?

    http://bloom.bg/sY2cyv
    Dec 22 07:03 AM | 3 Likes Like |Link to Comment
  • Long Euro / U.S. Dollar: That Which Doesn't Kill The Euro Makes It Stronger [View article]
    "Fiscal union was a pipe-dream that in March will become a reality,"

    Will that union allow for someone in Greece to move to Germany the same way someone from Maine can move to California and give up citizenship in one state and gain citizenship in another? One way to control bad fiscal policies is "voting with your feet". If the new union doesn't allow for this it might not have the kind of fire power it needs.

    Also, does the union create a central taxing authority that can fund central debt the same way the Federal gov can tax and issue treasuries? If not, the new union may not have the firepower it needs.

    If the new union only allows for "central belt tightening" authority, I rather see the union as temporary stimulus.

    It is like someone who is going to school at night, working a low paying part time job, and is living off a credit card. The credit card company (Germany) has an interest in the night school resulting in a better paying job down the road in order for the cc debt to be paid off. However, if it turns out this person has been partying rather than going to class, that cc debt is in jeopardy. The cc company can't make this person want to stay in school, but it could force an agreement based on future credit for the partier to cut out the partying. This person would then be faced with the proposition of, would the part time job be able to pay off the cc bill or at least keep it current. It could take years of no parties before that finally happens, assuming the debt doesn't get any bigger. Short term the debt could be shorn up, but long-term it is still in question.

    What is needed is a workable business plan for growth, and belt tightening is not growth. However, even a full fiscal union is no plan for growth, but it could be a tool that facilitates that. Based on what they do, they may not even have this basic tool.
    Dec 21 11:28 AM | 2 Likes Like |Link to Comment
  • Stability of the European Union (10)? (December 1, 2011 - December 31, 2011 ) [View instapost]
    Robert

    You have illustrated a very good point. World history is tyranny. A people that prevent tyranny would be the exception. The reason they would be the exception is that tyrants use the oldest fraud in the world. No tyrant ever comes to power promising to be a tyrant. They always come to power promising to be a savior. All they need to be your savior is your freedom and your money. Then they will save you from all of life's risks and you will have security. Of course, once they have these, the tyrant no longer has any incentive to be your savior, and now you are exposed to life's greatest risk - the tyrant promising to be a savior.
    Dec 21 09:22 AM | 4 Likes Like |Link to Comment
  • Stability of the European Union (10)? (December 1, 2011 - December 31, 2011 ) [View instapost]
    Impressive. Hats off to anyone that can time these mini bubbles. There may be another mini bubble in Jan based on another EU summit, but some larger time frames to consider are April 2012 and June 2012 (when OT ends). I would also look to Fed QE if S&P drifts down to 900 range, then it will depend on the size of the Fed action as far as the effects on the markets. Without fiscal stimulus to boost it, the Fed QE would have to be $1.5 trillion plus to push the S&P back towards 1300 and the 10yr over 3%.

    In keeping with this...

    http://bloom.bg/sY2cyv
    Dec 21 09:02 AM | 5 Likes Like |Link to Comment
  • Stability of the European Union (10)? (December 1, 2011 - December 31, 2011 ) [View instapost]
    This is EU QE. The stimulus impact will depend on how much they grow the ECBs balance sheet, and how long the advances are offered. Ultimately this is just a bank extending credit to govs. Now it is up to those govs to come up with a business plan to pay off these advances. If they don't, and defaults happen, then the ECB's capital will go negative and the sovereigns will have to tax their populaces to recapitalize it. Overall, the basic EU plan seems to be predicated on reducing expenses rather than improving revenues. In this case the expenses are the level of consumption of its populace, and their revenue would be the level of productivity of their populace. They are unwilling to deregulate their markets, and as a result they must face austerity. Based on this the stimulus effect from the ECB's effort would seem to be mild and short lived. I'd be more inclined to keep on eye on the Fed rather than the ECB. Never-the-less, is anyone tracking the size of the ECB's balance sheet?
    Dec 21 08:08 AM | 4 Likes Like |Link to Comment
  • Stability of the European Union (10)? (December 1, 2011 - December 31, 2011 ) [View instapost]
    The quest for classless societies, always produces two classes. Those to whom power was given to eliminate classes, and those from whom all was stolen by those who were given the power. A gov that is powerful enough to provide everything you have, is powerful enough to take away everything you have.

    Leninism, Fascism, Marxism, Socialism, Communism may have different names, but they are all rooted in looterism. They all require an elite few to control the labor of the non-elite. This power is incompatible with human nature. Human nature is a survival instinct, and people will steal or produce to survive. It all depends on which one costs less. Force makes stealing very cheap, and gov is a monopoly of force. Force has only two applications. It can be used for stealing, or as a defense against stealing. When gov force is not being used for defense, it is being used for stealing. When stealing becomes rampant (a welfare/warfare state), austerity will be the result.

    The reason is very simple. Only an omniscient person can be trusted with power over another, because only the omniscient person has no motive to steal. Everyone else needs to be watched like a hawk. If they are not watched, their survival instincts will soon have them acting in their own best interests at the expense of everyone else. Debt will rise, while productivity falls, and nature will force austerity on the populace and eventually the tyrants.

    The US and Europe have firmly embraced tyrannical markets, thus the robust growth they need to make good on the debts they created from over consumption will not materialize. This does not mean Armageddon, but it most likely means malaise for years. That is if the tyrannical policies are maintained or increased.

    Plan accordingly. Look for the wealth transfers in order to protect yourself, and even prosper.
    Dec 19 04:07 PM | 4 Likes Like |Link to Comment
  • European Impact On U.S. Equities Is Overstated [View article]
    I hope your point of view prevails.
    Dec 19 02:27 PM | Likes Like |Link to Comment
  • European Impact On U.S. Equities Is Overstated [View article]
    "just an asset price bubble that fooled people"

    This is part of the taxing mechanism of central banks. They transfer wealth via bubbles, which is just another way of saying, "inflation". Of course, in this sense, it is inflation for specific asset classes rather than general price inflation. When money is private, or rather the medium that is used to represent money contracts is private, bubbles become part of the pricing mechanism that serves to educate people with what is efficient and what is not. A free market (a market that is free from force and fraud) is forced to learn from bubbles, where as a tyrannical market (a market that is composed of gov imposed force and fraud) never really has to learn from its mistakes (if it makes mistakes, it just uses its force to extract more wealth from the populace and continue with the bad policy). In a free market, bad players are eventually driven out of business, but in a tyrannical market they are bailed out. In other words, a tyrannical market inflates the value of bad assets via wealth transfers.

    All, I am saying is to recognize the gov action for what it is, and not what the rhetoric says it is. Tyrannical markets transfer wealth via bubbles (it is a tax because it relies on gov force), and once you recognize this, you can start to look for the wealth transfers as a means to protect yourself. Thus, recognize that money isn't central bank notes or gold. These are just physical representation of the underlying contract, which is the real money. The contracts and their physical mediums only have value to the extent there is capital creation, and capital creation can only occur if there is productivity. When the creation of the physical medium that represents money is created faster than capital creation, the physical mediums become diluted in value. In other words, the things those physical mediums are used to purchase inflate, and a bubble is created. When the bubble forms, wealth is being transferred. The only way to protect yourself is to look for these wealth transfers.
    Dec 19 12:09 PM | Likes Like |Link to Comment
  • North Korean dictator Kim Jong Il is dead, according to NK state TV. Video here.  [View news story]
    Kim Jong is dead? I didn't even know he was ill.
    Dec 19 10:58 AM | 3 Likes Like |Link to Comment
  • European Impact On U.S. Equities Is Overstated [View article]
    "Now, we have a Central Bank that possesses the power to create money"

    Central banks don't really print money. Money is an abstract. It is a contract for the exchange of capital in the form of assets. Money creation can only occur when there is capital creation. For a central bank to print money it would also have to print capital which would require printing assets. Of course, if a central bank could print assets, then no one would ever have to work again. Talk about your voo-doo economics.

    Central banks tax, pure and simple. The notes they generate are backed by gov force, and they serve to transfer wealth. If a system could be devised to restrict central bank note creation based on aggregate capital creation, then their power to tax would be eliminated. Such restrictions are never imposed on central banks. Why would politicians that are using gov force to transfer wealth to themselves and their supporters ever want to put limits on that?

    Taxes are a cost of living, the higher that cost the lower the standard of living. The more taxation via central banks, the more austerity they will cause. The malaise we are engaged in could go on for years if we continue these actions. In order to prosper, you have the find the wealth transfers, and find some way to participate in them.
    Dec 19 10:08 AM | Likes Like |Link to Comment
  • Stability of the European Union (10)? (December 1, 2011 - December 31, 2011 ) [View instapost]
    Socialism is just another expression of looterism as was fuedalism. Any economy that shifts from the producer end to the looter end will ultimately face austerity, as Europe and the US are faced with now and as all other looter states have faced. There is a simple reason for this, and it is based on one of natures immutable laws. That law is, a first person's ability to consume what a second person produces, will always be greater than what the second person can produce. The deeper economies go into the looter spectrum, the less investment opportunities there will be. The only remaining lucrative ones will be those that have the greatest access to gov guns. Find the wealth transfers and figure out a way to get in on them in order to prosper.
    Dec 19 09:47 AM | 4 Likes Like |Link to Comment
  • European Impact On U.S. Equities Is Overstated [View article]
    Never let your ideology about ideologues cloud your judgment about the reality of how ideologues affect the markets via politics.
    Dec 16 12:20 PM | 1 Like Like |Link to Comment
  • Tortoise, Hare And The Coalition Of The Unwilling [View article]
    It may be more of a finacial market impact, than a real economic impact.

    http://1.usa.gov/vg9W1C
    Dec 16 12:15 PM | Likes Like |Link to Comment
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