Lawrence J. Kramer's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/91390/comments http://seekingalpha.com/article/178252-the-next-leg-of-the-crisis-unavoidable-catastrophe?source=feed#comment-809224 809224
And then there's the paradox of thrift, a prisoner's dilemma writ large, in which everyone defects. Your claim that easy money is badly invested was completely true when our trading partners had the money and were buying subprime mortgages. But it's not true now. Now, even with interest rates at historic lows, anyone with money to lend can and does lend it to Uncle Sam. Look at how much money is going into bond funds - careful investments, not even entrepreneurial investments, much less risky investments. The fate of cheap money is contingent on the national mood. You are offering boomtime logic in a bust time context. (Yeah, there's a risk trade on, and the dollar is depressed by it, but it's nothing like what you fear.)

We need broken windows now because, if Bastiat's baker doesn't need a glazier, he won't spend at all, and, what's worse, his savings will not be deployed productively by his bank because, well, the glazier isn't creditworthy on account of people are being really careful not to break their windows. It would be nice if people wanted stuff so that paying a glazier would divert spending. But right now, people don't want stuff, and until they do, a lot of your concerns are misplaced.]]> Wed, 16 Dec 2009 19:31:53 -0500
And then there's the paradox of thrift, a prisoner's dilemma writ large, in which everyone defects. Your claim that easy money is badly invested was completely true when our trading partners had the money and were buying subprime mortgages. But it's not true now. Now, even with interest rates at historic lows, anyone with money to lend can and does lend it to Uncle Sam. Look at how much money is going into bond funds - careful investments, not even entrepreneurial investments, much less risky investments. The fate of cheap money is contingent on the national mood. You are offering boomtime logic in a bust time context. (Yeah, there's a risk trade on, and the dollar is depressed by it, but it's nothing like what you fear.)

We need broken windows now because, if Bastiat's baker doesn't need a glazier, he won't spend at all, and, what's worse, his savings will not be deployed productively by his bank because, well, the glazier isn't creditworthy on account of people are being really careful not to break their windows. It would be nice if people wanted stuff so that paying a glazier would divert spending. But right now, people don't want stuff, and until they do, a lot of your concerns are misplaced.]]> http://seekingalpha.com/article/163855-why-there-will-be-no-recovery-and-markets-will-trend-lower?source=feed#comment-696428 696428
I agree that we need to get off the oil teat - and export our own production - but we also need to import less from China, using trade barriers if necessary. Smoot and Hawley be damned, in this time and place, if we could sell to ourselves, we wouldn't need to sell to anyone else whose workers work for so much less than ours. (And the day will come when the Chinese do consume enough of their own outputs to make us superfluous as a market. Note, for example, their statement that they will be using their rare earth production domestically.)

If we put on trade barriers, a trade war is a possibility, but only a possibility. And if it results in our producing our own electronics, steel, and solar cells, it will have been worth it. Because you are right about the alternative.]]> Wed, 30 Sep 2009 00:45:06 -0400
I agree that we need to get off the oil teat - and export our own production - but we also need to import less from China, using trade barriers if necessary. Smoot and Hawley be damned, in this time and place, if we could sell to ourselves, we wouldn't need to sell to anyone else whose workers work for so much less than ours. (And the day will come when the Chinese do consume enough of their own outputs to make us superfluous as a market. Note, for example, their statement that they will be using their rare earth production domestically.)

If we put on trade barriers, a trade war is a possibility, but only a possibility. And if it results in our producing our own electronics, steel, and solar cells, it will have been worth it. Because you are right about the alternative.]]> http://seekingalpha.com/article/157418-why-do-equity-markets-disagree-with-the-data?source=feed#comment-639221 639221
We have inflation in financial instruments - too much money chasing too little paper. So everything "goes up," and stays up until supply catches up. But supply won't catch up; no one wants to issue paper when no one will buy the goods the issuer would use the proceeds to produce. (When else has a bull market produced so little IPO activity?)]]> Fri, 21 Aug 2009 00:34:58 -0400
We have inflation in financial instruments - too much money chasing too little paper. So everything "goes up," and stays up until supply catches up. But supply won't catch up; no one wants to issue paper when no one will buy the goods the issuer would use the proceeds to produce. (When else has a bull market produced so little IPO activity?)]]> http://seekingalpha.com/article/153576-restricting-access-to-leveraged-etfs-are-brokerages-outlawing-products-or-strategies?source=feed#comment-614564 614564 Tue, 04 Aug 2009 10:45:27 -0400 http://seekingalpha.com/article/149542-jobless-recovery-fasten-your-seatbelts?source=feed#comment-595618 595618 Mon, 20 Jul 2009 17:02:49 -0400 http://seekingalpha.com/article/148234-how-30-barrel-oil-could-save-the-world?source=feed#comment-584405 584405
Unfortunately, the Chinese and Indians will have to reduce their oil consumption, too, if there is to be real impact on the flow of cash to bad actors. The Chinese, at least, for all their efforts to acquire oil, are moving forward on alternative energy as well. But it's such a big country with so many people emerging from poverty, that it's hard to say that the oil export business will ever wane.]]> Sun, 12 Jul 2009 11:43:10 -0400
Unfortunately, the Chinese and Indians will have to reduce their oil consumption, too, if there is to be real impact on the flow of cash to bad actors. The Chinese, at least, for all their efforts to acquire oil, are moving forward on alternative energy as well. But it's such a big country with so many people emerging from poverty, that it's hard to say that the oil export business will ever wane.]]> http://seekingalpha.com/article/145587-movie-sheds-light-on-sirius-naked-shorts?source=feed#comment-565661 565661 Sun, 28 Jun 2009 10:48:29 -0400 http://seekingalpha.com/article/103919-exchange-traded-derivatives-why-stop-at-cds?source=feed#comment-529472 529472
The problem with CDS contracts is not transparency; it's moral hazard. A CDS on a company in which the holder has no significant stake is, in effect, a life insurance contract on that company, unsupported by an insurable interest. The holder benefits from the collapse of the company, and that's always bad public policy. Since the whole point of an exchange would be to make CDS contracts transferrable from those who need them as hedges to those who want them as speculations (or worse), an exchange for them is a terrible idea.

The law has long prohibited people from taking out life insurance policies on people in whose lives they have no insurable interest. Such a policy gives its buyer a motive for murder and provides no competing social benefit.

Imagine that John Doe wants to borrow $1,000,000 without collateral from XYZ Bank. The bank examines his credit and says "Ok, but you'll need to provide us with a life insurance contract that will pay off your debt to us if you die." Joe, who is in excellent health, easily obtains the contract from CDS Life Insurance Company. Then, unbeknownst to Joe, CDS puts this ad in the newspaper:

----------------------...
Life Insurance on John Doe

We have recently underwritten the life of John Doe and have found him to be in excellent health (depsite his severe peanut allergy). To amortize the cost of underwriting Joe's policy, we are offering identical policies on Joe's life to anyone who wants one, no questions asked. Joe lives at 10 Maple Lane, Somewhere, USA, and likes to buy his lunch from passing vendors.
----------------------...

Is that offer any different from what AIG FP proposed with respect to various American corporations? And if not, is there any reason to believe that transparent pricing of this toxic product would do anything to remove the moral hazard it creates?

Naked CDS contracts are a terrible idea, and better price discovery won't make them any less so.
]]> Wed, 03 Jun 2009 07:57:24 -0400
The problem with CDS contracts is not transparency; it's moral hazard. A CDS on a company in which the holder has no significant stake is, in effect, a life insurance contract on that company, unsupported by an insurable interest. The holder benefits from the collapse of the company, and that's always bad public policy. Since the whole point of an exchange would be to make CDS contracts transferrable from those who need them as hedges to those who want them as speculations (or worse), an exchange for them is a terrible idea.

The law has long prohibited people from taking out life insurance policies on people in whose lives they have no insurable interest. Such a policy gives its buyer a motive for murder and provides no competing social benefit.

Imagine that John Doe wants to borrow $1,000,000 without collateral from XYZ Bank. The bank examines his credit and says "Ok, but you'll need to provide us with a life insurance contract that will pay off your debt to us if you die." Joe, who is in excellent health, easily obtains the contract from CDS Life Insurance Company. Then, unbeknownst to Joe, CDS puts this ad in the newspaper:

----------------------...
Life Insurance on John Doe

We have recently underwritten the life of John Doe and have found him to be in excellent health (depsite his severe peanut allergy). To amortize the cost of underwriting Joe's policy, we are offering identical policies on Joe's life to anyone who wants one, no questions asked. Joe lives at 10 Maple Lane, Somewhere, USA, and likes to buy his lunch from passing vendors.
----------------------...

Is that offer any different from what AIG FP proposed with respect to various American corporations? And if not, is there any reason to believe that transparent pricing of this toxic product would do anything to remove the moral hazard it creates?

Naked CDS contracts are a terrible idea, and better price discovery won't make them any less so.
]]> http://seekingalpha.com/article/134128-zagg-market-leader-breakthrough-product?source=feed#comment-488412 488412 Mon, 04 May 2009 08:31:52 -0400 http://seekingalpha.com/article/130528-why-our-credit-crunch-mirrors-the-weimar-hyperinflation-from-1919-1923?source=feed#comment-460397 460397
None of this makes the historical lessons of Weimar inapposite. It's just sad to see the matter wrapped in the sort of conspiratorial silliness that makes people stop reading before they get to the stuff that matters.

Stripped of unimportant talk about what motivates individual actors, the material problem is that we bought more than we could pay for and now have to default on our bills. We have to. There is no choice, as we don't have anything to sell to pay what we owe. We tried pretending that our real estate was worth more than it is, but that didn't work. Dollar-denominated obligations will be settled at less than par in real terms because there isn't enough of value to settle them in full. Inflation is merely the mechanism by which that default occurs naturally.

If there were no stimulus, no "runaway spending," the trade deficit would still be there, and the debts would still be coming due and we would not be able to pay them except by printing dollars. Without the stimulus, though, the Chinese and OPEC would simply stop taking our dollars sooner, as they would have less business to lose. They wil continue to supply us for so long as they can pretend they are getting paid. If we don't buy, the music stops now. If we do buy, it stops later. In the scheme of things, there's not much difference.

Our standard of living has long been subsidized by the poverty of others. That may or may not have to be the case, but foreign suppliers seem no more eager to elevate their workers and consumers than we are to demand that they do so. In a globalized world, the economies of the U.S. and India should be as much alike as those of New York and Iowa - different, but not very different. Is there enough productive capacity for that to be the case? If yes, can we get there? If the answer - to either question - is "no," then what? I mean, if our hyperinflated currency won't employ those call centers, what will?]]> Sun, 12 Apr 2009 10:04:14 -0400
None of this makes the historical lessons of Weimar inapposite. It's just sad to see the matter wrapped in the sort of conspiratorial silliness that makes people stop reading before they get to the stuff that matters.

Stripped of unimportant talk about what motivates individual actors, the material problem is that we bought more than we could pay for and now have to default on our bills. We have to. There is no choice, as we don't have anything to sell to pay what we owe. We tried pretending that our real estate was worth more than it is, but that didn't work. Dollar-denominated obligations will be settled at less than par in real terms because there isn't enough of value to settle them in full. Inflation is merely the mechanism by which that default occurs naturally.

If there were no stimulus, no "runaway spending," the trade deficit would still be there, and the debts would still be coming due and we would not be able to pay them except by printing dollars. Without the stimulus, though, the Chinese and OPEC would simply stop taking our dollars sooner, as they would have less business to lose. They wil continue to supply us for so long as they can pretend they are getting paid. If we don't buy, the music stops now. If we do buy, it stops later. In the scheme of things, there's not much difference.

Our standard of living has long been subsidized by the poverty of others. That may or may not have to be the case, but foreign suppliers seem no more eager to elevate their workers and consumers than we are to demand that they do so. In a globalized world, the economies of the U.S. and India should be as much alike as those of New York and Iowa - different, but not very different. Is there enough productive capacity for that to be the case? If yes, can we get there? If the answer - to either question - is "no," then what? I mean, if our hyperinflated currency won't employ those call centers, what will?]]> http://seekingalpha.com/article/126961-not-the-tax-clawback-i-had-in-mind?source=feed#comment-433307 433307 Fri, 20 Mar 2009 08:39:29 -0400 http://seekingalpha.com/article/126929-tarp-surtax-bill-could-create-millionaires?source=feed#comment-433294 433294
It's all theater anyway, as the courts won't let the IRS collect a retroactive, confiscatory excise tax. Well, maybe not ALL theatre: the courts may strike down only the retroactive part, leaving the bad policy in place to tie the hands of managers going forward.]]> Fri, 20 Mar 2009 08:30:24 -0400
It's all theater anyway, as the courts won't let the IRS collect a retroactive, confiscatory excise tax. Well, maybe not ALL theatre: the courts may strike down only the retroactive part, leaving the bad policy in place to tie the hands of managers going forward.]]> http://seekingalpha.com/article/119228-fears-on-gold-declining-supply-increasing-demand?source=feed#comment-380117 380117 Sun, 08 Feb 2009 15:39:19 -0500 http://seekingalpha.com/article/116851-ultrashort-etfs-can-work-if-you-trade-them-correctly?source=feed#comment-368260 368260 Wed, 28 Jan 2009 00:57:34 -0500 http://seekingalpha.com/article/116851-ultrashort-etfs-can-work-if-you-trade-them-correctly?source=feed#comment-368259 368259
The math is simple. Suppose the index and the etf are both at 100 on Day 0. On Day 1, the market goes up 5% to 105 and your etf goes down 5% to 95. On Day 2, the market returns to 100. What does your inverse do? It goes down 5/95 (the inverse of the 5/95 increase in the index). But 90/95 of 105 is only 99.47, less than 100. Poof, you're tracking is off. Compound that result over several fluctuations, and of course the inverse does not "track."

2x inverse funds are even worse. Same 5% drop in the index produces a 10% gain in the fund. Return to 100 produces a drop of 10/95 from a level of 110, leaving 98.42. That means the index hasn't moved, but you're down 1.58%. Compound that.

The only way out is to trade for a daily burst, or adjust your holdings frequently so that the value of your etf holding as a percentage of your portfolio stays constant.]]> Wed, 28 Jan 2009 00:55:59 -0500
The math is simple. Suppose the index and the etf are both at 100 on Day 0. On Day 1, the market goes up 5% to 105 and your etf goes down 5% to 95. On Day 2, the market returns to 100. What does your inverse do? It goes down 5/95 (the inverse of the 5/95 increase in the index). But 90/95 of 105 is only 99.47, less than 100. Poof, you're tracking is off. Compound that result over several fluctuations, and of course the inverse does not "track."

2x inverse funds are even worse. Same 5% drop in the index produces a 10% gain in the fund. Return to 100 produces a drop of 10/95 from a level of 110, leaving 98.42. That means the index hasn't moved, but you're down 1.58%. Compound that.

The only way out is to trade for a daily burst, or adjust your holdings frequently so that the value of your etf holding as a percentage of your portfolio stays constant.]]> http://seekingalpha.com/article/116851-ultrashort-etfs-can-work-if-you-trade-them-correctly?source=feed#comment-368143 368143
Trading, per se, may not the be the key to using Ultrashorts. Balancing one's holdings may be sufficient. For example, if you buy an ultrashort and the index moves down 5%, your ETF should move up 10%. Now ask yourself what would a move in the index back to the day before's level mean to your ETF. The answer is that it would fall by more than it went up the day before, and you'd be out money. If, on the other hand, you sold a carefully computed chunk of the ETF, you could expect that a gain of 5.26% in the index (about what it would take to get back down to the original level), and the resulting 10.52% loss in the ETF, would lose a dollar amount equal to the previous day's gain. My arithmetic says you need to unload about 13.6% of your ETF holding so that the 5.26% gain in the index will lose the same amount of dollars as you made the day before. I may be wrong about this, but It seems to me that balancing one's holdings on a daily basis would give you a pretty good chance of having the ETF do over the long haul what it is designed to do on a daily basis. ]]> Tue, 27 Jan 2009 19:36:01 -0500
Trading, per se, may not the be the key to using Ultrashorts. Balancing one's holdings may be sufficient. For example, if you buy an ultrashort and the index moves down 5%, your ETF should move up 10%. Now ask yourself what would a move in the index back to the day before's level mean to your ETF. The answer is that it would fall by more than it went up the day before, and you'd be out money. If, on the other hand, you sold a carefully computed chunk of the ETF, you could expect that a gain of 5.26% in the index (about what it would take to get back down to the original level), and the resulting 10.52% loss in the ETF, would lose a dollar amount equal to the previous day's gain. My arithmetic says you need to unload about 13.6% of your ETF holding so that the 5.26% gain in the index will lose the same amount of dollars as you made the day before. I may be wrong about this, but It seems to me that balancing one's holdings on a daily basis would give you a pretty good chance of having the ETF do over the long haul what it is designed to do on a daily basis. ]]> http://seekingalpha.com/article/116851-ultrashort-etfs-can-work-if-you-trade-them-correctly?source=feed#comment-368122 368122 Tue, 27 Jan 2009 18:57:38 -0500 http://seekingalpha.com/article/116700-gold-is-the-only-long-term-bull-market?source=feed#comment-367317 367317
I'm wondering what effect the GLD ETF is having or will have on the price of the metal. I'm not sure what the difference is between GLD shares and gold-backed currency (the ETF is backed by physical purchases as far as I know). Doesn't Gresham have something to say about this? Is there any reason why gold must remain a means of exchange jsut because it has always been one?]]> Tue, 27 Jan 2009 07:43:24 -0500
I'm wondering what effect the GLD ETF is having or will have on the price of the metal. I'm not sure what the difference is between GLD shares and gold-backed currency (the ETF is backed by physical purchases as far as I know). Doesn't Gresham have something to say about this? Is there any reason why gold must remain a means of exchange jsut because it has always been one?]]> http://seekingalpha.com/article/116297-evidence-that-big-inflation-is-coming?source=feed#comment-365505 365505
Inflation may be coming, but only AFTER the wealth has been replenished in nominal terms, people are no longer underwater on their mortgages by reason of equity loss, and the stimulus keeps coming because turning it off too early replays 1937. But I think that day's a ways off.

Gold is till a good near-term play, though, because thanks to GLD, the public can effectively "corner" the physical market. GLD is gold-backed currency, and Gresham tells us that people will hoard it, putting tremendous upward pressure on the price of the physical metal.
]]> Sun, 25 Jan 2009 10:11:40 -0500
Inflation may be coming, but only AFTER the wealth has been replenished in nominal terms, people are no longer underwater on their mortgages by reason of equity loss, and the stimulus keeps coming because turning it off too early replays 1937. But I think that day's a ways off.

Gold is till a good near-term play, though, because thanks to GLD, the public can effectively "corner" the physical market. GLD is gold-backed currency, and Gresham tells us that people will hoard it, putting tremendous upward pressure on the price of the physical metal.
]]> http://seekingalpha.com/article/115591-gold-shares-etf-inventory-reaches-800-tonnes?source=feed#comment-361749 361749
And my whole point is that gold has BECOME too easy a savings account. I want the dollar savings account to have an advantage; those dollars get recycled here into mortgages. Dollars paid for physical gold get recycled in South Africa.

They've moved the pins on the economic bowling alley. Rolling the ball in the same old way over the same old spots will not produce a very good score.]]> Wed, 21 Jan 2009 09:15:50 -0500
And my whole point is that gold has BECOME too easy a savings account. I want the dollar savings account to have an advantage; those dollars get recycled here into mortgages. Dollars paid for physical gold get recycled in South Africa.

They've moved the pins on the economic bowling alley. Rolling the ball in the same old way over the same old spots will not produce a very good score.]]> http://seekingalpha.com/article/115591-gold-shares-etf-inventory-reaches-800-tonnes?source=feed#comment-361679 361679
Hoarding of physical gold by investors through GLD is too easy for our collective good. I expect that it will be made illegal by law and treaty as soon as the next bubble happens and trading in GLD is identified as a major contributor. ]]> Wed, 21 Jan 2009 08:22:17 -0500
Hoarding of physical gold by investors through GLD is too easy for our collective good. I expect that it will be made illegal by law and treaty as soon as the next bubble happens and trading in GLD is identified as a major contributor. ]]> http://seekingalpha.com/article/112213-inflation-is-in-our-future-not-deflation?source=feed#comment-337372 337372 Wed, 24 Dec 2008 08:27:20 -0500 http://seekingalpha.com/article/109162-dow-will-equal-gold-in-2009?source=feed#comment-320546 320546 Thu, 04 Dec 2008 07:31:01 -0500 http://seekingalpha.com/article/108965-the-american-crisis-and-the-case-for-an-inflationary-depression?source=feed#comment-320336 320336
Not hardly. The collapse can be traced to the trade deficit, exacerbated by the oil bubble. With all those dollars looking for a home, we had to pretend there was value here for them to buy. So we said that homes were worth what people paid for them, even though they paid with liars' loans. Then, the AAA paper backeed by the stupid loans proved not to be AAA after all. Duh. That seized up the credit markets, and it has nothing to do with artificially low interest rates. (The flood of petrodollars looking for dollar investments guaranteed that rates would be low, whatever the Fed did.)]]> Wed, 03 Dec 2008 19:44:50 -0500
Not hardly. The collapse can be traced to the trade deficit, exacerbated by the oil bubble. With all those dollars looking for a home, we had to pretend there was value here for them to buy. So we said that homes were worth what people paid for them, even though they paid with liars' loans. Then, the AAA paper backeed by the stupid loans proved not to be AAA after all. Duh. That seized up the credit markets, and it has nothing to do with artificially low interest rates. (The flood of petrodollars looking for dollar investments guaranteed that rates would be low, whatever the Fed did.)]]> http://seekingalpha.com/article/99813-bailouts-will-soon-drive-the-currency-markets?source=feed#comment-283152 283152
The dollar may be damaged by the discovery that the Reward Points we have been distributing to our trading partners cannot be redeemed for anything worth having, but that's not a result of the Treasury printing money so much as it is the result of exporters grasping that they will not in fact get paid for what they send us. (Of course, taking into account the low marginal cost of selling stuff to us, that risk may actually prove acceptable to them...)

On Oct 15 02:30 PM Pipo wrote:

> Jim Rogers is also worried abaout massive inflation going forward.
> Commodities will excel.
>
> Visit his blog at jimrogers-investments....]]> Wed, 15 Oct 2008 15:14:14 -0400
The dollar may be damaged by the discovery that the Reward Points we have been distributing to our trading partners cannot be redeemed for anything worth having, but that's not a result of the Treasury printing money so much as it is the result of exporters grasping that they will not in fact get paid for what they send us. (Of course, taking into account the low marginal cost of selling stuff to us, that risk may actually prove acceptable to them...)

On Oct 15 02:30 PM Pipo wrote:

> Jim Rogers is also worried abaout massive inflation going forward.
> Commodities will excel.
>
> Visit his blog at jimrogers-investments....]]> http://seekingalpha.com/article/99813-bailouts-will-soon-drive-the-currency-markets?source=feed#comment-283100 283100


On Oct 15 01:46 PM User 30121 wrote:

> Kelly, you tried. remarkl just doesn't get it. Granted, he/she has
> faith in the system, and we "should" have that, but let's face it,
> if you buy a dog for protection, and at every opportunity to excel
> in his job to protect you, he BITES YOU, what should you think/do?
>
>
> I bet he hasn't a ounce of gold or silver in his safe! Those paper
> promises, oh well, I'm not going to beat that (very) dead horse!
>
>
> Love your posts, Kelly. Of course, you know that!]]> Wed, 15 Oct 2008 13:54:58 -0400


On Oct 15 01:46 PM User 30121 wrote:

> Kelly, you tried. remarkl just doesn't get it. Granted, he/she has
> faith in the system, and we "should" have that, but let's face it,
> if you buy a dog for protection, and at every opportunity to excel
> in his job to protect you, he BITES YOU, what should you think/do?
>
>
> I bet he hasn't a ounce of gold or silver in his safe! Those paper
> promises, oh well, I'm not going to beat that (very) dead horse!
>
>
> Love your posts, Kelly. Of course, you know that!]]> http://seekingalpha.com/article/99813-bailouts-will-soon-drive-the-currency-markets?source=feed#comment-282874 282874
When I say "if," I don't mean "when." I have a passle of TWM, SDS, GLD, and SLV that says I don't disagree with your prediction.

I do not agree, however, that the "fools that created this mess" are on Wall St or K Street. My first domino is the trade deficit. Given Jimmy Carter's failed attempt to wake us up from our addiction to oil, I believe that the relevant fools can be found in our bathroom mirrors. All of the mistakes of all of the subsequent fools were largely irrelevant to the big picture. Those latter fools determined which card would be pulled out of the house to trigger the collapse, but we built the house. But even if Government did not make this mess, Government may be the only one that can fix it, and pessimism about the ability of Government to get it right is certainly not without historical support.


On Oct 15 09:29 AM Kelly Lieberman wrote:

> Remarkl,
> If,If, If....I feel bad to be the one to tell you, so just reread
> your own post. The dominos are already falling and there is no way
> that the fools that created this mess are smart enough to get us
> out of it.
> It is really just that simple. You have two choices, the first is
> to put your full faith and credit (literally) in the hands of the
> criminals who created this mess or self preservation. You choose.
> There is not much time left.]]> Wed, 15 Oct 2008 10:25:49 -0400
When I say "if," I don't mean "when." I have a passle of TWM, SDS, GLD, and SLV that says I don't disagree with your prediction.

I do not agree, however, that the "fools that created this mess" are on Wall St or K Street. My first domino is the trade deficit. Given Jimmy Carter's failed attempt to wake us up from our addiction to oil, I believe that the relevant fools can be found in our bathroom mirrors. All of the mistakes of all of the subsequent fools were largely irrelevant to the big picture. Those latter fools determined which card would be pulled out of the house to trigger the collapse, but we built the house. But even if Government did not make this mess, Government may be the only one that can fix it, and pessimism about the ability of Government to get it right is certainly not without historical support.


On Oct 15 09:29 AM Kelly Lieberman wrote:

> Remarkl,
> If,If, If....I feel bad to be the one to tell you, so just reread
> your own post. The dominos are already falling and there is no way
> that the fools that created this mess are smart enough to get us
> out of it.
> It is really just that simple. You have two choices, the first is
> to put your full faith and credit (literally) in the hands of the
> criminals who created this mess or self preservation. You choose.
> There is not much time left.]]> http://seekingalpha.com/article/99963-moral-hazard-the-real-culprit-of-the-financial-crisis?source=feed#comment-282734 282734
Moral hazard is an enabling condition, perhaps, but the immediate culprit is the ratings agencies who had no skin in the game: having no risk to be insured, they had no moral hazard in their decision-making process.

But the immediate cuprit is usually just the weak link in a chain that has come under tension; the tension on the chain that is the "real cause" of the crisis. In our case, the tension was the trade deficit. The deficit made it necessary for us to provide a home for the dollars we spent on imports. Where else were they going to go to make them worth having? We had to borrow them, but Pres. Clinton balanced the budget, leaving the private market to supply the paper. The rest is history. Even the burgeoning Iraq-based deficit could not keep up with the inflow of money. Only by lying about the value of collateral could we accommodate the deluge of petrodollars. So we lied. What else could we do? Conserve energy? Use natgas or nuclear energy? C'mon, this is America!]]> Wed, 15 Oct 2008 08:09:36 -0400
Moral hazard is an enabling condition, perhaps, but the immediate culprit is the ratings agencies who had no skin in the game: having no risk to be insured, they had no moral hazard in their decision-making process.

But the immediate cuprit is usually just the weak link in a chain that has come under tension; the tension on the chain that is the "real cause" of the crisis. In our case, the tension was the trade deficit. The deficit made it necessary for us to provide a home for the dollars we spent on imports. Where else were they going to go to make them worth having? We had to borrow them, but Pres. Clinton balanced the budget, leaving the private market to supply the paper. The rest is history. Even the burgeoning Iraq-based deficit could not keep up with the inflow of money. Only by lying about the value of collateral could we accommodate the deluge of petrodollars. So we lied. What else could we do? Conserve energy? Use natgas or nuclear energy? C'mon, this is America!]]> http://seekingalpha.com/article/97829-my-proposal-for-improving-lending-between-banks?source=feed#comment-269169 269169
Nuclear energy, CNG, coal, wind, solar, etc. We need to use local energy sources to run our stuff, and we need to SELL our oil to pay for our toys.

Go back to econ 101 and study comparative advantage. In this day and age, any country that can produce oil ipso facto has a comparative advantage in oil and should export oil. Until recently, our comparative advantage was in investment grade paper - something we could produce more cheaply than just about anyone else. Now, that advantage is gone. We need to export something else, and oil is it. All we need is the brains and courage in Washington. Which is why I've loaded up on SDS and TWM.

]]> Mon, 29 Sep 2008 22:19:56 -0400
Nuclear energy, CNG, coal, wind, solar, etc. We need to use local energy sources to run our stuff, and we need to SELL our oil to pay for our toys.

Go back to econ 101 and study comparative advantage. In this day and age, any country that can produce oil ipso facto has a comparative advantage in oil and should export oil. Until recently, our comparative advantage was in investment grade paper - something we could produce more cheaply than just about anyone else. Now, that advantage is gone. We need to export something else, and oil is it. All we need is the brains and courage in Washington. Which is why I've loaded up on SDS and TWM.

]]> http://seekingalpha.com/article/96582-treasury-s-actions-not-in-our-best-interest?source=feed#comment-261248 261248 Mon, 22 Sep 2008 08:44:09 -0400