Another "Sucker's Rally"

What seems to be happening will be a true battle between fiat currencies....and the seeming inevitability of hard and commodity asset prices rising relatively....

However....in simple speak....

Assume there are two items in the marketplace....

The collective value of currencies is $1000....

The highest possible combined price is $1000....

Then all currencies are diluted such that there is now $2000....

Now the highest possible price of the two items is $2000....

.............................................................

The demand supply constraints ended up being the same, and the wealth distribution was the same....
............................................................

In this case it was a matter of one retaining their jobs and relative incomes....
............................................................

Of course this is just theory....when in actuality there were huge disruptions in jobs, supply, and demand....

But after all the disruption....a more normal demand supply economy arises out of the ashes of disruption....
...............................................................

In any case....the US has taken the bigger government road....and not the smaller government road....

What is happening at the moment is a political economy....which is a very dangerous path to take....if one wants to remain a capitalist country....
...................................................................

SouthAmerica....its seems as if the better positioned countries will just make an effort to focus on less currency dependence....whereas the more poorly positioned countries will walk a long road....

...............................................................

By the way...thank you for bringing Roubini to my attention....He certainly has made a name for himself....
 
Quote from EMRGLOBAL:

Yawwn, who cares.....

Just make fucking money......or loose money.

And if you stack up your win's and the world falls apart buy land and oil, cows and chickens.
More...

^this x 9999999999999

People bitch too much. You can make money both on both sides of the market, just trade.
 
Quote from libertad:

What seems to be happening will be a true battle between fiat currencies....and the seeming inevitability of hard and commodity asset prices rising relatively....

However....in simple speak....

Assume there are two items in the marketplace....

The collective value of currencies is $1000....

The highest possible combined price is $1000....

Then all currencies are diluted such that there is now $2000....

Now the highest possible price of the two items is $2000....

.............................................................

The demand supply constraints ended up being the same, and the wealth distribution was the same....
............................................................

In this case it was a matter of one retaining their jobs and relative incomes....
............................................................

Of course this is just theory....when in actuality there were huge disruptions in jobs, supply, and demand....

But after all the disruption....a more normal demand supply economy arises out of the ashes of disruption....
...............................................................

In any case....the US has taken the bigger government road....and not the smaller government road....

What is happening at the moment is a political economy....which is a very dangerous path to take....if one wants to remain a capitalist country....
...................................................................

SouthAmerica....its seems as if the better positioned countries will just make an effort to focus on less currency dependence....whereas the more poorly positioned countries will walk a long road....

...............................................................

By the way...thank you for bringing Roubini to my attention....He certainly has made a name for himself....
More...


Libertad...thank you. This is precisely the point I'm trying to make and get through to SouthAmerica.

Is America going to struggle and experience inflation? You betcha. But the doomsday sayers (might I say the leftists?)...who are predicting the fall of the United States are missing 2 very important points.

Number 1: The US is a net importing country. Therefore, any "adjustments" in the current account deficit will be to import less, thus hurting the demand of other countries.

Number 2: The US is not some backwater country with no resources. The US is abundant in both natural and intellectual resources.

Third world countries are those with relatively few resources and strictly exporting economies. The US on the other hand is for the most part able to self-sustain, (albeit with a lower living of standard), but in the end, no matter which monetary system is used, supply and demand win out in the end.

I do also agree with you that the danger we have to navigate is going too far to the extreme of socialism. But we have one huge advantage over most other countries. We can shift on a dime and if the leading party (the Democrats) screw it up too bad, they'll be gone in a few years and we can correct our mistakes relatively quickly compared to socialist communist countries.

So, in essence, the point is that people can wish for the death of the United States, but it ain't gonna happen anytime soon.
 
Quote from tradestrong:


Is America going to struggle and experience inflation? You betcha. But the doomsday sayers (might I say the leftists?)...who are predicting the fall of the United States are missing 2 very important points.

Number 1: The US is a net importing country. Therefore, any "adjustments" in the current account deficit will be to import less, thus hurting the demand of other countries.

Number 2: The US is not some backwater country with no resources. The US is abundant in both natural and intellectual resources.

Third world countries are those with relatively few resources and strictly exporting economies. The US on the other hand is for the most part able to self-sustain, (albeit with a lower living of standard), but in the end, no matter which monetary system is used, supply and demand win out in the end.

I do also agree with you that the danger we have to navigate is going too far to the extreme of socialism. But we have one huge advantage over most other countries. We can shift on a dime and if the leading party (the Democrats) screw it up too bad, they'll be gone in a few years and we can correct our mistakes relatively quickly compared to socialist communist countries.

So, in essence, the point is that people can wish for the death of the United States, but it ain't gonna happen anytime soon.
More...

I am most definitely not a leftist and I don't wish for the demise of America (my adopted country). I fear that may happen.

Point number 1 is valid so long as demand from other countries doesn't increase by more than the demand from the U.S. falls. Further, the demand destruction is dissipated among many exporting countries and is thus less lethal to any one country.

Point number 2 is also true. However, we're also seeing a growth in government power scary enough to frighten this Soviet immigrant. There's nothing like the heavy boot of government to make the smartest and most productive members of a population flee and to inhibit the use of natural resources via "environmentalism". Let's not forget that the Soviet Union was always in possession of a vast amount of natural resources and had a better education system than the United States when it collapsed.

I'm also not sure we are able to shift on a dime anymore. For one thing, we are now saddled with an enormous liability against future GDP- the deficit. For another, government is growing at an alarming rate. Even Reagan, who truly believed in small government and made every effort to reduce the size of government, was only ever able to achieve a slowdown in the growth of government for a short time.

Now we have a vast expansion of government burden which will not only reduce the standard of living, but also turn the United States into another Europe. The character of this country is changing. I'm afraid the deficit will trigger a currency crisis at some point. But, watching the a country built on the protection of the individual's right to life, liberty and pursuit of happiness turn into another totalitarian state (and some of the policies in the U.S. now are actually more totalitarian than Europe's - I can't imagine what's coming) is almost as painful.
 
.

March 20, 2009

SouthAmerica: As the US economy descends into a new great depression – the stage has been set:

Fed Funds @ Zero %

Regarding the latest Fed moves:

As the US economy continues to be in complete free fall the Feds reaction = Fed hit the “PANIC” button.

For the people who want to study a country under an economic depression and at the same time under hyperinflation check the history of Germany around 1922, and also of Zimbabwe in the last few years.

US dollar = Confetti

.
 
.

April 14, 2009

SouthAmerica: It is a good thing that the world is full of suckers – the main lifeline of Wall Street today.

In the Monopoly game we have play money.

Today, in Wall Street we have the “make-believe” banking and financial institutions play earnings and Wall Street loves the Bernard Madoff way of calculating the banking and financial institutions fake earnings.

Now that the major banks and financial institutions got their way and started using the Mickey Mouse accounting system to record the value of their toxic assets – a system where you just report good results and hide write offs and other losses and negative information – when you eliminate from the P&L the massive asset write downs the results of the banking system and other financial destitutions look great – and the stock market started rewarding these companies.

As an example: In the last few weeks the stock of Citigroup the Zombie bank went from $ .97 cents to over $ 4.00 per share on the strength of a lot of hype and the Mickey Mouse accounting change.

I wonder why Bernie Madoff is going to jail when at the same time Wall Street celebrates Madoff’s way of deceiving people with fake earnings which are being reported today by the banking and financial institutions?

I understand it is O.K. buying stocks of the Zombie banks such as Citigroup and other major financial institutions if you just go in and out and make a few bucks at the expense of the other suckers.



*******


Reality check:

Last Friday I met my friend at his business on Rt 17 in North New Jersey – he has only 5 employees on his store and in an effort to try to survive the current economic crisis he decided to close the store every Monday since November of 2008 - and he also cut the working hours of his all employees from 45 hours per week to 32 hours per week.

The GM car dealership next door (had been in that location for decades) close down recently and went out of business laying off the last 25 people.

On the other side of his business he has an Acura car dealership and he told me that in normal times that leadership was selling about 3 cars per day times 6 days for about 30 cars per week. In the last few months that same Acura car dealership on a good week they have been selling about 3 cars in total.

That Acura dealership went from selling 30 cars per week to the current average of 3 cars per week.

My friend also told me that the business right across the highway might have to close in one or 2 months – the owner of that business is also running out of money and credit.

Over the weekend someone who works at Sharp Electronics Headquarters in Mahwah, NJ told me that on their location they had already had cut all part time employees and all outside consultants. They also had a recent layoff of permanent employees. Last Friday they announced a major cut in salary for the entire staff and the higher your position the higher the cut in salary.

A neighbor who works at the Jaguar cars headquarters in Mahwah, NJ also told me a few weeks ago that she got a major cut in salary and benefits from that corporation about a few weeks ago.

As I drive on Rt 17 here on Bergen County NJ, I have noticed more and more empty stores and also many new people going out of business.

When I was visiting my friend who has a store on Rt 17 he received a telephone call from his nephew who has a very successful computer business in the Miami area – he has many servers and he also design website for businesses, and install IT networks and so forth. He was asking advice from his uncle because most of his customers are business people but since November 2008 he has lost 60 percent of his revenue since most people stopped paying the bills and things still getting even worse.

Last Thursday I went to have a hair cut and I asked my barber how is business and he told me that things are very bad since most of his regular customers instead of cutting their hair once a month as before, now they have been cutting their hair only every 3 or 4 months to be able to save some money – because of that my barber said that he has cut all his expenses to the bone.

The talking heads on TV; the spin-doctors, and other fools keep saying that the US economy will start improving on the 3dr Quarter of 2009 - I wonder how?

Maybe Lehman Brothers, and thousands of other companies that went out business will start hiring again. All kinds of stores that are being closed all over the place also will hire the employees back. Maybe all these state governments that are in deep trouble financially such as California and many other local county and cities also will hire millions of new people with the money and budgets that they don’t have.

.
 
.

May 4, 2009

SouthAmerica: I don’t agree with Warren Buffett regarding the financial shape of the U.S. Zombie banks including Wells Fargo.

The Zombie banks such as Citigroup and Bank of America among others should be nationalized immediately.

If Wells Fargo was in such a great shape then why Warren Buffett was going all over the place at the end of 2008 pushing of the $ 700 billion bank Bailout in which Wells Fargo got $ 25 billion dollars as their share of the piece of the action.

Mr. Buffett said: “ losses at Citigroup Inc. have distorted the public perception of U.S. banks…”

The public’s negative perception regarding the major U.S. banks are not distorted by Citigroup losses; the public’s negative perception of the major U.S. Zombie banks are rooted on “Mickey Mouse” accounting procedures being used by the banks and the usual off balance sheet shenanigans.

I bet that without the Mickey Mouse accounting principles being used by the banks and the other shenanigans that they play with the numbers – if all that BS is eliminated then the real numbers probably would be scary – in plain English; most of these banking institutions would be insolvent and bankrupt.

If you are investing on these Zombie banks today then you can consider yourself to be a potential customer for another Bernie Maddoff in the future since you are a big fool and deserve to lose all your money.


***


Regarding the current “Sucker’s Rally”

The current Sucker’s Rally started when a Pandit internal memo at Citigroup was leaked to the press saying that things were looking good at Citigroup in the first 2 months of 2009 as long as they did not take in consideration the write offs and other losses.

Suddenly all the banks were doing great – mainly after the FASB changed the accounting rules and the Banks were allowed to use the new Mickey Mouse accounting rules.

The market went up even more when the results for the first quarter in many companies were better than Wall Street had estimated. These results were achieved by cost reductions and massive layoffs and not by market and product improvements in most of these businesses.

Wall Street still can have a few more great quarters in 2009 if the US companies continue laying-off at least another 5 to 10 million full time workers here in the US.

Wall Street is usually very sort sighted and their game is geared for short-term gains, but when the source of most companies profits are based on cost cutting and the massive amount of employee lay offs that has been going on then all you are doing is descending into the abyss in a long-term economic downward spiral and nothing else.

Yes, in my opinion we have been going through another Sucker’s Rally since the beginning of March 2009.


*****


“Buffett Says Citigroup Distorts Perception of Banks”
By Erik Holm and Andrew Frye
Bloomberg News – May 3, 2009

May 3 (Bloomberg) – Billionaire Warren Buffett said losses at Citigroup Inc. have distorted the public perception of U.S. banks and that lenders including Wells Fargo & Co. are better able to withstand the recession.

“Wells Fargo has a dramatically different business model,” Buffett said at a press conference in Omaha, Nebraska, one day after his Berkshire Hathaway Inc. had its annual shareholders meeting.

Buffett has used the weekend events to tout the long-term prospects of his derivative bets and stock investments that soured in the recession. He said yesterday that Wells Fargo, the second-largest holding in Berkshire’s portfolio, will prosper regardless of the results of a federal stress test of top lenders.

Wells Fargo declined 33 percent this year on the New York Stock Exchange on concern the bank will take losses on loans acquired with the purchase of Wachovia Corp. Berkshire held about 290 million shares of San Francisco-based Wells Fargo as of Dec. 31. Based on the May 1 stock price, the stake is valued at about $5.7 billion. The bank slashed its dividend 85 percent in March, reducing investment income for Berkshire.

Citigroup has plunged 56 percent this year. Stephen Cohen, a spokesman for the New York-based bank, declined to comment. Citigroup has taken $45 billion in taxpayer rescue funds and posted more than $20 billion in combined net losses in the past five quarters. Wells Fargo, which received $25 billion from the Treasury, has been profitable in the period.

U.S. Bancorp., M&T

Buffett said U.S. Bancorp and M&T Bank Corp., which are in Berkshire’s portfolio along with Wells Fargo, also avoided the riskiest bets. U.S. Bancorp, the largest bank in Minnesota, has slipped about 28 percent this year. Buffalo, New York-based M&T dropped 14 percent.

“We would buy stock in any of the three banks at the present prices,” Buffett said.

The portfolio he oversees at Berkshire also includes shares of Sun Trust Banks Inc., and Buffett said he isn’t as familiar with the finances of the Atlanta-based lender.

Berkshire had a stake in Bank of America Corp. as of Dec. 31, according to a regulatory filing. That holding is managed by a different Berkshire executive.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aEY2xEbUlLaQ&refer=home

.
 
.

June 23, 2009

SouthAmerica: Today I did watch CNBC early in the morning and around market closing time and it seems to me nobody at CNBC and also at Bloomberg Radio and TV had the chance to read the Financial Times (UK) of June 23, 2009.

CNBC and Bloomberg News are looking very hard to find any type of information that they can spin as “green shoots” – and in the meantime any piece of bad news has been turned into a new “green shoot”.

Most of the time they sound moronic with their “green shoot” bad news spin.

The talking heads and the misinformation spin masters at CNBC and at Bloomberg News missed the Main Headline story on the front page of today's edition of the Financial Times - (I guess that type of information does not comply with their usual “green shoot” BS.) – The main story “Pessimistic executives cash out of shares.”

The article said: “ Company insiders sold more than they bought. Growing pessimism about the prospects for a global economic recovery sent stock and commodity prices tumbling yesterday while new data showed that leading US corporate executives were cashing out of their share holdings at a rapid pace.

… Executives in charge of the largest US companies sent a signal of their concerns by selling far more shares than they bought this month, according to data based on Securities and Exchange Commission filings.

Share sales by so-called company insiders are outstripping purchases so far this month by more than 22 times.

TrimTabs, the investment research company, said insiders of S&P 500 listed companies have unloaded $2.6bn in shares in June, compared with $120m in purchases.

"The smartest players in the US stock market - the top insiders who run public companies - are not betting their own money on an economic recovery," said Charles Biderman, chief executive of TrimTabs…”


*****


SouthAmerica: No wonder the talking heads and news spin masters at CNBC and at Bloomberg News decided to ignore this type of information since share sales by so-called company insiders are outstripping purchases so far this month by more than 22 times – for every share that these executives insiders in charge of the largest US companies are buying they are selling 22 shares.

It seems to me that the smart money is getting out of the Titanic before the herd realizes what is going on and get poked and start another massive stampede.

Maybe the people at CNBC and at Bloomberg news still are trying to figure out a way to spin this information as a “green shoot” and as a very good news for the stock market.

.
 
Quote from southamerica:

....Share sales by so-called company insiders are outstripping purchases so far this month by more than 22 times.

TrimTabs, the investment research company, said insiders of S&P 500 listed companies have unloaded $2.6bn in shares in June, compared with $120m in purchases.

"The smartest players in the US stock market - the top insiders who run public companies - are not betting their own money on an economic recovery," said Charles Biderman, chief executive of TrimTabs…”
More...

I've never seen it so lopsided.

I wonder what put option buying looks like.
 
.

From above posting:

It seems to me that the smart money is getting out of the Titanic before the herd realizes what is going on and get poked and start another massive stampede.


Correction - It should read:

It seems to me that the smart money is getting out of the Titanic before the herd realizes what is going on and get spooked resulting in another massive stampede.

.
 
You must log in or register to reply here.
Back
Top