Has anybody learned anything?

Quote from Babak:

We won't know until after 2003 what this sonafabich did.

Not the sign of a healthy bull market. But rather a contrived one, forced down everyone's throat.
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November 2004...
 
to me, the strength of this ralleye (rally that comes back to punch you in the eye) is indicative of the entire professional industry being net short and forced to cover at the end of the war.

ding-ding-ding ---> time to remember that this whole thing was caused by a short covering rally in the $$$

and when the ralleye persisted, we all began talking about the plunge protection team...indicating that something is fundamentally lacking in this rally. the strength of gold makes you wonder what's really going on. i don't know anything about bonds so i am lacking entirely there. then there's the derivatives timebomb...

the selloffs in the past year have been fear inspired. fear of terrorism, accounting, and a fear of martha stewart. :D

in the past week (which is historically a very strong week until tomorrow) i have been seeing more size on the offer, and a higher frequency of outright market shorts for size.

the catalyst that is lacking is fear. all of the recent selloffs have been catalyzed by fear. nobody cares about the economy or debt; this is a society that is leveraged to the gills and apparently the average fund manager or monthly contributor cares nothing about deficits either...we may enjoy a boost in the bottom lines from lower taxes, but higher spending is going to kill us...tack on the $25k the average household had to pay for iraq PLUS whatever the figure is to pay off national debt interest and it adds up quick...

yesterday afternoon it seemed like fear was coming back on CNBC, but today they are all sunshine, shits, and giggles again. the saudi terorrist attack and apparent survival by al-queda seemed to be a decent catalyst to me for the fear to start, so we'll have to see what the news is allowed to show and talk about.

i mean, do you really believe that the administration will allow the news to really get out about the al-queda attack in saudi?? the truth about the attack and even worse -- the truth about saudi arabia -- will be too hard for the american people to stomach. i believe that saudi is in danger of being controlled by a fundamentalist muslim party, or so a friend told me recently, and this is going to be a big problem for W's world tour...doesn't it seem odd that the news is talking about why the FBI isn't being allowed into Saudi?? i mean, rules are rules, but the fact that this was mentioned RIGHT AFTER THE ATTACK is strange to me. why are they trying to buy time with that story about the FBI waiting for clearance to go investigate?? i don't recall this being mentioned in other foreign attacks, like at the nightclub in asia...someone correct me if i'm wrong...

the point is that as soon as the fear takes over the selling will begin...the fed meeting and CSCO weren't strong enough catalysts, as nobody seems to care about anything (including the economy) except for fear...
 
Quote from bungrider:

...tack on the $25k the average household had to pay for iraq PLUS whatever the figure is to pay off national debt interest and it adds up quick...
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The average household had to pay $25,000 for Iraq?

100,000,000 households x $25,000 = $2.5 trillion, no?


I don't get it.
 
Estimates vary -- that 25k is spread out over the next 10 years (plus let's not forget the fact that the US is trying to get the rest of the world to just forgive Iraq's debt, which is total fucking bullshit).

Check out this article -- it puts this war in perspective with the Vietnam war.
http://www.twincities.com/mld/twincities/business/columnists/edward_lotterman/5395749.htm


(From the article):
"A conservative economist, with the support of the bellicose faction within the Bush administration, is likely beavering away to produce a study that will show how the economy will get a huge boost from bringing democracy and free markets to the Middle East."
 
Quote from AAAintheBeltway:

...Maria B. breathlessly reports made up numbers every morning like they are important....
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that's just because they tell her she looks extra hot when she's outta breath...:D
 
can we please put this thread in the trading forum???

it's definitely not chit chat and deserves a little more attention than it's getting here...

please,
-b
 
Quote from Babak:

What Greenie is doing is what he has been doing ever since he was appointed. It is the only thing he knows how to do.

Gotta a problem? Throw money at it.
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Here's a guy that agrees with you -

(excerpt)
Remember, the Fed minutes show Greenspan knew raising margin requirements would have thrown cold water on the speculative stock market fire in stocks. Margin requirements were not raised because the Fed didn't want to raise them! Moreover, they now want to throw a party even bigger than the one after Long Term Capital collapsed, or at the end of the 2000 crisis, when banks were supposed to be out of cash at midnight. Remember that scare? The Fed is always looking for a good scare to justify "goosing the money supply."

How about deflation? Take a look at your bills for insurance (health, home and car), home property taxes, gas, heating, college tuition, and anything the shrinking middle class might want. The CPI is up 3% from April 2002 - April 2003, the dollar is off 30%, and the Fed gets away with actually talking about deflation as a threat. Speculators will look back and laugh. John Q Public will look back and cry.

Greenspan's history as Fed Chairman suggests that when there is anything obvious that would suggest a prudent Fed Chairman might want to take the Punch Bowl away (like a stock market bubble or housing bubble), he casts around for an excuse to distract from the obvious. For the stock market bubble, the theme was "productivity"; For the housing bubble, the theme is "deflation."

In order to understand what is wrong with the system, one needs to focus on what used to be right. The old economy rewarded saving and investment. A balance between the need for funds and the use of funds was achieved by the concepts called credit underwriting and interest rate risk, and a return on capital as well as a return of capital. Investors needed to rely on the credit worthiness of a borrower to be paid back. Savers cared about their money. Lenders and portfolio managers were there to protect them and held to a prudent man rule. Through careful underwriting, only the best projects that could pay the required return got financed. Reasonably high interest rates balanced the risk of repayment, and many credits were denied because, frankly, supplying those projects with credit was foolish and would result in loss. In the Mid-1990's, the Fed changed and so did the world.

The new Fed Model is based on two simple rules: 1) Forget about actual cash savings, and 2) if two entities in the economy enter into a contract, make sure that the contract is financed. Indeed, everything gets financed. There is no need to ration investments to the best projects and credits. Saving is not necessary because there is credit creation. Since credit can be created without limit, credit underwriting is not necessary. All ideas deserve to be financed. The Fed's lack of knowledge or concern about credit underwriting is understandable because Fed officials are unlikely to have ever made a loan of their own money that they personally had to collect.

Indeed, the only loan the Fed ever makes is by buying United States Treasury Bonds, which the Fed knows will be paid. Old Treasury bonds will be paid because the Fed can always buy more New Treasury bonds with their own money (just printed up) to pay off the Old Treasury Bonds. Since the Fed can print money, it can always pay itself off! So, why would a central bank concern itself with credit underwriting or whether investments are any good? Money can always be created to make the investments good!

The Fed's New Economic Model allows the economy and asset prices, like stock and housing, to "break free" and rise without any concept of true value. Money and Credit can be created by Alan Greenspan's will and spent to carry the world economy. If easy money is always available, and all contracts will be financed, there is really no need for something so outdated and passé as savings, allocating credit, credit underwriting or due diligence. Any systematic concerns about getting repaid are overcome, because there is really no penalty to Moral Hazard and speculative finance. The Fed will always signal the speculators when to get out or guarantee their returns.

For the system, money has become either totally free, or extraordinarily cheap, and available to all. When you think of it, how could the "dot.com scam" have been pulled off by Wall Street if money had been tight enough to require serious consideration of an investment's value? Now, after $7 Trillion was wiped out, what is the penalty? At worst, a few "fall guy" stock analysts might be blamed, and a minor "speeding ticket" issued to the major Wall Street firms. Cost benefit analysis shows hundreds of billions in profits, and a mere $1.4 billion fine. Not a bad risk reward analysis for your newly minted MBA's out learning the way the system really works. Wall Street can offer reward without risk, and it's clear the best money to be made is in Moral Hazard and speculative finance (just don't keep the e-mails)!

Indeed, with Greenspan at the helm it is obvious he can't run his New Economic Model without relying on Moral Hazard. Example: Automobile Companies. He desperately needs them to keep selling cars and they are desperate to book sales. If the car manufacturer is fortunate to get someone to come to a dealer's car lot and sign a piece of paper that says some day they might have to pay for the car, the auto manufacturer can book an accounting sale. Forget loan underwriting. The finance company of the manufacturer can bundle the loans into an asset backed security, and sell the security to a bond or money market fund, and, with an easy Fed, all such securities will be financed. It doesn't matter that used car prices have been cut in half because of the 100-year flood of trade-ins and repossessions. A $3,000 cash back incentive really helps if a customer is broke. Buy a car. You can drive off with enough cash to pay your mortgage and car payments for a few more months! Sign your name and drive away; it's a sale! Losses for the car companies will be staggering if America does not find jobs. Ford could fail in 2004.

Sears is trying to sell their credit card portfolio. Maybe they know that a lot of past sales were made to "dead beats" and the sales weren't actually sales. All this paper has been financed - does anyone remember how much of the technology equipment sales were made using vendor finance to companies who could never pay. Corporate balance sheets might be getting stronger with easy money, but there is likely Half a Trillion Dollars of balance sheet equity based on past sales that were not real or will never be paid for. Moreover, there is at least a Trillion Dollars of goodwill on corporate balance sheets used to support debt covenants which represents pure vapor, bogus sales, and over-paying for previous acquisitions.

Credit underwriting? Fugidaboutit! Let Moral Hazard Roll. The GSEs must have over a Trillion dollars of very low down payment and sub prime mortgages either on their books or guaranteed in Agency securities. The GSE paper is "mystery meat" which explains why they are fighting so hard to give out honest data and to register their securities with the SEC. Many GSE loans are loans that would never be made by investors lending their own money. However, nobody cares because GSE paper is by definition AAA. So, every mortgage created will be financed. Most importantly, for the care and feeding of the housing bubble, financing any and all mortgages allows housing prices to rise. Rising housing prices makes all loans good, even if the owner can't afford to make any payments! FNMA's motto is "REFI because a "rolling loan gathers no loss." For every Hedge Fund, Broker Dealer, and small or large bank, it's "hold your nose, close your eyes, and buy Treasuries, Agencies, and even Junk Bonds." The Fed will finance anything and promise to buy the bonds if prices come under pressure. Take the risk; be patriotic; save the economy. The Fed will bail you out! Doesn't this encourage Moral Hazard?

(link)
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My site is commercial 'although free since 6 months because it's not my priority) everybody knows and I don't hide under false pseudonyms by posting "do you know this site it's great " and hypocrisis : I am not doing that to help people but for my own interest I hate people pretending that they do things only for the sake of others; I have being working in business since more than ten years I am not communist so it's your problem to have something against business haha ! At least when you do business you create employment and activities for other business whereas as a speculator excuse me but it's rather parasitism for the society. If I wasn't considering that I am eating the parasits by speculating also I would hesitate and do only business :D.


<FONT COLOR=RED><B>Freeeeeeeeeealways: I don't regret to have put you in my ignore list. You're just a snake, you ask email of people for sending them virus in word document, when you have no argument you look for personal attack that is very interesting indeed hahahaha : Grow up a little.</FONT></B>

Quote from freealways:

Many people have a bleak outlook of the US economy. Whether that eventually will turn out to be a route, who knows (i.e. no-one knows).

Alfonso, the way you have been taking up Harry's cudgel lately I wouldn't be at all surprised if you have taken up the opportunity which he offered on his website where he was looking for people to get rich promoting his method or system.

Quote from alfonso:




Actually free, I haven't even read his website. You, having done so, probably know a lot more about Harry than I! :)

As for the economy, yes, there have been prophets of doom since way back in the day -- I was just reading one at my library the other day, written in the early 80s. I forget the title, something about how to survive the coming depression :) Still, when you compare then and now, I think it's probably fair to say that there's quite a bit more to be concerned about, not less; it's not so much that the doom analysts of yesteryear were so wrong, I think it's more a case that the economy has been bandaged and dressed up beyond what anyone could have reasonably expected when the analyses were being made. So you'd figure that something's gonna give soon or later? I'm not knowledgeable enough to make that call (yet), but I'm learning.
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