Archive for the 'thrift' Category

If Stock Market Analysts seem to be wrong, why do we believe them?

I am just wondering if we all have some sort of sick pathology.  For crying out loud, why do we believe people who are perpetually wrong.  I read a story on Yahoo news, where they quote the chief strategist from Wachovia Bank.  Wachovia is at $5.45 a share.  In February of 1989, as far back as the yahoo charts will go for me, they were at $11.31.  Remind me again whey these guys are such good strategists?  If the best financial advice you can offer is, “Take the company that I am the chief strategist for, and short it”, you shouldn’t be offering too much advice.

The equivalent of this would be my brother coming to me and telling me he was broke because , and asking if I had an extra few k lying around.  Then, after he takes the loan, he tries to give me financial advice.  Aren’t these brilliant strategists the same ones that asked for a mere 700 Bil?  That is over $2,000 for every man, woman, and child in America.  Wow.  They certainly have some cojones.

I guess I look at all these people saying that we are going to have a recovery in the next six or so months.  That is what they were saying about a year ago.  And things definitely aren’t better.  I guess we will have to see, but I think we should still see the inflation riding back on the “we love the printing press” policies of the of the Fed.

Good luck

New column at my new blog

Just posted another post on the Housing bill, link here.

I am writing from a new address now

Here it is.

I’m from the government, and I am here to help.

Clinton has continued on the popular democratic theme, rob from the rich and give to the poor.  This time it is in the form of mortgages.

The thing that concerned me most was found at the bottom.  Clinton proposed that we freeze the mortgage rates of those who have borrowed using sub-prime mortgages. 

Let’s say that you had a CD at a bank, and you were given a 3% rate for the first year, and told that the rate would go up to 8% for the next 5 years.  Well, the bank ran into financial straits because of poor decisions, and could not pay you back the 8%. Can the government allow the bank to freeze the rate at 3%?  “Sorry, they can’t afford any more.  I guess you will have to start eating rice and rats.  It is for the public good.” 

That is what Clinton wants to let people do to the banks.  These banks make money on very small margins, but because they move so much money, they can make it happen.  When we destroy these margins, we destroy the banks. 

The other thing she brought up was forbidding lawsuits between financial companies.  The people who do the negotiating on the loans are expected to do all they can to ensure that the terms on the loan are honored by the investors (who actually end up lending the money).  Now Clinton want to remove the only method that the investors have to ensure that the contract is honored.  Nice.

Politicians continue to put a band-aid on the infection instead of letting the burning disinfectant permanently clean out the would.  We need to address real concerns, or we will just have a deeper trough.

 I also saw an article that did not make me feel secure about the inflationary pressure we are facing.  In China, service stations are running out of fuel.  The subsidized resource is falling short, because businesses can’t make enough, and don’t have any reason to expand because prices are held in check. 

One solution they are looking at is importing more fuel.   The price of goods in the US is influenced strongly by the price of diesel.  China is looking to import diesel directly.  Not going to be helpful to our trucking industry.

Despite this downturn in commodities prices, I still see the prices continuing to rise.  Railroads are going to get more popular as an efficient shipper of goods.   We will have ot see how much they can grow.

Good luck

Market Meltdown averted- For now

Banker From Monopoly

The fed has helped in averting a chain reaction that could have caused a meltdown in the markets. 

Bear Stearns made a lot of very risky investments in the derivative markets.  About 14 Trillion worth.  Holy crap.  $14,000,000,000,000.  Apparently, the fed pumped in the money to stabilize those investments.  The fed encourages risky behavior, and then proceeds to rescue big business from the results of that behavior.  All you have to do is put yourself in a position that if you go down, you take others with you.   It has almost become an art.  Who ever has the connections and the best sob story is insulated from disaster.  We are in what is becoming an Aristocracy of pull (thanks frisco).  It will be painful to live through the results, but we continue to placate the foolish, putting off the crisis, but ensuring that it will be worse.  I read that this happening after the S & L crisis in the 80’s proves that people don’t learn.  On the other hand, I think it proves that people learn very well.  Get deep into risky business, and tie others to you, and you are set.

Trading derivatives was once a vehicle that people used to eliminate future risks.  Farmers and food manufacturers traded corn and heat futures.  Miners, smelters, and steel companies traded metal commodities.  People used these to plan for the future, and make deals in advance.

Today, there is over $500,000,000,000,000 (not a typo) worth of derivatives in existence.  That is greater than the world’s wealth.  Instead of the stock market beign a place for people to enjoy partial ownership of large companies, it is the worlds largest casino.  Commodities markets are often worse.

We have been shuffling money around long enough, it is time for us to get back to producing wealth. 

Praising the Criminals

I saw a disturbing article that praises the rule of the mob.  This is not a good economic sign.  I was pretty disappointed with the tone that the article took.  We are moving more away from the rule of law to the rule of emotion. 

The basic store is that an activist group harrassed the leadership of countrywide until they renegotiated on loans.   They felt like borrowers should not be required to abide by their contracts.  They demanded that countrywide run their business in a certain way or risk continued harrassment of top executives. 

The result will be that banks will not loan money to the poor any more.  They are not worth the trouble.  Instead of being allowed to mitigate the risk risk of lending, they are being required to lose money.  Let me know how that works out in the next ten years.  If people follow ESOP’s model, the result will be driving out the good business in America.  If a company was using the same methods to coerce a contract they would have an injunction filed against them.  On the other hand, because ESOP is in favor of the “public good”, they have a carte blanch to do whatever they want and it is praised as gutsy, not illegal.   No wonder people want to live in gated communities.

These people seem like lobbyists that aren’t quite as slick as the ones in DC, but have a complete disregard for the rules, and could therefore be seen as even more dangerous.

Feeling the stock market pain

Well, they say that you are supposed to buy when there is blood in the streets.  They seem pretty bloody today.  I am looking for an opportunity to put more money in.  I have been severely kicked in the teeth.  I guess I will have to invest a little more.  It is interesting how the market has responded to the up days over seas. 

I still think that people should be looking at the long term.  The stocks that make you money are going to continue to make you money. 

One interesting part of the energy story is that as fossil fuels become more expensive, our dependence on electricity is going ot continue ot move up.  This will increase the demand for copper.  Apparently, mexico is still in the middle of a big housing boom, where they will be using huge amounts of copper. 

The Chinese are probably getting ready to consume a bit of the accumulated resources that they have. 

Today was painful, but to me it would be irrational to get out now.   The finances of the world do not support that story.

Good luck

A little taste of the Economic Trouble we are in

Well, this morning was pretty interesting.  I was surprised to read that Bernie cut the feds rates this morning by a whopping 75 points.   People are getting nervous and starting to shake things around.

I have been saying for a while that the economy is going to be caught between the twin anvils of recession and inflation.  We have chosen inflation and we will get recession.  It will just hold off for a few more months.  Anyway, try to get your assets in something that isn’t US dollars.

 I read a book recently called Crash Proof (Thanks In-Laws).  It was pretty good over all, and talked about the coming economic problems.  They guy points to three ways to get yourself protected against the coming issues. 

One is to invest in foreign stocks, and he recommended his company, E.  This was a little frustrating, because it felt like the last third of the book was a plug for investing through him.  I checked on the Internet and found that you could also buy foreign stocks through Etrade as a discount broker.  I am going to check if scottrade will do anything like this anytime soon

2nd was to get into precious metals, as they traditionally hold value well.  He also recommended doing this through his company.  If you watch feedback, I have found Ebay is a very effective way of getting precious metals at prices that are very close to melt value. 

The last thing he recommended was keeping some  money in cash.  But not dollars, they will not do so hot.  He recommends buying foreign currencies.

 One thing he did dwell on with the stocks is that you want a company that pays out dividends.  That way if the market goes down, who cares, you get your dividend each quarter anyway.  I tend to agree with him here.  A company should have a plan on how it will return money to you.  Even if the dividends are small, as long as it increases them consistently, you are doing well.

Reinvesting all the earnings can be nice at the beginning, but the company is supposed to exist to make you money, not simply to grow.  Many American companies seem to have lost this concept. 

I am still big on the commodities.  These rising countries need more electrical infrastructure and they now have the saving to purchase it.    I have been getting my butt handed to me on  a platter the past few days though.  I have increased my position, and home to see it go up as earnings come in tomorrow. 

 On the election, everybody through out the stimulus package where we send out free money to everyone. This is retarded, and I will talk more about it tomorrow.  Romney had the plan that I liked best.  Making a more favorable business economy in the USA.  The average citizen would rather have a steady job than a handout.

Stagflation is right around the corner

Well, it looks like the stars of recession are beginning to align.  I remember about a year ago, when our trustworthy, impartial friends over at the National association of Realtors said that the housing slowdown would be over by the end of 07, and that it was a great time to buy (isn’t it always?).  The market has shown otherwise.  Most economists say that a recession is now nearly guaranteed.  I remember the creepy fat guy on disney’s Pinochio, telling the little jackasses, “You’ve had your fun, now pay for it!”  Well, we certainly had ours. 

I sometimes wonder how we didn’t see what was coming.  Is our society now so advanced that even the laws of math don’t apply?  Many otherwise intelligent people just can’t put off the gratification that comes from buying right now. 

I recently talked with a friend about lasic.  His first thought was to transfer the cost to a payment plan over 4 years.   No wonder Americans are in such poor financial shape.  The idea of paying for things up front has completelty disappeared.  I teach for a living, and am continually amazed by the amount of people that want me to shove infromation down their throats without them exerting any substantial mental effort.  You have to pay the price if you want the benefits. 

We are the sailor who went out and had a fantastic time, disregarding the advice of the old fogies that advised us to use moderation.  We are waking up the next morning with a hangover, an empty wallet, and a yet unnamed venereal disease.   The question is, what’s the cure?

I guess that individuals have made good decisions and are finding themselves in a precarious situation as far as investments.  If you are not extremely interested in the stock market, you should do what the old fogies recommend.  Cost average though the downturn, because no one knows when we will finally get the upswing.  Your financial solvency will yield big dividends.  I remember hearing about some economist in california that sold his house and planned on buying back after the market regained sanity. 

These environments can be tricky to navigate.  You want to keep your money is non dollars as much as possible, but it would be nice to be able to keep the cash around to swoop up bargains (anyone have any good theories on how to do this, other than foreign currencies?).  I am staying with companies that produce commodities.  They will be braced against the inflation.  The recessionary environment will hit them, but they should hold up, given the Asian situation.  Other areas might me European stocks, or your “Proctor and Gamble” companies of the world.  Make sure you are going for basic goods that meet basic needs.  One are that should be taking a hit fairly soon is consumer electronics and car stocks.  Anything that produces durable or semi durable goods will take a dip, such as apple.  People will have trouble forking over $300 for the latest ipod when they aren’t sure their job will be there at the end of the month. 

 Any comments are welcome, and good luck to all

Hello Inflation

I assume that everyone has seen the jump in wholesale prices.  It jumped by 3.2% last month.  This falls in line with what people have been actually seeing.  If all the commodities are more expensive, soon what we buy in the stores has to follow.  I think the amazing fact is that they are still understating inflation.\

I think one of the clearest indications of inflation is the falling dollar.  In the world economy, when one currency falls, it represents de facto loss of buying power for that country.  It can be argued that the inflation that the US is seeing averages about

The exchange rate for the Euro has gone from a low of .857 to 1.47 dollars per euro from 2001 to today.  This represents a loss to the euro of about 8.66% per year.  The the Europeans are saying that their inflation is around two percent per year, that means that we  are having an effect that will simulate inflation of around 10% a year after the US interior trade catches up to the rest of the globe.  I recognize this number is high, but I believe it shows some things that the government statistics don’t.  Loss of value is loss of value.  Our increases in productivity have made up for a lot of our inflation in keeping the cost of the goods in this country down, but we can only ask innovators to do so much. 

On the other hand, consumers think it is their duty to keep spending as if nothing has happened, and that is what they are happily doing.  This can’t go on forever.  The longer we put our heads in the sand, the worse things will be when we look.  The old fashioned theories of thrift, savings, and investment are based on sound principles, and as a nation as we do this we will restore national wealth.  Hopefully the politicians will pass laws that encourage this sort of behavior.  The flat tax is a good start.

In the mean time, I have my own ideas about what we can do to preserve the value of our money.  One of the big things is only keep an emergency fund in cash.  Put the rest in some sort of investment, so you can preserve yourself against the encroaching beast of inflation.  I prefer stocks that are tied to commodities and other countries economies.  Others prefer real estate.  Just make sure that each individual investment makes sense on its own.  Think about how many hours you worked for the money that you invest, and recognize that it is worth many hours of your time to make sure that the value of that savings does not dwindle down to nothing.  The people that conserve wealth will end up owning the wealth of this country.  We can all be haves if our choices don’t make us have-nots.