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