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Old 03-11-2009, 01:35 AM   #15
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BOING...was that a bounce today or what? +379pts...Now we need another 10 just like it
Yea...but this bounce was entirely about the hope that the banks will be able to keep their dirt under the rug a little longer with a reprieve from mark-to-market (M2M).

All about "lets pretend...and we can prop up our stock prices"

Not a good reason for a bounce. Even so, if on Thursday the Congress determines that letting them ignore M2M (or some variation), the market--not just banking stocks--will likely go wild for a bit. Then, let's see...the next bad news that comes along...busted and back to the downward spiral for a bit longer.
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Old 03-11-2009, 03:21 AM   #16
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All I can say is YaHoo - big day for me. It would be nice if we could just look a the positive for one week. Keep from predicting the sky falling.
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Old 03-11-2009, 08:00 PM   #17
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Keep from predicting the sky falling.
It already fell. We're trying to pick up the pieces right now. That would be the "Obama Stimulus Plan..."
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Old 03-11-2009, 08:17 PM   #18
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It already fell. We're trying to pick up the pieces right now. That would be the "Obama Stimulus Plan..."
Can I ask why you think the Obama Stimulus Plan made the sky fall. It hasn't even started yet.

For me, the clouds grew dark in '06, rained like hell in '07, and the hurricane hit in '08. Funny that since Obama got in office, the wind is dying and it's just a drizzle out now. The big task ahead is mopping up the mess from Hurricane George.
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Old 03-11-2009, 08:32 PM   #19
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Can I ask why you think the Obama Stimulus Plan made the sky fall. It hasn't even started yet.

For me, the clouds grew dark in '06, rained like hell in '07, and the hurricane hit in '08. Funny that since Obama got in office, the wind is dying and it's just a drizzle out now. The big task ahead is mopping up the mess from Hurricane George.
My meaning was that the Obama Stimulus Plan IS picking up the pieces. You seem to misunderstand a lot of the things I write. Sorry about that.
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Old 03-11-2009, 08:41 PM   #20
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Sorry. I didn't realize I'd questioned you before. I'll be more carefull in the future when I'm reading posts.
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Old 03-11-2009, 08:49 PM   #21
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Sorry. I didn't realize I'd questioned you before. I'll be more carefull in the future when I'm reading posts.
I was writing quickly--and you were probably reading quickly--good entertainment for the rest of the forum folk
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Old 03-12-2009, 03:06 AM   #22
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Please allow me the luxury of moving this conversation away from “who shot the sheriff” into the domain of history. Please be clear that I am neither a Democrat nor a Republican; neither a conservative nor a liberal. I consider myself an “originalist” as in a believer that the best form of government currently known is the “original intent” of the Constitution, a form of government that no longer exists in the United States.

Let me make four statements that I will elaborate on below:

1) The United States has been moving from “original meaning” toward socialism since the days of Herbert Hoover. Although the pace of this shift has varied, the direction has been constant. (Original meaning is the legal theory that the Constitution should be interpreted in the context of what they words meant at the time it was ratified)

2) Starting in earnest in the beginning of the 20th century the United States Federal Government has been shifting away from the separation of powers between the Federal Government and the States toward a concentration in power at the Federal level.

3) Starting in the post WWII period the United States has been less and less able to mandate the impact of its political decisions on the action of its more well to do citizens. This trend has accelerated exponentially since that time.

4) As a result of the impact of globalism, an impact that started in earnest in the 1980’s, the countries of the world are in economic competition with each other. Much of what passes for global politics is really a smoke screen for economic competition.

I suggest these four elements have resulted in the “perfect storm” for our economy. I further suggest that it will get much worse before it gets better.

I have always been fascinated by the question asked by Francis Fukuyama in The End of History and the Last Man. To paraphrase: Is there a natural evolution in the direction of Government that will ultimately result in an “ideal form?” In essence, Fukuyama suggests that there is some form of sociocultural evolution toward a ideal and final form of government. Fukuyama argues that radical socialism (or communism) is incompatible with modern representative democracy. While Fukuyama includes the concept of “social democracy,” he leans toward a capitalistic system that contains markets.

What I find interesting about Fukuyama’s thesis is that he suggests that there are certain societal life lessons that result, over time, in a better understanding of the form an “ideal government.” For example, he cites Sparta (not Athens, as I was taught in school!) as a historic example of such a life lesson. In Sparta citizens were taught from birth that their allegiance was first to the city-state and not to their family or clan. This resulted in the idea of overall governance by a larger group than the family facilitating the establishment of nations based on national governments.

I suggest that the 20th and early 21st centuries are playing out a similar conflict. At the extremes we have Marxism – socialism and at the other extreme we have rugged individualism. What is the better choice? At some point there will be a winner of the societal life lesson and mankind will settle on some form of government between the extremes.

In the United States the first major shift toward socialism was actually Herbert Hoover, but the trend was greatly accelerated by FDR and reinforced by Lyndon Johnson. Hoover was the first president to actually suggest that the Federal Government has a role in managing the economy; of course FDR with the “New Deal” and Johnson with the “Great Society” raised the level of government intervention dramatically. Note that every administration with the possible exception of Ronald Reagan has continued the trend – Democrats and Republicans alike.

A wise man (or woman) once defined insanity as doing the same thing over and over again and expecting a different outcome. If this is true then we are in a period of insanity. Historically no government that embraced central planning and control has ever been successful. Looking pragmatically rather than emotionally once must admit that since the days of FDR our Federal Government has succeeded by tax policy, regulation, and extortion of the States (if you don’t pass this bill, provide this benefit, etc you will not get any Federal tax money) to move the governance model of the United States to a central control and planning model.

Historically the problem with socialism is that it represents a utopian society in the form of an egalitarian state – e.g. from each according to his ability, to each according to his needs.” And we have yet to see a successful utopian society. I believe that Margaret Thatcher summarized the reason with her famous quote: “The problem with socialism is that, sooner or later, you run out of other people’s money.”

How does this all relate to the current economic crisis? If one believes that centrally planned and/or utopian societies are destined to fail and that (as has been historically true) they are more likely to fail when the society is under high stress then it should be clear that the Federal Government is making more and more and bigger and bigger mistakes faster and faster. It is critical to recognize that this is not “Bush’s fault” or “Obama’s fault” but rather that the fine cracks that have been appearing in the fabric of the Federal government for years are now becoming big and obvious. Consider that all of the government regulation and control did not stop OPEC, the Savings and Loan debacle, stagflation under Carter, the ENRON scandal, the Internet bubble etc. The Federal government has been failing in various ways for years, and as time has gone on the failures have become bigger and more obvious.

Going forward one can take one of two points of view: (1) We just have to get better at central planning and control (the current Obama strategy as evidenced by bailouts, earmarks, deficit spending, etc.) or (2) we have to return to the concept that the Federal government does not have a significant role in “managing the economy.” (Note the word “significant.” I don’t think any reasonable person would want to propose total anarchy or laissez-faire.) Historically the Obama strategy will fail, and given the size and scope of the Obama agenda one can predict that it will fail with historic proportions. It may not fail during the Obama presidency; it took both Russia and China decades to move away from socialism back toward capitalism. But ultimately it will fail. This does not bode well for the future.

This brings me back to Thatcher and my third point above. Until very recently even the “rich” did not have many choices but to endure the economic circumstances of their country of origin. Of course the mega-rich could do what they wanted, but in this context I am talking about the 5% who are going to pay the bill so that the other “95% will not see an increase in their taxes.” What I believe most people fail to realize is that this 5% group has a level of social mobility never seen before in history. They can “vote with their feet” and go many places in the world with comfortable surroundings and good jobs. They will tend to migrate to places where the economy works rather than staying around to be punished and demonized by the central government for their success. Our economic competitors will create policies to induce the “best and the brightest” to immigrate to their countries.

As a consequence I believe that the current crisis will get deeper at a faster rate than most people expect.

I suggest a triple reef or maybe even bare poles and a drogue.

Disclaimer: Before responding please note that this is not a moral argument. I have taken no stake in “how it should be.” I am simply speculating on what the likely outcome of the independent actions of millions of people will be on the economy in light of the current governance model of the United States federal government. And, given the size of the US economy I am also speculating on the likely impact of these policies on the economies of the rest of the world.
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Old 03-12-2009, 05:44 AM   #23
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A really nice article on Marketwatch about this issue from the viewpoint of a trader trying to remain in the market during these trying times.

http://www.marketwatch.com/news/story/thir...ist=SecMostRead

TODD HARRISON

Thirsting for the truth

Commentary: Honesty is best policy for investors in today's market

By Todd Harrison

NEW YORK (MarketWatch) -- It's just a couple of lines from a middling '90s film about the presidency, but the passage has relevance in today's volatile market.

To paraphrase, an aide in "The American President" -- in an attempt to get his boss to address a sticky public relations issue -- contends there are times when people are so thirsty for information that in the absence of water, they'll drink the sand.

At that point, the president replies: "People don't drink the sand because they're thirsty. They drink the sand because they don't know the difference."

As we edge through these trying times, once-trusted information sources are challenged. This has spread throughout the societal spectrum -- from financial advisers to mainstream media to politicians -- with accountability demanded as a function of frustration.

We've long said that the leaders who emerge from a crisis aren't the same as those who enter it. A snapshot of our current conundrum has brought it to bear.

Citigroup © traded as a penny stock last week and General Motors (GM) was fitted for a toe tag. Heck, even Warren Buffett's Berkshire Hathaway (BRK.A) and General Electric (GE) , both considered untouchable, were caught in the credit crosshairs. I recently offered that March Madness was upon us with a 20% move likely in the near future. The feedback from many on the message boards was that without taking a definitive directional stance, there was little, if any, value in sharing those thoughts.

A movie, not a snapshot

My response is that the market is a movie, not a snapshot, with a multitude of ever-changing variables continually rewriting the script. To appreciate where we're going, we must see and respect both sides rather than relying on any one opinion that tells us what to do.

Indeed, failure to do that is what got so many people into trouble in the first place.

The binary dynamic continues with tomorrow's House Financial Services Committee meeting on mark-to-market accounting next up as a potential catalyst. While Fed Chairman Ben Bernanke voiced disapproval of outright suspension yesterday, it remains on our trading radar.

Should they relax the rules, we'll see a reflex rally that skins the bears. If they leave current policy in place, the risk of a systemic meltdown rises in kind.

I'm a free-market advocate who believes time and price are the only true arbiters of our financial fate. Still, a shift in mark-to-market or credit-default swaps may indeed be needed to stabilize the patient before flatlining occurs.

Where you stand is a function of where you sit. I operate with two buckets of capital, a short-term active trading account and my long-term nest egg, which has been 100% cash for some time. While most folks don't employ the same stylistic approach, I can only share what I'm doing, why I'm doing it and when and how it's being done. It would be disingenuous to offer outright advice, since I don't know the time horizon and risk profile of a faceless audience.

With that said, I offer these thoughts -- sometimes right, sometimes wrong but always honest -- with hopes that sharing my process adds value to yours. In my active account, I've been trading from the long side. While I use trailing stops to manage intraday risk, that won't protect my portfolio overnight. As such, I'm keeping a very tight risk leash lest we see white flags and black swans.

Long view

Through a longer-term lens, S&P 600 is where I plan to put 25% of my cash to work. I've been weighing potential vehicles including ProShares Ultra (SSO) or the SPDR S&P 500 fund. (SPY) I'm leaning towards the latter as I don't trust leveraged ETFs for anything more than a trade. I also like gold, preferably after the devil of deflation has its way, and the Japanese yen (FXY) .

The great unknown -- and why it's so difficult to map any plan with certainty -- is that the field literally is shifting underfoot, akin to playing football during an earthquake.

The U.S dollar remains a key variable and I'll look to push more chips on the table when it flips the downside switch. While the dollar and asset classes both can trade lower, a weaker greenback is a necessary precursor to higher asset classes for as long as it is the world reserve currency.

This is indeed a new world order, one that will forever change the perception of financial markets. It is my sincere hope that, as we navigate these hairpin turns, we will pave the way to old school values where your name and word mean something -- and honesty, trust and respect are the foundational construct of future endeavors.
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Old 03-19-2009, 07:28 PM   #24
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Trim, about those housing prices....I just ran across this link and found it very interesting. From the New York Times :

graph of housing prices over time
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Old 03-20-2009, 06:14 PM   #25
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And yet nobody said "Time-out"...what is happening here?
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Old 03-20-2009, 06:28 PM   #26
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Why am I not surprised?

We see something similar happening now. There are scores of "experts" who predict that this depression will last the year out / until mid 2010 / for the next two years (delete as you wish) but all the experts who predict the end of the depression are the same experts who could not see it coming. In some cases, they may even be the same experts who caused the depression in the first place.

As long as I have enough cash to sit on the terrace sipping red wine and watching the scenery go past before going to the comfort of my boat for the night then I am happy enough.

Aye // Stephen
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Old 03-20-2009, 07:26 PM   #27
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Michael Lewis, the fellow who wrote Liar's Poker just penned a very good opinion piece on Bloomberg.com-- Mass Hysteria Over AIG Obscures Simple Truths:

http://www.bloomberg.com/apps/news?pid=206...&refer=home

It points the finger back at the lowly consumer/home buyer rather than the big evil banks. Since I agree with this view, of course, I post it here

Another good article which I liked because it gives a history of the use of asset backed securities going back to the 1988 McKinsey handbook on securitization was on Bloomberg last fall. If you read it and pay attention, you'll see that every institution was in on the game all doing the same things. The article notes the irony of Enron's CEO Skilling ending up in jail for moving assets off balance sheet but yet here is every major investment firm and bank in the first world doing the same thing but we're not jailing their CEO's, we're rescuing them... Here's the link--

http://www.bloomberg.com/apps/news?pid=206...id=a0jln3.CSS6c

What a world we live in
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Old 03-20-2009, 08:09 PM   #28
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It points the finger back at the lowly consumer/home buyer rather than the big evil banks. Since I agree with this view, of course, I post it here
As a "lowly" consumer I would refute that. The lowly consumer had no part in this. It was the over-consumer together with the banks.

My home is paid for and even at today's prices it is worth more than I gave for it, although with inflation counted in I am not so sure if it is worth that much more, if anything. I worked hard and lived frugally to pay it off and there are many like me. I can't see how then I, as the lowly home buyer had any part in the collapse? Especially as I have paid cash for everything else I own, and that includes my boat.

The problem now is, what do I do with any spare money I have? Do I still trust the banks? Not a bit of it and the interest is lousy anyway. Do I trust the stock market? Nope, no more than the roulette wheel. Maybe Kruger Rands, as has been suggested? Not so bad but what happens if a lot of gold onto the market in order to buy basic foodstuffs?

I honestly don't know the answer but sitting here in Riga there will be those who remember the times when folks not many miles from here were giving away all they owned for bread (St. Petersburg during the revolution, Prussia where suitcases full of money were being used also to buy basic commodities during the 1920:s)

If things really go keel over truck then maybe the half rusty tins of whatever-it-might-be food (don't know as the label fell off) in the bilges will be worth more than any savings I might have?

How much do crystal balls cost?

// Stephen
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