Look at the clip below - and pause it at 9 seconds in. All you need to know about the EU?
Sunday, February 28, 2010
Should we have paid-off everyone's mortgage?
A recent figure I've seen for total mortgage debt outstanding in the US is $14.4 trillion. According to this commentator, the true cost of all the financial crisis bailout measures is $14 trillion. Should we have simply cancelled all mortgages, massively deflating house values but liberating millions of Americans from the threat of repossession and freeing up large amounts of their take-home income?
Probably not. Sudden and simplistic measures can be horribly destructive. But can we permit a system to continue, that is built on inflating (or maintaining the absurdly high level of) the cost of our dwellings? In cartoon-mythical ancient times, all a tribe of cavemen had to do was get rid of the bear - all in a day's work - and now the right to live in your own space takes years and years of toil.
Back to Thoreau and Walden?
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this bl
og.
Probably not. Sudden and simplistic measures can be horribly destructive. But can we permit a system to continue, that is built on inflating (or maintaining the absurdly high level of) the cost of our dwellings? In cartoon-mythical ancient times, all a tribe of cavemen had to do was get rid of the bear - all in a day's work - and now the right to live in your own space takes years and years of toil.
Back to Thoreau and Walden?
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this bl
og.
Big market fall expected, over several years
It seems likely that there will be a new leg down in financial asset valuations, as reality overcomes often not-so-subtle propaganda and disinformation. It may start in March, or it may be a 'market break' that provides a subtle warning for a large decline that begins in September 2010, with multi year progression to lows that are, as of now, almost unimaginable, at least in real terms. I cannot stress this issue of nominal versus real enough. As inflation comes, it will initially be in a 'stealth' manner, with the backing of the currency eroding slowly but steadily, and largely unrecognized for some time.
This from "Jesse", a sober and savvy commentator who deplores the schadenfreude crowd. Do read the rest.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
This from "Jesse", a sober and savvy commentator who deplores the schadenfreude crowd. Do read the rest.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Saturday, February 20, 2010
Matt Taibbi on the reinflated bubble
Rolling Stone journalist Matt Taibbi reexamines the world of Wall Street in his latest article of 3 days ago. He finds that the US government, aiming to rid the market of toxic mortgage-related investments, has provided cash for buyers and so inadvertently created a market for the rubbish it's trying to clear. In the third quarter of last year, reports Taibbi, Goldman Sachs, Morgan Stanley, Citigroup and Bank of America bought $3.36 billion of such bad assets, presumably expecting to sell them on at a profit in a government-underwritten buying environment.
Slashing interest rates to get us through the emergency has made ordinary savings accounts unproductive and forced money into investments instead, even when analysis says stay out:
"One trader, who asked not to be identified, recounts a story of what happened with his hedge fund this past fall. His firm wanted to short — that is, bet against — all the cr*p toxic bonds that were suddenly in vogue again. The fund's analysts had examined the fundamentals of these instruments and concluded that they were absolutely not good investments.
"So they took a short position. One month passed, and they lost money. Another month passed — same thing. Finally, the trader just shrugged and decided to change course and buy.
""I said, '**** it, let's make some money,'" he recalls. "I absolutely did not believe in the fundamentals of any of this stuff. However, I can get on the bandwagon, just so long as I know when to jump out of the car before it goes off the damn cliff!"
"This is the very definition of bubble economics — betting on crowd behavior instead of on fundamentals. It's old investors betting on the arrival of new ones, with the value of the underlying thing itself being irrelevant. And this behavior is being driven, no surprise, by the biggest firms on Wall Street."
It takes nerve to stay out of the market when it's rising and when you think you may lose value on your cash held at bank. But unless you're confident that you'll be able to "jump out of the car before it goes off the cliff" (and remember, you don't have access to instant dealing like the City pros), maybe sitting on your hands is the thing to do.
And if price inflation worries you, don't forget, both the US and UK governments still sell guaranteed inflation-proofed investments of their own.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
Slashing interest rates to get us through the emergency has made ordinary savings accounts unproductive and forced money into investments instead, even when analysis says stay out:
"One trader, who asked not to be identified, recounts a story of what happened with his hedge fund this past fall. His firm wanted to short — that is, bet against — all the cr*p toxic bonds that were suddenly in vogue again. The fund's analysts had examined the fundamentals of these instruments and concluded that they were absolutely not good investments.
"So they took a short position. One month passed, and they lost money. Another month passed — same thing. Finally, the trader just shrugged and decided to change course and buy.
""I said, '**** it, let's make some money,'" he recalls. "I absolutely did not believe in the fundamentals of any of this stuff. However, I can get on the bandwagon, just so long as I know when to jump out of the car before it goes off the damn cliff!"
"This is the very definition of bubble economics — betting on crowd behavior instead of on fundamentals. It's old investors betting on the arrival of new ones, with the value of the underlying thing itself being irrelevant. And this behavior is being driven, no surprise, by the biggest firms on Wall Street."
It takes nerve to stay out of the market when it's rising and when you think you may lose value on your cash held at bank. But unless you're confident that you'll be able to "jump out of the car before it goes off the cliff" (and remember, you don't have access to instant dealing like the City pros), maybe sitting on your hands is the thing to do.
And if price inflation worries you, don't forget, both the US and UK governments still sell guaranteed inflation-proofed investments of their own.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.
"Consumer choice" and liberty
A letter to the Spectator magazine, emailed to them today:
Sir: Your editorial (“People Power”, 20 February) welcomes Conservative proposals to extend consumer choice in schools and hospitals, and I hope this will open a wider debate about these imperfect and possibly outdated reifications of learning and health. For example, might we see less bureaucratic resistance to, and more financial support for home education?
But if the Conservatives have rediscovered their appetite for freedom and democracy, why, as Greece, fons et origo of those principles, lies tormented on the Procrustean metanarrative of the EU, are we denied a voice in the ultimate political question, that of national self-determination? Absent a referendum on membership of the Romantic and revolutionary project, we shall be limited-list libertarians, like council house dwellers selecting the hue of their front doors from officially-compiled colour charts.
Are we to be consulted, or must we refuse to vote at all in the coming General Election?
Sir: Your editorial (“People Power”, 20 February) welcomes Conservative proposals to extend consumer choice in schools and hospitals, and I hope this will open a wider debate about these imperfect and possibly outdated reifications of learning and health. For example, might we see less bureaucratic resistance to, and more financial support for home education?
But if the Conservatives have rediscovered their appetite for freedom and democracy, why, as Greece, fons et origo of those principles, lies tormented on the Procrustean metanarrative of the EU, are we denied a voice in the ultimate political question, that of national self-determination? Absent a referendum on membership of the Romantic and revolutionary project, we shall be limited-list libertarians, like council house dwellers selecting the hue of their front doors from officially-compiled colour charts.
Are we to be consulted, or must we refuse to vote at all in the coming General Election?
Friday, February 19, 2010
Jerking the chain: China preparing a proxy US bond dump?
A few days ago on the Broad Oak Blog, I referred to Brad Setser's theory that China has been using the UK to make purchases of US Treasury securities, and that this may offer a different view of what has been happening recently (the apparent reduction in Chinese support for US debt).
In response to a comment, I suggested that the reason for this supposed system of proxy purchases was to allay the fears of the American public.
It occurs to me now, belatedly, that the recent reduction in direct Chinese holdings, coupled with the increase in holding by the UK, may be a preparation for a self-protective (or even punitive) dump of Treasuries using the same intermediaries. If their direct holdings remained relatively unchanged, the Chinese could (if their nominees stayed quiet) deny responsibility and forestall a backlash from American public opinion.
In response to a comment, I suggested that the reason for this supposed system of proxy purchases was to allay the fears of the American public.
It occurs to me now, belatedly, that the recent reduction in direct Chinese holdings, coupled with the increase in holding by the UK, may be a preparation for a self-protective (or even punitive) dump of Treasuries using the same intermediaries. If their direct holdings remained relatively unchanged, the Chinese could (if their nominees stayed quiet) deny responsibility and forestall a backlash from American public opinion.
The Beginning of the End?
A recent episode of 'The Simpsons' featured a popular new teacher, who gave assignments by iPhone, and didn't believe in memorization, since it 'is simpler and easier to just google it'.
I laughed, until I started an on-line exchange with an instructor at a private college. I learned that there is a new breed of teacher, coming mostly from colleges of education. They use phrases such as 'training life-long learners', 'having students take charge of their education', 'learning to use the correct tools, rather than learning how to do things', 'cite sources, rather than memorizing' and 'communicating with podcasts, instead of writing'.
I have seen these methods tried in mathematics and science education, and they simply do not work. Even if they do work in other subjects (doubtful), the bad training carries over to the technical fields, hampering the learning anyway. That should be the end of the matter, except that these ideas are dangerously attractive:
Weak or lazy students like them, since they can get good grades without actually mastering anything. They also get the comfortable illusion of learning, without the pain.
Administrators like the idea, since they can then eliminate or reduce the cost of libraries and textbooks, and replace experts in subject matter with general 'communicators'. All teaching is then a higher art, being removed from 'mere content delivery'. This last is a phrase that I heard used by a colleague in our college of education.
Lastly, parents and politicians love the idea, since education costs can be brought down, and performance is way up, at least on paper. Never mind that the Pacific Rim countries, still using the 'old-fashioned' techniques, are outperforming us, year after year.
How much longer until we have the world of Ray Bradbury's 'Fahrenheit 451', when books are actually banned, because reading makes some people feel inferior?
I laughed, until I started an on-line exchange with an instructor at a private college. I learned that there is a new breed of teacher, coming mostly from colleges of education. They use phrases such as 'training life-long learners', 'having students take charge of their education', 'learning to use the correct tools, rather than learning how to do things', 'cite sources, rather than memorizing' and 'communicating with podcasts, instead of writing'.
I have seen these methods tried in mathematics and science education, and they simply do not work. Even if they do work in other subjects (doubtful), the bad training carries over to the technical fields, hampering the learning anyway. That should be the end of the matter, except that these ideas are dangerously attractive:
Weak or lazy students like them, since they can get good grades without actually mastering anything. They also get the comfortable illusion of learning, without the pain.
Administrators like the idea, since they can then eliminate or reduce the cost of libraries and textbooks, and replace experts in subject matter with general 'communicators'. All teaching is then a higher art, being removed from 'mere content delivery'. This last is a phrase that I heard used by a colleague in our college of education.
Lastly, parents and politicians love the idea, since education costs can be brought down, and performance is way up, at least on paper. Never mind that the Pacific Rim countries, still using the 'old-fashioned' techniques, are outperforming us, year after year.
How much longer until we have the world of Ray Bradbury's 'Fahrenheit 451', when books are actually banned, because reading makes some people feel inferior?
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