Uber bulls beware

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    Posted: 08 November 2010 12:59 PM

    Individual investors are wading back into the U.S. stock market.

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    Posted: 08 November 2010 01:30 PM #1

    Mace - 08 November 2010 04:59 PM

    Individual investors are wading back into the U.S. stock market.

    Mace, my housekeeper is adding onto her house. Allow me to explain:

    Last winter everybody in my neighborhood began dipping a big toe back into the sandbox and began increasing their consumer spending. First everybody upgraded to new lousy lake home vehicles during the cash f?r clunkers program which subsidized people who could afford a new car and pulled forward sales. Then when Mercedes had a big winter sale, my local Benz dealer sold out of S-classes ($110,000 cars got sold out?a clue to consumer spending). Then, after the healthcare bill was passed crushing the rally as successful small business owners recognized their financial exposure, people took profits out of equities and rolled them into, high-yield equities, bonds and RE improvements.

    Over the summer business earnings stabilized and people who had once thought that they would lose their jobs, now feel better about their continued employment prospects. While they were scar’t, they paid down their debts like they never had before. And so after two years of being afraid, armed with their new-and-improved debt to income ratios, the willingness of banks to lend to the credit-worthy, the middle class is beginning to spend?just a little?on slightly increased consumerism and lower-cost RE improvements.

    That’s how I see it from my neighborhood.

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    Black Swan Counter: 9 (Banks need money, Jobs needs a break, Geithner has no plan, Cuomo’s grandstanding, .Gov needs a hobby, GS works for money, flash crash, is that bubbling crude?).

    For those who look, a flash allows one to see farther.

         
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    Posted: 08 November 2010 02:01 PM #2

    So…the “dumb money” is getting smarter?  That would be good news.

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Team™
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    Posted: 08 November 2010 02:02 PM #3

    Mace - 08 November 2010 04:59 PM

    Individual investors are wading back into the U.S. stock market.

    IMO, for the short term, this can only make the market go up. More bids, price goes up. It would be an exercise in futility to bet against the FED since one of their stated goals is to improve the equity market. It is not a matter of the market going up, it is, are you positioned in the right places to really benefit from a market move up. Just my freshly minted .01.

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    Posted: 08 November 2010 02:06 PM #4

    That’s the nice thing about it.  As a harbinger instead of the Great Destroyer or whatever, the party continues.  We just have to keep our eyes out for signs of things going south.

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    Posted: 08 November 2010 02:41 PM #5

    Maybe this looks a bit off topic for this thread, but consequences of government intervention in markets could be starting to appear and those are visible signs of it.


    Earlier this Monday the FT published an article where the president of the World Bank Robert Zoellick said leading economies should consider adopting a global reserve currency based on gold as part of structural reforms to the world foreign-exchange. This should be discussed at this week?s G-20 meetings in Seoul.

    He said ?employing gold as an international reference point of market expectations about inflation, deflation and future currency values.?  Adding ?Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today,? said Zoellick. Saying such a reform would reflect economic realities and should be considered as a successor to the existing global currency paradigm known as ?Bretton Woods II.?

    This discussion, brings back memories of the Nixon Shock that happened back on the early 1970s amidst escalating cost for the US with the Vietnam War and increased domestic spending accelerated inflation mostly caused by money printing, a 10% increase just in 1971. At this time, gold was still the standard, however the paper dollar declined from 55% to 22% of its coverage on the metal. There was an impending currency war with countries dropping off the Bretton Woods system, starting with Germany and followed later by no less than Switzerland.

    Nixon came up with an unorthodox plan to stabilize the economy and curb inflation on August 15, 1971 by freezing wage and prices and ending the convertibility between US dollars and gold. Nixon propaganda called it the Nixon Shock that became popular in the beginning, but soured later with known consequences.

    Some blame the post-2007 financial crisis to the end of the dollar-gold convertibility.

    In this new age of monetary liquidity experimentation with QE1 and QE2, some serious thoughts on consequences of government intervention should be brought up. The issue raised by the president of the World Bank should be placed on the centerpiece of economic discussions.

    Just some philosophical remarks from someone that had the honor to meet one day with the Nobel laureate Professor Friederich Von Hayeck.

         
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    Posted: 08 November 2010 03:00 PM #6

    BrazilNuts - 08 November 2010 06:41 PM

    Maybe this looks a bit off topic for this thread, but consequences of government intervention in markets could be starting to appear and those are visible signs of it.


    Earlier this Monday the FT published an article where the president of the World Bank Robert Zoellick said leading economies should consider adopting a global reserve currency based on gold as part of structural reforms to the world foreign-exchange. This should be discussed at this week?s G-20 meetings in Seoul.

    He said ?employing gold as an international reference point of market expectations about inflation, deflation and future currency values.?  Adding ?Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today,? said Zoellick. Saying such a reform would reflect economic realities and should be considered as a successor to the existing global currency paradigm known as ?Bretton Woods II.?

    This discussion, brings back memories of the Nixon Shock that happened back on the early 1970s amidst escalating cost for the US with the Vietnam War and increased domestic spending accelerated inflation mostly caused by money printing, a 10% increase just in 1971. At this time, gold was still the standard, however the paper dollar declined from 55% to 22% of its coverage on the metal. There was an impending currency war with countries dropping off the Bretton Woods system, starting with Germany and followed later by no less than Switzerland.

    Nixon came up with an unorthodox plan to stabilize the economy and curb inflation on August 15, 1971 by freezing wage and prices and ending the convertibility between US dollars and gold. Nixon propaganda called it the Nixon Shock that became popular in the beginning, but soured later with known consequences.

    Some blame the post-2007 financial crisis to the end of the dollar-gold convertibility.

    In this new age of monetary liquidity experimentation with QE1 and QE2, some serious thoughts on consequences of government intervention should be brought up. The issue raised by the president of the World Bank should be placed on the centerpiece of economic discussions.

    Just some philosophical remarks from someone that had the honor to meet one day with the Nobel laureate Professor Friederich Von Hayeck.

    Gold? whatever. The IMF implemented Special Drawing Rights (SDRs) under the Bretton Woods system in order to address supply issues with gold since central banks wouldn’t be able to keep up with demand. SDRs are like a paper gold and SDRs mean that every reserve has more “gold” than physically exists. In other words, gold is a fractional reserve system in its own right.  As such why gold as the basis? why not trust like we have in our existing faith-based money system?

    Moreover, gold is never used as a means for paying for commerce. Gold is used only as a hedge. Because of the lack of supply of gold, gold notes (whatever flat money is based on any kind of metal standard) will slowly devalue as demand outstrips supply.

    That said, I understand the need for a new global currency since it creates an untenable position for other nations when the reserve currency is the dollar but we need to QE to functionally lower interest rates. A world currency would remain stable against which all national currencies values are relationally valued against. If we had a world currency, then we wouldn’t have the problems with China and the rest of Asia and Australia wouldn’t have the problems against the dollar when we do the right thing for our nation and QE.

    As such, I propose “Eric Bucks” as the global currency against which all other currencies may be rightly valued. Smile.

    In other words, a global currency can be anything so long as all participants agree to it. However, to base a global currency on anything limited in quantity, will lead to a gradual devaluing of the global currency which is the exact problem we face right now.

    FWIW, wage freezes would ultimately extend and prolong the pain.

    BTW, you should look me up on Skype.

    [ Edited: 08 November 2010 03:04 PM by Eric Landstrom ]

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    Black Swan Counter: 9 (Banks need money, Jobs needs a break, Geithner has no plan, Cuomo’s grandstanding, .Gov needs a hobby, GS works for money, flash crash, is that bubbling crude?).

    For those who look, a flash allows one to see farther.

         
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    Posted: 08 November 2010 03:11 PM #7

    Eric Landstrom - 08 November 2010 07:00 PM
    BrazilNuts - 08 November 2010 06:41 PM

    Maybe this looks a bit off topic for this thread, but consequences of government intervention in markets could be starting to appear and those are visible signs of it.


    Earlier this Monday the FT published an article where the president of the World Bank Robert Zoellick said leading economies should consider adopting a global reserve currency based on gold as part of structural reforms to the world foreign-exchange. This should be discussed at this week?s G-20 meetings in Seoul.

    He said ?employing gold as an international reference point of market expectations about inflation, deflation and future currency values.?  Adding ?Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today,? said Zoellick. Saying such a reform would reflect economic realities and should be considered as a successor to the existing global currency paradigm known as ?Bretton Woods II.?

    This discussion, brings back memories of the Nixon Shock that happened back on the early 1970s amidst escalating cost for the US with the Vietnam War and increased domestic spending accelerated inflation mostly caused by money printing, a 10% increase just in 1971. At this time, gold was still the standard, however the paper dollar declined from 55% to 22% of its coverage on the metal. There was an impending currency war with countries dropping off the Bretton Woods system, starting with Germany and followed later by no less than Switzerland.

    Nixon came up with an unorthodox plan to stabilize the economy and curb inflation on August 15, 1971 by freezing wage and prices and ending the convertibility between US dollars and gold. Nixon propaganda called it the Nixon Shock that became popular in the beginning, but soured later with known consequences.

    Some blame the post-2007 financial crisis to the end of the dollar-gold convertibility.

    In this new age of monetary liquidity experimentation with QE1 and QE2, some serious thoughts on consequences of government intervention should be brought up. The issue raised by the president of the World Bank should be placed on the centerpiece of economic discussions.

    Just some philosophical remarks from someone that had the honor to meet one day with the Nobel laureate Professor Friederich Von Hayeck.

    Gold? whatever. The IMF implemented Special Drawing Rights (SDRs) under the Bretton Woods system in order to address supply issues with gold since central banks wouldn’t be able to keep up with demand. SDRs are like a paper gold and SDRs mean that every reserve has more “gold” than physically exists. In other words, gold is a fractional reserve system in its own right.  As such why gold as the basis? why not trust like we have in our existing faith-based money system?

    Moreover, gold is never used as a means for paying for commerce. Gold is used only as a hedge. Because of the lack of supply of gold, gold notes (whatever flat money is based on any kind of metal standard) will slowly devalue as demand outstrips supply.

    That said, I understand the need for a new global currency since it creates an untenable position for other nations when the reserve currency is the dollar but we need to QE to functionally lower interest rates. A world currency would remain stable against which all national currencies values are relationally valued against. If we had a world currency, then we wouldn’t have the problems with China and the rest of Asia and Australia wouldn’t have the problems against the dollar when we do the right thing for our nation and QE.

    As such, I propose “Eric Bucks” as the global currency against which all other currencies may be rightly valued. Smile.

    In other words, a global currency can be anything so long as all participants agree to it. However, to base a global currency on anything limited in quantity, will lead to a gradual devaluing of the global currency which is the exact problem we face right now.

    FWIW, wage freezes would ultimately extend and prolong the pain.

    BTW, you should look me up on Skype.

    Eric Bucks will be fine if adopted. You got the point of the exercise, however the president of the World Bank has a bit more voice than us and is proposing gold to kick-start the debate.

         
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    Posted: 08 November 2010 03:47 PM #8

    How many Eric Bucks for your everyday…“potdish”, as you say? wink

    Or those Bunker Food Buckets or something at Costco or Sam’s Club?

    Or…an S-Class? LOL

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    Thanks, Steve.

         
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    Posted: 08 November 2010 03:54 PM #9

    BrazilNuts - 08 November 2010 07:11 PM
    Eric Landstrom - 08 November 2010 07:00 PM

    Gold? whatever. The IMF implemented Special Drawing Rights (SDRs) under the Bretton Woods system in order to address supply issues with gold since central banks wouldn’t be able to keep up with demand. SDRs are like a paper gold and SDRs mean that every reserve has more “gold” than physically exists. In other words, gold is a fractional reserve system in its own right.  As such why gold as the basis? why not trust like we have in our existing faith-based money system?

    Moreover, gold is never used as a means for paying for commerce. Gold is used only as a hedge. Because of the lack of supply of gold, gold notes (whatever flat money is based on any kind of metal standard) will slowly devalue as demand outstrips supply.

    That said, I understand the need for a new global currency since it creates an untenable position for other nations when the reserve currency is the dollar but we need to QE to functionally lower interest rates. A world currency would remain stable against which all national currencies values are relationally valued against. If we had a world currency, then we wouldn’t have the problems with China and the rest of Asia and Australia wouldn’t have the problems against the dollar when we do the right thing for our nation and QE.

    As such, I propose “Eric Bucks” as the global currency against which all other currencies may be rightly valued. Smile.

    In other words, a global currency can be anything so long as all participants agree to it. However, to base a global currency on anything limited in quantity, will lead to a gradual devaluing of the global currency which is the exact problem we face right now.

    FWIW, wage freezes would ultimately extend and prolong the pain.

    BTW, you should look me up on Skype.

    Eric Bucks will be fine if adopted. You got the point of the exercise, however the president of the World Bank has a bit more voice than us and is proposing gold to kick-start the debate.

    Every time we dilute the dollar voices cry for a new global reserve currency. domestically, most of those voices simply do not understand what they are asking for or how traders (people like myself) would react to a new, global reserve currency. Eventually we’ll get new, global reserve currency but only if the world’s economies worsen far more than in March of 2009. Consider the problem the Euro zone is experiencing handling the weaker, entitled nation-states debt issues and magnify those onto a global stage. Imagine what people like myself would do in those circumstances: We short everything and our selling would begat more and more selling. A global currency would require and immediate contraction of US government spending because people tend to buy our debt because the dollar is the global reserve currency. With the immediate need to contract government spending, we couldn’t expand government spending to backstop the loss of consumer commerce and we’d likely see an economic collapse that only aspirational despots could look forward to. With that special entitlement of the dollar as the global reserve currency removed from the US treasuries, they instantly are devalued. That would require a higher service to debt cost that even at the already existing rate will, in ten years time, require an estimated fifty percent of government spending toward servicing interest on existing US debt. It is obvious to those of us looking down range that the US will be required to cut back on spending at some point or sink under the weight of its own debt. To hit the US with a new global currency around the same time would likely send the world into a global depression unless it is believed that China and Indian internal consumerism will rise to the occasion so as to absorb the world’s productions of goods.

    Proposing a new global reserve during soft economic times is like handing a monkey a gun?it will be random and it will not end well. 

    FWIW, from the tinfoil hat files there are plenty of people out there who believe for seemingly good reasons that our economic downturn is an engineered crisis designed so as to implement further globalization and if those people are correct, then passing a global currency during soft economic periods, would be enough to push that agenda

    Signature

    Black Swan Counter: 9 (Banks need money, Jobs needs a break, Geithner has no plan, Cuomo’s grandstanding, .Gov needs a hobby, GS works for money, flash crash, is that bubbling crude?).

    For those who look, a flash allows one to see farther.

         
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    Posted: 08 November 2010 03:59 PM #10

    Mav - 08 November 2010 07:47 PM

    How many Eric Bucks for your everyday…“potdish”, as you say? wink

    Or those Bunker Food Buckets or something at Costco or Sam’s Club?

    Or…an S-Class? LOL

    LOL a basket of commodities from Costco, BJs and Sam?s Club not leaving behind MN crock pot specialties and definitely a couple of S-Class. Bunker Food Buckets is awesome! And the Blackhawk at his backyard not to forget. Vote for Eric Bucks.

    [ Edited: 08 November 2010 04:21 PM by BrazilNuts ]      
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    Posted: 08 November 2010 04:07 PM #11

    Eric Landstrom - 08 November 2010 07:54 PM
    BrazilNuts - 08 November 2010 07:11 PM
    Eric Landstrom - 08 November 2010 07:00 PM

    Gold? whatever. The IMF implemented Special Drawing Rights (SDRs) under the Bretton Woods system in order to address supply issues with gold since central banks wouldn’t be able to keep up with demand. SDRs are like a paper gold and SDRs mean that every reserve has more “gold” than physically exists. In other words, gold is a fractional reserve system in its own right.  As such why gold as the basis? why not trust like we have in our existing faith-based money system?

    Moreover, gold is never used as a means for paying for commerce. Gold is used only as a hedge. Because of the lack of supply of gold, gold notes (whatever flat money is based on any kind of metal standard) will slowly devalue as demand outstrips supply.

    That said, I understand the need for a new global currency since it creates an untenable position for other nations when the reserve currency is the dollar but we need to QE to functionally lower interest rates. A world currency would remain stable against which all national currencies values are relationally valued against. If we had a world currency, then we wouldn’t have the problems with China and the rest of Asia and Australia wouldn’t have the problems against the dollar when we do the right thing for our nation and QE.

    As such, I propose “Eric Bucks” as the global currency against which all other currencies may be rightly valued. Smile.

    In other words, a global currency can be anything so long as all participants agree to it. However, to base a global currency on anything limited in quantity, will lead to a gradual devaluing of the global currency which is the exact problem we face right now.

    FWIW, wage freezes would ultimately extend and prolong the pain.

    BTW, you should look me up on Skype.

    Eric Bucks will be fine if adopted. You got the point of the exercise, however the president of the World Bank has a bit more voice than us and is proposing gold to kick-start the debate.

    Every time we dilute the dollar voices cry for a new global reserve currency. domestically, most of those voices simply do not understand what they are asking for or how traders (people like myself) would react to a new, global reserve currency. Eventually we’ll get new, global reserve currency but only if the world’s economies worsen far more than in March of 2009. Consider the problem the Euro zone is experiencing handling the weaker, entitled nation-states debt issues and magnify those onto a global stage. Imagine what people like myself would do in those circumstances: We short everything and our selling would begat more and more selling. A global currency would require and immediate contraction of US government spending because people tend to buy our debt because the dollar is the global reserve currency. With the immediate need to contract government spending, we couldn’t expand government spending to backstop the loss of consumer commerce and we’d likely see an economic collapse that only aspirational despots could look forward to. With that special entitlement of the dollar as the global reserve currency removed from the US treasuries, they instantly are devalued. That would require a higher service to debt cost that even at the already existing rate will, in ten years time, require an estimated fifty percent of government spending toward servicing interest on existing US debt. It is obvious to those of us looking down range that the US will be required to cut back on spending at some point or sink under the weight of its own debt. To hit the US with a new global currency around the same time would likely send the world into a global depression unless it is believed that China and Indian internal consumerism will rise to the occasion so as to absorb the world’s productions of goods.

    Proposing a new global reserve during soft economic times is like handing a monkey a gun?it will be random and it will not end well. 

    FWIW, from the tinfoil hat files there are plenty of people out there who believe for seemingly good reasons that our economic downturn is an engineered crisis designed so as to implement further globalization and if those people are correct, then passing a global currency during soft economic periods, would be enough to push that agenda

    Scary scenario to take into account, however government intervention can lead to same with inflation and tax raises on an infinite loop to fix Adam Smith?s invisible hands (of the market).

    Is that the rally monkey asking gently to buy AAPL?

         
  • Posted: 08 November 2010 04:50 PM #12

    BrazilNuts - 08 November 2010 06:41 PM

    Nixon came up with an unorthodox plan to stabilize the economy and curb inflation on August 15, 1971 by freezing wage and prices and ending the convertibility between US dollars and gold. Nixon propaganda called it the Nixon Shock that became popular in the beginning, but soured later with known consequences.

    I remember what happened to the CA housing market:

    $25K in 1971 = $125K in 1981

    The price and wage controls turned out to be pretty much just wage controls.  Exemptions were granted and loopholes used right and left for price increases, but employers merely had to point to the wage freeze rules in order to refuse wage increases.

    I do think that this action by itself was responsible for the oil crisis of the mid-70s.

         
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    Posted: 08 November 2010 06:02 PM #13

    Zeke - 08 November 2010 08:50 PM
    BrazilNuts - 08 November 2010 06:41 PM

    Nixon came up with an unorthodox plan to stabilize the economy and curb inflation on August 15, 1971 by freezing wage and prices and ending the convertibility between US dollars and gold. Nixon propaganda called it the Nixon Shock that became popular in the beginning, but soured later with known consequences.

    I remember what happened to the CA housing market:

    $25K in 1971 = $125K in 1981

    The price and wage controls turned out to be pretty much just wage controls.  Exemptions were granted and loopholes used right and left for price increases, but employers merely had to point to the wage freeze rules in order to refuse wage increases.

    I do think that this action by itself was responsible for the oil crisis of the mid-70s.

    Good point Zeke.

    Just adding, housing was usually a good inflationary defense and sound investment until the 2007 financial crisis. The invisible hand made its correction at that time, the visible hand led us to the debacle post 2007.

    And correct, just wage control, as the string usually breaks on the weaker point, so cost of living up even with prices frozen by decree and wages compressed to down on a cruel mistreatment. A lesson not to be taken for granted.

    On a global perspective, Germany pulling out of the DM/gold standard and France buying gold at a point. US creditors lining up to receive their dues. A huge global imbalance.

    Government intervention has unintended consequences.

         
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    Posted: 08 November 2010 10:46 PM #14

    Zeke - 08 November 2010 08:50 PM

    ... I remember what happened to the CA housing market: $25K in 1971 = $125K in 1981 ... .

    The story continues: $25K in 1971 = $125K in 1981 = $625K in 2001

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  • Posted: 09 November 2010 12:40 AM #15

    Eric Landstrom - 08 November 2010 07:00 PM

    [...]

    In other words, a global currency can be anything so long as all participants agree to it. However, to base a global currency on anything limited in quantity, will lead to a gradual devaluing of the global currency which is the exact problem we face right now.
    [...]


    I commend to you, Murray Rothbard’s Man Economy and State.  In it he demonstrates why a limited quantity of money (including gold) has no deleterious effect on the economy.