A Father's Love for His Son...
I saw this video and it really touched my heart. It something I would thought impossible but this MAN(sorry, should be HERO) made it..... they completed the Ironman and not just once....!
Every father should watch this...
Friday, December 25, 2009
Saturday, November 28, 2009
John Paulson stock lessons
Extract from www.Retirerichblog.com (I love this website, have been follwing it for quite sometime now)
His firm made $20 billion between 2007 and early 2009 by betting against the housing market and big financial companies. Mr. Paulson's personal cut would amount to nearly $4 billion, or more than $10 million a day. That was more than the 2007 earnings of J.K. Rowling, Oprah Winfrey and Tiger Woods combined.
His firm made $20 billion between 2007 and early 2009 by betting against the housing market and big financial companies. Mr. Paulson's personal cut would amount to nearly $4 billion, or more than $10 million a day. That was more than the 2007 earnings of J.K. Rowling, Oprah Winfrey and Tiger Woods combined.
Wednesday, November 25, 2009
Jim Rogers: My First Million
From FT.com Published: November 20 2009 18:26 Last updated: November 20 2009 18:26
Since Jim Rogers, 67, co-founded the Quantum Fund with George Soros he has worked as a guest professor of finance at Columbia University and as an economic commentator. In 1998, he founded the Rogers International Commodities Index (RICI).
He is the author of A Bull in China, Hot Commodities, Adventure Capitalist and Investment Biker. His latest book is A Gift to My Children, a father’s lessons for life and investing.
When you realised that you had made your first million were you tempted to slow down?
I can remember the exact day of my first million dollars’ net worth. It was in November 1977. I was 35. I knew I needed more than that to do what I wanted when I was 37 – the age I decided to stop working to seek adventure.
What is the secret of your success?
As I was not smarter than most people, I was willing to work harder than most. I was prepared to examine conventional wisdom. If everyone thinks one way, it is likely to be wrong. If you can figure out that it is wrong, you are likely to make a lot of money.
What has been your most spectacular gain?
The Quantum Fund. When we started the company in 1970, I had $600 in my pocket. Within 10 years, the portfolio had gained 4,200 per cent.
What is your basic investment strategy?
Buy low and sell high. I try to find something that is very cheap, where a positive change is taking place. Then I do enough homework to make sure I am right. It has got to be cheap so that, if I am wrong, I don’t lose much money. Every time I make a mistake, it is usually because I did not do enough homework.
Since Jim Rogers, 67, co-founded the Quantum Fund with George Soros he has worked as a guest professor of finance at Columbia University and as an economic commentator. In 1998, he founded the Rogers International Commodities Index (RICI).
He is the author of A Bull in China, Hot Commodities, Adventure Capitalist and Investment Biker. His latest book is A Gift to My Children, a father’s lessons for life and investing.
When you realised that you had made your first million were you tempted to slow down?
I can remember the exact day of my first million dollars’ net worth. It was in November 1977. I was 35. I knew I needed more than that to do what I wanted when I was 37 – the age I decided to stop working to seek adventure.
What is the secret of your success?
As I was not smarter than most people, I was willing to work harder than most. I was prepared to examine conventional wisdom. If everyone thinks one way, it is likely to be wrong. If you can figure out that it is wrong, you are likely to make a lot of money.
What has been your most spectacular gain?
The Quantum Fund. When we started the company in 1970, I had $600 in my pocket. Within 10 years, the portfolio had gained 4,200 per cent.
What is your basic investment strategy?
Buy low and sell high. I try to find something that is very cheap, where a positive change is taking place. Then I do enough homework to make sure I am right. It has got to be cheap so that, if I am wrong, I don’t lose much money. Every time I make a mistake, it is usually because I did not do enough homework.
Sunday, November 8, 2009
US Unemployment Rate Troubling, But …
By Prieur du Plessis on November 8, 2009 | More Posts By Prieur du Plessis | Author's Website
The US Labor Department announced Friday that the unemployment rate rose to a 26-year high of 10.2% in October, an increase of 0.4 of a percentage point, even though the labor force contracted as well.
The graph below, courtesy of Chart of the Day, illustrates the unemployment rate since 1948 and provides some perspective on the current state of the labor market. As shown, Friday’s increase above the 10% level marks only the second time such a move has occurred during the post-World War II era.
Closer analysis of the chart indicates that the unemployment rate is a lagging indicator, peaking after the end of a recession. However, in the case of the previous two recessions the rate only peaked several quarters following an improvement in real GDP.
Asha Bangalore (Northern Trust) said: “A similar case is projected for the current recovery. Our forecast is for the unemployment rate to peak in mid-2010. At the same time, real GDP should continue to advance during the final months of 2009 and all of 2010.
The US Labor Department announced Friday that the unemployment rate rose to a 26-year high of 10.2% in October, an increase of 0.4 of a percentage point, even though the labor force contracted as well.
The graph below, courtesy of Chart of the Day, illustrates the unemployment rate since 1948 and provides some perspective on the current state of the labor market. As shown, Friday’s increase above the 10% level marks only the second time such a move has occurred during the post-World War II era.
Closer analysis of the chart indicates that the unemployment rate is a lagging indicator, peaking after the end of a recession. However, in the case of the previous two recessions the rate only peaked several quarters following an improvement in real GDP.
Asha Bangalore (Northern Trust) said: “A similar case is projected for the current recovery. Our forecast is for the unemployment rate to peak in mid-2010. At the same time, real GDP should continue to advance during the final months of 2009 and all of 2010.
Saturday, November 7, 2009
Fuel Your Stock Portfolio With BHP Billiton: The Best-Run Commodities Company In The World
By Tony D’Altorio on November 6, 2009 | More Posts By Tony D’Altorio | Author's Website
Some companies just stand out - both in their own sectors and in the larger market.
Australian firm BHP Billiton (BHP: 68.15 +0.32 +0.47%) is one of them.
As the largest and most diversified commodities producer in the world, BHP has leading positions in most key, low-cost, metal and mineral deposits in the world.
And as if that weren’t enough, it also has a solid position in oil, thanks to its petroleum division, which had operating profits of $4 billion last year.
Impressively, that total only made the petroleum division BHP’s third-best performer in 2008. Its iron ore segment scooped up $6.23 billion, while base metals enjoyed a $4.62 billion operating profit.
Crucially, that sets BHP’s oil division apart from its competitors. Not only does it bring in extra revenue, it’s also not overly reliant on the commodity fuel its operations.
So what does this mean for investors?
BHP’s Big Three: Profits, Cash, Growth
Thanks to BHP’s highly disciplined management team, investors have seen consistent profitability. And with $5.6 billion in net debt, that’s significantly less than many fellow mining companies.
In addition, with BHP sitting on almost $11 billion in cash, rumors are swirling that it’s chasing acquisitions, especially in oil and potash.
However, it has no need to rush out and buy anything right away. Thanks in part to a recent $116 billion deal with Rio Tinto plc (RTP: 193.77 +3.20 +1.68%) to merge the Pilbara iron ore operations in Western Australia, BHP is already well positioned with what it has.
Including the $5.8 billion it plans to sink into the Pilbara venture, BHP has a total of $17 billion already set aside for pre-existing projects over the next 12 months, highlighting the fact that it can grow simply by developing its own rich global asset portfolio.
BHP is Perfectly Poised in Emerging Markets
Like many other companies, BHP knows the strategic importance of establishing a strong base in emerging markets.
And deals like the one with Rio Tinto build strong, long-term shareholder value and help BHP fulfill its long-term mandate of capitalizing on booming emerging market demand.
The rise in consumer purchasing power in China, India, Brazil and other emerging economies will lead to a sharp spike in electricity consumption, as wealthier consumers buy televisions, refrigerators, washing machines and other consumer electronic items.
BHP sees energy demand alone growing at an annual 8% pace in China and 7% in India… and it has positioned itself perfectly to capitalize on those trends.
Coal: This still accounts for about 40% of global energy production, which suits BHP just fine, since it’s one of the largest producers of thermal coal in the world. Even better, the company produces copious amounts of coking coal, a commodity the steel industry depends on and one that emerging economies need vast quantities of.
Nuclear: Both China and India have plans to build numerous nuclear power plants over the coming decades. And BHP is already poised to take advantage through its Olympic Dam project in Australia, the world’s largest uranium deposit.
With a strong grasp on not only the commodities market, but also the countries most likely to need them, BHP is a must-have for any investor interested in taking advantage of the commodities markets and fast-growing global economies.
Some companies just stand out - both in their own sectors and in the larger market.
Australian firm BHP Billiton (BHP: 68.15 +0.32 +0.47%) is one of them.
As the largest and most diversified commodities producer in the world, BHP has leading positions in most key, low-cost, metal and mineral deposits in the world.
And as if that weren’t enough, it also has a solid position in oil, thanks to its petroleum division, which had operating profits of $4 billion last year.
Impressively, that total only made the petroleum division BHP’s third-best performer in 2008. Its iron ore segment scooped up $6.23 billion, while base metals enjoyed a $4.62 billion operating profit.
Crucially, that sets BHP’s oil division apart from its competitors. Not only does it bring in extra revenue, it’s also not overly reliant on the commodity fuel its operations.
So what does this mean for investors?
BHP’s Big Three: Profits, Cash, Growth
Thanks to BHP’s highly disciplined management team, investors have seen consistent profitability. And with $5.6 billion in net debt, that’s significantly less than many fellow mining companies.
In addition, with BHP sitting on almost $11 billion in cash, rumors are swirling that it’s chasing acquisitions, especially in oil and potash.
However, it has no need to rush out and buy anything right away. Thanks in part to a recent $116 billion deal with Rio Tinto plc (RTP: 193.77 +3.20 +1.68%) to merge the Pilbara iron ore operations in Western Australia, BHP is already well positioned with what it has.
Including the $5.8 billion it plans to sink into the Pilbara venture, BHP has a total of $17 billion already set aside for pre-existing projects over the next 12 months, highlighting the fact that it can grow simply by developing its own rich global asset portfolio.
BHP is Perfectly Poised in Emerging Markets
Like many other companies, BHP knows the strategic importance of establishing a strong base in emerging markets.
And deals like the one with Rio Tinto build strong, long-term shareholder value and help BHP fulfill its long-term mandate of capitalizing on booming emerging market demand.
The rise in consumer purchasing power in China, India, Brazil and other emerging economies will lead to a sharp spike in electricity consumption, as wealthier consumers buy televisions, refrigerators, washing machines and other consumer electronic items.
BHP sees energy demand alone growing at an annual 8% pace in China and 7% in India… and it has positioned itself perfectly to capitalize on those trends.
Coal: This still accounts for about 40% of global energy production, which suits BHP just fine, since it’s one of the largest producers of thermal coal in the world. Even better, the company produces copious amounts of coking coal, a commodity the steel industry depends on and one that emerging economies need vast quantities of.
Nuclear: Both China and India have plans to build numerous nuclear power plants over the coming decades. And BHP is already poised to take advantage through its Olympic Dam project in Australia, the world’s largest uranium deposit.
With a strong grasp on not only the commodities market, but also the countries most likely to need them, BHP is a must-have for any investor interested in taking advantage of the commodities markets and fast-growing global economies.
Sunday, November 1, 2009
Be Prepared for the Worst
Ron Paul, 10.29.09, 09:20 AM EDT Forbes Magazine dated November 16, 2009
The large-scale government intervention in the economy is going to end badly.
Any number of pundits claim that we have now passed the worst of the recession. Green shoots of recovery are supposedly popping up all around the country, and the economy is expected to resume growing soon at an annual rate of 3% to 4%. Many of these are the same people who insisted that the economy would continue growing last year, even while it was clear that we were already in the beginning stages of a recession.
A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.
Anytime the central bank intervenes to pump trillions of dollars into the financial system, a bubble is created that must eventually deflate. We have seen the results of Alan Greenspan's excessively low interest rates: the housing bubble, the explosion of subprime loans and the subsequent collapse of the bubble, which took down numerous financial institutions. Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollars, allowing them to survive and compete with their better-managed peers.
This is nothing less than the creation of another bubble. By attempting to cushion the economy from the worst shocks of the housing bubble's collapse, the Federal Reserve has ensured that the ultimate correction of its flawed economic policies will be more severe than it otherwise would have been. Even with the massive interventions, unemployment is near 10% and likely to increase, foreigners are cutting back on purchases of Treasury debt and the Federal Reserve's balance sheet remains bloated at an unprecedented $2 trillion. Can anyone realistically argue that a few small upticks in a handful of economic indicators are a sign that the recession is over?
What is more likely happening is a repeat of the Great Depression. We might have up to a year or so of an economy growing just slightly above stagnation, followed by a drop in growth worse than anything we have seen in the past two years. As the housing market fails to return to any sense of normalcy, commercial real estate begins to collapse and manufacturers produce goods that cannot be purchased by debt-strapped consumers, the economy will falter. That will go on until we come to our senses and end this wasteful government spending.
Government intervention cannot lead to economic growth. Where does the money come from for Tarp (Treasury's program to buy bad bank paper), the stimulus handouts and the cash for clunkers? It can come only from taxpayers, from sales of Treasury debt or through the printing of new money. Paying for these programs out of tax revenues is pure redistribution; it takes money out of one person's pocket and gives it to someone else without creating any new wealth. Besides, tax revenues have fallen drastically as unemployment has risen, yet government spending continues to increase. As for Treasury debt, the Chinese and other foreign investors are more and more reluctant to buy it, denominated as it is in depreciating dollars.
The only remaining option is to have the Fed create new money out of thin air. This is inflation. Higher prices lead to a devalued dollar and a lower standard of living for Americans. The Fed has already overseen a 95% loss in the dollar's purchasing power since 1913. If we do not stop this profligate spending soon, we risk hyperinflation and seeing a 95% devaluation every year.
Ron Paul is a Republican congressman from Texas.
The large-scale government intervention in the economy is going to end badly.
A false recovery is under way. I am reminded of the outlook in 1930, when the experts were certain that the worst of the Depression was over and that recovery was just around the corner. The economy and stock market seemed to be recovering, and there was optimism that the recession, like many of those before it, would be over in a year or less. Instead, the interventionist policies of Hoover and Roosevelt caused the Depression to worsen, and the Dow Jones industrial average did not recover to 1929 levels until 1954. I fear that our stimulus and bailout programs have already done too much to prevent the economy from recovering in a natural manner and will result in yet another asset bubble.
Anytime the central bank intervenes to pump trillions of dollars into the financial system, a bubble is created that must eventually deflate. We have seen the results of Alan Greenspan's excessively low interest rates: the housing bubble, the explosion of subprime loans and the subsequent collapse of the bubble, which took down numerous financial institutions. Rather than allow the market to correct itself and clear away the worst excesses of the boom period, the Federal Reserve and the U.S. Treasury colluded to put taxpayers on the hook for trillions of dollars. Those banks and financial institutions that took on the largest risks and performed worst were rewarded with billions in taxpayer dollars, allowing them to survive and compete with their better-managed peers.
This is nothing less than the creation of another bubble. By attempting to cushion the economy from the worst shocks of the housing bubble's collapse, the Federal Reserve has ensured that the ultimate correction of its flawed economic policies will be more severe than it otherwise would have been. Even with the massive interventions, unemployment is near 10% and likely to increase, foreigners are cutting back on purchases of Treasury debt and the Federal Reserve's balance sheet remains bloated at an unprecedented $2 trillion. Can anyone realistically argue that a few small upticks in a handful of economic indicators are a sign that the recession is over?
What is more likely happening is a repeat of the Great Depression. We might have up to a year or so of an economy growing just slightly above stagnation, followed by a drop in growth worse than anything we have seen in the past two years. As the housing market fails to return to any sense of normalcy, commercial real estate begins to collapse and manufacturers produce goods that cannot be purchased by debt-strapped consumers, the economy will falter. That will go on until we come to our senses and end this wasteful government spending.
Government intervention cannot lead to economic growth. Where does the money come from for Tarp (Treasury's program to buy bad bank paper), the stimulus handouts and the cash for clunkers? It can come only from taxpayers, from sales of Treasury debt or through the printing of new money. Paying for these programs out of tax revenues is pure redistribution; it takes money out of one person's pocket and gives it to someone else without creating any new wealth. Besides, tax revenues have fallen drastically as unemployment has risen, yet government spending continues to increase. As for Treasury debt, the Chinese and other foreign investors are more and more reluctant to buy it, denominated as it is in depreciating dollars.
The only remaining option is to have the Fed create new money out of thin air. This is inflation. Higher prices lead to a devalued dollar and a lower standard of living for Americans. The Fed has already overseen a 95% loss in the dollar's purchasing power since 1913. If we do not stop this profligate spending soon, we risk hyperinflation and seeing a 95% devaluation every year.
Ron Paul is a Republican congressman from Texas.
Friday, October 23, 2009
BDIY:IND BALTIC DRY INDEX
DryShips website
Primarily Dry Bulk Shipping Stocks
DRYS, EXM, TBSI, EGLE, PRGN, OCNF, NMM, DSX, GNK, NM, DHT, SBLK, FREE, SB
Hybrid Shippers (Shipping Oil and other fuels as well as Dry Bulk)
DHT, FRO
Primarily Dry Bulk Shipping Stocks
DRYS, EXM, TBSI, EGLE, PRGN, OCNF, NMM, DSX, GNK, NM, DHT, SBLK, FREE, SB
Hybrid Shippers (Shipping Oil and other fuels as well as Dry Bulk)
DHT, FRO
Thursday, October 22, 2009
7 Reasons Gold Will Surpass $2,500 - And Inflation Isn’t One of Them
By Money Morning on October 21, 2009
We’ve all heard that inflation drives up gold prices. When inflation is on the rise, investors buy more gold to hedge their portfolios.
And, with all the government bailouts and stimulus packages, it’s hard to deny that inflation is coming. After all, the money supply has more than doubled since October.
Yet few people realize that inflation may be the least of the reasons why gold prices will push higher.
Since bottoming out in 2001, gold prices have risen by nearly 300% and have twice targeted the $1000 mark. And that’s happened in a relatively “inflation-free zone.”
There are other forces at work here. This report will show you exactly why inflation is only a small part of the gold story. And, we’ll identify the best ways to profit from the coming gold rush.
Gold Trend #1: Gold Mine Production is Decreasing.
Annual worldwide mine production of gold has decreased by 9.3% since 2001. Considering gold prices have nearly quadrupled since then, why isn’t more gold being produced? The answer is simple. Resources are being depleted and their quality is diminishing. And, when a discovery is made, it takes about 7-10 years to get a mine permitted and into production - making it difficult to quickly ramp up gold production.
Gold Trend #2: Gold is Getting Harder to Find.
Fewer and fewer large gold discoveries are being made every year. And the discoveries that are being made tend to be in more remote and less geopolitically attractive areas. Considering that the risks to opening any gold mine are considerable, mining companies just aren’t interested in mining in areas that have significant political and geographical drawbacks. As a result, miners are having difficulty replacing depleted resources.
Gold Trend #3: Investment Demand for Gold.
Large institutional investors, such as hedge and pension funds, are making large allocations to gold and gold shares. Individual investors are also getting in on the action, with gold exchange-traded funds (ETFs) gaining influence. SPDR Gold Trust (GLD: 103.745 0.00 0.00%), the largest physically backed ETF on the planet, is now the 6th biggest holder of gold bullion with more than 1000 tons. That is helping to facilitate and spread the ownership of gold by individuals. In fact, in the first half of 2009 investment demand for gold is up 150% over the first half of 2008, according to the World Gold Council.
Gold Trend #5: Push for Gold-backed Currencies.
As investors the world over lose faith in their government’s ability to contain the financial and economic crises, many are calling for gold backed currencies - much like the U.S. dollar was until the early 1970’s. Even Zimbabwe, which a year ago had hyperinflation running at 231 million percent annually, is now considering reintroducing its Zimbabwe dollar, but this time fully backed by assets, including gold. In order for this to happen, countries would have to purchase enough gold to back all their currency - putting extreme pressure on the gold supply.
Gold Trend #6: Asian Demand for Gold is Exploding.
Asia, with its more than two and a half billion people, has a major impact on investment demand. Asians have a long-standing cultural affinity for gold as a store of wealth. India is the world’s largest gold consumer. For the last 50 years, until 2009, the Chinese government has forbidden its citizens from owning gold. But now China is encouraging its citizens to buy silver - which automatically draws more attention to gold. Today, Chinese investors even have access to gold-linked checking accounts. As a result, demand for gold in mainland China is expected to triple in the next few years.
Gold Trend #7: Gold is in a Secular Bull Market.
Gold’s price has increased every single year since 2001. This is a clear signal that we are currently in the middle of a secular bull market for gold. A secular bull market typically last about 17 years and ends with a mania stage where investors throw the concept of supply and demand out the window and frantically invest in gold. We’ve seen this same pattern repeat itself over the last hundred years of investment history and we’re about to see a major run up in gold prices. The gold market is very small in relation to the currency, bond or stock markets, so when investors start to pile in, look out. Prices will go through the roof - making the tech and housing bubbles seem small in comparison.
How to Play the Gold Rally
There are a few ways to play the rise in gold prices. You can buy investments backed by gold or you can invest in gold miners themselves.
To play gold prices directly, invest in the SPDR Gold Trust (GLD: 103.745 0.00 0.00%) Each unit of this ETF represents 1/10th of an ounce of gold. It’s highly liquid, and provides you with the quickest and easiest way to get exposure to gold. It’s also the lowest risk option, without the storage costs associated with buying physical bullion.
Next up on the risk scale is the Market Vectors Gold Miners ETF (GDX: 47.39 0.00 0.00%). This investment vehicle tracks the world’s major gold and silver producers. While more volatile than GLD, the leverage offered based on the gold price and profitability makes this an attractive option. And you have the added benefit of owning some 30 precious metals producers all wrapped into one simple investment.
Barrick Gold Corporation (ABX: 38.10 0.00 0.00%) is the world’s largest gold miner. With lots of liquidity, it draws considerable interest, in particular from big money institutional investors. Keep in mind, ABX carries more risk than the two previous options, as you have exposure to a single company. But this gold mining behemoth is sure to pay off big as gold rises and eventually soars.
We’ve all heard that inflation drives up gold prices. When inflation is on the rise, investors buy more gold to hedge their portfolios.
And, with all the government bailouts and stimulus packages, it’s hard to deny that inflation is coming. After all, the money supply has more than doubled since October.
Yet few people realize that inflation may be the least of the reasons why gold prices will push higher.
Since bottoming out in 2001, gold prices have risen by nearly 300% and have twice targeted the $1000 mark. And that’s happened in a relatively “inflation-free zone.”
There are other forces at work here. This report will show you exactly why inflation is only a small part of the gold story. And, we’ll identify the best ways to profit from the coming gold rush.
Gold Trend #1: Gold Mine Production is Decreasing.
Annual worldwide mine production of gold has decreased by 9.3% since 2001. Considering gold prices have nearly quadrupled since then, why isn’t more gold being produced? The answer is simple. Resources are being depleted and their quality is diminishing. And, when a discovery is made, it takes about 7-10 years to get a mine permitted and into production - making it difficult to quickly ramp up gold production.
Fewer and fewer large gold discoveries are being made every year. And the discoveries that are being made tend to be in more remote and less geopolitically attractive areas. Considering that the risks to opening any gold mine are considerable, mining companies just aren’t interested in mining in areas that have significant political and geographical drawbacks. As a result, miners are having difficulty replacing depleted resources.
Gold Trend #3: Investment Demand for Gold.
Large institutional investors, such as hedge and pension funds, are making large allocations to gold and gold shares. Individual investors are also getting in on the action, with gold exchange-traded funds (ETFs) gaining influence. SPDR Gold Trust (GLD: 103.745 0.00 0.00%), the largest physically backed ETF on the planet, is now the 6th biggest holder of gold bullion with more than 1000 tons. That is helping to facilitate and spread the ownership of gold by individuals. In fact, in the first half of 2009 investment demand for gold is up 150% over the first half of 2008, according to the World Gold Council.
Gold Trend #4: Central Banks are Buying Gold.
The Central Bank Gold Agreement, originally signed in 2001 and recently renewed for another five years, limits the amount of gold European central banks - including the International Monetary Fund - can sell to 400 tons per year. This means that even if governments want to sell off their gold reserves, they can’t - further straining the supply of gold on the market. The U.S., the world’s largest holder of gold, is holding on to their stash as well. Some governments are going even further: Venezuela’s Finance Ministry now requires 70% of gold produced in the country to be sold domestically. At the same time, Russia, Ecuador, Mexico and the Philippines are all buying gold. And China has increased its reserves by a staggering 76%.Gold Trend #5: Push for Gold-backed Currencies.
As investors the world over lose faith in their government’s ability to contain the financial and economic crises, many are calling for gold backed currencies - much like the U.S. dollar was until the early 1970’s. Even Zimbabwe, which a year ago had hyperinflation running at 231 million percent annually, is now considering reintroducing its Zimbabwe dollar, but this time fully backed by assets, including gold. In order for this to happen, countries would have to purchase enough gold to back all their currency - putting extreme pressure on the gold supply.
Gold Trend #6: Asian Demand for Gold is Exploding.
Asia, with its more than two and a half billion people, has a major impact on investment demand. Asians have a long-standing cultural affinity for gold as a store of wealth. India is the world’s largest gold consumer. For the last 50 years, until 2009, the Chinese government has forbidden its citizens from owning gold. But now China is encouraging its citizens to buy silver - which automatically draws more attention to gold. Today, Chinese investors even have access to gold-linked checking accounts. As a result, demand for gold in mainland China is expected to triple in the next few years.
Gold Trend #7: Gold is in a Secular Bull Market.
Gold’s price has increased every single year since 2001. This is a clear signal that we are currently in the middle of a secular bull market for gold. A secular bull market typically last about 17 years and ends with a mania stage where investors throw the concept of supply and demand out the window and frantically invest in gold. We’ve seen this same pattern repeat itself over the last hundred years of investment history and we’re about to see a major run up in gold prices. The gold market is very small in relation to the currency, bond or stock markets, so when investors start to pile in, look out. Prices will go through the roof - making the tech and housing bubbles seem small in comparison.
There are a few ways to play the rise in gold prices. You can buy investments backed by gold or you can invest in gold miners themselves.
To play gold prices directly, invest in the SPDR Gold Trust (GLD: 103.745 0.00 0.00%) Each unit of this ETF represents 1/10th of an ounce of gold. It’s highly liquid, and provides you with the quickest and easiest way to get exposure to gold. It’s also the lowest risk option, without the storage costs associated with buying physical bullion.
Next up on the risk scale is the Market Vectors Gold Miners ETF (GDX: 47.39 0.00 0.00%). This investment vehicle tracks the world’s major gold and silver producers. While more volatile than GLD, the leverage offered based on the gold price and profitability makes this an attractive option. And you have the added benefit of owning some 30 precious metals producers all wrapped into one simple investment.
Barrick Gold Corporation (ABX: 38.10 0.00 0.00%) is the world’s largest gold miner. With lots of liquidity, it draws considerable interest, in particular from big money institutional investors. Keep in mind, ABX carries more risk than the two previous options, as you have exposure to a single company. But this gold mining behemoth is sure to pay off big as gold rises and eventually soars.
Saturday, October 17, 2009
The Crisis of Credit Visualized
This person is able to explain a complex finance CRISIS into simpler
context.... Genius! He is jonathan jarvis.com and currently designing for Google's Creative Lab.
The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.
context.... Genius! He is jonathan jarvis.com and currently designing for Google's Creative Lab.
The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.
Monday, October 5, 2009
The Truth About Jobs That No One Wants To Tell You
By Robert Reich on October 2, 2009 By Robert Reich
Unemployment will almost be certainly in double-digits next year - and may remain there for some time. And for every person who shows up as unemployed in the Bureau of Labor Statistics’ household survey, you can bet there’s another either too discouraged to look for work or working part time who’d rather have a full-time job or else taking home less pay than before (I’m in the last category, now that the University of California has instituted pay cuts). And there’s yet another person who’s more fearful that he or she will be next to lose a job.
In other words, ten percent unemployment really means twenty percent underemployment or anxious employment. All of which translates directly into late payments on mortgages, credit cards, auto and student loans, and loss of health insurance. It also means sleeplessness for tens of millions of Americans. And, of course, fewer purchases (more on this in a moment).
Unemployment of this magnitude and duration also translates into ugly politics, because fear and anxiety are fertile grounds for demagogues weilding the politics of resentment against immigrants, blacks, the poor, government leaders, business leaders, Jews, and other easy targets. It’s already started. Next year is a mid-term election. Be prepared for worse.
So why is unemployment and underemployment so high, and why is it likely to remain high for some time? Because, as noted, people who are worried about their jobs or have no jobs, and who are also trying to get out from under a pile of debt, are not going do a lot of shopping. And businesses that don’t have customers aren’t going do a lot of new investing. And foreign nations also suffering high unemployment aren’t going to buy a lot of our goods and services.
And without customers, companies won’t hire. They’ll cut payrolls instead.
Which brings us to the obvious question: Who’s going to buy the stuff we make or the services we provide, and therefore bring jobs back? There’s only one buyer left: The government.
Let me say this as clearly and forcefully as I can: The federal government should be spending even more than it already is on roads and bridges and schools and parks and everything else we need. It should make up for cutbacks at the state level, and then some. This is the only way to put Americans back to work. We did it during the Depression. It was called the WPA.
Yes, I know. Our government is already deep in debt. But let me tell you something: When one out of six Americans is unemployed or underemployed, this is no time to worry about the debt.
When I was a small boy my father told me that I and my kids and my grand-kids would be paying down the debt created by Franklin D. Roosevelt during the Depression and World War II. I didn’t even know what a debt was, but it kept me up at night.
My father was right about a lot of things, but he was wrong about this. America paid down FDR’s debt in the 1950s, when Americans went back to work, when the economy was growing again, and when our incomes grew, too. We paid taxes, and in a few years that FDR debt had shrunk to almost nothing.
You see? The most important thing right now is getting the jobs back, and getting the economy growing again.
People who now obsess about government debt have it backwards. The problem isn’t the debt. The problem is just the opposite. It’s that at a time like this, when consumers and businesses and exports can’t do it, government has to spend more to get Americans back to work and recharge the economy. Then - after people are working and the economy is growing - we can pay down that debt.
But if government doesn’t spend more right now and get Americans back to work, we could be out of work for years. And the debt will be with us even longer. And politics could get much uglier.
Unemployment will almost be certainly in double-digits next year - and may remain there for some time. And for every person who shows up as unemployed in the Bureau of Labor Statistics’ household survey, you can bet there’s another either too discouraged to look for work or working part time who’d rather have a full-time job or else taking home less pay than before (I’m in the last category, now that the University of California has instituted pay cuts). And there’s yet another person who’s more fearful that he or she will be next to lose a job.
In other words, ten percent unemployment really means twenty percent underemployment or anxious employment. All of which translates directly into late payments on mortgages, credit cards, auto and student loans, and loss of health insurance. It also means sleeplessness for tens of millions of Americans. And, of course, fewer purchases (more on this in a moment).
Unemployment of this magnitude and duration also translates into ugly politics, because fear and anxiety are fertile grounds for demagogues weilding the politics of resentment against immigrants, blacks, the poor, government leaders, business leaders, Jews, and other easy targets. It’s already started. Next year is a mid-term election. Be prepared for worse.
So why is unemployment and underemployment so high, and why is it likely to remain high for some time? Because, as noted, people who are worried about their jobs or have no jobs, and who are also trying to get out from under a pile of debt, are not going do a lot of shopping. And businesses that don’t have customers aren’t going do a lot of new investing. And foreign nations also suffering high unemployment aren’t going to buy a lot of our goods and services.
And without customers, companies won’t hire. They’ll cut payrolls instead.
Which brings us to the obvious question: Who’s going to buy the stuff we make or the services we provide, and therefore bring jobs back? There’s only one buyer left: The government.
Let me say this as clearly and forcefully as I can: The federal government should be spending even more than it already is on roads and bridges and schools and parks and everything else we need. It should make up for cutbacks at the state level, and then some. This is the only way to put Americans back to work. We did it during the Depression. It was called the WPA.
Yes, I know. Our government is already deep in debt. But let me tell you something: When one out of six Americans is unemployed or underemployed, this is no time to worry about the debt.
When I was a small boy my father told me that I and my kids and my grand-kids would be paying down the debt created by Franklin D. Roosevelt during the Depression and World War II. I didn’t even know what a debt was, but it kept me up at night.
My father was right about a lot of things, but he was wrong about this. America paid down FDR’s debt in the 1950s, when Americans went back to work, when the economy was growing again, and when our incomes grew, too. We paid taxes, and in a few years that FDR debt had shrunk to almost nothing.
You see? The most important thing right now is getting the jobs back, and getting the economy growing again.
People who now obsess about government debt have it backwards. The problem isn’t the debt. The problem is just the opposite. It’s that at a time like this, when consumers and businesses and exports can’t do it, government has to spend more to get Americans back to work and recharge the economy. Then - after people are working and the economy is growing - we can pay down that debt.
But if government doesn’t spend more right now and get Americans back to work, we could be out of work for years. And the debt will be with us even longer. And politics could get much uglier.
Sunday, September 27, 2009
Fed’s Strategy Reduces U.S. Bailout to $11.6 Trillion
Fed’s Strategy Reduces U.S. Bailout to $11.6 Trillion (Update2)
By Mark Pittman and Bob Ivry
Sept. 25 (Bloomberg) -- The Federal Reserve decided to keep pumping $1.25 trillion of new money into the mortgage market to focus on rescuing the U.S. economy as the financial system revives and banks ask for less help.
The Fed is allowing some of the 10 support programs it created or expanded after the credit crisis began in August 2007 to expire or shrink. That caused the first decline in the amount of money the U.S. has committed on behalf of taxpayers to end the recession, according to data compiled by Bloomberg.
The central bank has purchased $694 billion of mortgage- backed securities since January and plans to spend $556 billion more by April 2010 to keep interest rates down. The debt-buying is the biggest program in the Fed’s arsenal.
“The first thing the Fed had to do was stop the bleeding in the banking system,” said Richard Yamarone, director of economic research at Argus Research Corp. in New York. “Now that that seems to have been accomplished, they’re focusing on the economy by buying mortgage-backed securities.”
The purchases were scheduled to stop at the end of December. The Federal Open Market Committee decided on Sept. 23 to continue the program through the first quarter of next year and slow the pace of buying to “promote a smooth transition in markets,” the committee said in a statement. It also said the economy has “picked up.”
9.4 Percent Decline
The debt-buying pushed the average 30-year mortgage interest rate this week to 5.04 percent, its lowest since May, according to McLean, Virginia-based Freddie Mac. The debt is guaranteed by Freddie Mac and the other government-sponsored home-loan financiers, Fannie Mae and Ginnie Mae, both based in Washington.
The U.S. has lent, spent or guaranteed $11.6 trillion to bolster banks and fight the longest recession in 70 years, according to data compiled by Bloomberg.
That’s a 9.4 percent decline since March 31, when Bloomberg last calculated the total at $12.8 trillion.
The tally “ignores the fact that virtually all commitments are backed by assets,” Andrew S. Williams, a Treasury Department spokesman who had the same role at the Federal Reserve Bank of New York until earlier this year, said in an e- mail. “The Federal Reserve’s current ‘outlays’ are largely in the form of secured loans. The aggregate value of the collateral backing those loans exceeds the loan value. These are not ‘outlays.’”
Refused to Identify
Spokesmen Calvin A. Mitchell of the New York Fed and David Skidmore of the Fed in Washington declined to comment.
The Fed has refused to identify the collateral backing its loans. Bloomberg News parent Bloomberg LP, the New York-based company majority-owned by Mayor Michael Bloomberg, sued the central bank in November to force it to provide the information. U.S. District Judge Loretta A. Preska gave the Fed until Sept. 30 to appeal her decision requiring more disclosure about the financial institutions that have benefited.
The Standard & Poor’s 500 Financials Index has risen 140 percent since its low on March 6, including a 174 percent increase in share price for JPMorgan Chase & Co. to $43.65 and a 137 percent jump for Goldman Sachs Group Inc. to $179.50.
Among the U.S. programs that have expired is the Treasury guarantee of money market mutual fund deposits, instituted a year ago to stem an investor run the week after Lehman Brothers Holdings Inc.’s collapse. The department said it collected $1.2 billion in fees from funds before the effort concluded on Sept. 18 and never paid out a claim.
Gas Guzzlers
The $3 billion “cash for clunkers,” which gave people rebates for trading in gas-guzzling vehicles, ended in August after 700,000 vehicles were sold, according to the U.S. Department of Transportation.
The Fed’s Money Market Investor Funding Facility, or MMIFF, is slated to be closed on Oct. 30, and four other Fed programs with a total limit of $2.5 trillion are scheduled to expire in February. Others have been cut back.
The central bank said Sept. 24 it will reduce the Term Securities Lending Facility to $50 billion from $75 billion and the Term Auction Facility, once $900 billion, will shrink to $50 billion. Support for commercial paper, short-term loans that corporations and banks use to pay everyday expenses, has fallen to $1.2 trillion as the market fell from a one-year peak of $1.8 trillion in January.
64 Percent Higher
Banks have repaid about $70.6 billion of the $204.6 billion in direct aid extended through the Capital Purchase Program of the Troubled Asset Relief Program, or TARP. Congress created the $700 billion fund last October.
The $70.6 billion includes $25 billion from New York-based JPMorgan Chase, one of the biggest recipients, and $28 million from Novato, California-based Bank of Marin Bancorp, one of the smallest, according to the Treasury and regulatory filings.
“Because financial conditions have started to improve, Treasury has already begun the process of exiting from some emergency programs,” the TARP administrator, Herb Allison, told the Senate Banking Committee Sept. 24. “It will, however, be some time before all CPP participants have fully extinguished their obligations to the taxpayers.”
The Federal Deposit Insurance Corp. said its Temporary Liquidity Guarantee Program has generated more than $9 billion in fees.
The combined commitments of the Fed and government agencies are 57 percent higher than on Nov. 24, when Bloomberg’s first tally was $7.4 trillion.
“We’re not self-sustaining yet,” William O’Donnell, head of Treasury strategy for RBS Securities Inc. in Stamford, Connecticut, said in an interview.
===========================================================
--- Amounts (Billions)--- Limit Current
===========================================================
Total $11,563.65 $3,025.27
-----------------------------------------------------------
Federal ReserveTotal $5,870.65 $1,590.11
Primary Credit Discount $110.74 $28.51
Secondary Credit $1.00 $0.58
Primary dealer and others $147.00 $0.00
ABCP Liquidity $145.89 $0.08
AIG Credit $60.00 $38.81
Commercial Paper program $1,200.00 $42.44
Maiden Lane (Bear Stearns assets) $29.50 $26.19
Maiden Lane II (AIG assets) $22.50 $14.66
Maiden Lane III (AIG assets) $30.00 $20.55
Term Securities Lending $75.00 $0.00
Term Auction Facility $375.00 $196.02
Securities lending overnight $10.42 $9.25
Term Asset-Backed Loans (TALF) $1,000.00 $41.88
Currency Swaps/Other Assets $606.00 $59.12
GSE Debt Purchases $200.00 $129.21
GSE Mortgage-Backed Securities $1,250.00 $693.60
Citigroup Bailout Fed Portion $220.40 $0.00
Bank of America Bailout $87.20 $0.00
Commitment to Buy Treasuries $300.00 $289.22
---------------------------------------------------------------
Treasury Total $2,909.50 $1,075.91
TARP $700.00 $372.43
Tax Break for Banks $29.00 $29.00
Stimulus Package (Bush) $168.00 $168.00
Stimulus II (Obama) $787.00 $303.60
Treasury Exchange Stabilization $50.00 $0.00
Student Loan Purchases $60.00 $0.00
Citigroup Bailout Treasury $5.00 $0.00
Bank of America Bailout Treasury $7.50 $0.00
Support for Fannie/Freddie $400.00 $200.00
Line of Credit for FDIC $500.00 $0.00
Treasury Commitment to TALF $100.00 $0.00
Treasury Commitment to PPIP $100.00 $0.00
Cash for Clunkers $3.00 $2.88
------------------------------------------------------------
FDIC Total $2,477.50 $356.00
Public-Private Investment (PPIP) $1,000.00 $0.00
Temporary Liquidity Guarantees* $1,400.00 $301.00
Guaranteeing GE Debt $65.00 $55.00
Citigroup Bailout, FDIC Share $10.00 $0.00
Bank of America Bailout, FDIC Share $2.50 $0.00
------------------------------------------------------------
HUD Total $306.00 $3.25
Hope for Homeowners (FHA) $300.00 $3.20
Neighborhood Stabilization (FHA) $6.00 $0.05
------------------------------------------------------------
* The program has generated $9.3 billion in income, according to the agency.
Glossary:
ABCP -- Asset-backed commercial paper AIG -- American International Group Inc.
FDIC -- Federal Deposit Insurance Corp.
FHA -- Federal Housing Administration, a division of HUD
GE -- General Electric Co.
GSE -- Government-sponsored enterprises (Fannie Mae, Freddie Mac and Ginnie Mae)
HUD -- U.S. Department of Housing and Urban Development
TARP -- Troubled Asset Relief Program
Breakout of TARP funds:
==========================================================
--- Amounts (Billions)---
Outlay Returned
==========================================================
Total $447.76 $75.33
----------------------------------------------------------
Capital Purchase Program $204.55 $70.56
General Motors, Chrysler $79.97 $2.14
American International Group $69.84 $0.00
Making Home Affordable Program $23.40 $1.13
Targeted Investment Bank of America $20.00 $0.00
Targeted Investment Citigroup $20.00 $0.00
Term Asset-Backed Loan (TALF) $20.00 $0.00
Citigroup Bailout $5.00 $0.00
Auto Suppliers $5.00 $1.50
To contact the reporters on this story: Mark Pittman in New York at mpittman@bloomberg.net; Bob Ivry in New York at bivry@bloomberg.net.
Last Updated: September 25, 2009 16:39 EDT
By Mark Pittman and Bob Ivry
Sept. 25 (Bloomberg) -- The Federal Reserve decided to keep pumping $1.25 trillion of new money into the mortgage market to focus on rescuing the U.S. economy as the financial system revives and banks ask for less help.
The Fed is allowing some of the 10 support programs it created or expanded after the credit crisis began in August 2007 to expire or shrink. That caused the first decline in the amount of money the U.S. has committed on behalf of taxpayers to end the recession, according to data compiled by Bloomberg.
The central bank has purchased $694 billion of mortgage- backed securities since January and plans to spend $556 billion more by April 2010 to keep interest rates down. The debt-buying is the biggest program in the Fed’s arsenal.
“The first thing the Fed had to do was stop the bleeding in the banking system,” said Richard Yamarone, director of economic research at Argus Research Corp. in New York. “Now that that seems to have been accomplished, they’re focusing on the economy by buying mortgage-backed securities.”
The purchases were scheduled to stop at the end of December. The Federal Open Market Committee decided on Sept. 23 to continue the program through the first quarter of next year and slow the pace of buying to “promote a smooth transition in markets,” the committee said in a statement. It also said the economy has “picked up.”
9.4 Percent Decline
The debt-buying pushed the average 30-year mortgage interest rate this week to 5.04 percent, its lowest since May, according to McLean, Virginia-based Freddie Mac. The debt is guaranteed by Freddie Mac and the other government-sponsored home-loan financiers, Fannie Mae and Ginnie Mae, both based in Washington.
The U.S. has lent, spent or guaranteed $11.6 trillion to bolster banks and fight the longest recession in 70 years, according to data compiled by Bloomberg.
That’s a 9.4 percent decline since March 31, when Bloomberg last calculated the total at $12.8 trillion.
The tally “ignores the fact that virtually all commitments are backed by assets,” Andrew S. Williams, a Treasury Department spokesman who had the same role at the Federal Reserve Bank of New York until earlier this year, said in an e- mail. “The Federal Reserve’s current ‘outlays’ are largely in the form of secured loans. The aggregate value of the collateral backing those loans exceeds the loan value. These are not ‘outlays.’”
Refused to Identify
Spokesmen Calvin A. Mitchell of the New York Fed and David Skidmore of the Fed in Washington declined to comment.
The Fed has refused to identify the collateral backing its loans. Bloomberg News parent Bloomberg LP, the New York-based company majority-owned by Mayor Michael Bloomberg, sued the central bank in November to force it to provide the information. U.S. District Judge Loretta A. Preska gave the Fed until Sept. 30 to appeal her decision requiring more disclosure about the financial institutions that have benefited.
The Standard & Poor’s 500 Financials Index has risen 140 percent since its low on March 6, including a 174 percent increase in share price for JPMorgan Chase & Co. to $43.65 and a 137 percent jump for Goldman Sachs Group Inc. to $179.50.
Among the U.S. programs that have expired is the Treasury guarantee of money market mutual fund deposits, instituted a year ago to stem an investor run the week after Lehman Brothers Holdings Inc.’s collapse. The department said it collected $1.2 billion in fees from funds before the effort concluded on Sept. 18 and never paid out a claim.
Gas Guzzlers
The $3 billion “cash for clunkers,” which gave people rebates for trading in gas-guzzling vehicles, ended in August after 700,000 vehicles were sold, according to the U.S. Department of Transportation.
The Fed’s Money Market Investor Funding Facility, or MMIFF, is slated to be closed on Oct. 30, and four other Fed programs with a total limit of $2.5 trillion are scheduled to expire in February. Others have been cut back.
The central bank said Sept. 24 it will reduce the Term Securities Lending Facility to $50 billion from $75 billion and the Term Auction Facility, once $900 billion, will shrink to $50 billion. Support for commercial paper, short-term loans that corporations and banks use to pay everyday expenses, has fallen to $1.2 trillion as the market fell from a one-year peak of $1.8 trillion in January.
64 Percent Higher
Banks have repaid about $70.6 billion of the $204.6 billion in direct aid extended through the Capital Purchase Program of the Troubled Asset Relief Program, or TARP. Congress created the $700 billion fund last October.
The $70.6 billion includes $25 billion from New York-based JPMorgan Chase, one of the biggest recipients, and $28 million from Novato, California-based Bank of Marin Bancorp, one of the smallest, according to the Treasury and regulatory filings.
“Because financial conditions have started to improve, Treasury has already begun the process of exiting from some emergency programs,” the TARP administrator, Herb Allison, told the Senate Banking Committee Sept. 24. “It will, however, be some time before all CPP participants have fully extinguished their obligations to the taxpayers.”
The Federal Deposit Insurance Corp. said its Temporary Liquidity Guarantee Program has generated more than $9 billion in fees.
The combined commitments of the Fed and government agencies are 57 percent higher than on Nov. 24, when Bloomberg’s first tally was $7.4 trillion.
“We’re not self-sustaining yet,” William O’Donnell, head of Treasury strategy for RBS Securities Inc. in Stamford, Connecticut, said in an interview.
===========================================================
--- Amounts (Billions)--- Limit Current
===========================================================
Total $11,563.65 $3,025.27
-----------------------------------------------------------
Federal ReserveTotal $5,870.65 $1,590.11
Primary Credit Discount $110.74 $28.51
Secondary Credit $1.00 $0.58
Primary dealer and others $147.00 $0.00
ABCP Liquidity $145.89 $0.08
AIG Credit $60.00 $38.81
Commercial Paper program $1,200.00 $42.44
Maiden Lane (Bear Stearns assets) $29.50 $26.19
Maiden Lane II (AIG assets) $22.50 $14.66
Maiden Lane III (AIG assets) $30.00 $20.55
Term Securities Lending $75.00 $0.00
Term Auction Facility $375.00 $196.02
Securities lending overnight $10.42 $9.25
Term Asset-Backed Loans (TALF) $1,000.00 $41.88
Currency Swaps/Other Assets $606.00 $59.12
GSE Debt Purchases $200.00 $129.21
GSE Mortgage-Backed Securities $1,250.00 $693.60
Citigroup Bailout Fed Portion $220.40 $0.00
Bank of America Bailout $87.20 $0.00
Commitment to Buy Treasuries $300.00 $289.22
---------------------------------------------------------------
Treasury Total $2,909.50 $1,075.91
TARP $700.00 $372.43
Tax Break for Banks $29.00 $29.00
Stimulus Package (Bush) $168.00 $168.00
Stimulus II (Obama) $787.00 $303.60
Treasury Exchange Stabilization $50.00 $0.00
Student Loan Purchases $60.00 $0.00
Citigroup Bailout Treasury $5.00 $0.00
Bank of America Bailout Treasury $7.50 $0.00
Support for Fannie/Freddie $400.00 $200.00
Line of Credit for FDIC $500.00 $0.00
Treasury Commitment to TALF $100.00 $0.00
Treasury Commitment to PPIP $100.00 $0.00
Cash for Clunkers $3.00 $2.88
------------------------------------------------------------
FDIC Total $2,477.50 $356.00
Public-Private Investment (PPIP) $1,000.00 $0.00
Temporary Liquidity Guarantees* $1,400.00 $301.00
Guaranteeing GE Debt $65.00 $55.00
Citigroup Bailout, FDIC Share $10.00 $0.00
Bank of America Bailout, FDIC Share $2.50 $0.00
------------------------------------------------------------
HUD Total $306.00 $3.25
Hope for Homeowners (FHA) $300.00 $3.20
Neighborhood Stabilization (FHA) $6.00 $0.05
------------------------------------------------------------
* The program has generated $9.3 billion in income, according to the agency.
Glossary:
ABCP -- Asset-backed commercial paper AIG -- American International Group Inc.
FDIC -- Federal Deposit Insurance Corp.
FHA -- Federal Housing Administration, a division of HUD
GE -- General Electric Co.
GSE -- Government-sponsored enterprises (Fannie Mae, Freddie Mac and Ginnie Mae)
HUD -- U.S. Department of Housing and Urban Development
TARP -- Troubled Asset Relief Program
Breakout of TARP funds:
==========================================================
--- Amounts (Billions)---
Outlay Returned
==========================================================
Total $447.76 $75.33
----------------------------------------------------------
Capital Purchase Program $204.55 $70.56
General Motors, Chrysler $79.97 $2.14
American International Group $69.84 $0.00
Making Home Affordable Program $23.40 $1.13
Targeted Investment Bank of America $20.00 $0.00
Targeted Investment Citigroup $20.00 $0.00
Term Asset-Backed Loan (TALF) $20.00 $0.00
Citigroup Bailout $5.00 $0.00
Auto Suppliers $5.00 $1.50
To contact the reporters on this story: Mark Pittman in New York at mpittman@bloomberg.net; Bob Ivry in New York at bivry@bloomberg.net.
Last Updated: September 25, 2009 16:39 EDT
FDIC Is Broke, Taxpayers at Risk, Bair Muses
FDIC Is Broke, Taxpayers at Risk, Bair Muses: Jonathan Weil
Sept. 24 (Bloomberg) -- The FDIC’s insurance fund is going broke, and Sheila Bair is wondering aloud about how to replenish it. This means one thing for taxpayers: Watch your wallets.
Bair, the Federal Deposit Insurance Corp.’s chairman since 2006, says the agency has many options. One way to boost its coffers, now running low after a surge in bank failures, would be to charge banks higher premiums. It could make them pay future assessments in advance. Alternatively, the FDIC could borrow money from the banks it regulates. Or it could borrow from the Treasury, where it has a $500 billion line of credit.
“There’s a philosophical question about the Treasury credit line, whether that is there for losses that we know we will have, or whether it’s there for unexpected emergencies,” Bair said Sept. 18 at a Georgetown University conference in Washington. “This is really a debate for Washington and for banks,” she added.
Far be it from me to intrude on this closed-circuit conversation. The question Bair posed should be a no-brainer. Borrowing taxpayer money to bail out the FDIC should be an option of last resort reserved for unforeseen emergencies. That the agency would consider this now underscores how dire its financial condition has become.
Whatever path it chooses, we shouldn’t lose sight of this: The FDIC has been mismanaged, and its credibility as a regulator is in tatters. Its insurance fund wouldn’t be in this position today if the agency had been run well.
Flipping Out
Bair’s comments last week reminded me of a year-old article by Bloomberg News reporter David Evans, who wrote that the FDIC soon could run out of money and might need a taxpayer bailout by the Treasury Department. Most revealing was the FDIC’s reaction. It flipped out.
The day the story ran, the agency released an open letter to Bloomberg from a spokesman, Andrew Gray. He said the piece “does a serious disservice to your organization and your readers by painting a skewed picture of the FDIC insurance fund.”
Gray said “the insurance fund is in a strong financial position to weather a significant upsurge in bank failures” and that he did not foresee “that taxpayers may have to foot the bill for a ‘bailout.’” He said the fund “is 100 percent industry backed,” and “our ability to raise premiums essentially means that the capital of the entire banking industry -- that’s $1.3 trillion -- is available for support.”
Tapping Capital
If needed, he said, the FDIC could borrow from the Treasury, noting that the funds by law would have to “be paid back from industry assessments.” He stressed the FDIC had done this only once. It happened in the early 1990s, and the money was repaid with interest in less than two years.
Gray told me this week that he stands by his earlier remarks. His notion that the FDIC could tap the capital of the entire banking industry still baffles me. While hypothetically this might be true, I doubt all $1.3 trillion would be available in any practical sense.
The FDIC said its insurance fund’s assets exceeded liabilities by $10.4 billion, a mere 0.22 percent of insured deposits, as of June 30. The liabilities included $32 billion of reserves the FDIC had set aside to cover bank failures that it believed were likely to occur during the next 12 months.
As recently as March 31, 2008, the FDIC had earmarked just $583 million of reserves for future failures. This was after the rest of the financial world already knew we were in a crisis. By the end of 2008, it had boosted these reserves to $24 billion.
Projected Losses
The balance-sheet reserves don’t capture all the insurance fund’s anticipated losses. In May, the FDIC said it was projecting $70 billion of losses during the next five years due to bank failures. The agency said it expects most of those collapses to occur in 2009 and 2010.
The FDIC’s problem is that it didn’t collect enough revenue over the years to cover today’s losses. The blame lies partly with Congress. Until the law was changed in 2006, the FDIC was barred from charging premiums to banks that it classified as well-capitalized and well-managed. Consequently, the vast majority of banks weren’t paying anything for deposit insurance.
Of course, we now know it means nothing when the FDIC or any other regulator labels a bank “well-capitalized.” Most banks that failed during this crisis were considered well- capitalized just before their failure. After the law changed, the FDIC still didn’t charge enough premiums.
So far this year, 94 banks have been shut, the fastest pace in almost two decades. Hundreds of others are in trouble. The FDIC said 416 banks were on its “problem” list, a 15-year high, as of June 30. That was up from 305 three months earlier.
Regardless of the law’s requirements, if the FDIC starts tapping its credit line at the Treasury, there can be no assurance it would be able to pay back all the money through future assessments on banks. That’s why it should be reluctant to borrow from taxpayers now, even though the banking industry whines that it can’t afford any short-term cost increases.
At the rate it’s going, though, the FDIC may not have a choice much longer. Perhaps Bair and the FDIC someday might see fit to deliver a full account of how the agency managed to mess itself up this badly. The country deserves an explanation.
(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net
Last Updated: September 23, 2009 21:00 EDT
Sept. 24 (Bloomberg) -- The FDIC’s insurance fund is going broke, and Sheila Bair is wondering aloud about how to replenish it. This means one thing for taxpayers: Watch your wallets.
Bair, the Federal Deposit Insurance Corp.’s chairman since 2006, says the agency has many options. One way to boost its coffers, now running low after a surge in bank failures, would be to charge banks higher premiums. It could make them pay future assessments in advance. Alternatively, the FDIC could borrow money from the banks it regulates. Or it could borrow from the Treasury, where it has a $500 billion line of credit.
“There’s a philosophical question about the Treasury credit line, whether that is there for losses that we know we will have, or whether it’s there for unexpected emergencies,” Bair said Sept. 18 at a Georgetown University conference in Washington. “This is really a debate for Washington and for banks,” she added.
Far be it from me to intrude on this closed-circuit conversation. The question Bair posed should be a no-brainer. Borrowing taxpayer money to bail out the FDIC should be an option of last resort reserved for unforeseen emergencies. That the agency would consider this now underscores how dire its financial condition has become.
Whatever path it chooses, we shouldn’t lose sight of this: The FDIC has been mismanaged, and its credibility as a regulator is in tatters. Its insurance fund wouldn’t be in this position today if the agency had been run well.
Flipping Out
Bair’s comments last week reminded me of a year-old article by Bloomberg News reporter David Evans, who wrote that the FDIC soon could run out of money and might need a taxpayer bailout by the Treasury Department. Most revealing was the FDIC’s reaction. It flipped out.
The day the story ran, the agency released an open letter to Bloomberg from a spokesman, Andrew Gray. He said the piece “does a serious disservice to your organization and your readers by painting a skewed picture of the FDIC insurance fund.”
Gray said “the insurance fund is in a strong financial position to weather a significant upsurge in bank failures” and that he did not foresee “that taxpayers may have to foot the bill for a ‘bailout.’” He said the fund “is 100 percent industry backed,” and “our ability to raise premiums essentially means that the capital of the entire banking industry -- that’s $1.3 trillion -- is available for support.”
Tapping Capital
If needed, he said, the FDIC could borrow from the Treasury, noting that the funds by law would have to “be paid back from industry assessments.” He stressed the FDIC had done this only once. It happened in the early 1990s, and the money was repaid with interest in less than two years.
Gray told me this week that he stands by his earlier remarks. His notion that the FDIC could tap the capital of the entire banking industry still baffles me. While hypothetically this might be true, I doubt all $1.3 trillion would be available in any practical sense.
The FDIC said its insurance fund’s assets exceeded liabilities by $10.4 billion, a mere 0.22 percent of insured deposits, as of June 30. The liabilities included $32 billion of reserves the FDIC had set aside to cover bank failures that it believed were likely to occur during the next 12 months.
As recently as March 31, 2008, the FDIC had earmarked just $583 million of reserves for future failures. This was after the rest of the financial world already knew we were in a crisis. By the end of 2008, it had boosted these reserves to $24 billion.
Projected Losses
The balance-sheet reserves don’t capture all the insurance fund’s anticipated losses. In May, the FDIC said it was projecting $70 billion of losses during the next five years due to bank failures. The agency said it expects most of those collapses to occur in 2009 and 2010.
The FDIC’s problem is that it didn’t collect enough revenue over the years to cover today’s losses. The blame lies partly with Congress. Until the law was changed in 2006, the FDIC was barred from charging premiums to banks that it classified as well-capitalized and well-managed. Consequently, the vast majority of banks weren’t paying anything for deposit insurance.
Of course, we now know it means nothing when the FDIC or any other regulator labels a bank “well-capitalized.” Most banks that failed during this crisis were considered well- capitalized just before their failure. After the law changed, the FDIC still didn’t charge enough premiums.
So far this year, 94 banks have been shut, the fastest pace in almost two decades. Hundreds of others are in trouble. The FDIC said 416 banks were on its “problem” list, a 15-year high, as of June 30. That was up from 305 three months earlier.
Regardless of the law’s requirements, if the FDIC starts tapping its credit line at the Treasury, there can be no assurance it would be able to pay back all the money through future assessments on banks. That’s why it should be reluctant to borrow from taxpayers now, even though the banking industry whines that it can’t afford any short-term cost increases.
At the rate it’s going, though, the FDIC may not have a choice much longer. Perhaps Bair and the FDIC someday might see fit to deliver a full account of how the agency managed to mess itself up this badly. The country deserves an explanation.
(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net
Last Updated: September 23, 2009 21:00 EDT
Saturday, September 19, 2009
Friday, September 18, 2009
Alan Grayson: Is Anyone Minding the Store at the Federal Reserve?
Alan Mark Grayson (born March 13, 1958 in Bronx, New York) is the Democratic Congressman in Florida's 8th congressional district. The district includes just over half of Orlando, as well as Celebration, Walt Disney World and part of Ocala. He defeated four-term incumbent Republican Ric Keller in the 2008 congressional election. I can see there is a lot talking but any action done...? I seriously hope there is...
Friday’s Food For Fear
Interesting article from my mentor... (pls click on title to re-direct)
RESPECT him...
Gerald Celente : Revolution next for U.S.
Extract from wikipedia:- Gerald Celente (born November 29, 1946) is a United States trend forecaster,publisher of the Trends Journal, business consultant and author who makes predictions about the global financial markets and other events of historical importance. An article in the Washington Times has claimed "Celente's accurate forecasts include the 1987 stock market crash, the collapse of the Soviet Union in 1991, the 1997 Asian currency crash" and "the 2007 subprime mortgage scandal." His forecasts since 1993 have included predictions about terrorism, economic collapses and war. More recent forecasts involve fascism in the United States, food riots and tax revolts. Celente has long predicted global anti-Americanism, a failing economy and immigration woes in the US. In December 2007 Celente wrote, "Failing banks, busted brokerages, toppled corporate giants, bankrupt cities, states in default, foreign creditors cashing out of US securities ... whatever the spark, the stage is set for panic in the streets" and "Just as the Twin Towers collapsed from the top down, so too will the US economy ... when the giant firms fall, they’ll crush the man on the street." He has also predicted tax revolts. In November 2008 Celente appeared on Fox Business Network and predicted economic depression, tax rebellions and food riots in the United States by 2012. Celente also predicted an "economic 9/11" and a "panic of 2008." In 2009 Celente predicted turmoil which he described as "Obamageddon" and he was a popular guest on conservative cable-TV shows such as Fox News Sunday and Glenn Beck's news program. In April 2009 Celente wrote, "Wall Street controls our financial lives; the media manipulates our minds. These systems cannot be changed from within. There is no alternative. Without a revolution, these institutions will bankrupt the country, keep fighting failed wars, start new ones, and hold us in perpetual intellectual subjugation."He appeared on the Fox/Glenn Beck show and criticized the US stimulus plan, calling government controlled capitalism "fascism" and saying shopping malls in the US would become "ghost malls."Celente has said, "smaller communities, the smaller groups, the smaller states, the more self-sustaining communities, will 'weather the crisis in style' as big cities and hypertrophic suburbias descend into misery and conflict," and forecasts "a downsizing of America."
10 Small Caps With High “Insider Ownership”
By Marc Norton on September 16, 2009 More Posts By Marc Norton Author's Website
All 10 stocks mentioned below offer double digit rates of return on equity as well as assets.
ROE is a corporations measurement of how profitable the company is with the money shareholders have invested.
ROA shows how efficient management is at using its assets to generate earnings. All ten are trading at reasonable P/E ratios.
All 10 mentioned have current ratios above 1.9, any thing above 1.5 shows that the company is capable at paying back short term debt. All 10 have a large inside ownership with modest to low debt and free cash flow, with each paying a dividend.
* Deep Value Investor Seth Klarman of The Baupost Group holds 8.49 million shares of BreitBurn Energy which accounts for over 16% of the stock.
Tuesday, September 15, 2009
Monday, August 10, 2009
Sooner Rather Than Later
Posted by Conrad June 12, 2009 http://www.conradalvinlim.com/?p=1103
You enter a trade. It goes well for the first few moments. Then without warning, it turns and goes the wrong way! Horror of horrors! Now in the heat of the moment, you battle your wits for the best decision to make as the trade gets worse … cut now? … or wait a while more?
The same thing happened last month. You decided to cut your losses fast. And as soon as you did, the trade turned around and went on to be a big winner had you not cut and run.
- “Why didn’t you wait?”
- “Why were you so hasty?”
Then last week, the same thing happened again and being smarter, you decided to hold out. The trade continued losing. The longer you held it, the more you lost. But you knew then that as soon as you cut your loss, it would have turned around. So you held on and the losses kept mounting.
- “Why didn’t I cut sooner?”
- “Why did I hold on for so long?”
By the time you made that cut, the loss was insurmountable. And the trade turned around right after the cut. Let’s resign ourselves to one fact; Whatever the decision, it will always be the wrong one. So a simple lesson in this is that if we are going to make a decision, it WILL always be the wrong one. Cutting losses fast will return the trade. Cutting too late will continue the trend. What ever you decide, the market is going to take the mickey out of you. So to overcome this dilemma, ask yourself a simple question: “Is it better to make the wrong decision sooner or later?” The answer is obvious, isn’t it? I don’t know why anyone, in their right mind, would want to prolong an agony. If any decision you make is going to be the wrong one, then get it over and done with it quickly. Here’s another line of logic … You know that the moment you cut, the trade will return. So why don’t you cut it quickly and be ready for another entry as soon as the trade returns? (okay, that is speculative … but it works for the psychology!) At least it is obviously better than running the losses deeper. Likewise, you know that you are always going to take profit too early. So what can you do? Answer: Make the wrong decision early because making it too late will surely eat away your profits or could even end up with profits becoming losses. But in profit taking, you do have the advantage of taking some profit and leaving some to be greedy. It is always a good way to manage your profits. Take it when you have it but do it in stages. For example, if you have 10 lots long and they’re making some money, take half off the table when you reach your time/profit target. Let the remaining five lots run. The worst that can happen now is you can still get out at break-even if the trade turns against you. If the 5 remaining lots continue the profitable trend, when the trade hits a resistance, or if it stalls, take three more lots of the table and see what happens to the last two. At this point in time, you’ll have no fear and nothing but greed to manage. Should the remaining two lots reverse, your worst case scenario is that you can still get out at breakeven on those two lots and still get to keep the profits of the first eight lots. In a best case scenario, you are now in a position to put on a trailing stop and let the profits of the last two run to the sky. So avoid procrastinating on your trading decision. Make it quick, make it sensible and make it happen … make it sooner and never later. Moral of the story is that in Trading, it is NOT “better late than never” because in Trading, late is as good as never.
Sunday, August 9, 2009
A Stock Market Crash Is Coming...?
By KhronoStock on August 7, 2009 More Posts By KhronoStock Author's Website
A lot of commentators have begun heralding a new bull market in stocks. Day after day, I hear that March was THE bottom, that the next bull market has begun, and that anyone betting on another collapse is a moron.
These claims are not only wrong, they are completely misleading and should be depicted for what they are: nonsensical hype from sources with conflicted interests - folks whose jobs and income stem largely from people remaining bullish.
More often than not, these are the same guys who claimed that Bear Stearns marked the end of the Financial Crisis (how’d that work out?) and that the Federal Reserve can pump our way back into a bull market (how’s that working out?).
The reason this is entirely wrong is because this recession is not your average run of the mill excess inventory recession: the kind of economic contraction we’ve experienced post-WWII.
No, this is a DE-flationary debt collapse, a bursting of a 30-year credit bubble that papered over enormous drops in real incomes, standards of living, and financial stability. The private sector hit a point of total debt saturation in 2007
This recession so far has been the first taste of DE-flation the US has experienced since the ‘30s. Comparing it to every other post-WWII recession is like comparing apples and oranges. A debt bubble cannot be re-flated by issuing more debt. A second-grader can understand this. I don’t know why guys with PhDs, alleged experts, and the like don’t get it.
For 30 years, our economy grew by borrowing from the future. I mean that the US’s economic growth was funded largely by the use of credit: borrowings that would be paid back down the road.
In simple terms, the economy grew based on imaginary, not REAL demand. We pulled forward future sales of cars, TVs, homes, and the like. By using credit, we bought things NOW, that we would have normally bought LATER. This pulled future sales, future corporate earnings, future incomes, and future economic growth to the NOW through the ‘70s, ‘80s, and ‘90s.
So instead of having a safe, annual rate of consumer spending growth (say 4-5%), we saw double digit rates of growth: for example, between 1980 and 1990, credit card spending increased more than five-fold while average household credit card balances quadrupled. That’s NOT normal.
This led to the single largest debt bubble in history ($49 trillion in private sector debt and $50+ trillion in public sector debt). And a debt bubble can continue until you can no longer meet debt payments. The private sector hit its “debt wall” in 2007. The public sector continues to grow its debts, creating an even larger bubble that will have even worse consequences.
Now, as you know, there are only two ways of dealing with a debt problem:
1) Paying it off
2) Defaulting.
The US consumer has begun both. From February to May of this year we paid off $45 billion in credit card debt. Consumer credit contracted $3.3 billion in May, the fourth consecutive monthly decline (this makes our current credit contraction the longest running since 1991).
And we’re just getting started…
Total consumer debt at the bubble’s peak was $2.57 trillion (the other $46 trillion was corporate). So the fact we’ve paid off about $50 billion of this means Joe America has a LOT more (98%) debt to pay back and default on before he’s finished de-leveraging his balance sheet.
Folks, we’ve got a long, LONG ways to go before this crisis and Crash are over. Anyone who’s telling you the bear market is over either isn’t looking at the data or is basing their analysis on “a gut feeling” or some other nonsense. They’re all going to get destroyed this fall.
Above, we detailed the difference between this current economic contraction, and your usual run of the mill plain vanilla recessions. We also went over the MASSIVE consumer credit contraction that needs to occur before American households have finished de-leveraging.
Now, we’re detailing why stocks will crash this coming fall. As you know, the media is rife with folks calling the end of the recession and the beginning of a new bull market. It’s clear to me that this is a load of nonsense. I’ll show you why.
Because a lot of the alleged “analysis” that is backing up the bulls’ claims of a new bull market comes from technical analysis and charts, I’m presenting the below chart from David Rosenberg of Gluskin Shef. It charts today’s bear market over that of 1929-1932.
As you can see, today’s bear market is mirroring that of the ‘30s almost to perfection. Indeed, the correlation between the two charts is an incredible 0.8, meaning it’s 4/5ths perfect. In finance, you’re lucky if you get a correlation above 0.6. (gold and the dollar are only 0.28 inversely correlated). A 0.8 correlation is virtually unheard of. But that’s exactly how closely today’s market is mirroring that of the ‘30s.
I can’t take full credit for this insight. Ron Coby, an investment manager at Coby Lamson in Oregon, first started pointing out the similarities between this market and that of 1929 back in February ‘09. No one wanted to listen to him then.
They’re listening now.
Coby notes that from October 29, 1929 until November 13, 1929, the stock market collapsed 49% (2008’s was 52%). Ron points out that the market then staged a 155-day rally of 50%. Today’s rally (starting in March ‘09) has lasted 150 days and the market is up an average of 50% (average of Nasdaq, DJIA, and S&P 500).
Unfortunately for the bulls today, the 1929 market then rolled over and collapsed another 70%. “Bottom callers” INCLUDING legends like Jesse Livermore, Benjamin Graham and others bought ALL THE WAY DOWN, losing entire fortunes.
Ok, so the charts for today and 1929 are identical, what about the earnings? After all, profits are ultimately what drive the stock market: you buy based on expected future earnings of the companies.
Earnings today are even lower than they were in the ‘30s during the Great Depression. They’ve fallen 98% from their peak in 2007. Adjusted for inflation, stocks have NEVER been this unprofitable in the last 80 years.
The US was already in a recession in 2008. And 2Q09 profits are actually down 31% even from THAT. Indeed, based on ACTUAL posted earnings, the S&P 500 is trading at a P/E of 700 today. Even if you go by operating earnings the multiple is still 24: hardly cheap.
Looking over this, I can’t see where any claims of a “bull market” are coming from. The people who are saying today is a new bull market probably went long Tech Stocks in 2001, Housing in 2006, and Financials in 2008.
In light of the rampant bullishness, the parabolic rally in the S&P 500, the horrific earnings, and the similarity between today’s rally and that of 1929, I believe the likelihood of another Crash (like 2008) is quite high. In fact, I would not be surprised to see stocks collapse within the next eight weeks.
As you can see, today’s bear market is mirroring that of the ‘30s almost to perfection. Indeed, the correlation between the two charts is an incredible 0.8, meaning it’s 4/5ths perfect. In finance, you’re lucky if you get a correlation above 0.6. (gold and the dollar are only 0.28 inversely correlated). A 0.8 correlation is virtually unheard of. But that’s exactly how closely today’s market is mirroring that of the ‘30s.
I can’t take full credit for this insight. Ron Coby, an investment manager at Coby Lamson in Oregon, first started pointing out the similarities between this market and that of 1929 back in February ‘09. No one wanted to listen to him then.
They’re listening now.
Coby notes that from October 29, 1929 until November 13, 1929, the stock market collapsed 49% (2008’s was 52%). Ron points out that the market then staged a 155-day rally of 50%. Today’s rally (starting in March ‘09) has lasted 150 days and the market is up an average of 50% (average of Nasdaq, DJIA, and S&P 500).
Unfortunately for the bulls today, the 1929 market then rolled over and collapsed another 70%. “Bottom callers” INCLUDING legends like Jesse Livermore, Benjamin Graham and others bought ALL THE WAY DOWN, losing entire fortunes.
Ok, so the charts for today and 1929 are identical, what about the earnings? After all, profits are ultimately what drive the stock market: you buy based on expected future earnings of the companies.
Earnings today are even lower than they were in the ‘30s during the Great Depression. They’ve fallen 98% from their peak in 2007. Adjusted for inflation, stocks have NEVER been this unprofitable in the last 80 years.
The US was already in a recession in 2008. And 2Q09 profits are actually down 31% even from THAT. Indeed, based on ACTUAL posted earnings, the S&P 500 is trading at a P/E of 700 today. Even if you go by operating earnings the multiple is still 24: hardly cheap.
Looking over this, I can’t see where any claims of a “bull market” are coming from. The people who are saying today is a new bull market probably went long Tech Stocks in 2001, Housing in 2006, and Financials in 2008.
In light of the rampant bullishness, the parabolic rally in the S&P 500, the horrific earnings, and the similarity between today’s rally and that of 1929, I believe the likelihood of another Crash (like 2008) is quite high. In fact, I would not be surprised to see stocks collapse within the next eight weeks.
Saturday, August 8, 2009
Jesse Livermore, The Great Legendary Stock Operator
http://www.retirerichblog.com/2009/08/jesse-livermore-great-legendary-stock.html
During his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. He subsequently lost both fortunes. Apart from his success as a securities speculator, Livermore left traders a working philosophy for trading securities that emphasizes increasing the size of one's position as it goes in the right direction and cutting losses quickly.
Livermore sometimes did not follow his own rules strictly. He claimed that his lack of adherence to his own rules was the main reason for his losses after making his 1907 and 1929 fortunes.
The popular book Reminiscences of a Stock Operator, by Edwin Lefevre, reflects many of those lessons. Livermore himself wrote a less widely read book, "How to trade in stocks; the Livermore formula for combining time element and price". It was published in 1940, the same year he committed suicide.
"Cash was, is, and always will be - king. Always have cash in reserve. Cash is the ammunition in your gun. My biggest mistake was not in following this rule more often. Time is not money because there may be times when your money should be inactive... Often money that is just sitting can be later moved into the right situation and make a fortune. Patience-Patience-Patience. Patience was the key to success - Don't be in a hurry." - Jesse Livermore. How To Trade In Stocks, 1940."I have suggested to people who are interested in the stock market that they carry around a small notebook, keep notes on interesting general market information, and perhaps develop their own stock market trading strategy. I always suggest that the first thing they write down in their little notebooks should be: 'Beware of inside information- all inside information!' "
"The stock market must be studied, not casually, but deeply, and thoroughly. It's my conclusion that most people pay more attention to the purchase of an appliance for their house, or when buying a car, than they do to the purchase of stocks. The stock market , with its allure of easy money and fast action, induces people into foolishness and the careless handling of their hard earned money, like no other entity."
During his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. He subsequently lost both fortunes. Apart from his success as a securities speculator, Livermore left traders a working philosophy for trading securities that emphasizes increasing the size of one's position as it goes in the right direction and cutting losses quickly.
Livermore sometimes did not follow his own rules strictly. He claimed that his lack of adherence to his own rules was the main reason for his losses after making his 1907 and 1929 fortunes.
The popular book Reminiscences of a Stock Operator, by Edwin Lefevre, reflects many of those lessons. Livermore himself wrote a less widely read book, "How to trade in stocks; the Livermore formula for combining time element and price". It was published in 1940, the same year he committed suicide.
"Cash was, is, and always will be - king. Always have cash in reserve. Cash is the ammunition in your gun. My biggest mistake was not in following this rule more often. Time is not money because there may be times when your money should be inactive... Often money that is just sitting can be later moved into the right situation and make a fortune. Patience-Patience-Patience. Patience was the key to success - Don't be in a hurry." - Jesse Livermore. How To Trade In Stocks, 1940."I have suggested to people who are interested in the stock market that they carry around a small notebook, keep notes on interesting general market information, and perhaps develop their own stock market trading strategy. I always suggest that the first thing they write down in their little notebooks should be: 'Beware of inside information- all inside information!' "
"The stock market must be studied, not casually, but deeply, and thoroughly. It's my conclusion that most people pay more attention to the purchase of an appliance for their house, or when buying a car, than they do to the purchase of stocks. The stock market , with its allure of easy money and fast action, induces people into foolishness and the careless handling of their hard earned money, like no other entity."
Thursday, August 6, 2009
United States GDP Growth Rate
From http://www.retirerichblog.com/2009/08/united-states-gdp-growth-rate.html
http://www.retirerichblog.com/2009/04/unemployment-chart-monthly-statistics.html
United States GDP Growth rate
2008 Mar +2%
2008 Jun +1.6%
2008 Sept 0%
2008 Dec -1.9%
2009 Mar -3.3%
2009 Jun -3.9%
Unemployment Chart Monthly Statistics
2007-07 4.60
2007-08 4.60
2007-09 4.70
2007-10 4.70
2007-11 4.70
2007-12 5.00
2008-01 4.90
2008-02 4.80
2008-03 5.10
2008-04 5.00
2008-05 5.50
2008-06 5.50
2008-07 5.70
2008-08 6.10
2008-09 6.10
2008-10 6.50
2008-11 6.70
2008-12 7.20
2009-01 7.60 Obama
2009-02 8.10
2009-03 8.50 13M now jobless
2009-04 8.90
2009-05 9.40
2009-06 9.50
Unemployment Chart Monthly Statistics
2007-07 4.60
2007-08 4.60
2007-09 4.70
2007-10 4.70
2007-11 4.70
2007-12 5.00
2008-01 4.90
2008-02 4.80
2008-03 5.10
2008-04 5.00
2008-05 5.50
2008-06 5.50
2008-07 5.70
2008-08 6.10
2008-09 6.10
2008-10 6.50
2008-11 6.70
2008-12 7.20
2009-01 7.60 Obama
2009-02 8.10
2009-03 8.50 13M now jobless
2009-04 8.90
2009-05 9.40
2009-06 9.50
Wednesday, July 22, 2009
JP Morgan (JPM): There are Cracks but the Foundation is Strong
InvestorGuide Stock of the Day Stock Analysis Let's evaluate the two competing arguments. The pro-JPM case rests on CEO Jamie Dimon and how he has been very effective in managing risk at the bank. JPM made the same mistakes as the rest of Wall Street when it came to the quality of mortgage assets on their book but the magnitude of exposure to residential real estate was much lower and better hedged. This meant the firm was able to take advantage of cheap acquisition opportunities in the form of Bear Stearns and Washington Mutual. Dimon has also gotten much better at lobbying Washington where government officials mostly like him and see him as a very competent leader. Additionally, there is much reduced competition on the street and that along with the upward sloping yield curve makes this a profitable trading environment for the firms that survived 2008. JP Morgan's two chief commercial banking competitors -- Bank of America (BAC: Charts, News, Offers) and Citigroup (C: Charts, News, Offers) -- have lost a lot of leverage with customers and regulators -- as they are both seen as wards of the state. This backdrop led JP Morgan to record a 36% jump in net income (to $2.7 billion) on a 39% year-over-year increase in revenue which rose to a record level of $27.7 billion. With short-term interest rates being close to zero, JPM was able to make $4.9 billion in revenue by exploiting wide credit spreads. JPM also took in a lot of equity underwriting business as the ranks of investment banks, with deep balance sheets to offer to clients, have dwindled. The investment banking division accounted for $1.5 billion of the $2.7 billion profit number. The case against JP Morgan uses these very same numbers. Yes, the second quarter was very profitable but let's remember JP Morgan is a commercial bank after all. It's not a hedge fund so don't count on that kind of fixed income trading performance again (plus spreads will narrow too) and it has never brought home the bacon consistently by operating as a white-shoe bulge bracket investment bank, so don't plan again on a quarter in which JPM outshines everybody (including Goldman) on the investment banking deal-making league tables. Therefore, for JPM to consistently perform well in the future, it will have to continue to rely on its bread-butter business of consumer and business banking. And that's where there are serious problems now and in the future. For example, JPM made only $15 million from retail banking this quarter as compared to $474 million last quarter and losses at the consumer lending division rose to $955 million from $389 million. And despite all the talk of an improving economy, housing loans continue to deteriorate with a $1.31 billion charge-off in this segment, up 4.61%. So the argument here is simple, JP Morgan's core business of lending continues to hemorrhage blood and with the unemployment rate slated to cross 10%, things will only get worse. Additionally, JPM will have to suffer more pain thanks to its commercial real estate portfolio which has yet to take major hits. So which of these two arguments carry more merit? Time (and the future course of the economy) will tell but we lean towards the first position because a) JP Morgan has set aside about $29 billion in loss reserves (or 5% of loans outstanding) providing it with a much bigger cushion than its competitors to deal with future losses and b) it may be time to start thinking of JP Morgan as more than just a commercial bank. The departure of Lehman and Merrill has probably created a void that needs to be filled by a blue-chip investment bank. JP Morgan could play that role well especially with Bear Stearns in its fold. Also, Bear was a powerhouse in the area of bond trading, something that JPM is finding very profitable.
Tuesday, July 21, 2009
Do We Cheer Banks’ Earnings?
By Zacks Investment Research on July 20, 2009 More Posts By Zacks Investment Research Author's Website
Last week, after a round of “positive surprises” delivered by some of the major banks, we had “not so surprising” news of closure of five more banks, bringing to 57 the number of federally insured banks closed this year।
It appears that the divide in the banking landscape between the “haves” and “have-nots” is increasing। Even among the big banks, there is now a clear two-tier system.
On one hand, we have Goldman Sachs (GS: 158।31 -1.72 -1.07%) and JP Morgan (JPM: 36.80 -0.18 -0.49%), which delivered record profits from their trading and investment banking revenues. There is no doubt that these two managed their affairs well, have increased their market share after the collapse of Lehman and Bear Stearns and also have benefitted tremendously from the various programs by the Treasury and the regulators. And, we should not forget the generous AIG (AIG: 13.42 -0.04 -0.30%) payout to Goldman.
On the other hand, the second-quarter profits of Bank of America (BAC: 12।01 -0.23 -1.88%) and Citigroup (C: 2.6703 -0.1197 -4.29%) were reliant on several one-time gains, resulting from asset sales etc, while weaknesses in some businesses and continued credit deterioration showed that there is more pain to come.
Bank of America’s credit-card unit lost $1।6 billion amid rising delinquencies, compared with a year-ago profit of $582 million. Its home-loan and insurance unit lost $725 million. The bank reported $8.7 billion in credit losses, up from $3.6 billion in the year-ago quarter. Its nonperforming loans jumped to 3.3%, up from 1.1% a year ago.
Like Goldman and JP Morgan, Bank of America’s results were aided by strong investment-banking and trading income following the merger with Merrill Lynch। But Citigroup saw decline in investment banking profits and it appears to be losing market share to stronger rivals.
Citigroup reported $8।4 billion in net credit losses, nearly double the loss from a year ago. Incidentally, the CEO of Citigroup — after the bank had posted a sixth quarter of loss ($2.4 billion net loss on operational basis) in the last seven quarters — sounded most optimistic during the conference call, saying “the rate of growth in these consumer losses may be moderating.” Obviously he was trying to put on a brave face as the bank still faces an uncertain future.
With spiking unemployment, these banks will face increasing credit card losses। Housing and Commercial Real Estate prices are still on a downward spiral and will cause more losses in the coming quarters. On the other hand, mortgage refinancing, which was one of the main reasons for supporting the revenues in the last two quarters, is expected to taper off as the rates are creeping up now.
The smaller banks that do not enjoy the privilege of being “too big to fail” continue to struggle. The regulators shut two banks in California and two smaller banks in Georgia and South Dakota on Friday (something that has become the rule rather than the exception for Fridays).
The 57 bank failures this year compare with 25 last year and just three in 2007. The latest round of failures is expected to cause a loss of $1.1 billion to the FDIC and bring the total cost of failures this year to $13.4 billion. And unfortunately, this trend is expected to continue for some time.
Sunday, July 5, 2009
Hitachi Expanding Hybrid Cap
By Zacks Investment Research on July 4, 2009 More Posts By Zacks Investment Research Author's Website
Hitachi Ltd. (HIT: 31.44 +0.45 +1.45%), a Tokyo-based global conglomerate, is expected to supply advanced lithium-ion batteries to General Motors (GMGMQ.PK: 0.82 -0.0875 -9.64%) in 2010 for use in its gasoline hybrid-electric vehicles (HEV). The deal with GM will increase Hitachi’s production capacity for lithium-ion and expand its business in the automotive-related field. It will also meet rising demand for gas-electric cars.
Hitachi expects the global market for HEVs to expand from 690,000 units in 2007 to 1.5 million units in 2010. As a result, Hitachi estimates the demand for HEV lithium-ion batteries to overtake that of the current mainstream nickel metal hydride batteries by 2015. Toyota Motor (TM: 74.09 -1.21 -1.61%), which currently uses nickel-metal hydride batteries, will start using lithium-ion batteries for its plug-in hybrid cars for the first time.
The company has boosted capacity to handle demand. Currently, Hitachi produces 40,000 lithium-ion batteries per month and expects to increase production to 3,000,000 units. According to The Nikkei business daily, Hitachi will invest approximately ¥30 billion ($311 million) to raise production capacity.
Hitachi has declined to comment on the report. Hitachi’s lithium-ion battery systems will be installed annually in more than 100,000 hybrid-electric vehicles (HEV), which are scheduled for launch in the North American market in 2010.
The company was also recently awarded an order from U.S.-based Eaton Corporation (ETN: 42.99 -2.29 -5.06%) to supply motors, inverters, lithium-ion batteries and other components for Eaton’s hybrid power systems to be delivered through 2011. Plans call for commercial vehicles using Eaton’s hybrid system to be rolled out in markets in North America, Europe and Asia.
Hitachi plans to form a cross-business unit for lithium-ion industrial and automotive batteries and an R&D unit for next-generation batteries. In 2009, Hitachi converted Hitachi Koki, a manufacturer and seller of power tools into a consolidated subsidiary to foster increased research and development into lithium-ion battery-operated products.
Additionally, to develop and manufacture rechargeable lithium-ion batteries for hybrid electric vehicles and other applications, Hitachi merged Hitachi Unisia Automotive, Ltd. with TOKICO LTD., thereby forming Hitachi Vehicle Energy, Ltd. Through these structural reforms, we expect Hitachi to emerge as a leading supplier in the global automotive market.
Hitachi will be able to create more energy by producing lithium-ion batteries and help hybrid cars give greater mileage, but the company may face some technological barriers. Furthermore, globalization of some of its markets, commoditization of products and stagnation of industries may pose difficulty for the company to grow shareholder value.
Hitachi posted large revenue declines across all its segments in fiscal 2008, particularly in automotive-related products, due to a fall in demand. With a large amount of debt and low amount of cash on its balance sheet, Hitachi’s performance has been deteriorating over the past few years. We therefore maintain our Hold rating on Hitachi shares.
Hitachi Ltd. (HIT: 31.44 +0.45 +1.45%), a Tokyo-based global conglomerate, is expected to supply advanced lithium-ion batteries to General Motors (GMGMQ.PK: 0.82 -0.0875 -9.64%) in 2010 for use in its gasoline hybrid-electric vehicles (HEV). The deal with GM will increase Hitachi’s production capacity for lithium-ion and expand its business in the automotive-related field. It will also meet rising demand for gas-electric cars.
Hitachi expects the global market for HEVs to expand from 690,000 units in 2007 to 1.5 million units in 2010. As a result, Hitachi estimates the demand for HEV lithium-ion batteries to overtake that of the current mainstream nickel metal hydride batteries by 2015. Toyota Motor (TM: 74.09 -1.21 -1.61%), which currently uses nickel-metal hydride batteries, will start using lithium-ion batteries for its plug-in hybrid cars for the first time.
The company has boosted capacity to handle demand. Currently, Hitachi produces 40,000 lithium-ion batteries per month and expects to increase production to 3,000,000 units. According to The Nikkei business daily, Hitachi will invest approximately ¥30 billion ($311 million) to raise production capacity.
Hitachi has declined to comment on the report. Hitachi’s lithium-ion battery systems will be installed annually in more than 100,000 hybrid-electric vehicles (HEV), which are scheduled for launch in the North American market in 2010.
The company was also recently awarded an order from U.S.-based Eaton Corporation (ETN: 42.99 -2.29 -5.06%) to supply motors, inverters, lithium-ion batteries and other components for Eaton’s hybrid power systems to be delivered through 2011. Plans call for commercial vehicles using Eaton’s hybrid system to be rolled out in markets in North America, Europe and Asia.
Hitachi plans to form a cross-business unit for lithium-ion industrial and automotive batteries and an R&D unit for next-generation batteries. In 2009, Hitachi converted Hitachi Koki, a manufacturer and seller of power tools into a consolidated subsidiary to foster increased research and development into lithium-ion battery-operated products.
Additionally, to develop and manufacture rechargeable lithium-ion batteries for hybrid electric vehicles and other applications, Hitachi merged Hitachi Unisia Automotive, Ltd. with TOKICO LTD., thereby forming Hitachi Vehicle Energy, Ltd. Through these structural reforms, we expect Hitachi to emerge as a leading supplier in the global automotive market.
Hitachi will be able to create more energy by producing lithium-ion batteries and help hybrid cars give greater mileage, but the company may face some technological barriers. Furthermore, globalization of some of its markets, commoditization of products and stagnation of industries may pose difficulty for the company to grow shareholder value.
Hitachi posted large revenue declines across all its segments in fiscal 2008, particularly in automotive-related products, due to a fall in demand. With a large amount of debt and low amount of cash on its balance sheet, Hitachi’s performance has been deteriorating over the past few years. We therefore maintain our Hold rating on Hitachi shares.
A Clear Picture On The US Debt Situation
More Posts By Michael Panzner Author's Website
With all of the rhetoric, obfuscation, and spin coming out of Washington these days, some might find it hard to see just where our current policies are leading us. One look at the following chart of federal receipts, outlays, and borrowing, however, and the facts seem pretty clear.
Put that together with the following report from the Associated Press, “Mountain of Debt: Rising Debt May Be Next Crisis,” and it makes you wonder whether this year’s July 4th holiday should really be a time for celebration.
The Founding Fathers left one legacy not celebrated on Independence Day but which affects us all. It’s the national debt.
The country first got into debt to help pay for the Revolutionary War. Growing ever since, the debt stands today at a staggering $11.5 trillion - equivalent to over $37,000 for each and every American. And it’s expanding by over $1 trillion a year.
The mountain of debt easily could become the next full-fledged economic crisis without firm action from Washington, economists of all stripes warn.
“Unless we demonstrate a strong commitment to fiscal sustainability in the longer term, we will have neither financial stability nor healthy economic growth,” Federal Reserve Chairman Ben Bernanke recently told Congress.
Higher taxes, or reduced federal benefits and services - or a combination of both - may be the inevitable consequences.
The debt is complicating efforts by President Barack Obama and Congress to cope with the worst recession in decades as stimulus and bailout spending combine with lower tax revenues to widen the gap.
Interest payments on the debt alone cost $452 billion last year - the largest federal spending category after Medicare-Medicaid, Social Security and defense. It’s quickly crowding out all other government spending. And the Treasury is finding it harder to find new lenders.
The United States went into the red the first time in 1790 when it assumed $75 million in the war debts of the Continental Congress.
Alexander Hamilton, the first treasury secretary, said, “A national debt, if not excessive, will be to us a national blessing.” Some blessing.
Since then, the nation has only been free of debt once, in 1834-1835.
The national debt has expanded during times of war and usually contracted in times of peace, while staying on a generally upward trajectory. Over the past several decades, it has climbed sharply - except for a respite from 1998 to 2000, when there were annual budget surpluses, reflecting in large part what turned out to be an overheated economy.
The debt soared with the wars in Iraq and Afghanistan and economic stimulus spending under President George W. Bush and now Obama.
The odometer-style “debt clock” near Times Square - put in place in 1989 when the debt was a mere $2.7 trillion - ran out of numbers and had to be shut down when the debt surged past $10 trillion in 2008.
The clock has since been refurbished so higher numbers fit. There are several debt clocks on Web sites maintained by public interest groups that let you watch hundreds, thousands, millions zip by in a matter of seconds.
The debt gap is “something that keeps me awake at night,” Obama says.
He pledged to cut the budget “deficit” roughly in half by the end of his first term. But “deficit” just means the difference between government receipts and spending in a single budget year.
This year’s deficit is now estimated at about $1.85 trillion.
Deficits don’t reflect holdover indebtedness from previous years. Some spending items - such as emergency appropriations bills and receipts in the Social Security program - aren’t included, either, although they are part of the national debt.
The national debt is a broader, and more telling, way to look at the government’s balance sheets than glancing at deficits.
According to the Treasury Department, which updates the number “to the penny” every few days, the national debt was $11,518,472,742,288 on Wednesday.
The overall debt is now slightly over 80 percent of the annual output of the entire U.S. economy, as measured by the gross domestic product.
By historical standards, it’s not proportionately as high as during World War II, when it briefly rose to 120 percent of GDP. But it’s still a huge liability.
Also, the United States is not the only nation struggling under a huge national debt. Among major countries, Japan, Italy, India, France, Germany and Canada have comparable debts as percentages of their GDPs.
Where does the government borrow all this money from?
The debt is largely financed by the sale of Treasury bonds and bills. Even today, amid global economic turmoil, those still are seen as one of the world’s safest investments.
That’s one of the rare upsides of U.S. government borrowing.
Treasury securities are suitable for individual investors and popular with other countries, especially China, Japan and the Persian Gulf oil exporters, the three top foreign holders of U.S. debt.
But as the U.S. spends trillions to stabilize the recession-wracked economy, helping to force down the value of the dollar, the securities become less attractive as investments. Some major foreign lenders are already paring back on their purchases of U.S. bonds and other securities.
And if major holders of U.S. debt were to flee, it would send shock waves through the global economy - and sharply force up U.S. interest rates.
As time goes by, demographics suggest things will get worse before they get better, even after the recession ends, as more baby boomers retire and begin collecting Social Security and Medicare benefits.
While the president remains personally popular, polls show there is rising public concern over his handling of the economy and the government’s mushrooming debt - and what it might mean for future generations.
If things can’t be turned around, including establishing a more efficient health care system, “We are on an utterly unsustainable fiscal course,” said the White House budget director, Peter Orszag.
Some budget-restraint activists claim even the debt understates the nation’s true liabilities.
The Peter G. Peterson Foundation, established by a former commerce secretary and investment banker, argues that the $11.4 trillion debt figures does not take into account roughly $45 trillion in unlisted liabilities and unfunded retirement and health care commitments.
That would put the nation’s full obligations at $56 trillion, or roughly $184,000 per American, according to this calculation.
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On the Net:
Peter G. Peterson Foundation independent assessment of the national debt: http://www.pgpf.org/
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