If you are wondering why I keeping making posts about Greece and ranting about how the entire system is built on excessive debt look no further than the NYTimes for a graphic that says it all.
Can you imagine a German looking at Greeks rioting because their pensions may be reduced thinking that you are actually going to extend these people more money? I believe Greeks can retire at age 55 on a public pension, I guess I'd be rioting too if I had grown used to the idea that someone else would take care of me for the next 40 years!!!
DEBT WEB
As I type the Dow is down 276 points. I am hopeful for some turnaround here, but there is a real possibility that later in the week the Europeans vote down a bailout for Greece. Remember what happened in the US when TARP funding was voted down the first time? The S&P500 went down almost 8% that day. Be on your toes this week.
WANT MORE?
- Read this pretty good article on the "What If" the Euro collapsed by Julian Phillips
I don't agree with everything he says, but I've found few folks that actually outline what they think will happen, so I like it!
What will happen to currencies if the Euro collapses?
Goatmug
Tuesday, May 4, 2010
Monday, May 3, 2010
IMPACT OF HEALTHCARE REFORM -
I was asked to give a speech last week to some Christian Business Owners on the impact of Healthcare Reform. I've had some techincal difficulties posting the actual slideshow here on my blog, so I made a pdf available and Tim Knight at Slope of Hope posted it for me this weekend. As usual, please check out Tim's site if you are in any way interested in trading, it is great stuff. www.slopeofhope.com
The talk was well received however I discerned that there is so much frustration in people that they feel like they have no voice and they are angry. Each person that posed a question really needed an outlet to vent. In fact, the majority of the questions were rhetorical.
I've tried to position this presentation in an even handed fashion where we examine the good stuff about the bill and point out the things that need improvement. At the end of the day no one will argue that the current system doesn't really stink. Unfortunately I still have not heard anything that convinces me that we can come close to paying a portion of the future liability we are signing up for.
Face it, if I wasn't concerned about the future cost and long term fiscal solvency of my family I would drive new cars every year, live in a house that was 5 times larger, trade for a living, write a blog, and take two week vacations in Paris and blame it on a volcano. However, I am pragmatic and focused on reality therefore I weigh the risk and the cost of each purchase.
Our government's leadership does not possess the same value system that I do and this is why this program is doomed never to make financial sense. When we raise taxes and add a VAT it still will not be enough to meet the future obligations created in this plan.
Don't get me wrong, I want everyone to have insurance and be healthy, I just want someone to show me the money!
Download Goatmug-HealthReformActSummary-4.29
The presentation was divided into two parts. The first 18 slides were the subject matter in my talk, the remaining 40 slides provide details about the timeline of implementation and highlights the provisions as they are scheduled which I did not have time to cover. - I did not include the additional slides here, but I will attempt to make them available on along with the actual vocal commentary when I post it on You Tube.
Goatmug
The talk was well received however I discerned that there is so much frustration in people that they feel like they have no voice and they are angry. Each person that posed a question really needed an outlet to vent. In fact, the majority of the questions were rhetorical.
I've tried to position this presentation in an even handed fashion where we examine the good stuff about the bill and point out the things that need improvement. At the end of the day no one will argue that the current system doesn't really stink. Unfortunately I still have not heard anything that convinces me that we can come close to paying a portion of the future liability we are signing up for.
Face it, if I wasn't concerned about the future cost and long term fiscal solvency of my family I would drive new cars every year, live in a house that was 5 times larger, trade for a living, write a blog, and take two week vacations in Paris and blame it on a volcano. However, I am pragmatic and focused on reality therefore I weigh the risk and the cost of each purchase.
Our government's leadership does not possess the same value system that I do and this is why this program is doomed never to make financial sense. When we raise taxes and add a VAT it still will not be enough to meet the future obligations created in this plan.
Don't get me wrong, I want everyone to have insurance and be healthy, I just want someone to show me the money!
Download Goatmug-HealthReformActSummary-4.29
The presentation was divided into two parts. The first 18 slides were the subject matter in my talk, the remaining 40 slides provide details about the timeline of implementation and highlights the provisions as they are scheduled which I did not have time to cover. - I did not include the additional slides here, but I will attempt to make them available on along with the actual vocal commentary when I post it on You Tube.
Goatmug
Friday, April 30, 2010
Encouraging the ECB to go Nuclear!
Central banks and governments are getting a little scared. The FED and their buddies in Europe have had the belief that as long as we they could drive the stock market and financial markets higher it would in turn propel economies higher. In other words, some time around 1995 Alan Greenspan and his cohorts decided that they would compel markets higher and the resulting fruit would be a great economic boom.
Guess what? They were right!----In the short run. In fact they were so good that our US economy and other world economies thrust higher without any sense for fundamental growth or data to back up the growth. The low rates, easy money, and lack of regulation created several busts such as our most recent (short-lived) sub-prime debacle and the tech-wreck in 2000-2002.
I've lamented several times though that more pleasure, more stimulus, and more reward all lead the addict to abandon any rational view of the world and suddenly the desire and pursuit of a greater and greater high is all that matters. In addition, the addict does not worry about the consequences of their actions, they simply crave pain to stop and the resumption of the pleasure (whatever addition that may be). In this way, we see crack addicts rob stores, kill people, and other terrible things --- not because they are truly bad people, but because their addiction is overwhelming the goodness within and stopping the addiction and placating it is job number one.
Our central banks have the same addiction and means to quell the insatiable lust for economic pleasure. In the same way a drunk begins to shake and become physically ill when alcohol is out of reach, the FED and the central banks become violently ill when credit is removed and the liquid courage of debt liquidity is withheld.
Greeks are in the throws of the detox process and they are in complete denial of their level of addition. Unfortunately the drug pushers (credit markets) have run out of supply (or the desire to supply at rates Greece will pay) and if they have any left over are charging quite a premium that is hard for Greece to stomach. Has anyone learned from the mistakes of sub-prime borrowers? Heck no!!!
The ECB, IMF, FED, and other bankers are now determining how best to rescue their addicted fellow. While Greece is a problem we've failed to notice that Greece has a few drinking buddies that just might be worse than the small island country. Spain and Portgual are ailing and their supply of cheap drugs too seems to be dwindling.
What is the answer? If you read the following article, it seems like that stance is to facilitate the additions, not let the sick guys face detox. In this case the prescription is to begin QUANTITATIVE EASING and buy government bonds directly, therefore artificially creating a ceiling for the bond yields and a floor for the dropping prices. Instead of demanding that lenders take the medicine for their lack of analysis of true risk, or penalizing Greece for lying and hiding their true debt levels, the answer apparently seems to be to allow the sick countries to feed their addictions with more drugs, not more reality.
http://www.telegraph.co.uk/finance/economics/7640783/ECB-may-have-to-turn-to-nuclear-option-to-prevent-Southern-European-debt-collapse.html
So, while the ECB and the FED (don't think for a minute that the FED isn't participating and using your tax dollars) is going to undertake their SHOCK and AWE campaign of dashing reality the market may move higher and we all merrily attempt to look away from the coming disaster. The knock on effect of this is going to build and build until it is uncontainable.
If you listen to the tv and radio you'll hear that everything is getting back to normal. I would suggest that "normal" is simply a set up for the next bust cycle courtesy of the FED and central bankers.
We know that the central banks absolutely over do it and hold rates low for too long. But the real question I'm asking now is simply this, what are they looking at that scares them so much to continue to keep rates down? I know the answer, but it is worth asking again and again and again.
Goatmug
Guess what? They were right!----In the short run. In fact they were so good that our US economy and other world economies thrust higher without any sense for fundamental growth or data to back up the growth. The low rates, easy money, and lack of regulation created several busts such as our most recent (short-lived) sub-prime debacle and the tech-wreck in 2000-2002.
I've lamented several times though that more pleasure, more stimulus, and more reward all lead the addict to abandon any rational view of the world and suddenly the desire and pursuit of a greater and greater high is all that matters. In addition, the addict does not worry about the consequences of their actions, they simply crave pain to stop and the resumption of the pleasure (whatever addition that may be). In this way, we see crack addicts rob stores, kill people, and other terrible things --- not because they are truly bad people, but because their addiction is overwhelming the goodness within and stopping the addiction and placating it is job number one.
Our central banks have the same addiction and means to quell the insatiable lust for economic pleasure. In the same way a drunk begins to shake and become physically ill when alcohol is out of reach, the FED and the central banks become violently ill when credit is removed and the liquid courage of debt liquidity is withheld.
Greeks are in the throws of the detox process and they are in complete denial of their level of addition. Unfortunately the drug pushers (credit markets) have run out of supply (or the desire to supply at rates Greece will pay) and if they have any left over are charging quite a premium that is hard for Greece to stomach. Has anyone learned from the mistakes of sub-prime borrowers? Heck no!!!
The ECB, IMF, FED, and other bankers are now determining how best to rescue their addicted fellow. While Greece is a problem we've failed to notice that Greece has a few drinking buddies that just might be worse than the small island country. Spain and Portgual are ailing and their supply of cheap drugs too seems to be dwindling.
What is the answer? If you read the following article, it seems like that stance is to facilitate the additions, not let the sick guys face detox. In this case the prescription is to begin QUANTITATIVE EASING and buy government bonds directly, therefore artificially creating a ceiling for the bond yields and a floor for the dropping prices. Instead of demanding that lenders take the medicine for their lack of analysis of true risk, or penalizing Greece for lying and hiding their true debt levels, the answer apparently seems to be to allow the sick countries to feed their addictions with more drugs, not more reality.
http://www.telegraph.co.uk/finance/economics/7640783/ECB-may-have-to-turn-to-nuclear-option-to-prevent-Southern-European-debt-collapse.html
So, while the ECB and the FED (don't think for a minute that the FED isn't participating and using your tax dollars) is going to undertake their SHOCK and AWE campaign of dashing reality the market may move higher and we all merrily attempt to look away from the coming disaster. The knock on effect of this is going to build and build until it is uncontainable.
If you listen to the tv and radio you'll hear that everything is getting back to normal. I would suggest that "normal" is simply a set up for the next bust cycle courtesy of the FED and central bankers.
We know that the central banks absolutely over do it and hold rates low for too long. But the real question I'm asking now is simply this, what are they looking at that scares them so much to continue to keep rates down? I know the answer, but it is worth asking again and again and again.
Goatmug
Tuesday, April 27, 2010
MORE STIMULUS? RIGHT ON CUE....
I don't think this morning's post could have been more right on. While the market was dropping we were typing that this only means that we'll be seeing more effort from our government to push forward demand, create confidence, and ultimately print money to escape the gravitational pull of deflation.
It looks like we (the US) aren't the only ones to print new currency. The Chinese are contemplating new efforts to keep the plates spinning. The Bloomberg article here cites that this will be announced in August.
http://www.bloomberg.com/apps/news?pid=20601089&sid=ajsv6gEJ15Nw
We keep hearing that China is in a bubble and China will need to step on the brakes to stop rampant speculation. If there weren't real forces gripping their economy why would a government continue to distribute easy money?
I think the truth is that they absolutely need to keep printing and try to competitively devalue the yuan. If they don't, we'll see riots, unemployment, and a real estate collapse again in the most populous country in the world. More printing in China will create more printing in the USA to offset the devaluation. It is truly a race to the bottom for currencies.
Goatmug
It looks like we (the US) aren't the only ones to print new currency. The Chinese are contemplating new efforts to keep the plates spinning. The Bloomberg article here cites that this will be announced in August.
http://www.bloomberg.com/apps/news?pid=20601089&sid=ajsv6gEJ15Nw
We keep hearing that China is in a bubble and China will need to step on the brakes to stop rampant speculation. If there weren't real forces gripping their economy why would a government continue to distribute easy money?
I think the truth is that they absolutely need to keep printing and try to competitively devalue the yuan. If they don't, we'll see riots, unemployment, and a real estate collapse again in the most populous country in the world. More printing in China will create more printing in the USA to offset the devaluation. It is truly a race to the bottom for currencies.
Goatmug
HOME SALES CONTINUE TO RISE - CAN IT LAST?
POSTING UPDATE -
I haven't been posting as much lately because I am working on several projects. In particular I am giving a presentation on the Health Insurance Reform Act and its impact on business owners. I will post an outline of what I present and if I can figure out how to do it will also post the slides. In addition, I will begin some longer posts to outline what I responded to Dacian regarding the catalysts for a turn down.
HOME SALES - CAN IT LAST?
Here is a graphic that shows where we are in existing home sales since September 2008. We've had a spike as a result of the economy stabilizing and massive stimulus applied to every facet of the financial system.
We have a few more days of "cash for houses" the incentive that allows new home buyers and trade up buyers to access a tax credit to help with the purchase of a home.
Hopefully the housing market will now be able to stand on its own feet and we won't see a drop from these stimulated levels - however I doubt it. (Edit- I noticed that I didn't put in my skepticism as the auto plan cash for clunkers did nothing to change long term demand).
I pulled the chart from - http://dailycaller.com/2010/04/22/existing-home-sales-up-6-8-in-march-propelled-by-buyer-credit/
TRADING UPDATE -
We've been on target for the last several months as April has delivered "more of the same" as the melt up has continued. As I'm typing the market Dow is down 150 points on the back of the Portugal debt downgrade. This revelation added to the Greek debt uncertainty and the Goldman Sachs testimony is adding risk and volatility back into the markets.
Does this mean we need to bail on trades? Actually, I believe this is not true at all. In fact, this weakness and the continued understanding that Europe is on its deathbed means that the only course of action will be more of the same. More of what? More printing of course! As I suggested in December and January in my predictions, the FED is not going to be able to raise rates given the deflationary forces at work. This uncertainty assures us that the FED will continue to press the gas pedal and inflate.
Notice that despite the sell off that gold is doing well. This gives us and indication that players have a sense that inflation is going to be looming.
I'm still watching issues with seasonality of the markets in May (Sell in May), but feel like we have sometime before that will kick in near the end of the month. I will be buying on weakness here.
Goatmug
I haven't been posting as much lately because I am working on several projects. In particular I am giving a presentation on the Health Insurance Reform Act and its impact on business owners. I will post an outline of what I present and if I can figure out how to do it will also post the slides. In addition, I will begin some longer posts to outline what I responded to Dacian regarding the catalysts for a turn down.
HOME SALES - CAN IT LAST?
Here is a graphic that shows where we are in existing home sales since September 2008. We've had a spike as a result of the economy stabilizing and massive stimulus applied to every facet of the financial system.
We have a few more days of "cash for houses" the incentive that allows new home buyers and trade up buyers to access a tax credit to help with the purchase of a home.
Hopefully the housing market will now be able to stand on its own feet and we won't see a drop from these stimulated levels - however I doubt it. (Edit- I noticed that I didn't put in my skepticism as the auto plan cash for clunkers did nothing to change long term demand).
I pulled the chart from - http://dailycaller.com/2010/04/22/existing-home-sales-up-6-8-in-march-propelled-by-buyer-credit/
TRADING UPDATE -We've been on target for the last several months as April has delivered "more of the same" as the melt up has continued. As I'm typing the market Dow is down 150 points on the back of the Portugal debt downgrade. This revelation added to the Greek debt uncertainty and the Goldman Sachs testimony is adding risk and volatility back into the markets.
Does this mean we need to bail on trades? Actually, I believe this is not true at all. In fact, this weakness and the continued understanding that Europe is on its deathbed means that the only course of action will be more of the same. More of what? More printing of course! As I suggested in December and January in my predictions, the FED is not going to be able to raise rates given the deflationary forces at work. This uncertainty assures us that the FED will continue to press the gas pedal and inflate.
Notice that despite the sell off that gold is doing well. This gives us and indication that players have a sense that inflation is going to be looming.
I'm still watching issues with seasonality of the markets in May (Sell in May), but feel like we have sometime before that will kick in near the end of the month. I will be buying on weakness here.
Goatmug
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