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LUC

Posted by Contrarian Guitarist on Thursday, October 16, 2008 12:27:41 PM
I have to say I really love the Law of Unintended Consequences (LUC). It will, for me, be the most enjoyable thing about being governed by Obama, Reid and Pelosi. One predicted unintended consequence I can see coming: shift in democratic thinking when the Fed's investment starts to pay back. Big! Suddenly, in spite of lower tax revenues from individual payers due to the looming recession, the gov'ment money bags will swell as their investments in banks and financial and insurance companies, bought for pennies on the dollar become worth real dollars, in spite of Fed management. Suddenly they'll notice that pro-business policies will result in better return on their investments. More money to give to the poor. Wait, where did the poor go? What, the pro-business policies resulted in more jobs?!?! What LUC!
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Bowling for Banks

Posted by Contrarian Guitarist on Thursday, October 16, 2008 12:06:06 PM
I get the impression from this Washington Post article about many banks refusing federal monies that most banks, particularly community banks, did the right thing: only loan to those who can pay you back and only loan that which you have. This paragraph from the article I found socialistic...

"Participating banks cannot increase the dividends they pay to shareholders without federal permission, they must accept some limitations on compensation for their executives, and Paulson said the government would press companies to limit mortgage foreclosures."

The government will always get theirs first. Except when they are giving it out to get your vote and their power.
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The Blame Game

Posted by Contrarian Guitarist on Tuesday, September 16, 2008 5:17:38 PM
Speaker Pelosi, when asked if the Democrat congress bore any responsibility in banking troubles we find ourselves in said, "No". It was Bush's "mismanagement" that resulted in the current problems. From the Hill article...
“John McCain said that this is a result of overregulation by the Democrats in Congress,” she added. “Either he doesn’t know what he's talking about or he’s misrepresenting the facts as he knows them. But it’s simply not true.”
McCain "doesn't know what he's talking about"? Hmmm, that's rich seeing that it's Congress that regulates banking. Apparently she's the one who doesn't know what she's talking about. However I would hardly put the blame on the current congress. I would put most, if not all, of the blame on Democratic policies embraced by Republicans to use Fannie Mae an Freddie Mac to artificially boost minority home ownership. The Democrats can't have it both ways. If minorities are unfairly left behind in economic booms, as they say, then they shouldn't be given loans they can't afford during those times. Which is it? They are poor? Or they are homeowners?



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Oil Tell You Again

Posted by Contrarian Guitarist on Wednesday, September 10, 2008 4:19:22 PM
I made this point here, here and here. Now I could make an argument for greater regulation on oil speculation and commodity trading in general. I've shied away from investing in commodities myself. Partially for fear I'll forget I bought 2,000 bushels of wheat and it'll show up at my door. "Here's the wheat you ordered sir. Where do you want it?" Kind of thought that end users should be the only ones buying oil, etc. That could be legislated. One problem, the Law of Unintended Consequences. If the US should outlaw speculative trading of oil would other countries? Of course not. Control would escape US hands, as would trading revenue and jobs.
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Stealing the American Dream

Posted by Contrarian Guitarist on Wednesday, June 25, 2008 12:10:56 PM
Man we should've bought a house we couldn't afford.
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Congress Passes Laws...

Posted by Contrarian Guitarist on Friday, June 13, 2008 6:29:59 PM
... and the Executive branch enforces them. Civics 101. Thomas Edsall makes this point at his Huffington Post article about how BHO is "moving to the center"...
"At the same time that the economy flourished during Rubin's and Summers' tenure (1995-2000) -- per capita income rose from $22,153 to $25,469 in inflation-adjusted dollars; median family income rose from $53,349 to $59,398; and unemployment fell from 5.6 to 4.0 percent -- both Treasury secretaries were accused of acceding to Wall Street pressure to eliminate deficit spending at the expense of the poor and unemployed."
Forgetting completely that Rubin/Summers/Clinton had virtually nothing to show for their tenure. The heavy lifting was done by the congress. But hey, if they want to take credit for that mild boom, how about taking credit for the massive dotcom crash that really created what everyone now knows as an artificial boom.

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Dude, here's my job!

Posted by Contrarian Guitarist on Thursday, June 12, 2008 8:50:12 PM
The May '08 unemployment numbers though large were heavily skewed by new job seekers. Not technically un-employed more like not-yet-employed. From this article...
"The number of unemployed increased by 861,000 in May, the third-largest monthly increase since the US Labor Department started collecting figures in 1948 and more than 60% was accounted for by new entrants and those re-entering the workforce, with the bulk of the new workers in the 16 to 24 bracket."
Probably will see it downwardly revised in the coming weeks and relatively unreported. And will drift down more in the late Summer early Fall.

Remember unemployment was 7.5% in May of 1980 and stayed there until around the Winter of '81. Inflation was around 12% during that same time. Prime interest rate peaked at 21.5% later in 1982. Loved my money market fund then.
Tags: economy   jobs  
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Bride of More On Oil

Posted by Contrarian Guitarist on Thursday, June 12, 2008 8:37:21 PM
Something on oil/dollar relationship from this article.

Key sentence...
"...because the inverse price relationship between oil and the dollar has been proven fundamentally reliable, traders and investors with negative exposure to the steep fall in the dollar over the past three years have been increasingly using oil futures contracts as their hedge instrument of choice."


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Inflate Your Porfolio

Posted by Contrarian Guitarist on Tuesday, June 10, 2008 11:59:06 AM
Read about Inflation-proof Investing here. I still wonder how much of commodities inflation is due to investors not end users. Time will tell.
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Anticipating Governmental Attacks

Posted by Contrarian Guitarist on Monday, June 09, 2008 9:25:43 PM
With much fear and loathing I opened my annual package from Blue Shield. Usually contains a thick booklet of policy changes and a new fee (read: new higher fee) structure. Well the policy changes were there, but something was missing. Like rechecking a winning lottery ticket over and over (something that I understand requires the purchase of a lottery ticket) I literally reread my statement three times before I dared to believe my sizable family premium had been cut by 10%!!! No I hadn't gotten younger (though Mrs. Contrarian Guitarist looks younger than ever), we hadn't lost a kid, nothing had changed just our premium. I wasn't the only one, millions of Californians experienced the same thing.

What happened? Had costs gone down? Probably not. What happened is twofold. Blue Shield is non-profit, meaning it can't, ultimately make a profit. It can build assets to a point to cover future costs. But at some point if it is paying out less than it is taking in then it's either going to have to give rebates, cut premiums or even give a premium holiday. The second possible reason for the cut is to inspire a fuzzier, warmer feeling towards insurers and the candidates they prefer come November. Those would be candidates that are opposed to a single payer nationalized health care system.

I planned on voting for them anyway. But the extra jingle in my pocket is cool too.

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More on oil.

Posted by Contrarian Guitarist on Saturday, June 07, 2008 2:10:00 AM
Shawn Tully makes a good point here. Actually he makes my point.
Tags: oil   economy  
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OIL is driving oil.

Posted by Contrarian Guitarist on Saturday, June 07, 2008 1:48:00 AM
The index ETN - OIL, is at least partly responsible for irrational run-up of oil prices. An ETF is an Exchange Traded Note. What is OIL? This is the description from it's Yahoo Profile page...
"The investment is linked to the performance of the Goldman Sachs Crude Oil Return Index as reflects the returns that are potentially available through an unleveraged investment in the futures contracts comprising the index plus the Treasury Bill rate of interest that could be earned on funds committed to the trading of the underlying contracts. The index is derived from the West Texas Intermediate (WTI) crude oil futures contract traded on the New York Mercantile Exchange. The fund is not diversified."
OK, I challenge anyone investing in OIL to restate that paragraph back to me in a manner to prove you understand what you are getting into. It's never been easier to invest in oil futures, everyone's doing it, everyone's getting rich! Well not so fast. Get ready for the next crash. The Crash of 1987 was largely caused by program selling of large lots of stocks. Who owned all these shares? Investors? Nope. Mutual funds. An investment vehicle that exploded in the 1980's ($48 billion in assets in the late 1960's - to $12.358 TRILLION in 2007). Computers executing programed selling went into a free fall. Since the system has installed "circuit breakers" of sorts. I'm not aware of any such safeguards for commodities investors. So, um, look out.

Other funds like USO, an ETF, that invests in futures contracts is also very likely to have an affect on oil prices. The inception date? April 10th, 2006. Check out it's chart here. Only up. When did gas prices start going up again. Hmmm. Average volume? Almost 10 million shares a day, times a price of over $100 and that's a billion dollars every day being traded in this fund.

Find out who's buying and selling OIL and USO. Is it individuals like you and me or institutional investors?
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Dude, where's my job?

Posted by Contrarian Guitarist on Saturday, June 07, 2008 1:17:11 AM
After watching this generalizing report on 60 Minutes a few months ago, I said to Mrs. Contrarian Guitarist, "What we need is higher unemployment, then the millennials will appreciate their jobs." Well 5.5 is a start.
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Inflation vs. Deflation

Posted by Contrarian Guitarist on Thursday, May 29, 2008 3:21:43 AM
I recently was reminded of a gag David Letterman did on his show back in his NBC days, that of an actual face-to-face duel between a humidifier and a de-humidifier. Clever bit. I'm afraid I can't recall which won.

OK. I believe we will see some softening of commodity prices. Oil, precious metals, grains, pork bellies (whatever those are). I agree with George Soros (first time for everything) that we are experiencing a commodities bubble. Bubbles burst.

It seems though in the meantime that everything is up. The cost of living is way up. Right? Or is it? What are most households largest expense? Their monthly rent/mortgage payment. A lot of emphasis has been placed on homeowners in trouble, what about renters who are going to buy in this buyers market. But houses are cheaper this year than they were last year. About 14%. If you can get into a $300,000 house at a 14% discount, you are saving around 42,000 smackeroos. That'll buy a lot of gas, gold, milk, eggs, tortillas, wood for the deck, metal for the shed, and still have some left over for the kids college education. Some areas have seen a much greater drop in prices, in other words "deflation". We are in a the midst of inflation-deflation duel.

Factor into that much lower interest rates (heck the Fed rate is down 60% in a year) and the savings is much greater!

If you add new home sales of about 1.2 million to existing home sales of about 6.1 million, that's 7.3 million projected in the next 12 months. What percentage of those are first time buyers? Don't know.

I imagine if we ran the numbers, over all, spread out over everyone, costs are down. This is why we don't have a technical recession. Banking turmoil rarely results in recession. Not in my lifetime anyway.
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