The manifestations of this free printing press are many: Any commodity priced in plentiful dollars will cost more. Crude is now $82; and Inflation Fears Send Gold to 27-Year High.
Why? One way to think about it is supply and demand. Print A LOT more dollars and each one is worth a little less. Or, consider it this way: Extracting Oil or Gold from the earth ain't easy: We have to explore for Oil, determine where it is, how deep, what quality, etc. Then we have to use lots of heavy machinery to extract it, ship it to where it gets processed, refined, used in chemical manufacturing. Some of it gets refined into gasoline, and it is then transported to a network of gasoline stations, and it gets pumped into your car -- all for less per gallon than diet Coke or peach Snapple!
For gold, the process is not all that dissimilar.
Just crank up the printing press: It's cheap and easy. But why should us gold and oil producers exchange our hard won commodities (it's hard work) for pieces of paper you people are simply cranking out for free? Either give us something of real value -- or instead, we will insist on more of your crappy little pieces of green paper.
Thus, the inflationary repercussions of a "free money" policy. In fact, every commodity that is priced in dollars can potentially see much higher prices: Gold, Oil, Wheat, Soybeans, Copper, Timber, Corn, etc.
It's easy to understand why inflation has been called The Cruelest Tax.
Thursday, September 27, 2007
when dollar fall, we pay higher price for commodities
The greenback has been in freefall, and that means the prices we (Americans) pay for commodities just go higher.
A few examples: Oil is at an all-time high, having broken through $83 last week. 2008 could be the year we see Crude hit triple digits. Gold is at a 28-year high, having broken through $735, with $800 a realistic possibility. Copper is soaring.
Agflation is very strong: Wheat recently made all-time highs, along with recent big moves in Orange Juice, Corn, and Soybeans. Dairy prices are out of control, up nearly 100% over 24 months.
A few examples: Oil is at an all-time high, having broken through $83 last week. 2008 could be the year we see Crude hit triple digits. Gold is at a 28-year high, having broken through $735, with $800 a realistic possibility. Copper is soaring.
Agflation is very strong: Wheat recently made all-time highs, along with recent big moves in Orange Juice, Corn, and Soybeans. Dairy prices are out of control, up nearly 100% over 24 months.
Wednesday, September 26, 2007
Current Economic Condition: how to invest
http://seekingalpha.com/article/47995-sell-the-u-s-market-before-october
Readers know of our incessant bleating about the worsening Economic Time in America.
But we are now on "red alert" for the current month of October - and suggest how to earn off this.
1. What is so bad about October?
Call it instinct. Many of the bigger market crashes have occurred in October, but nobody knows why. So we are just going to accept the reality of this perception.
What we would say is that finally, finally, markets have woken up to our long-held concerns about The Economic Time™ in America getting worse and worse.
Their next shock is another long-held belief of ours: stagflation is returning.
Those of us who survived the oil shocks of the seventies and eighties know this scenario: growth stops and inflation rises.
Inflation rises because of cost-push pressures. Today's cost-push pressures are:
Rising RMB. The avaricious politicians in Congress keep forcing China to revalue. That means that Chinese exports to America rise in cost.
Falling dollar. Besides, the rate cut in America implies that the USD has to fall more - as all superpower currencies do.
Rising commodity prices. Wheat, oil, gold - you name it, people are scrambling for safe havens.
Slower productivity growth. As suggested in The Economic Clock™ of America: unit labor costs are rising 6x faster than when they bottomed.
The bottom line: companies either pass higher costs on, or they don't. If they pass such higher input costs on, the Fed will have to tighten yet again. So down goes turnover. Alternately, if they don't pass these higher input costs on, with demand receding, their margins wilt. Either way, profits have to disappoint.
This stagflation scenario is going to start souring the market subconscious this month, so expect a bear run to follow. Initially, all markets will get hit. But America will get hit the longest and hardest...
2. How to Make Money Off This Idea
1. Always consult your financial advisor before investing!2. Buy commodity ETFs and individual commodities like gold, oil and wheat.3. Buy high yielding Asian currencies.4. Buy the Euro and Sterling.5. Buy a "short" ETF on the US stock market.6. Load up on China and Hong Kong.
Readers know of our incessant bleating about the worsening Economic Time in America.
But we are now on "red alert" for the current month of October - and suggest how to earn off this.
1. What is so bad about October?
Call it instinct. Many of the bigger market crashes have occurred in October, but nobody knows why. So we are just going to accept the reality of this perception.
What we would say is that finally, finally, markets have woken up to our long-held concerns about The Economic Time™ in America getting worse and worse.
Their next shock is another long-held belief of ours: stagflation is returning.
Those of us who survived the oil shocks of the seventies and eighties know this scenario: growth stops and inflation rises.
Inflation rises because of cost-push pressures. Today's cost-push pressures are:
Rising RMB. The avaricious politicians in Congress keep forcing China to revalue. That means that Chinese exports to America rise in cost.
Falling dollar. Besides, the rate cut in America implies that the USD has to fall more - as all superpower currencies do.
Rising commodity prices. Wheat, oil, gold - you name it, people are scrambling for safe havens.
Slower productivity growth. As suggested in The Economic Clock™ of America: unit labor costs are rising 6x faster than when they bottomed.
The bottom line: companies either pass higher costs on, or they don't. If they pass such higher input costs on, the Fed will have to tighten yet again. So down goes turnover. Alternately, if they don't pass these higher input costs on, with demand receding, their margins wilt. Either way, profits have to disappoint.
This stagflation scenario is going to start souring the market subconscious this month, so expect a bear run to follow. Initially, all markets will get hit. But America will get hit the longest and hardest...
2. How to Make Money Off This Idea
1. Always consult your financial advisor before investing!2. Buy commodity ETFs and individual commodities like gold, oil and wheat.3. Buy high yielding Asian currencies.4. Buy the Euro and Sterling.5. Buy a "short" ETF on the US stock market.6. Load up on China and Hong Kong.
what is ETF?
http://www.minyanville.com/articles/AMGN-DNA-CKFR-CP-TBH-QQQQ-AMGN-DNA-CKFR-CP/index/a/14233/from/yahoo
ETFs Explained
Scott Reeves Sep 26, 2007 2:15 pm
ETFs, including funds devoted to domestic and foreign stocks, have grown to about $488.8 bln since the first fund started trading on the American Stock Exchange in 1993.
ETFs, or Exchange Traded Funds, represent a basket of stocks and offer diversification that few investors can match on their own. ETFs aren't actively managed and this keeps costs low. Investors don't hold the shares directly. Instead, ETFs represent ownership shares in the fund that holds a portfolio of common stocks that track a market sector, index or international stocks. "The basic mistake individual investors make with ETFs is that they don't use them in accordance with their own asset allocation policy – many just buy an ETF at random," says Philip Yockey, president and chief investment officer at Tactical Analytics, an independent research company. "The reality is that not all ETFs are designed to be a buy-and-hold – not every asset class works 365 days a year." ETFs, including funds devoted to domestic and foreign stocks, have grown to about $488.8 bln since the first fund started trading on the American Stock Exchange in 1993. Mutual funds represent about $11.3 trln, the Investment Company Institute reports. An ETF can be bought and sold as a single security. Just about anything that can be done with shares of common stock can be duplicated with an ETF. Unlike a mutual fund, ETFs can be traded intraday, shorted and placed with stop or limit orders. Many funds offer options. Remember: Extensive trading will drive up your costs and erode your returns because most individual investors must go through a broker to buy into an ETF. But that doesn't mean ETFs are on automatic pilot and investors can buy and forget about their money. "In a bear market, it's silly for an investor to sit there and just grin and bear it and watch the investment go down the drain," Yockey says. "You've got to pay attention to ETFs just like anything else." Tactical Analytics offers a Web site, MarketMetre.com, that tracks the performance of ETFs and provides investors with information needed to make sound decisions. No one expects ETFs to slug it out with mutual funds for the affections – and assets – of individual investors. But if you're a long-term investor, ETFs offer distinct advantages, including low management fees and generally low exposure to capital gains. An ETF's diversification reduces risk without incurring upfront sales loads or redemption fees common to many mutual funds. ETFs enable investors to track just about any sector, including financial services, real estate, healthcare, technology, telecommunications, natural resources, utilities, semiconductors, software, biotech and manufacturing. Other funds track S&P indexes, the Russell 2000 and international equity indexes. The Nasdaq 100 Trust tracks the index and offers broad exposure to the technology sector. The funds can be equally weighted or based on other parameters such as market-cap, liquidity and price/earnings ratio. Most funds are sliced every which way, but some invest heavily in a few major stocks such as Amgen (AMGN), Genentech (DNA) or CheckFree (CKFR). An ETF investing in overseas stocks is likely to hold an array of stocks to limit volatility. But there are ETFs that track the new operations formed by the break-up of major foreign companies, including Brazil's telecommunications giant, Telebras, and Canada's Canadian Pacific Railway (CP). Another ETF tracks the stocks that comprise the Dow Jones Industrial Average. In general, index funds have a lower turnover than actively managed funds. Typically, this means lower capital gains taxes. However, ETFs may not be suitable for Mom and Pop because, in general, shares must be purchased in lots of 100. If an ETF's shares trade at $188.87, it would require an investment of $18,887, plus a broker's commission to participate. Investors can't make monthly contributions to an ETF without getting slapped with a broker's fee. This makes ETFs a bad choice for monthly employee contributions to a retirement or education fund. ETFs are dominated by institutional investors and hedge funds, but can make sense for individual investors. If you're thinking about an ETF, be sure to check the fund's holdings to see that it provides the diversification you seek. Investors putting their money in an obscure ETF may encounter liquidity troubles, but a quick review of a fund's daily trading volume should eliminate this potential problem. Some ETFs are eligible to receive dividends on the stocks held in trust, less fees. Read the prospectus to see if stocks held in the fund pay dividends.ETFs can be purchased on margin. Contact your broker about margin requirements and fees. ETFs don't deal directly with shareholders, cutting cost. However, you must buy and sell through a broker. If dealing in small amounts, this drives up the cost of trading and erodes returns. If you're a day trader and flip stocks quickly, ETFs probably aren't for you. But if you're a long-term investor, give ETFs a long look.Like any other investment, do your homework. Start by reading the prospectus, a basic step some individual investors apparently skip in their haste to get in on what they see as the next big thing. Be mindful of cost and always keep an eye on your money
ETFs Explained
Scott Reeves Sep 26, 2007 2:15 pm
ETFs, including funds devoted to domestic and foreign stocks, have grown to about $488.8 bln since the first fund started trading on the American Stock Exchange in 1993.
ETFs, or Exchange Traded Funds, represent a basket of stocks and offer diversification that few investors can match on their own. ETFs aren't actively managed and this keeps costs low. Investors don't hold the shares directly. Instead, ETFs represent ownership shares in the fund that holds a portfolio of common stocks that track a market sector, index or international stocks. "The basic mistake individual investors make with ETFs is that they don't use them in accordance with their own asset allocation policy – many just buy an ETF at random," says Philip Yockey, president and chief investment officer at Tactical Analytics, an independent research company. "The reality is that not all ETFs are designed to be a buy-and-hold – not every asset class works 365 days a year." ETFs, including funds devoted to domestic and foreign stocks, have grown to about $488.8 bln since the first fund started trading on the American Stock Exchange in 1993. Mutual funds represent about $11.3 trln, the Investment Company Institute reports. An ETF can be bought and sold as a single security. Just about anything that can be done with shares of common stock can be duplicated with an ETF. Unlike a mutual fund, ETFs can be traded intraday, shorted and placed with stop or limit orders. Many funds offer options. Remember: Extensive trading will drive up your costs and erode your returns because most individual investors must go through a broker to buy into an ETF. But that doesn't mean ETFs are on automatic pilot and investors can buy and forget about their money. "In a bear market, it's silly for an investor to sit there and just grin and bear it and watch the investment go down the drain," Yockey says. "You've got to pay attention to ETFs just like anything else." Tactical Analytics offers a Web site, MarketMetre.com, that tracks the performance of ETFs and provides investors with information needed to make sound decisions. No one expects ETFs to slug it out with mutual funds for the affections – and assets – of individual investors. But if you're a long-term investor, ETFs offer distinct advantages, including low management fees and generally low exposure to capital gains. An ETF's diversification reduces risk without incurring upfront sales loads or redemption fees common to many mutual funds. ETFs enable investors to track just about any sector, including financial services, real estate, healthcare, technology, telecommunications, natural resources, utilities, semiconductors, software, biotech and manufacturing. Other funds track S&P indexes, the Russell 2000 and international equity indexes. The Nasdaq 100 Trust tracks the index and offers broad exposure to the technology sector. The funds can be equally weighted or based on other parameters such as market-cap, liquidity and price/earnings ratio. Most funds are sliced every which way, but some invest heavily in a few major stocks such as Amgen (AMGN), Genentech (DNA) or CheckFree (CKFR). An ETF investing in overseas stocks is likely to hold an array of stocks to limit volatility. But there are ETFs that track the new operations formed by the break-up of major foreign companies, including Brazil's telecommunications giant, Telebras, and Canada's Canadian Pacific Railway (CP). Another ETF tracks the stocks that comprise the Dow Jones Industrial Average. In general, index funds have a lower turnover than actively managed funds. Typically, this means lower capital gains taxes. However, ETFs may not be suitable for Mom and Pop because, in general, shares must be purchased in lots of 100. If an ETF's shares trade at $188.87, it would require an investment of $18,887, plus a broker's commission to participate. Investors can't make monthly contributions to an ETF without getting slapped with a broker's fee. This makes ETFs a bad choice for monthly employee contributions to a retirement or education fund. ETFs are dominated by institutional investors and hedge funds, but can make sense for individual investors. If you're thinking about an ETF, be sure to check the fund's holdings to see that it provides the diversification you seek. Investors putting their money in an obscure ETF may encounter liquidity troubles, but a quick review of a fund's daily trading volume should eliminate this potential problem. Some ETFs are eligible to receive dividends on the stocks held in trust, less fees. Read the prospectus to see if stocks held in the fund pay dividends.ETFs can be purchased on margin. Contact your broker about margin requirements and fees. ETFs don't deal directly with shareholders, cutting cost. However, you must buy and sell through a broker. If dealing in small amounts, this drives up the cost of trading and erodes returns. If you're a day trader and flip stocks quickly, ETFs probably aren't for you. But if you're a long-term investor, give ETFs a long look.Like any other investment, do your homework. Start by reading the prospectus, a basic step some individual investors apparently skip in their haste to get in on what they see as the next big thing. Be mindful of cost and always keep an eye on your money
Friday, September 14, 2007
tanganykan cichlids
Hello,
www.cichlid-forum.com
they deleted my post.
because they do not believe in my strategy on how to keep a low maintenance freshwater aquarium, free of diseases and ailments.
Later, I willshow my pictures and my strategy on this blog.
Thanks,
Chip
www.cichlid-forum.com
they deleted my post.
because they do not believe in my strategy on how to keep a low maintenance freshwater aquarium, free of diseases and ailments.
Later, I willshow my pictures and my strategy on this blog.
Thanks,
Chip
Tuesday, August 21, 2007
The Fed Prepares the Bailout Bucket
Seeking AlphaThe Fed Prepares the Bailout BucketTuesday August 21, 3:41 am ET
Markham Lee submits: The big news on Wall Street last Friday was that the Fed cut the discount rate.
From Bloomberg:
The Federal Reserve unexpectedly cut its discount rate and said it's prepared to take further action to "mitigate'' damage to the economy from the rout in global credit markets.
The central bank reduced the rate at which it makes direct loans to banks by 0.5 percentage point to 5.75 percent. Policy makers kept their benchmark federal funds rate target unchanged at 5.25 percent. It's the first reduction in borrowing costs between scheduled meetings of the Federal Open Market Committee since 2001 and Ben S. Bernanke's first as Fed chairman.
The Fed also noted:
The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets.
[...]
These changes are designed to provide depositories with greater assurance about the cost and availability of funding.
This statement was in response to the fact that many banks are increasingly unwilling to let hedge funds and other institutional investors use credit portfolios as collateral for loans. However, it doesn’t address the fact that many banks are employing common sense by being wary of loans backed by debt securities, after scores of institutional investors lost billions due to improperly valuing debt securities and then borrowing against them.
The rate cut led to a wild ride for many beleaguered financial stocks, with many rocketing up in early morning training, prior to settling down by close, but still up for the day.
click to enlarge
It appears, for now, that Wall St. may indeed get the Federal Reserve bailout it was praying for with the first round occurring today. If the Fed’s goal was to restore investor confidence, the early returns show that we’re headed in that direction (for now at least). Only time will tell if we’re able to turn the momentum from Thursday afternoon and Friday morning into a long-term rally.
My thoughts on the rate cut are as follows:
1) The biggest beneficiaries are going to be companies like Countrywide (NYSE: CFC - News) and Thornburgh Mortgage (NYSE: TMA - News); profitable on the bubble companies that were in danger of becoming victims of the credit crunch. For Countrywide in particular, the rate cut should give them the breathing room necessary to make the transition to funding their loans via Countrywide FSB and/or originating loans that can be sold to the Mortgage GSEs.
2) It doesn’t change much and in many ways, it’s just a placebo. Lower rates can’t truly raise investor confidence when investors worldwide are still losing money due to mortgage debt securities, loan defaults, and accelerating losses. In addition, hedge funds and other institutional investors are still over-leveraged on mortgage debt securities, etc.
3) Once the excitement dies down and bad news related to mortgage lenders, retail bank loan losses, and credit markets continues to pour in, we could see things reverse drastically.
4) We’re on a potentially dangerous sliding slope right now, because if the Fed decides to “fix” the credit crisis via multiple rate cuts. It’s basically sending the message that the Fed is going do what it can to create the level of confidence required to enable the credit markets to function as if it was 2004. The long-term consequences of this action would be rather disastrous as low rate cuts coupled with bad business practices are what got us into this situation.
The rate cut is here, but it still doesn’t change the real question “What is going to be done about the assumptions, lending standards, and business practices that created this mess in the first place?” There is a lot of talk and thought going into short-term solutions, but not enough into long-term solutions that would prevent a credit crunch from happening in the first place.
Markham Lee submits: The big news on Wall Street last Friday was that the Fed cut the discount rate.
From Bloomberg:
The Federal Reserve unexpectedly cut its discount rate and said it's prepared to take further action to "mitigate'' damage to the economy from the rout in global credit markets.
The central bank reduced the rate at which it makes direct loans to banks by 0.5 percentage point to 5.75 percent. Policy makers kept their benchmark federal funds rate target unchanged at 5.25 percent. It's the first reduction in borrowing costs between scheduled meetings of the Federal Open Market Committee since 2001 and Ben S. Bernanke's first as Fed chairman.
The Fed also noted:
The Federal Reserve will continue to accept a broad range of collateral for discount window loans, including home mortgages and related assets.
[...]
These changes are designed to provide depositories with greater assurance about the cost and availability of funding.
This statement was in response to the fact that many banks are increasingly unwilling to let hedge funds and other institutional investors use credit portfolios as collateral for loans. However, it doesn’t address the fact that many banks are employing common sense by being wary of loans backed by debt securities, after scores of institutional investors lost billions due to improperly valuing debt securities and then borrowing against them.
The rate cut led to a wild ride for many beleaguered financial stocks, with many rocketing up in early morning training, prior to settling down by close, but still up for the day.
click to enlarge
It appears, for now, that Wall St. may indeed get the Federal Reserve bailout it was praying for with the first round occurring today. If the Fed’s goal was to restore investor confidence, the early returns show that we’re headed in that direction (for now at least). Only time will tell if we’re able to turn the momentum from Thursday afternoon and Friday morning into a long-term rally.
My thoughts on the rate cut are as follows:
1) The biggest beneficiaries are going to be companies like Countrywide (NYSE: CFC - News) and Thornburgh Mortgage (NYSE: TMA - News); profitable on the bubble companies that were in danger of becoming victims of the credit crunch. For Countrywide in particular, the rate cut should give them the breathing room necessary to make the transition to funding their loans via Countrywide FSB and/or originating loans that can be sold to the Mortgage GSEs.
2) It doesn’t change much and in many ways, it’s just a placebo. Lower rates can’t truly raise investor confidence when investors worldwide are still losing money due to mortgage debt securities, loan defaults, and accelerating losses. In addition, hedge funds and other institutional investors are still over-leveraged on mortgage debt securities, etc.
3) Once the excitement dies down and bad news related to mortgage lenders, retail bank loan losses, and credit markets continues to pour in, we could see things reverse drastically.
4) We’re on a potentially dangerous sliding slope right now, because if the Fed decides to “fix” the credit crisis via multiple rate cuts. It’s basically sending the message that the Fed is going do what it can to create the level of confidence required to enable the credit markets to function as if it was 2004. The long-term consequences of this action would be rather disastrous as low rate cuts coupled with bad business practices are what got us into this situation.
The rate cut is here, but it still doesn’t change the real question “What is going to be done about the assumptions, lending standards, and business practices that created this mess in the first place?” There is a lot of talk and thought going into short-term solutions, but not enough into long-term solutions that would prevent a credit crunch from happening in the first place.
Thursday, August 16, 2007
Credit Crunch
Combined with the mortgage ills of late, it's all starting to look like a perfect storm for real estate. Consider how the chain of events may be playing out. A builder sets out to construct a new house. In recent years, there was no trouble finding willing buyers who would sign a contract to pay, say, $500,000 nine month from now, when the home was finished. Between today and nine months from now, there was a halfway decent chance that the $500,000 house would be worth more. That combined with easy credit made banks and other financial institutions eager to back the home buyer with a loan, regardless of the buyer's credit history. The deal was beneficial for all involved.
But the game has changed. The builder isn't so sure that he'll have a buyer who can find the necessary credit. One reason: it's not clear that the $500,000 house will be worth $500,000 nine months from now. And with mortgages tougher to come by, it's a lot easier to delay purchases, which only inspires builders to become defensive and cut back on construction plans.
But the game has changed. The builder isn't so sure that he'll have a buyer who can find the necessary credit. One reason: it's not clear that the $500,000 house will be worth $500,000 nine months from now. And with mortgages tougher to come by, it's a lot easier to delay purchases, which only inspires builders to become defensive and cut back on construction plans.
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