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Weekend Reading – Gee, 20 Hundred Billion More Stimulus?

MORE FREE MONEY!

According to CNBC, the G20 is now considering a $2Tn rescue fund for EU bailouts, double the $1Tn they put in during the crisis in 2008.  Of course the markets plunged in 2009 as it occurred to people that, if the banks needed $2Tn to be rescued, then we were in what leading economists refer to as "deep shit."

The plan is to combine the EFSF and the ESM to create a 1 Trillion Euro fund ($1.34Tn) and to augment that with the other $700Bn coming through the IMF (on top of the $350Bn already pledged).  While $2,000,000,000,000 is a staggering amount of money – enough money to more than double the net worth of the bottom 40% of the planet – but, is it enough?  

It's enough to kick the can down the road but Greece alone is $500Bn in debt and Ireland alone owes well over $2Tn externally (mostly to England), Italy owes $2.6Tn externally and $400Bn just to France and Spain is also at $2.6Tn of debt owed to other nations but they spread the pain around pretty evenly by comparison.  That's the damages in the PIIGS before we even get to France ($5.6Tn), Germany ($5.5Tn), the UK ($9.8Tn) and, of course, the United States, which owes over $1Tn to Japan and the UK and another $2.5Tn to China within their $15Tn external debt load.  How's that $2Tn looking now?  

So let's not confuse can kicking with "fixing" as there is NOTHING about this $2Tn that fixes anything but the ability to roll over that $40Tn for another year.  Unfortunately, in another 12 months, some portion of the $120Tn of unfunded liabilities that no one likes to discuss will also drop to the bottom line.  The US alone will add over $2Tn of additional debt in 2012 and about $5Tn is expected of the others – but that was before they all pledged this new $2Tn that they will be lending themselves to pay themselves for the old debt while the add on new debt.  

The gasoline riddleLet's keep in mind that the source of this "news" about $2Tn in aid is CNBC and, as of 8pm on Sunday, it's still not confirmed by legitimate news sources.  Of course, CNBC is nothing more than the propaganda station for the top 1% and their agenda, differentiated from Fox only by the fact that Fox has shows like the Simpsons and Family Guy while CNBC has ridiculous cartoon characters like Kudlow and Cramer.  

While tension over Iran has ratcheted up over the last few months, the price of oil and gasoline has leaped far beyond conventional supply and demand variables. Financial speculators are piling into the market, egged on by CNBC in particular, torquing the Iranian fear factor into ever-higher prices.

"Speculation is now part of the DNA of oil prices. You cannot separate the two anymore. There is no demarcation," said Fadel Gheit, a 30-year veteran of energy markets and an analyst at Oppenheimer & Co. in a great McClatchy research article on the subject, "I still remain convinced oil prices are inflated."

"These people (Wall Street Oil Traders) are not there to be heroes. They are there to make money. It's our fault because we are allowing them to do that," said Gheit. "Obviously these people are very strong, and the financial lobby is the strongest of any single lobby. I've been in this business 30 years, and I can tell you I think this is smoke and mirrors."

Read more here: http://www.mcclatchydc.com/2012/02/21/139521/once-again-speculators-behind.html#storylink=cpy

Let's keep in mind though, that just because we know a thing is being done with smoke and mirrors does not stop David Copperfield from making an Elephant disappear on stage.  We know it's a trick but we sure can't stop it from happening and we sure can't find the elephant and we sure can't make it come back.  Only if the audience stops the show, storms the stage, turns on the house lights and turns the theater upside down will we find the elephant and reveal the trick but – as noted by Gheit – they've been running this show for 30 years and the US Energy Cartel is strong enough that no one is going to stop this show – so we'll have to let it run it's course until the people tire of the same old tricks over and over again.

That's why USO was one of our top 10 picks in Wednesday's post.  It was just $40.58 at the time, now $42 but the June $40/46 bull call spread is still $2.40 (up 20%) and the short SCO Oct $26 puts are $3.20 (down 6.66%) so a net .20 change on the overall trade.  At some point between now and June, we do think oil prices will collapse but we could be wrong so it's good to have a long-term bullish trade to offset some of our short-term bearishness.   

Now, on to Berkshire!  As noted right at the top of their annual report, they have beaten the S&P's "book value" by an average of 10.6% a year since 1965 (46 years) and the net effect of that is that $1 has become $63.97 on the S&P over that time but $5,130.55 with Berkshire – what a difference 10% makes!  After outperforming the S&P by 27% in 2008, Berkshire has fallen behind the past 3 years.  This is not because Buffett is losing it but because Buffett's style, like ours, is not to chase rallies.  When stocks are cheap, we buy them – not sell them.  When stocks are expensive, we sell them – not buy them.  This is not a popular approach but it does tend to get the job done over the long haul.  

Buffett highlights the acquisition of Lubrizol and it should be noted that, when Berkshire acquires a company like that, they are acquiring CEO James Hambrick and his management team with the intention of giving him access to capital to expand his business.  Already they have done 3 acquisitions for $493M because Berkshire is structured in such a way that there is no red tape between identifying a good opportunity and closing on the contracts – no one is more efficient at it than Buffett and Berkshire.  This gives them huge advantages as they are taken seriously as CEOs all over the World go to bed at night dreaming they will be woken up by a phone call from Warren Buffett.  

Berskshire's insurance division made $9Bn (pre-tax) last year.  In 2004, they only had one insurance company that made $393M.  What happened in 2005?  Katrina and Rita.  Insurance companies went on sale and no one would touch them – except Buffett, who is very proud that his operating companies spent $8.2Bn for property, plant and equipment in 2011, 95% of it in the USA and expects to top that record in 2012.  

Buffett is, of course, with us on our Bank of America deal.  While we used option spreads to maximize our upside potential, Buffett went with $5Bn of 6% preferred stock and warrants to buy 700M more shares at $7.14 (another $5Bn) ANYTIME before Sept 2nd, 2021 – now THAT'S a cheap call!  

Berkshire also accumulated 63.9M shares of IBM at $10.9Bn ($170.57/share), which is 7.6% and makes him the largest shareholder of IBM, as well as AXP (8.8%), KO (5.5%) and WFC (7.6%).  Keep in mind that the profits from the shares of these and many other stock holdings are unrealized and are not reflected as company profits (like our Income Portfolio).  As with our Income Portfolio – Warren just likes to build positions in companies that will pay dividends for the long haul.  

There is an excellent section, beginning on page 6 and through 7 where Buffett explains something I am constantly trying to get Members to understand – PRICE is not important.  When you like a stock, you want it to go DOWN in PRICE so you can buy more of it for less money.  The VALUE does not change (assuming no change in circumstances) just because a stock is in or out of favor.  As Buffett says:  

The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition)The logic is simple: If you are going to be a net buyer of stocks in the future, either directly with your own money or indirectly (through your ownership of a company that is repurchasing shares), you are hurt when stocks rise. You benefit when stocks swoon. Emotions, however, too often complicate the matter: Most people, including those who will be net buyers in the future, take comfort in seeing stock prices advance. These shareholders resemble a commuter who rejoices after the price of gas increases, simply because his tank contains a day’s supply.

Charlie and I don’t expect to win many of you over to our way of thinking – we’ve observed enough human behavior to know the futility of that – but we do want you to be aware of our personal calculus. And here a confession is in order: In my early days I, too, rejoiced when the market rose. Then I read Chapter Eight of Ben Graham’s The Intelligent Investor, the chapter dealing with how investors should view fluctuations in stock prices. Immediately the scales fell from my eyes, and low prices became my friend. Picking up that book was one of the luckiest moments in my life.

I do expect to win many of you over, so I urge you to read Berkshire's report in detail and Graham's book if you are so inclined as well.  Keep in mind that Value Investors are not short sellers – it is more of a patience game.  We made our first buy in the income Portfolio in over 3 months last week as the S&P showed a little strength at our breakout lines.  I hope we have reasons to do a little more buying next week – I'm still a bit skeptical but we'll just have to go with the flow at this point.  


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  1. stjeanluc

    The weekend portfolio update can be found at:

    http://www.philstockworld.com/2012/02/26/weekend-virtual-portfolio-update-2262012/

    I had not published an update for 3 weeks so lots of changes…

    As an aside and it is not a virtual portfolio, we have with a couple of members tried some earnings strangles over the last week or so and here are the results for reference:

    2/17 BKS Mar 10/16 Strangle – $1.00 now $0.35
    2/17 CAKE Mar 28/36 Strangle – $0.87 now $0.35
    2/22 GDP Mar 15/20 Strangle – $0.60 now $0.52
    2/22 ESRX Mar 47.5/57.5 Strangle – $1.50 now $1.21
    2/23 DECK Mar 75/105 Strangle – $1.90 now $1.95 (could be bought back for 1.37 at the open)
    2/23 CROX Mar 18/23 Strangle – $0.77 now $0.30
    2/23 CRM Feb4 115/150 Strangle – $1.00 expired worthless.

    All could have been closed the day after for a profit although smaller than today. The goal of these trades is to take advantage of the volatility crush that happens once earnings have been released. It does work better with weekly options like CRM because the crush is that much more violent. But as we warn, these should be very small bets as they are quite risky.

    I also talked about a trade on SHLD (Feb4 45/60 Strangle) but Phil mentioned that it was a crazy stock so everybody who played that was warned – and it did blow up. They are running that business not as a retail (they lose money) but as hedge fund, selling assets to generate cash. The puts did expire worthless and the 60 calls could be rolled to the Mar 62.5 even while we wait for sanity to take hold…. If you look at options in future months (looking at rolls), they seem to indicate little confidence that the stock will continue on a great upward move.

  2. stjeanluc

    Jim Morin

  3. alik

    Hello Phil, Is this a time to go short on FXY? If yes, then what is the best way of doing it?
    Also, would you recommend going long TBT on expectations of a massive QE?

  4. pstas

    BRK/B- some updated numbers based on recent annual report:

     

    2/24/12

    2011

    2010

    2009

    2008

    2007

     

     

    BV

    99.8

    99.8

    95.5

    84.5

    70.5

    78.0

     

     

    $-B Sh

    80

    76.5

    80.3

    66.13

    64.4

    94.72

     

     

    Pr/Book

    1.2

    1.15

    1.26

    1.17

    1.37

    1.82

     

     

    For comparison- the 25 year avg is 1.63; The high was 2.23 in1995; The low was 1.17 in 2009.

  5. zeroxzero

    Ah, good morning here, your "Specialness" checking in.  It's pure pap, you know.  I was neither born into a wealthy family — my grandmother carried water up the mountain in her native [European] village — nor given a nickle of inheritance.  The U.S. government paid for my overseas schools because my father was in the foreign service.  I waited tables, scooped ice cream, cleaned bathrooms, worked jobs at all times during college and law school, the latter getting out of class at 5 and working in a bar until 2AM.  Factory assembly line work, gas stations — I didn't have a job wearing a tie until after my second year of law school.  So your imagined construct of my life is just that, a convenient straw man as a target for your ideological arrows.  But facts have very little to do with professional debating, or legal cases, for that matter — we were taught to make "the weaker argument the stronger,"  were we not?
     
     But I only do that if I get paid for it.  On my own time, I think I'm more honest, more balanced, and a lot less partisan than you --, I don't seem to have your underlying ressentiment, and think that your ad hominen approach to debate reflects your particular psychopathology, not mine.  Not that it bothers me — it's a rough and tumble world, and you make many good points, but, you are, after all, closer to being an arch-capitalist than a Peace Corp worker, so I wonder how you reconcile what you do with what you believe.  I know you are thinking you are helping the "little people" — it's the subtitle of your website — but I know an awful lot of "little people", having spent a third of my life in the Third World [sounds archaic, doesn't it?], and not many of them can afford to open an options account.  Peace, brother….

  6. pstas

    thought I could post that from Word w/o the format issues.
    If someone would like to post the table, I can email the exel file.
     

  7. pstas

    ZXZ- Welcome . You are now an official member of the Punching Bag Club. Very exclusive. No acolytes need apply.

  8. lflantheman

    Now THIS   http://news.yahoo.com/penn-judge-muslims-allowed-attack-people-insulting-mohammad-210000330.html
    might put your knickers into a knot!

  9. rdn4evr

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    History – Thanks Phil, Jmm, Jromeha, Newbie and Snow for all the great book suggestions (just downloaded the HGWells).   I didn’t mean to disparage Spanish, and he’ll certainly continue taking it, just not the AP version, buti it’s not the best use of his high school coursework.  As we live in a part of West LA where the local high school gets an API rating of 2 out of 10, 10 being the best, he is attending a private college-prep high school.  In addition to the $16,000 tuition, which is considered “reasonable” for LA, his school is located near downtown, which necessitates a 2-hour round-trip to pick him up in traffic.   My mom had it easy, she just waved me off on my bike to my local top-ranked high school back in the golden age of California public schools.  Now I feel that I have a bit more skin in the game and want to make sure he gets the most out of this experience.

  10. Phil

    Thank StJ! 

    FXY/Alik – The time was when the BOJ announced they would do anything to weaken the Yen at the beginning of the month.  They dropped a lot already and may drop a lot more as they seem to have found a winning formula but currencies are so crazy I don't see how you can pick them.  TBT has been a widow-maker with the Fed controlling TLT, our new system is to go long TLT at $116 and short at $123 – seems to work very well so far but we jump out at $118 on the way up as the real pressure is for TLT to go down (reality) not up (the Fed, panic).  

    Berkshire/Pstas – Seems like a better buy than the S&P to me.  I think they have a 10% pop in them if the markets keep going.  You can sell the 2014 $70 puts for $5 and buy the June $75s for $6.80 with no offset and it's $1.80 of premium that should be mostly paid for by the decay on the $70s over 6 months (assuming Berkshire holds $80) and you get most of any move up with a .80 delta.  As long as you stop out the longs at $3, the only risk is owning BRK.B for less than net $72. 

    Special/ZZ – Well I'm trying to move on and be productive but I don't know or care how you were born.  I assumed you had a fantastic life story full of triumph that backs up how superior you are to the ordinary people, who could never accomplish what you did given the same opportunity – so why bother?  Only you could have come from humble beginnings and worked your way to success and those that didn't are weak or lazy and need to be led by guys like you – yes, I get it.   I know I'm conflicted – we discuss it all the time.  No, I don't go to Nigeria to teach pig farmers option trading but I do lobby to get money to help them build a well in their town and I do my best to make people in this country, who otherwise might not give it a second thought – to perhaps consider giving a little something back to the World.  If you want to crucify me for that, go ahead – whatever makes you feel better.  I say help people and you say they aren't worth helping – our readers are free to decide for themselves whether or not it's worth the effort, aren't they?  

    PBC/Pstas – First rule of PBC – don't talk about PBC! 

    Muslims/lflan – Yes, they are foaming at the mouth over this one on Fox.  As it says in the article, "Judge Martin stated that the First Amendment of the Constitution does not permit people to provoke other people."  That's not invoking Sharia Law, it's upholding our existing ones.  Why is it OK for some guy to mock Muhammad – remember the uproar over Mapplethorpe's images of Christ?  What if the guy was marching with Nazi banners?  We do have lines of decency but it will be interesting to see where this goes.  I'm not on either side of this one, it is very much like Mapplethorpe as I can certainly sympathize with people who feel that it's an unacceptable form of expression but, then again, it is a form of expression and what's more important in our supposedly open society?  Perhaps we need to point out to immigrants that, inside the US, we can make fun of their religion in any way we see fit but, if that's the case – we'd better get the memo out to the church leaders as well, right?   Of course, this is an important point: 

    It should be noted that another atheist, dressed as a Zombie Pope, was marching beside the Zombie Muhammad. No outraged Catholics attacked him.

    South Australian police raid bookshop and seize Mapplethorpe's Pictures

     

    Let he who is without over-reaction cast the first stone…

  11. joemayo

     Paul Tudor Jones  closing the Robin Hood Foundation breakfast
    http://www.robinhood.org/bulletins/2011-heroes-breakfast—closing-remarks.aspx

  12. tophytooth

    Wow! Went away for the weekend and came back to great political debate! Phil you are enlightening me with your social insight. I consider myself me "conservative" but I deal with everyday people daily. The ability of people to get decent paying jobs has ruined the lower/ middle class. That's why I am psyched about the " building a better Berkshire" idea of giving back. Any updates?

  13. tophytooth

    BTW, I am an "everyday" person who does deeply discounted, aka free, dental work on many families in my community.

  14. newbie

    zero / life history
    Thank you VERY much for posting a few details about your life history. I wish that we (I) knew more of that sort of thing about our more of our fellow members here.
    I am NOT a person of means. In fact, the last 5 or 6 years have been a major "reversal" in my life, as I have become 100% disabled (possibly permanently) and through no fault of my own character or efforts in life. I have gone from, at the high point, earning a mid $50k salary to now living on a very small Social Security Disability payment. It's a long fall. Extremely difficult to adapt to, especially since my own internal "drive" to work hard and excel still exists, I just don't have the abilities to put them into practice.
    Like you, I "worked" my way out of being destitute at the age of 18, through a long, long series of very hard and very low paying jobs, over many many years. Like you, I had/got nothing from my parents. Left home at 18 with $15, a sleeping bag, and the clothes I was wearing. Eventually, (it took about 25 years) I reached the point of being in the "lower middle class" category. I became a Senior Engineering R+D Technician at a medical device company (having started there as a temporary assembler), and after that I eventually became a Systems Administrator (Computer systems) at a publishing company. Like you, I have done so many low paying jobs that I can barely remember them all. Warehouse worker ($2.25 per hour in 1975), busboy. waiter, taxi driver (12 hours per day, 6 days a week, for two years, making almost no money) assembler (several times), factory worker (loud, noisy, and dangerous-3rd shift), and many many others.
    I have been "laid off" probably a dozen times. Actually fired only a couple. And I can honestly say, and this is for real, that I don't think a SINGLE ONE of the times I was laid off was I under performing in my work. But companies decline, loose out to competition, have incompetent-shortsighted-sometimes overly greedy managements, go through recessions (1981 was absolutely brutal for me), etc. I was with Control Data for 7 years and got laid off twice. When I joined them, they had 55,000 people worldwide. Shortly after being laid off the second time, they sold off most of the company and became Ceridian, with 300 employees. So it can not be said that the 54,700 people who over time lost their jobs were all lazy, incompetent, or poor performers. In fact, I received SEVERAL awards for outstanding achievement while I worked there, but that made no difference in the end.
    So, thanks for sharing some of your details. I enjoy reading all the different points of view that people have here regarding philosophies of work, advancement, character, economic factors, what people "deserve", the differences between the quality of a persons character versus how much money they have or earn, etc. 99% of the time I am in Phil's camp. Sometimes it grates on me to hear people who are quite well off express the attitude that "I did it, so everybody else can too, if they weren't a bunch of lazy slackers". It's a little more complicated than that, but I'm sure we'll all have opportunities to explore those ideas here, in the future.
    Peace

  15. rdn4evr

    History – Thanks Phil Jmm, Jromeha, Newbie and Snow for all the great suggestions (just downloaded the HG Wells).  I tried to post a longer version of this earlier copied from Word, but it never showed up.

  16. jmm1951

    Phil/Thomas Jefferson's children
     
    I don't know. Jefferson was 40 when his wife died and the slave Sally Hemings was her half-sister. Jefferson was at Monticello when all of Hemings children were conceived and she did not conceive any when he was not there. DNA tests have shown  a Hemings descendant to be of the male Jefferson Y chromosome line.
     
    In September 1802, political journalist James T. Callender, a disaffected former ally of Jefferson, wrote in a Richmond newspaper that Jefferson had for many years "kept, as his concubine, one of his own slaves." "Her name is Sally," Callender continued, adding that Jefferson had "several children" by her.
    Although there had been rumors of a sexual relationship between Jefferson and an enslaved woman before 1802, Callender's article spread the story widely. It was taken up by Jefferson's Federalist opponents and was published in many newspapers during the remainder of Jefferson's presidency.
    Jefferson's policy was to offer no public response to personal attacks, and he apparently made no explicit public or private comment on this question (although a private letter of 1805 has been interpreted by some individuals as a denial of the story). Sally Hemings left no known accounts.
    Jefferson's daughter Martha Jefferson Randolph privately denied the published reports. Two of her children, Ellen Randolph Coolidge and Thomas Jefferson Randolph, maintained many years later that such a liaison was not possible, on both moral and practical grounds. They also stated that Jefferson's nephews Peter and Samuel Carr were the fathers of the light-skinned Monticello slaves some thought to be Jefferson's children because they ressembled him.
    However, there is a strong possibility that Jefferson's younger brother Randolph fathered the children.
    Anyway I have always thought of this as potentially a rather beautiful love story rather than a scurrilous slander. Clearly back in those days there was a great deal of the love that dared not speak its name, and it wasn't homosexuality

  17. jmm1951

    Phil/H.G. Wells on Mohammed
     
    This is possibly why the multimillion bestseller is not used as a school textbook:
     
    Then for four years more until his death in 632, Muhammad spread his power over the rest of Arabia. He married a number of wives in his declining years, and his life on the whole was by modern standards unedifying. He seems to have been a man compounded of very considerable vanity, greed, cunning, self-deception and quite sincere religious passion. He dictated a book of injunctions and expositions, the Koran, which he declared was communicated to him from God. Regarded as literature or philosophy the Koran is certainly unworthy of its alleged Divine authorship.

  18. newbie

    Phil / Tudor
    Do you know of any "biographies" or similar books about or of him? I've read the chapter on him in one of the Wizards books (which was hilarious-arriving at a cocktail party in a helicopter), but aside from a few limited articles on the web I haven't seen much of value written about him.
    I was extremely surprised (from viewing the video referenced above) to learn that he had an active social conscience and was  using not only his own wealth, but also using his personal time and his expertise to help make things better for some people.
    It is kind of interesting when, at various times, I find out about ultra rich who are doing social philanthropy (I'm not talking about donating to orchestras and museums) but that they are often "under the radar".  Not looking for adoration or attention.
    I recently read, within the last few days, and I think it was somewhere in PSW (although maybe it was someplace else) the cliche that "money changes people" (implying for the worse). Maybe that is often true, but I don't think it is necessarily universal. Although it is easy to say now, I think that if I became worth hundreds of millions, it would not damage my soul. I firmly believe I would be at least as good a person as I am, and would have not only the same level of consciousness that I do now, but probably much greater.
    For me personally, and I'm sure it varies for everybody, it would not take a *whole lot* of money for me to feel like I could have anything in the world that I could possibly want, for myself, my family, and to help close friends who I care about. If I had enough money to have a very comfortable house (not a mansion), to be able to eat the best food available to buy at the grocery store, to not have to be concerned about affording great health care, and to have enough money to be "secure" for life in a comfortable but not ostentatious way, I think I would be satisfied with that.
    AS I pointed out in one of my comments within the last few days in the threads, one of the most cogent things I've heard you say is (paraphrasing): "all I know is that if I lived behind that wall, I couldn't life with myself".
     I could not live with myself if I had a 40 foot yacht on the St. Croix river (the place on the Minnesota-Wisconsin border where the megarich have their yachts parked).
    I could not live with myself if I lived in a mansion that had marble floors. Marble floors?? I mean, Jeez…….
    I could not live with myself if I had a maid who I was paying $10 an hour to do my laundry, while I flew my private Gulfstream to Paris for lunch.
     
    There are the megarich (I'm talking a billion dollars of liquid net wealth) who literally hoard it, and have the temerity to castigate the lower working class. Then there are the Paul Tudor Jones'es, who understand and accept that their wealth may have come mostly through hard and brilliant work, but that they could not have done it without taxi drivers and waiters, as I've pointed out here before. Jones will always be as comfortable as he chooses to be, living any lifestyle he wants. But he also knows that the resources he controls that are above and beyond what he needs for himself, family, and cared for friends can be used for better purposes than sitting in the Caymans making 10% that is little more than an entry on a ledger to him. I mean, if you die with 20 million, or you die with 2 billion, you're still diying with more excess than can be meaningful to you in any way.
    I could go on, and probably will over time, in the right places and contexts, but I also know I'm not saying anything you don't know. Just wanted to be one more of those who are vocal in agreeing with much of your commentary and philosophy.
    Peace Out

  19. rdn4evr

    Hey can someone who knows TOS please help me out?  My charts got reset and now on the flexible grid I can't figure out how to get rid of the box smack in the center of each chart that adds/deletes charts and has a Sidebar check box.  I can't see the chart with that grey box right in the middle.
    Thanks in advance.

  20. barfinger

    This has become a bit more interesting to me. Thanks Zero for making the case I wished I could have made. Phil, I think, is a perfect example of an extremely smart and informed person who has somehow reached a conclusion that should be submitted to debate. It is tough for us to debate it here, but in person, it would be much more interesting.
     
    I wonder a lot about the life experiences that convince a person of intelligence to reach exactly opposite opinions from mine. I can be (and am sometimes have been ) wrong and then I need to modify my views. But I am not ignorant, and my view of humanity is not insensitive. I have seen much, and what I have learned is useful to some. Phil, I have to submit that you have become bombastic, and I ask you for more balance. As always, I expect to be dismissed by some offhand denigration, which both bypasses my point and disrespects my intelligence.

  21. barfinger

    and, I have to say, newbie, that I would enjoy meeting you.

  22. barfinger

    Actually, can I suggest a meeting in SW Florida for interested parties?

  23. jmm1951

    Newbie/Maid
     
    I could not live with myself if I had a maid who I was paying $10 an hour to do my laundry, while I flew my private Gulfstream to Paris for lunch.
     
    Due to the time zone differences you would have to leave New York at midnight to get to Paris for lunch. Hopefully you would allow your maid to do your laundry during the daytime. A lot of people would regard $10 per hour as pretty good pay, maybe not in New York, but in Florida you would have people lining up for that $10 per hour job, especially if you had a washing machine. Here in the Dominican Republic you could employ a whole family for that kind of money and they would wash it by hand.

  24. pstas

    Rdn- look for the small wrench symbol on the top/right menu bar. Click on that to remove the grid/side bar tool. Also, if you save your workspace using the Setup button also located on the top right, it will save your chart set up. You have to name your work space and remember to save it when you make any changes you wish to keep. When you open TOS back up after closing, you can choose which work space you want to use for a session.

  25. barfinger

    Jmm: what is the point you are making? And what axe are you grinding?

  26. pstas

    Barfinger- I suggest you pick up a copy of:
    http://www.amazon.com/Rules-Radicals-Saul-Alinsky/dp/0679721134

    That's the playbook and very effective.

  27. rdn4evr

    PSTAS – Thanks so much, you saved me at least 3 hours!

  28. Phil

    Very uninspiring futures action.  No definitive news from the G20 so we'll have to wait for Europe to wake up and see where things are heading.  

    Jones/Joe – You scared me with that headline.  I thought you meant he shut the foundation!  

    Build a Berkshire/Tophy – Yes, I've been contacting some people and need to finish.  The delay has been my fault as I have had to rearrange a couple of my other projects to free up some time as this is going to be a major endeavor going forward.  The good news is that's all set and now I'm going to be tying up the loose ends and getting the ball rolling this week.  

    Reversal/Newbie – Thanks for sharing that.  

    Jefferson/JMM – I wasn't even questioning the legitimacy of the claims – it's an issue of timing, etc.  These guys are experts at digging – when they want something, they'll find it – on anyone, any time.  I know it seems surreal but I've seen these things done first-hand many times over with a conversation that goes like:  "Sir, they keep quoting Jefferson as warning the people against banks gaining power and inflating the currency in a cycle that deprives people of their land"  "Well, get me some dirt on this Jefferson guy – we'll discredit what he has to say and take the wind out of their sails."  "But sir, he's been dead for 200 years"  "Even better, then make something up – he can't sue us!"   If you are interested, read John Perkins' "Confessions of an Economic Hit Man" – Perkins went the Government route, most people in this game are Corporate but you'll never read their books – we sign contracts! 

    Jones/Newbie – I don't know if anyone wrote a book on him but he's a super-good guy.  His fund is consistently good enough that he charges 4/24, rather than the standard 2/20 and he's got almost $20Bn under management so, in fees alone, he gets $800M a year – a very nice gig!  He does a lot of good work in New York, as well as on the West Coast and his Robin Hood Foundation is one of my key inspirations in wanting to do our Build a Berkshire Workshop project.  

    Offhand denigration/Barf – To what?  Was there a point to that post I should be responding to other than your characterization of me?  I too, wish you had a a case to make…

    Rules for Radicals/Pstas – Oldie but goodie.  

  29. kongen

    Phil and politics.  I confess to taking some pleasure from the discomforts of the right-wingers on this site.  But nothing compares to the pleasure of reading the products of Phil's idealism and intellect.  This is especially piquant in comparison to Telechart.  There, the chat room is filled with vile comments.  When I respond, it is usually polite and brief, such as "right-wing wacko", "tea-bagger", or "racist pig".  Yes, there is an enormous amount of racism there and among the extremist right.  I had come to believe that most of the retail investment community was like that.  Keep it up, Phil.  It encourages me mightily.

  30. zeroxzero

    I don't think of myself as a "winger."   More like a scrum half. :)

  31. newbie

    barfinger/likewise
    but i live in minneapolis
     
    kongen/agree totally
     
    jmm /paris
    i would have said the Concorde, which made it more practical, but we know what happened with that (which i think is sad)
    weren't you the one talking about your taxi driver the other day? I don't know if you were being only rhetorical, but it sounded like you have an very good above average asset in him. Are you trying to get  him down to the absolute last penny? If so, he probably won't remain as loyal over time as he has been. i posted a fairly lengthy comment on that, not sure if i read a response from you or not.
    here's my point……i'm not saying i *wouldn't* hire somebody to do my laundry, or cut my grass, or clean my house, or lots of other things, if i was rich. sometimes i fantasize about having somebody to go buy my groceries for me, as spending an hour in a massive big box store with enough sodium lights to illuminate a major city and enough noise to damage my hearing is one of the more difficult things i have to do.  it's not a lot different than hiring somebody in a small business to help out. phil has people helping him.
    but, and this is a very personal thing with me, it would not be my OBJECTIVE in hiring somebody, to make sure that I was getting them for the absolute lowest possible last dime. if i'm flying my Gulfstream and they are at home washing my clothes, i would be very comfortable paying them WAY more than the going rate. Assuming they were very good at what they did, and if they showed me some loyalty for me trying to be generous to them. Phil made a somewhat similar remark a day or two ago about the company he had that was bought out. He took the "enlightened" or "progressive" approach in managing and his company did extremely well, partly because of it.
    If you go back a week or two and look at the article I wrote about Boston Scientific/Scimed, the underlying theme that I didn't emphasize enough probably, was that one of the BIGGEST reasons we totally kicked the shit out of our competitors was because WE HAD EVERYBODY WITH THEIR OARS IN THE WATER PULLING AS HARD AS THEY COULD IN THE SAME DIRECTION. The difference between what I think you are alluding to, and what Scimed did, is they paid market rates for talent, but then went out of their way to treat everybody as great as possible. Lots of perks, etc. They actually TRIED to promote as many people as far as possible as fast as possible. And the loyalty they got back from that was that we had a VERY HAPPY workforce, while our competitors' workforce was miserable (they kept trying to come work for us). So paying the absolute last lowest possible penny for labor is not necessarily the best path to success for anybody. Just that simple.

  32. Maya1

    Phil/article
    Thank you for putting the oil charades in perspective. Very useful for people like me who don’t necessarily have the time to evaluate news below the surface.
    However, as it pertains to the market, your getting’ bullish’ appears that you are being somehow ‘dragged’ by forces to part from the bear.
    We got S&P over 1361… And it stayed for two days…yet you are uncomfortable, and getting more so, it seems…
    Which makes me glad to own some puts, despite them rapidly declining in value over the past week.
    So, where do we go from here? Besides, of course, watching to SEE ‘where we go’?

  33. scottmi

    Gasland/Phil – Finally sat down to watch that today, following your mention several weeks ago. A well done documentary.

  34. Phil

    Good morning!

    Sharp sell-off at 3am after head fake back to even.  As we expected, high oil prices freaking everyone out. Oil back and just failed $109 so we'll see what sticks.  

    Dollar just 78.45 and problems for the Bulls if we break over 78.50 so let's watch that line.  Indexes down about a quarter point 

    All of Asia had a rotten close but not down much except Hang Seng down a  point with a 200-point drop in the last hour.  Europe opening down about half a point on still no proper deal from the G20 but announcement could come any time so dangerous to be shorting Futures but oil (/CL) is good below $109 as long as the Dollar is heading up although it's ALSO good over $109 (bullish) also with very tight stops as long as the Dollar stays below 78.50.  

    Ball seems to be in the EU's court with G20 saying firewall MUST be beefed up before more money kicked in by IMF.  Gives the rumor-mongers plenty to work with!

  35. Phil

    Dollar over 78.50 now and Nikkei backed the wrong horse (Euro) as the Yen falls despite the Dollar rising now.   Nikkei has given up over 100% of it's gains in the post-market from 9,755 (9,633 at close) back to 9,550 now.  9,945…

    Yen at 80.83 after getting pumped up to 81.65.  Euro $1.343, Pound $1.5863, EUR/CHF $1.2045.  Oil $109.89, gold $1,772, silver $35.41, copper $3.85, nat gas popped from $2.512 to $2.654, which is a crazy move and gasoline is down from $3.327 at the open (6pm) to $3.3096 but, so far, Dollar not holding 78.50 so still hope for the bulls.  

    Maya asks where do we go besides watching to see but watching to see is a perfectly legitimate thing to do when you are not sure.  I'm not a fan of playing for the sake of playing.  All Fundamental logic points to being short and the only reason to be long in the short term (long-term, inflation is a great reason) is the fact that the markets are being manipulated higher and what I was talking about in the above post is the extent to which the manipulators can have their way as the market goes up and up.  

    Even $2Tn is not going to be much and, if we don't get that, then moves like the Nikkei is making will be normal (very rapid 2.5% drops) because we've risen on nothing but a wing and a prayer and the wing is broken and the prayers are unanswered by the G20. 

  36. Phil

    G-20 Defers Move On Aid for Europe

    Officials from the world's leading economies deferred key decisions on international aid for Europe as they awaited more euro-zone action to fight the Continent's debt crisis.

     

    Oil Weighs on Some Asia Markets

     

    Demonstrators Ring Moscow

  37. Phil

    Monday's economic calendar:

    10:00 Pending Home Sales

    10:30 Dallas Fed Manufacturing Outlook

    2:12 AM Asian markets are mostly down, spurred by concerns over oil's recent spike. China is the notable exception, +0.9% onexpectations the government may further loosen monetary policy. Japan -0.1%. Hong Kong flat. India -1.6%.

    The S&P 500 is already up 8.6% YTD, but volume is anemic. The combined 18.9B of S&P 500 component shares traded is a 20% drop from the same period last year and less than half the 48.5B shares traded during the same period in 2008. Friday's action was no different: 3.32B shares in NYSE composite volume, the third lowest volume day of the year.

    It appears that the bond market bubble is ready to pop, says Clover Asset's Eric St-Cyr. If you're going to profit from a bubble you need to get out when the first signs of collapse emerge. So, with the quality of fixed income assets deteriorating rapidly, and yields close to zero, the risk/reward profile may be telling us it's time to cash out.

    The bailout that rescued Greece from a looming default has failed to restore confidence in credit markets, where traders are paying nine times more to insure European government bonds than they are for Treasuries. While European stocks are off to their best start since 1998, the relative cost of credit default swaps has risen to a record, more than double the July levels, according to CMA.

    European central banks may be unable to make a profit on Greek sovereign bonds that euro-area governments want to use in the country's second bailout, European Central Bank council member Jens Weidmann said. Weidmann said it's "not certain at all" that the bonds will make a profit, citing an interview. Risks on the central banks' balance sheets have actually increased, Weidmann said.

    Banks in Greece, Spain, Italy, Portugal and Ireland have issued $72.6 billion of bonds this year and most will probably be used as collateral for loans from the European Central Bank, citing its own research.

    G-20 ministers indicated this weekend they expect to reach an agreement to expand Europe's rescue fund next month, pushing off any short-term decisions and effectively delaying discussion of new international support until the G-20's next gathering in April. (G-20 communique)

    Germany Rejects 'Ever Bigger' Firewalls, Schaeuble SaysGerman Finance Minister Wolfgang Schaeuble rejected calls to make rescue funds “ever bigger” and reiterated the opposition of Europe’s biggest economy to joint euro-area debt issuance as means to fight the debt crisis. Writing in an op-ed in Mexican newspaper El Universal published on Feb. 24 and distributed to German reporters today, Schaeuble said that debt burdens can’t be lowered “by inflating it away,” and that debt-based strategies “stunt” growth in the long term. “Should we also mutualise sovereign debt in the euro zone?” Scaheuble said in the article. “Should the European Central Bank print money to finance the member states’ budgets? Should we make the firewalls ever bigger? The answer is an empathic no.”

    German Interior Minister Hans-Peter Friedrich said Greece would have better chances of overhauling its economy and storing growth if it left the euro area, citing an interview. Friedrich, a member of the Bavaria-based Christian Social Union that's allied with German Chancellor Angela Merkel's larger Christian Democratic Union, is her first Cabinet member to suggest Greece's exit from the euro.

    Sixty-two percent of Germans want lawmakers to reject renewed aid for Greece in a parliamentary vote scheduled for tomorrow in Berlin, citing a poll. Thirty-three percent said parliament should approve German participation in Greece's second bailout, citing the Emnid poll of 500 people.

    G-20 Snubs Germany on IMF FundingGermany was left to dig deeper to combat the euro-area debt crisis after the Group of 20 nations told Europe to come up with more financial firepower before they consider lending outside support. The decision by G-20 officials to rebuff European calls for assistance in their crisis-fighting effort pending an increase in its own financial backstop puts the onus on Germany, already the biggest national contributor to bailouts, to overcome its resistance to doing more

    European Central Bank Executive Board member Joerg Asmussen said the ECB can't commit to offering more three-year cash to euro-area banks after its second batch of loans planned this week, citing an interview.

    G-20 officials discussed the threat to the global economy from rising oil prices, sources say, but the U.S. did not openly call for a release of countries' strategic oil reserves. On Friday, Geithner said the U.S. is considering a strategic reserves release as tensions with Iran push up oil prices.

    Greece Is Just A Preview Of What's Coming For The Rest Of Us. (video)

    It May Well Turn Out That We Are Watching Not A Greek But A Euro Tragedy. Another week, another euro "solution". According to last week's plan, by 2020 the ratio of Greek national debt to GDP will be down to 120.5pc. You don't really need to know much more to see that we are in cloud cuckoo land.

    On PIGS on Drugs. An interesting article in the Swiss press this morning regarding the big Swiss drug companies, Roche and Novartis. Apparently the PIGS are not paying their drug bills. The numbers are big. The bills have been unpaid for years. Some excerpts from the article:

    Upward pressure on the yen is easing, says a senior official at Japan's Finance Ministry, though he signals Japan's readiness to intervene again if speculators push the yen too high. Speaking from the G-20 summit, he says the yen hasn't been directly addressed, though currency volatility was discussed.

    China will probably have a soft landing in the near future, says World Bank President Robert Zoellick as he introduces "China 2030," a report that stresses sustainable economic expansion for China will require redefining the government's role, scaling back state-owned enterprises and gradually allowing market-set interest rates.

    Word China could double rare-earth exports this year is less than meets the eye. A slowing global economy had China exporting only about one half of its government-mandated quota in 2011. The quotas for 2012 aren't changing, it's just hope sharply lower prices for the minerals will lead to a bump in demand and those quotas being hit.

    Chinese automakers surge after the government excludes foreign brands from a preliminary list of vehicles approved for purchase by state agencies. The move will help local brands gain in the 80B yuan ($12.7B) market at the expense of foreign automakers like GM (GM) and Toyota (TM). In the past, overseas brands accounted for 80% of the official pool. 

    Ford(F) Faces China Hurdles. Even With a New $490 Million Chongqing Plant, Further Expansion Could Prove DifficultFord Motor Co. is facing stiff industrywide regulatory obstacles to future growth in China, even as the auto maker launches a $490 million plant to boost its presence there.

    China's Billionaire Congress Makes Capitol Hill Look Poor. The richest 70 members of China’s legislature added more to their wealth last year than the combined net worth of all 535 members of the U.S. Congress, the president and his Cabinet, and the nine Supreme Court justices. The net worth of the 70 richest delegates in China’s National People’s Congress, which opens its annual session on March 5, rose to 565.8 billion yuan ($89.8 billion) in 2011, a gain of $11.5 billion from 2010, according to figures from the Hurun Report, which tracks the country’s wealthy. That compares to the $7.5 billion net worth of all 660 top officials in the three branches of the U.S. government.

    Builders Feel Bite in China. Along this city's historic canal, in a location picked for its good feng shui, a 59-acre complex of commercial and residential towers not long ago looked like a sure winner. Artists' renderings showed a forest of gleaming glass buildings, including a 40-story hotel-anchored skyscraper, overlooking yacht-bearing waterways. Even though Wuxi isn't generally considered among China's marquee cities, the country's property-mad investors were hooked. When the first 303 apartments went for sale in 2009, they sold out within four hours.Today, the Xi Shui Dong development stands less than half complete, hamstrung by its parent company's high debt.

    China's Massive Property Supply Threatens Market. A virtual shutdown of China’s new home sales during the Lunar New Year holiday week could signal a major crack in buyer confidence, with some analysts seeing prices heading lower as cash-strapped real-estate developers become more aggressive in their selling.

    At least the Banksters made some progress this weekend:  The U.S. will likely water down part of the Volcker Rule, or at least that seems to be the sentiment among G-20 finance ministers. At question is the prop trading ban on foreign sovereign debt, which foreign finmins have "thoroughly explained" to the U.S. is an insufficiently global vision. (see also)

    "We see some risks to our financial system" from the Volcker Rule, says Manuel Medina-Mora, Citigroup's head of global consumer banking. The rule will likely have an "averse" impact on the liquidity of sovereign securities, which will curb the ability of banks to manage their own risks. He suggests foreign sovereign debt be exempt from the prop trading ban.

    SEC Reviewing Trading Practices After Shift to AutomationThe U.S. Securities and Exchange Commission is examining equity trading practices that gained dominance in the past decade amid a shift to automation, according to an official in the agency’s enforcement division. Daniel Hawke, head of the market-abuse unit, said at an event yesterday that the SEC is looking into techniques such as co-location, in which exchanges let traders place computers close to the market’s systems to shave time off executions. He said other practices under examination include the rebates that venues pay to spur transactions, direct market access where brokers let investors send orders to venues themselves, and whether the types of orders exchanges offer are being misused. Regulators are evaluating U.S. markets after rules since the 1990s boosted competition and spread stock trading across 13 exchanges and dozens of private, broker-run venues. While the shift cut investors’ costs, it made trading more complex, and scrutiny increased after a May 2010 rout erased $862 billion from equities in less than 20 minutes. Several practices Hawke highlighted are used by firms engaged in high-speed trading.

    Blackstone (BX) has raised over $10B in less than a year for its latest real-estate fund and is looking to pull in another $2B by year-end, sources say. The firm's ability to rapidly attract money in a difficult fundraising environment highlights how far Blackstone has come in positioning itself as one of the world's dominant real-estate investors.

    Boeing (BA) has replaced Scott Fancher, the head of its 787 Dreamliner program, with Larry Loftis, who until now was in charge of Boeing's successful 777 program. The move, which is accompanied by Fancher's transfer to the 777 division, comes after United Continental became the latest airline to demand compensation for 787 shipment delays.

    BP (BP) is reportedly considering a $14B settlement with plaintiffs over the Gulf oil spill, and would finance the settlement using the remaining balance from its $20B claims fund. The talks, which are nearing completion, are separate from negotiations with the government. (see also)

    Transocean (RIG) reports a wider Q4 net loss of $6.12B (-$18.62/share) on revenue of $2.42B. Analysts had expected profit of $0.24/share on revenue of $2.34B. However, the quarterly loss reflects special items which net to a loss of $18.80/share, including a $5.2B goodwill impairment and a $1B estimated loss contingency on Gulf oil spill. (PR)

    Alaska's North Slope shales may hold as much as 80T cubic feet of gas and 2B barrels of oil, the U.S. Geological Survey reports. The assessment, the first made of North Slope shale resources, is based on success in extracting oil and gas from similar formations, such as the Marcellus Shale. The USGS last year estimated Marcellus may hold as much as 144T cubic feet of gas. 

    ExxonMobil (XOM) and Norway's Statoil (STO) say analysis of a recent discovery off the coast of Tanzania shows it holds up to 5T cubic feet of natural gas, further cementing the idea that East Africa could become an exporter of liquefied natural gas to Asian markets (earlier).

    Farmers get into the speculation game:  Behind Corn's Squeeze Play: FarmersA new phenomenon is underpinning corn prices: prosperous farmers. Having benefited from high prices last year, farmers are becoming more choosy about when they sell their corn. Right now, some are opting to stockpile some of their harvest, rather than sell it, a decision analysts say is helping keep corn prices relatively high. Farmers now hold about 64% of the nation's corn in storage, up from 62.7% a little over a year ago and the highest in two years, according to the latest quarterly government survey.

    The Mobile World Congress kicks off today, with wireless execs and device makers descending on Barcelona for a week of speeches, networking and show-and-tell. Some topics that will get no shortage of attention: an update on the Microsoft-Nokia pairing, one year in; Apple vs. Android; lack of traction on mobile wallets; and keeping up with data overload. (more here)

    The longer Apple (AAPL) sits on its cash, the more tempted it may be to do something stupid with it, Mark Hulbert writes, weighing in on whether it should pay a dividend. Ironically, distributing cash to shareholders may be the best strategy for ensuring Apple remains a hungry, growth-oriented company, he says in countering the argument of those who feel a dividend would ruin its entrepreneurial spirit

    No Company Follows Apple's(AAPL) Expanded China AuditsApple Inc. (AAPL)’s rivals aren’t rushing to emulate the iPhone maker’s decision to subject supplier factories to audits by a labor group. Instead, they’re sticking to internal checks that may leave room for violations — and negative public relations fallout.

  38. roro

    Phil,
     
    the way i read the Telegraph article is a political realization that austerity cannot work and the 'buck' stops at Rajoy and Spain.
     
    If Hollande is elected in France and it is obvious Germany is being isolated in regards of European QE with the G-20, Geithener, Japan and China clearly backing Monti and a push for Germany to 'print' and 'join' the club all of that looks a bit ominous for shorts other than maybe hit and run trades not to mention LTRO for the 29th which should at least prop the market near term until the latest money printing snag gets worked out.
     
    you thoughts on that take of a time-buying exercise?

  39. Phil

    Time-buying/Roro – Look at what you're saying.  Everything depends on the whims of the players across the pond on time-delays behind closed doors on complex matters where rumors can send the markets flying up and down.  How do you construct a rational investing premise from that?  My thoughts are to wait and find out what's really happening and, meanwhile, plenty of hit and run opportunities fading the rumors as they come by.  You look at all the moving parts the need to click and I'd still say that, if I had to bet, I'd bet it's going to explode at some point.  Getting this thing done right is going to be a delicate ballet and these people don't even know the tune.  

    6:00 AM Overseas: Japan -0.1%. Hong Kong -0.9%. China +0.3%. India -2.7%. London -0.8%. Paris -1.3%. Frankfurt -1.2%

    6:45 AM U.S. stock futures turn lower after G20 finance ministers delay boosting funding for the IMF until European leaders take stronger action on a rescue fund. S&P -0.5%, Dow -0.4%

    Opinions are diverging among big bond funds about emerging-market debt, with some funds piling in as others pull out, and both sides unsure of the ultimate impact Europe's debt crisis will have on global growth. Investors, meanwhile, poured a net $2B into emerging-market debt in January, up 72% from Jan. 2011 and up 167% from Jan. 2009. 

    Blackstone (BX) is expected to announce today a $2B investment in Cheniere Energy Partners (CQP) that will allow the company to build a gas-liquefaction plant in Sabine Pass, La., the first of its kind in the continental U.S.

    HSBC (HBC) annual profits reach £13.8B, up 15% in a year of "major progress." Its commercial banking unit had a record year with pretax profit +31% to nearly £5B. The faster-growing markets of Asia, Latin America, the Middle East and North Africa now account for 49% of group revenue. 2011 dividend of $0.41, up 14%. (PR)

    Wells Fargo (WFCplans to grow its wealth management and insurance divisions through acquisitions and through the purchase of more assets from downsizing European banks, says CEO John Stumpf, noting the bank has 10% of U.S. retail deposits but very little of its wealth.

    Lloyds (LYG) and RBS (RBS) may tap the ECB's three-year low-interest loan facility this week, reports the FT, with both banks saying the 1% interest rate makes the LTRO attractive. Sources say the funds raised will likely be ~£5B for RBS and ~£10B for Lloyds.

    Lowe's (LOW): Q4 EPS of $0.29 beats by $0.06. Revenue of $11.6B (+11% Y/Y) beats by $260M. (PR)

    More on Lowe's (LOW) Q4: Comparable store sales +3.4% Y/Y. Expenses as a percentage of net sales fell to 30.05% from 31.20%. Plans to open 10 stores in FY12. Expects total sales to increase by 1%-2% in FY12, with comparable stores sales up 1%-3%. Shares +3.1% premarket. (PR

     

    IPhone's Crutch of Subsidies - The iPhone's relatively weak sales in parts of southern Europe highlight its reliance on wireless firm subsidies.

  40. jmm1951

    newbie/barfinger
     
    No the point I was making was simply that $10 per hour is considerable in excess of minimum wage (at least in the part of the US that I am familiar with) and that many people without a high school diploma would be very happy to do that job working in the rather pleasant environment of a rich person's home where it is probably air-conditioned, quiet etc, with the boss often away at lunches in Paris. It certainly beats working in an orange juice factory for $7.60 per hour.
     
    Re my taxi driver, the thing is that the Dominican Republic is a place where naked capitalism thrives, and if you pay too much you are regarded as a "pendejo" (literally 'pubic hair', means 'dumbass', 'fool'), but if you pay too little, then you are regarded as "tacaño" (a cheapskate). Regardless of whether you are a pendejo or a tacaño, in any case you suffer from the additional whammy of being a gringo, a mildly derogative term for a foreigner. The other day I was in the supermarket and the cashier asked if I lived locally. As I answered in the affirmative, she made some marks on her clipboard, so I asked what this was about. "We are doing a market research survey to see how many gringos shop here", she answered in Spanish.
     
    Anyway, bottom line is if you overpay someone, they will be telling everyone else what a fool you are, and if you underpay they will be telling everyone else what a meanie you are. Hence a Hegelian dialectic is necessary to determine a fair price to pay for a service in which the provider is unwilling to state a fixed price. This is surely how markets are supposed to work, but it can make life uncomfortable for the trader, as conditions are constantly changing.

  41. jmm1951

    iPhones Crutch of Subsidies
     
    This is why I think that Nokia and the Windows 8 smartphone will be a good thing, at least in markets outside of the US. When  you go into a cell phone store run by a network provider, they have a variety of phones at a range of prices on display, usually in glass cases,  and there are all sorts of ways in which the vendor's can offer specials, etc. in a manner such as to steer prospective customers towards phones that offer better margins for the vendor. The Apple may indeed be the best phone, but other smart phones that cost less may be "good enough" for most people's purposes. The Lexus models  may be better than the Toyota models, but that doesn't stop the Toyota models from selling a lot of cars.

  42. roro

    Phil,
     
    i agree with you and if it all was suspended central bank animation prices would probably be a lot lower but the reality is that central banks trump, at least so far, and no point to short the cbs, right then part of the point in the above was also making your point about austerity cannot work and at sooner or later the banks have to print.
     
    you have been touting that line for quite a while.
     
    if things are getting 'hot' socially in Spain and it looks obvious that the Spanish will not be taking the road to Greece and Rajoy knows it and a social movement agaist the severe austerity imposed upon Greece has political momentum behingd it in Spain France and Italy and every other country including the US and Japan and China is backing printing except Germany and every country is pressing to Germany to capitulate to printing then the odds look to be with the printers.
     
    at least that is how i read it.
     
    the other question it all raises is what if Germany sticks in the mud and goes it owns way? what then?

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