Posts Tagged ‘taxpayer money’

It’s unanimous: Propping up underwater mortgages is a bad idea

It’s unanimous: Propping up underwater mortgages is a bad idea

Courtesy of Edward Harrison at Credit Writedowns 

Families Are Evicted From Homes As Economic Crisis Worsens

What follows is a more comprehensive re-write of my take on the latest bailout proposals by the Obama Administration. I felt the original write-up was a bit rushed and one-sided. I have tried to outline the objectives of the bailout plans more dispassionately. And I have added some historical references from prior posts to demonstrate the basic merits of the idea.

Clearly the mindset will not change. It’s all bailouts, all the time in the Obama Administration, as it was at the end of the Bush Administration. I want to talk about the most recent bailouts, why they were proposed, what’s wrong with them and why bailouts generally don’t work. My remarks will concentrate on the principal reduction program since this is the newest bit.

Why bailouts won’t work

What should be clear to you as an observer by now is that these bailouts implicitly assume that government can stuff financial institutions full of taxpayer money and in so doing adequately recapitalize them so that they can lend again.

The thinking is that, these policies, while "deeply unpopular, deeply hard to understand," are necessary to prevent another systemic breakdown and a deflationary spiral.

Also implicit is the assumption that economic weakness depends in large measure on supporting home price values by increasing the supply of credit via bank lending and securitizations. But, as I argued 14 months ago when Barack Obama came to the White House, the financial system is so fundamentally unsound that bailouts are like catching a falling knife. The writedowns that needed to be taken – in the absence of serious house price appreciation – are just too large to be handled quickly via bailouts.

Moreover, it is the demand for credit which is critical here because households are over-indebted and reluctant to take on further debt. While I do believe officialdom can be successful in creating mild but brief cyclical upticks in consumer demand, weak consumer spending will last for years. The secular trend is clearly going to be toward increasing savings and reducing debt.

So bailouts alone cannot address the debt problem which is behind the reduction in credit demand growth. Nor are they likely to be adequate to deal with the scale of unrealized losses on bank balance sheets.…
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In Defense Of Secrecy; Three Prong Attack On The Fed; Selective Myopia

Here’s another terrific article by Mish.  If you’ve wondered like I have about the 45B the Fed apparently made last year, towards the end, Mish questions that figure. Op-Toons has a suggestion to improve the accuracy of reported numbers (keep reading). – Ilene

In Defense Of Secrecy; Three Prong Attack On The Fed; Selective Myopia

Courtesy of Mish 

The Fed is pulling out all stops to defend its secrets, including publishing self-serving mathematical gibberish. Please consider the St. Louis Fed article on the Social Cost of Transparency.

Unless you are an academic wonk, you will be stymied by pages that look like this …

There are 24 pages of such nonsense with titles like

  • 2.2 Private Information and Full Commitment
  • 2.3 Private Information and Limited Commitment
  • 3.2.1 Decision Making in the Day
  • 3.2.2 Decision Making at Night
  • 3.2.4 A No-News Economy

Just for good measure here is the page describing 3.2.4 A No-News Economy

The article culminates with …

For an asset economy then, the prescription of “full transparency” is not generally warranted.

Approaching the problem under the premise that fuller transparency is always desirable may not be the right place to start.

Hiding Behind Empirical Formulas

The problem is Bernanke places his complete faith in such gibberish, so much so that he has lost all sense of real world action by real people. The result is that in spite of his PhD, he could not see a housing bubble that was obvious to anyone using a single ounce of common sense.

Moreover, had Bernanke simply opened his eyes instead of relying on a poor interpretation of an already fatally flawed Taylor Rule, the credit/housing bubble would not have gotten as big as it did, and we might not be discussing the above ridiculous mathematical formulas that supposedly show us the Fed needs to be secretive.

For more on Bernanke’s love affair with the Taylor Rule (even though Taylor Disputes Bernanke on its usage), please see Taylor, NY Times, Dean Baker Call Out Bernanke.

Appeals Court To Hear Bloomberg’s Freedom of Information Suit

Bloomberg has been in a battle with the Fed for two years over the Fed’s “unprecedented and highly controversial use” of public money. In August it "won" the lawsuit but the Fed has appealed.

Please consider


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Kimble Charting Solutions

Germany Breakout Bullish For Stocks In The States!

Courtesy of Chris Kimble.

An important message to stocks in the states will come from Germany in the next few weeks!

This chart looks at the DAX index from Germany over the past 10-years. For the majority of the past 6-years, the DAX has remained inside of rising channel (1). The 2018 decline saw the DAX hit support where a 1-year counter-trend rally started.

Over the past year, the DAX has created a new falling channel (2). It is now testing the top of this falling channel and the lows of last February at (3).

For most of last year, the DAX created a bearish divergence with the...



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Insider Scoop

Earnings Scheduled For March 18, 2019

Courtesy of Benzinga.

Companies Reporting Before The Bell
  • Lumber Liquidators Holdings, Inc. (NYSE: LL) is estimated to report quarterly earnings at $0.12 per share on revenue of $272.54 million.
  • Genesis Healthcare, Inc. (NYSE: GEN) is expected to report quarterly loss at $0.24 per share on revenue of $1.19 billion.
  • Overstock.com, Inc. ...


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Zero Hedge

"Spring Is Coming": Why Europe Looks Set To Surprise On The Upside

Courtesy of ZeroHedge. View original post here.

Is the winter of Europe's discontent coming to an end?

After a long period of economic pain which many believe culminated in Europe's descent into recession just as the ECB's QE of public bonds came to an end, in a note titled "Spring is coming" and focusing on events in Europe, Bank of America writes that its EU Composite Macro Indicator (CMI) avoided a decline for the first time in 12 months.

...



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Phil's Favorites

No Free Lunch: Valuation Determines Return

 

Source: Pixabay

No Free Lunch: Valuation Determines Return

By John Mauldin, Thoughts from the Frontline

Last week, I described the enormous challenges retirees face. One reason for that, aside from insufficient savings, is that markets haven’t delivered the returns many experts said we could plan on.

Back in the late 1990s, we were told that the long-term average return (~10%) was a reasonable long-term assumption—even if the market cooled down from the tech boom. Instead, the S&P...



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Biotech

Marijuana is a lot more than just THC - a pharmacologist looks at the untapped healing compounds

Reminder: We are available to chat with Members, comments are found below each post.

 

Marijuana is a lot more than just THC - a pharmacologist looks at the untapped healing compounds

Assorted cannabis bud strains. Roxana Gonzalez/Shutterstock.com

Courtesy of James David Adams, University of Southern California

Medical marijuana is legal in 33 states as of November 2018. Yet the federal government still insists marijuana has no legal u...



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ValueWalk

Crescat Capital On The "Macro Trade of The Century" Short Bet

By Jacob Wolinsky. Originally published at ValueWalk.

Via Crescat Capital

At Crescat we remain positioned to capitalize on a downturn in the economic cycle. Global equity markets peaked in January 2018 while US markets peaked in September 2018. Crescat’s hedge funds were two of the world’s top performing funds in 2018 as a result of our bearish macro views and positioning last year. We are confident that was only the beginning of a downturn in asset prices from record global leverage and central-bank-driven asset bubbles for this cycle. US asset bubbles only just began to burst at the end of last year as on can see in the chart below.

Year to date, global stocks and corporate credit have rallied back while economic indicators have continued to deteriorate. This is setting the market up for another down-leg. We haven&#x...

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Chart School

Wyckoff Price Thrust Measure

Courtesy of Read the Ticker.

Richard Wyckoff said in his last days as an educator,'follow the waves'. And an important measure of those waves is the 'thrust'. The thrust of price into new ground, considering price and volume support or lack of it. The price wave thrust is clear visual presentation of the composite man demand or supply characteristics: strong, mild, weak or confused. 

readtheticker.com favored trend tool named RTTTrendStatus sister indicator RTTTrendThrust shows off Wykcoff measure of price thrust. RTTTrendThrust can be used to assist mechanical trading systems...

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Digital Currencies

Facebook's cryptocurrency: a financial expert breaks it down

 

Facebook's cryptocurrency: a financial expert breaks it down

Grejak/Shutterstock

Courtesy of Alistair Milne, Loughborough University

Facebook is reportedly preparing to launch its own version of Bitcoin, for use in its messaging applications, WhatsApp, Messenger and Instagram. Could this “Facecoin” be the long-awaited breakthrough by a global technology giant into the lucrative market for retail financial services? Or will...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

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