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 And I have added some historical references from prior posts to demonstrate the basic merits of the idea.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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Phil's Favorites

Life in South Africa's economic hub is improving -- but big challenges remain

 

Life in South Africa's economic hub is improving -- but big challenges remain

The Gauteng City-Region is home to a quarter of South Africa’s population. Mark Momberg

Courtesy of Julia de Kadt, Gauteng City-Region Observatory and Alexandra Parker, Gauteng City-Region Observatory

More than 14 million people live in South Africa’s economic hub, the Gauteng City-Region. That’s 25% of the country’s population.

A lot of media reporting and public discussion about Gauteng i...



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Zero Hedge

"It Was All A Lie": Homeless Vet, NJ Couple Charged In $400,000 GoFundMe Grift

Courtesy of ZeroHedge. View original post here.

A feel-good story about a New Jersey couple who raised over $400,000 to help a homeless good Samaritan - before they pilfered his GoFundMe account - was all a scam, a prosecutor said Thursday. 

39-year-old Mark D'Amico (left), 28-year-old Kate McClure (center) and 35-year-old Johnny Bobbitt (right) are facing theft and conspir...

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Kimble Charting Solutions

Gold Bugs; Would Love This To Be A Double Top!

Courtesy of Chris Kimble.

Gold, Silver, and the precious metals industry have a pretty simple relationship with the U.S. Dollar: They perform better when the Dollar is weakening… and they tend to struggle when the Dollar is strengthening.

One of our favorite ratios to monitor for Gold Bugs is the U.S. Dollar/Gold ratio. It tells us when the Dollar is weakening or heading lower (which is good for gold) or when it is strengthening or heading higher (bad for gold).

Looking at the Dollar/Gold chart below, we can see that the ratio climbed higher from late 2011 to early 2016. This wreaked havoc on Gold prices. Since peaking in early 2016, the ratio has formed a broad declining channel (pink shaded area). Each swing lower has provided a tailwind for Gold prices, while each counter-swing higher has been a headwind.

in ...



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Insider Scoop

Macy's Receives Mixed Analyst Reaction After Q3 Earnings Beat, Sales Miss

Courtesy of Benzinga.

Related M Big Box Bonanza: Walmart Beats Most Estimates, But Brexit Could Steal Attention Mid-A...

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Members' Corner

NY Times: OPERATION INFEKTION

 

This is a three-part Opinion Video Series from NY Times about Russia’s meddling in the United States’ elections as part of its "decades-long campaign to tear the West apart." This is not fake news. Read more about the series here.

OPERATION INFEKTION

RUSSIAN DISINFORMATION: FROM COLD WAR TO KANYE

By Adam B. Ellick and Adam Westbrook

EPISODE 1

MEE...



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Chart School

Weekly Market Recap Nov 11, 2018

Courtesy of Blain.

This past week was saw another positive move up by bulls – especially in the Dow and S&P 500; the NASDAQ was not quite as enthusiastic.   Wednesday’s rally was on the legs of an election that was seen as market friendly or at least not as bad as it could have been.   Essentially – paying people a lot of money to get nothing done the next 2 years – woo hoo!

The market is interpreting Wedneday’s result as insuring that “no big things will get done,” in Washington between now and 2020, Craig Birk, chief investment officer at Personal Capital told MarketWatch. “The market appreciates the relative certainty of the slow legislative agenda.” he said.

“As President Trump plans his 2020 reelection campaign, a gridlocked Congress is unlik...



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Digital Currencies

Bitcoin's high energy consumption is a concern - but it may be a price worth paying

 

Bitcoin's high energy consumption is a concern – but it may be a price worth paying

Shutterstock

Courtesy of Steven Huckle, University of Sussex

Bitcoin recently turned ten years old. In that time, it has proved revolutionary because it ignores the need for modern money’s institutions to verify payments. Instead, Bitcoin relies on cryptographic techniques to prove identity and authenticity.

However, the price to pay for all of this innovation is a high carbon footprint, created by Bitc...



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ValueWalk

Vilas Fund Up 55% In Q3; 3Q18 Letter: A Bull Market In Bearish Forecasts

By Jacob Wolinsky. Originally published at ValueWalk.

The Vilas Fund, LP letter for the third quarter ended September 30, 2018; titled, “A Bull Market in Bearish Forecasts.”

Ever since the financial crisis, there has been a huge fascination with predictions of the next “big crash” right around the next corner. Whether it is Greece, Italy, Chinese debt, the “overvalued” stock market, the Shiller Ratio, Puerto Rico, underfunded pensions in Illinois and New Jersey, the Fed (both for QE a few years ago and now for removing QE), rising interest rates, Federal budget deficits, peaking profit margins, etc...



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Biotech

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

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

 

Gene-editing technique CRISPR identifies dangerous breast cancer mutations

Breast cancer type 1 (BRCA1) is a human tumor suppressor gene, found in all humans. Its protein, also called by the synonym BRCA1, is responsible for repairing DNA. ibreakstock/Shutterstock.com

By Jay Shendure, University of Washington; Greg Findlay, ...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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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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All About Trends

Mid-Day Update

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

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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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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