Daily Digest

Daily Digest - March 2

Tuesday, March 2, 2010, 11:42 AM
  • The Importance of Economic Equality
  • European Union Moves Toward a Bailout of Greece
  • Despite Bailouts, Fannie & Freddie Continue To Lose Billions
  • QOTD: “Half the Formulas They Teach You in Grad School Are False”
  • Senators Push For Higher Tariffs On Chinese Goods
  • At Risk: The Sustainability of Oil and Gas
  • Common Weed-Killer Chemically Castrates Frogs: Study 
  • E.U. Clears Biotech Potato for Cultivation

Economy

The Importance of Economic Equality (Ben Johnson)

Comparing statistics between developed economies and within the U.S., Wilkinson and Pickett argue GDP and overall wealth matter little to wealthy societies. Rather, it is the gap between the rich and poor that is telling. They spoke to TIME about what they believe are revolutionary findings.

European Union Moves Toward a Bailout of Greece (Ben Johnson)

Greece, in the midst of a financial crisis, is planning a bond deal this week that depends on a lot of things going right. For one, other members of the European Union — much as they would prefer not to — are discussing ways to show that they will stand behind Greece. In recent days, the outlines of a rescue plan have started to come together, probably involving loan guarantees from the German and French governments to encourage their banks to buy Greek debt. But even as the negotiations continue, the bloc insists that Athens impose further austerity measures, in part to overcome political opposition in Germany to providing aid to what it sees as the spendthrift Greeks.

Despite Bailouts, Fannie & Freddie Continue To Lose Billions (Ben Johnson)

Hoping to keep the news low-keyed and under-reported, Fannie Mae announced late Friday afternoon after the markets closed that it had lost over $74 billion in 2009, bringing its 3-year loss totals to $137 billion. This is in addition to Freddie Mac's $80 billion loss during the same period.

QOTD: “Half the Formulas They Teach You in Grad School Are False” (Davos)

Q: Where did you learn about finance?

A: You don’t learn much in grad school. Half the formulas they teach you are false. It’s a lot of self-study. I read a lot of finance books, and I usually read them with a calculator because I go through the math to make sure I master the formulas.

Senators Push For Higher Tariffs On Chinese Goods (Erik T.)

In a letter to Commerce Secretary Gary Locke, group of 15 U.S. Senators led by Charles Schumer have urged regulators to impose higher tariffs on exporters of Chinese goods, according to Bloomberg. The Senators claimed that the undervalued yuan gives exporters in China an unfair advantage in the U.S., citing a report from NewPage.

Energy

At Risk: The Sustainability of Oil and Gas (PDF presentation) (Tom A.)

Presentation from the GASAON Annual Energy Insurance Symposium on January 14, 2010.

Environment

Common Weed-Killer Chemically Castrates Frogs: Study (mhoop)

Researchers compared 40 male control frogs with 40 male frogs reared from hatchlings until full sexual maturity, in atrazine concentrations similar to those experienced year-round in areas where the chemical is found. Ninety percent of the male frogs exposed to atrazine had low testosterone levels, decreased breeding gland size, feminized laryngeal development, suppressed mating behavior, reduced sperm production and decreased fertility.

E.U. Clears Biotech Potato for Cultivation (TAsland)

E.U. officials had long deemed the potato safe. But some scientists have linked the marker gene to antibiotic resistance in humans, arousing concerns that sick people and the elderly especially could become more vulnerable to disease.

Please send article submissions to: [email protected]

26 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - March 2

"The school board as early as March 10 will decide whether to close nearly half the district’s 60 schools and eliminate hundreds of jobs, all to save as much as $50 million a year. Superintendent John Covington said the district must take these unprecedented steps to keep from filing for bankruptcy in 2011."

""This financial crisis is not yet over," Liu said, adding Europe's sovereign debt crisis is likely to persist for some time yet.

Earlier use of fiscal policy to shore up financial institutions has weakened the financial position of governments, leading to the current turmoil in sovereign debt markets, he said.

"In the U.S., the E.U., Japan, and other developed economies, government deficits and national debt levels are currently all very near or even far past the warning line," he said. "

"Dubai: Gulf countries should drop their peg to the US dollar to avoid unnecessary risk, John Taylor, chairman of FX Concepts, the world's largest currency hedge fund based in New York, said in Dubai on Monday.

"Any fixed exchange rate makes countries vulnerable to activity that has nothing to do with their economy," he said at Hedge Funds World Middle East 2011 conference, referring to fiscal policies in the US."

"March 1 (Bloomberg) -- Jonathan Slone, head of Hong Kong- based CLSA Asia-Pacific Markets, said he sees the chance of a systemic, public-sector debt crisis in the U.S. that will ultimately lead to the end of the dollar-peg standard.

“There’s a 40 percent possibility,” Slone said during an interview today in San Francisco, where the group is holding a three-day investor forum. “I think people should take that seriously.”"

"American International Group Inc.'s moves to sell two large life-insurance units will give a boost to the U.S. government's efforts to recoup its taxpayer-funded investments in hundreds of banks, insurers and other companies. But losses on the rescues still are expected to hit about $117 billion."

"NEW YORK (Reuters) - New York state's five-year deficit is $60.8 billion, partly because of the soaring costs of repaying debt and paying for health and pension benefits for public employees, Governor David Paterson said on Monday.

Each year, debt service costs will rise 17 percent while the tab for benefits and pensions will go up 11 percent.

But the "revenue generation," which broadly speaking is how much the state can spend, will only be about 37 percent of the increase in the state's bills during that period, said the Democrat at a New York Observer newspaper breakfast.

The deficit for the new budget that starts April 1 has probably grown to about $9 billion from last month's $8.2 billion estimate because several expected payments will be late or not materialize, he said."

"NEW YORK (CNNMoney.com) -- Snail mail might soon get even slower.

The U.S. Postal Service plans to propose Tuesday an adjusted mail service schedule, which will likely cut Saturday delivery. The agency will also suggest closing some branches and expanding its use of self-service kiosks in grocery stores and other popular retail spots, as part of its effort to work its way out of a mountain of debt. "

"Mississippi taxpayers will have to come up with an additional $90 million during the next fiscal year to fund the state employee retirement program. In three years this shortfall may be as much as $350 million, in addition to the present $700 million taxpayer cost, according to The Clarion-Ledger.

According to published reports, taxpayers will be paying $1 billion by 2013 -- almost a fifth of the state's total budget."

"TRENTON — Gov. Chris Christie was told that he's unlikely to get an unemployment fund bailout from the federal government to blunt a steep tax increase on New Jersey businesses, but the state's representatives in Washington agreed Monday to lobby for other aid.

Sen. Robert Menendez told Christie that a federal bailout of the 31 states that owe a combined $33 billion to the unemployment insurance fund was "unlikely." Menendez said it was more realistic for the congressional delegation to lobby to extend the states' time frame for repaying the money or getting the interest on the debt forgiven."

"New Jersey is one of 31 states borrowing from the federal government to meet unemployment claims. Together, the states owed $33 billion as of Feb. 25, according to the U.S. Labor Department."

"OLYMPIA — State House Democrats want to raise about $760 million in taxes by shrinking a long list of tax exemptions and collecting more money from smokers, lawyers, accountants and out-of-state businesses.

The plan, announced Monday, is the latest of three proposals from state leaders as they seek to bridge a $2.8 billion budget deficit."

"Connecticut Comptroller Nancy Wyman Monday issued grim news that the state's budget deficit has inched upward to $518.4 million, as most major tax categories continue to sputter.

The deficit has hovered around $500 million since last October, driven mainly by declining payroll-tax revenue tied to the loss of jobs, Wyman said in a statement. Overall, the income tax is expected to fall about $200 million short of the $6.6 billion it was targeted to generate by the end of the fiscal year June 30. "

"ATLANTA - One leader in the Georgia legislature says "massive" layoffs of state employees are likely, as the state continues to struggle with its budget.

As many as 8,000 state jobs may be on the line/

That's according to Senate Majority Leader Chip Rogers, who spokes at a news conference Monday and said he really can't offer much comfort or solutions.

Lawmakers are still working on the 2011 state budget."

"County coroners, treasurers and sheriffs across Illinois are getting unexpected pay cuts this year, and no one is happy about it.

The state ordinarily pays each of those elected officials a $6,500 annual stipend to compensate for duties they perform for the state. Because of the state's budget crisis, those officials will receive a stipend of only $4,196 this year -- a cut of $2,304, or 35.4 percent, on this portion of their pay. "

"Gov. M. Jodi Rell plans to use $219 million in reserves tagged for next year's budget to help plug a projected deficit of $504 million in this year's."

"New Jersey lawmakers want to reverse years of raids on state retirement funds by requiring the state to pay its annual share into the pension system.

The Senate held a required public hearing Monday on a resolution that ultimately would be decided by voters because it changes the state constitution. The Senate is expected to vote on the resolution next week. The Assembly has yet to consider it."

"The pension system for public workers, teachers, police and firefighters is underfunded by $46 billion and risks becoming insolvent unless fixes are made.

The state for years has skipped or greatly reduced its annual contribution to the system, diverting money that should have been budgeted for such contributions to other spending, including general operations."

"We've looked at the worst public pensions from state to state, judging by 2008 levels, and pointed out those with the highest unfunded liabilities.

We've ranked them by their actuarial funding ratios, which is the percentage of assets on hand able to cover their liabilities."

"WASHINGTON: The US Senate pressed ahead Monday with a 150-billion-dollar measure that extends tax cuts and unemployment benefits, part of a broad election-year push to keep the economic recovery on track.

Lawmakers weighed the bill, which extends jobless aid and a stopgap health coverage plan to the end of 2010, after Republican Senator Jim Bunning short-circuited a short-term extension with a price tag of US$10 billion.

Bunning used procedural tactics to stymie passage of the smaller, 30-day version, which had aimed to extend the benefits past Sunday, when they expired.

The new measure would retroactively extend the benefits."

(Look at the graphs posted at Nathan's Economic Edge)

 

Japan lower house passes record budget (will issue a record 44.3 trillion yen in new bonds)

US monitoring banks' sovereign risk exposures

Singapore, Abu Dhabi Face $10 Billion Loss on UBS, Citigroup

ANALYSIS-Czech left will be hard pressed to meet promises

Greek unions call new strikes against deficit-cutting measures

Calif. Unions Step Up Opposition to Public Education Gutting (Protests)

Euro May Slide Further Without Greek Rescue Details, UBS Says

Bank-run zombie hotels 'threaten entire sector' (Ireland)

Miami-Dade attorney: County responsible for paying Jackson's union workers (but can't file for chapter 9 bankruptcy)

SDSU's admissions for local students fall by more than 50% (San Diego)

City cuts hit ambulances; fee hikes to follow? (Los Angeles)

Education cuts may never be healed after special session (Las Vegas)

LAUSD expected to approve 4700 layoff notices (Los Angeles)

Johnny Oxygen's picture
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The Real Cause of Hyperinflation

The Real Cause of Hyperinflation

http://www.marketoracle.co.uk/Article17576.html

Mauldin and many others make the assumption that hyperinflation can’t occur without some kind of economic demand. It is the mainstream theory that money has to make its way into the economy (via bank lending and then business investment or consumption) for price inflation to occur.

The private sector or even the Federal Reserve isn’t the root cause of hyperinflation. Hyperinflation occurs when a country’s bond market breaks. In other words, the sovereign nation is no longer able to fund itself. Its bonds fall (yields rise) to the point where the government has to print money or default. Rising interest rates cause the interest payments to consume too much of the overall budget. The government or central bank then begins to print money to fund its deficit. Then the citizens start to consume, knowing the currency is rapidly losing value. Demand has nothing to do with the cause or the onset of hyperinflation.   

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Re: Daily Digest - March 2

Bakken Oil Warter Study: (www.ndoil.org/.../Bakken_Water_Optimization_Study_-_John_Harju.pdf).

extracted from the pdf:

As much as 1.0 million
gallons of water per well to
fracture the Bakken
Formation.
• Typically transported to well
site in 7500- to 8000-gallon
tanker trucks.
• Transportation costs for long
haul distances can be
excessive.
Permits to obtain water from high-quality
groundwater sources can be difficult and time consuming
to obtain.

• The North Dakota State Water Commission
(SWC) is encouraging withdrawal of water from
the Missouri River system for uses like fracing.
• The SWC and Corps of Engineers are currently
working together to identify “low-risk” corridors
for water extraction (i.e., easy access, low
probability of cultural features, etc…).

Relatively low recovery of the original frac
water within the first 10 days.
– Ranges from 15% to 50% recovery
• Very high salinity in flowback water.
– Salinity levels as high as 200,000 mg/L
• Water chemistry is predominantly sodium
chloride (NaCl), with lesser amounts of
calcium, potassium, and sulfate.
Bakken Recycling Challenges

• Slow recovery of flowback water
• Relatively low volume initial recovery
• Extremely high dissolved salts early in the
flowback
• Treatment very challenging, even with the
most robust technologies
• Treatment very likely not cost-effective in
most cases

Current Frac Water Costs
• Acquisition costs
– $0.25–$0.75 raw water cost
– $0.63–$5.00 transportation costs
• Disposal costs
– $0.63–$5.00 transportation
– $0.50–$1.00 disposal via deep well injection
• Total costs
– $2.00–$11.75/bbl

rickets's picture
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Re: Daily Digest - March 2

Hi Johnny,

Interesting article.  But, do you have any comments/ideas on where the money will come when this author states "The government or central bank then begins to print money to fund its deficit. Then the citizens start to consume, knowing the currency is rapidly losing value. Demand has nothing to do with the cause or the onset of hyperinflation."    ?

As a whole, there is no money.  People cant afford what they have, they are leveraged to the hilt, and their credit is being pulled.  So, even if they think the currency is going to rapidly lose money, how are they going to buy anything?  They dont have any do they?  Am I missing something?

Thanks

Rickets

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Re: Daily Digest - March 2

Rickets

I kind of thought what he meant by 'consume' was 'trying to get rid of their dollars' because the citizens realize the value is dropping. Like maybe buying hard assets like land, PM's, food, clothing, that kind of thing.

But good point. They can only 'spend' what they have on hand or access to. I suppose people could 'liquidate' what ever they have that holds any value. It wouldn't necesaarily have to be fiat currency. Plus if any credit was available they could use it to buy consumables like food that the bank could never take back.

I think the general idea is that this happens at once. In other words its the trigger. So at that point people would still have cash, stocks, whatever. Not for long but right at the beginning. Then what you are saying would happen.

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Re: Daily Digest - March 2

Thanks Johnny.  Interesting thoughts.  There were threads long ago on this site (and maybe an article from CM?) that suggested a likely outcome was hyperinflation in essential goods, and deflation in almost everything else.

If I picture a world where our bond market is failing, and therefore our dollar, then its likely all foreign businesses selling us (the U.S.) stuff would require more money to compensate for the devaluation.  But, their sales would plummet as most here are already out of money and could not spend more on stuff.  In the end, perhpas this leads to a higher % of what, if anything, of the money people still have being focused on essentials (food, water) and less and less on leveraged goods and luxury items.  I can certainly see people panicing and buying as much food as possible and that happening literally overnight.

This scenario makes the most sense to me and has the highest probability of happening.  What I go back and forth on daily is if this can lead to higher relative value in PMs or not.  I tend to lean toward not, as PMs are not essential.  The rest of the world, in a dollar devaluation/crisis, would be in crisis themselves as we are so big - and the concept of investing vs survival takes a back seat.

 

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Re: Daily Digest - March 2

As a whole, there is no money.  People cant afford what they have, they are leveraged to the hilt, and their credit is being pulled.  So, even if they think the currency is going to rapidly lose money, how are they going to buy anything?  They dont have any do they?  Am I missing something?

I suspect much of the money people will be spending will be coming directly from the government by way of social programs, bailouts,  and make work projects.  All that flows into the economy and dilutes the money supply.  I firmly suspect the government will spend as much as necessary to keep things flowing.  At some point, then you get the rush out of dollars as those that still have money realize how bad the inflation has become, making it even worse.  Look at Zimbabwe, clearly a vast majority of the citizens didn't have much money, yet they still managed to create hyperinflation due to the govement spending on it's pet projects (police, military).

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Re: Daily Digest - March 2

This scenario makes the most sense to me and has the highest probability of happening.  What I go back and forth on daily is if this can lead to higher relative value in PMs or not.  I tend to lean toward not, as PMs are not essential.  The rest of the world, in a dollar devaluation/crisis, would be in crisis themselves as we are so big - and the concept of investing vs survival takes a back seat.

I think PM's will definitely go up (become more valuable), because as CM says in the crash course, if money were to disappear, a new form of currency will spontaneously occur, because barter is too limiting.  When that occurs, I believe the world will turn to PM as they are one of the few things that can act as real money.   Look at what happened in Zimbabwe, gold became the defacto currency very quickly.

I agree that survival should be first:  water, food, protection(weapons), energy (solar,wood,etc) - and generally in that order.  Then anything left you need to protect wealth.  The wealth doesn't disappear just because money does, people will still have stuff and skills that they want to trade for other stuff and skills they need/want.  The value of goods I suspect will change greatly and I suspect you will have great deals on luxury items as most people will be struggling for basic survival items and will be willing to trade that new PS3/Ipod/plasma TV for a few loaves of bread when the time comes.

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Re: Daily Digest - March 2

That link to Nathan's site rocks. It hurts, but it helps show the truth very well.

http://economicedge.blogspot.com/2010/03/economic-reality-check.html

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Swarm USA

Tycer - Through the economicedge link you just sent I found:

www.swarmusa.com

I have only spent 20 minutes there, but looks fantastic on the surface.  Thought people on this site might want to see an organization set up to end the fed and debt based money.

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Re: Daily Digest - March 2

It is also true that there are a decent amount of people out there who have money right now, but are unwilling to spend it or invest it in this deflationary environment, which will rapidly change in the event of consumer price inflation. However, it seems that asset prices will most likely bounce around while trending downwards.

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Re: Daily Digest - March 2

I look at it like this. Most of the industrialized nations are printing money to solve their problems. Maybe not as much as the US but they are still doing it. I think eventually people will lose faith in fiat currency. When that happens where do you go to preserve your wealth especially if you have to move quickly (exponential collapse). I think this is what will drive PM's up. Not that they are the best bet in the long run but that they are the most readily available 'life-preserver' once you know the ship is going down.

Once you can steady yourself on PM's then maybe you will see a slow change to other assets like land, agriculture, booze, etc. But the key thing is that immediate panic. Once its clear people are dropping fiat look out! It will be a damn gate crashing rush to PM's.

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Re: Daily Digest - March 2

Thanks Sax.  Every time I read through your articles and see the horrible state of pensions and deficits, I think, "when will the understanding dawn that what they need to do is actually address the problem by bringing spending in line with tax receipts".  I repeat, "they (politicians) have to actually address the problem".

Then I read about the Europeans likely going to bail out Greece "we can all kick the can another few months down the road!"

Then I read about the Greece unions planning strikes against austerity as their country is in a debt crisis.

And I wonder if and when that understanding (or is it simply courage) will come.

Waiting and at times almost wishing for the comeuppance which answers once and for all the question, "can't we just print and borrow money and go on with the status quo?"  Then thinking, we'll will be painful so patience and try to enjoy this time in the eye of the storm (but try to prepare for the other side of the storm).

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8 reasons Wall Street loses another 20% in this decade

Wall Street steals another 20%  -  PAUL B. FARRELL

Warning: In the past decade, Wall Street lost trillions. Adjusted for inflation, Wall Street lost 20% of your money. It will do it again by 2020. You can't get back to even, cannot win Wall Street's 'Loser's Game.

http://www.marketwatch.com/story/wall-street-is-stealing-another-20-from-you-2010-03-02?link=kiosk

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Re: Daily Digest - March 2

Great post Tycer! Thanks

 

Hi Ashvinp!

Hi jhart5!

Welcome to CM.

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Re: Daily Digest - March 2

"Exaggerating Enormously": Why the U.S. Is Not Heading for a Greek-Style Crisis

http://finance.yahoo.com/tech-ticker/article/432342/%22Exaggerating-Enormously%22%3A-Why-the-U.S.-Is-Not-Heading-for-a-Greek-Style-Crisis

"They're exaggerating enormously," Martin Wolf, The FT's chief economics commentator, tells Aaron in the accompanying clip. In a column last month, Wolf went on to describe such worst-case claims as "hysteria."

Why the U.S. is not the next Greece. Wolf cites several reasons why America can safely avoid's Greece's fate. 

  • -- A floating currency: America has the ability to devalue the dollar in order to lift demand for exports.
  • -- Still the dollar: Despite rumors of its demise, demand for U.S. dollar-denominated assets remains strong globally. There isn't a viable alternative to the dollar, he adds.
  • -- Debt management: Many Americans are concerned about the country's growing deficit, but now is not the time to reign in spending and jeopardize the nascent recovery, Wolf argues. "A country -- which has its own currency, a floating currency, a currency which the central bank can print and which the rest of the world is still desperate to hold, because there are no other alternatives -- has room for maneuver."
  • -- EU limits. And it's that kind of monetary independence that gives U.S., and the UK for that matter, room to maneuver without the shackles of a multi-nation fiscal union, where countries like Greece are handcuffed by the EU's strict guidelines. (Click here to get Wolf's take on why he thinks Greece "looks like a train wreck.")  
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Re: 8 reasons Wall Street loses another 20% in this decade

When folks really begin to realize that the "market" isn't their friend, that will probably be around the time that the feds begin ratcheting up the penalties for early IRA withdrawls. I suspect that a 10% penalty will look like a good deal in 2-3 years.

Imagine what will happen when mainstreet begins to figure out that between the poor returns on investments and the probability of a currency crisis, they might just want to take their money and run.  And I suspect that the govm't will not want that happening...So what to do?? Ratchet up the penalties for early withdrawl to 20,30,40% or more. It's pretty easy to imagine a senario like this coming true.

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Re: 8 reasons Wall Street loses another 20% in this decade
targetbuster wrote:

When folks really begin to realize that the "market" isn't their friend, that will probably be around the time that the feds begin ratcheting up the penalties for early IRA withdrawls. I suspect that a 10% penalty will look like a good deal in 2-3 years.

Imagine what will happen when mainstreet begins to figure out that between the poor returns on investments and the probability of a currency crisis, they might just want to take their money and run.  And I suspect that the govm't will not want that happening...So what to do?? Ratchet up the penalties for early withdrawl to 20,30,40% or more. It's pretty easy to imagine a senario like this coming true.

Which is exactly why people need to adopt a market neutral approach to trading and investing.  Up or down - I don't care.  Just move - I can trade movement and take cash proceeds from my trading to buy PMs.

And for those folks who are just now realizing that the market has never been their "friend", hopefully it isn't too late.  There is a market maker on the other side of every transaction made in the market.  A market maker whos primary function is to create liquidity by ensuring a spread between Bid and Ask prices of underlying equities, ETFs, options, funds - whatever.

The market maker's secondary function is to separate ignorant people from their money - ignorant in the sense of those people who think the market is "fair" and plays nicely with others.

It is not fair and it does not play nicely.  As long as you know you are in a war for your money every time you venture into the market - be it a stock purchase or an option purchase - you are forewarned and forearmed and can turn the tables on the market maker.  But you must have a plan you will stick to - and first and foremost is the discipline to leave a bad trade the second it turns against you.  get out with most of your money, figure out why your trade did not work and look for another one.

Trade wisely, invest trading proceeds wisely and you eliminate the need for a 401K and you never expose yourself to early withdrawal penalties.

All it takes is a little self-education and a whole lot of practice and discipline.

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Re: 8 reasons Wall Street loses another 20% in this decade
Dogs_In_A_Pile wrote:

All it takes is a little self-education and a whole lot of practice and discipline.

I suspect that there many who do not have the energy, time or smarts to embark on this path. I agree, that if a person intends to stay in the market, this would be the proper approach. But how many will choose to do that? Making money through traditional investing venues will be increasingly more difficult.

Taking ones assets and finding other (perhaps more intrinsically productive) methods to increase their net worth will inevitably cross the minds of many people. Hense, they may want to simply "get out" of the markets that have consistently performed so poorly for most of us.

As you said, it may quickly become too late for many.

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Senators Push For Higher Tariffs On Chinese Goods

Senators Push For Higher Tariffs On Chinese Goods

Hmmm...Smoot-Hawley redux

We have no collective memory.

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Re: 8 reasons Wall Street loses another 20% in this decade
targetbuster wrote:
Dogs_In_A_Pile wrote:

All it takes is a little self-education and a whole lot of practice and discipline.

I suspect that there many who do not have the energy, time or smarts to embark on this path. I agree, that if a person intends to stay in the market, this would be the proper approach. But how many will choose to do that? Making money through traditional investing venues will be increasingly more difficult.

Taking ones assets and finding other (perhaps more intrinsically productive) methods to increase their net worth will inevitably cross the minds of many people. Hense, they may want to simply "get out" of the markets that have consistently performed so poorly for most of us.

As you said, it may quickly become too late for many.

target -

I can tell you from personal experience that EVERYONE has the energy, time and smarts  to embark on this path.  They however, choose to do otherwise.

Given that they will likely expend a similar amount of energy, time and smarts to find the "other methods" you refer to, it becomes a wash.  I do know that in very few instances, those who say they lack the energy, time or smarts are just making excuses as to why they can't "do it".  I understand they are being pushed out of their comfort zones wrt trading the market, but that is apparently going to happen anyway.

That and they have been handicapped into inaction by years and years of a green market bias.  This is no small hurdle to overcome, but once you become a market neutral trader you really don't care about anything other than whether or not the price of the underlying equity moves. 

The quality of the product or service doesn't matter.  Beta and EPS doesn't matter.  Who the CEO is doesn't matter.  Who the Board is comprised of doesn't matter.  The only thing that matters is does the price of the stock move.  If it moves up - trade to the upside.  If it moves down - trade to the downside.

Trade in the direction of the market - take what the market gives you, not what you want it to give you.  Doing so eliminates all of that other noise and is a perfect reason to turn off the circus that is Jim Cramer and Mad Money.

targetbuster's picture
targetbuster
Status: Bronze Member (Offline)
Joined: Jun 1 2009
Posts: 27
Re: 8 reasons Wall Street loses another 20% in this decade
Dogs_In_A_Pile wrote:
targetbuster wrote:
Dogs_In_A_Pile wrote:

All it takes is a little self-education and a whole lot of practice and discipline.

I suspect that there many who do not have the energy, time or smarts to embark on this path. I agree, that if a person intends to stay in the market, this would be the proper approach. But how many will choose to do that? Making money through traditional investing venues will be increasingly more difficult.

Taking ones assets and finding other (perhaps more intrinsically productive) methods to increase their net worth will inevitably cross the minds of many people. Hense, they may want to simply "get out" of the markets that have consistently performed so poorly for most of us.

As you said, it may quickly become too late for many.

target -

I can tell you from personal experience that EVERYONE has the energy, time and smarts  to embark on this path.  They however, choose to do otherwise.

My point exactly

TechGuy's picture
TechGuy
Status: Gold Member (Offline)
Joined: Oct 13 2008
Posts: 428
Re: Daily Digest - March 2

As a whole, there is no money.  People cant afford what they have, they are leveraged to the hilt, and their credit is being pulled.  So, even if they think the currency is going to rapidly lose money, how are they going to buy anything?

There are always people with money. The Top 10% earners have significant saved capital.  They will covert their cash into tangable assets. Also there are trillions in pension plans, 401Ks and other retirement funds that will be used to buy tangable assets. Fund managers will sell bonds and buy selected stocks (those that do well in high inflation), PMs, land and other assets. 401Ks will be liquidated by the middle class to put food on the table.

Consider that most people in Zimbabwe are dirt poor and the poverly level is many times greater in Zimbabwe than in the US, but that didn't stop hyperinflation from happening. Consider that the US imports tens of billions of goods and services every month. As foreigners loose faith in the US they will demand higher prices. Consider what would happen if the price of oil rose to $200, $300 or even $500 per barrel priced in devalued US Dollars. Everything would become much more expensive even if people didn't buy a lot of stuff.

Right now the US is stuck in stagflation, as unemployment continues to slowly rise and prices remain steady. Considering that many states are on the verge of going bankrupt, the federal gov't is going to have to step hard on the gas just to keep the US economy from falling off the cliff. This means more spending and higher deficits which will lead to bad inflation, as it did during the late 1970s. If the federal gov't falls to act to prevent the economy from collapsing than it risks default. US currency become nearly workless in a few weeks and we end up with abrupt hyper-inflation. See the Russian economic collapse in the early 1990s. A few Weeks before the collapse 2000 Rubles bought a two week vacation at a luxury resort. After the collapse, you could not buy a loaf of bread with 2000 Rubles.

 

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
Status: Martenson Brigade Member (Offline)
Joined: Jan 4 2009
Posts: 2606
Re: 8 reasons Wall Street loses another 20% in this decade
targetbuster wrote:
Dogs_In_A_Pile wrote:
targetbuster wrote:
Dogs_In_A_Pile wrote:

All it takes is a little self-education and a whole lot of practice and discipline.

I suspect that there many who do not have the energy, time or smarts to embark on this path. I agree, that if a person intends to stay in the market, this would be the proper approach. But how many will choose to do that? Making money through traditional investing venues will be increasingly more difficult.

Taking ones assets and finding other (perhaps more intrinsically productive) methods to increase their net worth will inevitably cross the minds of many people. Hense, they may want to simply "get out" of the markets that have consistently performed so poorly for most of us.

As you said, it may quickly become too late for many.

target -

I can tell you from personal experience that EVERYONE has the energy, time and smarts  to embark on this path.  They however, choose to do otherwise.

My point exactly

target -

I pulled my punch a bit.  Here's the rest:

I can tell you from personal experience that EVERYONE has the energy, time and smarts  to embark on this path.  They however, choose to do otherwise.  And those who choose to do otherwise and still complain about their financial well being get and deserve no sympathy.  They are the people who want their lives to be different, yet they don't change anything about what they are doing with their lives and they still expect things to be different.

These are the same people who will say that "The government will take care of things...they always do."

And then wonder why things don't change. 

Sometimes I just don't get it.

JAG's picture
JAG
Status: Diamond Member (Offline)
Joined: Oct 26 2008
Posts: 2492
Re: 8 reasons Wall Street loses another 20% in this decade
Dogs_In_A_Pile wrote:

I can tell you from personal experience that EVERYONE has the energy, time and smarts  to embark on this path.  They however, choose to do otherwise.

Thank God! If everybody was a day/swing trader, the potential profit from such a trading approach would be zilch. If anyone wants to employ the buy-hold-pray strategy please don't let me discourage you. Just invest your capital and forget about it! There is no effort needed on your part, just let your "money work for you"/ Wink

Erik T.'s picture
Erik T.
Status: Diamond Member (Offline)
Joined: Aug 5 2008
Posts: 1234
Re: Daily Digest - March 2

@target & DIAP:

You left one point out, Dogs. The also still haven't watched the FREE Crash Course DVD you gave them more than a year ago, because they don't have the time. Despite being laid off.

ET

 

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