Financial topics

[Higgenbotham]

Also the bottum link confirms the operation.

http://www.frbsf.org/publications/econo ... 1-08bk.pdf

Reading these Fed papers or anything that comes out of the Fed lately reminds me more and more of what the Soviet news agency Tass put out before Communism collapsed.

In this link, the Fed compares the size of Operation Twist to the size of QE2 and states that the size of the operations were comparable and therefore the operations were comparable. I laughed so hard I just about fell off my chair. While it's possible they are ignorant enough to be doing oil price correlations that don't apply in today's environment, there isn't any chance at all that they can be making an honest comparison between Operation Twist and QE2.

Operation Twist had no impact on the size of the Fed's balance sheet. QE2 added $600 billion to the Fed's balance sheet. Who do these guys think they're kidding?

Oh, and I love the disclaimer. At least when the Soviets put out junk it was official. This country is a complete joke.

[Higgenbotham]

In our previous communications, you are aware that my trading positions have ironically been similar to yours in timing, but I've probably given up more on this torturous melt up.

I started shorting exactly two years ago this weekend, doing half a position to start. By late July 2009 I was fully short at an average of 970 on the S&P Index. The S&P closed Friday at 1316.

For those who don't trade futures, there has been a negative carry on short positions these 2 years of a about 5 points per roll. There are also commissions which in my case are a quarter point per round turn. Over 2 years, the carry and commissions ate up an additional 42 points.

Therefore, the total loss to anyone holding a short position from 970 for 2 years is 388 points.

The size of my position is such that 1 point is equal to $1,000.

On the plus side, I have traded 203 points out of the market during these 2 years mostly by covering shorts and going in higher. Also, over the previous 2 years, my metals increased in value by an equivalent 199 S&P points before I sold them all in late April.

Therefore, in 2 years, the loss on my short position is currently $185,000, while my overall trading gains are equivalent to 14 S&P points, or $14,000.

[Higgenbotham]

Digging into the dustbin of failed predictions, I had put forth the idea that the S&P would be capped at 1310 and would likely peak out and roll over by early February at the latest.

It interesting to note that since then the S&P has pretty much averaged 1310. The high was 1370 on May 2 and the low was 1250 on March 16, both 60 points from 1310. It keeps zipping up and down around 1310 and doesn't seem to be able to decide.

There was the discussion a week ago about how the herd had reversed polarity with the Japanese earthquake. Now it gets more interesting because after the flash crash of May 6, 2010 the stock market rallied for 5 days to May 13, 2010 and then headed down again. Lately, it peaked on July 7 and a similar 5 days down would have resulted in a low on July 14, then another move higher. Instead, the market continued lower into the morning of July 15, then rebounded some in the afternoon. It's still not real clear to me whether the herd will continue following the polarity reversal of the past 3-4 months or depart from that and head south. I'm still short.

Somewhere in my notes I have an exact logarithmic calculation of the line connecting the 1937 and 1966 highs. That data is only available for the Dow because the S&P didn't exist in 1937. On May 2, the Dow traded over that line for a few minutes, then reversed down. I'll post that data if I run across it.

[Higgenbotham]

Dow Industrials

March 10, 1937 high = 195.59
February 9, 1966 high = 1001.11

Days between March 10, 1937 and February 9, 1966 = 10,563
Days between March 10, 1937 and May 2, 2011 = 27,081

Inverse log [log 195.59 + [log 1001.11 - log 195.59]*27,081/10,563] = 12,865

The actual May 2, 2011 high was 12,876. It only went over the 12,865 trendline value for that day very briefly, for a few minutes near the open of the session as I recall.

Here's a visual of that trendline. This isn't my chart, it's Atilla's chart from his blog.
http://2.bp.blogspot.com/-BSoT-EFzBd4/T ... 17_Pro.gif

[aedens]

MIDWAY, Ga. (AP) -- Police in Georgia have shut down a lemonade stand run by three girls trying to save up for a trip to a water park, saying they didn't have a business license or the required permits. Midway Police Chief Kelly Morningstar says police also didn't know how the lemonade was made, who made it or what was in it. The girls had been operating for one day when Morningstar and another officer cruised by. The girls needed a business license, peddler's permit and food permit to operate, even on residential property. The permits cost $50 a day or $180 per year.

Above does sum up why things are beyond repair. Also note a street vendor in China was beaten to death so wake up cheerfull idiots. Who could spend for the best benefit. We already know that answer. Romers work for the administration's theory of money multiplier was based on Fishers observations and it is in the forums from the 1930's.
http://generationaldynamics.com/forum/v ... omer#p3891
How to generate severe stagflation in the years 2010 through 2019 right on que thanks Washington provided below.
The Macroeconomic Effects of Tax Changes: Estimates Based on a new Measure of Fiscal Shocks, by Christina D. and David H. Romer (March 2007). (Christina Romer now chairs the president's Council of Economic Advisors). This study found that the tax multiplier is 3, meaning that each dollar rise in taxes will reduce private spending by $3."
In the same vein: This is from Professor Fisher's book entitled 100% Money, revised edition
published by The Adelphi Company (1936)
There is a growing opinion among specialists in this field that the per capita money income is approximately equal to three times the per capita
money in circulation. Should this opinion be confirmed - that money and money income maintain an approximately constant ratio or even that this
would be true in the absence of great booms and depressions - we would reach the rather startling conclusion that to maintain the dollar as a
fixed fraction of per capita income would amount to the same thing as fixing the per capita supply of money and that the only statistics needed
by the Currency Commission would be those of population. We cannot, as yet, be sure that the two criteria - a fixed per capita quantity of money
and a dollar as a fixed fraction of the per capita income - are so nearly the same; but we can at least be sure that the per capita quantity plan
would not be a bad solution of the money problem.

This debt issue today, and they are aware to the extent that policy error was the issue then rused of Money Stock rigidity as Capital flight was ignored.
As they say kill a chicken to scare the monkeys. They assert now that the Senators sent to end this insanity are back seat drivers and no consequence. They should be fired since balancing a check book is so difficult. Voters deserve this travail since they send them back over and over again.
The fact of the matter is you are owned.

Facts: http://money.usnews.com/money/blogs/flo ... an-anymore

Money will not come Home since basic's are this. Gold collar, White collar and Blue collar workers. Between the two party's there are none for the taxpayers who are being pushed around like vegetables on a plate. And they expect another election to be to there benefit is beyond words to express.

[aedens]

It's not that government has lacked information needed to fix the problem. It is institutionally incapable of bringing about the desired result, since the principles of profit and loss, private property and contract, enterprise and entrepreneurship, do not exist in government. Any Government operates with an eye to its own short-term survival, and those of its connected interest groups, and nothing else. Basil Moore 1983, “Unpacking the post Keynesian black box: bank lending and the money supply”, Journal of Post Keynesian Economics 1983, Vol. 4 pp. 537-556; here Moore was quoting a Federal Reserve economist from a 1969 conference in which the endogeneity of the money supply was being debated. “In the real world, banks extend credit, creating deposits in the process, and look for reserves later”.

We see who paid for that.

Their empirical conclusion was just the opposite: rather than fiat money being created first and credit money following with a lag, the sequence was reversed: credit money was created first, and fiat money was then created about a year later: Having failed to understand the mechanism of money creation in a credit money world, and failed to understand how that mechanism goes into reverse during a financial crisis, neoclassical economics may end up doing what by accident what Marx failed to achieve by deliberate action, and bring capitalism to its knees. Academic economics responded to these empirical challenges to its accepted theory in the time-honoured way: it ignored them.

It was ignore to the extent to inflate the debt away in which all Governments do. It is policy and another fatal deciet of historical context of fact.
The fact of being Independant is your only recourse to preserve capital. No one will, or does care other than the common man regard to which is being subjucated for total assimilation to the Statist's wake of they know what is best to push you into.

[aedens]

Also the bottum link confirms the operation.

http://www.frbsf.org/publications/econo ... 1-08bk.pdf

Reading these Fed papers or anything that comes out of the Fed lately reminds me more and more of what the Soviet news agency Tass put out before Communism collapsed.

In this link, the Fed compares the size of Operation Twist to the size of QE2 and states that the size of the operations were comparable and therefore the operations were comparable. I laughed so hard I just about fell off my chair. While it's possible they are ignorant enough to be doing oil price correlations that don't apply in today's environment, there isn't any chance at all that they can be making an honest comparison between Operation Twist and QE2.

Operation Twist had no impact on the size of the Fed's balance sheet. QE2 added $600 billion to the Fed's balance sheet. Who do these guys think they're kidding?

Oh, and I love the disclaimer. At least when the Soviets put out junk it was official. This country is a complete joke.

From to get to: above article primer
Consider the tip of the funnel. If we wanted to explain the behaviour of nominal lending then it was legitimate also to consider firms’ costs (at least this seemed to be proven for the flow of nominal lending) and thus to support the view that changes in the money stock were traceable to firms production and costs. Any major differences of opinion concerned the role of interest rates, and this was important because of the emerging consensus that a short-term interest rate, set by the central bank, was the only plausible policy instrument.
Recall the context later. 1971 had seen the introduction of the ‘Competition and Credit Control’ measures and yes that did end badly, a package which swept away the long-standing use of administrative controls over money and credit and promised, in future, that the Bank's would rely solely upon changes in minimum lending rate as its policy instrument.

To get to and survive:
This just conveys who you are and not what you are, size. What you are is narrowed not by demand as we know is truly the supply overhang. Choppy as things are we are speaking of two thugs beating the market until moral improves which is not going to happen since in the long run the Consumer will decide. This OVER HANG did not profit the common man since he just payed for it. He did not benefit in nomimal wages in context to inflation true damages over time. This is why we have a long way to go. For the brutal bear case we know it is only surviving. You may admit like me years will pass and interests is not about the taxpayers anymore. Just stealth theft which may "cost out of reach" have just damaged beyond repair to many to recover.
Also the information was from the FEDS. Scary how disconnected things truly are, I will convey in the strongest sentiment.

[Higgenbotham]

From to get to: above article primer
Consider the tip of the funnel. If we wanted to explain the behaviour of nominal lending then it was legitimate also to consider firms’ costs (at least this seemed to be proven for the flow of nominal lending) and thus to support the view that changes in the money stock were traceable to firms production and costs. Any major differences of opinion concerned the role of interest rates, and this was important because of the emerging consensus that a short-term interest rate, set by the central bank, was the only plausible policy instrument. Recall the context later. 1971 had seen the introduction of the ‘Competition and Credit Control’ measures and yes that did end badly, a package which swept away the long-standing use of administrative controls over money and credit and promised, in future, that the Bank's would rely solely upon changes in minimum lending rate as its policy instrument.

The Fed had a pre-planned series of steps to "fight deflation" but it was not known as to deflation in what. Now isn't it interesting in the op-ed piece in the Washington Post late last year it was stated that stock prices did go up. But the deflation "problem" was in real estate (and the associated securities) and the attempt to stimulate real estate by lowering the long end of the curve (in theory) was not admitted as the failure it was. As I've mentioned, when the money was handed to the speculators, they did what speculators always do, which is to chase winners, like dogs chase the cars that are moving. This process of chasing winners has resulted in higher than normal fuel prices, higher than normal food prices, and lower than normal real estate prices which according to recent articles have now fallen more than during the Great Depression. Now I would say this - the bottleneck in this case is not the interest rate on the long end, it is the fact that the cost structure is too high to support real estate and, even more important in the long run, new economy business. We have these bubbles and deflation is the solution, not the problem. The speculators need to be whipped, not the taxpayers/potential entrepreneurs. I would add that as a past and potential future entrepreneur i can sit idle with idle capital until the Fed's morale improves and they stop the speculation and let the cost structure deflate.

To get to and survive:
This just conveys who you are and not what you are, size. What you are is narrowed not by demand as we know is truly the supply overhang. Choppy as things are we are speaking of two thugs beating the market until moral improves which is not going to happen since in the long run the Consumer will decide. This OVER HANG did not profit the common man since he just payed for it. He did not benefit in nomimal wages in context to inflation true damages over time. This is why we have a long way to go. For the brutal bear case we know it is only surviving. You may admit like me years will pass and interests is not about the taxpayers anymore. Just stealth theft which may "cost out of reach" have just damaged beyond repair to many to recover.
Also the information was from the FEDS. Scary how disconnected things truly are, I will convey in the strongest sentiment.

All correct in my view. The supply overhang can only be cured by transition to the new economy and the Fed is the bottleneck. The demographics and generational dynamics are not trending toward more old economy consumption. The largest demographic is now in the 50-54 age group and the Fed could cause those folks to literally work themselves to death trying to pick up pennies before the tsumani that's been delayed hits with greater force than it otherwise would have, leaving their 15-30 year old kids with no job skills/relevant work experience after it hits.

[aedens]

Yes indeed fire for effect "Credit" has been noted more than locally. Living the super bubble
from such disfunctional group's does try one soul. Credit indeed has a place and as you suggest
chasing parked cars I would forward does seem they would give up under normal thinking.
Unfortunate for many we are not speaking of normal cycles of growth even they did forward.
Conditions are consequences, and that is not going to change the Politco's calculation to there
alleged worth.
http://data.worldbank.org/indicator/FP.CPI.TOTL.ZG

[OLD1953]

Well, it's been said before that the US will eventually do the right thing - after doing all the wrong things first. The definite American economic cycle is indeed boom and bust, but the govt actions always lag the dynamic needed to correct problems.

Infrastructure was built during the last recovery, giving jobs to millions and causing a large expansion of the middle class. This allowed for high productivity and rising wages.

By the 60's we were coasting on that productivity, and instead of another rework of infrastructure with breaks to business to increase production and cut cost further, we built social programs and fought wars.

During the 70's/80's we were a mess, German and Japanese production was climbing and the US had "stagflation" in a bad way.

So finally, the govt cut regulations and cut taxes and also cut the unions loose, while starting "free money" policies at the Fed. This allowed for a series of bubbles, first in commercial real estate (S&L mess) then the tech bubble(s), then a bubble in stocks/housing and now a bubble in commodities.

So what happens next? We go full circle and build the infrastructure again. Probably this time will be passenger rail (underground? evacuated for high speed?) for electric transport, nuclear and solar power plants, and superconducting power cables interlinking the US and Canadian grid (http://www.ornl.gov/info/reporter/no13/southwir.htm).

We are looking at a soon to start 15 or 20 years of infrastructure building, then the rest of the cycle again, unless the technological singularity derails the whole thing.

And government is a major driver behind it all, you can't have cars without roads, you can't have a grid without the govt, because nobody owns it, they just use it, etc. It's not that I see government as ineffective, they are just ALWAYS late to the party.