Financial topics

[jusme]

The banks are hoarding real estate. I think that's what they have planned also.

Interest rates will go up now.

Taxes

Fee's on top of fee's !

There has been citizen's arrested for growing garden's ?

But food stamps are going to be cut ?

I would watch and wait and see what the "new normal feels like " ?

I hate that term. There won't be anything "normal " on any given day !

Chaos perhaps ?

Good luck Higgie !

jusme

[aedens]

http://www.youtube.com/watch?v=ht7mxF9X ... re=related

"Run On", is a traditional folk song

I think stones need to be dropped and think.

[Higgenbotham]

I suspect this is the battle being fought this weekend under the surface. The S&P downgrade may have...(fill in the blank).

WSJ: Obama Administration Weighs How to “Rent” Foreclosed Homes to Their Owners

July 22, 2011

The Obama administration is examining ways to pull foreclosed properties off the market and rent them to help stabilize the housing market, according to people familiar with the matter.

While the plans may not advance beyond the concept phase, they are under serious consideration by senior administration officials because rents are rising even as home prices in many hard-hit markets continue to fall due to high foreclosure levels.

Trimming the glut of unsold foreclosed homes on the market is “worth looking at,” said Federal Reserve Chairman Ben Bernanke in testimony to Congress last week.

http://online.wsj.com/article/SB1000142 ... 0001332210

[vincecate]

Back in 2009, someone could take a low risk bet on the short side if they were long some gold/silver because if Bernanke could boost stocks with QE there was a good chance gold/silver would move faster. But that is a tougher proposition now.

For most of the last 2 years I have been in long term calls for silver and short term puts for S&P. I made money on silver and so far am behind on the S&P puts. I still think it is a reasonable plan.

Either they print like crazy and silver does well or they don't and the S&P crashes. If they are printing they are stealing value from the rest of the world but debasing the currency. If they don't, they would have to tax the hell out of US citizens and companies to fund that huge government. So either silver goes up or S&P goes down. Or both.

Are you just saying that because silver has gone up by more than a factor of 3 it is not so safe to expect it to go up more?

[Higgenbotham]

Are you just saying that because silver has gone up by more than a factor of 3 it is not so safe to expect it to go up more?

What worried me is the fact that silver probably can't go a lot higher without food and energy costs going up with it. And the Fed is going to be really hesitant to take the risk of boosting food and energy costs in the face of a newly stagnant labor market where job growth and wages aren't following. I didn't understand how the cycle could actually be repeated until seeing a second iteration of the 2002 to 2009 cycle play out in real time, which it is doing (I could have gone to sleep if I had held long gold/silver against an equal dollar amount of short S&P - instead, I was biased toward deflation and went short a much larger dollar amount of stocks, thus losing the outsized gains in gold/silver). In both cases, the Fed pushed inflation until it became counter productive (maybe not by our definition) and then they backed off. So I see a lot of similarity between the 2007/8 period and 2011 as I run through all the numbers and chart patterns. The interesting thing we are seeing overall is gold/silver higher than 2007/8, commodities roughly the same, and the stock market lower. I could imagine that after some bloodletting as we saw from late 2007 to early 2009 that the whole thing could repeat once more with yet higher gold/silver and lower stocks at the top of the next cycle around 2015 if the same politics and other factors allow them to drag things out. But seeing if and where things bottom will tell us more than could be said now - talking about 2015 is getting a little ahead of the game. Armstrong has been doing that for awhile and I think he's talking $5000 gold and higher stocks in 2015.

[jdcpapa]

Good evening everyone,

John, thank you once again for your valuable wisdom. There is something else working here. I stand by my posts. For those of us who have exercised sound fiscal conduct ,the internal ripple is of concern. Regards,

[vincecate]

What worried me is the fact that silver probably can't go a lot higher without food and energy costs going up with it. And the Fed is going to be really hesitant to take the risk of boosting food and energy costs in the face of a newly stagnant labor market where job growth and wages aren't following.

If the Fed does not buy the Treasury debt, who will? The Chinese have the same amount they did 10 months ago. The Fed does not want to see interest rates shoot up. If they are not buying debt, rates will shoot up. If they did not need to help out the Treasury, then they could just look at inflation and do something. But when the government needs to borrow money or shut down, the Fed will help them. And even if nobody else anywhere is buying government debt, the Fed will with newly made money.

If I was running any resource country or business, I would not do long term contracts in dollars any more. If a country stops doing long term contracts in dollars, they won't be exposed to the dollar inflation that is coming. So I expect this to happen. It is, and will be seen as, a huge vote of no-confidence in the dollar.

http://www.treasury.gov/resource-center ... ts/mfh.txt

[Higgenbotham]

If the Fed does not buy the Treasury debt, who will? The Chinese have the same amount they did 10 months ago.

http://www.treasury.gov/resource-center ... ts/mfh.txt

http://www.ici.org/research/stats/flows/flows_08_03_11

One source is the US public. The flows coming out of domestic mutual funds will go into the bond market, roughly. The $3-4 billion per week of inflows are into just bond mutual funds and the inflows into bonds overall will be greater. I think knowing the domestic US savings rate and income plus the movement of capital out of other assets would allow for a rough estimate. I don't know those figures off the top of my head.

A second source is large investors. Buffett's $40 billion in treasury bills is significant and when Soros moves a $25 billion fund to 75% cash, that's (probably) going into treasuries too. I recently read Paulson is trimming stock assets but the article didn't say how much. Icahn shut down a fund earier this year and so have a few others.

Another source is corporations. For example, Apple has $76 billion in cash, up from $23 billion 3 years ago, as much as a medium sized country. And there are other cash rich corporations. Interesting to note from your link that if Apple did have most their cash in treasury bills (I don't know that they do), they would hold more treasuries than all but 11 countries in the world and Buffett holds more treasuries than all but 16 countries in the world.

For a different way of looking at it, the bid to cover is usually reported. When I buy treasury bills, I put an order in to buy at whatever price is determined at the auction. But investors have the option of bidding at a price they determine. Lately I've read that the dollar amount of bids has been over 4 times the dollar amount of treasuries available. That's not a figure I track regularly though so it may not be representative. I've only been paying attention lately because I've been buying treasuries for the past 3 months.

[vincecate]

If the Fed does not buy the Treasury debt, who will? The Chinese have the same amount they did 10 months ago.

One source is the US public. [...] A second source is large investors. [...] Another source is corporations.

I am not sure I understand those numbers, but it looks like an average of $10 to $20 billion per month for all of these? They need more than $100 billion per month. We are not close, are we?

[Higgenbotham]

I am not sure I understand those numbers, but it looks like an average of $10 to $20 billion per month for all of these? They need more than $100 billion per month. We are not close, are we?

http://www.federalreserve.gov/releases/ ... /z1r-5.pdf

Starting over with the above PDF, there are three tables:
B.100 Balance Sheet of Households and Nonprofit Organizations (1)
B.102 Balance Sheet of Nonfarm Nonfinancial Corporate Business
B.103 Balance Sheet of Nonfarm Nonfinancial Noncorporate Business

So far as I know, this should cover everything except the financial entities that the deposits reside in and the hedge funds and holding companies like Soros Fund and Berkshire Hathaway. Where direct ownership of treasuries is not shown in the line item, then the question becomes what the financial institution who has the deposit is doing with the money.

I'll sort through these tables some more, but it doesn't appear to me that these 3 sources are very large holders of treasuries either directly or indirectly through treasury only money market funds. Therefore, it would probably be necessary to try and find a similar balance sheet for the financial entites that hold any treasuries purchased with the deposits and the hedge funds and holding companies.

Overall, I see what are classified as "Financial assets" having grown by about $4 trillion over the past year. That seems a bit high as personal savings are about $0.6 trillion per year while corporate profits are running at about $1.7 trillion per year.