Friday, March 27, 2009

Economic disinformation

I ran into this article by Henry Blodget. While he maintains them as "misconceptions", I say intentional deception by the mainstream press. Nobody wants to step up to the grindingly painful solution(s) of spending LESS than their income, and that is why this economic mess will last a good while.

Here's a graph of household debt vs. US GDP, hmm remember 1929 that started the Great Depression?

So basically unless the western world buckle up and apply realistic solutions, this thing's gonna get worse. Let's look at the meat of Blodget's article,


The trouble with the economy is that the banks aren't lending. The reality: The economy is in trouble because American consumers and businesses took on way too much debt and are now collapsing under the weight of it...

The banks aren't lending because their balance sheets are loaded with "bad assets" that the market has temporarily mispriced. The reality: The banks aren't lending (much) because they have decided to stop making loans to people and companies who can't pay them back...

Bad assets are "bad" because the market doesn't understand how much they are really worth. The reality: The bad assets are bad because they are worth less than the banks say they are...

Once we get the "bad assets" off bank balance sheets, the banks will start lending again. The reality: The banks will remain cautious about lending, because the housing market and economy are still deteriorating...

Once the banks start lending, the economy will recover. The reality: American consumers still have debt coming out of their ears...


Sunday, March 22, 2009

Many financial analysts have got it wrong

Today, most studies in equity forecasting rely heavily on historical prices along with its derived figures exclusively, this generally does not generate significant (if any) edges. The answers sit elsewhere.

Fundamental flaw

Many assume that some esoteric, extraordinary relationship exists between the predicted security and its immediate past, that price impact transactions occur due to historical fluctuations alone. Not so. The big players with enough cash to influence markets make decisions on other elements, economic, liquidity measurements are a couple right off the bat.

George Soros mentions in Alchemy of Finance how some of his traders apply economic figures exclusively for trade recommendations. When guys like him and Warren Buffet started out, they made most of their initial fortunes with arbitrage schemes, which require fairly deep understanding of financial economics (and some math). See where this is going?


Relationships exist between financial markets, e.g. moves in treasury rates, bond returns, index volatility are some numbers with fairly significant correlation to equity markets. One of the really awesome books I’ve liked on this subject is Arbitrage Guide To The Financial Markets. Read it, understand it, relevant knowledge is power.

Tuesday, March 17, 2009

Economy to worsen in England

I noticed this from The Telegraph

Somehow the British media isn't as optimistic as CNBC. OK I could the following "rather disconcerting",

" Britons’ total personal debt – the amount owed on mortgages, loans and credit cards – is, at £1.46 trillion, more than the value of what the country produces in a year."


"Total personal debt has risen by 165 per cent since 1997 and each household now owes an average of about £60,000."

This affects us all, London serves as a global financial center. This personal credit bubble is bound to burst, probably not just in England, concurrent with Meredith Whitney regardless of what Obama claims. So until interest rates go up, things are bound to get worse for stocks.

Sunday, March 15, 2009

Jon Stewart isn't helping

Jon Stewart's battle with CNBC, link.

As much as I admire the courage it takes Stewart to point out borderline unethical industry practices en masse, this move could affect the status quo. Big, apparent market behavioral changes are easy to handle and react, subtle moves though are those that erode professional traders' "edge".

The Daily Show could potentially modify "dumb money" behavior, and this creates uncertainty for the professional algorithms, risk assumptions, etc... Uncertainty is undesirable.

Wednesday, March 11, 2009

Credit card crunch in the near future

Meredith Whitney gives the warning here. She makes some enlightening points at times!

Saturday, March 7, 2009

Obama, not much to hope for

Quick video summary:

-Small businesses create 97% of new jobs in America, yet they get absolutely nothing from the Obama "bailout" money, allegedly.

-Obama repeatedly mentioned transparency, yet Joe Biden (the VP) is having secret meetings with the unions. What the hell!

Here's the Glen Beck interview,

Tuesday, March 3, 2009

Global-Cooling more likely

Murdock: Even left now laughing at global warming
Some highlighted actual climate scenarios

  • Nearly four inches of snow blanketed the United Arab Emirates' Jebel Jais region for just the second time in recorded history on Jan. 24. Citizens were speechless. The local dialect has no word for snowfall.

  • Dutchmen on ice skates sped past windmills as canals in Holland froze in mid-January for the first time since 1997. Defense Minister Eimert van Middelkoop, who inhabits a renovated 17th Century windmill, stumbled on the ice and fractured his wrist.

  • January saw northern Minnesota's temperatures plunge to 38 below zero, forcing ski-resort closures. A Frazee, Minnesota dog-sled race was cancelled, due to excessive snow. Snow whitened Surf City, North Carolina's beaches. Days ago, ice glazed Florida's citrus groves.

  • Global cooling is more likely to take place. Where the hell is Al Gore and his freaking Nobel Prize?

    Monday, March 2, 2009

    Pension gaps, negative equity!

    Pretty odious huh. I think the most realistic approach from the US government will entail an inflation boost to remedy the above, i.e. to raise interest rates, which creates some very interesting "side effects".

    Exploiting the above for a profit:

    Short these companies off a rally, and close positions when:
    1) The Fed raises interest rates
    2) bankruptcy filing(s)

    Sunday, March 1, 2009

    Simple & Free Growth Hormone Boost

    Most people think you'd have to take (expensive) shots of synthetic HGH(Human Growth Hormone). Screw that. You can dramatically increase your own body's HGH release with Intermittent Fasting.

    Benefits from increased HGH levels:

    1. Increased lean body mass (muscle, bone, organs)
    2. Increased fat utilization for energy
    3. Higher bone density (avoiding osteoporosis)
    4. Increased skin thickness (retaining youth)

    Basically you end up both looking and feeling great, for free. In fact you'll save money due to the lower food consumption. I'm fasting every 3-4 days, and it really feels fantastic. Haven't lost any muscle since I take in quite a bit of protein on the days I eat, and I still hit the gym regularly.

    A pretty extensive research document covering this:

    The Im
    pact of Short-Term Fasting on the Dynamics of 24-Hour Growth Hormone(GH) Secretion in Patients with Secere Radiation-Induced GH Deficiency
    Ken H. Darzy, Robert d. Murray, Helena K. Gleeson, Suzan S. Pezzoli, Michael O. Thorner, and Stephen M. Shalet