ubuy2wron

QE 3 will cause ONLY gold to go up. Right now at least the US$ and treasuries are increasing in value. I think QE3 will result in only gold going up in fact the gold bugs are daring Bernanke to enact it. I saw something yesterday which stated the gold to Dow ratio was at levels not seen since the March of 09 lows.

Bank of America Corp., the biggest U.S. bank, said yesterday it had a $16.7 billion exposure to the five countries at the end of June, including loans and leases. This includes $15.2 billion of “non-sovereign” exposure, according to a quarterly report. The Charlotte, North Carolina-based lender purchased credit-default protection of $1.77 billion as a hedge against potential losses, according to the filing. http://www.businessweek.com/news/2011-08-05/citigroup-has-31-7-billion-gross-exposure-in-five-nations.html From this I can conclude then that the exposure is really concentrated with the Fed and the ECB and other unknown parties then. If this is true then I think levered positions on BAC may start to make sense.

Has any one calculated the return on buying the stock and selling the warrents a very long term covered call.

Today we started to see even the winners getting sold AAPL was down gold was red only the US dollar and treasuries were up. I bought some ABX today I still have 1/3 of my hedges on got close to going naked. LOL

I think the economy contracted during the month of July in the USA, some of it was consumers sitting on their wallets during the protracted debt ceiling debate a recession is 2 quarters of consecutive negative GDP, a banking crises in Europe will pretty much tip us over into negative territory as far as the US economy is concerned. I think a European banking crises is at least a 50 50 proposition therefor a recession certainly is not a faint chance it is smelling more and more like 1937. While I make those bearish statements I removed 2/3 of my hedges in the last 24 hours cuz it appears that the mkt is the very short term oversold and a lot of people have jumped into the bear camp in the last week.

I have stated I thought the debt ceiling crises was just a sideshow, but we were all transfixed with the slow motion train wreck which was unfolding before our eyes. I have been reducing exposure since the spring as I felt the QE2 fueled rally had lifted prices of all asset classes beyond levels that could be justified. It is now looking like the US economy is in fact contracting how much of this is very temporary caused, by participants sitting on their wallets because they wondered about getting their check or (cheque for the Canucks) next month is moot at this stage but I can assure you that I did not expect a resolution to result in the price of gold making a new high and the mkt making a new low. I was certain that the second Washington was not the focus eyes would once again turn to the bigger problem which is Europe. I have felt and still feel that Europe and the problems that are building there are much larger and have much more potential to cause gasp dare I say it "permanent loss of capital" The US bailed out the banks the risk was transferred to everyone through TARP and bailouts. In Europe its the govt.s which have the risks Germany France can not bail out the rest of Europe. I suppose China can do a little but no way is the US treasury going to come to the rescue. It seems to me that some real wealth is going to be destroyed and some largish banks will get wiped out and the fear of this and the solutions to this is why we are seeing gold trade where it is. I also believe that we will never see a secular bull mkt in equities as long as gold is the asset which is getting the most love.

You know Warrens father would have likely found a spiritual home in the tea party. He was a complete despiser of Roosevelt and the New Deal economics. The same arguements were being made by the right then as now. I do not care about political positions I just want the pie to grow bigger I just happen to believe we will get more growth and jobs quicker if we tax the Wealth creators a little more and have govt spend the money that is being invested by the private sector in lumps of shiny metal and social media startups in areas where it is difficult for the private sector to invest.

Parsad, I in turn must politely disagree. To complain about the cruddy hand Obama has been dealt is to fail to realize that the cruddy hand is a big part of why he was elected. America took a chance on someone who promised change. Turns out they didn't like the change he implemented, so they reacted in 2010. Is he in a no-win situation? No, but that is not to say it is easy for him. It isn't. President's get too much blame and too much credit for the economy. The problem is that most Americans don't want to hear that it will take time to work through the mess. Politicians, like bad investors, cannot fight the urge to do something. And that something means programs to achieve a noble goal. Obama is taking it from both sides, which many consider a sign of compromise and therefore success. Progressives are ticked off that the growth in spending is being reduced. Tea Partiers, while pleased that the "beast" is not being fed further, are hardly jubilant since they know that we are still on an unsustainable path, (planning on adding 7 to 8 trillion to the national debt over the next decade instead of 10 billion), only about $10 billion in cuts occur in the next two years, and spending is considerably higher as a % of GDP than it has been historically. Regarding "equalizing the disparity between income and wealth," which sounds a lot like equality of outcome. It is not a goal that most Americans subscribe to. The left does. If you meant reduce, rather than equalize, that would gain more support, but is still not part of most Americans DNA. It is about a land of opportunity, not result. Bill Gates is not thought of as evil for become wealthy. (Yes CEOs are overpaid, but that is an issue about shareholder rights and how board members are proposed and elected. The fox is guarding the hen house.) Lastly, the quote "The truth is that even Ronald Regan (sic) would not have been elected by the present day Republican Party...he would be considered more moderate than Boehner!" is beomcing a favorite liberal accusation but not accurate. Reagan ran on reducing the size of government. He wanted to kill off whole departments. He compromised on that in order to win his tax cuts. He was the most conservative Republican nominee since Goldwater in '64. McCain, both Bushes, and Dole were to the left of Reagan. I doubt many political analysts would see Reagan as more moderate than Boehner. I think Reagan was simply the most likeable Republican elected to office or heading the party.He compromised on many issues many times because he was in the end a pragmatist, read The Triumph of Politics.Obama has the same likeability and he certainly is pragmatic

It looks like that is what the market is thinking. Down 140 at noon today. I thought it would bounce up with an agreement. Better to focus on what bargains will be brought to us.

Really interesting topic. It seems that from the world of quant investing and a whole pile of dough is invested by the quants ,Relative strength, which is one measure of momentum, has a pretty prominent weighting in most models. It would seem that cheap by most definitions would preclude it from any highly ranked momentum measure. However it would seem pretty easy to buy the most reasonably valued companies with a high momentum ranking would be a pretty easy policy to implement. Whether it ads Alpha is questionable. What you are proposing is done a lot already I think.

Is a deal even there, the Whitehouse and the Senate seems to be onside but I have no idea about the house. Ms Bachmann has already come out and said just say no. The mkts reaction has been pretty lacklustre are we still on the edge of a cliff. If we can assume that a deal is done what about the other side of the deal what does the world look like. I just saw a 90000 jobs estimate for Fridays employment numbers is this 1937.

The two books that had the most influence on how I think today are Atlas Shrugged which I read in university and The Bell Curve which has been villified by many. The authors of the Bell Curve discuss in length the emergence of the cognative elite and suggest that one of the thornier issues facing modern economies was how to deal with this .

In 2006 they should have been reducing the debt in 2011 they should be increasing it. It is Keynes in reverse what has happened and what is proposed.

About 2 1/2 years ago I posted here that the wall street and the rating agencies had tried to turn inherently very risky securities into AAA govt paper through financial engineering and all of that risk was now being assumed by the govt. through bailouts and Tarp and was there fore turning govt securities into much more risky investments. The mkt for US treasuries has acted perfectly logicaly there is a extremly small chance that the US will not pay interest when due nor is there any reason to expect that they can not pay principal on maturity it would take a reduction in the debt ceiling for that to be a measurable risk. I believe that modern financial engineering is at the core of our current dilemna. The mkt playing hot potato with risk through CDS and like instruments has caused the explosion in credit. Billions of highly complex financial instruments are being created daily by the financial services industry they are generaly harmless but almost all have imbeded tail risks counterparty risk etc. that the purchaser who is invariably sold the instrument(they are never bought) can not determine.The mkt by and large does a pretty good job of pricing risk sub-prime borrowers for example pay extremely high interest rates for unsecured loans. It is when risk is hidden or at least not readily transparent that risk generaly gets mis priced. In another thread there was a discussion of balance sheet items of BAC the amount was definately material but the composition was unknown by any one outside of the bank or at least any one commenting here which is a pretty informed crowd. My point is that Buffett is right they are instruments of mass destruction because fundamentaly they allow risk to be mis priced

Gee whiz seems to me that any major railroad has that characteristic and MR B pretty much confirmed that. I am hoping that CNR which I believe to be one of MR Gates largest investments gets cheaper next week.

Southern Yankee. This believe it or not is not a left right battle nor is it a liberals vs conservative battle or Dems vs Republicans. If you are looking for political solutions to the problems of the US economy it would be adviseable to look outside of your borders. Some countries ARE getting it right. Trickle down paid off in the beginning because the private mkts were capital constrained. Give the "wealth creators" more dough they will invest and create more jobs and more wealth the pie gets bigger every body wins. The problem is the marginal returns from additional investment etc. have reached the point where all the "wealth creators "do is buy gold. The capital constrained are govts. they can not invest in areas that the private mkt can not because the pay off is too long or there is no way to capture the societal profit. If global warming is a fact and I am not going to argue that it is and the outcome of global warming is a country wide or world wide cost. It is very difficult for private mkts to capture the societal benefit of a green investment only govt. can make that investment or implement regulation which imposes additional costs on mkt participants but yields a return for society as a whole. Consumption is the other part of the equation which is missing the middle class have been decimated in the last decade. The wealthy are buying gold and that does not create a bunch of employment if you cut taxes more at this stage you will just get the price of gold going up. If you raise some taxes and give it to govt to make some needed investments you create a ton of employment. What the US needs more than anything is some growth. The time for cut cap and balance was a decade ago in fact it was pretty much how Clinton ran the govt finances. It is not a bad idea for all time just for the next few years. The time to implement that sort of policy would be after the US has run a surplus for a few years. For the US govt at his stage there are no easy choices but anything that is going to reduce consumption and jobs are clearly the wrong ones at this time. That is all Krugman is saying. I think Bill Maher and Dennis Miller are equally funny but I think Rush Limbaugh is an obnoxious slime ball so I guess that makes me a liberal.

As A child of the 60's I remember the antiwar poster hanging on many colledge dorm room walls. What if the gave a war and nobody came. As a value investor I am hard wired to be a contrarian. The simple fact that no one is panicking makes me feel that I should be. ::)

The most depressing book I ever read was David Stockmans Book, entitled The Triumph of Politics. It told the story of how an young idealist in the Reagan administration was gound up and spit out by the machine that is Washington DC.The founding fathers created so many checks and balances that getting ANYTHING sensible done in Washington is almost impossible. And not to sound too cynical, politics is nothing but the art of getting the other guy to pay for stuff. If you are in business and you can not beat your competitors in the mkt place hire a lobbyst and change the rules of engagement.

There is no way in heck I would be hedging my US $ exposure at this stage except for perhaps the next week. One outcome of all of this political soap opera is that regardless of who claims victory in the end. The US balance sheet is going to be improved the trajectory of the debt is going to be on a very different path. This is why the bond mkt is completely sanguine about the debate and the outcome. Only if the house completely caved and gave Obama everything HE wanted or the GOP thinks he wants would the bond mkt. be having fits. The equity mkts however are a different kettle of fish. The US $ should catch a bid and start to reverse the 10 year bear mkt for the greenback. I still say this is ALL a sideshow Europe over the next 6 months is what is going to cause us more sleepless nights and has the potential to cause shudder permanent loss of capital if they get it wrong. As Churchill I think said you can count on the US to do the right thing after they have exhausted all alternatives, I think we are just seeing them actively follow their typical path. I think no resolution will be reached this weekend we likely need a few more days like yesterday to galvanize a compromise. Perhaps Obama should threaten to sell the gold in Ft Knox to pay the bills that would get the attention of the ideologues and force a compromise.

Parsad, US corporations balance sheets are in the best shape in my lifetime. Companies in North America by and large are in no way capital constrained they have nothing to invest in if they increase their plant who will they sell to most have excess capacity right now. They should either buy back shares or pay a dividend. It is interesting who is capital constrained. Govts and the middle and lower classes. They would love to spend the dough or invest it perhaps ,if you can consider bridges and roads and airports etc. an investment (some consider any expenditure by govt a waste) The rich by and large are also not capital constrained but they ARE afraid and they are buying gold and silver. The countries that are doing the best right now are ones that have not been involved in destroying the middle class or where a new middle class is emerging. Instead of trickle down we need trickle up. Give the money to govt and the not fabulously wealthy they will spend it on stuff it will create more wealth for EVERYONE because the pie will get a lot bigger a lot faster. We are doomed to a dull future if the best the "wealth creators" can do with their dough is buy a brick of some shiny metal.

Obama is reported to have proposed less than $2 billion in cuts for 2012. Tim who did the reporting FOX News or the tooth fairy everyone knows the propsals that will survive a presidential veto will include expenditure cuts a heck of a lot more drastic than that amount. Budgets are the responsiblity of the house by the constitution, nothing that is written by the whitehouse is going to pass the house if it has any tax increases nothing is going to pass the whitehouse that only has expenditure cuts. Ms Bachman may have a titanium spine but she has rocks in her head. Anyway enuff on this I ain't getting sucked in any farther on this debate. America is looking sillier by the minute.

I listened to MS Bachman who is currently running ads in Iowa to try to cement a lead in the polls> I will not approve of ANY increase in the debt ceiling, I also listend to here comments on CNBC and I quote as closely as possible "any govt expenditure is bad for the economy and any tax is bad for the economy." This is not economics this is faith it is religion it is as silly a viewpoint as all business is evil .

Tim if you repeat a falsehood a thousand times it does not make it any closer to being the truth. The tea partiers are focussed on one issue only NO TAXES lets kill the beast kill the beast is their chant the rest of the adults including the much maligned MR Obama are suggesting a combination of expenditure cuts and "revenue enhancements" are required. The economy can not tell the difference between a expenditure cut and a tax increase on the margin but voters can and this farce is all about votes and nothing about the economy. The Tea Party absolutely does not want additional taxes. In that you are correct. Do they see the federal government as a beast that is growing in size? YES. Do they want to reverse that trend? YES Do they want no federal government? NO. But if you don't think they are serious about balancing the budget then I would say you are wrong. Most have no problem with reducing the size of government back to 19 to 20%. Many would go even lower. Try talking to them. How much of the problem is due to tax rates being to low? Not much if at all. If you disagree please tell me which ones (corporate, payroll, or income) and how much you would raise them and how much of the deficit it would solve. So if it is not a revenue shortfall problem, why should they support "revenue enhancements." The reality is that significant cuts in spending are needed or else we are just kicking the can down the road. This is where I disagree with Howard Marks. He thinks compromise is part of the solution. I see past compromise as part of the problem, and compromise as refusing to seriously deal with the issue. Why is refusing to raise taxes a sign of intransigence when demanding that taxes be raised is not? Tim um lets me see Obama and the adults on both sides are open to dramatic cuts in all budgets on the expenditures side but no house Republican will approve any proposal that includes ANY tax increases... you can not be serious.

There will be a resolution. On the surface it will sound acceptable but the details will reveal it actually did little other than extend the debt ceiling. I think you have it backwards if you are wanting the tea partiers to get worried about the debt. They are the ones who already are. Obama isn't. He is yet to publicly name anything that will get cut. He is more interested in raising taxes. Reid is floating a plan that counts savings from ending wars that we already know will occur. I am not sure anyone can figure out what Senator McConnell is doing. Any serious plan that actually puts us on a responsible path is shot down as unacceptable (Ryan and Coburn). Do you realize that all the cuts they talk about are years down the road and are just reductions in increase not actual cuts. That all of the "acceptable" plans are projected to add $5 trillion to the national debt in ten years? Insanity. Many Americans have been through this in terms of their own budgets. They see the double talk and ignoring of reality. The US needs to get its fiscal house in order sooner rather than later. That would make the market go higher as business would no longer be as fearful. The bottom line is if the House wasn't willing to play a bit of a game of chicken, no one would be addressing the horrible fiscal position of the US government. And it must be addressed. The fear of a downgrade will still be there if all they do is increase the debt limit. Read Howard Marks' latest. If you cannot pay off your debt then you are not really AAA. All the US can do is roll it over. We all saw how that worked out for a few Wall Street firms. Tim if you repeat a falsehood a thousand times it does not make it any closer to being the truth. The tea partiers are focussed on one issue only NO TAXES lets kill the beast kill the beast is their chant the rest of the adults including the much maligned MR Obama are suggesting a combination of expenditure cuts and "revenue enhancements" are required. The economy can not tell the difference between a expenditure cut and a tax increase on the margin but voters can and this farce is all about votes and nothing about the economy.