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Getting Closer to the Brink!


Parsad
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They've got less than a week to get this thing done!  Hopefully, S&P and Moody's are willing to wait that long. 

 

At least China will be happy earning a bit more interest on their massive holdings of U.S. treasuries...as well as the Japanese!  Harcore Democrats and Republicans are having fun lighting matches after dousing everyone in gasoline.  Cheers!

 

http://www.cnn.com/2011/POLITICS/07/22/debt.talks/index.html?hpt=hp_c1

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A lot of players with knowledge not available to the rest of us are decreasing risk in their portfolio + raising cash:

 

http://dealbook.nytimes.com/2011/07/19/goldmans-safer-positions-eat-deeply-into-its-profit/

Goldman’s Safer Positions Eat Deeply Into Its Profit

 

http://blogs.barrons.com/focusonfunds/2011/07/22/soros-funds-cash-stash-up-to-75-hedgies-ponder-global-sovereign-debt-issues/?mod=BOLBlog

Soros Fund’s Cash Stash Up To 75%; Hedgies Ponder Global Risks

 

Should be interesting.

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I don't like talking politics on message boards, but it seems to me that all the Replublicans do is try to block everything Obama tries to do so that in the next election they can try to convince people that Obama didn't accomplish anything. The GOP actually seems to intentionally do things to hurt this country for the sake of trying to make Obama and Democrats look bad. I know Obama hasn't been perfect, but the current GOP is a showcase of everything that is wrong with politics. I know others on here probably don't agree, and that's fine, but Obama has done a pretty exceptional job, in my opinion, despite the efforts of the Republican Party to try to sabotage his presidency. I really hope I'm wrong about the GOP's intentions, but it really has been one thing after another.

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I don't like talking politics on message boards, but it seems to me that all the Replublicans do is try to block everything Obama tries to do so that in the next election they can try to convince people that Obama didn't accomplish anything. The GOP actually seems to intentionally do things to hurt this country for the sake of trying to make Obama and Democrats look bad. I know Obama hasn't been perfect, but the current GOP is a showcase of everything that is wrong with politics. I know others on here probably don't agree, and that's fine, but Obama has done a pretty exceptional job, in my opinion, despite the efforts of the Republican Party to try to sabotage his presidency. I really hope I'm wrong about the GOP's intentions, but it really has been one thing after another.

 

tea party

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I think if you look closely at why little has been accomplished all you have to do is look at how he has treated the opposition.  Most presidents that have accomplished big things in the past 20/30 years have realized that the country is divided and develop good relations with the opposition to get things done.  Reagan's first thing he did when he got into office was to personally call every Demcorat in Congress and develop a relationship with them.  Carter and Obama by contrast thought they knew what was best and pushed their priorities versus developing respectful relationships with the opposition.  I agree that he has done a good job if you agree with him but the mark of a good leader is one who can put a compromise together and have both sides respect him.

 

 

Packer 

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I think if you look closely at why little has been accomplished all you have to do is look at how he has treated the opposition.  Most presidents that have accomplished big things in the past 20/30 years have realized that the country is divided and develop good relations with the opposition to get things done.  Reagan's first thing he did when he got into office was to personally call every Demcorat in Congress and develop a relationship with them.  Carter and Obama by contrast thought they knew what was best and pushed their priorities versus developing respectful relationships with the opposition.  I agree that he has done a good job if you agree with him but the mark of a good leader is one who can put a compromise together and have both sides respect him.

 

 

Packer   

 

Kind of hard when the opposition thinks you're a socialist who is part of Al Queda and wasn't born in this country, no? 

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If you believe the press.  It looks like the opposition was willing to give $800 million of tax loophole closure but Obama wanted more taxes.  These views are held by few if any in the opposition and the press and others are using as a smoke screen.  I find it incredible how some can be objective in stock selection but not in challenging some of the "facts" in other realms (like politics).

 

Packer

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We all might want to see the opportunity.

 

Irrespective of outcome, the US has been severely damaged, & it is self inflicted.

If there is no resolution, or a delay, we have selective default; same as Greece - the US gets downgraded. If there is a resolution we still get a downgrade ..... it just takes a little longer as the ability to reach concensus continues to decay.

 

US rates of 1/4 of 1% are only low because of treasury intervention. Take away that ability to intervene & borrowing costs will quickly approach the 3-4% that PIGS have been paying. 3% is still very low (for the circumstance), but it is 12x the current cost. Even if rates ONLY increase to 3/4 of 1% (under threat of a downgrade), it is still 3x the current cost. When you are having trouble trying to pay your interest bill now, why should I think that it will get easier when that bill is likely to at least triple ?

 

Cash & a few call options has a lot going for it.

 

SD     

 

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US rates of 1/4 of 1% are only low because of treasury intervention. Take away that ability to intervene & borrowing costs will quickly approach the 3-4% that PIGS have been paying. 3% is still very low (for the circumstance), but it is 12x the current cost. Even if rates ONLY increase to 3/4 of 1% (under threat of a downgrade), it is still 3x the current cost. When you are having trouble trying to pay your interest bill now, why should I think that it will get easier when that bill is likely to at least triple ?

 

 

 

SD      

 

 

If this were true, then wouldn't we see a higher rate on excess reserves? The M1 multiplier is at .73, and excess reserves are up 54% YOY. This looks more like a liquidity trap than a pure monetary exercise.

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Every student who ever studied a yield curve has had it drilled into them - the higher the risk, the higher the yield you need to compensate for that risk. As risk increases the longer it takes to get repaid - we get the positively shaped yield curve. The higher the systemic risk (non-diversifiable), the higher the risk free rate that the yield curve starts from.

 

At 1/4 of 1% there is supposedly almost no systemic risk.

But how can that possibly be when there have been multiple PIG bail-outs within the last 6 months, & the US appears to under imminent threat of default ? - UNLESS there has been extensive ongoing treasury intervention that is absorbing an awfull lot of risk. Restrict that ongoing intervention & we all see a world of hurt.

 

Reserves rise because either 1) your loanable credits are repaying their debt, not increasing it, or 2) your central bank has required you to (China, & some BRIC nations). When a central bank is doing 2) it is usually anticipating that a lot of its banking systems existing loans are going to default, & that a systemic write off against reserves will be required (hence it wants a bigger cushion to charge against). In the global village, when you summize that the biggest global creditor may have a banking problem - there is no way that you're going to deplete your reserves.   

 

We are not going back to the way it was, so welcome to some hurt!

 

SD

   

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Every student who ever studied a yield curve has had it drilled into them - the higher the risk, the higher the yield you need to compensate for that risk. As risk increases the longer it takes to get repaid - we get the positively shaped yield curve. The higher the systemic risk (non-diversifiable), the higher the risk free rate that the yield curve starts from.

 

At 1/4 of 1% there is supposedly almost no systemic risk.

But how can that possibly be when there have been multiple PIG bail-outs within the last 6 months, & the US appears to under imminent threat of default ? - UNLESS there has been extensive ongoing treasury intervention that is absorbing an awfull lot of risk. Restrict that ongoing intervention & we all see a world of hurt.

 

Reserves rise because either 1) your loanable credits are repaying their debt, not increasing it, or 2) your central bank has required you to (China, & some BRIC nations). When a central bank is doing 2) it is usually anticipating that a lot of its banking systems existing loans are going to default, & that a systemic write off against reserves will be required (hence it wants a bigger cushion to charge against). In the global village, when you summize that the biggest global creditor may have a banking problem - there is no way that you're going to deplete your reserves.     

 

We are not going back to the way it was, so welcome to some hurt!

 

SD

   

Sharper a train is hurtling down the track at 90 miles an hour and NO ONE is willing to get off the track the only thing I see is gold goes up a little in value a little every day. Is it at all possible that the only thing that will get us a resolution is a crash if the Dow drops 1000 points maybe even some tea partiers will get worried about the debt ceiling.
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Sharper a train is hurtling down the track at 90 miles an hour and NO ONE is willing to get off the track the only thing I see is gold goes up a little in value a little every day. Is it at all possible that the only thing that will get us a resolution is a crash if the Dow drops 1000 points maybe even some tea partiers will get worried about the debt ceiling.

 

That's what it may take.  If they don't come to some sort of agreement tonight and get it into the house tomorrow, I think Wall Street's interpretation of this just being political gamesmenship will quickly dissipate.  Can't believe that such pig-headed behavior is being put ahead of the welfare of the country!  Cheers! 

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Sharper a train is hurtling down the track at 90 miles an hour and NO ONE is willing to get off the track the only thing I see is gold goes up a little in value a little every day. Is it at all possible that the only thing that will get us a resolution is a crash if the Dow drops 1000 points maybe even some tea partiers will get worried about the debt ceiling.

 

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.   

 

 

 

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Sharper a train is hurtling down the track at 90 miles an hour and NO ONE is willing to get off the track the only thing I see is gold goes up a little in value a little every day. Is it at all possible that the only thing that will get us a resolution is a crash if the Dow drops 1000 points maybe even some tea partiers will get worried about the debt ceiling.

 

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.
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After reading about the Reid bill, I am a lot less worried about this thing getting through. I am, however, still remain nervous about our entitlements and massive debt load... but, it seems like we are the best of the bad, when everyone out there is in pretty bad shape as well... Am I really to believe if the world defaults on debt, that the Swiss will really be that safe?

 

Personally, I would feel much safer here.

 

Anyway, I certainly have enough faith in our politicians to botch this up, and won't be shocked by anything that happens; tonight's speeches will be interesting to watch while having a few strong drinks. ;)

 

In the mean time? I still sit on very little cash. I hold a lot of UWN, some SYMS, a little bit of some other stuff, and a fair amount of a nano-cap that is trading at 1-2 earnings, and less than 1/2 book. Part of it's business is dying, but, at the price I bought at, I really can't care what happens to it, or the economy. :)

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No doubt that over the long term, the Reid bill sucks. Though, it is the sort of thing that is passable, and will keep us paying our bills...

 

I wonder why it is that no one would ever lend money to a family that was constantly funding it's living by an ever increasing amount of credit card debt... When it is the USA, then, it's a different story.

 

Seriously, to all of you T-Bill owners out there: Why do you keep lending money to us in the US? Are you not worried about the repayment being made in fiat dollars that were essentially printed, and have the ability to lose so much purchasing power in the process?

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Am I really to believe if the world defaults on debt, that the Swiss will really be that safe?

 

Personally, I would feel much safer here.

 

Let's hope the Swiss are safe just bought a big chunk of a Swiss company.

 

In all of this I am confident that our politicians will be able to kick the can down the road. I fear for whoever actually will have to solve the buildup of debt one day. It will go on until it can't, that's when the fireworks begin.

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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?   

 

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