The Sad "State" of Affairs

Pastor Adrian Rogers explained how many Americans feel today.

"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it."

This quote came for this post on our present situation. Maybe I'll post something later today.

Just what you need....................A little international finance

The beginning and end of this short (I promise you that it is short) article are the good parts. For those who don't want to read it here's a synopsis.

USA - "China stop manipulating your currency to acquire an advantage in world trade."

China - "We hold $682 Billion of your debt that we now want guarantees for."

USA - "Sorry, we won't speak out of turn again. After all the new guy said it. What does he know? He couldn't even figure out his own taxes. Turbo Tax, duh! Can we be friends again? Anything we can get for you? Anything at all? How about the Statue of Liberty? After all, New York is almost bankrupt and could really use the cash."

History is there for us to learn from.................unless you are a politician

One of the causes of the Great Depression was the choking off of global trade. For a little diversion, lets take a one question test.

Question 1 - True or False - Global trade is a larger percentage of the global economy now then it was in 1929.

If you answered False then go back to your cave. If you answered True you are correct. So when I see this quoted in the new economic stimulus bill I cringe and die a little inside.

"The "Buy American" provision bars spending on any infrastructure project "unless all of the iron and steel used in the project is produced in the United States."

There would be exceptions if the head of the federal department or agency determines that applying the provision "would be inconsistent with the public interest."

Other exceptions would be made if there was an insufficient quantity of US iron and steel of satisfactory quality available and if inclusion of US iron and steel would raise the overall project's cost by more than 25 percent."

All this will do is ignite a trade war with other nations and choke world trade. WooHoo change is looking much like the past.

© Finance Red 2009

Insanity

This chart (if you can see it since my previous chart has somewhat disappeared) represents the fear and insanity of the bond market. I predict the next bubble to pop will be the government debt markets. For what its worth, a low yield indicates and expensive bond. Notice the yield on the 3 month note, basically 0%. It's one expensive note. Sell expensive, buy cheap. Till next time. Also see this link for more info.

U.S. Treasuries

	COUPON	MATURITY DATE	CURRENT PRICE/YIELD	PRICE/YIELD CHANGE	TIME
3-Month	0.000	03/12/2009	0.01 / .01	0.01 / .000	12/08
6-Month	0.000	06/11/2009	0.25 / .25	-0.03 / -.030	15:15
12-Month	0.000	11/19/2009	0.44 / .45	-0.05 / -.051	15:00
2-Year	1.250	11/30/2010	100-25+ / .83	0-06+ / -.104	15:25
3-Year	1.750	11/15/2011	101-25+ / 1.12	0-09½ / -.103	15:51
5-Year	2.000	11/30/2013	101-28 / 1.61	0-18+ / -.121	15:48
10-Year	3.750	11/15/2018	109-17+ / 2.65	0-26 / -.089	15:53
30-Year	4.500	05/15/2038	128-00 / 3.05	2-07½ / -.099	15:53

1$ Gas

Who would have thunk it? Gasoline futures BELOW 1$/gal. To extrapolate the future price at the pump, add taxes and approx 10%.

Energy

	PRICE	CHANGE	%CHANGE	TIME
BRENT CRUDE FUTR (USD/bbl.)	42.900	-2.540	-5.59	13:44
GAS OIL FUT (ICE) (USD/MT)	477.250	-10.750	-2.20	13:44
GASOLINE RBOB FUT (USd/gal.)	98.810	-5.340	-5.13	13:23
HEATING OIL FUTR (USd/gal.)	152.390	-6.010	-3.79	13:24
NATURAL GAS FUTR (USD/MMBtu)	6.057	-0.290	-4.57	13:24
WTI CRUDE FUTURE (USD/bbl.)	44.100	-2.690	-5.75	13:25

Something NOT to laugh about

List of Biggest Two-Day Dow Advances: New Entry

from Paul Kedrosky's Infectious Greed by pk

In case you were thinking "Good, this has been a huge two-day advance in the Dow", you're right. It has been a huge two-day advance in the Dow index. Here is the top fifteen list of all-time two-day advances in the index, including today. Today is highlighted in dark yellow, and note that every entry above it, except one, came during the Great Depression.

Note that until the Dow lost 200 points in the closing minutes of trading, we were up more than 13% over the two days, which had us in the top ten. Nevertheless, the point stands.

Something to Laugh About

The original link VENTURE CAPITALISTS INVEST IN SOMALI PIRATES

VENTURE capitalists in New York and London are pumping millions of dollars into Somalia's booming pirate sector.

Personnel issues are now dealt with via mentoring and third-party arbitration

The sharp-eyed investors say Indian Ocean piracy has replaced Bangladeshi t-shirt factories as the developing world's strongest source of high-growth revenue streams.

Julian Cook, head of strategy at Porter, Pinkney and Turner (PPT), said: "The margins are very impressive. These guys can board a Chinese freighter or Saudi oil tanker and turn it around in less than a week. Usually without killing anyone.

"The staff are well-trained and they operate a structured bonus system involving the daughters of nomadic tribal chiefs and as much hallucinogenic tree bark as they can eat.

"The tax position is also very favourable given that Somalia isn't really what you would describe as a 'country' with 'laws' and a 'government'."

PPT has paid £25.7 million for a 32% stake in Captain Ahmed's Crazee Bastards with the initial tranche used for capital purchases including new speed boats, 200 yards of very strong rope and a gun the size of a cow.

The investment will also be used to establish an out-sourced personnel department to ensure the quick replacement of any colleagues shot by the Royal Navy during working hours.

Captain Ahmed will retain day-to-day management control and has also negotiated a clause allowing him to go 'ape crazee' and shoot everyone on board up to three times a year.

Vote for ME!!!

With one day left before the "biggest election ever", until next time that is, you have a chance to think about voting for me. Yes, me. I'm not going to tell you lies about what I will do for you or what I can accomplish in washingtion (notice the lack of capitalization), my candidacy is based purely on my vanity. As of Monday Nov. 3 I have roughly 10-20 write in votes for President. With your help, I can easily clear 15-25. WooHoo!!! Let's make it happen. Bring change to the changers and inflate my ego some more!!! Now lets get out there and make it happen (I'm kissing a baby while helping an old lady across the street as I fill in my charity donation as I'm typing this sentence). Remember only you can inflate my ego. Write in your vote tomorrow. Vote for ME!!!!

The Butterfly

I have been quiet lately because of the enormous happenings happening ( :) ) on Wall Street and Main Street. All I can say is WOW, what a month September was. I can't find words or explanations for any of it but I do have my opinions. Remember this is a credit crisis and NOT a stock problem. Forget about the DOW and focus on the LIBOR rate, overnight lending rates, swap spreads, etc. Find a interest rate running commentary here. Once these levels get back to "normal" stocks will follow.

Why "The Butterfly" for a title? I saw one today. That's it.

Holy Manipulation Bat Man

With respect to my previous blog about short sellers now comes this. Apparently when short sellers "manipulate" the market its bad, but when government policies MANIPULATE the market its GOOD and will bring "balance" back to it. HAHAHAHAHAHAHAHAHAHAHAH!!!!!!!!!!! You see, with the new rules in place, the people who were taking the unpopular view that a stock would decrease (how un-american and communist to think that a stock would actually go down because the fundamentals don't matter any more or didn't you get the memo from Nanny oh I mean Uncle Sam) because of the basic rules of finance are forced to purchase shares to cover their positions. This buying is proping up the market and when it concludes what then? Oh yea another Sunday is approaching so look for another World Saving announcement soon.

Polyanna to be appointed SEC chief

When you see headlines like this, you should grow very uncomfortable. This is the recipe for the next bubble. When all you can do is buy what are you going to do? Right, buy. Short sellers bring stability and sanity to a market by trying to find the truth in companies balance sheets and trading on what they perceive as an opportunity. I will be the first to admit that there has been abusive short selling and rumor mongering, but I don't recall there ever being a ban on buying certain internet companies stock in the late nineties that had more hype then substance. Short selling is needed and is NOT a bad thing as the media and gov. make it out to be. Much like speculators who grease the financial markets by taking the other side of the trade, short sellers balance out the buyers and keep companies "honest". Both speculators and short sellers are vilified and pilloried by the press for no good reason other than for someone to blame. Remember to have an up you need a down, to have good, you need evil, for happiness you need sadness. Its the way the universe works and the way its intended to be.

But its a Wednesday

A few posts ago I wrote about how the Fed. is saving the world one Sunday at a time. Well they couldn't wait until Sunday. The Fed has taken over AIG, the nations biggest "insurance" company. I put insurance in quotation marks because of the fact that if they were only in the insurance business, they wouldn' t be failing. In return for an approx 85 billion dollar loan, AIG will sell its many parts, to pay back the loan, to others all the while paying 11.4% interest to the Gov. or more precisely you. Unfortunately you and I will never see that 11% money except in the form of more regulation after this all shakes out (it will eventually end, whether it ends next month or 50 years from now :) ). The more troubling happenings now is that the overnight dollar loan rate has topped 10%. This means banks are hording cash and lending has stopped because of counter party risk (remember I blogged about counter party risk last year). This is the really frightening thing now.

The Fed will be back again on Sunday with an announcement about WaMu and then after that it gets hazy. Maybe a Hedge Fund you have never heard of or a local bank that bet too much on home developments. Who knows except maybe the CEO's and Presidents of these institutions.

WoW!!!!!!

For a finance geek such as myself today is an amazing (bad, good, scary, down right frightening) day. Two of the biggest firms on Wall Street disappear on the same Monday. Wow is all I can say. Lehman Bros and Merrill Lynch

Happy Birthday

As the title suggests, one year ago today we had a blessed event happen to us. Yes its been a struggle emotionally to go to work while leaving the new one to its own devices. I'm constantly on the internet researching places to take the new one so that it and I can experience this world together. It has me wrapped around its handle bar. It's fallen down many times as it tries to negotiate this world of rocks, sand and roots, but its never let me down. It has a voracious appetite but usually loses pounds instead of gaining them with each feeding (of cash and gas). HAPPY BIRTHDAY KTM!!!! (Keeps Taking Money). Anyway here's too year number two, may it bring more time together. ;)

Saving the World one Sunday at a time

I found this quote to be interesting with regards to the Fannie Mae / Freddie Mac debacle.

Update 11:20 PM. This comes via e-mail from James Bianco of Arbor Research:

As of this writing (Friday night, 10:14), it appears no one has a clue as to how the Fannie/Freddie Government bailout is going to work. I guess will have to wait for the now common Sunday night/Monday morning press releases to save the financial system from ruin....

If you???re are keeping score at home we had Sunday night/Monday morning ???save the world??? press releases in August 2007 (cut of the discount rate), December 2007 (TAF), January 2008 (ease 75 bps), March 2008 (Bear) and July 2008 (first Fannie/Freddie rescue) and now September. Anyone want to believe this is the last one (which will be the sixth in 14 months) will be the one that finally works and saves the world?

Along the same line, here's another article to ponder. (for some reason blogger has this italicized)

I AM MAN! HEAR ME ROAR!!!!!

Do you think the Russian government wakes up each morning and repeats that phrase 10 times while looking at its self in the mirror? While I admit that I haven't kept up with the Russia-Georgia conflict (who can with NBC fawning all over Shawn Johnson and totally forgetting about the American, Nastia Luikin, that actually won the all-around gold), this article may shed some light on the subject if my following theory is correct.

Where's Georgia? Isn't that the place where the last Olympic Games were held (at least in the minds of many self centric Americans HeHeHe. I'm only kidding!) My theory revolves around the fact that Georgia is a small, poor country, that has a pro-western stance and a gov which wants to join NATO. On the other side we have Poland. A country with a long, dark history of war and suppression. But two things Poland has going for it is that history and it's "European". Let me explain. If the Russians invaded Poland like they have Georgia, the international ie European / North American response would be swift and potentially world shaking. So how do you control the actions of the Polish government without actually setting a boot in Poland? You invade Georgia. What???? You read the article didn't you? Come on tell the truth.

You see Poland agreed this past Thursday to allow an American anti-missle system to be placed on its soil (you can bet your house, if its worth anything, that the Russians knew this was going to happen a long time before it did). This anti-missle system is supposedly there to protect Europe and North America from missles launched from roge states such as Iran, Syria, etc. Russia's problem with this is that they see the anti-missle system as a threat to their power. After all if my missle's can't hit you are you going to be afraid of me? So what is a thug country to do when two of its former "allies" turnig to the evil West for saftey and security. Well the answer, as any thug knows, hit something. So the Russians invaded the small, weak soverign county of Georgia. See the Russians could kill two birds with one stone. Take out Georgia and influence Poland's upcoming decision to allow U.S. bases on its soil. All with one military action. While an action against Poland would evolve into possible war, an action against Georgia would only garner strong words and little else. Unfortunatly for the Russians their action against Georgia did not sway the Polish from agreeing to allow the systems. This has now led to a top ranking Russian general threatening Poland with a possible nuclear strike. Yes I said NUCLEAR. But you read the article right, so you already know this.

This is my theroy. Take it for what it is, A THEORY. So why do the Russians really care whether Europe and North America are trying to protect themselves from Middle Eastern missles. Money. Yes it usually comes down to money and who gets paid. How can Russia sell its technology and missles to Middle Eastern regimes if the missles would be shot down over Poland before they had a chance to effectively wipe out a chunk of the Western world. After all these missles would cost 10's of millions of dollars each and could line a whole lot of pockets in the cold, snowy Moscow nights. Who would pay all that money to Russia(ns) if the missles wouldn't hit their target.

So basically Russia invades Georgia to influence Poland's decision to allow an anti-missle system on its soil which the Russians are against because they would then not be able to sell missles and missle tech. to Middle Eastern regimes. The end.?

Sleep well.

Somebody KILLED a Bear!

This is some interesting reading. No really it is.

Why yes, motocycling is part of this blog.

This blog has turned into more of a financial rant then a balanced depiction of my life so I'm out to change that. One goal (ok my only personal goal) for the July 4th weekend was to ride AF canyon on my 250. Well after lots of non-starts and changes I got my wish on Sat. morning. My



brother was kind enough to guide my slow butt on some of northern Utah's best trails (and the only single track I have done). Here are some pics.

Update to previous Posts

How much money could you have made? Well as of today 6/30/08, (since only Trailrunnings actually reads this blog HAPPY ANNIVERSARY Love HBOO) SKF is trading at $153.96 and MBIA is at $3.80. If you had bought SKF individual shares when I originally blogged about it on 11/8/07 LINK you would have made $57.15 for a return of approx 59%. For MBIA, if you had shorted the shares on 2/8/08 LINK (my post date) you would have made $10.80 with an undetermined % return because of leverage. Why yes I'm that good and I'm still living in my condo, so you can see I didn't whole heartily invest my life savings into these two schemes. ;)

Those darm speculators!!!!

As "speculators" are now the scapegoat for the run-up in oil prices I find it funny how the gov. (do they even deserve to be capitalized now) specifically the senate (again, the respect that capitalizing a letter in the name of an organization is very undeserved in this case in my opinion. And after all this is my forum for my opinions ;) ) drags "Hedge Fund" operators to testify in front of a panel of POLITICIANS! If my memory serves me right, politicians are failed lawyers who in turn failed math in school :). Do they even know how markets really work? Speculators grease the wheels of the markets by taking risks others don't want to take. These same "speculators" built American markets from scratch and will continue to make and lose vast sums of money (whether in formal markets or ????) long after the politician has moved onto the next new thing that gets their face on camera. While markets behave irrationally at times, this is what they do. Sometime in the future the oil market, baring any unforeseen calamities (again, politicians and administrations can force a "calamity"), will right itself and fall below its intrinsic value. When this happens (I predict after the Nov. elections) a politician will be there to take credit. Can you tell I have a chip on my shoulder with respect to politicians.

Instead of dragging speculators in front of know nothing panels, what the representatives of the people should be doing is balancing the federal budget by eliminating PORK!!! My views have lately been influenced by reading Alan Greenspans book "The Age of Turbulence" specifically his years as Fed Chairman. He experienced Presidents from Richard Nixon to george II and found the bush's (again notice the lack of capitalization. Wow, I'm mean today) to be the most politicized of them all. This means instead of focusing on what would make the American economy strong, robust and flexible, and in turn those same citizens, they chose to do the politically expedient and "friendly" thing (do you know that george II didn't veto any of the first 60 bills that crossed his desk. The power of the veto is one of the BASIC checks and balances of our governmental system. To not use this as a check on congress, opened the floodgates to new and creative ways of wasting YOUR money). This has lead to record deficits that have decreased the value of the dollar and thus increased our costs of most raw materials (as most commodities are priced in U.S. Dollars). This is what the senate should be investigating, but they are a smart bunch and know if they throw out the word "speculator", they will deflect the real blame away from them and onto the age old evil doer, the Speculator.

PS The President, from Nixon to georg II, with the best economic record when it came to doing the right thing for the American economy most of the time (they can't be perfect all the time with respect to economic issues. They after all, are politicians) according to his record and the accompanying results from those policies, is................... drum roll please ........................................................................................................................................................................................................................................................................ Bill Clinton, a tax and spend Democrat who put programs and policies in place to retire the debt of the US by the mid to late 2000's. george II, a fiscally conservative republican, has taken that legacy and turned a possible zero debt balance into 9 Trillion dollars of crushing debt. For a few hastily figured figures, that equates to 360 Billion dollars in INTEREST per year (at 4% anum.), 986 Million per day, 41 Million per hour, 684 K per minute, 11 K per second. See you later.