with MrArbitrage
TableofWisdom.com
March 12, 2010 ('
’)The Business of Tiger Woods COULD be Better than Ever
by MrArbitrage
Jon Friedman of Marketwatch recently wrote a column in which he contends that Tiger Woods will eventually be bigger than ever as long as he can get control of his sex-addiction and that the public views it as such. Friedman also highlighted the fact that the public loves a “comeback story” which will be a key factor in Tiger’s future success. I agree with Friedman’s entire premise but I don’t think that Woods needs to wait for public perception to turn.
It is not a question of whether Tiger Woods can become “bigger than ever”. Tiger Woods –is- bigger than ever and it is naïve to believe otherwise.
Regardless of the number of people who are verbally flogging him, the fact is that when he comes back, like him or not, PGA Golf ratings are going to be higher than ever. What is that worth? It is already known that before any of this scandal, PGA ratings were down over 50% while Woods was out of golf due to an injury.
Tiger Woods has accumulated enough of a fortune that he can live an extravagant life, for the rest of his life, if he never played golf again and never obtained another endorsement deal (divorce losses notwithstanding). He has reached that point where his wealth is at the top level and as far as –lifestyle- additional millions are superfluous to that end. In most cases, the guy who has $1 Billion lives as well as the guy who has $10 Billion if you compare their mansions, yachts, private jets, etc. Of course, warren Buffet is the exception as he is in the top two of the world yet lives like the guy who has $1-$2 million (but that’s tangential).
The point is that at this juncture, like many billionaires, the motivation of Tiger Woods should be more about the score board than what the money can actually BUY him. The score board I am talking about is not his golf game but rather his BUSINESS of Golf game.
The traditional way that star athletes make money is by first procuring a multi-million dollar salary and secondly by making 10 times or more of that annual salary in endorsement deals. Tiger Woods is not your typical “star athlete” because he has for his entire career brought an audience to the game that is his and his alone. He has brought an audience to the game that would not be there if he was not there and that has proven to be - one substantial audience.
So when you are talking about an athlete who has shattered the norms to pieces and brought so much additional revenue to the game and to other golfers, why should his management settle for the cookie-cutter business model? Can you name one star player in the NFL or the NBA whose injury would cause the ratings for the entire league to drop by half for the whole season?
The fact that Tiger doesn’t need the money should put him in a position of leverage to get a piece of equity in the game itself. Perhaps (if it’s legal) his agent should negotiate with the networks to be compensated based on a percentage of ratings. If a network has the rights to broadcast certain tournaments, it is clearly in their best interest for Tiger Woods to play in that tournament as their ratings will be substantially higher as will be their ad revenue.
There are many businesses that will profit substantially when Woods comes back and for his management not to find a way for him to participate in what other companies will rake in from him would be gross negligence on their part. I certainly don’t care about Tiger’s finances but taking out my personal feelings and being realistic about the fact that this is a business, there is no way that I, as a business man from the investment banking industry, would allow him to go back without making more money than ever.
If I couldn’t get him what he is worth from the media and/or the PGA, I would have my client starting a new golfing league (TGA?) because where Tiger plays, eyeballs will go and that should be monetized either on networks or perhaps start it off -initially- with the first pay-per-view golf tournaments. I think he would be a schmuck if he were to play the game for the standard check.
As a side note, all of this assumes that he plays at a top level because if he didn’t, the ratings would obviously go away. Regardless of what people SAY about Tiger Woods to make themselves feel better or look better, just like with Mike Tyson, they will watch and even root for him - until it became clear that his heart was not in it and he was -only- there for a paycheck.
Tiger Woods may contact: MrArbitrage@TableOfWisdom.com (for better representation)
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January 15, 2010
MrArbitrage on Wall Street & Intel: "This one goes to eleven"
A half-decent column by MrArbitrage
Marketwatch featured a column today regarding the fall of Intel’s stock price in spite of beating the consensus in a strong quarter. The concern is that although Intel is executing perfectly, they may be “peaking” and there are signs that margins are eroding.
http://www.marketwatch.com/story/wall-street-cheers-intels-profit-jump-2010-01-15
The column is full of statements like “analysts had expected…” “analysts currently project…”
There’s the problem right there. Although I’ve been in this industry of “Wall Street” for a long time, it got me thinking - why even have analysts when all of these companies provide such guidance? Who knows better of what to anticipate than the people running the company? And the executives seem to be held to more scrutiny than the analysts. How many Wall Street analysts do you see going away in handcuffs versus CEOs? I laugh when I see the numbers analysts “expect” versus the company guidance because it’s usually within a few cents. I would LOVE to see how FAR OFF Wall Street analysts would be if they were not given guidance from these companies. I would love to see their raw due diligence and how they came to their numbers (I’m smirking).
It’s a farce. I mean, we all know the companies like to under-promise and over-deliver so they can “beat expectations” – but I think we are smart enough to figure that out and just round up a few cents to come up with our own expectations.
It reminds me of a scene from the cult classic film “This is Spinal Tap” where "Nigel", the metal guitarist is showing off his custom
One of the quoted analysts wrote "Although we believe Intel is executing flawlessly, we are seeing several signs of a peak in the stock in terms of gross margins and earnings,.
I wrote a piece eight years ago on Intel that is relevant to this situation. There are many more archived at http://tableofwisdom.com/MY_TRACK_RECORD.html but this is one of my favorites:
DATE: 1/16/2002 TITLE: “To the Pollyanalysts” http://boards.fool.com/Message.asp?mid=16476018
Letter to the Analysts:
It's a tragedy that people still listen to you charlatans. Do earnings mean anything to you?
Does market cap mean anything to you?
When a company like Intel has its earnings drop 80% and it is still priced not for perfection as some like to say, but rather for stupidity, what do you do? You stick to your guns in order to save face and declare it a strong buy! It is typical of human nature to mitigate as you do in order to save face; however, it is disgraceful when your saving face is at the expense of millions of people. With INTC currently near its 52 week high and a market cap of about $240 BILLION DOLLARS, Intel will need to reach a market cap of about $1 trillion dollars in order to live up to the premium by which it now trades.
If Intel's near term future was so rosy, they would be increasing capital spending - not decreasing it. They should also be pumping up R&D spending because they are going to need to open new industries if they are going to reach the new highs from here which you predict. The actions of Intel don't seem to match the zeal priced into the stock, after all, as I have been challenged over the past several months for propounding the notion that the nature and history of technology is attrition in profits and margins despite the improvement of technology, the contention was that Intel would spend money fervently in order to create new markets. That was the justification I was given for such an extraordinary premium for diminutive earnings.
It will be absolutely necessary for Intel to re-invent itself to warrant this price because during their glory years, most people didn't yet own computers so naturally sales would be quite strong. It was the same way with automobiles, radios, televisions, VCR's etc.
The Calculator business was once a highly profitable growth industry. Now that so many people already own computers, there needs to be a pretty @#$%&! compelling quantum leap in technology for most people to keep that extraordinary growth rate of the 1990's going.
There is no such incentive at this time. Unfortunately, Intel is priced at the 50% EPS growth rate at this time while growth rates have actually been receding by the double digits! The price doesn't make sense.
I'm not saying that Intel is a bad company. There is nothing wrong with Intel. There is something wrong with Intel's price. I might add that it is through no fault of their own, unless Arthur Andersen is doing their accounting. The current egregious error in Intel's price in my opinion is directly attributable to the charlatanism of the Wall Street analysts coupled with the excessive credulity of the investors and fund managers. I believe we have a castle in the air my friends. Remember $240 BILLION Dollars is allot of money, even in this day and age. In order to be willing to pay $240 bills for this company, one has to believe that Intel is heading to at least a half of a trillion dollars in market cap while jobs continue to be obliterated...
As I predicted in December, the new wave of cuts are coming after the major new cuts in automotive firings. We are in recession. Unemployment is going to the double digits and there is no compelling technology out there to start a massive wave of upgrades in tech spending.
So, all of you pseudo-analysts out there, sit back and have another hit of the old peace pipe."
In retrospect, not only did people scoff at my Intel price target, they also ridiculed my double digit unemployment prediction.
Contact: mrarbitrage@tableofwisdom.com
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December 1, 2009
Elected Scoundrels drive Gold Higher
By MrArbitrage
CNBC featured another “expert” commenting on Gold today as it crossed a new threshold of $1,200 per ounce. He was bullish on it, calling for $1,800 an ounce. Yet they are still perplexed by what is driving the price because it has risen more sharply than the dollar has fallen in recent days, as though gold should only trade in perfect parity with the daily valuation of the US Dollar in relation to other fiat currencies.
I don’t know why it’s so difficult to understand that it is trading not just on the immediate vicissitudes of the dollar and monetary policy. They seem to overlook the fact that it is also trading on the –obvious. The obvious is TREACHEROUS fiscal policy by the elected scoundrels in
So, to the financial geniuses in the media who have a gift for circumventing the obvious, let me spell it out. Gold is trading on unprecedented failure and government corruption. Anyone with even a morsel of acuity can see that gold is not only trading on what is unfolding TODAY. Gold is trading on the inevitable future results of Obama’s chicanery. Metals like gold are the most dependable refuge from usurpers and scoundrels.
When the fat lady sings and the implosion of governmental profusion befalls us, the results may compare somewhat to the unraveling of Madoff’s scam multiplied by a factor of 1,000 ($50 Billion x 1,000) amortized over 300 million people.
mrarbitrage@tableofwisdom.com
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July 28, 2009
The intellectual indolence of those who attack speculators
by MrArbitrage
The big story this week: regulators considering setting limits on Wall Street speculators
Forget additional position limits. Ceding that kind of authority to elected imbeciles is probably just as bad if not worse than the actual disease. It is a slippery slope, like allowing these buffoons to determine salaries. I think I would prefer to see the leverage abated. I have heard compelling arguments on the “pro” side of changing margin requirements but not too many “cons”. I don’t think that controlling copious quantities of commodities which are essential to human sustenance -with 10 cents on the dollar- is some kind of inherent right derived from natural law.
As I wrote back on June 20th 2008 in my piece called “Speculation: Good for America but Manipulative Analysis = Crime against Humanity”(at http://tableofwisdom.com/MrArbitrage_on_Market_.html ) – the problem is fallaciously being attributed to “speculators” by intellectually lazy people like Bill O’Reilly. The demonization of “speculators” in the generic sense is quite dangerous to our free markets. If the mere presence of speculators CAUSED the vexing bubble in oil that we recently experienced, how do you explain the MAJORITY of time throughout the 20th century when there was relative equilibrium in prices? We had speculators THEN. This begs the question -WHY- was there stability during most of those years despite the presence of speculators?
The key to this imbalance (according to me) is the presence of two extreme variables that were NOT the norm for most of the past century and a quarter:
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It is not normal to have a powerful company like Goldman Sachs permeating every level of state and federal government. Historically we have seen powerful industries with deep pocketed lobbyists (which I’m personally ok with). However, this parasitic company not only has access to legislators and presidential appointees – they have actually BECOME the most powerful people in our government. One might say that we the people are the “host”. The Goldman conspiracy is an interesting topic but what does that have to do with anything? In my aforementioned piece from June 2008, I elucidated on how I believe that Goldman may bear a substantial amount of responsibility for the pain the world suffered last year and which may have been the proverbial straw that broke the camel's back.
What the simple minded media overlooks in their critique is that WHILE Goldman was apparently making a fortune trading oil last year, their ANALYSTS were ubiquitous throughout every form of media talking up the price of oil while their trading division reaped a fortune at the expense of their fellow countrymen. As people in some parts of the world suffered starvation and Americans went broke from gas prices and a bursting real estate bubble – Goldman analysts threw gasoline on the fire as they daily inveighed on the direction of oil. These “analysts” never proffered any due diligence with quantifiable numbers to support their suspiciously timed and arbitrary price targets for “$200 per barrel within a year”. The sophistication of their due diligence, at least that which proliferated the media was as prosaic as “China is growing rapidly”; therefore we were to believe that there could be no ceiling to oil prices. No price was too high! If they were able to drive oil to $200 per barrel, I have little doubt these cheerleaders would have called for $300 and so on.
When the fundamentals clearly contradicted their propaganda, they began to advance the most absurd “catalysts” to keep it going. I had envisioned them unwinding their positions while publicly trying to convince us that stories like the Somali Pirates would keep oil prices going ever higher. I cynically imagined them praying for a hurricane to hammer the gulf of Mexico because once the public built an immunity to the China story, that’s all we heard about were Pirates and their hurricane fear mongering about what COULD happen IF…
How that ties in with the “Goldman conspiracy” is simple. I believe that Goldman is so firmly entrenched within our governments, federal and state, that arguable crimes against humanity have been tolerated in a way that never would have been if it were not for their control and influence within the most powerful governmental circles. That is not to say that they could have convinced their colleagues in government to act in collusion. It could all transpire without impunity by simply having the power to manipulate the markets with “analysis” that was a direct- conflict of interest – while having their colleagues in government turn a blind eye. I fully expect nothing to happen to Goldman aside from a possible tongue lashing as certain gutless politicians posture before the cameras in hope of a nice sound bite making its way to their constituents while knowing they will not do anything of substance in the end.
2. The other extreme variable that has played a part in fomenting the oil bubble is the Federal Reserve keeping interest rates at unnatural lows. Every time they have done it, they have created new bubbles. That combined with manipulative analysis created a perfect storm. As we ran through bubbles in the other major asset classes, this potential energy created by the Fed was easily converted to kinetic energy with the guiding hands of the unscrupulous. As an aside, the bubble they are about to create next will be in junk bonds.
Again, there is nothing wrong with speculation – absent manipulation. I feel embarrassed for people like O'Reilly and Obama when I hear them ignorantly (or deviously in Obama's case) blaming this on speculators. Yes, speculators carried it out but they would not have been induced into it if it were not for Goldman, J.P. Morgan and the Federal Reserve who essentially spiked their drink with an overdose of ecstasy. Absent those two variables, speculation would never have gotten out of control the way it did. The hearings held by the Commodity Futures Trading Commission this week need to stop attacking capitalism and focus on the conflict of interest and manipulation by these firms. It was no different than the way the wire houses like Merril had their analysts knowingly pumping garbage stocks while raking in investment banking fees. Henry Blodgett went to jail for that and the only people hurt were those who chose to speculate on their bad information. In the case of the commodities, the people who were hurt, even killed in riots globally were NOT those who chose to dabble in script. These victims were just trying to eat or fill their gas tanks. THAT is what makes THIS a “crime against humanity. It is nothing short of treachery and people need to be investigated at these firms to see what kind of communication may have gone on between analysts, traders and fund managers at these firms.There is nothing wrong with self-interest when the people have the morality essential to self government, liberty and capitalism, without which we can have none (according to our founders). The golden rule is the only rule that will preserve our nation and our economy.
Contact: mrarbitrage@tableofwisdom.com
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May 18, 2009
The New York Times: First to be Nationalized or sold for Scrap?
by MrArbitrage
The Wall Street Journal just featured a column speculating that control of the troubled New York Times may be acquired within the next couple of years.
That’s it! Abuse your shareholders by running those assets into the ground then sell off what’s left for scrap. Like most of the major media companies, they ran the company not to increase shareholder equity but rather to increase DNC equity. The New York Times is more of a 527 organization than a news organization. The scoundrels running the NY Times should be in a prison cell with John Rigas of Adelphia Communications for abuse of shareholder assets and a long lasting breach of fiduciary responsibilities.
Nevertheless, I expect that it is only a matter of time before companies like The New York Times, Gannet, GE’s NBC and Time Warner’s CNN become the recipients of billions of our tax dollars. A cunning Marxist like our Hussein would not dare miss an opportunity to nationalize the news media. It will have to be done in a somewhat furtive manner but I have no doubt Obama will make it seem quite palatable to the average voting android.
Never mind the fact that these companies were losing their subscribers and bleeding red, long before the recession began. Never mind the companies that are flourishing and actually profitable because they practice legitimate journalism. I can already hear the mindless pabulum about how Obama is “saving democracy”. He will be single handedly “saving the free-press”, so essential to our Republic – by “temporarily” nationalizing it.
Frustrated viewers tired of the liberal agenda inculcated by these organizations have generally felt the only thing that could be done was to “boycott” them or complain to sponsors. Those tactics have rarely shown results. The public has little understanding of the fact that these companies have been “hi-jacked” and those running them are essentially plundering investors. David Weidner of www.Markewatch.com wrote a column regarding the issue of banks hoarding the TARP money and not passing it on to consumers in the form of loans. The title of Weidner’s column is “Your credit is no good here”, in which he makes the case of why banks need to pull back from lending. In his column Weidner points out a strange dichotomy in the position of Bank of While pondering the question of whether or not banks should open the proverbial spicket, just ask yourself this question: Would I personally make these loans from my own savings account? It’s a great question because under “Obamunism” - if the loans are bad – you are making them. That’s the diabolical genius of Obama and little Timmy’s (picture Dr’ Evil’s “Mimi-me”) scheme to convert the Preferred Bank Shares to Common stock. It would appear that if they could take control of the management of these institutions by gaining control of the Boards and a large percentage of voting shares, they would essentially be able to engage in the type of reckless spending i.e. wealth re-distribution without having to bother with Congressional approval. It would be a minor technicality that they would be calling the redistribution “loans” instead of “spending”. This new spending could essentially be viewed by the recipients as “forgivable loans”. That’s chicanery at its finest! It would be a lousy deal for shareholders because any profits from the -good loans- made by the bank would be wiped out by all of the bad loans. If these preferred shares do get converted to common, don’t look for much in the way of dividends if you are a shareholder because any “profits” will end up in the hands of organizations favored by the administration that is controlling the Treasury Department. Looked at from this perspective, this would undoubtedly be the biggest bank heist in the history of the world. Instead of the tax-payers getting paid back with the present high yielding Preferred dividends, we will own equity positions in banks that will never pay dividends again as they become a piggy bank for governmental pet projects and corruption. If you want to see the disingenuous motivation behind their proposal to convert the Preferreds to Common, let’s require that the conversion only take place if 100% of the Common is placed in -private- Social Security accounts for “Generation X” to be systematically divested over the next eight years with all voting rights diluted by the individual recipients of these accounts. (I chose Gen-X because they have paid into SS for decades, will continue to do so to fund the Boomers retirements – but will never receive anything close to what they’ve paid in.) That would take away the true motivation, which is control. Subsequently, I’ve never heard of anyone converting Preferred stock to Common stock –without- the “convertible” feature being in the Indenture or Prospectus upon issuance. If these shares were indeed convertible, WHY was this considered NEWS as it was a few days ago when the trial balloon was floated? In his conclusion Mr. Weidner wrote that “taxpayers fuming about the banks' unwillingness to loan government money into the system might reconsider, given that the banks are actually being prudent with taxpayer cash.” That is absolutely correct; however, one cannot help but wonder what might have been if these prodigals had just returned the capital, all of these trillions of dollars, to its rightful owners, the people who created it. That would have been too radical, too “unfair”. So grab your popcorn, sit back and enjoy the deliberate destruction of western civilization. Don’t forget to thank your treasonous scoundrel in DC and your indoctrinated grandchildren for electing our Hussein. Contact: mrarbitrage@tableofwisdom.com It surprises me that it surprises anyone - that Gold and other commodities would rally in this environment. Some are even calling this rise in gold a bubble. In each of the bubbles of the past 12 years, gullible investors essentially had to make the case that the fundamental laws of economics would cease to apply to the present situation. During the tech bubble “it was a new paradigm…” During the real estate bubble, the excessive appreciation beyond historical average returns were justified because “the baby boom generation is retiring" (increasing demand in Florida, Arizona, Nevada…). During the commodities bubble ANY price was justified by “growth in It may appear that I’m about to assert that the rise in gold is a bubble. That would be wrong to say. The rise in gold is certainly not a bubble. The world currencies, including the dollar - is the latest asset class to experience a bubble. These currencies go up and down against one another all the time but zoom out and you will see they are like a teeter totter on the deck of the Titanic. On any given day one might be “strong” compared to the other but in reality we are comparing the value of turds. In a traditional bubble, an asset class will rapidly appreciate together as a group. These fiat currencies are a little different in that the expectation that they should maintain their value is the actual bubble. The common characteristic among the masses is that those who are surprised to see gold rising must expect that “it’s different this time!” (just like it was different during the stock and real estate bubbles.) THIS TIME – they believe the federal government can spend more money than we could ever afford to pay back without consequence. THIS TIME they can print trillions of dollars out of thin air without it affecting the purchasing power of the currency. THIS TIME (once again) the laws of economics will cease to exist because the Messiah is going to talk us into a new millennium of prosperity – right from his teleprompter. Even oil has reason to rise in this environment, although not because of an improving economy and not because of increased demand or a decrease in supply. Oil should go higher as people realize that by next year the freaking metal barrel in which the crude is contained is going to be worth 40 of those deflated Obama/Geithner dollars. Thanks for reading. If you are on the Nobel Economic Committee, contact MrArbitrage at mrarbitrage@tableofwisdom.com -------------------------------------------------------------------------------------------------------------------------------- Within the next few months to a year, sagacious media “experts” will be telling you about how the warning signs were on the wall well in advance - as we saw how these Chinese companies were all to willing to sell our children toys with toxic paint in order to make a few extra bucks. They will bring up the thousands of houses in the USA that are now vacant as they were found to have toxic Chinese paint all over the walls, making their former inhabitants ill. The “experts” will tell you how that was a portent of things to come. After all, if they are willing to sell you toxic toys and house paint - why should you trust the integrity of their balance sheets and income statements??? The Chinese government is either ignorant or complicit; either way common sense says that something isn’t right. I find it difficult to believe that the chi-com government doesn’t regulate enough. Remember the 90’s? How did the mafia make fortunes pumping bogus stocks? They knew from the beginning that their companies they pumped and dumped were bogus. They knew their schemes couldn’t last forever. They knew they would suck so much money out of people that it wouldn’t matter by the time everyone caught on. They would be set for life. I’m talking about a brutal regime that as recently as in 1996 was selling the organs of their political prisoners to finance the Red Army. I don’t think they would have any qualms about doing the largest pump and dump in history to suck the money out of their old buddies the The communist Chinese government is not our friend and they never will be. We have been duped. We have financed their regime and the joke is on us. By the way, is it still legal for me to say negative things about communists in the I just thought I’d share this with you now in case you are long Chinese securities. If you read TableOfWisdom.com, you get these kinds of tid bits at a time when the analysis is actually useful or “actionable” as opposed to reading the many journalists who ruminate on them after all hell has broken loose and it is too late. I don’t know if China will be the NEXT financial debacle – because our government and their cronies are doing a fine job creating so many here – but I believe China will a fairly near term disaster. Contact: Mrarbitrage@TableOfWisdom.com The heading of the column is "There are alternatives when you owe more on your home than it's worth". I would say yes there are, like honoring your covenant. When she got the loan, was there something in the contract about being guaranteed the absolute right to a profit on the home from day one? The fact that columns like this are so prevalent, which treat the question with legitimacy is a sign that we have become a nation of dishonorable deadbeats. I personally know a single man who has $600,000 in cash but is in the process of walking away from a home on which he is about $30,000-$50,000 in the negative. This is becoming an epidemic. He doesn’t care about his credit because he “doesn’t need it”. I know I was born in the wrong era. There used to be a time in this country when "a man's word was his bond" and people did business on the proverbial "handshake". I think that was basically the first 190 years of this nation's history. We certainly have changed. The Baby boom marked the end. It is one thing if something happened and you are trying to make your payments but end up being foreclosed upon. It is quite another to be so cavalier and to openly ponder the question of whether it's a legitimate financial strategy to just walk away because 2 years have gone by and YOU didn't make a profit on your investment - leaving the TAXPAYER to foot the bill. I keep coming back to the copious warnings by our founding fathers such as Adams, who said "we have no government armed with the power capable of contending with human passions, unbridled by morality and true religion. Our constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other." The same is true for capitalism. Capitalism like democracy is a system dependant on integrity, trust and self government. Capitalism is a beautiful thing when the people participating in it share that belief that they are more than animals, that they have a Maker to Whom they are accountable in the hereafter, when they believe in eternal rewards and punishment. Capitalism is a brutal thing when the participants believe they are cosmic accidents, animals that live by the law of Darwinism, the strong survive, "it's a jungle here" and he who dies with the most toys wins. The latter system was tried during the last major "enlightenment". Thanks to the tenacious liberals with their right hand, the ACLU, their left hand public "education" and their "head" the news media, this country has been turned into another France (late 18th Century). The market isn’t broken; WE ARE BROKEN and until we fix ourselves, the free-markets will not function properly. We are at a crossroads where we have the opportunity to admit our guilt, take responsibility, honor our obligations and become a strong nation through our suffering. The other road, the road we seem to be taking is to blame everyone else for our failings, to play the victim and to walk away from our responsibilities and obligations. The latter is the destruction of our democracy and capitalism. Based upon the responses I have seen from the voters age 30 years and under, it seems that our nation's future is in the hands of a group that has been absolutely indoctrinated from the Kindergarten through college. When capitalism and democracy fail, despotism fills the void. As in Making such warnings used to be considered radical. Some of us have warned for years about what is coming economically but were generally dismissed. That is because the past few generations have been spoiled. Most of us have never seen suffering in this country and we have felt that we are invincible. The same is true of our democratic republic. We have taken it for granted. We are not invincible. Unless we have a Road to Contact: mrarbitrage@tableofwisdom.com
Shareholders need to take action against these crooks who are abusing these assets with no regard for the owners. Institutions need to unite in order to push these parasites off of the boards and out of leadership. I have felt like a lone voice in the wilderness on this issue of shareholder abuse by companies like GE, Viacom, Time-Warner and others. However, it seems as though it is starting to become recognized for what it is.
As I wrote five years ago regarding “Fiduciary responsibility” http://boards.fool.com/Message.asp?mid=20257729&sort=postdate and “the arrogance of the entertainment industry, more specifically the executives who run these companies as if they are mere tools that exist only for the purpose of furthering their own liberal agenda…. It's about time these charlatans be held accountable for their decisions as they ignore what consumers clearly want instead of what they can get them to tolerate. The vast polling data cited in the aforementioned post show that these executives are NOT providing that for which the majority of consumers want and are in essence negligent in fiduciary responsibilities to increase shareholder equity at the maximum level… It's time to get fired up. It's time to start putting our feet down.”
Contact: mrarbitrage@TableOfWisdom.com
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April 22, 2009
The Diabolical Genius of TARP
by MrArbitrage
Unfortunately it may be here for YEARS thanks to our government prolonging the agony instead of letting nature run its course. It’s funny how much these kooks supposedly believe in “nature” when it comes to their desire of not interfering with the eco-system. If only they could make the correlation between their tampering with the laws of economic nature and realize it is very much analogous to the former.
Weidner wrote that “six months later, it's fair to say TARP has helped prop up some banks, but it hasn't flowed into the consumer credit markets the way the framers intended.”
That’s because the “framers” are blithering idiots at best, otherwise complete scoundrels. Just watch and listen to Chris Dodd and Barney Frank; enough said.
THANK GOD it hasn’t flowed through “the way the framers intended”. It stands to reason that credit would dramatically abate. It’s called going back to generally accepted underwriting procedures. The way these elected imbeciles designed TARP was apparently not to fix the problem but rather to keep the Ponzi going until they are dead and gone.
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March 19, 2009
Gold is the antithesis of a "Bubble"
by MrArbitrage
February 13, 2008
China's Accounting: The Next Debacle?
by MrArbitrage
Speaking of
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January 16, 2008
The Market isn't Broken; WE ARE BROKEN
by MrArbitrage
A Q&A appeared in today’s edition of Marketwatch. The author, Lew Sichelman was answering questions from readers. The first question was from a reader who was wondering if they should “walk away” from her Mother-in-law's mortgage since the realtor indicated the house is probably worth $80,000 while she owes $96,000. (Her husband has power of attorney.)
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November 21, 2008
"Positive Wealth Effect" versus "Negative Wealth Effect"
by MrArbitrage
Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
by MrArbitrage Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
Much of the market meltdown is a panic attack, feeding on itself as it grows larger and larger by the day. Make no mistake about it, there is a problem and consequences cannot be avoided. We have seen the extreme on the upside during the bull market of the 90’s where the paper stock gains created what was called “the positive wealth effect”. That fed upon itself in a positive way (if you want to call millions of people going out and buying things on credit a “positive”). Regardless of your perspective on that, the positive wealth effect stimulated further consumer purchases, which caused further revenue and EPS growth, which caused even higher stock prices, which caused even more purchasing and so it went - until the bubble broke as all bubbles do. Then the Fed lowered rates to the same extreme that precipitated the tech bubble, which led to the real estate bubble.
Now we find ourselves in a situation where we are out of participants who could help us to defer the inevitable BECAUSE – there are not enough people left to suck into a new bubble that could cause ANOTHER wave of “positive wealth effect” spending to stimulate the economy. It’s very similar to what inevitably causes the implosion of a Ponzi scheme – there are no NEW participants to keep it going.
This thing is GLOBAL – so unless we find some aliens on another planet that will buy our stuff and provide us with the EPS GROWTH to which we are accustomed – there MUST be a recession – best case scenario. However, the extreme to which we take it is somewhat dependant upon us. There certainly is some truth to the old FDR quote “the only thing we have to fear is fear itself”. I wouldn’t go so far as saying the ONLY thing we have to fear is fear itself because government stupidity is certainly a formidable foe, but just as we saw extreme reactions (excessive spending) during the bull market that could have been avoided had people been more rational, I believe we could avoid some of the extreme reactions on the downside.
A “negative wealth effect” is partially psychological and it could make a Depression self-fulfilling. The “fear itself” that we have to fear is that which is not rational. People who are deeply in debt and perhaps now unemployed cannot do much right now to stop a “depression”. They need to stop discretionary spending and most have no choice. The people who are not heavily in debt and do have employment (as well as the wealthy) – need to avoid the knee-jerk reaction of tightening up. If they are in that auspicious situation it is because they are responsible; so if they continue doing what they normally do and spend how they have always spent, they will be fine. If everyone panics and hoards their money the negative wealth effect will lead to the polar opposite extreme that the positive wealth effect once created. That would translate to Great Depression.
There is some reason for hope. Just think of these lower oil prices as a sizable, across the board tax-cut. Even though the decline of oil is attributed to decreased global demand in a sluggish economy, much of the rise was due to a speculative bubble; so despite the economy being the downward catalyst, even if the economy were to recover somewhat – that doesn’t mean that oil would be entitled to the old premium brought upon by manipulative analysis by companies like Goldman whose analysts called for $200 a barrel. In that sense, this decline in oil, despite the given reasons for it - can be a “gift horse” to the economy as consumers have that much more money in their pockets.
Contact: mrarbitrage@tableofwisdom.com
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November 19, 2008
Gold: Nothing like the real thing
by MrArbitrage
I read an interesting column in Marketwatch about how “demand for gold hits a record even as institutions head for exits” as the column put it.
Over my years of watching the "institutions" in action, I would not put my money behind the advice of these people. Just a couple months ago they were all over the media telling us that the days of $2.00 gasoline are over and that we would NEVER see that price again..." Have the institutions been a beacon of competence???
It used to be that you were viewed as some kind of extremist kook if you were buying tangible gold to protect yourself. People dismissed us a few years ago as we warned about the "D" word (depression). These are different times. Now all of the warnings about the inevitable consequences of a debt ridden economy and poor monetary policy that were previously dismissed as “doom & gloom” are today’s daily headlines. The worst case scenarios predicted perhaps pre-maturely are today’s reality. Now they think that inflation only happens when “too many dollars are chasing too few goods.” The REAL inflation will happen as the government creates more fake money then anytime in history to bail out their “corporate sponsors” and the millions of people whose votes they bought this past election.
These parasites don’t care if the government is going to devastatingly dilute the life savings of those who didn’t gamble in the real estate bubble. Those people have nothing to lose and everything to gain because they worked for nothing, risked nothing and now they will be the recipients of at least half of the fruits of your life’s labor.
It’s legalized theft. If you are sitting in cash or debt instruments like Treasuries or CD’s - Government can literally STEAL half of your money by printing more of it – giving it to people who voted them in – and you will have NO RECOURSE – because technically – they are guaranteeing the NUMBER – not the VALUE.
That explains why “paper gold” is going DOWN while real gold is going up. You have seen how quickly the government moved in banning SHORT SALES on a whim? They didn’t care about how many people lost money on the short side when they made that impetuous move. If they see too many people dumping their dollars and debt, seeking refuge in paper traded gold – what is to stop them from banning GLD the way they did shorting financials? It won’t do them any good but that doesn’t matter to elected idiots. It’s all about posturing to the financial illiterates who elect them in the first place. Most of what they do never works the way they purport to intend but that doesn’t stop them.
I'm an equities guy to the end. Unless the end literally is coming (and it could be), I see some historic buying opportunities right now for those who have the money to buy. I recommend 15% in tangible gold not necessarily to get rich but rather for protection from predatory government officials.
I also do not dissuade responsible people from having a nice cache of 2nd Amendment pieces to protect that gold from the Jacobincrats when they come to plunder those who were responsible and took precautions because "it isn't fair that they are not suffering with us...."
Contact: MrArbitrage@tableofwisdom.com
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November 5, 2008
The Ultimate "Sucking Sound"
by MrArbitrage
I just read a column by JOHN DVORAK of Maretwatch.com titled: “How to Obama-proof your portfolio: One approach, apparently, is not to invest in
I agree with the title but his objective was geared more toward speculating on which sectors to buy and which to avoid.
But the title made me think:
Perot spoke about a “giant sucking sound” resulting from NAFTA. As an investor, you may want to prepare yourself for the ultimate “sucking sound” as the money leaves the
The financial world is rightfully getting the picture as they hear the laudations emanating from Castro and Chavez in regard to our vote for “change”. It’s like it just hit them - "Something's wrong with this picture; these are not good guys." Liberals would have you believe they are but there’s nothing new about that.
See
These people used to be harmless “Kook fringe” but while we were sleeping the past 30 years, they became Congressmen, Senators, Supreme Court Justices and Professors.
Thank your children and grand-children for “rocking our vote”. Thank them for listening to our communists in
Thank you for “investing” in their Marxist educations throughout our universities nationwide. You will soon feel the effect on your nest egg of paying people like Professor Bill Ayers to indoctrinate them into the religion of a place to which we used to refer as "the evil empire".
Oh, by the way, just thought you should know, that long haired guy proudly displayed on your kid's tee shirt; that's not some old character played by Brad Pitt or Al Pacino - that's Marxist guerrilla leader Ernesto "Che" Guevara (pictured below). He's become quite the "rock star" among our college students these days. They spoke loudly yesterday, their voices will reverberate in infamy.
"Che" Guevara: Benevolent Marxist Killer
"Google" "Che Guevara" and you will find
over 7 MILLION "results"! This is serious
folks. The barbarians are not just at the
gate, they have come in through a Trojan
Horse called Academia, "News Media"
and entertainment. Demand the cable
company get the M-TV, VH-1, Bravo &
Lifetime the hell out of your cable "package".
Yank the funding from your children or
grandchildren's college if the state insists upon
inculcating your offspring with left wing propaganda.
Find a good private college deserving of the money
We have deluded ourselves long enough waiting for
politicians to win this war. This is OUR ground game now.
Contact: mrarbitrage@tableofwisdom.com
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October 24, 2008
Liberal Media Withering on the Vine
by MrArbitrage
The MARKETWATCH Headline reads:
"Gannett adds to the industry's misery
Commentary: Newspaper companies keep slipping
That's the sound of the newspaper industry's water torture. It seems that bad news of some sort invariably accompanies every newspaper company's earnings report. There doesn't seem to be an end in sight, given the breakdown in the global economy and the worldwide stock markets. "
Here's a newsflash for the executives in charge. The global economy and stock market isn’t the reason why these companies are hurting. These companies will wither on the vine and their Boards as well as their CEO’s should be ousted for breach of fiduciary responsibility. Their subscribers and/or television ratings have fallen precipitously as they have allowed their editors to routinely abuse the assets of shareholders by converting what were once objective news organizations into untrustworthy, left winged propaganda machines that should be forced to reorganize as 527s. If they had not undermined their credibility to this extent, their ratings would be higher and they would not be losing so much money.
These people should be sent to prison just like John J. Rigas, who built the Adelphia Communications Corporation into the country's sixth-largest cable company, who was sentenced in 2005 to 15 years in prison for looting hundreds of millions of dollars from the company's coffer. These people have done the same thing. They arrogantly treat these companies as though the shares were 100% privately held by the DNC.
Contact: mrarbitrage@tableofwisdom.com
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September 23, 2008
I'm Not Your Sugar Daddy
by MrArbitrage
Everybody’s looking for a bailout. Now these companies are demonstrating a sense of entitlement. I believe that we the tax-payers should come out ahead if we are going to foot the bill.
If we should be the lender of last resort we should make terms that will help these companies survive - but not to our detriment.
The elderly have been the most powerful lobby group in the past because they are the people who have historically voted. The elderly have benefited greatly from entitlement programs for many decades as many have taken out far more than they ever put in.
Now the Baby Boomers are becoming the elderly and they are beginning to collect Social Security. Because the system is a Ponzi-scheme and Congress has relentlessly raided the ‘trust fund” over the years, they are counting on my generation, generation-X to keep those payments coming.
My generation as well as those who follow Gen-X are faced with the knowledge that in order to support the Baby Boomers on Social Security and Medicare, we have to face the fact that we have been working for the past 20 years, paying into this system and will receive nothing in return. Not only that, they are demanding that we continue to work and pay even MORE into it while we KNOW that we are getting the old shaft. That’s supposed to be our civic duty.
A great deal of concern has been expressed about the government taking over companies like AIG. The government owning the dominant players in various industries brings about fears of Socialism or Communism. With the AIG proposed bailout, the government would own 80% of the company. The stock has consequently fallen headlong to reflect such a dilution.
My thought on the matter is that the government should not retain ownership but rather the new equity for all “bailed out” companies should be placed in “privatized” retirement accounts in custody for generations following the Baby Boom who have been paying into Social Security for a specific number of years. These can be special class B, dividend paying shares with less voting power, leaving the control and operation to the private sector.
If companies like GM, Ford & Chrysler need to come to us for a “bail out”; they should be subject to the same terms. Nobody would force them to go to the tax payer. If they hadn’t run their companies imprudently, they wouldn’t have to agree to such terms. This system would keep the government out of the operation of these companies, save jobs and avert a meltdown while helping to solve an enormous problem we are going to be facing in the coming years with Social Security. Any other plan will likely result in the government turning around and selling off valuable assets to Goldman Sachs for pennies on the dollar while the tax-payer gets left with the garbage. This way the only people who lose will be the people who purchased the stocks of these companies, which is fair since that is the inherent risk one takes when investing in equities. That is why we diversify.
The same goes for the mortgage bailout. The assumptions are perhaps overly pessimistic as to the number of expected “toxic mortgages”. If the tax-payers are expected to assume the bad mortgages, our elected charlatans need to see to it that the good mortgages in the bunch end up in the custodial accounts as well.
These custodial accounts need to be “tamper proof”, meaning that under no circumstance can politicians raid them for their prodigal spending. I expect resistance to such a proposal for the same reason why they resisted “privatizing” Social Security in the first place: In such custodial accounts, Congress cannot plunder them and replace stock with IOU’s.
Their specious rhetoric about how “risky” this would be wouldn’t be as effectual because we are already agreeing to take the risk due to the alternative risk of allowing these companies to fail. They couldn’t claim that this is a conspiracy to drive up stock prices through excessive buying because the stocks are falling as a result of share dilution. The beneficiaries would be the people who are going to become the victims after all the Baby Boomers are receiving their Social Security checks.
We could use this “rescue plan” as an opportunity to deal with two problems at one time and set in motion a plan for the gradual phasing out of Social Security starting with Generation X. Eventually these companies will come back and command market caps in the hundreds of billions of dollars. Once that happens, the positions in such accounts could be gradually unloaded into the marketplace and replaced with low cost index funds that have historically returned over 10% per year long term without having each beneficiary day trading their accounts, a preposterous notion the opponents of privatization have often propounded in order to maintain the status quo of their unabated plunder.
Contact: mrarbitrage@tableofwisdom.com
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September 17, 2008
It’s the Morality Stupid
by MrArbitrage
The title of this column of course refers to the Clinton campaign's famous slogan in the 1992 election. I don't mean to call anyone “stupid” but as that phrase was deemed so integral for that particular time, I think that the emphasis now more than ever should be diverted to the consequence of our materialism. It is not my intent to undermine what is often referred to as the “American way”. I think prosperity is a positive and it is not for government to be our conscience. It is up to us to properly align our collective conscience and for government to reflect it. Judging from the disappointing actions of many representatives in Congress, it looks like they are indeed doing so.
Watching the financial news networks and reading most of the popular publications has brought me to the conclusion that most if not all of them are missing the point. The big government liberals want to blame our woes on “corporate greed” and the Bush administration for the onslaught of financial losses.
It's not just "corporate greed" that is to blame. Immorality has permeated our entire country.
Capitalism is a beautiful thing when the people “love their neighbors as themselves” and “do onto others” as they would have others do onto themselves. A country of hedonists and narcissists will destroy each other without hesitation. These are the fruits of Darwinism. It is survival of the fittest. Why shouldn’t I plunder you for everything you have? So what if YOU are going to be destitute; just think how happy my wife and kids will be while we enjoy your money. It equals out right? “If I didn’t take the suckers money, someone else would have.” If there is no system of eternal reward or punishment why should I care? Oh, it’s wrong because YOU say so? Well it “feels right” to me so what gives you the right to impose your morality on me?
We are reaping the harvest that comes as a result of moral relativism. Today’s corporations are run by generations who have been taught by public schools and Ivy League universities that they are accidents which emanated from cosmic goo (Carl Sagan). They believe that man determines right from wrong and there is no higher authority. This is the same disastrous belief that failed the so-called “enlightenment” in
You cannot believe anyone anymore. How do you trust anyone's reported numbers? How do you know you can trust anyone's analysis? Stronger government oversight and regulation will safeguard us from corporate greed? Dream on folks. That has been tried for the last 100+ years. First of all, immoral people will always find away to get around the new laws and regulations. Secondly, the government and their regulators are no more than a sample taken from the same pool of immoral people that are ostensibly being regulated. Look how many of our representatives took sweet heart deals from Fannie Mae. They are just as corrupt as those running many corporations. These are the same spoiled brats who we saw smoking their dope, dropping their acid and protesting our country at
We are overly self righteous in that we all point the finger at corporate America for being corrupt and insatiably greedy as though we ourselves are immune. When I listen to the Obama campaign it makes me nauseous to hear them blame the banks and mortgage industry for making “bad loans”. There is culpability across the board from the mortgage lenders, realtors, developers, property appraisers to the actual borrowers themselves. It is time for
We as a nation CAN become stronger from our suffering if we stop acting like insolent children, take responsibility for our own actions and once again become a people worthy of self government. Just as gold is refined by fire as the fire burns out all of the impurities, we can use this time to become a better people. If we as a nation do not return to our heritage, which first requires that we learn what those roots are (thanks to the juggernaut of public education), we will witness a tyrannical ending to our freedoms. The writing is on the wall. People find it cute these days in using the phrase about having a “come to Jesus moment”. I am not being flippant in saying that is exactly what we need.
"Where is the security for property, for reputation, for life, if the sense of religious obligation desert the oaths, which are the instruments of investigation in Courts of Justice?" – George Washington/Alexander
Contact: mrarbitrage@tableofwisdom.com
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August 22, 2008
Oil Price: It's all relative these days
by MrArbitrage
If it were not for the initial "Morgan-Goldman bubble" in oil, it probably would have closed up the same 4.4% yesterday on the Russian threat - but likely up only $3.52 per barrel from a starting point of more like $80.00 (to $83.52 per barrel instead of being up the $5 & change to $120.)
It’s all about reference point because wherever oil happened to be that day it was going to get a little bounce from the speculators. The price still isn’t correlated to supply and demand.
What’s it going to take to get back to a true point of reference? Wait until the aristocracy is FORCED to bump up rates and we'll find out quickly. When that day comes, look out below paper traders.
mrarbitrage@tableofwisdom.com
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August 7, 2008
Predatory Government is at it again (or “things are not always as they seem”)
By MrArbitrage
Today’s Headlines read:
"Today's settlement sends a resounding message to the entire auction-rate securities industry," said New York Attorney General Andrew Cuomo in a statement. "This type of deceptive behavior will not be tolerated and we will actively seek justice on behalf of investors.
"Our goal is simple: to get investors back their money, and that's exactly what this deal does."
http://www.marketwatch.com/news/story/citi-settle-charges-auction-rate-securities/story.aspx?guid=%7B465758DC%2DD98F%2D4E93%2D86A0%2DFBA1EA3A234C%7D
Spoken like a true trial lawyer. This in itself is a deceptive practice by government “regulators”. It’s great that Citigroup has agreed to reimburse retail investors who sold their Auction-Rate Securities at a discount and that they have agreed to reimburse refinancing fees to any
The devil is in the details. The part of the settlement with which I take issue is in the subtle statement "Citi will pay a $50 million fine to the state of
This is where the government predators are fleecing one group of investors to placate another. I don’t care what benevolent schemes that Cuomo and friends have in mind for that $100 million dollar fine. Citigroup (symbol C) is a publicly traded company the MAJORITY of which is owned by INSTITUTIONS. 60% of the shares are institutionally owned! What that means is that while guys like Cuomo are championed as heroes for the common man – they are essentially robbing the common man who indirectly own stock in Citi through their retirement plan’s mutual funds and pension funds.
Take a look at Citigroup’s stock; it’s down about 6% today as a result. I am writing this because I am tired of seeing this repeatedly reported as something done out of the benignity of ambitious politicians. Cuomo is also suing UBS, another globally owned public company. The same thing was done to the tobacco companies, largely institutionally owned. And now they want to rob the common man through a “windfall profits tax” on companies like ExxonMobil, 53% of which is owned by institutions and Exxon’s only “crime” was to make an 8% profit margin.
I am all for giving back the spread between discount at which they sold the Auction Rate Securities and par as many were told they would get out at par - but reporters need to look a little deeper because things are not always as they seem. Hold ambitious politicians like Cuomo and his disgraced colleague Elliot Spitzer accountable.
Do what is right for both the ARS investors AND the little guy who doesn’t KNOW that he owns Citigroup and UBS. If any fines are levied, the money should be divided among the pension plans which have no culpability in these matters and pay them a one time “dividend”.
Contact: mrarbitrage@tableofwisdom.com----------------------------------------------------------------------------
August 4, 2008
Dow 20,000 & Trillion Dollar Market Caps
by MrArbitrage
Raw material prices are up, producer prices are up, retail prices are up and wages will go up. There will be some downward pressure on wages as most of the employed are too fearful of losing their jobs to demand higher salaries. However, unless the
Wages have already started to go up among the elite entertainers, a profession that has historically been recession proof. When you read seemingly ridiculous news stories about people like Hannah Montana or the “Olson Twins” being BILLIONAIRES, it isn't because they have crossed some unprecedented threshold; it's because of inflation. Stories like theirs and those of athletes making record salaries or Rush Limbaugh's $400 million contract a few weeks ago are often misinterpreted. Not to take away from their success but it isn't that these people are outdoing mega-stars from the 1970’s, 80's and 90's. These are the portents of inflation. In real dollars these highly successful entertainers are keeping pace.
The average income will follow when the economy turns around. Congress has already helped to push along the wage inflation by raising the minimum wage. This move may actually accelerate unemployment in the short term but will buttress inflation in wages in the long run. Very few people earn minimum wage but it is a new “water mark” against which skilled workers and white collar employees gauge their earnings. For their expertise, they demand a spread between their wage and the minimum wage – so when the minimum goes up – their wages go up.
We will first see higher unemployment before things begin to stabilize but the new stock market highs will either come just before the rise in wages in anticipation of higher wages and a better employment picture – or- right after that time as investors see corporate earnings go higher as a result of the better employment picture.
The duration of unemployment will depend on the result of the November elections. If we have an administration that punishes corporations, raises taxes and keeps oil high by undermining supply; we will likely see a long period of unemployment and economic attrition. If we have an administration that allows the cycle to run it’s course by cutting taxes, cuts wasteful spending and increases oil supply, this period will be much shorter (recession at worst).
One of the last pieces of the inflation cycle will be the inevitable rise in market caps. This may seem like a strange time to claim that the market is going to be hitting all time highs but it will. Doom & gloomers like to verbally assault the market in times like this but the market has always been the best investment of any asset class over the long term and the #1 hedge against inflation. Most people don’t want to embrace that fact and that is why most people cannot build wealth. The best time to own equities is usually counter-intuitive.
The caveat is that in order for this whole scenario to work, SOMEONE will have to hold the bag for everyone else to deal in the new larger numbers. The people who will pick up the tab will be those who hold debt, because of course, the debt is not inflation adjusted. This will help those who are in the debt as they are earning larger dollars (that have the same old purchasing power) yet are still paying the older, more diminutive balances. This "benefit" also applies to the US Government as they receive larger amounts of tax revenue resulting from higher consumer prices, wages and capital gains, while they pay down the national debt that remained the same.
In the short term the inverse volatility will remain between oil and the stock market until the oil bubble bursts. However, the longer term trend will be higher stock prices when oil finds equilibrium around $50-$70 per barrel.
We will adjust our perception of prices, wages, securities and stock valuations as we get used to TRILLION dollar market caps and as the 99 cent stores change their signs to “$1.99 - Adjusted for Inflation” stores. In the end, after a time of fear and suffering for some, everything will feel the same for most of us.
The moral of the story is: Don't get punked.
Own equities, own some assets like gold but don't own debt, at least not YET.
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January 31, 2008
It's Time for Oil & Automotives to work together
Oil companies are spending large amounts of money advertising on television, radio and billboards. They are trying to win brand loyalty by extolling the virtues of their gasoline’s cleansing properties! It’s GASOLINE, give me a freaking break! At $4.00 per gal, people are looking for the cheapest price down to the penny.
SOLUTION: Big Oil, eliminate that small fortune in advertising that is wasted. We know you are there because we see you on every street corner. We don’t care about your octane at this juncture.
Consumers know how much gas they consume every week as they fill their tanks. It’s a simple equation. They can calculate that average and extrapolate their annual average gas consumption per family or household.
You want them to loyally buy gas from you? Issue annual contracts in which consumers commit to buy a specific monthly or annual amount of gas from say Exxon, Shell or Chevron stations or stations supplied by your companies. This would be like a cellular phone service contract.
How would you motivate consumers to commit to such a contract? That begs the age old question that every consumer needs answered – “WHAT”S IN IT FOR ME?”
What is in it for the consumer with wireless phone contracts? Usually it involves a competitive rate and a very low price on a high quality phone. Sometimes they give the phone for free if the contract is long enough or large enough.
So instead of “Big Oil” spending a fortune on useless commercials and billboards, they can procure multi-year contracts with consumers by partnering up with GM. GM would sell the gasoline contracts to car buyers with the motivator being a DEEPLY discounted price on the car. This would be especially effective with the gas guzzling inventory.
GM would be paid by the oil company for each contract. This would be a win-win. The consumer would not be committing to specific price – but rather a specific MARGIN. It would guarantee the oil producer/refiner a specific margin like an adjustable loan does to a lender, for example Prime + (whatever %) over cost. It also guarantees the producer/refiner a loyal customer for a period of a year or more. (The longer the contract, the lower the car price)
It also guarantees the consumer that they won’t be stuck paying a higher gas price than everyone else if oil were to fall dramatically during the contract. Their price would fall as well. They would just be committed to buy a particular brand at a specified percentage over cost.
The technology is here. They issue a credit card that keeps track of their spending as they swipe it at the pumps as most people already do. The consumer doesn’t need to go around looking for the station with the lowest price because if one day they happen to be in an area where prices are higher, they will pay their contract price, not the price on the station’s marquis. The stations will benefit from increased traffic and sell more products at their convenience stores, which is how gas retailers make their profits anyway.
This is a strategic alliance that would make sense for oil companies and automotive companies because their products are quite correlated.
It could work even more efficiently if Big Oil were to acquire the troubled automotives. As one company they would have more flexibility with prices.
For more on that subject read my column “A Big Oil Bailout of the Big 3”
at http://tableofwisdom.com/Big_Oil_Bailout_-_Big_3.html
Contact: MrArbitrage@tableofwisdom.com
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Speculation: Good for America but Manipulative Analysis = Crime against Humanity
June 20th, 2008
by MrArbitrage
Goldman Sachs is at it again. As we all know, oil was pulling back yesterday on news that China was going to stop subsidizing oil, which would require citizens to pay more out of pocket.
The common interpretation of that news was that it would assuage demand in
Goldman didn’t waste any time today coming out with a “glass is half empty” proclamation saying “
Frankly, with essential commodities, the firm should not be allowed to offer ANY analyst coverage if they have any type of position in a commodity, directly or indirectly – EVEN IF they disclose it (as they always do with stocks).
What they really need to do is treat people found guilty of market manipulation by knowingly disseminating false information for financial gain (or to avert losses) as those who commit treason against their country. The same should apply to analysts or firms who disseminate subjective information that cannot be proven false but clearly benefits the firm’s investment position. If the consequences are more severe than the typical short term vacation at Club Fed, I believe it would have a more viable effect than more government red tape.
For example, if it were to be found that analysts at investment firms were making outlandish, seemingly arbitrary price targets for oil; going to $200 per barrel while they or any subsidiary or hedge fund had a long position in oil at the time, they should be charged with treason, defined as “the betrayal of a trust or confidence; breach of faith; treachery.” I suspect there are firms doing this and the timing of Goldman’s public proclamations seem a bit suspicious. Whatever the case, it should be considered a crime against humanity as it has literally led to rioting and starvation in some countries.
Senators like Joe Lieberman and John McCain are calling for investigation of speculators. Speculation is good. Without it we would still be in the stone ages. Speculators alone have not caused the run up in oil to today’s levels. If it were speculation alone, this would have happened long ago. I believe it is the –ANALYSTS- who feed the frenzy of excessive speculation who are to blame and I think it would be naive to think they don’t have a vested interest somewhere along the line to make these ridiculous predictions while knowing they would become self-fulfilling prophecies – just like in the Tech/Internet bubble of the 90’s.
This bubble is much more harmful to the public because when analysts like Henry Blodget made outrageous recommendations and predictions for the valuation of Yahoo, the only people hurt were those who participated in the stock market – by choice. No matter how absurd the market cap of YHOO was at $200 BILLION – the consumer didn’t pay more for Yahoo’s services (free), the same with AOL or GE appliances. The consumer prices were not affected.
The analysts at these firms who are throwing gasoline on the fire (no pun intended) in the commodities market are destroying the financial well being of hundreds of millions of consumers. They have a constitutional right to express their beliefs regarding the future price of oil; however, if their firms are profiting from the upward direction of those oil prices by any means other than paid subscriptions to their analysis – they should be charged with crimes against humanity. Legislate THAT and you will see a much more circumspect approach to their analysis. I promise you.
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Wednesday 19th, 2008
Morgan Stanley: Another 'isolated incident' or sign of an epidemic?
by MrArbitrage
One of the major stories on Wednesday was the 60% decline in earnings after a trader at the firm's London offices incorrectly valued positions by roughly $120 million.
A column at www.marketwatch.com quoted Colm Kelleher, chief financial officer of Morgan Stanley, as saying during a conference call with analysts."We are very angry about it, but in this sort of environment of stressed markets, one would expect to see people try to behave improperly... "The issue is, do you have the controls to catch them? We believe we do."
"Control" is exactly what we will be seeing more often than anyone realizes. These are not isolated incidents nor are they confined to the financial markets. These people do not have some genetic disposition that makes them different than anyone else in society. I believe that such characteristics are permeating throughout our nation whether you are talking about small business, large publicly traded corporations or local, state and national government. You are witnessing the decline of western-civilization that has resulted from our removal of the morality and upon which this nation was built over 200 years ago. We have removed that basic foundation from our education and we are reaping the consequences of the relativism and Darwinism. To put it succinctly, we have become a narcissistic and immoral people.
John Adams warned that "Our constitution was made only for a moral and religious people. It is wholly inadequate to the government of any other."
This doesn't just apply to our structure of government. It also applies to capitalism itself because both democracy and capitalism require the self government of the people who participate in it. If they cannot govern their unbridled passions and do not "do unto others as they would have others do unto them" - we will have widespread fraud and the system will collapse. Hence, the people of an immoral society will be in need of masters as anarchy will not last long. Something will fill the void and it cannot be freedom without a great deal of bloodshed. The way things are shaping up with half of our country being Islamic terrorist sympathizers, including our Supreme Court, I wouldn’t be surprised if that is what will be filling the void.
I have long been fascinated by the French Revolution and what can be learned from it as France went through their revolution right after we successfully went through our own. The difference between theirs and ours was the KEY. They were going through the so-called “enlightenment” period which was vastly different from the ideal that led to our prosperity. Their revolutionary leaders WERE VERY HOSTILE TOWARD RELIGION and built their house on sand. They even went so far as to change their calender because it had been based upon Jesus Christ.
If any student of history were to look at the parallels between the French leaders like Robespierre and the leaders of America's leftist movement, they would see that they are chillingly similar movements. The American left are also revising our history. Like the Jacobins they use rhetoric that sounds good on the surface; however, their ideals are completely erroneous and lead to violence, anarchy and finally despotism. The French ended up with Napoleon. If things keep running this course toward a leftist monopoly of the three branches of government, we will soon see what version of totalitarianism will befall us.
I do believe there is hope – if we recognize that the abandonment of the values of our founding fathers up to through “greatest generation” is what has led us to this precipice and that we need to turn back and restore that foundation to what it had been for hundreds of years.
I don't claim clairvoyance but I have for years felt that a depression was coming and in the following video that I recorded almost a year ago, just before the Federal Reserve began recklessly lowering rates, I expounded upon the notion. Ironically, I feel as I stated then – that a depression may be the best thing for us. Watch the video.
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The “greatest generation” as great as they were, collectively raised a generation of spoiled brats who lived off of the sacrifices of their parents, never knew the pain that their parents knew and they feel entitled to everything. They had children, then their children had children and of course there are exceptions, but collectively, it has been a case study of moral degeneration ever since.
2008 will be a pivitol year in deciding the future of our country. If the youth who have been indoctrinated by the pseudo-intelligentsia of our universities - do what I fear they are going to do- we could go in the direction of the Bolsheviks.
I leave you with a sobering quote from George Washington's Farewell address, written in collaboration with Alexander Hamilton in which he said:
"Of all the dispositions and habits which lead to political prosperity, religion and morality are indispensable supports. In vain would that man claim the tribute of Patriotism who should labor to subvert these great Pillars of human happiness--these firmest props of the duties of Men and citizens."
Godspeed.
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Tuesday 6-17-08
The Jacobins are at the Gate
by MrArbitrage
If you're not a student of history and are unfamiliar with the events of the French Revolution, Google it later - but suffice it to say that the Federal Reserve's cavalier attitude could be construed as akin to the attitude of the aristocracy in France at that time. Their national debt and runaway inflation led to the Jacobins running around the streets with the heads of their aloof former leaders at the end of stakes.
Of course I am writing metaphorically but if heads are going to roll, first look to the Federal Reserve. The opposition to this financial chicanery is getting louder by the day as evidenced by yesterday's column at Marketwatch entitled "The Feds Lacker Joins Chorus calling for Rate Hike."
http://www.marketwatch.com/news/story/lacker-joins-chorus-calling-rate/story.aspx?guid=%7BB0B5D0FE%2DAEDC%2D45A2%2DBCDA%2D0BAF690ADCAA%7D
It is causing a rising amount of resentment that they are bailing out these reckless speculators who leveraged themselves in the housing bubble. They are doing so by choking the senior citizens/retirees with these unnaturally low rates of return. As their bonds and CD's mature, the Fed helps to force these retired folks into JUNK BONDS and/or other vehicles they do not understand.
In the end you will still have the dead beats walking away from their mortgages but the Fed compounds the problem by making victims out of those poor people who just wanted to survive off their nest egg with a reasonable return.
Of course that is only one facet of this gem. Then there is the effect their funny money has caused in oil and other commodities while they are abrogating the best interest of the masses - all to appease the least deserving of the market.
I didn't speculate in the housing bubble. Most of us didn't. But the Fed is punishing us at the pumps and at the grocery store so we can prop up those
who did.
Bernanke is soon going to have to raise rates or be removed. You cannot keep bailing out idiocy. It sends the wrong message.
MrArbitrage
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June 31, 2008
Goldman Sachs is at it again.
As we all know, oil was pulling back yesterday on news that China was going to stop subsidizing oil, which would require citizens to pay more out of pocket.
I don't think The Fed is necessarily engaging in "reckless" monetary policy as some suggest. I think they are engaging in - prosaic monetary policy. They are removed from reality and don't seem capable of common sense interpretation.
The article reads: ---- "For a central bank, it is "how are we perceived by our constituents," Mankiw said. "If the public thinks the central bankers are doing a good job and are committed to inflation stability, [then] the public's expectations will be anchored; they won't start expecting prices to get out of control and as a result prices won't." ----
I think that is dead wrong. "The public" can think whatever they want about the Fed and where inflation is going and it will not change a thing. The prices I pay at the grocery store for eggs or a gallon of milk has nothing to do with my psychology. Somebody has to get through to Bernanke that the -psychology- is much further up the food chain where the average person does not participate i.e. commodities speculation. It is those people who need some stern signals from the FED, not "Joe Six pack", the end user.
If they want to have an effect on inflation, they need to put aside their cookie cutter solutions that are not applicable here and do something about these interest rates and leverage. Where's the "irrational exuberance" comments for the commodities market? Delusional people don't usually listen but at least acknowledging the real problem would be fair warning to those about to lose their assets when the Fed finally does hike interest rates.
If the Fed continues to play this game and allows commodities to continue to inflate, GLOBAL depression will ensue and it almost looks like the governments around the world actually WANT this to happen. They are either just plain moronic or they are deliberately wasting time launching "investigations" that they know will have no effect on oil prices but make it APPEAR like they WANT to fix the problem.
The Democrats are trying to make it look like they want to do something by probing people like George Soros and attacking oil executives in front of the cameras - all so they can look good before their constituents.
Republicans are talking about needing new refineries while the refineries we have are deliberately running at 80%. They are calling for more drilling and for ease in environmental regulations. Yes, we need more oil but we need to deal with the immediate problem NOW, which is the fact that the current price has little correlation to demand. The current price has been STORY DRIVEN just like the prices of tech stocks were in the late 90’s.
Both sides are barking up trees. Some of their contentions have merit but have nothing to do with the short term solutions needed.
If they are not in collusion, they need to put pressure on Bernanke to raise interest rates NOW - or REMOVE him. - MrArbitrage
In my video Oil: The Final Frontier of Bubbles, I examine the question of whether the current energy market is the final bubble being brought about by the reckless monetary policy of the Federal Reserve and self fulfilling prophecies of industry analysts.
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6-9-2008
The headline reads:
“THE FED
Bernanke: Slowdown will bring down inflation
Federal Reserve Board Chairman Ben Bernanke said Monday that he believes that sluggish growth will hold down inflation, suggesting he is in no hurry to raise interest rates to combat higher prices.”
http://www.marketwatch.com/news/story/bernanke-says-slowdown-bring-inflation/story.aspx?guid=%7BB17B9D54%2DA9A8%2D4B31%2D8F65%2D2AD170A5B561%7D
I believe Bernanke has it backwards. The sluggish growth will not hold down inflation as Bernanke propounded. Rather INFLATION, paradoxically is CAUSING the sluggish growth in this environment.
The only thing the recent rate cuts are stimulating is the bubble in oil and other commodities. It isn’t stimulating the economy or consumer spending as the banks are hung over as a result of their reckless binge lending. I have often said that these unusually low rates are akin to putting a juicy filet mignon in front of someone who is hung over from a week long drinking binge. It would ordinarily be quite attractive but they just don’t have the appetite right now. Likewise, banks do not want to lend to the average consumer, even with high credit scores.
The only thing that this funny money created by the Fed is stimulating is the same type of leverage that gave us the previous two bubbles in equities and real estate. At the beginning of each bubble, the Fed Policy was exactly the same; interest rates were at the same post WWII lows.
As was the case during the past two bubbles, rates are so low that they are pushing retirees among others out of safe vehicles and where the “returns” are so dismal that what remains after taxes doesn’t come close to beating inflation. Hence, “cash is trash”. Equities are struggling due to declining consumer spending, real estate is dead due to historically high inventory; so the last frontier of bubbles seems to be commodities.
As was also the case with the Internet/tech bubble, leverage is exacerbating the escalation in prices, which will compound the problem as prodigal I “investors” will eventually be wiped out.
As was the case during the French Revolution when the citizens became mobs due to their outrage over inflation and a lack of collective morality, Bernanke’s cavalier attitude regarding the present ferments may make him our Louis XVI with the Jacobins currently at the door.
The Bush tax cuts were a necessary strategy but are being palliated by the effects these interest rates are having on commodities and speculation. We need a cohesive policy that is much easier articulate than to implement because as is often the case with prudent financial strategy, the panacea is a medicine that is not easy swallow.
What we need to do to truly revive this economy is to continue to 1. cut taxes 2. aggressively cut government spending and 3. increase interest rates to bring down commodity prices. It is contrary to conventional thinking that an increase in interest rates could actually stimulate the economy; however, the effect it would have on the commodity prices would be far more beneficial to consumer discretionary spending than the supposed negatives of encouraging consumer saving - attributed to rate increases.
The tax and spending cuts would offset any tightening in interest rates as it would be putting REAL money into the hands of consumers as opposed to the ersatz money that led to many of the current problems.
This cure is an unlikely one because we would be hard pressed to find enough elected officials who would cut popular entitlements in the face of a weak economy, taking the barrage of criticism that would ensue. It would likely be politically suicidal to do what is actually best for the economy and even what is best for those who are receiving the actual “entitlements”. Such actions would be the type of behavior one would expect from a FIDUCIARY. These people in
What is more likely to happen is the same thing happened in the 1930’s. The people will vote what they perceive to be in their best interest. They will vote for the politician who will promise them all kinds of new government programs to take care of them forever. This agent of change will help to take what could have been a recession and turn it into a full blown depression.
-MrArbitrage
The headline reads:
“THE FED
Bernanke: Slowdown will bring down inflation"
http://www.marketwatch.com/news/story/bernanke-says-slowdown-bring-inflation/story.aspx?guid=%7BB17B9D54%2DA9A8%2D4B31%2D8F65%2D2AD170A5B561%7D
Federal Reserve Board Chairman Ben Bernanke said Monday that he believes that sluggish growth will hold down inflation, suggesting he is in no hurry to raise interest rates to combat higher prices.”
I believe Bernanke has it backwards. The sluggish growth will not hold down inflation as Bernanke propounded. Rather INFLATION, paradoxically is CAUSING the sluggish growth in this environment.
The only thing the recent rate cuts are stimulating is the bubble in oil and other commodities. It isn’t stimulating the economy or consumer spending as the banks are hung over as a result of their reckless binge lending. I have often said that these unusually low rates are akin to putting a juicy filet mignon in front of someone who is hung over from a week long drinking binge. It would ordinarily be quite attractive but they just don’t have the appetite right now. Likewise, banks do not want to lend to the average consumer, even with high credit scores.
The only thing that this funny money created by the Fed is stimulating is the same type of leverage that gave us the previous two bubbles in equities and real estate. At the beginning of each bubble, the Fed Policy was exactly the same; interest rates were at the same post WWII lows.
As was the case during the past two bubbles, rates are so low that they are pushing retirees among others out of safe vehicles and where the “returns” are so dismal that what remains after taxes doesn’t come close to beating inflation. Hence, “cash is trash”. Equities are struggling due to declining consumer spending, real estate is dead due to historically high inventory; so the last frontier of bubbles seems to be commodities.
