Super, I am usually in your camp in most
matters but I disagree with
you as far as whether you will have money leftover for a therapist
with McCain or Obama. I expect you will have more left over with
Obama unless you are in the over $250K crowd. Clinton did pretty
well during his 8 years and the Republicans had tagged him as a big
spender too. The current Republican organization is leaving us with
the most massive deficit I have ever seen..
In any case, may I suggest that we not get into any further
discussions relating to the US election on this forum, regardless of
how tempting it may be? Let us pls stick to Metastock and its uses..
Thanks,
--- In equismetastock@xxxxxxxxxxxxxxx,
superfragalist <no_reply@xxx>
wrote:
>
> Hi Cameron,
>
> It's good to hear from you. I hope you are doing well and that
Canada
> has managed to avoid this mess.
>
> The problem with most bank insolvencies can be solved with a
lifting
> of the mark to market accounting rules. The SEC "clarified" the
rules
> which gave banks some latitude, but the auditor liability is still
> there so I doubt the "clarification" will do much for that
problem.
>
> The second issue regarding liquidity has been solved a long while
> back. The credit freeze is due to banks not trusting other banks
> because the lending bank can not tell what kind of financial shape
the
> borrowing bank is in. That's a transparency issue, a problem with
> asset valuation, understated liabilities, financial instruments
that
> are too complex to price, and a lack of visible leadership willing
to
> forthrightly disclose the true health of their organizations. Until
> those problems are resolved or the Fed guarantees all interbank
> lending, the freeze is going to thaw slowly. It seems to be moving
a
> bit now, but not much.
>
> In the 1980's we had a collapse of the Savings and Loans, which
were
> the primary real estate lenders back then. Inflation, and the same
> lack of down payments and lose loan approval, especially to
developers
> caused the same problems. The banks didn't get hit too badly. The
> problem thin was there were a lot of depositors who had bought very
> high paying CDs from those Savings and Loans. Those CD's had no
FDIC
> insurance because Savings and Loans were insured by state funds,
which
> of course didn't have the money to pay back the CD deposits that
had
> been loaned to developers and that became the bad debt of that
era.
>
> Because of the problems here, the US is going to move closer to
> socialism and farther away from the capitalism, which built the
> country over the last 200 years and which makes it an economic
engine
> others rely on. Now that the US has given away its manufacturing it
> won't be able to rely on nationalism.
>
> In addition, the new political regime is going to propose
trillions in
> new social programs, which will cause the drying up of investment
and
> expansion capital over the long run.
>
> My best guess is the recession is going to be longer and deeper
than
> people think, and/or any recovery is going to shallow and shaky.
There
> will be changes in global politics, which may not be good for a
lot of
> other countries. There is no such thing as a free lunch, so it's
time
> for everyone to pay up for the cost of cheap and plentiful money.
>
> The world will go on, either way. Here's my take on the forth
coming
> election.
>
> No matter who wins, it will be depressing for a lot of people.
>
> If McCain wins, I'll still have enough money left to hire a
therapist
> of my choosing to help me get over my depression.
>
> If Obama wins, I won't have any money left to hire a therapist for
my
> depression, but one will be provided to me free of charge.
>
> Super
>
>
>
>
> --- In equismetastock@xxxxxxxxxxxxxxx,
Cameron Reid <cwr_74@>
wrote:
> >
> > Good morning Super,
> >
> > I read and enjoyed the WSJ article you recommended. My summary
is
> that their can be two generic problems within banks: A lack of
> liquidity and a lack of equity ( insolvency ). At this present
time,
> I believe there is a crisis of insolvency which has cause almost
all
> inter-bank lending to cease and thus removed the FED's ability to
> manipulate the credit cycle and by extension, the real economy.
> >
> > Now we have to issues to deal with: 1) the FED has lost a good
> portion of its ability to regulate economic demand and 2) Many of
the
> major financial institutions are insolvent.
> >
> > As far as I know, the last time the banking system in America was
> insolvent was in the early 1980s. At this time many of the Latin
> America and other 3rd world loans were in default. A formal
> recognition of this fact would have caused write downs that would
have
> bankrupted most of Europe's, America's and Canada's banks. The
> solution at that time was to allow the Banks to collectively hold
> these loans on their books at par value until they had built up
enough
> equity to weather the write downs. This happened for the first
time
> in 1986, when Citi Bank announced that they were writing down a
> portion of their loans; other banks followed Citi's lead.
> >
> > What, in part, enabled this strategy to work was the continue
> profitability of each banks domestic franchise. All of the
European,
> American and Canadian banks enjoyed robust levels of growth and
> profitability in their home markets and a steep yield curve.
> >
> > Today, the profitability of each bank's domestic franchise, in
most
> cases, is materially compromised in America and Europe; Canadian
banks
> are remarkably profitable at home.
> >
> > In my view, if the US and Europeans continue on their current
path,
> the solution will be painful. When equity is injected, banks
regain
> the ability to sustain write downs and remain technically solvent.
> But, the opposite side of a Bank's write down is either a consumer
of
> commercial default. These continued defaults discourage consumers
and
> businesses from taking any risks or additional debt; thereby
removing
> the prospect of any economic growth outside of increased government
> spending. This process can be successful if enough equity is
injected
> and all of the bad loans are written off and the assets behind them
> liquidated, but the cost is incredible.
> >
> > The other option is to manufacture equity. This can be done
through
> inflation. If the US and Europe were to devalue their currencies
by
> 25% of so, then wages would rise between 20% and 33% on both
> continents. With hire incomes, families could begin to afford the
> mortgages on their homes again and businesses would see their
balance
> sheets improve. Additionally, with fewer loans going into default,
> there would be less need to inject equity into the balance sheets
of
> banks and because of this counter party risk would diminish.
> >
> > Each scenario will have its own winners and losers. In the first
> scenario, the wealthy make out better as their prudent investments
> will retain their value through time. In the second scenario, we
are
> bailing out many of the imprudent speculators; those who are the
most
> indebted and who can avoid being liquidated will come out the best.
> >
> > I don't know what will happen. But with the prospect of 1 in 5
US
> home ( and probably a similar number in Spain, the UK, Ireland and
> some parts of Italy ) worth less than their mortgage the political
> pressure to 'save the voter' will be substantial.
> >
> > There is certainly the sense of panic in the air. Looking down
from
> Canada, the US electorate is desperate for change. But, it also
> appears to have lost much of its frontier self reliance in what
> appears to be a jump to the left. A larger government is certainly
> the most prospective outcome at this time.
> >
> > In my opinion, much of the economic freedom I enjoy today in
Canada
> is the result of Canadians being forced to remain competitive with
the
> massive US economy to the South. I suspect that this constructive
> pressure is about to diminish considerably.
> >
> >
> >
> > Cheers,
> >
> > Cameron
> >
> >
> >
> > To: equismetastock@: no_reply@: Sat, 18 Oct 2008 19:29:15
> +0000Subject: [EquisMetaStock Group] Monetary History of the US
> >
> >
> >
> >
> > If you like to read clear and concise economic theory and what's
> wrongwith what is happening now, the Wall Street Journal had an
> interviewwith in the Saturday Oct 18 edition with Anna Schwartz, co
> authorwith Milton Friedman of A Monetary History of the United
States.
> Here's the link.
> http://online.wsj.com/article/SB122428279231046053.htmlThe
Journal
> allows non-subscribers to read opinions for a few daysbefore they
take
> them down. This is an exceptional look at economic theory from
someone
> who wasalive during the depression and through all of the
recessions.
> Sheunderstand economic policy as well as any Fed executive. As
> traders, we all need to prepare for a return to the oppressive
> taxpolicies of the 1930's through the 1980's. Implied tax rates hit
> 70plus percent in those days. If you want a read an article
> thatillustrates how someone with a small amount of historical
> knowledgeand misapplied statistics can make a case for higher
taxation
> as a wayto grow, here's a link to an article written by such a
>
person.http://www.oregonlive.com/opinion/index.ssf/2008/10/bailout_in
stead_double_the_top.htmlI
> also found it interesting how many comments were supportive.
Wow,does
> this speak to the level of education, or lack of it, in oursociety.
> There is a huge difference between implied rates andeffective
rates.
> In those days there were a zillion ways to taxshelter income. Back
> then the IRS even allowed income averaging. Thosedeductions are
gone.
> No mention of that. No mention of the effectivetax rate back then
and
> why rates were brought down.In addition, America was not a global
> economy then, the economy wasnationalized. We bought what we
consumed
> so we had a huge post warexpansion because of the population
growth.
> Of course the standard ofliving was much lower then than it is
today.
> In addition, credit washard to come by. No one was leveraged up to
> their teeth in credit carddebt. Opps. Was that all conveniently
left
> out, forgotten, or maybethe author just didn't know about those
> economic factors--that'scalled ignorance. This is what happens when
> GDP is looked at as anisolated number. Back then the government
> accounted for less than 10%of the GDP. As we've moved toward
> socialism, the government nowaccounts for 28% of the GDP. And it's
> going to grow in the next 8years to something over 35%. I also
noticed
> that the economic history writer left out the fact thatwhen Europe
> raised taxes, particularly the UK, to those levels upto90% business
> investment dropped and the wealthy left. (If that'sincorrect, the
UK
> members my age should correct my argument.) Anyway the point is
when
> all these new tax policies hit, it's going tochange trading
strategy.
> TA isn't going to help with that. When atrader is keeping $0.40 on
the
> dollar from successful trading ratherthan $0.67 on the dollar, it
> changes the risk/reward ratios. Remember the government is our
partner
> only when we win. If we have anet loss, the government only allows
us
> to deduct up to $3000 a yearin losses. That's a great partnership.
If
> you win I get 35% (moving upto 50% or more shortly) and if you
lose,
> my share of your losses islimited to $3000. Sweat! A large part of
the
> population is yelling for change. They might wantto be careful what
> they wish for!Enjoy those articles. Your trading life is going to
> change in theyears to come. Well, only the ones of you who
survive. Super
> >
> >
> >
> >
> >
> > __________________________________________________________
> > Stay organized with simple drag and drop from Windows Live
Hotmail.
> > http://windowslive.com/Explore/hotmail?
ocid=TXT_TAGLM_WL_hotmail_102008
> >
>