Who is Laff(er)ing now?

[ClaudeTucker]

ENS - I couldn't agree with you more. I think this whole thing was somewhat setup from the get-go. I'm curious if George Soros had short positions.

And the beginning of your post making "an uneducated observation" should be the beginning of all of my posts considering how stupid I'm being told I am.

In a similar vain..

Here's another uneducated observation....

I've heard the soundbites of Maxine Waters, Chris Dodd and Barney Frank (all Dems) telling us as little as two years ago that "there are no problems with Freddie Mac and Fannie Mae." This was in response to attempts at reigning in some of the loans that were being written and asking for oversight.

100% financing to people without documentation and an apparent inability to repay could be viewed as socialism. Look what it's gotten us. The timing is also very suspicious occuring in the month before the election.

 

[ENS Audio]

[quote author="ClaudeTucker"]ENS - I couldn't agree with you more. I think this whole thing was somewhat setup from the get-go. I'm curious if George Soros had short positions.

And the beginning of your post making "an uneducated observation" should be the beginning of all of my posts considering how stupid I'm being told I am.

In a similar vain..

Here's another uneducated observation....

I've heard the soundbites of Maxine Waters, Chris Dodd and Barney Frank (all Dems) telling us as little as two years ago that "there are no problems with Freddie Mac and Fannie Mae." This was in response to attempts at reigning in some of the loans that were being written and asking for oversight.

100% financing to people without documentation and an apparent inability to repay could be viewed as socialism. Look what it's gotten us. The timing is also very suspicious occuring in the month before the election.[/quote]

I think that you're only getting whats some people refer to as a "half truth" which is common among both Lib and Conservative pundits when they are citing articles or giving out information under the various mediums of communication. If you dont mind me to ask, what is your source of information to where you found out about (all Dems) being apart of Fannie / Freddie???

I am just curious...thats all

 

[ClaudeTucker]

ENS

Let me point out that I've heard these through various outlets. They are undoubtedly contained within the Congressional Record and are public hearings. They are long-form soundbites and I recognize the voices of the individuals.

I have heard both of these broadcast on Sean Hannity and Rush Limbaugh. Now you're free to attack the sources, and no one here has been shy at attcking me, but it doesn't change the public record nor does it alter what Waters, Dodd and Frank said in their own words/voices does it?

I don't hear any edits. If you wish to look it up I'm sure there's a You-Tube, possibly a link on Hannity's site, a Congressional Quarterly. All I had to do was turn on my radio with an open mind. The mainstream media has no interest in what they said and will not cover this because it doesn't promote their agenda. The right wing media uses this to promote theirs, but it still doesn't change what these people said. And, being long-form it's very diificult to see how these comments can be taken out of context. The context is established by the bite.

What I ask you to please refrain from is the temptation to descredit the record based on the source. They said it. It's not the messenger but the message.

And it's not Joe the Plumber, who he is, if he's really a plumber, has a tax lein or whatever. It's what Obama said in response to him in his own voice.

The many attacks on sources being right wing/left wing etc. here serve as a convenient means to divert attention from fact-finding.

Isn't it fair to draw conlusions based on what people actually say?

 

[JohnRoberts]

Once again the conspiracy theories. They are like the modern day equivalent of Greek mythology, to explain stuff like lightning they couldn't understand. :grin:

I had several private exchanges with one soul who was convinced it was a republican conspiracy, while the apparent result is to get the democratic candidate elected. Hard to argue with or even understand logic like that?

I looked at the obvious very short list of potential conspirators... guys like George Soros who were already big dog currency traders and also of the political suasion to benefit from that timing, but he appears clean, or smarter than me (which he probably is as evidenced by his bank acct.). All I could find from Soros was his editorial in the Guadian suggesting the need to capitalize banks which Paulson actually did a little while later.

I'm willing to write this off to simple ignorance, and people putting their self interest ahead of the public interest. There will always be people warning of impending gloom and disaster in the best of times, but like chicken little most can't be taken seriously, even if they are occasionally right.

Some of the big investment firms on wall street were smart enough to limit their exposure to these toxic debt instruments, but still got dragged down in the broader economic spiral.

I suspect the seeds for this melt down were planted in plain view. Few appreciated the urgency in correcting trends that looked like they were already moving the other way. Those who did were not in a position to do anything about it.

JR

PS. Claude. Barney Frank was on TV a few months (not years) ago saying Fannie and Freddie were financially sound. He probably still believes it. How that guy got to be chairman of the financial services committee is one of the great mysteries of modern government.

 

[ClaudeTucker]

Thanks John Roberts. I don't think it's conspiratorial either other than perhaps timing. I think Bush may be questioning the loyalty of his Democrat apointees. But yes, the seeds were sown a long, long time ago.

You just can't loan money to high risk borrowers whose sole qualifiaction is a pulse and expect to get it back. Then, take that loan, securitize it, "back it by government guarantee," create an incentive for the borrower to walk and not expect that house of cards to fall. A lot of borrowers and the lenders that service them have a hard time finding out who currently holds the paper. IRRC I remember reading that in the Federal Reserve Quarterly. IIRC is was the St. Loius fed edition.

Not speaking to you John, but if the mainstream media just did it's job I wouldn't have to put on my tin-foil hat everyday and listen to AM radio. I'm glad you were able to see the Frank piece on TV which has now most likely been spiked.

Although my tin-foil hat currently recieves only AM, I'm considering an XM mod for when the "fairness doctrine" (which will only applies to radio) becomes enacted.

EDIT: Responding to an ssltech post I missed:

If I'm reading this correctly, it says "I'm proud ('honored') that I'm pissing people off".

That's not my intent at all. I wouldn't be proud of that either. But the anger and name-calling I'm seeing is indicitive that many of you are emoting and unwilling to rationally consider alternative viewpoints not your own. The sky is not falling. It's just a bump on the head.

I prefer that each of you not be angry. I want all of us to be happy and succeed. The sooner each of us stops blaming someone else for thier misfortune the sooner each of you will be able to improve your own circumstance. This anger is not healthy. Hopefully I'm providing a means for each of you to vent that rage. It ain't healthy dude. I'd rather you not have it, but I may be doing you a service - long term - by getting it out.

 

[ENS Audio]

[quote author="JohnRoberts"]Once again the conspiracy theories.[/quote]

The only conspiracy theory is the "bi-partisanship" conspiracy, Im still surprised to how people dont see that there isnt really any sort of "partisan politics" they're more or less of one party..the difference is to how they want to spend peoples money :grin:

 

[Svart]

The sooner each of us stops blaming someone else for thier misfortune

Unfortunately, everything and everybody is related in some form or fashion. We all pretend to be somewhat self-sufficient but it's farce at best. I was thinking today while I was at the home-improvement store of choice, what IF I were to lose my job? I work in high tech which is usually pretty hard hit when recessions/depressions hit. Everybody kinda stops buying things they don't need and those companies cut down their workforce.

Lets say my savings/severance becomes exhausted while looking for a new job in a "recession" and now I can't pay for my house anymore. What now? I thought about what the conversation would be if I called my mortgage company and told them what was going on. I'm sure their reaction would be one of apathy in this time of high foreclosures. I'd probably simply be foreclosed on too. As a side note, there are 5 houses for sale on my street. ALL of which were for sale when I bought my house.. Nobody even looks at them.

So I thought it was interesting that I would try to work something out with the mortgage company but they would likely not care. I also thought it was interesting that the whole "mortgage crisis" is their fault as well. I don't care that a number of bumbling idiots in washington don't know how to deal with money. They've been screwing it up for decades and I'm sure they'll keep screwing it up forever. It's the fault of the companies looking for a quick buck at the expense of the regular person and simply not being moral and looking for honest business.

So IF I lost my house due to a recession, but the recession is due to the "mortgage crisis". Who is at fault? It would be the mortgage company's fault that I lost my house. Not mine. I have a conventional 30 year mortgage and I pay less than a lot of people do per month because I bought a foreclosure and fixed it up myself but it still doesn't make me feel any better when the house two houses down got foreclosed on a couple months ago.

 

[JohnRoberts]

[quote author="ENS Audio"][

I think that you're only getting whats some people refer to as a "half truth" which is common among both Lib and Conservative pundits when they are citing articles or giving out information under the various mediums of communication. If you dont mind me to ask, what is your source of information to where you found out about (all Dems) being apart of Fannie / Freddie???

I am just curious...thats all[/quote]

I'm not big on searching down videos, but this report from the dreaded Fox news offers a timeline on the lead up to the F & F conservatorship that puts it in some perspective.

http://www.youtube.com/watch?v=3QBRIsCkGQ0&feature=related

No doubt Republicans supported F & F early on, but Fox reports a party line Democratic stand to resist clamping down on excesses for the last few years.

This is slightly different than the version I heard (and was repeating), that the bill didn't even get out of committee. So I stand corrected on that. Similar result though, the bill was never voted on by the full congress.
-----
Here's a clip more recent that a few years ago with Barney Frank talking about F & F

http://www.youtube.com/watch?v=OisVZFSx3Lo

Near the end of this clip is Barney Frank in July of this year saying F & F are solid going forward.


JR

PS I sold some right around the time Frank said it was OK... Anybody who bought based on his judgement, lost a bundle.

 

[nickt]

There's a book called "Liars Poker" that describes Salomons in the 1980's in the leadup to the 87 crash. It talks at one point about how government is lobbied to allow securitization of mortgages and opening up of the funds in "Thrifts" to the investment banks. Politicians of any colour are/were keen to support (and be seen to support) "home owners".

The whole mortgage backed securities industry started in the 80's with Salomons. All the wierdo instruments pilloried today have been in play since then (15 to 25 years). Their existance spans Reagan, Bush 1, Clinton and Bush 2. They predate Greenspan.

Subprime lending is a newer take on MBS's (late 90's) but given the power of the industry I doubt it would have made any difference if Clinton had been Bush or Bush had been Gore. It would have happened.

Greenspan got it wrong. The FED was the independent regulator and US interest rates were too low too long. Ratings agencies had a hidden conflict of interest and speculation had replaced productive investment because a quick buck today is always more attractive than a moderate return tomorrow.

There's an ultimate cause to the mess but its systemic in nature. The Asian crash, the Russian crash and Techwreck all played out without bringing the whole system down - but they could have if conditions had been right.

Something I've only seen in a dodgy business blog I read may be the herald of worse things to come. The Baltic Dry freight rate index has apparently fallen from 11,900 to 885 as part of the meltdown. An indication of the fall is a CapesSize vessle (I have no idea how big this is either) now only costs about $6400 per-day for a voyage (down from about $235,000). As a consequence vessles are being left idle because they are too expensive to sail.

This is scary stuff but much less sexy than home owners being foreclosed. I wonder if we'll hear more about it over time?

Edit: Ha! just found the link.
http://www.businessspectator.com.au/bs.nsf/Article/The-end-of-deflationary-trade-KWREY?OpenDocument

 

[PRR]

> The Baltic Dry freight rate index has apparently fallen from 11,900 to 885 as part of the meltdown.

Part of meltdown? Or flip-side of an anomalous spike?

Looks like it was $1,000-$2,000, spiked, spiked higher, and then rebounded.

http://investmenttools.com/futures/bdi_baltic_dry_index.htm

The index is bulk cargo, generally raw materials not finished goods.

I interpret that we had a few busy years when shippers would pay whatever for the limited supply of ships. The drop in 2006 suggests that the rise in 2004 incited ship-building; takes 2 years to build these. There is another rise in 2007; if that incited more ship-building those ships are coming online now. Meanwhile demand has slacked, and this month maybe nobody wants to move anything until they find funds.

> a CapesSize vessle (I have no idea how big this is either)

Originally "too big to pass the Suez Canal". They ran around the Cape of Africa. BIG. 150,000 long tons of deadweight. Some now pass Suez. Mostly coal, ore, and other commodity raw materials.

> they are too expensive to sail

Wikipedia says "851 points. These low rates move dangerously close to the combined operating costs of vessels, fuel, and crews." So if ~~850 is near break-even. 11,900 was making loot by the ship-load. Apparently for a while cargo consigners were willing to pay >10 times actual cost to get their ore moved. Just as you might pay $400 for "$40" concert tickets, if the show sold-out unexpectedly. OTOH, you might get "$40" tix for $10 if nobody likes the act.

"The supply of cargo ships is generally both tight and inelastic — it takes two years to build a new ship, and ships are too expensive to take out of circulation the way airlines park unneeded jets in the California desert. So marginal increases in demand can push the index higher quickly, and maginal demand decreases can cause the index to fall rapidly."

1,000 would be a nice price. 10,000 was a fluke. 800 is the rebound.

"Too expensive to sail"? Yes, but expenses don't stop if you don't sail. They don't call it a "mortgage" but projects this size are "financed" one way or another, and somebody expects to get money every month. This month, many money-shops NEED the check, to cover all the non-paying home-loans they put on the books. True, they know things are tough; true, if they expect $1,000 and you show you only got $800, this month they will take the $800 and charge the $200 to future debt you can pay (with interest). Some outfits may be wise enough to make the hard decision to park or scrap some less-good ships so other ships can get more work.

Unless somebody WAY overbuilt (which is quite possible), the work is there, it is just stalled. We can go a week or a month without a new car; "we" can't go 6 months without new cars and other goods. There was a slump around 9/11 2001 (in part because the US stopped buying cars and other coal/ore products), and then 2 years later the index quadrupled. So in context of a 20-year ship-loan, one bad month or year is a drag, should not be a disaster, and may turn-around to a bonanza.

 

[nickt]

PRR - do you actually know everything or does it just look that way!! :grin: :grin: :grin:

I hadn't thought to chart this baltic dry thingy. I wonder what Alan Kohler was on about in his article. He's not really a guy with an agenda.

Edit1: two sides to every story

So the shipping news—at least as measured by the BDI—is largely good. Even better, it may be a sign that China's trade deficit may be declining. The downside: China isn't sucking up raw materials in vast quantities from the United States. (We export grains and soybeans to China, but not coal or iron ore.)

The above from http://slate.msn.com/id/2090303/ sounds good for the US but really bad for us commodity exporting Aussies - probably Kohler's point.

Edit2: looks like this article is talking about 2003 so much less relevant... sigh...

cheers
Nick

 

[PRR]

> I wonder what Alan Kohler was on about in his article.

Reading further: he says we are going to stop buying cars made in China and go back to making cars (and other products) made in the US, or at least not so far away.

Which is BS.

Our rush to export production (or import deflation, his view) may become less rushed. Though I doubt it. The world HAS changed this decade and it can't just change back.

He's gotta fill a page a day. He surely argues one side today and another side next week/month/year. If readers read every day, this is good teaching: they digest one side at a time, and long-term they get a good all-round view. AND it is the easiest way to get something exciting every day.

Interesting he says financiers are foreclosing on ships. What do you do with a ship? It isn't worth any more to a banker than a shipping company, actually a lot less. At least I see in the US, bankers turn valuable but slow-paying occupied houses into empty decaying houses. They often list them for sale at "normal price" and don't go out and push the product. Yes, there are some low-low prices and "good bargains", but a lot of negligent house-holding. True, long-term, these ships (and undecaysed houses) will turn-around and be valuable again. If I thought today's breed of banker had an eye on the future 5 and 10 years out, it would be good to own these items when the market rebounds.

 

[nickt]

[quote author="PRR"]If I thought today's breed of banker had an eye on the future 5 and 10 years out, it would be good to own these items when the market rebounds.[/quote]
I work in this industry ("in technology" he said ducking behind a barrel as knives flashed). I can assure you they consider the 5 year or 10 year RATEs "right now" but their attention span and foward thinking is limited to micro seconds.

I followed a couple of other links (think it might have been from the Slate but can't recall) and ended up at 'Lloyds List'. The news there is pretty much as gloomy as Kohler's.

Edit: actually I've seen assets run down for no sensible reason and worse. In the 70's my state government kicked sqatters out of a bunch of vacant government owned houses. They then sent workmen round to remove the floors. Unfortunately they removed the floors from some real peoples homes as well. Everyone had a nice time :roll:

 

[ClaudeTucker]

Here's an interesting EDN.comment in the October, 30th issue of Electronic Design. It's authored by Rick Nelson:

http://www.edn.com/index.asp?layout=articlePrint&articleID=CA6607200

You’re all aware that a relationship exists between the theories of economics and electrical engineering. As the economist Charles C Holt has written with regard to his collaboration with economist AWH Phillips on control theory, “We started corresponding in the summer of 1956 about bringing the tools of operations research and electrical engineering to bear on improving economic stability.” Phillips, Holt continues, “had already published several articles applying the tools of electrical engineering to the stability of single-loop economic models,” and he goes on to discuss the stabilization of economic systems incorporating multiple loops and control variables

 

[JohnRoberts]

As usual PRR gets it right...

It's always instructive to look at longer term charts to see where sustainable prices should be, and how supply/demand volatility has distorted things in the short term. Since the only argument these days is about how long the recession will be (longer than recent ones), the Baltic freight index is getting slammed by the confluence of world wide economic softness reducing raw material demand, reducing finished goods demand, and new build coming on line... a triple whammy.

Perhaps a good contrarian investment opportunity to buy shipping companies now or soon as they will surely be beaten down mercilessly. Just pick one that will survive since bankruptcy tends to scrape off common stockholders.

I've heard anecdotal reports of crude oil tankers sitting full or sailing in circles, waiting for those prices to recover (as they surely will from here). That may not even be in the "dry" index.

I perceive some movement away from free trade but the horse has left the barn for major US manufacturing a long time ago, and is nowhere to be found. The question these days is who will be the new low cost provider after China gets westernized (Africa?) ?

JR

 

[nickt]

JR/PRR,

The interesting thing about the Baltic chart is its only for the 2000's. Wonder what it would look like over 20 years? Perhaps cycles would be seen. I wonder when the "rise" of China occured? I'm guessing over the last 10 years but my direct knowledge of offshoring is with India and Eastern Europe. The early 2000's represented a recession (did it apply to shipping?). Perhaps the big price jumps were China going on the boil? The precipitous fall? China going off the boil? No idea.

I perceive some movement away from free trade but the horse has left the barn for major US manufacturing a long time ago, and is nowhere to be found. The question these days is who will be the new low cost provider after China gets westernized (Africa?) ?

Even more so for Oz as it happened in the late 70's early 80's. We're a nation of warehouses and salesmen!

I'd bet South America gets a run before Africa now most of the dictators have left the building. In the end the "low cost" providers will be exhausted. Personally I can't see why a factory full of robots would be cheaper in China than Oz or the US. Presumably as transport and labour become more costly manufacturing work will move closer to markets. But who will be the markets? Will China end up offshoring to the US/India/Europe? :roll:

cheers
Nick

 

[JohnRoberts]

I recall that Alps was assembling pots in S.A. (Brazil) in the '90s. Since then I believe they're in China now. Lately S.A. countries have been cutting deals with China trading natural resoiurces for DVDs or whatever. Brazil is expanding it's agricultural capacity for exports.

Some big car companies have already started building plants in Africa.. perhaps early but their time will come.

JR

 

[PRR]

> the Baltic freight index is getting slammed by the confluence of world wide economic softness

I would argue that it isn't "slammed" (bad); that 11,000 represents an extreme shortage of shipping capacity. Such shortages tend to self-correct, are not long-term situations. But there's 2 years of phase-delay in this loop. And there are "many" other loops (too many for Holt/Phillips to model in electrical terms).

-------------

China has gone wild building new production. Over time, as the Chinese collect and demand more income to buy the things they make, labor costs should rise, and capitalists should seek cheaper labor. Always has, always will. It could come to one Mongol pushing the switch on a robotic factory making all goods for the whole world. But I asked a friend who has toured China, and he thinks we will "never" run out of Chinese willing to be exploited for small cash. It is a huge country, lots of people. Rich in total but very poor per capita. I think the Africans are not going to be caught-up in this economic shift, not for decades. It also undercuts efforts in Brazil to foster domestic production and get out of the cash-poor farming racket.

> Oz ... We're a nation of warehouses and salesmen!

That's not necesarily bad. In 1776, the americal colonies produced timber and rum and tobacco for English brokers who sold to the world. In 1860, the southern US produced cotton sold through nothern US brokers to the world. Brazil grows coffee and other crops, but global sales are out of their hands. In each case the brokers end up with the bigger slice of the pie. In '76 and '60, it seemed worth going to war over (with mixed results). That may or may not be fair. But Marx was wrong: the means of production aint worth much, distribution is where it's at.

 

[nickt]

[quote author="PRR"]But I asked a friend who has toured China, and he thinks we will "never" run out of Chinese willing to be exploited for small cash. It is a huge country, lots of people. Rich in total but very poor per capita.[/quote]
There is a generational change coming due to the "one child" policy. All the "little emporers" and "little princesses" are less hungry than their parents for wealth from hard work. My company is having issues getting native chinese employees in china because the young graddies don't want to work!

My understanding is that the US built for the local market THEN exported surplus. Export was all gravy because all costs were covered by the home market. China is building goods many Chinese can't afford to purchase and exporting most of them. That will have to change sometime.

I think it will happen faster than your friend thinks.

 

[bcarso]

In spite of how cheap the labor seems I agree with nickt that things will change more quickly than we are likely to anticipate.

In terms of where you make stuff:

I've already begun to see some speculation about cost comparisons that include time-to-market, reputation/reliability/initial quality, cost of the near-endless travel, effects on these travellers' health and all the wasted time---when you add all these in, domestic manufacturing with high-tech equipment and responsive*, English-speaking (or other native language) work forces begin to not look so expensive.

Another remarkable thing is afoot: the Chinese companies don't seem to know how to ask for more money when they are at break-even and sinking. They just many times abruptly disappear! This has happened to some suppliers to BIG Japanese and US corporations recently, to said customers' disbelief and extreme consternation.


*James Reedy has a way with phrases---after trying to get things moving in China, out of frustration he refers now to "the Chinese Foot Dragon". :razz: