Wednesday, 12 March 2008

The Bigger Fraud

I'm stealing this title from an email I sent to my brother. We had an interesting exchange today on what's going down. Unlike me, he doesn't need to stay in Holiday Inn Express or play an investment professional on tv, he's smart and has played an investment professional for a long time. Well enough to have retired before he was eligible for any Masters races of any sort. He keeps going back to work, but I digress.

Anyhow, I got to spend a little time getting to know a little bit more about what happened. Here is what I think now: the worst is yet to come. Here is the crux of what I wrote to him:

"On the surface, the corporate interests win again. They f-d up HUGE, didn't understand what their own calculators were telling them, didn't bother to put the eggheaded theorems to the sniff test, committed and encouraged fraud in the lending process, patched up the cracks ('we believe that this will be the full extent of write-downs') long enough to get fatty year end bonuses, and are now unloading the whole crap on the stupid populace, who might become as informed as listening to a news report that says "the markets are back up" and go back to spending the money they never had and still don't.

That's the surface of it. You'd like to think that the Fed isn't as bald-facedly into the corporate hip pockets as the above scenario would have you believe, and that they are operating in a world of better information. Which leads you to the question of "if they have good information about the true landscape of this thing and they've made this terrible a bargain on behalf of what should be their main constituency, what the hell kind of nasty situation is banging on the front door?" A scary question."

So that's what I think. That selling out America was probably the lesser evil, versus what could be imagined as pretty much a total global credit lockdown. My brother thinks that we might actually be half brothers, and that Oliver Stone is my real father, but we agree that Joe American took it in the pants yesterday.

In happier news, I did a very disciplined recovery ride today. A guy from Harley passed me going about a buck twenty down at the point and I kept rolling along. Then Blair passed me doing about a buck twenty and I rolled along. I kept them doggies rolling. I don't think I cracked 200 watts the whole time. Man was I slow. But recovered. Tomorrow I am going to have the bejeesus stretched, poked, kneaded and prodded out of me by the lovely and talented Cary Bland. I hear it's quite a workout, but I'm looking forward to it.

Sorely tempted to last minute it into the 3/4 at Strasburg but I think I will keep my powder dry.

The risotto I'm cooking is probably burnt by now.


Kyle Jones said...

How about those gas prices chuck? Man I heard tonight that the fed is going to cut interest rates again. This is said to weaken the dollar even more, which in turn makes gas more expensive. And that is the short term effects. I can not imagine what that does long term. And I heard on Market Price money(NPR) that gas really should cost something like 70 dollars a barrel but because all of this money in speculative Play and retirement funds are causing it to be more expensive(my understanding is so small I do not give it justice in explaining this). This was said to be most evident with a surplus in reserves. The question I have is if the government is responsible for get us oil how come it is sold by companies. And if it is a resource why the hell is it traded. I know it is a way to make money but at least make some exceptions to what can be bought and sold on speculation. I am done if that makes sense.

jim e said...

A man on a bicycle is more effecient than a bird in flight ... the cure for the addiction? Love your blog. jh

jim e said...

PS. What do you think about my fellow Alabamian ... Jim Rodgers?

jim e said...

Here is what he said according to Trader Bill recently:A Brit friend sent an article from the Times Online (London), yesterday and it is truly shocking as it was about a global fund managers conference in Tokyo and had comments from a panel discussion. Here are is the entire article as TB thinks it is important for you to read:
“Jim Rogers - who co-founded the now closed Quantum Fund with George
Soros - told 750 global fund managers in Tokyo today that, America is
“completely out of control”, there will be a 20-year bull market in
commodities and that prices will be in turmoil.
And he also warned that it “made sense” if global competition for
resources ended in armed conflict.
Mr Rogers told delegates to the CLSA investment forum that the prices
of all agricultural products would “explode” in coming years and that
the price of gold, which hit an all-time high of $964 an ounce
yesterday, will continue its surge to as much as $3,500 an ounce.
Gold would continue to rise, the analyst Christopher Wood told fund
managers, “because it is the exact opposite of a structured finance
In a blistering attack on US monetary policy and the “helicopter cash
drop” responses of the Federal Reserve, Mr Rogers described the
American dollar as a “terribly flawed currency”.
He said that the plan by Ben Bernanke, the Fed Chairman, to “crank up
the money-printing machines and run them until we run out of trees”
had exposed America’s weakest point to her rivals and enemies.
The dollar may have declined recently, he added, “but you ain’t seen
nothing yet”.
Talking to a room almost exclusively populated with Japan-focused
equity investors, Mr Rogers recommended an immediate language course
in Mandarin and a switch into commodities — the second-biggest market
in the world behind foreign exchange.
Mr Rogers said that historic drains on wheat, corn and other soft
commodity inventories have created market dynamics that could lead to
severe food shortages.
The outlook over the next two decades would see prices of everything
from cotton and sugar to lead and nickel “going through the roof”.
Heavily playing down the prospects of a big recovery in Japan, Mr
Rogers said that the country’s demographics — as the fastest-ageing
country in the world — would cause it greater problems and an
ever-diminishing quality of life for ordinary Japanese.
But he also said that other countries — including Britain, Italy,
China and the US — should take note of what their own demographics
would look like without the effect of immigration.
“Japan will be the perfect laboratory for the world to watch how a
demographic crisis plays out,” he said.”
TB hopes you took the time to read it as it calls your attention to major problems facing us and unfortunately we have no leaders capable of dealing with them…especially the slate of Presidential hopefuls. Think any of them would make Jim Rogers, Treasury Secretary, or Energy, or Agriculture?
So if you believe that your stock portfolio can insulate you in this environment you are mistaken.

Chuck Wagon said...

Kyle - Oil/gas and other commodities that are traded in dollars are high because they are traded in dollars. People believe that it will be better to be holding a barrel of oil than a fistful of dollars in the near future so up goes the price. Gold, even more so. Yesterday's oil inventory report put the lie to this whole thing - oil prices are a proxy for how deep people think the dollar will fall.

Jim - Wow. I think Jim Rogers is pretty spot on. I have one old Roth IRA that's in small caps, hammered, too down to sell. Everything else, which admittedly I'm not retiring on any time soon, is in energy-related, commodity-related and utilities related. If the 401k world had let me put it all into commodities I would have. There is no more 'safe diversification.' If you haven't already, click on the "Clusterfuck Nation" link. He regularly talks about armed conflict as a result of resources. Shit, the US has already done it twice quite recently.

Kyle Jones said...

Thanks Chuck with the explaination. What a pretty grim out look with what Jim E posted. I listen to the news and they are so caught up with the now and not the 2-20 year outlook. Reading you blog is pretty interesting. Every day I grow more and more in disgust with the fed chairman.

Since your investments are partially in energy I suppose you own the stock PVX. I have been told to invest in that one because of the high dividend yield.

jim e said...

Here is what I hear ... from the housing bubble blog ... the latest from Mr.Rogers:From CNBC. “Federal Reserve Chairman Ben Bernanke should resign and the Fed should be abolished as a way to boost the falling dollar and speed up the recovery of the U.S. economy, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe Wednesday.”