fabijo's account talk

[fabijo]

As Rates Race to Zero, Printing Presses Gear Up
http://www.cnbc.com/id/28193601

Rates won't likely hit zero Tuesday, but this could be unavoidable in the near future, according to strategists and market experts.

Buying Treasurys would be the biggest weapon that hasn't been deployed yet, as such a policy means the Treasury could pump into the economy as much cash as it needs.

"There's no limit to the amount of money that the Fed can print and Congress can spend," Ashworth said.

But for some, that's a scary thought, as the amount of U.S. government debt is already staggering.

"Nobody really knows how these policies will work out," Stoeferle said. "If it were another country, the U.S. should probably declare bankruptcy."

 

[fabijo]

Since we've had the trade restrictions, I haven't been even checking out the monkey to see how it'd be doing. Well, I just ran the numbers for this year. Looks like I'd be down about 43.7% following that crazy monkey!!

 

[nnuut]

You know Yer Monkey is only good in an UP MARKET, but then he's really GOOD! In this Bear Market just use him as a centenarian indicator.

 

[fabijo]

Definitely. Maybe I'll learn one day to actually follow some system. By the time I decide to, I'll be on my death bed.

 

[fabijo]

I've mentioned Prosper.com before. Here's the latest with them. I've made 10 small loans through them, all of them are current and averaging 18.64% interest rate. For the past few weeks, nobody's been able to loan money. Here's a copy of what it says on their site:

Prosper Filing Registration Statement; Enters Quiet Period

Prosper has started a process to register, with the appropriate securities authorities, promissory notes that may be offered and sold to lenders through our site in the future.

Until we complete the registration process, we will not accept new lender registrations or allow new commitments from existing lenders. If you're an existing lender, your current lender agreements will be unaffected; your existing loans will continue to be serviced; you'll be able to track and monitor your loans; and you'll be able to withdraw funds from your Prosper account.

If you're a borrower with an existing loan, you will continue with your current borrower agreement and be unaffected by the registration process. If you're a borrower seeking a loan, you will still be able to create a new loan listing, which we will endeavor to fulfill through alternative sources. As the appropriate securities authorities may consider a new loan listing to constitute the offer of a security, we are unable to post new loan listings on our site until our registration statement becomes effective.

A successful registration can take several months, but we assure you we will do our best to move forward as quickly as possible. Until this process is complete, we're required to be in a quiet period and will be unable to respond to press, blogger or other inquiries about Prosper or the registration filing until it becomes effective.

We apologize for any inconvenience this may cause, and want to thank you in advance for your understanding and support.

 

[fabijo]

1 out of 3 banks will disappear next year:

http://www.cnbc.com/id/15840232?video=975644719&play=1

 

[fabijo]

Some good stuff from Peter Schiff - the guy that was laughed at on CNBC, MSNBC, and Fox News when he kept saying a couple years ago that the wealth we're experiencing is fake and not sustainable.

The Fed’s Bubble Trouble
http://www.europac.net/externalframeset.asp?id=15132

A few weeks ago when the Fed announced a strategy designed to bring down long-term interest and home mortgage rates through unlimited Treasury bond purchases, government debt staged a spectacular rally. To the unschooled market observer, the spike may be difficult to understand. After all, why would the value of Treasury bonds rise while their underlying credit quality is deteriorating faster than Bernie Madoff’s social schedule? The move is actually a perfect illustration of the tried and true Wall Street strategy of “buy the rumor and sell the fact”.

If it is well known that Fed will be a big purchaser of Treasuries, those buying now will be positioned to unload their holdings when the buying spree begins. If the Fed pays higher prices in the future, traders can earn riskless speculative profits. If the traders lever up their positions, as many are likely doing, even small profits can turn unto huge windfalls.

The downside of course, is that all of the demand for Treasuries is artificial. Treasuries are now in the hands of speculators looking to sell, not investors looking to hold. These players are analogous to the mid-decade condo-flippers who flocked to new developments for quick profits. They did not intend to occupy their properties, but rather flip them to future buyers. Once these properties came back on the market, condo prices collapsed, as developers were forced to compete for new sales with their former customers.

This is precisely what will happen with Treasuries. Just as the U.S. government issues mountains of new debt to finance the multi-trillion annual deficits planned by the Obama Administration, speculative holders of existing debt will be offering their bonds for sale as well. In order to prevent a complete collapse in the bond prices the Fed will be forced to significantly increase its buying.

However, since the only way the Fed can buy bonds is by printing money, the more bonds they buy the more inflation they will create. As inflation diminishes the investment value of low-yielding Treasuries, such a scenario will kick off a downward spiral. But the more active the Fed becomes in their quest to prop up bond prices, the bigger the incentive to hit the Fed’s bid. The result will be that all Treasuries sold will be purchased by the Fed. But with the resulting frenzy in the Treasury market, and with inflation kicking into high gear, we can expect that demand for other debt classes that the Fed is not backstopping, such as corporate, municipal and agency debt, to fall through the floor, pushing up interest rates across the board.

In order to “save” the economy from these high rates the Fed will then have to expand its purchases to include all forms of debt. If that happens, run-away inflation will quickly turn into hyper-inflation, and our currency will be worthless and our economy left in ruins.

To avoid this nightmare scenario, the Fed should pull out of the bond market before it’s too late and let prices fall to where real buyers, those willing to hold to maturity, re-enter the market. Given how high inflation will likely be by the time this happens, my guess is that long-term Treasury yields will have to rise well into the double digits to clear the market.

But we should know that the bursting of the bond market bubble will have even more dire consequences than the bursting of prior bubbles in stocks and real estate. Significantly higher interest rates and inflation that will result will severely compound the current problems. Imagine how much worse our economy would be if we faced double digit interest rates? In addition, not only will homeowners be confronted with record high mortgage rates, but the Government will be staring at trillion dollar annual interest payments on the national debt, making interest by far the single largest line item in the Federal budget. Just like homeowners who relied on teaser rates, the Government will face a similar problem when all its low-yielding short-term debt matures.

The grim reality of course is that when the real estate bubble burst the Government was able to “bail-out” private parties. However, when the bond market bubble bursts, it will be the U.S. Government itself that will be in need of the mother of all bailouts. If U.S. taxpayers or foreign creditors are unwilling or unable to pony up, and if the nightmare hyper-inflation scenario is to be avoided, default will be the only option. If misery really does love company, Bernie Madoff’s clients might finally find some comfort.

 

[fabijo]

Look at Ben Stein saying that everything will be ok. He also argued with Peter Schiff a couple years ago when Peter Schiff said the housing bubble will burst:

 

[fabijo]

The World Won't Buy Unlimited U.S. Debt
by Peter Schiff
http://online.wsj.com/article/SB123266988914308217.html

Barack Obama has spoken often of sacrifice. And as recently as a week ago, he said that to stave off the deepening recession Americans should be prepared to face "trillion dollar deficits for years to come."

...

What he might have said was that the nations funding the majority of America's public debt -- most notably the Chinese, Japanese and the Saudis -- need to be prepared to sacrifice. They have to fund America's annual trillion-dollar deficits for the foreseeable future. These creditor nations, who already own trillions of dollars of U.S. government debt, are the only entities capable of underwriting the spending that Mr. Obama envisions and that U.S. citizens demand.

These nations, in other words, must never use the money to buy other assets or fund domestic spending initiatives for their own people. When the old Treasury bills mature, they can do nothing with the money except buy new ones. To do otherwise would implode the market for U.S. Treasurys (sending U.S. interest rates much higher) and start a run on the dollar. (If foreign central banks become net sellers of Treasurys, the demand for dollars needed to buy them would plummet.)

In sum, our creditors must give up all hope of accessing the principal, and may be compensated only by the paltry 2%-3% yield our bonds currently deliver.

As absurd as this may appear on the surface, it seems inconceivable to President Obama, or any respected economist for that matter, that our creditors may decline to sign on.

And to quote Proverbs 22:7:

The rich rules over the poor, and the borrower becomes the lender's slave.

 

[fabijo]

The Global Financial Pyramid Scheme Explained:

http://www.guardian.co.uk/business/...log/interactive/2009/jan/29/financial-pyramid

 

[budnipper1]

Interesting reading, and it linked to another article
which seemed to complement your signature nicely.

Debt has become a drug. Withdrawal will be painful
This week's reports showed how firmly the addiction had taken hold.
We now have to build a new kind of economy.

http://www.guardian.co.uk/commentisfree/2009/jan/30/uk-economy-debt-credit-crisis

______________________________________

The Global Financial Pyramid Scheme Explained:
http://www.guardian.co.uk/business/...log/interactive/2009/jan/29/financial-pyramid
-The rich rules over the poor, and the borrower becomes the lender's slave. -

View attachment 5615

 

[tsptalk]

Look at Ben Stein saying that everything will be ok. He also argued with Peter Schiff a couple years ago when Peter Schiff said the housing bubble will burst:

You're right... Ben said, "Subprime is a blip" August 2007...

http://www.youtube.com/watch?v=RYX1AgEV0vo

 

[budnipper1]

You're right... Ben said, "Subprime is a blip" August 2007...

Yeah, I remember that... and, you can bet Peter Schiff is saying,
- "Who's laughing NOW". :laugh:

View attachment 5616

Here's Schiff again, more recently.
Peter Schiff January 20 2009 CNBC
http://www.europac.net/Schiff-CNBC-1-20-09_lg.asp

​

 

[fabijo]

Got my 2008 year end statement yesterday. My contributions and my losses canceled each other out, so I basically got 0% last year. That constant buying during every pay check actually softened what should have been a huge loss.

 

[Birchtree]

I always say that dollar cost averaging can be the portfolio redeemer - glad it worked out fine for you. Waiting for the bull to return.

 

[fabijo]

My wife was upset, because she thinks we wasted money by putting it into something that gave us nothing back. I tried to tell her that we are buying shares that will one day be moving up too fast. I said, "So, at what point do you decide to get back in?" I also explained to her that some of the money was from matching contributions. And that if we put $100 less into the TSP, that will only show up as $75 dollars or so in our paycheck.

We then went on to other topics and once again, I can just let the money keep going down the rabbit hole.

 

[fabijo]

ok, now this just seems odd/funny/sad:

 

[fabijo]

If you've got the time, this is a great article on the current economic situation:

http://www.writingshop.ws/html/11th_hour-i.html

Consider this: the $9.5 trillion already committed to the banking industry is more than the cost of all wars America has ever fought. It was reported to be enough to pay off virtually every mortgage in the nation, which would have stopped all the defaults, foreclosures and subsequent pain cold. Sharon Astyk adds: “It could have paid for free health care for every American, cradle to grave for a century. It was enough to build renewable energy infrastructure that could have softened the crisis, to re-insulate our houses, to provide basic food and health care to the world’s poor. The same trillions we were told we didn’t have when it was needed by those who wanted educations, basic medical care, decent shelter, a home, hope, a decent life, but we had a plenty for the banks and the wealthiest people in the world.”

 

[fabijo]

Here's what I'm thinking. If the system is collapsing, then what good is any money? If it's not collapsing, then I'll just keep dumping each paycheck into cheaper shares. Eventually, it'll come skyrocketing up. I've got almost 30 years left to start needing the money - assuming we're still using dollars by then.

 

[Birchtree]

You have the right approach even if it hurts a little - realizing everytime you buy more shares you face further devaluation on the down side. But eventually rational emotion will return to the markets and greed will reign supreme. I'm doing the same thing on both my accounts - many, many dividends due in March. Perhaps I'll finally catch a C fund price under $9.00 for this current cycle - then we buy all the way back up. It's a long way back to $17.54 but hey, that's a blessing if you are concentrating on dollar cost averaging. I may be retired before I see $17.54 again but I'll catch the gains for the next ten years before required minimum distributions kick in.