Let's Play "You Figure it Out"!

I had to stay late at work so the traffic would have been terrible and thus the wife and I went out on the town of Cambridge for a while to burn some time. Home late but I wanted to cover a few things. Let's play a game and I hope the spell check is working!

Let's Play "You Figure it Out"!
I actually had a post in mind today after I saw an article but I am out of time to do a full review. Given that, I know my readers are the best out there so I think you can figure a few things out for yourself.

First, the section in question comes from a review of a John Hussman piece by Pragmatic Capitalism where Hussman writes:

The global financial system continues to be unsound in the same way that a Ponzi scheme is unsound: there are not enough cash flows to ultimately service the face value of all the existing obligations over time. A Ponzi scheme may very well be liquid, as long as few people ask for their money back at any given time. But solvency is a different matter – relating to the ability of the assets to satisfy the liabilities.

Regular readers may remember a missive I wrote a while back which stated:

It is a strange phenomena at work here. Unless a major world event occurs where there is a scramble for hard assets and hard money the US will continue to get away with this stuff. I actually have a fleshed out theory on this big picture wise, but I do not want to be called a conspiracy nut. If interested, email me and I will serve it up!

And of course I was saying what Hussman did, as long as nobody needs all the cash up front, this game can go on. If they do, it's over. See, I am not crazy! Well, at least not about this! Yes, this is an Illusion of Prosperity ripoff job!

Now to the game.

I have made the argument time and again that it is policy to keep blowing bubbles and hope it works. It is not more complicated than that. Don't believe me? Well, you figure it out! Here is what Brian "The Potato" Sack and then John Snow had to say about FED policy of supporting bubbles, I mean "asset" prices:

The idea behind quantitative easing is you buy government paper that’s held by financial institutions or individuals. And then they have the money. And then they go out and buy some other financial assets, stocks. And they drive up the value of those other financial assets so we get an increase in the value of financial assets which means an increase in the value of lots of peoples’ household wealth. And the idea is if household wealth goes up, then that will be a spur to spending.

We will side step the idea that QE is a mere "swap", the guys running the show think this is the way it works. I think you can figure it out from here what the "plan" is.

Next up, I have written plenty that a monster government backed housing bailout/black hole is in the works. Everyone wants results immediately but some things take time. A 2 trillion dollar hole takes time to set up. We may be there. I submit some quotes/references and you figure it out!

Via Naked Capitalism:

The next question is “what does this mean for MBS investors?” If you are a Fannie and Freddie investor, there will probably be no obvious consequences, even thought there ought to be. The government is not going to want to raise doubts about the integrity of such an important market. Servicers will continue to pay advances on delinquent accounts.

Next!

Via Zero Hedge:

Ultimately, if these issues do in fact escalate, the Administration may try to broker some sort of settlement. If such deal brokering does take place, Levitin believes that “some payment” will be exacted from the lenders and servicers. The Administration could bargain for more mortgage principal write downs." In other words, the endgame will likely end up being the extraction of material concession from the banking syndicate, in the form of systemic mortgage writedowns, with Obama's blessing, which will likely put the 25% of homeowners who are underwater on equal footing with the other 75%. It may turn out that this was the plan all along. And people naively wonder why banks have hundreds of billions in cash stashed on the sidelines. . .

Leave aside the Obama jab (like McCain would have been different??) the matter at hand is who pays going forward for all of this. I trust you can figure it out!

Have a good night.

Still Waiting

The season is definitely changing here. Today was hot and humid, around 85 degrees until a cool wind just moved in and it will be dry and 50 degrees tonight. September is always a fine month up here, but you cannot stop the fall from rolling in. Luckily I have ordered an acorn picker upper tool that was suggested a couple years back but I never got around to getting it. The acorns were terrible this year.

Blog Title Selection
When I make my rounds through my reading list I always wonder how the writers selected the names for their blogs. Some make sense, others not so much. I spent a solid 15 minutes coming up with the blog title Economic Disconnect a few years ago because I felt it was the perfect description of the financial world back in 2007. I guess Oblivious and Stupid would have worked, but I was trying to be more subtle.

I will look around and see if the terms "economic disconnect" get used in main stream press articles, but it is few and far in between. My friend Mark who writes The Illusion of Prosperity has had his title used often and today even by the president himself (a commenter left the link):

"The idea was that if we had blind faith in the market; if we let corporations play by their own rules; if we left everyone else to fend for themselves, America would grow and prosper.
For a time, this idea gave us the illusion of prosperity. We saw financial firms and CEOs take in record profits and record bonuses. We saw a housing boom that led to new homeowners and new jobs in construction. Consumers bought more condos and bigger cars and better televisions.
But while all this was happening, the broader economy was becoming weaker."

Epic WIN! For another see here.

Electric Cars need to Make Noise
I do not want to get into some environmental (air pollution or sound pollution or any other) debate here. What I did want to talk about is how deadly silent electric cars and hybrids are when they are on full battery. I mean, you can barely make anything out! It is a little creepy. I find this an issue in the crazy cramped streets of Cambridge when I need to take a turn and because there are so many cars (all SUV's, just what one would expect from city dwelling liberal hippie hypocrites by the way) parked all over the place you cannot see around corners.

What I do is try and see the best I can, and I roll down the window to listen for a car. These dang things make no noise! No real close calls as yet, but I do think about it. The following article offers a solution:
ECTunes solves silent electric vehicle "problem" with directional noise system
They bring up some other points about car noise. I am all for this!

Still Waiting
I guess with a market that seems to do the most it can to frustrate the most amount of players I should not have been surprised by this week so far. I thought we would see some direction or larger volume but nothing but the same old market. Up one day big, down the next all at the open. One day the Irish banks will crash the system, the next they make loans to themselves in a show of liquidity and all is well. I am still waiting for something to happen.

We did get more baby stimulus ideas from the president today, but any infrastructure spending will not create jobs but will be used by the states to pay their own existing employees to do more wasteful work. At 50 Billion, that is not even a rounding error anymore.

For some reading material for a slow middle of the week, I offer:

Nanowire Coated Cotton Cleans Water by Zapping Bacteria to Death
Illness-inducing bacteria, meet nano-engineered cotton–and a quick death. Researchers have created a new “filter” that zaps bacteria with electric fields to clean drinking water. They say their system may find use in developing countries since it requires only a small amount of voltage (a couple of car batteries, a stationary bike, or a solar panel could do the job) and cleans water an estimated 80,000 times faster than traditional devices.

Instead of trapping bacteria in small pores like many slow-going traditional filters, the cotton and silver nanowire combo uses small electric currents running through the nanowires to kill the bacteria outright. In a paper to appear in the journal Nano Letters researchers say that 20 volts and 2.5 inches worth of the material killed 98 percent of Escherichia coli in the water they tested in their lab setup.

The authors argue that the filter’s silver nanowires and carbon nanotubes are cheap; the small amount of silver required makes its expense “negligible,” coauthor Yi Cui says in a press release, and the group chose to use cotton because of its abundance.

And it is not robotic! Seriously, some argue the next war will be fought over water and not much water purification work has been done using the newer technologies....yet.

Making Plastics out of Switchgrass Plants
Metabolix Inc. Creates a 100% Biodegradable Plastic
This is a local company that has made strides using natural products for polymer science. For more color you can try out this review paper:
Advances in the synthesis and extraction of biodegradable polyhydroxyalkanoates in plant systems – A review
NOTE: No position or affiliation with the companies or technology listed. I hold physical silver and a paper position in SLV.

Rich exoplanet system discovered
These new finds are tantalizing!

At long last, we find out what exactly the cargo was that Han Solo had to dump that got him in all the trouble with Jabba the Hutt. Skip towards end for the hilarious finish. Ah yes, Darth Sidious never fails to settle a score.

Have a good night.

Monday Short and Sweet

Home very late so not much time to post.

Economic Disconnect 6 Months of Trading
A while back I posted a trading idea about "stomach stocks" and I highlighted Hormel Foods (HRL) and Campbell's Soup (CPB). The original post can be seen here from September 8, 2009. I opened positions in both HRL and CPB on September 9, 2009.

A little further back in June I posted some trade plans concerning GLD, SLV, PAAS, and SPY. So how have the past 6 months been for me?

HRL = +5%
CPB = +7%
GLD = +19%
SLV = +18%
PAAS = +8%
SPY = -2% (I was stopped out, but this one would have ran had I kept it!)

Please note that I have what I refer to as "core" holdings of both gold and silver via various channels that I wish not to share details about.

My only loser was the SPY buy as I set my stop very tight because I did not even want to play the general market on principal.

Not a bad 6 months, with only 1 loser. I hate losing money trades. I would rather play a Beatles tune on Friday night than lose money!

I have a good chunk of my portfolio in cash right now. I am not making any changes to the positions noted above save setting stops higher than they were previously to lock in some very nice gains should things change. I have been outpaced by the general S&P 500, but I refuse to trade in the fantasy land that is the general stock market over the last months.

How have you all been doing? No need for fine details, but what has been working? What has not?

This is a short holiday week so I do not imagine too much heavy duty posting. I will probably check in with more fun related posts to lighten things up.

For a chuckle I would ask you to check out Stagflationary Mark's "Illusion of Prosperity" picture-gate scandal where a photo on his site of his own dog was lifted by another blogger without asking. Not a huge deal in the scheme of things, but annoying for sure:
Honey's Popularity Rises!
Awesome.

Have a good night.