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  • On 25 Oct 2014 in Republicans, bad for America, mell said:

    Dan8267 says

    I disagree with you that the difference is significant. Libertarians may state in principle that they are for social freedoms, but in practice libertarians are typically Republicans that just don't give a damn about social issues one way or another.

    In any case, the libertarian philosophy that there should be no laws against pollution and that the oceans should be privately owned are bad policies. Furthermore, libertarian economic policies are essentially the same as Republican policies, which do harm the economy.

    Dan, I agree that some of these are important issues that needs to be addressed and fought out should a Libertarian rise to significant power, but I claim that the outcome will still be favorable for this country overall. Nobody and no party is perfect. The problem I have with the so-called progressives which have taken a strong foothold in the Dems is that they don't even get to important topics such as the debt, deficit-spending, the environment, the wars anymore, because they are completely consumed with and enraged by sideshow social non-topics that have absolutely nothing to do with civil rights or civil liberties.

  • On 25 Oct 2014 in Republicans, bad for America, mell said:

    indigenous says

    Peter Schiff indicated that he did 4 hr of video that was cut down to a few soundbytes and completely out of context. It should be no trouble to find the clip. I'm not going to waste my time but this does appear to be his MO.

    Yeah, that was a pretty despicable, but well done hack-job. For example Schiff highlighted the inclusion of somewhat mentally challenged people into the workforce for simplistic jobs at a low salary and they spun it to make him look like he attacked that group, knowing very well that the alternative for those people is to live and work parallel to the "normal" society in special homes and artificial workplaces.

  • On 25 Oct 2014 in It's not the fed, mell said:

    Japan's real wages keep falling, unemployment rising and demand stagnant => stagflation, the result of excessive money printing. Discussing whether hyperinflation arrived or will arrive or not is a sideshow used to distract from the fact that pretty much everybody has woken up to the fact that QE fucks up the economy and that the Keynesian wet dream was just that. Btw. to insinuate that Japan is cheap is laughable as well, it's cost of living is quite high (considering the local purchasing power). It's the Fed folks.. ;)

  • On 24 Oct 2014 in QE 101 tatupu: How Quantitative Easing Contributed to the Nations Inequality, mell said:

    tatupu70 says

    mell says

    Ah but they didn't. Why acquire even more assets at considerable tail risk? Once the Fed removed all the tail risk it was a no-brainer. A house is just one example of such an asset, but one of the important ones since the housing market is where a considerable amount of the fiat money that removed the tail risk went.

    Of course they did. It's easy to account for tail risk in a present value calculation and the wealthy certainly can and do. When the price is low enough, they buy.

    No they didn't - except for our resident clairvoyants. That was the whole premise of the "stimulus". Maybe they would have if the prices dropped more, but by then plenty of my lower-middle class to middle-class friends may have pulled the trigger and bought in. Several were on the fence of buying a house. Now you can say that the Fed signal came to everybody at roughly the same time, but you simply have much less of a window once big money drives up the price because the tail risk was removed.

  • On 24 Oct 2014 in QE 101 tatupu: How Quantitative Easing Contributed to the Nations Inequality, mell said:

    tatupu70 says

    mell says

    Exactly - nobody was buying, except for Iwog of course ;) But when the Fed telegraphed that they are going to flood the place with freshly printed fiat no matter what everybody who had some started buying, the wealthy of course have most at their disposal => huge increase in inequality. It's really simple.

    I'm not talking about buying houses. I'm talking about buying any income generating asset. The wealthy have the means to buy when assets are undervalued and they do. It has very little to do with Fed action or inaction.

    Ah but they didn't. Why acquire even more assets at considerable tail risk? Once the Fed removed all the tail risk it was a no-brainer. A house is just one example of such an asset, but one of the important ones since the housing market is where a considerable amount of the fiat money that removed the tail risk went.

  • On 24 Oct 2014 in QE 101 tatupu: How Quantitative Easing Contributed to the Nations Inequality, mell said:

    tr6 says

    tatupu70 says

    Do you want me to find examples of wealthy folks buying assets during a recession?

    Wealthy really started buying only after Fed started QE.

    Exactly - nobody was buying, except for Iwog of course ;) But when the Fed telegraphed that they are going to flood the place with freshly printed fiat no matter what everybody who had some started buying, the wealthy of course have most at their disposal => huge increase in inequality. It's really simple.

  • On 23 Oct 2014 in Cronyism from the left going to Hollywood, mell said:

    bob2356 says

    What exactly was BRK's direct cds exposure?

    They did have direct exposure, not just through positions, Buffett detailed them as roughly 5 billion. Here's another opinion point with some data if you're interested:

    http://jeffmatthewsisnotmakingthisup.blogspot.com/2008/11/is-buffett-worried-no-but-somebody-is.html

    Nobody can know for sure one way or the other, but the hedgies I am friends/acquainted with were afraid to touch BRK with a 10ft pole back then, and I consider them centainly pro's compared to myself posting on patnet ;) Another interesting question is also what liabilities they could have simply walked away from, which also doesn't seem to have a clear answer to this day.

  • On 23 Oct 2014 in Cronyism from the left going to Hollywood, mell said:

    bob2356 says

    I don't understand this post at all. The blog was about the cost of buying cds on BRK bonds. What does that have anything to do with cds owned by BRK. Go read the comments. You and indeginous both seem to randomly shift between writers of cds, holders of cds, and the objects of cds.

    It was about both, cds owned and their own cds spread. It was a discussion of traders at that time referring to the fact that the market was betting against BRK (as witnessed by the spreads). Regarding the numbers, they are fairly accurate as reported by Buffett himself as net cds exposure in billions (~5 vs ~20 gross). Sure you can say they were irrationally priced, but they are priced as what they are, the market doesn't care whether you think it's rational or irrational and companies have blown up simply from the credit pressure on them and the sell-off of their stock (as debt was called in by concerned parties). It was not meant to prove any financials, which didn't help Bear Stearns as mentioned earlier.

    DavidCayJohnston says

    mell --yet again -- indicates mell does not understand what mell reads. The link mell offers at 2:08 provides no support for his baseless assertions.

    Read the above, you haven't provided any numbers at all, and you are making a lot of assertions yourself ("haven't read xyz...", "I am pretty sure..."). I have to put you on ignore, which I haven't done since that binary guy, good luck riding that FCIC report ;)

  • On 23 Oct 2014 in Cronyism from the left going to Hollywood, mell said:

    DavidCayJohnston says

    @mell - what you wrote its not hyperbole; it is false. World of difference, especially after you doubled down. Facts matter.

    Tell that to the market which though so otherwise back then, and since you believe it to the market. Oh and tell that to Buffett (spelled right this time?) as well who himself said he would/could have crumbled, albeit as one of the last. I didn't know we have another Iwog here. Here, I found something:

    http://brontecapital.blogspot.com/2008/11/berkshire-credit-default-swaps.html

  • On 23 Oct 2014 in Cronyism from the left going to Hollywood, mell said:

    You have not addressed the CDS at all, so what's new? I am all for letting it play out in 2008 and maybe he would have survived, but you cannot seriously disregard the - not only indirect, but also direct - CDS exposure. I am happy though that you have so much faith in the market and advocate for letting it play out instead of using crony bailout policies.

  • On 23 Oct 2014 in Cronyism from the left going to Hollywood, mell said:

    indigenous says

    mell says

    I have given you numbers of CDS exposure that alone could have brought BRK down

    For educational purposes, would you say the same re AIG?

    mell says

    Not only are financial statements often heavily cooked (not much has changed here), the money can escape the closed universe in an instant, for example when a whale trader makes a huge losing bet where thew money ends up in a totally unrelated (and possibly foreign) party and the sudden loss makes them insolvent should they have to pay out insured risk, which then triggers the events we have seen in 2008.

    I read somewhere that this could be said of GE and Jeff Immelt in the repo market.

    CDS are difficult to predict, but I believe that AIG and GE would have ceased to exist before BRK. Just an opinion ;)

  • On 23 Oct 2014 in Cronyism from the left going to Hollywood, mell said:

    bob2356 says

    So you are saying that no can get the information, but lacking the information you can predict that BK would have gone under? How is it your numbers lacking the details are better than anyone else's numbers lacking the details. That's an interesting position.

    The CDS exposure numbers and the way their own swaps traded back then lead me to the conclusion that it was a likely event. Then Buffet himself said something along those lines. Even if not, he would have been severely decimated and certainly not the greatest billionaire investor of all times anymore, just a regular smart guy with ups and downs in the market. By the way, if you want to tag my toast expression as hyperbole, I have no problems with this. But then you should tag ramblings such as "The Fed has nothing to do with the markets/wealth inequality" as mega-hyperbole ramblings of lunatics ;)

  • On 23 Oct 2014 in Cronyism from the left going to Hollywood, mell said:

    The Professor says

    Does anyone know how much of these "CDS", "MBS", and other non-treasury assets the Fed holds? Beside all of this debt, is their ANYTHING REAL backing the "Federal Reserve Note"s I have in my wallet?

    That's exactly the problem. A net CDS number is not worth much. They are assuming a closed financial universe where the counterparties cancel each other out. However that assumes that each of them can pay and that assumption is based on their last financials. Not only are financial statements often heavily cooked (not much has changed here), the money can escape the closed universe in an instant, for example when a whale trader makes a huge losing bet where thew money ends up in a totally unrelated (and possibly foreign) party and the sudden loss makes them insolvent should they have to pay out insured risk, which then triggers the events we have seen in 2008.

  • On 23 Oct 2014 in Cronyism from the left going to Hollywood, mell said:

    bob2356 says

    mell says

    We all don't know if it would have happened without TARP, but the likelyhood was significant.

    That's a long way from BUFFET=TOAST. You are basing this on what information? Any article, research, link, anything at all or just I believe it's true? I haven't seen anything yet that documents how BK would have been taken under by AIG. I was assuming you could supply that since you are so definative it would have happened. I'll read the FCIC report and see what it says.

    You cannot make a 100% sure claim without knowing the exact math, reading 8Ks or 10Ks gives you half the information at best. The FCIC report is not worth much since they are based of the 8Ks and 10Ks. That's where Cramer got his info from when he screamed "buy buy buy Bear Stearns, they are rock solid!" - just before they went belly up. I have given you numbers of CDS exposure that alone could have brought BRK down - why do you think the Fed backstopped them? It certainly is much much much much much more likely that BRK would have gone belly up then it is that the Fed has no influence on the markets.

  • On 23 Oct 2014 in Cronyism from the left going to Hollywood, mell said:

    DavidCayJohnston says

    @mell you really have not read the record on this. Try studying the FCIC report -- http://fcic.law.stanford.edu -- which is very solid and which Congress tossed in the round file or the FCIC autopsy at UMKC in fall 2011.

    B-K has stakes in banks that would have gone poof, but that would not sink B-K as they were but a part of its portfolio. Wild overstatements undermine credibility.

    The disclosures on what share of B-K assets were in institutions with CDS paper are right there for you to read if you just make the effort. The facts do not support your claim.

    bob2356 says

    mell says

    Without TARP => W. Buffet = toast

    Show me the numbers.

    I have neither time nor inclination to do so, I could as well ask for the reverse. Let me be brief, BRKs CDS exposure was roughly 20 billion gross and AIGs roughly 50 billion. Net it was far less of course, however with counterparty concentration risk and the absence of collateral (anybody who by now still thinks banks have significant collateral needs their head checked) the net numbers cannot be trusted. Further there was enormous credit pressure on BRK during that time, leading the stock to trade "irrationally" low (of course there wa nothing irrational about it)and the 5 year swap for BRK went nuts, obviously meaning a lot of people betting on a default within that time-frame. With the open risk with CDSs the market was definitely thinking default. We all don't know if it would have happened without TARP, but the likelyhood was significant.

  • On 23 Oct 2014 in Cronyism from the left going to Hollywood, mell said:

    DavidCayJohnston says

    “Berkshire Hathaway would be gone if not for the unwitting taxpayer largess.”

    Utter nonsense. This shows you do not understand the structure of B-K, its diversified portfolio or its huge tax subsidies (that $57 billion zero interest loan I cited before that keeps growing, its pipeline tax profits, its utilities, etc.).

    We can argue some of the points, but that is utter nonsense. Diversified portfolios and hokey religions are no match for a good amount of CDS blowing up at your side (or in your face that is). Without TARP => W. Buffet = toast

  • On 22 Oct 2014 in How about a Clinton Warren ticket, mell said:

    Blurtman says

    mell says

    I'd support Black, but not Warren. Black has a track record, Warren only hot air.

    I voted for Black in the last presidential election, but he might be seen as a one issue candidate, although an issue that resounds strongly with the majority of Americans. He'd be a dream AG.

    Black and who then?

    I have no idea - Warren as VP could not do much anyways and would be ok as long as Black is president. But if we're realistic it is likely going to be Hillary, so I hope a libertarian Republican will run, win the primaries and beat her. As close as it gets for a fiscal conservative and social liberal. Not holding my breath though.

  • On 22 Oct 2014 in How about a Clinton Warren ticket, mell said:

    I'd support Black, but not Warren. Black has a track record, Warren only hot air.

  • On 22 Oct 2014 in Middle Class Wealth Gone!, mell said:

    It's getting clearer by the day that deficit spending is the main driver of sucking out the wealth of the middle class. The good thing is that more people will come around to finally put an end to this criminal practice of indebting future generations which have no right to vote and using the excess liquidity to fuel rampant crony capitalism - look no further than the housing market. Hey, but our resident patnet experts will have everybody cornered, and that's really all that matters!

  • On 22 Oct 2014 in QE 101 tatupu: How Quantitative Easing Contributed to the Nations Inequality, mell said:

    Call it Crazy says

    tatupu70 says

    I understand

    tatupu70 says

    That assumption

    tatupu70 says

    The author makes

    Finally!!!

    It was about time! I mean, talk about damning evidence.

  • On 22 Oct 2014 in How The Federal Reserve Is Purposely Attacking Savers, mell said:

    "Here's what truth would sound like if I were to re-write Yellen's speech:

    My fellow Americans. Decades of poor fiscal restraint and accommodative monetary polices have brought us to an uncomfortable juncture.

    My intention today is not to cast blame – there will be plenty of time for that later – but to take stock of where we are so that we can all decide on the best course forward, openly and honestly, as should be the case in a democracy.

    There are no easy choices at this point, only a rather poor range of options spanning from somewhat unpleasant to potentially catastrophic.

    The heart of the matter is simply this: the US government has built up an extraordinary amount of public debt, and an even larger pile of unfunded liabilities.

    There’s simply no way for those to all be paid back under current terms. And given recent trajectories in play with respect to economic growth and deficit spending patterns, those debts and liabilities are only growing larger with time.

    Quite simply our choices are these:
    Pay down the debt by taking in more revenue than expenses. This is also known as austerity and given the size of the debts and other obligations, several decades of severe belt tightening would be required. This program would be extremely painful for nearly everybody and would require massive tax hikes coupled to major spending cuts.
    Default on the debts and obligations. This simply means not paying people, investors, institutions and countries what we have promised to pay. Down this path lies the potential for massive destruction of our financial and political systems, so we have chosen to not entertain this path any further than to mention it exists.
    Do nothing and wait for a fiscal and monetary accident to happen. This is a guaranteed disaster that could result in the sudden and permanent decline of opportunity in this country that would be so painful we cannot even predict the possible outcomes.
    Engineer conditions where negative real rates of interest slowly allow the government’s obligations to fall relative to inflation. Over the span of decades this is the least painful route and our country has been down this path before.
    We’ve selected path #4 as the least bad option. Since 2009 our policies have been geared towards #4 and we see no alternative besides staying on that path for as long as necessary. The alternative is the literal bankruptcy of our nation and we cannot and will not allow that to happen. Not on our watch.

    While path #4 is the least objectionable of them all, it comes with its own share of unfortunate consequences and injustices. At its heart, negative real interest rates are an effective tax on savers and those whose incomes fail to keep pace with the inflation we are creating as an overt act of policy. This generalized and widespread loss of purchasing power takes a little bit from everyone, rather than a lot from a few systemically important institutions such as your federal government, which spreads the pain widely, and therefore causes the least disruptions to our daily lives.

    Path #4 has a name: Financial Repression. This policy combines negative real interest rates with various forms of capital controls and tax policy to assure that nobody can evade it.

    Obviously this is not fair, nor is it in alignment with our national narrative of prudence and hard work being rewarded because, truth be told, it rewards the profligate and those who produce nothing of real value but can play the game of high finance well. Yet here we are without any better options before us, and so we reluctantly chose Financial Repression.

    One other distasteful ‘feature’ of the program of financial repression we’ve been putting you all through is that the rich get richer. Until or unless there is a massive change to the taxation and wealth re-distribution programs of the federal government, the Federal Reserve’s program of Financial Repression will continue to deliver an ever-larger gap between the wealthy and everyone else.

    Such is the nature of the compounding function combined with the inequity of who gets first access to the newly created funds we make available in order to drive the interest rate curve into negative territory.

    Are there any risks to this program? Well, the largest of them really needs to be discussed. Financial Repression has worked in the past, but it has only worked because we experienced both inflation and economic growth in equal measures.

    Today, for reasons that we are still studying, neither the wage growth necessary to incite the sort of inflation we need nor economic growth have arrived as we thought they would.

    If economic growth does not return, then the entire program of financial repression could well fail, and fail spectacularly. Everything depends on a return of economic growth sufficient to service the vast increases in debts that will result from the program.

    But if that growth does not materialize? If the world is now stuck in a ‘New Mediocre’ of low growth then one risk is the possibility of a crisis that will be rooted in a permanent loss of confidence in debts of all forms, but government debt specifically. Down that road lie currency crises, and a wide variety of related financial upheavals the final result of which is what most will experience as a massive destruction of wealth.

    We are working hard to assure that these risks are well contained, but you should be aware that they exist

    After all, this is all of our futures that we are experimenting with and we do not have a playbook that we can follow here in 2014. We are in wholly uncharted territory. The exact arrangement of conditions we see across the global landscape is brand new.

    We’re sorry to have to be in the position of engineering Financial Repression, but we felt there were no other options before us and we hope that you agree that a slight yearly discomfort to almost everyone is preferable to a major disruption to our way of life, our political system, and the possibility of worse things.

    Is this fair? No. Was it avoidable? Yes. Is there anything we can be doing differently today? Not that we are aware of. The choices are between bad, worse and utterly terrible. We're choosing the bad path, and we hope you’ll agree that this is the best we can do at this point.

    But you deserve the truth because it’s already completely obvious and available for anybody with access to a computer. Since we are all in this together and we’re all being asked to sacrifice in some way, it's much better that we all agree on the treatment plan.

    It’s not a perfect plan, far from it. But considering the alternatives, this is the best one on the table.

    If you want to make it more fair, more equitable, and with an eye towards building to a future in which we can all share some hope, you’ll need to turn to your policy makers and ask them to work from the fiscal side to correct what they can. Without a profound realignment of priorities, we’ll just get more of the same and, truth be told, eventually more of the same turns into a fiscal and monetary disaster about which nothing can be done except absorb the pain and loss that it will bring.
    Conclusion

    Context is everything. The growing gap between the very wealthy and everyone else is a consequence of Fed policy.

    Whether you decide to be shocked, angry, or scared by Janet Yellen’s recent speech is up to you. Personally, I'm pissed off at being lectured to that falling further behind the super wealthy is my fault for not investing enough in my kids, not being entrepreneurial enough, and not having wealthy parents.

    That level of ‘blame the victim’ is psychopathic, utterly appalling, and I reject it on every level. Worse, the level of trust destruction that happens with such a tone-deaf speech stains our entire national leadership. It is the modern version of Let them eat cake.

    Once an institution, be it royalty of old or the Fed today, gets so far off the rails that they cannot locate their own role in the misery they see around them, it’s a sign of a huge problem for that society.

    Ms. Yellen should not be allowed by anyone to get away with such a patently and provably false set of arguments. She should have been soundly booed off the stage and the President should be asking for her resignation immediately.

    But we’re so far down the rabbit hole that almost nobody blinked an eye at the speech, and thought it perfectly normal.

    For you personally, you need to be aware that the debts, deficits and liabilities across the entire OECD world are continuing to grow at a far faster pace than GDP, and far faster than oil production and discoveries of low-cost oil reservoirs (those schooled in net energy understand this to be the real issue), and that the most likely outcome, someday, will be an extraordinary financial accident.

    It will be called something else -- a period of wealth destruction -- but for those who can see it coming, it will actually be period of massive wealth transfer.

    And we'll keep up our efforts on how to see clearly amidst the intentional obfuscation, to help those aware to the situation avoid ending up on the wrong side of that transfer."

  • On 22 Oct 2014 in California real estate market stuck in low gear, mell said:

    gsr says

    Don't worry, another "stimulus" is coming.

    http://finance.yahoo.com/news/america-s-housing-policy--the-definition-of-insanity-145304611.html

    >>

    Federal Housing Finance Agency director Mel Watt on Tuesday unveiled new regulations that would make it easier for Americans to buy a house with little or no money down. The rules are aimed at private lenders who opposed a proposal that borrowers make a 20% down payment.

    If you like your crony capitalism, you can keep your crony capitalism!

  • On 22 Oct 2014 in 3% down mortgages now available again, mell said:

    If you like your moral hazard, you can keep your moral hazard!

  • On 22 Oct 2014 in Mark Cuban to GOP: Forget the social issues, mell said:

    CaptainShuddup says

    The social issues are a distraction that has allowed the rich to do and be what they are today. The greater we focus on social issues the more poor we create.

    Coincidence?!?!?

    I think NOT!

    Social issues does this.

    "I'll let you lay off 30,000 people, and automate you business, ship most of your work over seas, and give you tax breaks and other cushy incentives, IF

    You build a YMCA and endorse a gay marriage deal.

    Agreed.

  • On 22 Oct 2014 in Slump in mortgage rates fails to rally home buyers, mell said:

    Negative rates! Moarr Fed cowbell! Loosen the lending standards already!

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