patrick.net

I believe Hedge funds from cayman are buying those treasuries. These guys are super rich and i remember vaguely the name of fund started with Ben....

TOB,

I did not think you were joking. But I suppose most people just don't know about these things, and jump to conclusions.

Peter P,

if anything, Forbes always overestimates, not underestimates their wealth. Let's say I know someone who compiles the list and happen to know how it works.

OO,

I never said anything about what portion of peoples' money is in these locations. And you also wrongly assume that its not legal to do so.

The IRS has no jurisdiction over non-US companies. And US citizens can legally invest in them. And non-US companies do not pay US income tax on profits earned outside the US.

A rich person could legally put all of their money offshore and pay no income if the deal is structured properly (in compliance). This does not require smoke and mirrors. All perfectly legal.

OO,

If Forbes overestimates for many then their methodology is either lame, or it is evidence that some of the money has susequently slipped away uncounted.

OO, I trust you.

However, I believe they did underestimate Bloomberg's networth until recently. (Or are they overestimating it now?)

Zephyr,

we will just wait for another 3 months to see how many of these phantom "rich people" from tax havens are going to US Ts.

Japan is certainly not buying, they started shedding a year ago and even offloaded some in the "flight to quality" period of Sept. Chinese simply doesn't have the dough to pay, if they don't cash out, I am already very thankful.

There is already a number circling around saying that our next quarter (!) deficit will hit $500B. I will be watching in amusement how these "tax haven super riches and hedgies" just keep buying our T, no matter the economy goes up or down, they just happen to have unlimited amount of money to buy, very funny.

Just as a reference, all the Asian superriches on the Forbes list suffered huge losses from stock market and a financial weapon of mass destruction called Accumulator. Don't expect these guys to chip in on T. Russian oligarchs are bleeding to death on the tanking oil price. Middle Eastern riches are hurting like hell with oil price more than halved. So there just happen to be a group of really smart rich people whose wealth does not shrink in the deleveraging, and they can afford to buy as many T as they want, not on leverage but dollar for dollar. Very nice.

This offshore game has been going for a very long time. I have no idea when it started (probably with the first income tax). I was in the business of forming and managing offshore companies during the 1980s, and I have set up and run a few offshore companies since then. The companies that I ran elected to be taxed as if they were based in the US. But that is only because our ownership profile did fit the US tax rules to be untaxed.

OO,

You overlook one very important fact in this market decline. All the people who bought stock, real estate and other assets at or near the top bought from someone. For every top of the market buyer there was a seller - selling at the top. Some people sold and went largely to cash, or at least partially to cash.

Many of these people even shorted the markets. Too risky for my taste, but they have made money in the decline. And still have it. Probably in the safest place one can put it - US Treasury bonds.

Zephyr,

no, stocks are priced at the margin.

So not the whole lot was sold, just that the wealth of a family or a person is valued as his total stock holding x the marginal price at which the stock changed hand.

A lot of wealth never existed in the first place, it was on paper. Only the marginal amount that changed hand accounts for the wealth that changed hand, but you never see personal wealth being evaluated that way.

Only a small part of that wealth got transferred at the top. Most of the wealth was never there, it just evaporated.

Are there more people shorting the market making money or are there more people longing the market making money?

My whole point is, I do not believe for a sec that the banking centers that hide identity of buyers are representative of the real demand for US Treasury than many countries combined, and these are not small countries, I am talking about Germany, France, Japan, Canada, Korea, etc. the most industrialized countries in the world.

I am of the firm belief that the Fed has already started raw printing, and I take my actions accordingly.

Most people who short the market lose money. This is why allowing short-selling is great for bulls. (Think short squeezes.)

The next big play is to short the Treasury.

But the problem is, when Treasury implodes, what currency do I hold? Is there any way to short the Treasury and get paid in another currency?

There is way too much negativity. Perhaps we should calm down.

Of course stocks are priced at the margin... everything is priced at the margin (econ 101). And turnover is very high. So a very large share of all stock did change hands during the 2007 peak market.

BTW, the stock market dwarfs the Treasury market. So even a modest exit from the stock market can cause a tidal wave in the Treasury market. Of course we are witnessing a massive exit from the stock market, and the the Treasury market cannot absorb it all.

The amount of stock traded during a typical year is roughly equal to 100% of all stock existing. Of course, much of this stock trades repeatedly during the year, while the rest never or rarely trades. But on average the turnover is about 100% per year. Probably higher in the last two years.

In contrrast, only about 6% of resdential real estate turns over in a typical normal year. (Is there such thing as a normal year anymore?)

That is sad, the world is flat is a best seller in China, because it inspires so many Chinese to be living just like the Americans, do you mean they are denied the chance to live like the flat broke Americans? Boo hoo.

I have never read his book.

TOB,

Could not agree more about Thomas Friedman. That windbag of windbags among columnists is the sneakiest right-wing propagandist I can think of. He always does that "notice-how-moderate-and-reasonable-I-am" writing style all the while underhandedly spouting propaganda and right-wing memes. Good riddance.

The best economics book I have ever read is The Alchemy of Finance by George Soros.

No kidding.

No kidding? Huh?

The real reason that the Republicans are against the auto industry rescue is that they want bankruptcy so that the Big 3 corporations can get out their legal obligation to pay pensions and health-care for their retired workers (the weasel-word they use is "legacy costs")

The Big 3 made promises, now Republicans want them to break them. The unions have negotiated in good faith and agreed to accept lesser obligations so that the Big 3 can stay afloat. For the Republicans, the desire to screw the unions trumps everything, at considerable cost to the economy.

Barack Obama has the wits to structure a Big 3 rescue package that is good for the country and good for the workers. Better cars, high mileage standards, the works. Let us hope he gets a chance to influence the rescue package.

We can smooth the disruption of the automakers’ decline - but not for long. It is a hopeless cause - Detroit is dead.

The biggest problem Detroit auto makers have is their excessive compensation levels for workers and incompetent management.

It is hard to be competitive when your workers are paid about 60% more than your competitors pay their workers. You either charge much higher prices, or sell inferior goods at the same price (or a blend of the two).

A rock and a hard place comes to mind.

Cars will no longer be made by overpaid workers. The question is whose workers will build cars in the future.

Who will replace Detroit’s remaining market share?

There is nothing Obama can do to restore health to the big 3 because their cost structure is not viable. They pay their workers an average $72 per hour including benefits (about $140,000 per year).

The only thing that will keep them operating as they are now is to subsidize them like Amtrak at taxpayer expense.

Zephyr,

The workers are not overpaid, that is the lie that the propagandists are spreading.

The problem is that Big 3 management underfunded their pension plans, and count pension expenses against current worker hourly rates

Go back to the previous thread and read this comment (and the others), you will get the big picture:

http://patrick.net/wp/?p=645#comment-640898

Come on, anyone who is against the Wall Street bailout cannot support the automaker bailout in good conscience.

Please be consistent.

Ah, you posted the $72/hour propaganda number that Big 3 is spreading. They must be out in force all hour the wen and on conservative talk radio,

Like I said, go back to the previous thread and get the real story.

If the management has underfunded pension plans, the workers should litigate. Taxpayers should not have to intervene.

(typed to fast, trying again)

Zephyr,

Ah, you posted the $72/hour propaganda number that Big 3 is spreading. They must be out in force allover the Web, Fox and on conservative talk radio,

Like I said, go back to the previous thread and get the real story.

justme,

are you being cynical?

when you join a startup, the starup promises you many stock options, in full faith, and if it ever gets to IPO, you will reap handsome financial benefits, if everthing goes as rosy as they claim.

So now this startup is defunct, it cannot churn out anything that the customer wants and it is running out of cash flow, so if it lays you off, is it going back to its promise? Shouldn't every single employee realize there is a bankruptcy risk when they take up an employment?

Detroit workers just need to get real. Either they jump ship, move to TN or NC to work for Honda, Toyota, or they look for another job. Detroit is game over, just face it.

The last time I checked, Barrack Hoover Obama knows nothing about car manufacturing. He will probably save the big 3 by pumping money in them, just like we tried over and over again, but he will be able to do nothing to revive them.

The best way to revive the big 3 is to sell them to Toyota, if Toyota is stupid enough to take them over.

Justme, You can spin it all you like. The simple fact is that the big three have a labor cost structure equal to around $72 per hour worked. And this well above the labor cost of their competitors.

The sad irony is that GM has lost more money over the years than it would have taken to buy Toyota.

Zephyr,

oh no, if GM bought Toyota, then I don't have anything I want to buy then.

The only thing I am interested in GM is a second hand Hummer at a dirt cheap price, but I don't want it that badly.

Everything else at GM is just POS that I will never consider buying even if they give me 0% for 60 months.

If the detoit autoworkers are not overpaid then they have little to worry about. They can go work for someone else who is willing to pay them a comparable wage. They can thumb their nose at the incompetent management as they walk out.

OO,

Strawman argument. There are no startups with defined benefit pension plans, and people know full well that startups are risky. There is no comparison.

Zephyr, how can that be spin. It is the plain truth.

OO,

I'll bet that Barack Obama has more common sense and knowledge about building a sustainable car industry than all the Big 3 CEO s added together.

OO,

I agree. I am not suggesting that GM should have purchased TM - only that they could have with the money they lost. I too would mourn the destruction of TM by GM management.

I once bought a GM car. It was not so good. I have been very happy with Toyota cars.