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Old 03-09-2013, 02:54 PM   #3961
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it just doesn't matter, and perceptions are apparently more important than fundamentals.
Correct.

And I'm not being facetious. Ben Kingsley's character really nailed it in Sneakers:



Cosmo: Posit: people think a bank might be financially shaky.

Bishop: Consequence: people start to withdraw their money.

Cosmo: Result: pretty soon it is financially shaky.

Bishop: Conclusion: you can make banks fail.

Cosmo: Bzzt. I've already done that. Maybe you've heard about a few? Think bigger.

Bishop: Stock market?

Cosmo: Yes.

Bishop: Currency market?

Cosmo: Yes.

Bishop: Commodities market?

Cosmo: Yes.

Bishop: Small countries?

Cosmo: With luck, I might even be able to crash the whole damned system. Destroy all records of ownership. Think of it, Marty. No more rich people, no more poor people, everybody's the same, isn't that what we said we always wanted?



We, all of us, make judgement and decisions based upon what we perceive to be true.
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Old 03-09-2013, 07:45 PM   #3962
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ive bene lazy this morning. i plan to wash and vacuum both my cars today.

happy? I am, smells good too.


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Old 03-10-2013, 03:43 AM   #3963
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Perceptions have always been the only thing that mattered. Under normal circumstances the "fundamentals" guide perception. The difference in this situation is that the "fundamentals" do not apply to the U.S. govt. This is why the market did not react poorly to a downgrade. The U.S. will not run out of money to pay its debts and the country was no where near a complete political meltdown like a coup or something.
Fundamentals Don't apply, accounting doesn't apply, laws don't apply.

Someone even told me that government works for us...isn't that a hoot?
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Old 03-10-2013, 09:28 AM   #3964
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Well, I guess we're all in the clear now, because it just doesn't matter, and perceptions are apparently more important than fundamentals.

...sorry, just trying to get used to the upside-down rules in this new world.
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Perceptions have always been the only thing that mattered. Under normal circumstances the "fundamentals" guide perception. The difference in this situation is that the "fundamentals" do not apply to the U.S. govt. This is why the market did not react poorly to a downgrade. The U.S. will not run out of money to pay its debts and the country was no where near a complete political meltdown like a coup or something.
It's actually more fair to say that fundamentals do matter. In the case of the S&P downgrade of US debt securities credit rating, the market completely ignored it because Standard & Poor's got the fundamentals wrong.

Just as they did with subprime mortgage backed securities.

The fundamentals, in this case, are that the only way the US defaults on its US dollar denominated debt is if a bunch of ******** in D.C. decide to do so voluntarily.

There are a bunch of other more fundamental and technical reasons why buying US Treasury securities makes sense for a lot of people and institutions, but the above is why no one cares about S&P's credit rating.
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Old 03-10-2013, 07:00 PM   #3965
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"For the first time in recorded history, we have nearly every central bank printing money and trying to debase their currency. This has never happened before. How itís going to work out, I don't know. It just depends on which one goes down the most and first, and they take turns. When one says a currency is going down, the question is against what? because they are all trying to debase themselves. Itís a peculiar time in world history."

"Central planners' policies are punishing the prudent in favor of rescuing the irresponsible. This has happened before in world history, and the aftermath has always had grievous economic, social -- and often human -- costs."

http://www.zerohedge.com/news/2013-0...le-consequence

Our economy is being run by men who couldn't run a lemonade stand. Hows that for perception?
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Old 03-10-2013, 11:08 PM   #3966
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"For the first time in recorded history, we have nearly every central bank printing money and trying to debase their currency. This has never happened before. How it’s going to work out, I don't know. It just depends on which one goes down the most and first, and they take turns. When one says a currency is going down, the question is against what? because they are all trying to debase themselves. It’s a peculiar time in world history."

"Central planners' policies are punishing the prudent in favor of rescuing the irresponsible. This has happened before in world history, and the aftermath has always had grievous economic, social -- and often human -- costs."

Jim Rogers: We're Wiping Out The Savings Class Globally, To Terrible Consequence | Zero Hedge

Our economy is being run by men who couldn't run a lemonade stand. Hows that for perception?

They make a living working a lemonade stand, with no lemonade. How's that for creativity?


Chart the value of the US dollar, compared to the price of a "real" commodity. Generally, you'd need something of which there is a finite amount, which is both desired and useful. Gold, silver, whatever. Why does the price of oil fluctuate so erratically? Hint: Currency relations and perceptions play a very large part in this.



Why did the S&P downgrade the US? Increased requests for credit, with poor returns thus far on borrowed funds. What's funny is, our "credit" doesn't even exist. Say we ask china for a loan; where does china get the money? They don't pump more oil, or make more nikes; they just say "here's the money" (they print it).

So china creates money (which didn't exist in the first place), to give to the US as a "loan", from which it will print 10 times the amount loaned, via new US currency. So in the whole system, nothing was actually created. China knows the currency will never be paid back, it just wants to be a debt-holder, which increases its' own "credit" rating.
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Old 03-11-2013, 12:02 AM   #3967
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Old 03-11-2013, 02:09 AM   #3968
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Does the president have any control over gas prices?
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Old 03-11-2013, 09:42 AM   #3969
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indirectly.
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Old 03-11-2013, 10:49 AM   #3970
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Obama is keeping gas prices up to help out his rich buddies in the oil business, like Dick Cheney and such.
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Old 03-11-2013, 10:56 AM   #3971
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Democrats dont have rich buddies, democrats can't practice cronyism, democrats are completely altrusitic.
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Old 03-11-2013, 10:58 AM   #3972
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Quote:
Originally Posted by 2ndGearRubber View Post
Chart the value of the US dollar, compared to the price of a "real" commodity. Generally, you'd need something of which there is a finite amount, which is both desired and useful. Gold, silver, whatever. Why does the price of oil fluctuate so erratically? Hint: Currency relations and perceptions play a very large part in this.
USD Index vs Gold


USD vs Brent Crude Oil (that's as far back as the Brent data that I could find in a few seconds went)


USD vs US Natural Gas (that's as far back as the Henry Hub data that I could find in a few seconds went)



Quote:
Originally Posted by 2ndGearRubber View Post
Why did the S&P downgrade the US? Increased requests for credit, with poor returns thus far on borrowed funds.
Can you cite the source for that? Having read the S&P special report, I recall virtually all of the discussion being about political uncertainty and the increasing polarization of the US political system adding to their perception of difficulties in stabilizing "the general government debt burden
by the middle of the decade." Source

Granted, it's been a while since I read the document, so I might have missed the reasons you cited. If they did actually talk about "poor returns thus far on borrowed funds" (your words), it would further reduce their credibility in my mind. US Treasury securities have been a terrific investment for the past ~30-40 years.

Looking forward, you could absolutely question the returns on US TS assuming you are not a primary dealer or a sophisticated fixed income trader.

Quote:
Originally Posted by 2ndGearRubber View Post
What's funny is, our "credit" doesn't even exist. Say we ask china for a loan; where does china get the money? They don't pump more oil, or make more nikes; they just say "here's the money" (they print it).

So china creates money (which didn't exist in the first place), to give to the US as a "loan", from which it will print 10 times the amount loaned, via new US currency. So in the whole system, nothing was actually created. China knows the currency will never be paid back, it just wants to be a debt-holder, which increases its' own "credit" rating.
China sends us real goods and services (stuff). We send them 0s and 1s. They take those 0s and 1s and either buy US Treasury securities, gold, African oil fields, Swedish car makers, etc. In that way, "real" things are involved.
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Old 03-11-2013, 11:09 AM   #3973
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Here's another potentially interesting chart of a real commodity:

Inflation-adjusted US gold in USD:
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Old 03-11-2013, 11:25 AM   #3974
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Originally Posted by Scrappy Jack View Post
Can you cite the source for that? Having read the S&P special report, I recall virtually all of the discussion being about political uncertainty and the increasing polarization of the US political system adding to their perception of difficulties in stabilizing "the general government debt burden
by the middle of the decade." Source

Granted, it's been a while since I read the document, so I might have missed the reasons you cited. If they did actually talk about "poor returns thus far on borrowed funds" (your words), it would further reduce their credibility in my mind. US Treasury securities have been a terrific investment for the past ~30-40 years.

Looking forward, you could absolutely question the returns on US TS assuming you are not a primary dealer or a sophisticated fixed income trader.
I don't have a source. I'm just making a basic observation. The US borrows far more than it pays back (as most countries do), and "difficulty stabilizing" and "uncertainty", are just a polite way of say; they're not paying anything back, and it doesn't look like they'll be sending a check anytime soon.


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Originally Posted by Scrappy Jack View Post
China sends us real goods and services (stuff). We send them 0s and 1s. They take those 0s and 1s and either buy US Treasury securities, gold, African oil fields, Swedish car makers, etc. In that way, "real" things are involved.
So that's where all those Harbor Freight tools come from.

Even if china buys securities, when they come due, we'll just invent money, print it, and pay them. As with your own example, nothing real is involved until china buys something with the imaginary 1s and 0s. The ones and zeros aren't real, so again, they're using the illusion of "credit" to buy actual resources.
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Old 03-11-2013, 11:35 AM   #3975
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Suburbs secede from Atlanta

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when you allow powerful groups of citizens to opt out of a social contract, and form their own, it may benefit the group opting out, but it hurts the larger collective,” he said.
awwww, boo hoo.
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Old 03-11-2013, 11:37 AM   #3976
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Does the president have any control over gas prices?
It's like saying "Does the president have a policy to encourage lower energy costs?" Doing so would lower gas prices, as perception and reality.

You could also ask, "Does the president believe in a balanced budget?"

The answer to both is NO.
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Old 03-11-2013, 12:01 PM   #3977
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Obama is keeping gas prices up to help out his rich buddies in the oil business, like Dick Cheney and such.
Even the oil extraction in the Gulf has resumed, it's 15% below pre-oil spill numbers. This is mainly due to the Feds slow-walking the leasing paperwork, etceteras.

Speaking of paperwork, government review of the Keystone pipeline has now taken longer than the actual creation of the pipeline would take.

Here is perception and reality, all rolled into one.
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Old 03-11-2013, 02:29 PM   #3978
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RE: S&P downgrading US Federal credit rating because of " Increased requests for credit, with poor returns thus far on borrowed funds."

Quote:
Originally Posted by 2ndGearRubber View Post
I don't have a source. I'm just making a basic observation. The US borrows far more than it pays back (as most countries do), and "difficulty stabilizing" and "uncertainty", are just a polite way of say; they're not paying anything back, and it doesn't look like they'll be sending a check anytime soon.
In that case, you are wrong.

A) There is only the slightest chance that enough ******** in Washington get together and decide it's better to refuse to pay the money when the money is available.

B) Let's talk total return from an individual investor perspective. For the absolutely simplest, most vanilla package with a reasonable track record, I'll use Vanguard US Treasury open-end mutual funds available to any Joe Blow with $3k. This is not a complex strategy, no synthetics or other derivatives, no leverage, no quant-driven roll strategies, etc.

Short, intermediate or long duration, you would have made very good risk-adjusted returns. The total returns range from about 4.5% per year to almost 8% per year. The longer the duration, the higher the return.


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Originally Posted by 2ndGearRubber View Post
Even if china buys securities, when they come due, we'll just invent money, print it, and pay them. As with your own example, nothing real is involved until china buys something with the imaginary 1s and 0s. The ones and zeros aren't real, so again, they're using the illusion of "credit" to buy actual resources.
You are correct in many ways - that fiat currency is really a social construct. You are incorrect in other ways, or maybe more accurately, missing some steps.

Where does China get the US dollars to buy US Treasury securities (notes, bills, bonds, etc)? From selling stuff to the USA. They send us stuff and services, we send them US dollars. They then decide what to do with those dollars. In some cases, they buy US Treasury securities because they figure ~2% on a 10-year bond is better than ~0.25% on excess reserves.

If they "lend" the USA money by buying a 10-year US Treasury bond and hold to maturity, in 10 years they get their original money back plus 2% interest per year along the way.

Again, ultimately, the money is a social construct backed by the economy and productivity of the issuer. In this case, the USA which is ~20 - 25% of the world's economic output.
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Old 03-11-2013, 02:31 PM   #3979
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It's like saying "Does the president have a policy to encourage lower energy costs?" Doing so would lower gas prices, as perception and reality.

You could also ask, "Does the president believe in a balanced budget?"

The answer to both is NO.
I think that's pretty fair to say. The POTUSA does not directly control US crude oil prices, global crude oil prices or US refined gasoline prices but his policies can have an effect. Congress also plays a major role.

For now, the "politicians" with the most influence over global crude prices are the Saudis. What they say and do does directly affect global crude prices.
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Old 03-12-2013, 02:24 AM   #3980
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I think that's pretty fair to say. The POTUSA does not directly control US crude oil prices, global crude oil prices or US refined gasoline prices but his policies can have an effect. Congress also plays a major role.

For now, the "politicians" with the most influence over global crude prices are the Saudis. What they say and do does directly affect global crude prices.
Surprisingly I disagree with you Jack. Obama can turn prices around on a dime, and concerted efforts would give us sub-$2 gas by the end of his term. As for the Saudis, the brush fires over in the Middle East concern the princes enough to give us huge leverage over them, even with our "sequestered" forces.

Obama:
--Declare a pro energy policy utilizing domestic fuel
--approve the pipeline
--approve lease permits for offshore drilling (don't drag your feet)
--approve leases for Federal land drilling
--approve clean coal
--fast-track nuclear power stations, and allow older stations to upgrade to newer (and safer) power without the multi-billion dollar price tags they now face.
--lower Federal tax rates on natural gas.
--incentivize natural gas, LNG, propane, mixed fuel and even hydrogen fueled vehicles.

What did that dumb Alaskan chick say? Oh yeah, "All of the above."

Doing all of the above would not only explode employment, you'd see gas prices plummet around the globe and the economy would curiously grow.

However, oil stocks will soar and Algore might get pissed...
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