The biggest mistake was allowing the banks to survive untouched. By buying toxic assets, the US government became the primary customer eliminating the need to look for business. Government is a market segment. We made the banking system serve the government by having them sell to it. Getting book value on assets made better sense than risking capital for more complex transactions in the consumer or commercial markets. Now it is too late. We should have taught them to fish again, but we gave them supper.
If they were too big too fail, it doesn't mean they were too big to fail later on. I wonder what would have happened if the lower interest rates would have been given only to smaller banks to take on the giant banks. The big ones didn't lend anyways. At least it could have produced the debacle of the ones meant to fail plus the raising of a new breed simulating competition while diminishing the impact. Talent jumps ship anyways. But the smaller ones don't have the lobby capacity only the regulator's scrutiny. A new breed could make the regulation easier by growing with the new rules. Now we are left with regional and small banks failing while the big ones are sitting on their balance sheet with their new gargantuan ingestion of failed banks who continue to survive inside a bigger umbrella.
Monday, November 29, 2010
Blindness
Presidents everywhere speaking for economists: Selling the package or containment procedure?
The Koreas and the waiting for China's help. S. Korea cancelled its planned exercise on THEIR Island after the N. Koreans "were done" with "theirs." Why? If the leaks show us anything is that is showing the cracks of Western influence in the world. The promise to improve America's standing in the world have left the US having to like everyone else. Iran... and meanwhile Israel is silent. Decades of soft stance have produced nuclear material. I just hope the increased investment in high tech warfare and the massive amount of engineers moving to certain areas have their milestones soon. I offer myself to test. I test for free speech.
The good news China is not trigger happy. Their own stability is more important, but eliminating the containment force of the US is not by any means a detriment to their interests.
Front pages of finance newspapers have politicians and possibly serious underplayed events. It means uncertainty. Finance news will always follow.
The Koreas and the waiting for China's help. S. Korea cancelled its planned exercise on THEIR Island after the N. Koreans "were done" with "theirs." Why? If the leaks show us anything is that is showing the cracks of Western influence in the world. The promise to improve America's standing in the world have left the US having to like everyone else. Iran... and meanwhile Israel is silent. Decades of soft stance have produced nuclear material. I just hope the increased investment in high tech warfare and the massive amount of engineers moving to certain areas have their milestones soon. I offer myself to test. I test for free speech.
The good news China is not trigger happy. Their own stability is more important, but eliminating the containment force of the US is not by any means a detriment to their interests.
Front pages of finance newspapers have politicians and possibly serious underplayed events. It means uncertainty. Finance news will always follow.
Monday, November 15, 2010
The compatibility of the missing science
Isn't this a clear sign that it might be time to change the current metrics used for policy.
If things are not working, it might be time to step back and make sure that what you saw painted on the Monet was a building. The same applies to policy makers. Maybe it is time to take a couple step back and look again to see what data they are following.
The deepest financial crisis. The government over spending which probably has let things roll longer. The head of the budget bureau saying we are tapped. There is not lending happening. US production is overseas. And some of the opinions in the Federal Reserve is that no market works on the current zero percent lending rate. What it really means is that things are not working now or they are about to stop working unless things get a bit harder.
Another study challenged the idea of the US ingenuity and creativity. It mentions how the majority of US force is not engaged on their work compared with previous research.
90% of the engineers and Computer Scientists will be working in Asia in the near future given the rate of foreign workers returning to their countries. This gets compounded with the graduation rate of computer scientists and engineers that graduate in the US which is 14% of the total of computer scientist and engineers that graduate every year in India and China (Even most of US graduates in computer science are foreigners).
We might just be in a transition period. There are new promising fields rising, and they might be the new propulsion engines. But still...
"Cheap dollar won't help US exports because US companies are mainly producing overseas."
There is something totally inverted about that sentence. Decades of economical thought might be rendered useless like a curtain at the end of a show when the lights go out.
Is the US stock market a reflection of the production overseas making us think it is the US industrial power? Has the time arrived when the Dow ends to mean what is supposed to? In a global economy, the meaning of the index of the largest American companies might stop representing the "American" locality leaving us following the wrong metrics.
Is the happiness of TARP being repaid making us think it was a good investment while the funds were generated outside US borders?
Things are changing. What used to work is not working. The characteristics of pre-emergent economies are showing up in the largest economy of all. It is like the IMF lending to Guatemala or Nicaragua to build infrastructure without hope of production or exports in spite of their depreciated currencies (The cigars did get really good. I am still looking for the Nicaraguan Hoja Cubana that disappeared. Maybe someone just had a good batch they had to get ride of at a discount). Anyways, coming back, regressing to the spontaneity of the absurd...
Time to come up with new science or science will be written of us.
If things are not working, it might be time to step back and make sure that what you saw painted on the Monet was a building. The same applies to policy makers. Maybe it is time to take a couple step back and look again to see what data they are following.
The deepest financial crisis. The government over spending which probably has let things roll longer. The head of the budget bureau saying we are tapped. There is not lending happening. US production is overseas. And some of the opinions in the Federal Reserve is that no market works on the current zero percent lending rate. What it really means is that things are not working now or they are about to stop working unless things get a bit harder.
Another study challenged the idea of the US ingenuity and creativity. It mentions how the majority of US force is not engaged on their work compared with previous research.
90% of the engineers and Computer Scientists will be working in Asia in the near future given the rate of foreign workers returning to their countries. This gets compounded with the graduation rate of computer scientists and engineers that graduate in the US which is 14% of the total of computer scientist and engineers that graduate every year in India and China (Even most of US graduates in computer science are foreigners).
We might just be in a transition period. There are new promising fields rising, and they might be the new propulsion engines. But still...
"Cheap dollar won't help US exports because US companies are mainly producing overseas."
There is something totally inverted about that sentence. Decades of economical thought might be rendered useless like a curtain at the end of a show when the lights go out.
Is the US stock market a reflection of the production overseas making us think it is the US industrial power? Has the time arrived when the Dow ends to mean what is supposed to? In a global economy, the meaning of the index of the largest American companies might stop representing the "American" locality leaving us following the wrong metrics.
Is the happiness of TARP being repaid making us think it was a good investment while the funds were generated outside US borders?
Things are changing. What used to work is not working. The characteristics of pre-emergent economies are showing up in the largest economy of all. It is like the IMF lending to Guatemala or Nicaragua to build infrastructure without hope of production or exports in spite of their depreciated currencies (The cigars did get really good. I am still looking for the Nicaraguan Hoja Cubana that disappeared. Maybe someone just had a good batch they had to get ride of at a discount). Anyways, coming back, regressing to the spontaneity of the absurd...
Time to come up with new science or science will be written of us.
The backward compatibility of the wrong and forward and the one that came back
"Cheap dollar won't help US exports because US companies are mainly producing overseas."
Tuesday, October 26, 2010
Ticks
Conduits are first on the FCC agenda. It is becoming too popular for companies in need of financing to raise capital through government munis. So far, they were targeted by the IRS for the revenue lost. Interest payments are paid by the company, and the government gets fees and projected economic growth.With lower standards for filing, corporations access to capital at lower rates that they would have on their own.
Governments don't carry the liability on the issue, but the munis carry the government's brand. It works for municipalities in good financial standing, but look for the ones who are sliding under the radar, and a good opportunity for speculation arises. 35% of munis in default were conduits.
Another tick:
Credit default swaps. Even though the brains of Long Term Capital Management were crowned the kings of M&A hedging, the credit default swaps are said to be a nicer arena for speculation. When rumors of take over start, prices of the other targets get bidden higher. But depending on the debt involved in the takeover, a higher payout happens in the credit default swaps. Credit default instruments go up in price at a higher payout than the actual stock price without the risk of the stock collapsing right after the take over because debt stays in the books for good.
Governments don't carry the liability on the issue, but the munis carry the government's brand. It works for municipalities in good financial standing, but look for the ones who are sliding under the radar, and a good opportunity for speculation arises. 35% of munis in default were conduits.
Another tick:
Credit default swaps. Even though the brains of Long Term Capital Management were crowned the kings of M&A hedging, the credit default swaps are said to be a nicer arena for speculation. When rumors of take over start, prices of the other targets get bidden higher. But depending on the debt involved in the takeover, a higher payout happens in the credit default swaps. Credit default instruments go up in price at a higher payout than the actual stock price without the risk of the stock collapsing right after the take over because debt stays in the books for good.
Friday, October 22, 2010
The China that will be in spite of
There has been somber predictions and dangers from the Chinese growth. Inequality between the country and the city, unrest of farmers, ecological problems, disillusion in the communist party. However, it seems the financial crisis has strengthen the country's belief in its leadership.
Talking about numbers about China is just mind blowing. In 2007, China had already 460 million cell phone users. Maybe it is not that impressive.
But for example, every US phone user pays a tax to subsidy poor income bracket' phone usage. Economical studies have proven that a cell phone to a low level income bracket person is one of the most effective ways to increase its ability to generate economical activity. In the last two years, those subsidies have been put into practice, and poor income bracket's consumers have been getting a free cell phone and service paid by the US government.
If it has been proven by the numbers in the US, just imagine the multiplier effect of 460 million cell phones users in China.
Now, with all the risks and threats of China's growth, there is one figure that is really extraordinary. Its consequences are unimaginable. Avoiding a natural disaster which doesn't seem to stop China like the Earthquake, these figures just show the incredible potential for indefinite growth.
The US has 9 cities with population of over 1 million people. China has 300 cities with populations of over 1 million people counting the migrant workers (200 mill) which I don't think are included in the figures (they are still asking for equal rights, so they are not even counted yet). High speed trains will interconnect these 300 cities in the near future. They go from 1 million to a city like Shanghai with over 18 million.
The possible combinations of 300 cities interconnected with such high populations are unimaginable. It is like a mini Earth. The future products developed to supply this demand, and the mini ecologies of demand, supply, tourism, population movement, and services could easily beat any expectations. The number of permutations of this amount of people interconnected and with economical freedom will render any focus groups in the US meaningless because its consequences are just almost impossible to foresee. This is assuming China's individuals continue to gain economical freedom and "adequate" legal commercial rights.
All these cities have budgets and are landscaping, planning, building and creating services. They just don't have any other choice. There has been a migration of 200 to 300 million people into these cities. If that is not a train of growth, I don't know what it is. They are graduating and creating mini countries onto themselves.
I believe it was Philips which sold around $200 million in city lights in one year. Almost every important architect has been hired to work in one of these cities. It is true that it might be an artificial demand for now fueled by city budgets competing among each other about who has the best city hall, but this has always been the beginning of cities. Five hundred years ago, the church and the plaza identified a city. Then a city was the one that had a post office. Then it is the constant fight for which has the tallest building.
China with its three hundred cities of this magnitude with every major corporation present, 200 million migrant workers, erecting streets, city lights, fire houses, city halls, trade surplus with Europe and the US, political stability, economical freedom supported by their government, and inter-connecting themselves at the speed of a bullet train at the same time of entering the information and Internet age is at least the most clear indication of future economical growth I have ever heard.
Talking about numbers about China is just mind blowing. In 2007, China had already 460 million cell phone users. Maybe it is not that impressive.
But for example, every US phone user pays a tax to subsidy poor income bracket' phone usage. Economical studies have proven that a cell phone to a low level income bracket person is one of the most effective ways to increase its ability to generate economical activity. In the last two years, those subsidies have been put into practice, and poor income bracket's consumers have been getting a free cell phone and service paid by the US government.
If it has been proven by the numbers in the US, just imagine the multiplier effect of 460 million cell phones users in China.
Now, with all the risks and threats of China's growth, there is one figure that is really extraordinary. Its consequences are unimaginable. Avoiding a natural disaster which doesn't seem to stop China like the Earthquake, these figures just show the incredible potential for indefinite growth.
The US has 9 cities with population of over 1 million people. China has 300 cities with populations of over 1 million people counting the migrant workers (200 mill) which I don't think are included in the figures (they are still asking for equal rights, so they are not even counted yet). High speed trains will interconnect these 300 cities in the near future. They go from 1 million to a city like Shanghai with over 18 million.
The possible combinations of 300 cities interconnected with such high populations are unimaginable. It is like a mini Earth. The future products developed to supply this demand, and the mini ecologies of demand, supply, tourism, population movement, and services could easily beat any expectations. The number of permutations of this amount of people interconnected and with economical freedom will render any focus groups in the US meaningless because its consequences are just almost impossible to foresee. This is assuming China's individuals continue to gain economical freedom and "adequate" legal commercial rights.
All these cities have budgets and are landscaping, planning, building and creating services. They just don't have any other choice. There has been a migration of 200 to 300 million people into these cities. If that is not a train of growth, I don't know what it is. They are graduating and creating mini countries onto themselves.
I believe it was Philips which sold around $200 million in city lights in one year. Almost every important architect has been hired to work in one of these cities. It is true that it might be an artificial demand for now fueled by city budgets competing among each other about who has the best city hall, but this has always been the beginning of cities. Five hundred years ago, the church and the plaza identified a city. Then a city was the one that had a post office. Then it is the constant fight for which has the tallest building.
China with its three hundred cities of this magnitude with every major corporation present, 200 million migrant workers, erecting streets, city lights, fire houses, city halls, trade surplus with Europe and the US, political stability, economical freedom supported by their government, and inter-connecting themselves at the speed of a bullet train at the same time of entering the information and Internet age is at least the most clear indication of future economical growth I have ever heard.
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