Saturday, July 7, 2018

Re: Book - "he Ponzi Factor" by Tan Liu

On Sat, Jul 7, 2018 at 3:01 AM, KEVIN KEYES wrote:

  My brother lent me a hard copy of the book "the Ponzi Factor" by Tan Liu that states the stock market is a Ponzi Scheme, the data in this book is compelling and disturbing.  It is a quick read, interested in your view point.

Kevin


I made this argument before without firmly believing in it.  

My rationale is that when a company issues stock, people give them money, and the company gives them pieces of paper representing ownership in the company.  The paper itself has no inherent value, it is only what the paper represents that has value.  Companies that issue dividends have some inherent value, but not all companies issue dividends.  Unlike the first publicly traded stock, the Dutch East India Company, you can't sell that stock back to the company for money.  Eventually the Dutch East India Company discontinued this practice, and you could only get value out of the stock by selling it to other people, just like today's stock market.  So like buying and selling antiques, the value of your holding depends upon somebody else's willingness to buy it.  In the antique business they call this "the bigger fool theory."

Of course, money only has value based on people's willingness to exchange goods for it, so the value of any financial holding is dependent upon other people.

What is the ultimate fate of the stock you own?  The Dutch East India Company went out of business 198 years after they first issued stock.  Apple is doing really right now, but what are the chances that they will continue to do well in perpetuity?   Eventually corruption or mismanagement will cause the company to go into decline.  (I think that this could already be happening.)  At some point it will either go out of business, or be bought out by somebody else.  For example, in the early 1980's Atari was at the top of their game, but after the video game crash of 1983 they nearly went out of business, and what little is left of the company has several times been bought and sold by other companies.

​So it seems to me that the value of our stock is temporary ​and depends upon a number of factors including the economy doing well.  I think that everybody hopes to sell their individual stocks before the inevitable decline.  However, the stock market as a whole has been a proven winner, and there is safety in diversification.

-- 






Thursday, August 31, 2017

What Colleges and Graduate Schools Don't Want You to Know


I have heard that 40% of college graduates have to take a job that does not require a degree.  It means that we are educating more people than the market needs.

Thursday, August 13, 2015

Fwd: China

'Global markets fell Tuesday after China unexpectedly devalued its yuan currency amid weaker economic growth.

 

Beijing's devaluation of the yuan allowed it to fall by its biggest one-day margin in a decade. The central bank said the 1.9% decline was due to changes aimed at making the way it sets exchange rates more market-oriented. The U.S. dollar also gained against the yen, Indian rupee, South Korean and other Asian currencies.'

 

http://americasmarkets.usatoday.com/2015/08/11/stocks-tuesday-23/


Tuesday, May 26, 2015

Fwd: Balance Sheet

'The exact timing of the Federal Reserve's first interest rate rise is uncertain, but even less clear is what will happen to the $4tn pile of bonds the central bank amassed during the financial crisis.

Optimists take the view that, like a skilled pilot, Fed chairwoman Janet Yellen will be able to bring the size of the balance sheet down smoothly and steadily without hitting too much turbulence.

Pessimists, however, believe the pilot is flying blindly through dense clouds with a faulty radar and constant risk of storms, making the policy normalisation process particularly risky.

"For me the new thing to look out for is what they do to the portfolio," says Robert Michele, chief investment officer at JPMorgan Asset Management. "We know about moving the [interest rate] corridor. What we should be worried about is what they do with the balance sheet."

The Fed's strategy for reducing its bloated balance sheet has evolved over time, but in September policy makers said the Fed will cease or start phasing out reinvestments only after it first begins increasing short-term interest rates. The balance sheet would shrink in a "gradual and predictable manner", but the details were left unclear — as well as the timing, which will depend on how economic and financial conditions evolve.

One market concern is that allowing assets to roll off automatically as they mature could lead to a jagged path of balance-sheet reduction. BlackRock's Investment Institute pointed out in a recent report that a third of the Fed's entire Treasury portfolio, about $785bn, comes due by the end of 2018. Allowing the balance sheet to deflate that quickly could spook markets.'

 

http://www.ft.com/intl/cms/s/0/520377e8-037e-11e5-b55e-00144feabdc0.html#axzz3bGOeKjV8


Sunday, March 22, 2015

Fwd: Inflation

'The currency's strength affects the economy in two main ways: It holds back economic growth by reducing the competitiveness of U.S. exports while depressing inflation by pushing down import prices.

Economic Headwind

Not only is the dollar's rise reducing price pressures, making it harder for the Fed to tighten, it's also acting as an "economic headwind reducing the need to tighten," said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey.

The FOMC made a nod to the dollar's impact on the economy in its policy statement, noting that export growth has weakened. Yellen was more explicit in her press conference, saying that exports would be a "notable drag" on growth this year and tying that to the strength of the dollar, which she said partly reflected the strength of the U.S. economy.

Yellen said the currency's rise was also "holding down import prices and, at least on a transitory basis at this point, pushing inflation down."

"The Fed sees the stronger dollar as effectively tightening conditions in the U.S.," said Jonathan Wright, a professor at Johns Hopkins University in Baltimore and a former economist at the Fed's Division of Monetary Affairs. "They are worried about what will happen to the dollar and financial markets when the Fed starts tightening with much of the rest of the world at negative interest rates." '

 

http://www.bloomberg.com/news/articles/2015-03-19/dollar-s-surge-makes-it-hard-for-fed-to-buck-global-easing-trend

 




Friday, March 20, 2015

Fwd: U.S.



Fwd: Inflection

'it's necessary to go back a decade to 2005, when the production-maximizing strategy was first adopted. At that time, Big Oil faced a critical juncture. On the one hand, many existing oil fields were being depleted at a torrid pace, leading experts to predict an imminent "peak" in global oil production, followed by an irreversible decline; on the other, rapid economic growth in China, India, and other developing nations was pushing demand for fossil fuels into the stratosphere..

A "Brave New World" of Tough Oil
No one better captured that moment than David O'Reilly, the chairman and CEO of Chevron. "Our industry is at a strategic inflection point, a unique place in our history," he told a gathering of oil executives that February. "The most visible element of this new equation," he explained in what some observers dubbed his "Brave New World" address, "is that relative to demand, oil is no longer in plentiful supply." Even though China was sucking up oil, coal, and natural gas supplies at a staggering rate, he had a message for that country and the world: "The era of easy access to energy is over."
To prosper in such an environment, O'Reilly explained, the oil industry would have to adopt a new strategy. It would have to look beyond the easy-to-reach sources that had powered it in the past and make massive investments in the extraction of what the industry calls "unconventional oil" and what I labeled at the time "tough oil": resources located far offshore, in the threatening environments of the far north, in politically dangerous places like Iraq, or in unyielding rock formations like shale. "Increasingly," O'Reilly insisted, "future supplies will have to be found in ultradeep water and other remote areas, development projects that will ultimately require new technology and trillions of dollars of investment in new infrastructure."
For top industry officials like O'Reilly, it seemed evident that Big Oil had no choice in the matter. It would have to invest those needed trillions in tough-oil projects or lose ground to other sources of energy, drying up its stream of profits. True, the cost of extracting unconventional oil would be much greater than from easier-to-reach conventional reserves (not to mention more environmentally hazardous), but that would be the world's problem, not theirs. "Collectively, we are stepping up to this challenge," O'Reilly declared. "The industry is making significant investments to build additional capacity for future production."
On this basis, Chevron, Exxon, Royal Dutch Shell, and other major firms indeed invested enormous amounts of money and resources in a growing unconventional oil and gas race, an extraordinary saga I described in my book The Race for What's Left. Some, including Chevron and Shell, started drilling in the deep waters of the Gulf of Mexico; others, including Exxon, commenced operations in the Arctic and eastern Siberia. Virtually every one of them began exploiting U.S. shale reserves via hydro-fracking.
Over the Cliff
By the end of the first decade of this century, Big Oil was united in its embrace of its new production-maximizing, drill-baby-drill approach. It made the necessary investments, perfected new technology for extracting tough oil, and did indeed triumph over the decline of existing, "easy oil" deposits. In those years, it managed to ramp up production in remarkable ways, bringing ever more hard-to-reach oil reservoirs online.
According to the Energy Information Administration (EIA) of the U.S. Department of Energy, world oil production rose from 85.1 million barrels per day in 2005 to 92.9 million in 2014, despite the continuing decline of many legacy fields in North America and the Middle East. Claiming that industry investments in new drilling technologies had vanquished the specter of oil scarcity, BP's latest CEO, Bob Dudley, assured the world only a year ago that Big Oil was going places and the only thing that had "peaked" was "the theory of peak oil."'
http://www.realclearworld.com/articles/2015/03/20/why_the_oil_price_is_really_collapsing_111061-2.html

Tuesday, March 3, 2015

Fwd: Test



'This exam, given in 23 countries, assessed the thinking abilities and workplace skills of adults. It focused on literacy, math and technological problem-solving. The goal was to figure out how prepared people are to work in a complex, modern society.

And U.S. millennials performed horribly.

That might even be an understatement, given the extent of the American shortcomings. No matter how you sliced the data – by class, by race, by education – young Americans were laggards compared to their international peers. In every subject, U.S. millennials ranked at the bottom or very close to it, according to a new study by testing company ETS.

"We were taken aback," said ETS researcher Anita Sands. "We tend to think millennials are really savvy in this area. But that's not what we are seeing."

The test is called the PIAAC test. It was developed by the Organization for Economic Co-operation and Development, better known as the OECD. The test was meant to assess adult skill levels. It was administered worldwide to people ages 16 to 65. The results came out two years ago and barely caused a ripple. But recently ETS went back and delved into the data to look at how  millennials did as a group. After all, they're the future – and, in America, they're poised to claim the title of largest generation from the baby boomers.

U.S. millennials, defined as people 16 to 34 years old, were supposed to be different. They're digital natives. They get it. High achievement is part of their makeup. But the ETS study found signs of trouble, with its authors warning that the nation was at a crossroads: "We can decide to accept the current levels of mediocrity and inequality or we can decide to address the skills challenge head on."

The challenge is that, in literacy, U.S. millennials scored higher than only three countries.

In math, Americans ranked last.

In technical problem-saving, they were second from the bottom.

"Abysmal," noted ETS researcher Madeline Goodman. "There was just no place where we performed well."'

http://www.washingtonpost.com/blogs/wonkblog/wp/2015/03/02/u-s-millennials-post-abysmal-scores-in-tech-skills-test-lag-behind-foreign-peers/

 

Fwd: Wages


'consider the Congressional Budget Office estimates of actual median household income. Measured in 2013 dollars, after-tax median income rose briskly from $46,998 in 1983 to $70,393 in 2008 but remained below that 2008 peak in 2011. The sizable increase before 2008 is partly because the average of all federal taxes paid by the middle fifth has almost been cut in half since 1981—from 19.2% that year to 17.7% in 1989, 16.5% in 2000, 13.6% in 2003 and 11.2% in 2011.

Census Bureau estimates of median "money income," on the other hand, do not account for taxes, so they miss a major source of improved living standards. They also exclude realized capital gains, public and private health insurance, food stamps and other in-kind benefits. Even so, the Census Bureau's flawed estimate of median income rose 13.7% from 1984 to 2007 before falling 8% from 2007 to 2013.

Both CBO and Census estimates show only six years of middle-class stagnation…

 

 

 

In their original 2003 study, Messrs. Piketty and Saez mentioned one rapidly expanding source of missing income—disappearing dividends in tax-return data. These were "due mostly to the growth of funded pension plans and retirement savings accounts through which individuals receive dividends that are never reported as dividends on income tax returns."

The same is true of interest and capital gains accumulating inside such tax-free savings accounts. These have grown to nearly $20 trillion, according to a 2014 report by Tax Foundation economist Alan Cole.

Messrs. Piketty and Saez shrink the total income numbers further by subtracting all transfer payments, such as Social Security and unemployment benefits, and excluding all health and retirement benefits provided by private employers or government agencies. The result, as Brookings Institution's Gary Burtless noted, is that, "The Piketty-Saez measure [of total income] excluded 24% of NIPA [National Income and Product Accounts] 'personal income' in 1970, but it excluded 37% of 'personal income' in 2008." It excluded 40% of personal income by 2011. '

http://www.wsj.com/articles/alan-reynolds-the-mumbo-jumbo-of-middle-class-economics-1425340903

 

 

 

 

Tuesday, February 24, 2015

Fwd: Fed

'Janet Yellen sought to lay the groundwork for the end of zero interest rates in America, opening up the US Federal Reserve's options on policy amid a strengthening economy.

The Fed chairman told a US Senate committee on Tuesday that if the central bank modified its guidance to markets, rate moves could follow at any meeting, as she prepared global investors for interest rate rises later this year.

http://www.ft.com/intl/cms/s/0/e7475446-bc34-11e4-b6ec-00144feab7de.html#axzz3SgPuTM78


Wednesday, February 11, 2015

Re: It's all greek to me

​​
'Tsipras struck a defiant tone in parliament late on Tuesday, saying that "little Greece" was changing Europe by casting off austerity.

Monday, February 2, 2015

Fwd: Plosser

'Mr. Plosser, who plans to leave the Fed in March, before the end of his term, also reflected on the Fed's performance during his nine years as a policy maker at the central bank….

The history is that monetary policy is not ultimately a very effective tool at solving real economic structural problems. It can try for a while but the problem then is that it's only temporarily effective, and when you can't do it anymore you get the explosion yesterday in the Swiss market.

One of the things I've tried to argue is look, if we believe that monetary policy is doing what we say it's doing and depressing real interest rates and goosing the economy and we're in some sense distorting what might be the normal market outcomes at some point, we're going to have to stop doing it. At some point the pressure is going to be too great. The market forces are going to overwhelm us. We're not going to be able to hold the line anymore. And then you get that rapid snapback in premiums as the market realizes that central banks can't do this forever. And that's going to cause volatility and disruption…

Fwd: Germany

'As the euro zone hurtles toward a fresh crisis, Germany is often portrayed as Europe's stern paymaster, strict and unyielding with countries that fall short of its standards.

But if you think Germany is tough with Greece, you should see how it behaves at home.

The current dilemma now facing Europe is partly an outgrowth of Germany's own countrywide obsession with avoiding excessive debt.

It's a focus born out of long historical experience, which has helped to turn responsible spending into both a personal and a civic virtue. Germany is a place where cash remains king; some retail outlets, including IKEA locations, don't accept credit cards.

At the national level, the German federal government recently balanced the budget for the first time in 45 years. Starting in 2016, it will be bound by a constitutional measure restricting its borrowing, something known as the "debt brake."

The unwavering focus on fiscal discipline is a source of consternation for those who see Germany's debt phobia as unhealthy for Europe and for its own future. In an era of ultra-low interest rates, they say, Germany should seize the chance to borrow cheaply and use the funds to update its infrastructure and make an investment in long-term prosperity.

"We are not in a situation where the balanced budget should be the first priority," said Ferdinand Fichtner of the German Institute for Economic Research in Berlin. "It would make more sense to take a bit more money and invest in public goods."

But such arguments have found little traction so far within the German government. 

http://www.theglobeandmail.com/report-on-business/international-business/european-business/at-heart-of-new-euro-crisis-germanys-obsession-with-debt/article22740448/

 

Fwd: Oil

'Oil prices fell to the lowest level since 2009 last month as the U.S. pumped the most in three decades and OPEC kept its own supplies unchanged to defend its share of the global market. The United Steelworkers union, which represents employees at more than 200 U.S. refineries, terminals, pipelines and chemical plants, stopped work on Sunday at nine sites after failing to agree on a labor contract.'

Fwd: Russia

'With oil prices down more than 50 percent in the past year and still falling, the ruble having lost more than half its value, a recession looming and the country already dipping into its rainy-day funds, the Russian economy is in a race against time. But one would be hard pressed to grasp the depth of the troubles from the Kremlin's prescriptions.

After Anton Siluanov, the finance minister, laid out the government's long-promised "anti-crisis" package in a live broadcast on state television last week, economists unanimously dismissed as inadequate his laundry list of half-measures and a vague promise of a 10 percent budget cut.

"That plan is nonsense," the Russian oligarch Aleksandr Y. Lebedev said in an interview, describing it as throwing away money to rescue some of Russia's worst companies. "Lots of words and little specific."

President Vladimir V. Putin weighed in briefly, repeating that along with keeping tight control over government finances, "We need to change our economy's structure."

Yet a wide array of business owners, economists and former senior government officials said in interviews that they expected the Kremlin to react to the crisis the way it had in 2008, the last time it faced a precipitous decline in oil prices — with disaster management, but no fundamental changes.

"They are trying to get by, manage it strategically and hope that oil prices rise, hope they can make a few adjustments and it will all go away," said Kenneth S. Rogoff, an economics professor at Harvard University who recently attended a high-level economics conference in Moscow. "There is no appetite for fundamental reform. They are just going to wait."

http://www.nytimes.com/2015/02/03/world/europe/russia-details-plans-to-bolster-its-economy-but-experts-scoff.html?_r=0


Sunday, February 1, 2015

Fwd: Oil

'Oil output, however, is still at a record level. In the week that ended on Jan. 2, when the number of rigs also dropped, it reached 9.13 million barrels a day, a 44-year high.'

Fwd: India

'The World Bank on Tuesday said that the Indian economy is witnessing a slow recovery, aided by improved export momentum and a steep decrease in inflation, which could allow for a rate cut by the Reserve Bank of India (RBI).

The World Bank has projected the Indian economy to grow at 6.4% in 2015-16 from an estimated 5.6% in 2014-15. India's GDP is expected to surpass that of China's by 2017.'

http://nationalinterest.org/feature/the-trillion-dollar-question-are-low-oil-prices-here-stay-12029?page=2