Financial topics

[Higgenbotham]

I made some very bearish comments about technology in a post on Friday, also expressing doubt that any mainstream analyst would find such a view even remotely believable. Turns out that on Sunday, John Dvorak, the tech writer for Marketwatch, which is owned by Dow Jones, put out a very bearish article on technology.

I was interested in the reaction to the article. Most amateur investors expressed disbelief, which is the kind of reaction you want to see if Dvorak is likely to be right. I think his reasoning is sound and fits with my non-expert crackpot view.

Nov. 19, 2011, 12:00 a.m. EST
Tech gloom has moribund PC business to blame
Commentary: Commodity era is weighing down the whole sector

http://www.marketwatch.com/story/tech-s ... 2011-11-19

http://generationaldynamics.com/forum/v ... 390#p10738

[John]

"PC is a commodity" was not PREDICTED in 1990, as Dvorak claims -- it
was ANNOUNCED as already true in 1990, probably by Dvorak himself. In
fact, the PC has been a commodity since then. You can buy an empty
case and put in your own components, and they can be anyone's
components. That's why IBM left the PC business. That's why Dell
succeeded by becoming the Model T of PCs.

It's far from clear to me that the PC is anywhere close to dead.
Mobile computers are growing quickly, but it's not clear to me that
these are displacing PCs, rather than adding to PCs. If you have to
do real work on a computer, then you still need a keyboard, a large
screen, and plenty of hard disk space. The cloud is nice, but you're
limited by bandwidth, and you still need local backup of important
files.

A major paradigm shift that I expect to see is a mobile device that
you can take with you, and then come home and plug things into it,
making it a PC. This isn't possible today because mobile apps aren't
anywhere near the enterprise-quality of PC applications. People who
are pooh-poohing Microsoft Windows 8 should realize that this is the
only platform that will allow a mobile device that has the potential
to run existing PC applications.

So the two main factors are that there's a lot you can't do on the
mobile form factor (the fat finger problem), and there's trillions of
dollars worth of application software that can't yet run on mobile
computers. Those will be the driving issues for the PC in the next
decade.

John

[Higgenbotham]

"PC is a commodity" was not PREDICTED in 1990, as Dvorak claims -- it
was ANNOUNCED as already true in 1990, probably by Dvorak himself. In
fact, the PC has been a commodity since then.

John

Commodity prices sometimes fall below the cost of production for periods of time. I expect the high tech industry to start behaving more like that. I don't have much familiarity with how much profit the various PC software, hardware, producers, and retail sellers make per unit sold but expect the profit per PC sold to narrow more and in some cases perhaps go negative. As the profit per PC sold continues to narrow, I no longer think the industry will be able to make that up on volume or by selling value added products.

[aedens]

http://www.reuters.com/article/2011/11/ ... ompanyNews
http://finance.yahoo.com/news/madoff-as ... 05509.html
http://video.pbs.org/video/1302794657#
Black box, CFTC already knew, Senate are only employees as are other branches.
MF Global's 4.7 percent stake could shift the odds in the takeover battle for the LME, the world's biggest metal market.
http://www.scribd.com/doc/73487392/Pars ... -Statement

[aedens]

http://www.docstoc.com/docs/104693736/HSBC-Nov

http://www.scribd.com/fullscreen/73543698

granular liquidation analysis, ES dropped 1% in less than 5 minutes as volume dwarfed the rest of the day with
machines fighting each other to exit at a reasonable price, Commodities in general converged back on the inverse of the
USD performance of the week, down around 1.5% (with the exception of Copper which is -4% on the week.
The U.S. Federal Reserve plans to stress test six large U.S. banks against a hypothetical market shock,
including a deterioration of the European debt crisis. The Fed said it will publish the results next year of the
tests for six banks with large trading operations.

One idea that you are floating is allowing that net asset value to float.

SCHAPIRO: Right.

MILLER: Do you worry that if it no longer has that $1 consistent value that that could cause disruption in the marketplace?

SCHAPIRO: Sure. I mean getting from here to there is difficult. You might never invent a money market fund now but the fact is they exist. They have $2.6 trillion in assets. And to go from a stable entity to a floating entity creates challenges. It's that stable entity that has made them such useful cash management tools for investors. But at the same time, it that stable net asset value that makes them susceptible to run.

Next layer of the onion is targeted as we discussed.You are on your own now. Also our guest Google [Bot]

[Higgenbotham]

MILLER: One idea that you are floating is allowing that net asset value to float.

SCHAPIRO: Right.

MILLER: Do you worry that if it no longer has that $1 consistent value that that could cause disruption in the marketplace?

SCHAPIRO: Sure. I mean getting from here to there is difficult. You might never invent a money market fund now but the fact is they exist. They have $2.6 trillion in assets. And to go from a stable entity to a floating entity creates challenges. It's that stable entity that has made them such useful cash management tools for investors. But at the same time, it that stable net asset value that makes them susceptible to run.

Next layer of the onion is targeted as we discussed.You are on your own now. Also our guest Google [Bot]

Good find. Allowing stratification of the dollar market is an admission they can't contain the deflationary forces with backstops. So the question becomes whether to let the balloon pop (run) or deflate it slowly (float the NAV).

[aedens]

Already on the way as we know here. "condensed from forums"
Eurodollar market began back in the early 1950s. The Soviet Union sold gold for dollars, but was afraid to keep the dollars in an account in New York, where they might be blocked for Cold War reasons. Moscow started a dollar-denominated account in an Italian bank known as “Eurobank,” where it felt safer from seizure. Later policy was inclusive to floating peg. From 1946 to the early 1970s, the Bretton Woods system made fixed currencies the norm; however, in 1971, the United States government abandoned the gold standard, so that the US dollar was no longer a fixed currency, and most of the world's currencies followed suit. A floating currency is one where targets other than the exchange rate itself are used to administer monetary policy.
http://www.foreignaffairs.com/articles/ ... ?page=show
When it broke the Stability and Growth Pact (SGP) in 2003, it sent the signal to the smaller countries that fiscal profligacy would go unpunished. The result was heightened public sector borrowing and increased public spending. Germany's enthusiastic lending to the periphery only exacerbated the problem.

Thatcher warned of this effect "to choose good over evil is a right" and it is not in view. In reality we already warned no nation can continue to depend on the likes of the foreign banker controlled Federal Reserve’s Open Market Committee. Rickards framed it well also.

Brigadier General (Ret.) Joseph L. Shaefer, U.S. Air Force Intelligence Crisis Action Team
"The leading edge of tomorrow's warfare is economic, and we are being probed daily by those who would do us grave harm. . . . Fortunately, we are developing means of detection and a small cadre who understands that the economy intersects national security at the ground zero of modern warfare. Currency Wars provides the best introduction to how it has occurred in the past, how it is occurring today, and how we may prepare ourselves to prevent it from happening tomorrow."

Four Horsemen are again getting ready to ride, leaving destruction, suffering and death in their path. Wars are man-made, and peace, when it comes, will also be man-made. Wed Dec 31, 2008 1:06 pm

Parity was a goal and linked was the results but as we are seeing the reality is only in terms of the ideological soil it was deposited in. As we know there can only be the market, or the government since there is no third solution. Many will linger in platitudes of isms.
http://www.businessweek.com/news/2011-1 ... ndefined,0_

[Higgenbotham]

100% short at the close, average short is S&P 1233 (October 21).

Covered all shorts tonight for about a 15 point loss (October 31).

100% short from S&P 1240 (November 2).

Covered 20% at about S&P 1205. 80% short now (November 20 pm).

Covered 20% at about S&P 1155. 60% short now (November 24 pm).

Futures are down about 5 points tonight.

I'm thinking it may be a waste of time to continue doing these trading updates. If the market falls further, I plan to get rid of another 40%, withdrawing the original margin funds out of my account as it falls. I may leave 20% on in case there's a crash and see what happens. This will likely be the last trade I do.

[aedens]

This is the reality we are up against.
British Board of Trade dated October 8, 1943, Keynes also made the following clear and unequivocal declarations:
I believe the future lies with,
1.State trading for commodities;
2.International cartels for necessary manufactures; and
3.Quantitive import restrictions for nonessential manufactures.
Yet all these future instrumentalities for orderly economic life in the future you seek to outlaw.

De Soto, H. "Dead capital and the poor", 21(1) SAIS Review 21 (2001).
Hernando de Soto’s groundbreaking work, which has shown through concrete study and practical application the truth of a simple idea, has brought millions into a worldwide economy and given hope to impoverished people around the world. The simple idea is that people want to own that which they build on and improve, and that if economic systems don’t recognize that occupation and improvement of land creates rights to ownership which should be legally recognized, then underground economies will prevent the full development of capital markets, and ensure that chronically impoverished people will remain so.
De Soto’s successful implementation of the Lockean theory that occupation and improvement gives previously unrealized value above and beyond often Byzantine methods of land registration and tenancy has bridged a gap between theory and practice. It is empirical proof also of the metaphysical reality of the right of ownership that flows from the necessary and sufficient relations among persons and real property. In other words, we may now comfortably conclude that the a priori nature of ownership by occupation, labor and improvement should be recognized by legal systems, and that legal system which fail to recognize this do so at their own risk.

[OLD1953]

I suppose those folks in the LA area that occupied that open land for several years, growing tomatos and other crops they sold at the sidewalk, would be an example of an underground economy. They certainly were holding the land in adverse possession. When they were turned out to build a warehouse on that spot, it was a bit of a pity the land owner didn't put up a green roof and rent it to them for their enterprize. But that would be a compromise, and compromise is not popular now, it's "my rights are bigger than your rights", world without end.

The question about the market now is simple, will it drop to the point where P/E figured in trailing earnings will approach the magic number of 5, or not? If not, we've not seen a bottom. That P/E will be low for an extended period is a given, but creates an opportunity for dividend investors.

Happy Thanksgiving weekend to all, would have said that earlier but access here is not only limited but terrible at this time. So it goes.