Weekend Open Thread (2011-12-30)

Here is your open thread for the weekend beginning Friday December 30th, 2011. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

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About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

89 comments:

  1. 1
    Pegasus says:

    A look at which income group reap the benefits of most of the growth in recent years

    http://jaredbernsteinblog.com/wp-content/uploads/2011/12/cb1.png

    Top of the wealth scale have seen a much reduced tax burden as a share of their income.

    http://jaredbernsteinblog.com/wp-content/uploads/2011/12/cb41.png

    http://jaredbernsteinblog.com/the-best-of-cbpp-graphics/

  2. 2
    David Losh says:

    You’ve done a lot for having a slow week.

    Happy New Year!

  3. 3

    RE: Pegasus @ 1 – Sort of an odd article because it uses a lot of data that ends in 2007 and 2009. I’ll admit I used 2009 data responding to pfft in the healthcare thread, but a post responding to a comment just doesn’t justify the same level of work as an entire article.

  4. 4
    Pegasus says:

    RE: Kary L. Krismer @ 3 – Unfortunately a lot of data is not compiled until years after. I guess we could continue to distort reality by saying since we don’t have any up to the minute data we are free to make any claim we want to serve our purposes?

  5. 5

    RE: Pegasus @ 4

    Yep….the Census Bureau Data is Always a Few Years Late

    Sometimes the best recent data is avoid distorted worded Polls and other brainwashing tools the globalist MSM uses to convince us nothing is going wrong. Look out the window, check out mall parking lots, check out traffic flow on a Friday/Saturday prime evening time, go to a Restaurant.com desparation website and see how many local businesses are forced to discount tables at $25 off $35 purchases….BTW, the SE King county Restauarnt.com data has grown about 100% in the last year alone….

    The Census Bureau tallies good houehold income data, but publishes hardly any decent recent reports IMO. Lest they scare us to death?

  6. 6
    Blurtman says:

    Kill the Bankers.

    http://readersupportednews.org/opinion2/279-82/9142-the-big-lie

    “This time, I fear, the public anger will not be deflected. Confessions, not false, will be exacted. Occupy Wall Street has set the snowball rolling; you may not think much of OWS – I have my own reservations, although none are philosophical or moral – but it has made America aware of a sinister, usurious process by which wealth has systematically been funneled into fewer and fewer hands. A process in which Washington played a useful supporting role, but no more than that.

    Over the next year, I expect the “what” will give way to the “how” in the broad electorate’s comprehension of the financial situation. The 99 percent must learn to differentiate the bloodsuckers and rent-extractors from those in the 1 percent who make the world a better, more just place to live. Once people realize how Wall Street made its pile, understand how financiers get rich, what it is that they actually do, the time will become ripe for someone to gather the spreading ripples of anger and perplexity into a focused tsunami of retribution. To make the bastards pay, properly, for the grief and woe they have caused. Perhaps not to the extent proposed by H. L. Mencken, who wrote that when a bank fails, the first order of business should be to hang its board of directors, but in a manner in which the pain is proportionate to the collateral damage. Possibly an excess-profits tax retroactive to 2007, or some form of “Tobin tax” on transactions, or a wealth tax. The era of money for nothing will be over.”

  7. 7

    RE: Pegasus @ 4 – Could be. This link indicates that CBO data was released in October, 2011. Maybe the blame does to the CBO. I would assume the government has data on ATI since 2007.

  8. 8
    Blurtman says:

    Step on the Cockroaches. (Apologies to the order Blattaria.)

    “I have lived what now, at 75, is starting to feel like a long life. If anyone asks me what has been the great American story of my lifetime, I have a ready answer. It is the corruption, money-based, that has settled like some all-enveloping excremental mist on the landscape of our hopes, that has permeated every nook of any institution or being that has real influence on the way we live now. Sixty years ago, if you had asked me, on the basis of all that I had been taught, whether I thought this condition of general rot was possible in this country, I would have told you that you were nuts. And I would have been very wrong. What has happened in this country has made a lie of my boyhood.

    There should be more to America, Gore Vidal has written, than who pays tax to whom. It has been in Wall Street’s interest to shrivel our sensibilities as a nation, to shove aside the verities of which General MacArthur spoke at West Point – duty, honor, country – in favor of grubby schemes and scams and “carried interest” calculations. Time, I think, to take the country back.”

  9. 9
    MacroInvestor says:

    By Kary L. Krismer @ 7:

    RE: Pegasus @ 4 – Could be. This link indicates that CBO data was released in October, 2011. Maybe the blame does to the CBO. I would assume the government has data on ATI since 2007.

    Sheesh, Krismer. Does EVERY thread have to taken over by your obsession over the minute of how every number is calculated? I like Tim’s new up/down arrows. I hope you get voted off the island. Go out and sell a dang house or something.

  10. 10
    cw says:

    Long time reader. First comment. Happy New Year to The Tim and all at SB. Thanks for the entertainment and education!

  11. 11

    RE: MacroInvestor @ 9 – Sheesh, Macroinvestor. Does EVERY thread have to be taken up by your wild exaggerations which are not base at all in fact, raising pointless issues? How about posting something that might contribute to this site?

    And for the record, it wasn’t me that voted thumbs down on your post.

  12. 12
    MacroInvestor says:

    RE: Blurtman @ 8

    “If anyone asks me what has been the great American story of my lifetime, I have a ready answer. It is the corruption, money-based…”

    Unfortunately, he still doesn’t get it. That corruption has always existed. (Look at the writings of
    Andrew Jackson and many others). What’s different lately is word is spreading. A better “greatest story” would be how the media helps cover it up with various forms of lies and distraction. Again, always true but people are connecting the dots. Money + power + communication — the total package.

  13. 13
    Blurtman says:

    RE: MacroInvestor @ 12 – Mix 2 parts internet, one part magnitude of fraud, one part corrupt justice system, and two parts economic decline. Shake, and let’s hope it serves up some payback.

  14. 14

    RE: Blurtman @ 8
    Gore Vidal is awesome!

  15. 15

    RE: Ira Sacharoff @ 14
    I Like Your Style Ira

    Now that we can thumb down you, you’ve gotten bland, boring and humorless. Musn’t offend the pink ponies or the patriots [risk a thumbs down], just be the McDonalds smiling clown?

    Happy New Year to ya Ira!!!

  16. 16

    RE: Kary L. Krismer @ 11
    Kary, I’m On Your Side

    What did you say wrong to get voted out? I offended the top 10% household incomes buying Seattle real estate….not a good reason either, just the pragmatic facts [they don’t like being blogged?]….this voting system is a joke. Albeit, we can all maybe get some laughs out of it :-)

  17. 17

    RE: Kary L. Krismer @ 11RE: MacroInvestor @ 9 – – I feel like an NFL player. The one that responds to something bad gets the flag thrown.

    It’s sad though that so many people here like B.S. posts that don’t say a damn thing, and nothing that is in any way accurate.

  18. 18
    Scotsman says:

    This new thumbs up/down deal is a real time saver. Now I don’t have to post nearly as much- I can just drop in, click a few thumbs, and leave.

  19. 19
    David Losh says:

    RE: MacroInvestor @ 12RE: Blurtman @ 6

    There is a sign on a partially finished building across from Garfield High School that I saw today; It said “Occupy Everything.”

    Has any one noticed that the ranks of homeless below the James Street over pass in down town Seattle is growing? How about the security people in front of Bank of America branches? has any one noticed?

    In my opinion when we get out side of our neighborhoods there is a growing desperation. Even in our neighborhoods you may see more people trying to figure things out, financially.

    I know that as a long time home owner I’m really questioning that mortgage payment. As a long time Real Estate investor I know that there are no easy squezey deals out there.

    If you take residential Real Estate out of a family’s wealth strategy there may be millions of people who are going to be very disappointed.

    So, I agree that there will be blood in the streets, and I think this time more people will be involved than ever before.

  20. 20

    By softwarengineer @ 15:

    RE: Ira Sacharoff @ 14
    I Like Your Style Ira

    Now that we can thumb down you, you’ve gotten bland, boring and humorless. Musn’t offend the pink ponies or the patriots [risk a thumbs down], just be the McDonalds smiling clown?

    Happy New Year to ya Ira!!!

    Oddly enough, I don’t see it that way. I think I’m fascinating and hilarious. I’d much rather be told that I’m dead wrong and full of crap than be told that I’m bland, boring, and humorless.
    It’s only been what? A day since we’ve got the thumbs up thumbs down thing going? Don’t worry. I haven’t changed. I’m not afraid to offend, and I guarantee it won’t be long before one of my opinions generates a bunch of thumbs downs.

  21. 21
    ChrisM says:

    Tinfoil hat on: the ranking system is probably some university psych study, a la Stanford Prisoner study: http://www.prisonexp.org/

    For those of you non-nerds, slashdot.org probably pioneered social media ranking – it is where the +1 comes from. In that model, a small percentage of readers at any given time are given five moderator points with a time constraint, where they can either increment or decrement someone’s post (max 1 pt per post), as well as give reasons for the ranking (insightful, informative, flamebait, etc.). Rankers are also forbidden from posting to a thread they have ranked. It has its flaws and gets gamed, but overall works probably better than this system.

    I suspect some idiot with too much time on their hands could vote here more than once.

    But I understand and applaud Tim’s doing something to address the problem.

  22. 22
    Natalia Orinko says:

    RE: Blurtman @ 8

    Russia is suffering immensely from capital cronyism. And I do not want to suggest that just petty fraud is going on. Under Putin (and he has never really been out of power) a few people are making billions while those who investigate or protest are found dead. Based on what I see in America, the same thing may happen here. Just look at the economic calamity that started in 2008. Greed is running amok. Corruption is everywhere. Can’t you see it??

  23. 23
    2kt says:

    RE: Blurtman @ 6

    If the population lived within their means and saved money, it would be a lot better off.
    Now it is “looking for answers” and “those who are responsible”, those who “make too much money”, “the banksters”, the politicians, etc., etc., etc.

    Surely, there are some parties more responsible than others. But in most cases the answer for one’s problems is looking at that individual in the mirror each morning.

  24. 24
    Tatiana Kalashnikov says:

    RE: Natalia Orinko @ 22

    Well said cousin Natasha. Also, at the same time the elite wealthy in Russia take their billions, human rights have vanished. Is this the future of our new country? Not if we have anything to say about it. Russians and Ukrainians have suffered for so long. We know how to fight for justice. We want a chance to be prosperous and happy.

  25. 25
    The Tim says:

    RE: ChrisM @ 21 – Slashdot’s comment system has always been my favorite. I prefer threaded comments and really like their moderation setup. Unfortunately that method only works when you have a critical mass of readers willing to participate in the comment system.

  26. 26
    Blurtman says:

    RE: 2kt @ 23 – Yes, or course. Each individual should have realized that massive fraud committed by investment bankers would vaporize 401k savings. Each individual should have realized that greed driven mortgage backed securitization was driving up home prices beyond sustainability. Each individual should have realized that in order to rescue criminal banks, interest on savings would be zero.

    Werner Erhard lives!

  27. 27
    2kt says:

    RE: Blurtman @ 26

    Not really.

    Each individual should only realize that stock market is not a guaranteed savings account.
    Each individual should only realize that buying a home and borrowing large amount of money is not a risk-free proposition.
    Each individual should only realize that everything has a cost and nothing is free.

    The state has two options: 1) a bailout of major banks (which requires making zero-interest rates) or 2) let the banks fail. In both cases there’s a very significant cost. Should major banks go bankrupt, it would bankupt businesses and individual account holders all the same since FDIC has no capital.

    You are so mad about bank bailout, did you like the outcome of Lehman bankruptcy? If yes, do you want to let Bank of America go under? Would that make you feel better? Just an FYI, 50% of the population has accounts there.

    The only sensible solution is break-up of all major banks and restoration of Glass-Seagal.

  28. 28
    David Losh says:

    RE: ChrisM @ 21

    The charm of this site is that it has less moderation.

    Something obviously needed to be done, and I applaud another self regulating solution.

  29. 29
    David Losh says:

    RE: 2kt @ 27

    But that isn’t what you are saying. You said, ” If the population lived within their means and saved money, it would be a lot better off,” and that simply isn’t true.

    Living outside of our comfort zone is what moves us ahead. If we all “lived within our means” we would stagnate.

    Banks do need to be regulated, and many laws need to be changed to protect the consumer. The banking system itself is way out of control. That should be a focus.

    My interpretation, from my own personal experience, is that my risk factor, my ability to make money, has been seriously blind sided by global games that banks have played.

    The stock market is a dead deal of ETrade fees. Sweat Pea said it best that political policy is having more impact on the stock market than sound financial fundamentals.

    The macro economy has dwarfed what any individual can do to protect themselves. So it’s easy to say that yes we should all be smarter, but I don’t know what that would look like.

  30. 30
    ChrisM says:

    On stock investing, where to begin? If you’re “investing” either you adopt a long-term or a short-term. If long-term, congrats, I have no advice for you. I also don’t understand how you’re investing; hopefully you will respond to educate me?

    If short-term, I hope you’re trading via interactivebrokers.com, otherwise I don’t see how you’d make any money.

    HFT trades are (by definition) occurring every Milli-second – if you’re a HFT trader not connected to GS (if you were GS you don’t have enough time to waste on seattlebubble.com) please educate me on your trades – how can you compete against GS?

    I used to trade SUNW back in the day (2006-2008) – I think they must have been some sort of coordinated trade at that time – high volume & high volatility – enough to make a trade. If there’s something similar today, please elucidate!

    My (non-professional!) advice is to steer clear of the stock market…

  31. 31
    Pegasus says:

    RE: 2kt @ 27 – Actually it is Glass-Steagall not Glass-Seagal. A Seagal is a Seattle Seahawks cheerleader. Returning to the Glass-Steagall is a nice dream that can only be realized after the whole system implodes. Until then it is a pipe dream in a corrupt world. We have not fixed any of the problems that caused the great global collapse. In fact we are far worse off now then we we were just before it happened in 2008. As long as our politicians are “owned” by Wall Street and our regulators are “captured” by the industries they are supposed to regulate there can be no meaningful reform. MF Global is a perfect example.

  32. 32

    By David Losh @ 29:

    RE: 2kt @ 27

    But that isn’t what you are saying. You said, ” If the population lived within their means and saved money, it would be a lot better off,” and that simply isn’t true.

    Living outside of our comfort zone is what moves us ahead. If we all “lived within our means” we would stagnate.

    I don’t think that’s what 2kt was saying, but what you said there is one of the reasons I often read your posts more than once.

    Getting ahead individually almost always takes risk. People here tend to like to laugh at others when they fail, but without those who do take risk, our society would have a much smaller pie to split up. Note I am distinguishing between not living within your means for consumption and for investment/production.

    And I say that being one of those people who does NOT take risk. I admire those that do. It’s also why I don’t think much of the OWS movement (besides the fact that they don’t have a solution).

  33. 33
    Dirty Renter says:

    RE: Pegasus @ 31
    I think the MF Global meltdown has worked out pretty well, so far. The shareholders & bondholders have been crushed. Their clients and everyone who did business with them has learned the concept of counter-party risk. And only $1.2B is missing……smells like capitalism to me. And in the bigger picture, we’re all the better for it, since Corzine was in line to replace Geitner as Treasury Secretary. Yes, that was the sound of a 9mm slug whizzing by our head….you can’t make this stuff up.

  34. 34
    wreckingbull says:

    By David Losh @ 29:

    RE: 2kt @ 27

    Living outside of our comfort zone is what moves us ahead. If we all “lived within our means” we would stagnate.

    Not sure what you mean by that, David. Ever try starting a small business with $30,000 of consumer credit card debt? Good luck. It is hard enough without that wet blanket. It is financial prudence that gives us the ability to take risk.

  35. 35
  36. 36
    David Losh says:

    RE: wreckingbull @ 34

    I always encourage people to start a small business with profits. Your business is either profitable or it isn’t. If it isn’t making money there probably isn’t a reason to throw money at it.

    However, there is always a point where you need to expand. At that point it can be very beneficial to take on debt.

    In home purchases it’s always a matter of taking on debt.

    Cars?

    It’s the people who go outside of what’s comfortable that drives the economy,or it used to be that way.

    My main objection in today’s economy is all the “safe” investing that is going on. Borrowing money at 1% to lend at 4%, or investing in commodities in a massive way, then taking the profits until the next prudent trade. Political insider trading by making bets on what some politician will say next? or some country?

    The way I read the comment is, “get a good job, keep your head down, save your money, and some day you will be rewarded.”

    I say take the money now.

  37. 37
    Dirty Renter says:

    RE: ChrisM @ 30
    Hi Chris.
    I’m a long term investor.
    I live very far from Wall Street, thus receive no inside information and continue to change with the times, as best I can.
    I believe the best investment advice is still to live far beneath your means(give the Jones’ the finger), and understand that investment advisors could care less about you personally. They care only about their commisssions & AUM numbers. IOW, you are on your own. The sooner you realize this, the better off you’ll be.
    Secondly, you should have complete trust in the management of any company or entity in which you invest. Though I’m a small town hick, I usually have a good nose for this. For example, I like really ugly guys, like Warren Buffett, Charlie Munger, Bill Gross & Peter Lynch. Man, those guys are UGLY. I don’t like managers who are impeccably dressed or groomed. Michael Linn of Linn Energy fame, was extremely frumpy, looked a mess, looked down when he talked….it was obvious to me all he cared about was his company and finding natty gas & oil. haha
    I’m fairly sure the volatility & high correlation will continue into 2012, so be patient and buy good companies during the big downdrafts.
    I will refrain from specific names, as no one really seems to care.

  38. 38
    Dirty Renter says:

    RE: Blurtman @ 26
    What each individual should have known is that he/she couldn’t afford the promissary note they were about to sign, no?

  39. 39
    Chris says:

    RE: Tatiana Kalashnikov @ 24
    I understand most of the oligarchs during the Yeltsin era were originally from the government. Is it the same with Putin?

  40. 40
    Chris says:

    RE: Dirty Renter @ 33
    Interesting comment. Do you know if this is true – regulators gave preference to JP Morgan over the supposedly segregated account holders in MF Global? Was it a priority issue and if so did the regulator have discretion? If the regulators could have given priority to the account holders it seems like a very big deal even beyond the fact that an almost Secretary of the Treasury lost a billion.

    http://gonzalolira.blogspot.com/2011/12/run-on-global-banking-systemhow-close.html#8581173696969905626

    From the article:

    Brokerage firms hold clients’ money in what are known as segregated accounts. This is the money that brokerage firms hold for when a customer makes a trade. If a brokerage firm goes bankrupt, these monies are never touched—because they never belonged to the firm, and thus are not part of its assets.

    Think of segregated accounts as if they were the content in a safety deposit box: The bank owns the vault—but it doesn’t own the content of the safety deposit boxes inside the vault. If the bank goes broke, the customers who stored their jewelry and pornographic diaries in the safe deposit boxes don’t lose a thing. The bank is just a steward of those assets—just as a brokerage firm is the steward of those customers’ segregated accounts.

    But when MF Global went bankrupt, these segregated accounts—that is, the content of those safe deposit boxes—were taken away from their rightful owners—that is, MF Global’s customers—and then used to pay off other creditors: That is, JPMorgan.

  41. 41
    Blurtman says:

    RE: Dirty Renter @ 38 – Sure. But those with more knowledge and experience might have had a greater responsibility as they recognized the ramifications better than a relatively uneducated Mexican immigrant, for example.

    But if the ratings agencies had acted responsibly, we would not be having this debate. Ditto mortgage brokers, securtizers, investment banks, etc.

  42. 42
    Blurtman says:

    RE: 2kt @ 27 – Do investors really have to take into account that widespread fraud, captured regulators, criminal ratings agencies, and toxic revolvong door cronyism can crash the financial system when they decide to invest? Should home owners have taken this into acount? Investment bankers certainly realize that there is a cost to everything and capture politicians to make sure that someone else pays.

    The state has more than two options. Nationalization of the banks, breaking up of the TBTF’s which are now even bigger, bailing out the consumer, are but a few.

    Continuing to do wrong things, because you fear what would happen by acting correctly – not sure that is ever a good strategy.

    One will never know if letting the TBTF’s fend for themselves would have been the better course of action or not.

  43. 43
    One Eyed Man says:

    RE: The Tim @ 25RE: ChrisM @ 21

    “An element of conflict in any discussion is a good thing. It means that everybody is
    taking part and nobody is left out. I like that.”

    – Elwood P. Dowd – one of my hero’s since about 1966 when I first saw the play “Harvey” by Mary Chase

    forums like this are the “Public Houses” where issues of political, economic, social and sometimes scientific importance have been discussed for centuries. Perhaps you’d care to join me and Elwood at Charlie’s (or The Tim’s) later for a drink?

    I have no problem with tally’s of thumbs up and thumbs down, but I don’t see them as a substitute for insightful comments, newfound facts and critical thinking which benefit each of us and our society in the same way that a diverse and well mixed gene pool helps insure a species ability to adapt and survive.

  44. 44
    2kt says:

    RE: ChrisM @ 30

    I mostly hold large caps with decent yelds and corporate bonds and other income instruments. You can trade Apple with reasonable amount of risk/return. Other than that, I agree with that average person is better off staying away from stocks.

  45. 45
    2kt says:

    RE: Blurtman @ 42

    Yes, they do. There’s market risk, company risk, sector risk, regulation risk, fraud risk, etc., etc., etc. It has always been this way. Buy $10 book written in 1923. It will help you to put things in prospective.

    http://www.amazon.com/Fred-Schweds-Where-Customers-Yachts/dp/190682133X/ref=sr_1_1?ie=UTF8&qid=1325360328&sr=8-1

  46. 46
    Dirty Renter says:

    RE: Chris @ 40
    Sorry Chris, to say I know nothing about the laws governing investment banks, is a gross understatement. I have, however, seen many of the hedge fund managers & other traders, complain bitterly about their treatment by assorted governing bodies in the MF Global debacle. Rick Santelli of CNBC, has them on his segments on a daily basis. It smacks of the 1%ers being mistreated by the .1%ers? Every time I see them, I can’t help but think of the NBA strike, where the millionaire players were fighting with the billionaire owners.
    If laws were broken, let’s hope justice prevails.

  47. 47
    2kt says:

    RE: Chris @ 40

    I think the problem at MF arose in the accounts that were on margin. When customer buys securities on margin, the law permits the firm to use those margined secutiries. They will reconcile all accounts and eventually will find them. That is assuming the books were clean. MF was losing money for years before Corzine came on board. The recent articles in WSJ confirmed that Corzine actually reduced its leverage while at the firm. Not enough, obviously, and the repo trade was put on at the wrong time. Hence, the firm is gone, people lost jobs and the mess will take many years to sort out.

  48. 48
    Macro Investor says:

    RE: Chris @ 40

    “Do you know if this is true – regulators gave preference to JP Morgan over the supposedly segregated account holders in MF Global?”

    Chris, my understanding is “regulators” haven’t been involved. It was the bankruptcy administrator. Zerohedge is the place to discover more about this. Gonzalo is missing a few facts and likes to get readers all excited.

    A brief recap… There was a little-known law change (2003?), buried deep in a larger law. It allowed brokers to “hypothecate” (i.e. lend) customer funds and securities — keeping the interest received for themselves. For MF, those funds were levered up and invested in European gov debt. When those investments turned south the company went under. Customer funds were lost. Debt owed went to highest priority creditors first, perfectly legal (???, looks like yes).

    Bottom line — there is no such thing as segregated funds any more.

  49. 49
    Dirty Renter says:

    By Blurtman @ 42:

    RE: 2kt @ 27
    The state has more than two options. Nationalization of the banks, breaking up of the TBTF’s which are now even bigger, bailing out the consumer, are but a few.

    RE: Blurtman @ 41

    The same state which begged & cajoled JPM to buy Bear & WAMU; Bank of America to buy Countrywide & Merrill; Wells to buy Wachovia? That same state?

    HAPPY NEW YEAR, ALL.
    MAY 2012 BE PROSPEROUS AND A LOT OF FUN

  50. 50
    Pegasus says:

    RE: Macro Investor @ 48 – You still legally can’t commingle them which according to the regulators was done at MF.

  51. 51
    David Losh says:

    RE: 2kt @ 45RE: 2kt @ 44

    Can you define average person for me?

    and I disagree that what we just experienced, and are continuing to be beaten by, is the same as any other time in history.

    Nothing has changed, and if you have money in any corporation you will lose that “investment” unless you are an insider.

    I agree that the game is so far rigged that by the time your “long term” strategy comes due, that return will be long gone.

    OK, you might get lucky, but if you are like a whole bunch of other, “you gotta look at the long term” investors you didn’t cash out, you are back to being at evens.

    The run up however is over. We went from a 4000 stock market to 12000 stock market between 1994 to 2001 http://www.economicnoise.com/2009/12/10/stock-market-overvalued-but-still-rising/

    Technology launched the greatest amount of global trading, and is still that driving force. Any comparison to the 1930s is like comparing a horse to a Ferrari. Your “investment” is a little prize to the technology that is available.

    You don’t want to see that the game is rigged against you, no matter how much evidence there is to the contrary.

  52. 52
    Macro Investor says:

    RE: 2kt @ 47

    “I think the problem at MF arose in the accounts that were on margin.”

    This is not true. Be careful out there. Bill Fleckenstien lost money at MF. All he had in his account were treasury bonds — owned not margined. He THOUGHT he was safer keeping money in a “segregated” account instead of a bank.

  53. 53
    WillyNilly says:

    RE: softwarengineer @ 16

    My sibling has a friend who is 62. She is obstinate, self validating and in denial. Her family will have nothing to do with her, no man is interested in having a relationship with her, and she cannot seem to hold a job for very long – A hero in her own mind. What is lacking is any shred of humility.

    I think the rating system is fantastic. We all have our blind spots of perception, and some of ours are bigger than others. Anonymous posting is sterilized of the feedback loop of body language – getting a drink tossed in your face, a sock in the jaw, a hug, wink or smile, a tip of the hat. A simple ratings system such as this can tell us when we are on target, off, or way out of bounds. There are some very smart, high functioning, experienced voices here; I would not classify the group as a slice of mainstream humans. I imagine that after getting several hundred red thumbs you may storm off into the ether. Perhaps the voting system is not a joke, but an opportunity to see where the joke really lies. Munching on a little crow is an excellent remedy to balance out an excessive ego.

    In keeping with the excellent delivery system of the Seattle bubble, I would like to see a few more ratings icon options. I know there have been a quite a few posts here that have made my day, made me think – to dig in and learn more. An Icon click is a great, easy way to say thanks or F-U.

    May the new year bring us all the gift of an increased perceptual acuity.

  54. 54
    Pegasus says:

    RE: 2kt @ 47 – Don’t forget the repo trade was extremely risky especially in the current environment. A fool’s trade when backed with little or no equity. It was also carried off the balance sheet as were other transactions. In the end the the off balance sheet investments were about 16 billion dollars. Add that into your story of reducing exposure. Corzine did everything he could to increase the risk at MF including lobbying against increasing the firm’s equity on its investments and turning the firm into a gambling casino by placing high risk bets with the firm’s extremely leveraged tiny equity. Their total equity was about 1.3 billion at quarter’s end before bankruptcy and they can’t find 1.2 billion of their clients money?

  55. 55
    Chris says:

    RE: Macro Investor @ 48
    Thanks, that makes it clearer. I wasn’t sure what to make of that article as it implied the banks were getting priority over account holders through some discretionary act by a regulator or the Merc. It seemed with all the hearings going on and the elections that would be a pretty risky move for the banks, although I don’t put it past them. It looks like the law creating this outcome was from earlier.

  56. 56
    2kt says:

    RE: David Losh @ 51

    You, Dave. Stay away from the stockmarket. The game has always been the same.

  57. 57
    Blurtman says:

    Way off topic and an unsolicited product endorsement – Obenauf’s Heavy Duty LP. (https://www.obenaufs.com/index.php?route=product/product&product_id=30)

    I have an old pair of Vasque leather boots made in Italy when they used to make them there. They were faded, abused, and used as around the house work boots. I tried the Obenauf’s on them and they look great. It’s apparently made of beeswax, in the USA. You apply it by hand. I now wear the boots for going out to fancy dinners at the road house. Check it out. It works.

  58. 58
    2kt says:

    RE: Macro Investor @ 52

    If someone pledged un-margined treasuries from customer accounts on firm’s trade, they will end up in jail.

  59. 59
    2kt says:

    RE: Pegasus @ 54

    The firm has been overleveraged and risky well before his arrival. He did not make it either weaker or worse. It would have died with or without him.

  60. 60
    Sweet Pea says:

    By 2kt @ 47:

    RE: Chris @ 40

    I think the problem at MF arose in the accounts that were on margin. When customer buys securities on margin, the law permits the firm to use those margined secutiries. They will reconcile all accounts and eventually will find them. That is assuming the books were clean. MF was losing money for years before Corzine came on board. The recent articles in WSJ confirmed that Corzine actually reduced its leverage while at the firm. Not enough, obviously, and the repo trade was put on at the wrong time. Hence, the firm is gone, people lost jobs and the mess will take many years to sort out.

    One of the more disturbing things to me about the MF Global mess is the apparent difficulty in tracking what money went where. Operations was clearly in shambles for a while. Corzine either didn’t know and didn’t care, or did know and didn’t care. This is negligence at best. But not surprising. Operations and risk depts were long seen by Wall Street (and many other financial firms) as cost centers. Too bad they are essential to running a quality business. You don’t have to be evil to neglect these functions, just greedy and egotistical.

  61. 61
    David Losh says:

    RE: 2kt @ 56

    The game has changed significantly in the past ten years.

    I believe in small business. The returns are greater, it’s a real roller coaster, but I have control over the out come.

    Let’s say you have $50 million in the stock market. OK, only kidding. Let’s say your little, teeny, miniscule nest egg, that you are about to lose, is $2 Million. Your hoping and praying, because you have absolutely no information, that you get a 17% return this year, oh OK 37% return this year. Now what? How are you going to bury that?

    Let me guess, you’re going to defer, and some day, when you are a very, very, good person, you will get that money back with a capital gains tax that you are hoping, and praying Congress doesn’t monkey with.

    Do you have any idea how many people you could employ, how much you can save in taxes, or how much you can expense for $2 Million?

    If you don’t have a business plan just ask me. There’s lots to do in America, or globally for that matter.

  62. 62
    Pegasus says:

    RE: Macro Investor @ 48 – I think you will find it is not the hypothecated segregated funds that put the firm under. It was mainly the repo trade on the crappy European sovereign debt in the firm’s own trading account that killed them and that was not done with segregated funds. When it went against them they were forced to meet margin calls. They may have used client monies to meet those calls. On the day of the firm’s bankruptcy, early on October 31, the MF Global executives told regulators that the customer fund shortage was real with almost $700 million going to the broker-dealer side for liquidity problems due to transactions, possibly beginning from October 26.
    In addition, they were also told by MF that a $175 million segregated fund loan went to the firm’s U.K. office.

  63. 63
    David Losh says:

    RE: 2kt @ 58

    I doubt that very much. The focus will be on Corzine.

  64. 64
    Pegasus says:

    RE: 2kt @ 59 – Wrong! Anyone with a brain who has followed what Corzine was doing at MF knows he was to trying increase the firm’s risk. Against the firm’s own risk advisor he leveraged the firm into the repos that killed the firm. That is what killed the firm, not what was on the books when he arrived. He had to go and convince the board of directors to increase their exposure to make more of the more of bad bets that he was making. If you leverage into riskier and riskier investments it will eventually destroy you. That is what Corzine was doing. He even went to the regulators to stop them from requiring more equity for their own(MF’s) trading. That sure sounds like more risk. He was turning MF into his own hedge fund to try to make a buck instead of MF’s traditional business. MF’s traditional business growth had slowed and Corzine was trying to regrow the profits by speculating more and more with highly leveraged and improper bets. It blew up in his face and I believe he is also now lying about looting the firm’s clients to cover their own(MF’s) bad bets. You continue to defend Corzine by trying to minimize his role in the collapse of MF. You are so wrong.

  65. 65
    2kt says:

    RE: Pegasus @ 64

    Anyone with a brain can take a look at MF 2009 filing and see that it had $52 billion balance sheet and $1 billion of equity. It was long before Corzine’s arrival. You would like to believe that it was Corzine’s bet that killed it. This is simply not the case.

  66. 66
    Macro Investor says:

    Not real estate related, but possibly an important story for 2012 and the global economy:

    “Tehran proved its claim that closing the Strait of Hormuz is as “easy as drinking water,” debkafile reports. First thing Saturday morning, Saturday, Dec. 31, Iran’s state agencies “reported” long-range and other missiles had been test-fired as part of its ongoing naval drill around the Strait of Hormuz. Ahead of the test, Tehran closed its territorial waters. For five hours Saturday, not a single warship, merchant vessel or oil tanker ventured into the 30-mile wide Hormuz strait, waiting to hear from Tehran’ that the test was over.

    Instead, around 0900 local time, a senior Iranian navy commander Mahmoud Moussavi informed Iran’s English language Press TV that no missiles had been fired after all. “The exercise of launching missiles will be carried out in the coming days,” he said.
    For five hours therefore, world shipping obeyed Tehran’s warning and gave the narrow waterway through which one-fifth of the world’s oil passes, a wide berth.”

    http://www.debka.com/article/21608/

  67. 67
    Pegasus says:

    RE: 2kt @ 65 – You are refusing to admit that he changed many of those investments into riskier investments. You refuse to admit that he had about 18 months to clean up the balance sheet but instead he did the opposite by speculating more. You refuse to admit that it was the investments that he pushed and fought to be able do that killed the firm. Those were the investments that were hidden from view until their auditor forced them to reveal them in a note to their first quarter report. That report triggered the demise of the firm as the regulators and their counterparts started increasing their requirements. You refuse to admit he transferred about 16 billion into OFF-BALANCE SHEET investments that are not included in your false comparisons. You originally did not know the difference between a firm’s equity and it’s assets. Could it be that you don’t know what OFF-BALANCE SHEET means and how it affects leverage? You probably think that Corzine did not know that they were breaking rules with customers’ funds while they commingled their funds to trying to stay alive.

  68. 68
    Pegasus says:

    RE: Macro Investor @ 66 -That is one way to keep the price of oil up in the face of sinking demand. Roll out the fear machine. Works every time.

  69. 69
    2kt says:

    RE: Pegasus @ 67
    You are trying to tell everyone that a cancer patient died from a particular tumor. What I am saying is that the patient had terminal cancer and would have died any way. When Corzine came the firm was overleveraged and near death. He simply failed to produce a miracle.

  70. 70
    David Losh says:

    RE: 2kt @ 69

    How could you possibly know that? What would be your insider information source?

    Did you know MF Global was in trouble? and how could you know to what extent?

    In my opinion this company is a case about the point that the small investor has no credible information to base long, or short range decisions on.

  71. 71
    2kt says:

    RE: David Losh @ 70

    For the fiscal year ending 3/31/2008, MF lost ($69.5) million and ($49.1 million) in 2009, in 2010 loss was ($137 million). It’s commodities trading business kept losing business to automated exchanges, it was simply outdated. It’s commissions (May 2010 filing) were $1.386 billion in 2010 vs $2,014 billion in 2008. For the fiscal ending 3/31/2010 total revenues were $2.145 billion vs $2.914 billion on 2009. It was a dying business when Corzine joined it.

    You can look at annual report yourself.

    http://www.wikinvest.com/stock/MF_Global_Ltd._(MF)/Filing/10-K/2010/F62534222

  72. 72
    David Losh says:

    RE: 2kt @ 71

    It’s wikivest for heaven’s sake, brought to you by ETrade, and Ameritrade.

    Let’s cut the carp. In the deriviative market there are $707,568,901,000,000

    That’s $707 Trillion dollars. If you look at some of the stocks in your “portfolio” you’ll find $600 Million or Billion in deriviatives, it makes no difference what so ever because today it’s just a matter of a few more zeros.

    There is no way in the world your AmeriTrade account is giving you any information what so ever other than what trades will generate the most fees in the long term holding pattern.

    We are in an economy of funny money, fraught with fraud, and greed.

  73. 73
    Macro Investor says:

    RE: David Losh @ 72

    You ask him for proof. He gives it to you. Then instead of acknowledging you were wrong, you drop some random numbers you made up and explain it’s just “extra zeros”. Now I think I have to tell you what I told Krismer earlier — how about not annoying everyone and go sell a dang house or something?

    Okay? That’s as polite as I can be telling you this is polluting the thread.

  74. 74
    Scotsman says:

    “Underneath the patchouli and pneumatic drumming, the starry-eyed young share the same cobwebbed parochial assumptions of permanence as their grandparents: We’re gayer, greener, and groovier, but other than that it’s still 1950 and we’ve got more money than anybody else on the planet, so why get hung up about a few trillion here and a few trillion there? In a mere half century, the richest nation on earth became the brokest nation in history, but the attitudes and assumptions of half the population and 90 percent of the ruling class remain unchanged.”

    http://www.nationalreview.com/blogs/print/286867

  75. 75
    Tatiana Kalashnikov says:

    RE: Chris @ 39

    Yeltsin had dreams of a free Russia but two things got in the way – vodka and greed. Sadly, vodka is killing most Russian men at about age 57. But we can discuss that at another time. Greed on the other hand is making a lucky few in Russia very rich. When the Soviet Union fell the powerful and connected used their influence to position themselves to make vast sums of money. It continues today under Putin. Russia today is really not a country. It’s a criminal organization and Putin is Don Corleone.

  76. 76
    Pegasus says:

    RE: David Losh @ 70 – David the firm had a few hiccups before Corzine and was not in great shape. If memory serves there was a rogue broker problem or something similar several years prior to his arrival. The real problem was their interest income had gone away because of short term rates becoming almost non-existent. When rates were normal MF had a great profit stream off from their client base. Corzine’s game plan was to turn MF into a proprietary trading firm much like Goldman had. Unfortunately he had no capital to back the speculative enterprise and he choose to put the entire firm at extreme risk of failure by using high leverage and high risk investments. In the end it appears they used the clients’ equity to keep their head above water while they tried to sell the firm further compounding the nightmare. After all of the global destruction from similar game plans Corzine felt he could succeed where others had failed using the same stupid plan like AIG did. There were years where MF could have downsized, been orderly liquidated or sold without stealing the customers money.

  77. 77
    Pegasus says:

    RE: Tatiana Kalashnikov @ 75 – The Russian mob is alive and well in America. Something I am sure you are aware of.

  78. 78
    Tatiana Kalashnikov says:

    RE: Pegasus @ 77

    Oh yes, a handful of Russian and Ukrainian immigrants work on the dark side, engaging in theft, fraud and other crimes as they did in their home countries. I have two cousins, Arkady and Yakov Orinko who are auto dismantlers. The police comes to their wrecking yard too much, looking for evidence of malfeasance. But they, like most immigrants from the Slavic countries are honest, You are not suggesting that Arkady or Yakov are Russian mafia I hope??

  79. 79
    Scotsman says:

    http://www.nationalreview.com/blogs/print/286867

    “Public debt has increased by 67 percent over the last three years, and too many Americans refuse even to see it as a problem. For most of us, “$16.4 trillion” has no real meaning, any more than “$17.9 trillion” or “$28.3 trillion” or “$147.8 bazillion.” It doesn’t even have much meaning for the guys spending the dough: Look into the eyes of Barack Obama or Harry Reid or Barney Frank, and you realize that, even as they’re borrowing all this money, they have no serious intention of paying any of it back. That’s to say, there is no politically plausible scenario under which the 16.4 trillion is reduced to 13.7 trillion, and then 7.9 trillion, and eventually 173 dollars and 48 cents. At the deepest levels within our governing structures, we are committed to living beyond our means on a scale no civilization has ever done.

    Our most enlightened citizens think it’s rather vulgar and boorish to obsess about debt. The urbane, educated, Western progressive would rather “save the planet,” a cause which offers the grandiose narcissism that, say, reforming Medicare lacks. So, for example, a pipeline delivering Canadian energy from Alberta to Texas is blocked by the president on no grounds whatsoever except that the very thought of it is an aesthetic affront to the moneyed Sierra Club types who infest his fundraisers. The offending energy, of course, does not simply get mothballed in the Canadian attic: The Dominion’s prime minister has already pointed out that they’ll sell it to the Chinese, whose Politburo lacks our exquisitely refined revulsion at economic dynamism,

  80. 80

    By Scotsman @ 79:

    http://www.nationalreview.com/blogs/print/286867

    Look into the eyes of Barack Obama or Harry Reid or Barney Frank, and you realize that, even as they�re borrowing all this money, they have no serious intention of paying any of it back.

    Part of that is similar to the issue that comes up with executives at corporations being only interested in short term performance. President Obama will be gone in either 1 or 5 years, Reid probably 5 and Frank one year (he announced that right?). At this point you could even argue Frank doesn’t care at all!

    Short term performance will always be better spending more money and providing more services.

  81. 81
    Pegasus says:

    RE: Tatiana Kalashnikov @ 78 – I know nothing about your cousins nor you. I have noticed you have spoken several times about Putin and corruption and wondered if you thought Putin’s corruption had spread here. I know the Russian mafia has been active in America for many years but it really seems to have exploded in the past 10 years.

  82. 82
    Tatiana Kalshnikov says:

    RE: Pegasus @ 81

    The “Russians” who are here are actually from many places – Russia, The Ukraine, Moldavia, Belarus, etc.. Most are fundamentalist Christians and most are honest hard-working people. If there is a “Russian Mob”, it is loosely organized. For the most part a handful of men will work together, but they get tagged with the term “Russian Mob.”

    This criminal element is a menace however. Our community works very closely with law enforcement to identify those who steals, sell drugs or worse.

  83. 83
    Pegasus says:

    RE: Tatiana Kalshnikov @ 82 – Sorry. Did not mean to make you defensive about your heritage. I was hoping you might have some special insight into my observation of the recent rapid growth of the mob.

  84. 84
    David Losh says:

    RE: Macro Investor @ 73

    Proof of what? That MF Global was a dead company? They are all dead companies.

    This is a discussion of if bringing in Corzine was good or bad. It was all bad, and getting worse.

    I’ll say it more plainly, that it is better to invest your money where you can see it, like small business, than playing games in a Trillion dollar market place.

    By the way, Real Estate agents also sell, buy, and trade Business Opportunities.

  85. 85
    David Losh says:

    RE: Scotsman @ 79

    and you see? just like that Scotsman shows the significance of the $707 Trillion number.

    The national Debt is dwarfed by an illusion of the Derivatives Market.

    If you are indeed Macro Investing you must be aware that globally the amount of debt isn’t just a government issue, it’s also private. That debt is being reinvested a thousand times through trades.

    MF Global was a play area. 2kt is claiming that Broker trades were improper based on numbers that are compiled, and distributed by the very people who were giving Pegasus strong buy signals.

    It’s just numbers, with zeros, and so many zeros that you, as the investor, have no way of playing.

    The National Debt has gotten to be kind of the same thing. It’s big numbers, it’s Trillions of dollars, not as many Trillions of dollars as the Derivative market, but still they are big numbers.

    Let me do a what if for you, as nicely as I can. Let’s say the governments, globally, tax the trades of these extremely complicate financial market places. How would that work?

    Because it seems strange to me that governments struggle, and corporations like MF Global hire a rock star like Corzine, declare bankruptcy, and next we hear is that all the Brokers have government positions.

    There are millions of small businesses for sale right here in America. If you want to invest, I suggest you look at your own neighborhood, and stop playing around in a market place that is rigged against you.

  86. 86
    Pegasus says:

    RE: David Losh @ 85 – “2kt is claiming that Broker trades were improper based on numbers that are compiled, and distributed by the very people who were giving Pegasus strong buy signals.”

    HUH? Dave I was hoping that 2012 would be a year of enlightenment for you. Appears that is not going to happen. Happy New Year regardless.

  87. 87
    David Losh says:

    RE: Pegasus @ 86

    I understood your point about Corzine.

    Your point isn’t my point.

    “Mr. Corzine joined MF Global in March 2010 following a failed re-election bid for New Jersey governor.
    Soon after joining the firm, he moved to transform the sleepy brokerage firm into a full-service investment bank in the mold of his former employer, Goldman. He aggressively bought up European sovereign debt, wagering that the Continent would not let troubled countries default on their loans.”

    http://dealbook.nytimes.com/2011/11/04/corzine-resigns-from-mf-global/

    My reference to your “buy” signal is from the time when Corzine joined the firm.

    My point is that the risk of European debt was a gamble, and there is no way an individual investor would have any working knowledge about the prudence of those trades.

    The second part about my point is that $707 Trillion isn’t just a random number:

    http://www.myglobalinvestments.com/goldsilver/news/2011/11/derivative-bubble-707568901000000.cfm

    http://originaldialogue.blogspot.com/2011/12/707-trillion-derivative-bubble.html#!/2011/12/707-trillion-derivative-bubble.html

    http://icliks.wordpress.com/2011/11/26/the-derivatives-bubble/

    The $707 Trillion number is the most quoted dollar amount of the Derivatives Market. The other often quoted number is that the market has increased in “value” of $106 Trillion in less than a year.

    When you look at your stock performance, and holdings, in my opinion, you are looking at accounting numbers based on repeated capitalization of the same assets.

    How are you going to sort that out? Where is your information going to come from?

    Wikinvest

    So we have people on the week end blog in a “discussion” about the virtues of a multi national corporation that up until the day it failed was an investment opportunity.

    My repeated point is that it is all just a gamble. In gambling the house always wins.

  88. 88
    Jose says:

    I found the short interview with Robert Shiller interesting. In particular when he talks about the possibility of further long terms declines in home prices because of changes in manufacturing, style, etc.

    http://www.fool.com/investing/general/2011/12/23/robert-shiller-on-why-home-prices-could-fall-for-s.aspx

  89. 89
    Tatiana Kalshnikov says:

    RE: Pegasus @ 83

    No offense taken Mr. Pegasus. It is no secret that the Russians, Ukrainians, etc. are pouring into this country. There are now 125,000+ in Sacramento County alone – 1/5 of the population. And being fundamentalist Christians, they have many babies. Look for this group to have major voting influence in maybe 15 years. Most of our families live a traditional life. The men work in the trades – consider hiring them for your flooring, granite, etc.; they are true craftsman. But yes, I and most others from this group have direct knowledge of the men involved in the criminal element. Some can be quite ruthless, although I can assure you they all love their mothers!! All kidding aside, the “Russian Mafia” in the US is real. And it is a small offshoot of the real Russian Mafia, led by the very evil Mr. Putin himself.

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