[MrBill]

$this->bbcode_second_pass_quote('firestarter', 'M')r Bill,

Do you see a dollar depreciation inflection point whereby other CB's will act (cut)?

Also, it looks as if subsequent to BB's cut on Tuesday, real interest rates are up big. As of now the 10 yr note is yielding 4.6%, which is almost 15bp's above its Tuesday am yield.

[Doly]

Let's summarize the current state of the American economy:
1) Falling dollar
2) Rising price of oil (even more with the dollar pegs from oil-producing countries removed), combined with the highest oil dependency of any country.
3) Enormous credit bubble bursting as we speak
4) Huge trade deficit

(1)+(2) > (a) Oil will be more and more expensive for the Americans
(2)+(3) > (b) The average American won't be able to make ends meet.
(1)+(3) > (c) Other countries will lose all interest in American debt and start dumping dollars like they aren't worth the paper they're printed on.
(2)+(4) > (d) The trade deficit will keep widening

(a)+(b) > (I) The American economy will grind to a halt. Literally. A likely scenario in my opinion is rampant inflation happening to transport, food and imported products, deflation to most other stuff. The average will be whatever the Fed wants to publish as an average.
(c)+(d) > (II) America, as a country, is going to be bankrupt. The dollar will devalue into nothing, but worse still, nobody will be interested in doing business with America.
(III) America is a very big portion of international trade.

(II)+(III) Houston, we all have a problem.

Is there anything wrong with my analysis?

[drew]

A very scary analysis indeed!

But, on the flip side, assuming that the US of A doesn't go 'tits up' first, there has to be a point where buying the greenback has to be a good idea.

Two of my coworkers want to do such a thing. One wants to buy 20k in US$ and the other is shopping stateside next week and wants to keep an extra 1k in US funds.

I wonder how long the canuck buck can stay at or above parity. Certainly money can be made or lost on the gamble.

Drew

[MOCKBA]

$this->bbcode_second_pass_quote('drew', 'I') wonder how long the canuck buck can stay at or above parity. Certainly money can be made or lost on the gamble.

[grillzilla]

a lot has been posted here concerning what Helicopter Ben knew, and why he did what he did..

I realize this is a day or two past the immediate discussion, but here is the best analysis of the Feds action that I have read:

Sudden Debt

[sparky]

.

Love it, it make perfect sense !

the 29 crash was caused by the wholesale dumping of good stocks to pay the margins ,
it got ugly when there was no buyers for overpriced stocks or dud ones
Still the greenback is worth less everyday , the aussiebuck is going up and up

The Chinese and Japanese , Korean , Saudis and other sheicks holding vast amounts of green are royaly screwed ,
the Chinese rattle money sabers but cannot have the greenback melting ,
it would destroy their best market and evaporate most of their savings
there is no present alternative but to grind teeth , bang their chest and get some pound of flesh , Japan and Korea are in the same situation .
however ,worst case, if one of them move to dump a selling avalanche might happen


cheers up stateside , it might seems all doom and gloom but it will give your manufacturers a bit of oxygen ,
cure your ridiculous trade imbalance ,
and make sure ( fingers crossed ) you can't afford expensive stupid wars for a while , only little cheap ones

in the link ,the analogy of financial markets as being the economy power plant is nearly perfect , I would have put it as the electricity grid of the real economy as closer still

P.S oil at 100$ for Xmas ??

.






.

[seahorse]

Looks like BHP just struck gold, the largest gold mine in the world that is, and, right next to their uranium and silver mines.

[url=http://www.marketwatch.com/news/story/bhp-billiton-strikes-gold-olympic/story.aspx?guid={C5A0E8CD-67F5-4DE1-9495-E055A7423750}&siteid=yahoomy]BHP strikes gold[/url]

[sparky]

.
The real gold is iron ore ,of witch there is not much around and steaming coal
Around Gladstone ( Queensland ) they have open cut mines with cliff faces of it
it's not mining as such , they blast half a klik of it and dump it in the waiting ships
lowest cost in the world

.

[MrBill]

Thanks for the comments over the weekend. Not much new to add here. Amid the cheerleading for lower rates to support the stock market were some sober commentaries about their inflationary impact, but, in summary, no one it seems wants to know. Party on, dude!

Mr. Sarkozy is becoming a real pain in Mr. Trichet's and the ECB's butt to be honest. At first I thought it was just playing to the home audience when he stormed the EU finance minister's meeting and called for a loosening of the Maastricht Criteria, and then more of the same when he publicly called for a lower euro. But now he is at it again. The French it seems will never learn that they need to reform their own economy, and not rely on the charity of others or a weak franc to get the job done for them. Italy can only hope Mr. Sarkozy succeeds, while the rest of us that like our inflation in the low single digits can only hope he fails le miserable.
$this->bbcode_second_pass_quote('', '
')Commodities Weekly

Gold and soybean price risk remains skewed to the upside

Dollar weakness has helped push gold sharply higher, while strong Chinese demand is providing support for soybeans.

Gold continues to shine -- raising our price forecasts

As expected, gold prices have rallied sharply and have already reached our previous price target of $725/toz, leaving our gold trade initiated on September 6 substantially in the money. We are further upgrading our gold price outlook based largely on the further weakening in the US dollar, and now expect gold to trade up to $775/toz on a 3m horizon and $800/toz on a 6m horizon. As a result, we are leaving our long gold trade open despite recent
gains.

Despite fresh highs, beans in the teens is still a risk

Since mid-August, soybean prices have appreciated by over 20% and are now approaching our 3 month forecast of 990 cents/bu. As a result, our long soybeans trade initiated on March 30 is substantially in the money. Nonetheless, we believe soybean price risk remains skewed to the upside in the near term and therefore recommend maintaining the position. In particular, demand from China, the world's largest importer of soybeans, remains strong amidst a backdrop of declining inventories.

[MrBill]

In response of a PM I received. Edited and updated adding quotes. Thanks.


Hello,

I think gold should be part of your portfolio as protection against a depreciating US dollar. But only one part of a balanced one. By the way, my salary is also tied to the US dollar, so I am not that happy with the dollar's decline either. I have to constantly exchange dollars for euros to stay ahead of (or at least keep up to) the free fall in the dollar.

If you care what ‘the investment biker’ thinks…
$this->bbcode_second_pass_quote('', ' ')The Federal Reserve's interest rate cut was a mistake that will prompt ``skyrocketing'' agricultural prices worldwide, exacerbate a decline in the dollar and quicken inflation, investor Jim Rogers said.

The ``clowns in Washington'' have ``signaled to the world they don't care about the U.S. dollar,'' Rogers said in an interview from Singapore. The Fed reduced its benchmark rate by half a percentage point to 4.75 percent last week.

The commodities rally, which Rogers correctly predicted in 1999, may last 15 more years, he said. Oil may reach $150 a barrel during that time, he said.

[Concerned]

$this->bbcode_second_pass_quote('', '
')One of the reasons Francois Sarkozy won the French presidency was the shocking revelation to the citizens of France that many of their wealthiest and most prominent families were moving to Belgium to avoid the high taxes in France. Soaking the rich can not go on indefinitely. It has its costs. The wealthy can vote with their feet.

[MrBill]

Concerned, never the less within three generations the distribution of wealth would probably look very similar once again. Given post peak oil depletion probably more of a smaller economic pie.

If you did have globalized labor unions then jobs would flow to only those countries that possess sustainable competitive advantages. That would impoverish those that do not. Forget Africa or Latin America with their lack of infrastructure, or even France with its adversion to hardwork, you would only want your factory in Germany where labor productivity is its highest.

If income was taxed worldwide at one uniform rate then investment would gravitate only to those countries with the absolute lowest costs. Again forget France or even America you would only locate your factories in low cost countries like Chindia. A level playing field is exactly that, but what do under-performers do when they are up against a superior team? They lose.

The only reason some companies might have operations in high cost, high tax regimes is if they can offset those higher costs by booking profits elsewhere either through subsidiaries or internal pricing. And tax competition between countries keeps tax and spend politicians honest. This tends to lower the rate for all rather than clustering at the top marginal rate where the incentive to innovate or invest is blunted by punitively high tax rates.

Governments need on average taxes of approximately 25-percent, which is still three working months out of each year per citizen, to fund basic infrastructure and social spending. Anything over and above 25-percent is just a tax grab and is a wealth transfer from its most to its least productive citizens. The rest is just wasted on big government and pork barrel politics.

$this->bbcode_second_pass_quote('', ' ')There seems to be almost universal agreement that one of the great ills of the United States is that wealthy people do not pay enough taxes. The facts, however, suggest that higher income people in the US are anything but under taxed.

According to an Op/Ed piece in the April 2007 Wall Street Journal, the Congressional Budget Office (CBO) reports that in 2004, people making more than $43,000 (the upper 40%) pay 99.1% of all taxes. That, of course, means that the lower 60% of the American population pay under 1% of federal taxes.

But there is more. The top 10% earners in the United States, those families making more than $87,300, pay almost 71% of all federal taxes. What makes this so remarkable is that in 1979 the top 10% paid only 48%.

Heaven forbid that a person be in the top one percent of earners in this country; according to the same CBO report, their part of the total federal tax bill was 37%.

[sparky]

.

Don't forget the cost of security ,
what 's the point of being rich if everyone's hand is up to get to your wealth over your dead body ?
The rich pay taxes to be left in peace to enjoy it ,
the poor have no particular reason no to go on a rampage , except fear
...a very short term commodity , cheaper to buy them off !
move to a small unimportant country and you can see your wealth disappear with no recourse ,
there too you have to buy protection .

.

[Concerned]

$this->bbcode_second_pass_quote('MrBill', 'C')oncerned, never the less within three generations the distribution of wealth would probably look very similar once again. Given post peak oil depletion probably more of a smaller economic pie.

If you did have globalized labor unions then jobs would flow to only those countries that possess sustainable competitive advantages. That would impoverish those that do not. Forget Africa or Latin America with their lack of infrastructure, or even France with its adversion to hardwork, you would only want your factory in Germany where labor productivity is its highest.

If income was taxed worldwide at one uniform rate then investment would gravitate only to those countries with the absolute lowest costs. Again forget France or even America you would only locate your factories in low cost countries like Chindia. A level playing field is exactly that, but what do under-performers do when they are up against a superior team? They lose.

[gswarriors4life]

I realize this is a little off topic, but I found out that the deep water drillers RIG and GlobalSantaFe are going to merge and become a new company as a result.

My question is how I can calculate the Price Per Share(PPS) of the new company once its merged. Sorry, can't seem to figure it out
myself

Here are the terms:(http://biz.yahoo.com/bizj/070723/1495058.html?.v=3):
"Terms of the agreement include Transocean shareholders receiving $33.03 and 0.7 shares of the combined company for each share of Transocean.

GlobalSanteFe (NYSE: GSF - News) shareholders will received $22.46 and 0.5 shares of the combined company for each GlobalSanteFe share." The merger will create a $53 billion company and 318 million shares outstanding.

___
Thanks so much!

[MrBill]

Just a few observations, some of which I have said before, in response to Comrade Concerned's remarks.

Yes, if you live on a finite planet, and breed like out of control rats that have discovered how to prolong lifespans, then eventually no matter what your income or lifestyle you will quickly outlive your resources. The definition of unsustainable growth.

Secondly, why should I volunteer to give up any of my wealth, not even 5-10%, to support others? Do I have a say in what they do all the days of their lives? Do I even have a say whether or not they are born? No. We live in an age where everyone has rights, but no one wants obligations.

It is true that we voluntarily choose to belong to a community. We may collectively pay income tax, even up to 50% (and more), which represents up to six months a year of our own labor and talents, so as to ensure 'equity' in our chosen community. But when the demands on our resources are all out of proportion to any perceived benefits then it is 'if you don't like it, leave', right?

Well, many choose gated communities or to change countries of residence and even nationalities because they cannot live with it any longer. They vote with their capital and eventually with their feet. Economic migration in reverse.

If you cannot control your borders and stop illegal immigration then how do you stop your best and brightest as well as those with capital from just getting up and moving voluntarily?

Alternatively, why would I stay in a war torn country with extreme poverty and a perrennially corrupt government if I had a choice?

When I think of the millions of dollars in taxable revenue and thousands of jobs that I have created for foreign countries as well as transferring knowledge and skills then I think of Canada's tax policies and Canadian businesses' narrow mindedness and have only them to thank for that loss. They create the brain drain. It does not invent itself. I am only one of thousands that were part of an exodus for twenty years or longer. Do I feel guilty? No, but resentful is a good word.

The free movement of capital and labor bring many economic benefits to host countries. Cyprus is a perfect example. Foreign firms like mine pay 75% of all taxes here, plus we create many other 'clean' high value white collar jobs for locals. However, it is true that there is a natural limit to how many unskilled laborers or ethnic groups not schooled in local culture and common values (Leitkultur) can be effectively absorbed into a community or nation.

One example is not whether 'gastarbeiters' from Turkey that helped fill labor shortages during Germany's 'wirtschaftswunder' played a positive role or not - they certainly did - but they were not successfully integrated into German society. Why? Because one they were not sent home after they finished their short-term job and secondly they were never offered permanent citizenship either. Now you have third generation Turks in Germany that are still not German citizens.

Canada is also grappling with this issue with short-term work permits. Canadian laws are somewhat different as Canada allows dual citizenship, but Germany does not. However, it is a public policy choice. How much immigration do you allow (legal) or tolerate (illegal), and how do you fill short-term job vacancies without triggering massive inflows of permanent workers. If only temporary, what incentive do they have to be good citizens or to integrate?

And in the post peak oil depletion context how do you enforce such trade-offs in the future as other countries go down the proverbial toilet, and Canada as such a large country seems to offer such potential (not that a lot of immigrants seem to want to live in Moosejaw or Thunder Bay and seem to prefer Vancouver or Toronto that are already over-crowded)? Do we need them? Can we (ethically or by force) keep them out? How many can we realistically integrate? Do they have core Canadian values? More importantly, can they leave their greavances and prejudices where they came from? All good questions and I am sorry far away from Trader's Corner.

We have a trade-off between events we can and cannot control. We have a trade-off between our duty to ourselves and our families and our obligation to greater society. Quite often there are compromizes that have to be made. This is not a civics class. I prefer to concentrate on concrete measures that we can control, like our investment decisions. Hey, if you get rich and want to give away all your money to worthy causes then good on you! ; - )

Sorry if I got a bit off topic. Cheers.

[MrBill]

$this->bbcode_second_pass_quote('gswarriors4life', 'I') realize this is a little off topic, but I found out that the deep water drillers RIG and GlobalSantaFe are going to merge and become a new company as a result.

My question is how I can calculate the Price Per Share(PPS) of the new company once its merged. Sorry, can't seem to figure it out
myself

Here are the terms:(http://biz.yahoo.com/bizj/070723/1495058.html?.v=3):
"Terms of the agreement include Transocean shareholders receiving $33.03 and 0.7 shares of the combined company for each share of Transocean.

GlobalSanteFe (NYSE: GSF - News) shareholders will received $22.46 and 0.5 shares of the combined company for each GlobalSanteFe share." The merger will create a $53 billion company and 318 million shares outstanding.

___
Thanks so much!

[MrBill]

RE GlobalSanteFe pricing

yes, yes, I know I have made a mistake! As soon as I left the office and sat down at the beach bar to wait for friends from Germany I realized I had not compared the offer to existing share prices. I will fix that tomorrow as soon as I have Bloomie in front of me. In the meantime sorry.

Like a Carpenter, measure twice, cut once. Think twice, edit, then hit send. Doh!

[gswarriors4life]

Thanks MrBill! Really appreciate your help.

[MrBill]

$this->bbcode_second_pass_quote('gswarriors4life', 'T')hanks MrBill! Really appreciate your help.