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Iran, Iran so far away

Today's Stocks

Triple digit rise of the dow. First time in six weeks. It's the pullback and it's over. The slide downward resumes tomorrow.

Oil spiked up the other day bacause Iran elected a new president, who is quite conservative. He was one of the founders of the student movement, who back in the 70's, decided that the US's embassy workers were all spies and took them hostage. Iran is also building up its nukes and more importantly, Iran has the second-largest pool of untapped petroleum in the world, an estimated 125.8 billion barrels and 16% of the world's natural gas. Iran has become a major oil supplier of China, whom it does not have a problem selling oil to, like it does us, because we are the Great Satan. It will be interesting to watch what happens concerning Iran in the months and years ahead. We currently have Iran surrounded. We have troops in Afghanistan, Iraq and naval ships in the Persian Gulf. So if we go to war with Iran, there's the oil reason (a fairly logical one, why we can't admit that we go to war for the valuable resource that is oil is beyond me, our entire economy depends upon it). Then there is the "Iran is developing nukes" reason, which may be what they tell us is the reason, but I doubt that's the real reason, any more than WMD is Iraq. Note: this is a really good reason for Israel to attack Iran however, or for the US to in order to protect Israel. There's also another reason that may come into play here, when I was a Mormon boy, talk about Armeggedon was interesting talk. It was fun to try and figure out the rantings of the biblical prophets. The great war is called the battle of Gog and Magog. Gog is Russia (or something like that) and Magog is Persia (aka Iran) and these countries will invade Israel. Please don't quote me on any of this bullshit. Here's a site that explains it better than I would ever want to. Now I don't put a lot of stock into these stories, but some people do, just the kind of people that are running our country at the moment. I think these stories are of use to them because they provide an easy exit strategy during these difficult times (we'll all be dead soon, so let's party!) and it helps them make sense of complex international relations. But they're dangerous in the sense that they become quite literally self fulfilled prophesy. If evangelicals continue to occupy the White House and the Congress then we can pretty much gaurantee that this scenario will play out exactly how it is spelled out in the Bible, not because the Bible is true, but because this is how those in power want to see it played out.

posted by Howie Hardcore @ 6/28/2005 02:29:00 PM 0 Comments

Oil the national termoil

I'm reading a book called "The Long Emergency" which give a very dire prediction of the world economy (and thus playing nicely into my doomsday scenarios) and it blames oil as the main culprit. I must say this makes a lot of sense to me. The book lays out the argument that our whole economy and well being: food, cars, plastics, everything rests on the foundation of cheap oil. If this were to be taken out of the equation then our economy would be very, very different. Then the book says that we are currently at the peak of oil production, that all the oil that is going to be found, has been and that we are consuming the last half of what's left and demand is rising as well and at an ever increasing clip thanks to us and China. This last half of oil is going to be the harder half to get. It will take more energy to pump it out of the ground and we probably won't get every last drop of it, especially if it takes a barrel to get a barrel. Add to this the fact that most of the remaining oil is in Saudi Arabia, Iraq and Iran then you being to get the picture that we're in for a rough ride. This last week (and today) the stock market is reacting negatively to the rise in the price per barrel of oil. It is now above $60 ($60.70) and as the future markets are predicting, it'll stay there for a year. This rise in the price of oil will greatly impact our economy. It'll be like being slowly sanded down. It will affect everything. Here are some fun predictions:

• SUVs will become evil(er). Driving one will cause one to take their life in thier own hands as people will vandalize them openly
  
• Sales of bicycles will skyrocket
  
• Revival of the Mother Earth News
  
• Suburbs will become ghost towns
  
• Office buildings will become obsolete and too expensive to run and cities will suffer as commuters are no longer able to commute
  
• Airplane travel will be a luxury reserved for the rich
  
• Big box stores including grocery stores will dwindle
  
• Self reliance will be in vogue and family farming will become a necessity

posted by Howie Hardcore @ 6/27/2005 11:08:00 AM 0 Comments

I'm Right, You're Wrong

It has been interesting to watch the financial tv shows over the last few days as the Dow has suffered its largest two day loss in a long time. The pundits I've seen, namely CNBC's Jim Cramer and Fox News's/Forbes's Ben Stein have been acting like cheerleaders for a losing team, trying to bolster the crowd because even though it's 4th a ten with under a minute remaining, there's still hope and you should buy, buy, buy. These are two individuals that I have a lot of respect for too. Based on what I've read about them, I would say they are fairly lucid, intelligent people. Ben Stein, who everyone knows as the teacher in Ferris Bueler's Day Off is actually an economist with a conservative bent. Recently he has been advocating that people save money (a novel concept) in order to have some money for retirement. I consider this pretty damn good advice. So why would he then advocate to "buy on the dip" of the recent decline in the stock market? He feels there is a sale going on. I don't think he could be more incorrect.

Jim Cramer knows how to take a beating. According to him, there were some days when he would walk into work when he used to manage a hedge fund and he'd be down a few million dollars. He learned that if you make small changes then you can usually turn things around. Jim understands that the hedge funds are short the S&P 500 but to him this is a rallying cry and we should prove them wrong by keeping cool heads. Instead of throwing up our hands in panic, we should buy, but buy the correct things. Let's look at what he is advocating we should buy. He says we should diversify and buy grocery store names like Proctor and Gamble and maybe some tech with Microsoft, get into the oil drilling biz with some Schlumberger or Halliburton plus of a host of other sectors which he thinks are worth while. I actually like his advice of taking a really down day and noticing which stocks do well under the conditions. He says those are the stocks to buy because when the money comes back, those are the ones which will do the best. Sounds pretty logical, except what happens if the money doesn't come back?

Here's why I think these two men are fundamentally incorrect but before I spell out my rationale I will turn first to the Oracle of Omaha, Warren Buffett, who is betting big that commodities are going to go up and that, more importantly, the dollar is going to go down. Mr. Buffett makes money by thinking very long term and he sees the writing on the wall. That writing is $7,773,570,880,558.82 in US debt ($7.7 trillion). The more in debt we go, the more we have to take a percentage of our GDP and pay it off. The less productive we are (in GDP) the less the dollar is worth and Mr. Buffett will be correct. For him it's a hedge however because most of his assets are in dollars to begin with, so he'll be lucky to break even, my guess is it won't be enough and he'll suffer too.

So we have the deficit, we have a huge trade imbalance which adds to our debt, we have irrational war spending with no exit strategy and we have high speculation, of which I think Mr. Crammer and Mr. Stein are victim to. The Dow is high, really high. Notice this chart of the Dow since the 80's.

Before the 80's the Dow didn't ride above 1,000. A 290 point decline in two days (like we just had) would have been a major crash back then. Now the Dow is above 10,000, it was riding high just before 2000 and then we had that little dot com crash and it's all but come back. Attention: we are in a bubble. Bubbles burst. The irrational exuberance went from tech stocks to blue chips, hedge funds and real estate but it's still a bubble. The dot com crash will look like a walk in the park compared to what's coming. How can someone get on national tv and advocate buying when we are in the last throws of the greatest bubble that mankind has ever seen?

One key difference between me and Mr. Stein and Mr. Crammer is that I pay attention to past market performance as an indicator of future performance. I think that if one does not do so, they are foolish. The Random Walk Theory refutes my notion that past performance equals predictable future results but all one needs to do is look at a chart like the Dow one above and it becomes pretty clear that we're on top of something that is very tenuous. Whether you believe the Random Walk Theory or buy into technical charting and Elliott Wave Theory (like I do) is your choice but I think it behooves you to know both sides, especially if you are investing in the market. You gotta look at those p/e ratios too, they are not dot com high but they are still high historically. We shouldn't use the dot com era as any kind of measuring stick to figure relative value.

One last word on the economy. The "R" word stands for recession. TV pundits and politicians hate to utter the "R" word. It scares people and hurts their chances of getting reelected. The definition of recession is actually pretty straight forward and we should have no problems uttering it if it appears. A recession is occurring if we have three straight quarters of declining GDP. Recessions happen all the time, what we don't have all the time is a depression, which is an extended, long recession and declining GDP.

According to the Bureau of Economic Analysis (the guys who figure out GDP), we just had down quarter #2 and if Q2 of 2004 hadn't been so much lower than Q1, then we'd officially be one quarter into a recession. Either way, I say we're already there and I believe that this one is not going to be a short lived blip. It's going to approach the "D" word.

posted by Howie Hardcore @ 6/25/2005 01:13:00 PM 0 Comments

I'm a ray of sunshine

I'm not quite sure how a flu pandemic would affect the stock market (and thus dovetail into my theory that the market will crash) but I guess it's possible that people just wouldn't be in a spending mood. As it stands today we are all sitting around waiting for a little, highly infectious virus to mutate, which when it does will kill millions and millions of people because we're defenseless against it. Fresh word from the Vietnamese agriculture ministry that the virus's antigen structure has changed (an antigenic shift has occured). This could be what we're all waiting for: a strain of this flu that can pass from human to human. Scientists claim that the H5N1 strain will most likely infect pig populations and from there (inside a pig) possibly combine with another strain of flu found in humans and then that will be passed from a pig to a human(s) and they'll sneeze on two friends and so on and so on... A report from China shows that pigs have already contracted H5N1 influenza, so depending on how long it remains in this (or other) pig population(s) we may see a human infection version.

Some things are certain, I will stay away from Chinatown, Vietnamese restaurants, airplanes, airports, subways and my child will not be playing at the public playground. Our apartment will transform overnight from Oscar Madison's oily t-shirt to the new autoclave in that episode of M*A*S*H. I will start making my own lattes and probably eat beef instead of poultry (irrational as that may be). I'll bet I won't be alone on this one; Netflix, Amazon and Ebay will do a brisk business. Worker attendance will hit an all time low. Baseball games will be deserted. It will be a really good time to write that novel, paint that picture and record that solo album. Real estate will get really cheap (I don't know why this would happen but I'll just mention it because it's a fantasy of mine). Introversion will finally be "in" but sadly there won't be anyone around to impress.

posted by Howie Hardcore @ 6/24/2005 10:03:00 PM 0 Comments

Down Dow

Down down another 123 points from yesterday, that's 2.7% in only two days.

posted by Howie Hardcore @ 6/24/2005 02:25:00 PM 0 Comments

That's it... we're screwed

Remember last month when Newsweek published a report saying that the Koran had been flushed down the toilet in Guantanamo prison? How it touched off five days of rioting in islamic countries? Well there is a new book out (actually an old book) written in the 1800's that has just been lifted off the censored list in Egypt. It's the account of a christian minister about the early days of Islam. The book has been censored because of its unflattering description of muslims, calling them "locusts" and the Prophet Mohammed as an "imposter". The kicker is that the author's name is "George Bush" yep, George Bush and it turns out he's a relative of the President. The Egyptian press is calling the author a direct descendant, his great-grandfather but the White House is saying the guy is a distant relative, third-great cousin, 40,000 times removed. In my opinion this is big. Regardless if the author is a relative of the prez, it's got that name on the cover. I wouldn't have thought that this would be a big deal prior to the Newsweek riots but if that can touch off such angst how is a book written by George Bush calling the Prophet an imposter going to play? I don't think this will spawn immediate riots but I also don't think it helps at all and definately adds fuel to the fire.

posted by Howie Hardcore @ 6/24/2005 09:37:00 AM 0 Comments

I am Dazed and Confused

Wow, two months since a post - I think I soiled me trousers. Anyway, I noticed in Howie's blog about the pot raids that there are 40 Mary Jane clubs in SF alone. WOW. I have a good friend who actually managed to survive spiral menengitus this past winter and he is now slowly but surely coming back to full health. While he was laid up in the hospital/morgue in San Jose, for extremely few peeps survive, he was legally prescribed the ishens. Now, does that mean he could seemingly roll up a fatty and walk down the street in front of Jah and everyone smoking that cheeba? I mean, if the grass is legal, albeit as prescribed by a licensed CA doc (Doktor Feelgood I presume?) to a CA resident, can that herb be puffed anywhere? Do you see people step out of office buildings with other smokers and twist up a joint of the ganja and talk to Jah? When they are done, do real men eat spleef? Do you see the moms at soccer games jammin on some indica while their kids are fighting under the goal post?

Just curious I guess.

posted by Captain Heinous @ 6/23/2005 12:39:00 PM 1 Comments

And now a word from our government....

Stock Market News:
Fed Ex warns, stock is down 7.5%. They are claiming the rising cost of oil as the main factor. This bodes bad for the economy at large. As a result of the Fed Ex warning, Merrill Lynch claimed that this may indicate the the economy was slowing down more than they had anticipated.

Both the Nasdaq and the Dow are down big today (Dow 166 points (ouch!), Nasdaq down 35 from its intraday high). I'm betting that during the next week the markets will go down 3-5%.

The 10 year bond yield is still less than 4% and oil is just under $60 bouncing between $59.20 and $59.95.

Our Government:
Four items came about today that remind me that as we inevitably slide into economic ruin, the US government will be there to make sure it's as painful as possible for its citizens.

1) In a hearing designed to throw cold water on two measures winding through Congress aimed at imposing sanctions on China for "unfair trading practices", both Alan Greenspan and Treasury Secretary Snow explained that imposing tariffs would "slow the drive to persuade Beijing to adopt a more flexible currency and won't protect U.S. jobs." "[It's] a misguided effort to protect jobs from competition, would redound to the eventual detriment of all U.S. job-seekers, as well as millions of American consumers [and] action on any of the punitive legislative proposals before Congress now would be counterproductive to our efforts at this time."

This of course fell on deaf ears in Congress where the assembled Senators interrupted Greenspan with trite emotional responses such as this from Senator Evan Bayh, "Workers across the country start each day at a disadvantage, simply because of illegal subsidies and illegal manipulation. It's not right. We must act to correct this situation.''

I guarantee the US Congress will take the steps to impose tariffs on China. It will sour relations and cause a lot more harm than good. The truth to the matter is that we no longer have a manufacturing economy, we have a services economy which is a bunch of smoke and mirrors. China and India are going to kick our ass and there isn't anything we can do about it, however the Congress can make life a lot easier on its citizens by not becoming isolationist and not leaning closer and closer to totalitarianism. Becoming protectionists and isolationist will harm the American, Chinese and world economy.

...and on the totalitarian front:
2) The House yesterday approved a bill for a Constitutional amendment to make it illegal to burn the flag. This is the 5th time such a bill has passed the House and this time it is likely this one will make it into the Constitution. This is a ridiculous bill designed to make idiots feel better but the underlying sentiment is a detraction of free speech rights. It's a piece of cloth. Get over it. What other flammables will be illegal to ignite, or flush or spit on in the future?

3) Our pot clubs were raided in San Francisco. Under the guise of breaking up a money laundering scheme, the Feds (with the help of the SFPD) raided three clubs (we have over 40) and arrested 13 people. They say it was money laundering but all the videos I saw showed cops stuffing pot into trash bags. I don't know if that was B-roll but it was a powerful image and I think the message is clear: Even though California and San Francisco is lenient (and has voted to make it legal) on medical pot use, the Supreme Court's recent ruling has given the conserva-nazis the fuel they need to scratch their punishment itch and it's probable that they won't stop until all the clubs are closed. If you take this example of Federal law superseding State law and grow it out, it is conceivable to come up with all sorts of hypothetical issues on which the Feds would be out of step with a particular state and enforce its laws by force.

4) The Supreme Court ruled today that it's OK to seize private property in the name of economic expansion. In other words, if a developer wants to build a Krispy Kreme where your house sits and he can convince a city council that that is a good idea, that city council can seize your property (after paying you off what they feel like paying) and then they will give it to the developer. Does anybody see the inherent danger here?

posted by Howie Hardcore @ 6/23/2005 10:32:00 AM 0 Comments

Four developments today on the countdown to doom

1) Ford Motor Company warned that their earnings would suck and also that they'd be cutting more jobs. As a result of this the Street expects their bond rating to be cut to BB-, or junk bond status. Thier stock dropped 4.5% today. GM fell 3%. Wonder what this means for the hedge funds. Did they bet on the wrong side of this one again?

2) The 10 year treasury bond fell under 4% yield again (3.945). This number is significant psychologically and it puts it within 23 basis points of the 5 year bond which is at 3.71%. According to economists, a flattened yield curve portends bad economic times ahead. This is a global phenomenon. Western and European bonds are all at historic low yields, the German ten year yield is at 3.114% and the UK ten year yield is at 4.21%.

News from Europe today indicated that they would begin lowering rates. This fueled rumours that there is a major slowdown in economic growth coming out of Europe and that it could effect the United States. Is this a spreading of the asian contagion, Japan's economy is sloooooow, now Europe, are we next?

3) Morgan Stanley reported that they would see a 24% drop in profit. They claim that rising costs of their equities trading, retail investors leaving the market earlier than usual during the summer, legal costs and equity underwriting all suffered. Who cares? Hey its Morgan Stanley, they're huge! 24% Yow!

4) Standard and Poors is downgrading mortgage debt of the type that consists of optionable ARMs, where a borrower can choose a variety of monthly payments. The minimum payment is one where they pay down none of the interest. These are popular in overheated markets where buyers are clammoring for houses. They are also the ones most likely to default. If defaults begin to occur the economy will suffer.

I went to a bookstore today and noticed the magazines. A lot had cover stories of the housing boom and coming bust: Economist, Atlantic Monthly and New York Magazine (nobody wants to be left in the dust for having not called such an obvious bubble burst). How long before home buyers start noticing the writing on the wall? Prices are all psychological. When buyers wake up to the fact that the 1 bedroom apartment is not worth $650,000 (I swear to god, it's for sale less than a block from my house) two things will happen: 1) loan defaults and 2) plummeting prices. Having S&P downgrade mortgage loans will probably have a tightening effect so that those dumb enough to want to buy a $750k 1 bedroom apartment will no longer be able to and then the guy holding onto it, who bought it a year ago for $600k is screwed.

posted by Howie Hardcore @ 6/22/2005 05:03:00 PM 0 Comments

Revenge!

Revenge!
I'll watch you bleed
Revenge!
That's all I need
I won't cry if you die
-Black Flag

Recently I’ve noticed that I’ve been incurring the wrath of my fellow human beings but I’ll save the hypothesis for why this is occurring to me for a future Lowbar post. This recent spate of wrath has caused me to reflect on why certain people feel the need to chastise others. I remembered reading in the news recently that some study had been done somewhere about revenge so I did some research.

The study, preformed by the University of Zurich involved a game where people were able to retaliate against other players. Sometimes the game’s rules dictated a retaliation, sometimes it didn’t and sometimes there would be a cost involved (money) for a retaliation and sometimes there wouldn’t be. As players played this game the researchers hooked up the players to PET scanning devices to monitor their brain activity. The PET scans show increased blood flow to certain areas of the brain. Blood carries oxygen, which is the fuel for brain activity and the theory is that increased blood flow to a certain area indicates activity in that area.

The researchers found that as players anticipated a retaliatory move in the game that blood flow increased in the area of the brain called the dorsal striatum. Previous research has shown that this region is involved in enjoyment or satisfaction. This stimulation of the dorsal striatum occurred before the revenge moment (in those players who decided to take revenge) and not after.

The researchers noted that the majority of players elected to impose a penalty even when it cost them some of their own money. When the retaliation cost them money, a second brain region (prefrontal cortex) that helps weigh costs and benefits got involved, too, but the striatum remained key. The level of activity actually predicted which players would spend more money to get revenge.

The researchers further noted that deficits in prefrontal cortical functioning may contribute to the psychopathology (not being able to control one’s drive for revenge) by a lack of ability to weigh beneficial against negative consequences of an action. They also discovered that subjects with lower activation in the dorsal striatum punish less.

Why would we (through evolution) select to have brains that get rewarded when we dole out revenge? Why do we reprimand people who have abused our trust or broken other social rules, even when we get no direct practical benefits in return or when it even costs us something?

The researchers suggest that the feeling of satisfaction people get from meting out altruistic punishment may be the glue that keeps societies together. "Theory and experimental evidence shows that cooperation among strangers is greatly enhanced by altruistic punishment," said Ernst Fehr, director of the Institute for Empirical Research in Economics at the University of Zurich in Switzerland "Cooperation among strangers breaks down in experiments if altruistic punishment is ruled out. Cooperation flourishes if punishment of defectors is possible."

Ah so that’s it! We’ve created this ability in ourselves in order to enhance cooperation, which on the surface appears like a good idea but the problem lies in that while people are operating under the guise of altruism (cops, judges, the self-righteous, lawmakers, busy-bodies, vigilantes, war mongers) they are really just getting off in their own minds -mental masturbation in public.

So based on all the above information, it can be said that:

1. We’re hard wired to seek revenge, chastise and punish others.
2. If the risk of doing so isn’t that great then we will be more likey to engage in this type of behavior.
3. Some people’s prefrontal corticies do not function correctly and they are unable to switch off this reward mechanism even when the risks are high.
4. Some people with low activation of the dorsal striatum punish less (pacifists)

This is something to think about the next time you encounter someone who decides to retaliate against you when you violate a social norm -they are actually getting off doing so and they may not be able to help themselves because their brain isn’t functioning correctly.

posted by Howie Hardcore @ 6/20/2005 03:16:00 PM 0 Comments

Economics
Small but telling developments today on my watch to see the Dow tank,

1. Oil rose to nearly $60 a barrel.
2. The Index of Leading Economic Indicators dropped more than expect in a year that hasn't seen the index rise at all (the only indicator that rose was the stock market). There's an interesting quote from the labor economist, Ken Goldstein, saying that the indicators suggest "slower growth setting in during the third quarter." and that it's "not just a domestic phenomenon." He noted that six of the eight countries for which the Conference Board monitors a leading economic index have either showed declines or slower growth. This is significant because I am suggesting that the coming stock market crash will be a result of a global economic slow down.
3. A major UK Hedge fund is closing its doors, Bailey Coates Asset Management LP. This fund used to manage over $1 billion. In April they lost 17% (probably due to the GM bond fluctuation) and lost 20% the first four months of 2005. Hedge funds don't close doors if they are profittable. Many reputable banks are running or participating heavily in hedge funds.

Technology Sux
Here's something that I can't quantify but I've given it some thought of late: technology just isn't cool anymore. Sure it's amazing, take a cell phones for example, we can call anybody from just about anywhere anytime but the buzz has worn off. Nowhere is this more evident than on a bus where people try to one-up everyone else by chattering incessantly into their co-workers voice mails.

There's not one gadget I can think of that I enjoy using. I've stopped totting my iPod around. I have no idea where it even is. If I don't use my cell phone all day, I'm happy. The sight of blue-toothed ear pods makes me cringe and "Crackberried" co-workers are on my shit list. I may be alone but I'm anticipating that general boredom will set in and en mass Americans will stop consuming iPods, cell phones, PDAs, etc. Gadgets that get rid of technology's imposition will continue to sell well. Here I am referring to the gadget that turns off TVs and the one that blocks cell reception.

Popskull
The band played a house party this weekend. It's been almost 20 years since I've played at a house party. I noticed a few changes:

• Girls no longer make out with me. This is probably due to that fact that a) I'm married b) they are married c) they didn't like our music d) I'm ugly
• The cops didn't come. At first I thought this was good now I'm not so sure. Were we not loud enough?
• People danced. They didn't slam dance, they boogied. I had never seen that before. I'm not talking about a lot of people dancing but there were a few. It was weird.
• Some lady asked if we were a punk band "you know like the Cure."
• Instead of playing to a crowd we played to a semi-empty room. The crowd was in the backyard drinking.
• A passed around joint got no takers.
• Instead of a keg and jello shots there was sushi (and lots of it).
• We got the biggest response when we started playing (as a joke) "Jessie's girl". We don't know the song however so by mid way we stopped. The two girls who were excited about the song left in disgust.
• We had a mist machine, lasers and light robots.
• People looked nice. They came to the party kind of dressed up. I'm used to people smelling badly.
• Our guitarist thanked people for "rocking out with us."
• I am much less self-conscious than I used to be when playing live. I am much more adept at spazing out than I was when I was 17.
  

posted by Howie Hardcore @ 6/20/2005 10:17:00 AM 0 Comments

I am fun at parties

I haven't written much in the past year here on Lowbar but the recent shutting off of this domain has caused me to reflect on how fun it is to spout off here. So I thought I'd give you all a dose of the kind of thing I spend my day thinking about. You are free to consider me a freak, doomsayer, economic genius or libertarian regurgitate, it don't matter to me. Feel free to post your own thoughts.

So here's what I think about the current world economy:

1. Countries that are manufacturing cheaply produced goods are selling to the Americans
2. Because these countries are selling to us and are not buying what we produce there is a trade deficit.
3. This money that the producing countries are making is going back into our economy in the form of bonds.
4. Because of the demand for bonds by these foreign countries (Japan and China mostly) the yield on the 10 year bond is very low (a 4% yield is attractive to these countries because their yields are much lower).
5. Mortgages and long term bank loans are tied to the 10 year bond yield. Because this is low, this is fueling the housing boom and also the home equity loan boom (credit)
6. Because there is lots of "easy money" available, Americans are spending and not saving
7. The US trade deficit is running at $55+ billion a month
8. We make up for that deficit and for our unbalanced budgets by borrowing money (selling bonds)
9. Our national debt, what we owe on the money we've borrowed, is at an all time high of $8+ trillion dollars

1. The US has a solid reputation for repaying its debts
2. The dollar is the defacto currency for trading in oil (thanks to Henry Kissenger) and thus it has clout as a currency
3. The competition hasn't gotten its act together (yen and euro)
4. The creditor countries are not in dire straights economically (yet) and therefore they are not pulling their loans and they are continuing to invest in the US debt
5. We are buying their goods so it is in their best interest to keep us in a buying mood

Some possible scenarios on how this may play out

1. The US will continue to increase its debt (why wouldn't we?). The recession that started in Japan and now is taking hold in Europe will worsen and expand and foreign countries will begin scaling back their investment in US bonds
2. Our debt to GDP ratio will start to look ridiculous to our creditor countries and they'll stop investing in our bonds. After all, with all those baby boomers retiring, who is going to pay the interest on the debt?
3. An unforeseen fluctuation of markets will cause highly leveraged hedge funds to loose record investment monies. Since banks are hedge fund players, many of these institutions will fail. This will cause a tightening of easy money lending and possibly a massive government bailout which will add to the debt

We'll still need to fund our spending however so as the dollar becomes less attractive and starts to drop the Fed will be forced to raise short term interest rates. This will not be the quarter point rate hikes that we've seen from the Fed of late but will be much sharper and quicker rates of increase. These increases will spill over to the banks and they will tighten the easy money. The housing boom will go bust overnight in that those home buyers that are using creative loans will no longer be able to do so and their mortgage rates will go up, so they won't buy. In addition, people who have existing adjustable rate mortgages are going to get shafted. The really bad news here is that for most Americans their home is their savings (and also their debt through home equity loans). If that investment dries up, Americans will not be in the mood to spend. If Americans are no longer spending then the rest of the world is in a load of trouble since we are the #1 consumer in the world. Countries like China, whose entire economy has become dependent on US consumption, will crash.

I think this worldwide crash is inevitable since we continue to get into debt. Sooner or later that rate of debt will catch up to us. This is further exacerbated by our increasing dependence on foreign labor, increasing demand for oil and its rising price and of course our expensive war.

How you can profit by the coming crash

Learn how to short stocks, commodities and currencies (dollar). Any stock will do. Those dependent on housing are good choices. Index stocks are a good pick. Gold will likely go up as well.

If you are looking for a cheap house learn how to buy preforclosures. I don't recommend buying these as investments but soley as your primary residence (since the costs of homes is likely to go down for many years). Here's good information on how to buy preforeclosures.

Refinance your existing ARM to a 30 year fixed if you can afford it, pay off your credit cards and save cash. Better yet, sell your inflated house now while you can.

More to come (lucky you)....

posted by Howie Hardcore @ 6/17/2005 07:25:00 PM 1 Comments

Wakey wakey

Welcome back to Lowbar. Sorry about the lights out. I forgot to pay the bill.

Here's another nifty tool. This one you have to install. Now when I type in my browser address bar "google:das rok aeps" or "lucky:crazychuck" I get the desired results.

posted by Howie Hardcore @ 6/17/2005 03:40:00 PM 0 Comments

Find Your Next Apt.

Just about the coolest thing I've ever seen: http://housingmaps.com/

posted by Howie Hardcore @ 6/09/2005 04:23:00 PM 0 Comments