You can find out more by searching the following:
- "How Wall Street Can Bail Itself Out Without Destroying The Dollar" By Thom Hartmann
- U.S. Congressman Dennis Kucinich from Ohio
Thursday, October 16, 2008
o Securities Turnover Excise Tax
The idea of taxing security transactions has been floating around the internet but has not been considered yet by Congress. A Securities Turnover Excise Tax is a small tax on every stock, swap, derivative, or other trade.
You can find out more by searching the following:
You can find out more by searching the following:
Wednesday, October 15, 2008
o US Government to Purchase Bank Stocks
The US government has mandated a $250 billion purchase of bank stock. A partial list of CEOs and banks to be included are:
The fiscal health of the US government is at stake. The value of US Treasury bills, fiat money printed by the Federal Reserve Bank, and toxic mortgages are at stake. We can see a global meltdown if other countries start dumping US dollars and Treasuries. The global market is not rational, it runs on confidence, fear, and greed. Rescuing the banking system is none other than rescuing the US government from its own financial meltdown.
Buy gold bullion and buy silver coins now.
- Ken Lewis, CEO of Bank of America and Merrill Lynch & Co
- Jamie Dimon, CEO of JPMorgan Chase
- Lloyd Blankfein, CEO of Goldman Sachs Group
- John Mack, CEO of Morgan Stanley
- Robert P. Kelly, CEO of Bank of New York Mellon
- Vikram Pandit, CEO of Citigroup
- John Stumpf, CEO of Wells Fargo
- Ronald Logue, CEO of State Street Corp
The fiscal health of the US government is at stake. The value of US Treasury bills, fiat money printed by the Federal Reserve Bank, and toxic mortgages are at stake. We can see a global meltdown if other countries start dumping US dollars and Treasuries. The global market is not rational, it runs on confidence, fear, and greed. Rescuing the banking system is none other than rescuing the US government from its own financial meltdown.
Buy gold bullion and buy silver coins now.
Sunday, October 12, 2008
o word of the day: MARGIN CALL
Buying a security such as stocks on margin is a form of leverage. An investor uses funds borrowed from a brokerage company to purchase the equities. The Federal Reserve Board governs margin requirements for brokers such as Merrill Lynch and Wachovia.
Assume an investor contributes 50% to the purchase of $10,000 worth of a stock. The investor sends $5,000 to his brokerage firm and the brokerage firms lends him the additional $5,000 needed for $10,000 total. The term "investor" no longer makes sense because now that person has crossed the line and has become a "speculator" hoping to magnify his gains. The next day the share price falls and his speculative portfolio is worth only $4,000. But the speculator owes the brokerage firm $5,000. Ruh Roh! The speculator gets the dreaded margin call.
A margin call is a demand from a broker for additional cash or securities to bring a margin account back within minimum maintenance limits. Brokerage firms are forced to liquidate holdings if the minimum margin requirements are not met. In the above example, the brokerage firm will likely liquidate the person's holdings and demand an additional $1,000 worth of cash or securities to remain whole.
Hence the vicious spiral down in the equities market. I heard they were going to remove the word 'buy' from the dictionary due to lack of use. I would not reinvest in the markets until all leveraging has been purged.
Assume an investor contributes 50% to the purchase of $10,000 worth of a stock. The investor sends $5,000 to his brokerage firm and the brokerage firms lends him the additional $5,000 needed for $10,000 total. The term "investor" no longer makes sense because now that person has crossed the line and has become a "speculator" hoping to magnify his gains. The next day the share price falls and his speculative portfolio is worth only $4,000. But the speculator owes the brokerage firm $5,000. Ruh Roh! The speculator gets the dreaded margin call.
A margin call is a demand from a broker for additional cash or securities to bring a margin account back within minimum maintenance limits. Brokerage firms are forced to liquidate holdings if the minimum margin requirements are not met. In the above example, the brokerage firm will likely liquidate the person's holdings and demand an additional $1,000 worth of cash or securities to remain whole.
Hence the vicious spiral down in the equities market. I heard they were going to remove the word 'buy' from the dictionary due to lack of use. I would not reinvest in the markets until all leveraging has been purged.
o The Order of Operations Matter
The government should concern itself with long term job growth and lowering fuel costs first. The result of job stability and affordable fuel will naturally be increased home ownership. Just like in mathematics, the order of operation matters for economic factors as well.
Without the correct order, watch what happens: I buy a house but lose my job to an overseas firm that can under cut labor costs. Now I have to foreclose on my house and live in my car.
Without the correct order, watch what happens: I buy a house but lose my job to an overseas firm that can under cut labor costs. Now I have to foreclose on my house and live in my car.
Saturday, October 11, 2008
Friday, October 10, 2008
o Conspiracy Theory
Note, this is a conspiracy theory with no proof to back it up.
It's interesting to speculate why AIG was bailed out while Bear Stearns and Lehman are left to fail? Conspiracy theorists trace AIG back to Goldman Sachs. If AIG fails, Goldman Sachs is exposed to huge losses because of their bilateral transactions with the company. More than likely, an AIG failure means a Goldman Sachs failure. That event would hit Hank Paulson personally and financially. Paulson has a trust set up containing his Goldman shares. Plus he has personal friends at Goldman. Friends don't let friends fail, do they? Is the AIG bailout sound fiscal policy or old school Washington DC cronyism?
It's interesting to speculate why AIG was bailed out while Bear Stearns and Lehman are left to fail? Conspiracy theorists trace AIG back to Goldman Sachs. If AIG fails, Goldman Sachs is exposed to huge losses because of their bilateral transactions with the company. More than likely, an AIG failure means a Goldman Sachs failure. That event would hit Hank Paulson personally and financially. Paulson has a trust set up containing his Goldman shares. Plus he has personal friends at Goldman. Friends don't let friends fail, do they? Is the AIG bailout sound fiscal policy or old school Washington DC cronyism?
Saturday, October 4, 2008
o word of the day: VISUALIZATION SOFTWARE
Visualization software provides interactive data visualization that helps business, scientific and engineering users gain critical insight from all types of data. It should be applied to the impact that government policies have on the economy.
A software package called PowerWorld (www.powerworld.com), for example, maps out power lines so engineers know what effect a power line going down has on the entire power grid.
Let's assume the Fed raises interest rates, natural gas prices fall, and the Alternative Minimum Tax is repealed. I don't trust anyone in Congress to know what the aggregate impact of all three changes will have on consumer spending. Visual software allows the user to enter data into a model to create scenario testing. The software helps to bring about optimal decisions. Its powerful stuff.
Its hard to contextualize policies and scenarios when politicians talk about them independently. The economic system is intertwined. I'd rather hear a debate be over the accuracy of input data and system modeling techniques than an argument over individual policies, especially since government policies can have a big impact on the overall economy.
A software package called PowerWorld (www.powerworld.com), for example, maps out power lines so engineers know what effect a power line going down has on the entire power grid.
Let's assume the Fed raises interest rates, natural gas prices fall, and the Alternative Minimum Tax is repealed. I don't trust anyone in Congress to know what the aggregate impact of all three changes will have on consumer spending. Visual software allows the user to enter data into a model to create scenario testing. The software helps to bring about optimal decisions. Its powerful stuff.
Its hard to contextualize policies and scenarios when politicians talk about them independently. The economic system is intertwined. I'd rather hear a debate be over the accuracy of input data and system modeling techniques than an argument over individual policies, especially since government policies can have a big impact on the overall economy.
o The Worst Form of Cruelty
The worst form of cruelty is hurting people you intend to help. It happens when your heart is in the right place but your head is not. The promise of home ownership and affordable housing for all sounds like a great idea. The difficult part is how to achieve that ideal.
The Community Reinvestment Act (CRA) encourages banks to lend to subprime "risky" investors. The regulation was substantially revised in May 1995. Lending standards in general were loosened over the past decade, whether loans fell under the CRA or not is not the issue.
The Community Reinvestment Act (CRA) encourages banks to lend to subprime "risky" investors. The regulation was substantially revised in May 1995. Lending standards in general were loosened over the past decade, whether loans fell under the CRA or not is not the issue.
- Federal Reserve website describing the CRA
- http://www.federalreserve.gov/dcca/cra/
- Please read Fannie Mae's Brochure:
- www.fanniemae.com/media/pdf/fanniemae_introduction.pdf
- https://www.efanniemae.com/sf/ip/cra/mbs.jsp
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