Being outside the Bubble

Firstly, Happy Monday.

Over the past week I’ve been reading and hearing a lot of material on this Quantitative Easing by Bernanke etc. How his talk was interpreted was a mess so the Fed’s president spoke to clarify things on how QE would be approached, blah blah blah. And more about how Bernanke was trying to take some of the juice out of the Equity market so it wouldn’t take off without the economy.

Now, 2-3 weeks later, many see exactly what many feared. With the Fed acting the way it is with it’s policies, analysts have found a trend in the last few bubbles. The attached picture explains it perfectly. Whenever the Fed has kept its rates lower than the Nominal GDP, there’s been a bubble. And yes, that is exactly the position we are in now. Image

Many now fear that this bubble whether seen or unseen will either happen now because it has been noticed, thus putting investor confidence in the toilet or will be triggered in a more financial fashion, rather than the Red Scare. However, it’s very interesting. Would now be a great time to buy gold? Markets have been somewhat bullish, the fear of a bubble is setting in unless the Fed changes something, and gold is at record lows.So? Buy gold? I mean, if I could, I would, at least a sufficient amount to maybe collateralize what I have invested in equities? Or go all in and become a millionaire if things go my way. But then again isnt that the whole game?

 

Who knows, just some food for thought. Enjoy your July 4th’s.

 

Cheers.

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Globalization Theory

Buon Giorno.

Recently got out of the daily 9AM trade floor meeting. I was so tempted to bring up this little theory that I’ve developed over the past couple months; patents pending. However, in a room full of geniuses, I didn’t say anything in-case someone found it utterly stupid for “the intern” to put his two cents in, especially if my little idea was already known.

 

However, during the last couple weeks of school, on April 29th. I went to a talk at Brown University that involved a couple former Latin American Presidents. One was Ernesto Zedillo Ponce de León, a Mexican economist and former president of Mexico from December 1, 1994 to November 30, 2000.

Approximately a month before, I had given a presentation on the reality of Brazil as an emerging market among the BRICs and if it was actually leading the BRICs, aka fulfilling the economic prophecies. My findings led me to an article that helped me formulate my presentation. It, among other sources, pointed out that Brazil was underperforming and it’s as simple as that. It was not leading the BRICs and had under-preformed during the last few quarters.

So the question is, why? Well, my theory or as I call it, phenomenon, is that of globalization’s impact on emerging markets. The world is no longer flat. We know in a matter of seconds what is going on with the Nikkei over in Asia and milliseconds whats going on with the FTSE in London. Between the critics, the analysts, the media and speed that information travels today every move is speculated and known instantly. The connectivity is truly unbelievable between markets. With this integration of markets, an emerging economy is killed by it’s own hype. The analysts, speculators and media kill the potential of these emerging economies. Former President Zedillo coined the concept perfectly during his talk, labeling this mentality as a form of complacency. He related it to Mexico’s potential and arguing that outlets and economists (WSJ, Bloomberg, FinancialTimes, etc) tell the world that Mexico and the BRICs are going to be growing economies and have endless potential, so the country grows a little and figures because everyone in the financial world is saying they’re going to be good, that there’s nothing to do but sit back and let it happen. This is the complacency factor and phenomenon that globalization has caused and that the world economies have never seen. Never in our history have markets been so connected and information been so readily available; therefore causing this hype. I mean, I think it’s rather simple.

Now to relate this back to the meeting this morning, the fact that emerging markets currencies all haven’t been returning as much as people have hoped for other than the MXN Peso was brought up and questioned. Other, all very plausible factors were also thrown into discussion but I was surprised nobody had addressed anything close to my idea and it left me wondering if it would be relevant or worthy of consideration. Even if so, I don’t think there would be a way to quantify it’s (globalization/complacency theory) impact, which poses a problem were it to be taken into account.

 

Nonetheless, I would be very interested to see if anyone talks about this or if this becomes a big deal as markets integrate more and more.

 

Thoughts?

 

Arrivaderci.

 

Romney v Obama

 

Seriously. Our election is between a half black man and a Mormon. Why can’t our candidates be normal? And obviously that begs the question, what is normal. But thats not what I plan to talk about so lets not waste time.

Recently there was this whole video leak from a private fundraiser dinner with Mitt Romney and it wasn’t the most sensible and lacked solidarity. Basically, it was a conversation where any political leader would easily have in a small environment and have everyone nod their heads in agreement but if said on national TV would enrage millions. Which is exactly what happened.

This is what was said that was so looked down upon (if you already know, just skip down):

“There are 47 percent of the people who will vote for the president no matter what. All right, there are 47 percent who are with him, who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that’s an entitlement. And the government should give it to them. And they will vote for this president no matter what…These are people who pay no income tax.”

Romney went on: “[M]y job is is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.”

 

Romney told the contributors that “women are open to supporting me,” but that “we are having a much harder time with Hispanic voters, and if the Hispanic voting bloc becomes as committed to the Democrats as the African American voting block has in the past, why, we’re in trouble as a party and, I think, as a nation.” When one attendee asked how this group could help Romney sell himself to others, he answered, “Frankly, what I need you to do is to raise millions of dollars.” He added, “The fact that I’m either tied or close to the president…that’s very interesting.”

 

“We speak with voters across the country about their perceptions. Those people I told you—the 5 to 6 or 7 percent that we have to bring onto our side—they all voted for Barack Obama four years ago. So, and by the way, when you say to them, “Do you think Barack Obama is a failure?” they overwhelmingly say no. They like him. But when you say, “Are you disappointed that his policies haven’t worked?” they say yes. And because they voted for him, they don’t want to be told that they were wrong, that he’s a bad guy, that he did bad things, that he’s corrupt. Those people that we have to get, they want to believe they did the right thing, but he just wasn’t up to the task. They love the phrase that he’s “over his head.” But if we’re—but we, but you see, you and I, we spend our day with Republicans. We spend our days with people who agree with us. And these people are people who voted for him and don’t agree with us. And so the things that animate us are not the things that animate them. And the best success I have at speaking with those people is saying, you know, the president has been a disappointment. He told you he’d keep unemployment below 8 percent. Hasn’t been below eight percent since. Fifty percent of kids coming out of school can’t get a job. Fifty percent. Fifty percent of the kids in high school in our 50 largest cities won’t graduate from high school. What’re they gonna do? These are the kinds of things that I can say to that audience that they nod their head and say, “Yeah, I think you’re right.” What he’s going to do, by the way, is try and vilify me as someone who’s been successful, or who’s, you know, closed businesses or laid people off, and is an evil bad guy. And that may work.”

Okay. My grandparents came to this country without a dime to their name over 50 years ago and I’m not living off food stamps and government aid. Why? Hard work and not being lazy. Were they hurt by the economy? Fuck yea they were. Hurt hard, to the point of tears at the money they lost. Am I on foodstamps and living off government aid? No. You get what you put in.

If you haven’t worked a damn day in your life and you expect everybody else, because at the end of the day the government is basically everybody else’s money its not the governments, to pay for your new iPhone 5, your contacts, dental, healthcare, groceries and salary? Yet you also have about 1 grands worth of tattoos in your family, collectively? Are you out of your Goddamn mind?

I guarantee you if the people relying on government aid, aka everyone else, to live, had a “little fire under their ass” they would not be poor and needing the aid.

HOWEVER, there are always exceptions, bad luck and extraordinary circumstances that cause people to need help. These are the people that need help. 47% of the country does NOT need this help. I would love to see how much of the money goes towards what it is meant for.

WHY NOT REQUIRE DRUGS TESTS FOR WELFARE?

There will always be some way around but some regulation is better than none, and the money being spent frivolously.

Everybody seems to want a handout these days. And its not a matter of making a survey and asking people if they want a handout rather than working for it because I’m sure a large percentage would say they want to earn their share but when put to the physical test they’d check out in a second.

What Romney said at this dinner is in no way offensive to the “47%” he is addressing. He is speaking about common sense strategy for his campaign. Why target the 47% of voters who will be voting for Obama solely because the programs he is funding is keeping them alive? These are the voters that are voting for Obama no matter what because of his programs. So Romney stresses the importance of targeting the independent 10% of voters. Makes sense to me. Sounds like common sense. Doesn’t sound like someone who is not giving a shit about the other 47%. Maybe it sounds like someone who is tired of freeloaders.

Nonetheless, I feel like both parties are way to extreme. The Republican party needs to address and regard the middle class more than they do now and the Democrats need to stop trying to feed every hungry mouth in this country in addition to all the ones around the world. Democrats want to spend money they don’t have. How can we spend more money we don’t. We already need to pay over 15 trillion dollars in debt. It is actually really sad that people write out 15 trillion instead of writing the numeric version like this, $15,000,000,000,000. Just so you realize how much money that is.

And just keep this in mind, the US has about over $120,000,000,000,000 (trillion) in unfunded liabilities and these numbers are not slowing down.

It is up to the new generation, my generation, to realize to keep living the way we do; we have to change this.

I honestly would like to retire before I am 90 years old and enjoy some of my life doing nothing like the hundreds of generations before me have.

So vote with some common sense. If you don’t know, use http://www.isidewith.com/ to figure it out.

And when you get a chance, check this out, let it sit, and realize we are not wealthy. We’re fucked.
http://www.usdebtclock.org/

Thank you.

P.S. Please hate me and this rant/outcry. I love it.