Best Of The Best Share Discussion Threads

[traderabc] 08/4/2009 12:14

jim Rogers Americans should move to Asia !

[049balt] 07/4/2009 19:03

Farming is thew only business where a product is produced on an ongoing basis at a loss to the producer.

[049balt] 07/4/2009 19:01

traderabc, you have started some interesting threads, I find this one interesting because I am an Irish beef farmer and have followed Rogers for a while now. The problem with agriculture is the there is oversupply and the people that need what I produce cannot afford to buy it !, so unless the world gets richer then what is going to drive price increases?

[traderabc] 06/4/2009 17:56

'I would like to know WHEN will...'

o49balt

I take it they are higher then they were a few months ago? So the recovery has already started, though it could take a few more years before you see prices that will convince you that a generational pricing change is taking place (jmo)

The caveat being, other commodities will go up too, things like oil and electricity, which will in turn increase your running costs.

[traderabc] 06/4/2009 16:14

How do they get away with it?

[steve1905] 05/4/2009 19:00

westcoastrich, you're right there. Surpasses even Eva Cassidy's version

[049balt] 05/4/2009 18:16

Agriculture is in depression, it has been for the last twenty years, yet according the Rogers it the place to be!. I would like to know WHEN will beef, milk and grain prices start to recover?

[traderabc] 05/4/2009 14:47

Let's Play Pretend!

Peter Schiff
Apr 6, 2009

When elementary school kids want to escape the confines of their circumstances they pretend to be pirates, princesses, and Jedi knights. Now, with the relaxation of "mark to market" valuation rules announced yesterday by the accounting trade's self-regulatory body, our bankrupt financial institutions can escape their own reality by pretending to be solvent. The unraveling of our fairytale economy over the last few months has not yet convinced us that the time has come to put away childish things. The applause that greeted the news yesterday on Wall Street is a clear sign that we still have some growing up to do.

The imaginative conceit that lies behind the accounting change is that the toxic assets polluting bank balance sheets are not really toxic at all. They are in fact highly valuable assets that for some irrational reason no one wants to buy.

Using the "mark to market" accounting method, mortgage-backed securities were valued relative to the latest prices fetched by the sale of similar assets on the open market. Currently, those bonds are being sold at deep discounts to their original value. By "marking" their unsold bonds down to those prices, the insolvency of our financial institutions had been laid bare. The new accounting changes will allow the nervous owners to assign more "appropriate" (i.e. higher) values. Problem solved.

It is important to note that the Financial Accounting Standards Board made their rule modifications only after intense pressure had been applied by Washington and Wall Street. In their heart of hearts, I can't imagine that there are too many bean counters happy with the outcome.

The banks and the government have argued that the assets should be valued based solely on current cash flow. Most mortgages, after all, are not delinquent. Therefore, a few bad apples should not spoil the whole cart, and those that are not yet delinquent should be valued at par. This method assumes we have no ability to look into the future and make assumptions about what is likely to happen, which is presumably what the market is already doing by valuing the assets lower than the banks wish.

All kinds of bonds (corporate, government and municipal, etc.) that are not in default frequently trade at discounts. In fact, the reason that agencies such as Moody's and Standard and Poor's rate bonds is to assess the probability of default. The higher that probability, the lower the value placed on the bonds, regardless of their current cash flow.

For example, GM bonds that mature 10 years from now currently trade for only 8 to 10 cents on the dollar, despite the fact that GM is current on all interest payments. The 90% discount reflects investor awareness that GM will likely default long before the bonds mature. By the new logic, financial institutions with GM bonds on their balance sheets should be able to ignore the market and value these bonds at par.

Some argue that the comparison is invalid because GM's bonds are liquid while mortgage-backed securities are not. However, if sellers of GM bonds were holding out for 70 or 80 cents on the dollar, those bonds would be illiquid too. The reason GM bonds are trading is that sellers are realistic.

The same should apply to bonds backed by mortgages. To assume that a 30-year, $500,000 mortgage on a house that has declined in value to $300,000 has a high probability of remaining current to maturity is ridiculous. The borrower could lose his job, his ARM might reset higher, or he may simply tire of paying an expensive mortgage for a house that is unlikely to be sold at a profit. Any bond investor with half a brain will factor in these probabilities and look for deep discounts. The only way to accurately assess a real present value is to let the market discover the price.

Despite the pleas from bankers and politicians, mortgages are not plagued by a lack of liquidity but a lack of value. If sellers would be more negotiable, there would be plenty of liquidity. Who knows, at the right price I might even buy a few. The problem is that putting a market price on these assets would render most financial institutions insolvent, which is precisely why they do not want to let that happen.

Simply pretending that all these mortgages will be repaid does not solve the underlying problems. It may keep some banks alive longer, but when they ultimately do fail, the losses will be that much greater. In the meantime, solvent institutions are deprived of capital as more funds are funneled into insolvent "too big to fail" institutions - hiding their toxic assets behind rosy assumptions and phony marks.

Going from the sublime to the completely ridiculous, in a speech at the just-concluded G20 summit in London, President Obama urged Americans not to let their fears crimp their spending. It would be unwise, he argued, for Americans to let the fear of job loss, lack of savings, unpaid bills, credit card debt or student loans deter them from making major purchases. According to the president, "we must spend now as an investment for the future." So in this land of imagination (where subprime mortgages are valued at par), instead of saving for the future, we must spend for the future.

I guess Ben Franklin had it wrong too - apparently a penny spent is a penny earned.

[westcoastrich] 05/4/2009 11:27

Israel Kamakawiwo Ole' - Somewhere Over The Rainbow Lyrics



What a voice!

[rdlaing] 04/4/2009 23:16

Trader Jim Rogers is 67 Years Old?

[notanewmember2] 04/4/2009 23:15

"It comes as new figures from The Grocer magazine show food prices rose by more than 18% over the last year.
---
Rice - up 81%
Pork sausages - up 51%
Mince - up 22%
Milk - up 14% Source: The Grocer "

Agriculture fundementals not impaired, Banking fundementals impaired.

[traderabc] 04/4/2009 17:26

Having a laugh is essential when changing a discredited system, peaceful positive direct action is a laugh...

[i_hopi] 04/4/2009 16:58

traderabc - 4 Apr'09 - 16:09 - 201 of 201

Having a laugh is 'pointless'?
===============

It is if you're trying to overthrow the governments of the G20 LOL
=============

He is right on some things imo commodities e.g.

He was way off when he said the UK is finished as an exporter.

Hell, he couldn't even tell the difference between Rolls Royce cars and RR. engineering.

[traderabc] 04/4/2009 16:09

Having a laugh is 'pointless'?
Only in your world hopi.

Wrong MH, he called the yen correctly a few months ago, his long term predictions have been right for a decade, and he's still right about commodities, come back in a years time and lets talk about it.

[montyhedge] 04/4/2009 16:01

Rogers is a hasbeen, never calls it right now, everytime he is on Bloomberg he just talks his own book, utter rubbish.

[i_hopi] 04/4/2009 14:15

traderabc - 4 Apr'09 - 00:28 - 198 of 198

... the vast majority were peaceful and having a laugh, dancing in the streets ...
=========

All rather pointless then.

Lol!

[traderabc] 04/4/2009 00:28

Great demo out side Central Bank of England UK Wednesday, forget what they told you on the mainstream media, the vast majority were peaceful and having a laugh, dancing in the streets alongside the 'heart' of the beast...

Lol!

Alternative G20 Summit, London - Mark Thomas Part 1

[traderabc] 03/4/2009 12:25

Start Learning Mandarin Chinese