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My Pocket Just Got Picked
Old 04-05-2008, 08:35 PM   #1
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My Pocket Just Got Picked

I was thinking just this morning... Cash is King now, right? Credit is harder to get. There is a flight to quality. So guys like you and me should be in the cat-bird seat, right? We piled up the cash for just such an opportunity. We are about to take our rightful place at the financial table. Yet the rates that the needy pay for our cash could hardly be lower.

I pondered this until I read a quote from the “Bond King”, Bill Gross...

"Politicians – especially those on the Republican side of the aisle – are adamant about not using taxpayers’ funds to bailout Wall Street or housing speculators, or whoever the current devil may be. The public seems to nod in agreement while at the same time not noticing that their watch is being lifted or their pocket being picked. Let’s see: Twelve months ago the yield on your money market fund was 5%+ but your next statement will probably feature something closer to 2%. Did your money market fund (which in aggregate approaches 3 trillion dollars) experience any capital gains in the process? Absolutely not. So it looks like your (the taxpayer’s) contribution to the bailout of banks, or Florida condominium speculators can at least be quantified: 3% foregone interest per year on whatever you own. In addition, as pointed out in a previous section, the reflationary (inflationary) implications of all this suggest your contribution to the bailout will be even greater, since you’ll likely wind up paying higher prices for many of the things you’ll buy."

Now I understand. The conservatives pick my pocket again. First, they cut taxes and charged everything to the National Debt, now this. All thanks to the big thinkers at the Hover Institute (the man that brought you the depression). "Deficits don't matter, Regan proved that" is now their mantra.

Good grief.
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Old 04-05-2008, 08:50 PM   #2
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The fed is trying to tell you something: it's time to spend your cash.
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Old 04-05-2008, 08:53 PM   #3
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Supply and demand

If there is too much money chasing the auctions what is going to happen?

rates go down

If they held an auction and no one showed up what would happen to rates?

Flight to quality is my explanation for the lower rates. No one knows (for sure) which banks are writing down assets. Just a few weeks away from Bear being fine (or thereabouts) on Friday and $2.00/share on Monday
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Old 04-05-2008, 09:00 PM   #4
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Empires rise and Fall and the USA will be no different to the empires of millenia past, I'm covinced of that. In our case the great "economic empire" built could well be in decline during the remains of my life (assuming i live another 40 yrs). Already the oil rich nations hold our financial future in their hands since they finance large portions of the humongous debt we have heaped on our nation.

Today, DW was telling me of an article she read that compared to the standard of living of a US person in 1900 and 200 and that of a UK person over the same period. In the USA the standard of living had risen by a factor of 10. Not surprising given the rising "empire" of the USA during this period, while the British empire was in steep decline. However, the standard of living of the Brit has increased by a factor of 5. This gives me great hope for the future.
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Old 04-05-2008, 09:16 PM   #5
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Can you explain how the Hoover Institute (or Republicans, or whoever else you believe to be on the grassy knoll) engineered this delta between last year's MM rate and the present rate, and where this money that was allegedly stolen from you (lower expected returns = theft, apparently) has gone? Inquiring minds want to know!
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Old 04-05-2008, 09:18 PM   #6
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Supply

"Supply and demand" Scrapr

So are you saying that there is so much demand for money that the price to borrow it is dropping?

There was far more demand for money a year ago than there is now. Remember all the borrowing? Not much borrowing going on now.

The supply of money has dropped not risen.

b.
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Old 04-05-2008, 09:19 PM   #7
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the implication is to suggest that we should have no federal reserve system, and that there should be no monetary policy. while we're at it, i suppose we should get rid of fiscal policy too. the further implication is that absent federal reserve action we would somehow manage to continue to get 5% even if the economy (and the banks) go down the tubes. interesting.
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Old 04-05-2008, 10:05 PM   #8
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I think you are experiencing one of the risks of holding a large amount of cash. Diversify your portfolio.

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Old 04-05-2008, 10:07 PM   #9
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It's part of the administration's "strong dollar" policy...
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Old 04-05-2008, 10:14 PM   #10
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Originally Posted by twaddle View Post
The fed is trying to tell you something: it's time to spend your cash.
Yep, Im not so sure where to spend it. but do it. I been buying stocks. Maybe I will get burned but eh whatever we all come around for another try dont we..?
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Old 04-05-2008, 10:29 PM   #11
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Quote:
Originally Posted by boont View Post
I pondered this until I read a quote from the “Bond King”, Bill Gross...

"Politicians – especially those on the Republican side of the aisle – are adamant about not using taxpayers’ funds to bailout Wall Street or housing speculators, or whoever the current devil may be. The public seems to nod in agreement while at the same time not noticing that their watch is being lifted or their pocket being picked. Let’s see: Twelve months ago the yield on your money market fund was 5%+ but your next statement will probably feature something closer to 2%. Did your money market fund (which in aggregate approaches 3 trillion dollars) experience any capital gains in the process? Absolutely not. So it looks like your (the taxpayer’s) contribution to the bailout of banks, or Florida condominium speculators can at least be quantified: 3% foregone interest per year on whatever you own. In addition, as pointed out in a previous section, the reflationary (inflationary) implications of all this suggest your contribution to the bailout will be even greater, since you’ll likely wind up paying higher prices for many of the things you’ll buy."

The conservatives pick my pocket again.

Good grief.
It is amazing what people will say these days to make a political point or to squeeze their agenda into everything.


-The Fed lowered rates.
-Fewer people buying houses = lower demand for money = lower rates
- Banks tightening loan requirements = lower demand for money = lower rates
- Is the demand for high quality bonds up? If so = lower rates

- Are people putting more money into Money Market funds instead of the stock market? If so = higher demand for bonds = lower interest rates.
-----
Higher prices in the future - could those be caused by the cost of OIL; and the use of ethanol?
--------


I think this points out what is wrong with today's political debate - the truth is getting trample on to make a political point. It is sad if people actually believe the lies - then again considering the the shape of education today they will be believed.
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Old 04-05-2008, 10:34 PM   #12
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Pimco

"Can you explain...where this money that was allegedly stolen from you (lower expected returns = theft, apparently) has gone?" Mark Twain

Yes, read the Bill Gross essay on the PIMCO website. You are arguing with him, not me. He just explained to me where all that money went.

b.
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Old 04-05-2008, 10:35 PM   #13
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First, they cut taxes and charged everything to the National Debt, now this.
And, those tax cuts--man, they are killing us! We cut the tax rate, that must have really cut the amount of money the government has to spend.

Wait--um, in 2007 the government took in 6.7% more than it collected in 2006. That doesn't sound like a cut in revenues. And, in the two years preceding that, government revenues increased 14.5% and 11.8%. Even accounting for inflation, government has been taking in more money every year.

We don't have deficits because of tax cuts or insufficient government revenues. We have deficits because of record government spending. Some of this is for the war, but we're spending record amounts domestically, too. In this regard, President Bush and the Congress, (controlled by Republicans for most of his presidency) have been huge disappointments.
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Old 04-05-2008, 10:43 PM   #14
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"Can you explain...where this money that was allegedly stolen from you (lower expected returns = theft, apparently) has gone?" Mark Twain

Yes, read the Bill Gross essay on the PIMCO website. You are arguing with him, not me. He just explained to me where all that money went.

b.
He says noting more than you did, except that somehow the low returns are "bailing out Wall Street." It's just populist blather.
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Old 04-05-2008, 11:28 PM   #15
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Crying

"It is amazing what people will say these days..." dex

If you don't understand this stuff don't come crying to me, look it up.

b.
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Old 04-06-2008, 01:08 AM   #16
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Your money wasn't stolen.

You've been allowed to support the profligate spending or your government and fellow citizens during the last decade.

They got plasma TVs, SUVs and great,big houses.

For your reward, you get to go to heaven. Won't that be nice?
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Old 04-06-2008, 06:25 AM   #17
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One thing is indisputable. The taxpayer got scr3wed and so did the investor.

Investors expect businesses to be prudent in running the business... many companies in the financial food chain got sloppy and greedy.

So we bail out the companies that scr3wed up and lowered the value of our investments.

I will not be satisfied until several of those high profile CEOs go to jail.

On the political side. The Bush administration has been severely criticized for his lack of focus on domestic policy. Part of this has been his stonewalling of performing normal regulatory functions. This type of situation has played out over and over again. In any presidential administration they get blind sided by a thing or two. But he had purposes hobbled regulators. His approach is hands-off. And that approach would work fine... except some people will always try to exploit an opening even if it is detrimental to all of the rest of us.

Republican's... including some of the conservative radio host pit bulls (kind of a shock) view GWB as a failure. They stick with the party line to try to keep the masses whipped up... but when not on their shows (other interviews and discussion), they recognize that he has ruined the Republican party's credibility. A few of them are beginning to publicly criticizing him.

Yes GWB is an embarrassment to many Republicans. Except for the extremely wealthy. They tend to be doing much better... but they do not live in the same world as the rest of us.

He will replace Jimmy Carter as a political pariah and an oft cited example of administrative failure.

Yes GWB lived down (he made the case for them) to all of those insults we heard about his intelligence back in the election against Gore. He really messed things up.
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Old 04-06-2008, 11:49 AM   #18
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Quote:
Originally Posted by boont View Post
"Supply and demand" Scrapr

So are you saying that there is so much demand for money that the price to borrow it is dropping?

There was far more demand for money a year ago than there is now. Remember all the borrowing? Not much borrowing going on now.

The supply of money has dropped not risen.

b.

No the money (I believe) is exiting banks and hedge funds. Looking for a safe place. Flight to Quality. So more money is chasing the same or less borrowing auctions. Rates drop

I'm sure Brewer can set me straight with graphs and reasoned logic. But that's what I believe is going on
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Old 04-06-2008, 12:13 PM   #19
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If you don't understand this stuff don't come crying to me, look it up.
Thanks, boont, for your helpful suggestions and the additional links you've provided to back up your statements.

I'm not sure how Gross links the interest rates offered by a capitalist auction to the government bailouts of financial institutions. If you're not willing to clarify your interpretation of the quotes you post then perhaps you wasted your effort posting them in the first place.

I think Bill Gross goes for glib sound bites that he can connect to the phrase "bond king". He may be good at his occupation but I've had trouble understanding his economic-policy logic.
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Old 04-06-2008, 03:15 PM   #20
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NORDS, in what way are the recent actions of the Fed capitalistic?
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