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Finance Thread

Discussion in 'Permanent Threads' started by ryrob, Oct 21, 2009.

  1. Gramercy

    Gramercy
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    The dollar and the equity market are usually inversely correlated, so it makes sense that the dollar is strong right now. I think Oil and Gold are down about 10% this week as well.
     
  2. scotchcrotch

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    Gold is overdue for a correction.
     
  3. Ben

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    What do you guys think of this article from Zero Hedge?

    <a class="postlink" href="http://www.zerohedge.com/article/albert-edwards-500-net-liabilities-gdp-it-too-late-prevent-collapse-g-7-greece-irrelevant-we" onclick="window.open(this.href);return false;">http://www.zerohedge.com/article/albert ... elevant-we</a>

    I don't know much about economics beyond the basic, so I have no idea if this guy is right on or not. I imagine that on the old board, Drinking Heavily probably would have posted this article and D-Rock would have said this guy was being hysterical.

    Questions reading this article -

    What exactly does it mean to annuitize a 401k? As I understand it, my 401k is accessible without penalties once I'm 60. Would annuitization change that, for me or for any other group (those already drawing from their 401k)?

    The article states that we're insolvent because our total liabilities-to-GDP ratio is close to 500%. I'm assuming that others obviously have access to the same statistic, but don't feel the same way. Why are some worried and why are some not? Should we be worried about this?

    Why is he focusing on liability to GDP more than debt to GDP? What exactly is "total net liabilities"?

    He seems to be anti-stimulus ("The outcome of broken Keynesian policy (by definition)") but the last paragraph he quotes suggests aggressive stimulation.

    Anyone want to help me get a better understanding of our current situatoin by providing a dispassionate perspective on this article?
     
  4. Bob the Builder

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    I had a long post written out. But alas, it has disappeared. Basically, the unfunded liabilities are taking into account Medicare and Social Security. Adding those two to our current on-balance-sheet debt, and the associated interest, and you quickly get to a point where something like 33% of the federal budget (or more) is going to interest payments, Medicare and Social Security. It's not a big problem yet, because we can kick the can down the road. But at some point, we won't be able to sell treasuries. We can't print money infinitely, or sell enough treasuries to cover our future system. Medicare and Social Security are a ticking time bomb. But no politician seems to want to touch that nerve despite the obvious problems.

    An annuity is essentially giving someone a lump sum of money in exchange for a fixed payment on that money for a set period of time, usually your life span. My guess is the articles' reference to annuitizing 401ks would be an attempt to use the 401k reserves by the government to get upfront payments to support deficit spending, while only having to pay a fixed percentage on said 401ks. It's probably more complicated than that. But the theory is generally that we can only issue so many treasuries to the Chinese and other sovereign wealth funds, so where else can the Gov't get some money....

    Marc Faber recently came out and said that he thinks every government is going to default on its debt, with the exception of Singapore and other Net Cash countries. What that would look like, I have no idea. But I think the "PIIGS crisis" is making people exceedingly nervous about sovereign debt. Lots of people don't think it can happen to the USA, but at some point something will have to give. There is not infinite demand for treasuries, nor can you print money forever.

    This article is a starting point in finding out more about unfunded liabilities.
    <a class="postlink" href="http://www.usatoday.com/news/washington/2007-05-28-federal-budget_N.htm" onclick="window.open(this.href);return false;">http://www.usatoday.com/news/washington ... dget_N.htm</a>

    I watched the full version of this movie, but it looks like they have some sort of abbreviated version below. Definitely should give anyone who's curious a good idea on what we are facing.
    <a class="postlink" href="http://www.iousathemovie.com/" onclick="window.open(this.href);return false;">http://www.iousathemovie.com/</a>
     
  5. PoppaBear

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    Does anyone have good recommendations for books that teach fundamentals in modeling? I've been recommended some of McKinsey's books, but can anyone give any specific titles for valuing companies? I'm looking for something technical, but still something that a beginner can get through. As a background, I've already taken courses in (and read the textbooks for) Financial & Managerial Accounting, as well as a Corporate Finance Course. Thanks guys.
     
  6. toddus

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    Guessing you are looking to better understand IB? Start with http://www.amazon.com/Investment-Ba...ged-Acquisitions/dp/0470442204/ref=pd_sim_b_2
     
  7. Porkins

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    I have Arzac's Valuation for Mergers, Buyouts, and Restructuring on my bookshelf. Technical, but a good foundation.

    Something I've always wondered: why do people seem to pretty universally view the Chinese (or any foreign nation) holding a CA surplus denominated in US dollars as a position of strength for them (being the Chinese or whoever)?

    Couldn't the case be made that running a current accounts deficit in your own currency gives you a remarkable amount of financial maneuverability (because you're able to spend so much more) and negotiating strength (because you can devalue another nations wealth seemingly at will)?

    Now, I know that doing so would have vast and far-reaching consequences, yadda yadda -- I get that. But if all these armchair economists are talking about these doomsday scenarios of every G8 country defaulting on its debt or what have you, then why not mention the opposite of the US and its allies taking advantage of the dollar's (very advantageous) position as the world's reserve currency?
     
  8. PIK_Toggle

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    One of my professors from grad schools works for Trainingthestreet.com. They have a couple of books that cover financial modeling. The only drawback is that they are somewhat expensive.

    Here is a link to the books that they have for sale:
    <a class="postlink" href="https://www.ttsuniversity.com/Index.aspx" onclick="window.open(this.href);return false;">https://www.ttsuniversity.com/Index.aspx</a>

    If you want a bunch of spreadsheets to look at, go here:
    <a class="postlink" href="http://pages.stern.nyu.edu/~adamodar/" onclick="window.open(this.href);return false;">http://pages.stern.nyu.edu/~adamodar/</a>
     
  9. fly1180

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    Does anyone know any good online resources for Defense and Aerospace news/trends, with a focus on a financial perspective/implications?

    Thanks.
     
  10. Nohik

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    <a class="postlink" href="http://www.rollingstone.com/politics/story/32255149/" onclick="window.open(this.href);return false;">http://www.rollingstone.com/politics/story/32255149/</a>

    Matt Taibbi on how the taxpayers are getting scammed.

    I´m really too stupid to know this but is this all true? Did they really get to lent money almost at a 0% interest and buy Treasury bills with it?
     
  11. fly1180

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    In a sense, yes. Banks have access to a few borrowing options from the Fed at the current Fed Funds Rate which floats between 0 and 0.25%. And while banks did make money off this, they also made huge profits by drastically cutting costs and jobs, and from the huge upswing (up 70+% since the bottom) in the stock market and other financial products. However, you need to take everything from Taibbi with a grain of salt. I personally think he is a shitbag, but thats beside the point. The man is convinced that Goldman Sachs is running this vast conspiracy to take over the US government and its blinds him in his reporting. He makes very good points but its just overrun with his own agenda that it just makes him look silly. I mean, c'mon, he's writing financial articles for a magazine known for celebrity blowjob pieces. Its like ZeroHedge, they bring up a lot of good technical points and support it with pretty good data, but then they go off on this wild tinfoil hat tangents and people discredit them.
     
  12. Porkins

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    I can't comment on the majority of that article, but I do know a fair amount about the mortgage-backed security world, and I assure you he is giving you a biased view of the way that part of the system worked.

    Go look at any list of top mortgage securitizers or underwriters from 2003 - 2008, and I guarantee you Goldman will never once appear anywhere near the top. Shit, I bet they're not even in the top 5. Want to know who was number #1 most of those years? Lehman. #2? Bear Stearns. Had Goldman been as big in those sort of instruments as he makes them out to be, they would no longer be in business.
     
  13. scotchcrotch

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    If Lehman had the backing Goldman Sachs had, from both the govt and Buffet, maybe they'd still be in business today.

    In this economy, a company's solvency has as much to do with politics as its risk management.


    Anyone catch 60 Minutes on Sunday? There was a great piece on the bubble.
     
  14. fly1180

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    So I'm actually reading the article now and what a bunch of horseshit. Goldman was in no way "minutes from bankruptcy." GS and JPM (I think) were both essentially forced to take TARP funds because the Fed/Treasury was concerned that singling out the weaker banks and causing runs if only some of the banks took TARP funds. Goldman repeatedly tried to pay the Treasury back but was not allowed to until some more banks were able to do so.

    I'm actually enraged at this article. There are so many half truths and left out facts its appaling. Seriously, fuck Matt Taibbi. Yes, GS has a whole swath of political connections, but you know what, they are still better at what they do than anyone else. Citi has the same opportunties at GS and they shitting the bed right now, basically insolvent, being floated up by the Fed and Prince Alwaleed. Wanna be outraged about political connections going too far, look at Detroit. The bailout of GM and GMAC will end up being far more expensive than the bailout of the banks, and they don't even have a functional plan on how to become profitable, let alone pay back the government. No wants to complain that GMAC is losing money hand over fist, but their retail banking arm, Ally, is offering better savings rates than any back in the country, funded with your tax dollars.

    Seriously, what does Taibbi want to happen? That we didn't bailout the banks? Not decrease interest rates? Destroy our financial system, further pushing down on economy, leading to 25+% unemployment? I hate people who scream NO NO NO, THAT'S WRONG!, when they don't have the feintest idea what the consequences would be or what a better alternative would be. Its like the Congressmen questions Geithner about AIG, asking why he didn't unwind them like a bank, completely unaware that AIG isn't a bank and the Fed, FDIC, or anyone else didn't have the authority or mechanism to do so. Everyone wants to stand on their pulpit and say how evil Wall Street is when they are so uneducated about the actual issues at play.
     
  15. toddus

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    Dude relax, Taibbi is a fucking hack who writes for a music magazine. It is basically the Michael Moore school of Journalism, scream loud enough about conspiracy theories against the average Joe by evil Corporate America until it makes you famous. The financial and economic opinions of a man who has also written an article entitled 'The 52 funniest things about the upcoming death of the Pope' should not be taken seriously.

    [Attitude edit: Edited for politics]
     
  16. theking23

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    Does anyone have any thoughts on the proposed Cantor Exchange? It trades in futures contracts on a film's domestic box office. Contracts trade at 1/1,000,000 of the domestic box office. A movie that makes $250,000,000 would be worth $250. A film has an Initial Contract Offering about six months before its released and are then open for trading. Four weeks after the movie opens trading ends and box office numbers for those first four weeks determine the value of the contract.
     
  17. toddus

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    The exchange will basically provide a function for studios to hedge against upcoming releases. As the term of the contract is only 4 weeks I just don't see how this will work. For the market to find an equilibrium it will need a fuck load of money from Hedge funds and individuals willing to gamble that despite all the variables that exist they can accruately out pick the studios and the market in a contract that last 4 weeks.

    I am trying to think of another Future that has the same risk from regular events that happen. We aren't talking black swans like a Hurricane affecting Oil futures or things of that ilk, but an industry in which there often seems little rhyme or reason behind box office performance over 4 weeks. I would imagine there is a huge scope for skilled investors to make some money here, I just can't see where the 'sucker' money will come from.
     
  18. scotchcrotch

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    Watching "The Smartest Guys in the Room" a documentary on Enron.

    I am very much a Libertarian and believe in the free market, but this shit was just too easy. I was always under the impression there was at least *some* regulation of public companies, but these guys took the easiest route and did it for years. Several of these assholes got off with millions, with no repercussions. This wasn't some elaborate scheme, it was easy and blatantly simple.

    My main question is, what prevents any other company from doing this today? How is there any trust in the market?

    As much as I hate regulation, there has to be a happy medium between socialism and capitalism.

    I keep my portfolio in the S&P, and only speculate on individual companies short-term. There has to be some type of reassurance going forward, aside from goodwill, that companies have an inkling of fiduciary responsibility to their shareholders.
     
  19. 9iron

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    Sarbanes-Oxley was a direct response to the Enron type scandals, and now holds executives criminally liable for misrepresenting their company's performance. Regulation is arguably better now than it was then, but yeah, as you can see with recent news about Lehman's "Repo 105" transactions, there will always be people trying to manipulate the system, there's not much you can do about it. Sticking to companies you're familiar with and have some form of "trust" in is not a bad idea.
     
  20. Rutabaga

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    I work in insurance regulation, and it is a sad fact, but there is very little regulators can do against out and out fraud. You’d think that would be a high priority when it comes to these companies, but if the fraud is widespread enough it just can’t be curtailed by a regulator. With a big meltdown like Enron, one of the main regulatory staples, the auditing process, was corrupted and becomes useless.

    9iron put it great with the “manipulating the system” as even those Repo 105 transactions were perfectly legal where they took place, but amounted to basically fraud. I can’t for the life of me find where I read it, but I believe not one person has been charged with fraud stemming from any of the major financial collapses. Unfortunately, it really isn’t something you can predict, and it really isn’t anyone but the fraudsters' fault.

    If you really want to be mad at regulators, read a little about Kingsway Insurance and Lincoln General. A failing insurer just “donated” one of its failingest subsidiaries to 20 charities, and a judge ruled against regulators saying the transaction was legal. Now the parent has no obligation to pay off any debts of the donated company.