When in the history of the world has this not been good advice? Should we also start to eat right and get plenty of rest? Be kind to others?
Lol - you didn't listen to the interview, did you Baley? Okay, okay - I'll do it for you.
It was a very interesting interview that delves into the workings of the Greek bailout and the organization, ISDA (International Swaps & Derivatives Association) that determines when a bondholder haircut is a default, which is important because the definition of a default is what determines whether or not a Credit Default Swap (hedge insurance on a long bet on Eurobonds) can be exercised.
You really should listen to the interview.
The main issue is that the ISDA is made up of the 5 large US banks who stand to lose the most if those CDSs have to be honored. If a default is declared, the CDSs will be exercised and those 5 banks will be rendered insolvent due to the magnitude of their losing bets. They are the ones who determine whether a default is declared.
Can you say, "moral hazard"?
The ISDA didn't declare it to be a default on Greek bonds when MF Global went long in Eurobonds and took out CDSs to hedge their position. When the bonds took a 50% haircut, MF Global couldn't collect on their hedge position and had to eat the entire loss of their long position gone bad. That is why MF Global went under. The fact that Corzine ripped off customer accounts in a bogus bankruptcy filing that the corrupt bankruptcy judge allowed, in order to pay off the large bank accounts preferentially - is an entirely separate issue.
Now we are looking at a 70% haircut on Greek bonds and 97% of the CDSs that supposedly backstopped the longs on bad Greek bonds were issued by the 5 major US banks that comprise the ISDA. It appears that the ISDA isn't going to declare a 70% haircut to the bondholders as a "default" because then they would have to make good on their CDS contractual obligations, which would render them (the 5 major US banks) insolvent. He expects the Greek bond haircut negotiations to continue toward the 90% haircut level, and wonders when a default will be declared, which will force the ISDA members to make good on their contracts, making them insolvent.
Sinclair notes that this process isn't over yet and observes that everything is still being done exactly as it was being done prior to the 2008 Real Estate meltdown, except that this bubble is much more pervasive and widespread. He notes that the system is much more fragile and each of these negotiations deals another blow to the system stability.
He expects another run at taxpayers for more bank bailouts when it becomes necessary, probably not in 2012 because of the election, and he expects much more liquidity to be injected. His observation is that the liquidity already spent should have caused a massive stock rally (instead of a nominal one). Sinclair thinks that EPS doesn't drive stocks as much as liquidity. He notes that EPS haven't really increased lately, and therefore the ongoing stock rally is only due to liquidity coming from the Fed.
Sinclair thinks that stocks have about 2 years or less in which to rally and that they shouldn't be ignored, because the large amount of liquidity he expects to be injected will huge, and will raise stock valuations even without EPS growth.
So, Sinclair essentially agrees with Gecko. At this point, I may even have to agree with Gecko (about the coming print job).
So, yeah - the bit about consolidating your finances and cutting back on your lifestyle did have some basis, other than "it's always been a good idea".
I'm still not convinced to buy stocks, though. How do you evaluate a stock when EPS isn't the main driver, in an economy that's only running on paper?
Q: Are You Printing Money? Bernanke: Not Literally
The ISDA website provides what seems to be valid info regarding the Greek CDS. They say that the total dollar amount is only $3.2 billion, a sum which will not bankrupt the sellers. Lots of interesting stuff there. http://isda.mediacomment.org/ISDA
Many, many perfect transactions with other members. Ask please.
The ISDA website provides what seems to be valid info regarding the Greek CDS. They say that the total dollar amount is only $3.2 billion, a sum which will not bankrupt the sellers. Lots of interesting stuff there.
I just read through it. To look at it the way they state it, the Greek default and how that gets treated are both minor problems and have no risk of creating a worldwide banking contagion or of causing any problem with bank insolvency. Basically, they say that the payout of something less than $3.2 billion is "no biggie" (to them).
That makes me wonder why the problem isn't put to bed already.
Their rebuttals focus on technicalities in the definitions of default and who makes those determinations. They also state smaller numbers for CDS vulnerability - both in the Greek situation and overall - than anywhere else I've read. By their own admission the European banks are in for $535 million. The European portion of the total liability isn't the issue from the banks' perspective. This article provides a smokescreen. Sinclair says that the European banks only have 3% of the total exposure. By my own calculations, that means that the US banks are in for $18.16 billion in CDS exposure.
The ISDA link states that the $545 million is already marked to market at 30%. That's not exactly the issue. The issue is that even though the haircut has occured, a default is not being declared and therefore - the banks don't have to honor their insurance payout agreements.
They offer peripheral arguments about the reason they won't honor CDS contracts, mainly being the point that their exposure is really so very small. Their argument is a well constructed circular bunch of bs. The fact is that they don't wanna pay for their own contractual losses. Not only are the banks making their own rules, they are making them "after the fact".
In any case, it's still the bankers making the rules that affect the bankers' pocketbooks, ultimately at the expense of both government and taxpayers. The article whines about the ISDA Determinations unit being called a "secret" group. It doesn't matter if the ISDA publishes who is on the committee or not. That's a diversion. That's not the issue. The issue is that they are making rules that favor themselves, when they are the ones who lost their own bets, and collected premiums & bonuses in the process.
Maybe I've got it all wrong. Heck, most of us are so far removed from these dealings that we will never really know where it's coming from when it does hit us.
Q: Are You Printing Money? Bernanke: Not Literally
<< Carrying debt just makes the bank rich. By the time year 25 or 30 rolls around, you've paid 2 or 3 times what the house initially cost. >>
If you pay off the bank over 25 to 30 years in continually depreciating dollars (or pounds or whatever), you may still come out ahead. It all depends on how fast the currency is losing value.
<< <i><< Carrying debt just makes the bank rich. By the time year 25 or 30 rolls around, you've paid 2 or 3 times what the house initially cost. >>
If you pay off the bank over 25 to 30 years in continually depreciating dollars (or pounds or whatever), you may still come out ahead. It all depends on how fast the currency is losing value. >>
This assumes your defintion of currency losing value as monetary inflation that is felt in relation to paying off a fixed rate mortgage, right? Or am I bassakwards..again.
So, are these Alarms like someone else's nuisance car alarm going off waiting for them to beep it, or is this, like, Our car alarm going off, and how do we supposed to beep it?
So, are these Alarms like someone else's nuisance car alarm going off waiting for them to beep it, or is this, like, Our car alarm going off, and how do we supposed to beep it?
This is definitely your car alarm going off while you are in the mall shopping. Unfortunately, there are no cops and the thieves know this very well.
To make things a bit worse, the reason that the thieves know that the cops aren't coming is because they are the cops, and in California they are no longer being paid because your city and state are broke.
Q: Are You Printing Money? Bernanke: Not Literally
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
being in debt simply means that you are working for someone else, with at least a portion of your energies.
Well, if that's the way you want to look at it, I'd say that it's only fair. After all, the lender was essentially working for the borrower when he earned the money that he would later entrust to the borrower. Right?
Andy Lustig
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
Well, if that's the way you want to look at it, I'd say that it's only fair. After all, the lender was essentially working for the borrower when he earned the money that he would later entrust to the borrower. Right?
I understand that you disagree. I don't know about you, but when I work for a paycheck, I consider that money to be mine after I earn it - and not a borrower's (if I ever intended to lend it out). I think that your logic is off, Andy.
back to the OP, which particular alarm is going off today? Is this a fake crisis or a real one?
Baley, I don't even hear an alarm. What crisis would this be? Did someone just pay off the $16 Trillion of Treasury debt - and why would that be a crisis? If it wasn't that, then nothing has changed. It was really windy today, though.
Q: Are You Printing Money? Bernanke: Not Literally
back to the OP, which particular alarm is going off today? Is this a fake crisis or a real one? >>
Crisis? I see volatility influenced by uncertainty. Anyone that can't stomach it should not be into PMs? Anyone that can handle it can make money. Uncertainty is what we strackers thrive on.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Without debt a farmer cannot buy a larger tractor to produce more corn. Without debt a factory cannot expand to employ more people. All debt is not bad.
Those that take on debt can and do lose everything. Those that take on debt can do become wealthy beyond their dreams. All debt is not bad. >>
I agree, but would like to separate 'producing' from 'consuming' in your debt example.
Going into debt to 'produce' as in your farmer and factory example, is agreed "debt that is not bad"
Going into debt to 'consume' is 99% of the time, bad debt.
"Gold is money, and nothing else" (JP Morgan, 1912)
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
<< <i>being in debt simply means that you are working for someone else, with at least a portion of your energies.
Well, if that's the way you want to look at it, I'd say that it's only fair. After all, the lender was essentially working for the borrower when he earned the money that he would later entrust to the borrower. Right? >>
"The borrower is servant to the lender" Not to say that if the borrower puts his lending to fruitful use that he himself may make gain above and beyond the lendings; but he is still in bondage to that lender for the sum he borrowed.
NumbersUsa, FairUs, Alipac, CapsWeb, and TeamAmericaPac
<< <i>It's difficult to characterize any debt as good or bad without a context. >>
Bad debt is debt that cannot and will not be repaid. What the debt is used to purchase is irrelevant.
Good and bad DECISIONS to use debt are a different animal. If I purchase a car with a loan that cost me 5% when I could have paid cash and that cash is making me more than 5% elsewhere, I made a good decision to finance the car.
Likewise if a farmer borrows to buy a new tractor and he can't make the payments then his loan is bad debt.
It boils down to evaluating the cost of using someone else's money and being able to afford that cost.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
that was really well put, and of course I agree with every word.. most likely because I said essentially the same thing in an earlier post to this thread
<< <i>that was really well put, and of course I agree with every word.. most likely because I said essentially the same thing in an earlier post to this thread >>
What you said:
<< <i>It's difficult to characterize any debt as good or bad without a context. In the case of real estate, very few can possibly save enough money up to buy a home outright, it must be financed. Similarly, few young companies can buy and staff plant and equipment, they both must borrow and pay interest on the loan.
If the family or company does well, they will get to utilize the expensive asset right away, as if they owned it outright, and pay down the loan over time. If the results of their operations ("income" in the case of a family or company) exceed the interest paid, then it was a good debt. Also, if the real estate asset appreciates in value, the borrower/buyer experiences a leveraged increase in the value of the initial investment and accumulated interest paid.
Of course, market gyrations and/or inopportune execution of activities , particularly if in the short-term the cash flows do now allow servicing of the debt (missed payments) or cause the need to borrow more, the activities intended to generate income may cause the outcome of the borrowing to be negative for the borrower.
simply put, borrowing to invest, in hindsight, will be viewed as brilliant if your ideas work, and stupid if they don't. The trick is making decisions that maximize your probabilities. It helps if you aren't operating at the edge of failure, either from the outset, or due to events beyond your control. >>
What I said:
<< <i>Bad debt is debt that cannot and will not be repaid. What the debt is used to purchase is irrelevant.
Good and bad DECISIONS to use debt are a different animal. If I purchase a car with a loan that cost me 5% when I could have paid cash and that cash is making me more than 5% elsewhere, I made a good decision to finance the car.
Likewise if a farmer borrows to buy a new tractor and he can't make the payments then his loan is bad debt.
It boils down to evaluating the cost of using someone else's money and being able to afford that cost. >>
You may have meant what I said but that is not what you said.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
I was interviewed today concerning the most powerful body in the financial world that now holds in its hands the near future of all markets, from currencies to commodities, based on a single edict to be given.
The interview is being processed and should be posted here later this evening.
This organization supersedes all governments and central banks today in terms of the financial power they edict. This organization can have a greater impact on your pocketbook than the FASB did when they killed "true value" accounting.
This body is made up of the key players of the five largest banks in the USA and other countries. This body by their actions this week will guarantee QE to infinity.
This is relevant to all your assets, yes all. If you have the time listen to it please. If you don't have the time listen to it please. If you don't listen to it do not blame me when all hell breaks loose six months from now.
Not one word about this body was on the airwaves today, yet this group by a simple decision rules the financial plant. They will be making this edict in just a few days. They have to do it again this year. It is then that you know what will hit the fan.
I feel this is it for jsmineset.com tonight. I do not want to write another word and detract from the revelations you will hear.
Your financial future, even if you have never heard of them, is in this organization's hands. Check in later for the interview. If you don't check in your finances might just check out.
Please remember you have been informed of this impending edict as a service to the community.
Respectfully, Jim >>
Well, this was a big yawn....
Headlines crossing that ISDA is ruling that a credit event has occurred with respect to Greece -Update
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>And a "credit event" isn't equal to a default, because the ramifications are different. But that's all been said as well. >>
Exactly. The markets already knew that at a minimum this was always going to be no less than a "credit event." But a default that triggers payment of CDS's, that's the next level up. So where on the totem pole does a "restructuring credit event" stand? Seems illogical that the credit in question will at most trigger $3-$4 BILL in payments. Even with leverage that seems miniscule.
Thanks for that Willy of an article derryb. The Dutch had their tulip mania. Ours was the housing bubble and unregulated otc derivatives. In comparison, the tulip mania was a blip.
The Dutch had their tulip mania. Ours was the housing bubble and unregulated otc derivatives. In comparison, the tulip mania was a blip.
Did tulip mania negatively affect those citizens who refused to participate? or was the mania and aftermath from it the greatest financial gift of their lifetimes?
It is an unfortunate misconception on the part of those that do not participate in bubble economics or malinvestment that the resulting outcome will not affect them. The depression that followed tulip mania affected all Dutch citizens just as the US housing/debt crisis is still affecting those who never owned a home mortgage.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Seems illogical that the credit in question will at most trigger $3-$4 BILL in payments The rest was hedged. >>
We already found out how well hedging worked for Lehman, Bear Stearns, MF Global and others. I think that's Sinclair's point. Hedging doesn't work, because derivatives as currently employed do not function as anticipated. If all the big banks (and sovereigns) are all hedged against each other.....that's a problem. These same entities that have "safely" hedged themselves were also supposedly self-regulating when it came to derivatives and hedges. An analogy would be nuclear weapon stockpiles. They are hedges that perform as intended if neither side fires. Unlike nukes, some hedges have already fired and indeed blew up. That caused the other side to automatically fire back and blow up as well. Otc hedges aren't win-win, they are win-lose, lose-win, or lose-lose.
Sinclair had an update to the above yesterday, now saying that some portion of $37 TRILL in BIS reported CDS's is affected by the Greek outcome. The game is domino's. When one standing domino falls, the one right next to it does as well....hedged or not. The chain continues to tumble until enough cash is injected to stop it.
Comments
Lol - you didn't listen to the interview, did you Baley? Okay, okay - I'll do it for you.
It was a very interesting interview that delves into the workings of the Greek bailout and the organization, ISDA (International Swaps & Derivatives Association) that determines when a bondholder haircut is a default, which is important because the definition of a default is what determines whether or not a Credit Default Swap (hedge insurance on a long bet on Eurobonds) can be exercised.
You really should listen to the interview.
The main issue is that the ISDA is made up of the 5 large US banks who stand to lose the most if those CDSs have to be honored. If a default is declared, the CDSs will be exercised and those 5 banks will be rendered insolvent due to the magnitude of their losing bets. They are the ones who determine whether a default is declared.
Can you say, "moral hazard"?
The ISDA didn't declare it to be a default on Greek bonds when MF Global went long in Eurobonds and took out CDSs to hedge their position. When the bonds took a 50% haircut, MF Global couldn't collect on their hedge position and had to eat the entire loss of their long position gone bad. That is why MF Global went under. The fact that Corzine ripped off customer accounts in a bogus bankruptcy filing that the corrupt bankruptcy judge allowed, in order to pay off the large bank accounts preferentially - is an entirely separate issue.
Now we are looking at a 70% haircut on Greek bonds and 97% of the CDSs that supposedly backstopped the longs on bad Greek bonds were issued by the 5 major US banks that comprise the ISDA. It appears that the ISDA isn't going to declare a 70% haircut to the bondholders as a "default" because then they would have to make good on their CDS contractual obligations, which would render them (the 5 major US banks) insolvent. He expects the Greek bond haircut negotiations to continue toward the 90% haircut level, and wonders when a default will be declared, which will force the ISDA members to make good on their contracts, making them insolvent.
Sinclair notes that this process isn't over yet and observes that everything is still being done exactly as it was being done prior to the 2008 Real Estate meltdown, except that this bubble is much more pervasive and widespread. He notes that the system is much more fragile and each of these negotiations deals another blow to the system stability.
He expects another run at taxpayers for more bank bailouts when it becomes necessary, probably not in 2012 because of the election, and he expects much more liquidity to be injected. His observation is that the liquidity already spent should have caused a massive stock rally (instead of a nominal one). Sinclair thinks that EPS doesn't drive stocks as much as liquidity. He notes that EPS haven't really increased lately, and therefore the ongoing stock rally is only due to liquidity coming from the Fed.
Sinclair thinks that stocks have about 2 years or less in which to rally and that they shouldn't be ignored, because the large amount of liquidity he expects to be injected will huge, and will raise stock valuations even without EPS growth.
So, Sinclair essentially agrees with Gecko.
So, yeah - the bit about consolidating your finances and cutting back on your lifestyle did have some basis, other than "it's always been a good idea".
I'm still not convinced to buy stocks, though. How do you evaluate a stock when EPS isn't the main driver, in an economy that's only running on paper?
I knew it would happen.
http://isda.mediacomment.org/ISDA
I just read through it. To look at it the way they state it, the Greek default and how that gets treated are both minor problems and have no risk of creating a worldwide banking contagion or of causing any problem with bank insolvency. Basically, they say that the payout of something less than $3.2 billion is "no biggie" (to them).
That makes me wonder why the problem isn't put to bed already.
Their rebuttals focus on technicalities in the definitions of default and who makes those determinations. They also state smaller numbers for CDS vulnerability - both in the Greek situation and overall - than anywhere else I've read. By their own admission the European banks are in for $535 million. The European portion of the total liability isn't the issue from the banks' perspective. This article provides a smokescreen. Sinclair says that the European banks only have 3% of the total exposure. By my own calculations, that means that the US banks are in for $18.16 billion in CDS exposure.
The ISDA link states that the $545 million is already marked to market at 30%. That's not exactly the issue. The issue is that even though the haircut has occured, a default is not being declared and therefore - the banks don't have to honor their insurance payout agreements.
They offer peripheral arguments about the reason they won't honor CDS contracts, mainly being the point that their exposure is really so very small. Their argument is a well constructed circular bunch of bs. The fact is that they don't wanna pay for their own contractual losses. Not only are the banks making their own rules, they are making them "after the fact".
In any case, it's still the bankers making the rules that affect the bankers' pocketbooks, ultimately at the expense of both government and taxpayers. The article whines about the ISDA Determinations unit being called a "secret" group. It doesn't matter if the ISDA publishes who is on the committee or not. That's a diversion. That's not the issue. The issue is that they are making rules that favor themselves, when they are the ones who lost their own bets, and collected premiums & bonuses in the process.
Maybe I've got it all wrong. Heck, most of us are so far removed from these dealings that we will never really know where it's coming from when it does hit us.
I knew it would happen.
If you pay off the bank over 25 to 30 years in continually depreciating dollars (or pounds or whatever), you may still come out ahead. It all depends on how fast the currency is losing value.
My Adolph A. Weinman signature
<< <i><< Carrying debt just makes the bank rich. By the time year 25 or 30 rolls around, you've paid 2 or 3 times what the house initially cost. >>
If you pay off the bank over 25 to 30 years in continually depreciating dollars (or pounds or whatever), you may still come out ahead. It all depends on how fast the currency is losing value. >>
This assumes your defintion of currency losing value as monetary inflation that is felt in relation to paying off a fixed rate mortgage, right? Or am I bassakwards..again.
Liberty: Parent of Science & Industry
This is definitely your car alarm going off while you are in the mall shopping. Unfortunately, there are no cops and the thieves know this very well.
To make things a bit worse, the reason that the thieves know that the cops aren't coming is because they are the cops, and in California they are no longer being paid because your city and state are broke.
I knew it would happen.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
Knowledge is the enemy of fear
I knew it would happen.
Well, if that's the way you want to look at it, I'd say that it's only fair. After all, the lender was essentially working for the borrower when he earned the money that he would later entrust to the borrower. Right?
Doggedly collecting coins of the Central American Republic.
Visit the Society of US Pattern Collectors at USPatterns.com.
back to the OP, which particular alarm is going off today? Is this a fake crisis or a real one?
Liberty: Parent of Science & Industry
I understand that you disagree. I don't know about you, but when I work for a paycheck, I consider that money to be mine after I earn it - and not a borrower's (if I ever intended to lend it out). I think that your logic is off, Andy.
back to the OP, which particular alarm is going off today? Is this a fake crisis or a real one?
Baley, I don't even hear an alarm. What crisis would this be? Did someone just pay off the $16 Trillion of Treasury debt - and why would that be a crisis? If it wasn't that, then nothing has changed. It was really windy today, though.
I knew it would happen.
<< <i>gosh, that does make sense.
back to the OP, which particular alarm is going off today? Is this a fake crisis or a real one? >>
Crisis? I see volatility influenced by uncertainty. Anyone that can't stomach it should not be into PMs? Anyone that can handle it can make money. Uncertainty is what we strackers thrive on.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Without debt a farmer cannot buy a larger tractor to produce more corn. Without debt a factory cannot expand to employ more people. All debt is not bad.
Those that take on debt can and do lose everything. Those that take on debt can do become wealthy beyond their dreams. All debt is not bad. >>
I agree, but would like to separate 'producing' from 'consuming' in your debt example.
Going into debt to 'produce' as in your farmer and factory example, is agreed "debt that is not bad"
Going into debt to 'consume' is 99% of the time, bad debt.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
<< <i>gosh, that does make sense.
back to the OP, which particular alarm is going off today? Is this a fake crisis or a real one? >>
the alarm that requires yet another apologetics that the sky is falling NOW!
<< <i>being in debt simply means that you are working for someone else, with at least a portion of your energies.
Well, if that's the way you want to look at it, I'd say that it's only fair. After all, the lender was essentially working for the borrower when he earned the money that he would later entrust to the borrower. Right? >>
"The borrower is servant to the lender" Not to say that if the borrower puts his lending to fruitful use that he himself may make gain above and beyond the lendings; but he is still in bondage to that lender for the sum he borrowed.
<< <i>It's difficult to characterize any debt as good or bad without a context. >>
Bad debt is debt that cannot and will not be repaid. What the debt is used to purchase is irrelevant.
Good and bad DECISIONS to use debt are a different animal. If I purchase a car with a loan that cost me 5% when I could have paid cash and that cash is making me more than 5% elsewhere, I made a good decision to finance the car.
Likewise if a farmer borrows to buy a new tractor and he can't make the payments then his loan is bad debt.
It boils down to evaluating the cost of using someone else's money and being able to afford that cost.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
most likely because I said essentially the same thing in an earlier post to this thread
Liberty: Parent of Science & Industry
<< <i>that was really well put, and of course I agree with every word..
most likely because I said essentially the same thing in an earlier post to this thread
What you said:
<< <i>It's difficult to characterize any debt as good or bad without a context. In the case of real estate, very few can possibly save enough money up to buy a home outright, it must be financed. Similarly, few young companies can buy and staff plant and equipment, they both must borrow and pay interest on the loan.
If the family or company does well, they will get to utilize the expensive asset right away, as if they owned it outright, and pay down the loan over time. If the results of their operations ("income" in the case of a family or company) exceed the interest paid, then it was a good debt. Also, if the real estate asset appreciates in value, the borrower/buyer experiences a leveraged increase in the value of the initial investment and accumulated interest paid.
Of course, market gyrations and/or inopportune execution of activities , particularly if in the short-term the cash flows do now allow servicing of the debt (missed payments) or cause the need to borrow more, the activities intended to generate income may cause the outcome of the borrowing to be negative for the borrower.
simply put, borrowing to invest, in hindsight, will be viewed as brilliant if your ideas work, and stupid if they don't. The trick is making decisions that maximize your probabilities.
It helps if you aren't operating at the edge of failure, either from the outset, or due to events beyond your control. >>
What I said:
<< <i>Bad debt is debt that cannot and will not be repaid. What the debt is used to purchase is irrelevant.
Good and bad DECISIONS to use debt are a different animal. If I purchase a car with a loan that cost me 5% when I could have paid cash and that cash is making me more than 5% elsewhere, I made a good decision to finance the car.
Likewise if a farmer borrows to buy a new tractor and he can't make the payments then his loan is bad debt.
It boils down to evaluating the cost of using someone else's money and being able to afford that cost. >>
You may have meant what I said but that is not what you said.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>He did say to cut back on your lifestyle and to consolidate your finances.
When in the history of the world has this not been good advice? Should we also start to eat right and get plenty of rest? Be kind to others? >>
I like that.
<< <i>Got this in my email tonight:
Dear Friends,
I was interviewed today concerning the most powerful body in the financial world that now holds in its hands the near future of all markets, from currencies to commodities, based on a single edict to be given.
The interview is being processed and should be posted here later this evening.
This organization supersedes all governments and central banks today in terms of the financial power they edict. This organization can have a greater impact on your pocketbook than the FASB did when they killed "true value" accounting.
This body is made up of the key players of the five largest banks in the USA and other countries. This body by their actions this week will guarantee QE to infinity.
This is relevant to all your assets, yes all. If you have the time listen to it please. If you don't have the time listen to it please. If you don't listen to it do not blame me when all hell breaks loose six months from now.
Not one word about this body was on the airwaves today, yet this group by a simple decision rules the financial plant. They will be making this edict in just a few days. They have to do it again this year. It is then that you know what will hit the fan.
I feel this is it for jsmineset.com tonight. I do not want to write another word and detract from the revelations you will hear.
Your financial future, even if you have never heard of them, is in this organization's hands. Check in later for the interview. If you don't check in your finances might just check out.
Please remember you have been informed of this impending edict as a service to the community.
Respectfully,
Jim >>
Well, this was a big yawn....
Headlines crossing that ISDA is ruling that a credit event has occurred with respect to Greece -Update
Knowledge is the enemy of fear
I knew it would happen.
Knowledge is the enemy of fear
Battened the hatches,
Secured the latches,
and unleashed the dog.
Thank you Jim.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>And a "credit event" isn't equal to a default, because the ramifications are different. But that's all been said as well. >>
Exactly. The markets already knew that at a minimum this was always going to be no less than a "credit event."
But a default that triggers payment of CDS's, that's the next level up. So where on the totem pole does a "restructuring credit event" stand?
Seems illogical that the credit in question will at most trigger $3-$4 BILL in payments. Even with leverage that seems miniscule.
Thanks for that Willy of an article derryb. The Dutch had their tulip mania. Ours was the housing bubble and unregulated otc derivatives. In comparison, the
tulip mania was a blip.
The rest was hedged.
Knowledge is the enemy of fear
Did tulip mania negatively affect those citizens who refused to participate? or was the mania and aftermath from it the greatest financial gift of their lifetimes?
Liberty: Parent of Science & Industry
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
<< <i>Seems illogical that the credit in question will at most trigger $3-$4 BILL in payments
The rest was hedged. >>
We already found out how well hedging worked for Lehman, Bear Stearns, MF Global and others. I think that's Sinclair's point. Hedging doesn't work, because derivatives as
currently employed do not function as anticipated. If all the big banks (and sovereigns) are all hedged against each other.....that's a problem. These same entities that have
"safely" hedged themselves were also supposedly self-regulating when it came to derivatives and hedges. An analogy would be nuclear weapon stockpiles. They are hedges
that perform as intended if neither side fires. Unlike nukes, some hedges have already fired and indeed blew up. That caused the other side to automatically fire back and blow
up as well. Otc hedges aren't win-win, they are win-lose, lose-win, or lose-lose.
Sinclair had an update to the above yesterday, now saying that some portion of $37 TRILL in BIS reported CDS's is affected by the Greek outcome. The game is domino's. When
one standing domino falls, the one right next to it does as well....hedged or not. The chain continues to tumble until enough cash is injected to stop it.
One opinion on how the ISDA ruling will fall out - $79 BILL rather than $3 BILL
I knew it would happen.