Skip to main content

Posts

Showing posts from 2005

What's Bernanke going to do during the housing crash?

A Recent NY Times article on the Japanese Housing Bubble got me thinking. Especially this quote:

Japanese economists say the United States is not likely to suffer a decline that is as severe or long-lasting as Japan's, because they see a more skilled hand at the tiller of the American economy: the Federal Reserve. Japan's central bank, the Bank of Japan, failed to curb the stock and real estate bubbles until mid-1989, when it was too late and prices were sky-high, they said.


Translation: It's different this time! Is it really? Let's listen to some words from Mr Bernanke:



But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to ra…

Why there are fewer people in engineering in the U.S : Money

There have been all kinds of articles recently about how the United States is losing its scientific edge because fewer people are going into the sciences and engineering. There is a great deal of handwringing and people talking about the anti-intellectualism of our country, its poor schools, etc and all sorts of wild guesses as to why this is happening. Well India has plenty of anti-intellectualism, poor schools, etc but they are turning out a lot of engineers. The real reason is that being an engineer in the United States does not mean you're going to get rich relative to your real estate speculating condo flipping peers.

Let's look at some facts:

The International Herald Tribune says that the average wage for an experienced programmer in India is $11,423 a year. The average wage for an experienced programmer in the U.S is $83,000 a year. However the average per capita income in India is $3,100 and in the U.S it is $40,100. Per capita income is a good indicator of the r…

Being a "better" contrarian investor

I for some sick reason am drawn to contrarian investment ideas. I like laughing at the latest hot investing trend; for example, the current housing mania. I did however find that during the last two years, I spent a lot of time looking for ways to criticize the mania more or less so I could find a way to keep the pressure off from my friends and relatives to get a house and a mortgage.

This was a big waste of time. Being a bear in a market with upward momentum is impossible. Trying to call a top is something the smartest investors have a hard time doing. There will be a lot of air coming out on the downside and one is unlikely to miss it but waiting for the top can drive one nuts.

That's why I've found it far more productive to instead go hunting for the next bubble while everyone is chasing around the current one. How does one know its a bubble by the way? If one is reading about it and one grin starts getting to big, to the point of giddyness one may be becoming emoti…

The current credit cycle dynamic

I read this article Article over at the Economist about the current global credit bubble situation.

I think that there is an excess of money flooding into the bond market from the savers and currency peg maintaining central banks in Asia. It is being sent back to them by debt financed consumption in the developed world which they are putting back into bonds. As long as the trade volume keeps increasing at greater than the rate of interest this will keep going as the Asians keep giving the rest of the world the liquidity to issue new debt and make the interest payments on the bonds.

This will continue until trade volume becomes flat or falling.

A good analogy is that of a person who buys everything he owns from walmart on his walmart credit card. All the profits from walmart gets lent back to the customer so he can pay his interest payments on the credit cards. If walmart stops lending then walmart can't sell anymore. If the customer stops buying than walmart can't fund his intere…