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January 2009

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USO & OIL: Super Contango!

January 30, 2009 – Comments (0)

I am not a commodities investor, but the recent gyrations in crude plus the newly found knowledge that there are ETFs based specificially on the forward month WTI contracts attracted my attention. Reading up on them, I ran into this contango thing. The contracts for this summer are a full $10 above the spot. So, there are 330M bbl of crude in domestic storage, and 90M more in super-tankers squirreled away, all awaiting the price increase this summer.   [more]

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Wait: Tax Cuts are Keynesian?

January 29, 2009 – Comments (3)

I was reading an older tract about economic policy, when I ran into this bit of trivia. OK, this is how I understand it. GNP = C + I + G. So, if GNP is below full employment, increase to G (gov’t spending) to increase total output. It was pointed out that cutting taxes, while keeping G constant, had the same effect. Taxpayers, with their increase $$$, will either save/invest (increase I) and/or increase spending/consumption (increase C). So, if tax cuts work (there has to be something wrong with this logic), the “stimulus” package will also increase economic output by increasing G, just not as efficiently. Huh?  [more]

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Mark-To-Market: Now I Get It

January 23, 2009 – Comments (0)

I was on Investopedia, looking for a Keynsian explanation why a rightward shift in Interest Rate vs. Investment also causes a rightward shift in Interest Rate vs. Income.  Incidentally, I found an article on MTM; the light bulb goes on. (Articles > Financial Theory > Mark-To-Market Mayhem). This explains how a bank can be worth tens of $B one day, and be worth zilch the next day, even though there has been no substantial changes in that bank.   [more]

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Oh, No: Dow Testing 8000 AGAIN?!?

January 16, 2009 – Comments (4)

Relax, pop open another beer. Since the market crashed in late Nov, the DJIA has been trading sideways in the range of 8100 to 9000. This time, however, I feel much better about the decline. Yes, the Santa Claus rally is over (like they said on pbs/nbr today), and the dow has gone down. This time, though, the market is acting rationally and predictably to bad news about the bad shape that banks and retail are in. None of this panicky, almost 1000 point swings in a single trading session (and rallying a few hundred points on bad unemployment news). So, from here, I expect the market to react to the latest economic business news as it should, and to finally start heading up once evidence that the recession is easing appears.   [more]

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Black-Scholes and Long Term Capital Management

January 13, 2009 – Comments (1)

I ran into a reasonably coherent primer on this (Schaum’s Outline Series: “Investments”, p. 240 in chapter 21). It is an interesting equation that calculates what price an option should be, and the so-called “hedge ratio” also pops out of the calculation. It seems to be a fool-proof way of making money, and LTCM did just this using leverage. The best resource I found was on the PBS/Nova website (“Trillion Dollar Bet”). They have a very nice, interactive webpage that describes this mathematical beastie.  [more]

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Dear President-Elect Obama: It Won’t Work

January 09, 2009 – Comments (1)

Don’t get me wrong: I am praying hard for a quick, powerful economic recovery. My investments are underwater (heck it’s the Titanic resting in Davy Jones Locker. If the news reporting is correct (OK, that’s a whole different discussion), your economic rescue/stimulus plan isn’t.  [more]

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Thoughts About VIX

January 07, 2009 – Comments (0)

I first heard about VIX during the current market crash: normally at 25, it went up to nearly 80. I began watching it. Right now, I am still not sure what to make of it, but this is what I have so far.  [more]

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Community Reinvestment Act (CRA) - Bad Dog

January 02, 2009 – Comments (4)

I hereby state: IMHO, the cause of the current financial disaster is the CRA. Period. QED. Done and Done. Hair of the Dog. And any other cliché I can think of.   [more]

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