Recently US auto industry is taking a heavy blow. The Big three(Chrysler, Ford and GM) share plunged as GM said it will need a big help from government to inject money or it will fall.
Amazingly, a lot of expert say yes to this and urge government to take action as fast as possible. According to them, Auto industry is too big too fail.
First of all, total worker in the auto industry is small relative to health care or real estate. Only 3% of American work in the auto industry.
Furthermore, even senate reject the bill of 34 billion loan, Bush Administration still want to use TARP money to save them.The 700 Billion TARP now only left 60 Billion and if Government loan 34 Billion to The big 3, that's mean only 26 Billion left and frankly 26 Billion is as useless as my toilet paper which again mean another big bill coming?
Don't think 34 billion loan will save them, it only ensure them to survive till March so they can get out with a restructuring plan. Does that mean they will need a much bigger loan March 2009?
GM is in talk with Chrysler to merge as a new company for 1 reason and 1 reason only: to make them big enough so government won't let them fall just like financial companies. For Chrysler case, it is even ridiculous. The Owner of Chrysler, Subaru said they don't want to help Chrysler so Subaru ask Chrysler to get help from Government. I mean if Chrysler still has hope of making a profitable business, I am sure Subaru will step in.
The reason they can't fail: too big. They are too big to fail. The same situation happened to Financial companies, Banks, IB and now auto company. Couple of months ago most Banks are into Merge and Acquisition. They merge just to make itself big enough. Bank of America bought Merrill Lynch after accessing ML balance sheet for a day. How can a company buy another company as big as ML after only reading its balance sheet for a day?
Tomorrow FOMC will decide interest rate and it is widely expected to be cut to zero or near zero. Furthermore, Federal Reserve also said they will gear up the printing press.
Anybody remember Zombie Companies and Zombie Banks from the Japanese in the 90's? Jim Rogers mention it many times on TV. In the 90's, Japanese Government won't let anybody fail and bailout everybody. As a result, Japan stock market today is 80% lower than in the 90's and still recovering from it.
However Japan is different as Japanese government is one of the biggest creditor in the world and Japanese work hard and save a lot. US is in exact opposite scenario.
So do you know why government won't save you and me? because we are not big enough. So next time when you make a bad decision, make sure you are big enough so that Paulson and Bernanke will answer you call.
11.11.08
When Will US Economy Recover?
When will US economy recover? this is the 1 million dollar question that every economist, investor, trader, fund manager, just about everybody in the world try to get the answer.
August last year(17/08/2007) when sub prime crisis started, many journalists and traders said it is just a small problem for the mighty US economy. If you watch CNBC regularly then you will notice that Erin Burnett, Jim Cramer and other CNBC people said about sub prime problem is a opportunity to buy!
Then came October last year when Dow at all time high of around 14100, everybody is talking about economic nirvana, greatest story never told and super bull stampede!
Then disaster happened on November and December. Stock market all over the world start dropping and again, many "expert" on CNBC and Bloomberg shouted that this is the life time opportunity to grab some under priced stock. Somehow most of them liked financial stocks.
Early this year again stock market tumbled and again they said worst is over......
So more than 1 year after sub prime crisis, people started to realize this is no regular bubble. This bubble is so big and it's probably the biggest we ever had.
Back to the 1 million dollar question, now everybody on CNBC and Bloomberg again forecast we will have bottom on end of next year or early 2010 and some folks actually believe them. They have been wrong for a year and if you still believe them, you are in real trouble.
I have read many Analyst report, watch CNBC and Bloomberg all the time and only agree to 3 people: Jim Rogers, Peter Schiff and Marc Faber because they have the guts to tell you the truth.
What if the answer of that question is US economy can't and won't recover?
Throughout last century world economy never had a crisis that can't recover and we all assume that this crisis is just like others. It's almost like we never had bad illness and suddenly we have a cool and we assume we will heal very soon. However that cool maybe is the early symptom of a AIDS and other disease that gonna kill us?
In other word, US economy may recover and may not.
So the real question you should ask yourself is this: WILL US ECONOMY RECOVER?
August last year(17/08/2007) when sub prime crisis started, many journalists and traders said it is just a small problem for the mighty US economy. If you watch CNBC regularly then you will notice that Erin Burnett, Jim Cramer and other CNBC people said about sub prime problem is a opportunity to buy!
Then came October last year when Dow at all time high of around 14100, everybody is talking about economic nirvana, greatest story never told and super bull stampede!
Then disaster happened on November and December. Stock market all over the world start dropping and again, many "expert" on CNBC and Bloomberg shouted that this is the life time opportunity to grab some under priced stock. Somehow most of them liked financial stocks.
Early this year again stock market tumbled and again they said worst is over......
So more than 1 year after sub prime crisis, people started to realize this is no regular bubble. This bubble is so big and it's probably the biggest we ever had.
Back to the 1 million dollar question, now everybody on CNBC and Bloomberg again forecast we will have bottom on end of next year or early 2010 and some folks actually believe them. They have been wrong for a year and if you still believe them, you are in real trouble.
I have read many Analyst report, watch CNBC and Bloomberg all the time and only agree to 3 people: Jim Rogers, Peter Schiff and Marc Faber because they have the guts to tell you the truth.
What if the answer of that question is US economy can't and won't recover?
Throughout last century world economy never had a crisis that can't recover and we all assume that this crisis is just like others. It's almost like we never had bad illness and suddenly we have a cool and we assume we will heal very soon. However that cool maybe is the early symptom of a AIDS and other disease that gonna kill us?
In other word, US economy may recover and may not.
So the real question you should ask yourself is this: WILL US ECONOMY RECOVER?
9.11.08
Our F**king Leader
Yes, you read my title right. Most of World leaders are F**king. Most of them still don't understand our problem and continue their destroying work and i bet they will continue to do until we die.
All the so-called "smart" leaders of the world have unlimited amount of meeting and they always have the conclusion of not enough credit and interest rate is not low enough.
I remember Ben Bernanke said one thing in front of US Congress and what he meant is that world economy is in crisis and banks are not functioning well. As a result people who need money can't get their money and economy activity will be stopped.
However to answer Bernanke stupid statement, I remember Peter Schiff said a thing: what Federal Reserve and world central banks do is just to ensure people who need money get theirs but those money is worthless because of hyperinflation after this.
In other word, what central banks do to solve the problem actually create more problem and the problem become bigger and bigger.
What we need to do is: DO NOTHING. There are a lot of good fundamental banks that still can provide loan to those who survive. Don't fix the price, let the price adjusted by invinsible hand. Free market mechanism never fail and it never will.
Yesterday, world leader gathered once again to have a meeting about our economic situation. Let me teach them what they should talk about:
Economy is a business cycle. There are long term, medium term and short term business cycle. Business cycle mean we will have UPs and DOWNs and it's perfectly fine.
However, central banks around the world just want the UPs of the business cycle and try to prevent the DOWNs so they try to fix the price. Once they did it, yes, we will have more UPs and less DOWNs for a short term period but that is what we call a bubble.Bubble mean it's empty in the middle and may burst any time. It is phony and not real.
Every single economic crisis existed is created caused by central banks. They try to fix the price and try to prevent DOWNs in the business cycle that we should have. From the Great Depression 1929 to 1979 to Japan in 1990's to asia financial crisis in 1997 to dot-com to credit crisis now, they all are caused by central banks.
However, i think stock market will rally tomorrow due to short term effect of central banks action. As i say before stock market is irrelevent in short term. People can't resist to buy stock because everything looks good and credit is easy to get. However in the long term, please don't touch stock unless your are a short seller
All the so-called "smart" leaders of the world have unlimited amount of meeting and they always have the conclusion of not enough credit and interest rate is not low enough.
I remember Ben Bernanke said one thing in front of US Congress and what he meant is that world economy is in crisis and banks are not functioning well. As a result people who need money can't get their money and economy activity will be stopped.
However to answer Bernanke stupid statement, I remember Peter Schiff said a thing: what Federal Reserve and world central banks do is just to ensure people who need money get theirs but those money is worthless because of hyperinflation after this.
In other word, what central banks do to solve the problem actually create more problem and the problem become bigger and bigger.
What we need to do is: DO NOTHING. There are a lot of good fundamental banks that still can provide loan to those who survive. Don't fix the price, let the price adjusted by invinsible hand. Free market mechanism never fail and it never will.
Yesterday, world leader gathered once again to have a meeting about our economic situation. Let me teach them what they should talk about:
Economy is a business cycle. There are long term, medium term and short term business cycle. Business cycle mean we will have UPs and DOWNs and it's perfectly fine.
However, central banks around the world just want the UPs of the business cycle and try to prevent the DOWNs so they try to fix the price. Once they did it, yes, we will have more UPs and less DOWNs for a short term period but that is what we call a bubble.Bubble mean it's empty in the middle and may burst any time. It is phony and not real.
Every single economic crisis existed is created caused by central banks. They try to fix the price and try to prevent DOWNs in the business cycle that we should have. From the Great Depression 1929 to 1979 to Japan in 1990's to asia financial crisis in 1997 to dot-com to credit crisis now, they all are caused by central banks.
However, i think stock market will rally tomorrow due to short term effect of central banks action. As i say before stock market is irrelevent in short term. People can't resist to buy stock because everything looks good and credit is easy to get. However in the long term, please don't touch stock unless your are a short seller
8.11.08
Buffett Is The Next US Treasury Secretary?
January of 2009 United States of America will have a new president and new government. That's mean US will have a new Secretary of Treasury, the most important and crucial position in the government.
Now that is good news as we know Henry Paulson is one of the lousiest ever Treasury Secretary of all human history. Getting rid of him will surely bring some "change we can believe in".
Everybody talking about Warren Buffett, chairman and CEO of Berkshire Hathaway inc, as one of the hottest candidate for that position. Warren Buffett is a legendary investor. His life is a epic journey every investor should know. Every word that he said should be remembered by investors arould the world. He helped countless investor became millionaire and he is the world's richest man.
Besides that, he is a modest man. He live a simple life, driving a low cost car and staying in a medium-cost house.
However, as the head of the department of Treasury, The Secretary of the Treasury is the principal economic advisor to the President and plays a critical role in policy-making by bringing an economic and government financial policy perspective to issues facing the government. The Secretary is responsible for formulating and recommending domestic and international financial, economic, and tax policy, participating in the formulation of broad fiscal policies that have general significance for the economy, and managing the public debt. The Secretary oversees the activities of the Department in carrying out its major law enforcement responsibilities; in serving as the financial agent for the United States Government; and in manufacturing coins and currency.
In other word, The Secretary of the Treasury is the financial advisor for US government and in charge of economic policy(micro and macro) of US government. That's ironic because warren buffett is not famous of economic studies. Warren Buffett is a investor. He is not a economic expert that know how to ensure stability of a economy. Instead, he more comcern which type of investment will give him maximum return.
In other word he is a wall street guy and not main street guy. I bet he know much more about stock market that economic. However some time what good for stock market may not be good for economy and vice versa. So for me who should become next US secretary of Treasury?
A nobel prize winner may be a good candidate as he or she sure know about economy more than Buffett. If we can't find one then a prefessor in a famous University such as MIT, Harvard may be a good idea. At least his or her main focus is economy itself and not wall street.
The candidate must also know the importance of free market mechanism. Free market is the only tool that help US to become the most powerful nation in the world. It correcting government failure every single time. Without it, US uis already died in 1929 or 1970's. Every time US government agencies did something wrong, free market gave a warning and correct it. However this time government don't care about free market warning and ignore it. Let's see what is the consequences of that...
Anyway that's my point. Henry Paulson did such a lousy job because his main focus is wall street and ignore main street. He take care of the wealthy people and ignore the lower-medium class people. He helped chairman of big companies but he never help a poor citizen. Let us hope next US Secretary of Treasury won't be that.
Now that is good news as we know Henry Paulson is one of the lousiest ever Treasury Secretary of all human history. Getting rid of him will surely bring some "change we can believe in".
Everybody talking about Warren Buffett, chairman and CEO of Berkshire Hathaway inc, as one of the hottest candidate for that position. Warren Buffett is a legendary investor. His life is a epic journey every investor should know. Every word that he said should be remembered by investors arould the world. He helped countless investor became millionaire and he is the world's richest man.
Besides that, he is a modest man. He live a simple life, driving a low cost car and staying in a medium-cost house.
However, as the head of the department of Treasury, The Secretary of the Treasury is the principal economic advisor to the President and plays a critical role in policy-making by bringing an economic and government financial policy perspective to issues facing the government. The Secretary is responsible for formulating and recommending domestic and international financial, economic, and tax policy, participating in the formulation of broad fiscal policies that have general significance for the economy, and managing the public debt. The Secretary oversees the activities of the Department in carrying out its major law enforcement responsibilities; in serving as the financial agent for the United States Government; and in manufacturing coins and currency.
In other word, The Secretary of the Treasury is the financial advisor for US government and in charge of economic policy(micro and macro) of US government. That's ironic because warren buffett is not famous of economic studies. Warren Buffett is a investor. He is not a economic expert that know how to ensure stability of a economy. Instead, he more comcern which type of investment will give him maximum return.
In other word he is a wall street guy and not main street guy. I bet he know much more about stock market that economic. However some time what good for stock market may not be good for economy and vice versa. So for me who should become next US secretary of Treasury?
A nobel prize winner may be a good candidate as he or she sure know about economy more than Buffett. If we can't find one then a prefessor in a famous University such as MIT, Harvard may be a good idea. At least his or her main focus is economy itself and not wall street.
The candidate must also know the importance of free market mechanism. Free market is the only tool that help US to become the most powerful nation in the world. It correcting government failure every single time. Without it, US uis already died in 1929 or 1970's. Every time US government agencies did something wrong, free market gave a warning and correct it. However this time government don't care about free market warning and ignore it. Let's see what is the consequences of that...
Anyway that's my point. Henry Paulson did such a lousy job because his main focus is wall street and ignore main street. He take care of the wealthy people and ignore the lower-medium class people. He helped chairman of big companies but he never help a poor citizen. Let us hope next US Secretary of Treasury won't be that.
6.11.08
Changes That We Can Really Believe In
Yesterday mark the greatest day in American Democratic history as Barack Obama becomes the first black US President in US history. Most people in the entire world love it. According to survey by The Economist magazine, 90% of the countries in this world support Obama and more importantly, 52% of American citizen support him which put him in charge of the strongest country in the world, or is it?
Barack Obama slogan is "change we can believe in" which I believe is the main reason he won except for the fact that his opponent is too weak. However, as US economy are on the edge of "turbulence", what changes Obama gonna make?
Neither Barack Obama or John McCain said before how they gonna get the money needed to fund the 700 billion bail out and now as bail out episode 2 is on the way, we should seriously ask the man where he will get his money? Well at least we know he could blew up >500 million to become who he is now...
As a person studied economics for years, I really think Obama knows nothing about economics and from the statement he made before about US economy, I pretty sure he gonna destroy the US economy.
So I think yesterday is a sad day for US economy. Although I think John McCain would not does any good for US economy, at least he won't destroy it further. Now US senate and House of Representative dominated by democrats, it's easy for them to pass another bail out plan which will definitely kill it.
As a trader, I really hope Obama can make changes that not only we can believe in, but changes that work but I have serious doubt on President Obama. Forget terrorism, forget Iraq, forget war, forget healthcare, education, senior citizen pension. Without a strong fundamental in economy, nothing will work.
Let the free market and invinsible hand work it out. Changes we really need is no intevention. Let us hope Obama believe in free market and make a changes that we can really believe in.
Barack Obama slogan is "change we can believe in" which I believe is the main reason he won except for the fact that his opponent is too weak. However, as US economy are on the edge of "turbulence", what changes Obama gonna make?
Neither Barack Obama or John McCain said before how they gonna get the money needed to fund the 700 billion bail out and now as bail out episode 2 is on the way, we should seriously ask the man where he will get his money? Well at least we know he could blew up >500 million to become who he is now...
As a person studied economics for years, I really think Obama knows nothing about economics and from the statement he made before about US economy, I pretty sure he gonna destroy the US economy.
So I think yesterday is a sad day for US economy. Although I think John McCain would not does any good for US economy, at least he won't destroy it further. Now US senate and House of Representative dominated by democrats, it's easy for them to pass another bail out plan which will definitely kill it.
As a trader, I really hope Obama can make changes that not only we can believe in, but changes that work but I have serious doubt on President Obama. Forget terrorism, forget Iraq, forget war, forget healthcare, education, senior citizen pension. Without a strong fundamental in economy, nothing will work.
Let the free market and invinsible hand work it out. Changes we really need is no intevention. Let us hope Obama believe in free market and make a changes that we can really believe in.
1.11.08
Must Watch Video From Peter Schiff at Early 2007
This Video was on air at around early 2007.
What make this video great is so many so-called "expert" laughed at Peter Schiff when he talked and now you know who's laughing.
Finally Jim Cramer Talk Something Wise and I Totally Agree
http://www.cnbc.com/id/15840232?video=911841132
Watch this as Jim Cramer explain why market moved higher this week and i am totally agree with him.
Although i am no jim cramer fan, he is right this time.
Remember 3 days ago Dow surged 900 point or 12%? Here's the answer.
However my "agreement" to Jim Cramer stop when he answer phone call!
Watch this as Jim Cramer explain why market moved higher this week and i am totally agree with him.
Although i am no jim cramer fan, he is right this time.
Remember 3 days ago Dow surged 900 point or 12%? Here's the answer.
However my "agreement" to Jim Cramer stop when he answer phone call!
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