Sunday, April 24, 2011

Is Obama Serious?

President Obama ceases to amaze me with Yahoo News' report "Team to probe oil market fraud, manipulation." Talk about a red herring issue. Seriously Obama!?!? Oil market manipulation??? How about the fact your government's borrowing 40 cents on every dollar spent? The last couple years have been some of the largest deficits in the history of the United States. Or perhaps its the Federal Reserve Bank blatantly printing money over the last couple of years? Unbelievable that folks don't call him out on this chicanery. The same ol' politics as usual is one of the most disappointing issues that I have with Obama as president. He promised "change" and its been anything but when it comes to transparency and shifty politics.

Wednesday, April 13, 2011

Tax exemptions for Munis in Jeopardy?

The Bond Buyer reports on congress looking into possibly doing away with the tax exemption on new Municipal Bond offerings. This is a risk that most will hush away as an impossibility. However Investment Mercenary favorite Jeffrey Gundlach hasn't nor have I. See: Gundlach: Two Ways to Lose in Munis

Senators Ron Wyden (D) & Dan Coats (R) introduced tax-reform legislation to eliminate the tax exemption. They would institute in its place a tax credit scheme to allow certain tax advantages with the bonds. If the budget deficits continue with no realistic plan this sacred cow for high tax states & investors could be in trouble. The budget problem is dire as I outlined in the post: Budget Crises Averted??? To fix the mess nothing will be safe when it comes to cutting or raising taxes.

Here are the consequences I see initially if this was ever to pass.
The Bad:
  • Municipalities would see their interest costs go up significantly
  • At this current time it would crater an already skittish market
  • Less benefit for wealthy individuals to fund municipalities
  • Municipalities would be forced to compete with other debt financing in the market place
The Good:
  • Municipalities would be forced to compete with all other debt financing creating a level playing field
  • Competition would force municipalities have the same stringent accounting as other bonds
  • Lower income investors would receive a much better yield that leads to a better tax benefit
My initial take would be that it in theory this could work as an overall benefit. What wouldn't, as it states in the article, is adding different tax rates and making our tax code more convoluted. As an aside I find it humorous that the politicians that are proposing this are the ones who's state's would have the most to benefit. Neither of their states have high personal income taxes. In fact Senator Wyden's state Oregon doesn't even have an income tax. Regardless don't right this or future legislation off that could effect muni tax-free interest.

Monday, April 11, 2011

Fukushima nuclear accident is now at the same rating as Chernobyl.

Today's news of Fukushima getting the same severity level as Chernobyl is a big deal. A very big deal. In a months time the Soviets had mobilized 500,000 troops & "volunteers" to fight the meltdown in Chernobyl. Japan has a few hundred people working on it. Oh by the way Chernobyl had one reactor meltdown versus at least 2 of the 6 reactors at Fukushima. Crazy people aren't more pissed about the lack of transparency & effort from the Japanese government. The good news is the amount of radiation released is supposedly 10% of the levels of Chernobyl. The bad news is the problem hasn't been contained in Fukushima. The silver lining to this news is that by recognizing the severity of the situation (albeit late) Japan and the world can mobilize with maximum effort.

Bloomberg is on top of it with more details.

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Sunday, April 10, 2011

Arnott: Market Hyped Up on Stimulus

Another great Mercenary is Rob Arnott of Research Affiliates. His viewpoints are always welcomed and this Morningstar video is no exception. A key part in the interview is at minute 2 as he expresses his caution and thoughts on the Stimulus. Where he explains his concerns of $4 Trillion of borrowed stimulus getting a measly 1/2 Trillion in economic output. Well put Rob!

Arnott: Market Hyped Up on Stimulus

Saturday, April 09, 2011

Budget Crises Averted???

Congratulations to our fine politicians for working long hours to come together to make a budget for 2011! Problem solved, we can all go about are daily life... Poppycock! They say a picture is a worth a thousand words and Michael Ramirez's Political Cartoon from IBD is no exception to that rule. I thank Barry Ritholtz's Big Picture Blog with finding this gem and calling it: "Our Absurd Budget Debate"

My take on it is simple and is best summed up when I talk to different people about it.
Liberal Friend: "We need to not spend as much on defense and foreign wars"
Hunter: Yes you are 100% correct!

Conservative Friend: "We need to cut spending on entitlements like Medicare & Social Security"
Hunter: You're damn right we need to!

Liberal Friend: "If our country eliminated the corporate tax loop holes & corporate welfare/subsidies we could start to get this budget under control."
Hunter: Absofucklutely we should do that and create a level playing field for business! I'm looking at you General Electic!

Conservative Friend: "Our government bureaucracy has grown so large and bloated we need to eliminate programs and privatize where we can."
Hunter: You my friend are preaching to the choir!

Liberal Friend: "We are going to have to increase revenues in the forms of taxes."
Hunter: Damn, you are right. I don't like it but we are going to have to fix this mess. I say we eliminate some of the 3.8million pages of IRS tax code by getting rid of a ton of deductions and raising the effect tax rate. Taxes are going to have to go up in one form or another.

Conservative Friend: "The country/states/cities spend too much on inefficient unionized government workers that have higher pay and outrageous benefits compared to those they take from in the form taxes."
Hunter: So you're saying that we shouldn't pay somebody more in their lifetime for not working (pensions) versus working. Then not allow them to collectively bargain against the "people" where there is no alternative, but to be forced to work with the union & its demands. It sounds like there is zero competition. Well that doesn't make sense at all. Why wouldn't anybody want to curtail their power and cut where you can? That's brilliant!

Well what does this dialog sound like? It's AUSTERITY and its coming to a neighborhood near you. We can deal with our problems by easing into austerity and "lick our wounds" over time. Or we can continue to procastinate and get 100% Austerity sooner then we think when our economy & government collapses. Then we might be looking at possible a deflationary depression or a hyper-inflation crisis. Not fun.

I don't find these problems and solutions difficult to identify no matter what political side of the fence you come from. We all have to live together so let's come together and fix this mess. The sacred cows of both political parties will have to be put to the alter! People should be pissed off and demand this political charade stop!

Friday, April 08, 2011

Thursday, April 07, 2011

Gundlach: Two Ways to Lose in Munis

More Gundlach from Morningstar's interview and this time discussing Municipal Bonds. I agree with Gundlach. My take is that yields are better then last year this time, but there is pain to be had. There is going to weakness in price and most muni bond holders are not accustomed to volatility. The panic will create opportunities because most bonds should survive the crisis. I have warned folks if they are confident in their holdings and can stomach "paper" losses they should be okay. Those that are more tactical it makes sense to have some dry powder ready for the next 12-18 months. That could be said for a number of different asset classes... Anyways enjoy Gundlach and his new facial hair.

Gundlach: Two Ways to Lose in Munis

Wednesday, April 06, 2011

Tuesday, April 05, 2011

95% LTV hurray for Australia!

As I'm working on part 2 on my aussie housing bubble problem I stumbled upon this brief headline from the online/magazine publication The Advisor: industry news for mortgage and finance brokers. Which by the way is gold mine of all things bubbly in Australia. Do not think this will be the last time I will post something originating from this publication! The link below is an article talking about one of the majors joining the ranks of 95% LVR or what we in the states call Loan To Value (LTV).

"The Commonwealth Bank has become the latest in a long line of lenders to increase its maximum LVR. Over the weekend, the major announced it would allow all new mortgage customers to borrow up to 95 per cent of the value of a property."

"CBA’s general manager retail products Michael Cant said the decision to increase its maximum LVR was a response to growing competition for a smaller number of borrowers.

“We are certainly looking to grow our lending to the home loan market,” he said."

The money part of the quote: "...was a response to growing competition for a smaller number of borrowers." Umm that sure sounds like a ponzi scheme to me! They seem to be running out of greater fools and they need to ratchet up the risk another notch to keep this thing afloat.

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Radiation Dose Chart

Follow the link from the Big Picture blog to get an idea of radiation dosage. I have been meaning to post this for some time...

It puts these posts into prospective and is a good guideline for what's going on in Fukushima
-Footage of the Highway to Fukushima
-Best/Scariest Chernobyl Documentary: Battle for Chernobyl

Link Source:

Monday, April 04, 2011

Best/Scariest Chernobyl Documentary The Battle of Chernobyl (HQ)


The Housing Bubble isn't gone it just moved; Part 1

I find it unbelievable that after what the US & Europe have been through over the last 4+ years with the housing bust that folks around the world would be more vigilant to preventing it from occurring. Well at least temporarily from occurring. History teaches us that humans are bound to repeat similar mistakes. Mark Twain's quote says it best, "history doesn't often repeat itself but it sure does rhyme". Anytime I can quote Twain I take that opportunity! Well the shocker in all of this is Australia hasn't learned 1 bit from the suffering of Europe and the US. Their major banks have all the greatest hits from the housing bubble. I am going to pick on one of their banks but most of them are doing similar irresponsible lending practices. Hell they are trying to out compete each other in the quest of market share without regard to the consequences.

I am going to feature Westpac Bank Corp one of the larger Aussie & New Zealand banks out there. All of this information I will be commenting on is in plain sight and can be gathered on Westpac's website. First I will rattle off some of the terminology like the Rocket & Flexi First Option Loans. Interest Only up to 10 years with Low Doc loan Applications: "If you're self-employed and don't have documentation proof, we can still help." Combination loans that combine a fixed and variable component to the loan. 100% offset loan accounts that act like a margin account. Then a laundry list of different options of: Top-up, Redraw, Portability, Repayment Holiday, Parental Leave, Reduced Repayment, Progress draws for Construction, Smart Pay, and Funds Access. Wow! That my friend is a lot of financial innovation. Now granted some of the options can be useful and are nice. You can put lipstick on the pig, but a pig is a pig. Guess what? Debt is still debt no matter how you dress it up too.

I am in debate with a leading Australian bank analyst and he has passed on some of his reports countering my belief that Housing Bubble in Australia is a major danger. After I look through it I will pass on some of the findings.

*Disclosure: No position in Westpac Bank corp as of the date of this post

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