OB: It's the end of Dubai World as we know it

In this episode of Practical Economics Matt Stiles talks whether the bond default of Dubai World marks the beginning of a run on emerging markets or whether it is just a passing regional financial failure that will have little broader impact. Could Dubai World be the canary in the coal mine, foretelling a broader market crack-up just around the corner?

Check out Matt's blog at http://futronomics.blogspot.com/.




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NOTE: You can view the complete list of Practical Economics podcasts to hear more conversations with the experts. Tune in to the weekly economics round-table discussions to hear the latest from the Optimistic Bear.

OB: Now we know - the game of economics and finance is rigged

In this episode of Practical Economics, John Berling Hardy explains how the economy, and society, are driven by the actions of an elite group that understand and orchestrate what happens, ensuring they always come out on top. The current global recession only makes sense when explained in the context of someone orchestrating things. These same principals of unsporting gamesmanship also apply on the level of small groups, where someone is always taking unfair advantage of others. Understanding that this game exists, and how it is played, is an important part of protecting ourselves and our investments.

You can check out more of John's ideas at http://www.playingtheplayers.com/.

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NOTE: You can view the complete list of Practical Economics podcasts to hear more conversations with the experts. Tune in to the weekly economics round-table discussions to hear the latest from the Optimistic Bear.

OB: Eugenics resurrected

In this episode of Practical Economics, Alan Hall of The Socionomics Institute talks about his latest research paper on Eugenics, which traces the rise and fall of the movement with the ups and downs of social attitudes throughout history. If the patterns Alan sees hold true, we could see a massive resurgence in an acceptance of ideologies to cleanse humanity of unwanted genes as the depression progresses. Already there are signs that human life is being talked about as a cancer plaguing the world.

You can check out more about Socionomics at http://www.socionomics.net/.

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NOTE: You can view the complete list of Practical Economics podcasts to hear more conversations with the experts. Tune in to the weekly economics round-table discussions to hear the latest from the Optimistic Bear.

Round table economics discussion - 2009-11-17

In this episode of the Optimistic Bear round-table economics discussion our panelists (Elliott & Jeremy) talk about how the fact the US does not have much debt denominated in foreign currencies sets it apart from other nations which have had gret economic stresses. They also talk about how a deeper recession may not mean a break-down in civil society, but that it could lead to greater inneficiences as businesses and consumers start to keep greater supplies of goods to make up for a less predictable supply chain.

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Optimistic Bear Round table discussion podcast series

Welcome to the Optimistic Bear round-table discussion podcasts. Check out the latest conversations about economic news, and issues, with my friends and guest speakers.

• (2009-11-10) Kevan & Jeremy discuss the definitions of inflation and deflation, and whether government policy makers actually understand economics or are willfully driving the economy into a deeper hole. The Optimistic Bear's attempts at finding hope from economic trauma, with the belief that the depression will cure the mal-investments, are tempered by Jeremy's comparison to the rise of Fascism in 1930s Germany, and Kevan's concerns that the lack of US savings, and massive unfunded liabilities cannot possible lead to a happy ending.
• (2009-11-05) In this episode of the Optimistic Bear round-table economics discussion our regular panel (Kevan, Elliot & Jeremy) discuss the Federal Reserve's decision to keep interest rates unchanged, and whether their hands are tied by the direction of the Treasury Bill markets. We also ponder the morality of "walking away" from properties that are worth substantially less than the mortgage, even when a home-owner is able to continue making payments.
• (2009-10-30) In this episode of the Optimistic Bear round-table economics discussion Matt Stiles joins us as a guest, filling in for our regular participants who are unavailable this week. We talk about the paradox of a declining stock market at the same time that the economic news was so positive this week and the financial stresses that local governments are experiencing with pension obligations.
• (2009-10-22) Kevan, Jeremy, and Elliott discuss whether rosy earnings reports indiciate that tech industry has turned the corner, and whether innovation thrives during recessions. Kevan takes on the deflationists, suggesting that the worst might only be starting for the dollar.
• (2009-10-16) Elliott and Jeremy talk about the significance (or lack thereof) of the Dow hitting 10,000 and societal attitudes when markets hit bottoms. Hear about how stocks are not a panacea for long term investors, and that bonds usually perform better in the long haul. Also, the Optimistic Bear points out that bearish investors need to tread carefully since the cards are stacked against bearish investors.
• (2009-10-08) In this episode of the Optimistic Bear round-table discussion podcast, we talk with Jeremy about growing problems with reverse mortgages, and how to make head or tails of the inflation/deflation debate when each side claims the Federal Reserve is doing different things with the money supply. We also talk discuss about the societal, and career, pressures to just "play along" that many people faced during the bubble years.
• (2009-10-01) Welcome to the inaugural Optimistic Bear round-table discussion podcast. The Optimistic Bear chats with Kevan, Elliott & Jeremy about Economics, inflation/deflation, bond prices, with a smattering of politics thrown in for good measure.

NOTE: You can view the complete list of Economics Unveiled podcasts to hear more conversations with the experts.

Round table economics discussion - 2009-11-10

In this episode of the Optimistic Bear round-table economics discussion our panelists (Kevan & Jeremy) discuss the definitions of inflation and deflation, and whether government policy makers actually understand economics or are willfully driving the economy into a deeper hole. The Optimistic Bear's attempts at finding hope from economic trauma, with the belief that the depression will cure the mal-investments, are tempered by Jeremy's comparison to the rise of Fascism in 1930s Germany, and Kevan's concerns that the lack of US savings, and massive unfunded liabilities cannot possible lead to a happy ending.

This is a recording of the innaugural live broadcast of the Optimistic Bear weekly discussion.



NOTE: Tune in to the weekly economics round-table discussions to hear the latest from the Optimistic Bear. You can view the complete list of Practical Economics podcasts to hear conversations with the experts.

Introducing the Optimistic Bear Weekly Economics and Finance

Tune in to the Optimistic Bear live internet radio show every Tuesday night at 9:00pm (Pacific Time).

The Optimistic Bear discusses the latest economics and financial news with both guests and listeners. Has the global economy turned the corner? Is deflation or inflation ahead? What will happen to stocks, bonds, real-estate, commodities and gold? Is there anything that can be done about it? Tune in to find out. The Optimistic Bear has his own opinions, but his guests offer different views to give listeners a broad perspective.

http://www.blogtalkradio.com/optimisticbear

Note: You can check out the full directory of past episodes from the Optimistic Bear weekly economics discussions.

Round table economics discussion - 2009-11-05

In this episode of the Optimistic Bear round-table economics discussion our regular panel (Kevan, Elliot & Jeremy) discuss the Federal Reserve's decision to keep interest rates unchanged, and whether their hands are tied by the direction of the Treasury Bill markets. We also ponder the morality of "walking away" from properties that are worth substantially less than the mortgage, even when a home-owner is able to continue making payments.

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NOTE: Tune in to the weekly economics round-table discussions to hear the latest from the Optimistic Bear. You can view the complete list of Practical Economics podcasts to hear conversations with the experts.

Round table economics discussion - 2009-10-30

In this episode of the Optimistic Bear round-table economics discussion Matt Stiles joins us as a guest, filling in for our regular participants who are unavailable this week. We talk about the paradox of a declining stock market at the same time that the economic news was so positive this week and the financial stresses that local governments are experiencing with pension obligations. If the global economy is indeed about to head to new lows emerging markets that have been seeing some of the largest gains recently could catch the brunt of the decline. McDonald's recent decision to leave Iceland may be an indicator of things to come as globalization takes a breather.

Check out Matt Stiles' blog at http://futronomics.blogspot.com/.

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NOTE: Tune in to the weekly economics round-table discussions to hear the latest from the Optimistic Bear. You can view the complete list of Practical Economics podcasts to hear conversations with the experts.

Round table economics discussion - 2009-10-22

In this episode of the Optimistic Bear round-table economics discussion Elliott, Jeremy and Kevan talk about whether the dollar is set to fall even further and if the tech industry has turned the corner. Is Windows 7 really the engine that will "save" Microsoft? Has Apple found the magical formula to success even in a recession? The law of supply and demand is called into question, with concerns that it might not be sufficient to explain why currencies rise and fall (or at least the way most people interpret the law to work).




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Here is the link to the article about innovation in a recession that was mentioned in the podcast.

NOTE: Tune in to the weekly economics round-table discussions to hear the latest from the Optimistic Bear. You can view the complete list of Practical Economics podcasts to hear conversations with the experts.

The world's best financial & economics analyst

I would like to announce that www.surkan.com has just joined the affiliate program of Elliott Wave International. This is the financial newsletter service that I have come to view as indispensable. I have been a subscriber for years, and find that their analysts are the closest to my own views of anything there is.

The EWI view that society, and the economy, moves in cycles (or waves, in their parlance), has had a profound impact on my view of economics and the world. It’s not the “news” that drives the big changes in society, rather it is changes in society that create the news.

I have never fully bought into the complex wave theory that EWI uses, with which they will plot (and predict) trends in the stock market, but their general technical analyses has been dead on the money as to where the economy was headed, even if their timing hasn’t always been the best. EWI is one of the only authorities to call for deflation (which they still maintain is ahead), and they were way ahead in seeing the growing financial storm that was brewing. Astonishingly, EWI has held these bearish views without falling into the trap of conspiracy theories, blaming everything on nefarious cabals and manipulators.

I whole-heartedly recommend EWI to all of my readers. They have a free membership service (Club EWI), which allows you to access some basic articles, and they have various levels of paid subscriptions to the different newsletters they offer.

Right now EWI is offering a free series of courses based on Bob Prechter’s book “Conquer the Crash”, which offers very useful advice on protecting yourself from the growing depression.

Incidentally, I had the great privilege of going to lunch with Bob Prechter (the EWI founder) when he was visiting Seattle earlier this year.

In the interests of full disclosure, as an EWI affiliate member I do gain a commission for all subscribers (even the ones using the free Club EWI service) that come from Surkan.com. If you do decide to sign up to EWI (which I highly recommend), please use the links on Surkan.com (in the advertisement banners, or this post) so that I will get some credit.

Re-defining terms: forget inflation and deflation

In this episode of Practical Economics Matt Stiles talks about how the recession is far from over, and that the entire inflation/deflation debate may be irrelevant since the very definitions used for these terms don’t describe the phenomena we are seeing in the global economy. Matt goes on to say that the recession may be part of a generation cycle, and that it is inevitable that boom and bust cycles will persist forever. Check out Matt’s blog at http://futronomics.blogspot.com/.

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Profiting from the recovery

In this episode of Economics Unveiled Bill Conerly explains that the economic recovery is going to be a lasting (albeit slow) one, and that businesses should start positioning themselves to profit from it. He also explains that business plans should be robust enough to succeed regardless of what happens to the economy. Don't over-extend yourself when times are good, and don't cut out muscle when things get tough.

Bill tells the Optimistic Bear that he has been around the economics block enough to have learned the humility to know that the future is hard to predict, and that outcome of debates such as the inflation/deflation argument are just unknowable. You can check out Bill's blog here: http://businomics.typepad.com/.

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NOTE: You can view the complete list of Practical Economics podcasts to hear more conversations with the experts. Tune in to the weekly economics round-table discussions to hear the latest from the Optimistic Bear.

Talking about FinancialArmaggedon

Michael Panzner (of http://www.financialarmageddon.com/) discusses his views of the global economic roadmap, and the “end of the American era”. He describes an inflationary future for America as policy makers cave into the pitchfork wielding masses, unwilling to accept deflation. Unfortunately, Panzner doesn’t believe there is necessarily any particular nation for investors to park their money that will remain unscathed from the coming turmoil. Panzner’s view is an expansive one, covering the history of empires and societal trends.

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NOTE: You can view the complete list of Practical Economics podcasts to hear more conversations with the experts. Tune in to the weekly economics round-table discussions to hear the latest from the Optimistic Bear.

The next shoe to drop: reverse mortgages

Alarm bells are beginning to sound about the reverse mortgage industry. As I’ve long suspected, these reverse mortgages aren’t nearly as “safe” as many have believed. It is very interesting, that the articles coming out about the growing problems with reverse mortgages don’t really make it clear who is going to suffer. Bloomberg, for example, talks about this as a potential consumer problem, but doesn’t really specify how that would be.

Ironically, it is the consumer that may well have the last laugh when it comes to reverse mortgages. If property prices actually plunge below levels that lenders had thought possible, it is the banks that will take it on the teeth. The seniors who have taken out the reverse mortgages have basically guaranteed that they won’t lose more than a fixed amount on their own homes, regardless of how far prices crash. It is the poor lender who is going to suffer when it comes to selling the property to be made whole when the borrower passes away.

Risks that contributed to the collapse of the subprime- mortgage market also are a concern in the sale of reverse mortgages, said John Dugan, head of the Office of the Comptroller of the Currency, at an American Bankers Association conference in June.
“While reverse mortgages can provide real benefit, they also have some of the same characteristics as the riskiest types of subprime mortgages -- and that should set off alarm bells,” Dugan said.

Declining rents: a practical lesson in supply and demand

The economic concept of supply and demand seems simple enough. If demand for lollipops increases, but the number of lollipops produced remains the same, prices will rise (and fall if some people suddenly stop eating them). However, the application of this economics principal gets tricky. Many people assume that the demand side of the equation is some easily calculable variable, that can easily be extrapolated given the right information.

Unfortunately, demand is a fiendishly complex thing, subject to so many factors that there is often no easy way to determine how it will change, or alter.

The recent decline in rents across the USA is an excellent example of this. Why is it that rents are in decline at the very same time that fewer people are buying homes? I recall seeing articles at the beginning of the housing downturn in 2007 which proclaimed that a real-estate bust would be fantastic for landlords since demand for rental accommodations would increase. Instead, we are seeing that demand for rental properties is falling at precisely the same time that demand for acquiring homes is also down.

Has the USA suddenly been losing population, thereby reducing over-all demand for residential dwellings over-all?

What this apparent contradiction of declining rents simultaneous with declining home sales shows is that demand is far more elastic than many have thought. Demand is actually a highly elastic concept, that has as much (or more) to do with peer-pressure, culture, and income levels than it does with population. In the case of rents, we are clearly seeing that people are down-sizing their housing needs due to a loss in incomes, or even fear of such. 4 person families that previously lived in 3 bedroom homes with a garage, are now content to live in a two bedroom apartment, and having the kids share a room. Increasing numbers of single adults are moving back to live with their parents.

All the old assumptions about how demand for real-estate could be linearly extrapolated from population can be chucked out the window.

Even the idea of supply itself is also a fuzzy concept, that is difficult to nail down. For example, we are seeing increasing numbers of home owners who are now renting rooms in their homes to help make ends meet (adding additional “shadow” supply to the rental market).

The law of supply and demand is still valid, but there is no simple equation that will tell us what will happen to either supply or demand in the future.

Mish is right on deflation, but wrong on the cause

Mike Shedlock has posted another interesting article on the likelihood that severe deflation lies just ahead for the economy. Over-all, I agree with his points.

Travakoli makes six points about deflation. I concur with all of them. Here
are three of them.

• Our fundamental financial and economic problems, i.e. overleveraging, lack of transparency, have not been solved.
• Since 2008, capacity utilization has plummeted; businesses have no pricing power; U.S. lost 6.7 million jobs but numbers are underreported; personal income tax receipts are down 21%; corporate tax receipts are down 58%; U.S. deficit will exceed $1.8 trillion; govt. spending is now 185% of tax receipts; 13% of mortgages are seriously delinquent and/or in foreclosure; huge decrease in personal net worth; 15 million mortgages exceed the home value. We’re on a massive debt spending spree.
• Income on all levels is not sufficient to make debt payments.

However, I disagree with the explanations for the cause of the current crisis. Mike agrees with Travakoli’s condemnation of bankers and regulators for imprudent, and immoral, behaviour.

At its core," Tavakoli observes, "the mortgage crisis is no more sophisticated
than a schoolyard swindle, and the SEC is the principal."

The debt bubble was a broad societal phenomena, in which everyone played a role. Bankers took on imprudent risks, and regulators let them. At the same time, however, investors were willing to turn their heads to obviously questionable dealings of the firms they put their money into, and consumers were also willing to gorge at the debt troughs, taking on mortgages that they knew they couldn’t pay, in the hope of getting rich with asset appreciation. It is so eye-opening to read about how many of the investors in Bernie Madoff's investors knew he was up to something since the returns were too good to make sense, but they kept their money with him because they simply figured he was breaking the law by getting access to insider information or such like.

The old adage of con-men, about how you can only cheat a crooked person, is very apt. The crazy schemes of the bubble era only worked because there were SO many people willing to knowingly participate in scams. Even if individuals didn’t understand the full depth of the malfeasance that was taking place, they knew full well that something was up. The janitor who got a million dollar loan to purchase homes with 100% financing knew full well that there was no rational reason for the people giving him the loan to do so unless they had some sort of scheme up their sleeves.

My disagreement as to the cause of the debt bubble, and resulting crash, is critical. If my belief is true (that the bubble was a result of a societal wide psychological delusion), then there really isn't anything wrong in the structure of the economy, or regulatory bodies, per-se. We may simply be dealing with nothing more than the ebb and flow of long-term cyclical swings in societal attitudes.

Optimistic Bear Round table discussion podcast - 2009-10-01

Welcome to the inaugural Optimistic Bear round-table discussion podcast. The Optimistic Bear chats with Kevan, Elliott & Jeremy about Economics, inflation/deflation, bond prices, with a smattering of politics thrown in for good measure.

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UK banks bail-out Irish subsidiaries

Lest anyone think that the asset bubble (and concomitant crisis) is confined to America, Ireland continues to reel from the bust. Banks in the United Kingdom continue to pump billions of pounds into their Irish subsidiaries, which are struggling from collapsing real-estate prices.

Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc, rescued by
British taxpayers last year, injected 3.03 billion euros ($4.4 billion) into
their Irish units during the past 10 months amid rising real estate losses.

“The scale of that figure is quite shocking,” Brian Lucey, associate professor of finance at Trinity College Dublin, said in an interview. “They weren’t leaders in the Irish market. The figure just shows the level of clean-up needed.”

British banks invested in Irish real-estate developers at the height of the “Celtic Tiger” boom and are now writing down investments amid the worst property slump in western Europe.

Refiners struggle as fuel demand slows

Declining demand is continuing to hurt all commodity sectors. Even oil refiners are now hurting as demand for gasoline remains low. Who knows, maybe once the speculators who have been stock-piling crude during the past year begin unloading their inventories the resulting drop in oil prices could lift refinery profits.

U.S. refiners may fail to meet financial requirements of their credit agreements later this year as slumping fuel demand erodes the profitability of making gasoline and diesel.