The dark side of the Bond market as been exposed has one of the most dangerous
financial earthquakes that has hit the financial markets. A bond in its most simple form is a IOU. The entire Bond market is based on the assumption that
the collateral behind the Bond would be effectively rated by the Bond rating
service to create a standard grade of AAA, AAa, BBB, CCc, and junk bonds.
The Shadow banking system came up with a brillant idea to take the mortgage
market and turn it into a system of high quality and low quality bonds. The
Shadow banking system would then market these "rated" bonds to domestic
and overseas investors. So, the mortgage market became the domain not of
the bank and real estate market but of highly powerful Wall Street hedge
funds and insurance groups who would underwrite these bonds. The idea
was brillant but the mortgage market ran into the effects of a Bubble market.
The Bubble Market as Schiller pointed out was entirely irrational and based
on rank speculation and subprime mortgages. Ultimately, it did not matter
because Wall Street was making billions of dollars and the entire outcome
of this new bond market was a multi-trillion market. The more mortgages
that came to the real estate market were coverted into a new language of
finance: derivatives, interest rate swaps, currency swaps, credit default
swaps,portfolio insurance,gearing, asset based securities, tranches,
senior tranches, junior tranches,credit obligation debt, fannie mae,
freddie mac, credit enhancement insurance and derivative protection.
What happens next? The various institutional traders now have an
inventory of high quality bonds with cash flow that pays the highest
possible interest rate. This creates the real origin of the bubble for
an incredible demand for safe bonds which offer unlimited safety of
principal and interest. The billion dollar gates are now open to develop
a series of big time financial moves to network the large hordes of
cash in hedge funds, insurance groups, pension funds, bond inventory
in major brokerage houses, and high demand for real estate mortgages.
The Keys to the Shadow of the Bankings System:
I. DEVELOP A CASH ONLY TREASURY MONEY MARKET FUNDS :
The key idea is to remember that this is a new period of economic
deflation and the idea that the dollar is finished is incorrect. The
dollar benefits from deflation and will reverse in every market because
prices are deflating. The real problem is that with globalization
we are facing a greater savings and liquidity which creates an overleveraged
financial instruments. This means that deflationary supply is greater than
Global demand which is driving down prices on all commodities and foreign
goods and service. It is best to use treasury only money market funds
and purchase Treasury securities from the Federal government.
II. THE USE OF PROXY MONEY: GOLD
The use of Gold as a substitute money is the driving play behind Gold incredible
rise to power. Gold during deflation can serve as an effective investment
edge against paper currencies that tend to depreciate with the coming
realization that paper money will solve the numerous crisis. The inherent
problem is that the movement toward increasing the money supply leads
directly to inflation. The coming inflation should last 15 to 20 years and
realistically is beyond control by the Federal Reserve System. The problem is
that the Fed will be chasing the Bond Bubble for the next five years and
finally come to the realization that labor shortage and increasing supply
shocks will put into a deep inflationary cycle. The Fed does an excellent
job but as Homer noted that history is caused by human behaviour which
tends to be the key problem. The gold solutions are quite obivious because
the Shiller financial technology that created a liquid infrastructure
beyond bullion. That is to say, Gold Index funds, Gold mutual funds, Gold
mining stocks, Gold ETF and Gold sector funds.
III. DEFLATION PROOF CASH RICH COMPANIES
The inherent problem with deflation is that tends to abhor debt of any
kind. It is like a vaccum cleaner that sucks all the cash out of the system.
This means that Cash is king and cash is extremely valuable. The problem
with debt is that it sucks all the cash out of the system. The Bond bubble
has sucked all the cash out of the system and created imaginary asset
value which is based on foreclosure, subprime, empty homes, and devaluating
asset. The key companies to examine are Cash rich companies like Micro-soft,
cisco, intel, and dell. I would recommend you invest in the software program
from VectorVest and run a list of all the cash rich companies and use
Scottrade as an effective tool to capitalize on this 5 year trend.
IV. DEFLATIONARY COMPANIES WITH PRICING POWER
The hardest thing to do in an deflationary enviroment is to raise the
price of items. First, people do not have cash and cannot spend alot
of money. Second, the market competition of monopolistic everyday
companies from retail stores, grocery stores, fast food establishments,
and others all exist on the ability to compete on non-price competition.
This leaves only oligopolies, and defacto monpoly;s with ability to
raise prices. Consequently, HMO'S, MEDICAL DEVICE MAKERS,
FOOD PROCESSORS, CONSUMER PRODUCTS COMPANIES, DRUG
COMPANIES, ELECTRIC UTILITIES, AND RELATED CONVERTIBLE
BONDS OF THESE STOCKS AS REALISTIC PRICING POWER WINNERS.
V. CASHING IN ON THE BOND BUBBLE GROUP
The creators of the Bond bubble group should be put to the Oxford
test: See if they can survive the short or the put. This means using
etf's, puts, options to say that these groups will be heading south, ie,
massive losses in these sectors. The deflation light of day as now
exposed the entire industry so that students in High School are
now doing class projects on the entire industry! These students
are only in their late teens and know more than most investors.
THE LIST INCLUDES MORTGAGE PACKAGERS, CREDIT INSURERS,
INVESTMENT COMPANIES, CONSUMER FINANCE COMPANIES,
MONEY CENTERED BANKS, REGIONAL BANKS, HOME BUILDERS,
TITLE INSURERS, U.S. AUTO MAKERS, CONSTRUCTION/
ENGINEERING COMPANIES, PROPERTY DEVELOPERS,
FURNITURE MAKERS, APPLIANCE AND TOOL MAKERS, MORTGAGE
REITS, OFFICE AND COMMERCIAL REITS, AND RETAIL REITS.
USE VECTORVEST TO FIND UPDATED LISTS AND SHORT AND
LEAP POINTS TO MAKE THE MAXIMUM MONEY. SEE STOCKPICKR:
SUBPRIME DERIVATES STOCK FUND PORTFOLIO. THE INTERNATIONAL
DERIVATES MARKET IS VALUED AT $435 TRILLION.
VI. THE GLOBAL PLAYERS OF DEFLATION
The Real Estate Bubble and Bond bubble have gone International. You
will need to use the same list on section five and use this against all
major international companies engaged in those activities. A good
starting point would be with list from Vector Vest and use the
new financial technology infrastructure. The brilliant DR. Robert
Schiller has made an uncanny discovery that the world of finance
has been transformed into a new technology. He has taken Marshall
McLuhan's idea that the medium is the message. The message of
economics is not information but technology. The message of
economics is financial technology. This is an incredible innovation
that Dr. Schiller has discovered to be the prime mover of economics
and not more textbooks or articles but how do ordinary people deal
with systemic nature of regular risks in the 21st century. Marshall
McLuhan's brillant insights into the nature of human innovation
is that the medium of economic knowledge has been effectively
displaced by the computer and the internet. The idea that economics
can be taught by mere textbooks (Guttenberg invention of 16th century)
and German university system (disciplinary knowledge of the
19th Century) is obsolete. McLuhan would argue the Dr. Schiller
entire career could be impacted by the fact economist live in a highly
interdisciplinary world of financial technology. The implications
are beyond the scope of Yale University.
financial earthquakes that has hit the financial markets. A bond in its most simple form is a IOU. The entire Bond market is based on the assumption that
the collateral behind the Bond would be effectively rated by the Bond rating
service to create a standard grade of AAA, AAa, BBB, CCc, and junk bonds.
The Shadow banking system came up with a brillant idea to take the mortgage
market and turn it into a system of high quality and low quality bonds. The
Shadow banking system would then market these "rated" bonds to domestic
and overseas investors. So, the mortgage market became the domain not of
the bank and real estate market but of highly powerful Wall Street hedge
funds and insurance groups who would underwrite these bonds. The idea
was brillant but the mortgage market ran into the effects of a Bubble market.
The Bubble Market as Schiller pointed out was entirely irrational and based
on rank speculation and subprime mortgages. Ultimately, it did not matter
because Wall Street was making billions of dollars and the entire outcome
of this new bond market was a multi-trillion market. The more mortgages
that came to the real estate market were coverted into a new language of
finance: derivatives, interest rate swaps, currency swaps, credit default
swaps,portfolio insurance,gearing, asset based securities, tranches,
senior tranches, junior tranches,credit obligation debt, fannie mae,
freddie mac, credit enhancement insurance and derivative protection.
What happens next? The various institutional traders now have an
inventory of high quality bonds with cash flow that pays the highest
possible interest rate. This creates the real origin of the bubble for
an incredible demand for safe bonds which offer unlimited safety of
principal and interest. The billion dollar gates are now open to develop
a series of big time financial moves to network the large hordes of
cash in hedge funds, insurance groups, pension funds, bond inventory
in major brokerage houses, and high demand for real estate mortgages.
The Keys to the Shadow of the Bankings System:
I. DEVELOP A CASH ONLY TREASURY MONEY MARKET FUNDS :
The key idea is to remember that this is a new period of economic
deflation and the idea that the dollar is finished is incorrect. The
dollar benefits from deflation and will reverse in every market because
prices are deflating. The real problem is that with globalization
we are facing a greater savings and liquidity which creates an overleveraged
financial instruments. This means that deflationary supply is greater than
Global demand which is driving down prices on all commodities and foreign
goods and service. It is best to use treasury only money market funds
and purchase Treasury securities from the Federal government.
II. THE USE OF PROXY MONEY: GOLD
The use of Gold as a substitute money is the driving play behind Gold incredible
rise to power. Gold during deflation can serve as an effective investment
edge against paper currencies that tend to depreciate with the coming
realization that paper money will solve the numerous crisis. The inherent
problem is that the movement toward increasing the money supply leads
directly to inflation. The coming inflation should last 15 to 20 years and
realistically is beyond control by the Federal Reserve System. The problem is
that the Fed will be chasing the Bond Bubble for the next five years and
finally come to the realization that labor shortage and increasing supply
shocks will put into a deep inflationary cycle. The Fed does an excellent
job but as Homer noted that history is caused by human behaviour which
tends to be the key problem. The gold solutions are quite obivious because
the Shiller financial technology that created a liquid infrastructure
beyond bullion. That is to say, Gold Index funds, Gold mutual funds, Gold
mining stocks, Gold ETF and Gold sector funds.
III. DEFLATION PROOF CASH RICH COMPANIES
The inherent problem with deflation is that tends to abhor debt of any
kind. It is like a vaccum cleaner that sucks all the cash out of the system.
This means that Cash is king and cash is extremely valuable. The problem
with debt is that it sucks all the cash out of the system. The Bond bubble
has sucked all the cash out of the system and created imaginary asset
value which is based on foreclosure, subprime, empty homes, and devaluating
asset. The key companies to examine are Cash rich companies like Micro-soft,
cisco, intel, and dell. I would recommend you invest in the software program
from VectorVest and run a list of all the cash rich companies and use
Scottrade as an effective tool to capitalize on this 5 year trend.
IV. DEFLATIONARY COMPANIES WITH PRICING POWER
The hardest thing to do in an deflationary enviroment is to raise the
price of items. First, people do not have cash and cannot spend alot
of money. Second, the market competition of monopolistic everyday
companies from retail stores, grocery stores, fast food establishments,
and others all exist on the ability to compete on non-price competition.
This leaves only oligopolies, and defacto monpoly;s with ability to
raise prices. Consequently, HMO'S, MEDICAL DEVICE MAKERS,
FOOD PROCESSORS, CONSUMER PRODUCTS COMPANIES, DRUG
COMPANIES, ELECTRIC UTILITIES, AND RELATED CONVERTIBLE
BONDS OF THESE STOCKS AS REALISTIC PRICING POWER WINNERS.
V. CASHING IN ON THE BOND BUBBLE GROUP
The creators of the Bond bubble group should be put to the Oxford
test: See if they can survive the short or the put. This means using
etf's, puts, options to say that these groups will be heading south, ie,
massive losses in these sectors. The deflation light of day as now
exposed the entire industry so that students in High School are
now doing class projects on the entire industry! These students
are only in their late teens and know more than most investors.
THE LIST INCLUDES MORTGAGE PACKAGERS, CREDIT INSURERS,
INVESTMENT COMPANIES, CONSUMER FINANCE COMPANIES,
MONEY CENTERED BANKS, REGIONAL BANKS, HOME BUILDERS,
TITLE INSURERS, U.S. AUTO MAKERS, CONSTRUCTION/
ENGINEERING COMPANIES, PROPERTY DEVELOPERS,
FURNITURE MAKERS, APPLIANCE AND TOOL MAKERS, MORTGAGE
REITS, OFFICE AND COMMERCIAL REITS, AND RETAIL REITS.
USE VECTORVEST TO FIND UPDATED LISTS AND SHORT AND
LEAP POINTS TO MAKE THE MAXIMUM MONEY. SEE STOCKPICKR:
SUBPRIME DERIVATES STOCK FUND PORTFOLIO. THE INTERNATIONAL
DERIVATES MARKET IS VALUED AT $435 TRILLION.
VI. THE GLOBAL PLAYERS OF DEFLATION
The Real Estate Bubble and Bond bubble have gone International. You
will need to use the same list on section five and use this against all
major international companies engaged in those activities. A good
starting point would be with list from Vector Vest and use the
new financial technology infrastructure. The brilliant DR. Robert
Schiller has made an uncanny discovery that the world of finance
has been transformed into a new technology. He has taken Marshall
McLuhan's idea that the medium is the message. The message of
economics is not information but technology. The message of
economics is financial technology. This is an incredible innovation
that Dr. Schiller has discovered to be the prime mover of economics
and not more textbooks or articles but how do ordinary people deal
with systemic nature of regular risks in the 21st century. Marshall
McLuhan's brillant insights into the nature of human innovation
is that the medium of economic knowledge has been effectively
displaced by the computer and the internet. The idea that economics
can be taught by mere textbooks (Guttenberg invention of 16th century)
and German university system (disciplinary knowledge of the
19th Century) is obsolete. McLuhan would argue the Dr. Schiller
entire career could be impacted by the fact economist live in a highly
interdisciplinary world of financial technology. The implications
are beyond the scope of Yale University.
Posts
