Philip Gvinter

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    • Michael Sesit: "After relying on an export-oriented growth model for the better part of three decades, China and much of the rest of Asia must devise a new formula for their economic well-being - one that is weighted more toward domestic consumption."
      The math simply does not work. China's domestic level of consumption is a tiny fraction of the consumption of just Chinese goods in the US and EU. Therefore to offset any percentage drop in foreign demand domestic demand must increase by significant multiples of this percentage. That is difficult enough to do in a decent economic situation but is nearly impossible in an environment where factories are closing and workers are losing jobs.
      Jan 04 10:32 am |Rating: 0 0 |Link to Comment |View news story
    • Option ARMs: The Banking Backdrop of 2009
      One last point that RM did not mention is that over 75% of these loans were originated using stated income or lower levels of income and asset documentation.
      Jan 04 10:29 am |Rating: 0 0 |Link to Comment |View article
    • Michael Sesit: "After relying on an export-oriented growth model for the better part of three decades, China and much of the rest of Asia must devise a new formula for their economic well-being - one that is weighted more toward domestic consumption."
      Have to agree with the above and add a bit to this.

      The current system is indeed unsustainable not because of its structure but rather because it has been stretched to an unsustainable level.

      The dollar denominated assets bought by the Chinese are necessary in order to maintain the yuan currency peg. Without this peg the yuan would appreciate to a level which would remove China from its perch of cheap manufacturer of choice. Because Chinese goods are marketed and sold exclusively on price rather than value this would destroy China's ability to export goods.

      The problem however lies in the fact that the level of debt has been allowed to grow beyond a point where the debtor can service said debt. This can be fixed by pulling back on the vendor financing and allowing the debt level to decrease somewhat. The federal reserve is helping to facilitate the process by replacing China and Japan as a buyer of Treasury debt and GSE mortgage debt.

      The Western world (EU, US, Canada, Australia) does need to decrease the proportionality of its deficit spending as measured against GDP. China also needs to focus on value rather than price if it wants to keep its status as manufacturer of consumer goods because one thing we all know is that competing on price will eventually lead to ruin.
      Jan 04 00:48 am |Rating: 0 0 |Link to Comment |View news story
    • Is the Microsoft Empire Cracking?
      The point about ERP and other enterprise systems linking into Office apps is a very good one. I did not say that the next shoe to drop would be the enterprise market, but rather that it would be the small to mid size market which tends to not use these kinds of large and oftentimes legacy apps for back office operations. While losing small business market share will in no way crush MS it will be the beginning of a secular downtrend. Also the counterpoint to this is as next generation enterprise software continues to evolve towards a web-based SaS model many of these links will disappear. That ofcourse is something which is much further down the line and is in no way a guarantee, but is still where I believe IT infrastructure is headed over the next 10 to 15 years. IT infrastructure tends to swing like a pendulum between localized desktop systems to distributed client-server systems. It appears to me that we are swinging more and more towards the distributed system where the role of the desktop computer is closer to that of a dumb terminal which simply allows the user to access their applications and data which are stored remotely. Cloud computing seems to me to just be the latest incarnation of this trend and due to its ongoing success and evolutions seems to be far from its peak.



      On Dec 10 12:48 PM User 316869 wrote:

      >
      > Sorry, but there are sooo many links into excel and word from other
      > programs, i.e. ERP systems, detailed macro's, etc. The lack of such
      > plug ins and the cost / effort to rewrite the macro's will hold back
      > enterprise adoption of a competing product.
      >
      > Also, why not upgrade Office verisons, you are foreced to pay a yearly
      > tax (licensing fee), so you may as well use the latest product.<br/>
      >
      Dec 10 15:00 pm |Rating: 0 0 |Link to Comment |View article
    • Is the Microsoft Empire Cracking?
      I agree completely with the author. MS is finally beginning to lose some market share to other operating systems, but more importantly as Alex points out the value proposition for upgrading the OS is no longer there. I am still amazed that corporate clients upgrade the office suite. Can anyone here honestly tell me that they have seen any functional upgrades that regularly get used between office 2003 and any later edition of the software? Open office is not really getting adapted yet but I feel that once cloud computing becomes more reliable and acceptable it can steal away a good bit of microsoft's small business customers who do not have the resources for a dedicated IT department. The gaming division is essentially a very large low yielding investment as it has failed to produce any meaningful revenue after having tons of money thrown into starting it. The online is even less successful than that. Office sales will begin to slow down some time soon as the upgrade cycle lengthens just as it has already lengthened for the OS. MSFT had better think up some new revenue streams quick if it does not want to begin shrinking soon.
      Dec 09 23:54 pm |Rating: +2 -1 |Link to Comment |View article
    • 10 Contrarian Reasons for a Bottom
      I tend to agree here. I think that we have what has been referred to as a Santa Claus rally followed by another leg down and than we can talk about a real bottom forming. I still feel that while stock prices are beaten up they are not cheap when measured against anything but the trailing 12 months of earnings and that analyst estimates for S&P earnings for next year are much too high. I think that $65 is a much more realistic level than the $80-$95 that many analysts are still forecasting. That having been said a "cheap" price for the S&P would be somewhere in the 600s so a very realistic scenario would be one last nasty leg down some time in Q1 09. The counterpoint to this is the argument that all bubbles tend to over-correct before a recovery which would mean the low 600s or lower for the S&P.
      Dec 08 20:02 pm |Rating: +1 0 |Link to Comment |View article
    • Are We Seeing Housing Market Manipulation?
      While the price to income ratio varies around the country it still has a historically sustainable range in every market. California is certainly a more highly leveraged market than the mid west and both need to return to their individual historic price-income ratios.


      On Dec 08 12:58 PM nym wrote:

      > "Prices must absolutely correct back to where median income can support
      > median price." This would come as quite a shock to metro areas of
      > California, where price/income > 5 for decades while most of country
      > is 3 to 4. How can this be supported? I suspect that most "owners"
      > make minimal payments and are thus little more than a peculiar type
      > of renter with rights to a capital gain (or default) when they roll
      > over into another house priced with a gain built in.
      Dec 08 15:24 pm |Rating: 0 0 |Link to Comment |View article
    • Are We Seeing Housing Market Manipulation?
      Actually my point is that this is the only action taken which will not artificially support housing prices. The point here is that systemic norms have been violated. This is really more about returning the mortgage market back to a reasonable level of functionality in order to encourage some buyers to look. Lower mortgage rates may have a significant psychological effect in encouraging buyers to look but in the end tough underwriting standards will keep many of them away anyway. Prices must absolutely correct back to where median income can support median price.
      Dec 08 12:36 pm |Rating: 0 0 |Link to Comment |View article
    • Are We Seeing Housing Market Manipulation?
      I don't think that 4% rates will clear inventory but they will help to some degree and most important of all to a degree that will not lead to a bubble forming on the way out.


      On Dec 08 09:54 AM sickofthehype wrote:

      > The issue: Foreclosures and high inventory, which are bringing down
      > everyone's home values.
      >
      > Solution: Get rid of them
      >
      > How? 4% 30-yr rates will clear this inventory out LIKE NO OTHER.

      >
      >
      > Then: Once they're mostly flushed from the system inventory levels
      > as a number and as of composition (not majority bank owned) will
      > get things to normal
      Dec 08 10:29 am |Rating: +1 0 |Link to Comment |View article
    • Defining Deflation
      Be careful what you call absurd. Don't want to take my word for it try wikipedia or investopedia.

      From en.wikipedia.org/wiki/...)

      Deflation in economics is a persistent decrease in the general price level[1] of goods and services - a negative inflation rate. When the inflation rate slows down (decreases, but remains positive), this is known as disinflation.
      Inflation destroys real value in money. Deflation creates real value in money. Alternatively, the term deflation was used by the classical economists to refer to a decrease in the money supply and credit; some economists, including many Austrian school economists, still use the word in this sense. The two meanings are closely related, since a decrease in the money supply is likely to cause a decrease in the price level.

      From www.investopedia.com/t...

      A general decline in prices, often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression.

      Declining prices, if they persist, generally create a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals. To counter deflation, the Federal Reserve (the Fed) can use monetary policy to increase the money supply and deliberately induce rising prices, causing inflation. Rising prices provide an essential lubricant for any sustained recovery because businesses increase profits and take some of the depressive pressures off wages and debtors of every kind.


      That certainly seems to make my point of a combination of reduction of prices as well as reductions in M3 (www.shadowstats.com/al... (2nd chart) seem to mean deflation. I also still stand behind the point that the true aggregate amount of money rotating through our economy is no longer accurately reflected by M3 as M3 does not include significant funding sources which fluctuate and have significant equally effects on the availability of capital for non government purposes.



      Dec 07 21:33 pm |Rating: 0 0 |Link to Comment |View article
    • Defining Deflation
      I believe that M3 is no longer being published by the Fed. also believe that our entire system of money supply statistics is no longer an accurate representation of the actual "money supply." Every country uses a slightly different formula for determining money supply. For example the EU uses securities with maturities of up to two years as part of money supply. My point is that the use of securitization has opened new sources of funding both domestic and foreign in origin within the US financial system. When securitized loans made up a relatively small portion of total credit extended the M1, M2 and M3 statistics accounted for a majority of the capital available to be deployed within the financial system. As securitized debt began to be sold off in ever greater proportion to the assets held on bank balance sheets and secured by deposits or repo agreements which are part of the traditional money supply statistics the accuracy of the current M1, M2 and M3 began to represent a smaller portion of actual money supply as it exists within the system. In short I believe that a new measure of money supply must be added to the existing M1 and M2 and that M3 should be brought back as an official measure.
      Dec 07 19:32 pm |Rating: 0 0 |Link to Comment |View article
    • Defining Deflation
      I would appreciate actual constructive criticism of the points made rather than a blanket rejection with absolutely no alternative point. It is this kind of behavior that takes value away from a forum such as seeking alpha. My point is that the money supply statistics no longer accurately represent real amount of money available in either the US economy. The increased use of securitization and the variable reserve requirements imposed on lending institutions which are effected as much by the ratings of assets held as by deposit volume has taken many of the actual sources of money out of the transactions which compose the data points used for calculating real money supply. I am very interested in hearing a counter point to this contention but do not think that simply saying "you don't know what you are talking about" and putting previously posted information in quotation marks suffices to offer a counterpoint.
      Dec 07 17:17 pm |Rating: 0 0 |Link to Comment |View article
    • Defining Deflation
      I believe that it would be rude to suggest that my disagreement with the calculations of money supply inherently imply a lack of understanding of the term money supply. Money supply is a statistical measure meant to show the total amount of money circulating in the economy. I feel that the statistics can be misleading because there exists a tremendous amount of discretion in determining how any securitized debt plays into the formulas. Combined with variable reserve requirements placed on financial institutions who hold securitized debt bought with borrowed funds and reserved against with customer deposits can skew the real amount of money flowing through the economy. In short I feel that real money supply is an extremely important component of the economy but that the current methods used for calculating it are highly flawed and extremely inaccurate.
      Dec 07 12:29 pm |Rating: 0 0 |Link to Comment |View article
    • Defining Deflation
      I do not disagree that the central banks are attempting to fight deflation by using every inflationary tool in their arsenal. Despite their best efforts however deflation is beginning to accelerate rather than decelerate. It is no longer just durable goods which are suffering from a lack of consumer credit and corporate confidence. Even cheaper items like clothing or portable electronic devices are suffering. It is also not just consumer credit but corporate credit which has been nearly cut off. My main point is that money supply should not be calculated at the banking level but rather at the borrower level regardless of whether the borrower is a business, individual or institution. With a reduction of credit to all of these classes of borrowers the real money supply has in my opinion clearly shrunk.
      Dec 07 10:49 am |Rating: 0 0 |Link to Comment |View article
    • Defining Deflation
      Actually to be fair property and liability insurance rates are extremely cheap and have come down in price. Healthcare and health insurance however continue to rise in price. However, when we discuss the cost of healthcare we do have to take into account the new technologies and procedures which at least partially drive up the cost. As for education that is a very fair point. It will be interesting to see what happens over the coming 9 to 18 month period regarding educational costs, especially in light of the reduction in the availability of private student loans.
      Dec 07 10:02 am |Rating: 0 0 |Link to Comment |View article

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