Posts Tagged ‘finance’

Why is #WarrenBuffet Staying Away from #CMBS & #Derivatives?

Posted: July 26, 2014 in Excess and Algorithms
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by @anarchyroll
7/26/2014

If you don’t know who Warren Buffett is, all you need to know is that he’s the greatest living investor in the history of the American stock market(s). In the world of finance he’s the Michael Jordan, Muhammad Ali, Wayne Gretzky, and Babe Ruth. He is the man and has nothing resembling an equal.

Warren Buffett has also become the conscience of the finance sector the American economy.

This is evidenced by his refusal to put his wealth of wealth into commercial securities and derivatives. Whereas all other big banks, hedge funds, and trading houses can’t get enough of either.

In a recent issues of TIME magazine, Buffett called all commercial securities “weapons of mass destruction.”

Commercial mortgage-backed securities (CMBS) and derivatives were two primary instruments in the 2008 global economic meltdown, the worst economic collapse since The Great Depression.

Warren Buffett invests the old-fashioned way, when investing was investing. CMBS and derivatives are the tools that have turned Wall Street into a casino on steroids. CMBS and derivatives are the dice, the global economy is the table, the chips that big banks and hedge funds are playing with are the liquid assets of the global economy. Are the craps and gambling metaphors coming across clearly enough?

After all of the pain and devastation that derivatives trading has done to the global economy, there is certainly a strong case to be made that they should be done away with completely. But in the spirit of baby steps and pragmatism, how about we start with at least putting some kind, any kind of regulation on derivatives trading?

If commercial securities and derivatives aren’t good enough for the greatest living investor in America, perhaps it is best that we all steer clear of them. If someone with literally billions of dollars to burn doesn’t want to touch them, why would any person dependent on a robust 401k to be able to retire at 65 want their limited assets intertwined with the same investment instruments that collapsed the global economy barely a half decade ago?

 

Quantitative Easing = Economic Crack Part 1

Posted: January 17, 2014 in Excess and Algorithms
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by @anarchyroll
1/17/2014

Quantitative easing is a hard concept to comprehend and I would not classify it as easy to write about either. I wanted to write an article about the subject in August. I sat down to do my research and gather sources. When I decided to take a break, I saw that I had been reading articles, watching videos, and listening to audio clips on the subject for five hours. And I felt like I had barely scratched the surface of the subject. And I just wanted to write a blog, not a graduate school thesis.

The economic collapse of 2008 and the fallout of it, part of which being quantitative easing, are the fuel for me wanting to write economics articles in simple language.

QE (quantitative easing’s often used abbreviation) is a tool in the monetary policy tool belt of the a country’s central bank. In the case of the QE being used by the United States Federal Reserve Bank (not associated with the federal government) to ease credit flow or encourage lending by banks to small businesses and citizens, buy up government bonds with freshly printed money to keep the financial markets stabilized, and encourage large scale investors to invest in safer more boring assets than riskier/sexier assets (derivatives, credit default swaps).

So the Fed is printing money and buying government debt with it to stop the bleeding, close the wound, and aide in the rehab of the US financial sector and the global economy.

Sounds good right? The central bank of the United States is using their stroke to end a financial crisis and prevent another one…..except…Many signs and indicators are pointing to the economy becoming or already being dependent upon QE, hence the crack analogy/drug metaphor. There are also signs pointing to an asset bubble growing in the debt market. What do both of those last points mean? I’ll explain and expand in part two…

www.nointernetsalestax.over

Posted: December 27, 2013 in Excess and Algorithms
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eanda logoby @anarchyroll
December 26, 2013

Why no online sales tax? A 1992 Supreme Court ruling in the case of Quill Corp v. North Dakota where it was ruled a business needed a physical presence (ie office, store, etc) to collect sales tax as opposed to just a paying customer. How was this ruling maintained for two decades? The Direct Marketing Association‘s lobbying on behalf of online behemoths like Amazon and eBay. What could force sales taxes onto online purchases? The Marketplace Fairness Act of 2013. Who? The bill was sponsored by Illinois Senator Dick Durbin. When do you have to start paying taxes on your online purchases? You already do in 24 states. However, surprise surprise there is a loophole and congressional gridlock holding up progress.

States must simplify their sales tax laws in order to make the collection of taxes easy. Apparatus is being provided to states free of cost to help in the transitory process/period. However, a certain political party is objecting to a new tax of any kind being put on the books. I’ll give you one guess which one, hint hint, it’s not the Whigs. In October it appeared as though the machine and momentum were both rolling in the direction of sales tax collection on all internet purchases made in the United States. But never underestimate what congressional obstructionism has the power to not do.

Even if the bill were to pass tomorrow it is already too late for the thousands of brick and mortar stores that shut down and the millions of people who lost their jobs due to being unable to compete in a game rigged against them by a law that protects e retailers created before they existed. There is hope for the future. Small businesses that are better able to adapt to and engage with technology will find that a new era where the internet is a friend and a tool as opposed to a competitor will equal opportunity and prosperity. Now if only they could get small business loans…

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