Monday, July 27, 2009

Common People vs. Ruling Class ?

Reading history broadly, I've been struck by how many great empires and nations were slowly destroyed or debilitated by the growth in power of the aristocracy (aka ruling class) at the expense of the common people. The most stable and prosperous nations have a strong class of common people and a strong central government, but a relatively weak aristocracy. As the aristocracy grows in wealth and power, the government and people become weaker and eventually the government falls either internally or from outside enemies.

The various aggressive employee job actions in France last month were indicative of a trend towards the common people trying to get a better deal from the bosses. Today news arrived of similar, but more aggressive and violent actions happening in China

FT: “The privatisation of a state steel group has been scrapped after an executive was beaten to death by workers angry at the threat to their jobs from a takeover of their company, according to a Hong Kong rights group.

The violent riot in north-east China late last week involved up to 30,000 workers, a reminder of the ongoing sensitivity about lay-offs from state companies in industries targeted for consolidation.”

I’ve been reading “Babbitt” by Sinclair Lewis, which has a chapter describing how the people and George Babbitt react to a large, multi-industry employee action in moderate-sized city which is the setting for the book. These industrial actions in France and China are a bit reminiscent of the strikes and other job actions of the early 1920s and 1930s. I’m wondering how far this trend will go.

Russia continue to evolve and solidify its gangocracy.

FT: “A Moscow court has freed on bail Semyon Mogilevich, a suspected organised crime boss who is wanted by the FBI for alleged racketeering and fraud, 18 months after his arrest by armed commandos in Moscow on charges of tax fraud, the Financial Times has learnt. ... The release of the [man], who [was] arrested in January 2008, is unusual for Russian courts where suspects are often held in pre-trial detention long beyond the legal expiry date of one year. Another high-profile prisoner, Mikhail Khodorkovsky, the former Yukos tycoon, has spent 2½ years in detention since a second set of charges were brought against him in February 2007, while the court case continues. ... Mr Mogilevich had been living freely in Moscow until the January 2008 arrest despite being on the FBI’s most wanted list since 2003. Robert Mueller, the US bureau’s chief, had accused him in a 2005 speech of setting up “a powerful organised crime ring” that “engaged in drug and weapons trafficking, prostitution and money laundering”. Mr Mogilevich has denied any wrongdoing. “

You can see his photo in the walls of your post office or local police station.

Russia criminals with likely government nods kill dissidents and human rights activists worldwide, just like the Mafia tries to silence those who break omerta.

Did We See Another Portfolio Insurance Debacle in September 2008 ?

Reading the gloating of variable annuity promoters over the weekend, I realized that part of the huge wave of selling that hit the markets in September 2008 might have been from selling by variable annuity managers. They had sold billions of such variable annuities promising fixed minimum annual gains and a percentage of stock market gains from the date of sale. Looking at charts, one can see that the rough average “minimum” market average guaranteed was around S&P 1200-1300. So those managers would have had to hit the sell buttons for stocks and derivatives, either directly or via their Wall Street brokers who sold them derivatives that matched their guarantee structure.

Perhaps that partly explains the “air-pocket” from S&P 1200 to S&P 950 ? It was eerily similar to the waves of selling in September and October 1987.

This is another reason to regulate strongly ALL derivatives.


I turn 55 soon, so am re-evaluating my Krypto Fund asset allocations. One should do this every 3-5 few years to make sure one is not over weighted in equities compared to your retirement cash flow needs.

I'll probably be selling some US equities and moving the moving the money to TIPs, but nothing is certain yet.

The press says analysts now expect the S&P 500 earn about $75 for 2010. Hmmm, it was suggested last month by a normally erudite commentor that I was delusional for thinking 2010 earnings could hit $80 in 2010. The numbers are moving my way. Putting a cap of 15x on that $80 forward earnings gives me my year end optimistic target of S&P 1200.

Unfortunately, Obama is trying to do a lot of things that will likely create stagnation after a return to normalcy in 2010. So gains past S&P 1200 might be hard. This era is sure looking like a 1970s redux. If so, stagnation and inflation are coming. If Obama does not reappoint Ben, I fear that will happen.

Word of the Day

"Bodeful" - adjective [$10]
"Bode" - verb, transitive [$10]
Bodeful means ominous.
Bode means 1. portend, foretell; 2. foresee, foretell (evil).
Sentence: Numerous Obama efforts collectively are bodeful for US economic growth beyond a simple return to normalcy.

Le Mot de la Semaine

"Penser" - verb, regular -er conjugation
Penser means to think. For "to think about something", use penser à. To ask an opinion of something, use penser de.
La Phrase: Je pense, donc je suis.
Sentence: I think, therefore I am. This is a famous expression of Descartes which was the basis for his philosophy that was a crucial part of the 17th century movement from Scholasticism and reliance on religion and received authority to using reason and empiricism.

This week I plan to express this concept in all five languages that I am studying, viz., French, German, Italian, Polish and Spanish.


Frosty said...

55...thougt you were 75 or bad Bunky.

Frosty said...

Bunky 3 Frost 0...well played sir.

Bunkerman said...


mentally, I'm from the generation born around 1905, so I'm 104.

Bunkerman said...

sold BHP, UNP. Think they don't have much more easy ups.

Bunkerman said...

transferring some US equity funds to TIPs per Krypto's instructions.

Here's your fee, Krypto -> dog biscuit.

Krypto is up 9% ytd - not bad for a well diversified long term investment fund.

Bunkerman said...

this TARP "watchdog" is a moron - no concept of how a financial institution works.

Money is fungible.

mfl59 said...

interesting tactics Bunkerman...can you explain a sale of BHP but a buy of FCX? Thanks sir...

Bunkerman said...

the FCX chart has a lot more upside - could go to 100+ vs. BHP hitting only 80 or so.

Also, the PE of BHP on stabilized earnings is already rather high vs. FCX being stil cheap.

Also, the FCX was really a re-buy fixing a mistake when I liquidated Obama.

Bunkerman said...

by "stabilized" I mean 2006.

Bunkerman said...

ya gotta look at the weekly charts to get an idea of the upside possibiilties on a return to normalcy.

mfl59 said...

arent PE ratios on cyclicals a bit misleading? As Bob's boy Peter Lynch used to say, I buy em when they are high, I sell em when they are low....or is that not relevant?

Bunkerman said...

I said I was looking at a stabilized sort of PE - current price off 2006 earnings as a normalized assessment of value.

Frosty said...

what...thought this was buy the rips sell the dips blog...did someone kidnap the bunkerman?

mfl59 said...

I guess the question becomes....will "normalcy" as we knew it return? Some say yes...some say no...

Bunkerman said...

haha frosty the jester.

Hmmm in Italian, "jester" is "burlone", a masculine noun.

Bunkerman said...

here's a great Polish word: 'upupienie', means the act of making a fool or ass of somebody.

to do that repeatedly is 'upupianie'.

I guess that happens a lot here.

Frosty said...

NO BUNKY...your not going back to read the tea leafs again...give krypto an extra biscuit to handle the task...Mrs B perhaps...she's the best.

Frosty said...

Bunky how do you like the VXX chart

Bunkerman said... reports Congress will consider steps to curb speculation in the credit default swaps market and could ban naked swaps, according to a U.S. House of Representatives Committee document obtained by Reuters. The bill would give regulators authority to set position limits on credit default swaps (CDS) dealers. It would also shift oversight of ICE Trust Clearinghouse from the Federal Reserve to the Securities and Exchange Commission, the document said.

About bleeping time !

Bunkerman said...

VXX = "exchange traded note corresponding to the short term VIX futures index."

Sheesh, is that a derivative of a derivative of a derivative of aderivative of a derivaive ?

Guess the options would be a (Derivative)^6

It looks like a cold turd, frosty, but what does it mean ? Sort of abstract for a trained theoretical astrophysicist physicist like me..

Frosty said...

indeed Bunky...your heros at the SEC are moving at lighting speed to protect the common man...I also read they have a handle on naked short should be proud.

Bunkerman said...

SEC = Surely Entirely Corrupt

Frosty said...

It looks like a cold turd, frosty...LMAOOO