I knew that post title would catch your eye. Har.
I welcome John Venlet back to the blogosphere. Good to see you back, John! But I must begin by gently criticizing him.
His disagreement with me concerning ARMs is poorly thought out and very misguided. Why? John perhaps forgets that I am an Austrian. He is not -- as far as I know. Thus the difference in the way we will view the financial world. The current excess of ARMs - and it is an excess John - is based on a few things that I'll leave you to ponder.
- ARMs allow people to engage in excess by negatively amortizing their home in hopes that the government's monetary policy will continue to spring forth this "prosperity." This "prosperity" is gained via highly-managed money creation and interest rate policies from your government, which is a destroyer of wealth everywhere.
- Indeed, the managed "prosperity" has landed us in the worst housing bubble ever, and with more bankruptcies and foreclosures than we have ever seen the likes of in this country. And guess who funds the clean-up?
- Historically, ARMs were financial vehicles created by banks only for their most wealthy and financially sound/responsible clientele. They were more entrepreneurial in purpose whereas the modern version is entirely bubble-driven and therefore financially irresponsible.
- ARMs would not exist in their current form, nor would they be extended to those with such feeble finances were it not for the Federal Reserve Bank and its easy credit policy propped up by government decree to prolong the appearance of prosperity. Thus the Federal Reserve feeds and props up financial irresponsibility.
- All of the above means one thing: none of this is free market stuff, John. It is not just a risky financial vehicle or financial tool. It is a financial train wreck made possible only by the Federal Reserve's wreckless monetary policy.
- Understand the Austrian Business Cycle Theory (ABCT) and relate it to the current boom.
Via an ARM, marginal buyers enter into the housing market—lured by easy money, bountiful lending practices, and the opportunity to purchase overpriced, fantasy homes on “buy now, pay later” terms. According to press releases from Merrill Lynch, America’s hottest housing markets—and that means housing bubble areas—are seeing the ARM account for over half of all home sales. Most people still don’t think there is any such thing as a housing bubble, so they continue to spend and “invest” in housing. An ARM still can’t afford you a fool’s paradise? Then disregard paying your principle and go for broke with an interest-only mortgage, once a luxury financing alternative that private banks offered to wealthy individuals that has now become a financial hustle marketed for the housing bubble. That's my correction of John saying I was "erroneous."
Now, on to the next move. Read the comment below. As to this Richard Nikoley, the arrogant, look-at-me-I'm-so-wannabee-rich asshole who leaves his droppings on John's blog, he's a fucking retard. Mr. Nikoley, perhaps, should have said something like "I disagree with Karen on ....... because I do not share the Austrian view of economics, and certainly, I oppose thier monetary views and bearish outlook." But poor, stupid, uninformed Mr. Nikoley, who champions a government-created "propsperity" and excess, cannot see thru the smoked plexiglass which is melting his vision and suffocating his brain.
Of course, when Buffett recently went off the deep end as concerns his value investor principles (and Mr. Nikoley appears to have forgotten the details by the looks of his post), financial Austrians the world over were horrified. But then again, he doesn't know anything about economics, so his stupidity is truly forgiven. Onward to more.
Eventually, I found my way to Mr. Nikoley's blog called "No Common Sense." See, this bird is a charging Bull out of the gate, and since I am a Bear of the Austrian persuasion, that makes me a person who "doesn't know what she is talking about." Since I criticize that which he relishes (DOW 12,000,000, asset bubbles, plunge protection granting consumer "confidence," the housing bubble, the Fed's easy credit and overall monetary policy), this necessarily means that I am stupid. Perhaps Mr. Nikoley's argument would be better served by prefacing it with "Due to........I find myself disagreeing with Mrs. De Coster on...." But no, that would be the intelligent thing to do.
Now back to his financial puerility. Let me give you a sample of his absolutely laughable analysis of the market.
The title refers to a condition that you may have seen in the DOW, S&P, and other indexes last week, if you follow. It began a couple of weeks ago, actually. The markets were moving up, up, up...relentlessly -- every day -- with very little in the way of consolidation, profit-taking, or retracement. When that happens, the market reaches a condition we refer to as overbought and you can pretty much know with certainty that you're going to get some stiff down days very soon.
This is pure drivel. It has zero meaning. My eyes glaze over at his attempt to convey any meaningful analysis whatsoever. I have this vison of Jim Cramer in my mind, with his sleeves rolled up and sucking on his lollipop, when I read this. Here's a better post. Here he celebrates bullishness and actually states that government entities are "virtually powerless to regulate the daily buy and sell grind that goes on to the tune of billions and billions of dollars over millions and millions of trades."
This is a stunning statement, and can only come from the mouth of one who worships daytradernomics, while having no knowledge of the real world. Um, er, gee, Mr. Nikoley, may I direct you to a beginner's guide to the Federal Reserve? And while I'm at it, how about a book called The Millionaire Next Door? Or how about any book by Jim Grant? Or may I be so bold as to throw Benjamin Graham's The Intelligant Investor your way? Or might you look up something on Fannie Mae?
Mr. Nikoley, see my article on the Federal Reserve, where Eric Englund and moi don't know what we are talking about. Or see my piece on the government's plunge protection team. This piece was brought up by Ron Paul, when questioning Fed Chairman Ben Bernanke, on the House floor. Of course, congressman Paul would also agree that I don't know what I am talking about, which is why I'm sure he directed my article's thesis to Mr. Bernanke. And surely, I've been invited to the Financial Sense roundtable on real estate and the housing boom because I don't know what I am talking about. Or, perhaps, is it just that I live in reality-land and study the economic aspects of the financial world while you live your world of throwing darts at a dartboard, and thus we just think differently?
Mr. Nikoley, in the end, I celebrate that anyone anywhere can speculate off of idiots and make money. It's indeed grand. (Hence the whole purpose of bear funds and the glories of gold.) You bulls profit at times, and we bears profit at the opposite times. However, on the other hand, there is the economic analysis of the system which thrives at the heavy hand of government, a system you don't understand because all you want to do is play your little stock market fantasia and ride the government's back into false prosperity. And damn anyone who criticizes that system and the heavy hand of government that has created this shitstorm that is not the growth of real wealth, but a perception that is aimed toward sucking in idiots like you who refuse to understand the underpinnings of basic economics, a truly free market, and wealth and prosperity as the outcome of an increase in real production and market efficiency.
You are nothing but a stock market hobbyist blowing hot air, Mr. Nikoley. And so why do I spend 45 minutes of my day getting back at you? Well, I have the day off. And two, I am sick and tired of daytrader, know-it-all hobbyists like you that will convey undue disrespect toward me because I should dare shed some reality on your video-driven world of false prosperity. Plus, I am a CPA, economist, financial professional, readying for my Series 7 and 27 exams, and currently work in the financial sector after being at a multi-billion $$$$$ company in the auto industry - working in the bowels of the day-to-day race for short-term, shareholder wealth-destrying profits made possible by the SEC and government intervention. Thus I do know a little bit about these matters. So be assured that if one of us is all wet, it's likely you that has the pisshose hanging over his head.
Now you go play your little daytrader games and parrot mainstream, bullshit analysis, and when the Fed can no longer play the prosperity game, it is vultures like me who will be swooping in to pick at the carcasses of roadkill like you who saw the real world through video game eyes.