Entries by Keith Weiner

The Practical Side of Deflation and Deleveraging

Companies with cash beat those without it. The need for cash rises with economic uncertainty. Sure, cash has a low yield, but so what–there aren’t many better opportunities anyways. Our competitors get it and the central bank gets it. If you don’t get it, try to raise the cash to buy the company? Oh, you […]

Wow! Just wow!

This is pretty technical, but in essence X owns junk bonds, so he swaps them for Treasury bonds with a promise to un-swap later.  Then X has good collateral to post to buy another asset.  Y owns Treasury bonds, so he swaps them for junk bonds.  Then he has yield (the 10-year Treasury pays less […]

China Fantasy or China Reality

It’s become popular to theorize that China is smarter than the US, that China’s economy is doing better, that China will rise to surpass the US, etc.  This theory is false, in our opinion.  China has massive government controls and intrusions into the market throughout the economy. This article (http://www.zerohedge.com/news/2013-01-23/what-really-goes-china) enumerates some of China’s problems: […]

Dutch Deflation

A bank, not in the PIIGSC (Portugal, Ireland, Italy, Greece, Spain, Cyrpus) is insolvent. It’s in Netherlands. So the government is taking it over. Inflation is an expansion of counterfeit credit. Deflation, a forcible contraction of credit, is the inevitable consequence of inflation. – goal is to “shore up confidence” – Netherlands’ deficit was already […]

Big Debt in Little China

– Local governments to borrow for unneeded “infrastructure” – They acted under orders from Beijing – Unable to pay, they “rolled the debt over” – Li says it’s OK, it takes time to amortize(!) – Yiping says it’s fine when duration is mismatched – Peng says everyone does it – Most banks refuse to lend […]

Bailouts and Moral Hazard

Bailouts and Moral Hazard are not just for “banksters”. The money quote from this piece about Nortel’s bankruptcy is: “I’d rather end up on welfare than give our hard-earned assets to these vultures,” Mills said in the statement” Mills admits he is not negotiating in good faith, with a taxpayer bailout of his personal finances […]