Question for you money gurus

General Business
1

What kind of inflation are we looking at due to stimulus programs and the massive amounts of additional currency being printed?

Also, say if someone were to come into a decent sum of money, what should they do with it to make it grow and keep it safe?

Mark
Mako 262 Twin Yammaha F200s
Yeah, but do you consider a dog to be a filthy animal? I wouldn’t go so far as to call a dog filthy but they’re definitely dirty. But, a dog’s got personality. Personality goes a long way.

“Life’s tough…It’s even tougher if you’re stupid” John Wayne

2

I’ll take the bait, just remember that I’m no economist, and I didn’t stay at a Holiday Inn last night.

If interest rates were 7-10%, we’d be in trouble, because if the fed tried to raise interest rates from that point, it could stifle the economy. However with our current interest rates, the fed can raise interest rates as the economy picks up, with out discouraging limited growth.

OF course the mechanism they use for this is money supply, and I expect the fed to start taking money off of the table as we go forward. Quietly, silently, but necessary. For example, if it were me I’d have to think about taking some of the UBS 10 billion out of circulation. Maybe 10%. Its a drop in the bucket, but those drops add up.

The biggest problem will be China. If they decide to ramp up their economy unfettered, then commodity prices will rise drastically, and the fed will have little control over inflation. Thus my stock, or mutual funds selection: commodity, natural resource, or energy mutual funds. Mutual funds because well-managed mutual funds have less day-to day volatility, and because many of these are international companies and hard to track here in the US.

If inflation rears its ugly head, these companies are going to be leading the way, so you’ll benefit (though you’ll be suffering the fate of inflation). And if it doesn’t, these mutual funds will still have some appreciation, but you benefit more from low inflation.

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3
quote:
Originally posted by Mandopickr

OF course the mechanism they use for this is money supply, and I expect the fed to start taking money off of the table as we go forward. Quietly, silently, but necessary. For example, if it were me I’d have to think about taking some of the UBS 10 billion out of circulation. Maybe 10%. Its a drop in the bucket, but those drops add up.

You seem to be fixated on this 10 billion the US gov’t got from UBS. Please tell us more, or enlighten us with a source. Further along that subject, do you really feel that 10 billion is a significant number in light of the fact that we’ve had a couple of $200+ Billion weeks of t-bill auctions in the past month? And a fair amount of those t-bills are getting bought back by the Treasury (read: quantitative easing). At this point, the evidence seems to indicate that the money supply spigot is far from being turned off, heck, they just extended the TALF through March…

4

First of all, its merely an opinion. No, I’m not fixated on UBS, its just nice (IMHO) that something worked the way its supposed to. I was clear in pointing out that it merely a drop in the bucket, but for me that’s better than an empty bucket. Find your own source, its been all over the financial news.Or just believe that I made it up. Whatever pleases you best.

This was released yesterday, from comments made by a Fed Chief and a Fed Reserve bank head: Lacker, speaking earlier at an event in Danville, Virginia, suggested the Fed should consider now whether its planned purchases of mortgage securities might give the economy more of a boost than it needs.

"I will be evaluating carefully whether we need or want the additional stimulus that purchasing the full amount authorized under our agency mortgage-backed securities purchase program would provide,’’ said Lacker, who is a voting member of the central bank’s policy-setting committee this year.

As for auctions: “The Fed plans to buy up to $1.45 trillion of agency mortgage debt by Dec. 31, 2009, as well as $300 billion of longer-dated U.S. government bonds by the end of October.”

You can argue that the Fed is wrong in their actions, but you can’t argue that they are unaware of the same inflation concerns you (and I) and others have.

You are probably right, its all going to hell in a hand basket. I certainly am not trying to change your opinion.
So what’s your take, dollar will collapse? Inflation hit 10%? Or better yet, where do you think we’d be today if no actions had been taken?

5
quote:
Originally posted by Mandopickr

First of all, its merely an opinion. No, I’m not fixated on UBS, its just nice (IMHO) that something worked the way its supposed to. I was clear in pointing out that it merely a drop in the bucket, but for me that’s better than an empty bucket. Find your own source, its been all over the financial news.Or just believe that I made it up. Whatever pleases you best.

You are talking about the bank, UBS, correct?

I cannot find my own source, that’s why I asked.

Frankly, I thought it sounded a little fishy, and couldn’t find anything on the google. Then while reading the evening financial news I ran across a link to an article this evening that tallied up US govt bailout profits.

http://www.msnbc.msn.com/id/32623489/ns/business-the_new_york_times/page/2/

The Swiss government, for example, said last week that it had pulled in a handsome profit for taxpayers on a $5.6 billion bailout it gave to UBS, the troubled Swiss bank, at the height of the financial crisis in October. The government netted $1 billion on its investment, a gain equal to a 32 percent annual return.

So I ask again, where did the US gov’t make $10bill off of UBS?

I don’t think you made it up, at least not intentionally. I would genuinely be interested in seeing your source, as it contradicts what I just read in CNBC/NYT (and believe me, I do not hold alot of trust for either of those media outlets).

Furthermore, the article says that the total early returns on bailouts from 8 banks only totals 4bill USD.

6

Go to., among other places, CNBC. At the top of the page, they have a search function. Put in these words, “UBS conversion”.

A new page will come up, and click on one of these:

Mid-morning rally
“For everyone who thinks the government is wasting money helping banks out, UBS pointed out this morning that the recent conversion of Citigroup’s preferred shares into common has netted the Treasury a $10 billion (unrealized) profit …”

Treasury makes money on Citi Bailout
“For everyone who thinks the government is wasting money helping banks out, UBS pointed out this morning that the recent conversion of Citigroup’s preferred shares into common has netted the Treasury a $10 billion (unrealized) profit…”

I understand this is the same link, but several of the links have already been taken down. They’re still out there, but I’m not interested in spending time to find them. But it was also mentioned by Art Cashin on his show (Trader Talk?), Larry Kudlow,
and on MSNBC (Sqawk Box, i think).

To provide additional details, UBS converted preferred shares of Citi to common stock, which is where the “conversion” and benefit took place. Of course, it could all be just one big fat lie, like the supposed lunar landing. In which case, ignore all the above.

Just curious, what was your keywords for your search when you went to CNBC?

Now who has the fixation on UBS?

7
quote:
Originally posted by Mandopickr

Treasury makes money on Citi Bailout
“For everyone who thinks the government is wasting money helping banks out, UBS pointed out this morning that the recent conversion of Citigroup’s preferred shares into common has netted the Treasury a $10 billion (unrealized) profit…”

Now who has the fixation on UBS?

With all due respect, we could have avoided this entire run around if you had simply stated this was a conversion of CITIBANK shares.

It should further be emphasized that this is an UNREALIZED gain. The US gov’t can’t just dump 10bill in C common on the market and walk away with the cash. FWIW, C was down 9.2% today and lost another 1.1% after hours…

8

Sorry, I thought people on a business thread would know what “conversion” means. I also thought most people were aware, with all the press coverage, what the UBS conversion referred to. For those that didn’t, I couldn’t image that they couldn’t find the source on the internet. I was wrong on all three points.

I made comments based on what I believe, on August 26th, 2009. I also thought the fed comments a few days later reinforced my comments (just lucky?). I typically lurk on this part of the board, since they are select people here whose opinions I read. Many of those are very different from my leanings, but that doesn’t mean that they aren’t based on fact. It doesn’t mean that they made it up, “intentionally” or not. Their postings and comments are worthy of my time. This isn’t.

I’m sorry I responded to the thread.

Post Quatermaster, put me on your ignore list. We are not compatible.

9

I don’t really do ignore lists.

Spirited debate and diversity of opinion is a large part of what makes this country great, lets not let some semantics get in the way of that…

So back to the topic at hand…

In regards to inflation, you made the statement:

You can argue that the Fed is wrong in their actions, but you can’t argue that they are unaware of the same inflation concerns you (and I) and others have.

And I agree with you to a point. I believe that right now the Fed is giving lip service to being “concerned about inflation”. Bernanke even claims to have a plan to remove excess liquidity from the system when the time comes. Of course he’s not telling what it is…and in the meantime we’re curing drunks with more drinks IMO…

Taking from your own examples:

“The Fed plans to buy up to $1.45 trillion of agency mortgage debt by Dec. 31, 2009, as well as $300 billion of longer-dated U.S. government bonds by the end of October.”

Buying up $300million worth of bonds is not clamping down on the money supply, it is quite the opposite. Call it quantitative easing
if you like, but that is just a fancy term for “printing money b/c we can’t lower interest rates”.

http://en.wikipedia.org/wiki/Quantitative_easing

Personally, I believe that inflation is a key part of the Fed playbook, as I’ve posted before…quite frankly, the exponential growth of debt service in a deflationary environment is a killer…we need inflation, to a degree, personally, I’m just worried about how much we’re gonna get…

Further along this point, and where I have another big problem with “mass media” reporting successes such as the Citi/UBS conversion, when in fact these yet unrealized gains have come from a market being pushed up by quantitative easing…is a $10 billion profit really a profit when the Fed is monetizing many more billions (on a weekly basis) that primary dealers are using to prop up the market?

I don’t think so.

A little more reading on the

10

I have to kick in my 2 cents worth.
The US govt takes in about $1 Trillion in taxes a year.
The Obama budget is 3-4 Trillion. China is not buying our debt any more which means the govt will have to print about $3 trillion. That is what causes inflation.
Gold hit $1000 ounce recently for that very reason.
If you have a steady income and do not have to worry about servicing your debt, it is better to buy something worth a dollar today and pay with cheaper dollars tomorrow.
If you are young, buy income producing real estate and finance it; invest in an international index fund; buy a little gold as a hedge and sit back and watch the carnage.
Example, if you had just gone to Canada 2 years ago and converted you US dollars to Canadian dollars and converted them back to US dollars today you would have 50% more dollars. Reverse the process. If you bought Canadian dollars today it would cost you 50% more than if you bought them 2 years ago. That’s what inflation does to your savings account.