Ray Hendon

Comment Stream

Ray Hendon picture
77
Profile Articles (39)
Comment Stream
Filter comments by:
Highest rated Latest comments
Or filter by symbol:
    • Economic Outlook for 2009: A New Deal for a House of Cards
      We will see something of the effects by the end of next year. Since so many economies of the G-20 are in trouble, most of them will initiate some kind of fiscal stimulus. It will not be formally coordinated, but it will be more or less simultaneous, which will work just about as well.

      Best wishes,

      Ray
      Dec 11 11:39 am |Rating: +1 0 |Link to Comment |View article
    • Origins of the Economic Crisis in One Chart
      Great job, Jeff.

      You have done a remarkable job of cramming into a small place a credible explanation of a complex set of circumstances.

      I think the Iraq war (or at least the financing of the war) should be put on top of the Federal Budget Deficit box as a major contributor, but I can see that this would have added a partisan note to your presentation. It would also have made your presentation less palatable to some of the members of Congress, so I can see good reasons to omit it.

      My view is a simple quibble over an outstanding job. Thanks for the effort.

      Best Wishes,

      Ray Hendon


      Dec 07 08:53 am |Rating: +1 -1 |Link to Comment |View article
    • After G-20: The Beginning of the End of the Old Order
      Invest in A Farm: Thank you for your thorough exposition on Mr. Draghi. I confess I am not familiar with the history you describe, so I appreciate the information.

      Best wishes,

      Ray
      Nov 19 15:43 pm |Rating: 0 0 |Link to Comment |View article
    • After G-20: The Beginning of the End of the Old Order
      gramps2
      I see you are quite active in posting comments. I always appreciate thoughtful contributions. My preference would be more thought and less name calling and silly labeling. But to each his own.

      You must take your views on yesterday's economics to all the world forums. Romanticism never dies. I guess that is its charm.

      Best wishes,

      Ray
      Nov 19 15:41 pm |Rating: +1 -1 |Link to Comment |View article
    • After G-20: The Beginning of the End of the Old Order
      I don't know what government actions you are referring to that have caused the existing turmoil in currency prices. Perhaps you could be more specific on what actions you mean.

      As far as economic theories taught in textbooks, I am not aware of any theory that does not consider the effects of government actions. It would be a weird theory that ignores this important a factor. Even the most outdated classical microeconomic theory recognizes the importance of the public sector in influencing economic events.

      As far as returning to a gold or other commodity standard, this subject has been adequately explored and tried over the centuries to know the actual effects. A modern economy would be hard pressed to function waiting on a new gold discovery to increase the supply of money.

      There is something romatically appealing about "gold" that casts a spell on a lot of folk. But, as a tool of economic growth or even stability, it is like all romantic notions: great in conversation and dreams, but a nightmare in actual practice.

      Best wishes,

      Ray
      Nov 19 14:27 pm |Rating: +1 0 |Link to Comment |View article
    • The G-20 Sings a Song of Sixpence
      I suggest you do a little more research on J.M. Keynes, including his role at the Bretton Woods Conference, and his place in establishing macro-economic theory. If you look at any elementary economic text book for the last forty years, Keynes' theories and policy recommendations have dominated about half the volume.

      I also reject any bias because I use to teach economics and finance in college. No one deserves to be assigned either a liberal or conservative label just because they chose that profession. Economic theory does not come in flavors of liberal or conservative. It comes as a study in trade-offs between competing goals with limited resources.

      If you want some current relevance of Keynes, study his liquidity trap theory, which thoroughly explains our current situation of trying to use monetary policy to get out of a serious economic downturn.

      Lastly, I did not expect any great things from the meeting of this week. I suggest you re-read what I wrote. I think the next meeting, in 100 days or so will be the more meaty of the two. All participants need some tome to study their options, and there will be some fundamental differences about the role of regulation, size of stimulus and IMF participation.

      I also disagree with your assessment of the IMF over the years. Check out the hundreds of countries what have borrowed from the IMF and taken their advice on how to straighten out their economies. I think once you are more familiar with the facts of the situation, you will draw a different conclusion.

      Everyone of good will wants the situation to get better. I have no particular biases that cannot be broken if it would help. I am not sure you understand the seriousness of the crisis we face. The wheels have come of the world's economies. Major stuff is needed to put them back on. Clinging to ignorance and prejudice will not do the job.

      Also, to assign to Keynes the problems the UK has had since WWII is rather simplistic and, simply, wrong. He was a private economist and currency trader. The British Empire was at the end of it life because of a host of factors, none of which were under the power of J.M Keynes.

      Best wishes,

      Ray
      Nov 14 20:07 pm |Rating: 0 0 |Link to Comment |View article
    • The G-20 Sings a Song of Sixpence
      The major contributors to an expanded IMF fund would be Europe, America, Japan and Saudia Arabia. All these nations have good supplies of foreign reserves, and could make contributions in the hundreds of billions of dollars if needed.

      I agree with you that the Bush Administration has used the IMF and the World Bank as dumping grounds for washed up hacks. But it hasn't always been that way, and it will not be in the future, at least is the G-20 members gave their way. Also, some of the past Administrations have actually put good people in these positions.

      Best Wishes,

      Ray


      Nov 13 11:54 am |Rating: 0 0 |Link to Comment |View article
    • Opportunities for Currency Investors Amid Market Turmoil
      I do not expect the dollar to weaken in a long-term sense. It has spent the last seven years doing that, and I believe it has weakened past the point where it was reasonably valued.

      You seem to be taking a narrow point of view about the dollar, looking at it from your American perspective. But the demand for dollars is truely world wide, and all over the world, the dollar is still a sought after currency because it can be used to purchase what America sells or what other countries sell and will accept dollars for. America produces over 35% of the world's GDP, and people want what we sell, whether computers, software, airplances or stocks and bonds.

      Nor is the bailout relevant to the dollar supply world wide. The bailout is a mere trading of assets. We sell debt and trade the proceeds of that debt for other debt. We may win or lose on the trade, but this is not the same as pumping raw money into the bankings system. We are buying assets that will, in the long run, be quite valuable. Even if there are mortgage defaults, the underlying property can be re-mortgaged to more qualified buyers.

      Also, things may be bad here, but they are not as bad as elsewhere, at least for many places. Europe is further into a decline than we are, and all of developing Asia is hurting. With the decreasing supply of world dollars eminating from reduced foreign purchases by Americans, there is even more need for dollars to satisfy world liquidity needs. No other currency can take its place, at least for now. And, I don't think there will be a viable competitor for its place in world finance for some time to come.

      In this sense, then, the dollar is not being over produced. It is now or will be soon, actually undersupplied as the world's clearing currency. I see the demand for it going up rather than falling, because all other currencies are now taking their turn being hammered.

      You may be right. I confess I don't know what will happen. But I'm still long on the dollar and will be until the fundamental value gets out of line. It is still out of line on the down side for now. And it will probably take a long time for it to get into an overvalued position. At least that is my take on it.

      Best wishes,

      Ray
      Oct 28 01:01 am |Rating: 0 0 |Link to Comment |View article
    • Opportunities for Currency Investors Amid Market Turmoil
      Joe: This is a very real possibility. As of today, not only Japan but the G7 finance ministers also, are talking about selling yen in order to keep it from getting too higy. I put some references in my latest blog about this development it you'd care to check it out.

      Best wishes,

      Ray
      Oct 27 11:44 am |Rating: 0 0 |Link to Comment |View article
    • Sleeping with Short Bond ETFs
      If short interest rates go down further, which some are predicting, then you will get a little price bump of SHV or SHY--less so on BIL or USY.

      You must forgive me if I tend to write as if all accounts were like mine, were almost everything is in a tax protected account. The disavdanatage is that you don't have the freedom to move your money around into and out of savings accounts.

      This is one of the oddest periods, financially, that I have every experienced. So much of what we expect is not relevant today. But, I think more normal times will return once the dust settles on the banking and credit crisis we have experienced.

      Thanks for the comment.

      Ray

      Oct 17 17:38 pm |Rating: 0 0 |Link to Comment |View article
    • Sleeping with Short Bond ETFs
      I think money markets are fine, most of the time, but usually short bond ETFs and short bonds will outperform MMs. As you extend out the curve, to 2+ years AD, it is almost impossible for MM to keep up with the yield.

      When you say that most of the funds mention are not performing well, how do you mean that? I see them as performing fine. If, by chance, you mean over a few days or weeks, then I can see that. But, if you will look at the average duration of a prospective fund, and measure the average duration against the length of time you can keep your money invested, then as long as the AD is as long as your investment horizon, you cannot lose money. The arithmetic of average duration will work that way.

      I got out of MMs some time ago because of their returns were well below inflation. Now, however, almost all short durations obligations are below it, too. So, I try and at least keep as close to inflation as I can, and a longing short-term bond ETF is the best bet, at least as far as I can see.

      Best wishes,

      Ray
      Oct 17 13:10 pm |Rating: 0 0 |Link to Comment |View article
    • Sleeping with Short Bond ETFs
      Good question. With my fixed income holdings, I use current market conditions to determine where new monies go. In a rising or unstable interest rate environemnt, I always go short. In a falling or stable interest rate environment I extend out to the intermediate range. I do not try and time the market. I simply go where I see the best spot at the moment. Fortunately, going from an average duratio of 2.5 to, say 4.5 is not exactly a techtonic shift in assets. And, in my view, one cannot be over or under-weighted in short or intermediate bond holdings. There isn't that much difference to justify any kind of attempted precision in allocation percentages.

      For most of my fixed income portfolio, I keep my allocations fairly constant, but do vary the short-intermediate allocations slightly as market conditions change, but only to the extent that I am putting in new money.

      In terms of "after the fact", I could say right now, that any time the equities market takes a major downturn, short fixed income investments will beat equities. This is not rocket science, but merely the simple observation that short bonds do not fluctuate much in price. I can also say with great precision exactly how much a bond fund will appreciate or depreciate given a 1% change in interest rates. This is not because I have any special predictive powers, but rather it is because the relationship between bond prices and interest rates is scientifically defined by the value of the funds' average duration.

      Best wishes,

      Ray
      Oct 17 10:13 am |Rating: 0 0 |Link to Comment |View article
    • A Peek Under the Wisdom Tree
      John: I'm not sure I can provide you with the answer you need, but here's the way I understand their structure. First, only a few of their currency ETFs hold the actual currency. In all emerging markets they buy non-deliverable forward contracts or currency swaps if multiple currencies are involved. In both cases, an interest rate is built in to the contract, which is part of the forward market mechanism.

      For the currencies they own directly (Euro or yen, e.g.) they use the currency holdings to invest in local short-term, high quality financial instruments, that on maturity, pay interest.

      They may collateralize their forward contracts with U.S. Treasury obligations, and will earn interest on the holdings in addition to that paid on the forward contracts.

      It is my understanding that all interest earnings are retained for the shareholders and are added to the net asset value as they accrue. This provision, I believe, is part of the requirements of the Investment Company Act of 1940 which regulates mutual funds and most ETFs.

      Best, wishes,

      Ray
      Oct 05 15:12 pm |Rating: 0 0 |Link to Comment |View article
    • Barclays Will Not Pick Up Lehman ETNs
      The bonds will be paid accouring to: their status with respect to other debt--some are senior, some are subordinated, etc., and subject to how much in assets are left to distribute. Also, some bonds may be tied to specific assets, such as mortgages, railroad cars, airplanes, etc. I doubt Lehman had any railroad car bonds, but they may have some that are tied to other specific assets.

      Generally, I think the bond holders are just above stockholders in the long line of creditors. Both classes are probably going to take one for the team!

      Ray
      Sep 27 11:58 am |Rating: 0 0 |Link to Comment |View article
    • Barclays Will Not Pick Up Lehman ETNs
      Exchange Traded Note, a financial insturment somewhat similar to an exchange traded fund, except with an ETN the value of the note is strictly limited to the credit worthiness of the sponsor. They are not protected by any of the provisions of the Investment Company act of 1940, as mutual funds and ETFs are.


      Best Wishes,

      Ray
      Sep 26 21:01 pm |Rating: 0 0 |Link to Comment |View article

Ray Hendon's Comments Stream Stats

  • 65 Comments, 4 , 2
  • Total Comment Stream rating - = 2