Why shouldn't the government openly purchase securities such as equities or derivatives ?

Why would you want government in markets at all?

What you're proposing is manipulation of the fortunes of others, and both furthering of the pyramid scheme (add public money to private) and bubble creation (false temporary value).

Political manipulation of stock would be used to destroy stock (automakers, oil companies, gun makers) and falsely inflate the value of others (alternative energy, agriculture, political marketing companies).

Imagine if lobbyists were able to influence this. Lobbyists for say; Unions, Wall Street, Banks, Environmentalism, etc.

None of these are concerned about the good of others, only their own selfish interests. The absence of good is like the absence of heat, what do you end up with? If the goal is making money and not rewarding value, that is a selfish endeavor, and is absent of good.

[edit on 8-2-2010 by Dbriefed]

reply to post by Dbriefed


Because I want a new way of financing our debt while we make money.

Not selfish at all, IMO.

The problem with this sort of idea is that if instituted, it creates false demand for the underlying items. False demand equals higher prices based on no valuation whatsoever. You are basically arguing the govt should use taxpayer dollars to artificially drive up the value of these things to make the govt and investors investing with them a lot of money. You idea creates the definition of an unsustainable bubble.

reply to post by johnny2127


Yes, I want to prop it up. Artificial? I don't know, dollar will most likely plummet so international demand for our goods will go up big time. This will most likely cause a chain of events that I am not knowledgeable enough as of yet to determine.

At face value yes, that is what I am doing. But not really so far off from what we are doing now, I just want a monthly paycheck from the government every month that I can share with everyone.

I don't think we would have a problem at all selling these long maturity bonds and even could prob. sell some high yielding short term bonds in the years we plan on injecting liquidity.

It sounds pretty crazy, but I bet this could be pulled off successfully. Remember, we have to keep the mill spinning, so once we start this charade we must keep it up forever,

reply to post by GreenBicMan


This can't be pulled out successfully. It IS creating artificial demand. Artificial demand is when an outside force creates more demand for a certain product or service than would occur through normal marker conditions. This is just driving up these things without any valuation being added to them. Keep in mind, who is going to write (sell new) options contracts when they know the govt is buying them all up? Those that do will lose on their side of the deal. There is a winner and loser in nearly all derivative deals. Those that do write new ones will charge huge huge premiums meaning you have just priced out of the market most people needing to buy options or futures as hedges. This is a bad bad idea man. No offense. I know you are very intelligent and mostly come up with great stuff. But this would end so badly and cause huge problems. HUGE.

reply to post by johnny2127


Oh I'm aware this has problems.

This is just my plan to help everyone that is always asking for help on this site.

No plan is perfect, maybe that is why it is hard to come up with another plan than what the government has right now?

That's a pretty serious question, how else would you handle it?

Maybe they are doing a good job?

Hard to say, and I would prob. wipe out a whole investing class with what I want to do.

I would like to do this like Big Ben like I said and call it over "an extended period of time" so I wouldn't say when I would do it, but just how much.

With banking interventions in FX we still have pairs trade on the CME. Maybe we would figure something out?

Not sure, if there is no perfect plan, maybe there is no perfect solution to our problems.

We could always cut spending on .mil etc. but IMO that is part of our global dominance and cutting .mil could hurt us in the long run (even though I hate .mil ops).

reply to post by GreenBicMan


Any real solution that will work in the long run is going to cause some serious pain for a little while. The problems of the US govt and the US people have come from decades of poor fiscal policy. Any real solution is going to involve a drastic cut back in the size and scope of govt. Govt will have to stop trying to be all things to all people. That is much of the problem. Slowly much of our society has become completely dependent on govt in some form or another. Govt cannot continue to provide everything. So a real solution is honestly going to hurt many people. Its going to be cutting millions off from being dependent on govt, while at the same time modestly increasing taxes for some to raise more revenue. But we have gotten to the point where there is no painless solution. People are asking for help, and I feel for these people. However, you creating another govt ponzi scheme is just going to allow further bad policy out of govt, and more recklessness from citizens in America. Then what it causes and the burst of the bubble your idea created will cause even more damage.

reply to post by johnny2127


Yeah, Im aware this is the path down the rabbit hole. Like I said, we would have to keep the mill spinning forever.

You are prob right that pain must be felt for this all to be shaken out. Was last years pain enough?

I am doubting it, I have put a theory together though about speed/quality of information that perhaps will not allow for the super crash in this day of age, as opposed to early 1900's.

Also, I am thinking the rich did not feel enough pain this recession. This makes me think the market will keep rallying. I base this off of the rich only being in fear for about 1/4 of a year this last recession and in the early 1900's everyone was in fear for long periods of time. No one was jumping out of windows this time around.

We probably need to let some people outright fail. I am actually all for that, and in my "brave new world" this would happen, also IMO it would bring out a lot of easy money for venture capitalists etc.

Thats why I think though this market rally is not over. The ultra rich have put all that out of their minds, it's in the past, I think they need to be scared more like your average person. Average people have been scared for a full year, and most still are IMO. Thats why most people are still bearish IMO (they still remember pain) while the ultra rich have long forgotten IMO. This will allow for equity markets to keep going up.

reply to post by GreenBicMan


The pain of the last few years could have been enough, but the govt handled it wrong. The problems that created the crisis are still there and haven't been taken care of. Bad loans are still out there and still on balance sheets, although many are now owned by govt. But all that really happened was that govt dramatically increased liquidity and propped up institutions. Then they changed accounting rules to help banks hide losses longer. The system is still broken. Govt is the largest mortgage originator now. They are the entire MBS market. They bought 80% of their own debt last year even. And the wealthy are still very afraid. I can tell you that for sure. I do not know one wealthy person confident in this recovery or thinking we are out of the woods. They are more pessimistic than the average person right now actually.

I broke a bone once, and it didn't feel so bad. It was kinda numb, swollen and crooked. When the Doctor set the bone, it didn't hurt, but I heard a buzzing in my head and nearly fell over. Something about a shock to the system. But if he didn't set the bone I would've had a crooked hand.

The government is doing all it can to prevent a shock to the system. But we all know the bone needs to be set, and soon. If not, we'll be dealt a crooked weaker system.

reply to post by johnny2127


I don't know about pessimistic. I mean all my dads accredited investors that I have talked to and seen the paperwork really haven't been pessimistic since early this summer. I guess it depends what camp you are in.

Most money that I have seen has been pumped into DPP, Limited Parterships etc. along with a lot of money into variable annuities.

That could be more of an opinionated statement I suppose, although I guess I have to disagree that big money is scared right now, I see a lot of money being pumped into a lot of things right now, and I cannot say they are all conservative. A lot of money still in bonds too from what I am seeing.

Again, this is all through my dad's clients and it's not like I have a crystal ball or anything.

reply to post by Dbriefed


Trust me, I understand where you are coming from, and I feel your pain in my ACL along with this ridiculous auto-immune disease I conveniently have ran into haha.

But really though if you just look at the charts and ignore all fundamentals (which is my game) this rally has made a lot of sense. You just don't go up or down that fast without going straight back the other way.

If this was indeed it for going back the other way, if we do go down after this it may be very accelerated. I don't personally think that is going to happen, but again that is an opinionated statement.

I hear you on both afflictions.

Speaking of accredited investors, each residential Realtor I talked to over the last two years said we're at bottom and it's time to jump in before prices rise. It's in their best interest say this and hope for a rise. To say this they have to believe this in order to pitch a home to a buyer in this market. They couldn't, with any moral sense, sell a falling knife to a qualified buyer after the massacre we've been through. Back in 2006 I sold a home, and the Realtor said I'd break even if I kept it for 5 years. The home is worth 1/2 it's value now. Some Realtors that are less bullish use the '5 years' statement, and immediately triggers a memory of the home I sold in 2006.

Do you think your accredited investors believe themselves bullish, or do fundamentals like home prices, securitized mortgages, consumer credit and employment not matter in this economy?

[edit on 8-2-2010 by Dbriefed]

reply to post by Dbriefed


Hard to say.

A lot of these DPP, LTD Ptnrships have all been resource plays actually.

We are talking Nat Gas mostly - have seen some commerical real estate actually, and they have all been doing quite well (comm. real est.) contrary to what some would have you believe.

Nat Gas has been hammered, thats prob why I am seeing a lot of flows into that, rich people buying at the bottom. Makes sense. We are talking 5 - 50 million in assets people. Not Ultra Net Worth by any means (over 100 million) - I dont know anyone that cool.

But here is the big picture I think a lot of people are missing my friend.

What is the market?

Really all it is, it's a mechanism where big money buys at rock bottom prices and sells to retail as they move the trend.

It's really that simple in my mind. You didn't see WB running away, he buys at the bottom. BTW I'm not a real fan and originally he got in the market at the best possible time in the world when he was a younger man, but you can't fault someone for that I suppose.

My point being big money looks for deals. If they cant find a deal they will sell it back to you. Think about how many institutions are carrying millions and millions of shares to play with as they please.

Thats why I say it doesn't matter what we think. Our job is to identify what big money is doing then buy on their trend dips. Or sell the opposite way, or play counter-trend, whatever your game is, it's really a reflection of what big money is giving you.

You probably already knew that of course, but it's just a way to look at this market and try to rationalize what is happening. Right now IMO this is just an inflection point in the market and just like before will get bought up. At what point? I dont know, Im guessing the 200 EMA Daily scale. Thats where I bet a ****ton of money is going to come back into the market. I am totally neutral on all equities until that happens. We knew it had to happen to keep this rally going, but of course everyone and their brother is a genius when the market drops from 10,500 to 10,000 (I told you so etc.. its all crap)

reply to post by GreenBicMan


Wealthy people put money to work wherever they can make money at a risk level they feel comfortable with. Many times they keep the vast majority of money safe and then invest small portions in various things, some of which you mentioned.

But back to the point of pessimism. I have yet to talk to a wealthy person that is short term optimistic. Some are longer term. But all of them very cautious right now. The difference is that they always keep one foot out the door now. They invest and make some money, but nearly all are not convicted about their investments. Basically they are trading, not investing. Big difference mentality wise. I am sure there are some optimistic wealthy people. But from my view point, doing what I do, and literally talking to dozens and dozens of some of the wealthiest people in this country, I have not seen any optimistic.

reply to post by johnny2127


Could be you are right short term.

We (me and you personally) might be speaking on different time horizons.

Like I said, I can't find real reasons to buy here, I dont think they can keep GDP up etc., but if you are dollar cost averaging on here I really dont think this is a bad spot long term.

The people I am referring to really do not hold single equities. They buy baskets, or variable annuities etc.

The people that have been using this method are of course long term. Short term, you obviously know as good as I do it could go to 10500 next or go to 9500 even. Prob. 9500 most likely, but it wouldn't be the first time we have both been wrong I am guessing. Definitely not me at least.

You are correct in the fact you need to define your risk. It's all about who you are and what you are and what your time horizon is.

There is so much EUR bearishness it might be hard to keep our equity markets up. Could be the case again of the market hurting the most amt. of people at one time and surprising. I am long EUR USD right now till 1.38 - prob sounds ridiculous but too many people short term on one side of the boat. Thats why I am quazi thinking market short term will stay here or move higher.

Short term is almost a guessing game either way, but I think your short term views are as correct or better than mine. Long term I really don't see a problem adding another chip to the stack if you are +1-xx amt. of years.

You might want to look into the subject of CAFR via Cafr1.com. The big problem with this idea is that it is socialism, it is a vest special interest by the government that basically destroys competition and it put the government in a position to simply shut down business. A corporation is unfair competition. It's ganging up on the individual and it's hiding the ownership. Most likely the corporation will get various advantages.

Here's a possible example of this that may already be happening. We've all more or less accepted the brainwashing that we must have car insurance. When you get a ticket the government will over you a deal of one kind of another to keep the ticket off you record. If you don't go for the deal you pay higher insurance. Now you city police is likely a for profit corporation listed on the stock exchange. Does it invest in insurance companies? Do they invest in the police department's stock? Is selling you a ticket good for business?

reply to post by ReelView


It could be a form, but straight socalism it is not IMO.

I think there would be more competition as there will be

1) No too big to fail

2) A lot of free money around to support venture capital.

So the best would remain the best, the worst would fail. You would have to be a total ^^^^^ to bite the bullet in that environment, but if that is your destiny, then I suppose it is.

I have referred to the fact that there is holes in this. It would wipe out an investing class etc. Is there holes in what we are doing now? Sure. Would there be holes in letting it all crash? Yes, do you enjoy filling up on gasoline or enjoy electricity in your house? You think you would have that if Dow were to cross below 4-5000? Doubting it.

So I dont know, I am all ears on all input though.