Monday, December 3, 2012

Links 12/03/2012

-MUST READ: 2008? That’s Ancient History, Right? (see also Leveraging/Deleveraging: “Give me a lever long enough and a fulcrum on which to place it, and I shall move the world”)

Memories are short, and 2008 is ancient history. Consumers can’t suppress their urge to consume. Lenders can’t suppress their urge to lend. We’ve learned nothing from the last boom-bust. We are repeating it, piling error upon error.
“People will spend more of their equity,” Chris Christopher, an economist at IHS Global Insight in Lexington, Mass., tells Bloomberg. “It won’t be as much as they spent when prices were gaining at a rapid pace in 2005 and 2006, but it should have a positive impact on consumer spending.”
As you may have detected in Mr. Christopher’s statement, bankers (speaking of short memories) are back in the business of making home equity lines of credit — HELOCs — and consumers are ready to ramp up the good life again [...]
[...] Of course, this increase in home prices is a temporary mirage, as empty homes and those occupied by strategic squatters are held off the market by legal kinks in the foreclosure hose. ZeroHedge estimates that an additional 2.5 million homes should be for sale. For now, millions are living in homes mortgage-free “just to perpetuate the illusion that ‘housing has rebounded,’” writes ZeroHedge.
The problem with this consumer debt is that while analysts cheer on the consumer purchases, the debt is what market analyst Robert Prechter calls unproductive. Three years ago, Prechter pointed out in his Elliott Wave Theorist newsletter that banks had been lending to consumers at the expense of businesses [...]
[...] Only business loans are self-liquidating. Healthy businesses generate cash flow that can pay off debt, while consumer loans “have no basis for repayment except the borrower’s prospects for employment and, ultimately, collateral sales,” Prechter wrote.
Lines of credit to businesses are provided with the understanding that the business borrowers will “revolve the debt,” borrow to pay vendors and employees and then pay down the debt as their customers pay them for product. Thus, the debt is directly tied to the business firm’s production. The funds tend to be borrowed only for short periods of time. Credit, in this case, aids a business in potentially earning entrepreneurial profits, which build capital, which ultimately fuels economic expansion.
Conversely, consumer debts are not self-liquidating, but instead stay on the banks’ books for long periods of time, with payments being made only to service the interest and pay down very small portions of the loan principal balance [...]

- OIL is still King (and it will continue to be King for the foreseeable future, because it is a lot cheaper than green energy (which has a long way to becoming financially viable, for the moment it only exists because of government subsidies at the expense of the people who pay increased energy bills to sustain the green energy industry) and easier to use/store than gas or nuclear energy): IT'S OVER: Why Everyone Is Losing Hope For Green Energy

- Regardless of the various political games between America and Europe, that's what happens when you try to deal with everything by using more and more money-printing: You lose credibility - European Rescue Mechanism Loses AAA Rating

- Ever played Monopoly? (yes, the classic board game). The game starts out as a "free market", but it always ends up creating monopolies/oligopolies. In fact, the only way for this game to end is to form a monopoly, where one player controls the "market" and everyone else goes bankrupt...Here's the latest news on the real-life monopoly game we are all playing: 4 Companies Provided Half of SPX 2012 Earnings Growth

- And talking about monopolies and oligopolies, the few big players in the market are destroying or acquiring everyone else, just like the board game - here's the latest example of an acquisition by google: Google Is Going On An Acquisition Spree To Compete With Amazon

- And the more concentrated property and wealth become, the more necessary it becomes for those who own it to protect it by all costs, even if it means destroying the competition by not allowing it to compete and create a better product - here's the latest from the "patent wars" on 'intellectual property' and more (SEE ALSO  Intellectual property rights and "patent wars"):
- TECH: Asia is being incorporated into the global market, and they are growing (in a capitalistic, non-equal way of course) $25 tablets, $2 mobile data plans, and zero margins–how the internet is about to gain 3 billion new users

- TECH: Staples Will Offer In-Store 3D Printing

- This is old news: Detroit on the Verge of Insolvency, Again

- Free-trade is good, but if we can't compete, we'll just not gonna use it: EU okays free trade talks with Japan while protecting cars (SEE ALSO  Trade wars, protectionism, military spending and war; Who is Nikolai Bukharin?)