What are pundits?

If people have no money now then where did all the money in the world go to - has the super rich or upper class made off with money that usually circulate from the middle class that makes the economy?

The problem we are experiencing is not a decrease in the money supply, but rather a rapid reduction in the money multiplier due to banks holding excess reserves. Every income bracket is experiencing a decrease in wealth, so it is false to say that someone has "made off" with the money. No. The poor have began to obtain the money of the rich and middle class through socialism and welfare. As a result, the poor have had no need to work, and have begun to stop working towards becoming middle class. The middle class and rich have seen that they have obtained little and nothing from their hard work as it has been given to the poor, and have also stopped working. Although socialism has good-seeking roots, it takes away the economic urge to work of the middle class, poor, and rich, and all stop working hard. The economy is not a pie (as it was thought to be in mercantilism) The amount of wealth in the world can change, as it has. There is less and less wealth in the world. No one, has it. There is still plenty of money in the world. The problem has stemmed from several factors. Poor lending practices from lending institutions around the world to individuals who could not afford it, then repackaging and reselling (over and over again), and then when those who got those loans to start with could not pay them that part of the house of cards fell. Then the automakers (at least two here in the USA, and some around the world), wanted the short term benefits of the huge gas hogs and to hell with making gas efficient or electric vehicles, and now those corporations (along with hundreds or thousands of other companies tied to them) are in the tank. Of course my take on this is that this is just another sign that the return of Jesus is very very soon ! Wealth never disappears it is simply redistributed. Take for instance the problem the USA is having with loan repayments. Once upon a time the USA produced products that it sold to its own population and to other countries. This gave its population work raised their wealth and brought about a situation where people did not suddenly find them selves living in the street. However now these goods are made by countries like China, and the money we are speaking a bout is going there instead. This creates a problem for china in that they have become awash with American dollars and America does not have the ability to buy them back. So they have to lend the dollars they earned from the USA back in order for the USA to be able to keep buying Chinese goods. This leads to a situation where the Dollar becomes progressively worth less and is desperately reloaned to just about any one that says they are committed to repaying it. This in turn leads to a situation where some one says this is a house of cards that can topple any moment and suddenly no one is game to take part in economic activity because they are afraid they will lose their shirt. so this time the Governments of the first world countries have suddenly decided to become socialistically inclined by giving the tax payers money to the very corporations that are exacerbating the problem. To keep the man in the street quiet they throw a few dollars in cash at him so that it feels like something real is happening. Many alternative media pundits believe that several step by step plans are being played out. In 1999 - 2000 US federal legislation was passed that struck down laws from the 1920s that explicitly forbid trading uncovered derivatives. Search >Gramm Leach Bliley "Commodity Futures Modernization Act" 1920s Mortgages OR loans OR backed-securities< Banks and insurance companies involved in the banker bail out were involved in such trading, and over 1.14 Quadrillion dollars were lost / gained in the last few years. Search >quadrillion dollars derivatives mortgages< According to recent calculations, this amount exceeds the entire world economy by a pretty large factor that would make every man, woman, and child on the planet owe about $190 k towards the payment of this debt owed to the winners of these trades. Search >Quadrillion derivatives bubble size world economy< Apparently the Bilderberg Group meeting that took place in 2006 at the Brookstreet Hotel in Kanata, Ontario, Canada had planning meeting minutes leaked to the alternative media where the plans were recorded during news video footage for Internet radio and TV shows. Search >"Bilderberg Group" 2006 meltdown leaked< Video search >"Alex Jones" "The Obama Deception"< Recorded for posterity at some point in that video is that price levels, interest rates, and stock market trends could be predicted if the traders were aware of these plans, and, no doubt, the winners of these derivatives trades were insiders who fleeced the losers-which was our banking and monetary system. Was the economic meltdown caused by failed mortgages?-Yes in part. What caused these people to fail in their mortgages?-(a) The boom and bust economic business cycle that is caused by international central bankers caused job losses. (b) The system was encouraged / designed so that real estate was purchased by people who could not afford it or the people's risk of job / income loss during an economic downturn was just too high to risk providing them with a low money down mortgage. Was the economic downturn caused by laziness of socialistic people who would not work?-Yes, the international central bankers are part of a philosophical group known as Fabian socialists (a society) whose efforts are targeted towards centralized control over the world: World Bank, World Trade Organization, Nato / UN Troops, Codex Alimentarius (a Nazi-established control categorization over trade of food), Bilderberg Group, the Council on Foreign Relations (CFR), the Trilateral Commission, and other various round table groups world-wide. Some claim that this group is headed by members of various secret societies one of which is the Illuminati. The Zeitgeist videos have some philosophical flaws regarding their goal of a Utopian society (and some factual flaws too), but correctly point out in their Addendum version video that international bankers have teams that go out to destabilize poorer nations by forcing them to take out huge loans that they have no hope in paying back. These poorer countries are just like the working poor who were tricked into taking out mortgages that they could not afford. The countries end up having to give up their sovereignty of their ports, highways, natural resources, and laws so that multinational corporations can come in and take over. It would be different if the multinational companies were invited to participate in a competitive environment in these places, but this isn't happening. One of the reasons that Iraq was invaded was that Saddam knew all about this, refused to take out loans, and thereby, would not permit multinational corporations to take over his country. The weapons of mass destruction were just a smoke screen for taking over Saddam's natural resources such as oil for a world market hungry for this precious resource. Video search >Zeitgeist Addendum< Money, credit, debt and risk can be gained or lost. One place this happens is on the stock market depending on the part of the economic cycle that we are experiencing-upturn (boom) or downturn (bust). The wealth of the world is manipulated by the elite rich. They have entire organizations of minions looking out for their interests, and have these agents working for their best interests in many of the governments of the world. The US Federal Reserve is a privately owned corporation incorporated in Delaware. It is owned by regional Federal Reserve banks who are in turn themselves privately owned. The ownership is kept secret. Leaked information from time to time emerges that indicates that large New York banks own some, and European banks own another large part. J.P. Morgan, J.D. Rockefeller, Paul Warburg, Jacob Schiff, Lehman Brothers, Solomon Brothers, Kuhn Loeb, American Express, and NM Rothschild were known to have varying levels of ownership stakes in the corporation when it started. Video search >Federal Reserve< The Fed apparently intervenes in markets such as gold, oil, bonds, stocks, US Treasury Bills, commodities, and so on. The US Fed chairman does not want to disclose what things the Fed is doing in regard to market intervention, nor money supply levels. Minion mouth pieces for the Fed sing its praises and say that all conspiracy theories regarding its activities are false. However, pundits in the gold commodities market claim that prices are being artificially held low by practices like gold leases rather than selling gold to electronic circuit board manufacturers for signal connector contact metals. Obviously the gold that is leased is ultimately used and sold to end computer users for their expansion cards and mainboards, so the leased gold will never be returned to end the lease. Most of the gold available for purchase, sources say, is "coin melt" (usually an alloy) that is not pure. If no one is privy to the Fed's activities except its own insiders, auditing is non-existent so laws governing its actions will be unenforceable. The only way to take advantage of the stock market is not to listen to what minions are saying, but observe what they are doing in the market. Certain companies monitor such liquidity flows of cash into and out of the equity markets. By knowing about these in / out flows, the direction of the market (rising or falling prices) is then no longer a mystery. Exactly timing the market will still be impossible if insiders act suddenly. When the increase in the money supply out paces productivity, this causes inflation. When the money supply or credit markets are tightened, then there deflationary pressures that start to happen as more people become unemployed due to the resulting contraction in the economy. Inflation is an invisible tax on everyone's savings because the buying power of each dollar is reduced. Some people believe that returning to a gold standard would prevent inflation, but gold as a commodity can be manipulated by those who control most of it already. The interest owing on the debt to the private Federal Reserve system is about 1 trillion dollars per year, and the private income taxes paid by all individual tax payers just manages to cover this amount-leaving none to go into running the government, building new schools, building new roads, and so on. The corporate income tax collected coincidently is usually the amount spent on the military budget. So when the government gets more into the war on drugs, the war on terror, expands military spending, expands homeland security, puts more non-violent citizens in more and more privately owned / operated prisons, all of this operational money must be added to the debt owed to the Federal Reserve system, creating a downward spiral into tyranny. The people of the USA, Canada, and Mexico do not want to give up their democratic rights, but that is exactly what their leaders started during "the three amigos summit" where the Security Prosperity Partnership (SPP) agreement was signed by US President Bush, Canadian Prime Minister Martin, and the Mexican Prime Minister a few years ago. Lou Dobbs covered the event and said that these men signed an agreement that will end the countries as we then knew them. The managed trade agreement will have unelected bureaucrats creating laws under which we will all have to live, and our police forces and judges will be in charge of enforcement of these undemocratic laws and regulations. The health effects of cannabis has been analyzed numerous times in the past and found to be less addictive than coffee, and contrary to the long ago falsely publicized "reefer madness," the natural flower buds from the plants causes a calming / pacifying effect. The combustion gases given off are non-toxic, and non-carcinogenic. One study was faked. Cannabis was found to kill brain cells only when "smoke only" was supplied to the tested animals, depriving them of any oxygen for a period of many minutes (oxygen deprivation during which brain cells will always die). Even drug manufacturers have attempted to make a synthetic replica of the active THC ingredient from the plant. Video search >The Union Business of Getting High< It is stated in the above 2007 video that more than one million non-violent Cannabis possession people are serving stiff sentences in jail, wasting tax payer money of a considerable sum on a yearly basis just for incarceration, and less than 10 percent of the budget for the war on drugs is spent combating really dangerous, addictive drugs like cocaine, heroine, and speed. In a Spring 2009 video, it is claimed that the number of non-violent drug possession prisoners has reached 2 million. Even if the Canadian government enacted legislation to legalize cannabis and hemp there, the trade zone harmonization of the SPP might mean that the Rockefeller / drug company-illogically imposed cannabis ban may still be imposed on them by the USA. Bio fuel, paper, and medication industry could spring into life if cannabis was legalized. It would be carbon neutral because the burned fuel would be recycled by the next crop of growing green plants. Many drugs would go obsolete, somewhat reducing the Rockefeller family's iron grip on western medicine. The price for the natural cannabis weed would go way down if people were allowed to grow it in their back gardens, circumventing Rockefeller control on drug production.

Evolution of The field of Finance?

Today's Finance is still in its infancy as a science. The domain of what we know pales in comparison to what we actually know we don't know. For example, we know that our understanding of the basic mechanisms of asset valuation (stocks, real estate, gold) is limited, confused and non-operationalfor the most part. Who can tell and predict the value of stocks today? Investors are offered conflicting views (rational vs. irrational), quick recipes, and voodoo advice. The "pseudo" scientific mathematical models that are offered today, far from resolving real-world problems do revel in their own complexity in exchange for minor incremental learning. Below, I am addressing several outstanding issues in Finance. Let me give you a few examples of major unresolved issues:· The CAPM dead or alive? Over the last few decades one of the most prominent model of Finance called the CAPM has been under attack, not because its logical foundations are wrong or limited, but rather since it does not explain returns, the way it was intended to: higher contribution to systematic risk leads to higher returns. Noteworthy, is the French-Fama (1992) paper showing that price to book is a better predictor of stock returns than beta. Now, we can accept that an essentially static model created about 40 years ago can fall short of explaining reality. Maybe the reason is that we are not capturing expected returns properly. Recently, there have been new attempts to validate the model (for example showing that a form of inflation illusionhas an effect on the Beta-expected return relationship (Cohen, Polk and Vuolteenaho (2004)), or that the French-Fama result can be explained by incorporating leverage as a factor, thus rendering the beta effective again (Ferguson and Shockley (2003)). These results may be incrementally informative but it is important to know if the stream of new insights about CAPM is fundamental enough to repair the model.· Beta only a measure of risk? Beta measures the contribution of a single stock to market volatility. One of the confusing piece of language about it is that it is supposed to represent risk. However, in some instances it may rather represent growth. For example, since the stock market moves upward in the long-run, and market returns are positively serially correlated (low frequency data), then a high beta stock may in fact capture a boost to the average market return due to faster than normal growth (in earnings). The extra premium is not for risk but for growth. Here are some new views about redefining the standard CAPM model in terms of beta linked to downside risk (Kaplansky (2004) or Post and Van Vliet (2004)).· What about those macro-finance models? Since the static model has not done so well, what about the dynamic models? These have not fared better since the middle of the 1970's (essentially since the works of Merton (1973) and Lucas (1978). Both are Nobel laureates in Economics).· Valuation of stocks, anyone? The standard dividend discount model taught in our schools (and many variations on it) has not borne its fruits. Stock prices MUST be based on the present value of expected future cash flows accruing to investors (Warren Buffett concurs). The questions are: 1) Are these cash flows adequately represented by forecast dividends or proxies? 2) How do we account for expected price appreciation independently of future dividend proxies? 3) How can we narrow the choices for the right discount rate(s) and other inputs to apply to these models? Still, it appears that demand often forces prices to temporarily diverge from a present value calculation due possibly to "irrational exuberance", then 4) How fast does the reversion mechanism to fair value operate (if any)?· Is the stock market rational or irrational? This is a very confusing issue since the latest conventional wisdom is that the stock market is mostly irrational (Shiller 2001). In fact, it is probably a mixture: an undercurrent of fundamental value plus superimposed short-term deviations due to irrational behavior and/or news. Let us be careful though, one reason why markets are seen as irrational is that Finance has been unable to provide a logical/mathematical foundation to valuation since the current models have fallen short. Thus, our definition of "rational" is contained within the rationality of the models we have so far developed. The core guiding principle of investors' decisions may very well be founded on economic laws (systematic and reproducible) left to be discovered…· What are we (investors) to do? If markets are irrational what is there to learn about investing in stocks? Are we investors supposed to throw in the towel when there is no solid ground on which to make a stock investing decision? Maybe some investors can capitalize on the irrationality of other investors? (Contrarian trading: Am I irrational or is she?). On the other hand, you'll say there is always the motto of Value Investing: buy companies for which you understand the business model, scrutinize the financial statements, do they have a good cash position, low PEG, etc… There is no argument that these factors can contribute to good stock selection. More to the point though: an entire industry has sprung-up not necessarily caring about how stocks are truly valued. Yes, I'm talking about the mutual fund industry. How so? The industry creates portfolios with particular flavors: Growth oriented, Large caps, Small caps, Blends etc... The game in town is product differentiation and finding a market niche. A marketinggame! Since no one truly understands the pricing of stocks, mutual fund managers attract investors by promising to replicate 'good' past records, or to generate great returns based on the fund's investment style (an oxymoron). Since portfolios are turned over to dump losers and buy winners (often late), these outfits are not in the business of fully understanding stock valuation but rather in the business of maintaining or growing their fund participation by minimizing quarterly losses and riding the growth endemic to a capitalistic economy.· The (in)famous Equity Premium puzzle. The Equity Premium (EP) is the difference between the stock market return and a Treasury yield (also referred to as risk free rate). Now, if there were an equivalent to the speed of light in E = MC2, as applied to the valuation of most assets, this would be the EP. However, the EP is typically not constant over time. It is what economists call counter-cyclical: it rises during recessions and lowers during booms. Now, since stocks are riskier than bonds in the short-term, following the CAPM logic they should pay a higher return. Thus, the EP should be explained by risk avoidance. However, the current macro-economic and finance models are unable to confirm this intuition, since (not to bore you too much) the size of actual equity premium does not reconcile with what the models need to assume for the level of risk aversion in the economy. Recently, Bansal and Yaron (1994) have had some success in reconciling our economic models with the ctual size of the premium. However, their solution is a bit strange: in order for their result to hold investors have to be worried about minute variations in long-term GDP growth, by an order of few basis points (1% of 1%)!· Stock returns that compound faster than economic growth? No kidding! Current theories accept that compound equity returns have been around 11% nominal in the long-run. This far outpaces the nominal GDP growth of the US economy about 6.5%. Imagine a savings account paying 11% when the bank's profits only grow at 6.5%… Why are current theories endorsing this result? Well, the key to this gap is that the equity compounded return calculation assumes that dividends are fully reinvested period after period. A single investor may be able to do this for a while as he/she can increase their market share, but since aggregate stock wealth cannot grow faster than GDP in the long-run, all investors at large cannot do that. The pricing of stocks must incorporate a relationship to feasible wealth compounding. Right now, the current theories do not link returns to GDP growth in a convincing manner.· Loving or fighting the Fed model. The Fed model (Orphanides and al. (1997)) is highly controversial. Many practitioners love it (see Dr. Yardeni's page); academic pundits hate it (Asness (2003)). The Fed model is the result of a discovery that the SP 500 forward earnings yield is highly correlated with the 10- year Treasury yield, since the 1970s. This is the best working model we have for the SP 500. Academics believe the model is logically flawed, based on thinking that the earnings yield is a real rate of return. Yes sure, how can you compare a real rate to a nominal yield? Since the Fed model is flawed, the observed correlation must be a fluke and since reality violates our current accepted theories, then reality must be wrong! (This is an actual quotation!) Well, try to tell that to practitioners! We must attempt to better understand why the Fed model works.We need to view ourselves much more like engineers or physicians, in our capacity as social scientists. We are living in exciting times, the science is young, the questions are still open, novel thinking and scientific breakthroughs await us.Dr. Christophe Faugere is an Associate Professor of Finance at University at Albany School of Business Chair of the Finance Department. His research attempts at solving some of the challenging issues presented above. Please visit his website at wwww.albany.edu/~faugere.

What are pundits?

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