Global Economy Bursting?

[Randolph Kinney]

Credit-Default Swaps as Hedge Threatened by Greek Debt Plan

http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2011/10/28/bloomberg_articlesLTRTPU0D9L35.DTL

"I would probably shy away from CDS in the sovereign markets and some of the more mega companies in the world," David Withrow, the head of taxable fixed income at Fifth Third Asset Management in Cincinnati, said in a telephone interview. "Politics are too much involved in the sovereign game and potentially even too-big-to-fail companies."

That approach threatens to affect banks that use the swaps to hedge their holdings of government bonds, forcing them to look at other ways of laying off risk. The contracts pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

"It punishes the banks that were well-hedged and managed, and I think it's just starting to sink in as to what this might mean," said Peter Tchir, the founder of hedge fund TF Market Advisors in New York. "Bank hedging desks are definitely now trying to re-evaluate" their use of default swaps, he said.

"If they find a way to avoid a trigger event in the CDS, then people will doubt the value of credit-default swaps in general, leading to more dislocations in the market."

 

[Couch Potato]

Population growth and inflation combined over the 33 years was 400%. 4 times $10.3 billion pre-Prop 13 = $41.2 billion which is less than the $49 billion Prop 13 for 2010-11 the last time I looked, what about you? :new_all_coholic:

Using the CPI calculator, which we know actually under estimates real inflation, the 10.3 billion of 1977 translates to 38.5 billion today so that is the figure with a stagnant population. However, the population increase over that time period was 13.6 million, or about 57.3% and accounting for that growth pushes the equivalent revenue to just over 60 billion.
Increase the current revenue by 20% and it still falls short of pre-prop13 levels. :new_all_coholic:

 

[Randolph Kinney]

Fitch: Greek Debt Deal a Default

http://online.wsj.com/article/SB10001424052970203554104577003493756246110.html

LONDON—Fitch Ratings became the first major credit ratings agency to pass judgment on the European Union's anticrisis plans Friday, saying that the proposed Greek debt exchange would constitute a default and that none of the plans remove the risk of further downgrades for other sovereigns.

Fitch said that after the default, the country's rating would probably be in the B category or lower.

All three major ratings agencies previously said such a plan would push Greece into a default-rating category.

 

[Randolph Kinney]

Using the CPI calculator, which we know actually under estimates real inflation, the 10.3 billion of 1977 translates to 38.5 billion today so that is the figure with a stagnant population. However, the population increase over that time period was 13.6 million, or about 57.3% and accounting for that growth pushes the equivalent revenue to just over 60 billion.
Increase the current revenue by 20% and it still falls short of pre-prop13 levels. :new_all_coholic:

Well, since the comparison is the fiscal year 1978-79 begins July 1, 1978 and the ending fiscal year 2010-11 ends June 30, 2011, or 33 yrs (2011 - 1978 = 33), the CPI calculator gives $35.8 billion. That would be (35.8 - 10.3)/10.3 = (25.5)/10.3 = 2.47 or 247% increase over 1978.

Lets take your 57.3% increase for population, add that to 247% for inflation, we get 305% roughly. Multiply 3.05 time $10.3 billion = $31.4 billion increase for combined inflation and population growth. Add $10.3 billion to $31.4 billion = $41.7 billion as of June 30, 2011.

ZOWEE! I get 400% or a factor of 4 times $10.3 billion which is $41.7 billion which is less than the $49 billion.

That exceeds pre-Prop 13 levels of property tax revenue and considering the starting point was $4.9 billion, that is a 1,000% increase or a factor of 10.

But lets be conservative and say it was only a 475% increase over pre-Prop 13. :new_all_coholic:

 

[Couch Potato]

Well, since the comparison is the fiscal year 1978-79 begins July 1, 1978 and the ending fiscal year 2010-11 ends June 30, 2011, or 33 yrs (2011 - 1978 = 33), the CPI calculator gives $35.8 billion. That would be (35.8 - 10.3)/10.3 = (25.5)/10.3 = 2.47 or 247% increase over 1978.

Lets take your 57.3% increase for population, add that to 247% for inflation, we get 305% roughly. Multiply 3.05 time $10.3 billion = $31.4 billion increase for combined inflation and population growth. Add $10.3 billion to $31.4 billion = $41.7 billion as of June 30, 2011.

ZOWEE! I get 400% or a factor of 4 times $10.3 billion which is $41.7 billion which is less than the $49 billion.

That exceeds pre-Prop 13 levels of property tax revenue and considering the starting point was $4.9 billion, that is a 1,000% increase or a factor of 10.

But lets be conservative and say it was only a 475% increase over pre-Prop 13. :new_all_coholic:

Putting aside disagreement over the year of comparison the correct way to combine the percentages would be using multiplication, not addition, giving a factor of about 404% not 305%. So that would be 41.6 billion added to the 10.3 = 51.9 billion. Even with your numbers current revenue comes up short when calculated properly.

 

[Randolph Kinney]

Putting aside disagreement over the year of comparison the correct way to combine the percentages would be using multiplication, not addition, giving a factor of about 404% not 305%. So that would be 41.6 billion added to the 10.3 = 51.9 billion. Even with your numbers current revenue comes up short when calculated properly.

Take a course in algebra.

305% + 100% = 405%

405% x $10.3 billion = $41.7 billion = 305% x $10.3 billon + 100% x $10.3 billion = $10.3 billion x (305% + 100%) = 405% x $10.3 billion = $41.7 billion.

No matter how you slice that cheese, the number is $41.7 billion.

The quick way is 41.7 divided by 10.3 = 4.05 0r 405%.

 

[Workbox]

So who is ready for a key reversal? or do you believe a melt up is still possible?

 

[Couch Potato]

Take a course in algebra.

305% + 100% = 405%

405% x $10.3 billion = $41.7 billion = 305% x $10.3 billon + 100% x $10.3 billion = $10.3 billion x (305% + 100%) = 405% x $10.3 billion = $41.7 billion.

No matter how you slice that cheese, the number is $41.7 billion.

The quick way is 41.7 divided by 10.3 = 4.05 0r 405%.

I teach courses in algebra, but some students refuse to learn. Your 305% is a bogus number because you added percentages that came from different numbers. It's a basic violation of the order of operations. You simply can't do that in mathematics. If you combine the percentages properly (although it is a foolish way to approach the problem IMHO) the number for the increase is not 305% but 404%. Change the 405% percent in the calculation to 504% to get some semblance of a valid number.

 

[Couch Potato]

So who is ready for a key reversal? or do you believe a melt up is still possible?

A "melt up" is certainly possible because the dive to the bottom was a headline driven panic out of touch with reality. The markets are still adapting to the concept of a global economy and global corporations. The noise of the traders still blinds many investors.

 

[Randolph Kinney]

I teach courses in algebra, but some students refuse to learn. Your 305% is a bogus number because you added percentages that came from different numbers. It's a basic violation of the order of operations. You simply can't do that in mathematics. If you combine the percentages properly (although it is a foolish way to approach the problem IMHO) the number for the increase is not 305% but 404%. Change the 405% percent in the calculation to 504% to get some semblance of a valid number.

So you are asserting that you can't add two numbers together, as percentages, because they come from different sources?

How do you get 504%? Show your work, step by step.

My assertion is that if you start with population percent increase and add the percent increase for inflation, that should equal the same as starting with inflation and adding population.

What you are doing is calculating a rate of inflation and the rate for population increase, and adding them together. They are different rates so it won't make any sense to do that.

If you calculate the increase as percent of the base number, you can add then together.

Using the CPI calculator, which we know actually under estimates real inflation, the 10.3 billion of 1977 translates to 38.5 billion today so that is the figure with a stagnant population. However, the population increase over that time period was 13.6 million, or about 57.3% and accounting for that growth pushes the equivalent revenue to just over 60 billion.
Increase the current revenue by 20% and it still falls short of pre-prop13 levels. :new_all_coholic:

Lets take your number of 57.3% for population increase. I noticed you did not use or assert 157.3%. Why? You won't use 305% for inflation increase but you assert 405%.

So, lets take this step by step starting with $10.3 billion as the property tax revenue base or starting. Your inflation calculator says 10.3 starting 1978 ending 2011 yields 35.84. The rate of increase (35.84/10.3) = 3.48 or 348%. The percent change was (35.84 - 10.3)/10.3 = 35.84/10.3 - 10.3/10.3 = 3.48 - 1 = 2.48 or 248%.

Now lets look at population. 2010 census population was 37,253,956. 1980 census was 23,667,902. That difference is 13,586,504 but the percent change is (37,253,956 - 23,667,902)/23,667,902 = 0.574 or 57.4%. Is not that percent you quote? The rate of increase is 157.4% = 37,253,956 / 23,667,902.

So, using your math, we have 348% for inflation and 157% for population rates of increases. Add them? Multiple them? What?

Since the change is what it is all about, lets start with those.

inflation = (35.84 - 10.3)/10.3 in dollars
population = (37,253,956 - 23,667,902)/23,667,902 in people

Adding together

35.84/10.3 - 10.3/10.3 + 37,253,956/23,667,902 - 23,667,902/23,667,902 =
3.48 - 1 + 1.57 -1 = 5.05 - 2 = 3.05 or 305%

Now, go back and add 305% of the base number to the base $10.3 billion = (3.05x10.3) + 10.3 = $41.7 billion as the combined effect of population and inflation in the change in property tax revenue over that time period of 33 years.