Update - Stocks, etc

I've altered my stock positions slightly, by removing AEE (Ameren). AEE, like most utilities paying good dividends, are loaded with debt, so I think their dividends are too risky and will be under pressure to be cut. I've also added a small position in ADP (Automatic Data Processing). ADP, a solid company, has little debt and raises its dividend annually. Listed in order of largest to smallest holdings.

• KMB (Kimberly Clark)
  
• PEP (Pepsico)
  
• PG (Procter & Gamble)
  
• MMM (3M Corp)
  
• KO (Coca Cola)
  
• KFT (Kraft)
  
• BMY (Bristol Myers Squibb)
• ADP (Automatic Data Processing)

My major asset are CDs. I don't own a home, though I do think that is OK, as long as one doesn't go into much debt to do so. I have no debt at all, and never want any, though I do think some is OK for a home.

I also own US Treasuries, about 7% of my assets. Right now I own inflation protected ones (TIPS). The two I hold are...

• 2015's
  
• 2013's

I like them because they protect both against deflation and moderately against inflation (yielding about 3% annually for the 2015's, more if inflation picks up).

I also own some gold (coins), but it is only about 3% of my assets and use a safe deposit box to store it. Gold does not qualify as an investment, but I do think it is warranted as a small insurance policy on US currency.

Comment on the Economy - "2004"

If you want one year, more critical than most, where deregulation went amuck, it was 2004, when Henry Paulson, then CEO of Goldman was the main pusher, with the SEC approving, regulations were eased allowing non-bank financial institutions to use leverage above 15:1 to as much as 30:1 or so. So, then these megabanks moved much of their lending to the investment divisions of their banks to issue less capitalized loans.

There are more details which made these banks undercapitalized even more, like being allowed to use their cash (or even borrow) to buy back stock, reducing their capitalization, etc. Mark to market is another factor, though that part I think is necessary, but in this perfect storm it may need to be adjusted.

And, letting Paulson dole out TARP funds, when he was a key guy behind this whole mess, was just asking for trouble.

Nationalization may be the only option, because TARP money has been used to get preferred stock of the banks in exchange. All that effected was to essentially increase the banks' debt load. We probably should have been getting equity in exchange for the TARP funds, not preferred stock. So, nationalization, temporarily, at least gives taxpayers equity which sometime will be worth more, when the banks are turned private, likely smaller and with a better regulatory environment.

Comment on The Economy - "The Window", update

1) When did the window open, the window being a time when assets (hence a form of money supply) depreciated to the point where the government actually should increase the money supply and/or debt to stimulate the economy, without risking serious currency weakness or serious inflation?

2) How long will the window be open?

Housing began to depreciate the beginning of 2006, unemployment began increasing in the beginning of 2007, the Dow started its decline in the middle/toward the end of 2007, and finally oil/commodities in the middle of 2008.

So, I calculate the approximate time when the window opened being the middle of 2008.

I would look for the first sign of the window closing being when unemployment starts decreasing. At that point housing prices probably would have stopped going down and begun increasing.

Obviously, there could be some unexpected event or series of events, particularly of a geo-political nature, which closes the window, but there is a window and it has been open for about half a year.

The bottom line is the window opened around the middle of 2008 and shows no immediate risk of closing, at least for a few more months, but likely longer.

Also, I would add that if it is a choice between the government increasing the money supply (by buying Treasury bonds, notes, etc - monetizing our debt or just printing money) versus issuing more Treasuries, there is such a global demand for Treasuries which has driven yields down so much that the US should be issuing debt rather than buying back debt. So, with this "window", right now, the global markets want US debt to flow through it.