Fubarrio Expat Trader

As some of you may know, Paulson, formerly the head of Goldman Sachs was named Treasury Secretary this summer.

FuBarrio stupdily bet that gasoline wouldn’t go down by as much as it did.

FuBarrio found this posting online. FuBarrio likes to think he was “snookered”, rather than just admitting to being stupid. So, this explanation fits his world view of why he lost his ass(ets) on bets that gasoline prices wouldn’t tank:

As most of you folks who drive a car are more than aware, over the past six weeks we’ve all been on the receiving end of welcome reprieve in the price of gas at the pumps. In fact, a good many commodity prices have moderated somewhat over the course of the summer. While I “welcome” cheaper gas just as much as the next guy, I also like to get my head around the reason[s] for precipitous price movements – particularly in prices of commodities that have such a profound influence in my life. After all, it’s often said that knowledge is empowering, isn’t it?

Well, if you happen to be a “Commodities Bull” – last week [Thursday, September 21, 2006] the Wall Street Journal ran an inauspicious article in “Section C” titled, Some Investors Lose Their Zest For Commodities. With the article being “buried” in Section C and the fact that the newsy bit received zero TV time – I wouldn’t be at all surprised if you all missed it.

One person who did not “miss it” was Bill King – he of the King Report fame. Not only did Mr. King “not miss it,” he quickly understood the implications of the content of the article, namely that, Goldman Sachs [on July 12] tweaked the composition of their “benchmark” Goldman Sachs Commodity Index [GSCI].

Not A Big Deal, Right? For those of you who might figure a little “tweaking” of an index is not such a big thing, you might want to consider this; “The Pimco fund has a rival in Oppenheimer Real Asset Fund (QRAAX), which doesn’t use commodity swaps and is therefore unaffected by the SEC ruling. It tracks the Goldman Sachs Commodity Index, which is much more volatile than Pimco’s benchmark.” Or this, “It is public knowledge that PGGM and ABP, two of the largest pension funds in the world, are benchmarked to commodities via a passive allocation to the Goldman Sachs Commodity Index, with ABP between 2-4% and PGGM 4%. Since ABP manages $155bn and PGGM $50bn,….” So let’s just say “a little tweak” in the composition of the much watched and followed Goldman Sachs Commodity Index can [and does] have a profound influence on the composition of funds and institutional money that is tracking it.

The Tweak… So here is what Goldman Sachs did to the GSCI, Prior to Goldman’s revision of the Goldman Sachs Commodity Index in July, unleaded gas accounted for 8.45% (dollar weighting) of the GSCI. Now unleaded gas is only 2.30%.

So What’s Wrong With This? As Bill King points out, “Goldman’s changes probably induced arbs, commercial hedgers, and other traders to sell September and October unleaded gasoline future contracts to avoid possible (settlement, delivery, etc.) problems. September futures expired in August; October contracts expire September 29. So unleaded gasoline prices collapsed in August and September.” I would like to “restate” what Mr. King said: What this means folks, is that hedge funds and institutional money that “TRACKS THE INDEX” were FORCED TO SELL 75% of their gasoline futures to conform with the reconstituted GSCI.

And if anyone hasn’t noticed the timing of the price of the gasoline price collapse…just in time for November’s Mid Term Elections! So don’t be fooled into believing that potential energy shortages have “magically been solved.” In all likelihood – much of the recent decline in the price of gasoline we have all “welcomed” has been the result of paper tricks being played on what amounts to a wealthy flock of sheep. But in the meantime, filler up! Rob Kirby, Sept. 25, 2006

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This just in : housing is finally going down in the US!

Seriously, I thought this was the oldest story on the planet. But after talking to a few people who live in areas where housing price changes have traditionally been more moderate, I found some people who didn’t realize this was happening….or worse, figured it wouldn’t happen in their neck of the woods…..

While plenty of well known and respected economists debate the degree of the slowdown, I think it will be a very difficult time for either home values or the dollar or both- everywhere.

Why?

Because the seeds of this bubble — ridiculously loose credit standards, coupled with low interest rates — are not regional phenomenae. Both are/were national, if not worldwide, drivers, meaning too much debt was chasing too few goods.

NATIONWIDE, median home prices have gotten WAY AHEAD of incomes. The median home in the US is selling at 3.7X the median US income. In some “hotter” areas, it’s much, much higher. The historical average is 2.8X the median income.

(note: –if you are thinking about buying, waiting for the price drop to move in DO NOT BUY until the median price to median income is AT LEAST back to the historical average in your area. The reality is, the price will probably “overshoot” on the way down. Don’t try to catch a falling chainsaw….while it is still running….while blindfolded…..between your legs!!! )

Why is 2.8X the historical standard? Well, much beyond 3X and a reasonable person would start to doubt the borrowers ability to repay the loan. However, as many of you know, the banks have gotten more and more creative with their financial engineering in an attempt to keep the ponzi scheme alive. While enumerating the multitude of products that allow buyers to lower their monthly and down payments would be interesting, the biggest reason has been the “securitization” of the loans. By “securitizing” the loan, they sell the debt to someone else, take down a HEFTY fee for doing the paperwork, and move on….

If you don’t have to worry about being repaid personally (or your company) it all becomes a giant game/puzzle for the loan broker to figure out how to get you to qualify for the loan to get you into the house of your nightmares. Here is an interesting story out of the bay area, as the media is FINALLY starting to report on this.

http://cbs5.com/30minutes/local_story_266005029.html

Unfortunately, the ramifications will not be felt only by those participating/benefitting from “liars loans”. Undoubtedly, the backlash will mean *overly restrictive lending practices*.

Newly self-employed will probably not have “stated income” loans as an option in the future.
Comps will crash for newly purchased homes once bkruptcies, foreclosures, and short-sales begin. A family needing to move for work or another valid reason will be stuck upside down in a loan valued more than their house.
Empty, or half-finished housing developments will forever scar the neighborhoods of people who were responsible with their debt, and the housing debacle will have ramifications unforeseen to this point.

In the end, perhaps we shouldn’t worry:

-perhaps these are the ravings of another chicken little
-perhaps people will abandon living outside of their means, relinquish the McMansion in favor of something that doesn’t take as many resources to maintain, OR start living in their McMansions with a larger portion of their extended family or families. That would probably be good for the social fabric, imo…although it would certainly create “new” stresses people are unfamiliar with.
-perhaps, sane lending practices will return without a gross overadjustment, which could make it difficult for some deserving people to get credit.
-perhaps the dollar will just adjust downward gradually, letting debt ridden citizens, and the govt, pay back its bloated debt with cheaper paper.

In the end, however, probably just more of the same….
-”woe’s me”, innocents, taken in by greedy corrupt system in the press.
- lawyers filing class actions against everyone (and their mother).
- politicians cracking down with an overly heavy hand after much grandstanding and chest thumping. government bailouts for everyone with tax monies collected from those that were actually responsible.
- carpetbaggers (realtors and mortgage brokers) moving on to the next bubble-de-jour.

What will it be? precious metals? bullets? bottled water? fed printing presses?….or tickets to South America?

ciao for now,
fB

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Nothing seems more “American” than a crisp fall air and a game of pickup football. These “Americans” would agree…

Of course, to be technically correct, they are South Americans, the game is “futbol” (soccer) and I guess it’s crisp Spring air this time of year.

I got invited to go play some futbol with some Uruguayos. I was so amped to join in on the national passtime I managed to supress my horror at hearing the game would begin at 7. I was incredibly relieved later to find out that the game was actually being played at 7 PM…not AM as I had feared.

I was further relieved to hear that it would be played on a miniaturized version of a field (less running!) and the game would only last an hour vs. the more typical 1.5 hours….

As it turns out, i was being invited to participate in a game of “cincos” — five on five — often played (as in this case) on rugged aritificial turf with miniaturized goals and a mini-field. Although I’d never played “cincos” a friend had told me just a week before that he was constructing a “cincos” field in Costa Rica complete with walls, roof (for weather I imagine), lights, etc. Apparently, it’s all the rage. As you might imagine, it’s easier to get together 10 people to play, than the traditional 22, and people pay to ‘rent’ the fields by the hour.

I blame my ignorance of cincos to the fact that I haven’t played soccer in YEARS, and to the fact that the US just isn’t as “into” the sport as they are south of the border (and elsewhere).

When we arrived at the field, from the condition of the “turf” it was clear that it was getting a LOT of use, and it had likely been in use for some number of years. The “turf” wasn’t astroturf, but basically, that green plastic fake grass crap that people put on their patios(or used in bad Easter displays in stores) in the 70’s glued to the concrete subfloor…..slide tackles are a no-no, and falling down is discouraged as my still noticeable limp (days after) will attest.

This field had neither roof, nor walls, but lights. The fields are down by the water — which is probably a nice feature on a warmer night. That night, my lungs were no match for the cold air. Luckily, we took turns playing “keeper” and right about the time I was about to pass out and take a “header” into the plastic turf it was my turn in goal.

It is a really good way to meet a bunch of locals, and even better if you have any kind of fitness or ball skills. All in all, it was a ton of fun, and I fully intend on trying to get in shape and “represent” for the US on the off chance I’m “reinvited” — as soon as I can walk again.

peace,
fuBarrio

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Shortly after arriving in Montevideo, FuBarrio came down with a brief cold, and a few weeks later, even Golden Lotus was suffering from flu-like symptoms.

The reason this is worth noting is that because of FuBarrio’s hermit like tendencies, gruff exterior, scowling demeanor, pessimism, crumudgeon-ism, third person self-referencing tirades, and general dislikaility usually keep him well insulated from from the populace at large, and by extention, communicable disesases.

(side note: Of course, the sad tragedy in all of this is that FuBarrio’s Uni-Bomberesque facade is merely a defensive mask….All those who have actually gotten to know FuBarrio (both of you) realize that deep down FuBarrio craves the respect, admiration, idoliz — uh, i mean, admiration of his fellow man.)

However, FuBarrio was attempting to turn over a new leaf in his new home. He promised to leave the house more than once every 8 weeks, and to try to adopt some of the local customs. While some of the local customs, like enjoying 3 hour italian lunches laden with nice argentine and uruguayan reds were easy to come by, others were a little more difficult to get used to.

I know, you’re thinking, “what in the world could FuBarrio not adjust to? After all, he has already cut back to no more than three twinkies per day, and has only broken that self imposed limit twice since last week….both times during very volatile days in the market! He’s a obviously a veritable chameleon.”

It’s the kissing.

Uruguayans, and I imagine Argentines, when greating each other (even people you don’t know but are meeting for the first time) kiss each other cheek to cheek. FuBarrio, sensing his personal space being invaded, immediately grew his beard out to Grizzly Adams-esque proportions…..to no avail. These Montevideans are very dedicated to their customs! Neither a beard that would make ZZ top jealous, nor a bathing frequency not seen since 15th century France, seemed to make any difference. Never once did anyone shy away from the obligatory kiss (?!?!)

OK…not a real kiss, but a cheek to cheek “air kiss” a la Hollywood….except only on one side, and not just with fellow star-lettes. Basically, everyone does this. Girls are expected to “kiss” everyone — with both other girls and guys. And, with some of the younger generation, guys kiss guys….yikes!

Guys my age apparently, can just get away with kissing the females. When meeting ones real estate agent, when meeting her assistants, when meeting, greeting or saying goodbye to ones cleaning lady, neighbors, waitresses u get to know, the woman who sold me dsl when i went in to sign the contract, all constitute obvious times to exchange a kiss apparently.

So….did all this kissing contribute to our illnesses??? Have Uruguayos’ frequent cheek to cheek interludes increased the countrymen’s resistance to communicable diseases??? FuBarrio cannot be sure without more medical evidence.

All this aside however, FuBarrio has found a much more awkward problem associated with all this kissing. Not known for social graces, he has been trying to look suave while kissing total strangers at times…..(remember FuBarrio secretly wants to be loved). However, when kissing a stranger, where does one put their hands????

In FuBarrio’s very limited North American experience, if you’re going to try to kiss someone — even an air kiss Zsa Zsa style — you’re probably going to be hugging them first — or just done hugging them….viola…awkward hand problem solved!

Au contrair (to keep with the frenchy theme)…Apparently, that would be a lot more forward of an approach in Uruguay — and one best not attempted with the woman who just had you sign your dsl contract — who’s to know?

Seriously though, what exactly to do with the hands??? I found them falling awkwardly around the waist of women 30 years my senior……oh….my hand didn’t slip and touch her butt did it???

OK…here’s the skinny…which i’m sure has seemed perfectly obvious to all of you more cosmopolitan readers….I think I’ve figured it out:

Reach out with right hand, palm down and cup their right hand….not exactly like a shake….but, with fingers looked. Next, pull them toward you….if necessary, it’s a nice touch to cup under the “shake” with your left hand, but remember….you’re not really shaking in the North American sense of the word….just steadying yourself and drawing a vector on that space about 1/4 to the outside of this stranger’s right cheek.

Next, move in, always to the left, usually without actually touching them and do a Hollywood “air kiss”….. and remember, unlike Costa Rica, and other locales u might be familiar with, only on one side here. After all, kissing guy friends on BOTH cheeks would be kinda gay!

ciao, xxx’s, no ooo’s (or did i get that backward?)
fB

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FuBarrio’s mood has lightened considerably the last week.

His once deeply furrowed brow has lightened to a mildly-pleasant arch….The sun is shining, birds are chirping, glorious spring is in the air. Unleaded is under 2.50 a gallon, and with any luck, in the near future mere mortals may consider international travel as a possibility without first leveraging another HELOC outa the ol’ homestead.

However, all this pales in comparison to the profound importance of the return of the almighty “bread and circuses”TM (twinkies and cable t.v.)

OK…Well, to be honest, we still have neither here in Montevideo. However, GL made a brilliant find called ‘medialunas’ or “half-moons” to the linguistically challenged. These are basically croissants (uh…is that spelled right?) but SOFT and with honey drizzled over the top….almost “spongecake” like in texture…you see where I’m going with this right?

In addition, I was able to listen to a radio broadcast of my Huskies’ 2nd half collapse against the Sooners, AND I was able to watch ‘Survivor’ online (damn that show is stoopid — why do i enjoy it so much?)

If I watch Survivor at the same time as eating a medialuna I almost don’t even notice that they are missing the artificial whipped sugar-oil filling and assorted preservatives that keep the mental accuities of fuBarrio well lubricated while state-side.

Of course, all of this romantic opulence may have unintended side effects; like, bringing down an empire, and/or referring to oneself in the third person whilst enjoying serious waves of meglomania — All in all, totally worth it!

Hail Caesar!…er, I mean “four more years!!!”
fuBarrio

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The street we live on is relatively “busy” — it is divided by a median in the front, and it is one of the main arterials for moving about Montevideo.

We aren’t on the water, nor do we have a view. However, I noticed while on the upper terrace (aka roof), that we have what US RE agents would describe as a “peek-a-boo” view of the water — I can almost read the sales writeup now! (if you still don’t see it look to the right of the tip of the red chimney)

Golden Lotus captured the shot below outside of a corner market. This is *very* common for the local corner store (very very small stores) to have fresh fruits and vegetables. Jeez…at a state-side 7-11, which averages about 3 times the size, you’re lucky if you can find orange fanta for a fruit, and relish for your hotdog to make up your “veggie group”. I guess they need all that floor space for the “hostess” aisle.

The ease (acceptability) of walking and the “euro” diet really seem to show up in the waistlines down here. There just aren’t as many heavy-set people. I know, you’re thinking “you mean diet and exercise play a role???”. I guess my point is, it’s not difficult to do here. It’s just a natural part of the lifestyle. It’s not some conscious (difficult) thing you have to do everyday. It just happens.

The guy with the horse is doing garbage collection. While I’ve seen some big trucks empting dumpsters, a majority of all the garbage collection is done daily by what seems like a large “fleet” of working horses.

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Confucious, from Rodo Park, looking out over the “rambla” in Montevideo

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storm shutters half-drawn on one of our back windows

Good News, everyone….Golden Lotus has informed me that our home is “zombie proof”. Uh….those of you that know Golden Lotus well know that she was being as serious as someone can be when announcing such a feature.

Aside from having a heavy front door, living in a second floor flat, and possessing a flat roof with no exterior access (good for standing on top of and watching the masses of flesh eating undead staggering and limping through the streets of Montevideo I suppose) we have *storm shutters*.
Storm shutters seem to be a common feature of a lot of homes in Montevideo and are controlled by a pulley system inside the house. Lots of people pull them down at night. I like them because they help me sleep in a bit (until the neighbors noisily draw their’s up each morning at 8ish). In addition, I have the fantasy that the storm shuttters help keep some heat in the house at night.

So, not to brag or anything, but ON TOP of being relatively safe from northern hemispherical thermo-nuclear war and the resulting fallout — now I find out that we are “zombie proof”. I bet you’re all green with envy.

PEACE,
fuBarrio

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Ok. Golden Lotus is feeling a bit under the weather lately. I don’t have too long to write, but I wanted to post some of the snap-shots we took in Montevideo.

I’ll put some more “color” on these photos later, but for now, keep in mind that I wasn’t really doing a good job of “chronicaling” things here because I was running out of space. The camera became my digital “notepad” and a lot of the shots are of “for rent” signs with phone numbers on them

In short, until I have more time to put some color on the photos, the sidewalk is outside our home. The animals, for the most part are from the fair, the trashed buildings are mostly in Ciudad vieja — the side u usually don’t get to see. and, the horse drawn garbage collection cart is in ciudad vieja or “centro” but you could see these anywhere in town.

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