Tuesday, August 13, 2013

355% interest, HYPErloop and Fed Truth or Dare?

NYS filed suit today against a shady South Dakota lender for charging interest on their short-term loans that reached up to 355%.  Western Skye's TV commercials are all over late night television and if you don't have the ability to pause commercials you may have missed this key part of their disclaimer " "The APR for a typical loan of $10,000 is 89.68%, with 84 monthly payments of $743.99." 

Just think about that for a moment:  Borrow $10k today and you'll have to repay roughly $9k in year 1 and then $744/month, EVERY MONTH for the next 6 YEARS!!

"In a statement obtained by Bloomberg, the company insisted that as a Native American-owned company, it's subject only to the laws and jurisdiction of its tribe."
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Do you believe the hype?

Yesterday Elon Musk revealed his concept for the hyperloop transport system that would run from San Francisco to LA in 30 minutes.  Despite all of the publicity surrounding this story, I'll reiterate that this is a 40 year old idea - a magnetic levitation train in a vacuum tube was first proposed in 1970.  

For those that don't know Mr. Musk he was a founder at Paypal (a nice company), Tesla (probably the hottest stock around), SpaceX (commercial space exploration) and solarcity (solar projects) so he has a bit of a track record with new concepts.  His claim is that this project would take too much time and effort for him to bring it to fruition so he merely presented the concept in the hopes that someone else may develop it.

I am a big believer in discussing new technologies but this seems like a lot of effort to solve a problem that doesn't really exist.  Currently, flight times from SF to LA are 1 hr 20 minutes and costs about $130.  Yeah, you have to go to airport an hour early for security etc, but does Mr. Musk really think the US Dept of Homeland Security would let people board a mag lev train doing 700 mph in a vacuum without going through security?  If you really want to speed up the travel among cities, expand the TSA Pre program then you could arrive 15 minutes before your flight and still get on your plane.  Unfortunately, this plan doesn't have the sex appeal of mag lev trains and vacuum tubes, but it seems a bit more plausible and would result in travel times that are only slightly longer than Mr. Musk's HYPErloop.

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This is a little hard to believe but bear with me.  

 The US Treasury Department issued a quarterly update and it included a couple of slides I never thought I'd see.  It's almost as if the report was written to be an internal document and someone forgot to change the slide titles before releasing it to the public.

On one particular slide they note the impact of Fed purchases on the stock market ---
This chart might be a little hard to understand so let's walk through it.  It says there have been 159 weeks (roughly 3 yrs) where the Fed has purchased over $5 billion in debt.  During those weeks the S&P 500 is up 570 pts.  During weeks with smaller purchases (under $5 billion) the S&P still managed a 141 point gain.  However, the real key indicator are the 29 weeks when their were no purchases and the S&P 500 actually lost 51pts.  

Keep in mind that at this moment the only debate inside the Fed is when to begin scaling back purchases - September, October, or December.  If purchases end and the economy slows I wonder what that might mean for stocks? #sarcasmoff.

Cheers!

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