Rob Cheng’s Blog

Somewhere in the 80′s or perhaps the early 90′s, the American dream changed. The American dream became to own a house. Before that time, it had been about the future. I was raised to believe that if you were smart and worked hard, you could build a better future for yourself. Also, I have always wanted to believe that whatever future I could build, my children would have a brighter future than me. I no longer believe this.

Many of my friends and relatives childrens are becoming of age to go to college or enter the work force. It makes me sad because they do not have anywhere near the opportunities I had when leaving college. There were literally a line of companies that wanted to interview me. I was 20 years old flying throughout the entire country for free trying to select the best company for me. It made me feel great about myself and my future. Today’s college graduates are lucky to get a job at all much less get wined and dined by the most attractive companies in the country.

So how did we get here? How did such a bright future turn so bleak in the course of one generation? It has taken me a while but I have figured out the answer. It is the Fed. The Fed has ruined the future. Let me explain how.

The core of the issue is ZERO percent interest rates. What are interest rates? What does that mean? Interest rates are generally thought to be the time value of money. So therefore, if you want to borrow $100 today and interest rates are 10%, you must pay back $110 one year from now. More importantly, if you pay back in two years, you now owe $121. Basically, the longer you wait to pay, the more you owe which in general is not good.

How are interest rates determined? Interest rates historically have been considered a price between the supply and demand of money. Back in the gold old days, if a lot of people were saving money in their bank accounts, this would drive interest rates down. Conversely, if a lot of people wanted to borrow money, that would drive interest rates up. This entire equation has been broken in the last 10 years but one retard named Alan Greenspan who was the chairman of the Fed under Ronald Reagan, George H. Bush, Bill Clinton, and George W. Bush. More »

November 22nd, 2011 | Category: Financial Crisis, Politics | Leave a comment

I just finished watching the Republican debate the other night and frankly I am scared for my country just like the people at Occupy Wall Street. Here is my analysis on why all of us should be scared for the future of the country.

Barack Obama

To give the guy a break, the entire financial crisis began before he was elected to office. But on the other hand, he had ample time to think through his plan to fix the economy. He also knew that if he didn’t, that he would not be reelected. He ran on a platform of hope and change. He has delivered neither. He has trusted the same people that have gotten us into this financial mess, and we are still in two wars that defy logic. He won the Nobel Prize despite the fact that he continues to drop drone bombs on innocent people. Most of the time now, he spends his time whining about the Republicans being obstinate. Like he just figured that out yesterday.

Still today, Obama has the most powerful job in the entire world. Worse yet, Obama had the country and the entire world at his feet. No president during my life time had such popularity at home and throughout the world. He had both houses of Congress and extraordinary public support. It is now lost, and he used none of that political capital for any good. It is such a damn shame because the potential was there for Obama to be a great president. We all can agree is that he has fallen far short of the potential.

The Republicans whine (that’s what they do), that Obama has transformed the country into a socialist elite state. Nothing could be further from the truth. Obama in reality hasn’t got jack shit done during his term as president. If you throw out the death of Osama Bin Laden, then you really don’t have jack. His health care bill is really weak and does little to fix a severely broken health care industry. The Dodd Frank financial reform is inadequate to even make a small dent into the reckless behaviour of our massive blood sucking financial industry.

At the end of the day, I believe that Obama’s chances of getting reelected are poor because his record is so bad. So it was my hope that there is an intelligent person in the Republican field. I looked hard but I really can’t find one. Here’s my analysis of the rest of the field. More »

October 13th, 2011 | Category: Financial Crisis, Politics | Leave a comment

I have traveled outside of the United States my entire life. Every passport that I have ever had, has required additional pages for entry stamps and visas. I have also lived twice outside in the United States. First I lived in Dublin, Ireland in 1997, and then I moved to Rio de Janeiro, Brazil in 2003. As I have traveled throughout the world, I meet with many other world travelers and all of us agree. The dollar has gone in the toilet.

When I was in Ireland in 1997, the dollar was the envy of the world. That was back before the Euro, but the dollar was significantly stronger than the Irish pound and the British sterling. As I recall, it was like 1.4 British sterling to the dollar, and 1.3 Irish pounds to the dollar.

Better yet, when I purchased my apartment in Rio de Janeiro, the dollar was close to 3 Brazilian reals to the dollar. It is a great great feeling when you are the owner of such a strong currency. When you travel internationally, everything seems cheaper. It made me feel very proud to be an American and all that it means.

But now, in such a short period of time, the dollar has gone from being the envy of the world to one of the weakest. To be clear, the dollar is now a lot weaker than the British Pound and the Euro. More importantly to me personally, the dollar has fallen close to 50% against the Brazilian real in the last 8 years.

The root of this problem is one and only one thing. The Federal Reserve. Just to be clear, the Federal Reserve is total bullshit because it is not federal nor is it reserve. It was invented in 1913, and given its name to give it an air of importance but let’s be clear. The Federal Reserve controls the American money supply and the dollar, but it has no direct reporting back to the federal government. Furthermore, they hold no reserves. In the past twenty years, there have been two retards running the Fed, Alan Greenspan and Ben Bernanke. In that time, they have managed to ruin the country and destroy the dollar.

More »

June 20th, 2011 | Category: Financial Crisis, Politics | Comments (1)

I watched Obama’s speech last week and frankly I was disappointed. It was a nice speech, but in my view, Obama missed the key issue that will fix our economy from a death spiral. That issue is Wall Street.

We all agree that Wall Street and the Fed are the underlying reason behind the greatest economic depression since the Great Depression. BTW. Why do people call our current crisis the worst since the Great Depression? They have been calling it that for years at this point. The Great Depression is over and it was bad. Our current crisis is not over, and so therefore, we cannot compare one against the other.

Back to Wall Street. So these guys are making record profits. They are making money hand over fist during this economic crisis. While unemployment remains high and the rest of America suffers, these guys are raking it in. Why is that? I think I know. More »

January 31st, 2011 | Category: Financial Crisis, Politics | Comments (2)

There is certainly no easy way to put it. You got your ass kicked in the mid term elections. Well, I got some good news now. As I already told you in 2008, your presidency is going to be about the economy. You did not choose these circumstances, but they are yours to manage. You did not make the economy your #1 priority. It is not clear that it was even your second priority. From the looks of your first two years, I would say that your first two priorities were health care and the war in Afghanistan. Whether I am right or wrong, jobs were certainly not your first priority.

On top of that, you trusted the wrong people. There is no dispute by anyone that Wall Street is the reason behind this economic crisis. Yet you continue to listen to them almost exclusively and unemployment still hangs at 10% even with interest rates stuck at 0% for the foreseeable future. You guys sit around now that interest rates are at a floor and figure out how to “stimulate” the economy. They call it quantitative easing and I call it bullshit. There is a saying that if all you have is a hammer, then every problem looks like a nail. If all you trust is Wall Street, then all you are going to get is the Fed printing more money and deficit spending. On the surface, I agree that borrowing money from the Chinese creates American jobs, but at what expense? Let’s just say that you have made a mess of it. It’s not too late, but you have to first realize that it is a mess and you’ve made it worse in your 2 years. You didn’t create it all, not even close, but it is your role to fix it, not make it worse. More »

November 7th, 2010 | Category: Financial Crisis, Politics | Leave a comment

Since the financial crisis began in earnest in September 2008, I have read 10 books on the subject. Additionally, I got my MBA in finance from the University of Texas. After a lot of thought and a lot of pondering, I am going to put together my analysis of the center of our nation’s economic woes, Wall Street.

Confidence

The financial industry is sort of a con game. Although Bernie Madoff is the poster child for malfeasance, the entire financial industry’s business model is not all that different than Madoff’s Ponzi scheme. The financial industry is 100% a confidence game. Back in the early days, in fact, banks used to routinely put the word “trust” in their titles because that’s what they were selling. Still today, banks place themselves in fancy buildings with flashy signs, and big sturdy vaults all to give the illusion of stability. This trust is the essence of the banking industry, and without it, it could not exist.

What are we trusting? We are trusting the fact that if we give the bank our money, that when we want it, they will give it to us. Pure and simple. Now, once they have our money, they immediately go and burn that money. In today’s world, they don’t want our money to be idle, so it is spent in some way. It may go out as a small business loan, or your banker might build himself the nicest house in the neighborhood, but either way, the money is spent. So in essence, your money is gone. Their only hope is that when you actually want your money back, that some other guy is depositing money at the same time. Then and only then will you get your money back. More »

October 10th, 2010 | Category: Financial Crisis | Comments (1)

I have now lived in Brazil for close to 7 years. I have married a Brazilian woman, and I have two children, one which was born in Rio de Janeiro. So I am very embedded in Brazil, but I believe that I can state in an unbiased manner why I believe that Brazil is set to become an economic super power. When I look at the facts, it is a stark and scary difference to compare the fundamentals of the American economy with that of Brazil.

1. No wars or enemies

Only 25 years ago, Brazil was a military dictatorship. But since that time, Brazil has avoided military conflict. This of course is in stark contrast to the United States, where we manufacture reasons to go to war (weapons of mass destruction).

2. Made in Brazil

By and large, Brazil’s trade policy has been protectionist. Still today, many conveniences of American modern life are either non existent or very expensive. One area where they could improve greatly is in technology such as computers. Computers are still very expensive in Brazil and hence internet adoption and basic computing skills lag behind other developed nations. That said, the upshot of this policy is that Brazil produces almost everything it consumes. A great example are cars. Cars are affordable in Brazil, and I would say that 90% of the automobiles in Brazil are made in Brazil.

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March 22nd, 2010 | Category: Brazil, Financial Crisis | Comments (9)

14 months ago the American economic bubble burst bringing about the worst recession since the Great Depression. Since that time, in the age of internet enlightenment, we have all watched as the Fed has done everything in is power to re-inflate the bubble. It is a very weird time in the history of our country and I hope I can bust a few myths related to our economic bubble.

Our economy is not improving

They are quick to rush out any sign that the economy is improving because GDP is on the rise. The best measure of the strength of our economy is not GDP; it’s employment. No matter how you cut it, the unemployment numbers continue to grow. Plus if you add in the people that were searching for a job and have given up, the picture looks even worse.

Although the Fed and the government would like us to believe that things are improving, it is a hard pill to swallow as long as unemployment continues to rise. If one takes into account, all of the illegal aliens and transient workers that have left since the economy imploded, the employment picture looks abysmal.

The Stock Market is not a proxy for the economy

The Dow has hit over 10,000 and is up to over 30% from its lows a little over a year ago. Wow! That is great growth. The problem is that in times such as these, there is little or no relation to stock market performance and that of our economy. More »

November 29th, 2009 | Category: Financial Crisis | Leave a comment

About two weeks ago, one of my brokers called and told me that it was time to get back in the market. I laughed at him. I reminded him that I got out of the market entirely in May 2008, and now that events have unfolded, I had little faith in our financial system. But he kept on pushing and pushing, and of course, we were going nowhere, because in my view the downsides far outweigh the upsides. Here are the top reasons why I will never listen to another stockbroker ever again.

Stockbrokers advise you when and what to buy not when to sell. That was what my broker was doing two weeks ago. He wanted me to buy again. That’s my issue, in all of my years of investing, I have never had a broker call me and tell me to sell. Never. More »

June 14th, 2009 | Category: Financial Crisis | Leave a comment