Monday, October 5, 2009

Monday Mixed Bag

I arrived home from work a bit late tonight so I will go over a bunch of random items I came across today that were interesting in one way or another.

It Had to Happen
If you live long enough, you may well see everything eventually. It seems it was always a matter of time until this became real:
Animals with Lightsabers
Sample Picture:

Too funny!

Metal Market Manipulation
Now before you think you know which metal this post is about, it is not gold or silver!

Moving on, I caught this story today via Naked Capitalism:
The mystery investor who is turning the tin market on its head
A single investor – thought to be a hedge fund – is sitting on thousands of tonnes of tin in warehouses across London. According to traders almost the entire stocks of tin on the London Metals Exchange (LME) was bought up by a single, mysterious investor, last week.
One fund has warrants for more than 90pc of all physical tin stocks because the market rules dictate that above this threshold, the buyer must lend out the commodity, if asked, at the cash price with no premium.
Industrial buyers are furious that they are paying up to $730 per tonne for immediate delivery more than it would cost them to buy three-month futures contracts, arguing this stranglehold on the market should not be allowed to happen.
This story is very interesting. I have zero understanding of the tin market, but the buyer here is really gambling on higher tin prices and/or that they are not forced out of this position. I will try and keep an eye on this one.

Thoughtful Missives
A trio of top flight writings this evening.

Mish Shedlock pokes fun at those that are afraid deflation may happen, because it is indeed going on right now!
Deflation Threat? What Deflation Threat?
If you missed the authors write up on how the CPI component of rents is from outer space, he recounts it here as well.

I came across this Gregor Macdonald essay via Clusterstock. I am surprised I had not stumbled onto his writings before now:
The Alignment of Asset Reflation and a Collapsed Economy
You can think of the US economy as a kind of defunct amusement park, over which the FED has poured trillions of dollars of syrupy goo. The caramel candy is there for tasting, but it doesn’t turn the machines back on. The ferris wheel is silent. Since WW2, Washington has always been able to call upon Housing and Autos as the two areas to stimulate, to pull the country out of recessions. Of course, we just did that in super-sized fashion 6-7 years ago, to extract ourselves from the last recession. So, it’s kind of sad to see policy makers trying this again. Failed thinkers promote failed playbooks.

Zero Hedge poster George Washington had this nugget of information up today that is well worth a look:
The Largest U.S. Banks Have Repeatedly Gone Bankrupt Due to Wild Speculation, and the Fed Blessed the Speculation and then Helped Cover Up Their Bankruptcies
With a title like that you really should not need prodding to check it out!

Looking for the Next Bubble
Two pictures that summarize my feelings on the US economy:
Clusterstock Chart of the Day

Coupled with this:

I understand the argument that all those excess reserves are not entering the money system. That is of course true. One line of thought is that banks are going to use those reserves to write off losses. That is absurd, no more writedowns are forthcoming from the banks on bad assets.

I think that the banks are looking for a story that will sell. They are always seeking the next bubble, like Sauron was constantly seeking the One Ring. So far we have seen a 50% move up in the stock indices, but this has not really captured the imaginations of the general populace. What we need is a full blown asset bubble that everyone can get into. The FED/Treasury/Banking system would prefer a fast reflation of both real estate bubbles (residential and commercial) as this is what is killing them right now.

For this to happen, you need a good story. 10% unemployment does not help. A stubborn consumer that actually would like to save maybe 3% of their income is a problem indeed.

I look at all the money running loose right now and I am actually shocked it has not caused an issue yet. Yet.

At some point some braniac with a dry erase board is going to come up with an idea to use massive leverage and relaxed lending standards to ignite some kind of boom. As long as it has a believable storyline it surely has all the ammo it needs to get going. Many say that the US does not manufacture anything anymore, but we do. We proudly build bubbles, and have done so since 1987 and exported them across the globe. You are welcome. Please buy our debt while you are at it.

Have a good night.


getyourselfconnected said...

Move along, nothing to see here:

If the dollar is scrapped, how do we fund deficits?

getyourselfconnected said...
This comment has been removed by the author.
watchtower said...

KD had some interesting thoughts today:

Mish "Hard Money" Goes Off The Rails

"Mish and others like him are wrong because they have their premise incorrect. This incorrect base premise leads to shrill calls for that which will not work (hard currency) and in fact has a thousand-year plus history of not working to stop depressions and other serious economic imbalances."

Reality Strikes In Retail?

"Remember, this is the time when Christmas goods are on the way. You can't order something from China, have it produced, and then have it sent in a ship in a week. Uh uh. Those goods have been ordered now, they are in the pipeline for delivery now, or they're not coming.

They're not coming.

Flat to down 1% is insanely optimistic folks."

The Market Ticker link is to the side.

getyourselfconnected said...

I am staying way away from any Mish/KD fracas!