Monday, November 30, 2009

Ben Bernanke: "I Am So Smart, S-M-R-T"

I cannot pretend that my mind is not almost 100% on the big Monday Night game! A couple of items and then some football talk.

Ben Bernanke: "I Am So Smart, S-M-R-T"
When Ben Bernanke is out in force writing opinion items for the Washington Post, you know he has been spooked by all the "Audit the FED" talk! Gee Ben, over 10% of America is unemployed and they do not get front page treatment in the Post, maybe you can join the ranks of the jobless and see how the other half lives!

My reaction to Ben's missive was one of awe. I was in awe the man had the gall to basically say the FED knows all and any talk otherwise is dumb. He has guts, I give him that. I was reminded of this classic Simpson's scene:

"I am so Smart, S-M-R-T!"

I could savage Bernanke's article, but Mish and Naked Capitalism have already done such nice jobs I think I will let them run with it.

Ben Bernanke Pleads for His Job; My Response to Bernanke

Naked Capitalism:
Bernanke Tries to Defend the FED

Insolvency: It's What's for Dinner
Found a great post over at Sudden Debt that covers a key point:
Insolvency vs, Illiquidity
You should read the whole thing, but the summation sentence is as sharp as they come:
"Dealing with insolvency will require far greater political resolve and much different skills than merely lowering rates and opening credit facilities to all comers."
As in no need for another Bernanke term please!

New England Patriots at New Orleans Saints Monday Night Football
Big game this evening, and I am very excited. Economic Disconnect LOVES NFL football and his two most beloved teams are the Patriots and the Saints. How does a born and raised New Englander come to love the Saints? Well, it was not that hard!

I never watched football, except for the Superbowl, until high school. After a long summer of pick up tackle football games I was hooked. I started off watching the NFL my sophomore year in high school and I was mesmerized by the New Orleans defense of that time. The Saints had the "dome patrol" which consisted of maybe the greatest set of 4 linebackers ever to play on the same team:
OLB Ricky Jackson
OLB Pat Swilling
MLB Sam Mills
MLB Vaughan Johnson

The Saints played an aggressive slant of the 46 defense and they were amazing. They became my favorite team at that time and have remained so only recently sharing the top spot with the Patriots.

When Bob Kraft came into New England and turned around a franchise that was a mess for some time, my loyalty was finally won over by the home team. Bill Parcells brought a winning attitude to the Patriots, and when Bill Belichick took over things became amazing fast! That first Super Bowl win against the Rams was just shocking.

So, about tonights game.....

What is funny is this game is not huge in the overall picture of things. The Saints may want to stay ahead of the Vikings for the NFC home field advantage. The Patriots have room to breathe after another Dolphins loss. Still, you know everyone wants to win on Monday night!

Three Reasons the Saints will Win:
1-The Colts opened up the Patriots secondary with their passing game, and the Saints passing attack is even better. Add to this that the Saints can run the football (the Colts cannot) and it is not hard to see some eye popping point totals for New Orleans.
2-The Patriots have had terrible second halfs this year so should the Saints trail, they will know they can come back.
3-The Superdome is going to be deafening for the New England offense to operate effectively.

Three Reasons the Patriots will Win:
1-After dominating the other #1 team in the league 2 weeks ago, the Pats will be very hungry to close out a big game.
2-The Saints defense is going to have issues with both Randy Moss and Wes Welker; inside a dome with fast turf those two are killers.
3-The Saints have been turnover prone and the Patriots will capitalize on mistakes.

My prediction:
The game may not have as many fireworks as some think as I believe both teams will try and run the ball more to slow down the others offense. I think the Saints are for real, I think they are a great team right now, but I think the Patriots may have too much experience at this point and will win 38-35 on a late New Orleans key turnover.

Of course I would not be shocked in the least if the Saints win, they are certainly capable. Tough spot to be in as a big fan of both teams!

Have a good night.

Sunday, November 29, 2009

Sunday Views on Silver

With the entire NFL waiting for the monster Patriots vs. Saints clash tomorrow night, the games today were a bit boring.

-The Dolphins lose again!
-The Texans blow a lead against the Colts, easily the most recurring theme of the season. Note to Colts fans: Having to come back from 17 points down is all fun in the regular season, but come playoff time that will not work. Period.
-I think the Titans will win out this year

My take on the huge game tomorrow night between my two most loved NFL teams? Either way I win, but I think the Patriots have a break out game on Monday and pull off the shocker.

Sunday Views on Silver
On a slow Sunday two esteemed friends of Economic Disconnect weighed in with some views on Silver.

Stagflationary Mark of The Illusion of Prosperity offers his view on Silver as it relates to Aluminum:
Silver to Aluminum Price Ratio
There is a great chart provided and I think it a worthwhile stop to make if you are a fan of silver.

Denver Dave, writer of The Golden Truth, has a very interesting letter detailing the ginormous short position held by JP Morgan in the Silver market:
A London Silver Trader Shines a Spotlight on the Huge Silver Short Position on the Comex
One might look back in time and see the actions of the government when Silver was being aggressively hoarded by the Hunt Brothers (See Silver Thursday) and spot the difference. Silver prices going up on leverage is bad, but excessive short interest in silver is ok.

Regular readers know I am a big silver fan and own silver through a variety of channels (PAAS, SLV, physical bullion).

I suggest checking out the two pieces above. Food for thought.

My own take is still the same:
In a time where the very meaning of "money" is being called into question by overnight vaporization of debts, governments printing non stop, and asset bubbles being pumped by carry trades and low volume futures bumping, I think many are turning to the oldest store of value known; Gold and to a lesser extent silver.

Maybe I am a metals "bubble head" or maybe I just like shiny things too much, but that is how I see it. I am not saying "Its different this time" as much as I am saying things may be moving back to some kind of system where "value" and "worth" have some kind of tether to something that cannot be fudged. My 2 cents.



Fiat Currency

Have a good night.

Friday, November 27, 2009

Something to Think About

I forgot that today is Friday! As always, I will be presenting the usual Friday night festivities, an extended one tonight as I am not motivated to write about fiance this evening except for one thought.

Something to Think About
As I am sure everyone knows, the small city-center of Dubai is trying to delay payments on debt which may or may not constitute a debt default. There was some degree of panic across the world markets on the news because after all, things like this don't happen in the midst of a robust recovery like the one we are told we are in. All eyes turned towards the US market open today to see how bad things were going to get.

Answer: Not bad at all.

Yes, the indices all ended lower by about 1%, but there was no real force behind the selling. It almost seemed staged; something like "this Dubai news is bad, we should sell off a bit to show a good face".

Here is my take on the whole thing. Over the last week we have seen severe credit/debt/currency stress headlines. Items include the Dubai issue, Greece CDS, Vietnam devaluing by 5%, and new increases in personal bankruptcy. None of these things make a difference even though they should. Why you might ask? The answer is very simple:

Everyone everywhere now firmly believes that there will not be any shock to the system that a government will not bailout.

Example, from Clusterstock today:
JP Morgan: Stop Freaking Out, The UAE Can Easily Save Dubai
No worries if the biggest waste of construction in the middle east is going down, the UAE government will step in and make HSBC (among others) whole. If not the UAE, any exposure JP Morgan may have would qualify under the "too big to fail" category and promptly be backstopped.

This is leading to a dangerous mindset. Market participant s are almost cocky right now and placing bets under the idea that one cannot lose. When I tried in vain to get Moral Hazard discussed over the last year and a half, this is what I had in mind. Want to finance a huge water park in the middle of the Sahara Desert? What? Nobody came to go on the slip and slide? The property is now worth only 30% of the old price? No worries, bond holders will be made whole and no lasting damage will be allowed to the banks.

Expect this to manifest itself in news ways as market players use the FED/Treasury pledge of never ending support to trade against.

Friday Night Entertainment
A bit of entertainment to start the official weekend.

Picture Pages
"Picture pages, picture pages, time to get your picture pages, time to get your markers and your pencils!"

You Are Being Watched
funny pictures of cats with captions
see more Lolcats and funny pictures

Is this a beautiful princess?:
epic fail pictures
see more Epic Fails
I say NO.

Film Clips
Some more cinematic masterpieces.

From a discussion elsewhere I was reminded of the dark humor film "Heathers" which is a must see:

All the poker talk put me in the mind of "Rounders" widely regarded as launching Texas Hold Em into the stratosphere. Enjoy this scene:

"Not hungry?" Classic.

If you have not seen "Revolutionary Road" then you have not seen a modern classic:

Rock Blogging
Some music to end the show.

Housing Doom had a Johnny Cash song posted for Thanksgiving and that put "It Ain't Me Babe" on my radar. I really love the version form the film Walk the Line so check it out:

Now everyone knows Economic Disconnect is a huge hair band fan. Enjoy the power anthem "Somebody Save Me" from Cinderella:

I saw these guys live at a show in 1999 and they sound the same live as their studio album.

Another stellar live show performer is Depeche Mode. Take a listen to "Enjoy the Silence":

One of my favorite songs is Don Henley's "The Boys of Summer":

Nice HD version.

Last call! Final curtain call.

When Motley Crue had their big comeback album, "Dr. Feelgood" there where plenty of songs that got all the headlines. The best song on the album, in my opinion, is "Wildside" though it is not as well known:

NICE! Love this song.

Have a good night.

Thursday, November 26, 2009

Thanksgiving Holiday Toast

Hello all!

I wanted to send out my Happy Thanksgiving this morning to everyone that may see it. It certainly has been a wild year and it seems more action will ensue before the calendar rolls into 2010. Wasn't 2010 the year we were supposed to make contact? Well at least we found water on the Moon and probably on Mars, so we are a bit behind schedule.

I get a reputation as being a perma-bear, a doom and gloomer, or an eternal pessimist. I really do not see it that way. I believe in America, and most of all in Americans. Maybe not the upper crust big money folks that always seem to find their way into the highest halls of government, but the everyday average American. Most folks do the best they can for their families and all they want is a fair deal with reward for their efforts. It is here that I think America can be doing MUCH better and the target of this blog are those things that would impede the efforts of normal people all over the country.

Over the last year Economic Disconnect has made it onto the compilation site Seeking Alpha and that was a wonderful boost both to readership and my own moral. I was able to either meet or have valuable correspondence with Mark from Illusion of Prosperity, Jeff from The Housing Time Bomb, Lisa (on hiatus) from Capitalist Preservation, Ilargi from The Automatic Earth, C-T from We are Screwn, Dave from The Golden Truth, and Kevin Depew of Minyanville. I have appreciated all the time and patience everyone has for me!

When are we going to have a huge Blogger party? A fun place like Las Vegas or Atlantic City would be great. Maybe we could have a big Blogger Poker Tournament (do not invite Kid Dynamite, he is a shark!) and walk around with funny name tags like "I am Economic Disconnect" or whatever. I think it could be fun, though we may have to ration the booze!

Anyways, here is the Wikipedia entry for the holiday:

You may want to make sure this does not happen to your turkey meal:

Too funny!

All My Best

Wednesday, November 25, 2009

A Study in Contrasts

Here I was up early on my vacation day and reading across the web at my usual stops when I came across a post (via Naked Capitalism) that seemed familiar in title, but very different in content to a post of mine from last week. This offers a chance to see a real contrast is opinion and so I will post them both.

Bronte Capital weighs in this morning on the March expiration of FED MBS purchases:
The Ides of March and the FED Exit Strategy
You should read the whole article. It is well written and many angles are thought out. I would summarize (my words) that the writer's idea is that the Banking system will be ready, willing, and able to buy back all the MBS paper the FED took off their hands next year as risk appetite increases, thus making the FED exit from this space relatively smooth. The crisis of last year was one of liquidity, and not solvency.

Now contrast with my post from last Thursday:
Beware the Ides of March (Maybe)
Here I argue that not only will the banks not want the impaired paper, but the FED will have to extend the MBS plan early next year due to severe aversion to these instruments as well as a monster move up in mortgage rates should actual banks offer to by this stuff.

I left a comment at the authors post that we will only have to wait until about February to see which view is more in line with the reality on the ground. Let me know what you, the readers, think about this great study in contrasts.

Tuesday, November 24, 2009

Mosaic of Information

I will be off from work until Monday. 5 days off is just what I need after a super busy couple of months.

Leading Off
This story is just too awesome to leave alone, so I will give it another run tonight!

Clusterstock found an interesting Cornell Business School employee dirty email thread that is both mildly disturbing and hopelessly entertaining at the same time. Have at it:
Cornell Business School Employees Accidentally Email Everyone With Their Dirty Love Notes
After reading this I have the following thought:
Every morning at 6am as I am driving in to work about 90% of the people I see are talking on the cell phone. Now who would call the wife/husband right after leaving the house? How many of those people are doing work related calls at 6am? It is my opinion that in the cyber age there is all kinds of bad stuff going on just like these dirty emails between bored adults. Any thoughts?

That said, should Lil Kim or Joan Jett find themselves bored, please feel free to use the contact email listed at the left!!

Headlines Can be Misleading
Yahoo Finance has this lead concerning the released FED minutes:
Brighter FED forecast helps market pare losses
Sounds great! The FED is optimistic (when are they ever not??).

Another Clusterstock headline reads:
FOMC Minutes: Fed Admits That ZIRP Could Fuel A New Speculative Bubble
Key take away:
The Fed certainly doesn't think the economy is about to come booming back. Fed policymakers said it could take "five or six years" for the economy and the labor market to be consistently healthy.
A 5-6 year recovery plan is a bright forecast?

Asked and Answered
Mortgage Insider asks today:
Will the FED Let Mortgage Rates Rise?
Allow me, NO.

Attack on Gold?
The FED does not like Gold. The banks are net short gold and silver (big time). It may be very difficult absent a financial calamity (think last fall) to confiscate the metals. So how does the establishment go about messing with metal holders? Refuse to store it of course! Genius!

The Mess That Greenspan Made covers the Wall Street Journal article which details the HSBC decision to boot metals from their vaults. Tim Iacono makes some very good observations:
In another sign of the times, now that big investors are beating down the doors of HSBC asking them to store their growing quantities of gold bullion as part of the 2009 mad dash to shore up investment portfolios with something that is not paper and has no counterparty risk, the little guy who had his bars and coins stored there is getting the boot.
It would be fascinating to learn more of the details here - who and what's getting booted.

You can easily fit a half million dollars worth of gold in a large safe deposit box so, it's not clear just what kind of customer HSBC is asking to leave.

Are there that many individuals with millions of dollars in physical gold?
I am sure the answer is no. More from Tim:
My guess is that HSBC is pushing a lot of silver out of its vaults to make room for gold...

They are telling customers to remove their metal or prepare for it to be delivered to the address of record at the owners' expense, so, be on the lookout for armored trucks in your neighborhood that leave packages on doorsteps if nobody is home.
Sure, gang up on Silver you fiends!

This bears watching if a trend starts.

Deflation Taken on by Jesse
Today's must read comes from Jesse's Cafe Americain and while you should read the whole thing, I offer this zinger which really caught my way of thinking:
So, absent a conscious policy decision by the Fed to strangle the US economy premature to recovery, deflation becomes a likely outcome if the Federal Reserve runs out of debt obligations, both public and private, which it is willing and able to monetize. That is the only 'hard stop' in the game on that side of the equation, and good luck with that.
I agree 100%.

Expansion of MBS purchases will be the first step. TARP repayment is a scam that will be used to funnel that same money to bankrupt states and the municipal market. I expect more new creative ways to print money in the months ahead.

Have a good night.

Monday, November 23, 2009

Monday Short and Sweet

Home very late so not much time to post.

Economic Disconnect 6 Months of Trading
A while back I posted a trading idea about "stomach stocks" and I highlighted Hormel Foods (HRL) and Campbell's Soup (CPB). The original post can be seen here from September 8, 2009. I opened positions in both HRL and CPB on September 9, 2009.

A little further back in June I posted some trade plans concerning GLD, SLV, PAAS, and SPY. So how have the past 6 months been for me?

HRL = +5%
CPB = +7%
GLD = +19%
SLV = +18%
PAAS = +8%
SPY = -2% (I was stopped out, but this one would have ran had I kept it!)

Please note that I have what I refer to as "core" holdings of both gold and silver via various channels that I wish not to share details about.

My only loser was the SPY buy as I set my stop very tight because I did not even want to play the general market on principal.

Not a bad 6 months, with only 1 loser. I hate losing money trades. I would rather play a Beatles tune on Friday night than lose money!

I have a good chunk of my portfolio in cash right now. I am not making any changes to the positions noted above save setting stops higher than they were previously to lock in some very nice gains should things change. I have been outpaced by the general S&P 500, but I refuse to trade in the fantasy land that is the general stock market over the last months.

How have you all been doing? No need for fine details, but what has been working? What has not?

This is a short holiday week so I do not imagine too much heavy duty posting. I will probably check in with more fun related posts to lighten things up.

For a chuckle I would ask you to check out Stagflationary Mark's "Illusion of Prosperity" picture-gate scandal where a photo on his site of his own dog was lifted by another blogger without asking. Not a huge deal in the scheme of things, but annoying for sure:
Honey's Popularity Rises!

Have a good night.

Sunday, November 22, 2009

NFL Week 11 Recap

A stunning NFL Sunday with all kinds of crazy on tap.

Dallas Cowboys 7, Washington Redskins 6
Gawainsghost reminded me that these NFC East matchups are never easy, and it seemed the Cowboys were well on their way to dropping another game. With about 3 minutes left Patrick Crayton finally got loose and Dallas pulls out a victory. If the Cowboys can ever put their inconsistent offense problems to bed, this is a top flight team.

New York Giants 34, Atlanta Falcons 31 OT
In a game where the loser is probably done for a playoff chance, the Giants come out on top with a big win. While I am no Giants fan by any means, they are not as bad as they have looked over the past few games and showed it today. The Falcons are struggling right now and their chances of a post season are getting very small.

New Orleans Saints 38, Tampa Bay Buccaneers 7
The Saints move to 10-0 for the first time in team history by blowing out the Bucs. With all the defensive injuries the Saints have I am amazed they are still doing as well as they are. This of course sets up a dream/nightmare game next week as my two favorite loves of football, The Patriots and Saints, meet on Monday night.

Indianapolis Colts 17, Baltimore Ravens 15
The Colts go to 10-0 with a hard fought win against Baltimore. Joe Flacco's inexplicable interception at the games end was almost unreal. Nice gift to the Colts. At this point the Colts will have to have a team meeting and decide if they want to go 16-0 or lose a game or two to sidestep the whole undefeated trap. I would suggest they drop one.

Kansas City Chiefs 27, Pittsburgh Steelers 24 OT
In the days second biggest upset, the Steelers lose in Kansas City. Most worrying is the injury to QB Roethlisberger which may be a concussion. I saw a bit of this game and all I can say is that the Steelers are a TOTALLY different team when Troy Polamalu is not in the lineup. The Steelers right now are a big question mark.

Oakland Raiders 20, Cincinnati Bengals 17
The days biggest upset. Oakland scores 10 points in like 1 minute to steal a win against the 1st place Bengals. Just a puzzling performance by the Bengals, but maybe a let down after last weeks huge win. The Raiders are either obscenely terrible, or play pretty well depending on their mood it seems.

San Diego Chargers 32, Denver Broncos 3
3 weeks ago the AFC West was about done in my mind. Now the Chargers have come back to take control, throttling Denver at Mile High. Denver backup QB Chris Simms (no Phil Simms that's for sure!) was so bad that an injured Kyle Orton had to come out and play very hurt (hats off to that guy, what a fighter!). To me the problem with Denver right now is the offensive line is playing about as poor as can be. The defense also has slowed down quite a bit. The season for the Broncos is not over, but they have some real issues. The Chargers are red hot right now, and I may have to eat my words on them later this year!

New England Patriots 31, New York Jets 14
So why is this iteration (last 10 years) Patriots one of histories best teams? Because they get the job done. After a rough 1 point loss last week in Indianapolis on a questionable 4th down play call (I liked it) and a terrible spotting of the ball (pure bullshit) the Pats rebound to destroy the Jets in a rematch. I have to eat crow here a bit, Jets corner Darrelle Revis had much the better of his one on one play against Randy Moss and I tip my hat to that guy. He won today fair and square and he rarely had help at all. Of course the Jets may have thought about switching Revis to cover Wes Welker in the slot as he lit up the Jets for almost 200 yards. Mark Sanchez had a terrible day as the so called "crushed by lack of trust" Patriots defense overwhelmed the Jets. This sets up the big Monday night game between my two beloved teams.

Other Action
-The Lions have a winner in the QB rookie Stafford. Mission number one for the Lions should be getting a better line for this kid, he is the real deal.

-Green Bay keeps their season alive with a big win.

-Minnesota is probably the best team in the NFC, yet they are under the radar?

-Jacksonville wins again and seems to be making a surge.

-Is Arizona for real? They are playing as well as they did in last years playoff run.

You have to love the NFL. Today we had drama, blowouts, nail biters, season changing wins and losses, and upsets. Much fun indeed.

PS, while you are writing your congressmen about the audit the FED bill or the health care bill, please register your utmost protest to a remake of the classic film Red Dawn, which should be stopped no matter the cost!!!!! This must not happen!

Have a good night.

Friday, November 20, 2009

Friday Night Litmus Tests

Another week in the books! I can report that my DVD collection of Japanese anime robots have arrived all the way from Australia! I have the complete seasons of Grendizer and Gaiking as well as about half a season of Starvengers and Dangard Ace. The wonders of EBay never cease! All that is missing now is to get Starblazers. Sweet.

I wanted to say special thanks to reader Lisa who deposited $2.38 into the Economic Disconnect account for safekeeping instead of T-Bills. I am currently trying to decide how best to apply my .04 cent cut and its a toss up between 1/450th of an ounce of silver or gunning SPY mini futures for a huge low volume gain. Any suggestions?

A Word About FED Transparency
While I am glad the better version of the Audit the FED bill passed (everyone from Massachusetts voted against it of course!) it is still a long way from becoming a reality. Who knows how much pressure will be put on politicians to kill this off by the FED and the banks before final passage. I would also add that it is my belief that even if passed, the FED will just decide to not comply, and I see no mechanism to make them do so. Still, a large victory today for better information.

Friday Night Litmus Tests
There come times when one has to figure out what they believe and where they stand. These times can be about many things and I think we are nearing a point where how you look at things finance will be faced with such a time.

Tonight I will present two articles that serve as a type of "litmus test" for economic thinking. How you respond to the ideas and opinions in the articles will say quite a bit about how you see policy.

The first article was posted at Naked Capitalism this morning penned by Marshall Auerback with some comments by host Yves Smith. When I read the piece this morning all I can say is that my reaction was heated to say the least. You should read the entire article for all the choice quotes, but I will submit a few here to get you started:
Does US Need a Second Stimulus to Create Jobs?
What we desperately need to do is to increase our deficit by several percentage points of GDP and offer public sector jobs to all those who want one. Government as Employer of Last Resort is one idea I have been pushing (along with Randy Wray, Bill Mitchell and a host of other people). As I said in an earlier post,

The U.S. Government can proceed directly to zero unemployment by hiring all of the labor that cannot find private sector employment. Furthermore, by fixing the wage paid under this ELR program at a level that does not disrupt existing labor markets, i.e., a wage level close to the existing minimum wage, substantive price stability can be expected. Other benefits could be provided, including vacation and sick leave, and contributions to Social Security and, most importantly, health care benefits, providing scope for a bottom up reform of the current patchwork health care system.

Obama’s attempts at deficit expansion to date have been pitiful.
Quite the start ,yes? More deficits, jobs for anyone that wants one, and full benefits for wards of the state. Forget for one moment the pie in the sky dreaming going here to think that the 10% unemployed in this country could or would take minimum wage jobs and that this in any way would save anything, what is the writer getting at? Is spending really unlimited? I have wrestled with this topic forever it seems. Moving on:
The US Government is a monopoly issuer of the US dollar and is not revenue-constrained The facts I presented above would tell anyone who knows the slightest bit about how our currency operates that anyone who talks about “neutral deficit” outcome at present is an irresponsible lunatic.
I am a lunatic. More:
I do not, as the caricatures suggest, advocate completely unrestrained government spending, paying no heed to inflation. But inflation is the constraint on government spending, not a uninformed ideas about ’solvency’.
People who think that investors will lose confidence in the US Government and somehow that will stop them spending even more because your spending is helping to put some semblance of a floor into aggregate demand which is retarding the jobs loss somewhat? If you think that tell Larry to close Mankiw for a while and learn something about how your monetary operations actually work.

The other dubious idea is that the government spending gets conflated with some idea of “fiscal insolvency”.

I can certainly see how government overspending creates inflation, but is that what you mean by “fiscal insolvency” in the sense that the inflation represents the de facto default?

That to me is a separate issue.

The inflation would be from too much aggregate demand and a too small output gap.

That would mean that fatefull day would be an economy with maybe 4% unemployment and 90%+ capacity utilization and an overheating economy in general.
i will be honest, I have no idea what the writer is talking about here.

My quick summary (and I may have the writers angle all wrong) is that there is no constraint on government spending as long as inflation is low. Solvency is a state of mind, not a numbers condition.

All I can say is Wow. I look forward to the readers comments on this one, but I think you can guess that I disagree with about all of the article. The comments section at Naked Capitalism for that post was full of great interplay and you should check that out as well. Tell me what you think and think about how this serves as a litmus test for your own ideas.

The second item relates to the T-Bill rates I posted on yesterday. As I noted Zero Hedge had picked up on it (as well as many others) and I found significance in such a rare event myself. Negative rates on short term money is very strange, unless you think it is not.

I always find it fascinating that as soon as Zero Hedge posts something people go nuts trying to show that the writers there are either wrong or crazy.

Moving on, if you are John Janzen of Across the Curve or Calculated Risk, you think this is just normal operations of the T-Bill market and any attention to it is a waste of time:
More on Negative T-Bills
On Negative T-Bills
Of course, it is hard to find one FED action Across the Curve does not think is "normal" and Calculated Risk stopped offering opinions on much of anything a long time ago.

So, was this story worth some attention or was it just a normal T-Bill market phenomena? What do you say?

Friday Night Entertainment
Next week is Thanksgiving, so lets try and set up the short week with some frivolity!

Funny Pictures
In my never ending quest for Google search hits......

Always remember to "clear history" and "clear temporary internet files". Just do it or else:
funny pictures of cats with captions
see more Lolcats and funny pictures

With all the rage about the next "Twilight New Moon" film, you may want to make sure your daughters do not buy these promotional underwear:
epic fail pictures
see more Epic Fails

Film Clips
A craven attempt to influence your weekend movie selections!

While I think many of Stephen King's horror novels hardly ever translate to good film (think Pet Semetary) his more thoughtful works always tend to make stellar films (think Shawshank Redemption). Perhaps the most moving story translation to film was "Stand by Me" which makes you feel 12 or 13 every time you see it. First 8 minutes:

This is so Boss!
PS, does Kid Dynamite know Will Wheaton (Gordy in the film) is a world class poker player?

If you have not seen the film "The Assassination of Jesse James" with Brad Pitt and Casey Affleck you are missing one of modern cinema's great works. Pitt should have won the Oscar for this role, and the film is a new classic and one of may all time favorites. Here is the trailer:

Now see it already!

Rock Blogging
A little music to set up the weekend.

A more modern song that sounds like an old classic comes from the band Cracker with "Low":

The Creedence Clearwater Revival song that was featured in "The Twilight Zone" films was "Midnight Special" and it is a good one:

I have not had my Joan Jett fix in a while, so enjoy "I Love Rock and Roll":

She just needs to admit she is in love with me. Come on Joan, what's a restraining order in the face of true love? (kidding!)

Last call! Everyone have a drink?

I will close the show with a little Queen. As I have stated numerous times, some of Queen's best work was done for the film "The Highlander" soundtrack! Enjoy "One Year of Love":

Have a good night.

Thursday, November 19, 2009

Beware the Ides of March (Maybe)

What is the world coming to when Dell (DELL) cannot even "beat the street" after massaged guidance? Things must be rough indeed!

Picking a Blog Title
Sometime a blog title really says something important. Other times they are random quips. My friend Stagflationary Mark runs the great site "Illusion of Prosperity" and I always liked that title. Today on Yahoo Finance I saw this article:
"The Illusion of Prosperity": U.S. Destined to Lag Rest of the World, Peter Boockvar Says
A perfect fit! I would argue that the title could have been "Economic Disconnect, the US and the Rest of the World" but I am the jealous sort.

Paying to Stash Cash
As noted by Zero Hedge and others today, the action in T-Bills has become very negative. It seems many are back to paying other people to hold their money for short spans on the promise of getting it back. A look at action over the last 6 months:

Trending down with a serious move down as of late. For some perspective, here is the two year look of the same 13-week T-Bill:

Seems many are ready to take very little to safeguard their cash. Negative rates are still pretty rare (think Lehman collapse) and that is where we are at.

Economic Disconnect would like to offer services where I will stash your cash for 13 weeks for a small 0.02% haircut. Please leave your account numbers in the comments, or use the email listed at the left for more secure transactions. You can trust me, really.

Beware the Ides of March (Maybe)
As any Shakespeare buff knows, Julius Caesar was warned to "beware the ides of March" shortly before his murder. March may play a significant role in the markets next year as well, though as you may know there's many a slip twixt the cup and the lip (Thanks Young Guns!).

The FED has used their MBS purchase program (1.2 trillion strong and running to support a collapsed market in mortgages. No bank wants to touch them, and no outside investors want to hold them. Never fear, the US government has stepped up to the plate and enlisted the FHA to juice things up even more.

So far the results have been mixed. While some rebound in housing had been seen, it has been muted and at the low end. At this point there does not seem to be renewed animal spirits in the housing mortgage market as memories of instant insolvency still are fresh wounds (The US government has no such fears of course).

As of now, the FED MBS buying bonanza will sunset in March 2010, or even before then. Some observers think that a mortgage rate increase of, get this, 30bps (that's .30% for you and I) will be the after effect of the support program. One may wonder how in the world mortgage rates, set by real world appetites for the product, will register such a minuscule rise after 80% of the buying power evaporates but smarter people than us all seem very confident. I would argue that the program is a colossal failure if that small a reduction in rate was all that could be done, and I think I am (and will be) right about that.

From the red hot blog Housing Doom, I was pointed to this article in Reason about the housing market that bears a closer look:
Government is Encouraging Lax Lending Standards
The Obama Administration is prepared to do anything, including dramatically lowering mortgage lending standards, to keep real estate prices inflated, as demonstrated by statements, reports and events in the month of October.
With an intro like that you know I am going to check it out!:
First came the Federal Housing Authority inspector general's report on the FHA's lender approval process, which found that FHA was missing or ignoring relevant information, failing to document loans, not preventing convicted financial criminals from participating in its lending program, and in most other ways failing to "ensure that lenders met all applicable requirements." The IG's spot check revealed, for example, that just one out of 22 approved applications contained all the documentation needed to meet the FHA's own standard for guaranteeing a loan.

The FHA's much more serious offense against lending standards -- its dangerously low 3.5 percent down payment minimum for guaranteed loans -- became the focus of attention this month when the authority admitted it was shown to be close to bankruptcy, and Rep. Scott Garrett (R-New Jersey) introduced legislation to boost that minimum to 5 percent.
So far these are things many of us are well aware of. Disturbing, yes, surprising, no. Back to the article:
There is both anecdotal and statistical evidence that the debased lending standards being pushed by FHA and other government entities are creating a dangerous dead cat bounce in real estate markets. Anecdotally, here's a profile of a new home borrower who as of this month is paying 54 percent of her income on a house. Statistically, defaults on government-approved loans continue to rise, with Fannie Mae-backed loans now breaking through a 3.3 percent delinquency rate.
So the market is this bad? I am sure banks, stretched as they are, will pile on and buy these mortgage securities without government support. I am very sure. NOT!. As if we needed more;
How are people buying all this expensive real estate? With nearly the same ratio of debt to down payment as they had in 2005. According to NAR, the median down payment is 4 percent -- slightly above what it was earlier in the decade -- but a third of all U.S. houses are still being bought with no money down.

That's a bad bet for us, because we will be on the hook for the defaults. As this San Francisco Federal Reserve report notes, nearly all mortgage securitization is now being done by the nationalized government sponsored enterprises, and virtually none by the private sector. So lenders are not just gambling on bad credit risks, but gambling with your money. Not surprisingly, it's the administration that gets the benefit, as real estate prices, in marked contrast to unemployment, are doing better than the most-adverse projections of the bank stress test conducted earlier this year.
The bold faced lines are key, but in summary of the article:
Meanwhile, it appears that October may be remembered as the month that the evidence, and the statements of many officials, all pointed to the same conclusion: The Obama Administration has taken a no-parachute leap of faith that real estate will stay inflated. If you're keeping score at home, this is the precisely the behavior Sen. Obama used to blame on the "ethic of greed."
That's ball game folks.

In March when the support programs run out, the housing market will resume it's travel toward equilibrium.

So go short all things banks, mortgages, housing and home improvement?

Au contraire mon frere

In the face of a resumption of the housing downturn, which happens to be one of the only standouts of failed policies do you think:

-The government will allow DEFLATION on home prices to resume?
-Any presidential administration (and by extension congress) will allow the one centerpiece of success (albeit at the low end only) to go away?

It will not happen.

The entire game so far has been to extend the game until such a time that home prices would regain a chunk of their former bubble values, not all, but a good chunk. This will not happen. Any recovery now is at the low end (most gullible) and would take 2 spring selling seasons to percolate up the chain. This March is too soon. Nobody serious thinks other wise.

So, expect to see another MBS purchase program started (very little political backlash, nobody knows what this means or thinks it helps them indirectly anyways) and another Quantitative Easing campaign to begin in the February month.

With about 95% of the investment world looking for that monster dollar rally, things may be delayed (indefinitely?). What is the difference in the dollar at 74 on the index, or 68? What about 65? Think the world will end? It has not after a 20% plus drop, what's another 5-10% between friends?

I am looking for a New Years celebration, not of new beginnings, but of old tricks. More funny money and more support for low rates. Expect stocks (do not like many on principle), oil (not my thing), gold (love it!), and silver (really in love) to run hard when the spigots get opened up once again.

What other choice is there? Let mortgage rates rise .30% (dreamers)? Impossible I say!

Have a good night.

Wednesday, November 18, 2009

All Bases Covered

First really hard frost this morning here. Going to have to locate the car ice scraper before too long.

All Bases Covered
From across the web I saw many interesting and/or important stories today and so a recap is on hand. I apologise for the brevity of the posts lately, but I have been under time constraints from work and various errands the last 2 weeks.

I Told you So
Economic Disconnect has been perturbed by FED apologists who claim that the FED will navigate the waters of monetary policy without mistake. A while back (about 2 months) some were even making grumblings as if a FED rate hike was at hand in the near future. I savaged these types at the time, but I am not expecting an apology any time soon after this:
Fed May Not Increase Rates Until 2012, Bullard Says
The Bloomberg story recounts Federal Reserve Bank of St. Louis President James Bullard's contention that based on prior history, there is still room to run with ZIRP:
"If you look at the last two recessions, in each case the FOMC waited two and a half to three years before we started our tightening campaign,” Bullard said today in a speech in St. Louis. “If we took that as a benchmark, that would put us in the first half of 2012.”
Mr. Bullard fails to describe the effects of those policies, but who cares about that anyway.

Bob Toll Knows Subprime
Quote of the day belongs to a villain of the housing bubble, Toll Brothers CEO Bob Toll:
"Yesterday’s subprime is today’s FHA,” Toll said today at a New York conference for builders sponsored by UBS AG. “It’s a definite train wreck and the flag will go up in the next couple of months: Bail us out. Give us more money.”
Now we could poke fun at one guy that is getting all kinds of breaks talking smack about another basket case institution, but that would be too much fun for a week day evening. I would just say for an industry Mogul to say something like this at this juncture of the fragile housing "recovery" means quite a bit.

Reduction of Deficit Spending, You are Doing it Wrong
Just after the president calls for less aggressive spending, here is how the US Senate reacts:
Senate health bottom line: $849 billion overhaul
This stuff writes itself!

As if Nothing Ever Happened
So you brought the US banking system to it's knees due to poor judgement, bad lending, and ridiculous leverage? What is your punishment? If you answered nothing at all, you are correct:
Wall Street on Track for Record in Profits
Ten months ago, President Obama said a time would come for Wall Street to make profits and pay bonuses, but “now’s not that time.” But it appears that was exactly when Wall Street began to return to profitability.
In a report released Tuesday by Thomas P. DiNapoli, the comptroller of New York State, Wall Street profits in 2009 are on track to exceed the record set three years ago, at the height of the credit bubble.
Now one may wonder how on earth profits could be as high as the height of the credit bubble, but why question such things? As a parting kick in the groin:
“The national economy is slowly improving, but Wall Street has recovered much faster than anyone had envisioned,” Mr. DiNapoli said in a statement.
As long as Wall Street is happy I guess the rest of us can bend over and kiss our own behinds. Your welcome for the bailouts by the way, fruitcake.

He Who Has the Control has the Power!
Courtesy of the classic film "The Neverending Story"
G'mork: Foolish boy. Don't you know anything about Fantasia? It's the world of human fantasy. Every part, every creature of it, is a piece of the dreams and hopes of mankind. Therefore, it has no boundaries.
Atreyu: But why is Fantasia dying, then?
G'mork: Because people have begun to lose their hopes and forget their dreams. So the nothing grows stronger.
Atreyu: What is the nothing?
G'mork: It's the emptiness that's left. It's like a despair, destroying this world. And I have been trying to help it.
Atreyu: But why?
G'mork: Because people who have no hopes are easy to control. And whoever has control has the Power.
Now who would want to control our behavior?:
Calif. requires TVs to be more energy efficient
SACRAMENTO, Calif. (AP) - Power-hungry TVs will be banned from store shelves in California after state regulators adopted a first-in-the nation mandate to lower electricity demand.
On a unanimous vote, the California Energy Commission on Wednesday required all new televisions up to 58 inches to be more energy efficient beginning in 2011. The requirement will be tougher in 2013, and only a quarter of all TVs on the market currently meet that standard.
Now I could accept helping energy consumption, but this kind of control creep extends very quickly into all kinds of areas in the name of various noble causes.

Macro Man has the FED Skewered
Today's MUST read come via Macro Man and his missive "The FED and Bubbles". While I hate to excerpt such a piece (there are plenty of charts and great insight) I have to share a point I have harped upon many times:
Still, if Kohn's claim that "our abilities to discern the "correct" values of assets is quite limited", how can the Fed fail to recognize that Nasdaq 1999-2000 was a bubble.... was the 2003-05 housing market.....
...and oil last year.....
...but that a less than 10% decline in the value of the S&P 500 in the first few weeks of last year was sufficiently worrisome that it merited a 75 bps inter-meeting cut a mere 8 days before a regularly scheduled FOMC policy decision (which produced a further half-point cut.)?
Put another way, why does the Fed feel powerless to identify bubbles in real time, but is evidently highly confident in its ability to determine when asset prices have fallen below equilibrium?
This is a key point and it really blows the FED out of the water in their "Nobody Can See a Bubble" babble. read the whole thing.

Have a good night.

Tuesday, November 17, 2009

Notes on the Day

Home a bit late so just a couple of notes.

Sad Times for the Silverdome
In an example of what happens with monster government run spending projects, the Pontiac Silverdome in Detroit today was sold at auction for $583,000. I did not miss a zero, I swear!:
Silverdome sale price disappoints
Pontiac officials wanted more than $583K for stadium

The Silverdome consumed $55 million dollars to build, and it sells for quite the discount.

Wiki fact on the Silverdome:
The largest crowd was on March 29, 1987 for Wrestle Mania III, with a reported attendance of 93,173.

Another Informative Gold Chart
As of late there has been plenty of coverage of gold priced in Euros, dollars and many other variants. How about gold priced in gold, how does that hold up? Paul Kedrosky and Barry Ritholtz do all the hard work and present this graph:

Hat tip to Kid Dynamite!

About that New Jobs Creation Plan
With a new jobs creation plan set to be put in place soon, I would argue that it may make sense to figure out where all the money from other plans for jobs went first. How about fictional districts?:
Exclusive: Jobs 'Saved or Created' in Congressional Districts That Don't Exist
One of my many issues with the Keynesian sort is that their models assume government spending will actually be legitimate and not full of fraud and theft. Well, maybe they do count on that!

Have a good night.

Monday, November 16, 2009

The FED Speaks and Gold and Silver Listen

It is always harder to go to work after a big loss for one of your favorite teams!

Colts 35, Patriots 34
The Patriots blew away the Colts last night for 48 minutes. The game was not even close as the Pats finally hit a groove on offense, for 48 minutes. After 48 minutes it was clear just who held the cards in the AFC.

Of course there were 12 minutes unaccounted for!

In a move as puzzling as the same move made in the 2006 AFC title game, the Patriots got off the accelerator on offense in the 4th quarter and switched from a physical press defense to a back off zone coverage. Both had disastrous results as the Colts rallied for two scores before "The Call"

Faced with 4th and 2 and their own 28 yard line, the Patriots burned a time out and then decided to try and win the game right there. There will be endless debate about this move, and even here in Massachusetts there are many super angry fans right now. Here is my way of thinking:
-The Pats defense was on their heels and Manning was white hot
-2 minutes and a time out might as well be an entire quarter the way the Colts play offense
-2 yards would be fully expected by the offense which finally hit on all cylinders
-Do it!

When Brady came back out the announcers figured he was going to try and draw the Colts offsides. I knew they were going, it made sense to me. Kevin Faulk caught the ball and it was a bit wobbly and thus he was spotted a full yard behind the marker. I cannot recall having ever seen this kind of call made in the NFL, the forward progress rule is a bad one but always given to the offensive players. Until last night. It is what it is and of course the Colts scored shortly after to win the game.

Ok, the Patriots lost. What is with all the moaning? Teddy Bruschi, former Pats linebacker and all but a god here, came out today and penned this article:
Belichick dissed his defense
Bruschi argues that the defense must have felt terrible about this call and it will be hard for them to recover their confidence. With all due respect to Teddy, WERE YOU WATCHING THE SAME GAME I WAS? The Colts would have scored if we punted the ball and somehow it landed at the Colts 1 yard line. I understand "anything can happen" and "give them the long field" but what would have happened was a long scoring drive in about 1:45, which was about as long as the two previous drives took for the Colts. If the defense was so offended, they should have gotten mean and closed the game out on a short field to send their own message. Instead they got dusted for another score. Spare me.

In summary, I think that Bill B wanted to win the game right there and not have to leave it to Manning's arm hopefully misfiring. I think it was an aggressive call, and one I would have made. It did not work. It happens.

On the good side, Brady finally looks very sharp and Randy Moss has awoken. When allowed to play aggressive defense the unit played well, though they ran out of gas late from chasing desperate Colts receivers trying to catch up. After a day to think about it, I have cooled off. The Pats went into the home stadium of the undefeated Colts (who are either #1 or #2 ranked in all team power rankings) and lowered the boom on them for most of the game. It took a frenetic effort and some really amazing catches for the Colts to win this game. Lost in all this was that this contest was wildly exciting!

Kid Dynamite has his take on the game up today as well, if you are so inclined.

The FED Speaks and Gold and Silver Listen
I was laughing over the weekend as I saw several articles imply that Ben Bernanke's speech today may start to flesh out the vaunted "exit strategy" everyone is so sure is on the way. Right before Ben's speech hit the wires the dollar was even in rally mode on this kind of thinking. Why so many want to look dumb is beyond me, but the speech was as easy money friendly as can be.

Accrued Interest has the noon time panic in pictures when Bernanke mentioned the dollar, but is was short lived after reading his words over.

You can see a copy of the prepared remarks here.

Quick and dirty summary is "the FED has saved the world and while some issues remain, growth will resume even though there will be no jobs. Oh yeah, and easy money is here to stay. Bank on it!"

My favorite line:
My own view is that the recent pickup reflects more than purely temporary factors and that continued growth next year is likely.
HA! Look like Bernanke has been reading the blogs!

It seems funny that Bernanke felt it was needed to try and paint the recovery as anything other than government stimulus/bailout artificial pumping. To me this is very revealing and shows just how scared the FED is about confidence right now.

In the Q&A session Bernanke offers up his signal of "all clear" for stock market mania:
In a Q&A session after a speech in New York, Bernanke at first channeled his predecessor, Alan Greenspan, on the subject of bubbles: Bernanke said it was "inherently, extraordinarily difficult to know whether an asset’s price is in line with its fundamental value or not."

And he added: "It’s not obvious to me in any case that there’s any large misalignments currently in the U.S. financial system."
And subprime is contained as well.

Well there must be a bubble someplace and many think it is in gold. Gold moved up strong today and EconomicDisconnect was very pleased to see silver make a key breakout above $18/ounce. Nice!

Metal minded readers may like to check over a Sunday article at The Golden Truth which discusses foreign country interest in the metal.

That's about it, I have some errands to get done.
Disclosure: If there are any new readers, I am LONG GLD,SLV,PAAS and hold physical gold and silver as well, so I am biased indeed.

Have a good night.

Sunday, November 15, 2009

Sunday Observations

I would like to say that the Star Wars in concert show was a wonderful treat. All my favorite john Williams music with a movie scenes on a jumbo tron. The orchestra was perfect and the sound was very good. Anthony Daniels, the actor who played C3PO narrated the show in person and was very entertaining.

The orchestra got a standing ovation at the end by the TD Garden crowd, and they did an encore of Vader's Anthem to close the show. I had a great time.

Of course we all then went out until close in Boston, so I am a little slow today. Still, I am waking up for the huge game tonight between the Patriots and the Colts. I was shocked at some of the early game results, so just a quick recap.

Bengals 18, Steelers 12
This was pretty surprising. I guess I still do not give the Bengals enough credit. I will now. Season sweeps of both the Steelers and the Ravens leaves the AFC North entirely in their hands. I guess 8 years of #1 draft picks eventually catches up with a team!

The Bengals are 7-2 now and their next 4 games are very favorable. The Steelers will have to play to win now as they may need to grab a wildcard to get into the show. Amazing turnaround for Cincy.

Jaguars 24, Jets 22
In a battle of 4-4 teams looking to try and make something out of the season, the Jags run all over the Jets and score late to wrap up the win. At 5-4 the Jaguars have dim playoff hopes, but they are still alive.

What to make of the Jets? Where is that "number one" defense? Why do they turn the ball over so much? I cannot answer these questions but at 4-5 the Jets are in trouble. A loss next week at New England and it is dagger time for their season. Does ESPN's Tom Jackson still think the Jets are going to the Superbowl? If they buy tickets maybe so!.

Redskins 27, Broncos 17
Another upset. The lowly Redskins use every trick in the book and get help by a hurt Kyle Orton to win their 3rd game. Denver is on a skid right now and will play the Chargers (who are beating the Eagles early in their game) next week in a game that suddenly means much more than I thought it would 2 weeks ago.

What ails the Broncos? Limited run game, short passing game, and a defense that is getting a bit worn down look to be the problems. Next week will be big.

Other Games
-The Buccaneers grossly mis-manage the clock at the end of the game and kill their chance to beat the Dolphins. Dolphins 25, Bucs 23

-The Saints continue to play bad football, turn the ball over, and suffer yet another monster injury in the secondary. They still beat the Rams, but things are getting a bit darker for the Saints. Saints 28, Rams 23.

-The Titans continue to show they have not mailed in this season, blowing out the Bills. Titans 41, Bills 17.

-The Vikings keep rolling. Adrian Peterson is going to have practice holding the football all week I imagine. Vikings 27, Lions 10.

-The Falcons continue to be up and down, dropping a game to the resurgent Panthers. It is hard to get a solid read on either of these teams at this point. Panthers 28, Falcons 19

Late Games in Progress as of writing:
-The Cowboys are having a hard go against the Packers, just as Gawains predicted and I did not. Uh oh.

-The Chargers no doubt saw the Broncos score and are leading the Eagles going into the 3rd quarter.

New England Patriots at Indianapolis Colts
The weeks biggest game by far.

I could talk about this game all night, but I will keep it short. To win the Patriots will have to score 28 to 31 points and the safety play on Dallas Clarke will have to be good. Anything less will not get it done. Can the Pats score 28-31 points? Maybe, with a few turnovers then probably. This should be a high level game but the Colts have the home field and recent history on their side.

Addendum: The Automatic Earth has a new article up tonight that addresses many of the very things that are wrong right now. Of course the writing over there is a bit better than mine, so you should check this one out:
Instant Gratification
TAE is running their Fall Fund Drive and if you appreciate the work done over there as much as I do, you could pass along a small gift to help the site run.

Have a good night.

Friday, November 13, 2009

If At First You Don't Succeed

I will be taking the advice of the Anon poster from the "Running Man" post and get on with my stalled empty life instead of waiting for the end of the world that I am sure is coming. To that end, I have premium tickets for tomorrow night's Star Wars extravaganza, Star Wars in Concert!!!!! I will be staying the night in Boston to celebrate and allow myself to feel joy instead of gloom and doom. Thanks Anon!

The Big Dogs Unload the Big Guns
The writers in the blogroll at the left represent, in my opinion, the best thinking and writing on things finance available. Sometimes the big dogs have a huge game, and today featured some really impressive pieces.

Mish Shedlock rolled with Mish Unemployment Projections Through 2020 - It Looks Grim. The article is very lengthy but well worth the read.

In summation, after some modelling, Mish thinks UE could stay at or above 8% until 2020! Now that summary may seem totally laughable, it did to me, if you really look at the work Mish goes over this scenario is very likely. Of course most will say "there will be some unknown massive driver of jobs" and that very may well happen. In fact, I think it will have to happen for this projection not to hold. Ugly, but great for low inflation!

The second big gun was a thoughtful piece over at Jesse's Cafe. The title is Money Supply and Demand, and the Monetization of Debt which is required reading if you want to understand some of the action behind the scene. If you don't care because GOOG is up, then please skip this one.

If At First You Don't Succeed
To set this section up, allow me to review my macro ideas on things economic:
-Unemployment is very bad, and much worse than the headline number would indicate
-There is no recovery in housing, only the US government buying all the mortgages and giving bribes to people to buy
-The Banks are still in worlds of trouble, but have been provided with so many helping hands that they are marching on
-The dollar is in trouble and not in technical sense, but in a real lack of faith kind of way
-The economy is still terrible and absent government stimulus spending things would be much worse number wise

That is just a few. Now if I am wrong, then the headlines and stories would run counter to what I have written.

So if it is "Mission Accomplished" by the FED, how come an exit strategy is on hold probably until 2011? Across the Curve featured a submission by Steven K. Beckner, a noted FED watcher, and the whole thing screams "No Exit Coming". Of course the tone is all soft and easy on the FED, but it does contain this snippet:
The problem, of course, is that eventually the Fed has to start to
back up this kind of talk with action or risk losing credibility. At
some point the Fed will start to sound foolish and unbelievable if it
keeps talking about all the tools it has but keeps them locked away.
I just about burst out in laughter on that line.

What about a measly rate hike? No way says David Rosenberg until 2011, which has been my earliest target for a rate hike. FED futures now bear out what I have been saying forever.

So forget FED policy for a moment, if I am wrong then the extra help from Uncle Sam should not be needed. After all the housing programs, TARP, and a $787 recovery spending bill for all those "shovel ready" job projects things should be getting better, yes?

Well then:
Senator Reid tees up 2010 jobs bill
No word on if these jobs will be "shovel ready" or just making shovels as yet.

Obama to focus on job creation
The next line should read "Just in time for election 2010".

Ok, I agree this could just be political posturing. What I do take seriously is the idea that more stimulus spending is on the way by someone that really has inside information. Please consider:
Goldman On Why A Second Stimulus Is Merely Months Away
Now that is INSIDE information if there is such a thing!

I could go over the disaster that is the coming FHA bailout (it's policy to make bad loans, its the American Dream!!) but I want to keep a good vibe for the fun stuff.

If at first you don't succeed, try try again! I think they all will be trying for some time to come. Of course being a perma bear will bias my view, so be warned.

Friday Night Entertainment
A mix of things to get you ready for the weekend.

Funny Pictures
In my never ending quest to generate more web traffic for my humble site, here is an LOL CAT, FUNNY CAT PICTURE, FUNNY-PICTURE, LOL CHEESEBURGER submission which generates tons of hits for some reason.
Moms can be protective of their children:
funny pictures of cats with captions
see more Lolcats and funny pictures

I am hoping this is some kind of quark due to language, if not no wonder retail sales have been weak:
epic fail pictures
see more Epic Fails

Wikipedia is a Worthwhile Resource
By now you all know I am a serious Wikipedia addict. What you may not know is that Wiki is running a donation drive to raise funds. Now I cannot vouch for how that money is spent and all that so do not email me telling how they use the money to gun SPY mini futures to kill your shorts on a perfect fibonacci sell point. I have donated today, and I am merely asking that you consider it.

For an example of how great the site is (or how sick I am, you decide) while i was checking out some information on Civil War submarines (don't ask) I became engrossed by all the submarine links and eventually ran into Project Jennifer.

from Wiki:
"Jennifer" was the code name for the United States Central Intelligence Agency (CIA) project to recover the sunken Soviet submarine K-129, one of the Soviet Union's GOLF II Class strategic ballistic missile submarines, from the Pacific Ocean floor in the summer of 1974, using the purpose-built ship Hughes Glomar Explorer.[1] The 1968 sinking of the K-129 occurred approximately 1700 miles north and west of Hawaii,[2] at a location still (as of 2009) held highly classified by U.S. intelligence agencies. Project Jennifer was one of the most complex, expensive and secretive intelligence operations of the Cold War at a cost about $800 million. The salvage operation has been compared to Apollo space program in terms of its complexity and scope: in addition to designing the high tech recovery ship and its unique lifting cradle, the U.S. had to also develop precision stability equipment to keep the ship nearly stationary above the target while lowering nearly two miles of "drilling" pipe, and scientists also developed methods for preserving paper that had been underwater for years in hopes of being able to recover and read the submarine's codebooks.
Amazing! If this interests you I can recommend a couple of books I have already read about this topic. And yes, I know I have some serious issues.

Film Clip
Tonight's cinema comes from loyal reader Watchtower who suggested the car chase scene form the classic film Bullitt. This is a thrilling throw back to real stunts and real engines that growled and roared. Nothing like it:
Super Sweet!

Rock Blogging
Ending the evening with some songs to get you positioned to enjoy the weekend.

I was thinking of reader Kevin (Kev, where you at?) when this song came on the radio Today on the ride home. One time Kevin requested an Ace of Base song and I remember how that struck me as out there (I do like Ace of Base). Today I heard Roxette and "She's Got the Look" and I thought Kevin may like this one as well:

This song has always hit me pretty hard and is a longtime favorite. Take a listen to Crowded House and "Don't Dream It's Over":

When Van Halen broke up I was crestfallen. I thought David Lee Roth would suck as a solo, and only the song Yankee Rose is a stand out. this tune does indeed rock:

Great into segment! And yes that is Steve Vai on guitar.

Last call! Grab a drink and enjoy the close!

A band I liked when they broke out was System of a Down. I had lost track of them, but after checking Wiki, I know they are on hiatus. Their breakout song was called Chop Suey and I really love this song for the tempo changes and vocals:

Have a good night.

Thursday, November 12, 2009

Thursday Night Open Thread

I have some extra computer time tonight and I am going to use it to research a few things, as well as polish off an Economic Disconnect Christmas list for Mrs. Disconnect. I am a huge Christmas and Birthday supporter and it is like in the film "The Godfather" during the daughter's wedding, I cannot refuse a request!

I am going obscure for myself this year and am looking for some vintage Grendizer and Gaiking Japanese robot anime DVD's. Maybe even some Star Blazers. They just do not make cartoons like they used to.

That said, I will checking in during the evening, and half watching the NFL game between the 49ers and the Bears. Your mission, should you choose to accept is.....

-What are you watching right now? What seems ready to move?
-What area of economics is most important to you?
-What item has been beat to death?
-What item(s) have been overlooked?
-Any new (or old) sites that you are finding have great content?
-What's on your mind?

Let it all out, you will feel better.

As always, Friday night is the usual entertainment, so please leave ideas or requests in the comments. If shy about a pick, use the contact email.

Have a good night.

Wednesday, November 11, 2009

The Running Man; A Reality Show?

Today is Veterans Day and I would ask all the readers to take a minute and think about all the men and women that have served in our armed forces over the years and presently. They do not make policy, they carry it out and that is above any partisanship. This site used to have a regular commenter named AnonG who frequented the site. A while back AnonG announced his joining the military. I wish him well and if you are still out there checking in G, I am thinking of you!

A bit short on time but I had a post in mind, so away we go.

Before The Regularly Scheduled Programming
Before tonight's missive I wanted to offer my own 2 cents about the markets in general and specifically ideas about "perma bulls" or "perma bears".

What I would like to say is that I am bearish on many things. Of course I can see a government influenced pop as much as the next person, but that does not change my macro fundamental view. It perhaps changes the timing, but not the end result.

My own words for the "perma bull" types and those that are screaming "look at what the market is telling you bears" or "admit you are just plain out wrong" is the following public service message:

-You need to go over the last year again as I think time and distance had warped your mind. Fundamentals finally trumped collective delusion and things went south in a hurry, and no doubt you were "dollar cost averaging" in the whole way down. No you would have the nerve to try and run a victory lap and taunt those of a different view because of the single greatest financial experiment in the history of the USA? Shame is not an issue for you.

Try and remember something as the S&P 500 rockets higher (as the dollar is dropped in tandem) and know that your only claim to fame is that the government saved you. The FED took your hand when you were lost and crying in the fetal position and the Treasury powdered you backside after your bout with incontinence in the face of the credit crunch. You now rely on their committed support to help you learn to walk again and play the only game you know how to: every asset going up all at once makes investing easy.

Of course if you would like to remove your diapers and make an effort to stand on your own "the fundamentals are improving" two feet I would welcome you in joining me is a call for the immediate end to any and all government support/easy money practices and then we can see where the chips fall.

Oh, you need to go to the bathroom again? Well by all means go ahead, your coddling parents will be here when you get back.

Back to the regular show.

The Running Man; A Reality Show?
A more light hearted post to get a few laughs and maybe inspire some thinking.

I am sure that most readers are familiar with the Arnold Schwarzenegger film "The Running Man". What you may not know is the film was based on a Stephen King short story of the same name which was an excellent piece of writing. Now you know.

Taking great liberties, and having some fun with the dialogue, I will present the show "The Running Man" with an whole new set of players and circumstances.

Damon Killian: Hello all the folks at home! Tonight we have a special show for you, one you do not want to miss. But first, who loves you and who do you love?!:

Raucous crowd: YOUOOUIO!!!! (roar)
Killian: YES!!!!:

Killian: As you know we have bad debts, they are bad elements, they hurt us all. Now forget how they happened, it does not matter, what matters is we are going to help those bad debts. Indeed, if these sick players can survive our game for the allotted time frame, they will simply be forgiven! Their debt to society paid in full! What a deal!

Here are your guest runners
-Housing Market Assistance across all fronts (you know the players)
New item today:
FHA moves to boost condo market
I am sure government backing for buying up Miami condos is rooted in sound policy making.
-Commercial Real Estate Support
New item today:
New Rules and More Lies Hide Cancerous Commercial Real Estate Loans
Extend and Pretend in perhaps it's finest iteration. Unreal.

Back to our host:

Killian: Now these bad debts can either be lost over time to a recovering market, or inflated away by the central bank. But first they will have to survive their time in the game zone, and you know who is hunting them, right?

Raucous crowd: YEESSSSESS! (roar)

Killian: Who?!

Raucous Crowd: The Stalkers!!

Killian: YES!!!:

Killian: Tell em about our stalkers!

Announcer: Leading the league in kills last year is Fireball whose main weapon is his "mark to market" flamethrower which torches accounting tricks, wait, I have just been informed that Fireball's flamethrower has been rendered inactive and thus he cannot participate in the hunt. Never fear, we have a deep stable of stalkers!

Announcer: Next up is "Buzzsaw" whose currency devaluation chainsaw tears away at the dollars value across the world:

Announcer: And finally, we have Professor "Sub Zero" who can chill any countries plans for unlimited funding by freezing a bond sale:

Killian: The rules are simple, all the runners have to do is run out the clock on the stalkers and all will be well. So are you ready? Are you ready?!
Raucous Crowd: YESSSS!!!

Killian: To Extend!!:

And Pretend!!!:


Guest Runner Bad Debt: Killian, I'll be back!

Killian: Only in a sovereign default punk! GO!!!!!!!

End Sarcasm.

The entire plan has always been to buy time so that someday, someway these debt will be at par either through some miracle of a real estate mania rebound, or devaluation of the currency in a controlled manner. If you are of the mind that this kind of gamesmanship is both good and needed then you sit across the divide from me.

Have a good night.