Thursday, May 27, 2010

Economic Disconnect Special Exclusive Interview

It will be the maiden voyage of my new fishing kayak tomorrow. If I do not post something by 7pm tomorrow maybe something went very wrong! Wish me luck!

I am now officially on a 4 day mini vacation. There was plenty of important things going on today in the financial world, but I am already half way out the door on that mindset! A few links, thoughts, and a special exclusive interview will be the content tonight. As always, Friday night is in full effect so get your requests in and if I do not drown I will have the big show up tomorrow night.

Best of the Best
I think I have had my fill of debating small details and following daily gyrations of most things. At this point I am confident in my macro views going forward and all evidence and data supports my view, in my own mind of course! Going forward I would like to spend more time and more pixels writing larger essays instead of snippets and small items of news. I used to do this almost exclusively but time constraints became an issue. We shall see how it goes.

As such, tonight I will feature some more thought provoking essays I came across that will serve as the kind of writing I think is most important to being able to really make your own decisions on things going forward.

Back when I just was out of college and started working I was a political junkie. I loved the stuff. After a bit I saw all the crap that it all really was and lost interest. A fellow I used to read quite a bit for his great sense of balance and truthful speaking was Charles Hugh Smith. As of late I re-discovered his work and lucky for me he has now devoted more and more of his time to things economic. Tonight I offer without excerpt:
The Root of the Housing Bubble Remains Unchanged
When I read this today I felt it was like a huge clue bat to swing at the never ending garbage calls of a "rebounding housing market". Mr. Smith now has a spot on the blogroll, so don't miss him!

Dr. Housing Bubble has also been on fire as of late and returns to the Must Read column. Nobody does housing number breakdown and original research like the Doctor. Nobody. As we enter into the next dip in real estate, his work will become very important. Today's missive is on the ginormous volume of home sales the FHA has to handle to keep things from falling apart. See it here.

No stranger making an appearance here, Jesse has yet another great article covering the money supply and all that entails. Take a look.

Other Tidbits
The blog everyone loves to hate, Zero Hedge, has all kinds of items up tonight so just keep scrolling.

I had to share this one! I almost laughed the soda out of my nose this morning when I read this one.

Barry Ritholtz of The Big Picture was ill yesterday into today, probably from a little food poisoning. We have all had it, it is not fun. The comments section provided the kind of nasty, hilarious humor that is bad taste, but you cannot help but fall apart laughing.

Barry wrote:
I seemed to have eaten something yesterday — breakfast and lunch from the same deli — that caused quite a bit of intestinal distress. I thought I might actually go to the hospital last night to check for Appendicitis.
Flushed out my system with lots of liquids instead.

A few comments down came this one:
NolansDad Says:
May 27th, 2010 at 9:46 am
Barry. These things happen all the time. The guy who made your sandwich probably just got a little chit on his hand when he was wiping his ass and didn’t wash his hands. He than wiped the chit by accident on your sandwich. What you have to be careful about are tapeworms because many illegals have worms and pass it to coworkers. Now if it was a lady who made your sandwich she may have
been bloody and wiped herself and you picked a bacteria. Either way I would make sure to get my hands on the tapeworm pill. No charge for the free advice. You are on my team and I am looking out for you.

OMG, that was so bad but too funny.

Economic Disconnect Special Exclusive Interview
At a time when so much seems to be so confusing I thought I would seek out a voice of calm and advice. I was granted an interview under the following conditions:
-Quite a few pictures would be shown
-The interview would not interfere with bedtime
-The guest did not have to leave the couch
-A milkbone would be provided as compensation, and not the really small ones

I agreed to all terms and so here is our special guest for the evening, my Pug.

GYSC: Welcome Pug!

Pug: Hello, and hello to all the readers. Let's do this, "Milo and Otis" is on at 9pm.
GYSC: Again? Ok, lets start.
Pug: Yes, Lets.
GYSC: A major concern right now is that the debt problems of some Eurozone nations will cause the breakup of the Euro currency and result in chaos in the world. What is your take?
Pug: It will not happen.
GYSC: Care to elaborate?
Pug: I guess, it's your milkbone. It will not happen because it CANNOT happen. You get me?
GYSC: Not really, can you help me out?
Pug: Oh boy. Ok, if the Euro splintered what would happen? A total madhouse for a while, yes? So it will not happen and any effort needed in that regard will be performed.
GYSC: What if things really get bad in Spain and ....
Pug: Let me stop you right there. All the major US banks are insolvent by any reasonable measure, correct?
GYSC: I guess so...
Pug: Well, you can guess, but I can talk so they are. So what has happened?
GYSC: They are all open and getting record bonuses.
Pug: I have to lay down for this one, it's going to bend your mind:

Pug: Nothing has happened because IT CANNOT HAPPEN. You understand? In any system built on confidence and notional values of things as important as money and debt, keeping the game going is not that hard when you get down to it. I mean, who wants the stone age? Who wants a lowered living standard? Who wants to miss their DVR? The whole show is set up this way. Another example because I can tell you are not quite there. With all the crazy forex moves up and down as well as bond spreads moving in ways rarely seen how come not one hedge fund has blown up?
GYSC: That's a good question.

Pug: Yeah, Ya think? With an 80% rally off the lows are you to think not one fund was way off on that and blew up? Maybe a few baby ones, but not one with any connections. Systemic Risk prevention is like that. Wonder why all those reserves are just sitting at the banks? Maybe they are spoken for.
GYSC: I never thought about that way, nifty.
Pug: Yeah, I know. What else.
GYSC: Please do not do that.
Pug: Do what?
GYSC: Sit like that, it looks almost like you are a person and it is creepy.

Pug: Look, sitting like this helps my lower back. Are we going to continue?
GYSC: I guess. What do you make of the action this week?
Pug: I saw no action that you had.
GYSC: I meant the markets, smartass.
Pug: My bad. Well it is a sign of a solid market when some rumor that China wants to "re-evaluate" their Euro bond position causes a sell off , but when they say they are not doing that it, it ignites a huge rally. Markets move up and down 3% daily all the time.
GYSC: Come on, this is supposed to be a serious interview.
Pug: Yes, and you think your hair is serious, HAHAHA! Sorry could not help it. Ok, when everyone knows the game is up all want to hit the exit first, hence the overreaction to things both silly and maybe true. Of course nobody wants to miss a move up, so they cannot stay away.
GYSC: Some would call this a "stock pickers" market, what's your take?
Pug: It's a donkey market. You should write a fake headline on a popular blog comment thread with a fake headline like: "China says no more US bonds; Commies hate Capitalists as well as the Socialist USA!". See if you get a move in the futures.
GYSC: Are you serious?
Pug: Try it. Look leave a paper out on the garage floor instead of the doggy pad, when I pee during the day on the markets section just buy those stocks. Especially for Mondays and Fridays.
GYSC: You are indeed cynical.
Pug: It's called realistic. Anything else? I am getting bored.
GYSC: Ok. A never ending debate is between the outcomes of inflation, hyper or regular, or deflation, regular or extra sugar, HA!
Pug: Was that a joke?
GYSC: A small attempt.
Pug: Yes, very little. To be honest I just do not think about those things.
GYSC: Why not?
Pug: Look, I live what, 12-16 years? How much have biscuits changed in price in that time? Maybe in Zimbabwe, but here its not an issue. I have heard the tales from my super-great-grandfather that a box of biscuits in 1918 cost 1 cent. Today it is $4.99. So what? Who lives that long?
GYSC: Now how could you know your super-great-grandfather?
Pug: It is passed through our genes like stories. You dummy humans need cave paintings, hieroglyphs, and books to record history, us pugs just know.
GYSC: Well assume you did live longer.
Pug: Explain both to me in terms I can understand.
GYSC: In inflation the price of biscuits goes up so fast that an income, say MY INCOME, cannot keep pace and thus I cannot buy them.

Pug: WHAT????
GYSC: Oh, now you perk up?
Pug: Well that's nuts, tell me about deflation.
GYSC: In deflation things get way cheaper...
Pug: Praise be the god of dogs....I am SAVED!
GYSC: Let me finish! In deflation things get way cheaper, but MY INCOME gets smaller and all my assets shrink....why are you chuckling?
Pug: Your ass shrink? Not since you stopped hitting the boxing bags buddy!
GYSC: OK Mr. Smarty Man, let me finish. In deflation things get way cheaper, but MY INCOME gets smaller and all my assets shrink so I cannot spare any money for things like dog biscuits.
Pug: I'm sorry, what's the difference?
GYSC: Semantics I guess, plus some think if they buy certain things if either happens they can be safe.
Pug: Well it sounds the same to me. Terrifying!

Pug: Can't you just stockpile biscuits now while you have money? What about those shiny metal things I always see you counting and polishing?
GYSC: Down low Pug, Down low! I could, but I think we are ok for a bit.
Pug: So you say. It bed time. Can I ask a question?
GYSC: Why not? Go ahead.
Pug: Is it true that you and my human mother are going to get another pug to usurp my authority here at my castle?
GYSC: Well, we may get another pug, but....
Pug: Be careful on the stairs usurper!
GYSC: Hey, come back, lets talk about this!

NOTE: The opinions of the Pug are his own, but may reflect some of mine, his human mom's, and various other voices. This post was inspired by a doggie related post over at Kid Dynamite's site.

Have a good night.


Lurker said...

My Friday night pick is "School's Out" by Alice Cooper

sedintary state said...

Regarding Pug; Let him eat cake.

Just hope he doesn't pick up human tendencies and want to have it and eat it too. But he looks like a fine fellow. Worth the risk.

getyourselfconnected said...

The Pug Knows all, disregard at your own risk!!!!!!!

Jeff said...


Nice post!

Better buy some bisquits now before inflation kicks in:)

Futes dropping off here. Dollar is rising....Dump tomorrow perhaps?

GawainsGhost said...


Yeah, I had pretty much the same conversation with Ally the Alley Cat the other day. This would be the stray kitten my mother found at the office and brought home a couple of years ago. Ally promptly invaded my condo and took it upon herself to serve as my alarm clock. Apparently she doesn't like for me to sleep past 5:00 AM.

But she's a smart cat. The other two, Calico Cat and Puffy the Persian, really don't do much of anything except lay around. Not Ally, she's constantly running around, exploring, and generally being mischievious. However, occasionally she will curl up on my lap and we'll talk, like the other day.

GG: Ally, I'm worried about this economic calamity. Rampant fraud, securities violations, racketeering, market manipulation, regulatory arbitrage, corrupt politicians, insolvent banks, high unemployment, stagnant wages, bankrupt cities, counties, states, and countries, recession, depresssion, falling housing prices. What do you think, are we all doomed?

Ally: Meow.

GawainsGhost said...

By the way, here's some inside real estate nonsense.

The local board down here has been taken over by a bunch of miscreants. Last year it was revealed that the association had over $1,000,000 in the bank and the directors were planning on buying a fancy commercial building downtown to move the board office into. That didn't sit very well with many of the realtors, particularly my mother. (She was elected president five years in a row in the 80s, you know, back when the association had some credibility, and is widely respected.)

Ordinarily, she doesn't get involved in board machinations these days, preferring instead to concentrate on listing and selling more houses than anyone alive, and intentionally working me to death. If God were a realtor, he'd have to work to keep up with her.

Last year, she went to the board meeting to express her outrage. "If you've got a million dollars in the bank, it's obviously because our dues are too high. You don't need to buy a building! This is the most ridiculous thing I've ever heard of." Or words to that effect.

She received a standing ovation, and the realtors overwhelmingly voted to kill the planned purchase. That did not go over well with the directors, but none of them have the guts to say anything to her about it. So instead they took to plotting behind closed doors and extracting their revenge on the poor secretaries who work for the board, whom they believe had tipped off my mother. (Actually, it was several of the older realtors, but they don't need to know that.)

They've fired all but one. I was at the board office yesterday to pick up some updated grid page books, and this poor girl was severely stressed. The directors were having another secret meeting, and she was fearful for her job. I told her, "Don't worry, I got your back." So as I left to continue on with my assignments for the day, I called my mother and let her know what was going on. Now she's really pissed.

She sat down and fired off an email to the directors and copied it to all the board members. Basically, she wrote:

"For 37 years, I believed I belonged to a professional organization. Now I know that I'm only paying dues so the directors can play childish political games. I would be happy if I could remove Obama from office, but he was duly elected. The directors were also duly elected and should be allowed to serve out their terms. There will be another election in a few months. Until then, they should stick to selling real estate, or they won't have any work to do when they're voted out of office."

We'll see how this sordid scenario plays out. Stay tuned.

GawainsGhost said...

Oh, and for Friday Night Entertainment, you know what I haven't heard in a long time? Some Rolling Stones.

Their catalogue is vast, but some songs stand out. "Sympathy for the Devil" is of course their signature song. "Gimme Shelter" as well. "Jumping Jack Flash" is revolutionary, however, "Bitch" remains one of my favorites. "Rocks Off" is probably their best work, but "All Down the Line" is excellent. "Shine a Light" should not be dismissed though. "Hand of Fate" is extraordinary. "Respectable," "Beast of Burden" and "Shattered" are legendary. "One Hit to the Body" rocks.

The Rolling Stones, where would rock and roll be without them?

getyourselfconnected said...

that is really great inside information. Who new the real estate biz was so nuts?

Ok, I have to go rig my fishing rods and get set to go out on the kayak. Wish me luck!

Anonymous said...

GYSC - AWESOME! That conversation between you and the pug was both insightful and funny (provoked one or two audible chuckles). The pug should be a semi-regular contributor to your site!

GawainsGhost said...

Yes, well, I just found out that one of the director's responded to my mother's email. The directors are not at fault for the current situation, there has been a lot of drama at the meetings, and certain information has not been made public, blah, blah, blah.

This was my mother's response.

"The directors and board members should conduct themselves in a manner befitting their professional status and responsibilities. There is no place for drama in a professional organization. If the directors and/or board members want drama, they should go to a theater."

Good luck on you fishing venture, GYC!

Cookie said...

CH Smith is OK, but he is just a little too out there for my takes. Take this quote of his.

"I know this sounds "impossible" (just like it was "impossible" for stocks and housing to crash) but what if the government is forced to repudiate its housing policy and ownership falls from 67% to 47%?"

For starters, anyone with half a brain realizes that the "impossibility" of housing & stocks to crash is not equal to the impossiblility of ownership falling from 67% to 47%. Some risks are simply more probable than others.

That aside, suppose in 1950 you saw that ownership chart spike to 55% as the govt got into housing and you said, "this is unsustainable, im gonna sit this out til it crashes back to 47%".

In 1960, as it rose higher to 60%, you said, "this is unsustainable, im gonna sit this out til it crashes back to 47%"

In 1970, as it rose even higher to 64%, you said, "this is unsustainable, im gonna sit this out til it crashes back to 47%"

In 1980, as it started to fall, back to 63/62% you said, "I KNEW this was unsustainable! It took a long time but its finally crashing! Only a few more years til it gets back to the 47% I knew was coming - after 30 years my patience will finally be rewarded!!!"

In 1990, as it did not continue falling but instead flatlined at 63/62% you said "gee this getting back to 47% is taking alot longer than I thought. Maybe I shouldnt have passed on the 55% level I thought was unsustainable 40 years ago!

In 2000, as it started rising once again to 66%, you said "oh shit", I made a terrible mistake by passing on that 55% level I thought was unsustainable 50 years ago!

In 2006, as it peaked at 69% and started falling again, you said nothing, because you were dead of old age.

Whats my point in all this? I guess its at some point you just have to say fu*k it! and get on with life, otherwise you may be sitting on the sidelines for your entire existence. It shure would have helped our hypothetical guy in 1950 who was sure that what he saw at the time was "unsustainable" and the prudent thing to do was wait out the "crash".

getyourselfconnected said...

yeah maybe the Pug will be a weekly contributor.

I would not mess with your mom, she is tough stuff

I would think a drop to 47% highly improbable as well. CHS makes a compelling case for what's still wrong with housing nonetheless. I have zero idea on his positions (stocks, homes, etc) but I would doubt he is holding his breath waiting for something. Can you really say most of us do not "get on" with life? Wait till the Friday night post, HA!

On that note, the kayak first run was pretty good and I did catch some stuff. Full report later.

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