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The wind today is huge and I am hoping it can clear off the rest of the acorns from the trees. I am looking forward to serious yard work ahead (snark)! At least I have a mini vacation coming up!

Tomorrow is Friday Night and you know what that means, but read on and see if maybe you, the readers, can add to the post.

Ask a Question
I had a few things I was going to write about, but I am not feeling it. More of the same it seems every day and it matters less all the time. A 1.6% print for GDP would be terrible, but it's great for now at this stage of the recovery. FX moves being made all around and Mexico writes Dollar options now? Ok. The mortgage document fraud stuff is now getting more coverage, but I already told you how that will play out.

I saw this headline when I got home:
Awesome Month For Stocks Ends With Frightening Thud: Here's What You Need To Know
When I looked up the closing numbers, it was barely down! Must be a bull market if a tiny dump makes headlines.

Most of all I guess I want to know what you, the readers, want to know about.

Between tonight and tomorrow around 7pm (eastern), submit questions or areas you would want my opinion on in the comments or via the email to the left. I will answer anything and everything that I can tomorrow night before the show. I will give you my take on anything. I cannot say I will be right or that I may even be able to offer something depending on your question, but I will do my best. This is your chance to "interview" Economic Disconnect! I know, try to contain yourself.

I actually wish bloggers would do this regularly, I would love to have a chance to get an inside look at how a writer I like thinks. I think my blog is small enough that I can handle the whole 5 requests I will get, but I can see how larger sites could run into trouble.

Questions can include;
-Targets for stocks
-Targets for metals
-My likes, dislikes
-Music
-Boxing History
-Genetics/Biotech/Microbiology/anything related
-Books
-Personal Experience (keep it clean!)
-ANYTHING!

Let it fly and I promise to get everything answered. How many times will you get this chance? Along the way I may get an idea what people are thinking about and wondering about right now and that may guide some posts going forward. I do get something out of it!

If nothing else, just leave a Friday request so I know folks are out there!

Filler
When I was not at Wikipedia, FINVIZ, or my blogroll here is what I clicked today and into tonight:

-Most complete beer 'proteome' finding could lead to engineered brews

-It's not legs or breasts that make men go weak at the knees - to catch a fellow's eye, show a bit of arm (BALONEY!)

-Ok I wrote this one in jest (not really): "Study shows that TARP and QE Money used as a total tax holiday for taxpaying Americans would have led to an amazing economic recovery, as proven by Chi Square analysis"

-The Sauciest Moments from the Best Ever Month of Sci-Fi Burlesque (NSFW oops!)

-Bad Ex

-Ok, One Financial! Mish gets a letter from a REAL LIFE business owner, the kind the FED never talks to, and here is what he has to say (summation):

So QE actions by the Fed have no effect on us. Interest rates could go to zero and it still would not matter. What we are NOT seeing are credit card rates going down - now THAT might help us somewhat.

Keep buying those bonds Boom Boom!

-Can Bacteria Make You Smarter?

-Could computers and robots become conscious -- if so, what happens then?

-Zacatecas 8 Reale Discussion

-BBQ related: "September 4 Ingredient Challenge" done well by the maestro.

-Ha! Paper money swappable for gold!

-Or pure fiat!

Have a good night.

Is This How the FED "Manages Expectations"?

Middle of the week once again. I finished Stephen King's novel "Under the Dome" last night. For 90% of the book I thought it was as fine a work as any King masterpiece, but King's inability to write solid endings is becoming his biggest shortfall later in his career. This book is no different. A little disappointing, but overall a nice novel.

Obligatory Robotic Scare
Reader Scharfy communicates a disturbing new advance in cybernetic enhancement. As it is, the following work was done at Raytheon Corp, which I can almost see from my back porch (You Betcha!):

Raytheon Unveils 2nd Generation Exoskeleton Robotic Suit
Raytheon’s second-generation exoskeleton (XOS 2), essentially a wearable robotics suit, was unveiled for the first time recently during an event at the company’s Salt Lake City research facility. XOS 2 is lighter, stronger and faster than its predecessor, yet it uses 50 percent less power, and its new design makes it more resistant to the environment.

While not a pure robot in this case, the march forward continues!

I Say Again
Maybe I am not that bright in things legal (100% likely) and way too sure that the bounds of legality will be thrown aside in the name of the "recovery" (150% likely) but every time I see a headline about the fraudulent mortgage/summons/contracts practices by the mega banks, I call no joy. As readers know I harbor lucid dreams of the TBTF banks going down the drain but this just is not going to amount to anything. As I have stated before, it would be against the narrative and so expect soon some kind of side step legislation to get around legal rights and law.

A few samples:
It's Really On: JPM Tells CNBC It Is Systematically Reviewing Foreclosures

20% of Florida Cases Have Problems, Including Phony Court Summons

Is This How the FED "Manages Expectations"?
I figured that when everyone, including Calculated Risk, were now sure of QE 2.0 to be rolled out in November the FED would try and throw a few guys up to say "we are still thinking about it". The FED does like to play their little games of not really showing their hand even though all their cards are QE's of varying suits. One you are a one trick pony you have to dive off a platform every now and again to maintain interest.

Here is your example of "managing expectations" by a mess of varied blather:

For QE and Beyond
-Bernanke based on last FED statement (voting member)

-Boston Fed president Eric Rosengren gets aggressive:

I’ve called this talk “How Should Monetary Policy Respond to a Slow Recovery?” My answer to that question is: vigorously, creatively, thoughtfully, and persistently, as long as we have options at our disposal. And we do have options, despite having pushed short-term rates to the zero lower bound.

For an encore to go and buy metals hand over fist:

Yet all in all, my firm view is that it is important that policymakers be open to implementing policies consistent with achieving full employment, and an appropriate level of inflation, within a reasonable time frame.

The "reasonable time frame" is a scary escalation.

Ok, now for some water on that fire:

-Tom Hoenig (voting member) offers that this stuff is not working:

In Washington, he is the burr in Fed Chairman Bernanke’s saddle: the rogue heartland banker who keeps dissenting alone -- for the sixth straight time on Sept. 21 -- to protest the Fed’s rock- bottom interest-rate policy. Hoenig warns that the Bernanke majority is setting the country up for an as-yet-unknown asset bubble: the next dot-com or subprime craze. He can’t tell yet where the boom-and-bust will materialize, but he can feel it coming, like a Missouri wheat farmer senses in his bones the storm that’s just over the horizon.

-In the same Mish item Philadelphia Fed President Charles Plosser (non voting member until next year):

The Fed must be credible. Protecting that credibility is why, based on my current outlook, I do not support further asset purchases of any size at this time. As I said earlier, asset purchases in our current economic environment can do little if anything to speed up the return to full employment. But if the public believes that they can and is disappointed, it may have less confidence that the Fed will act to raise inflationary expectations if needed. Because I see little gain at this point, and some costs, I would prefer not to engage in further asset purchases at this time.

The FED is not omnipotent and should not pretend they are is how I read that.

Quite a mix of ideas. How anyone can think lowering borrowing rates will do anything has no idea how low they are! Check this:

$29 Billion 7 Year Auction Comes At Record Low Yield And Record High Bid To Cover
Today's 7 Year came at the lowest yield in history or 1.89%, while the Bid To Cover surged to an all time high 3.04.

1.89% for 7 year money?!! How would 7 year cash at 1.3% change anything? Crickets.........

Add to all of this that the FED Audit looks to be going forward:
Fed To Disclose Emergency Lending Details By December 1
I will believe it when I see it.

I really think the FED is pissed Congress has not done something on their own by now and so close to the election I would doubt they will.

While expectations are managed, small business has called it quits and is waiting for some kind of stable policy on many fronts including taxes, banking issues, and credit conditions. They already know the customers are in thin supply, but at this point all they can expect is the unexpected from all other angles.

Have a good night.

Long Term Interest Rates

It was raining very heavy today and thus the ride home was extra special long! No time tonight, so just a quick note.

Long Term Interest Rates
I have written many times about how interest rates will have to stay ultra low (suppressed or otherwise) for a really long time. The reasons are many but the biggest that jumps out is housing and a reliance on free credit for a weak economy. Looking out I do not think it nuts to say that rates could be less than 1% (as set by the FED) for 10 years or more. How is that for an "extended period"?

Karl Denninger gets a little excited along these lines in a post today and I would suggest you check out the math he does. If rates on US debt go to 5% things get ugly in a hurry:
Avoidance Will Not Work

We are proceeding towards even more QE and maybe other stupid pet tricks as yet unknown, as hinted at today by FED member Dennis Lockhart (via Calculated Risk):

I cannot tell you how the economic policy story will play out. I can assure you, however, that the Fed has scope for further action to influence the course of recovery. And, importantly, I believe the Fed and the committee have the will to act—or not—as demanded by economic conditions in the near term.

I would again ask at what point will a clear plan that takes into consideration the LONG TERM ever be articulated by the FED? It strikes me as very weird that an entire financial system is rested upon a US Treasury and a FED that have been less than forthcoming about many things. It is my future (yours too!) on the line, how come I don't get an explanation?

Have a good night.

November Surprise?

I thought Miami was going to pull that game out last night, but those Jets are a crafty bunch. Not much defense on display last night, but the offenses were rolling.

November Surprise?
The indices closed ugly and the catalyst may have been a story which made the case that the FED may do small QE moves over the long term instead of one massive push. As we know, the markets are based 100% on fundamentals and are showing the strength of the recovery not reflecting unlimited liquidity pumping. Here is the WSJ item:
Fed Weighs New Tactics to Bolster Recovery

It is too early to make a call on this, but I am sure the markets will not like any back tracking by the FED.

Sharp Items
It would be worth your time to check out these two articles form today.

Via Leigh Drogen:
Would You Practice Brain Surgery?

The Reformed Broker shares a cool missive from David Blair (The Crosshairs Trader):
Earning Your Stock Trading Degree at Idiot University
Enjoy!

Added:
Gonzalo Lira has this take on Monetization of the Debt which fits nicely with what we have been discussing:
Gonzalo Lira: How The Fed Gave Away $1.5 Trillion Through Stealth Monetization

Have a good night.

NFL Week 3 Recap and the Mutant Mushroom

Another interesting football Sunday.

Week 3 Recap
Late games finishing up as I write.

Bengals 20, Panthers 7
These Bengals are pretty solid. Wait until they play the Steelers before getting to excited.

Patriots 38, Bills 30
The Pats passing defense makes even the inept look wonderful.

Chiefs 31, 49ers 10
The Niners are a puzzle right now. Great day for Matt Cassel.

Titans 29, Giants 10
I find it hilarious that monster contract the Giants gave Eli Manning based on one season. He is right where he belongs, a terrible QB.

Ravens 24, Browns 17
The Ravens are bipolar week to week.

Steelers 38, Bucs 13
The Steelers may be playing the best football in the NFL right now. How much better will they be when Big Ben gets back? Scary stuff.

Falcons 27, Saints 24 (OT)
Saints miss the winning field goal in OT. I have seen headlines saying "shocking win" and "huge upset" but it was neither. Falcons always play well against the Saints.

Vikings 24, Lions 10
Adrian Peterson at 160 yards rushing! How easy is football? Keep running that kid!

Cowboys 27, Texans 13
Like last years game against the Saints, the Cowboys wake up and show what they can do. Interesting team at this point.

Eagles 28, Jaguars 3
Michael Vick is playing really well. The Jags look lost.

Rams 30, Redskins 16
Sam Bradford is the real deal!

Colts 27, Broncos 13
The Colts are a tough team to beat! Broncos had quite a few chances.

Cardinals 24, Raiders 23
Yes it is the Raiders as they miss a 32 yard field goal by the highest paid kicker to lose. Hee hee.

Seahawks 27, Chargers 20
Can we just get rid of the NFC and AFC West divisions? As is, I HATE the Chargers and they get beat after gaining 518 (WOWZA) total yards of offense. Too funny.

Mutant Mushroom
I went to the side of the house to check on a gutter and spotted the biggest, ugliest looking mushroom I have ever seen! This thing must have grown in 2 days because I was just looking there on Friday afternoon! Here it is:

Closer look:

That is gross!

Have a good night.

2010 NFL Week 3 Preview and Picks

I must have collected about 400 pounds of acorns today using the "nut wizard". There are still plenty out there! Unreal.

2010 NFL Week 3 Preview and Picks
Last week I went 9-7 and I should have went with my gut on a few calls. By week 4 I should be more dialed in.

Bengals at Panthers
How the Bengals seem to own the Ravens is something I do not understand. They will get the road win this week.
Bengals 27, Panthers 17

Bills at Patriots
Seeing as the Bills offense cannot pass the ball, the Patriots should be ok in this one though they are unlikely to score in the second half.
Patriots 35, Bills 14

Titans at Giants
Two teams that are a mess. Hard to pick this one.
Giants 20, Titans 17

Browns at Ravens
The Ravens are a puzzle right now but the Browns are really bad.
Ravens 23, Browns 13

Steelers at Buccaneers
It is shocking how good the Steelers are playing right now.
Steelers 20, Bucs 13

Falcons at Saints
The Falcons got some scoring in last week and the Saints have been a little sloppy. No Reggie Bush will hurt as well. Could be an upset here, but...
Saints 31, Falcons 28

Lions at Vikings
Hey Vikings, just hand it to AP already!
Vikings 20, Lions 10

Cowboys at Texans
The Texans pulled off a miracle last week. The Cowboys are really struggling. In the battle for Texas the winner is...
Texans 27, Cowboys 20

Eagles at Jaguars
Another game between hot or cold teams. No idea on this one.
Eagles 23, Jags 20

Redskins at Rams
The Skins snatched defeat from the jaws of victory last week. They have enough to win this one.
Redskins 17, Rams 10

Colts at Broncos
Just when you think the Colts are done, they blow some one away. They have too much for the Broncos to handle.
Colts 28, Broncos 17

Raiders at Cardinals
The Cards have been worse than I expected. Can the Raiders keep their focus for a road win? No.
Cardinals 20, Raiders 16

Chargers at Seahawks
I hate the Chargers.
Chargers 30, Seahawks 14

Jets at Dolphins
Game of the week. Last year the Dolphins abused the Jets in the two games they played. The Jets looked like a good offense last week, but that was against the New England non-defense. I like Miami this week and next week as well.
Dolphins 24, Jets 20

Packers at Bears
The Bears have surprised, just as I had predicted! People will be surprised again as they win a shootout against the Packers.
Bears 34, Packers 31

Strange season so far, teams up one week fall apart the next and vice versa. Should be a good football day!

QE Battle Royal
Look! It is a Battle Royal for the right to decide just what the heck QE is and does! All the bloggers showed up!:

Hee hee.

Added:
I saw my main man Josh of The Reformed Broker playing some new age music that was nifty I guess. I said NO! We need to go back in time, not forward! As if all new movies are so fake and rely on 3-D or other graphic tricks, now music will follow? Keep it, I got my real power right here:

That is fine indeed. So is this.

Have a good night.

Fuzzy Headed Friday

I may have broken my brain thinking about things the past few days! I need a break!

Broad Observations
As i write the site Pragmatic Capitalism (which has been added to the blogroll) is actively responding to questions Kid Dynamite and myself posed over this article from today:
DOES QUANTITATIVE EASING DRIVE ASSET PRICES HIGHER?
First off it is not easy to make my Must Read list. What I feel are the very best places for information are listed at the left. I do not endorse nor agree with everything you will find, especially so for Prag Cap, but you will be shown great thinking and great work.

Second, it is very rare to get the kind of interaction TPC and Ndk are showing on the above post when faced with tough questions. This says a lot about the writers and I appreciate that kind of response.

Ok, butt kissing time is over! If you follow the above piece there is even more about Quantitative Easing than you thought possible. I can wrap my head around what they are saying, but something just seems wrong to me. I will reiterate what I have come to; the FED is playing psychology games here and it is not working. To work they will have to become a credible threat to inflation, not just expectations. That is where things get dangerous.

As for today's action, there is too much hoping an praying going on and risk appetite against a dropping dollar is getting out of hand, especially in equities. Check these two headlines via Zero Hedge back to back:
Peru Just Entered The Currency Devaluation Race... Yes, Peru
...Promptly Followed By Brazil
The Golden Truth covers the China Currency bill passed by Congress as well:
Currency Wars set to Escalate
I know, Peru is nothing and Brazil is not a huge deal. The Swiss failed intervention was funny and Japans belly flop was almost hilarious. This is not small time.

With so many moving parts and so many Central Banks getting involved the risk of something going wrong grows exponentially. All it takes is a mistake and there is going to be trouble. Risk is high right now and it will be important to pay attention to world events going forward and not be self-absorbed Americans like the NetFlix CEO said.

I am giving a shout out to SILVER which I played a while back in the biggest (size wise) trade of my career. I tightened up my stop really tight to preserve what has put me past where I wanted to get for the whole year return wise and I even have enough extra to go to the Bahamas in October for a long weekend! What a deal! The wife is pleased, and that is all that matters.

Friday Night Entertainment
I may not be able to solve the riddled enigma of QE and I may not be able to swap punches with the MMT crowd, but I can put on a Friday Night show that they cannot match!

No Kidding, Here is the Neural Net Processor
This would be interesting if we were not following the script Skynet has planned for us:
How to Build a Brain with Neural Networks
When do we declare war?

Mayan Apocalypse Watch
You know I think those crazy star gazers may have been on to something. Newest sign the end is at hand:
Bill and Ted are Back!
Yes, that Bill and Ted of the excellent adventure variety.

Picture Pages
A few images to look over.

This one was perfect for today, EPIC WIN!:

see more funny videos
Wicked BURN!

Your kids are being taught well:

see more Friends of Irony

Film Clips
I get the Netflix thing and the Redbox stuff. It is just that I have Comcast and their On Demand system makes everything available at the touch of a button. I think it is much more pricey, but it is very easy. My 2 cents.

Can a $5 milkshake bring all the boys to the yard?:

Great scene from a new era classic film.

Sam Kinison in "Back to School":

Mr. Helper! Classic.

One for me! From The Highlander Series, "The Immortal Cimoli" is a fine piece of work. The villain is not rally bad and that has Macleod in a quandary. Skip to the 37:45 mark for a great discussion followed by a thrilling duel:

One of my favorite episodes.

Rock Blogging
What comes around goes around; I'll tell you why!

I got the big ZERO for requests save one from a BBQ site so I guess I am on my own this evening.

Now Gawains, do not get upset but this request is from a huge Redskins fan! Via request I found The Outlaws and "Hurry Sundown":

Now that is a fine tune! Great pick, thanks! What a tune.

A womans touch is always welcome, and thus I suggest "Black Velvet" by Alannah Myles:

Nice!

We should check in with Marlon and Jackie on the "Nightshift" by the Commodores:

Smooth.

It has been over two years so I have no problem playing maybe my favorite Billy Idol tune, "Eyes Without a Face". Turn this one way up!:

I love that one.

A late request by Scharfy! Because he provided valuable content this week and he is a boxing history fan (huge plus!) I can present Phil Collins and "Easy Lover":

Not bad, but obviously not about marriage, kidding! I think this is Ben Bernanke's theme song but he swapped (inside joke) 'lover' with 'money'!


Two to go, what will close the show? You don't know? How will it go? Who wants to know? On with the show!

A little off the path, but I do like Candlemass! Plenty of good tunes and complex sound. Take a sample with "Darkness in Paradise":

Dark, but a nifty tune!

Ok, time to close the show! Last call. If there is a lady nearby, grab hold and whisper sweet nothings in her ear! Get your lighters up!

Going back old school! I offer an older Bon Jovi tune, "In and Out of Love":

Not bad at all!

Have a good night.

Voodoo Economics

It was a really long week at the real job and I am running out of gas this week. Never fear, as Friday is upon us! The Show will go on.

Voodoo Economics
I spent quite a while on last nights post and I did get some great feedback which is appreciated. I have spent quite some time cogitating on things QE, MMT, and monetary phenomena and I can tell you I am about all set. As a scientist I can tell you this stuff is all make it up on the fly baloney. My only explanation for things MMT and Keynesian crapola is that they look at the fact that the US had been the big dog for so long and has done whatever it wants money wise and they extrapolate out a whole theorem based on that history and the idea that it will continue to the end of the universe. Guys, it could change.

When you are outgunned intelligence wise and outclassed by huge words and round about reasoning all you can do is strike back with sarcasm. It is one more free service I offer! So I am about to let one rip, you have been warned.

Great Link, Now I am Dizzy
Reader Scharfy offered this article in my quest for greater understanding:
FED Mulls Trillion Dollar Policy Question
You can read it but quick summary (All my own interpretation):
QE lowers rates which does not help anything. Stop QE and have fiscal spending as large as you want because there is no limit to fiscal spending for a sovereign nation.

As Scharfy pointed out, reader Brian in the comments asks:

Good stuff, my question is does QE shift buyer base of assets into other things and create inflation (not necessarily good) in other forms? As an example, China no longer buying / and potentially selling Treasuries into the bid of the Fed shifting USD reserves into EURO or GBP or other resources? Does QE shift USDs into different assets as FED is new buyer?

The answer (my take):
All purchases are net cancellations of some part of the money universe so don't worry.

Sounds wonderful.

While everyone is in deep thought how long to keep the Fed statement reading as :

"The baby oil massage will continue indefinitely, but the tantric hold off experiment will end sometime in the next 25 years, so don't delay your happy ending".

I would offer a new idea.

State in no uncertain terms (hard for the FED to do) that rates will be set at 4% on the first Monday in 2012 (provided the Mayans were not correct) and the FED rate will never be less than 4% come hell or high water ever again. That gives one year to take advantage of the best rates you will ever see. Now let's see who wants to buy!

Asked and Answered
I have been trying to square the fact that rail traffic has been higher while real sales and tax receipts are still terrible. What gives? I could argue a few ideas, but what fun is that? Pragmatic Capitalism covers the rail traffic:
RAIL RECOVERY CONTINUES TO CHUG ALONG
Of course the graph used is my most hated, a % year over year change but the press release says some stuff:

U.S. railroads originated 304,679 carloads for the week, up 8.1 percent compared with the same week in 2009, but down 2.4 percent from the same week in 2008. In order to offer a complete picture of the progress in rail traffic, AAR reports 2010 weekly rail traffic with comparison weeks in both 2009 and 2008.

So better than last year but not better than 2008.

My tin foil hat theory? The FED is indeed "printing money" and instead of using electronic means they are actually shipping the paper money all over the world! Think of all those jobs! All that energy usage! First great idea they have had in a while.

Crazy Stocks and a Nice Hit Piece
Readers know by now that the Apple company bugs me. I am no PC guy (I just use a computer, I don't snuggle up with it and speak sweet things to it like some of you weirdos!) so I could give a crapola less if Apple is better, or is easier to use. I also get furious when there is a line at the Apple store for useless gadgets that will not survive even a minor EMP blast from a meteorite. If you think the key to getting a better life is to be MORE dialed in with everyone you know and plenty you don't at all times you are beyond any help I could offer.

Given this prelude, here you go:
Apple Passes PetroChina to Become Second-Largest Stock
So if I can remember my old definition, a stock price is the price thinking about all future earnings divided by time or whatever. So for the math symbol geeks, here is a question:

Is Chinese appetite for gadgets > their need for energy looking out 10 years?

I have a clear bias here, I hate Apple like you cannot believe because it is a cult about 1000X worse and bigger than us gold/silver freaks! What I could do this weekend is get an Ipad and drop 10 ounce silver bars onto it from a height of 3 feet until it shatters. What's the over under on tries? On height? I also want to get an Ipod Nano and flush it down my golden toilet (I am not rich, it's only plated to 1/18th of an inch, the rest is tungsten but it is till crazy heavy!). The toilet is rated to flush over 15 golf balls per flush so I fail to see an issue with an Ipod Nano meeting it's final destination (maybe Nemo can use it).

I could do that, or I could print this piece and re-read it a few times (via Wall Street Forums Writer Ags Nightmare):

I will give a pass to bulls, or should I say gamblers, that have played this "Stairway to Heaven" rally which has pole axed anyone with a negative thought. And I will give a pass to bears, gamblers, that have tried to guess when this stoopid rally will end due to the fact the negative news outweighed the positive. Sure bears are idiots for not seeing the obvious but in a weird way righteous for not buying trash at 300 or chasing space needles. They all end the same way. Don't give us the "we are discounting future earnings" sheet, Wall Street. Not flying this time. This is insanity. Pure bullsheet wafting in the morning dew.

You know I have to excerpt more:

Would I call a bull a bull in today's market? Not really. Just someone who recognizes rigging and moral hazard when it's in play. That is all that is left. Bubbles and crashes. Sure, call me a tin foil hat wearing fool, but if you do not think there is some kind of rigging going on somewhere, you are out to lunch. Real long term bulls are gone and the "it's just a trade" bulls are surfing the 20 foot waves and smoking hooch. In the end, the "just a trade" bulls will end up morphing into chest thumping jackasses that push the envelope too far right before we get ripped. Never fails.

I have argued this point many times but not as well. Last piece but you really should read the whole thing:

So I have a suggestion. If we are going into another bubble, announce it to the American public. Let people know where we intend to top out. If 666 was advertised as the low, how about the high? Just let us know. Or better yet, just open the market next week and place the prices where you want them. Why go through all the bullsheet of taking a year to do it. Get it over with. Then you can freeze everything and give people a window of one week to sell at the high. After that, allow Goldman Sachs, JPM, BAC, and Morgan Stanley to get short and ride down the decline to 666 so we can test our Exorcist low.

"They Make Our Lives, But They Will Never Take Our FREEDOM!!!!!!"
What a great hit piece! I am so envious.

In light of my Voodoo Economics based post, I will close with Joe Rogan's song, "Voodoo Poonanny":

Indeed.

Have a good night.

The Answer is Nobody Knows

The "Nut Wizard" is going to com in real handy because the acorns have escalated their fall from the trees if that is possible! There must be a metric ton of acorns in my front and back yard.

Everyone Sees Something Different
I always love a chart like this one from dshort.com because everyone sees something different:

Some may say that the move to fiat smoothed things out and that effective management of the monetary supply made recessions less frequent. I of course see something else entirely.

As is the norm in human business history, things tend to get too hot. The red/green sections under the gold standard almost balance perfect as things tended to get corrected at some point. All this chart shows me is that inflation has been standard operating procedure for 50 years and thus no malinvestment has ever really been accounted for, just papered over. It took the biggest credit bust in history just to print a small red blip recently. You can make what you want of that view point, but that is what the chart says to me. Maybe you think economists and the government have become much smarter over time, hee hee.

The Answer is Nobody Knows
I wanted to try and tackle a key item over the weekend after I had some more time to think about what I wanted to say. Instead I have been struck by what I have been reading regarding Quantitative Easing and figured as I am sure I have no idea what the deal is, I may as well throw my thoughts out there to be ridiculed.

It all started with EconomPics's question from last week:

With that said... I completely understand why Japan is intervening in the currency markets for economic purposes (a strong yen is hurting exports), BUT isn't the ability to literally print an overvalued piece of paper the ultimate prize?
For years, counter-fitters have printed worthless paper in the hopes of using it to buy things of value, but with Japan they can do this legally! Why not open up the printing presses and use that new currency to buy goods of value from abroad (I'm not talking other currencies, I'm talking REAL assets)?
To me this will result in at least one of the following (though, I'm sure there are 1000 more):
A weaker Yen (i.e. the goal)
Inflation (i.e. the best thing that could happen to Japan so that monetary policy would actually work)
Nothing to the Yen or to inflation, which means you got a bunch of real assets... for free.
What am I missing?

I had an answer on tap for this, but wanted to see what smarter folks than I had to say first. The comments section was pretty bare.

Kid Dynamite hit upon a similar theme yesterday:

So, here's the question: Gross acknowledged "printing money" for quantitative easing, and advocates it heartily. We already know from our prior discussions of Modern Monetary Theory (MMT) the government need not tax in order to spend - they can just spend - they can just print money (of course, there may be consequences if they do this). Why then, is it a problem to cut taxes by $2T, but not a problem to just print $2T for QE? Said differently, we don't need taxes to "pay" for the budget - we can just print money for that too/instead. Said a third way, why not get rid of QE, and use the $2 Trillion for tax cuts instead?

I guess it's possible that what Bill Gross really meant is that we can print $2T for QE, but we can't print another $2T in the form of tax cuts, because THAT would be too much for the dollar to handle...

Again, I was looking forward to some real meat, but the comments got bogged down with terms and pointing out how one example of something in a broad sense was "not right" or whatever. The answers were again a bit lacking.

In the comments KD asked simply:

When the Fed buys treasuries, the effect is temporary - more bucks are freed up in the financial world to chase less assets. Since we all think that the Treasury will be able to pay back their debts, this is TEMPORARY - and will be reversed if/when the Fed's holdings of Treasuries mature, and the reverse happens - the money goes back in to the Fed (that's what I meant earlier when i said used the terms "unleashed" and "Reigned in)

I'll give you guys another example: what if the Fed took everyone's MSFT shares tomorrow and paid them current price - that's an "Asset swap" right? investors used to have MSFT, now they have cash.. guess what - they'll go use that cash to buy, who knows - IBM. AAPL... the point is - it's "inflationary" in the real world sense - it drives prices higher

Fed buying Treasuries does the same thing.

Again, no real answer.

Here at EconomicDisconnect I like to help! I will supply my answer and while it may be wrong, at least it is a no baloney answer.

Up front you should know that I was a long term inflationista bordering on hyperinflationist. I correctly figured on the policy moves the FED and others would make and correctly estimated the amounts. A funny thing happened though, nothing I figured to occur because of this ever did! The money supply never expanded really (as measured by velocity or money in the actual economy). While I would argue that preventing massive deflation in the stock market and property markets (and yes these two items would be FAR lower now) this is not really super duper inflation.

Faced with this real world observation, I had to review what I was thinking. Beers help this process immensely.

To start, this discussion only pertains to treasuries and cash swaps. I am of the firm belief that the MBS paper bought by the FED is a swap that will never balance out, hence the FED has printed some amount of the 1 trillion plus of that paper it swapped out. The losses are not 100%, but neither are they small losses. This is cash that will remain in the system.

At the very heart is that the money the FED is supplying the banks with is not going anyplace. No one can really argue this. I do believe that small potion of this cash has made its way into the stock markets, supported by Algos and computer driven trading to take the market higher, but surely not anywhere near the amounts available. If not for the flash crash induced scare in the markets a while back, you would be hard pressed to find a chart as bullet proof as the S&P since March 2009.

Now back to the questions. Why can't Japan "print" money and buy real assets? Because this is an unacceptable practice. I know that sounds stupid and amateur, but is is true! It is true that the US has spent over a trillion dollars in deficit, but had Bernanke really dropped a trillion from the proverbial helicopter at malls across the US to regular people we would be discussing dollar support lines at 40 rather than 80 right now. Again, what's the difference?

It is my belief that these games of book keeping legerdemain are nothing more than crude tools with which to look like a not so credible threat to really do something stupid. The banks have reserves now that if used in classic fractional reserve lending would cause the very hyperinflation many seem to think is going to happen any day now. What do I mean?

I have to admit, I just deleted about 5 paragraphs of writing after I re-read it all and I was not getting to what I wanted to say. It is weird that I have a way off looking at this in my head, but I cannot write it out so that it sounds correct to me. Maybe this makes my whole post a waste as I am probably really dumb, but I will simplify.

We know that banks are flush with cash and we also know they are not going crazy with it, even buying up even more treasuries with cash they were swapped by the FED! This means one of two things:
-There is no desire to use this money (poor loan prospects, etc)
-This money was never meant to circulate

Now I like to think banks have learned something about loan quality, but I think it a stretch to say they cannot find anything at all worth a shot. Either their losses are so severe they cannot loan out the cash at low rates and still make good with the FED later. Is that macro observation priced into the markets? Wow, that is huge if true.

Or maybe all this intervention was just for show. Make the banks flush with cash so they will "loan to each other" (another debunked falsehood) and extend credit to the economy. As I have said, leveraged up via fractional reserve banking we should be running at 8% inflation right now easy.

None of this is happening.

I am left with the only idea that stays with me. This money was never meant to be circulated and was a ploy by the FED to target interest rates and take them to forever lows. This has happened. This was supposed to get the US consumer so jazzed about being able to go into even more debt at better rates they would go nuts and buy houses again. All the bought were Ipads, with cash savings instead. Small business was supposed to jump at the chance to expand by utilizing all time low rates, but these rates have been here for a while and are not going anywhere so why expand into a weak economy? Again, this all is happening and makes sense.

So it was all a bluff? A psychological ploy? I think it was and is. I think there was a clear agreement between parties (FED/Treasury/Banks) about this before it all happened. Don't bother with the tin foil hat comments, it is more likely than unlikely.

The danger here is that the FED will go over some line at some point and become a credible threat to do something stupid. Maybe issuing cash and taking the reins off of the banks. Use your imagination on what that could include.

I still am not happy with how this post turned out and would welcome any ideas. Maybe the answer is nobody knows what QE is or does!

Have a good night.

Same Old Song and Dance

Of course I got sucked into that Monday Night game! Bed at 12:15am with a 5am wake up for work is not fun at all. The 49ers played their game of the season and came up just short against the Saints. Watching the Saints keep fighting for 4 quarters and never giving up or looking down was a nice change from the team here in New England.

Same Old Song and Dance
Today the FED started the process of Quantitative Easing 2.0 (QE2) as they downgraded their forecasts for the economy. There has been plenty of ink spilled on just what QE is and what it does and EconomicDisconnect has high hopes that a real break through is going to come soon on this front. Just today Kid Dynamite asks:

So, here's the question: Gross acknowledged "printing money" for quantitative easing, and advocates it heartily. We already know from our prior discussions of Modern Monetary Theory (MMT) the government need not tax in order to spend - they can just spend - they can just print money (of course, there may be consequences if they do this). Why then, is it a problem to cut taxes by $2T, but not a problem to just print $2T for QE? Said differently, we don't need taxes to "pay" for the budget - we can just print money for that too/instead. Said a third way, why not get rid of QE, and use the $2 Trillion for tax cuts instead?

I guess it's possible that what Bill Gross really meant is that we can print $2T for QE, but we can't print another $2T in the form of tax cuts, because THAT would be too much for the dollar to handle...

Great question indeed.

I need to fully write out my view on this core issue, it is one that took me some time to get to, but I feel pretty good about where I arrived. I want to see how things sort out on KD's post and see what else is written later in the week. This is important to understand.

The FED is looking to play the "lower interest rates across all time frames" game once again. I wonder if Bernanke and company would love to include in their statement something like "if you Congress fools would do something we could get a break!" but that will never happen. I think it is dangerous for the FED to do something large right at the mid term elections. I have to wonder why they would risk such a thing unless they think the economic data will improve so much by then that they will not have to move. Precarious game they are playing indeed.

Sorry I do not have more! I am off to try and finish Stephen King's "Under the Dome" and get to bed by 10pm to catch up.

Have a good night.

The Narrative

I have to be honest, I am still flammable angry about the Patriots game yesterday. This is year 4 of a horrendous pass defense. I wrote plenty last year asking serious questions about coach Bill Belichick's ability to run a defense. I am still wondering.

At least I get to see a real team, the New Orleans Saints, play tonight. The Bayou Boys love being on Monday Night Football so good luck to the 49ers.

The Narrative
It started with Tim Geithner's "Welcome to the Recovery" Op-Ed and has now included a sort of victory lap by the President on CNBC. The all clear has been signaled and while various things are still very wrong, those things simply do not matter anymore.

Now I do not think things are really all that great, but the underlying belief right now is that the FED/Treasury has the back of the big boys. They always have, but never so openly. I would wonder what is going to happen should all those reserves get flowing.

Case in point? The developing story about mortgage fraud is a real monster. Yves Smith has been on top of this along with several other writers. For reference:
GMAC Stops Foreclosures in 23 States
More on GMAC and Foreclosure Fraud Mess: "The Shit is Hitting the Fan"
I suggest readers start with these two items and then read some more. The issue is complicated and very legally complex so it is a bit over my head to cover such a thing in any detail.

Added:
via Zero Hedge
GMAC Mortgage: "Proudly Executing Up To 10,000 Fake Documents Per Month"

The take away point is that in many cases banks my not have clear title to homes they are or have foreclosed upon. The corner cutting done is ginormous and this promises to have more underneath the surface. Just today GMAC has been doing gymnastics with retractions and press releases based on this information coming to light.

Why is this important? This could be a severe issue for the banks involved, especially if there are suits to follow. This could be a big deal. Now remember the narrative.

This is nothing. While it is important, it is also a non-issue. Why? Congress will pass a law that gets around any unpleasant legal problems for the banks and then they will ban any lawsuit attempts. You think I am kidding, but I am not. The banks will not be facing any stress over this, the recovery narrative demands it. It should not be too long until I see if I am correct.

Anyways, welcome to the recovered economy. It was a strange trip indeed.

Other Stuff
With the all clear being sounded, I may need new material!

Star Blazers Live Action Film
I used to love the cartoon "Star Blazers", which was a Japanese anime series. The central theme was built upon a WWII battle ship that was refitted for space! It was cool by the way.

There is a live action film being made in Japan! Here is the preview. Skip to the end, you know you have to see the Wave Motion Gun being fired!:

AWESOME! I hope we get an English version.

Creative Robots to Hunt You Down
As if the robot revolution needed any mor ehelp, here is the quadrotor flying assasin bug robot and at the 1:00 mark it can now think in nano seconds on how to evade human fired RPG, well hoops for now. For now:

Scary.

Have a good night.

Blown Out on Sunday

First off allow me:



Congratulations to the New York Jets who blew away the New England Patriots tonight. The Jets got rid of all the pre-snap motion crap, as well as all the signal changes and it made all the difference. An added bonus: with no Revis on the field the Jets may have figured out that they are better at two deep zone defense than a variant of the 46 defense.

That all said, this is for the New England fans.

We got hoodwinked in week one. This is like the time you spend a night at a bar doing your magic on this hot woman, you luck out and she comes home with you. Things progress and then she starts taking out the bra stuffer thingies and you are like "I got false advertising!"

A defense that looked fast and smart last week was the same defense from last year. The same team that scored 5 million points in the first half last year and only 4 points in the second half is back! How much fun is that?! Just balls out awesome if you ask me.

I am glad Tom Brady was resigned. I am falling all over myself that Vince Wilfork got a huge contract. Wunder-fiing-ful. Maybe a few bucks spent on Julius Peppers or any cornerback not named Darius Butler would have been more prudent? What a joke of a situation we have there. If Butler steps on the field next week he should be arrested. How do you play a 3 foot tall corner anyway? I know everyone is like "well can you do that?" and I would answer I do think I could cover better than Butler in fact. Give me a uniform, I cannot do any worse!

My fellow New Englanders, the Patriots are not a great team anymore. They hardly pass for a good team. I think we can beat any team in the league for one half, too bad there are two halfs!

I want you to remember the last 10 years of Dan Marino's career in Miami. He never got any help and the team maybe made the playoffs but were never a top shelf team. That's us now. Get used to it. The run is done, hope for the upper end of mediocrity.

Oh yeah, and by the way NY Jets, if you caught the Miami-Minnesota game you may want to watch out for those guys.

Have a good night.

2010 NFL Week 2 Preview and Forecast

I have no idea where the time went today! The wife and I were out shopping today for some new clothes. By some stroke of extreme luck they actually had my size pants for once (32X32). I will be looking spiffy next week.

I am of the opinion that I don't care what people call me, as long as they call me, so when I saw over at The Reformed Broker terms like "excellent" and "eclectic" I was humbled. Thanks Josh!

2010 NFL Week 2 Preview and Forecast
Week One Results: 11 Wins 5 Losses

I think every year most observers like to say "this year the NFL is wide open" but in the last 10 years I don't really think that was true more than maybe 2 times. This year is certainly the third time because it is, well, wide open!

This year every game is huge and teams better be aware of their division and conference records because the playoffs are going to be a tough show to get a ticket to. With all that said, here is my outlook for week 2.

Pittsburgh Steelers at Tennessee Titans
The Steelers beat the Falcons last week without Big Ben and with Troy Polamalu back the defense looks downright nasty. The Titans have been a new team since last years 0 for start. I think the Titans find a way to win this game at home.
Titans 17, Steelers 14

Baltimore Ravens at Cincinnati Bengals
An interesting game to see where both teams are. The Ravens were gifted several opportunities last week to beat the Jets and the Bengals were blown away by the Patriots. This is a huge AFC North game. I think the Bengals are better than they played last week, but Baltimore historically starts the season fast.
Ravens 20, Bengals 17

Philadelphia Eagles at Detroit Lions
Who cares? Michael Vick's first start in a long time.
Eagles 28, Lions 17

Arizona Cardinals at Atlanta Falcons
The Falcons were really bad on offense all preseason and it carried over into the opener last week. Tough game to call, though I hope Derek Anderson does well.
Falcons 23, Cardinals 20

Miami Dolphins at Minnesota Vikings
The best of the early games and this should be a good one. The Dolphins run well, the Vikings are the best run defense. Something has to give! I like the Viking defense in this one, though this game could get aerial and wild late.
Vikings 31, Dolphins 27

Kansas City Chiefs at Cleveland Browns
Wow, who really cares?
Chiefs 20, Browns 13

Tampa Bay Buccaneers at Carolina Panthers
Honestly, I have not seen either team in the preseason and I did not review either teams game last week. No idea.
Panthers 14, Bucs 10

Buffalo Bills at Green Bay Packers
The Packer defense is going to roll the Bills struggling offense.
Packers 28, Bills 13

Chicago Bears at Dallas Cowboys
The Cowboys draw a game against a team that can play really well or fall apart in the Bears. Demarcus Ware is back for the Cowboys and he should get Jay Cutler uncomfortable. The Cowboy offensive line had better wake up because Julius Peppers does not play around. Dangerous game for the Cowboys here and I am tempted to pick Chicago.
Cowboys 20, Bears 16

Seattle Seahawks at Denver Broncos
Here in New England we know Pete Caroll, hee hee. I have no real take on the Seahawks as yet, last week the 49ers fell apart for them. The Broncos are in flux right now. Close game to call.
Broncos 24, Seahawks 21

St. Louis Rams at Oakland Raiders
Now I did say the Raiders will be good by seasons end, not on week one obviously! I think the Raiders have enough to get this one done, but I would not be surprised if they lose by double digits.
Raiders 16, Rams 14

Jacksonville Jaguars at San Diego Chargers
Bad weather made things hard for the Chargers last week while the Jags looked pretty good. Upset special?
Jaguars 27, Chargers 24

New England Patriots at New York Jets
The game of the week! The Jets could not have made more mistakes last week. I think this week they will scrap all that crappy pre-snap motion baloney and get back to smash mouth football. If Randy Moss wants another 3 year deal at 10 million a year, he has to beat Darrelle Revis for at least a few catches. Key things to watch in this one:
-Jets are going to blitz (no kidding) and I imagine they learned from last year what Welker can do to them. The Pats tight ends might have a monster game should the Jets rotate the safety in close to cover Welker with the cornerback.
-Tom Brady has been pretty poor against Rex Ryan defenses, so I do not expect a big game.
-The Jets need to run a lot more, and it will be interesting to see if the Pats can stop them as they could not stop the run last year.
Very hard game to call. I am just not sure the Jets will get enough points to win unless they force some turnovers, which they very well might.
Patriots 23, Jets 20

Houston Texans at Washington Redskins
The Skins won an ugly contest last week while the Texans scored a monster win against the Colts. Classic let down game for the Texans here, but they rally late and do not hold on the final play to win a shootout.
Texans 31, Redskins 27

New York Giants at Indianapolis Colts
Bob Sanders is out again for the Colts and must be nearing the end of his career. The Giants are back defensively in a big way. The Colts have a serious run defense issue. I want to pick the G-men but I do no think Peyton will lose two in a row. The Giants might run for 300 yards, but Manning pulls it out late.
Colts 28, Giants 27

New Orleans Saints at San Francisco 49ers (Monday)
I think the Niners will play much better but this is the Champs after all.
Saints 30, 49ers 20

Enjoy the games!

Knocked out by a Jab
If Scharfy is around he will like this one!

I was just watching Marvelous Marvin Hagler vs. William "Caveman" Lee from 1982. This is the Hagler Sugar Ray Leonard never would have fought no matter what. Here Hagler (who is a southpaw) practically knocks out the challenger with a right jab! Yes, a jab (skip to the 5:00 minute mark):

There were a few more punches but Lee was out on his feet from a jab. Nasty!

Have a good night.

Funkalicious Friday

I finally had an easy drive home but that was because I left at noon to go and get my teeth cleaned! Luckily I have good teeth and nothing needed any attention, just a cleaning.

I will have a NFL Week 2 preview post up tomorrow. Some big matchups again already so the action should be great. NASCAR kicks off the final 10 races for the championship in New Hampshire as well.

Sentiment Survey
The Reformed Broker pointed me to survey done by The Kirk Report on the investor sentiment cycle. Here is what it looks like:

From the write up:

Of those who dared to offer take the poll and go on record (most I asked never responded), 63% thought the cycle had already bottomed out while 37% see further downside to go in this cycle.
How did I figure that out? When you look at the overall votes, the most popular response was that we are currently in the hope phase as 26% of those who I polled offered that as their view. This was followed closely by 21% who said we are in the depression phase, followed by 16% who think we are in the optimism phase. If these people are correct, as a combined group 63% of them think we’ve already bottomed out and are headed higher at least in terms of this current sentiment cycle. Please note where each of the three areas of the cycle – hope, depression & optimism – fall within the cycle. After each phase, the market moved higher.

Interesting comments by the respondents are worth a look.

Nobody asked me, but I think massive intervention and some market friendly machinations built a bridge from panic right over to hope. We have been at hope for some time hoping for something to happen while the data gets worse as of late. Hoping for a miracle?

Blogroll Addition
I am adding the site iBankCoin as I have been reading it now for 2 weeks straight and I think it offers plenty of great insight and also it is plenty of fun! Writer chessNwine is as balanced in his thinking as you are ever to come across; Jake Gint is a metal lover, and The Fly, well, this guy is so funny it hurts! He is also a great market timer as well. A little taste to get you started over there? From The Fly today:

The Party is Fun, Until it Ends
In my opinion, we have a maximum of 2% upside left, and 15% down. I’ve been through markets like this before, as many of you. The big difference between you, and a person such as myself: I remember the answers. I can personally guarantee many of you will be caught 100% long, or more, into the top. It happens every time. After all, someone has to hold the bag of bombs filled with shit.

There will be no warnings or mercy, just down. Perhaps the widening CDS spreads in Ireland, Portugal, Greece and Ukraine will have something to do with the decline. Or, it might be caused by fears of taxes rising or monetary tightening in Asia. Dare I say, the markets may just sell off due to profit taking? I mean, let’s be perfectly clear with one another, if the United States economy was a business, would you buy it now? The notion that news is so bad it has to get better applies best when markets are depressed. Last I checked, CRM was trading 1 billion times 2020 earnings.

That rocked!

Full disclosure: I have no affiliation with the site, but I am very seriously considering subscribing to their PPT product for trading purposes. I want to see how it works and see how I work on stock picks compares with it. I do want to be more active in the markets and a little help is a good thing! Let me know if anyone uses this service so I can get some feedback.

Funkalicious Friday
When your down and out. Feeling small. When evening falls so hard, you need Friday Night entertainment!

I Have Seen the Future and It Wants to do Exercises
Well you knew a robot post was sure to come up! Check out this creepy robot that can do exercises and track a human as he intends to vaporize him with eye socket laser beams:

The HRP-4:

The HRP4 has full arm articulation and simple hand movements, giving it a grasping force of 1.1 pounds. It has facial recognition built in, so it'll know who you are, and it also reacts to voice commands.

You have been warned. Repeatedly.

Pictures Are Easier Than Words
Which is why all I read are pop up books!

The REAL reason the Empire won at the Battle of Hoth:

see more Lolcats and funny pictures

I just don't think this is a real statue!:

see more EpicFail
No Way.

Cinematic Suggestions
Helping you pick films since 2007.

An 80's classic comedy is "Ruthless People". One of my favorite scenes is when Judge Reinhold goes crazy and tries to sell a monster speaker to a poor kid (skip to the 1:25 mark):

"Hey, what's it f#%king cost?!"
"That's the bitchin part about it, it don't matter! If you can't afford it, f#kin finance it!"
So classic.

Not too many have seen the Bruce Willis movie "The Last Boy Scout" but I happen to think he plays this part very well even if the movie was a bit on the poor side. Here is a good scene:


One of my new era favorite films is "Gangs of New York". An all star cast and of course the amazing Daniel Day Lewis as Bill the Butcher:

He is chilling in this role.

Rock Blogging
Now that we are armed with the Dominator MX-10 speakers, we should be ready to rock!

Last week I had tons of requests, this week, almost none! Lurker wanted to hear "Puff the Magic Dragon". As I did once do a post with the mythical Honali in the title, I felt I could not object:

Nifty tune.

Gawains emerged from his sadness bunker following the Dallas Cowboys loss last week to ask for "Gimme Three Steps" by Skynyrd:

Good tune.

My wife has been replaying the performance by Taylor Swift from the 2010 VMA award show of the song "Innocent". Everyone thinks it about Kanye West, but there is NO WAY a song this pretty and heart felt is about that donkey and his antics from last year. This song must have been written about a close friend, family member that is facing serious issues, in my opinion:

Again, I think it should be clear what this song is about. Very nice.

Need a little animal influence? How about The Animals and "House of the Rising Sun"?:


Is that "London Calling"? It must be! Here is The Clash:

Like it!

Two songs left.

Maybe we should go down "Gypsy Road" with Cinderella? Ok, lets go!:

Good trip!

Last call!

Replay, but it is my blog and I had this one on the mind all day so what can you do. Iron Maiden and "Revelations":

One of my favorites.

Have a good night.

For My Amusement

Another silly ride home today. I have no idea what is going on, the usual back to school thing cannot explain all the traffic. Long rides home really suck the life out of you. What I cannot figure out is that I leave at 6am and the roads are empty but when I leave at 4pm they are full. What freaking hours are these people working anyway, 10-4? Good deal if you can get it. We need higher unemployment in Massachusetts! (joking obviously, I am not that kind of doomer!)

For My Amusement
Seeing that there has been as much interest in this blog over the past week as there is in a turkey turd taco, I figured I would branch out and hit a few topics that I will find amusing or interesting. I will even break my writing about metals rule!

When Greenspan Makes Sense I know I Need a Drink
I know I need a cool one when Alan "The Maestro" Greenspan makes sense to me. If Paul Krugman ever makes sense I will need a bender in Vegas to get right!

Tim Iacono notes in an interview with the NY Sun Greenspan had this to offer:

Mr. Greenspan replied that he’d thought a lot about gold prices over the years and decided the supply and demand explanations treating gold like other commodities “simply don’t pan out,” as Mr. Malpass characterized Mr. Greenspan. “He’d concluded that gold is simply different,” Mr. Malpass wrote. At one point Mr. Greenspan spoke of how, during World War II, the Allies going into North Africa found gold was insisted on in the payment of bribes. Said the former Fed chairman: “If all currencies are moving up or down together, the question is: relative to what? Gold is the canary in the coal mine. It signals problems with respect to currency markets. Central banks should pay attention to it.”

Oh No He DIDN'T!!

Should be the final nail in the coffin for Greenspan's legacy, though somehow Andrea Mitchell found him hot enough to marry.

Barry Ritholtz has an interesting bet on tonight based on gold prices:

Gold Bet: $2500 Over/Under 2012
With Gold at $1275/oz today (spot cash price), Paul took the over and I took the under on $2500, on September 16, 2012.
The bet: A dinner for 4 — us and our wives — costing whatever an ounce of gold goes for then.
May the best man win.

Barry does not play!

As of writing there are 31 comments. Breakdown:
-Over $2500 = 5
-Under $2500 = 10
-Non Committal/Nonsense = 16
Best comment by Shnaps:
Lock of the year. Except that you may end up dining at Applebee’s.

My call? I hate to take any bet looking 2 years out with the Mya 2012 thing and all! A far better bet would have been September 2011, and more telling of both men's positions. Even in 2011, I think $2500 is aggressive, but $1800 would be my call for next year at this time. Gold may well be $500 an ounce in September 2012, but it will not mean what you think it will mean right now.

Advice for the Federal Reserve
Forget about gold, forget about stupid curves and various models and equations. Economic Disconnect has a new policy tool in mind for the FED board to use, and it will even come cheap.

Rather than rely on advice and theorems from already rich people that have never worked and reports in their beige book from business folks across the country (I mean come on; who is going to say "business sucks and you guys did it!" No, we get "my orders are looking up compared to that one week last year when I had a cold and the internet was down so I am more optimistic!). Here is the winning tool:

Buy a Television and Get Cable TV

Now for the folks at the FED, a TV is a small (or huge, depends on what you want) box that shows moving images. You know, like the old black and white Zenith boxes they used to watch "Howdy Doody" and "Gunsmoke" on as a kid? Yeah, those, only better. And in color.

Tune into any show that has to do with folks getting their hands on free money that banks provide and you will know when things are getting out of control. Had the FED seen "Property Ladder" or "Flip this House" where starving artists were flipping Las Vegas condos worth (at the time!) $900k or more with no money down and never making a mortgage payment they might have even sidestepped the whole housing mess. Today they could watch "Jersey Shore" and then ask themselves should banks be lending aggressively to anyone that likes this show? I would suggest they read blogs, but they will only frequent the ones by their friends. Free advice guys!

A Note About Contrarian Calls
Think of the song "Every Breathe You Take" (The Police) and use these lyrics:

"Every page I load,
Every call I read,
Every single play,
Every single day, it's called contrary"

Ok, maybe that is a bit harsh, but I have been inundated with the "is this a contrarian indicator?" or "Time Magazine Cover Calls", or "this is so outside the main line of thinking contrary it rocks the house!" baloney I am getting dizzy.

First off, a definition to work with:

In finance, a contrarian is one who attempts to profit by investing in a manner that differs from the conventional wisdom, when the consensus opinion appears to be wrong.

Important points here:
-there has to be accepted conventional wisdom
-that opinion must appear to be wrong

This disqualifies about 80% of all the calls I see day in and day out.

The Three Kinds of Contraries
Three broad types.

Absolute Contrarian
Here in Massachusetts it is Thursday. If I say tomorrow is Friday a whole subset of people will try to find a futures contract for tomorrow being Saturday. This is absolute contrarianism and it is the worst offender of all.

Wrong Contrarian
Remember from the definition, for a contrary idea to be good for investing, the main view has to be wrong. Sometimes the mainstream is right, it does happen. It was contrarian to get real long CSCO at the bottom of the tech crash in 2001. It is still right there if you want it around $21 bucks if you want to get contrary.

Nuanced (but still wrong) Contrarian
These callers have cool charts and maybe even some historical anecdotes to use but in the end they are still wrong. My favorite are the new era "housing may have bottomed due to rent/own ratio looking good and long term trendlines for prices looking more normal". The charts back them up but history does not. These two posts (here and here) on Barry's site have some charts that look downright encouraging for housing going forward. Too bad they are almost useless.

Anyone that lived through the late 80's/early 90's housing bubble (I did), which is barely a blip on the charts above, knows that it took a full decade to get back to the old prices! An entire decade (no accounting for inflation, just the dollar price)! So yeah, maybe thing have bottomed but I would think a entire 10 year waiting period is a long time to be correct. This is a believable but still very wrong contrarian call. I cannot stress enough that the late 1980's bubble in real estate is dwarfed by the last one. It is the height of contrarianism to think history will change now. Good luck with that!

What is More Important to You: Fairness or Lack of Inconvenience?
I will have a new poll question up (which should garner 2 or 3 votes) which will ask what is more important to you based on an essay at Aleph Blog (via The Reformed Broker).

The presentations key point by my excerpts (but you should read it all!):

Fairness Versus Economics
"...Men/(Women) were created to judge their surroundings and rule it. Man was created on Earth for moral purpose primarily, not for increase in consumption. When ethics are transcendent rather than a question of economic advantage (more is better), men will act against their short term interests to promote the long term good.
This is yet another reason why people don’t necessarily act on average to maximize their short-term pleasure. People will not normally enter into deals that they find morally repugnant even if they would gain from it. Ask a liberal if they would encourage the Nature Conservancy to sell land to Plum Creek Timber, or one of its peers. They will object. Wait, couldn’t they take the proceeds, and buy up more forest elsewhere? Sorry, this is a sine qua non for them. They don’t deal with the enemy.

So the central bank decides to finance a certain financing market in a panic. Fairness asks this: why them, and why not me, or everyone? We don’t care if the economy would supposedly collapse without the aid of the central bank. Things should be fair; if you are offering it to them, you should offer it to me, or everyone, or you should not offer it.The same applies to fiscal policy. Stimulus, should it exist at all, should apply to the broadest category of applicants. Don’t target troubled industries, particularly those whose products are in oversupply. Send the stimulus to average people equitably. Let industries fail, but let consumers choose what they need. Why should we support industries that are not needed by the public?

Forget the political angle and the religious one, it is not the writers point, nor mine in the presentation, just example. Focus on what the questions are. A little more:

"So when I read Daniel Henninger in the Wall Street Journal arguing that average people don’t respect spending beyond the budget of the government, I get it. I GET IT!!! They have an interest in fairness, which stems from their moral sense that we can’t spend beyond our means, printing press or not. Yes, the printing press may print, but it does not create value as much as redistribute value into the hands that the government favors, and the average person suspects they are getting none of it.
They look at it and wonder, Why can’t I do that? Why can’t we all do that? The moral/ethical question pops to the top, regardless of other concerns."

I hate to excerpt such a great piece so much, but you really should take a trip over there for the whole thing. Like now.

Now that you are back, let's get down to it:
There is no reason anyone on the street should not be treated as a huge bank. If I am in financial trouble, why can't the government give me a $2 million dollar loan at 0% up front with me to pay it off as a balloon payment when I die should I save enough? If I am short, why should the taxpayers of that time not pay for it? I supported consumption! I fostered aggregate demand! Where is my cookie? Where is my bride?

This brings me back to a point of contention I had during the big wash out a while ago. While many contrarians were piling in to the banks, Fannie and Freddie, and any insurance company saying the government would not let them fail, they were not contrarian at all to reality, just morality! That craven play was as ugly a thing as I have ever seen and I really could give two chits if you made money for your clients. It was disgusting and paved the way for future policy because you all got lead by your greed to do what the powers that be wanted, sell out. It is what it is. Middle ground is hard to find on that one.

So the question is up tonight, please place a vote as I am interested in seeing what the readers think.

Have a good night.