Wednesday, October 27, 2010

Trick or Treat

Wow, Halloween snuck up on me this year! We usually get about 30 kids that come by for candy but with this years holiday falling on a Sunday there may be more kids than usual. I hope they don't bug me too much from watching the football games. A quick thought tonight and some fun stuff as I am not into things as yet.

Short Term Support or Long Term Structural Requirement
The one thought that became clear in my mind over the break was that people come to rely on any support they are given. I am sure you have seen this in your own daily travels. It gets worse when there is a real gain to be had from said support as this will become taken for granted and any removal will result in a confrontation.

Thinking along this line, I was struck that there has not been more discussion in the financial press about the enormous amount of market "short term" support that has lingered for quite some time into the "recovery". Rather than ask when this will end I would offer that we should be asking can it end.

Today was strange as plenty of big dogs, including Bill Gross of PIMCO, came out and stated that Quantitative Easing part 2 (QE 2.0) will not accomplish anything for the real economy. Gross even used the word ponzi to describe the debt usage going on but that is because he has no idea that we need not sell debt to spend we are not constrained by such things (as says Prag Cap). While Gross manages the biggest bond book in the business it is clear he does not know how the debt markets work (sarcasm on mega high).

An item in the WSJ postulated that the FED will go with some number less than 500 Billion in bond buys at the next FOMC meeting and they will spread this out over time. In no way is this priced into stocks and commodities right now so if things hold up until November 3rd it will be because the markets do not believe that number or they think the FED will move quickly to make the number bigger.

Let's just say the FED buys 100 Billion a month and does so until things get "better" (by whatever definition they use), just how long are we talking? Japan has not had a good show of this policy. If you had a time travel device and opened up a paper in 2020 would you be shocked to see the FED still engaged in QE?

At some point there will be a conflict between Wall Street and the banks against any withdrawal of QE money, POMO money, Zero interest rates, and capital requirements. The FED has the power in one way, but they have none in the way that matter, stock market movement. If the status quo is threatened a 5% 1 week drop could be engineered to scare the FED into the desired behavior. This is a serious problem.

Star Wars Pumpkin
This is way too cool:

A masterpiece of artwork! Pumpkins used to depict the Death Star destroying Alderaan.

QE 2.0 Fail?
This video (as seen on Fail Blog) made me think of the FED's success in much of anything:

Maybe we can replace "pushing on a string" with "cannot break the blocks" as the description of zero rate liquidity traps!

Computer Games
Just so you know that I am not totally clueless about the gaming world, I do know who "Leeroy Jenkins" is:

That cracks me up every single time.

Demotivational Site
Just stumbled across the site Very Demotivational and it has some funny stuff:
demotivational posters - Lindsay Lohan's First DUI
see more Very Demotivational

Have a good night.


Stagflationary Mark said...


"We usually get about 30 kids that come by for candy but with this years holiday falling on a Sunday there may be more kids than usual."

We generally get nearly 200 kids each year. In past years I have actually counted them if only to know how much candy to buy the next year. I was warned when I first moved in back in 1997.

That means I buy 450+ pieces of candy at Costco and hand them out 2 at a time.

My favorite trick-or-treater of all time was a young girl. I presented the small cauldron of treats and told her that she could take two.

Her reply was priceless and is permanently etched in my memory.

"Oh Mister. You can't be giving out 2 pieces of candy. Look!"

She pointed back up the street to the waves of minivans unloading children.

I tried to explain that I had more candy just out of sight but she would not take that as an answer. She just took one piece and it was clear that she thought I was doomed!

Being thought of as "doomed" on Halloween is actually kind of cool when you think about it though, lol.

getyourselfconnected said...

That young lady was clearly deflationary in mindset even then!

Wow, that is a huge number of kids!

sedentary state said...

>any removal will result in a confrontation.

It seems this is the psychology behind the 'blame the messenger' response, which is near universal amongst humans.

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