The Cost of Capital

Just a quick note for tonight.

The Cost of Capital
There has been a strange dynamic in play for about a year now in regards to the cost of capital. In normal markets rates are set by various inputs that in the end give both the borrower and the creditor a feeling that they are getting "fair value" both in taking the loan and in making it.

That is not how things work anymore. What would a mortgage written by a bank cost right now if they were left alone to set rates? With the double dip in home prices already here and a slew of inventory on the books, I think the 10 year US Treasury number would not even be in the ball park. Of course policy now is to make sure those rates stay ultra low.

CDS spreads have gone crazy for many European countries, but I have been watching CDS spreads for some time and they fail to make me take them too serious. What is serious is even a troubled state like Portugal is looking at rates going up to the 7% level(up from 4% in March) but along comes the ECB and they say "that is not right, we will lend money at 4% or 5%". The US FED has done much the same here. Add to this troubled US states like California have been taking advantage of US backed muni debt sales at rates far below what a open market would demand.

Now I think we all know that distortions cause problems....eventually. Easy money has a nasty habit of finding poor places to live. You can get things like bubbles or woefully miss priced instruments of all kinds that imply a lack of risk that simply does not exist. I think this should be clear. But let's look at another point.

If creditors are forced by the will and actions of government to lend at lower rates than they might want to, they are going to push rates where they can much higher. I would ask you all to review your credit card rates over the past year and see how they are moving. I just got a huge letter from my bank explaining the monster fees and penalties that will result now if I go into overdraft or miss any kind of payment on anything. Of course no one speaks for the little guy here, we will all just pay high rates and fees because that is where the banking system has pricing power now. They will chase return where they can.

Taking a step back, when you read that Ireland or whomever simply cannot pay debt back at such "high rates" as 7%, or even 10% there is an issue there. If a US state is on the verge of going bust over a 2% difference in a loan rate that is really walking a fine line. Yes, I know we are talking big bucks and it adds up, but really? I have argued that artificial low rates are now a structural necessity, not a short term support mechanism. Can the 10 year really be at 6% in 2 years without major issues? I would ask that the readers ponder what steps will be needed to keep rates of all stripes at all time lows for the next 5 years at a minimum and write them down or write them in the comments. Going further, ponder what avenues will be used by creditors to balance out their "fake risk" book with their "real risk" book. I think the answers will be useful in making investment decisions going forward.

Have a good night.

Sith Lords of the Star Wars Expanded Universe

I spent the better part of the last two days fixing up the half bathroom on the first floor. New counter vinyl covering, new light fixtures, and new bathroom sink and faucet. The sink was quite an issue as the supplied gasket for the drain would not seal and I went all over creation trying to find a larger gasket to fit the larger sink. I think I have it done now, but what a path to get there. At least the bathroom looks good and I also changed the hallway ceiling lights as well. Time for a break!

Sith Lords of the Star Wars Expanded Universe
Most of you know I am a monster Star Wars fan, especially for all things Sith related. I understand that not many know of the characters of the Expanded Universe, so here is a gallery and quick note on some Dark Lords of the Sith you may not know.

Darth Sion
One of the three members of the Sith Triumvirate in the game Knights of the Old Republic: The Sith Lords, Darth Sion was held together by his embrace of the darkside of the force:


Darth Traya
Another member of the KOTOR Triumvirate, Darth Traya is as cool a character as there is in Star Wars:


Darth Bane
The Sith Lord who made "The Rule of Two", Darth Bane is perhaps the greatest Sith in the Expanded Universe:

My personal favorite.

Darth Zannah
Darth Bane's apprentice and eventual conqueror, Darth Zannah is a master of Sith Alchemy and uses a double bladed lightsaber:


Darth Plagueis
The master of Darth Sidious, it is thought that Plagueis was the first to create life through influence on midichlorians (Anakin Skywalker) and next year there will be a new novel about this mysterious Sith Lord:


Naga Sadow
An ancient Sith Lord, Naga Sadow pictured here with his meditation Sphere:

The ancient Sith used Sith Swords which were created with alchemy and could withstand lightsaber battles.

Freedon Nadd
One of the first Sith Lords to have the ability to imbue his spirit to remain, Freedon Nadd is a curious Expanded Universe character:


Of course the Sith used Holocrons like the Jedi, but Sith artifacts were triangle in shape:

Nifty.

Of course the greatest of all the Sith, Darth Sidious, was a master of influence. Here is a picture I love of Sidious and the future Darth Vader:


Have a good night.

Happy Thanksgiving

Happy Thanksgiving
Could not ask for more today. Weather is about 50 degrees, not cold but still cool like this time of year should be. All the grub is on schedule to be cooked (sorry, wife said NO to a turkey on the smoker) and plenty of football on the way.

The Wiki entry for today:
Thanksgiving

Don't bother me with comments about how we used native Americans and Thanksgiving is a scam, I like this holiday so too bad:


Thanks to everyone that makes this so much fun. Thanks for all the great readers that come by and offer so much. Have a drink on me all.

Have a good day.

Darth Vader and Lord Voldemort: A Comparison

Another funny find today.

Darth Vader and Lord Voldemort: A Comparison
Here is a contest of supervillains! Via NerdBastards (click over or click picture for better view):

Enjoy!

Have a good night.

Perspective

Nifty find today.

US Debt in Perspective
Found this gem of a post over at Ptak Science Books. Click on over for the ultra cool graphs of US debt from the later 1800's.

Key summary by the author:

What we see here is a history of American federal indebtedness from 1791 (when the public debt stood at 75.1 million dollars) to 1881 (about 2 billion). Using the CPI (consumer price index) as a factor to translate that number in 2008 dollars (or so), the 2 bil grows to about $40 billion (a nickel then is about a dollar now). The interesting part of the legend--and what drew me to this graphic even before its somewhat unique shape--state "1"--370 millions", that is one inch of pink horizontal bar stands for about $370,000,000, and the last bar on this graph is about 6 inches long, which, adjusted for inflation, would now be about 10 feet long. .That said, the really interesting part comes next--if we use this measure to graph a horizontal bar for the American debt as it stands in 2008, it would pink a pink bar that was about a HALF MILE long to express our 10(+) trillion dollars of debt. OR, somehow, the old debt of 1881 would be about 1 story of a house, while the 2008 version would be up one side of the Empire State Building and down the other (and yes that includes the aerials). I don't know how to put this comparison in context, the differences are so staggering.

Again, go there for the graphs, it is worth the stop.

I guess it is true, some have worried about the US debt for a long time but it never matters! This is excellent news. Soon I am thinking a new 100 year roll over of all national debts of the world will happen and we can deal with it then.

Have a good night.

Wowza!

Allow me:



The New England Patriots held on for a huge win in a huge game against the hated rivals Indianapolis Colts. 31-28 and the difference was a slight jam against Peyton Manning on his final pass that resulted in a game ending interception. Tom Brady has now won 25 games in a row at home and the Patriots are 8-2. Shocking really.

My second love, the New Orleans Saints have caught fire and are looking very stout indeed. Who in the NFC can beat them? Exactly.

In racing news Jimmie Johnson won his 5th straight title which would make him the greatest driver of all time, but allow me to be blunt; those fuckers cheat and everyone knows it. Johnson is a pansy and a bore. Where the hell is Dale Earnhardt when you need him? How many IROC races has Johnson won (in identically prepared cars against the best drivers???? NONE.) Sad really.

I have to work Monday and Tuesday then off until the next week! That will work.

Have a good night.

Cover That!

Saturday night and nothing to do!

Cover That!
I ran across some great stuff on YouTube today and so a short post is in order.

One of my favorite songs is "Tears of the Dragon" by Bruce Dickinson (front man of Iron Maiden) when he had one of his solo albums, Balls to Picasso. The song is really wonderful and you can see the original here.

Now of course the wonders of YouTube can bring you covers of said song. Some are terrible, some not bad, and some are really good. I of course have zero music talent and the dream of playing the guitar was not to be, even with my Dad's best efforts to help me.

Here is a fellow, jesustcbtv, who plays his heart out on acoustic and does his best with a tough vocal song:

Right on! Great effort.

Here is an amazing acoustic cover of the song played by a lady named Yves:

When I heard that today I was stunned silent. Very nice playing.

Of course if you play a sick cover a tune like Crazy Train, you may get Ozzy's attention and get to play a live show like 7 year old Yuto Miyazawa:

The kid is good!

How about an all time classic tune like "Hotel California"? Well, julianaeveryday has you covered and then some:

Most impressive.

Here is oooopmymom wailing out Van Halen's ultimate rock tune "Atomic Punk":

Nasty!

A band named Sabre tries out Dokken's ballad "Alone Again" and it is not bad! Posted by CompGEED:

I like it.

How about a father and son playing my favorite Journey song, "Wheel in the Sky"? Here is tonedr:

Great stuff.

If you know the guitar duel from the film "Crossroads" then you may like this cover of Eugene's winning riff by bolajunky:

Wow!

See, you can find most anything if you want to look.

Have a good night.