Sunday, October 31, 2010

Prime Rib Sunday

Running a little late due to the evening game, but I had to get this post up!

New England Patriots at 6-1
I have no idea who switched football teams with the New England Patriots of the last year and a half, but this team is winning games by doing all kinds of things! Another impressive wins versus a Vikings team that played their best game of the season is almost unreal. Great job guys!

Prime Rib Sunday
I have had a stomach bug since we returned from vacation and I have had no appetite at all. After having maybe one sandwich on Saturday and a full 7 hour yard work tour I felt I needed something to get me hungry. What about a prime rib? why not indeed?

The butcher at the supermarket cut me a fresh 5 pounder and it looked very nice:

No special treatment for something like this, just salt, pepper, and some rosemary to coat. Brush on some olive oil and you are good to go.

I set up the Big Steel Keg for indirect heat. I added some potatoes on the top grate as a side, but who cares about the side, it's PRIME RIB! Here it is after an hour at 350 degrees:

I lowered the temp down to 300 after the first hour and cooked at 300 for another 2 hours. When the internal temp right in the middle was measured at 125 degrees I pulled the roast and placed in a pan with tight foil wrapping for 30 minutes. This allows the meat to continue to cook to a target of 135 degrees or so. The ends will be medium while the middle will be medium rare. I like medium rare, but the ladies of the house like solid medium. If you do this right you can have some for every taste. Here is the roast after the foil step:


Here is about the third slice in:

Ready to eat!

I had a thick slice from the middle and it was really great. Just what I needed to get back to feeling a bit better. Prime rib sandwiches for lunch? Indeed.

Have a good night.

Friday, October 29, 2010

It Is Friday After All

Well today was more New England like with blustery winds and colder temperatures! A literal ton of work to do in the yard tomorrow so you can guess how excited I am about that!

Could Have Skipped Friday
I don't have much to say about things economic tonight. I am in weekend mode already.

I think today the markets could have been closed as the NASDAQ ended right where it started (0.00% change) and both the DOW and S&P ended up 0.04% which is really creepy how they all were moving in identical patterns all day. Almost fractal like, or computer generated. Weird stuff.

Friday Night Entertainment
An extended dose of the "other" stuff as I am not really into a groove yet for the heavy duty stuff.

Macro Man Does Comedy
A great stop in finance is Macro Man and he had a very funny post up titled:
You Know QE Expectations are Getting Out of Hand When....
The whole thing is a must read, but a sample to get you to click over:
You know QE expectations are getting a bit out of hand when...
1. Goldman calls for $2trn.
2. Rumours fly around that the Fed may eventually do $4trn.
3. China starts complaining that the Fed is about to purchase $1trn of USTs despite buying a similar amount themselves.
4. Xerox is up 36% since Jackson Hole.
5. Your Mom calls you asking what QE is.
6. The BoJ buys a promissory note from TMM for $1bn whose principal is equal to their combined yearend bonuses price in Gold today.
7. IBM issues a super long bond.
8. Mexico issues a really super duper long bond.
9. You find out that both of these organisations have a guy who had Bernanke as a thesis advisor in their Economics PhD program before joining their respective Treasury departments.
10. Greek tourist-tat shops sell QE wallets three times the size of normal ones.
There are 10 more at the link.

They Are Already Arming Them!
First they are teaching the robots how to hurt a human in the best way, now they are handing out guns!:
Robots with Guns are the Pentagon's Equivalent of Booth Babes
Just wonderful.

Reddit Not so Great Here
I always see little tags for Reddit but I had no idea what is was. I am going to say it is safe that this poor guy will not be using it again (click for larger view):


In Case You Need One
As I am horrible at math I often resort to calculators for assistance. Here is a great online one if you need to do some crazy math:
Online Calculator
It does most everything.

Corrected, Project Azorian
Last November I highlighted a wild story about the CIA project to recover the sunken Soviet submarine K-129. I thought the project was called Project Jennifer, but a new book I just finished that was just released (Project Azorian by Polmar and White) details it was really called Project Azorian:
"AZORIAN" (erroneously called JENNIFER after its Top Secret Security Compartment by the press) was the code name for a U.S. Central Intelligence Agency (CIA) project to recover the sunken Soviet submarine K-129 from the Pacific Ocean floor in the summer of 1974, using the purpose-built ship Hughes Glomar Explorer. The 1968 sinking of the K-129 occurred approximately 1,560 nautical miles (2,890 km) northwest of Hawaii
I love this kind of stuff.

Added right after I posted:
Had to show this picture (click for larger):

via Geekologie, the graphic shows where various films were based in the US states! Too cool. "Children of the Corn"!

Film Clips
I will stick with the horror genre due to the approaching holiday.

My all time scariest movie? Easily "The Exorcist". I still cannot watch this thing and go to bed anytime soon that night. Here is the original trailer:

No, I am not watching that any time soon again.

Best scene from "Halloween"? The Lonnie scene:

Hee hee.

"The Blair Witch" film creeped me out and the ending was shocking and terrifying:

He's in the CORNER!!!!!!!!!!!!!!

Rock Blogging
While the music never leaves, the songs have returned to Friday night!

Watchtower wanted some Billy Squier and "In the Dark" and I had never heard it before! I like it very much:


Let's go with "Born on the Bayou" for a CCR fix:

Always nice.

Play this one for the kids before Halloween night! Iron Maiden's "Fear of the Dark":

They can pull anything off. Bruce Dickinson is the greatest. Great live version here with a great crowd. A real show.

How I came to know the Del Shannon song "Runaway" was through the theme for the show "Crime Story" and someone was nice enough to post it on YouTube:

Love it.

You know you love the "Chariots of Fire" song, admit it:

One of the comments on the song at the Tube was "makes me want to run in slow motion!". Too funny.

Two songs left, what will it be?

"Under the Bridge" by the Red Hot Chili Peppers is up:

Wonderful tune.

Last call! One more song and I am gone.

Ok, in my dreams I can play guitar! Seeing as I cannot, here is exactly what I would do if I could! Play the middle acoustic section of the Metallica song "To Live is to Die" right off the cue:

The studio version of the band is at the 4:50 mark of this video. Great job dude!

Have a good night.

Thursday, October 28, 2010

Wishlists for the FED

It was almost 80 degrees here today in Massachusetts! It was Bahama-like with high humidity and a nice breeze. This is an obvious tease for the nasty winter to come no doubt.

After a week hiatus the Friday Night Show will be in full effect tomorrow night! If anyone is still coming by get your requests in!

High Frequency Trading: How Big is It?
Today there was some coverage of the HFT angle and it got a little crazy.

A quickly accepted number that has been passed around was that most stocks are held for less than 11 seconds. Barry Ritholtz does not agree and cites some great material. At Zero Hedge George Washington offers that it may be hard to even know for sure without serious disclosures how large a share HFT makes up.

What do I think? I have seen enough quote stuffing and computer algo stuff reported to make me think at least 50% of all trades are silicon chip based and holding periods are very short, under a day. What can I offer for data? Nothing, but neither can anyone that says otherwise. My solution:
Turn off the algos for one week, measure the volume and churn levels versus the previous week
There, easy enough, when do we do it? Market stuff can be a science experiment after all. Who is with me?

Wishlists for the FED
At some points in time things can move from the crazy all the way to crack up insane and when that happens it is hard to do much more than get snarky and sacrcastic because treating the issue as serious when nothing and no one will care makes no sense. We have that kind of time today.

After leaking to the WSJ that the QE 2.0 move may be a little bit smaller than many had thought, the FED must have had serious pushback because in about a minute they went with a fill in the blank questionnaire on just how big the primary dealers (TBTF banks) would like to see QE 2.0 and what they felt would be accomplished by the policy. I am not making this up, it is a Bloomberg piece!:
Fed Asks Dealers to Estimate Size, Impact of Debt Purchases
This fits perfect with my piece from last night. I said that the supportive FED will now be boxed in by the banks "expectations" for support until the end of time. The FED almost admits as much by this move. Consider:
-The FED has decided that a 500 Billion buy spread over 3 months will be enough
-They get the returns from this survey back and the "ask" is for 2 trillion over a year or 16 months
-What the F$uck can the FED do? If they say "no way" the markets melt down and rates go higher nixing any effect of their purchase
This is an unreal situation.

Zero Hedge has some info on what has gone back to the FED already on this:
Exclusive: 4 Dealers Respond With "$1+ Trillion" To Fed Reverse Inquiry Into How Much QE2 Is Necessary
Yesterday we made a big stink over the Fed's reverse inquiry into the PD community over how much QE2 it should launch. Today, we find out what the distribution is: as Merrill's Harley Bassman points out: "Four dealers are predicting a $1+ Trillion buy program." It is good to finally know what the bogey is....

...Keep in mind this is a number most likely over a 6 month period. Double for full year impact.

At this point, if the Fed does something so stupid as demonstrating independence (whether from D.C. or the primary dealers), and does not announce $1 bn in QE2, well... welcome back gravity.
Who is shocked?

Well, I guess I am. This is disgusting.

Thus here are my wishlists for the FED by select banks.

JP Morgan
-4 Trillion in QE total
-2 Trillion allocated to silver short positions to crush those annoying hoarders
-1.5 Trillion in more silver shorts
-500 Billion in bonus pools for JPM employees (we earned it)

Bank of America
-5 Trillion in QE total
-1 Trillion in mortgage buybacks from Countrywide originations (indeed it was COUNTRYwide fraud!)
-2 Trillion in special bonds to pay off expected checking account charges that BAC used to get but those savvy f#ing savers figured it out!
-2 trillion to re-float Merril Lynch, hey it was your idea anyway to merge!

-6 Trillion in QE total
-6 Trillion in pay-offs to sovereign wealth funds that keep buying our stock, many of which have known terror cells they could use for retribution for losses; combines nicely with the war on terror, thanks!

-Why are you asking in public, we already positioned to front run what we talked about! Wise up goof balls!

Funny until you cry about the sadness I guess. Here is where we are.

Sick and Tired of Feeling Sick and Tired
My man over at The Housing Time Bomb has a nice list of things he is tired of. Well worth a look but I will excerpt a segment:
I'm tired of turning on the TV and being lied to about the recovery by the media on a daily basis.

I'm tired of the mortgage fraud and everyone that's involved.

I'm tired of worrying about whether or not I will have a job a year from now.

I'm tired of of the way Wall St continues to hide their losses.

I'm tired of Wall St paying themselves huge bonuses based on fictitious profits.

I'm tired of listening to Jim Cramer telling me to buy stocks on a daily basis.

I'm tired of watching the stock market trade like a bipolar schizophrenic that hasn't taken their meds for 3 years.

I'm tired of Apple and Google. Don't ask me why I'm just sick of both of them.

I'm tired of watching every politician promising the world and then delivering nothing.

I'm tired of the Democrats and the Republicans. I don't know which side makes me more sick.
Hard to argue with that! Go read the rest.

What Graph is This Really?
Jake of EconomPic has graph up tonight showing how many seconds a host laughs during the various NFL pregame shows. Here it is (click for larger view):

Ok, but in the comments I said:
I think the graph stacks up nicely based on level of inebriation during a broadcast. I still watch though!

Now tell me I am wrong? You know Bradshaw is out there!

More Star Wars!
I know how excited you all are!

Via Geekologie, here is Boba Fett's invoice for delivery of Han Solo to Jabba the Hutt:


Cooking Fix
Now that the Fall is upon us I will not be doing too many cooks outside as it gets colder. No worries! My man at No Excuses BBQ cooks year round and if you need to see some serious work, try out this post:
It is the End of October so it must be time for another 4-Ingredient Challenge. This month we have a new blogger (from The Netherlands!) and a list of ingredients that truly turned out to be a challenge:
You will not believe the masterpiece that was made with those ingredients!

Have a good night.

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.

Tuesday, October 26, 2010

Back Home Again

Obviously I have returned!

I usually go to the Bahamas in late April and I would say the weather then is a bit more settled. The mornings while we were there had quite a bit of rain and clouds. By 10am things cleared up for the day but a slow start most mornings. As always I love the Bahamas! I had a great time and got plenty of rest.

When I go on vacation I do not bring anything with me. No computer, no cell phone (which would have worked, Verizon is online down there now), and I do not watch TV. OK, I did catch the last 5 minutes of the wild Patriots vs. Chargers game and saw the San Diego field goal attempt clang off the upright! Go Patriots! This way I get plenty of distance from the usual stuff and I can relax and chill out. We forgot to take any pictures as well! We are not big picture people anyway, but we both totally forgot, what can you do.

Anyways, I am back and the yard here is showing that fall is in full effect. It is going to be a LONG weekend of yard work this weekend for sure, yuck.

Just a few light items tonight, I need to get back into things and it may take a few days.

Robots Learn to Break First Rule of Robotics
The first rule of robotics (via Asimov) was that a robot cannot harm a human or allow it's actions to harm a human. No worries, scientists now are already teaching the robots to either hurt human or just torture them:
Robot arm punches human to obey Asimov's rules
ISAAC ASIMOV would probably have been horrified at the experiments under way in a robotics lab in Slovenia. There, a powerful robot has been hitting people over and over again in a bid to induce anything from mild to unbearable pain - in apparent defiance of the late sci-fi sage's famed first law of robotics, which states that "a robot may not injure a human being".

But the robo-battering is all in a good cause, insists Borut Povše, who has ethical approval for the work from the University of Ljubljana, where he conducted the research. He has persuaded six male colleagues to let a powerful industrial robot repeatedly strike them on the arm, to assess human-robot pain thresholds.

It's not because he thinks the first law of robotics is too constraining to be of any practical use, but rather to help future robots adhere to the rule. "Even robots designed to Asimov's laws can collide with people. We are trying to make sure that when they do, the collision is not too powerful," Povše says. "We are taking the first steps to defining the limits of the speed and acceleration of robots, and the ideal size and shape of the tools they use, so they can safely interact with humans."
Famous last words if I ever heard them!

Not to be outdone, now when you are chatting up that smoking hot young lady online and think you are making moves like a true player, it may just be a computer program stringing you along:
Meet Suzette, The Chat Program that Convinced an Expert She was Human
Have you met Suzette? If you have, you might not know it — because Suzette has passed the Turing Test. This chatbot convinced a judge that she was a human.

The Loebner Prize is given out every year for the machine that can fool a judge they're talking to a person for the space of a conversation. The judge chats to both a human and a machine about a few subjects - such as "What is a hammer for?" - and at the end of the time period, the judge has to pick which is the bot. After a twenty-five minute conversation with Suzette, a judge picked wrong.
Again, you have been warned.

Book Review for "The Force Unleashed II"
Warning Star Wars content coming up!

As a hard core Star Wars fan I can stay silent no longer!

Understand that I do not play computer/video games in any format. No XBox, no Wii, nothing. What I do is read Star Wars material. Any and all of it in the expanded universe. What has been going on as of late is disgusting and I can only hope the Star Wars community gets their head on straight soon.

I let the original "The Force Unleashed" novel go by because I understood that they were trying to tie in a game they wanted to sell. Fine, whatever. There were so many things wrong with the book it would take way to long to cover, but a few issues:
-In the book/game Galen Marek is found as a boy by Darth Vader and taken as a "secret" apprentice. In some way his training by the sith lord allows him to be about 4 times as powerful as Vader!? How does that work? He can use force lightning, but Vader cannot, so who taught him that? His name becomes "Starkiller" (how dumb) and he can tear entire Star Destroyers out of the sky which seems funny because Vader could not stop the Millennium Falcon from leaving Hoth. A total mess. Ad to this by the end Starkiller fights BOTH Vader and Darth Sidious and about kills them both. So this guy was the most powerful force user ever it seems? What a joke.

Anyways, I let it go even though I thought the entire crap show should not be true Star Wars canon.

The new game/novel, The Force Unleashed II goes even further in it's stupidity and silliness. In this one it is not clear if the original Starkiller was cloned or what and it does not matter. Now in addition to being the most powerful force user ever, get a load of all this stuff:
-Force powers that can disintegrate people by the crowd size
-Starkiller can enter the atmosphere of a planet on the outside hull of a starship and not get burned up due to his "force bubble"
-During the story Starkiller goes to Dagobah and sees Yoda, yet this makes no sense in any way as Yoda never speaks of it
-Again, Starkiller is so powerful he beats Vader easily and then even imprisons him for transport to Dantooine?? What a freaking joke as in the novel Princess Leia knows about this but it never comes up anywhere else

I could go on and on but the story remains the same:
In the expanded universe the move has been to show both Darth Vader and Darth Sidiuos as total lunatic idiots incapable of much of anything. Both are inept and weak and only luck allows them to remain in power. This makes them both silly looking and flies in the face of all other work in Star Wars.

There I said it. Can Darth Sidious, the master that took over the Republic, hid himself in front of the jedi using sith sorcery, killed jedi by the score and outlasted Grandmaster Yoda in a fight be practically a buffoon? I hate this stuff so much.

Get your heads on straight Lucas Arts, you are killing a great story with this pandering to game sales and liberal invention of force powers never before seen. What a joke.

Sorry for the side track, back at the regular stuff soon!

Have a good night.

Thursday, October 21, 2010

Swords, Sorcery, Magic, Fantasy. Yeah, I Like It

I am about all set for my trip! With a cold snap moving in here in Massachusetts I will be getting away while the getting is good.

I have a bit of time to kill and there is probably no way I can really go to bed super early for my early flight (I get very nervy before trips) so I will do a filler post with crazy stuff only I would like to scare everyone away.

If you need the economic stuff, the Must Read list is the very best out there. Who is hot as of late? The best three of this week (and who can pick really?) are:
-The Reformed Broker
-Zero Hedge
-The Housing Time Bomb

Make sure you stop by those places and all the rest. I will get caught up next week. If I come back.....

Swords, Sorcery, Magic, Fantasy. Yeah, I Like It
Back in the distant past when we both had to spark stones into hay to make fire and read books for entertainment I was a young addict for anything swords, sorcery, fantasy or magic in written form. I especially loved the whole "choose your own adventure" genre as it opened up new doors. I will share a few items this evening.

Wizards, Warriors, and You!
These books allowed you to serve King Arthur as either a Warrior or a Wizard. Both were cool but the Warrior did sport the Sword of the Golden Lion which had "Unbreakable" (EDIT: The blade reads "Forever") etched on the blade! Too cool.

I have copies of all the books now, and here a few covers pulled from the Internet:


Oh, the memories!

While those were great, the Lone Wolf Series of books were out of the world amazing to a young, fanciful Economic Disconnect!

Joe Dever wrote all the original "choose your own adventure" novels (Illustrated by Gary Chalk) and these books are true masterpieces all. I have a complete collection of original prints as well as a complete set (new editions by Mongoose Publishing) signed by the author himself and sold to me by none other than...Joe Dever! A real treat if you ask me.

A couple covers?:



Now who can forget the co-writer, John Grant (aka Paul Barnett). I have had email correspondence with Mr. Grant over time and he is a real person that loves sci-fi!

Mr. Grant was unleashed when he was able to pen the "Legends of Lone Wolf" series of novels which were the canon novel versions of the adventure books. These novels have some of the best writing I have ever read and you cannot think of them as you would the genre. Of course I have a complete first edition set. You don't?

Two Covers:


A sample? From the novel "The Sword of the Sun":
'And then the first fire of sun rose above the far horizon. A single shaft of dawn light came across the sea.
Lone Wolf stood, the Sommerswerd still stretched out towards the huge red tent.
The shaft of light touched the very tip of the sword.
Both Lone Wolf and the Sommerswerd became a statue carved out of incandescent white light.....
A thrust of lightning sprang from the Sommersword to the Darklord's tent. Thunder shattered the air. The tent vanished, and in it's place there was a great column of fire, expanding heavenwards.
All of the world seemed to howl with the anguish of Zagarna's death.....
And then there was rain - warm, gentle rain.
Lone Wolf sheathed the Sommerswerd, its light now only a subdued red glow, and cupped his hands to the rain.
He tasted the water once, and then again.
And then he fell.'

The novel "The Tides of Treachery" is a special effort as well.

Ok kids, time to go! Enjoy the weekend and I will be back next week.

Have a good night.

Wednesday, October 20, 2010

What I Want to Know

Tonight may be my last post until next Tuesday as I have a bunch of stuff to get ready for the trip on Friday morning. I think this is perfectly timed as the wild market gyrations and the equally wild speculation by writers everywhere is getting a bit on the extreme end of the pool. Maybe we should all take a few days off?

What I Want to Know
Over the next few days I will be taking time to put my mind "offline" and funny enough this is usually when I figure things out! Sometimes a step back is all you need. As a scientist I often find things economic annoying and frustrating because of two main sticking points which will forever keep economics from being a real science:
-Incomplete Information

The psychology part I am sure you all understand, but the incomplete information part may not be what you think I mean.

Take guidance and analysts estimates for example. There is no reason for either, not really. Are you going to argue that Apple Inc (AAPL) the monster tech firm that makes I-stuff cannot post sales and shipping records every single day from their corporate IPad? Of course they could. All you would need to do is have a running spreadsheet to track it and there is your revenue "estimate". This is not what happens and throw in a bunch of crazy accounting tricks and you never know what a company may post for earnings. This is incomplete information. I will not even get into the banks and their games.

When I return I would like to do more trading type things, not daily stuff, but work on positions I can run with for a couple of weeks that look attractive. On the other hand I do want to write more about macro issues and larger picture thinking as well. Should be interesting.

Anyways, here are some things I would like to know so if you know go ahead and leave it in the comments if not I will cogitate on it on New Providence Island:

-I think Karl Denninger should take this weekend off, but as he is on the job how come it is not knowable right now (like this very second!) whether mortgage securities were sold multiple times? I think this is impossible but again, why am I even wondering?

-When and how did the stock market become a proxy for the Forex market? I can tell you with 100% confidence that no small timer or 401k contributor at and around my level even knows that the dollar fluctuates in value so they are damn sure not trading the buck up and down via stocks.

-This post at The Housing Time Bomb kind of scared me a little. Why did it make me so uncomfortable?

-Why does momentum trading piss me off so much?

-If we all agree (we do not!) that any nation that has it's own currency needs not collect taxes to spend and can never go broke, how come $100,000 has not been deposited in every single Americans bank account to end this recession? Why not tonight at midnight? If the above line of thinking is true there is no excuse for not taking this action. Money where your mind (and mouth) is time boys.

-When the automobile caused a serious "output gap" in the horse cart manufacturing industry how come they did not target that gap with cheaper money? Think of all the oil we could have avoided using all this time!

-Related: What if the consumption and output level of right now is actually steady state equilibrium? Makes all being done look pretty stupid, yes?

-Related 2: When you get in your car do you immediately gun it to 100 mph to re-capture your highest speed ever output? Why not?

-I have been disappointed with the FED (you think?) but I cannot help but wonder if behind close doors the members are not screaming about a US CONgress that will not do anything on their own but rely 100% on the FED for action? (Note: I don't favor the Congress getting to crazy either)

-That said, should some kind of ban on massive spending bills be enacted before the week prior to Christmas? I think there could be some serious gifts on the way by an outgoing CONgress.

-So the Republicans will win in November and all this will change right? Hee hee.

-If Barney Frank loses his seat here in Massachusetts will I be arrested for playing this tune too loud?

Have a good night.

Tuesday, October 19, 2010

MBS Fallout: Mark to Market by Other Means?

I have a million things to do before I leave on Friday!

MBS Fallout: Mark to Market by Other Means?
The pyrotechnics were blazing today as news story after news story brought more and more information and developments in the mortgage saga. There is plenty of commentary out there so I just want to add a few thoughts to the debate.

He Said, She Said
The buyers of pooled MBS want the banks originating them to buy them back because they believe they were either mislead on the asset mix covered or the underlying assets were not handled correctly leading to impairment of the whole lot. In either case the banks will say "it was all right there in the literature we provided" and the buyers will say "you did not model the samples correctly vastly overstating the quality of the pool!". He said, she said indeed. How will this settle out without the legal process getting involved?

Even Though You Know How the Movie Ends, It can Still be Hard to Write the Story
There is no way the story will read as:
After moving heaven and earth and a moon sized pile of cash to save the big banks, Bank of America and Citigroup will now be broken up, bond investors dealt a severe haircut, and fraudulent activities will be prosecuted.
Not. Gonna. Happen.

So what will happen? It is way to early to know. I think Blackrock and PIMCO both know very well that BAC cannot buy back all that paper without going to the markets for serious cash. So why did they issue this note today? There is more going on here and only time will give up the answers. I know plenty of bloggers are getting the champagne on ice for the monster bank blow up, they may be waiting a long time to pop that cork.

Mark to Market by Other Means?
By far the most compelling issue to me is how this process will affect what banks hold on their balance sheet. The monster rally in the markets were largely driven by the ability of the banks to scrap mark to market accounting and go with mark to whatever you feel like accounting. If a serious look is performed on the MBS pools to determine how degraded they were and thus need to be bought back, those assets are going to have a well known clearing price! This would be mark to market by other means and thus poses a severe risk to the banks. Needless to say some kind of deal will have to be reached to prevent this.

Final Thoughts
The smoke screen being run by the banks right now is that they want to boil this all done to whether people are being foreclosed on in error. I have no doubt that in 99% of the cases the home mortgage holder is about to be foreclosed upon correctly. That really is not the issue. What is central is how fraud and corner cutting during the boom times left a mess of broken chains and packaged garbage.

Think of where we are right now, I promise it will either make you laugh or cry:
The entire US Banking system will need to have either another massive handout or some way of legalising fraud will have to be put in place to get them off the hook.
That is the condition of our finance system. Well worth saving at the tax payers expense?

Have a good night.

Monday, October 18, 2010

Lighter Fare

One day down and three to go before mini vacation time!

Question for all my fellow bloggers:
What is with all the email requests I get to place ads for payday and short term loans? Don't they know no one that reads this site would ever do that?

My Sunday with Halo Reach and an 8 year old
Yesterday friends of ours scored some tickets to the Patriots/Ravens game (I cannot believe the Pats won that game!) so we offered to watch their sons for them so they could go. One is about 16 and was going to play hockey all day at his friends so that was no big deal. That left the 8 year old boy to entertain for about 9 hours!

We did all kinds of things to keep him interested including carving jack o lanterns, playing with a remote controlled helicopter I had but never used, and playing about 5 games of chess. After a while he finally came to what he wanted:
"Want to play Halo Reach with me?"
Now you have to understand that I cannot play video games to save my life. I said ok, but I knew this was going to go bad.

The kid was obsessed with sneaking up behind my game character and "assassinating" me usually by crazy violent actions. After about the 57th time I was killed I asked him why he found it so hilarious each and every time. He said it was just so much fun! Ok. I got a break to watch the football game, but then is was right back at it. I know Halo is a huge thing, but after getting decapitated for the 1000th time by a kid I had enough! It is my opinion that Halo is evil.

This is YOUR Market
Not much to say about market stuff today, my mind is already running away to the Caribbean. Had to love the SPY issues this afternoon though:
SPY Flash Crashes: NYSE Cancels $500 Million Worth Of Trades
Would you say we are a.) closer to or b.) farther from outright price level setting for stocks? I think we get closer everyday.

After hours AAPL is selling off a little after their basic beat came out less outlandish than usual. I am sure dip buyers will grab it up by the open, unless it flash crashes as well. Great market, great fundamentals and great participation.

Menace of Mechanization
Another entry in my long running series of warnings about the world being taken over by robots.

If robots are not going to try and take over the world, then why is a study like this even needed?:
In New Study, Babies Think a Silvery Robot is human, as Long as it Acts Friendly
Whoa! Opening paragraph:
At 18 months old, babies have begun to make conscious delineations between sentient beings and inanimate objects. But as robots get more and more advanced, those decisions may become harder to make. What causes a baby to decide a robot is more than bits of metal? As it turns out, it takes more than humanoid looks--babies rely on social interaction to make that call.
First they come for the children!

Readers may remember when we discussed the Uncanny Valley here a while back, but a refresher:
The uncanny valley is a hypothesis regarding the field of robotics.[2] The theory holds that when robots and other facsimiles of humans look and act almost like actual humans, it causes a response of revulsion among human observers. The "valley" in question is a dip in a proposed graph of the positivity of human reaction as a function of a robot's lifelikeness.
Here is a chart for those that like data that way:

With this in mind, please play the following video of a Japanese pop singer/dancer robot and tell me you don't want to take a sledge hammer to this creepy thing! (via Geekologie):

This must be stopped and soon!

Benoit Mandelbrot
If you know fractals you know that Benoit Mandelbrot died on October 14th and I wanted to say thanks for the great work!

Uplifting Scenery
A little fun with uplifting film clips to end the night.

Want to get amped? What can be better than the fight in Rocky II?:

Would have loved to be at the theater when this came out, I bet people were throwing punches in the parking lot!

How about King Arthur being reborn in Excalibur? Love the music when the plants are blooming!:

Regular readers know that Ozzy always starts the song "I Don't Know" with this tune (a section of O Fortuna).

For some reason it is embed disabled, but I love the scene when Aragorn is driven to say:
"For Frodo!"

What about the song by Ozzy "Secret Loser" as seen in the film "The Wraith"?:

What, you have not seen the film? You should, and how can Sherilyn Fenn stay so hot for what seems like all time?

Ok, final one, take a ride with the last scene from "Rounders" which is a poker film:

If online poker gets the green light my blogging time will be cut way short!

Have a good night.

Saturday, October 16, 2010

Thinking Out Loud

It has been almost hurricane like outside today! The winds are very strong. I replaced a light on a lamp post near the road but I could not do any yard work because the wind just blew everything around. Too bad, HA!

What I Said
As the details of the foreclosure/loan packaging mess keep coming to the surface, here is what John Carney is thinking right now:
So here’s what I expect will happen. The lame duck session of Congress will pass a bill that essentially papers over the misdeeds of the banks that originated mortgage securities. Every member of Congress and every Senator who has been voted out of office will cast a vote for the bill. And the President will sign it.

Of course readers will know I thought this on day one of the news. I cannot imagine a way the banks cab get what they have coming after all the money that was spent on them. The wild card? Get enough lawyers involved and a few sympathetic courts and this could move to a place where new legislation could be blocked. I would not hold your breathe though.

Thinking Out Loud
After re-reading the article over at The Automatic Earth I linked to last night I had a few thoughts I wanted to jot down.

I think the huge problem the FED is having here is that they really do not understand where we were just a few years ago in regards to demand from consumers for credit and "stuff". I use the term "stuff" because I mean everything from TV's to furniture, everything.

So how I see it is that from 2004-2007 people had the dial set at 11 for all out consumption and then some:

During this time not only did people (in general, not every single person obviously) spend every cent they made, they went out and spent all the cash they could suck out of their homes as well. The credit markets were a huge pool to draw on and people did. I will not rehash all those numbers but the spending frenzy was immense, the dial was turned to 11.

The bad thing is that the old "11" has now become the new "need to return to" level. Right now most people are still spending every single penny they have, but they cannot access extra credit because they do not have any home equity left. Even if they do, unemployment and stagnant wages are putting the breaks on credit appetite.

What Ben Bernanke and the FED, Paul Krugman, CONgress and everyone else seem to be missing is that spending and demand are still highly elevated and probably at the maximum level possible given the income side of things.

I have written that stocks going to the moon is not a pot of gold for normal people because they either do not own much stock or if they do it is held in plans like a 401k or other retirement vehicle where getting to that money is not an easy (or cheap) thing to do. We can be thankful for that at least. In this sense I do not see the S&P at 1600 as adding much if anything to consumer spending. Some may argue that higher stock prices will encourage business to expand or grow, but grow for what? Expand into what? All time low borrowing costs are here to stay and there is no hurry to get bigger in the face of flatlining demand. Business may borrow money, but they will most likely just do stock buybacks with it!

The issue with the monster tsunami of liquidity the FED keeps deluging the world with is this:

There is only a small place for all the cash to go in the end!

Right now where is money running?:
-Some equities (AAPL, NFLX, GOOG, and like others)

How will this re-ignite massive consumer over spending? How will higher input costs for business make them want to hire more people?

The FED is getting more and more scared and now we even have this kind of thinking going on out loud:
FED's Evans Suggests a Price Level Target
Discusses aiming for higher inflation in the short term (sure buddy!) to make up for lost time. This kind of discussing is abhorrent!

So the FED would like to make cash trash and get people to run out and spend due to fears their cash will not go as far tomorrow? This is a path forward? Again, here in the real world things are different on the ground.

If inflation heats up and even the average joe knows about it, what do you think is going to happen? Here again, the FED has no real ability to see things as they are.

The US is broadly a service based economy. This means we make "services" as our primary way to make money. So if cash is going to go away to inflation in a hurry, would you buy a vacation to Disneyland (which would add revenue to service based industry across the board) or are you going to buy food? If your savings are getting smaller all the time, is a plasma TV sure to be outdated by the time you get it to the car in the parking lot going to be your first purchase or will you look to make sure you have heating oil covered for the winter?

Backing away from the small scale one person model, what about big business? Will you look to hire more people that are going to make more money or will you streamline even further? Will you try and procure your materials and energy in bulk to dodge higher input prices going forward? I think so. This adds nothing to the service sector, but it will add revenue to producers and manufacturers in China and Japan. I think Australia is exporting more materials to China than ever as well.

In the end I think the policy right now would be great if we were a net manufacturer or a net materials provider. We are not! We will need to buy more expensive things due to higher costs and this will hit the service sector! It seems all backwards to me.

On another side of things I have an issue with the Central Bank discussing so openly the idea of scaring you into spending using fear. So far only us economic minded folks have any clue what is happening, if there is a Nightly News Special on how to get the most for your ever inflated away cash there is going to be an ugly panic!

Along these lines I have always said a serious currency issue will not happen slowly and with broad signs for all to see. You will just wake up one morning and it will "be on". I get a chuckle when I read folks say if things get bad they will have time to see it and get out of various positions. Yeah, you and a million other guys! Wait until all your stocks go no bid after a dollar scare and let me know how those stop losses worked out for you.

I am not saying this will happen. I think the FED will likely fail for the reasons I outlined above. Should they succeed I can then put the more ugly scenarios on the table at that time. It's a real mess out there right now!

A bit outdated (here the Saudis are the big dogs!) but this clip from "Rollover" was making the rounds and it is worth a look:

Have a good night.

Friday, October 15, 2010

Fuggedaboutit Friday

You know...Fuggedaboutit!

Crazy rain storm last night into this morning and now massive winds. I am not worried at all, I am still waiting for the monster generator I had installed to come into play should the power go out!

Oh yeah, take one second and check the picture from the last post and then vote in the poll at the top left. 2 votes??

Weekly Wrap Up
Another noisy day and I am tapped out on things economic. I chuckled when I saw these two Zero Hedge headlines back to back:
John Williams Warns Of "Severe And Violent Sell-Off In Stocks"
paired with:
The Empire Strikes Back: China Daily Warns About Currency War, Blames Dollar
I am assuming you all know the composer John Williams did all the music for the Star Wars films!

Anyways, if you want a great read today's best once again comes from The Automatic Earth with an essay titled:
QE 2 and the Nominal Man
Well worth a stop.

Fuggedaboutit Friday
I am going to step away from the not fun stuff and go for the fun stuff.

Now I have no idea if this is true but in this video (go to the 3:10 mark) you can see a guy fire a .40 caliber handgun into ice and the bullet stops and starts spinning in place! Has anyone ever done this? It seems real, and I guess the barrel rifling could cause the action but it is strange!

This is My Hometown

This sign used to read "Welcome to Spaghettiville" and was from a time when Prince Pasta was a huge employer in the area.

I was reading random stuff as I am prone to do and I came across a wonderful site that has many pictures of Economic Disconnect's childhood hometown! It was a great time to see all the old places. Mind you the Lowell of recent years is in much better shape than the Lowell of my youth. I would doubt anyone is interested but if you are the complete list of photos is here:
Photo Essays on Lowell, Massachusetts
You may like the sections:
Lowell Cemetery
Neighborhoods, Part 2
Oh, the memories!

Movie Clips
Some scenes from cinema to get you to go nuts for Netflix (NFLX) instead of just hitting a button on Comcast.

In an unlikely pairing, Tom Hanks foreshadowed how great an actor he would come to be accepted as in the film "Punchline" along with Sally Field. The movie is funny, sad, and moving on many levels and you would not regret taking a look:

The trailer is a bit focused on the funny parts, but there is much more.

Wow, I saw this on the side bar, Hanks fights The Fonz! Too funny.

I love Brad Pitt and if you see "Meet Joe Black" you may see what I am saying:

Boxing History
A couple fight scenes for the fans of the lost art.

In 1988 Marlon Starling was dominating his opponent, Tomas Molinares, through 6 rounds when the bell rang and all hell broke loose:

A punch which was way after the bell resulted in Starling first losing the title then the result changed to a no contest. Starling didn't bother to fight Molinares again and instead beat Lloyd Honeyghan to become champion once again. Molinares drifted off into nothingness.

In the next clip there are two important things to keep in mind:
-This fight was tied after 14 rounds and the heavyweight title was on the line. Both fighters knew they needed the 15th round.
-These are heavyweight fighters and this is the 15th ROUND!!!!:

Larry Holmes edges Ken Norton for the vacant WBC title and wins one of the most memorable heavyweight fights in history. Unreal to fight that hard that exhausted.

Rock Blogging
A special blog tonight as it is reader Watchtower's Birthday weekend! Happy Birthday my man! You have been here for so long and I do appreciate the company! I wish you all the best and hope you have a great weekend. Don't lose too much at the casino, you can always lose it in the markets! No one should be denied anything on their birthday, I live by that rule, so remind the wife of that fact, hee hee!

No, I cannot play the band that cannot be named (because they suck) but may I offer a better version:

Happy Birthday Watchtower!

So of course Watch's request leads the show. Let's go disco with Joe Tex and "Ain't Gonna Bump No More (With No Big Fat Women)":

All women are gorgeous in my way of seeing things, but this song is all get out funny!

I can rely on Gawains to supply some rocking tunes! Here is "American Band" by Grand Funk Railroad, live as well!:

Nice pick live!

I beat the year rule by far so get rocking with Van Halens's sick as all get out "Panama":

Second only to "Atomic Punk" as their best song in my mind. Yeah we are getting a little bit hot tonight!

Ok, I obey the 1 year rule and then I break it! Sorry, but the new Guns N' Roses tune "Better" is stuck in my head for some reason!:

Not bad at all.

Another tune stuck on the brain is "Silent Lucidity" by Queensryche:

Wow, just wow.

Ok, two to go! Only two, it's the rule of two!

I am now on the Lacuna Coil bandwagon (Thanks Mark!) so lets ride with "No Need to Explain":

So pretty!

Last call! A dream to some, a nightmare to others! (obscure reference!)

Closing the show with an 80's tune, because that's all that matters and you know it! Let's go back in time with Mr. Mister and "Kyrie":

He even talks about lasers and stuff!

Have a good night.

Thursday, October 14, 2010

Price This In

Seems a few lines and ideas struck some readers as either pretty good or fun last post! I do aim to please after all.

Tomorrow is Friday Night so get those requests in. There will be NO Friday Night next week as I will be on New Providence Island getting warm.

Do Not Out Fight the Machines
Not sure how I missed this story, but I saw it on CNBC this morning which means it has to be old:
Norwegians Convicted for Outwitting 'Trading Robots'
The crime you ask? You cannot guess?:
Two Norwegian day traders have been handed suspended prison sentences for market manipulation after outwitting the automated trading system of a big US broker.
Prosecutors said Mr Larsen and Mr Veiby “gave false and misleading signals about supply, demand and prices” by manipulating several Norwegian stocks through Timber Hill’s online trading platform.
Anders Brosveet, lawyer for Mr Veiby, acknowledged that his client had learnt how ?Timber Hill’s trading algorithm would behave in response to ?certain trades but denied this amounted to market manipulation.
“They had an idea of how the computer would change the prices but that does not make them responsible for what the computer did,” he told the Financial Times. Both men have vowed to appeal against their convictions.
How is this a crime? I guess because the HFT computers don't really place real orders, just screw with prices using false and misleading signals it is different somehow. In any case, don't fight the robots, your fate is sealed! I would hope they appeal as this would make an excellent test case. I would donate to the legal defense.

Google Misses Estimates
Yes, they missed my estimates.

Google (GOOG) had earnings up tonight and beat Wall Street estimates for $6.69 (hee hee who got that number out?) by posting $7.64 a share. Too bad EconomicDisconnect's estimate was for $8.50 a share so GOOG missed wildy actually. How did I come up with my estimate? Who cares, how does anyone? If GOOG has beaten the Street's estimates 92% of the time by 5% or more why the hell would anyone even care what they estimate earnings at? Mine and theirs carry equal weight in real terms, but not in terms of "the game". I guess unemployed people buy a ton of crap they find through Google. I use Yahoo myself but I am old school.

Latest Estimates for Foreclosure-Gate
While we are talking estimates, here are two I saw today for Foreclosure-Gate Fallout (FGF) that I will update daily as I see them:
Jeff Gundlach Expects The Foreclosure Moratorium To Have Negligible Impact On MBS
No real numbers but lets say $0-$100 million in dead tree work


Around $400 Billion as says Market Ticker (almost any post) as he types fast and furious in glee.

Quite a spread. Can CONgress act before the election or will we see a Christmas Night at 11:59pm ramrod screwjob go through? You know where I am betting. (see the Montreal Screwjob here, it's not what you think!)

Related: JPM is looking to sell $4 Billion in 10 and 30 year debt even as they sit on piles of cash so high you could measure the distance to the laser range finders on the moon in $1 dollar bills! Houston we have a problem, or share buy back by issuing debt?

Price This In
It can get annoying to hear so many talking about how resilient/strong/upbeat/moving up the markets are like either that matters to anyone in the real world (those without $500k plus trading accounts they can lightning trade .5% moves during the day) or even like the so called awesome markets are not being actively targeted by free money and liquidity from the highest levels. I love chartists and I read quite a few, but the lack of a macro lense can get annoying at times.

So here is your homework assignment (should you choose to accept it!) price out the S&P under the following scenarios:

-QE 2.0 at either 300 Billion total one shot or 15 Billion on a monthly basis (almost 1/10th POMO, another stealth QE)?

-August 2011, when unemployment is at 9.8%, GDP has registered a 0.4% number, and tax receipts are still in the dumps?

-Ok, in the above example now add QE 3.0 expectations?

-Say in 2013 we are on QE 7.0 or whatever, have stocks moved up the whole time (DOW 30,000 here we come!) or has anyone figured it out?

Now I can offer these questions are are too far out for anyone to really be on the hook for, but so was where we are now a year ago; a slowing economy that is not adding jobs and banks that may still be facing real issues. Yet we are approaching serious all time highs in equities!

I am getting angry with myself for talking about things stock market related so much. Stocks are a sideshow (for regular people) but easily influenced so that is where the bulk of the work is being done. I guess I just try to do what I can.

Final Notes
So what do you see first off? A duck or a rabbit?:

From one of the first Optical Illusions ever explored! I will put a poll up to get votes! Please vote!

Last note;
I will probably stay light until I leave for vacation next week. Mostly fun stuff and light fare. When I get back I will be looking to make a few changes around the site so I would welcome any and all input! What do you want to see more of? Less of? What topics? Macro? Micro? Boxing? Really all, I would like some input so I can formulate a plan.

Have a good night.

Wednesday, October 13, 2010

Panic Room

Short on time this evening so a few notes.

Silver Moves Higher, no Regrets
Silver hit my upside target of $24 today. Do I regret selling a little while ago? Nope, not at all. If you are going to trade you have to have targets to the upside and downside and you have to stick with them. I felt $22 was very attainable and $24 was the top of the resolution. I got about $23. No worries here. Besides, I have plenty of physical silver sitting pretty to enjoy the ride.

Minyanville has what they call the "Mr. T Gold Top Indicator" and the big guy was on Bloomberg TV today touting gold! Usually a reliable top marker, but with animal spirits running wild on the promise of QE2 you never know. More in another section.

Mortgage Mess to End in Five Weeks. Six tops.
JP Morgan (JPM) had earning s today and if you allow that they played with loss reserves they "beat" estimates for the 20 thousandth time since 800 B.C. What was amazing was how smug and glib the CEO was about the whole process. Calculated Risk has a partial transcript up. Some examples:
-"As a result of these actions, we're reviewing 115,000, plus or minus, loan files that are currently in the foreclosure process"
-"It's going to take several weeks to go through the files and make sure and correct any errors that are in there. The underlying stuff is all accurate. So that's the key substance. Obviously we know there's a lot of state AGs and we have conversations with them. We're hoping [to get back to] the normal process -- for us, the sooner the better for everybody involved."
-"Again, I hope -- this is a hope. This is not a knowledge. Is that when people take a deep, sigh breath, go back to the right, look to the substance underlying the files and go back to modifying, foreclosing and doing the right thing, all told, it could be a blip. Talking about three or four weeks it will be a blip in the housing market. If it went on for a long period of time it will have a lot of consequences, most of which would be adverse on everybody."
Now I would ask how they can review almost 120 thousand files so fast? How many people are doing the work? How come nobody asked how realistic this is? It is clear the CEO either does not think anything will come of this or he is seriously full of it. Worth watching but I have already written how this all ends.

Panic Room
Stocks. Grains. Gold. Silver. Oil. Bonds. You name it and it has been panic buying for a little while now. If QE 1.0 resulted in a year long melt up, QE 2.0 induced blow off tops might be done in another week! This kind of rush buying is not healthy.

The Evil Speculator notes the FED POMO schedule for the rest of the year and submits:
Anyway – the market, right. Bottom line: The bear case is done until early January – at least in equities. Bonds look like they’re ready to reverse but in a market where equities, gold, and bonds all move up I am not willing to entertain any big bets.
Another 2 plus months of panic buying? That might get interesting!

I have no idea what is going on right now. The orgasmic euphoria out there is stronger than late 2007. Potato Sack and Boom Boom Bernanke have ignited a scorched earth policy of incinerating cash and savings to get a conflagration of equity and commodity prices. It looks like people want to play. Big time.

While the FED ponders how to get unemployment down, I have a better idea. If they keep this stuff up, why not just roll all the super-extended unemployment benefits checks into AAPL, NFLX, and BIDU and let that ride the wave to 100% gains! Then hand out the checks, or have people re-invest in the unemployment triple bull favorite stock ETF ( ticker: NOJOBBUTONFIRE) so they can get ahead in this tough economy? Geez, that was easy!

Being a wet blanket I would caution there is some headline risk out there with things like currency wars brewing, the mentioned foreclosure mess meaning losses at the banks, and just exhaustion of buyers but why worry about a 5% move down when you can move up 5X that in a month! Missing out is worse than death these days.

At the current average of .5% moves up every day we could be at all time highs by January, December if we get rid of those pesky red days of -0.002%! The law of big numbers should get in the way, but that is what QE 3-10 is for after all. How many shares of AAPL will it take to buy a loaf of bread or grab a can of corn to heat over your remaining cash that is better used as fire fuel? I have no idea, but it should go over well with all the idiots that pulled so much money out of the equity market over the last year. But that is cash on the sidelines, right? Rock on through the night!

More Fun
If you like biting wit, sarcasm, pictures of eye candy, and a general great time you should stop on over at When Genius Prevailed as the author has a great mix of great insight and a fun format. If you say I sent you you will get a discount on the page loading time. Kidding!

Have a good night.

Tuesday, October 12, 2010

Let's Play "You Figure it Out"!

I had to stay late at work so the traffic would have been terrible and thus the wife and I went out on the town of Cambridge for a while to burn some time. Home late but I wanted to cover a few things. Let's play a game and I hope the spell check is working!

Let's Play "You Figure it Out"!
I actually had a post in mind today after I saw an article but I am out of time to do a full review. Given that, I know my readers are the best out there so I think you can figure a few things out for yourself.

First, the section in question comes from a review of a John Hussman piece by Pragmatic Capitalism where Hussman writes:
The global financial system continues to be unsound in the same way that a Ponzi scheme is unsound: there are not enough cash flows to ultimately service the face value of all the existing obligations over time. A Ponzi scheme may very well be liquid, as long as few people ask for their money back at any given time. But solvency is a different matter – relating to the ability of the assets to satisfy the liabilities.
Regular readers may remember a missive I wrote a while back which stated:
It is a strange phenomena at work here. Unless a major world event occurs where there is a scramble for hard assets and hard money the US will continue to get away with this stuff. I actually have a fleshed out theory on this big picture wise, but I do not want to be called a conspiracy nut. If interested, email me and I will serve it up!
And of course I was saying what Hussman did, as long as nobody needs all the cash up front, this game can go on. If they do, it's over. See, I am not crazy! Well, at least not about this! Yes, this is an Illusion of Prosperity ripoff job!

Now to the game.

I have made the argument time and again that it is policy to keep blowing bubbles and hope it works. It is not more complicated than that. Don't believe me? Well, you figure it out! Here is what Brian "The Potato" Sack and then John Snow had to say about FED policy of supporting bubbles, I mean "asset" prices:
The idea behind quantitative easing is you buy government paper that’s held by financial institutions or individuals. And then they have the money. And then they go out and buy some other financial assets, stocks. And they drive up the value of those other financial assets so we get an increase in the value of financial assets which means an increase in the value of lots of peoples’ household wealth. And the idea is if household wealth goes up, then that will be a spur to spending.
We will side step the idea that QE is a mere "swap", the guys running the show think this is the way it works. I think you can figure it out from here what the "plan" is.

Next up, I have written plenty that a monster government backed housing bailout/black hole is in the works. Everyone wants results immediately but some things take time. A 2 trillion dollar hole takes time to set up. We may be there. I submit some quotes/references and you figure it out!

Via Naked Capitalism:
The next question is “what does this mean for MBS investors?” If you are a Fannie and Freddie investor, there will probably be no obvious consequences, even thought there ought to be. The government is not going to want to raise doubts about the integrity of such an important market. Servicers will continue to pay advances on delinquent accounts.


Via Zero Hedge:
Ultimately, if these issues do in fact escalate, the Administration may try to broker some sort of settlement. If such deal brokering does take place, Levitin believes that “some payment” will be exacted from the lenders and servicers. The Administration could bargain for more mortgage principal write downs." In other words, the endgame will likely end up being the extraction of material concession from the banking syndicate, in the form of systemic mortgage writedowns, with Obama's blessing, which will likely put the 25% of homeowners who are underwater on equal footing with the other 75%. It may turn out that this was the plan all along. And people naively wonder why banks have hundreds of billions in cash stashed on the sidelines. . .
Leave aside the Obama jab (like McCain would have been different??) the matter at hand is who pays going forward for all of this. I trust you can figure it out!

Have a good night.