Mrs. B and I go to London tomorrow for about a week. There will be no new blog post until Tuesday, May 5. I need some culture and have planned visits to the British Museum, National Gallery, Tate Gallery and Wallace Collection, among others. The British Museum is easily worth two days or more to see the antiquities, which will complement my recent CD courses on the ancient cultures of Egypt, Sumeria, Babylon, Assyria, Greece and Rome.
I see we get to travel while the world panics on this swine flu fears. What is it about modern society that seeks to panic ? We lived through SARS, bird flu and now a reprise of swine flu. Of course precautions should be taken. But a panic ?
Beefers are slinging around preplanned shorts to try to create some more fear and bag a few dollars for their pockets.
Maybe I'll get the pullback I've been awaiting to deploy my new capital.
Word of the Day
"Enclitic" - adjective & noun [$10] Grammatical, from by language studies
Enclititc means (adjective, of a word) pronounced with so little emphasis that it forms part of the preceeding word; (noun) such a word, as the 'not' in 'cannot'.
Sentence: Grammatical endings in many languages arise from separate words indicating grammar becoming enclitics over long periods of time.
Le Mot du Jour
"Pagaille" - noun, feminine (variant spelling pagaïe)
Pagaille means mess, shambles; chaos. This is a polite alternative to the word in Friday's translation of FUBAR - see comments. Pagaille complète means screw-up.
La Phrase: Cette panique de grippe porscine sera une pagaille complète.
Sentence: This swine flu panic will be a screw-up.
Monday, April 27, 2009
Friday, April 24, 2009
Gold
Well, well, well ...
FT: "SHANGHAI/BEIJING, April 24 – China revealed on Friday that it had quietly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying. Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told Xinhua news agency in an interview that the country’s reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure. ...
"China’s reserves were now the fifth biggest in the world, with only six countries holding more than 1,000 tonnes, she said. ...
" 'The comments indicate that China will buy more gold as reserve to improve its foreign reserve portfolio. This is a trend,' said Yao Haiqiao, president of Longgold Asset Management.
Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes. 'It’s not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis,' he said.
'The financial crisis means the U.S. dollar value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage.'
"The European Central Bank recommends its member banks hold 15 percent of their reserves in gold, but among Asian nations the percentage is far smaller, said Albert Cheng, World Gold Council managing director for the far east. "
China should be buying some gold for its monetary base. This is bullish for gold, by the way, over the long term. It shows a huge potential buyer for the gold in European central banks and the IMF gold, if those institutions are stupid enough to sell their gold. The amount of Chinese buying is a lot, but not quite as much as the incremental amounts going into gold ETFs over the same period.
Gold
For a few years, I've been watching and buy & selling gold. I follow the monthly gold chart for guidance on value. Long term, readers know I'm bullish. I sold a lot around $1,000 last year and re-bought some around 750 early this year. From the monthly chart there is a very long term uptrend line dating back to the bottom in 2000-1 that is about 600 now. Another multi-year trend line now exists dating to 2006 that is around 750 now. So I'm still not a buyer, and will wait for a better price. Chartwise, the recent failure to punch through the peak prices in early 2008 shows a bearish pattern, or at best a long consolidation pattern.
I invest in gold three ways: the ETFs in a retirement account, physical gold American Eagle coins, and a gold stock fund in a retirement accounts. Long term gains in gold are taxed at 28%, so this bifurcation helps me keeps taxes low.
It's Wasn't All a US Bubble.
FT: "The number of Spanish unemployed rose sharply in the first quarter of this year to more than 4m, confirming Spain’s position as the European Union state worst affected by job losses during the global economic crisis. Unemployment rose to 4.01m, or 17.4 per cent of the workforce, up from 13.9 per cent in the fourth quarter of last year, the National Statistics Institute said on Friday.
"Spain’s economy had grown rapidly in recent years on the back of a surge in home construction, and the collapse of the housing market wiped out nearly 700,000 building jobs over the past year. In the latest quarter, however, it was in the services sector where most jobs were lost. "
A housing bubble in Spain, too. And the UK. And others. One should keep these facts in mind when hearing all the handwringing and anguish about this crisis.
Markets
Amazon revenues up: "revenues rose 18.2% year/year to $4.89 bln vs the $4.76 bln consensus" from Briefing.com. What happened to the Depression ?
I am doing nothing, waiting for better prices.
Word of the Day
"Obtrude" - verb [$10]
Obtrude means (intransitive) to be or become obtrusive; (transitive) to thrust forward importunely.
Sentence: Today's "stress test" reports to bank CFOs and the inclusion of counterparty risk in them will likely obtrude uncomfortably, like a poke in the eye with a sharp stick, into staid mindset of these cluster fubars*.
["fubar" is WW II slang for F***ed Up Beyond All Recognition. I wonder if I can translate that into French ? Hmmm I think so ... ]
Le Mot du Jour
Reading parts of Le Monde this morning was fun. I'm going to break form a bit here and copy an entire paragraph, then paraphrase it. Remember Jerome Kerviel, the trader who lost about $6 billion for Societe General ? It's about him.
Le Monde: "Jérôme Kerviel, le trader accusé d'avoir fait perdre 4,9 milliards d'euros à la Société générale, aurait investi 800 milliards d'euros entre 2005 et 2007 (achats et ventes), selon son nouvel avocat Olivier Metzner, pour qui ces dérives ne pouvaient pas passer inaperçues de l'"employeur" : "C'est deux fois le budget de la France et 120 fois le budget du ministère de la justice ! A moins d'être non-voyant, on ne peut pas ne pas le voir", relève Me Metzner."
Mr. Kerviel's lawyer say the aggregate buys and sells of Mr. Kerviel totaled E800 billion ! And such sums, being twice the national budget of France and 120 times the budget of the ministry of Justice, could not have gone unnoticed. His point, I presume, is that Mr. Kerviel was simply trading under his bosses supervision and should not be fired under French law. Maybe he has a point.
"Inaperçu, e" - adjective
Inaperçu means unnoticed. The usual usage is with the verb passer, "passer inaperçu" meaning to go unnoticed.
La Phrase: Est-ce que Ken Lewis a crû que l'affaire de Merrill Lynch passerait inaperçue ?
Sentence: Did Ken Lewis believe that the Merrill Lynch affair would go unnoticed?
FT: "SHANGHAI/BEIJING, April 24 – China revealed on Friday that it had quietly raised its gold reserves by three-quarters since 2003, increasing its holdings to 1,054 tonnes and confirming years of speculation it had been buying. Hu Xiaolian, head of the State Administration of Foreign Exchange (SAFE), told Xinhua news agency in an interview that the country’s reserves had risen by 454 tonnes from 600 tonnes since 2003, when China last adjusted its state gold reserves figure. ...
"China’s reserves were now the fifth biggest in the world, with only six countries holding more than 1,000 tonnes, she said. ...
" 'The comments indicate that China will buy more gold as reserve to improve its foreign reserve portfolio. This is a trend,' said Yao Haiqiao, president of Longgold Asset Management.
Hou Huimin, vice general secretary of the China Gold Association, said China should build its reserves to 5,000 tonnes. 'It’s not a matter of a few hundred, or 1,000 tonnes. China should hold more because of its new international status, and because of the financial crisis,' he said.
'The financial crisis means the U.S. dollar value is changing fast, and it may retreat from being the international reserve currency. If that happens, whoever holds gold will be at an advantage.'
"The European Central Bank recommends its member banks hold 15 percent of their reserves in gold, but among Asian nations the percentage is far smaller, said Albert Cheng, World Gold Council managing director for the far east. "
China should be buying some gold for its monetary base. This is bullish for gold, by the way, over the long term. It shows a huge potential buyer for the gold in European central banks and the IMF gold, if those institutions are stupid enough to sell their gold. The amount of Chinese buying is a lot, but not quite as much as the incremental amounts going into gold ETFs over the same period.
Gold
For a few years, I've been watching and buy & selling gold. I follow the monthly gold chart for guidance on value. Long term, readers know I'm bullish. I sold a lot around $1,000 last year and re-bought some around 750 early this year. From the monthly chart there is a very long term uptrend line dating back to the bottom in 2000-1 that is about 600 now. Another multi-year trend line now exists dating to 2006 that is around 750 now. So I'm still not a buyer, and will wait for a better price. Chartwise, the recent failure to punch through the peak prices in early 2008 shows a bearish pattern, or at best a long consolidation pattern.
I invest in gold three ways: the ETFs in a retirement account, physical gold American Eagle coins, and a gold stock fund in a retirement accounts. Long term gains in gold are taxed at 28%, so this bifurcation helps me keeps taxes low.
It's Wasn't All a US Bubble.
FT: "The number of Spanish unemployed rose sharply in the first quarter of this year to more than 4m, confirming Spain’s position as the European Union state worst affected by job losses during the global economic crisis. Unemployment rose to 4.01m, or 17.4 per cent of the workforce, up from 13.9 per cent in the fourth quarter of last year, the National Statistics Institute said on Friday.
"Spain’s economy had grown rapidly in recent years on the back of a surge in home construction, and the collapse of the housing market wiped out nearly 700,000 building jobs over the past year. In the latest quarter, however, it was in the services sector where most jobs were lost. "
A housing bubble in Spain, too. And the UK. And others. One should keep these facts in mind when hearing all the handwringing and anguish about this crisis.
Markets
Amazon revenues up: "revenues rose 18.2% year/year to $4.89 bln vs the $4.76 bln consensus" from Briefing.com. What happened to the Depression ?
I am doing nothing, waiting for better prices.
Word of the Day
"Obtrude" - verb [$10]
Obtrude means (intransitive) to be or become obtrusive; (transitive) to thrust forward importunely.
Sentence: Today's "stress test" reports to bank CFOs and the inclusion of counterparty risk in them will likely obtrude uncomfortably, like a poke in the eye with a sharp stick, into staid mindset of these cluster fubars*.
["fubar" is WW II slang for F***ed Up Beyond All Recognition. I wonder if I can translate that into French ? Hmmm I think so ... ]
Le Mot du Jour
Reading parts of Le Monde this morning was fun. I'm going to break form a bit here and copy an entire paragraph, then paraphrase it. Remember Jerome Kerviel, the trader who lost about $6 billion for Societe General ? It's about him.
Le Monde: "Jérôme Kerviel, le trader accusé d'avoir fait perdre 4,9 milliards d'euros à la Société générale, aurait investi 800 milliards d'euros entre 2005 et 2007 (achats et ventes), selon son nouvel avocat Olivier Metzner, pour qui ces dérives ne pouvaient pas passer inaperçues de l'"employeur" : "C'est deux fois le budget de la France et 120 fois le budget du ministère de la justice ! A moins d'être non-voyant, on ne peut pas ne pas le voir", relève Me Metzner."
Mr. Kerviel's lawyer say the aggregate buys and sells of Mr. Kerviel totaled E800 billion ! And such sums, being twice the national budget of France and 120 times the budget of the ministry of Justice, could not have gone unnoticed. His point, I presume, is that Mr. Kerviel was simply trading under his bosses supervision and should not be fired under French law. Maybe he has a point.
"Inaperçu, e" - adjective
Inaperçu means unnoticed. The usual usage is with the verb passer, "passer inaperçu" meaning to go unnoticed.
La Phrase: Est-ce que Ken Lewis a crû que l'affaire de Merrill Lynch passerait inaperçue ?
Sentence: Did Ken Lewis believe that the Merrill Lynch affair would go unnoticed?
Thursday, April 23, 2009
Tidbits for Thursday
My meaning here is expressed in French as le détail la plus croustillant (the crunchiest details), not les potins (gossip) or la friandise (candy). When translating to another languge, one must think and not just grab the first word from the dictionary.
Hillary seems to be the iron fist for this administration, while Obama is the velvet glove. She hits the bad guys (read Iran, Taliban, etc.) in the mouth, while Obama bends over (read Castro, Chavez, etc.). I wonder if this is a coordinated effort or disarray ?
Apple reports good numbers - iPhone sales strong. I'd re-buy a pullback to 100 area for a trade, but otherwise will just stick with Mrs. B's position in Sky Fund and let it ride. I figure Apple eventually gets 25% of the PC market for its Macs, viz. every PC not tied to a work/job. In other Words, AAPL goes to 500 eventually (maybe five years).
China consumers are spending and buying. Makes sense. If you were slaving in a dusty village five years ago, how bad can this slowdown look ? American whiners live better than their parents did after World War II, yet gripe & moan how tough it is. Take a look at the old photos of houses built after World War II compared to today's. Or the kitchens, then, when most women actually could and DID cook. Today many grip while eating prepared foods or takeout.
Basic foods are so good and so cheap, IFF one is willing to prepare them.
Ken the Cad says Hank and Ben "made" him hide the looting and losses at Merrill Lynch from his shareholders. What a greasy swine ! This guy should be instantly fired.
Prices plunge in the Hamptons, says Blabberg. Aw, shucks.
Markets
I am doing nothing. Underinvested beefers are buying quickly on dips. My analogy is that the market is behaving like a balloon being pushed under water (by bears). When the pressure is released, it pops back up and out to higher levels.
I have new skim to deploy, but will wait. I have plenty invested already if the market rips to S&P 900 or 1000 ... which could happen.
Word of the Day (two for today)
"Homeopathic" - adjective [$10]
Homeopathic means of a diluted or insipid nature.
"Insipid" - adjective [$10]
Insipid means 1. lacking taste or savor: tasteless; 2. lacking in qualities that interest, stimulate or challenge: dull, flat. ALTERNATIVE: 1. lacking vigor or interest; 2. lacking flavor, tasteless.
Sentence: Timmy's "stress tests" will likely be seen to be homeopathic, worthless frauds. Why he is doing this static analysis in the dynamic situation is beyond comprehension. Reserves are made to be USED in stress, not saved. That's what J. P. Morgan ordered banks to do in 1907.
Le Mot du Jour
"Onde" - noun, feminine.
Onde means wave (generally and in physics). Ondes radioelectriques = radio waves; Ondes courts = short waves.
La Phrase: Les marchés des valeurs subissent les ondes de la vente et de l'achat.
Sentence: The securites markets are subject to waves of selling and buying.
Hillary seems to be the iron fist for this administration, while Obama is the velvet glove. She hits the bad guys (read Iran, Taliban, etc.) in the mouth, while Obama bends over (read Castro, Chavez, etc.). I wonder if this is a coordinated effort or disarray ?
Apple reports good numbers - iPhone sales strong. I'd re-buy a pullback to 100 area for a trade, but otherwise will just stick with Mrs. B's position in Sky Fund and let it ride. I figure Apple eventually gets 25% of the PC market for its Macs, viz. every PC not tied to a work/job. In other Words, AAPL goes to 500 eventually (maybe five years).
China consumers are spending and buying. Makes sense. If you were slaving in a dusty village five years ago, how bad can this slowdown look ? American whiners live better than their parents did after World War II, yet gripe & moan how tough it is. Take a look at the old photos of houses built after World War II compared to today's. Or the kitchens, then, when most women actually could and DID cook. Today many grip while eating prepared foods or takeout.
Basic foods are so good and so cheap, IFF one is willing to prepare them.
Ken the Cad says Hank and Ben "made" him hide the looting and losses at Merrill Lynch from his shareholders. What a greasy swine ! This guy should be instantly fired.
Prices plunge in the Hamptons, says Blabberg. Aw, shucks.
Markets
I am doing nothing. Underinvested beefers are buying quickly on dips. My analogy is that the market is behaving like a balloon being pushed under water (by bears). When the pressure is released, it pops back up and out to higher levels.
I have new skim to deploy, but will wait. I have plenty invested already if the market rips to S&P 900 or 1000 ... which could happen.
Word of the Day (two for today)
"Homeopathic" - adjective [$10]
Homeopathic means of a diluted or insipid nature.
"Insipid" - adjective [$10]
Insipid means 1. lacking taste or savor: tasteless; 2. lacking in qualities that interest, stimulate or challenge: dull, flat. ALTERNATIVE: 1. lacking vigor or interest; 2. lacking flavor, tasteless.
Sentence: Timmy's "stress tests" will likely be seen to be homeopathic, worthless frauds. Why he is doing this static analysis in the dynamic situation is beyond comprehension. Reserves are made to be USED in stress, not saved. That's what J. P. Morgan ordered banks to do in 1907.
Le Mot du Jour
"Onde" - noun, feminine.
Onde means wave (generally and in physics). Ondes radioelectriques = radio waves; Ondes courts = short waves.
La Phrase: Les marchés des valeurs subissent les ondes de la vente et de l'achat.
Sentence: The securites markets are subject to waves of selling and buying.
Wednesday, April 22, 2009
Tuesday, April 21, 2009
How Old is Too Old ?
Two recent example of foolishness by elderly high public officials brings this question to mind. I postulate that age 80 is a cut-off age to avoid probable nonsense from babbling forth into public discourse.
Permit me to adduce two bright examples.
Example I. John Paul Stevens (age 86) writes an opinion that Shakespeare didn't write the plays. WSJ: Justice Stevens, who dropped out of graduate study in English to join the Navy in 1941, is an Oxfordian -- that is, he believes the works ascribed to William Shakespeare actually were written by the 17th earl of Oxford, Edward de Vere. ... This puts much of the court squarely outside mainstream academic opinion, which equates denial of Shakespeare's authorship with the Flat Earth Society.
" 'Oh my,' said Coppelia Kahn, president of the Shakespeare Association of America and professor of English at Brown University, when informed of Justice Stevens's cause. 'Nobody gives any credence to these arguments,' she says. Nonetheless, since the 19th century, some have argued that only a nobleman could have produced writings so replete with intimate depictions of courtly life and exotic settings far beyond England."
Gosh, a common man couldn't read and talk to courtiers. Nor write such magnificent works. That required the nobility.
What nonsense !!! But what would I expect from one involved in saying that carbon dioxide - essential to plant life - is a pollutant. Or one who can't read the Second Amendment and understand its plain language.
Example II. Yesterday Paul Volcker (age 81) opened his mouth again. WSJ: "Mr. Volcker, who led the Fed in conquering double-digit inflation in the 1980s, questioned how the Fed can talk about both 2% inflation and price stability. 'I don't get it,' Mr. Volcker said, leading to a lively back-and-forth between the two central-bank heavyweights at a conference Saturday at Vanderbilt University." I suppose he doesn't think sub 2% core inflation rate is close enough, but wants to grind down millions of the common man to get it closer to zero.
Then on Blabbberg I heard his suggesting that Fed accountability be reviewed. Now ? Here's a guy who used his unaccountable authority to destroy millions of manufacturing jobs in the MidWest in the 1980s as he caused the dollar to soar to ridiculous levels with high interest rates. I call Paul Volcker the Neutron Bomb of central bankers. He saves the money while killing all the people. If one thinks ECB chairman Trichet is an Ostrich with his head in the sand, then Volcker is Pluto, god of the underworld far down below ground level.
The Fed under Bernanke is the only institution in DC that is working well. Maybe Volcker is opening his mouth to be in the spotlight after years in the shadows. Maybe he likes the attention Obama gave him. But he's dangerous to listen to. People I know personally heard him speak at a conference recently in NYC and told me everyone was thinking Volcker sounded completely foolish, bloviating on matters he knew nothing about.
Conclusion: The drop-off in wisdom begins at age 80. Let's make it a mandatory retirement age for public figures.
Markets
Big drop yesterday. After six weeks of green, some big, bright red days are expected. Barring bad news, I'll give the selling three days, then look for some adds.
Word of the Day
"Emend" - verb [$10]; from the card file
Emend means to remove errors or corruption.
Sentence: Excessive Congressional and "watchdog" efforts to emend the TARP appear to seriously harm its effectiveness. A similar failure due to undue focus on emending a program killed last summer's multi-billion $ mortgage relief program.
Le Mot du Jour
"Le pouvoir" - noun [sic], masculine. I am not referring the the common verb, "pouvoir".
Le pouvoir means power, ability, capacity; (Physics) power.
La Phrase: Les pouvoirs de l'État sont grandes et dangereux.
Sentence: The powers of the State are great and dangerous.
Permit me to adduce two bright examples.
Example I. John Paul Stevens (age 86) writes an opinion that Shakespeare didn't write the plays. WSJ: Justice Stevens, who dropped out of graduate study in English to join the Navy in 1941, is an Oxfordian -- that is, he believes the works ascribed to William Shakespeare actually were written by the 17th earl of Oxford, Edward de Vere. ... This puts much of the court squarely outside mainstream academic opinion, which equates denial of Shakespeare's authorship with the Flat Earth Society.
" 'Oh my,' said Coppelia Kahn, president of the Shakespeare Association of America and professor of English at Brown University, when informed of Justice Stevens's cause. 'Nobody gives any credence to these arguments,' she says. Nonetheless, since the 19th century, some have argued that only a nobleman could have produced writings so replete with intimate depictions of courtly life and exotic settings far beyond England."
Gosh, a common man couldn't read and talk to courtiers. Nor write such magnificent works. That required the nobility.
What nonsense !!! But what would I expect from one involved in saying that carbon dioxide - essential to plant life - is a pollutant. Or one who can't read the Second Amendment and understand its plain language.
Example II. Yesterday Paul Volcker (age 81) opened his mouth again. WSJ: "Mr. Volcker, who led the Fed in conquering double-digit inflation in the 1980s, questioned how the Fed can talk about both 2% inflation and price stability. 'I don't get it,' Mr. Volcker said, leading to a lively back-and-forth between the two central-bank heavyweights at a conference Saturday at Vanderbilt University." I suppose he doesn't think sub 2% core inflation rate is close enough, but wants to grind down millions of the common man to get it closer to zero.
Then on Blabbberg I heard his suggesting that Fed accountability be reviewed. Now ? Here's a guy who used his unaccountable authority to destroy millions of manufacturing jobs in the MidWest in the 1980s as he caused the dollar to soar to ridiculous levels with high interest rates. I call Paul Volcker the Neutron Bomb of central bankers. He saves the money while killing all the people. If one thinks ECB chairman Trichet is an Ostrich with his head in the sand, then Volcker is Pluto, god of the underworld far down below ground level.
The Fed under Bernanke is the only institution in DC that is working well. Maybe Volcker is opening his mouth to be in the spotlight after years in the shadows. Maybe he likes the attention Obama gave him. But he's dangerous to listen to. People I know personally heard him speak at a conference recently in NYC and told me everyone was thinking Volcker sounded completely foolish, bloviating on matters he knew nothing about.
Conclusion: The drop-off in wisdom begins at age 80. Let's make it a mandatory retirement age for public figures.
Markets
Big drop yesterday. After six weeks of green, some big, bright red days are expected. Barring bad news, I'll give the selling three days, then look for some adds.
Word of the Day
"Emend" - verb [$10]; from the card file
Emend means to remove errors or corruption.
Sentence: Excessive Congressional and "watchdog" efforts to emend the TARP appear to seriously harm its effectiveness. A similar failure due to undue focus on emending a program killed last summer's multi-billion $ mortgage relief program.
Le Mot du Jour
"Le pouvoir" - noun [sic], masculine. I am not referring the the common verb, "pouvoir".
Le pouvoir means power, ability, capacity; (Physics) power.
La Phrase: Les pouvoirs de l'État sont grandes et dangereux.
Sentence: The powers of the State are great and dangerous.
Monday, April 20, 2009
Patriot's Day
Today is Patriot's Day in Massachusetts - the holiday celebration of the Battle of Lexington and Concord in 1775 that showed how determined people could protect their freedom from oppression with some organization, bravery and personal firearms kept in their homes. One can read about this battle - really a series of skirmishes - in many books. From a purely military perspective, a British raid to the interior was stopped and then seriously mauled by a swarm of individuals and small companies of militia.
The celebrations here include re-enactments and the running of the Boston Marathon.
Some Déjà Vu Again
Hmmm ... it's April 20. Where is the financial industry re-regulation plan ? It's probably bogged down in a mud wrestling match with a swarm of lobbyists.
Perhaps some bashing of the short sellers is in order. A relative sent me the links to some interesting and partially illuminating video clips on the bear raids on Bear Stearns and Lehman and has data on the absolutely huge amounts of fraudulent short selling - aka "naked" short selling that occurred in those events. And what has the SEC done ? Nothing. Take a look at the clips and I'll suggest why the SEC has done nothing.
Illegal Naked Short Selling ...
Parts 1, 2 & 3 ...
http://www.youtube.com/watch?v=xUKSU1qahgE&annotation_id=annotation_177033&feature=iv
http://www.youtube.com/watch?v=NcjssQSthNU&feature=related
http://www.youtube.com/watch?v=Q48eSoTNByQ&annotation_id=annotation_911154&feature=iv
Pretty interesting, no?
Here's what the videos miss.
First, I suspect that a huge amount of the naked short selling was by the market making writers of the put options on Bear Stearns and Lehman Brothers. Yes, by the Street itself. Their trading desks have programs to hedge their positions in those options dynamically and they must do that or cover their open put writes. So yes, the hedge funds did initiate the positions, but the huge wave of naked shorts was principally from the Street itself. The analogy is a group of sharks feeding on one of their own who is wounded.
How does the Street do this ? Actually it was and still is legal due to the "Madoff Rule" - remember him ? The SEC in its "wisdom" - or maybe as a payoff - years ago at the prompting of Bernie Madoff made it legal for a "market maker" (read: The Street) to do naked short selling to hedge their book or to temporarily fill an order. And even last year when the SEC put on temporary restrictions on short selling, they exempted the Street "market makers". So all bear hedge funds had to do if they could not get a borrow was to buy lots of put options and the Street did the naked short selling for them.
What a world ! Is the SEC not completely corrupt ? If not corrupt, then completely incompetent ? In either case, why does it still exist ?
Second, the videos miss the huge role of credit default swaps. The bear hedge funds bought the puts and then put in large orders to buy credit default swaps against Bear Stearns and Lehman Brothers. Who could write such insurance against default ? No one. Those firms were in the position of borrowing overnight every night huge amounts of capital. Any fear would cause that necessary funding to dry up. [OK, they were inordinately stupid to fund themselves that way ... but that's another issue.] So the bear raiders tossed a smoke bomb via the credit default swaps to create panic. and then profited hugely on the put options. The Street did the rest.
A recent article by George Soros in the WSJ lays out his agreement with this blog on this matter. I wrote about George's agreement and congratulated him on reading this blog at the time. [ ;) joke ]
Overall, those videos are quite worth watching as they provide good facts, even if important aspects were missed.
Markets
Maybe we'll see a pullback this week. Lots of money is on the sidelines, looking for either a sign to get in, or a good entry point. But without bad news (GM perhaps ?) I suspect pullbacks will be limited. I have some money to invest but also want a good entry. I'll be patient.
Word of the Day
"Chiaroscuro" - noun [$10] from the art world
Chiaroscuro means 1. the treatment of light and shade in drawing and painting; 2. the use of contrast in literature; 3. (attrib.) half-revealed. From italian chiaro 'CLEAR' + oscuro 'DARK', 'OBSCURE'.
Sentence: Does not most public commentary on the stock market use an allegory of chiaroscuro with forces of darkness - the 'evil' bears - battling with the forces of light - the 'good' bulls ?
Le Mot du Jour
"Outil" - noun, masculine
Outil means implement, tool. Outillage [NM] means a set of tools.
La Phrase: Rambo a dit que le meilleur outil est l'esprit. Je suis d'accord.
Sentence: Rambo said that the best tool is the mind. I agree.
The celebrations here include re-enactments and the running of the Boston Marathon.
Some Déjà Vu Again
Hmmm ... it's April 20. Where is the financial industry re-regulation plan ? It's probably bogged down in a mud wrestling match with a swarm of lobbyists.
Perhaps some bashing of the short sellers is in order. A relative sent me the links to some interesting and partially illuminating video clips on the bear raids on Bear Stearns and Lehman and has data on the absolutely huge amounts of fraudulent short selling - aka "naked" short selling that occurred in those events. And what has the SEC done ? Nothing. Take a look at the clips and I'll suggest why the SEC has done nothing.
Illegal Naked Short Selling ...
Parts 1, 2 & 3 ...
http://www.youtube.com/watch?v=xUKSU1qahgE&annotation_id=annotation_177033&feature=iv
http://www.youtube.com/watch?v=NcjssQSthNU&feature=related
http://www.youtube.com/watch?v=Q48eSoTNByQ&annotation_id=annotation_911154&feature=iv
Pretty interesting, no?
Here's what the videos miss.
First, I suspect that a huge amount of the naked short selling was by the market making writers of the put options on Bear Stearns and Lehman Brothers. Yes, by the Street itself. Their trading desks have programs to hedge their positions in those options dynamically and they must do that or cover their open put writes. So yes, the hedge funds did initiate the positions, but the huge wave of naked shorts was principally from the Street itself. The analogy is a group of sharks feeding on one of their own who is wounded.
How does the Street do this ? Actually it was and still is legal due to the "Madoff Rule" - remember him ? The SEC in its "wisdom" - or maybe as a payoff - years ago at the prompting of Bernie Madoff made it legal for a "market maker" (read: The Street) to do naked short selling to hedge their book or to temporarily fill an order. And even last year when the SEC put on temporary restrictions on short selling, they exempted the Street "market makers". So all bear hedge funds had to do if they could not get a borrow was to buy lots of put options and the Street did the naked short selling for them.
What a world ! Is the SEC not completely corrupt ? If not corrupt, then completely incompetent ? In either case, why does it still exist ?
Second, the videos miss the huge role of credit default swaps. The bear hedge funds bought the puts and then put in large orders to buy credit default swaps against Bear Stearns and Lehman Brothers. Who could write such insurance against default ? No one. Those firms were in the position of borrowing overnight every night huge amounts of capital. Any fear would cause that necessary funding to dry up. [OK, they were inordinately stupid to fund themselves that way ... but that's another issue.] So the bear raiders tossed a smoke bomb via the credit default swaps to create panic. and then profited hugely on the put options. The Street did the rest.
A recent article by George Soros in the WSJ lays out his agreement with this blog on this matter. I wrote about George's agreement and congratulated him on reading this blog at the time. [ ;) joke ]
Overall, those videos are quite worth watching as they provide good facts, even if important aspects were missed.
Markets
Maybe we'll see a pullback this week. Lots of money is on the sidelines, looking for either a sign to get in, or a good entry point. But without bad news (GM perhaps ?) I suspect pullbacks will be limited. I have some money to invest but also want a good entry. I'll be patient.
Word of the Day
"Chiaroscuro" - noun [$10] from the art world
Chiaroscuro means 1. the treatment of light and shade in drawing and painting; 2. the use of contrast in literature; 3. (attrib.) half-revealed. From italian chiaro 'CLEAR' + oscuro 'DARK', 'OBSCURE'.
Sentence: Does not most public commentary on the stock market use an allegory of chiaroscuro with forces of darkness - the 'evil' bears - battling with the forces of light - the 'good' bulls ?
Le Mot du Jour
"Outil" - noun, masculine
Outil means implement, tool. Outillage [NM] means a set of tools.
La Phrase: Rambo a dit que le meilleur outil est l'esprit. Je suis d'accord.
Sentence: Rambo said that the best tool is the mind. I agree.
Friday, April 17, 2009
World Reserve Currency. V.
Today I elaborate on the prospects for the future of the World Reserve Currencies [sic].
Since World War II the United States of America has been the engine of growth for world trade and economic development. What evidence is there for this ? The US decadal trade deficit proves that conclusion. The people of the US have been willing, and the government has permitted them to, buy everything they wished to buy from the other nations of the world. Those nations received dollars that they used to buy the goods of other nations or to invest in US government debt to provide a base of value for their own local currencies. Or they could buy US real estate, stocks, or even whole companies. The high relative freedom in, to and from America gave confidence to all those dollars were worth something. The stable US republic and its military might gave confidence to all that the US was going to be there - period, full stop.
Now due to demographics and barring a new boom in immigration, the US population will level off and slowly age in future decades. From Marketing 101, the prime spending years of households is in the 25 to 49 age bracket. Some might say 54 is the upper limit to relatively high spending. In either case, growth in numbers in that age cohort will stop. The US over time will certainly stop importing more goods and services from other nations. The recent US trade deficit numbers show this fact and the trend rather clearly to anyone who wishes to look with an open mind.
That means fewer dollars flowing overseas to other nations' central banks. That means lower growth in their monetary bases. That means overall, lower growth in the world's money supply. And from simple monetary economics, that means lower world economic growth. Money supply growth is a necessary condition to economic growth - read Milton Friedman's work. Yes, lower ... unless other nations step up and start buying with their currencies.
What will that do ? That will provide a start to multiple world reserve currencies. This is a good thing, but will take decades to occur as the confidence in those currencies like the Euro or yen will take a long time to build. [Forget about the Chinese yuan until China becomes a stable democracy - maybe in 100 years. Ditto the Russia and the ruble.]
What about the IMF's "special drawing rights? Laughable. Does anyone have "confidence" in the UN ? Hahahahahaha.
For all the talk about other world reserve currencies, the simple truth is that the ball is in the court of other nations. If a nation (or nations) wants its (their) currency to be a reserve currency, prove it. Hello Europe, China ? Make yourself into a stable republic. Build up your own military ... for defensive purposes. Encourage your citizens to expand there horizons and BUY ! That goes to Japan, too. Prove you have staying power and are trustworthy. And economically expansive and free. Stop bloviating. You can do it in ... in 50 years, perhaps.
Markets
Why does receipt of a Nobel Prize for some sophisticated work in economics make these guys experts on banking ? I guess that alternate name for that prize might be the "Great Badge of Ego".
Word of the Day
"Tenebrous" - adjective [$10] literary; many adjective, verb and noun $1000 variations with the root, tenebr- exist, such as "tenebrity".
Tenebrous means dark, gloomy.
Sentence: Bunkerman is sick and tired of hearing endless tenebrous bloviations about the world economy, that all just seem to say, it's bad out there so it will stay bad. If that was true, the world would still be in the Great Depression of 1893 [sic !!!].
Le Mot Du Jour
"Homard" - noun, masculine.
Homard means lobster.
La Phrase: Selon l'homme du bunker, le homard est simplement un véhicle pour mettre de buerre dans la bouche.
Sentence: According to Bunkerman, lobster is simply a vehicle for putting butter into the mouth.
Since World War II the United States of America has been the engine of growth for world trade and economic development. What evidence is there for this ? The US decadal trade deficit proves that conclusion. The people of the US have been willing, and the government has permitted them to, buy everything they wished to buy from the other nations of the world. Those nations received dollars that they used to buy the goods of other nations or to invest in US government debt to provide a base of value for their own local currencies. Or they could buy US real estate, stocks, or even whole companies. The high relative freedom in, to and from America gave confidence to all those dollars were worth something. The stable US republic and its military might gave confidence to all that the US was going to be there - period, full stop.
Now due to demographics and barring a new boom in immigration, the US population will level off and slowly age in future decades. From Marketing 101, the prime spending years of households is in the 25 to 49 age bracket. Some might say 54 is the upper limit to relatively high spending. In either case, growth in numbers in that age cohort will stop. The US over time will certainly stop importing more goods and services from other nations. The recent US trade deficit numbers show this fact and the trend rather clearly to anyone who wishes to look with an open mind.
That means fewer dollars flowing overseas to other nations' central banks. That means lower growth in their monetary bases. That means overall, lower growth in the world's money supply. And from simple monetary economics, that means lower world economic growth. Money supply growth is a necessary condition to economic growth - read Milton Friedman's work. Yes, lower ... unless other nations step up and start buying with their currencies.
What will that do ? That will provide a start to multiple world reserve currencies. This is a good thing, but will take decades to occur as the confidence in those currencies like the Euro or yen will take a long time to build. [Forget about the Chinese yuan until China becomes a stable democracy - maybe in 100 years. Ditto the Russia and the ruble.]
What about the IMF's "special drawing rights? Laughable. Does anyone have "confidence" in the UN ? Hahahahahaha.
For all the talk about other world reserve currencies, the simple truth is that the ball is in the court of other nations. If a nation (or nations) wants its (their) currency to be a reserve currency, prove it. Hello Europe, China ? Make yourself into a stable republic. Build up your own military ... for defensive purposes. Encourage your citizens to expand there horizons and BUY ! That goes to Japan, too. Prove you have staying power and are trustworthy. And economically expansive and free. Stop bloviating. You can do it in ... in 50 years, perhaps.
Markets
Why does receipt of a Nobel Prize for some sophisticated work in economics make these guys experts on banking ? I guess that alternate name for that prize might be the "Great Badge of Ego".
Word of the Day
"Tenebrous" - adjective [$10] literary; many adjective, verb and noun $1000 variations with the root, tenebr- exist, such as "tenebrity".
Tenebrous means dark, gloomy.
Sentence: Bunkerman is sick and tired of hearing endless tenebrous bloviations about the world economy, that all just seem to say, it's bad out there so it will stay bad. If that was true, the world would still be in the Great Depression of 1893 [sic !!!].
Le Mot Du Jour
"Homard" - noun, masculine.
Homard means lobster.
La Phrase: Selon l'homme du bunker, le homard est simplement un véhicle pour mettre de buerre dans la bouche.
Sentence: According to Bunkerman, lobster is simply a vehicle for putting butter into the mouth.
Subscribe to:
Posts (Atom)
