I have to admit I don’t have much sympathy for those who lent or borrowed at floating rates like LIBOR.? Personally, I have always preferred fixed-rate deals where everything is locked in from the beginning.? It means the terms are fixed, and either you can meet them or you can’t.
There are two problems with floating rate deals.? The first is that you can’t control your funding costs.? This stems from two things: short rates are volatile, and the index is typically not controlled, though it often acts like it is.? Here is an example: there were mortgages that floated off of the one-year Treasury Note rate.? Then the Treasury cancelled the one-year Treasury Note auction, and investment banks scrambled to come up with a substitute.? As I recall, they used the interpolated rate on six month bills, and two year notes.
When I was a corporate bond manager, aside from rare occasions, I never bought floating rate debt.? Why?? I needed more certainty for the client.? Fixed rate bonds and loans are more certain.? When you float, you are subject to the vicissitudes of the index, whether a borrower or a lender.
Whatever else is true, you do not control a floating rate index.? If a related party has some influence on it, that is a negative surprise, but there may be nothing illegal about their influence, particularly if it is moderate as is likely with LIBOR.
As I say to so many others in related situations: don’t give others options against you; don’t play in their casino by their rules.? Average people should not let financial institutions have variability of terms; terms should be fixed to the greatest extent possible.
And, why do borrowers go for floating rates, if they can be harmed by them?? Because they are cheaper on average.? Yield lust works on the downside as well, and many borrow shorter than is prudent for them, in order to save a little.? Works most of the time, but not all of the time, and when it doesn’t work, it can be ugly.
Thus I encourage fixed rate finance, as always, and encourage lenders and borrowers to fix their financing in advance.
Commented on The Economist | The LIBOR scandal: The rotten heart of finance $$ LIBOR may not be as rotten as advertised http://t.co/GfXH4hRq Jul 06, 2012
LIBOR scandal: The rotten heart of finance http://t.co/g2RBmaNy Proving actual damages will b tough; don’t think this will amount2much $$ Jul 05, 2012
Libor, central banks and financial stability http://t.co/9DBCcZaK The degree of damage from Libor-fixing is arguable; more analysis2come Jul 04, 2012
LIBOR: Everything You Want to Know, but were Afraid to Ask http://t.co/eYwKF68v Good summary article. $$ Jul 04, 2012
Eurozone
Europe Recalls Hamilton as Desperation Turns on the Debt http://t.co/K8RvS9dP Time running out; will EZone pull together or fly apart $$ Jul 07, 2012
This Is A Fantastic Presentation On Why ‘Germany Is Riskier Than You Think’ http://t.co/UPcEg8yS Cost: Support Euro < Abandon Euro $$ Jul 04, 2012
France Signals More Austerity http://t.co/gCiXPLKl Fascinating:Hollande may b delivering more conservative fiscal policy than Sarkozy $$ Jul 03, 2012
US Politics
Obama Fails to Gain as Unemployment Stuck Since March http://t.co/vX87x6vQ W/policy unsustainable, business owners reluctant 2 hire $$ Jul 06, 2012
Cities Consider Seizing Mortgages http://t.co/V9CKARiC Abuse of eminent domain will not hold up in court. Theft by another name. $$ Jul 05, 2012
How Stockton went broke: A 15-year spending binge http://t.co/VGy6fWv7 Offered enhanced employee benefits, which required no cash outlay $$ Jul 05, 2012
Thx 4 sharing this; worth the read $$ RT @LaurenLaCapra: How Stockton went broke: A 15-year spending binge | Reuters http://t.co/LK9VKq4q Jul 05, 2012
Yes, there is a free-market alternative to Obamacare http://t.co/gOpygz04 Support high deductible insurance, even if govt has2do it4the poor Jul 04, 2012
Who Is John…Allison? A Randian, Libertarian Business Icon Takes Over the Cato Institute http://t.co/Bms310O7 Met him @ #CMC29. Nice guy Jul 04, 2012
Debt Forgiveness Would Revive the Economy http://t.co/D5lkF7b6 @JamesGRickards argues this, as I have elsewhere: http://t.co/LdeYyBkh $$ Jul 03, 2012
Financial Markets
Big Board’s New Dark-Pool Ammo: Sub-Penny Quotes http://t.co/FgvZ7ebD I agree w/the guy quoted @ end; A step in the wrong direction $$ Jul 06, 2012
The High-Frequency Conspiracy http://t.co/iOs8buSu HFT and the market makers / specialists work together to extract $$ from stock traders. Jul 04, 2012
@TraderNewsFeed I don’t share that view; I think the GSEs deserve some blame, the Fed a lot of blame, & invt banks a lot of blame, but… $$ Jul 04, 2012
@TraderNewsFeed Pt 2, the investors deserve blame as well. U can’t have a derivative hedge without a yield hog seeking additional income $$ Jul 04, 2012
Tail Risk and Hedge Fund Returns http://t.co/uqcs0Bcg ht: @PragCapitalist As I have argued B4, hedge funds as a whole r short volatility $$ Jul 04, 2012
Blackstone Makes Foray Into Houses for Rent http://t.co/UaRvTRqE Economics of managing a lot of single family houses is difficult $$ Jul 04, 2012
Ex-JPMorgan Trader Feldstein Wins in Betting Against Bank http://t.co/pSfwA1xd This is a good example of how frenemies act on Wall Street Jul 04, 2012
The Changing Face of U.S. Equity Ownership http://t.co/aqQXXVFF Individuals own less, Institutions more; Graph: http://t.co/gb7M6RgY Jul 04, 2012
Stocks for Bond Lovers http://t.co/nzNrE6RA If dividends grow rapidly, a rising income stream beats bonds, if market value persists $$ Jul 04, 2012
Pimco’s Bond King Regains Investor Favor http://t.co/MwSZ8hUu Owning long Treasuries is too fashionable, think I have2sell $TLT FD: +TLT Jul 04, 2012
Pimco?s El-Erian Says US, Emerging Markets R Top Investments http://t.co/LwbYAIzs EM r in good shape, US better than other big nations $$ Jul 03, 2012
China
For CFAs: China?s Fragile Foundations http://t.co/jwf1IJJB Fraser Howie of CLSA Asia-Pacific explains the economic weaknesses of China $$ Jul 05, 2012
China?s New Rules May Curb Credit Growth http://t.co/KQcRe9uQ Loosen with one hand; tighten w/the other. Now that’s a monetary policy $$ Jul 05, 2012
BRICs Priced for Economic Meltdown http://t.co/wTf6nRp9 It is the lack of “rule of law” that makes them cheap, not possible slump $$ Jul 04, 2012
Jim Chanos ?China Makes Greece and Spain Look Like Child?s Play? http://t.co/GA2woEwn Chanos is an accounting expert; sniffs out failures $$ Jul 03, 2012
Miscellaneous
Good for about 45 minutes as well, eh? $$ RT @BloombergNews: Central banks deliver 45-minute salvo as growth weakens http://t.co/MzlnAUXQ Jul 05, 2012
A New Market for Schools http://t.co/HbMuSfcK Be wary; costs of the degree including foregone wages may not be worth it. $$ Jul 05, 2012
The Green Mountain saga: a cup of joe to go http://t.co/uUPtr1Ht Once again, revenue policies take center stage for accounting quality $$ Jul 04, 2012
Loeb’s Third Point fund moves into Chesapeake http://t.co/3yYeKOhq The plot thickens, as a group of activist investors gathers $$ Jul 04, 2012
Contra: Carlyle Bets Big on U.S. Energy http://t.co/0bT7y1LM This does not look like a big bet to me. $$ Jul 04, 2012
Been experimenting with a spreadsheet that takes @yahoofinance news, and weeds out the chaff, I like it; improves quality, takes work $$ Jul 03, 2012
DNA Mapping of Alzheimer?s Patients Gives Deep Dive View http://t.co/L5M0ATIN May be promising, but not every disease is gene-based $$ Jul 03, 2012
Comments
“It will be very difficult to prove actual damages in these cases. I don’t think this will amount to much.” http://t.co/BP18Tw8D $$ Jul 05, 2012
“Organic growth is one of the toughest tasks in business, and also the most valuable.” ? David_Merkel http://t.co/T2MMseVx $$ $BLK Jul 05, 2012
RE: @TheStreet_News I think all orders should be good for at least one second. Until them, I will use discretionary r? http://t.co/dxvv58RA Jul 03, 2012
“What a fragmented market: top 10 have ~45%. Not much of a story here. Next. $$” ? David_Merkel http://t.co/nChBIcF2 $JPM $BAC $C $DBK $BARC Jul 02, 2012
“Only one way to lower healthcare costs: move back to a first-party payer system. Individuals decide?” ? David_Merkel http://t.co/lGZaDFJW Jul 02, 2012
“Difficult proposition: choke the economy to achieve an uncertain environmental benefit.” ? David_Merkel http://t.co/ngsN5VdG $$ Jul 02, 2012
I downloaded the data for LIBOR over the period 2005-2008, and decided to run regressions of the 3-month rates submitted from each bank versus 3-month LIBOR, since I think it is the most commonly used.? Here are the results:
Note the inverse relationship between the willingness to be above the consensus, and the willingness to move with the consensus.
Those that were above the LIBOR rate were in general less willing to adjust to changes in LIBOR whereas those below were more willing to adjust.? This could all be an artifact of being in a declining interest rate environment.
Also note that JP Morgan was below the LIBOR consensus by more than Barclays was above it.? Why is JP Morgan escaping criticism if Barclays is getting it?
Let’s look at the residuals from the regressions over the whole period:
As you can see, we had the great moderation in effect from 2005 through mid-2007. Everything was placid; central banking could not err, even as it erred by providing too much liquidity.? Financial companies could not err either.
There are three periods here: the great moderation, the SIV/correlation crisis in the third quarter of 2007, and the bank solvency crisis in the second half of 2008.? Let’s look at them closer up.
SIV/Correlation crisis, residual bank yields in percent:
Now, in the above graph which covers July 2007 vs 2008, same graph as above, just expanded for better viewing, you can see at the left the orderliness of the past.? Deviations from normal LIBOR behavior are 1-2 basis points; the banks in the middle generally agree about where LIBOR should be on any given day, and those that are in the tails are excluded from the calculation.
But the deviations are small, relatively speaking from what the banks commonly did — +/- 0.05% usually, and almost never higher than +/- 0.10%.? You can note that in 2008 JPM and Barclays get closer together.? JPM is ~5 basis points higher than its normal practice, and Barclays is ~5 lower, but given that on average Barclays was 7 basis points over LIBOR, and JPM 12 bp under LIBOR, that cuts the gap in half in that era.
But now lets take a walk on the wild side:
Banking Solvency crisis, residual bank yields in percent:
In mid-September, as the failures cascade, the submissions for LIBOR lose regularity.? Some go high, like Barclays, HBOS, Credit Suisse, and BTMU.? Others go low, like WestLB, Rabobank, JP Morgan, HSBC, Lloyds and Citi.? Most of these don’t make it into the LIBOR calculation, because they are outliers.? Sizes of the deviations are ~10x the size of what they were during the SIV/Correlation crisis.
By mid-November, semi-normalcy turns, though JP Morgan is lower than their normal practice, and Barclays starts higher, and ends the year lower than their normal practice.
The Correlation Matrix
So, if I were hunting for a conspiracy to fix LIBOR, I would look for clusters of high positive correlations, which are dark green in the correlation matrix above.? Starting with Barclays, I get BTMU, Credit Suisse, HBOS, Norinchuckin, and RBS, maybe Deutsche.? With BTMU, I get Barclays, Credit Suisse, HBOS, Norinchuckin, and RBS, maybe Deutsche.? With HBOS, I get Barclays, BTMU, Credit Suisse, but none of the rest.? By the time I am done, I have an informal group that seems to act together: Barclays, BTMU, Credit Suisse, HBOS, Norinchuckin, and RBS.
Maybe there is another cluster.? Starting with Citi, I have HSBC, JP Morgan, Lloyds, and Rabobank.? Yes, upon further inspection, that’s the second and only other cluster, which means we can ignore for now Bank of America, Deutsche, RBC, UBS, and WestLB.
Here’s my punchline: go back to my table at the top.? The first group, Barclays, BTMU, Credit Suisse, HBOS, Norinchuckin, and RBS are high LIBOR submitters (along with Deutsche, who is close to being a part of the group).? The second group, Citi, HSBC, JP Morgan, Lloyds, and Rabobank are low LIBOR submitters.? (Weaker ties may exist with Bank of America and RBC.)
My initial diagnosis is this: whether formally or informally, you have two groups of banks submitting rates for LIBOR.? One group is trying to pull LIBOR up, the other is trying to pull LIBOR down.? Statistically, if I add up their intercept terms from the first table, they both sum to 0.23%, one positive, the other negative.? Even if LIBOR were a simple average, which it is not, this is a colossal game of tug of war, with two equal teams.
As it is, LIBOR excludes the outliers, and calculates an average off of those that remain.? It’s a difficult measure to manipulate.? There may have been attempts to manipulate LIBOR, and even two groups of banks trying to pull LIBOR their own way, but successful systemic manipulation of LIBOR is unlikely in my opinion.
But if you disagree, here are the two clusters of banks, pursue their collusions:
Coalition to pull LIBOR up
Barclays
BTMU
Credit Suisse
HBOS
Norinchuckin
RBS
Coalition to pull LIBOR down
Citi
HSBC
JP Morgan
Lloyds
Rabobank
Start with Barclays and JP Morgan, they are the outliers, and if there is collusion, they are the likely leaders.
When I was a life actuary, following the deferred annuity market, the concept of market-value-adjusted annuities arose.? Annuity values could react like bonds to:
An external index rate, or,
An internal index, driven off of the new money rate for annuities
Now, the internal index sounds soft, but it is not so.? Yes, you can lower your new money rate but reserves grow on indexed products.? You can raise your rates, but reserves will shrink.? It’s not perfect here, but the internal index will work over the long haul.
So when I look at LIBOR and potential manipulation, I don’t see a lot of reason for concern.
When bond deals are priced, the relative yield is what is priced; it does not matter what the benchmark is, roughly the same overall yield would have been obtained.? Spreads are a way of expressing the excess yield over equivalent maturity government or AA bank (swap/LIBOR) yields.? They are a result of the process, not a driver of the process.
If 3-month LIBOR were replaced by the on-the-run 3-month Treasury yield, new deals would be priced, and the spreads would be higher by the TED (EuroDollar – Treasury) yield spread.
When I was a bond manager, dealer desks would often try to sell or buy bonds off of unusual benchmarks.? I would always make the necessary adjustments to calculate the option adjusted spread over interpolated swap rates, with further adjustments for the degree of premium or discount to par.? (Note: A premium bond carries extra credit risk because if it defaults, the most you can recover is par.? Opposite for discount bonds.? There is a mathematical method for calculating the amount of yield tradeoff between premium/par/discount bonds, even in the absence of a credit default swap [CDS] market.? You assume that the spread over swap is the CDS premium, and calculate the annual cost of insuring the premium to par.? Deduct that from the current spread, and you have the hypothetical true par spread.? Once you have that, you can make rational swap trades.)
What I am trying to say is that benchmarks/indexes aren’t all powerful.? Bright bond investors look past them, and analyze the economics of the situation.? Same for intelligent borrowers; they know that LIBOR rises during times of financial stress.? If you are a floating rate investor/borrower, you ought to analyze the rate that your investment/loan is tied to.
Many commentators with knowledge of the situation think that lawsuits regarding LIBOR will amount to little (one, two).? Yes, there may have been some manipulation in a micro-sense for some banks, but in terms of having a big effect on many, I don’t think that is possible.? There might be some degree to which borrowers benefited and savers/lenders lost.? That’s a tough case to press on any side.? Courts favor borrowers, and they benefited from any manipulation.
In closing, I don’t think much will come from the “LIBOR scandal” the same way that nothing will come from the “rating agencies scandal.” Both are examples of summarizing information/opinions that investors can use at their own risk.? They are not fiduciaries; those who use the information do so at their own risk.
So SEC Chairman Mary Shapiro wants money market funds to use mark-to-market accounting, and publish a daily NAV.? Well, why not impose mark-to-market accounting on banks, and force them to report the fair market value of their surplus every day? Large depositors over the guaranty limit and the repo market might be interested in this data.? Oh wait, that’s procyclical, so many claim, even though it reveals cash flow mismatches, which are material to the running of a banking business.
There’s a lot of hypocrisy involved in the SEC’s proposals on money market funds.
Banks are a larger problem.? When money market funds fail, the losses are a couple percent on NAV, versus much larger on banks.
Having a balance sheet enables a bank to postpone the day of reckoning; there are more games to play.
Some banks run “money market funds” that are essentially savings accounts, but do not have identified pools of assets behind them.? In an insolvency, a holder of such is a general creditor after FDIC coverage.
Money market funds cost consumers a lot less than banks in order to provide transactional services.? In one sense, money market funds deserve to exist far more than banks — they have a very low asset liability mismatch, asset quality is very high, and they exist to pass through interest earnings on a short-term portfolio.
Money market funds should be treated like book value ETFs.? They should pass through interest net of fees, and impose credit events should the NAV fall below 0.995. [Link to my letter to the SEC]? This is a simple, stable solution, that would not require any regulation beyond that.? It would keep money market fund losses small, end deliver them to holders, not taxpayers. (Even indirectly, by borrowing from the Fed.)
Money market funds are a way of avoiding the high expenses of banks, and offer savers a decent rate of return.? If there are losses, holders of the money market fund should bear it through a reduction in units, as described in my proposal, unless sponsors generously want to preserve their franchise.
Consumers get a better deal with money market funds.? Those that are in the pocket of the banks argue against money market funds.? I do not ever want the? government to bail out money market funds, and the US Government erred greatly when they did so in 2008.? Those holding money market funds should have borne their small losses.? There would have been little risk from letting money market funds deliver losses to holders.
Those losses were not the cause of the crisis, but the banks with their bad residential mortgage loans.? That was the crisis, and continues to be so, with so many mortgages underwater.
If you’ve read me for more than two months, you probably know that I am an actuary, though not a practicing actuary at present.? I grew up in the life insurance industry.? It’s an unusual place for an investor to start, but there are some advantages:
You learn some of the most complex accounting rules in business.
You learn the value of having a strong balance sheet, because when it slips, it is hard to get back.
You learn the value of simplicity, because many companies that wander from that die.
You get to know a lot of people with different bits of specialized knowledge, which you the actuary have to tie together.? And, respecting the older people in dead-end jobs which they do well goes a long way toward getting significant cooperation.
If you are a corporate actuary, as I sometimes was, potentially you become a good risk manager.
If are an investment actuary, you learn that risk control is far more difficult than it seems, and so you learn not to take obscure risks, and test a variety of modeling assumptions, because models can go wrong.
You build in margins for error if you are a pricing actuary, as I often was, and review actual results when setting assumptions.
You get to see regulation up close and personal, because you have to interact with 51 different regulators if you do valuation, cash flow testing, pricing, etc., with your home state regulators leading the way.
There’s more, but my topic this evening is financial regulation generally.? I’ve been thinking about it, and I have had a moderate shift in my views: I think it would be wise to reinstitute a modified version of Glass-Steagall, but modeled after the way that insurance regulation is done today.? For solvency regulation, insurers are much better regulated than banks.? The banking industry should imitate the insurance industry in a number of ways.
Here’s the main idea: Allow financial holding companies to own all manner of financial subsidiaries, but disallow:
Stacking of subsidiaries.? No A owns B, B owns C.? This allows capital to be stretched thin.
Cross-ownership and cross-lending: subsidiaries may not interlace their capital.
There may be no reinsurance or derivative agreements across subsidiaries.
This would bar complex ownership charts.? There would be a big box at the top, with lines to little boxes below, but only one level of depth, and no lines between subsidiaries.
Also:
Each subsidiary must be subject to its own regulator.? There must not be an overall regulator for “financial supermarkets.”? Keep it simple and focused.? Remember, the Fed has never been a good regulator.
Since financial holding companies die if they don’t get dividends, make the payment of dividends from any subsidiary to the parent company subject to the discretion of the regulators.? Regulators should not care about the holding companies, but only about the solvency of subsidiaries.
If a company is presently in two businesses with different regulators, the company must divide the business into two subsidiaries which each regulator can separately regulate.
Subsidiaries do not get to choose their regulators.? If there are potentially duplicate regulators, merge them and create one regulator if that makes sense.? Otherwise, make rules so that there is no ambiguity on who regulates what.
The view of the government toward financial holding companies should be this: we don’t care if you fail.? We do care if your subsidiaries fail, so if the solvency of any of them is getting marginal, dividends to the holding company will be cut off.
Now, I would prefer the rest of the financial industry mimic the insurance industry, in that State regulation is better than Federal regulation.? If you want to end too big to fail, split up banks into state subsidiaries.? Each state regulator would separately determine solvency issues, and would limit dividends back to the holding company.
Remember, we don’t care if holding companies go broke.? If a holding company goes broke, and all of the subsidiaries are solvent, the subsidiaries will easily be sold to other holding companies.? The creditors of the bankrupt financial holding company will divide the spoils after a year or so.? Cost to the taxpayers: zero.
And maybe, mimic the guarantee funds of the insurance industry, and let the financial subsidiaries self-fund the losses of their fallen competitors.? Cost to the taxpayers: zero.
Under this sort of arrangement, you can have “financial supermarkets,” but they would be very different, because the solvency of each part would be separately regulated.? You don’t want macro-regulators, they are far easier to fool; specialization in financial regulation is a plus; don’t give any credit to those who use a diversification argument.? We are focusing on risks, not risk.? Failure does not happen from risk in abstract, but from particular risks that were underrated.
Finally you need risk managers inside all regulated financial institutions that are either FSAs [Fellows in the Society of Actuaries] or CFAs [Chartered Financial Analysts].? I am both, though my FSA status is inactive, because I don’t pay the dues.? Why is this valuable?
You need organizations with ethics codes to teach and monitor the behavior of those within.? There are failures amid FSAs and CFAs, but society and legal punishment tends to decrease the occurrence.
If we did this, financial companies would be much more stable, and we would reduce the need for the FDIC.? There would be personal ethics standards among risk managers inside financial companies, and less reason for regulators to compromise from political pressure.
This is my modified version of Glass-Steagall, which gives financial industries most of what they want, but offers solvency protections far beyond what we have today.? Is this a good compromise, or what?
Spain Grazing Junk Status Fuels Contagion Risk http://t.co/bEvUbpcE Life is tough near the tipping point; EZone unstable by design $$ Jun 16, 2012
A Conversation on Europe’s Political Economy with George Friedman and John Mauldin http://t.co/HysUyF2N Can EZone politics work? $$ 9min vid Jun 15, 2012
ECB Tells Court Releasing Greek Swap Files Would Inflame Markets http://t.co/pASYdDNC All-wise ECB tells us we can’t handle the truth $$ Jun 15, 2012
Central Banks Warn Greek-Led Euro Stress Threatens World http://t.co/fwFSb7wr Central Bankers will dilute the curncys2pay bank ruptures $$ Jun 15, 2012
Draghi Hints ECB Is Ready to Act http://t.co/dG4QRLTE Nobody else is doing much, so Draghi takes the next step 2 $$ looseness #FTL Jun 15, 2012
Merkel?s options: Pay, inflate, or else? http://t.co/6iyl3f0H If the Germans want2keep EZone, must give up @ least 1 of their goals $$ Jun 15, 2012
Bond Parishioners Are Leaving The Euro Church http://t.co/szDlBJ5m “Liquidity never cures solvency problems which is exactly where we r now” Jun 14, 2012
David Rosenberg Channels Felix Zulauf http://t.co/7g7JN8e5 High debt levels combined w/inflexibility of Euro make solutions tough $$ Jun 14, 2012
Germany and Greece: a tale of estrangement http://t.co/2YFZ2xDY Greece was probably hopeless, but Germany raised/dashed expectations $$ Jun 14, 2012
Switzerland joining the Eurozone would have to join the EU; would not solve the currency problem but merely make the problem permanent $$ Jun 14, 2012
The Dangers of Switzerland’s Currency Strategy http://t.co/ryydgM5Q Switzerland should join the euro http://t.co/zdotnFSb $$ Jun 14, 2012
I would love to meet Angela Merkel & discuss the Eurozone w/her, but I know my limits, i am not important enough 4 that 2 happen $$ Jun 13, 2012
?German history teaches us compellingly that isolation would spell disaster,” I don’t agree, and think dissolving the Euro would b best $$ Jun 13, 2012
Spanish, Italian Yields Leap Higher http://t.co/KkIgKyYJ How long, to the point of no return? $$ Jun 12, 2012
Whole world feels soggy $$ RT @agnestcrane: So much for the Spanish bank bailout bounce. Dow down 1.24%, 10-Yr Tsy back below 1.6%. Jun 11, 2012
RT @historysquared: ?We cannot push through a banking union when the French have just cut their retirement age to 60 and we have raised … Jun 11, 2012
Greek Blackouts Risked as Power Companies? Cash Runs Out http://t.co/qtOOodzG When does Greece finally realize their nation has failed? $$ Jun 11, 2012
Italy Moves Into Debt-Crisis Crosshairs After Spain http://t.co/SDEe8FQm That’s the nature of contagion; In the EU contagion is ragin’ $$ Jun 11, 2012
+1 $$ RT @Queen_Europe: Well, the Spanish might be too big to bail but at least they hold their press conferences on time. #BeingGerman Jun 09, 2012
Energy
Venezuela’s Massive Oil Reserves ‘Irrelevant’? http://t.co/rhEZlZXJ Highlights Chavez’s mismanagement of industry, especially crude oil $$ Jun 15, 2012
Nationalised oil can deliver output growth http://t.co/o0ssVqXb Overly laudatory piece praising the virtues of state-run oil companies $$ Jun 15, 2012
Unconventional oil to alter geopolitical balance http://t.co/RABAp9FT Balance may get tilted, but I would not expect self-sufficiency $$ Jun 14, 2012
Financial Sector
Duke, GE Tempt Savers With Higher Yield Than Money Funds http://t.co/3HJ3BKzK I would be careful; single creditor risk w/no gtees $$ Jun 16, 2012
Jamie Dimon Welcomes You to the Next Financial Crisis http://t.co/6oyULAic Could $JPM make $$ anticipating EZone finl crisis? from @moorehn Jun 15, 2012
Why it’s time for higher interest rates http://t.co/xjmZMNub Sheila Bair takes on Paul Krugman & Ben Bernanke’s overly loose $$ policy Jun 15, 2012
Americans See Biggest Home Equity Jump in 60 Years http://t.co/Yq5nHxtn Another bright spot, but still lotta mtges r inverted $$ Jun 14, 2012
Large Institutions Discuss New Marketplace for Bonds http://t.co/t9j4sEtk Few holders, large lot sizes, usually self-liquidating $$ Jun 14, 2012
Private Equity Has 2 Much Money to Spend on Homes http://t.co/VPToSU8I Don’t get how many residences can b managed @ reasonable expense $$ Jun 14, 2012
@mickwe Thanks, Mick, I get it. I have “traded” illiquid securities in my life and have a feel for when claims r invalid. $$ Jun 13, 2012
Mortgages Beating Junk Bonds as Homes Top Europe http://t.co/HTjhcz7T Mkt more accepting of nonconforming mtge risk than Eurozone or junk Jun 13, 2012
‘ @GaelicTorus Cool, hexadecimal yields. There are only 10 types of people in the world, those that get binary, and those that don’t $$ Jun 12, 2012
Loophole at MF Global Is Headache for Regulators http://t.co/P1xUc1Y5 Except Corzine, senior execs weren’t registered w/regulators $$ Jun 12, 2012
Why do I get so many pump&dump scams in the mail? I’m getting tired of the liars that call themselves analysts who profit from promoting $$ Jun 12, 2012
In other words, the crisis hit people who thought they were well-off because of overpriced housing assets; this really isn’t news $$ Jun 12, 2012
Family Net Worth Fell Almost 40% Between 2007-2010 http://t.co/W4rfdy1o Effect largest on 2nd wealthiest quintile $$ Jun 12, 2012
Banks seek to offload risk on insurers http://t.co/6laka8hb Check my comment at the end; I am dubious that this would work. $$ Jun 12, 2012
Panel Finds U.S. and Europe Behind Schedule on Financial Rules http://t.co/zGlSjrG6 Not too surprising regulating financials is complex $$ Jun 11, 2012
Bond Bubble Dismissed as Low Yields Echo Pimco?s New Normal http://t.co/lRtwy360 How do you guarantee receiving value in the future? $$ Jun 11, 2012
Need Money? Just Ask Your Customers http://t.co/Ce6pj7QL Clever move by companies raising $$, but people who lend to them r patsies $$ Jun 11, 2012
Rest of the World
With Tax Deal, Japan Deals Initial Blow to Big Debt Problem http://t.co/U5srcgjK Japan still has to fight their population shrinking $$ Jun 16, 2012
Ex-Soros Adviser Fujimaki Says Japan May Default by 2017 http://t.co/n0G6TBAC Disagree that Japan will precede Eurozone $$ $FXY Jun 15, 2012
Rain, Pests Imperil India?s Wheat Crop as Warehouses Full http://t.co/Qib0xsck What 2do w/a bumper crop that came at the wrong time? $$ Jun 14, 2012
Political
Harvey Golub: A Simple Tax Code Is a Fair Tax Code http://t.co/hwUwbVfE Similar2my proposals: focuses on defn of income, not tax rates $$ Jun 15, 2012
Scalia represents the Constitution, which is against Obama and Bush’s Imperial Presidency views. He may be sarcastic? http://t.co/rEc5icLe Jun 15, 2012
Inequality: It?s Even Worse Than We Thought http://t.co/hMkbGXBp Highlights Warren Buffett’s ability to avoid capital gains taxation. $$ Jun 14, 2012
That said, inequality is unavoidable in a productive society, because some people work harder or smarter than others $$ Jun 14, 2012
@StockTwits It’s really difficult to get a muni bond to default. Ch 9 allowed in 48% of states, even then state approval sometimes needed $$ Jun 14, 2012
Medicaid Fraud Audits Cost Five Times Amount U.S. Found http://t.co/E3Z5d2zt Can’t win 4 losing here. How to fight Medicare fraud? $$ Jun 14, 2012
Romney Aide Oversees Fundraising That Makes Him Cash, Too http://t.co/mMQdDf7e Zwick definitely works hard, but he gets a lot for it. $$ Jun 13, 2012
‘ @FrankButcherr If something similar happened in an SEC-regulated context, charges could b brought. But I am not an expert here. $$ #CFTC Jun 12, 2012
Obama to Revisit Economic Debate http://t.co/AVbVrgzV A Presidency of Excuses http://t.co/6gv8rkT1 Is fiscal multiplier positive? $$ Jun 12, 2012
Odd if there is no CFTC regulation that says if you acting in a regulated capacity but you aren’t registered to do so, that’s not a crime $$ Jun 12, 2012
States Remain Cautious Even as Finances Improve http://t.co/hAHCBq8F Things better but c this pensions article http://t.co/RQ4PMswj $$ Jun 12, 2012
Familiar w/author; good guy knows his stuff RT @jasonzweigwsj: who is to blame for the state & municipal budget crisis? http://t.co/YMkU2a9h Jun 12, 2012
Obama?s formula for more economic growth? More government http://t.co/eMw5UYiR Obama only has hammer; everything looks like a nail to him $$ Jun 11, 2012
@lorriebarkins My friend Cody Willard would say,”flip it,” so I say, “teach them to vote against Republicans and Democrats.” Both r fools $$ Jun 10, 2012
Company & Industry News
Truckers as Leading Indicator Show Stable U.S. Economic Growth http://t.co/irRAJpNm Bright spot amid punk economic conditions $$ Jun 14, 2012
GM’s Chief Labors to Get Rebuilt Car Maker Into Gear http://t.co/dFmKObdy New $GM was not in bankruptcy long enough 2 kill old GM $$ Jun 12, 2012
RT @ampressman: @AlephBlog They’re saying it now so justices can point to it in fantasy opinions, just like the majority in Citizens United Jun 12, 2012
Wrong: Insurers Stand Firm on Benefits http://t.co/aQ0NxDiu These changes will disappear due2 competitive pressure post-strikedown $$ Jun 12, 2012
Patents may not be as valuable post-Posner’s ruling in the $GOOG – $AAPL trial. Can’t patent basic things. http://t.co/L4rIhlkc $$ Jun 12, 2012
Companies Shape Curricula in New University Partnerships http://t.co/LhkAI3qi Good in some ways; wonder if this limits creativity? $$ Jun 11, 2012
Best Time for Best Buy Bid Now as Founder Exits http://t.co/41B34pdm Really doubt $BBY goes private; deteriorating erns, internet competes Jun 11, 2012
+1 RT @StockTwits: Love This! – Famous judge spikes $AAPL v $GOOG case, calls patent *system ?dysfunctional? http://t.co/WXOjNmmi via @gigaom Jun 09, 2012
China
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China one-child policy leads to forced abortions, mothers’ deaths http://t.co/JiwypM8q Yes, forced abortions in China & don’t care 4 moms $$ Jun 16, 2012
Market Factors
Foreigners Snap Up Properties in the U.S. http://t.co/4oeyYAey Offers wealthy foreigners options in a crisis & for vacations/college $$ Jun 12, 2012
Junk Yields Fail to Deter Investors Seeing No Recession http://t.co/YPeNc1HP Remember, the junk bond mkt works on a yield not spread basis Jun 12, 2012
@fuzzyinvesticle @dpinsen I put more trust in the Q-ratio, CAPE, Price/Resources, & @eddyelfenbein ‘s view stock market as a bond measure $$ Jun 12, 2012
The Two Reasons Stocks Won’t Get as Cheap as They Did in 1982 http://t.co/QXXjdUCc Reasons: low int rates, high buybacks. Not convinced $$ Jun 11, 2012
Counting on an Inheritance? Count Again. http://t.co/1Z0cnjkl Far more likely that u will support your parents than receive a bequest $$ Jun 11, 2012
@newrulesinvest I also admire and voted for Terrance Odean & Jason Zweig; they are bright men who deserve attention by all. $$ Jun 11, 2012
@BoydRoddy Thank you Roddy, and I am honored to be mentioned in the same sentence as the estimable @John_Hempton. $$ Jun 11, 2012
. @lorriebarkins I teach people about money so that they will b wiser; wise people r less easily taken by hucksters & popular fads $$ Jun 10, 2012
Miscellaneous
Just felt weird, but I laughed $$ RT @ReformedBroker: We Are All Rajat Gupta Now. Not sure what that means, just felt right. Jun 15, 2012
‘ @GaelicTorus It’s my opinion that markets don’t create liquidity; they reflect the native liquidity of the asset being traded $$ #testidea Jun 14, 2012
@Pfro That’s not my experience. We have come so far on racism in the US that my adopted black children haven’t experienced it. $$ Jun 12, 2012
RT @ToddSullivan: Keep hearing people tell High School Grads “these are the best years of your life” …what a terrible message to send … Jun 11, 2012
RE: @wstreetallstars Wow, Cody, very glad that you survived.? What an ordeal.? Praying for you, and those near you. http://t.co/HcuU6R89 Jun 11, 2012
@asymmetricinfo Brings meaning to the phrase “Lied like a finance minister on the eve of the devaluation.” Jun 11, 2012
Here’s one thing I am not worried about: suppose the Bush tax cuts go away, and the budget is cut pro-rata.? That would be a good thing.? I have always believed in balanced budgets.? Yes, restoring balance may be painful for a little while, but the results are usually good after a “big bang,” whether that is a default, currency conversion, or massive privatization.
Why are balanced budgets good? Duh, they are sustainable, particularly if they are done on an accrual basis, which is not the norm.? Sustainable government budgets engender confidence in businesses and individuals, because they sense stability, and stability encourages growth.? Businessman can plan sensibly, because they have a sensible government.
I don’t think the economy would do badly in this scenario.? Hopefully, we would clear out the least valuable programs (I dream), and the taxes raised were not counted on by those subject to the change.
I don’t think this would have a big effect on the US economy.? So Congress can’t agree; that is good, because it forces cuts that Congress would never make given their disagreements.
This is the next best thing to a balanced budget amendment.? Eliminate Keynesian idiocy, and manage the economy sensibly, balancing the budget as a normal matter, and don’t use government or central bank policy to moderate it, because that only creates liquidity traps like the one we are in.? (Need I mention that the Fed should either peg to gold, or that it should only have a a double mandate — bank solvency first, inflation second. unemployment does not figure in, largely, because the Fed has no effect on unemployment.)
Let the economy be free, aside from regulating banks tightly; it will be far better than what we currently have.? Regulation of maturity transformation is important because maturity-transformation violates basic asset-liability management rules.? We need to force banks not to take interest rate risk.? No more borrowing short and lending long.? Long-dated lending requires long-dated financing.? Organize society for stability, not boffo profits for banks in the bull phase, and huge losses/bailouts in the bear phase.
I don’t care about short-term pain, so long as we end up in a better spot afterward, with better growth prospects.
When I started writing this blog, my Major Article List was a big thing to me.? I wrote some pretty good things at RealMoney.com, and I wanted to have a record of the best of that.? I only wish I had done the same thing for my Columnist Conversation comments, because many of them were far better than most articles at RealMoney.? Give TST credit, they would frequently take my best comments, and turn them into posts, and pay me for them.? They did not have to do that.
But, I would love to republish many of my best timeless posts here.? I offer a deal to RealMoney: In exchange for being able to republish old posts and comments of mine here, I will offer you new posts of mine, or the best of my old posts at my blog, so long as they are timeless.
Regardless, when I was at RealMoney, I wrote a series that dealt with the motives of various investors as it stemmed from their balance sheets.? For those that have access to RealMoney, here are the articles (note: I wrote different titles than what was used):
The main idea is this: There are a wide variety of investors, and they have differing abilities to hold assets.? Why should investors have differing abilities to hold assets?? And why should that matter?
When will you need the cash?? That should be a central question for every investment adviser, dictating asset allocation.? This is basic asset-liability management.? This gets neglected in investing more often than most imagine.
Mutual funds know that money will be pulled if they underperform.? This forces them to be more short-term in investing.? An exception can be closed-end funds, since they have captive capital, so long as the discount to NAV doesn’t get too great, and they attract activist investors.
Same thing for hedge funds; they tend to be volatility-averse on average; and their investors may be technically more sophisticated than mutual fund investors, in practice, they make the same mistake of chasing performance.
Average individual investors chase trends; that is very short-term.
ETPs react to the market.? Indexed investing amplifies a market as it grows, and muffles a market as it shrinks.
Endowments can resist short-term underperformance for a few years, then the trustees get antsy.
Same thing for Defined Benefit [DB] pension plans, but more so.
Most banks and insurers have short liability structures so they can’t allocate that much to long duration assets like stocks and esoteric illiquid assets.? Life insurers could invest there, but the risk-based capital regulations make it unworkable.? That leaves P&C insurers writing long-tailed business; many of them are value investors, and use the long-duration liabilities (as Buffett calls it “float”) to invest in a wide number of cheap assets where it may take a while for value to be realized.
Trusts, limited partnerships, etc., hinge on how much leverage they employ and how often the terms of the leverage shift, as well as any limitations on when capital must be distributed.? Sometimes that’s not obvious, as in the failure of many mortgage REITs when the repo haircuts got boosted in the midst of the financial crisis, leading to forced selling, as they did not have enough capital to post as margin against all the assets that they held.? The forced selling led to falling prices for mortgages, which led to further increases in the repo haircut, which created a self-reinforcing spiral until a new class of investors held many of the mortgages, and many mortgage REITs were bankrupt or broken.
With respect to institutional investors, my experience is the more of the investment is done internally, the more patient the capital tends to be.? Perhaps that’s the illusion of control, but I tend to think that investors have more trust in their own reasoning than in the reasoning of external managers.
The longer the time that you can invest and wait for returns, on average, the more aggressive you can be in investing.? The investor that can “Buy-and-hold” can take on the most difficult situations if there is a sufficient discount in the price to make the wait worthwhile, and avenues that allow for change to be encouraged.
Strong Hands — long liability structures, excess capital, experienced, patient, never compelled to do anything; they can live with short-term losses.
Weak Hands — no balance sheet or short liability structures, have to make a certain return each year, less experience, leveraged; they can’t live with short-term losses.
When I go through 13F filings, I note the quirkiness of the assets held, and often held for a long time.? Almost all of the 13Fs that I track I would classify as strong hands.? They don’t care about the next quarter; they are thinking about the next 3-5 years.? They care about the growing underlying value of the businesses; they wouldn’t care if stock market was only open one day per month.? Some, like Seth Klarman, do little on the long side when opportunities are not compelling.? Like underwriters at well-run insurers, when an insurance market is nuts, you stop writing business, and spend time improving your skills.
So for my own investing this past period after I finished my 13F analysis, I took the companies that had:
The 100 largest increases in my 13F investors
The 100 largest increases in cash invested as a fraction of market cap
The 100 with the greatest number of my 13F investors
and the 100 largest positions as a fraction of market cap,
and put them in as competitors in my ranking system, against my current portfolio.? Because of redundancy, it was about 320 companies in all.? I think it was a good exercise, because it made me think about a bunch of companies that I would otherwise never consider.? Anyway, the process is complete, and the equity portfolios have some promising new names with good prospects, and fellow shareholders that are for the most part “strong hands.”
@AmyResnick One more note: MD benefits from the presence of Johns Hopkins, biotech, NIH, the REIT industry, hotel industry, etc. $$ Jun 02, 2012
@AmyResnick Martin O’Malley spoke2the Baltimore CFA society. Slick. Made many of us wonder if we lived in the same state that he governs $$ Jun 02, 2012
@AmyResnick That’s true.We live next to the US money sink, DC, and we profit from the woes of the nation along with Virginia. $$ Jun 02, 2012
@AmyResnick If my state passed a budget like that, I would b ill & annoyed. Oh wait, I live in the People’s Republic of Maryland. Never mind Jun 02, 2012
Companies
GM cuts $26bn from pension liability http://t.co/wL7hlRab $GM buys annuities from $PRU, and cashes out other pensioners; amazing gain. $$ Jun 02, 2012
Groupon Sinks to New Low as Lock-Up Expires http://t.co/NuE7dA9b A $GRPN share is now cheaper than the amount 1 can save w/a Groupon. 😉 $$ Jun 01, 2012
Chesapeake Valuation Seen Luring Major Deal http://t.co/1n6fnjzZ Natural gas assets r not worth as much; too much marginal cheap supply $$ May 31, 2012
Toyota Tsunami Recovery to Be Seen in 93% U.S. Sales Gain http://t.co/UlO4SSzC $TM stock below where it was one year ago, as w/many autos $$ May 31, 2012
“Chesapeake?s equity and net debt was valued yesterday at $9.19 for each barrel of oil equivalent” Key phrase: “barr? http://t.co/KAcfGoyH May 31, 2012
@TheStreetHub @abnormalreturns will publish my pick 4 the next decade next week. It may not beat $CHK, but there is less risk to it. $$ May 31, 2012
@TheStreetHub Once fracking starts, difficult2turn off economically; there r a lot of places to frack; don’t c NG prices rising anytime soon May 31, 2012
$JPM CIO Swaps Pricing Said 2 Differ From Investment Bank http://t.co/4jgUCTry via @BloombergNews | Not2surprising since trades moved market May 31, 2012
Icahn?s Chesapeake Stake Puts Governance Before Value http://t.co/csRUxisS Icahn has his own version of “doing well by doing good.” $$ $CHK May 31, 2012
Toll Buying Half of a 2,379-Home California Subdivision http://t.co/RDIUQiNK ?There?s not much inventory now in Orange County…? $$ May 31, 2012
Miscellaneous
Heavy rain on Baltimore. Just went out with 3 of my kids. We dug a trench diverting water awa from the house. Boy, did we get wet & dirty $$ Jun 01, 2012
@Alpha_Rook I was proud of their initiative & that they executed my idea, and not theirs, which would not have worked. Yes, it was fun. $$ Jun 02, 2012
Dating Shanghai-Style Draws 38,000 Hopefuls as Weddings Fall http://t.co/ECmp4ppU More men than women, but fewer desirable men than women $$ Jun 01, 2012
Indian-American wins U.S. Spelling Bee http://t.co/ZkjzSSAP Nandipati became the 5th consecutive Indian-American winner & 10th of last 14 $$ Jun 01, 2012
Defectors Cast New Light on Korean Camps http://t.co/TOQtTM3s US intervenes in so many places; one that is @ the top of the list ignored $$ May 31, 2012
Thx, I’m Touched & Impressed $$ RT @valueprax: Notes – AlephBlog Digest #1 – David Merkel On Corporate Bonds ( #bonds http://t.co/vXSPiApn ) May 31, 2012
Energy assets in front line of cyber war http://t.co/4UZG5wJx Ability2use stuxnet2take over SCADA systems running energy/utility assets risk May 31, 2012
10 Things Presidential Candidates Won’t Say http://t.co/8l3tPGEz 1. “I’m powerless to change the economy.” Honest talk u will never hear $$ May 29, 2012
For Healthy Eating, Bitter Is Better http://t.co/A3gPQIYV “It’s also the first step toward eating a broader, healthier diet.” $$ May 28, 2012
Sudan, South Sudan Trade Accusations Ahead of Crisis Talks http://t.co/XFpu79GQ Unless there is a way to share oil revenues, war is possible May 28, 2012
Funds May Wrong-Way Bets Before Price Slump http://t.co/u3garjlL ?surprising to see so much on the long side…trend is down in commodities” May 28, 2012
Why ‘Value’ Stocks Lag http://t.co/Uy5nwkC8 After reading this article & the comments on it, I still don’t get value is doing poorly $$ May 28, 2012
@felixsalmon I would be honored to have you as a client. I’ve done well over the last 12 years, but not the last 16 months. $$ May 27, 2012
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Eurozone
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Euro Area Is Running Significant Risk of Breakup, Rehn Says http://t.co/1Wx5nAEq Presence of negative German short rates is a danger sign $$ Jun 01, 2012
Negative interest rates are like antimatter. They never exist for too long, and the presence of a lot of them means things r dangerous $$ Jun 01, 2012
Berlusconi Says ECB Must Print Euros or Italy May Say ?Ciao? http://t.co/a1sAsDIJ Taking aim @ those who ejected him, back in the hunt $$ Jun 01, 2012
@The_Dumb_Money It’s the 5%+ spread over bund yields that gets people antsy; it indicates a crisis in Italian ability to pay; unstable. $$ Jun 01, 2012
“German 2-yr yields fell below 0 for the 1st time this wk while the yield on similar-maturity Spanish notes rose 11.8 bps to 5.11% today” $$ Jun 01, 2012
It may be wrong, and may harm Italy deeply, but it makes for great politics by encouraging popular resentment of fore? http://t.co/0xm4RY5l Jun 01, 2012
Why France Has So Many 49-Employee Companies http://t.co/nKcECoQK “Sir, we r up to 49 again, shall I start another new company?” “Oui!” $$ May 31, 2012
Spain Ejects Clean-Power Industry With Europe Precedent http://t.co/SFhWg1lF Amazing what happens when u stop subsidies;companies fold/leave May 31, 2012
Iceland Property Bubble Grows With Currency Controls http://t.co/o5IUO1hF Classic. Trapped cash needs 2 protect value so buys real estate $$ May 31, 2012
ECB Opposes Spain Bank Idea http://t.co/Vx9tdeua Spain has reached its notional credit limit, can’t borrow more w/o driving rates up $$ May 31, 2012
EU Proposes ‘Banking Union’ http://t.co/3lK74rxE This is an easy thing to propose, but hard to achieve without nations giving up power $$ May 31, 2012
Greek Democratic Left Demands Euro Pledge to Back Syriza http://t.co/cmkcflzR They dream that they can stay in Euro, and not pay promises $$ May 29, 2012
Leveraged Loan Defaults May Surge to 25% in Europe, Moody?s Says http://t.co/vUpMQisS If credit tightens in Europe, many defaults come $$ May 29, 2012
Greek Pro-Bailout Parties Gain Amid Euro Collapse Concern http://t.co/Ta2m8TDC “Greece is the only country…we can say it?s a failed state” May 28, 2012
Spain roundup: http://t.co/WtGRfFDP & http://t.co/KGwBE4gY & http://t.co/MvlXpx2R Credit situation for Spain as a whole is troubled $$ May 28, 2012
Unsecured Creditors Face Losses in EU?s Plan for Failing Banks http://t.co/xCQFqJqv No free lunch; watch unsec rates rise 4 bonds & CP $$ May 28, 2012
@japhychron No decoupling there that I can see. The likely credit panic is in Europe, with limited spillover the US. $$ May 27, 2012
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Financial Sector
Regulators Adopt New Tools to Prevent Another Flash Crash http://t.co/8aClpGWw These regulations seem reasonable. I’m not used 2 saying that Jun 02, 2012
Volcker Rule? We need a Slurpee Rule http://t.co/a1GNBm7e “Lose $1B -> lose your job.” Great, can we apply this 2 government officials 2? $$ Jun 01, 2012
Bank says: We?re defaulting, but don?t you dare! http://t.co/PmYEk4kW Strange that many think they don’t have to pay if their creditor is BK Jun 01, 2012
Insurance Supervisors Ready to Identify Too-Big-To-Fail Insurers http://t.co/bve0otvq Less risk than banks; liab structures can’t acelr8 $$ May 31, 2012
Woman Who Couldn?t Be Intimidated by Citigroup Wins $31 Million http://t.co/CaznlXxA Post-2008 $C employee blows whistle onlousy mtges $$ May 31, 2012
Look for corporate incest, where capital structures are interlaced between parent & subsidiaries. $AIG had that in sp? http://t.co/2zz1qwmo May 31, 2012
Speculating on the Long Bond
@shamir_k @SoberLook Only 10% of my portfolio; ask u what I asked Shiller, Hoisington & Lacy Hunt: when do u leave? $$ FD: +$TLT Jun 01, 2012
@SoberLook I have too many friends who were burned on $TBT, it will b right eventually… but the trade was 2 popular amid deflation $$ Jun 01, 2012
@SoberLook True enough. I just sold my last TIPS. $TIP Thinking of kicking out my last chunk of $TLT. FD: Long $TLT (me & clients) Jun 01, 2012
Ten-Year Treasury Yield Hits Record Low http://t.co/xkfc1JP2 The benchmark 10-year U.S. Treasury yield sank to an all-time low of 1.659% $$ May 31, 2012
CHART OF THE NIGHT: What A Difference A Year Makes http://t.co/VLqVDCiK Global deflation drives people2grab 4 predictable income streams $$ May 31, 2012
Federal Reserve
He’s pretty connected $$ RT @pdacosta: Done deal? Morgan Stanley Fedster Reinhart now sees 80 percent chance of Fed easing in June. Jun 01, 2012
Rosengren Says Renewed Fed Operation Twist to Spur Growth http://t.co/5lz5Zwof If we all clap Tinkerbell will live! Hasn’t worked yet… $$ Jun 01, 2012
They assume that lowering long Treasury rates will aid growth; it did not work in the Great Depression & WWII. The Fe? http://t.co/IYHxbtML Jun 01, 2012
@vjnttp That’s why I included a link to my article on the topic; it’s more complicated than what Buffett wrote in his annual report $$ Jun 02, 2012
My Goof on NFP
@andrewhorowitz I don’t trust the ADP #s. My model uses 4 wk avg of jobless claims, adjusts4past model errors b/c errors r autocorrelated $$ Jun 01, 2012
@andrewhorowitz Yes, a little above consensus, that’s what the models show, personally I’m more bearish but the models r better than me. $$ Jun 01, 2012
@Estimize I looked at estimize for a place to lodge an NFP est, and couldn’t find it. Do you do those? May 31, 2012
@joelight It’s a blend of 2 models which have different error properties — their point estimates r 145 & 171K. Don’t know CI 4 combined $$ May 31, 2012
I don’t do this often, but here goes — projecting NFP at +158K +/- 13K May 31, 2012
US Economics
RE: @SoberLook This is what stagflation looks like.? Copper reacts to GDP. Gold reacts to real rates. http://t.co/JODgLATu Jun 01, 2012
The Surprising Global Shortage of Skilled Workers http://t.co/6fnJOUZb There r skilled workers w/o work, they don’t have the *right* skills May 31, 2012
Some people kvetch. Some start their own firms, and hire people that don’t kvetch, with skills that match.? The latte? http://t.co/XO57VQa2 May 31, 2012
Totally agree, let govts protect depositors @ most, not banks RT @simonconstable: also a stupid thing to propose. Bust companies should fail May 31, 2012
Rest of the World
Dumb: China?s Blog Censorship Rules Have U.S. Parallels http://t.co/eDmN4L4X Even in colonial times restrictions on speech in US were modest Jun 01, 2012
Intervention From Rupee to Real Shows Focus on Inflation http://t.co/Mr5sIquM Emerging Markets face inflation & policy tightens, currs rise May 31, 2012
China Has No Plan for Large Stimulus to Counter Slowdown http://t.co/Zzo9hzRG Maybe they figured out extending more loans won’t help growth May 31, 2012
Egypt’s Next Leader Won’t Be A Creature of Tahrir Square http://t.co/8UEP48Vg Revolution in Egypt subverted by military & muslim brotherhood May 28, 2012
US Politics
Startup Act Shows Silicon Valley Clout Growing in DC http://t.co/mJYKPeGu How Silicon Valley pushed 4 the JOBS Act. Scammers, PE rejoice $$ May 31, 2012
Note: the same thing will happen in 10-15 years to Social Security, but it will b cut by 25%. http://t.co/PpV5XGqO A series of bad surprises May 29, 2012
Congress Unwilling to Address Disability Plan?s Shortfall http://t.co/WrtxovbX In a few years, disability payments will b cut by 21%. $$ May 29, 2012
