Fed Policy – Page 16 – The Aleph Blog

Sorted Weekly Tweets

Posted on 9 August 2013 by David Merkel

Financial Companies & Lending Markets

Hedge Fund GSO Scores Win With MBIA Bet http://t.co/eMYUgX6Syg Risky bet that paid off; he realized the banks would have2 compromise $$ $MBI Aug 10, 2013
Mortgage Delinquencies Hit Five-Year Low http://t.co/HlfyPTbUAV Judicial states trail non-judicial states as cases drag on $$ Aug 10, 2013
The bailout Wall Street is blocking from Main Street http://t.co/gFasMd4jdG Eminent domain should not b used 4 trivial reasons $$ Aug 10, 2013
The US July 2013 Senior Loan Officer Opinion Survey on Bank Lending Practices http://t.co/JAL5TggXg1 Perhaps bank lending is turning up $$ Aug 08, 2013
The US Has a Really Helpful Student Loan Repayment Program?and No One’s Using It http://t.co/xyAgjk24PE Pay % of your income for a # yrs $$ Aug 08, 2013
BofA Trader Avoided Bank’s Bad Mortgages ‘Like A Fat Kid In Dodgeball’ http://t.co/3OdziStl8r Colorful, shows awareness of credit issues $$ Aug 07, 2013
Consumers Find Investors Eager to Make ‘Peer-to-Peer’ Loans http://t.co/5gKhnAzJ2x Eventually credit will b abundant leading 2 failure $$ Aug 07, 2013
Obama Urges Mortgage Overhaul With Limited Role for Gov’t http://t.co/MCtNMlBlJX Guaranteeing 30Y mtges incents housing overinvestment $$ Aug 07, 2013
House Democrat introduces bill to end mandatory arbitration http://t.co/2VHm4qXeK3 Costs of court cases vs crooked playing field of arb $$ Aug 07, 2013
Mortgage Debt Rejected by Banks Facing New Rules http://t.co/GCCoZvINkt Fewer want 2 hold mtge debts b/c of changes in capital rules $$ Aug 07, 2013
Many Can’t Pay Student Loans http://t.co/PgxJqtBtYT Some 8% of Borrowers in a New Federal Program Have Defaulted; avoid student loans $$ Aug 06, 2013

Companies & Industries

Hurricane forecast may have traders on edge http://t.co/2mRSgZvuXZ Hurricane forecasting has not been very accurate over the last decade $$ Aug 10, 2013
Warren Buffett Trains ‘Elephant Gun’ on Smaller Prey http://t.co/G4l4fxVtOZ No surprise. Buffett lets his managers buy good prospects $$ Aug 09, 2013
Remodeling Rebounds in US With Contractors http://t.co/TqOVgTh9Wa Deferred projects r finally getting done, as ppl more willing 2 spend $$ Aug 08, 2013
Loeb?s Reinsurer With No US Staff Gains From Jobs Act http://t.co/jnBqNMgucG Just b/c u list on US exchange doesn’t mean u will hire here $$ Aug 08, 2013
Goldman sees ‘creative destruction’ in these businesses http://t.co/BkgQSb1wsk Don’t agree on reinsurance; underwriting takes expertise $$ Aug 08, 2013
Xerox’s Ursula Burns on Her Career Path and Changing Company Strategy http://t.co/z3kFlsSOKU Xerox is interesting turnaround FD: + $XRX $$ Aug 08, 2013
27,900 Reasons For Amazon’s Loss http://t.co/lQ41dRZfuu Ordinarily, good corporate growth comes w/profits. $AMZN hires 28K over past year $$ Aug 08, 2013
CBS-Time Warner Cable Dispute Shows an Industry Unaware of Reality http://t.co/ZSNNOPstzV Internet may reshape economics of televison 2 $$ Aug 07, 2013
Jeff Bezos’s Tool Kit for Washington Post http://t.co/Yib1yt6k7Y Bezos is a bright guy, but making $$ off of newspapers tough w/internet Aug 07, 2013
Ride a Painted Pony, Let the Spinning Wheel Fly http://t.co/vG89yC4ooJ The word flywheel is popular 2 use, c here: http://t.co/vxc8d0fofQ $$ Aug 07, 2013
The 40 cheapest stocks, according to Goldman Sachs http://t.co/XADhLHVD4G $GS tells u2 buy cyclicals. I own 4 on the list. Seems risky $$ Aug 07, 2013
IBM Furloughs US Hardware Employees to Reduce Costs http://t.co/bQWk3BtgD3 2me, this seems kind of gimmicky; I would lean bearish $$ $IBM Aug 07, 2013
Hidden Billionaire Found With Food Fortune in California http://t.co/w2yUPsx86D Uses zoning laws to keep potential competitors at bay $$ Aug 06, 2013
We’re In 4A Long Bottom http://t.co/NtMxx5hIzj Barring strong inflation, gold miners have slashed exploration, mining best deposits only $$ Aug 06, 2013
For Twitter, Free Speech Is a High-Wire Act http://t.co/Yx80PIwfQ1 Twitter tries 2 chart a middle course in censorship in diff countries $$ Aug 05, 2013
Hidden Billionaire Cohen Hauls Fortune in Unmarked Trucks http://t.co/YpXAmxlo3F C&S Wholesale Grocers, biggest company u never heard of $$ Aug 05, 2013

Politics & Policy

A User?s Guide to Obama?s Inside-Out Economics http://t.co/5dHZasczfL Obama long on rhetoric, & short on reason; doesn’t understand econ $$ Aug 09, 2013
Fed Belongs to Everybody as Public Says It?s Our Money in Crisis http://t.co/YYy7dXkY3r Level of lobbying 4 Fed Chair is unprecedented $$ Aug 08, 2013
We Are All Going to Pension Hell http://t.co/SoGeWiryxV @asymmetricinfo points out hopelessness of the pensions crisis, only Q is when $$ Aug 08, 2013
Heroin Makes a Comeback, Especially in Small Towns http://t.co/Uwrh97QwU3 Small towns gain big city problems; drugs know no boundaries $$ Aug 08, 2013
Ted Koppel: America’s Chronic Overreaction to Terrorism http://t.co/4ueqew4oB9 The War on Terror has done more harm to the US than good $$ Aug 07, 2013
Deficit Shrinks to 5.7% of GDP as Debt Ceiling No Vote Risks All http://t.co/NaWdRcTzlf Maybe the deficit will disappear by accident? $$ Aug 07, 2013
Obama’s False History of Public Investment http://t.co/X8Lx8za8CW Planned 2b an investment, ended up being an expense. Happens in biz 2 $$ Aug 06, 2013
Insider-Trading Probe Caught in a Washington Knot http://t.co/ykIYLNNgvL Investigation of Health-Policy Leak Muddled by Congress’ rules $$ Aug 05, 2013
Central Bank Needs to Untangle ?Monetary Gordian Knot? http://t.co/IkNfB8X2sh Fisher says little help 2 job growth from $$ Trillions of QE Aug 05, 2013
US Growth comes Mostly from Inventories http://t.co/nEUK3zyDTY “Mostly” overstates it, but 40% does put a significant dent in GDP growth $$ Aug 05, 2013
US July Non-Farm Payrolls: The Hidden Weaknesses http://t.co/Cb8OyzJAMQ Number of hours worked decreased a lot & lower participation rate $$ Aug 05, 2013
Newt Gingrich sees major Mideast mistakes, rethinks his neocon views on intervention http://t.co/n27U4QpgxN Not as big a change as stated $$ Aug 05, 2013
Republicans Don’t Need to Sabotage Obamacare http://t.co/Eu9z62ITjz Obamacare, badly designed, is its own worst enemy $$ Aug 05, 2013
Summers After Government Saw Wealth Surge to $17M http://t.co/M0MgH8TUco “Consulting” can make up 4a lot of lost revenue post-govt $$ Aug 05, 2013

Rest of the World

In China, a New City Attracts Few http://t.co/QYyhVJPzx6 CIties r organic things; they grow a little at a time, not all at once $$ Aug 10, 2013
India?s Fear of Growth http://t.co/K2A7QTDruR Socialism in India is deep, as deep as corruption. Corrupt countries do not grow. $$ #simple Aug 09, 2013
Germany displaces China as US Treasury’s currency villain http://t.co/3JDudxN7yE Low labor costs, strong exports, weak consumer demand $$ Aug 08, 2013
Terrorist Tungsten in Colombia Taints Global Phone-to-Car Sales http://t.co/jgZr8fDbA6 Long piece regarding FARC smuggling tungsten $$ Aug 08, 2013
Vietnam Banking Fix Starts With $474M of Bad Debt http://t.co/Zt0YG7Mx0x Credit bust in Vietnam may b absorbed by central bank sub $$ Aug 07, 2013
Obama Snubs, Russia Laughs, Putin Wins http://t.co/ROvRuwFBDm Russia policy is ticklish 4 any US president, little 2 gain either way $$ Aug 07, 2013
The $4M Teacher http://t.co/onnV3kvClQ South Korea’s students rank among the best in the world, and its top teachers can make a fortune. $$ Aug 07, 2013
Islamists Seize Airbase Near Aleppo http://t.co/eNBrMdgDVu This feels like a long bloody stalemate; a warning to all who favor war $$ Aug 07, 2013
Toyota $37B Cash Program Shows Effect of Abenomics http://t.co/87YHXM0CkL No: Toyota has no profitable places 2 reinvest in Japan $$ $TM Aug 07, 2013
China?s Debt Surge Pressures Xi-Li to Avert Lost Decade http://t.co/tJp4pEDLKB The time to avert a lost decade is when the boom is strong $$ Aug 07, 2013
Mexico Leader Said to Seek Changes to Break Oil Monopoly http://t.co/Fqi9oJTj4U Never thought Mexico would change its position on oil $$ Aug 06, 2013
India Names Rajan Central Bank Governor as Rupee Plunges http://t.co/UOeo9Ah4Tg Good choice; 1 economist who understands financial crisis $$ Aug 06, 2013
South Africa?s Post-Apartheid Failure in Shantytowns http://t.co/o4CARCmq4L South Africa merely traded one group of cronies for another. $$ Aug 06, 2013
Will Portugal Bring Down the Spanish Banking Sector? http://t.co/TKEe5MfAil Spanish banks lent 2 Portugal credits. Tough 2 do Pt haircuts $$ Aug 06, 2013
Ex-Soros Adviser Fujimaki Sees JGB Bust From Tax Delay, Fed http://t.co/T2Ktp1lHFF Many difficulties afflicting Japan w/the weak yen $$ Aug 06, 2013
Baguette Hopes Fade for Some French Farmers on Wheat Quality http://t.co/a5JiNJAV4S Just 1 more economic difficulty 4 weak man of Europe $$ Aug 06, 2013
Stagnant South Korea Property Drags on Growth Rebound http://t.co/bHwUW59ard Add South Korea to property bubble club, underweight stocks $$ Aug 06, 2013
Bond Salesman Who Wasn?t Reveals RBS Human Errors http://t.co/5vU3u6pWfq Very senior managers fooled in2thinking janitor was top salesman $$ Aug 05, 2013

Bond Market

Pimco?s Gross Vows to Win Bond ?War? After Redemptions http://t.co/yrmdUeVeo4 Maybe the total AUM has gotten too great 4 outperformance $$ Aug 08, 2013
Bond Share Tumbles as Morgan Stanley Says Sell: Credit Markets http://t.co/uq4QFGxYAD Another “interest rates can only go up” piece $$ Aug 08, 2013
For Bond Investors, a ‘Generational’ Chance to Sell http://t.co/PtV9OOW7Ok W/a weakening economy, this is not a done deal, 2many leaning $$ Aug 08, 2013
Private-Equity Payout Debt Surges http://t.co/PWslmEr7YU Borrowing to pay dividends to their sponsors; PIK toggles and other risky bonds $$ Aug 06, 2013
Get Ready for the Next Round of Bond Pain http://t.co/rMvYV3Op0b Pain won’t come if economy keeps weakening, but be wary on credit risk $$ Aug 06, 2013
US Credit Markets: My US Lite Rita Covenant: Freshness without Protection? http://t.co/N8lbbYEpvz Cov-lite loans larger % now than 2007 $$ Aug 05, 2013

Market Impact

How to Teach Teenagers About Investing in the Stock Market http://t.co/eL7BC7rqtQ I learned from my Mom; most of my kids aren’t interested $$ Aug 10, 2013
What if the Stock Market Were a Bond? http://t.co/3LJEhCwym3 @eddyelfenbein gives a tool 2 analyze stock prices: http://t.co/Wwu3q5t2kf $$ Aug 10, 2013
Confessions of an Institutional Investor http://t.co/Cu5OT0vxVw @reformedbroker prints a saga of high expenses, negative alpha & hopeless $$ Aug 08, 2013
Spot the Outlier http://t.co/BDfN1ms7t8 @ritholtz notes the considerable outperformance of US equities in 2013. When does the party end? $$ Aug 08, 2013
Mind the (Expectations) Gap: Demographic Trends and GDP http://t.co/5LyZkROeyl Because of low pop growth GDP growth resets 3% -> 1%/year $$ Aug 07, 2013
Advisers don’t have a firm grasp of ETF liquidity, Cerulli finds http://t.co/b5gnuEKTi4 ETFs do not create liquidity, but shift liquidity $$ Aug 06, 2013

Detroit

Detroit Losing $1 Million Check Bares Hobbling Processes http://t.co/X0R0QpE9an Real question is why didn’t Detroit go bankrupt sooner? $$ Aug 10, 2013
Foodies Fight to Save Detroit With Job Hopes Pinned on Arugula http://t.co/s2WZuTYPql Cities die slowly 2, as multiplier effect reverses $$ Aug 10, 2013
Michigan’s Saginaw County Postpones Debt Sale http://t.co/N1dbcUamXE Wait. U r in Michigan. They let munis default. We will not lend 2u $$ Aug 09, 2013
Steve Malanga: The Real Reason the Once Great City of Detroit Came to Ruin http://t.co/aWSmiIHyK3 Chase out middle class taxpayers $$ #boom Aug 06, 2013

Energy

Growth in crude oil shipped by rail slows http://t.co/Jw3f1KxVFc Price differentials narrow 4 feedstocks & it does not pay 2ship by train $$ Aug 10, 2013
US refiners eye shale butane to cut gasoline costs http://t.co/qsfuoOapYr Fracking producing cheap butane, alkylation can make it octane $$ Aug 10, 2013
Europe’s gas-fired power plants attract opportunistic investors http://t.co/ShLtiMicQY Idea counts on electric rates rising; uncertain $$ Aug 07, 2013
US becoming ‘refiner to the world’ as diesel demand grows http://t.co/8KG3qn4lJY Adds2 GDP growth w/rest of world short refining capacity $$ Aug 07, 2013

Replies, Comments & Retweets

RT @trengriffin: The spectacle of journalists giving Jeff Bezos advice on how to make a newspaper profitable is like watching a Three Stoog? Aug 09, 2013
“If I were running a significant endowment, I would invest in people rather than external firms, and?” ? David_Merkel http://t.co/kC5gAHHEl7 Aug 08, 2013
@BarbarianCap move along, nothing to see here… Aug 08, 2013
. @Contra_Invest Try this: http://t.co/WplgPsxjkL Wisdom from Howard Marks, with help from Seth Klarman in the last two pages $$ Aug 07, 2013

Best of the Aleph Blog, Part 22

Posted on 9 August 2013 by David Merkel

These articles appeared between May 2012 and July 2012:

On Distribution Formulas

Most formulas for distributing income from an endowment or a a savings/investment fund are too liberal.? If you want the purchasing power to last, distribute less.

Correlating Risky Assets

How do correlations come into existence with risky assets.? This piece explains.

Simple Stock Valuation

An exploration of Eddy Elfenbein’s simple stock valuation model.

Don?t Become the Market

When any firm becomes the dominant provider of a good or service, it should ask whether it has mispriced.? A veiled critique of JPM’s whale trade in the credit markets.

In Defense of Nothing

Manufacturing is overrated.? We’ve got enough things, now we need services to make our lives richer.

Little Things are Important

When leverage is high, little things failing can lead to large and bad results.

High Profits

Labor is not scarce, so profit margins are high.? Will that last forever?? No, but it might be a while.

23,401 Auctions

391 Auctions

A pair of pieces suggesting that the markets could be better off if we held auctions once a second, or once a minute.

The Rules, Part XXXII

Dynamic hedging only has the potential of working on deep markets.

Arbitrage pricing can reveal proper prices in smaller less liquid markets if there are larger, more liquid markets to compare against.? The process cannot work in reverse, except by accident

The Rules, Part XXXIII

When politicians don?t have answers, they blame speculators, financiers (Wall Street), or foreigners.? They do anything to take the spotlight off their culpability or ineptitude.

Aim for the Middle

Very basic advice that tells you that the best returns come from taking moderate risk.

Works if Small, Fails if Large

Another bogus theory of asset allocation that works today, because markets favor it, and not enough people are using it.

Strong Hands

On the value of long-term investors holding stocks that you hold.

Logical Links

If there are a lot of links in a chain of reasoning, it is likely to be wrong.

Modified Glass-Steagall

I suggest a number of reforms that would be more effective than reinstating Glass-Steagall.

Don?t Blame Money Market Funds

On the hypocrisy of the SEC and the banking regulators

Do Insurance Stocks Do Better than Average Over the Long-Run?

The answer is probably, but not certainly.? Really, it is a mess.

On Life Insurance and Life Reinsurance

Explains why I like the life reinsurance oligopoly

On Bond Ladders

The most robust strategy for interest rates; always second-best, and never the worst.

On Internal Indexes, like LIBOR

An Analysis of Three-Month LIBOR 2005-2008

On Floating Rates

In most scandals, not enough attention is paid to those who should have been questioning the situation and did not.? There were parties angling for higher LIBOR and lower LIBOR.? Anytime you borrow or lend using an index, you assent to the method of the index.? What, you didn’t analyze it?

The Failure of Government-Provided Prosperity

The government has almost no control over prosperity, and yet it tries to take credit for it, and ends up ruining prosperity through deficits and loose monetary policy.

Grow Embedded Value

The main idea in investing is finding investments that will compound your money at an above average rate, with a margin of safety.

The Education of a Mortgage Bond Manager, Part I

The Education of a Mortgage Bond Manager, Part II

The beginning of my eight-part series on mortgage bonds.? I did it well for three years.

Packages! Packages!

A tale of my younger investing days, when I would mail companies for data.

Missing Earnings Estimates

Why occasional earnings misses are desirable.

Forget Your Cost Basis

All good investment decision-making is forward looking.? Whether you are buying or selling, it doesn?t matter where prices have been in the past.

Concentrated Interest

This piece generated a lot of heat, but I still stand behind it.? The concentrated interest of a profit motive is a good thing, and all of the government services do not affect what you have done at all.? The entrepreneur is a hero, whether in business, government, or elsewhere.

Sorted Weekly Tweets

Posted on 3 August 20133 August 2013 by David Merkel

US Politics & Policy

U.S. Declassifies Court Order Allowing Record Collection http://t.co/0AOMcCRsGi Perhaps some small step of transparency, we need better $$ Aug 03, 2013
Obama Urges Business Tax Rewrite to Help Spur New Jobs http://t.co/DmRwtwHS6r Lousy legislation that panders to power, it will pass $$ Aug 03, 2013
The Very Worst Part of Today’s Lousy Jobs Report http://t.co/Tvn2F6mWQ6 Job quality is low, growth is slow, & incomes don’t grow $$ Aug 03, 2013
Who Are Worse, Renters or Owners? http://t.co/cHKBfXp210 Govt meddling in housing leads 2 problems favoring old vs young, owners/renters $$ Aug 03, 2013
American Dream Slipping as Homeownership at 18-Year Low http://t.co/7b6sYVu8Q6 People need place 2 live, but houses r rarely good invtmts $$ Aug 02, 2013
Freshmen GOP Lawmakers Revel in Maverick Power http://t.co/iGaLIjt2qe We want idealistic politicians until we actually get them $$ #maverick Aug 02, 2013
Obama open to changes at NSA; intel officials fight to maintain secrecy http://t.co/rZaR9r2aKf Officials task-driven, Constitution blocks $$ Aug 02, 2013
Cities Grabbing Houses Won’t Fix the Market http://t.co/AXaCHwuIoP @asymmetricinfo on y using eminent domain on mtges is likely 2 fail $$ Aug 02, 2013
Coburn thinks defunding Obamacare is a horrible idea http://t.co/W2jK00gOgZ Truth-teller Tom Coburn aims to fix PPACA rather than destroy $$ Jul 28, 2013

Market Impact

Walsh?s Unconstrained Wins in Bond Rout: Riskless Return http://t.co/W8LNnWE5Kr Unconstrained strategies r easier when u don’t run lotsa $$ Aug 03, 2013
Blackstone, Deutsche Bank in Talks to Sell Bond Backed by Home Rentals http://t.co/m3cae6mljQ This would b better killed off when little $$ Aug 03, 2013
Search for Muni-Bond Guidepost Sputters http://t.co/zjQHXiWAqi Start w/illiquid collateral u can’t get a liquid benchmark, pricing issues $$ Aug 03, 2013
Big Question Hangs Over Small-Caps http://t.co/Ehzm5j9490 Valuations r stretched, but large cap mgrs need a way to beat their benchmarks $$ Aug 03, 2013
No, Earnings Have Not Been ‘Good’ http://t.co/kT7dfnbeUN Actual earnings growth has been anemic, which matters more in the long-run $$ Aug 02, 2013
Leveraged Loans Pass ?12 Level With Record Ahead http://t.co/Mf7OHWm5kB Quality & pricing r getting sacrificed 4 quantity; bad long-run $$ Aug 02, 2013
BlackRock Rolls Out Index 2 Make Inroads in Retirement Market http://t.co/uRpJ6qvfmj How much $$ do u need 4 a decent retirement income $BLK Aug 02, 2013
Bank commodity earnings are a mystery http://t.co/TjMkuWTnS9 Neglects financialization of commodities by pension plans & retail investors $$ Aug 02, 2013
This is the cost of sitting on cash in a bull market. Different when valuations are stretched, like now. http://t.co/WYC6bAReyt Aug 01, 2013
JPMorgan to quit physical commodity trade amid scrutiny http://t.co/VWmtIClYXk Business case: commodities require 2much capital&attention $$ Jul 28, 2013
Tourre Tells of Low Status at Goldman in Defense Preview http://t.co/uCc7GWK5LB “I didn’t have any significant authority at GS! I didn’t” $$ Jul 28, 2013

Rest of the World

How Venezuelan Used ?Scrape? to Make Six Times Her Salary http://t.co/L3rUmVK3vB When currencies r manipulated, clever people play games $$ Aug 03, 2013
Wheat Costs in Japan to Gain for 3rd Time as Abenomics Bites http://t.co/mPQxXBGAjc Devaluing the yen has negative side-effects $$ #duh Aug 03, 2013
Merkel?s Green Shift Backfires as German Pollution Jumps http://t.co/JAXdm53hiT Closing down nuclear plants was an unforced error ->coal $$ Aug 03, 2013
How Big Is China?s Debt? The Best Guesses http://t.co/BzY8f7Gzz3 This estimates total governmental debt at all levels, not total debt $$ Aug 02, 2013
The $7 Trillion Problem That Could Sink Asia http://t.co/A9y8QzOx54 In the short-run Asians would acquire $$, in long-run it would hurt $$ Aug 02, 2013
Japan’s Three-Year Fiscal Plan to Urge Sales Tax Rise http://t.co/jxsYhJc24E Will be difficult 2 execute, w/o a lot of political backlash $$ Aug 02, 2013
Ghana?s Dancing Pallbearers, Insurers Lead Funeral Boom http://t.co/GWd4V8xu3g $$ spent for status events is wasted, & keeps people poor. Aug 02, 2013

Companies & Industries

Tax Shelters, Nebraska Hurricanes And Other Captive Insurance Mistakes http://t.co/V7Xsp1tmek 10 rules 2 keep a captive insurer legit $$ Aug 03, 2013
7-Eleven Adds Bento Rigor to Slurpee Appeal in US Push http://t.co/www8ObGqhL 7-11 went from the US 2 Japan, then goes back w/Japan mgmt $$ Aug 02, 2013
Third Point Hedge Fund Targets CF Industries http://t.co/ioIzcPlFlu Thinks that $CF could free up more cash 4 shareholders $$ Aug 02, 2013
Uralkali Breaks Potash Accord to Grab Market Share http://t.co/EfyqzqZr8P Amazing the effect a large foreign player can have on US cos $$ Aug 02, 2013
Burger Costs Rising With Beef Supply at 21-Year Low http://t.co/nXfFXEECbd Should c higher prices, more births, less slaughter, etc. $$ Aug 02, 2013
SAP Invades Silicon Valley via Acquisitions http://t.co/vXOK0YmIb8 Creates room 4 new competitors as acquirers don’t integrate them well $$ Aug 02, 2013
Why Are Google Employees So Disloyal? http://t.co/Ye0ZBLADtk Calculate actuarial decrement tables 2 arrive at the truth $$ Avgs don’t work. Jul 30, 2013

Central Banking

When you?re rattled by collateral, do the Fed taper talk http://t.co/lImzjMdmT8 Taper talk forced on the Fed 4 market operational reasons $$ Aug 03, 2013
Near-Zero Interest Rate Trap http://t.co/hjoBF5acb6 If long-term rates rise 2 normal levels, banks holding bonds would b de-capitalized $$ Aug 03, 2013
Money shot from John Mauldin: “We are watching the Fed employ a trickle-down monetary policy.” Couldn’t have said it better. $$ Jul 28, 2013

Other

Afrikaners Reaping Colorado Wheat Threatened by Visa Cap http://t.co/Cj6pTKm5NG 2nd largest immigrant ag labor group might get restrained $$ Aug 03, 2013
Banker Saves 20,000 From Nepal to Uganda With Her Profits http://t.co/c0HURcg3wJ Rather than wait 4 death, pursues charity personally now $$ Aug 03, 2013
Pope Signals Openness to Gay Priests http://t.co/t5leZXst4D Jesus said that the sin was not only in the action, but in the thought $$ Matt 5 Aug 02, 2013
My Life & Past, as Seen Through Google’s Dashboard http://t.co/LPkviIKHGj Would u like 2 review your history? Would u like 2 delete it? $$ Aug 02, 2013
Famous Restaurant Chains That Have All But Disappeared http://t.co/i5yxIighw7 Remember Chi-Chis, Sambo’s, Bennigan’s, Steak & Ale, HoJo? $$ Aug 02, 2013

Replies, Retweets & Comments

Commented on StockTwits: Thanks, Howard. Coming from you, that is high praise that I hope to live up to. http://t.co/Q5ikvtjzHa Aug 03, 2013
@zingfinapp That’s part of the nature of the seasonal adjustment factor: when jobs over/undershoot in current month, they adjust prior same Aug 03, 2013
@Kevin_Holloway This is surfacey, but it looks good for all parties except other Japanese insurers… Aug 02, 2013
“The keys to merger are keep them small & integrate them well. Does anyone do this consistently?” ? David_Merkel http://t.co/cEGnuBXrYe $$ Aug 02, 2013
@ReformedBroker But it lowers volatility, I’m sure… and in a real equity market catastrophe, it will be a home run in relative terms. 😉 Jul 27, 2013

Redacted Version of the July 2013 FOMC Statement

Posted on 1 August 2013 by David Merkel

Comments

This FOMC Statement was close to a nothing-burger.? They try to take the deflation boogeyman off of the table with words, and no proof.? All the same, they shaded down their views of housing and GDP.
Current proposed policy is an exercise in wishful thinking.? Monetary policy does not work in reducing unemployment, and I think we should end the charade.
In the past I have said, ?When [holding down longer-term rates on the highest-quality debt] doesn?t work, what will they do?? I have to imagine that they are wondering whether QE works at all, given the recent rise in long rates.? The Fed is playing with forces bigger than themselves, and it might just be dawning on them now.
The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.? As a result, the FOMC ain?t moving rates up, absent increases in employment, or a US Dollar crisis.? Labor employment is the key metric.
GDP growth is not improving much if at all, and much of the unemployment rate improvement comes more from discouraged workers, and part-time workers.

The Optimal Interest Rate Scenario, Until Now

Posted on 27 July 201328 July 2013 by David Merkel

When I was running cashflow tests for life insurers, there was one scenario that was among the best for most insurers (life or otherwise).? The optimal scenario was a slow protracted rise in interest rates, say 1/2% per year for 10 years, or flat (no change).? Yes, with the slow rise, there will be unrealized capital losses, most of which will evaporate with time.? But excess cash flows will be invested at higher rates, raising the value of the firm.

I remember talking about this with people in the finance areas of other life insurers, and there was agreement — a slow rise in rates would benefit the industry as a whole.? Maybe annuity floor guaranties played into that as well.

But there are a number of parties that could not bear with the slow persistent rise.? Most governments of the world, including the US would find their budgets severely inverted if interest rates slowly rose and stuck.? As such, governments will do what they can to avoid such a scenario.? They don’t want to end up like Greece. That said, if they do end up there, expect that the governments hand losses off to bondholders, pensioners and/or medical care recipients.? The prime motive of a secular government is to survive, even if core goals are not achieved.

Thus at present, what is optimal for governments is to keep rates low for a long time.? Let savers get clipped, that government programs get paid for.? The risk here is that the bond market rebels and rates rise whether the government likes it or not.? But should that happen, and the government cannot pay on all promises made, it will force losses onto all long-term recipients of cash flows.

Perhaps policy will relax the strain on those in the private sector who have made long-term promises to pay, like pensions.? I would not count on that.? The government will be content with its own survival.

Sorted Weekly Tweets

Posted on 19 July 2013 by David Merkel

Energy

US fuel export surge gives refiners surprise summer blockbuster http://t.co/8d3WbY7xZg We need free trade in energy & end corn ethanol $$ Jul 19, 2013
US approval of Enbridge pipeline plan irks some oil shippers http://t.co/4YYisxzgFH Limited pipeline capacity versus supply raises rates $$ Jul 19, 2013
Deadly derailment won’t stop oil on trains http://t.co/gb7u6riA6S Rail allows 4 flexibility at a higher cost and lower safety $$ Jul 19, 2013
The danger of too much ethanol http://t.co/huUzLpgvDX We would b a lot smarter 2 buy ethanol from Brazil, or drop ethanol in entire $$ Jul 17, 2013
Surging Gasoline Prices Push CPI Inflation Higher, But Weak Core Fuels Taper Uncertainty http://t.co/0Z5zXMjvlJ Inflation rising, note it $$ Jul 17, 2013
Senators Grill Refiners Over High Prices Amid Oil Boom http://t.co/j0jhNhkXSF There is cheap crude in the center of the US, not at coasts $$ Jul 17, 2013
US ethanol credits soar to fresh high http://t.co/1gUVMm5O3u Perhaps allow the importing of Brazilian ethanol; that would improve matters $$ Jul 16, 2013

China

China Loosens a Key Control Over Banks http://t.co/AS6hzeD9vY Not sure this is big; eliminating floor interest rate allows 4 lower rates $$ Jul 19, 2013
China’s Zhu Changhong Helps Steer Nation’s Currency Reserves http://t.co/WcjpJD4YiC Aligns China’s interests more tightly w/the US $$ Jul 17, 2013
China Keeps On Gobbling Up Treasurys http://t.co/4gOipjltfJ Meet the Fed’s competitor 4 acquiring Treasury bonds; forced buyers both $$ Jul 17, 2013
Wealth Products Threaten China Banks on Ponzi-Scheme Risk http://t.co/BB8162405P Chinese banks will b threatened by runs in a few years $$ Jul 17, 2013
Police Say Sexual Favors Spur $1.5 Billion Glaxo China Sales http://t.co/hrPhrJjGkb China sells itself cheap if this is true $$ #SAD Jul 17, 2013

Central Banking

Curse of the front-runner a bad omen for Fed contender Yellen? http://t.co/CabkT1vGRV We need someone other than a neoclassical economist $$ Jul 19, 2013
The Summers or Geithner nightmare http://t.co/oltKKRvRMC They benefit from not being Yellen. Otherwise, no reason to consider them. $$ Jul 19, 2013
Bernanke Says Unwinding of Risky Bets Boosts Borrowing Costs http://t.co/QVVmtUPUnq Interesting argument, given his prior encouragement $$ Jul 19, 2013
Bernanke: Three Reasons Interest Rates Have Risen http://t.co/AJ7fVb2Csp Stronger economy, ‘fraidy cat markets, & leverage unwind $$ Jul 19, 2013
Hilsenrath: What Bernanke Means http://t.co/riIsNWgsCq When you have a poor communications strategy, a lot of people r needed to explain $$ Jul 18, 2013
Four Factors the Fed Faces on Bond-Buying Exit http://t.co/nDpYsdDKef Fed does not get labor market, inflation, & fiscal concerns $$ Jul 17, 2013
3 reasons why Larry Summers should not b next Fed chairman http://t.co/kS6d0VcThG Many reasons y da conceited fool should not b Fed chair $$ Jul 17, 2013
Bernanke Boom Signaled by Yield Surge as Market Recalculates http://t.co/H7miGoHpoI Watch rates fall again on economic weakness $$ Jul 16, 2013

Rest of the World

Female Footballers Covered Head to Toe Inflame Islamists http://t.co/WWTPU4EIqu No matter how hard u try, some people won’t b happy $$ Jul 19, 2013
Honda?s Fujino Readies ?Flying Acura? to Challenge Cessna http://t.co/fAaOQ7Oq3v Honda pours lotsa $$ into a long-shot small plane venture Jul 19, 2013
Honda Builds ?World?s Fastest Lawn Mower? http://t.co/WpCe7DciTf Can go 130MPH, or 15MPH when it is cutting grass. All bragging 4 rights $$ Jul 19, 2013
Rudd Home Sale Thwarted as Canberra Market Slows Pre-Vote http://t.co/uts4KwqXru Housing prices fall as economy slows & govt shrinks $$ Jul 18, 2013
Abe Unleashed After Vote Seen in Biggest Risk Drop http://t.co/mKuANJSeKL Social-security costs r already 31% of government budget $$ Jul 18, 2013
Payday Looms on Dictator?s Defaulted Bonds in Peru http://t.co/0gDmQGzGu5 Expropriation in the 70s demands repayment 4 those that lost $$ Jul 18, 2013
Ahmadinejad Departure in Iran Means Moving Desk Down Hall http://t.co/Iiv0lTr3nI Never underestimate the staying power of a bad idea. $$ Jul 17, 2013
International Paper’s Big Pulp Bet Hits a Frosty Siberia http://t.co/zOv3fPyKC9 Cheap Timber & transport stymied by Russian bureaucracy $$ Jul 17, 2013
Merkel?s Unseen Power Beate Baumann Misses No Chancellor Details http://t.co/G23npBa7qF Baumann works behind scenes on policy & politics $$ Jul 16, 2013
In Egypt, the ‘Deep State’ Rises Again http://t.co/GEXtZ1kR63 Collusion between Army & Opposition parties against Muslim Brotherhood $$ Jul 13, 2013

Market Impact

A portfolio for all seasons? http://t.co/GZle4jAj2U If Harry Browne’s idea were more widely adopted, the price of gold would fly. $$ Jul 19, 2013
The 100 Best Finance Blogs: All The Internet?s a Stage http://t.co/6nUipa6mbv Aleph Blog is pleased to make the list @ # 48. Great blogs $$ Jul 19, 2013
Red Bull-Fueled All-Nighters Put Fortress Fund on Top http://t.co/VhA7FTlNNJ Diminishing marginal returns 2 scale; time spent late poor $$ Jul 18, 2013
Excellence Hurts Returns in US Stock Study http://t.co/IgN41lyuUA Stock performance mimics bond performance; junk stocks & bonds do well $$ Jul 18, 2013
Judge Slams S&P’s Defense in US Lawsuit http://t.co/PP9FNRlGGj Puffery: lousy argument 4a rating agency 2make b/c ur supposed 2b honest $$ Jul 18, 2013
Meet the Man Who Has Worked at Goldman for 80 Years http://t.co/JsQTRY20Vl Alfred Feld is still plugging away for clients @ $GS at age 98 $$ Jul 18, 2013
Eminent Domain Plan Decried by DoubleLine Sees New Life http://t.co/h78U7z5i5i Myth: ordinary people were innocent in housing bubble $$ Jul 17, 2013

Biggest Muni Sale of 2013 Set to Price for Texas Roadway http://t.co/VYTI7TAqH2 There is demand 4 muni deals; this is a prime example $$ Jul 17, 2013
Should You Invest in the New Wave of IPOs? http://t.co/CSBOFQYpIa When IPOs r many, often the quality is lower. B careful w/IPOs here $$ Jul 13, 2013
Senators Introduce Bill to Separate Trading Activities From Big Banks http://t.co/2ig1nWw4hH There r better reforms that need 2b made $$ Jul 13, 2013
The Yankees parking lots that went bankrupt, skipped city payments and took city land http://t.co/aIylgsyrmf Read; fascinating tale $$ Jul 13, 2013

Other

Three Ways to Unlock Great Insights http://t.co/wNpdgGcwp5 Consider anomalies, new perspectives,& desperation $$ Jul 19, 2013
South Carolina Psychiatric Patient Stuck 38 Days in ER http://t.co/ublh93VwXe Eats up a lot of hospital resources, but what to do? $$ Jul 18, 2013
For His Next Trick, the Cronut Maker Reinvents the S?more http://t.co/dyMYB1V6BO I am into cooking, but this sort of stuff makes me blink $$ Jul 18, 2013
The Cronut Maker Reinvents the S’more http://t.co/AqIfdAtEyo If you add enough calories to any recipe, it will be delicious. $$ Jul 18, 2013
Smartphone Upgrades Slow as ‘Wow’ Factor Fades http://t.co/G1dKzoe1Zm Every trend fades. Exponential goes linear, linear goes logarithmic $$ Jul 17, 2013
Health Insurance Shoppers Put Low Price Above Other Options http://t.co/qBBuCCvHXV People want basic coverage 4a moderate price $$ Jul 16, 2013

Wrong

Wrong: China’s Flying Propaganda Weapon Will Blow Your Mind http://t.co/OtBvBMFKle Will b an ez target, given RF signature & 4 turboprops $$ Jul 19, 2013
Wrong: Consumers Most Penny-Wise in Almost 50 Years http://t.co/LTuUGB3eEW A high correlation doesn’t mean a beta of one $$ #studystatistics Jul 19, 2013

The Rules, Part XLIV

Posted on 19 July 2013 by David Merkel

Expectations are a part of the game.

As expectations change, so do the markets.? What could be simpler?? Markets are discounting mechanisms, so why aren’t expectations the whole game?

Expectations are the whole game for widely traded assets that are analyzed by many.? But there are complex assets and smaller assets for which expectations, should they exist, are not well-defined.? A large example would be Berkshire Hathaway.? When the stock of Berkshire Hathaway begins to care about making/missing earnings estimates, that will be a real change in the way the stock is viewed.

I have a number of other stocks in my portfolio that have no analyst coverage, so whatever expectation their is for the company is ill-defined.? Earnings shrink?? Stay flat? Rise a little, lot, or more?? Often the reactions are muted, because expectations are ill-defined.

With cheap stocks, I often view results in two ways:

Expectations mode: are they beating earnings expectations or not?
Book value mode: are they earning enough to justify the current market price?? (And are the earnings real?)

It’s hard to lose money on companies that trade below book and have a single-digit P/E.? The value accretes and eventually market prices follow.? You just have to be happy with firms that are boring, but profitable.

Cheap stocks with good balance sheets do not get killed when there are earnings disappointments.? With those stocks, we can sit back and wait for a better day.

All that said, earnings estimates provide a feedback mechanism for those stocks that have an adequate number of analysts following them.? Imperfect as it is, it guides the way we react to quarterly releases of adjusted earnings.? And when companies attempt to show adjusted earnings that are liberal, it is no surprise when the market rejects their presentation, and the stock goes down.

But this rule applies to policymakers as well.? Over the last 27 years, the Federal Reserve has placed a greater emphasis on communications.? I think that was a mistake, but the Fed made it a goal to shape the expectations of the market.? And they did so.

But once you sharpen the focus of the market to your promises, should it surprise you that when you give the least bit of equivocation, that the market reacts badly?? Hey, you made your bed, now sleep in it.? You trusted in your ability to communicate, and now you reap the result.

Even with no current change in policy, a change in expectations can have a huge effect on markets, particularly when novel policy tools are being used.? Ben Bernanke should not have been surprised by the reaction of the market to his comments to the press after the last FOMC meeting.? All of the efforts since that time to take it back have bolstered the stock market, but have not affected the bond market much.? Remember that the bond market is usually smarter than the stock market, thus I remain bearish.

Full disclosure: Long BRK/B

The Rules, Part XLIII

Posted on 16 July 2013 by David Merkel

Modify Purchasing Power Parity by adding in stocks and bonds

An optimal currency board price basket would contain both assets and goods.

In one sense, assets are future goods.? Assets throw off an uncertain stream of future benefits, which can be used to purchase goods at that time.? Based on the demographics of an economy, if marginal dollars tend to be saved versus spent, stimulus would affect the economy differently:

Spent: we get goods/services price inflation.
Saved/Invested: we get asset price inflation.

Asset price inflation is different.? It is difficult to transfer resources from the present to the future.? Even a zero coupon bond relies on the solvency of the issuer, and the realized goods/services inflation.? Hoarding gold/commodities relies on the idea that they will be more scarce in the future, which is unlikely as prices rise to encourage more supply.

Cash rarely earns more than the CPI.? Bonds have long cycles where they are alternatively “certificates of confiscation” or “beneficiaries of deflation.”

Asset prices rising is not always a good thing.? The rise in prices may reflect additional productivity or they may reflect a higher price for transferring goods to the future.

When I was a bond manager for an insurance company that had long-dated promises to pay, I bought a variety of fixed-rate bonds that that appreciated dramatically in value in a falling interest rate environment.? What did that do to my expected cash flow stream?? Nothing.? If anything, it meant we would earn less because we would reinvest excess cash flows at rates lower than the market yield of the bonds.

This is a reason why QE from the Fed is questionable.? Their asset purchases push up the price of assets, but the cash flows don’t change.? Maybe a few more entities decide to issue debt in the process, but that doesn’t mean the debt gets used for expansion.? It may well replace equity, given its cheapness.

Maybe the answer here is to look at inflation as a credit phenomenon, whether the credit is used to purchase assets or goods/services.? At present, assets are inflating more than goods/services, and that has been true for some time.? I suspect that relationship will reverse, but when that will come I can’t predict.

Temporary Prosperity at the Cost of Longer-term Prosperity

Posted on 13 July 2013 by David Merkel

Apologies for last night’s post on Bernanke.? I have deleted it.? It was not one of my finer efforts (it was late), and I went down some rabbit-trails that overshadowed my main, and valid point.? Bernanke has no business criticizing Congress for running a less accommodative policy, when he is signaling a less accommodative policy.? Congress does not have a communications strategy that investors rely on.? The Fed does, and Bernanke has made a lot out of transparent communications, which I believe is a harmful concept that is bearing bad fruit now.? So when he signals that policy accommodation will be less, and sooner than you think, why should he be surprised at the carnage in the bond market?? Markets are discounting mechanisms, they anticipate.? Why can’t the Fed Chairman recognize that, rather than saying the market misunderstood him?

That was a good thing with the Fed, pre-Greenspan.? It was much easier to understand the Fed when they said nothing.? Onto tonight’s piece:

Borrowing from the Future to Take Care of the Present

I am a fan of balanced budgets.? Why?? Balanced budgets are sustainable.? This is particularly true if budgets are balanced on an accrual basis.

Politicians like to promise more than they deliver.? They are like J. Wellington Wimpy, who said, “I would gladly pay you Tuesday for a hamburger today.”? Goods and services today, payment later.

This happens in a lot of ways, large and small:

Federal Pension Plans are unfunded, supported by the taxation authority of the Federal Government.
Running large deficits that don’t do much good for the economy as a whole, while racking up debts that will have to be paid by future generations.
Running monetary policies that improve conditions today, but will worsen future conditions as a result.? Far better to let recessions bite, eliminating bad debt & projects, and leave behind a less indebted society, ready to grow.
Social Security & Medicare are unsustainable programs created by our grandparents, sustained by our parents.? These programs will kill the rest of us with their costs.? Our forebears ate sour grapes, and our teeth are set on edge.? And with each generation it gets worse, as the demographic crisis makes it harder to sustain.
Obamacare front-end loaded taxes, and back-end loaded benefits.? We are now faced with the costs, and the taxes have been spent on other matters.? Aside from that, the estimates when the bill was passed were dishonest.
States & municipalities played with their pension assumptions for years, offering generous benefits that could not be afforded under intelligent assumptions.? It becomes benefits today, taxes tomorrow.
Tax policy encourages debt rather than equity, creating industries that over-borrow.

Things could have been better at this point had the Fed done its job and let recessions bite, eliminating bad debts.? Congress could have run balanced budgets, constraining spending on all departments.? The Social Security surplus could have been walled off from the government, and invested in index funds.? States & municipalities could have funded their pension plans fully, and not used the flexibility to fund other spending.? We could have had a tax code that did not tax dividends, but offered no deduction for interest.? We could have constrained the Fed’s ability to act.

We have a mess now as a result of politicians promising, with funding to some later.? In the 1840s over-indebted governments defaulted, and there were many revolutions in Europe.? What will be the price in the modern era, with our over-indebted governments?

I don’t know.? But I suspect it will be ugly.

Sorted Weekly Tweets

Posted on 12 July 2013 by David Merkel

Monetary Policy

Fed stops short of the clarity global markets crave http://t.co/fdQUJlHDX3 Fed has shown that it does not understand global debt markets $$ Jul 12, 2013
Unintended consequences made the PBOC?s strategy fail to work http://t.co/iQGNVFelw3 Highlights lack of liquidity in Chinese banking $$ Jul 12, 2013
Bernanke Supports Continuing Stimulus Amid Debate Over QE http://t.co/oPhi1HGF40 Bernanke really doesn’t know, but he is afraid 2 tell u $$ Jul 11, 2013
Bernanke reduces future policy accommodation &sez Fed is stimulating, then criticizes fiscal policy as tight for running smaller deficits $$ Jul 11, 2013
Fed Affirms Easy-Money Tilt http://t.co/62OXSxaCNu Transparent communications requires many words & misunderstandings to get msg right $$ 🙁 Jul 11, 2013

Michael Pettis

Pettis: An analysis that points to an unsustainable trend is always right if the trend turned out indeed to be unsustainable. $$ Jul 11, 2013
Pettis: That it took many years before the limits were reached is not an indication the model was wrong. It’s how the economy works. $$ Jul 11, 2013
Pettis does not like those who criticize those who pointed to unsustainable debt trends as “Stopped clocks that are right twice a day.” $$ Jul 11, 2013
It’s impossible to precisely time leverage unwinds, merely seeing it in advance qualifies as a win, whether US Housing, Eurozone, China $$ Jul 11, 2013

PPACA [Obamacare]

Obamacare called ‘The fiasco for the ages’ http://t.co/ZHFA72sIGe Call it an unforced error; stupid policy that destroys better policy $$ Jul 09, 2013
Decision to Delay Employer Mandate Will Cause More Employers to Drop Coverage http://t.co/02lqVlAdxN Obamacare the dumbest idea out there $$ Jul 09, 2013
Part-Time America http://t.co/ikzsOSOeaG There r more people “employed” but many have several part-time jobs, b/c of Obamacare [PPACA] $$ Jul 07, 2013

Rest of the World

Haredim Harassing Women Prompt Ultra-Orthodox Backlash http://t.co/tj4aXNM7IU Q: has wailing wall become an idol 2 some Jews? $$ Jul 11, 2013
After all, u can pray anywhere. God is everywhere, so he will hear u. Whether he will favor u is another matter. Jul 11, 2013
Greek outlook bleaker than lenders think, local think tank calculates http://t.co/Ktuc9JMRUS Austerity should not increase from here $$ Jul 11, 2013
Value of the Syrian Pound Hits an All-Time Low http://t.co/wz8t1hkqZP Unsound currency is a common casualty of any war, especially civil $$ Jul 10, 2013
Pimco Shuns Korea to Turkey Covered Debt on Liquidity http://t.co/HN0wdw7xqo Liquidity is not free: requires quality, size & simplicity $$ Jul 10, 2013
The Muslim Brotherhood?s Legacy: Controls, Shortages and Inflation http://t.co/GaTU9LBp16 Brotherhood wanted power for Islamic reasons $$ Jul 09, 2013
Japan in a Bind on Planned Tax: Fears Are It Will Hurt Rebound http://t.co/43NQV3EXFd Far better to cut government spending; much wasted $$ Jul 07, 2013

Market Impact

Hedge Funds Are for Suckers http://t.co/RBpyL1c84z There are limits to leverage, arbitrage, good ideas, no limits 2 high costs, though $$ Jul 12, 2013
Property Crushes Hedge Funds in Alternative Markets http://t.co/SDCFgPHxxE Fell hard 2007-9, has come back hard since, but so have stocks $$ Jul 12, 2013
US Banks Seen Freezing Payouts Under Harsh Leverage Rule http://t.co/ZRMqXy2Z2k This will eventually be gamed, as capital is squishy $$ Jul 11, 2013
Corporate Insiders Shift From ‘Buy’ to ‘Sell’ as Bankruptcy Nears http://t.co/uk2QIagvIz Now u tell us. Really? Potent Inside information $$ Jul 11, 2013
REITs Deepening Bond Losses as Leverage Forces Sales http://t.co/3fQ15I9ITC Is it possible we get another self-reinforcing selloff? $$ $NLY Jul 11, 2013
SEC Lifts Ban on Hedge Fund Ads http://t.co/2jcKBcpDaS Probably a mistake, but let the big guys take their lumps w/survivor bias $$ Jul 11, 2013
Senator Hatch says insurance firms can ease US pension crisis http://t.co/yAJMEf43zs Cute idea, but life insurance industry is 2 small $$ Jul 11, 2013
U.S. Boosts Bank Capital Demands Above Global Standards http://t.co/J8jHFQ3Qdk Big banks will squeal, but their size poses systemic risks $$ Jul 10, 2013
Kevyn Orrs’ plan for paying bondholders could cost Michigan cities http://t.co/vSLW5f8h2d 2nd-order effects r neglected by the desperate $$ Jul 09, 2013
S&P Raises Puffery Defense Against US Ratings Case http://t.co/V0HGTyPjeV Reasonable. Wise investors know to ignore rating, read review $$ Jul 09, 2013
The New Breed of Income Fund http://t.co/ryMg2SN47u Risks r higher on these funds b/c stocks r not as safe as bonds, they can fall more $$ Jul 07, 2013

Companies & Industries

Fracking Firms Face New Crop of Competitors http://t.co/iVhNbNkQkw High profit margins drive competition; benefit goes 2 E&P firms $$ Jul 10, 2013
Tanker Cars in Fatal Quebec Rail Crash Had Drawn Scrutiny http://t.co/O3i6GCVKEh Relative safety of pipelines becomes apparent post-fire $$ Jul 10, 2013
Deadly Train Derailment Fuels Crude-by-Rail Concerns http://t.co/V3CPfaTGMP This was a case of operator error; it does not generalize $$ Jul 09, 2013
Alcoa Facing ?Hard Decisions? on Aluminum Plants http://t.co/wuZO515yrS Plant shutdowns teach investors where good opportunities may be $$ Jul 09, 2013
At 88, Former AIG Boss Is Building a New Empire http://t.co/I8x1siazJn He did not deserve to be thrown out of AIG; now he builds anew $$ Jul 07, 2013

Other

Oregon Tuition Plan Punishes Graduates? Success http://t.co/Li3tr4X95J Will attract the less successful, paying 3% of earnings 4 25 years $$ Jul 13, 2013
Math, Science Popular Until Students Realize They?re Hard http://t.co/UXA00o0Sqc Yes, math & science r hard & not squishy, but rewarding $$ Jul 12, 2013
Gangs Ruled Prison as For-Profit Model Put Blood on Floor http://t.co/8HxXWEZ5sR Long article describing lousy control at some prisons $$ Jul 12, 2013
Father Cancels Tiramisu to Cable Under Pentagon Furloughs http://t.co/kNdLn2PuEm Watch 4 the impact of the next round of base closings $$ Jul 12, 2013
Can Spider Web Be Replicated? A Japanese Startup Thinks So. http://t.co/N4B0yKprnU Something 2watch, many uses 4 light ultrastrong fabric $$ Jul 10, 2013
Non-Farm Payrolls Revisited – Strong Weaknesses http://t.co/JsMeYetfNh Part-time work grew, full-time work fell. Does this look healthy? $$ Jul 09, 2013
Show Me the Jobs That Immigrants Steal http://t.co/mwfUqVVEUj Immigrants do things that the native-born won’t do. Who wants 2 pick fruit? $$ Jul 07, 2013

Wrong

Dumb: Fed?s risky codependency with the markets http://t.co/KxfOrHxD9j Increased communication yields more losses than gains, duh $$ Jul 12, 2013
Wrong: ?Middle-class revolution? fuels Pentagon war plan – MarketWatch http://t.co/CNxA1AO9JJ What a dope, Marketwatch should be ashamed $$ Jul 12, 2013
Dumb: 8 Things Really Successful People Do http://t.co/EvhKoxfpWK Points 6 & 7: Religion necessary for Spirituality & Ethics $$ Jul 11, 2013
Wrong: The Second Great Depression http://t.co/5WUd24YZlk If u don’t c the problem as 2 much private debt creating a boom, u don’t get it $$ Jul 10, 2013
The Fed facilitated that boom, & when excess liquidity was gone, a scad of broken balance sheets resulted; leverage still 2 high now $$ Jul 10, 2013

Replies, Retweets, and Comments

@auaurelija Not sure I would have analyzed it that way. That piece only highlights increases, and many cos in the table still have low debt Jul 12, 2013
@felixsalmon Yes, & the dual mandate led to providing too much stimulus 1987-2007, leading to the mess we r in now. Single mandate better Jul 12, 2013
@auaurelija So where do you see the increase in leverage? Most companies seem not to be doing that, as far as I see. Jul 12, 2013
RT @pdacosta: The Fed’s message to the markets is clear: the path of rates will depend on stuff happening or not happening. Jul 12, 2013
A great time w/ @japhychron as we discussed math, computing, economics, security, secuities, equities, bonds, FX, banking, & work. Jul 11, 2013
“I disagree; there is emotionless investing. It depends on realizing that you have a long time?” ? David_Merkel http://t.co/qoT1BrMgIt $$ Jul 11, 2013
RT @ggreenwald: Don’t worry: a court that meets in total secrecy, housed inside the DOJ, with only the Govt allowed to be present, is reall? Jul 08, 2013

June 2013	July 2013	Comments
Information received since the Federal Open Market Committee met in May suggests that economic activity has been expanding at a moderate pace.	Information received since the Federal Open Market Committee met in June suggests that economic activity expanded at a modest pace during the first half of the year.	Shades their view of past GDP down.
Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated.	Labor market conditions have shown further improvement in recent months, on balance, but the unemployment rate remains elevated.	No change
Household spending and business fixed investment advanced, and the housing sector has strengthened further, but fiscal policy is restraining economic growth.	Household spending and business fixed investment advanced, and the housing sector has been strengthening, but mortgage rates have risen somewhat and fiscal policy is restraining economic growth.	Shades their view of housing down.? I?m sorry, but balanced budgets promote growth, because economic actors don?t fear their taxes rising in the future.? Also, in Keynesian terms, any deficit is stimulative.
Partly reflecting transitory influences, inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable.	Partly reflecting transitory influences, inflation has been running below the Committee’s longer-run objective, but longer-term inflation expectations have remained stable.	No change, and not true.? TIPS are showing rising inflation expectations since the last meeting. 5y forward 5y inflation implied from TIPS is near 2.5%, up 0.25% from June.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.	Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.	No change. Any time they mention the ?statutory mandate,? it is to excuse bad policy.
The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate.	The Committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate.	No change. Emphasizes that the FOMC will keep doing the same thing and expect a different result than before. Monetary policy is omnipotent on the asset side, right?
The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall.	The Committee sees the downside risks to the outlook for the economy and the labor market as having diminished since the fall.	No change.
The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.	The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, but it anticipates that inflation will move back toward its objective over the medium term.	CPI is at 1.8% now, yoy.? It may be closer than they think.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.	To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.	No change. Does not mention how the twist will affect those that have to fund long-dated liabilities. Wonder how long it will take them to saturate agency RMBS market? Operation Twist continues.? Additional absorption of long Treasuries commences.? Fed will make the empty ?monetary base? move from $3 to 4 Trillion by the end of 2013.
Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.	Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.	No change.
The Committee will closely monitor incoming information on economic and financial developments in coming months.	The Committee will closely monitor incoming information on economic and financial developments in coming months.	No change. Useless comment.
The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability.	The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability.	No change.
The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.	The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes.	No change. Vacuous.
In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.	In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.	No change
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.	To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.	No change. Promises that they won?t change until the economy strengthens.? Good luck with that.
In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.	In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.	Not a time limit but economic limits from inflation and employment. Just ran the calculation ? TIPS implied forward inflation one year forward for one year ? i.e., a rough forecast for 2014, is currently 2.20%, unchanged from May.? Here?s the graph.? The FOMC has only 0.30% of margin in their calculation.
In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.	In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments.	No change.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.	When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.	No change.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen.	Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen.	No change
Voting against the action was James Bullard, who believed that the Committee should signal more strongly its willingness to defend its inflation goal in light of recent low inflation readings, and Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.	Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations.	Bullard made his point last month, and sits back with the majority. George continues to make her point that is the same as mine in my piece Easy In, Hard Out; that the Fed may have greater problems as a result of its abnormal policies, whatever they do in the future.