Fed Policy – Page 20 – The Aleph Blog

Sorted Weekly Tweets

Posted on 23 February 2013 by David Merkel

Companies

Cargill joins Wall Street banks as swap dealer http://t.co/vvamqbSPM0 Could b a good idea 4 any firm that does much commodities hedging $$ Feb 22, 2013
Office Depot To Buy OfficeMax? And Then There Were Two. http://t.co/VzkCs2aDWl 0 + 0 = -1 Combined company faces $AMZN undercutting them $$ Feb 21, 2013
U.S. Insurers Resist Push to Make Gun Owners Get Coverage http://t.co/8DvviX2jRU It hasn’t worked that way with cars; this is a good idea $$ Feb 21, 2013
$OMX & $ODP merge — market doesn’t like it, combined companies worth less than before the merger rumor emerged $$ http://t.co/sy41UOiY Feb 20, 2013
Buffett brand has more beans than Heinz http://t.co/9xdLHvic The investor has won every advantage in the deal, writes Alice Schroeder $$ Feb 19, 2013
Bondholders Dislike Uncertainty in Berkshire-Heinz Deal http://t.co/vRylO1uj Bondholders, Buffett *never* assumes acquired debt $$ #patsies Feb 19, 2013
Annaly Reversing Slump as Denahan Tries to Dodge Fed http://t.co/eFkOQMtc $NLY changes its character as Fed crowds them out of RMBS $$ Feb 19, 2013
The Pitfalls of Dividend Yield in the Oil Patch http://t.co/CsUPn6T3 The higher the dividend yield the less $$ 2 pour in2 exploration/growth Feb 19, 2013
Reader?s Digest Is Bankrupt; Iconic Magazine Falters http://t.co/NYzgyqSQ 2 much debt & competition from internet; private equity failure $$ Feb 18, 2013
Danone Stake Poses a Challenge for Heinz Investor Peltz http://t.co/P492n9ic Much harder 2 get changes in France than the US. Won’t work $$ Feb 18, 2013
US Airways Wins AMR as Horton Said to Wage Last CEO Push http://t.co/aqTIj0cD CEO job went 2 visionary who saw a way 2 create value $$ Feb 17, 2013
Amazon Sells Out Predator Drone Toy After Mocking Reviews http://t.co/14FOo6H1 Don’t like it keep quiet; mocking draws more attn & sales $$ Feb 17, 2013
What? Carl Icahn Just Thinks Selling Diet Shakes And Herbal Tea Is A Really Good Business http://t.co/tZAYwLRZ nuances of synthetic long $$ Feb 16, 2013
McGraw-Hill Credit Rating Cut by Moody?s After U.S. Sues S&P http://t.co/yV4DMich Less 2 this than some say; it’s just business, baby $$ Feb 16, 2013

Rest of the World

Waiting for a Crisis http://t.co/acZOK6tG Wishful thinking on this side of the Pacific, but China needs to reduce the size of government $$ Feb 20, 2013
Cyberwar With China Is Here, Like It or Not http://t.co/d0GYgZ5z Most systems can be compromised from inside by inviting someone 2 err $$ Feb 19, 2013
Spanish Debt Grows by Euro146 Billion, Largest Ever Recorded; Debt-to-GDP Highest Since 1910 http://t.co/gvPQntX6 Spain will leave EZone $$ Feb 19, 2013
G20 currency truce shortlived as Japan mulls foreign bond buys http://t.co/nMpGhREw Japan decided G20 meeting gave a free pass to devalue $$ Feb 19, 2013
China?s New Leader Needs Grip on Wacko Next Door http://t.co/lEMu4aqM Instead, trade Taiwan for North Korea. Interests become aligned $$ Feb 19, 2013
Saxo Bank CEO Says Euro Is Doomed as Currency Woes Resurface http://t.co/z3TekaAD CEO: “Right now we?re in one of those fake solutions” $$ Feb 18, 2013
Billionaire Miner Fights Rivals to Halt Digs on His Ranch http://t.co/GwwtJW78 Interesting Aussie mining claims law; u only own top meter $$ Feb 18, 2013
Mrs. Watanabe Dumping Australia Debt Signals Turn for Yen http://t.co/jzoAdZi7 JPY Retail FX speculators try to pick a top for the AUD $$ Feb 18, 2013
How China’s President Is Earning A Nobel Peace Prize http://t.co/ETDm3nU1 If true, many unlawfully detained in China may be freed $$ Feb 18, 2013
Ugliest Danish Banks Find No Buyers in Toxic Asset Trap http://t.co/r9pJyJbA 2 much leverage in system makes resolutions hard. Who can buy? Feb 18, 2013
BlackRock Sounds Covered Bond Collateral Alarm http://t.co/2x8TUlAd Weaker collateral & larger haircut did not work well 4 securitization $$ Feb 18, 2013
CDS Uncertainty Adds to Fear on Europe Bank Bonds http://t.co/iwe0OzAu Y don’t the protection buyers get paid by sellers? No auction poss $$ Feb 18, 2013
Hugo Ch?vez Returns to Venezuela http://t.co/7zjjeqPZ I wouldn’t get 2 excited; rare that he would fully recover after so many operations $$ Feb 18, 2013
Japan flirts with equity targets to drive a stake in the zombie economy http://t.co/nUqJzPXQ Targeting yields& equity prices doesn’t work $$ Feb 18, 2013
EU Economy and Horse Meat Scandal: Both Finishing last at the Gate – Germany to follow? http://t.co/bC79NXaW EZone Core falters, what2do? $$ Feb 18, 2013
Celebrating the end of the eurozone affair ignores the heart of the matter http://t.co/qH8dbJcl Problems reappear after victory declared $$ Feb 18, 2013
Group of 20 chiefs take stand on exchange-rate policies http://t.co/sCCweMmW Basically, nothing happened, everyone hopes it goes away $$ Feb 18, 2013
Hollande Tiptoes Toward Raid on Pensions With EU Pressure http://t.co/i8MZZnCS No way to make the budget balance; needs many, too little $$ Feb 17, 2013
Walking-Pace Trains Spur $17 Billion India Rail Revamp http://t.co/75U6s3Ch I don’t believe in the BRIC nations; all have huge problems $$ Feb 16, 2013
Auto Keiretsu Wracked by Antitrust Probes http://t.co/slQiOR5d Friendly collusion 4 the purpose of quality, or profit? Not allowed in US $$ Feb 16, 2013

Other

Cardinal Dolan Preps for Conclave Vote on New Pope http://t.co/R0ffQ9Q76J “Bring Peanut Butter” & other tips for traveling Cardinals. 😉 $$ Feb 21, 2013
Sewage Status Grows as Resource for Utilities to Skiers http://t.co/MCKboprN2P Amazing what we can do2 convert waste to power $$ Feb 21, 2013
Gasoline Pump Prices Soaring on Refinery Repairs, Oil Rally http://t.co/98E0NlHy Rising crude prices & refinery outages raise gas prices $$ Feb 20, 2013
Ironing Out the Wrinkles?The Complexities of Madeleine L?Engle http://t.co/ZeU5HKNn As a kid, I loved ML, opinion has always fallen since $$ Feb 19, 2013
Rotten Egg Gas Seen Offering Promise of Extending Life http://t.co/3GZYNK0f Hydrogen Sulfide – up to a limit we could all use more of it $$ Feb 19, 2013
What Doesn?t Kill Us Makes Us Stronger http://t.co/zB4cwRkY Small problems lead to product & service improvement & more robustness $$ Feb 18, 2013
Close Encounter by Asteroids Makes Case for Scrutiny http://t.co/LA5dyO7k We humans always fight the last war; remember the avian flu? $$ Feb 16, 2013

Credit Conditions

Junk Bond Froth Seeps into Emerging Markets http://t.co/mIq7e1qt I prefer emerging market gov’ts to corporate junk, they are run better $$ Feb 20, 2013
Bubbles and fraud: A smoking gun? http://t.co/BBbEsqGn Easy profits always brings out the worst in people; no wonder fraud increases then $$ Feb 20, 2013
The Indianapolis 500 of Corporate Bonds Yields http://t.co/EpblxrM0 The trend chaser are blowing out of credit; avoid 4 now, b cautious $$ Feb 19, 2013
Finra bond warning a real worrier http://t.co/E0Y5rI0x Dog bites man. Many have predicted long rates would rise & they haven’t (so far) $$ Feb 18, 2013
Debt Bubble Born of Easy Cash Prompts Swedish Rule Review http://t.co/BAuPbVVc $$ policy should not be used 2 stimulate; 2 much debt kills Feb 18, 2013
Super-prime?s invisible driver http://t.co/lrHsHjya Would u rather hold govt bonds or prime property? Which will lose less? @izakaminska $$ Feb 18, 2013

US Politics

Obama?s Deficit Commission Leaders Offer New Debt Plan http://t.co/SPlLstx0 50% cuts, 25% adjustments 2 Medicare, 25% close tax loopholes $$ Feb 19, 2013
How to Fix Too Big to Fail Without Taxpayer Bailouts: Rep. Campbell?s Plan http://t.co/7YGLejaK Plan is reasonable; receivership4BK banks $$ Feb 19, 2013
Pentagon Budget Stuck in Last Century as Warfare Changes http://t.co/1Qqn5sGP More smaller weapons, lower tech, fewer ppl, more skill&mobile Feb 19, 2013
All-the-Right-Skills Immigrants Ride US Hiring Wave: Economy http://t.co/YQ5wMqxB Note many in US have those skills & get screened out $$ Feb 19, 2013
Obama Golf With Woods in Florida Risks Muddling Message http://t.co/DPX5du27 Give Obama a break; he deserves a little fun too $$ Feb 19, 2013
Fiscal trouble ahead for most future retirees http://t.co/tEMoFpdy I predicted 20 yrs ago: Many Baby Boomers won’t b able 2 retire $$ Feb 18, 2013

Market Impact

Paulson Leads Funds to Bermuda Tax Dodge Aiding Billionaires http://t.co/KZINU1G9 After all that Paulson lost $$ rendering no tax savings Feb 19, 2013
Performance Tops Pedigree in Money Managers? Fortunes http://t.co/LUMTpchB Story of two $$ mgrs & how performance drove their stock prices. Feb 17, 2013
Upside: Why Most Value Investors Will Burn Out http://t.co/BMicKXex You have to be willing to look like an idiot & be patient 2b rewarded $$ Feb 16, 2013
Confidence on Upswing, Mergers Make Comeback http://t.co/lzg5cJ7y 2 early 2 say. Profit margins r2 high & interest rates 2 low; unstable $$ Feb 16, 2013

Wrong

Wrong: Let?s Downgrade S&P, Moody?s Ratings Oligopoly http://t.co/tbh1eBIH Writer does not understand the needs of regulators or bond buyers Feb 19, 2013
Wrong: Swelling US Labor Force Keeps Fed at Ease http://t.co/V6vKs01q Every statistic I c on labor force participation says otherwise $$ Feb 19, 2013

Replies & Retweets

@TheStalwart Hey Joseph, thou hardest working guy on Wall Street, Congrats on your promotion at BI — it is well-deserved Feb 21, 2013
If I were long $HNZ now, I would sell; likely there is no better deal coming along, & upside is only 0.5% $$ http://t.co/TiCHLQm7GK Feb 20, 2013
“Johnson will report to 3G; they have all of the incentives to cut costs and recognize synergies?” ? David_Merkel http://t.co/38KbUtiq $$ Feb 19, 2013
SEC EDGAR seems to be down, at least the search function isn’t working… Feb 19, 2013
@TheStalwart pick a medium-nice suburb of Rome. I grew up in the county of Waukesha, WI, FWIW. Feb 19, 2013
“These aren’t bargains; buying them @ these prices assumes they grow rapidly for the next 5 years.” ? David_Merkel http://t.co/nq2fSMXe $$ Feb 19, 2013
‘ @groditi Yes, reviewing it tonight. Agree about conviction; book’s only drawback is that if you get his emails, not much new $$ Feb 19, 2013
“When I analyze mutual funds, I look at active share and process — are they doing it right? Do?” ? David_Merkel http://t.co/uZ8g1Exi $$ Feb 19, 2013
Illegal, you used “US postal service” & “innovate” in the same sentence $$ RT @ReformedBroker: CAN THE US POSTAL SERVICE STILL INNOVATE? Feb 18, 2013

FWIW

My week on twitter: 34 retweets received, 3 new listings, 49 new followers, 39 mentions. Via: http://t.co/cPSEMLXpb8 Feb 21, 2013

Sorted Weekly Tweets

Posted on 8 February 2013 by David Merkel

Currency Wars

Battling the unknowns of currency devaluation | Reuters http://t.co/3kiN75eT A tough game to play, particularly w/changed policy in Japan $$ Feb 09, 2013
This is what a currency war looks like http://t.co/ibWgIZTg Japan is leading the #currencywar by no longer sterilizing monetary policy $$ Feb 08, 2013
The Dark Side of Japan’s Creating Inflation http://t.co/3O384dKU Risk is interest rates rise and Japan can’t finance itself. #tippingpoint Feb 07, 2013
Japan Inc.?s appreciation of the yen?s depreciation http://t.co/zdYFkcYR Japanese stocks rally as their exports get relatively cheaper $$ Feb 07, 2013
Falling yen set to spark renewed currency wars http://t.co/1QXtUFoA Japan has finally “thrown the hammer down.” No more sterilization $$ Feb 05, 2013

LBOs

Dell?s largest outside shareholder thinks it?s worth $10 more a share – Quartz http://t.co/1gr8dTZb Let Southeastern et al bid 4 control $$ Feb 09, 2013
The Three Scariest Letters for Bondholders: L-B-O | Fox Business http://t.co/wEEHVJUR Note: junk bonds r protected from this, not invt grade Feb 09, 2013
New Worry for Bondholders: LBOs http://t.co/KumxFjws Company is cheap & has good Bal Sheet, it could LBO, harming current bondholders $$ Feb 04, 2013

Pensions

Danger Seen in Pension Fund Cuts on Abe Inflation http://t.co/wDu6fWjE Guess what? Inflation can harm pensioners. Sad 4 them. $$ Feb 07, 2013
Pension Funds Cut Back On Commodity Indexes http://t.co/ZSvFgIoG Hoarding not a panacea, also, can get clipped on the roll $$ Feb 07, 2013
The Asset Mix (Stocks-Bonds) will make the Difference – 2 many Bonds Mr Abe? http://t.co/AOHm6p5X On pension asset allocation globally $$ Feb 07, 2013
Baby Boomers Sicker Than Parents? Generation, Study Finds http://t.co/Xy7VIs0n Will live longer too; big reason to reshape Medicare $$ Feb 05, 2013
Americans Rip Up Retirement Plans http://t.co/s5UARuld Nearly 2/3rds of Those Between 45 & 60 Plan Delays, Steep Rise From 2 Yrs Ago $$ Feb 05, 2013
Low Rates Force Companies to Pour Cash Into Pensions http://t.co/32JNXekQ Low long rates push pension liabilities higher, req $$ payment Feb 04, 2013

High Yield

US High Yield Bonds: HYG On the support http://t.co/Gcj35TAJ In order 4 HY 2 rally from here, need dumb buyers 2 apply leverage $$ Feb 08, 2013
Fed?s Stein: Signs of Overheating in Credit Markets http://t.co/TAT7QcwB Junk yields less than in June 2007. Replace CDO bid w/Fed $$ Feb 07, 2013
Two Things about High-Yield Bonds Investors Must Understand Today http://t.co/w3n4IODi Low yields & spread relatives & high $$ prices Feb 07, 2013
A Mad Rush Could Be Coming In The Corporate Credit Markets http://t.co/KFGkM3gQ Possible, but it depends on how levered investors are $$ Feb 05, 2013
No, there probably isn?t a bond bubble http://t.co/92p5SJBz Misses key question: how much debt is being issued to acquire other debts? $$ Feb 05, 2013
US Higher Yield Bonds: A Corrective Update http://t.co/RITd5UGl Corrections may be happening w/ both credit & high-quality long-duration $$ Feb 04, 2013

S&P Lawsuit

State Lawsuits Could Add to S&P Exposure http://t.co/oQSwfYFR Attorneys General for states become profit centers; opportunistic thieves Feb 07, 2013
Wrong: Levitt Says McGraw-Hill ?Foolish? to Not Settle S&P Lawsuit http://t.co/dEL4g1ja There’s a good chance that S&P will win, y give up Feb 07, 2013
S&P Lawsuit Undermined by SEC Rules That Impede Competition http://t.co/GCUE01zz Will not be simple for the govt to win its case $$ #FTL Feb 07, 2013
S&P Lawsuit Portrays CDO Sellers as Duped Victims http://t.co/rAI69G1G Stretching truth; CDO sellers knew credit better than agencies $$ Feb 07, 2013
S&P feels Justice’s lash, but can law ever conquer greed? http://t.co/SVDZVZtG Diffcult 2 single out people/firms 2 prosecute in big crisis Feb 05, 2013

Companies

Top NY court throws Travelers asbestos award into question http://t.co/GAujEmCH Case started in 1948, when USF&G insured Western Asbestos Feb 08, 2013
Buffett?s Son Says He?s Prepared Whole Life for Berkshire Role http://t.co/xYWVlMu8 As Chairman, Howard will be “cultural guardian.” $$ Feb 08, 2013
San Francisco Gasoline Rises as Tesoro Seen Cutting Rates http://t.co/4Rmvbcz1 It’s tough when state governments discourage refineries $$ Feb 07, 2013
Bond insurers aren’t the only winners in Rakoff’s Flagstar ruling http://t.co/6A2IICLD All can rely on reps & warranties of mtge origin8rs Feb 07, 2013
Berkshire-Insured Muni Sees Good Demand http://t.co/yKX1lGPy Nothing amazing; some $BRK.B businesses r part of the development borrowing Feb 07, 2013
Life Insurer CFOs Say Their Financial Models Fall Short: Survey http://t.co/zJ3f2DJc Surprising, another reason 2b bearish on life ins Feb 07, 2013
BlackRock Cautious as Sales End Dollar Bond Rally: China Credit http://t.co/4LZDSoMf Questions over credit quality, maybe 2 much supply $$ Feb 04, 2013
Herbalife Drops After Report of Law-Enforcement Probe http://t.co/zC0a9GGv $HLF rises today. $$ Worries over being named “pyramid scheme” Feb 04, 2013
Was the AIG Rescue Legal? http://t.co/LUTVHQa9 Of course not. Gov’t should not play favorites; emergencies b a DIP lender of last resort Feb 02, 2013

US Politics & Policy

House Speaker: Washington Has to Address Spending http://t.co/lZcQcinD Yes it does, but will the Senate and President ratify that? $$ Feb 07, 2013
Party Eyes ‘Red-State Model’ to Drive Republican Revival http://t.co/qrlp6Zn5 First balance budget on an accrual basis; no state does $$ Feb 05, 2013
House Leaders Weigh US Spending Bill Below $1T http://t.co/0nBcoURd Good luck w/Senate & President on that, you will need it $$ Feb 05, 2013
Study Says States Lose Billions in Offshore Tax Avoidance http://t.co/qTnlUpTX Just an effect of federal tax policy, which needs change $$ Feb 05, 2013
The Fed?s Worst Fear http://t.co/nanNt52c Losing control of long interest rates; the bond market will eventually trump the Fed $$ Feb 04, 2013

Market Impact

Americans Are Tapping Into Home Equity Again http://t.co/gLLrlDEx Does this mean a return to the reckless equity withdrawals? Likely not $$ Feb 08, 2013
Banks Should Defer Bonuses for Up to 10 Years, Jenkins Says http://t.co/udabGhNT Better that banks become partnerships; creates caution Feb 08, 2013
Insiders now aggressively bearish http://t.co/vWogX2LF Last Fri: sell-to-buy ratio for NYSE-listed shares listed stood at 9.20-to-1 $$ Feb 08, 2013
SP500 Complacent Divergence – Risk Factors http://t.co/CPqaNYY4 Decelerating earnings growth threatens valuations. Econ surprises falling 2 Feb 08, 2013
Interdealer Brokers Emerge as Key Enablers in Libor Scandal http://t.co/bTgMtUOa & http://t.co/yBo7oxKJ Them & Rain Man Tom Hayes $$ Feb 08, 2013
Schwab Unveils Game-Changing Commission-Free ETF Platform http://t.co/yqCaunnJ Part of the ETF’s fees go to $SCHW . No free lunch here $$ Feb 07, 2013
H-P Aside, Corporate Splits Are Wholly Worth Investors? While http://t.co/e9dptR0E Managements gain new focus; Behemoths lack true mgmt $$ Feb 07, 2013
U.S. to Offer Floating-Rate Notes Within a Year http://t.co/eXCUd3Ni Money-market funds take heart; yield (w/spread duration risk!) $$ Feb 07, 2013
Small lenders ride US mortgage wave as big banks cut back http://t.co/KbACkvJk Interesting 2c little independent mortgage brokers return $$ Feb 04, 2013
America’s Baby Bust http://t.co/CaWPjZVU Heard on Radio C-SPAN yd http://t.co/Ow86Jsfs ?Economies don’t work well when popul shrinks $$ Feb 02, 2013

Rest of the World

Mind the Liquidity Gap – Credit Gap http://t.co/m2xTMEIs 3 factors: global monetary policy, global credit supply & global credit demand $$ Feb 08, 2013
German Hope French Despair and EU Rescue: PMIs http://t.co/qioLvblN Eurozone PMIs r rising, but economies r still contracting $$ #France Feb 07, 2013
Basel Seen Rotten in Denmark as Banks Bypassed http://t.co/HX9a6vOI Denmark has many covered mtge bonds; Basel doesn’t care much 4them $$ Feb 07, 2013
Shades of ’80s for Japan’s Stocks http://t.co/68rhfLmX What, Japanese stocks can go up after the demographic dividend has faded? Feb 07, 2013
Desperate Greeks scuffle at free food handout http://t.co/XpQUEBMM Total desperation. Democracy started there, and it may end there too $$ Feb 07, 2013
Canadians back2borrowing: avg consumer debt hits new hi http://t.co/wtSpy1pB overall debt low | cred: evergreen http://t.co/ndpBH0Ch Feb 07, 2013
Last tweet derives from this article http://t.co/wjSwNztf I believe in freedom, and small biz capitalism, with equality 4 all. $$ Feb 06, 2013
We need Obama/Hollande 2create economic barriers average people can’t surmount, so the clever rich can get richer. Cynical, but true $$ Feb 06, 2013
ECB Executive Board Member Asmussen: ‘German Interest Rates Will Rise Again’ http://t.co/oIJZtFtK Thinks *real* interest rates will rise $$ Feb 05, 2013
Top Iranians Trade Barbs in Rare Public Feud http://t.co/W1uR6M1p Corruption is endemic to Iran; rare 4 the mafiosi 2 fink on each other Feb 05, 2013

Other

An Insider’s Guide to Counterfeiting Wine – Businessweek http://t.co/SoVp0OrF 3 ways to counterfeit expensive wines & how to avoid them $$ Feb 09, 2013
Most Australian Wine Exports Ship in Giant Plastic Bladders http://t.co/jL1S9KLF ?We don?t ship glass around the world, we ship wine.? $$ Feb 09, 2013
Super Bowl Blackout Caused by Faulty Relay, Entergy Says http://t.co/GKd5619I That was what I guessed; weak spot in many power grids $$ Feb 08, 2013
Asteroid to Traverse Earth?s Satellite Zone, NASA Says http://t.co/ZnpmCxXD Interesting we only get one week’s notice on the near miss $$ Feb 08, 2013
What Abraham Lincoln Liked About Richard III http://t.co/oAp8PQjg Lincoln was Shakespeare buff; 1 controversial man’s thoughts on another Feb 08, 2013
Lease Surprise in Stuyvesant Town http://t.co/O7DQsILq “clause that allows landlord to increase the rent in the middle of the lease” $$ Feb 07, 2013
Nine Questions for Peter Levine, Andreessen Horowitz?s Enterprise Dude http://t.co/yiubWsqj How SDN commoditizes much special hardware $$ Feb 07, 2013
On Pins and Needles: Stylist Turns Ancient Hairdo Debate on Its Head http://t.co/RgrZqc80 Kinda of a quirky story, but interesting $$ Feb 07, 2013
‘They Owe It to Me’: FBI Identifies Top Email Phrases Used by Fraudsters – Compliance Week http://t.co/9FtlTkEH Set up filters, compliance Feb 06, 2013
Legacy of Benjamin Graham: http://t.co/GztBNt53 via @youtube In last minute, BG anticipates the Efficient Markets Hypothesis years ahead $$ Feb 05, 2013
Legacy of Benjamin Graham: http://t.co/GztBNt53 via @youtube Fascinating video w/Buffett, Kahn (2), Schloss, & other students of his $$ Feb 05, 2013
US Construction Jobs – A very Constructive Story http://t.co/Gqy8YIU0 Construction jobs coming back, looks like a dead cat bounce $$ Feb 04, 2013
Sending electronic money to friends catching on http://t.co/zRBh8tkT Creating next great avenue 4 money laundering; cheap & convenient $$ Feb 04, 2013
Hitler Awakes in 2011 Berlin, Becomes YouTube Hero http://t.co/ore3XtWB Hard 4 me 2 believe. Does humor have any limits anymore? Funny $$ Feb 04, 2013

Replies & Retweets

@dpinsen 16x deteriorating free cash flow @ $24/sh. There’s some bluster there. Wouldn’t want to be a bondholder here $DELL $$ Feb 08, 2013
Commented on StockTwits: Wait, I’m wrong. Didn’t look far enough — they have 8.5% of shares, but 7.5% of votes. Onl… http://t.co/18jIZ94S Feb 08, 2013
Commented on StockTwits: Here: http://t.co/a3SdyNFq http://t.co/4OBGCIp0 Feb 08, 2013
‘ @ampressman Thanks, Aaron. Reading it now. http://t.co/aGpdRr8R Good stuff. SE recently bought more http://t.co/UGh12nkp $$ $DELL Feb 08, 2013 ?(This tweet was wrong, SE has been a seller of $DELL shares, and even recently?)
Owns 7.5%, what could they b thinking? $$ RT @BloombergNews: BREAKING: Dell holder Southeastern Asset plans ‘All Options’ to stop deal Feb 08, 2013
Worth the read RT @cate_long: Is the U.S. growing, or just issuing debt? – #MuniLand http://t.co/KLB1838k Feb 08, 2013
Seems reasonable to me $$ RT @TFMkts: @AlephBlog the high yield market is on cusp of some stop losses getting triggered Feb 08, 2013
@GaelicTorus Did not know that, thanks Feb 08, 2013
Small caps +7% http://t.co/ewRvffTb $$ RT @credittrader: Gentle Reminder Japan Nikkei 225 +0.75% YTD in USD http://t.co/cxxhjMoG Feb 07, 2013
@anatadmati Twitter is too small for this. Read: http://t.co/JDnLfhJ5 & http://t.co/yo7C05d0 Biggest problem isn’t capital, but liquidity $$ Feb 07, 2013
@Nonrelatedsense @credittrader Thanks, missed that Feb 07, 2013
@BlandDexter In a word, yes. Feb 07, 2013
@The_Analyst What floors me are professional investors that don’t read the prospectus the first time they analyze a new type of investment. Feb 07, 2013
@SapienQuis A lot of investment banks got pinned w/crud they could not sell whether due to secondary trading or origination Feb 07, 2013
@The_Analyst Yes, they did have staff. If u r a professional firm, you must independent vet out credit quality; ignore rating read writeup Feb 07, 2013
Well done! RT @jasonzweigwsj: 2 things about high-yield bonds investors should understand today, from @DavidSchawel http://t.co/EYo8KSEQ $$ Feb 07, 2013
@anatadmati A better idea would be double liability, where mgmt & directors lose their capital before shareholders do. Change incentives Feb 07, 2013
@anatadmati At current margins, banks could not earn their cost of capital w/30% E/A. Banks & credit would shrink a lot -> crisis Feb 07, 2013
@DavidSchawel Where will it be? Feb 06, 2013
Bondholders will get badly hurt $$ http://t.co/i7Fxa10p RT @DougKass: HPQ mulling a break up. $HPQ Feb 05, 2013
It’s starting $$ RT @LisaCNBC: The Japanese are going to overdo it and create an inflation problem. #Yen will spike in 2013. @PeterSchiff Feb 05, 2013
@TFMkts People made absurd predictions about capital mkts off of the experience 1982-2000, culmination ing tech bubble / lost decade $$ Feb 05, 2013
Mersenne Primes RT @motokorich: Largest Prime Number Discovered, and it’s 17,425,170 digits long. http://t.co/U8GzYFj1 via @sciam Feb 05, 2013
@TFMkts Would be interesting 2c a firm try that. The wind seems to still b blowing the wrong way there, w/discount rates so low. Feb 05, 2013
He was/is a bright guy $$ RT @munilass: Picking on S&P just isn’t as much fun without @EconOfContempt around. Feb 05, 2013
RT @LaurenLaCapra: “big exchanges therefore stand to gain tremendously from even a relatively small shift twd futures & away from sw … Feb 05, 2013
“I only want to add one thing: its not what pundits say that matters, it is what people rely on economically… http://t.co/zAPlxIHU $$ Feb 04, 2013
RT @moorehn: Pffft. MT @nycjim: Washington Post says it, too, was victim of hacking attack that appeared to originate in China. http://t … Feb 03, 2013
Good marketing kills bad ideas, people & products $$ RT @MattVATech: Marketing is never a substitute for substance. Feb 03, 2013
“Only if you think that by waiting a little while you might have higher yields to invest at. Can’t?” ? David_Merkel http://t.co/Vt16DKeU $$ Feb 02, 2013
“Hi, KD… my bond mandate is unconstrained, so I just aim for total returns. Right now I am pretty?” $$ David_Merkel http://t.co/4x41D4D2 Feb 02, 2013

FWIW

My week on twitter: 77 retweets received, 4 new listings, 86 new followers, 81 mentions. Via: http://t.co/SPrAWil0 Feb 07, 2013

Seven Notes on Blogging and the Markets

Posted on 5 February 2013 by David Merkel

I need to catch up on a few things, so bear with me.? This might ramble.

1) Should I live and continue to write until mid-October of 2013, I will reach 10 years of investment writing.? I started writing for RealMoney in October 2003, and that changed my life.? Thanks to Cramer, because he created an organization that revolutionized financial media.? Former TST news writers occupy a wide number of top spots in many places in the financial press — it is astounding how much better financial news is today.? I am grateful to know many of them, some of whom would call me for help on occasion.

2) In a few more weeks, Aleph Blog will hit its sixth blogoversary.? Seems like minutes to me, but I have a lot more grey to prove that the time has passed.? I do want to note that much as I wrote at RealMoney, I have written far more here.? I have a problem though.? It seems that RealMoney has lost its ability to recover old posts pre-2008.? I would love to get copies of my old posts that are listed here.? If any of you know how to do that, please let me know.

3) Saturday night’s second article was hate me or love me in terms of responses.? There are no other writers at this site; the same flawed man writes them all.? My main point is that you need someone who acts like a fiduciary (whether they are a fiduciary or not) to tend to your assets.? Investment banks do use retail to lay off exposures that they do not want.

In any significant transaction, you want to know who is with you and who is not.? (This was true in the housing bubble, where many parties teamed up against buyers.)? For my clients, they know that over 50% of my net worth is on the line in the same portfolio that they have. (At present, over 70%.)? I have a lot of confidence in my ideas.? I eat my own cooking.

You want to invest in situations where there is alignment of incentives.? Are there brokers who are noble?? Yes.? But to use one, he needs to jump through extra hoops, because he is not under obligation to be a fiduciary.

4) 4+ years ago I wrote a piece called: Inflation for Goods Prices, Attempted Inflation for Housing-Related Assets, but Sorry, No Inflation for Wages.? Probably one of my longest titles… but that still seems to be the case today.? Fed policy inflates housing-related assets, gives some price inflation, but because labor is not scarce globally, wages are flattish.

5) I wrote this piece summarizing my views on the rating agencies.? I stand by it.? The rating agencies are not the problem.? Regulators are the problem.? They create the conditions where ratings are needed.? Ratings by their nature are opinions, they are not guarantees.? They can’t be otherwise, or else the rating agencies will have to become financial guaranty insurers, and charge far higher fees that will destroy financing for so many.

That’s why I think the lawsuits against the rating agencies will fail, again.? This is not to say the rating agencies were blameless, but it is very difficult to estimate future losses on any class of securities that has not ever gone though a failure cycle.

6) I believe in the conservation of liquidity: it can’t be created or destroyed, but it can be shifted.? My first example is stock price increments.? I think that the tick size is arbitrary, and a small tick size will favor small investors who are looking to buy small positions.? A large tick size will favor larger institutions that wait patiently to buy and sell.

7)? I believe in the conservation of liquidity in bigger ways also.? The Fed does not create liquidity, at least not in the sterilized? way that they do it presently.? But they can shift liquidity; who do the QE programs help?? The US Government and the GSE-backed mortgage market.? Liquidity has been shifted there, and away from everyone else.

That’s all for now.

Sorted Weekly Tweets

Posted on 2 February 2013 by David Merkel

God gave proverbs to the Jews; Epigrams were of the Romans. Now we do the same through tweets, why do I sense bad omens? #badpoetry Feb 02, 2013

Credit

One of Warren Buffett’s Greatest Trades http://t.co/wnU2g1z4 Comparing Buffett winding up his partnership to lack of distressed opps now $$ Feb 01, 2013
Be Very Afraid When Fear Disappears From Markets http://t.co/t8wKalsQ Low implied vols, low yields, High Q-ratio & CAPE10 $$ Feb 01, 2013
How a $91 million loan on the Marlins ballpark will cost Miami-Dade $1.2B http://t.co/F2u2rZbP Poway-style debt in Florida $$ cc @munilass Jan 31, 2013
Big, Rich, and Wobbly: Wall Street Banks Are Still Sicker Than You Think http://t.co/irKmQqLy Mohamed A. El-Erian explains the problems $$ Jan 30, 2013
In US Debt We Trust- The Transfer from Private to Public Debt http://t.co/2nq1pGCn Total debt hasn’t declined much from peak, gov debt up $$ Jan 30, 2013
Chavez?s 681% Returns Mean Socialism Buoys Goldman http://t.co/IYPD6fEJ Give Chavez credit, at least his country paid what they owed $$ Jan 30, 2013
4 Reasons the Junk Bond Rally Will Continue in 2013 http://t.co/r7SF05NJ Check my comments. I like this site, but disagree w/the thesis $$ Jan 30, 2013
Pimco to DoubleLine Leveraging as Yields Retreat http://t.co/LBUsmfQ6 Here comes leverage; PIMCO and Doubleline gear up to get returns $$ Jan 30, 2013
US Not So High Yield Bonds : “It’s Starting To Feel A Lot Like 2007” http://t.co/PZ0dOyzC More like 2005-6, we need more leverage 4 2007 $$ Jan 30, 2013
The US High-Yield Corporate Bond Conundrum http://t.co/w0wlsn7s & this leads to buybacks & M&A. It all depends on how aggressive it gets $$ Jan 30, 2013
Investors Pivot Back to Banks http://t.co/ixvSSGf8 Bank bonds are likely safe, the stocks r another matter $$ Jan 30, 2013
Too Soon to Celebrate for Europe’s Banks http://t.co/cKT6OXli Let them deal with the mountains of bad debt & restructure them $$ Jan 30, 2013
Can anyone tell me why HY loan defaults are up, while HY bond defaults are down? http://t.co/gxfVA5za Usually they move in tandem $$ Jan 29, 2013
And very few LP CEFs at discounts, which is also true for HY bond CEFs. Preferred funds look a little more promising, but still pricey $$ Jan 29, 2013
Looking at bank floating rate closed end funds, a few r at high prems 2 NAV, such that if u bot the trust 2 liquidate would get 0% return $$ Jan 29, 2013

Companies

Newell Rubbermaid Goes After $127B Health Market http://t.co/lcarSSmS Interesting 2c consumer prods comps go after the healthcare mkt $$ Feb 01, 2013
Chevron Realigns Its Gas and Midstream Organization http://t.co/u1WoIl2Y Sort of thing u do, prior to splitting co into 2 | FD: + $CVX $$ Jan 31, 2013
Good 4 refiners $$ http://t.co/q3lVpoI5 US crude oil inventories are well above the upper limit of the average range for this time of year Jan 31, 2013
Container Shipping Faces Merger Urge as Money Dries Up http://t.co/7Kur08t6 Capital-intensive biz is tough when financing not plentiful $$ Jan 31, 2013
Oh, Full disclosure two tweets ago, I am long Valero, $VLO Jan 30, 2013
$ACE ?s Greenberg Asks ?Why R We Doing Guidance?? http://t.co/dKtvopDX Evan has impressed me after leaving $AIG | Chip off the ol block $$ Jan 30, 2013
Valero Looking at Rail, Barges to Ship Canadian Crude to Gulf http://t.co/diLQGBZC Cheap oil in middle of N. America wants2get2the Gulf $$ Jan 30, 2013
Singer Chases Icahn With Stake in Cheapest Oil Company Hess http://t.co/Hk4ynp6q Worth reading 2 understand activist investors $$ Jan 30, 2013
Fund Outflows? Blame the ‘Cliff’ http://t.co/QOq13Jn8 $TROW is a good firm. If anyone should not get fund outflows, they would b one $$ Jan 30, 2013
Fannie To Allow Walkaways by On-Time Borrowers http://t.co/Nnx00VfR & so taxpayers will pick up the losses for walkaways on FNMA mtges $$ Jan 30, 2013
Software Firms Find Tax Advantages http://t.co/5G2QXmmD A good transfer-pricing accountant is worth his weight in gold. $$ Jan 30, 2013
Apple Reverse Convertibles: How Brokerage Firms Pervert Everything http://t.co/4ugTpgTe Don’t buy structured notes. Listen2 @reformedbroker Jan 29, 2013
How Apple’s Fall Bit Bondholders, Too http://t.co/60fmfhle Structured notes: Wall St. gives u a small increase in yield & lots more risk $$ Jan 27, 2013

Central Banking

Japan’s lessons for America’s budget warriors http://t.co/ftUKEJPa Think this might be the start of unsterilized monetary policy globally $$ Feb 01, 2013
What finally convinced me to sell my long bonds 30 bps lower than now was market’s reaction to the Fed in December. http://t.co/vQONtgBC $$ Feb 01, 2013
The Fed?s Actions Are Counterproductive http://t.co/THDwyijc If printing $$ or issuing credit could bring prosperity, it would be here now Jan 31, 2013
2 early to celebrate ECB’s balance sheet reduction http://t.co/srQiQJ4Q @soberlook right again: off-Bal Sheet gtees dwarf BS improvement $$ Jan 31, 2013
Fed Policy Is a Drag on the Economy http://t.co/T3Wx0ezh I have argued the same here: http://t.co/l7MyjNLM John Taylor 4 Fed Chairman $$ Jan 30, 2013
Anyone else notice that all FOMC meetings are now 2 days long? Gives them more time to come up with creative errors in monetary policy $$ Jan 30, 2013
The Ghosts of 1994 http://t.co/Hdf2UFLi 2 things are different now: Fed was hawkish in ’94, few expected prepays 2 decrease so much then $$ Jan 30, 2013
What Happened To Markets The Last 15 Times The Fed Tightened… http://t.co/zq4TRGxg Long article, but instructive on tightenings $$ Jan 30, 2013
With Each Central Bank Move, Nations Are Impoverished More http://t.co/70lBSDeQ Combined actions of Central banks create global infation $$ Jan 30, 2013
USD-JPY: Short Term Reversal? – Hara-kiri http://t.co/K9N3Viom Japan leads the race to the bottom. Will they stop sterilizing asset buys? $$ Jan 30, 2013
There are two things lacking that were present in 1994: a hawkish Fed, and expectations that RMBS prepays… http://t.co/DHekaqIN Jan 29, 2013
The Unintended Consequences Of The Greatest Economic Experiment http://t.co/0hEH3VS1 The Fed won’t admit it, but it is flying blind $$ Jan 28, 2013

Rest of the World

Greek Companies Test Bond Waters as Exit Risks Fade http://t.co/fOgUn41S I guess every dog has its day. Sleep w/dogs, wake up w/fleas $$ Feb 01, 2013
Best Stock Pickers Trawl Frontier Markets as US Funds Lose http://t.co/yfAKqI7t When mgrs seek unusual venues 4 investing, risk is up $$ Feb 01, 2013
Deutsche Bank Improved Its Capital Ratio By Changing Risk Measures http://t.co/jWTc73pR Risk mgmt is easy when you can alter standards $$ Feb 01, 2013
Spain’s crisis strategy under fire as economy buckles again http://t.co/Qeaeotx0 The ECB?s Mario Draghi is ?itching? 2buy Club Med bonds $$ Jan 31, 2013
Japan?s Government Proposes First Spending Cut in 7 Years http://t.co/DHpOH3II The journey to fiscal sanity begins w/a single cut $$ Jan 30, 2013
Canadian Mega Housing Bubble http://t.co/GwbpWMGs Quietly, the average Canadian HH has accumulated more debt than US & UK HHs. Who knew? $$ Jan 30, 2013
Chinese currency 2 loosen exchange rate: business chief http://t.co/q6zNLSGh Easier said than done; is China willing 2 absorb volatility $$ Jan 30, 2013
Scandal of Italy’s Monte Paschi means questions for Draghi http://t.co/mufcYFkI Had some reg oversight over Monte dei Paschi solvency $$ Jan 30, 2013
The Super Bowl, Chicken Wings and the FED – a Risky Mix ? http://t.co/EDCV958k The Fed has no idea what it is doing, the same as in 2007 $$ Jan 30, 2013
Why We?re at the End of Cheap China http://t.co/kSW2tbWG Argues there is more consumption going on in China, hidden in coprporate perks $$ Jan 26, 2013
The Biggest Housing Bubble in the World Is in … Canada? http://t.co/GgUfyM74 Interesting 2c France, Sweden, HK, & Singapore on the list $$ Jan 26, 2013

Speculation

Forget the ‘Rotation’, Here’s the Source of the Money Pouring Into Stocks http://t.co/tn4Dxs39 ~$30B of special dividends get reinvested $$ Feb 01, 2013
ML Fund Managers Survey – Jan 2013 http://t.co/GR19wML6 Professionals r hedging less equity risk, flexible capital increasingly committed $$ Feb 01, 2013
Bill Gross: Be very afraid of the markets http://t.co/k7Ouhax3 Favors: Currencies of creditworthy countries, short bonds, gold, HQ debts $$ Jan 31, 2013
Whan financial institutions start buying gold as an inflation hedge, only 2 possibilities remain: a top in gold prices, or hyperinflation $$ Jan 30, 2013
SP500 Earnings Optimisim : But let’s revise them lower! http://t.co/bPXqFSos We should expect actual earnings 2 come in below projections $$ Jan 30, 2013
Upside Risks http://t.co/AuT58IEC @reformedbroker gives us the bull’s case; I’m agnostic on market direction; think long yields will rise $$ Jan 29, 2013

Market Dynamics

Goodwill Is Bad News for US Assets http://t.co/8ctt5UeQ Not all goodwill is bad; if it produces extra cash deserves 2b treated as asset $$ Feb 01, 2013
It’s the Stocks You Don’t Own That Matter http://t.co/M3pDaeFl @herbgreenberg talks about new Forensic Accounting ETF $FLAG | Good idea $$ Jan 31, 2013
Your ETF Owns Too Little Amazon, &Other Index Quirks http://t.co/UOZINiEc Float-weighting underweights ?owner-operators? which do better $$ Jan 31, 2013
Asset Allocation & Rebalancing: (Still) Competitive Together http://t.co/FrLCygAY Rebalancing global value-weighted index: good strategy $$ Jan 31, 2013

US Economics

US GDP Q4 2012 Weaker with a Strong Mix http://t.co/ZmVlZZ52 In Q3, few talked about the weak mix, but yes, result better than headline # $$ Jan 31, 2013
U.S. Economy Unexpectedly Contracts in Fourth Quarter http://t.co/dmKSsHlf After getting upside surprises, shouldn’t we get one down? $$ Jan 30, 2013

US Politics

US government warns of hack threat 2 network gear http://t.co/lZvMgyOe Disable feature known as Universal Plug & Play on your network $$ Jan 30, 2013
How President Obama Lost His Shirt to John Boehner http://t.co/VZwfxqiw Interesting argument; not sure it’s correct. Seemed like a tie $$ Jan 28, 2013
Women?s Path to Ground Combat Strewn With Obstacles http://t.co/DkVG9UDM Only the strongest ~5% of women will be able 2b in combat $$ Jan 28, 2013
Bipartisan Immigration Plan Counters Republican Orthodoxy http://t.co/nL9Q8RFp Has some chance of passing 4 the 1st time in 6 years $$ Jan 28, 2013

Other

Psst…This Is What Your Co-Worker Is Paid http://t.co/3lUOLmT9 I’m not sure this is a good idea. What someone is paid is personal $$ Jan 31, 2013
Bombarded by Ads, Few Drivers Switch Car Insurer http://t.co/LsyjydyM Average ppl have an agent they trust until they get burned $$ Jan 30, 2013
Backyard Farming Gets Fancy http://t.co/0FqwgxRr High-End ‘Homesteaders’ Want Pricey, Stylish Tools; The $1,300 Chicken Coop $$ #noway Jan 30, 2013
15-Year-Old Creates Test for Pancreatic Cancer http://t.co/qrRalNtv This fellow beat the child of a friend of mine who came in third $$ Jan 30, 2013
Derivatives trader: ‘The trouble is, regulators are idiots’ http://t.co/PTJpQe9G In general, true. This is why dumb regulation is better $$ Jan 30, 2013
Liability Issues Create Potholes on the Road to Driverless Cars http://t.co/VDVux7vV If a driverless car has an accident who pays? $$ Jan 28, 2013

Wrong

Wrong:Piracy and Fraud Propelled the US Industrial Revolution http://t.co/JONyDRPd Doubt that explains more than 3% of American Success $$ Feb 01, 2013
Wrong: Alan Blinder:Everything You Think You Know About the Crisis Is Wrong http://t.co/gTVjTm4t TARP a failure; encourages moral hazard $$ Jan 31, 2013
Wrong: Morgan Stanley Buys Argentine Stocks as YPF Deal Lures BlackRock http://t.co/MdXXq1uu Until expropriation ends, avoid Argentina $$ Jan 31, 2013
Wrong: Bitcoin?s Gains May Fuel Central Bank Concerns http://t.co/bXNdgp9c Chart here: http://t.co/Xaz8cxbh Thin speculative market $$ Jan 28, 2013

Comments & Retweets

RT @japhychron: The Real, and Simple, Equation That Killed Wall Street | Guest Blog, Scientific American Blog Network http://t.co/9YDmZu … Feb 02, 2013
RT @BankersUmbrella: @AlephBlog …buying on margin at 5y high in NYSE, fund inflows higher than just before techbubble burst, net sales … Feb 01, 2013
You can say that again $$ RT @paulnovell: @AlephBlog unless you own an east coast refinery. Mid continent refiners are killing it Jan 31, 2013
@GlennBusch I almost moved to Poway to work for the last remaining large life insurer in San Diego; Offer fell through, company failed later Jan 31, 2013
@steve13smith So how are you doing at Minyanville & otherwise? Jan 31, 2013
@steve13smith Are you my friend from RealMoney days? Good to hear from you. Yes, I signed up on a Wednesday. It’s a useful summary to me. Jan 31, 2013
You can say that again RT @credittrader: $SPY vs $VIX – oops – http://t.co/ARvpNfRP Jan 30, 2013
Feels like it to me. RT @StockTwits: Has Value Turned a Corner? http://t.co/GQnUMCcw via @eddyelfenbein $$ Jan 30, 2013
@RossJaklik I don’t market. People ask me to manage their money. They get a clone of how I invest my own money. If that is not legitimate… Jan 30, 2013
@RossJaklik @faithmight @abnormalreturns In order to receive fees for investing OPM, you must pass the regulatory hurdles Jan 30, 2013
@RossJaklik @faithmight @abnormalreturns And to manage OPM legitimately, u have to start a firm like $TROW $LM $JNS $BEN $$ Jan 30, 2013
@wesbury @cabaum1 I want to get rid of the neoclassical economics monoculture at the Fed, & replace w/Actuaries & Value Investors $$ #dreams Jan 30, 2013
@prchovanec Enjoy it, friend. I have 8 kids, 5 adopted. Every age is fun, & has sorrows. Enjoy your kids while u can; they grow up fast $$ Jan 30, 2013
Little kids r so cute $$ RT @prchovanec: 3-year-old son William on new twin baby sisters: “Can they talk? What did they say?” Jan 30, 2013
Thanks, have ~3 more to go $$ RT @BarbarianCap: Great “101-level” series in the last few days on insurance investing over on @AlephBlog #ff Jan 30, 2013
+2 RT @niubi: ?@prchovanec: Twin baby girls Alice and Rachel Chovanec born at Amcare hospital in Beijing at 6:45am this morning!? Congrats Jan 30, 2013
premiums r so migh my nose is bleeding! $$ The RT @groditi: HY and Levered Loan CEF discount snapshot http://t.co/HH8tyX7x Jan 29, 2013
“You are not going to get as much from me, then. Not going 2 use Stocktwits as my Twitter client.” ? David_Merkel http://t.co/78eWsIVF $$ Jan 29, 2013
+1 RT @allstarcharts: Here is one chart that bothers me: $IWM vs $DJIA spread peaked weeks ago as $SPY makes new highs http://t.co/Bt9c6mlB Jan 29, 2013
@aenbrnood @GuldbergPeter I think both of your ideas have merit, thanks Jan 29, 2013
“”As for the part of the budget that won’t take care of itself, President Obama fought an ugly and?” ? David_Merkel http://t.co/ueQBGOkp $$ Jan 29, 2013
@prchovanec Leverage at each point in the chain of lending amplifies the impact of dodgy nonbank lending, esp when loans r short-dated Jan 29, 2013
A weakness in investment grade bonds RT @Convertbond: $DELL 5 Year CDS, Lesson on what an LBO can do to a credit.. http://t.co/foe7W2gf $$ Jan 28, 2013
@Danny_5079 That covenant is only common with junk bonds, though a few BBB bonds have it. That’s all. Jan 28, 2013
@Danny_5079 via arbitrage. Should have no effect on the deal, unless the bonds had a covenant requiring buying the bonds @ 101% in a buyout Jan 28, 2013
@Danny_5079 of the company & its pre-existing debt, thus leading to a decline in the value of debt, raising yield spreads. CDS reacts to it Jan 28, 2013
@Danny_5079 In a buyout debt is issued to finance the purchase that is equal or senior in terms of claim priority, reducing creditworthiness Jan 28, 2013
“They have to lure retail back in before the next bear?” ? David_Merkel http://t.co/lCQ1ex1c Jan 27, 2013
“If the risk parity players r still levered long credit, then they r the CDO equity of this cycle. End will b ugly” http://t.co/uR8ji9Ty $$ Jan 26, 2013
My problem is this: we have a dysfunctional credit market where yields are too low, and protections are… http://t.co/7mYgP0VQ Jan 26, 2013

FWIW

My week on twitter: 46 retweets received, 7 new listings, 87 new followers, 32 mentions. Via: http://t.co/SPrAWil0 Jan 31, 2013

Redacted Version of the January 2013 Version of the FOMC Statement

Posted on 30 January 2013 by David Merkel

Comments

I really think the FOMC lives in a fantasy world.? The economy is not improving materially, and inflation is rising. Note that the CPI is close their 2.5% line in the sand.? TIPS-implied inflation 1X1 (one year ahead for one year) is 2.41%, and 5X5 is 2.86% annualized.
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 my opinion, I don?t think holding down longer-term rates on the highest-quality debt will have any impact on lower quality debts, which is where most of the economy finances itself. When this policy doesn?t work, what will they do?
Also, the investment in Agency MBS should have limited impact because so many owners are inverted, or ineligible for financing backed by the GSEs, and implicitly the government, even with the recently announced refinancing changes.
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 the unemployment rate improvement comes more from discouraged workers.

A Statement to Dr. Bernanke:

More debt will not get us out of this crisis.? The Great Depression ended when enough debts were compromised, paid off, or cancelled, which from my study is 1941, before World War two started.

Your policies further aid the growth of the budget deficit, and encourage malinvestment in housing and banking, two things in a high degree of oversupply.? The investments in MBS only help solvent borrowers on the low end of housing, who don?t really need the help.? Holding down longer-term rates on the highest-quality debt does not have any impact on lower quality debts, which is where most of the economy finances itself.

The problems with unemployment are structural, not cyclical.? Labor force participation rates continue to decline.? There is greater labor competition around the world, forcing down wages on the low end.? There is nothing that monetary policy can do to change this.? You can create stagflation through your policies, but not prosperity.

When inflation does arrive, the FOMC is going to find it very hard to raise Fed Funds or shrink its balance sheet.? The banks will not react well as you try to shrink, and the long rates that you have held down will react violently.

You haven?t thought through all of the ?second order? effects of your policy.? Even the ?first order? effects, which favor the rich over the poor, seem to elude you.? Assets rise, helping the rich.? Interest rates fall, helping the rich who can borrow.? Commodity prices rise, harming the poor.

Insanity is doing the same thing over and over, and expecting a different result.? When will you realize that the policies of the Fed aren?t helping, and need to be abandoned?

Sorted Weekly Tweets

Posted on 19 January 2013 by David Merkel

Central Banking

Records Show Fed Wavering in 2007 http://on.wsj.com/SgLPoG 4 all of their vaunted intelligence, the Fed was worried, but clueless in 2007 $$
Three Stages of Fed Grief: Key Quotes From 2007 http://t.co/X4ygwdqU Slowly realized the economy they overlevered was getting worse $$ Jan 18, 2013
Fed Concerned About Overheated Markets Amid Record Bond-Buying http://t.co/wDckfD77 The sourcerer’s apprentices note there is a problem $$ Jan 17, 2013
Paul Moreno: Gold, Greenbacks and Inflation: A History and a Warning http://t.co/75M1jNRo Ppl forget the degree the Fed has debased $$ Jan 17, 2013
Once you turn base money into short-term debt, can you go back? http://t.co/pG3gxBwA @interfluidity ideas getting deserved attention $$ Jan 16, 2013
First Shots Are Fired in Global ‘Currency War’ http://t.co/y6GJi0V5 Japan leads “race 2 the bottom.” Who will b first 2 stop sterilizing? $$ Jan 16, 2013
Currency Moves? & Central Bank Bravado http://t.co/zt7BI1As Posit that the yen is falling due to war risks & Japan biz risks in China $$ Jan 16, 2013
Abe Rocket-Start Lowers Sony Risk With Market Fuel http://t.co/J4cLgQKJ Loose monetary has spillover benefits 2 indebted corporations $$ Jan 16, 2013
I’ll grant this: the government always has some role in money, even commodity money like a gold standard… http://t.co/QtVI3oeC Jan 12, 2013

Rest of the World

Pressure Rises on China to Scrap One-Child Policy http://t.co/iDfZ0Ssl No better way 2 have a demographic crisis; change long overdue $$ Jan 18, 2013
Default Alarm Rings as Trust Loans Jump Sevenfold http://t.co/2tr1vFnq China is so messed up that it makes the Eurozone look good $$ Jan 17, 2013
Singapore Curbs Industrial Property Sales to Avert Bubble http://t.co/vZQhsdya Increases bid-ask spread; can’t fight fundamentals $$ Jan 17, 2013
Mongolia?s Erdenes TT Halts Coal Exports to Biggest Buyer China http://t.co/hoTHAxxZ Probably either gross malfeasance or bribery $$ Jan 17, 2013
European Dividends Tumble to Four-Year Low as CEOs Hoard http://t.co/D6YdzVqD Favor European Exporters over their Domestic companies $$ Jan 17, 2013
Euro at 10-Month High Poses Economic Threat, Juncker Says http://t.co/bk0FsVEE The #currencywars continue. Rule: Beggar thy neighbor $$ Jan 17, 2013
Russia Says World Is Nearing Currency War as Europe Joins http://t.co/OvVu0ZMH Accept export slowdown? Monetize debt? Stupid QE-like stuf? Jan 17, 2013
Rio Tinto CEO Steps Down http://t.co/lqWyRPES Every CEO should have etched on his wall: “Paying up 4 scale acquisitions is dumb” $$ $RIO Jan 17, 2013
China Capital Flow: Foreign Direct Dis-Investment http://t.co/V8erkuxL Foreign inv’t inflows falling, domestic inv’t outflows rising $$ Jan 17, 2013
China Starts Losing Edge as World’s Factory Floor http://t.co/pG7uOFqX SE Asia benefits as China becomes more expensive 2 operate in $$ Jan 16, 2013
Norway Sees Deeper European Job Pain as Default Fears Recede http://t.co/ztbfvp0H Rising NOK makes exports less competitive &fewer jobs $$ Jan 16, 2013
Often when FX vols spike it means something might break, like the SNB not able continue its EUR peg. But if… http://t.co/fydAlRSX Jan 16, 2013
HSBC needs 2 end its Ping An silence with simple answers http://t.co/8xVAWiHD much alleged insider deal information has been circulating $$ Jan 14, 2013
Mainland alchemists turn damaged zinc into solid gold http://t.co/W4zu69k7 An example of how Chinese banking system papers over bad debts $$ Jan 14, 2013
Rumor: large backlog of Chinese companies want to IPO, but having hard time slowing the required 2 years of rising earnings $$ Jan 14, 2013
Neighbors Grow More Wary of China http://t.co/aYMUvLs2 Ex-pat Chinese moving in, looking a little graspy w/respect to resources, etc $$ Jan 14, 2013
Mineworker Debt Mounts as South African Lending Booms http://t.co/hTkXyCTc There are few places in the world without debt overages $$ Jan 14, 2013

Market Impact

Deutsche Bank Derivative Helped Monte Paschi Mask Losses http://t.co/PeqTdPBT Bad investing led to losses 2 hide. Enter Deutsche Bank $$ Jan 17, 2013
reaching for yield http://t.co/zFaWCA7h @researchpuzzler notes tight junk spreads, but + Ed Meigs & Dan Fuss r ?naysayers on junk credit $$ Jan 17, 2013
Short-term Debt and Financial Crises: What we can learn from US Treasury Supply http://t.co/UG1RvuHm Qty issue ST fin’l sector debt->crisis Jan 17, 2013
22 Insights From The Most Successful Investors In History http://t.co/4u3QVRJL Very nice assemblage of quotes from the best investors $$ Jan 16, 2013
[Will] the Bond Bubble Finally Burst? http://t.co/1c7hOX4W Synthesis of a variety of views: Yes, but not in the short-run… $$ Jan 16, 2013
FINRA to brokers: know your high-yield securities http://t.co/DJHC5NvT Intelligent words from FINRA; b able2show clients all possibilities Jan 16, 2013
The High Yield Market is “Completely Out of Control.” http://t.co/GBUfGOa9 Watch risky debt buyers; c if they need things 2go right2survive Jan 16, 2013
Gold Forecasters Splitting on Peak for Bull Market http://t.co/EIEgk2Al Most-accurate gold forecasters>price will probably peak in 2013 $$ Jan 16, 2013
Whatever Happened 2 Good, Old-Fashioned Accountants? http://t.co/aFofQ4Mv @retheauditors explains y basic blocking&tackling go a long way $$ Jan 17, 2013
Yale May Buy More Hedge Fund Assets After Favoring Cash http://t.co/D0cP9LDV Timing feels wrong here w/credit spreads tight & vol low $$ Jan 16, 2013
Baupost Group Sitting On 116% Return From Madoff Claims http://t.co/u4MYuhJI Bankruptcy judge said ?seller?s remorse,? denied his effort $$ Jan 16, 2013
Leeway on Repo Rules Is Cut Back http://t.co/B16EXZfR “…we’re basically saying all repos should be accounted for as borrowings,” $$ Jan 16, 2013
Inside the Self-Driving Index Funds That Finish First http://t.co/XPEfHyE4 @jasonzweigwsj $BLK low fees, shares sec lending revenue $$ Jan 15, 2013
How2use Twitter & Facebook 2 make $$ from shares http://t.co/lXXw321E Just watch: this causes the next ‘flash crash’ h/t: @abnormalreturns Jan 14, 2013
KRS Spin Machine Is Smearing The Truth Again http://t.co/VGGSkxHX Kentucky Retirement Systems does not use RFPs -> “pay to play” @ KRS $$ Jan 14, 2013
US Not So High Yield Bonds : “It’s Starting To Feel A Lot Like 2007” http://t.co/QUGhAMqC Will supply grow, or will misfinancing start? $$ Jan 14, 2013
SP500 Revisited – Testing 1484/1500 zone and reversal after? http://t.co/8TMktTjD Argues for a correction in stocks in the near term $$ Jan 14, 2013
Hedge-Fund Leverage Rises to Most Since 2004 in New Year http://t.co/rwFVhRmz H0: flexible $$ overallocated to stocks now> correction due Jan 14, 2013
39% of Fund Managers Beat the S&P in 2012 http://t.co/xRx3Juik It was a growth year & not a value year. 48% would b the 10-yr average $$ Jan 13, 2013

Billionaires

I suppose Bloomberg could write a book about hidden billionaires, and call it “The Billionaire Next Door.” http://bloom.bg/WN9Jo8 ?#yeah $$
Erie Billionaire Hagen Revealed as Car Premiums Surge http://t.co/BsMEp8gu $ERIE interesting company w/a unique asset-lite biz model $$ Jan 17, 2013
Hidden Billionaire Milking Saudi Dairy Fortune in Desert http://t.co/XAoRKBRp Bloomberg likes ‘outing’ obscure billionaires like this $$ Jan 14, 2013

Personal Finance

Why you can?t avoid dumb 401(k) mistakes http://t.co/fffPsn0k Plan sponsors chase hot managers & avoid passive options $$ Jan 16, 2013
Behind the indexed annuity curtain http://t.co/Qo7RdSX9 Avoid. Surrender charges r long & high 2pay commission; opaque int crediting $$ Jan 16, 2013
One in four savers has 401(k) ?leakage? http://t.co/TRBsFfwx Retirement seems far away, but $$ needs r near, so ppl tap their 401(k)s Jan 16, 2013
Seven Resolutions to Get Your Nest Egg in Shape http://t.co/cqNqpxJF Good basic advice 4 ordinary people taking care of the nest egg $$ Jan 16, 2013
E-Filing and the Explosion in Tax-Return Fraud http://t.co/9SAE6oPL Identity theft; 1 reason y I do it myself & file on paper $$ Jan 14, 2013
Housing Problems: Where To Get Help http://t.co/3hrCyQFy @retheauditors gives advice to those having issues with foreclosures $$ #goodstuff Jan 13, 2013

Banks and Investment Banks

More Ideological Excuse Making for Bad Banks http://t.co/0wjkQq3n It takes two to tango; it takes two to make a loan. Both deserve blame $$ Jan 17, 2013
A tempest in a spreadsheet http://t.co/W2mwYeHO A reason y having robust “smell tests” r needed when mathematical models get complex $$ Jan 17, 2013
Mortgage Nanny Added to Lender Job Description http://t.co/nRRonPBL Caveat Emptor:May make probs worse by creating illusion of safety $$ Jan 17, 2013
Wells Fargo to Start Jet-Leasing Venture http://t.co/a0FwgcNn FD: + $WFC | I like the fact that theyr starting small #organicgrowth $$ Jan 17, 2013
Jefferies Sets Table in Pay Clash http://t.co/s6utAuEy Or, they could jump 2 $JEF soon 2b $LUK. $$ motivates better, but conflicts occur Jan 16, 2013
Bankers Get IOUs Instead of Bonus Cash http://t.co/fKrpWXZL Will tie employees more tightly, unless they jump to related industries $$ Jan 16, 2013
Report of $JPM Management Task Force Regarding 2012 CIO Losses http://t.co/i7x0Ifi4 [132pp PDF] If interested in $JPM, summary in 17 pgs $$ Jan 16, 2013
Municipalities Should Ditch Wall Street Derivatives Deals http://t.co/Jqmgjllk If Wall St is on other side of table, watch your wallet $$ Jan 16, 2013
Banks say new agency’s oversight is slow, costly http://t.co/aHIGFRUh Banks pine away over the regulatory laxity they had 6-10 years ago $$ Jan 16, 2013
Goldman?s ?Secret? Team Shows Volcker?s Folly http://t.co/fovIyDRf Difficult to stop prop trading, better 2 remake I-banks partnerships $$ Jan 14, 2013
Bank Deal Ends Flawed Reviews of Foreclosures http://t.co/7DoTN8yA absurd, $$ will b distributed w/little regard 2 who was actually harmed Jan 13, 2013

Economic Policy

Portfolio Manager Creates Dazzlingly Deep Presentation On What’s Really Going On With The US Economy http://t.co/vcRHWwEe Long but good $$ Jan 17, 2013
Obama Finds Path to Congress Deals Goes Through McConnell http://t.co/B763HV1u Give him his due; has a nose that can sniff out deals $$ Jan 16, 2013
The Next Tax Increase http://t.co/7beI2QUO What the US Govt has belongs 2 the US Govt. What belongs 2u is subject 2 negotiation $$ Jan 16, 2013
Swap the Debt Ceiling for a Rule That Makes Sense http://t.co/NVYjvTD8 Maybe limit total liabilities of US Gov’t to 2x GDP? Way past that Jan 16, 2013
Why U.S. might be ?a nation of deadbeats? http://t.co/UuOHrKlt Consumers have been paying down debt, but walking away from more $$ Jan 16, 2013
A Credit Downgrade Warning Both Sides Should Listen To http://t.co/TbB3Gbdn Rating agencies r more honest than US Govt. Fitch may d/g US $$ Jan 16, 2013
Treasury Bill Rate Curve Inverts Amid Debt-Ceiling Showdown http://t.co/0KOQqC7A Bill curve showing some inversion due 2 debt ceiling $$ Jan 16, 2013
Money-Printing Will Lead to an Inflation in Another Guise http://t.co/erqP71P7 Debt overload & slack capacity short circuit credit growth $$ Jan 16, 2013
Two Warning Signs for Treasuries http://t.co/BdAcNkHE “yield curve btw 2&10 years is starting to steepen” Resistance 2 neg real rates up $$ Jan 16, 2013
TIPS Implied Inflation 4 2018-22 rose over 2012; flat now http://t.co/R28O77bX 2014 Inflation rising http://t.co/VCfupYLT $$ Fed target 2.5% Jan 16, 2013
US states flirt with major tax changes http://t.co/EnZmtggx Red states moving toward sales & away from personal/corporate income taxes $$ Jan 14, 2013

States & Municipalities

California, Unsaved, Speeds Toward a Wall of Debt http://t.co/pyrObgbr Constants in life that r not comforting: gimmicks in CA budget $$ Jan 17, 2013
California Could Be the Next Shale Boom State http://t.co/r0QChYDh Energy could flow from the Land of Squandered Advantages $$ Jan 16, 2013
Pension Funding Gap Widens for Big Cities http://t.co/a76JAJT0 Expect 2c many fights where bens cut 4 new, active & retired employees $$ Jan 16, 2013

Companies

Suitors Interested in H-P’s Autonomy, EDS Units http://t.co/AXdvxjei Wouldn’t put 2 much into this; $HPQ won’t get good prices $$ Jan 16, 2013
Genworth Shares Soar Amid Plan for Mortgage Insurer http://t.co/Jqmgjllk $GNW moves deck chairs on the Titanic; rewarded for now $$ Jan 16, 2013
Chevron Signs Deal for More Oil Exploration Acres Off China http://t.co/Yqb7yY7g FD: + $CVX smiles as it rides the tiger $$ #risks Jan 16, 2013
My Favorite Tobacco Stock Is Intel? http://t.co/Wupvh1qk @CharlesSizemore explains y it should deliver returns, amid hatred $$ FD: + $INTC Jan 16, 2013
TNT Left at Altar Gets No Immediate FedEx Deal http://t.co/QSdDHarC “FedEx in a good position to wait this out & let TNT come to them.” $$ Jan 16, 2013
Latest IPOs Arrive In The Form of New MLPs http://t.co/cq7XuIKv All of the new MLPs r energy-related $$ Jan 14, 2013
ARM CEO East Says Phooey to the ?Transistor Cliff? http://t.co/wfiIeQau Cost, speed, & power use r the key factors 4 logic chips $$ Jan 14, 2013

Miscellaneous

Davos Pitch for Dynamism Rams Into End-of-Growth Debate http://t.co/1bNvkwD7 I don’t think growth is ended, but bad finances interfere $$ Jan 17, 2013
Global Piracy @ 5-Yr Low http://t.co/YgJlRQSh 2012: Pirates boarded 174 ships globally v 439 in 2011, people taken hostage 585<-802 $$ Jan 16, 2013
NRA Labels Obama Hypocrite on Guns for Child Protection http://t.co/DqIsubsA Administration doesn’t like the argument; hits close 2home $$ Jan 16, 2013
Kidnap insurers eye sales as euro crisis bites http://t.co/w5CfiwOe Stable rates: More competition, & armed guards 4 sea transport $$ Jan 16, 2013
Mathematicians coming of age to become the most sought after professionals http://t.co/thXJdgsS Nerds of the world unite! Big data 2analyze! Jan 16, 2013
The Margin Debate http://t.co/zE6p5oO1 Labor share of US GDP has fallen because growth in the global capitalist labor force, wages fall $$ Jan 13, 2013

Financial Blogging

Your guide 2the financial blogosphere http://t.co/9mkoln2n Comprehensive list of finance bloggers. I’m listed under “Trading & Investing” $$ Jan 14, 2013
What are the 100 Top (Anglo-Saxon) Finance Blogs? A Pseudo-Scientific Study http://t.co/I9UU32zP I ranked higher than I expected 🙂 $$ Jan 14, 2013
The purpose of this site http://t.co/Bp4sqw5o @reformedbroker ‘s excellent piece on how his blogging helps him think & invest better $$ Jan 14, 2013

Painting Kate Middleton

@judehere Perhaps this then? http://t.co/hstcUqPq Jan 16, 2013
@judehere That’s okay. You say he painted the Queen? That’s interesting. Is there an image of that out on the web? Jan 16, 2013
‘ @judehere She seems to be a nice lady, so I wouldn’t be a fan of that. But Freud died in 2011, so the possibility is not there. Jan 16, 2013
But this portrait of Kate Middleton is worse in my opinion http://t.co/LBMKplpo No wonder only 19% like it. (2/2) $$ Jan 16, 2013
Learning to draw, I copied a photo of a friend w/pencil. Another friend said “You took a very pretty girl, & turned her in2 pretty girl” 1/2 Jan 16, 2013

Michael Pettis

Pettis: What I will watch in 2013: 10 things: hard commodity prices, trade numbers, Spanish Bonds, Target 2, & Japan (2/2) $$ Jan 14, 2013
Pettis: What I will watch in 2013: 10 things: China growth, Debt trajectory, financial scandals, bank activities, inflation (1/2) $$ Jan 14, 2013
Pettis: Imbalances can continue for many years, I argue, but at some point they become unsustainable & the world must adjust by reversing $$ Jan 14, 2013
Pettis: Policymakers do this by shortening their time horizons &managing from crisis2crisis, rather than sorting out the underlying problems Jan 14, 2013
Pettis: policymakers… taking steps that protect them from the consequences of the crisis but that also make the crisis worse. $$ Jan 14, 2013
Pettis: It is interesting that policymakers are so pleased by an end (temporarily, I assume) to the financing crisis. $$ Jan 14, 2013
Pettis:We ended 2012 in a burst of optimism for Europe, w/everyone cheering Mario Draghi 4having ?saved? the euro, but I am deeply skeptical Jan 14, 2013

Wrong

Wrong: How to Find a Fund Manager Who Can Beat the Market http://t.co/2Nq1Z9b2 Doesn’t understand difference btw correlation & beta $$ Jan 15, 2013
Wrong: US Budget : Federal finances continue to improve http://t.co/HKzv6pLK It is a *spending* problem that started w/Bush 43, not revenue Jan 15, 2013
Wrong: Municipal Bonds May Not Be Safe From Income Taxes http://t.co/MnIQIdor Would be a big shift, hit blue states hard. Won’t happen $$ Jan 14, 2013
Wrong: Chris Hayes’ Brilliant Explanation Of Money Is One Of The Best Things We’ve Ever Seen On TV http://t.co/e0kxN5oZ #goldstandard $$ Jan 13, 2013

Comments and Retweets

Good night. Blessings to all. Jan 18, 2013
@cogent_rambling Think of judges in a court. No one will forgive a man for doing wrong in one area, because he has done good in others Jan 18, 2013
@cogent_rambling It’s not a question of weakness but wrong. Divorce your wife for no good reason, cheat at your craft, all amounts 2 wrong Jan 18, 2013
@cogent_rambling Good question. God created Lance with a weakness. If Lance had trusted God, he could have overcome it, but he didn’t. Jan 18, 2013
@cogent_rambling Not those that are God-given. Mt 5:48: “Therefore you shall be perfect, just as your Father in heaven is perfect.” Jan 18, 2013
@cogent_rambling One last point: in the view of Jesus is there is no balancing. The least amount of evil poisons any good. Jan 18, 2013
@cogent_rambling Read some of the writings of Kahneman & Tversky. Bad things have 3 times the force of good things. Good doesn’t erase bad Jan 18, 2013
@cogent_rambling Okay, I get it. But doing good things does not erase bad things. Doing things that are notably bad tarnishes anything good. Jan 18, 2013
@cogent_rambling I have heard the word as a part of popular culture, but have no idea what it is beyond a phrase. Jan 18, 2013
@cogent_rambling Okay, I’ll bite. His charitable endeavors, but what else? Jan 18, 2013
@sallyeastman1 Well said Jan 18, 2013
My view: Lance Armstrong is best ignored. Close the browser window, change the channel on the TV, he will go away. I don’t care about him $$ Jan 18, 2013
@AboveAvgOdds Off to meet w/u & Chris Mayer in downtown Baltimore Jan 17, 2013
Endorse. I have read over half of these $$ RT @TheStalwart: The 22 books that Dylan Grice says you must read. http://t.co/QSOWvuBc Jan 17, 2013
@graemehein good point, but most simple models have obv intuition. Complex models have more potential 4 error b/c of 2nd+ order effects $$ Jan 17, 2013
@cate_long Others that did the same in 1994: Piper Jaffray’s Institutional Gov’t Income & FPA’s Fundamental US Gov’t Strategic Income funds Jan 17, 2013
@cate_long Combined w/levering them, and not having the mathematical savvy to price them right http://t.co/5vkUxgO6 Story near the bottom Jan 17, 2013
@cate_long Cate, you’re right, I’m wrong. At the time, David Askin & those like him were notable. W/Citron it was mostly structured notes Jan 17, 2013
@kirstensalyer Sorry, that honor belongs to the first quantitative hedge fund manager, Ben Graham, who was doing that in the 1920s Jan 17, 2013
@cate_long Also used complex RMBS. There was kind of a contest 2c how much negative convexity one could absorb in exchange 4 yield Jan 17, 2013
RT @maxrudolph: #unintendedconsequences when pension regs set up EA designation cut off practitioners from ALM development. Still catchi … Jan 17, 2013
Well done $$ RT @LaurenLaCapra: Jim Chanos talks to @Reuters about Herbalife & whether Ackman or Loeb will win out: http://t.co/sV7B604o Jan 17, 2013
@finsovet @prieur @vitaliyk Honored 2b included in such a group Jan 17, 2013
Think this analysis is correct, but uncertain $$ RT @mickwe: 3D printing is a lot of hype and it’ll never go mainstream http://t.co/8wkr5oxp Jan 17, 2013
I just left a comment in “7 gut checks before the stock market?s opening bell” http://t.co/MrSqVXZF Jan 17, 2013
@niubi If so, good for him. He revolutionized my economic thinking with his last book. Looking forward to the next one. Review copy coming Jan 17, 2013
+1 RT @dpinsen: Paging @TomFriedman: comment on How a ‘model’ employee got away with outsourcing his work to China http://t.co/wukYAV8T $$ Jan 17, 2013
+2, scrap IFRS RT @Alea_: +1 Britain should scrap IFRS accounting standards, MPs told http://t.co/woWmyC2v Jan 16, 2013
@oddballstocks very different mindsets; marketing and operations r different from finance, which is still different from investing Jan 16, 2013
@oddballstocks I did that as well from 1992-1998. Tried very hard to select non-name-brand mgrs w/durable competitive advantages Jan 16, 2013
‘ @ClayNickel It depends on how equitylike the bonds r, & the financing composition of the holders. If the bonds r financed w/sig debt.. $$ Jan 16, 2013
RT @Matthew_C_Klein: The big deal about the German gold story isn’t that they’re taking some of it out of NY but that they’re moving *al … Jan 16, 2013
RT @Matthew_C_Klein: @izakaminska has a thoughtful take on the base money debate between @interfluidity and @NYTimeskrugman http://t.co/ … Jan 16, 2013
‘ @joshuademasi Good point. After all, most nations would love to swap for Norway’s economic situation. $$ Jan 16, 2013
@earwulf Good insights both. We live in “interesting times” in the full meaning of the Chinese curse Jan 16, 2013
@ReformedBroker Rieder is a bright guy, as is my friend Ed Meigs at First Eagle; HY is okay for the short run, but 2 years out… $$ #Boom! Jan 16, 2013
@earwulf Yes Jan 16, 2013
@earwulf No, I don’t really find them persuasive. I do think that some Central Bank will stop sterilizing asset purchases, start new phase Jan 16, 2013
@JacPatterson I thought about that too, & think he really meant “English Language” Finance Blogs Jan 15, 2013
“But that also means you have to keep more $$ around if the puts get exercised, which Buffett had & many don’t.” http://t.co/uEIRn5i3 Jan 15, 2013
@joelight @spbaines the paragraph that starts ‘To screen out such “closet indexers,”‘ is factually wrong, does not understand statistics Jan 15, 2013
@joelight @spbaines I’m not arguing w/R2 as a proxy for active share, though there r better measures; article says correlation, means beta Jan 15, 2013
+10 Mmmmm… RT @dpinsen: Bresaola, lemon, olive oil, Parmesan, and basil joining forces for a great sandwich. http://t.co/pMMVmoI5 Jan 14, 2013
@abnormalreturns I’ve run into a *lot* of people trying to do this. Some are cleverer; not sure how it will work out… Jan 14, 2013
@JayLeonard but gold does control inflation and limits the government’s ability to use monetary policy for its own ends Jan 13, 2013
@JayLeonard Much of the difficulty is not gold vs not gold, but how banks were regulated — short liabs carrying long assets Jan 13, 2013
@GuldbergPeter Thanks, though I have heard that Canada *may* have issues. Jan 12, 2013
RT @GuldbergPeter: “@AlephBlog: Is there anyplace in the world that hasn’t overlent on real estate? Sweden, Canada and actually to some … Jan 12, 2013

FWIW

My week on twitter: 40 retweets received, 1 new listings, 67 new followers, 65 mentions. Via: http://t.co/SPrAWil0 Jan 17, 2013

Hit the “Defer” Button, Thanks…

Posted on 18 January 201318 January 2013 by David Merkel

Long-time readers know that I am a fan of Michael Pettis.? I learned a ton from his book, “The Volatility Machine.”? (I have the top review of his first book at Amazon.)

I am quoting from his recent email, “What I will watch in 2013.”

Quoting what I can legally do from his recent e-mail, Michael Pettis says (my emphases are in bold italic):

We ended 2012 in a burst of optimism for Europe, with everyone cheering Mario Draghi for having ?saved? the euro, but I am deeply skeptical. As far as I can tell nothing substantial has changed, and if countries like Spain are a little more able today to roll over their debts than they had been during the summer, so what?

It is interesting that policymakers are so pleased by an end (temporarily, I assume) to the financing crisis. One of the regular features of sovereign debt crises, and one amply revealed in Beth Simmons book on the 1930s crisis in Europe, Who Adjusts?, is that one of the complicating factors in a crisis is the tendency of policymakers (along with workers, creditors, small businesses, and middle class savers) to change their behavior in response to a crisis by taking steps that protect them from the consequences of the crisis but that also make the crisis worse. Policymakers do this by shortening their time horizons and managing from crisis to crisis, rather than by sorting out the underlying problems. The fact that Spanish policymakers are so relieved by their ability to
access near-term financing may be a case in point. It is easy to see why the worry so much about getting through the next bond auction, but at the end of the day this is not Spain?s real problem.

….

One way or the other, in other words, the world will rebalance. But there are worse ways and better ways it can do so. Large trade surpluses can decline, for example, because exports fall, or they can decline because imports rise. Large trade deficits can contract under conditions of high unemployment, but they can also contract under conditions of low unemployment. Low savings rates can rise with declining household income or with rising household income. Repressed consumption rates can reverse through collapsing growth or through surging consumption. Excessive debt can be resolved by default or by growth.

Any policy that does not clearly result in a reversal of the deep debt, trade and capital imbalances of the past decade is a policy that cannot be sustained. The goal of policymakers must be to work out what rebalancing requires and then to design and implement the least painful way of getting there.? International cooperation, of course, will reduce the pain.

For this reason I have no doubt that over the next few years we will see the imbalances I have identified over the years in this newsletter reverse themselves, but whether they reverse in more orderly or less orderly ways will depend on policy decisions. It is likely to be political considerations that determine how quickly the rebalancing processes take place and whether they do so in ways that set the stages for future growth or future stagnation.

When there is too much debt, and things aren’t going wrong it could be an unusual perching on a mesa.? The room to adjust is limited, and the cliffs are steep.? China, as much as the US, has a tangled financial system. Too much much lending from banks to nonbanks.? Too much lending to Party Members.? Too much creation of Wealth Management Products, which threaten the legitimacy of financial capitalism inside China.? I would rather be in the US than China if I were an average person — the protections in the US are much better.

As it is, central bank bureaucrats can lower interest rates for the banks, but it does not really cure the bad debt problem, because after a bout over overlending, there will be some that could not repay even if interest were reduced to zero.? In one sense, that is the reality behind the zero bound.? After a bull market in credit, the bear market will involve some companies/people who borrowed so much that the principal cannot be repaid even at zero interest.

The action of central banks at the zero bound may allow those that are well-off to become better-off and increase their well-being.? But monetary policy cannot help those that can’t refinance.

This is why I believe that the biggest issue in restoring prosperity globally, is finding ways to have creditors and stressed debtors settle for less than par on debts owed.? Move back to more of an equity culture from what has become a debt culture.? A key aspect of that would be making interest paid non-tax-deductible for corporations, housing, etc., while making dividend payments similar to REITs, while not requiring payouts equal to 90% of taxable income.? Maybe a floor of 50% would work, with the simplifying idea that companies get taxed on their GAAP income — no separate tax income base.? Would certainly reduce the games that get played.

Anyway, those are my opinions.? The world yearns for debt relief, but governments and central banks argue with that, and in the short-run try to paper over gaps with additional short-term debt that they think they can roll over forever. They just keep trying to hit the ?defer? button, avoiding any significant reforms, in an effort to preserve the ?status quo.?

My fear is that at some point, some significant player will follow a discordant approach which changes the terms of the tenuous equilibrium, leading to global inflation (monetize the debts for real; do not sterilize) or insist on fair payments at par (adopt a gold or other commodity-based currency standard).? I think the former is more likely than the latter, but who can say?? It is possible to end up with a bipolar world where both exist, or we could muddle along with the present “race to the bottom” for some time.? “Crabs in a basket,” and no one ever gets out, always pulling each other down.

Time to hit publish.? I am indebted to Michael Pettis, but do not write as well as he does.? Get on his mailing list if you can.

Sorted Weekly Tweets

Posted on 11 January 2013 by David Merkel

Basel III

Betrayed by Basel http://t.co/dzH7crDt Additional Liquidity & Capital will always lower the bank’s ROE; banks always protest over safety $$ Jan 12, 2013
International rules & regs r also easier to co-opt, b/c the normal political opponents r easier to shut out of the process $$ Jan 10, 2013
BaSell Illiquid Liquidity Rules (Under Basel 3) http://t.co/mIww29wC International acctg rules & regulations r easier 4 companies 2ignore $$ Jan 10, 2013
Banks Win an Easing of Rules on Assets http://t.co/8eealPyW If u want stronger banks, their costs go up b/c liquidity reduces profits $$ Jan 08, 2013
Rules for Lenders Relaxed http://t.co/HIaunjdU Basel III Regulators Cave 2 Banks;Ease Requirements for Meeting Guideline on Liquidity $$ Jan 07, 2013

Rest of the World

Morocco Stalled Tourist Drive Traps Lenders http://t.co/pUdxfQUg Is there anyplace in the world that hasn’t overlent on real estate? $$ Jan 12, 2013
A Protest Unites Far-Flung Activists http://t.co/hGR0J8IQ China does not tolerate protests that seem to be coordinated $$ Jan 12, 2013
Google Chief Urges North Korea to Embrace Web http://t.co/XjXOBr4c Wait till they learn how poor they r compared 2 the rest of the world $$ Jan 10, 2013
Gold Lures Japan?s Pension Funds as Abe Targets Inflation http://t.co/ORqqGIuu Didn’t think Gold, Japan & inflation allowed in 1 sentence Jan 09, 2013
Japan to Buy European Debt With Currency Reserves to Weaken Yen http://t.co/qTW7RbqA Make a bunch of bad investments w/your monetary base $$ Jan 09, 2013
The Oslo Housing Bubble Syndrome http://t.co/UbXKjTvE Keep interest rates low to protect your exporters, and so inflate a housing bubble $$ Jan 08, 2013
Pakistan Loving Fatburger as Fast Food Boom Ignores US Drones http://t.co/TlNm0DGc Something endearing about Pakistanis eating burgers $$ Jan 08, 2013
Inconvenient Truths About Al Jazeera http://t.co/F8JdS1Co Perhaps it should be renamed “The Wahhabi Islam Ministry of Propaganda” $$ Jan 07, 2013
Record India Deficit May Limit Rate Cuts as Rupee Drops http://t.co/B9e24zwt India badly-run compared2 other EM Countries; feeling stress Jan 05, 2013
Ch?vez’s Appointed Heir Prepares 4 Battle http://t.co/JEvNVwJa Maduro Faces Factional Infighting Amid Campaign 2Win Venezuelan’s Hearts Jan 05, 2013

Fixed Income

Fitch Places Illinois GO Bonds on Negative Watch, Says Large Unfunded Pension Liabilities Unsustainable http://t.co/73qh5vg8 No Surprise $$ Jan 12, 2013
Is High Yield Overvalued? http://t.co/8ATkkF8B The high-yield category has increased risks and low absolute yields $$ High yield nulla est Jan 10, 2013
Fed Governor Tarullo pressing 4 banks 2fund themselves w/more long-term debt. http://t.co/vCT1tyy1 Good idea, I may have misjudged him $$ Jan 10, 2013
Banks to Boost Liquidity With Illiquid Assets http://t.co/CzObiq31 Chart of the Day http://t.co/wD6VJRLi BBB bonds illiquid in crises $$ Jan 08, 2013
Junk Bonds’ Fire Is Poised to Fade http://t.co/zSLNRXX3 Avg yields dropped below 6% 4the 1st time ever; Avg prices highest since 2004 $$ Jan 07, 2013

Jack Lew

?? 10 Things You Need 2 Know About Jack Lew, Obama’s Next Treasury Secretary http://t.co/5kaGstrc Interesting summary of an influential guy $$ Jan 10, 2013

Is Jack Lew A Friend to Wall Street? http://t.co/SoK6kyw1 Like Tim Geithner, the new Treasury nominee may owe his views to Robert Rubin. $$ Jan 10, 2013
Trading 1 type of cronyism 4another http://t.co/vCT1tyy1 & http://t.co/gx4cTK4U Lose Fed crony [Geithner], get political crony [Lew] $$ Jan 10, 2013
Obama to Nominate Lew as Treasury Secretary http://t.co/D6rAids5 Strategy: nominate a lot of controverial ppl & wear down the Senate $$ Jan 09, 2013

Debt Ceilings, Platinum Coins, Etc.

This impresses me as 6 of one, a half dozen of the other. Both try to make something out of nothing. http://t.co/5afNZxY9 Jan 10, 2013
Platinum-Coin Punditry Poses Threat to Dollar http://t.co/0pyjh2x3 Takes my view that it will decrease demand in the Treasury market $$ Jan 10, 2013
Only Thing Wrong With the Debt Ceiling Is the Lag http://t.co/L7LFyqeD First Congress decides on how much 2 borrow, then sets budget $$ Jan 09, 2013
Why we won?t mint a platinum coin http://t.co/xbDdI5IA The reaction of foreign $$ obligation holders would be swift & negative #rsvcurrency Jan 08, 2013
Rebranding the ?trillion-dollar coin? http://t.co/YoqGgFWQ You can’t get something for nothing; this will makes foreigners distrust the $$ Jan 05, 2013

Economic Policy

Fed?s Plosser Says Stimulus May Backfire, Fuel Inflation http://t.co/qtp04uVT “?stimulus? may not help speed up the process…may prolong” Jan 12, 2013
James Buchanan, a Star Economist Who Understood Obamacare http://t.co/qn34aQPO Bureaucrats have a natural interest in seeing gov’t grow $$ Jan 10, 2013
Economist Who Argued Public Officials R Ruled by Self-Interest Dies http://t.co/fx8ss0r7 James Buchanan founder of Public Choice Theory Jan 10, 2013
Button-Down Central Bank Bets It All http://t.co/Udzx5QCF What does it mean when central banks downgrade asset quality? Very trendy $$ Jan 09, 2013
US Consumers Obligation to spend http://t.co/stw01ER3 America’s Cars and Appliances Are Getting Old, may presage demand 4 durable goods $$ Jan 08, 2013
Why Austerity Works and Fiscal Stimulus Doesn’t http://t.co/nJhXmjFK Austerity exalts free actions of humans; stimulus exalts bureaucrats Jan 08, 2013
The Education of John Boehner http://t.co/OgUWkXUw Leverage 4the next clash: GOP willingness 2let the spending sequester take effect $$ Jan 07, 2013
Ending the Era of Ponzi Finance http://t.co/oaPG7s8h 24 pgs PDF | John Mauldin has Daniel Stelter describe what’s unsustainable in policy $$ Jan 05, 2013

Companies

Mohawk Chief Lorberbaum Emerges as Billionaire With Tiles http://t.co/lQeR5B45 $MHK CEO owns 14% of the company; he’s a clever acquirer $$ Jan 12, 2013
What?s at the Center of the Debate Over Herbalife http://t.co/B4GV7Fi5 Ackman is hoping the FTC will declare $HLF 2b a pyramid scheme $$ Jan 10, 2013
News Corp. Tabloid Swaps Sex for Cats Among Brands Buffing Image http://t.co/4wILocCG No one is immune from aiming 4 irrelevance $$ Jan 10, 2013
Buffett Railroad Sees Crude Cargo Climbing 40% http://t.co/JmbE7HmT Makes up for a loss of revenue in hauling coal $$ FD: + $BRK.B Jan 08, 2013
Secret Goldman Team Sidesteps Volcker After Blankfein Vow http://t.co/mTCwjoZ8 Wagers ~$1B $GS own funds on unaffiliated stocks/bonds $$ Jan 08, 2013
Bill Ackman Says Just Getting Started Exposing Herbalife http://t.co/Cp40Zuqu Most of my summary acctg test #s look okay on $HLF. ?? $$ Jan 07, 2013

Housing? Finance

The latest foreclosure horror: the zombie title http://t.co/b7hkmKDX Long article about people stuck w/homes b/c banks won’t foreclose $$ Jan 12, 2013
Rules Set for Home Lenders http://t.co/jg7QqiwQ Rules seem overly lenient; has the CFPB been co-opted already? That was fast $$ Jan 10, 2013

Market Impact

Hedge Funds Squeezed With Shorts Beating S&P 500 http://t.co/55EpCxpb Positive momentum has led many shorts to cover, performance drags $$ Jan 08, 2013
Finra to Shine Light on Dark Pool Trading http://t.co/Nt9OjmIb Does FINRA have the talent to analyze this? That would surprise me. $$ Jan 08, 2013
In Search of Family Ties http://t.co/g5SGaY1Z Families w/control can b valuable if they r interested in growth & not milking da biz $$ Jan 08, 2013
What’s Hot?And What’s Not (in mutual funds) http://t.co/W3blerlL Hot: Low Vol, Local $$ EM bonds, Active Bond ETFs Not: Vol ETPs, 130/30 Jan 07, 2013
Above the Market?s Leading Investment Indicators http://t.co/j54Dl3vu Long-term val’n measures like Q-ratio, CAPE10, Total Cap/GDP, etc $$ Jan 07, 2013

Other

Well done, Henry. I write this as one who enjoys BI, though I was won over bit-by-bit. Keep up the good work. http://t.co/cWecMkPh Jan 10, 2013
Check These Out at the Library: Blacksmithing, Bowling, Butchering http://t.co/teaqR76s Who knew Libraries would try 2b so relevant? $$ Jan 08, 2013
Excellent Police http://t.co/qKpoliWR What the Baltimore P.D. can teach your office about multitasking and incentives. $$ #whoknew Jan 07, 2013
East St. Louis Cops Outgunned as Cuts Let Killers Thrive http://t.co/zHGmesXX Cut the Federal budget; don’t cut the local budget $$ Jan 06, 2013
Keystone Pipeline Clears a Big Hurdle in Nebraska http://t.co/Y1WqqCiE Local review says small impact on the environment at most $$ Jan 05, 2013

Wrong

Wrong: Buffett Says Banks Cleared of Excess Risk Pose No Threat to US http://t.co/KWtOOcxo Excessive reliance on Fed funding $$ Jan 10, 2013
Wrong: Why we need a currency war with China (and Denmark and Singapore ? ) http://t.co/b8XqDqfa You may as well say “Smoot-Hawley” $$ Jan 07, 2013

Replies & Retweets

RT @cate_long: While savers forgo ~$200B in interest payments “@nytimesbusiness: Fed transferred $88.9 billion to Treasury in 2012 http: … Jan 10, 2013
@NickTimiraos Steep yield curve helps too, though it isn’t *that* steep thanks 2 QE-infinity Jan 10, 2013
@Kathleen_Hays Not necessarily. My friend Caroline Baum shared this article w/me: Is Jack Lew A Friend to Wall Street? http://t.co/SoK6kyw1 Jan 10, 2013
RT @ajkurki: @AlephBlog Absolute yields below 1st percentile of all observed observations since mid-90s (BofAML data). What could go wrong?! Jan 10, 2013
@cabaum1 Dear Caroline, thank you for replacing my bias w/a good article. Rubin’s influence is significant; didn’t know Lew was part of it Jan 10, 2013
@CharlesSizemore That it did. Jan 10, 2013
@CharlesSizemore I’m sorry, Charles. In my busyness, I didn’t catch that, and I should have. Apologies. Jan 10, 2013
Not a chance $$ RT @CharlesSizemore: Is Sears the Next Berkshire Hathaway? http://t.co/NNro3uuu $SHLD $BRK-A $BRK-B $WMT $HD #WarrenBuffett Jan 10, 2013
@EddyElfenbein Just a general mindset, but the penny stock promoters irritate me to the max. Jan 10, 2013
Investment banks r bull market babies $$ RT @ReformedBroker: Morgan Stanley still searching for a reason to exist $MS http://t.co/Zux43Z7C Jan 10, 2013
@howardlindzon @researchpuzzler Happy new year to both of you as well. May you have joys and constructive challenges. Jan 10, 2013
@howardlindzon @researchpuzzler Have fun reading tonight’s Aleph Blog piece then 😉 $$ (Not published yet) Jan 10, 2013
Eisenstadt discovers momo RT @researchpuzzler: “Go to it then.” Arnold Bernhard, in 1959, sounding like @howardlindzon http://t.co/jyCz1Fhi Jan 10, 2013
@Kelly_Evans It’s okay… given all that you do, an occasional blip is fine. I make lots of mistakes…. Jan 09, 2013
@Fullcarry I *don’t* think it will be an equilibrium. Besides, equilibria are rare in economies, they are ultracommon in journals though Jan 09, 2013
@Kelly_Evans Perhaps you mean inversely? Jan 09, 2013
@Fullcarry My problem is that most of the major central banks r doing this, not just Japan. What happens when all CBs have corrupt $$ bases? Jan 09, 2013
@moorehn @katierogers There were more revenues behind the Bowie bonds than the worth of the platinum in a coin. $$ Jan 09, 2013
@macrotourist Thanks, did not have time to listen to the webcast, but the slides are interesting. Jan 08, 2013
@LaurenLaCapra you’re right, wasn’t thinking — tweet deleted Jan 08, 2013
You can say that again. $$ RT @profithuntergrp: @AlephBlog agreed Iceland proved it early on – do the hard thing! Jan 08, 2013
Something looks wrong w/slide 3 — the bar lengths don’t compare with the numbers next to them. $$ http://t.co/kECnkBA0 Jan 08, 2013
Shouldn’t black holes be stable? They exist because all mas in a given area collapses under its gravity… http://t.co/4xJVsykF Jan 08, 2013
@JacobWolinsky It is more accurate, so I made the change… Jan 07, 2013
@munilass Do you have any opinion on BAM? I’m a little skeptical because credit risks r more correlated than life, P&C, etc. Jan 07, 2013
I just left a comment in “Lou Simpson’s top stock picks – MarketWatch” http://t.co/uTBPy1QW Jan 07, 2013
@JacobWolinsky That’s a fair point. I’ll delete the last tweet, & send out a better one. Jan 07, 2013
I just left a comment in “Lou Simpson’s top stock picks – MarketWatch” http://t.co/nC1KnTr2 Jan 07, 2013
RT @ModeledBehavior: A trillion dollar coin really feels like the U.S. jumping the shark. We’ve been on for too many seasons, the plots … Jan 05, 2013

FWIW

My week on twitter: 63 retweets received, 2 new listings, 50 new followers, 56 mentions. Via: http://t.co/SPrAWil0 Jan 10, 2013

Why I Sold the Long End

Posted on 8 January 2013 by David Merkel

My bond strategy has always had a position in TLT until last week.? TLT, composed of long Treasuries. is a hedge against deflation, and has made money for my clients.

I changed last week because of significant disagreements at the Fed regarding the duration of QE, and also the selloff in the long end breaking my price drop limits.? Also, it is worthy of note that each Fed intervention is leading to smaller results.? In the process, I made more money from my credit-sensitive investments than I lost from TLT.

With stocks, I am not a technician or an active trader.? With bonds, I am both.? Why?

Bonds are more determinate than stocks and the tradeoffs are clearer.? Bonds are promises to pay under certain conditions.? Those conditions can be analyzed more readily than the open-ended conditions of stocks.

At this point in time, I am taking limited domestic credit risks, and taking larger risks in the emerging markets, where economic policy is more orthodox then it is here.

But beyond that, I have pulled in my horns, and have reduced interest rate risk.? If I see opportunities, I will act on them, but I am taking far less risk than previously.

Sorted Weekly Tweets

Posted on 5 January 2013 by David Merkel

Greetings

To all of my readers: Happy New Year. Here is to a blessed and fulfilling 2013, amid troubles and joys – no year is w/o them, glory 2 God $$ Jan 01, 2013
To all of my readers: 2012 had its joys and sorrows, but I appreciate that you read me. I will always try to bring you my best on twitter $$ Jan 01, 2013

US Fiscal Policy

Why the fights over disaster relief in Congress keep getting worse http://t.co/NZCEwU7N Local disasters increasing funded by Feds $$ Jan 04, 2013
Sorry Folks, The $1 Trillion Coin Is Unconstitutional http://t.co/RXav6MlY h/t: @carney | Congress controls $$ policy, can’t delegate 2exec Jan 04, 2013
Why were there so many special interest provisions in the fiscal bill? Why didn’t the president veto it & ask 4a clean bill? #fiscalcliff411 Jan 04, 2013
Fresh Budget Fights Brewing http://t.co/lOdAltk7 Markets Breathe Sigh of Relief After Fiscal Clash, but Tax-and-Cut Battles Loom $$ Jan 03, 2013
Infighting in GOP Follows Scuttling of Storm-Aid Vote http://t.co/cUQxnnu5 “Tin ear” When something big hits smaller principles must bow Jan 03, 2013
How Deal Was Made, Unmade, Then Saved http://t.co/xhHj15fs Surprising deal between Biden & McConnell did an end-around on other tries $$ Jan 03, 2013
A trifecta of articles on pork in the fiscal cliff bill: http://t.co/0ymE51HH & http://t.co/iEvwLdxE & http://t.co/CCuMAXnS Shame $$ Jan 03, 2013
Senate-Passed Deal Means Higher Tax on 77% of Households http://t.co/WvIyEkJT What! You thought your taxes would not increase?! Hahaha! $$ Jan 03, 2013
Deductions Limits Will Affect Many http://t.co/D0rteMMC Taxes are going up more than you think due to the phasing-out of deductions $$ Jan 03, 2013
Ron Paul Rips Government in Last House Speech http://t.co/UuwfSI9o He was 2good 2b in DC; now he can be a rock star on college campuses $$ Jan 02, 2013
Sequestration Threat To Defense Sector Begins To Recede http://t.co/QYACs66b Grateful that I did not sell my defense stocks $$ Jan 02, 2013
Bipartisan House Backs Tax Deal Vote as Next Fight Looms http://t.co/Ns4SgHKX Both sides claim victory & decry dishonesty of the other $$ Jan 02, 2013
As an aside, when I had the chance to ask Ron Paul whether the Fed’s policies favored rich over poor, he immediately said, “Of course.” $$ Jan 02, 2013
House Balks at Cliff Deal; Down2Wire as Republicans Object2Lack of Spending Cuts in Senate Bill http://t.co/FkS6o1Ms Fall off cliff $$ Jan 02, 2013
Lawmakers push one-year extension of farm bill in bid to avert spike in milk prices http://t.co/bRroFoo4 Please, just free milk prices $$ Dec 31, 2012
US loses if we go over the Fiscal cliff = US wins if we go over the Fiscal cliff | Some will be b affected 4 better/worse; US will b ok $$ Dec 31, 2012

Energy

US petroleum rail shipments up nearly 50% in 2012 http://t.co/kQnGw63v Only way to get additional crude to the coasts in the short-run $$ Jan 04, 2013
Buffett Like Icahn Reaping Tank Car Boom From Shale Oil http://t.co/ekehRs3Y Buffett keeps all tank cars he produces-> BN can ship oil $$ Jan 03, 2013
A Novel Ship Extends Shell’s Reach http://t.co/RAEtM1fH High technology at work in offshore oil drilling. Impressive! $$ Jan 03, 2013
Shale-Gas Revolution Spurs Wave of New US Steel Plants http://t.co/XEuaDiKY Ask this: what other impacts exist from cheap natgas? $$ Dec 31, 2012

Financials

“Did the authors look at the “Call Reports” filed with the FDIC? More public data there. Kinda sloppy to miss that.” http://t.co/vCtQkZmu $$ Jan 04, 2013
Why Bank Disclosure Is So Awful and How to Fix It http://t.co/RwW45LG5 Did they try reading the call reports? http://t.co/vAYMh7wE @carney Jan 04, 2013
BofA Joins JPMorgan in Having Units Ripe for Sale, Mayo Says http://t.co/4DtCCVdR Is there enough slack $$ around 2 absorb all of these? Jan 03, 2013
US Money Fund Exposure and European Banks: Eurozone Rises for Fifth-Straight Month http://t.co/nfWYO4jv “Risk on” MMF trade returning $$ Jan 03, 2013
Insurer Sues Paulson Firm http://t.co/XFGKNGWB Does not seem like an easy win. ACA should have done more due diligence; they r pros $$ Jan 03, 2013
Basel Becomes Babel as Conflicting Rules Undermine Safety http://t.co/1QIyVdR5 Rules, not principles. External models, not internal $$ Jan 03, 2013
Big RIA Firm Uses Bible to Advise Clients http://t.co/9mtmySTo Almost every Evangelical w/$$ knows of Ron Blue; never knew he was so big $$ Jan 02, 2013
Buffett Combines BofA With Buybacks to Beat S&P 500 http://t.co/zo8kLdNz FD: + $BRK.B | BRK is a conglomerate fueled by insurance prems $$ Jan 02, 2013
Carlyle Agrees to Buy Duff & Phelps for $665.5 Million http://t.co/VoFVh6Oi Cheap price 2 become part of the ratings triopoly $$ Dec 31, 2012

Fixed Income, Gold & Monetary Policy

Gold Heads 4 Longest Run of Weekly Losses Since 2004 http://t.co/xBRfbJ8P Key Q: What happens to real interest rates; will Fed tighten? $$ Jan 04, 2013
Gold Set for Worst Run Since ?04 as Fed Signals End of Purchases http://t.co/xBRfbJ8P I would b skeptical here; no idea what the Fed does Jan 04, 2013
Risk Seen in Some Mortgage Bonds http://t.co/c7rROhEE Many CMBS bonds seem 2b priced 2 perfection, while some fundamental weakness $$ Jan 03, 2013
Does the Fed need a new mandate? http://t.co/NkfjhSeG Fed should have one mandate: tighten policy when goods or asset markets go crazy $$ Jan 03, 2013
Fed Officials Divided on Bond Buys http://t.co/7Gh6y8tn & increasingly worried about stimulus side effects http://t.co/SomUi1uK $$ Jan 03, 2013
While still holding $TLT, my bond strategy did well today b/c of all the emerging market bonds.TLT is a deflation hedge http://t.co/TiTMg6So Jan 02, 2013
TCW to Pimco Bet on Housing Bond Rally After 41% Gain http://t.co/DcXmVEj9 Feels like squeezing last drop of juice out of the lemon $$ 😉 Jan 02, 2013
Credit Has Best Rally in Europe Since 2009 With Central Bank Aid http://t.co/csZD3K8n At a cost of socializing future losses $$ Jan 02, 2013
Why Bernanke?s policies could hurt the economy more than going over the ?fiscal cliff? http://t.co/EZDkZ6Sv Favors rich over poor $$ Jan 02, 2013

Market Dynamics

TV is Next: Why Investors Are Getting the Media Industry Wrong http://t.co/yLoZRU55 52 pp PDF | $AMCX $CBS $DIS $NWSA $VIAB $TWC $TWX $$ Jan 03, 2013
U.S. Electricity Use on Wane http://t.co/dEiZBCDe A good time to avoid overpriced electrical utility stocks, and alternative energy $$ Jan 03, 2013
Of $30.9B Special Dividends in Q4, 28.6% Went To Insiders http://t.co/QTalSmva Interesting skew on who decided to do special divs $$ Jan 02, 2013
A Really Good Year?Wins and Losses of 2012 http://t.co/zS69udit Fridson: “Rather than being reassured, investors should be worried,” $$ Jan 02, 2013
Avis?s smart Zipcar buy http://t.co/SEgD8JPJ Too early. Depends on refinancing, expenses saves, & uncertain synergies & mgmt attention $$ Jan 02, 2013
Tribune Co. Emerges From Bankruptcy http://t.co/mUGITwmt So who owns the equity interests in Tribune now? Dec 31, 2012
Risk defined. http://t.co/eC3U00Lb @microfundy gives us three common definitions of risk & explains the virtues & deficiencies of each $$ Dec 30, 2012
The Six Biggest Investing Lessons of 2012 http://t.co/XWHRu0nG @reformedbroker takes us through mean reversion, momentum, & optimism $$ Dec 30, 2012

Rest of the World

China Poised for 2013 Rebound as Debt Risks Rise for Xi http://t.co/0P9o0HzX Investment will not work, but will the Govt free the economy? Jan 04, 2013
El Al?s Shamir Parachutes Into Israeli Vote as Liberman Fades http://t.co/Yyi2iGAv Would heighten tension level if Shamir is elected $$ Jan 03, 2013
Chavez Cancer Imperils $7 Billion Caribbean Oil Funding http://t.co/j5MLSeYx Lot of “
Why 49 Is a Magic Number http://t.co/F2DPpmtV France has a lot of firms that have only 49 workers b/c onerous regulations kick in at 50 $$ Jan 03, 2013
Great Canadian Maple Syrup Heist http://t.co/mCMokL6T Cartel reminds of De Beers. Competitive supply makes it impossible 2 fix prices $$ Jan 03, 2013
Used to Hardship, Latvia Accepts Austerity, and Its Pain Eases http://t.co/9v7Sf1AH If u haven’t let debt get too large, austerity works $$ Jan 03, 2013
Chinese Fly Cash West, by the Suitcase http://t.co/L0NCTpo7 Kind of fitting that they come to Canada & US 2gain freedom after wealth $$ Jan 02, 2013
At Europe’s Doorstep, Fierce War Against TB http://t.co/2Z41atWb Makes good case4 quarantine when diseases r highly infectious/deadly $$ Jan 02, 2013
Japan?s Population Falls by Record in 2012 as Births Decrease http://t.co/OTHuGOY1 Economies don’t work well when population falls $$ Jan 02, 2013
Chavez Suffers New Complications After Fourth Cancer Operation http://t.co/fqIwxz8R If he dies by 1/10, there will b a new election $$ Dec 31, 2012

Other

Then I Watch ‘Em Roll Away Again http://t.co/2uF2LKhf The fascinating story of Otis Redding’s final hit. cc: @reformedbroker $$ Jan 04, 2013
Threatening Asteroid Will Narrowly Miss Earth in 2040 http://t.co/buih448d That means it will come within twice the distance of the Moon $$ Jan 02, 2013
Outmaneuvered at Their Own Game, Antivirus Makers Struggle to Adapt http://t.co/wD6LAA7l Whitelisting, Petri Dishes, Cleanup programs $$ Jan 02, 2013
Disease Rips Through Florida Citrus http://t.co/zXlZEXX0 Bacteria Deal Slow Deaths to Trees; diversify to Brazil & California $$ Jan 02, 2013
Pattern time: 1-1-13 11:13 PM $$ Jan 02, 2013
For-Profit Nursing Homes Lead in Overcharging While Care Suffers http://t.co/6RTKMhdq Choose nursing homes 4 your loved ones w/care $$ Jan 02, 2013
“Minds work best when they r castles, w/a moat, drawbridge raised, defenders ready 2destroy thoughts of deceivers w/arrows & boiling oil” $$ Jan 01, 2013

Wrong

Wrong: In a Diverse New Congress, Several ‘Firsts’ http://t.co/Xy3HVjlo Congress not genuinely diverse; 2 types of thought @ most $$ Jan 03, 2013
Wrong: This Dow Component Has A 4.5% Yield And Sells For Less Than Book http://t.co/f9AFrt4t My comment: http://t.co/5T9XMJZW $$ Jan 01, 2013
Wrong: Benevolent Billionaires Should Buy Out Bushmaster http://t.co/iicdOxOd Monstrously dumb column asks liberal billionaires 2 lose $$ Dec 31, 2012
Wrong: Gauging the Guidance That Models Give the Fed http://t.co/J63vKEWM Neoclassical macro models r not capable of getting turning pts Dec 31, 2012

Replies, Comments & Retweets

@finemrespice @merrillmatter DB plans could have been managed better. Funding rules were too loose @ creation, & IRS discouraged overfunding Jan 05, 2013
@finemrespice It would then send out notices to the oldest people not yet retired, bringing the retiree pop up to 1/3 size of workers $$ 😉 Jan 05, 2013
@finemrespice At ~3 workers : 1 retiree. Yearly the government would measure the number of workers & announce the # that can retire (2/3) $$ Jan 05, 2013
@finemrespice It’s a good idea. It would stabilize %age of people retired vs working. Another way would b2 set the ratio directly (1/2) $$ Jan 05, 2013
@finemrespice Good idea – Make it a %age (~80%) of the life expectancy of a 20-yr old. %age goes up if pop proj 2 shrink & vice-versa $$ Jan 05, 2013
@carney Thanks, appreciated. Jan 04, 2013
.@Carney delegate so much of its rulemaking to study committees. Most of the Dodd-Frank law is getting designed by bureaucrats. $$ Jan 04, 2013
.@Carney Having a hard time commenting at @CNBC on yr articles. If Congress can’t delegate significant lawmaking, how does Dodd-Frank 1/2 $$ Jan 04, 2013
“I think you are right. Why is it that bad monetary ideas get more “currency” than good ones? 😉 ” ? David_Merkel http://t.co/VbCZpinR $$ Jan 04, 2013
You can read my comment $$ RT @BloombergView: It’s time for Japanese women to honor their Gloria Steinem | http://t.co/8brsJJ1v Jan 04, 2013
‘ @TheEconomist Cover preview: America turns European. January 5th ? 11th 2013 http://t.co/JuBYRyZW Europe is in far worse shape $$ Jan 04, 2013
Bigtime $$ RT @NorthmanTrader: @AlephBlog speaking fees in 4 years….. Jan 04, 2013
@insidermonkey Bigger firms chain together a bunch of 49-person subsidiaries. The French allow it to happen. $$ Jan 04, 2013
@Dirty_Alfred @TFMkts Key Question: Do financial institutions have enough capital & liquidity to absorb losses,turning debt into equity? $$ Jan 03, 2013
@groditi I like the added duration so I don’t have to hold so much of it. More room 4 other diversifying bonds w/more potential Jan 02, 2013
Bigtime $$ RT @mcgilcoli: @AlephBlog a pox on both their houses! Jan 02, 2013
RT @AsifSuria: Agreed but they should have replaced Black Swan with Fooled by Randomness. MT @AlephBlog: This is a great list. http://t. … Jan 02, 2013
This is a great list. I have read almost all of them. Here are my disagreements. Aswath Damoradan… http://t.co/ATKQ6wkG Jan 02, 2013
If he can stop that weird grin, I can stop $$ RT @BloombergView: Can we all please stop laughing at Joe Biden? | http://t.co/xJlpt8wI Jan 02, 2013
@ritholtz I have a Tex-Mex Lasagne recipe near me. There r a lot of unusual/fusion recipes that borrow the layering idea from Lasagne $$ Jan 02, 2013
“This is why I use momentum positively in most of my investing, even though I buy a lot of undervalued companies” http://t.co/WlFQV6Py $$ Jan 02, 2013
“This applies to wealthy people anywhere; at times of crisis, give up 5-20% to preserve 80-95%.” ? David_Merkel http://t.co/XFa6akOC $$ Jan 02, 2013
@carney Great, I respect you, Carney. We don’t always agree, but I respect those that say what they think, contra politicians. $$ Jan 02, 2013
@McCainBlogette I am sorry, but every generation from the Baby Boomers & prior deserves progressively more blame. You don’t deserve blame $$ Jan 02, 2013
@carney Am I MSM, or am I just a blogger? I support the debt ceiling. Jan 02, 2013
Sad but true $$ RT @The_Analyst: making early call that’s your best/most accurate tweet of the year. Somehow she’s worth like $200mm. Ugh. Jan 02, 2013
Does she realize the she herself is a natural disaster? $$ RT @MicroFundy: Pelosi explaining how natural disasters happen. #nightisyoung Jan 02, 2013
Bigtime $$ RT @volatilitysmile: @TheStalwart best motivation to close a negotiation: being tired, wanting to just go home. cc @HarvardBiz Jan 02, 2013
U do it well RT @TheStalwart: Not to get sappy, but had a great 2012. Awesome year. Thanks everyone following and reading and all that stuff Jan 01, 2013
Yes, default is often the major form of deleveraging $$ RT @ZH_Crown: @AlephBlog @cate_long http://t.co/1nZlMA36 Dec 31, 2012
@mark_dow @cate_long & the other point is during a financial bust, enough debt has 2b liquidated/compromised/paid 4 things 2 become “normal” Dec 31, 2012
@fbaseggio @interfluidity @rfraserTX That could work; only difficulty is getting the data; oh, &getting the politicians 2 give up control $$ Dec 31, 2012
@mark_dow @cate_long Yeh, saw that at the time; one reason we were short so many financials at the hedge fund I worked at — too early Dec 31, 2012
@mark_dow @cate_long Good bond mgrs know that when as class of debt is plentiful, you have to avoid it. Hard 2do amid benchmarking though $$ Dec 31, 2012
@mark_dow @cate_long Bad institutional incentives like the CDO mkt had 1998-2007, fed by fin’l institutions reaching for yield even in AAAs Dec 31, 2012
@cate_long Consumers may not be as leveraged as they were in 2008, but they r still highly levered relative to history amid high unemp $$ Dec 31, 2012
@GonzoEcon @cate_long Businessmen do not take risks when their own leverage is high &

they know their customers r in the same boat $$ Dec 31, 2012

‘ @cate_long No such thing as “animal spirits.” If leverage high, caution is warranted. Low leverage allows 4 borrowing 4 new projects $$ Dec 31, 2012
RT @TheStalwart: RT @tylercowen: So many say Obama is bad negotiator, but isn’t he actually rolling “the left” and secretly in league wi … Dec 31, 2012
@dpinsen That *is* cheap. Pity I can’t use them 4 clients — self-imposed simplicity Dec 30, 2012
Fingernails, def RT @ReformedBroker: Should I take the kids to the Les Miz movie? Or just stay home and pull my fingernails out one by one? Dec 30, 2012
“If you didn’t mention #4, I was going to. I am still long $TLT for clients, but toward the end of?” ? David_Merkel http://t.co/9CGLXgiT $$ Dec 29, 2012

FWIW

My week on twitter: 36 retweets received, 3 new listings, 57 new followers, 69 mentions. Via: http://t.co/SPrAWil0 Jan 03, 2013

December 2012	January 2013	Comments
Information received since the Federal Open Market Committee met in October suggests that economic activity and employment have continued to expand at a moderate pace in recent months, apart from weather-related disruptions.	Information received since the Federal Open Market Committee met in December suggests that growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors.	Shades GDP view down, finally. Remember when the FOMC cited the Tsunami in Japan for economic weakness that would soon go away?? More grasping at straws.
Although the unemployment rate has declined somewhat since the summer, it remains elevated.	Employment has continued to expand at a moderate pace but the unemployment rate remains elevated.	No real change. So long as discouraged workers increase, this is a meaningless statement.
Household spending has continued to advance, and the housing sector has shown further signs of improvement, but growth in business fixed investment has slowed.	Household spending and business fixed investment advanced, and the housing sector has shown further improvement.	Shades up their of business investment
Inflation has been running somewhat below the Committee?s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.	Inflation has been running somewhat below the Committee?s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable.	No change.? TIPS are showing rising inflation expectations since the last meeting. 5y forward 5y inflation implied from TIPS is now at 2.86%. The FOMC is wrong on inflation.
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 remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions.	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.?	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?
Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook.	Although strains in global financial markets have eased somewhat, the Committee continues to see downside risks to the economic outlook.	Shades up their views of the financial markets.
The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.	The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective.	No change. CPI is at 1.7% now, yoy, so that is quite a statement.
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 will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.	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 will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month	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?
The Committee also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially 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, in January, will resume rolling over maturing Treasury securities at auction.	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 real change.? 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.
If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability.	If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability.	No change.
In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.	In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases.	No change.? The FOMC promises what it cannot know or deliver.
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 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.	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 2.41%.? Here?s the graph.? The FOMC has only 0.09% of margin in their calculation if they are being honest, which I doubt.
The Committee views these thresholds as consistent with its earlier date-based guidance.		The inaccurate sentence is deleted.
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.	New sentence.? Giving yourself an out clause on the hard-and-fast promises made above?
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; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; 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 Jeffrey M. Lacker, who opposed the asset purchase program and the characterization of the conditions under which an exceptionally low range for the federal funds rate will be appropriate.	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.	Esther George takes up the thankless task of telling the FOMC that they are doing more harm than good.