Category: Macroeconomics

Penny Wise, Pound Foolish

Penny Wise, Pound Foolish

Posted on by David Merkel

Some of the dumbest things I have seen in my life inside corporations revolve around incompetent managers, who don’t have the foggiest idea how to grow value organically, and use a variety of shortcuts or cheats to give an illusion of creating value by doing nothing.? I have given a few examples in these two articles:

Here are some more examples:

Some acquirers tend to despise the employees of firms that they acquire, and assume there is a lot of fat to be cut.? So it was that a client that I managed assets for that was acquired by a British company.? A few months after the acquisition the client firm announced that they were firing half of the accountants, and all of the accountants dealing with investing.? I went to the management of the firm that was a new client of ours and expressed my concerns, saying that they would lose all customization and control of results by outsourcing investment accounting — it could never be as responsive as retaining “in-house” staff.? Also, firing half of the remaining accountants would lose a lot of local knowledge where systems are deficient and need “hand holding’ with regular adjusting entries to make sure the accounting was correct.

In this example, the investment accountants were actually quite good, though their leader did not present well.? I had a good relationship with him and his staff, and helped them find new jobs, much as I hated to see them go.? I did the same for some of the other accountants that were let go, since I interacted with some of them as well.? It almost seemed like the new client wanted to eliminate all of the accountants with special long-term knowledge of the business, and retain the cheaper ones with less institutional knowledge/tenure.

As it was, my dealings with the new heads of financial reporting left me scratching my head, wondering why the new guys were a “trade up.”? They seemed to understand the issues less well than those they replaced, but were advertised to be really bright.? Okay, lost on me.

I relayed my concerns to my bosses, and they said, “Not much we can do.? We have the same ultimate parent company, but they’re not geared toward taking feedback at what would be such a micro level for them.? Let’s just watch and see what happens — if it is as bad as you think, it should materialize in six months or so.”

As it was, my bosses were right, and so was I.? For the first six months after the accounting change, profits were astounding.? The new management team was patting itself on the back, certain that their decisions were leading to greatly improved profitability.? (As an aside, I remember sitting through interminable meetings where new accounting software was being introduced. The old stuff was not good enough.)

Then came the year end audit, and new internal auditor plus new external auditors questioned accruals produced by the new outsourced investment accountants.? I was asked what the right approach was for accruing income on some obscure fixed income security.? Belying their cheap cost, the new investment accountants did not make the correcting entries into the system that the old accountants had, leading to a massive over-reporting of income.? Far from being more profitable than the past, it was far less profitable, despite all of the firings in accounting.

This was the first comeuppance of many for an untalented management team that eventually all got fired, as well as the ultimate CEO of the firm that trusted them, and invested a lot of money into that subsidiary.

Warnings to the wise: always analyze your profit margins in a competitive industry, and if results seem too good to be true, don’t accept them, push back and look at all of the squishier accrual items to see if there is an error.? Bad management teams accept good results without question, and criticize bad results always.? Good management teams criticize unusual results, whether good or bad, but bias income to the low side of fair, allowing small positive surprises to emerge.

Then there was the time where an insurance company that I worked for bought out a smaller company, and the hidden price of the deal was that the new CEO would be the CEO of the acquired company in a year.? Bad move.? The guy was an accountant, and his only means of “adding value” were cutting employees, and skimping on squishy accrual items.? While he was CEO, I kept track of how mach GAAP income outpaced my adjusted Statutory income, which should have been close to GAAP.

The CEO had a fragile personality as he did this, emphasizing that the team he had assembled (loyal, but less competent) was highly ethical.? As it was, the CFO tried to find ways to convert capital gains into regular income for GAAP but not tax purposes, which maximized ROE, which was the largest contributor to management bonuses.? They were even the first ones to try an unusual derivative marketed by Morgan Stanley — bull/bear notes, as they were called. It was a bond that would split in two after a certain trigger, leading to two bonds — one with a premium income that would be held, and one with a discount income that would be sold for a capital loss.

Sadly, the company had a hard time evaluating the offer, until they approached me.? (Here is where ability conflicts with ethics.)? The chief actuary (via the Peter Principle, but true of all of that management team) showed me the derivative, and I said, “Oh, that’s easy.”? I told him I would have results by the next morning, and it was 4PM already.? I took it home, worked on it through the evening, and the next day presented the result.

I told him that the math worked mostly, but that if the US Treasury applied anti-abuse rules, it would be invalidated.? I also told him that I didn’t think the transaction was ethical, because restructuring merely to avoid tax, and change the GAAP statement impact had no economic substance.

He ignored my warnings, and so I found myself a week later presenting before all of the leading managers of the company the details of the transaction to be.? (Before that, I talked to the instigator of the idea at Morgan Stanley, and showed him errors in his spreadsheet.? Do not assume that investment banks are infallible.? Also, don’t assume that actuaries or any quants are infallible.? They are human too, and subject to their own biases.? People often shout the word “science” when they are the most weak.)

I told them that I thought the idea was not ethical, but that it would do what was promised.? They were happy with that.? I was already known to be opinionated, though my results were very good.? That poisoned me with senior management which prized loyalty over truthfulness.

Two months later, I was working with a new firm, and the boss came to me and said, have you ever heard of bull/bear notes?? I roared with laughter, and puzzled, he looked at me and I said, “Heard of them?? I corrected their models!”

It should have been a warning sign because our client (the same as mentioned in the first story prior to the acquisition) was willing to consider such garbage in order to increase operating income.? Good managements don’t go for gimmicks.? Going for gimmicks means you aren’t focused on real organic growth.

So, we started in on a new transaction.? The rep from Morgan Stanley was surprised to talk to me again.? Very easy to do, because I knew the model as well as he did, or maybe better, much as I did not like it.

I went through the same schtick with the new client, but they were determined to do it no matter what.? I still remember being in a dim conference room with my boss, when FASB’s EITF [Emerging Issues Task Force] disallowed the transaction going forward, and required all of those that had done it do disclose the results in a footnote.? (Only one company had done it, my prior employer.)

-==-=–=-=-=-==-=–==-=-

The company that actually executed the bull/bear note eventually sold itself to another firm.? While I was working as a buy-side insurance company investment analyst, I got to meet the CFO of the company that bought them.? I said to him, “Would you like me to tell you the history of how this came to be?”? With a grim face he told me no.? It was a thing of pain, but he did not want to know the truth.? He kinda knew it already, and simply absorbed the loss.

With Epictetus, I can tell you that the truth will set you free.? Lies always constrain.? With Jesus, I can say, “You will know the truth, and the truth will set you free.”? This is far more personal, and useful, because Jesus himself lives to teach and protect his own. He is the Truth.

To all, I say, be wary of management teams that control results overly — this seems to be more common in finance, where results are harder to judge.? Finance is all accruals, which makes results ephemeral.

But good managers of financials are conservative.? That is the thing to look for in financials.? If my two examples above are not enough, it is not wise to buy financials that offer growth, because it often stems from scams, not real growth.

I have seen my share of fakers in this life in financial company management.? Be wary when you invest in financials; there is a reason why they are separate from industrials and utilities.? They are less reliable, particularly in time of stress.

So, to investors that care about what they invest in:

  • Analyze acquisitions — most aren’t good
  • Scrutinize accounting — most of the devils lie in accrual entries
  • Analyze management, if you can — understand their ethics, or lack thereof

I’ve written too long, but consider what I have said for your own good.? It will help you.

Hit the “Defer” Button, Thanks…

Hit the “Defer” Button, Thanks…

Posted on 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.

On Financial Blogging

On Financial Blogging

Posted on by David Merkel

Why do financial bloggers do what they do?? (I include in this economists and investors as well…)

Is it for fame?? Maybe for some, particularly at the top, for the most popular finance bloggers.? One nice thing about the financial blogosphere is that over enough time, it really does sort out who has a lot to say, and who doesn’t.? There have been a lot of promising bloggers that ran out of things to say.? I know that I look inside me each night, and I ask, “What burns inside me that I have to write about?”

Alas, there are things that burn, and things that merely smoulder.? Once a quarter, I return to what I wrote one year ago to highlight the best of what I wrote then.? To me, a year is enough time to look back and say, “Boy, was that a bomb.” or, “Well done, that was prescient.” or, “How could you have hit the Publish button on that?” or, “Classic wisdom for the ages.”? I don’t love everything I have written, but aside from one or two pieces, I don’t delete them.? I’m fallible; what should you expect, I am human. ;)? Therefore I err.

I don’t think of myself as one of the top financial bloggers.? I do think of myself as unique; that does not make me good/popular.? One difficulty of my blog is that I write on a wider number of topics than other blogs, and some of my views on macroeconomics, ethics, etc., will make me somewhat controversial.

Do financial bloggers write to further their own business interests?? Some do, some don’t.? I get a lot of people asking me to manage money for them — definitely the majority of my clients, but my main reason for writing is to give something back.? I’ve had a unique career, where I have worked in a wide number of environments.? I’ve seen more corners of the market than most people, but I admit that I’m not a specialist.? When I write about a narrow topic, in the back of my mind, I know that there are some out there who know it better than me.? It makes me be more careful, and limit what I say to what I know.

Do financial bloggers write to affect policy?? We can try, but I don’t think we ever get very far.? Even though I eventually talked with senior people at the SEC over money market funds, and was one of the eight bloggers that went to the first Treasury-blogger meeting — I think we don’t have much ability to affect policy, much as I might wish otherwise.? (That won’t stop me from trying, though.)

Do financial bloggers write to vent frustration over dumb economic policy?? You bet, though there are many that don’t care for policy; they just trade, and I don’t blame them.? For those think of me as a buy-and-hold investor, you would have been amazed to see me as a corporate bond manager 2001-2003.? I traded & traded.? I could feel the pulse of speculation in the market.? I would say at that time, the two hardest things to do are to buy higher, and sell lower.

Back to dumb economic policy — that’s an area where we are kind of a sideshow.? We argue among each other, but we don’t accomplish that much.? My main complaint is economic indebtedness, and the need to reduce that globally.? But the powers that be favor increased indebtedness because it has little short-run cost, even if the long-run cost is significant.? We are short-sighted.

Do financial bloggers write to give something back?? I do, and I think many bloggers do.? Sometimes I think we are the conscience of Wall Street.? Personally, I think it is important to have a strong ethical slant in financial blogging, but aside from policy issues, I think few financial bloggers do.

Do financial bloggers want to learn from each other, and make more money?? In general, yes.? Most economists would be excluded here; they are mostly required to not be practical, and live in a world where maximizing robots dwell, and not people.

But sharing trading ideas, and conversing about market trends can be valuable.? I can’t say that I have gotten many micro ideas from financial bloggers, but I have gotten macro ideas that have shaped my views of the markets.

Do financial bloggers write to have fun? Yes, though that’s not why I write.? I write to give something back, but I have fun in the process.? When I read many of the financial bloggers out there, I sense that they are having a lot of fun as they put forth opinions.? If I could get them to Baltimore, I would love to host a party for all of them.? It would be a blast to have a lot of sharp people trade ideas with one another face-to-face.

So why do we write?? For many reasons, and most of them noble.? After all, why blog if you could write a newsletter and make money?? Because we want people to read our opinions for free, benefit from them, and better the world generally.

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on 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

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FWIW

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

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On the Platinum Coin

On the Platinum Coin

Posted on by David Merkel

Okay, so the Treasury mints a Platinum coin, and deems it to be worth One Trillion Dollars.? We have a fiat currency, so what is the problem?

There are fiat currencies, and there are fiat currencies.? Depositing something as collateral into the central bank where the “melt value” is decidedly less than one million, much less trillion dollars, is ridiculous.? I realize that many believe that the Fed can do whatever it wants, but eventually cash flows will catch up with a central bank as inflation rises.

The Trillion dollar coin would have value only because the taxation authority of the US Government stands behind it.? But that is not the way the government is behaving.? The taxation authority is not taking in as much and more so that they can redeem the promises inherent in the coin.? Instead, they are looking to the Fed to absorb losses in a stealth monetizing of the debt.

Monetizing government debt leads to inflation.? Receiving something worthless, and deeming it to be of high worth is the same as monetizing the debt.? Yes, the Fed can try to sterilize the effects, but it leaves the Fed with a problem — it will never be able to shrink its balance sheet to 2007 levels.? Thus inflation, eventually.

The platinum coin is a bad joke, and bad policy if eventually done.? This is what I wrote at Felix Salmon’s blog yesterday:

If they tried the platinum coin(s) once, Congress would legislate to eliminate the practice. The Purple party would take back their authority.

It is also possible that the Supreme Court would make them reverse the transaction, on the grounds that only Congress can regulate what is money. The executive may not. The minor exception made by Congress for platinum coins was only intended for numismatic coins ? not anything large.

But yes, Felix, you are right. This would end the concept of the dollar as a reserve currency. Only banana republics monetize their debt. Hey, maybe even the Fed would develop a backbone, and refuse the coin, or tell them it is only worth $1000. They don?t want to be stuck with QE not of their own design. Their QE is bad enough, but the coin, which will be a hole in the Fed?s balance sheet for as long as it lasts will be far harder to reverse.

You can’t get something for nothing.? Monetary stimulus is garbage, it steals from savers to reward solvent debtors.? Insolvent debtors can rot.? As with all monetary policy, stimulus helps the solvent.

This is a huge advertisement to get the government out of the economics business.? It has never been good at it, and this is proof.? The government might be able to goose things in the short-run, but it never succeeds in the long-run.

As it is, our government is addicted to short-run policy, and as such, does not consider long-run solutions that might be painful in the short-run.

Too bad.? Your kids lose, while you don’t seem to lose much for now.? This is a lousy position to be in.? People play for short-term advantage while while inflation increases.

You can’t get something for nothing.? Either there will be inflation, or taxation to pay back the platinum coin.

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on 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

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?

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

 

Locking in a Smaller Loss

Locking in a Smaller Loss

Posted on by David Merkel

Why are TIPS yields negative out to 20+ years?? People are willing to lock in a loss versus CPI inflation in order to avoid a possibly larger loss.

Why do some people continue to invest in money market funds, bank deposits, savings accounts, when inflation is running at 2%+/year?? They are willing to lock in a loss versus inflation in order to avoid a possibly larger loss.

When the Fed adopts aggressive strategies, people will have two responses:

  1. “Yields on safe investments are too low.? I need more income.? I guess I have to take more risk.”
  2. “Policy is abnormal, and I am scared.? I know I am going to lose here, but I want to lose as little as possible.? TIPS, bank deposits, and money market funds make sense here.? Maybe some gold as well.”

The Fed is counting on response #1, but response #2 is much more common than they would like.? Now, response #1 is nothing all that great — the Fed is trying to extract value out of economic actors by making them undervalue risks, whether those risks are duration, convexity, credit, etc.? When they encourage more risk, they are trying to extract economic wherewithal out of those that invest there.? Who is the one that buys when things are hot, before they are not?? That is the target.

So be wary amid the efforts to “stimulate” the economy.? When an economy is heavily indebted, stimulus does not work.? Far better to invest your money in areas where stimulus does not play a role.? Look for healthy places in the economy that do not rely closely on the government.

Finally, don’t take minor changes by the Fed too seriously.? They are utterly convinced of their “super powers,” and do not appreciate how little control they have.? Every action of the Fed in their “stimulus” has produced progressively less response.

The Fed does not control the US economy.? They are codependent with it, and they do not act, they react.? The FOMC is hopelessly lost, with a cast of C+ students running the show — people who can’t think more broadly than the failed ideas of neoclassical economics.? As I have said before, the FOMC needs more historians, and no neoclassical economists.? Bring in the Austrians, they might solve things.? You might get a depression in the short-run, but afterwards, things would be normal.

That’s why some would rather lock in a smaller loss; this situation is volatile enough that many will want to do so.? As for me, I will try to buy undervalued companies, and make money there.

Funding What Should Not Be Funded

Funding What Should Not Be Funded

Posted on by David Merkel

With the Fed engaging in financial repression (maybe that should be oppression, the only role of the Fed is to steal from savers…) there are many corporate bonds being issued at low yields, some of which? are at lower yields than losses that we experience during crises for the ratings class.? Should this not be a warning sign?? Yes, it should.

The Fed is creating another bubble.? Note the failure of the last bubble they engineered — the housing mortgage bubble.? They are smart, oh so smart, but with little true knowledge of how the world works.? We would be better of without the Fed.? Please unemploy a bunch of Ph.D. economists who can create very clever models of the economy that bear no resemblance to the real economy.? Please eliminate a bunch of pseudo-intellectuals who think they can control the economy.

Please eliminate a bunch of sorcerers apprentices who think they understand how to stimulate the world, and replace them with a bunch of humble people who know that they do not know, and maybe, a few that know that they can’t really stimulate, so give up.

The low interest rates that the Fed supports for high quality bonds indirectly attempts to overleverage the corporate sector in the same way that they overlevered the consumers through housing 2003-2007.

We would be a lot better off without as much government interference.? We grew much faster when the government did not try to control the economy as a whole.? Please point to successes in government macroeconomic management.? You will find none.

Interest rates are too low now, and are building up a new bubble in corporate debt.? Don’t worry in the short run, the corporate sector is strong.? But what if this continues for a while?? The one remaining sector of strength will be compromised.

Our policies in the US stink… it is only a matter of time before they hurt us badly, whether through higher taxes, inflation, or default.

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Before I give you the Tweets, I just want to tell you that I will be blogging? this fine accounting conference on IFRS/ US GAAP.? Those that want to attend at a discount can use this code Aleph10 to save 10%.? CFAs get a code that saves 20%.? I think the conference will be valuable, so I will be heading up to NYC on January 10th.? See you at NYSSA’s conference center near Times Square.

Now for the Tweets:

THE FISCAL CLIFF!!! AUGH!!!

 

  • The Fiscal Cliff Could Last Forever http://t.co/ay6gKOrc The upward curve in entitlement expenditures could make “fiscal cliff” normal $$ Dec 28, 2012
  • Fed Helps US Dance on Ceiling http://t.co/g2X0UijU Seiniorage revenue (stealth tax on savers) keeps the deficit lower than otherwise $$ Dec 27, 2012
  • Grand Bargain Shrinks as Congress Nears US Budget Deadline http://t.co/Dr2GCk6l No incentive 4 either side 2 do a deal $$ #shiftblame Dec 26, 2012
  • No Fiscal Cliff Deal Could Cause Jails To Release Inmates http://t.co/07gm3Drm We need less costly alternatives 2 incarceration $$ Dec 25, 2012
  • Campaign on US Debt Gains Steam http://t.co/CwdnN21X ?4 the longest time, nobody cared, nobody listened-it was 15 years of irrelevancy.? $$ Dec 24, 2012
  • Cliff Would Strike Low Incomes Hard http://t.co/aEENGola Difficult 2 say who would b most affected if we went over the fiscal cliff $$ Dec 24, 2012

 

China

 

  • China Tightens Rules for Internet Users http://t.co/HRACEhue Problem: very difficult to enforce when u have so many users $$ Dec 28, 2012
  • Chinese Scholars Demand Communist Leaders Relax Their Grip http://t.co/1bdCHHDL They think another Cultural Revolution can’t happen?… $$ Dec 28, 2012
  • Billionaire Princelings Ruin a Chinese Vision http://t.co/mTHFPt8R Crony capitalism w/Chinese “Communist” characteristics ->princelings $$ Dec 28, 2012
  • 3rd&last long article on Chinese political succession: Xi Jinping Relations Reveal Fortunes of Some Elite in China http://t.co/iFz7e6dg $$ Dec 27, 2012
  • Heirs of Mao?s Comrades Rise as New Capitalist Nobility http://t.co/ALYa5e7V It’s becoming an aristocracy in China & will that last? $$ Dec 27, 2012
  • Defying Mao, Rich Chinese Crash the Communist Party http://t.co/UTcNO2oj Looong article on wealthy in China gaining political power $$ Dec 27, 2012
  • Too big to fail? China’s wealth management products stir debate http://t.co/UM5Z5vxr China gets its turn to decide: bailout or failure? $$ Dec 26, 2012
  • Bell tolls for Beijing’s Drum Tower homes http://t.co/SJrkVhXO Forced evictions from old homes to enhance a touristy area in Beijing $$ Dec 24, 2012

 

Michael Pettis

 

  • Pettis: …illicit money out of China totaled US$420 billion in 2010… 94% of the illicit $$ flows occur through mis-invoiced trade Dec 22, 2012
  • Wow. Pettis: Trade misinvoicing is the preferred method of transferring illicit capital from all regions except the MENA region Dec 22, 2012
  • Pettis: problem is the inexorable tendency of the current development model 2generate debt faster than it generates debt-servicing capacity. Dec 22, 2012

 

Rest of the World

?

  • Euro Zone Set to Continue Contraction http://t.co/rFOZlSjy Successful austerity eliminates much debt for small GDP losses; but this? $$ Dec 28, 2012
  • Cinnabon Finds Sweet Success in Russia, Mideast http://t.co/IFewJw5p Interesting print&video interview; they customize 2 local tastes $$ Dec 28, 2012
  • Putin Set to Sign Russian Adoption Ban http://t.co/ODMcwtTP The kindness of the wicked is cruel, Pr 12:10b $$ Dec 27, 2012
  • Betting on Yen to Fall Further in 2013? Think Again http://t.co/38zvTYmk Depends on how much expectations change in the race 2 the bottom $$ Dec 27, 2012
  • Iran Says ?Irresponsible? GCC Raises Regional Tensions http://t.co/Xqut7V9z Iran cries “foul” when the Sunnis take them seriously $$ Dec 26, 2012
  • GCC to Form Unified Military Command Amid Iran ?Threats? http://t.co/EBO0aaaW Great, not. The Sunnis join forces to fight the Shia $$ Dec 25, 2012
  • Norway Looks to Spread Wealth to US http://t.co/qsDYlE3o Norway’s SWF likes 2 buy irreplaceable real estate; lotsa kronor 2put 2work $$ Dec 25, 2012
  • Deciphering the Decline in Spanish Mobile Accounts http://t.co/ckXo2TT7 Mobile subscriptions usually 1 of last things to go when $$ tight Dec 24, 2012
  • Yen Weakens to 20-Month Low on Abe?s BOJ Pledge; Euro Up http://t.co/aEENGola The race to the bottom continues, w/Japan running hard $$ Dec 24, 2012
  • Looting Tests Leader in Argentina http://t.co/mhwSo7AG Yes, cry 4 Argentina. What should b a wealthy place suffers from bad leaders $$ Dec 24, 2012

 

Fixed Income & Real Estate

 

  • Housing Wealth and Wage Bargaining http://t.co/etoJ7w7A When people think they r going to lose their houses they get desparate $$ Dec 28, 2012
  • Gross Doubles New York Bet as California Loses Lead http://t.co/l0w0wBJr NY is less of a dirty shirt than CA $$ Keeps adding to Munis Dec 27, 2012
  • Mortgage-Bond Sales Soar on Fed?s Refinance Push http://t.co/xX7Do3TY “Sales of U.S.-

backed mortgage bonds soared to a three-year high” $$ Dec 27, 2012

  • A Banner Year for Riskiest Debt http://t.co/zdb83zAa End of Affair With Corporate Bonds http://t.co/rkb2jdtZ 2013 should b ok $$ Dec 27, 2012
  • Home Prices Hit a Milestone http://t.co/cwpVuhfn Nice Graphic: http://t.co/sQggRNj8 Portrait of a dead cat bounce $$ Dec 27, 2012
  • Home-Price Gains Pick Up as US Real Estate Market Rebounds http://t.co/8ZHWeMkU Too early to say much about this dead cat bounce $$ #mew Dec 26, 2012
  • ‘Hope Note’ Strategy Is @ Times Hopeless http://t.co/5TDgdL6z 0% certificate that if everything works perfectly, might get a recovery $$ Dec 24, 2012

 

Stocks, Industries, and Market Dynamics

 

  • Refiners Beating Exxon Join Pipeline Boom for Lost Margin http://t.co/VdzNxkn4 Oil Boom Spurs New Investment http://t.co/4pGXup4P $$ Dec 28, 2012
  • Look at this graph of Barrick Gold Corporation $ABX http://t.co/T4DD2JYU Is the main reason 4 underperforming $GLD rising mining costs? $$ Dec 27, 2012
  • ICE Chief Challenges Stock Views of Trading http://t.co/9OvrtlSF Now watch $CME buy out $NDAQ & we can transform mkts, but2 what end? $$ Dec 27, 2012
  • Garbage Time http://t.co/deDDfsmp @reformedbroker on the lack of liquidity/activity @ year-end. Every real player is looking forward $$ Dec 27, 2012
  • Gus Sauter is at the Vanguard of Roping In Trading Costs http://t.co/OtLi9XBk Sauter likes HFT, uses algorithms 2 lower Vanguard’s costs $$ Dec 27, 2012
  • SEC going high-tech with real-time trade data http://t.co/AWpNNDjd The SEC can get some really fancy tools, but can they use them well? $$ Dec 27, 2012
  • It’s Time for Cramer 2 Short His Show http://t.co/QZ4UUqFF Cramer invests differently than his show; show on how he invests would b dull $$ Dec 26, 2012
  • How to Tell When a Stock Buyback Is Good for Investors http://t.co/SnnQeDoV If price rises on the announcement, it is usually LT good $$ Dec 24, 2012
  • Retiring Vanguard CIO Gus Sauter Looks Back http://t.co/q9rUbE0L A true titan of mutual funds as Vanguard served clients, not Vanguard $$ Dec 22, 2012

 

Macroeconomics And the Fed

 

  • The Mythology of Chained CPI http://t.co/UbtRkVAF Better to cut benefits directly, & not b sneaky by making a technical adjustment $$ Dec 27, 2012
  • Puzzle of weak investment jeopardizes growth rebound http://t.co/7ya8nkks People & firms will not invest 4 the future if present is weak $$ Dec 27, 2012
  • Push for Cheaper Credit Hits Wall http://t.co/48PKxWSf Watch the Fed push on a string; my aren’t they diligent? $$ #untestedtheories Dec 24, 2012
  • Evans Won New Fed Consensus Linking Rates to Unemployment http://t.co/NOelrxXm One day we will call bad economic ideas “Evans.” $$ Dec 24, 2012
  • Usage: “Where did you ever come up with an Evans like that?” “I was so embarrassed for him. At the meeting, he uncorked a real Evans.” $$ Dec 24, 2012

 

Other

 

  • Curbs on Smokers Continue to Grow http://t.co/8APeHuzz I’m allergic 2 cigarette smoke, but we r disadvantaging smokers 2 much $$ Dec 28, 2012
  • Perfect 10? Never Mind That. Ask Her for Her Credit Score. http://t.co/LWb4B7lE Even true love can be thwarted by a lousy credit score $$ Dec 27, 2012
  • 2013 Threats Predictions from McAfee, 16 pages PDF http://t.co/atec8Hpm Introduction article here: http://t.co/LTcjeTxR Surf carefully $$ Dec 27, 2012
  • Anatomy of an Air Attack Gone Wrong http://t.co/EBt24vfj A botched attack on a terror suspect kills 12 civilians & destroys a community $$ Dec 26, 2012
  • Do Unmarried Poor Have Bad Values or Bad Jobs? http://t.co/ukj2Mg99 Only 57% of couples in the program were still together after 3 yrs $$ Dec 26, 2012
  • The Great Chicago Christmas Credit Card Fiasco of 1966 http://t.co/zKR9oFjr Figures it would happen in Chicago, a sandbox 4 corruption $$ Dec 25, 2012
  • NY, Unlike Most States, Treats Education Achievements & Even Talents as Property to Be Divided Between Spouses http://t.co/totejhuX $$ Dec 25, 2012

 

Comments & Replies & Retweets

 

  • Just had a great time w/ @japhychron & @Daily_Pinch $$ RT @japhychron: Getting ready to meet @AlephBlog @ Starbucks http://t.co/f7k3gCTY Dec 28, 2012
  • Gas. Large family only buys 7 gals milk/wk max $$ RT @fundmyfund: what would cause more distress for american households? $6 gas or $6 milk. Dec 28, 2012
  • @mattrixDOTinfo @fundmyfund We had eight (5 adopted) — we briefly maxed out @ 8 gals/week, only 5 @ home now but bigger, so 7 gals/wk 4 us Dec 28, 2012
  • Fiscal Cliff: Boo! Dec 28, 2012
  • RT @randomroger: Fiscal Cliff: Boo! Dec 28, 2012
  • @DavidSchawel Mostly a fair observation, the only exception is that if u think the economy will shift & u r right, the returns can b big $$ Dec 28, 2012
  • @tarhinitrade @ReformedBroker Sound money allows businessmen to be more rational & enterprising. Also, macroeconomists r pretend 2 know $$ Dec 28, 2012
  • @XacAngXiangYin You’re welcome. China is fascinating to me. Dec 28, 2012
  • Just bought: ‘Financial Fine Print: Uncovering a Company’s True Value’ by Michelle Leder via @amazon cc: @footnoted $$ http://t.co/VKc1jdRp Dec 28, 2012
  • ‘ @TheStalwart Yeah, watching $LLL run higher over the last few months. Glad I didn’t sell. FD: + $LLL $$ Dec 27, 2012
  • So far people don’t seem 2b panicking. $$ RT @Alea_: We’ve Already Gone Over the Fiscal Cliff http://t.co/LyzU2bqo from: @cabaum1 Dec 27, 2012
  • @jucojames Thanks, that helps. Dec 27, 2012

?? @dpinsen @footnoted The price of helium is ballooning 😉 Dec 26, 2012

  • @TheStalwart Not much, man. Stocks are likely to sell of a little on the open. Bonds will rally a little. Dec 26, 2012
  • @BUDDIEE18 You have clever phrasing but you don’t have proof. Dec 26, 2012
  • ‘ @Jesse_Livermore @scott_matagrano I know one or two guys that do it professionally; I just don’t know how they get the borrow Dec 26, 2012
  • ‘ @BUDDIEE18 You may find this difficult to believe, but $TSM has a really strict policy against market manipulation for its writers Dec 26, 2012
  • ‘ @scott_matagrano Promoted penny stocks are better: -93%/yr if you can get a borrow. http://t.co/jJ79L4Ac Dec 26, 2012
  • “Given the predominance of S-T $$ in professional $$ mgmt, I think most smart $$ is slow $$. But if?” ? David_Merkel http://t.co/04qie15E Dec 26, 2012
  • Excitement @ the Merkel house today: a water main breaks, brings 5 trucks & 10 men paid triple 2 avoid annoying relatives & icky food $$ Dec 25, 2012
  • Make that 6 trucks. De bossman jus showed up, so the fine art of sitting around ceases, & swing around in2 what is loosely called action $$ Dec 25, 2012
  • @rudibest Reminds my of an article I wrote in 2009 called, “Voted for Change, Got Bush-Plus” & it has only been more so since then $$ Dec 24, 2012
  • Well said. The law was against them from the start $$ RT @munilass: Congratulations @CalPERS on your new status as Just Another Creditor Dec 22, 2012

 

 

Wrong

 

  • Wrong: High-Frequency Trading Prospers at Expense of Everyone http://t.co/jG4mgsRt This just looks like intelligent arbs doing business $$ Dec 27, 2012
  • Wrong: People Hate Losses & That Affects US Budget Talks http://t.co/uDNqcQeE Not good logic. More like envy 2 deny other side a win $$ Dec 25, 2012
  • Americans Miss $200 Billion Abandoning Stocks http://t.co/vO4s2t4S Better H/L: Open end Mutual Fundholders Miss $200B Abandoning Stocks $$ Dec 24, 2012
  • Wrong: India?s Unfinished Journey to Economic Success http://t.co/CnJ7I69y Gary Schilling’s musings on India in need of cultural reform $$ Dec 22, 2012

 

FWIW

?

  • My week on twitter: 53 retweets received, 57 new followers, 33 mentions. Via: http://t.co/SPrAWil0 Dec 27, 2012

 

 

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Macroeconomics

 

  • Here’s my plan for reducing the deficit: http://t.co/XJPjf8A5 #mydeficitplan via @wsj Draconian, I know, but the budget shoould b balanced Dec 21, 2012
  • Canada?s exports crucial as sluggish growth continues: IMF http://t.co/iIOJ6PoF Bank of Canada should raise rates 2 reduce excessive debt $$ Dec 21, 2012
  • Everything You Need To Know About the Economy in 2012, in 34 Charts http://t.co/aXnjSkR0 Good stuff; could have been formatted better $$ Dec 21, 2012
  • Fiscal Cliff’s Dirty Secret: It’s Not About Taxes At All, But Too Much Spending http://t.co/UY8rKW9h We need 2 deal w/SS, Medicare & Defense Dec 20, 2012
  • We?ve Nationalized the Home Mortgage Market. Now What? http://t.co/YSCrvVmK Congress loves 2 have cows around that they can milk for $$ Dec 20, 2012
  • EU Banking Re-Unions http://t.co/khSA0co0 The lack of a timetable indicates that things aren’t really finalized; not sure this will fly $$ Dec 20, 2012
  • ?Spending Cuts? Lose Something in Translation http://t.co/DYFxVMno Only in DC is reducing planned growth in spending called a cut $$ Dec 20, 2012
  • Money Funds Brace for Flood http://t.co/4J7VWuxx MMFs r between a rock & a hard place: loose Fed policy & regulatory over-reach $$ Dec 20, 2012
  • Wall Street’s Biggest Geniuses Reveal Their Favorite Charts Of 2012 http://t.co/at12mMsV Very long, but lots of good stuff $$ Dec 20, 2012
  • My forward estimates, derived from TIPS are rising, 2014 inflation, and 2018-2022 inflation. The latter has… http://t.co/tgrGfiDG Dec 19, 2012
  • Estimated 2018-2022 inflation rate continues to rise: http://t.co/ebqeM5KJ Stagflation may be coming. cc: @federalreserve #stagflation $$ Dec 19, 2012
  • Estimated 2014 inflation rate continues to rise: http://t.co/ZrvIc5Nk Stagflation may be coming. cc: @federalreserve #stagflation Dec 19, 2012
  • Economics may be dismal, but it is not a science http://t.co/I6B9LbSw No universal economic theory, & new economic thinking must be eclectic Dec 18, 2012
  • Fisher: Fed Risks ‘Hotel California’ Monetary Policy http://t.co/fRKOYl9d When the Fed starts 2 tighten, it will b hard 2 do $$ Dec 17, 2012
  • FDIC Guarantee Program Set to Expire After Senate Block http://t.co/qPdQNWQF Will squeeze the short end of the yield curve further $$ Dec 17, 2012
  • US Banks Lack Liquidity to Withstand Crisis, Study Says http://t.co/psmQEP1z Liquidity mismatches r pernicious; key risk gets ignored $$ Dec 17, 2012
  • Mkts r discounting mechanisms. Temporary events like bond ratings, debt ceiling & fiscal cliff should not affect market much $$ Dec 17, 2012
  • So, as an example, if the govt runs a deficit, it should not stimulate much b/c people discount future econ adjustment b/c of more debt $$ Dec 17, 2012
  • Same 4 monetary policy; the Fed can “stimulate” as much as it likes; mkt players discount the future removal of policy, inflation, etc. $$ Dec 17, 2012
  • Cliff? What Cliff? http://t.co/QEvklDQU Or maybe, just maybe investors don’t care whether we go over the “fiscal cliff” or not. $$ Dec 17, 2012

 

Stocks & Sectors

 

  • There are 272 gold & silver companies trading on US exchanges or OTC. 59 of them have mkt caps > $100M. 22 of them have mkt caps > $1B $$ Dec 21, 2012
  • Aviva Sells US Life Business to Apollo for $1.8B http://t.co/UqM2kqyr When Aviva bot Amerus, I said that they overpaid massively. Proof $$ Dec 21, 2012
  • Value Investing In Practice: A Conversation About Oaktree Capital http://t.co/4FVok5wz Good value investing does not hyper-diversify $$ Dec 20, 2012
  • ICE in Deal to Buy NYSE http://t.co/ik348vsZ New era; expect 2c more deals like this. As an aside average holders of $NYX stock lost $$ Dec 20, 2012
  • Buffett’s Leading The Corporate Buyback Surge http://t.co/U3piJgDv He has the $$, & 1.2x BV is a defensible floor ||| FD: + $BRK.B Dec 19, 2012
  • Investment Fads and Themes by Year, 1996-2012 http://t.co/cvLFKyRE @reformedbroker on what the broad themes this year & back to 1996 $$ Dec 19, 2012
  • Alterra up after deal, analyst positive on Bermuda peers http://t.co/Y5jTB40c Room 4 a new round of consolidation. $MKL buys $ALTE $$ Dec 19, 2012
  • $ALL Bets on Home Insurance as Stock Rally Withstands Sandy http://t.co/XBQOOSB5 Insured damages (excl flood) low4 Sandy; premratesflat $$ Dec 19, 2012
  • Stocks Held Hostage as CEOs Plan Spending Cuts http://t.co/5c7nBKAS It is difficult to avoid deflation; so much uncertainty presently $$ Dec 18, 2012

 

Credit & Fixed Income

 

  • Swaps ?Armageddon? Lingers as New Rules Concentrate Risk http://t.co/QK3s19Hz Clearinghouses r not a panacea; it is possible 4 them 2 fail Dec 21, 2012
  • Americans Hacked Don?t Know Chamber Left Them Alone http://t.co/DSBDUijq Common programs place yr computr @ risk; CoC defends SW makers $$ Dec 21, 2012
  • The Indianapolis 500 of Corporate Bonds Yields http://t.co/dCamXED3 Too much $$ flowing into corporate credit; feels like 2006 Dec 20, 2012
  • India Cash-for-Gold Loans Hide Shadow-Banking Risks http://t.co/BGnO4YWI 2much lending creates a mess; 2much secured lending creates a panic Dec 20, 2012
  • Pimco Sees Spreading Slowdown Boosting [Australian] Bonds http://t.co/oDFSkGoF Pimco buying the debt of fringe developed nations $$ Dec 19, 2012
  • CAB Legislation Expected in January http://t.co/TSuxBmM4 California legislation proposed 2 limit issuance of Capital Appreciation Bonds $$ Dec 19, 2012
  • Why China May Be Facing US-Style Credit Crunch http://t.co/99xMzC3M “To some extent, this is fundamentally a Ponzi scheme,” [Xiao] said. $$ Dec 19, 2012
  • Pimco’s Gross Cuts Back on MBS http://t.co/4FaxLTKq Lightening up on MBS & Corporates, buying developed fringe, sticking w/TIPS $$ Dec 19, 2012
  • Mind the rate risk http://t.co/nVqjlWW9 Rates may stay low 4 a while, but when they run up, total returns could b worse than 1994 $$ Dec 19, 2012
  • Spain House Prices – Deconstructing Spain http://t.co/7ARRPZqS Housing prices continue 2fall, more foreclosures, setting up bad bank fund $$ Dec 17, 2012

 

Energy

 

  • Valero Received Approval 2 Ship US Crude 2 Quebec Refinery http://t.co/ojABCqu1 Could b start of something big: US exports oil FD:+ $VLO Dec 20, 2012
  • Extracting shale oil from a Dead Cow http://t.co/bok4bNE7 Interesting: after the expropriation of Repsol that oil majors line up4more $$ Dec 20, 2012
  • Gasoline at US Pumps Drops to Lowest in a Year on Supply Gain http://t.co/4pI5SXiV Good news coming to users of refined fuel products $$ Dec 19, 2012
  • California refiners dreamin’ of shale oil face hurdles http://t.co/vJgiW4rm Many efforts t get cheap oil 2 CA; $24/bbl price difference $$ Dec 17, 2012

 

Other

 

  • CEOs Concerned about the Time and Cost of Implementing Predictive Analytics http://t.co/QcABrcFH Big data facilitates cluster pricing $$ Dec 20, 2012
  • In the Flesh: The Embedded Dangers of Untested Stem Cell Cosmetics http://t.co/de2aio1V Adult stem cells can do as much harm as good $$ Dec 19, 2012
  • The First Time Tech Ruined the Music Business http://t.co/d0RE4002 As technologies improve all manner of “rights” issues crop up $$ Dec 18, 2012
  • Advisers Question Modern Portfolio Theory http://t.co/lLbCVvgL Look through the security 2 the underlying economics of the investment $$ Dec 17, 2012
  • Twitter has started rolling out the option to download all your tweets http://t.co/IIOVO6mJ Not common yet, but may b coming soon $$ Dec 17, 2012
  • Schools Safer Than 1990s as Educators Anticipate Killers http://t.co/aQaB6G6Q Students r far less likely2b killed in school than elsewhere Dec 17, 2012
  • Highest-Paid California Trooper Is Chief Banking $484,000 http://t.co/JwgYWfg2 Giving officers comp time rather than $$ 4 unused vacation Dec 17, 2012
  • ‘Followers for sale’: Twitter’s very own black market http://t.co/HKCqo074 Fake Follower Check will estimate how many followers r real $$ Dec 17, 2012
  • SEC Says Asset Firm Manipulated Trades to Enrich Some Clients http://t.co/L8IJQ77k I remember their ads, proclaiming their track record $$ Dec 17, 2012

 

Wrong

  • Bad idea: Africa Dreams of Building Telescopes to Study Space http://t.co/gSwkKIBs Would make more sense 4 Africa to fix agriculture $$ Dec 20, 2012
  • Wrong: US should intervene in Nagorno-Karabakh process at the highest level http://t.co/2tJTKtht We should stick 2r own business $$ Dec 18, 2012
  • Wrong: This is why I generally don’t like Quartz; pretending to be smart $$ RT Our favorite charts of 2012 http://t.co/w2bvLDvX Dec 18, 2012

 

Replies & Comments

  • “This would have been a better article if you had put separators between each graph/explanation.” ? David_Merkel http://t.co/uoMy61H1 $$ Dec 21, 2012
  • @EddyElfenbein Thanks, Eddy. Dec 19, 2012
  • @geekpryde Hey, thanks for the kind words, I appreciate that you follow me. Dec 19, 2012
  • @VIXandMore Ludwig is letting us down, and 3 days after his birthday. Call Schroeder 😉 Dec 19, 2012
  • @Alea_ Cool new avatar, I like it Dec 19, 2012
  • @Money_in_Stereo Well said, though I am not an expert there. Thanks for sharing that. Dec 18, 2012
  • @BarbarianCap Hint: if company is offering u a nice buyout, they r offering less than its worth, unless u no more about when u will die $$ Dec 18, 2012
  • @volatilitysmile @carney I knew a close adviser of Mozillo; he told me stories of how disconnected Angelo was w/reality in 2009 $$ Dec 17, 2012
  • @nicster There have been many changes, but they are all local, and don’t make the news. US Govt was stupid on the shoe bomb. Local better $$ Dec 15, 2012

Retweets

  • Amazing RT @moorehn: “the average lifespan of American musical superstars in the pop, rock and rap genre is only 45.” http://t.co/uXVNuStF Dec 20, 2012
  • Practically. Old bond mgr rule: underweight the most rapidly growing debt class $$ RT @ToddSullivan: didn’t they already do student loan? Dec 20, 2012
  • Remember deriving formula when younger $$ RT @munilass: Twelve Days of Christmas and tetrahedral numbers http://t.co/VVNnyU2V (via @ptak) Dec 20, 2012
  • You can say that again $$ RT @japhychron: @AlephBlog Always funny the way they call economics a science. Studying people is anything but. Dec 18, 2012
  • Banks are insolvent & w/large & rapidly growing budget deficit $$ RT @FGoria: DJ: Cyprus May Be Days Away From Default — Fin Min Official Dec 17, 2012
  • Sad & dumb $$ RT @carney: You’d never guess who has a completely self-serving & bonkers theory of the financial crisis. http://t.co/LIAd8WqB Dec 17, 2012

 

Twitter Summary

  • My week on twitter: 72 retweets received, 1 new listings, 85 new followers, 132 mentions. Via: http://t.co/SPrAWil0 Dec 20, 2012

 

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