Macroeconomics – Page 38

Sorted Weekly Tweets

Posted on 30 June 2012 by David Merkel

Eurozone

Germany Signals Shift on Europe Aid http://t.co/AcnaysGz “a common fiscal policy would be irreversible and well coordinated.” $$ Jun 29, 2012
Bermuda on track to comply with EU insurer rules http://t.co/TFdvIr1D If not, cos reinsured could not take full reserve credit;wud lose biz Jun 26, 2012
How Germany?s euro fight has turned Orwellian http://t.co/fjwZFYvb “foreigners shouldn?t overestimate Germany?s financial capacity.” $$ Jun 26, 2012
Hollande Reality Makes French Debt Less Attractive http://t.co/Rroiv8TI Bondholders care about getting repaid. Hollande = higher risk $$ Jun 26, 2012
Germany to Confront United Euro Bloc at Summit http://t.co/vWLyG6ND Time to bring back the D-mark, or, centralize the E-zone into a nation Jun 25, 2012
All the bail-out systems under the sun cannot make the eurozone work http://t.co/apMBQ3FB The loans, at whatever rate, cannot b repaid $$ Jun 25, 2012
Merkel Parries Push for Euro Debt Plan as Growth Outline Agreed http://t.co/JLWa9Ley Merkel repeated ?liabilities & controls go together? Jun 24, 2012
Bundesbank Swipes at Draghi as European Fault Lines Deepen http://t.co/EwRMq9kT Do you want your currency 2b a stable unit of account $$ Jun 24, 2012
Spanish Government in Denial: Banks Need 100B EUR to Recapitalize http://t.co/r1FaA0Lp Eurozone is under stress & estimates capital low $$ Jun 24, 2012

TEXAS SHIFT MAY SHOW WAY OUT OF IMMIGRATION STALEMATE http://t.co/eWN2NYuV Favoring guest-worker programs may break national stalemate $$ Jun 29, 2012
A defense of the tax exemption for municipal bonds (part one) http://t.co/xYV1S4Ft @munilass explains the reasonable nature of the exemption Jun 29, 2012
Congress Would Hate to Lose Its Tax-Code Toys http://t.co/2iifOmcE @cabaum points out that our current policies aren’t working $$ Jun 29, 2012
All municipalities that raise employee benefits without respect for costs deserve bankruptcy: thus Stockon, CA $$ http://t.co/5ZQITDW2 Jun 29, 2012
Pt 2 — individual does not survive, and the fragmentation of the decision makes the interpretation messy; Obama implements asmuch he can $$ Jun 26, 2012
Going to toss out a wild idea on #scotus & PPACA/Obamacare; several concurring opinions get issued overturning aspects of the law, but… $$ Jun 26, 2012
Yield spreads widening, Industrial commodity prices falling. I think those are the main factors. http://t.co/qehXYflS? http://t.co/EKG81LB0 Jun 26, 2012
No such thing as animal spirits, businessmen r cautious w/debt $$ RT @EconTalker: Spending is the consequence of prosperity, not its cause. Jun 26, 2012
Biggest U.S. Banks Curb Loans as Regional Firms Fill Gap http://t.co/kxqgOjwu Lending reduction from bigs is > increase from regionals $$ Jun 26, 2012
Flood Cleanup Continues in Duluth http://t.co/XXNH1oW6 “surge of run-off from the hill made the flood so dramatic.” Duluth flooded? $$ Jun 25, 2012
Stockton, CA Nears Bankruptcy http://t.co/H2GTkjrl Will reduce employee benefit costs; muni bondholders likely be paid $$ 14x Vallejo Jun 25, 2012
States Face Pressure on Pension Shortfalls http://t.co/h1U5PYbE GASB finally gets spine & tells states their pension acctg is liberal $$ Jun 24, 2012

Comments

@RMGSelection They get clones of portfolios that I personally own Jun 29, 2012
@RMGSelection I manage separately managed accounts of stocks and bonds for upper middle class individuals and small institutions Jun 29, 2012
@RMGSelection You’re welcome, but I don’t do Facebook 🙁 Jun 28, 2012
@BubblesandBusts 40% banks; top 10 75%, too much downside risk in a real washout, would rather consider $TEF, $REP, or maybe a CEF… $$ Jun 27, 2012
You’re sounding good, keep it up $$ RT @ReformedBroker: @AlephBlog bob auer from auer growth fund Jun 26, 2012
@ReformedBroker Who was the GARP mgr that you were interviewing late in the 1st hour, and early 2nd hour? Jun 26, 2012
@CLHinkle I don’t know enough about Gina Rainmondo; don’t live there, etc. What little I have seen of her I have mostly liked $$ Jun 26, 2012
“Hard to see how Telefonica $TEF goes bust. 5.4% is a lot of spread… $$” ? David_Merkel http://t.co/P37qVme0 Jun 26, 2012
EJ made its name w/quantitative models of corporate risk; govts aren’t the same $$ RT @fundmyfund: Egan Jones has jumped the shark Jun 26, 2012
RT @TheOneDave: Chemicals ought to come with a U.S. economic warning label. See this Chart of the Day: http://t.co/JgeNLCTI via @Bloombe … Jun 26, 2012
What a chart, but price was lower in April 2000 $$ RT @BarbarianCap: Arch Coal $ACI lifetime low, I think. Jun 26, 2012
RT @historysquared: sustained negative real yields in advanced economies (preceded double digit inflation in the 70s) http://t.co/qAhT1Y6m Jun 26, 2012
Well done! $$ RT @AmyResnick: Well beyond bonds: Digging into reports from muni borrowers : Reynolds Center http://t.co/8VqthumF Jun 26, 2012
Switched back 2 old RT @asymmetricinfo: New Tweetdeck app has broken the ability to follow conversations. Curse you, Tweetdeck developers! Jun 26, 2012
‘ @grossdm Skills that can be used by multiple employers r typically paid for by the employee; company-specific skills by the employer $$ Jun 25, 2012
@moneyscience I didn’t find this compelling; my practical experience in holding multiple auctions says differently http://t.co/eO2OVeHl $$ Jun 25, 2012
@manualofideas I agree, it is hard. But when I was a kid, my friends would say to me, “There r accidents, but Dave, that error took skill.” Jun 25, 2012
@manualofideas there is the risk of continuing to lose money, and no deal emerges… $$ Jun 25, 2012
@saraeisenFX Dissolving the Euro would be the smartest idea, but ideologues insisting on “closer & deeper union” will say otherwise $$ Jun 25, 2012
Diversification: A substitute for knowledge & a poor one $$ RT @EddyElfenbein: The most over-rated investing concept = diversification. Jun 25, 2012
Can also pull into XL http://t.co/iFcz0Hf3 RT @TheStalwart: Wow, you can download all the data on FRED in one big file. http://t.co/yFiymSDu Jun 24, 2012
@manualofideas What I sent to the SEC: http://t.co/vuNGATPK Only 2 pgs long, but offers a simple solution. Let me know what u think Jun 24, 2012
@manualofideas Two pages: http://t.co/vuNGATPK Let me know what you think. I think this is the best proposal so far. Jun 24, 2012

Fraud

New bank theft software hits three continents http://t.co/ImYJHG38 “sophisticated enough to defeat… two-factor authentication” b aware $$ Jun 26, 2012
Greed is an attitude, and it is not good. It is present with people who are addicted to making more. More, more, more? http://t.co/ChDSAB4T Jun 26, 2012
1 Year of Your Life and $100,000: Growing Cost of Medical ID Theft http://t.co/7FUFfmGV Important 2b aware of this new form of ID theft $$ Jun 26, 2012

Market Currents

Do Good Investment Managers Give Away Great Ideas? It?s Entirely Rational According to New Study http://t.co/g00pNfDy @sumzero & Value IC $$ Jun 26, 2012
Tropical Storm http://t.co/J16JmXP7 The same could be said of pricing/trading in the bond market, and few complain about that. $$ Jun 26, 2012
Chesapeake Slumps On Report Of Scheme To Suppress Land Prices http://t.co/HTTKi80j Another cockroach. Y I saw 1 of those yesterday… $$ Jun 25, 2012
Kepos’ quiet touch wins favor among quant funds http://t.co/EG7Dydaj Remains 2b tested. As a quant, how do u avoid crowded trades? $$ Jun 25, 2012

Miscellaneous

In a Shift, Chinese Exporters Cling to Dollars http://t.co/gaEIIW5I As I have sometimes said, it may be that the Yuan is overvalued $$ Jun 29, 2012
Central Banks Commit to Ease as Threat of Lost Decades Rises http://t.co/3h4MPgKn “It?s going 2b very hard for them 2 stimulate demand” $$ Jun 25, 2012
Should Tenure for College Professors Be Abolished? http://t.co/rvk7kena Tenure rewards the past, 2 the possible neglect of the future $$ Jun 25, 2012
Borg Bashes Banks in Sweden Shielding Housing Bubble http://t.co/Z0SISjQC Can a housing bubble be deflated w/o significant fallout? $$ Jun 25, 2012

Don’t Blame Money Market Funds

Posted on 23 June 201224 June 2012 by David Merkel

So SEC Chairman Mary Shapiro wants money market funds to use mark-to-market accounting, and publish a daily NAV.? Well, why not impose mark-to-market accounting on banks, and force them to report the fair market value of their surplus every day? Large depositors over the guaranty limit and the repo market might be interested in this data.? Oh wait, that’s procyclical, so many claim, even though it reveals cash flow mismatches, which are material to the running of a banking business.

There’s a lot of hypocrisy involved in the SEC’s proposals on money market funds.

Banks are a larger problem.? When money market funds fail, the losses are a couple percent on NAV, versus much larger on banks.
Having a balance sheet enables a bank to postpone the day of reckoning; there are more games to play.
Some banks run “money market funds” that are essentially savings accounts, but do not have identified pools of assets behind them.? In an insolvency, a holder of such is a general creditor after FDIC coverage.
Money market funds cost consumers a lot less than banks in order to provide transactional services.? In one sense, money market funds deserve to exist far more than banks — they have a very low asset liability mismatch, asset quality is very high, and they exist to pass through interest earnings on a short-term portfolio.

Money market funds should be treated like book value ETFs.? They should pass through interest net of fees, and impose credit events should the NAV fall below 0.995. [Link to my letter to the SEC]? This is a simple, stable solution, that would not require any regulation beyond that.? It would keep money market fund losses small, end deliver them to holders, not taxpayers. (Even indirectly, by borrowing from the Fed.)

So there are 300+ cases where the sponsors of money market funds put up money or offered loans where money market funds were about to break the buck.? Where Mary Shapiro sees weakness, I see strength.? Isn’t it great that financial organizations, without being required to do so by regulation, kick in their own funds or liquidity in order to preserve the interests of savers? Most banks could never do the same when they are about to go bust.

Money market funds are a way of avoiding the high expenses of banks, and offer savers a decent rate of return.? If there are losses, holders of the money market fund should bear it through a reduction in units, as described in my proposal, unless sponsors generously want to preserve their franchise.

Consumers get a better deal with money market funds.? Those that are in the pocket of the banks argue against money market funds.? I do not ever want the? government to bail out money market funds, and the US Government erred greatly when they did so in 2008.? Those holding money market funds should have borne their small losses.? There would have been little risk from letting money market funds deliver losses to holders.

Those losses were not the cause of the crisis, but the banks with their bad residential mortgage loans.? That was the crisis, and continues to be so, with so many mortgages underwater.

Sorted Weekly Tweets

Posted on 23 June 201223 June 2012 by David Merkel

A note to all of the actuaries in the audience, all three of you 😉 : an old friend from my GIC days is seeking a multi-talented actuary to work in the stable value business.? Must understand how wraps work, etc.? If interested, drop me a note, and I’ll send you the contact info.

On with the tweets:

=-=–=-=-=-=-=-=-=-=-=-=-=-==–=-=-==-=-=-=–==–=-=-=-==–=

Eurozone

May not last long $$ RT @John_Hempton: @AlephBlog Spain imposing on bank junior bonds but prefs in Santander still trading at par! Strange. Jun 23, 2012
Buying Europe Banks Is Easy for Herro as Cheap Stocks Fall http://t.co/gfCOhY8q Key question here is accounting quality; not a buyer $$ Jun 23, 2012
Spain Said to Weigh Imposing Losses on Junior Bank Bondholders http://t.co/cD1hoAVa Fine, but they won’t fund jr debt for 20yrs or so $$ Jun 23, 2012
Spanish Aid Plan Is Flawed, Says IMF http://t.co/9V2FJ0Xc IMF doesn’t like the complexity of the E-Zone, wants it 2 behave like a nation Jun 23, 2012
Debt crisis: Angela Merkel defies Latin Europe and the IMF on bond rescue http://t.co/qTKEAr5O She who pays the $$ calls the tunes Jun 23, 2012
What?s So Special About the Euro Currency Area? http://t.co/oJWyrLAk Currency unions don’t work; must centralize or die $$ Jun 21, 2012
Merkel Balks at Sovereign Debt Purchases to Overcome Crisis http://t.co/UfuN4ae8 Physically, the crisis looks like it is wearing on Angela Jun 21, 2012
Spanish short-term debt costs reach alarm levels http://t.co/Dm8d2bsv Yields high enough that Spain unlikely to grow out of the debt $$ Jun 21, 2012
Cyprus Said to Face Europe Pressure for $13 Billion Aid http://t.co/z0etJBlX Who wants to maintain influence in Cyprus? Russia, E-zone? $$ Jun 20, 2012
‘ @aarontask He might b right. Key Q is how much Germans/Nordics/Dutch view themselves as Europeans 1st rather than Germans/Nordics/Dutch $$ Jun 20, 2012
Greek Leaders Poised to Agree on Three-Way Coalition http://t.co/JvAaPDDj It will be difficult for that coalition 2 hold together $$ Jun 20, 2012
Ma?ana-nomics at Los Cabos http://t.co/GtlAj4lY Weak Europoliticians blame US, when their banking system was overlevered & malregulated $$ Jun 20, 2012
G20 summit: perils of a half-baked rescue for Spain and Italy http://t.co/7E6jPK4W E-zone not ready 2 take strong actions; don’t force it $$ Jun 20, 2012
Is Spain past the point of no return? http://t.co/zCRF7qKo ??I suspect the ECB will have to be the buyer of last resort for Spanish bonds.?? Jun 19, 2012
Saddling Spain With Bank Burden Repeats Irish Error http://t.co/dWgYAUht Protect deposits, not bank bonds, preferreds, or stocks $$ Jun 19, 2012
“Which is why $JPM had the hedge there in the first place $$” http://t.co/o61frAFX Dimon Says ?Firewalls? May Halt Spread of Europe Crisis Jun 19, 2012
Germany set to allow eurozone bailout fund to buy troubled countries’ debt http://t.co/OEFi9UI9 Last refuge of scoundrels:blame speculators Jun 19, 2012
Fran?ois Hollande said meeting btw Ezone & Obama rescheduled4this morning2brief Americans on “mechanisms that allow us to fight speculation” Jun 19, 2012
Spanish Yields at 7% Show Investors Slamming Door http://t.co/JxGxNHDn Spain is slowly passing the “tipping point” into hopelessness. $$ Jun 18, 2012
Where is the relief? RT @jennablan: Where is the relief rally? Jun 18, 2012

FOMC Meeting/Press Conference

Fed Seen Extending Operation Twist and Avoiding Bond Buys http://t.co/qFOSA0rf Fed can’t do nothing, so it does something that is nothing Jun 21, 2012
RT @ezraklein: Hypothesis: Bernanke doesn’t do more because he doesn’t think he can. He says otherwise is because he doesn’t want the ma … Jun 20, 2012
Dr. Bernanke: Couldn?t increased unemployment be structural, after all, there is a lot more competition from labor in emerging markets? Jun 20, 2012
That’s all folks!!! Jun 20, 2012
Dr. Bernanke, Isn?t stagflation a possibility here? I mean, no one expected it in the ?70s either. $$ Jun 20, 2012
Q for Bernanke: If the Fed ever does shrink its balance sheet, what effect will it have on the banks? $$ Jun 20, 2012
Stocks trading off — correlated with future inflation rates; long Treasuries rallying nominal yields falling -> real rates stable-ish $$ Jun 20, 2012
What Bernanke is describing in terms of hedging and risk management has to be done in the insurance industry; actuarial risk analyses Jun 20, 2012
W/MBS rates, those mtges that are underwater don’t benefit, same for Alt-A & Jumbo; low rates don’t help many in residential real estate $$ Jun 20, 2012
Effect of Tsy ylds on corporate yields is stronger 4 AAA-A bonds, moderate 4 BBB bonds, little 4 junk & the effects get weaker w/maturity $$ Jun 20, 2012
That’s the wrap up for the central tendencies and averages of the FOMC’s additional data release. Anyone find those summaries useful? $$ Jun 20, 2012
Changes in Avg Target Federal Funds Rate at Year-End 2012-2014, Longer -0.07%, -0.10%, -0.22%, -0.09% $$ Levels: 0.30%, 0.50%, 1.11%, 4.11% Jun 20, 2012
Average appropriate timing of policy firming moved out 1.6 months to November 2013 $$ Jun 20, 2012
Changes in PCE Inflation central tendency 2012-2014, Longer -0.4)%, -0.07%, -0.12%, 0% $$ Levels: 1.48%, 1.76%, 1.77%, 2.00% Jun 20, 2012
Changes in unemployment central tendency 2012-2014, Longer +0.18%, +0.20%, +0.24%, +0.03% $$ Levels: 8.10%, 7.71%, 7.28%, 5.60% Jun 20, 2012
Changes in real GDP growth central tendency 2012-2014, Longer -0.50%, -0.37%, -0.11%, -0.04% $$ Levels: 2.13%, 2.57%, 3.28%, 2.44% Jun 20, 2012
+1 RT @bondscoop: Steve Liesman is the Fed’s Helen Thomas Jun 20, 2012
Fed wants to see long TIPS up in price relative to long nominal Treasuries. http://t.co/X5Gjt6jI Jun 20, 2012
@TheStalwart #FOMCGuesses OT extended, no QE3, central tendencies move back to where they were in January, shades lang down GDP, CPI, etc $$ Jun 20, 2012
C?mon, Ben, Just Say It; Please, Just Say QE3 http://t.co/ksIKxZ6C Sad that equity guys beg 4 stimulus; think OT extends; no QE3 yet $$ Jun 20, 2012

Rest of the World

Glencore Protests Bolivia’s Move on Mine http://t.co/OcIzatJ5 Bolivia has Venezuela envy; won’t end until Morales is shown 2b a fail. $$ Jun 23, 2012
Children of Mao’s wrath vie for power in China http://t.co/pWzj4Dbq All of the current ruling class survived the Cultural Revolution $$ Jun 22, 2012
Riskier Bets Pitched to Asia’s Rising Rich http://t.co/P6PjFqyR Yield is the oldest scam in the books; Asia’s brokers fleece clients $$ Jun 21, 2012
China warns its rare earth reserves are declining http://t.co/ve2e6PQq I doubt this, but if true -> significant scarcity of rare earths $$ Jun 20, 2012
Britain doomed, apparently http://t.co/WdvPCsxs Countries that don?t reset their systems through default, will experience money decay $$ Jun 20, 2012
Suicides, Arrests Show Trouble at Korean Savings Banks http://t.co/aP1fu6KS Pride drives suicides, rather than confession of wrongdoing $$ Jun 19, 2012
The UN’s Internet Power Grab http://t.co/LE704S74 Never surrender an advantage for no gain; does the Obama administration get that? $$ Jun 18, 2012
The Return of Egypt’s ‘Deep State’ http://t.co/i1IkbmMq Islamists & liberals checkmated by Egyptian Army 4 now. Liberals s/b glad $$ Jun 17, 2012
@dpinsen Agreed, better H/L would have been: “Egyptian Army reveals full control, ends show that played w/democracy 2 smoke out enemies” $$ Jun 17, 2012
Noda Ends Japan Nuclear Freeze, Risking Voter Backlash at Polls http://t.co/Jcoxl91Z He does the right thing, but will the voters agree $$ Jun 17, 2012

Banks

A History of Money Funds http://t.co/KXCpfCDz Let the critics of money market funds apply the same2banks; mark2market accounting. $$ Jun 23, 2012
Bank Investors Dismiss Moody?s Cuts as Years Too Late http://t.co/5cOsGOyG True. Moody’s should’ve done it in 2008; did politics stopthem? Jun 23, 2012
Citigroup Faces $5 Billion on Dollar?s Rise, Peabody Says http://t.co/5HZtJfvx So, on the heels of $JPM, $C has a currency mismatch? $$ Jun 21, 2012
Eminent domain for underwater mortgages could have biggest impact on banks http://t.co/NK9W0PyO Comments at end; disagreement welcomed $$ Jun 20, 2012

Central Banking

Bernanke Acknowledges Tsy Strategy @ Odds W/Fed Policy http://t.co/MqW6qda2 “Thx, Unca Ben 4letting us issue morre 30s” Ben:”Arrrgh!” $$ Jun 23, 2012
The Fed?s second best solution http://t.co/YJhiHbNd “collateral damage will mount, making the next policy steps even more excruciating.” Jun 21, 2012
Fed Born of Morgan?s Bailout Under Scrutiny After Dimon?s Loss http://t.co/7EHPlSvM How significant is it 4 Jamie D 2b on NY Fed board? $$ Jun 19, 2012
Krugman’s Intellectual Waterloo http://t.co/brrRB3CP Suggested possible Fed stimulus: blow housing bubble 2replace tech bubble $$ Jun 17, 2012
Also, the last H/L could have been: “Bernanke?s GDP View Invalidated as Economy Slows” FOMC has been lousy economic forecasters lately $$ Jun 17, 2012
Bernanke?s Inflation View Validated as Commodities Fall http://t.co/pjRKhXWv Median & Trimmed mean CPIs mot falling, better measures $$ Jun 17, 2012

Asset Management

Pimco?s Gross Warns of Risk Assets as Aberdeen Avoids Stocks http://t.co/pcqnMis6 Bill Gross signs on to deflation late & promotes it $$ Jun 23, 2012
Private Equity Has Too Much Money to Spend on Homes http://t.co/VPToSU8I Big buyers need to stay quiet if they want 2 make good returns $$ Jun 22, 2012
Simon Lack responds to AIMA’s hedge fund cheerleading http://t.co/VQq4s1O8 Backfill bias, IRR vs Buy&Hold, high fees, survivor bias $$ Jun 21, 2012
At 40,000 feet, Fidelity’s Danoff ponders Groupons http://t.co/BwOKJR8X Danoff is a survivor; he’s right it’s lonely 2b a stockpicker $$ Jun 21, 2012
Very good point. Wall Street is a 1-note Sam RT @chadstarliper: Has there ever been a time when Wall St didn’t think stocks were “cheap?” $$ Jun 20, 2012
Wall Street says stocks are bargains, but that assumes surging profits http://t.co/0c0iDdK6 Or at least growing sales w/flat profit mgns $$ Jun 20, 2012
America?s $8T corporate debt market faces liquidity drought as banks retreat from the trade http://t.co/rvXwFsjW Shouldn’t b that bad $$ Jun 19, 2012
Equities entail less risk than ?haven? investments http://t.co/u3befAMT Ain’t necessarily true; think of the Great Depression or 1871 $$ Jun 19, 2012
Valuation Matters…. Equity vs Bonds Edition http://t.co/23IikMDJ Earnings ylds v Tsy ylds unstable; Q-ratio, CAPE10, Price/resources bettr Jun 19, 2012
Biggest Stocks Beat S&P 500 Most in 13 Years as Valuations Fall http://t.co/7vLxG6VN Once valuations get so low, they must go up $$ Jun 18, 2012

Companies

DuPont selling Conoco at oil mkt trough $$RT @BarbarianCap: “Delta seals deal to buy Pennsylvania refinery” > hasn’t that been tried before? Jun 23, 2012
DuPont buying Conoco at oil mkt peak $$ RT @BarbarianCap: “Delta seals deal to buy Pennsylvania refinery” > hasn’t that been tried before? Jun 23, 2012
J.C. Penney Falls After Francis Leaves Amid Strategy Flop http://t.co/jfAVGj3V Rare setback 4 Ackman/Pershing on $JCP; retail is tough $$ Jun 20, 2012
Buffett Extends Real-Estate Bet With ResCap Pursuit http://t.co/ZsN6J0Pm Buffett is early, in my opinion, but has the capital to do it $$ Jun 18, 2012

Pensions

US public retiree benefits gap grows to $1.38T http://t.co/7bZ18GRB Gap widened by $120 billion since last year; thx Ben 4 low discnt rates Jun 20, 2012
Joe Nocera Is Wrong About Woonsocket’s Crisis http://t.co/Z3RM9UGO Harder2discharge muni “pension” bonds than renegotiate muni pensions $$ Jun 20, 2012
GM Seen Fueling Pension Deals as Employers Face Shortfall http://t.co/noz9auU0 Hope $MET & $PRU survive; guaranty funds limited in size $$ Jun 19, 2012
Terminal funding of DB pension plans will be a growing phenomenon if corps/states bite bullet and kick in more $$ to fund annuity purchases Jun 19, 2012
Problem to annuitants is companies can go broke; no PBGC coverage of annuities, and state guarantees r usually limited 2 $100,000 total $$ Jun 19, 2012

Media

Love the Leaker, Hate the Leak http://t.co/wiY7RwJU Value of releasing sensitive govt data to the public is in the eye of the beholder $$ Jun 21, 2012
How David Weidner Changed My Life http://t.co/g9LVJIWD @reformedbroker – how getting on @davidweidner ‘s Top 10 list gave him a big boost $$ Jun 19, 2012
+1 won’t watch RT @ReformedBroker: Bloomberg PR pushing their Meredith Whitney interview video hard today. They haven’t gotten the memo yet. Jun 19, 2012
Wrong: 20 rules that can save you from the Doomsday Cycle http://t.co/jLB0s2pL Why does Marketwatch give Paul Farrell space 2 write? $$ Jun 19, 2012
So long, suckers ? I?m leaving Wall Street http://t.co/x1Ju1fmZ David Weidner: Some lessons from 15 years observing the industry $$ Jun 19, 2012

Miscellaneous

Liquidity, Noise, and Signal http://t.co/cV15Mr2z Shorter the time period-> higher ratio noise/signal; leads2bad trades @ turning points $$ Jun 21, 2012
‘ @JATranfo Never criticized ECRI when out of favor; FWIW, I reverse-engineered their main model: industrial commod pxs & credit spreads $$ Jun 21, 2012
Lawmakers Push for Overhaul of IPO Process http://t.co/qhh7tX1V Every “fix” creates its own set of problems. Mania can hit auctions 2 $$ Jun 21, 2012
Yes $$ RT @Fullcarry: A point I have made many times in the past: the drop in yields the past decade is mostly due to a drop in real rates. Jun 20, 2012
Housing Starts in U.S. Fall 4.8% in May on Apartments http://t.co/PhMFwHQL Interesting contrary data; $EQR chart http://t.co/vleXkVAM $$ Jun 19, 2012
Asians Top Immigration Class http://t.co/Sir2IFxQ Certainly noticeable here in Ellicott City; most businesses have signs in Korean $$ Jun 19, 2012
Poorly reasoned: Court-Ordered Care ? A Complication of Pregnancy 2 Avoid http://t.co/DqmhsvkU Mothers w/child in womb uniquely affect child Jun 18, 2012
Please follow @jarrodwilcox, He has taught me many things, and I respect him a great deal #FF Jun 17, 2012
A Jewish-Asian Couple?s Union Leads to a Scholarly Interest in Intermarriage http://t.co/U3jfPkyK Both ethnic groups prize education $$ Jun 17, 2012

Comments

DavidMerkel’s discussion on “The New Yorker’s Newest Writer Is a Big Self-Plagiarist” http://t.co/g1i0YeF4 Writing belongs2those that paid Jun 20, 2012
“High energy particle physics is only a small part of science, and not adequate to measure the?” ? David_Merkel http://t.co/T4BrvWBj Jun 20, 2012
“Please, accidents per passenger mile would be better, rather than: “He also pointed to the fact?” ? David_Merkel http://t.co/Yg6r5N3X Jun 20, 2012
RE: @bloombergview Maybe DC city govt should start a reality TV show, w/prizes 2 the official who commits the most cr? http://t.co/lIXL6eMi Jun 20, 2012
RE: @bloombergview ?How will you deal with deferral of individual taxes on investment from DC plans, unrealized CGs, ? http://t.co/NY0Q3Ia5 Jun 20, 2012
“Cool picture, Ed. Thanks for sharing it.” ? David_Merkel http://t.co/Mg9lx0ij Jun 19, 2012
“Hitting the fiscal cliff won’t happen, and that’s too bad, because we need to discuss long-term imbalances” ? D_Merkel http://t.co/csiaLXlV Jun 19, 2012
“Here is a proposal for how rating agencies could be eliminated: http://t.co/rLrOK4vu…” ? David_Merkel http://t.co/q2mxmhpW Jun 19, 2012
“I trust ratings agencies more than mismanaged governments. Ratings are needed to provide?” ? David_Merkel http://t.co/vOdPJvzv Jun 19, 2012
“If this is representative of what the ruling Greek coalition will do, the government will fail?” ? David_Merkel http://t.co/HEe4GwHt Jun 19, 2012
“Much as we may dislike financial fraud, suggesting that those in the US that mismanaged their banks?” ? David_Merkel http://t.co/fEZQIo0h Jun 19, 2012
‘ @FilmCriticOne You say u want tax reform, but ur willing2let value grow untaxed through deferral? Get real; ability2defer is the issue $$ Jun 16, 2012

Dimon for Fed Secretary

@dlevineMW @moorehn and pay cut. The same rumors were applied to Hank Greenberg $AIG 4 Tsy Secretary user Bush, Sr. Said the same then $$ Jun 19, 2012
Jamie kind2let us live in his world 😉 RT @ReformedBroker He’s hedging the Senate w/the House right now, y’all r just pawns in a bigger game Jun 19, 2012
Why should Jamie accept the demotion? $$ RT @moorehn: This is just Jamie practicing for confirmation hearings as Treasury Secretary, right? Jun 19, 2012

Tax Policy

Tax Panels Turn Focus to Investments http://t.co/sq6AnHdE Best poss is lowering corp tax rates, equalizing all tax rates for individuals Jun 23, 2012
How to Kill the Corporate-Income Tax http://t.co/T5MgnVuD Evens out personal income tax rates by class. Good, but what about deferral? $$ Jun 20, 2012

Book Review: The Decline and Fall of Europe

Posted on 21 June 201221 June 2012 by David Merkel

This book is written by a man who wants to see the European experiment succeed, but is not confident that it will succeed.? I think this is a fair book on the topic; it does not absorb all of my biases on why I think the Eurozone is hopeless: a) Currency unions have never worked; they must either become a nation, or break up.? b) I have a saying, “Governments are smaller than Economies, and Economies are smaller than Cultures.”

This saying puts things in their place.? Government can’t in the long run prevent things that are economically successful, those things fill human needs.? But cultures are bigger than economies; we don’t live to consume. We live for ideals.? Different cultures have different ideals, and it means that a purely individualistic or collectivist view of economics won’t be accepted in the Eurozone.? They muddle in the middle.

The Eurozone is a political and economic experiment, and was pretty successful and harmless until they began to seek a common currency.? Yes, there were other problems, bureaucrats in Brussels, seeking human perfection though regulation, helped to strangulate a previously more competitive Eurozone economy.? That said, the common currency offered some offsetting advantages of efficiency.

Other Troubles

But there are other troubles.? There are unaffordable pensions in many countries that lie behind that economic problems.? As one who is 51, and well off, why should anyone, aside from oil wildcatters, who endure a lot of physical stress retire at age 50 on the largess of the taxpayers, that is, if you have taxpayers.

Even retiring at age 60 is ridiculous, which France has recently reverted to from 62.? France will never be able to afford it as a nation.

But then there are cultural issues: do you care what your laws are?? Would you care if immigrants are ruled by Islamic Law?? Would you care if your grandchildren, a minority like the Maronites (Roman Catholics) in Lebanon, are ruled by Islamic Law?

The Main Economic Issue

After all of the strangu-regulation, what if economies can’t grow at levels sufficient to exceed the rates at which they borrow?? They slowly fail, as debts grow, and doubts about repayment grow.

In the Euro-zone this is particularly pertinent, because countries can’t depreciate; they must repay in Euros.? When the Euro was introduced it was heaven for many nations, because they could borrow cheaply.? Eventually, they had too much debt, and lenders rebelled.

This is the nature of an area that is not a natural currency area — the Eurozone.? This was an experiment doomed to fail.

Quibbles

None, but I would be a full Euro-sceptic.? This can’t work.? More effective human labor is always better than less.

Who would benefit from this book:?? If you want to learn about the problems in the Eurozone from someone that is fair, you will find it here.? If you want to, you can buy the book here: The Decline and Fall of Europe.

Full disclosure: The PR flack asked me if I wanted the book, and was kind enough to send me the book.

If you enter Amazon through my site, and you buy anything, I get a small commission.? This is my main source of blog revenue.? I prefer this to a ?tip jar? because I want you to get something you want, rather than merely giving me a tip.? Book reviews take time, particularly with the reading, which most book reviewers don?t do in full, and I typically do. (When I don?t, I mention that I scanned the book.? Also, I never use the data that the PR flacks send out.)

Most people buying at Amazon do not enter via a referring website.? Thus Amazon builds an extra 1-3% into the prices to all buyers to compensate for the commissions given to the minority that come through referring sites.? Whether you buy at Amazon directly or enter via my site, your prices don?t change.

Redacted Version of the June 2012 FOMC Statement

Posted on 20 June 2012 by David Merkel

Comments

Operation Twist is extended for six months, but there is no amount set for it.? Looks like an oversight, then again, they may not have a lot of bonds three years and shorter to sell.
The changes are significant, because in the space of one meeting, they went from things are good to things are bad.? They shaded down their views on GDP growth, employment, inflation, and household spending.
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.
Also, the reinvestment 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.
Do they want the yield on 30 year TIPS to go negative?? Looks that way.
GDP growth is not improving much if at all, and the unemployment rate improvement comes more from discouraged workers.? Inflation has moderated, but whether it will stay that way is another question.

Questions for Dr. Bernanke:

Is it possible that you don?t really know what would have worked to solve the Great Depression, and you are just committing an entirely new error that will result in a larger problem for us later?
Why do think extending the period of accommodation by a little more than two years will have any significant effect on the economy, aside from stock and bond prices?
Discouraged workers are a large factor in the falling unemployment rate. Why do you think the economy is doing well?
Couldn?t increased unemployment be structural, after all, there is a lot more competition from labor in emerging markets?
Why do you think that 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?
Why will reinvestment in Agency MBS help the economy significantly?? Doesn?t that only help solvent borrowers on the low end of housing, who don?t really need the help?
Isn?t stagflation a possibility here?? I mean, no one expected it in the ?70s either.
Could we end up with another debt bubble from keeping short rates so low?
If the Fed ever does shrink its balance sheet, what effect will it have on the banks?

Best of the Aleph Blog, Part 17

Posted on 19 June 2012 by David Merkel

These articles appeared between February and April 2011:

On the Percentage of Market Cap held by Domestic Stock ETFs

Implications

Domestic stock ETFs tend to pick more volatile stocks.

Domestic stock ETFs tend to pick stocks held by major institutions.

Domestic stock ETFs tend to pick stocks less held by insiders.? (They tend to be more boring.)

Goes Down Double-Speed

Bear markets move at 1.9x the rate of bull markets. (double speed)

Consider the Boom in the Bust; Consider the Bust in the Boom

We would all be better off if policymakers thought at least half a cycle ahead in the credit cycle. Sadly, they are linear thinkers, and would be better off working at the county landfill, if they qualified for such authority.

Critical Analysis of Buffett?s Annual Letter

Critical Analysis of Buffett?s Annual Report

Analyzes Berkshire Hathaway in 2011.? Points at the growth in debt at BRK, and concentration risk in the subsidiaries.

Musings on Yield

Why you should not use yield as a criterion for investment.

On the Usefulness of Yield Spreads

So what does this tell us?

There is a credit factor that effects yields, and the effect on Baa bonds is roughly 1.5x that of Aaa bonds.

As Treasury yields get lower, Baa bond yields rise at roughly 45% of the rate.? There is the nominal yield need ? even Baa bonds tend to need a certain nominal yield, particularly for 20+ year bonds.

Present yield levels are fair for long Baa bonds, to the extent that Moody?s measures them accurately.

On Con Men

So avoid complex investments.? Particularly avoid investments that you don?t understand.? At minimum, find a competent friend, or some neutral party that will look at the deal.? If you can?t find such a friend/party, don?t do the deal.? The friend is important, because he does not want you to come to harm, or lose you as a friend if things go bad.

Three Years from Now

There are real advantages to managing for the intermediate term.

Responding to a Bright Reader

Why I started a bond product.

Things are not as good as they look

Analyzing economic statistics when they don’t sound right.

Limits: Models, Governments, and Central Banks

Most writers say the governments and central banks are all-powerful.? I disagree, and I try to explain why.

Regarding David Sokol

Regarding David Sokol, Redux

Regarding David Sokol, Part 3

Regarding David Sokol, Part 4

The growing sentiment, though ahead of the crowd, that David Sokol should leave Berkshire Hathaway.

Everything Old is New Again in Bonds

On unconstrained mandates and managing for total returns with bonds.

When I was Young

What I went through in investing in my younger days.? Taught me a lot.

When Everything is Strong

When Everything is Strong, Redux

When the only thing weak is high quality bonds, what do you do?

It Would Have Happened Already, Redux

What do you do when all you hear are consensus opinions?

Sorted Weekly Tweets

Posted on 16 June 2012 by David Merkel

Eurozone

Spain Grazing Junk Status Fuels Contagion Risk http://t.co/bEvUbpcE Life is tough near the tipping point; EZone unstable by design $$ Jun 16, 2012
A Conversation on Europe’s Political Economy with George Friedman and John Mauldin http://t.co/HysUyF2N Can EZone politics work? $$ 9min vid Jun 15, 2012
ECB Tells Court Releasing Greek Swap Files Would Inflame Markets http://t.co/pASYdDNC All-wise ECB tells us we can’t handle the truth $$ Jun 15, 2012
Central Banks Warn Greek-Led Euro Stress Threatens World http://t.co/fwFSb7wr Central Bankers will dilute the curncys2pay bank ruptures $$ Jun 15, 2012
Draghi Hints ECB Is Ready to Act http://t.co/dG4QRLTE Nobody else is doing much, so Draghi takes the next step 2 $$ looseness #FTL Jun 15, 2012
Merkel?s options: Pay, inflate, or else? http://t.co/6iyl3f0H If the Germans want2keep EZone, must give up @ least 1 of their goals $$ Jun 15, 2012
Bond Parishioners Are Leaving The Euro Church http://t.co/szDlBJ5m “Liquidity never cures solvency problems which is exactly where we r now” Jun 14, 2012
David Rosenberg Channels Felix Zulauf http://t.co/7g7JN8e5 High debt levels combined w/inflexibility of Euro make solutions tough $$ Jun 14, 2012
Germany and Greece: a tale of estrangement http://t.co/2YFZ2xDY Greece was probably hopeless, but Germany raised/dashed expectations $$ Jun 14, 2012
Switzerland joining the Eurozone would have to join the EU; would not solve the currency problem but merely make the problem permanent $$ Jun 14, 2012
The Dangers of Switzerland’s Currency Strategy http://t.co/ryydgM5Q Switzerland should join the euro http://t.co/zdotnFSb $$ Jun 14, 2012
I would love to meet Angela Merkel & discuss the Eurozone w/her, but I know my limits, i am not important enough 4 that 2 happen $$ Jun 13, 2012
?German history teaches us compellingly that isolation would spell disaster,” I don’t agree, and think dissolving the Euro would b best $$ Jun 13, 2012
Spanish, Italian Yields Leap Higher http://t.co/KkIgKyYJ How long, to the point of no return? $$ Jun 12, 2012
Whole world feels soggy $$ RT @agnestcrane: So much for the Spanish bank bailout bounce. Dow down 1.24%, 10-Yr Tsy back below 1.6%. Jun 11, 2012
RT @historysquared: ?We cannot push through a banking union when the French have just cut their retirement age to 60 and we have raised … Jun 11, 2012
Greek Blackouts Risked as Power Companies? Cash Runs Out http://t.co/qtOOodzG When does Greece finally realize their nation has failed? $$ Jun 11, 2012
Italy Moves Into Debt-Crisis Crosshairs After Spain http://t.co/SDEe8FQm That’s the nature of contagion; In the EU contagion is ragin’ $$ Jun 11, 2012
+1 $$ RT @Queen_Europe: Well, the Spanish might be too big to bail but at least they hold their press conferences on time. #BeingGerman Jun 09, 2012

Energy

Venezuela’s Massive Oil Reserves ‘Irrelevant’? http://t.co/rhEZlZXJ Highlights Chavez’s mismanagement of industry, especially crude oil $$ Jun 15, 2012
Nationalised oil can deliver output growth http://t.co/o0ssVqXb Overly laudatory piece praising the virtues of state-run oil companies $$ Jun 15, 2012
Unconventional oil to alter geopolitical balance http://t.co/RABAp9FT Balance may get tilted, but I would not expect self-sufficiency $$ Jun 14, 2012

Financial Sector

Duke, GE Tempt Savers With Higher Yield Than Money Funds http://t.co/3HJ3BKzK I would be careful; single creditor risk w/no gtees $$ Jun 16, 2012
Jamie Dimon Welcomes You to the Next Financial Crisis http://t.co/6oyULAic Could $JPM make $$ anticipating EZone finl crisis? from @moorehn Jun 15, 2012
Why it’s time for higher interest rates http://t.co/xjmZMNub Sheila Bair takes on Paul Krugman & Ben Bernanke’s overly loose $$ policy Jun 15, 2012
Americans See Biggest Home Equity Jump in 60 Years http://t.co/Yq5nHxtn Another bright spot, but still lotta mtges r inverted $$ Jun 14, 2012
Large Institutions Discuss New Marketplace for Bonds http://t.co/t9j4sEtk Few holders, large lot sizes, usually self-liquidating $$ Jun 14, 2012
Private Equity Has 2 Much Money to Spend on Homes http://t.co/VPToSU8I Don’t get how many residences can b managed @ reasonable expense $$ Jun 14, 2012
@mickwe Thanks, Mick, I get it. I have “traded” illiquid securities in my life and have a feel for when claims r invalid. $$ Jun 13, 2012
Mortgages Beating Junk Bonds as Homes Top Europe http://t.co/HTjhcz7T Mkt more accepting of nonconforming mtge risk than Eurozone or junk Jun 13, 2012
‘ @GaelicTorus Cool, hexadecimal yields. There are only 10 types of people in the world, those that get binary, and those that don’t $$ Jun 12, 2012
Loophole at MF Global Is Headache for Regulators http://t.co/P1xUc1Y5 Except Corzine, senior execs weren’t registered w/regulators $$ Jun 12, 2012
Why do I get so many pump&dump scams in the mail? I’m getting tired of the liars that call themselves analysts who profit from promoting $$ Jun 12, 2012
In other words, the crisis hit people who thought they were well-off because of overpriced housing assets; this really isn’t news $$ Jun 12, 2012
Family Net Worth Fell Almost 40% Between 2007-2010 http://t.co/W4rfdy1o Effect largest on 2nd wealthiest quintile $$ Jun 12, 2012
Wrong: Hedges’ Assets: $5 Trillion http://t.co/1fcWfhWK Mkt habitat 4 HFs limited by relatively efficient mkts & volatility avoidance $$ Jun 12, 2012
Banks seek to offload risk on insurers http://t.co/6laka8hb Check my comment at the end; I am dubious that this would work. $$ Jun 12, 2012
Panel Finds U.S. and Europe Behind Schedule on Financial Rules http://t.co/zGlSjrG6 Not too surprising regulating financials is complex $$ Jun 11, 2012
Bond Bubble Dismissed as Low Yields Echo Pimco?s New Normal http://t.co/lRtwy360 How do you guarantee receiving value in the future? $$ Jun 11, 2012
Need Money? Just Ask Your Customers http://t.co/Ce6pj7QL Clever move by companies raising $$, but people who lend to them r patsies $$ Jun 11, 2012

Rest of the World

With Tax Deal, Japan Deals Initial Blow to Big Debt Problem http://t.co/U5srcgjK Japan still has to fight their population shrinking $$ Jun 16, 2012
Ex-Soros Adviser Fujimaki Says Japan May Default by 2017 http://t.co/n0G6TBAC Disagree that Japan will precede Eurozone $$ $FXY Jun 15, 2012
Rain, Pests Imperil India?s Wheat Crop as Warehouses Full http://t.co/Qib0xsck What 2do w/a bumper crop that came at the wrong time? $$ Jun 14, 2012

Political

Harvey Golub: A Simple Tax Code Is a Fair Tax Code http://t.co/hwUwbVfE Similar2my proposals: focuses on defn of income, not tax rates $$ Jun 15, 2012
Scalia represents the Constitution, which is against Obama and Bush’s Imperial Presidency views. He may be sarcastic? http://t.co/rEc5icLe Jun 15, 2012
Inequality: It?s Even Worse Than We Thought http://t.co/hMkbGXBp Highlights Warren Buffett’s ability to avoid capital gains taxation. $$ Jun 14, 2012
That said, inequality is unavoidable in a productive society, because some people work harder or smarter than others $$ Jun 14, 2012
@StockTwits It’s really difficult to get a muni bond to default. Ch 9 allowed in 48% of states, even then state approval sometimes needed $$ Jun 14, 2012
Medicaid Fraud Audits Cost Five Times Amount U.S. Found http://t.co/E3Z5d2zt Can’t win 4 losing here. How to fight Medicare fraud? $$ Jun 14, 2012
Romney Aide Oversees Fundraising That Makes Him Cash, Too http://t.co/mMQdDf7e Zwick definitely works hard, but he gets a lot for it. $$ Jun 13, 2012
‘ @FrankButcherr If something similar happened in an SEC-regulated context, charges could b brought. But I am not an expert here. $$ #CFTC Jun 12, 2012
Obama to Revisit Economic Debate http://t.co/AVbVrgzV A Presidency of Excuses http://t.co/6gv8rkT1 Is fiscal multiplier positive? $$ Jun 12, 2012
Odd if there is no CFTC regulation that says if you acting in a regulated capacity but you aren’t registered to do so, that’s not a crime $$ Jun 12, 2012
States Remain Cautious Even as Finances Improve http://t.co/hAHCBq8F Things better but c this pensions article http://t.co/RQ4PMswj $$ Jun 12, 2012
Familiar w/author; good guy knows his stuff RT @jasonzweigwsj: who is to blame for the state & municipal budget crisis? http://t.co/YMkU2a9h Jun 12, 2012
Obama?s formula for more economic growth? More government http://t.co/eMw5UYiR Obama only has hammer; everything looks like a nail to him $$ Jun 11, 2012
@lorriebarkins My friend Cody Willard would say,”flip it,” so I say, “teach them to vote against Republicans and Democrats.” Both r fools $$ Jun 10, 2012

Company & Industry News

Truckers as Leading Indicator Show Stable U.S. Economic Growth http://t.co/irRAJpNm Bright spot amid punk economic conditions $$ Jun 14, 2012
GM’s Chief Labors to Get Rebuilt Car Maker Into Gear http://t.co/dFmKObdy New $GM was not in bankruptcy long enough 2 kill old GM $$ Jun 12, 2012
RT @ampressman: @AlephBlog They’re saying it now so justices can point to it in fantasy opinions, just like the majority in Citizens United Jun 12, 2012
Wrong: Insurers Stand Firm on Benefits http://t.co/aQ0NxDiu These changes will disappear due2 competitive pressure post-strikedown $$ Jun 12, 2012
Patents may not be as valuable post-Posner’s ruling in the $GOOG – $AAPL trial. Can’t patent basic things. http://t.co/L4rIhlkc $$ Jun 12, 2012
Companies Shape Curricula in New University Partnerships http://t.co/LhkAI3qi Good in some ways; wonder if this limits creativity? $$ Jun 11, 2012
Best Time for Best Buy Bid Now as Founder Exits http://t.co/41B34pdm Really doubt $BBY goes private; deteriorating erns, internet competes Jun 11, 2012
+1 RT @StockTwits: Love This! – Famous judge spikes $AAPL v $GOOG case, calls patent *system ?dysfunctional? http://t.co/WXOjNmmi via @gigaom Jun 09, 2012

China

China one-child policy leads to forced abortions, mothers’ deaths http://t.co/JiwypM8q Yes, forced abortions in China & don’t care 4 moms $$ Jun 16, 2012

Market Factors

Foreigners Snap Up Properties in the U.S. http://t.co/4oeyYAey Offers wealthy foreigners options in a crisis & for vacations/college $$ Jun 12, 2012
Junk Yields Fail to Deter Investors Seeing No Recession http://t.co/YPeNc1HP Remember, the junk bond mkt works on a yield not spread basis Jun 12, 2012
@fuzzyinvesticle @dpinsen I put more trust in the Q-ratio, CAPE, Price/Resources, & @eddyelfenbein ‘s view stock market as a bond measure $$ Jun 12, 2012
The Two Reasons Stocks Won’t Get as Cheap as They Did in 1982 http://t.co/QXXjdUCc Reasons: low int rates, high buybacks. Not convinced $$ Jun 11, 2012
Counting on an Inheritance? Count Again. http://t.co/1Z0cnjkl Far more likely that u will support your parents than receive a bequest $$ Jun 11, 2012
Impressed w/ @saraeisenFX Asks great questions of Marc Faber http://t.co/pgDzHIhf & George Papandreou http://t.co/hgn8K Buy #video $$ Jun 11, 2012
@newrulesinvest I also admire and voted for Terrance Odean & Jason Zweig; they are bright men who deserve attention by all. $$ Jun 11, 2012
@BoydRoddy Thank you Roddy, and I am honored to be mentioned in the same sentence as the estimable @John_Hempton. $$ Jun 11, 2012
. @lorriebarkins I teach people about money so that they will b wiser; wise people r less easily taken by hucksters & popular fads $$ Jun 10, 2012

Miscellaneous

Just felt weird, but I laughed $$ RT @ReformedBroker: We Are All Rajat Gupta Now. Not sure what that means, just felt right. Jun 15, 2012
‘ @GaelicTorus It’s my opinion that markets don’t create liquidity; they reflect the native liquidity of the asset being traded $$ #testidea Jun 14, 2012
@Pfro That’s not my experience. We have come so far on racism in the US that my adopted black children haven’t experienced it. $$ Jun 12, 2012
RT @ToddSullivan: Keep hearing people tell High School Grads “these are the best years of your life” …what a terrible message to send … Jun 11, 2012
RE: @wstreetallstars Wow, Cody, very glad that you survived.? What an ordeal.? Praying for you, and those near you. http://t.co/HcuU6R89 Jun 11, 2012
@asymmetricinfo Brings meaning to the phrase “Lied like a finance minister on the eve of the devaluation.” Jun 11, 2012

Might not be so Bad

Posted on 15 June 2012 by David Merkel

Here’s one thing I am not worried about: suppose the Bush tax cuts go away, and the budget is cut pro-rata.? That would be a good thing.? I have always believed in balanced budgets.? Yes, restoring balance may be painful for a little while, but the results are usually good after a “big bang,” whether that is a default, currency conversion, or massive privatization.

Why are balanced budgets good? Duh, they are sustainable, particularly if they are done on an accrual basis, which is not the norm.? Sustainable government budgets engender confidence in businesses and individuals, because they sense stability, and stability encourages growth.? Businessman can plan sensibly, because they have a sensible government.

I don’t think the economy would do badly in this scenario.? Hopefully, we would clear out the least valuable programs (I dream), and the taxes raised were not counted on by those subject to the change.

I don’t think this would have a big effect on the US economy.? So Congress can’t agree; that is good, because it forces cuts that Congress would never make given their disagreements.

This is the next best thing to a balanced budget amendment.? Eliminate Keynesian idiocy, and manage the economy sensibly, balancing the budget as a normal matter, and don’t use government or central bank policy to moderate it, because that only creates liquidity traps like the one we are in.? (Need I mention that the Fed should either peg to gold, or that it should only have a a double mandate — bank solvency first, inflation second. unemployment does not figure in, largely, because the Fed has no effect on unemployment.)

Let the economy be free, aside from regulating banks tightly; it will be far better than what we currently have.? Regulation of maturity transformation is important because maturity-transformation violates basic asset-liability management rules.? We need to force banks not to take interest rate risk.? No more borrowing short and lending long.? Long-dated lending requires long-dated financing.? Organize society for stability, not boffo profits for banks in the bull phase, and huge losses/bailouts in the bear phase.

I don’t care about short-term pain, so long as we end up in a better spot afterward, with better growth prospects.

Winding Down the Eurozone

Posted on 14 June 2012 by David Merkel

I write this realizing that the dominant reaction might be, “That won’t work.”? Well, I toss out ideas on things like this because they *might* work, amid a situation where things are ugly, and real solutions aren’t appearing.? If you explain to me why it won’t work, that will help me do better in the future.? I don’t respond to all comments due to time constraints, but I do read all comments and I consider them.

We have a lot of problems in the world today, but the one that is the most volatile at present is the Eurozone. The Eurozone has issues, because tries to have one currency across an area where levels of productivity, retirement policy, regulatory policy, etc., vary considerably.

The goals of having an “ever-closer union” are perhaps desirable, if naive. Two can only walk together if they agree on underlying issues — with 17 nations, it is far tougher.

The first step toward a solution, given that all nations have fiat currencies is to acknowledge that you made a mistake in creating the Eurozone.? If you are going to have a fiat currency, you should have some form of taxation authority behind it, and that is not true in the Eurozone.

The second step is to re-introduce individual currencies for each country in the Eurozone.? A Euro would be defined as a weighted average? of the individual currencies in the Euro; the initial weights would stem from the percentage of GDP for the Eurozone as a whole.? Local currencies would be used for local transactions, but the trade in currencies and Euro arbitrage would result in changes in the trading values of the local currencies.? Quarterly, the value of a Euro relative to the local currencies would be redefined by the percentage of GDP the country has compared to the whole of the Eurozone.

The third step is dealing with bankrupt nations.? Solvent nations should not bail out bankrupt nations, but instead, bail out local financial institutions with assets from bankrupt nations the right way — wipe out common and preferred shareholders, and junior debtholders, and make senior debtholders take a haircut.? Protect depositors, but others in the capital structure lose.

Fourth, when things have normalized, take Euros, and force an exchange into the underlying currencies.? The Eurozone is gone, and all of the problems that it created.? Send the Eurozone to the ash-heap of other currency unions; they don’t work.

There will be some complexity here, but the need to undo a major policy error — creating a common currency when there is not a common government, is a significant matter, and the effort to unwind the mess should be pursued.

And now, you can tell me why this won’t work.

Sorted Weekly Tweets

Posted on 9 June 2012 by David Merkel

US State Economics

State Politicians and the Public Pension Cookie Jar http://t.co/NLyWlK2X Politicians don’t cut public pensions b/c they pad own pensions $$ Jun 09, 2012
North Las Vegas Crisis Shows Fragility of Nevada Economy http://t.co/sCnrcmRk Moral laxity of Vegas invites elements that lead2trouble $$ Jun 09, 2012
Wrong: What Scott Walker can teach Barack Obama http://t.co/lpO5hETn When Walker campaigned he did not know he would have a majority in +1/2 Jun 06, 2012
both houses of the legislature. He seized the opportunity & did something bold in order to fix Wisconsin’s finances. Result: Survives recall Jun 06, 2012

US Fiscal Policy

U.S. House May Split Up Package of Expired Tax Breaks http://t.co/hXcmb1Ec Good idea; let each tax break stand on its own &b abolished. $$ Jun 09, 2012
True Capitalists Are Pro-Market, Not Pro-Business http://t.co/HVQjkfk2 Get business special interests out of tax code & govt subsidies $$ Jun 08, 2012
Senate Dealmaker Baucus Turns to Rewrite of US Tax Code http://t.co/naa2hePj Baucus is going to try to gore everyone equally, maybe? $$ Jun 08, 2012
RT @TheOneDave: True capitalists are pro-market rather than pro-business, according to Yale’s Stephen Carter: http://t.co/vQQ64YDa via @ … Jun 08, 2012
Americans Cling to Jobs as U.S. Workforce Dynamism Fades http://t.co/acaAmcGm Inverted Mtge, 2 earners, ec uncertainty reduce flexibility $$ Jun 08, 2012
Teachers Unions Have a Popularity Problem http://t.co/QGqzD8Ys Pct of electorate backing rights of teachers 2 collectively bargain falls $$ Jun 05, 2012
Monetary Aid Coming as Wal-Mart Helps Housing http://t.co/pBBoiRH6 Mixed Bag: QE3, Youth unemployment & being near a WalMart boosts home $$ Jun 04, 2012
U.S. Multinationals Lobby to Alter Tax Rules They Sought http://t.co/7maKR41m Would be better to eliminate, & raise taxes on divs & CGs $$ Jun 04, 2012

US Mortgages & Real Estate

Mortgage Rates Hit New Low, 30-Year Drops to 3.67% http://t.co/BLQGkosE Because housing is not recovering, mtge rates continue to fall $$ Jun 08, 2012
FHA Turns to Investors as Losses Continue to Rise http://t.co/c73e01TU US Govt messes up another lending guarantee area. They always do $$ Jun 08, 2012

Asia

Strong Yen Won?t Survive Japan?s Fiscal Cliff http://t.co/e7P6RyFl Shilling argues that Japan will suffer as it ages & sells govt debt $$ Jun 09, 2012
Ikea to Consider India Entry, Plans More China Stores http://t.co/lfrvVgTY Many difficulties setting up biz in overregulated India $$ Jun 08, 2012
Japan Confronts Flight to Quality With Brutal Yen http://t.co/bWj62zo3 Wondering when the “flight to quality” may no longer benefit Japan $$ Jun 07, 2012
China Cuts Interest Rates for First Time Since 2008 http://t.co/7bIbIdUd Unlikely to do much to stimulate, not much demand 4 loans now $$ Jun 07, 2012
Bad News Piles Up for China’s Economy http://t.co/coT0mfgf Repeated cycles of malinvestment are finally hitting tipping point of failure $$ Jun 07, 2012
Keep tight stops RT @mercenaryjack: Contrarian buy signal $USDJPY RT Japan Confronts Flight to Quality With Brutal Yen http://t.co/D98ax8rH Jun 07, 2012
Japan?s Debt Sustains a Deflationary Depression http://t.co/6sUCexpl As Japan ages & shrinks, will be hard 4 it to maintain economy $$ Jun 05, 2012
Bob Fu: The Pastor of China’s Underground Railroad http://t.co/1HXIypo5 Fascinating tale of life in China & influencing China from outside Jun 04, 2012

?Politics

Brown Challenged Over Dodd-Frank http://t.co/UsRpt5tf Scott Brown best chance at election: pro-business moderate; paint Warren extremist $$ Jun 08, 2012
What’s Changed After Wisconsin http://t.co/rTa0vaWi Don’t normally link2 Peggy Noonan, but the last line was quite a stinger. Jun 08, 2012
“Because Bill Clinton loves politics, he hates losers. Maybe he just can’t resist sticking it to them a little, when he gets a chance.” $$ + Jun 08, 2012
Romney Executive Style Forged in Faith He Rarely Mentions http://t.co/SOOSDnwI He has 2b quiet; there is no upside explaining Mormonism $$ Jun 08, 2012
Hollande Gets Crisis-Protection Tips From Business-Friendly Lyon http://t.co/4emjSYXn Interesting piece; Lyon businessmen guide Socialism $$ Jun 08, 2012
Walker Bets on Brats to Heal Wisconsin as Praise Pours In http://t.co/9Kto2qIA Smart move on Walker’s part after a bitter election fight $$ Jun 08, 2012
Chavez Losing Grip on ?Benjamin? as U.S. Dollars Sought http://t.co/YQ9aLNTp Thier’s law in action in Venezuela http://t.co/mNNp2KzJ $$ Jun 08, 2012
Congressman to Bernanke: Take QE3 Off the Table http://t.co/QpQnU0BZ I’m sorry, but the Fed doesn’t listen 2 Congress; they’re above that $$ Jun 07, 2012
Bernanke Cites Risks, but Doesn’t Signal Action http://t.co/Ew9Nc2K8 Bernanke is a dove, but does not like to telegraph views, only leak $$ Jun 07, 2012
French, Greek Unemployment Rise http://t.co/vKfvrwWY Highest jobless rate in France in a decade and a record unemployment rate in Greece $$ Jun 07, 2012
Hollande Deficit Vow Lures Investors to French Debt http://t.co/25CZUhHS I’ll believe it when I c it. What taxes rise & programs cut? $$ Jun 07, 2012
Merkel Allies Signal Progress on Fund to Pool Debts http://t.co/p8UGaOXr Don’t see how this works economically or politically long-term $$ Jun 07, 2012
RE: @bloombergview Bloomberg’s regulation fails one basic test: “I’d like two sodas, please.”? Very dumb, and he went? http://t.co/GphkCClc Jun 07, 2012

?? Student Loans Held by the Federal Government http://t.co/IsW6eywX When the govt enters a lending business, it typically creates a bubble $$ Jun 06, 2012

?? Obama’s Debt Boom http://t.co/OsPykK3q $$ borrowed & misspent produces no growth; same 4 QE which inflates goods and Hi-Qual asset prices $$ Jun 06, 2012

Wisconsin Voters Head to Polls in Recall Election http://t.co/9pNJvCsL <2% of WI voters uncertain. Most divisive election I can recall.. $$ Jun 05, 2012
Recall Stirs Passion in a Purple State http://t.co/2NsLiisy I think Wisconsin would b more civil if it weren’t recall election $$ #civilwar Jun 04, 2012

Energy

Oil Heads for Longest Weekly Losing Streak in 13 Years http://t.co/Gx0wPKr4 After oil bubble popped in 2008, we went down to $50, not now $$ Jun 09, 2012
Oil Tankers Squeezed as Rates Drop to Lowest Since ?97 http://t.co/dXFAzMw4 Could go lower; what will the bondholders do w/the boats? $$ 😀 Jun 05, 2012
Romney Aversion to Wind-Power Aid Alienating Republicans http://t.co/V7yp3lHE Good. End *all* energy subsidies, especially ethanol. $$ Jun 05, 2012

Bond Markets

Investors Bail on Junk Bonds http://t.co/Iwk1URn2 This is still early, & we lack notable defaults necessary to have a full-scale panic $$ Jun 09, 2012
A Safe Haven in ‘Cat’ Bonds http://t.co/MbXh1KLB Every fixed income subclass eventually underwrites crud in a mania; still waiting here $$ Jun 07, 2012
MF Global and the Risks Looming in the Repo Market http://t.co/AD8XXOGh Should have been a red flag to see Corzine change the core biz $$ Jun 07, 2012
The TIPS curve has become inverted http://t.co/DN0ZHsbY CPI inflation expectation falling in near term; may justify some dumb move by Fed $$ Jun 06, 2012
Thought experiment: What if PIMCO Hi Inc $PHK 70% prem2NAV did a rights offering giving each share a tradable right 2 buy a share @ par? $$ Jun 05, 2012
Quirks of High-Yield ETFs http://t.co/voVBkmvr Good article; I will follow up w/a piece comparing time- & $$ -weighted returns of bond ETFs Jun 04, 2012
In all of the bond furor of last week, anyone else notice that the real yield on the on-the-run 20-yr TIPS went negative? I didn’t either $$ Jun 04, 2012

Eurozone

I like to think that I am pretty imaginative, so, wow! $$ RT @betandbetter: @AlephBlog and the reality of France is worst than u CAN imagine Jun 07, 2012
The rise and fall of European banking http://t.co/94t9dzk2 Lenders retreat within own borders to minimize losses in breakup scenario $$ Jun 07, 2012
4 reasons why the euro will survive http://t.co/PcDpsERP Too painful, Votersr risk-averse, euro is innovative?? & ECB can handle troubles $$ Jun 07, 2012
Spanish, French Borrowing Costs Diverge http://t.co/X2XfTUem Spain had to cut the size of its auction to make it succeed $$ Jun 07, 2012
My Self-Esteem a Mess Is Refrain for Spain?s Unemployed http://t.co/sV7l8Gbq When the economy turns down many other problems occur $$ Jun 07, 2012
Germany Grapples With Role in Rescue http://t.co/dvkQXL38 Will the rest of Eurozone embrace the idea of a Federal Europe? Open question. $$ Jun 06, 2012
Maybe the solution is to send unemployed Greek, Portugese, Spanish, Italian & Irish workers to Germany, there is low unemployment there $$ Jun 06, 2012
“It has brought untold suffering to Europe” http://t.co/JDvp91eq Interview w/Felix Zuluaf, translated from German, regarding the Eurozone $$ Jun 05, 2012
@JackHBarnes @japhychron Maybe define a euro as exchangeable into fixed %s of subcurrencies, and let the subcurrencies trade; learn new wgts Jun 05, 2012
RT @JackHBarnes: How hard would it be to relaunch sub currencys at the N.C.B level, but have a quote vs the Euro as a whole? Dynamic int … Jun 05, 2012
Spain Warns Market Access Being Shut http://t.co/tkr6No7s Spain auctions 2-yr, 4-yr & 10-yr bonds on 6/7, which will tell us a lot. $$ Jun 05, 2012
Germany refuses Eurobonds: http://t.co/RLqELufX Germany would accept eurobonds if full fiscal/banking unification http://t.co/qXcrvsXh $$ Jun 04, 2012
Portugal Props Up Three Banks http://t.co/xJOpX1yP The Eurozone must either centralize, or break into smaller compeatible units $$ Jun 04, 2012

Companies

Intel Can?t Break TV?s Bundles http://t.co/4RUtMAPi Difficult 2encourage a la carte pricing for television shows; few incentives FD: + $INTC Jun 08, 2012
Pushing the PRAM: when chips just can’t get any smaller http://t.co/G7Tcd6hg Fascinating technologies 4 future shrinkage of storage & NAND $$ Jun 08, 2012
Could value investors be the reason a stock’s cheap? http://t.co/xAMVjAqx No, cheap stock is y value investors show; we don’t make it cheap Jun 08, 2012
Big Customers Are Taking Longer to Pay http://t.co/7JS1Nov0 Causes everyone to seek longer financing terms; not a good sign $$ Jun 07, 2012
The (very) bullish case for the American auto market http://t.co/ukPi2GUj Premature to forecast a boom here; credit is not that good $$ Jun 05, 2012
JPMorgan Faces $4.2B Trading Loss, ISI Forecasts http://t.co/0FPsl5bR $JPM looks cheap here, but is it safe here? Almost tempted 2 buy $$ Jun 05, 2012
Hedges Gone Awry Set Back Chesapeake http://t.co/Kw7gUpOD How many times does a hedger lose $$ speculating? Usually once, the last time 😉 Jun 04, 2012

Monetary Policy

Rely on BB2provide dovish $$ policy RT @cabaum1 Bernanke says nothing without committing to anything http://t.co/qCV9J5SF via @BloombergView Jun 07, 2012
Why Everyone Still Wants Dollars http://t.co/9QbDkaxl $$ hegemony will stop when neomercantilistic nations stop subsidizing exporters via FX Jun 07, 2012
Pimco?s Home-Loan Wager Seen as Prescient on QE3 Odds http://t.co/gr8BmHOr Key Q: if QE3, what will the Fed buy? Tsys, Agys, Mtges, other $$ Jun 07, 2012
@ampressman Monetary policy has not been run properly since Volcker left. $$ Jun 06, 2012
RE: @bloombergview Where is your proof that QE works? A stupid idea thought up by ivory tower economists. Rubbish. http://t.co/Wgzpx01I Jun 06, 2012
@GaelicTorus Sorry, disagree. Fiat monetary policy is constrained by the total resources/productivity of an economy @ a given price level $$ Jun 06, 2012
Bill Gross: Global monetary system may be fatally flawed http://t.co/Hm2kIEFD System doesn’t work well if savers don’t earn more than CPI $$ Jun 06, 2012

Economics

Behind every model is an analogy; behind every datum is history; marry the 2, you have a story. Math obscures, doesn’t reveal econ truth $$ Jun 07, 2012
Wrong: What If Speed Traders Competed on Price? http://t.co/jZm0dlOs Moves to lower the tick size have always led to more games, not less $$ Jun 07, 2012
Are Economics PhDs Learning the Wrong Thing? http://t.co/oT5oH9eK If more Economics depts taught philosophy & history would help fix Econ $$ Jun 07, 2012

Resources

Gold Bugs Defy Bear-Market Threat With Soros Buying http://t.co/Q3g6xOwS Gold does well when real interest rates fall, & vice-versa $$ Jun 06, 2012
Exhausting the Earth’s Resources? Not So Fast http://t.co/OZlc0GS5 It will b a long time b4 mining asteroids will b economic. $$ Jun 05, 2012
Next Frontier: Mining the Ocean Floor http://t.co/o7DAp8Oi After years of discussing it, it is finally happening, w/Glencore buying ores $$ Jun 05, 2012

Miscellaneous

Wall Street to Muppets: Thanks for the Love http://t.co/d0KLKPYF Blunt opening: “The dumb money is back.” Equity mutual funds get $$ inflows Jun 06, 2012
10 Things Law Schools Won’t Tell You http://t.co/l5NcIHBd Most of it boils down to oversupply, high training costs, low quality, job lies $$ Jun 06, 2012
Bristol Immune Drug Success in Cancer May Spur Industry Race http://t.co/kivy3JgW Promising therapy awakens immune system 2fight cancer $$ Jun 05, 2012
NRA-Backed Law Spells Out When Indianans May Open Fire on Police http://t.co/8v922BB2 Law will likely not last long; few corrupt cops $$ Jun 05, 2012
AIG Chief Sees Retirement Age as High as 80 After Crisis http://t.co/VF0thYCp A bit of a tin ear as he relaxes at his Croatian villa $$ Jun 04, 2012
IPads on a Plane Let Scoot Save Fuel by Shedding TV Tons http://t.co/50POpeO2 Never realized the entertainment system weighed so much $$ Jun 04, 2012
Q: What Is New and Scary? A: The Revised GMAT http://t.co/Z0LR8dq4 Nu requires test-takers2read & sort complex charts & analyze much data $$ Jun 04, 2012
Iran and Israel Can Agree on This: Rita Jahanforuz Totally Rocks http://t.co/83HxNwsx Jewish Star Remakes Persian Oldies; Fans in Tehran $$ Jun 04, 2012
European Project Trips China Builder http://t.co/7jtu1Q5M Long tale of woe in Poland from accepting lowball bid from Chinese construction co Jun 04, 2012
Good time had by all $$ MT @interfluidity: a mexican lunch in ellicott city with @interfluidity makes for a delightful afternoon. Jun 04, 2012

April 2012	June 2012	Comments
Information received since the Federal Open Market Committee met in March suggests that the economy has been expanding moderately.	Information received since the Federal Open Market Committee met in April suggests that the economy has been expanding moderately this year.	?This year? makes it more of a historical statement, and shades the GDP view down.
Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated.	However, growth in employment has slowed in recent months, and the unemployment rate remains elevated.	Shades labor employment down.? Still thinks there is growth in employment rate.
Household spending and business fixed investment have continued to advance. Despite some signs of improvement, the housing sector remains depressed.	Business fixed investment has continued to advance. Household spending appears to be rising at a somewhat slower pace than earlier in the year. Despite some signs of improvement, the housing sector remains depressed.	Shades down household spending.
Inflation has picked up somewhat, mainly reflecting higher prices of crude oil and gasoline. However, longer-term inflation expectations have remained stable.	Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable.	Shades down ?their view of inflation. TIPS are showing virtually unchanged inflation expectations since the last meeting. (5y forward 5y inflation implied from TIPS.)
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.
The Committee expects economic growth to remain moderate over coming quarters and then to pick up gradually. Consequently, the Committee anticipates that the unemployment rate will decline gradually toward levels that it judges to be consistent with its dual mandate.	The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate.	Shades down its views of future GDP growth.
Strains in global financial markets continue to pose significant downside risks to the economic outlook.	Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook.	No real change.
The increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily, and the Committee anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.	The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.	Declares victory in their view on energy prices.
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 expects to maintain a highly accommodative stance for monetary policy.	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 expects to maintain a highly accommodative stance for monetary policy.	No change.
In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.	In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.	No change.
The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September.	The Committee also decided to continue through the end of the year its program to extend the average maturity of its holdings of securities. Specifically, the Committee intends to purchase Treasury securities with remaining maturities of 6 years to 30 years at the current pace and to sell or redeem an equal amount of Treasury securities with remaining maturities of approximately 3 years or less. This continuation of the maturity extension program should put downward pressure on longer-term interest rates and help to make broader financial conditions more accommodative.	Extends Operation Twist for six months.? Doesn?t say how much.
The Committee is maintaining its existing policies 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.	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.	I guess the renewal of Operation Twist changes the language here.
The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.	The Committee is prepared to take further action as appropriate to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability.
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; Sarah Bloom Raskin; 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; 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.	Adds in the two new doves; can?t have enough groupthink.
Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.	Voting against the action was Jeffrey M. Lacker, who opposed continuation of the maturity extension program.	Does this mean Lacker is on board with policy accommodation through 2014?? Don?t think so, but maybe a reporter should ask.