Category: Real Estate and Mortgages

Redacted Version of the January 2013 Version of the FOMC Statement

Redacted Version of the January 2013 Version of the FOMC Statement

Posted on by David Merkel
December 2012 January 2013 Comments
Information received since the Federal Open Market Committee met in October suggests that economic activity and employment have continued to expand at a moderate pace in recent months, apart from weather-related disruptions. Information received since the Federal Open Market Committee met in December suggests that growth in economic activity paused in recent months, in large part because of weather-related disruptions and other transitory factors. Shades GDP view down, finally.

Remember when the FOMC cited the Tsunami in Japan for economic weakness that would soon go away?? More grasping at straws.
Although the unemployment rate has declined somewhat since the summer, it remains elevated. Employment has continued to expand at a moderate pace but the unemployment rate remains elevated. No real change.

So long as discouraged workers increase, this is a meaningless statement.
Household spending has continued to advance, and the housing sector has shown further signs of improvement, but growth in business fixed investment has slowed. Household spending and business fixed investment advanced, and the housing sector has shown further improvement. Shades up their of business investment
Inflation has been running somewhat below the Committee?s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable. Inflation has been running somewhat below the Committee?s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable. No change.? TIPS are showing rising inflation expectations since the last meeting. 5y forward 5y inflation implied from TIPS is now at 2.86%.

The FOMC is wrong on inflation.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. No change. Any time they mention the ?statutory mandate,? it is to excuse bad policy.
The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. The Committee expects that, with appropriate policy accommodation, economic growth will proceed at a moderate pace and the unemployment rate will gradually decline toward levels the Committee judges consistent with its dual mandate.? Emphasizes that the FOMC will keep doing the same thing and expect a different result than before. Monetary policy is omnipotent on the asset side, right?
Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. Although strains in global financial markets have eased somewhat, the Committee continues to see downside risks to the economic outlook. Shades up their views of the financial markets.
The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective. No change. CPI is at 1.7% now, yoy, so that is quite a statement.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month No change.

Does not mention how the twist will affect those that have to fund long-dated liabilities.

Wonder how long it will take them to saturate agency RMBS market?

 
The Committee also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and, in January, will resume rolling over maturing Treasury securities at auction. and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. No real change.? Operation Twist continues.? Additional absorption of long Treasuries commences.? Fed will make the empty ?monetary base? move from $3 to 4 Trillion by the end of 2013.
Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. No change.
The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will closely monitor incoming information on economic and financial developments in coming months. No change. Useless comment.
If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability. No change.
In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases. No change.? The FOMC promises what it cannot know or deliver.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. No change.

Promises that they won?t change until the economy strengthens.? Good luck with that.
In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee?s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee?s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. Not a time limit but economic limits from inflation and employment.

Just ran the calculation ? TIPS implied forward inflation one year forward for one year ? i.e., a rough forecast for 2014, is currently 2.41%.? Here?s the graph.? The FOMC has only 0.09% of margin in their calculation if they are being honest, which I doubt.

 
The Committee views these thresholds as consistent with its earlier date-based guidance.   The inaccurate sentence is deleted.
In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. New sentence.? Giving yourself an out clause on the hard-and-fast promises made above?
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. No change.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Charles L. Evans; Jerome H. Powell; Sarah Bloom Raskin; Eric S. Rosengren; Jeremy C. Stein; Daniel K. Tarullo; and Janet L. Yellen. No change
Voting against the action was Jeffrey M. Lacker, who opposed the asset purchase program and the characterization of the conditions under which an exceptionally low range for the federal funds rate will be appropriate. Voting against the action was Esther L. George, who was concerned that the continued high level of monetary accommodation increased the risks of future economic and financial imbalances and, over time, could cause an increase in long-term inflation expectations. Esther George takes up the thankless task of telling the FOMC that they are doing more harm than good.

?

Comments

  • I really think the FOMC lives in a fantasy world.? The economy is not improving materially, and inflation is rising. Note that the CPI is close their 2.5% line in the sand.? TIPS-implied inflation 1X1 (one year ahead for one year) is 2.41%, and 5X5 is 2.86% annualized.
  • Current proposed policy is an exercise in wishful thinking.? Monetary policy does not work in reducing unemployment, and I think we should end the charade.
  • In my opinion, I don?t think holding down longer-term rates on the highest-quality debt will have any impact on lower quality debts, which is where most of the economy finances itself. When this policy doesn?t work, what will they do?
  • Also, the investment in Agency MBS should have limited impact because so many owners are inverted, or ineligible for financing backed by the GSEs, and implicitly the government, even with the recently announced refinancing changes.
  • The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.? As a result, the FOMC ain?t moving rates up, absent increases in employment, or a US Dollar crisis.? Labor employment is the key metric.
  • GDP growth is not improving much if at all, and the unemployment rate improvement comes more from discouraged workers.

A Statement to Dr. Bernanke:

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

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

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

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

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

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

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Central Banking

 

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

 

Rest of the World

 

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

 

Market Impact

 

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

 

Billionaires

 

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

 

Personal Finance

 

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

 

Banks and Investment Banks

 

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

 

Economic Policy

 

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

 

States & Municipalities

 

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

 

Companies

 

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

 

Miscellaneous

 

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

 

Financial Blogging

 

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

?

Painting Kate Middleton

 

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

 

 

Michael Pettis

 

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

 

Wrong

?

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

 

Comments and Retweets

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

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FWIW

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

Sorted Weekly Tweets

Posted on by David Merkel

Basel III

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  • 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

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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

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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

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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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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

 

Evaluating Regulated Financials

Evaluating Regulated Financials

Posted on by David Merkel

Dear readers, I repost here an edited version of what I shared with a Linked-in group:

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

I took Benefit-Cost Analysis from Dr. Hanke of Johns Hopkins in 1980, and so I never gained the benefit of his current proprietary tweaks to the Discounted Cash Flows model for stock valuation.? That said, application of DCF to any regulated financial company is difficult, because not all of the capital is free to be deployed into investment in new business, stock buybacks, or dividends.

The level of required capital at a regulated financial varies with the risks of the blocks of business (liabilities) that it underwrites, the assets they buy with the proceeds from the liabilities, and the cash flow, currency and other mismatches between the assets and the liabilities.

The marginal amount of capital for new business and investments may be significantly different than what is required for old business.? So here is my question to the group, especially the students, to think about: how would you apply your DCF model to a situation like this?

Notes, Mostly on Financials

Three final notes: 1) If you want to experiment with this, here are five very different insurers that are my current favorites: RGA (life reinsurance), ENH (P&C insurance & reinsurance), AIZ (Life, P&C, Warranties, Pensions & Individual Health), SFG (disability), & NWLI (Life insurance and annuities sold to foreigners for flight capital).? Try applying the model to one, and see what you get.

2) Most real risk in large financials does not come from inadequacy of capital, but from borrowing short and investing/lending long.? The key measure is whether an institution has enough high-quality short-term assets to meet a run on the institution, where those that supply funds to the institution demand them back at the same time.

With life insurance companies, failures occasionally happen from a run on the company (General American and ARM financial in 1999), but more often, because regulators think the capital base has shrunk too much because of bad credit risks, and take the company into conservation. (Pacific Standard, Confederation, Kentucky Central, near-miss w/The Equitable, etc.)

With P&C insurers and reinsurers, failure happens because bad underwriting leads to a shrinkage of capital, and the regulators take them into conservation. (Think of Reliance and Saul Steinberg, though a lot of reinsurers were de facto bankrupt in the mid-1980s, but the regulators didn’t catch them.)

With small banks and thrifts, it?s credit problems versus capital.? Liquidity does not usually play a role because of deposit guarantees.

With large banks, it is illiquid and longer assets versus short financing.? In the recent crisis, much of that came from financing mortgage inventories in the repurchase market, where financing had to be renewed daily, and margin requirements in derivative financing that had to be adjusted daily.? In the latter case, a credit downgrade would trigger a need for more capital to be put up as margin, just at the time when liquidity was scarce.? In the former case, deteriorating prices for the assets financed in the repurchase market led to an increase in the capital haircut, requiring more liquidity out of the borrowers at the time they could least afford it. (AIG, Wachovia, Countrywide, etc.)

Finally, remember that the financial markets are talkative.? No one wants to hold unsecured credit from a bank they think will go broke, so if there is a reasonable doubt on failure, liquidity dries up because other banks stop dealing with you (Bear Stearns, Lehman Brothers, Merrill Lynch, etc.)

As an example in my own life, back when I managed and traded corporate bonds back in 2002, when the market was feeling a lot of stress, I joked with my broker, ?Hey, is XYZ Corp trading flat yet??? (With most corporate bonds, when you settle a trade, the pro-rata portion of the next interest payment is added to the price.? A bond like XYZ Corp, when its solvency is doubtful, the dealers start settling bond trades assuming it will not make another payment.)? He told me that it was not trading flat.? The high yield manager, Ed, sitting next to me, after the call ended said, ?Just a matter of time.?

Half an hour later, my broker that talked with before called me back, and in an edgy voice said ?XYZ Corp is now trading flat!? and quickly ended the call.? Ed looked at me and said, ?Dave, don?t do that again.?

Liquidity is plenteous when you don?t need it, and scarce when really needed.? Remember that when investing in financials.

3) The Baltimore CFA Society gives significant discounts for students that want to attend our meetings.? $10 gets you a $30 meal and an interesting speaker or two, so consider yourselves invited.? Next meeting on January 11th is one of our bigger ones.? You even get to meet the aforementioned ?Ed.?

Full disclosure: long RGA, AIZ, NWLI, ENH, SFG

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

 

Redacted Version of the December 2012 FOMC Statement

Redacted Version of the December 2012 FOMC Statement

Posted on by David Merkel
October 2012 December 2012 Comments
Information received since the Federal Open Market Committee met in September suggests that economic activity has continued to expand at a moderate pace in recent months. Information received since the Federal Open Market Committee met in October suggests that economic activity and employment have continued to expand at a moderate pace in recent months, apart from weather-related disruptions. Remember when the FOMC cited the Tsunami in Japan for economic weakness that would soon go away?? More grasping at straws.
Growth in employment has been slow, and the unemployment rate remains elevated. Although the unemployment rate has declined somewhat since the summer, it remains elevated. So long as discouraged workers increase, this is a meaningless statement.
Household spending has advanced a bit more quickly, but growth in business fixed investment has slowed.? The housing sector has shown some further signs of improvement, albeit from a depressed level. Household spending has continued to advance, and the housing sector has shown further signs of improvement, but growth in business fixed investment has slowed. No real change ? just word order differences
Inflation recently picked up somewhat, reflecting higher energy prices.? Longer-term inflation expectations have remained stable. Inflation has been running somewhat below the Committee?s longer-run objective, apart from temporary variations that largely reflect fluctuations in energy prices. Longer-term inflation expectations have remained stable. Shades down their view of inflation, blaming energy prices. TIPS are showing rising inflation expectations since the last meeting. 5y forward 5y inflation implied from TIPS is now at 2.97%.? The FOMC is wrong on inflation.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. No change. Any time they mention the ?statutory mandate,? it is to excuse bad policy.
The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. The Committee remains concerned that, without sufficient policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions. Emphasizes that the FOMC will keep doing the same thing and expect a different result than before. Monetary policy is omnipotent on the asset side, right?
Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. No change.
The Committee also anticipates that inflation over the medium term likely would run at or below its 2 percent objective. The Committee also anticipates that inflation over the medium term likely will run at or below its 2 percent objective. No change. CPI is at 2.2% now, yoy, so that is quite a statement.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee will continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month. No change.

Does not mention how the twist will affect those that have to fund long-dated liabilities.

Wonder how long it will take them to saturate agency RMBS market?

 
The Committee also will continue through the end of the year its program to extend the average maturity of its holdings of Treasury securities, and it 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. The Committee also will purchase longer-term Treasury securities after its program to extend the average maturity of its holdings of Treasury securities is completed at the end of the year, initially at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and, in January, will resume rolling over maturing Treasury securities at auction. Operation Twist continues.? Additional absorption of long Treasuries commences.? Fed will make the empty ?monetary base? move from $3 to 4 Trillion by the end of 2013.
These actions, which together will increase the Committee?s holdings of longer-term securities by about $85 billion each month through the end of the year, should put downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative. No real change.
The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will closely monitor incoming information on economic and financial developments in coming months. No change. Useless comment.
If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until such improvement is achieved in a context of price stability. Explicitly says that they will buy more long Treasuries.
In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases. In determining the size, pace, and composition of its asset purchases, the Committee will, as always, take appropriate account of the likely efficacy and costs of such purchases. The FOMC promises what it cannot know or deliver.
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens. To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. No change.

Promises that they won?t change until the economy strengthens.? Good luck with that.
In particular, the Committee also decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that exceptionally low levels for the federal funds rate are likely to be warranted at least through mid-2015. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee?s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. Not a time limit but economic limits from inflation and employment.

Just ran the calculation ? TIPS implied forward inflation one year forward for one year ? i.e., a rough forecast for 2014, is currently 2.01%.? The FOMC has only 0.49% of margin in their calculation if they are being honest, which I doubt.

Next time, I will provide a graph.
  The Committee views these thresholds as consistent with its earlier date-based guidance. New sentence, and it is not accurate.
  In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. New sentence.? Giving yourself an out clause on the hard-and-fast promises made above?
  When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. New sentence. So what?
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Jerome H. Powell; Sarah Bloom Raskin; Jeremy C. Stein; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen. Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; 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. No change
Voting against the action was Jeffrey M. Lacker, who opposed additional asset purchases and disagreed with the description of the time period over which a highly accommodative stance of monetary policy will remain appropriate and exceptionally low levels for the federal funds rate are likely to be warranted. Voting against the action was Jeffrey M. Lacker, who opposed the asset purchase program and the characterization of the conditions under which an exceptionally low range for the federal funds rate will be appropriate. Lacker sharpens his hopeless dissent against a flock of doves.? I like that he is opposing the QE, as well as the foolish promises regarding Fed funds.

Unlike the rest, he cares about the institutional reputation of the Fed, and thus opposes asset-side policies.

?

Comments

  • I really think the FOMC lives in a fantasy world.? The economy is not improving materially, and inflation is rising. Note that the CPI is over their 2.2% line in the sand.? TIPS-implied inflation 1X1 (one year ahead for one year) is 2.01%, and 5X5 is 2.97% annualized.? Both of these measures have continued to rise since the last meeting.
  • Current proposed policy is an exercise in wishful thinking.? Monetary policy does not work in reducing unemployment, and I think we should end the charade.
  • In my opinion, I don?t think holding down longer-term rates on the highest-quality debt will have any impact on lower quality debts, which is where most of the economy finances itself. When this policy doesn?t work, what will they do?
  • Also, the investment in Agency MBS should have limited impact because so many owners are inverted, or ineligible for financing backed by the GSEs, and implicitly the government, even with the recently announced refinancing changes.
  • The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.? As a result, the FOMC ain?t moving rates up, absent increases in employment, or a US Dollar crisis.? Labor employment is the key metric.
  • GDP growth is not improving much if at all, and the unemployment rate improvement comes more from discouraged workers.

A Statement to Dr. Bernanke:

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

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

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

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

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

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

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Credit Markets

 

  • Credit Suisse Raises $802M CLO; Prudential Closes Fund http://t.co/RbXDgtPU Watch arb from creation of CDOs & CLOs: clue 2 bond rally end Dec 01, 2012
  • Caisse Thinks Bond Party Is Over? http://t.co/j6lWdJjA Shifting $$ from bonds 2 infrastructure; usually good though liquidity is underpriced Dec 01, 2012
  • Bond Yields May Fall Short of Corporate Pension Fund Needshttp://on.barrons.com/VkWekV Bonds in DB plans r4 risk reduction not just yield $$ Dec 01, 2012
  • My point is that it is difficult to tell whether we will be getting inflation or deflation. My bond portfolios are barbelled: long &short $$ Nov 30, 2012
  • Investors Unprepared for Bond Danger, BlackRock?s Rosenberg Says http://t.co/56kv1CrS B wary of owning 2 much or 2 little long bonds $$ Nov 30, 2012
  • Safe or junk, bonds in bubble trouble http://t.co/Nd5iEYPy Fuss told the summit in New York there was evidence of “a spread bubble” $$ Nov 28, 2012
  • Overnight Rates Surge in Fed?s Operation Twist http://t.co/xwvKCPGb Large supply of short Treasuries raises Repo rates over LIBOR $$ Nov 26, 2012

 

Muni Markets and Pensions

 

  • Bankruptcy threat back on the table in Pennsylvania city as filing ban ends http://t.co/NgMGQs2Z Will b tough to stiff muni bondholders $$ Dec 01, 2012
  • Calpers Seeks to Sue San Bernardino Over Pension Payments http://t.co/xv0OqQV9 Will have2show a place in CA law/constitution reqrng pmt $$ Nov 28, 2012
  • Fierce Debt Puts Pensions at Risk in Puerto Rico http://t.co/w2oGk8YW Future curse: May u starve like a Puerto Rican pensioner! Uh, yeh $$ Nov 27, 2012
  • Proponents of pension reform face steep hurdles http://t.co/n2AYvghT Choose: raise taxes, reduce services, attempt constitutional change $$ Nov 26, 2012
  • San Bernardino?s ?Toxic Politics? Snarl Calpers Debt http://t.co/N4YWPCTD Be careful what you put into your city’s Charter. $$ Nov 26, 2012

 

Market Dynamics

 

  • The Great 2012 Cashout http://t.co/i4lZvD0c Special dividends r coming fast & furious; last call 4 low tax rates; next stop: Caymans $$ Dec 01, 2012
  • Wells Fargo CEO: ‘Bad players are gone’ from finance http://t.co/AwSGY8gz FD: + $WFC | Sadly, false. There may be fewer, but not all gone $$ Nov 30, 2012
  • Nontraded BDC sales on a tear despite closing of first fund http://t.co/ML7oVkIu Poison, beware. BDCs are bad enough w/o the illiquidity $$ Nov 30, 2012
  • Beware the Smart Money: Hedge Funds Issue Sell Signal http://t.co/HXBKD5ZO When fast money is “all in” it just takes a jolt2make mkt fall $$ Nov 30, 2012
  • Home Equity Loans Make Comeback Fueling US Spending http://t.co/3WULRzOO We never learn, we never learn, we never learn, we never learn $$ Nov 27, 2012
  • Private-Equity Managers Make Moves as Tax Increases Near http://t.co/eKKsH5w6 refinancing investments, accelerating gains, etc. $$ Nov 26, 2012
  • The Faustian Bargain between States and Banks http://t.co/gGUHGWIa I lend 2u, u lend 2me. I lend 2u, u lend 2me. What could go wrong? $$ Nov 26, 2012
  • The Manufacturing Boom You Won’t Notice http://t.co/R62nFiae Productivity continues 2 improve -> more mfg in US, but not more mfg jobs $$ Nov 26, 2012
  • Overlooking Overvaluation http://t.co/nWfA1KMe Hussman interacts w/long-term valuation measures. He finds the market overvalued $$ #whatelse Nov 26, 2012
  • Everything You Know About Investing is Wrong http://t.co/v8wAYPg6 Single-vble measures of valuation fail in short-run, some in long-run $$ Nov 26, 2012
  • The prior BB article is a little deceptive, because regulated entities use them under regulation. Many r quite safe, like auto ABS, etc. $$ Nov 24, 2012
  • Shadow Banking Grows to $67 Trillion Industry, Regulators Say http://t.co/houN2uhM Many are SPV securities held by banks & ins cos $$ Nov 24, 2012

 

Companies

 

  • How a desperate HP suspended disbelief for Autonomy deal http://t.co/qv1vIWcQ If $HPQ had been focused on organic growth, wouldnta happened Nov 30, 2012
  • Berkshire Hathaway, CaixaBank Agree to Reinsurance Deal http://t.co/RDQqXhMl Berky hasn’t done well w/Life Re — I would be cautious $$ Nov 30, 2012
  • Google Has Officially Eaten the Newspaper Industry http://t.co/TGqEWK7T $GOOG now has more advertising revenue than all print media $$ Nov 28, 2012
  • Investors Demand CEO Face Time http://t.co/4CPugaAV CEO griping about time spent on investors is wrong; a good CEO is Mr. Outside $$ Nov 28, 2012
  • Global Steel Industry Faces Capacity Glut http://t.co/DhU7BaWa We need to see 20% of the steel industry fail b4 buying steel stocks $$ Nov 28, 2012
  • Lehman Sells Archstone in Deal Worth $6.5B http://t.co/f2V5K7tk Losses taken; Lehman more liquid; Sam Zell lives 2 gravedance $$ $EQR $AVB Nov 27, 2012
  • $AMZN ‘s bond offering will b a bit of a “museum piece.” I.e. unusual issuer unlikely to issue more; should get tight deal spreads $$ yld<2% Nov 26, 2012
  • $ICOA Says $GOOG Didn’t Acquire the Company http://t.co/y3XXagL7 Whoever put out the press release will be an easy target 4 the SEC $$ Nov 26, 2012
  • France to ArcelorMittal: if you don?t like losing money, get out of France http://t.co/gYQ31NOk Invisible foot punishes France 4 bad policy Nov 26, 2012
  • Flowers Foods Sizes Up Hostess http://t.co/4DYwu6p6 Might buy brands, marketing arrangements, factories., etc. Won’t hire unions $$ $FLO Nov 26, 2012

 

Central Banking

 

  • Japan?s Ill-Fated Experiment With Money Doctoring http://t.co/OgCSJ4KB Interesting tale of Asia conquest; what does it imply 4 the US? $$ Nov 30, 2012
  • The death of volatility? http://t.co/04RNO7z1 “Central bank puts have done a great job of removing tail risks.” for now h/t: @izakaminska Nov 29, 2012
  • When the Credit Transmission Mechanism Breaks? http://t.co/HvCddUDh While we r delevering monetary policy won’t work well. h/t: @pragcap $$ Nov 28, 2012
  • The Indiana Jones economy http://t.co/GqjOk5Ql @izakaminska explains how economic transmission mechanisms r short-circuited by hoarding $$ Nov 28, 2012
  • Brazil real jumps as central bank eclipses Mantega http://t.co/xUpU6tE2 Loose developed mkt $$ polcy forces choice: exports or inflation? $$ Nov 26, 2012

 

Politics & Policy

 

  • Mortgage interest rate tax deduction scores political points ? but little else http://t.co/xiaLfUkT Limit to $20K of interest $$ @hnmoore Nov 30, 2012
  • IMNSHO, the PPACA was designed to destroy the parts of the US health care system that worked well, in order 2 move 2a single-payer system $$ Nov 30, 2012
  • Unaffordable Cost Seen for Some Under Affordable Care Act http://t.co/iEPsMhdh When this law goes live in 2014, people will hate it $$ Nov 30, 2012
  • In D.C., Social-Media Surveillance Pays Off http://t.co/XkLcZ3nm What they glean from social media aids service to constituents $$ Nov 29, 2012
  • 10 Things the SEC Won’t Tell You http://t.co/QOfbkvhC 11) U r your own best defense; we can’t help u much if u r stupid, b skeptical $$ Nov 28, 2012
  • Going to college is not of itself a good thing economically. You have to choose something that will pay off if you dare borrow money $$ Nov 28, 2012
  • Federal Student Lending Swells http://t.co/Wvi2d6vT We need to eliminate student loans. They do more harm than good. $$ Nov 28, 2012
  • Time running out on debt ceiling http://t.co/iZ6BLqdP Follows months behind the “fiscal cliff.” Will probably cause as much angst. $$ Nov 27, 2012
  • “Y is the burden of proof on those who want 2 return 2 the proven statutory & regulatory approaches of the past?” http://t.co/GJuNCS1X $$ Nov 26, 2012
  • Disabled parents face bias, loss of kids: report http://t.co/SvW3g3Xn Found this 2b disturbing; govt should avoid meddling w/families $$ Nov 26, 2012
  • A Minimum Tax for the Wealthy http://t.co/THiT0YGK Let Warren pay tax on his deferred gains in $BRK.A shares, & pay the large DTL also $$ Nov 26, 2012

 

Rest of the World

 

  • China?s over-investment problem http://t.co/WJVLvnMD IMF working paper says what China skeptics have said for years: 2 much investment $$ Nov 30, 2012
  • China Mafia-Style Hack Attack Drives California Firm to Brink http://t.co/cmnb4qco Chinese hackers steal software & hack software firm $$ Nov 28, 2012
  • A UK Exit From EU Offers No Promise of Better Fortunes http://t.co/TBmi6as7 EU is a failed experiment; Y should the UK continue there? $$ Nov 28, 2012
  • French jobless total hits 14-yr high http://t.co/NYdjc6Rs Francois Hollande getting costly economics lessons, paid4 by the French people $$ Nov 27, 2012
  • China Wage Gains Hurt by Weaker Profit Damp Consumption http://t.co/tESRToBZ Malinvestment leads2 lower profits, then wages can’t grow $$ Nov 27, 2012
  • China?s nemesis: bribes, banquets and backslapping http://t.co/D7V7yF06 Difficult 2 develop highly when rule of law is not followed $$ Nov 26, 2012

?? Sovereign CDS trading plummets http://t.co/jKBj47bv Will eventually lead discretionary holders to lighten sovereign positions $$ Nov 26, 2012

  • Egyptian Army allowed Morsi in2 power 2 avoid riots & allow him 2 mess up, so that Egyptians would support military rule again. US wins 2 $$ Nov 26, 2012

 

Wrong

 

  • Wrong: Misconceptions 101: Why College Costs Aren?t Soaring http://t.co/nZWYKQSQ Doesn’t square w/the rise in delinquent student loans $$ Nov 28, 2012
  • Wrong: Obama To Meet Romney Tomorrow Amid Fiscal Cliff Talks http://t.co/2VfO7Fxz Doesn’t Obama realize Romney has no power in the GOP? $$ Nov 28, 2012
  • Wrong: Fed’s Easing Yields Hidden Benefit http://t.co/6bJejPB1 1994 is not 2013. The banks/financials/households were in good shape $$ Nov 28, 2012
  • Taleb Mishandles Fragility http://t.co/qIGbLQHl Taleb needs new ideas, but does not perceive that. He is mired in the past. $$ Nov 28, 2012
  • Russell Napier’s “Most Important Chart In The World” http://t.co/XYKdagZm While we’re at it let’s reprise the Nikkei vs Nasdaq charts $$ Nov 28, 2012

 

Other

 

  • THE FUTURE OF DIGITAL [SLIDE DECK] http://t.co/RabKP5EC Good but long piece from BI on the future of digital media $$ Nov 30, 2012
  • Alleged Insider Group Includes Website Editor http://t.co/Llnmz2aE In general insider info is a curse to the upright; ties your hands $$ Nov 30, 2012
  • Texas Feral Hog Wrecks Mark Losing Battle With Animals http://t.co/TMPpFNh6 This is Texas, no one said anything about losing. $$ Nov 29, 2012
  • He Carries On, She Likes to Check http://t.co/4D1Fd5Td Men and women are different when they fly. This explains it. $$ Nov 29, 2012
  • . @izakaminska is a favorite writer of mine. She helps me with the nuances of tightly nested markets, finding the variable that is valuable Nov 29, 2012
  • American Housing Casino Revives After Big Drop: Mortgages http://t.co/lZmmHo9s Setting up conditions for the naive 2 lose again $$ Nov 28, 2012
  • FHA?s Biggest Loser: No-Money-Down Mortgages http://t.co/bJgwTdtV Surprise! Lend2 someone w/nothing 2 lose & they default a lot more $$ Nov 26, 2012

 

Teaching Math

 

  • Helping Parents Score on the Homework Front http://t.co/7FPGjA0n 6-yr olds should not be doing fractions. Parents aren’t the problem $$ Nov 28, 2012
  • The push to think abstractly about math does not work w/kids. You can start with girls around 13, boys around 14; misguided idealism $$ Nov 26, 2012
  • Children learn math best through drill, giving way to problem-solving, giving way to algebra (abstraction), further abstraction Calculus Nov 26, 2012
  • A New Kind of Problem: The Common Core Math Standards http://t.co/VGxxQGqr This is as bad as the “New Math” of the 1960s; utterly idiotic $$ Nov 26, 2012

 

 

Retweets

 

  • RT @prchovanec: Market should be rooting for China to buckle down to real econ adjustment, not hit yesterday’s growth targets with yeste … Dec 01, 2012
  • Would put the fraction at 80%, but I agree $$ RT @GMRobertson: if they are risk free they are solely for risk reduction, IG is about 2/3 so Dec 01, 2012
  • Wow! RT @prchovanec: Chinese company debt climbed to 122% of GDP in 2012 from 108% last year, highest level in 15 years http://t.co/ujKmHpTx Dec 01, 2012
  • Probably $$ RT @merrillmatter: @hnmoore I think eliminating (slowly) the 2nd home tax deduction is more palatable and possible. Nov 30, 2012
  • Blameworthy RT @grossdm: anybody ask boehner about the time he voted for massive new medicare entitlement without a funding mechanism yet? Nov 30, 2012
  • +1 RT @jonsticha: as is mine. Large bets on rates either way are a bad bet IMO Nov 30, 2012
  • RT @MuniTrader: @AlephBlog completely agree. credit risk front end, high coupon quality on the back end. pretty obvious but best way to … Nov 30, 2012
  • RT @PlanMaestro: If you don?t know enough to know about the business instantly, you won?t know enough in a month or in two? ? Buffett H/ … Nov 29, 2012
  • Needs2meet an actuary RT @TheStalwart: James Galbraith is only economist who talks about lowering the retirement age http://t.co/3srMzYX3 Nov 29, 2012
  • Recognizing reality, & verbally shading down fwd GDP $$ RT @carney: What does the beige book change from “moderate” to “modest” growth mean? Nov 28, 2012
  • Thanks, still think Eurozone should dissolve, replace w/mere free trade zone $$ RT @euromoney: Another take (quick): http://t.co/WxSquHKf Nov 28, 2012
  • RT @John_Hempton: Nassim Nicholas Taleb is a humourless git… and his publishers censor the internet. Do not buy his book… http://t.c … Nov 28, 2012
  • RT @munilass: Over 300 drone strikes and 2,500 people killed without a policy in place for when such attacks should be authorized http:/ … Nov 27, 2012
  • To the best of my knowledge, never RT @merrillmatter: do humans ever (in toto, as a society) voluntarily deleverage? Nov 27, 2012
  • Sad but true RT @AppFlyer: we never learn. Nov 27, 2012
  • That’s a big gap w/Moody’s @ Baa1 – S&P looks at balance sheet, Moody’s at Income Stmt? $$ http://t.co/C4wCNzaM RT @jonsticha: AA- @ S&P Nov 26, 2012
  • Rated Baa1 $$ RT @SimoneFoxman: RT @chrisadamsmkts: Amazon is today set to issue its first bond in more than a decade http://t.co/k03iJNi4 Nov 26, 2012
  • That’s why we homeschool RT @Nonrelatedsense: @AlephBlog pull kids from public schools if you can afford it. Nov 26, 2012
  • Bigtime $$ RT @Pawelmorski: Though anyone who thinks Canada is bubble-free might care to follow @garthturner and read his blog. Nov 26, 2012
  • Can we get the PBOC to take Yellen? $$ RT @TheStalwart: I’m definitely on board with this Central Bank poaching/global market place thing… Nov 26, 2012
  • Wow. Whoever published the original release will be an easy target $$ RT @mickwe: @AlephBlog so did all these guys http://t.co/sdUtAnlN Nov 26, 2012
  • AP goofs RT @mickwe: oh… RT @allthingsd: Google Sources: Acquisition of ICOA Wireless Are ‘Not True’ -by @ahess247 http://t.co/aGVCteBf Nov 26, 2012
  • RT @mickwe: That wifi co Google just bought for $400m? Loses $ and ‘Cash and cash equivalents were $10 at June 30, 2012’ http://t.co/PXB … Nov 26, 2012
  • Warranties r usually ripoffs RT @danielckoontz: Anybody who’s ever bot an extended warranty should read this post twice http://t.co/Ryl1AkKn Nov 25, 2012
  • A good guy; I appreciate him $$ RT @PlanMaestro: Retail Industry’s Ninja Mind Tricks http://t.co/DxJfueu4 #biases Nov 25, 2012

 

Replies

 

  • @LSilverspar as @EpicureanDeal says: “Names will be changed to protect the innocent, if we find any.” Few clean hands among banks, S&Ls, etc Nov 30, 2012
  • @Frank_McG Consider it a different way… I think it would b more likely to see a case prosecuted over insider information w/ CDS trading $$ Nov 30, 2012
  • @Frank_McG I’ve never seen a case tried for insider information on bonds, because gains r less, but technically, legally it is possible $$ Nov 30, 2012
  • Congress controls the purse strings, not the Presidency, which is too powerful as an office already. Bad… http://t.co/iGBUVgtw Nov 30, 2012
  • But when she became CEO, she could have paid the ~$100MM breakup fee. She didn’t, so she is partly to blame. http://t.co/N1xiZ0mh Nov 30, 2012
  • @ritholtz Dear Barry, is that a real plus? We have increasing delinquencies there, in the face of nondischargability in bankruptcy $$ Nov 29, 2012
  • @danielckoontz Thank you, dear friend Nov 29, 2012
  • @munilass I’m no expert, but CALPERS would have2 point @ California statutes/constitution requiring the payment http://t.co/UJpO1m3T Nov 28, 2012
  • @williamalden Not surprising. Academics & pseudo-academics r easy to co-opt. Most of the members worked in finance & r its friends $$ Nov 28, 2012
  • @Sir_Strangelove Free trade is a simple concept, & is hindered by Eurocrats. Free trade means fewer laws & regulations, not more $$ Nov 28, 2012
  • @Sir_Strangelove No. The Euro is the worst of it, but nations need to have their own unique rules to function well, not standardization $$ Nov 28, 2012
  • @EddyElfenbein Funny in a way, because at the beginning of his career, his main research tools were S&P and Moody’s stock reports $$ Nov 28, 2012
  • “You have more to say than Taleb. He has not had a useful new idea in 10 years.” ? David_Merkel http://t.co/sSh4Qetw $$ @reformedbroker Nov 28, 2012
  • @JayLeonard So, more like $2.0-2.5T per year Nov 27, 2012
  • @JayLeonard I think they are wrong. Other statistics I have seen indicate the amount is 8% of GDP, or $1.2T plus whatever the current gap is Nov 27, 2012
  • @carney My comment: If you pay $400M to get $500M over 30 years, the IRR is 1.45%. Better to buy a ladder of muni or corporate bonds. $$ Nov 27, 2012
  • @AppFlyer Care 2 clarify? Nov 27, 2012
  • @BryanMortenson Thanks, appreciated. Nov 27, 2012
  • @BryanMortenson Has the latest Financial Report of the US Government come out yet? Due soon. Thought I was on the email list… Nov 27, 2012
  • @carney Best place to look would be Canadian Mortgage bubble articles like this: http://t.co/w1Zk7Uhc Nov 27, 2012
  • @TheStalwart This is why I don’t follow any monthly numbers for my investing: noise/signal is high. Even a year of data, noise swamps signal Nov 27, 2012
  • @richtoscano I largely agree. My main disagreement is that the majority says rates must go up, and for some time, but they don’t $$ Nov 27, 2012
  • @richtoscano They R the best comparisons that we have 2 the current situation. I respect U, Rich, but wht wld B a better comparison? $$ Nov 27, 2012
  • “You may have a long wait. Great Depression & Modern Japan went on over 10 years.” ? David_Merkel http://t.co/YlMSAU9c http://t.co/XVq1wgWO Nov 26, 2012
  • @jonsticha Used 2 manage corporates for Fidelity & Guaranty Life. I only guessed, but big rating gaps mean there r two stories told $$ Nov 26, 2012
  • @japhychron I don’t know. So many things are messed up that it is impossible to say… 🙁 Nov 26, 2012
  • “But Buffett’s tax proposal barely nicks him because he makes little income. His shadow income is?” ? David_Merkel http://t.co/7zWRb4SV $$ Nov 26, 2012
  • @mickwe Basically, $GOOG bot out a penny stock, $ICOA, virtually inactive & broke. Pays a ~nickel/share for something $.0001 Friday. Huh? $$ Nov 26, 2012
  • @BarbarianCap $HOGS Tough company to analyze; doubts as to the reality of assets, financials, according to some Nov 26, 2012
  • @GaelicTorus I’ve been through the social work system five times in my life, each time to rescue a child & adopt him. I am not naive. Nov 26, 2012
  • @Nonrelatedsense I knew that, but I still think that Taleb had great insights in his first book, and has not grown from there. Nov 25, 2012
  • @volatilitysmile A good warning to all of us who put our opinions forthto the public. Nov 25, 2012
  • “Taleb has jumped the shark” ? David_Merkel http://t.co/QNdVE57V Sorry to be so blunt $$ Nov 25, 2012
  • @PlanMaestro I have friends working in South Sudan on that. Bigger problem is a lack of tending the fields; the culture is not aggressive $$ Nov 25, 2012
  • @PlanMaestro One of the most important initial things a developing nation can do is get agriculture right; other things tend to follow $$ Nov 25, 2012
  • @moorehn I liked Taleb’s first book a lot. His insights since then have not increased. I think he is on his 16th minute of Warhol’s fame. $$ Nov 24, 2012
  • @Convertbond Is there a link for that? Investment dept @ ins co in 93 was reaching for yield through duration @ wrong time 94 bad year 4 dur Nov 24, 2012
  • @JamesGRickards If you’re in Baltimore/DC and want to talk, I would be interested in what you are thinking. Let me know. Nov 24, 2012
  • @JamesGRickards Too speculative. We should be happy saying that we don’t know. The Bible does not speak to the issue, nor do the Fathers. Nov 24, 2012

For what it is worth

  • My week on twitter: 51 retweets received, 3 new listings, 48 new followers, 106 mentions. Via: http://t.co/SPrAWil0 Nov 29, 2012

?

Cato Institute 30th Annual Monetary Conference, Epilogue

Cato Institute 30th Annual Monetary Conference, Epilogue

Posted on by David Merkel

I’m back home, and now I can give my opinions on the presenters at the Cato Monetary Conference.

Vernon Smith was relatively realistic.? He understands that this is a debt crisis, and that reducing debt is the main priority.? Overindebted economies don’t grow well.? Households and corporations that have too much debt tend to be reluctant to spend.

Thomas Hoenig had a number of good points.? Argues for simple capital regs, with harder regulators adding to the capital as they judge riskiness.

Jeffrey A. Miron had issues.? I think it is simpler to regulate banks than to try to fix crises.? My reasoning is that average people don’t differentiate between banks, and can’t understand balance sheets.

Lawrence H. White argued that if we remove guarantees, people will be more careful.? The boom-bust cycle suggests otherwise.? People cast away care during booms, and get skewered during busts.? If you’re going to have a fiat currency, better to lean against debt levels, than inflation or unemployment.

Poole criticized loose monetary policy in the late 90s and 2003-4, but why does he not go after Greenspan from 1986-98?? Debt levels screamed higher during that era.? Greenspan facilitated the growth in bad debt, and while it worked, he became the “Maestro.”

The main point of Warsh was that loose monetary policy won’t work.? If you have a lot of excess reserves, more excess reserve won’t help.

O?Driscoll argued that the Fed was by nature no independent of the US Government.? It is a statutory creation.

David Malpass stirred opinions.? Many liked his statements, many disliked.? His main point was that the Fed was sucking Treasury Duration out of the fixed income markets.? Personally, I think that eventually it will erase two years worth of seiniorage.

John Taylor was mostly against policy rules that were too volatile, whether reacting to the output gap, asset prices, or anything else.? Pointed out that the current Fed is overpromising versus the Taylor rule, in projecting that they will hold Fed funds low until 2015.? (2016 for the overly loose Yellen.)

All of the commenters on the Eurozone were too optimistic.? It is only a matter of time before the the pain of holding the Eurozone together becomes greater than the pain of breaking it apart.? On the bright side, future generations will not consider the dopey idea of currency unions without political union.

The China panel was ridiculous.? The first speaker dared to say that Chinese economic policy was better than that of the US, and as a result I signaled my disapproval.? China has no idea for what it is doing.? They are blind, and their slack resources are running out.

China will not have a reserve currency, it cuts against more important goals.? Democracy is also unlikely in China, unless the Communist Party is overthrown.? Unlikely, but looking forward to that.

Plosser is concerned for the institutional image of the Fed, and trying to be more orthodox, and rules-based.? He wants the Fed to move away from the relatively unorthodox policy currently followed.

-=-=-==-=–=-=-=-=-=-=

All that said, the Fed moves on.? They don’t care that their ideas don’t work.? They don’t care that their ideas harm/distort investment markets.? They just pursue the wrongheaded ideas of Ben Bernanke, who assumed that the Great Depression occurred because banks would not lend, when the banks had overlent in the past.

I met my share of cranks today, both liberal and conservative.? We need a new paradigm where debt levels are an important factor in economic decisions.

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