Search Results for “easy in, hard out” – Page 2

Bubbles are Easy to Spot, well almost…

Posted on 5 November 20116 November 2011 by David Merkel

Bubbles are easy to spot.? Wait, don’t most people say that bubbles are impossible to spot?

I’ll say that again: bubbles are easy to spot.? Why?? People have the wrong theory on bubbles.? They listen to those that don’t understand the efficient markets hypothesis, and think, “Prices are always fair predictors of the future.? I don’t have to think about the future as a result.” (It would be better to say that current prices are the short-term neutral line against which bets are placed.)

Don’t listen to academics on bubbles.? There have been booms and busts as far back as we can see.? If markets tend toward equilibrium, that is very well hidden — please require economists to take courses in history.? I mean this; I am not joking.? Neoclassical economics is not? a science; it is a religion, and with much less historical evidence to support it than Christianity has to support the historicity of the resurrection.

Why do I write on this? Partly because of Jason Zweig’s piece in the WSJ.? I ordinarily like what Jason writes; this is a rare exception.

Spotting bubbles gets easier when you don’t simply look at rising prices.? It is better to look at what is driving the rising prices.? How are players financing the purchase of assets is more important to view than even price trends.

It is hard to get a bubble without having an increase in debt-finance.? Financing with debt is cheaper, and riskier than financing with equity.? Financing long-term assets with short-term debt is even cheaper and riskier than financing with debt that matches the term of the asset.? Most bubbles end with some sort of financing time-mismatch, where the inability to renew short-term indebtedness in order to hold the asset leads to a panic, which leads some to say, “This is a liquidity crisis, not a solvency crisis.”? When you hear that leaden phrase, ordinarily, it is a solvency crisis, with long-dated assets of uncertain worth, and near-term liabilities requiring cash.

This is why the simplest way of looking for bubbles is to look for where debt is increasing most rapidily, and where the terms and conditions of lending have deteriorated.

But where do we have these issues today?? Let me offer a few areas:

We have a chain of financing arrangements in the Eurozone where many banks might have a hard time surviving the failure of Greece, Italy, Portugal, and perhaps some other nations as well.? Failure of those banks might lead to bailouts by national governments and/or a significant recession.? Anytime financial firms as a group would have a hard time with the failure of a company, industry, government, etc., that is a sign of a lending bubble.
There is a major imbalance in the world.? China trades goods to the US in exchange for promises to pay later.? Creditor-debtor relationships are meant to be temporary, not permanent as far as governments are concerned.? There may never be a panic here, but so long as the US retains control of its own currency, it is safe to say that they will never get paid back in equivalent purchasing power terms as when they exported the goods.
China itself, though opaque, has a great deal of lending going on internally through its banks, pseudo-banks, and municipalities, a decent amount of which seems to be for dubious purpose at the behest of party members.? The government of China has always been able in the past to socialize those credit losses.? The question is whether covering those losses could be so large that the government follows an inflationary policy to eliminate the debts amid public discomfort.
AAA and near-AAA government debt has been the most rapidly growing class of debt of late.? Maybe AAA governments that are unwilling to cut spending or raise taxes are a bubble all their own.? Remember, when you are AAA, the rating agencies let you make tons of financial promises — think of MBIA, Ambac, FGIC, AIG, etc.? Only when its is dreadfully obvious do the rating agencies cut a AAA rating, but once they do, it is often followed by many more cuts as the leverage collapses.

Now, my view here is both qualitative and quantitative.? To find bubbles there are indicators to watch, such as:

Low credit spreads and equity volatility
Low TED spreads
High explicit/implicit leverage at the banks
High levels of short term lending/borrowing (asset/liability term mismatches)
Credit complexity and interconnectedness
Poor Credit Underwriting
Carry trades are common (many seek free money through seemingly riskless abritrages)
Accommodative monetary/credit policy

All manner of things showing that caution has been thrown to the winds and lending is done on an expedited/casual basis is a sign that a bubble may be present.? Kick the tires, look around, analyze the psychology to see if you can find a self-reinforcing cycle of debt? that is forcing the prices of a group of assets above where they would normally be priced without such favorable terms.

Not that this analysis is perfect, but it follows the broad outlines of Kindleberger and Chancellor.? Speculative manias are normal to capitalism; don’t be surprised that they show up.? Rather, be of sane mind, and learn to avoid participating in manias, long before they become panics or crashes.

Economics is Hard; the Bad Assumptions of Economists Makes it Harder

Posted on 30 June 2010 by David Merkel

Before I start this evening, a small apology to my readers.? Things have been busy around here; blogging has been well below what I would like to do.? Worse, for some unexplainable reason, the hosting of my blog fell apart two days ago, and not for any change that I made.? As it was, WordPress deemed my theme to be broken.? So, I went in search of a new theme that would be compatible with what I used to have with Salattinet, and chose Green Apple.? I am a little more than half through in modifying it.

That said, I needed to make changes and had been delaying doing so.? I have modified my blogroll to reflect who I regularly read.? For the most part, I feature those that say more, but say it less frequently.

I will modify my leftbar to make it shorter, so that the site loads faster.? I will categorize my book reviews, and place the least recent of them on a separate page.

Though I like long post blogging, I will do more short posts.? My site will load a lot faster, so for those that visit the site directly, it should not be as much of a pain.

I expect to have this complete over the next month.? Much as this episode was a pain for me, I kept a good attitude about it, and am looking forward to the better blog that may result from the changes.

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

In order to write tonight’s essay, I scanned Kartik Athreya’s letter, and used OCR to turn it into a tractable file.? I had to correct OCR errors, but I left his spelling and grammar errors alone.? The formatting is slightly different, and fits on three pages, not the original four.

In many ways, economics and finance are about competition.? Writing about economics and finance is tough.? There are many facets to write about; there are feedback loops galore.? So, why do some writers in the blogosphere gain followers, and others don’t?

Tough question.? Being an engaging writer helps in the intermediate-run, and being a scandalmonger helps in the short-run.? In the long-run, all that matters is that the writer is right frequently, makes sense to readers, and has the humility to admit errors.? The economics and finance blogosphere is highly competitive, and talent tends to prevail over long periods of time.? Blogging is more of a meritocracy than peer-reviewed journals.? It more closely resembles “perfect competition.”

There is another aspect to blogging that is different from writing for economic journals: we have more of a slant toward positive economics than normative economics.? Ethics plays a larger role in what bloggers write about than what timid Ph.D. economists will write about.

Just as Law is too important to be left to lawyers, with all of their self-protecting biases, even so Economics is too important to be left to economists with Ph.Ds.? The economics guild protects its own in much the same way as described in Thomas Kuhn’s The Structure of Scientific Revolutions. Bad paradigms survive until a significant number of young scientists displace the paradigm, and replace it with a new one that explains things better.

Economics needs a better paradigm, and I do not mean better mathematical formulas.? For decades economists have been playing sterile math games assuming what they define as rational behavior which is not rational.

Simple example: when I was much younger, I was traveling with the two senior members of my Ph. D. dissertation committee, and I asked them, “But what if consumers don’t maximize?? What if they conserve on maximization, because maximization takes a lot of effort, and take the first ‘good enough’ solution?”? Their answer was the intellectual equivalent of a shrug.? Without maximization, mathematical economics falls apart.? Besides, Milton Friedman taught us that the realism of assumptions doesn’t matter.

I disagree.? It matters a great deal.? If we can’t get optimization to work, all of the implications of a model will fail; there is no way to get correct significant estimates of an optimization model, if people merely satisfice.? And most of us know that we are under time and knowledge constraints, and do not optimize.

The same issues apply to the Microeconomic theory of the firm.? But now let us consider Macroeconomics, which is even squishier.? Academic macroeconomists did not distinguish themselves regarding the recent economic crisis.? Few predicted it, versus a greater number of economist in the business world that did predict it.? Think about it: what should we say about macroeconomic models that claim that the financing structure of the economy is neutral?? That it does not matter how much is financed by debt versus equity?

As I said to Dr. Carmen Reinhart when I met her, “We need more economists that are students of history, and fewer that can do the pretty math for the ideal world that does not exist.”? She seemed to agree.

Get in contact with real data.? Abandon theories that don’t make sense when applied to the real world.? Work in the markets; see if you can make money.? Be practical and adjust.? If businesses can’t lever up infinitely, why should we assume that governments can do so?? Because they can tax or inflate it away?? Ah, but each comes with a cost.

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

With respect to Athreya’s letter, I would tell him to grow up, and genuinely compete with those who blog on economics and finance.? Though I am not a Ph.D., I did pass my comprehensive exams and oral exams from UC-Davis, an institution far more prominent than the University of Iowa, at least as far as applied economics goes.? That my dissertation committee left me, and that I could not set up a new committee killed my Ph. D.? It did force me to become an actuary, (my wife-to-be and I wanted to marry and start our family) and learn a lot of practical things about markets and funding structures that most economists will never bother with, to their practical detriment.

In my days at Johns Hopkins and UC-Davis, the longer that I studied, the more I learned that economics waves its hands at the problems that come whenever detailed studies attempt to test the main theories.? The results aren’t pretty; far better to have ad hoc theories that work over a limited range, than theories that proceed from basic principles, but do not work.

Yes, economics is hard.? Much harder than most economists think.? They need to abandon Keynesian, Chicago, and Neoclassical thinking, and aim for something that fits the data more closely.? That may not be the Austrian School, but it will be closer to that than the Neoclassical School.

We need an economic paradigm that is willing to tell the politicians that their actions will do no good, and will likely do harm; that central banks can’t create prosperity.? Governments exist to enforce justice, not goose the economy.

When we are in the bust phase of the economy, there are no good solutions, except to take the pain, realize the losses, and come to a quick end through a painful “big bang.”? This is the solution our central bank and politicians are fighting.? The “Japan solution” that is being followed refinances assets that are in oversupply at progressively lower rates, allowing bad assets to survive, and encouraging unproductive investment.? Real progress comes from accepting that there is no easy solution, and allowing the economy to liquidate bad investments without hindrance from the government or central bank.

The solution comes in preventing booms from getting out of hand, and always letting recessions be hard enough to liquidate bad investments.??? We can’t do that now in the midst of the bust, but after the bad debts of our economy are liquidated, much as the Depression ended in 1941 when Debt/GDP reached 1.4x due to compromises and payoffs, and not due to the government or Fed, there can be real growth again, because less-indebted consumers and businesses are ready to act.

To Mr. Athreya, I would say that he has insufficiently embraced the complexity of the economy.? It is so complex that reducing it to mathematics does not work well.? But in a spirit of friendship, I invite him to visit me in Maryland and have lunch or dinner with me, at my expense.? Maybe I will tell him the story of when I got to question the head of the Richmond Fed.

That’s all for now.? There is more to say, but I am tired, and might not continue the essay so well.

The Whole Earth is Owned; Debts Net Out to Zero

Posted on 21 April 201022 April 2010 by David Merkel

Tonight’s post could be one in the “rules” series, but since I did not get this idea prior to 2003, when I started investment writing at RealMoney.com, it does not qualify for me.? But here it is:

At the end of the day, the world as a whole is owned 100%.? There are people with short positions, calls, puts, etc., and even things more exotic.? Those are noise around the real economy that produces the goods and services of our world.

Beyond that there are debt transactions in order to own assets, or purchase products and services.? But every debt is an asset to another party, and cancels out across the globe.? There are no debts on net in the world.

Does that mean that debts are irrelevant?? No.? Debts are relevant for two reasons: 1) Highly indebted economic systems are inflexible, because there are too many fixed claims.? They are far more prone to crises.? 2) The debt of financial companies is very important because they often borrow short-term to finance longer-term assets.? In the current crisis, repo funding is the great example of this.

A financial firm thinking long run would not do repo financing because it can be easily pulled.? It would float long debt equal to the term of the assets that they want to finance.? But that might make their margins inadequate.? Don’t you know that short rates are volatile, and that they tend to be lower then long term rates most of the time?

Well, maybe.? But when debts increase, parties step forward to finance long credit via short borrowing.? That is an essential element of the credit system when it is in bubble mode.? (Side note: the exception to this is lending against sticky checking and savings account liabilities.? Those liabilities are sticky only because of deposit insurance.? The policy question there is whether the insurance premium is set too low. In hindsight, the answer is yes, though at my prior employer, we talked about the inadequacy of the FDIC, and bank reserving regularly.)

Though all debts net out to zero across the global economy as a whole, a lot depends on who owns the debts.? If the debts are owned by those who are borrowing money, risks of a debt crisis rise.? The layering of debt upon debt, and borrowing short to lend long decrease financial system resilience.

Finally, the willingness to make loans to marginal borrowers is really a statement that lenders are willing to make an equity investment in someone they are lending to, or some property that they are lending against.? Formally, it is all a loan, but economically the lender is betting on prosperity, much as a stock investor might.

When I wrote my piece on the residential housing bubble at RealMoney back in May of 2005, I did not focus on the high prices much; instead, I focused on the financing issues:

Amount of debt vs assets
Borrowing short term to buy a long-lived asset, a house.
Quality of the debt underwriting

And, much the same when I wrote my piece on subprime mortgages in November 2006, too much leverage, the teaser rates are short term borrowing, and the loan underwriting was horrible.? As with residential mortgages generally, subprime mortgages were even more set up for failure.

If you want to find a bubble, focus on the financing.? The rise in asset prices is not sufficient, assets must be misfinanced for there to be a bubble.

When I was writing at RealMoney, I did a series of four articles to illustrate market dynamics:

Managing Liability Affects Stocks, Pt. 1
Separating Weak Holders From the Strong
Get to Know the Holders? Hands, Part 1
Get to Know the Holders? Hands, Part 2

I wanted them to have similar titles, but it was not to be.? Even for managing equities, understanding the balance sheets of companies, and those that own companies can make a difference.? When stocks are owned by those that can truly buy and hold, downside is limited.? When stocks are owned by those who are under pressure to earn money in the short run, upside is limited.

But what of liabilities for which there are no assets?? What of underfunded municipal and corporate pension plans?? With the corporate plans there is bankruptcy and the PBGC.? With municipalities, and the Federal Government it is more questionable.? There are few assets to lay claim to, even if there were a right to do so.? They rely on increased taxation, and the willingness of the courts to enforce pension promises.? This will prove politically difficult, and perhaps prove to be a greater challenge to the constitution than anything previous, because the economic demands are far greater than what the US taxpayer has been willing to bear.

Still, the greater challenge for countries is the ability to continue to manage debt issuance.? As we see with Greece today, that is not a simple thing.? Countries can be misfinanced, as much or more so than corporations.

Risk management is primarily management of liquidity, and planning to avoid? liquidity risks over the long haul.? Easy to state, hard to do.? The siren song of the short-run is so compelling, but the long–run eventually arrives, and when it does, it comes to stay.? Plan your life, or your corporation’s life such that you control your destiny, and are never in a spot where you are forced to do anything.? That takes discipline, but the man who controls his own soul is ready to rule things far greater.

Downgrades Come Easy, Upgrades Come Hard, Upgrades to AAA? — Forget It.

Posted on 20 June 200820 June 2008 by David Merkel

We’re not quite to the endgame yet, but the jig is up for MBIA and Ambac, after the downgrades from Moody’s at the holding companies to Baa2 and A3 respectively.? Wait, why I am I mentioning the holding companies?? Isn’t it the operating subsidiaries that matter?

Well, yes, for sales and regulatory purposes, but the ratings at the holding companies matter for a different reason — notching.? But let me tell a story first.

Failure improves markets by introducing risk-based pricing.? In the late 80s and very early 90s, virtually all of the life insurance industry was rated AAA/Aaa, or A+ from A.M. Best.? Taking advantage of the good opinion that the raters had of the industry, many life insurance companies issued Guaranteed Investment Contracts [GICs] to institutions for their Defined Benefit and Defined Contribution pension plans.? The insurance companies levered up issued AAA liabilities, and invested the proceeds in lower rated bonds, commercial mortgages, limited partnerships, and other things yet more risky.? (These were the days prior to risk-based capital.)

After a few failures hit — Pacific Standard (who?), Executive Life, Mutual Benefit, Fidelity Mutual, Confederation, and the near miss on the Equitable (what a story — I was on AIG’s failed takeover attempt team), the rating agencies went into full scale defense mode, downgrading every company in sight.? It was everything a company could do to retain its ratings — and there were almost no ratings upgrades until 1996 or so.

The rating agencies are ratchets. (or, do I mean rackets? 😉 )? Downgrades come easily, upgrades come hard, and almost no corporate credit ever gets upgraded to AAA.? But, in this case, the downgrades have come for this industry in the way that I predicted earlier this year:

		David Merkel
		Moody’s Downgrades XL Capital Assurance
		2/7/2008 3:34 PM EST

When the main rating agencies begin downgrading the lesser guarantors, the big guarantors are likely not far behind. Moody’s just downgraded XL Capital Assurance from Aaa to A3, and Security Capital Assurance From Aa3 to Baa3 (barely investment grade).

Psychologically, the major rating agencies, Moody’s and S&P, have been taking baby steps toward downgrading Ambac, MBIA and FGIC. But first they have to do the lesser guarantors that are in trouble. As I have pointed out before, the major rating agencies are co-dependent with the major guarantors, and that will only throw the guarantors over the edge if hurts them more to leave the guarantors at AAA. That will cost them future revenues to cut the ratings of the major guarantors, but it might save their larger franchises. (Fitch, on the other hand, has less to lose and can downgrade with impunity.)

Now, the effects on the broader insured bond market are probably overestimated. There will be new entrants to take the place of the legacy companies that may have to go into runoff. The holding companies for the major guarantors could die, but a rescue of the operating insurance companies in runoff mode is more likely. Those who own equity in the holding companies or debt claims to the holding companies will not be happy with the results, though.

Watch for downgrades of the major guarantors. Unless a lot of new capital gets pumped into their operating insurance companies, the downgrades are coming, maybe within a month.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Security Capital Assurance to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

Position: none

Once your insurance operating subsidiary is downgraded below AAA/Aaa, there are many classes of business that cannot be written anymore.? Revenue dries up.? What’s worse, is that the rating agencies no longer have any practical reason to not downgrade further; the revenue model is broken for the rating agencies, and if there are highly rated new entrants, there is no reason to care about the company; the industry will survive, and the rating agencies will get fees.

Now, supposedly, New York doesn’t want to take the operating subsidiaries into conservation because it would trigger acceleration clauses in the CDS.? If those contracts were written at the operating companies, the insurance commissioner has the power to nullify any seniority those contracts possess — you can’t favor one insurance claimant over another.

But Dinallo wants to favor municipal claimants, which is probably illegal.? They could force the capital into the operating company, but they would rather see the municipal business reinsured.

Oh, notching — once a holding company is rated lower than Aa3/AA-, there is no way to get a subsidiary to have a Aaa/AAA rating.? The rating agencies will not allow it to happen.

So, I don’t see good things ahead for the guarantors.? Two final notes: Ambac tells Fitch to take a hike.? Fitch won’t do it.? Expect a downgrade soon.? Triad goes into runoff; my old colleague John must be smiling… he always thought they wrote the worst business.

Estimating Future Stock Returns, March 2020 Update

Posted on 16 June 202016 June 2020 by David Merkel

Graphic Credit: Aleph Blog, natch� same for the rest of the graphs here. Data is from the Federal Reserve and Jeremy Siegel

As I said last time, a lot can happen in 3 months. At the end of March 2020, a rally was starting that would become a new bull market. At that time, the market was poised to deliver a return over the next 10 years of 6.84%/year. As I write this evening, after the rally the likely return over the next ten years is 4.63%/year.

Hee are a few more graphs, and then I will come to my main point for this post.

25 scenarios — one down, 24 up over ten years, with an average likely return of 4.63$/year.

In general, this model fits the data well, but who can tell for the future? This is likely the best estimate over a ten-year horizon.

So, do you go for stocks here with a likely return of 4.63%/year, versus the Barclays’ Aggregate at around 2.5%/year or cash at around 0.2%/year? You can hear the siren call of TINA (There Is No Alternative) loud and clear.

Let me peel this back a bit for a moment, as one who once managed a large portfolio of bonds. Why not always buy the highest yielding bonds? The answer that would come back from the bright students would be: don’t the highest yielding bonds default more?

The bond manager that buys without question the higher yielding names presumes stability in the financial markets, and likely the economy as well. Defaults can affect the realized yield a lot. You might be getting more yield today, but will you be able to realize those yields? In addition to losses from defaults, many managers lose value during times of credit stress because they are forced to sell marginal bonds that they are no longer sure will survive at distressed prices.

I think the estimate of returns that I have given on the S&P 500 is a reasonable estimate — it’s not a yield, but an estimate of dividend yield and capital gains. 4.63%/year over 10 year certainly beats bond handily. But do you have the fortitude, balance sheet, and time horizon to realize it?

More say they have it than actually do have it. The account application form at my firm stresses the risks of investing, and talks about stock investors needing a long time horizon. I still get people who panic. The present situation, given the novelty of a virus “crowning” (idiom for a whack to the head) the market, and the market largely ignores it makes many panic, assuming that there must be a big fall coming soon.

Eh? There might be such a fall. The S&P 500 could reach a new high in July. Who cares — that is why I run a 10-year model — to take the emotion out of this. If you are afraid of the market now, you should do one of three things:

Sell your stock now — you are not fit for stock investing.
Sell your stock now, and choose two points where you will reinvest. What is the lower S&P 500 that would give you comfort to invest? Second, if after an amount of time the market doesn’t fall to the level that you dream of, at what date would you admit that you were wrong, and reinvest then.
Do half — sell half of your risk away, moving it to safety. Again, try to set a rule for when you would reinvest.

In general, I don’t believe that there is no alternative to stocks, and I don’t think stocks are cheap, but in general, the optimists triumph in investing. I have been shaving down risk positions, but with the Fed doing nutty things like QE infinity (whatever it takes), buying corporate bonds and doing direct lending, I don’t see how the markets fall hard now. The dollar may be worth less when it is done, but I think it is likely that you will have more ten years from now by investing in stocks and risky assets like stocks, than to invest in safe assets.

When the Fed shifts, things will be different. As Chuck Prince, infamous former CEO of Citigroup once said:

�When the music stops, in terms of liquidity, things will be complicated,� Prince said. �But as long as the music is playing, you�ve got to get up and dance.�
What we have learned 10 years after Chuck Prince told Wall St to keep dancing

As I wrote in my Easy In, Hard Out pieces, the Fed will have a hard time removing stimulus. They tried and the market slapped them. Now they live in a “Brave New World” where they wonder what will ever force them to change from a position from a position of ever increasing liquidity. They try to not let it leak into the real economy, so there is little inflation for now.

But there is no free lunch. Something will come to discipline the Fed, whether it is inflation, a currency crisis — who knows? At that point, “things will be complicated.”

So what do I do? I own assets that will survive bad scenarios, I raise a little cash, but I am largely invested in stocks. To me, that is something that balances offense and defense, and doesn’t just focus on one scenario, whether it is a disaster, or the Goldilocks scenario of TINA.

The Best of the Aleph Blog, Part 36

Posted on 25 July 2017 by David Merkel

In my view, these were my best posts written between November 2015 and January 2016:

Don?t be a Miser in Retirement (Or Ever)

?There is a fine line between over-saving and under-living.?

Another way to phrase it: God isn?t a miser; you shouldn?t be either.

On Lump Sum Distributions

Managing a lump sum distribution for income is one of the hardest things to do in investing.

Easy In, Hard Out (III)

Continuing the series on the troubles the Fed will have shrinking its balance sheet.

Understand Your Liabilities

Your investment decisions should be driven by when you will need to convert the assets to cash for spending purposes.

The Limits of Risky Asset Diversification

Because of the behavior of investors, and increasing interconnectedness between markets, the degree that risky assets diversify each other has been decreasing over time. ?There is really only one diversifier for risky assets — high quality bonds, whether short or long.

How Much is that Asset in the Window? (III)

Continues the fictitious conversation between me and a friend on the topic of how there are no objective prices in the market, much as we might like them.

Seven Thoughts on the Markets

Learning Investments
OPEC
High Yield
F&G Life
Missing Opportunities
FOMC, and
What could the next crisis be?

Direction Matters More Than Position with Monetary Policy

Accommodation ended a lot sooner than the FOMC said it did

Sell a Fraction of Your Home?

In general, highly idiosyncratic and indivisible assets like a home should not be sold in pieces. ?That said, this idea is better than most.

Annotated ?In Hoc Anno Domini??

Response to ?In Hoc Anno Domini?

My critique of Vermont Royster’s vapid Christmas message which gets published in the Wall Street Journal each year.

On Currencies that are Not a Store of Value

What do you do if you live in a place where high inflation is the norm?

On Currencies That Are A Store Of Value, But Maybe Not For Long

What do you do with the currencies of countries that are currently stable, but aren’t running the most stable economic policies?

Cheapness versus Economic Cyclicality

What do you do when the only cheap, safe companies embed a lot of economic cyclicality? ?I.e., they rely on economic growth in order to do really well…

Okay, Go Ahead, Sweat the Fed

Posted on 17 September 2015 by David Merkel

Photo Credit: Nate Steiner || There is always enough time to panic. ;) — Photo Credit: Nate Steiner || There is always enough time to panic. 😉

Today, I happened to stumble across an old article of mine: Easy In, Hard Out (Updated). ?It’s kind of long, but goes into the changes that have happened at the Fed since the crisis, and points out why tightening policy might be tough. ?Nothing has changed in the 2.4 years since I wrote it, so I am going to reprint the end of the article. ?Let me know what you think.

-==-=-=–==-=–=-==-=-=-=-=-

In normal times, central banks buy only government debt, and keeps the assets relatively short, at longest attempting to mimic the existing supply of government debt.? Think of it this way, purchases/sales of longer debt injects/removes liquidity for longer periods of time.? Staying short maintains flexibility.

Yes, the Fed does not mark its securities or gold to market.? Under most scenarios, it is impossible for a central bank which can issue its own currency to go broke.? Rare exceptions ? home soil wars that fail, or political repudiation of the bank, where the government might create a new monetary standard, or closes the bank because of inflation.? (Hey, the central bank has been eliminated twice before.? It could happen again.)

The only real effect is on how much?seigniorage the Fed remits to the Treasury, or, if things go bad, how much the Treasury would have to lend/send to the central bank in order to avoid the bad optics of negative capital, perhaps via the Supplemental Financing Account.? This isn?t trivial; when people hear the central bank is ?broke,? they will do weird things.? To avoid that, the Fed?s gold will be revalued to market at minimum; hey maybe the Fed at that time will be the vanguard of market value accounting, and revalue everything.? Can you imagine what the replacement cost of the NY Fed building is?? The temple in DC?

Or, maybe the bank would be recapitalized by its member banks, if they are capable of doing so, with the reward being the preferred dividend they receive.

Back to the main point.? What effect will this abnormal monetary policy have in the future?

Scenarios

1) Growth strengthens and inflation remains low.? In this unusual combo, it will be easy?for the Fed to collapse its balance sheet, and raise rates.? This is the dream scenario; and I don?t think it is likely.? Look at the global economy; there is a lot of slack capacity.

2) Growth strengthens and inflation rises.? The Fed will likely raise the interest on reserves rate, but not sell bonds.? If they do sell bonds, the market will back up, and their losses will be horrible.? If don?t take the losses,?seigniorage could be considerably reduced, or even vanish, as the Fed funds rate rises, but because of the long duration asset portfolio, asset income rises slowly.? This is where the asset-liability mismatch bites.

If the Fed doesn?t raise the interest on reserves rate, I suspect banks would be willing to lend more, leaving fewer excess reserves at the Fed, which could stimulate more inflation. Now, there are some aspects of inflation that remain a mystery ? because sometimes inflationary conditions affect assets, rather than goods, I think depending on demographics.

3) Growth weakens and inflation remains low.? This would be the main scenario for QE4, QE5, etc.? We don?t care much about the Fed?s balance sheet until the Fed wants to raise rates, which is mainly a problem in Scenario 2.

4) Growth weakens and inflation rises, i.e. stagflation.? There?s no good set of policy options here. The Fed could engage in further financial repression, keeping short rates low, and let inflation reduce the nominal value of debts.? If it doesn?t run wild, it could play a role in reducing the indebtedness of the whole economy, though again, it will favor debtors over savers.? (As I?ve said before, in a situation like this, or like the Eurozone, all creditors want to be paid back at par on the bad loans that they have made, and it can?t be done.? The pains of bad debt have to go somewhere, where it goes is the argument.)

I?ve kept this deliberately simple, partially because with all of the flows going back and forth, and trying to think of the whole system, rather than effects on just one part, I know that I have glossed over a lot.? I accept that, and I could be dead wrong, as I sometimes am.? Comment as you like, with grace and dignity, and let us grow together in our knowledge.? I?ve been spending some time reading documents at the Fed, trying to understand their mechanisms, but I could always learn more.

Summary

During older times, the end of a Fed loosening cycle would end with the Fed funds rate rising.? In this cycle, it will end with interest of reserves rising, and/or, the sale of bonds, which I find less likely (they will probably be held to maturity, absent some crisis that we can?t imagine, or non-inflationary growth).? But when the tightening cycle comes, the Fed will find that its actions will be far harder to take than when they made the ?policy accommodation.?? That has always been true, which is why the Fed during its better times limited the amount of stimulus that it would deliver, and would tighten sooner than it needed to.

Far better to be like McChesney Martin or Volcker, and be tough, letting recessions do their necessary work of eliminating bad debt.? Under Greenspan, and Bernanke to a lesser extent (though he persists in pushing the canard that the Fed was not too loose 2003-2004, ask John Taylor for more), there were many missed opportunities to stop the buildup of bad debts, but the promise of the ?Great Moderation? beguiled so many.

Removing policy accommodation is always tougher than imagined, and carries new risks, particularly when new tools have been used.? Bernanke can go to his carefully chosen venues and speak to his carefully chosen audiences, and try to exonerate the Fed from well-deserved blame for their looseness in the late 80s, 90s, and 2000s.? Please, Mr. Bernanke, take some blame there on behalf of the Fed ? the credit boom could never have happened without the Fed.? Painting the Fed as blameless is wrong; the ?Greenspan put? landed us in an overleveraged bust.

I?m not primarily blaming the Fed for its current conduct; we are still in the aftermath of a lending bust ? too much bad mortgage debt, with a government whose budget is out of balance.? (In the bust, there are no good solutions.)? I am blaming the Fed for loose policies 1984-2007, monetary policy should have been a lot tighter on average.? But now we live with the results of prior bad policy, and may the current Fed not compound it.

Postscript

The main difference between this time and the last time I wrote on this is QE3.? What has been the practical impact since then?? The Fed owns more MBS and long maturity Treasuries, financed by more reserve balances at the Fed.

Banks use this cheap funding to finance other assets.? But if they want to make money, the banks have to take credit risk (something the Fed is trying to stimulate), and/or interest rate rate risk (borrow short, lend long, negative convexity, etc).? The longer low rates go on through interest on reserves, the greater the tendency to build up imbalances in the banking system through credit and interest rate risks. 1992-1993 where Fed funds rates were held at 3%, was followed by the residential mortgage backed security market melting down in 1994, not to mention Mexico.? Sub-2% Fed funds rates from 2002 through mid-2004 led to massive overinvestment in residential housing, leading to the present crisis.

Fed tightening cycles often start with a small explosion where short-dated financing for thinly capitalized speculators evaporates, because of the anticipation of higher financing rates.? Fed tightening cycles often end with a large explosion, where a large levered asset class that was better financed, was not financed well-enough.? Think of commercial property in 1989, the stock market in 2000 (particularly the NASDAQ), or housing/banks in 2008.? And yet, that is part of what Fed policy is supposed to do: reveal parts of the economy that are running too hot, so that capital can flow from misallocated areas to areas that are more sound.? At present, my suspicion is that we still have more trouble to come in banking sector.? Here?s why:

We?ve just been through 4.5 years of Fed funds / Interest on reserves being below 0.5% ? this is a far greater period of loose policy than that of 1992-1993 and 2002 to mid-2004 together, and there is no apparent end in sight.? This is why I believe that any removal of policy accommodation will prove very difficult.? The greater the amount of policy accommodation, the greater the difficulties of removal.? Watch the fireworks, if/when they try to remove it.? And while you have the opportunity now, take some risk off the table.

Redacted Version of the October 2013 FOMC Statement

Posted on 30 October 2013 by David Merkel

Comments

This announcement was a nothing-burger.
No taper yet.? Equities, and long bonds fall.? Commodities do nothing. Feels like some market participants expected more QE.
The FOMC says that any change to policy is contingent on almost everything.
They think that if they use more words, they will be clearer.? Longer statements are harder to parse and understand.
Current proposed policy is an exercise in wishful thinking.? Monetary policy does not work in reducing unemployment, and I think we should end the charade.
In the past I have said, ?When [holding down longer-term rates on the highest-quality debt] doesn?t work, what will they do?? I have to imagine that they are wondering whether QE works at all, given the recent rise in long rates.? The Fed is playing with forces bigger than themselves, and it isn?t dawning on them yet.
The key variables on Fed Policy are capacity utilization, unemployment, inflation trends, and inflation expectations.? As a result, the FOMC ain?t moving rates up, absent increases in employment, or a US Dollar crisis.? Labor employment is the key metric.
GDP growth is not improving much if at all, and much of the unemployment rate improvement comes more from discouraged workers, and part-time workers.

Bad Theories Lead to Bad Results

Posted on 26 October 201327 October 2013 by David Merkel

From John Mauldin’s latest book, Code Red:

Investors should ask themselves: if central bankers couldn’t manage conventional monetary policy well in the good times, what makes us think that they will be able to manage unconventional monetary policies in the bad times?

I would point my readers to two of my detailed pieces on monetary policy:

What Mauldin says is common sense, and is a summary of my own views.? The Fed missed many opportunities to tighten monetary policy enough during the good times.? They tried to be short-term heroes, not willing to take the heat like Martin and Volcker did.

So why should we entrust these losers with “more powerful” tools (that have never been shown to work), when they can’t use the normal monetary policy tools right?? By over-provisioning liquidity from 1986-2004, the Fed created the trap that we are all in now.

I don’t see a good way out of this, and as for investing, I am mostly holding companies that can pass inflation through, with strong balance sheets, should there be deflation.

Sorted Weekly Tweets

Posted on 28 September 2013 by David Merkel

China

Chinese Cities Hooked on Land Revenue Fuel Housing Costs http://t.co/8SXwubzUjk Ppl invest in what they think they ctrl; no alternatives $$ Sep 28, 2013
Amway Bankrolls Harvard Course?For Chinese Cadres http://t.co/XVk5MXV2eh May not b pyramid, but successful sellers mostly recruit sellers $$ Sep 26, 2013
Chanos Undeterred by China Growth as O?Neill Bullish http://t.co/xwvC9mOFHa China will become the biggest windshield bugsplat ever seen $$ Sep 25, 2013
Party Will Pay the Price for China?s Rebalancing http://t.co/inQ5BHYMdn The Day has arrived: Michael Pettis is on Bloomberg. Go Michael! $$ Sep 25, 2013
China?s Generation Winnebago Avoids Traffic in RVs http://t.co/Q8z41qGv1j New Chinese status symbol: RVs. Rest while your driver works $$ Sep 24, 2013
China + Gold = 9 Million iPhones Sold http://t.co/DfIAopLDLV Gold may do nothing, but it is beautiful, & beauty drives much marketing $$ Sep 24, 2013
Michael Pettis, in his current newsletter, reminds us that loan growth outstrips ability to repay in China, recent “growth” is a fake-out $$ Sep 24, 2013

Companies & Industries

Meet Hummingbird: Google Just Revamped Search To Answer Your Long Questions Better http://t.co/mtAf5pxGIA Improved Search Engine $$ $GOOG Sep 28, 2013
JC Penney Is on the Brink http://t.co/UtMX5sa3ZT Now $JCP has liquidity, @ a cost, but can they transform their business model? $$ #unlikely Sep 28, 2013
Penney’s Share Offering Prices at a Discount http://t.co/CWVp8dOKln $JCP Danger Will Robinson! Stock price does not hold secondary level $$ Sep 27, 2013
Kat Cole, Former Hooters Waitress, Runs Cinnabon’s $1B Empire http://t.co/sOe9WKUB1v Ppl go gaga 4 Classic Roll. 60% more cals vs Big Mac $$ Sep 27, 2013
Oaktree group to sell US foreclosed homes http://t.co/dUuGn768TI Too many investors chasing residential RE vs owner occupiers $$ #badsign Sep 24, 2013
Meet Prem Watsa: The Man Riding to BlackBerry?s Rescue http://t.co/flg4xn1MkX A case of regret, throwing good $$ after bad $BBRY Sep 24, 2013
Banks Prove Safer Than Industrials in Bond Rally http://t.co/B2t3pbaNGd I would b willing 2 overweight industrials now; they r safer $$ Sep 24, 2013
Do Amazon’s Lockers Help Retailers? Depends on What They Sell http://t.co/Pbd2cPK6zl Works if $AMZN doesn’t sell what u sell, &vice-versa $$ Sep 23, 2013
FireEye Takes Off as Shares Rise 80% in IPO Debut http://t.co/fnY1YkvvD1 Score processes on weirdness, share info globally 2 stop malware $$ Sep 23, 2013

Rest of the World

Irish Billionaire Has ?Boatload? of Customers for Spanish http://t.co/GhyDzrhkhk Get your own Spanish Villa while supplies last! $$ Sep 27, 2013
Debt Disaster Seen Unless VAT Rises to 20% by 2020 http://t.co/fXyeptRNJZ Japan is a bug in search of a windshield; 20% would kill econ $$ Sep 26, 2013
Merkel?s Cold Embrace Leaves SPD Wary of Coalition Talks http://t.co/6pCmU9KgCf If SPD doesn’t compromise, cud a minority government form $$ Sep 24, 2013
Believing Data Not Required W/GDP Warrants http://t.co/36SKEKLcha Do u think Argentina is fudging GDP #s up? Buy Argentine GDP Warrants $$ Sep 23, 2013
For Migrants, New Land of Opportunity Is Mexico http://t.co/jy3XaZeRCA Immigrants r moving to Mexico as the economy deregulates a little $$ Sep 23, 2013
Czechs Yearning for Growth Set to Abandon Merkel Path http://t.co/sU8mxocTL7 No natural political coalition 4 austerity, even when right $$ Sep 23, 2013
Greece Plans Foreclosures to Meet Bailout Demands http://t.co/W7Ryxvv6J6 Inability 2 foreclose gums up Greece’s financial system $$ Sep 23, 2013

Central Banking

Richard Koo says ‘vicious cycle’ taking hold as Fed faces ‘QE trap’ http://t.co/se3uPY5eP1 Similar to my arguments in Easy in, Hard out $$ Sep 27, 2013
Constitutional Money by Richard Timberlake http://t.co/iipZBfnFqm “Treaties may become inapplicable because of changes in circumstances” $$ Sep 25, 2013
US Fed Shouldn’t Give Forward Guidance, Former Bank of Israel Head Fischer Says http://t.co/ZzbTLqTEU9 Correct. Fischer 4 Fed Chair $$ Sep 24, 2013
Why we listen to former FOMC members who r partisans of the Fed, rather than skeptics of central banking, like James Grant, amazes me $$ Sep 24, 2013
Yellen Would Bring Tougher Tone to Fed http://t.co/xoNY2kKWqa Academic economists, like Yellen, do not understand how the economy works $$ Sep 24, 2013

Housing/Mortgages

Mortgage Bonds Without Government Backing Face Tough Time http://t.co/MrtGxmynes Tough 2 mkt private label RMBS, not enough excess spread $$ Sep 28, 2013
Subprime bond bounces back, leaving behind a subprime borrower http://t.co/x7KRB8Rp9n Long article about a deadbeat & his subprime loan $$ Sep 27, 2013
There have been a scad of articles like this, but the guy did not do “due diligence” on the loan, and did not have to buy the house $$ Sep 27, 2013
Home gold rush is over http://t.co/AASXbe14zc Too many investors vs owner occupiers creates an imbalance as smarter players start 2 sell $$ Sep 26, 2013
FHA, Facing Losses, Likely to Tap Treasury http://t.co/Hdpqqdplri Shortfall for Fiscal Year Could b at Least $1B, Early Projection Shows $$ Sep 26, 2013

Financial Sector

BATS Prepares to Take On Big Bell Ringers http://t.co/x8PjU05xE9 NYSE + Arca > BATS + Direct Edge > NASDAQ $$ Graph: http://t.co/rDV3hY7uzf Sep 28, 2013
Shine a Light on Repo http://t.co/KrF4MtaA7Y Did u know that repos r 96 years old? Learn about obscure corner of the fixed income market $$ Sep 27, 2013
The bank that rejects the most mortgages http://t.co/JxD3xhvlY4 $JPM highest rejection rate, $STI lowest, $WFC biggest lender, avg 20.6% $$ Sep 27, 2013
Covenant-Lite Loans Need Uniform Definition http://t.co/RbEywreAEC It would help, but there is always nonstandard data in securitizations $$ Sep 26, 2013
Wells Fargo: New CLO Regulations May Lead to Issuance Slump http://t.co/FcK5NLQvba Forcing securitizers 2 take first losses ruins profits $$ Sep 24, 2013
The VC Secret: 3 Out of 4 Start-Ups Fail http://t.co/jjFrQc9JNP Ratio sounds high, but when VC-backed firm wins, it pays 4a lot of losers $$ Sep 24, 2013
That’s the way 2 manage pension assets if u r big enough. In-source, build up expertise, & keep adding smart people 2 addl asset classes $$ Sep 23, 2013
In-Sourced, Fully Funded, Public, and American http://t.co/ISUDgDvGhC! South Dakota Retirement System manages 65%-70% of assets in-house $$ Sep 23, 2013
America’s latest financial crisis? It’s incredibly personal. http://t.co/yHLcIm7xuR People do NOT understand how to save or handle cash $$ Sep 23, 2013
Value Investor Charles de Vaulx On China, Gold, Apple And Berkshire Hathaway http://t.co/4LgwGyzI7g Longish good interview. $$ $STUDY $BRK.B Sep 23, 2013
Fidelity sued by employees over its own 401(k) plan http://t.co/yo5h32QQD6 Biting hand that feeds them, they object 2 high fees 4 funds $$ Sep 23, 2013
Inside Nasdaq’s succession planning process http://t.co/6uOUsgrpuQ $NDAQ trades at a discount 2 peers; it needs a merger or better mgmt $$ Sep 22, 2013

Other

Billionaires Battle as Bezos-Musk Companies Vie for Launch Pad http://t.co/jEOhw4xXac Fight over a launchpad @ Kennedy Space Center $$ Sep 28, 2013
Supersonic Drones Can Outmaneuver Humans. So Why Do We Still Need Pilots? http://t.co/J5N9FhDVbH Pilots fly better in complex situations $$ Sep 28, 2013
Postal rate hike proposal faces Senate scrutiny http://t.co/aq7gKcDnm1 First Class would go to 49 cents, as internet slowly eats USPS $$ Sep 26, 2013
This Year’s SAT Scores Are Out, and They’re Grim http://t.co/04jtzUJMtL <50% of 2013 graduating seniors got “college-ready” SAT scores $$ Sep 26, 2013
Little GAAP Could Drive Accounting Simplification http://t.co/Ti24zRMFY2 If the acctg is 2 complex, biz is probably 2 complex as well $$ Sep 26, 2013
Work is not waiting for a job. If you don’t have a job, start your own business. http://t.co/pkUXupCOJg Sep 25, 2013
Investors Are Buying High, Yet Again http://t.co/PaTcowZvk8 Opportunities are fewer now, listen to Buffett & Klarman & trim back risk $$ Sep 25, 2013
Tweet tips: Most effective calls to action on Twitter http://t.co/PrcHMiNDMc! U could also ask them to favorite your tweet $$ $TWTR Sep 24, 2013
Death Dinners at Baby Boomers? Tables Take on Dying Taboo http://t.co/68nxd534eB Good 2 talk about death, but r u ready 4 the afterlife? $$ Sep 24, 2013
Here Are The Best Fundamental Investors To Follow On StockTwits http://t.co/a72aV98KUo A good list of resources & teachers; I’m listed #5 $$ Sep 23, 2013
A Backdoor Roth IRA for a High-Income Couple http://t.co/79fYNIF5d6 Invest in regular IRA, convert 2 Roth, repeat process annually $$ Sep 23, 2013

PPACA / Obamacare

Will Obamacare hurt job creation and marriage? http://t.co/n7h7BEkrXK Belief in Obamacare is akin 2 belief in magic; resources r free $$ Sep 27, 2013
Prices Set for New Health-Care Exchanges http://t.co/J4VFjvF5HR Younger Buyers May Face Higher Insurance Premiums $$ Obamacare #FTL Sep 26, 2013
Best of the Web Today: The Young and the Clueless http://t.co/3GbWYOqipM ObamaCare may work, provided no one responds to its incentives. $$ Sep 26, 2013
Young Invincibles Caught in Crossfire Over Obamacare Cost http://t.co/hgyCGtZMaj Note how Obama packs the gallery w/young people $$ Sep 24, 2013

Municipal Debt / Detroit

Stockton to Unveil Plan Including Cuts for Creditors http://t.co/zBj3ngCXMz Trying to preserve pensions may draw lawsuit from bondholders $$ Sep 28, 2013
Detroit spent billions extra from pensions http://t.co/UBdb3GaqtI That’s what u get 4 having 1-party rule, w/no 1 to look over shoulder $$ Sep 27, 2013
Orr proposes freeze for Detroit pension funds http://t.co/sSFtqADV23 Unions don’t get that they destroyed the finances of Detroit $$ Sep 27, 2013
Judge Rules Retiree Health Protected Like Pension http://t.co/xg7bcR28oM! Loopy ruling sets Los Angeles on a course 2 bankruptcy $$ Sep 25, 2013
Hands off DIA, pensions, Detroiters say in poll http://t.co/dHmp2qjc5n! Detroit is an example of a complex system self-destructing $$ #dying Sep 23, 2013

Energy

Pipeline Billionaire Ready for Next Round of Deal Making http://t.co/KhTwsdBDRs $ETP CEO thinks there is room to consolidate pipelines $$ Sep 28, 2013
Six Myths About Renewable Energy http://t.co/G0dB1SJ2aU Balanced article. 3 myths pro, 3 myths con. It will b a minority of total energy $$ Sep 23, 2013

The Economic views of Ray Dalio

One more note, this slideshow put together from BI moves a lot faster than Dalio’s video or the… http://t.co/ytGIHQEaxP Sep 24, 2013
And for those that want to read Ray Dalio’s economic template book, it is free here: http://bwater… http://t.co/f1AVlDufxo Sep 24, 2013

US Politics & Policy

Texas Counties Lead in Job Growth, Lag in Wage Gains http://t.co/XdyNF4ZEJt No surprise, but biz leaves CA & there is high unemployment 2 $$ Sep 27, 2013
CHRISTIE KEEPS PENSION PROBE RECORDS FROM PUBLIC VIEW AS GOVERNOR EYES 2ND TERM http://t.co/NmnbLRxRwd! Running mate has pension scandal $$ Sep 24, 2013
Open-Government Laws Fuel Hedge-Fund Profits http://t.co/P5vZBpkiDq Hedge funds file FOIA requests 2get FDA reports on drugs, etc. $$ Sep 23, 2013
At 77 He Prepares Burgers Earning in Week His Former Hourly Wage http://t.co/jQJaWTiQd3 Example of “failed 2 save” Don’t let it happen 2u $$ Sep 23, 2013
Self-Driving Vehicles Progress Faster Than Rules of Road http://t.co/1lFAmdlJKz Regulations, laws, insurance all need 2b revised 4 this $$ Sep 23, 2013
The Hidden Classified Briefing Most of Congress Missed http://t.co/eSBnz0uPxd How intelligence gets disseminated w/o getting disseminated $$ Sep 23, 2013
How the NFL Fleeces Taxpayers http://t.co/OeG5kRTM2O Longish article on how they get free stadiums, pay no federal or state taxes, etc. $$ Sep 23, 2013
Facebook ?Likes? Are Now Legally Protected Speech http://t.co/Oi7XQkYVlB Political speech is protected by the 1st Amendment even “like” $$ Sep 22, 2013

Wrong

Over the Top: Jordan R. VanOort Earns Prestigious CFA Designation http://t.co/jRMcdyRq1R CFA designation is good, but prestigious? $$ Sep 28, 2013
& really, when there are over 100,000 of us, does receiving your CFA Charter really rate a press release? Tougher to become an Actuary $$ Sep 28, 2013
Wrong:Pimco shook hands with Fed – & made a killing http://t.co/gBlELQ6U7p 2 notes: agency MBS r easy 2 understand, & TBA mkt not obscure $$ Sep 27, 2013
Point: Fed could have easily done this internally. What! They can’t find any among their 1000s of Ph.D. economists to get simple mkts? $$ Sep 27, 2013
It is probable that enough data on what the Fed would do escaped over the transom 2 give PIMCO & the other firms insider info. $$ Sep 27, 2013
Wrong: New idiots, same as the? actually these idiots might be worse http://t.co/Xa5jGmbQII US economy grew faster under balanced budgets $$ Sep 27, 2013
Wrong: Reduce working week to 30 hours, say economists http://t.co/HiI7Zmhimo More work means more production means more GDP, Consumption $$ Sep 27, 2013
Loony: Detroit Union Seeks 2 Revive `13th’ Pension Check Policy http://t.co/Lf5YMVBKxW Practice that continues 4 28Y is a tacit agreement $$ Sep 27, 2013
Wishful thinking: Let ObamaCare Collapse http://t.co/n3yNizNAfP Until the US itself fails, no entitlement has ever been eliminated $$ Sep 26, 2013
Wrong:Shinzo Abe: Unleashing the Power of ‘Womenomics’ http://t.co/R00AN5pUEH This comes from nation w/a shrinking population. Ridiculous $$ Sep 26, 2013
Wrong: How Sensitive Is Public Pension Funding to Investment Returns? http://t.co/hSeoOLsvrc! Should use mkt-based assmptns not historic $$ Sep 25, 2013
Wrong: US city, county public pension levels sank in 2012 http://t.co/o2JUwsi5JF! 2 optimistic, b/c risk assets bottomed in late 2002 $$ Sep 25, 2013
Wrong: Don?t Be Alarmed by Obamacare?s Failures http://t.co/fS63xQpaaP PPACA doesn’t make actuarial sense, young people won’t participate $$ Sep 24, 2013
Wrong: Yellen Isn?t a ?Knee-Jerk Dove,? Kroszner Says http://t.co/0aeTM6BIiB Favoring negative interest rates == ?Knee-Jerk Dove? $$ Sep 24, 2013

Replies, Retweets & Comments

Thanks @TightTalk @BabyFreshNuggz @X9T_Trading for being top new followers in my community this week (insight via http://t.co/sern3wLA13) Sep 27, 2013
“Here is part of my solution: accounting for repos should be bifurcated, so that is not treated ?” ? David_Merkel http://t.co/caWGlbe3eL $$ Sep 27, 2013
Loonies, Detroit is dead MT @ToddSullivan: RT @AmyResnick: just wow. Detroit Union Seeks to Revive `13th’ #Pension http://t.co/u3XJAER0bi $$ Sep 27, 2013
Believe MT @ReformedBroker: You’re not gonna believe this – but Detroit’s pension doled billions left and right http://t.co/9i5MinpGAX $$ Sep 27, 2013
RT @ezraklein: Perhaps if President Obama makes the House GOP 300 sandwiches, they’ll agree to lift the debt ceiling. Sep 27, 2013
#FollowFriday Thanks @ReformedBroker @pelias01 @researchpuzzler for being top influencers in my community this week 🙂 Sep 27, 2013
‘ @allstarcharts @jfahmy The 1st discipline of investing/trading is humility; even if you know more, the timing/environment can be tough $$ Sep 27, 2013
Commented on StockTwits: I think Watsa can be trusted. Aside from financials in the old days that were dodgy, I th… http://t.co/dJ8g2rVKmK Sep 27, 2013
Thanks @abnormalreturns @dpinsen for being top engaged members in my community this week (insight via http://t.co/sern3wLA13) Sep 26, 2013
“I never directly pay for research… most of it is freely available on the web. What is not, I?” ? David_Merkel http://t.co/EAk37XXNdJ $$ Sep 26, 2013
“This is already known by those that study the statistics. Look at year over year figures, you ?” ? David_Merkel http://t.co/5J46Rm19vo $$ Sep 26, 2013
I just left a comment in “We’ve got bubbles, we’ve got troubles – MarketWatch” http://t.co/P11awJw1KQ Sep 26, 2013
‘ @Reddy Cummings is my gerrymandered rep. He is by far one of the most intellectually underpowered members of the House, & that says a lot Sep 25, 2013
@moorehn @ReformedBroker @SimoneFoxman @SallyPancakes @kensweet @jennablan They r favorites of mine. $$ Sep 25, 2013
Entitlements will have to be reduced; it is only a question of how and when. Druckenmiller’s presentation:… http://t.co/BsA9S78RTI Sep 24, 2013
Thanks @MarshaCollier @EdmundSLee @rwohlner for being top new followers in my community this week (insight via http://t.co/sern3wLA13) Sep 24, 2013
Thanks @researchpuzzler @pelias01 for being top engaged members in my community this week (insight via http://t.co/sern3wLA13) Sep 23, 2013