Search Results for: My Visit to the US Treasury

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

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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

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  • 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

Who to Follow

 

  • #FF @researchpuzzler @newrulesinvest @felixsalmon @interfluidity @Alea_ I go through my follow list twice/yr & highlight those I respect $$ Dec 15, 2012
  • #FF @EddyElfenbein @ReformedBroker @smallcapanalyst @BarbarianCap @abnormalreturns @TheStalwart @The_Analyst @mickwe @marketfolly @bondscoop Dec 15, 2012

 

Stupid political things I have said

 

  • @jpgriffard When I say great, I mean “large.” I hate them both. Dec 15, 2012
  • @JoshForde Me too, thanks 4 interacting w/me Dec 15, 2012
  • @JoshForde Wrong time of year, and Congress is tied up with the budget, so I guess no. NYC mayor provoked me, demanding immediate action Dec 15, 2012
  • ‘ @JoshForde Yes. Unintended consequences. 9-11 and the wars it engendered r my leading exhibits there. The US messed up badly. Dec 15, 2012
  • @Borderscrossed No they don’t, have a good night. Dec 15, 2012
  • @JoshForde That I can agree with as well, w/rights come responsibilities, bigtime. Dec 15, 2012
  • @JoshForde Second-order effects; our policy usually omits those. Example: the Fed & Central Bank freedom; what if they act irresponsibly? Dec 15, 2012
  • @trmcloughlin I would agree with that also Dec 15, 2012
  • @incakolanews I would agree w/that Dec 15, 2012
  • @JoshForde Okay, but I’ve said that before on other topics… this has been a general position of mine on a wide # of issues, not just guns Dec 15, 2012
  • Auughh! Blam! Drones r another ethical issue that I hate $$ RT @Borderscrossed: @AlephBlog NSA has logged our tweets. Drones on the way. Dec 15, 2012
  • ‘ @jpgriffard He has two great achievements PPACA & Dodd-Frank Dec 15, 2012
  • @Borderscrossed Wait, you said “Obama” & “do something” in the same tweet. Isn’t that illegal? 😉 Dec 15, 2012
  • @JoshForde I’m willing to consider… what was insensitive? Dec 15, 2012
  • ‘ @ross_marketment I agree, freedom requires some laws, and here’s one to consider… liability for not securing your gun. Dec 15, 2012
  • Behind every economic view there is a political view. Unavoidable. All I know is that I get more grief from writing on politics. $$ Dec 15, 2012
  • @laGiocondaVinci That’s fine hope u do well Dec 15, 2012
  • My politics r complex; I am mostly a libertarian: I was against Iraq 1 & 2, Afghanistan. I did not like Bush 43, don’t like Obama either $$ Dec 15, 2012
  • RT @dpinsen: @AlephBlog The same people who now regret the TSA, the PATRIOT Act, etc. rushed through after 9/11 want to rush through mor … Dec 15, 2012
  • ‘ @Borderscrossed I am just saying 4 all legislation consider the second order effects; never act in heated emotion, consider all effects $$ Dec 15, 2012
  • ‘ @ross_marketment Again, 9/11 is my best example. It has harmed Americans more than our enemies. I have been against all our recent wars $$ Dec 15, 2012
  • @streetbrief Take care Dec 15, 2012
  • @ross_marketment Not sure. I am saying is consider wide range of effects from policy change; we do not typically do that & we get bad policy Dec 15, 2012
  • I’m willing 2c intelligent limits on firearms & some degree of liability 4 those that don’t secure them, but rushed policy is bad policy $$ Dec 15, 2012
  • @ross_marketment Problem: there may be fewer murders, but in the UK they have more “hot robberies” than we do; robbers have more 2fear in US Dec 15, 2012
  • ‘ @trmcloughlin What we don’t know is how many lives have been saved by firearms. We don’t hear the sound of one hand clapping. #2ndorder Dec 15, 2012
  • No doubt; I have 8 kids; 5 adopted – I feel sorry 4 the parents; grief RT @ross_marketment: and for the minority as well. 26 today Dec 15, 2012
  • And we get salvation through a plethora of ineffective statutes RT @JamesMarsh79: our society demands intervention $$ Dec 15, 2012
  • ‘ @ross_marketment I don’t own a gun, probably nevr will. I serve the Prince of Peace. I know that a few people ruin freedom 4 the majority Dec 15, 2012
  • So after a really ugly event like the killing of 6-7 year olds, we need to mourn, leave policy decisions 4 a calmer time, weighing +s/-s $$ Dec 15, 2012
  • 2 many people react 2 an ugly event saying, “This must never, Never, NEVER HAPPEN AGAIN!!” w/o considering what 2nd order effects will b $$ Dec 15, 2012
  • After 9/11, we made many policy decisions in haste that left us less free. Part of being a free culture –> we must accept some disasters $$ Dec 15, 2012

 

Wrong

 

  • Wrong: Former HP CEO Shifts Blame for Autonomy Deal to Chairman http://t.co/p8xH0BoR No deal can get done w/o sponsorship of the CEO $$ Dec 14, 2012
  • Wrong: As Dollar Loses Reserve Status Central Banks Diversify http://t.co/lfq2UGNW Bad as the $$ is, no other currency is as investable $$ Dec 14, 2012
  • Wrong: Canadian Exceptionalism in Compensation http://t.co/Q6VDqm5P France is no exemplar in paying bureaucrats a lot of $$ a % of GDP Dec 14, 2012
  • Wrong: Our Hero, Ben Bernanke: Why Central Bankers (Not Politicians) Are Saving the Global Economy http://t.co/BawbK79N First do no harm $$ Dec 14, 2012
  • Wrong: Mozilo Unbowed Says Countrywide Was ?World-Class Company? http://t.co/6pzQQyos Big, yes, but horrible underwriting, 2much debt $$ Dec 14, 2012
  • Wrong: Bernanke Wields New Tools to Reduce Unemployment Rate http://t.co/M3GXZomh No new tools, only wishful thinking $$ Dec 13, 2012
  • Wrong: Oil at $60 or $120 Doesn?t Prevent US Supplanting Saudi Arabia http://t.co/sWB1CqEa Decay curve 4 fracking means short advantage $$ Dec 13, 2012
  • Wrong: Krugman, Krauthammer and Their Implied Authors http://t.co/seOKbPdg U r what u write; Just another aspect of your personality $$ Dec 11, 2012

 

Companies

 

  • And with that, I sign off Twitter 4 the evening (aside from robotic posts). One note b4 I go, $HPQ has not filed its 10-K @ its due date. $$ Dec 15, 2012
  • Apple Falls as UBS Projects Growth Slowdown http://t.co/f7Gi1Wwm Size is an enemy of growth. Channel check indicates slowdown 4 $AAPL $$ Dec 14, 2012
  • Hurd was an accounting manipulator; he boosted asset accrual items to paper over flagging profitability. $$ http://t.co/ubjkmR9C $HPQ Dec 14, 2012

 

Energy

 

  • Alberta-Quebec Oil Pipeline Reversal Study Done by June http://t.co/CkqBZul2 Let Quebec find its own oil then $$ Dec 14, 2012
  • Refiner Phillips 66 would support U.S. crude oil exports-CEO http://t.co/lvKXNlcg More important: infrastructure 4 LNG exports FD: + $PSX Dec 14, 2012
  • Tokyo Steel Shifts Output as Power Costs Rise Post-Fukushima http://t.co/jYPrhUDA There r real costs to doing w/o nuclear power $$ Dec 14, 2012

 

Federal Reserve & Central Banks

 

  • We would b better off in the long run if the central banks of the world stopped QE & low rates & let us work out bad debts 4 a decade $$ Dec 14, 2012
  • Houston We Have a Problem – The Abe Approach http://t.co/V9XlZ7pw Fed adopts an approach similar 2 the proposals of Shinzo Abe $$ #FTL Dec 13, 2012
  • Inside the Risky Bets of Central Banks http://t.co/rKRwTgb9 They talk together, but the central bankers of the world share ignorance $$ Dec 13, 2012
  • Biggest Opportunity Will Be Shorting the Bond Market: Dalio http://t.co/GdGIGNkQ Shorting bonds is tough b/c of negative carry $$ Dec 13, 2012
  • RAY DALIO: The US Economy Is Facing A Rare Set Of Circumstances That Will Be Bad For Markets http://t.co/7lgVsmRR Bull mkt 4 cash & gold $$ Dec 13, 2012
  • BoE’s King warns of growing currency competition http://t.co/zTsohWHT “Beggar thy neighbor” characterizes Central Bank policies globally $$ Dec 13, 2012
  • “Economists at the BIS, meanwhile, have grown more skeptical about the central bank tilt.” http://t.co/Fje7WTFI All lean the same way $$ Dec 13, 2012
  • “There is a lot we don’t understand,” said Donald Kohn, the Fed’s former vice chairman. http://t.co/Fje7WTFI You can say that again $$ Dec 13, 2012
  • Most interesting move of the day was watching long Tsy bonds sell off after Fed said it would buy more http://t.co/wk4ZFhAR “Et tu, QE?” $$ Dec 12, 2012
  • PS: long a little bit of $TLT 4 me & bond clients, short a little bit of $SPY for hedged clients Dec 12, 2012
  • Love the DJ reporter asking about Fed forecast accuracy. The answer is they missed financial crisis, & have been shocked by slow recovery $$ Dec 12, 2012
  • Love those reporters who assume monetary policy can do anything, & that monetary policy can change unemployment w/a snap of the fingers $$ Dec 12, 2012
  • Change since September in Central tendency of Fed funds Fed forecasts 2013-2015 & longer run: 0.01%, -0.20%, -0.32%, -0.15% $$ Dec 12, 2012
  • Change since September in Central tendency of PCE inflation Fed forecasts 2013-2015: -0.08% -0.08% -0.05% $$ Dec 12, 2012
  • Change since September in Central tendency of Unemployment Fed forecasts 2013-2015: -0.27% -0.18% -0.05% $$ Dec 12, 2012
  • Long Treasuries not liking the Fed Statement, even w/the promise of additional buying FD: long $TLT Dec 12, 2012
  • Change in Central tendency of GDP Fed forecasts since September 2013-2015: -0.07%, -0.16%, 0.08% $$ Dec 12, 2012
  • Steve Liesman actually asks a decent question, wow. Dec 12, 2012
  • Here’s one year forward, one year inflation implied from TIPS over the last 40 days: http://t.co/dmzjrO9W moving up, currently @ 2.01% $$ Dec 12, 2012
  • Using TIPS, the figure for inflation between one and two years ahead is already 2.01%. Fed did not do its homework, again. $$ Dec 12, 2012
  • Fed Seen Pumping Up Assets to $4 Trillion in New Buying http://t.co/YkZo23sl Doing same thing over & over & expecting different result $$ Dec 11, 2012

 

US Politics

 

  • How to Keep All of Huck Finn in the Classroom http://t.co/rPo5syl2 We need 2 eliminate the pseudo-intellectual “common core” standards $$ Dec 14, 2012
  • Dispatches from the public pension wars: http://t.co/rvD9zmAU & http://t.co/oWgfJYGQ & http://t.co/EYvaGTJ2 End pension spiking $$ Dec 14, 2012
  • It really seems stupid to spend $151B to upgrade Acela when it only has revenue of $0.5B/year http://t.co/SNbmuXJW Slow trains r better $$ Dec 14, 2012
  • Whose job is it to stop an asteroid from hitting the Earth? http://t.co/dNFyVjJR Would need at least 2 years of lead time, preferably 5 $$ Dec 13, 2012
  • Big Banks Flunk OCC Risk Tests http://t.co/2f1veBS8 2big2b effectively regulated; left hand doesn’t know what right does, centipede-level $$ Dec 13, 2012
  • Pimco?s Gross Says Fed Policy Means ?Free? Debt for Treasury http://t.co/d7K7wHm1 Ah, seigniorage; it is good 2b king Dec 13, 2012
  • Amtrak Plans to Replace All High-Speed Acela Trains http://t.co/SNbmuXJW I like the Acela, but I can’t see how 2 recoup $151B 4 new trains Dec 13, 2012

 

Rest of the World

 

  • Islam in Egypt’s new constitution http://t.co/0oqRk11B Kind of interesting; gives u a feel 4 different types of Islamic casuistry $$ Dec 13, 2012
  • Assad Losing Syria, Say Russia and NATO http://t.co/rNeKVmhS Could Chavez & Assad lose their power in the same week? $$ Dec 13, 2012
  • EU Reaches Deal on Bank Supervisor http://t.co/YNFGjnjk A lot of the details have 2b worked out; will b interesting 2c it in action $$ Dec 13, 2012
  • China’s Economy – weaker than we think http://t.co/FwbPNviK The math is pretty clear: rebalancing will inevitably require lower growth. $$ Dec 13, 2012
  • What Mario Monti?s Exit Tells Us About Europe?s Debt Crisis http://t.co/Ak8zB6N4 Problems r cultural; politics can’t bring prosperity $$ Dec 13, 2012
  • ?Reckless, Wrong-Headed? Pension Rules Could Savage Europe?s Economy http://t.co/OP7xDSGM Key Q: how large is the equity prem over Tsys? $$ Dec 13, 2012
  • US Schoolchildren Lag Asian Peers on Academic Tests http://t.co/PEJufbTb Phonics & going back to the “old math” would help considerably $$ Dec 11, 2012
  • Argentine mom rescues hundreds of sex slaves http://t.co/9dz9sZw9 In rescuing her kidnapped daughter, gains a quest & rescues hundreds $$ Dec 11, 2012
  • Germany displaces China as US Treasury’s currency villain http://t.co/7giRsoJE Germany > China; biggest source of global trade imbalance $$ Dec 11, 2012
  • BIS: Policy measures and reduced short-term risks buoyed markets http://t.co/M4k5j2Oq True now, but will make eventual tightening harder $$ Dec 11, 2012
  • Honey Laundering http://t.co/x2Dl5sdr No way India is now producing so much honey. Imports from China, escapes duties, exports 2 US $$ Dec 11, 2012
  • Hitler Has a Following in India http://t.co/Mksfyv6R India dislikes the British enough, & desires a strong leader to save them, & thus $$ Dec 11, 2012
  • Sony Loses Science Talent as Student Resumes Go to Dairies http://t.co/dKJsVDIN Can’t obsolete food; shows caution among Japanese youth $$ Dec 10, 2012
  • Carson Block Goes Short Unafraid as Chinese Gangsters Chase http://t.co/QVRFxy1i Trying 2 hide information does not change negative FCF $$ Dec 10, 2012
  • China November factory output jumps to eight-month high http://t.co/Y0HNSoqp And consumer inflation bounced off 33-month lows $$ Dec 10, 2012
  • Chinese Group Buys 80% of AIG Plane Unit for $4.2B http://t.co/7YLMn3ro Good 2c $AIG simplify. I suspect the seller is the winner here $$ Dec 10, 2012
  • Raging Oil Price Will Burn OPEC http://t.co/xRnGN9Pa Suggests downward pressure on oil prices. Sell high-cost E&P, maybe $$ Dec 10, 2012
  • Slowing China Forex Reserves May Spell Trouble http://t.co/Bcy9KnW9 Suggests gold and Singapore $$ off of weakness & capital flight in China Dec 10, 2012

 

Other

 

  • Those Diabolical Anonymous Commenters http://t.co/hl7tGZJ1 If we have to sign our names to what we write, we will b more judicious $$ Dec 14, 2012
  • The five most disruptive technologies of 2012 http://t.co/AbNJyUSF Pretty fascinating, particularly power storage & cheap internet $$ Dec 13, 2012
  • Finally did it. Joined the cult of Warren the Wonderful http://t.co/8p67b2yl Now my clients & I can get a discount @ GEICO. FD: + $BRK.B $$ Dec 12, 2012
  • America’s Milk Business in a ‘Crisis’ http://t.co/ANb8xN6d Maybe if they got rid of the growth hormones, more people would want milk $$ Dec 11, 2012
  • Bloomberg Weighs Making Bid for The Financial Times http://t.co/E2r3t7hw Creating a more powerful Bloomberg, LP piece-by-piece $$ #FTW Dec 11, 2012
  • Green energy will come into existence without subsidies when crude is $200/bbl $$ http://t.co/Ufz0Kig2 Dec 11, 2012
  • They Know What You’re Shopping For http://t.co/MuBloNPi Interesting. Shows how auto dealers get data on you $$ Get “do not track” $$ Dec 08, 2012

 

US Politics & Economics

  • When the CPI is up, journos point at the bogus “core” figure. When the CPI is down, journos point at the CPI. Bias http://t.co/ODXMyo1V $$ Dec 14, 2012
  • The Myth Of Cash On The Sidelines Remains A Myth http://t.co/c6UKgvxV Also have 2 count the cash that collateralizes derivative positions $$ Dec 13, 2012
  • Mortgage Rates in the US Drop to Near-Record Lows http://t.co/ciJ8b4rd Attractive credit, if u can get it; hey, rhymes and scans $$ Dec 13, 2012
  • If u r a professional bond investor, researcher would like you 2 take survey on Investor Preferences for Climate Bonds http://t.co/NP4X0iPV Dec 13, 2012
  • Beef in America is plentiful & affordable, spun out in enormous quantities @ high speeds: bonanza w/hidden dangers. http://t.co/ZhYQcleo $$ Dec 13, 2012
  • States Faulted Over Teacher Pension Shortfall http://t.co/bMnCE92x (non) Payback coming to teachers 4 negotiating 2 high pension bfts $$ Dec 13, 2012
  • How Republicans engineered a blow to Michigan’s powerful unions http://t.co/pll6Uo1r Hidden in plain sight; careful planning achieved it $$ Dec 13, 2012
  • For-Sale Signs Sprout in Heartland http://t.co/Fs7sB8b4 Likely sustainable as there are low levels of debt used to effect buys $$ Dec 13, 2012
  • I care more for how a man weighs ideas & opinions than what he weighs. http://t.co/9Cf51G9e Dec 12, 2012
  • “Ferri’s reasoning only looks easy in hindsight. I agree with Barry’s reasoning, though. Consistent w/Q-ratio, etc. $$ http://t.co/I8MPtJlh Dec 12, 2012
  • Before the public pension crisis ends, some states will remove pension protections in their constitutions, & retroactively cut benefits $$ Dec 12, 2012
  • $822,000 Worker Shows California Leads U.S. Pay Giveaway http://t.co/YfcZsCWU People r finally getting how big this problem is $$ Dec 12, 2012
  • Social Security ? 2012 Results http://t.co/GgxzcD4q Social Security & Medicare get worse and worse; US Govt will not b able 2 afford them $$ Dec 13, 2012
  • Hawaii Real Estate Paradise Returns With Goldman Loan http://t.co/eMAJl5IM Japanese & Korean travelers driving hotel visits $$ Dec 11, 2012
  • LOOMING CRISIS: State Budgets Soon to be Under Siege http://t.co/IwGIK90g Cash payments r curving up rapidly 4 public employee benefits $$ Dec 11, 2012
  • Don’t forget the unforced give up of stricter bailout terms, made when $$ was impossible to get; $AIG deal… http://t.co/G9zwHuDV Dec 11, 2012
  • Please ignore special tax benefits given $AIG & unforced renegotiation of original deal. A loss in economic terms http://t.co/gShXtNIq $$ Dec 11, 2012
  • Better Gas Mileage, Thanks to the Pentagon http://t.co/rmVBspJ0 As w/the space program, rarely we get positive spillover from Defense $$ Dec 11, 2012
  • 13 Insights From Paul Tudor Jones http://t.co/BsAnkdgS He is not only a successful hedge fund manager but a very original & clear thinker $$ Dec 11, 2012
  • $GOOG Revenues Sheltered in No-Tax Bermuda Soar 2 $10B http://t.co/az2KrBhI Shock in Hamilton as NATO blockades, seizes shell companies $$ Dec 10, 2012
  • Hostess Maneuver Deprived Pension http://t.co/tyvhsCF2 Multi-employer pension trusts r weak; PBGC coverage is < single-employer plans $$ Dec 10, 2012
  • Climate Treaty Hinges on Obama Making Case: Ex-Aides http://t.co/zIA5j27p Obama doesn’t want 2 waste political capital on low odds win $$ Dec 10, 2012
  • Most Accurate Forecaster Sees Lethargic US Expansion http://t.co/e0nDazST Economic Lethargy girdles the globe, everything slowing $$ Dec 09, 2012
  • SEC’s Aguilar Warms Up to Money-Fund Overhauls http://t.co/mkLQNYAX Will destroy MMFs & won’t significantly help systemic risk $$ Dec 08, 2012

 

Retweets

  • To the main point: High speed rail is a boondoggle. Slow will do. RT @finemrespice: @AlephBlog http://t.co/UKb2A9hO Dec 14, 2012
  • Not indice, index $$ RT @weigu: Shanghai Composite Index is the 2nd-worst performing stock indice in the world this year, just after Spain. Dec 13, 2012
  • RT @randy_cass: Hint #1 that we’ve gotten conditioned to stimulus. Journalist asked question and referenced ‘$45 Billion a month’ as ‘a … Dec 13, 2012
  • Inertia RT @AsifSuria: Why does Best Buy still pay a dividend? $BBY Dec 13, 2012
  • Here’s a graph of it for those who don’t know where 2c it: http://t.co/G2P4kknG RT @TheStalwart: @AlephBlog tanked right at 8 PM ET $$ Dec 13, 2012
  • RT @Convertbond: Scary US Percentage of High Yield Bonds Trading ABOVE next Call Price 2012 40% 2011 30% 2010 22% 2009 0% 2008 5% 2007 … Dec 12, 2012
  • You said it RT @credittrader: umm benny – look at 5y5y fwds! come on man…. Dec 12, 2012
  • He can’t mean that $$ RT @davidgaffen: “I don’t think any policymaker, including the Fed, should respond to markets.” -BB 12/12/12 Dec 12, 2012
  • RT @Kathleen_Hays: CBS news guy asks Bernanke how does tying rate change to 6.5% jobless help economy? Bernanke says better communicatio … Dec 12, 2012
  • RT @LaMonicaBuzz: Where’s Chuck Barris? The Bernanke press conference is approaching the hour-long mark. Time for someone to ring a big … Dec 12, 2012
  • Muted response from $GLD, $TLT down, $SPY up/down since stmt RT @jamessaft: it is not the reporters who scare me, it is the investors $$ Dec 12, 2012
  • I assume we r both “persona non grata” there RT @cabaum1: @AlephBlog Use my name. It’ll get you a seat in the very back. Dec 12, 2012
  • You made me laugh; I applied to be in the press, they didn’t take me RT @cabaum1: @AlephBlog Be nice. He’s playing Helen Thomas. $$ Dec 12, 2012
  • RT @WildestFacts: Only 70% of people will understand the following: 2 + 2 = Fish. 3 + 3 = Eight. 7 + 7 = Triangle. RT if you get it. Dec 12, 2012
  • RT @tracyalloway: So long European aversion? Yankee bonds of European issuers now trading at pre-debt crisis levels, BarCap says: http:/ … Dec 11, 2012
  • Can’t make this up $$ RT @Alea_:[ pictures ]Mayan apocalypse: Chinese farmer builds survival pods in case of a disaster http://t.co/zWWNTWdr Dec 11, 2012
  • RT @MKTWBurton: What if the stock market is rigged? @abnormalreturns @felixsalmon @alephblog @bclund @nastrading: http://t.co/mkaMbNBE … Dec 11, 2012
  • +1 RT @fmanjoo: The University of California’s new logo is just unbelievably bad http://t.co/SFMdC22j Dec 10, 2012
  • Faith too RT @Mctaguej: It’s the growing number of collectivists among us that most concerns me. American individualism is in steep decline Dec 08, 2012

 

Replies

  • @e_d_sanders But once they are set up, most of the costs are incurred already, even the externalized ones. Dec 14, 2012
  • ‘ @JonathanProber My advice to all investors is to be wary of asset accrual items that seem too big relative to assets & profits $$ Dec 14, 2012
  • @JonathanProber I grew up on life insurance acctg, which is probably the most complex acctg of any industry, except investment banking Dec 14, 2012
  • @bundesbank Die Buba ist jetzt auf Twitter. Feiern Sie mit! Holen Sie sich eine Currywurst, Sauerkraut und ein Bier! $$ 😉 Dec 14, 2012
  • @finemrespice Living near Baltimore, idea of turning it in2a toxic nuclear waste dump could b an improvement. Better 40 miles SW, though $$ Dec 14, 2012
  • @quartznews Queen: “At least we don’t have to worry about whether this gold exists. Pity about the colonies & Fort Knox…” Dec 14, 2012
  • @Pedant_Bot This *is* Twitter, u know. Often we use less than optimal words 4 space reasons. Or, r u referrring to a blog post of mine? $$ Dec 14, 2012
  • @ritholtz I’m agreeing w/u, Barry – there is less cash available 2b invested than most think, b/c much of it is encumbered Dec 14, 2012
  • @ReformedBroker Thanks, Josh. You have my respect; it’s tough to put out quality content w/frequency, variety & regularity Dec 13, 2012
  • @SimoneFoxman “At least we don’t have to worry about whether this gold exists. Pity about the colonies & Fort Knox…” Dec 13, 2012
  • @finemrespice Got me to laugh. Yeh, hedge funds r the financial equivalent 2 alchemists. Let them propose alternative math, c who buys it $$ Dec 13, 2012
  • @finemrespice Alas, but mathematics is a tough foe. Let alternative mathematics try to make $$ by outcompeting traditional math 😉 Dec 13, 2012
  • @TheStalwart Not much in today’s trading… why, is something happening in Asia? Dec 13, 2012
  • @LaurenYoung The saints will laugh, the sinners will cry http://t.co/5cwaOtbH Dec 13, 2012
  • ‘ @Healey_trades I think the market is adjusting to the idea of higher future inflation, the Fed will not be able to maintain its policy $$ Dec 13, 2012
  • @OVVOFinancial I’ve never agreed with that — that would be why median CPI or trimmed mean CPI would be preferred Dec 12, 2012
  • @OVVOFinancial And if you use chained CPI vs chained PCE, they are virtually the same over the last 10 years Dec 12, 2012
  • @OVVOFinancial Over the last 10 years that would shave 0.2% off CPI inflation Dec 12, 2012
  • @OVVOFinancial I understand that Fed uses PCE $ TIPS r CPI-based, but there are no objective forward measures for PCE Dec 12, 2012
  • @cate_long Here’s 1-yr forward, 1-yr inflation implied from TIPS over the last 40 days: http://t.co/dmzjrO9W moving up, currently @ 2.01% $$ Dec 12, 2012
  • @cate_long Here’s a graph for that: http://t.co/dmzjrO9W Dec 12, 2012
  • @TheStalwart Ready at the criticism turret! Dec 12, 2012
  • ‘ @Kevin_Holloway As the market has run, $$ has grown, approaching max cash limit; 1.2x BV $BRK.B is below; well-run, difficult to replicate Dec 12, 2012
  • @WildestFacts 70% sounds high, but the process is simple, flip one and paste over the other for a picture Dec 12, 2012
  • “4 of 6 companies graphed are housing related. $CLGX is not an insurer. Maybe you need to revise?” ? David_Merkel http://t.co/vTGZv3i2 $$ Dec 10, 2012
  • Many thanks to my 6000th Twitter follower @syedasyraf4 . Wherever you are, I pray things go well for you. Dec 09, 2012
  • ‘ @muffiehbs05 @carney I guess you’re right, Muffie, much more than a fund http://t.co/78kXw5Rf A home 4 student & alumni moral decay $$ Dec 08, 2012
  • .@historysquared The slow corruption of the last set of strong balance sheets in the US. Leverage is being substituted for organic growth $$ Dec 08, 2012

FWIW

 

  • My week on twitter: 57 retweets received, 1 new listings, 54 new followers, 65 mentions. Via: http://t.co/SPrAWil0 Dec 13, 2012

 

Book Review: Bailout

Book Review: Bailout

Posted on by David Merkel

What does Washington, DC care about more — people or corporations?? Do you have to ask? DC favors corporations, and all three branches of the government support this.? Both parties favor this.? Why is this so?

The corporations, and those that own them are a more effective means of raising funds to maintain their hold on the offices that the occupy.? Beyond that, there is an attitude that economic policy needs to be carried out through laws that address corporations.

So whether you come from the t-party, Occupy, or someplace else, you might harbor resentment against the status quo: big government in league with big corporations, and wealthy people.

I wish it weren’t so, but the Constitution takes a back seat to “pragmatic” concerns, especially when a “crisis” happens. It should not be that way, but that’s the way it is.

So, what if you drop an idealistic guy, the author, Neil Barofsky, into the job of watchdog for the TARP?? [SIGTARP: Special Inspector General of the Troubled Asset Relief Program] He objects to the uncontrolled nature of how money is being handed out to banks, with few checks as to how the money will be used.

Now, the author could have made a stronger argument.? The FDIC, where does it pump in cash to failed institutions? They protect depositors — that’s the lowest level of the capital structure.? But where did the TARP add capital?? At the highest level of the capital structure; they bought stock and warrants.

Constitutionally, the government has no authority to own corporations.? Further, even if the government had that authority, if it was trying to preserve the soundness of the banking system, the proper way to do it would be to make senior secured loans.? That would guarantee the banking system, but let the common and preferred stockholders, and bondholders go broke before the taxpayer coughs up the first dime.

As it was, the author found himself adrift in DC, cleverly fighting to bring some rules to what was a giveaway to the banks, many of which did not need the bailout, and certainly did not want the limits on executive pay.? He found that DC was a place where the bureaucratic government fights itself.? No one wants to look lazy or foolish, so when someone alleges a crime against a party that another branch of the bureaucracy is supposedly investigating, they fight back.? Applying the principles of Peter Drucker, our government could be smaller, and more effective — there would be fewer turf wars.

Were the Bailouts Wrong?? Did they Fail??

The author makes the case that the bailout has failed. When he says that he is not saying that the bailout as a whole lost money. (I would note that the bailouts have lost money on the home if you include Fannie and Freddie, the auto companies, along with all of the financial institutions including AIG.) He is saying that the problem of too big to fail banks has not only not been solved, is actually gotten worse since the crisis. The big five banks now have around 50% of the deposit base in US. “Too big to fail” is a problem unsolved that still threatens our financial system. This problem is solvable; the US government broke up AT&T (then allowed it to recombine again). Interstate branching could be limited, or ended.

The second problem with bailout is that engenders moral hazard. Because you have done it once, it would be expected next time, which when the financial system once again enters a bull cycle, the bankers will know that the federal government has its back and will not be inclined to limit risk to the same degree that they otherwise might.

The third problem with the bailout is that it was uneven. A logical question for any person harmed by the crisis is, “Where’s my bailout?” Even if bailing out the banks in order to preserve financial systemic integrity was needed, there were other ways to do it, such as being lender of last resort at a penalty rate, or giving vouchers good to reduce debts to every household in America. Particularly that last option would have been viewed as fair by the American people. That could have saved some of the pain felt by those with mortgages, and help the creditworthiness of loans at the banks. Instead, the Obama administration created programs like HAMP, which did little good for most, and actually harmed some.

The fourth problem with bailout and monetary policy that accompanied it was that it was a large transfer of wealth savers to banks. It doesn’t do much for the economy, if the banks have zero cost on their deposits, and all they do is invest in ultrasafe securities, clipping a small, but safe profit.

What was it Like to be There?

More often than not, the Treasury Department did not want to have the Special Inspector General interfering with their plans.? There was a lot of stonewalling, and nondisclosure of pertinent data.? It got fairly contentious at times, and often required members of Congress to intervene on behalf of SIGTARP.? The relationship probably got worse over time, because those working at SIGTARP knew that they would have no influence, no changes would be made, unless they convinced the media that something was wrong, and thus prodded Congress to push for change at Treasury.? The worst that that could happen would be that the President would fire the Special Inspector General, and appoint a new one.

Another part of challenge was realizing the need to build a talented team of lawyers, analysts, PR professionals, etc., to do the work analyzing how TARP funds were being spent, and write reports that would grab attention, and change the terms of the political debate.

That challenge was made more difficult by a lack of adequate facilities.? The initial staff was relegated to some pretty poor accommodations at the Treasury building.? I met with the SIGTARP staff over the AIG bailout in June of 2010 over a paper that I wrote that exposed aspects of the weakness at the domestic insurance subsidiaries.? (For Amazon readers, there is a link to my report at my blog.)? The accommodations that they had were some of the poorest I ran into in DC.

I know from personal experience that the US Treasury was sensitive to any criticism of the TARP.? At the first blogger summit at the Treasury, the officials were prickly over any questioning on the topic.? It did not help that GMAC got another dollop of cash that morning.? (links here, and here)

There were some ugly controversies.? One of the SIGTARP reports noted that if every potential program had been fully tapped the US would have expended $23.7 Trillion.? The report caveated that figure heavily, but it was seized upon by Republicans for partisan advantage.? They took a lot of flak for totaling figures that were in some sense apples and oranges.

On page 190, the question from Democrat Stephen Lynch to Tim Geithner, ?Why didn?t he try harder to cut a better bargain for the American people?? was never answered by Geithner.? Truth, Treasury was making it up as they went, with counsel from money managers and banks, which left the US Treasury vulnerable to those more technically proficient at finance who had at least some degree of conflicts of interest.

One more limitation of SIGTARP, they had no ability to bring cases ? they had to convince the Department of Justice or another prosecutor to take action.? That brought another level of negotiation and bureaucratic infighting.

The end came for the author after he realized that the TARP was winding down, and he was tiring of the Washington scene, and the corrosive effect it was having on his own character.

That leaves me with one closing question: What good did the author and his team do?? In one sense, not a lot.? The current financial regulatory environment post-Dodd-Frank continues business as usual with a more complex bureaucracy, with likely more infighting between competing regulators.? My view is when many are responsible, no one is responsible? that is certainly not the fault of SIGTARP, but we are probably in a worse regulatory environment than prior to the crisis.

That said, SIGTARP gathered data on the TARP, which led to a decent number of small and medium-sized fraud cases, and constrained the open-handed nature of the US Treasury toward financial companies, which could have result in a lot more fraud, and/or higher costs to the taxpayer.

Quibbles

Small mistake on page 173, where the author mentions PNC acquiring City National Bank instead of National City Bank.

The book reads a little disjointedly.? It is mostly chronological, but topical by chapter, so sometimes it feels like two steps forward, one step back as far as the time flow goes.

Who would benefit from this book:??This book will benefit anyone who wants a first person account of what it was like to be the Special Inspector General of the TARP.? It is also for those who want to see how dysfunctional politics can be in DC, and how resistant the Treasury Department was to any limits on their autonomy.? Finally, it shows how difficult it is for anyone to change the system in DC.? The author survived in DC for 2+ years as a change agent; that?s difficult enough, but he is gone now, though SIGTARP soldiers on.?? If you want to, you can buy it here: Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street.

Full disclosure:?I asked the author to send me data on his PR flack, who I asked to send the book to me.

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

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

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Politics

 

  • Bernanke Letter Defends Fed Actions http://t.co/COYtCtzg Hope the election brings enough change that we end up w/a fresh Fed Chairman $$ Aug 25, 2012
  • Private equity tax questions for Mitt Romney http://t.co/hXaAu0sR 1) Carried interest 2) Corporate interest deductions 3)Mgmt fee waivers $$ Aug 24, 2012
  • Sorry, Henry Blodget, You’re Wrong About Election 2012 http://t.co/5DghXuzI Religious Conservatives r viewed as suckers 2 support the GOP $$ Aug 24, 2012
  • Obama Supporter Suggests Anti-Mormon Whisper Campaign http://t.co/ism2YbbR Too obvious. Democrats pay Evangelicals to describe Mormonism $$ Aug 24, 2012
  • The Treasury?s Oversimplified View of Its Mortgage Relief Effort http://t.co/cwm1rrX8 The program did wonderful things… for the banks $$ Aug 23, 2012
  • Top six myths about Medicare http://t.co/qKYGtsLT Mostly correct but #3 brings lower quality & #6 is wrong, see: http://t.co/WvPr4giZ $$ Aug 23, 2012
  • White House Worked With Buyout Firm to Save Plant http://t.co/KPKHvZC5 Government help to get deals done begets more of the same $$ Aug 22, 2012
  • Consider keeping Bernanke, top Romney adviser says http://t.co/3Kp575gA This is rhetoric, if Romney is elected, Hubbard will chair Fed $$ Aug 22, 2012
  • Is BUBB (breaking up the big banks) now a ?conservative imperative? ? http://t.co/exRI726x I like $BAC so much; there should b 50 of them $$ Aug 21, 2012
  • Why Democrats think taxes will need to rise by more than 50% http://t.co/VUlfCM6K Entitlements will drive change in America but what change? Aug 21, 2012
  • How the tea party beat Occupy Wall Street http://t.co/SAUzzNog No contest. The t-party organized politically, & #OWS didn’t $$ Aug 21, 2012
  • Lanai owner Larry Ellison used tax loopholes for payouts http://t.co/la7HJMh6 The problem isn’t Larry, it’s the politicians’ bad tax code $$ Aug 21, 2012
  • The Real Conservative Opportunity This November http://t.co/m5nXtCUH Urges Republicans 2 champion banking reform. $$ #nixonwent2china Aug 20, 2012
  • Effective protest requires wide organization and general respect for the property rights of others, which these three women did not have $$ Aug 20, 2012
  • Fannie and Freddie: The Walking Dead http://t.co/u0Y4CgAt Fannie & Freddie may be dead, but the US Govt’s role in housing is not dead $$ Aug 19, 2012

 

Companies

?

  • There?s Warren Buffett ? and then there?s the rest of us http://t.co/rgMH0kjX The new paper on Buffett’s investing has gotten attention $$ Aug 24, 2012
  • Take that Square! eBay still a leader in mobile payments http://t.co/CxHkNQkG Am I wrong, or is most of the value of $EBAY in Paypal? $$ Aug 23, 2012
  • Yellow Pages’ Last Lifeline: Clinging to Each Other http://t.co/X347LfLD $DEXO $SPMD hit sell button, internet destroys yellow pages $$ Aug 22, 2012
  • The Beginning of the End of Print: The Lessons of an Amazingly Prescient 1992 WaPo Memo http://t.co/hVa62p0A No one listened 2 Cassandra $$ Aug 22, 2012
  • Last tweet FD: long $PSX . Frankly I’m surprised that an oil refiner, transporter, marketer would help come up w/an advance on solar $$ Aug 22, 2012
  • Phillips 66, South China U of Technology, & Solarmer Energy Set a World Record in Solar Power Conversion Efficiency http://t.co/95ND020R $$ Aug 22, 2012
  • Zynga Spurning Sale Strands Owners @ Worst Web Value http://t.co/zrKw0fjv Remember u r a outside minority investor. Choose mgmts w/care $$ Aug 22, 2012

http://t.co/xW9zcuWY $AMZN does amazing things as nonprofit $$ Aug 21, 2012

  • Monsanto Genetic ?X-Ray Glasses? Speed Tastier Tomatoes http://t.co/AJQZDJY9 Interesting comment thread, no one defending $MON $$ Aug 21, 2012
  • Facebook Shares: Still Too Pricey http://t.co/z38X4OsZ The lack of a reliable revenue model makes $FB a buy at prices ~$9-15 $$ Aug 21, 2012
  • Barnes & Noble Falls After Second Straight Nook Sales Drop http://t.co/nWNxr3Pw $BKS losing to $AMZN . Slow-motion train wreck $$ Aug 21, 2012
  • Up Against Retail Giant Amazon, BufferBox Aims to Jump-Start Parcel Delivery http://t.co/MhW35CeB Any of these should team up w/USPS $$ Aug 21, 2012
  • Amazon Wins Race to the Bottom With Radical Pricing on Long-Term Data Storage
  • Facebook Investors Brace for More Shares Coming to Market http://t.co/GE7usIDt Test of how much insiders truly believe in Facebook $FB $$ Aug 20, 2012
  • Aetna to Acquire Coventry Health Care http://t.co/sFRdRDv3 The People’s Republic of Maryland loses another large company $$ #BDK #USFG Aug 20, 2012
  • Stocks: The ‘Lockup’ Effect http://t.co/SG5sZIXL A lesson learned during the dot-com bubble is forgotten & must b re-learned. $$ #lockup Aug 18, 2012

 

Financial Markets

 

  • Stock Market Indicators http://t.co/sf0D3BDY Interesting take from the normally bullish Ed Yardeni $$ Aug 23, 2012
  • Hedge funds are betting on disaster http://t.co/dDtO6Cd3 Maybe some hedge funds r putting on “big shorts” through CDS, but most avoid vol $$ Aug 23, 2012
  • ‘Insider Trucking’ Drives Strategy at J.P. Morgan Fund http://t.co/JZyRVZ5P This brings “bottoms up” analysis to a much lower bottom $$ Aug 23, 2012
  • The bond bubble still has room to grow http://t.co/DNM9teW1 High yield bond defaults typically peak 2-3 years after issuance peaks $$ Aug 22, 2012
  • FDIC files lawsuit tied to failed bank RMBS investments http://t.co/63GYJ7Zn I know many investors that did due diligence & avoided the prob Aug 22, 2012
  • The Profession’s Faulty Assumptions: A Top Ten List http://t.co/lAeCIRzq A worthy article displaying common errors for financial planners $$ Aug 22, 2012
  • Wrong: Why hedge funds may not be right for you http://t.co/SdPmZeRN Only global macro benefits from volatility, other HFs like calm $$ Aug 21, 2012
  • Is Your Credit-Card Company Secretly Screwing You Over? http://t.co/7ptHex0g Excellent advice from @eddyelfenbein . Follow it & prosper $$ Aug 21, 2012
  • Goodbye, Growth. Hello, Dividends. http://t.co/AO2STJhx Companies pay divs get more efficient w/capital. Doesn’t slow growth much $$ Aug 20, 2012
  • When Wall Street Watchdogs Hunt Whistle-Blowers http://t.co/YyY6UREt Really a sad article. Try to do the right thing & many fight u $$ Aug 20, 2012
  • A Flock of Black Swans http://t.co/ClDRJYho Study history & other cultures &u may find possible some things considered impossible by many $$ Aug 20, 2012
  • Russell To Close All But One Of Its ETFs http://t.co/wjKsHrEp A trend that I think will come to most marginal ETF providers $$ Aug 20, 2012
  • Calpers Defends Pension Benefits While Risking Losses http://t.co/1nnyYD7t CALPERS relishes its importance, but not its performance $$ Aug 20, 2012
  • Five Myths about Glass-Steagall http://t.co/hgzzPkgM What’s the other side of the argument here? The Fed was hollowing out G-S b4 GLB $$ Aug 20, 2012
  • Revisiting Stocks For The Long Run http://t.co/b1Dz4mOk DIfficulty of using & rolling the 30-yr Tsy… it’s a very special bond $$ Aug 20, 2012
  • Wrong: Six Investment Moves to Make Now http://t.co/kkoarfR8 Reads like this: missed the rally, so take more risk now to make up 4 it $$ Aug 18, 2012

 

China

 

  • China Confronts Mounting Piles of Unsold Goods http://t.co/qXaOoX0h As w/any command & control economy, eventually get gluts & shortages $$ Aug 24, 2012
  • How China Sees America http://t.co/Cv0d61KI Believe US a revisionist power, seeks2curtail China’s political influence & harm its interests Aug 24, 2012
  • Caterpillar Cuts China Production as Digger Slump Reaches Mining http://t.co/Rprs0FS2 China’s coming slump has ripple effects $$ $CAT Aug 24, 2012
  • China Has Become One Big “Stuffed Channel” http://t.co/aAFwHUyj Strategies of promoting exports & forced industrialization have failed $$ Aug 24, 2012
  • Weak Demand Drags on Chinese Carmakers, Earnings Growth Stalls http://t.co/dvIrhc0D China slowing rapidly, also c http://t.co/po7PVA3a $$ Aug 22, 2012
  • For China, Too Much Steel Isn’t Enough http://t.co/af9MjbWT Economic growth happens when actions expand options 4 society as a whole $$ Aug 22, 2012
  • China’s Brewing Pension Crisis http://t.co/pHq4Ijgg Still at $3T, it’s a lot smaller than what the developed nations r facing $$ Aug 22, 2012
  • China Reluctance on Reserve Cut Signals Inflation Concern http://t.co/WcH0kKkM If inflation starts running in China, the game changes $$ Aug 20, 2012
  • China?s Yuan Decades From Challenging Dollar http://t.co/J3hmRaID It takes a long time to create deep/transparent capital markets $$ Aug 20, 2012
  • China Said to Order Action by Banks as Developer Loans Sour http://t.co/EUj63rb3 This is a liquidity crisis, not a solvency crisis, NOT $$ Aug 18, 2012

 

Money Market Funds

?

  • Statement Regarding Money Market Funds by Commissioner Luis A. Aguilar http://t.co/6RNScb0L Well-thought out dissent on MMFs. Good job $$ Aug 24, 2012
  • Wrong: The lurking dangers in money market funds http://t.co/q2X3gSe8 Another scare piece. MMFs are more stable than banks $$ Aug 23, 2012
  • Just sent Mary Shapiro my compromise proposal on money market funds. Hope she grabs it and runs with it http://t.co/vuNGATPK $$ Aug 23, 2012
  • Big Blow for Money-Fund Overhaul http://t.co/jnRnfA97 Yay! No changes for MMFs, which are better managed than banks. $$ Aug 23, 2012

?

Municipal Bonds

?

  • The 5 Biggest Muni Defaults Ever http://t.co/BlqI96wY Instructive. CA & OH tobacco bonds, Jefferson County, AL, American Air & WPPSS $$ Aug 23, 2012
  • Should Muni Investors Follow Buffett to the Exits? http://t.co/6w7wgnzg Sound advice: B selective, only buy what funds necessity $$ Aug 23, 2012
  • U.S. muni market riled by Fed report on defaults http://t.co/6XC0OmS8 Corrects many false impressions generated by the NY Fed muni piece $$ Aug 23, 2012
  • School district debt, representing lgst % of California net par insured (35.5%), is ineligible for Chapter 9 BK http://t.co/TU0uG87h $$ $AGO Aug 22, 2012
  • Buffett?s Exit From Muni-Bonds Signals Trouble Ahead 4 Local Govts http://t.co/Ay9eG3uj Don’t think so; Buffett still owns lotsa munis $$ Aug 21, 2012
  • Meredith Whitney?s Muni Prediction Gets No Boost From Fed http://t.co/hVWiQBrx Fed study focused on risky areas, non-rated & IDBs $$ Aug 21, 2012

 

Other

 

  • College Tuition’s 1120% Increase http://t.co/632ueDsX Outstrips even the rising cost medical services $$ Graph: http://t.co/bvYQljFC Aug 24, 2012
  • The closing of American academia http://t.co/MTQjCPQv Adjunct professors earn little&teach a lot. But getting a PhD in Anthropology: Fail $$ Aug 24, 2012
  • Lawyer separates variable annuity investor & annuitant, allowing him 2 benefit from the deaths of sick people http://t.co/C2xwCtRc $$ Aug 24, 2012
  • My Last Post – Arnold Kling http://t.co/YvJPt3RH One of the best hangs up his blogging. It’s the way of the internet, ephemeral $$ Aug 24, 2012
  • Blind Mice Given Sight After Device Cracks Retinal Code http://t.co/pIaxnTtH Looks like a huge advance $$ #goodnews Aug 23, 2012
  • Wrong: How algorithms will help us spend, spend, spend http://t.co/of3Bhyll People will start blocking it, like telemarketers $$ #FTL #fail Aug 21, 2012
  • Hopes for Chestnut Revival Growing http://t.co/Y58WfC9n Efforts to restore the chestnut tree seem to be succeeding $$ Aug 21, 2012
  • Historians, rather than mathematicians usually make better economic predictions, but that’s not saying much… http://t.co/db7NDOKf Aug 20, 2012

 

Eurozone

 

  • Greek Crisis Evasion to Fore as Merkel Hosts Hollande http://t.co/wlXKlz8h Not sure how this will lead to a long-term solution $$ Aug 23, 2012
  • Last Man Standing Means Europe Investment Banks Resist Cuts http://t.co/eIauqQj1 Total capacity must fall, the survivors get better biz $$ Aug 22, 2012
  • Wrong: Spain and Italy Are (Probably) Fine http://t.co/5jiC6zRQ Add in the social welfare obligations & dysfunctional politics $$ Aug 20, 2012
  • Finnish Euro Doubts Hide Business Plea to Commit to Currency http://t.co/rDbf5isL Euro weak 4 core EZ countries, & 2 strong 4 EZ-fringe $$ Aug 20, 2012

 

Around the World

 

  • First Solar to Build India Farms as Outages Propel Sun Power http://t.co/MJGiIrhj Sunshine is more reliable than India’s electric grid $$ Aug 23, 2012
  • The ECB: Europe’s Conditional Bank http://t.co/6abGujtg “these ideas fail to take account of a key ECB requirement: conditionality.” $$ Aug 21, 2012
  • A Tax Revolt in Japan, and a Bond Bubble Too http://t.co/CoL7Ticw Unrealistic view; financial claims exceed Japanese resources $$ Aug 22, 2012
  • What a Tangled Financial Web Terrorist Networks Weave http://t.co/84eBN6Mc In a networked era, difficult2avoid leaving digital breadcrumbs Aug 22, 2012
  • “The FSA warned that its [risk] survey results were based on self-assessments by individual [hedge fund] managers” http://t.co/KWb6ktQy $$ Aug 21, 2012

 

Energy

 

  • Think Gas Prices Are Bad Now? http://t.co/l4srlshm Between Iran & refinery outages, gas prices are rising particularly on the coasts $$ Aug 21, 2012
  • The Exquisite Symmetry of the Natural Gas Revolution http://t.co/QSit1HWT 10 points on how cheap natural gas is an aid 2 the economy $$ Aug 21, 2012
  • Methanol Wins http://t.co/yYP0Z1Qp Interesting experiment fueling a car w/methanol did not take much effort, cheaper & cleaner $$ Aug 20, 2012

 

Comments

 

  • “None of the things you mentioned are markets. The article above is about manipulating markets, not?” ? David_Merkel http://t.co/OcU9gn4O Aug 25, 2012
  • Tropical storm Isaac is likely to miss Tampa anyway, storm is consistently moving west of the forecast track of NOAA $$ Aug 24, 2012
  • Haiti has trouble w/rain & 40 mph winds, much less 60 mph $$ RT @AnnieLowrey: Forget Tampa. Pray for Haiti. http://t.co/eJBxmukv Aug 24, 2012
  • @PlanMaestro Thanks 4 passing the article along; some of those benefit designs are astounding $$ Aug 24, 2012
  • @BubblesandBusts I don’t think so Aug 24, 2012
  • @AnaCapMgmt Very good points. There are others trying to do things his way, but difficult 2 manage an insurance investing conglomerate $$ Aug 24, 2012
  • @ToddSullivan Yes, and here it is: http://t.co/SqXcFiqI Aug 24, 2012
  • RE: @bloombergview The only way medical costs will decline is to move to a first-party payer system. When its your ow? http://t.co/Dzjy8j6b Aug 24, 2012
  • “Impossible to manipulate markets without leaving accounting trial. Conspiracies r bunk.” http://t.co/WaXMpySm http://t.co/TPnCsHiB $$ Aug 24, 2012
  • RT @fundmyfund: again why is Japan stock market not up 100% of %,they did many QEs and CB can buy equity assets there.Its mostly psychol … Aug 24, 2012
  • plus ?a change, plus c’est la m?me chose $$ RT @munilass: So Glenn Hubbard has started blogging and Arnold Kling is giving it up. Egads. Aug 24, 2012
  • @rajivatbarnard Nice piece. Did not know you had written it, because my RSS reader broke 2 months ago & I have not rebuilt it yet $$ Aug 24, 2012
  • @ShawnMcFarlane My proposal makes MMF holders take losses in bites, and avoids “runs of funds.” U can read it here: http://t.co/vuNGATPK Aug 24, 2012
  • RT @merrillmatter: @ShawnMcFarlane @alephblog I disagree. They should not be FDIC insured and should be allowed to ‘break buck’ on occasion. Aug 24, 2012
  • @politicoroger Isaac may hit the gulf coast on FL panhandle or further west. God is not man or woman, but he represents himself as a man Aug 24, 2012
  • RE: @bloombergview Hasn’t worked so far. Doing the same thing repeatedly and expecting different results $$ http://ww? http://t.co/tIOtLhYh Aug 23, 2012
  • @nereidadin Yes, no response yet Aug 23, 2012
  • @foxjust Just sent it off to her. Commented on her article, but Reuters is having issues w/blogs and comments these days Aug 23, 2012
  • @SallieKrawcheck @Reuters Would you be willing to review my compromise proposal on money market funds? http://t.co/6vrVXVGS Thanks. Aug 23, 2012
  • @foxjust Been pushing this idea for 3 years, have sent it to the SEC, but I’m a disinterested nobody. Felix Salmon liked it, as have others Aug 23, 2012
  • @eisingerj Would you be willing to look at my compromise proposal on MMFs, & tell me what you think? http://t.co/vuNGATPK $$ Aug 23, 2012
  • @foxjust Would you be willing to look at my compromise proposal on MMFs, & tell me what you think? http://t.co/vuNGATPK $$ Aug 23, 2012
  • @merrillmatter I’ve even heard that Dihydrogen Monoxide is making is way into the water supplies! $$ #help #thereisalwaysenoughtimetopanic Aug 23, 2012
  • @TFMkts @The_Analyst Good points, seems to be more mkt timing than disaster, though I know of some putting on CDS trades. Pay prem & hope $$ Aug 23, 2012
  • @munilass Yes, that’s correct, but I could not fit that in. Aug 23, 2012
  • @TheStalwart Really seems like Romney was on the aggressive side of legal on taxes, but his investments aren’t unusual for a rich guy $$ Aug 23, 2012
  • @TheStalwart Do I have this right then: a company that Romney invested in was 1 of the lenders through CLOs to American Media Operations? $$ Aug 23, 2012
  • @BarbarianCap Thanks for the praise. I just try to write about what is most motivating to me on any given night Aug 23, 2012
  • @moorehn Read some of the comment letters at the SEC, a non-stable public NAV 4 MMFs would cause significant harm to users. $$ Aug 23, 2012
  • @Dvolatility Yes, I heard, that was a decade or so in the making. Actuaries sometimes joke that we keep GASB around 2 make FASB look good $$ Aug 23, 2012
  • @Dvolatility does that affect Poway School district’s ability to service their debt? Yes, data quality varies more with munis than corps Aug 22, 2012
  • @Dvolatility don’t knowhow to bring their thinking up a level of complexity, and say, if CA is in trouble, and San Diego County, then how + Aug 22, 2012
  • @Dvolatility Just read a few articles on overlapping debt. Interesting; love to learn. I think some investors don’t look at it b/c they + Aug 22, 2012
  • @Dvolatility Yes, but I am not an expert on it; as investors go, I am a generalist Aug 22, 2012
  • @Dvolatility What do you mean by overlapping? I just found it interesting that CA schools can’t use BK Ch 9… Aug 22, 2012
  • RT @TheStalwart: In the old days, the idea that None Of The Above could actually ‘win’ (thus making an office go unfilled) was promoted … Aug 22, 2012
  • RT @historysquared: The $Fed is like the frustrated driver who keeps pumping gas into a car that won’t start, eventually flooding the en … Aug 22, 2012
  • @GaelicTorus I might be inclined to the bank debt of $ZNGA or $GRPN. No way $FB goes broke; it has a franchise $$ Aug 22, 2012
  • @joshuademasi I’m saying that Japanese society has not yet come to grips with its inability to fund future promises, that’s all $$ Aug 22, 2012
  • Clever and not what I expected $$ RT @AnnieLowrey: “But at least now we know.” http://t.co/mh5Ldk62 Aug 22, 2012
  • Just finished complex stock screening: 28 candidates, auto parts, airlines, insurers, regional banks, infotech, retail, etc. $$ #bizarre Aug 22, 2012
  • “At that price, bondholders will scour the Globe 4 external assets of Belize, and place liens on them” $$ David_Merkel http://t.co/rZGmkSgQ Aug 21, 2012
  • “Maybe they should team up with the US Postal Service. Lotsa locations, and they need $$” ? David_Merkel http://t.co/lKe9ShxQ Aug 21, 2012
  • @LarryThompson5 Historically, successful political movements do 1 of 2 things: form a 3rd party, or gain influence over1 of the parties $$ Aug 21, 2012
  • @LarryThompson5 I would agree w/u that #OWS is not Dem-driven. Some tried to use it, couldn’t figure out how, vs repubs co-opting t-party $$ Aug 21, 2012
  • Catch my comment http://t.co/FHwMSyLX Yes, 4 2 reasons RT @ritholtz: Is Pension-Plan Shift Into Bonds Permanent? http://t.co/OWjdqPjH $$ Aug 21, 2012
  • @WatersLogan Good, keep it up. 12% of my readers are Canadian. Aug 21, 2012
  • @TheStalwart Here it is: http://t.co/fBvKxQXq Aug 21, 2012
  • @TheStalwart I wrote a data-intensive post on the Poway School Distirict, and you didn’t post it to BI, but lesser posts did make it to BI. Aug 21, 2012
  • @ETFProfessor1 I understand and that is fine. Aug 21, 2012
  • @e_d_sanders I’m interested in stopping the next crisis; I would like to end interstate branching, and hand regulation back to the states $$ Aug 21, 2012
  • @milktrader Thanks, nice to know it is not just me. Aug 20, 2012
  • Anyone else finding Yahoo Finance to be squirrelly now? $$ Aug 20, 2012
  • @ritholtz I live near Baltimore. B4 my father-in-law died, wud visit in-laws in La Jolla every few years. Wife’s favorite beach near Romney Aug 20, 2012
  • I know I have walked past it; didn’t know Romney owned it $$ RT @ritholtz: Mitt Romneys water front LaJolla shack http://t.co/ee8AwnEN Aug 20, 2012
  • @asymmetricinfo Most homeschoolers in Howard County, MD r secular, many r liberal; the schools r not performing well; HS kids get peer time2 Aug 20, 2012
  • RT @asymmetricinfo: Why worry homeschool kids won’t get socialized? It’s spending most of your time around a mob of your own age that is … Aug 20, 2012
  • As a class yes, some won’t gain critical mass $$ RT @GaelicTorus: but bond etf doing ok, right? low costs, asset growth – as a class Aug 20, 2012
  • Too much honesty there $$ RT @RNPJHP: @The_Analyst @AlephBlog RBC Dominion told me they can’t make 5% returns on client’s money! Aug 20, 2012
  • @wesbury @ 1st Tsy-blogger summit, I encouraged the high-level people there to do that, & what are they considering now — floaters! $$ Aug 20, 2012
  • @ETFProfessor1 You would probably know better than me. It seems economics of running a bunch small funds is poor. Open to your thoughts $$ Aug 20, 2012
  • @abnormalreturns I would consider $FB @ around $8, a touch over book value and a PEEG ratio of 50%, mainly b/c revenue model is unclear $$ Aug 20, 2012
  • @ToddSullivan I knew you were being sarcastic, just wanted to flesh out my thoughts further Aug 20, 2012
  • @ToddSullivan Of course that’s easier; I use a technique like that to try to deal w/high growth situations that r uncertain $$ Aug 20, 2012
  • Hard to compete against $AMZN, which doesn’t have an immediate profit motive. $BKS http://t.co/SC5gA1Ps Aug 20, 2012
  • “Corporate spread tightening is highly correlated w/VIX, another reason $$” ? David_Merkel http://t.co/R9vTpa7s $$ http://t.co/M7X60pC5 Aug 20, 2012
  • @ToddSullivan I would try this 4 $AAPL — est mkt size @ maturity, time 2 maturity, value of biz then & discount @ 12% 2 get NPV/sh $$ #swag Aug 20, 2012
  • “Almost no one arrives early to a fad/motif, so investing of this sort is likely to lose.” ? David_Merkel http://t.co/yCJ0K9SY $$ Aug 20, 2012
  • Much wisdom from Mr. Berra $$ RT @JATranfo: @AlephBlog As Yogi said, “Making predictions is hard, especially about the future.” Aug 20, 2012
  • “I get surprised by what gets attention when I write. To have two pieces on the top 10 list is?” ? David_Merkel http://t.co/UpaKEY0I $$ Aug 20, 2012
  • RE: @bloombergview Pray tell, what interest does Putin have in liberalizing? Current system favors his retention of p? http://t.co/RjR8WI0C Aug 20, 2012
  • @geronimo2003 It means that mortgage bonds will lose net demand, but F&F will still gtee conforming MBS. Pvt sector can absorb supply $$ Aug 20, 2012
  • +1 Well done $$ RT @AmityShlaes: Lobsters as metaphor for everything, including Obama trade policy: http://t.co/qDn83Fqs Aug 19, 2012
  • @StockTwits got the ticker wrong. Mosaic is $MOS , Monsanto is $MON . Both in agriculture… $$ Aug 18, 2012
  • @prchovanec They should listen to Pettis, Walter, & Shih also Aug 18, 2012
  • @prchovanec If they are listening to you, that is good for all of us. $$ Aug 18, 2012
Crossroads

Crossroads

Posted on by David Merkel

This is a confusing time:

  • Lousy fiscal policy — way too much borrowing by the government
  • Lousy monetary policy — way too much expansion of the monetary base, and for little good reason, and funding the deficits of the government as a result…
  • Negative real interest rates on Treasuries 15 years out; that is financial repression, and that can’t happen without the Treasury and Fed conspiring to do so.
  • Low equity market valuations, but only because profit margins are abnormally high.? There are reasons to think that profit margins will not mean-revert this time, because the increase in the global capitalist labor pool is depressing wages.? Wages may remain low for a longer time than many expect.? Sorry to the laborers, but there are more of you than the globe can accommodate.? Thus I remain agnostic on high profit margins; let’s revisit the issue when wage rates rise.

Personally, I think that the fiscal multiplier is negative.? Spend money on government projects, many of which do not build value for the economy, and the economy grows slower or shrinks.

We would do better with austerity.? The economy would grow faster with a balanced budget, and a sense that government was not out of control.? Shrinking the bureaucracy and its rules, would allow the economy to grow faster.? Delegate more responsibilities to the states, particularly regulation of financial companies.? Relatively few insurers fail, which are state-regulated.? Many banks fail, which are federally regulated.? It is far easier to co-opt a single federal regulator than many state regulators.? Best yet, split all of the too big to fail banks into 51 entities, divided into the states and DC.? No more interstate branching — that’s the real problem, not Glass-Steagall.

Limiting banking to states keeps it small, Glass-Steagall tinkers at the edges, but if banks are kept small by limiting their size by states, like insurers, they won’t become systemic problems.? Simple, huh?

Much like the AT&T breakup, I think a breakup of interstate banking would be good for the US economy.? It would unleash competition in financial services, and would eliminate systemic risk in the financial economy.? And once banking regulation is returned to the states, like insurance, we can eliminate the Fed, which has been a poor regulator of banks, and a bad manager of monetary policy.? Go back to a gold standard, or at worst a currency board.? Get money out of the hands of the government, who diverts much of the economics back to themselves.

Sorted Weekly Tweets

Sorted Weekly Tweets

Posted on by David Merkel

Eurozone

 

  • Danske Bank?s Patience With Moody?s Evaporates http://t.co/eGbf3kV5 Questions over willingness of Denmark to provide support in a crisis. May 11, 2012
  • CIC Stops Buying Europe Government Debt on Crisis Concern http://t.co/dljk9Tau Overblown; China will return to funding the Eurozone $$ May 10, 2012
  • Greeks May Hold $510 Billion Trump Card in Renegotiation http://t.co/P7U4LSpG Depends on how well Core EZone banks have divested Greece $$ May 10, 2012
  • Spanish Banks Erode Creditors With ECB Loans http://t.co/HaEx3bgT Better collateral highly encumbered; Unsec debts implicitly subord 2 ECB May 10, 2012
  • Greece Euro-Exit Debate Goes Public http://t.co/0xOgsa7G Core Eurozone wrestles w/how to kick Greece out, even though they can’t. $$ May 10, 2012
  • How a Radical Greek Rescue Plan Fell Short http://t.co/Ds0589IG Greece is failing as a culture due2 corruption; no rescue would work $$ May 10, 2012
  • Denmark?s Banks Endure Writedown Shock Delaying Recovery http://t.co/A2Vdpymn Good sign on Denmark; take pain early -> in good shape $$ May 10, 2012
  • Greek Election Surprise Rejects ?Barbarism? of Bailout Austerity http://t.co/oX0nt5SF Growth is magic, magic I tell u! Just invoke it! $$ May 08, 2012
  • Merkozy End Means Franco-German Gulf; Greek Voters Rebel http://t.co/iCd0Cs6l Loss of Sarkozy may not b bad, but Greek paralysis will b $$ May 08, 2012
  • Francois Hollande has ten weeks to avert a French bond crisis http://t.co/3SEAWJB5 When few adults r in the room the children run wild $$ May 08, 2012
  • Challenge to Austerity, And Germany, Is Sharpened http://t.co/BWbgQJ85 The odds have risen that Germany will leave the Eurozone $$ May 08, 2012
  • Obvious but it needs 2b said $$ RT @Hawk100Clemens: Mauldin tells #CFA12 every monetary union in history has failed. May 07, 2012
  • France faces 40pc house price slump http://t.co/nPuMaVnJ If French banks have trouble now, just wait until the bad mortgage debt hits $$ May 06, 2012

 

JP Morgan

 

  • What Beached the London Whale? Credit Indices http://t.co/JKFxfaMb Crosshedging long credit risk by buying protection on an index? $$ May 11, 2012
  • J.P. Morgan Trades In Its Crown http://t.co/QUJ6hmoA That goes for firms and CEOs as well: $JPM and Jamie Dimon will not get free passes May 11, 2012
  • Drew Built 30-Yr JPMorgan Career Embracing Risk http://t.co/uocyyVC1 Lifetime 2build reputation; few years 2destroy it; revealed: 1 day $$ May 11, 2012
  • And the best way to reduce risk is to lower leverage & raise cash $$ RT @marydchilds: “The best way to hedge something is to get rid of it.” May 11, 2012

 

Facebook

 

  • Facebook Co-Founder Saverin Gives Up U.S. Citizenship Before IPO http://t.co/kL1VQYXU Cuts down on the tax bill; discount prior 2 IPO $$ May 11, 2012
  • Facebook IPO Said to Get Weaker-Than-Forecast Demand http://t.co/ktK5Bgun $FB faces slowing revenue growth, order books 4 IPO go slack $$ May 11, 2012

 

Miscellaneous

 

  • Google?s Brin Makes Strides in Hunt for Parkinson?s Cure http://t.co/YvL4LUNA He may get it one day; his Mother already has Parkinson’s $$ May 11, 2012
  • And also for those who call vegetables “veggies?” RT @jasonWSJ: Can we impose a $40 fine on dudes who refer to sandwiches as “sammies”? May 10, 2012
  • Firefox browser group irked with Microsoft, Windows 8 http://t.co/tBZ9GFuw Only Internet Explorer runs on Windows 8; expect some lawsuits $$ May 10, 2012
  • Aluminum Buyers in Japan to Pay Record Fee on Supply Drop http://t.co/7AVU1knI Smelting capacity reduced, China buys more, Japan pays up May 10, 2012
  • @RobTheStreet A lot depends on the definition of marriage, Would you allow people to marry inanimate objects, animals, or multiple parties? May 09, 2012
  • Brookstone to sell Lilliputian portable power chargers, this year http://t.co/FnSvdfOw Impressive technology if it works. $$ May 08, 2012
  • Economy Reshapes Wisconsin Recall Vote http://t.co/G0OetHhV My wife and father were forced in2 unions by collectivist brutes. Go Walker! May 08, 2012
  • Father?s Shadow as Transit Leader Hard to Evade for Shuster http://t.co/0FAZUqd4 Bud Shuster is a jerk, forcing us through Breezewood $$ May 08, 2012
  • Kellogg?s Kashi Targeted as Web Food Fighting Escalates http://t.co/BNhf5294 We need 2 send a lot of people back 4 science reeducation May 08, 2012

 

Rest of the World

 

  • Sony, Panasonic Fall to 30-Year Lows as TV Losses Mount http://t.co/Euo37RLQ Sold Panasonic after reviewing uneconomic “green” agenda $$ May 11, 2012
  • Kim Jong Un Bashes ?Pathetic? North Korea Fun Park http://t.co/gb4S9HBc He should know; he lived outside NK, where there is real fun $$ May 10, 2012
  • Sukhoi SuperJet Disappears During Indonesia Demo Flight http://t.co/0JrxAkAw Another sign of degraded Russian abilities in aerospace $$ May 10, 2012
  • Bad H/L: Shooting to Kill Pirates Risks Blackwater Moment http://t.co/laW55VEo Correct H/L: Hiring Armed Guards protects cargoes &crews $$ May 10, 2012
  • Drug-Defying Germs From India Speed Post-Antibiotic Era http://t.co/XGeno5mf Long. Scariest article of the day; wash your hands w/soap $$ May 08, 2012
  • Israel Pyramid Rules Turn Insurers Into Buyout Targets http://t.co/4tXBqehx Interesting:

Israel is limiting holding company levels to 3 $$ May 10, 2012

  • UK Pay Protests Oust Aviva Chief http://t.co/WKVdmQGM I remember when they overpaid for Amerus Life in the US; sign of bad management $$ May 10, 2012

 

 

Energy

 

  • RT @merrillmatter: @AlephBlog Methinks we’ll need to see some epic blowouts in natgas space (ha ha) before supply/demand can come back i … May 10, 2012
  • Chesapeake Deals Carry $1.4 Billion in Undisclosed Liability http://t.co/UFohsseZ $CHK May b worth a look when things stop getting worse May 10, 2012
  • When the Exxon way stops working http://t.co/BgN2zLO6 $XOM learns 2b more cooperative w/foreign countries where it wants 2 explore 4 oil $$ May 08, 2012
  • Argentina Taps Ex-Schlumberger Executive Galuccio to Run YPF http://t.co/j5P1oyoS Possibly a good choice to run the purloined company $$ May 08, 2012

 

Fixed Income

 

  • Still time to make money in Treasury bonds http://t.co/ABl43gzM The depressionary bull case 4 long T-bonds; D. Rosenberg & Lacy Hunt $$ May 10, 2012
  • Why Emerging Market Corporate Bond ETFs are Hot http://t.co/tWvz0sif High USD yield, but be wary. Laws governing creditor rights vary $$ May 10, 2012
  • In other words, the 30-year Tsy sold well today b/c some seek Depression insurance & others hedge convexity or immunize long liabilities $$ May 10, 2012
  • Treasuries Pare Losses as Europe Concern Aids Sale http://t.co/C7jytF08 Investors make sure they get income 4 30-yrs & $$ back when old May 10, 2012
  • S&P Warns Of $46T Perfect Credit Storm http://t.co/jZTbvy42 If companies have adequate cash flows from operations, this is not an issue. May 10, 2012

 

Canada

 

  • In Canada, Alternate Currency Keeps Traction With Fans http://t.co/ePyXRH1f Paper Money, Issued by Canadian Tire, Is Popular Way 2Pay $$ May 11, 2012
  • Revisit after their housing bubble pops RT @vgmac: There is a lot of love for Canada’s banking system here at the Chicago Fed conferences $$ May 10, 2012
  • @vgmac Then again, at the first Treasury/blogger summit I told them they should imitate the Canadian regulators and central bankers. #canada May 10, 2012
  • Canada Housing Bubble Concern Shown in Insurer Query http://t.co/kGHcqgDE Should the Canadian govt try2exit the mortgage insurance biz? $$ May 10, 2012
  • CMHC Says Capital Levels “Double” OSFI Requirements http://t.co/R4p5TuBO F&F also had capital far higher than their disaster level $$ May 08, 2012

 

Cisco Systems

 

  • Cisco shares drop on tech spending worries http://t.co/06maBaX4 Global economic weakness feeds into tech firms that sell much abroad $$ May 10, 2012
  • @ampressman Cramer said something like, “It’s not a growth company if they have to talk about the economy, weather, industry factors, etc.” May 10, 2012
  • @ampressman $AAPL is a growth company, at least for now, $CSCO was a growth company somewhere in the last 15 years… May 10, 2012

 

Delta Air Lines

 

  • Buy Delta Air Lines: Trainer Refinery Purchase & Improving Financials Will Lift The Stock http://t.co/W7YeEmgb Poorly reasoned thesis $$ May 08, 2012
  • Remember when $DD bot Conoco? There would b synergies in petrochemicals. $DD bot it at the peak, spit it out at the bottom $$ #limitscope May 08, 2012
  • $DAL substitutes risk in jet fuel pricing 4 risks in crude oil, gasoline, heating oil prices, & operational risk in a biz it doesn’t know $$ May 08, 2012
  • @The_Analyst Agreed, though enough capacity has come out of the industry through mergers that they might finally c some pricing power $$ May 08, 2012

 

US Housing

 

  • 5 Pitfalls of Home Refinancing http://t.co/ZxGUF3HM Longer maturity, Closing costs, Contract terms, Hidden fees, Appraisals $$ May 10, 2012
  • Look Who?s Pushing Homeowners Off the Foreclosure Cliff http://t.co/T6CBkUAt Mtge docs exist to protect the lender’s property interest $$ May 08, 2012
  • RE: @bloombergview Read any mortgage contract; it exists to protect the rights of lenders, including protecting the m? http://t.co/ob9eIcBt May 08, 2012
  • No Repeating Slowdown Seen by U.S. With Banks to Housing http://t.co/A0LNwrjh While hi % of mtges r underwater, finl stress will remain $$ May 08, 2012
  • Pimco Housing Bear Kiesel Says It?s Time to Start Buying http://t.co/f3zaBNZA He assumes dark supply will hang on for higher prices. $$ May 06, 2012

 

US Regulation

 

  • Maybe to be perfectly fair, the government releases the data on a website at midnight ET, long before the US markets ? http://t.co/9Zqniljs May 10, 2012
  • A Jury of Peers for Broker Disputes http://t.co/5Ly14oKJ The playing field may be more even now; odds r still stacked against investors May 10, 2012
  • Congress Seeks Postal Overhaul While Making It Impossible http://t.co/lvcEBxmw The real danger is after reduction, PS is less relevant $$ May 10, 2012
  • US Millionaires Told Go Away as Tax Evasion Rule Looms http://t.co/Tx6lr1Bl Fewer foreign banks will accept accts w/US citizens/firms $$ May 10, 2012

 

Berkshire Hathaway

?

  • Biggest Buffett Targets Seen Spanning Deere to Henkel http://t.co/dLbp9pic Muses about what Buffett would buy 2 eclipse BNSF $$ May 08, 2012
  • +1 RT @Kevin_Holloway: Good read on possibilities of recent $BRK.B purchases among some other gd thoughts by @AlephBlog http://t.co/xkN8SlXu May 08, 2012
  • Deep in the Insurance Weeds at Berkshire Hathaway http://t.co/GkH9oWBo This helps explain the life reinsurance losses at $BRKB. LTC $$ May 08, 2012
  • Buffett understands tech. But he searches for revenue streams that can’t easily be obsoleted. $AAPL & $GOOG could be ? http://t.co/VyOnKUTy May 07, 2012

?

Market Dynamics

 

  • World?s Simplest Stock Valuation Measure http://t.co/OvmQTmHs Growth Rate/2 + 8 = PE Ratio; @eddyelfenbein & his conservative PE formula $$ May 10, 2012
  • Dole Food Breakup Seen Bearing Fruit With 58% Return http://t.co/C4SvaNvw Can $DOLE become a high margin biz, & pay down debt? $$ May 10, 2012

 

Financial Sector

 

  • What about front-running? $$ RT @abnormalreturns: @MebFaber: Nail in the Mutual Fund Coffin (NAV Based ETF Trading) http://t.co/SZ3CbIY3 May 08, 2012
  • BTW, for those holding dividend funds, back in 1994, stock managers following a yield strategy got crushed. $$ #annushorribilisforbonds May 08, 2012
  • The Dangers of Dividend Funds http://t.co/5WSdEFwN Dividend funds may b safer than other stock funds, r still stock funds w/real risk $$ May 08, 2012
  • True 4 many $$ RT @ReformedBroker: ?Daddy, what do you do at your job?? http://t.co/mxrcVyhm May 08, 2012
  • BofA?s New Black-Belt Data Chief Targets Blinding Gaps http://t.co/P60yhtAk Merger integration didn’t happen in $BAC ‘s IT areas $$ #mess May 08, 2012
  • Billion-Dollar Traders Quit Wall Street for Hedge Funds http://t.co/2yFJ2JXr Volcker Rule reducing dealer-driven market liquidity $$ May 08, 2012
  • Flash-Crash Story Looks More Like a Fairy Tale http://t.co/0mBQDGKZ Still a mystery; but4any self-feeding panic, players leaning wrong way May 08, 2012
  • Almost Half of Finance Graduates Seek New Jobs, PwC Says http://t.co/YUuH9KJl The bubble in financial jobs has popped, decamp 2 other inds May 08, 2012
  • ?Where is Everybody?? http://t.co/7YPOcMUb Little retail participation is bullish; it means that only the relatively smart $$ is playing May 08, 2012
  • 50 Ways to Restore Trust in the Investment Industry http://t.co/VHhllKyp The CFA Institute gathers opinions from members on cleaning up $$ May 08, 2012
  • RE: @bloombergview Equity is more expensive than other types of bank capital; raising the cost of capital means fewer? http://t.co/qPvVygll May 07, 2012
  • Heat’s on Triparty Repos http://t.co/7Jk7DrTS Fed Is Pressing Big Players to Reduce Exposures to $1.7 Trillion Market $$ May 06, 2012

 

Company Specific

 

  • How Hewlett-Packard lost its way http://t.co/pA683e3H Very long & ugly article about board & mgmt dysfunction @ $HPQ. FD: +$HPQ 4 me&clients May 08, 2012
  • A Real Concern For Apple?s Stock: Telecom Carriers Threaten to Kill Subsidies on Phones http://t.co/JlQwSDAq Interesting thesis $$ May 08, 2012
  • AMR Said to Seek More Overseas Flights as Suitor Circles http://t.co/eUHdHju4 $LCC wins more backing, could allow filing another plan $$ May 08, 2012

 

Politics

  • Exodus From Tiburon to Texarkana Is Exaggerated http://t.co/nsyd3QjF Truth is, people & firms r sticky, until they finally get fed up! $$ May 10, 2012
  • If we do not discipline ourselves, the bond market will discipline us $$ RT @carney: Why the left will keeping winning. http://t.co/kJcfgEt4 May 08, 2012
  • Too bad, we need a better opponent to Obama $$ RT @BloombergNews: Breaking: Santorum Endorses Former Rival Romney as Republican Nominee May 08, 2012
  • Don’t Worry (About GDP), Be Happy http://t.co/BaSDMbTM GDP approximates economic growth; more subjective progress measures r ridiculous May 08, 2012
  • @justinwolfers Last thing we need on the Fed is another neoclassical Ph. D. economist. Let’s try some brainy generalists, value investors $$ May 07, 2012
  • @GaelicTorus @justinwolfers All I am saying is value investors understand how the economy works better than neoclassical economists do $$ May 07, 2012
  • Disabled Americans Shrink Size of U.S. Labor Force http://t.co/NX6ZzCjK I still resent former neighbor on SSD, putting Xmas lights on roof May 06, 2012
  • But are they ending with an accrual basis surplus, not just a cash surplus? That’s the question. http://t.co/uGa7WX14 May 06, 2012
Impossible Dream, Part 2

Impossible Dream, Part 2

Posted on by David Merkel

In this post, I want to talk about enhancing fixed income returns.? Next week, I will talk about hedging, or Tactical Asset Allocation.

My views on managing fixed income (bonds) are quirky.? I don?t look to maximize yield, as many do, but my view is to preserve the purchasing power of capital, which might lead to underperformance in the short-run.? There are times to grab yield, and times not to do so, and preserve capital.? Typically, the times to grab for yield are the times one would be scared to death to do so, like November 2008 and March 2009.

But to do that means being willing to take risk when everything seems to be dying.? Before I explain more, here is my stylized view of how the investment cycle works for equities and corporate bonds.? Gains and losses are not purely random, they tend to streak.? Here?s my stylized view of how an equity/credit cycle works:

  1. After a washout, valuations are low and momentum is lousy.? People/Institutions are scared to death of equities and any instruments with credit exposure.? Only rebalancers and deep value players are buying here.? There might even be some sales from leveraged players forced by regulators, margin desks, or ?Risk control? desks.? Liquidity is at a premium.
  2. But eventually momentum flattens, and yield spreads for the survivors begin to tighten.? Equities may have rallied some, but the move is widely disbelieved.? This is usually a good time to buy; even if you do get faked out, and momentum takes another leg down, valuation levels are pretty good, so the net isn?t far below you.
  3. Slowly, but persistently the equity market rallies.? Momentum is strong.? The credit markets are quicker, with spreads tightening to normal-ish levels.? Bit-by-bit valuations rise until the markets are fairly valued.
  4. Momentum remains strong.? Credit spreads are tight. Valuations are high, and most value-type players have reduced their exposures.? Liquidity is cheap, and only rebalancers are selling. ?(This is where we are now.)
  5. The market continues to rise, but before the peak, momentum flattens, and the market meanders.? Credit spreads remain tight, but are edgy, and maybe a little volatile.? This is usually a good time to sell.? Remember, tops are often a process.
  6. Cash flow proves insufficient to cover the debt at some institution or set of institutions, and defaults ensue.? Some think that the problem is an isolated one, but search begins for where there is additional weakness.? Credit spreads widen, momentum is lousy, and valuations fall to normal-ish levels.
  7. The true size of the crisis is revealed, defaults mount, valuations are low, credit spreads are high.? A few institutions and investors fail who you wouldn?t have expected.? Momentum is lousy.? We are back to part 1 of the cycle.? Remember, bottoms are often an event.

You could call part 4 of my stylized cycle ?borrowed time.? But it is borrowed time that can last a long time.? At the end of the bull cycle, the equity market catches up to the credit market, creating a situation where the valuation of the equity can no longer be sustained by further increases in leverage (part 5 leading to part 6).

Now, value investors typically play the game from part 1 to part 4.? This is what drives the idea that value investors are always early.? Focusing solely on valuation, they arrive too soon, and leave too soon.

In 1994, I was part of a team that hired a clever small cap value manager to help manage money for our multiple manager funds.? The firm?s name was Moody, Aldrich & Sullivan; they were based in Boston.? One partner, Avery Aldrich, was their quantitative analyst, and he had a chart that I had never seen before: a two-dimensional grid for buy/hold/sell using valuation and momentum.? He said that it solved the problem of being early.? Using my seven parts, MA&S would take on the most exposure to risk in parts 2-5, when the most reward was received.

Applying this to Bonds

Here is the challenge: investment performance is a product of two main factors:

  • Valuation, a long run factor, and
  • Momentum, a short run factor.

These two factors interact with each other.? If momentum is positive, rising prices will make valuations rise, which lowers long-term return potential.? If momentum is negative, falling prices will make valuations fall, which raises long-term return potential.

In general, momentum changes more than valuation.? That?s to be expected.? When J.P. Morgan was asked by someone what the market would do that day, Morgan reportedly replied, ?It will fluctuate, young man. It will fluctuate.?

There are numerous articles, books, and posts that show that momentum tends to persist in the intermediate-term.? Here is one example from a study that I did, A Different Look at Industry Momentum ? II (and part one).? Mean-reversion can play a role over a 4-year period or so, but that seems to be a weaker effect.? Now momentum is not infallible, because when a lot of people follow it, the market goes nuts (1998-2000 for example) and then you get a wipeout.

But typically at times like that, valuations are high, so someone with an eye on valuation could avoid the wipeout as momentum flattens.

Now, with bonds, I have a model for valuation, but it is not simple.? I can analyze the relative risks of loss among different bond asset classes and compare that against spreads, and allocate to those that offer the best relative return.? I this environment, it means principal preservation is preferred to stretching for yield.

But what would a momentum model say?? I have a little more than 90 years of data on three yield series, the Aaa and Baa series on long corporate bonds from Moody?s, and Shiller?s long (usually 10-year) Treasury series.

Using a method that borrows from work done by Mebane Faber, I look at a ten month moving average of yields for each series, and invest in the one that has current yield lowest versus the moving average.? As yields fall, prices rise, and the bond subclass that has done best for the last ten months is likely to do better than most in the next month.

So, consider five strategies:

1.????? Invest and reinvest only in Treasuries.

2.????? Invest and reinvest only in Aaa corporate bonds.

3.????? Invest and reinvest only in Baa corporate bonds.

4.????? Invest in the one that has the yield the most below, or least above its 10-month moving average.

5.????? Invest and reinvest 36% in Treasuries, 19% in Aaa corporate, and 45% in Baa corporates.

Here are the results of those strategies over the last 91+ years:

Treasuries Aaa Baa Switching Weighted Average
Annualized Return 4.86% 5.94% 7.10% 6.58% 6.23%
Standard Deviation 9.02% 6.62% 8.12% 8.37% 6.04%

Impossible Dream

Now for a confession: when I first ran the analysis, the switching strategy had a return that was 1.5%/yr higher than what it shows now.? One simple math error did that.? Thus, I don?t have a worldbeater to trot out to you. At a later point I will revisit this, after thought, and not data abuse.

That said, the switching strategy isn?t bad, and seems to work well in high volatility environments.? But let me explain.

Buying and holding Baa corporate bonds (BBB for those speaking the language of S&P or Fitch) has always been the high returning option for corporate bonds.? After that comes Aaa, Aa, A, Ba, B, Caa.? For more on this look at Eric Falkenstein?s book Finding Alpha.? It is similar to what we know about the equity markets.? Those who take moderate risks do best.? After that, those who take little risk, then no risk, then a lot of risk.

You would think that Baa/BBB corporate bonds would be an asset of choice, but for most bond managers who have to compete against a broad benchmark, it would be too big of a bet to use them indiscriminately.? Some life insurers use them more aggressively, but it would be rare to go above 30%.

Now, relative to the standard deviation of returns the weighted average portfolio did well.? It mimics a AA- portfolio, which is pretty high quality.? The percentages came from the switching strategy.? Those percentages came from how often was the switching portfolio in Treasuries, Aaa, or Baa securities.

Lessons

Now, I only made one pass through the data.? I am not torturing the data to make it confess.? There might be better ways to do things.? But observing the momentum improves matters.? It is not as good as investing in Baa bonds, but who would run such a strategy?? If one is beating the Aaa bonds, it is good.

Another lesson is that investing for the average investment grade credit quality is good also.? The average mix is roughly Aa3/A1 (AA-/A+).? That would be similar to the main bond averages.

Lesson three is the pursing yield is rewarded, within limits.? If a society survives, and general order prevails, credit risk is generally rewarded.? It can?t be otherwise, aside from revolutions.

Lesson four is that switching yields better than its average, but the volatility is higher.? It kept up with Baa bonds for some time, but missed in the last cycle.? Had this analysis be run three years ago, the endorsement would have been strong for the switching strategy.? And that endorsement might be strong 10 years from now, because the strategy did well during periods of high volatility.

Caveats

1) Transaction costs would cut the fees of the switching strategy, but if ETFs and closed-end funds are used the effect can be minimized.

2) It?s easy to find Treasury funds, but hard to find Aaa and Baa corporate funds.? Most investment grade corporate funds are a blend of everything from Aaa to Baa.? This strategy as written will prove hard to implement.

But, maybe a variation might not prove so hard.? I plan on testing the difference between the current yield and the 10-month (or 200-day) moving average on a variety of ETFs, and seeing if it has any usefulness.

But the work for next week is writing up a trading model for stock indexes, and I have something more substantial to say there.

The Best of the Aleph Blog, Part 4

The Best of the Aleph Blog, Part 4

Posted on by David Merkel

The period from November 2007 through January 2008 was challenging, but I did say a lot of good things.? Here’s a sample of the best:

Contemplating Life Without the Guarantors

Markets always beat governments, unless governments get so determined as to subvert markets.? Guarantors provide “thought insurance” so you don’t have to analyze the bond that they guarantee.? But what if the solvency of the guarantor is questioned?

The US Dollar and the Five Stages of Grieving

An important article that explains why currency interventions almost never work.? Required reading for Treasury Departments and Central Banks.

Why Did I Name This Site ?The Aleph Blog??

Cogent explanation for the odd name.? But I have gotten the question a few times as to whether I named my site after Jorge Luis Borges short story, “The Aleph.”? The answer is no, but after reading “The Aleph,” I would say that it folds into reason number four for why this is called The Aleph Blog.? Aleph is big.? Very, very big.

On the Value of Secondary and Primary Markets

They are valuable for different reasons, but they are related.

In Defense of the Ratings Agencies

The original piece, pointing out how the regulators have abandoned their responsibility, having outsourced it to the rating agencies.

Personal Finance, Part 6 ? The First Question

How much are you willing to learn, and how much work do you want to do? For people who ask my advice, that is usually the first question that I ask.

Booyah for Brainy Buybacks! (But not Brain-dead Buybacks.)

There is no simple answer to whether a buyback is the right strategy or not.? It depends on the price of the stock versus its value.

Options as an Asset Class

You can own/short options, but you can’t own/short volatility per se, at least not back in 2007.

Municipal Tensions

We are experiencing the front end of the woes now.? This won’t be over for 20 years.

How to Read the Whole Bible, and Survive the Experience

A simple way to read the whole of the Bible, and avoid getting bored, as so many do who try to read it straight through, and give up when 10-50% done.

In Defense of the Rating Agencies ? II

Anyone can criticize, but who can offer a system that is better than the present one on a comprehensive basis?

The Beauty of Broken Moats

Berky had an opportunity with almost all of the financial guarantors kicked to the curb.? It never worked out because Berky would not take modest risks.? In foresight today, those modest risks don’t seem so modest, so salute Mr. Buffett, who has forgotten more than most of us will ever know.

What Did Buffett Know about the Gen Re Finite Reinsurance Deal with AIG?

Odds are, Buffett knew a lot more than he confessed to know.? Buffett is a maven on insurance issues.

On Benchmarking

Benchmarking enforces conformity on managers, and the shorter-term the horizon, the more it makes them closet indexers.

Pandora and the Fair Value Accounting Rules

There are really tough issues here.? Everyone wants to be accurate, but over what time horizon, and how to adjust over time?? Bright investors will build in provisions for adverse deviation, and be conservative.

Unstable Value Funds?

This didn’t prove to be an issue, in this credit cycle, though form what I heard from insiders, it got close.? If the Fed hadn’t done 0% and QE, my dire predictions might have come true.? They still might in the future.? Be wary.

Meet Some of my Friends

Though the videos have disappeared, the story of how President George W. Bush, Jr. came to visit the factory of a friend of mine (of which I own 1.4%) is an interesting tale.? I was proud of my friend, who is a humble, but a great guy.

A Bonus from MoneySense Magazine

A free version of what Canadian magazine buyers had to pay for. How to earn more while taking less risk.

Personal Finance, Part 11 ? Your Personal Required Investment Earnings Rate

The intuitive explanation of what you need to earn in order to achieve all of your life goals.? It’s probably higher than you think.

With 401(k)s and Other Defined Contribution Plans, Watch Your Wallet

An important article — from the article:

If you are paying more than 1% of assets per year, then something is wrong, unless the asset classes are esoteric, which should not be the case for DC plans.? Remember, you have to be your own guardian with defined contribution plans.? No one will do it for you.? And, if a few of your colleagues complain at the same time, you will be amazed at how quickly it will be taken seriously, because the administrative staff of the plan sponsor usually doesn?t get that much feedback.

In general, high costs are closely correlated with low performance.? Keep a close hand on your wallet, and leave those who are charging you more than 1%, unless they are doing something special for you.

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I think I gave good advice in that era.? As the bubble deflated, investors needed to be more careful, and I highlighted that.? Not that I will always get it right…

Mary Miller at BCFAS

Mary Miller at BCFAS

Posted on by David Merkel

Assistant Treasury Secretary Mary Miller Met with the Baltimore CFA Society [BCFAS] on Tuesday.? Given her prior efforts at T. Rowe Price, it was a bit of a “welcome home” for a local woman who has excelled.? And she said that it was great to be back in Baltimore, though at the end of the presentation she said it wasn’t unpleasant working in the Treasury Department.

She talked about four things, and left a lot of time for questions, much to her credit.? Here are the four items:

1) Drafting of regulation for the Volcker Rule.? Her direct comments and answers in the Q&A indicated an understanding of the difficulties in getting banks to stop taking significant trading and equity risks.? Nonetheless, she did not offer that the Treasury has a silver bullet.? And, as I would say, there can’t be one, unless the US wants to outlaw investment banking.? Nonetheless, new regulations are coming next week for comment.

2) On securitization, new rules are being proposed as well next week.? There are several targets:

  • Raise underwriting standards.
  • Align incentives of originators with investors.
  • Create a clear and open system.
  • Don’t interfere with the efficiency of capital.
  • Place the proper burdens (my phrase) on each player in the chain of securitization.

These goals are somewhat self-contradictory, but hey, this is the US Government!? They specialize in contradictions.

3) Two weeks from now, housing finance reform ideas will be out.? They have many contradictory goals:

  • Make mortgage finance widely available.
  • Protect consumers against deception in lending.
  • Provide for affordable housing, both through renting and ownership.
  • And not burden the taxpayer with these costs.

We can all dream, but for me this is the financial equivalent of antigravity.

4) Financing the Government

  • Focus on flexibility of funding
  • Mention that the TARP has lost little money, if any at all.? See, I mentioned it. Mary.? (Please ignore the GSEs, who may lose half a trillion before this is all done.? How does that affect the value of our money?)
  • She mentioned how the US government has lengthened the maturity of debt from 49 months to 60 months.
  • She then mentioned that it was critical for the government to raise the debt ceiling.

I like Mary Miller.? I interviewed with her in 2003 as a 42-year old oldster, because T. Rowe Price hires only young people, and promotes from within.? It took 4 major investment banks banging on the door to get me the interview, but you can’t overcome T. Rowe Price culture for good or for bad.? Their loss, I say.? At my interview, I remember thinking that I would like to work for her.

There was a long Q&A, which she did pretty well at answering.? There was at least one nut in the audience who could not formulate his question clearly in a short amount of time.? Very annoying.

That said, there was one questioner who asked about about offering floating rate and long duration debt, and she gave him a complete but noncommittal answer, much as he received from Treasury officials at another time.? A reasonable answer on that question, but got no answer to his second question, “How much help to your Treasury issuance is the buying of the Federal Reserve for QE2?”

His friends noted that there was no answer, and a few commented, “Hey, you were there only one that asked a question that got no answer.? Way to go!”? He was less happy or excited about all of it.? He just wanted an answer, and wasn’t sure if Mary Miller forgot, or didn’t want to answer.? He assumes the former, being a humble blogger, small asset manager, and one who assumes the best of others most of the time.

The Point of No Return

The Point of No Return

Posted on by David Merkel

I first became interested in Social Security back in the 80s.? In order to become a Fellow in the Society of Actuaries you had to study all manner of insurance programs, both private and social, to understand the framework in which insurance and pension products existed.

The Greenspan Commission back in 1981-1983 proposed another large increase to Social Security taxes.? The system only needed a small lift to get it past some demographic difficulties, but the Commission proposed, and Congress passed a large change, which would mean that the Social Security would develop a large base of Treasury Notes, because income to the system would outstrip benefit payments for a long time, and the proceeds would be invested in Treasuries, because they are a neutral asset.? Investing in other assets would invite socialism and cronyism.

But really, what was needed was to move to a pay-as-you-go system, as Pat Moynihan suggested in the early 1990s.

But the fix could never be permanent, because even as taxes were increased, the benefits increased along with them, and there would come a day of reckoning.? But when?? There are three dates that many would point to:

  1. When the excess of taxes over benefits would peak.
  2. When benefits and taxes would be equal.
  3. When the trust fund would be broke.

I always looked at the first of these, whereas most commentators looked at the last of them.? My reasoning worked like this: the Federal Government has cynically integrated its budget with Social Security to make its deficits look smaller.? This is like a drug to the government; the real pain will come to it when the subsidy begins to fall.? By the time it goes negative, the US Government will account for it separately, so as to minimize the deficit again.

Given my view of how the US Government could no longer balance its books, the real change would come when they would have to increase their borrowing because there was not as much excess from the Social Security system.

When I first started looking at the Social Security system, the three dates in question were in the 2010s, the 2020s, and in the 2040s.? I thought that those dates were optimistic, but what I did not expect was that the current economic crisis would accelerate the first two dates dramatically.? As it is, date one has passed in 2008 (+/- a year), and I think the second date is happening in 2010.? Bruce Krasting’s post highlights the details, but I would concur, this recession will not end rapidly in the place where is counts for Social Security — employment.? We are not likely to see Social Security deliver surpluses to the US Government anymore.? Thus I expect deconsolidation of Social Security’s finances with that of the Federal Government.

What I never expected was that dates one and two would come so rapidly — almost together.? Let the morons who talk about trust fund exhaustion pontificate.? “We have all of these assets with which to pay future benefits….”? Nonsense.? As they sell bonds issued to the Social Security System, they must issue even more debt to the public.? How much can they bear, and at what yield?

Going back to my trip to the US Treasury, I want to remember one particular incident:

After the meeting, I said to one Treasury staffer, ?One of the quiet casualties of this crisis is that you lost your last bit of slack from the entitlement systems.?

?What do you mean??

?Just this, prior to the crisis, Social Security and Medicare would produce cash flow surpluses for the Government until 2018.? Now the estimates are 2016, and my guess is more like 2014.? The existing higher deficit takes us out to the point where the entitlement systems go into permanent negative cash flow.? This means that the US budget is in a structural deficit for as far as the eye can see, fifty years or more, absent changes to entitlements.?

He looked at me and commented that it would be the job of a later administration.? No way to handle that now.? To me, the answer reminded me of what I say to myself when I go on a scary ride at Six Flags with my kids.? There is nothing we can do to change matters.? The only thing to adjust is attitude.? So, ignore the fact that you are afraid of heights, and enjoy the torture, okay?

The crisis has accelerated that date to 2010.? That’s a lot of change in just eight months.? The long-term problem is upon us now.? We are at the point of no return, absent large changes that those influenced by Keynesians will resist.

There are no good solutions now.? Budgetary cuts and tax increases reduce the possibility of government default.? They also will tend to slow the economy, unless the tax increases stem from cutting cheating, and the budget cuts affect only things that are a fraudulent waste.

Once you reach the point of no return, it doesn’t matter what prescriptions one follows — failure is coming.? One can shape the type of failure, but not that there will be failure.

All that said, there are still options, though none of them are good.? Will the currency be inflated?? Will the government default?? Will taxes be raised dramatically? I don’t know.? Be alert; be ready.? The endgame is here; we will see what moves the government makes.

PS — I have a signed copy of A. Haeworth Robertson’s book, Social Security: What Every Taxpayer Should Know.? He was the Chief Actuary of the Social Security System for a time, and a noted skeptic of the program.? He sent me the copy after I shared some of my misgivings with him in the 1990s.

Alas, but the average actuary has been skeptical of the Social Security system, and I have met many actuaries that work there, and they agree.? But leaders of the Society of Actuaries, when asked to give a clear warning on the troubles to come have refused.? I have my theories as to why — they curried favor with politicians for their own personal reasons.? Sad.

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