Thursday, February 28, 2008

Is The Planet Feinting Us On Global Warming?

I've written a few brief posts on here re global warming. And, had a few lengthy discussions in the comments section about the causes and evidence or lack thereof. Ultimately, I personally support a position of taking care of the planet before mother nature boots us off of her dominion for our misdeeds. And, because I don't exactly enjoy eating poisoned food, drinking poisoned water or breathing all of the pollutants from China. Yes, there is substantial evidence much of the west coast air pollution in the U.S. is from China. And, because green technology is good for business. Unlike all of those people who argue that green technologies are bad for business, they are actually going to drive substantial innovation, productivity, employment and economic growth. Who doesn't love that?

Here's the "G"-rated one minute closing to George Carlin's stand up act on saving the planet. The whole act is really quite hilarious but it's also not "G"-rated so as not to offend anyone, you have to view it on Youtube.

I have a friend who works for a very large scientific research institution and every time global warming comes up, he bellows in disbelief. I also hear a similar roar when it comes to the concept of peak oil. He has actually shown me some substantial research that points to the possibility the world may never run out of carbon-based fuels. Not conclusive but interesting research now that every self-appointed expert is telling us high oil prices are pointing to peak oil. To go off topic a second, it's interesting to note Michael Economides, a professor at the University of Houston and frequently quoted expert on energy, has said Saudi Arabia could increase production by fifty percent if they needed to. Not overnight but with access to western oil technology and major investments over a period of years. I've never believed peak oil and am more confident than ever high energy prices are significantly affected by Wall Street traders.

Anyhow, back to global warming. So, my skeptical friend sent me this link a few days ago. It seems there is evidence from some leading climatologists that the melting of the global ice caps could lead to another ice age. So, does this mean An Inconvenient Truth is an inconvenient mistruth? Might Al Gore have to give back his Nobel Prize? Or is the new question if humanity is going to cause a new ice age?

"According to Robert Toggweiler of the Geophysical Fluid Dynamics Laboratory at Princeton University and Joellen Russell, assistant professor of biogeochemical dynamics at the University of Arizona -- two prominent climate modellers -- the computer models that show polar ice-melt cooling the oceans, stopping the circulation of warm equatorial water to northern latitudes and triggering another Ice Age (a la the movie The Day After Tomorrow) are all wrong.

"We missed what was right in front of our eyes," says Prof. Russell. It's not ice melt but rather wind circulation that drives ocean currents northward from the tropics. Climate models until now have not properly accounted for the wind's effects on ocean circulation, so researchers have compensated by over-emphasizing the role of manmade warming on polar ice melt."

posted by TimingLogic at 2:28 PM links to this post

Wednesday, February 27, 2008

Is The Google Party Over?

"These stocks (Google, Apple, RIMM, Baidu) are so overvalued that I'd rather take a cyanide pill than put my money in these companies as long term investments." --November 2007

It appears the Google party is over as are the other apocalyptic stocks we have written of. Above is a chart of the company from its public offering. The last move upward looks like a classical blow off top. It has now broken its upward trendline for the first time. That doesn't necessarily portend a change in trend. Realistically, the stock is broken so significant rallies are not likely any time soon even though we are now in a support band. It is not a positive sign that Google has continued to weaken significantly as the market tried to rally over the past month. So, when the market rhythms turn south, be it temporary or otherwise, Google could easily punch right through this support.

The euphoria surrounding Google has been near mania this cycle. Of course, this is the cycle of manias. Emerging markets, China, Russia, private equity, oil, agriculture, Wall Street, metals, consumer stocks, derivatives, housing and on and on. I have written numerous posts about Google over the past three years. From the fact that the technology used is primitive comparative to where the market will likely head to competition beating them with new offerings to online marketing budgets being expendable in an economic downturn to the probability of the next great innovation in their business not coming from within the walls of Google to a valuation similar to the entire stock market of Thailand, one of the world's largest economies. Quite frankly, I'm not even convinced about the long term sustainability of their business model. I believe Google will have to transform itself to remain relevant long term. That is a very difficult undertaking not accomplished by many. Because, first it takes a realization that this may be so while business results are fantastic. Maybe Google realizes this and maybe they don't. I don't know. This is blasphemy to the Google pumpers but as I wrote not too long ago, Yahoo is one of the worst managed technology companies out there. Eight years ago they were considered invincible.

On the other hand, Google may continue to dominate its space for years to come. But that is irrelevant. Intel still dominates its space yet eight years after its bubble burst, the stock is still down 75%. We are going to find out how much Google is really worth. And, I wouldn't be surprised to see that number be 75% less than at its peak similar to Intel.

By the way, Microsoft, you should walk from this $40+ billion Yahoo offer. You would likely be top ticking the paid search and online ad pricing cycle at a price that is astronomically ridiculous. If you can afford this type of loose expenditure, cut shareholders another one time dividend. Otherwise, you might consider making more surgical acquisitions to fill in your business strategy or functionality gaps and spend some of the savings redeveloping your online presence. Because Yahoo's brand is not worth $40 billion. Yahoo's stock was $4 just a few years ago and it is likely headed near that price again. Patience will be rewarded. And, if someone else can raise that kind of capital to buy Yahoo, then so be it. Let them deal with the albatross of $40 billion in debt to acquire Yahoo. Frankly, I don't believe anyone can raise this kind of money for Yahoo in the private equity space. If they do, they'll likely burden Yahoo with enough debt to bankrupt them. And, who else is going to buy them other than you? Walk away. Re-offer if Yahoo is still available in the future. They might be begging you to take over the company at some significantly lower price.
posted by TimingLogic at 9:17 AM links to this post

Monday, February 25, 2008

Home Owners' Loan Corporation

Alan Binder, the former Vice Chairman of the Federal Reserve has an interesting article at the New York Times today. Binder proposes the institution of a program similar to one used the last time we had such a serious housing problem. That being the Great Depression. Giving a cursory look at the math, it would likely be significantly cheaper and much more precise than the stimulus package we already said won't work because of the lack of monetary multiplication in the economy.

I would like to see significant and permanent banking reform and transparency should society get involved in a program such as the HOLC. If we have to cumulatively bail out the mess made by banks, they need to be held to account not to be able do create similar messes in the future. And, not just as it pertains to mortgages. Sweeping reform to instill quasi-permanent confidence and transparency. A personal income tax on finance executives who perpetrated this scheme could be used to pay for the HOLC program.

It wouldn't bother me to see lobbyist reform and transparency thrown in for good measure. How about a law that requires all government officials meeting with lobbyists to have meetings taped and then transcribed onto the internet for public access. And, that no lobbyist meetings take place outside of business hours or outside of government offices. I'd even pay for the tape recorder. We'd only need one. If lobbyist meetings were open to public access and transparency, there would likely be very few lobbyist meetings.
posted by TimingLogic at 9:27 PM links to this post

I'm Deleting All Of The Feeds On The Blog Except Feedburner

I'll be deleting the Yahoo, Google and AOL feed on the upper right hand of the blog within the next two weeks. AOL is on life support and Feedburner now supports Yahoo, Google and Bloglines. Just an early heads up.
posted by TimingLogic at 7:13 PM links to this post

Friday, February 22, 2008

Friday Post

I just saw my favorite NBA player, Ben Wallace -- and one of the few reasons I'd ever actually watch an NBA game -- was traded. Wallace personifies dedication and passion as of the hardest working and most feared defensive players ever to play basketball. While offense receives the glory, defense wins championships.

While this may appear to have nothing to do with markets, economics or business, it indeed does. Wallace's traits are what have made humanity great. And, they are the traits that will pull us out of an environment at some point. It will be dedication, hard work and passion. Rather than believing our economy will flourish by pushing paper as we have recently been led to believe, we will refocus on what makes humanity great. That being solving problems, innovation and our passion to build things. The cycle of financial games is over. And, rather than believing capital markets lead the economy as we are often told, they will return to their critical role as a primary support mechanism for the real economy. You remember that don't you? In other words, Wall Street receives the glory but the cumulative ability of individuals in the real economy wins championships.

Let's watch a clip of Wallace put together by a few Youtubers to remind ourselves of what we are all capable of, in our own way, when we put our minds to it. Because, as bad as the economy may get, the sun will shine again. And, it will do so because of our hard work and dedication to make it so.

posted by TimingLogic at 11:15 AM links to this post

Thursday, February 21, 2008

Precious Metals, Gold And The Equity Markets

I believe the last significant post on gold was July of 2007 when we highlighted Newmont Mining around $38. At that time we said gold would have to rise or oil fall in some variation of a relative pricing relationship. That very week was the actual turning point in the gold & oil ratio as measured by the oil index and Newmont. As we expected the strength of gold increased. In fact gold has risen by nearly 50%. Much more than I expected. But, the size of the move simply validates the global imbalances we have been talking about. This is not a housing crisis or a subprime crisis. Those were simply the first measurable outcomes. This unfolding environment would have come to pass even if there weren't a subprime or housing crisis. In other words, this is an unfolding economic crisis whose foundations really have nothing to do with subprime. Therefore, market discounting has yet to be realized.

How about another gold update. This time let's look at the top performing precious metals fund over the past five years; U.S. Global Precious Metals. The fund has had unique pricing action of short bursting rallies rather than sustained trending action over this cycle. Rallies were followed by resting then rallies then resting. Notice that positive pricing action in the fund happened in 2001, 2002, 2003 and 2005. Do these dates have any significance to you? Anyhow, I expect the next big move to be in 2008. And I expect that move to be down. Of course, I am anticipating fundamental factors leading to this move and I'm reasonably comfortable with these fundamentals developing into a tipping point. (More on this in a later post.) It's simply a matter of when. On that note, the fund attemped a false break out of this recent resting period back in December. It failed rather substantially. Watch the current consolidation or resting box pattern for a break above or below the consolidation box. You can follow the pricing action over the coming weeks and months at the chart link here.

As I wrote, people are looking to the 2000-2003 bear market for guidance on this market. And, that using it as a template was erroneous because technical analysis is a function of fundamentals and the fundamentals have nothing in common. In other words, looking at market measurements is not really useful over the long term unless one understands the 'why'. This is one reason why technical analysis has a poor reputation and weak track record over decades. Fundamentals really determine technicals. Were we following the last bear market script, we would have already seen a very sharp and significant rally in the S&P 500. Yet, we have seen nothing. If we do get a sell off in gold, I expect global asset markets to make another major push down in sympathy. Exactly when? That's the big unknown but I would guess some time before summer. I expect any move to be sooner rather than later given the market is storing up significant energy for what will likely be a big move within the next two weeks. Given we are nearing the end of the month, I don't discount a move up followed by a move down or a move down or a move up. But, to date, there are no buyers. So, for any positive move, we would need to see a miraculous epiphany that value exists at these levels by investors heretofore not willing or able to partake in this market since July of last year. In other words, unless buying picks up substantially we are going to see that energy resolve itself to the downside. Frankly, as I wrote before, I'm not sure buying can pick up. A reflection of fundamentals rather than chattering that the market is oversold. Of course it is oversold. A point not lost on anyone. Yet still no rally.

My trading model is still short and that supports a position of down being a likely outcome. Most everyone is calling for a rally because we are 'oversold' or a generally trendless market that makes little movement in either direction. My work is showing a spring is being loaded that is likely to pop soon. There's another reason I am short term concerned and I'll try to get it posted soon if I have the time. But as of right now, the bulls are still trying to shove higher. There was alot of buying into the last four weeks but the door has been slammed hard. Returns in the S&P are negative since the day following the mini crash last month.

The consequences of this virus are substantial, well beyond what is generally being discussed, and immediate. One need only look at the crisis developing in the Russian banking system we discussed earlier this year to see how severe, rapid and far reaching this economic crisis is. If the Russian banking system, as an example, teeters, the world as we know it could very well be over for the Russian economy for some period of time. Just one example. In the U.S. we've already seen the Institute for Supply Management reading have the largest one month decline in its history. And, just like the retail numbers we talked about a year ago as being some of the worst on record, we hear much of the same apathy responding to the ISM numbers. That being, generally that this ISM number is not to be trusted as it dropped too rapidly to be accurate. A confirmation of foolishness.

To wrap up, short term predictions are very difficult but a rather unpopular position here is that we are going to see another large push down. Nearly everyone who is anyone is citing sentiment surveys or oversold stocks and their historical accuracy pointing to an imminent rally. Show me a macro environment such as today and I will show you how these anecdotal tools failed repeatedly. How quickly this downturn unfolds depends on many factors. Weeks, months, years? Yes to all is probable. Rallies in the interim? Maybe. Maybe not. Ask Japan about stock market rallies during their economic unwinding.

One final comment. I've heard people recently stating that the Transports are picking back up again and signaling an economic recovery. We've heard this before. Right near the market top last year. I wrote about Dow Theory in 2007 here. Dow Theory is anecdotally interesting-and being misinterpreted by many-but let's be very clear, the only equity index that matters in this market is the S&P. Period. When I see something constructive in the S&P, I'll re-evaluate my short term outlook.
posted by TimingLogic at 9:00 AM links to this post

Sunday, February 17, 2008

Lack Of Transparency A Boon To Banks

"This lack of transparency is a boon for the banks, says Christopher "Kit" Taylor, executive director from 1978 to 2007 of the Municipal Securities Rulemaking Board, a panel that issues rules on municipal bond sales. "Business moves from transparent and competitive markets to markets where there is less transparency and the profits are greater," he says. "If you don't know how much you're paying, you're going to be paying too much.""

The above quote is from an excellent Bloomberg article in the latest Bloomberg magazine. You can access the article by clicking on the highlighted text above. The article exposes the heinous breach of trust banks used to fleece investors in the Pennsylvania school system. Re my last post, this action was only possible due to the lobbying efforts of financial firms and the receptiveness of politicians as pointed out in the Bloomberg article. All at the expense of citizens of the state of Pennsylvania. This type of behavior appears to be rampant within the financial community as we see more and more outcomes unfolding across a wide spectrum of the global economy. All of these schemes by bankers have contributed to an excess pool of liquidity used to drive the biggest global bubble in history as we have written of time and again.

In the same issue of Bloomberg magazine but in a different article titled 'The Hidden Fees in the 401k' we see how financial institutions are raking in large sums of money from individual investors without disclosing said practices. "......undisclosed expenses for securities trades, administration and advisory services were driving the cost of Elcon's plan to at least 3.5 percent of the amount he invested. He says he was furious because Elcon Vice President Kinh Pham had told workers in a February 2007 memo that Elcon had cut fees to 0.10 percent."

This is part of the same buy & hold investment scheme that is perpetuated so that Wall Street makes their management fees on money regardless of what asset prices do. The same ones lobbyists are using in an attempt to privatize Social Security. Now, I really have no opinion on that topic but it is surely not debatable which lobbyist group is pushing this into the public forum. Wall Street's structure of management fees produces guaranteed income regardless of what our investments actually do. If asset prices go up or down, they still collect management fees. These fees are often used to create or back risky trading schemes by bank trading desks or hedge funds that have, amongst other outcomes, created this massive commodities bubble that costs everyone every time they make a purchase. That's on top of the other financial shenanigans unfolding. Supply & demand? That's a laugh. Wall Street traders are going to ram commodities prices to the moon and make the global economy pay catastrophic prices for the underlying product. Somehow, I'm not sure that was the spirit of free markets that was envisioned when these markets were created for buyers and sellers to trade these commodities. It was supposed to be based on supply and demand characteristics in the real economy. Not, based on supply and demand imbalances created by the financial economy's massive desire for the paper assets used to trade these products. In other words, if people knew what was really happening on Wall Street, we'd likely see a revolt. Of course, I'm taking that statement from eighty years ago when the same shenanigans cost the global economy dearly. I've written of this commodity mess unfolding before and the feedback I generally get is that the markets are working properly. Really? Just like the other shenanigans we've talked about that are now coming to pass. We shall see.
posted by TimingLogic at 11:27 AM links to this post

Tuesday, February 12, 2008

Buffett Moves The Market? Hardly.

I really find it hilarious to read the commentary across nearly every web site this morning that Warren Buffett's statements about the bond insurance business is what moved the markets today. I showed this chart a few weeks ago on a daily basis. If you want to understand how to interpret it, scroll down to the January 28th post.

Let's look at it on an intraday basis. I pulled this just a few minutes ago so it is current. The data is overlaid on a chart of the S&P 500. It's pretty obvious to me that the market had decided to move higher well before Warren Buffett woke up this morning. The reality is today's move higher was determined before today even started. Financial journalists all too often associate correlation with causation. In other words, today's buzz is about Warren Buffett's remarks. Warren Buffett is an investing genius. So, therefore, the markets must be moving higher because of Warren Buffett. Not!

Too many of our beliefs are influenced by unreliable stimuli. One of which are journalists. Journalists often reporting with a lack of reliable data or their own bias or the bias of someone trying to purposefully bias them.

Let me put it another way. The cartoon below is a more accurate representation of the information flow on Wall Street and between Wall Street and the media.

posted by TimingLogic at 11:14 AM links to this post

Sunday, February 10, 2008

Government To The Rescue. Again. The Announced Stimulus Package And Specifically Why It Won't Work.

Politicos have been telling us for half a year that they are going to help solve the economic circumstances unfolding. First they announced a plan to help homeowners late last year. How's that working out for you? Anyone feel better owning an asset that's worth 30% less than it was three years ago? And still dropping? I sure do. That reminds me of Hayek's Road To Serfdom. Everyone in that situation is on the road to serfdom and the bank is their lord. Banks, using anti-competitive, monopolistic and predatory practices supported by politicians, break basic risk management practices. As a result they make billions then receive welfare bailouts while consumers are told personal welfare promotes sloth. So, then what does corporate welfare promote? Consumers live in servitude to corporations receiving welfare. I need a vacation. A permanent one. Any bankers hiring? What better vacation than to be a banker? Have a monopoly on receiving money from the Federal Reserve and lend it out at cost plus. Then sit back and watch the cash roll in. When people don't pay their loans, garnish their house, family, children and future grandchildren. Blame your garnishments on their lack of personal responsibility. Then when all else fails, absolve yourself of responsibility and receive government welfare. How can one lose? Free markets? Competition? Why subject one's self to such pressures?

We are about to see the law of unintended consequences come to pass in more ways than anyone can imagine across the global asset bubble. One we already see is that homeowners with good credit are walking from deflating properties regardless of their ability to pay. In the end, attorneys are likely to present lawsuits and legal challenges on behalf of homeowners. If these gain traction, we could see a wholesale exodus from overvalued properties. And, who would be left holding the bag? Banks. That is just one example. America is not Japan and the outcome of an asset bust will likely be somewhat different as Japan's culture is very different. In the U.S. many will show no loyalty to a system that has perpetuated a costly scheme at their expense. There will be many impacts and unintended consequences that will, in part, be dependent on actions intended to deal with perceived issues. I say perceived because the reality is that no one is really acknowledging the underlying problems that have created this situation. That means the intended actions could create much larger problems. Right now we are traveling with an inaccurate map. And, that means we are likely headed to a place where no one wants to go.

There are only so many IOU's government can write. If those are used and a real crisis emerges, then what? In other words, throwing money without discretion at housing, markets, consumers, wars, defense, banks, homeland security, pet projects and other forms of government irresponsibility is limiting our ability to deal with a real crisis should one occur. As we wrote some time ago, excessive government spending reduces economic vitality and private investment. In the long run I really don't worry about that. The market will enforce change when it is necessary regardless of whether it is wanted. In other words, there comes a time when change is imminent. Change we should all embrace because it will lead to solving today's greatest economic problems and transforming government. Transforming it into what it was originally intended to be. That is, elected stewards with a responsibility for its citizens first and foremost.

I have written for three years that financial market deregulation would haunt us. Before anyone cares to blame a particular political party or politician, this deregulation happened over a period of decades and has its roots in both political parties. Defending any participant is nonsense. Rather than throwing money at a stimulus package, maybe politicians could find time to reflect on their involvement in this situation. Might I add their involvement is substantial. Amongst many significant issues, politicians have fallen prey to corporate lobbyists and special interest groups seeking to undo or deflect necessary transparency and oversight in the financial industry. When playing any game, in this case economics, there must be rules. Those rules involve transparency and regulation. Don't kid yourself when people tell you we don't need transparent and regulated markets. That free markets somehow means no regulation. If you really want to talk about free markets, we should bust up monopolies that have developed in our economy. That's not going to happen unless Teddy Roosevelt gets re-elected so we must have regulation. In normal circumstances I would be willing to argue transparency before regulation but we passed that opportunity eons ago.

Each second or third generation is equally foolish in their belief they are smarter than those before them. That our accumulated knowledge somehow makes us impervious to repeating mistakes. I have heard this so often from friends and acquaintances that it must be one of the most commonly held untruths of society today. Humanity is indeed brilliant but the irony is that we are equally foolish. There is no way to separate the two. It is the human condition. Given that fact, how many times do politicians need to be reminded that our money and deposits are never to be jeopardized? Maybe a constitutional amendment would keep lobbyists and politicians away from our money. But, what is even more horrifying is that Wall Street used money made on our deposits to lobby politicians on behalf of jeopardizing our deposits. And politicians used these lobbying efforts to get re-elected and perpetuate the process of greed and power in lieu of integrity and righteousness. The human condition we have always suffered from. I hope that someone will read this and write their Congressperson or some politico will read this and have an epiphany that will result in permanent laws never to be tampered with again. And, that we clean up this lack of transparency not only in markets but government. Permanently. By law. Laws are to be trusted. Not politicians. Not anyone regardless of virtuosity. We are a society of laws that must be applied equally. That is all that protects us from ourselves.

Let's lighten up the post with a little joke on this topic. Why do bankers, hedge funds, mortgage companies, private equity, insurance companies, ratings agencies and other financial institutions engage in foolishness? Because they can. Funny isn't it? Funny enough to embolden you into action to ensure this never happens again? Maybe not yet. But, hang around. It's going to get a whole lot more interesting. Crisis creates change. One unintended change is a lack of confidence in the status quo. Isn't it ironic we were just told months ago that Goldilocks was upon us? That myth was perpetrated by those wanting the status quo to continue for whatever reasons. They've lost the game. And, in the long run, that is a very positive development for everyone.

Now we have the recently announced stimulus package. I appreciate that politicians are sincerely trying to help but I view this as election year pandering more than anything. These consumption-focused packages have no history of success. Because politicians know this from historical records of similar efforts, how can we not concluded this is only an effort to garner votes? What they should have been focusing on whilst they were deregulating our financial markets was business investment and technology-based or new economy small & medium business (SMB) growth and creation. Not pizza franchises for Wilma and Fred Flintstone. (Although pizza franchises are a good thing.) Large companies have been a net reducer of jobs and, therefore GDP, for decades. Their government welfare needs to be reigned in. Frankly, as does their disproportionate and negative impact on free markets. Small and medium businesses are the dynamite that fuel job creation and economic vitality. On that note, I am completely bored with the dogmatic types yammering about a need to protect capital formation. Who cares? I mean really. These dogmatic types open their mouths and garbage comes out without even thinking about what they are saying. Part of the problem is that excessive capital formation is chasing every asset imaginable in the form of hedge funds, real estate, investors, private equity and on and on. We have too much capital and too little economic demand. But, then we talked about this ages ago.

Let's look at the primary stimulus package component, cash for individuals, and the implications for the economy. This is really quite simple and really proves my point of political pandering. Let's assume the stimulus payment to each individual is $600. That's close enough for government work. Pun intended. Let's also suppose that American consumers run their households generally as companies do. That is, in an environment of uncertainty, they are looking to cut down on their expenses or reduce their debt if possible. That's entirely plausible as an assumption. Especially given we've already seen data confirming the consumers are spending substantially less. And, let's assume financial institutions are hoarding money as is clearly a fact. In case that needs some type of explanation, banks are doing so for fear of rising bankruptcies, to shore up their capital ratios, increase their loss reserves, pay down their bad investments, pay their bloated salaries, throw good money after bad by doing things like buying Countrywide, etc, etc, etc. There are a multitude of issues.

So, how does this $600 stimulus help the economy? Given the above dynamics, let's walk this stimulus through the economy. (It's a very short walk.) The majority of consumers will likely use most or all of this money to pay down their debts or expenses. Or possibly deposit the check for an emergency. Mind you, just like banks and businesses are doing as I type this. And, to whom does the consumer pay their debts? The banks. And, what are the banks going to do with that stimulus money once they get it? Continue to hoard it of course. So, what effect does this stimulus package have on the economy? Well, I can see one effect. The government has just spent more money it doesn't have and our future repayment obligations as taxpayers have increased. Oh, and our favorite politicians can tell us come election time that they reached out to us. But, it hasn't helped the economy one iota. The problem with this stimulus approach is that money turnover in the economy has ground to a halt. There is no economic multiplier in stimulus. Ironically, what this stimulus package turns out to be is more corporate welfare for banks. Through a circuitous route banks end up with the majority of this stimulus. No wonder Wall Street cheered the stimulus package. More handouts for them. More gruel for us.

Is it really so hard to understand why the leading Presidential candidates are change agents of some sort? Or that integrity and transparency seem to have bubbled to to top of the process as opposed to cronyism or partisan hacks gaining favor? And, that the election spin machines and money machines of the status quo are failing to deliver on their spin genius? That two of the three candidates left had little money and weak organized support just a matter of half a year ago? (Update: I've been corrected. Three of the four candidates....) I find it hilarious that candidates now believe in the concept of morphing their personalities based on polls and marketing spinsters. Here's a more clear view of reality. These high priced hacks hired to manipulate people actually believe their voodoo works. The reality is few are really listening as long as economic conditions are reasonably good. People don't care what politicians do when they have some jingle in their pocket. But, when that isn't the case people actually care about who gets elected. And, if an American can smell one thing from a mile away, it's bullshit. So, when substance matters, the spinsters and manipulators are the first to be written off by the electorate. This is an election of change. What kind of change? That's for the voters to decide. And, if they aren't happy with the change, in four years we'll get another change agent. But, ready or not, change is here.
posted by TimingLogic at 8:26 AM links to this post

Tuesday, February 05, 2008

Super Tuesday. Continue The Revolution. Vote!

"History has tried hard to teach us that we can't have good government under politicians. Now, to go and stick one at the very head of the government couldn't be wise."
-- Mark Twain

I saw a comedian over the weekend say terrible politicians are as American as apple pie. Once one gets past the facts that politicians will say anything to get anyone to give them large sums of money so they can say anything to anyone that they believe will get them elected to a position of power, then politicians are fine people.

Politicians will do what they want and we generally pay little attention. Because people realize little of value is accomplished in politics. But, in times of general social consensus we look for leadership and change. And, what is leadership? It's not the smartest. Or the best educated. Or the most experienced. Or those who have the best ideas. The best ideas come from the empowered people. Of all great ideas including our current form of self-rule, how many came from politicians? We fought a revolutionary war to rid ourselves of elitists. Of a single person or a small group of people making decisions of what is right and wrong. Or having undue influence over our rights.

As sure as the sun will shine tomorrow, the true defining characteristic of great leadership is to empower the rights of individuals before that of government, corporations and concentration of power. If history is any guide, we shall see true political leadership develop in the coming years be it this election or the next. Why? Because the majority are achieving enlightenment. They are awakening to the fact that these ideals have been taken from them through voter apathy. And, that in return they have received nothing but uncertainty. As Lao Tzu told us thousands of years ago, "A leader is best when people barely know he exits. When his work is done, his aim fulfilled, they will say, 'We did it ourselves.'.".

This country was started by a revolution. A revolution of ideas and ideals. Ideals of self-rule by the masses. All are equal. Our founding fathers sacrificed everything for these ideals. It is your duty to continue the revolution by voting. And to pick the candidate you believe will protect the individual rights most important to you. Not what is good for Wall Street or corporations. Those institutions are only successful if you are successful. If the masses are successful. Some may value conservative ideals. Some liberal. Some both. Some neither. Ideals are constantly bent and twisted by politicians. Both parties want to be the party of Jefferson. Both parties want to be viewed as uniquely American. Neither are. Jefferson wanted to ban political parties. The right candidate is your candidate.

Continue the revolution on this biggest voting day of this Presidential primary process. VOTE!
posted by TimingLogic at 8:14 AM links to this post

Monday, February 04, 2008

Russia's Ticking Time Bomb

Back on January 21st we wrote, "The latest potential catastrophe is now building in Russia. And, it appears to be gaining momentum. Let me stick my foot in my mouth and say I would put the potential for a blow up in Russia near the top of a "next" shoe to drop list. If this comes to pass, isn't it ironic that Time magazine just named Putin "Person of the Year"? What does that make Time magazine?".

That very week Russian authorities made disdainful comments about the mounting economic problems in the U.S. And that it was inevitable. And, that the Russian banking system was strong and far removed from any such concerns. Well, how quickly times change. Over the weekend the Russian Central Bank's Deputy Chairman admitted for the first time that the Russian banking system is melting down.

"Central Bank Shifts Crises

Russian Central Bank deputy chairman Alexey Ulyukaev, speaking at an annual meeting with bankers in a Moscow suburb yesterday, acknowledged for the first time that there is a substantial crisis of liquidity in the Russian banking system. He stated that the Central Bank will shift its priorities away from inflation control to concentrate more on stability in the Russian banking system. This is in response to the continuing problems stemming from the U.S. mortgage crisis. The Central Bank is this acting in harmony with Western regulators – European central banks and the U.S. Federal Reserve Board – even though it runs counter to government anti-inflation plans. This is indicative that the Central Bank expects the situation to worsen, observers say.

Ulyukaev's radical statement is taken as an attempt to reassure bankers of the regulator's support, especially for small banks, thus making the situation more predictable on the market. Otherwise, the banks may have started to raise interest rates in order to create a reserve of liquidity. Experts say that the refinancing measures instituted by the Central Bank last autumn were insufficient. Moreover, the Central Bank will be unable to raise liquidity through currency purchases as Russia's trade balance turns negative.

Bankers also note that, since Ulyukaev's statements were made in a closed meeting, and the Central Bank's monetary and credit policy for 2008 was written before the beginning of the liquidity crisis, without mention of changes in priority, it is unclear what specific moves the Bank will make, if any."

Now, why would any non-Russian firm extend credit to Russia given this unfolding situation? It was just a decade ago Russia defaulted on its financial obligations. Financial institutions in Europe and the U.S. are close to insolvency in many situations. With very significant inflation in the Russian economy, it is imperative Russian bankers continue to extend credit or risk a significant economic meltdown and deflation. Guess where those Russian foreign exchange reserves are going before this is all said and done? Now what are Russians going to be voraciously attempting to acquire? Maybe dollars? As we've said time and again, most simply do not understand the gravity of what has developed over the last business cycle. I just cringe when I hear statements like what are you buying today in anticipation of a Fed rate cut. The financial world has become a casino. Those telling us to buy the dips or that stocks are cheap have no concept of risk. Let alone rudimentary skills on how to manage it.
posted by TimingLogic at 9:00 AM links to this post