Saturday, January 31, 2009

A Legal Revolution? Stay In Your Foreclosed House.

posted by TimingLogic at 11:17 AM links to this post

Canada's Government Wants American Taxpayer Bailouts

It is amazing how the world has distorted the concepts of trade. Remember, there is no such thing as free trade. Never has been. Never will be. We seek fair trade. We seek mutually beneficial agreements. Agreements that produce a net positive for both parties. Similarly there is no such thing as free markets. We seek fair markets. Markets that are as fair as possible for all participants.

If I wrote a post about trade since the advent of capitalism and modern society, most people would be shocked at how we ended up where we are today. So too would Adam Smith, the primary theorist and founder of capitalism. Yet, today's business and political leadership will defend the status quo with the most ignorant, uninformed and even destructive arguments. That includes this blabbering about free trade any time our government attempts to move the ball forward on any trade issues or taxpayer-funded initiative. Ironically, Marx told us that the highest echelon of society, which he called the capitalists in a capitalist system, would defend the status quo of commerce whether it is fair, free or destructive because this class benefited greatly from current ideology. And, he told us this while our great, great, great, great grandparents were living. He was right. Forget about the general notions of Marx and communism. Marx was more than likely one of the most brilliant thinkers ever to walk the earth. Not perfect. Just brilliant. It would be interesting to hear Smith or Marx comment on economics today were they alive. Frankly, we really know what their comments would be because they wrote it down. It's simply that no one pulling the strings has ever bothered to learn economics. Instead we often get nonsensical drivel. Drivel that often shoves the economy off of a cliff.

Now, in some Orwellian interpretation of globalization, it appears the world wants American taxpayers to bail out their economies as well as bail out every Tom, Dick & Harry who made bad bets. And, Canadian politicians are at the head of the list of Dicks. (Forgive me Canadian readers. I love the country of Canada.) It's not enough that the world suckles off of the U.S. economy rather than reforming their own institutions of commerce, property rights, rule of law and economics that would stimulate their own economies. Why would they do that when America provides such as easy target for profits.

Who the hell ever said global trade inferred American taxpayer money had to be spent on foreign goods in a taxpayer-funded government stimulus package meant to benefit said taxpayers. We've already done the world a favor with our brilliant trade policies and the first stimulus package. The first stimulus package was an abject failure and waste of hundreds of billions of dollars that would have been better spent buying everyone in the U.S. a ticket to see a Mel Brooks movie - one hundred times.

The reality is the U.S. is the most open market on earth. Many of our trading partners put impossible limitations on American exports while we allow them unfettered access to sell similar goods and services into our markets. We have this mouth-breather policy of hoping if we treat every nation nicely, they will eventually reciprocate. The buffoonist Neville Chamberlain policy of appeasement applied to trade. Truly. A completely fatal flaw in dealing with the psyche of the state. But, then our trade policies weren't meant to benefit the sovereign. They were meant to benefit lobbyists.

Let the world stimulate their own economies with their own money. Let us stimulate ours with our money. Let us work together for mutually beneficial arrangements of equitable and fair trade. Let the corrupt bastards on K Street eat dirt and the equally corrupt communists in China, who are killing their own people and destroying their own economy, face the wrath of its own citizens who have been lied to in the name of corruption and cronyism. Maybe then we shall see a government in China that truly embraces human dignity and human rights. And, who embraces fair trade and the associated just policies of governance of its society. (Forgive me readers of China. I love the country of China. :) )

Yesterday ex-UK prime minister Tony "Neville" Blair was out there blowing baloney that we are all in this together and that American taxpayer money should be used to stimulate the global economy. Who is we? Do you have a mouse in your pocket? First off Neville, er Tony, it's apparent you understand nothing about economics given the state of your home country's economy. An economy you played a primary role in creating. Secondly, you suckle off of JP Morgan and other financial institutions as a consultant (lobbyist) making millions pulling political knobs and levers. What I would call clear cronyism and attempts at influencing policy with no transparency that usurps the will of the American people. You therefore suffer from a tremendous conflict of interest as to policy, you do not pay taxes in the U.S. and neither does anyone in Canada or the UK.

This notion that everyone wants some of the American taxpayer money is enough to send me to the store for an overdose of canned pork products and porn. (Thanks Tom.) It's terribly unjust and corrupt to those of us who actually have to earn a living and pay for this ungodly scheme. (Forgive me UK readers. I love the UK. But, I dislike your food and your weather.)

I think we can all agree that most everyone wants a better world. That we seek peace and prosperity for all people. And, that were we of the financial means, we would help everyone in need. But, this isn't Fantasy Island. This is the real world of limited means. This is a mess created by the state and to ask the American people to bear a global burden of bailing out other states can be classified in terms I would say are criminal.

The first step to recovery is change. Legal change. Regulatory change. Governance change. What has been embraced for the last three decades is not working. Nor will it ever work again. Ever. The more we spend time trying to rig the current system, the greater the disaster will be.
posted by TimingLogic at 10:11 AM links to this post

Politicians Fret As The Sovereign Stretch Their Legs

posted by TimingLogic at 9:48 AM links to this post

Friday, January 30, 2009

Update On Consumer Staples

We recently highlighted the statement "We do not view lower product cost as a margin expansion opportunity" made by the U.S.'s largest grocer during their earnings announcement. And, the fact many consumer products prices are dropping substantially. Not their equity prices but the prices of their goods. I was browsing the food section at Target yesterday and there were hundreds of new permanent price markdowns on major brand items. Some of this is due to falling input costs but much is due to other factors.

Today Procter & Gamble, the world's largest consumer packaged goods company is cutting its forecast and the stock is making a multi-year low. When the stock market was making new highs we wrote that no investment would be spared the wrath of this downturn. Brand name manufacturers in the staples business are very exposed to tremendous risks. Substantial emerging markets exposure, currency volatility, shrinking margins from competing private label business, demands from retailers to lower prices in an effort to boost sales and demands from consumers for greater value. Were companies able to manage these risks effectively, there remains the issues of unsustainable earnings, decreasing cash flows, higher costs of capital and stock valuations priced to perfection. Even if unit sales remain robust, we shall see what will likely be a major repricing of risk and future opportunity discounting in their equity valuations.
posted by TimingLogic at 11:54 AM links to this post

Thursday, January 29, 2009

Bad Bank Estimates Of $4 Trillion

In the last two weeks we hypothesized that total losses from U.S. banks could reach $5 trillion using a rudimentary economic discounting calculation. Today Senator Charles Schumer is stating that experts believe a 'bad bank' government entity set up to save the banksters could cost $4 trillion. That is on top of the $700 billion bankster bailout we have already pissed down our leg with no oversight and no idea how it is being used. Oh, except to pay bonuses and to allow Pfizer to spend $70 billion to buy Wyeth. (Banksters made some hefty fees on that one too.)

Government never under shoots. That means our estimate of $5 trillion using economic discounting is probably quite accurate or even low. That would be a debt of about $40,000 for every working American. Want to send you kids to college? Fuggedaboutit. Want to participate in a retraining program? Fuggedaboutit. Want to pay your rent? Fuggedaboutit. Want to put food on your table? Fuggedaboutit. The banksters would have first dibs on your salary. This truly is medicine that is worse than the disease.

Remember, using the same calculation we might expect to see $15 trillion in bank losses outside of the U.S. This crisis is still substantially larger than most anyone is currently considering.

How do you like your new credit card bill? Crooks stole it, ran up charges and now the banksters are attempting to pin it on you. Is this really any different than 1776? Seriously. What was that again? Oh yeah. Taxation without representation. Now we are truly nearing uncharted territory. At least uncharted in the last two hundred and thirty two years. It is quickly becoming a possibility that there could be substantially unpredictable social outcomes.

And, what is this supposed to accomplish? Oh, yeah. Clear bad assets so the banks can lend. Who the hell is going to want a new loan after the new tax obligations on $5 trillion of new debt? I guess I could take out a loan to finance my part of the $5 trillion bill. Who dreams this stuff up? Oh, yeah. The banksters. Yeah, this is a real winner of a plan. Are you upset enough to shove the status quo out a proverbial window? Don't worry. You will be. The new President needs to prove his mettle in placing the sovereign above the crooks. Will he? We'll learn together.
posted by TimingLogic at 2:32 PM links to this post

Trichet Remains Indignant

If nothing else, I have to give Jean-Claude Trichet, the head of the European Central Bank, credit for remaining resolute. Before the scope of this crisis was evident most everyone in the world thought Bernanke was incompetent for lowering rates in such an inflationary environment. Bernanke may be incompetent but if that is a true statement, it isn't because he was on the wrong side of the trade as Trichet was and is.

When Wall Street was cheering Trichet for being resolute we were writing that he was very likely running the European economies off of a cliff. And, we were right. The Euro nations are being downgraded left and right by Moody's and S&P strictly because of European Central Banking policy. But let's be honest. Past economic sins must be accounted for in some method. Therefore, no easy solutions exist. The reality is the world has become so reliant on credit that Trichet's approach will have devastating impacts. Forcing the world to change on a dime will increase systemic risks. The entire world is awash in its economic sin. And, that goes substantially well beyond credit.

Trichet may be correct in his literalism that countries must reach a level of sustainability in their policies but reality is much more complex. If his indignance drives unemployment to 25% in Spain, what will be the social and economic costs? Are they worth the hard line policy in the short term? In other words, one cannot become completely reliant on leverage and credit then remove any flexibility in credit and not expect a hard landing. There are parameters around which Trichet could be conduct more flexible policy while still achieving goals of long term sustainability. How many decades will it take to put one fourth of the workforce back into productive employment?

Trichet - No European Central Banking assistance for European nations. Additionally, further Trichet's remarks are available on Bloomberg video.
posted by TimingLogic at 10:08 AM links to this post

New Home Sales - 388,000 In November To 331,000 In December

A 15% decline. Not year over year but month over month. Gulp.
posted by TimingLogic at 10:01 AM links to this post

Mega Banks Rally After Reaching 1995 Pivot

Just as the world was about to end banks have rallied upward off of the price levels hit last Wednesday. Citigroup, as an example is up about 70%. The media tells us it is because of the "bad bank" plan put forth by the new political team. But, we know better because we said banks were likely near a temporary washout before any announcement or rally.

Isn't it funny how the little game works? This is Wall Street's way of manipulating politicians and public opinion. Dump the banks when President Obama talks about less direct assistance for banks then rally the banks when politicians finally cave to an even bigger bailout for the banksters. It's like a child having a tantrum. They'll manipulate and cajole to drive policy decisions.
posted by TimingLogic at 7:17 AM links to this post

Wednesday, January 28, 2009

Citigroup Cancels Corporate Jet After Government Pressure & New Treasury Secretary's Aid Is A Former Goldman Sachs Lobbyist

The New York Times has reported that the Citiboobs have cancelled their new corporate jet after pressure from government and the Wall Street Journal is reporting that Geithner's new chief of staff is a former Goldman Sachs lobbyist. It should be apparent to anyone that a new administration does not mean an end to the crookedness that is so pervasive in Washington. Lobbyist cretins have literally destroyed representative government.
posted by TimingLogic at 10:29 PM links to this post

50 Million Global Job Losses Before The End Of 2009?

That is what the Financial Times is reporting today. What is even more disturbing is that 200 million people could drop back into the infamous $2 or less a day working poverty class. That totals 45% of global workers. Of course, were we to add in the entire world's population it would be billions. An amazingly sad statistic. Obviously, none of this is really news as we've anticipated a global bust in emerging markets for years. But as a humanist first and an American second, what is terribly disturbing is that the constant repression of most people and ongoing corruption keeps many of the world's people under the yoke of abject poverty.
posted by TimingLogic at 10:48 AM links to this post

Restoring Credit Flow The Old Fashioned Way : Cronyism And Legal Bribery Better Known As Corporate Lobbying

posted by TimingLogic at 7:23 AM links to this post

The Smarmy World Of Davos

I simply don't understand the intrigue surrounding this global pilgrimage of the world's illuminati. Come on. In the years leading up to this crisis, the attendees were basking in their brilliance while we were highlighting their deer-in-the-headlights demeanor. Many of the attendees at Davos are international power brokers looking to make deals beyond the scope of our Constitutional rights and out of site from the sovereign. There is something unseeming and smarmy about an international group of elitists attempting to operate outside of our country's rule of law. Attempting to craft dealings outside of the transparency of individual governments or peoples that benefit a chosen few.

A few choice remarks from the entire Bloomberg story at the title link.

“The pendulum of power has swung from financial institutions to politicians,” says Morgan Stanley Asia Chairman Stephen Roach, who was among the first to raise the specter of global recession at last year’s conference. Stephen Roach is a favorite of mine but let's be real. Roach has been on the wrong side of this for some time. And, he took the Morgan Stanley China job just as China is likely entering a protracted depression. More like the pendulum is swinging to the sovereign from the politicians and the financial institutions my dear friend.

Financiers are already lobbying. While they acknowledge greater transparency has its virtues -- they’ve accepted the idea of an additional regulator for derivatives -- they want to preserve the potential for profits and warn that too much disclosure risks confusing markets.

“Flooding investors with a lot of disparate information can be misleading,” says Charles Dallara, managing director of the Institute of International Finance, who will be in Davos. His organization represents more than 300 financial companies.

It appears obvious we know which side the Institute of International Crooks is on. Let society worry about information overload and disparity. Letting the monkeys run the zoo is what got us into this event. And just as has happened throughout history, the crooks appear to be attempting to craft their own future out of sight of the sovereign. The only lasting resolution to repeated crises is 100% transparency for society. Imagine how many hundreds of millions of lives throughout history would have been saved were society to have been self-governed and aware of the conniving of those seeking power and greed.

Public debate, transparency, education of society and intellectual discourse in the light of day are the only disinfectants for the virus of elitism. More attempts at opaqueness by the illuminati is the last thing anyone needs. Of course, unless they want to see society dust off the guillotine.

I'll get up a post in February re transparency and the future of Wall Street.
posted by TimingLogic at 7:17 AM links to this post

Tuesday, January 27, 2009

Road To Ruin: 25 Dimwits That Betrayed The **Public** Trust

posted by TimingLogic at 5:14 PM links to this post

Just Plane Dispicable - Citigroup's New Jet

The New York Post reports Citigroup takes delivery of a new corporate jet. A jet capable of carrying twelve of the most incompetent executives in America. The cost? $50 million. Citigroup's defense? We would have had to pay a penalty to cancel the order.

Is it amazing that Congress grilled the automakers for coming to town in corporate jets. And, Citi executives most assuredly saw or read of this gaffe. Just months later they give the American public the middle finger after receiving hundreds of billions in guarantees and loans from said clowns. (That would be you and me.)

This is some pretty complicated math. So, let's see if I can get this straight. If you are in a bad business deal or one you can no longer afford, and your choices are to a) consummate the deal at $50 million or b) cancel the deal at a cost of $1-2 million, might I ask what the appropriate action should be? Let's ask the airline industry.
posted by TimingLogic at 7:55 AM links to this post

Monday, January 26, 2009

Why The Euro Will Never Be A Reserve Currency

Because much of the European political establishment often lacks the will, be it political or moral, to play a leadership role beyond their borders. Unless the current situation, at the link above, changes, the future role of the Euro in the international community will be diminished even more so.
posted by TimingLogic at 7:47 AM links to this post

Global Volatility - Whale Beaching

One of the key themes of this blog has been increasing volatility. As we have often discussed, financial market volatility is simply an extension or reflection of volatility in the world. On that note, there is absolutely no doubt the world is substantially more complex than the minuscule limits of humanity's knowledge.

We see an additional proof point of global volatility with the just released video of a very substantial beaching of 50 sperm whales in Australia.

The earth's dynamo is currently in significant flux. For those who are electrical engineers, physicists or who understand electromagnetics, pun intended. We also know that whales most certainly rely on electromagnetics to navigate the world's oceans. By conclusion.....

What has nature and the world been telling us over the last decade? Are you listening? We'll get into a few esoteric topics re volatility sometime in 2009.

posted by TimingLogic at 7:36 AM links to this post

Sunday, January 25, 2009

China's Communists Slam Geithner's Comments On Currency Manipulation

If there is one thing we can be certain of, it is that the communists have learned how to use the Big Lie made popular by Adolph Hitler. I guess if you say something forcefully enough or with enough conviction, whether you are Bernie Madoff or Wall Street or the Chinese communist party, there is a certain part of the population that will naively believe in the goodness of power rather than seek the truth of free thought. And, indeed it would be a better world were we always able to be naive and idealistic. Because I believe these are great virtues.

In the last fifteen years the Chinese communists have, through policy, devalued their currency by about 80%. Now the markets will oblige by finishing off the yuan as a worthless currency. Something we have been anticipating for quite some time. Something that is inevitable. A major driver in our call for civil unrest in China when its people find out the extent of the criminality of their corrupt leadership.

Yet, the communists want to continue the Big Lie and attack Geithner's comments as if there is some argument to the accuracy of his statement. There is not. It's easy to lie to the people of China who live under the yoke of repression, manipulation and media censorship, but the rest of the world isn't going to buy it. And, neither are we.
posted by TimingLogic at 7:29 AM links to this post

Is Big Brother Spying On Whomever They Want?

As I have said before on here, America is not great because of our government, it is great because of our lack of government. The founders of this country realized this made it nearly impossible for government to get anything significant accomplished. With all of the rules and regulations and government bureaucracy we now live under, imagine what it would be like were the founding fathers not to have been so diligent? I have no doubt America would have failed by now. It is only our Constitutional protections from the state that have allowed us to survive as a free society. That we are now to the point where society is relying on government to save the economy should be more than frightening. Not only because of its consistent incompetence or worse but because there is nothing else left to keep society from careening off of the cliff. Remember, Roosevelt's New Deal was just as much required to save the institution of democracy as it was an act of dignity for those suffering from the corruption of Wall Street. Without the New Deal, we may have seen the guillotine fall on a few. No one really knows. More than any other factor today, government is responsible for this crisis. And, often it is for conscious reasons that were less than savory. I'm not talking about the Federal Reserve either. We'll talk more of this in the economic sense this coming year.

When I hear Obama talk of restoring government, I am reminded that trusting the state to any morality is ridiculous. Something Jefferson, Madison, Franklin and Washington clearly articulated in their writings. In fact, these great men told us that the greatest threat to our liberties would be from within the United States and not outside of our borders. They knew the treachery of the state unchecked by complete control and transparency of the sovereign.

Bureaucracies will always first defend themselves regardless of whether the methods are noble or lecherous. And, that the NSA has been spying on the media, if true, is more than lecherous. It would constitute crimes against America.

Restoring government can only be impacted by change driven from the sovereign. From grass roots efforts. That is, permanent and complete oversight by the people and permanent checks on government's power. Not checks and transparency left to the whim of politicians. Only when permanent change is instituted and complete transparency is written into law will government be guaranteed to always work for the sovereign of this country. In other words, to mangle Gorbachev's words, when it comes to the state, any state, don't trust, verify.
posted by TimingLogic at 6:40 AM links to this post

Saturday, January 24, 2009

Corporate Executives Find More Ways To Line Their Pockets At The Expense Of Shareholders And Society

Not only has it become obvious that many of the current generation of executives are incompetent, but many are outright crooks. That their behavior might be in the bounds of current law is irrelevant. Especially given corporations have lobbied Congress using tens of billions of shareholder's and society's money to write the laws as they saw fit.

That Congress has done nothing about any of the misappropriation of taxpayer money in the TARP program or auto bailouts says more about their allegiance than most any other actions of Congress today. I never watch a politicians lips. I watch their actions. Government cannot serve two masters. It must either serve the sovereign or conflicting interests that involve monetary and personal reward. I think we were told in writings a few thousand years old what the answer should be. What would Congress do without the $3 billion annually spent by foreign governments, dictators, banksters, companies and competing special interests corrupting our government? And, by extension, our society. While Obama's executive order on lobbying is a noble action, the reality is true and lasting reform cannot be achieved until lobby reform and clear transparency is written into stone never to be changed at the whim of a scheming politician.
posted by TimingLogic at 4:39 PM links to this post

The United Kingdom Was Three Hours From Total Collapse Back In October

posted by TimingLogic at 3:44 PM links to this post

Goldman Sachs, Citigroup and Morgan Stanley Still Lobbying Government With Taxpayer Money

posted by TimingLogic at 1:26 PM links to this post

Harley-Davidson To Close Factories

This post is a reminder that all businesses - well run and otherwise - are being severely impacted by the credit crisis. Of course, if you live in the real world, I'm talking to the hand.

Harley-Davidson is one of the best run consumer industrial companies on earth. Their global brand is on par with that of Apple and Toyota. They dominate the large bike segment in the U.S. with approximately 50% market share. They don't do too badly outside of the U.S. either. In fact, Harley-Davidson has achieved cult status from Japan to Germany. I've been a member of that cult for twenty years.

Less than two months ago we highlighted the problems at Harley-Davidson. Specifically we highlighted the deliquency rate at the finance unit and that same unit's contingency plan to tap finances from the parent company should they be unable to access credit outside of the company. An ugly situation that we said was going to get worse. Now we see the head of the finance unit, a former mortgage business executive, has left the company and results have deteriorated further. I haven't looked at the most recent SEC filings but I'm not sure I want to. The stock has already dropped an additional 60% since our last post.
posted by TimingLogic at 10:24 AM links to this post

Banks Misled Governments On Use Of Derivatives

posted by TimingLogic at 7:58 AM links to this post

Friday, January 23, 2009

Banks Have Hit Their 1995 Pivot - Quick Remarks On The Banksters And Global Banking Losses

Equity markets are the most oversold in probably the history of mankind right now. We are so many standard deviations out of bounds in the banking sector that in any normal situation, we would have had an explosive rally this week. Normal is defined as anything up until a month or so ago. Obviously normal is becoming less and less normal as time progresses.

It may also be of interest to note that the Banking Index has reached its 1995 pivot with the bloody massacre on Wednesday. In fact, we could be near a temporary washout in many banks. That doesn't necessarily have any implications other than the fear of nationalization, the fear of losses, the fear of defaults, the fear of the unknown and the fear of fear has forced everyone and their brother to throw banks out the window. Doesn't mean they won't go bankrupt. Doesn't mean they will go up by any appreciable amount. In fact, it doesn't necessarily mean anything other than some banks have been literally puked out of portfolios. If I sound like someone who now finds banks appealing, I wouldn't get too excited. Most mega banks aren't likely to survive longer term without some involvement by government.

Now that banks have actually reached a price level (1995) that would generally have been classified as insanity just six months ago, let's revisit what this could potentially mean. I know we have talked about this first point before but I want to state is again. One way to look at what has happened in the banking system is that the markets have effectively discounted all banking activity in the mega banks since 1995. Thirteen years gone. Given the tens of trillions of dollars in global wealth loss, there is little doubt to some validity of this statement. If we accept this statement of economic discounting as a potential baseline, total banking losses could very well amount to $5 trillion in the U.S. and $15 trillion outside of the U.S. Total wealth loss including paper assets, bank losses, bankruptcies and asset price declines could be as much as $100 trillion globally by the time this crisis has passed. Now, what I am stating is simply a guesstimate but we are likely closing in on $50 trillion already. Think central bankers can inflate their way out of this type of wealth destruction?
posted by TimingLogic at 7:43 AM links to this post

Aptera Update

It has been a while since we talked of the Aptera. This is one of the truly innovative vehicles being readied for production today. After moving back production dates to alter the design based on consumer feedback, the first pre-production Aptera just rolled off of the line.
posted by TimingLogic at 7:31 AM links to this post

Thursday, January 22, 2009

Wall Street's Sense Of Entitlement

Some people probably yawn when I write about elitism on here. But, I can assure you it has played a substantial role in creating this global crisis. Very substantial. If this report is true, it's just absolutely vile and, frankly, could be construed as crimes against shareholders and taxpayers given the taxpayer funded bailouts of cretins like Thain. Thain spent $1,400 on a waste basket and $1.2 million decorating his office?
posted by TimingLogic at 2:04 PM links to this post

Rhetoric Heats Up - China A Currency Manipulator?

posted by TimingLogic at 11:49 AM links to this post

Portugal Joins Ireland, Greece, Spain And Raft Of East European Economies With Credit Downgrade Putting More Pressure On European Union

posted by TimingLogic at 7:57 AM links to this post

China's Media Censorship

An interesting look at Chinese media censorship of the recent Presidential inauguration.

Interesting that content such as “Recall that earlier generations faced down fascism and communism….” and “To those who cling to power through corruption and deceit and the silencing of dissent know that you are on the wrong side of history, but that we will extend a hand if you are willing to unclench your fist." were removed from the censored media. Of course, all in the spirit of Orwellian happiness for the people of China.
posted by TimingLogic at 7:47 AM links to this post

Wednesday, January 21, 2009

Is The British Pound On The Verge Of Collapse?

I watch the pound quite closely because I'm about to start a project that involves business in England. The foreign exchange market trades nonstop so speculators can trade all day every day. So, I just pulled a live chart of the pound versus the dollar. At 10:50pm eastern time in the US the pound had just broken the 2001/2002 lows versus the dollar. Not a lot other than hot air between here and the 1984 lows shown above.

I have no idea what is going to happen but given the dynamics before us, the possibility exists for a runaway downside slide here as happened into the 1984 low. Das pound ist kaput, bitte?
posted by TimingLogic at 10:45 PM links to this post

Feng Shui Masters' Economic Forecast For 2009

posted by TimingLogic at 11:06 AM links to this post

China Steps Up Devaluation Efforts

After a near immediate yuan devaluation following our last major post, it appears Chinese officials quickly became sensitized to the international concerns such a move would make. That first devaluation drew immediate attention from the international community. Such a blantant effort at undermining the economies of other countries, if continued, would have caused an international trade crisis. Additionally, devaluing ones currency is a quick way to see money roll out of the country in today's wild and woolly environment of unregulated capital flows. Although that has and will continue to happen as China's economy collapses.

Frankly, a devalued yuan is very likely whether it is via overt move by bureaucrats or a market based move reflecting fundamentals. I'm highly dubious the yuan peg can be maintained. But in the interim, never fear. Chinese officials have a different tool of affecting the same outcome - tax cuts for thousands of exported Chinese products.

That I continue to see headlines even this morning on saving the international apparatus is really quite ridiculous. Does anyone really believe global finance and globalization is going to be resurrected? The patient was on life support. I think we can now stick a fork in it. There is a way forward but it is not in the rear view mirror.
posted by TimingLogic at 9:47 AM links to this post

Banking Indices Crash - Again

In the last few weeks the U.S. banking index has seen an unprecedented crash in such a short period of time, a 40% drop. Bank of America, Citi, State Street and others have literally collapsed. Some done 30-50% yesterday alone. In other words, the crash of 2008 has been followed up by the crash of 2009. And, it only took a few weeks into January for it to develop. Bank stocks around the world are following suit in what can only be described as a collapse.

Is the world giving its first challenge to a new U.S. President? If so, let's be realistic. The positive rhetoric out of Washington and the media surrounding a new President may be instrumental to restoring long term confidence, if and only if it is followed up by quantifiable action, but no President has a magic wand to make the economy better.

The global finance and banking industry has been and remains on the wrong side of every single trade. Yet they keep trying to re-enter the same trades. That's working mighty fine isn't it? How's that hyper-inflationary Wiemar Republic and Zimbabwe trade working out? It's a bitch getting that trade going with banks collapsing.

Globalization is dead. Modern finance is dead. Current economic ideology is dead. The world is very clearly telling us the future way out of this. Is anyone listening?
posted by TimingLogic at 9:45 AM links to this post

Financial Firms Are Bagholders Extraordinaire In The Commodities Scheme

Morgan is caught holding the bag by speculating in crude oil and just like every other mess Wall Street has created, they don't want to mark the asset to current prices. So, instead, Morgan decides to rent tankers to float their "investments" in oil around while they pray oil prices increase. This sounds more than a little like mortgage backed securities and other Ponzi schemes perpetrated by the banksters. Schemes they don't want to recognize. So, instead we get cries to repeal mark to market accounting. Hell, why not repeal the market price of oil? Oh, I forgot. They already did that. That's why we saw $147 oil. Morgan and others want to still repeal the price of oil. That's why they keep holding the bag as opposed to doing what any good trader should always do. Take the loss while it is still manageable. Speak of which, why agaiin is Wall Street trading in and taking delivery of oil?

Eventually, there will be a tremendous backlash and outrage amongst the general public if this becomes front page news. If people on a wholesale level start to understand the scope of possible fraud and the methods used by financial firms to swipe money from society. Including swiping it from our pockets by manipulating commodities. If I sound like a broken record on this, that's because I'm going to beat this like a drum until it becomes well known to all of society. And, until lasting change is instituted. I may only be one voice but there are others. And, soon even more.

Now, would someone please tell me why financial firms and hedge funds are buying copper, natural gas, crude oil and other commodities? And doing it with society's money? Now doing so with taxpayer TARP money? Let's see if I can get my mind around this. Bankster makes highly risky leveraged bets with society's money. Bankster reaps tremendous profits by stealing from society. Bankster bets go bad and destabilizes all of society. Bankster gets bailout from society. Bankster pays themselves handsomely with bailout money. Bankster then uses bailout money to perpetuate schemes and price manipulation. Does that about sum it up? Oh, one final step. Banksters retire to large mansions while society cleans up their mess.

Remember, the government agency responsible for oversight and transparency in these markets, the CFTC, already investigated and determined there was no manipulation in the markets. That is a joke. And, so too has been the CFTC.
posted by TimingLogic at 7:05 AM links to this post

Tuesday, January 20, 2009

Change. Change You Can Believe In! Yes Indeed. Change. I Feel The Wealth Effect Already.

posted by TimingLogic at 10:25 PM links to this post

Prince Alwaleed Gets Expensive Haircut - He Should Have Gone To Great Clips

Of course, he could have hired me. And, I wouldn't have charged anywhere near the 2-20 of most hedge funds. Instead, a nice dinner every so often and a measly pittance would be all I would have required. But, no bowing to royalty. It's unsightly for a free person to make such an undignified gesture. Of course, I will shake your hand or greet you with whatever method of respect you so desire. Although I'm not sure you deserve it because your wealth was taken from the people of Saudi Arabia.

By the way, if I actually have to state the obvious after being so bearish on hedge funds and the financial community, the 2-20 model is dead. No ifs ands or buts. I'll write more on that some other time. And, I'll explain specifically why it is dead.

From the title link above it appears Alwaleed's net worth has dropped from $21 billion to at least $8 billion in about a year. That's a pretty expensive haircut. Might I recommend Great Clips? I use a coupon for the $7.99 haircut. Since the difference between a good and bad haircut is seven days, it's really not necessary to spend $13 billion.
posted by TimingLogic at 5:02 PM links to this post

Today Is A Day Of Celebration

Just a quick comment on a special day. This United States Presidential election saw many firsts including the first woman and first non-white Presidential candidates. Today, the United States swears in the first non-white President. A man who has a multi-cultural family background. A man of color.

Regardless of political or economic beliefs, this is a glorious day for social progress. Not that the U.S. elected a President of color but that color was no longer the barrier to becoming President. The United States is the greatest social experiment in history. Even today there is no other country where such an event could take place. Today is a proud day for all of humanity. A day when we embrace dignity for all people.

Obviously, we will have an opportunity to critique coming economic policy but in a world that has often been intolerant for the most bane of reasons, let's celebrate the social achievement of today.

Congratulations Barack Obama.

Update 12:01pm. Barack Obama at 12:00 became President of the United States. Congratulations President Barack Obama.
posted by TimingLogic at 7:07 AM links to this post

Monday, January 19, 2009

Spain Downgraded By S&P. Let's Make A Prediction - Spain Will Be The First To Leave Or Force Change In The ECB.

Now, I'm not putting odds on this statement but they are higher than anyone will give credence to. As we have discussed on several occasions, I remain very cautious as to the future of the ECB. At least in its current form. Spain's economy is already in a depression. Because of the seriousness of the pain in Spain (no pun intended) and the aggressive market-based philosophy of the Spanish economy, I expect Spain to be the first to break from the bureaucratic ECB for greater flexibility in dealing with this crisis. And, if they do, the ECB could fall like a house of cards. That is, unless they change their charter. Exactly how this would play out is unpredictable but I'm dubious that the ECB could change in short enough order as political forces would squabble amongst themselves while economies in Europe burned.

I can assure anyone reading this that the economic advisors to the leaders in Spain are painfully aware of the limitations that now exist being part of the European Central Banking apparatus. Spanish leaders must do something to relieve the credit crisis literally destroying its economy or risk a possible economic collapse.

This is really quite simple. The ECB at this moment in time has many parallels to the gold standard leading into the Great Depression. It is a monetary system that shackles government's ability to deal with a sustained credit crisis. Something the U.S. is currently not constrained by. Whether one considers this good or bad, it is a fact. If managed properly, I consider it a large net plus. The big question is "if". So far I'd give the U.S. a C- but they show signs of improving grades.

Heading into the 1930s, the gold standard fell like a house of cards and so too could the ECB for the exact same reasons - governments wanted the financial flexibility to deal with crises. Of course, many would call this currency devaluation. And, I guess it is if the phenomenon is long term. But at this point there aren't a lot of other options for past sins. Welcome to the race to the bottom of the barrel we have so appropriately remarked would happen.

Oh, one more thing. Anyone still want to be long the Euro?
posted by TimingLogic at 3:51 PM links to this post

Sunday, January 18, 2009

Will We Finally See Some Sanity In The TARP Program?

Larry Summers is a very polarizing figure. He's smart and opinionated. Style isn't a core competency of Summers but substance is seldom in question. Yes, he is a recycled name in the political arena but I like him. A lot. I believe Face The Nation replays are available on the web but I don't have time right now to link to the site as I'm running out the door. I'll try to take a peek at his interview later and if it's worthwhile, I'll get a link into this post. In the mean time, click on the post title link to read Summer's remarks.
posted by TimingLogic at 3:22 PM links to this post

The Fall Of Modern Finance

Let's get a post up that I didn't get up last October when the article highlighted was printed. The post remains extremely relevant.

We have discussed before Modern Finance is going to be proven significantly wrong on many levels this cycle. And, no one is at the heart of Modern Finance's movement any more than the monetarists Anna Schwartz and Milton Friedman. In fact, Bernanke is following a roadmap of what he believes is sound science, espoused by Friedman and Schwartz, to avert a significant crisis in the economy. Obviously, if the Fed can save many bank deposits, it will have a positive impact but the largest determinant of future economic activity is not the supply of money determined by the Federal Reserve. Far from it. And, an outcome as negative as the 1930s will not be determined by the Federal Reserve. In fact, much of the FDIC insured deposits are going to disappear anyway. Instead of these deposits disappearing with bank failures and no depositary insurance as we saw in the 1930s, we will witness them disappear as they are deployed in the economy in acts of subsistence and to pay down debts. Many of these deposits will simply not be replaced as unemployment and wealth creation in the economy continues to deteriorate until we reach a steady state. FDIC insurance, while constructive for individuals, doesn't necessarily impact bank financial positions in a positive fashion. In other words, bank capital positions are eroding not only because of bad assets but their balance sheets are shrinking because the balance sheet of society is shrinking. This is a recursive process that has shown no signs of abating. It is what we wrote of time and again that would happen in our posts about The Game.

While the world was still worried about inflation, one of my favorite bloggers commented that it would be nice if a new CEO to a troubled financial institution would come in and simply clear all of the toxic assets off of the books. A great act of transparency. A noble hope but I responded that this was impossible. Because the problem with deflation is there is no end to the deterioration of both bad and shrinking assets over time. That is, until the deflation has ended. This is one reason why recapitalizing banks will be a never-ending process. It is why we now see more and more injections into the same banks and soon new banks will suffer the same issues. This will continue until the deflationary forces in the economy have stabilized. The monetarist position of Modern Finance cannot solve this dilemma. Although it can be mitigated using other methods eschewed by Modern Finance and the economics community.

The concept that the Federal Reserve caused the Great Depression because it removed liquidity is and always has been a silly revisionist notion. A revisionist notion of the Great Depression that Schwartz and Friedman adopted thirty odd years after the economic collapse. The Fed was a "no show" at times but that they caused it by removing liquidity can only be true if monetarism is indeed an accurate theory. While we have been one of the most concerned voices over the last three years, there are still solutions to this crisis that can mitigate a 1930s style outcome for the U.S. But, time is running out. That's for another discussion. We'll have plenty of time to get a post up on this because policy makers and politicians are groping in the dark. And, they aren't even groping in the right universe.

Anyway, back in October Schwartz gave her perspective on the current crisis and policy decisions by the Treasury and Federal Reserve. It's an interesting read. Not because she is correct. But, because Modern Finance and the associated monetarism Schwartz was so instrumental in formulating is going to be proven wrong. So then is the economic hocus pocus taught at our finest institutions of knowledge. Hocus pocus that is pawned off as science.

While Schwartz may be critical of current governments and central banking tactics, many of which appear as cronyism, it is important to remember it is her research and conclusions for the cause of the Great Depression that central bankers are using as a guiding principal. Schwartz's remarks imply a plan to save the banking system has turned out to be a bailout for particular banks. In other words, cronyism. Of course, that is obvious to anyone watching from afar. Goldman Sachs, Morgan Stanley, Citigroup, JP Morgan, Wachovia or any other mega monopoly represents such systemic risk that there is little we can do other than play an interventionist role on some level. But should the intervention be to maintain systemic risks in the economy or to dismantle them in an orderly fashion? Our position on here has always been to dismantle them in an orderly fashion. In the end we shall probably see the markets do what government won't.

But, while Wall Street was cheering the Federal Reserve's early actions as the Fed started cutting rates, we were commenting that it is utter nonsense to believe central bankers can plan an economy. It is completely unfounded faith that has no scientific backing. That politicians, Wall Street and society should sit on the edge of their seat waiting to hear the next words from a central banker in the U.S., Europe or anywhere else simply wastes time that could be used to adopt real solutions. The Federal Reserve cannot fix what ails the economy. They can provide the conduit for credit. That's it. That doesn't mean deposit insurance or the role of lender of last resort does not play an important role in the economy. But, no one can wave a magic wand and make the world a better place.

Culture, industriousness, knowledge, technology, invention, the arts and most importantly the people represent irreplaceable assets in the economy. Does a loan from Citigroup have a different ability to help Google or the local business thrive more effectively than a loan from JP Morgan Chase? Wall Street and banking offers nothing other than a source of lending for drivers of the underlying economy - commerce. That's it. Period. Lending can come from the government, from a bank, or from the Gambino crime family. It matters not. The distribution of money is such a commodity that were any bank to fail, it would easily be replaced by another similar institution or even the government as we see today. There is no sustainable economic value in banking or finance. There is economic value in the aforementioned variables of commerce. There never has been and there never will be any sustainable value in banking per se. That is except for value derived by protecting the savings of society. That is the furthest up the value chain banking goes. In fact, as I wrote some time ago in a comment to a post, this country would operate just fine were the government to nationalize these mega banks. And, even if we had a not-for-profit banking system. In fact, our capitalist model has nothing to do with a particular view of banking. It never has. The imbalances in our economy are much more because we have a f0r-profit banking system that continually corrupts our government than any of the timeless incompetences in government regulators or the Federal Reserve or fractional reserve banking. Those are incompetences that have and always will exist. Those are incompetences that can easily be managed.

Instead of supporting the underlying economy, the finance sector has crowded out the underlying economy and this has only happened due to the drivers of profit and greed in the banking system. That impact has rewritten our laws, our regulations and driven nonfinancial companies to seek profit over investment, greed over concerns for society, short term gratification versus long term innovation.

Now, compare this to the economy's underlying commerce and businesses that are in jeopardy because of this crisis that is caused by banking. The concept of "creative destruction" is not at work in the failure of GM or other companies. There is no "new" technology obviating the role of GM. There is no economic winner at the expense of GM being a loser in the market. All global car companies will most assuredly fail without government involvement at some point. Wait and see. Failure to realize that neither superior competition nor creative destruction is at work here and, therefore, allowing these firms to fail will have dire and lasting consequences on society. Because, where there is creative destruction, there is new economic opportunity. With this environment we simply have economic destruction caused by the financialization of the industrial economy's management. Caused by the financialization of the economy. This is the virus at work in the failure of commerce. Bailing out poor decisions or poor management isn't a winner either but when I actually hear people on Wall Street or on financial television state that GM should be allowed to fail because the crown jewels of the American economy are the finance sector, I have to wonder what planet these people live on. There is absolutely no truth in that statement. Not one iota.

Government, when representative of the sovereign, is the true lender of last resort. It's decisions should be made for the people not to save the existing apparatus. Government needs to be focusing on how we stabilize commerce and worry less about the misguided beliefs developed under Modern Finance. Modern Finance is dead.
posted by TimingLogic at 12:07 PM links to this post

Saturday, January 17, 2009

From The Washington Post - Mega Monopolies And Financial Firms Give Americans The Shaft Every Which Way They Can

posted by TimingLogic at 5:56 PM links to this post

Nakheel Tower Stopped For Twelve Months

What Dubai officials don't yet seem to realize is the headlines should read Nakheel Tower stopped. Forever.
posted by TimingLogic at 4:13 PM links to this post

Hugo Chavez Begs For Western Investment

We wrote a post a few years ago bout Venezuela. Hugo Chavez is a thug. Unfortunately, the social and political system that existed before him was also controlled by thugs. This style of statism and repression has been common across South America for a long time - a few rob society blind and create a constant state of underprivilege and repression. Or, as one of my friends says, it's the Golden Rule. Those who have the gold make the rules. It's no different with the constant struggle in Mexico which we have also talked about. And, now Mexico is on the verge of collapse again after just being bailed out by the U.S. not long ago. It's also a major reason why these countries can never seem to make it out of the developing status. And, for that, the good people of these countries unnecessarily suffer and struggle with even the basics of human life and dignity.

Hugo Chavez may have had noble intentions at one time. I don't live in his head so I don't know. But, he is popular with the underprivileged because for so long they have never had a voice. Is Chavez sincere or is it a form of manipulation to maintain control? Life is complex but it is most surely more of the latter. Chavez manipulates the people with messages of the great devil, the U.S. and how he is their protector from the rich that pilfered Venezuela for so long. The people of Venezuela don't need protected from anyone. They need to be free in thought, in association and will. They need a rule of law that will embrace equal opportunity. They don't need a narcissistic controlling thug running their lives.

Anyone who doesn't want to play the game of democracy and capitalism can look to Venezuela for their future. Chavez is destroying the wealth of the country with his antics. Now he begs for western technology to invest in Venezuela after he literally terrorized them just a few years ago. Is he doing this for the people of Venezuela? Chavez is doing this for himself. He terrorized western companies when it was convenient to his message of control. He now embraces them for the same reason. With oil prices imploding, his ability to control Venezuela's populace is in jeopardy. Frankly, what the west should do is refuse to participate until we see internationally monitored free elections and the institution of a rule of law. But, given the complexity of reality, profit and jobs for western countries trump human rights. Another major contributing factor to the state of underprivilege in developing nations - our desire to do business with anyone regardless of the cost to humanity.
posted by TimingLogic at 1:58 PM links to this post

Friday, January 16, 2009

Bank Of America - Great Acts Against Society?

Isn't it ironic that seemingly when Hank Paulson tells us the world is a better place, within days the government is throwing more money at the problem? The last interview was Monday. Since then some banks are down 50% and the Feds just propped up Bank of America with $138 billion in capital and guarantees. Before that it was just days before Citi's final implosion and similarly sized bailout. In fact, Hank is batting near 100% over the last eighteen months.

Government and society are learning a lesson. Unfortunately, that lesson is at society's expense. Even after this crisis was realized, how much of this would have been avoided with significant transparency and some market-based ideas on how to deal with the banking mess? And some accountability. Something every reasonable mind was calling for before this crisis became a tsunami.

Last week we posted the magnanimous Ken Lewis remarks below. This week, Lewis needs $138 billion in our money to pay for his incompetence as CEO of Bank of America. Do I live in some alternate universe or is this just a little upsetting? Yet, where is our government? Where is the outrage of lawmakers and government that is to be the will of the people? Lewis runs the company into the ground, tells the board that he has done a great job but given he is a pay-for-performance kinda guy refuses a bonus that he clearly intimates that he really deserves. And a week later he needs the largest public bailout in American history. A bailout large enough to pay a year's worth of unemployment benefits for ten million Americans affected by his incompetence. Or to keep five million families with children in their home and another five million given unemployment benefits. The question isn't if Lewis should get a bonus. The question is if Lewis is just narcissistically foolish or if there is criminal intent in the implosion of Bank of America. Does Lewis have any remorse? A conscience? Contrition would go a long way to help mend society's pains from any of the banksters. Instead they take the TARP money and give themselves billions in bonuses. Why would we not get a public apology and a commitment to fix this mess and to forfeit his compensation for the last five or ten years and for the next five or ten years? Why shouldn't Lewis be forced to give society back his entire salary and benefits as CEO.

Where is the representative voice of the sovereign? Who will stand to bear witness for families? For children? For society? Who? Will you?

Bank Of America CEO "URGES" No Bonus For Himself

“This was a difficult decision because we have worked hard and made progress on many projects that will create value for our company in future years,” Lewis said in the memo. “Nonetheless we are a pay-for-performance company.”

posted by TimingLogic at 3:23 PM links to this post

Banking Index Sets Thirteen Year Low And Closes In On 1995 Pivot

Chart of the Banking Index courtesy of the always marvelous Stockcharts.com

How many times have we written on here that the banking system is still deteriorating and has not bottomed? Not only has the Banking Index dropped 75%, on Wednesday and Thursday it set new cycle lows, it set thirteen year prices lows and is now closing fast on its 1995 price pivot. We would already be there were it not for government bailouts. In fact, the banking index would, for all practical purposes, likely be zero. (I am very happy that is not the case and you should be too.) There is absolutely no reason why the S&P should not eventually follow. Our guesstimated downside of the 1995 price pivot of 400-450 on the S&P 500 is still intact.

In closing, I do not anticipate the S&P will reach the 1995 price pivot in 2009. As we have discussed, I believe any intermediate downside risk will be contained to the 600-724 level.
posted by TimingLogic at 11:48 AM links to this post

Thursday, January 15, 2009

World Container Ship Demand Implodes

One of the favorites on the financial media circuit this past cycle were shipping company executives. We first wrote back in 2006 that transportation stocks were likely to implode at the end of this cycle. And, they have not disappointed. In fact, we are likely to witness unprecedented bankruptcies in the transportation business. The Journal of Commerce reported this week that hundreds of container ships were idled. What they didn't report is that hundreds more are in the process of being built or scheduled to be built. The global logistics and transportation business is obviously in the middle of its own massive bubble.
posted by TimingLogic at 12:42 PM links to this post

The Street Runs Red With The Blood Of Banks Again And Again And Again

A sampling of today's action:

Bank of America down 27%
Citi down 24%
Suntrust down 12%
Wells Fargo down 12%
US Bank down 9%
M&T Bank down 10%
BB&T Down 7%

If we don't 820-ish on the S&P, we are headed back to test the November lows.
posted by TimingLogic at 10:44 AM links to this post

Wednesday, January 14, 2009

The End Of An Era Of Ideology - Greenspan's Mea Culpa And Its Profound Implications For The Future Of Governance And Economics.

"Convictions (ideology or doctrine) are more dangerous enemies of truth than lies." -- Friedrich Nietzsche



I wanted to get this video up while it was still relatively fresh. There is really no limit on the timeliness of this post as the implications are long term anyway. The video itself is only relevant if you didn't see Greenspan's Congressional testimony a few months ago. It simply provides context for the rest of the post.

If Alan Greenspan is guilty of anything, it is his unwavering support for deregulation and lack of regulation where none existed - something we have pointed to as his legacy. That lack of regulation or misguided policy extends well beyond the obvious and well beyond financial markets. Substantially well beyond. Every aspect of the American economy has been profoundly impacted.

Hopefully you now see beyond the nonsense that this global crisis is primarily because Greenspan lowered interest rates in 2000 below where many believe they should have been. This remains a very popular cause for this crisis cited by many including a few Nobel Prize winning economists. Given not a single Nobel Prize winning economist anticipated this global environment, need I say more? It's similar to another nonsense that this global crisis is because of U.S. subprime mortgages. Can anyone still say with a straight face that a global economy with a ten year run rate of $600 trillion is literally collapsing because we saw American companies write $800 billion in subprime mortgages? Please. Subprime mortgage debt amounts to less than one half of one percent of all global debt. Even with the addition of Alt-A mortgages, it's still a ridiculous position. The global economy, were it actually based on sound fundamentals, would absorb any subprime mess like an after dinner mint.

How would a trained economist understand the market is repudiating his or her study? It's quite simple. Only by observing it. Comparably, it would be as if everything I studied about engineering or mathematics or physics was wrong. How would I know this? Well, the most obvious way would again be by observing it. In other words, your computer wouldn't work. The electricity in your house wouldn't work. The internet wouldn't work. Medical equipment in the hospital wouldn't work. How do economists realize modern economics is an abject failure? Well, this is the insanity of it all - the global economy falls off of a cliff and doesn't return to potential. And, that is exactly what is going to happen. In other words, the credit crunch will eventually be realized to be a much broader systemic economic crisis - that all of the generally accepted economic principals no longer work. So goes the process of learning. Much of our economic policies on completely unproven ideology or doctrine.

To say that policy in Washington was influenced by Greenspan's ideology may be the understatement of the century. An entire generation's belief systems were significantly impacted by Greenspan ideology. The market this. The market that. The market knows best. The market. The market. The market. Ultimately the market does weigh in but it does so in esoteric ways not generally understood by Wall Street or economists as opposed to generally accepted economics perspective that correlation always equals causation. To be fair, Greenspan was not the originator of this modern day brainwashing. Nor is it confined to the United States. It has infiltrated and destroyed minds around the world. Indeed, "convictions are more dangerous enemies of truth........."

When Greenspan testified before Congress late last year, (video above) all he could muster in his own defense was what he observed supported his ideology. And, now he believes his observations appeared to be wrong. Therein lies the problem with economics or, more appropriately, much of pseudo science based on observation. Often observation of a data set too small to accurately validate anything other than what the observer wants to believe. In other words, ideology. Many observational methods are a basis for crackpot science I have railed against on here. I was astounded by the naked ignorance of Greenspan's faulty logic during his testimony. I am not talking figuratively either. Ignorance in the scientific sense. We would have been substantially better served with a third year philosophy of logic student giving economic policy advice to Washington. For, what we ended up with was someone using a Ouija board to divine our economic path. (I apologize in advance to those who use Ouija boards. I do realize your predictive success rate is substantially higher than that of the mainstream economics community.)

Greenspan's mea culpa has extremely profound implications that cannot be overstated. They are enormous. Entire political careers, philosophies of markets, economics, college curriculum and government were built around beliefs that have now been abandoned, even if sheepishly, by one of its prime advocates. Might I add, the abandonment is going to spread beyond regulation of financial markets and in time the entire American economy will achieve a new level of enlightenment.

The earth will move beneath the Republican party because of this. And, that means the earth will move beneath Washington. We are now entering a transformational period of some unknown time frame. That's a very positive development that cannot happen quickly enough. In the coming years or decades Republican ideology on markets and economics will once again shift and embrace new standard bearers. But, first the party needs to wander in the desert while they engage intellectual discourse to reformulate their strategy. What will that strategy be? It will be something they can sell to the American people. How bad is that? It's called listening to your customer. This is nothing new. We have seen political parties transform themselves time and again when their beliefs are exposed as either outright ignorance, unpopular, or as in this case untrue. The significant irony here is if I were to cite many of the Lincoln Republican economic principles from long ago, you might believe I was citing the President-elect. And, indeed he has pointed that out. An example of two positions Lincoln supported are one, collective bargaining by workers is absolutely necessary and two, trade liberalization must be based on ideals that protect the wages of American workers. Two beliefs that have been completely abandoned by the current ideology of the Republican party, the Democratic party, Wall Street and the economics community. Yet there is not a Republican in Washington who wouldn't want to be first in line to be recognized as a Lincoln Republican. Or for that matter any Democrat either. My point? Beliefs are far from truth and run in cycles. So, those adamantly and inflexibly supporting current beliefs eventually end up on the wrong side of the debate because their positions are dogmatic rather than enlightened or truth seeking. Amazingly though, dogma is often defended to the death. In fact, what could be more dogmatic than radical hypernationalism we see developing throughout the world today. This type of indoctrination has led to the death of hundreds of millions of people throughout time and there is no reason to believe it won't lead to hundreds of millions of more deaths in the future.

Similarly, the current Democratic ideologists seem to believe society has achieved enlightenment by sweeping them into power. This is based on a completely fallacious argument of your position is wrong, therefore mine is right. Where the argument is binary that may be so. Come talk to me when you can distill economic ideology down to two states. Democrats too will have their own awakening soon enough for much of their beliefs could very well sink the American economy even more so than the mistakes leading up to this crisis. Amongst other things this includes reckless spending (shared by both parties) without understanding the consequences and increased government meddling and involvement in markets as a solution to this crisis. (Not to be confused with necessary and sufficient regulation.)

The real question is what mindset will win out in Washington over the next four years. Will it be the destructive and equally fallacious ideology of the leadership in the Democratic Congress? Or will we get true change? Not Democratic change or Republican change but a change away from the failed partisan ideology we have witnessed from both parties over the last half century.

I still marvel at the remnants of this most current ideological position that the market knows best. A market-based economy is the best economic model but that in no way translates into the simpleton statement that the market knows best. The market might know best if we had free markets but we have never had nor will we ever have free markets. We strive for fair markets. There is a radical difference. You don't use the same thinking to get out of a problem that you used to get into it. And, the market knows best has been the prevailing ideology for decades. The ideology leading to the collapse of the global economy. Needless to say, I have a beef with some of these simpletons who read an introductory Austrian economics book and believe they have the answer to all of the world's economic problems - let everything collapse and the system will recover beautifully. In between being absorbed by the first grade math behind these positions, they might have taken a break to study nonlinearity, chaos theory or complex systems theory. Or, for that matter, the historical context of the notion of simpleton beliefs. Were we to let the markets decide the first to go would be the financial idiots generally behind this propaganda message more affectionately known as the Big Lie. Why? Because if left to its own devices, the market knows pushing paper around provides no sustainable economic value in any society.

Here is the true reality. The economy is a massively complex system as defined in a scientific sense. The unintended consequences, unintended reactions and unknown variables are well too complicated for any one human to comprehend when the system experiences massive shocks that we see today. Allowing greater and greater chaos in the economy creates larger and larger disturbances that can only be framed as heading down the rabbit hole to see how deep it goes. In other words, no one can accurately quantify risk or its scope. Does anyone really want to go there if we have even a remote possibility of stopping it? We might not find our way out for a long time and many will most assuredly never find their way out. As a point of reference, we are likely at the mouth of the rabbit hole as I type this. Are you really sure the market knows best? Is there undeniable scientific evidence to back it up? Because there is incontrovertible scientific evidence to back up my remarks that the economy can be destabilized beyond anyone's imagination by letting the markets determine our fate. In other words those quoting Mises or Schumpeter to support an ideology that the market should decide are bastardizing scholarly work for foolish dogmatic positions without understanding the limits and spirit of these great men. Additionally, these dogmatics have no answers to solve any problems other than the intellectually shallow let the markets decide position. Let the walls come caving down.

What I am saying is those advocating we should just let the markets decide are suffering from a bout of extreme ignorance. They really don't know what they don't know. And, someone who is confident of what they don't know most surely has the potential to create greater chaos achieved through the ideology of stupidity. The larger the scale of impact for such ignorance, the greater the potential devastation. What do I mean by that? I mean the ignorance of Alan Greenspan and politicians has global scale and reach. Therefore, they hold the potential for the creation of substantially greater devastation through their actions. Of course, you will have to look in the rear view mirror to do that analysis because what you see before you is the outcome of their ignorance.

There is no critical thought in a statement so mindlessly simple as let the market decide. In this environment it is akin to accepting a future that is predetermined. It is defeat without even trying. It stands in stark contrast to the great human ability to rise to the occasion and meet crisis with its best and brightest ideas and innovations. And, for that, society should listen? This is one reason why I completely discount ideological positions. They are based on shallow thought processes. They lack the depth and complexity of reality and truth. And, by conclusion of this reality what did the market teach us about current economic ideology? The market repudiated its ignorant and intellectually shallow positions. So, now is a time to repudiate the ideologues and embrace those willing to engage in critical thought and intellectual discourse as we attempt to solve current crises.
posted by TimingLogic at 7:37 AM links to this post

Tuesday, January 13, 2009

Yahoo Ditches Last Vestiges Of The Worst Management Team In Tech

I've remarked a few times on here about the zoo over at Yahoo. And, it is a zoo. Yahoo was a brilliant idea and internet leader in its early days. Yet, the company has never had effective leadership needed to manage a mature business. Ever. So, after the easy money was made and competition starting popping up, Yahoo became an easy target. Semel, Decker and Yang were all incredibly incompetent managers. And, they were cumulatively paid hundreds of millions of dollars for doing anything and everything imaginable to bury Yahoo. An equally incompetent board sat on its hands until Carl Icahn took an interest in the company.

Yahoo's days as an entrepreneurial leader are likely over. But, that doesn't mean it can't settle into a mature business model and be a sustainable entity delivering 5-10% earnings growth over the years. That is, after we get through this mess.

Today Yahoo made a very interesting choice for their new CEO - Carol Bartz. I'm reasonably familiar with Bartz and I believe she is a proven leader who exhibits the necessary traits of a successful manager. The silly remarks by industry analysts that Bartz doesn't have media experience shows that most anyone with a pulse can become an industry analyst. Good management practices are not industry specific. And, Bartz built Autodesk into a software empire. That was not accomplished without a firm grasp of the media industry.

Remember, Yahoo's wounds are generally self-inflicted. Bartz has strong operational skills and leadership qualities that are nonexistent at Yahoo. She could provide the leadership Yahoo so desperately needs. Now, if the stock would only drop another 50%, it might be an interesting play.
posted by TimingLogic at 8:33 PM links to this post

Monday, January 12, 2009

The European Union Continues To Fray Around The Edges

Today the countries of Spain and Greece are placed on credit watch negative. Will Spain be the first country to leave the ECB or to violate its charter?
posted by TimingLogic at 12:40 PM links to this post

60 Minutes Story On Oil - One Of Wall Street's Greatest Ponzi Schemes

60 Minutes ran a story on the oil Ponzi scheme over the weekend. A Ponzi scheme that completely dwarfed the Madoff scandal. Yet government seems to care little. Why? Possibly because government is complicit. The script and video are located here. I would highly encourage everyone watch the video.

It's not an exaggeration to say that this blog was probably the biggest critic of the commodities scam over this cycle. And, we laid blame squarely on Wall Street, where it belongs. For years I have been saying that commodities were in the greatest of bubbles. Even well before this blog was created. All the while I listened to society become more and more taken by one of the greatest Ponzi schemes the world has ever seen. Even today, I hear the roar of the same loud mouths telling us oil is going to blow through its old highs as the commodity supercycle re-ignites. The only way the commodity cycle will re-ignite to anywhere near the prior levels is if we have sustained global conflict. That isn't likely since the state has the ability to end a war and what we know of humanity with the touch of a button.

If you don't understand the Enron scam, I would encourage you to do some research. Not in the failure of the company but how they removed transparency then proceeded to manipulate the energy markets thus sending prices skyrocketing, creating brown outs through the west coast of the U.S. and then blaming it on a lack of supply. They could blame it on anything they wanted to because no one could tell what they were doing. You can do just about anything you want without transparency. Just like Wall Street did with commodities. There never was a supply problem in the Enron Ponzi scheme. And, we wrote on here numerous times that the world had oil coming out of its ears while Wall Street pumped the price higher. People suffered under the yoke of Enron's financial manipulation. In fact, I believe quite a few deaths were attributed to elderly not being able to pay their energy bills. All because of financial manipulation.

Don't buy the psycho babble that the last fifty dollars of the oil move may have been attributed partly to speculation. This bubble in commodities was created ten years ago and big bets have been building in commodities ever since. It started with the deregulation of the energy markets. Deregulation that could not have been accomplished without the complicity of government to change the laws. China's economy has been growing at an incredible rate for decades. Oil was $10 just ten years ago. Why didn't oil respond for the prior twenty years of China's growth? China may have added $10-$20 a barrel to the price of crude but it didn't add the $137 increase we witnessed. In fact, given oil was $10 in 1998 and that included the entire world's consumption (including China), it is arguable China didn't add much of anything to the price of oil in the run to $147.

Wall Street had all of the elements it needed to create the greatest of Ponzi schemes. It lobbied (likely paid) government officials to deregulate the markets and thereby destroyed any transparency so that no one could see what they were doing. (Lack of transparency is a prerequisite to any such scheme.) They immediately started pumping reports they produced which showed how commodities were a great investment that was non correlated to stocks. Something that was key given we have been in an extended period of overvalued equities. The 2000 stock market collapse helped reinforce their scheme. They created derivatives galore to control and profit from the large swings in energy prices. They invested in energy businesses that would allow them to control the actual commodity. Then they pumped the China growth story and peak oil scam like there was no tomorrow.

In the end, any major Wall Street firm that profited by speculating in energy, actually took money from society. There was no wealth creation. They took money from you and from me and from that little old lady living on her Social Security. The same lady who froze to death because she couldn't pay her utility bill. They took from the single mother who had a minimum wage job and had to choose between paying her gas bill to get to work or putting food in her kid's mouth. They took money from the working poor in undeveloped economies unable to feed their children. What they did was heinous. But, there is no proof anyone did anything illegal. Of course, that is because Wall Street helped write the laws. Laws are simply an enforcement of the state's will not necessarily a definition of right and wrong.

The completely unacceptable point about all of this is we still have no transparency into the commodities markets. WTF is our government doing? Oh, I'm sorry. They created this mess. They knowingly created the environment for this to happen. And, after Enron imploded, they knowingly refused to reregulate the markets knowing what lack of transparency could do. Surely at the behest of Wall Street.

And, we wrote all of this while oil was still rising. Anyone who was pumping oil-related equities above $100 a barrel has probably irreparably harmed investors. How is that? I'll tell you how. I wrote on here quite some time ago that some point would mark the peak of oil prices - forever. And, that this cycle's peak could be that ultimate peak. Well, I'm now going on the record by saying I believe that statement has a very high probability of coming to pass. That, indeed, we have witnessed the all time peak in oil prices. That $147 will never be exceeded again. Ever. And, if you need a reason why, go back and read some of my prior posts. (Use the search box at the top of the blog. The other search box delivers erratic results. Update: I just checked and neither search box yields all of the results for any topic on the blog any more. I'll have to make sure all articles are indexed. I'll look into this in coming months. )
posted by TimingLogic at 10:22 AM links to this post

Sunday, January 11, 2009

Would You Like To Buy An Oil Fiefdom On The Cheap?

As sycophantic CNBC journalists with no seeming sense of investigative journalistic compass or critical thinking skills were bowing to the brilliance of Dubai bureaucrats, we were talking about the coming depression in Dubai and the imminent implosion of the oil bubble. Now, we see Dubai bonds are pricing in a depression. It seems curious to many as to why. Might it actually be for obvious reasons? Many are telling us this is a great time to buy including an analyst quoted in this article. I wonder how the finance industry would change if any analyst or company recommending a certain investment had to invest their life's savings in what they were scamming? I'm sorry. I mean selling. It's really quite easy to be an idiot when dealing with other people's money.

Bahrain has joined Dubai, Russia and Kuwait on the precipice with a recent downgrade by Moody's. Soon other oil producing fiefdoms will follow.

I know where you can get your own island or skyscraper on the cheap. Going once, going twice................
posted by TimingLogic at 7:07 AM links to this post

Saturday, January 10, 2009

Enjoy The Wolf Moon

posted by TimingLogic at 10:32 PM links to this post

Friday, January 09, 2009

Here We Go Again?

On the 6th, before the open I posted the Volume at Price post. And, the market has since obliged by starting a relatively large three day correction. I put that post up because I saw quite a few people starting to feel their oats that we were off to some type of explosive rally. Weak trading systems. More likely no trading system and simply unsubstantiated opinion.

I've often remarked about my dislike for oscillators but I do use a few of my own within their limits of ability. In other words, I understand when they are telling me something I shouldn't be listening to. A limitation that clearly gets many in trouble. While everyone was bullish after breaking out on Monday, the above S&P 500 oscillator had just turned negative. There is a chance we could go back to retest the old highs set on the 6th, but beyond that there is a substantial amount of data that leads me to believe this could be another major correction that will, at the minimum, retest the November lows. We shall see.

In the mean time, enjoy that massive rally half of the talking heads are calling for.
posted by TimingLogic at 10:02 AM links to this post

Thursday, January 08, 2009

A Timely Reminder - Very Few Seeking Positions Of Authority Have Society's Best Interests At Heart

"Unthinking respect for authority is the greatest enemy of truth" -- Albert Einstein

I posted a link on here some time ago to a BBC documentary that, if correct, shows that an American coup was being planned by wealthy elitists during the Great Depression. A coup meant to destroy the freedoms of most Americans. I really don't have any idea as to the extent of its validity but I do not doubt there were discussions of some sort that actually took place.

I bring this up again for a reason. As I have remarked on here time and again, I have a great disdain for elitists as anyone who loves freedom for all of humanity should. There will always be people, through their contempt for others, who believe by divine right or self-assessed superiority that they are more appropriately determined to lead society. Often by any means they deem necessary. Often via insidious and less than obvious methods that may now be revealing themselves to you. I plan to talk about some of those methods in 2009.

The human mind in its natural state seeks to develop itself, to make decisions for itself, to provide for itself and to be free in association, thought and will. It matters not if that mind belongs to a President of the United States or an immigrant seeking his or her mind's freedom and the economic & educational opportunity that goes with it. The enlightened human mind free of our sins and insecurities rejects elitism. Elitism is perniciously anti-humanist and therefore anti-American. Yet the infiltration of this virus consistently perpetuates corruption, destroys free markets, limits economic & educational opportunity and is hijacking American-style capitalism. It is a scourge that must be removed from our economic system if we are to successfully recover. And, I have little doubt it will be removed. For its removal is a basis for my long term bullishness on the U.S. economy. In fact, we are witnessing the destruction of its very fabric as I type this. You ain't seen nothin yet.

Extreme success in life is as much a function of luck, taking risk and being in the right place at the right time as it is motivation and intelligence. It is what it is. Not all of us can be President nor do most of us want to be. We each play an important and valued role in society. A society embracing human rights and equal opportunity realizes this and, therefore, respects the mind and opportunity of every individual be it to become President or a production worker or a musician or a teacher or a janitor. Specifically, intelligence or ability is often the least likely determinant of success when it comes to those who seek positions of power be it government or business. Human intelligence first seeks knowledge. Power first seeks dominion or authority over humanity. Therefore, we know that those seeking authority often exhibit behavior that should never be given any responsibility of maintaining the keys of justice, opportunity and freedom for humanity. At least without substantially defined checks and overly transparent oversight. Without it what have we witnessed through history? How many hundreds of millions of people have died defending elitism? Or fighting elitism? Most often, not of their own free will.

Seldom does the search for enlightenment or knowledge cross paths with power when it comes to governance or corporate leadership. When it does, we see the rare benevolent leader.

I bring this up again to make a melodramatic point based on recent remarks made by SEC Chairman Cox. I have no reason to believe Cox is not a decent person who had the best of intentions as SEC Chairman. He inherited a system run amok and his faulty belief system supported an already laissez-faire environment at the SEC. Were he to have the benefit of hindsight, I have great confidence he would have done things differently. He has capitulated on a faulty belief system by saying so.

But what Cox recently said with regards to a CEO of a major U.S. investment bank is very disturbing and a reminder of a timeless truth. And, a reminder in times such as these that those who seek dominion or authority would do anything to preserve the status quo. The BBC story may have had more truth than anyone would care to believe. What other rights, including human rights, would this CEO, or others with a similar perspective, violate were he able to? A timeless reminder that power seldom seeks truth and should never be trusted. As I've said before, we are witnessing a great power struggle. Many who have created this environment are not going to accept change without fighting to keep the status quo as it is. That includes manipulating the media, leadership and society, if possible.

People such as this CEO are an important reminder of why we have a Constitution and a Bill of Rights. A Bill of Rights meant to protect us from our government and the elitists who often seek to control it......and us. And, then to exercise their will upon us and, thereby, destroying the principles of freedom and opportunity. It is also a reminder that a return to those principals will not come easily.

Cox said the chief executive of one major U.S. investment bank even urged suspension of normal trading rules across the entire U.S. market, likening the situation to how Abraham Lincoln suspended habeas corpus during the Civil War and Franklin Roosevelt sent Japanese-Americans to internment camps during World War Two.

The chief executive said, "that is how America made it through such crises, and we couldn't be too focused on maintaining the rule of law," Cox said. "That was advice we rejected."

Cox said he spoke to the White House, the chief executives the New York Stock Exchange and the Nasdaq, strongly urging them to keep the U.S. markets open.
posted by TimingLogic at 11:07 AM links to this post