With Christmas coming, we begin tomorrow our annual pilgrimages to see the grandkids. Wife, dog and 2,347 wrapped Christmas packages will be on the Interstate at 0-dark-30 (as we used to say in the Great War) heading East. That means you are going to have to survive with only intermittent pieces of genius for the next few weeks. Sorry. One thing to look out for, however, is the progress being made on financial regulation while everyone is focused on the Health care bills and wondering whether the Senate is going to be ale to vote on it's disaster before the New Year. Because of all the noise there is not enough focus on the disaster-in-the-making that could well wreck our financial establishment and put us beyond the eight-ball internationally.
If one is looking for a road map one need go no further than Sarbanes-Oxley which, enacted in haste has been regretted in leisure and resulted in the loss of billions if not trillions of dollars since its birth. One thin about SOX is that it can be removed or amended relatively easily and the terrible fall-out from its existence reversed because we control it. Financial meddling on the other hand is going to involve everybody world-wide and undoubtably result in a loss for the United States of its preeminent position in the world of finance. THis will not be a good thing: it will result in a loss of money, jobs influence and prestige. It will hasten the decline of the dollar both in value and has the world's reserve currency and force our institutions to engage in markets under rules set by other people and their institutions which will be in many ways unfamiliar to us. In the coming weeks, I hope to discuss this view a bit more fully, so stay tuned. In the mean time I'm really happy the good folks in Copenhagen are all over this Global Warming thing. It's going down to 13 tonight with 40 MPH winds and I understand that up around Hudson Bay it's -29 (-54 wind chill) and 23 Polar bears froze to death. God Bless Al Gore for keeping us cool. Moron.
See ya soon.
Tuesday, December 8, 2009
Friday, December 4, 2009
ROCKY
Well, Helicopter Ben pulled a Rocky. No, he didn't beat the crap out of Apollo Creed (aka Chris "the Crook" Dodd). Rather, he followed Rocky's creed (wow, I like that!) of, "You do watcha gotta do." He bowed and scraped and pulled at if forelock...well, he couldn't do that but he wodda had he had one...and consequently it is a veritable lock that he will be re-confirmed. He even took the blame for the consumer mortgage debacle that anyone with a brain in his head would lay at the doorsteps of Dodd/Frank & Co. but no one seems to care. He never really got asked about the liquidity ocean his predecessor had created and which he continued so here I am with nothing to write about after leaving all of you on tender hooks yesterday. Bummer. So I called my really smart friend Larry to ask him about a few things that have been on my mind.
"Whatup with Gold?
"The dollar."
That simple?
"Yep."
"How long is this going to keep going on."
"Donnno. It's a Chinese thing."
"What?"
"They suckered us."
'I thought they were in a dollar trap?.
"Oh, they are, they just don't care."
"I don't get it."
"Neither does Obama and the jerks around him. Look, they had that stupid G-20 meeting and got bupkus from everybody. But the Chinese are really smart. What's the one thing the guy you call The Leader really cares about."
"Uh ho, I'm beginning to see. The environment..."
"Charlie, you are getting good at this. So the Chinese throw him a bone about CO2 and all they are THINKING about doing with their currency and everybody starts breathing heavy and forgets about the things they can REALLY do to deal with the Yuan." They have absolutely no intention of changing their domestic policies nor their trade policy, such as it is and are quite prepared to suffer whatever paper losses they may suffer in dollar terms to preserve the status quo which for them is create jobs through export industries and keep a lid on things. But they are prepared--I think--to accommodate us in other ways so we're REALLY happy. Of course the "other ways" are meaningless for all intents and purposes."
"...But inflation...?"
"You're thinking like a Guailo. Look, these guys can control the internals in ways we cannot conceive. They could care less about our economic models and are convinced that we're dumb enough to blindly convince ourselves that they are, at some time, going to play by OUR rules. Baloney. I read your stuff about Dubai and you're right, but do you know what you missed saying?"
"No, what."
'That everybody believed that #2 would bail out #1 because THAT'S WHAT WAS INTIMATED AND THAT'S WHAT WE WOULD DO BECAUSE IT MAKES SENSE. To us, maybe but not to them. Same thing in regard to China. Their pitch, their rules. So off we go to Copenhagen feeling so warm and happy, except that we heard what we wanted to hear and not what they have been saying. The big problem though is that other people, especially in Asia, understand the Chinese and understand what they were saying and are not in a dollar trap. The can dump the buck at the drop of a hat, and guess what, that's one of the reasons why gold is where it is."
"So this could really get bad."
"Oh yeah, Charlie, really bad. Like in a real run on the dollar." If or when, I don't know but as Damon Runyon used to say, "The race doesn't always go to the swift, nor the battle to the strong, but that's the way to bet." Especially when the other guy doesn't even know what game he's in." And trust me, these guys haven't a clue."
"Larry, it's always a joy."
"Isn't it though! God, I love it so!!!!"
"Whatup with Gold?
"The dollar."
That simple?
"Yep."
"How long is this going to keep going on."
"Donnno. It's a Chinese thing."
"What?"
"They suckered us."
'I thought they were in a dollar trap?.
"Oh, they are, they just don't care."
"I don't get it."
"Neither does Obama and the jerks around him. Look, they had that stupid G-20 meeting and got bupkus from everybody. But the Chinese are really smart. What's the one thing the guy you call The Leader really cares about."
"Uh ho, I'm beginning to see. The environment..."
"Charlie, you are getting good at this. So the Chinese throw him a bone about CO2 and all they are THINKING about doing with their currency and everybody starts breathing heavy and forgets about the things they can REALLY do to deal with the Yuan." They have absolutely no intention of changing their domestic policies nor their trade policy, such as it is and are quite prepared to suffer whatever paper losses they may suffer in dollar terms to preserve the status quo which for them is create jobs through export industries and keep a lid on things. But they are prepared--I think--to accommodate us in other ways so we're REALLY happy. Of course the "other ways" are meaningless for all intents and purposes."
"...But inflation...?"
"You're thinking like a Guailo. Look, these guys can control the internals in ways we cannot conceive. They could care less about our economic models and are convinced that we're dumb enough to blindly convince ourselves that they are, at some time, going to play by OUR rules. Baloney. I read your stuff about Dubai and you're right, but do you know what you missed saying?"
"No, what."
'That everybody believed that #2 would bail out #1 because THAT'S WHAT WAS INTIMATED AND THAT'S WHAT WE WOULD DO BECAUSE IT MAKES SENSE. To us, maybe but not to them. Same thing in regard to China. Their pitch, their rules. So off we go to Copenhagen feeling so warm and happy, except that we heard what we wanted to hear and not what they have been saying. The big problem though is that other people, especially in Asia, understand the Chinese and understand what they were saying and are not in a dollar trap. The can dump the buck at the drop of a hat, and guess what, that's one of the reasons why gold is where it is."
"So this could really get bad."
"Oh yeah, Charlie, really bad. Like in a real run on the dollar." If or when, I don't know but as Damon Runyon used to say, "The race doesn't always go to the swift, nor the battle to the strong, but that's the way to bet." Especially when the other guy doesn't even know what game he's in." And trust me, these guys haven't a clue."
"Larry, it's always a joy."
"Isn't it though! God, I love it so!!!!"
Thursday, December 3, 2009
TV TIME OUT
Been watching the hearings on Helicopter Ben for most of the day. Time for absorption and preparation for comment tomorrow. See ya.
Wednesday, December 2, 2009
MUCH ABU ABOUT NOTHING
Ok, really cheesy as my daughter-in -law would say. But this thing in the Gulf is a real kick. Right out of Arabian Nights.
Once upon a time there were two Sheiks who were cousins from the marriage of convenience of two families why the heck back when. One sheik wound up growing up and eventually becoming the ruler of a sheikdom which has more oil and gas than any 10 square mile place on the face of the earth, The other guy, though just a hop, skip and a jump away would up with sand. Sheik #2 was a fun-loving guy, however--none of that stay away from booze stuff for him (three wives were ok and a bit on the side worked)--and he had big ideas. You see, he figured out that there was in fact a sucker born every minute and when you couple that revelation with the fact of many of those suckers had access to more money that they ever dreamed possible, you could have more fun than a herd of camels...assuming camels have fun which given the way they look and smell is hard to believe.
#2 was a pretty shrewd guy when it came to politics as well and he also figured out than unless you lived in the neighborhood he and the other sheiks looked pretty much alike to those people who were known as bankers and investors and who had all this money, but more importantly they also believed that the mutual interests of he and his cousin and all the other sheiks in the area were the same and when it came down to the good and dirty it would be all for one and one for all.
He was also a pretty good salesman. Now a while back I had wise old banker say to me, "Charlie, one day you're going to meet a guy who will tell you he can put 2 pounds of crap into a 1 pound bag and if you believe him, you are going to have 2 pounds of crap all over your boots." #2 was that guy, and sure enough, a lot of people believed him, and to be honest he probably believed himself. Anyway, he talked these bankers and investors (let's call them yield whores...oh hell, whores will do) into lending his little plot of land (called Dubai by the way) more money that Allah ever had to build a dream world to include a snow-ski jump in a place where the average temperature is about 92F. on the theory that build it and they will come. And come they did, fueled by the most incredible increase in world-wide liquidity anyone had ever seen and they kept coming until...the money stopped in far off places like New York and London and Zurich.
At this stage the whores had a problem 'cause Bernie Madoff had nothing on #2 and his boys. This was a Ponzi scheme to end all Ponzi schemes 'cause if the people stopped coming to fill up all the space #2 had built there was Zip there to service what the whores had lent. At first, there was little worry because the conventional wisdom was that the entire region was interconnected and the guys with the REAL assets wouldn't dare let one of their own collapse. Problem was no one took account of human nature, and as I keep saying in the end it is all about people, and in this case the other people--especially #1--had been quietly seething at the antics of # 2, so when a few of the whores asked #1 and his boys whether they were standing behind #2, jolly good show, brothers in arms, blood is blood and all of that, turns out #1 said, "Think again."
Horror and disbelief. One shakes one head and asks one's self, "Will they never learn?" The answer is apparently not. The good news for The Suit and Helicopter Ben is this one isn't on their watch; it is very much a European banking problem with the Brits having a substantial part of the action. But as we have all learned, oceans do not protect us from actions in some far away place and the repercussions of this in Europe may well affect us at some later date. Do I believe that this will be the case. Actually, no. Folks who know a lot more about this than I say it's really #1 trying to teach #2 a lesson and that some accommodation will be reached. Me, I'm more of a cynic. I suspect the fact that #1 and his buddies have all of their PRIVATE money with the folks who are the creditors of #2 may influence them to be of some assistance before bad things begin to happen to them. Then again, it's the Middle East. Inshalla.
Once upon a time there were two Sheiks who were cousins from the marriage of convenience of two families why the heck back when. One sheik wound up growing up and eventually becoming the ruler of a sheikdom which has more oil and gas than any 10 square mile place on the face of the earth, The other guy, though just a hop, skip and a jump away would up with sand. Sheik #2 was a fun-loving guy, however--none of that stay away from booze stuff for him (three wives were ok and a bit on the side worked)--and he had big ideas. You see, he figured out that there was in fact a sucker born every minute and when you couple that revelation with the fact of many of those suckers had access to more money that they ever dreamed possible, you could have more fun than a herd of camels...assuming camels have fun which given the way they look and smell is hard to believe.
#2 was a pretty shrewd guy when it came to politics as well and he also figured out than unless you lived in the neighborhood he and the other sheiks looked pretty much alike to those people who were known as bankers and investors and who had all this money, but more importantly they also believed that the mutual interests of he and his cousin and all the other sheiks in the area were the same and when it came down to the good and dirty it would be all for one and one for all.
He was also a pretty good salesman. Now a while back I had wise old banker say to me, "Charlie, one day you're going to meet a guy who will tell you he can put 2 pounds of crap into a 1 pound bag and if you believe him, you are going to have 2 pounds of crap all over your boots." #2 was that guy, and sure enough, a lot of people believed him, and to be honest he probably believed himself. Anyway, he talked these bankers and investors (let's call them yield whores...oh hell, whores will do) into lending his little plot of land (called Dubai by the way) more money that Allah ever had to build a dream world to include a snow-ski jump in a place where the average temperature is about 92F. on the theory that build it and they will come. And come they did, fueled by the most incredible increase in world-wide liquidity anyone had ever seen and they kept coming until...the money stopped in far off places like New York and London and Zurich.
At this stage the whores had a problem 'cause Bernie Madoff had nothing on #2 and his boys. This was a Ponzi scheme to end all Ponzi schemes 'cause if the people stopped coming to fill up all the space #2 had built there was Zip there to service what the whores had lent. At first, there was little worry because the conventional wisdom was that the entire region was interconnected and the guys with the REAL assets wouldn't dare let one of their own collapse. Problem was no one took account of human nature, and as I keep saying in the end it is all about people, and in this case the other people--especially #1--had been quietly seething at the antics of # 2, so when a few of the whores asked #1 and his boys whether they were standing behind #2, jolly good show, brothers in arms, blood is blood and all of that, turns out #1 said, "Think again."
Horror and disbelief. One shakes one head and asks one's self, "Will they never learn?" The answer is apparently not. The good news for The Suit and Helicopter Ben is this one isn't on their watch; it is very much a European banking problem with the Brits having a substantial part of the action. But as we have all learned, oceans do not protect us from actions in some far away place and the repercussions of this in Europe may well affect us at some later date. Do I believe that this will be the case. Actually, no. Folks who know a lot more about this than I say it's really #1 trying to teach #2 a lesson and that some accommodation will be reached. Me, I'm more of a cynic. I suspect the fact that #1 and his buddies have all of their PRIVATE money with the folks who are the creditors of #2 may influence them to be of some assistance before bad things begin to happen to them. Then again, it's the Middle East. Inshalla.
Tuesday, December 1, 2009
FIRST THINGS FIRST
I was going to comment on the 60 billion dollar misunderstanding in the Gulf but I though I would clean up a few things first and save that piece of lunacy for another day.
Wonderful leading article in the Wall Street Journal today highlighting a rather unfortunate piece of scholarship written in 2002 by the newly minted Nobel laureate joe Stiglitz (who is reported to be even more arrogant that Larry "double down for Harvard" Summers if that is possible) and the Orszag brothers in re the risk of Fanny and Freddie. It was spectacularly wrong of course but to cast judgement with the benefit of hindsight is not a good nor gentlemanly thing to do. The article points out that the writers acknowledged that "the extremely rare events located in the tail of a distribution are often quite difficult to analyze accurately." Might I point out (as I have previously) that another Nobel laureate was also spectacularly wrong in 1997 in the LTCM debacle and there too, the tail of distribution proved difficult to analyze accurately. What is most remarkable to me is that these three chuckle-heads didn't learn a damn thing from the chuckle-heads who went before them, wouldn't recognize systemic risk if it bit them in the ass and are now all in favor of a moronic plan to let a mob of politically appointed hacks figure it out for the rest of us. As events have proven, it is not easy to identify risk even if you have been doing it all of your professional life; it is impossible if you are new to the game. I've been saying this for months now; thank you WSJ for agreeing.
Skip a paragraph and the final article in today's Journal concerns the agreement by the management of AIG to bury the hatchet in regard to Hank Greenberg and, in fact, choose to use Mr. Greenberg as a resource in trying to put Humpty Dumpty together again. Hopefully, this is the end of the sad tale begun by the odious Eliot Spitzer and followed by the only slightly less so Andrew Cuomo. As loyal reader Paul points out in his comment to last week's post, AIG probably never represented a systemic risk except for the fact that the handling of that mess by the FED & Co.--in one of their rare missteps--made it such. I suspect that a hugh pile of excrement can be pilled up outside The Suit's door for this one but of course we can never be sure. Now Mr. Greenberg isn't a miracle worker but he's a hell of a smart guy and just mean enough that I suspect he will WILL himself to stay around long enough to fix his creation. Best of luck to him and the good Lord willing, the political thug Cuomo will keep the hell out of it. Thanks again for agreeing---well, that may be a bit of an overstatement--WSJ.
Finally,...I simply can't resist. WHAT THE HELL ARE YOU THINKING ABOUT, TIGER WOODS?!!!!
We will deal with the Gulf tomorrow.
Wonderful leading article in the Wall Street Journal today highlighting a rather unfortunate piece of scholarship written in 2002 by the newly minted Nobel laureate joe Stiglitz (who is reported to be even more arrogant that Larry "double down for Harvard" Summers if that is possible) and the Orszag brothers in re the risk of Fanny and Freddie. It was spectacularly wrong of course but to cast judgement with the benefit of hindsight is not a good nor gentlemanly thing to do. The article points out that the writers acknowledged that "the extremely rare events located in the tail of a distribution are often quite difficult to analyze accurately." Might I point out (as I have previously) that another Nobel laureate was also spectacularly wrong in 1997 in the LTCM debacle and there too, the tail of distribution proved difficult to analyze accurately. What is most remarkable to me is that these three chuckle-heads didn't learn a damn thing from the chuckle-heads who went before them, wouldn't recognize systemic risk if it bit them in the ass and are now all in favor of a moronic plan to let a mob of politically appointed hacks figure it out for the rest of us. As events have proven, it is not easy to identify risk even if you have been doing it all of your professional life; it is impossible if you are new to the game. I've been saying this for months now; thank you WSJ for agreeing.
Skip a paragraph and the final article in today's Journal concerns the agreement by the management of AIG to bury the hatchet in regard to Hank Greenberg and, in fact, choose to use Mr. Greenberg as a resource in trying to put Humpty Dumpty together again. Hopefully, this is the end of the sad tale begun by the odious Eliot Spitzer and followed by the only slightly less so Andrew Cuomo. As loyal reader Paul points out in his comment to last week's post, AIG probably never represented a systemic risk except for the fact that the handling of that mess by the FED & Co.--in one of their rare missteps--made it such. I suspect that a hugh pile of excrement can be pilled up outside The Suit's door for this one but of course we can never be sure. Now Mr. Greenberg isn't a miracle worker but he's a hell of a smart guy and just mean enough that I suspect he will WILL himself to stay around long enough to fix his creation. Best of luck to him and the good Lord willing, the political thug Cuomo will keep the hell out of it. Thanks again for agreeing---well, that may be a bit of an overstatement--WSJ.
Finally,...I simply can't resist. WHAT THE HELL ARE YOU THINKING ABOUT, TIGER WOODS?!!!!
We will deal with the Gulf tomorrow.
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