Wednesday, September 14, 2011


The Suit was interviewed (lovingly) today by Jim Kramer on CNBC this morning at some conference entitled "Seeking Alpha" whatever the hell that is supposed to mean.  The former said nothing that was coherent and the latter understood nothing at all.  Now there is nothing new about that except for the fact that people actually took it seriously.  Most of the talk was about Euroland with The Suit telling everybody that the Euros had a plan and Kramer actually confusing Euroland with a single soverign stste.  There would be no Euro Lehman, the French banks were fine and all will come good in the end.  While this nonsense was going down all the Frenchies announced asset sales throught next year, the clearest indicator that all was not fine, the heads of Germany, France and Greece were arranging a conference call to reconfirm to all the world that the former had the latter's back thru thick and thin, and our stock market, having been reassured headed through the roof.  There is no level of wierdness in the world that cannot be reached.

No. 1 son drew my attention to what I guess is a very popular blog called Interfludity which today seemed to have the answer for what ails Euroland.  Equity.  Yep, equity.  It appears that this blogger proposes that if all European debt be replaced with equity in individual states with contrasting levels based upon an ECB fomula, POOF, all will be well again.  This equity will pay a dividend based on the rate of inflation (or be reduced if there be a negative rate) and will be redeemable only by the issuer.  I confess I didn't understand all of it as I didn't read it too closely, but a couple of things came to mind.

Now I'm all in favor of new ideas but I have a prejudice that any idea be grounnded in some form of reality or at least a basic understanding of the subject at hand.  Equity, at least the way I was taught, represented ownership and therefor I had a bit of a hard time getting my arms around the concept of what ownership does soverign equity give one in a country like...say...France; the Tour, the Trocadero, the L'Arc de Trioumph?  Suggestions welcomed.  Of course if ownership of soverign equity gave one, along with the other equity holders the right to tell M. Sakorzy how to govern or be fired it might not be a bad thing except the good Frencmen that elected him might object.  They would lose The Hottest First Lady in the world.

The other thing that bothered me was to whom was this equity to be issued?  Not me thank you.  I have this thing about liquidity in case I run a bit short of the ready as I think do most investors.  Not many markets out there for this kind of beast.  Then I got into the other thing they taught me about equity was that it was there for capital appreciation not for an interest payment based on some rate of inflation for which there are alternatives like TIPS which come immediately to mind and for which there is a substantial, liquid market. Then again, thought I, here is a fellow with a fertile mind: if the job of Treasury Secretary ever opens up, I have a candidate. Nevertheless, the author writes beautifully.  Check it out.

It's amazing what bubbles up in times like these when a simple application of logic and a rudimentary knowledge of history, finance and political science might prove useful, but then, as is said, that's what makes markets.  The other thing is, as I have said before, the only new idea in the last 2000 years was The Sermon on the Mount.  Everything else is a variation on a theme.  The real genius is to undersatndwhat theme.

We have a real housefull for the weekend starting tomorrow--my classmates--and Trouble and Strife is on the warpath.  If I don't get back to this before Monday, please be sympathic.  I face substantial physical risk in the coming days if I stray too far from the role of host.  Wish me luck

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