The stock market rose today on the basis that following the White House meeting The Leader and the Republican leadership didn't threaten each other with mayhem. Europe was quiet as a result of minimum rioting and public disagreement among Euro leaders. Actually, there was a bit of snickering over the front page of the Economist which pictured a tri color bag full of baguettes with a burning fuse and the caption "Time bomb in Europe?" Frankie and his mob nearly lost it which is precisely what the editorial board was hoping for and all had a good laugh at France's expense--except it may not be a laughing matter if the economy turns negative in the first quarter as many expect.
I'm beginning to have some serious self-doubts. Maybe there is a new paradine and I'm just too old to recognize it much less accept it. Maybe this state is permanent and can go on for ever. Maybe there is no finite number for the creation of money. Maybe nobody cares. Now wouldn't that be something. But I think people do which brings me back to 1982 when Tall Paul was in the midst of killing inflation and interest rates were going through the roof except for the head of our domestic economic group who was predicting a decline by mid year. This was fairly important for us international types as all of our loans were based on floating LIBOR with the obvious implications for our clients. So I went to see him.
"Hey Eli, you confident about your model?"
"Yes we are."
"Suppose the Fed continues to squeeze?"
"That will not happen."
"Why wont it?"
"Because then the model wont work."
As the poet put it, "You know the rest in the books you have read..." As Carter has suggested maybe the academics at this Fed have a better model than my friend Eli; then again all those CMO's were AAA weren't they? Great things models; they let you sleep at night.
Final home game tomorrow. Great thing about sport. You have to play the game to learn if the model was correct. Then you can sleep.
Have a great weekend
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