Wednesday, February 27, 2013


Well, what more is there to say following yesterday's piece.  Ben finished his bit up on the Hill in grand style, the markets loved him and indicated that they could care less about the sequester which apparently everyone seems to have figured out is meaningless and Italy has been reduced to the status of Greece; an annoyance but not much else despite the fact that they are a real country but not to worry, the ECB will take care of them.  Heck, they even raised 8 Billion Euros across the curve and only paid 4.84% for the 10 year.  A rousing success.  So, let's take it up 175 on the DOW today and feel good about things.

It's the central banks that are doing it and as the saying goes, "Don't fight the Fed."  If you're a bull, that's just fine, but if you were paid to worry as I was for a long time, to me the current situation means I become more concerned with "even risk" which to put it into the current vernacular, the return of the Black Swan.  What's that?  Well that's the problem, you don't know or even think about it until it arrives and as a result the effects are greatly enhanced, but there seem to be the belief that if there is nothing on the horizon, it's full steam ahead.

Except it isn't.  The remarkable rise in equities is occurring as a result of Central Bank action resulting in an absence of alternative investment opportunities, high net corporate profits but with little or no top-line growth, continued cash hoarding but corporates of all shapes and sizes and no volume.   It's as though some people need something to do rather than acts of real conviction.  Then again, those folks are making a lot of money lately which isn't a bad thing.  Does it end?  Of course, all things do but the question is when and how.  What is absent from this extraordinary world wide creation of money is inflation which has surprised a lot of people including your buddy, Charlie, unless you throw in food, gasoline and some other stuff that everybody knows doesn't count.  But fair is fair, we started off with this standard and I guess we are stuck with it.  Fact is however, if the Big I ever does show up things will get ugly really quickly and the undoubted rise in interest rates will pose an enormous threat to solvency on a number of fronts.  But until then, "Lassez les bon temps roulet," as they say in The Big the 9th Ward.

A little while ago I got on the case--and rightfully so--of Prof. Steven Davidoff of THE Ohio State University, on the subject of the Argentine bond dispute and the Foreign Sovereign Immunities Act.  Prof. Davidoff is back in the Times today with a cracker of an article on the proposed tax on trades of financial instruments which the Euros, led by France, are about to make happen despite the protests of the Brits and the United States.  The article traces the origins and histories of this idea and the implementation, in various formats, of the same.  It is  a very good article and I commend it to you.  Interestingly, it points out that if history is any guide such a tax has to be imposed everywhere as if there are jurisdictions which do not employ it there will be a natural migration to those garden spots.  More interestingly, Prof. Steve points out that Canada, today held up as the paragon of financial planning and implementation has already rejected such a tax.  Huuuumm, wonder what Sen. Chuckie Schumer thinks of that?  One hour and ten minutes to Toronto from LGA, Chuck.  Check it out.  It's on the right side of the Lake.  No snow, and really nice people.

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