A COUPLE OF THINGS

I have no idea what happened to yesterday's post.  Had it completed, thought it was a good one, published it and a 1/3 of it never printed...

Which was really too bad because I was talking about Fanny Mae and despite the good news on earnings why would one wish to ramp up it's business again which is what got us into trouble in the first place?  Well sure enough we wake up this morning to the news that The Leader and his band of merry men (by the by, has anyone seen the Sec. of the Treasury, Jacob whatshisname lately?) are attempting to do precisely that by jawboning banks to increase the number of sub-prime mortgage loans.  Told you that was going to happen months ago unless we finally kill Fanny and Freddy and Sally stone, cold, dead.  It's that "fairness" thingy again, and speaking of that, The Leader announced that he will accept only 95% of his salary in keeping with the spirit of the sequester.  Better he should pay for the vacation the kids took down to the Bahamas but nobody asked for my opinion.  It's like living in Oz...nothing makes sense any more.

This is a down day with little in the headlines to stir interest, but I think I witnessed a subtle but yet real change in commentary as to the economic situation.  In spite of the performance of markets to date, some doubt is beginning to creep into the discussion as to the sustainability of global markets.  I think part of the reason is a real question as to how long can the world central banks continue to pump out liquidity.  I actually hadn't been paying too much attention to Japan and was shocked this morning to note that the 10 year was paying about 55b.p.--and we think money is cheap at under 2%.  But with the jobs outlook taking a hit this morning we are probably going to witness more of the same.  The distortion of capital markets as a result of these policies is enormous, but as foolish encouragement in the mortgage market creates bubbles, what we are also witnessing is an explosion of high yield debt snapped up by investors desperate for yield.  However, high yield today is measured at something like 150 b.p. above Treasuries which at these levels makes one ask why the heck would ANYONE want to take on that level of risk for that little return.  Anyway, just something to think about on a dull news day...unless you want to start thinking about Korean War II.