When the Fed announced itd QE II plan, one of the stated goals was to maintain interest rates at low levels and create a rise in the equity markets. I'm sure there were pages of formulae to support the goals. Funny thing about formulae--or models--for that's what they really are, is that they are only as good as the assumptions made to produce them. Therefore, when, say, Goldman predicted in its model for a particular self created security that the maximum loss, based on whatever assumptions they had made would be within 1.365784632750773 of the standard deviation they would have been right if all the assumptions held true. But assumptions are funny things and as was pointed out at the time they're great until some 23 yrar old trader somewhere in the world decides he doesn't like that particular security, sells it off and convinces 5 of his 23 year old friends to come to the same view. Ooops. Any way, the market has been up and down but the dollar has strengthened and taken the yield curve with it with the 10 year above 3.00% and the buying in the action by Ben's Boys yesterday huge as the auction was a stinker. Not as planned. A lot of people are looking at the Lame Duck Congress trying to figure out how in hell a bunch of people who will not be there in 25 days have the nerve to try to set in stone 100 year legislation, while they can't tell a country what the tax rates will be next year and are asking themselves what the hell is going on? Confidence, remember? Not a lot of that around. The job report this morning stank and the jobless rate crept up towards 10% and yet where I sit, folks are feeling a bit better about things. I must confess, I don't get it.
Anyway, this weekend we are off to London for the wedding of the daughter of a dear friend. I plan on drinking a considerable amount of really good stuff from the cellar of my really smart friend, Larry and who knows, by the time we finish we may have figured out this thing although I think it's a better chance that we wont give a damn. So, I'll be out of action for a bit but back on the 15th. with an on-the-scene view from the other side. A couple of things to look out for in the meantime.
1. The Euros are still kicking each other about. The best thing that could happen is that all goes quiet because in a week or two there will not be anybody about to cause mischief until mid January at the earliest.
2. Focus shifts to Cancun and the climate conference. The timing is perfect--almost as it was designed to capture the world's journalistic attention with nonsense. Journalists are very good with nonsense.
3. The Leader has a lousy hand in this tax game. We should hope he decides to fold and ante up to the next deal. The economy doesn't need a battle like this now.
4. Now that the Tax Commission's report has not been approved one can hope that some of the very good ideas it contained can be integrated into a comprehensive reform package which includs a complete overhall of the tax code. That process needs to begin now.
Anyway, I'm off to pack. Haven't been to London in a couple of years and am looking forward to it. It's a man's town, there's power in the air. Hummm. Catchy. Might be able to do more with that
See you in 12 days.
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