I'm having procedures. That's what the medical profession calls them these days. Tests. Puncturing, picturing and positioning. There is one great thing about living in the fly-over zone within a moderately populated area with a legal and ingrained distaste for malpractice suits and jackpot justice. The health care is wonderful; oh, not Cleveland Clinic or Mayo wonderful but really good doctors, sans egos (they'll send you somewhere if they don't feel comfortable), on time service and friendly folks. I have a spine that looks like a train wreck so in I went today for some drug therapy to see how that would work out. I had a neuro-surgeon look at it but he recoiled in horror and said go get stuck. Now it's an every-day thing these days but the thought of some guy you have had drinks with sticking a needle into your spine can be a bit off-putting but in I went at 2:15 and out I came at 3:22 including a 20 minute "let's make sure he's OK" rest after the procedure. Remarkable, and if it works really remarkable. I had another "procedure" last Friday which is why there was not a post. Two weeks before the next one. Nice to be active when you get old.
I was reading a few papers from Over There over the weekend and while the Ukraine was by far the biggest story, there was a really interesting report from Germany by some minister--frankly, I forget who, speaking of the future of the EU in terms of the dormant economy of Japan which has lasted for years. Unless, he argued, the EU was prepared to engage in a massive government-sponsored bond buying campaign in order to flood the continent with liquidity, it would be next stop Japan. OK, that's been said before and practically every day by some the likes of Little Paulie Krugman, but by a German minister? Statements such as that coming from the source are never heard.. But reading it I thought to myself that with a balance sheet of over $4 Trillion at the Fed, Japan printing money like it's going out of style and now this broadside, if adopted, just how much debt is going to be out there investing in what? Answer: a hell of a lot.
OK, so what. Well, Alan Greenspan--you remember him--gave a most interesting interview the other day that for some reason got very little play at all which is all the more remarkable because among a number of interesting things on which he commented was bubbles. According to Mr. Greenspan, bubbles are inevitable and there is very little central banks can do to avoid them. Well, thought I, that's a hell of a deal and I wonder if today's Fed agrees with that because if they do, here we go again with no real effort to be expected in the tapering that has begun because there are God knows how many other ways there are to pump liquidity and if What Is To Be Is To Be, who the hell cares anyway. And I mean, what's wrong with a company that makes a car that sells for around 90 Large and can pretty much get around the block before you have to plug it in again, with a stock price that is, well, let's just say priced for perfection if not deification. And I'm thinking that this 10 year is hanging around 2.70% with all this gearing going on and shouldn't the bond boys one day look up and say, "Hold on, is all this priced right," and then what happens? And I know I've said it before and I was wrong but there's a lot of municipal debt out there, some of it in the tank, and in every case the bond holders took it in the neck as opposed to the employees and how long are the former going to keep hitting themselves on the head because it feels good to stop? And of course the big question is if this thing does behave in the manner in which Mr. Greenspan thinks it's going to behave, who are they going to blame this time? Hey, not me. I was having procedures when all this went down.
Showing posts with label Greenspan. Show all posts
Showing posts with label Greenspan. Show all posts
Monday, March 10, 2014
Tuesday, February 11, 2014
AYE! EINE YIDDISHE MAMA!
Janet Yellen made her first appearance before congress today as the first woman ever to chair the Federal Reserve. Not quite a triumph, but everyone heard exactly what they wanted to hear despite confirmation of the old adage that You Can Take the Girl Out of Brooklyn but You Can't take Brooklyn Out of the Girl. It was wonderful to hear but Claire Bloom she's not. I'm told her chicken soap is better, tho, and it was served in copious amounts.
If anything, the lady is as good if not better that her predecessor once removed, Alan Greenspan. She speaks, says very little and you believe you are in good hands. One would hope so. The two things that everyone seems to have taken away from today's event was that
1. The Fed will remain as accommodating as possible (or as needed), and
2. The Fed will continue to scale back it's purchases of securities.
Of the first no surprise, but of the second I guess I was wrong again…except I didn't hear the real conviction that everyone else did. No matter, it's what's believed that counts. I also heard positive sounds relating to the economy but these were distinctly muted--not to the extent of Mr. Bernanke's last chat but far from any cheerleader mode either. As expected, the equity boys deemed this to be salvation and the DOW powered ahead to an almost 200 point gain at the close. Interestingly enough, the 10 year was all over the place all day finally settling at 2.72%, Go find someone who understands that, I don't.
All of this, of course was in the face of far from strong numbers either on the economy of in corporate earnings, continued bad news in emerging markets and troubling events in Europe. It is really quite amusing how the markets can turn on and off regarding emerging always having the same final idea that we in the U.S. are pretty much insulated from their effects…until we're not. Except for China, and increasing concern is being expressed over the economic/credit situation in terms of "this is really important," whereas I don't have very much concern at all except in a macro sense as to the worldwide response to a slowdown in economic activity. But credit? Nah. That's the wonderful thing about a totalitarian state. Nobody dies unless the bosses say so.
But why should any of us care about any of these thing when we have The Greatest Show on Earth playing right now on the shores of the Potomac and the Rappahanock. Welcome ladies and gentlemen to the Barry and Frankie show, two Presidents with their approval ratings in the tank finding one another amid the complete lack of interest on the part of anybody else in the world! It would be better of course if The Leader could pronounce Frankie's name properly and if he (or, perhaps, she) didn't have an idiot working for him/her that plans a state dinner in a tent in the middle of February in Washington (forecast: 14 F. and windy) but hey, we're friends again. Lafayette, nous Somme ici! Dear God you can't make this up.
If anything, the lady is as good if not better that her predecessor once removed, Alan Greenspan. She speaks, says very little and you believe you are in good hands. One would hope so. The two things that everyone seems to have taken away from today's event was that
1. The Fed will remain as accommodating as possible (or as needed), and
2. The Fed will continue to scale back it's purchases of securities.
Of the first no surprise, but of the second I guess I was wrong again…except I didn't hear the real conviction that everyone else did. No matter, it's what's believed that counts. I also heard positive sounds relating to the economy but these were distinctly muted--not to the extent of Mr. Bernanke's last chat but far from any cheerleader mode either. As expected, the equity boys deemed this to be salvation and the DOW powered ahead to an almost 200 point gain at the close. Interestingly enough, the 10 year was all over the place all day finally settling at 2.72%, Go find someone who understands that, I don't.
All of this, of course was in the face of far from strong numbers either on the economy of in corporate earnings, continued bad news in emerging markets and troubling events in Europe. It is really quite amusing how the markets can turn on and off regarding emerging always having the same final idea that we in the U.S. are pretty much insulated from their effects…until we're not. Except for China, and increasing concern is being expressed over the economic/credit situation in terms of "this is really important," whereas I don't have very much concern at all except in a macro sense as to the worldwide response to a slowdown in economic activity. But credit? Nah. That's the wonderful thing about a totalitarian state. Nobody dies unless the bosses say so.
But why should any of us care about any of these thing when we have The Greatest Show on Earth playing right now on the shores of the Potomac and the Rappahanock. Welcome ladies and gentlemen to the Barry and Frankie show, two Presidents with their approval ratings in the tank finding one another amid the complete lack of interest on the part of anybody else in the world! It would be better of course if The Leader could pronounce Frankie's name properly and if he (or, perhaps, she) didn't have an idiot working for him/her that plans a state dinner in a tent in the middle of February in Washington (forecast: 14 F. and windy) but hey, we're friends again. Lafayette, nous Somme ici! Dear God you can't make this up.
Wednesday, July 11, 2012
RIGHT AGAIN, CARTER!
You hit it right on the head: what I want the Fed to do is keep inflation control...which is another way of saying I don't think the Fed has any damn business trying to maintain full employment in this country or anywhere else. For two reasons. First what the hell is full employment? Thank you, I don't know either. Second the job of creating an atmosphere in which job creation, production and the creation of wealth can thrive is that of the executive and legislative branches. Third the stupid "dual mandate" allow the above mentioned to hide behind the Fed when they refuse to do their jobs...which is precisely the scenario in which we find ourselves today. Waiting for the Fed to clean up the mess left by the past administration and the abject incompetence of The Leader and his band of culture warriors is dangerous, unrewarding and simply plain stupid. GET RID OF THE DUAL MANDATE, RESTORE AN INDEPENDENT CENTRAL BANK AND DEMAND THE ELECTED MORONS DO THEIR JOB! Whew!
Oh good buddy, five years ago out here in the fly-over zone the price of rib-eye steak was $5.99 a pound. Today it's $12.99. Now I know the geniuses who live by the great oceans don't conside the price of food to be a proper measure of inflation but if the Fed wasn't so damn busy trying to set right what the pols cocked up perhaps we could get a re-think of what really counts to Mr. & Mrs. Jones who live in the middle? At least we could try.
Anyway, Mr. & Mrs. North and all the ships at sea, if we go back about 20-odd years we will encounter the great genius of that time, Alan Greenspan, who reversed the tight money policy of Mr. Volker and the fun really began. The Clinton years were terrific; hell, I never made so much money in my life. We are constantly reminded even today as to how good things were. The Leader tells us if we just raise taxes on the "rich" we'll have it all again. Of course while raising income taxes, the good ol' boy from Hope slashed capital gain taxes from which all the growth in revenue came...that's right ALL. Anybody remember the Dot Com. era? Put DotCom. after a company name and the funds available were almost unlimited. And from where did these funds come. Not from under the mattress gang, it was all borrowed money, but hey, while the music was playing you had to dance.
Now, can we spell B U B B L E? 'Cause that's what it was and in 1989 it all started to come apart. Then came 9/11 and things really got bad. The Fed to the rescue. Not content with the results of their first effort the Fed doubled down and promoted even easier money and off we went again. Just like water finding it's own level, capital searches for investment--the higher yielding the better--and when there is a lot of capital looking for a home the guy who can create investment opportunities can make a hell of a lot of money. Enter real estate and collateralized mortgage obligations. Have we learned how to spell B U B B L E? The rest is history.
But while all of this was going on in palin sight what was not so easily seen was the effect the Fed policy was having among friends an foes alike. The effect excess liquidity has on the value of a currency is clearly linked. In both eras the effect was a steady devaluation of the dollar against all currencies and if you rely heavily on exports as practically every nation in the world does (EXCEPT the United States) this is not a good thing. Your exports become more expensive and you must embark on a program to keep your currency in line and of course the way to do that is buy dollars and create your own liquidity through monetary creation. That of course reduces interest rates all over the place and mkes it difficult for investors to obtain decent returns on funds to be invested. So, if you are Brazil for example, you catch a double whammy: you must devalue quickly an appreciating REAL and at the same time you must fight domestic inflation that is a result of of your currency manipulations. American Central Bankers and Treasury Secretaries are not on the top of a Brazilian hit parade...or any one elses for that matter. But, hey, the dollar is your problem not ours.
Non-American investment managers are no different from their American counter parts; their job is obtain the highest returns for their clients and they are judged--and paid--on how well they perform. They are yield whores just like us. But life gets really hard when interest rates and returns continue to decline and having a pretty firm idea as to who is numero uno, these guys, and gals, increasingly seek out higher yield and by definition, higher risk. It matters little that the investment may consist of a bond backed by 200,000 homes in palces of which they have never heard; Moody's (who have been paid to do so) rates it AAA. And guess what? It pays T+350! BUY IT! Best of all, your central bank has all these dollars that they don't want so borrow them or buy the damned things. The thought that there might be a reason that the yield is so much different never enters their minds. By this time I think we all know how to spell B U B B L E.
One can take issue with all parts of this post but may I suggest that if the Fed did not see themselves as the guardian of truth, justice and the American way some of this stuff might never have happened. I guess I'm kinda wierd in thinking that I really don't care what Barclays or 16 other banks did with Libor. I DO care when people like the NYT try to explain Libor as being a creation of the banks in the 1980ies: I'm getting old but I remember making Libor-based loans back in the early 70ies. I do care when fools or liars (or both) try to influence public opinion with neither knowledge nor facts. Just me I guess.
_______________________________________
Many thanks for the kind words from Ewen Watt at Wordpress. Inside the Beltway but a smart young guy from his writings. Look him up
Oh good buddy, five years ago out here in the fly-over zone the price of rib-eye steak was $5.99 a pound. Today it's $12.99. Now I know the geniuses who live by the great oceans don't conside the price of food to be a proper measure of inflation but if the Fed wasn't so damn busy trying to set right what the pols cocked up perhaps we could get a re-think of what really counts to Mr. & Mrs. Jones who live in the middle? At least we could try.
Anyway, Mr. & Mrs. North and all the ships at sea, if we go back about 20-odd years we will encounter the great genius of that time, Alan Greenspan, who reversed the tight money policy of Mr. Volker and the fun really began. The Clinton years were terrific; hell, I never made so much money in my life. We are constantly reminded even today as to how good things were. The Leader tells us if we just raise taxes on the "rich" we'll have it all again. Of course while raising income taxes, the good ol' boy from Hope slashed capital gain taxes from which all the growth in revenue came...that's right ALL. Anybody remember the Dot Com. era? Put DotCom. after a company name and the funds available were almost unlimited. And from where did these funds come. Not from under the mattress gang, it was all borrowed money, but hey, while the music was playing you had to dance.
Now, can we spell B U B B L E? 'Cause that's what it was and in 1989 it all started to come apart. Then came 9/11 and things really got bad. The Fed to the rescue. Not content with the results of their first effort the Fed doubled down and promoted even easier money and off we went again. Just like water finding it's own level, capital searches for investment--the higher yielding the better--and when there is a lot of capital looking for a home the guy who can create investment opportunities can make a hell of a lot of money. Enter real estate and collateralized mortgage obligations. Have we learned how to spell B U B B L E? The rest is history.
But while all of this was going on in palin sight what was not so easily seen was the effect the Fed policy was having among friends an foes alike. The effect excess liquidity has on the value of a currency is clearly linked. In both eras the effect was a steady devaluation of the dollar against all currencies and if you rely heavily on exports as practically every nation in the world does (EXCEPT the United States) this is not a good thing. Your exports become more expensive and you must embark on a program to keep your currency in line and of course the way to do that is buy dollars and create your own liquidity through monetary creation. That of course reduces interest rates all over the place and mkes it difficult for investors to obtain decent returns on funds to be invested. So, if you are Brazil for example, you catch a double whammy: you must devalue quickly an appreciating REAL and at the same time you must fight domestic inflation that is a result of of your currency manipulations. American Central Bankers and Treasury Secretaries are not on the top of a Brazilian hit parade...or any one elses for that matter. But, hey, the dollar is your problem not ours.
Non-American investment managers are no different from their American counter parts; their job is obtain the highest returns for their clients and they are judged--and paid--on how well they perform. They are yield whores just like us. But life gets really hard when interest rates and returns continue to decline and having a pretty firm idea as to who is numero uno, these guys, and gals, increasingly seek out higher yield and by definition, higher risk. It matters little that the investment may consist of a bond backed by 200,000 homes in palces of which they have never heard; Moody's (who have been paid to do so) rates it AAA. And guess what? It pays T+350! BUY IT! Best of all, your central bank has all these dollars that they don't want so borrow them or buy the damned things. The thought that there might be a reason that the yield is so much different never enters their minds. By this time I think we all know how to spell B U B B L E.
One can take issue with all parts of this post but may I suggest that if the Fed did not see themselves as the guardian of truth, justice and the American way some of this stuff might never have happened. I guess I'm kinda wierd in thinking that I really don't care what Barclays or 16 other banks did with Libor. I DO care when people like the NYT try to explain Libor as being a creation of the banks in the 1980ies: I'm getting old but I remember making Libor-based loans back in the early 70ies. I do care when fools or liars (or both) try to influence public opinion with neither knowledge nor facts. Just me I guess.
_______________________________________
Many thanks for the kind words from Ewen Watt at Wordpress. Inside the Beltway but a smart young guy from his writings. Look him up
Thursday, September 17, 2009
DO YOU THINK...
Was watching CNBC this afternoon. Steve Liesman, the almost economist, was interviewing the deputy head of the IMF. By the way, do you know the deputy head is always an American while the managing director is always a Frenchman? You didn't? Now see what this blog does for you? Anyway, they were talking great thoughts such as global recovery and new financial regulation. Out of no where Liesman asked whether or not there was an issue as to whether greater financial regulation might interfere with global recovery. Indeed replied the deputy head and the politicians and regulators are aware of the risk. Now you don't think...I mean they couldn't ...would they...I mean is there a chance they read the Blog?Then again, maybe it's just a co-incidence. I wonder what these guys get paid for those great thoughts.
Anyway, M. Le President seems to have backed off a bit in his statement that he was prepared to walk out of the G-20 unless the position of La Republique in regard to compensation is adopted. I suspect that in the next week there is going to be a lot of backing off of previously held "firm positions" and "agreements in principal." After all, these are the least principled humans on the face of the earth save perhaps for the Congress of the United States. But in the end, they have an admittedly hard task. It wasn't made any easier by a speech made by paul Volker yesterday on the Left Coast calling for the prohibition of proprietary trading by commercial banks. He also spoke out in favor of the Fed as the regulator for financial institutions, greater leverage restrictions for non-commercial banks--read Goldman Sachs--higher capital requirements and against the sponsorship of hedge funds and private equity firms by commercial banks.
Over 20 years ago, Sen. Bill Bradley, who is a hell of a smart guy and a guy who loved to get out at the head of a parade, sponsored a very hush, hush meeting in Washington brought on by the Latin American financial crisis and the changes needed in bank regulation. All the major players from both an institutional and individual standpoint were present save one exception: your humble blogger who received an invitation from Sen. Bradley himself as a result of a conversation we had some weeks previous. No other banker agreed to show up. My institution thought me to be harmless I guess. I was was seated next to Alan Greenspan the spanking new Head of the Fed (who has terrible halitosis by the by...most unpleasant and uncomfortable) when his predecessor, Tall Paul launched into the very same speech he gave yesterday save for the hedge fund and private equity remarks there being...by God's good grace...none of them in existence at that time. I remember asking Paul why the hell he was singling out the commercial banks for all this new regulation when there were institutions like the Pru doing the same damn thing. Gruffly; "Yeah, yeah, you"re right." "And try to put a fence around them as well, wouldn't that lead someone else--somewhere else--doing the same thing?" says I? "Yeah, you're right," says my hero. I took a deep breath and turned to look at Greenspan. He never moved but stared silently ahead. Nothing came out of that meeting. 23 years ago.
As you know I feel Mr. Volker was bagged by this administration. He is testifying before Congress next week. Volker has always been the ultimate team player. For once, I hope he is not. He may not have been wrong 23 years ago, but undoing what brothers Rubin, Clinton and Bush did just 10 years ago may not be in the cards.
Have a nice weekend.
Anyway, M. Le President seems to have backed off a bit in his statement that he was prepared to walk out of the G-20 unless the position of La Republique in regard to compensation is adopted. I suspect that in the next week there is going to be a lot of backing off of previously held "firm positions" and "agreements in principal." After all, these are the least principled humans on the face of the earth save perhaps for the Congress of the United States. But in the end, they have an admittedly hard task. It wasn't made any easier by a speech made by paul Volker yesterday on the Left Coast calling for the prohibition of proprietary trading by commercial banks. He also spoke out in favor of the Fed as the regulator for financial institutions, greater leverage restrictions for non-commercial banks--read Goldman Sachs--higher capital requirements and against the sponsorship of hedge funds and private equity firms by commercial banks.
Over 20 years ago, Sen. Bill Bradley, who is a hell of a smart guy and a guy who loved to get out at the head of a parade, sponsored a very hush, hush meeting in Washington brought on by the Latin American financial crisis and the changes needed in bank regulation. All the major players from both an institutional and individual standpoint were present save one exception: your humble blogger who received an invitation from Sen. Bradley himself as a result of a conversation we had some weeks previous. No other banker agreed to show up. My institution thought me to be harmless I guess. I was was seated next to Alan Greenspan the spanking new Head of the Fed (who has terrible halitosis by the by...most unpleasant and uncomfortable) when his predecessor, Tall Paul launched into the very same speech he gave yesterday save for the hedge fund and private equity remarks there being...by God's good grace...none of them in existence at that time. I remember asking Paul why the hell he was singling out the commercial banks for all this new regulation when there were institutions like the Pru doing the same damn thing. Gruffly; "Yeah, yeah, you"re right." "And try to put a fence around them as well, wouldn't that lead someone else--somewhere else--doing the same thing?" says I? "Yeah, you're right," says my hero. I took a deep breath and turned to look at Greenspan. He never moved but stared silently ahead. Nothing came out of that meeting. 23 years ago.
As you know I feel Mr. Volker was bagged by this administration. He is testifying before Congress next week. Volker has always been the ultimate team player. For once, I hope he is not. He may not have been wrong 23 years ago, but undoing what brothers Rubin, Clinton and Bush did just 10 years ago may not be in the cards.
Have a nice weekend.
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