Worth a quick read, but stick around for the punchline:
http://www.bloomberg.com/apps/news?pid=20601039&sid=aBG26d6aO25U
Thursday, September 24, 2009
Money
Ambrose Evans-Pritchard has been blogging with ferocity lately. Common sense dictates that the dollar is facing a huge decline, and many important actors are positioned for such an eventuality.
One would think that the Federal Reserve would be listening to this and tightening up QE and interest rates.
But you have to think bigger before blaming the Fed. Assess these facts:
1. The finance industry is profitable only because of low interest rate borrowing.
2. The finance industry is stabilized because of phony accounting standards, meaning we won't know the true extent of loan losses for at least 2 more years.
3. The finance industry is buoyed by Agency and Treasury debt, much of which is being bought by the Fed. The Fed's purchase of these securities allows FNM and FRE to buy more mortgages and convert them to taxpayer-backed securities, which creates some fine collateral (currently trading at more than par -- if you can believe that).
4. The price of oil will determine the speed of economic recovery.
How do these facts fit together? It means two things. The Fed has to continue QE to keep the finance industry afloat until the loan losses from the subprime/Alt A fiasco can be realized. This means there has to be a justification for continued money printing, which can only come from a perceived deflationary threat. It also means that the dollar has to continue to remain strong in order to keep oil down. QE and strong dollar don't match, you might say. And you're right -- but only over the long term.
Expect this: continued talk of deflation, continued Fed purchases of T-Bills and Agency MBS, and lot's of propaganda about increased supply of oil and larger than expected oil inventories. We will see inflation, and it will be painful, but it will not come for at least two years.
One would think that the Federal Reserve would be listening to this and tightening up QE and interest rates.
But you have to think bigger before blaming the Fed. Assess these facts:
1. The finance industry is profitable only because of low interest rate borrowing.
2. The finance industry is stabilized because of phony accounting standards, meaning we won't know the true extent of loan losses for at least 2 more years.
3. The finance industry is buoyed by Agency and Treasury debt, much of which is being bought by the Fed. The Fed's purchase of these securities allows FNM and FRE to buy more mortgages and convert them to taxpayer-backed securities, which creates some fine collateral (currently trading at more than par -- if you can believe that).
4. The price of oil will determine the speed of economic recovery.
How do these facts fit together? It means two things. The Fed has to continue QE to keep the finance industry afloat until the loan losses from the subprime/Alt A fiasco can be realized. This means there has to be a justification for continued money printing, which can only come from a perceived deflationary threat. It also means that the dollar has to continue to remain strong in order to keep oil down. QE and strong dollar don't match, you might say. And you're right -- but only over the long term.
Expect this: continued talk of deflation, continued Fed purchases of T-Bills and Agency MBS, and lot's of propaganda about increased supply of oil and larger than expected oil inventories. We will see inflation, and it will be painful, but it will not come for at least two years.
Friday, September 18, 2009
The Weather
This market is like the weather. Everyone with good eyes can see the clouds are still forming, but just right now it's balmy with a slight sea breeze. Let's have a picnic and eat some GE and FNM. Wash it down with some commodities ETFs.
Those clouds are there, and prudent minds remain risk averse. We just hope that if the storm does pass, there will be enough left at the table.
Those clouds are there, and prudent minds remain risk averse. We just hope that if the storm does pass, there will be enough left at the table.
Thursday, September 10, 2009
Numberwang -- Funny Why?
If you haven't seen That Mitchell and Webb Look, you don't know Numberwang. And you're missing out.
Numberwang is absurdist comedy in the tradition of Monty Python or the sketches SNL shows in the last five minutes of the program. A gameshow, contestants must guess the correct number in a variety of challenges. Losers suffer humiliation or even injury. But how does one win? That's numberwang. Let's rotate the board.
Of course it makes no sense whatsoever.
So why is it funny?
Numberwang is funny, in one way, simply because it makes no sense. Watching it, you don't know what's coming next, and you are baffled why "eleventy-six" is the correct number. Or why a black contestant is wearing lederhosen.
In another light, Numberwang makes fun of game shows in general. All you need is a competition with blinking lights, playful colors, an enthusiastic host, buzzers, and spinning wheels. It works. I mean, look at Let's Make a Deal, which is a stripped down (pardon the pun) version of the standard gameshow. Yet it's hugely popular and has revived Howie Mandel's corpse from the cemetary of dead laughter.
The genius of Numberwang is that we are the subjects of comedy. Numberwang is funny because of a ridiculous tendency in human nature to sit and watch any competition. Mix together some competitors, a running score, and some threat of jeopardy. That's all. We'll watch it. Add blinking lights and a raucous theme tune and we're transfixed. Watching Numberwang, we get it. Game shows are dumb. We're dumb for watching them. It's absurd!
Numberwang is absurdist comedy in the tradition of Monty Python or the sketches SNL shows in the last five minutes of the program. A gameshow, contestants must guess the correct number in a variety of challenges. Losers suffer humiliation or even injury. But how does one win? That's numberwang. Let's rotate the board.
Of course it makes no sense whatsoever.
So why is it funny?
Numberwang is funny, in one way, simply because it makes no sense. Watching it, you don't know what's coming next, and you are baffled why "eleventy-six" is the correct number. Or why a black contestant is wearing lederhosen.
In another light, Numberwang makes fun of game shows in general. All you need is a competition with blinking lights, playful colors, an enthusiastic host, buzzers, and spinning wheels. It works. I mean, look at Let's Make a Deal, which is a stripped down (pardon the pun) version of the standard gameshow. Yet it's hugely popular and has revived Howie Mandel's corpse from the cemetary of dead laughter.
The genius of Numberwang is that we are the subjects of comedy. Numberwang is funny because of a ridiculous tendency in human nature to sit and watch any competition. Mix together some competitors, a running score, and some threat of jeopardy. That's all. We'll watch it. Add blinking lights and a raucous theme tune and we're transfixed. Watching Numberwang, we get it. Game shows are dumb. We're dumb for watching them. It's absurd!
And that is the joy of absurdist comedy done well.
Follow Numberwang on Twitter:
http://twitter.com/numberwang
Follow Numberwang on Twitter:
http://twitter.com/numberwang
Friday, September 4, 2009
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