Wednesday, October 28, 2009

Karzai and the CIA

http://www.nytimes.com/2009/10/28/world/asia/28intel.html?em

Whenever I talk to anyone who has had interactions with high level officials in foreign lands, they are always quick to mention who is on the CIA's payroll. At first I was skeptical. Having seen time and again those rumors and gossip statements ultimately proved correct, I conclude that the CIA is only covert in one country -- the USA.

Wednesday, October 14, 2009

He's Hot

I have a man crush on Martin Wolf:

http://www.ft.com/cms/s/0/9165b8b0-b82a-11de-8ca9-00144feab49a.html

I wish the US had just one MSM finance/economics writer with as much perspicacity. Lewis comes close, I guess.

But, to discuss Wolf's argument, he seems to suggest that nations should better utilize the Special Drawing Rights (or some other basket of currencies) for the purposes of international trade and reserve holdings. Makes sense. If the IMF governs the basket, it could be reweighted quarterly or annually to reflect changes in GDP. Hmm, the more I think about it, the more I like it.

Gold

I almost feel bad for the gold bugs. Don't they know they're riding high on a commodities bubbles fueled by Chinese stockpiling? Once the market discounts the inevitable Chinese pullback from minerals, gold will take a major hit.

So many of the gold bugs are buoyed not by market fundamentals, but by market principles. They mistake their politics for the way of the world. Sorry, fellas, they ain't gonna end the Fed. They ain't gonna go back to the gold standard. And, eventually, the hyperinflationary threat will be quashed and the dollar will find footing because America's capital markets will still be attractive.

Yes, I know, I've been saying it myself: the dollar will lose strength against most currencies. So what? Could be worse. Wait til the commodities bubble really bursts, then you'll see a lot more currency pain.

Deflationary Threat

Remember, here's the game. The financial system is on life support. We won't know the extent of the damage for at least two more years. Until then, the government will be lending free money to the banks (whether through the discount window at the Fed, or through purchases of agency debt -- which provides liquidity to the lending market). That's just how it's going to be.

To prevent dollar destruction, we will see propaganda against oil and we will see continued worry about deflation.

How to invest in this climate? Don't. If you must, just go beta.

See Mishkin's take:
http://www.cnbc.com/id/33308407

Tuesday, October 13, 2009

It's Not You, It's Me

Enjoyable op-ed on the potential fallout from red versus blue state health care debates:

http://finance.yahoo.com/insurance/article/107941/let-the-red-states-secede.html

Though it is a stretch to suggest that health care could be solved by dissolving the polygamous marriage of 50 states, the thinking is not reductio ad absurdum.

Some food for thought:
But America is starting to resemble those other countries where two or more
"nations" coexist unhappily within a single state -- like the English and the
Scottish, the Spanish and the Catalans, or even the English-speaking Canadians
and the Quebecois. In most cases, greater autonomy for the two halves usually
has been found to make both sides happier.