Not Many

The title sums up my recent posts. I have come across lots of interesting stuff lately, but for one reason or another, I have decided not to post about.

Zerohedge always has interesting posts as does Abnormal Returns. Zerohedge provides some of the best insight I have come across in recent memory. I am amazed at the volume of posts over there. Abnormal Returns collects a bunch of links that are varied enough to almost always have something interesting.

On the economy front, I think I am still bearish overall. With the stock market recovering, a lot of people thought we were out of the woods. I still think that we will need to see the job destruction slow down before we really start making any actual headway. I think the price of oil is too high and so is the price of natural gas. The CAD/USD FX rate overshot. I think the CAD should be in the 1.16-1.20 range. If it appreciates too much it hurts Canada's recovery because exports in USD will be relatively high.

On the cycling front, not a ton going on. The Dauphine just finished and the Tour of Switzerland is going on. Both are used as final tune ups for the Tour. I guess there is some unrest over at Astana. Contador views Armstrong and Levi as adversaries and Val Verde has said he would help Contador in a sort of Spanish solidarity thing.

But that could all be moot if Astana's money runs out. And that could happen today. Apparently, they need to have a sizable chunk of change in the banks as a deposit for the second half of the season, but if they do not, that could be all folks.

Go Figure

On the eve of the Giro D'Italia, it looks as though Astana's sponsorship is about to fall through. A few days ago news broke that the Kazakh sponsors hadn't paid the team and weren't returning phone calls. No one saw this coming? Borat references aside, I doubt Kazakhstan has the best institutional framework to support following up with people/corporations who don't honour their contracts.

Now the rumour mill is churning out the possibility that Lance may secure backing from the US and possibly from himself. Isn't this the same guy who said that the Discovery Team ended because it was too hard to get new dollars into the sport because of the all doping? He thinks it's going to be easier now, given the current economic climate and the ongoing blood doping and regular doping investigations?

I'm not as confident. I think that the riders will pay their own way during the Giro and might even dawn the Mellow Johnny jerseys worn by Lance, Levi and Chris at the Tour of the Gila.

Calculus Does Have A Role In The Real World

We have been keeping our eyes open for any negative second derivatives. Basically, when the second derivative is negative, the rate of recessionary decline is slowing. It is a first step towards capitulation and an eventual turn around.

Ugh

Lately, I've gotten tired of following all the developments in the de-capitalization of the capital markets. This bailout and that bailout. This promise and that promise. Those bonuses and whose bonuses? Everything is such a mess and it is going to take a while for it to be resolved. I'm tired of analogies putting the financial mess into terms even I can understand.

I'm suffering from negative-data-fatigue-syndrome or NDFS for short. It's exhausting being inundated with and having to process unemployment figures, growth figures, money supply changes, trade data, current account balances, consumer spending numbers and all the random indices that come out every week. And I'm an information fiend. I like to be on top of it. But, 'it' has gotten so big that I would have to leave my job in order to track 'it' to the extent that it deserves. But I can't leave my job cause there's a recession going on.

I have a high tolerance for information so I am used to handling a lot at once, but it is starting to get ridiculous. I would rather be smacking you with information instead of having it smack me. Ugh.

Economic Indicators

There's been a lot of talk about how to interpret all the economic releases that come out during the course of the week. Some looks promising, some not so much and some looks and good and bad depending on what kind of spin you put on.

The unemployment data that came out is bad. There is no way to put a good spin on it. None. In fact, I think the real unemployment rate is much higher. The current calculation does not include people who have stopped looking for work. Some argue that the actual rate is closer to two times larger than the headline rate of 8.6%.

I think it's difficult to come up a real number, but it is going to be higher than the headline rate for sure. I don't think the economy will turn around until we see these numbers decrease. The US job destruction is just massive and it will take time for job creation to ramp up.

FIrst Pass

Mini-Madoff, Canadian style [Bloomberg]
Ecuadorean oil cuts [IHT]
Surprise build in US nat gas stocks, sends price back down [Forbes]
Taleb's crusade rages on [Slate]
A scathing story about working at AIG [Clusterstock]

First Pass

Ratings shmatings. Do credit ratings mean anything anymore? [Clusterstock]
US budget deficit balloons [Reuters]
Goldman profiting from AIG's collapse [Zero Hedge]
GS conference call regarding relationship with AIG [WSJ]
Surprising retail numbers in Canada [Report on Business]
Next year, I'm going to get Barclays to do my taxes [Guardian UK]
Just in case your Friday is going too well, read this [Daily Reckoning]
Give Bernanke a run for his money [San Francisco Fed]

First Pass

Quashing deflation fears in Canada [Report on Business]
The effects of quantitative easing in the US [Bloomberg]
Is this what brought LEH down? [Bloomberg]
Not according to this interview [Portfolio.com]
Changing status of the USD [ftalphaville]

It's not looking good for Geithner:


This is a graph from Intrade showing the probability that he will be out of job by by June 2009.

First Pass

Do what this guy does [Clusterstock]
Interesting advice for AIG [Reuters]
A workaround for the gov to recoup the AIG bonus money [Dealbreaker]
Surprising housing numbers out of the US [Bloomberg]
Lance calls out his teammate [Cyclingnews]
Large decrease in worldwide upstream energy deals [Oil & Gas Journal]

First Pass

Declining nat gas rigs in the US [Bloomberg]
A view on the eventual recovery [Econbrower]
Encouraging numbers from Canadian investors [Report on Business]
Not so encouraging Canadian housing numbers [Report on Business]
Interesting goings on at the weekend OPEC meeting [Oil and Gas Journal]

Mixed Bag

I read Madoff's allocution the other and was immediately struck by the fact that he deposited large sums of cash into accounts at J.P. Morgan Chase. How did the bank not know that something was? Maybe they did... [Portfolio.com]

An interesting piece on magnesium bikes. My bike is a carbon fiber monocoque and I've heard of titanium bikes, but I've never heard of a magnesium bike [velonews.com]

I watched Cramer get trashed by Jon Stewart. Stewart did a good job of asking relevant questions and Cramer did a good job of not really answering them while at the same time admitting he may have made a mistake or two. I think CNBC is in a bad position. They can't decide whether or not they want to be an entertainment channel or a news channel. One could argue that they've managed a decent balancing act until now, but that their perceived position is changing.

It was easy to fly all over the world with the CEOs of various banks and go on rants about companies and yell at the government when the markets were going up. But ever since the market has gone down, CNBC is seen more as part of problem rather than an impartial entity reporting on the problem.

They would argue that in order to get the best stories they have to be tight with the Wall St. inner circle, that there is no other way and that this is part of the territory. Wall St. is run by insiders and so CNBC promotes and rallies behind the companies and people it wants to remain close to in order to maintain a competitive advantage over the other financial news organizations.

I can understand why Stewart thinks that CNBC contributed to the current financial mess. They were bullish up until the very last second and started up again as soon as they could. The part that bugs me, though, is that Stewart thinks that CNBC is responsible for the drop in his mother's retirement fund.

Why are investing and finance areas where it's ok to be ignorant? You don't drive a car with knowing the rules of the road, how to operate it and what the risks are. If you don't understand the risks involved, that's fine, just don't invest and instead, put all of your money into a savings account. If you do invest, you must be prepared that crazy stuff will happen. People must take responsibility for their actions. That is the key point. Everyone wants to be absolved of responsibility and play the blame game. Granted, derivatives got out of hand and everyone bet against them all being in the money at once. But, the probability isn't zero. It's larger than we'd initially think, but it's definitely not zero.

And don't give me some story about an investment professional telling you that your money would grow at 7% indefinitely and you just did what they said and now your portfolio is down 50%. You could have not invested. If you are shocked at being down 50% you should never have invested. No one forced you to. You did it because you got greedy just like the Wall St. CEO's that are taking all the heat (I am in no way defending what they did. They got super greedy and bet the farm without fully understanding the risks and that was stupid.).

You could have put your money under the mattress and not participated in any of the craziness.

Required Reading

Madoff's allocution [Dealbreaker via WSJ]
Some perspective on large amounts of money [Gizmodo]
Canadian doom and gloom [Report on Business]

First Pass

And again...Paulson & Co cleaning up the UK banking sector [ftalphaville]
A nice discussion of AIG, CDSs and moral hazard [Econbrowser]
More on moral hazard [CafeHayek]
John Galt would hate this bill [Report on Business]
Libor rate are indicating that credit markets are still frozen [Bloomberg]

First Pass

The contango in the crude market is almost completely gone [ftalphaville]
Will crude follow nat gas on its march to zero? [clusterstock]
This does not bode well for consumer confidence [Reuters]
Hayek wrestling with the economy [Taking Hayek Seriously]

First Pass

Built on fake [Dealbreaker.com]
C'mon man, you didn't have to go that far, did you? [Reuters.com]
Update on the crude contango, the WTI/Brent spread and the goings on with the USO [ftalphaville]
Paris-Nice is the first meaningful European stage race of the season. A lot of riders will begin gauging their competition for the grand tours at this race.

It's A Good Thing She's Got Such Valuable Insight

...to balance with her good looks.

First Pass

This can't be good. [dshort.com]

Black Swan hedge fund closing because they're are making too much money. [Bloomberg]
Rogue traders at MER before BOA bought em? [Bloomberg]
So timely. If you haven't read this yet, now's the perfect time. [Asymmetric Information]
More on BOA's lack of due diligence. [ftalphaville.com]

I Love CNBC Just As Much As The Next Guy

For some reason, Jon Stewart is not a fan. Rick Santelli was supposed to be on the Daily Show, but he "bailed out", so in fine form, Stewart tears in to the network.

More Michael Lewis

I'm a fan of his pieces. This is his latest in Vanity Fair. He also had a good one, here, at Portfolio.com.

Quantitative Easing Vs. Open Market Operations

In the Bank of Canada's statement today, they mentioned that they were open to quantitative easing. I'd heard this phrase used by the Federal Reserve in the fall, but I hadn't really understood what it means or how it is different from open market operations.

Turns out, they are quite similar. When a central bank announces a change to the target of their benchmark rate they must either buy or sell government securities in the open market. In order to lower (raise) interest rates, the bank must buy (sell) government bonds in the open market. These transactions change the size of the money supply causing the benchmark rate to approach its target.

Quantitative easing involves purchasing a wider variety of securities or accepting securities as collateral for loans from the central bank. Both buying and lending increase the amount of money in circulation.

Remember all those mortgage backed securities and collateralized debt obligations that the US banks couldn't wait to get off of their balance sheets? The Federal Reserve will accept the best of these assets as collateral for loans in order to infuse the economy with more money.

A slightly more technical, but still accessible explanation is available here.