Dot Definitions

November 30, 2009

What are the Dots I hope to connect?

The short answer is that they are the signposts and policies that help us see where we are in the cycle.

The cycle is the pendulum swing between generally building or retaining income as a society, and spending or extracting previously retained income (wealth).

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Year-end Contest

November 29, 2009

Mind on Money readers are hereby invited to enter our first-ever year-end contest.

The point of the contest is to come up with a reason for a market anomaly to exist when it shouldn’t.  This is the kind of situation that costs people like me lots of money when trading.  It’s a prime example the old saw that the market can stay irrational longer than you can stay solvent.

I’m talking about the 30-year swap rate.

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Connecting the Dots

November 27, 2009

Like many others, I traveled quite a distance to have Thanksgiving with my parents and siblings and assorted other relatives, significant others, and guests.  It was a good day, even though the four-airport trek keeps it from being an annual event.

I hope you all had similarly affirming days.

Part of the catching up was the discussion of “what’s next”.  Fortunately our discussions stay away from politics and economics until after the pies and coffee.  Our family has “one of each” in many ways, and politics is no exception.

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Same as Ever

November 24, 2009

At least the Crash of ’29 led to the Pecora Hearings and the bankers that gambled with depositors’ money were ruined themselves.  Today the people that engineered the recent disaster are looking forward to their best payday ever.

The “punishment” Wall Street got out of the 2008 meltdown was one year of lowered bonuses.  Pay was rolled back to levels of four or five years earlier, but still far more than way back in 1999. The people on Main Street should be so lucky.

Happy days are here again, at least for the investment bankers.

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The Economy – a New Direction?

November 20, 2009

The week had a negative cast to it, ending on a sour note with the ECRI WLI and WLI growth index both down. Things headed down by Tuesday with the PPI taking a large fall. The PPI being down was not so much about inflation as aggregate demand. An economy is not growing at this point in a recession if producer prices drop .6% across both intermediate and finished goods.

Housing starts was another big disappointment down almost 11%. What effect if any on this poor performance resulted from uncertainty about the new home buyers credit program remains to be seen. Jobless claims was the big news of the week for bulls with a second straight week of new claims at the 500,000 level confirming the prior weeks decline. While the Philly Fed was a positive all it did was pair off with and eliminate the earlier negative report from the Empire State Index. I think it’s fair to say that as the week ended forces in the economy are now pretty well balanced between recovery and decline.

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Filling the Void

November 20, 2009

As a dedicated reader of the Weekly World News, I always enjoy the hard-hitting hilarity of the column by Ed Anger.  (I actually had the pleasure of handing writer/director John Waters his very first copy of the paper at a sleazy South Philly theater in 1981 as he and the cast premiered Polyester.)

Serial analyst The Mogambo Guru does for investing what Ed Anger does for American politics what Serial Mom did for fashion faux pas.  Now my friend George has the news that we may not see the Guru’s missives on investments, especially if he gets much much better at golf.  Read the rest of this entry »

Channeling Mickey Rooney

November 20, 2009

A staple of the Saturday matinee TV movie in my youth was a particularly dreadful vehicle for perennial college kid Mickey Rooney.  I have no idea how old he was when he finally stopped play post-pubescent leads, but I think he must have been well into his 30’s….

[Bonus points for any reader that can tell us how old Mickey was when he last played a cute college kid.]

Anyway, all of these low-budget grinders were fashioned on the formula that had Mickey exclaim early in the show

“I’ve got a swell idea!  Let’s put on a play!”

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Carry Trade Exposed

November 19, 2009

A reader writes (via the Blowback page):

I have read many very good explanations of how the carry trade works.

My number one question is still unanswered.

Who can borrow dollars at what ever the low rate is? Is it banks, or brokerages or individuals? Is the actual borrowing a series of trades and transactions done by individuals or institutions?

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Paulson’s Envelope

November 18, 2009

Fortunately my credit card banks are constantly sending me “important information” in envelopes that don’t have printing all over them.  Thus I have a steady supply when I want to do “back of the envelope” figuring.

But Hank Paulson needed a much larger envelope than a simple #10 when he was figuring what a collapse at AIG would do to the net worth of his former firm.   Not that he had to worry, because he got a “get out of jail free” card, and a special tax exemption, that let him sell his Goldman stock without paying $200 million in capital gains taxes back in 2006 when he took the job in the Bush Administration.

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CDO Kama Sutra

November 17, 2009

In a recent phone interview, Jody Shenn, reporter on the securitized products beat at Bloomberg, asked me why Goldman would have created a deal that let the manager choose to pay off subordinated bonds while simultaneously leaving senior bonds very likely to default.

He had me stumped.  The obvious reason – that there was a benefit to Goldman, just didn’t suffice.

First of all, the deals dated to 2006, and the very idea of arbitrarily choosing to pay off junior bonds ahead of senior bonds three years later seemed to stand the entire concept of senior/junior on its head.

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