Alpha Guy

Inflation FTW!

noreply@blogger.com (Khyron) — Mon, 01 Dec 2008 09:45:00 +0000

I don't know why so many people think the Fed actually cares about preventing/stopping inflation when the Fed's primary role over the course of the last 95 years has been to manufacture inflation. I mean, come on, what would have you think the Fed is seeking to fight inflation? It can't be the last 26 or more years of credit creation led by the Fed (mostly on Greenspan's watch). With the dollar worth 5% of its value in 1913, the year of the Fed's founding, it can't be that either.

Am I missing something? Why do people still think the Fed has a mandate to fight inflation? If they did, they are horribly incompetent and inept at that job and thus should be taken out and shot. I am a firm believer in Hanlon's Razor, but even this level of stupidity doesn't make sense. I can't see how 95 years worth of ineptitude can be justified unless...its not ineptitude at work but intention.

Capitalism at Work

noreply@blogger.com (Khyron) — Sun, 30 Nov 2008 14:26:00 +0000

THIS is what capitalism looks like. Not the pseudo-capitalism, Gordon Gekko wanna-be greed driven shite that has overtaken the Western world for the last few decades.

I honestly believe that if more company owners and managers behaved in the fashion described in this article, unions would not have the kind of traction that they do (did?). Capitalism shouldn't be about maximizing profit at any and all costs. It should be about creating a win for everyone - employees (probably more so employees than anyone), customers (strong second), management, and the community (indirectly through the already named constituencies as well as through direct involvement of the corporation).

I have nothing against unions, personally, but I don't believe in them. I also get that unions derive their leverage from their role as self-appointed defenders of the common man. Unions would largely be unnecessary if the "leaders" of corporations weren't always trying to fuck over their employees (among others). Management creates an adversarial environment and then wonders why the unions are so hostile toward them. How stupid do you have to be? If managements spent more time attempting to share the company's success with all involved in creating that success -- serving the employees, customers, vendors and families -- they'd probably not have to worry about unionization creeping into their workforces. If they spent as much time and energy on enriching those same customers, employees, vendors, et. al, I think a lot of wasted time and energy could be directed into profitable ventures.

(I admit to oversimplifying a bit, but probably not too much. "Getting over" is a human trait. It transcends cultures, nationalities, race, gender, and every other division you can think of. However, it doesn't work, as Nas reminds us. So why bother trying to "get over on someone" if its not a long term strategy for real success?)

Historically, tech companies have been the embodiment of this ideal (more so than old line industrials, anyway). The technology industry has a reputation as a meritocracy, which encourages people to give their all in the (deserved) expectation that they will be compensated commensurately with their contribution. That ideal IS the very definition of service. While the tech industry doesn't get it perfect, they are still much closer than more established industries. This probably explains the lack of presence of unions within technology companies to a large degree (although not exclusively).

Anyway, just something for all of you to think about. I'm feeling the spirit of Earl Nightingale wash over me these days, but the more I think about "The Strangest Secret", the more I see that Earl was spot on. Take care of others, and you will be taken care of. Universal, karmic law.

Just too bad that Ken Lay and the rest of those Enron cocksuckers didn't get their just desserts -- violent anal rape -- in prison. Well, you can't win 'em all!

Saving and Investing Seminar at Howard University on Wednesday

noreply@blogger.com (Khyron) — Wed, 26 Nov 2008 22:55:00 +0000

Yours truly has been invited to speak at Howard University next week. Specifically, for the Saving and Investing Seminar being presented by the Student Council of the College of Engineering, Architecture and Computer Sciences (CEACS). (Don't blame me. I didn't make up the name.) The president of the student council is one of my former "students" from my technical advisory days, so I guess he trusts me with the minds of his peers.

*grin*

I have to admit to having a very palpable feeling of fear at the thought of speaking before a group of college students. This is a bit weird, as I have done these types of engagements in the past (just with smaller groups). I guess the fear has to do with being tapped as some sort of "expert" on finance topics. While I appreciate that, I am just feeling a bit nervous about the whole thing, as this is the first time that I have been asked to speak.

Don't misunderstand. I love sharing what I do know. I like helping people prepare for all of the potential issues that may arise. I want to help people move to a position where they don't have to worry about money. Simple math shows that speaking to a group is way more effective at spreading my message (me - message?) than individual consultations. So this would seem to be a natural progression for me. Still, I am (slightly) worried.

I do look forward to this event though. Personally, I take the fear as a signal that I should do this, that it is to be embraced and not avoided. That mantra has been serving me well this year. We'll see how it works out in this instance as well. So if you happen to be in the DC metro area next Wednesday around 7:00 PM, drop by the Lewis K. Downing School of Engineering building at Howard University to hear what I have to say. There will be a special guest as well, in the form of the estimable Ginger from Girls Just Wanna Have Funds. So if saving, investing, (personal) finance, and other such subjects appeal to you, you are welcome to come hear what we have to say. Make sure to introduce yourself as well. I know I personally like to know who is deriving benefit from this blog, and what I can do to increase its value to everyone.

Peace!

The 51% Solution

noreply@blogger.com (Khyron) — Wed, 26 Nov 2008 22:12:00 +0000

This is what it comes down to in investing -- being right just a bit more often than being wrong, and when we're right, pressing our advantage. Easy in theory, but extremely complex and nuanced in practice.

A big point that many professional traders emphasize is that the greater your advantage (and we're talking in basis points here, realistically - 5+ bps - against your opponents), the more you need to press. Even Charlie Munger will tell you that when an opportunity comes along, you need to put as much weight behind that trade as possible. (See #6 from the following list of his rules for investment success, about asset allocation.)

Ask John Paulson.

Ratings Agencies: A New Model

noreply@blogger.com (Khyron) — Wed, 26 Nov 2008 20:10:00 +0000

One of the fundamental breakdowns of this credit crisis was in the ratings agencies (technically, the Nationally Recognized Statistical Rating Organizations - NRSROs).

This article over on the Financial Times gives a nice overview of the growth of Moody's and the NRSROs, especially in the structured finance arena. You should check it out, twice if you're not really a follower of the market.

The big takeaway from this whole crisis, on the NRSRO side, is that the appropriate compensation model for the NRSROs is for their customers to be the buyers of bonds and other credit products. Additionally, they should probably be private versus public organizations, much like SC Johnson. Many firms are public that have no good reason to be. I am all for public markets, but when a firm serves such a large public role, being publicly traded is probably a handicap as opposed to a benefit. Adding a touch of the Google internal stock market is probably a good idea for these private firms, but their shares do not need to trade on public markets. I really don't get this desire for firms to be public, except if they are struggling. Maybe all those LBO targets are on to something? (About being private, anyway. It sure isn't their business processes.)

As for the point of credit buyers paying the ratings firms, this is ideal because they are the ones who ultimately will benefit from the research. The current structure invites severe moral hazard. The FT articles mentions that the complexity of rated products forced growth in the size of Moody's in order to rate these large entities and the esoteric products coming into the credit market. Well, maybe scale was required, but the flip side of the subscription model is that if a corporation will not allow the NRSRO to rate its product -- if the corporation willfully decreases transparency into its credit quality -- then a suitable discount must be applied in the market to compensate for the lack of information. This is the ONLY model that makes sense. Without the information, the opacity should force the market to discount the bonds, commercial paper, convertibles, or structured product being sold (or underwritten) by the corporation. That's not fair -- its just plain good sense and good business!

The final concern becomes the models themselves. As has been widely noted, the NY Times covered this recently. The models are just mathematical equations. They have no position on this subject; they are merely tools, and like any tool, they can be misused or misunderstood by those wielding them. Human frailty (and that damn good sense) come into play here again. The Times piece looks at how quickly humans were willing to set aside their reason in the pursuit of compensation, or assume that the real world was accurately reflected by the models.

The models were not then, and are not now, the problem. The problem is the gatekeepers wielding the models. Once a flaw - a programming bug, or worse, a design flaw - was found, anything rated with that software should have been re-rated. The decision to NOT re-rate those issues should be considered an act of negligence, possibly willful and criminal negligence. Models will evolve if their creators update them. Secondly, if any product has little to no history, then you cannot reasonably rate it based on historical performance of any other product.

So if you're out there in the credit market in any way, you owe it to yourself to do SOME credit analysis on any product you might buy. Whether we're talking bond funds, or direct investment in credit products, you have to understand what you're buying on some level. Credit analysis is more difficult than equity analysis. Such is life.

So to wrap this (very late) missive up, the ratings agencies can serve a useful function. However, their role of being public watchdogs, a la the press, must be honored. Otherwise, that role is better subsumed within a unified regulator (whenever the SEC and CFTC merge), and let's face it - we don't want that. This is something that is probably better suited to government functionally than most other tasks it takes on, but it still should be a market function. Government could provide credit research and publish it, for free even, but would that research be very good? Could it be subverted? A market system for credit research will go a longer way to promoting the transparency and lack of conflict that investors deserve. Adding that value should come with a price.

Selling Online Real Estate

noreply@blogger.com (Khyron) — Wed, 19 Nov 2008 20:23:00 +0000

Since my grandiose plans from about a year ago to turn some of the domains I own into businesses never came to fruition, I have decided to re-park them. Given the (somewhat) amazing response that has been generated with the currently parked domains, and the fact that the 4 domains I just listed were generating no income, it would be absurd to continue keeping them in reserve.

I currently have 7 domains listed, including one semi-premium domain (a .net) and a truly premium domain (a choice .com). We'll see how these do being parked. They performed fairly well up until de-listing them last summer, so I think this could be promising. Not lucrative, but at least they should cover their registration and other holding costs.

Until next time...

Woo Hoo!

noreply@blogger.com (Khyron) — Thu, 13 Nov 2008 23:35:00 +0000

I just made $22.01 for July - October from parking some domains with Sedo. Very nice.

The Effective End of an Industry

noreply@blogger.com (Khyron) — Wed, 12 Nov 2008 19:05:00 +0000

It occurred to me yesterday that, as we approach the the $1,000,000,000,000 mark in losses from this mortgage induced economic and credit crisis, the size of the global hedge fund industry is estimated at somewhere between $1.5T and $2T in assets under management. (Or at least, it was prior to this crisis.)

So, if we really do hit $1.5T in losses as some of the extreme estimates have stated, we will have effectively wiped out the ENTIRE hedge fund industry. The ensuing liquidation will drive down prices on many financial assets, and drive quite a few people out of jobs.

Politicians really need to be careful what they wish for.

Quote of the Week

noreply@blogger.com (Khyron) — Tue, 11 Nov 2008 08:55:00 +0000

From Felix Salmon at Portfolio:

"If you want to save money, save money. Don't place too much trust in the market to make your money grow, since there's a good chance the market will end up moving in entirely the wrong direction."

Paying Yourself First

noreply@blogger.com (Khyron) — Thu, 06 Nov 2008 12:01:00 +0000

So I finally received my Federal tax refund earlier this week. I think it actually came yesterday, IIRC. $2484. Not bad. So I deposited it along with $15 that I have saved in the last week.

(On an unrelated note, my personal saving has really declined recently. I haven't carried as much cash in the last few months, and in the interest of fitness, I have stopped eating as much junk food, especially from vending machines. So I guess the drop in cash saving is a positive sign. I did increase my automated saving recently, however, to $700 per pay period. That's effectively 30% of my monthly net income.)

Anyway, I decided to take a bit of time this morning to do some saving. Of the almost $2500 I deposited on Wednesday, $1250 was transferred to my brokerage account so that I can re-balance my Satellite Portfolio. Another $500 was transferred to my emergency savings account, which replaces $500 I transferred out a few weeks ago as an insurance policy on some upcoming spending. Depending on how my automated payments on my secondary credit card go, I may transfer another $500 over there and really be $500, not just at break even.

*shrug*

So $1750 has been allocated to savings of some sort out of almost $2500. I think that's respectable. The additional $500 may be icing or, even more likely, I will put it against my accumulated debt on my primary card. (The secondary card is now encased in ice. More on that in my October update.)

Whatever is left from the $2500 will be used to fund my snowboard. I estimate about $249 left over, all told.

The whole point here is that you must pay yourself first. It feels great, and that should be enough reason for anyone to do it. Second, you can't help others (if you are so inclined) if you yourself need help. Eliminating your debt, having your retirement saving locked up, having an investment program, and emergency savings is all about positioning yourself to do with your time - your life - that which is important to YOU. Money is the tool to that end. Whatever is left, and there should be something left, do with as you please. That's the payoff for successfully completing the other phases. Indeed, you need to build that into the overall picture so that you have a bit of motivation.

Its like working out. I work out to improve and show respect for my body. Your body is a loaner that is taken if you don't treat it right. However, we all have something we like which is diametrically opposed to a fitness goal. It may be food in general, or a specific cuisine, beer or other alcoholic beverages, or laziness. So you have to build your program to take these factors into account. Your financial program should never feel like punishment, otherwise you will subvert yourself in rebellion. That serves NO ONE, least of all YOU. Build in the slack. You should enjoy everything, both the act of saving and investing, accumulating and growing your wealth, along with the act of spending what you have accumulated on those things that are important to you. (Things that are NOT important to you should ruthlessly and efficiently be cut out of your life, with extreme prejudice.)

Also, every victory should be celebrated. Why? Because it represents CHOICE. A choice to do something that supports the achievement of your goal. (You do have written goals, with deadlines and implementation plans, right?) You have chosen your goal over other available options. Celebrate the process of moving closer to your goals all the time!

So how are you paying yourself first? And how are you rewarding yourself for doing so?

Money Clubs

noreply@blogger.com (Khyron) — Sat, 01 Nov 2008 10:32:00 +0000

While I don't like the name (just a personal thing), this is a great idea for anyone having problems with their finances.

In order to achieve any goal, you must first gain clarity around that goal. That means the goal must be well defined, succinctly, measurable (e.g. quantifiable), achievable, and all that other good SMART stuff. As Napoleon Hill said, "A goal is a dream with a deadline". How important are your dreams to you?

You have to create an environment conducive to achieving the goal. That means creating support structures, as we like to say at Landmark Education. In the arena of money, creating a group like this is an ideal structure for the achievement of a financial goal (or goals). While the article does not go into heavy detail, the basics are there along with pointers to specific resources.

Those who follow me on Twitter know that I have an intense workout schedule, Monday through Friday, usually starting at 10:00 AM for an hour to 90 minutes. I also hired a personal trainer through my gym, to coach me on matters that I was unfamiliar with, and generally push me harder than I am inclined to push myself. (Even better, he has taught me HOW to push myself harder - safely - so I don't absolutely have to depend on him in perpetuity for that role.) These are all parts of the support structure I have created to achieve the fitness goals I have for the rest of my life.

The final piece, and the piece that this article is suggesting and encouraging, is creating a group of like minded individuals with similar goals. With these people, you share your successes and failures, coach each other, congratulate each other, and help each other grow toward the goal. My group takes the form of an e-mail list with about 9 of my really good friends around the country. And it works. By creating this group, not only have I enhanced my overall fitness, but I have people who will hold me accountable (along with my trainer) for doing so on an ongoing basis. I learn from these guys, I let them know how close I am to my 5 clearly defined goals (which I shared with them), and I share what I have found with them so they might benefit from my experience. I think we've created a supportive environment for all, and I love that. The same can be done with your financial goals, if you really want it.

The same concept applies in personal finance. If you're not where you want to be, and you're honestly committed to achieving a goal, then you NEED to do this! Period. It is one piece of the puzzle.

My only request is that you don't lie to yourself. In order to lie to others, you have to start by lying to yourself. Now, lying is a sign of disrespect for the person in its own right. (I'm not making judgments about anyone for doing so, but just consider that by itself.) However, by lying to yourself, you are showing your disrespect for YOURSELF (just as working in a job you hate and not working to create a job you love is disrespectful to your mind, or not exercising and eating poorly is disrespectful to your body). If you won't show yourself the respect of honesty -- no matter how bad it "looks" or "feels" to do so -- then no one else will, and rightfully so. You aren't deserving of respect from others beyond basic human respect for your existence.

The final consideration is that lying to yourself typically leads to wasting your time. There is no resource on this planet of more value than your time. EVERYONE gets the same 24 hours in a day, and what you create with that time is your choice. However, lying to yourself, for any and all reasons, will lead you down the path of pursuing activities that waste your time. Treasure your time, because it is the one resource you can NEVER get back.

So, on that note, go create your support structures. Start with a "money club". Please!? What's the worst that could happen?

NOTE: Whatever the voice in your head is saying in response to that question, I call BULLSHIT! Most bad things only happen in our minds, and we spend our lives avoiding theoretical bad shit. Go get a real world problem which exists in physical time and space, THEN we can talk.

I can't wait to hear about more of these popping up all over. Its so very overdue.

Okie, I go to sleep now. G'night all, and until next time...

Negative Crack Spread

noreply@blogger.com (Khyron) — Thu, 30 Oct 2008 19:19:00 +0000

The FT Alphaville has a piece on the negative crack spread. I'm not going to get into explaining what the crack spread is here, since the article does a much better job. However, it does make me wonder what trade might be available in the next 3 - 6 months in the energy futures market. Buy the RBOB, while going short WTI?

Just sayin'.

Amen!

noreply@blogger.com (Khyron) — Wed, 29 Oct 2008 08:24:00 +0000

I have no idea how I missed this originally, but I think it was because I was in Las Vegas when this was published by David Merkel.

Simply put, this is the best definition of how Capitalism SHOULD work that I've seen in written form. (I don't like using the word "should" in any context, but it seems appropriate in this case.)

Granted, it does not always work like that. Maybe not even most of the time, at least in this period of world history. However, I don't think Capitalism is dead. On life support maybe, but not dead. The greedy, self-centered and selfish bastards took over and have been running the show for far too long. However, there are still people out there interested in creating the most value for others -- providing service -- in exchange for the money those people are willing to part with.

Pricing is a great measure of the service you're providing people. By definition, if you are lowering your prices, it is because you are not offering enough value to your customers to garner the higher price. Instead of racing to the bottom, you need to figure out how to move up the value chain. No, its not easy, but nothing worth doing is. (And when something is easy or perceived to be easy, too many people start doing it, looking to get rich. See the dot com boom and real estate investing/speculation in the last 10 years. THAT's the definitive contrarian indicator, when everyone is trying to make money in a given arena.)

So I have to hand it to David Merkel with this well timed post. Too bad I'm finding it a month after its original publication.

Now back to creating some value, somehow, for someone...

Oh Well

noreply@blogger.com (Khyron) — Mon, 27 Oct 2008 16:57:00 +0000

I was so looking forward to making a rebalancing buy in my trading account today, but my cash balance conspired against it. No matter. Next week will give me an opportunity to rebalance for November.

I did pick up some additional PMF at $12.30 per share. I'll be slowly buying into that over the coming weeks as well.

I know I've been delinquent for the last week, but I'll be updating over the course of the week. There's a lot of catching up to do regarding the last 2 months, and lots of stuff to share with you all.

Later.

Deleveraging Academia

noreply@blogger.com (Khyron) — Fri, 17 Oct 2008 13:46:00 +0000

The WSJ has an article about the impact of the credit crunch on colleges. It appears that the effects are being felt all through the academic complex.

Good!

Higher education has been one of the most mis-priced and overvalued products in this country. The rate of increase in college costs has been flatly absurd. Why? Too much money.

For the longest time, colleges and universities have been overpriced. The price inflation we've seen for college education was completely ridiculous, fueled by easy government grants, loans and other spending. Isn't that the kind of government spending that leads to inflation - spending that creates no marginal increase in value? Sure seems like it. We're not talking Weimar Germany yet, but still, the entire college financing market has been able to increase in cost at insane rates of growth on the back of cheap money, mostly in the form of debt.

It had to come to an end. Good riddance.

I think there is a lot more to come - a lot more layoffs, more construction to be postponed, and other crazy spending by universities to reign in costs. No longer will they be able to finance this madness with 6% annual tuition increases, because shortly there will be few (if any) with the capacity to pay. Definitely not from the "middle class".

And socioeconomic stratification will get worse.

I feel sorry for anyone who was counting on getting loans to pay for any kind of higher education. Its going to be ugly, but it is long overdue.

Is Anyone In Charge Here?

noreply@blogger.com (Khyron) — Wed, 15 Oct 2008 07:45:00 +0000

THIS (WSJ.com sub req'd) is abso-fucking-lutely absurd!

Doesn't anybody realize that artificial demand is what caused this problem in the first bloody place? The whole point is that real, market clearing prices need to be found for houses. This is so simple even I get it! WTF?

People need to start saving for the things they want to buy, and that includes houses. That means getting your 20% or greater down payment, and having a way to cover not just PI (principal + interest) but TI (taxes + insurance) as well, and maintenance costs, furniture, utilities, landscaping or yard work, and all the other associated expenses that no one ever seems to take into account. And don't forget to factor in inflation and increasing tax rates as well.

Get over it already!

Beware the Second Order Effects!

noreply@blogger.com (Khyron) — Wed, 15 Oct 2008 03:47:00 +0000

A nice piece, several days old, by John Dizard over at the Financial Times. Not sure where I picked this one up, but thanks to whomever supplied it!

If nothing else, the moral of this story is "beware those second-order effects". It seriously takes conscious thought to catch this stuff, and I figure 99.99% of the planet is technically unconscious so...we should be surprised that we get the results we do.

Beware those second order effects!

An Old Market Hand Speaks

noreply@blogger.com (Khyron) — Mon, 06 Oct 2008 17:22:00 +0000

Nice interview with Seth Glickenhaus here (WSJ.com sub req'd). Definitely worth a few minutes to read. I'd say it was spot on, but then I'd probably be gushing.

Clicked

noreply@blogger.com (Khyron) — Sat, 04 Oct 2008 08:22:00 +0000

This has been floating around in my mind for a while, but it all just came together right now as I finished reading the Bloomberg article referenced in my last post.

Whenever you hear someone make an analogy between almost any advanced derivative or structured product and some simpler product, the simpler product is almost always a call option. There is almost a 100% chance that the simpler product will be an option of some sort, but usually, it is a call option. If THAT doesn't convince you to just trade the underlying options directly, I don't know what does.

Just a thought.

Laziness Insurance

noreply@blogger.com (Khyron) — Sat, 04 Oct 2008 07:33:00 +0000

So I'm finally catching up on some reading, post-vacation. After getting about halfway through this piece of reporting at Bloomberg.com, I'm once again led to wonder who the hell would buy a principal protected note. Ever. From anyone.

The Japanese and Chinese investors, apparently, and as usual. Somehow they seem to embrace a product just as it is getting ready to implode.

Think about this shite. After some term, you are guaranteed - GUARANTEED - to get back your principal. Return of principal versus return on principal. Fair enough. However, did no one calculate the loss due to inflation?

No laughing!

If you're that inclined to lose money, why not just get a regular bank account (in the US)? I don't know what the HK folks had at their disposal, but somehow I imagine there were safer products, plain vanilla products, available for purchase. The whole notion of principal protection, while it sounds good, should more accurately be considered an insurance policy against doing one's research. We see how well that works out. Doing the research improves your odds.

(It made sense in my head. Hopefully it makes sense when you read it. If not, that's what the comments are for.)

So what have we learned, if nothing else, childrens?

1. To hell with the bells and whistles. If you don't understand the product, and most importantly, the risks attendant with investing in the product, you don't purchase it. Salient advice for all time.

2. The game IS risk management. This is a world of probability. While it could be said I am re-stating #1, I don't fully agree. You must always be present to the risks around you, because EVERYTHING, even the safest of activities, have some level of risk. Look at the swap spreads on US Treasuries to see what I mean - even the "risk-free" investment has risk. Can you live with the risk? Can you hedge it? Because you can't eliminate it.

3. Beware asset gathering. Any firm which has rumors swirling around it that introduces a high return product is probably trolling for funds. So consider this, and be sure about where you land in the capital structure if said firm goes tits up. Basically, see #1. If BSC had already been chewed through, and you're an unsecured investor in Lehman Brothers, the #4 investment bank, you're next in line to be chewed through. So if you MUST buy, buy quality, and that means buy Goldman unsecured products. Duh!

4. Don't bet what you can't afford to lose. This goes for the $100 I blew in Vegas playing craps this past week, and it goes for the $2B US that those suc...investors in Hong Kong will be blessed to recover. (I'd say lucky, but you create your own luck.)

5. Do your homework. Swap spreads and the death of BSC should have told people to avoid Lehman structured debt products.

6. Homie don't play dat!

Oh, and if you ever feel the need to be separated from your money that badly, just give it to me. I accept PayPal donations. At least that way, you know its going to a good cause - liquor and women, although not necessarily in that order.

:)

G'night, all!

Thinking about CDS

noreply@blogger.com (Khyron) — Sat, 04 Oct 2008 03:10:00 +0000

Not like this is due to happen anytime soon, but I do have to wonder when shorting CDS becomes a viable strategy?

Just a thought...

Or how about a company shorting its own CDS, maybe through a shell or subsidiary?

Natural Progression?

noreply@blogger.com (Khyron) — Thu, 02 Oct 2008 02:56:00 +0000

As a bit of a follow up to my last post, I leave you all with this. I guess I'm cautiously pessimistic, overall.

Oh My God

noreply@blogger.com (Khyron) — Thu, 02 Oct 2008 02:13:00 +0000

I'm angry.

Sitting in my room in the Monte Carlo hotel on the Las Vegas strip, I've been watching the absurdity of the last few days. Needless to say, I'm disgusted. However, that's not why I'm writing this. I'm writing this because for some reason, the elected officials in DC are getting on my nerves with all of the political pandering we've seen. However, its not their fault. They're doing what they were chosen to do, with a bit of criminality thrown in for good measure.

(Thank you, America, for voting in these cocksuckers! Just had to throw that in. YOU got the politicians YOU DESERVE. I hope you're proud of yourselves, American public, you fucktards!)

Moving on, everyone wants to know what should be done. I think its pretty obvious that there is no "right" answer. Shit is fucked. All of that said, here's what makes sense to me given that we live in a world of probability. (Nothing makes that clearer than walking around the casinos in this town.)

First, the bills hitting the congress need to be simplified. I don't honestly care about the numbers being bandied about. We long ago passed the point of those being relevant. Plenty of people have already noted that the $700B is a ROLLING number. Once $700B is burned, a next $700B is up. The $700B is the amount outstanding that Treasury could put to work at any given moment. THAT'S ALL. So I wish people would get off that one. Just make it a cool trillion even. The amount is somewhat irrelevant. Its a question of what happens to it - how is it used - that matters the most.

Second, the notion that Treasury should not have oversight is patently absurd. Paulson had a better chance of getting a blowjob from an electrical socket than getting that one through. If it somehow has crept back in...well, see paragraph 3 above. No, he wasn't elected, but his boss was. Utter bullshit that should be thrown out.

Third, the purchases by Treasury should be at market price. I think Merrill put down a $0.05 price on its most recent sale. Hey, at $0.05, I'm a buyer of as much of that paper as possible. Hell, that's a 95% markdown or better. I doubt 95% of the mortgages in any securitized deal are going to hell. 50% - maybe. 30% - likely. 80% - oh please! If you want private buyers to come in with capital, the price has to be right. Getting these illiquid assets off the books of public commercial financing institutions is the order of the day. Allowing the Treasury to buy this crap from the banks at par - THAT is a monumental mistake which will accelerate the downfall of the American empire. I don't know who Hank was blowing (or being blown by) to put that fuckery into the measure, but THAT is my biggest problem. The folks sitting on this debt either need to put a bullet in their own heads and be done, or sell that shit for the best amount they can get. The writing is on the wall. Will their brains be as well? If the price is $0.05, then dammit, sell and move on.

Now, what the hell is with all of this partisan politics adding pork to these bills? Again, thank you America! You have no one to argue against about greed when clearly, by virtue of the fact that your elected officials are sticking in amendments and other dick sucking measures into this legislation. You know, this is one of those times (like, well, really, EVERY OTHER TIME) when legislators shouldn't be playing sides, state against state, pork against pork. These motherfuckers need to be doing the best for the ENTIRE NATION, not sucking their constituents' dicks on some bullshit. How come no one is calling in to make sure that shit doesn't pass? Because YOU, American public, are a greedy, selfish, self-centered motherfucker who doesn't honestly give a flying fuck about anyone else in this country except yourself. I guess we can nickname you Gordon Gekko. You want a better outcome? Get the legislators to remove all the bullshit and get the bill down to the basic, fundamentals to address this ONE ISSUE.

But where are you when it comes to making that call? Absent. As expected.

You know what is really upsetting about this whole thing isn't that the politicians are doing what they are doing. They're mostly pathetic cocksmokers pandering for votes anyway. Expecting more from them at this point is useless. However, the dicks they are trying to suck -- their constituents' -- aren't out there instructing them to do the BEST thing for the NATION. No, the constituents are out there saying that the pols should be fucking over the next American so that they can sleep well, have their cake and eat it too. The pols are just doing as they have been instructed.

I'm inclined to ask people how it feels to be greedy, evil bastard motherfucker willing throw your fellow American under the bus. But I don't even know that there's a point to that. If you people actually gave a shit about anyone other than yourselves, you'd be encouraging - nay, screaming for - your representatives and senators to cut out the bullshit and whittle down the bill to the simplest incarnation to address the short term credit market liquidity problem. PERIOD.

But considering there is no heart left among the populace, I don't see that happening. You people want it nice and easy. Fuck, if everything were meant to be easy, everyone would do it. If marriage were easy, no one would get divorced. If saving were easy, everyone would have 6 - 12 months of funds put away for an emergency and no credit card debt. (Not saying I'm perfect here. Just making the point, plain and simple.) If college were easy, more than 25% of the population would have college degrees. If being healthy and fit were easy, less of you people would be clinically obese, overweight, and about to drop dead due to your inability or unwillingness to be disciplined about exercise and eating in a healthy manner. Worthwhile shit is hard to do. That's the price of doing it. At the end, you're supposed to feel good about overcoming whatever you had to overcome to win the ring. That's how it works.

This is the most difficult economic problem to face this nation in a long fucking time, and the easy solutions were passed over decades ago. So get over it. You - yes, you, American public - chose this course with your willingness to be forgo difficulty, your willingness to throw your fellow man under the bus so you could get what you wanted, and your willingness to believe that the economic fundamentals of the last 300+ years of capitalism had been suspended in your favor.

I laugh when I hear people talk about the character of the American public. It sure hasn't been on display in my lifetime. If you people want to start claiming any sort of high ground, then the simple fact is that you need to take your medicine. The American public - everyone, myself included - created this problem. There is no easy way out. So just deal with it and get to the other side as quickly as possible. It won't be easy. That doesn't mean that good companies need to go to zero because of the over-emotional American investor. But the pain has to be felt, lifestyles have to be adjusted downward, and EVERYONE has to de-lever. That's all there is to it.

If you're really up to it, then do it! Fuck talking about it. BE ABOUT IT.

Or don't. It really is your choice. But if you're not going to take the pain; prepare for emergencies; cut your standard of living; eliminate your debt; put your foot on the neck of the politicians in Washington, DC; bust your ass adding or creating value at your employer or in your business; and otherwise tighten your belts, then realize that the shit only GETS WORSE from here.

What are you going to do?

Ahhh, I feel much better now. Time to see what's going on outside of my room.

Randomness

noreply@blogger.com (Khyron) — Wed, 01 Oct 2008 10:46:00 +0000

I like Marc Faber, and his analysis seems to be generally good, but man does he like to hear himself talk. Just answer the damn question, Marc. 20% in US dividend paying shares. 10% in gold. The rest in Treasuries, presumably preferring TIPS. Got it.

See how simple that is, Marc?

Yes, this has nothing to do with anything. I'm definitely tired. But I'm back.

G'night, all.

Woo Hoo!

noreply@blogger.com (Khyron) — Wed, 01 Oct 2008 02:25:00 +0000

Yes, I did just post. I've been on vacation in Las Vegas for the last week. I thought I said that, but maybe not.

Anyway, I've got some thoughts on some of the things we've been seeing out there in the markets and the economy generally. Not very original thoughts really. Maybe that's the liquor. Or the women. Or the lack of sleep.

Eh.

Anyway, I haven't forgotten you all. I'm getting back into the swing of things. Stay with me.