Assorted Links 11/05/09


How to sell a dollar for more than a dollar


Prediction with game theory

  • Limbaugh on Third Parties – “I too get frustrated with existing parties. As long-time readers know, I transitioned from voting Democrat during the 1970s. I wasn’t happy with everything the Republicans did during the Bush 41 or 43 eras and supported McCain with reluctance. Nevertheless, as things stand now politically, I side with Limbaugh on the issue of third parties.”
  • What Kind of People Affiliate with Human Rights Watch’s Middle East Division? – “So there you have it. Among other Jews, Robert Bernstein, the founder, longtime president, and now critic of Human Rights Watch is not merely mistaken when he accuses HRW of anti-Israel bias, he is mistaken because he thinks Jews should be held to different, lower standards than everyone else because he thinks Jews are ‘so “special.”‘ Damn Jews just think they are better than everyone else, and should be exempt from the moral standards that the civilized Christian (Cobban is a Quaker) world adheres to. We’ve heard such sentiments before, but not generally from “human rights activists.” [And as for her bizarre reference to the ‘allegedly “Jewish” state, Israel,’ Noah Pollak notes that ‘her writing is so sloppy that it’s impossible to discern what specific slander she has in mind.’]”
  • MA Gov. Patrick: Lower State Deficit with Red Light Camera Revenue – “National Motorists Association researcher John Carr said that introduction of the legislation as part of the budget process was a sign that Patrick’s primary concern is monetary.”
  • Mother of all Carry Trades Faces an Inevitable Bust – “Since March there has been a massive rally in all sorts of risky assets — equities, oil, energy and commodity prices — a narrowing of high-yield and high-grade credit spreads, and an even bigger rally in emerging market asset classes (their stocks, bonds and currencies). At the same time, the dollar has weakened sharply, while government bond yields have gently increased but stayed low and stable.
    . . .
    So what is behind this massive rally? Certainly it has been helped by a wave of liquidity from near-zero interest rates and quantitative easing. But a more important factor fuelling this asset bubble is the weakness of the US dollar, driven by the mother of all carry trades. The US dollar has become the major funding currency of carry trades as the Fed has kept interest rates on hold and is expected to do so for a long time. Investors who are shorting the US dollar to buy on a highly leveraged basis higher-yielding assets and other global assets are not just borrowing at zero interest rates in dollar terms; they are borrowing at very negative interest rates — as low as negative 10 or 20 per cent annualised — as the fall in the US dollar leads to massive capital gains on short dollar positions.”
  • Curious Meeting at Treasury Department – “Four of us had a drink afterward and none of us felt that we learned anything (not that we expected to per se; if the ground rules are “not for attribution” in an official setting, we are certainly not going to be told anything new or juicy). But my feeling, and it seemed to be shared, was that we bloggers and the government officials kept talking past each other, in that one of us would ask a question, the reply would leave the questioner or someone in the audience unsatisfied, there might be a follow up question (either same person or someone interested), get another responsive-sounding but not really answer, and then another person would get the floor. The fact that the social convention of no individual hogging air time meant that no one could follow a particular line of inquiry very far.

    My bottom line is that the people we met are very cognitively captured, assuming one can take their remarks at face value. Although they kept stressing all the things that had changed or they were planning to change, the polite pushback from pretty all the attendees was that what Treasury thought of as major progress was insufficient. It was instructive to observe that Tyler Cowen, who is on the other side of the ideological page from yours truly, had pretty much the same concerns as your humble blogger does.”

  • The Coming Collapse of the Municipal Bond Market – “A money manager friend showed me an interesting research report by Frederick J. Sheehan titled “Dark Vision: The Coming Collapse of the Municipal Bond Market. This is a product of weedenco.com and available only to subscribers, but I will summarize it here.

    Sheehan starts off by noting that a lack of panic by the ratings and government agencies does not indicate health for a financial market. He cites the fact that the Fed did not anticipate how bad the subprime collapse was likely to be and obviously the Moody’s and Standard and Poor’s ratings were ridiculous.

    Sheehan notes that “spending is rising and revenue is collapsing” for all levels of government. Pension fund losses will require governments to double their contributions to pension plans (see my blog posting on public employee pensions). Spending is rising, e.g., in New York City from an average of $65,401 in compensation per public employee in 2000 to $106,743 in 2009. The number of full-time employees in NYC grew as well, despite falling school enrollment. The number of state and local government workers grew from 4 million in 1955 to 20 million in 2008 (5x growth, against less than 2X growth in U.S. population). Those workers receive an average of 43 percent more pay and benefits than a private sector worker.
    . . .
    Barring some sort of miraculous boom in the economy and pension fund investment returns, state and local governments are headed for insolvency and default. This means that valuing a municipal bond becomes a matter for a legal expert rather than an accountant.”

  • The creeping power grab by the executive branch and Federal Reserve – “The power grab at the Federal Reserve is a topic I first broached back in February when the Federal Reserve was creating its alphabet soup of liquidity programs to pull us back from the brink of financial disaster. I was troubled about Fed policy then and I am still troubled today.

    I am equally disturbed by what is happening in shift in the balance of power to the executive branch. The Obama Administration seems to be following in the footsteps of the Bush Administration and making its own power grab and Congress has only just begun to wake up to this and start to push back.

    At the risk of making this post overly broad, I want to make a few general comments about how executive power in government operates before I take on the specifics of the cases at hand. Everyone who has studied political science is aware that dictators and oligarchies use crises to invoke fear that allows them to usurp power using the cloak of ‘national security’ as a Trojan horse to consolidate power.”

  • The Periodic Table of Finance Bloggers – “Everyone listed on The Periodic Table of Finance Bloggers has either inspired, educated or entertained me in some way, so I figured I’d return the favor. I should note that the numbering of these blogs is no way a ranking system (if it was, I’d have to decide whether or not my site goes on the top or bottom!)”


Palindromic Video

  • Top 15 Franchise Failures – “One third are pizza restaurants. Hence, this wise advice:”
  • Q&A: Thinking About Opening a Restaurant? Think Twice. – “I had somebody approach me who had a very good job with a major company and an MBA from a prestigious university. I looked at him and asked, ‘Is your career in danger?’ He said, ‘No, but I’ve always loved food. I love to cook. I love to have parties.’ I told him to invite 20 friends over, throw a great dinner party, and then take a stack of $100 bills and burn them one by one. It will be fun–and cheaper than opening a restaurant.”
  • 14 Ways a Notebook in Your Pocket Can Save You Money – “Aside from the fact that I’m able to use the notebook to write down my ideas — my career’s bread and butter — a pocket notebook constantly comes in handy for many other financial reasons as well. (FYI, I usually just keep a simple small Mead reporter’s notebook in my pocket, along with a good pen that doesn’t run out of ink.) Here are fourteen ways I use that notebook to directly save money.”
  • Dolphin markets in everything, Gresham’s Law edition – “So how would dolphin bimetallism work?”
  • Anniversary Celebration – “Anti-regime activists in Tehran chose the 30th anniversary of the US embassy seizure there to take to the streets:
    . . .
    Hope ≠ Strategy.”


Weird Al” Yankovic – Bob


Raving grace

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Posted in: Caught Our Eye

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