Financial Sarcasm Roundup for 07/22/13

I find it un-freaking believable that markets continue to hit new highs while central banks pump them with liquidity and dingbat money managers keep gambling with other people's money.  The only way out of this mess is through sarcasm.

The G-20 is doing a u-turn away from austerity even though it knows by know that monetary easing doesn't spur real growth.  All of those ugly protests in Greece and Spain spooked the elites into thinking they won't get their weekly caviar fill if austerity brings revolution.  

China's interest-rate liberalization now makes excessive borrowing easier than ever.  This extends the life of the shadow banking system's overburdened balance sheets by months, or perhaps years.  Chinese real-estate developers now have to meet fewer hurdles to commit control fraud.  

Mme. Lagarde wants the US Supreme Court to reaffirm the doctrine of sovereign immunity so she can get on with the IMF's business of ignoring the imminent sovereign debt defaults of the PIIGS bloc.  The IMF and other transnational institutions didn't get the memo that sovereignty still matters to investors who consider tax policies, political risk, and other factors specific to nation-states.  The globalization of the ruling class into a transnational blob came about thirty years too late.  Now the pendulum swings back to nations and their tribal constituents, just as it did in the fifth century as the Roman Empire came apart.

Existing US home sales are heading down the tubes again.  Just a teensy rise in mortgage rates was all it took to make the numbers crater.  Many homeowners still haven't returned to their breakeven price and now they get to watch their home equity get flushed all over again.  

I'd like to thank all of the idiots I've met and heard about recently for making this sarcasm possible.  I wouldn't be who I am without them.  

The Haiku of Finance for 05/04/13

Government debt load
Crushes growth, destroys budget
Force austerity

Financial Sarcasm Roundup for 04/22/13

Whether good news or bad news, the news stream in business never ends.  That is why my sarcasm will never end.

The grand poobahs of world finance have anointed the global economy as just fine, except for weak growth and not enough jobs.  That kind of logic is so tortured it might as well reside in Torquemada's dungeon.  If GDP growth is weak and job growth is scarce, then there is no real global recovery.  The top dogs don't keep their jobs by generating spooky headlines but it's high time someone called them out.  I have no idea what these fools are smoking but I'm glad I've never smoked anything (except a couple of perfectly legal cigars on special occasions).  Oh, they're also giving moral cover to Japan's debt-fueled stimulus and currency devaluation because they can't think of anything better to do.  Lots of policymakers are backing away from austerity now that economists are questioning the Reinhart-Rogoff 90% debt/GDP formulation.  Austerity is on the ropes and Krugmanite stimulus is ascendant, with no brakes.  The die is cast for hyperinflation and currency collapse in most of the developed world.

Fitch is flushing the UK's credit rating down the tubes.  This is going to happen more frequently as the G-20 consensus referenced above endorses more mad Krugmanite spending and inflating.  The UK's finance minister still pushes austerity but the IMF gave him a polite reminder that the global consensus is shifting to super-stimulus.  Do they have any real sterling left to back the pound?  Or will they pledge the Crown Jewels and the Queen's silver flatware as collateral to stem a run on the pound?  When the dust settles they'll have to find a hard asset pool to back the value of Pound 2.0, or neo-pound, or whatever.  I'd suggest pledging North Sea oil reserves but production may have peaked.

Budget pressure on the air traffic controller workforce is forcing flight cancellations.  This is why I don't invest in airline stocks.  Too much union influence and too much debt hurt profitability.  Now a ceiling on human infrastructure is limiting the daily revenue passenger miles of the industry.  I suspect the USDOT directed the furlough to a sector that would immediately cause the public an inconvenience, in the hope that travelers would whine loudly to elected officials about restoring full budgets.  That's a cute trick.  It will last until dollar devaluation forces a bond market exodus that denies deficit spending.  The hyperinflation that follows will drive fuel costs through the roof and make airline travel unaffordable for anyone except Donald Trump.

I've got other material to write about so I'll finish with some sarcasm about my worthless alma mater, Notre Dame.  Their star football player from these last few seasons is now getting mentioned as an active prospect for the NFL.  The pro teams don't seem to care that this player had an imaginary girlfriend and that the school lied to cover up his friend's deception.  It just goes to show that you don't have to be smart or honest to succeed at Notre Dame.

Financial Sarcasm Roundup for 04/08/13

Cyprus is out of the headlines but not out of trouble.  There's enough going on in other countries to warrant continued sarcasm.

Portugal is going for austerity.  Europeans can say goodbye to their precious social safety nets, which are really drags on productivity.  No more nonsense like two months of vacation for those folks.  What has Portugal done lately that warrants such generous benefits anyway?  It's not like still own big chunks of the New World, for crying out loud.

Abenomics isn't going to work.  The Japanese yen is at a three year low against the U.S. dollar.  Other central banks aren't going to wait for Japan's export data before they retaliate with more printing.  When that happens, Japan will be right back in stagflation and on its way to high inflation.  Japanese exporters have window of maybe two or three months in which to use their windfall earnings to stock up on physical plant and inventory that will hold their value domestically.

U.S. unemployment is dropping only because frustrated job seekers are leaving the workforce.  Federal spending cuts so far have been too minuscule to account for the hiring slowdown, so I wish the financial media would drop that meme.  It's ironic that last week I attended a technology transfer conference with scientists and investors who would love to create new jobs.  They need STEM graduates for high-tech work but American colleges are churning out indebted liberal arts grads.  The mismatch won't last forever.

Australia is the latest country to go for direct currency exchange with China.  Neither one wants to get stuck holding U.S. dollars when the run on that currency starts sometime.  I'd like to know whether Asian multinational corporations are moving their cash holdings out of dollars.  American and European multinationals were minimizing their euro exposure in 2012 and events will prove them to be prescient.

Today's good news comes from New Zealand, where the central bank promises to raise rates to fight inflation.  That's the exact opposite of the Greenspan-Bernanke philosophy and the results for their economy will be very different from America;s current malaise.  I haven't purchased any New Zealand dollars yet but stories like this revive the temptation.

My quest for sarcastic material will never be fully satisfied.  Even "Mickey Ronin" knows that but he hasn't provided me with anything stupid to laugh at in recent days.  Come on, dude, don't save all of your lies for your court appointment.

Financial Sarcasm Roundup for 03/04/13

I must state up front that the federal sequester has not impacted the operations of Alfidi Capital.  This firm doesn't run on government largess.  It runs on my limitless supply of genius.

The sequester happened because the consequences for the U.S. government's finances and the economy were minimal, despite lots of scary rhetoric.  The potential shutdown of the government is more serious, and that's why the negotiations in Washington are more likely to get a deal.  No one in D.C. wants to see the interest costs for new debt jacked up.  The U.S.-based credit rating agencies are sufficiently deterred from cutting the nation's sovereign credit rating but the bond market won't be fooled for long.

Professional fund managers are losing their heads again.  The slowing Chinese economy is spooking hedge fund managers into cutting their exposure to commodity derivatives.  Okey-dokey, derivatives are one thing but hedge funds have no business fiddling with those anyway.  IMHO only industrial end-users are knowledgeable enough about demand for stuff to use hedges.  Commodity prices will indeed suffer as the global recession becomes obvious but the low-cost commodity producers left standing will trade at bargain valuations.

Corporate earnings are up while hiring stays down.  Executive greed for more bonuses isn't the only reason.  American workers are less productive and more expensive than workers in emerging economies.  If you don't believe me, just look around your own office.  Observe the room full of obese slobs goofing off on the Internet instead of making things happen.  Oh yeah, let's not forget how Obamacare has made hiring one full time employee more expensive and troublesome than engaging a temp firm to bring in two or three part-time employees.

Portuguese demonstrators don't like living within their means.  Gee, that's too bad.  They won't like hyperinflation either but that's what they'll get after they're kicked out of the eurozone.  The U.S. will see a lot of this self-pitying and indignation eventually.  It will be fun for me to watch because I'll be able to buy things that stupid people can't afford anymore.

Here's some advice for U.S. government workers based on the headlines above.  Don't feel sorry for yourselves because Uncle Sam is cutting your pay by 20%.  Don't take to the streets like the Portuguese and complain about subsidies that will be permanently gone.  Instead, go learn some marketable skills that have nothing to do with your present job pushing papers around.  Real skill at making real things will come in handy once our society turns off many of the subsidies it can no longer sustain.  Start by taking classes at General Assembly and then market your project work online.  I know I'm talking to human beings here, so asking people to get off the stoop and take charge of their lives might be a waste of effort.  Maybe one or two people out of a few million will get the message.

The Haiku of Finance for 02/28/13

Sequester coming
Bipartisan agreement
Won't happen on time

Greece And U.S. Don't Really Have Two Years

Here's today's "whoa Nellie" moment.  There will be more in years to come.  Europe is willing to give Greece two more years to meet its fiscal adjustment targets.  That's pretty silly considering Greeks are rioting right now over cuts to government spending.  They'll really light things up the longer that two-year reprieve window drags out their pain.  Leaving the euro for a hyperinflating neo-drachma will be just as painful but will probably end sooner.

The U.S. probably doesn't have two years either to solve its fiscal shortfalls but we don't know it yet thanks to the dollar's ever-more precarious status as the world's reserve currency.  Lining up business leaders to provide cover for tax increases will probably help but there shouldn't be any promises of business tax breaks in return for support.  Wealthy investors selling assets now are getting ahead of the game, so let's not count on any giant revenue boosts next year from higher capital gains taxes.  The Laffer Curve's implication that higher tax rates don't necessarily raise gross collections is becoming a self-fulfilling prophecy.

Jobless benefits are a potential casualty of the fiscal cliff but IMHO the federal government is not likely to slaughter this sacred cow.  The lesson of last week's election is that working-age Americans like their free handouts and will punish politicians who talk about taking them away.  Americans have become more like Greeks than they know.  Whatever compromise comes out of Washington will probably impact the rich first and the poor last, until hyperinflation makes everyone poor.

I have no idea whether Americans deprived of government benefits will be up in arms like Greeks.  America got its history of social unrest and agitation out of its system by the late 1960s thanks to an elite consensus in favor of a welfare state.  The end of the welfare state's income-support programs and lifestyle entitlements (SocSec, Medicare) will test our social fabric, and our elites are willing to postpone that day of reckoning even if it means they continue to bear a proportionately large share of the nation's income tax burden.

The Limerick of Finance for 11/11/12

Austerity's path is not done
Greece says this next round is the one
Creditors still demand
A far stronger hand
Protesters don't think this is fun

The Haiku of Finance for 05/08/12

IMF pulls back
Mad voters get point across
No one will pay debts

The Limerick of Finance for 05/06/12

Hollande scores a big win in France
The left will now seize its big chance
They'll resist any cuts
But at this point, that's nuts
Leaving euro now deserves a glance

The Haiku of Finance for 03/27/12

Europe lifestyle cut
End of old social contract
No more nanny state

Ireland Beats U.S.

It's hard to admit that a second-rate European economy has a better grip on macroeconomic reality than the U.S.  Today's headlines prove it true.  The U.S. continues on a delusional course of unsustainable fiscal profligacy:

The White House and Republican leaders in Congress reached a sweeping agreement Monday to extend expiring income tax cuts for two years, extend unemployment benefits and cut how much millions of workers pay in Social Security payroll taxes.

Meanwhile, Ireland bites the bullet and sits down to a cold supper of austerity:

One of the toughest budgets in the history of the State, involving substantial tax increases and welfare cuts, is expected to be approved by the Dáil today following the declaration by Independent TD Michael Lowry that he will vote for the measure.

Observers with at least half a brain can see that the reality facing Ireland will eventually face the U.S.  Such observers must be found outside Washington, D.C. 

Friday's Fun Miscellany

Let's take a look at a big jumble of newsworthy stuff on an options expiration Friday.


Goldman Sachs' wrist-slap SEC fine is being spun as a victory for Lloyd Blankfein's skill in negotiation and strategy.  Maybe so, but I think influence peddling among Goldman alums (now lobbyists) and SEC staffers' i-banking aspirations played a strong role too. 

BP caps the Deepwater Horizon well.  I think it's going to hold.  They didn't even have to hire SpongeBob SquarePants to get the job done on the ocean floor.  Maybe a short-expiration covered call strategy on BP is a special situation worth playing.  I have all weekend to think that one over. 

Greece continues to take its austerity medicine by raising retirement ages for government workers.  Great!  Now let's do the same thing here and stick it to government employee unions, who BTW are now the majority of unionized employees nationwide. 

The Creature from Jekyll Island grows more tentacles.  The Fed is now the fourth branch of government, a development that puts it outside the Constitution's system of checks and balances.  A central bank owned by private interests that has veto authority over a broad swath of economic activity is something the Founding Fathers never envisioned.  The U.S. has entered unchartered territory with its population completely unaware of the new reality.  What did Ben Franklin say we had?  "A republic, if you can keep it." 

An overhaul of housing finance is coming three years too late.  The time to break up Phonie and Fraudie and unwind their obligations has passed.  China threatened Uncle Sam with the nuclear option of dumping Treasuries back in summer 2008 and Uncle Sam caved in.  Now Uncle Sam is stuck with the bill for supporting 95% of all new mortgages.  "Overhaul" now means just another way of disguising wealth transfer from American taxpayers to Chinese agency debt owners. 

Full disclosure:  Anthony J. Alfidi has plans for the weekend.

Suburban Studies Herald The Onset Of Peak Cheap Oil

I can't make this stuff up.  Folks in Shawnee, Kansas want a national museum to study suburbs as a way of life and cultural phenomenon:

Enough, say the Johnson County civic leaders planning a National Museum of Suburban History. Their contention: With more than 50 percent of the country living in places like Shawnee, it's past time to take the suburbs seriously.

(snip)

In southern California, the Center for Sustainable Suburban Development at UC-Riverside was formed in 2003 to promote economic research and examine regional planning as well as the political, cultural and environmental impact of suburbia.

In Long Island, New York — home to Levittown, the epicenter of the mid-20th Century suburban boom — Hofstra University's National Center for Suburban Studies also aims to advance the public conversation about modern American life beyond cheap laughs, or pulp fiction melodrama.

I think it's hilarious that these "suburban study institutes" are located in suburban enclaves themselves.  Apparently nobody told these folks that the onset of Peak Cheap Oil is going to render much of suburbia unlivable, let alone unworthy of study.  Flight from suburbia will begin in earnest as McMansions are foreclosed and municipal services are shut down (check out Detroit!).  This will leave these study centers high and dry.  The last person to leave the institutes at Hofstra and UC Riverside should turn the lights out, but they won't have to if the lights are out all over their neighborhood anyway. 

Let me save them all some work.  It's what I do as a public service.  Suburbs are a temporary phenomenon enabled by a confluence of factors, including the wide availability of cheap petroleum in the United States after World War II, the federal highway program, and the successful lobbying from automakers that convinced municipalities to replace local trains and trolleys with roads and freeway easements.  All of it was based on cheap gasoline.  All of it has now begun to contract in size and vitality. 

Why study something that's about to disappear?  Americans can't seem to come to grips with the reality of declining national power and a resource base constricted by scarcity and lack of future investment.  Suburbophiles are longing for the good old days, but the trouble is we've left those days behind.  This kind of pining can easily lead to a sense of loss and betrayal when the double-dip recession is finally recognized.  The national zeitgeist can turn ugly if Americans have to be pried from suburbs.

I'd short suburbs if they were a security in the financial markets. 

The Haiku of Finance for 06/30/10

Spending won't return
Austerity owns us all
More than half cut back

European Contagion Ready To Leap To Spain

It's not official yet, but the IMF and ECB are about to get a lot busier crafting a bailout for Spanish government debt:

The head of the International Monetary Fund is to visit Spain amid reports Madrid is seeking a bailout while the government bit the bullet and approved crucial reforms of its rigid job market. 

The cabinet agreed the sweeping labour reforms, deemed essential for reviving the economy and fending off a Greek-style debt crisis, despite a union call for a general strike against them.

 

Lots of luck with that one!  The bond market will never tolerate a bailout of the size required to save Spain.  The best case scenario is a narrow passage of an austerity package in Spain, with all its attendant deflationary effects.  Throw any growth projections for Europe out the window. 

Keynesianism On Its Deathbed

Future historians will look back on this era as a time when economists discredited themselves by clinging to a theory that's on its last legs.  That theory is Keynesianism.  Simply put, Keynesians believe a sizable enough macroeconomic stimulus can jumpstart a new economic cycle of growth.  People like Robert Reich just can't let go:

American Corporations are sitting on huge piles of cash but they're not investing, and they're creating only a measly number of new jobs. And they won't invest and create jobs until they know there are customers out there to buy what they sell.
(snip)

Keynes prescribed two remedies -- both of which are now necessary: Government spending to "prime the pump" and get businesses to invest and hire once again. And, as Keynes wrote, "measures for the redistribution of incomes in a way likely to raise the propensity to consume." Translated: Instead of big tax cuts for corporations and the rich, tax cuts and income supplements for the middle class.

Reich misdiagnoses aggregate corporate strategy.  Companies aren't sitting on cash because they lack investment opportunities.  They're sitting on it because they don't want to be caught without a recourse to pay their bills if the short-term credit markets (particularly commercial paper) freeze up again in a repeat of 2008's credit crunch.  The danger of a repeat increases with each passing day as the federal government's huge borrowing needs crowd all other debt offerings out of the bond market.

The Keynesian prescription of more debt and more stimulus is distorting the U.S. economy's ability to recover.  Let's put J.M. Keynes back in the ground and let him rest.  It's time to revive a much older and more venerable economic strategy:  austerity.