French Ameri-Can Climate Talks In San Francisco 2015

The French Ameri-Can Climate Talks (FACTS) roadshow came to San Francisco last night. I attended at the Exploratorium to hear from luminaries, as I usually do when intellectual heavyweights are around. The French government promotes the FACTS series as a precursor to the UN COP 21 / CMP 11 conference in Paris this December. I will render my impressions of the speakers' insights with my own genius thrown in to make it worthwhile.

The UN Environment Program (UNEP) quantifies the gap between annual goals for carbon reduction and actual carbon generation. The UN 2030 Agenda for Sustainable Development supersedes the UN Millennium Development Goals (MDGs) because development without sustainability still exacerbates climate change. NOAA data shows the world's surface temperatures rising. Complaining about methodologies does not change the data. UNEP quantifies each country's climate change as Intended Nationally Determined Contributions (INDCs). The implied take-away is that some nations, presumably the heavy polluters like China, will have disproportionately larger INDCs. UNEP's Green Economy Initiative redefines prosperity to include human and ecological factors. The initiative would be more marketable to the finance sector if it used the language of ESG criteria and triple-bottom line outcomes that investment managers now widely accept.

President Nixon's Project Independence was an early attempt to put the US energy sector on a sustainable path. It failed because it focused more on supply changes than demand management. One of the FACTS speakers noted that decarbonizing the US economy now works because demand-side energy efficiency is ten times more effective in reducing carbon output than the expansion of renewable energy supply. Energy used per unit of GDP and carbon generated per unit of energy can still decline while GDP continues to grow. The central lesson of sustainability is that the developing world need not trade away future prosperity to save the planet.

Regulating energy markets and human behavior ideally generates Nash equilibriums, but some actors will always resist these equilibriums by seeking self-maximizing outcomes. The paradox is that individuals' optimizations do not optimize an entire system. The global regulatory regime that COP 21 / CMP 11 embodies should move many national economies toward Nash equilibriums. The US EPA Clean Power Plan recognizes that decarbonization is the only politically possible solution the developed world can offer the developing world.

I like the Lazard investment banker's joke that energy companies should put their receivables into special purpose vehicles (SPVs) and sell them as unit trusts to investors. The good thing about carbon trading is that energy companies won't have to use SPVs to monetize their gains from efficient demand or renewable supply. Investment banks can have their fun packaging solar and wind assets into yield cos at a high scale while microfinance enables smaller off-grid solutions at a low scale. Lazard does great work publishing annual summaries of the levelized cost of energy (LCOE) for each major renewable energy technology. The DOE NREL's LCOE calculator is agnostic towards any one technology. I say utilities should use NREL's calculator first to determine what commitment their capital budget and credit quality will allow, then use something like Lazard's numbers to determine which tech is most affordable.

Two hot French babes chatted me up at the reception afterwards. I kept them entertained by demonstrating my amazing intellect and they were suitably impressed. A whole bunch of hot French babes attended this lecture. There must be something in the water over there in France that makes women so much hotter than the ones growing up in other regions. The FACTS talk got me interested in hearing more about financing the UN's sustainable goals even if there are no babes on hand to admire my interpretations.

Financial Sarcasm Roundup for 02/17/14

I'm actually having a hard time getting sarcastic this week.  Nah, just kidding.  Sarcasm comes naturally to me after years of practice.  I barely have to try anymore.

The G-20 claims to have a newfound concern for financial market turbulence.  Yeah, sure.  Don't expect them to own up to the years of misapplied monetary and fiscal stimulus that contributed to the growing risk of market collapse.  It's really funny to think the US will lecture Europeans on fixing their banking system when we haven't even fixed our own.  Those of us in the know about the US-UK bank resolution plan, which IMHO is a much better concept than anything policymakers did in 2008, can ignore the hot air from the G-20.

The G-20's FSB is just now getting around to examining foreign currency benchmarks.  They sure took their sweet time.  It's been like, what, months since this scandal broke?  Regulators are not serious at all about stopping market manipulation.  The multiple ongoing investigations would duplicate effort without the FSB's oversight, but maybe that was the plan until someone decided the FSB could lend the whole mess a veneer of credibility.  Developing countries who complain about being left out of this action would be better off starting their own economic bloc.

If you need more evidence that the developed economies aren't serious about solving problems, note that the EU is delaying action on a new law to curb financial benchmark abuse.  The need for more study is a silly excuse.  The law's authors have plenty of data from the Libor probe.  The lessons for investors are clear.  Nothing is fixed and no one is serious about fixing anything.

If you miss the LOLcats I used to put in here for a few roundups, I don't want to hear about it.  Make your own LOLcat blog if you're upset.  

The Haiku of Finance for 01/29/14

Emerge contagion
Markets on edge of worry
Global precipice

Financial Sarcasm Roundup for 01/27/14

The turmoil in global markets that began last week is wonderful news, from my perspective.  This means I can't afford to let up on the sarcasm directed against anyone who went all-in on any asset class this month.

Argentina is liberalizing its restrictions on foreign currency.  IMHO that signals the beginning of that country's hyperinflation end game but we're nowhere near the denouement.  Argentina would have to reduce the currency transaction tax to zero and allow other currencies as legal tender to truly end its crisis.  The Fernandez administration isn't ready to throw in the towel on its failed micromanagement of Argentinians' economic choices.  Argentina could have been a contender for world domination a century ago with its rich agricultural resources but its potential has been comatose since after World War II.  Maybe it's all the fault of the bizarre Peronist combination of incompatible ideologies.

Central bankers at the WEF in Davos are warning banks to quit playing games with rate benchmarks.  Global regulators are promising us even better benchmarks.  Well, sheesh, if they would have invited me to Davos I would have sold them on my idea for GIBOR as a benchmark.  These people need to appreciate my genius.  It's easy for banks subscribing to one benchmark to manipulate it, but a benchmark of benchmarks like GIBOR would be harder to peg.  I'm way more awesome than these global bank regulators.

The global elite confab is studying more than just rate benchmarks.  The Davos crowd sees broader risks in the emerging market sell-off.  They give themselves too much credit.  The crowd in the eye of the pyramid may be blind.  The biggest risk right now is the lack of confidence investors have in the transparency of markets and the trustworthiness of institutions.  The inability of elites to prosecute their own kind for financial malfeasance is the source of market distrust.  Solve that with prosecutions and trust will gradually reappear.

I have a couple of meetings this week in the San Francisco Bay Area with some business folks and an event to attend.  I'll let you all know what happens.  Alternatively, maybe I won't let you know what happens.  

The KPI Legacy of Nelson Mandela

Nelson Mandela passed away this week.  He was one of the most revered statesmen the world has produced in my lifetime.  His evolution from a radical activist to a master of reconciliation was remarkable.  Historians will debate his legacy for years.  I would like to explore one aspect of his legacy right now.  His stewardship of South Africa's transition from an apartheid regime to full democracy should presumably have benefited South Africans of all races.  We can measure the success of this transition with publicly available statistics on governance, economic conditions, and quality of life.  These key performance indicators (KPIs) will show us South Africa's progress.  Mr. Mandela was elected President of South Africa in 1994 and left office in 1999, so it makes sense to seek statistics for the period of his presidency and for the present day.

Transparency International tracks a Corruption Perception Index for every country in the world.  In 1995, the earliest year for which the index is available, South Africa's score was 5.62 (out of 10) with a rank of 21st least corrupt country among those sampled (out of 41 countries).  In 1999, South Africa's score was 5.0 (out of 10) with a rank of 34 (out of 99).  In 2013, South Africa's score was 42 (out of 100) with a rank of 72 (out of 175).  South Africa's corruption score thus slipped somewhat in absolute terms during President Mandela's term and continued to slide until the present day.  The good news is that South Africa surpasses the median compared to other countries.  It's worth noting that Transparency's scoring methodology has changed since the inauguration of the index and many more countries are now part of the survey.

The Heritage Foundation tracks an Index of Economic Freedom for every country in the world.  I used the "explore the data" option to find South Africa's figures for 1995, the earliest year available.  The country's overall score that year was 60.7 (out of 100), with no ranking available.  Their score in 1999 was 63.3 and in 2013 it is 61.8.  That's a slight improvement overall since the end of apartheid.  South Africa today ranks 74th out of 177 countries, clearly beating the median and putting it in Heritage's "Moderately Free" category.

The World Bank tracks a Logistics Performance Index, one of my favorite measures of how well a country is positioned to handle trade.  The earliest year for data is 2007 so we can't see any changes during Mr. Mandela's presidency.  In 2007, South Africa scored 3.53 (out of 5) and ranked 24th (out of 150).  In 2012, it scored 3.67 and ranked 23rd (out of 155).  This statistic alone tells us little about whether Mr. Mandela made the country's infrastructure more robust but South Africa clearly ranks quite high.  

The OECD maintains plenty of stats, including GDP, but the earliest data they have online is from 2007.  GDP is a very relevant measure of an economy's health.  We need stats from Mr. Mandela's era.  This 2006 academic paper from the University of Stellenbosch demonstrates that South Africa did experience modest improvements in economic growth since 1994.  CNN reports that South Africa has experienced enormous growth in its economy and middle class, even while severe inequality remains.  Consider that economic benefits were primarily available only to the white minority before the end of apartheid.  The salutary economic transformation since Mr. Mandela ended apartheid is praiseworthy.

The World Bank has additional data on South Africa from its World Development Indicators.  GNI per capita has risen since 1994 but life expectancy and school enrollment have fallen.  The UN Statistics Division data on South Africa shows strong economic growth since 2005; labor force participation has slightly declined; telephone and Internet use have skyrocketed.

This analysis is by no means an all-encompassing consideration of Mr. Mandela's effectiveness as a leader.  I would argue that his most important achievement was the turnaround of an ostracized country.  He rehabilitated what the business community would call a damaged brand and made it viable.  South Africa earned inclusion among the BRICS nations as a dynamic emerging economy.  Mr. Mandela took great care during his presidency to assure international investors that he would not nationalize South African industries or engage in wealth redistribution, and he held true to his word.  Using Big Data KPIs shows clear progress in many areas.  I would hire "Madiba" to save a troubled company.  

Financial Sarcasm Roundup for 09/16/13

I'll lead off this particular roundup with a bizarre twist in the Fed-head replacement saga.  Larry Summers has withdrawn from consideration as the next Fed chairperson.  That means Janet Yellen is once again the heir apparent to Helicopter Ben.  I have two theories about this sudden pullout.  My first theory is that Summers' media game was a lot stronger than his real candidacy.  Old Washington hands are skilled at spinning the media even if they advocate a weak case.  If this theory is correct, Summers never had much of a chance and Yellen was always the front-runner, as I've long suspected.  Nothing negative in her background ever emerged in the media.  My second theory (which does not conflict with the first theory) is that Summers' public commentary on the limited effectiveness of QE was the dealbreaker.  Yellen's dovishness on inflation indicates she will continue QE-infinity, and that's ultimately what politicians want from the Fed now.  Bernanke likes Yellen because she'll continue his policies and thus take the fall for their eventual failure.  He's off the hook with the old "I'll be gone, you'll be gone" banking adage..

The reality of economic annihilation is filtering into the daily awareness of more Americans.  A record number of Americans self-identify as "lower class."  People receiving EBT cards and HAMP modifications have no illusions about their station in life.  That's why those programs aren't alleviating poverty.  Many of the working poor will simply give up on upward mobility if this class consciousness becomes permanently ingrained and they settle for a lifetime of collecting public benefits.  That may very well be what the plutocratic class wants the poor to do.  The country club's parking lot only has so many spaces and nobody wants to see a cheap compact car next to a Rolls Royce.

Emerging markets are on a debt binge.  This will end badly for markets that aren't export-driven.  It may be a blessing for markets that export hard assets and borrow in US dollars.  Hyperinflation will eventually destroy the dollar's value and leave hard asset owners feeling fine.  The Fed's hints of tapering QE have pounded emerging market equities lately.  Those hints will end once Yellen is running the Fed.  It's a great time to be a BRIC exporter.  

Emerging Market Currencies Scared Down By Fed Taper Talk

BRIC currencies are sinking like stones.  That's good for the dollar in the short run because the dollar still looks like the cleanest dirty shirt in the clothing pile.  India's rupee is hitting all-time lows.  That's good for anyone in the US who wants to import curry spices from India or go there for cheap medical tourist surgery.  Australia is not an emerging market but it remains a standout case in non-US markets.  Australian debt is in demand even though its currency is falling.  Some non-Australian investor is thus getting a major bargain.

Please don't take rising real interest rates in the US as some kind of vote of confidence in the US dollar.  The flight from riskier currencies does make the US dollar more attractive but it also makes capital more costly inside the US.  This will eventually drive US equity markets down as higher mortgage rates hurt consumers and higher borrowing costs hurt business cash flows.  Whatever panicky QE buying the Fed then conducts in response to deteriorating fundamentals will make currency traders lose their confidence in the dollar.  I thus expect the dollar to be the last domino to fall among the developed economies' currencies.

If the Fed's hints at tapering were intended to drive investors out of emerging markets and into US Treasuries and equities then it was the most brilliant head-fake ever from a central bank.  I don't give the Fed's leaders that much credit, so the more likely explanation is that these emerging market currency selloffs are the unintended consequences of the Fed's risk-off hint.  Central banks are not the all-powerful meta-attractors they pretend to be.  Monetary policies have unintended consequences, especially when they inflate asset bubbles all around the world.  Global markets have postponed the run on the dollar for now.  

Social Implications of Integrating Google Wallet Into Gmail

In case you haven't heard, Google Wallet is now integrated into Gmail.  I believe this is a very disruptive development in finance.  Conventional analysis focuses on the convenience it offers to American users of Google's integrated platform.  This is only the beginning.  We can expect some far-reaching effects.

This will be terrific for expatriates who migrate between emerging market countries in search of work.  Expat laborers send portions of their earnings as remittances to family members in the home country.  The World Bank believes the remittance market is over US$440B per year.  The OECD says that international migrant remittances are a major source of capital for developing economies.  Workers who currently pay wire transfer fees to send money home will be thrilled to attach micropayments to their email messages at no charge.  Goodbye, Western Union. The flow of development capital among emerging markets is about to become frictionless.

It will also enable more fraud, because Nigerian scam emails will have one-click enabling links their victims will be tempted to use.  Scams work because stupid people believe false promises from anonymous liars.  Enabling a monetary transfer with email eliminates the delay between responding to a deceptive offer and completing a fraudulent transaction.  Hazard is one click away but so is legal help.  Filing an online complaint about email scams is easy with IC3.

Finally, this innovation will allow intelligence agencies to track hawala transfers to radical organizations.  The US Treasury has extensively documented the role hawala transfers play in money laundering for criminals and terrorists.  Some central banks are cracking down on hawala because unlicensed money transfer operations make their national economic climates less transparent for investors.  The growing resistance to hawala means non-state insurgent actors will turn to innovative methods of moving money.  Cybercrime components of US law enforcement agencies now have a golden opportunity to track and intercept hawala transfers from "persons of interest" to the Taliban's proprietary madrasas if jihadis use Gmail.  Google has given the US intelligence community a wonderful tool for justice.

There are no solutions, only changed problems.  Emailing money reminds me of the early days of the Internet boom when startups were pushing "digital cash."  The e-cash movement was stillborn when banks and brokerages built web portals that allowed customers to access their accounts from home.  The contemporary reinvention of the e-cash concept is Bitcoin, and it's not faring any better because the US government just shut down a major Bitcoin exchange.  New forms of money are not the future of finance.  Existing money  will simply flow to new means of transfer.

Full disclosure:  No positions in any companies mentioned.  BTW, I do not participate in Bitcoin.

The Haiku of Finance for 12/20/12

Transparency rank
Check it before you invest
Avoid corruption

The Limerick of Finance for 10/14/12

Ben denies the Fed hurts currencies
He vows to continue to ease
The dollar gets weak
Food shortages peak
Raising prices in many countries

The Haiku of Finance for 04/16/12

World Bank picks new chief
Emerging countries shut out
Until they get rich

The Haiku of Finance for 04/13/12

New IMF cash
BRIC bloc wants more voting sway
Europe must concede

Clenergen (CRGE) Has Not Cleaned Up For Investors

It's time for another dive into my dusty old mailbag of slick promotional brochures from investment newsletter publishers.  A few months ago Shawn Ambrosino at Trinity Investment Research sent me a mailer touting Clenergen (CRGE), processor of plant-based biofuel.  The pitch is that this company's Indian-sourced feedstocks make it a winner.  Let's examine the track record. 

CRGE debuted on Sept. 30, 2011 at $0.84/share.  Today it trades barely above four cents per share.  Investors who bought this stock at any time in 2010 or the first half of 2011 are now so far underwater they may never see the light of day. 

Figuring out why this stock has suffered isn't difficult.  Accounts payable have been roughly twice as large as current assets for the past four quarters.  Clenergen has apparently never seen a bill it didn't like.  With negative free cash flow and only $160K cash on hand as of April 2011, it won't be long before the company is completely unable to pay its bills. 

Clenergen's business model up to the present quarter has been flawed.  Their efforts to simultaneously build stand-alone biomass power plants in several emerging markets have no synergy.  Try running multiple, non-integrated supply chains under multiple regulatory regimes in countries where you have little on-gound presence and see if you'll make any money.  No wonder their costs are out of control.  A look at their senior management team reveals limited bench strength in the energy sector, with a CEO who's had some experience in biofuels and other people who never seem to have touched the stuff before coming to Clenergen.  Clenergen's decision this year to change its business model from owning and operating power plants to licensing its technology for use by local power companies is probably the best move it could make under the circumstances.  This is the only business model they ever should have pursued given management's lack of experience in energy project execution. 

Full disclosure:  No position in CRGE, ever.

Debt Ceiling Raised To The Roof

This weekend, another brick was laid in America's long, winding road to financial implosion. Our leaders reached some kind of deal on raising the debt ceiling, which has been raised umpteen times already after World War II. We can now look forward to being the butt of jokes among those countries whom our financial strongmen at the IMF have bailed out and restructured.  Russia took the lead today in calling us out for our profligacy.  That criticism is likely intended for a domestic audience; no doubt Russia likes the rise in oil prices driven by our Federal Reserve's monetary expansion. 

Speaking of the IMF, it's coming off its leash.  Mme. Lagarde is gently admonishing us that maybe our Treasuries aren't such a hot product after all.  Good for her.  She knows the U.S.'s time as hegemon is drawing nigh.  Maybe Russia can be the IMF's new backer if it throws some oil money over the fence.  They can start planning new bailout packages for investors who are about to get burned by the new bubble in emerging market bonds. 

Taking Apart This Week's Emailed "Emerging Markets" Picks

I like International Living and The Sovereign Investor for their take on world markets. It's nice to hear what aspiring expatriates think of prospects for leaving the good old U.S.  Advice on cheap living aside, they should work on their fundamental analysis of stocks. 

Cases in point came in this week's emailed financial teasers.  Sovereign Investor swung for the fences with a broad endorsement of emerging market small cap stocks as insurance against a U.S. debt default.  International Living recommends investments in Intel (INTC),  Philip Morris (PM), Coca-Cola (KO) and Microsoft (MSFT) for their "above-average emerging markets exposure," whatever that means.

I usually stay away from broad-brush approaches that are "plays" on anything other than fundamental analysis.  I can address these with some broad-brush critiques of my own.  Small cap stocks in emerging markets are no better than penny stocks here in the U.S.  They may be scams and the lack of robust securities regulation in emerging markets means you'll have a tough time doing due diligence or filing a complaint.  The four stocks named above may indeed derive significant revenues from emerging markets, but a bad year here in the U.S. can negate such results.  It's better to look at their whole pictures.  A second act to the Great Recession is imminent, and tech stocks like INTC and MSFT will be hurt badly if businesses curtail IT spending to survive. 

S.I. and I.L. are outside the box in thinking about solutions to the sovereignty crunch,  Good for them.  That's why I read their stuff. 

Full disclosure:  No positions in companies mentioned. 

Walk Like An Egyptian ETF - With Caution

The world's eyes were until recently glued to Greece, the cradle of civilization.  Now they're mesmerized by that other font of ancient mystery, Egypt.  U.S. retail investors have little access to the Egyptian stock market except through thinly traded instruments like the Market Vectors Egypt Index ETF (EGPT).  This ETF isn't as liquid as others because many of its underlying equities are illiquid, requiring new shares to be handled via in-kind creations.  Van Eck has suspended those creations now that Egypt's turmoil has closed its equity market.  Investor cash intended for EGPT can't be put to work in the fund, so the Egyptian market remains largely inaccessible to new investors despite increased investor attention.  Even ETF experts are unable to estimate a fair value for EGPT thanks to the implied tracking error of all that sidelined cash. 

Daily trading volume in EGPT has exploded in the past two weeks.  Long investors might be betting that the crisis will soon be resolved and stability will return.  Short investors can bet on further chaos.  Value investors need to consider the long-run implications of Egypt's problems.  Credit default swaps on its debt are extremely high, with yields rising due to uncertain bond market interest in new issues.  There is some risk that Egypt's logistics infrastructure can be compromised by political violence.  The Suez Canal seems safe for now but an explosion has taken a very important natural gas pipeline offline.  It is too early to tell whether that explosion was due to sabotage, but any any infrastructure vulnerability puts additional pressure on the military to implement backup measures. 

The risks of investing in emerging markets are obvious.  Egypt is a boiling cauldron right now, and investors can easily get burned. 

Full disclosure:  No position in EGPT. 

Chinese Underground Lenders Signal Frothy Top

America had its freewheeling mortgage brokers during the housing bubble.  Those generators of unregulated, undocumentable mortgages catapulted the U.S. housing market over a cliff.  China now has something comparable with legions of underground lenders serving small businesses:

Second-quarter figures from the Wenzhou branch of the People's Bank of China showed that 89 percent of local people and nearly 57 percent of enterprises had either borrowed from or made deposits at non-bank finance companies.

You would think China's larger banks would take this as an opportunity to develop a market for commercial paper.  Lack of such a development illustrates the immaturity of fixed income trading in emerging markets.  Investors drawn to emerging market bonds need to take heed. 

I'll take this as a sign of an approaching top for China's own bubble. 

Full disclosure;  Long FXI with covered calls and cash-covered short puts.

Suckers Rush Into Emerging Markets

I'm convinced that most people never learn anything at all.  Retail investors are desperate to pick up nickels in front of steamrollers in their insane chase after yield.  Look at the money jumping into emerging market stocks that pay sky-high dividends.

It's too bad the party won't last.  China's growth has finally slowed to single digits. Now all Chinese companies have to do is pay huge dividends to keep FDI flowing in.   

Thanks for the never-ending macro "put," Helicopter Ben.  Your ZIRP is forcing know-nothing investors to price the rest of us out of emerging markets.

Full disclosure:  Long FXI with covered calls.  No position in IWM. 

Untapped Resources Set The Stage For Domination

Earth is a finite sphere.  There are only so many ounces of recoverable ore left to mine.  The point of diminishing returns from resource extraction will appear some day.  That day will herald the world's transition from a perpetual growth economy to a steady-state economy. 

Until that day comes, it's game on in a scramble for untapped mother lodes of metals and energy.  The winners in this scramble will be able to dictate the future structure of the world's political arrangements.  There's plenty of potential in the U.S. for wind energy, and the company that lays the grid to collect and distribute wind-derived electricity will hold a perpetual monopoly. 

Some resource-rich countries still have relatively accessible mineral deposits.  These countries will be able to name their own prices for extraction as long as those deposits last.  Such countries also risk becoming battlefields for Great Powers if the price they name for their mother lodes is too high.  I am willing to bet that the military leaders of China and India are wargaming options that will maintain their countries' access to resources if a rival cuts them off.

Map out the remaining resource deposits in emerging markets and draw lines from there to Chinese and Indian ports.  The flash points for future naval confrontations lie at points where those trade lines cross natural geographic choke points.  I will invest accordingly. 

The Argentinian Option In America's Future

It's easy for commentators and polemicists to use the word "bankruptcy" in the context of sovereign debt obligations.  I've done it myself in my lazier moments.  A more appropriate description for what happens when governments can't pay their bondholders would be "default," not bankruptcy.  Given the U.S. government's massive unfunded liabilities, bond investors must consider a default on Treasuries as a possibility.

How would a U.S. default affect bondholders?  Argentina shows us one case:

Argentine bonds and stocks rose on Monday and the country risk narrowed to its tightest since July 2008 on expectations for a high rate of acceptance in a planned swap of up to $20 billion in defaulted bonds.

Locally traded bonds closed up 1 percent on average as investors continued to buy sovereign debt in the run-up to the exchange, which is set to launch on April 14

.
The initial announcement of default always roils the bond market, driving up interest rates and crowding out private borrowers as investors shun all kinds of debt.  Greece is still in the early stages of its default, which I believe will proceed apace regardless of what the EU's leaders say they will do.  The U.S. has yet to begin its sovereign default drama, although the curtain will go up on the opening act once Social Security starts to have trouble covering its payments. 

Defaults hurt in the short term.  Argentina shows us that there is life after default, with investors ready to exchange devalued bonds and participate in issues from a newly creditworthy government.

I believe that U.S. Treasuries with maturities longer than one year pose a default risk, so I'm not buying them.