Wednesday, November 16, 2011

A Buyers Strike in Eurozone Bonds?

Financial Times:
“Buyers’ strike,” for a number of reasons, is a good way to describe the state of Europe’s sovereign debt market at the moment. It has really affected the lack of liquidity even in prime long-dated AAA bonds like those of France — see those vaulting spreads to German debt — but we think that it must really end up hurting sovereigns’ short-term refinancing needs, in the primary market (auctions) in particular. Spain had a T-bill auction on Tuesday with the same problems. Italian T-bills in the secondary market were (sorry to bring out the cliche) canaries in the coalmine before last week’s carnage.
What this means is that European countries seeking to raise short-term capital are, in a word, screwed.  Their cost of borrowing is going to go through the roof as they must offer higher and higher yields to attract bond buyers.

Monday, November 14, 2011

The Cognitive Dissidents

Some people...

Barry Ritholtz:
I have frequently referenced the idea of Cognitive Dissonance. This has been traditionally described as the “uncomfortable tension which comes from holding two conflicting thoughts in the mind at the same time.”

However, where we see an even greater discomfort is when a person of a given mindset or ideology is confronted with facts that directly contradict their previously held beliefs.

As we have seen, there is a cynical attempt to falsify the narrative of what actually occurred before, during and after the credit crisis. The data is overwhelming as to what did and did not cause the financial collapse. The belief that markets can self regulate, that bankers can be trusted to act int heir own best interest, even that people are rational, have all been shown to be siilly nonsense.

The conflicts within the minds of the people who believe these fallacies is overwhelming. 
The attempt at reconciling facts with beliefs leads them to a painful conflict: Either they significantly modify their belief system — a challenge when its a defining characteristic of their personas — or, they utterly disregard the facts in order to construct a new narrative.

Some people have recognized their belief system was overrun by reality. They are chastened, have begun searching for a new or modified ideology.

Many others refuse. Facts be damned, they double down, sticking with their beliefs, regardless of all evidence to the contrary.

I have a new name for these folks: They are Cognitive Dissidents. They will continue to dissent from reality for as long as it takes to get everyone else to believe as they do, no matter how much evidence there is to the contrary.

If you engage with a Cognitive Dissident, it is futile to try to use facts or data, for theirs is a belief based upon Faith. You cannot convince a person of a fact if it conflicts with their deeply held, nearly religious convictions.

Thus, when confronted with someone who has a fervent belief based not on evidence or reason or data or logic, do not waste your time convincing them the earth is not flat; their cognitive facilities simply will not allow them to recognize the world is round.

A farmer — or was it Robert Heinlein? — once passed along this slice of wisdom; I repeat it now for your benefit: Never try to teach a pig to sing; it wastes your time and annoys the pig.

Sunday, November 13, 2011

Amazing Video of Earth from the ISS

Just spectacular!

Get 'em While They Last!

Yes, you too can own a slice of cinematic offal!  Among the worst rated films in the history of cinema,   Atlas Shrugged: Part 1 is now available on DVD (and, god help me, Blu-Ray!)

Before you rush out to buy it, you might want to check out Rotten Tomatoes for the reviews...

As the reviewer for The New York Times said,
“Atlas Shrugged: Part I” is in many ways charmingly oblivious to its inherent contradictions and the fact that its capitalist titans appear to be squatting in old, abandoned “Dynasty” sets, eating food-court baked potatoes.

It Never Occured to Me!

That von Misses, Hayek, Marx and Ron Paul all share the same delusional value proposition never crossed my mind before.  Thanks Brad!
The point of view underlying von Mises's--and von Hayek, and Marx, and Ron Paul--complaint against fiat money in general and monetary management of the business cycle in particular is this: that value comes from human sweat and toil, not from being clever. Thus it is fine for money to have value if it is 100% backed by gold dug from the earth by sweat and machines and muscles (even if there is no state of the possible future world in which people actually want to exchange their pieces of paper for the gold that supposedly backs it). But it is not fine for money to have value simply because it is useful for buying things. There is, von Mises--and Marx, and von Hayek, and Ron Paul--think, something profoundly wrong on an economic and on a moral level with procedures that create value that is not backed by, in Marx's case, human labor, and in von Mises's and von Hayek's case human entrepreneurial ingenuity. And in its scarier moments this train of thought slides over to: "good German engineers (and workers); bad Jewish financiers".

Friday, November 11, 2011

Libya: The Backstory

Libyan Leader Colonel Muammar Gaddafi in 1971,
two years after he seized power in a coup d'etat
In a very comprehensive review of Libyan history and politics over at The London Review of Books, Hugh Roberts points to some very inconvenient truths in the overthrow of Gaddafi.

Spend an Hour with Tim Wise

The best hour you'll spend learning American history this month...

Occupy Wall Street Trickles Into the SEC

This is fascinating...

As far as we can tell, Occupy Wall Street made its SEC-filing debut yesterday, at least by name, in two separate filings. The first, in an 8-K from Strategic Hotels & Resorts (BEE) — a $943-million market-cap real-estate investment trust that concentrates on luxury hotels — landed on the SEC’s virtual desk a few minutes before noon. More on them in a moment. 
The second instance came not two hours later, when CME Group (CME) filed its 10-Q. CME Group, of course, runs the Chicago Mercantile Exchange, the Chicago Board of Trade and the New York Mercantile Exchange. So it’s not surprising that it would take a dim view of the protests in New York’s financial district and see itself as a potential target of any nefarious foes of the financial system.
The 10-Q filing from CME is really interesting.  Remember, these are the clowns who posted a sign that said "We are the 1%" in the windows above the Occupy Chicago protests.

“In connection with the continued economic uncertainty, groups such as Occupy Wall Street and Anonymous, have targeted the financial services industry as part of their protest against the perceived lax regulation of the financial sector and economic inequality.” 
It's working, Occupy, it's working.

Krugsandra Makes a Funny

The sad irony here is that the euro is, in reality, essentially an Italian creation. If you were part of the dialogue in the late 80s and early 90s, it became clear that the euro was best understood as a plot by Italian technocrats to get themselves German central bankers.

This was not, it turns out, a good idea.

Thursday, November 10, 2011

Sunday, November 6, 2011

Rockin the Souq!

Damn, these guys rock! An awesome fusion of Middle Eastern and symphonic metal music.

Tuesday, November 1, 2011

Spain misses Q3 GDP Target

And you'll never guess why...
The Bank of Spain blamed stagnant growth on a number of factors, including a drop in domestic demand in a country with a 21.5 percent jobless rate. 
It said domestic demand fell because of lower government spending as a result of deficit-reducing austerity measures taken by regional governments and because of a moribund real estate market.
So what's the solution to this drop in aggregate demand caused by the severe austerity measures the Spanish government has imposed?

Why more austerity, of course!
The Bank of Spain said there is still time to meet the deficit reduction target by the year's end but warned that fresh measures may be necessary.
Because repeating the same action over and over again while expecting a different result must be the right solution.  It simply must!

Prepare for a longer, deeper and more pronounced recession in Europe.  It's coming, kids.  It's coming.
"By the pricking of my thumbs, Something wicked this way comes!"

If you Give a Credit Rating Agency a Cookie...

...he'll love you bestest of all (and drink all the milk in your fridge)!
Credit-rating companies routinely award higher rankings to debt issued by banks and corporations that pay them the most, a conflict of interest that may escape Congressional efforts to change the way they do business.

Bonds from countries and cities that pay about half as much as issuers of less creditworthy debt are “rated more harshly,” according to a study by scholars at Indiana University in Bloomington, Washington, D.C.-based American University and Rice University in Houston. Sovereigns rated A had no defaults over a 30-year period, compared with 1.8 percent of corporate bonds and 27.2 percent of securities backed by debt such as mortgages and loans assigned that ranking, the study of Moody’s Investors Service data said.