Free Markets, Free People

Daily Archives: October 5, 2011

There are certainly more comprehensive tributes, but this is my favorite so far. From Steven Horwitz:

Unlike many, I am not an Apple-phile. I honestly don’t get the emotional relationship people have with their products. HOWEVER… there is absolutely no doubt that Steve Jobs is a symbol of all that is right with markets and capitalism. This is a man who became very, very rich by making many people’s lives (including my own) very much better. He was a master at creating value and persuading people that they wanted things they didn’t know they wanted. He should be part of the pantheon of human heroes.

Unlike the political and military heroes of war we too often celebrate, Jobs is a hero of peace. He made his money through persuasion not at the point of a gun, and through mutual benefit not oppression and exploitation. Those of us who really desire a peaceful society should not celebrate those who were victorious in war, but those who created value through peaceful, voluntary, mutually beneficial exchange – exchanges that happen billions of times every single day. And we should do it no matter whether what was exchanged was electronic bits of magic, food for us to eat, or financial instruments that improve the movement of capital. They all create value and improve our lives, and all of their benefits are deserved.

Thanks for everything Steve and thanks for making the world a better place one peaceful, cooperative exchange at a time.

What? No stories about the “all white” Occupy Wall Street crowd?

Well there is one, and I’m going to cite it, but it is interesting, I think, that only one has appeared given the constant “lily white” portrait of Tea Party events.

Though a few representatives of minority groups have appeared among the “Occupy Wall Street” protesters in New York City, photos and videos of the left-wing mini-throngs indicate they suffer from a serious lack of diversity. And the protesters themselves told The Daily Caller on Tuesday that they are conscious of the issue, if not the inconsistency it demonstrates.

A 40-photo Washington Post slideshow showing hundreds of angry protesters in New York and other cities includes no more than 15 clearly identifiable minority protesters, and just six African-Americans. The rest of the protesters shown are white, and most are male.

And yet they’re trying to portray themselves as the 99%.

I’m sorry, I find the whole thing hilarious.  Hoist on their own petard, the spokespeople are clueless about how to spin this:

“That’s an interesting question, and it comes up often,”’s Patrick Bruner said in an email to TheDC. “Unfortunately, we have a very high turnover rate, and nobody as of yet has come up with official diversity related statistics for us. From observation, I can tell you that we’re not all white, and that we also have a huge LGBT [Lesbian Gay Bisexual and Transgender] population.”

“We’re working on reaching out to minority groups as well,” Bruner adds. “Thanks for the food for thought, I’m sorry I don’t have more exact information for you right now.”

They are a caricature of what they consistently accuse the right of being and then condemn.

Irony – I love it.


Twitter: @McQandO

Further Reading: The Devil’s Dictionary Edition

The story of professional curmudgeon and cynic Ambrose Bierce and The Devil’s Dictionary. Bierce’s astringent satire and observations made Twain seem treacly sweet:

POLITICIAN, n. An eel in the fundamental mud upon which the superstructure of organized society is reared. When he wriggles he mistakes the agitation of his tail for the trembling of the edifice. As compared with the statesman, he suffers the disadvantage of being alive.

HISTORY, n. An account mostly false, of events mostly unimportant, which are brought about by rulers mostly knaves, and soldiers mostly fools.

MAN, n. An animal so lost in rapturous contemplation of what he thinks he is as to overlook what he indubitably ought to be. His chief occupation is extermination of other animals and his own species, which, however, multiplies with such insistent rapidity as to infest the whole habitable earth and Canada.

SATAN, n. One of the Creator’s lamentable mistakes, repented in sashcloth and axes. Being instated as an archangel, Satan made himself multifariously objectionable and was finally expelled from Heaven. Halfway in his descent he paused, bent his head in thought a moment and at last went back. “There is one favor that I should like to ask,” said he.

“Name it.”

“Man, I understand, is about to be created. He will need laws.”

“What, wretch! you his appointed adversary, charged from the dawn of eternity with hatred of his soul — you ask for the right to make his laws?”

“Pardon; what I have to ask is that he be permitted to make them himself.”

It was so ordered.

HEAVEN, n. A place where the wicked cease from
troubling you with talk of their personal affairs, and the good listen with
attention while you expound your own.

For several years now we have been trying to explain repeatedly that buybacks are in general a bad deal. Jason Zweig looks at the question. That being said, the The PowerShares Buyback Achievers Portfolio has done very well over the last three years. We’ll let that hang there and discuss in more detail later.

Economics proceeds on the assumption of ‘given data’ and produces a beautiful, aesthetically satisfying theory to show how these data determine a resulting order, but [economists] forgot that these data are purely fictitious: the data are not given to anybody. — F. A. Hayek

Ben Bernanke and the Costanza Effect

Yesterday I wrote The Bear Arrives. Then it left in the space of less than an hour. Supposedly it is because a new plan is coming to save the Eurozone. This one seems to require lenders to take more losses. Unsurprisingly some banks are not happy with that idea. Still, we may be getting somewhere. Somebody will need to take a loss. I suggest this interview from Kyle Bass to put this in perspective:

there’s only one way out in my opinion of this debt mess and it’s through restructuring and that means default. It’s not the end of the world. It just means a lot of people are going to lose a lot of money and then we’ll get up the next day and go back to work.

Researchers believe they have found the written form of the ancient Pict language.

UCLA has restored Robert J. Flaherty’s LOUSIANA STORY (1948), a portrayal of Cajun life and the disruption an oil company causes when it enters the bayou.

The Robin Hood Tax is a bad idea, at least as described.

While a recession may be coming, Mark Perry reviews the reasons we are “not experiencing any of the significant, persistent and widespread declines that would lead the NBER to declare sometime next year that the U.S. economy entered a recession in any of the recent months.”

Auto Sales strength should help lead to a weak, but improved, GDP number for the third quarter.

Beware of Market Rallies Ahead

More doubts about leveraging the EFSF

Capital goods orders and shipments remain strong according to Ed Yardeni:

It’s hard to put a negative spin on such strong numbers, other than to note that they looked this strong during the previous two cycles when they peaked and then took a dive. On a more fundamental basis, capital spending is driven by corporate profits and cash flow, which have been very strong. They should remain strong, though both are likely to grow at slower paces through next year.

On the other hand he sees issues for earnings overall going forward, especially in the materials sector.

Odds are that there will be lots of disappointments in the earnings season ahead, most likely led by the Financials and Materials sectors. Of course, the bad news for the quarter may have been discounted already. However, there could also be lots of cautious guidance about Q4 and 2012. Industry analysts are already trimming some of their earnings estimates for next year, particularly in the Financials sector.

Goldman is getting more and more bearish.

The derivatives nightmare:

“What is the gross number and what’s the difference between the gross and the net?” Citi CFO John Gerspach replied: “I don’t think that the gross number is relevant.”

It isn’t? So, we are all supposed to trust that as an industry (really, five US banks) you have a handle on a total derivatives book of 332 Trillion! Seriously? This reminds me of one of my favorite posts from back in 2008, JP Morgan, Lehman and Nightmares:

Personally there are better ways to make money than hoping a company with 90 trillion in derivatives exposure has a handle on it in my book, but then again, I am admitting that I have no idea what I am talking about, and cannot find anyone else who does either.

Warren Buffet often speaks of defining a circle of competency when investing and staying inside it. It doesn’t matter how big the circle is, just knowing when you are inside it. Well, 90 trillion in derivatives exposure is outside of my circle of competency to assess.

The nightmare is what if it is outside of JP Morgans circle?

Personally the idea that Trillions, netted or not, are within anyone’s circle of competency is ridiculous.

Lesson’s from 1930

We are often told that we cannot be about to have a recession because they are always preceded by an inverted yield curve, to which we reply:

  1. Glad to know the Fed can therefore outlaw recessions.
  2. Funny, when we pointed out a few years ago the yield curve was inverted and flashing recession the yield curve wasn’t considered such a great barometer.

Ruslan Bikbov at BofA Merrill Lynch found that a weak argument and decided to adjust for that fact and then tested his method. What do you know, the yield curve is flashing recession.

HSBC says there will be no hard landing in China.

Deutsche Bank agrees forecasting a slowdown to 7% and a drop of 10% in housing prices. However, this interests me:

Readers may ask why we are not projecting a 30% drop in property prices. Those who understand China’s political economy should know that a 15% decline in average property prices in 35 cities within a few months must be accompanied by a range of economic and social consequences. These will include a sharp decline in real estate transactions, a visible deceleration in real estate investments, rising unemployment in the property construction and agency sectors, a further decline in construction material prices, demand destruction due to inventory destocking, and finally a worrying decline in GDP growth and the resulting concern of social stability. In other words, the government will most likely not tolerate a 30% drop, and probably not even 15% in our view. We expect real estate policies will likely be relaxed way before a 30% price decline is observed.

I see, the old “the government won’t allow it” explanation. Maybe, but the idea that we can assume government policy can control the economy is awfully presumptuous. Now that we know that can be done, market and economic realities be damned, we should all just merrily bid stocks up because governments have eliminated business cycles, haven’t you noticed?

Sam Harris on the Future of the Book and how writers need to adapt.



Fast and Furious scandal evokes yelling and screaming from DoJ and White House

The ATF operation, “Fast and Furious” is causing frayed nerves at both the DoJ and White House.

In a document dump last week, it became clear that the White House was aware of the operation at some level for quite some time.  Additionally, it appears that Eric Holder at DoJ was also very aware of the operation prior to his Congressional testimony where he testified he’d only recently found out about it.  The Hill:

Attorney General Eric Holder was issued multiple memos from senior Justice Department officials about a controversial gun-tracking operation months before he said he first became aware it, according to documents.

So either he doesn’t read his memos or he was just flat telling a fib when he told the Congressional committee that he wasn’t aware of the operation until recently.

Those revelations have caused the most transparent administration in history to begin yelling and screaming at reporters chasing the story.  CBS investigative reporter Sharyl Attkisson told the story on the Laura Ingraham show yesterday:

In between the yelling that I received from Justice Department yesterday, the spokeswoman–who would not put anything in writing, I was asking for her explanation so there would be clarity and no confusion later over what had been said, she wouldn’t put anything in writing–so we talked on the phone and she said things such as the question Holder answered was different than the one he asked. But he phrased it, he said very explicitly, ‘I probably heard about Fast and Furious for the first time over the last few weeks.’

That’s right folks, the defense coming out of DoJ is that Holder was answering a different question than the one asked?   Or, in simpler terms, he flat out lied.  Attkisson goes on:

Ingraham: So they were literally screaming at you?

Attkisson: Yes. Well the DOJ woman was just yelling at me. The guy from the White House on Friday night literally screamed at me and cussed at me. [Laura: Who was the person? Who was the person at Justice screaming?] Eric Schultz. Oh, the person screaming was [DOJ spokeswoman] Tracy Schmaler, she was yelling not screaming. And the person who screamed at me was Eric Schultz at the White House."

And Atkisson is lectured about what is “reasonable” concerning coverage of this scandal, and apparently she’s way over that arbitrary boundary:

[The White House and Justice Department] will tell you that I’m the only reporter–as they told me–that is not reasonable. They say the Washington Post is reasonable, the LA Times is reasonable, the New York Times is reasonable, I’m the only one who thinks this is a story, and they think I’m unfair and biased by pursuing it.

You can hear the entire interview at the link above, but this is one of those “where there’s smoke, there is fire” moments and given the reaction, Atkisson must know she’s on to something big.  The use of “unfair and biased” show they’re willing to use the big gun accusations that are supposed to shame Atkisson into dropping the story. 

But the tone tells you a lot.  They are running a bit scared on this one.  And if they can just shut down the major news outlets pursuing the story, they’re fine.  They obviously believe their faithful lapdogs – Washington Post, LA Times, and NY Times – are pretty much off the story or covering it in such a way that it doesn’t reflect poorly on the administration while CBS and Atkisson are pursuing it much too deeply for their comfort.  Thus the yelling, screaming and accusations.

This is a very serious scandal and the administration knows it.  Their fire brigades are out there trying their best to dampen the flames.  My guess is the head of CBS news will be getting some phone calls if he or she hasn’t already. 

This is how the team that was going to “change politics in Washington” play ball.

Seems like business as usual to me.  And you?


Twitter: @McQandO

Economic Statistics for 5 Oct 11

Today’s economic statistical releases:

The Mortgage Bankers Association reports that mortgage applications fell -4.3% for the week, with purchases down -0.8%, and refinance applications falling -5.2%.

The Challenger job cut report indicates there were 115,730 layoffs last month, swollen by 30,000 jobs at Bank of America and a military troop cut of 50,000.

ADP estimates private payrolls rose 91,000 in September. We’ll see how close that estimate is with the release of the Employment Situation on Friday.

ISM Non-Manufacturing Index fell slightly to 53 from 53.3 last month, however, new and backlog orders both rose, giving some hopes for better reports in the future.

Dale Franks
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