Month: July 2007

And Then There is The Yen Carry Trade

No Comments

While I have talked about currencies, it has primarily been about the fall of the dollar relative to the Euro. A more significant risk in the short term is a strengthening Yen.

Much of the current investment mania has been driven by the Yen carry trade.

Basically, Japan has the lowest interest rates in the industrialized world, so if one borrows money in Yen, and invests them in another country.

The Japanese interest rates are currently arounc 0.5% (no, I did not misplace a decimal point), so you could invest in the US at around 4-5%, and pocket the difference.

The rates are low because of the long Japanese recession, and deflation, starting in the early 1990s.

The carry trade is not risk free. If the Yen strengthens versus the Dollar, then you have to pay back more dollars, and you can end up losing money.

Japan appears to be finally over its 15 year downturn, it’s economy “grew at a 3.3 percent annual rate in the first quarter”, so it’s likely that the central bank will raise rates, which will bolster the Yen generally.

In any case a rate of 0.5% is simply not sustainable, so it has to go up, and the currency can be expected to go up then too.

So, in addition to the private equity binge, sub prime mortgage securities, exotic mortgages generally, and an IPO boom, we have another potential for a collapse with the Yen strengthening.

Net Radio Receives a Reprieve

No Comments

This is about congress taking a good look at the US IP regime, and folks like the RIAA and Sounc Exchange not wanting that. This is whySound Exchange has compromised, and won’t collect the new rates for now.

Intellectual product (IP) is not property. It a temporary exclusive license for the public good.

There are more and more people, including the US Supreme Court, who are finding the US IP regime a hinderance, rather than a help to innovation and art in the US.

Indications of a PERMANENT Presence of US Troops in Iraq

No Comments

This article makes it very clear that the United States plans to never leave Iraq.

The facilities involved are extensive, expensive, and permanent.

Inside spacious, air-conditioned “Kingpin,” a new air traffic control center at this huge Air Force hub 50 miles north of Baghdad……

“We’re the busiest aerial port in DoD,”…..

Early this year, with little fanfare, the Air Force sent a squadron of A-10 “Warthog” attack planes — a dozen or more aircraft — to be based at Al-Asad Air Base in western Iraq. At the same time it added a squadron of F-16C Fighting Falcons here at Balad……

Those big bombers were moved last year from distant Diego Garcia in the Indian Ocean to an undisclosed base in the Persian Gulf…..

The weaker of Balad’s two 11,000-foot runways was reinforced — for five to seven years’ more hard use. The engineers next will build concrete “overruns” at the runways’ ends. Balad’s strategic ramp, the concrete parking lot for its biggest planes, was expanded last fall. The air traffic control system is to be upgraded again with the latest technology.

This folly is going to kill a lot of US troops. It fuels the insurgency.

Once Again, The Japanese Bomb Pearl Harbor, and We Attack New Zealand

No Comments

There is an interesting story in the Los Angeles Times.

It appears that the bulk, if not the outright majority of the foreign fighters in Iraq killing our boys are Saudi.

Not Syrian. Not Iranian. Saudi.

About 45% of all foreign militants targeting U.S. troops and Iraqi civilians and security forces are from Saudi Arabia; 15% are from Syria and Lebanon; and 10% are from North Africa, according to official U.S. military figures made available to The Times by the senior officer. Nearly half of the 135 foreigners in U.S. detention facilities in Iraq are Saudis, he said.

Impeach Dick Cheney today. Impeach George W. Bush Tomorrow.

Google Earth Pics of Chinese Boomer

No Comments

The FAS has some pictures of the New Chinese SSBN at dock.

This was (note water mark) right off of Google.

22 years ago, Samuel Loring Morison was sent to jail for passing information almost identical to this to Jane’s Defense Weekly.

As to Mr. Morison. I believe he was properly convicted. His claims to want to publicize this notwithstanding, he was using classified information to get a job, and to get raises from Jane’s.

That’s why he leaked them, and I’m still conflicted about Clinton’s pardon of him. He deserved to go to jail, but the use of the Espionage act, which is a bad law to begin with, is troubling.

Even With the Sub Prime Market Crashing, Bad Paper Still Flows Freely.

No Comments

People know that this is crashing. People know that someone will be left holding the bag on trillions in bad loans, but they are still making bad loans.

It’s simple: In our “flexible and deregulated economy” the crooks make their money, and get out of town before the house of cards collapses.

At some point, a risk premium will be associated with investing in the US, and it will get very ugly here.

Subprime lending: Business as usual

A consumer group charges that many subprime lending abuses continue to plague the lending industry despite the recent crisis.
By Les Christie, CNNMoney.com staff writer
June 28 2007: 3:25 PM EDT

NEW YORK (CNNMoney.com) — It would appear that subprime lenders have yet to learn from their mistakes. According to a consumer advocate group, abuses persist industry wide, despite the recent subprime mortgage meltdown.

At a Senate subcommittee hearing on ending mortgage abuse this week, the Center for Responsible Lending (CRL) presented its findings on subprime loans included in 10 recent packages of mortgage backed securities.

“A lot of the terms that make these loans so dangerous are still being used,” said Keith Ernst, CRL’s senior policy counsel. “We had been told that these things are going away.”

More than three quarters of the subprime loans CRL looked at turned out to be adjustable rate mortgages (ARMs). 90 percent of those were hybrid ARMs – otherwise known as “exploding” ARMs.

Hybrid ARMs have two- or three-year periods of cheap, low-interest, fixed-rate payments, or “teaser rates.” But after two years, the loans reset at much steeper rates, which can prove fatal for homeowners who can’t handle the higher payments.

On a $200,000 loan with a teaser rate of 5 percent, for example, borrowers would pay about $1,074 a month. At reset, the interest rate could jump to 8 percent, adding nearly $400 to payments, which could continue to increase every six months.

…

Republican Sex

No Comments

I came across this very amusing quote while perusing news of More on David Vitter, Patron Saint of Schadenfreude:

Jeanette says that most of the clients who wanted to be dominated were Republicans. She cracks a smile, then adds, “They wanted to be spanked and tortured and wear stockings–Republicans have impeccable taste in silk stockings–and these are the people who run our country.”

There appears to be a lot of self loathing there.

Quote of the Day: John Kerry

No Comments

The WaPo has a story on the Nixon admin wanting to co-opt Kerry and get him to run as a Republican.
Because of his background (He’s went to Yale), they thought that he might be able to bring him into the fold.

One of Kerry’s comments is prize:

I experimented with a number of things in college. Being a Republican wasn’t one of them. Besides, going to Yale doesn’t make you a Republican. Going to Bob Jones University makes you a Republican.

Lol!!!!!!

More Downward Pressure on the Dollar

No Comments

This makes it more likely that other nations will be putting part of the foreign reserves in non-US currencies.

This will place further downward pressure on the USD, and further upward pressure on interest rates.

Iran Asks Japan to Pay Yen for Oil, Start Immediately
uly 13 (Bloomberg) — Iran asked Japanese refiners to switch to the yen to pay for all crude oil purchases, after Iran’s central bank said it is reducing holdings of the U.S. dollar.

Iran wants yen-based transactions “for any/all of your forthcoming Iranian crude oil liftings,” according to a letter sent to Japanese refiners that was signed by Ali A. Arshi, general manager of crude oil marketing and exports in Tehran at the National Iranian Oil Co. The request is for all shipments “effective immediately,” according to the letter, dated July 10 and obtained by Bloomberg News.

The yen rose on speculation for an increase in demand for the currency, the result of Japan’s annual 1.24 trillion yen ($10.1 billion) of oil imports from Iran. Central bankers in Venezuela, Indonesia and the United Arab Emirates have said they will invest less of their reserves in dollar assets because of the weakening currency.

….

Vacation, All I Ever Wanted….

No Comments

The fact that the Iraqi Parliament is going on vacation indicates that they know something that our morally bankrupt intelligentsia do not, that regardless of what they do, GW Bush will not pull out of Iraq.

If Lichtenstein were to conquer Texas, and claim it as their own right now, George Bush would not pull a single soldier out of Iraq to stop them and to take it back.

For Shrub, it’s all about him, and Iraq, for various oedipal and addictive personality driven reasons is what he thinks he is.

Putting On Your Stupid Hat

No Comments

As some of you are no doubt aware, I’m in the SCA, a medieval re-creation group, which simulates a number of activities, such as cooking, calligraphy, garb, and medieval combat

For the past 5 years, between the kids, and my involvement in other aspect of the SCA, most notably cooking, and I haven’t put my armor on at all.

I put my armor and re-authorized (qualified to be a safe fighter) yesterday.

The combat is full contact, with rattan (a sort of solid bamboo) weapons, and we wear armor (16 gauge steel on the head, minimum).

I did OK, though after qualification, I laid down, and put my hand on a hornet, with the expected results, so I spent the next half hour getting Benadryl® on that the sting, and I decided not to fight after that, because the (admittedly minor, I’m not that allergic) swelling looked like a blister just waiting to happen.

When all is said and done, I did OK in the authorization bout. I actually “killed” my opponent from my knees after my legs were taken (think Monty Python and the Holy Grail), which I almost never do.

I’ve got to get back into my “getting hit over the head lessons”.

Unfortunately, fighter practice here is Friday night, which is right out because it’s Shabbos, so I can’t show up.