Year: 2008

Economics Update

First, let me complain, yet again, about the nature of financial reporting. They are neck deep in dung, but they continue to look for a pony.

Cases in pointL

The the Institute for Supply Management’s (ISM) manufacturing index rose to 48.6 from 48.3 in February, which while higher than the 47.5 anticipated is still a contraction. Any number below 50 is a contraction. The index is a derivative (the calculus type, not the financial type), with 50 being zero. 48.6 is still a trend down, and this should be the lede.

Then we have construction spending “falling less than expected“. Again, construction spending fell, and while the “consensus” was 0.9%, and it fell 0.3%, this isn’t news, unless you tell us who, or why the consensus was that number.

Grrrrr.

On the “economic news for the rest of us” front, we have predictions that 200,000 jobs will be eliminated in the banking sector, and the number of food stamp recipients has gone through the roof.

BTW, if you are wondering if the real estate collapse is just a locak phemenon, the answer is no. We are now seeing the beginnings of a real estate collapse in china, and the housing crunch has now moved to the Hamptons.

Shanghai and the Hamptons. When you look at the range covered, there ain’t much left outside of this.

In the world of currency, it appears that the dollar has had the biggest quarterly loss since Q4 2004. The ECB is concerned with inflation, and quite honestly is not experiencing the same sort of meltdown that the US is, so it’s holding rates steady, which strengthens the Euro.

Finally, we have banks writing down billions of dollars (here, and here) in various bad investments. The markets rewarded them today, but I think that this will get much worse before it gets any better.

Zimbabwe Elections

The elections results are still delayed, and there is now talk of a presidential runoff. My guess is that the margin was too large for Zanu-PF to make Mugabe the winner, so they are angling for a 2nd round of vote fraud, possibly at a time when foreign attention is elsewhere.

We have reports that the leaders of MDC were in hiding. If the Zimbabwe state security apparatus wants to move, it would have be before the final vote total.

On the brighter side, it appears that thare are negociations between Zanu-PF and the MDC, which implies that there might be a peaceful transition, though I think that Mugabe will be the wild card in all this.

The Role of Hedge Funds in Economic Collapse

Paul Krugman blogs today and wonders if, “Iceland the victim of a financial conspiracy. Really, seriously.

There are reports that hedge funds are trying to break the bank of Iceland for a few bucks.

As Krugman notes:

Such things really do happen. During the 1997-1998 financial crisis there was, almost certainly, a financial conspiracy against Hong Kong. According to the Hong Kong Monetary Authority, several major hedge funds engaged in a “double play”, shorting both the city-state’s stock market and its currency. The alleged plan was to put the HKMA in a double bind: it would be forced either to raise interest rates to defend the Hong Kong dollar — driving stocks down — or to devalue the currency. Either way the hedge funds thought they’d make a killing. They were, however, caught in a bear trap when the HKMA did the unexpected and bought up a large fraction of the HK stock market.”

According to Krugman, who is in a position to know, Bear Stearns figures prominently in what is going on in Iceland.

I would not be surprised if Bear were also involved in the 1997-8 machinations too. They have always had a rep as being the most brutal of the large investment banks.

This is yet another case for greater regulation of the financial markets.

A tax on currency transactions might be a bad idea either. Even a tax of less than 1/10% would eliminate much of the currency speculation that leaves a path of poverty and destruction around the world.

Iraq Fighting Post Mortem (Sort Of)

First, we have the revelation that the news cease fire was brokered by Iranian General Qassem Suleimani, who is on a US terrorism watch list for, “alleged involvement in terrorism and the proliferation of nuclear and missile technology.

When the going gets tough, our allies the Hakim family run to Iran for help. Nice.

The reports of NY Times reporter is particularly instructive, “The common observation was this: There was nowhere the Mahdi either did not control or could not strike at will. Maliki and the Hakims lost, and they lost big.

The reason for the qualifier in the title is that elements of the Mahdi Army are claiming that the government is breaking the cease fire. Hopefully, this is simply a temporary artifact of a new cease fire.

Paulson Proposed Regulatory Changes on Financial Industry

Sec. Paulson just proposed a series of changes, and U.S. Senate Banking Committee chairman Chris Dodd response call it a , “ pitch. … It’s not even close to the strike zone.”

I agree with the distinguished gentleman from Connecticut.

My analysis is that this is an attempt to make fixing things more difficult.

In proposing that the Federal Reserve have additional regulatory authority and responsibility, Paulson is trying to transfer this from executive agencies, which would follow the direction of the next president, to an independent organization which has been loaded to the gills with Bush toadies over the past 8 years.

Additionally, by putting these powers in an organization almost wholly dedicated to monetary policy, it means that other actions, either through fiscal policy (Keynesian budgets), or regulation will get the short end of the stick.

The biggest strike against this is the enthusiastic endorsement from the financial industry. If the people who f%$#ed this up in the first place like the proposed regulatory regime, it’s likely that this regime sucks wet farts from dead pigeons.

Croatia Looking at Gripen

They are considering buying 12 aircraft.

This is not surprising. The Gripen is about half the weight of its next smaller competitor among the 4th gen fighters, and you pretty much pay for planes by the pound (or by the kilo for you metric folks).

I think that the Gripen may very well be the Mirage III of the 4th generation fighters.

It’s small, it’s cheap, it’s designed for austere basing, and by all reports, its avionics are superb.

Neocons Now Going After Brits

Yes, Fredrick Kagan, an chicken hawk idiot in a family of chicken hawk idiots, is criticizing the UK over its withdrawal from Basra last year, and its determination not to involve ground troops now.

Mr. Kagan, you are 38 years old, and according to the wiki, “He earned a B.A. in Soviet and East European studies and a Ph.D. in Russian and Soviet military history, both from Yale University. He worked as an Assistant professor of military history at West Point from 1995-2001 and as an Associate professor of military history from 2001-2005.”

You are young enough to serve, and you have the background to serve. Go serve in this war you love so much.

How Barack Obama Blew the John Edwards Endorsement

I was reading an article discussing what it would take for Hillary Clinton to quit the race, and we had an interesting insight into how Barack Obama blew a possible Edwards endorsement:

In the days after John Edwards’s withdrawal from the Democratic race, the political world expected his endorsement of Barack Obama would be forthcoming tout de suite. The neo-populist and the hopemonger had spent months tag-teaming Hillary Clinton, pillorying her as a creature of the status quo, not a champion of the kind of “big change” they both deem essential. So appalled was Edwards at Clinton’s gaudy corporatism—her defense of the role of lobbyists, her suckling at the teats of the pharmaceutical and defense industries—that he’d essentially called her corrupt. And then, not least, there were the sentiments of his wife. “Elizabeth hasn’t always been crazy about Mrs. Clinton” is how an Edwards insider puts it; a less delicate member of HRC’s circle says, “Elizabeth hates her guts.”

But now two months have passed since Edwards dropped out—tempus fugit!—and still no endorsement. Why? According to a Democratic strategist unaligned with any campaign but with knowledge of the situation gleaned from all three camps, the answer is simple: Obama blew it. Speaking to Edwards on the day he exited the race, Obama came across as glib and aloof. His response to Edwards’s imprecations that he make poverty a central part of his agenda was shallow, perfunctory, pat. Clinton, by contrast, engaged Edwards in a lengthy policy discussion. Her affect was solicitous and respectful. When Clinton met Edwards face-to-face in North Carolina ten days later, her approach continued to impress; she even made headway with Elizabeth. Whereas in his Edwards sit-down, Obama dug himself in deeper, getting into a fight with Elizabeth about health care, insisting that his plan is universal (a position she considers a crock), high-handedly criticizing Clinton’s plan (and by extension Edwards’s) for its insurance mandate.

I will say that this plays into the worst perceptions of Obama, as someone who is far too fond of himself and far too confident in his charm to get people to do what he wants.

You have to be an egotist in order to run a real campaign for President, but the thing that has always disturbed me about Obama is the sense that he thinks that he is so personally awesome, and when he threw gays under the bus in South Carolina, I was wondering who is next.

At this point, I think that it is every major Democratic constituency, because he wants to show that he can reach across the aisle.

BTW, Richard Band Is a Moron

Reference my previous post.

In any case Richard Band, publisher of a well respected Wall St Newsletter is saying that the Dow will hit 16,000 by late 2008 or early 2009.

Dow 36,000 writ small, I guess, because the only way I see it hitting that number that soon (a 33% appreciation) is inflation hits 50%.

I dunno, maybe he’s banking on some sort of Bush is not the President rally, but this still makes him stupid.