Liquidity Tug-o-War??

Many (myself included) have been worried about the excessive liquidity, both in dollar-land and worldwide. The causes have been clear: persistently loose USA fiscal policy whether through war, tax cuts, or just plain demagoguery, loose monetary policy (by any measure of Taylor-Rule or otherwise prudent exercise of monetary creation), a shadow banking system too-clever-by-half, a neutered US bond market prevented from expressing its displeasure in yield terms; pegs to the dollar by GCC and Asian mercantilists that has allowed US consumptive profligacy to exist upon the shelf long beyond its sell-by date; a complete unwillingness of America (and pointing a finger at the entire American polity) to countenance energy taxes sympathetic with other OECD nations. This is but a short-list and is by no means complete thought it is a fine place to start the search for culpability. The net result has been buoyant growth in and money and credit and hence oodles of liquidity contributing in a "virtuous" circle towards rising asset prices that emboldens both lenders and borrowers, the latter whether unsecured or against boated asset values.

This has been worrying to anyone concerned about the value of a paper chit from afar, or unluckily holding them in lieu of other assets pseudo-indexed to their rising quantities, forlornly watching their markers become more-diluted by the hour, day, year or other preferred descriptor of time. Some Moldbugs believe this dilution to be on the order of a reasonably consistent 10 to 20% per year - excluding the rare and more austere interludes characterized by tight money. Such figures, whether real or imagined - would be alarming for one need not be skilled in linear algebra or the finer points of calculus to understand that one will lose half the value of the paper every four to six years, despite the tamer prevailing rate of so-called inflation as measured by government officials and apologists for unfettered liquidity creation. Such a reality is sufficient for those with such paper to avoid its accumulation by (a) spending it immediately (b) converting it to other stores of value (c) borrowing it in order to do 'a' or 'b' or both above, the latter outcome a reflection perhaps that the archetypical cat, has escaped the proverbial bag.

Few would find significant fault with what I've recounted so far, even the most hardened of Moldbugs amongst us. But this might be the point where we diverge. And such departure is neither the result of excessive optimism or pessimism regarding human nature or a new-found desire of central bankers to be the bill amidst a rave, or The Dour Parents at a party of teenagers. Instead, the departure is driven by two theses I will posit: (1) the credit cycle resembles a lognormal distribution; (2) when we find ourselves collectively somewhere far from the normally [positive] mean [of monetary dilution], way out on the negative tail, such revulsion extinguishes existing money and credit quickly and prodigiously, and in the process creates a cascade that scars the collective human (and financial institution) pysche for what is perhaps a generation. These, together, I'll put to you, help tether an otherwise fallibly doomed system of human weakness in the hands of politicians and other parochially-selfish miscreants to something that might continue to be a useful servant of mankind, at least for the next unit of time or perhaps until the art of cold nuclear fusion is mastered.

Real monetary and credit growth significantly in excess of real GDP, resembles a growth stock that continues to increase in market capitalization above and beyond that commensurate with both the continuing fine expectation and undaunted realization of such expectations. Such robust nominal performance feels good, and doesn't hurt anyone...yet. It is a universal confidence booster, and, as a result of its price signals, draws further investment into itself in a virtuous circle, for with its heady rating, it can now easily make accretive acquisitions. But its very froth and beauty draws capital from everywhere towards everything similar. It is not an orgy - certainly not at first. It does so slowly and continuously, hence the daily and weekly return distribution has a definitively positive skew, though occasionally, when the market swoons, such small and continuous price appreciations are decimated in large and concentrated moves caused by panicked investors attempting to save profits or fearing the party is over, get out with their skin. Typically, real quality growth stocks shrug off such doubts, power ahead in their underlying business, soon reflected in share prices which eventually, at much higher levels than prevailed during the swoon, draw the moths back to the flame. This is the essence of the lognormal distribution: a mean of small positive returns, but with a fat negative tail far-departed from mean. Some have suggested that this is rooted human behaviour. reflecting the species preference for positive reinforcement before embarking upon a risky gambit. We see in it prehistory. Humans rarely hunted alone, emboldened by the safety in numbers, their success rates perhaps also lognormally distributed - the fat negative tail represented by an utter mauling of the hunting party with near catastrophic losses.

And so credit growth, fueled by rising asset prices and ever-more confident lenders, is likewise positively skewed. Like the first skaters testing the ice, they proceed slowly, whereupon confident of its integrity based solely upon the fact that they remain above the surface of the icy waters, signal to the others that all is fine in slippery Golconda. Of course this is overly simplistic. There are in reality many forces at work: agent vs. principal issues; keeping up with the jones'; and all manner of behavioural biases that serve to reinforce the alledged prudence of one's herd-like actions and penalize the questioning of the same, for no one benefits from caution, not least the individual. At least until the edifice is too large for its foundations. There are of course limits to how many can safely glide upon an ice-sheet of certain thickness. Exceeding such threshold limits results in rapid fat-tailed catastrophe with no recourse. Eschewing analogies, revulsion destroys credit and collateral values in vast quantities. It crushes the price of core asset values in real estate and equity, and cremates securities that use these assets as collateral. The size of core asset value destruction in our present case being measured perhaps, ultimately, in the double-digit trillions. This is not a matter of small-step back after a long promenade forward. It is monetarily, nearer to Jack&Jill falling off the hill back nearer to the intermediate-term bottom than the top.

But mega-revulsions do more. They scar the psyche, irrespective of whether by natural consequence of falling in under the weight of the edifice, or in response to man-made pressure such the Volcker's Saturday night massacre. Our current predicament is the former, the result of multiple attempts to prevent recession over the years, with diminishing marginal returns to the priming almost guaranteed that much of the investment would of marginal quality and ultimately wasted. Lenders, accustomed to lognormal distributions begin to rework risk under more symmetrical regimes. They reduce existing leverage to save powder and prepare for worse to come, much like the body will warm the trunk at the expense of the extremities. And like the body they do this not as opportunists but in self-preservation. Ray Dalio's Bridgewater in their latest research report makes the following points:

"The financial market unraveling is, as we've described, 'the Big One". What we have meant by this is that the implications of the last six months will impact how the financial system will work for years. Both directly and indirectly (through the literal profits and incomes associated with the financial sector) and indirectly (through the benefits of credit creation) the economy is more reliant upon the financial sector than ever. The virtuous circle of easy credit and rising asset prices leading to increased consumption and therefore increased incomes has been fueling the economy for so long that it has been taken for granted. The reverse of this cycle will have profound implications for the economy, and we have only just begun to see those implications upon the real economy."

It is a natural and logical reaction. This is what the beginning of a cascade feels like, and one that only will end with the eventual uprightness and sustainable leverage atop the system, corresponding levels of consumption related to output, and asset values that are either reasonably well-discounted or known, at the very least, to have stabilized in the longer-term. We are not there yet, and every bank - whatever their domicile - knows this, hence are reticent to lend except to all but the most creditworthy, and on terms that provide more than just compensation for there remains a reasonable probability that price discovery continues in a direction that erodes one's margin of safety. Falling asset prices, in turn, kills the speculative animal spirits. Why build a new shopping mall when the existing ones can be had for less than the cost of new construction? Time shares will trade at hilarious distances below where they were sold in the primary market. And banks, flush with assets recently foreclosed have no appetite to project-lend when they are recently - involuntarily - long the last cycles excesses. Again the chain of dependencies numerous and complex, but the end result is the same: more destruction in collateral values and hence both liquiidity and the supply of dollars.

The remedy for this is clear. Rapid Price discovery. Writedowns. Recapitalisation where required. This will return confidence, albeit upon a much diminished capital base, and much diminished risk-appetites on the part of financial lending institutions. A reordering of the deck occurs: leveraged asset holders - whoever and whatever they leveraged against lose, as do the previous financial sector shareholders. It is against this backdrop that I raise the ultimate question for Moldbugs and those in dread of helicopters and printing presses alike: Is it even remotely plausible that authorities can replenish anything remotely like what's been lost, or what will be lost? Is not "reflation", or Fed gestures to bridge recapitalizations for systemic lubrication anything more than a drop in the bucket to what has been destroyed, making inflationary fears resulting from Fed or Governmental actions a canard? The liquidity resulting from securitisation, wanton misuse of the shadow banking system and its conduits ARE ALREADY out there. Much of it having ALREADY circulated and coursed through sytsemic veins is in the hands of foreign Official entities. They can spend it, but they can multiply it, won't multiply. Moreover, the effects have already been seen in the BRICs in the form of raging economies, buoyant mercantilist exports, vaulting commodity prices, and the $1000+ Kruggerand. But that was then, and this is now. Replacing some of the destroyed credit and liquidity surely can be but a salve upon a lost limb. It will, in the end, simply be inconsequential in the grand scheme of what's gone before and what is to come.

Longer term, I will defer to Moldbugs of the world and not challenge their assertion that the probability that the current reign of fiat money will end. But here, and now, I am far less concerned with the inflationary effects of TAF, TSLF, fiscal packages or outright nationalisation of financial institutions when the need arises since I believe that the credit so destroyed by this revulsion, and the associated cascades and intermediate-term behaviour changes far outweighs the remedial impacts of authorities.

Lewis Fights The Bear (and Gets Mauled)

One of my favorite David Mamet screenplays is "The Edge", starring that one of my favorite Hollywood actors, the late 'Bart The Bear' (seen here on the right of the inserted photo). The plot is simple: Following a plane crash in the Alaskan wilderness, a self-made Billionaire and his posse, face the challenge of surviving both the elements and a determined grizzly, while the Billionaire parries with underling over secret affair with trophy wife. Anthony Hopkins plays "Charles", the stoic and reserved magnate with quiet but steely determination and beaucoup common sense, opposite Alec Baldwin as the young cheeky Photographer doing Charles' wife (Elle MacPherson) on the sly. The plane goes down, several survive with next-to-nothing and exposed to the elements, as they use their wits and Charles ' simple survivalist skills to avoid freezing and starving to death, and being dinner for the giant grizzly (believably played by Bart) that is tracking them. Then "Bob", whose affair with trophy-wife is found out by Charles, but is given the opportunity to safely eliminate his wealthy rival, resulting in superb action, thrills and some unexpected turns. The script has everything suspenseful that insures one is insatiably gripped.

Equally thrilling has been tycoon Joseph Lewis' flirtation with the other Bear (Stearns). Here, too, we see a self-made Billionaire, an apparently stoic and successful FX operative with a steely determination and a stomach for risk, with famous friends such as golfing buddies Els and Woods operating boldly. And like Mamet's character Charles, we are voyeuristically sucked into Lewis' world by virtue of the public disclosure of his stake in The Bear, and the sheer size of the bet amidst apparent market adversity. Morbidly, we watch as Lewis is mauled by the Bear, filing again with the SEC to report additional purchases on the way down that brought his stake to approx 10%. A brief swoon in the BSC stock price in early Feb, and observers are already counting his heady losses for him with wide-eyed disbelief. But then, as with most battles that are deemed worthy by the audience, The Bear bounces from mid-$70s to high $80s and Lewis is again looking the canny operator. "What one man can do, another can do..." - that was Charles' mantra as he set about to turn the table on Bart the Bear from hunter, to hunted. Unfortunately, for Mr. Lewis, here the stories and objectives diverge. "Kill the Bear" was Charles' objective, whereas Mr Lewis simply wanted it acquired for a higher price than paid.

We all know how it has ended for Mr Lewis, who, according to most reputable (as well as less-than-reputable) rags is a billion dollars or so out-of-pocket. This simply cannot be a good feeling, even for the most stoic of traders. Mr Lewis has seemingly learned the difference between the FX markets and the equity markets, which is that doubling-down in a potentially distressed equity holds risks that a rarely mirrored in major liquid FX markets, irrespective of how wrong your FX punts might be. That said, one doesn't make a couple of billion without taking risks, a reality that yields an understanding that not all trades have Disney endings, particularly those penned by Mamet.

But should we feel sorry for Mr Lewis, who is probably a like-able-enough guy, and who has just been dissed, slapped in the face, and humiliated in front of friends, colleagues, and, as it happens, the entire world?? Mamet fortunately answered this very question for us, early on in the film as they are flying over the Alaskan wilderness towards their destination when "Bob" (played by Baldwin), making conversation, taunts Charles (Hopkins) as he says in mocking and faux-concerned tone:

"I feel sorry for you... never knowing who your friends are... or what they like you for....or who you can trust..."

Charles reflects upon this, understanding the barb and at least part of its intention and replies:

"Never feel sorry for a man with his own plane."

Feedback Trading's Hollow Victory

My friend, and part-time drinking companion, Macro-Man, whom I respect much, flippantly employed the title late last week of "Will the last one to leave please turn out the lights?" in regards to the spate of Hedge Fund blow-ups. I say flippant because I daresay this doesn't reflect the actual situation. For every Drake, Carlyle, Sowood, Amaranth, Peloton, Go, and yes and of course merely brow-beaten like SocGen, there is a Winton, Citadel, Brevan, Ospraie, Caxton, SAC or Tudor, or increasingly a bevvy of non-fundamental systematic investors popping cork on the vintage stuff as they do their victory lap. Not to say that there is a winner for every loser - for this is fallacy: there isn't. But you see, I am fascinated by the structure and nature of market participants - particular the more active traders who, in frenzied turnover, increasingly make up a greater percentage of daily value traded. And cannot help wonder whether the winners and losers are merely "the right" and "the wrong", respectively, or whether market Darwinism is not in the process of yielding something more pernicious that a winnowing of the most feeble investors and less-adept game-players.

Imagine for a moment that the winners and losers have, in addition to being right or terminally wrong, archetypical investment styles associated with them. Imagine that the future health of the market (at any point in time) is dependent upon the continued representation of diverse investor phenotypes. Now go one step further and imagine that Darwinian natural selection has wiped out an inordinate amount of the contrarians, be they the value-players, real short-term liquidity-providers (e.g. jobbers, market-makers, block-desks, independent floor traders or once-successful contrarians like Alliance Cap;s Alfred Harrison), en masse representing substantial risk capital.

Is this problematical? Perhaps not if the successful, i.e. those that were "right", were randomly victorious, OR if they were "right" on the basis of idiosyncratic but ephemerally-correct fundamental analysis that, next time around, would amongst the prior winners, yield equal amount of losers. But, as a thought-experiment, imagine what might happen if they [the winners] were predominantly of a single species, or reasonably correlated investment style or approach, be they trend-followers (CTAs), or momentum-oriented, systematic-macro employing price-based quant models for short-term predictive purposes, or order-sniffing micro-structure strategies - all which share traits that arrive at similar positions, for similar (essentially non-fundamental) reasons. What would this mean for markets, price behaviour and volatility, and the relationship between shorter-term prices and their more fundamental longer-term equilibrium?

Getting to the point, might a meaningful shift in the balance of "styles" pursued have a dramatic impact upon behaviour, elevating volatility, diminishing liquidity (in the market sense of size at a price), and elongating trends and their departures from longer-term fundamental equilibrium prices where real supply meets real non-speculative demand?? More to the point, hasn't this been happening in a almost continual process of natural selection over the past six years, accelerating recently with the rapidly bifurcating fortunes of all manner of traders, investment managers and hedge funds?? What is the practical result of a market with a paucity of liquidity providers and more value-oriented investors willing to warehouse risk, contra the prevailing trends? Alan Brown, Investment Head atop $280bn at Schroders in London said o Bloomberg:

I am struck by two thoughts. There are an awful lot of assets out there that are offering very attractive terms. On the other hand, we have an entirely dysfunctional market at the moment where marked prices are notional and if you want to trade, the bid falls away from you dramatically..."

He means liquidity withdrawn due to "The Credit Crunch", but the same dynamic might result from a rapidly changing balance in participant makeup where those with feedback-oriented strategies rule the roost, and amplifying the smallest of signals, reinforcing oft-divergent trends from the underlying market, and in the process disintermediating real buyers and real sellers, raising price volatility and uncertainty, both negatives for markets and economic efficiency.

Now we might also sensibly ask whether the survival of the fittest might produce better economic outcomes, for ridding markets of feeble should be an unmitigated good, no? To answer this, we need to ask "why?" this has come about at all, i.e. why has feedback trading has trounced human judgment? . The "why" has probably been globalization, poor policy extremes in US (fiscal, monetary and energy) & China (international and domestic monetary and trade) , and GCC, as well as the lack of policy agreement and coordination amongst nations. As for whether such natural selection is "good", I have a suspicion it is not. While such mimetic and feedback-oriented strategies still rely upon "the signal" from somehwere, what if at the source, "the signal" or impulse is manipulative or predatory (remember Amaranth?) in origin, or worse sheer fad or folly (remember E-hemorrhoid.com??) ? In reality, most commodity markets and exchange contracts are small in relation to the financial economy, and so are ripe for manipulation and abuse by large, clever, or large and clever particpants' size and relative market power. If the sources determining market price and initial impulse were on the other hand real supply and demand, then perhaps the amplification of such allocative outcomes would serve to create signals and move prices towards longer-term equilibrium faster, thereby promoting efficiency. But where, for example, in Crude Oil, Wilbur Ross proffered on Thursday, more than 30% of trade is pure financial leveraged spec, much which is the sub-category type described here, one would have good reason to view their presence in regards to market efficiency, as, in the words of Donald Rumsfeld, "rather unhelpful" for a speculative collapse might, yet again , send alternative back in to the realm of the less-than-economic faster than a less-high but more stable price regime might accomplish.

Finally, one might ask the logical question: what sort of nightmarish doog-chasing-his-own-tail market regime follows such outcomes when the feedback traders - now dominant - are destined to trade amongst and against themselves in a nightmarish hell (for systematic traders) of failed breaks, large reversal gaps, that is perhaps the inevitable rent for the extended runs of the present, after which ummm errrI guess Citadel will own The World??!?!

The Night Comes On...

London Visitors Diary - March 2008

Denial! The People haven’t yet grasped what it precisely means that credit is no longer ubiquitious, nor do they comprehend the dominoes that will inevitably follow in the aftermath of its withdrawal. When did Paul Reichmann realize that his vision of Golcanda-on-Thames was, despite its audacious brilliance, doomed to change hands several times hence, sadly without him (O&Y) as seller, but his creditors. The magnificent Empire State Building, icon of all that bedazzles the visitor to Manhattan was a white-elephant, meaningfully vacant for a decade-and-a-half after it pierced the upper boundaries theretofore seen for skyscrapers. And few Canadian bankers, no matter how hard they might try, will forget the early 1990s purging of just-minted vacant buildings at thirty cents on the dollar of prevailing cost of new construction. Vision is simply not enough. Nor is skill. Not where leverage is involved. Timing, it would seem, is very nearly everything.

And so I look out the window of a friend’s office high-above the London skyline and – suspending judgment upon the “success” of vision and risk-taking as might be proffered two decades hence – see frames of rising towers that will ultimately stand empty, destined to pass, as if on a carousel, from old-owner, to bank, to vulture, and then, eventually, back to public ownership in the form of a purchase by a pension fund, REIT, dedicated property investor, or if it be prime, by hoard of still-to-be recycled petrodollars. Both in London proper, and from the train escaping the city’s grip, sky-cranes are everywhere. And as I drive past sites – from the craters to the half-completed - marginal of projects (and they exist in numbers that are astounding, built upon poor locations and cashflow models that redefine the meaning of the word “optimism”), I cannot help but wonder what precisely their principals might be thinking at this very moment, or what spin they are preparing for their bankers upon next chance encounter. Were jingle-mail an option, would they be addressing the envelope as you read this?

Between the impending mass of layoffs from hedge-funds now-gone or soon-to-be put out of their misery, private equity firms, commercial and city banks reeling from that Jones-ing feeling, the impending exodus of non-doms, the looming wealth-effect spirals from continued home price implosion a-la-USA, erosion in the values of other core investment assets, Financial ZIRB (zero incentive reward bonuses), the biting of higher energy and food prices, the inevitable trough in visitors due to ridiculously over-valued pound sterling and recession or sclerotic growth elsewhere, and the negative cascades that ripple through the chain of dependencies supporting the formerly lavish business and personal spending that will wither by comparison to its former robust levels. This is a tale of woe, and I believe rather deterministic in its arrival despite government protestations to the contrary that suggest (or rather hope and pray) Britain will escape recession. No manner of bolstering the UK governments financial team (or policy for that matter) will have any appreciable impact upon its impending arrival.

Lore according to Knight-Frank has it that very near forty percent (40%) of central London residential purchases >GBP1mm were made by non-residents, primarily for “investment purposes”. Much is made about them being “cash” buyers, and so (the reasoning goes) unaffected by vicissitudes of leverage, and unbowed by price destruction. But, this one asset purchase says nothing about their total leverage, or their beta to credit generally. They may have leverage on their domestic abode to benefit from interest deductions. Their business may be leveraged. Euro-based investors will have already seen 15% decline in values via currency alone. Most stock-market investment is, in fact, “fully-paid”, but that doesn’t prevent investors from selling in reaction to, or after things have already gone down. So when it becomes apparent that their investment is “dead money”, one shouldn’t be surprised to find many sellers, putting further pressure on prices. I am sympathetic to the optimists seductive extrapolation of the recent past towards the future, for property prices have indeed provided robust returns. But they would do well to consider alternative realities, such that I chanced upon today in “Country Life” (no, I’m not a regular reader), which detailed the history of a Torquay “cottage”, sold for GBP2400 in 1868 to change hands in 1902 for a mere GBP1,000, before being sold in 1987 for GBP110,000 and now, in 2008 “offered” in the region of GBP1,750,000. Japanese and Germans can attest to the lingering after-effects of commercial and residential bubbles, however, even those bubbles are unlikely to see terminal values more than thirty years hence at 30p on the proverbial pound.

A bubble is a bubble is a bubble. The unwinding of which is typically rather unpleasant. London, and by extension, the UK, is in the early stages of being broadsided by the concurrent popping of three bubbles – one in property, one in HFs and PE Funds, and the other in credit and leverage itself. If you be long and leveraged into one, two, or all three, you should now be worried…very worried indeed…

HF Obit. March 2008

Farewell then
Carlyle, Drake
and Go Capital
(and whoever else
gets carried out
tomorrow).

You certainly
weren't the first
to rapidly combust:
fizz
bang
WHOOOSH.

And you
won't be
the last.

"Easy come, easy go"
will be your
catchphrase....
if it wasn't
already.

But don't sweat it.
After all,
the "trader's option"
is just that:
an option.

(apologies to EJ Thribb aged 4-1/2)

Dr. Faustus - Your CHF & YEN Mortgage Liabilities Are Coming Due

Dear Dr Faustus and other YEN & CHF Borowers,

Undoubtedly, you've been expecting this letter.

Maybe you've a sinking a fund where you've been religiously depositing your interest-rate savings these past four or five years. Maybe you took the savings and won the lottery by investing in Paulsen's winning ticket.

Whatever you've done, the time has now come to pay for Mephastophilis' services. Irrespective of whether you have borrowed for the low rates, or because you think the currency is supremely flawed and should be weak, you've made a deal knowing that there were ultimate consequences, and the deal has now come due.

I understand you may be saddened or frightened (or both) by the inevitable outcomes arrival. Some may even see it as Tragedy. I think, however, the best way to view it is simply determinism. No more. No less.

In future, for eternity I suppose, please remember: "There is no such thing as a free lunch..."

Yours fondly,

Globo-Bank PLC
for "Lucifer"

Earth to Exchanges: Raise Margin Requirements Now!!!

(Fade in to telephone ringing.....)

Brrrring Brrrrring.

EARTH: Hello? Futures Exchanges?
This is Planet Earth calling.

FUTURES EXCHANGE(S): (in Nasal BQ Accent) Yea? Waddda youze want?

EARTH: Ummmm if you look out the window, we seem to be encoutnering a bit of turbulence. Or is Turbolence. Oh well, never mind spelling or semantics, things are turbo-ing and we here on Planet Earth are becoming concerned that someone will get hurt. Errrr, yes, hurt rather badly.

FUTURES EXCHANGE(S): Whoozit you sez you were again?

EARTH: Errr Planet Earth. Terra Firma. Gaia. The Big Blue Marble.

FUTURES EXCHANGE(S): Did Vinny put yooze up to this?

EARTH: Ahem No. We're calling in respect of The Public Interest.

FUTURES EXCHANGE(S): Waddaya want again.

EARTH: Well we were thinking you should be thinking about raising margin requirements for speculators. Significantly. And increasing the penalties for mis-categorization as a Hedger to "Death".

FUTURES EXCHANGE(S): Vinny DID put ya up ta this!! Yooze are trying to mussel in my rackit arentcha??

EARTH: No. Now please I implore you. Things are really getting out of hand. Traders are embarking upon positions on the basis of the thin-ness of trade and the fact that you're the ONLY leverage in town. This is a recipe for disaster....

FUTURES EXCHANGE(S): Are you CRAZY? I'ze live for days like these. THIS is what its all about. But you looks like a nice boy, prolly got some wop blood in ya so I tell ya what: "I'll do you a favor and swop the caffinated jo' for decaf. THAT should cool things off a bit.

EARTH: Ummmm errrr. yes thanks. Now about those margin requirements....

A-u-s-s-s-s-s-s-s-st-t-t......

A-u-s ssssssss...

A-u-s-ssss-t...

A-u-s-ssssst-t-t-t-t...

A-u-s-sssst-t-t-terrrrrr...

A-u-s-s-s-s-t-t-?@??@###**

FRICK IT! B-B-B-E-L-T T-T-T-T-ightening.

Phew! There! I said it. Not that anyone in America seemingly understands its meaning, particularly those that rely upon VOTES for their election or re-deposition in the US Congress. Possibly because you're a trustafarian and never need fathom it. Perhaps because there appears to be little advantage to saving IF no one else is. Perhaps because you're a youngling and you've simply never seen it in your life time. So for the avoidance of doubt (one of my contract lawyer's favorite phrases), as a public service, I list, for your collective understanding of what will soon be coming to America, some synonyms for "austerity":

Albigensianism, Catharism, Franciscanism, Lenten fare, Sabbatarianism, Spartan simplicity, Spartanism, Trappism, Waldensianism, Yoga, abstinence, anchoritic monasticism, anchoritism, asceticism, astringency, austerity program, authoritarianism, baldness, bareness, candor, canniness, care, carefulness, chariness, common speech, demandingness, directness, discipline, economic planning, economicalness, economy, economy of means, eremitism, exactingness, exiguity, exiguousness, false economy, fasting, flagellation, forehandedness, frankness, frugality, frugalness, good management, grimness, hardness, harshness, homespun, household words, husbandry, inclemency, inornateness, jejuneness, jejunity, leanness, maceration, management, matter-of-factness, meagerness, meanness, mendicantism, meticulousness, miserliness, monachism, monasticism, mortification, narrowness, naturalness, niggardliness, openness, paltriness, parsimoniousness, parsimony, plain English, plain speaking, plain speech, plain style, plain words, plainness, prosaicness, prosiness, providence, prudence, prudential administration, puniness, puritanism, regimentation, restrainedness, rigid discipline, rigor, roughness, ruggedness, rustic style, scantiness, scantness, scrawniness, scrimpiness, self-denial, self-mortification, severity, simpleness, simplicity, skimpiness, slenderness, slightness, slim pickings, slimness, smallness, soberness, spareness, sparingness, starkness, sternness, stinginess, straightforwardness, strictness, stringency, thinness, thrift, thriftiness, tight purse strings, toughness, unadorned style, unadornedness, unaffectedness, unelaborateness, unfanciness, unfussiness, ungentleness, unimaginativeness, unpoeticalness, unwastefulness, vernacular, voluntary poverty

Buffett: "It ain't a savings glut..."

Bloomberg Reported that Warren "The Sage of Omaha" Buffett weighed in on the reserve paradox at the annual Berkshire meeting by scoffing at "the Savings Glut" hypothesis, and pointing the accusatory finger directly at the American Consumer. Culpability, of course, doesn't stop there, since Congress (who lowered taxes while increasing spending), the Fed (who cut rates to nearZIRP, & watched house prices vault and homeowners extract unsustainable amounts of equity at uber-high prices, while swapping low-rate fixed-rate (emphasis on "Fixed") for even lower, albeit temporary, floating-rate mortgages), as well as the Administration (who eschewed and obstructed all energy policy, waged war(s) and submitted further-bloated budgets while at the same time recommending the cutting of taxes), share the blame, which taken together, imply all my economics and finance education at university was for all intents seemingly irrelevant to anyone and everyone else concerned with public policy, and useful for nothing other than a personal understanding that America was The Short of The Century", and remains rather fucked.

Who wants to bet with me that NO Presidential candidate (except Ralph "Eeyore" Nader, the only non-kool-aid drinker of the bunch) will similarly point the finger and hari-karily suggest that America needs to RAISE fiscal revenues by about 4%, and that consumers need to reduce expenditure on overseas goods and services by a rough & dirty six percent.

Farewell Peloton

Farewell then
Peloton Partners
King of
the Hills
for 2007.




You earned
gobs at GS
but didn't notice
Joyti was
driving an
Aston-Martin.

You returned
Eighty-seven
percent, NET
last year,
but failed to see
the backlash
of your bankers'
anguish.

"The Devil
is in
the Details"
will be your
watchword...

NB: he
who wins
the Polka Dots
rarely possesses
the yellow
in Paris.

(with apologies to EJ Thribb, aged 46-1/4)

Are Commodity Specs Still "Useful"

Is speculation in commodities socially "useful"? Do classical economic arguments in favor of unfettered speculation retain their validity?

I have been ruminating upon these related questions questions for a while, composing several aborted missives over the past half-year, but I keep returning to it and would like to throw it out to the crowd for discussion. I know the classical arguments in favor - as utilitarian risk-transfer devices, as important market-signaling mechanisms, and hence re-direction of risk-capital for investment etc. But my fears linger, essentially wondering whether classical arguments may have significant and meaningful flaws in a modernity where behemoths now-dominate global resource exploitation; where the financial economy is bloated in relation to the real economy; where funds available for speculative activities pose structural hazards as they dwarf the size of the underlying market liquidity, or exchange-traded derivatives markets that often set the prices thereof; where such speculative flows are increasing employing the same techniques (momentum, trend-following etc.) thereby increasing position correlation amongst investors (and thus volatility) resulting in something resembling de facto collusion; where technology opens the Pandora's box for anyone and everyone to join the electronic herd in the [temporary?] stampede for this or that. What, for example, would be market-clearing price of wheat in a world where physical traders (i.e. real buyers and sellers) dominated?

I contemplate this as a long-standing on-the-record voice of the viewpoint that inflation is no simple chimera, that agricultural terms-of-trade have been secularly depressed and will recover; that poor global fiscal and monetary policies (particularly US, China & Japan, but increasingly EM and GCCs) cannot help to have consequences upon prices, so its not simply that prices are rising that raise the question. But to me, the question remains: should "we" be encouraging "it", by not only facilitating it, but institutionalizing it ? My gnawing suspicion is that the modern context poses challenges for classical market theory for even the US bond market and so US rates it would appear has been neutered by official flows of central bank reserve accumulation making traditional arguments in favor of the economic benefits of unfettered speculation suspect. This leaves second-order arguments such as "freedom" and "the right to speculate", or the argument that "the slippery slope" of intervention or regulation ultimately leads to an outright ban upon financial speculation which might engender worse outcomes than the volatile consequences of unfettered spec by nation-states, leveraged Hedge Fund wunderkinder and the agnostic but seemingly omnipresent systematic computer-driven CTAs.

At present these are but still-crudely-formed thoughts defining the camps at both poles, but I hope this will form the basis for a discussion of whether pure leveraged financial spec in commodities is parasitic, and if so, is it unduly detrimental to The Public's interest.

Joe's Country

Joe [Smith's] story is most implausible. Indeed so implausible that Mitt Romney would have had a dastardly time explaining how we might rely upon his judgement in regards to say, fiscal policy, when said judgement seems so obviously impaired in discerning the credulity of a certain self-proclaimed Utah-based Prophet. That said, and ignoring Mr Smith's amusingly revisionist scribblings, he was not (apparently) incompetent when it came to mother nature and seeing the merit in locating one's hall of worship nary a twenty-five mintue drive from what is the hands-down-best and most challenging powder skiing in the lower forty-eight states, making it a fine place to escape from the strenuous market dramas taxing one's brain (and cortisol) production. This is particularly true when [God, Mother Nature, The Sugarplum Faerie] drops nearly two feet of fresh upon The Mount, munificently clearing the sky of all obstruction by daybreak!!

OK the people are a little too earnest for me. The arts & crafts rather kitsch. The food and lodging are most basic and without praise. The apres-ski wholly non-existant. But the skiing is breath-taking, and some Utah philistines do have a sense of humour, particularly the local brewers, offering up such goodies as Wasatch's "Polygamy Porter" (Slogan: "Why Have Just One?") , or Squattter Brewery's "Revelation Ale", "St. Provo Girl" (with a thinner, more seductive serving wench on the label than Bremen's St. Pauli Girl), and my favorite, a crisp lager called "Chasing Tail", who slogan is "Don't Make Me Beg!"

Religion seems to bring out the best in alcoholic-artisans, for Israel's foremost handmade beer is called He-Brew, whose slogan is "The Chosen One....."

UBS Board of Directors 2009

Sent to yours truly by a friend, with an obvious sense of humour, and the comment:

"And the extra “fashionista” prize goes to whoever first identifies Marcel!!"

Sedantary Ways

Investors in Activist funds targetting Japan would do well to consider the following curious fact when assessing the probability that their cage-rattling surrogate greenmailers will be successful in monetizing the apparent value embedded in Japanese enterprises:

"Only 13% of Japanese homes have EVER been resold, compared to 89% in Britain and 78% in the USA"

- From The Economist, 3rd Jan 2008 via Feb 2008 Prospect

From 'Something-For-Nothing' And Back Again

18th February, 2008

Dear Northern Rock Shareholders,

Please stop your whinging. You are, of course, the equity investors (or in capital market parlance: The Bag Holders). For those of you not versed in what precisely this means, it entails ownership rights, which in turn, yields a vote upon various orders of business that, from time-to-time, are put to shareholders, a fractional ownership share of the net assets of the Company, and a same fractional claim upon all the net profits of the firm - both those retained by the Company, as well as the portion paid in the form of dividends that management deems you worthy to receive, pari-passu to all other common equity holders.

In good times, these may indeed be plentiful and above and beyond both management and shareholder expectation. During bad times for the company, however, of which you are the owner-in-fact, this may entail a mind-numbing, ego-bruising, complete utter-and-total loss. In the case of Northern Rock PLC, lest you need reminding, times have been very very very bad indeed. This last description may, in fact, be an understatement.

You as the owner of the enterprise may argue, like the owner of a pretty red automobile parked in one's driveway whose motor is potentially broken beyond repair, that it is a fine car by all appearances sake. And that (if it were running) it would be worth a tidy sum. But, be that as it may, it is impossible to know whether or not the cost of towing and fixing and possibly replacing the engine will be greater than the ultimate value of the car, something not improbably given the visible cracks in the engine block and the oozing of slimy black stuff now pooled upon your drive. Of course, you must have the money the money (e.g. 50 billion or so) and the resolve to find out, or else it is, despite outward appearances, for all intents, worthless as an automobile except perhaps as scrap, a West-Virginian yard-ornament (when raised up upon breeze-block), or as a low-rent spare bedroom for less-than-favored house-guests and mothers-in-law alike.

You've been given ample time to try and sort yourselves out, but all I have seen is a few carpet-baggers buy shares in the secondary market to little avail, but nowhere has the sort of GBP 5billion rights issue been successfully floated that might provide the sort of cushion that would placate newly (required) creditors to balance your books, and avoid receivership and ignominy. Having failed in this this regard, creditors could, of course, try their (and yours) luck in a dismembering receivership. This would be messy, indeed, and given the nature of current credit market conditions, would likely net you ZIPP-O, ZER-O, NADA, and rien du tout.

Fortunately for the hemorrhaging credit markets, Northern Rock employees, and other holders of like mortgage assets, the largest of the creditors (Hiya Ali D.!), to whom the keys of the enterprise have been turned over, does not wish to liquidate at present. This is probably good for you (in a medicinal sort of way) for IF the loan portfolio and servicing enterprise do turn out to be sound (and profitable) in future, and Mr Darling recoups more than the financing (plus spread!) that he's lent the enterprise that you [formerly] owned, on behalf of The People, you may actually get a small "thank you" checque to deposit in addition to the rather pleasing [now rather worthless] Share Certificates that, once framed, will hang nicely on above mantle next to your Enron and WorldCom certs.

So please, show some decorum, and refrain from whining and filing frivolous lawsuits for there are far more interesting things with which to fill broadsheets and tabloids alike, such as "What was Princess Di's favoured method of contraception?".

Most Sincerely Yours,

Cassandra

P.S. Don't forget that most of you original small shareholders got "something for nothing" in any event, and I don't recall anyone kicking up a fuss about it.

Switzerland:: Moody's Was Here!!

Refreshed by sun, mountain air, despite avaricious Swiss irreversibly far-along their Faustian road predating others' tax-regimes, and overzealous Brits trying to make Rupert Jr. or little Gemma a ski champion by age-five, I will pose the quuestion: What do Swiss Hotels, The Rating Agencies, and the wonderful parody Spinal Tap have in common? (Hint: pictured above)

The guitarists' amplifier is iconic of unsubstantiated wishful ambitions whether laughably ignorant (as in Spinal Tap) or cynically self-interested as in the case of The Rating Agencies, or Swiss Hoteliers. The Rating Agencies are slightly less nefarious perhaps falling in the middle of the continuum, for while their conflicted interests are/were obvious, their talent pool and experience was - to be entirely fair - both thin and perpetually depleted by design since pay and ultimate rewards were laughably low in comparison to both sell-side and buy-side peers. The rating agencies are the equivalent of FI-boot camp, practically speaking, certainly not the home of analytical SAS or Green Berets, for those with such aspirations and talents were long since poached leaving...well...we can all see the sorry result.

But how can Swiss Hotels be more ignorantly wishful than Spinal Taps iconic volume-control that goes beyond "10" to "11", or more conflicted that the rating agencies? The answer is they either undertake compromised self-rating of hotels, or or have so corrupted anything resembling accurate independant "star-based" ratings as to be entirely useless, for there is almost no correlation between the star-rating and the quality and facilities of the establishment except to say that they are (like CDO's) universally over-rated whether by hook, or by crook. Our first establishment, a purportedly neat and clean 3-star in a convenient location, bore almost no resemblance to either the promotionary words and pictures nor the compromised rating. I will not spoil your lunch with photos, lest you soil your desk. High-tailing it out of there after a quick kip, we secured adjoining rooms in the "***** Superior" (better than five star, yes the #11 on the Amp). Now, Cassandra and Family have had the good fortune to stay at many unrated luxurious and "five-star" establishments all over the world but especially the mountain, and this was certainly NOT five-star, let alone five-star-superior (reminiscent of Bear Stearns "Enhanced Leverage High-Yield Fund"), with rock-hard beds, non-existent feather duvets, dilapadated and antiquated hardware, a ski-room that resembled a root-cellar, and stingy fare for the half-board. Oh the Russians were there, as were the smarmy waiters in starched polyester white jackets, along with the high-end British fully-orchestrated ski-holiday complete with little Ivan or Nigel being whisked-off with private instructor in the stretch Mercedes.

Now before you put this off to bad luck or limited sample-size, I have stayed at worthy places in Switzerland, but there appears to be something more systematic at work here. For what is fascinating in comparison to say Austria, is that despite CHF hyper-bas rates of interest, there has been little investment in hotels here. Russkie contrapreneurs, domicile-arbs, and hedgies have fueled private chalet and beaucoup new-apartment construction, but the tired hotels suffer from lack of investment whether due to wage bills that cannot compete with Austrian generous use of eastern european labour, or a more cost-concious consumer. And Switzerland is not without its charms, so these competitive disadvantages in themselves would be tolerable if ONLY they were honest. But they are not, and the entire system appears corrupted and disingenuous. This is NOT snobbishness, for I've happily camped, hosteled, and dormitoried without pretension or complaint, knowing what to expect. But dishonesty and inflated self-opinions well-departed from reality, is short-termism as its worst.

So "au revoir, Valais". Next year, it will be a return to the familiar and entirely more sober and honest "Austrian Gemutlichkeit".

Swiss Aid

Dr Jean-Pierre Roth
President
Schweizerische Nationalbank
Boersenstrasse 15
PO Box 2800
8022 Zurich
SWITZERLAND

7th February, 2008

Dear Dr Roth,

I will be visiting your fair and beautiful country for a holiday over the next 10 days and would self-servingly be most grateful if you would kindly follow the lead of Mr Trichet and suggest/confirm that that the tightening cycle in Europe is, in fact, over, and that it is now safe for thrill-seeking investors to once again use your currency as a source of funds for all manner of opportunity that is beginning to emerge.

Such a statement would go a long way towards offsetting the horrid appreciation that has (almost) made me regret not booking in at Crested Butte.

Thank you for your consideration and I remain hopeful of your immediate assistance,

Respectfully,

Cassandra

Anti-Dollar's [Temporary?] Demise

I like gold, I do! I like it as I fancy "The Times Atlas of the World" in front of which I can kill an entire afternoon, a 70's Vintage Port, or a pair of dreamily-fitting Lorenzo Piano trousers. Despite this inherent attraction for something of obvious inherent quality, Gold is a speculative red herring, here and now. For each new datapoint indicating a more severe contraction, and each new lurch down in other asset prices, makes the precious metal (and sisters) - psychic allures that they may still hold - a dramatic financial non-sequitir in comparison to other non-levered or lowly geared assets with and potentially growing cashflows, or for that matter, mid-term government securities. Not that Alt-A mortgages at the other end of the spectrum provide much better comfort, nor does equity with cyclical sensitivities - with low visibility and diminishing earnings expectations - provide safer haven.

For while the fear remains inflationary hell or deflationary systemic implosion at the extremes, it is the inflationary fears that appear more canard-like as the sucking sound of all manner of wealth destruction, balance-sheet reduction, asset-impairment, price-discovery, money-velocity deceleration, higher margin requirements and haircuts, creates multitudes of overt and unseen cascades throughout all markets (and the economy) at a pace many times greater than it can be replaced with SWF contributions, cheaper money, steepening yield curves, or fiscal stimulii.And this is lkely to remain the case, irrespective of the smell of monetary napalm in the morning.

Add to this Gold's large leveraged speculative position, and huge percentage of prevailing open interest owned by fundamentally agnostic CTA's resulting from short, medium and long-term programs, and it seems likely we will soon witness a rather ugly pile-up on the exit ramp. Such is the nature of the log-normal distribution that describes speculative price advance, and decline.

Specs are still fearful of global easing and global stimulus, which is why the metal is levitating while the known financial world incinerates. Longer term, of course, who knows, the economic horrors unfolding may be granted respite, and the fear-pendulum may once again swing towards stagflation or even inflation. But that will be in the future, for at the moment the barometer is suggesting otherwise, and Gold longs would be wise take heed, and not fall in love with their position.

Halftime Fun and Some Diffs Between Liberals & Conservatives

(apologies in advance for an off-subject rant, for there is undoubtedly copious amounts of gratuitous political missives floating about, without having to read another. This one is general, but personal, not to mention entirely true. Names have been omitted to protect the guilty)

Watching the Superbowl (or in my case the good half of it) got me to thinking about a few of the minor things that distinguish American liberals from conservatives. What, pray tell is the connection to the SuperSpectacle? Giants stadium, for a start combined with the fact that one seemingly cannot escape from Election 2008, now in full-swing, though still with a mind-numbing 270 days or so before the Nov trigger date. Why-o-why can we not have a single day upon which the parties conduct their respective Round-One Selections? And may we please limit this selection date to no more than 90 days before the general election? And finally, anyone caught airing gratuitously self-serving political ads prior to 180 days before the General Election will be disqualified - with no exceptions. And, oh yeah, people: Please do NOT let politicians kiss your baby...

Back to the thread and the connection I wish to reveal. You see, all is NOT well in the Meadowlands Giant's Stadium. Witness this NY Times report, or this one from Can't Stop The Bleeding depicting errrr less-than-salubrious behaviour at "Gate-D" where (apparently) women are [successfully?!] taunted to expose themselves, perhaps for the greater morale of NY Jets fans. This doesn't surprise Cassandra, though the similarities remain with my experiences more than twenty years ago. Now before you all go and get yourselves excited, let me first explain. A maddeningly (i.e. unfathomable and inexplicably) conservative friend took me to a NY Giants game one Sunday at the Meadowlands. Actually, for me it was an Eagles game, but there was no need to telegraph this fact to the other 75,000 blue-and-white Giants fans. Some watery beer was drunk. Fumbles and turnovers witnessed, mostly Eagle-inspired (this was after the days of Jerry Wolman, voucahbly professional sports' least astute owner EVER, but before the days of Donovan McNab). More beer was drunk. Then half-time. My conservative (though generous amongst friends) companion then bought us six-more foul and overpriced "beers". I assumed he bought that many because it was watery.

We went outside and camped ourselves leaning against the inner wall overlooking the central area of one of the circular pedestrian ramp-ways (depicted right) that are strategically positioned at the corners of the stadium. We imbibed a bit more, smoked a cigarette. I noticed more people congregating and looking down. Didn't think much of it. My friend
took out a dollar, and tossed it over the wall whence it floated down many floors below, before settling on the ground level. Other people started tossing coins, their chimes echoing over the noise as they hit the bottom. Were they, like pennies in a fountain, making wishes to insure the Giants overcome Phila's feeble efforts? I couldn't imagine what was to come. My "friend" now tossed a fiver ove rthe side (thats prolly $50 v.2008.2 money). More coins. More dollars - even a few tenners - showered down. There was some commotion going on below. Someone was climbing the fence at the ground level, a young black kid it seemed. The gallery was now filled to the brim. My conservative friend had an ear-to-ear grin, and proudly said: "Watch This!" The kid went over the top of the fence, landed feet-first inside and started scurrying to pick-up money. As soon as this young gladiator started, Romanii in the galleries began hooting and howling and pelting him from all sides and all levels - five and six floors up - with coins, anything and everything, making him cover his head, and whincing as they hit him. Half-full cups of Pepsi and Ice cubes created mini-explosions as the fell from more than 100 feet up. One even hit its target. The kid was going for the paper. My "friend" hurls one of the beers down with venom - it misses the mark- but the spray-shrapnel leaves a slick foaming residue, upon which he slips. More coins hit him, and after 45 seconds like a rider bucked off the Electronic Bull, he scurries out and over the fence, less enthusiastic than when he began. I look over at my "friend" (inverted commas indicating my increasing discomfiture) and he's laughing his ass off, and can't understand why I don't find it as amusing as he does. This continues with several more black kids having a go, before the audience runs out of beer, money and ammunition, the second-half is set to begin, and police make their way to break up the spectacle. So, I'd suggest if the NYT fuss is over the exposing of one's tits for some cash, I'd say while it's certainly no LESS venal, and probably a cultural improvement over 20 years ago.

Liberals think that such a spectacle is simply "wrong". They may not wish to legislate against it, but they viscerally feel something's awry, and will at the least try to both understand the problem, and if possible, solve or ameliorate it, with respect to the conventions of sober-minded cost vs. benefit analysis. Conservatives, by contrast, gleefully see as a reflection of, no Celebration of "the market - for nobody made them do it." This ignores links between their poverty and society as if their fate and condition is somehow, entirely self-inflicted. Though even IF one accepts society's organization and events which have gone before were responsible for the poverty, lack of opportunity, or what have you, (strong motivators the world over), one still needs to feel some responsibility to the community and society, to feel the least bit culpable. In the curious conservative mind, however, "the best public interest" seemingly "is no public interest!" This sufficiently distances The Conservative from the tether of any responsibility such that he/she can now self-justifyingly pursue that which may please them, without respect to consequence to others or the common the good. It also apparently is without regards to the inherent logical inconsistencies and hypocrisy of such a position. Indeed, The Conservative desires to see a firm line on immigration, but sees no problem in hiring a housekeeper or nanny working illegally in order to save money, nor do they understand the connection between their "cheap" restaurant food, and so-called "efficient" distribution system, and the same "cheap" illegal labour that makes it so. They are likewise intent upon maintaining a robust defense and projecting American power abroad, yet fail to see the connection between the expenditure and the revenue required to fund it. They similarly believe that the private sector is always the best answer to delivering services to the people, yet fail to comprehend that this same private sector has caused America to spend approximately 17% - or between one-and-a-half to TWICE what other OECD nations expend - for WORSE outcomes and hardly-extensive coverage. Yet despite their apparent faith in the private sector, they do not seemingly believe that the one and the same private sector's welfare can be left to chance, such that further knee-jerk monetary & fiscal pump-priming - even beyond which is implied by the Taylor Rule - is required to save the private sector from itself. And there are more logical singularities: inconsequential to the important policy debates, highly indicative the flawed reasoning around which Conservative thought orbits. In their world, every life is apparently sacred (unless it be a gay or lesbian life), and personal liberties are sacrosanct so long as they are evangelically-approved - a moral rock/paper/scissors outcome that confers superiority to guns over sex, and flags over birth-control pills, and images of murder over those of, yes, a woman's [divinely created?] teat.

It's a shame to have to generalize, for there are undoubtedly logical and principled people, who may be labeled conservatives though who abhor such inconsistencies, but such is the nature of the two-party system. Maybe its not conservatism per se, The Republican Party - a strange form of crony-moralistic-authoritarian- feed-my-selfish-greedy- friends-at- the-troughism that was characteristic of the Nixon and Bush-2 Administrations and which spawned all manner of strangeness, from "disco" and "bell-bottoms" to Abu-Ghraib, Creationism, and the emergence of Alberto Gonzalez.

Liberals undoubtedly make policy mistakes, but importantly they will be different mistakes, resulting not from venality and mal-intent, but from mis-calculation, or well-intentioned mis-understanding. The people they will hire will be more honest, or at the very least, less corrupt and partisan in respect of the money-interests of their friends and themselves. All these distinctionsmatter. Liberals' mistakes, in general are akin to smoking pot - dopey, but endearingly benign - whereas conservatives' mistakes resemble those resulting from a bourbon binge- leading to all manner of baseless intoxicated triumphalism and a car-wreck or two, often with fatalities, including more-than-a-few innocents, which is the bothersome bit, in what might be an otherwise satisfyingly Darwinian outcome. But the bottom-line is that flexible, but clear-thinking, the public interest, and less-than ideological, outcome-driven result - virtuous prerequisites for societal leadership in modernity will more likely result from the Liberal mind, than the faith-based and parochially-selfish. Please vote accordingly.

For years, my "friend" and I bridged our political differences, though since the abortion of this administration and the realization of this Cassandra's most dire warnings, and the increasing role of "faith" in his politics, I speak and correspond with him less and less. I do not know whether he has tired of defending positions that dangle from "sky-hooks", or whether he, like America, prefers not to confront the embarrassment of what "being so wrong" has brought to the country...

The Virtues Low Key Ownership

"Hey, Great game! "Can you you believe it??!?" "What an upset!" "....Spectacle .... suspense .... and that Eli Manning....!" Blah blah blah ya-da ya-da. In all honesty, even for this philistine who believes that steroid-pumped behemoths slamming into to each other and scrumming toogether in tights and armour for 60 minutes bounded by anal-retentive letter-of-the-rules interpretation and eagle-eyed camera enforcement is rather absurd, the second half admittedly was exciting, though I make no apologies for my cynical opinion regarding the game, the sport, the game of the sport, or is it the sport of the game?

Foul and curmudgeonly critic that I may be, what I found curiously emblematic amidst the post-joust celebration and triumphalism of the presentation of the Vince Lombardi trophy was the peculiar comfort everyone seems to have with the oxymoron represented by the concept: "Owner of The Team". This seems such a long way from my youth soccer club, or the PAL baseball and basketball leagues with which I grew up, as well as foreign to the university teams and sporting clubs with which I played. I never, in fact, recall being "owned" as such, and rebel that I am, wonder aloud about what it might have meant.

I can tell you I don't know the Mara's (the NY Giant's "owners"). They might be fabulous people. "Ma' Mara, looked a bit uptight on the podium, but its hard to look warm and matronly in Gucci on TV, right?? They might even have had something "hands-on" and endearing to do with enabling the victory (though I harbour my doubts - for many "owners" of professional sports resemble "lucky squatting" monopolists). But like throes of nationalism, and the often-dubious benfits accruing to the median-citizen from its pursuit, there remains a veil between The Team and its fans, and the business interests of The Owner. Some Owners, like perhaps a few enlightened corporations, or benign Lords or Viziers of old, understand the tenousness of the relationship between owners and owned, and the potential for backlash when said relationship is deemed too exploitative. Others are already well-beyond any reasonable indication of their intention.

This tension is always there. The "Game" (however absurd) IS a game of the common man, and the benefits derived by owners therefrom requires buy-in in the form of passion, enthusiasm, and the willingness to either fork over huge sums of money for tickets, parking and memorobilia OR large chunks of time in front of the big-screen TV devouring the finest Madison Ave has to offer. The People's continued buy-in requires - at the least - lip-service and the appearance of sensitivity to issues of capital-labour relations (insuring the Fan doesn't feel similarly exploited in the process). It's hard to be "one of the lads" from The Super Box, emerging to bask in others' glory and collect the spoils. The danger that lurks here is that "The Owners" - or at least those that are not hands-on, salt of the earth-types (like Jeff Lurie of Phila) or rabid charitable enthusiasts, should NOT be center-stage, EVER. Certainly not in public jubiliant celebration. And I suggest this not out of a preference for self-effacing behaviour over racuous triumphalism (though I am more sympathetic to the former), but as a detached observer looking at it from the vantage point of their long-term interests. For while it may remain deterministic that complexity, media, spectacle and finance in modernity are ever more central to professional "Sport" generally, money, monopoly, greed, exploitation of taxpayers for private gain, makes farce of this same "sport" (if this is even possible at this point), exposing The Game itself precisely for what it is (and isn't). So my advice to the "Owners": watch from a distance. Always take a backseat to Club and Team and managers, for it is welll-nigh impossible to appear genuine when you're not.