So Farewell Then...

So farewell
then
Pequot Capital
Management
Hedge
Fund.

You told
investors
you
channel-checked
more accurately
than
anyone...

...counted cars
in a
fab's lot
at 9pm
to stay ahead
of the
herd.

And you didn't
dispel flattering
rumours
your Wharton interns
were dumpster-diving.
on your
behalf.

But it seems
your research
edge was
less-than
salubriously
on the edge.

Quite aptly,
'Pequot'
translates as:
"Men of
the Swamp"

Perhaps there
is more
justice in
the second liquidation
of the Pequot
than in
the first.

(With apologies to PrivateEye and EJ Thribb and posthumous ackowledgement to Greg Newton)

Trojan Horse Becomes Trojan Rabbit

Porsche's perfect Trojan Horse corner and attempted takeover of VW is, according to Bloomberg (and others), rapidly in danger of becoming a less-perfectly concocted "Trojan Rabbit". Had Mr Wedeking perhaps spoken with the Hunt Brothers, they would have learned that getting the price up is only half of it (and the easy half). Cashing out in full, and banking the plunder, as the Hunt's would have told them, is a bit more tricky.

I must admit that I am actually a bit sad to see it come unravelled (not having had a short in VW) since there was brilliance in shafting may of the self-professed smartest guys in the world (?!?!?) by suckering them in with a trail of seemingly free bank notes, before giving them the P&L wedgie of their lives and hanging them-up in public view by their short and curlies. But it appears that The Street may have the last laugh.

Caned!

This would be funny if it weren't so sad...

Perfect Revelation

In my post, The Perfection of Quantitative Easing, I ruminated upon the linguistic perfection of the phrase, wondering aloud who might have conjured such a wonder. The answer has revealed itself in this kind note below that was too illuminating to leave buried in the comments section of the post...

Richard Werner said...
I believe I am the originator of the phrase 'Quantitative easing'. The original Japanese expression is 'ryoteki kinyu kanwa' or 'ryoteki kanwa' for short. Both are, literally translated, 'quantitative easing'. Thank you Cassandra for your most wonderful description of the English translation.

I used the expression prominently in my articles in the Japanese press in 1995, 1996, 1997, 1998 (Nikkei, Japanese Economist, Toyo Keizai, Japanese Newsweek, etc.) to suggest the necessary and sufficient policy response to end the recession (I had predicted the Japanese banking collapse in 1991; in print see Discussion Paper 129, Oxford Institute of Economics and Statistics). I had already argued then that interest rate reductions, even to zero, won't help. What was needed was to stimulate the economy through the quantity, not the price of money - correctly done. I wanted to avoid expressions such as the figurative 'printing money' and the common 'expanding the money supply', not only because they would unnecessarily alarm Japanese lay readers, but also because these are traditional monetarist prescriptions, which I argued would not work (as the monetarists argued for an expansion of bank reserves). At the time I was chief economist at Jardine Fleming Securities (Asia) Ltd. and Assistant Professor at Tokyo's Sophia University and known as the BoJ's fiercest critic. The Bank of Japan adopted my expression in 2001 as its official policy. The BoJ used exactly my Japanese phrase, and in its English-language press statement literally translated it.

However, and this is a predictable irony of central bank behaviour, they used it is a cover, because they did not adopt true quantitative easing, and instead implemented simple monetarist expansion of bank reserves. As I had predicted, this could not work. Next year Japan will basically be in its 20th year of recession. One further comment: In my English-language articles and interviews that I gave I used the expressions 'credit expansion', 'liquidity expansion' or 'credit creation' (the latter being the most accurate description) instead of 'ryoteki kanwa', as the audience in the financial markets would then understand me more or less correctly. Anyway, shame I'm not getting license fees each time a central bank talks about 'QE'.
Professor Richard A. Werner, D.Phil. (Oxon), Chair in International Banking, Director of the Center for Banking, Finance and Sustainable Development, School of Management, University of Southampton. werner@soton.ac.uk
9:00 AM, May 14, 2009

Time of Your Life

It's a contemplative self-proclaimed "No-Finance Monday". As such, I will encourage you to enjoy one of my fav's with me. It's quite an archetypical theme, so I would be surprised if it doesn't touch most people, at even just a little.

Financial Psalm 16

Financial Psalm 16

16:1 Preserve me, Gold, for in you do I take refuge.

16:2 My portfolio, you have saveth, and it sayeth: “You are my Saviour.

Apart from you, I have no good thing.”

16:3 As for the silver and oil which is in the earth,

they are also excellent ones in whom is my delight.

16:4 Their sorrows shall be multiplied who diversifyeth into other assets.

Their offerings of bonds I will not accept,

nor hold such paper on my lists.

16:5 Gold well-assayed is my preference and made-eth my cup. 

You made my lot secure.

16:6 Your prices have risen making pleasant our faces.

Yes, our offspring will have a good inheritance.

16:6.1 Beware the false prophet, paper gold, promising false profits.

16:7 Blessed be Chris Wood, who resembleth Jesus, and has given me wise counsel.

My heart instructs me to stay long during the right seasons.

16:8 I have set Gold always before other assets. Because It is is heavy in my right hand, and shall not be moved from its Swiss vault without  countersigned instructions.

16:9 Therefore my heart is glad, and my relative purchasing power rejoices.

My portfolio shall also dwelleth in safety so long as Bernanke ruleth.

16:10 For you, Gold will not leaveth my portfolio in Zimbabwe, or Weimar

neither will you allow my portfolio to become holey due to political corruption, or crony capitalism.

16:11 You, Gold, will show me the path of wealth preservation during times of inflationary woe and political uncertainty.

In your presence, I feel the joy of your security.

So that my hand can exchangeth you for pleasures forevermore.

(with apologies to Private Eye)

Reg FD: I am not a goldbug and still believe it has one more big puke before the rocket-ride (not the "gee, I printed a price and stayed there for 5 mins puke)

The People of Great Britain are Better Off Today...

The People (and Government) of Great Britain have, for the last century-and-a-half been notoriously tolerant. From Karl Marx to the Mad North London Mullah with a prosthetic hook, Abu Hamza, from Glenn Hoddle to Simon Cowell, they let a whole lot pass upon their shores that other people simply wouldn't countenance, (and if they did, certainly would not do so for as long). And true to my political orientation, I think Britain, and the British people are not the worse-off for their open-mindedness and forbearance. So I am reasonably certain that, if I were consistent, I rightly should feel Britain has suffered some meaningful loss over Home Secretary Smith's slapping an entry ban on Michael Wiener, a.k.a. Michael Savage.



Yet, I don't. Paradoxically, despite my predisposition towards free speech, and general tolerance of most weird, eccentric, iconoclastic, ludicrous, subversive, even lunatic ideas, I am quite confident that Britain is better without the inciting bigotry and facist, racist, homophobic, hyperbolic rantings of Mr Savage-Wiener. Mrs.Smith's solution was simple and clinical. Probably not optimal, but effective. And so in one small way, (FTSE short-squeeze andincreasing risk appetites asides) the people of Great Britain are better off today than they were but a few days ago, save the elimination of Mr Savage-Wiener 's entertainment-value of which they will now be deprived.

Financial Gitmo

I am a survivor of the Japanese bear market. Twelve (or twenty - depending on your school of thought) long years of it. Call it "Financial Gitmo". The lessons of this incarceration were varied, and the experience invaluable - indelibly etched upon my brain for ease of retrieval when required in the future. Like now. One such lesson was that once the initial violent trauma of the market waterboarding dissipated, the mind-fucking treachery and psychologically-painful water-torture begins. Not unliike being forced to watch the same lame episode of "Kudlow & Cramer" or being subjected to a Mossad interrogation (at least according to recountings of the tens of thousands of Palestinians so graphically subjected).

Deeply oversold markets can rally for all manner of reasons: simple sellers' fatigue; government intervention, whether directly in markets (PKO anyone?) or indirectly through moral suasion, jawboning, or policy response, inciting the feedback loop to short-covering, which, causing higher prices fuels positive momentum and the optimism that the worst is maybe, possibly, hopefully over. The Strategist weatherwanes (like Abbey Cohen or Alex Kimmont) chortle which way the wind is blowing rather than where it will blow tomorrow. Professionals get squeezed-in to further penalize their (and their customer's) less than prescient capitulation at or near the prior lows. These episodes typically last longer than most bears can tolerate, both in time, though more acutely in P&L. They decry the move and point to fundamentals (and they are of course right, though it matters not). They conjure conspiracy and highlight manipulation (and may be right) but it gets no traction for the bullish side has more constituents than the bears. Their confidence wanes with their P&L, each higher intermediate-term low pushing them one step to closer to covering. The trend-followers have long-since bailed - even the longer-term programmes are turning bullish. Markets do, after-all, lead, don't they? Finally, like the interrogated, the short is broken and confession to anything and everything is achieved. And like a false confession, this capitulation is a hollow victory for the bulls and the market, since it is likely to be an intermediate-term top - NOT an early whistle-stop along the New Prosperity Line, particularly where The De-leveraging is The Big One.

So hearing Mobius, Cohen, and other pundits speak of bull-markets and greenshoots is predictable. But I reckon that Mssrs Schilling,and Roubini, will in time - once again - more likely be correct insofar as I believe continued recession and mild deflation will predominate longer than optimists (and inflationists)- and in particularly longs, can bear once the shorts have sufficiently covered and the intermediate term optimism rolls over with the continued bleak news flow. Then, the trend-followers will mechanically bail, and reverse positions, prescient programmes and specs, too, will re-establish their shorts, until finally the squeezed-in will, once again get squeezed-out, and those amongst us with weak constitutions will be forced to hide the pills and sharp objects to avoid .... tragedy.

The Interview (With Thaler)

BBC's Lyse Doucette does just an OK job grilling Dr Richard Thaler on this week's The Interview . She's admittedly a bit out of her depth (Tom Keene would have been more provocative and teased more out of him). Despite this, it is worth a listen regardless of his plugs for his book, and apparent soreness for being under-recognized in Kahnemann's & Tversky's Novel award.

Tempting Offer?!?

I am not scatalogically-preoccupied. But on Page 53 of this week's Economist magazine - the European edition at least - is an advertisement for Bocconi SDA's Master's in Fine Food and Beverage with a picture of what appears, at first-sight to be a large Parisian sidewalk pile of excrement with the caption "Come and see how tasty a Masters in Management could be." Ummmm, thanks, but no.

With our current predicament fueled by such Masters, I couldn't help but chuckle at the sight (though my appetite, upon seeing and recounting it, now, to you, has decidedly been lost) and timing. Of course - for The Few Master's themselves, flush with their spoils and nouveau-elevated tastes that increasingly only they can afford - will undoubtedly recognize the mess-pile as a rare and valued Truffle, sure as their covetous and parochially selfish eyes can recognize a Vintage Krug on a purveyor's shelf at 30 meters (or more!). But one would be forgiven for wondering whether Bocconi's PR Agency boys and/or girls were looking for a little payback while working out their pink-slip notice period(s) recently handed to them as a result of the fallout of The Masters' financial follies.

Lest you think me unfair to said Masters (for the would-be's of this Bocconi course are arguably harmless), I will happily point out that I do not single them out, for the pavements are veritably littered with piles of crap, from the legislative capitals where lawmakers have whored themselves like street-harlots, while even those that didn't were too timid, ignorant, or fearful of electoral backlash to interrogate the foundations and wisdom of unlimited credit sans regulation or prudential tether, to suburbia and the American heartlands desperation to believe in tooth-faeiries, Santa Claus, Goldilocks, and pixie-dust as panaceas for unsustainable consumption over production, and at the collective level, unsustainable fiscal expenditure relative revenue.

Farewell Greg Newton

I learned today via Felix Salmon, and FT Alphaville's Paul Murphy of the sudden and very sad passing of Greg Newton, the former Metal Bulletin and MAR-guru, and prescient satirist of Naked Shorts. As Felix highlighted, Greg was not only one of the earliest must-read on-line commentators but he was probably the originator of the genre of on-line Financial Satire, a platform he employed to great effect in the lampooning of contrapreneurs, scamsters, hubris and simple outright financial stupidity - more often than not BEFORE its discovery by authorities, investors and mainstream financial journalists .

Greg was very supportive of Cassandra Does Tokyo from the outset as we shared a joy of satire, irony, expatriation from the lands of our birth, and a similarly skeptical view of markets and human nature. More impressive however, was that he courageously tackled important contentious issues and people head-on, despite threats of libel and legal action, without the bashful anonymous guerrilla sniping I've shamefully adopted. His bullshit detection skills were of the highest order, coupled with an unparalleled no-nonsense wit and punchy literary-style that always brought a smile to my face, typically accompanied by audible laughter, as I am certain it did to all readers, except perhaps those that he skewered.

But most important from where I sit, Greg Newton was a warm, kind, and thoughtful man, evidenced by the time and attention that he devoted to our correspondence and the issues he championed in Naked Shorts without recompense. I know I, too, will sorely miss him, and the world will be worse-off without his critical eyes.

Death Nell

If there is any doubt that the high-end of conspicuous consumption is stinging, just come and visit Aspen or Snowmass. Local Pitkin county radio this morning was discussing the closure of several well-known high-end retail stores - not for the season, but permanently. The reason cited: many of their clients, they said, had were reeling from being "Bernied". The slopes are eerily quiet. Kids who'd we' had booked into group lessons were nearly private. Chatting with a local high-end builder, he was quick to tell me that he has no backlog with current work ending in July. Yes he said he's been through three of these before and something has always come up. But this time, the something has yet to materialize.

Most ridiculous is the real estate porn infusing local glossy mags, still sporting prices beyond the realm of the absurd. Despite the confidence of local cognoscenti made wealthy from peddling slopeside or barren building lots with a view, this shoe has yet to drop, sure as Danny Bonaduce had freckles and a numbingly expensive cocaine habit, it will drop with a resounding THUD! If one needs any evidence on top of the increasing number of building sites abandoned by homeowners made skittish or insolvent, they need only look to the headline news today of the abandonment of Little Nell's Snowmass project due to inability to sell forward OR find adequate financing. Not surprising perhaps at a mind-numbing $3,000 per square foot. This leaves a rotting carcass in the center of Snowmass - an eyesore to other local residents who've recently overpaid, or worse, put a deposit on a project that will likely fall into receivership.

Like many a bull-market project and their champions, Little Nell and their partners undoubtedly committed the cardinal investment sin of extrapolating forward, that which should never have been - at least not if one is dependent (or will be dependent) upon munificent external finance at some time before completion, or the stupidity of strangers. Such fallibility is nevertheless human, and before this cycle is over, they will not be alone in having assumed they could borrow required sums to complete, and subsequently shift astronomically over-priced leisure housing to the yet-to-be-identified even more stupid would-be purchaser. But requiring more scrutiny perhaps is the description of the project itself ("luxury", "five-star", "exclusive", "gourmet", "world-class"), for such adjectives appear increasingly suspect, with their redemption more elusive than anytime in living memory.

Pause for Thought

I have very few problems with the authorities attempts to triage the patient (using Dr Roubini's analogy). I do of course have some more restrained opinions with respect to the nuances, but nothing (as a critic) that hasn't been more articulately or exhaustively covered by those more intelligent and cogent than I.

But as a trader/investor I will admit to being a little bit skittish at the thought of the P&L consequences of posting a trillion dollar purchase of US Govt Bonds, here...and now ...at these prices and yields. For if "price" IS any indication of market distress, and forward-looking expected return is (acknowledging the exception of a decade-and-a-half of JGB yields with a 1-single-digit handle) related to value, then by deductive analogy, one might posit that Treasury Bonds are not the part of the patient that requires such attention in the emergency room.

Yes, I understand it is a tool, in a larger policy context. And that there are perceived positive externalities (like causing long rates to artificially hover at lower levels than they might otherwise thermodynamically tend). But given the length and breadth of distress in the markets, and it would seem, on financial institution (and household!) balance sheets, if one were to post trillion-dollar tickets, there are far more attractive opportunities elsewhere.

Umm al-Fahm

I have TARP Tiredness; AIG-Overload; PPIP-Exhaustion; TALF & TSLF -weariness; and Bonus-Outrage Burnout, not to mention a bout of Pozni-Lassitude. It will undoubtedly fade with the goodness of time, but in the meanwhile, with nearly every critic, blogger, strategist, economist and commentator all over it, any musings I might have, seem more or less irrelevant at best, and a waste of time at worst.

Yet, such outrageousness is not monopolized by financial forces as evidenced by zealots marching in Umm al-Fahm, who are depicted (rather poorly and without aesthetic formation) in the adjacent photo capture taken yesterday:

And while attempting restraint in stirring the hornet's nest, I will suggest that pictures DO very often speak louder than words, the former image conjuring my memories of those most assininely-Patriotic-of-folk, The Orangemen, in all of their Portadown-glory as more elegantly,but just as ridiculously captured here. Need one say more...?!?!

Don't Dish it Out If You Can't Take It

The wind was blowing 30 knots, whipping ice-crystals into exposed orifii. In the near white-out, looking down from perch on the lift I was able to make out a lone young female boarder who'd missed her drop and now had a most long and heinous traverse. She was putting on a brave face, and through the howling of the wind, and in-between her apparent tears and sniffles I could hear her repeating the mantra "Boarders don't cry...boarders don't cry...boarders don't cry...."

Similarly, there is more than a little irony in today's FT report, highlighted by Gwen Robinson at FT-Alphaville (Tokyo) that numerous Hedge Funds are planning to sue Porsche over the sports-car manufacturer's perfectly-executed Hunt-like squeeze of VW shares that snookered hedge funds and traders, large and small, the all world-over. Now before I am accused of mimicking Private Eye's Glenda Slagg, let me say that I don't believe Porsche's actions were particularly noble, and were at best in the murky grey nether-regions of financial legality. Having said that, despite my career as a professional arb, I do (from a purely technical standpoint) admire Porsche's patient setting of the trap before springing it's blitzkrieg with Rommel-like precision over-running any and all VW shorts misfortunate in their timing, leverage or position-sizing.

I should indentify and empathize with the squeezed for I often root for the underdog and have always played The Game by the rules, and dislike when dishonesty and malfeasance triumphs (even temporarily), gaming the system, arguably at the expense of more virtuous or long-term investors (or HFMs own investors). I realize this sounds sanctimonious, but I too have been at the game long enough to have been on the other side - occasionally too early like the VW shorts - of virtually every type of shenanigan ever plotted. conjured, or imagined. And a meaningfully large percentage of these have been nudged, cheered, lead, architected, sculpted, orchestrated, and cajoled, by hedge funds - quite likely the very same ones now suing Porsche. Whether the predation of shorts, trading on material non-public information, tape-painting, end-of-day/week/month/quarter/year window-dressing, stop-fishing, front-running, option-leans, illegal short-sales, collusion with other like-minded similarly-interested investors, using OTCs or other paper-smoke-and-mirrors, options to avoid SEC filings, sponsoring bogus research, buying early release of research, worming clinical-trial results, cornering stocks, ambushing and killing entire hedge funds, front-running new-issues, death-spiraling Reg-d issues, mutual-fund timing, all these are just the run-of-the-mill man-made (often hedge-fund made) market-hazards one must contend with.

Yet, despite the aforementioned, the cautious and skeptical contrarian (if I be an example) can successfully overcome them. Diversification, prudent position sizing, keen observance of the structure of crowded trades, conservative leverage, understanding as precisely as possible when and why something is not doing what one expects or forecasts it to do, who (or whom) is responsible for a position NOT doing what one expects all can contribute to preventing the horror of being checkmated whether by an HF or a would-be Porsche. Lose a pawn? Sure! Maybe even sacrifice a knight. But live on, and learn. So, if I, an honest plier of the trade can withstand the humiliation of having my stock called back after some unscrupulous fund has ramped-and-lent and ramped-and-lent, or suckered into buying a dip in-front of an earnings torpedo, and still live to fight another day, because it is the nature of The Game, then surely those playing The Game with greater abandon adhering to fewer rules should take their lumps like men, and admit that from time-to-time Alekhine will somewhat epicly have them for lunch.

Cheney: "Rush is a good guy"

In his typical charismatic fashion, Dick Cheney let it be known in a national TV interview that he has no doubts "Rush" Limbaugh is a "good guy".

One might expect that the late Generalissimo Francisco Franco also ranks fairly high on the Cheney-scale of "Good-Guy-ed-ness".

USD$ -50,000,000,000,000.00 - The Horror

Blackstone's Stephen Schwarzman was commenting on The Horror of wealth destruction. So one should rightly ask: How much "wealth" has been obliterated? Ashamedly, I often seek the path of least resistance, though I've been more recently preoccupied, both of which are excuses for taking the easy route and referring to the FT quoting the Asian Development Bank's number suggesting $50 trillion has been smoked, vaporized, hacked-off,roto-rootered or otherwise removed from the mark-to-market asset side of the global balance sheet.

I was actually quite pleased to see this number - not because of schaudenfraude or a sadistic desire to inflict ill-will upon others, but rather because it confirmed the number I had (of my own lazy accord) roughly estimated of what Americans had seen their net asset values diminish which was twenty-trillion (20,000,000,000,000). This, relative to the ADBs estimate, also roughly jives with America's share of global GDP, (not wanting to quibble over a trillion here or a trillion there). This still leaves Americans with $20 to $25 trillion of net asset value by my very rough back-of-the-envelope calculations (though please don't ask me to show my work).

There are those who adopt a glass-half-full view of this, and hope we'll return back soon to the warm and fuzzy place of high asset values. Or one might take a glass-half-empty view and dismiss peak values and more!!) as never having actually existed or, been realizable, and see where we are presently as being still enroute to where Global NAV will ultimately bottom. For the moment, I'll take the middle ground and venture that having shed an awful lot of aggregate value (an entire year of global GDP according to the ADB!), we're a lot closer to where we're going than we were. Some limb, I've climbed out on, huh? But it in fact matters. It matters to the inflation vs. deflation debate. It matters to the keeping of one's head in regards to the scale of the problem and the potential resources that can rallied, marshaled (or sequestered and confiscated for the more authoritarian amongst us).

I know this is a facile way to look at it. I know it is not a matter of simply passing the hat to each and every for their contributions since the assets are mal-distributed beyond mosts' comprehension. But it seems fair to ask the question: Precisely how big is the problem (the eventual total hole in financial system's balance sheet) in relation to everything, in the US and globally. A further two trillion? three trillion? perhaps five trillion in the USA?? Mind boggle-ingly large numbers indeed. What is this as a percent of GDP? What is it as a percent of GDP spread over 10 years? What is it as a percent of Aggregate Net Worth? Ten percent? Fifteen percent? Can we translate this into a facile figure that allows us to contemplate how much poorer it makes America, in aggregate? Would it be another ten (or fifteen? or five?) percent poorer than it currently believes and, if so, is it possible we can apply our credit accordingly, and start again?? Would you trade 10% of what you thought you had (savings, pension, net home equity) for an end to the uncertainty, and a reasonable assurance it shan't happen again (in addition to warrants on the excised pot of shite)? IF the answer is categorically no, does this mean we are in for the mother of all political battles while the real economy burns? Will this battle be generational? Does it pit the ends of the mal-distribution against each other? How else can we parse the question?

I am not dismissing the validity of the debate over official action, and it's reasoned moral implications and differences over optimal implementation. But it seems such is the vehemence and vitriol of the debate over the mechanics - however valid - that it has run roughshod over the very broad and simple questions that include phrases such as The Long-Term Public Interest, sustainability, and fairness.

Needless to say, I don't have the answers. But I wonder if the descent into technical jabberwocky hasn't prevented public buy-in, instead, fracturing the polity into factions defending parochial interest, rather than asking, and attempting to non-partisanly answer the question: What is best for the vast majority of American people - not simply this month, or this tax-year, but in the context a generation, and their children. The risk, is the image conjured by that of Pontius Pilate arguing and accusing his legion,in the life of Brian, while Brian, ostensibly held prisoner, escapes due to the recrimination. If not apt, perhaps it should nonetheless replenish diminishing reservoirs of amusement.

The Perfection (of sorts) of Quantitative Easing

The Brits are now offically obsessed with quantitative easing, first not comprehending it, then wryly examining it, finally yielding to a stoic skepticism about it's parochial impacts. There is a certain anodine perfection to the phrase, quantitative easing, unlike anything else in the entire rather utilitarian financial or economic lexicon. It sounds wonderful, functionally-useful tonic, though certainly not dangerous or hazardous to our well-being. Yet it remains sufficiently innocuous so as to escape scrutiny and with it, the associated public examination that prying eyes bear. It is entirely Madison Avenue rather than inflated Goebbels-like propaganda or overly-wooden Soviet or Pyongyang slogans.

Once one begins to unwrap the phrase Quantitative Easing, it continues to enigmatically distract and intrigue, like Russian a Matryoshka dolls, opening one, only to find that it yields an empty shell, in which sits another nested figurine. Now make no mistake, I am talking about the phrase and not the substance. For those who perservere and look further, say (to continue our analogy) inside the first egg, one immediately encounters a measure of good feeling in the word "easing". One ignores quantitative at first, mostly because of some dormant maths-phobia. But the "easing" is offering tangible relief from something-left-unspecified, but, nonetheless something that must have been unpleasant. So far so good. After a deep breath, one re-approaches the imposing "quantitative". Ahhh, that's not so bad. It does have lots of letters, and "Q-words" are daunting - particularly those with twelve or more letters that are virtually impossible to construct upon a Scrabble board. But ignoring the feeling that it could just as easily inflate to fourteen or sixteen letters without impacting the meaning, the word actually confers a feeling that the subjects of its intention are getting more of something, and it's not costing them anything, - a bargain rarely seen in today's world, and one that defuses suspicion from all but the most cynical.

The architects of the phrase have been careful to avoid any suffixes with -tion, or -sion, thereby extinguishing unnecessary alarm or in the extreme causing the reader become panic-stricken. Inflation, deflation, recession, reflation, depression, castration, malnutrition, cessation, or the dreaded hyperinflation are nowhere in sight, their fearful suffixes kept as far away as phonetically possible. And for good reason.

When the disparate two parts are put together - "Quantitative....e-e-e-a-a-s-s-i-n-g" - one can imagine a free neck-massage by a friend or the relief one feels when winding down a manual jack to finally lower one's car after having worked hard and gotten filthy changing a tire. It recalls visions of opening a nicely chilled Laurent-Perrier 1998 Vintage Brut and slowly letting enough gas out to avoid a Tour-de-France celebratory ejection. Indeed, the two words "more" and "relief", (altogether now: "more relief"), indeed who could question or reject such a positively magnanimous offer?

Interestingly, I had a go at thinking of some alternatives of equal disarming grace and feel-good. And after more than thirty-minutes, I could not even begin to think of anything remotely as elegant. Complete defeat. Which begs the question: From where did it's coining precisely arise??!? Though first employed in Japan, and conceptually, wholly the child of rather utilitarian central-bankers, I am quite certain the term could not have been born in a government ministry, any branch of government or for that matter a financial institution. It's seduction and perfection can only be the brainchild of far more skillfully cunning Persuaders. It is time for them to step forward and accept credit where [no pun intended] credit is due.

What is Your Real Name?

I believe there is a problem with the lexicon describing our current sad state of economic affairs. Terms like "Bailout", and "Rescue" are simply inadequate, making it sound as if the collective "we" have somehow been gypped – now forced to shell out for something collectively we’ve never obtained. Even respectable media organizations are guilty of fanning the proverbial flames of linguistic indignation and its implied recriminations through mindless repetitive use. All which reminds me of a July afternoon in early 1980s when I was commiserating with one of my best mates at the LSE who had just obtained his examination results from the papers he sat for the first-year of his law degree. Head in his hands (when he wasn't shaking it to and fro'), he was utterly dejected, for he had failed each and every one, possibly obtaining the lowest aggregate score ever in the long history of the Law department. "I can't believe it!...I can't fucking believe it..." he kept repeating.

Now this particular year was a grim one economically and socially speaking in the UK. Toxeth and Brixton riots were still fresh in peoples minds; Arthur Scargill was agitating on behalf of the miners; almost everyone possessed a Billy Bragg LP, "gentrification" and "buy-to-let" were hitherto unknown phrases in the prevailing English dictionary, and there were, to the best of my knowledge, no celebrity chefs or Michelin-starred establishments on said shores. But they were glory years as a student evidenced by 20-pound-a-week rents and 35p-per-pint at "The Three Tuns" not to mention parity exchange rates for my USDs. My friend, armed with a keen wit and intellect and the gift of blarney, his guitar, strong voice and a long repertoire, was a sought-after bard at Pubs, bars, and parties both inside and outside student circles. He partied longer, harder, and more frequently effortlessly whiling away the hours, days, weeks and months with nary-a-thought of consequence. Until that sullen July.

What use are friends if not honest? So I cleared my throat, and said "Matey...yes it's a pain in the arse. You'll need to spend the summer revising and re-sit the papers in Autumn. But you've little reason for regret. You’ve objectively had a smashing year! You played with some of the best, met interesting people, slept with more-than-a-few attractive women, and made friends you'll have for life. I mean...it's not as if you studied and failed....THAT would be disappointing! THAT would be a more worrying failure!! You made choices, and have something to show for it, even if "that" proves ephemeral...no one can take it away" He thought about what I’d just said, and didn't fight me. He knew I was right, and his broad smile returned. "Fancy a pint?"...


Returning to the present, pejorative talk of "bailouts" and undeserved “rescues” just misses the point. Focusing upon bent bankers, snake-oil securities, or inept analysts, which were but symptoms, is somewhat misplaced since hey are not the root causes, and, as such, these facile recriminations however satisfying and apt, trivialize the breadth of culpability, and near-universal benefit of The People over the past two decades. For what we are witnessing is the arrival of the bill, getting around, as it were, to coming to fathoming the scale of it AFTER a long long long collective night out. We’ve HAD the fun (and I use the "we" in the broadest and most encompassing of terms). GDP, employment, consumption, wages, all were substantially higher than they otherwise would have been. Everyone earned more and everyone had work who desired it. Enjoyable trips were taken, and attractive shades periwinkle now adorn what might otherwise have been walls and ceilings of cracked and peeling fomerly-white paint. Purchasing power was buoyed by a dollar that was stronger than it ought to have been had nations lived on a balanced and current basis. Taxes too were collectively lower further buoying PCE. Yes, everyone benefited, though as is always the case, some more than others. Securitizations of cars, homes, CC receivables, Refi with equity withdrawal and HELOCs all were but more rounds on the tab to be (or not, as the may prove to be) paid for in the future. Homes were built, enlarged and landscaped. Offices multiplied like spring mushrooms. Nations were wired in fiber. Previously incurable diseases, cured by overly-flush investors. Yet other entire nations emerged (if only temporarily). A Wii now sits in every house, and a recent version of Windows on every desktop. Does anyone still use a CRT?? Everyone has several handsets despite the amusing antiquated cumbersomeness of those with a vintage of more than a few years. This happened not just in a year (or two) but over a decade, perhaps two, or even three so the comparison of the cost must surely be kept in perspective by comparing it to a decade (or more) of GDP - not the annual figure - to get a true sense of perspective. Yes, our binge was mostly about consumption, though this itself drove massive capex and investment (mostly elsewhere), by those wrongly extrapolating that our thirst would need to be quenched similarly and persistently, longer into the future than has been manifested by events.

So I propose that we need a new, more accurate linguistic to reflect what this is called since. “Bailout”, package, rescue, are inadequate insofar as they don't describe more precisely in its historical context what it is we are witnessing, and fail to address the universal nature of the benefits and, I would add, the culpability that descends throughout the polity. It IS a pity that thoughts of prudence, resilience, and sustainability were demagogically dismissed when these thoughts would have provided a tether to reality. But we can, at least being anew by calling it what it IS, and as such, I’d be happier with merely “The Bill”, “L’addition” "Il Conto", or more succinctly, "The Tab" - which for the sake of the avoidance of doubt, should include the more historical detail than less. But let’s stop the narrowly-focused pejoratives or value-charged labels (correct as they may parochially be) and take a moment to reflect on our past collective tangible and ephemeral revelries. Once there, understanding everyone has a piece if of political or economic shit on their shoe, one may begin to let go of the anger and accept that socialization of The Tab is not wholly unjust, and that the time for anger and incredulity in opposition (i.e. all those numerous political and economic forks to settle up before) has long since passed.

It's Official: Mrs Madoff is Delusional

Bloomberg reported that Ruth Madoff's lawyers are purporting that the USD$45mm in muni bonds and USD$17mm in cash on depo at Wachovia that she possesses are "unrelated" to the Grand Ponzi. In other circumstances, a wife's claim to have independent assets might be credible, particularly depending upon how long she's been beneficial owner, how they were acquired, what she did in her professional life (if any), and so one should at least entertain the claim. In this instance, it just demonstrates she is utterly unrepentant and delusional. If her kids won't take her in, perhaps justice would have her spend her waning days in a Jewish Retirement home populated with Madoff investors and spouses of Madoff investors.