Wednesday, January 25, 2012

Liar Liar Pants on Fire

Oh please.  Surely, David Einhorn cannot have actually used THAT as his defense. And the FSA, like The Revenue in the Vodafone and Goldman Tax cases, and who remains in apparent awe of corporate celebrity, has seemingly bought at least some of it, judging by their willingness to accept his representations at face value.  By comparison with former GLG Chief Spec Philippe Jabre's torpedoing of Sumitomo Bank shares with thermonuclear ordnance in front of their imminent CB issue while still on the bat-phone to GS's "Philby", Einhorn's corporal caning by the FSA was a step in the right direction.  However, despite Mr Einhorn's attempt to nuance his rather implausible defense, I really see little difference in spirit between IMCL's Waksman, Martha Stewart, Raj-Raj or other examples of law-breaking financial malfeasance.

The thing is, Mr Einhorn paints himself to be, well, errrr ummm like David, representing Truth, Honesty, Goodwill Towards Men (OK maybe not the latter) and the Light of Virtue versus the evil dishonest greedy Goliath-like titans of Allied, MBIA and the gorgon's of Lehman. So today's ruling by the FSA, even if not what it should have been since few of his peers or practitioners would doubt that he knows very well what constitutes material non-public information, knew this approach was material non-public information, and yet brazenly acted upon it for parochial advantage, thereby representing yet one more "another one bites the dust" moment for what previously passed for integrity. He has been found out to be a cheat, playing his preferred game with marked cards.

And so it is a sad day for anti-cheats.  And I too am a bit forlorn because Mr Einhorn has been right  about a number of the well-researched cases he's made, and seemed somehow different to others-who-shall-not-be-named. ***Sigh*** But now, investors, stringers, financial journalists and even his acolytes, will need to scrutinize him, and his public proclamations  carefully - far more carefully than before. Because cheats are often liars, and the line between a cheat and a liar, and a sociopath who will talk his own book and harvest from his neighbors' Victory Gardens for parochial advantage, irrespective of collateral damage, is very thin indeed.

Kudos for his lawyers (they must have earned their fees)...shame (again) on the FSA.

Monday, January 23, 2012

Final Result: ZH Mob-417, PK-4

I will sheepishly admit that I occasionally read the odd ZeroHedge post. Sometimes, it is because they provide some useful information (such as a reprint of a Richar Koo research article). More often it is out of some morbid fascination with demagoguery and how it palpably impacts people's belief structures. 

Today, the post  entitled United Welfare States of America 2011 - Nearly Half Population Received Some Form of Government Benefit caught my attention. Not because I thought it overstated the case, but because I reckon it UNDERSTATED the case. Indeed, the number is closer to 100%. The post was highlighting entitlement recipients, and their rise as a apercet of the population and a percent of GDP. Indeed, since the beginning of the crisis from an average of 12% of GDP for the preceding three decades to a conspiratorial 15% of GDP post crisis.   
The numbers reveal a reasonably counter-cyclical pattern of rising during recessions and falling (even if slightly) during recoveries.  

I would argue for fairness, it should be 100%, as they have conveniently forgotten or ignored those receiving other benefits or subsidies. For if taxpayers are incensed, they should be as outraged, not by the extra five percent thrown onto the benefit rolls during hard times, but by the other 50% of the people whose non-welfare benefits are received 100% of the time, such as those using mortgage interest deductions, and all manner of tax-reducing loop-holes, grants, and other deduction to reduce their level of tax, and therefore keep the federal income statement deep in the red. Indeed, there is likley no one in the country who did not receive some benefit - in kind, or service - be it a road, defense of the nation, hospital or educational grant, or beneficiary of technological or medical research financed in part or whole by the government.  But this is subject matter for another post.  

More interestingly, it appeared that Dr Paul Krugman made a surprise appearance in the comments section, pointing out, that, such countercyclical sensitivity was not only to be be expected (as in the past) but needed, and debating with other commenters. It could have been a ruse or hoax, but it actually appeared veritable, with the correct language and timbre of Dr PK himself (not that this would be too difficult to fake).  I would like to say that Dr Paul Krugman emerged unscathed today from this Zero-Hedge-sponsored rumble with the likes of YogiBear, AlienIQ, JPMHater001, SHEEPFUKKER, Satan2Liberals, Blindman, and HarBanger and a horde of apparently brown-shirted zealots, but it was akin to what one might imagine of Dr Martin Luther King trying to chat to the hooded-chapter of a KKK at a midnight cross-burning.  And he did not fare well. While the PK was calm and measured, the crowd, in not unexpected ZH fashion tarred and feathered him, pissed downwind upon from behind the bushes, before the lynch-mob hoisted him up by a rope into the tree. 

The final tally was a disappointment for those interested in informed debate. I felt sorry for Dr Krugman - if it WAS PK - sorry that he felt it necessary to try and debate folks that have no interest in discussion, little grasp of the facts, and that his calm discourse only inflamed seeming hatred and rage already burning our of control. I wonder aloud with some dread whether THIS is the precursor of what awaits America, the mob of Atwood & Roth's dread. 

Friday, January 20, 2012

So Long (and thanks for the all the....)

The European Commission
rue Archim├Ęde, 73
1000 Bruxelles

18th January, 2012

Dear Hedge Funds, Financial Speculators and Bloggers,

Euro-Area members wish to thank you for your support through these difficult times. 

As you know, thanks chiefly to munificently-expansive fiscal and monetary policies, in other regions (Japanese ZIRP, American near-ZIRP and their respective persistent fiscal yawns), compounded by the Chinese desire for reserve diversification and insuring an attractive quasi-pegged exchange rate, we Europeans have been living with a significantly overvalued currency for the better part of the past decade. This has undoubtedly been difficult for much of both labour and export related industries across the community (though not nearly as difficult as the eye-popping pain suffered by Swiss, Norwegian and Swedish non-commodity exporters. Your concerted actions against the Euro, in both words and positioning, have been unbelievably helpful in relieving some of the pressure from over-valuation, and for this we thank you.  

Currency strength has not been without its benefits. We have been able to fill our shopping trollies with all manner of consumer goods, at prices and in quantities heretofore undreamt. It has allowed our enterprises to acquire assets, plant and equipment abroad at attractive prices that will serve our business' future production and distribution needs. Finally, as our Calvinist forefathers philosophized "What doesn't kill you makes you stronger", and trying to export out of the EU at  USD1.50 indeed came very close to killing us (and sadly remains challenging for Urs, Lars and Sven respectively). But it did encourage meaningful leaps in productivity and efficiency gains in manufacturing processes and services. And thanks to high energy taxes, our sensitivity to energy prices is greatly reduced thanks to our alternative energy investments and higher efficiency vehicle fleets running on diesel.  While the latter leaves us in a better position than had our industrial and energy policies been directed by rent-seeking interests and industries (as in the Anglo Saxon Countries), the time had clearly come to unshackle ourselves, and pursue more aggressive growth policies by every means possible.   

We also wish to thank you for highlighting the flaws in our financial framework left unfinished from our first go at Maastricht. These were bound to be fleshed out at some point, and the Commissioners wish to express their gratitude for taking such a focused interest in our future monetary affairs. Your attention  has been most welcome by helping us achieve what we, ourselves, have been unable to do: encourage the ECB to broaden its mandate and to move the exchange value of our common currency back towards more competitive levels - one that will help boost our growth and employment and find new markets which can afford our substantial selection of food, fine wines, well-made manufactured goods and first-rate services, in addition to making the Euro-Area a destination-of-choice for newly-minted tourists the world-over.

Indeed, far from being a nuisance as some now-departed civil servants might have let slip in haste, your aggressive intervention in our affairs has been of great assistance in helping us focus upon what needs to be done. Of course amongst the cacophony, there have been wing-nuts and the self-serving with much contradictory advice (urging us at once to borrow less, devalue, spend less, spend more, borrow more etc.). Confusing as this has been, it has helped us focus upon our issues and policy weaknesses, and what is important to us, helping us, finally, embark upon changes sorely needed such as those related to pension reform, fiscal adjustment, greater financial integration and significant labour market reform. In fact your attentions and the fear of the abyss where you've been herding us, has helped leaders rally a political support  necessary to overcome parochial political opposition that has been the been a chief obstacle to change. Indeed, thanks to you, the EU will achieve first-mover status in many such reforms, which interestingly, neither Japan, nor the the American Union have been able to make either in reducing primary deficits or reining in future liabilities. Finally, your valuable input has kept us consistent with our new motto: "Doing the right thing for YOU....after exhausting all other possibilities!".    

We recognize that for many of you, labels like "altruist",  "communitarian", or even "do-gooder" are shunned lest they sully an otherwise pristine reputation for selfishness and greed. But in this case, there is no denying that in applying your version of "tough love", you have helped the people of Europe, and for this we wish to express our gratitude. 

Yours truly,

The European Commissioners

P.S. - While we are thankful, and hopeful of your continued support in dissing the EU weakening the Euro further to levels more sympathetic with PPP, please do not think we will relent in trying our best to prevent you from gaming politically hard-fought solutions to our present difficulties. 

P.S.S. - If you are a hedge fund manager buying Greek Debt and making a fuss to be paid 100% of face, please note irrespective of Schengen, we reserve the right to detain and cavity-search anyone suspected of trafficking. And even if you choose NEVER to come here, you never know when your London->GVA flight might unexpectedly be diverted to Frankfurt. Just saying....  

Sunday, January 15, 2012

Pleasure Principles

“What will fill the vacuum formerly occupied by religion?”

The most thoughtful, as well as the most memorable wedding gift my spouse and I received in 1993, the year of my first (and only) marriage, was neither the most expensive, nor an object. Rather it was a “Brunch” - that uniquely American invention deplored by Anthony Bourdain in Kitchen Confidential as a reliable though odious route for restaurants to recycle anything and everything left over in their refrigerator and pantry. I learned other useful pointers from Boudrain, (who since parlayed that success into a TV Celebrity status that sufficiently provides for his habits), such as never eat restaurant fish on a Monday, and if you're a foodie and looking for best execution, avoid Fri and Sat evenings like the plague., etc. But I digress. This 'Brunch' was a simple but special affair in that it included the company of [the late] acclaimed author, Chaim Potok, and his lovely wife Adena.

Who is Chaim Potok, you might ask? I'd read several of his novels, independently, following on the heels of those  by Nobelists Saul Bellow and Isaac Bashevis Singer, though before I'd been introduced to works of Philip Roth. All their voices rang true. All chewed upon the clash of the traditional with the modern. All seemingly lamented the loss(es) of what was, even when (reluctantly) accepting the victory of modernity's “progress”. And they all struck some chord within me, each ruminating in their own perspectives and style upon issues still-raw-and-contentious (in my own family), growing up as I did on the generational cusp, and witnessing my parents wrestling with theirs over the same.

I think Potok stands out as his breadth of thought was more encompassing. He was first a Rabbi, then a writer, also a theological academic and philosopher (PhD Penn, Philosophy) as well as a graphic artist, and playwrite, though the arts were his first love and a source of conflict with his own (traditional) parents. His  timeline reflected this same struggle: from indoctrination and orthodox study sliding towards the increasingly secular graphical artist and thinker. He may not have been the superior novelist of the genre shared by the four eminent writers, but he probably was the most eclectic and adept thinker. His experiences were varied: an army Chaplain, a rabbi, a teacher, an editor, writer, an artist). Bellow's and Roth's characters and dialogue might have been more realistic, Potok stretched the boundaries of thought further than the others. Like the great Jewish minds (unlike those of current-day Likud), Potok ruminated thoroughly and saw things not categorically, but nuanced – context within context within context.

Beyond these spartan observations, there is little I can add. We drank coffee, and chatted about our experiences, and about faith. I made no effort to hide my lack thereof, though I couched it in the agnosticism of the empiricist versus certitude of the militant aetheist, which was more useful for friendly discussion than Dawkin's axe-wielding approach. More coffee and cakes, and the conversation drifted from the first to third person, and modernity's impacts upon religion. I noted that religion was useful historically as a means control. Fear of God, his wrath (for the Jews) or Hell (for Christians) were powerful tools. And whether a tool for purposes of control, or more recently as panaceas for the spirit, there is in modernity, I suggested, a gaping hole in the psyche and in one's preoccupation that was previously occupied by religion. “What”, I continued, did he “think might or will replace it???!!?”

He pulled on his whiskers for a long time, looked upwards towards the heavens, and then stared deep into the depths of his half-filled cup before meeting my eyes and saying more categorically than he had about anything to that moment ......”Hedonism”. “Hedonism will fill the void...”, and for the first time, I saw resignation on the face of this otherwise thoughtful optimist. It is the same resignation floor traders must have felt as transactions went "upstairs", or that which strikes value-oriented reversion traders horse-whipped by seemingly less-than-explicable momentum, or an allocator feels when assessing the new normal of what used to be the risk-free rate. It is a distinct feeling that the sense one previously made of the world has been palpably altered, leaving it a less-hospitable place as a result.

Conversation rebounded from the after-effects of this pronouncement, for it was clear he knew that however depressing the prognostication, there was nothing he could do. He could analyse this wave, indeed, he could explain it. But he knew it will be as it inevitably will be. Efforts to change the direction of such a tide would be futile. I understood he was not whining. Nor was he living in the past. As was the case with his literature, he sought first and foremost to understand what was going on around him, and make sense of it, rather than tell us how it should be.

In 2012, it seems ironic, that mired in debt with unemployment rife, that our Grasshopper-like spirits' gaze is, as Potok forecast nearly two decades ago, firmly fixed (and growing) upon hedonism. Not spiritualism or New Age-ism, but full, unbridled "Whatever!" I see it manifested in demagogues pandering "7-Minute Abs" solutions, to problems of marathon proportions. I see it in my eldest's seeming addiction to fatuous social networking, or under the spell of inane traditional media at the cost of reading or doing. I see it in the increasingly stylized beach or ski holidays. I see it in the untempered expectations still being conjured and polished by companies and their Madison Ave agents. I see it in the politicians' promises to restore what Americans' believe is owed to them.   

But is this not natural? Should hedonism be a pejorative?  To the extent it plays a part in fueling expectations and pursuit of a lifestyle for the individual that is unsustainable for the group, then yes. To the extent that it prevents sober or pragmatic evaluation  of what needs or might  be done to pursue even weak-form sustainability, then yes. To the extent it discounts the longer run policy pursuits, for the short-run, then indeed, yes. To the extent it encourages anti-social behaviour to finance parochial hedonism, then yes.  To the extent it fuels near-unprecendented greed at the expense charity yielding a coarser way of life for the benefit of parochial pleasure and the privilege of the yet unborn, then yes, it is a pejorative, and we should lament its expansion in filling the vacuum.

Unlike the Apocalyptors and Tin-Foil Hat Brigade, I do not believe 2012 will be the year of the Return of Barter or Oblivion For Mankind, and while it may even surprise to the upside given the hugely bearish expectations of the market and anti-European shills, I do think it will be an interesting year for observing what happens when hedonistic rubber meets the austere reality of the road ahead of us [all].

Wednesday, January 11, 2012

A Farewell DingDong

Hostess Brands - 
national baker. 

Some knew
you as
Continental Baking 
Interstate Bakeries.

Others will 
remember your 
WonderBread (Indeed!!)
(the one upon which Madison Ave. 
lusciously poured liquid butter);

Though it is the child within me who
most fondly recalls your 
or the most awesome-of-all
which my mom never forget 
to put in my lunchbox.

(NB: Hostess Cakes were NEVER as good as Tasty Baking's various offerings, though DingDongs (RingDings) came close...)

(NBB: Sno-Balls were just plain alien: pink rubbery glutinous coconut-studded shell around a VW-Beetle-shaped cake filling with bland white creme inside. They were generally avoided, and traded at big discounts in the secondary school lunch-room market )

(NBBB: RingDings and DingDongs were best when frozen and eaten straight out of the freezer; RingDings were to be avoided in summer lunch boxes at all costs as their chocolate shells were prone to melting, making it impossible to remove the aluminium-foil wrapper)

Monday, January 02, 2012

No Virginia, Tin-Foil Hats Do Not Help....

Half-truths and paranoia can be downright dangerous. Indeed, the few remaining at MIT who possess a sense of humour demonstrate that, far from protecting their wearers against invasions of the mind by Extra-Terrestrials Dr. Evil Abba The Fed The Government, the shiny material may actually aid their invasion by amplifying radio signals. Ever insightful, they recursively hypothesize that the Tin-Foil Hat myth may have actually been promulgated by the evil government itself in order to encourage adherents and thus more easily gain entry.