Wednesday, February 29, 2012

[Almost] Unvarnished Truth

My first radio was a black, sixties, Japanese made transistor brick of no import, given to me by my grandfather when I was no more than six years old. At eight, I received a modern ball-shaped plastic one whose precise, late 60's psychedelic colour now-escapes me, with two dials (for eyes) and a lucite window dial (the nose) for the frequency. Both were 9v powered and limited to AM or FM. At ten, I withdrew my accumulated savings and bought a cool-looking Sears ten band receiver (with all the shortwave spectrum) that called out to me from its display shelf every time I passed enroute to the hardware department with my father. I strung an "X" of wires from the corners of my room in a crude attempt to mimic a di-pole antenna. And with that, the world entered my bedroom through this box, and I was never the same.

Although day-time transmissions can be received on the higher frequencies, it was after dusk that the world seemed to truly come alive. "Lights-out" was never bedtime for me. It was only the beginning of my nightly travels. The BBC World Service was my first and daily fare, but "Tom Meier" of Radio Nederland, was my favorite, mostly for reasons of its strong signal relayed through their station in Bonaire, Netherlands Antilles. Radio Moscow punched through every band, and occupied what seemed to be the entire 41meter frequencies with their 200kw transmitter, holding up their end of the propaganda wars then raging. So strong and prevalent were they, they trampled and bled into more diminutively-powered neighboring stations that had the misfortune of living adjacent to them.  Radio Kiev, sharing facilities and transmitters, was almost indistinguishable in brashness (unless one wishes to learn Ukrainian over the airwaves). Radio Habana Cuba, Peking Radio, Radio Sofia, Vatican Radio, and half-hour english-language broadcasts from every capital in Europe never failed to intrigue and fascinate as I sought to determine their location in my World Atlas.

By eleven, I had reached the limitations of this box, whose low sensitivity and poor filters prevented me from visiting more exotic lands, and caused the unstable signal to drift and waver. I watched the newspaper classifieds daily for used army surplus gear receivers (or transceivers) made by military suppliers Hammarlund or Hallicrafters, bedazzled as I was by their dimensions, knobs and toggles and super-sensitive tuning wheels. I finally found one and my mother hesitantly drove the two hours to exchange my $35 for a grey metal behemoth filled with glowing-orange tubes, weighing at least twenty kilos, that looked as if it belonged on the bridge of a WWII aircraft carrier, or in the control-room of a nuclear power station.

I pestered my mother for a trip to the nearest Radio Shack to buy big spools of copper wire, and insulators. Upon returning home, I shimmied up the trees in the backyard and created a large array - a 75m by 75m di-pole, complete with a ground, and ran it to control box that I built which allowed me  to create single directional poles, as well as attenuate their lengths. Now, inserting it into the antenna receptacle  of the receiver,  I was able to visit almost every nation of the world from my bedroom. I would send them letters attesting to my reception on the east coast of America. In exchange, they would send a post card of verification (a "QSL") - typically with a lovely photo or image from their capital or something iconic from the country, in addition to a schedule, magazines, pennants, and tourist info to entice the potential traveller. And for the ones with ulterior political motives, they sent reams of propaganda (The Ba'ath Party Manifesto, History of Socialism in Albania, The Christian Word Afrikaans Life, and dozens of LPs from Springbok Radio that were intolerably boring but which looked great on my bookshelf). Some were after my soul, which I would gladly rent for a large pretty colour-postcard of Ecaudor's majestic snow-capped Mount Cotopaxi, whereas others were as eager for international contact from their remote studios in Kabul or Irian Jaya, as I was. For at eleven, the many politics were dwarfed by the novelty value of correspondence from around the world. I might go to bed with ABC Brisbane's morning show, dial down to the multitude of local small-power stations in rural Venezuela or Colombia, before drop in to Tashkent and Yerevan. I'd set my alarm to rise at 3am to catch the afternoon news on Radio New Zealand, before drifting back to sleep under the magical spell of Radio Cairo's non-stop show-casing of Umm Kulthum. I started receiving more mail than my parents. All my money was spent on postage, and I fretted when Mr Smiley (real name, no fooling!), our local postman was late for his route.

Within two years, lightning had not yet taken out my installation, and solid state technology was advancing rapidly. The tubes and heat generated by the Hallicrafters (not to mention the space it took up on my desk) were becoming a liability and I upgraded to a best-in-class Japanese-made Yaesu FRG-1-0-something-or-other. I initiated the formation of a regional club of similarly socially-awkward radio geeks, and began publishing a specialty shortwave radio publication, gathering several hundred of members from the area, organizing in-depth, surveys of frequencies, equipment reviews, and tips, as well as occasional get-togethers. This was quite an undertaking since it was all done before word-processing and home computers, requiring final drafts all typed on an IBM Executive (without an eraser-key relying wholly upon good typing and bottles of "Liquid Paper"), before the monthly two dozen pages were arranged, reduced and printed on my father's IBM Copier, to make a neat package. Dues just about covered postage, but it was enjoyable and engaging nonetheless.

As a result of my virtual travels, I matured and rapidly developed intellectually. Political sensitivities arose early as result of the many hours of listening. My bullshit detectors were raised to hypersensitive levels, as I mastered the art of distilling fact from fiction or opinion. The sheer hyperbole of Radio Tirana's or Radio Pyongyang's english service was comical, even to a twelve-year-old. It was possible to listen to both All India Radio and Radio Pakistan's versions of the Indo-Pakistani war, before being mediated by the BBC for the central case, or the Voice of Israel's version of the Yom Kippur war relative to that of Radio Moscow. It became obvious that, by comparison to the BBC World Service, The Voice of America was almost as tainted as Radio Moscow, fighting as they were for minds on the front line of the cold war. Though despite all these defects, the variety of programs from talk radio, classical music, interviews with artists and writers in their respective countries provided enlightenment unavailable in American television or radio media, let alone my middle-school in an anodyne middle-class suburb. World capitals, major cities their industries and life, were memorized as were world leaders, forms of government and regional and historical travails. Geography and history became my favorite subjects, though my writing skills were honed as well.

But it was the BBC (and to a lesser extent CBC and CBC Northern Service) which provided the daily stability - the continuous unexaggerated voice to navigate the extremes of bullshit, propaganda, and outright lies. They were the gold standard, and I became addicted, and remain so to this day. As I went to university and travelled abroad, I brought a SONY ICF-5100 and now, still possess an even a smaller version, that has allowed me have the BEEB with me, wherever and whenever, which was particularly important when travelling back to the USA where intelligent international news was and remains well-nigh impossible to find without a broadband connection.

Of course the internet has changed everything. Short-waves while still important to outlying areas and less-developed nations, are almost wholly irrelevant where connectivity is ubiquitous and live stream from all over the world are the norm. Yet, the BBC, more than any other news, information, or media organization has continued to make itself relevant in walking the line of [almost] unvarnished truth in an increasingly tainted world of slant and disinformation, airing diverse views and opinions, producing unfathomable quantities of fascinating content that would otherwise be nearly-impossible hear, as well as developing methods of audience participation on many contentious issues. Some may take exception and find fault in the BBC World Service and they are not perfect, but, to me, they are valued beyond measure. And to this end, I wish them and all associated, a very very happy happy 80th anniversary. You impacted my life, and changed MY world for the better, and I will always be extremely grateful.

Tuesday, February 28, 2012

Doubting Your Doubter or There Is Always A Bull Market Somewhere

One of the first "Old Saws" I learned in my market apprenticeship several decades ago was the adage: "There is always a bull market somewhere". Despite plummeting prices of Greek and Portuguese sovereign debt, the flat-lined bid-side for McMansions in Vegas, Phoenix and non-prime Fla, or real wages for unskilled labour in much of America, the advent of internet coupled with good web-design, and a Silly-Putty-like stretching of the truth, has enabled a definitive bull market in the power of self-invention and consequential rise of the self-proclaimed-though-untrained-expert. 

Nowhere is this more apparent than the sphere of macroeconomics and financial advice, where by sheer force of will, clever obfuscation and exaggeration, or the adoption of an impressive-sounding title, one can instantly step-up onto their virtual soapbox and turn plausible-sounding kernels of truth into dangerous demagoguery. Charlatans abound, creating the financial equivalent of doomsday cults built upon membrane-thin educations, and even finer and more dubious layers of "experience", though never for wont of hyperbole or adjectives.  Such suspicion and derision directed towards the aspirational self-invented commentator is NOT meant to idolize bona-fide, (i.e. more educated and certificated) economists. They too have been known to get it wrong, missing the obvious, as well as being guilty of putting conclusions before objective observation and research. Rather, it is meant to serve as a warning for those relying upon authoritative but tainted 7-Minute Ab equivalent of macro-like advice.  

So, you might ask, what's wrong with the power of self-invention and positive thinking (or in case of the doomsday web-ring, negative thinking)? Can you not be what you aspire to be by sheer power of a desire to be so?  Despite the hijacking of Nichiren-Shoshu, I think not. I do not see how one can place value (other than psychic confirmation of prior bias) on "research" or observations of those whose point of departure is an already-formed conclusion, and who then work backwards, witnessing each and every event through a unitary (often distorted) lens. Oh, they will  inevitably be "right" about some things. And their distillation too, will on occasion, hit close to the target, just as the broken clock will be right once in the day. But how can a perma-view maintaining a narrow static unitary macroeconomic view of the world have value in respect to markets whose relative values fluctuate largely and significantly? 

Bear Stearns lost a 2002 lawsuit involving former Fed Gov and their FX strategist Wayne Angell over advice to a rich and silly Canadian FX Spec named Count Henryk Kwiatowski. Bear's Angell gave advice to the Count who subsequently lost hundreds of millions punting FX. It's a funny docket and should be read in its entirety by everyone with a sense of humour. The Count was obviously sore after taking such a beating while following the advice of Mr Angell and wanted his money back. Bear tried to argue (unsuccessfully) that they, and Angell, were not responsible since he was in fact "an entertainer", and therefore whose advice shouldn't be relied upon. I'd long thought this an amusing, and somewhat accurate line of defense. However, they were found culpable since the court believed there are certain fiduciary responsibilities incumbent upon firms to their clients. As I said, I think their defense WAS apt, up to a point. Angell, despite his FRB pedigree WAS an entertainer. And I put to you, so too are the great majority of newly-minted self-invented  macro-strategist-commentators and members of the doomster-ring. They do NOT have your interests in mind. They have NO fiduciary responsibility, toward you or anyone. And though credentials guarantee neither accuracy, nor impartiality, such charlatans frequently offer little to none of consequence. They are cynically, like Glenn Beck, simple entertainers, parochially-self-interested, scraping a living by media appearances, online advertising, premium newsletters, referral payments for click-throughs, and in some instances, talking their, and their friends books and positions. And if one accuses this pot of calling the kettle black, let it be said here and now that this blog, too, is entertainment, albeit less-tainted and conflicted due to its entirely non-commercial nature. I also, hope it sets itself apart by occasionally eliciting a few chuckles, rather than unending tears. 

So be wary. And in the event you have doubts about doubting your favourite doubter, just consider that your "trusted source of economic analysis" for interpreting the latest US unemployment numbers, Spanish trade figures, or Euro-area CDS-spreads may have just been interviewed on Coast-to-Coast AM, sandwiched in between George Noori's talk with "Crypto-Hunter John Rhodes's Tales of Underground Reptilian Bases"; Greg Braden's exposition about the end of the Mayan 5,125 year cycle which is now meant to be impacting us all; Nostradamus' forecast of the Obama Presidency; and a report on ET Intrusions into America's most secret nuclear weapons sites. Next time, don't forget to have the popcorn ready before opening your RSS reader...  

Sunday, February 26, 2012

AIJ - I [Strangely] Never Knew Ye

When Bernie Came Out of The Closet, I was not the least bit surprised he was doing something illegal. But as I stated in what was the most cross-posted and commented account I've ever related through this blog, I was NOT expecting a full-frontal Ponzi. Cheating? Yes. Stealing from other market participants? Maybe. But complete total and utter fabrication over nearly twenty-years and forty-billion USDs?  Surely no one would have the chutzpah...would they?  My sensibilities were right, and these were lauded, but I was way off the actual mark and undeserving of anything other than acknowledgement of possessing some common sense.

I'd never heard of AIJ...until the day-before-yesterday. And one might well say "So What?!!?". They might even say it derisively (particularly if they've been dissed in these spaces). But after nearly twenty years in the Japanese equity markets, participating reasonably actively, and with reasonable success, I would with modesty say, that this would be unusual. Not because I myself am well known. I've paraded on no catwalks or investment beauty contests; eschewed analysts and research-salesman and  ordinary  brokers; retained as low-a-profile as humanly possible due the value I place upon privacy coupled with a curmudgeonly streak. But rather it would be unusual because I am OCD about the names that have graced my portfolio on both the long and short side, and I have always been fastidiously keen to know who I am trading both with, and against. And during these twenty years, I've fought (and won) guerilla battles against virtually everyone who was anyone in this market. And during this time I've never ever ever ever knowingly fought against AIJ, nor seen them in battle, not in the sky, or on the ground, or in the trenches.

This is unusual because the Japanese equity market is NOT a big market. It may have (or had in the past) bouts of large size capitalization, but this is not the same thing as being a big market. The majority of floats don't trade. Most brokerage houses from two decades ago do not exist anymore. Perhaps 9 of 10 stockbrokers over this period have NOT maintained the same vocation. You can get lost in the city, but out in the countryside, or in a smaller town, everyone knows everything metaphorically. Tracks are visible in one form or another. And the thing about being OCD about something like this is that one remembers everyone, and it would be most unusual for someone that large, to NEVER have left tracks, to never have been seen, directly or indirectly. And to be sizeable, and have unusual returns, returns that stick out, one has to be doing something different. And this too, would likely have been seen. And lauded. And, to raise more assets, marketed. Perhaps their alleged forte was asset allocation. Perhaps they told their clients they used futures and derivatives. Or, perhaps they, like Bernie, just fabricated it.

All I know, is I never "saw" them, ever. And I think this says something. Anyone else with similar OCD ever have a sighting of them in the markets?

Thursday, February 23, 2012

Now Speechless?

Despite parts of New Jersey objectively resembling the armpit of the world, others, defying popular belief, are gorgeous, charming and even bucolic. I speak with some authority on this having grown up and studied in this often-maligned state. My (late) mother, who was a veteran employee of a most liberal mind, working within the State's most liberal bureau, would undoubtedly have HATED Chris Christie almost as much as she uncharacteristically spewed venom at the other Christie - Christie Todd Whitman who trampled upon and  slimmed her bureau before ironically taking over the same at the national level for Bush-the-Lesser. I admired her (and still do) and we shared many sentiments, though she was not fond of my political pragmatism that often resulted in me traversing party lines and hacking away at some of her most cherished ideals. While memories have a notorious habit of softening their edgier bits over time, such conflicts, unlike the poisonous political debate of the present era, never resulted in hatred, obstructed conversation, or prevented the pouring of another  after-dinner glass of wine.

Despite my mothers opinion, I liked Christie Todd-Whitman both as Governor of NJ (irrespective of  her unpopular decisions including those that infuriated my mother) for her balanced leadership and the moral position she took against the Bush admin (and Dick Cheney in particular) by voting with her feet rather than towing the lame-ass GOP party line that "The Best Public Interest is NO Public Interest...". And as a pragmatist, I cannot help but admire hers, especially in respect of trying to bridge the divide between wing-nuts of both parties.

Yet, there are times when shibboleths NEED to be outed and contrary opinions voiced boldly...when bureaucratic processes take on a life of their own in stark contrast to prevailing realities, and perhaps even their original mission, or that foreseen by original lawmakers and beneficiaries alike. At such junctures, larger-than-life provocateurs speaking the increasingly obvious (but too-often unsaid) - however painful - is not only entertaining to behold, but also both useful and necessary, for The People (even if they don't know it....yet). I have, to date, viewed Chris Christie in this way, and will admit to admiring his willingness to jump in the pool and make a large splash by saying things that need to be said, and doing things that more diminutive men (or women) just cannot do. He is unashamedly unashamed of his [frequent] insensitivity, political incorrectness, his gaffes, and for that matter his girth, all which is as it should be (except speaking with mal-intent about his waistline). It has been enojyable and refreshing.

But such men come with baggage. Speaking your mind, and shooting from one's proverbial hip, runs risks - for those far-from-perfect, for better or for worse. Sometimes such honest and unscripted quips are more apt than anything Safire or Frum could conjure working late into the night with a well-worn thesaurus. But others - those that go awry - perchance give insight into the real person. At one extreme, recall Jimmy Carter's infamous Playboy interview. At the other end are Governor Christie's, and this should be concerning to all concerned - even those who otherwise *like* him, such as myself. And what such a peek-under-the-hood reveals is the presence of some of the least-desirable traits in a leader: an ignorant intolerant bully.

Whether you-the-reader or Mr Christie agrees or disagrees with WB regarding the present level of marginal tax rates, or whether higher rates should be *optional*, is wholly irrelevant. As a citizen, WB has every to right the the soapbox. In fact, in issues of wealth that effect the uber-rich and business, he perhaps deserves even a larger pulpit with a more ornate lecturn. The political process with all its warts is precisely about airing contrary views, and letting them be kicked around, and judged by the polity. Some have direct access by position or money. Some have more direct access than they should. Others have indirect access, but all are entitled, and should be encouraged to express their views without being told to "Shut-Up" by a large, loud-mouthed, bully, just because its contrary to his (or his party's) position. By extension, if you, as a citizen in a democracy think the public interest would be improved by a road expansion, rather than bring it to the attention of other citizens, in "Mr Christie's world you should just "Shut The Fuck Up And Build It Yourself". If believe that an existing law insufficiently and unsustainably protects fish-stocks, I suppose in Mr Christie's world you should just "Shut The Fuck Up and east Spam" or alternatively going down the action-path, Mr Christie might encourage you to take matters in your own hands and become a Vigilante-Of-The-Sea.  If capital-expenditure on sewage treatment is insufficient to purify drinking water or prevent noxious gases from permeating the neighborhood, by extension, I presume Mr Christie would suggest you "Shut The Fuck Up, buy bottled water and shut your friggin' windows". Politics as it should be?, one might ask?

Perhaps one cannot know what Mr Christie really meant. Perhaps he was just misunderstood. But I have the suspicion that this super-sized New Jersey Djinn, now out of the bottle, is displaying his true persona. And it is NOT a pretty sight...unless of course you're a brown-shirt.

Tuesday, February 21, 2012

The Markets 2012 H2 European Pandemonium Explained

Like carbon-dating, one's film references define one's epoch and frames of reference. With the exception of The Life of Brian, and Les Visiteurs my children look at me quizzically should I perchance mention Animal House, Stripes, or Caddyshack versus their Hangover, American Pie, or Harold & Kumar.

So my description of the markets' H2 European pandemonium (please watch!!) as seen through the eyes of Harold Ramis was completely lost upon them...

Monday, February 06, 2012

It's [Still] a Shame There's No More Shame

Ask a German about his skiing ability, he might unassumingly suggest that he "can get down the mountain alight". Ask an American, and he is likely say he is an expert, and boast about the ease of which he conquers near-vertically-faced triple-black diamonds with names like "Widow-Maker", "Knee Shredder"  or "Sonny Bono's Lament"  Ask a Japanese Fund manager who has had a good year, and he will self-effacingly attribute it to a conspiracy of luck.  Ask an American, and he will be unashamedly attribute it to his superior intelligence and skill. Ask the same Japanese Fund manager why he did poorly, and he will culpably volunteer that he didn't work hard enough, whereas  his American counterpart - someone like Fairholme's Bruce Berkowitz - will (or did) hold to his Martingale-like near-death that it was the market that was wrong - NOT him.  

Confidence is a wonderful thing (at times). It is the stuff that provided the inspiration to deposit men on the moon, cure previously incurable diseases, allow Shackleton to set out for South Georgia Island in a duct-taped dinghy, and help our forefathers make Hitler and his cohorts Shut The Fuck Up, permanently.  But when it goes awry, it also leads to such things as the invasion of Iraq, New Coke, The Rainbow Warrior debacle, Ishtar,  a $50bn++ markcap for JDS Uniphase, and an errant belief that one might be above the law.  

Confidence from within often begets confidence from others. This is frequently a trait of strong leadership, inspiring others to overcome obstacles hitherto insurmountable. But this confidence from others in oneself, should not be taken for granted, for it is fickle and easily (and quickly) squandered. Indeed it takes little more than the discovery of but a few lies, being caught with one's trousers around one's ankles cigar-in-hand, or failure to admit that you're culpable when caught on tape to alter one's reliability factor in the eyes of the public from the green zone of "Abraham Lincoln" to the red zone of "Radio Pyongyang". Such miscalculations can spell the near instant death of credibility, or worse. How one behaves in the face of adversity is often, as Sidney Poitier put it, the measure of a man.   

So it curious to see David Einhorn's reactions to his own misfortune. In somewhat stereotypically-American fashion, he appears to have launched himself down that triple-black diamond run called "Denial", clinging to the utmost of truth-stretching and verbal contortions to avoid the rocks of culpability, to such an extent that observers are left wondering whether he will make it down the proverbial piste at all. It is precisely this attitude, this lack of humility, or sense of shame that one's truth may be far from more widely accepted perceptions of truth, that has led to extreme polarization of American politics: a result of digging in one's heels into an often-indefensible position by lack of willingness to concede that truth and reality lay somewhere in between the parochially beneficial ideal, and that sought by the opposition - or in Mr Einhorn's case, the law. The result: a caricature of self-righteousness and a hollowing out of trust which for a public political figure, or, in this case, a large investor can result in a less-than-intentional, though no less self-inflicted death. 

Mea culpa.

Friday, February 03, 2012

Battle of the Alamo - The Sequel

Perhaps Kyle Bass is right. Perhaps we are all buggered and everything is FUBAR. Perhaps what we really need is not VIX protection, CDS and variance swaps, but guns and ammo and a defensible place to hide with arable land and reliable water. Oh and some luck, too. And perhaps one NEEDS Gold, preferably lots of it, either to barter with, or to rather recursively pay one's private army to protect one's errrr ummm Gold, oh and presumably one's spouse too. Mr Bass, being in Texas, seems in the right place to achieve all these things, though one could go further and imagine all of the great unwashed engaging Mr Bass's private army in what might be thought of as The Alamo, Part II. And while we can sit over another beer and conjure all manner of future frightening tail probabilities, we needn't try too hard as we can just touch the popcorn button on the microwave, press ">PLAY>" on the DVD remote, and watch Mad Max 1,2, or 3 or the The Postman (yuck), or any manner of Disturbing Dystopian Visions (DDV) about what the future might resemble.    

At the moment, however, I have far less conviction than Mr Bass. Perhaps my bank will spontaneously combust, and my neighbors will loot my humble abode and my wine cellar, (or worse), and I will have been rather unprepared. What I DO know at present are two things: one is that my in-box is increasingly filled with Gold related rubbish and scams replacing of all variety, replacing the Nigerian 501 scams of yesterday, which is in itself a telltale of errrrr welll something. And second, that while everyone is paying thru the nose for left-tail protection, many investors are vastly underweight as are risk-parity portfolios, and as vols drop, they become MORE underweight. So if I were to offer any advice, it would be thus: wait until those guns, ammo and jerry-cans go on-sale before backing up the truck.