Farewell then Bennigans...

Farewell then
Bennigans -
Bringer of
faux-Irish
to American
Suburbia,

Amazingly,
you wrung
huge margins
from the cheese-slathered skin
of
the humble
potato.

You were
the first
of your kind
to arrive,
and now,
the first
to depart.

Your green-roofed
carcasses
will litter
dead retail
centers for
years to
come.

Oh yeah, and
my first flame
was once
a server
for you...
and even way back then,
thought (rather articulately)
that "you
sucked!".

(With usual apologies to EJ Thribb and Private Eye)

It's the Silly Season (in DC)

Last night, I had the misfortune of hearing an interview with Senators' Dodd & Shelby discussing their bipartisan housing bill (which passed committee 17-2, or so). This was just after listening to Speaker Pelosi rant about the dire need to release oil from the SPR in order to send prices lower. Little makes me more despondent than watching the knaves pandering.

First let me address Dodd's inanities, which were delivered in a tone of voice that was positively pleading, usually reserved for a mother with a malnourished child. "THE SKY IS FALLING ALL AROUND US AND NOT JUST IN THE US BUT WORLDWIDE!!! THE CASE-SCHILLER INDEX IS LIKELY TO FALL ANOTHER 30%", he told PBS's reporter, " AND WE SIMPLY CANNOT ALLOW THIS TO HAPPEN..." Ahem, pardon me, Mr Dodd, but ummm where the hell were you when when housing prices were vaulting upwards and the Fed was doing its best mimic of Japan's ZIRP? You were dissing Issing, and all others who suggested that skyrocketing asset prices demanded attention. Where were you when financial institution balance sheets and credit growth were ballooning?? Which fellow Senators were you whipping into shape when tax cuts were the rage, unrequited as they were by fiscal restraint??!? Perhaps if you'd not let housing prices appreciate so, and encourage your banking friends to willy-nilly finance the HELOCs and equity-withdrawal refi's in order to mindlessly consumer beyond their means, we wouldn't be here now. Hypocrite!

Gollywag #2 was listening to Madame Pelosi waffle on about the benefits of slamming the market with oil from the SPR. Mrs Pelosi may be a fine leader, and consensus-builder, and she may have a good heart, in sort of the same way that Gore Vidal is a wonderful writer and perhaps the top literary critic. But neither he, nor she should trespass into the realm of economics. For while such a notion of spending our savings would be consistent with American public and private economic policy over the past two decades - particularly the last one, it is, I must say daft in the extreme, particularly when the primary reason cited was: "Because the American people have already paid for it...". Ma'am, if I might point out, that logic is the same logic that would have us spend all our savings, because we've already saved. It is utter nonsense. The SPR, like one's savings, have been built for a rainy day. Not a drizzle. Not a light shower. But a full-on honking severe turbo-tempest. Next time, we who would dearly like to see the republicans dethroned would kindly ask that you please think before speak.

The SPR issue really gets my goat. For LOWER oil prices (without an attendant energy policy) only encourages MORE of the wastefulness that has gotten into this dilemma in the first instance. I would be amenable to a temporary draw on the SPR in exchange for say large energy taxes, renewable incentives, mandatory conservation initiatives (beginning with government itself), etc. But it is terribly painful to listen to all manner of demagogue (whether its about the SPR, drilling the ANR or offshore, or imploring the Saudi's to pump more) prattle on about supply, when - as Amory Lovins of the Rocky Moutnain Institute rights points out, by far the highest returns on energy investment are NOT on the supply side, but on the demand side in the form of conservation and extracting higher efficiencies.

Mechel: Steal or Steel?

Poor Igor Zyuzin. What could he possibly have done to earn the wrath of Prime Minister Putin? Stealing? Price Fixing? Insufficient baksheesh? Slept with his girlfriend? Doesn't really matter. The stock has been shattered, and along with it, the confidence that Mechel is "safe" and squarely within Putin's circle of friends (Oh how the god of mixed metaphors will crucify me for that!).

Hope you weren't long...

Shock - Horror!! - Trading Firm Manipulated Prices!

An SEC press release detailed with shock, horror (and awe) the luciferian machinations and manipulations of Optiver BV in the US energy markets. OK, admittedly my language is overblown, and no one is, or should be surprised by such revelations. At least anyone whose seen the smartest guys in the room, or witness the torpedoing of Amaranth.

But perhaps the most amusing thing about such a firm (compared in the same breath with Susquenhanna, and DE Shaw) who ironically vocally boasts about recruiting A-1 mathematicians from the best schools who also are "the smartest guys in the room", is that (according to the SEC) these geniuses left a slime trail of e-mails detailing their bold exploits in vivid colourful splendidiferous language, thus violating a cardinal rule of market-based "crime": vaporizing your own plausible deniability. For there are lots of reasons why participants do seemingly sub-optimal and uneconomic types of trades, including ignorance and stupidity. But when you hang yourself by bragging about it in emails, one's length of rope with the authorities demonstrably shortens.

Clearly business and engineering schools in America (and apparently elsewhere) are failing their students by NOT properly educating them in the subtleties of contrapreneurship. It seemingly happens over and over again - across the spectrum of firms, spanning industries. The groundrules are simple: Cover your tracks. Always have a Plan B. Retain multiple outlets to describe the appropriate plausible deniability. Certainly do not brag about it to friends or associates. Know when to fold, when to walk away, and when to run. Don't count your money, when your sitting at the table. And Never, NEVER refer to any such activities in any written electronic communication except in the most obscure of coded language indecipherable to prosecuting authorities.

Bad Chapter 11 Poetry

So Farewell
Then
SemGroup,
LP.

Latest
(and largest)
non-consumer
casualty
of energy
price
vol.

You were
stealthily
in the Midstream
before being
ummm
errr
"victimized"?!?!

Dr Hyperbole
tells us:
"Hedging should
reduce
risk"
No?

Shucks! (*)
you must've
missed the
fine print detailing
the perils of
"variation margin".

(*) - red state vernacular for "FUBAR"
With apologies to Private Eye & EJ Thribb (aged 8-1/2)

Effingly Absurd Efforts

If I'd told you that Jeff Skilling or John Rigas were raising capital for a new investment fund or business venture, laughter would be the more polite of your reactions, though effing derision might be appropos. Of course, one is free to give it the old college try as the now overly-effervesced Sowood, Peloton and Amaranth PMs have. But legal imbroglios are different, and so it is with raised eyebrows that I bring your attention to former MAC associate Takashi Kosaka's effingly bold Singapore-domiciled activist-value fund managed by eponymous Effissimio Capital Management.

He's bought some effingly big stakes (see above) in the "time-honoured" (JCH code for shitty and shrinking) Gakken CO Ltd.#9470, also-ran Nissan-assembler Nissan Shatai #7222, "hidden-asset" landlord Tachihi Enterprise #8821 (and their intermediate parent, New Tachikawa #5996, Mitsui M&S Plant Engineer, MESCO, #1737, and PC distributer Daiwabo #9912. It is my contention that in time, they will become portfolio effigies - tributes to an investment strategy with lottery-like odds.

Why? CAll me conventional, but in contrast to other activists who often at least make an attempt to target reasonably "good" assets and companies whose share-prices have been under-performing, Mr Kosaka's effingly bold accumulations have the following in common: the enterprises are uniformly shitty and largely shrinking; they are all, excepting Gakken, wholly-owned or controlled subsidiaries of other listed companies, and all the positions are wholly and completely unmarketable in the context of the market. Transgressing any one of the foregoing might be forgiven for a three-cent nickel, but violating all three together should be a cause of grave concern to investors in the effingly absurd hedge fund. And all this is before pointing out the frightening lack of diversification to which investors are exposed for the luxury of one-and-twenty.

A very astute friend and former manager of a large global hedge fund looked at me puzzle-ingly when once, long ago, I pointed to the "cheap" assets in Japan such as those precisely owned by Effissimo. For he had cut his teeth as a well-connected opportunist in the French market and learned that such things are mostly cheap for a reason (tax, control, financial flexibility afforded the parent) and that there is little gain to be had from being a minority holder no matter how cheap. "IF it is cheap, AND otherwise 'controlled', you must own 50.1% or nothing at all..." And this is in France where at least minority investors are afforded some protection against the common Japan practice of "The Take-Under", where consolidated subsidiaries are subsumed at often-unfavourable prices back into the parent.

This was of course in the days before the agent-principal hedge fund conflicts made their pursuit an efficacious and attractive undertaking - at least for the IM. While I have been less-than effusive of Steel Partners investment manager enrichment schemes masquerading as a hedge fund (which interestingly has NOT been seen recently adding a to a single position in any MoF filings leading one to believe that my prognostications about an eventual death-spiral may be in the process of being requited), Steel's approach appears positively scientific by comparison to Effissimo's efforts (though I'll hold my tongue on their relative honourability).

But what is it in the pursuit of large illiquid holdings that seemingly prevents the ability to resist the temptation to manipulate stock prices into meaningful valuation periods? Do they think no one will notice? Perhaps like MAC (and the late Leona Helmsley), rules are for "little people"? As an observer, I admit that I must be careful not to fall prey to the behavioural flaw of seeing non-existent patterns in the erstwhile random meanderings of stock-prices. But the coincidence of quarterly ramps (as depicted in New Tachikawa Aircraft - seen adjacently) would stretch the imagination of even the strongest apologists for the primacy of an unfettered market determining price. For the former cohort of a felon, Singapore may be (from Mr Kosaka's perspective) the domicile of choice for all the right reasons...

CNN vs. Chris Wood

What gives? CLSA's Chris Wood is banging the table on the attractiveness of Japan's equity market, yet, in a little-noticed innovation, CNN's scrolling financial banners (at least the ones piped through the cable news channel's Italian offering) has scrubbed the Nikkei index from its news scroll in favor of Singapore's Straits Times, and the HK's Hang Seng, as the Asian bellwether(s). Perhaps it is an oversight, or maybe the Nikkei is now well-and-truly irrelevant. Or perhaps CNN, like the covers of the Economist and Time magazine, are meaningful contra-indicators. I just thought it was interesting, and potentially telling, as a news-and-data junkie, that I was unable to keep abreast of the daily (mostly downward) fluctuations from a purported leading news provider.

(Note to self: Must get a USB global 3-G device...)

Earth to Gramm: W.T.F.Were You Thinking??!??!

In the solitude of the high Alta Badia amidst the Malga's (working summer farms), the world's happiest cows gorge themselves upon verdant clover, wildflowers and grasses, clinking bells carried by the wind from seemingly all directions. From here, where the fossils in the Dolomite rock are Pleistocene, it is hard to imagine that the international monetary system is in severe and irreparable decline. The farmers cut and dry the grass for winter while the rest of the family including a now-short-and-stooped grandmother rake it on the steep slopes unreachable by conventional tractor. Marmots still squeal in the fog of morning, hawks hover high and time - excepting the encroachment of modern tourist construction built by the more enterprising of the Ladinisch - seemingly stands still.

Modernity intrudes nonetheless. Some of the enterprising have assumed large debts to construct - at a most dubious point in the cycle of both economic growth and changes wreaked by global warming - resorts that will inevitably be owned by the banks before the cycle is done. Restricted as comms were, a CNN-branchlet seemingly intended for Africa evidenced by ads for Nigerian banks and Ghanian port-services accompanied Berlusconi #1, 2 & 3 on the limited cable. It was the odious CNN that delivered to me the somewhat hilarious figure cut by Phil Gramm calling Americans a bunch of economic whiners, further suggesting that America's economic ills are both imagined by the Polity in general and a figment of the democrats' political strategists in particular. Now while it may be true that Americans are whiners - whether about taxes, gas prices, or one's liberalness, that is as far as Mr Gramm's worldview intersects with objective reality. Lore has it that everything is bigger in Texas - the cars, hats, steaks, the ego's, and if Mr Gramm and America's President are anything to go by, so to is the sheer ludicrousness of her politicians. $150bbl-oil has it would seem, has untethered any prior connection that such figures had with reality in the rest of the non-oil producing, home-owning, food-eating nation, a nation itself divorced from reality by the bubble of its own existence, as aptly summarized by Dr Roubini in his latest missive.

The problem with monumental political falsehood is that, like slander, it nonetheless tends to stick, remaining in the conscious mind long after it's been garroted by the facts. So let us contemplate for a moment the objectively sorry state of America's economy, and the likelihood of a yet-sorrier state in the imminent future. She [the USA] has seen steeply falling real wages for most workers for the last decade, impossibly large and persistent current-account and trade deficits on top of fiscal gaps that (all-in including SS) stretch the probable and exist only as a result of cynical piss-taking by foreign CBs mercantilist policies; persistently negative household savings rates that would make Edith Cresson's Grasshoppers blush; an energy-appetite woefully incongruous with the soaring energy prices, and future supply considerations, and energy-inefficient housing and transport infrastructure; an absurd healthcare infrastructure that consumes more per unit of GDP that any other nation YET leaves more than 20% of the population uninsured and uncovered, and fails to measure-up to peers spending half-as-much when it comes to basic measures of achievement such as infant mortality, and longevity; a financial system (including brokers, mono-line insurers, GSEs, and regional banks) that is in tatters due to excessive short-termism, greed, and flawed monetary policy; unprecedented income inequality that continues to widen through all-manner of rent-seeking and flawed political process, a currency that is in near free-fall through not-so-benign neglect, and an unwillingness to impose austerity upon a people whose lifestyles are at odds with their ability to afford what they've been told and sold is their god-given right; homes prices that are also in free-fall, municipal and state-finances that are in shambles, infrastructure (particularly transport, education and electricity) that is decaying rapidly, on top of unprecedented real and nominal levels of household indebtedness - especially credit-card debt, and international diplomatic initiatives strait-jacketed by the nation's debt held by our potential military foes and both real and imagined economic rivals. This is in addition to the Rappaport short-termism and economic cronyism encouraged by asymmetrical risk/reward of executive compensation that rivals the very best the Russian kleptocrats can muster, leaving the nation's enterprises as perilously fertile as the midwestern soils ravaged by intensive monoculture.

So, while it is all well-and-good for Mr Gramm to conjure political invective accusing the opposition of false manufacture, the fact is that none of these major-league problems are imagined, most were encouraged by, and accelerated their emergence since the turn of the millennium under republican watch without any acknowledgment to mission-control in Houston that we've even got a problem. Whiners? Maybe. But rest assured this has nothing to do with with the issues we face. Hopefully, this will be a year that the liars will be called-out, and perhaps that people recognize their own culpability in the travails that the nation now must confront.

Fiddling While Rome Burns

First, apologies and explanations for my absence: it was the Italians fault. Their hotels, you see, have a bizarre sense of what the internet represents, treating it like the way hotels-of-old treated telephone access: with unimaginably large mark-ups, byzantine security firewalls that restrict access, in distinct opposition to informations burning desire to be liberated. Not that my drivel represents a security threat, but apparently the Italians are more abusive than the NSA in this regard, with the most prevalent eavesdropping and surveillance of all NATO members. Of course, one might question whether Mr Berlusconi's intention is National Security or personal security, though I reckon its closer to the latter.

Second, though my market sensibilities feel guilty about vacationing while proverbial Rome burns, I have no regrets, having spent a decidedly magical couple of weeks at altitude in the Sudtirol with family, pursuing vigorous hikes and climbs with all the requisite libations. And it felt doubly-liberating since this was the first time in nearly nine years that I am truly free - unburdened with a so-called risk-position (more on this later). Up there, away from Bloomberg, newswires, cell-phones, email & dingleberries, the world appears just fine. Farmers make hay, with cows eating the excess grass; Dutch people still tow their camper vans anywhere and everywhere, and Belgians have yet to learn to drive in the mountains. Expresso's (always short - and never burned) are consumed frequently and with aplomb, while aperatifs and digestives flow freely. Change still comes slowly there. But if one looks with but mild astuteness, there are plenty of signs of the post-millennial, post-dollar-hegemony which I will share with you in a later post.

Third, sorry about not requiting replies to my observations on Bob Dylan’s latest tour. My brother (a far more informed critic than I) sympathized with my thoughts and pointed to “Live at Budokan” as 'the beginning of the end', with his brontosaurus-like mastication of “Maggie’s Farm”, to which I agreed. To the commenter who was looking for exemplary evidence of his manglings, I sadly cannot do justice as I fear I do not have the musical lexicon, but his destruction-through-bizarre parsings of nearly every line, in every tune, reminded me of the difference in meaning that a transposition of a single comma makes to the hypothetical phrase “…she was french, kissed by sun…” versus "...she was french-kissed by the sun....". The meaning is, of course, altered irreparably. That is a mere comma or pause. In musical vocalizations, there are multitudes of opportunities to inflect, emphasize, intone, change the pace of the cadence, whether overtly or subtly, that imbue (or not!) a song and lyric with meaning and hence poignancy. Not all changes of course impact the meaning or poignancy, but at it happened, most of Mr Dylan's THAT night, did, and did so for the worse. That is just my opinion. All the same, thanks to all to who've wrote and commented. Quiet alpine nights were perfect for conjuring and distilling musings - despite my technical inability to launch them into the world. They will hopefully re-emerge during the coming week.

Poignant No More

There are things in modernity that have outlived their useful purpose. Some (like the Gas Guzzlers, Mao Suits, the incandescent light bulb) by circumstance, some (the top-loading washer, the typewriter) by the emergence of better design and technology, whilst others (President Bush, the shadow banking system, stock-brokers, or mortgage brokers) become more-than-redundant due to senescence or worse yet, by willful neglect. A few (say the NYSE) of course will whither from superciliously clinging to the vestiges of past usefulness or glory beyond its sell-by date. And so it was with Bob Dylan, for almost the entirety of his two-hour gig at the Palais des Sportes in Grenoble, that I was unable to shake such thoughts from my head.

It was a combination of happenstance and serendipity that brought me there, to l’Isere in eastern France on that June day, so-aligning our paths, that I felt cornily compelled to pursue this ummm errr destiny to its conclusion. A ticket came easily, despite the apparent scarcity but hours before, as did on-street parking free from the hassles of K&C permits, zealous traffic wardens or other suspect and thoughtless municipal revenue scams. Beer and freshly-made sandwiches (on baguettes) were provided cheaply and with both quality and smiles unlike the Aramark-abuse heaped upon the customer at North American events where everyone is cynically entitled to their pound-o-flesh and where the words “public interest” are oxymoronic at best. As the lights dimmed, my hopes were uncharacteristically high, as touring bikers and hippies were joined by parents in their 50s and 60s accompanied their grown children (and grandchildren!), and for once, I didn’t feel old and out of place as one of my age inevitably does at such gatherings.

Yet as the concert began, I was bugged almost immediately. No, I was not put-off by his band, for he was indeed accompanied by fine and accomplished musicians. Nor was I disappointed that he wasn’t playing guitar, but keyboard of one variety or another. And anyone who’s seen him over the years wouldn’t expect him to croon sweetly, so I wasn’t disappointed by the evolution of his characteristic rasp into a definitive growl. Even expectations about repertoire were non-existent, so the mix of new and old sat perfectly well. What saddened me however, was the apparent contempt his displayed towards his “art”, and so - by extension - his audience with what to this seasoned listener’s ears were nihilistic and mocking interpretative phrasing of lyrics that mangled once-poignant creations. It is galling enough to witness the mercantilist piss-takers and their consumptive co-conspirators destroy (what’s left) of the Bretton Woods system, for flawed as it, it remains the only one we’ve got, and therefore highly poignant for any saver, at least until replaced by something better. But to do see an artist debase and grafitti his own works (that I myself love) is almost more than I could bear.

You see, I have no problems with change, and even admire it for its own sake. Change (in art, at least) is good - even when things are going well for there is virtue in taking one out of one’s comfort zone, or applying one’s talents to new medium. Miles (as I’ve written here before) explained why he stopped playing ballads as:

“…because I liked playing ballads too much….”

And I have no doubts that it would be bloody f*cking boring reproducing the same arrangement of the same song day-in-and-out year-after-year. But there is “good” change and bad change. Constructive change and destructive change. Change that works, and change that doesn’t. 1970s fashion was indeed a change from what preceded it, but its worth remains debatable. But Thursday night’s concert in Grenoble, the change was in my opinion decidedly for the worse. Take a classic such “Tangled Up in Blue” from Blood on the Tracks, or 60s classics “Hard Rain”, ”Blowing in The Wind”. These were poignant works, with meaning imbued by phrasings and their consequential emotion – particularly when read/spoke/sung by the songwriter-lyricist-poet. But to edgier backing rhythms of his band, he was parsing the phrases in the most bizarre fashion – growling them rapidly in ways that decimated the poignancy, emotion, an sensitivity of the original works, leaving me thinking….WTF???! It was, no pun intended, disconcerting, in much the same way as commodity allocations as an asset class are a classical demonstration of a composition fallacy. And like such fallacies of composition cynically mock the system of which they are a product, so too did it seem that Mr Dylan was mocking his fans, taking the piss at those tossing $100 bills his way for the dubious pleasure of two hours of entertainment approaching abuse.

Now Dylan has a long history of disappointing fans, admirers, and just about most people not immediately close. Some - even those personally dissed by Robert Dylan a.k.a. Zimmerman like Joan Baez - explain it away as something which is essential to the artist in him. Apparently, he is less of a creator of art, than a channeler of inspiration that allows him to tap into something almost-divine and verbalize archetypical feelings. This is in contrast to say, Leonard Cohen, who treats composition and songwriting like a 9-to-5 job, and says its bloody hard work. Fine, I can accept that. And they ARE his songs, so he is free to do whatever he wants to with them. Perhaps Ms Baez is correct, and since he hasn’t sweated for these works, he has no attachment to them. And if he has no attachment, perhaps they have no meaning to him, allowing him to shit and piss upon their carcasses. In this view, poignancy is conjured only in the eye of the beholder, and Mr Dylan has made his view clear. Just as the PBoC, BoJ, SNB, and Federal Reserve have made clear theirs.

It is a sign of the times. We are in new and uncharted territory in modernity – composed of one part selfishness, one part-nihilism. So have a drink. Borrow some money. Don’t pay it back. Steal from your neighbor. Pick the public flowers in the park. Fuck everyone. Nothing really matters anyway…right?!?!

The Times They Are A-Changing c1963

Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone.
If your time to you
Is worth savin'
Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin'.

Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won't come again
And don't speak too soon
For the wheel's still in spin
And there's no tellin' who
That it's namin'.
For the loser now
Will be later to win
For the times they are a-changin'.

Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'.
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'.

Come mothers and fathers
Throughout the land
And don't criticize
What you can't understand
Your sons and your daughters
Are beyond your command
Your old road is
Rapidly agin'.
Please get out of the new one
If you can't lend your hand
For the times they are a-changin'.

The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is
Rapidly fadin'.
And the first one now
Will later be last
For the times they are a-changin'.
Come gather 'round people
Wherever you roam
And admit that the waters
Around you have grown
And accept it that soon
You'll be drenched to the bone.
If your time to you
Is worth savin'
Then you better start swimmin'
Or you'll sink like a stone
For the times they are a-changin'.

Come writers and critics
Who prophesize with your pen
And keep your eyes wide
The chance won't come again
And don't speak too soon
For the wheel's still in spin
And there's no tellin' who
That it's namin'.
For the loser now
Will be later to win
For the times they are a-changin'.

Come senators, congressmen
Please heed the call
Don't stand in the doorway
Don't block up the hall
For he that gets hurt
Will be he who has stalled
There's a battle outside
And it is ragin'.
It'll soon shake your windows
And rattle your walls
For the times they are a-changin'.

Come mothers and fathers
Throughout the land
And don't criticize
What you can't understand
Your sons and your daughters
Are beyond your command
Your old road is
Rapidly agin'.
Please get out of the new one
If you can't lend your hand
For the times they are a-changin'.

The line it is drawn
The curse it is cast
The slow one now
Will later be fast
As the present now
Will later be past
The order is
Rapidly fadin'.
And the first one now
Will later be last
For the times they are a-changin'.

Never Go Food Shopping on an Empty Stomach

"Never go food shopping on an empty stomach" will ring true to any epicurean who's ever had the the munchies at the same time as finding themselves upstairs at Harvey Nicks or a new and clean Whole Foods market. Likewise, any thoughtful investment contrarian or value-oriented investor with more than a nano-second of attention span will tell you never to capitulate upon positions, or change your fundamental views as a result of inferred month-end, and quarter-end noise resulting from the multitude of performance jockeying, window-dressing and outright manipulation that seemingly concentrates itself at such calendar points in time.

Sure, some apparent breakouts will inevitably result, taking root in such moves. And some tactical swoons or rallies that over-do themselves will find reversal with the arrival of the new calendar quarter. But on the whole, it is decidedly important to keep one's sights on the central tendency of parochial moves, and keep highly attuned to those emerging secular exogenous trends that are generating and contributing to the noise at what will be seen in hindsight as a large inflection. It remains one of the hardest things to accomplish - filtering the genuine sustainable and secularly accelerating from the bogus, long-in-the-tooth mercenary price action that results at the end of a move, or from something unnaturally induced. Telltales are bountiful - be they relative volume,s microstructure activity, changing correlations. ownership behaviour, option implied vols, prior month-end and quarter-end relative performance, relative moves (to sectors and indices) that in part, and taken together, resemble footprints in fresh snow to the attuned.

So whatever your predilection be towards action today, remember the calendar, have a good long lunch - don't skimp on the wine, let those that desire to do so complete their sub-optimal objectives, and use the opportunity to lay out the most attractive of your contra-trend shorts, whether for a swing-trade, or as a basis for something more substantial. For today, here and now, for the very bold, there are no shortage of fat-tailed prey to hunt.

An Open Question

I have a simple question for everyone today:

At what USD prices do energy property rights create such dislocation, instability and inequality in America that they are de facto seized by the State into the public domain?

Prior lease and mineral rights null & void?? Prior owners and leaseholders perhaps permitted to continue stewardship and extraction under contract? Fixed rates of return to extraction based upon costs, granted and periodically reviewed as with state utility boards? I can envisage some of the fiercest political battles ahead that will cross the lines of philosophy, economics, politics, potentially shredding historical precedents of constitutional law, in attempts to equitably resolve what will be deepening energy and economic crises. Thoughts?

Notes To Self - End Q2 2008

This one is not for you, but for me...for the internal dialogue I run with myself - the one that integrates and assimilates the masses of new information arrival and worldly observations in order to update my forecast of the future. Necessarily, such a dialogue must be honest and as much as possible free from flowery language, normal humourous observations and effect to insure its integrity. Here goes...

Markets are pushing the commodity and the inflation meme to an extreme. And this swing of the pendulum from deflation in 2002 to the present was forecasted from the moment US authorities decided to rescue markets and the economy from cyclical recession by overly loose fiscal AND monetary policies , and in earnest from 2004 when Asian mercantilists joined the fracas by (i) continuing ZIRP and nearZIRP (ii) by not liquidating previously accumulated USDs (iii) and by unprecedented reserve accumulation by China, (iv) and other partially or unsterilized USD interventions and accumulations. Expectations in modernity are for the pendulum to swing with great speed - the speed with which epiphanies conjure themselves in market participants heads. But since these are policy-driven consequences reinforced by market feedback loops, the price and economic trends that emerge are strong and persistent. That is until the gravitational forces acting upon the pendulum assert themselves causing the pendulum and associated feedback loops to reverse direction.

By 2006 it was obvious to anyone who looked that the course was unsustainable: consumption by a tapped out consumer with a negative savings rate, the course in global house prices (particualrly in Anglo-Saxon land), putrid fiscal and monetary policies, current account deficits, reserve accumulations, currency pegs - the whole lot. YET, The Authorities chose to address these with co-conspiracy and not-so-benign neglect, and the markets requited with drawing down all manner of leverage to buy anything and everything, from "collaterized" re-packaged dogshit, to BAD art, to unimaginable large and vulgur stinkpots that apparently help compensate for the buyer's lack of natural physical endowments.

This asset-price run abruptly stopped (in things core) as the infamous Minsky moment arrived in 2007 causing said core-asset prices to begin to fall precipitously, but more importantly, its arrival marked the denoument of wanton credit expansion, the lifeblood of further asset price expansion and consumer deficit-spending, and ultimately inflation. I look around, I see carnage at the core. Carnage in real estate. credit, and equity. Look further and one sees the emerging devastation in the US consumer, financial institution balance sheets. "Wealth" has been prodigiously destroyed, with those at the center unable, unwilling and fearful of totalling up the losses. The impact is, and will be profoundly deflationary, whether people realize it or not just yet.

YET that inflation (of sorts) apparently is rife, is hard to deny. Its on the gas pump, at the supermarket, on the utility bill, and everywhere on the radio airwaves and print magazines. Its on the allocations of pension funds (be they TIPs or a dollop to the GSCI) , YET, (and this is important) IF it [inflation] is really here and going to stay, it is NOT in yet incorporated into nor discounted by equity prices (in terms of earnings forecasts and impact upon valuation ratings) , and most certainly NOT discounted by the king of financial paper, USD bond prices. What one CAN say is that food, industrial commodity and energy prices have already gone up. And that it is hurting one and all to greater and lesser effect. And that continued consumption has (in the USA) been debtor-financed courtesy of those that feel they have no other choice or are too spineless to do otherwise, leading to a BWII equivalent of "Dawn of the Dead".

But globalization, slack labour markets, wealth destruction and deflation in core asset prices has, is, and continues to place a boundary upon requiting the rise in commodities with a rise in consumer incomes necessary to afford said commodities. The result will ultimately be in diminishing quantity of demand - hardly encouraging for the forces of prolonged inflation. But for the moment, mercantilists and (to borrow Macro-Man's eloquence) the currency piss-takers, finance (still unsterilized) over-consumption, a tether that soon must, and will break, which allows the current deflation and inflation to co-exist in Olympiad Stagflation. But, unlike the 70s, this will be short-lived, because the credit-pendulum has already reached its highest point, the American consumer is more-than-spent, further commodity price rises themselves are highly destructive in terms of end-demand, real-estate in the developed world , be it commercial or residential, entirely satiated.

I am not arguing against Hubbard, or the likely continued rise in agricultural terms of trade from historically low levels, and the changes this will wring to our advanced energy-dependent consumer societies. These Malthusian trends may well be secularly robust until the emergence of cold nuclear fusion, or Craig Ventner's mass-commercialization of bacterially-produced crude oil. However, we are well on the divergent road towards demand destruction, de-leveraging and credit revulsion, and with globalization, these trends will insure that a wage-price spiral is not on the menu. And consequentially, since I believe that the world is MORE inter-dependent, not less hence, hence the hopeful panacea of decoupling is bunk -at least for the moment. I think the more interesting next question will be: "How do the EMs, mercantilists, and currency piss-takers fiscally and monetarily respond to dramatically lower demand from the US and credit availability from traditional sources ?? In the meantime, stay short of stocks, long-bonds and bad credit, rent rather own, insure your car is fuel-efficient, ride your bicycle more, and apprise yourselves in the art of market-gardening.

Sea Shepherds: "...Whalers Can Be Hunted Sustainably..!!"

In a bold bid to break the impasse at the IWC summit in Santiago, Chile, the Sea Shepherds conceded that Whalers - particularly those plentiful species from Japan and Norway - CAN be sustainably hunted and harvested without adverse impact upon the general population. "It is not only humane, but necessary" a spokesperson for Greenpeace explained. "We must continue our cull of whalers for scientific research since there are many unanswered questions about why, in the face of overwhelming opposition from the rest of the planet, depletion of numbers, and compelling evidence that whales are MORE intelligent that humans, that the whalers continue to do the absurd". She added: "It just doesn't make sense, and we must torture, capture, and kill them (for research) to figure out why they are doing this."

A member from the crucially important whaling nation of [land-locked] Mongolia went on record as saying: "Whales? What are whales?!? We're here because some wily-looking guy named Hiro told us there was a free pancake breakfast with all the fermented yak-milk we could drink..."

Here today. Where tomorrow?

Fortis is big and and errr ummm Belgian. That is perhaps the only explanation for their new global campaign which proposes as it's tag-line:

Fortis: Here today, Where tomorrow?"

What could they possibly have been thinking? Have their marketing people not seen the carnage, the worry and the uncertainty of investors? Could they have missed the obvious double entendre??!? Why not something simple but reassuring such as "Here today, Here tomorrow?"

The campaign, hilariously (in today's environment) called "Life is a curve" campaign asks one to contemplate one's position and the future. The positive side is they have stopped making empty promises. The catch is: What if you are the stick-figure. so-poised to give your hard-earned savings to Fortis just before the curve becomes extremely concave. They might have just as easily used as their tagline: "Wrong place, wrong time??" for THAT is the image conjured in this observers mind. Just what you want to hear from your investment manager cum insurer whose market value is dropping like piece of The rock...

Latest Econ Statistical Data Releases

Suburbiavilletown, BlueState (Retuers 13:51PM) Two new data points released today has provided economists and market observers yet more (anecdotal) evidence that higher food and energy prices are beginning to bite. The first data series, The Main Street "EyeDrX Appointment Backlog index " has shown a dramatic fall since the same time last year. The release, poorly attended by my spouse, heard the doctor reveal at said spouse's annual vision check-up that his appointment book, which was running consistently at three months wait for the past several years dropped precipitously during the last quarter, and is currently hovering at a mere two weeks wait for an appointment. No external factors (competition, weather, etc) can explain the drop other than that diminishing disposal income is beginning to bite into what historically may have been seen as non-discretionary purchases, but in a crunch can be delayed, perhaps indefinitely. "I've a lot more time on my hands" said the Doc, "and I'm none too thrilled about it. And by the way, my fees have gone 15% since this time last year, but your insurance reimbursement rates are the same! Happy Tuesday"

The second time series that is an insightful tell-tale into current middle and upper-middle class consumer distress is the "End of year Teacher Gift Reimbursement Ratio". Measured on an oscillating scale between "zero" and a "hundred", it measures the percentage of reimbursement received by the Class Moms, that compensates them for their prepayment of the their childrens' teacher's end-of-year gift. Historically (since the beginning of the index's compilation) we were at 75% by the end of the first week. "This year", said the bubbly class mom, "we're at 25%". "It's inexplicably low!! I've been class Mom for six of the past seven years, and even at the trough of the tech wreck in 2002, I've never seen a reading below 55% in week-one of asking for repayment. . " Something is incredibly wrong...."

In related news, the "Toddler's Median Value Birthday Present" time series fell in for a fourth consecutive month, both on a YoY and MoM from $29.50 in May, to $22, in what analysts say is another sign of our times. "Not only has the value fallen due to presumed consumer distress, but due to inflation, the quality of gifts at various pricepoints has diminished too". When one reveler was asked about what he thought of the trend, he replied: "I dunno....my mom bought it. Can I have more cake??!?"

Please, Mr Obama No Half-Assed Measures

Dear Mr Obama,

I mocked Mr Icahn, and defended you because like many Americans, I believe we share a visceral feeling that the nation's recent path has been wayward - not only from the optimal, but even from the tolerably wrong. As such, I am of the opinion that it is incumbent upon the opposition - all opposition - to do whatever it takes to place the levers of power in the hands of those more watchful of the Public Interest, and of an integrity that does not call itself into question as a result of each new contract, policy change or executive order. I realize the Executive Branch is only part of the problem, but nonetheless am hopeful that with strong leadership, the worst of shameful parochial pork-barrel politics will recede in favor of the greater good. In this regard, despite my stated distaste for dishonesty, I would (so to say) turn a blind eye to the little white lies and truth benders emanating from the opposition, provided it insures a transfer of the stewardship of the state to those who treat it with the respect and fiduciary reverence it deserves, which, in its absence may realize the worst of the criticisms and vitriol of the anti-statists. I am aware of philosophical paradox of this view, but can stomach the inconsistency in favor of goodness of the outcome, though I say again, I am not proud of stooping this low, but at least am honest with myself about it.

With this preamble out of the way, I must express my concern to you over your rant yesterday regarding the rhetoric of windfall profits tax, which to an economist, and even one who is rooting for your success, sounded, well, just lame, and fell outside the box of "necessary little white lie" I am willing to sanction into the cauldron of demagoguery. And let it be said, it is not the fact of a windfall profits tax, but rather the cynical ad-hoc pandering of seizing from A and giving to B, that will likely result in (and I never thought I'd be parroting an API talking point) BOTH a reduction of supply, and a prolonging of the adjustment of The American consumer to the realities of constrained supply in a neo-Malthusian century, which ultimately is counter-productive to the objective.

You see, I have high expectations of the next government, despite the historically-based probability that it will remain unrequited. Long before you start with energy-sector Robin Hood-ism for short-term electoral boost, you need to define a forward-looking energy policy, and more importantly sell it to the people. That means it has to be seen to be fair - in the long-term and short term, and achieve objectives that are truly in the public's interest. Sacrifice must be universal, and create discomfiture across the spectrum. Indeed, IF you're going to dip into supply-side with the windfall profits tax, (which by the way, I have doubts since the slope is slippery to coal, fertilizer, and all manner of resource whose price has risen through no fault or action of said resource- "owners") then it must be seen as part of a generalized sacrifice that would likely include regressive carbon taxes, as well as a gluttony surcharge upon large boats, private aircraft and their fuel, and home energy use above a reasonably allocated household threshold. Now, the shame is that you are squandering this opportunity by suggesting you'll simply do the absurd - i.e. subsidize consumption by the poor. No. No. No. This is precisely what is hammering India and China presently, and is the antithesis of the longer-term public interest. Proceeds from levies that essentially discourage fossil fuel use should be used to accelerate the US move away from imported carbon towards sustainable, renewable sources - the market decide which be they CCS. wind, solar, geothermal, tidal, or all the aforementioned as well as investment in transit infrastructure that will likely be MORE viable and attractive in the future, rather than less.

Some think this is unsalable. I beg to differ and think it is eminently salable and attractive - to blue and red-staters alike, for its logical cornerstone embraces the market and the freedoms, liberties and energy of the people. You see, it needs to be explained as a crisis - and a shared-one at that. And crises require sacrifice, which can be sold provided there is a feeling that the burden is shared. Of course, no one needs the government to tell one precisely which sacrifice to make, or how to contribute positively to our collective future betterment. Everyone's sacrifice will be different according to each individuals values, and the market is undoubtedly powerful in its wisdom to select, fund and develop the best and most efficient technologies. Energy policy in America, contrary to other developed nations, has been skewed towards promoting consumption. This is simply daft in the present day, given America's poor and unbalanced international financial position, and the trends in global resource supply and demand. And each day we persist upon this course, we become poorer, and children even poorer then. No, the time has come for an energy policy promotes conservation, and wise use of resources. That is not only because it is in our interests in the long-run, but because even in the short-term, we simply cannot afford to do anything else, and continuing an ostrich approach by denying the inevitable only conspires to detract from the future public interest for short-term parochial gain of a few.

It will not be pleasant. But it could and should be just, and fair, and in everyone's heart, they will know it (if explained with sufficient passion and empathy) to be the right thing to do. Yet while all change is initially difficult, there is no reason to be pessimistic. America is at presently vastly wasteful in its use of energy and water. The savings from anyone and everyone from barely noticeable changes are immense and will immeasurably alter the balance. This will give time for the market and our ingenuity when applied to an objective, to come to fruition that will decidedly improve the financial and economic prospects of future generations.

So please, Mr Obama, take a pause from thinking with your mouth open, and stop with the short-term demagoguery which in any event will be unmasked before November, and instead think with the Big Picture Systemic Vision of policy that enlists every American to overcome the challenges wrought by two decades of rudderless administration and eight years of bassackwardness and corrupt plundering that at once is patriotic, economically sensible, and finally, for a change, in the interests of our children, not to their detriment.

Good luck, and good night.

"Cassandra"

Berserk....

"B-E-R-S-E-R-K". What a funny word! It encapsulates vibrations that captures its underlying meaning. Webster defines it as "...destructively or frenetically violent; Mentally or emotionally upset; Deranged...".

And do not forget the Berserkers, from who the word derives its descriptiveness: "...one of a band of ancient Norse warriors, legendary for the savagery and reckless frenzy in battle..."










Friday the Thirteenth approaches.

Oil Traders: - OMG! They killed Kenny!

Everyone watching market prices today - especially those with large SUVs, Pick-ups, Cadillacs, and 30-foot Gallery ceilings - stood in awe, shock, and horror as known swing-short trader "Kenny" was killed today. "OH MY GOD! THEY KILLED KENNY!!! was the phrase hanging on everyone's lips. Kenny, had been a voicifierous proponent of theories suggesting that despite long-term supply concerns, oil is in a short-term bubble and speculators (both short-term and commodity indexers) are responsible for the state of a market where the daily amount of oil traded exceeds the entire daily US consumption by a factor of more than 15x.

I heard the mob chanting "In yer face you pussy!!" before it got ugly, said his closest friend, Kyle. "I guess they shut him up real good" said E. Cartman. "Nobody deserves a beating like that...I mean, like the kid can't even talk right!" But you know that the fuckin' weirdest thing of all was that I could've sworn I heard some suited spec with a huge wad of buy-tickets shouting "Allu Akbar!!"..

Are You On or Off The Bus??

Ever wonder why - over the past four years - commodity stocks have risen ceaselessly yet periodically crater in despair before vaulting to the upside with even more vigour, each up-leg catching more traders and portfolio managers with the equivalent of Commodity-Cat Scratch Fever?? It's easy to say "the specs", the BRIC bulls and dollar bears , though one must admit that rising prices have belatedly been requited with continued upward earnings revisions. That said, future earnings projections have in the main NOT caught-up with the pace of the rises in the stock prices, leaving "ratings" (valuation based upon out-of-sample forward-looking PEs) unprecedentledy high for a period when earnings are stable or rising.

Well I think I have stumbled upon the answer: guys... big guys... you know really big investors who punt around in round-lot percentages of shares outstanding, simply cannot make up their minds whether to stay-on the hard-asset bus, or get-off the commodity bus. This is perhaps best exemplified by Glenn Krevlin's Glenhill Advisers' position in Southern Peru Copper's parent Grupo Mexico SAB de CV (right). Krevlin, a former partner in Cumberland Advisers, now runs his own quiet $3bn operation, apparently throwing around large blocks in I "love it" - "I hate it" fashion.

Now the company itself has a reasonably small float anyway, but what's with the largest arms-length shareholder trading like a yo-yo??? Just look at the buy-puke-buy-puke-buy sell way early-jump back onto the
commodity trampoline. To me it is the classic reactive response that knows these thing aren't the thing to hold when the party is over, but ever the reveler, doesn't want to miss a good thing so-long as the party looks like it'll continue to cook. Importantly, judging by the historical price action, mirrored across the whole complex, Mr Devlin is almost certainly not alone in his hot and cold flashes of affection for the companies in this group.

Maybe this is as it should be. Maybe what he is doing is completely rational, processing, and discounting new information - sometimes bullish for the complex, sometimes not. But each time, The Trade attracts more marginal buyers and newly-converted portfolio managers, the pari-passu risk in "The Trade" increases in, what is in the hackneyed but nonetheless apt phrase, "archetypical bubble fashion".