Nothing to See Here

Thanks to everyone who took the time to read my most recent post, "We Fear What We Don't Understand" on the topic of some common high frequency trading misconceptions. I appreciate the positive feedback which illustrates the intelligence of my audience here.

This morning, I was surprised to see the market trading higher on "positive jobless claims numbers" - as the press had hyped them. Look - this isn't rocket scientist. You don't need a PhD in economic theory to understand, but empirical evidence suggests that you do need to be smarter than the average reporter. I wrote a post a full 6 weeks ago describing the record "exhaustion rate." More people than ever are using up their unemployment benefits and dropping off the continuing claims tally - so the continuing claims number goes down, but things are getting worse, not better.

Elsewhere in the "things aren't looking so good" file this week:

1) NYC pays to send homeless people back to where they came from

"The Bloomberg administration, which has struggled with a seemingly intractable problem of homelessness for years, has paid for more than 550 families to leave the city since 2007, as a way of keeping them out of the expensive shelter system, which costs $36,000 a year per family. All it takes is for a relative elsewhere to agree to take the family in."

2) MISH: "You can only sell the capitol building once." Arizona is needs to raise money to close a budget deficit.

"State properties now being considered for sale and leaseback include the House and Senate buildings, the Phoenix and Tucson headquarters of the Arizona Department of Public Safety, the State Hospital and the state fairgrounds, according to a document obtained by The Arizona Republic. Some prison facilities also are under consideration."You can only sell the Capital Building once.

What will they do next year to balance the budget?

3) Karl Denninger: "Barney Frank - STFU" Now, I don't agree with everything Karl Denninger says, and I don't like that he has the same monogram as me (KD), but I won't hold it against him for stealing the title of a post I wrote back in October of 2008 (STFU Barney Frank) - because in this case, he's totally correct. Barney Frank is threatening to revive the mortgage cramdown bill because lenders aren't being aggressive enough in modifying troubled loans. Denninger says:

"The banks are not modifying these loans in that fashion not because they want to be "mean", but rather because on a market value basis for these loans they are all insolvent right now and have been for over a year"

The sick thing is that Barney Frank knows this - so it's likely that Frank is just pulling more populous grandstanding, knowing that the banks can't redo the mortgages without recognizing losses, but still wanting to appear like he's fighting for his constituents.

4) I though this Wall Street Journal Op-Ed on "speculation" was pretty decent:

"The oil speculators are back—that is, back in the cross-hairs of the political class. On Tuesday, Commodity Futures Trading Commission Chairman Gary Gensler uttered the Pentagon-like phrase that “every option must be on the table” to curb “excessive speculation.” If you’re wondering what makes speculation “excessive,” in Washington the answer is this: Speculation becomes excessive when prices move in a politically inconvenient direction. Which brings us to the real meaning of the three days of theater, er, hearings that Mr. Gensler is conducting this week."

5) The market gave up half of its gains today when two Bloomberg headlines came out:

BN 15:31 *DEUTSCHE BANK CEO SAYS BAD LOANS ARE `NEXT WAVE' OF CRISIS
BN 15:31 *DEUTSCHE BANK'S ACKERMANN SPOKE AT EVENT IN ZURICH

Really? That caused the selloff? I mean, I guess there's no use looking for a good reason to sell off when there was no good reason to rally, but doesn't Ackerman's comment win the "NO SHIT SHERLOCK" award of the day? Bad loans were the FIRST wave of the crisis. We still haven't dealt with them!

This seems like a good time for a Ludwig Von Mises quote:

"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

-KD

disclosure: short the market (SPY)