Happy Halloween From Oscar & Mr. Griffey

Warning - pictures of dogs in costume follow...  If this sort of thing offends you, you will want to click away ASAP.  Also, if you are afraid of Bee Dogs, click away!

We discovered that Mr. Griffey has no qualms about wearing things - costumes, jackets - while if you put anything at all on Oscar he acts like he's wearing one of those collars from the Running Man that will make his head explode if he moves at all.   Griffey happily pranced around the house in his purple cape earlier this week, as we constantly hailed King Griffey:

We couldn't bear to torture Oscar when it wasn't Halloween, but he looked scared that he was going to get costumed up anyway:

Today, on Halloween, we got one trick-or-treater - a planned visit from a neighbor who wanted to see the pooches dressed up.  I present to you:  BEE DOGS!

I think this is the saddest bee-dog in the world:

If you have honey on your hands, bee-dogs will SWARM:

Thus ends today's episode of dog costume torture.  No dogs were actually harmed during the taking of these pictures.  If you haven't yet gotten your fill of beedogs, BeeDogs.com will keep you busy all day.

-KD

NOT Material Nonpublic Information

I opened up a high yield savings account with American Express Bank.  I mention it because I finally decided that there's no reason not to earn 1.30% with them instead of a few basis points at Etrade and Citi where the balance of my money is/was.   Anyway, I mention it because I've been absolutely bombarded with their ads everywhere I go online.  It's rare that I get hammered with advertisements for products which I may actually care about.

I called customer service today to ask about some electronic transfers I'm setting up, and after the agent answered my questions, I asked her if they'd been really busy lately.  She said that this high yield savings account campaign was the biggest ad-blitz they'd ever undertaken, and that they were extremely busy opening up new accounts.  I have no position or opinion on AXP stock, and I don't know what sort of deposit gathering The Street's analysts are looking for, but I'd expect AXP to garner a metric crap-ton of deposits this quarter.  I'm not sure what the implications of that are for them, but anyway.

note: for prior posts about the intricacies of identifying insider trading, see this and also this - good comments in those threads too.

-KD

Effin' Lawyers/Judges - Today's Sign of the Apocalypse

What the fuck is wrong with people?  Seriously.  I've preached about personal responsibility a lot on this blog  - I'm a firm believer in it - but there are limits: like saying a 4 year old can be sued for negligence for running into an old lady while riding a bike with training wheels. 

"Citing cases dating back as far as 1928, a judge has ruled that a young girl accused of running down an elderly woman while racing a bicycle with training wheels on a Manhattan sidewalk two years ago can be sued for negligence. 

The ruling by the judge, Justice Paul Wooten of State Supreme Court in Manhattan, did not find that the girl was liable, but merely permitted a lawsuit brought against her, another boy and their parents to move forward." 

Look - sue the parents - fine - THEY are responsible for the actions of their four year old.  But a four year old girl?   This one is too friggin' crazy not to keep reading:

"The suit that Justice Wooten allowed to proceed claims that in April 2009, Juliet Breitman and Jacob Kohn, who were both 4, were racing their bicycles, under the supervision of their mothers, Dana Breitman and Rachel Kohn, on the sidewalk of a building on East 52nd Street. At some point in the race, they struck an 87-year-old woman named Claire Menagh, who was walking in front of the building and, according to the complaint, was “seriously and severely injured,” suffering a hip fracture that required surgery. She died three weeks later."

Ok - it sucks that this old lady got hurt and died.  And no, I'm not going to argue that she should have been responsible enough to get out of the way - she was on the sidewalk.   The article continues with a reasonably sensible 2 paragraphs:

"Her estate sued the children and their mothers, claiming they had acted negligently during the accident. In a response, Juliet’s lawyer, James P. Tyrie, argued that the girl was not “engaged in an adult activity” at the time of the accident — “She was riding her bicycle with training wheels under the supervision of her mother” — and was too young to be held liable for negligence. 

In legal papers, Mr. Tyrie added, “Courts have held that an infant under the age of 4 is conclusively presumed to be incapable of negligence.” (Rachel and Jacob Kohn did not seek to dismiss the case against them.)"

Right - a 4 year old can't be negligent... But wait - this girl was four AND THREE QUARTERS!

"But Justice Wooten declined to stretch that rule to children over 4. On Oct. 1, he rejected a motion to dismiss the case because of Juliet’s age, noting that she was three months shy of turning 5 when Ms. Menagh was struck, and thus old enough to be sued. 

Mr. Tyrie “correctly notes that infants under the age of 4 are conclusively presumed incapable of negligence,” Justice Wooten wrote in his decision, referring to the 1928 case. “Juliet Breitman, however, was over the age of 4 at the time of the subject incident. For infants above the age of 4, there is no bright-line rule.” 

Hey Justice Wooten - there's also no bright-line rule that says when kids learn morality, responsibility and right and wrong.  Holy cow - I am on BAJUNGI TILT.

It gets even crazier:

"“A parent’s presence alone does not give a reasonable child carte blanche to engage in risky behavior such as running across a street,” the judge wrote. He added that any “reasonably prudent child,” who presumably has been told to look both ways before crossing a street, should know that dashing out without looking is dangerous, with or without a parent there. The crucial factor is whether the parent encourages the risky behavior; if so, the child should not be held accountable."

Wait - so if I'm driving down the street, and a 5 year old runs out in front of me and I run him over - it's his fault for negligence, right?  He should know that he has to look both ways, right?  He has presumably been told that already, right?  (END SARCASM!)  What planet does this judge live on where 5 year olds don't "dash out into the street" because they know better?  Guess what - they DO dash out into the street even though they MAY know better because they are only 5 years old and they are just thinking about getting their ball back!

Isn't there a saying "Behind every bouncing ball is a running child?"  Note how it's not "Behind every bouncing ball is a running child under the age of 4, because children over the age of 4 are reasonably prudent and should know better."

Maybe I'm overreacting.  I don't have kids.  Why don't some of my readers out there tell me if their 4 3/4 year olds have a sense of morally righteous behavior and know never to engage in any activity that might cause harm to themselves or others.

This is not a guiltless crime, obviously, the parents are responsible for their children's actions.  Justice Wooten is living in his own world of crazy that's so out of touch with reality, it makes me weep for the future of our judicial system.

Edit:  in any case, this seems like the perfect time to revisit an old classic:  Punitive Damages!

-KD

ps - I really really hesitate to bring it up because I really don't want to get into a tangent in the comments, but one of the things that's bothering me most about this case is that so much of our recent financial crisis has resulted in people trying to absolve grown adults of their responsibilities (ie, in understanding documents that they sign which tell them how much they'll have to pay on their mortgage) - and now we're trying to assign responsibilities to FOUR YEAR OLDS?  Come on.

Grantham and Gross

Two items for you to read:

1) Jeremy Grantham's monthly piece
2) Bill Gross's monthly piece.

enjoy.
-KD

Phish Manchester 10/26/10 - Please Me Have No Regrets

Phish came up to Manchester, NH last night, an easy 30 minute drive for me.  I met up with Dr. Pauly (I haven't read Pauly's review yet) and Senor before the show and we perused the wasteland that was the lot outside the Verizon Center.  It looked like a filthy tailgate scene - with wookies of all shapes and sizes hawking their wares:  sparkly head bands, grilled cheese sandwiches, Nitrous balloons, beer, etc.  I was surprised that the notoriously anal NH State Troopers didn't jump on the nitrous sales - I hypothesized to Pauly that they probably didn't know what it was - NH isn't used to that level of degeneracy!  

Pauly and I found our seats with time to spare, and relaxed as we watched the arena fill up.  "5 guy" was sitting next to us - a guy who wears a shirt with a large number 5 on it, who Pauly recognized from Colorado.   The band kicked off at 8:15 with After Midnight, which got the place pumped, and the energy after the follow up The Sloth was sizzling.  "Sleep all day, Rip Van Winkling. Spend my nights in bars, glasses tinkling."  Sadly, for me, I thought that Phish totally lost their way after this in the first set.  They had the crowd absolutely charged up after Sloth, but a constant cease in the flow - they'd stop and discuss the next song after every song, something I've never seen them do to this extent - and a shaky song selection (lots of tour debuts though) crushed the crowd's energy.  Alumni Blues was cool, but the Mellow Mood follower had people running for the bathrooms.  Things didn't improve with Access Me, but the crowd released pent up fury during a raucous Llama.  I didn't think the sound mix was nearly as good as it was in Providence, despite the fact that I had nearly identical seats, and Llama came out sounding like a lot of noise.  Between songs, I would make sarcastic song requests to try to tilt Dr. Pauly, fake screaming "T T EEEEEEEEEEEEEEE!!" and "JOYYYYYYYYYYYY"  which made him laugh, knowing I was joking.

Phish crushed the budding enthusiasm again with All of These Dreams, before rallying with The Curtain With, which led the crowd to chant along with the lyrics "As he saw his life run away from him, thousands ran along, chanting words from a song.  Please, Me have no regrets."  The crowd enjoyed Scent of a Mule, but again, with the sloppy sound mix I found it to be a lot of noise.  A Song I Heard the Ocean Sing was long and jammy, and It's Ice was dark and dirty before they closed the set with Walls of the Cave, which took 10 of its 12 minutes to build into a worthy explosion of energy.  There was a guy two rows behind us blowing up the kind of balloons you make balloon animals out of, and carefully launching them in a regular stream out over the crowd.

At the set break, Senor came down to sit with us, and he shared my disappointment over the first set.  I've seen a lot of Phish shows and the common theme in all of them is frenzied crowd energy.  It just wasn't there - a result, I think, of the disjointed song selection.  Reading some reviews this morning, however, people are calling this one of the best shows of the tour, so who knows.  All I can say is that the first set seriously lacked a strong energetic vibe.

All of that changed in set two.  Perhaps the crowd was coiled like a snake waiting to strike - the Possum opener absolutely BLEW UP the joint.  A very loud, very intense 10 minute Possum seemed like a relief to the crowd, who finally got to explode in a Kuroda-driven series of halogen-lit peaks.  There was no settling down in this set, as Light followed and kicked off a stream of segues that saw the band continue without break for most of the rest of the set.  Mike's Song started, as usual, happy and bright, and ended raucous and pounding, with Senor dancing in the row behind us playing multiple air-instruments at the same time.  Mike's jammed out before settling into the novelties of Simple and Makisupa Policeman, where Trey sang the lyric "Woke up this morning, all I could do was shrug.  Go back in my bedroom and smoke another nug."  Makisupa flowed into Night Nurse, a reggae cover, which morphed back into Makisupa, and was then followed by and upbeat Wedge.

Ghost followed, and was dark and searing - 11 minutes of filth - before another novelty, the Mango Song.  One review I read today said that Mango only got played because they butchered the opening segue back into Weekapaug Groove, which came out like Mango, so they went with it.  I noticed at one point that Trey was directing the band - he said something to Mike, who went to tell Fishman, but Fishman was looking into the crowd and spacing out, so Mike had to stand there for 3 minutes before Fishman turned and finally got the call.  At one point a girl in the first few rows got up on a guy's shoulders and flashed Trey.

Weekapaug jammed back into Llama, which closed the set in a firestorm of noise, light and energy.  Sadly, Show of Life was a mellow encore, missing an opportunity to put a real stamp on the night.

An insane second set made up for an energy lacking (although rarity bust-out filled) first set, and sent the mass of wooks out into the hallways of the Verizon Center still whoooping en masse.   I made it home in half an hour, and settled into bed to a ringing in my ears...

-KD

Insider Trading Redux

Last week I wrote a post about potential difficulties in identifying insider trading.  The post and the comments are worth a read - if for nothing more than to illustrate how cloudy the topic can be.

Today, NYT Dealbook's Andrew Ross Sorkin visits the subject, with another interesting case:

"Have you heard about the railroad workers charged with insider trading?

Late last month, the Securities and Exchange Commission brought an unusual and colorful insider-trading case: It accused two employees who worked in the rail yard of Florida East Coast Industries and their relatives of making more than $1 million by trading on inside information about the takeover of the company.

How did these employees — a mechanical engineer and a trainman — know their company was on the block?

Well, they were very observant.

They noticed “there were an unusual number of daytime tours” of the rail yard, the S.E.C. said in its complaint, with “people dressed in business attire.”

The case is raising eyebrows — and some important questions — about what constitutes insider trading at a time when the government is taking a tougher line against Wall Street and white-collar crime."

later:

"The S.E.C. claims that Mr. Griffiths and Mr. Steffes acted on more than a hunch. The commission says that “shortly after the tours began, a number of F.E.C.R.’s rail yard employees began expressing concerns that F.E.C.R. was being sold, and that their jobs could be affected by any such sale.”

The S.E.C. also claims that Mr. Griffiths was asked by the company’s chief financial officer for a “list of all of the locomotives, freight cars, trailers and containers owned by F.E.C.R., along with their corresponding valuations, which she had never requested before.” Florida East Coast Railway, or F.E.C.R., was a wholly owned subsidiary of Florida East Coast Industries.

Is all of that material information? Clearly, it is all nonpublic. But without being told directly that a deal was in the works, did the men actually have inside information?

Sorkin relates a good rule of thumb, pretty much the same as the one I proffered in the comments of my previous thread: "A safe maxim might be: “If you have to ask if it’s right or wrong, it’s probably wrong.”

EDIT: thanks to commenter UrbanAnalyst for pointing me toward the official SEC complaint.  It's a must read for anyone wanting to comment intelligently on the details of this case.  

-KD

Phish - 10/22/10 - Providence: 1000 Barefoot Children Outside Dancing On My Lawn

Friday I journeyed down to Boston to meet my brother-in-law, Dan, and then we continued on down to Providence to catch Phish at "The Dunk" - The Dunkin' Donuts Center, formerly the Providence Civic Center (where I saw Smashing Pumpkins some 15 years earlier).

Traffic to Boston was brutal, and even worse continuing to Providence, but we made it to the room Dan's buddy Glen had secured in the 4 star (sarcasm) establishment that is the Seekonk, MA Ramada Inn.  The hotel had been overrun by Phishheads, and they had the staff flummoxed.  As we were walking in, we saw a pack of 8 wooks with their own camping gear piling into a room down the hall.   We had a mere hour to pre-party, but Glen had smartly hooked up pizzas and beer already, and we ripped through them like a tornado.  Upon trying to get a cab to the venue at 7:30, we realized that we had a problem, as there was a 30 minute delay.  We managed to pile in with a nice couple who had already been waiting 45 minutes, and thanked them by paying for the cab, which got us to the venue at 8:05.  We made it to our seats and had 90 seconds before the lights went down and Mike Gordon's base wanked out the opening chords of Down With Disease - one of my favorite Phish songs.  

The crowd was fired up, and DwD was tight and short, followed by Funky Bitch.   Fluffhead was somewhat of a surprise next, and as they entered the dissonant jam part I went in search of Dan and Glen, who'd gone for beers 15 minutes earlier.  I found them 2nd in line, dealing with a Bajungi tilt situation in the incompetent beer girl.  Glen had a bunch of speeding tickets, so his license was, for a time, restricted - it says "valid 7am to 7pm" on it.  As he gave it to young Brittany, she looked at it, looked at her watch, and said "It's after 7pm, I can't serve you."  That should have been really funny, but she wasn't joking.  Glen provided another expired license, and after checking with her supervisor, Brittany said she couldn't serve him.  

"Ok - just 6 beers then, instead of 8,"  I countered, aiming to confuse and confound.

"You only have 2 people," she was getting more confused.

"No - there are three of us," I pestered, but she informed me that Glen couldn't be served and that I'd get in trouble if I handed the beers to him.  "Ohhh okayyyy," I mocked, as I handed the beers to Dan, who handed them to Glen.  Brittany then tried to short me $20 on my change, which I somehow caught, and then Dan made me laugh when he said "I'm just gonna stand here and order 2 more beers,"  which he did, and Brittany blurted out, "HEY - you TRICKED me!" as she woke up to the simple reality of the situation.

We returned to our seats for the end of Fluffhead and were hit with Roses are Free - a Ween cover - which gave me the opportunity to tell the classic Ween story of when I was out in NYC a few years ago with Dirty Dave and JC.  Dave somehow was in touch with a friend of a friend of a friend who was at a party with Ween at the La Quinta Inn near Herald Square.  "If you want to destroy my sweater?"  I sang out - but Dave chided me: "WEEEEEEN - not Weezer."  We ended up in a surreal scene, walking into the "penthouse" at the La Quinta.  It was a smoke filled room straight out of a Quentin Tarantino movie, with girls passed out in the bathtub (clothed) and weird music playing.  We beat a hasty retreat.  Anyway, back to the Dunk:

Rift was hot, and the lyric "and shocked and persuaded my soul to ignite," resonated with me, as the crowd bounced into a frenzy.    Moma Dance confused me, despite the fact that I've seen it many times, and Ocelot was a nice happy shift.  I love NICU, and spent the next 36 hours whistling the melody while chanting the refrain "Would you please, make clear to me, I'm peering out through your opacity. And you've rehearsed tomorrow's verse, forgive me if I don't sing in your key."

I tried to put Dr. Pauly on tilt during Sample in a Jar by sending him a text that said "Sample is the nuts," but it didn't work, and a raging Julius closed the first set.  Pauly came down to visit us during the set break, and I gave him his ticket for Tuesday's Manchester, NH show, which we'll be going to together.  I chatted briefly with the crew of guys behind us, who were from Concord NH!  They gave me tips on the Concord hot spots, and talked about the afterparty.

Rock and Roll got people back in their seats, but the dark and angry Carini got the crowd frenzied for real.  It's always hard to describe the audience at a live show, and even in video it rarely translates, but Carini was the beginning of some serious bee-hive activity inside the Dunk.  They slowed it down with a song I've never heard before "My Problem Right There," but I thought it was a pretty good song.  Interestingly, Phish's fans seem to know EVERY song they every play from the first note, but it was clear that I wasn't the only one who didn't know this song - the vast majority of the crowd seemed unaware, but also seemed to like it. 

From there, the roller coaster picked up speed - Mike's Song was intense, and Sanity in the middle of the Weekapaug sandwich pleased the crowd greatly.  Suzy Greenberg was the intensity highlight of the night - with pure energy exploding from the band and the crowd in one.  I swallowed my gum while screaming "SUUUUU-ZEEE, SU-ZEEEE, SUUU-ZEEE SUUU ZEEE, SUUUUU ZEEEE SUUUUZEEEEE GREEENBERG" and jumping up and down, but I rallied and recovered.  Light followed, then Character Zero and 2001, which generated the expected enthusiasm from the crowd.

Not quite done, Loving Cup pushed it over the edge, and First Tube as an encore was, strangely, almost a letdown from the frenetic atmosphere that had been established.  I normally find First Tube to be one of the most intense songs Phish plays, and have seem some sick versions of it - but this night it just didn't work for me.  Maybe I'll change my mind when I listen to the MP3s again.

We'll do it again on Tuesday

-KD

Foreclosures vs Short Sales vs Principal Modifications

When homeowners are unable to pay their mortgage, there are basically a few options that the banks have.   First, they can foreclose on the home - take back the home which is the collateral for the loan they made.  Second, since so many of today's homeowners are "underwater" on their mortgages - owing more than the value of their home, and are unable to pay, banks could write down the value of the outstanding loan, since the collateral isn't worth as much as the loan is anyway, in an effort to keep the homeowner in the home and eventually recoup the market value of the home via a .  A third solution is allow a "short sale" where the homeowner sells the house for less than they owe on the mortgage - ie, they sell the house for $200k and the banks takes that money instead of the $250k that's owed on the mortgage.

I previously discussed a reason why banks may not want to do principal writedowns, and MISH touched on it again last week - it creates incentive for people to fall behind on their mortgage.  Although the bank may actually be better off by allowing the person in the home to replace a $250k mortgage with a $200k mortgage that reflects the current value of the home, which is the value that the bank would get if they foreclosed (actually, the bank typically gets less by foreclosing, because of all the expenses involved), doing so creates incentive for other borrowers to seek the same deal, which is potentially disastrous for the banks who are desperately trying to avoid a massive wave of strategic defaults.  By taking a hard line against principal writedowns, the banks avoid giving borrowers the impression that they can get a "benefit" of sorts by deliberately becoming delinquent. 

Short sales, on the other hand, seem like a slam dunk for the banks - instead of having to foreclose, remove the borrower from the house and sell the house themselves -  the banks merely have to accept less than the value of the mortgage in a sale of the house.  Since the value of the house bears no resemblance to the outstanding mortgage, I would think that the banks would like this deal - homeowners are hardly going to take advantage of banks by executing short sales (although there are potential ways that people try to beat the system with short sales, like having a friend buy the house on the cheap and then sell it back to them).  As long as the banks have a decent estimate of the market value of the home, it seems clear to me that they should prefer a short sale at fair market value to a foreclosure which would then result in the bank attempting to garner fair market value anyway through their own sale process.

Which brings me to today's NY Times article about how hard it is to get short sales done - banks prefer to foreclose, for some mysterious reason.  I still talk to my realtor regularly, and he confirmed that it's extremely difficult to get responses - never mind acceptances - from banks on short sale related transactions.  The only "sensible" explanation I've seen is the one in the NY Times article:

"But less obvious financial incentives can push toward a foreclosure rather than a short sale. Servicers can reap high fees from foreclosures. And lenders can try to collect on private mortgage insurance.

Some advocates and real estate agents also point to an April 2009 regulatory change in an obscure federal accounting law. The change, in effect, allowed banks to foreclose on a home without having to write down a loss until that home was sold. By contrast, if a bank agrees to a short sale, it must mark the loss immediately."

Ahhh - so we have the "pretend we aren't really taking a loss on this" extend and pretend game, and also the interesting angle of the potential ability of lenders to collect on mortgage insurance in foreclosures, but not short sales.  Of course, there are also the skewed incentives of servicers who process foreclosures.

Am I missing anything else?  Is there any other reason banks should prefer foreclosures to short sales - aside from this accounting quirk?  I guess if banks were bullish on the real estate market and simply felt that they'd make more in the foreclosure process than the short sale process as housing prices rebounded, that might make sense, but I doubt the banks are so delusional in today's market.

NOTE:  this post has nothing to do with ForeclosureGate, and I don't want the discussion to revolve around ForeclosureGate either - I'm just trying to understand the banks' seemingly bizarre actions in preferring foreclosures over short sales.

-KD

Let's Second Guess Mike Tomlin

Last week I questioned Bill Belichick's decision to throw a Hail Mary at the end of regulation instead of attempting a super long field goal.  Today I was similarly baffled by Pittsburgh Steeler coach Mike Tomlin's decision to let the clock expire at the end of the first half.

Pittsburgh had a 17-16 lead, and two timeouts, with a third down around the Miami 38 yard line and roughly 30 seconds left.  Ben Roethlesberger got sacked back at the Miami 40 yard line, and Pittsburgh let the clock expire instead of calling a timeout and attempting either a 57 yard field goal or a Hail Mary.

I just don't understand this.  There is no chance that the field goal attempt is negative expected value.  Jeff Reed's career long is 51 yards I think, but I'd guess that most NFL kickers will make a 57 yard FG - what - at least 20% of the time?  Readers last week made the comment that a Hail Mary had less potential downside than a long field goal attempt - that argument is more true with a 63 yard FG than a 57 yard FG - but still - why not take another shot at the endzone if you don't want to kick the FG?

Miami suffered a tough beat at the end of this game when Roethlisberger fumbled on the goal line, but the play was prematurely blown dead and ruled a touchdown before the officials made a ruling about who had recovered the ball.  Miami challenged the play, and the review showed that Roethlisberger did indeed fumble the ball before crossing the goal line, but there was not conclusive evidence of who recovered the ball, so by rule Pittsburgh keeps the ball on the half yard line - where they promptly kicked the game winning field goal.

-KD

Gone Phishin'

I'm driving down to Boston and then Providence this afternoon to see Phish at the Dunkin' Donuts center.  Then the band will come up to Manchester on Tuesday and I'll see them again.

Recaps to follow...

-KD

Circle of Life

Ah hah - you thought that the title "Circle of Life" was going to be related to some interesting New Hampshire wildlife experience I had?  No - I'm thinking of the big headline yesterday about Pimco, Blackrock and the NY Fed pushing to putback faulty mortgage backed securities to Bank of America.

Now, it's not that I don't want BAC to have to buyback fraudulent or faulty crap that they created - I do - but the NY Fed's involvement?  What will happen? The NY Fed will put this crap back to BAC, which will result in BAC spending all their money and needing another bailout, which will then be provided by... that's right - you're one step ahead of me this morning - THE NEW YORK FED!   The circle of life.  Beautiful.

The other story bugging me this morning is the absurd spin-job "Wall Street Bailout returns 8.2%, beating Treasury bonds."

"The U.S. government’s bailout of financial firms through the Troubled Asset Relief Program provided taxpayers with higher returns than they could have made buying 30-year Treasury bonds -- enough money to fund the Securities and Exchange Commission for the next two decades. 

The government has earned $25.2 billion on its investment of $309 billion in banks and insurance companies, an 8.2 percent return over two years, according to data compiled by Bloomberg. That beat U.S. Treasuries, high-yield savings accounts, money- market funds and certificates of deposit. Investing in the stock market or gold would have paid off better."

I'm not going to spend a ton of time on this one, but to say that the investment was "$309B" is flat out ludicrous.  You can think up your own analogy, but the one I'm thinking of is if you bought stock in a factory, perhaps, for $1B.  Then you spend another $5B buying everything that the factory produces, and thus your "stock" investment turned a profit of $100M.  "Hey look - I have a $100MM profit on a $1B investment!"  You boast - only your true investment was much more than $1B.

Now, that analogy isn't perfect, obviously, as the Treasury/Fed won't lose all of the other money they've invested (the TRILLION they've spent buying MBS and Treasuries, for example) - they might not even lose any of it.  But it's still Ponzi math to high five and annualize returns based on the equity portion.  We won't even get into the intangible effects of the bailouts (savers earning 0%, asset price inflation, moral hazard, etc).

-KD

Insider Trading and Material Non-Public Information

One of the first things any new hire on Wall Street, or any executive in a publicly traded corporation, learns about is the laws pertaining to insider trading.  Individuals are prevented from trading on material non-public information, and from tipping off their friends to trade on such information as well.  The cases aren't always crystal clear in terms of legality, but this one seems pretty easy, and I would have gotten in wrong (although, on the correct side - the side that says "don't do it!")

From Bloomberg:

"Your senator learns that a much- maligned weapons system now has enough votes for funding. Before the news gets to a reporter, he buys shares in the arms manufacturer for a quick, handsome profit.

What’s wrong with this picture? Nothing, according to the law. Nor would it be illegal for him to tip someone else, say, his largest campaign contributor"

Now, it seems pretty clear to me that this is material non-public information.  What's the "reasoning" behind the legality of it then?

"Laws that criminalize insider trading cover corporate insiders and those they tip, but not specifically Congress. And while scholars differ on whether existing law could be applied on Capitol Hill, it hasn’t been."

I never really thought about the fact that insider trading laws cover only corporate insiders.  Congressmen are not corporate insiders, thus they are not covered!  Pretty surprising - if there are any securities lawyers in my audience, make your opinions known in the comments - could the existing law be applied to Congressmen?  There is another article linked to from the Bloomberg article that says that the answer is "no." (of course the whole point of the article itself is that the answer is "no!"  Actually, let me talk for just a second about the claim that linked article makes:

"This Comment argues against prohibiting trading on political intelligence by outside actors  (lobbyists and hedge funds) because these actors are merely the Washington equivalents of market analysts, whose information gathering functions are perfectly legitimate, if not desirable."

Huh?  Market analysts?  No - they are getting material non-public information from policy makers!  Just like it's illegal to trade on this information when it comes from company insiders, it should be illegal to trade on this information when it comes from policy makers.

It seems impossible to me that one could make the argument that if Congress is holding confidential talks about a bailout of the big banks, that it should be legal for Congressmen to trade on that information - or even that it is legal!  As the article notes, "scholars differ whether existing law could be applied on Capitol Hill."

“This is an area in which the public is quite justifiably suspicious about dual standards,” says Representative Brian Baird, a Democrat from Washington state. 

Along with New York Democrat Louise Slaughter, Baird has been trying to apply insider trading law to Congress through the Stop Trading on Congressional Knowledge bill..."

...

"But when it comes to forbidding members of Congress from using access to secrets for financial enrichment, Slaughter and Baird have gotten nowhere on their bill. Now Baird’s retiring. 

He says Congress could solve the problem without a new law or a repeal of an old one. 

“It’s not that we have laws protecting us,” Baird says. “We don’t have laws applying it to us.” 

All it would take is a change in ethics rules, which now generally forbid conflicts of interest and using official influence for personal gain.

EDIT - how about this from the SEC's website:

"Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security. Insider trading violations may also include "tipping" such information, securities trading by the person "tipped," and securities trading by those who misappropriate such information." 

Examples of insider trading cases that have been brought by the SEC are cases against:

-Employees of law, banking, brokerage and printing firms who were given such information to provide services to the corporation whose securities they traded;

-Government employees who learned of such information because of their employment by the government;"

I guess they are talking about something else other than policy makers?  Maybe, like, it's illegal for the Chairman of the FDA to short the stock of a drug company whose drug his administration is about to reject?

-KD

Let's Second Guess Bill Belichick

The Patriots won a great game today against the Baltimore Ravens.  Coming back from a 20-10 deficit, the Pats tied the game, and had a chance to win it at the end of regulation.  They had 4th down and 1 from Baltimore's  44 yard line, with 4 seconds on the clock, and called timeout.  

Do you a) bring in Stephen Gostkowski to attempt a 62 yard field goal for the win?  or b) throw a Hail Mary?   Now, Gostkowski's career long is 53 yards, and he did have the wind at his back here.   I think you kick the field goal, but by doing so, I guess you risk a block/runback.  Also, by throwing the Hail Mary, you give yourself the opportunity to draw a pass interference penalty.  What say ye, the readers?

The Pats went for the Hail Mary, had a legitimate chance to make a play, but failed.  They eventually won in OT, after a key field position reversal coming off of Zoltan Mesko's punt from inside his own 15 yard line - a 65 yard boomer that put Baltimore back near their own 20.

Another fast fact that Phil Simms mentioned:  Deion Branch, returning to the Patriots after four years in Seattle, had kept his condo down the street from Gillette Stadium the entire time he was gone - but he sold it two months ago, and was then traded back to the Patriots last week!  Bad beat!

-KD

SKUNK! What to do?

Perhaps solving my skunk problem will be easier than solving ForeClosure Gate.  Here's the problem:  there's a skunk in my 'hood. And by my 'hood, I mean, he has made my yard his domain.  This wouldn't generally be a huge deal - he keeps to himself during the day, and wanders away when we see him at night - but I have two small dogs, and I really don't want them to have a skunk encounter.  Oscar has "found" the skunk twice now in the last week on our nighttime walks, but fortunately has responded when called back instead of attacking the skunk.  

I worry that it's inevitable that an Oscar-skunk confrontation will eventually occur if I don't take action here.  Note - the skunk doesn't appear to be eating my garbage or anything - he may be snacking on my garden, although I've seen no evidence.

So, the questions:  Oscar and Griffey are off leash when we go outside during the day - what are the chances that they find the skunk during the day?  Where do skunks chill out?  I think he lives in a drainage pipe/ditch along my property - Oscar has been sniffing over there relentlessly.   Oscar runs over to one of the pipes every morning first thing when we go outside.   Does it make any sense to try to catch the skunk in a have-a-heart trap or something?    Sounds like a really bad idea.

Last week, when I spotted the skunk for the first time, he shrugged and waddled toward the street.  I pursued him from about 30 yards, and he turned to look at me, and raised his tail (while facing me) as if to say "Hey jackass - I'm a f'n SKUNK - you do NOT want any of this," and then turned and went on his way.  Last night, we encountered him as soon as we walked out the door - and he ambled into our forsythia bush.   Oscar goes BEZERK when he picks up the skunk's scent - running back and forth like a hunting dog who has locked onto his prey...

-KD

Promise - The Springsteen Documentary

I finally got around to watching The Promise - The Making of Darkness on the Edge of Town - a documentary on HBO about the making of Bruce Springsteen's Darkness album.  The footage is priceless for any Boss fan - I can't get enough of scrawny 1975 Bruce standing around in his Holmdell farmhouse basement jamming with the E Street Band and watching him create the albums that would put him on the map.   The highlight of the documentary was a clip of Bruce and Steve Van Zandt jamming an early version of what would later become Sherry Darling on The River.    Bruce is on piano, and Stevie is playing drums on the padded cover of the studio piano.  At the end, Bruce turns to the camera and and says "The one and only version of this phenomenal song you have captured on tape,"  yet it became a staple on his next album, of course.  Priceless - starting around 1:30 in the embedded vid below:

Bruce Springsteen - "The Promise: The Making of 'Darkness on the Edge of Town'" Sneak Peek from Columbia Records on Vimeo.

The other cool thing in the documentary is that it seemed that Bruce frequently wrote music before he wrote songs.  They spend a lot of time talking about Bruce's massive book of lyrics, but it seemed like he generally used those to fill in missing verses and concepts after the fact, and that it started with the music.  At one time, he describes the process of writing Badlands, where the only lyric he had was "Badlands" at the end of the verse, but he had the music for the verse written in his head.

Another interesting segment is about how Bruce hated the studio sound - where everything was set up so that there was no reverberation or natural sound at all.  As a band who made their mark playing live shows, they couldn't stand the washed out studio sound, and spent full days just trying to get Max Weinberg's snare drum to resonate properly.

I could watch clips of 1975 Bruce all day long, and I'd recommend catching this documentary to any Springsteen fan.

-KD

ForeclosureGate - How Do We Resolve It?

I've been reluctant to write about ForeclosureGate because a lot of other people are writing much better analysis of the problem.  I'm going to approach this topic from the view of someone who doesn't understand what the hubbub is about. (Yes - I understand that the rule of law was broken, we'll get to that).

David Streitfeld, in today's NY Times, tells the story of the house in Maine that kicked off the entire crisis (by the way, if you have no idea what I'm talking about, a good place to start is here).  Let's pull some facts from Streitfeld's article:

"Nicolle Bradbury bought this house seven years ago for $75,000, a major step up from the trailer she had been living in with her family. But she lost her job and the $474 monthly mortgage payment became difficult, then impossible."

She got foreclosed on, and contacted a non-profit legal group for assistance.

"Mr. Cox realized almost immediately that Mrs. Bradbury’s foreclosure file did not look right. The documents from the lender, GMAC Mortgage, were approved by an employee whose title was “limited signing officer,” an indication to the lawyer that his knowledge of the case was effectively nonexistent. 

Mr. Cox eventually won the right to depose the employee, who casually acknowledged that he had prepared 400 foreclosures a day for GMAC and that contrary to his sworn statements, they had not been reviewed by him or anyone else."

She hasn't paid her mortgage in a long time...

"It has been two years since she last paid the mortgage, which surprises even her lawyers.

“Had GMAC followed the legal requirements, she would have lost her home a long time ago,” acknowledged Geoffrey S. Lewis, another lawyer handling her case."

How did she get into this house in the first place?  With a zero down loan, plus another loan for renovations:

"In 2003, her brother-in-law at the time offered to sell her a house on property adjacent to his. It was across from a noisy construction supply site. But it was ringed by maple, evergreen and willow trees, and who does not want to be a homeowner, especially when GMAC Mortgage will give you a loan for the entire purchase price and then another loan to improve the property?"

But the key point here is that GMAC "cheated" in the foreclosure process - they did not follow due process, the Rule of Law.  The second paragraph below has the details - signing officers are fraudulently attesting to statements of fact:

"Mr. Cox vowed to a colleague that he would expose GMAC’s process and its limited signing officer, Jeffrey Stephan. A lawyer in another foreclosure case had already deposed Mr. Stephan, but Mr. Cox wanted to take the questioning much further. In June, he got his chance. A few weeks later, he spelled out in a court filing what he had learned from the robo-signer: 

“When Stephan says in an affidavit that he has personal knowledge of the facts stated in his affidavits, he doesn’t. When he says that he has custody and control of the loan documents, he doesn’t. When he says that he is attaching ‘a true and accurate’ copy of a note or a mortgage, he has no idea if that is so, because he does not look at the exhibits. When he makes any other statement of fact, he has no idea if it is true. When the notary says that Stephan appeared before him or her, he didn’t.”"

The end of the article:

"GMAC, which this week expanded its foreclosure freeze to the entire country, is not giving up on Mrs. Bradbury. It will try for the third time to evict her when the case goes to trial this winter. 

If Mrs. Bradbury is not quite victorious, she is still in her house, and for her that is the only thing that counts. If she can get her pickup fixed, she will go back to looking for a job. 

“I am not leaving,” she said this week, standing out on her front lawn, the autumn splendor spread all around her. “We have nowhere to go.”"

Now, let's discuss this, shall we?  Because I don't think this article helps the layperson (myself included!) understand how this problem gets fixed, or what the solution is.

The facts as I see them are these:

-GMAC was grossly incompetent - they gave Mrs. Bradbury a loan she probably never should have gotten (zero down + a second mortgage!), and then couldn't even foreclose on it properly.

- The result of GMAC's incompetence is that Mrs. Bradbury has been able to stay in her home longer than she should have - she's the beneficiary of GMAC's incompetence.

- Mrs. Bradbury hasn't paid her mortgage in two years - a wicked long time, even by her own lawers' admission, and should have been foreclosed on legally already

- But GMAC's foreclosure process was flawed - the signing officer who signed the documents didn't actually review them.

Now - I ask the readers - What is the solution here?

Have someone look at the docs, verify the information, and foreclose on Mrs. Bradbury? 

Actually, GMAC already tried that, and they screwed it up again!  From the article:

"In a ruling late last month, Judge Powers said that GMAC, despite its expensive legal talent and the fact that it got “a second bite of the apple” by filing amended foreclosure papers, still could not get this eviction right.

Even the amended documents did not bother to include the actual street address of the property it was trying to seize — reason enough, the judge wrote, to reject the request for immediate foreclosure without a trial."

Note - I'm talking about THIS SPECIFIC CASE.  There are clearly other cases where there are disputes about exactly how much money is owed on a mortgage balance, and the banks don't have their details down. 

In the end, I'm not sure Mrs. Bradbury's case is a very good example of the real problems (relating to questions of title and ownership) behind ForeclosureGate.  It seems that this case is more one of gross incompetence on GMAC's part, and how it results in a delinquent homeowner being able to benefit for a period of time from that incompetence.

The bigger problems lie where the banks are missing the actual mortgage notes (I didn't get the impression that was the problem in this case) - what do we do in those cases?    Do we tell the bank that if they can't produce Mrs. Bradbury's (or others') Note then she gets to keep the house?   Something else?


There is a whole other issue too, aside from the homeowners.  The purchasers of mortgage backed securities have clauses in many of their issues that say that they can "put" the notes back to the issuing bank (ie, force the banks to buy them back) if the notes aren't delivered.  See Mike @ Rortybomb's multi-part series on those details.

-KD

Quote of the Day - Ben Bernanke

“One disadvantage of asset purchases relative to conventional monetary policy is that we have much less experience in judging the economic effects of this policy instrument, which makes it challenging to determine the appropriate quantity and pace of purchases and to communicate this policy response to the public,”                     

Ben Bernanke, quoted in the NY Times, 10/15/10

-KD

Kid Dynamite Butchers A Cow

If you missed my earlier piece on the actual slaughter of the cow, you need to go read it now.

Saturday, I returned to Paul's house to help with the butchering of the cow.  Sadly, readers will be disappointed to know that since this cow was the equivalent of an Old Nag, the whole thing was ground up into hamburger meat.  In other words, we didn't end up with a pile of t-bones, porterhouse, fillets, skirt steak, brisket, flank steaks, rump roasts, etc. 

When I arrived at Paul's house, they were sitting down to lunch, and had prepared some shish-k-bob meat from both our cow and the bull they'd slaughtered the week before.  The bull, a prime 2 1/2 year old specimen, was a much higher quality of meat, and there were a few t-bones on the table.  I forgot to ask if they had to castrate the bull well before slaughter.  I would have thought that otherwise the meat would have been very tough on account of the bull's muscular structure.

We went down to the basement where Paul and his son-in-law Rick had brought the quarters in from the meat fridge.

I was handed a knife, and 5 of us stood around a waist high table for over 5 hours cleaning the meat.  As I said, the meat was too tough to make steaks out of, but I asked Rick to show me where the various cuts came from, so I did get to learn a little bit about the process, even if the finished product wasn't what I was expecting.    We basically repeatedly cut off hunks of meat and bone, carved the meat off the bone, carved the connective tissue off the meat, then threw it in a big bucket.  The outside surface dried into a texture similar to jerky, and that was also removed and discarded.

Here's a pic of the shank, which was cut up to make marrow bones for the dogs.  The meat in the picture gets cleaned and thrown in the burger bucket.

I brought home a few marrow bones for Oscar and Mr. Griffey.  They devoured them on Monday afternoon:

At one point, I managed to negotiate receipt of the neck/spine - it was a roughly 2 foot piece of half the spine, with vertebrae laden with meat. It would have made a top notch soup stock.  I called my wife with the good news, but she was none too happy.  I expected her to understand that when a cat brings you home a mouse, it's a sign that they love you, and when I was bringing her home the delicacy that is the cow spine, the intent was similar.  It was my fault for explaining poorly though, as Mrs. Dynamite was expecting a 4 foot cow-spine, which was a no-go considering that we had company coming over.  She was pissed, I could tell, and I abandoned the spine.  Mike told me I didn't market it very well to her over the phone - he said I should have just said I was bringing home soup bones.  

Brisket, soup bones, and a chuck roast:

My precious spine:

Finally, when the entire cow was chunked up into clean meat, we fired up the grinder and ground it into the leanest hamburger you'll ever see.  This is what we had before it went into the grinder:

And this is what came out:

There were two 30-gallon trashcans like this full of pre-grinder meat:

They graciously gave me a Ziploc baggie filled with a few pounds of hamburger meat, and I made up some burgers Tuesday night. I had to add egg for some sort of fat, and then breadcrumbs too, as the meat was just too soft for me to form into burgers.  I guess I'm used to the growth hormone riddled meat in the supermarket that holds its shape like Play-doh when you mold it.  In the end, I packed it into some nice lean 1/3rd pounders, and grilled them up for dinner and again for lunch the next day.  They were terrific (topped with homemade jalapeno pickles and home grown tomatoes), and the pasture-to-plate process was complete!

-KD

JOE: Bull vs Bear

David Einhorn made a splash today by detailing his short thesis on The St Joe Company (ticker: JOE).  Dealbreaker has a copy of the presentation here.  It's well worth flipping through the 139 pages.

Broyhill Asset Management, on the other hand, has a bull case on JOE, courtesy of Market Folly.

I guess Fairholme also owns a huge chunk of JOE, but I haven't seen their long thesis.  Einhorn reportedly reached out to them, but nothing came of it.

I have no position in the stock, but I find Einhorn's argument more compelling.


EDIT:  Market folly has more, as does The Rational Walk

-KD

Maxine Waters: Just Write it Off!

Maxine Waters channeled her inner Kramer - not Jim Cramer - Cosmo Kramer - when she suggested today that it was possible to have mortgage mods with principle reductions and not have any party incur losses.   Just write it off!   Mark Haines does a good job talking to her like she's a third grader, but Maxine, as usual, just goes off on a tangent when she gets backed into a corner.

For some reason, I'm having trouble embedding the video, but please click over to CNBC and watch the Maxine Waters video, then watch this classic Seinfeld clip:





-KD

JPM Earnings - Earning Interest on Borrowings?

As most people know, banks pay interest on liabilities (deposits) and earn interest on assets (loans).

A friend alerted me to an interesting line in their 8k which I'm sure some bank balance sheet expert can shed more light on.

So there are two sections on the balance sheet for interest rates.  The first is "Interest-Earning Assets" - which lists the assets that JPM earned interest on, and the rates earned:

Interest-Earning Assets

Deposits with banks:  .85%

Fed Funds Sold and Securities Purchased under Resale agreements: .92%

Securities Borrowed:  .22%

Trading Assets (debt instruments):  4.37%

Securities: 2.67%

Loans: 5.71%

Other assets: 1.57%

Total Interest Earning Assets:  3.75%

Right below that section is "Interest-Bearing Liabilities"

Interest-Bearing Liabilities

Interest bearing deposits: .51%

Fed Funds Purchased and Securities Sold under Repurchase Agreements: NEGATIVE .28%

Commercial Paper:  .20%

Trading Liabilities (Debt Instruments): 2.64%

Other borrowings/Liabilities: .54%

Beneficial Interests (VIEs) : 1.36%

Long Term Debt: 2.34%

Total  Interest Bearing Liabilities: .81%

There's a footnote under the Fed Funds Purchased that says "Reflects a benefit from the favorable market environment from dollar-roll financings."

This is the root of my intrigue here:  JPM actually earned money (ie, they paid negative interest) on that line item under liabilities.  They got paid to borrow money!

From the two tables, you can see that JPM got paid 28bps to "purchase" (borrow) Fed Funds, and "sold" (lent) Fed Funds at 92bps!  That's a nice money printing machine!

Is this related to stock loan (or fixed income loan) somehow - is that what the repurchase agreement refers to?  Or just regular overnight open market operations?  Anyone?  Thoughts?  Did the Fed pay JPM to borrow money, which JPM then lent to other banks and got paid again for?  (I doubt it, but I don't know)  What does that "dollar-roll financings" footnote mean?  If they benefited on their borrowings from favorable dollar-roll financings, then why didn't they get hit on their loans by the same phenomenon?

Anyone?  Beuller?

EDIT:  is this related to the 25bps that the Fed pays on excess reserves on deposit?

-KD

Surreal Headline of the Day - The Onion?

It's that time again - one of these headlines is from satirical fake news site The Onion, and the other one is from The Street.com.  

1) MGM Stock Offering Not Enough To Lift Stock

2) Congress Sets Sail in Search of Fabled Sword of Bipartisanship

Tough one, right?  I mean, could The Street.com really think that MGM stock would trade higher on a 69mm share secondary offering?  Seriously?  Yes - they did think that - the MGM story is the real one from The Street.com.  Sadly. 

Perversely, the author seems to be trying to use some sort of Bizarro Keynesian logic whereby MGM can increase the value of its equity by decreasing its debt load by issuing more equity to pay off the debt.  Of course, issuing more equity - wait for it... DILUTES THE VALUE OF THE EQUITY!

Whenever you need a good laugh today, just reread the headline "MGM Stock Offering Not Enough to Lift Stock."

-KD

disclosure: no MGM positions.

MGM, Inflation Swaps Redux, Mortgage Fraud, The Fed

If you read the Bloomberg story about MGM Resorts this morning you might think that they're doing a massive secondary offering because things are peachy!

" MGM Resorts International plans to sell about $550 million in stock, taking advantage of a 49 percent jump in the shares this year and signs that a record Las Vegas gambling slump is easing. 

The company, the biggest casino operator on the Las Vegas Strip, will sell 40.9 million shares, according to a statement yesterday. Founder and top shareholder Kirk Kerkorian will sell 27.8 million shares, reducing his holding after considering strategic alternatives for the past year. 

MGM and Kerkorian’s Tracinda Corp. are tapping public markets as a record slump in Las Vegas eases and casino stocks rally. Las Vegas Strip gambling revenue jumped 21 percent in August, Nevada’s Gaming Control Board said last week."

"Slump easing!"  And the very title of the article: "Vegas starts to recover!"

There's one problem. If you looked at MGM's earnings release, the numbers, even compared to the nine months from Jan-Sep 2009, which should have been the easiest comps in history, were pathetic.

I think the Reuters article on the subject paints a slightly more accurate picture, emphasis mine:

""It is surprising that Tracinda is selling a bunch of stock," said Jefferies and Co analyst David Katz. "It could be for any of a number of different reasons, of course, but none of them are positive."

That cuts all the sugar and spice out, doesn't it?  It reminds me of a quote from The Man, Steve Wynn:

"It is the job, and you can take this as a final statement on the subject going forward. It is the job of board of directors and especially of the CEO to take advantage of the market when that market movement is extreme. When a company increases its value by 100% in 60 days, that’s an unnatural movement of value and the market also goes the other way sometimes. These unnatural movements in value, no company gets to be worth twice as much in 60 days as it was before to any intelligent person, so when that happens, we take advantage of it. If everybody is so hungry for shares, we let them have some. If the shares go down, we buy them. And that, that is a statement of policy in this company, period."

I can translate that for you:  "Sold to you, SUCKA!" 

 

One thing that jumped out at me from MGM's earnings was this statement:

"CityCenter expects net revenues of $413 million in the third quarter, including $166 million related to residential operations, of which $28 million related to forfeited residential deposits."

$28mm in forfeited deposits!  You can do your own math  - I don't know what the average deposit was, but if it was $100k, that's 280 units. If it was $50k, that's 560 units.  

- Moving on, Nemo finally wrapped up the inflation swaps expectation debate we had more than a month ago.  I think he's agreeing with me.

"The moral is that risk and risk aversion are meaningless without reference to a portfolio."

- I haven't written at all about the foreclosure fraud crisis, and I hope not to for as long as possible - there are plenty of people out there who are doing great work on the subject, including Mike at Rorty bomb who is up to part 5 in his series on the whole shebang.  (That link has links to his other 4 parts as well).  Barry Ritholtz also has a good summary.

- The Pragmatic Capitalist (now: Pragmatic Capitalism) has been no fan of the Fed's handling of monetary policy, and I share his skepticism.  I snip his recent piece in its entirety:

"No wonder America is losing more and more of the wealth pie to Asia.  This quote from David Rosenberg pretty much speaks for itself:

“Brian Sack at the New York Fed stressed the need for the Fed’s actions to bolster asset inflation as to boost the wealth effect on spending (QE “adds to household wealth by keeping asset prices higher than they otherwise would be…”).  We just can’t seem to wean ourselves off this asset-dependent economy — and how directed by a Fed official that the attempt here is to bring asset values above their intrinsic value.  Amazing way to run an economy.  Whatever happened to skills, productivity, education, job creation, innovation?  Or thrift — when did that virtue become a dirty six-letter word?”

I’m thoroughly disgusted with the response of government over the last 24 months…."

-KD