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Wednesday June 10, 2009 7:55 A CDT
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Quiet Summer Wednesday - Too Quiet
Yup, life is sure 'normal'...but maybe too normal. Not that I'm the only one with a strange sort of feeling. Here's an email from a reader who catches it too:
"It is too quiet George . I just have a hunch ... here it is - Obama and Geithner toured the world looking for buyers of t-bills for auction this week - result- they scared buyers off more than anything .... auction will be a disaster tomorrow .... markets will see writing on the wall and commence dive .... or just before dive or during, war or some huge other disaster occurs providing cover for auction failure- just a hunch -it is just way too quiet , surreal today "
To be sure, the recent round of flag-raising in other countries doesn't seem to have created much in the way of good will. I mean when Chinese students laugh at an American Treasury Secretary, you know something is up. But what? The candidates might include:
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The Canadian gold scandal. Right now, it's been reported that the amount of gold missing from the Canada Mint facility is in the 10's of millions of dollars. But, what if the Mounties coming into it reveals that it's a much larger amount? That might shake things up a bit.
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Won't be triple witching week - that's not till the third Friday of the month which is a week plus two days from now.
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The Obama administration is seeking the 'fiscal responsibility mantel' which seems a little implausible, but as long as he's the MSM's darling, who knows what rebranding/repackaging will be attempted. Still, not something big in terms of the markets.
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Now, one thing that may move markets would be a leak that Middle Eastern sources are doing to demand gold for their oil - which has passed $70 a barrel now as the US revised predictions of a $16-barrel gain in the second half of this year. That's a potential upper limit on market action, and if the gold rumor turns out were confirmed, that would pop metals skyward. But would that account for that 'something's not right' feeling? Don't think so.
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No, I think that what is bothering me - and should be bothering the markets - is that according to the DTCC, there was "$27.8 Trillion of Credit derivatives outstanding as of June 5th" says tyhe Wall Street Journal.
Because the predictive linguistics project has another round of derivatives meltdown coming in the mid July to Mid August timeframe, I think it's important to put some things into perspective on the derivatives front.
The first thing I'd note is that the $27.8 trillion is the notional value of the underlying credit default swaps. The word "notional" means that that the full value (notion) could only become a real debt payable in full at the most extreme of economic conditions. At anything less, they can trade at a discount to notional...sort of analogous to how bonds trade at a discount to face value, is how I understand it.
That this popped up overnight, or even in the past two years, is not a correct assumption. My friend Cliff has many high-powered math friends who have been working lucrative computer programming gigs for the past 4-5 years at some of the biggest outfits in New York, because the pricing models to set CDS values have been stretched so far out of whack, that the modeled prices & values have stopped working.
Remember the AF 447 flight where were were lots of error messages sent before the plane went down? There's an analog in the financial markets about the math and native C guru's being called in several years ago to try and get financial models working right before the first part of the systemic collapse in October of 2008. The second leg down is within a month or two for the next leg down.
At an archetype (or design pattern search) an aware person might notice that in both the financial disaster and the AF 447 crash, black boxes are at the core of developments. The missing ones from AF 447, or in the derivatives disaster, the 'black box financial models' based on long & involved logic chains that humans may not be able to keep up with. Just a curious parallel to me.
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By the way - this grouping of a linguistic/archetype concept (here: black boxes) is what in time monk circles we refer to as a meta layer in the data. Once you see (usually with the help of modelspace, but this morning just using a bit of coffee) you can then taker the linguistically extensible path and go see what else is going on in the meta layer "black box" concept and trip over seeming innocuous headlines like "Progress Apama and Object Trading Ltd sign Partnership" where further detail emerges from the meta layer about the value of 'black boxes":
"The Progress Apama Algorithmic Trading Accelerator enables firms to quickly develop and deploy proprietary algorithmic techniques, achieving a dramatic advantage over commoditized “black box” offerings."
Black boxes are cool, and all, but while it's possible to make generalized trading decisions in advance and apply them in normal market conditions, where such models seem to have a 'soft underbelly' is when multiple assumed trading venues are impacted by extremely nonlinear events. Which means? How does a black box financial model perform under stress of something like the Russian markets closing for a couple of sessions as they did last fall?
Moreover, how do these black boxes work in an arbitrarily constrained market where there's the potential for a combination of closures as well as trading restrictions? Those are the design issues which the math whizzes figure they can deal with.
As we get into the next couple of months - and maybe even as late at October before we see the really BIG public awareness pop on this.
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Oh yeah, one other thing to pop out of this little extensible linguistics exercise: There's a British company that is out with something called the 'RoadHawk' digital driver protection system - a combination of GPS and video set up into a 'black box' for cars and trucks. Care to place a bet that within 5-years, insurance companies will be offering discounts for having this kind of 'black box' technology in your car, so that driver activity as video can be used as evidence in automobile injury cases?
Remember the concepts here: 'Meta layers' in data, extensible archetypical linguistics, and a slice of pie please.
Out From Under the TARP
While 10-banks may be able to get out from under TARP restrictions by repaying $68-billions, turns out Treasury also holds a bunch of warrants which will have to be redeemed, too. That will push the cost of out from under up to $73.1 billion if my pencil is working right this morning.
In some ways it's karmic justice to see banks getting treated like credit card users, but on the other hand, it's sad that they're in this position at all.
Balance of Trade Deficit Shrinking
If there's one good thing about the current international financial mess, it is that the amount of goods being brought into the US is declining and that has started what may be a longer term trend toward self-sufficiency; although speculation in that direction is likely way premature. While up a tad in the latest report out today from the Census Bureau, the increase in the latest figures is but a blip compared to previous Balance of Trade Deficits (BOTD's):
"The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that total April exports of $121.1 billion and imports of $150.3 billion resulted in a goods and services deficit of $29.2 billion, up from $28.5 billion in March, revised. April exports were $2.8 billon less than March exports of $123.9 billion. April imports were $2.2 billion less than March imports of $152.5 billion.
In April, the goods deficit increased $0.9 billion from March to $40.1 billion, and the services surplus increased $0.2 billion to $10.9 billion. Exports of goods decreased $2.6 billion to $80.0 billion, and imports of goods decreased $1.7 billion to $120.1 billion. Exports of services decreased $0.2 billion to $41.1 billion, and imports of services decreased $0.5 billion to $30.2 billion.
In April, the goods and services deficit decreased $33.0 billion from April 2008. Exports were down $33.7 billion, or 21.8 percent, and imports were down $66.7 billion, or 30.7 percent.
The thing I keep an eye on - since it seems to me a good indicator of how well America is doing in the high tech area is the Advance Technology Products category:
"Advanced technology products (ATP) exports were $18.7 billion in April and imports were $23.4 billion, resulting in a deficit of $4.7 billion. April exports were $2.0 billion less than the $20.7 billion in March, while imports were virtually unchanged at $23.4 billion.'
Damn! Still importing more high tech than we export. "Lead in tech or hit the deck, Lead in food you can be rude..." That's how to simplify econ, I think; poetry.
Boom Times
"28 people have been killed in a South Iraq Market Bombing" reports the NYT.
Also experiencing boom times: Pakistan where 16 are dead in a hotel bombing.
Iran Elections Near
Hardliners versus moderates seems to be the set-up as Iran heads into elections on Friday. Wonder what kind of campaign funding disclosure requirements they have in place?
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Our own Congress has put off the vote apparently on the "Iran Sanctions Enabling Act of 2009" citing the elections. So with any change in the strategic balance internally, I still expect the bombing by Israel to come along toward the end of October. Any reduction in the power base of incumbent president Ahmadinejad will cause reassessment of chances for a peaceful outcome. And then it'll be bombs away, I reckon.
Fair trial before the hanging kinda thing, to put it in frontier justice terms. They just have too much oil for their own good. Strip away the resource, and who'd care?
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Coping: Coming After Knives
Oh oh. Forget about the Ammo Shortage I've been telling you about for three years. Forget that the Obama administration has been the best gun sales promotion to hit firearms in decades.
No, seems that new regulations are in the works that would place new and more stringent limits on knives as one of our sharp-eyed readers has sniffed out:
"George. I have read your site for a good while now on Urban Survival. You saved us some $ last Sep. before things collapsed. I subscribe now to Peoplenomics and also bought the recent report from Cliff at HPH for the special.
One thing you have not mentioned so I'll include it. Not that I expect you to keep up with everything or to much focus on a small industry like knife manufacturing and making. I work in that industry. In fact I make folding knives and the very type that are made and covered that would shut me down making what I do both illegal to make in my shop regardless of the fact that I've done it for 20 years plus and also make me a felon for even mailing one or crossing state lines with it. In fact it would make the knives readers carry illegal too! 80% OF THE KNIVES CARRIED TO WORK EVERYDAY BY AMERICANS IS A ONE HAND OPENING CLOSING TYPE OF FOLDER!
Please read more here and post it to get this out. Letters need to be written and mailed to congress and senate. Letters to CBP will do no good that part is bad advice. They are not obligated or inclined to be moved by your contacts.
Thanks
Oh my goodness... a visit to www.kniferights.org turns up this page of interest "US ATTEMPTS TO RE-DEFINE SWITCHBLADES – WOULD MAKE MOST POCKET KNIVES ILLEGAL
Now, I'm no conspiracy theorist, but here's the 63 page proposal which goes on my reading list. However, being no fool, I ordered a couple of one-hand opening Spyderco's off eBay last night. When you live the kind of life I have (10-years on an offshore capable sailboat and now 7-years as a ranch owner) I can't tell you how indispensible a good one-hand opening knife is.
Boy, I can hardly wait for knife registration. Why, next thing you know, we'll all be going to the Outback or Ruth's Chrisd with rubber gloves and just gnaw on the prime rib. We're going back to Medieval times for sure. Which is why Elaine and I joined the folks at www.sca.org, LOL.
And that 'society for creative anachronism' not 'creative anarchy'. We've got the PTB for that.
Retribing
I've made mention many times about the whole 'retribing' thing that seems to be going on, especially with kids in their 20's coming back to the roost to live with mom and dad so they can finish upo schooling which might otherwise not be affordable given rents and falling wages.
So, it's with this in mind that I am not surprised to see that "Home Depot shares jump on raised profit forecast."
As I look at a variety of indicators, such as the Consumer Debt (Credit) report from the Fed and just talk to people, seems like the idea of getting rich though house flipping is pretty much gone, and since I'm not looking for the absolute bottom of the current decline to be in until late 2012 to late 2013 on a purchasing power corrected basis, I think what's going on is that people are trying to make their homes as comfortable as possible for this period.
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A significant sidebar to the retribing/cocooning in the home is seen in computer use trends, too. Lots of growth out there in services like Facebook, MySpace, YouTube, and did you see where Craigslist is now almost up to the $100-million in revenue level?
Again, it goes to the notion that people are finding new - and much less expensive ways - to connect and socialize than the traditional bricks and mortar approach.
Using our 'extensible archetypes' kind of view, it brings into question a lot of old 'bricks and mortar' that may fall - or at least change dramatically.
For example, the nature of how kids date seems to be changing. I noticed when my son was visiting, for example, that he was getting the 'low-down' on what's out her in the East Texas outback by simply hitting local connections of people. In an earlier time, he would have been out every night of his visit, hitting the local bars and night clubs, talking to people, being social and such. But not any longer. Takes too much time. Instead - and admittedly much more efficient, he can chat, revenue the local spots, and then make a one-time trip into town, just to 'people watch' since he's already got a pretty solid girlfriend by the sound of it.
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The trend in how people meet and collect relationships is changing in a big way. For those of us over 50, the old way to meet someone was to go bar-hopping - a practice that over the past 10-years or so has really fallen out of favor due to drinking and riving enforcement. Another way to meet was to pursue your interests and meet at some common ground, such as a gym, or in the case of Elaine and I at the Seattle Singles Yacht Club.
Today's young people, though, they have a way different approach. Research oriented. Read the Facebook, check out the MySpace, look at YouTube. See how someone texts and twitters, first.
Social networking seems to be providing a new way to date; video conference and conversation on Skype and all kinds of other tricks to being single.
I didn't know diddly about the international Couch Surfing group, but again, young people are finding a whole new way to beat hotel costs by couch surfing; or at their site explains "CouchSurfing is a worldwide network for making connections between travelers and the local communities they visit."
Gone, it seems, are those halcyon days of polyester leisure suits and a trip to the local beef & brew, with males like me trying to live out the adventures of Leisure Suit Larry. Just doesn't seem like as much fun sitting in front of a computer, though. Does everything have to go virtual?
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Send comments to george@ure.net
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For Your Money's Worth:
Depression or Recession?
This week, I wouldn't be surprised to see the market rally a bit more, with some softness to follow come month-end, and then one or possibly two more short moves up into either mid-July or mid-August. And then, I'm figuring the stock market will have completed its setup for another one of those 'once-in-a-lifetime' declines, which seem to be coming with some regularity. This week, a bit of detail on how past Depressions and sharp market drops have looked, and some amplification and detail on my very different way of looking at things'. We'll start with.....
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Shameless Self Promotion
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"Live on $10,000" Updated
What? You haven't ordered the ebook "How to Live on $10,000 a year -- or less"? Suit yourself. We're all going to live it shortly, anyway. I just thought you might like a heads up by reading about how to do it before you get pink-slipped. But, suit yourself OR visit www.liveontenthousand.com or, click one of the following button:
