Financial Skeptic Bulletin, January 2012

The first half of 2012 definitely looked like a calm before the storm...

January

[Jan 31, 2012] Ripe For The Picking Time to Short Muni Bonds By The ETF Professor

Let's look at this advice year later -- right, you would earn ton of money following this advice ;-)

Jan 30, 2012 | Forbes

ETFs tracking municipal bonds defied logic in 2011. Well, at least they proved doubters, Meredith Whitney among them, wrong on the road to some stellar performances.

Yes, concerns about major budget issues facing scores of U.S. states, cities and towns were and still are legitimate. However, yield-starved investors put those concerns on the back burner and did some serious shopping with muni bond ETFs.

There are no guarantees of imminent declines, but looking at the charts and indicators of many muni bond ETFs, it’s clear this group has moved up in a big way and the time might be right for some profit-taking if not all-out shorting of these ETFs.

[Jan 30, 2012] With friends like Facebook, who needs sociopaths by John Naughton

Jan 28, 2012 | The Guardian

The truth is that companies such as Facebook are basically the corporate world's equivalent of sociopaths, that is to say individuals who are completely lacking in conscience and respect for others.

In her book The Sociopath Next Door, Martha Stout of Harvard medical school tries to convey what goes on in the mind of such an individual. "Imagine," she writes, "not having a conscience, none at all, no feelings of guilt or remorse no matter what you do, no limiting sense of concern of the wellbeing of strangers, friends, or even family members.

Imagine no struggles with shame, not a single one in your whole life, no matter what kind of selfish, lazy, harmful, or immoral action you had taken. And pretend that the concept of responsibility is unknown to you, except as a burden others seem to accept without question, like gullible fools."

Welcome to the Facebook mindset.

[Jan 30, 2012] Is Facebook run by sociopaths?

A commentator on the Guardian suggests that "companies such as Facebook are the corporate world's equivalent of sociopaths." Might this be true?

While I wouldn't wish to wallow in a definition of sociopathy, I did happen to ask a couple of Facebook's advertising clients how they found dealing with the world's most powerful brain child.

"They breathe their own fumes," one executive told me. And he is someone who gives Facebook rather large sums of money.

It is in this, surely, that Facebook has its power. It tells us all that in tomorrow's world, everything will be social. If you're not riding in the social Ferrari, you will be but a mere cipher in the commerce of life. Worse, you will be a mere individual, someone with absolutely no friends in the playground.

And who would want to be an isolated individual or part of an isolated company? It's tempting, then to view Facebook's world picture as expressing the mindset of a sociopath--or even a con man.

The driving force of both is that their world is the only one that matters. Their own personal joy lies in dragging everyone else into their vortex and watching as everyone stares rapt in an excitement they can't quite define. There's a lot of fun in that.

Is there some ultimate meaning and spiritual uplift in the proceedings? Not so much. Rather, it's the power of the game and the protagonist's power in the game that matter.

The gullible--that would be us--play along because the game seems to offer something that we will enjoy: success or approbation, perhaps.

But, in the end, it's rather hard to believe that every move Facebook makes is the move of a benevolent association or a social revolutionary, instead of a move by an advertising company.

Who might suspect, in their private hearts, that privacy is not something that enjoys too much philosophical debate at Facebook HQ? Rather, it's simply something that stands in the way of selling more adverts. It's an inconvenience that gets in the way of economic progress.

Because economic progress is far more important than any individual's right to keep herself to herself. That's not Facebook's fault, some might say. That's just the world we live in. We've all come to believe that economic progress matters more than anything.

Naturally, this might all change a little should one of the Facebook management run into some sort of personal bother that becomes public. But, until then, let's knock down those privacy walls and make some money.

It is wrong, of course, to suggest that Facebook's management might be isolated in their apparent views. Google, too, would surely prefer it if you gave it more and more information so that it can sell more and more--and, cute phrase this, "better"--adverts.

For Naughton, sociopaths are "individuals who are completely lacking in conscience and respect for others."

I have a feeling that the people who run Facebook and Google aren't sociopaths in their private lives -- should they have them. It's just that when they create one of those social networks we call companies, a strange group-think takes over.

That strange group-think doesn't so much distort reality as try to create a new one.

We are now living in the new reality. It's one in which it all has to start with people. People are products, products are money, and money is power.

Once you have the power, you can even try to tell governments what to do and what to think. And that's so much fun.

[Jan 27, 2012] Is High Yield Credit Over-Extended

It might well have been overextended, but it kept for 2012 OK

Jan 27, 2012 | ZeroHedge

"Reach for yield" is a phrase that never gets old, does it? Whether it's the "why hold Treasuries when a stock has a great dividend?" or "if this bond yields 3% then why not grab the 7% yield bond - it's a bond, right?" argument, we constantly struggle with the 100% focus on return (yield not capital appreciation) and almost complete lack of comprehension of risk - loss of capital (or why the yield/risk premium is high). Arguing over high-yield valuations is at once a focus on idiosyncrasies (covenants, cash-flow, etc.), and technicals (flow-based demand and supply), as well as systemic and macro cycles, which play an increasingly critical part. Up until very recently, high yield bonds (based on our framework) offered considerably more upside (if you had a bullish bias) than stocks and indeed they outperformed (with HYG - the high-yield bond ETF - apparently soaking up more and more of that demand and outperformance as its shares outstanding surged). With stocks and high-yield credit now 'close' to each other in value, we note Barclay's excellent note today on both the seasonals (December/January are always big months for high yield excess return) and the low-rate, low-yield implications (negative convexity challenges) the asset-class faces going forward. The high-beta (asymmetric) nature of high-yield credit to systemic macro shocks, combined with the seasonality-downdraft and callability-drag suggests if you need to reach for yield then there will better entry points later in the year (for the surviving credits).

Compare the flow of shares outstanding (black line) as increasing demand for yield drove investors into the high-yield ETF. However, unlike what one might expect (demand-based price action), prices have not risen significantly in the last few months (as demand for creation of shares has blown up). The rally in HYG over the last week or two is notable though as the December/January seasonals come into play.

The seasonals in high-yield credit are astounding as Barclays points out and with so many now watching credit markets for signs of stress, the seasonal front-running and implicit flow has likely reflexively led and confirmed the risk-on rally. That seasonal strength is about to end.

With interest rates so low, and spreads compressing, high-yield bond all-in yields have compressed significantly leaving more than 30% of Barclays HY Index trading above their next Call Price. This means that high yield credit is increasingly prone to negative convexity concerns. In English this means that as yields fall (and prices rise) on high yield bonds (which often have a call option embedded to enable the borrower to repurchase the debt - and perhaps refi at the new lower rate), then it becomes increasingly likely that the firm would exercise the call and buy back the debt. This impact is called negative convexity as it causes the price of the bond to stabilize instead of following up the 'normal' convexity curve (so will underperform).

The point is that the higher the price of high-yield bonds get, the more of a negative impact of this callability and the less attractive the bonds become. The chart above shows that we are already above the levels of the peak in 2007 and are rapidly heading to the peaks in 2011 especially as the Fed flattens the curve out to 5-7Y (where most HY debt is maturing before this).

If the demand for HYG shares could not pump up prices, and seasonal are abating, and negative convexity concerns are increasing, and relative valuation with stocks is not compelling, perhaps the asymmetric nature of high-yield bond returns will be too much for even the 'reachers' to bear as we face a series of known and unknown unknowns in the coming months that will more than less impact credit markets (liquidity and all) first.

RobotTrader

Check out the muni-bond ETF's. All of them are going completely parabolic.

Dominating the list of 52-week highs today.

http://www.marketwatch.com/tools/marketsummary/screener?exchange=Nyse&report=High52WeekbyPercentGain

[Jan 24, 2012] Paul Krugman Makes Housing Call He Will Likely Come to Regret

2012 is going to be interesting and will be hard to track on the various levels. Especially several types of bonds such as TIPs and high yield.

naked capitalism

hyperpolarizer:

I am a huge Krugman fan, but I think he’s missing something else: why did household debt get so out of hand in the Bush years? Because salaries would no longer support accustomed lifestyles, and with the housing bubble, people found they could take money out of their homes.

Until a solid manufacturing economy returns to America, that won’t change. The idea that you can run a world-class economy just by building houses is crazy.

Also, Paul doesn’t get it about China. It’s not (as he claims) about having the supply chain localized — it’s about docile workers living in dormitories who can be rousted at midnight to work a 12 hour shift on a biscuit and a cup of tea.

If anyone thinks that is necessarily the future of manufacturing, they haven’t been watching France or Germany. A young French friend works in QA/QC for a machine shop making surgical prosthetics (outside Valence.) For Christmas all the workers were treated to Champagne and foie gras!

nonclassical:

Kevin Phillips has shown that U.S. has joined historically irrelevant economies who have exchanged manufacturing base economics for bankers pushing paper debt around…up from 20% of economy (or so) circa 2001, to over 40% by 2007.

Bushitters unite! Our first “MBA” president indeed…(“American Dynasty”)

James

Except that France and Germany (and especially the example you provided) hardly represent the “future of manufacturing,” whatever that is.

And the Chinese model might as well be considered the US model, as that’s the market it was built to support and which provides its tight-fisted meager funding.

The Chinese are merely doing to their workers what American interests are (so far anyway) unable to do to theirs, in the current day at least. Charles Dickens or Upton Sinclair anyone?

Options? Further automation or move on to the next third world sweat shop. All for cheap shit that most of us don’t need anyway shipped halfway around the world by cheap energy paid for by blood money. American capitalism’s something for nothing mentality is a powerful illusion, and it seems that all the world’s entranced. And the magicians performing the sleight of hand like it that way.

max:

And the wealthiest generation in history, having most of it’s wealth in real estate is preparing to sell for retirement over the next 10-15 years to a middle class which is disappearing daily.

Not to mention that they have eliminated all the jobs for their children....

Goodbye housing for a long time to come.

Luke Lea:

@ – “we may see a sustained reversal of household formation rates, and it may even go as far as leading to larger average household sizes. Extended families living together used to be not all that uncommon; it may go from being a sign of desperation to being seen as a smart way to economize and conferring other benefits (sharing child care duties, for instance).”

http://facingzionwards.blogspot.com/2009/04/future-of-retirement.html

Hugh:

A few days ago someone tweeted ironicaly, to all Democratic commentators, only good economic news in 2012. Apparently Krugman got the message.

This is a typical Krugman piece where he attacks those crazy Republicans, sucks up to the Democrats, and treats his mentor Ben Bernanke with kid gloves.

There has still been no serious effort to deal with the roiling morass of systemic fraud that is the housing market. Housing prices are still twice their historic (1997) norms. We have this huge overhang of millions of houses, but Krugman is seeing green shoots everywhere. Of course he does sound a note of caution, some understandable CYA given the load of BS he has just dropped on us.

Even if you accept the McKinsey report Krugman cites and I am not sure why anyone should, one of its highlights is US households “may have roughly two more years before returning to sustainable levels of debt,” that is this report says that it will take at least two years before Americans don’t get out of the water but get their heads above water. It takes more than squinting to make that look like a green shoot now.

[Jan 23, 2012] United Welfare States of America -- In 2011 Nearly Half The Population Received Some Form Of Government Benefit

Over 46 million of American are now receiving food stamps.

in 2011 nearly half of the population lived in a household that receives some form of government benefit, which in turn accounted for 65% of total federal spending, or $2.5 trillion, and amount to 15% of GDP.

NewThor

This comment is so muddled and confusing, I'm going to guess it's a FOXbot Algo used to spread profitable piffle.

FOXbot ALGO SAYS....

"REPUBLICAN GANGSTER BANKERS = GOOD

DEMOCRAT GANGSTER BANKERS = BAD"

Ghordius

Confusing? Just *TRY* to have a normal conversation with my UK and US relatives and you will find out that they think they live in the land of the free and that the eurozone is a socialist overregulated hellhole where half of the population is on some kind of government support.

Dr Paul Krugman

I appreciate the work that goes into this blog's technical analysis very much. But the fact is that if people no longer received assistance from the government the economy would be in shambles. Unemployment would skyrocket. GDP would plummet. Then where would we be?

The option is to stimulate growth now and pay for it later. It isn't like the U.S. is going to stop producing goods, food, and other such products. After a "push" from stimulus then Americans will be back on their feet and GDP will rise.

Along the way debts will be paid off. It has worked before, it will work now, and it will work again.

[Jan 23, 2012] How Private Equity Firms Like Bain Capital Earn Profits

The New Yorker

Jan 30, 2012 | http://www.newyorker.com/

At this point, the people who run America’s private-equity funds must be ruing the day Mitt Romney decided to run for President. His fellow Republican candidates, of all people, have painted a vivid picture of private-equity firms—including Bain Capital, where he worked for fifteen years — as job-destroying vultures, who scavenge the meat from American companies and leave their carcasses by the side of the road. Not since the days of “Wall Street” and “Barbarians at the Gate” have the masters of leveraged buyouts looked quite so bad.

Given the weak job market, it makes sense that the attacks have focussed on layoffs. But the real problem with leveraged-buyout firms isn’t their impact on jobs, which studies suggest isn’t that substantial one way or the other. A 2008 study of companies bought by private-equity firms found that their job growth was only about one per cent slower than at similar, public companies; there was more job destruction but also more job creation. And, while private-equity firms are not great employers in terms of wage growth, there’s not much evidence that they’re significantly worse than the rest of corporate America, which has been treating workers more stingily for about three decades.

The real reason that we should be concerned about private equity’s expanding power lies in the way these firms have become increasingly adept at using financial gimmicks to line their pockets, deriving enormous wealth not from management or investing skills but, rather, from the way the U.S. tax system works. Indeed, for an industry that’s often held up as an exemplar of free-market capitalism, private equity is surprisingly dependent on government subsidies for its profits. Financial engineering has always been central to leveraged buyouts. In a typical deal, a private-equity firm buys a company, using some of its own money and some borrowed money. It then tries to improve the performance of the acquired company, with an eye toward cashing out by selling it or taking it public. The key to this strategy is debt: the model encourages firms to borrow as much as possible, since, just as with a mortgage, the less money you put down, the bigger your potential return on investment. The rewards can be extraordinary: when Romney was at Bain, it supposedly earned eighty-eight per cent a year for its investors. But piles of debt also increase the risk that companies will go bust.

[Jan 23, 2012] Philip Pilkington Does Capitalism Have a Future

January 23, 2012 | naked capitalism

Why the Financial Times Asks All the Wrong Questions to Avoid the Real Issues

...First and foremost, the business class – like any class – are concerned not with profits but with power; the former are merely a means to the latter. They sense that their power comes from their ability to invest as investment drives a capitalist economy. The less they invest and the more the state invests, the less social power they will have. Clearly this is a perfectly logical and consistent idea; indeed, it is almost self-evident in its truth.

Without a major war – and we’re not talking about some piddly little adventure in Iran – there is no real motivating mechanism to alleviate the business class’ fears in this regard. They would much prefer to sit around idly doing nothing than give up some of their power. And the fetish of the balanced budget serves them well to sooth the doubts of the politician who thinks that something should be done despite such action potentially offending his dining partners. And so we end up in our present quagmire.

Democratic capitalism, quite simply, is a self-destructive system. In the present crisis the business class has rejuvenated their profits through financial chicanery. But, as I argued on this site the other day, this is probably through the inflating of a commodities bubble and will likely not last long. Still, even in the event of this coming to fruition we know from history that the business class will probably prefer to accept chronically low profits than they will the government moving in on their turf.

Thus it is likely that the West is heading for a long period of stagnation and decline. Is this due to capitalism? In a sense yes, but to put it in these terms is far too abstract. This has as much, if not more, to do with our political structures and the amount of power that the business class exercises in modern democracies. It is really a problem, not of capitalism, but of capitalist democracy.

Is this to say that some non-democratic system is preferable? Certainly not. Anyone who would give up their liberty for a pay check is reprehensible. Some will say that we already live in a non-democratic system. I would reply: hold your tongues lest that come true and all your fantasies become a horrifying reality.

But even beyond such moral judgments, in reality the idea that some other system of economic governance might come to replace our own seems unlikely. Again, this is January 2012, not March 1933. We have a welfare system that allows people in even the most callous Western states to avoid starvation. In truth, the structures of power have largely solidified. Even another financial crisis and a chronic shortfall in profitability are unlikely to loosen them up much – let alone break them.

These are the real issues that we face as we move into the future. And it is these that people who try to establish a more functional economic and political system face, bravely, everyday. But these are issues that the FT – with its enlightened business class liberal readership – could not raise. Otherwise it might see its profitability decline long before the next financial crisis. Perhaps then, rather than flag-waving and posturing, the FT would have been better leaving well enough alone. Perhaps they should have stuck to what they are good at – that is, actual analysis – and put away their pom-poms.

Selected comments

Mark P.

This has been mentioned before. But for those who haven’t seen it, check out Adam Curtis on ‘THE YEARS OF STAGNATION AND THE POODLES OF POWER’

http://www.bbc.co.uk/blogs/adamcurtis/2012/01/the_years_of_stagnation_and_th.html 

‘…I want to tell the story of another time and another place not so long ago that was also stifled by the absence of novelty and lacking a convincing vision of the future. It was in the Soviet Union in the late 1970s and 1980s. At the time they called it “the years of stagnation”…

‘Everyone in Russia in the early 1980s knew that the managers and technocrats in charge of the economy were using that absurdity to loot the system and enrich themselves. The politicians were unable to do anything because they were in the thrall of the economic theory, and thus of the corrupt technocrats. And above all no-one in the political class could imagine any alternative future.

‘In the face of this most Soviet people turned away from politics and any form of engagement with society and lived day by day in a world that they knew was absurd, trapped by the lack of a vision of any other way….

[Jan 22, 2012] In Search of Yield & Dividends

January 21st, 2012 | The Big Picture

constantnormal:

It would be interesting to see a historical chart with the rise in CEO compensation superimposed with the decline in dividends, both relative to earnings. I wonder how strong the correlation would be.

Sechel:

Dividends are very important component when calculating total return picture of stocks, but as a replacement for fixed income I take issue for two big reasons, first by investing in stocks vs bonds the investor is taking on considerably more duration risk, secondly the income stream is less dependable based on the lower priority in the capital structure. Lastly I wonder about the wisdom of buying into companies the article mentions such as Verizon which has huge infrastructure spending requirements or some of the companies which huge cash overseas that can’t easily be repatriated and used as to pay cash dividends. Dividend paying stocks should be how one allocates the majority of their equity exposure(in my view) and not as a replacement for bonds. After all the risk profiles of the two asset classes are not exactly the same.

[Jan 20, 2012] "Business Leaders of Today are Not Capitalists"

Economist's View

John Kay says that the term "capitalism" is misleading in modern economies:

Let’s talk about the market economy, by John Kay, Commentary, Financial Times:

...Karl Marx never used the word capitalism. But after the publication of Das Kapital, the term came to describe the system of business organization which had made the industrial revolution possible. By the mid-19th century ... individuals or ... a small group of active partners ... built and owned both the factories and plants in which the new working class was employed... The economic and political power of business leaders derived from their ownership of capital and the control that ownership gave them over the means of production and exchange.

The political and economic environment in which Marx wrote was a brief interlude in economic history. ... Legislation passed in Marx’s time permitted the establishment of the limited liability company, which made it possible to build businesses with widely dispersed share ownership. ...

So the business leaders of today are not capitalists in the sense in which Arkwright and Rockefeller were capitalists. Modern titans derive their authority and influence from their position in a hierarchy, not their ownership of capital. They have obtained these positions through their skills in organizational politics, in the traditional ways bishops and generals acquired positions in an ecclesiastical or military hierarchy. ...

People do not know who owns their work tools because the answer does not matter. If your boss pushes you around, exploits you or appropriates your surplus value, the reasons have nothing to do with the ownership of capital..., ownership of the means of production and exchange matters very little.

Sloppy language leads to sloppy thinking. By continuing to use the 19th-century term capitalism for an economic system that has evolved into something altogether different, we are liable to misunderstand the sources of strength of the market economy and the role capital plays within it.

This is an important point, and it relates directly to the claim by many that inequality is needed in capitalist economies as an engine of growth.

I think small businesses still operate in something resembling old fashioned capitalism -- owners putting their own resources at risk to open a new business -- but big business is another story (and in some cases, such as the financial industry, too big too fail considerations reduce risk considerably for high level executives making arguments that this type of risks motivates innovation, etc. hard to swallow).

[Jan 20, 2012] World Bank warns of downturn worse than 08

In the event of a major crisis, "no country will be spared," Lin said. "The downturn is likely to be longer and deeper than the last one."

msnbc.com

The World Bank warned Wednesday of a possible slump in global economic growth and urged developing countries to prepare for shocks that could be more severe than the 2008 crisis.

For the United States, the bank cut this year's growth forecast to 2.2 percent from 2.9 percent and for 2013 to 2.4 percent from 2.7 percent.

As reasons, it cited the anticipated global slowdown and the on-going fight in Washington over spending and taxes.

The bank also cut its growth forecast for developing countries this year to 5.4 percent from 6.2 percent and for developed countries to 1.4 percent from 2.7 percent.

For the 17 countries that use the euro currency, it forecast a contraction, cutting their growth outlook to -0.3 percent from 1.8 percent.

Global growth could be hurt by a recession in Europe and a slowdown in India, Brazil and other developing countries, the Washington-based bank said.

It said conditions might worsen if more European countries are unable to raise money in financial markets.

"The global economy is entering into a new phase of uncertainty and danger," said the bank's chief economist, Justin Yifu Lin. "The risks of a global freezing up of capital markets as well as a global crisis similar to what happened in September 2008 are real."

Separately Wednesday, the government of Germany — Europe's biggest economy — announced it had lowered its growth forecast for this year from 1 percent to 0.7 percent. However, it also predicted growth of 1.6 percent in 2013.

Developing countries that have enjoyed relatively strong growth while the United States and Europe struggled might be hit hard, Lin said. He said they should line up financing in advance to cover budget deficits, review the health of their banks and emphasize spending on social safety nets.

Many governments are in a weaker position than they were to respond to the 2008 global crisis because their debts and budget deficits are bigger, Lin said at a news conference.

In the event of a major crisis, "no country will be spared," Lin said. "The downturn is likely to be longer and deeper than the last one."

The bank's outlook — in its "Global Economic Prospects" report issued twice a year — adds to mounting gloom amid Europe's debt crisis and high U.S. unemployment.

"It is very likely that most European countries, including Germany, entered recession in the fourth quarter of last year," said Hans Timmer, the World Bank's director of development projects.

Investors have cut investments in developing countries by 45 percent in the second half of last year, compared with the same period in 2010, Timmer said.

The report follows similar warnings about the global economy by its sister organization, the International Monetary Fund, and private sector forecasters.

Global growth might suffer from the interaction of Europe's troubles and efforts by China, India, South Africa, Russia and Turkey to cool rapid growth and inflation with interest rate hikes and other measures, the bank said.

China's expansion slowed to a 2 1/2-year low of 8.9 percent in the three months ending in December from the previous quarter's 9.1 percent.

As Europe weakens, developing countries could find "their slowdown might be larger than is necessary to cope with inflation pressures," Lin said.

Developing countries hurt

A global downturn would hurt developing countries by driving down prices for metals, farm goods and other commodities and demand for other exports, the World Bank said.

Slower growth is already visible in weakening trade and commodity prices, the World Bank said.

Global exports of goods and services expanded an estimated 6.6 percent in 2011, barely half the previous year's 12.4 percent rate, the bank said. It said the growth rate is expected to fall to 4.7 percent this year.

Prices of energy, metals and farm products are down 10 to 25 percent from their peaks in early 2011, Timmer said.

[Jan 18, 2012] Larry Summers Considered As US Choice to Head the World Bank

18 January 2012 | Jesse's Café Américain

The Rubin Legacy continues on. Change we can believe in.

Hans Nichols does an exceptional job of covering the Washington beat for Bloomberg.

Bloomberg
Obama Considering Summers for World Bank
By Hans Nichols
Jan 18, 2012 11:47 AM ET

President Barack Obama is considering nominating Lawrence Summers, his former National Economic Council director, to lead the World Bank when Robert Zoellick’s term expires later this year, according to two people familiar with the matter.

Summers has expressed interest in the job to White House officials and has backers inside the administration, including Treasury Secretary Timothy Geithner and the current NEC Director, Gene Sperling, said one of the people. Secretary of State Hillary Clinton is also being considered, along with other candidates, said the other person. Both spoke on condition of anonymity to discuss internal White House deliberations.

Lael Brainard, the under secretary of Treasury for international affairs, is compiling a list of potential candidates to replace Zoellick, who was nominated to a five-year term that began in July of 2007 by then-President George W. Bush. By tradition, the U.S. president chooses the leader of the World Bank while the head of the International Monetary Fund is selected by European leaders. The nomination is subject to approval by the World Bank’s executive board.

You may recall the unfortunate tenure of arch-neocon and Iraq war architect Paul Wolfowitz at the World Bank.

"O, wonder! How many goodly creatures are there here! How beauteous mankind is!
O brave new world, That has such people in it!"

William Shakespeare, Tempest, Act 5, Sc. 1

[Jan 18, 2012] World Bank Warns Hope for the Best, Prepare for the Worst

Jan 18, 2012 | Jesse's Café Américain

In case your domestic financial press fails to deliver this important message to you so clearly, as the World Bank has done for the rest of the world's leadership.

Hope for the best, and prepare for the worst.

Equities are pricing in a rosy scenario, but the bonds and precious metals are saying 'beware.'

The western central banks will continue to print money in response to this financial crisis, both before and certainly after the fact.

'How much' is a policy decision, but the choice seems compelling. Rather than limiting their printing, they will most likely attempt to manipulate and mask the perception and awareness of their actions through programs of buying sovereign debt, engaging in disinformation campaigns, and allowing blatant price manipulation in the markets by insiders.

The problem with this is that insiders stand to profit enormously while the public is used and abused rather badly. Power really does corrupt, not all at once, but in stages, one rationale at a time, with a privileged outlook or groupthink that comes to be widely separated from the shared reality of the public. And the opportunity to turn this to pillage is not wasted on the worst elements of those in the halls of power.

"And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that."

Lord Acton

There are others ways to do this that do not benefit the few at the cost of the many in such a disproportionate manner.

Financial Times
World Bank warns emerging nations
By Chris Giles in London
January 18, 2012 2:00 am

Developing countries should take steps to plan for a global economic meltdown on a par with 2008-09 if the European sovereign debt crisis escalates, the World Bank warned on Wednesday in its latest economic forecasts.

Predicting significantly slower global growth in 2012 than it expected last summer even if the eurozone muddles through its crisis, World Bank economists said that if financial markets deny funds to eurozone economies, global growth would be about 4 percentage points lower than even these figures, with poorer economies far from immune.

Andrew Burns, head of macroeconomics at the Bank, told journalists in London: “Developing countries should hope for the best and prepare for the worst.”

Stressing the importance of contingency planning, he added: “An escalation of the crisis would spare no one. Developed and developing-country growth rates could fall by as much or more than in 2008-09.”

The world economy would find it much more difficult to grow out of a new economic crisis, the World Bank warned, because rich countries had little monetary or fiscal ammunition available to stem any vicious circle and poorer countries now have “much less abundant capital, less vibrant trade opportunities and weaker financial support for both private and public activity [than in 2009]”...

Read the rest here.

[Jan 01, 2012] Guest Post- 2011 - Catch-22 Year In Review

ZeroHedge

The Wall Street mantra of stocks for the long run is beginning to get a little stale. If Abbey Joseph Cohen had been right for the last twelve years, the S&P 500 would be 4,000. For this level of accuracy, she is paid millions. Her 2011 prediction of 1,500 only missed by 16%.

The S&P 500 began the year at 1,258 and hasn’t budged. The lowest prediction from the Wall Street shysters at the outset of the year was 1,333, with the majority between 1,400 and 1,500. The same Wall Street clowns are now being quoted in the mainstream media predicting a 10% to 15% increase in stock prices in 2012, despite the fact we are headed back into recession, China’s property bubble has burst, and Europe teeters on the brink of dissolution.

They lie on behalf of their Too Big To Tell the Truth employers by declaring stocks undervalued, when honest analysts such as Jeremy Grantham, John Hussman and Robert Shiller truthfully report that stocks are overvalued and will provide pitiful returns over the next year and the next decade.

Etc

Society

Groupthink : Two Party System as Polyarchy : Corruption of Regulators : Bureaucracies : Understanding Micromanagers and Control Freaks : Toxic Managers :   Harvard Mafia : Diplomatic Communication : Surviving a Bad Performance Review : Insufficient Retirement Funds as Immanent Problem of Neoliberal Regime : PseudoScience : Who Rules America : Neoliberalism  : The Iron Law of Oligarchy : Libertarian Philosophy

Quotes

War and Peace : Skeptical Finance : John Kenneth Galbraith :Talleyrand : Oscar Wilde : Otto Von Bismarck : Keynes : George Carlin : Skeptics : Propaganda  : SE quotes : Language Design and Programming Quotes : Random IT-related quotes :  Somerset Maugham : Marcus Aurelius : Kurt Vonnegut : Eric Hoffer : Winston Churchill : Napoleon Bonaparte : Ambrose Bierce :  Bernard Shaw : Mark Twain Quotes

Bulletin:

Vol 25, No.12 (December, 2013) Rational Fools vs. Efficient Crooks The efficient markets hypothesis : Political Skeptic Bulletin, 2013 : Unemployment Bulletin, 2010 :  Vol 23, No.10 (October, 2011) An observation about corporate security departments : Slightly Skeptical Euromaydan Chronicles, June 2014 : Greenspan legacy bulletin, 2008 : Vol 25, No.10 (October, 2013) Cryptolocker Trojan (Win32/Crilock.A) : Vol 25, No.08 (August, 2013) Cloud providers as intelligence collection hubs : Financial Humor Bulletin, 2010 : Inequality Bulletin, 2009 : Financial Humor Bulletin, 2008 : Copyleft Problems Bulletin, 2004 : Financial Humor Bulletin, 2011 : Energy Bulletin, 2010 : Malware Protection Bulletin, 2010 : Vol 26, No.1 (January, 2013) Object-Oriented Cult : Political Skeptic Bulletin, 2011 : Vol 23, No.11 (November, 2011) Softpanorama classification of sysadmin horror stories : Vol 25, No.05 (May, 2013) Corporate bullshit as a communication method  : Vol 25, No.06 (June, 2013) A Note on the Relationship of Brooks Law and Conway Law

History:

Fifty glorious years (1950-2000): the triumph of the US computer engineering : Donald Knuth : TAoCP and its Influence of Computer Science : Richard Stallman : Linus Torvalds  : Larry Wall  : John K. Ousterhout : CTSS : Multix OS Unix History : Unix shell history : VI editor : History of pipes concept : Solaris : MS DOS :  Programming Languages History : PL/1 : Simula 67 : C : History of GCC development :  Scripting Languages : Perl history   : OS History : Mail : DNS : SSH : CPU Instruction Sets : SPARC systems 1987-2006 : Norton Commander : Norton Utilities : Norton Ghost : Frontpage history : Malware Defense History : GNU Screen : OSS early history

Classic books:

The Peter Principle : Parkinson Law : 1984 : The Mythical Man-Month :  How to Solve It by George Polya : The Art of Computer Programming : The Elements of Programming Style : The Unix Hater’s Handbook : The Jargon file : The True Believer : Programming Pearls : The Good Soldier Svejk : The Power Elite

Most popular humor pages:

Manifest of the Softpanorama IT Slacker Society : Ten Commandments of the IT Slackers Society : Computer Humor Collection : BSD Logo Story : The Cuckoo's Egg : IT Slang : C++ Humor : ARE YOU A BBS ADDICT? : The Perl Purity Test : Object oriented programmers of all nations : Financial Humor : Financial Humor Bulletin, 2008 : Financial Humor Bulletin, 2010 : The Most Comprehensive Collection of Editor-related Humor : Programming Language Humor : Goldman Sachs related humor : Greenspan humor : C Humor : Scripting Humor : Real Programmers Humor : Web Humor : GPL-related Humor : OFM Humor : Politically Incorrect Humor : IDS Humor : "Linux Sucks" Humor : Russian Musical Humor : Best Russian Programmer Humor : Microsoft plans to buy Catholic Church : Richard Stallman Related Humor : Admin Humor : Perl-related Humor : Linus Torvalds Related humor : PseudoScience Related Humor : Networking Humor : Shell Humor : Financial Humor Bulletin, 2011 : Financial Humor Bulletin, 2012 : Financial Humor Bulletin, 2013 : Java Humor : Software Engineering Humor : Sun Solaris Related Humor : Education Humor : IBM Humor : Assembler-related Humor : VIM Humor : Computer Viruses Humor : Bright tomorrow is rescheduled to a day after tomorrow : Classic Computer Humor

The Last but not Least Technology is dominated by two types of people: those who understand what they do not manage and those who manage what they do not understand ~Archibald Putt. Ph.D

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Last modified: March, 12, 2019