Month: January 2008

Looks Like Failed Rally

Notice the rally on light volume and today’s reversal on high volume. This action came on the Fed’s fifth rate cut in the past 4 1/2 months. Wednesday’s 50bp move, coupled with last week’s emergency 75bp move, marked the first time the Fed cut rates so much and so fast in over 25 years. Can you say failed bond insurers. Cheers.

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Article: Stimulus Gone Bad [Bushenomics]

From the New York Times:

January 25, 2008
Op-Ed Columnist
Stimulus Gone Bad
By PAUL KRUGMAN

House Democrats and the White House have reached an agreement on an economic stimulus plan. Unfortunately, the plan — which essentially consists of nothing but tax cuts and gives most of those tax cuts to people in fairly good financial shape — looks like a lemon.

Specifically, the Democrats appear to have buckled in the face of the Bush administration’s ideological rigidity, dropping demands for provisions that would have helped those most in need. And those happen to be the same provisions that might actually have made the stimulus plan effective.

Those are harsh words, so let me explain what’s going on.

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Article: Nearly There

Fascinating, article from last week’s edition of The Economist.

Artificial life
Nearly There
Jan 24th 2008

The penultimate step towards the creation of artificial life has just been announced

LIKE a striptease artist in front of an eager audience, Craig Venter has been dropping veils over the past few years without ever quite revealing what people are hoping to see: the world’s first artificial organism. He has been discussing making one since 1995, when he worked out the first complete genetic sequence of a natural living organism. And, after a lot of hard graft and blind alleys, he and his team have almost got there. As they report in this week’s Science, they have replicated the genome of Mycoplasma genitalium, the species that was the subject of that original sequencing effort. It is not actual life, but it is surely the tease before the last veil finally falls away.

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Article: The State of the Union

January 29, 2008
New York Times Editorial
The State of the Union
Six years ago, President Bush began his State of the Union address with two powerful sentences: “As we gather tonight, our nation is at war, our economy is in recession, and the civilized world faces unprecedented dangers. Yet the state of our union has never been stronger.”

Monday night, after six years of promises unkept or insincerely made and blunders of historic proportions, the United States is now fighting two wars, the economy is veering toward recession, the civilized world still faces horrifying dangers — and it has far less sympathy and respect for the United States.

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Article: The Minsky Moment

THE MINSKY MOMENT
by John Cassidy
FEBRUARY 4, 2008

Twenty-five years ago, when most economists were extolling the virtues of financial deregulation and innovation, a maverick named Hyman P. Minsky maintained a more negative view of Wall Street; in fact, he noted that bankers, traders, and other financiers periodically played the role of arsonists, setting the entire economy ablaze. Wall Street encouraged businesses and individuals to take on too much risk, he believed, generating ruinous boom-and-bust cycles. The only way to break this pattern was for the government to step in and regulate the moneymen.

Many of Minsky’s colleagues regarded his “financial-instability hypothesis,” which he first developed in the nineteen-sixties, as radical, if not crackpot. Today, with the subprime crisis seemingly on the verge of metamorphosing into a recession, references to it have become commonplace on financial Web sites and in the reports of Wall Street analysts. Minsky’s hypothesis is well worth revisiting. In trying to revive the economy, President Bush and the House have already agreed on the outlines of a “stimulus package,” but the first stage in curing any malady is making a correct diagnosis.

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Article: Debunking the Reagan Myth

From the New York Times:

January 21, 2008
Op-Ed Columnist
Debunking the Reagan Myth
By PAUL KRUGMAN

Historical narratives matter. That’s why conservatives are still writing books denouncing F.D.R. and the New Deal; they understand that the way Americans perceive bygone eras, even eras from the seemingly distant past, affects politics today.

And it’s also why the furor over Barack Obama’s praise for Ronald Reagan is not, as some think, overblown. The fact is that how we talk about the Reagan era still matters immensely for American politics.

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Barack Obama’s South Carolina Primary Speech

For those of you who may not yet have a good picture of Obama’s message, this should clear things up. Also see Caroline Kennedy’s endorsement.

“This election is about the past versus the future”

From today’s New York Times:

January 26, 2008
Transcript
Barack Obama’s South Carolina Primary Speech

BARACK OBAMA: Thank you, South Carolina! (Cheers, applause.)

(Chants of “Yes, We Can! Yes, We Can!”)

MR. OBAMA: Thank you. Thank you.

(Continued chants of “Yes, We Can!”)

MR. OBAMA: Thank you, everybody. Thank you. Thank you, South Carolina. (Cheers, applause.) Thank you. Thank you, South Carolina. Thank you to the rock of my life, Michelle Obama. (Cheers, applause.)

Thank you to Malia and Sasha Obama, who haven’t seen their daddy in a week. (Cheers, applause.) Thank you to Pete Skidmore for his outstanding service to our country and being such a great supporter of this campaign. (Cheers, applause.)

You know, over two weeks ago we saw the people of Iowa proclaim that our time for change has come. (Cheers, applause.) But there were those who doubted this country’s desire for something new, who said Iowa was a fluke, not to be repeated again. Well, tonight the cynics who believed that what began in the snows of Iowa was just an illusion were told a different story by the good people of South Carolina. (Cheers, applause.)

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Article: A President Like My Father (JFK)

From today’s New York Times. Note, I am not a big fan of the Kennedy clan, but Caroline may be an exception.  Also read Barack Obama’s speech in South Carolina, after winning the primary last night in a landslide victory.

January 27, 2008
Op-Ed Contributor
A President Like My Father
By CAROLINE KENNEDY

OVER the years, I’ve been deeply moved by the people who’ve told me they wished they could feel inspired and hopeful about America the way people did when my father was president. This sense is even more profound today. That is why I am supporting a presidential candidate in the Democratic primaries, Barack Obama.

My reasons are patriotic, political and personal, and the three are intertwined. All my life, people have told me that my father changed their lives, that they got involved in public service or politics because he asked them to. And the generation he inspired has passed that spirit on to its children. I meet young people who were born long after John F. Kennedy was president, yet who ask me how to live out his ideals.

Sometimes it takes a while to recognize that someone has a special ability to get us to believe in ourselves, to tie that belief to our highest ideals and imagine that together we can do great things. In those rare moments, when such a person comes along, we need to put aside our plans and reach for what we know is possible.

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Fed’s Folly: Fooled by Flawed Futures?

From John Mauldin’s January 25th Thoughts From the Frontline:

In The Financial Times today the inside headline is “Markets ask if the Fed was duped?” It seems that a rogue trader (interesting how a lone trader who loses a lot of bank money is always a rogue) lost Societe Generale $7.1 million (4.9 million euros). Seems he knew how to override the risk control systems, had other employees’ passwords, and built up a massive long position which was down about $2.2 billion by the time SocGen management found out. He produced the losses in just a few weeks. SocGen started selling everything to cover the loss on Monday morning, and the markets moved away from them, growing the loss to the $7.1. That constitutes a bad day at the trading desk.

Some suggest that it was the very selling by SocGen, which was 10% of the market trades, which caused the downside volatility. It seems the European Central Bank knew early on about the problems at SocGen, but the Fed got caught by surprise. The Fed holds an emergency FOMC meeting ahead of the scheduled meeting this week, and makes a shock and awe 75-basis-point cut. I can tell you that shocked a lot of very sophisticated traders and managers that I talked with here in Europe.

Everywhere I went I was asked, “Why an inter-meeting cut?” The Financial Times wrote, “The question being asked now by some in the markets is: was the Fed duped into a clumsy and panicked move by the clean-up operation for Jerome Kerviel’s [AKA rogue trader at SocGen] mammoth losses for the French bank?”

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Another Reason Why WordPress Beats TypePad

I don’t often post negative reviews, but I did last month, when I moved my blog from TypePad.com to WordPress.com.

I summarized the reasons in this post: Why I Switched From TypePad.com.

Now it’s time to update that post with the following, from TechCrunch: WordPress Boosts Free Storage to 3GB. Leaves Blogger, TypePad in the Dust.

If you haven’t done so already, it’s time to make the switch.  It’s really easy to export your blog from TypePad and import it into WordPress (click those links for instructions).

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Article: The Early Bird Gets the Bad Grade

I can relate to this. I was not (and am not) a “morning person.”

From the New York Times:

January 14, 2008
Op-Ed Contributor
The Early Bird Gets the Bad Grade
By NANCY KALISH

IT’S Monday morning, and you’re having trouble waking your teenagers. You’re not alone. Indeed, each morning, few of the country’s 17 million high school students are awake enough to get much out of their first class, particularly if it starts before 8 a.m. Sure, many of them stayed up too late the night before, but not because they wanted to.

Research shows that teenagers’ body clocks are set to a schedule that is different from that of younger children or adults. This prevents adolescents from dropping off until around 11 p.m., when they produce the sleep-inducing hormone melatonin, and waking up much before 8 a.m. when their bodies stop producing melatonin. The result is that the first class of the morning is often a waste, with as many as 28 percent of students falling asleep, according to a National Sleep Foundation poll. Some are so sleepy they don’t even show up, contributing to failure and dropout rates.

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Stocks notched gains Thursday, But…

Just time for a quick summary today. IBD said it best:

Volume fell significantly, making the indexes’ gains less impressive. Still, we note that Wednesday’s activity was very high, and thus a tough comparison.

Also disappointing was the rally’s depth: Gainers beat losers by 5-to-3 on the NYSE and on the Nasdaq by not quite 4-to-3.

Those results don’t paint an exciting reversal.

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NY Times Endorsements: Clinton and McCain

From the New York Times:

January 25, 2008
Editorial
Primary Choices: Hillary Clinton

This generally is the stage of a campaign when Democrats have to work hard to get excited about whichever candidate seems most likely to outlast an uninspiring pack. That is not remotely the case this year.

The early primaries produced two powerful main contenders: Hillary Clinton, the brilliant if at times harsh-sounding senator from New York; and Barack Obama, the incandescent if still undefined senator from Illinois. The remaining long shot, John Edwards, has enlivened the race with his own brand of raw populism.

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Follow-Up on Yesterday’s Action and Trading

Yesterday, I went fishing. We caught five fish, including Martin’s 7.6 kilo Lake Trout (shown) and my 4 kilo wild Salmon.  More pics coming soon.

While we were fishing, I got filled on a QQQQ limit order around the 52-week low ($42.10 fill). The day before (at the close) I went long the Select Sector SPDR: Financial Select Sector SPDR Fund (XLF).

When I got home from fishing at 9:40 and saw the market action I took the following actions:

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Credit Contraction Spreads to Credit Cards

I got this in the mail the other day (click image for larger view).

Out of the blue and with no warning, Providian / WAMU decided to close my unused $21,700 credit card. My FICO score is over 700. True, I didn’t need and wasn’t using that credit card because I have other ones that are better. And true I carry a high balance on one of my other credit cards (because I get paid a 3% spread to do it).

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