NOVEMBER 30, 2008

 

As I stated in And the Darkest Hour is Just Before Dawn on October 18th, empirically speaking it is highly likely Greenspan would have handled this crisis differently and considerably better. My personal belief is he was able to provide confidence and leadership. I think this is factual. We never had the kind of "liquidy trap" or "squeeze" we are now experiencing. It is also not because he faced smaller crises, because he did not. Several were every bit as unwieldy, uncertain, and potentially as bad as this one (the 1990 high yield/real estate/S&L was as big or bigger than today). But he lead and people followed. Today, the market panics and the Fed follows. Jeffery Hummel and David Henderson contend Greenspan was the best Fed Chairman ever "Greenspan's Monetary Policy in Retrospect.".  I don't know enough to opine on that, but I think it is clear where he stands compared to his successor.

(posted at 11:14 pm by Mike Rulle)

 

Should We Penalize Liquidity Preference? . Arthur Kling hits a bullseye with this question and provides an intuitive read on the nature of the current psychologically based liquidity squeeze. I am not fully sure I buy into his exact solution but he is on the right trail. He believes the market has become so risk averse that it is demanding too much collateral and will only accept Treasuries. Rather than providing leadership on this question, the current chicken littles (my term) Bernanke and Paulson are trying to flood the system with cash to prevent the squeeze. They should take a lesson from the much maligned Greenspan and take a look at what he did in 1998. He forced the banks to coordinate. All we hear from our Government is "sell me equity" and "don't pay your senior people". They are weakling followers, not leaders.

(posted at 10:58 pm by Mike Rulle)

 

The United States imports about 10 million barrels of crude oil per day U.S. Crude Oil Imports   At $50 a barrel, that is $182.5 billion per year, or about $265 billion less on an annual basis than when oil was about $123 per barrel. Total consumer savings, of course, is much higher because we consume almost 20 million barrels per day. This means consumers save $530 billion relative to $123 (the high was $147 and Goldman was forecasting $200). Some percent of the domestic savings is just wealth transference to the extent profits decline for the oil related companies. Still, one would think that savings is a big number relative to the Goldman forecast of $200. Their forecast was just 6 months ago according to Bloomberg News Lets keep this in mind when the best and the brightest make forecasts about the broader economy as well. 

(posted at 10: 13 pm by Mike Rulle)

 

While Islamic terrorists had their way in Mumbai, lets not forget the "pirate" story. If one more TV anchor chuckles a smile when discussing those funny pirates I will report them to the hate police.The Sunni Muslim country of Somalia on the Indian Ocean has been making a growth business out of this. Leave it to the NY Times to look for their side of the story. Somali Pirates Tell Their Side - They Want Only Money .

(posted at 9:45 pm by Mike Rulle)

 

Stratfor  says about the current housing problem: "under normal circumstances, this is more or less where things would have ended: A glut in regional housing stocks where subprime mortgages were most overused — especially in the Southern California, Las Vegas and Miami regions — would lead to a recession in those housing markets and perhaps some leakage into the broader national housing market" .In other words, this more intense risk avoidance market we are in is unusual and unexpected. Part of the reason has been that broad distribution of subprime mortgages through securitization has made it difficult for the secondary market to separate the wheat from the chaffe. This means they back away from buying anything securitized. One would think if this was the case, which I agree is part of the problem, it would make more sense for the Obama Bush 2 headed Hulk to seek a more rifle shot type of solution. Instead, our political leaders seem to believe if you fire enough bullets something has to hit YouTube - AL PACINO - SCARFACE. It did not work in the end for Tony.

(posted at 4:30 pm by Mike Rulle)

 

Harvard Economics  Over at a student run Harvard Business School blog, they point out that the market is paying 56 basis points to bet that the US Treasury will default. When that happens, I wonder who is going to make good on the payment?

(posted at 12:03 pm by Mike Rulle)


National and Regional Prices of gasoline have dropped like a stone. The wholesale price of gasoline is about $1.20 per gallon. Even in the past week prices have dropped further. In New Jersey, 87 octane gasoline is selling at about $1.60 cents. It feels like a time warp. This is of course bad because it represents how weak the economy is going to be. When it was $4.00 it was bad because it represented how weak the economy was going to be. Hmm. There was a slight difference though in how this was covered. The $4.00 price was going to cause a recession. The $1.60 price means we are in a recession. Does that also mean the $1.60 per gallon can help cause a recovery? It certainly is not part of the financial Armageddon narrative.

(posted at 11:40 am by Mike Rulle)


Mark Steyn tells us “It’s Not the Cold War” but instead makes the obvious point that it is the "ideology stupid". I was unaware that there have been 200 murders in India by Islamist groups in the last 10 months. But they have not gotten the attention of the Western media. The Mumbai murders were designed to do just that. Steyn expresses irritation as well that the Western media constantly misses the forest for the trees every time we have an Islamic terrorist attack. It is always looking for "reasons" as if each attack were some local and specialized grievance. These are global ideologues not localized minority groups looking to settle some local score. Soon, unfortunately, it will become apparent these types of attacks had nothing to do with Bush. Except perhaps there would have been more of these without him.

(posted at 11:03 am by Mike Rulle)


It is absurd for the NY Times to describe the inner workings of how lobbying groups work in general as something unique with the "military industrial complex". I would like to see an article on the global warming lobbyists. I am sure the "imaging" would look quite different. What is misleading and annoying about this article is the representation that this activity is either illicit or out of the ordinary A Military-Industrial-Media Complex. 

(posted at 9:15 am by Mike Rulle)

While it is obvious what Maureen Dowd is getting at in her opionion column today, A Penny for My Thoughts she still fails to make a strong affirmative case for her position. She believes the description speaks for itself. The problem Newspapers have is not the threat of India writing about Pasadena for $7.50 an hour (although she makes a good case for that too), but that more intelligent and objective web based media are doing a better job at delivering unbiased news.

(posted at 8:55 am by Mike Rulle)


The reason it is so easy to recoil from anything Tom Friedman says is demonstrated in this article Friedman: Obama & Iraq.Friedman was an early supporter of the Iraq war, which for him probably took some personal fortitude. But as the war began getting bogged down, he almost reversed course and become a critic. His criticism was about the conduct of the war, but it bordered on renouncing his original position. Now he is back writing about the success of the war and still implicitly criticizing Bush. He also compliments Obama for, in effect, abandoning his most deeply held views on the Iraq war. No wonder the Left and the Right have grown to dislike Friedman.

(posted at 8:33 am by Mike Rulle)