Inexplicable

  Really? Let me get this right. You’re going to ask the destroyers how to fix what they destroyed. This is the unfortunate state of our country’s leadership.

 http://news.yahoo.com/s/ap/20090327/ap_on_go_pr_wh/obama_economy

  I don’t get it. Common sense would tell most rational people that you don’t ask a mechanic how to fix a transmission if he was the mechanic that supposedly assembled it correctly right before it fragged itself on the highway, a hundred miles from help.

 Why would CEOs, CIOs, and CFOs all agree to new regulations that Timmy G has come up with to control the credit default swaps and derivatives market? The CDS market is a very large, if not THE reason, we are in this current financial mess. Timmy G thinks that we can expand government regulation and start managing these derivatives deals like stocks, options, and commodities. Well, the problem with that is that the big boys that got us into this mess won’t go for it.

  I was talking about something similar with the family at dinner Tuesday night. You see, credit default swaps and other exotic derivatives trades have been the bread and butter of the banking industry for almost twenty years now. Take Sonic as an example. Their products that make them the most money (the biggest margins) are the beverages. One 44oz. drink, in the cup, with the ice, costs them about 7 cents. Yes. $.07. They sell those drinks for anywhere from .99 to 1.79 depending on the sale they happen to be running at the time. That’s a huge margin by any business standards. This margin, and the resulting profits, make up for products with a smaller margin like the smaller and less expensive burgers.  

 The bigger banks (and insurance companies/hedge funds like AIG) all make their fattest margins on these exotic derivatives trades. It’s their Route 44 big drink, if you will. Credit default swaps, collateralized debt obligations, all of that buying, selling, and insuring debt produces no real tangible product. It’s all a big gambling ring. That’s basically what it all boils down to. One company is betting on either the success or failure of another to make good on their debt, with the only underlying value being the quality of their name. That’s why you have Moody’s and Standard and Poor’s. Bigger money-makers (Lehman Bros., Merrill, etc.) can call the rating companies and convince them (pay them-yes, S&P and Moody’s are paid by the very institutions they rate) to apply a certain rating to a certain debt, allowing the broker (seller of a CDS) to convince a buyer that a AAA-rated derivative is a great buy while pocketing huge money for “fees”. You can see where money could easily influence decisions on these matters. Greed eventually kills. We’re seeing it now. The market is being killed because money that we thought was there is now disappearing. Money that isn’t backed by services or tangible product will always disappear. 

  Therein lies the problem I’ve always talked about with the fiat money system. You can print all you want, but you then have to be prepared to deal with the resulting roller coaster ride of deflation and inflation. We have obviously been in a deflationary period since oil went down to $40 a barrel, but I also believe we’ll soon be the victims of inflation like nothing we’ve seen in our country's short history. With a government that is as seemingly clueless as ours, all we can do is look out for ourselves and prepare. I’m not sure how well that’s going to work out for the increasingly apathetic population that thinks they are "entitled" to everything.

CZ

Seeing the Light?

I can't decide whether this is a good thing or bad thing. Here's a very recent quote from our fearless leader, President Obama:

Obama said that while the U.S. dollar remained a haven because of U.S. economic and political stability, he cautioned that if the federal government didn’t reign in spending, foreign investors would stop purchasing U.S. Treasury Bills.

“The dollar is still strong because people are still buying Treasury Bills,” he said. “They still think that’s the safest investment out there.”

“If we don’t get a handle on this, and also start looking at our long-term deficit projections, at a certain point people will stop buying--those-- Treasury Bills,” he said.

Well, No S*#$, Sherlock!! The fact that he is just now seeing the fact that we can't print money out of thin air and not have to worry about foreign countries buying our debt is absurd. Why would it take this long for him to see it? His advisers are only telling him what they think he should know. Telling him what they think he should tell the American people. Of course they don't want to have him talking about Dollar weakness prematurely. That could spark a worldwide selloff, and that's the last thing they wanted. The fact that this is coming out now, though, is somewhat frightening, for the very reason I just stated. Now that it may be common knowledge (because the President said so) that we need to reign in spending because of the threat to the Dollar, that could be the spark for other countries to see this weakness and start selling their Treasuries. I spoke of this a few blogs ago, about this distinct possibility, and now it appears to be coming to fruition. Ugh.

The only good I see coming of this is that maybe it isn't too late, and this realisation is just hitting the public as a whole. Maybe there will be a way for people in power to stop the spending of money we don't have. Maybe... Oh, the times, they are a changin'.

Here's the full story from Bloomsberg:

http://www.bloomberg.com/apps/news?pid=20601087&sid=amI5dRA9njjE&refer=home

CZ

Failure to Engage

I started golfing right around ten years ago. I still golf, but not nearly as much as I'd like to or can afford to. It's a great sport, and anyone that golfs at all can relate to the feeling you get when that one ball is struck so well and so cleanly that it sails to the exact point on the fairway or green that you envisioned. There is a distinct tactile difference in your hands and the club when that ball is struck. Every minute mental and physical detail coming together perfectly results in a euphoric feeling that is often referred to as being "in the zone".

A few people that know me well also know that I'm a bit of a perfectionist when it comes to proper grammar, spelling, and the use of words in our daily lexicon. I think my second job could easily have been editor in any capacity, really. "In the zone" is one of the many overused phrases in our world today, and like "thinking outside the box", or the use of any word purposely misspelled annoys me to no end. I have recently discovered though, that I can't readily replace the phrase "in the zone" with anything that would get my intentions across to the reader as much as that single phrase.

The zone. That familiar, warm, and endorphin-producing place was a destination again yesterday, but this time it did not happen on a pristine and green golf course. It was in a place of perfectly controlled chaos. The shooting range is filled with several targets, both reactive steel and paper. The targets are part of a game which I've started to play on a semi-regular basis. I've talked about it here already, but the USPSA competitions at the local range have grabbed me and taken hold of my psyche. I was "in the zone" yesterday on the last three or four stages of a six stage course of fire. The scores are not available yet, but I'm sure I was near the top of my capability on the last few stages. Pushing the envelope (yeah-there's another one) is the name of the game, and the faster you get, the higher you rank. It is as much mental as it is physical, and therein lies the appeal to me. Of course, misses, failures to engage (overlooking and skipping a target), and other mistakes count against you as penalties, so a perfectly constructed and executed bit of twenty or thirty second controlled fury is what gets you "in the zone". If you get the chance, I recommend you become a frequent flyer to this special place.

Fall In

  Even though I'm not happy about it, people need to be aware that there may be really bad things just around the corner.  I am seeing a few articles that back my opinion of what I thought we would see: 

http://www.marketwatch.com/news/story/treasurys-down-china-voice-worries/story.aspx?guid={EEB9E030-EE0E-492E-8120-8C88CF7912C2}&dist=msr_8

I talked about it below in Coming Around, and I think we'll be seeing more rhetoric like this from leaders of countries all over the world. As the paper money being printed by The Fed starts to make its way out of the banks and into the hands of consumers, look out for higher prices on everything. This small bit of inflation will likely start to show itself later this spring and during the course of the summer months in everything we buy. Groceries, gas, everything we need in our daily lives. This little rally we have seen on the Dow Jones, S&P 500, and Nasdaq this week, will likely be slammed by reality within a few short weeks. I hear analysts talk about how everyone should beware of "bear market rallies", but I haven't heard any of that this week. Hmm. People should be learning from history, but hope is blinding. 

Amendment: This one popped up on the Yahoo front page not even thirty minutes after I saw the Wall Street Journal post and posted this entry. Everyone may actually start seeing the big picture now.

http://news.yahoo.com/s/ap/20090313/ap_on_bi_ge/as_china_us_economy

CZ

SixBurgh

And I thought I might get away with only ordering a copy of the NFL Films DVD of Super Bowl XLIII. This six ring thing could get out of hand pretty quickly. Ugh. I love my Stillers.

http://www.post-gazette.com/pg/09063/953114-34.stm

Here's the full story from my favorite source for all Steeler news from Steeler Nation.

CZ

Free Lunches

  It always cracks me up when people say that the government should "take care of it". Unfortunately, our government can not be expected to do everything. It was never designed that way, and our founding fathers knew it all too well.  The sheeple have become more and more reliant on the government over the years, by fault of their own and by fault of the government itself, and we are now in a place where the government alone can not save us from every threat posed to the well-being of the United States of America. Each of us has to take the initiative and do things for ourselves. Taking the bull by the horns will be the key to recovery, not an apathetic reliance on Big Government. This is a great article from the Mises Institute that paints a very clear picture of how duplicitous our supposed "leaders" have been in our obese government machine. 

http://mises.org/story/3351