Europe's Treaty of Debt

A great video clip on some of the problems with Europe's latest treaty to solve their debt crisis. Mainly the problem of giving a lot of power and immunity to an unelected political body.

The “Tug-a-war” of 2011 Continues between Market Bulls vs. Bears!

The Bulls have regained the momentum! Anticipation & initial good news from the European Debt crisis had markets rebounding from 5 straight months of losses in one of the better months on record. Europe’s take on its heavily indebted nations for the last 18 months has been really a policy of “kicking the can down the road”. The best analogy I heard was they were not only kicking the can down the road but when they ran out of road they began paving more road to continue the kicking! As is all too clear with our own politicians nothing ever seems to get done until there is a major crisis at hand. This is truly a step in the right direction for Europe as they are actually trying to restructure Greek debt with the “voluntary” 50% reduction. Coupled with other bullish winds of healthy corporate balance sheets, low interest rates, accommodative Central Banks, and Government intervention has given strength to the rally.

 

However one still has to be cautious in a market environment where a lot of the factors that gave us the summer downturn are still real & present. Sovereign nation debt is still growing at alarming rates in the Developed world as Economic Growth sputters behind. The little economic growth we have had has in fact been showing signs of slowing since summer. The recession threat might be greater then what most experts think. The stock & commodity markets have also shown an amazing amount of correlation to government and central bank intervention. It was relatively easy to predict this summer’s market downturn when the market was no longer supported by Federal Reserve Bank’s QE2 (Quantitative Easing). Lastly the lack of political leadership to make difficult/unpopular decisions from the developed world has been troubling. A lot of the structural imbalances built up over the years in our economy still have not been addressed.

 

Predictions of the future however are always difficult and unpredictable. A balanced approach with emphasis on “playing defense” during the next 6-18 months in my opinion is still the prudent move. I am happy to see the European leaders finally coming to the realization of needing to restructure Greek debts. This is a big start to dealing with the world’s debt problem but the details of the EU summit still need to be ironed out. In addition the Europeans will have to deal with the much larger debt problems of Ireland, Portugal, Spain, and Italy.Time will tell.

Rob Arnott's latest: We're in a Recession

Rob Arnott talks with Market Watch about his views that the US is already in a recession, China's soft landing, and taking incremental risk. Enjoy:

Ray Dalio's Latest Interview with Chralie Rose

Anytime you have the opportunity to listen/watch Ray Dalio of Bridgewater Associates talk than you are better off having done so. His approach to global economics and assessment of the "machine" is truly revealing to his success as an investor. Whether you agree with him or not on the various subjects how he comes to his conclusions is what fellow mercenaries should study and emulate. Follow the link to Charlie Rose's website and enjoy!

Hugh Hendry's Latest Media Appearance

Hugh Hendry is back after a hiatus from making media appearances. According to him his new "CEO" has requested that he not make anymore media appearances. Luckily for us he was a able to sneak on to a BBC radio show to give his views of the European Crisis. Enjoy:



and the long version of the video:

California's Financial Woes Look to Continue

Michael Lewis' newest article over at Vanity Fair, California and Bust is an eye opening article and somewhat depressing. He covers quite a bit including defending Meredith Whitney, interviewing Arnold Schwarzenegger, and going to the city level where most of the pain is being felt. I implore you to read it in its entirety as it is well written and his premise is unique. My critical comments would be that he didn't go after the public sector unions and come to the conclusion that FDR had done in his presidency that they should not be allowed. On the flip side the public workers were unionized long before the most recent devolution of America/California society. Read it yourself and see what conclusions you come to.

Lewis' article inspired me to find the great work that Mish over at his Global Economic Trend Analysis has done on the subject of California. I have been meaning to post these links for sometime now. Mish's blog has done us all a wonderful service by discussing a lot of California's budget problems. Here are his solutions to budget crises in January 2008 & 2011:
Mish's California Budget Proposal
&
California Budget Balancer Interactive Map from LA Times Misses the Mark

Mish:
"Look at this disgusting list of California Agencies.

I sorted out some but not all of the more ridiculous ones.

Does the state need a ....

• Acupuncture Department
• Office of AIDs
• Air Research Board
• 3 different agencies for alcohol and beverages
• 2 Apprenticeship Councils
• Art Council
• Asian Pacific Islander Legislative Caucus
• Bureau of Automotive repair
• Barbering board
• Biodiversity council
• Calvet Loan program
• Climate Change Portal
• Coastal Commission
• Cool California
• 4 Delta agencies
• Digital Library
• Bureau of Electronic and Appliance Repair
• Employment Training Panel
• Energy Commission
• Equalization Board
• 2 Fair Employment agencies
• Film Commission
• Flex Your Power
• Healthy Family Program
• Hearing Aid Dispensers Bureau
• Home Furnishings Bureau
• Humanities Council
• Independent Living Council
• Indoor Air Quality Program
• Economic Development Bank
• Interagency Ecological Program
• Labor and Workforce Development
• Latino Legislative Caucus
• Learn California
• Little Hoover Commission
• Maritime Academy
• Managed Risk Board
• Museum for History
• MyCali Youth Portal
• Native Heritage Association
• Natural Community Planning Program
• Naturopathic Medicine Community
• Outreach
• Peace Officer Standards Board
• Postsecondary Education Commission
• Prison Industry Authority
• Privacy Protection Office
• Psychology Board
• Railroad Museum
• Recovery Task Force
• Refugee Branch
• Regents of the U of C
• Save Our Water commission
• Smart Growth Caucus
• Status of Women Commission
• Take Charge California
• We Connect
• Wetlands Information System
• Workforce Investment Board

California does not need ANY of those. Moreover I assure you I missed dozens more that could be cut back if not eliminated entirely. What the heck do those cost? And how much can be saved by my suggestions above."

A great quote from Mish... Read both of the links in their entirety. They are excellent. California has had 2+ years of massive budget problems. Early this year it was at the tune of a $25 billion deficit.

My take on this is simple and sensible. People of California and the United States need to ask themselves, "what kind of Government do you want and what are you willing to do to pay for it." I don't think that California residents realize what the costs are of having a fully intrusive government that tries to be all things to all people. Californians already have some the highest taxes in the union with little to show for it. Why not have the state focus on some of the more important aspects of basic governance: education, public safety, public health, infrastructure, and certain basic safety nets. Sure those basics are in need of massive reform, but at least the effort and focus could/should be on them. However if you think that California (and the US for that matter) is too far gone like Michael Lewis hints at then it might have to get a lot worse before it gets better. As time progresses I am leaning towards the later option and holders of  local/city municipal bond should be prepared on what that may look like.

Kyle Bass on CNBC discussing the latest on the European Crisis

Kyle Bass from Hayman Capital was on CNBC's Strategy Room last Wednesday to discuss the European Crisis. He parses through the noise on the situation with how "the period we are going to go through, people are going to lose a lot of money." Flat out he doesn't believe that Greece and the PIIGS are not going to have an orderly default, but the world is not going to end. He does see a recession on the way as I do. The video is top notch:

NCAA Hypocrisy Exposed by the Mercs & South Park

NCAA major sports programs are a big business... no a huge business. I find the hypocrisy of the NCAA Division I sports stifling. My doubts started when College Football refused all common sense and the spirit of competition when they rejected a playoff system. The vested interests of the bowl system, TV rights, etc. were not budging. I am fine with folks making money, but when the NCAA wrap themselves up in academics and the tradition of the bowls I call hypocrisy! The more I looked into the more the whole system absolutely stinks.

The NCAA loves to espouse academics and will parade it out or hide behind it at the first sign of trouble. Truth being told when it comes to academics the graduation rates of the "student athletes" is extremely low. Especially for the players who come from the top programs. Overall and there is some debate with the statistics, but ESPN reports grad rates at 69% for Division I football. You can see where all the schools individually rank at Scout.com. For reference this year's current college #1 ranked team, Oklahoma, is at an embarrassing 45% graduation rate. When comparing the racial divide between graduation rates of whites to blacks the numbers are even worse. 59% was the graduation rate from last years champion, Auburn. However 94% of Caucasian players graduated compared to the 48% of African Americans. That's a -46% difference! So you better hope these kids have a chance at the NFL, right?? Yeah, hmmm, well at least 90% of the 2500 Division I football players that run out of eligibility never play a single down in the NFL according to this ESPN article. The article is full of NCAA hypocrisy and is a must read. NFL has been known to stand for "Not For Long" and most players don't even make it to "full career" of 5 years. If that isn't enough information for you the Huffington Post does a good job exposing some of the questionable data that NCAA puts together in its statistics about student athlete academics.

Now that we've proven the sham of NCAA Student Athlete academics. The NCAA likes to play upon most of our fond memories of college that most of us share. They constantly talk up tradition and the spirit of history. I love history! Well guess what? The NCAA could really care less with their most recent antics. They have been turning a blind eye to conference realignment for the sake billion dollar TV contracts that the players will never see a dime of. Rose Bowl champion Texas Christian University, TCU will be playing sports in the Big East Conference?!?! Texas A&M is looking to jump ship to South East Conference, SEC. Oklahoma & Oklahoma State are contemplating a jump to the already crowded PAC-12. Why? For the TV contracts of course! Guess what if you are player in one of the big powerhouse schools if you accept any form of payment or trade you are suspended or kicked out of the league. The latest (ESPN) is the star quarterback, Terrell Pryor, from Ohio State was suspended and forced to try the NFL because he received a couple hundred dollars and some tattoos for signing his own jersey of the school he plays for! Meanwhile one injury could've ended his career and his earning potential. He would have little to show for it. However the school would have made 10s of millions on TV contracts, tickets sales, video game sales, memorabilia, etc. I don't have time to rant about the coaches who make millions in the face of their unpaid players....

The more I have looked into it, the more disenfranchised I have become of big time college sports. Worse is I hate the rank hypocrisy that is thrown in your face as a sports fan. And I am a huge sports fan. I am as big of a capitalist as any out there and don't have any problem with any coach or school making money. When you use the government and "non-profit" institutions to manipulate & oppress others so they can't get the same opportunity that's when I have a problem! One of the reasons I am a sports fan and a capitalist at heart is I love competition. However there isn't a level playing field for those that risk it all, the kids/students/players. So let's call the situation what it really is: SLAVERY. South Park doesn't pull any punches when it mocks the whole sham. Enjoy and remember careful what you support when you spend your money and time watching collegiate athletics.

Crack Baby Athletic Association
Get More: SOUTH
PARKEric Cartman,Kyle Broflovski,more...

Epic Nadal vs Djokovic US Open Final

This is one of the greatest tennis matches I have seen in a long time. The score doesn't do justice to the pace of play and competitiveness of the match. Djokovic and Nadal played a knock down drag out fight of a match. The crowd was loud like a Davis Cup match and both players were going blow for blow like a pair boxers throwing haymakers at each other. This YouTube clips is one of many great epic points that seem to come at the biggest parts of the match, break points, set points, etc. One of the games lasted over 17 minutes and the total time of the match was close to 4 hours. Unbelievable Final! Enjoy:

Rob Arnott Discusses the Euro Crisis

Rob Arnott always has interesting insight on the markets and in this video from the Breakout Blog of Yahoo! Finance is no exception. Talking Euro crisis and potential effects with Jeff Macke: