Short Structural, Long Cyclical

by Mr Juggles

Time is tough. People struggle to understand it. We can make sense of what’s happening now, can kind of remember what happened in the recent past, and can’t fathom the long-term. All of this is probably because of Twitter or because people no longer write each other long, boring letters like they did during the Civil War or ancient Greece or whenever. For whatever reasons, our attention spans are not only short, but also narrow, able to understand history only as if looking at it through a roll of paper towels.

It is increasingly apparent that everyone — investors, politicians, businessmen, consumers, etc. — have mistaken cyclical trends to be structural in many different areas. We are now at a crescendo as the long arc of history turns and heads back down in the other direction. This is a great opportunity to take advantage of people for whom the short term (the last 1 year, the last 3 years, the last 10 years, the last 30 years, depending on context) is the only relevant term. This is most everyone. It’s a rather large opportunity.

Some facts:

  • Global interest rates are not in secular decline. They have been in a 30yr cyclical decline and the 30yr reversal is now in process.
  • China is not locked in a structural vendor financing agreement with the US & EU. They are ending a long, cyclical run with an under-priced currency.
  • Europe’s imbalances are not the result of a structurally strong, responsible Germany and spendthrift periphery. They are the result of a cyclical trade imbalance due to domestic policies that increased German exports and savings rates while the inverse was true in Span, Greece, etc. The swing is coming back the other way now.
  • Keynesian intervention was not a structural improvement in the operation of the modern fiscal and monetary apparatus. It was a cyclical increase in leverage, starting from a time of low leverage and great demographics. Prepare for the payback.

To quote myself from The Model Business Model: “What is that expression? How does it go? Shit’s way different at this point in history, dude?” Maybe, just maybe, it’s not so different. Maybe we’re just lacking the benefit of the full context.

Recommendation: Short the so-called structural trends. Get long the true, underlying cycle.

Melissa Moody Does Greece, or Rather a Greek

by Melissa Moody


Previous Rating Greece: BFFAE (Best Friends Forever and Ever)
New Rating Greece: Whore

Ratings Rationale: Just when you think you found the one, you realize that the one is not…the one. He was so hot. A beautiful specimen. OMG, he was a god, a Greek God, an actual Greek God. He went by Helios. I wanted to prove my independence after I graduated college, so I drew down on my parents’ savings to finance a 6 week back-packing trip across Europe’s five star hotels in such exotic places as the Riviera, Croatia, Cinque Terre (too cute for words), and lastly, and amazingly, Mykonos.

This is where I met him, my Helios, the perfect man. He had long dark hair, Helios did, and so much charisma. He showed me around town, me with arms wrapped around his waist as he steered his scooter along sea roads. He lavished me with drinks, booked us in a lovely little hotel where our room had a balcony that looked out on the water. And in bed, let’s just say my world was his oyster. Or maybe his oyster was my world? I’m really bad at metaphors like he was really good in bed. No austerity anywhere to be seen.

But one morning I woke up and he was gone. He had retired to some location unknown, maybe to put in some face time at the “job” which he’d mentioned once in passing but which he never seemed to have to go to — not unlike how the married men I’ve slept act towards their families. In his place on the bed was one thing: the bill. He was asking me to finance his romancing of…me! He’d LITERALLY left me with the bill! I felt used, betrayed, like our entire relationship — his trade of money and time and hotness for my trade of young, female and American attentions — was for naught. So frustrating!

When he came back, after spending two hours at his “job,” a glass of ouzo in one hand, I confronted him, waving the bill in his face. He said some stuff in Greek to me. I stared back blanky. It was actual Greek. 10 years of boarding school and I only knew classical Greek. Then, in his bedeviling broken English, he said: “Look, toots, we both got something out of this, so let’s drop the naive kitten act and start calling a spade a spade. What we had was swell, baby, while it lasted. But I’m no Croesus, baby. You’re American, so you’re probably not cultured enough to know who he is, but Croesus had real money, mega bucks, baby. But me, I don’t have a pot to piss in or a window to throw it out. I just have an unfinished (for tax purposes) condo in Athens, a vacation home in Mykonos, an investment property in Turkish Cyprus, and an 8 hour per week job that pays peanuts, only €150,000 per year under the table. So, see, I can’t handle the bills for our little fling, these threads, or even these digs.”

I had never noticed that his bedeviling broken English took all its euphemisms and structure from 1940’s B movies. I looked him in those rich chestnut eyes. “This has to stop now, Helios. I can’t afford to continue to subsidize us. Either you leave this union, or pay me back.”

“Ok, it’s going to be ok, baby. We’ll work something out, you can bank on it. Just give it a little time, a few more days, or months, or years, or decades. I’ll put up some of my assets. Maybe my yacht or this little island I own. The whole kit and caboodle. But before I do that, why don’t you and me and a bottle of ouzo go for a weekend in Athens. We’ll take in the sights, we’ll see the people, I’ll take you for a spin, a real wild time, kitten.”

2 years of daily back and forth and amazing moments — moments even better than my JYA — later I came to my senses. Melissa Moody realized Helios wasn’t going to pay her back. He was my Greek God and he was great. But he was an irresponsible debtor, with no interest in austerity and less interest in repaying debt. He could, maybe, but he wouldn’t. And my parents are super rich relative to what money of mine he spent, so it didn’t really represent any systemic Moody family threat; we just wrote it off. But it was the principle of the thing, and I’d say it set a really bad precedent for my other more expensive long-term flings with Joao, Donal, and Sergio.

Ratings Methodology:
Hey everyone! It’s me, Melissa Moody…not that other Moody, Moody’s, you have been reading about. Actually that’s why I’m here I’m just so sick and tired of that other Moody! Their ratings stink, and they don’t know nearly as much as I do about debt, it’s true, I’m maxed out on 4 out of 7 credit cards I know I have a problem but I just can’t stop,ha ha. I can do a better job than Moody’s and that is what I’m gonna do! And let’s face it, their old ratings were too complicated. I mean Aa3, Baa1, Caa2, B1 who knows what that means? My ratings will be simple:

  • BFFAE (Best Friends Forever and Ever)
  • BFF
  • BFFLAF (Best Friends For Like Almost Forever)
  • BFFBAS (Best Friends Forever But Also a Slut)
  • BFFBIHH (Best Friends Forever But I Hate Her)
  • Whore

The Model Business Model

by Mr Juggles

Notwithstanding its conservative investment portfolio, the central bank remains highly profitable because of its unique business model. Rather than paying for funding, it simply creates the money that it needs at no cost. The return on its investments, as a result, almost all flows directly to the bottom line.
NY Times

So simple and so beautiful. What kind of genius entrepreneur would invent such a perfect business model? “Economist” John Law of the 17th and 18th centuries. Not only did he invent the perfect business model, but he also made significant advances in the business of Bubbles. How did his business model innovation turn out? Like most incredibly brilliant men who come up with bold ideas too early, John Law “ultimately fled the country disguised as a woman for his own safety.” 10 years later, Law “contracted pneumonia and died a poor man.” This is all according to Wikipedia, which, according to Wikipedia, is the source for the unvarnished and unbiased truth.

In the twenty-teens, our central bankers are much more advanced, more ethical, and more American. Importantly, they also look way less good in drag and wouldn’t “pass”. There should be no way this ends as badly as all the other times this has been done. What is that expression? How does it go? Shit’s way different at this point in history, dude.

Recommendation: Long the best business model, short all inferior business models, as the former will compete away the latter.

HT to the Paleofish

Solutions to Problems: Healthcare

by Machem Raiser

Healthcare continues to get ever more expensive. Healthcare is crucial to quality of life in America. How best to reconcile the former with the latter is an issue that has divided, and will continue to divide, people along many lines: have & have-not, 1% & 99%, Republican & Democratican. Healthcare is an issue, I agree. But it is an issue that, despite whinging by just about everyone (especially meek cries your ears can pick out from hospital beds in the distance), is eminently solvable. Simply, kill the sick.

Most people are small-minded and only consider what is lost, which, in this case, is sick people. But think of all the savings! It’s a difficult pill to swallow that things get expensive when there isn’t enough of them, so it’s difficult to swallow that there isn’t enough healthcare for the amount of sick people. Historically, society has dealt with expensive healthcare by increasing the amount of it; classic 20th century thinking and demonstrably too expensive. The right way to cure this ill, to make healthcare cheaper, is to decrease demand by ridding ourselves of the (almost) dead weight that the sick represent. The absence of the needy sick will make hospitals, doctors, pill-makers, breast implanters, and the whole healthcare system compete for customers, healthy customers who have practically no ailments whatsoever. Prices will plummet, affordability will skyrocket.

It’s time to live in the future, the future that is now, the now in which a modern healthy consumer can no longer afford the continued living of the unhealthy consumer. How else can a healthy modern consumer afford $15k per year to tutor each kid on top of the $50k he spends to send each to private nursery schools starting in pre-pre-pre-K? How else can he belong to three golf clubs (each with $1500 minimum monthly spends at the snack bar or clubhouse, mind you), have season tickets to the Knicks, and have a reasonable summer home in a 2nd tier vacation spot like Martha’s Vineyard? How else can he always pay a homeless person $50 in cough syrup to wait in line to get him the new iPad (which is actually called the new iPad) on the first day it comes out? The modern healthy consumer shouldn’t be asked to forgo the bare necessities of life to subsidize the sick. We can dick around with these please everyone solutions or we can get serious about healthcare and simply kill the sick.

Machem Raiser heads a consultancy shop, MLR Associates, which is “renowned” for providing “bold, clear-thinking” white papers to industry leading businesses. His ideas have had “a devil of a time” getting traction, but, per MLR Associates, “not one person has disputed that [MLR’s] solutions make sense.” The firm’s motto is: “The world can be better. Let’s make it so. Simply.” LoS has negotiated a pretty sweet deal for all MLR research, research which we are providing to our clients gratis, which means “free” in some old language, probably Babylonian or whatever they spoke in Ur (was it Babylonian?).

A Rebuke, Literally in Public

by Mr Juggles

From Georgetown’s own, “Elizabeth,” in the comment thread for Pomegranate Capital Thinks Women Can Run Money Better, Is Wrong:

This is quite literally the most ridiculous article and comment thread I have ever read. Are you men really so afraid of a little competition that you have to kill it before it becomes a serious threat? I suggest that you spend less time bashing women and more time getting an education and getting out of your tiny elitist and anti-female bubbles. I am so embarrassed for your gender reading these comments…

My reply:

You are LITERALLY the most ridiculous poster in that entire thread, Eliza. Literally! As successful men, we are always “killing it.” So your implied suggestion — let’s call it what it is, Beth, a rebuke — that we NOT “kill it” is offensive. Literally offensive. But the embarrassment you, Lizzie, feel for our gender (I usually fill out all Government forms that ask for my “Sex” as “Yes,” just to make it harder for the Government to know what my gender is. But I digress, I LITERALLY digress) is nothing compared to the embarrassment that we feel for not only your gender, but for your Common App safety school, and for your parents, and for that time you read A Modest Proposal and thought “Gee this Dr. Swift guy is practically the antichrist, how does he think can solve poverty and the ills of the underclass by eating their babies, I am so embarrassed for his gender, profession, language, countrymen, yadda yadda, et alia and cetera.”

Mr. Juggles

PS Chin up, the world needs coffee-makers, too. Human ones. With skirts.

PPS But it wouldn’t hurt to learn to type.

Never Trust A Mullet

by Mr Juggles

Recommendation: Do not own stock of, or hold prime brokerage balances at, companies run by mullet-toting executives.

Math Too Hard: Qualitative Easing a Literal No-Brainer

by Kaiser Edamame

Unfortunately it seems that, when we recommended Quantitative Easy, even though it was super easy, it didn’t gain a lot of traction. The markets haven’t been nearly as easy as Ben had hoped. So we here at LoS went back to the blackboard for a new idea, something on which we could write a clean, articulate white paper.

(Aside: yes we have a BLACKboard. Funny story because see last election cycle we realized that voting for Obama was a sweet get out of racism card, like buying carbon offsets so you feel ok about how much “damage” you do every time you fly in a plane, and while this came in very handy as a guilt hedge, based on his performance we don’t think we can vote for him again, plus it wont be nearly as “urban cool” to vote for a candidate with the slogan “Change, Again, Seriously.” So we thought, what else could we do to show cultural diversity? And we came up with installing a blackboard as the most obvious answer.)

After furious sessions, much chalkyness and vigorous eraser banging, what did we come up with? Qualitative Easing. As mentioned in our last Easy piece math is hard, almost as hard as lifting weights (which are VERY heavy by the way, just found this out). But Ben, the Bernank, is a hard man, capable of bearing an Atlassian load without so much as a shrug.

Qualitative Easing will have no math (rejoice!), it will just be a touchy, feely, sensual qualitative description of how the Bernank is going to increase prices for things that you OWN (stocks, bonds, homes) and keep prices the same for things you BUY a lot (gas, food, chia pets, viagra, tickets to Japanese hologram concerts).

Assuming he accepts my draft of his Qualitative Easing announcement speech (practically a fait accompli), it would go something like this:

Dear Americans,

I, the Bernank, am going to buy all of your assets from you at much higher prices and, like a hot shower with mango body wash, it is going to feel so good for both of us. I know you’re worried about the fact that the cost of everything is going up more than your income, but worry not: it is always darkest before dawn, and a beautiful dawn it will be with the prices of all the things you want to be more valuable growing like the rising hot solar star in space that we call the sun. Simultaneously, congruently, and coincidentally, the price of everything you want to be lower will fall like the delicate summer rain which wets the earth and promulgates the freshest of smells: moisty asphalt.

My warmest and kindest and biggest love to you,
Ben Bernanke

Things Are Too F**king Complicated

by Mr Juggles

Sept 29th’s FT contains two alarming articles. Martin Wolf calls for the EU to get the printing presses running because everything else has failed. We respect Mr. Wolf as one of the only three journalists in the world today who thinks for himself and does not have his head wedged up his ass. We respect his idea as well. He may be wrong but his idea is simple, to the point, and he admits it’s desperation (he calls it “the unthinkable”).

In the second article, George Soros explains how to prevent a “Second Great Depression.” Mr. Soros is an investing genius and a very smart man. Perhaps too smart. Because I have no f**king idea what he is talking about.

“This is how it would work. Since a eurozone treaty establishing a common treasury would take a long time to conclude, in the interim the member states have to appeal to the ECB to fill the vacuum….

It would require a newly created intergovernmental agency to enable the EFSF to cooperate with Europe’s central bank. This would have to be authorised by Germany’s Bundestag and perhaps by the legislatures of other states as well….

The EFSF would be used primarily to guarantee and recapitalise banks. The systemically important banks would have to sign an undertaking with the EFSF that they would abide by the instructions of the ECB as long as the guarantees were in force. Banks that refused to sign would not be guaranteed. Europe’s central bank would then instruct the banks to maintain their credit lines and loan portfolios while closely monitoring the risks they run for their own account…

To relieve the pressure on the government bonds of countries such as Italy, the ECB would lower its discount rate. It would then encourage the countries concerned to finance themselves entirely by issuing treasury bills and encourage the banks to buy the bills. The banks could rediscount the bills with the ECB but they would not do so as long as they earned more on the bills than on the cash.”

Ok, so I skipped a bunch of parts but WTF George? What are you talking about? I read this article excited to learn the solution to our woes but now I just need a stiff drink. I have literally no idea what he is talking about.

Neither do the regulators. Unfortunately, that will not stop them from implementing some inferior version of his plan. After all, they love complicated stop-gap measures that buy them a few more days/weeks/months and pass the buck to the next unlucky legislator.

As a society, we have outsmarted ourselves. Things are too complicated. No one — not George Soros, not The Bernank, not The Maestro — can understand how all the pieces fit together and where all the unintended consequences will pop up. And yet we add more towers to our castle built on sand.

Recommendation: Initiate a complication index spread trade. Get long short-term complication and confusion while shorting the out-year complication basket. Things are going to simplify, one way or the other.

Translating Corporate Speak: Wynn [Unforeseen Upside Edition #5]

by Mr Juggles

Steve Wynn used to discuss business trends on his quarterly conference calls. No longer necessary now that the Macau business generates almost a billion dollars of revenue and over $300mm of EBITDA per quarter. Instead, he is free to opine on the macro and political situation. It’s still the most entertaining call of the quarter even though it is sad when he no longer feels the need to mock investors and competitors. But at least he’s calling Jeff Immelt a Judas. Someone had to.

Wynn on Obama:

Well, here’s our problem. There are a host of opportunities for expansion in Las Vegas, a host of opportunities to create tens of thousands of jobs in Las Vegas. I know that I could do 10,000 more myself, and according to the Chamber of Commerce and the visitors and convention bureau, if we hired 10,000 employees, it would create another 20,000 additional jobs for a grand total of 30,000.
I believe in Las Vegas, I think its best days are ahead of it, but I’m afraid to do anything in the current political environment in the United States. You watch television and see what’s going on on this this debt ceiling issue, and what I consider to be a total lack of leadership from the President, and nothing is going to get fixed until the President himself steps up and wrangles both parties in Congress.

But everybody is so political, so focused on holding their job for the next year that the discussion in Washington is nauseating. And I’m saying it bluntly that this administration is the greatest wet blanket to business and progress and job creation in my lifetime. (our emphasis) And I can prove it and I could spend the next three hours giving you examples of all of us in this marketplace that are frightened to death about all the new regulations, our health care costs escalate, regulations coming from left and right, a President that seems, you know – that keeps using that word redistribution. Well, my customers and the companies that provide the vitality for the hospitality and restaurant industry, in the United States of America, they’re frightened of this administration.

And it makes you slow down and not invest your money. Everybody complains about how much money is on the side in America. You bet. And until we change the tempo and the conversation from Washington, it’s not going to change. And those of us who have business opportunities and the capital to do it, are going to sit in fear of the President. And you know, a lot of people don’t want to say that. They say “oh, God, don’t be attacking Obama.” Well, this is Obama’s deal. And it’s Obama that’s responsible for this fear in America. The guy keeps making speeches about redistribution, and maybe we ought to do something to businesses that don’t invest, they’re holding too much money.

You know, we haven’t heard that kind of talk except from pure socialists. Everybody is afraid of the government. And there’s no need – there’s no need, you know, soft pedaling it. It’s the truth. It is the truth. And that’s true of Democratic businessmen and Republican businessmen, and I am a Democratic businessman and a – I support Harry Reid, I support Democrats and Republicans, and I’m telling you that the business community in this country is frightened to death of the weird political philosophy of the President of the United States. And until he’s gone, everybody is going to be sitting on their thumbs.

Wynn on taxation on capital abroad:

If the government – if the administration in Washington isn’t frightening the dickens out of those of us who create jobs and build buildings and make lives for their employees, they’re attacking China where in the case of my company, the vitality of capital to improve Las Vegas has come from.

You know, it’s the double whammy. American companies that have ventured abroad to broaden their markets are bringing money – have reinvested much of that in America. And so the rhetoric about offshore capital, there would be a lot more of it brought back here if the government did intelligent and encouraging things to bring capital back. But this is a very business, job creating unfriendly administration and that’s the plain truth of it. And so you know, you want to build condominiums? Why? You want to protect yourself in this environment. Everybody is in a defensive crouch, except for Jeff Immelt, who is sort of a Judas goat. (emphasis ours)

Wynn on TSA:

Coming to the United States is tougher than going almost anywhere else in the world. Homeland Security has, you know, we seem to have been safe more or less but so much of it is excessive and irrational, you know, like patting down babies and old ladies and stuff like that. But it is very difficult – it’s more difficult today to get to the United States for people who have been coming here for years, for decades.

Our customers that are big businessmen that have been coming to America for 10, 15, 20 years, are asking us for help to relieve the bureaucratic congestion of government overregulation in this area. We’ve talked to Homeland Security. They’re aware of the problem. So is Customs and Immigration and the State Department. And you know, when we talk to any given individual in those organizations, in those bureaucracies, they’re very sympathetic. And they know the truth of the complaint.

And they know the truth of the fact that these things are very often excessive and unnecessary. But yet there seems to be a tremendous amount of inertia to move government in America, whether it’s the deficit management and coming to some kind of logical conclusion before August 2 or whatever it is, or whether it’s getting visas. Everybody has a clear understanding of the problem, but when it comes to our government it seems to be getting more and more sclerotic, more and more inflexible. By its own device, it keeps growing and growing and getting more and more onerous, more and more sluggish in its responses to real problems, and sluggish in its ability to take advantage of real opportunity. And it’s frustrating for me because I got a front row seat.

Update: While Wynn failed to mock investors or competitors, we were remiss not to include his mocking of some (past) customers.

We did not lower our rates like some of our competitors did. We’ve come to the conclusion here, incidentally, I’d like to add this parenthetically, having tried this before and failed, we don’t want to make the mistake again. This place is not set for price cutting. We lower the price, we can fill the rooms in an instant because they’re such fancy rooms. But we get people that carry their beer in from 7-Eleven, move their own bags, and don’t eat in our fine dining. We can’t use them. This is not a place for folks that have that kind of economy mentality. (our emphasis) This is a place for people who expect superior service, higher quality food, beverage and everything else.

Ben Bernanke announces Quantitative Easy

by Johnny Debacle

Hi everybody. It’s me, Ben Bernanke. As many of you know, I’ve been extremely busy. During Quantitative Easing I and II, I’ve spent almost all of my time finding just the right amount of flation. This is very difficult for one person to do, but don’t worry — I have a calculator that helps me compute the perfect amount. Not sure it would be possible without my calculator; I can see why every other central banker in history couldn’t get it right and why all their systems ended in some sort of systemic catastrophe. Between my calculator and the advance of knowledge, monetary science is better understood at the present time than in those days of old.

But what hasn’t changed is how much people hate things being hard. I know I do. And in spending time with my calculator, furiously pushing her buttons, I realized that QE I and II were just too hard for me. And in receiving a deluge of explicit and implicit inquiries from the market about when QE would end, what would happen when it did end, why QE wasn’t just blowing bubbles for the sake of blowing bubbles, I realized that QE I and II were just too hard for you all, too. So I sat down and said to my calculator, “Calculator, markets are too hard. Let’s make them easy. Let’s help boost assets prices with a new program called, Quantitative Easy.” My calculator didn’t reply but I could tell from the light reflecting off her display that she loved the idea.

So here we go everyone. Quantitative Easy. I know there will be a rush of people asking questions, so let me answer some obvious ones for you now:

What is Quantitative Easy? Quantitative Easy will be a program run by me, Ben Bernanke, that will make asset prices go up. This in turn will lead people to be happy. It will get their juices flowing, their animal spirits will stir in their hearts, and they will buy things. If we all agree to buy things, even if we we can’t afford to, then everyone will get rich. Easy.

How will it work? Asset prices, all of them, will go up. Like I said: QE I and II were too hard, people were constantly trying to figure out which assets would go up and when. Worse, people were worried that asset prices might actually go down at some point. Crazy, I know. Quantitative Easy is going to be easy. Everything is going to go up. Forever.

What should I buy? A horse. A rainbow. Mykonos (which is for sale fyi). Netflix stock. A mansion in Vancouver. A 1987 Topps Mark McGwire card. A slightly used Japanese nuclear plant. US Treasuries. Portuguese bonds. The only limit is your own creativity.

How can the Fed afford to do this given its balance sheet? That’s a good question. Next question, please.

Where will the money come from? We have a very complex process, involving machinery and paper, too complex to get into here. Make it easy for yourself and don’t try to understand it. Just trust us.

This sounds to good to be true. Is there a catch? No. Would I lie to you?

You Cannot Escape Doom

by Mr Juggles

One of the other two writer/PMs signed up Mister Juggles’ email for something called “Roubini Global Economics” (ed note: we will not be linking any of the mentioned material for reasons that will be made clear, bear with us). “They” made a huge mistake. At the time it seemed innocuous enough – “hey this guy sometimes has some insights, just like sometimes that dead clock over there tells me what time it is.” Roubini Global Economics is an attempt to parlay the Dr. Doom schtick into serious global economic monitoring with a Doom bias. Fine, knock yourself out buddy. Nouriel Roubini’s role in the project is as “Chairman,” and all of Latveria rejoices in his genius. Sample headlines include: “Meltdown, Anyone?” (Mar’08), “Are Commodity Prices Getting Ahead of Fundamentals?” and “Green Shoots or Yellow Weeds” (May’09). But there were too many emails, too much self-promotion, and too much repetition. I can only take so much information and so much email before I just tune it all out. I unsubscribed two years ago. Simple enough, really.

Except that I didn’t stop getting various RGE emails. No, no, no, into my inbox, Roubini still snuck. Email types received include: “The RGE MONITOR,” “The RGE Content Weekly Roundup,” “Welcome to the New EconoMonitor,” “New and Improved RGE Newsletters,” “From Nouriel’s Blackberry,” and “From the Desk of Nouriel Roubini.” I unsubscribed over and over and over and Nouriel did not go away. And he was a goddamned sneak about it, too. Like, for a couple weeks, I’d be in the clear and think: “Finally, this unsubscription took! I’m a-OK and Roubini free!” Then boom I’d get an email like: “From Nouriel’s Blackberry: Greek Contagion Risks – Much Ado About Relatively Little”; Roubini’s way of saying: “I’m not done with you yet, I’m economic hepatitis.”

And like in my lifetime fight against hepatitis, I roared and I raged. The whole thing gave me pause. What does it mean that since 2008 I have been unable to unsubscribe from Nouriel Roubini’s bearish soothsaying? Maybe it’s not the RGE that is unsubscribeable at all. Maybe, just maybe, what is really unsubscribeable is doom. You, one, me, we, WE cannot unsubscribe from doom.

Recommendation: You cannot escape doom.

Quotes Entirely Relevant to Investing 6-26-2011

by Mr Juggles

Any approach to scientific inference which seeks to legitimise an answer in response to complex uncertainty is, for me, a totalitarian parody of a would-be rational learning process.
-Sir Adrian Frederick Melhuish Smith

Past Quotes Entirely Relevant to Investing

Short Live-Action Penguins

by Johnny Debacle

Box Office Mojo has analysis on the filmic penguin market:

Despite its Liar Liar alienated father angle, Mr. Popper’s Penguins is shaping up to be a miss for Jim Carrey, who used to knock this kind of movie out of the park. The movie seems like an odd duck for June, and the live penguins aren’t as warm and inviting as other critters, anthropomorphized or otherwise. Animated penguins have had some success in Happy Feet and as supporting players in the Madagascar movies, but Surf’s Up wiped out in June 2007. Live-action penguins are untested outside of March of the Penguins, but Mr. Popper still is no Ace Ventura or Doctor Dolittle or even Evan Almighty.

Recommendation: Live-action penguins are “untested” so only those who can stomach not only the volatility, but the substantial downside risk are playing in those names. We’re short live-action penguins and underweight animated penguins. A catalyst for a change in our opinion would be the onset of another Ice Age or alternatively a substantial increase in the popularity of Italian Spiderman, the latter of which would result even more calls (e.g. demand) for pinguini.

Announcing the CPI-F (flat)

by Mr Juggles

The WSJ’s Heard on the Street column is generally pretty good. So the title of a recent entry, “Housing Bubble Continues to Haunt Fed“, made me interested to hear adults talk about the current stagnancy in real estate and how the hangover from the bubble still lingers. But I didn’t hear any of that malarkey. Instead, I learned that people are debating whether housing plays too big a role in the CPI; specifically, the “problem” is that the housing portion of the CPI is exerting upward pressure on the overall number. Y’know because consumers typically live somewhere and pay for that privilege.

“OER [editor’s note: “owners’ equivalent rent”] is expected to jump to 1.2% year-on-year in December from 0.6% in February, despite a sluggish housing market.”

1.2%!! This is getting serious.

So what should we do?

“Some suggest alternative inflation measures.”

Oh ok. Well, what are “some” proposing?

“A ‘supercore’ alternative excludes not just food and energy but shelter, too, to gauge underlying trends.

There is great opportunity for the Govt to reduce CPI by excluding more items. In fact, this looks eerily reminiscent of another highly successful endeavor in metrics improvement: LoS’s change from GAAP to SAAP (Seldom Accepted Accounting Principles). By changing our standard, we could change our metrics, and by changing our metrics from EBITDA to EBE (Earnings before Everything aka “supercore earnings”), we greatly improved our profitability.

As visionaries in the SAAP space and masters in specious metrics, LoS would like to be included in the “some” who are suggesting alternatives ways to measure CPI. Considering that the evolved goal of the CPI is to show a slight and consistent level of inflation, we propose that the CPI no longer include any components that are increasing in price level more than 1.5%. These items will be increasing as a percentage of the index, thus throwing off its accuracy. Similarly, items that are increasing in price level less than 1.5% or even decreasing should also be excluded since a) we are not interested in deflation and b) the accuracy of the model depends on items maintaining a consistent (rather than falling) proportion of the total index. It’s important to note that any price changes greater or less than 1.5% could skew the whole thing we are trying to measure and render the CPI not just unreliable, but practically useless.

This new CPI, CPI-F (flat), will provide data on all changes in the prices paid by urban consumers for a representative basket of goods and services whose prices demonstrated a slight and consistent level of inflation. We expect it to have the most consistent and consistently low inflation readings of all the CPI measures. Its current reading is 1.5%. In the future, the monthly CPI-F level will be reported on the 5th of the following month, unless there is no change to the index, in which case you can continue to use the prior month’s reading. Here is a pro forma chart that demonstrates what inflation would look like as measured by CPI-F since 1900.

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