tag:blogger.com,1999:blog-34323687.post6773414927558521573..comments2024-03-29T03:19:56.674+00:00Comments on Macro Man: Tenor MadnessMacro Manhttp://www.blogger.com/profile/12324967552369915949noreply@blogger.comBlogger41125tag:blogger.com,1999:blog-34323687.post-15378606179940640472008-10-02T15:55:00.000+01:002008-10-02T15:55:00.000+01:00It's no small irony to me that the President of on...It's no small irony to me that the President of one the perennial "Sick men of Europe" (Sarkozy - France) is needling German and U.K. to come up with their own bail-out plan. Certainly the opportunistic Mr. Sarkozy is using his time as rotating EU President to bolster his political chops. That said, and against the current economic backdrop, even Mr. Trichet must have realized he would have appeared like a caricture of himself had he sounded the cauldron on inflation once again.<BR/><BR/>Treasury and the Fed have been tap dance pretty fast non-stop for the past couple months. <BR/><BR/>It looks like the dance is just getting started in Europe.<BR/><BR/>CoelAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-52795877238768361282008-10-01T18:23:00.000+01:002008-10-01T18:23:00.000+01:00Johan, I'd be willing to bet a lot of money that t...Johan, I'd be willing to bet a lot of money that the per capita income in so-called Blue states is higher than it is in Red states.<BR/><BR/>As for morality, it has no place in politics except when immediately preceded by the letters "i" and "m".Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-49876606436259666272008-10-01T16:17:00.000+01:002008-10-01T16:17:00.000+01:00If this a class struggle, how come so many democra...If this a class struggle, how come so many democrats and so few republicans voted for the package?<BR/><BR/>To me, it sounds more like morality than class struggle.<BR/><BR/>JohanAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-4408808681325066552008-10-01T10:38:00.000+01:002008-10-01T10:38:00.000+01:00Anon 7.36pm, agree globalisation makes any top dow...Anon 7.36pm, agree globalisation makes any top down attempt to increase labour's share of productivity growth tricky, but whether by pushing the burden of social costs onto corporates Europe style, or redistributing the tax burden away from low/middle income earners to high earners and business, the political imperative is now to address what Macro Man calls an incipient class war in the US, before a new generation of demagogues like Huey Long re-appear on the scene.Sean Maherhttps://www.blogger.com/profile/11706813218805999161noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-36949263834018293672008-10-01T09:56:00.000+01:002008-10-01T09:56:00.000+01:00Some idiot once said: "The history of all hitherto...Some idiot once said: "The history of all hitherto existing society is the history of class struggle" <BR/><BR/>A problem like the present mess is pretty much what we make it out to be. By making it a class-against class-issue we will, in effect, disqualify any solution that does not include significant amounts of pain for bankers and shareholders, regardless of the benefit of the general public. Given that the issue is decided by politicians we can forget about the economic and logical merits of any solution -- if it doesn't fly with the uneducated public it simply doesn't fly.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-16679919998378875342008-10-01T07:05:00.000+01:002008-10-01T07:05:00.000+01:00Well Macro, I haven't been around for a few days, ...Well Macro, I haven't been around for a few days, felled by torpor and a feeling of heaviness in the limbs. I do come around the monitors in a mechanistic fashion. I do not make it a habit to discuss deeply cherished music, however, for you, I will except. Wayne Shorter, Juju. <BR/><BR/>I am still not sure what the hell Steve Winwood meant there, although it sounds very ominous. I just do not associate Stevie Winwood with something as sinister as a low signature muzzle attachment, to weakly stretch the substitute simile as far as it can go. Or perhaps it was something as simple as a badly cobbled pair of heel protectors<BR/><BR/>http://www.clothesbuy.com/heel-protectors.htm<BR/><BR/>that would strike the pavement with the nailhead and cause a spark?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-43567486220498955522008-10-01T01:34:00.000+01:002008-10-01T01:34:00.000+01:00Dilbert (2002) on the current bailout debate:http:...Dilbert (2002) on the current bailout debate:<BR/><BR/>http://www.dilbert.com/fast/2002-07-24/Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-8899995090751076042008-09-30T23:12:00.000+01:002008-09-30T23:12:00.000+01:00Anon 19:36 I wonder if rising energy costs will be...Anon 19:36 I wonder if rising energy costs will be a "stealth tariff" on Chinese goods. I have heard more than once that the cost of bringing a box from China to the US has quadrupled. Also the Chinese are not as energy efficient in manufacturing yet (that's not a permanent condition, they just haven't had to be yet). The high value, low cube/weight stuff (electronics) won't come back, but a lot of low value, high weight stuff (steel) will, though much of it will wind up in Latin America and Emerging Europe. It won't be the 1950s but the global wage arbitrage is going to relent a little. Also it seems like China is going to be naturally pushed into greater competition with Japan and Taiwan in high value manufacturing and will aspire to compete with India in outsourcing (much less energy intensive).HoosierDaddyhttps://www.blogger.com/profile/06070310058834687381noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-47537996171471944752008-09-30T19:58:00.000+01:002008-09-30T19:58:00.000+01:00Robert Said....."My thinking is that it is time to...Robert Said.....<BR/><BR/>"My thinking is that it is time to bypass the banks and have the government buy CP directly."<BR/><BR/>Robert that appears to be a sensible solution. However, TPTB are not focused on CP as they want the public to believe. This bailout it all about a certain list of banks that perform a specific function.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-29254516260889058312008-09-30T19:36:00.000+01:002008-09-30T19:36:00.000+01:00Sean, I agree that it appears labour's share of th...Sean, I agree that it appears labour's share of the pie will have to rise, but I can't make the leap to the 50s and 60s that you do. During that era, the US was uniquely positioned as the sole remaining industrial power not decimated by the war. Once the rest of the world was back on it's feet 20 years later, it was inevitable that the value of unskilled was going to decline in a global marketplace. So, today's situation simply cannot be compared. What does that leave as the way forward? The protectionist route beckons, but that leads to a smaller pie for all world-wide, and so I hope that road's not taken. The other route is increased socialism - labor's share of the pie is raised in a way that won't appear on MM's chart, namely, by having a greater share of their consumption paid for by the government in one way or another. Two obvious big-ticket items are health care and education expenses. Other costs may be subsidised by "tax credits" that amount to a negative tax rate for lower income groups.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-37460295233571667862008-09-30T19:32:00.000+01:002008-09-30T19:32:00.000+01:00Re: Class struggle.Exactly correct. The relative p...Re: Class struggle.<BR/>Exactly correct. The relative prosperity and economic security (whatever that is) of folks like me has been won on the backs of the lower 60% of the income scale. These folks have been decimated by outsourcing and (illegal) insourcing.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-31524644335387563842008-09-30T18:21:00.000+01:002008-09-30T18:21:00.000+01:00Johan, two observations:a) while I'd concur that h...Johan, two observations:<BR/><BR/>a) while I'd concur that hourly wages are an imperfect measure, the overall compensation figures also include stuff like dividends, interest payments, etc. that are not strictly wages. My chart shows a more complete picture of the relative gains of wages to the rest of the economy.<BR/><BR/>b) Moreover, the real data hides the growing income inequality in the US, a trend amply demonstrated in the Fed's triennial survey of consumer finances. Real income growth has not been evenly distributed- it's been concentrated primarily primarily at the top, particularly this decade.<BR/><BR/>And that, anon @ 4.53, is one of the reasons that I've interpreted the vote as a class struggle. Another is a browsing of the comments section of stories in places like The Times or the Washington Post. There are a lot of "screw the rich effers" type comments, which anecdotally the Congresspeople must be hearing from their constiuents. <BR/><BR/>I'd concur that the bill was suboptimal (or at least insufficient), but as a signalling device I believe it sent the wrong message to say "we're going to take action X to try and fix this problem" and then to fail to accomplish action X at the first hurdle.<BR/><BR/>Now, you might say that markets haven't exactly carried on today as if it's the end of the world as we'd know it, and you'd be right. However, I don't think it's a case of markets downplaying the impact of the credit crisis and lack of remedy so much as bargain-hunting and quarter end rebalancing.<BR/><BR/>As noted on many occasions, equities still look pricy to me relative to the macro environment and fundamentals; having never re-entered a max size short after the other week, I'll happily be selling into a sentiment-driven squeeze.Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-20208233466009194802008-09-30T17:54:00.000+01:002008-09-30T17:54:00.000+01:00Link was clipped. Try this one:http://tinyurl.com/...Link was clipped. Try this one:<BR/><BR/>http://tinyurl.com/3jymsg<BR/><BR/>JohanAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-63233680290244129492008-09-30T17:52:00.001+01:002008-09-30T17:52:00.001+01:00http://papers.ssrn.com/sol3/papers.cfm?abstract_id...http://papers.ssrn.com/sol3/papers.cfm?abstract_id=943769<BR/><BR/>Think some of the systemic changes that many are blindly groping for could be heralded with the proper accounting of intangibles (R&D, IT, IP) and wider quantification of the knowledge economy. Its not often that I'll argue for the underestimation of econ stats, suffice to say that the hank in the suit may try to negotiate with the high heeled boys if he can think clearly and quickly enough. Remain bearish, but lightened up a little in the throes last night, the other side of the tunnel promises to be interesting (http://www.youtube.com/watch?v=rK7xkNGKVP0). <BR/><BR/>As to social mobilisation would point out that social inequality has different dynamics and levels between the Anglo-Saxon and continental economies (Wyplosz had an interesting commentary in todays FT), and would be very surprised if anything really manifested in the US.<BR/><BR/>Signing off with some ipod imagery, cheers, JL<BR/>http://www.bankersball.com/images/ibanker.jpgAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-54209965742606774472008-09-30T17:52:00.000+01:002008-09-30T17:52:00.000+01:00Macro Man, Visit the Macro Blog and find out about...Macro Man, <BR/><BR/>Visit the Macro Blog and find out about real compensation for American workers.<BR/><BR/>http://macroblog.typepad.com/macroblog/2005/12/are_workers_los.html<BR/><BR/>JohanAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-49670279020082327522008-09-30T17:29:00.000+01:002008-09-30T17:29:00.000+01:00MM - for some of your readers for whom the "econom...MM - for some of your readers for whom the "economic consequences of the credit markets" seems to be something of a mystery (if you'll forgive the ob - a puzzling phenomenon for people who make their livings but we all tend to take our inherited ecologies for granted) we might remember the full title of the General Theory is "Employment, Interest and Money". And that it was preceded by a "Tract on Monetary Reform" while the heavier and more difficult section of his Essays was about credit and exchange markets. In much of which he was initially the student of Robertson and Pigou.Unknownhttps://www.blogger.com/profile/07898348310819841317noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-9498205026982868212008-09-30T17:26:00.000+01:002008-09-30T17:26:00.000+01:00Re: Main St. vs. Wall St. --- I think there are tw...Re: Main St. vs. Wall St. --- I think there are two problems:<BR/>1) Main St. doesn't recognize the importance of financial intermediation to the real economy 2) it's seen as a bail-out of Wall St. fat cats.<BR/><BR/>There is a failure on the part of Congress to communicate 1) to their constituents.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-26347140612167899952008-09-30T17:10:00.000+01:002008-09-30T17:10:00.000+01:00My thinking is that it is time to bypass the banks...My thinking is that it is time to bypass the banks and have the government buy CP directly.<BR/><BR/>If the CP market is what is frozen, it seems very circuitous for the government to buy $700 worth of CDS in hopes that the money flows into CP. Go into the CP market directly. That way we know there is no billionaire tax on the money so allocated.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-53375114481248950972008-09-30T17:02:00.000+01:002008-09-30T17:02:00.000+01:00MM- V useful post, provoking very interesting exch...MM- V useful post, provoking very interesting exchanges in the comments. I known each day that I will learn and be entertained. Thanks. Gramps-- from my perspective you are spot on. MM-- what odds would you assign to the S&P at, say, 900 by end of Oct? Any thoughts on the VIX?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-45911828234138442142008-09-30T16:53:00.000+01:002008-09-30T16:53:00.000+01:00MM, I don't understand why you're straining to cas...MM, I don't understand why you're straining to cast this as Main st vs<BR/>Wall St, class struggle issue etc. Politicians are saying similar<BR/>things (Main St is "angry" about "bailing out fat cats").<BR/><BR/>I don't know if you read the proposed legislation but I feel that it<BR/>was a very sub-optimal, hastily crafted bill which had some very loose<BR/>language about what the treasury could/could-not do and some<BR/>completely un-enforceable stuff that looked like it was thrown in to<BR/>hoodwink appropriate constituencies (the equity warrant and the<BR/>clawback in case of a loss was a joke, so was the oversight language).<BR/><BR/>If you want _something/anything_ *today*, we'll likely get something<BR/>really bad (like from last weekend) and we'll still be carrying<BR/>zombies of near-dead ex-IBs on our backs a decade later like Japan.<BR/>Was it the worst legislation ever? Probably not. Did it need to be<BR/>as good as it could be? Most definitely yes, considering the<BR/>importance and the scrutiny it was going to get.<BR/><BR/>I live/work in Silicon Valley. At least in my vicinity, I know<BR/>several people who hold similar views. I wouldn't necessarily<BR/>classify them as Joe Sixpacks. I doubt if they feel a part of any<BR/>class struggle as it is commonly understood. They're most definitely<BR/>not angry over Wall St. "fat cats" making a ton of dough or even over<BR/>tech jobs getting shipped to Bangalore.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-74230425795972819142008-09-30T16:14:00.000+01:002008-09-30T16:14:00.000+01:00gramps, might I suggest that you create your own b...gramps, might I suggest that you create your own blog?<BR/><BR/>So a beef processor in Asia expanded into DRAM production...what does this say about the expansion of a potato processor in the US into the same market? (I am neither long nor short MU.)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-20552711561347757392008-09-30T16:09:00.000+01:002008-09-30T16:09:00.000+01:00MM: I will grant you that **IF** you buy the asset...MM: I will grant you that **IF** you buy the assets at current "firesale" prices, then you might (or might not) get a profit. But that assumption is absurd.<BR/><BR/>(1) The banks can already sell at firesale prices (eg MER), but mostly they are refusing to do so. If they did, incompetent CEOs would have to admit they are failures<BR/>(2) If the taxpayer manages to buy at firesale prices -- it means the banks have to do a lot more write downs, and they are already under capitalized<BR/>(3) Analyst projections? I am sorry, but I just can't take Wall Street analyst projections seriously anymore. These guys are far worse than the weatherman. They might get lucky and be right, but given their track record a prudent investor would have to bet against<BR/><BR/>(4) The U.S. government does not generate profits. OK, they got lucky with Chrysler -- but that investment involved taking a big equity position that gave the taxpayer lots of upside. In every other instance, the US government has lost money<BR/><BR/>And more than a few people have argued that the Chrysler bailout was actually a failure... by allowing Detroit to continue along "status quo", rather than facing up to changing realities in the car market -- the bailout actually saved Chrysler short term and doomed it long term.<BR/><BR/>Banks also need to face reality. The Greenspan put is over and done. Any monkey can get over-levered in a bull market (and EVERY monkey did). Banks cannot get a sustainable competitive advantage by doing something that is the antithesis of uniqueAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-34323687.post-65572211836564042122008-09-30T15:59:00.000+01:002008-09-30T15:59:00.000+01:00Andy...with lots of Guinness.Andy...with lots of Guinness.Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-62611634102331710782008-09-30T15:58:00.000+01:002008-09-30T15:58:00.000+01:00It is not absurd. It doesn't matter how often you...It is not absurd. It doesn't matter how often you say it, it doesn't necessarily make it true.<BR/><BR/>The default rates implicit in market prices for these securities are, in many cases, well above even the most pessemistic projections for house prices and unemployment. Thus, if they are held to maturity, it is entirely reasonable to conjecture that they can return a profit. The divergence between market pricing and intrinsic value represents the liquidity premium of these assets. If every asset on every balance sheet in the world were marked at the price it would fetch if everyone sold at the same time...guess what? We'd all be insolvent.<BR/><BR/>Moreover, you appear to fail to realize that the implosion of credit markets affects everyone...including those legitimate enterprises that wish to borrow because the apparent cost of capital is lower than the expected return on investment. When capital is unavailable at any price, there is a problem.<BR/><BR/>And at the moment, capital is virtually unavailable at any price.Macro Manhttps://www.blogger.com/profile/12324967552369915949noreply@blogger.comtag:blogger.com,1999:blog-34323687.post-81419030476179971382008-09-30T15:51:00.000+01:002008-09-30T15:51:00.000+01:00How do the Irish propose to backstop 250% of GDP?How do the Irish propose to backstop 250% of GDP?Anonymousnoreply@blogger.com