Thursday, May 24, 2012

Free Form Ruminations

The positive correlation between crude and the SPX is senseless.  Oil is the base of the pyramid, the hub of the wheel.  For every dollar the price of crude increases, earnings power on the part of every other industry is impaired.  It says something when OPEC indicates that oil is overpriced vs. supply.  Whether you believe that they are scared of the slow down in China, or that the lunacy in contract pricing has choked American growth, you decide, but with a full year of increasing prices to combat inputs, many stand to benefit from this pullback in Texas Tea.  Look at SBUX and the three price increases they rammed through before contract coffee imploded last year.

So what's going on with gold?  Does the drop in crude imply deflation?  Is everyone so hungry for UST's that even gold goes out the window?  Wrap my wallet with eurobonds?  Look, if you actually care about the game of trading stocks, and enjoy the stories behind all this wackiness you know that for the Greek negotiating tactics you need look no further than ONAV and DRYS.  You're either going to get a Greek exit after the summer elections, or you're going to get money flowing into the black hole with no visible end.  Greeks are expert tacticians, greedy motherfuckers, and lovingly cling to their "scorched earth" composition.  To be Greek is capitalism incarnate.  So if I'm Greek I see inflation down this path and disorderly exit down that one.  Your choices become debt jubilee or confidence collapse.  Will the ECB's LTRO have a hard drive malfunction in the next 6 months?  But with the monetizing of JPM liabilities, and all that euro trash, I hardly see concern for deflation at the operational level.

I am on the record for a long time endorsing a neo-WPA.  All this doodoo bandied about on the European continent serve as a lesson in what not to do when America's card gets called.  We have bailed out banks, the auto industry, the insurance industry, and by extension every other industry, with the sad exemption of the American people.  Lo, they take their bail out in the form of food stamps.  But I say, when and if Germany shows the hair on its ass and cuts Greece out of the picture, there's nothing left but spiraling crime into civil war as people go hungry.

Here, as there, it would be more favorable to pay people to walk on hamster wheels 8 hours a day than give them food money for doing nothing.  On the one hand, hamster wheels may be viewed as demeaning, while on the other, governments pay their people to procreate and scheme.

Finally, I believe that the Western Financialization of Africa, and quite possibly this trans-Asian train system will continue to furnish spurts of global growth, but we must embrace the notion of commercial space flight and extra-terrestrial habitation.  Labor efficiency is the enemy to growth because more can be done with less manpower, and therefore progress must be achieved by undertaking labor intensive tasks, or through purely notional exercises like inflation, and social engineering.  Excusing war, which itself has become more efficient with long-range guided munitions and drones, and bubble activity like proprietary frozen yogurt shops, our own nation would be well served to construct a nationwide rail system and pay people to drive each individual rail spike rather than focus on miles of progress per day by automated cars.

The FT wrote an article today about how Allianz sees no benefit in allocating to equities.  That's funny because I was visiting with a quant yesterday who showed me some contrarian charts that have triggered 3 times since the 1950's that then lead to a decade of robust bullish performance.  On the other hand, this Facebook trainwreck highlights the fact that our hallowed exchanges are now viewed as exit markets by the National Venture Capitalist Association, and others.  With the rise of Second Market there is less reason than ever to "invest" in a big name IPO.  It used to be you came public to raise equity, now there are 8 layers of bonds and convertible preferred securities before you even get to equity.  For shame.

It must be tricky when you have $1.7T AUM.  Fucking hell, you could build a railway to the moon for that. I always get a rofflecopter out of Pimco's marionettes pontificating economical on government stimulus with the amount of jack they control.  If they told their people to take some of their goddamn money back and invent something we'd all be better off.

Hope is not getting by.  Hope is accomplishment.  You give people something they can put their name on and it's as if they were baptized in rain.