Sunday, December 23, 2012

A serious view on American gun control.

There are sound reasons why the U.S. should not crack down on law abiding gun owners, but these are overshadowed by the poor defense provided by pretty much every idiot who has managed to get  themselves on television. For all the right wing bluster about perceived liberal media elites, they sure seem to run like lemmings to just about any smirking prick with a news show.

What's changed in the last week is that I think blue state opinion makers have taken time to reflect and understand what the zeal of gun owners and the gun lobby is really about. Piers Morgan's repetition of 30,000 gun deaths a year vs. about 30 in the UK seems to make an inarguable, if patronizing, case for the solution to gun violence. The numbers are apparently clear. He has the data and it frames the issue in a way that shows quantitatively that there can be no rational response other than to reduce the number of guns available to civilians in the U.S. From this view, the facts have data, the government has the power to respond, and this should be a done deal. But these numbers don't tell the whole story.

Saturday, December 15, 2012

Bernanke's QE n + 1


Federal Reserve Chairman Ben Bernanke's commitment to provide liquidity (buy U.S. treasuries and other assets) until the unemployment rate drops from 7.7% to 6.5 is an open ended commitment to "print" money - inflation be damned - until it is politically viable to cease propping up the treasury.

Policy makers in Washington must be seriously weighing the consequences of high inflation brought about by "printing," against the likelihood of widespread unrest when the prices of staple goods multiply. Whether governments choose austerity or inflation, someone is going to lose. It's really a question of who will be in more of a position to do anything about it.

Otherwise-serious people appear to be making preparations to protect themselves from the breakdown of civil society. Ask anyone interested in "zombie apocalypse" anything, and you will find it's just a polite euphemism for protecting themselves from their neighbours when the ATMs turn off, the shelves are bare, and the lights, heat or taps turn off in cities.

End-of-days anxiety aside, the real point is that it is unlikely that U.S. unemployment will drop to 6.5% anytime soon. High inflation and its consequences are certainly implied, and so the question becomes, what civil effects might QE n+1 have?

Wednesday, December 5, 2012

Probable tax policies.

Fiscal conservatives may not be aware of a factor driving centre-left parties in the debates over the spending in the US, and over tax rates rates in the UK and France.

Arguments against increases in corporate rates and capital gains are based in sound economic reasoning, but at this stage of the economic crisis most politicians in power recognize that "recovery" is abstract and distant compared to more exigent concerns.

The logic of political survival asks a question which economists have not. Politicians are asking themselves, "would we rather govern in a poorer economy, or be the opposition in a better one?"

Monday, November 19, 2012

Who is buying Euro area debt?



Just some wild, baseless speculation, but with Euro area banks and governments under so much pressure to maintain their capitalization levels, it seems like a fantastic opportunity to launder some money out of the black market.

If I were a politician in certain southerly Euro nations, I would be doing anything to make sure that my country could make its interest payments and keep the flow of money going into the public sector that employs 1/3rd or more of the country, and is a key income in at least half of households - and possibly a majority of voters.

Wednesday, November 7, 2012

Bankster tax? How about a profester tax?


It seems that barely a week goes by without an op-ed by a distinguished professor of social policy, labour, or political science, declaiming income inequality and calling for new taxes on the rich.

Not to tear down straw men, but the argument tends to go that since banks (and their executives and employees (though apparently not pension plan shareholders or bondholders)) have profited so much from being bailed out by taxpayers, their salaries, bonuses, capital gains and lately, wealth, should be clawed back in the form of higher taxes, to "give back" the money they have "taken" from the public.


Monday, November 5, 2012

A bit of bother for bitcoin.


Digital currencies were considered a fringe idea unworthy of serious consideration a decade ago. Yet,  with the level of uncertainty about how the Euro crisis is going to play out, questions about currencies like Bitcoin are being contemplated by central bankers and mainstream economists.

The digital currencies are distinct from electronic payment systems like PayPal or Visa in that instead of negotiating the transfer of money from one place to another, electronic cash systems are designed to _store_ value instead of transmit it.

There are a number of criticisms of e-cash systems, which I won't go into here, but there is one I think will be a deal breaker is something that appears to be intrinsic to any system of algorithms.


Tuesday, June 12, 2012

Cherchez la frau.


Among the criticisms of German Chancellor Angela Merkel's handling of the Euro debt crisis, the accusation of being a self-interested ego-maniac driven by childish fantasies of power is not among them. That is, at least outside a fringe of people whose understanding of Germany begins and ends with the Nazis. Merkel appears (perhaps strategically) to suffer visibly from exhaustion with the brio and bravado of her southerly neighbours. She, matronly, them, like boys tousling over a toy or playing at king of the castle.

Conversely, many criticisms of former President of France, Nicholas Sarkozy, were of the short-man and tiny-prick variety. He was too ambitious, too brash, too vain, too physical, anti-intellectual, and so un-french. It makes me wonder whether it matters to the future of the Euro and the European Union that Merkel is a woman.

Tuesday, May 22, 2012

Enter the SinoDollar: China and reserve currencies.



Given %60 of China's (~$3trn) reserves are held in US treasuries and USD denominated securities, at what point will Beijing decouple itself from a dependency on a deflating dollar, and what will decoupling mean?

Wednesday, May 9, 2012

What if you saw it coming?


There is some very serious anxiety about the rise of ultra-populist parties in Greece and France. When coupled with the %50 unemployment rate for Spanish and Greek youth, with another %30 to %40 in Spain and Portugal, and uncertainty about the established political order of western dominance, it would seem irrational not to consider that the clouds are gathering.

European parliament member Nigel Farage makes some very bold statements about these concerns in the video below. Notably, that Europe may face another rise of "national socialism." ...

Friday, May 4, 2012

Buffet's Dad wrote this whole blog 65 years ago.


Zero hedge had a link to a 5-page speech given in the year 1948 by Howard Buffet, father of Warren "Sage of Omaha" Buffet that neatly summarizes most of what I've been going on about, and then some. Not that I expected my views to be new, but wow, this guy knew what was going on.

From the abstract:


"Congressman Buffet stresses relation between money and freedom and contends without a redeemable currency , individual's freedom to sustain himself or move his property is dependent on the goodwill of politicians. Says paper money systems generally collapse and result in economic chaos. Points out gold standard would restrict government spending and give people greater power over public purse. Holds present is propitious time to restore gold standard..."

Wednesday, May 2, 2012

Politicians can stay irrational longer than you can be right.


Market player/commentators like Charles Biderman, Hugh Hendry, and Kyle Bass have each at different times made rational, clear assessments of the solvency problems facing Europe. Each essentially agree that Eurozone governments, in particular the PIIGS, will not be able to balance their books or grow sufficiently to pay down their debts. Nor will they be able to maintain stable market prices for their populations, their levels of welfare spending, or in some cases, their social order while remaining in the common currency.

To use one of Hendry's elegant oversimplifications, the Euro is akin to the gold standard because Germany will not allow member countries to inflate away their debts by debasing the Euro currency. This makes debt payment and deficit reduction zero-sum for Euro economies, as compared to the US (and Canada), who can literally increase the money supply though printing, and then pay with that.

Keynes is said to have uttered the maxim, "Markets can remain irrational longer than you can remain solvent." This meant that even if you had a sound investment system that must inevitably succeed at some point, there was no way of knowing precisely when that point might occur, and you would likely go bankrupt if you waited for your circumstances to transpire. 

However, I would adapt this to say that, "politicians can stay irrational longer than you can stay  right."

Wednesday, April 25, 2012

On Yellow Metal Perils



With all the focus on the link between the price of gold and whether the US Federal Reserve will embark upon QE3, it seemed to be worth asking just what holding metal ingots is really a hedge against. The whole idea of hiding a stack of gold seems a bit dramatic, but it is a financial plan that is gaining mainstream acceptance. Everyone should have savings to fall back on in the event of a crisis. The question is whether it is actually useful to keep those savings outside of a bank, and yet then whether to convert them to the barbarous relic. 

The main criticisms of gold are that it pays no dividends, no interest, costs money to hold, and is driven by paranoia and bubbles, which is funny because given stock values, real interest rates, fund fees and the VIX, that sounds like pretty much everything these days.

The following table lays out examples of financial and economic risk scenarios some Euro area citizens could face under extreme circumstances, and compares holding gold as a mitigation...

Tuesday, April 24, 2012

Austerity backlash.

The piece that is missing from the discussion of austerity measures in Europe and in North America is one of the main factors in whether electorates will support or deny them, and in turn whether austerity will ensure the viability of currencies and global markets.

When you actually look at the size of the electorate against that of the whole population, depending on demographics, it's about a half to two thirds of the total population. The same can be said for the size of the labour force. Depending on the level of unemployment, you can shrink the labour force even further. Now, given the number of people employed in the public sector - from direct government services, to academia, military, municipalities, states and provincies, social services, and the health care system, and broader public sector agencies, boards and programs - you are looking at about one-in-five to one-in-four (%20-%25 of the labour force, or greater in some countries) whose salary is paid directly by the government.

In Canada, according to the Statscan data, it is at least %20, but that's just where it starts...

Friday, April 20, 2012

Riot season.

With the coming of the warm weather, it was only a matter of time before our nation's students again took to the streets to impress one another with the annual spectacles of marching, chanting, rock throwing and police provocation.

Students in Montreal clashed with police as part of a campaign to reduce tuition fees, probably to nothing, and presumably to ensure their undergrad degrees will be as truly worthless as they treat them.

Gold commentators get it wrong.

Another post over at Zero Hedge about gold and silver prices seems to miss the point. Barring it being declared contraband The price doesn't really matter. Holding physical metals is not a portfolio price hedge, it is a risk hedge. Think the kinds of things people keep in cottages and farmhouses in case of extreme weather events, a fairly common occurrence in which they may not be able to rely on the trappings and accoutrements of society for brief periods. In a city it seems like the end of the world, but in the country, that's just winter...

Thursday, April 19, 2012

Is there a Silicon Ceiling?

Computer World UK has a story on a Gartner survey that says Chief Information Officers are dismissed as techies without business savvy by CEOs

What's more, is the CEOs are mostly right. However, they are right in a very CEO kind of way.  The real hitters in organizations know that techies have a tremendous amount of power, but they typically are not educated to trade-on or use it effectively.

Techies can be discredited easily in political environments for this lack of savvy,  because geeks just don't understand the process-oriented view as a weakness or disadvantage. Tech people trade on skills and information, moreso than alliances and relationships, and in turn they do not value strategic advantage in the same way.

From the perspective of a CEO, she cannot rely on her technical people not to give the game away. The tech business is full of internally consistent logic, and it creates massive blind spots for the dynamic alliances and strategies that comprise how business actually works. Geeks may feel like they are a Lamborghini in a crowded shopping mall parking lot, and I'm sure it's great to be a Lamborghini, but who wins the day in business is the one who gets out unscathed and lives to race another day.

Wednesday, April 18, 2012

Don't get hopes up for high CAD, Carney

Passable article over at the Globe reporting that BoC governor Mark Carney is trying to "talk down" the loonie from being seen as a safe haven for hot foreign capital flows based on oil prices.

What he means, if not precisely is that real interest rates in Canada are still effectively negative, and he will print money to make sure that the CAD stays near parity with the USD because our exports depend on it.

Canada has no competitive manufacturing industries, and it uses its proximity to the US and periodic weakening of the dollar and commodity price controls to maintain exports. Anything below parity with USD is an opportunity, since in terms of raw purchasing power in Canada the CAD has a value of as much as, or more than the USD.

However, Canada's M2 equivalent marches exponentially alongside the US M2, and with an inevitable QE3 of some sort in the US, Canada will likely fire up the presses in unison, soaking carry traders and hot money alike.

Carney is spending more time in the press than the finance minister. Politically that must mean something.

Monday, April 16, 2012

Time to go long Apple anti-virus products.

Not a week has gone by lately without a new report of vulnerabilities or viruses affecting Apple products. It is useful to know about these things so that you can apply patches and have some faint hope of not having your data and personal information pilfered by eastern european data brokers. For more of the same, see Ars Technica for the latest.

What is more interesting is how predictable this was. Four years ago, a fellow named Adam O'Donnell published a paper in the IEEE Security & Privacy journal that provided a game theoretic model of when attackers would switch their efforts from infecting PCs to Apple...

Silly continentals hoard %35 more Barbarous Relic in eccentric hermit mountain kingdom.

The BBC is reporting that gold shipments from Italy to Switzerland have increased %35.

They then add this gem:

"Experts say improvements in the trade deficit could be a sign that Prime Minister Mario Monti's economic reforms are starting to take effect."


If by working they mean people with savings or wealth getting their money the hell out of the country before it can be seized under the aegis of wealth taxes, then yes Monti's policies are working...

Sunday, April 15, 2012

Inaugural

Thank you for looking me up. This blog, "A Sporting Interest", will take current events and somehow make them about me. It will be a general platform for half-baked ideas, self promotion, petty rivalries, and the kind of intellectual vomitorium people tend to use these things for.

Far from being objective or fair, my views on economics, arts, technology, and society can be summarized as sincerely disinterested.