Archive for December, 2008
Posted by Adrian on December 31, 2008
Posted by Adrian on December 31, 2008
Back in November 2007 I wrote a blog post on morbius glass titled Forecasts and Risk assessments. Can we predict the future? The post it’s self was written in light of the mortgage market collapse in the US, forecasts before and after (to the point of the wider credit crisis and so on). The post also went onto to discuss theories on prediction of future events, whether mathematically or instinctively based. One theory is the Chonesthesia, established as a theory of certain regions of the brain the uses past events to articulate future events, hence it’s popular known phrase of ‘mental time travel’ or MTT.
I haven’t given the theory much notice recently as it is relativity new and somewhat untested in the scientific sense. Still some everyday events that occur (non economics) gets me thinking about the validity of MTT in human mental perception.
One example is situation that occurred recently, a friend of mine was walking his dog (a small Shelty – gorgeous dog by the way) with his girlfriend in park. The park is situated in an area that both these people live in. A few months back they were walking the dog in this park, when a bigger dog a cross between a Staffordshire and some other dog ran towards my friends dog. In which it was roughly playing with the smaller Shelty. Of course the bigger dog was not on a lead and was out of control, both my friend and his girlfriend proceeded to tell the owner off; who happened to defend his dog actions. Some verbal aggression occurred as the owner of the other larger dog was completely unreasonable and irrational. Later after this incident, I spoke to my friend in regards to what occurred. He explained to me that certain ‘character’ has moved into the area, usually in their early to mid 20’s, in relationships and very insecure. Upon asking why they are insecure, he explained it was because a lot of younger people that have left home have decided to move into this area, that essentially is an area of established 30+ couples with young children. It is also an expensive and overvalued area, with high rents and property prices. In that sense it has created a divide between the younger couples and older ones, all grappling with high house prices for the area, yet the insecure younger couples feel ‘outside’ within that area. Of course I would argue that excess and over leverage have created a sociological problem, a deflation in prices may equalize imbalances and have a lot of the over leveraged and stressed move back out. Still, my friend after that incident mentioned to me that he could envision a similar incident occurring again, as he as correctly assessed that social dynamics in that area. His assessment was of a different person, but under almost the exact same circumstances.
Which it did. Again he was walking his dog and it was attacked by a bigger dog; same verbal dialogue to the owner who also fell into that category of early 20’s, male, insecure and predictable (aggressive). This incident could have become potentially more violent, as the aggressor was completely unreasonable. Still this was forecasted (by my friend) to the point of the guy’s tank top and look, except this guy was apparently taller 6 foot than my friends physical assessments of a pending similar incident. But then again, this isn’t clairvoyance, this is assessment and observation of the males in that area – drawing from a past event to project to a future one.
Even though it is a new theory, I hope more research is done into brain regions that utilize pass events to secure future ones
More information here
Israels 2nd military blunder in two years, the rise of bandits and fudementalism – blame America’s pointless war on terror
Posted by Adrian on December 29, 2008
Israel is making another military plunder. The first recent Israeli military plunder was the 2007 Israel/Lebanese conflict, which was a good example of poor Israeli military decision making, that not only effects the vast majority of civilians on the ‘other side’ but again puts a huge dent in Israels international standing in the world. We can thank American military examples that have created precedences for it’s ally countries (and not so much ‘ally’ countries like Russia – refer to 2008 Georgian conflict), usually a massive disproportional attack, lead by air strikes, a lot of civilian deaths and in the end no resolve. In fact resolve in the sense the ‘enemy’ retrenches it’s self back into previous positions, note Afghanistan and Iraq. But a closer conflict to Israel was the failed Lebanese invasion in 2007. With Hezbollah still in power in the South of Lebanon, the conflict killed a lot of Lebanese civilians and did not change the power structure in the South of Lebanon.
Hamas are bandits, fueled by a Islamic fundamentalism. The more the US and Israel perpetuate the terrorism cycle, by creating an enemy. The more these conflict will occur and give more significance to rag tag Islamic armies. It is an un-winnable war with an enemy entrenched in a highly dense populated area (Gaza Strip), so the invertible outcome will be a ratio of civilian deaths the far succeed any justification to declare an ‘all out war’ on Hamas.
Still Israel will need to launch a full scale ground assault, air strikes have never essentially worked in a gorilla, or quagmire type conflicts. Will Israel commit to a ground assault? They will have to, in the sense the rocket attacks into Israel will continue well after the areal bombardments. Of course, even though Hamas are bandit type militia, a ground war stirs emotion. So Hamas will not be short of a lot of fighters in a ground conflict, with weapons smuggled in from Iran and/or are being stockpiled, I imagine that Israel will suffer a lot of causalities on the ground. Unless they flatten the whole Gaza Strip and kill as many civilian’s as possible. The point is as mentioned in Israel attacks the Gaza Strip 280+ dead in 2 days Iran could be the wild card, a conflict between Israel and Iran has been on the boil for a long time. Will the US help if Iran comes into the play, maybe not. Iran can tighten the oil supply, no problems, also as mentioned in my previous post; China will be the country to watch as they depend on the oil from Iran, from Bloomberg December 29th 2008: Prices also advanced as China, the world’s second-biggest energy consumer, said it will supplement its emergency oil stockpiles while prices are low, while Libya and the United Arab Emirates announced compliance with OPEC output cuts agreed on this month. “China’s plans to stockpile crude may take up some slack from the demand destruction from the economic slowdown,” said Rob Laughlin, a senior broker with MF Global Ltd. in London.
So if Iran participates in this conflict in some way, either with oil supply embargo, weapon supply or direct involvement – the oil price will definitely rise back into 60 – 70 a barrel range. Even with Chinese stockpiles and it’s own overall energy demand, Iran could just force China into the play (if Iran cuts oil, which they most likely will do if the conflict continues, which would be a good excuse to kick some life back into the oil price; hence gain more profits on a higher price); this would most likely broaden the problem. But as long a the US sits on it’s hands with this conflict, as it has for decades, the more useless the US policy machine will appear to the global community. But with the US facing a massive economic meltdown, a forever war continuing in Iraq and Afghanistan, a spike in the oil price could draw the US and other countries into a tense situation.
While Israel kills Palestinian civilians daily and the world sits complacent on this one, this conflict could spill over into something larger and more dangerous. So a military plunder by Israel could also be a plunder that effects everyone.
Posted by Adrian on December 29, 2008
A self perpetuating conflict with madmen on both sides, still no one will win this, especially Israel – who’s government credibility is dissipating into a hole and may never resurrect. With it’s biggest alley the USA collapsing (economically), the power shift in the middle east could change dramatically and quickly. Israel is making huge errors with their disproportional counter aggression.
Iran is the key player here, the world doesn’t care about the Palestinians, but if Iran comes into this conflict or creates an oil embargo. This may force the UN and Europe too negotiate a peace deal.
The Arab union is pretty much hopeless and Egypt couldn’t care less, Saudi Arabia doesn’t care either.
Does Iran have the balls? Well they hold the most cards, China will protect Iran’s oil routes, so Iran could bring China into this if Iran tightens the screws of the oil supply – as Western warships try to end embargo.
Biggest question of all, does Obama have the balls? The US could end this conflict once and for all (by negotiating a proper peace deal with power sharing in that region), so the US holds some cards.
Posted by Adrian on December 23, 2008
I like Satyricon. It’s kinda sophisticated metal if that makes sense, obviously there are teen and early 20 markets out there. To me it’s got an mature edge to it. Satyr guitars and musical composition is very good, dynamic and atmospheric, not just harsh rhythm that some guitarists fall into. Especially with heavy metal, all the bands sound similar with the same tuning on guitars and chord structure.
And Frost is a killer drummer.
Posted by Adrian on December 23, 2008
There will be a break in my blog posts under the Category of “Finance and Economics. Strategy and Society“. Blog updates will return in 2009.
To my readers who frequent this category, please have a safe festival season with family and friends.
Please refer to October quote of the month (regarding the global economic recession)
Posted by Adrian on December 22, 2008
After the incredibly well put together MAX run of Garth Ennis’s Punisher concluded, it was unsure if Ennis would return with another run. Obviously Ennis’s Punisher MAX run had finished on Marvel, replaced by writer Gregg Hurwitz and art by Laurence Campbell. Personally I am not into the new MAX Punisher run and the Matt Fraction’s Punisher War Journal has kinda died on the vine, also I am not a huge fan of Howard Chaykin’s art. So that leaves the Marvel Knights Punisher War Zone and because Ennis is an adaptive writer, this Punisher story doesn’t have the raw grittiness that the MAX series had, but rather a sardonic style, similar to the Barracuda run. Art by Steve Dillon, gives that caricature feel, especially the mobster characters. It’s going to be a short run lasting 6 issues, but it will be a fun worthwhile ride.
The gist. Well a bumbling ‘wise guy’ (funny intro in issue #1), saved by the Punisher (bumbling ‘wise guy’ was about to get whacked by another gangster) is used to discover the truth about merging and emerging east coast mafia families. Mafioso style schlock characters including the seemingly indestructible (head of the Gnucci family) quad amputee Ma Gnucci and a host of other characters thrown into the mix; and yes just for good measure the psychotic rich white guy who wants to kill the Punisher for killing his upper crust vigilante dad (Elite) – who indiscriminately murders the ‘lower class’.
Also other aspect of the story is Garth Ennis’s trademark strong female characters that often appear in his Punisher stories; in this run it’s the female police officer on the Punisher’s trail
Go check it out, another classic Ennis Punisher here.
Still Marvel has got 3 punisher series all running at once, Ennis’s Punisher War Zone, Punisher War Journal and MAX Punisher. A forth is also on the way which is a new Punisher run, yes this run has that dreadful t-rating Marvel marketing ploy. But all and all this is to get the market ready for the Punisher movie “War Zone” that will be released in 2009.
So it’s all sales pitches, but in a recessionary market environment, be choosy. I am.
Posted by Adrian on December 22, 2008
Even though 2008 will close off as a terrible year for the global economy, 2009 will turn out to be horrendous. As liquidity will literally dry up right across the board, the only money being pumped into the economy will come directly from the Central Banks. Not only will growth completely slump in 2009, there will be three aspects (bailing out banks, printing money, increased taxes/cuts to public spending – health and community) to economies which have a devastating effect on a society. With governments throwing billions into the financial system, that on the whole will end up creating zombie companies and propping up zombie banks. As mentioned in ‘Keynesian’ fiscal policy out of control – Australian government bond downgrades, the worst policy plunders a government can make is cushioning the banking system, that has operated in a incompetent and risky way. In other words, the banks or at least the banking model should be punished for it’s lack of care and bad management. This hasn’t happened, instead they have propped up the bad business models. There are going to be lasting effects of tax payer money going straight into buying distressed debt, toxic waste, MBS’s and every bad assets banks own; and don’t believe these ‘effects’ will be a positive for the global economy. Shifting ledgers and accounts by using government money and guarantees, has given banks the ability to recapitalizes their balance sheets, whilst shifting their depreciating assets into other ledgers. So not only has tax payer money being used to recapitalizes banks balance sheets ( but don’t expect to receive personal big credit/loan account offers ), governments have foolishly rushed into guaranteeing bank deposits, with guarantee caps going up to a million plus, the banks can now also re capitalize by selling secured debt or bonds that are now AAA rated. But governments who are now sending all their accounts into deficit, will find it hard to raise capital because government debt will naturally be downgraded, 1. from all the risk on their balance sheets, 2. bank debt is now more attractive to investors, compared to government debt.
Still, the final insult to injury will be governments finding it hard to raise capital; which will be left with the taxpayer again (us), in the raising of taxes and the cutting of public spending – especially health and social services. Nice deal hey?
Then the money printing, which will ensure that inflation will creep back, especially in the US as the US dollar declines rapidly into 2009.
Another example of poor judgment and mindless money printing and spending by government has been the car industry bailouts. Most probably some of the worst business models known to humanity are now all knocking on government doors. You can thank the worst government policy machine in the world which is American policy makers, who have no idea whats going on and their incumbent central bank (The Federal Reserve) which is literally out of control. So it’s a double whammy of economic stupidly.
The car industry will still shrink, despite bailouts and loans, but as mentioned the US have created a precedence; now Canada, Russia, the UK and even France are all considering doing the same. At some point jobs losses in the car industry will be inevitable, but with governments only pumping money into the ailing car industry for their own self interest, ie votes. The joke will be back on the poor car workers as profits will still tumble and the fact is jobs cuts (company restructuring) have already been planned by upper management.
With emotion aside, one has to be sensible at the ramifications of printing money into a severally hemorrhaging car industry. It is senseless, sure the governments can print money, but this will lead to currency destruction and inflation, with the other detriment being raised taxes and public funding cuts. The pain, should be felt now, deal with it . The upper management should be relinquished, company then goes bankrupt and taken over by a rival; say a Japanese based car company (that made better smaller cars).
Also on a analytically perspective. The oil price has crashed from highs of 147 to 38 a barrel, it could go lower. Over leveraged and hugely indebted car giants took massive gambles, with car production. Designing fuel guzzlers and uneconomical junk (refer to the Chrysler 300c). I wouldn’t invest a dollar into that industry, with the oil price totally unstable in lower ranges, indicates that the world economy is slowing down to crunch time. Industries are using less fuel, oil and any petroleum based products. These industries have also expanded on loose credit conditions, are all going to find it hard to raise capital. As a trader, you just need to bring up the oil graph and see the massive deflation in the oil price; with potential to go much lower. But with oil trading in a range at 40 and 43 a barrel indicates that demand has fallen off, therefore any oil related products or products that use oil (cars) have also fallen off. In other worlds, there is NO MONEY to be made in collapsing industries, like the car industry. Yet, the governments have decided to create yet another living dead industry.
Refer to WTI graph. Oil looks stabilized to a point: trading range 40, 43. This could be on the back of OPEC cuts. From a bull to bear perspective on the oil price, which has been a shock in the sense of much it has fallen. Points to the direction of the global economy, which is sharply down. At this point the oil price does not look like it’s in a recovery buy at any point at all. Some more selling into 2009 on economic factors could see the oil price bounce down to 35 a barrel
Posted by Adrian on December 12, 2008
The US dollar in the last 4 months towards the end of 2008 has been a great hedge. Especially against the commodity producing country currencies and the EURO. But it’s time, albeit short rise (after some heavy selling in early 2008 ) is finishing, in fact you could say it will be the end of the US dollar (as a base currency).
At some point in 2009, the US dollar will crash hard. As the world will go further into a severe economic slump. Unfortunately the money printing and ‘bailout packages will cease to have any effect of the markets (except causing the USD to collapse ), as company earnings will be very disappointing throughout 2009 and the coming US dollar sell off will effect global equity markets.
The US dollar decline into 2009 will also include the EURO. At the time with relative strength of the US dollar up to December 2008, the EURO was sold off. From highs of 1.48 ( 22nd September 2008), to lows of 1.23 (27th October 2008). With the USD now showing weakness the EURO has made some gains, refer to graph (click for larger image):
EURO now at 1.33
I think the EURO rally is short term, which will also see weakness in 2009, but with the USD sell off imminent; the EURO may stablise in a flat range. With EURO coming under pressure, more so against the Japanese YEN.
The Japanese YEN will rise significantly through out 2009, as most global currencies will get dumped, more particularly the USD.
Note on the USD index, USD/JPY graph, the comparative sell off of the USD index and the USD against the JPY – from March 2004 to December 2004. Then in September 2005 the USD index broke aware from paring with the USD/JPY (refer to graph, click for larger image), to go to highs of 124.00 USD. Now crashed to 91.51 against the Yen (as at 11/12/2008).
USD index, USD/JPY graph
With USD now dropping off it’s highs 88.46 (21st November 2008), now 83.28 (11th December 2008).
It is very possible we are going to see both the USD index and the USD/JPY parity in collapse (as it did early in 2004), as USD positions will close off towards the end of 2008 into 2009. There is going to be a definite sell on the USD right into 2009.
Posted by Adrian on December 10, 2008
If you haven’t noticed every government on the planet have gone insane with dumping money on the ailing economies, bailing out rubbish companies, guaranteeing commercial bank deposits (hence insuring debt), bailing out dreadful banks that should have gone belly up. The term ‘zombie business’ will be used a lot in reference to a Keynesian economic model, that has been utilised by policy makers in a hyper frenetic way. With dire consequences to government budgets, public spending and economic responsibility of surpluses and the protection of currencies.
A good example of irresponsible fiscal stimulus or protection is when Australia made a rushed decision to guarantee all bank deposits, all and good for the consumer. Except the Australian government was pressured by the commercial banks to guarantee commercial debt. So in agreeing to bank demands the local state government’s got played, as government (and local government) issue debt got downgraded. No one wants it. But the banks are now utilising the government guaranteed to gain a triple A rating on it’s own debt, hence investors buying bank AAA debt and dumping state and government debt – which in turn makes Australia government debt less attractive, that in turn causes governments to find it hard to raise capital through higher borrowing costs.
Also keep in mind that the Australian government, much like other developed economies is in the process of giving out huge fiscal stimulus packages to the population. Which of course empties the government’s surplus and thus States will also find it hard to raise capital (as discussed – this causes government and state debt to be downgraded against bank debt).
Which of course inevitably leads to government cuts to public spending, which means health, community and welfare services.
This is only one example of Keynesian meddling in the economy, since policy makers have lost their minds with bail out packages left, right and center, we are going to continue to see huge distortions in the markets.
All at the detriment of the tax payer.