Links 9/3/08

Wolves prefer fishing to hunting BBC

Scientists fear impact of Asian pollutants on U.S. McClatchy

Monogamy gene found in people New Scientist

Credit Card Junk Mail Decreases By 260 Million The Consumerist

Paulson Asked to Spurn Rubin’s Inflation Indexed Debt Bloomberg. Paulson is considering killing TIPS. Rubin tried killing the long bond and succeeded for a while, too.

Russia and a new democratic realism Francis Fukuyama, Financial Times

A new dynamic for the Middle East Jim Hamilton, Econbrowser

Fitch Warns on Option ARMs; “High Defaults Await” Paul Jackson, Housing Wire

Whistleblower Says Dealers `Laundered’ Bond Prices Joe Mysak, Bloomberg

Antidote du jour:

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  1. doc holiday

    I’m told that hedgehogs bustle in hedgerows, but don’t be alarmed now, as it’s also heard that hedgehogs bustle in bowling alleys… where they wager cash on LEH credit default swaps…

    And a new day will dawn for those who stand long
    And the forest will echo with laughter…

    “My hand was writing out the words, ‘There’s a lady is sure [sic], all that glitters is gold, and she’s buying a stairway to heaven’. I just sat there and looked at them and almost leapt out of my seat.” Plant’s own explanation of the lyrics was that it “was some cynical aside about a woman getting everything she wanted all the time without giving back any thought or consideration. The first line begins with that cynical sweep of the hand … and it softened up after that.”

  2. doc holiday

    This looks like a great place for a dumb theory, so, what if….

    WTF, if … the crash of The 10-year Treasury is related to future value adjustments. Since this is the SciFi Channel, what if, Treasury is engineering a stealth plan to bail out Feddie and thus a low Treasury yield of say 2.8 is used as a discount for future value, in terms of a portfolio using the 10 year as a future value metric, i.e, (as I often bitch to myself) the inverse of The S&P 500 P/E, or the earnings yield of an index like that, is often gauged or measured, or weighed, or compared against a base/core/foundation like the 10 year Treasury.

    Hence, as corporate earnings are dropping, that obviously drops the corporate earnings yield — however, if Treasury yields are falling in sync, this type of manipulation could be used to keep future value somewhat relative.

    As far as SciFi goes, we should see an inverse relationship between debt and equity, but we are watching the correlation between these things move together, so I'm thinking aliens are screwing around with valuations and I feel awkward in my inability to explain this, and no one around here seems to get it, or care, so…

    In this chapter of Alien Finance, I think the plot has Treasury supporting a drop in Treasury yields to match the decline in corporate yield, to offset an imbalance of future value, which possibly helps increase the current value of treasury notes and discounts future value, thus these aliens are obviously aware of the flight to safety, so they want to make that current flight as expensive as possible and thus cash in on this cycle of cash movement.

    However, if this cycle is connected to a liquidity trap, how then will Uncle Sams Friends Of Aliens use this trap to their advantage and make cash into a dynamic liquid security that wont be vaporized?

    Will The Aliens do something with mortgages and Fannie debt? Will they decrease debt in some fun new way, like doing something with covered bonds? Will they perhaps use this cash flow to buy mortgages from Fannie and place them into a new covered bond pool, which will be held in a new weird trust like The Bear Stearns Maiden Lane Alien Vehicle….

    2 b continued?

  3. Lune

    I support killing the TIPS but for a different reason. With so much government expenditure (social security, salary COLAs) and borrowings (TIPS) tied to the CPI, the temptation is huge to fudge the CPI. We’re already seeing this. Inflation was a lot higher than 5% this past year, but thanks to changes made over the past decade or so, the CPI is commonly thought to underestimate inflation by 1-2%, perhaps more. How long before CPI ends up converging with “core” CPI, or some other bogus number that some economist dreams up as a way to avoid reality and allow the govt to essentially renege on its contracts?

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