Links 10/15/08

Internet use ‘good for the brain’ BBC

Voter suppression in Nevada Guardian (hat tip Ed Harrison)

The banker who wouldn’t say sorry Independent. This seems to be an occupational affliction.

Interview with Marc Faber Australian Broadcast Corporation. Among the highlights: Treasuries should be trading like junk bonds.

Effort to halt financial crisis costs governments two trillion pounds Telegraph

FY ’08 budget deficit swells to record $455 billion Reuters (hat tip reader Dwight)

Regulation Cannot Depend on Irrational Markets Christian Weller, Credit Slips

Bailouts, Nationalism and Diplomacy Roger Ehrenberg

What the enemies of short selling overlooked John Dizard, Financial Times. How the short selling ban contributed to the slide in financial stocks (and for reasons I bet most of you never considered!)

Goal: Increase Minority Homeowners by 5.5 Million in a Decade Barry Ritholtz

An unlimited guarantee requires unlimited access to financing … Brad Setser

Fossil Rabbits in the Precambrian Paul Kedrosky. Gives a high-level overview of where he thinks the economy and markets are headed.

Antidote du jour:

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  1. EvilHenryPaulson

    Lehman – PwC – Hedge Funds drama

    PwC wants to make margin calls on assets they won’t let hedge funds touch. ~3,500 hedge funds involved and if any had hard assets, then Lehman rehypothecated them away to JP Morgan and other creditors never to be seen again

    I foresee large pension funds and sovereign wealth funds being able to fill some niche where trust is of importance in the financial system, because there’s not a lot left for private banking and prime brokerages

  2. Anonymous

    Leo Jr, the young lion, is hoping for another ride to Wall St, where a lunch of Pigmen awaits. Ummm good.

  3. Richard Kline

    Big private capital should _never_ have operated through prime brokers; this was always nuts, and now they have learned that. They should mange their own diversified and compartmentalized portfolios, and save the fees. Stoopid, but they’re born every minute, right?

    That Kedrovsky piece is a small gem with many facets. He neatly describes a method—formulate a problem set, forecast conditions, and track the aggregate outcome—which is a good way to proceed. In the array he runs by his readers, he includes the necessity of long US rates rising; well yes. But a fascinating point not on my radar screen, or I suspect that of many others, is that the broad global downturn we have now all but mandates a resynchronized global upturn at the end of it. That is a very cogent observation, and in my view also he is right to frame this as a major _problem_. (In fact, we already had a synchronized ‘upfroth’ in consequence of the collapsing bubble, so the phase-locking he describes has already been in place. But that does nothing to undermine his observation going forward.) A valuable ‘think piece.’

    And his headline of the quote he mentions from J. B. S. Haldane, what a brilliant guy Haldane was, and enviably quotable. His ability to get a complex issue summarized in a pithy but dead accurate sentence of under ten words is to die for. That’s what an Oxbridge education _used_ to get you. We don’t do ‘perspicacious wit’ in the US, though, just dumbskull sports metaphors.

  4. RK

    Re: Paul Kedrosky
    He refers to a new estimate of losses in the financial
    system by Ray Dalio of Bridgewater. Back in March or
    thereabouts Yves was one of the first to reference a
    link to the original estimate of $1.6 trillion. The new estimate is $2.7 trillion. Is there a link anywhere to
    the commentary by Dalio associated with this new
    estimate? Would love to read it.

  5. Anonymous

    If treasuries should be trading like junk bonds, how much confidence should reasonably be placed in all of the “guarantees” (of deposits, money market, various other transactions) the feds have been making lately?

  6. Independent Accountant

    I read the Faber interview. I have been saying the same thing about US dollar denominated paper for years. That’s why I’m a bull on stocks! At least they’re not, that’s right, not Uncle Sam’s debt. With $11 trillion in nominal debt and $62 trillion in actuarial debt, Uncle Sam is a disaster waiting to happen. Jesse at Jesse’s Cafe Americain has also echoed these sentiments.

  7. EvilHenryPaulson

    richard kline said…
    I would agree to the coincident global upturn at the end of this with one major caveat. It depends on how encumbered individuals, corporations, and governments are at the end of the down turn.

    If they’re stuck in a debt trap where excess earnings go to pay for past misadventures, then their future growth will simply lag. This is more or less what happened in the ‘Great Depression’, it wasn’t so much the stimulus war spending that ended it, but rather it was a mechanism to eliminate the overhang. It is also the reason why a country like South Korea was able to grow quickly once they were able to restructure their debt and spending while a country like Japan has stagnated.

  8. donna

    Linos on Wall Street would be a good idea/ I think we need to let some lose in the Treasury Dept and the Fed, too.

    Heck, get some hungry tigers, wolves, etc and turn them lose, too….

  9. doc holiday

    Yves offers clearly offers a visual metaphor relating to the premise that the enemy is within and below.

    This matter of Paulson bailing out country club friends in a do or die effort to save capitalist corruption is like not being able to see the trees for the forest. Paulson et al, are not thrahing around gasping to save society, but these are wounded sharks bleeding in a fight of their own making. Paulson and clowns are swimming in a giant tsunami of parana fish in a bloody battle between moral hazard and the need for social change. IMHO, the sooner their flesh is destroyed the better for all of us.

    Once we get rid of Jaws, the seas will be safer for the little fish and with less blood in the water, the parana population will equalize and balance will be restored. Until then, don’t go in the water!

    See/Hear: When a gigantic great white shark begins to menace the small island community of Amity, a police chief, a marine scientist and grizzled fisherman set out to stop it.

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