The Big Picture |  |
- Open Thread: What is Causation?
- The charade of the super (or not so super) committee
- Fed and ECB to do more to ease credit stress?
- Tumblr Numblrs
- Reimagining Album Covers
- Bank Fraud Prosecution Continues to Drop under Obama
- Top Favorite Stock Holdings of Congress
- More pressure to introduce QE in the Euro Zone
- 10 Mid-Week AM Reads
- CPI little changed but oil now at $100
| Open Thread: What is Causation? Posted: 16 Nov 2011 04:00 PM PST Last week, I discussed “The Big Lie goes viral” in terms of the causes of the financial crisis. But that commentary begged the issue: What exactly is “Causation“? This is a precise term of art that has a very specific meaning. Many of the world's greatest thinkers, from Aristotle to Kant to Hume, have examined exactly what causality is. It plays a major role in the fields of Law, Physics, Logic and Economics. To me, Causality is the relationship between one event ("the cause") and a second event ("the effect"). I want to focus on the nature of that relationship. How and when can we say that one event is a consequence of another? To assess how blameworthy any factor is regarding the cause of a subsequent event, I look at the following:
All of these elements are not necessary to demonstrate a cause and effect relationship; however, a lack of these factors is quite damning to claims of causation. ~~~ Discuss . . .
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| The charade of the super (or not so super) committee Posted: 16 Nov 2011 01:10 PM PST The other factor that also has markets on edge is the results to date or lack thereof from the Super (or not so super) committee. But, before we get excited or disappointed on what this committee will deliver, let’s look at what is being discussed. They are trying to get to $1.2-1.5T in budget reductions over 10 years. Thus, $120-$150B per year, only 1% of GDP is being debated here, a joke of a number and also a blip in the context of $15T in national debt that is only growing and $60T of unfunded liabilities related mostly to medicare, medicaid and social security. Bottom line, any deal that does not address these three programs and sustainably reduces the upward trajectory in the spending on them is a giant charade.
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| Fed and ECB to do more to ease credit stress? Posted: 16 Nov 2011 12:10 PM PST While the Fed has set up swap lines to the ECB to help relieve some of the stress in the interbank lending markets, Fed Pres Rosengren is acknowledging that “clear stresses in short term credit markets” still exist. All one has to do is look at the euro basis swap making a new multi year high today to see this. In response to this, Rosengren is saying “crisis might warrant coordinated action by Fed, ECB” according to BN. What this action is he didn’t expand on but would entail likely more liquidity facilities if needed.
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| Posted: 16 Nov 2011 11:30 AM PST |
| Posted: 16 Nov 2011 11:07 AM PST Awesome collection of album covers revisited by the Cargo Collective at thirty three and a third (more here). Here are a few favorites: > > Hat tip GMSV
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| Bank Fraud Prosecution Continues to Drop under Obama Posted: 16 Nov 2011 08:45 AM PST In such a target rich environment,. how on earth is it possible that Bank Fraud prosecutions are dropping? It is an outrage! > > I bitched about this when George W. Bush was President, and I will continue until we get someone in the White House who understands what the RULE OF LAW actually means . . . > Previously: Failing to Prosecute Wall Street Fraud Is Extending Our Economic Problems (December 15th, 2010) Bush/Obama Fraud Prosecutions Down 39% Since 2003 (May 25th, 2011) Sources: Prosecutions for Bank Fraud Fall Sharply
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| Top Favorite Stock Holdings of Congress Posted: 16 Nov 2011 07:30 AM PST Why isn’t congressional members required to put their holdings into a blind trust? Why can’t we ban insider trading by Congress members be banned? How cant these elected officials do “the people’s business” when they are too busy running around trading on the votes they are about to cast? How one earth can we ever get fair outcomes of issues involving finance, healthcare, or energy when the members so personally have a monetary stake in an outcome they may or may not be in the public interest? Why aren’t these people in jail? ~~~ 1. General Electric (GE) Members invested: 75 Top Congressional Investors 2. Procter & Gamble (PG) Members invested: 62 Top Congressional Investors 3. Bank of America (BAC) Members invested: 57 Top Congressional Investors 4. Microsoft (MSFT) Members invested: 56 Top Congressional Investors 5. Cisco Systems (CSCO) Members invested: 56 Top Congressional Investors 6. Pfizer (PFE) Members invested: 51 Top Congressional Investors 7. Intel (INTC) Members invested: 47 Top Congressional Investors 8. Wells Fargo (WFC) Members invested: 45 Top Congressional Investors 9. AT&T (ATT) Members invested: 44 Top Congressional Investors 10. Exxon Mobil (XOM) Members invested: 42 Top Congressional Investors Sources: Open Secrets, CNBC,
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| More pressure to introduce QE in the Euro Zone Posted: 16 Nov 2011 07:00 AM PST Kiron Sarkar is an investor and advisor in London. Formerly in the M&A dept of N M Rothschild in London, he was head of M&A of Rothschild (Hong Kong) and worked on their international privatisation team. He worked as privatisation adviser to the UK Governments Know How Fund. Most recently, he was European Head of Media, Tech and Telecoms at CIBC World markets. Kiron has acted as a lead adviser in respect of over US$150bn of deals and has worked globally in both developed and emerging markets. Last Monday, the ECB announced that they had bought just E4.5bn of peripheral Euro Zone Sovereign debt, less than half the previous weeks total – likely to have been mainly Italian, with some Spanish and possibly Portuguese bonds. I had believed, somewhat optimistically, that the ECB would have been far more aggressive, particularly given that Draghi had supported the idea of bond purchases, even before he took over at the helm at the ECB – however, it was not to be. Italian 10 year yields had declined by over 100 bps at one stage last week (rose subsequently), suggesting some aggressive buying, though – will have to wait for next Monday’s announcement. They rose above 7.0% today, but I presume the ECB is buying as yields re lower today in spite of a weaker Euro/Market German officials continue to express their opposition to QE, but in reality, the fact that they are talking about QE to such an extent, suggests to me that it is being discussed seriously. The real problem is trying to convince the Germans, given their total paranoia of inflation – they still remember the 20′s/30′s and the resultant rise of the Nazi party, which was blamed/caused by hyper inflation. Whilst this is understandable, it is not a realistic position for the present. Indeed, I believe that Mrs M has finally understood this – the problem is that neither she, nor her colleagues, have persuaded or even discussed the need for it with the German public (read voters). As I keep banging on, QE in the Euro Zone will be introduced, sooner rather than later. The Euro Zone will, I expect suggest that it is a “temporary” measure (as the ECB claims in respect of its unlimited financing of European banks, but if I recall, this unlimited financing has gone on for 3 years), but “temporary” will last quite some time – certainly not months. A German official, with a wonderful name of Mr Bofinger (hope I got the spelling right and need to check him out, particularly to his standing in Germany), stated that it was unrealistic to expect that countries such as Italy could continue with the current level of bond yields – he is clearly correct. Expect more such statements, to get the German public ready for impending QE. To “sell” the idea even more, the Euro Zone will have to introduce measures that force countries to comply with predetermined fiscal targets, particularly given the antics of the Greeks. You will be amazed to hear that the Greek finance Minister suggests that Greece will produce a budget surplus in 2012 – must have been the ouzo, probably mixed with the awful metaxa. In addition, treaty changes have been proposed by Germany and Holland – inevitable. The Dutch, for example, want changes which will allow for the expulsion of countries that do not comply with their pre determined fiscal commitments – a clear reference to Greece. This is also positive, as these countries have to start getting real. Once these measures are in place (and may require a period of time – not too long – to monitor compliance), the Euro Zone can then issue Euro Bonds, which clearly is the final objective. At that stage, you may finally have a workable Euro ie with fiscal and monetary union – political union to follow thereafter A number of you believe that the above is impossible. Well, certainly based on recent comments by Euro Zone (particularly German) politicians, I don’t blame you. However, may I suggest that you don’t listen to what politicians say. As a character from the famous UK TV sitcom “yes Prime Minister” used to say “it’s only true once it has been officially denied”, or words to that effect and, boy oh boy, we have had many, many official denials. Timing – well certainly some next year at the latest – though in the case of another crisis (quite likely), possibly even sooner. I listened to an interview with an EU politician on Bloomberg the other day. He was clear that QE was coming. However, he added, that his Euro Zone colleagues (German) were not quite there YET. He believed that the Euro Zone had to have a deep, deep, deep problem before its introduction – to date you have had a deep, deep problem ie one more nudge necessary. Sensible guy, but not surprisingly, he was a Brit, though importantly he was on an EU Finance Committee. |
