Michael B. Duff

Lubbock's answer to a question no one asked

links for 2010-07-07

  • Finally our children are safe.
  • What's boiling up the markets is a decline in the discount rate. You have the widespread practise of naked shorting stocks, rather than really borrowing shares to hold shares short in lieu of the decline, because math's hard.

    So when interest rates decline, you are forced to settle, whereas if you borrowed shares at a fixed rate of interest, then you could still conceivably hold your short position.

    So the panics are settlement panics where people who sold shares short without owning a single share to their name, or borrowing any because math's hard and suddenly obliged to actually buy the damn things.

    What follows is an inventory sell-off, because holding these damn things is hard.

  • "People borrow money at a low interest rate and invest in things with higher profitability (risk). Before, the correlation wouldn't be as close, because of the time involved in carry trades, but with HF trading, the correlation becomes almost 1. Essentially, large firms are using super computers and microsecond connections to short a given currency in order to buy equities. So, as the carry trade moves, so does the equity market. Taken to its logical conclusion, the currency either plunges, and equities shoot the moon. Or the correlation breaks down, and there is a massive short covering rally in the currency while, the higher risk enterprise crashes. I hope this helps, as I tried to simplify. Look here for more information:"
  • In order to raise the same amount of revenue as our current tax system, a "revenue neutral" APT tax would impose a single tiny tax rate on each and every transaction in the economy. All deductions and exemptions would be eliminated. By declaring a "zero tolerance" policy for any exemption, we wipe out every special interest loophole that now riddles our overly complex tax code. Since the volume of all transactions is estimated to be 100 times larger than the current tax base, the flat tax rate needed to raise the same amount of revenues is just a hundredth of the current average tax rate of roughly 30%. So if transactions stayed at their current level, the APT tax rate would be three tenths of one percent (0.3%) on each transaction. Even if total transactions fell by 50%, the revenue neutral APT tax rate would only be six tenths of one percent (0.6%) split equally between the buyer and seller in each transaction so each would pay 0.3%.
  • Evil but funny comparison. And a good excuse to break in my #toosoon tag.
  • Since 1993, the 63-year-old woman has won four windfalls on the Texas Lottery, each time winning more than $1 million for a total of $20.4 million.
  • Some skeptics took that as proof that scientists were faking global temperature trends. Russell's report rejected that conclusion, but did say that the resulting graph — which graced the front cover of the World Meteorological Organization's 1999 report on climate change — was "misleading" because it wasn't explicit enough about the way in which the underlying data had been chopped and spliced together.
  • Bystanders monitor the reactions of other people in an emergency situation to see if others think that it is necessary to intervene. Since everyone is doing exactly the same thing (nothing), they all conclude from the inaction of others that help is not needed. This is an example of pluralistic ignorance or social proof. The other major obstacle to intervention is known as diffusion of responsibility. This occurs when observers all assume that someone else is going to intervene and so each individual feels less responsible and refrains from doing anything.[
  • The Keynesian view is that government spending is simply a monolithic letter "G." Keynes cared little about the productivity or lack thereof to which public resources were devoted, even writing " If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again… there need be no more unemployment." The only difference between Keynes and Tim Geithner is evidently that Geithner prefers to place the bottles a bit closer to Wall Street.
  • Blatant HFT price manipulation, orders being placed to drive up prices and canceled within a fraction of a second.
  • "Hamas said on its website Wednesday it had blocked the shipment because it wasn't properly coordinated. But an official familiar with Hamas' thinking says the group will not allow the newspapers in until the rival President Mahmoud Abbas lets Hamas-linked newspapers into his West Bank stronghold."
  • "Earlier today when Krugman assumed part of our political class was just junkyard dog mean, this is what he was talking about. No excuses about deficits here. No blaming greedy unions. No "we've got to cut labor or we're shipping jobs to China or Malaysia" card to play. Just telling a bunch of hard-working blue-collar ass-busting American workers "Sorry, we're cutting you off in the middle of the worst economy in generations. You have to pay for it. Nope, it's just plain greed: Becky at the Red Lobster makes too much money, you see. She's got to take a pay cut."
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Written by Michael B. Duff

July 7, 2010 at 23:01

Posted in Uncategorized

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