-- Posted Thursday, 4 December 2008 | Digg This Article | Source: GoldSeek.com
I now spend an inordinate amount of time alternately whimpering in fear and bellowing in outrage, especially after being told of the laughable lineup of the new Obama team of appointments and posts, every one of whom is promising vigorous intervention and deficit-spending of one kind or another, which is the exact last thing that is needed since government intervention and deficit-spending are the reasons that we are in the dire straits that we are, unfortunately, in!
But these moronic people are the same as moronic people everywhere these days, and to show you the kind of corruption, lying and general stupidity that pervades everything in some grotesque leveraged web of interconnected financial stupidities financed by Federal Reserve excesses of money and credit creation and governmental malfeasance in controlling it, Junior Mogambo Ranger (JMR) Richard R. forwarded an article from the Euromoney newsletter that reported that another bunch of scumbags were lying, this time about their pledged U.S. Treasury assets as collateral for debts and bets, and when it came time to make good on their losses, they could not deliver the pledged collateral!
Thus, "fails to deliver among the 17 primary dealers in the US treasury market have rocketed to more than $2 trillion over a period of weeks and still lie above $1.3 trillion. Broker/dealers have stopped delivering bonds." Yikes!
One of the most frustrating things in the world is winning your speculative bet but being cheated out of the money because the creep on the other side of your bet won't pay off, like when I charmingly bet my wife a thousand bucks after the honeymoon was over that our marriage wouldn't last another six months, and she laughed and said, "I'll take that bet, because if you think I am going to let you off that easy, you don't know squat about revenge, you Creepy Little Weirdo Bastard From Hell (CLWBFH)!"
Now, after 30 years of marriage, she is still hounding me to pay her the thousand bucks I owe her, and all the other thousands I owe her when I pressed the bet, even though I always have to tell her that I don't (pause) have (pause) any (pause) money. So you see, I am somewhat of an expert on "fails to deliver"! Hahaha!
The worse news, from the standpoint of a whole cornucopia of governments and taxing authorities that have sprung into being over the last 40 years, is that these kinds of "fails to deliver" things are losses, and losses are deductible against taxable gains, and even against some income sometimes, which means there are no taxes to be paid, potentially, on trillions of dollars of losses!
And not only that, but as far as federal income tax is concerned, losses that exceed taxable gains can be carried forward indefinitely until they are finally written off either by netting against all future taxable gains (again, paying no taxes on the gains!) and/or $3,000 a year of ordinary income, further reducing tax revenue.
So you can see the government's interest in preventing deflation, and why they are doing the desperate, doomed crap that they are doing.
Perhaps this has something to do with the commotion in corporate bonds, as Mark Lundeen, an independent market analyst, noted that the Barron's Confidence Index has plummeted to lows not seen since the late '30s and early '40s, at the height of the Great Depression! Yikes!
Barron's Confidence Index, in case you were wondering, is just a simple ratio of investor demand for different kinds of bonds, presumably because of the perceived risks of each bond (like the possibility of default), duration, yield and blah blah blah, which is all plotted out using the precise probabilities of the bell curve, which I say has now been shown to be a complete load of crap for assessing long-term risk by Nassim Taleb's Black Swan hypothesis, which shows that unexpected catastrophic events will happen and everything will be wiped out, and it looks to me like it always happens long before the "long-term" investment horizon is reached, which explains the complete lack of people in history who successfully invested "for the long term"! Hahaha!
If you are not satisfied with my glib-yet-stupid explanation, Barron's defines their Confidence Index as the product of dividing the "High grade index (bond yield)" by the "intermediate grade index".
They say that a "decline in latter", which are theoretically crappier bonds, "vs former", which are the higher grade bonds, would be a number that was going up as the denominator went down, "generally indicates rising confidence, pointing to higher stocks", which makes sense when you realize that you have to be pretty confident to prefer buying risky bonds over safe bonds!
And so while none of this really makes any sense to me, I cleverly hide my stupidity and nod my head like I agree that it makes sense that the Confidence Index is now falling, meaning that people are rushing to buy Treasury bonds ("high grade bonds") and are shunning other kinds of bonds ("intermediate grade bonds") because they are less confident.
Mr. Lundeen then looks at me like I am supposed to, oh, I dunno, say, "Aha!" and come to some marvelous conclusion or something. But I don't. I just sit there because I have no idea what in the hell is going on anymore, and I am feeling like a frightened rat in a trap, ready to fight my way out in a snarling whirlwind of panic and snapping teeth.
Finally, with a tone of exasperation in his voice, he says that the important point is that now we see that the "Barron's Best Grade Bond Yield is about double that of Long US Treasury Bond", which he says is significant in that "Since 1952 this spread has never been this wide." Never! Wow!
And since there is no end to the problems that are caused by a lack of confidence by the consuming public to incur more debt with which to buy more goods and services, I will cut, as they say, to the chase, and tell you that the historical record says to buy gold, silver, and commodities with every dime you have.
And with the constant references to building and infrastructure, I gotta also go with cement and oil, as it is going to take a lot of energy to move all those tons around!
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Editor's Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.
The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications. Click here to visit the Mogambo archive page.
-- Posted Thursday, 4 December 2008 | Digg This Article | Source: GoldSeek.com