Trump's Last 70 Days

Barring the unlikely, Donald Trump has 70 days left as President of the United States. The shot clock for Trump's time as Executive-in-Charge is approaching zero, but time has not fully expired. There remains enough time for President Trump to hit a game-winning three and walk off the court cloaked in glory.

Prior presidents have used their last bits of lame-duckery to waste time, steal White House property, and pardon friends. This is the minimum of what the talking heads expect Trump to do. Today's NY Times is full of hyperbolic examples, including an article headlined "Trump Still Has 70 Days to Wreak Havoc Around the World."

President Trump should flip the narrative. Trump can aim higher, bigger, and bolder. He can define history in a way that most presidents cannot by seizing on a specific opportunity this election has revealed. What follows is a proposal for creating a golden legacy.

 

During the last five years, the mainstream media has persistently attacked Trump as a racist. No amount of denial was enough. They perceived Trump's refusal to be yoked with white guilt as a critical disqualifying characteristic. Refusing to bend-the-knee to those in the burgeoning racial grievance industry was expected to cripple Trump's ability to expand his popularity.

 

And yet, in a shock to many, Trump made massive inroads with minority voters.

 

If we demographically divide the US into Male or Female x White / Black / Hispanic / Asian, during the 2020 election, the only demographic that Trump did not improve on his 2016 numbers with were white males. 

 

Read that again.

 

Trump improved with every demographic except straight white males. He improved with Asian men, black women, and nearly every other combination you can think of. He also doubled his support from LGBT voters. If you were not aware of this shift, you can be forgiven. This fact is so disconcerting to the mainstream media that they worry merely reporting on it will breathe life into it. Why it happened is not overly relevant to this essay. The fact that it happened is what matters. This creates opportunity.

 

Trump and Republicans did the unexpected: they made gains with people Democrats believe they own. This begs the question, "how do Republicans hold the ground and ensure more people see the broadness of their tent?"

 

Republicans are the party of individual rights. For a long time, and to the permanent shame of our country, those rights did not fully convey to certain groups, and, in the 1960s, Democrats pivoted from antagonists of minorities to defender of them. With Democrats staking out ground as protector of minority rights, Republicans allowed themselves to be painted as the opposition. Republicans have constantly rejected this claim but could not seem to rid themselves of its shadow. In an era of BLM and "kids in cages", it would seem to be stickier than ever.

 

Yet the 2020 election revealed a shift. To Democrats' amazement, Republicans expanded their base across nearly every group. Democrats ceded moral high ground by shifting from a party of minority protection to a party that uses a hierarchy of group identities as a tool of oppression. With Democrats increasingly focused on labeling and sorting people by skin pigment, gender, and sexuality, a window opened for Republicans.

The ultimate minority is the individual. If you protect individual rights, you inherently protect minority rights. There is no predetermined hierarchy in a society that values the inherent worth of all individuals equally, even if their circumstances differ. What Trump seems to have tapped into is the reality that many members of minority groups do not want to be measured by their skin pigmentation. They want to be measured by their abilities, their contributions, and the content of their character. In sum, their individuality.

 

This brings us back to Trump's last 70 days.

 

How will history brand Donald Trump?

 

Academics are the authors of history and academics hate Trump. They will label him a divisive race-baiter. To establish a different brand, he must forcefully counter that narrative through action, not just words. He has to leave a legacy that refutes that accusation.

 

Trump and congressional Republicans should quickly introduce a criminal justice reform act. Let's call it the Federal Reevaluation of Enforcement Effectiveness Act - the FREE Act. The FREE Act will support states' rights, individual liberty, and overly penalized minority communities.

 

On recent social issues such as gay marriage, states led the way on changing the legal backdrop. The Federal government was never meaningfully involved in marriage and largely did not need to legislate on the matter. 

The drug crime situation is different. While states again are leading the way, there are strong federal laws and regulations that criminalize the actions of many individuals that states view as non-criminal. Worst of all, unnecessary criminalization disproportionately hurts minority communities.

 

As of today, forty-three states have some form of legalized marijuana, with each election cycle further expanding acceptance. These states have either fully legalized it, decriminalized it, or allowed for marijuana for medical use. Increasingly, local police and prosecutors are not enforcing the few laws that remain. 

Principled Republicans know that drug crime is and should remain a states' rights issue. Republicans have an opportunity to stand on principle and magnify the overwhelming will of the people by fully relinquishing that power back to the states. 

 

If the Republican party could define its own brand, it would be something like "limited government, states' rights, and individual liberty." All three apply to the FREE Act. 

The FREE Act would remove marijuana and natural psychedelics (e.g., mushrooms) from DEA drug scheduling. Despite their fairly benign natures, both are currently classified as Schedule 1 drugs, lumped alongside heroin, meth, and crack. This characterization has contributed to the mass incarceration of nonviolent drug offenders and disproportionately harmed minority communities. We now know that marijuana and natural psychedelics are far less dangerous than alcohol and tobacco. They are also largely nonaddictive.

 

The FREE Act should also pardon and expunge the records of any current or prior non-violent Federal offenders related to these drugs. Likewise, President Trump should consider providing mass pardons to many additional non-violent drug offenders. This is a chance to bring the Republican brand to minority communities, and dramatically improve the party's image.

 

While I am personally for limiting federal spending, it is important to acknowledge worries about recidivistic behavior and offer a helping hand to those returning to society. To improve transitions back into free society, the Federal government should include funds for treatment and education programs that are made available to any state that likewise decriminalizes marijuana and psychedelics. Further, it should provide funding to states for investment in skills development and education for newly released citizens. Those released as a result of this legislation would also be eligible to receive a one-time incentive payment of $2000 after a period of non-criminal behavior (e.g., 6 months with no criminal charges unlocks a $2000 cash payment, which is much cheaper than keeping them in "the system"). The overall idea is to provide a social onramp that improves the odds of successful societal re-entry.  

Moral Republicans can comfortably acknowledge mistakes that happened under their watch, even if not their fault, and seek to rectify them. Supporting a soft landing for those released can be part of a healthy reckoning.

 

When Joe Biden becomes president, Democrats are extremely likely to pursue criminal justice reform. They will receive support from many Republicans (especially more Libertarian-leaning senators, like Rand Paul) and will easily pass reasonable legislation.

 

The question for President Trump and congressional Republicans becomes, "who gets the credit?"

 

Even if many Republicans support reform, some are likely to oppose it. If Republicans wait for Democrats to draft and propose reforms, only to have some in the GOP vote against it, Republicans risk undermining their newly expanded base.

 

By allowing Trump to lead the charge now, Republicans can change the narrative. Practically speaking, Democrats cannot fight against the FREE Act, lest they completely undermine their brand. Democrats will support this legislation allowing Trump to finish his service on a unifying, bipartisan note. With Democrats supporting it, the fact that the FREE Act will easily pass both houses allows Republicans who are deeply opposed to safely vote "no" without actually blocking progress. On the other hand, Republicans in purple states can safely support the legislation, with the knowledge that they are broadening their base and undermining Democrat talking points. Even Republicans who are on the fence can support this from a principled 10th amendment / states' rights position, saying "look, I'm personally against drugs, but, like abortion and marriage, this is not a Federal issue. We want a small Federal government that stays out of your home and your business. You and your community should decide what's right for you." This language also appeals to Libertarian-leaning voters, whose refusal to support Republicans made the difference in the recent presidential election.

 

Importantly, Trump and Republicans would forever mortally wound the ability to label them racists, having passed one of the most significant laws benefitting minority communities in history. He would be remembered as laying the groundwork for reuniting small children with their fathers and returning incarcerated young men to their moms. Thousands upon thousands of (primarily) men have been unnecessarily locked up and separated from their families. By providing funding for education, skills training, and positive incentives, Trump will also be remembered for investing in those communities.

 

The reality is social mores have already spoken on this issue. The dominos are falling, and a Biden presidency will get this done. Joe Biden wants to pass criminal justice reform if for no other reason than to erase the stain of having his name attached to awful crime legislation from the 80s and 90s. Likewise, Kamala Harris wants 2024's voters to forget that she aggressively prosecuted nonviolent drug offenders with a rare fervor. They understand that sweeping criminal justice reform is their path to absolution.

 

Trump and the Republicans have a chance to steal that thunder from Democrats, while aligning themselves with our inevitable future, and doing so for principled reasons. Trump has a chance to use his final days to go down in history as a re-uniter of families. He can be remembered as a champion of states' rights, minority communities, and individual liberty. Doing this will strengthen the long-term health of the GOP, allowing him to leave office a hero who broadened the tent and future-proofed the party. It is also the right moral action.

 

Time is of the essence. This is straightforward legislation and can be passed quickly:

• Constitutionally, states retain the authority to maintain their own laws and regulations
• Federally decriminalize marijuana and naturally occurring psychedelics 
• Remove from DEA schedule 1
• End Federal banking restrictions for businesses in these industries
• Pardon and expunge records for any current and previous non-violent offenders of these bygone laws
• Provide a safety net to improve transitions
• Block grant funds for states to educate and provide treatment
• Block grant incentives to states that decriminalize and choose to release non-violent drug offenders
• Block grant funds for skills training for citizens with expunged records and other former criminals, to reduce recidivism and improve the economic and social health of their communities
• Provide direct monetary incentives to citizens who maintain non-criminal behavior after release

 70 days and counting. If you are President Trump, there is no time to waste. Do the right thing. Broaden the tent. Write your own history. 

 

Godspeed. 

 

 

Author Notes: 

1. It took a lot of hunting to find articles that talk about the change in demographic voting behavior. Examples of discussion of Trump demographic shifts are CNN voters shift, Brookings scrambling bases, Asian American support, LGBT support, and an example of the shift.
2. Link to map of the United States, color-coded by current policy on marijuana.
3. On a personal level, I support decriminalizing nearly all drugs at the Federal level. I don't propose that in the FREE Act because I think "hard" drugs like heroin are a more challenging discussion and this opportunity is timebound. Because they are generally safe and non-addictive, marijuana and mushrooms are easy to federally decriminalize, allowing states to create their own rules. Start with the simple, and go from there. Do not let the perfect be the enemy of the good.

Herd Immunity is the Goal: What is the Most Important Question in the World?

What is the Most Important Question in the World?

There is a great deal of talk about Herd Immunity. Social Distancing absolutists poo poo it as Pollyannaish: "let's just all go inside for 30 days and kill this bastard once and for all!" 

Unfortunately, mass quarantine won't work. It flattens the curve, but doesn't get us past the pandemic. We will be trapped inside for a year, which would be certain to make the cure worse than the disease, as the global economy implodes, destroying the lives not just of those that die, but of those that live.

Many of the social distancing absolutists do not understand the unbelievable power of compounding. Even those that do appear to think we should treat all people as equally risky - "everybody go inside!". Both of those are terrible underpinnings for making rational decisions.

Those that follow me on Twitter know that the number of “Cases” of CV19 is a terribly misleading statistic, because it depends largely on self-reporting and testing breadth. 

Unlike Cases, "Deaths" is an extremely reliable number. While Deaths is not perfect (due to its lag and the fact quality of treatment impacts it), Deaths is objective, comprehensive, and easily measured. It helps us understand what is really happening in the world. 

According to this article in the WSJ yesterday, the number of Deaths in the US “quadrupled” in the past week. In Spain, the article mentioned that Deaths jumped by “a third” in one day (from ~1,000 deaths to 1,326). Both of those are staggering growth rates. While the growth rate differences are wide, in both cases we know it is very high. These differences make sense, because growth in Deaths will vary by geography depending on the quality of care available, how “seasoned” the ill are, overall population health and age, social response, population density, quickness to diagnose, etc. Different growth rates are to be expected. 

33% growth per day is horrifying. It implies more than a septupling (7x) every week or so. If that you think that sounds like a lot, it's because it is! 

Using Spain’s 33% daily growth as the benchmark, each infected person would lead to six new people infected each week (leading to a 7x - going from one infected person to that one person plus six new people). That does not mean the six people were directly infected by the first person. Rather, the people the first person directly infected went on to infect other people, and so on and so forth.

Why is herd immunity important? One might think that 20% herd immunity would only reduce the number of infections by 20%. One would be wrong. Welcome to the world of exponential math. Exponential up, but also exponential down. We will get into that in a moment.

I created a simple exponential growth weekly table below. You can see the Spain example in the top “0% Herd Immunity” row below. I set that row at approximately 33% growth per day. 

Importantly, Deaths are on a lag to initial infections (Cases). If you make a table that has 33% daily growth, and we assume the Infection-to-Death lag is 12 days (that’s an educated guess), that means Deaths are somewhere in the 26^th day and infections are in the 38^th day (i.e., it arrived in Spain around February 12). If we assume Spain began with a single true Patient Zero, which is a bad assumption, that would imply ~38,000 infections currently, 3.4% of whom are dead now but more of whom will die over the coming week.

My guess is there are many many more infections than that. It is much more likely that there were multiple Patient Zeros that returned from China or other countries with CV19 (not necessarily all arriving at the same time - some earlier, some later). In that case, there could be many multiples of 38,000 actual infections in Spain. All else equal, I view that as a positive (it implies lower Mortality Rate and future higher herd immunity). Also, the real growth rate may be higher or lower - but we're using 33% per day for these purposes.

So, we have no idea how many Cases there really are. But we do know the number of Deaths and we know that Deaths is going to keep growing dramatically, as the social distancing didn’t begin en masse until the past week. Recall Deaths are a lagging indicator. If we assume social distancing causes Cases to plateau and then decline, Deaths should plateau around 12 days after Cases, which gives another week of exponential Deaths growth. 

Unfortunately, 7 days from yesterday, if the 33% growth per day continues, over 9,000 people will have died in Spain, with 2,200 people dying on the last day alone (a septupling'ish from the 330 people that died yesterday). If, at that point, the curve has flattened, then it will continue at 2,200 Deaths per day for a period. The virus will work its way through the quarantine over the subsequent 2-3 weeks, declining rapidly throughout.

But what then? If even one person unknowingly remains infected and at large, when people go back out into the world, won’t we just start over again? Yes. 

This is why we care about Herd Immunity and compounding. 

If Spain is going to max out at 2,200 Deaths per day, and we assume a 1.5% Mortality Rate, we could assume that there were also 147,000 new Cases per day (12 days prior) that were leading to those 2,200 deaths. If one Patient Zero would have led to 38,000 new Cases per day, to get to 140,000 Cases per day, it actually requires about 14 Patient Zeros (don't put too much weight on that number). Let’s also assume that yesterday, Spain shifted from exponential growth to linear growth based on Social Distancing (i.e., the number of new Cases per day flatlines). Its new Cases would stabilize at 147,000 per day, then begin to decline rapidly. 

If we assume the linear growth for the next 2-3 weeks averages half that max growth, then 147,000 * 21 / 2 = 1.5 million additional new Cases during that period. This would be in addition to the over 500,000 people that were infected before the end of exponential growth, giving the world around 2.0 million infected Spaniards.  Spain has 49 million people and unfortunately only 2.0 million will be immune (most of whom won't even know they are immune). 2.0 million is around 4% of the Spanish population. 4% does not provide the necessary herd immunity to cut the transmissions down dramatically. Crazy as it sounds, Spain may have achieved 25%+ if Social Distancing measures had waited another week (my math becomes even less sciency as the number of Cases grows to very large numbers, because some benefits of Herd Immunity would slow down the contagion rate along the way and small changes in growth lead to big differences in ultimate outcome).

Why does herd immunity matter? Each person that gets infected and recovers becomes immune. These immune people begin to break the chain of contagion. Those immune people are protecting the rest of us - silent heroes.

Two Scenario Examples: 

1: Zero Herd Immunity: assume you personally would have given the infection to two people, and then they do the same, so on and so forth;

2: Same as #1, but the herd is 50% immune

In Scenario 1, after you get infected, you give it to two people. Then they each subsequently give it to two more people (you + four people). In Scenario 2, you try to give it to two people, but one of them is immune. So only one new person gets it. Likewise, the one new person gives it to one additional person (you + two people).  Take it two steps farther and it’s You + 16 People vs. You + 4 People.  Another step, You + 32 vs. You + 5.  You + 64 vs. You + 6. Hopefully you get the point.

So, a 50% herd immunity doesn’t reduce the number of new infections by half, it reduces the exponential factor by half, which reduces infections exponentially. It basically breaks the chain. Barring an effective treatment, this is the primary path to saving lives. We must get herd immunity up while also protecting lives on the journey. 

This becomes the most important question in the world today: how do we get to maximum herd immunity with minimum Deaths?  My next post addresses that.

World's Largest Pension And Owner Of JGBs Announces It's A Net Seller

Butterfly wings for Japan...
Linky Linky

Hayman Capital's Kyle Bass Provides CNBC Interview On Japan, Europe And Munis

Watch, listen, learn. Also, here's a link to Bass's/Hayman's most recent annual letter.

Intro and Japan:


Europe:


Munis and Meredith Whitney:

Hayman Capital's Kyle Bass Writes About The Cognitive Dissonance Of It All

Hayman Capital's Kyle Bass writes about "The Cognitive Dissonance of it All" - the fact that an increase in the unsustainable policies and economic structure of the past forty years that led to the recent financial crisis is being offered as the cure to the ills the very same policies caused. Sovereign defaults, debt accumulation, the Keynesian endpoint, Japan's coming X-Day, the future of the euro/EMU, fiat money, gold and other topics are all discussed.

Enjoy.

48881153 Kyle Bass Hayman Investor Letter February 2011[1]

When Teppers Speak, Investment Linebackers Listen

In this extended CNBC interview, Appaloosa's David Tepper is still somewhat optimistic, albeit toned down a bit from last September. Watch and see for yourself what Trader Tepper (as opposed to Investor Tepper) has to say about the opportunity set today. As always, he's entertaining as hell. [click here for his fantastic market call last September - many people credit this interview with setting the market psychology for the balance of 2010]

Part I - Tepper's New "Bank" Investment (NJ Food Bank charity) and a Look Back at His Fall Call:


Part II - Tepper Tones Down His Bullishness From Last Fall:


Part III - Tepper Gives His Somewhat More Micro Outlook (Semis, Semicap Equipment, Banking to a Certain Extent, potentially some of the PIIGS if they "do the right things"), Currencies and Gold are Tough, etc.:

Appaloosa's David Tepper Returns To CNBC This Friday January 21st

Long time readers know that we are David Tepper fans, if for no other reason than his fantastic communication skills. We directed you to watch the interview he gave on CNBC last September (which you still can do here). In that interview, he told you in no uncertain terms to buy because the Fed was intent on making everything go up, inflationary consequences be damned.

Mission Accomplished.

This Friday, he's back to drop more knowledge.

[HT: LB}

Jim Rogers, Ron Paul & Tom Woods Interviewed By Judge Napolitano

In a veritable quad-fecta of freedom loving interviews, Judge Napolitano interviews Congressman Ron Paul, Mises academic Tom Woods (and friend of TILB), and legendary investor Jim Rogers in this assembled video

Fourth in the quad-fecta is the combination of John Papola and Russ Roberts interviewed about their famous rap video concerning the debate between Hayek and Keynes.

Russia Is A Seven: Sergei Magnitsky's Murder Officially Swept Under The Rug

HT: Big E

As long time tilb readers know, we've been following the murder of Russian lawyer Sergei Magnitsky in Russian prison. He basically helped uncover a massive tax fraud/embezzlement by Russian officials only to have the tables turned on him. The officials turned around and charged him with theft, jailed and tortured him then had him murdered in prison. Bill Browder of Hermitage Capital (who was Magnitsky's relevant client in uncovering the original fraud) has spoken out loudly only to have his complaints drowned out by silence.

The NY Times gave the story a few last breaths of life today.

Human Freedom Relies On Gold Redeemable Money

I think the title of this post is pretty close to a piece Congressman Howard Buffett wrote in the first half of the 20th century (yes, Warren Buffett's father - they have slightly different political leanings).

In any case, I felt it was an apt title to the below video from Charlie Rose where he discusses gold, inflation, "quantitative easing", and dollar debasement with a few folks including Greenlight Capital's David Einhorn (whom we are a big fan of), Jim Grant (again, we're huge fans), the Chairman of Barrick Gold and John Hathaway of Toqueville Asset Management. Enjoy.

Jim Grant - "gold is money."



HT: TB

Munis, Munis, Munis

Long-time TILB readers know that we are very concerned about the muni-market (click here for our coverage of the bankruptcy filing for Harrisburg, Pennsylvania - that fine state's capital city).

Certain states, like Texas and Virginia, appear to be in fine shape and are resonable credits (though you aren't getting paid enough to care, in our opinion). We'll call citizens of these states Future Subsidizors. Other municipalities - like California, New Jersey and Illinois (aka Future Subsidizor Supplicants) - will go through stress or outright distress.

Many of these Future Subsidizor Supplicants may at some point be great investments, if you know what you're doing. But the vast majority of the muni-market lender base (which is largely doctors and lawyers retail investors) have no idea what they are doing - nor do their advisors (e.g., muni mutual funds or private wealth advisors).

In the last few days the muni-market has become spooky. Examples - a small town outside Detroit, Michigan called Hamtramck has begun the process of seeking state permission to file for bankruptcy (link here). Additionally, some much bigger munis (like the state of California - which would be one of the largest sovereign issuers in the world if it were a standalone country) have pulled some offerings due to "tepid demand". At some point these municipalities are going to have to start issuing again in order to fund their deficits and - TILB supposes - many will have to fund at rates that far exceed their budgeted cost. This of course will lead to further strain on those government budgets, leading to higher interest rates, further budget cuts, more local economic straing, yet further strain on those government budgets, leading to higher still interest rates, etc., etc. ad nauseum...default (or restructure).

Beware. Skillful investors willing to take an active role in helping these munis "solve" their debt problems will be able to make money (Jenny Hedge Fund Manager will buy California's debt at 40c and selling back to Cali at 60c, thus making itself a quick 50% while helping Cali reduce that issuance by 40%), but Johnny Retail is about to get rolled.

Caveat Emptor - get ready for more Schwarzies.

Below are some excerpts from today's Wall Street Journal A1 page (all emphasis added):

America's strapped states and cities took another hit Wednesday, with California seeing tepid demand for its latest bond sale and other governments pulling about $700 million worth of borrowing deals this week as investors continued stepping away from the municipal bond market.

The normally staid market has grown volatile the past week, posting its sharpest selloff in nearly two years, as investors demand higher interest rates to buy paper issued by states, cities and counties to finance their operations. Localities have been hammered by a drop in tax revenue amid the downturn—and unlike the federal government, most are barred constitutionally from running deficits.

"The tax-exempt municipal bond market is a cold, cold world right now for issuers and taxpayers," Tom Dresslar, a spokesman for the California State Treasurer, said late Wednesday. He added that the state decided to cancel another $267.3 million bond sale it planned to price next week "in light of market conditions."
California's $10 billion bond sale this week was seen as a test of access for governments to the bond markets, and the middling interest signaled that municipalities could have to pay more to attract investors. The state further jolted the market by delaying the close of the bond sale, citing a lawsuit filed Tuesday that challenges a separate tactic the state is using to raise funds.

"California's timing unfortunately couldn't be worse," said Gary Pollack, head of fixed-income trading and research at Deutsche Bank Private Wealth Management. "This creates a fear among individual investors and probably could hurt the state in terms of paying a higher borrowing cost than if they'd done a deal at a different time."

After pouring billions into municipal bond funds most of the year, investors pulled $115 million out of the funds last week, the Investment Company Institute said Wednesday. That was the first weekly outflow in seven months, ICI said.

The fragility of government finances was also evident in a move by Moody's Investors Service to downgrade the city and county of San Francisco, as well as the city of Philadelphia, and by a request by Hamtramck, a small Michigan city, for permission to file for bankruptcy.

California, facing a projected $25 billion shortfall through June 2012, aimed this week to sell $10 billion in so-called "revenue anticipation" notes. Over three days, it reported total orders of about 60% of that amount, or $6.06 billion, for the securities, according to the Treasurer's office. In September 2009, California sold 75% of a similar offering to retail investors. The remainder of an offering is typically bought by big institutional investors.

...

The short-term notes mature next May and June and yield 1.25% and 1.5%, roughly what California paid a year ago, though higher than other states. "It's still an incredibly low rate, and it's an awful lot of bonds," said Matt Fabian, senior analyst at Municipal Market Advisors. [TILB note: Basically commercial paper for California - keep not extending maturities and rolling it short Cali, it will work out just fine...]

...

At the same time, concerns have been mounting over whether, after the double whammy of 2008 market losses and the economic downturn, municipalities will be able to maintain their reputation for always paying their bondholders.

Average yields on 30-year municipal bonds rose 0.13 percentage point Wednesday to 4.77% and are up roughly 0.5 percentage point in recent weeks. Yields on 5-year bonds rose 0.06 percentage point to 1.58% on Wednesday.

About $700 million worth of bond sales were pulled this week, according to Thomson Reuters. That is roughly 3% of the week's planned sales, according to data from Ipreo. Many of the bond sales were to refinance outstanding debt at lower rates, meaning the governments didn't need the money.

But postponed deals are atypical, market watchers say, and they attribute them to investor demand for higher interest rates amid a glut of bonds as well as the impact of the move in 30-year Treasurys.

...

Moody's cited "continued weakness of the city's finances" in its downgrade of Philadelphia, affecting $3.85 billion in outstanding debt. Rob Dubow, the city's finance director, said, "We understand we face fiscal challenges, and we have, but for us the timing is odd, because we feel like we have stabilized." As for San Francisco, the bond rater said the "city ended fiscal 2009 with a balance sheet that was weaker than at any time in the prior ten years."

A spokesman for San Francisco's mayor said the ratings downgrade was "not unexpected" given the challenging economy, and that the city still had a better rating than many other local governments.

As a brief aside, this whole thing is very sad. Most municipalities could handle their debt if they were willing to make hard choices. However, in a culture where homeowners now making "strategic defaults" on their mortgages, it does not surprise us that rather than cut back on trash service or government size, our municipalities are choosing to renig on their contractual and moral obligations to their lenders.

We think lenders - broadly - are not requiring enough compensation for this sea-change in risk.

"This Is True, The Plumber Is Clearly Smarter Than The Ben Bernanke"

I can't think of one thing that I disagree with in this. As an aside, I love when people use extraneous "the"s. Such as, "The Ben Bernank"[sic].



HT: O

Liberty Quote Of The Day: Rand Paul

We've Come To Take Our Government Back.

"Do we believe in the individual or believe in The State? Thomas Jefferson wrote the government is best that governs least. Likewise, freedom is best when enjoyed by the most. America can rise up and surmount these problems if we just get government out of our way."

-Rand Paul - 11/2/2010 U.S. Senate Acceptance Speech from Kentucky

Amen.

Vote or DIIIIIIIIIIEEEEEEEEEEEEEE!!!!!!!!!!!!!

Vote donkey today and don't ever complain again

OR

choose a different path: one that supports liberty, encourages a government that protects and serves its people rather than controls and harbors power over them, and that provides for its citizens to operate relatively unfettered by centralized influences.

Obama Tells Businessman To Hire More People

Hilarious.

Appaloosa's David Tepper On CNBC

Always great to listen to. He's a guy that was literally given a statue of a pair of brass balls by his hedge fund buddies. Enjoy.

First half of the interview:


Second half of the interview:


He doesn't give a shitszu.

Phil Davison Is Seeking The Candidacy For Stark County (Ohio) Treasurer

Democrats, you best come with your boots on, because Phil Davison is coming with guns blazing. He recognizes politics is not touch football, politics is winner takes all. It always has been and always will be. He does not apologize for his tone. THIS IS THE OPPORTUNITY WE HAVE BEEN WAITING FOR!!! NOW IS THE TIME TO SEIZE THIS OPPORTUNITY!!! (tear) HE WILL COME OUT SWINGING AND WILL END UP WINNING!!! ...AND HE LIVES IN A VAN DOWN BY THE RIVER!!!!!!!!!!!!!!!!



[HT: TT]

The Khan Academy - Brilliant

I'm embarassed to have not been aware of this before. This guy, Salman Khan - who's an ex-SF-based hedgie, has basically created a high quality, free online library of teachings on basically any subject you can think of related to math or science and is below String Theory. I suspect String Theory is coming. He also has extensive playlists that address finance, economics, and government policy (e.g., an entire set of objectively presented lectures on the "Paulson Bailout" and "Collateralized Debt Obligation (CDO)"). I haven't vetted those, but I can tell you the more traditional lectures are excellent - understandable, effective and consumable. This sort of thing has the potential to revolutionize education.

Click here to check out the Khan Academy and spread the good word. Here's his intro video that shows the schematic overview of basically everything that is available on his website.

Welcome to the future, the weather is great.



[HT: TD]

Yen:Dollar In Freefall

Wow - the yen's strength is remarkable (or is it the dollar's weakness - pick your poison). Say Sayonara to the Japanese government's budget. Say Ohaiyo Gozaimasu to QE52 in Japan and the ultimate destruction of their currency. As we've discussed several times in the past, this is a "when, not if" scenario.

St. Louis Fed President James Bullard On Deflation Risk

James Bullard, one of the Fed's few "inflation hawks" (which is a relative term when we're talking about people who's job it is to debase our currency, so being a hawk on the Fed really just means he's not as overwhelming an inflationist as some of his colleagues) is - out of left field - warning about deflation. Strangely, his argument is that the easy money language of the Fed "extended period of time", etc. is what is driving this. However, really what he's saying is that the interest rate isn't what matters at this point in a deflation cycle, that the Fed needs to be more forceful and adopt further quantitative easing. Interest rate movements simply incent borrowing and money creation whereas QE causes it explicitly.

Folks, QE2 is nearly upon us.

If you think Bernanke, an avowed currency debasor, isn't the puppetmaster coordinating this - even to the point of using one of his biggest inflation hawks to lead the debasement charge - then you are fooling yourself. By the way, Bullard is not just saying the fed needs further quantitative easing, he's saying they need to make an open-ended commitment to QE, they need to explicitly state their QE as part of ongoing policy, and that it should probably be a lot. Not QE2, but QEForever.

The first time around, the Fed simply did "a lot" but didn't make it open ended and explicit enough. Bullard says the Fed won't make the same mistake twice.

Folks, get your AU and AG now. We are entering crazy-land - these guys literally have no idea about the implications of what they are talking about.

BTW, they would not do this unless they were really, really worried about the state of the economy. I watch this and am legitimately frightened.



[HT: TD]