Wednesday, May 4, 2016

- Making Presdient Trump

As of last night, Donald Trump and Hillary Clinton have locked up their respective nominations.

If I were Hillary Clinton's campaign manager I'd urge her to go to China until the election is over. If nothing changes she's going to be elected President. Trump is as likely to do himself harm as he to improve his position, so that's an uncontrollable risk, and any 'response' to talking points can be managed by Hillary's hatchet men.

For her, the far bigger risk is that voters will see her for who she really is. So if she hides and stays out of the limelight, that's really her best shot. But if they put her out there in front of the TV cameras, and the public see's what a stiff, unlikable candidate she really is... then maybe all bets are off. Hillary has a great and effective machine at her disposal. But for all it's power, she's an incredibly weak candidate. And as soon as she gets out there, I believe it's going to become clear.

Do you know why there are so few female CEO's in corporate America? Because they aren't very good at it. Their hyper-emotionalism makes them seem petulant and irritable even when they're being rational. They are far better at nurturing children than they are at commanding men. Sure, there are a few who manage it, and a very few who manage it very well. But they are few and far between. And Hillary is not cut from their cloth.

Getting her in front of the public eye is Trump's best bet of becoming President. And if that happens, then the carnival ride really begins.

PS. If you live or work anywhere near Cleveland, I'd recommend stocking up on ammo just in case.

Monday, May 2, 2016

- A Useful Trade Idea

I can't remember the last time I did this, but what I have written here is a trade-able investment idea. I think we've found all the missing inflation that has hobbled central banks for a decade or more.

I find this piece by Economist Robert Blumen, deeply persuasive, but I don’t think it much matters. A basic translation of it for non-economists is this:

The derivatives market has provided artificial demand for Treasury bonds, and has in that manner kept inflation low in spite of the Federal Reserve and other national reserve banks selling mountains of government guaranteed debt. We only see wage and price inflation as that money flows through traditional channels into productivity activity, but the Derivatives market’s artificial demand for underlying assets has instead given us unjustifiably high equity prices, an explosion of basically useless tech startups, and other highly leveraged investment vehicles.

Connecting the dots may seem a little unclear to the uninformed reader, but as a guy who made his living in the derivatives markets for most of his career, I can tell you that I believe this assertion to be unambiguously true. It may be conjecture as stated by Blumen, but it is reasonable conjecture that perfectly matches the circumstances we currently find ourselves in and reflects all the nuances that accompany our increasingly complex financial markets.

And I don’t think it matters at all.

Some may react with horror at that. “You mean to tell me that Hedge Funds are keeping the Fed’s one tool for managing inflation from working and you don’t think it matters?! The entire financial market is broken and you don’t care? What are you some kind of monster?!” (That last sentence is placed at the end of most of my assertions by someone at somewhere on the left of the spectrum, so I do it here out of habit.) But the reason it doesn’t matter is because it’s not like it’s a decision someone is making. These effects are symptomatic not causative. “Hedge fund profits” aren’t the reason this is happening, they are only the result of this happening. And they ain’t happening much anymore.

Hedge Fund profits have been falling for years, and will continue to do so. But this is because of how hedge funds have always worked. To make money hedge funds used what is called an ‘information advantage’. They learned something better or faster than someone else, reacted to it quickly and prudently, and the result was their profit. But since the markets are now broken, the business model of hedge funds are broken too. It’s taken some time for that fact to work its way through to the people who invest in hedge funds, but it finally has. The result is the billions in redemptions that are currently occurring.

As the hedge fund market space contracts, so too will the leverage that they carry in the derivatives markets. The derivatives contracts they own will be ‘rolled up’ just like selling a position, and less risk will be on the table. The air will come slowly out of the balloon in fits and jerks, as specific funds reduce specific positions. The derivatives were created from nothing, and will return to nothing. But not so the Treasury bonds used for collateralizing them. As they unwind their derivatives books, the funds will likely want to keep their leverage ratios more or less fixed (or at least manage them as a reaction to other market phenomena) so the Treasury Bonds they used to provide collateral, will likely be sold into the secondary market. That increases their supply, which reduces their price, and increases interest rates.

As rates rise, the Fed will try to ‘manage’ that. Our Federal Government is an economic basket case of the first order, and we as a people are profoundly addicted to the services offered by a government that is spending taxes which is has not yet (and is unlikely to ever) take in. Any meaningful increase in interest rates will have catastrophic consequences for the Federal balance sheet so the Fed will have to go and ‘buy’ the debt to keep demand high. The thing they will buy that money with, is what can accurately be referred to as ‘zero duration paper’, otherwise known as ‘cash’.

There is your inflation right there.

There is more to that though. No matter what happens in the financial markets, or in most cases, even with the Federal Balance sheet, the US is still thought of as the best place to store your assets – because it is. It’s a relatively free country with strong property rights and is responsible for 50% of the military spending on the planet. Those guns but a lot of certainty. This makes inflation a global story rather than a national one. Its US Federal debt that is acting as the collateral for all financial assets across the globe, from Japanese stocks the Chilean currency futures. Many of those markets are MUCH more sensitive to global interest rates than the US is. So when the Federal Reserve pushes on the US dollar, the rest of the world is likely to push back. We won’t see domestic inflation until after we begin seeing it elsewhere.

But I believe it’s coming now. And I believe it will be signaled by the rusting away of the Hedge fund world. Watch Hedge Fund redemptions. None of the hedge funds are making reliable and continuous profits high enough to justify a 2 and 20 pricing model so they will see redemption requests. As they redeem investors, their leverage will fall and the ‘printed money’ will find its way into the regular productive market.

%%%%%%%%%%UPDATE%%%%%%%%%%

the only caveat I have to this (as I'm thinking it through) is the pervasiveness of SPV's assembled by the banks so that their derivative counter-parties could carry off balance sheet derivatives. To my knowledge there is no means of accounting for these products except by the banks themselves, and since the risk they represent to the issuing bank is usually sold off to the secondary market and represent no real risk to the bank, they are not going to be found on any examiners reports.

An SPV is essentially a corporation assembled by a bank and 'purchased' by their counterparty. It serves as a holding company for the cashflows represented by the derived products. I've mentioned them before when talking about the Argentina Energy swap deals I worked on while at JPMorgan. In that case, the SPV amounted to a commitment from Argentina to deliver tankers full of oil over an extended period. And in return they received an up from payment from JPMorgan in the form of a swap which represented cash payments for that oil.

So although this description is of a commodity SPV, the same can be done with debt. In effect, the SPV becomes the equivalent of a Hedge Fund which have the effect of making the assets and liabilities disappears from the balance sheet of both the bank and the derived counter party. The company itself has no operations, and is a paper company only, which is used for managing cashflows. Some credit exposure usually flows through, but is usually quite small when compared to the underlying assets and is usually hedged away.

This might be a big deal, and it might not. It's been a very long time since I worked at an investment bank, so I don't know how common it is anymore. MY instinct is that it will be on the smaller side because there is a substantial cost involved in assembling an SPV, and in my day it was only done as a means of regulatory arbitrage. In the example above, so that the government of Argentina can 'sell it's oil' to a domestic Argentinian company - of which the SPV was one. There aren't nearly as many rules around the purchase of government debt, so I expect the cumulative leverage they represent is minimal.

If the deal mentioned above sounds 'fishy' to you, it wasn't. It was my experience that JPMorgan never even came close to violating the law - ever. Corporate cultures do change, but during my tenure they would sooner turn down a deal than push the envelope. If there was anything at all even remotely 'fishy' about it, you'd have to share that with the Argentinian authorities, and their regulatory body for disposition of mineral rights. You might consider asking them what became of those cashflows (payments) delivered years ago, for oil which (I believe) is still being pumped from the ground today.

Saturday, April 30, 2016

- A Simple Human Truth

When people are protected from the consequences of their bad decisions, you get more bad decisions. Decisions that center on intent rather than result. Decisions that reward the ego or signal virtue, rather than making our lives better. You can’t sit on the couch and eat junk food all day today, and expect to win a Marathon tomorrow. Your loss won’t be a result of cheating on the part of the other runners. It will be a product of your decision not to train as hard and as much as they did.

The right answer to that problem isn’t to make junk food eating mandatory, or to make training in advance of a Marathon illegal. It isn’t a different starting line for each competitor based on their weight or fitness. The answer, is to make people accountable for the consequences of their bad decisions.

We insulate a great many people from consequences. The women of our society (and the men who think like women) all believe this is a necessary condition of fairness. This idea has become so pervasive that the most extreme advocates of this view now demand that those making bad decisions need to be insulated from having to hear that their decisions are bad. They proclaim that anyone with a different view be silenced so their egos won’t be challenged. They scream with great passion that any disagreement is a product of ‘hate’, ‘racism’, and 'misogyny'.

It isn’t. It's only a reflection of a simple human truth.

This is what I meant when I said that we need masculine solutions to our society’s problems. We need policies which challenge instead of nurture. We don’t need to protect the ‘victims of oppression’, they have been too protected as it is. We need to tell them that they are on their own, and need to fend for themselves.

Children never like to hear this. Who would? When you’ve been raised in a world where others handle your responsibilities, and you receive all the benefits of their labor, sweat, and risk, who wouldn’t want more of the same? This doesn’t make them bad people. It makes them children. And it’s time for America to grow up a little.

Under the America I was raised in, blacks, minorities, and women are all equal under the law. We should begin holding them to an equal standard. No more preference based on how ‘downtrodden’ they are. Just because they declare themselves victims doesn’t make it so. But they are victims in a sense - victims of a culture that lacks the confidence to treat them equally. That needs to stop.

There will be tantrums of course. They will cry, and stamp their feet, and hold their breath. They’ll chain themselves together and wail about unfairness and the need for someone else to handle their lives for them. But this is the wailing of children. Women are persuaded by this, as are men who think like women. But men, are not. Men know that even though they tell us how much they hate us, we are doing what’s best for them.

It’s a cold, dangerous world. Our enemies abound. And we will never fight them off if we become a nation of children and the women who care for them. We need to start acting like men.

Friday, April 29, 2016

- Making Trump's Case For Him

Even the LA Time, THE LA FREAKIN TIMES, is making the case for Trump with video of the protesters burning American flags, rioting, and generally creating mayhem so serious, that Trump and his secret service detail had to sneak into his hotel through what amounts to a hole in the fence.

These protesters have been nurtured along by Obama and his Justice department, and a generation of idiots in academia and in the media telling them that everything bad that's ever happened to them is a white guy's fault. And just wait until Cleveland.

I can't wait to hear the media cornering Hillary and asking her how she defends people like this as a part of the Democrat party, and getting her response as to why they were carrying Mexican flags, and burning American flags .... (cue crickets.)

- Smart Guns Are Still Stupid

From Politico:

While the “smart gun” element of the actions drew little attention earlier this year, critics are gearing up to fight back against the possibility that such guns could be required for government firearms purchases. A source familiar with the plans said that type of mandate isn’t on tap right now, but critics are still worried the administration is laying the groundwork for such a move. Among the biggest skeptics are cops worried about testing an unproven technology on the streets. “Police officers in general, federal officers in particular, shouldn’t be asked to be the guinea pigs in evaluating a firearm that nobody’s even seen yet,” said James Pasco, executive director of the Fraternal Order of Police. “We have some very, very serious questions.”

I resubmit my assertion, that I will not ever buy a smart gun UNTIL it's been proven out by the Police, The secret service, and maybe the armed forces. If it isn't good enough for them, it isn't good enough for me. Instead, I'll just stick to using one of the other 100 million or so other handguns available on the secondary market.

The simple fact is, the only people who think smart guns are a catchall solution to anything having to do with guns or as the left calls it "gun violence", are the people who don't know anything about guns. People who do know something about it all know that you can't legislate stupidity, and with 400 million guns in the country, a few people are going to embrace Darwin, and get injured or killed.

There just isn't any way to solve this problem for the lazy legislator. If they want to address the actual problem, then they're going to have to go out there and throw a bunch of young men (who commit the vast majority of violent felonies) in jail. That's it. There are no shortcuts, no matter how much Obama may wish for one.

- The Capitulation Of National Review

The tone has changed at National Review, and I think we can take that as a kind of capitulation. Certainly this piece by Rich Lowry seems to be. I’ve met Rich, and like him as far as it goes. And I’ve never been one to criticize a man’s character just because he takes action or makes a decision that I disagree with. People are motivated by a lot of things, and no man ever truly knows what’s in another’s heart. So unless it’s blatantly obvious, I like to give people that I usually agree with, the benefit of the doubt with regard to motives.

Kevin Williamson, on the other hand, I know better, and call him a friend (though I’m not certain he feels the same way these days.) And knowing him as I do, I do feel capable of speculating on his motives. So I’d like to say a few words on what I think this tiff about the Trump candidacy has taught us about these two members of the intellectual wing of the Republican Party, and what I hope it indicates for the Future of America’s premier political publication of the right.

First, I still maintain that Rich was dead wrong to fire John Derbyshire. I think that event was the beginning of a broad misread of the changing political currents that inevitably led to the very same cultural tsunami that gave us candidate Trump. In his defense, when you’re in a bunker fighting, it can be hard to see the whole battle field.

But with that said, I think Rich and National Review got the nascent Alt-right completely wrong. I think John’s piece in Takimag was a part of what led to the Alt-Right as a political movement – or rather, was an early indicator that it was being created by the same things that inspired John’s piece. Decent American’s were being told by the left that they were guilty of a cultural sin that they manifestly were not. John felt the need to push back on that, and Rich thought it was too much.

But in that belief, Rich was letting the left set the terms of ‘civility’ for our political discussion, and those terms were set up in a way that prevented the left from ever losing an argument. Rich assumed that people could see past the hyperbole and unsubstantiated nonsense that the left continues to constantly repeat about race, and that they didn’t need the kind of sharp ridicule that John was bringing down on them. In this regard he gave people too much credit. And in the process, he put one more obstacle in the way of a more competent politician taking on the ‘tough talking’ role of Trump in this election cycle. Had he supported John instead of vilifying him, who knows how the frame of the discussion might have changed for the mosre established political classes.

I don’t believe men like Rick Lowry are too deeply influenced by anything in particular other than facts and evidence. There is no cabal of Zionists pulling his strings. That’s nonsense for the conspiracy minded. But I do think he labors under all the mistakes about the political left that are neatly summed up in “The Rational Male” with regard to how women think. I think Rich is a blue Pill man, and if he took the red pill, and began to understand what it is about Trump’s overt masculinity that has had such a broad appeal, he would be much more effective in the next battle than he has been in this one. The red pill is a paradigm shift in one’s thinking. One that I don’t think Rich has made.

Or to put it another way, I think Rich’s frame of mind with regard to the political debate aligned him with the left in ways that he didn’t then appreciate, and maybe still doesn’t. But I believe he’s smart enough and clear headed enough to see that if exposed to it, and to then throw off the blinders that our profoundly Feminized culture has put on him. He clearly thinks that black lives matter and the social justice left are just as silly as the rest of us, but he thought it didn’t matter. He believed he could argue with reason, and achieve the ends he meant to. And while Trump’s success is teaching him how wrong that was, I don’t know if he’s actually learned what would be better next time.

When he wrote ‘The Talk”, John Derbyshire was doing the right thing with regard to our ‘discussion on race’. He was pushing back on unprovable assertions in a masculine way, all supported by evidence, and was at least trying to change the frame of the discussion. He was ridiculing the piece he sites in the article, and doing so to great dramatic effect. Rich wasn’t objecting to the facts sited in the piece, but the frame change of the piece itself. He thought it ‘outside common civility’ and he was right. But that 'common civility' was specifically designed by the left to prevent rational arguments from being effective, and Rich never saw that. And going outside it is precisely the thing the right should be doing because against the left it’s really the only effective option. It's been wildly successful for Trump. So maybe Trump’s success will let him see that. I hope so.

Kevin Williamson is another story entirely. Kevin is no blue pill man. He isn’t even a beta. I’ve seen him in action in NYC’s bars and taverns. And even though he’s a big, bald, fat guy, women topple over like dominoes to his game. Kevin is a guy who came from poverty and dysfunction in west Texas, who used his intellect and wit to great success. He's a man of considerable courage. And is very much not the type of man to back down from a fight. He might not be right about everything, none of us ever are. But he’s one of the smartest guys I know and labors under no illusions about who the left are, and the lengths they will go to accomplish their goals.

I’ll tell you something else, I think Kevin is right about Trump. I think Trump lacks the character, principles, and intelligence to be a good President. And I think Kevin made that case with such fervor and to such great effect, that it brought down upon him the wrath of the know nothings. They have spent the last several months doing little other than slandering him and lying about his motives. Kevin will tell you that he doesn’t care what people think of him, and that’s true as far as it goes. But that assumes that the things they accuse him of are true, and where Kevin’s is concerned, that is most certainly not the case.

I’ve never cared much what people think of me either, it’s one of the many things Kevin and I have in common. I will cop to any sin that I believe I’m actually guilty of, and I think Kevin would too. But when people lie about me, it makes me very angry. And a whole lot of people have been lying about Kevin very loudly, and in very great numbers. I believe it’s made him angry, and he’s right to be angry. All he’s trying to do is point out what to him seem to be obvious facts. But what Kevin seems to have forgotten (to me at least) is that American’s no longer care about facts.

There are a lot more people in the world of average intelligence than there are geniuses. And since Americans are no longer taught the difference between facts and feelings, they often mistake the two. Only the geniuses are able to make the distinction anymore, and only because they were smart enough to ignore what they were taught. I am. A great many of my friends are. And I believe Kevin is. But the people attacking him are not. Instead of arguing with his ideas, they are slandering the man. And I would have trouble standing for that if I were him too.

When people are trying their best to crucify you, it’s hard not to believe the worst of them, especially if many of them actually deserve it. But I think Kevin is making a mistake as well. I think he’s been a little overzealous in his perfectly justified self-defense, and in the process of striking his erstwhile political enemies, has accidentally injured some of his allies.

There are outright racists and anti-Semites in the Alt-Right, and many of those people support Trump. But that doesn’t make the Alt-Right into a movement of racists and ant-Semites. The leaders of the Alt-Right are men of reason. And that is how the movement should be defined. The left would have it otherwise. They feel it’s important to set the frame of such things in the worst light possible for anyone who opposes them. And since Kevin is being attacked by the bigots of the Alt-Right, for the moment anyway, he’s inclined to agree with the left about who the right is. But I think too highly of Kevin to believe that this is a permanent condition. And when the attacks on his character begin to subside, I believe he will see things for what they really are.

All of this has to do with a ‘frame change’. We need to change the frame of our political discussion to include a masculine solution to our problems as well as a feminine one. Trump will never be a great president, but has been great at changing the frame. And by doing so, he’s done America a great service. Now we need the real intellectual fighters of the political right to embrace that frame change as well. We need them to see the forest for the feminized trees, and make room for a more serious intellectual approach to our political problems, framed in a masculine way.

Hopefully National Review's capitulation that Trump is likely to be the nominee is the first indication that this is coming.

Thursday, April 28, 2016

- The Last CCW Holster You'll Ever Buy

I'm left handed, have a PX4 in 45acp with a laser on it and ... what's a good way to say this... I don't have quite as much natural padding as some other shooters my age. So when I go looking for an Inside the WaistBand holster so that I can carry my gun concealed, I'm basically out of luck. There isn't much out there to fit a PX4 with a laser, particularly if you are leaner like I am and can't hide much in the way of bulk with your normal clothes. And in a left handed version, there is almost nothing.

Then I found the item above.

It's called a Versacarry, and it's a must have for all gun guys who will ever even consider carrying concealed. There are a ton of reviews on Youtube for it, and I suggest you go watch them. But that isn't the reason you should run right out and buy one. The real reason you should go get one, just on my say so, is the price. It's $19.95 from the manufacturer, and even cheaper on places like ebay and Amazon. It's ambidextrous, it fits any gun, in any size, with any attachments, it weighs nothing, and adds virtually no bulk.

You don't have to wait, you don't have to think about it, and you don't have worry that you'll never use it. Even if you might maybe just think about using it one day, you should have one.

I may not have many great ideas, but I know one when I see one. And this is simply brilliant.