Mish's Global Economic Trend Analysis

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• Musical Tribute to Quantitative Easin'
• SEIU Makes Voting Easy
• "Money’s Already Quite Cheap"
• Happy Halloween: Pumpkins from Readers and Surveys about Ghosts
• Simulation of a US State Defaulting

Musical Tribute to Quantitative Easin' Posted: 31 Oct 2010 11:05 PM PDT "Merle Hazard" writes ... Dear Mish Just wanted to tell you about a new song video out today that I had a hand in: Quantitative Easin'. It could hardly be more timely! I hope you will give it a listen. This is sung by my friend, the very soulful Mr. Curtis Threadneedle. This is his first song, and we wrote it together. It sort of speaks for itself; I think your readers might like it. Thanks for considering it. Best, "Merle Hazard" It's a good song. Please give it a play. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

SEIU Makes Voting Easy Posted: 31 Oct 2010 06:30 PM PDT If you are in doubt of how to vote on Tuesday, the answer is simple. All you have to do is look at SEIU Endorsed Candidates and vote the opposite. That link is for Illinois, but the SEIU has similar lists for other states. See if you can find one for your state. The general rule is: Do NOT vote for any candidate endorsed by unions, especially public unions. Illinois Voters I am surprised to see a number of Republicans on the Illinois endorsed list, but those candidates are for state, not national choices. The SEIU did not endorse anyone for some races, no doubt because there was no democrat running, or neither candidate was willing to sponsor the garbage the SEIU wanted. In Illinois, at the National level, simply vote Republican and be done with it. the same applies for all of the high level state positions including Governor, Lieutenant Governor, Attorney General, Secretary of State, Comptroller, and Treasurer. The most important things to remember are that Governor Pat Quinn has vowed to raise your taxes in a bribe to win public union votes. Senate candidate Alexander Giannoulias will do the same. California Voters If you live in California please see How Not To Vote. In California the process is simpler because public unions have only backed Democrats. However, California does have a number of important propositions to consider, notably proposition 25 which will make it easier for politicians to hike your taxes. Don't fall for it. Vote no on prop 25. In addition you may want to vote yes on Prop 19, legalizing Marijuana, even though the unions have endorsed it (no doubt because it taxes the stuff). Other States If you live in other states and are unsure how to vote, take a look to see if the SEIU or other union has made it easy for you as well. Disclaimer Bear in mind I am not a Republican. Rather, I am a Libertarian who has openly and actively endorsed those who want to lower taxes, stop being the world's policeman, and in general get government out of the way. Unfortunately there are not many such candidates. Regardless, we cannot afford cap-and-trade idiocies, expanding public unions, expanding collective bargaining, or more war mongering. In general the Democrats have been on the wrong side of all of those issues, while Republicans are right on many of them. Simply put, we simply cannot afford 2 more years of disastrous Obama sponsored nonsense and public union handouts. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

"Money’s Already Quite Cheap" Posted: 31 Oct 2010 09:02 AM PDT Quite often simple explanations are the best. There are dozens of reasons why another round of QE will fail, but much of comes down to "Money's Already Quite Cheap". Please consider Schwarzman Says Fed Easing Won't Make Much Difference Stephen Schwarzman, chief executive officer of Blackstone Group LP, the world's biggest buyout firm, said another round of asset purchases by the U.S. Federal Reserve won't have much of an impact on companies. "It's not an enormous incentive to do something different with your businesses because rates are down a few basis points," Schwarzman, 63, said yesterday in an interview with Bloomberg Television's Margaret Brennan at the UBS Wealth Management Roundtable in New York. "Money's already quite cheap." Schwarzman joins hedge-fund managers Paul Tudor Jones, Clifford Asness and Colm O'Shea in casting doubt on the effectiveness of more so-called quantitative easing. Asness, who runs Greenwich, Connecticut-based AQR Capital Management LLC, said he doesn't expect any long-term effects from such a move. "Us printing money to buy our own bonds I don't think can matter long term," Asness said this week in an interview with Bloomberg News at the Buttonwood Gathering, a conference organized by The Economist magazine in New York. Jeremy Grantham, chief investment officer of Grantham Mayo Van Otterloo & Co. in Boston, said in a quarterly letter to investors that the Fed's quantitative easing will be a "more desperate maneuver than the typical low-rate policy." Tony James, president of New York-based Blackstone, said today he wasn't convinced pushing borrowing costs lower would have a positive effect on the economy. "I don't see that lower rates are going to encourage American industry to borrow and build," James said today on a conference call with reporters. "It has a counter-stimulative effect. I don't think it works." The junk bond market has already gone nuts as noted in Mad Dash Into Junk Sets October Record so what is Bernanke hoping to accomplish other than a bigger bubble in junk bonds, equities, and commodities? Virtually none of that helps small business owners shut of from the bond market and hurt by rising input prices and collapsing prices for their goods and services. Cost-Push Inflation? Someone sent me a comment that I do not understand push-through inflation and that is why I don't understand hyperinflation. Well for starters hyperinflation is not caused by rising prices, hyperinflation is a loss of faith of currency (typically caused by some political event). The result (not the cause of hyperinflation) is rising prices. For a further discussion of hyperinflation please see "Straight Talk" with Economic Bloggers Second the whole idea of cost-push inflation is silly. An excerpt from $30 Billion Offer No One Wants - Small Businesses Hit by Deflation will prove it. NFIB Small Business Trends Inquiring minds are taking a look at NFIB Small Business Trends for September. INFLATION The weak economy continued to put downward pressure on prices. Seasonally adjusted, the net percent of owners raising prices was a negative eight percent, a four point increase from July. August is the 21st consecutive month in which more owners reported cutting average selling prices that raising them. COMMENTARY The Index has been below 93 every month since January 2008 (32 months), and below 90 for 25 of those months, all readings typical of a weak or recession-mired economy. Inflation? Not a threat. Far more owners have cut prices than raised them for 21 months in a row. Deflation? It certainly feels that way to a quarter of the owners reporting price declines for the goods and services they produce and sell. Here are a few charts from the article. Prices Received Actual Price Changes Cost-push inflation? Yeah right. Meanwhile, QEII is punishing small businesses, the very lifeblood of the job creation engine. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Happy Halloween: Pumpkins from Readers and Surveys about Ghosts Posted: 31 Oct 2010 08:35 AM PDT Richard D writes ... Mish, Thought you might appreciate this, I carved the scariest thing I could think of this year into my pumpkin. Richard In a salute to Bernanke and the Fed, FRB stands for Fractional Reserve Banking, and QEII is Quantitative Easing round II. 27% Believe in Ghosts A Rasmussen poll shows that 27% Believe in Ghosts Twenty-seven percent (27%) of Americans say they believe in ghosts, according to a new Rasmussen Reports national telephone survey. Sixty-three percent (63%) don't, but another 10% aren't sure. Belief in ghosts is up slightly from a year ago, when 23% thought they were real. Men under 40 claim to believe in spirits more than their elders. Unmarried adults tend to think ghosts exist more than those who are married. Maybe it's just because of the news this election year, but Democrats are twice as likely as Republicans to believe in ghosts. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

Simulation of a US State Defaulting Posted: 30 Oct 2010 11:29 PM PDT At the recent Buttonwood economic conference in New York City, a team of economists addressed the question "What If a State Defaults". WHAT happens if an individual state defaults? That was the question posed to a panel of luminaries at the Buttonwood gathering in New York, including Robert Rubin, Josh Bolten, Glenn Hubbard, Laurence Meyer and Laura Tyson. The panel was assumed to be a bunch of Presidential advisers faced with a request for funding from New Jefferson, a fictional state with many of the problems of a typical state - unfunded pension promises, years of fiddling the numbers to balance the budget and a government divided between the parties. New Jefferson is shut out from the markets and asks the Federal government for $1.5 billion to meet a debt repayment due 48 hours away. There could be systemic risks if default occurs with the Chinese government raising the issue of contagion and with some state banks owning a substantial portion of the state's bonds. The panel reluctantly agreed to provide temporary funding for the state - say for 30 days - but to require the state to sort out its mess. But it suggested a whole series of stringent conditions, including the use of proper accounting and a requirement to fund its pension plans properly. they were divided over what would happened if New Jefferson failed to save its problem within 30 days. This is a very long video that some readers might enjoy. However, the panel did not address whether the long-term pension problem can be tackled if the courts decided that existing pension rights are legally protected. Long-term pension issues are without a doubt the most likely reason a state would default. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com Click Here To Scroll Thru My Recent Post List Mike "Mish" Shedlock is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction. Visit http://www.sitkapacific.com/account_management.html to learn more about wealth management and capital preservation strategies of Sitka Pacific.

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