Friday, May 6, 2011

you can't tell the players without a program

Unemployment claims jumped by 43,000 last week pushing toward the 500,000 mark. That’s the bad news, the good news is that 244,000 jobs were created last month. If this were the Clinton years that would be an average month not a high point but this is what we’ve become accustomed too. Not that we should forget that Clinton participated with the Republicans in creating the WTO and NAFTA.  The good news is the jobs were widely distributed across the labor spectrum and not concentrated in temp jobs perhaps indicating wages are no longer being driven down.

The commodity bubble appears to have burst with West Texas Intermediate Crude dropping 15 dollars since Monday to under a $100/barrel. Gold was up slightly today but is down a $100/oz from Monday. Other commodities have dropped by similar amounts while at the same time manufacturers of consumer goods and food suppliers have been announcing sharp price increases.

The USD has strengthened dramatically as speculators are scrambling to get back into dollars to cover their contracts and loans that are payable in dollars. How this will shake out in the 600 trillion dollar derivative market is unknown as this is all done on dark markets. When these weapons of economic mass destruction were created toward the end of the Clinton Administration they were deliberately unregulated contrary to New Deal policies.

Congress had authorized the Federal Reserve to set the rules because the Commodity Futures Trading Commission who should regulate this sort of contract thought these things were crazy and shouldn’t be allowed at all. Allan Greenspan however thought they fit perfectly into the Ayn Rand model of an efficient economy. Greenspan further shoveled his wisdom over the heads of critics by saying there was no risk because such contracts would only be traded between sophisticated parties who know what they are doing. Sophisticated parties like Lehman Brothers, Goldman Sachs and AIG that participated in the market for securitized subprime loans and derivatives based on them. A few people made billions and it cost the rest of us trillions.

AIG got hundreds of billions in bailouts that in turn went to bailout Goldman Sachs. Lehman Brothers which was one of the really big banks turned out not to be too big to fail. TV stock analysts were screaming on Friday that Lehman’s stock was a steal at $60 but by Monday it wasn’t worth anything.

It took trillions to bailout the big banks and corporate America but of course it was all funny money. Basically the Fed, the FDIC, the SEC and the Treasury Dept just cooked the books and started over again. Only it wasn’t a start over in any real sense, they just fixed the bubble machine. The commodity bubble appears to have burst and they are talking about a sharp drop in gasoline prices by Memorial Day. The stock market is sagging but that bubble will probably float along in the breeze for now and hey look it‘s up today!

The Republicans appear to be pulling back on a number of fronts (or affronts) with Budget Committee Chairman Ryan saying publicly that he doesn’t think they can do anything about Medicare in this round (this round of the Republicans playing chicken with the debt ceiling). Since Obama is winning big with the poll numbers the Republicans have no choice but to regroup and lick their wounds. (Why does this sound like Al Qaeda? Get your program! You can‘t tell your terrorist groups without a program!)

Treasury Sec Geithner has extended the debt crisis deadline to early August which indicates they know they have the upper hand with Congress as Obama would have kept the pressure on otherwise, we are already past the first predicted deadline. So it looks like the economy is a strong buy despite all the bad news and we’ll see if it has goes to zero by Monday.

Wednesday, May 4, 2011

Apparent Threat Identified - Terminate, yes/no?

The stock market indexes were down sharply today and this was reported as caused by disappointing job creation numbers but that never concerns Wall Street so it must be something else. On the commodities markets oil, gold and other precious metals fell for the third straight day as Obama‘s poll numbers shoot up among independent voters. Perhaps the specter of regulated capitalism is sending a chill down the spines of budding feudal lords.

The USD strengthened again even as other countries continue to diversify away from the dollar. Mexico becomes the latest country to announce that they have been buying heavily in the gold market acquiring a hundred tons in the first quarter. That much gold is worth 4.6 billion USD or 53 billion pesos at current prices. That sounds like a lot of money but it’s only a little more than what we give the oil companies in subsidies every year, and Sarah Palin says that’s nothing (as long as you are giving it to the oil companies).

Palin declares that amount to be meager compared to the 14 trillion in debt and she points out that “President Obama had at least a hand in running that up”. She got surprisingly close to the truth compared to most Republicans who seem to think we had a balanced budget right up until Obama was elected.  The truth is of course that the debt was entirely run up by Republicans. Even Obama has been largely using the George Bush budget scheme as Obama’s budget never passed and the country has been cruising along on continuing budget resolutions and Bush’s tax rates.

The USD is close to all time lows having lost 10% since January compared to other major currencies. But this is not as big of a deal as one might assume, oil priced in Euros has been going up just as fast for example. Europe has its own problems thanks to including too many countries in the EU without keeping the smaller ones away from the ponzi schemes of Wall Street and the London bankers.

The problem in the US is that unlike most developed countries our rich people aren’t industrialists or even landed gentry, they maintain their lifestyles by shuffling paper around and selling our assets to the emerging empires like China. We would be far better off to just pay the bills of the wealthy class like Great Britain does with the Queen. Every time Donald Trump gets married we could throw a big party and have a parade. It only cost the Brits 36 million USD to marry off the Prince. Cheap compared to the 2 billion we give the oil companies. With 2 B we could throw 56 “royal” weddings a year, enough to keep the networks busy 24/7. Think of all the jobs that would create for us commoners.

All of this maybe moot as Intel announced today that they are going ahead with production of the biggest technological advancement since the transistor was invented.  I think they are being modest, this new technology will allow the production of 3-D computing chips. “Old fashioned” chips are designed in 2 dimensions which severely limits how many transistors can directly interact to approximately just ten to any one other transistor no matter how small you make them, which is insignificant compared to the connectivity of neurons in a brain.

This is why computers are just stupid sorting machines and the “artificial intelligence” portrayed by chess playing machines and Jeopardy winners has basically been a fraud. The ability to run through a database with millions of entries in a fraction of a second does not really make you intelligent, even the “smartest” algorithm is just a series of yes and no questions. Even many excellent human chess players are just as dumb as a box of rocks but are simply able to memorize 40-50 thousand relevant moves. That’s how a Grandmaster can play 50 people at a time but will lose to a 5th grader who doesn’t really know how to play because he does something unexpected.

At some point if enough transistors can be interconnected what you will see not artificial intelligence but real intelligence that can access all of the accumulated knowledge of the previous dominate life form in less than the blink of an eye. Will it treat us humanely? Better than that, I hope.

Monday, May 2, 2011

The voices in his head were preempted

Oil, gold and silver all dropped sharply in early Monday trading on the news of Obama’s victory but rose again on a sharp decline in the USD but that was reversed again in overnight trading in Asia. Yeah, things are unstable. Traders are unsure what to make of Obama. His success in taking down al Qaeda’s leader under the nose of the Pakistani military. They must have know he was hiding in their own gated retirement community and this kind of bold action indicates Obama is definitely not playing by the old rules.

Much of the strategy of world domination by the trans-national corporations had been built on the assumption that the war was never ending. The previous administration had made no attempt to eliminate their major “boogieman” but instead simply used Osama Bin Laden to further corporate interests. To keep up appearances they would occasionally kill that number three guy.  Obama has now done something completely unexpected, he kept his word.

This has to make certain interests wonder what other promised but unexpected things Obama might do in the future. The President now has the kind of political capital and international prestige that only the voices in George Bush’s head thought that he had. Donald Trump hears those same voices but his show was preempted for the real President.

Not that this means that we are out of the woods, we are so deep in the dark forest that the moss grows on all sides of the trees. But we now have a President willing to take risks and make them pay off. Helicopter raids are notoriously bad for a President if they go wrong (Carter + Iran hostages = Reagan). The safe bet would have been B-2 bombers but Obama put his political future second to the big payoff to the country. A confirmed kill, no civilian casualties and no Americans lost make all the right kind of headlines.

The question is how will Obama use all of this new capital? The markets seem to think he will use it for something.