Wednesday, February 29, 2012

Forgive Me Father For I Have Sinned

Forgive me Father for it has been ten days since my last confession and I have sinned with abundant obdurance in the interim. William Buckley's avid glean could not foresee my speculating as hubris having  envisaged the fall of the BRICs equity markets. The spring's fate air is upon us and so is the rapid precipice of the Nasdaq; the technology sell off is upon us. If you believe in the efficient market hypothesis the determined dip of tech should not be timed with the cherry blossom festival year after year, but since studying market data since 1982, it happens year after year with the tick of my patek phillip. My layman assumption is in fact that product renewal and advanced inventory upgrades are generally featured towards the end of the fourth quarter and these sales figures trickle into the next year's business cycle. By the spring however, the cache of a christmas state of the art macbook has dispersed and everyone is awaiting until the release of the next iPhone, say late summer early fall to incite the next plebiscite yah or nay. Could it also be as Tom Brokaw referred to in his " The greatest generation" a 'mass exodus' to the outdoors with the smell of barbecue jamborees and burned rubber on the asphalt cajoling the would be 1080p flat screen channel surfers and computer virtuosos to partake in the majesty of the outdoors. We all know gas prices will rise and continue to stay high during the peak travel months of late spring and summer however...... more to come

Friday, February 17, 2012

Keynesian Economics 101

"If you put two economists in a room, you get two opinions, unless one of them is Lord Keynes, in which case you get three,"- Winston Churchill

Such a remark often attributed to Winston Churchill was met by Manyard Keynes with the stout academic reply of " When the facts change, I change my mind. What do you, sir?". Without historical contextualization my point is without merit as the ability to change one's mind by my estimation highlights intelligence not ignorance. The year is 1931 the place is London, England and Keynes has just published his famed denouncement of the Treaty of Versailles entitles Treatise.  Nominal interest rates are high and prices on consumers goods are low and unemployment is over 20 percent. Keynes publicly encouraged mother's, daughters, and wives to spend and was pushing a public works program to lower unemployment.  Treasury Chancellor Philip Snowden in response wrote a memorandum illustrating how "continued state borrowing on the present scale without provision for repayment....would quickly call into  question the stability of the British financial system." Ergo, the fear that continued spending by the British government without repayment would echo fears throughout the already debt ridden super powers of Europe that the English government would renege on its debts prompting a run on the pound sterling.

Having read the memorandum Keynes made an about-face opting for temporary import levies to gain capital.  Citing Hayek's criticism's of Keynes, Hayek could not accept Keynes believe that the divergence between investment and savings was that it adversely affected the stability of prices. As a corollary Keynes naturally would insist upon public works 'investments and an increase in household spending to promote inflationary price measures that would in the short term trigger employment opportunities. Introducing Knut Wicksell's thesis from The Influence of the Rate of Interest on Prices I believe illustrates there is no finite answer to such an economic problems as they fluctuate like the ebb and flow of the tides. However, the noble and sensible gentleman would ascertain from Keynes capricious calls to action in the mist of Hyper inflation in Germany and Austria and the stock market crash of 1929 that his doctrine is not ingrained in stone. Keynes believed it was the duty of the government to assist its people in a time of crisis, a crisis that not only affects the individual and company, but a sovereign's solvency. To allow the free market to correct itself to Keynes politically would be peripatetic in that the free market would inadvertently be directing fiscal and monetary policy as opposed to the other way around. Therefore in a democracy, autocracy, or totalitarian regime, the natural rate of interest has the power unless reeled in by the government to shift power from the public sector to the private. According to Wicksell's thesis:

            "   The thesis which I humbly submit to criticism is this. If, other things remaining the same, the                   leading banks of the world were to lower their rate of interest, say 1 per cent. below its ordinary level, and keep it so for some years, then the prices of all commodities would rise and rise and rise without any limit whatever; on the contrary, if the leading banks were toraise their rate of interest, say 1 per cent. above its normal level, and keep it so for some years, then all prices would fall and fall and fall without any limit except Zero."

Point being the economic retracement to equilibrium in interest vs prices takes longer in the free market economy than through a central bank in establishing market rates. Based soley on the natural rate of interests yield to maturity curve, the angles of elevation in depression visa vie short and long term holdings would present much steeper inclines and declines and shorter periods of inelasticity....Thoughts so far? 

Thursday, February 9, 2012

Pay for your Postal Service America

USPS lost 3.3 billion dollars in the fourth quarter ending in December. With Thanksgiving, Ramadan, Hanukah, Christmas, Kwanza, my birthday, your sister's birthday, generous uncles and aunts etc this is supposed to be the most profitable time of year. As a government sponsored enterprise it does not receive tax payer money rather, it is sponsored visa vie the treasury and has reached its 15 billion dollar borrowing limit the past 5 fiscal annual cycles. Ironically, its annual lose of 14.1 billion is equal to this 'donation'; 'donation' because  GSE's are not required to pay back their debt, if they fail the U.S. buys back their debt raises taxes and issues more treasury bonds.

Never mind the 220,000 jobs USPS wants to cut, nearly 12 percent of its infrastructure; why aren't we paying for the mail we take for granted. If we want to use the service it should be taxed; if we don't, suffice it to say $7.70 for Fedex seems like an awful high price just to send a letter to my grandmother alerting her of her new assisted living center accommodations. Lets cut the mail off on Saturdays, include tax provisions for letters, effectively end priority first class mail in the sense of overnight or faster delivery, and just make the USPS for nonchalant no hassle package/envelope delivery. Leave the important stuff to UPS and FEDEX. Privatizing the U.S. mail service would make sense but then again I am far too worried about monopolization and or collusion amongst the mail service providers of what is effectively a corollary to freedom of expression. If someone controls the delivery of the message at cost, would that subject someone to rethinking sending a letter of dissension to their local Senator or Congressman. The very liberties we take for granted are founded on the basis of the free mail service; with a postmaster at the helm to guard and ensure the safe delivery of our secrets, our declarations, our fated last words. I must insist a tax premium be included for mail service; I do not care for any more privatization mixed with government regulation.

Wednesday, February 8, 2012

Ode to Gillian

Art thy without, am I not longing
You see but you know not my fawning desire
To break the bridge and light the fire
Like Mr. Blake's Tiger I am Yearning
For in the forests of the night I am Burning
I see the stars, I see HIM, He teaches me and I am learning

Upon this rock I build my church, with my hands alone
Learned for all to see my futures threads are sown
doth my beauty protests a syncope's ischemia
The ibid is no more; my legs result not from bulimia
Polaris gilded in white silk lines my path
My morrow's dawn blindingly bright
To those who doubted I bid you a farewell goodnight.

Wednesday, February 1, 2012

FCFF and Market Cap

Free cash flow and free cash flow to the firm are important for large cap companies but are not important for say a intellectual property firm. Furthermore, the IRR is greater as the overall required market return grows.  For example an oil company relative to Carrier Air Conditioners whose prospective growth rate does not achieve the same manifest destiny clause as a private oil firm such as Exxon Mobile. Furthermore, the relative carried debt of a firm is difficult to distinguish particularly in terms of its proprietary trading habits, Nota Buena Vockler Rule.........