Tuesday, August 21, 2012

The Math Doesn't Lie

I realize we live in a new world economy. One ruled by the Ivy league MBA, smartest in the room, set, who, full of arrogance, hubris and the next bonus cheque have created this financial Frankenstein that refuses to end. I understand that in this new fangled era of financial alchemy, schemery and chicanery lead can not only be turned into gold, but once you done so and sell it to the Sisters of the Covenant pension fund you can keep your bonus and avoid prosecution when the truth is revealed. Now this can only be accomplished if you possess that Ivy league MBA or have been a guest on CNBC because if you have, you simply cannot be a hack (Jim Cramer's conclusion not mine) or a thief.

In this new era ponzi,  old economic indicators like employment, income per capita, debt, net cash and other meaningful indicators mean little. Why would anyone waste the benefits of said MBA analyzing say shipping rates or container rates when you can spend your day buying the dip, writing an algorithm or gaming the central banks.

Now in keeping up appearances you go to conferences and tell wealthy institutions and individuals that you focus on tried and true financial ratios and fundamentals to help with your asset class selection and allocation but you really don't. I mean, David Tepper told us all on CNBC that "investing is easy" right? So why all the claims of investigation and analysis or to quote Lt. Daniel Kaffee questioning Col. Nathan Jessup in the movie A Few Good Men;  "If you gave an order that Santiago wasn't to be touched, and your orders are always followed, then why would he be in danger, why would it be necessary to transfer him off the base?"

If its so easy, why all the research and analysis?

Well in the non-ponzi real world 2+2=4 whether you matriculated at Harvard, MIT, Insead or the local Community College. It equals 4 no matter whether your net worth is $1,000, $1 million or $1 billion. It equals 4 whether you are a Libor rigging CEO, a customer fund stealing former Governor, or a corner hot dog vendor.

Speaking of the real world have you had a look at the Baltic Dry Index, which you can view here, lately? You should. is in free fall. The Telegraph had a piece last week World Shipping Crisis Threatens German Dominance as Greeks Win Long Game. There's a couple of choice real world quotes from the piece;

"Britain’s oldest shipowner, Stephenson Clark, dating back to 1730,went into liquidation last week." 
 
"Container volumes arriving at European ports plunged in June, dashing expectations of a summer rebound. Imports fell 7.5% from North America and 9% from Asia. Flows into the Mediterranean region crashed by 16%."

Not enough? Check out this 'real world' quote form Martin Smith of ship operators Norddeutsche Vermögen in Hamburg. 

"The market is barely paying above operating cost. If you are loaded with debt, you are in trouble,” 

Now there's a novel concept, loaded with debt = trouble and here I thought, via the smartest in the room because they keep telling us over and over again, that more debt will solve a global debt problem. Remember now, its all an issue of liquidity not solvency! Too funny.


"Commerzbank – the world’s second-biggest provider of ship finance, and reluctant owner of a flotilla of foreclosed ships – said it is shutting down its €20bn (£15.7bn) ship funding operations entirely to “minimise risk and capital lock-up”"


Nice. Seems like banking stupidity wasn't confined to liar, Ninja, fog a mirror you qualify real estate loans. Those genius bankers really spread the stupidity evenly. At least they repossessed the vessels which more than I can say for all our lovely banks here playing the delay and pray, extend and pretend game with their notes. I love the author's (Evans-Pritchard) comment in the piece about how forcing banks to raise capital too fast and too soon can choke lending to the real economy.

Really? Sounds to me like cutting off a crack addicted junkie, but alas we are all accustomed to 24/7 extortionist propaganda fed to us by the banks and their paid media stooges, that we need the banks, Armageddon comes if we let any fail blah, blah, blah. 

The only good part of all this is no matter what the smartest in the room and their brainless stooges concoct and foist upon us, the laws of mathematics are immutable. Or as Ayn Rand once said;

" You can avoid reality, but you cannot avoid the consequences of avoiding reality."


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