Top 10 Wealth Quotes of 2011

From the WSJ's The Wealth Report blog:

Yale University just released its top 10 quotes of the year. The rich, as is their wont, held a disproportionate share of the top.

The number one, two and three quotes were all about the rich, or more specifically, about the anti-rich. They were, in order:

1. “We are the 99 percent.” — slogan of Occupy movement.

2. “There is nobody in this country who got rich on his own. Nobody. You built a factory out there — good for you! But I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because of police forces and fire forces that the rest of us paid for.” — U.S. Sen. candidate Elizabeth Warren, speaking in Andover, Mass., in August.

3. “My friends and I have been coddled long enough by a billionaire-friendly Congress.” — Billionaire Warren Buffett, in a New York Times op-ed on Aug. 15.

As a full-time Wealth Watcher, I spotted some other quotes that should rank right up there. And not all were anti-rich.

To round out the top 10, here are seven of  my favorites from this year’s Wealth Report:
4 – “He’s a wealthy man, a very wealthy man. If you have a half a million-dollar purchase from Tiffany’s, you’re not a middle-class American.” — Mitt Romney (who has a net worth of $160 million-plus on lesser millionaire Newt Gingrich)

5 – “Rather than assume that the wealthy are a monolithic, selfish and unfeeling lot who must be subjugated by the force of the state, set a tone that encourages people of good will to meet in the middle.” — Leon Cooperman, open letter to President Obama....MORE

Too Funny: Sometimes You Shouldn't Follow Gurus (MWW; HL; CTRP; CREE)

From GuruFocus:

Weekly Guru Bargains Highlights: MWW, HL, CTRP, LYG, CREE

Monster Worldwide Inc. (MWW): Down 23% Since Paul Tudor Jones Bought In the Quarter Ended on 2011-09-30

Paul Tudor Jones initiated holdings in Business Support Services company Monster Worldwide Inc. during the quarter ended 09/30/2011. His purchase prices were between $7.22 and $15.13, with an estimated average price of $10.2..

.
Hecla Mining Co. (HL): Down 26% Since George Soros Bought In the Quarter Ended on 2011-09-30

George Soros added to his holdings in Gold Mining company Hecla Mining Co. by 45.71% during the quarter ended 09/30/2011. His purchase prices were between $5.43 and $8.45, with an estimated average price of $7.51. Since then the prices of Hecla Mining Co. shares have declined by -26% from the estimated average. George Soros owned 83,200 shares of as of 09/30/2011....

Ctrip.com International Ltd. (CTRP): Down 41% Since Steven Cohen Bought In the Quarter Ended on 2011-09-30

Steven Cohen initiated holdings in Specialized Consumer Services company Ctrip.com International Ltd. during the quarter ended 09/30/2011. His purchase prices were between $32.7 and $46.75, with an estimated average price of $40.51. Since then the prices of Ctrip.com International Ltd. shares have declined by -41% from the estimated average. Steven Cohen owned 20,617 shares of as of 09/30/2011....MORE

The Smartest Sentence on Housing You'll Ever Read (and a real "What were we thinking?" chart)

From Global Macro Monitor:
History of Real Housing Prices

Wow!  This chart reprinted by The Atlantic brings flashbacks.

We recall showing the Robert Schiller chart to many of our friends warning of a massive bubble and potential economic collapse.  They wouldn’t hear any of it.  We luckily sold our ocean view house in late 2004/early 2005 and have been a happy renter every since.   Still too much hopium for a rebound in housing prices for a bottom, in our opinion.

The demand for housing is based primarily on the cost of the monthly mortgage payment, but interest rates have no where to go but up over the long term.   What does that say about the secular direction of home prices?   The boom that began in the early 1980′s coincided with interest rates in the high teens.

Maybe the Fed can generate another housing bubble, but the value of housing in a mature market should move with bond prices unless a large dislocation takes place such as the one we’re currently experiencing....MORE

(click here if chart is not observable)

Utility Biz Grudge Match Ahead of EPA Mercury Regs (CEG; CPN; EXC; FPL: PEG)

 As I said in yesterday's "Best Utilities Picks for New EPA Rules" (FE; GEN):

Very quietly one of the biggest changes in the American economic landscape is about to hit the electricity producing sector and by extension every business and consumer in America....

From E&E's Greenwire:
Power companies battle for edge ahead of EPA rule changes

GLEN BURNIE, Md. -- No matter how much electricity the Brandon Shores power plant generates, the air above its hulking brick smokestacks stays crystal clear.

Built at no small expense to dissipate emissions from two coal-burning boilers, the 700-foot stacks were capped with metal plates last year after the plant added $885 million worth of new pollution control equipment.

The smokestacks are now useless.

Paul Allen, the chief environmental officer at Constellation Energy Group, has a joke about the smokestacks: He calls them the plant's "hood ornaments." But to Constellation shareholders, it is no laughing matter.
Some utilities can pass along the cost of an upgrade with a charge on ratepayers' electric bills, but Constellation cannot. The company is a merchant producer, selling electricity to industrial customers and onto the grid serving most homes and businesses.

Having borrowed money to pay for equipment that was not required when the plant opened in 1984, Constellation must now recoup its investment by competing against plants that lack the same pollution controls. Some of those plants are in West Virginia or other parts of Appalachian coal country, and their emissions can travel all the way to this Baltimore suburb.

It is unfair, Allen said, and his company is lobbying for U.S. EPA to come out with strict new air pollution standards later this month.

"Are we urging the rest of the industry to do likewise? Yes, we are," he said.

Constellation's plight is common among power companies and is one of the biggest reasons for a grudge match in the utility industry over a new round of rules meant to carry out the Clean Air Act. Clawing for an advantage in competitive electricity markets, power companies are lobbying heavily to change the regulations, such as the toxic emissions standards that EPA says it will make final next week.

For years to come, how often Brandon Shores gets called upon to produce power, and how much money it makes for doing so, could be decided by what the Obama administration does this month.

Allen met with White House officials last month to make a last-minute pitch for the rules -- one of at least 12 meetings held so far at the Office of Management and Budget. Also in the room with Allen were executives from New Jersey-based PSEG, Chicago-based Exelon Corp., Houston-based Calpine Corp. and Florida NextEra Energy Inc., who pointed out that their power plants would largely comply with EPA's proposed pollution limits.

Constellation did not expect to be in this position....MORE

"How Unlucky is 25-Sigma?" (and a huge apology) GS; C; BST; UBS; MER

 Last week we posted "UPDATED--Barclays Hit With "Immense" Copper Trading Loss; 50 Sigma Move In Cancelled Aluminum Warrants (50-Sigma events don't happen)" with a link to the Dowd, Cotter, Humphrey and Woods paper "How Unlucky is 25-Sigma?".
The link was dead.
And we heard about it.
And heard about it.
I am so sorry.
I hate clicking a link and getting a 404.
Hate it.
Please accept our sincere apologies and this gift.
Here's the paper, this time via University College, Dublin, which I trust will be around for a while.

How Unlucky is 25-Sigma?
By
Kevin Dowd, John Cotter, Chris Humphrey and Margaret Woods§
March 24 2008

1. Introduction
One of the more memorable moments of last summer’s credit crunch came when the CFO of Goldman Sachs, David Viniar, announced in August that Goldman’s flagship GEO hedge fund had lost 27% of its value since the start of the year. As Mr. Viniar explained, “We were seeing things that were 25-standard deviation moves, several days in a row.”1 One commentator wryly noted:

That Viniar. What a comic. According to Goldman’s mathematical models, August, Year of Our Lord 2007, was a very special month. Things were happening that were only supposed to happen once in every 100,000 years. Either that … or Goldman’s models were wrong (Bonner, 2007b).

But sadly Goldman were not alone. In 2007 alone, massive losses were announced by Bear Stearns, UBS, Merrill Lynch and Citigroup, and then there were the earlier financial disasters – 1987, Daiwa, Barings, Long-Term Capital, the dotcoms, Russia, East Asia, and so on – and afterwards Société Générale and Bear Stearns again in early 2008, with rumours of more yet to come. Citi’s case was particularly interesting.

To quote from the same commentator:

Gary Crittenden, Citi’s chief financial officer, claimed … that the firm was simply a victim of unforeseen events. … No mention was made of the previous five years, when Citi was busily consolidating mortgage debt from people who weren’t going to repay … pronouncing it ‘investment grade’ … mongering it to its clients … and stuffing it into its own portfolio … while paying itself billions in fees and bonuses. No, according to the masters of the universe, downgrades by Moody’s and Fitch’s were completely unexpected … like the eruption of Vesuvius; even the gods were caught off guard.

Apparently, as of September 30th, Citigroup’s subprime portfolio was worth every penny of the $55 billion that Citi’s models said it was worth. Then, whoa, in came one of those 25-sigma events. Citi was whacked by a once-ina- blue-moon fat tail.

Who could have seen that coming? (Bonner, 2007c).
___________________________________________________________________________________
§ Dowd and Woods: Centre for Risk and Insurance Studies, Nottingham University Business School,
Jubilee Campus, Nottingham NG8 1BB, UK. Cotter: Centre for Financial Markets, School of Business,
University College Dublin, Carysfort Avenue, Blackrock, Co. Dublin, Ireland. Humphrey: School of
Accounting and Finance, University of Manchester, Crawford House, Oxford Road, Manchester M13
9PL, UK. Corresponding author: Kevin.Dowd@nottingham.ac.uk.
1 Reported in the Financial Times, August 13, 2007.

Be all this as it may, one thing is for sure: there are certainly a lot of very unlucky financial institutions around.

2. How Unlikely is a 25 sigma event?
The once-in-a-100,000 year figure was quoted in a number of places,2 and suggests that Goldman, Citi and so on must have been very unlucky indeed. But exactly how unlikely is a 25-sigma shock?3

To start with, lets assume that losses are normally distributed – assume that losses obey the classic bell curve – and ask the question: what is the probability of a loss that is, say, 2 standard deviations or more away from the mean, i.e., what is the probability of a 2-sigma loss event?

The answer is given in Figure 1: the probability associated with a 2 sigma event is equal to the mass of the right-hand tail of the distribution demarcated at the point where the number of standard deviations from the mean is equal to 2, and this is equal to 2.275%.4 We might therefore expect to see a 2-sigma loss event on one trading day out of 1/2.275%=43.956 days, i.e., on approximately 1 day out of 44 days.

A 2-sigma event is unlikely to occur on any given day, but we would expect to see a few of them in any given year.5

...MORE (8 page PDF)

First it Was the Swedish Butter Smugglers Now Black Market EU Eggs Could Land in England

A couple weeks ago, during the height of Norway's butter crisis, entrepreneurs from Sweden and Russia were getting the golden goodness across NATO's front lines. A quick look at blocket.se shows the number of ads by smör-runners (smør in Norwegian) has dropped off perhaps because they are chasing the next hot market.
From EU Referendum:

The picture above is no more in the UK. More than 80 million battery hen spaces have been upgraded as a result of EU law. Almost all British egg producers will be compliant with the law that comes into force on 1 January. Others are not.

Spain, France, Poland, amongst others – eight in total, including Belgium - are not ready, and will continue producing eggs from battery cages, despite having had 13 years to prepare for the new law, one which introduces standards the British would have adopted, with or without the EU.

This, says the Independent, has led to fears that cheaper, illegal eggs from the Continent will flood into UK wholesalers, manufacturers and caterers – undercutting British egg producers, who say they feel "let down" by the Government's refusal to unilaterally ban eggs from non-compliant EU states....MORE

The wary reader may think we are feigning interest in the butter and egg biz but would be mistaken.
See:
Mix Butter, Onions, Cheese and Eggs. Add Electricity...

For some reason, this post from Freakonomics got me thinking about the Chicago Butter and Egg board, the Butter, Cheese, and Egg Exchange of New York and Title 7, Ch. 1, § 13–1 U.S. Code*... 

"Chart of the Day: Real Egg Prices, 1890-2011"

Egg Decorating

THE RENAISSANCE EGG: A FABERGÉ IMPERIAL EASTER EGG PRESENTED BY EMPEROR ALEXANDER III TO HIS WIFE THE EMPRESS MARIA FEODOROVNA AT EASTER 1894,WORKMASTER MICHAEL PERCHIN, ST. PETERSBURG
From Treasures of Imperial Russia

The Coming Productivity Shock

From EconoMonitor:

The Real Negative Real Shock

Are all the problems in the U.S. economy nominal? Robert Gordon implicitly says no in a new paper on the long-run outlook for U.S. productivity (hat tip Reihan Salam). He makes the case that rapid productivity gains from 1995-2005 will not persist going forward:

The 20‐year period 1987‐2007 combines the inexplicably slow productivity growth of 1987‐95, the temporarily ebullient period 1995‐2000, and the interesting 2000‐07 period that in some dimensions looks like more normal behavior. The seven years between 2000:Q4 and 2007:Q4 were neatly divided in half, with extremely rapid productivity growth between 2000:Q4 and 2004:Q2 (2.68 percent), and much slower growth from 2004:Q2 to 2007:Q4 (1.36 percent), averaging out to 2.02 percent for the seven‐year interval. As argued above the productivity growth “explosion” of 2001‐04 rested on a combination of savage corporate cost cutting and delayed learning from the internet revolution. Once profits had recovered the pressure for cost cutting disappeared, and eventually the delayed learning subsided as well.
[...]
The paper approaches the task of forecasting 20 years into the future by extracting relevant precedents from the growth in labor productivity and in MFP over the last seven years, the last 20 years, and the last 116 years. Its conclusion is that over the next 20 years (2007-2027) growth in real GDP will be 2.4 percent (the same as in 2000‐07), growth in total economy labor productivity will be 1.7 percent…

So over the next two decades Robert Gordon sees labor productivity growing at annual average rate of 1.7% compared to about 2.5% for 1995-2004. If his view is widely held then that means firms will expect lower returns to investment and household will expect lower incomes. Such lower expectations, in turn, would translate into lower investment and consumer demand today. This, then, may account for some of the prolonged slump....MORE

United-ICAP's Walter Zimmerman: "S&P to 579.57"

Back in September 2008 Mr. Zimmerman's Bullish case (recession) had the S&P dropping to 791 by May 2010, his Bearish case (depression) was S&P 307 by November 2011 a nice bracket of the March 6, 2009 intraday low of 666.79, although off on the duration (thank goodness). Pages 64-65 of 68 page PDF.

United Energy-ICAP is one of the largest inter-dealer brokers in the world, something like $1.5Trillion (T!) per day. 
 
From MarketBeat

United-ICAP senior technical analyst Walter Zimmerman says the S&P 500 could rally a little further into January before beginning a “traumatic decline” for the rest of 2012, dragged down by weakness in Europe.
How traumatic? You might want to sit down for this one.

He thinks the index will reach its 2012 peak in the 1293-1311 zone, then start a “sharp and sustained drop” until December. His downside target is around 579.57.

579.57! The index would have to wipe out the March 2009 lows and fall by more than 50% current levels to reach that target. And the last time the S&P 500 traded below 600 was in the mid 1990s, when the Backstreet Boys burst on the scene and bell-bottom jeans were making a comeback....MORE

The S&P closed at 1265 yesterday. Here's the CNBC video:




Back in July we announced the running of our inaugural Gloomster Stakes:
Coming into the Far Turn Russell Napier and Albert Edwards Lead the Gloomster Stakes But Felix Zulauf is Making a Move With an S&P at 500 Prediction

Napier is at 400
Albert says 450
Bob Janjuah trails at 550...
...Zulauf at 500...

As you see, Mr. Zimmerman faces some stiff competition as his number is higher even than that of Nomura's Mr. Sunshine, Bob 'the bear" Janjuah.

"Japan's Secret Plan to Dominate the World"

Just as one of my mentors used to watch loading docks to spot accounting frauds and the IRS checks water bills to detect tax non-compliance at laundromats, electricity output is one of those simple, basic things that tell a truth that some might prefer to keep hidden.
From Mother Jones:

And now for something completely different. The Counterparties blog today highlights an old post from Eamonn Fingleton arguing that Japan's "Lost Decade" is a myth. This is not the story I've heard before, suggesting merely that Japan has done pretty well considering its demographic problems. Not at all. This story suggests that Japan is just flat out lying about its economic growth. For example, here's a piece of data from Fingleton's blog:

In 2007 it was discovered that the long-term record in electricity output completely gainsaid the “lost decades” story. Adjusted to a per-capita basis, the figures showed that Japan’s electricity output in the 1990s rose 2.7 times faster than America’s!....Electricity output is widely accepted as an impartial, culture-neutral proxy for economic growth and it is indeed relied on by international organizations such as the IMF and World Bank when a government may not be following international accounting standards in calculating GDP growth.

Fascinating! But why is Japan supposedly lying about its economic growth?

For those who know Japanese history, a clue lies in trade policy. The fact is that, constantly since the 1870s (with the exception of a brief interlude in the late 1930s and early 1940s), Japan's pre-eminent policy objective has been to keep ramping up exports. That policy came very close to derailment in the late 1980s as a groundswell of opposition built up in the West. By the early 1990s, however, the opposition had largely evaporated as news of the crash led Western policymakers to pity rather than fear the "humbled juggernaut." It is a short jump from this to the conclusion that Japanese officials have decided to put a negative spin on much of the economic news ever since.

What is undeniable is that just as corporate executives enjoy great latitude to juggle their profits up or down for different disclosure purposes (generally up for shareholders, and almost invariably down for the Internal Revenue Service), government officials enjoy even greater latitude to vary a nation's ostensible growth rate....MORE

British Treasury Planning for Full-blown Euro Break-up

They are just gaming the contingency, not 'planning' for it.
From the Telegraph:

 
A break up of the euro would have a devastating impact on the UK. HSBC economists have warned that it could 
trigger a global depression. 

The Treasury is working on contingency plans for the disintegration of the single currency that include capital controls.

The preparations are being made only for a worst-case scenario and would run alongside similar limited capital controls across Europe, imposed to reduce the economic fall-out of a break-up and to ease the transition to new currencies.

Officials fear that if one member state left the euro, investors in both that country and other vulnerable eurozone nations would transfer their funds to safe havens abroad. Capital flight from weak euro nations to the UK would drive up sterling, dealing a devastating blow to the Government’s plans to rebalance the economy towards exports.

Earlier this year, Switzerland was forced to peg its currency to the euro to protect the economy after a massive appreciation in the Swiss franc due to spiralling fears over Europe.

The plans emerged as Spain’s new finance minister Luis de Guindos warned the country’s economy was set for negative growth in the last quarter.

Speaking yesterday he warned the next two months “are not going to be easy”.

Britain’s response to a euro meltdown would reflect measures taken by Argentina when it dropped the dollar peg in 2002 and by Czechoslovakia after the country broke in two in 1993, according to sources. Faced with a massive capital inflow, the Czech Republic temporarily imposed taxes on foreign inflows to banks and capped the amount of overseas credit domestic banks could use....MORE

"Best Utilities Picks for New EPA Rules" (FE; GEN)

Very quietly one of the biggest changes in the American economic landscape is about to hit the electricity producing sector and by extension every business and consumer in America.
We will have a lot to say as implementation nears.

From Barron's Investors Soapbox A.M.:
Credit Suisse likes Southern, American Electric and others.
Credit Suisse

The Environmental Protection Agency's finalization of the Toxics Rule (now Mercury and Air Toxics Standards) will, in our opinion, lead to significant coal-plant closures and investment to retrofit/replace emitting plants, helping to rebalance power market supply-demand fundamentals.

We see the rule broadly consistent with our expectations in Growth From Subtraction (Sept. 23, 2010) that favored Competitive Generators with cleaner fleets in dirtier markets (PJM [regional transmission organization] in the West, MISO [another RTO] in the East) and Regulated Utilities that will accelerate rate-base growth with capital expenditures to bring fleets into compliance.

We still see the biggest prospective beneficiaries from the new rules as FirstEnergy (ticker: FE) and GenOn Energy (GEN) with higher-capacity prices; for Regulated Utilities we will wait for capital-expenditures updates although large-cap opportunity could be in Southern Co. (SO) and American Electric Power (AEP). Catalyst-wise, watch for updated capital expenditure/closure plans and the May 2012 reliability pricing model (RPM) capacity auction. We think the final rule made life a little easier for generators but not to the point of substantively changing the structural impact on coal-generation.

We remain comfortable with our original base estimate of 60 gigawatts (GW) of U.S. coal-plant closures and could see the number go higher considering the awful relative economics of running a coal plant versus gas at forward curves....MORE

"Dow Reverse Head and Shoulders" (DIA)

From Bespoke Investment Group:

On Friday, the Dow Jones Industrial Average broke and closed above key resistance.  As shown below, the index broke above the neckline of a reverse head and shoulders pattern, which is a bullish technical formation.  This opens up quite a bit of upside room to run before any new resistance levels come into play for the Dow.

"Brazil Replaces UK As World’s 6th Largest Economy"

A quick hit from the International Business Times:

In what is likely a changing of the guard in the global economic landscape, the surging economy of Brazil has supplanted the United Kingdom as the world’s sixth largest economy, according to The Centre for Economics and Business Research (CEBR).

CEBR chief executive Douglas McWilliams spoke to BBC about the rise of Brazil and decline of Britain as part of a larger and ongoing trend.

"I think it's part of the big economic change, where not only are we seeing a shift from the west to the east, but we're also seeing that countries that produce vital commodities -- food and energy and things like that - are doing very well and they're gradually climbing up the economic league table," he said....MORE

And from the BBC:

....And it said European countries would drop down the table, with Germany falling from fourth in 2011 to seventh in 2020, the UK from seventh to eighth, and France from fifth to ninth.

CEBR World Economic League Table
Rank	2011	2020 (forecast)
1	US	US
2	China	China
3	Japan	Japan
4	Germany	Russia
5	France	India
6	Brazil	Brazil
7	UK	Germany
8	Italy	UK
9	Russia	France
10	India	Italy

"Will 2012 Be The Next '1932' for the Wealthy?"

From the Wall Street Journal's Wealth Report blog:

For the American wealthy, the year 1932 always conjures The Nightmare Scenario.

It was the year of reckoning both financially and politically.

After the 1929 crash and anemic recovery, American voters rose up in a wave of populist anger and sought to bring down the powerful cartels and plutocrats that they blamed for the country’s ills. Labor unrest was rife. In 1932, thousands of war veterans marched on Washington to demand their promised cash bonuses.
The year 1932 was the year Huey Long, “The Kingfish,” became a U.S. senator and launched his “Share Our Wealth” crusade, announcing that 4% of the American people own 85% of America’s wealth. (Today it’s closer to 60%). Long proclaimed, Michael Moore-like,  that new limits had to be placed on the nation’s millionaires and billionaires:

“Giv’em a yacht! Giv’em a Palace! Send ‘em to Reno and give them a new wife when they want it, if that’s what they want. [Laughter] But when they’ve got everything on God’s loving earth that they can eat and they can wear and they can live in, and all that their children can live in and wear and eat, and all of their children’s children can use, then we’ve got to call Mr. Morgan and Mr. Mellon and Mr. Rockefeller back and say, come back here, put that stuff back on this table here that you took away from here that you don’t need. Leave something else for the American people to consume.”

The same year, FDR was elected President and pushed through a tax increase on the wealthy that included a hike in the top rate to 63% from 35%.

The year 1932 was also the year that many of the wealthy recorded their biggest losses, as the “false bottoms” of 1930 and 1931 finally caved. In 1929, there were 413 Americans earning more than $1 million a year. In 1932, there were only 20, marking a 95% decline.

It was, in short, the annus horribilis for the American rich – both politically and financially.

Will 2012 mark a replay? It’s unlikely in politics, but financially, anything is possible....MORE 

MERRY CHRISTMAS!

First posted Christmas Eve, 2007.

Santa's Carbon Footprint

MERRY CHRISTMAS

 
Ho Ho Ho!

Santa may have one of the biggest carbon footprints of an individual, anywhere in the world, even greater than that of Al Gore....

...MORE

Back on Tuesday.

Dear Paul Krugman: "Food prices will continue to rise in 2012, says USDA"

Yeah, I got your four year smoothing right here, Professor.
From the Los Angeles Times' Money & Co. blog:

Get ready for more high food prices going into 2012 –- the USDA is projecting that next year will bring an overall spike of 2.5% to 3.5%.

That’s less than the 3.25% to 3.75% boost that the Department of Agriculture is projecting for 2011. High commodity and energy prices along with soaring demand for food pushed up the value of items including ice cream, lettuce and bread.

Grocery store shoppers this year watched prices rise as much as 4.75% while diners in restaurants saw menu prices go up as much as 2.5%, with a surge near the end of the year.

As of last month, beef prices were up 9.8% compared with the same month last year. Pork prices were up 6.9% and poultry was 3% higher. With fewer fertile hens around, egg prices were 10.2% higher; dairy was up 8.7%....MORE

If I were a conspiracy theorist I'd say there is a concerted effort to crush the middle-class with inflation in the things they buy daily (food, fuel), while things bought longer term (iPads etc.) decrease in price.

That said I don't think I'd use the word "spike" in the first sentence.

Judiciary Ranking Member Grassley, 16 Others Push for 'Exhaustive' Investigation into MF Global Failure

You don't want to screw around with the farmers, most every one I've ever met can plink a varmint at 500 yards.
From The Hill's Floor Action blog:

Senate Judiciary Committee ranking member Chuck Grassley (R-Iowa), along with a bipartisan group of 16 other senators, called on Attorney General Eric Holder this week to conduct a "comprehensive and exhaustive investigation" into the "potentially illegal misappropriation of funds" from MF Global customers.

"If the Department's ongoing investigation uncovers illegal actions, criminal prosecution should be pursued without hesitation," the senators wrote to Holder on Wednesday. "In order to get to the bottom of this, we urge federal agents to use every legal resource available."

The letter added that the bankruptcy of MF Global is posing the risk that thousands of farmers and other Americans stand to lose money in their accounts, even though federal rules require collateral to be held in customer segregated accounts.

"If credible evidence of illegalities is found by the investigation, significant resources should be utilized to prosecute those responsible," the letter said....MORE

My Nomination for Hat Tip of the Year

This one required a shout to the tech guy to see if he could save the keyboard.

...The reg cap advantage, which the above also benefits from, will now be discussed below, using a different trade — one that the Basel letter hinted at.

Trade #2 – The reg cap optimiser, aka “deathstar” (H/T Enron)

From FT Alphaville's More Angry Birds, less regulatory arbitrage, please

War Drums: "U.S. District Court Rules Iran Behind 9/11 Attacks"

A press release from the Mellon Webster & Shelly law firm:

NEW YORK, Dec. 23, 2011 /PRNewswire-USNewswire/ -- A federal district court in Manhattan yesterday entered a historic ruling that reveals new facts about Iran's support of al Qaeda in the 9/11 attacks.  U.S. District Judge George B. Daniels ruled yesterday that Iran and Hezbollah materially and directly supported al Qaeda in the September 11, 2001 attacks and are legally responsible for damages to hundreds of family members of 9/11 victims who are plaintiffs in the case. 

Judge Daniels had announced his ruling in Havlish, et al. v. bin Laden, et al., in open court on Thursday, December 15, 2011, following a three-hour courtroom presentation by the families' attorneys.  Judge Daniels entered a written Order of Judgment yesterday backed by 53 pages of detailed Findings of Fact and Conclusions of Law.
 
Fiona Havlish, whose husband Donald perished in the World Trade Center North Tower on 9/11 said, "This is a historic day.  For ten years we've wanted the truth to be known about who was responsible for our losses.  Now we have that answer."

Ellen Saracini, the wife of United Airlines 175 pilot Victor Saracini, which the hijackers crashed into the WTC South Tower, said after the hearing last Thursday, "We just came from Judge Daniels' court where he ruled in favor of holding accountable those who perpetrated the attacks of 9/11... I just smiled up to Victor and I said we're still thinking about you ... we're there for you ... we'll always be there for you.  But today's very special."

In Havlish, et al. v. bin Laden, et al., Judge Daniels held that the Islamic Republic of Iran, its Supreme Leader Ayatollah Ali Hosseini Khamenei, former Iranian president Ali Akbar Hashemi Rafsanjani, and Iran's agencies and instrumentalities, including, among others, the Iranian Revolutionary Guard Corps ("IRGC"), the Iranian Ministry of Intelligence and Security ("MOIS"), and Iran's terrorist proxy Hezbollah, all materially aided and supported al Qaeda before and after 9/11....MORE

"Are We Ready for a Future of Abundance?"

From Big Think:
Transcript

Tom Stewart: 10 years ago, I think, our, in many cases, mutual friend, Paul Saffo, told me, it was more than that, it was 15, said that, called the internet a “full employment act for entrepreneurs.”  I think you could now say, you could use that phrase again about the cloud and mobility, you could say, these are also new opportunities for a full employment act for entrepreneurs.

But the question is, as we see the rollout of technologies and also as we see the continued story of globalization, and like the internet, you know, globalization is a 25-year-old story and you ain’t seen nothing yet, as we see these rollout, are we seeing more, in the business of the future, are we going to see large companies?  Will large companies still play as big a roll in the business eco system that they do now?  Or will we see many more small companies networked together?  Is it a big company future or a small company future?

Michael Schrage:  The answer to that question, of course, is yes, but I think that you framed it in exactly the wrong way.  Because you’re going to have very large companies that don’t employ a fraction of the people that large companies employed in the year 2000.

Tom Stewart:  So sales huge, employment small?

Michael Schrage:  The revenue to employee ratio is going to be transformed because of the brilliant innovations from people like SAP and the entrepreneurs represented here.  And the one other area where I’m going to disagree with Professor Kaku is, you know, you can’t mass produce minds.  Forgive me, but my serious academic background was AI.  You know?  And if there’s anything that we’re focusing on, it’s the ability to algorithm-ize, to use technology as a vehicle to either leverage individual minds or to usefully and cost-effectively automate or augment how people make decisions and how people create.  So the economics are being transformed for this and I think it’s going to be a very interesting challenge how people are going to find jobs.  I don’t know what the answer to that is, but I know what the answer is not.  The answer is not four years in college.

Tom Stewart:  I’m going ask… I’m going to pick a little quarrel with the word jobs, because I think that may be the model that doesn’t work.

Michael Schrage: Oh, I thought you meant Steve Jobs, sorry.

Tom Stewart:  No, one never picks a quarrel with him.  But it may just be that the idea that a, for those of us who are Americans, the idea that the choice between a W2 and a W9 may just become a different choice, in terms of how you add value.  But, yes?

Michio Kaku:  I must disagree with my esteemed colleague here.  First of all, let me say that science is the engine of prosperity.  From steam power to electricity, to the laser, to the transistor, to the computer—

Michael Schrage: That’s science, that’s not true, we’re talking about technology.

Michio Kaku:  Hey, can I have my—you had your say, let me have my say.  However, the information revolution has a weakness, and the weakness is precisely the educational system.  The United States has the worst educational system known to science.  Our graduates compete regularly at the level of third world countries.  So how come the scientific establishment of the United States doesn’t collapse?  If we’re producing a generation of dummies, if the stupid index of America keeps rising every year, just watch network television and reality shows, right?  How come the scientific establishment of the United States doesn’t collapse?  Let me tell you something.  Some of you may not know this.  America has a secret weapon.  That secret weapon is the H1B.  Without the H1B, the scientific establishment of this country would collapse.  Forget about Google!  Forget about Silicon Valley!  There would be no Silicon Valley without the H1B.  And you know what the H1B is?  It’s the genius visa.  Okay?  You realize that in the United States, 50% of all PhD candidates are foreign born.  At my system, one of the biggest in the United States, 100% of the PhD candidates are foreign born.  The United States is a magnet sucking up all the brains of the world, but now the brains are going back.  They’re going back to China; they’re going back to India.  And people are saying, “Oh, my God, there’s a Silicon Valley in India now!”  “Oh, my God, there’s a Silicon Valley in China!”  Duh!  Where did it come from?  It came from the United States.  So don’t tell me that science isn’t the engine of prosperity.  You remove the H1B visa and you collapse the economy....MORE, including video.

Meanwhile, over at ZeroHedge:
Guest Post: Risk And The Indentured Servitude Of Student Loans

Submitted by Charles Hugh Smith from Of Two Minds
Risk And The Indentured Servitude Of Student Loans

Students stuck with gargantuan loans for life are bound in a bank-dominated "improvement" of indentured servitude.

Yesterday (Risk is Necessary for Adaptation, Innovation and Success) I discussed the inevitable failure of systems in which risk has been transferred from those who reap the gain to others. In the case of student loans, the risk has been transferred to students who enter decades of indentured servitude.
Indentured servitude has a long history in the U.S.; many immigrants accepted servitude of between two and seven years in exchange for passage to the New World. Orphans were indentured out of orphanages to the age of 21--potentially a much longer servitude. Indeed, the labor of anyone on the public dole could be auctioned off:
From Wilma A. Dunaway's Online Archive:

By the time of the Revolutionary War, indentured servitude had been a common practice in the United States for 150 years.

Following British laws established during the colonial period, post-Revolutionary public authorities indentured the labor of those who were likely to fall upon the public dole. Appalachian county governments bound out indigent adults and children whose families could no longer care for them. The age, gender, and racial trends are clearly documented in early records of Appalachian poor houses, for women and orphans represented more than two-thirds of the individuals whose labor was auctioned off by county governments.

Isaac Miller of Anderson County, Tennessee, advertised in 1819 for the return of Margaret Hutcheson who had been bound to him by the county poor house. Obviously, the seventeen-year-old girl had tried the patience of her master, for he offered only "a reward of 6 1/4 cents to the person who w[ould] deliver her to [him]," caustically adding, "but I will not thank any person for doing so."

When an orphan was bound out by the county poor house, the child was legally tied to the master until the age of eighteen or twenty-one.

Orphans were often bound to tradesmen or farmers until age 21, and indigent adults were typically bound for three to seven years. However, there is no way to document how many laborers were bound out by their own families. When parents indentured their own children, it was for "a usual term of seven years if a girl, or five if a boy."

Let us consider the modern form of indentured servitude, student loans, which now exceed a staggering $1 Trillion: "It's Going To Create A Generation Of Wage Slavery" (Zero Hedge), or perhaps more accurately, indentured servitude, because the debt cannot be dismissed via bankruptcy....MORE