Michael B. Krause

A Curious Call from Societe Generale

These analysts all missed the boat when the S&P was at 1500. Why should they be any more credible when the S&P is nearly half that?

There is no obvious visibility for a while, but that's where opportunity comes. The illusion of visibility is always precisely that in markets. Crude oil at 147, inflation, and record commodities demand were the offering of 'visibility' early-mid 2008. How deceiving was that...? Take a look at my latest article. It addresses the character of these frequent(ly wrong) paradigm shifts.

Time To Short Treasuries?

I agree TBT will eventually be a good long (and I am holding some), but lets get real - 30 yr is only up around 20% from the baseline its recently found. That isn't exactly a bubble in comparison to the 300-600% gains in your other charts. I want to buy more TBT going forward ... I will be buying at 25, then 15.... When TBT hits 15-25, then I think we can all agree it is a bubble by all definitions.

Regardless, a great inflation hedge to buy the TBT!

Rhodium: The Ultimate Reflationary Trade

You can procure it from some Jewelry stores as a powder or you can obtain a position in it from Kitco via their pool accounts.

Paulson's Plan Fails to Understand the Problem; Madoff Is a Perfect Example

The baby boomers leave the young generation no choice but to (hyper)inflate. By reducing the boomers' debts in real terms, problem solved, banks suddenly are solvent. Unfortunately, the poor retirees who weren't in on the ponzi scheme will be kicking and screaming as their buying power goes to nothing. How sad.

Natural Gas Transportation Is a Win-Win Technology

While on the margin we are good on natural gas supplies, you conveniently leave out of the detail that the recent surplus in natural gas is caused by wells that have extremely rapid decline rates (shale) and only satiate our need for the near term (5 years). Rapidly, the marginal cost of production on nat gas will skyrocket and make natural gas an untenable long term *primary* alternate transportation fuel.

You can't build a long term fuel infrastructure based on that model, considering we already so heavily depend on it for industrial uses that tend to like fossil inputs, and home heating which is much the same.

Natural gas looks good because it is cheap now, but unlike crude, we actually can run out of it in interim periods. In the winter we already consume a ton more than we pull out. If nat gas is to be viable as a primary alternative transport fuel, we probably need to double storage capacity, otherwise if poorly managed people may be freezing in their homes in the winter.

Additionally nat gas has pipeline and flow constraint issues. Did you know spot new york nat gas has seen $50+/mmbtu (maybe $90? I forget) price tags in recent winters due to demand in record chills? We're talking about massive infrastructure investment in a commodity that will ultimately dwindle just as quickly as oil wells if used en masse like this.

The only tenable long term solution (besides just driving less and accepting less economic activity as a fact of life) is nuclear power and electric cars. If Bush can give nuclear power to UAE, I don't see why we can't do it here and just solve the problem altogether. Next step is to build a few hundred power plant and use reprocessing internally in the design infrastructure (so waste never moves away from the plants, and we have no short supply of uranium or thorium ore). Even if we decided not to use a breeder reactor model, the vitrification methods (glass pelletizing of nuclear waste) work and are indeed relatively safe. It is time to end the fear over nuclear.

Obama's 2.5 Million Job Stimulus: We Need a Scalpel, Not a Shotgun

Respectfully disagree.

We need a shotgun and a scalpel. A scalpel for the long term, but in the short term we are in a mess. Take a look at the baltic dry index. We need to get goods moving again, trust restored, and demand back up in the world economies. It'll take a shotgun to make that happen...

Obama's 2.5 Million Job Stimulus: We Need a Scalpel, Not a Shotgun

Respectfully disagree.

We need a shotgun and a scalpel. A scalpel for the long term, but in the short term we are in a mess. Take a look at the baltic dry index. We need to get goods moving again, trust restored, and demand back up in the world economies. It'll take a shotgun to make that happen...

Treasuries and the U.S. Dollar: Twin Bubbles

The direction of monetary velocity is key. If it never recovers, the path is to hyperinflation as we are unable to pay off our debts. It will undoubtedly at some point, as banks feel no more need to hoard. This is probably equal to the point where all downside on homes is properly matched with reserves provided by the fed.

The Fed's Policy May Be Responsible for Interbank Lending Seize-Up

The title isn't mine. The original is 'partially responsible.' The responsibility clearly lies in the originator of the bad loans. My point is that Fed intervention in this prescribed way may be exacerbating the problem, and will most likely have long term effects that may be considered detrimental to some end.

Oppose the Treasury's Bailout Plan

Cheney and Bush and pals need to be hauled off to jail and .... for the treasonous actions on American society they've committed over the last 8 yrs.

I put together a letter you can send to your congressman based on this whole interest rate argument. Have a look. You can copy paste, put your name on it and hope the best happens, that being the Paulson does not get permission to buy foreign bank assets without any accountability or public discretion (yes, this is really in the proposal! I couldn't believe my eyes).

scriabinop23.blogspot....

Click there and copy paste my letter...

The Bull Market in Credit Default Swaps

I'm actually long 30 yr bond puts. That is my only relevant position.

The Paragraph That Changed the World: Will Treasuries Crash?

Many good points here. Furthermore, I've been doing some reading that suggests the proposed MBS purchase plan is only applicable for new auctions. That isn't nearly as scary.

No mean to fearmonger - just evaluate reality.

ECB Move: An Opportunity To Trim International Exposure

I wrote an article also dealing with the ECB and received the same anti-US rhetoric in the replies. Clearly there is a large audience caught up in the politics that uses these causes as justifications for their nationalistic or political campaign, clearly disregarding facets of economic analysis that make your point clearly undebatable.

The ECB is straying from its past alliance with the Fed, it appears. Whatever the reason, whether political or out of fiscal responsibility, it is straying. That has implications, however, since we are not isolated economies, and interdependence is a key trait defining our global trade experiment.

Trichet, ECB Missing the Point with Crude

The European banking system is just as guilty (if not moreso) and dependent on liquidity support from their respective central banks as US counterparts. I am suggesting that 'this time around' uncoordinated rate policy is really a sloppy way of solving these inflationary tendencies.

Remember that speculative money is out of stocks and bonds, looking for a home. That $240B (or whatever the # is) is now pumping commodities.

Also considering the destruction of wealth and reigned in credit (slower velocity of money as well), I am not sure total money supply is so 'pumped' as of recent despite what shadowstats might suggest. Whatever has been sent to the system offsets the hundreds of billions of wealth that have already disappeared (or been transferred to 'subprime' assetholders).

I agree the EU should look out for itself, and it should not have to pay for US policy recklessness as well. But at the same time, my criticism focuses on two issues seperately: 1) rate policy may be ineffective versus actual coordinated world energy policy (and this should have been done a long time ago), 2) the EU is now not backing up the Fed, but they were months ago. The EU has not decoupled from the US economy, and erroneous moves have negative ramifications for them as well, despite the wave of anti-US dollar sentiment that is so popular now.

Sigma Post-Earnings Update: Staying Long, Though Concerns Remain

With regards to inventories from the conference call:
'Inventory was $34.5 million, an increase of $8.2 million over the previous quarter primarily due to the decrease in our shipment and the purchased VXP inventory... (Per the VXP inventory) We book it at its selling value and that was one of the adjustments that I explained to our gross margin. There’s about a $700k gross margin miss or unrealized amount associated the VXP sales during Q1. As we sell through the purchased inventory we’ll begin to get new inventory in that will actually have a gross margin and that will be another positive affect on our gross margin.'

It'd probably be fair to assume at least half of that inventory build was actually the booking of inventory at selling price on the VXP assets (18m purchased).

Still, 28m of inventories is a little over a buck a share to discount. I don't see your point. On the goodwill and intangible, again similar numbers. Thus the $14 strong buy target.