Today's John McCain

Listening to a radio interview with John McCain today while doing some room cleaning, it was almost impossible to remember the ornery but balanced campaigner during the 2008 Republican primary or the wild Senator who matured into an across the aisle constructive legislator at various times. His litany today of obfuscations, half-truths, completely revisionist recent history, and outright lies can only be described as embarrassing.

Some would say that this performance is only politics, as McCain is being challenged in the Arizona Republican primary by former Representative J.D. Hayworth, whose right wing self righteous blowhard credentials cannot be questioned. This may be a sign of the times but for someone who once was viewed by many as unafraid to be a leader, it's disappointing. That characteristic could be said to be the pivot of McCain's entire reputation(that and the POW experience) as he has never been viewed as especially brilliant, rarely as hard working on policy, or as any kind of self-made man given his grandfather and father's exceptional military records and his wife's money, always a lucky Pierre. To completely trash the exemplary part of his reputation for thick skinned leadership and integrity now is sad to watch, just because of J.D. Hayworth.

McCain is now on the cusp, however, of success in relegating himself to an asterisk in history as he morphs into a lower level imitation of his chosen running mate Palin who ruined any chance that he had for election as President.


Postscript: It was especially galling to hear McCain describe how he was misled by Treasury Secretary Paulsen when he voted for the eventual financial rescue package. According to McCain today, "We were all misled. We were told that it was to buy distressed mortgage securities to help the market, but instead the money was just given to the big banks". McCain himself is as responsible as anyone for that outcome. Remember, he halted his campaign to rush back to Washington. Lagging in the polls, he was desperate to show that he was a leader on issues that he has never known anything about(his own admission in the past). With a vote pending he galvanized a group of fellow Republicans to defy the Republican administration and turn back the original Treasury department proposal. That proposal, if passed, would have likely been able to swoop into the market and stabilize prices in the securities markets, stop the panic. Forced to regroup, Treasury created a broad based proposal with plenty of pork that was passed four weeks later, when there was not enough liquidity in the markets to successfully intervene. Markets don't wait for political squabbles. The only recourse at that point was to go directly into the troubled financial institutions.

Greece and the credit default swap threat

Anyone who has followed this site for the past year and a half is well aware of the obsession here with regulating credit default swaps. The premise is simply to require that anyone buying a CDS on a security has a position in that security that is more than or equal to the notional value of the derivative. That means that a CDS would be a hedging instrument and not a gambling instrument.

Investments can go up or down, but fear can push an investment to zero and the game is over. Fear of zero is intense and can be vulnerable to a contagion that is subject to manipulation. This may or may not be illegal manipulation and in the world of constant media coverage of every angle the access to legal venues for opinion or book talking venting is more or less endless. That's the case now in a world that has not psychologically recovered from the '08 to mid '09 financial terror.

The regulatory attention to and media coverage of the CDS market in the last few days and its magnified effect on the Greek government credit problems is not news here. In an interview here with analyst Kizziah Finney on December 8 he was quoted as saying, "if we are going 'down'(not Finney's words) again it will be sovereign debt with those same CDS derivatives"... as the culprit once again. On November 28 an ENS post on Dubai and on sovereign debt concerns elsewhere called the CDS market "a toxic security for sovereign debt problems".

That the Obama administration and other central bankers have failed to see this is inexplicable, but as said earlier this has been an obsession here. With Greece and parts of Europe now we are on the cusp of seeing a repeat of Latin America in the 1980's. Unlike then, when the great great majority of the debt was held on commercial bank balance sheets and a group of the largest bank creditors could be brought together to negotiate a restructuring, today the debt is widely disbursed. There are some banks that have crucially large positions but they do not represent any predominant percentage of a country's debt. So Greece could end up like the homeowner in Arizona saying, "One of us still has a job, we're stretched for now, we're looking for some solutions, but who do we talk to, the initial broker, the initial lending bank, the servicer, some government bureacracy, or the end buyer of a securitization. How do we get some authoritive answer, or do we just linger until it's over."

At the moment Greece has no way out. The CDS market money makers are just beginning to pounce. It would take a concerted coordinated effort by the Eurozone, the IMF, and some substantial input from the U.S. and even Tokyo and China to stop their designs. Will Greece get to play the Lehman role, scare everyone to death, and then Spain gets to be AIG, rescued because there becomes no choice.

Why are we having this discussion, if in fact we are, when the needed regulation of the CDS market and limits on the positions should be so obvious. In the autumn this was being discussed as part of financial regulation and the Obama team, behind the scenes, argued against any stringent regulation at the same time that Obama was castigating the banks for every sin possible. I don't get it, but here we go again.

More Snow

With 20 inches on the ground from yesterday and this morning, the snow here is beginning to grate. The Weather Channel acknowledges the respite that we have at the moment but forecasts snow again starting at 1am tonight and extending through the day on Saturday.

Some snow is very attractive. This much snow can be painful. With no experience like this here in at least ten years, the purchase of one of those snow blowers seemed like a waste, especially since people who have them and use them infrequently spend much of their time when it is needed just trying to start the things. Not inclined to be machine savvy here, they were not attractive. The once age old practice of young teenagers going from door to door for shoveling jobs is non-existent here, social conventions of the town really not allowing such behavior. I did see some commuting shovelers getting back on a train to Queens in the late afternoon so a few kids from elsewhere know where some ready money is, but they didn't make it up my area's hill. The other alternative would be to have an annual contract with someone who has a Jeep with a plow but why do that based on recent history. It was a strenuous day.

With the sun coming out in the afternoon and the temperature reaching 33 degrees, the lower center of our four block downtown is now almost flooded. There is ankle deep water seven feet from the curbs on the main street leaving on only a few feet on each side of the median as not a creek. This melting will abate tonight but with temperatures reaching the low forties on Sunday afternoon one can only expect that when this all stops there will be many flooded basements and many people looking for the fly fishing boots to do their banking, mailing, or shopping in town. We are on an island and, long as it is, there remains the tendency for damp soil that already has enough moisture. That makes for beautiful springtimes, but when it gets too wet there are problems.

With March on the way we can hope that this is the last big weather event and also hope that this doesn't portend those Nor'easters that knock down trees and eliminate power in the Spring.

Next post, Greece and the unregulated CDS market.

Regional eating

Traveling around, as referenced in the prior post, was a reminder of prior business related travel around the U.S.A. Outside of urban areas, or New Orleans, there are some rules that are generally helpful. Those are: Eat at seemingly high end places with good crowds or Eat at apparently low end places with good crowds. There are exceptions of the macabre at each end, clubby places with green armchairs on the high end and wife beater shirters with really loud voices on the low end. Anything in the middle is terribly suspect due to some desire to stake out ground low or high.

So at a brewery pub in a regional city you could see --- "Sicilian Pork, fork tender braised pork in a rich tomato sauce served atop creamy artichoke parmesan and scallion rissoto" There's also a demi-glazed Zinfandel whatever steak with portobello... much more. Is this a three star at Madison and 24th seeking a star or this a pub that brews a few of its own beers.

Then you have the restaurant that offers something on its menu that is obviously not going to work but that someone like me will order anyway, like ME. A sucker for fried calamari with marinara sauce, I of course order it at one restaurant. Some special spices were promised. I licked my lips. What was offered was frozen food dumped in oil and served too hot with no taste ever possible but the Old Bay and pepper stuck to it. I pretty much knew that in advance but wished to ignore it.

Having been lucky enough to go to a high end hotel eatery that for the most part deserved it's low key billing(it was just great in that region), I had envied the steak that one of my guests had ordered, my monkfish seeming paltry. With one night left in our stay we went to an "upscale" Italian restaurant with a nice vaulted ceiling and a reference from our hotel. With the night before food envy in mind I ordered, "Grilled Marinated RibEye, spice crusted grilled ribeye with roasted red pepper, green pepper, red wine sauce over garlic mashed potatoes". SOUNDS GREAT. Just what I wanted after the balance of the last few days.

What came to the table---A giant cowpie---nothing visible on top but glutinous gravy with a few strands of pepper showing through. There were the formations of two steak portions sticking through. Underneath the glob that rind of hard fat that you only see at bad supermarkets lurked and the meat was at partially hot, partially cold, pretty much confirming that this was defrosted old meat done with various success in the microwave. This was apparently an upscale restaurant in a vibrant regional city. This food would not make it in a diner in Elmhurst---tossed at the owner or on the floor. In the setting that I was in, the challenge was managing my way out without being too rude. They did not offer to remove the cowpie, and wanted me to wait for another of their delicacies. Exit, stage left.

Best places on the trip for those who catch the places, Notti Bianche and Bistro Francais in one town and Ye Old Waffle Shop in another. A very honorable mention must go to the hotel spot mentioned above.

College touring

After five solid days of college touring with a prospective student we are intimately familiar with the themes of 2010. From safety to target to stretch, to those in-betweens like target-stretch and safety-stretch and the unambivalent super safety, we made the rounds. At all of these, high and mighty to strivers, words and issues merged into one, subject by subject, as detailed by young info session presenters from the admissions staffs and by student campus tour leaders:
---Food---"I love it. There's everything here." Talk of healthy eating in whatever campus's multi-faceted cafeterias is perhaps a tad undermined by the presence of food courts with national and local quick food providers. One campus defined itself as a "Coke campus" with Pepsi only being available in one historic building, whatever that connotes. Off campus living upperclassmen leading tours always said, "I like the campus food so much that I get my campus living friends to swipe me in for more". That sounds illegal.
---Study abroad---"You can go to any place in the world, any continent, except Anarctica, and we're working on that". Almost exact same words, every school. Ha, Ha on the first one, hmm after that, humorous by the end. There are only two schools in the country with permission to arrange study abroad in Cuba and one was was on our trip but I now have no idea which one. Every school projects max expertise in this area and promises fun and credits and education combined with no extra cost(this in fact must be a real money maker, as taking tuition for a U.S. school and then paying for a school in China or Thailand or Croatia or the Czech Republic would be a 50% or more gain).
---Teachers---slides of or comments about teachers inviting students into their homes for dinner and living room discussions are uniform. Teachers' care is a theme. Call them at 1am on the night before an exam and they will be there to help you. These presentations can arouse the skeptic.
---Family and community---this theme of school spirit and shared commitment was discussed at all presentations, but nuanced in different ways. At some schools it was stressed as a network of jobs and opportunities, at some as a collegiality that develops into a strong and important bond, and at one or two, through syrupy tales, as a blessing, or millstone from another perspective, of life just as in a real family.
---Clubs and activities---"We have over (fill in the blank) hundred student organizations on campus and whether it's a language, a service commitment, a religion, flamenco dancing, skeet shooting, a Fox news fan club, stock picking, italian cuisine, a populist peoples party, whatever it is, you will find it on our campus". That's a composite quote but this one is almost verbatim at all, "if you don't find it, you can create your own, just one faculty member approval and a few members and you are a university sponsored club". So one could have a penquin walk club, or a pen top chewing club, or an organization of Law and Order devotees having an intense rivalry with the NCIS fan club. Whatever you want, if you don't find it here you can create it.
---Safety---From out in the sticks to in the center of a city, the safety issue was thoroughly discussed. All have the "blue light" system of call buttons, interspersed at regular intervals and all have dedicated police or security departments. This topic was both reassuring and disconcerting. Even at the most self-contained campuses, women tour guides said that they made it a point not to walk alone at night for any distance. At the same time the universal comment was "that's just me being cautious, I have never once felt the least bit unsafe on this campus". Of the seven schools that we visited, two referenced the blue light system in a way that raised an eyebrow or two. The most urban one's tour guide said that the blue light system was beneficially arranged such that if you were being chased you could hit one after another as you ran for safety(a spontaneous laugh here that no one seemed to share) while the largest state university stressed the same thing as in "just keep walking after you hit one and go to the next if someone is making you feel uncomfortable".
---Internships---like study abroad, this is a college must-have these days. Some schools just arrange them for personal, networking, and service benefit and one degree mill gives four credits a semester for an internship. All schools stress their databases in this area but only one or two had that database focused nationally and even globally, at least based on their presentations, and that difference was not in line with expectations. One less widely known school seemed to have this internship opportunity wrapped really well, an impressive surprise.
---Interdisciplinary studies---this is a difference among schools. Some tout the opportunity to create one's own composite degree while others could stress only one path, in one case day one, others after sophomore year. Running the gamut, one weaker school and one stronger one discussed the opportunity to create one's own curriculum, combining different disciplines to a unified purpose.
---the G-word---if listening to student tour guides and talking to current and just graduated students is any guide, their college is such a refuge that the G-word, as in graduation, is dreaded. They seem acutely aware that college is a one time experience, one that does not guarantee the next phase of their life, and given that those chosen for contact with visitors must be pre-screened and are being paid, they really like their school. That said, they seem earnest and, given the times and the astuteness of many young people, they are telling the truth.

The experience of college viewing may have been an invaluable insight into some aspect of our culture, and perhaps a better experience for the most important person here. I don't really know, but we went to some nice restaurants, some saw some good friends and relatives, and the young one helped me move beyond step one on the smart phone(called smart for a reason I fear).

Discount rate rise, it's about time

Today's Fed announcement of a quarter point increase in the discount rate to 0.75% is overdue and necessary. Worst case, it's a chance to test the ongoing fragility of the financial markets with minimal risk. Best case, it will demonstrate over a number of days that intelligent life in the market would welcome some backbone at the Fed, some desire to balance abject fear with the need to retain a sound currency, a reasonable catalyst for savings, and a path to ending the erosion of retiree savings.

More workers

An exchange overheard in a Waffle House on a North Carolina interstate highway today:

"Man, I'm working seven days a week. It' wearing me out."

"You're lucky, lots of people these days only wish they could do that."

"Just try it. Sometimes I get up at three in the morning to get to the job. I do nothing but work. I wish they would just hire back some of the guys they laid off. It's good money but I can't go on like this."

"The Last Child", by John Hart

During a day of travel I unfortunately read the entire book that was meant to be my go to sleep reading for five days. "The Last Child" is the third book by John Hart, a writer that was unfamiliar to me, an Edgar award winner in 2008 and a nominee for the celebrated mystery writer's award again in 2010 with this book. The book has pace, it was actually a mystery, it has characters to love and to detest, and it has a sense of place, eastern North Carolina.

Some of the reviews that I have now just read suggest that it is a "genre breaking book", one that crosses the magic line into literature. I don't know about that but I was transfixed by the tale, rarely put off by the writing, was not required to watch advertisements, and surprised that the exaggerated caricatures at times added some depth to the plot. The book has an aspect to it that could be described as humorless melodrama and the opportunity for reader self-reflection is almost impossible with the non stop action of the story driven third person narrative. Who has time to think. The ending wraps up as neatly as a Taco Bell burrito, as in not quite satisfying but a lot less messy than most.

"The Last Child" was a wonderful diversion for the day. Oh, why was I such a glutton when it would have been relaxing me for several evenings. In either case there would have been no valuable insights to be gained, but perhaps some extended entertainment and a few more welcome dreams if it was drawn out.

"Lords of Finance --- The Bankers Who Broke the World"

This book of history by Liaquat Ahamed was published almost one year ago but found its way from the local library to my nightstand just a few weeks ago. At first glance the title suggests another tome on recent events but this is the story of the central bankers whose policies either dealt with or shaped the catastrophic economic events from 1914 to the mid-1930's. It's an accessible read that is informative and interesting but not academic in its style.

There is no new information or insight into the basic structure of political, military, and economic events of that period. It's all familiar. The fascinating focus of the book is on the lead central bankers of England, France, Germany, and the United States during this period, their personalities, quirks, financial policies, and actions. John Maynard Keynes is the other central character and all of the major political leaders of the period play their roles. Read as a backdrop to the challenges we face today, the developments of that period seen from a financial perspective are not only interesting but also compelling reading.

The thematic purpose of the book, as announced on the extended title on the cover, is to detail how the decisions of a few central bankers led to the disaster of the global Great Depression, "the direct result of a series of misjudgements by economic policy makers, some made back in the 1920's, others after the first crises set in -- by any measure the most dramatic sequence of collective blunders ever made by financial officials". The first sentence of the closing paragraph states that "the Great Depression was caused by a failure of intellectual will, a lack of understanding about how the economy operated". The last sentence evokes the legacy of Keynes' insights during that period as the reason that the world has avoided another such economic catastrophe.

That kind of bold statement is to some extent at odds with the best that this book has to offer. That is the portraits of these central bankers as human beings, smart ones but with flaws as well, who were facing unprecendented events and dealing with the ever changing tide of political pressures. Participating in a crisis that seems to be random in its outcome is entirely different from analytical hindsight.

This is a fine book but not one that in its overall thrust successfully suggests that we are now in an era of rarified economic intelligence as compared to that of the 1920's and 1930's. If that is supposed to be the point, I didn't get it.

Equity market shows resilience

The U.S. equity markets were encouragingly resilient today. Confronting an unexpected interest rate hike in China, a drop in a consumer sentiment survey, and only some well meaning but toothless talk in the Eurozone concerning the financial plight of Greece, the market fell one percent at the start but rallied back during the day, at times almost erasing all losses, before closing with the S&P down one quarter percent and the Nasdaq up by the same amount.

According to most financial commentary the big issues of concern were somehow offset by a modest improvement in a retail sales number and some better than expected earnings at a couple of relatively small tech companies. One could guess that there were a few other reasons for the market's stubborn strength today. From here the fact that the U.S. is going into a three day weekend, one that is not shared globally, could have caused traders to lighten short positions and not bite their nails Sunday night wondering what the day off on Monday will bring. The biggest factor by far, at least the thought here, is that Blackrock Asset Management with its $3.3 trillion under management buoyed the market with its comment in the afternoon that they were overweight Greek bonds and that Greece was no Lehman. The Blackrock statement expressed the belief that the European leaders would stand behind the Union and defuse the concerns about Greece and several other member nations.

At a minimum Blackrock's statement made me feel better.

Iran's comments not without some risk

Iran's comments today about its success in higher uranium enrichment are for internal consumption, a pride issue, but may come at a huge price in the external arena. The internal dissent in Iran is beginning to look like a lost cause, as in the remote possibility that something could have overcome the Nazis in Germany? The government's opposition is just too civilized, if that is a criticism. They are educated and cosmopolitan, and it is unlikely that they will be able to successfully confront the leading cleric's absolutism and brutality.

So the question is--- what is the right timing for Israel to seriously attack all major nuclear development areas with the deep pounding bombs that could reach their facilities. The U.S. would quietly regret such action, Saudi Arabia would protest but silently approve, other Middle East nations have always seen the Indo-European Persian Shiites as a threat, so no critical mass would likely oppose Isreal's action. Ahmadinejad, surrogate that he is, could be a target as well for his outspoken and irrational comments about European history.

Action by Isreal should not be a surprise, today or two years from now.

Greece and the rolling contagion

The crisis in the financial management of Greece may be contained at the moment, but this type of rolling contagion is not so unlike the 1930's, when country financial imbalances were an ongoing issue.

The big question is whether the voters in Germany and France will accept some kind of bailout of Greece, as will obviously be necessary down the road. Among U.S. international banking types it is widely known that, for whatever reason, doing business in Greece with the wealthy and the shipping firms has often ended poorly. Perhaps that penchant for being clever is also reflected in the huge amount of uncollected taxes that the Greek government claims. The fact is that many American bankers have been charmed by gracious Greek hospitality and not had a good outcome. If this is well known in U.S. financial circles, it is certainly a fact among informed citizens of the core EU countries.

The argument for the support of Greece will be focused more on stopping the contagion than on any great sympathy for that country. Among the countries mentioned as challenged: Italy is a country with some industrial power, some world class financial firms in Milan, and a robustly chaotic government and financial structure as always; Spain is still for the most part a government of polite entitled aristocracy(Catalonia excluded), right or left, that had an unchecked residential and tourist real estate boom that would have made Countrywide, Golden West, and Washington Mutual blush; Portugal is still just a charming developing country without major resources or industry, one that is highly sensitive to its European connection, or if the EU catches a cold Portugal catches the flu; and then there's the formerly resurgent Ireland which, if this thought is right, has a significant financial services industry that is more linked to the U.S. than most European countries and also has the drug firm subsidiaries and related tax breaks, and is in the position of waiting for a real U.S. recovery.

The EU powers must know that isolating Greece, forcing reforms, and backing some of its debt is essential to their coalition. One wonders whether they have the political power to pull it off given the deficit spending that has been the way of the world for the last two years. In the 1930's this kind of epidemic all seemed to be an ever unfolding mystery to the central bankers. That's not the case now, but does it make any difference.

Job stories, "Up in the Air" and "The Ax"

The current film "Up in the Air" is better than expected. While trying to hue to a politically palatable patina, it hits some harsh notes that are stronger than the story of a possessed character, a palliative ending, and the short but beautiful portrait of his paramour's posterior. The job cut shots of our culture are the real undercurrent of this film, one that is perhaps a purposeful attempt to humanize what people experience behind a director and some stars and near stars going through the motions to get this experience out to a broader audience. It's back door substantive, and well done.

It brings to mind Donald Westlake's 1997 "The Ax" which had as a prologue page the following:

"If you're doing what you think is right for everyone involved, then you're fine. So I'm fine." Thomas G. Labrecque, CEO, Chase Manhattan Bank

"The Ax" is a crime novel about an individual's job loss, and it can be taken as an allegory of the impact of job loss. It could be read as just a clever murder story but another perspective could be that it is far more valuable than anything Barbara Ehrenreich or anyone could write about the subjective impact of the loss of hope. Westlake was a perfect writer in his genre(the best), but one who went beyond it for anyone willing to see.

"Up in the Air" is no Oscar film, but there's more to the film than one might expect.

Who Dem Boys...WWOZ Super Bowl show

A friend gave me a wonderful gift just in time for the Super Bowl, that's a Wi-Fi radio connection and with the suggestion of the call signal WWOZ in New Orleans. It's Super Bowl time, no idea half the time what I'm hearing but it's up, and it's party, it's blues, it's real. I hear "I'm just sittin' waiting for you to come home and turn me on" and saying I know why my parents and I went to Jazzfest for so many years. It's black and gold time today on a real radio station, run by people, themed by people, unprogrammed, live, in person, in sync, just right, Go Saints.

Nice last hour

That last hour of U.S. equity market trading today was so welcome. It may not mean much more than a good night's sleep. Nothing wrong with that. With Asian markets being down for the third straight week and the Euro markets being upended by PIGS* debt issues and a precipitously declining currency, the U.S. might be seen as a haven. Could that be the last hour. It certainly wasn't U.S. retail standing against panic. Who did the traders represent in this day and age when downward movements are generally piled on by the still totally unregulated fast trading hedge fund community. Some traders with real money stepped up.

It may simply have been alert U.S. money managers looking at oversold groups against 50 day moving averages. Or could it have been global managers looking at the relative value in the U.S. versus the outlook now presenting itself in other markets. The U.S. has issues but it has some great corporations, the best that there are. If 2008 and 2009 taught us anything it was look fast for value and safety, don't wait, and other market equity players may do just that.


*PIGS is a really bad choice by a Barclays analyst trying to follow up facetiously on the BRIC Goldman label in 2003 that was such a success. PIGS---Portugal, Italy, Greece, Spain, of course BRIC---Brazil, Russia, India, China.

Andrew Cuomo's unnecessary civil suit

Andrew Cuomo, AG of New York, has launched a civil suit against Ken Lewis and his colleague charging fraud in the Merrill Lynch acquisition. Given that the SEC has been pursuing what is basically the same issue, with a corporate and not personal approach, this action by Cuomo is unnecessary as an action and as an expense for his office and New York taxpayers.

There is one obvious motive, and that's personal aggrandizement as he seeks higher and, in his grandiosity, higher office. Eliot Spitzer took the same approach, bringing to its knees the Brooklyn escort industry and major corporations, some guilty and some just hit by innuendo and his manipulation of the press. "Settle" decided the innocent and let this tyrant go on his way. What a role model.

Cuomo's choice of targets could be said to have a specific purpose. As Secretary of HUD under Clinton from 1997 to January 2001, he was at the epicenter of the change of mandate for Fannie Mae and Freddie Mac. With Clinton's backing and serious cheerleaders like Barney Frank and Carl Levin, Cuomo approved the expansion of Fannie and Freddie into the subprime markets under the goal of providing home ownership to more Americans. He has been linked to approving the agencies expansion of their broker networks and to turning a blind eye to commissions(aka kickbacks) for brokers that facilitated loans to previously unqualified applicants. As New York AG, Cuomo is working to distance himself from those actions. He subpoenaed Fannie and Freddie in a suit against various brokers in 2007 and now he takes on his biggest headline case against an already prostrate Ken Lewis, a rough and tumble talented banker, honest and ultimately naive, who simply does not deserve to be Cuomo's doormat, especially given Cuomo's own complicit role in sowing the seeds for the debacle of the last two years.

What Andrew Cuomo is doing is so transparent that he now has little chance of winning any higher office. Spitzer was just as unattractive but he had a dedicated core network of New York rich people, Harvard classmates, and those who saw him as possibly being the first Jewish President. On top of that he is from an incredibly wealthy family. Cuomo has his father and a mostly loyal state Democratic machine, but what did that do in Massachusetts. Spitzer ruined the AG formula and Cuomo is taking it to a personal extreme in what could seem to be a way to offset his past actions at HUD.

All of that said, Andrew Cuomo may still be the best choice that New York has for Governor. This approach will not get him there.

Extreme market downturn, confidence in question

There was a commentary here yesterday that discussed the perceived vulnerability of small cap stocks to "extreme volatility" in recent weeks. Unfortunately that insight was a tad narrow. Today global equity markets, equities large and small, declined dramatically. There were two most cited reasons for this. First, initial jobless claims in the U.S. came in at 480,000 versus a market consensus of 460,000, up yes but is 20,000 above consensus for the entire U.S. economy a disaster, isn't there some margin of error here, and aren't these numbers revised up or down by amounts this large routinely in successive months. At the same time business productivity growth was reported at 6.2%, above the consensus of 6.0%. A bad news seeking market paid no attention to that. The second explanation was heightened fear of sovereign debt problems in Mediterranean Europe, with Greece in the vanguard. Is this news. What happened today that pushed this story over the edge as Greece seems to be making some progress, however tenuous, with the Eurozone leaders. Nevertheless, what had been a visible market problem turned into a market crisis.

There was some bad news today, but the worst news by far was that the markets sold off so dramatically and in such lockstep globally. The real bad news is the fraying of confidence.

Could it be that there is a sense that there is no leadership in sight in the global economy so when disappointing news appears the trapdoor pops open. The U.S., the world's largest economy, seems directionless. One could look at U.S. economic actions and say that the country is pursuing both deflationary and devaluation policies at the same time, approaches which in the history of global economic policy have been opposites when countries decide on how to address outsized budget deficits and significant unemployment. Have the deep divisions within and among the various political factions made the country barely governable, and certainly not capable of having a coherent approach to significant economic imbalances.

Should that vague supposition be tackled in more depth here tomorrow or just be left to breathe with the hope that it gains more substance and character on its own.

Here's to a calming Friday before the snowfall.

Tame VIX masks small cap volatility, vulnerability

The VIX short term futures are below long term average levels, far below the highs of the last year and a half. Stock market volume levels are relatively healthy but by no means robust. The frightening action is below those radar screens and it's in the small cap market. Volumes are light and the predominent direction is a steady drift down. Unexpected events in the face of complacent traders lead to extreme reactions. NOA, a small west Canadian oil shale producer reported modestly better than expected earning this week and spiked. XIDE, the battery manufacturer, lost a contract with Walmart and completely collapsed. These were both material events but the reactions of the market were extreme. The liquidity is moving to the large caps more decisively now.

Money market fund yields to decline further, if that's possible

With new SEC rules approved last week to shorten maturities allowed in money market funds, to have ultra-conservative debt rating requirements for an entire portfolio, and to require 10% of a fund to be immediately liquid to meet any redemption crisis, money market fund rates of less than 10 basis points, down to 1 basis point, have no chance of having a heartbeat anytime soon. Fed interest rate policy to steal wealth from long term conservative savers or force them to move up the risk curve is understandable for short term crisis purposes but not as medium term or long term policy(six months is medium term in this business, two years is long term). This $3.3 trillion pot of money needs more creative regulation than this, and the investors, savers, retirees, who rely on this conservative investment should not be taken for granted or ignored.