Who wants to be a Frenchionaire?

Fifty-six percent. THAT is a thing of beauty.

Snow job

Tony Snow insists that giving people money to give to lenders differs from giving money to lenders:

Snow said [Bush's] measures are not a bailout for the mortgage industry because they are aimed at helping borrowers pay off loans.

Loans....to the mortgage industry by any chance?

You've got to admire the audacity, if nothing else, especially since it follows by barely an hour Bernanke's Jackson Hole speech where he basically said that investors* should have to shoulder the consequences of their own investment decisions.

I guess so long as we don't call it a bailout, it's not a bailout.

UPDATE: This White House literally doesn't even know what 'Subprime' means. Diana Olick of Realty Check is incensed. I'm merely amused.

* Yes, I realize he didn't mean it, at least not in the case of banks with a 212 area code.

Stolen from Snoop

Don't talk to me about life

Vox Day is currently involved in a fascinating debate with Scott Hatfield over evolution (his sixth-round response can be read here) as science, as a predictive model, and as the foundation for a comprehensive belief system. In the latest round, Scott gets to the heart of one of Vox's issues - in fact, it makes up the core of a new book Vox has coming out early next year:

Besides, it's not really the science that bothers him. Vox understands that scientific claims are always tentative, always subject to review/modification/rejection in the light of new findings...No, what gets Vox exercised is the uses to which the 'evolutionists' he knows about put that model. And that usage is clearly atheism.

And as Vox responds, there are actually three such uses that get under his skin: atheism, socialism, and eugenics.

I'll say right up front that I lack the technical knowledge to take part in (hell, even to follow much of) the debate. That's one reason I seldom discuss my own reasons for being an evolutionary skeptic. I'll happily admit that a knowledgeable evolutionist could eat my lunch (as could a knowledgeable proponent of any other view). I not only lack the knowledge, but I lack the interest. I'll be happy to discuss Morgan's maneuvers at Cowpens or Nennius' sources - and I expect that I can more than make up for my biological ignorance there. We can not all be experts in everything, and since I don't assert any other theory of origins, I don't feel much need to get involved in the discussion*.

But I did note one article tonight that makes me doubt that even if Scott and Vox reach some kind of accomodation upon where science ends and its non-scientific applications (especially its religious applications) begin, I doubt the rest of the scientific world will go along:

WASHINGTON (AP) -- Around the world, a handful of scientists are trying to create life from scratch and they're getting closer.

Experts expect an announcement within three to 10 years from someone in the now little-known field of "wet artificial life."

"It's going to be a big deal and everybody's going to know about it," said Mark Bedau, chief operating officer of ProtoLife of Venice, Italy, one of those in the race....

"Creating protocells has the potential to shed new life (sic) on our place in the universe," Bedau said. "This will remove one of the few fundamental mysteries about creation in the universe and our role."

What is most interesting to note is that the first named application of this science is purely religious, that of determining humanity's place and role in the universe. And while I doubt seriously that it would do that, at least for me**, it is of interest that the scientists who are using material forces to (intelligently, I chortle) design life fully expect their work to answer non-material questions that lie at the heart of the traditional spiritual inquiry that nearly defines religion.

Scientists' assertions, like those of Stephen Jay Gould, that religion and science exist in "non-overlapping magisteria," that they do not and need not intersect***, are shown to be bunk in practice. Religionists who intrude on the claimed realm of science are called out by scientists, yet those same scientists can't wait to tear down their philosophical Berlin Wall from the other side.

That being said, a more pragmatic issue is raised, reflecting perhaps one of Vox's favorite assertions, that if religion is responsible for the damage done by those acting in its name, then science is similarly responsible**** for the damage caused by its own offspring:

Bedau said there are legitimate worries about creating life that could "run amok," but there are ways of addressing it, and it will be a very long time before that is a problem.

"When these things are created, they're going to be so weak, it'll be a huge achievement if you can keep them alive for an hour in the lab," he said. "But them getting out and taking over, never in our imagination could this happen."

"Never in our imagination" seems like a very dangerous position for those who are in practice trying to think the thoughts of God after him to take. After all, in how many imaginations could housing prices go no direction but up?

* Not that I never have, as this post illustrates. But you will note in my discussion with John Rogers, my knowledge is undergrad-level and 'popular' at best. I can pick apart bad arguments, but not bad 'facts.'

** As one who believes that Man is created in some sense "in the image of God," I fully expect that we can and will create life as well. Why should we not be able to given sufficient planning, materials, and experimentation?

*** Read: Bug out of our schools, creationalist!

**** And far more dangerous.

Figures don't lie

But Larry figures the hair of the dog that bit us is just what is needed to save us:

There are a number of deflationary factors behind my campaign to get the Fed to permanently inject new cash into the banking system and deal with the dysfunctional commercial paper market — as well as the general credit freeze-up.

There’s housing price deflation: The Case/Shiller home-price index is off 3.5 percent over the past year.

In Larry's favor, he probably actually understates his case in regards to housing prices falling, as Mish (from whom I also stole that beautiful graphic of State Street's bond portfolio investment model) explains. However, as we will see below, that's the closest he comes to being honest in this whole article.

There’s commodity deflation: Gold prices are off nearly 15 percent from their 2006 highs. Stock prices for materials are off nearly 13 percent since July 19, while metal and mining shares are off 16 percent.

Note how he sneaks in the word 'highs' here. Yes, gold is off 15% from the spike high that occurred last year. But it is above where it was exactly a year ago (by 8%) and also above where it began this year. So gold is up both this year and in the past year, and has more than doubled in 5 years, and yet Kudlow is trying to make that look deflationary. It could just as easily* be argued that it is representative of inflation.

There’s the deflation of loan values, both CDOs and CLOs.

Which, in a nutshell, is the ENTIRE FREAKING PROBLEM in the credit markets, represented by the yellow part of Mish's chart, and there is nothing, not one single thing, the Fed can do to fix that. The world has realized they've chomped down on a big steaming shit sandwich cooked up by Kudlow's friends in the US banking industry, and all the monetary pepper in the world won't make them take another.

But I want you to note that Kudlow is claiming that the values of the loans (bonds) are representative of deflation because they have gone down. That's important, because of this:

And there’s the deflation of the Treasury bill rate from 5 percent to 4 percent.

Once we get out of the Roach Motel investments that are blowing up all over the world and get back to treasuries, Ludlow switches tactics on us. Where before he was talking about values, he now says we have a deflation in rates. But you know what? Rates and values move inversely, which means the values of treasury bills and bonds are inflating, going up, becoming worth more. Well, that's inconvenient.

So to make a case for deflation, Kudlow combines the value of roach motel bonds with the rate of t-bills, both of which are going down. He could have easily made the case for inflation by combining the value of t-bills and the rate of roach motel bonds. But of course that would not get him to where he wants to go, which is here:

The Fed needs to stop this deflation by pouring in new cash.

In short, Kudlow, like Bill Gross, like Jim Cramer, so many other captains of capitalism (not to be confused with Captain Capitalism) absolutely love the free market until they start to lose money. Then they want the government to step in and save their bacon by creating a bunch of money from nothing and loaning it to them at submarket** rates. It is simply socialism for the rich, a way that they can play all day long with other people's money, making a killing in fees and options while shuffling the risks off to the taxpayers. Such is the dry rot ubiquitous to late-stage capitalism.

If we have a deflation problem, it is caused by the fact that we have created so much money from nothing that that money is disappearing into nothing - the crisis today is the consequent of the Fed-pumping that has followed every market hiccup in the past generation. It seems to me rather foolish to assert that the way to fix that is by creating even more money from nothing. Foolish, that is, unless it's me and my buddies who are getting first dibs on it. Then the hair of the dog is just what Dr. Kudlow ordered.

ADDENDUM: Investment Guru and all-around stud Jim Rogers said something recently that was simultaneously true and incredibly naive: "The Federal Reserve was not founded to bail out Bear Stearns or a few hedge funds. It was founded to keep a stable currency and maintain its value." It's true in that keeping a stable currency and maintaining its value were how the Fed was sold to the public. But it's naive, after seeing the Fed destroy 97% of the dollar's value in less than a century, continuously bail out banks and hedge funds, and change*** the rules of banking so sweetheart members can escape their own errors, to believe that it currently exists for any reason other than to bail out**** Citigroup and Bank of America.

* and more accurately

** Yes, they are submarket rates. If they were not, there would be no need to borrow from the Fed; they could simply borrow it on the market.

*** LONDON (Thomson Financial) - The US Federal Reserve Bank has quietly relaxed its debt collateral rules, allowing borrowers to use distressed debt as collateral to raise emergency funds, the Telegraph reported, citing banking sources. - In short, if you are big bank, you can borrow from the Fed using the crap no one else will buy as collateral. I'll bet you get to set your own price for it, too.

**** NEW YORK (Fortune) -- In a clear sign that the credit crunch is still affecting the nation's largest financial institutions, the Federal Reserve agreed this week to bend key banking regulations to help out Citigroup and Bank of America according to documents posted Friday on the Fed's web site. - It is notable that this change was sold as temporary, meaning that as soon as the big banks are off the hook, the old rules will be back. Because they are absolutely necessary. Or something.

(hat tip: JD)

Whom to believe?

After hiring Fort Scott's former city manager last week, Ottawa's mayor called out its grand jury:

Fort Scott also was the target of a grand jury investigation sought by a group called the Citizens' Action Committee.

The group accused city officials, including [former Fort Scott city manager Richard] Nienstedt, of a variety of misdeeds including misusing, mishandling and not tracking funds, and ignoring open meetings and records laws.

The group got enough signatures to convene a grand jury about two years ago and it issued a few indictments, [Ottawa Mayor Blake] Jorgensen said. The Kansas Attorney General's office ruled the indictments were without merit and rejected them, he said.

Ottawa officials investigated the situation thoroughly, which Jorgensen characterized as an inquisition.

As a former spokesman for the AG's office, and as a guy whose wife sat on that grand jury, I can doubly assure the mayor that that was an exceptionally stupid thing to say. Pig dribble stupid. Apparently Ottawa's city attorney agrees, as according to today's Fort Scott paper:

Ottawa City Attorney Bob Bezek Jr. said Monday that neither the mayor nor anyone else from the city said that. "That's not right," Bezek said.

So the question on the table is not whether the city of Ottawa has just thrown itself the biggest surprise party you can imagine*, but what we are to make of the quote that was but is no longer.

Did the press make up the quote? That was always my fear when talking to them, and I am happy to say that while I was on occasion misunderstood, they never, ever made something up out of whole cloth. But they need not make it up completely to misquote, either.

Did a politician say something both ignorant and arrogant to support a hiring decision? Who can imagine a small-town politician doing such a thing?

Is an attorney lying in public? The City Attorney, if I'm not mistaken, is also a tinhorn prosecutor, an officer of the court. Surely no one of his stature would blatantly lie to the press, especially to keep an elected official out of trouble.

For the life of me I cannot figure out a logical case in which all three could be true simultaneously or all false simultaneously. So I'm going to have to side with the press on this one, and just imagine the meeting between the mayor and the city attorney where the latter screams in the former's face, "You said WHAT??!?"

* If I told you, it would not be a surprise.

Takin' a wide stance

Funny how certain names show up again and again...

Where are the editors?

The Nazis are coming. Let's hope they bring an AP style manual:

Omaha, NE - A major Omaha road may be shut down this weekend by Nazis...

"I have seen every kind of demonstration from pro to totally contrary so they are totally within there right to do it," says Consul Jose Luis Cuevas...

Illegal immigration threatens the self described Nazi group's main goal.

"The preservation and the promotion of the white Arian Caucasian people," says Bishop.

I don't know if anyone else has noticed this, but one major difference between news in the paper and news online is that online stories are absolutely filled with stupid typographical errors. The National Socialists in Omaha are not Arians. In fact, I doubt they have any opinion on consubstantiation at all. They are not within "there" rights, but their rights. And I may be wrong - after all, I don't do this for a living - but I always thought 'self-described' was hyphenated. I noticed the same kinds of things last night in this article on the Greyhounds' victory over Navarro on Saturday. Clue 1: "It's" is not a possessive. Clue 2: when you use a possessive on a plural, the apostrophe goes after the s. Clue 3: you do not need to explain or introduce a quote using exactly the same words contained in the quote. I don't mean to pick on Fort Scott's sports editor (any relation, Jozum?) but if you did to a person what he does to the language, it would be a felony.

I'm not sure if the fast pace of online journalism contributes to hurry-up errors, or if traditional, more Luddite editors ignore the medium, or if online is the place where all the newbies are broken in, or if it is some combination of all of them. But it is rather funny to hear the press complain about the blogs' lack of professional editorship, when the fact is that their own papers' online presentations are filled with the kind of crap that would have given my 7th grade English teacher a conniption.

* and I hate to play spelling nazi, but come on, these people are supposed to be professionals. And no, I would not hold it against them were they to mock me for committing some historical howler, either. If I was presenting myself as a professional, I would deserve it.

How about a little fire, Scarecrow?

Sometimes it's hard to tell when someone is just being facetious. Or rather I should say that while it's not difficult to detect, it's difficult to know how seriously to take a facetious argument when it's simply setting up a series of straw men and then sarcasticly knocking them down.

Blogger morbo tries to scare the creationalist* birds away which, while perhaps a noble endeavor, leads him into all manner of scarecrow-building. I'd normally not comment** at all, except that such a fine series is seldom found in one post. And I have to admire his ability in that respect.

Quoth he:

... the Bible makes so many other scientific claims that, by [Creationalist] logic, should also be taught in public schools.

For example, consider the claim that certain languages have a common origin. According to the Book of Genesis, God created all of the languages in the world during that fracas at the Tower of Babel. So why do we allow linguists to lead our young people astray by talking about the Latin roots of certain English words?

The reason that this is such a fine straw man is that it stuffs just enough truth in this scarecrow to get the non-Bible reader hooked. The Bible does say that God confounded the original, single human language at Babe, but it doesn't say the result was "all the languages in the world including modern English." Obviously, at the time of the episode (let's say 5 millennia ago) or even at the time Moses included it in his new bestseller (3+ millennia ago) there was no English. What the Bible does not say but which can be reasonably concluded by those who take Babel as an historical episode (as I do) is that the process begun at Babel did not end there. To insist that a literalist ought to believe that English is a static remnant of Babel is a straw man.

Also this: Genesis 1:16 claims that the moon gives off light. The passage reads, “And God made two great lights; the greater light to rule the day, and the lesser light to rule the night. He made the stars also.”

And we still say, Over in the bushes and off to the right, two men talkin' in the pale moon light. Sheriff John Brady and Deputy Hedge, haulin' two limp bodies down to the water's edge.

Warrant may be lying to us about the bodies in the wishing well, but no one will doubt that they are simply using a figure of speech to explain how they saw the errant lawmen. The moon does give off light even though it does not originate that light, an interpretation well within the limits of Genesis' prose***. But when you force and then defeat an interpretation that no one actually holds, that's a textbook straw man.

The Bible has much more to teach us about science, history and even math. Did you know, for example, that pi equals three? Why aren’t we teaching this controversy?

The conundrum of Hiram's bowl (1Kings 7:23) reads like this:

And [Hiram] made a molten bowl, ten cubits from the one brim to the other. It was round all about and five cubits high. A line of thirty cubits compassed it round about.

So here was have a circle with a diameter of 10 and a circumference of 30, which proves that the Bible claims pi = 3 when we know it's 3.14159 and something.

In all fairness, Morbo here links to a piece that links to a piece that does give a decent answer to this conundrum. There are others (like here, which I consider a $50 solution to a 5c problem) as well. But I would rather like to show that the value of pi is 3, or rather that 3 is exactly the number we should expect to get for pi, given the data we have:

• The diameter of the bowl is 10. How many significant digits is that? 1 (2 if we want to push it, but "it is impossible"**** to prove that, and we're all scientists here so we'll stick with what we can prove).
• The circumference of the bowl is 30. How many significant digits is that? 1.
• What is pi to 1 significant digit? It's 3. QED
  

Remember, we're dealing with a non-technical description of an item of art measured in a somewhat undefined***** length (not unlike a "hand's breadth," also a measurement used in the passage) and which is probably rounded off. It is frankly imposing on the text to presume that 10 cubits means 10.00 cubits. It could just as easily be 9.5. Or 10.412367943. Or 14. Context people, context. Imposing on the text creates a straw man, in this case because no literalist claims the Bible says pi = 3; only those looking for errors make that claim.

Morbo's argument is that if creationalists are going to take the Bible 'literally' then there's a whole bunch of other stuff they ought to be arguing for as well. The fact that they don't means one of two things: either they are inconsistent or he is forcing a different interpretation on 'literally' than the literalists (and we'll conflate creationalists with literalists here just to humor him) themselves do.

He's pretty sure of the first, but I know which one my money is going on.

* To quote Bloomberg. And as regular readers will doubtless have noticed, I've never argued in favor of creationalism being taught as science (it's not) and I'm not going to start now.

** mostly because I think much of his straw-stuffing is being done on purpose to make a point. That said, I've seen his examples presented seriously in enough places that I would probably address them some time. Why not today?

*** Of course, this is where my argument gets in trouble, because he's going to claim that for consistency's sake those who take Genesis "literally" can't simultaneously take it for prose - as I do - they must mean the moon is the same manner of "light" as the sun when it's not. But they don't claim that; nor, to my knowledge, did *any* ancient astronomer no matter their knowledge of or interpretation of the Bible. I also checked both Josephus and Philo - not astronomers but an historian and a Jewish philosophizer - and neither hold such an interpretation. But he is perhaps correct that literalists are inconsistent, at least according to his understanding of literalism.

**** "Zeroes at the end of a number are significant only if they are behind a decimal point as in (c). Otherwise, it is impossible to tell if they are significant. For example, in the number 8200, it is not clear if the zeroes are significant or not. The number of significant digits in 8200 is at least two, but could be three or four. "

***** A cubit is the distance from a man's elbow to the tip of his fingers. What's that in millimeters?

Mortality Day

For those of you who don't know, I'm responsible for maintenance and data integrity of a secret* government database. Normally, I have several student workers who search the obits daily and mark out those people who are in our DB so we can stop sending them stuff and inviting them to stuff. It's the new school year, and due to the as-of-yet-unfinished training of new students and some end-of-summer vacations on the part of our full-time staff, it has today fallen into my lap to scour the past 2 weeks of obits** looking for people we need to update.

One gal I found today stuck out at me because she was born pretty close to my own birthday. We might have grown up together, gone to each others' birthday parties, graduated in the same class. But now she's dead from causes unmentioned - and though she was sick, her death was apparently unexpected - and her obituary notes that both her parents are dead and all her grandparents are dead. In fact, I have no idea who even wrote the obit, as she doesn't seem to be survived by anyone.

So I went to look for someone left alive, as my DB has a lot of 'relationship' information. She had more former names than anyone ought to be burdened with, but no relationships that I could find. And I couldn't help thinking that probably represented her life as well as anything. From all indications, her life was sad, painful, and lonely in addition to being short. One ought to be able to fit a lot of things into 40 years, and she did, but it did not look like she enjoyed many of them. And I'm guessing, but I suspect they got her in the end.

And while it makes me doubly thankful for all my own blessings, it is a little depressing to realize that at my age, the opportunities to get it right at last are passing quickly.

* So it's not secret, but that sounds cooler than what it really is.

** From all over SE Kansas and SW Missouri. You would not believe the number of guys whose obits feature cool nicknames like "Swamprat" or "Seldom Seen". I wonder if El B will be featured such a way in my own...

Save Bullwinkle, save the earth

Der Spiegel names Bullwinkle's farts the last, best hope to avoid climate catastrophe:

The poor old Scandinavian moose is now being blamed for climate change, with researchers in Norway claiming that a grown moose can produce 2,100 kilos of methane a year -- equivalent to the CO2 output resulting from a 13,000 kilometer car journey...through its belching and farting.

Norway has some 135,000 moose (not meese or meeses*), which according to my napkin math collectively produce nearly 300 million kilos of methane a year. Sure, that's a lot of bic lighters**, but it's nothing compared to the tundra wind produced by Siberia's wooly mammoth.

What? You say there are no wooly mammoth in Siberia? True enough, but there were not long ago, a whole buttload of them. In fact, according to National Geographic, there are millions buried whole in Siberia's permafrost, silent victims of the last ice age. Since they lived 80 botrillion years until they didn't live any more, there must have been bazillions, even squillions of them, packed in like Sardinians. Trust me on this, I've seen the artists' renditions.

It has never been explained how they got frozen there, in such an excellent state of preservation that scientists hope to retreive DNA from them. But we do know a few things in addition to the fact that they died quickly. We know they are bigger than Bullwinkle. We know that they ate a similar diet. Therefore we can presume that they were probably big fans of the barking spider*** like the moose of Norway. But because of their vastly greater numbers, they would have produced at least 4 orders of magnitude more methane than the moose who are currently destroying the planet.

Or in fact, saving it from ice age. Because what really happened 10,000 years ago was that as wooly mammoths evolved they naturally developed better manners****, and what is more mannerly than not farting all the time? So for propriety's sake, mommy mammoths (mommoths) started frowning on their mates telling the calves, "Hey, pull my tusk," or asking them "Phew, who stepped on a caribou?" This unfortunate loss of audience caused the bull mammoths to quit farting. Bam, no more methane production, no more warming. Instead they got an ice age so fast they were all frozen in place.

That's science, baby. At least it smells like it to me.

* I'll be amazed if anyone gets this joke.

** and obviously of great concern to those opposed to climate progress.

*** a common yet troublesome tundra arachnid that goes by the scientific name "flatulus egregious."

**** This is how we know that we are more evolved than Cro-Magnon, we have better manners.

Double negative, and dog

There are some things you just can't not post.

Wow, how's that for bullish?

What? Oh those kind of bears. Never Mind.

(hat tip: Kevin Depew)

Good advice, and bad

CNBC comes to the rescue of the confused investor:

With the markets so volatile, many investors might be tempted to head for the exits. But in these nervous times, there are smart moves you can make to protect your portfolio.

CNBC.com asked the experts what they would buy--and sell--in this type of environment. Here's what they're telling us.

Buy: Consumer Electronics

Marc Pado, chief market strategist at Cantor Fitzgerald, says technology-related industries such as software and consumer electronics should do well as corporate spending usually picks up in the fourth quarter. He also believes retailers could be set for a rebound.

"I think we'll test the lows in the next few days," Pado says. "But the two key areas that do well in the fourth quarter are technology and consumer-sensitive areas like retail, which has been badly beaten because everyone has been worried about the consumer." ...

Sell: Homebuilders, Mortgage Lenders*

With the mortgage industry still in turmoil, "a reality check is coming back in for the homebuilders," says David Kotok, chief investment officer at Cumberland Advisors...

What follows is not trading advice, of course. It is incumbent upon you to do your own due diligence. I just want to lay out here what I think the near future holds and what *I* personally am doing about it. It will be a rambling post, because there's a lot to cover, but I don't want to make this a "market blog," even though I'll admit to spending an inordinate amount of time watching the markets recently. I have a real feeling this could be a once-in-a-generation event and I'm loth to miss it.

That said, the first thing I notice about the article is not the recognition of turmoil, but the complete ignoring of its true causes and what its likely effects will be. That leads to a paradox: we are supposed to buy consumer electronics because it has been beaten up, but we're supposed to sell home mortgages for much the same reason. "Everyone is worried about the consumer" because of the second, yet we should presume it's not a problem and buy the first? If they have been borrowing from their houses to afford big screen TVs, where will they get the money to buy more now that mortgages are scarce?

Let's examine, just briefly, everything else they ought to be worried about:

1. The mortgage problem is accelerating. In fact, while we just celebrated the 100th implosion on the Implode-O-Meter a few weeks ago, the number is now 129. That's huge. Really huge.

2. Another German bank has just had to be rescued by the government because of subprime issues. There was a run on Countrywide Bank last week. The SEC is investigating several big banks to see what exposure they have. Where there's smoke, it's safe to assume there's fire. The government always arrives late to the party, but they are often really going to a party.

3. After stating less than 2 weeks ago that subprime was 'contained' and only a catastrophe could cause the Fed to inject itself into the markets, the Fed lowered the discount rate by half a percent and central banks worldwide injected more than half a trillion in new money into the markets. They have also begun purchasing unsaleable paper on long contracts to keep the credit markets from completely locking down.

4. Government bonds are in such demand that interest rates in 30-day paper dropped by more than half just today, while many corporate issues have no bid at all. It is a flight to safety almost unparalled.

The problem is not the consumer**, it is a credit crunch, an acute lack of ability for businesses to borrow and a fear of banks to lend, and it will not be solved by the Fed cutting rates. That means the solution for the investor is not simply buying stocks assuming the consumer can pony up for them, but to focus on companies that don't need to borrow or companies that generate a lot of cash without needing access to a lot of cash. Frankly I like royalty trusts, organizations that own royalty rights, whether in oil (BPT), music (MMTRS), iron ore (MSB) or anything else that creates passive income based on real assets, not fantasies (like hotels or Real estate trusts). I also like small companies like USMO that have established contracts, preferably with large entities, and that throw off a lot of cash***. When cash is dear, the investor should buy companies that generate cash, not consume it. Then you can use that cash to buy whatever else you like. I'm also buying unhedged companies sitting on gold deposits - in fact, I'm buying their warrants, paying for my leverage with time rather than debt. If the Fed creates the number of dollars I expect, everything that is not a dollar is going up - except things like real estate that have gone up already.

Those are for people who insist on buying stocks. But in a market where the future is probably lower than the present, why buy at all? I personally have been building a cash position for months and have the highest proportion of cash presently that I've had in years. I also have two of my four retirement accounts *completely* in cash****. They are not for generating income - they pay almost nothing - but for buying stocks at much lower prices than today.

Now the big question, the one that is popping up more and more: are we headed for a market crash? I don't know, but I would not bet on it and am not betting on it. A lot of folks are busy comparing the present charts to 1929 and 1987, but I find their conclusions less than convincing (charts will tell you everything you need to know except the future) if for no other reason than that I believe the central banks will throw as much money at the markets as is necessary to avoid it*****. There really is a Plunge Protection Team, and they have a big checkbook.

What about the future? I think we have a lot of problems in the markets to work out. I think they are bigger than is being reported, they will last longer than is being reported, and they will be far, far more widespread than is being reported. Remember, Wall Street's job is to SELL YOU STOCKS. That's how they make their money. The vast majority of talkers on financial programs will tell you what to buy, and they will sell it to you, all the way down. Caveat emptor.

Finally, a thing about bears. I am one, but only at current prices. No matter how bad the problems get, they are not the end of the market. They are not the end of the world. They are an opportunity for people who saw and prepared to do very well and an opportunity for fools to get wiped out. Bears do not believe in financial Armegeddon (Jim Cramer's word, not mine) because they want to see people suffer, they simply see it coming and look to preserve themselves and their loved ones from it.

I want to see you preserve yourself from it as well. So don't count on me or what I say, do your own homework and protect your own family. We have a bumpy ride a-coming.

I really, really hope this is the last post I do on this subject.

UPDATE: Finally, I would be remiss if I did not tell you where to learn more for yourself, so here are a few sites and notes:

If you really want to understand the credit problem, Mike Shedlock has the best blog on the web. He's a deflationist (while I am an inflationist) so I don't always agree with him. But where I do not, he is more likely to be right than I. He also links a lot to Minyanville, which has been fantastic lately. Kevin Depew's column "5 Things" is timely and relevant, always.

If you want to understand derivatives, read Jim Sinclair. Avoid the charts unless you really want to learn them seriously and just read him. Sinclair has been a trader and a head of public companies for decades. He knows what he's about.

If you want 'oh-sweet-darwin-it's the-end-of-the-world,' Financial Sense and Dollar Collapse will give it to you. But they will also give you very good analysis. Unfortunately, it's not always easy to learn which authors are chicken littles because they are selling a newsletter (and even a few who are are very good.) But there's a high noise-to-info ratio at both sites, so beware.

OK, you're on your own.

* This really frosts me: why are these guys telling consumers to sell housing companies now? If they were worth a plugged nickel, they would have been screaming 'sell' a year ago. Now that investors have lost 70-100% of their money in these weapons of capital destruction, it's a little late to raise the sell sign. Bah! I guess they needed someone to sell to.

** that is 'a' problem, not 'the' problem.

*** disclaimer: some of these I own, some I have owned, some I will own if they hit my target price. If they go too high too fast, the shares you buy could be mine.

**** That doesn't mean El B has escaped subprime. At least one of them occasionally holds a small position in mortgage-backed repos. Nothing I can do about that; the company simply does not offer a 100% government paper fund. If you can do better than me in that regard, I certainly will not call you names.

***** Of course, now I've jinxed the whole thing.

Making the scriptures common

Too many bibles make Pastor a sad panda:

I will admit that it has made me sad, in the past fifteen or so years, to see so many pastors adopting the NIV in their teaching; for this has encouraged those being taught to rely upon this version. Once again, my personal feelings are that this has been caused mostly by the massive publishing campaign instituted by Zondervan Publishing. Now they are pushing the TNIV Bible, which some claim is gender neutral, but Zondervan claims is just bringing the Bible more up to date with the English language. I often wonder if God truly wants the Bible to be more English friendly. He did originally write it i[n] Aramaic and Greek, didn't He?

Ignoring two minor problems with the above*, whether God truly wants the Bible to be presented in a language in which common people can read and understand it is a pretty important question, forming as it does the basis for argumentation against both the KJV-only position and, to a lesser extent, the Vulgate-only position promoted by the Catholic Church for centuries. It also underlies the question of whether the Bible should be translated at all - since languages never translate perfectly one to another, something of the original meaning is always lost in translation. In this sense the scriptures are no different than, say, the plays of Nabokov or the operas of Wagner.

But how does one go about arguing for what God wants when God doesn't say one way or the other? The best way, I think, is to look at what God did, in this case, to examine the language in which the Bible - and specifically the New Testament - was actually written.

There is not one Greek language in history, but four** (classical, Koine, Medieval, and modern) and the New Testament was written in the second. Also known as "common" Greek , it flourished in about a 600-year period straddling the first century. And the reason it was called 'common' was because it was just that, the language used by the common people of the Empire. It was not the language of government or poets but a bastardization of that language which incorporated a number of features of the native languages of the fishermen and farmers and huddled masses who made up the vast majority of the people of the Greek and later, the Roman empire.

And there was, through much of that period and later, a literary reaction against Koine, a 'fundamentalism' if you will, called Atticism, which insisted that all writing be done in classical Greek - which is why, other than the NT and maybe Polybius and Epictetus, there are very few surviving documents written in Koine. The writers of the Bible would have been in good*** company had they written the NT in classical Greek rather than common.

But they did not. And why not? It is not difficult to conclude that the reason they wrote the NT in common Greek was because (ta da!) that's what the common people understood, and it was more important to present God's word in an understandable form than a punctilious one.

Which brings us back to English. When Pastor wonders whether God truly wants the Bible to be more "English-friendly," he is really wondering whether God wants it in a form that our own fishermen, farmers, and huddled masses can understand it****. And while no one ever bothered to ask God so far as I know, I think God has already answered.

* 1) God didn't "write" the Bible in the strict sense (small parts, sure, c.f. Exodus 31:18).
* 2) Aren't we forgetting about Hebrew?

** If one wants to get picky one could throw in Mycenaean, Attic, and a host of other dialects.

*** or at least sophisticated

**** Honestly, I share the pastor's preference for the NASB, which I find (now that they have eliminated the pretentious 'thee's and 'thou's) is a very good translation, maybe the best there ever was. However, when I taught the Bible to a group made up mostly of moderately-educated and older rural folks, I discovered that they had a hard time reading it aloud, much less drawing the meaning from its precision - it simply does not 'speak' the way they do. Once I switched them to the NIV, the problem disappeared and they began to not only learn but to enjoy learning. While serious bible study is a task to be undertaken carefully and with the best tools available, one must crawl before one can walk.

Fauxtography

For those who can't read the caption, it says, "An elderly Iraqi woman shows two bullets which she says hit her house following an early coalition forces raid in the predominantly Shiite Baghdad suburb of Sadr City."

The fauxtograph was credited to Wissam al-Okaili and published by editors who presumably* own no firearms.

UPDATE: This is a great story. So great, in fact, that it was told July 10th by the same fauxtographer, except this time the bullets were in her bed. It might even be the same woman, though I'm not sure. It's like that crazy uncle who always tells the same joke every year at the family picnic.

* and probably for the best, all things considered.

(hat tip: Captain Capitalism)

Give them all scholarships to Virginia Tech

(hat tip: Mike T)

Speaking of cows...

Because I don't particularly feel like writing anything today*, I present a rerun, the touching story of an American college student abroad, a Danish drink called "gluck," and badass Australian cows:

(language and drink warning)

True story.

I was in grad school in Sydney, living on campus. There were two Danish guys in the dorm, Mike and Lasse, who had kept in contact with some Danish girls who were going to another university out in the sticks, around dairy and emu farms. Since I didn't have any family around, and had no money to fly home for the holidays, they were nice enough to invite me to their little Scandanavian Christmas.

Things started out great. I was the only non-Dane in the room, but everyone was so nice, I was really starting to feel welcome. Then they prepared the Gluck.

If you don't know what it is (as I didn't then), let me explain: Gluck is a traditional Danish holiday drink made from hot wine, but there are spices and nuts and rasins and shit in there too. I guess you have to have been raised on it, because I could barely choke it down. But since I was a guest, I did my best to smile and swallow. I drank entirely too much of it. ENTIRELY too much.

Later on that night, after everyone was a bit lopsided, the American bashing started. Not mean spirited, or anything, but needling just the same. You know, things like, "Why do you love war so much?", "Why are Americans so fat?", and "What makes you think cow tipping is so funny?"

I was trying, without much effort or success, to defend myself. I explained that I didn't think cow tipping was particularly funny, and that I had never actually been cow tipping. So of course Mike and Lasse start screaming, "Let's do it! I want to see an American tip a cow! That would be funny as hell!"

I said Fuck no, I'm not tipping a cow, but everyone was really into it, and Mike and Lasse said that they'd go with me and tip as well. In my drunken mindset, it started to make more and more sense to me, so I reluctantly said Okay.

So we went out into a field that has maybe six or seven cows in it, and Goddamn if Mike didn't pick out the fucking biggest cow. He said, "Tip that one. Just walk up to it an push it over." Are you fucking kidding me? The cow must have weighed 500 pounds. There was no way I was going to just push it over. I said as much to Lasse, and he said, "Okay, get a running start."

Well all right...that made much more sense...I got about 50 feet away from the cow and took off. I got up a good head of steam, and ducked my shoulder at the last minute for the best impact. I even aimed high for the best leverage possible.

Lessons learned from that experience:

1. Cows are fucking heavy.
2. Cows are fucking hard as rocks.
3. I am fucking stupid.

I just about fractured my clavicle, and the cow shuffled over about half a step and walked off, leaving my stupid, drunk ass whimpering in the mud. The rest of the cows woke up and sort of wandered off. Mike and Lasse were pissing themselves in laughter. I picked myself up off the ground and resigned myself to taking the walk of shame back into the house.

As we were walking back, we passed a Momma cow and her little calf. I don't know anything about animal husbandry, but I guess the calf was maybe a year old. Cutest little thing. Mike pushed the calf over. He didn't say anything, didn't look to Lasse or myself for approval, just suddenly pushed him over. And started laughing like a lunatic.

The Momma cow freaked out. She gave a scary ass cow scream, which I had never heard before and hope to God in heaven that I never hear again. Jesus Christ, I nearly shit myself. I had no idea that a cow could make a horror-movie scream like that. Then the cow charged. Fuck, you never saw three drunks run like that. Suddenly, I remembered a joke from my childhood. Something about running from a hungry bear: I don't have to be faster than the bear, I just have to be faster than you.

Lessons learned from that experience:

1. Cows are fucking scary fast.
2. Drunk people can't run.

I was clearly in the lead, running back toward the fence. I hopped nimbly over (har har) and promptly spewed all over myself. Purple fluid, nuts and raisins came shooting out of my mouth like the pie eating contest in "Stand By Me". It was evidently quite spectacular.

Mike came over next, but it was obvious that Lasse wasn't going to make it. I guess he thought he was being chased by a bear, because he decided to fall down and play dead, but it was clear the cow wasn't to be had so easily. She stopped, rolled Lasse over with her nose, and started sniffing him. For a minute I thought his ruse was going work. Then the calf trotted over, and I swear, with God as my witness, monkey-stomped Lasse in the nutsack. Then the Momma and baby just walked away. Lasse projectile vomited in a fashion very similar to my own. Mike and I stood there, open-mouthed, disbelieving.

We never spoke of the incident again.

* I was actually going to explain why the Fed cutting the discount rate caused me to buy Nevsun warrants this morning, but ye allahs, how boring is that?

But I guess it's good news for farmers...

(link to article)

Too bad a fainting couch won't fit in her purse

A new entry for the "Women are Children" files:

Meet the sleek new C2 stun gun from Taser International in Scottsdale, a controversial device aimed mainly at women consumers that has sparked widespread concern among U.S. law enforcement and human rights groups...

[T]he new, lighter, brighter designer version, which was launched in late July with a price tag of around $350, is small enough to tuck into a purse and packs the same paralyzing punch...

But some of the nation's top police authorities are concerned that the gadgets could easily wind up in the wrong hands*. Amnesty International also is opposed, saying it can pose "serious harm" for women.

That's right. It's a well-known fact that giving a woman tools that could protect her from physical harm puts her in imminent danger of that same physical harm. Through the wonders of sympathetic magic, it is the tool that creates the danger in the first place, ergo banning the tool eliminates the danger**. Logically then, women are safer when they have nothing with which to protect themselves. How has that played out in history?

But those who believe that women are by nature both too virtuous and too fragile to take even a small part in ensuring their own safety do have one thing correct: a taser is the wrong tool for a woman. This is the right one.

* read: "a woman's hands." Men can already buy tasers, so the cops can't be talking about them.

** This is why liberals ban crayon drawings of guns from schools and why feminists are nearly always opposed to concealed carry. They live in a world imbued with magic, materialist objections notwithstanding.

And now for something completely Canadian

You old farts might remember this...

And you call yourself a scientist

There are two areas in which the parallel universes known as 'mathematical models' nobly attempt to stand in for the real ones:

The first is global warming:

Natural weather variations have offset the effects of global warming for the past couple of years and will continue to keep temperatures flat through 2008, a study released Thursday said.

But global warming will begin in earnest in 2009, and a couple of the years between 2009 and 2014 will eclipse 1998, the warmest year on record to date, in the heat stakes, British meteorologists said.

Existing global climate computer models tend to underestimate the effects of natural forces on climate change, so for this analysis, Met Office experts tweaked their model to better reflect the impact of weather systems such as La Nina, or fluctuations in ocean heat and circulation.

What is most interesting about this study are three facts: a) this year, the model got reality wrong; b) the models excluded data that by all means should have been included; and c) we are assured that the model will predict the future going forward, even though it has failed to predict today. The future is assumed to occur without the variations that haunt the present.

The second area is global finance:

It was widely reported in the media on Thursday that Global Alpha, a mega $9 billion hedge fund in Goldman's asset management group, was down 16% for the year.

Unlike the typical hedge fund, Global Alpha is a quantitative fund, meaning that its trades are determined by computers and convoluted mathematical models. Some quant funds are completely computer dictated, while others spew out investment options for a human trader to veto or accept...

Of course Global Alpha might not be alone. While it may be one of the most high-profile funds because of its size and the name of its parent, other quantitative funds may also be at risk.

What is most interesting about this story are three facts: a) this year, the model got reality wrong; b) the models excluded data that by all means should have been included; and c) unlike global warming models, there will be no future going forward for these funds because the future was assumed to occur without the variations that haunted the present.

Models are not science and they are not finance, they are mathematics and are therefore captive to literally a million variables, events, tides, occurrences, trends, and changes in trend which must necessarily fall, unknown and unaccounted for, outside the model.

When the model fails, it is easy to look back and discover why, to see what was missed. We didn't count on El Nino. We didn't expect housing prices to stall. And it's tempting to say that with every fix, NOW the model is correct, NOW the model will tell us the future*. It will not and cannot, because the computer thinks precisely as its programmer thinks, only faster. If the creator of the model was such a genius that he could create a perfect model, he would not need a model at all.

The problems in the current market are far deeper than simply subprime; subprime was a fuse on the bomb, not the bomb. Central banks all over the world have not created a half trillion in new money in the past week and injected it into the market to paper over the 3% (delinquent) of the 13% (subprime) of US mortgages that have gone bad. They are dealing with the collosal and coordinated failure of the alternate universe of global financial models to account for that tiny percentage of loans.

Mish, in a great piece on this genius, concludes:

"[T]here comes a time when all such models break down. We saw it with LTCM, we see it now with Moody's, Fitch and the S&P, and we see it again with Goldman Sachs's Global Alpha quant fund that simply cannot trade.

There is one more model that going to fail as well. That's the model [that] thinks the Fed can keep engineering bigger bubble after bigger bubble to bail out the markets. That model is on the verge of collapse right now and that is what has nearly every central bank spooked.

That's precisely what we're about to find out. And I suspect it will be a lot sooner than the new, improved global warming models tell us we're all going to die - that is, as soon as the future stops throwing surprises at us.

*It's like a programmer who fixes a bug in a complex system and believes that now he has gotten them all. Trust me, there are more. I make them for a living, and I've been busy.

something in here smells a lot like 'loser'

A good liberal is hard to find

It appears that San Francisco sweetie Garling Gauge has deleted her blog. Lawrence.com's "Yellow Dog" (David Ryan) also hasn't updated in 14 months and so has been dropped from the blogroll. That leaves only Coolaqua in my hardcore liberal corner - all the rest are center-right or libertarian, or apolitical.

I hate to be unbalanced*, so on the odd chance that you, dear reader, are a liberal who wants a link exchange, let me know and I'll add you in their places.

UPDATE: Garling Gauge is back at a new address. Never mind.

* unfair I can live with.

(hat tip: Jim Sinclair)

Something wicked this way comes

When I was a kid, one of my favorite vacation pastimes was making a map of the US with the states drawn in, then marking them in whenever I saw a license plate from that state. It was sort of a nerd's* bingo, and while I never got all of them (I've still only seen two Hawaii licence plates stateside in my life) on any one trip, it was still a lot of fun - perhaps it's a reflection of my personal oddball propensity to try to assemble disparate pieces into a rational whole.

I kinda found myself doing the same thing tonight as I was checking over the financial press, looking for the big names to see if there were stories or rumours about losses from last week (e.g. there's Bear, there's Goldman, where's Chase?) because the panicked actions of the Fed on Friday, rather than calming investors, ought to have let them know they have embarked on a different kind of trip: there is someone in trouble in the market, and that someone is big. Really big. Too big to fail.

The evidence is spotty at best. On Thursday, the ECB injected nearly $100 billion into the credit markets, the Fed a little less than half that- - I remarked at the time that this was a bigger number than 9/12. Then on Friday the Europeans came in with another $65b and the Fed came in three separate times, for $19b, $16b, and $3b. Smaller numbers, to be sure, but the pattern is what is scary. Why didn't the Fed just make one injection for $38b? Why instead make one, announce it, then make another, announce it, then finally make a third**? The Canadians came in with more of the same, as did the Japanese. Finally the markets closed for the weekend, and the stories*** I'd been seeking started popping up:

SAN FRANCISCO (MarketWatch) -- Goldman Sachs Group's $8 billion Global Alpha hedge fund has fallen 26% so far this year, a retreat that could lead skittish investors to cash out, according to a Friday report citing unnamed sources.

SAN FRANCISCO (MarketWatch) -- Citigroup Inc. has reportedly lost more than $700 million in credit business in recent weeks, placing the world's biggest financial services firm high on the list of casualties from the market-roiling credit crunch.

While both of those are huge names - the kind of names I expected to see - neither of the stories explains the coordinated panic of the world's central banks. That story has not yet made the press. I hope I'm wrong. We'll know soon enough.

* I know, I can't help it. Shut up.

** I conclude (probably incorrectly, I'll admit) that they came in three times because while they expected each injection of credit would solve the problem, it did not, demanding another injection.

*** Rumors, really.

Don't take any wooden nickels

I have in my coin collection a strange artifact of the Great Depression: a 1929 nickel made out of lead. It's not 'real,' of course, but rather is a silent reminder of a time when actual money was so scarce that it was worthwhile for some clever entrepreneur to make his own out of whatever cheap metal he could find laying around. In those days money was dear. Despite FDR's best efforts a dime was still worth begging, a nickel worth counterfeiting.

We seem to have the opposite problem today*, where a blob of nickel loses half its value as soon as the government stamps a bust of our third President on it. But Uncle Sam will fix that**:

Making coins may soon make more cents...

[U]nder a measure recently proposed by members of the Senate and House, the Mint would have the power to alter the metal composition of coins to make them cheaper...

"This proposed legislation establishes an open, flexible process to evaluate and use alternative materials for producing our nation's coinage more economically," Mint Director Edmund Moy said in a statement.

So today's question*** is simple:

If we're going to make coins out of something cheaper than copper, zinc, and nickel, historically considered the basest of base metals, a) what could we possibly use? and b) how long would it take us to re-train every cashier and re-gauge every vending machine in the nation to accept the new, improved slugs that will now pass for money?

* Though, ironically, the same solution.

** Of course, it is only because of Uncle Sam's greed combined with his monetary incompetence that the current penny and nickel accidentally became money in the first place, necessitating that they be removed from circulation. So I'm obviously using the word "fix" in the same way the Treasury Department and the Fed use the word "contained."

*** And I note that while there is a plethora of stories in this vein, this question is seldom asked.

Help us Obi-Ron Paulnobi

Ron's ubiquitous commenters say he's our only hope:

Ron is the man for our time. He could get this straightened out. God speed, sir...

Ron Paul is The only Candidate that is Honest and Knowledgable–Who will Restore Our Constitution before it is too Late...

Ron Paul is the last great hope for America as a nation that is a leader in freedom, hope, and honor. Helps us Dr. Paul, you’re our only hope…

Anyone reading the conservative or libertarian sites has seen plenty of the above from Dr. Paul's supporters*. Dr. Paul walks on water. Dr. Paul can change the world. Dr. Paul can save America.

He can't.

Look, I'm a Ron Paul supporter. I met the guy in 1988, loved what he said, and then voted for GHWB because it was "the most important election of my lifetime." 5 most important elections of my lifetime later and I'm still kicking myself for not voting for Paul rather than against Dukakis. If he's the GOP candidate, I'll vote for him next fall. I wish we had 535 legislators in his mold. I love the guy, which is why I listen to him when he says, "More important than the man is the message for liberty."

Ron Paul, even on the long shot that he were to be elected, could not save America. In fact, the more successful he was, the less power he would have to DO anything to save America. His entire message is that the government - and especially the president - cannot save you in any meaningful sense. The "message for liberty" has no place for an executive to save the nation.

Ron Paul would not be a successful President anyway, because he would be fighting against a united Washington establishment. He would not be a popular President, because Americans love their government-sponsored goodies. He certainly would not be a powerful President even if he were so inclined, because he would have no one with a vested interest in his success, not unlike Jesse Ventura when he was governor of Minnesota**.

Ron Paul could not possibly live up to the hype of his most vocal supporters. He WILL let them down if they expect him to save anything. Ron Paul's loudest supporters are looking for a man, a politician, to save their nation for them. So are John Edwards' supporters. So are Hillary's supporters. All of these people want a politician to take control and fix America.

And Ron Paul not only can't do that, he won't even try. Ron Paul says if you want it saved, save it yourself.

* Which is probably the main reason Paul is so hated by A-list conservative bloggers. The adulation is so intense that on a few days I've seen upwards of 30% of the articles on LewRockwell.com either by or about Ron Paul.

**The best we could hope for is that much of the Federal government would atrophy because Congress could not override his veto. Congress will certainly not voluntarily join a crusade to cut their own power.

In the Press Template

Only the first 4 words are important:

African-Americans are victims of nearly half the murders committed in the United States despite making up only 13 percent of the population, a report published Thursday showed.

Around 8,000 of nearly 16,500 murder victims in 2005, or 49 percent, were black Americans, according to the report released by the statistics bureau of the Department of Justice.

Broken down by gender, 6,800 black men were murdered in 2005, making up more than half the nearly 13,000 male murder victims...

Young black men aged between 17 and 29 bore a disproportionately high burden in the grim statistics, making up 51 percent of African-American murder victims.

but buried waaaaay down in the article is a telling statistic:

Most murder victims -- 93 percent of blacks and 85 percent of whites -- were killed by someone of their own race.

It seems to me that presenting blacks solely as victims, who stoicly "bear a disportionately high burden in the grim statistics," completely ignores the cultural and criminal side of the story. Isn't it at least as newsworthy that blacks, who make up only 13% of the US population, commit nearly half its murders, more than nine times in ten against members of their own race? And would saying so not be a good first step towards identifying - and perhaps addressing - the pressing problems of the black community, which not only contains the largest plurality of society's victims, but society's perpetrators as well?

Or can that not lead because it doesn't fit the template?

UPDATE: My man Snoop has another take.

Liar, liar, market on fire

It's the end of the world as we know it, or so one might think from reading the financial press following today's 400 point drop in the Dow. But since most analysts quoted are usually just talking their books*, reading the quotes will tell you how an analyst is invested but very little about what the market will do next. That being the case, one is wise to ignore the quotes except in conjunction with actions taken by those quoted.

So it's extremely enlightening to see the actions of the European Central Bank last night when a credit crunch developed (caused ultimately by subprime and causing short-term rates to spike as banks in Europe scrambled for cash) and the ECB acted to inject liquidity, meaning they created a bunch of money from nothing and lent it to anyone who asked for it.

The reason that action is so telling is this: the potential of a subprime-led cash crunch is not new**. In fact, as early as January of this year, not only was the ECB talking about it, they were warning investors not to count on them for a bailout:

Jan. 26 (Bloomberg) -- European Central Bank council member Axel Weber said investors shouldn't expect central banks to bail them out in the event of an "abrupt'' drop in financial markets.

"If you misprice risk, don't come looking to us for liquidity assistance,'' Weber said in an interview in Davos, Switzerland at the annual meeting of the World Economic Forum.

Investors ignored the warning, counting instead on what has become known as the "Greenspan Put," that rush of central bank money any time a problem develops in the market. Who was correct? Investors were:

Aug. 9 (Bloomberg) -- The European Central Bank, in an unprecedented response to a sudden demand for cash from banks roiled by the subprime mortgage collapse in the U.S., loaned 94.8 billion euros ($130 billion) to assuage a credit crunch...

The ECB said today it provided the largest amount ever in a single so-called "fine-tuning" operation, exceeding the 69.3 billion euros given on Sept. 12, 2001, the day after the terror attacks on New York.

Some "fine tuning." Not only did the ECB come thru to bail out investors, it came through with 150% of the cash called for after 9/11. There's a similar story with the Fed, which sent William Poole out a few weeks ago to tell investors they were on their own and then provided emergency cash last night to save their bacon.

Two weeks ago the story was:

The Fed should only act "in due time" if evidence accumulates that the market upsets threaten to cause price stability or low unemployment, or when financial-market developments threaten market processes themselves, Poole said.

And yet the Fed acted. And markets are now expecting the Fed to lower interest rates at or before their next meeting, scheduled for September. Action always leads to the expectation of further action.

So one of two things is true. Either the Fed and the ECB are liars who say they will stay out of markets and yet stand ready to inflate at the slightest sign of trouble****, or the current market "threaten(s) market processes themselves," in other words, we are on the verge of a market-locking, gut-wrenching crash across multiple markets.

I don't know which it is, except that it's possible if not probable that both are true simultaneously. In the meantine, anyone up for s'mores?

* If a reporter is looking for a bullish quote, he speaks to an analyst known to be bullish, if he's looking for a a bearish quote, he speaks to a bearish one. In reading the tenor of any story, one can almost predict who will be quoted, since the quotes are surprisingly consistent over time.

** As much as it would bolster my ego were it true, I didn't discover or invent it. I just drone about it interminably.

*** The position taken by the market at large.

**** eventually causing a crash in the dollar and simultaneously encouraging investors to ignore risk and take actions that will ensure that crash is fatal.