Brace yourself. Or, as we used to say in the Army, BOHICA...

The market has selling off substantially for over 24 hours now, with no visible signs of stopping.  

The real story is in the FX markets which are utterly going apeshit, along with the Treasury Curve which is blowing wildly higher (rates); the TNX is now +5.9% on the day (10 year).  The odd part of this is that the 30 year is only up 2.4% -- but the FVX (5 year) is up a stunning 15% -- straight up. Mortgage backed securities have fallen over 200 basis points in the last 36 hours. Gold is plummeting as well.

Reduce risk folks—the FX moves alone are going to generate some very interesting margin activity over the next couple of days, and coming right into the maw of a Quad Expiration along with the bond market moves..... oh boy.

What we have here is a massive clusterfuck.  "QE" has been a disaster, irrespective of what you think about Bernanke's "crisis management."  The fact of the matter is that the "crisis" was in 2007 and 2008, The Fed caused it with its policies back in 2001-2004 and through willful and intentional failures in supervision of the banks and non-banks through 2007 and Bernanke was both there and then running the show during that time; in point of fact he was one of the chief cheerleaders for Greenspan's policies during that time period!

You can always trust the guy who blew it to blow it again and that's exactly what has happened.  Not necessarily hyperinflation; what we've done is grossly inflate fast-money asset prices while the rest of the economy does not merit those prices.

Any sort of dispassionate analysis must arrive at the same end-point--the gross and outrageous distortion of borrowing costs and "easy money" have massively diluted the currency while at the same time has led corporations to make radically uneconomic decisions that only work due to those distortions, but during the time they're in place they are the only reasonable way to satisfy investors.

That is a recipe for a massive reversion back to value and what's worse is that the costs, particularly the rollover risks that have now become embedded through the economy, are going to screw people up, down and sideways.

You and I don't see these risks because rollover risk is something that most consumers never deal with (except for those who were in Option ARMs during the bubble, of course—they got a lesson in it first-hand and most of them went ka-boom because they were stupid.)  But for corporations and governments this risk is a daily issue that never goes away.  Schools, roads, capital equipment in business and even operating expenses are often rolled up into various financing packages none of which are typically amortized to completion and retired--they are instead rolled over continually because this makes your operating results look much better than they otherwise would.

The problem is that this "picture" of the health of your enterprise is dangerously distorted.  The fact of the matter is that debt, when taken to increase production, can be beneficial provided you can and do retire it at a rate that exceeds the economic service life of whatever it buys.  When it is rolled over on a continual basis it is not beneficial; it simply adds leverage to your enterprise, whether a company or a government.

The reality of leverage is that it amplifies results, both on the upside and the downside. It's a math thing, and since we refused to learn this in 2007 we will get taught the lesson again—soon.

Brace.

We're Number One...in San Francisco??

Really? How did this happen?

I guess it explains much regarding me, personally. I did--for reasons unknown--grow up in a household that loved the University of Michigan. I can remember watching Michigan play in the Rose Bowl (what seemed like) every single year; my father going on and on about how great Bo Schembechler was and how what a  great academic school UM was.

"The Berkeley of the Midwest," he called it.

Something must have stuck. Because here I am; almost 30 years later and 2500 miles away. But you know what; turns out I didn't grow up in an isolated household. In fact, it turns a lot out people in San Franscisco love the University of Michigan.

How much?

According to Deadspin, more than any other college competing in this year's NCAA basketball tourney. More than longtime powers Duke, UNC and Kansas. More even than local entrants St. Mary's (from nearby Moraga) or UC Berkeley, who's main campus is only a jaunt across the Bay Bridge away.

Here's Deadspin regarding teams that failed to win the popular vote of their local surrounding areas.

"That leaves Cal as the most baffling: the prestigious public university didn’t manage to snag even one of the eight counties that make up the Bay Area. One went to also-local Saint Mary’s, six went to Kansas, Duke, or UNC, and San Francisco, for some reason, went to Michigan."

So I guess there's only one thing left to say.

HAIL.

That "can't happen here." Bullshit, it can't. It already has.

Anyone remember what happened 71 years ago this week?

Probably not.

On February 19th, 1942 FDR willfully and intentionally violated The Constitution, an act for which he should have been impeached. I am speaking of the Executive Order 9066, more commonly referred to as Japanese Internment--the rounding up of over 100,000 people who were frog-marched into Concentration Camps on American soil.  Far more than half of these people were American Citizens with a full and complete set of alleged Constitutional Rights.

We, America, did this.

We, America, imprisoned our own citizens without trial, without suspicion, without due process of law and without evidence. We did so merely on their genetic code and the ancestry of their parents. We did this on American soil and through the American mainland, not in some foreign combat zone.

I repeat:  We, Americans, did this.

We did this here.  We not only took these people's freedom without cause we dispossessed them of every worldly thing they owned that was not able to be carried in their hands at the time they were rounded up.

 Those who are in our government in any capacity, local, state or federal, and state that our government "would never do such a thing" are factual liars, as our government has already proved through its own actions that it not only will do so, but has done exactly that.

NEVER AGAIN is not just for Jewish people. 

It is for us all.

It's not about hunting, idiots...

In the wake of the Sandy Hook tragedy, I have tried to stay out of the Gun Control debate all weekend, due to the fact that I have very firm feelings. But one thing that struck me over the weekend is this: to a man, every single proponent of firmer gun control laws talked about how certain types of firearms are "unnecessary" for hunting or self defense. These weren't just journalists, but politicians as well.

Funny, how not a single one of them points out that the Second Amendment wasn't established with hunting in mind at all, and self-defense being a very small reason. I haven't heard a SINGLE person (so called "expert") bring up the fact that the Second Amendment was in fact established to vouchsafe the populace against the tyranny of government. The United States government. Yours and mine.

"The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government." – Thomas Jefferson 

The fact that none of these politicians bring this up should surprise me, but does not. Governments by nature want to hold on to (and/or grow) their power. Firearms threaten that, which therefore makes sense that you don't hear about this (most important) aspect of the Second Amendment.

"The natural progress of things is for liberty to yield and government to gain ground." – Thomas Jefferson 

The greatest enemy of a police state Big Brother government is a populace that is both well-informed and armed. Since the US was established and the Constitution drafted, governments across the world have killed hundreds of millions of people--their own citizens. Not so in the US, and there is a reason for that.

"This year will go down in history. For the first time, a civilized nation has full gun registration. Our streets will be safer, our police more efficient, and the world will follow our lead into the future!" 

– Adolph Hitler [1935] The Weapons Act of Nazi Germany. 

I have heard it surmised that the Founders of our government never envisioned a world where one could purchase an .223 AR-15 with a 30-round magazine when they drafted the Declaration of Independence; that this document was drafted based on a world of muskets that required 20 seconds to load, aim and fire a single round. That's utter hogwash and anyone spewing that drivel either A.)Has an agenda, or B.)Doesn't understand the purpose of the Second Amendment. It was put in place so that average citizens could--in the event of tyranny or dictatorship--band together in the form of organized militias (almost exactly as they did during the Revolutionary War) in order to combat the forces of the government. If the intent is to ensure the population can effectively combat soldiers that in 2012 are carrying M-4s and SCAR-17s, then of course it makes sense that the average citizen should be able to purchase one.

"Germans who wish to use firearms should join the SS or the SA--ordinary citizens don't need guns, as their having guns doesn't serve the State." – Heinrich Himmler 

The Second Amendment ensures that the government is sufficiently scared of the population, which is exactly what it is intended for. The Second Amendment is what gives teeth to the rest of the Bill of Rights, and ensures "government of the people, by the people, for the people." The rights to freedoms of speech, assembly, religion, etc. don't mean squat without the Second Amendment, because it is the right to bear arms that ensures the people are in power.

"When the government fears the people, it is liberty. When the people fear the government, it is tyranny." – Thomas Paine

Sadly, this liberty has a price; collateral damage. We see it every day, According to the CDC, approximately 19,000 people were murdered in America in 2009; that's roughly 46 people per day. I won't get into the rise of mass murders over the last few decades, which in my mind is more a function of the use/abuse of psychotropic drugs amongst our youth than anything else. But the bottom line is this: people die every day through violence in America. And this is a side effect of living in a free society. It sucks, and I would love for us to find a way as a society to make it better.

The hard question is: is it an acceptable side effect of living in a free society? I would say it is. But that's a hard question that most people don't want to answer. How do you tell someone that lost a loved one in a shooting that it was "acceptable collateral damage"? It's not nice, it's not polite, and it's certainly not politically correct. But it's still accurate.

"They that can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." – Benjamin Franklin 

But when you accept the fact that we are debating the future of a nation, and the rights of your children and your children's children to grow up in free society, then it's a hard question that must be asked.

"Make yourself sheep and the wolves will eat you." – Benjamin Franklin 

 And we all know how I feel about sheep.

I Am The Sheepdog

“We know that the sheep live in denial; that is what makes them sheep. They do not want to believe that there is evil in the world. They can accept the fact that fires can happen, which is why they want fire extinguishers, fire sprinklers, fire alarms and fire exits throughout their kids’ schools. But many of them are outraged at the idea of putting an armed police officer in their kid’s school. Our children are dozens of times more likely to be killed, and thousands of times more likely to be seriously injured, by school violence than by school fires, but the sheep’s only response to the possibility of violence is denial. The idea of someone coming to kill or harm their children is just too hard, so they choose the path of denial.

The sheep generally do not like the sheepdog. He looks a lot like the wolf. He has fangs and the capacity for violence. The difference, though, is that the sheepdog must not, cannot and will not ever harm the sheep. Any sheepdog who intentionally harms the lowliest little lamb will be punished and removed. The world cannot work any other way, at least not in a representative democracy or a republic such as ours.

Still, the sheepdog disturbs the sheep. He is a constant reminder that there are wolves in the land. They would prefer that he didn’t tell them where to go, or give them traffic tickets, or stand at the ready in our airports in camouflage fatigues holding an M-16. The sheep would much rather have the sheepdog cash in his fangs, spray paint himself white, and go, “Baa.”

Until the wolf shows up. Then the entire flock tries desperately to hide behind one lonely sheepdog.” – LTC Dave Grossman, US Army (Retired)

Damn skippy, Colonel. Damn skippy.

Hello, Cedar Point!

Life is a roller coaster. An amazing, topsy-turvy ride full of thrills, screams and everything in between. I've had an interesting week, folks. But in the midst of right crosses out of left field, I never could have possibly imagined that the part of my week I've been dreading for weeks would have been the single best thing about it.



Go figure, huh? Live every minute, my friends. Enjoy the ride. Cheers.

Serenity now, people...

Yes, it was a bad bad BAD sports weekend is Southeast Michigan. As someone that is not only a huge sports fan, but also a resident of this area I get that. But you people need to chill the fuck out.

No. Like seriously.


Yes, Michigan lost to State. And the Tigers got knocked out of the playoffs. And the Lions dropped a hard-fought battle to the 49ers. So I get that it sucked. I feel it. But can we just please step back and get some perspective?

First, did anyone expect the Wolverines to go undefeated this year before the season started? If you answer "yes" to this you are a damn liar. Considering the shit sandwich Rodriguez left behind for Hoke, 6-0 was a damn fine start. Once O$U started imploding, it was pretty obvious that Sparty was going to be the toughest opponent on our schedule all season. We went on the road and came within one bad play of tying the game in the 4th quarter, despite MSU having a whole lot more talent and depth on both offensive a defensive lines. Yes, Borges playcalling was suspect, and his failure to compensate for State sending blitz after blitz over the middle is inexcusable.

It sucks because Sparty showed why they will always be Little Brother. They have no class, and that starts at the top. But what else would you expect from a head coach that went to O$U and an athletic department that covers up it's players assaulting the student body (sexually and otherwise) on the regular? It sucks for guys like Mike Martin, who have played thier guts out for four years and will never be able to say they beat those assclowns from Moo U up the road. Thanks, Rich. Thank, Bill Martin.

But at the end of the day, we were beaten by a better team. Michigan is still going to win 9 or 10 games this year, and starting in 2013, MSU might not win a game in the series for a decade. They better enjoy it now.

Next up: Tigers. Enjoy the moment, people. I don't remember Nolan Ryan or Sandy Koufax pitching in their prime, but when I am 70 years old sitting on my rocking chair, I will be telling my grandkids about watching Justin Verlander pitch back in 2011. This Tigers team never should have made it as far as they did; sit back and enjoy the moment, rather than taking every opportunity to bash the team, Leyland, etc.

Finally, the Lions. Seriously, people? San Francisco is a damn good team. Once again, who thought before the season that the Detoit Lions were going to the Super Bowl? (I feel like I'm taking crazy pills for even putting those two in the same sentence, but yes, they do belong there together) Who still thinks they are going? Newsflash: no chance. Not with that offensive line. So this is still a rebuilding year. Enjoy it, for fuck's sake!



This moment of clarity is brought to you by John Cusack, circa 1989.