Japan v. Europe / stimulus v. austerity

It's still early, but so far so good for the anti-austerity economic policies of Japan's Prime Minister Shinzo Abe aimed at pulling Japan out of 20 years of economic doldrums.  

He's doing the exact opposite of what the IMF/WSJ/CNBC/Davos talking heads say to do, by spending money and encouraging inflation. 

I know, I know, many old teabaggers are clutching their chests and turning purple upon reading those words, but there are unintended evils attendant with high savings and zero inflation.

So, once again, the rest of the world is doing us a favor, showing us what works and what doesn't, and all we have to do is watch and copy the smart guys.

It's austerity on the right in Europe, and stimulus on the left in Japan.  Who's gonna win?  

Rest assured that your ace blogger will be following this story!....

(This is totally off-topic, but remember that Michael Crichton novel & movie Rising Sun?  Remember how he and others warned us that Japan's economy was going to eat our lunch?  Seems very silly now.  This was the same Michael Crichton, by the way, (may he RIP) who reportedly convinced Dubya that man-made global warming was a scientific hoax.  So that's, uh, two big strikes against the dead guy.)

Japan household spending surges as "Abenomics" gains momentum

By Stanley White and Kaori Kaneko

April 30, 2013 | Reuters

URL: http://www.reuters.com/article/2013/04/30/us-japan-economy-idUSBRE93T03R20130430

Poll: 29 percent of Americans potential traitors

Forget profiling and surveilling Muslims, Arabs or Chechens, why aren't we profiling and tracking this self-identifying 29 percent of Americans?  You can see the poll results here.

These people are obviously gearing up mentally if not in reality for treason and armed insurrection. Where's the FBI, the Department of Homeland Security when we need them?

Seriously though, let me ask my Republican friends to imagine the FOX headline, "Poll shows 29 percent of immigrants/blacks/Northerners/Democrats think 'armed revolution' might be needed."  If you saw that on FOX, would you react with nonchalance?

No, pro-gun conservatives would be climbing the ceiling, ringing every alarm bell they could find.  

Moreover, has there ever been another time in American history when 29 percent of Americans thought this way?  Well, maybe in 18th century when Americans did not have any representation.  But that's not the case now.  

No, this is not good, not good at all.  These are folks who don't respect the scoreboard of democracy and are about to take matters into their own hands.  

These poll results are ugly any way you spin them.

Poll shows 29 percent of voters think 'armed revolution' might be needed

May 2, 2013 | FoxNews

URL: http://www.foxnews.com/politics/2013/05/02/poll-shows-2-percent-voters-think-armed-revolution-might-be-needed/?test=latestnews#ixzz2SEpN5MlD

Cuban: Twitter 'hackcrash' shows danger of HFT

There is an elegant way to solve the problems posed by High Frequency Trading: a financial transactions tax that would be so small as to bother only the algorithm-driven robot traders that make thousands of trades in a second.

UPDATE (05.08.2013): (HT: Ritholtz) Here is a nifty video from Nanex showing 1/2 second of HFT of Johnson & Johnson stock on May 2, 2013:

The Real Problem with the Twitter HackCrash

By Mark Cuban

May 2, 2013 | Blog Maverick

In case you missed it, the @AP twitter account was hacked , which resulted in a tweet that sent markets spiraling down only to recover a few minutes later once it was revealed that the tweet was a fake. Here is more info.

Why did the market head lower so quickly ?  This is from Paste Magazine:

“The events last Tuesday were likely caused by the news-reacting algorithms that are designed to electronically read and interpret machine-readable news,” said in an emailed response by Irene Aldridge, a hedge fund consultant on algorithms and author of High-Frequency Trading: A Practical Guide to Algorithmic Strategies and Trading Systems. “Most of the web content is machine-readable, so lots of algos are built on reading and reacting to news such as the Twitter hack… Clearly in the Twitter case, trading machines did not ascertain credibility of the tweet.”

So how does the future of HFT look in light of Tuesday’s AP hack tweet incident?

Aldridge said in terms of the technology, “going forward, many algorithm designers will take into account the Tuesday situation, and will build ever more sophisticated approaches.”

There is no question that there is an ongoing arms race between algorithm designers, as well as a technology race to improve Language Processing and Translation abilities (disclosure, I'm an investor in Linguasys).  Billions of dollars are being invested to make trading without humans faster, cheaper, smarter. The problem is that no matter how smart you make machines, they will never be smart enough in our lifetime to detect all levels of deceit and fraud. Particularly online.

No one has any idea, other than the traders using the algorithms, which twitter accounts the algorithms follow and read. The same with websites. Which do they track and read ?  If its worth it for someone to hack the @AP twitter feed in order to attempt to destabilize the markets why wouldn’t the same people or others with similar goals set up thousands of twitter accounts that for some extended period are a solid source of news and information, attempting to build  a following that include algorithms reading their feed , knowing that at some point they will tweet market moving fake information ? (Note, you don't have to actually follow an account to get access to their feeds, there are services that provide the twitter hose to financial companies).

It costs absolutely nothing to try to make this happen.  If you follow the writings of Nanex, you know that mini flash crashes happen in individual stocks all the time. That there are algorithms fighting algorithms all the time.  Its to the point where it sounds like the plot of a science fiction movie and it is.

Our markets are at risk.  I can’t quantify how big a risk there is, but I can tell you this, as long as there are algorithmically driven trades that happen in thousandths of a second, we can not eliminate that risk.  As long as that risk exists, there is a significant opportunity for hackers , terrorists (yes terrorists) and crooks to negatively impact our market to the tune of billions of dollars and possibly. This is the rise of the software controlled market. 

There is no such thing as bug free software.  If you are an investor, learn how to hedge.

Taibbi: 'TBTF' bill faces opposition from...S&P?!

In the bizarro world of high finance, the ostensibly conservative ratings agency Standard & Poor's has come out against the bipartisan Brown-Vitter "TBTF" bill in the Senate Banking Committee that would "elegantly" eliminate, according to Matt Taibbi, the Too Big To Fail problem by requiring any bank with more than $500 billion in assets to keep about 15 percent of its capital in reserve, so as not to require a government bailout if their risky investments fail.  

Here's S&P excuse during Senate testimony:

Under our methodology, we would potentially no longer factor in government support if we believed that once large banks are broken up, we would not classify these banks as having high systemic importance.

Here's Taibbi's response to that:

S&P writes about having to factor out the implicit government backing of big banks as though that would be a bad thing. But if implicit government support is the only thing keeping the ratings of these companies even as high as they are now, that means they really should be rated lower, in a true free market.  And Standard and Poor's is, what – against admitting that?  It's nuts.

On the other hand, the Brown-Vitter TBTF bill is supported by the Independent Community Bankers of America, that is ostensibly sick and tired of borrowing at higher rates and having a constant institutional disadvantage compared to Wall Street banks. 

If the voting public continues to pay attention to the TBTF problem then we'll win, because both the far Left and far Right and everybody in between supports ending TBTF, ideologically. But if we get distracted, then the TBTF lobbyists and the corrupt institutions like S&P will cut and gut this bill in the Senate. They don't mind sounding absurd and hypocritical to protect their advantages with the status quo.  

Stay tuned, everybody!....

UPDATE (05.04.2013): For those who are interested, here's a summary from my man Ritholtz of the Brown-Vitter 'TBTF' bill:

• Stricter capital requirements on megabanks, defined as institutions with over $500 billion in assets.
• Six U.S. banks — JPMorgan Chase., Citigroup, Goldman Sachs, Morgan Stanley, Bank of America and Wells Fargo — meet the TBTF criteria.
• Eliminates risk-weights as part of a capital assessment (less reliance on unreliable ratings).
• Does not rely on ratings agency grades.
• Removes off-balance-sheet assets and liabilities as different class — they are treated as if they were on-balance sheet.
• Requires derivatives positions to be included in a bank’s consolidated assets.
• Requires capital cushion that a bank hold be liquid.
• Mandates capital measures be more transparent.
• Eliminates Basel III as a regulatory requirement.
• Restores competition to industry by removing competitive disadvantages mega banks have over smaller and regional community bankers.

Too-Big-to-Fail Takes Another Body Blow

By Matt Taibbi

May 1, 2013 | Rolling Stone:

URL: http://www.rollingstone.com/politics/blogs/taibblog/too-big-to-fail-takes-another-body-blow-20130501#ixzz2S8uS0vvn

Give a kid crack, go to jail; give him a gun - OK!

I don't know what infuriates me more, these parents who gave their 5-year-old boy his own rifle, or his grandmother's reaction after he accidentally killed his baby sister with it:

It was God's will. It was her time to go, I guess I just know she's in heaven right now and I know she's in good hands with the Lord.

No, I think it' s because of terrible parents.  If they had given their son drugs they would be in jail now without child custody. But giving their son a deadly rifle that he kills his sister with?  That's just a terrible accident, say the police.  Time to forget and move on.

Man, our country is fffffff-ed up over guns.

5-year-old Kentucky boy fatally shoots 2-year-old sister

By Leigh Remizowski

May 2, 2013 | CNN

URL: http://edition.cnn.com/2013/05/01/us/kentucky-accidential-shooting/index.html?hpt=hp_t3