Nov

19

1. Showboating is a form of exaggeration. It is often done because there is a missing need in your life. Often in sports it tries to cover the weakness in your game. Say spectacular slam dunking to hide the lack of outside shot, or perhaps more directly playing up the 3 pointer because they know it does not happen enough. It shows known vulnerability and suggest it is soon time to attack. Often the "weakness" is simply being worn out. Very much like a toddler going on a rampage, right before bedtime and then crashing. At the race line most everyone knew where everyone else's best times stood. Bragging about them before the race meant you were not in your best shape and you were feeling vulnerable. Leave the bragging to us over the hill folks whose game is well past being able to improve upon. And our one time best will only get proportionally better as we look back at it with the distance of time.

2. To answer Mr. Tucker on why some people consistently have to start over, even to the point of suicide, going to the other side of life. I had a friend that self sabotaged many races, seasons and his potential by constantly getting in and out of shape. He would stop running, start eating and gain 20, 30 even 40 pounds. Then suddenly he was a man on a mission. Running 100 + mile weeks soon after 0 mile weeks. He would take trips to far extreme places like mountains or the desert or even different countries. No regular tourist, he would only camp and run. He would regularly call me excitedly tell me of his weight loss, his times dropping and his renewed racing conquest. He loved clawing back, from a nobody, an also ran, to a winner. First of local races and then regional races. But as the competition got tougher and the progress got slower and more gradual you could see the commitment wane and doubt creep back in to his training. Some people love the chase more than the success. My whole Senior year in college I dated a man eater. She simply wanted the thrill of finding someone new to feed the ego. She loved the chase, but hated the day to day doldrums and tasks of a real a relationship. She was a drama Queen.

This is also called the missionary syndrome, where a missionary is "called" to some exotic place. They learn a new vernacular and the inspiring complexity of any culture. It is all new, full of excitement, starting a church, getting it going, meeting new people, changing their lives… Then suddenly they stall, money gets tight and the newness wears off. Then they start realizing the filth, the poverty, the disease, the lack of opportunity for all their converts. They learn the vulgarity of the language and culture. Once the enormity of the task sets in and the hard work begins suddenly they get a new "calling" or start losing the faith. Or they may start drinking carousing with women or a myriad of other sins that disqualifies a spiritual leader. Often time they would simply miss handle the church's money for amounts that State side would hardly tempt anyone, let alone a professed contentious spiritual leader.

Often they would simply mishandle the church's money for amounts that State side would hardly tempt anyone, let alone a professed contentious spiritual leader. But it would seem clear in hindsight all along that you should have watched the church's offering plate and purse strings a little closers with those charismatic leaders that were overpromising and under delivering. Perhaps this is the string that binds them all charismatic, great promise but demons keep them from delivering on those promises.It sometimes hard to distinguish those that are apparently fearless from those that are truly courageous. Except the supposed fearlessness comes from not being afraid to start over, but still always carry the bigger fear of not having a new exciting all consuming goal. The courageous, focus on the goal and are not disturbed by boredom, but thrive on it.

3. For those of you who want just the facts on QE. One must look back to the early 90s to see a period where interest rates on the 10 year took such a 6 month spikes up and down and the 80s to see a down up down spike of such large BPS moves. A interest rate changes. Are we in for another spike up next 6 months? Why does it feel like the 80s are in vogue? Perhaps it is the nostalgia of a simpler time when everything hits the fan; at least the Fed understood what needed to be done to win, "Whip Inflation Now". One wonders why the Sage must write the NYT. It could not be that the Flexion victory see the need to help rewrite history as the rest of the US and world currently views it. Nor could it be and the President medallion given during a lame duck period is some last minute editing of the history books before the political winds shifts power, could it? It makes sense in the information age to make sure you spend the last hours of your reign to make sure your message is etched in the hardest stone or metal known, a medalian.

Speaking of 80s and campaign slogans and QE it all reminds me of the "Save Ferris" campaign except QE chant should be "Save Flexions". Perhaps just the slogan, Ben, Buffet and President are looking for to make the rest of us thankful this Thanksgiving for the benevolence of our leaders in maintaining the status quo. Of course there must be some more creative acronym with a constant "D"in Deflation, instead of the easy vowel like "I".

4. Of course Rocky has a point why should the Fed change tactics and give the Flexions such a blatant quantifiable gift. Consider GM IPO it apparently makes the public whole, because even the best accountant can not add up the lost opportunity cost or the missed creative destruction cost to kicking the can down the road of such a dinosaur. No ones saying Lackey that GM does not make great cars the Corvette comes to mind, or the high minded hybrids that people will rush to buy when everybodies coffers are full. But one cannot expect an economy to always support the high legacy cost, by only offering the high margin high dollar option every time. One cannot help but wonder where the hides must have come from that are being used to make the leather seats in those cars, if they were not simply stole by this opportunity cost versus accounting cost switch from other automakers and ultimately taxed into everybodies car buying bill and lost jobs an prosperity used to spend on real innovative start ups and things beside broken windows.. Piece by piece these hides come out of everybodies wallets. Likewise and similarly where are the hides coming from that are being used to reupholster the Flexion's balance sheets. Is it not it understandable for the public to notice how much lighter their wallets are lately and conclude that somehow those bankers took it from them. And The Question:

I am familiar with the break-down of the Black Scholes equation when a stock drops near zero as it means death to the company. The distribution matters rather than normal volatility. Does a low 10 year rate and with a limit of zero interest rate have such similar effect on how we normally would measure volatility?

Given that there is some upper limit to bond prices when rates hit zero, is there is a similar barrier to the distribution of the bonds prices?

However unlike stock prices interest at zero does not mean death to the underlying. And if so, how does one assume at least the non-Japanese scenario where interest rates do eventually revive. Does it mean the ab-normal distribution varies disproportionally by time? What does this say about the current volatile state of bonds… does it mean that this volatility effect is even more pronounced as the rates goes lower?

These are real questions,not just theory, does this should this and is this effecting hedging cost? How about modeling of interest rate scenarios? Perhaps the bonds prices and BPS recent volatility should be considered even more adnormal is such a low interest rate environment due to this static effect of a possilbe zero rate. 


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