Cassandra Is Sooooooo Correct

Nihon Cassandra is more of a stock market investor than macroeconomics type. In other words, she isn’t really into bonds. In her own charming words,

So long as my distribution is skewed-right, and the tail not overly kurtotic, I am sanguine.

Recently, Cassandra excoriated herself for failing to predict our current global macroeconomic malaise, specifically, the odd lack of self-preserving behavior by those who have the most to lose. I think she is being unnecessarily harsh, as she understands far better than many others do, even now.

It was a close call. From September 2007 through 2010, the masters of financialization escaped ruin by the skin of their teeth. Saving the system, at public risk and expense, was useful to asset holders, e.g. the AIG crowd, Goldman Sachs and friends, Stevie Cohen, Walmart family scions, Icahn, Einhorn, Pritzkers, Koch brothers, Larry Ellison, Larry and Sergei Google, Mark Z, Jeff Bezos, Bill and Melinda, other much less publicly known owners of nation-sized yet privately owned wealth.

Cassandra expected that the excesses leading up to the 2008 financial crisis, e.g. over indulgence in luxury goods, real estate and high-end everything, would be known later as “Peak Inequality”. If the authorities were to bail out highly-levered asset-owners (enriching them further in some cases e.g. the notorious AIG bonuses payments), Cassandra expected that the State would promptly devise a way to recapture most of this taxpayer-funded largess.  In return, a modicum of social stability, sustained by an orderly market economy, would be assured.

In the aftermath, the Federal Reserve and fiscal policy makers would realize how fragile consumption was. They would not raise taxes nor cut government spending precipitously. Bad actors would fall from grace. Attitudes would change. All of us would feel chastened, and act accordingly.

In other words, prevent a nationwide populist revolt due to massive betrayal of public interests.

Trade recommendation for the integrity market: Sell calls

Cassandra, and I, expected that the 0.1% of the 0.1% would have been grateful. They were not. They are not now. Integrity is a market for perma-bears. Various practices associated with rapacious greed, including regulatory and legislator capture, have continued unabated. Inequality continues its incessant rise. Economic recovery is scant, yet deficits grow absurdly. Political divisiveness spreads. There is no end in sight to the public loss of confidence in,

  • elected government and
  • due process as a consistently effective means of fairly resolving disputes

Since Cassandra has clearly-stated content re-use rules, I recommend that you navigate over to her blog, and read her post directly. Focus on the final six paragraphs, and don’t forget to read the comments.

* I question the usefulness of higher marginal taxes or changes to capital gains taxes. Tax laws have power over the “poorer wealthy”. It does little good to raise taxes on small businessmen, physicians and others whose income is between $100,000 and $1,000,000 (net worth between $100,000 and $5,000,000). The real control of capital is concentrated among those with one or more magnitudes of order greater assets than that.


Computer Virus Related Crime

Whac-A-Mole seems like it could be endless fun. Moles pop out of five holes in the arcade game and a soft mallet is used to force them back into the holes to score points. Children and adults alike could whack the moles for hours at a time.

Or at least they could until a worker programmed a virus into the machines to make them shut down after a pre-determined number of plays.

Now police have arrested that 61 year old man, a resident of Orlando, Florida. He will face intellectual property offense related charges. He was motivated by a combination of job security concerns and avarice. Bob’s Space Racers, an amusement game manufacturer and creator of the Whac-A-Mole game,was the injured party.

[The accused] was treated as an independent contractor and began working for Bob’s  Space Racers in 1980. He received a fee for creating and maintaining the company’s computer programs.

In 2008, company officials began encouraging him to transition his status from contractor to full-time, salaried employee.

His response was to increase the maintenance fee he was charging by 250%.

Company officials believe [the accused] intended to start a company that would sell working modules of Whac-A-Mole to customers of Bob’s Space Racers who were having issues with the modules he had infected with the virus. 

via Whac-a-Mole virus arrest, The Orlando Sentinel.

With thanks to @lcamtuf.