Tenth Race Recap

The writer announces with profound dismay the bursting of the last bubble - that which elevated to giddying heights, as asset prices and national economies tumbled into the abyss, the financial blog as a journalistic undertaking. With writer output way down and, if not, mostly reduced to endlessly recycling predictions of the same unlikely outcomes (or, even worse, of events that have already come to pass) or touting their forthcoming media appearances and recently published books, and blog readership simultaneously plummeting, this might be an appropriate moment to take a look at speculative frenzies themselves... and what better place to start than in that petrie dish so brimming with the spores of unrepentant hope - the race track.

The track qualifies, as far as we can tell, as a near perfect proxy for speculative bubbles on these counts:

1). Participants believe religiously that future outcomes, at least those on which their actions have no influence, are predictable enough to make them money. No one on the premises seriously considers the most probable result - that they will lose;

2). The majority of participants, once on the grounds, also believe that the opportunity cost of not being in the game outweighs the risks involved in participating - in other words, the motivation to bet is, to one degree or another, to hedge against the undesirable future outcome not having won;

3). When the bubble breaks and all the money has been irrevocably lost, in the case of a typical big city harness track at 11:10 PM five nights a week, the rush to the exits is invariably accompanied by much caterwauling centred on the theme that the game is fixed.

Although we started this piece a couple of days before Mr. Hempton published this missive (saving us the trouble of making ours much longer in the process), it might shed some light on what he notes is the curious current fixation with algorithmic high frequency trading displayed by the financial blogoshpere - headed by the millionth monkey: Zero Hedge. The present session of the blog races is over, John.

*Off the hook reserved for whiners is Cassandra, who (rightly or otherwise) has been on this theme for a couple of years.

Bookie Needed

Slowly getting over our snit about Lance Armstrong, the writer has to admit that Astana manager, Johan Bruyneel, played his cards perfectly. Seen on Saturday's stage decked out in Livestrong gear (thus proving, we think, our take that the entire exercise was mostly a marketing effort for non-Kazakh company), the very sharp Belgian got both the Tour win and his main man onto the podium amidst a phenomenal amount of media coverage. Our suspicion is that he is an investor in Armstrong's company. But all this is milk spilled below a bridge - overshadowed, as it is, by two news items.

The first, being a standard issue 'what did happen', is that Bruyneel and Armstrong were jumping Astana to start a new team sponsored by American electronics retailer, Radio Shack.

The second, being what inexplicably (according to irate Spanish commentators) failed to take place, consists of the observation that Alberto Contador passed on an absolutely riskless run for the super prestigious stage win on Mont Ventoux in order to go back and help his thought-to-be mortal enemy, Lance Armstrong, in his podium battle with Frank Schleck.

Given that...

1). Bruyneel will gut Astana on his departure;

2). The return of Aleksander Vinokurov to this team is going to be even more problematic for Contador than was Lance's arrival;

3). The general take is that a Spanish-sponsored team with Contador at the helm will not be ready for 2010;

4). The only European race of interest to a purely American sponsor is the Tour de France (Armstrong knew where his interests lay) and the only position to finish is first;

5). Contador is the best thing going by a margin - with all the respect due Andy Schleck...

...we see Alberto's pass on the stage win as, at the very least, an indication that the bridge under which the milk was spilled has not suffered the added indignity of being burned.

The real question, however, is: Where can we put a few pesetas on that one?

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Wheelsucking, Texas Style

Despite our admiration for his current performance, at age 37, we are starting to harbour an intense dislike for Lance Armstrong as a cyclist. Not that we ever thought that highly of a guy that came out to play for only three weeks a year, but this edition's consumate wheel-sucking performance to ensure himself second or third place in Paris on Sunday in order to advertise some brand of dietary snake oil in the U.S. throws him in the bin with any of a wide variety of history's fuckwits.

Hats off, however, to Alberto Contador's failed attempt to relegate his 'teammate' to fifth place in the GC. His attack on today's last climb was not intended to burn the Schleck brothers (who are no longer of real concern), but to haul fellow Astana rider, Andreas Kloden and the Schlecks ahead of Armstrong in the standings, potentially booting the Texan off the podium in the process. As it stood, Kloden - who had previously abandonned a sluggish Lance to join the lead group - had nothing left in his legs. The end result was an agreed-upon Frank Schleck stage victory and Armstrong in fourth place.

The rider who showed how it's really done was Christian Vande Velde. Being Garvin team leader didn't impede him from providing cover for Bradley Wiggins' podium pretensions.

By the way, the theoretical disadvantage the Schlecks face with respect to Armstrong in tomorrow's time trial are considerably reduced by the category three climb at kilometre 25. Then there's Mont Ventoux on Saturday.

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Old Time Revival

The writer has not yet scoured YouTube for late-60's vintage video to ascertain whether or not he is right, but Barack Obama has from day one always reminded him of Bobbie Kennedy. It's something about his body language and his manner of working the crowd - not to mention the revivalist fervour that accompanied his campaign.

Among other indications that the 1960's are being seen as the route out of the current malaise, we would add:

1). The apparently great sales success, in a difficult environment for such things, of the new/retro Chevrolet Camaro;

2). The widespread coverage received by Matt Taibbi's equally retro guerrilla press Rolling Stone article on Goldman Sachs (with all that this description might imply regarding journalistic rigour, or lack thereof);

3). The huge media assault accompanying the 40th anniversary of the moon landing. Briefly, since when has the number 40 been able to command such attention?

Aside from the fact that the significance of the 60's may vary widely according to one's personal interest - the new Camaro being available with a 6.2 litre engine at the same time as Fiat takes over Chrysler on the promise of fuel-saving technology, one would be remiss to fail to point out that there are a number of crucial differences between the present environment and that of four decades ago.

(Notwithstanding Silvio Berlusconni's Sardinian resurrection of the free love commune), first and foremost would be that 'we' don't have the money anymore. And he who has the money calls the shots. Leading the pack of the deep-pocketed, however, we find China, Russia and the Arab oil producing states - not one of which paid more than the faintest lip service to the rallying cries of the post-war utopia.

Mcluhan once made the point that 'We march backwards into the future'. Or perhaps quoting a futurist from the past amounts to more of the same error.

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Winners And Losers

One of the topics which interests the writer of this blog is the question of what economic and political actors have to gain or lose from their strategies in a given circumstance. The case of Lance Armstrong would be of some relevance in this regard.

Believed generally to be entered in the Tour because he thinks he can win it, we would suggest that he is actually there to provide marketing support for the weight loss and dietary supplement hawker, Livestrong. If the reader is on the verge of placing a bet on his parading up the Champs-Élysées all decked out in yellow, he or she should keep in mind that Armstrong will probably not, when it comes down to that, chase down Alberto Contador in the Alps if there is the slightest possibility that this would risk his ending up in the first three and on the podium on the last day of the race.

A rider with less to lose in this regard, however, is Andy Schleck.

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A Correction

The writer commited a serious error in yesterday's post. The sentence which read, '36% of students in 3º de ESO (approximately grade 10 in Canada or the U.S.) are in the year that "corresponds to their age"' lacked the word 'not'. The result, still mighty discouraging, is the opposite - 36%, and not 64%, have failed at least one year.

Our apologies.

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10

One of the nonsense bits of regional self-promotion that one - previously identified as being not from here, but from that magical place known as por ahí which extends from the Sierra Morena to approximately Antarctica - must regularly endure is the eternal claim that los andaluces live better than anyone else on earth. This usually shows up as sort of an extra tapa with the fifth or sixth round of beer with the locals on a hot summer evening and is, of course, a request that one vociferously confirm that Andalucía is, in fact, the promised land.

But who is this writer to shit on his host's parade? Instead, we'll merely point out the annoying possibility that the policy decisions made in an earthly paradise will probably not be, ummm, as good as they could be. This Saturday's Andalucía edition of El País lays it on the line. After 30 years of modernizing the region's educational system through the unremitting application of catch phrases, slogans and stated good intentions, a recent study shows that:

1). 36% of students in 3º de ESO (approximately grade 10 in Canada or the U.S.) are not in the year that 'corresponds to their age';
2). The average result from testing 82,961 students at this level on their ability to communicate using their native language was a 3.28 - 0.22 points below what is considered a passing grade in the context and 0.53 less than in 2008. Various versions of exactly the same apply to the mathematics and other surveys.

The problem might be that, if you live in a place that is predeterminedly perfect - as is Andalucía (and probably much of Spain if a zap through the endless reassuring tripe that is the daily fare of the regional television channels is any indication) - there is neither reward for achieving good outcomes nor punishment for rolling craps with one's bright idea, let alone any indication from either parents or students that the result is anything but just hunky dory. Simply, no matter what one does or doesn't do, one remains precisely in the same best place possible. The task is equivalent to trying to calculate the optimal fiscal stimulus in an infinitely large economy.

That perhaps the only incentive to improve, as implied by the insecurity before people from por ahí betrayed by the opening anecdote, is that others might not see it so is confirmed by Andalucía's education minister, Mar Moreno's, instant adaptive policy adjustment to the bad news - the tests will, rather than continue to be conducted in the first trimester in the future, henceforth be held in the third to bring them in line with those in other regions.

We suppose that it's arguable that the engine on the slowest train in Europe pulls into the station ahead of the caboose.

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To a degree echoing some of the above, we offer our English paraphrase of a joke that appeared in the comments to an entry in La Vanguardia Desde Fuera:

A group comprised of various EU leaders, whilst touring the Louvre, stop in front of a painting of the Garden of Eden.

Angela Merkel is the first to opine: 'Look at the perfection of their bodies. Eve so svelt and slender. Adam so athletic and muscular. They must be Germans'.

Sarkozy, however, is having none of that. 'The sheer eroticism of the two figures tells us that they are surely on the verge of falling into temptation. They must be French'.

Next up is Gordon Brown who remarks on the certain Englishness of their delicate poses, serene faces and serious gesture.

Lastly, and following a brief pause, José Luís Rodríguez Zapatero calls them all to order.'No way! Just look at the thing! They have neither clothes nor shoes. They're homeless and have nothing to eat but an apple. Worse yet, they don't complain and they believe they're living in Paradise. Spanish beyond a doubt!'

(Hat tip - Clover)

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Alberto Repeat

Bernard Hinault seems to like Andy Schleck's chances in this year's Tour de France. Having watched pre-race favourite, Alberto Contador, take 22 seconds out of the second place finisher in the short uphill TT in the Vuelta al País Vasco in April, and look just as fresh at the finish line as he did leaving, we don't buy Hinault's take.

At the halfway point of today's prologue, Contador leads by 5 seconds.

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Man Bites Dog

We have to admit that the hyperinflation argument, if nothing else, has tremendous mediatic appeal. After all, has anyone ever seen a headline that reads:

Bread Prices Drop - Rioting Reported

And we never will.

Apocalypsists*, faced with the inevitable monotony of deflationary recession, find themselves reduced to citing evidence such as this in order to maintain their blog readership. Touting the hyperinflation thesis, the piece was penned on behalf of a mutual fund manager that exclusively sells currency diversification to U.S. investors. Thank you. Next witness please take the stand.

Gold is starting to be a mightily appealing short at $930. Target? Somewhere south of 700, say.

*Among the other seeds of discord sown recently by Tyler Durden to keep that comment box rocking stands out the tantalizingly June 23rd "Morning News Recap" headline: 'Greece vehemently denies rumors it may drop EURO'. No attribution and no link to any source. As unsurprising as the fact that no Google news search that we can think up can find mention of it anywhere is the consequent 15 bps tightening of the Greek 10-year yield to that of the bund.

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Liquidity Trap

The Instituto Nacional de Estadística has released its quarterly report on Spain's national accounts. Outstanding was the rise in the country's personal savings rate - at 7.9% compared to 4.8% in the year earlier period. In absolute terms, household savings have increased from 8 billion to 13 billion euros.

Further on in the press release, the section on the public administration sector notes their disposable income has decreased some 19% over the same period. Behind this is a 12% decrease in tax receipts. This is divided into a 15% drop in value-added, and a 7% diminution of income, taxes collected.

Adding to these two the 18% increment in government social expenditures and we come up with none other than the feared liquidity trap - money thrown at the economy to prevent disaster resulting in a more than 50% increase in the rate of savings, and little else.

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