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Five Things You Need to Know: Actually, Just One Thing: What Would Crockett and Tubbs Do?


What you need to know (and what it means)!


Minyanville's Five Things You Need to Know to stay ahead of the pack on Wall Street:

1. A Little More Yellen, a Little Less Sellin'

San Francisco Fed President Janet Yellen, a dovish voting member on the FOMC, will speak today at 11:45 a.m. EST in San Francisco.

  • It's the customary "blackout" period before the FOMC meeting next week, but nevertheless many ears will be turned (bent?, cocked?, jiggling? who knows?) toward the West Coast later this morning as San Francisco Fed President Janet Yellen speaks on the economy at Golden Gate University.
  • Yellen is widely considered to be one of the most "dovish" voting members of the Fed Open Market Committee.
  • Her reputation stems not just from the San Francisco Federal Reserve Bank's vote against raising the discount rate at the last meeting (*note: the discount rate is different from the Fed Funds rate), but also due to a key 1995 FOMC policy decision to raise interest rates in which Yellen dissented from then-Chairman Alan Greenspan.
    * The Discount Rate is set by Fed Governors in response to requests from regional Fed banks.
  • In late May Yellen said in response to a question following a speech at the University of California Santa Cruz (Monetary Policy in a Global Environment) that a depreciating dollar could stimulate aggregate demand and raise inflation somewhat, and "would appear to call for a response of tighter policy."
  • That doesn't sound very dovish, but seeing that the U.S. Dollar Index has actually risen about .25% since then, the probabilities are that Yellen today reverts back to a more "pause-friendly" posture.
  • Of course, the end of a Fed tightening cycle is historically not "equity friendly," but we'll leave that for another time.

Anyway, it's just another Fed speech. So what? Like the rest of America, what we really want to know is, what would Crockett and Tubbs do in a situation like this?

One word: Chill.

2. America Gets a New Boss

The current account surplus of oil exporting countries is projected to widen to $311 billion this year from $242 billion in 2005, according to an International Monetary Fund report released back in April, Bloomberg reported. Why do we care?

  • The current account surplus of oil exporting countries is projected to widen to $311 billion this year, exceeding Asia's surplus, which is expected to decline from $263 billion to $253 billion. So what?
  • First off, Asian central banks tend to invest their surpluses in U.S. Treasury securities to keep their currencies weak and their exports competitive.
  • This helps finance our current account deficit, which in turn stimulates demand for our debt and keeps our interest rates low. Thanks!
  • But the Asian supremacy of capital in the form of current account surpluses will likely now take a backseat to the newfound clout enjoyed by oil exporting countries.
  • According to Bloomberg, Paul Donovan, an economist at UBS AG in London says the U.S. must import $1.72 million of capital every minute to finance its current-account deficit.
  • That means we have to keep our securities attractive to foreign investors. And, of course, what we mean by "attractive" is a "competitive rate of return for the risk of ownership."
  • Oh, and what we mean by a "competitive rate of return for the risk of ownership" is paying more to finance our spending.

Eh, big deal. Like the rest of America, all we want to know is, what would Crockett and Tubbs do?

Crockett would probably roll up the sleeves on his white jacket and push the pimp's face into the hood of the Ferrari. Tubbs would wear sunglasses... at night!

3. Risk Aversion Part 27: Freddie's Dead (Mac not Krueger)

According to a Reuters story we saw in the Boston Globe last week, downward momentum in the.. what? Oh sorry, yes, momentum works both ways - up and down. Anyway, downward momentum in the housing market is leading some of America's biggest mortgage lenders to adopt more risk averse strategies.

  • Countrywide, the nation's biggest mortgage lender, plans to cut as much as $500 million in costs in the next year.
  • Ameriquest Mortgage, the biggest subprime lender, earlier this year said it will cut more than a third of its 11,000 workers.
  • Washington Mutual has also said it would cut mortgage-related jobs.
  • So, as you can see, mortgage lenders are clearly becoming more risk averse... IN HIRING AND EMPLOYMENT!
  • Ho ho! See, it turns out that while Countrywide, New Century, and others are becoming more risk averse in EMPLOYING people, they're not worried one bit about LENDING to people.
  • Countrywide, New Century, and Thornburg Mortgage, among others, are further expanding their lending practices to capture the market share for payment-option adjustable-rate mortgages where borrowers can defer ALL principal and interest for a pre-set period.
  • But not to worry (unless you work for one of those guys), according to Reuters the lenders concede the loans have unknown risks as their payments reset higher, but for now are relying on data including credit scores to manage default exposure.

Clearly, this situation is serious. What would Crockett and Tubbs do?

Crockett would grow a perpetual three-day beard designed to look stylishly disheveled and cool but which would ironically require far more maintenance than either shaving daily or growing and trimming a regular beard. Tubbs would buy another skinny tie.

4. 25-year-old Travels Back in Time, Becomes Early 20th Century Media Mogul

Jared Kushner, the 25-year-old son of a wealthy New Jersey developer, has bought the weekly newspaper, The New York Observer, for a reported sum of nearly $10 million, the New York Times reported.

  • The New York Observer is a weekly newspaper focusing on New York city's culture, real estate, politics, media and entertainment with a paid circulation in, literally, the thousands!
  • The paper has a pink tint to it that allows it to be read in a coffee shop indiscreetly and without embarrassment by inserting it into the Financial Times, which also has a pink tint.
  • The newspaper may be best known for publishing Candace Bushnell's column on Manhattan social life, which was the basis for a late 20th century television* (note: television is a type of "electric" media) show called... hmmm... what was the name of that show? Circuit City.
  • No, wait, Circuit City was a late 20th century electrical appliance store. Anyway, it was a very popular show back in the day.
  • Mr. Kushner said that he bought the newspaper because it was a marquee property in the media capital of the world, and that the opportunity to buy a newspaper did not come around very often, the Times reported.

What would Crockett and Tubbs do?

Crockett would violate department policy and begin a relationship with a prostitute/informant with a heart of gold. Tubbs would continue to handsomely brood.

5. Help! Unemployed. Will work for food, and a minimum of $100,000 a year plus health benefits, but not on weekends, and definitely no heavy traveling. Also, I'm not going to work in one of those cubicles and I'll need a clothing allowance... and four six weeks paid vacation. And I want a good job title. Not one of those demeaning Assistant Vice-President of Whatever deals. I want to be a managing director. Or an officer. God bless!

According to the New York Times, millions of men in the prime of their lives, between 30 and 55, have dropped out of regular work and are turning down jobs they think are demeaning or don't pay enough.

  • About 13 percent of American men aged 30-55 are not working, up from 5 percent in the late 1960's, the Times reported.
  • The difference is about 4 million men if the employment rate had remained the same as the 1950s and 60s, the article said.
  • How do they do it? What's their secret to "getting by" without working for The Man?
  • Some rely on the Federal Government's disability insurance, which ranges up to $1,000 a month for the first two years before Medicare kicks in.
  • Still others rely on draining money from their 401(k)' s and tapping home equity to live.
  • "The future is always a concern, but I no longer allow myself to dwell on it," one man told the Times.

Yeah, whatever. What would Crockett and Tubbs do?

Sympathizing with the underemployed and overly spent, Crockett and Tubbs would dress and live far beyond their means as $28,000 per year vice squad detectives.

No positions in stocks mentioned.

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