Just as I did with the last episode of “The Newsroom”, I intend to live blog the 3rd game of the Oakland Athletics/Detroit Tigers game tonight. The game starts around 9 PM, so I’m going to try to hang in there for the duration. This is the 3rd game in the series, and unfortunately, the A”s have lost the first 2 games. So since it’s a best of 5 division playoff series, this is it for the A’s!

We’ll get started on this in about half an hour. Just an FYI – I did get an inexpensive wireless keyboard for the I-pad, so that should make my typing faster – in theory, anyway. We’ll see how it goes!

So I’ll bet you’re wondering how I came to be such a baseball fan. And in particular, how i came to follow a California ball team when their games are not broadcast on the east coast until the end of the season. Simple – blame Moneyball. Loved the movie – loved the book.

During the first two games, I was texting with my nephew, Michael – in particular during the first game. So this time, rather than just text, I’ll blog…

Well, we’re off to a late start, as the Cincinnati/SF Giants game has gone into extra innings (SF eventually won in the 10th inning, saving their chances). OK – changed the channel and it’s about to start at 9:05. Since Oakland is back home with their fans, I anticipate improved performance versus their lackluster showing in Detroit. Anderson is pitching, coming off some injuries the announcers continue to dwell on…results are all that counts, so we’ll see.

Detroit’s up first; first batter struck out. Might need to edit this after it’s done so I don’t bore you to tears…
another strike out
two down n first inning
Detroit’s Cabrera up third – made a big impact in first two games..

Coco Crisp is up first & got a base hit. He made some mistakes in game 2, so I advocated a public execution, but Ma says that might be a tad harsh. We’ll see about that.

Coco scores: 1 to nothing. Detroit looks tired. Must be the thin California air.

Drew & Cespedes are on 1st and 2nd. Will this be a 3 run inning for the A’s? Reddick is up – spotty performance so far. Either strikes out or gets a home run. Three outs – Detroit’s up. 1 to zip

Great catch by Coco getting Fielder out on what would have been a home run without his big jump. No runs for Detroit. Still 1/0 A’s.

Catcher’s up with 1 out.

Bottom of the fifth inning and the A’s Smith hits a home run. Now it’s 2/0 A’s. They don’t look like the same team we saw in Detroit. They are clearly more comfortable playing at home. Seems like a sign of youth & inexperience. That’s a potential downside of the payroll deficit. What they have in hustle and moxie they lack in experience and likely flexibility. Hence issues on the road.

Game over; score remained two zip. Audacious fielding and pitching won it. How about tomorrow night? Detroit will try harder, no doubt.

Yes, gentle readers, I’m back! Been busy the past couple of weeks, traveling and dealing with friend and family stuff. But I’m back, and ready to talk about my favorite topics…

Let’s start with current events in things financial. While the European Central Bank (ECB) and the Fed are doing their darndest to avoid a deflationary spiral, the situation in Iran is quite the contrast. A few weeks ago Ahmadinijad and company implemented a “foreign exchange stock market” that gave vendors the opportunity to exchange their rials for hard currency at about a 2% discount to import “necessary goods”, i.e. meat and other items for which there are shortages.
The government expected this small subsidy to stimulate the so-called “private sector” in Iran to increase the quantities of these goods.

All of this is a reflection of the impact of sanctions placed on Iran last year by the U.S., and subsequently by Europe in July of this year. The sanctions were placed on Iran because of its refusal to abandon its allegedly peaceful nuclear ambitions, as well as its support for terrorist activities. The currency stock market has only been in place for 3 weeks, and has had exactly the opposite effect from the government’s desired outcome.

What is occurring this week is wholesale flight from the rial into other hard currencies – particularly US dollars. The result of this panic and hoarding of dollars is a huge debasement of the Iranian rial – somewhere between two-thirds and three-quarters of its value.

If you go to any website for the “official” exchange rate, it’s around 12,200 rial to the dollar. The going rate in Tehran these days is between 36,000 and 38,000 to the dollar. This equates to an inflation rate of 50 to 60% per month. The impact on the average Iranian is to devastate the value of their savings and buying power. There are stories about college age children being recalled home because of parents’ inability to pay their schooling expenses in the U.S., Britain and Canada. There have been demonstrations in the streets. The bazaar, long a power-broker in the country and supporter of the government, is shut down and will remain so until Saturday.

Picture, if you will, the impact on you as an individual were the same thing to happen here. $12.00 for a gallon of gas. That’s $120.00 to fill the tank of your Honda Civic – $300 to fill your Chevy Suburban!

But that isn’t the biggest problem. If you’re a baker in Tehran, you’re hesitant to quote a price because your next batch of flour will cost 3 times what you paid for the last one. And people have stopped buying meat, because they can’t afford it, so they’re buying bread – that the baker may not be willing to sell.

So what will be the likely outcome of this? The government blames ‘enemies of the state’ and even money changers for the problem, obviously taking no responsibility for the impact of their own policies. Their solution is more government money changers. That would work if they weren’t surrounded by other countries that can supply the hard currency everyone wants. Afghanistan is getting into the act, and I imagine Iraq will in the next week or so. As long as there is panic and dollar hoarding, the crisis will continue to get worse. Where will it end?

Erik the Younger says this will inspire the Iranian government to expedite their nuclear ambitions. I think he’s likely correct. But if the public perception is correct, and there is a shortage of hard currency to pay for the expense of setting up this program – who will help them? The last week in September, the Iranian government said they’d found explosives planted in equipment purchased from Siemens in Germany. Siemens denies they have sold anything to the Iranians since 1979. So obviously the Iranians bought used equipment from Ebay, no doubt using PayPal to pay for it. But even PayPal would cut them off if the exchange rate is so volatile! (OK, small amount of levity here…ahem..)

So I think Iran is on the verge of imploding. All the Ayatollah’s Revolutionary Guards can’t put this genie back in the bottle. Will China and/or Russia step in to help? Not likely – even China is cancelling oil field development contracts in Iran because the contract conditions are too onerous and they can’t make a profit. Are Iranians angry over the government’s sending arms to shore up Assad in Syria? You betcha.

This story will continue for the next couple of weeks. Will it have an impact on the upcoming election? We’ll see – timing is everything. Who will be the big winner coming out of all this? Barak. No, not Barack H. Obama. Ehud Barak of Israel. More about that in the next post!

Point 1, to Reiterate from Yesterday’s Post’s Predictions:

The Republicans will hate it. They’ll say it adds to the debt and does not bring down the deficit.

Here’s the Response from the Republican standardbearer:

“After four years of stagnant growth, falling incomes, rising costs, and persistently high unemployment, the American economy doesn’t need more artificial and ineffective measures,” sand Lanhee Chen, policy director for Romney’s campaign. The Republicans will hate it. They’ll say it adds to the debt and does not bring down the deficit.”

That looks like “hate it” to me. Second prediction:

The Democrats will be mum on it, or at most say how clever and knowledgeable Chairman Bernanke is. No endorsement…no pan…

Well, can’t say because THERE’S NOTHING ON THE WEB ABOUT IT. Guess that makes ’em mum…

Finally,

The pundits will argue over whether it will raise or lower interest rates.

Here’s the first: yes, it will lower interest rates – sort of…but not really:

http://ftalphaville.ft.com/blog/2012/07/24/1094601/the-academics-on-qe-for-now/

Here’s the second: interest rates are already nil, so there will be no impact (I agree with this one)…

http://www.bankingmyway.com/save/savings/what-does-printing-money-mean

So there you have it, folks: 3 for 3, but here’s the real advantage, at least in the short term:

And what was the stock market’s response to implementation of Doors 1 & 2?

Dow up over 200 points

Gold price soaring

REIT’s up with an expectation of a continuation of lower interest rates, despite any threat of inflation…

What could be nicer, at least for Emily the investor? Her IAG (I am Gold) investment from 1 year ago gave her a 57% net return.

Her two REIT investments (New York Management Trust and Chimera Investments) this morning are both up when they had been drifting lower because of the concern over the past few weeks of Fed INACTION.

Bless, you, Ben Bernanke!

Today is Thursday, and I know you are all breathlessly waiting for this week’s trivia question, but I’m inclined to write about QE3 first. What is QE3? Refer to my previous post, but if you don’t want to scroll down: it’s the third major effort by the Federal Reserve to inject money into the economy. QE is an acronym for Quantitative Easing. The Fed has been meeting yesterday and today, with an expected announcement this afternoon of three possibilities, per the pundits:

1) Another round of Quantitative Easing, buying mortgage backed securities

2) Not another round of Quantitative Easing, but instead a promise not to raise interest rates for an additional year – until 2015; or

3) A more drastic, risky yet probably effective move to giving money directly to banks and instructing them to lend it (i.e. lower their current lending standards)

The so-called experts are divided between options 1 and 2. Option 3 is frankly one I am suggesting, so I suppose that makes me a pundit wanna-be of outrageous proportion.

Having said that, let’s take a look at explanations and then look at some data:

Marketwatch/Rex Nutting this morning:

http://www.marketwatch.com/story/why-the-feds-words-mean-more-than-its-actions-2012-09-12?dist=beforebell

If you don’t want to cut & paste (annoying) to read the article, let me summarize. Mr. Nutting suggests early in the column that Door #2 above is in the offing. Then he spends most of the column suggesting why Door #2 is very risky, theoretically effective buuuttttt…probably won’t be effective anytime soon. How’s that for confidence?

OK, how about this one – NPR this morning:

http://www.npr.org/2012/09/13/161037731/fed-stimulus-expected-but-remedy-may-not-be-right

Still not too keen on copy & paste? OK, another summary. This article suggests the 50/50 split of economists for Doors 1&2, then interviews one managing director of an investment fund pitching for Door #2. And then having same said manager suggesting that it would be a mistake to choose Door #2 because it could lead to the “liquidity trap”. Oh – new peril! What is a liquidity trap? According to the article, it’s when interest rates are so low that retirees go for short term versus long term instruments (i.e. money market funds versus long term CDs – not Compact Discs, but Certificates of Deposit). The theory pointed out here is that will hurt lending because of the lack of resources for banks to lend out. This assumption must mean that George Bailey and the Bailey Savings & Loan are alive & well. NOT! I think Mr. Potter is in charge now, and he’s selling his MBS’s (mortgage backed securities) to the stock market. Recall the meltdown of 2008 and the discovery that these MBS’s were empty vessels? There’s a bit of a reality check.

Now that we’ve dispensed with what I perceive as nonsense and double speak, let’s look at some real data:

Are people really putting all their money in the mattress? Here’s the graphic for savings rate since the late 50’s:

Click on the graphic to enlarge it.

Does that look to you like folks are hoarding money? Well, the answer is all relative – compared to the 50’s, not. Compared to 2008, definitely. But the line went down when the economy was on the upswing – now savings are going up when the economy is again softening. We’re talking the difference between 3% growth and 1.5% growth. So this is a contributor. But is it the biggest contributor? Nay, nay, I say!

How about this graphic? I think this speaks volumes:

This is a year over year comparison, so the trend over there on the right side is quite seriously bad, relative to all other decades precedent. So, with these two data points, I suggest the Fed give a significant amount of money to the banks and instruct them to lend it out. To people that will spend it. Soon.

Your thoughts?

UPDATE: And the correct answer, with today’s announcement at 12:30 PM: DING! DING! DING! Door #1! $40 billion A MONTH of Fed Purchases of Mortgage Backed Securities…you know, those bundles Mr. Potter is selling on the stock market that weren’t worth a tinker’s dam in 2008 because of the quality of the borrower’s balance sheets behind them.