Freud, Masturbation, Gambling

"In a haunting novel about gambling, Dostoyevski's hero reaches his hand out to gain caresses from older seductresses prior to making a series of losing bets at the gambling table. Freud's take on Dostoyevski's antihero is that the 'vice' of masturbation is replaced later in life by addiction to gambling. The mixed feelings of passion for playing the game and guilt for being impassioned with the game are the equivalent to a childhood compulsion to masturbate. Edmund Bergler, an American student of Freud, extends this theory to say that gambling replaces the feeling of guilt from a boy's Oedipal longing for his mother. For an adult gambler, losing becomes "self-punishment" for early transgressions. In a desire to rectify these transgression, the gambler then wants to lose."

-Victor Niederhoffer The Education of a Speculator (pp. 181-182)

New 12m JSE lows today

BARWORLD 3019

AFROX 1780

NEDCOR 7250

EQSTRA 540  

BIDVEST 8051  

INVLTD 2965  

MONDIPLCP 1829  

DATATEC 1220  

SAPPI 1853  

INVPLC 2730  

RICHEMONT 1310  

ANGLO 13755

economic history

need to read more into these events:

Top 10 Financial Crises

10. The Panic of 1907: The fourth so-called ”panic” in 34 years.
9. The Mexican Peso Crisis 1994 aka “The December Mistake” Punta !
8. Argentine economic crisis - 1999 If you have no money, is it a good idea to print more?
7. German hyperinflation - 1918-24 If you have to print a 1,000-billion Mark note, you probably have too much inflation.
6. Souk Al-Manakh - 1982 Try not to use post dated to buy stocks
5. Black Monday - 1987 Can we call a 23% drop in a single day a black swan?
4. Russian financial crisis - 1998 devaluation of the ruble and cancellation of debt is never good for a local stock market.
3. East Asian financial crisis - 1997 aka the Asian Contagion
2. Black Tuesday - 1929 — Really? One day, and not the entire Great Depression?
1. 1973 Oil Crisis — Big energy increases cause recessions

GFITS

"The S+P 500 cash is now 24 points away from the 741 Nov low. Recall that the violated
two month range below 800 "measures" down to 730. Also be aware that ANY sub-741
trade will start to create massive bullish momentum & breadth divergences, as Oct and Nov
saw peak downside momentum, breadth etc. Yes, our primary bear market targets are 650-625
from the 2009 Outlook. However, we will be getting MORE bullish as the market weakens, as LT
risk/reward stays quite bullish into 2010-2011. We WERE quite bearish in early January, as the
market was keyed to top amid 950-1000 (944 was it on Jan 6), and then drop to new bear market
lows, via our 2009 S+P 500 "Roadmap" (shown again below from Nov 21....we're in wave 5 down now)." 

links

TBP - SPX PE to trough below 10x

SPX support only comes in strongly at 450

Tracking the Household Balance Sheet

How Rational Behavior Leads to Inefficiency if there are Incomplete Markets

General Equilibrium Theory by Popular Demand

Shiller, Akerlof book - "Animal Spirits"

Arbitrage between debt on books of financials, and equity value of financials

Bank Solvency, Geithner Plan

weekend reading

Clive Crook - Barro correspondence, some talk of multipliers

NYT - "Fed officials estimated that the median family was 3.2 percent poorer as of October 2008 than it was at the end of 2004"

Mark Thoma on the Information Age and stability - links up with my concerns between stability and welfare gains in the long run

TBP - SP500 earnings collapse - S&P on 30x PE

Kanjorski and run on money market funds - did the financial world really come close to collapse?

       - FT follows up

Bill Easterly too harsh on Gates' gains with Malaria prevention

FT - Half of all CDOs of ABS failed

VOXEU - Nothing new, but good round-up of current recession

The conversation around free trade has shifted - yes, there are losers

EV - Fiscal spending and "inter-generational theft"

ECRI - "We cannot yet say that a recovery is in sight"

EFC - "no recovery until 2010"

Economist - Relevance of Fisher today: "He explained how changing velocity and prices could cause real interest rates to deviate from nominal ones. In this way, monetary forces could produce booms and busts, although they had no long-run effect on output"

VOXEU - Have social security reforms shifted too much risk to individuals?  - I really think that this is an underreported issue. I remember reading a while back that the most evil thing Nixon did was to demolish the gold standard, thereby creating the inflationary paradigm. After that moment, the purchasing power of money would never be protected, and one could never save simply and hope that the value of that money would be maintained. It meant that the average, common man would now have no other choice but to become a gambler, to play risk assets in the hope that they would rise at least in line with inflation. We can see this theft engineered by the Fed even today, with Bernanke trying to hyperinflate so that people have NO OTHER CHOICE BUT TO INVEST IN RISK ASSETS! He doesnt want people to pay down debt and be conservative, and to keep money in the bank and government bonds. No, he wants to force people to take on risks. This is why the FED is evil, it forces the conservative to be risk takers. So this is bad enough, and then you read about social security reform as well, that over and above the common citizen needing to assume risk, he has the added uncertainty that his social insurance might be gone soon. Governments say 'they cant afford it". This relentless attack on ordinary citizens is breathtaking, and I cant believe how few people talk about it.

COSATU and Economics

 I came across the 'Socialism from Below" newsletter yesterday.

What I found most interesting was the piece on COSATU who planned to march against 'high food prices' on the 7th July 2008. Yes, read it on page 2. 

To refresh your memory, COSATU also (1) vociferously called the SARB to cut interest rates sharply to help the economy and (2) have asked for above CPIX wage raises. Both of these demands are blatantly inflationary.

And then they decide to protest against high prices. 

Links

Weekend Reading:

denninger - What the Fed is and Isn't

interfluidity - i like this little piece on money

EcV - is the Fed tightening, and if so, why?

EcV - the great multiplier debate (NB)

EcS  -on anti-keynesians

An econometrics Blog 

Barro interview

Saxo Macro (although he has just quit)

Mankiw's preferred stimulus (similar to debates of Keynes and his suggestion to drop payroll taxes)

Everything you wanted to know about CDSs

Rodrik - Why not use SDRs? (NB)

$3.3trn lost in US home values

IS, LM, and two wedges: understanding the second wedge

TBP - great piece on Media as a contrarian market timing tool

http://lanekenworthy.net/2009/01/14/a-keynesian-free-lunch/

http://lanekenworthy.net/2009/01/18/why-the-conversion-to-keynes/

http://angrybear.blogspot.com/2009/02/econ-101-and-public-investment.html

great unwind

Brad Delong has an interesting post on money velocity:

What I find most fascinating of this graph, is how much velocity of money increased from 1987 to 1997. It really is an aggressive increase. So it seems that any unwind that takes place in the next few months, is not just an unwind of what happened in the last few years, but of what has happened since 1987. So it seems that this velocity slowdown will be much bigger than we initially suspect.

so the NFP comes out terribly and the market rallies like crazy.

surely no one believes that there is legs in this rally, so why do they buy?

maybe its smart traders (big prop desks?) who know that there are many people short who know that equities should fundamentally weaken, but are weak hands so will close quickly once trades turn against them.

I doubt dumb money will have so much buying power to bust up so strongly on a day like this. Whoever is making this move is big, and probably knows what they are doing (i.e. not dumb).

I feel stupid for being on the wrong side of this trade, but i'm not a weak hand!

i'm gonna hate them if they push SPX to 1100 tho....

UPDATE: Silly me, I overlooked the fact that 'bad = good". The worse the NFP was, the more likely the stimulus plan will pass.