I have a hedge position in SCO, which is up nicely from $27.36 where I purchased it. I will be dropping it on Monday and not looking back. I don’t much care for trading positions based on global events. It’s a messy business, and rarely works out. But this is an exception.

Iran’s behavior has simply changed too much to be ignored. First by acknowledging the holocaust, now having a conversation with the President. It was a subtle shift at first, but it is very noticeable.

You must understand, the president of Iran operates beneath the Ayatollah. The same people have headed Iran since 1980. Supreme Leader Khamenei himself served as president of Iran from 1981 until 1989.

So, pretending that Iran has suddenly completely changed their whole outlook on life is stupid.

Which makes one ask, why is Iranian posture changing? Have incentives correspondingly changed, somehow? Perhaps we’ve finally broken their less charismatic personality traits with our sanctions?

Look, it was just four short years ago that I watched the Basij, with clear backing from the IRG, firing shots into crowds of protesters, running down students on the backs of motorcycles, and generally beating the hell out of anyone who opposed the Iranian government. These protests didn’t look that disruptive. The people who attended weren’t violent, or trying to declare a state of anarchy, or generally doing anything a reasonable person would consider unethical. They were just protesting. And this lot, directly supported by Iran, road in and just slaughtered everybody they could.

Also, we’ve been sanctioning Iran literally since the inception of its current form in 1979. We’ve upped those sanctions continuous, notably in 1992, 1995, 1996, 2001, and 2010, while the EU and international community got more involved in 2010 and 2012. So you’ll forgive me if I don’t think Iran has cracked under sanctions.

But this sudden shift in behavior is attention getting. And so I don’t want exposure to the short side of oil.

There are many reason Iran could be cooling off their rhetoric. Yes, a general outreach for peace with their neighbors is such a reason. Unfortunately, their immediate intention to set off a nuclear test warhead is another.

Iran cannot test a bomb in the middle of calling for the extermination of two UN members. While such foul language may be merely unnerving in normal circumstances (and good for riling up nationalism behind their government), if Iran were to succeed in setting off a bomb while shrieking for the eradication of the United States and Israel, the resulting emotions would be nothing short of panic. War-inducing, perhaps…

If they want to test a warhead, they need to put in the time to convince the rest of the world that they really aren’t as batshit crazy as they’ve been pretending, and can really be trusted not to ruin everything.

You can talk crazy while you build a Bomb. But you have to talk sane when you detonate it.

I can’t see the future. For all I know, this sudden, unexpected shift with Iran is exactly what the good men and women of the US Press thinks it is. But if you any experience with the track record of the US Press Corps, whether their first impression of major events (like the Arab Spring), judgement of character (such figures as John Edwards comes to mind), or general literacy of the complex (I can’t think of a piece on Obamacare this year not riddled with errors)…and it starts to actually make it worse that the press thinks this communication between Iran and the West is so cut and dry for the good.

These are not the lot with which you would want to run with first impressions…

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I’m sitting around, being mostly quiet, while I chip my way through a rock pile of work that has managed to errupt on my desk.

I’m doing nothing, because that’s the best thing to do.

The Federal Reserve tricked you. Just admit it. There was never any intention to taper. Taper wasn’t even a real word, until they invented it and bribed the dictionary. Everything you knew was a lie.

Now, you’re petrified of a government shut down and the debt ceiling. People, despite your predilections, the GOP isn’t stupid. They’re pretty good at counting support, actually. And votes. Your party doesn’t run train for four decades by being moronic. Republican veterans are even now curb stomping the young and impetuous Tea Party losers, with flare and grace.

“RINO”s will jump ship and join Democrats in a grand bargain. Funding will be found, the debt ceiling will be raised with some small “moral victory” for the GOP, by way of future “future spending cuts”, or some such nonsense – and life will go on.

There’s no reward here for Republicans to try and be disruptive. There’s a lot of reward to just let this ship hit the iceberg, as most of the GOP have spent the last three years commandeering the lifeboats.

The debt ceiling is a sensational line of storytelling. But this is only being discussed because journalists are largely group-chatter monkeys. The causal storyline aside, I’m long and don’t care, because the Fed has my back. ~$500 billion annually will do that to a man.

I nibbled on CCJ today, because it’s cheap. My cash position stands just higher than 20%.

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I have a smaller cash position than the 50% I was holding this summer. My current cash level stand around 20%, with purchases of HCLP, NRP, DRI, RMCF, SCO and a handful of dips in my current assets eating up the 30% cash position.

I sold EUO weeks ago.

I’m not sure if I chose exactly the moment to lever up into the firestorm but I’d say we’re about to find out.

What I do believe, though, is that feminism has seized Ben Bernanke’s chair, and Janet Yellen can smoke blunts with the best of them.

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This morning, Italy announced they are now in the 8th consecutive quarter of economic decline. Do you understand how crazy that is?

In the 9th floor, a cool air drafts around my slippers, sneaking in to touch my feet. The black tea in my mug gives off a warmth to the touch, and the paper between my fingers stains the skin lightly. Dim shadows from the clouds outside the windows provides the need for a lamp on the side table that casts humming of electricity, while I read.

Italy, and all of the EU, are subjecting themselves to needless pain, just so that some dim witted economists and politicians from the 90’s can continue to enjoy the benefits of a legacy!

The thread that holds the eurozone together has slipped and is now strangling the wearer. But these fools won’t cut themselves free from some misplaced fear of tattering the shirt!

Fine; they’ve chosen their coffin. Do you believe, dear man reading over my shoulder, that we are near a bottom, just because numbers came in “better than expected”? Wrong!

These policy wonks have been calling for a bottom, always two quarters out, for two consecutive years now. They fail because they fail to grasp the intricacies of the problem. The debt maturities are breaking against the wall. Each crest that is survived simply marks a trivial point before the next wall of water raises up.

There’s one path for Europa, and that is the destruction of the euro. They may dismantle the debt instruments directing it, or they may dilute it directly. Their cheap side games are distracting from the main choice at hand, which is that the continent cannot survive if it allows itself to be dragged beneath the surface, anchored by the stubborness of those that created this mess in the first place.

As we are now almost three years past the start of the EZ crisis, my fears of Europe derailing US markets is on soft footing. However, even if America should rise above our distant cousins, and leave us sitting, as here in my office, watching curiously as distant spectators, my sympathies for what our brothers are being wrongly subjugated to stand.

There is no reason that a quarter of Spain should be sitting idle. There is no reason that almost a fifth of Portugal should be in despair. There is no reason that over half of Greek youth should be permitted to sink into shambles of anarchy.

There is no reason for any of this, other than the pride of a few.

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I’m watching Eliot Spitzer run for comptroller of New York, and listening carefully to what he says. Whatever your feelings for Spitzer’s personal, errr…tastes, when it comes to enforcement and fiduciary responsibility, the man is both feared and respected. The closest to misuse of taxpayer money you can hit the guy with were some of his trips as government may have been more about prostitutes than business; like 2 parts hooker, 1 part official duty.

And there is no doubt that company executives fear him. That may have something to do with Spitzer’s willingness to shoot first, between the eyes, on the scantest of evidence, and then try to take testimony from the accused…

As comptroller, Spitzer would have oversight of very large funds of money. He is promising to be an activist on shareholder rights, pushing for reasonable CEO pay. These are resonating issues, even now five plus years after the recession.

So this is a thought experiment; what do you think would be the implications of shareholder activism pushing CEO pay in line?

My personal guess follows this line of thinking; the ability of CEO’s to make a big payday is predicated on granted options which in turn are pushed from stock buybacks. Buybacks hike earnings per share and directly support share prices, helping investors, particularly because capital gains taxes are lower than dividend taxes.

Of course, they could also be viewed as executives using corporate funds to rig their paychecks – the company buys up what will, to some degree, be given back to them directly.

If this process is brought under close scrutiny, then lost compensation will probably reverse the progression that got us here. I would expect share buybacks to become increasingly rare, with dividend hikes becoming the norm again – that would be the quickest, most direct way for company executives to increase their compensation. Accordingly, price/earnings growth would slow, and there could be immediate fallout from price/earnings resetting to lower multiples to expand dividend yields.

And I tend to think that more dividends/less buybacks may be what elected officials want. This would increase tax revenues without needing to start the messy and contentious debate about long term capital gains taxes.

What do you think? Leave a comment.

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The flavor of the minute in financial news seems to be the gaining traction of sentiment that China is set to surpass the US as the master elite of the planet. Not just in the news, either; why just recently a family discussion turned to the Chinese domination of resource rights in Africa.

It’s amusing, but I don’t put much stock or fret in it.

Every 30 years or so, America fears it’s about to be unseated from the top dog spot on this planet by some emergent group. We had a thing about the European Socialists for a while there in the 20’s and 30’s before we were forced into the second World War.

In the 60’s it was the newly stable, successful and exciting Soviet Union, ushering in utopian communism and equality for all. The press had our eulogy written and published.

Then it was the Japanese, who were going to dominate the planet with their superior corporate structures and buy us all out, one automotive sale at a time. Japanese land at one point was valued at (I believe) greater than all the land in the United States. Commercial land was going for $45,000 per square meter.

This has ceded to a sort of more general Asian thing – where we are obsessed that the East is going to clean our clocks.

America is a very paranoid country. It keeps us on our toes. Where would we be if we didn’t have the next guy to think about killing?

The truth is, China’s economy should be bigger than ours. They have three times as many people. But China also has some deep structural problems, including no trustworthy corporate or personal legal protections to speak of. Their government houses nearly all of the country’s millionaires and billionaires, raising red flags of plutocracy and government corruption. Their decision making process is even worse than the US Congress, if you can imagine such a thing. Take a look at their most recent high speed train fiasco – everything about its construction was politicized, to the point that it became more of a burden on the country than a boon.

And the biggest problem of all is the one child policy.

(Update: There is evidently an exemption for parents who were single children themselves. They may have two children. I had no idea; thank you Berserker for pointing that out. Population will still likely contract, but in a more controlled way, if everyone follows the policy)

By forcing a one child policy, China set itself on the path of contracting the population. That’s an issue; remember that most forms of entitlement use increasing contributions from expanding enrollment to pay benefits. It also enables politicians to overpay benefits to important voting special interest groups, writing off the bad decision against future increases to budgets. If China’s population gets smaller, what do you think the odds are that they’ve successfully managed that process?

And the population getting reduced by half is probably optimistic. Chinese culture has encouraged selection and preference of male offspring. That leaves China sitting with a skewed distribution of more males to females. Even if China reverses the policy, that leaves quite a few disaffected young men, sitting on the sidelines watching all the country’s growth and prosperity fall in the laps of a handful of elected officials, and a pressure bubble working its way through the entitlement system that would normally keep them docile.

Over all, I’m not that worried as I find fears that China is in imminent position to dominate our leadership as premature. Let’s see them pull it off first.

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