you can have whatever you like...

maybe you've heard this song on the radio. i think it's one of the nicer hip hop songs to women out there, even though it's mostly about pleasing women with sex and material things, at least it's about pleasing them and not as terrible as the normal pimp-and-ho talk.

I am happy

Things are a little more normalized in work and life. The markets are taking a breather.

I had an absolutely beautiful weekend. To recap:

I went straight from work to Old World in HB for Oktoberfest. It was fun and new. I didn't get too wasted but plenty of people did and it was fun to watch.

On Saturday I went to Home Depot and bought a bunch of bushes and flowers. There's something nice about planting flowers, you feel me? It was relaxing but I was sweating it up too. Afterwards I laid down some Miracle Grow and the whole yard smelled like shit the rest of the weekend, but it's getting better now.

I met my buddy Josh and some of his friends at the District where I watched Brandon Vera lose in a decision in UFC. That was a bummer because he is half filipino and reps it with the Philippine flag TAP OUT trunks. I heard he has a huge fan base in RP even though he is basically a middle of the pack UFC fighter. I also heard because of this UFC will have a fight in the PI. That is going to be ridiculous. We finished off the night with some dancing at Woodys, some Newport antics and good conversation.

I woke up on Sunday and went and saw a matine movie, "Nick and Norah's Infinite Playlist." This was a really cool flick. It was funny and quirky and hilarious. This was probably the highlight of my weekend. I also just watched "Forgetting Sarah Marshall." These break up movie comedies are so funny. On a more serious level, it's amazing how down you can get on a break up and how universal it is. These movies speak to the universalness of it. People are ridiculous during break ups. It's just part of the human condition. A friend of mine was kind enough to offer some insight: you cannot experience deep sadness if you have not experienced the relative exuberant happiness. So when you feel down, you have to realize that it is because you have experienced joy and happiness previously.

I went to church Sunday night and also read a bunch of chapters in Nassim Taleb's Fooled by Randomness before I went to bed. A great read.

And that, my readers, is what a great weekend entails. I found myself smiling today for no reason at my desk at work.

Tough night

Everyone has nights like these when you work in the investment business. It is nearing 8pm and I arrived at work around 5:30am. Today wasn't as bad as yesterday though. Right now I am sitting at work blogging, waiting for a phone call from a manager that may or may not come. My eyes slightly sting and I feel loopy and tired. Did I take the bus to camp kill yourself this morning? I enjoy work but right now I am not enjoying not working and waiting for this phone call. I am leaving if it doesn't ring soon.

Overnight Libor

Overnight LIBOR is a part of the investment universe similar to the plumbing in the upstairs bathroom of your house. You never want to think or hear about it. While you think a lot of interior decorating, accent walls, and the color of your carpet or the stone counters in your kitchen, you only think about the plumbing when you have a problem, and water from the upstairs bathroom seeping into the second floor and threw the first floor ceiling can compromise the entire structure. It ruins the carpet, rots the walls, and can cause problems for years to come.

Overnight LIBOR is the rate at which banks charge each other for overnight loans. When we are talking LIBOR, we are talking about the biggest banks in the world. We are talking about the world's highest credit in any type of borrower. All lending, your car, student, home, and home equity loan, the financing on an exercise machine or a queen mattress are benchmarked off of LIBOR. The riskier the borrower, the higher the add on is to the LIBOR rate.

LIBOR is the foundation of lending, and the shortest loan is a one night loan. There is little to no risk when the world's highest credited borrower is taking out a one night loan right? Right now the annual rate on overnight LIBOR is 5.38%. FIVE POINT THREE EIGHT PERCENT annual interest to borrow money for one night. Two key elements of a loan determine how much interest you pay on a loan. These factors indicate the riskiness of a loan. Number one is the credit of the borrower. In overnight LIBOR the borrower doesn't get any more credit worthy. Number two is the length of the loan. The longer the term the more risk. Case in point, overnight LIBOR is one the least riskiest loans. 5.38% is absolutely shockingly high. The world cannot continue to function in a normal manner with LIBOR at this rate. We would like to see a 30 year fixed mortage in the low 6% range, but we are not going to get there on a 30 year loan to an individual American when overnight loans to the world's biggest banks are 5.38%. Think about the implications! Without reasonable financing home ownership will become even more out of reach, existing inventories of homes for sale nationwide will continue to rise, and prices will continue to tumble. Significant wealth destruction is occurring on Main St in the asset where Americans hold the largest component of their wealth...home equity.

I should mention a few asides. Overnight LIBOR is uncollateralized which slightly increases the risk, but the risk spread for that overnight is tiny. On the flip side, LIBOR is self reported by the banks so they are probably fudging a little on the low side. Case in point, you should round up that 5.38% to 6%.

If life with LIBOR at this rate continue, things will get very ugly very quickly in the world. With every HUGE government program introduced the market is able to bring back exceedingly shocking data to prompt more response. Ad hoc responses though of considerable size will no longer help alleviate the problem. The Fed cut rates by 50bps today to 1.5%, a 25% discount in the Fed Funds target rate, and LIBOR blew out to a new record!! That is unworldly and scary. That is some serious gloom in doom. I haven't looked at swap spreads but I heard they tightened which is some good news. I could get into swaps but I am waking up at 4:40am to go to work. After all, what am I going to tell my grandchildren about this? That I worked a normal day, 9-5? No, I'm gonna tell them I worked 14 hour days trying to figure out what the solution was.

Where's my life?

These past 4-5 weeks have blown by. I am working 70 hours a week. I went in on Sunday for 4 hours. Yesterday I went in at 5:30 am, worked until 7pm, played basketball for an hour and a half, went home, showered up, then logged on and worked from home until 11pm. I came in again today at 5:30am. By 5pm I was toast. Absolutely donezo. If you count Sunday, I have worked 31 hours this week and it's only Tuesday! I'm not complaining though, it's good to have a job and my work is incredibly interesting and exciting right now. Each day is bringing new and exciting challenges. There is an element of excitement in the markets for me right now. The markets are in unprecedented space and everything is new, the economy is being redefined.

Last week my friend Ace spoke at the first Liwanag meeting of the UCI academic year about the importance of LOG in his life. He did a really good job and stimulated some self reflection for myself. I realized how amazing it is that my life somehow feels balanced right now despite the long hours and lack of sleep. An hour at Mass on Sunday and a couple hours at a LOG meeting on Tuesday night are so powerful for me because they balance out a 70 hour work week. I am generally in a good mood every single day and am really trying to push myself. After all it's in the thick of the battle that you prove yourself. I feel like I've been given strength. Yo LOG thanks for the love and support!

To top off my ridiculous career commitments, CFA studying will soon be getting underway. Hopefully I can form a support group of others studying for exams and we can push each other. I will pass Level II. By the first Saturday in June, the hard work will have finished. I am getting eager.

On the topic of the markets today I thought about how delevering is unambiguously swallowing up every nook of the financial landscape (stocks, widening credit spreads, Oil!). I started to think about how all of the solutions to the financial crisis vis-a-vis TARP and other policy responses effectively are efforts to re-lever the financial system. Lending and credit is a levered business model and that is what is broken. I need to brush up on my econ to evaluate this response. Over reaching leverage caused this problem, but I need to research the negative effects of deleveraging to 0. I suppose this would create severe deflation. This last paragraph has done a good job of creating a framework in my mind to see that real economic growth is to some degree dependent on ample leverage. So in the brave newly landscaped financial world, the goal of massive policy interventions into market space should be a comfortably levered financial system with regulatory measures to prevent over reaching leverage on the high side to prevent future needs for delevering circuit breakers on the down side when excessive leverage creates houses of cards that all blow away from the same gusts of wind.

Completely unrelated, there are some cats on my street with a banging social life. They are always messing around in the middle of the street. I think there's three of them and they are always playing out in the open. I like it, they are fun.