Commitment and Resolve

A 2011 realization: The point at which a task is contextually the most difficult to accomplish is the point where its completion matters most.

A simple example involves a fitness regimen. Of course, there are days where one may be travelling, with limited time to run; where one may be stressed, with little motivation. These types of days will occur, but if the goal (there must be a goal) is to run six out of every seven days, the "difficult" days are by far the most critical. Specifically, if one can uphold his commitment through these abnormal yet inevitable scenarios, "normal" days will be psychologically bolstered. Conversely, if one allows an unexpected event to break his routine, the routine's foundation gradually crumbles. Traveling? Wake up an hour earlier. Stressed? Remember, fighting the headwinds and completing the task will ultimately clear one's mind. Replace traveling and stressed with x and y, and the same lesson applies.

"Gold Price" + VIX Correlation

Fascinating chart from The Economist:



Google query data is more pertinent and powerful than one might think.

Tax Relief?

The House and Senate have finally agreed to a two-month extension of the payroll tax cut, equating to a $33b total package. While this is slightly positive news for 160 million American workers, many do not realize (or simply ignore) how the cut is funded. As simply stated in today's Wall Street Journal, "the bill's $33 billion cost is expected to be covered by an increase in fees charged to mortgage lenders by government housing agencies Fannie Mae and Freddie Mac...the fee increase, expected to raise about $35.7 billion in revenue over 10 years, likely would be passed on to new-home buyers, raising their monthly mortgage payments by as much as $15 on mortgages of $210,000." Suddenly, it seems as if the tax cut isn't so beneficial. Of course, one could argue that the sample sets of those in need of tax relief and those seeking reasonable mortgage financing are somewhat exclusive, but such a dichotomy is difficult to define.

LTRO

On its face, the ECB's Long-Term Refinance Operation (LTRO) seems to be a blessing for troubled Eurozone financial institutions, especially when used in conjunction with the classic "carry trade" concept. At a high level, the banks would have access to cheap liquidity (borrowing at the 1% benchmark rate), which, in turn, would be used to purchase higher-yielding sovereign debt (anywhere between 500-700bps for Spain and Italy based on recent levels). Not only would the banks pocket the delta (approximately 400bps) as profit, but also the peripheral nations would benefit from increased demand at sovereign auctions. In addition, the sovereign bonds could be used as collateral for access to the ECB's cheap lending facility, thereby reinforcing the positive feedback loop.