Monday, August 3, 2009

"Mutually Exclusive Events"

Quote of the Day:

In probability theory,
events E1, E2, ..., En are said to be mutually exclusive if the occurrence of any one of them automatically implies the non-occurrence of the remaining n − 1 events. Therefore, two mutually exclusive events cannot both occur. Mutually exclusive events have the property: Pr(A ∩ B) = 0.[1]

For example, one cannot draw a card that is both red and a club because clubs are always black. If one draws just one card from the deck, either a red card or a club can be drawn. When A and B are mutually exclusive, P(A or B) = P(A) + P(B).[2]

One might ask, "What is the probability of drawing a red card or a club?" This problem would be solved by adding together the probability of drawing a red card and the probability of drawing a club. In a standard 52-card deck, there are twenty-six red cards and thirteen clubs: 26/52 + 13/52 = 39/52 or 3/4.

High Oil prices and an expanding U.S. economy are, IMHO, mutually exclusive events. High interest rates, and high equity prices are mutually exclusive events.

Something will give here. These asset classes cannot ALL have positive correlation for any length of time. I just pray that it is not the US$ that gives.


BTW, the Deflationists appear to be losing the argument at the moment. Actually, the Deflationists are watching their heads role down the street with their blood dripping from the sword of the various Central Banks.

Not that I am ready to throw in the towel on those guys... As I said a couple weeks back, I covered my shorts, because this is a beauty contest... and it doesn't matter which girl I think is the prettiest... what matters is what the judges think, and so far they seem to think the inflation trade is working.

This is either a VERY "V" shaped recovery, or one of the greatest head fakes of all time.


The time to have been bullish was at Dow 6,500. 9200? In the immortal words of former BEar Stearns CEO (my former boss back when Bear was a respected firm... say what you like about Bear, but this guy was the most humble genius I ever met) Alan C. "Ace" Greenberg: "If you didn't get invited to the wedding, don't go to the funeral".

There is a blow off in here somewhere... I just hope it ain't at Dow 12,000... or I will have a tough time cleaning up from all of the egg on my face.


The US$ is oversold versus the 6 other big currencies in the Dollar Index. This MIGHT mean that precious metals are over bought I own a great deal of metal, but I have continued to sell calls against it. If it gets called away, I will let it happen, and sell puts to re-enter. I have no intention of selling the actual bullion I own. Of course, if this is the Big Bang for the US$, well... let us hope not...

I have been a Gold Bull since just under $500. I still think over the next 5 years Gold can hit $2000. But if the US$ rallies, and it is long overdue, the precious metals could come under pressure. So, if you decide to hold now, don't freak out if they come in. Of course, with the kind of monetization the U.S. is going to have to engage in, this might very well be the beginning of the end.

The Obama administration is floating balloons about raising taxes on the middle class. I believe this is to assuage the Chinese and other creditor nations that the U.S. is going to get its fiscal house in order. The U.S., WILL ABSOLUTELY, POSSITIVELY cut expenditures and raise taxes at some point. I doubt whether this Administration will "Lead" the way, doing th right thing and cut expenditures like mad FIRST, and then sell a tax increase. They will be too busy looking 2012 in the face... but, you never know.

If Obama wants to go down in history as a great president, and was willing to forgo a second term (which is actually in his best interests. There is nothing better than being a former POTUS), and if I were working as his speech writer, here is what his opening address on the issue to the American people would be:

My fellow citizens:

America is faced with an unprecedented fiscal problem, and I am going to tell
people what they don't wish to hear, and require that which people do not wish
to do. Accordingly, I will not seek second term to my Presidency. I will instead use all of the power of my office to bring the nation's fiscal issues into balance. It will be VERY painful, but we can, and will, overcome these obsticles in our path.

Withing minutes of giving this speech I would communicate the seriousness of the issue by proposing to eliminate the Departments of Energy, Commerce, Homeland Security, Education, Labor, and Housing and Urban Development. I would issue a huge recall of military troops from around the world, and I would use these troops to engage the American poor in how to become more self sufficient in providing for themselves.

And then I would really start to cut spending.

This would throw the nation into a massive Recession, which is exactly what is needed. The U.S. must make the transition to less consumption and increased savings - and tha faster we do this the better - and only a popular president with street credibility could make it happen.

But I got a better shot at a date with the tooth fairy.


Anonymous said...

This administration has absolutely no intention to do the right thing by the American people. They hope to extend the largess by any means possible to buy the support necessary to have the big O re-elected in 2012. During this time, they will avoid raising taxes in order not to rally the people who will ultimately pay. After that, look out! They will show their real stripes. If they get the chance we will see 90% marginal tax rates again, and carbon taxes, and nationalized oil, extended takeover of banking and finance, and on and on. All of this will be in the name of correcting the problems that they are creating right now.

Look at the cost of the legislation and listen to the DNC/DSA mouthpieces on the news. There is so little in the news about the cost of all of this.

Just like the real estate bubble burst before the end of the Bush adminsitration, I don't think the the dollar's collapse can be put off until the end of Obama's first term. I hope.

I'm still thinking 12,000 is the peak of the DJIA, but all hell is going to break loose after that.


Coal Guy

Anonymous said...

Or perhaps they are only trying to make it until the mid-terms in 2010...


Coal Guy

coal said...

They need to restart the industrial revolution in North America. Get our people back to work and bring the factories back for the items that we consume.

Put up a big wall around North America and nothing in and nothing out, including the military.

Once we see that the store no longers has any t shirts for sale, the entrepruners of our society will and can start a business making t shirts and hire ten of thier unemployed neighbours. Same goes for all of goods that were once manufactured here.

A flat rate tax system of 15-17 % per person, with no exceptions.

It's a start and a hard one, but the way we are headed is far worse.

Greg T. Jeffers said...


I guess you and I are not TOO far apart...


There is an old saying "If goods do not cross borders, armies will".

Protectionism does not work.

Never fear, the imbalance caused by free financing from the Chinese will come to an end... but we are not going to like it a bit.

Stephen B. said...

Wow, "...nothing in and nothing out..."?

That would mean allowing no oil in... or aluminum, or copper, or a whole bunch of other lesser known, but still strategically important minerals. Oh, and no Canadian natural gas coming to the US either.

*THAT* would be interesting to see.

bureaucrat said...

A few points ...

1) I received two notices in the mail, one from B of A saying my AMEX credit line was being reduced from $12,500 to $7,500 (never used). I then got a letter from Chase, knocking my VISA card credit line from $33,000 to $7,500 (also never used). My friend who was trying to do veterinarian school in the Caribbean had his private sector school loan cut off, and now he has to deal with the gangsters at Sallie Mae, who want 2 signatures, not just his. The destruction of credit worldwide is ongoing -- and deflation will be the ultimate result. Everything will be on sale.

2) I bought gold in early 2007 for $667 an ounce. I thought I was taking a big risk, given that gold had collapsed to $400 or so in the early 1990s. Today, an ounce goes for $960, for a gain of 44% in 2.5 years. Who woulda thunk!

3) You were making me feel all happy with the idea that Obama could indeed be purposefully going for only one term to have what it takes to set this country back on some kind of right course. Then you started that Libertarian thing dumping Federal departments and you started getting crazy again. :)

4) Stop saying you'd cut Federal spending. I've given you the names of the top 5 Federal programs, encompassing 80% of the budget, and neither you nor anyone else has the guts to touch any of them. Even Ron Paul wouldn't touch them. So stop talking silly. Only the Chinese can stop us now.

Greg T. Jeffers said...

The point was to show SINCERITY, and nothing shows that like eliminating the Dept of Energy...

Anonymous said...

Sounds great, the open statement to the US people, that is,talk about the nightly rating for Katty. Not Burea's 4 points,your point?

However, this the same man who could not even honor the simple statement of picking a dog from the shelter. They drove by the place and said to hell with that. Oh, and the BlackBerry incident. Hell the Chinese got a front row seat to the Pres. with that one. "NO I'M KEEPING IT " Yea he will "speak the Truth". Ssschhhiitt!


Anonymous said...

Oh,Burea are you at work today?
Mostlikely using your Blackberry too?! On the job? Govt!


Anonymous said...

Hey handsome
Want to go on a date?

The Tooth fairy

Greg T. Jeffers said...

Tooth Fairy!

Thank you for calling me handsome...

At my age, I don't get that very much anymore, but getting old beats the snot out of the alternative...

To Life!

Anonymous said...


You just don't get it. Imagine going into the kitchen for a glass of water, and nothing came out of the tap...


Coal Guy

bureaucrat said...

Then you get off your ass and walk down the street and dip a bucket in Lake Michigan. :) People did indeed survive before we had running water. People survived even before there were toilets! It wasn't the cleanest existence, but they lived. Plus no one is saying there are any water shortages TODAY in the U.S. There are lots of things that MIGHT happen, but they haven't happened yet. I'm not going to spend every waking minute worrying about it.