ECRI Weekly Leading Index rises moderately, strongly suggesting that an end to the U.S. recession is now in clear sight

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) rose moderately by +0.47% vs. +0.69% last week, and its annualized growth rate rose very sharply from -0.6 to +2.1, well above its record low for its 60-year history of data of -29.7 for the week ended December 5, 2008, and its distinct upturn strongly suggests that recovery is on the way.

This was the first positive reading for the WLI growth rate since August 10, 2007, over 22 months ago.

The WLI growth rate has risen for 14 of the past 15 weeks.

According to ECRI, "Following a 28-week upturn, WLI growth has broken into positive territory for the first time in over 22 months -- an affirmation that an end to the recession is at hand."

My personal outlook is that: The recession of the U.S. economy that started in December 2007 and sharply accelerated in August 2008 finally looks as if recovery may be underway within the next few months.

Although a double-dip recession or "W" recovery cannot be discounted, it is becoming quite clear that the overall U.S. economy is on the verge of positive growth of spending and output, even if unemployment is still problematic.

Although the current economic reports continue to show significant weakness, there is also a vast amount of potential stimulus (especially from the Federal Reserve) in the pipeline that could kick-start the economy within the next couple of months. Please keep in mind that employment is not a leading indicator, so we could continue to see further employment losses or gains in unemployment even as recovery is underway.

-- Jack Krupansky

Note on fed funds futures: target rate vs. effective rate

Not everyone realizes this, but so-called fed funds futures are not based directly on the official FOMC target rate, but rather are based on the average daily fed funds rate for the futures contract month, as reported by the NY Fed. As per, the contract specification for 30-Day Federal Funds Futures (which you can read, but is "locked" so that I can't copy and paste it!) the contract grade (final price to compare the contract price to for cash settlement) is calculated as the simple average of the daily Fed Funds overnight rate from the NY Fed for each day of the month. For weekend days and holidays you use the reported rate for the previous business day.

The NY Fed has a web page entitled Federal Funds Rate Data that is updated every business day morning. The second column in the main table is labeled DAILY with a footnote that says "The daily effective federal funds rate is a volume-weighted average of rates on trades arranged by major brokers. The effective rate is calculated by the Federal Reserve Bank of New York using data provided by the brokers and is subject to revision." The last column of the table gives the target rate, which might be a range. It is that second column, not the last column that is used in calculation of the fed funds futures settlement price.

So, even if the Fed FOMC makes no change to the target rate in a given month, the final average effective daily rate is inherently unpredictable. The daily rate at the beginning of June was 0.21%. It got as low as 0.14% as recent as June 12. Yesterday it was 0.24%. On Friday it was 0.25%.

The importance of all of this is that all of these futures-driven forecasts of the target rate that give probabilities are in fact based on the volatile effective daily rate.

Some people may use the fed funds futures prices for these forecast calculations, but at the end of the month there are real traders (and speculators) who depend on the actual hard-core effective daily rate to determine their profit and loss for their "investment" in the futures contracts. Probability forecasts do not figure in their final calculations.

Granted, the effective daily rate does tend to average near the target rate, especially if the NY Fed is successful at doing its job of open market operations, but there can be times when there is significant variation of the effective rate from the target rate.

Regardless of what the FOMC decides today, only the open market transactions of the NY Fed will determine the effective daily rate for the remaining days of June and hence the average for the full month.

-- Jack Krupansky

Is it gettting time for the Fed to raise rates, a little?

The daily federal funds rate (average) has trended in the upper third of the 0% to 0.25% range for over a month now. It has not been below 0.17% since May 20, 2009. In fact, this week it was 0.22% or above and for the last day of data, Thursday, June 18, 2009, it was 0.25%. Given this "real" federal funds rate, there would probably be very little harm to dumping the range and setting the target rate to 0.25%.

Such a move would demonstrate to people that the Fed does have some serious concern about inflation pressures that may be building.

Sure, "the markets" may still be suffering from enough lingering nervousness about the recent crisis to suggest that the Federal Reserve hold off right now and wait until August, but if they wait until August people will then complain that the Fed waited too long.

If they don't raise the rate to a flat 0.25% now, they may be forced to raise it to a flat 0.50% in August. A rate of 0.50% may be appropriate in August anyway, but better to raise rates gradually.

-- Jack Krupansky

Withdrew 60% of my Kiva funding

I went ahead and withdrew 60% of my Kiva micro-lending funding (back to my PayPal account). I intend to keep the remaining 40% in Kiva and reinvest in new Kiva loans as repayments come in.

I have been quite happy with Kiva, other than the one limitation that there is no interest paid on my investments. If they paid even a modest level of interest, say 1-2%, I would happily invest A LOT MORE in Kiva. A 2% return would cover most defaults and make Kiva investment money self-sustaining.

I may move the money over to Lending Club, or I may park it over at SmartyPig.com where it can earn 3.05% APY.

-- Jack Krupansky

ECRI Weekly Leading Index rises moderately, strongly suggesting that an end to the U.S. recession is now in clear sight

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) rose moderately by +0.73% vs. +1.64% last week, and its annualized growth rate rose very sharply from -3.5 to -0.6, well above its record low for its 60-year history of data of -29.7 for the week ended December 5, 2008, and although it remains slightly below the flat line, its distinct upturn does strongly suggest that recovery is on the way.

The WLI has risen for 13 of the past 14 weeks.

According to ECRI, "With WLI growth rocketing up almost 30 percentage points in six months, it's virtually pounding the table about the recession ending this summer."

My personal outlook is that: The recession of the U.S. economy that started in December 2007 and sharply accelerated in August 2008 finally looks as if recovery may be underway within the next few months.

Although a double-dip recession or "W" recovery cannot be discounted, it is becoming quite clear that the overall U.S. economy is on the verge of positive growth of spending and output, even if unemployment is still problematic.

Although the current economic reports continue to show significant weakness, there is also a vast amount of potential stimulus (especially from the Federal Reserve) in the pipeline that could kick-start the economy within the next couple of months. Please keep in mind that employment is not a leading indicator, so we could continue to see further employment losses or gains in unemployment even as recovery is underway.

-- Jack Krupansky

Progress with Lending Club P2P loan investments

I got off to a great start with my initial peer-to-peer (P2P) loans ("notes") through Lending Club, but then things bogged down. Now I am starting to catch up again.

I started by making five small $25 investments in five different notes. I was done, for now. Or so I thought. But only two of the notes were eventually issued. For various reasons, the other three fell through. Two days after I made the investments those three were showing as 100% funded, but still "In Review." At first I thought that simply meant that Lending Club review staff was behind and would eventually catch up. Not quite.

The review process is really two steps. First, the credit bureau is consulted and credit history and credit score and all of that credit history stuff is evaluated. That is actually an automated process. Then the loan is made available for us investors. We get to see a combination of that auomated credit information as well as unverified employment and income information. Why unverified? Well, simply because it takes time and separate manual processes that can only be automated in some cases. The loan description actually does indicate whether the employment and income information has been verified (with an asterisk if it has been verified) and Credit Status Review does say "Under Review" if the displayed information is still unverified. The status will change to "Approved" once Lending Club has completed the employment and income verification. Lending Club is up-front and transparent with all of this, but you (I) need to understand the jargon and I had failed to do so initially. Now I know.

At least now I can understand why so many mortgage originators were so willing to issue "no doc" mortgages back before the financial crisis -- it is a real pain to verify income and employment.

Lending Club says that they are in talks with a number of payroll service providers so that they will gradually be able to automatically verify employment and income for an increasing portion of loans.

Why not wait until Credit Status Review says "Approved" before selecting a loan for investment? Simple: Because a lot of the "best" loans will already have gotten to 100% funded by that time and no longer be available for you to make an investment. There is no risk selecting an "Under Review" note, it is simply the inconvenience that your investment will be returned within a few days and the money is tied up during that review period.

So, I went ahead and selected another four loans (total of ten). My goal is still to get five or six loan investments.

So far, another loan has been issued (four so far), two more are "In Review" (fully funded), and three are "In Funding."

It is difficult to say how many of those five "open" investments will finally be "issued." I did not intend to do five more, but it's okay if all five get issued. Maybe only one or two will ultimately get issued and that would be ideal for me. Or, maybe they all fall through and then I will have to go back and search for new loans to invest in.

But the bottom line is that I am starting to get into the swing of the whole process.

I actually got to meet the executives of Lending Club last week. I'll post about that separately.

-- Jack Krupansky

Monthly GDP for April rose by +0.3% (+3.8% annualized), Q2 tracking for a -1.1% annualized decline

Monthly real GDP, one of the five primary economic indicators that the NBER Business Cycle Dating Committee (NBER BCDC) uses to judge recession start and end dates, rose modestly in April by +0.3% or +3.8% annualized, after falling slightly by -0.3% in March (revised down from +0.2%), and real Q2 GDP is forecast to decline by -1.1% annualized, according to Macroeconomic Advisers (MA). The government does not publish GDP data at a monthly level, but the NBER Business Cycle Dating Committee says that they refer to sources such as Macroeconomic Advisers (MA) and their MGDP data series. As Macroeconomic Advisers summarized GDP for April:

Monthly GDP rose 0.3% in April.  This followed a 0.3% decline in March that was revised down from a previously reported 0.2% increase.  After falling sharply over most of the second half of last year, monthly GDP has trended only modestly lower since December.  The increase in monthly GDP in April was largely accounted for by an increase in nonfarm inventory investment, as inventories were pared less sharply in April than in March.  The level of monthly GDP in April was 0.6% above the first-quarter average at an annual rate.  Average monthly declines of 0.4% per month in May and June would support our latest tracking forecast of a 1.1% decline of real GDP in the second quarter.

This report does not necessarily herald the return of happy days, but at least it is not indicating a worsening of the trend.

From the MA monthly data, I calculate that annualized real GDP fell at a rate of -6.1% in Q1 from Q4.

If the NBER BCDC is the definitive expert on marking of recessions, MA is the definitive expert on calculating real GDP at the monthly level with their MGDP data series.

-- Jack Krupansky

What is the Office of the Comptroller of the Currency (OCC)?

How many normal people have the slightest clue what the Office of the Comptroller of the Currency (OCC) is or does?

First, the OCC is a bureau of the U.S. Department of the Treasury. It does have a lot to do with money and banking, but little to do with "currency" per se.

The simple answer is that the Office of the Comptroller of the Currency (OCC) charters, regulates, and supervises all national banks.

Individual states regulate state-chartered banks and the Federal Reserve regulates bank holding companies, but the OCC is responsible for all national banks. The Federal Reserve does have a role in regulation of national and state banks as well, but that's another story.

You might be wondering why OCC has "currency" rather than "bank" in its name. As you might expect, there is a story, a history there.

The short version of the story is that the OCC was founded to fund the Civil War by chartering banks that would buy the debt of the U.S. government in exchange for the right to issue standardized national bank notes based on U.S. bonds held by the banks. The slightly fuller version of the story from the OCC web site:

In 1861, Secretary of the Treasury Salmon P. Chase recommended the establishment of a system of federally chartered national banks, each of which would have the power to issue standardized national bank notes based on United States bonds held by the bank. In the National Currency Act of 1863, the administration of the new national banking system was vested in the newly created OCC and its chief administrator, the Comptroller of the Currency.

The law was completely rewritten and re-enacted as the National Bank Act. That act authorized the Comptroller of the Currency to hire a staff of national bank examiners to supervise and periodically examine national banks. The act also gave the Comptroller authority to regulate lending and investment activities of national banks.

One of the reasons Congress created a banking system that issued national currency was to finance the Civil War. Although national banks no longer issue currency, they continue to play a prominent role in the nation's economic life. The OCC regulates and supervises about 1,600 national banks and 50 federal branches of foreign banks in the U.S., accounting for nearly two-thirds of the total assets of all U.S. commercial banks (as of March 31, 2009).

The web site also tells us that:

The OCC was established in 1863 as a bureau of the U.S. Department of the Treasury. The OCC is headed by the Comptroller , who is appointed by the President, with the advice and consent of the Senate, for a five-year term. The Comptroller also serves as a director of the Federal Deposit Insurance Corporation (FDIC) and a director of the Neighborhood Reinvestment Corporation.

The OCC's nationwide staff of examiners conducts on-site reviews of national banks and provides sustained supervision of bank operations. The agency issues rules, legal interpretations, and corporate decisions concerning banking, bank investments, bank community development activities, and other aspects of bank operations.

National bank examiners supervise domestic and international activities of national banks and perform corporate analyses. Examiners analyze a bank's loan and investment portfolios, funds management, capital, earnings, liquidity, sensitivity to market risk, and compliance with consumer banking laws, including the Community Reinvestment Act. They review the bank's internal controls, internal and external audit, and compliance with law. They also evaluate bank management's ability to identify and control risk.

The OCC also supervises the federal branches and agencies of foreign banks.

Headquarters is in Washington, D.C. There are four district offices.

An office in London supervise the international activities of national banks.

That's OCC today. But... Treasury just came out with a reform proposal today which proposes to create a new agency within the U.S. Treasury called the National Bank Supervisor (NBS) that will "conduct prudential supervision and regulation of all federally chartered depository institutions, and all federal branches and agencies of foreign banks." This new agency will subsume the OCC as well as the Office of Thrift Supervision (OTS), which currently supervises federally chartered thrifts and thrift holding companies. The proposal says that "The NBS should be an agency with separate status within Treasury and should be led by a single executive."

In any case, NBS or OCC, at least you now know what this strange creature called the Office of the Comptroller of the Currency (OCC) is all about.

-- Jack Krupansky

ECRI Weekly Leading Index rises sharply, strongly suggesting that an end to the U.S. recession is now in clear sight

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) rose sharply by +1.71% vs. +1.40% last week, and its annualized growth rate rose very sharply from -7.1 to -4.7, well above its record low for its 60-year history of data of -29.7 for the week ended December 5, 2008, and although it remains a bit below the flat line, its distinct upturn does strongly suggest that recovery is on the way.

According to ECRI, "With WLI growth rising to its best reading in a year and a half -- namely, since the recession began -- economic recovery prospects are brightening rapidly." Reuters notes that ECRI has said that "yearly growth will turn positive in the summer months."

My personal outlook is that: The recession of the U.S. economy that started in December 2007 and sharply accelerated in August 2008 finally looks as if recovery may be underway within the next few months.

Although the current economic reports continue to show significant weakness, there is also a vast amount of potential stimulus (especially from the Federal Reserve) in the pipeline that could kick-start the economy within the next couple of months. Please keep in mind that employment is not a leading indicator, so we could continue to see further employment losses or gains in unemployment even as recovery is underway.

-- Jack Krupansky

Invested in my fifth Lending Club P2P loan

I made my 5th investment in a peer-to-peer (P2P) loan ("note") through Lending Club, $25 in a note for $11,000 for someone to buy a wooden sailboat, at an interest rate of 14.74% for a term of 3 years. The loan grade is D3, which is higher risk due to the borrower's credit score being in the 660-678 range.

Read about my fourth investment loan.

-- Jack Krupansky

My first Lending Club peer-to-peer loan investment is now fully funded

The first Lending Club peer-to-peer (P2P) loan ("note") that I invested in yesterday is now fully funded, closed, and "issued." It was only 60% funded when I invested yesterday, but things move fast on Lending Club. This loan ("note") is for $10,000 intended for credit card refinancing. It is a low-risk loan (grade A5) with an interest rate of 9.63%. The first payment (interest only) is due on July 17, 2009.

I am still considering investing in another one or two loans in the very near future to round out my initial portfolio.

-- Jack Krupansky

Made my fourth Lending Club peer-to-peer loan investment

I just made my fourth investment in a peer-to-peer loan ("note") through Lending Club. This note was for someone to remodel their kitchen and bathroom. The loan is for $5,000. My investment is for $25 of that note. The interest rate is 9.32%. The term of the note is 3 years. The loan grade is A4, which is low risk. The borrower's credit score is in the 714-749 range. The note is still "In funding", with 13 days left in its funding period, so it is possible that it does not get fully funded and I get my investment back, but it is already 43% funded in just one day.

I may do another one or two investments in the very near future, but my initial four investments cover a wide range, from two low risk notes, to one moderate risk and one higher risk note, with a variety of purposes, including educational expenses, a motorcycle, home improvement, and debt consolidation.

That's enough for one day!

Read about my third investment loan.

-- Jack Krupansky

Made my third Lending Club peer-to-peer loan investment

I made my third investment in a peer-to-peer loan ("note") through Lending Club. This note was for a student for educational expenses. The loan is for $4,000. My investment is for $25 of that note. The interest rate is 15.37%. The term of the note is 3 years. The loan grade is D5, which is a lot riskier. The borrower's credit score is in the 660-678 range.

For my next loan... Maybe I'll fund some home improvement.

Read about my second investment loan.

-- Jack Krupansky

Made my second Lending Club peer-to-peer loan investment

I went ahead and made my second investment in a peer-to-peer loan ("note") through Lending Club. This note was for someone here in New York buying a motorcycle. The loan is for $7,700. My investment is for #25 of that note. The interest rate is 12.53%. The term of the note is 3 years. The loan grade is C1, which is a bit riskier. The borrower's credit score is in the 679-713 range.

For my next loan... Maybe I'll fund some home improvement.

I will also consider a somewhat higher-risk note in the 13% interest range.

Read about my first investment loan.

-- Jack Krupansky

Just made my first Lending Club peer-to-peer loan investment

I just now made my first investment in a peer-to-peer loan ("note") through Lending Club.  I opened a Lending Club account as an investor (lender) last Wednesday. The initial funding transfer from my bank account (actually my Fidelity brokerage account) completed yesterday.

I am starting with a modest $1,000 initial funding and intend to invest $25 in each peer-to-peer loan (called a note.) That will eventually spread my risk over 40 loans (notes.) After I get at least six months to a year of experience (and depending on my own financial condition) I will consider how much more to invest.

A typical Lending Club loan (note) would be in the $5,000 to $25,000 range, so my little $25 is only a small amount of the risk of default for a given loan (note.)

The standard Lending Club note is for a 3-year term.

I am still a little concerned about the dicey state of the economy and the risk that even people with good jobs today might lose them and default on their debts, so I am currently thinking of investing only a small portion of my funding up front, then a little more over the summer, then some more in the early fall, and maybe the rest as we start to see some economic strengthening and reversal of job losses later in the fall and into early next year. At least that is my initial "plan."

I'll probably invest about $100 to $150 upfront just to get some experience with the whole process. That would be small pieces of four to six loans (notes.)

I'll probably spread my investments over a range of credit risks, just to see how different risk levels perform and to average up to a higher return.

My first investment was for $25 of a $10,000 note intended for credit card refinancing. The loan grade is A5, indicating low-risk. The interest rate will be 9.63%. The borrower works for Best Buy. Their credit score is in the 714-749 range. There are a lot of other credit-related details that Lending Club provides. The note is still "In Funding", indicating that it has another 8 days left in its 14-day funding period. If investors do not buy up the entire note by the end of that period that note will not "close" and our investments will be returned.

For my next loan... I guess I'll get it over with and loan somebody money to buy a motorcycle!

-- Jack Krupansky

ECRI Weekly Leading Index rises sharply strongly suggesting that an end to the U.S. recession is now in clear sight

The Weekly Leading Index (WLI) from the Economic Cycle Research Institute (ECRI) rose sharply by +1.45% vs. +0.80% last week, and its annualized growth rate rose sharply from -9.3 to -7.1, well above its record low for its 60-year history of data of -29.7 for the week ended December 5, 2008, and although it remains well below the flat line, its distinct upturn does strongly suggest that recovery is on the way.

According to ECRI, "With WLI growth climbing to its best reading since July, U.S. growth prospects are rapidly reviving."

My personal outlook is that: The recession of the U.S. economy that started in December 2007 and sharply accelerated in August 2008 finally looks as if recovery may be underway within the next few months.

Although the current economic reports continue to show significant weakness, there is also a vast amount of potential stimulus (especially from the Federal Reserve) in the pipeline that could kick-start the economy within the next couple of months. Please keep in mind that employment is not a leading indicator, so we could continue to see further employment losses even as recovery is underway.

-- Jack Krupansky

Opened a Lending Club account to be a peer-to-peer lender

I just finished opening a Lending Club account as an investor (lender.) This online Web site supports what is called peer-to-peer lending. It lets people like me who have extra money to lend to... other people like me who need money. As the web site says:

Lending Club is a social lending network that brings together investors and creditworthy borrowers to offer value beyond traditional banks.

Borrowers with good credit can get personal loans from $1,000 to $25,000 at interest rates that are often significantly better than rates from conventional sources.

For lenders, money invested goes immediately to Lending Club's approved borrower members. Most lender members spread their investment across tens or hundreds of qualified borrowers. Notes (that correspond to specific borrower loans) are offered only by means of a prospectus.

The next step is to complete the initial funding of my account so that I can start matking loans. I initiated the transfer of funds this morning, but it may not complete until next Tuesday.

My expectation is that I will be able to make some initial loans in a week.

I am starting out with $1,000. I still need to do some more reading and strategizing, but I expect that I will spread my risk by only contributing $25 to each loan. That would give me 40 loans initially. Also, I may only commit half or even a third of my money at the beginning and wait a few months to see how things play out.

A typical loan might be in the $5,000 to $15,000 range with an interest rate in the 9% to 13% range, based on the grade of the loan.

A lot of credit background information is available for each "note" (loan), including income and credit score range and loan "grade", so a decision can be made based on verified facts and risk.

Unlike Kiva which is great as a non-profit charity for helping the working poor around the world, Lending Club actually permits me to make a decent profit from my lending.

I do have a fair amount of concern about lending in the current economic climate. Even if somebody has a great job today, they might lose it by the end of the day. I might in fact decide to defer most of my lending until later in the summer just to minimize the chance of lending too much to tomorrow's unemployed.

-- Jack Krupansky

Made my Kiva micro-loan for the month of June

I made a new micro-loan through Kiva for the month of June. My intention is to make a new micro-loan every month, in large part from repayments for past micro-loans.

This one was for a group of 18 micro-entrepreneurs in Tanzania who are making furniture. It is a 6-month micro-loan for a total of $4,550, of which I lent $25. The money is to be used to buy leather, cloth for sofas, and varnish for wood. Its first repayment is scheduled for August 2009. The micro-loan was already disbursed to the micro-entrepreneur group on May 27, 2009 by the local partner. Kiva is raising funds to essentially buy that loan from the local partner.

Here is my Kiva public lender page: http://www.kiva.org/lender/JackKrupansky

Note: This is all real and good, but these micro-loans do not net any interest to us micro-lenders. Kiva's fine print:

Lending to the working poor through Kiva involves risk of principal loss.
Kiva does not guarantee repayment nor do we offer a financial return on your loan.

Still, at least we know our money is really helping somebody better their lives in a visible way rather than put the money in a bank account or money market fund where who knows what it helps to pay for or what good it does and for only a few pennies of profit in our pockets.

-- Jack Krupansky

Disrespect for simplicity, worship of complexity, and juggling too many chainsaws

I am a big fan of simplicity and hate complexity. That leaves me out in the cold relative to Wall Street and high finance. On Wall Street, simplicity it sneered at or laughed at if not ignored completely. Simplicity gets no respect. Complexity, on the other hand, rules on Wall Street. Complexity is the God of All Gods on Wall Street. It is not money that Wall Street worships, but complexity itself. Money is just a way to keep score in the pursuit of complexity.

When thinking about how Wall Street has evolved in recent decades and into the current financial crisis, the image of juggling comes to mind. Juggling is a handmaiden of complexity. If you can only make a product complex to a certain degree, then you can always make more products and then start juggling them. As much as Wall Street "professionals" love a complex product, they are enthralled with anyone who can juggle multiple complex products. And each of these complex products is not simple a little ball, a toy, something easy to understand, but something very dangerous, as dangerous as a chainsaw. Managers on Wall Street are essentially juggling a bunch of chainsaws! As scary as that visual metaphor is, it is still tame relative to what has really been going on on Wall Street in the past decade.

And the real problem was not that Wall Street managers attempted to juggle chainsaws, but that once they had succeeded, they then kept adding new complex financial "chainsaws" to their juggling act, but the real danger was that they somehow began to think that they were in fact gods and true masters of the universe and that their prior success predetermined that they could juggle any number of financial chainsaws, and in fact that they could juggle an unlimited number of financial chainsaws.

In the old days it was called hubris.

So, there they were, all juggling, say 72, financial chainsaws (visualize that!) and doing it with big grins on their faces and imaging that they could by definition toss another one or two or more into the mix with no problem. At least that was their theory.

But, as much as they worshiped complexity, they did not fear complexity.

They did not respect the limits of their own ability to handle complexity.

True, hard-core hubris.

So, they added the proverbial straw that broke the camel's back and then were completely mystified as to why their house of cards began to crumble.

What we need now on Wall Street are more people who respect rather than worship complexity. In fact, we need true professionals who worship simplicity.

In any case, we do not need any more juggling of chainsaws on Wall Street.

That, in a nutshell, is how I conceptualize the recent crisis.

-- Jack Krupansky

Can anyone offer any rational explanation for the action yesterday in GM stock?

Floyd Norris, the chief financial correspondent of The New York Times and The International Herald Tribune, and who "covers the world of finance and economics" asked the question: Can anyone offer any rational explanation for the action today in G.M. stock? I'll bite. Yes, there is at least one very rational explanation: Short covering. Not all "buying" is to invest in new long positions. Some buying is simply to close out short positions. Now that "old" GM's fate is sealed, some shorts may simply wanted to get out of the game and move to some more promising trade. Granted, old GM stock is "headed for zero", but that little bit of icing on the cake may not be as significant as finding a new and more promising target company to short.

So, the stock goes up as speculators buy to "cover their shorts." Then, with all that shortable stock once more available, those "bought" shares could be borrowed again and "sold" to open short positions, taking the stock price back to where it started.

There, was that so hard to understand.

Granted, there may also have been a lot of other trading and speculation transactions going on, but at a minimum there is at least one plausible rational explanation.

Nobody ever knows exactly why any stock trades in any specific pattern, but it is inexcusable to assert that there is no possible rational explanation when a plausible explanation is readily at hand.

Now, can anyone give me a clue as to why Mr. Norris is so clueless on this matter and why he refused to enlighten readers as I just did above?

-- Jack Krupansky