Steve Keen provides a good critique of neoclassical economists and their “green shoots.”

The reason that most economists continue to underestimate this downturn is because (a) the downturn is being driven by deleveraging from literally unprecedented levels of private debt, and (b) the neoclassical theory of economics, which dominates academic and market economics alike, ignores the role of private debt in the economy…

…This is why the crisis exists, is so much worse than the official economic forecasters expected, and will continue and be much deeper than they currently believe: the crisis is being driven by deleveraging, and neoclassical economists do not even include private debt in their models.

I was spanked on my bond short, at least relative to last month, which hurt performance quite a bit. But I’m hanging in there, there are a lot of bonds to be sold and I think the buyers will need quite a bit of incentive to do business.

More energy shares and the commodity positions went over the side. Equity shorts are still not working, despite occasional dashes to the downside. Economic conditions are clearly continuing to deteriorate, but the stock market is so in the spell of the black box boyz that price discovery just isn’t happening. But it will, if today’s job report is any indication. Anyway, I am much shorter now than at the end of last month. Maybe too much so, but what the heck.

Relative performance is based on a relative return fund, FMAGX, an absolute return fund, HSGFX, and, newly added, “the Fed,” CPI-U price inflation as driven by public enemy number one, the Federal Reserve. Inception refers to reporting on the blog, and is based on the close of 2005.
6/30 portfolio.

You don’t see much straight talk on financial television. But, thanks to Zero Hedge, here’s some:

The media were all over the sentencing of Bernie Madoff yesterday, featuring the wailing and gnashing of teeth of the Madoff victims. To a person, these people have an over-developed sense of entitlement. First of all, they felt that their invitation to join the coterie of Madoff investors entitled them to a life of ease, without doing a shred of work or investment diligence.  As Joe Nocera says in the NYT:

What’s more, most of the people investing with Mr. Madoff thought they had gotten in on something really special; there was a certain smugness that came with thinking they had a special, secret deal not available to everyone else. Of course, it turned they were right — they did have a special deal. It just wasn’t what they expected.

Some, it appears, put their entire life savings with Madoff, without the slightest concern for diversification. That was pure greed. And these same people now feel that they are entitled to be reimbursed by the taxpayer, not only for the loss of money that they put in, but even for the profits that Madoff fraudulently reported to them.

There must be consequences for bad investment decisions, particularly the failure to perform even the most rudimentary due diligence. Otherwise these frauds will spread, because they will in effect receive a taxpayer guarantee. People need to learn that they are on their own with these decisions, that government agencies such as the SEC do not provide any useful protection, and in fact favor the industry over the public.

All you folks out there buying Treasuries hand over fist, you must be feeling lucky. Sprott Asset Management’s letter outlines the massive issuance of U.S. Treasury debt over the second half of this year.

The US government raised $705 billion worth of new debt in 2008. The debt was raised to pay for a $455 billion budget deficit and $250 billion in “supplemental appropriations” for the wars in Iraq and Afghanistan. In 2009, the US government will (and must) sell $2.041 trillion in new debt. This debt will pay for a projected budget deficit of $1.845 trillion, supplemental appropriations of $196 billion for Iraq and Afghanistan, a fund for pandemic flu response and a line of credit to the IMF. In fiscal 2009, the United States must find buyers for almost three times the debt that was issued last year.

Or to put it another way, Treasury debt outstanding will grow by about 20%. Oops. I am not feeling lucky.