After building out Merrill’s mortgage trading floor basically from scratch, then moving to the buyside at Pimco, several weeks ago Harley Bassman, more familiar to many traders as the “Convexity Maven” – a legend in the realm of derivatives (he helped design the MOVE Index, better known as the VIX for government bonds) – decided to retire (roughly one year after his shocking suggestion that the Fed should devalue the dollar by buying gold).
But that did not mean he would stop writing, and just a few days after exiting the front door at 650 Newport Center Drive in Newport Beach for the last time, Bassman wrote his first full article as a “free man”, in which the topic was, not surprisingly, derivatives and specifically the recent collapse in vol – and convexity – what prompted it, but most importantly and what everyone wants to know: what threshold would be sufficient to finally launch the next “critical mass” market move (i.e. crash) and, just as importantly, what could catalyze it. Continue reading
Tag Archives: budget
Illinois on the Fiscal Brink
Illinois—a state that has long embraced progressive fiscal policies—has moved one step closer to the financial abyss. Last week, Moody’s Investors Service issued the jarring announcement that it was downgrading Illinois’s general obligations bonds to Baa2 from Baa1, which is just two levels above junk bond status. The next day, Standard & Poor’s followed suit by lowering its rating to BBB+, or three levels above junk bond status. In one important sense, this is really not news at all, since Illinois had thirteen bond downgrades under its previous governor, Patrick Quinn, even though it passed a temporary tax increase that collected an additional $31 billion in revenues between 2011 and 2015, 90 percent of which was funneled into pension payments for public employees.
While Iran Receives Billions From Lifted Sanctions, the U.S. Military Is Cut by Billions
The fact that there will be no U.S. aircraft carrier in the Middle East this fall is an interesting development that is worth noting. It would be the perfect time for Iran to launch an attack on Israel and for Obama to duck his obligation of protecting the tiny Jewish state. Ironically enough, the Iranian nuclear deal forces America into defending the Persian nation.
There are many reasons to think that the Iran nuclear deal is an awful agreement. One of those being the $150 billion (or so) that Iran will receive as sanctions are lifted.
In 2011, President Obama signed the Budget Control Act (BCA) into law which was an attempt to rein in federal spending. While federal spending must be curtailed, unfortunately the BCA did little to control the real drivers of federal spending (the entitlement programs) and instead imposed disproportionate cuts on the national security budget. These cuts were backed by a mechanism called sequestration, which automatically cuts every budget line if spending is too high. Continue reading
Russia and China Aren’t Less Committed to Nuclear Force. So Why Are We?
As Russia and other nations around the world flex their “nuclear muscles,” when it comes to the United States, maintaining a credible nuclear force is certainly a tough task. Challenges include: declining research, development and acquisition budgets; uncertain prospects for modernization, and an American public that lacks a clear understanding of how nuclear weapons contribute to national security.
The U.S. nuclear force has prevented a great power war for seven decades. Yet the commitment to maintain a credible nuclear force appears shaky. Continue reading
Under Xi, China’s defense budget seen defying economic slowdown
(Reuters) – President Xi Jinping is expected to authorize robust defense spending for this year despite China’s slowing economy, determined to strengthen the country’s armed capabilities amid growing unease in Beijing at Washington’s renewed focus on Asia.
While China keeps the details of its military spending secret, experts said additional funding would likely go toward beefing up the navy with anti-submarine ships and developing more aircraft carriers beyond the sole vessel in operation. Continue reading
Orion: a last-ditch effort by a fading empire that will never strike back
When a space startup has twice the force for a fraction of the cost, you know the US government has a problem
On Friday, after a weather delay, Nasa launched a very cool space capsule, in what at first blush looked like another Apollo mission. It rose on a massive rocket spewing superheated exhaust like some creature from a Peter Jackson movie. All went well just now – and given the expertise of engineers performing what was essentially an update of a 1970s Apollo mission, that much was expected: a four-seat capsule called Orion will detach any minute now, and soar around the Earth twice, then descend into the atmosphere and finally splash down under some parachutes. There are no people onboard.
Orion is a long-shot demonstration mission that is aimed at no celestial body, nor the moon, Mars or even an asteroid. The United States government’s attempt is aimed at space startups that are trying to muscle their way into the spaceflight industry – and budge NASA out for good. Continue reading
Why Does the Navy Still Not Have Enough Money for New Submarines?
The Navy is beginning to increase the tempo of its drumbeat calling for additional shipbuilding money to pay for the long planned replacement for the Ohio-class ballistic missile submarine. The ship is not unexpected, which is why the plea for more money is surprising– or at least it should be. How has the sea service arrived at this strategic juncture without enough money already inside of its budget to pay for one of its most critical assets? Continue reading
HAGEL: The World Is ‘Damn Dangerous’ And Our Army Is Not Ready
In an exclusive interview with Charlie Rose at the Pentagon yesterday, Secretary of Defense Chuck Hagel warned of the unprecedented challenges facing the United States military role on the global stage.
“The world is dangerous. It is damn dangerous,” Hagel said.
“We live in this imperfect, dynamic, changing, threatening, dangerous, interconnected world that we have never seen before, that we have never seen anything like this before,” Hagel said. “And so policies, yes, are predicated on historical knowledge and cultural awareness and all that goes into that. Have we made mistakes over a series of many years? Yeah, I think we have. I think anybody would agree to that. But that’s not the issue. That’s not the responsibility I have now or the president has or John Kerry. Our responsibilities now are to find ways that we can make it better, find strategies and policies that work within a world of uncontrollables.” Continue reading
Army to force out 550 majors; some in Afghanistan
WASHINGTON — About 550 Army majors, including some serving in Afghanistan, will soon be told they have to leave the service by next spring as part of a budget-driven downsizing of the service.
Gen. John Campbell, the vice chief of the Army, acknowledged Friday that telling troops in a war zone that they’re out of a job is a difficult task. But he said some of the soldiers could join the National Guard or the Army Reserve. Continue reading
Obama Calls for Highest Sustained Taxation in U.S. History
(CNSNews.com) – In the budget proposal he presented to Congress last month, President Barack Obama called for what would be the highest level of sustained taxation ever imposed on the American people, according to the analysis published last week by the Congressional Budget Office.
Under Obama’s proposal, taxes would rise from 17.6 percent of Gross Domestic Product in 2014 to 19.2 percent in 2024. During the ten years from 2015 to 2024, federal taxation would average 18.7 percent GDP.
America has never been subjected to a ten-year stretch of taxation at that level. Continue reading
US Military Could Not Handle One Major Theater Operation If Sequester Sticks
“You gentlemen make life and death decisions in the Tank almost every day,” a somber Cooper said at a House Armed Services Committee hearing on the automatic budget cuts known as sequestration, looking straight at Army Gen. Ray Odierno, Adm. Jonathan Greenert, Air Force Gen. Mark Welsh and Marine Gen. James Amos. “We are unwilling to even come up with a budget for America.”
Even the usually partisan HASC Chairman Buck McKeon, after offering a very short defense of the House and GOP’s actions on sequestration, spoke the truth to the Joint Chiefs and the packed hearing room: ”It’s not your fault. It is us.”
How bad will it get if the United States Congress does not reverse the Budget Control Act, the foundation of sequestration?
Three of the four Joint Chiefs told the HASC that they would not be able to execute the most basic strategic requirement of the US military: defeating an enemy in a single major theater operation. Only Gen. Amos, Marine Commandant, said his self-sufficient force could handle one MTO, but could not handle more than that. Continue reading
Off to a Bad Start — Why is the president letting America’s nukes rust?
It’s been said, “where there’s a will, there’s a way”… The United States in this case has no will, and therefore will in the future have no way to effectively stop other militarily advanced countries from attacking should they attain first-strike capability (or in Iran’s case, it likely wouldn’t matter) — something Moscow has wanted since before the Cold War.
In his April 8 article on FP, “Time to Face Facts,” Secretary of State John Kerry observed how “in the Senate, we clawed our way to ratification [of the New START Treaty] with 71 votes, a big bipartisan statement that the arms control and nonproliferation consensus could hold together even in a polarized political culture.”
The secretary fails to mention, however, that the reason he, as chairman of the Foreign Relations Committee, was able to “claw” together enough votes to secure ratification is that President Obama and the Senate agreed to a 10-year effort to modernize our aging nuclear weapons complex and our nuclear delivery systems. It was this consensus on the link between nuclear modernization and nuclear force reductions that made New START ratification possible — not a consensus on arms control, as Secretary Kerry suggests. Continue reading
Pentagon delays deployment of carrier to Mideast over budget woes
Defense Secretary Leon Panetta delayed deployment of an aircraft carrier strike group to the Middle East due to budget uncertainty on Wednesday, hours after warning that financial concerns were a threat to U.S. security.
The outgoing Pentagon chief delayed the deployment of the USS Harry S. Truman aircraft carrier and the USS Gettysburg guided missile cruiser, which were due to leave Virginia later this week, because of uncertainty over the department’s finances, Pentagon spokesman George Little said. Continue reading