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Good morning, worker drones: This Week in Mayhem

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Good morning, worker drones:  This Week in Mayhem
by Project Mayhem

Zerohedge Treasury

After some interesting disclosures over the past week -- including the fact that a large percentage of the U.S. market volume is comprised of just five financial stocks -- let us review new information and take a look at the week ahead, in order to make some sense of the train wreck already in progress.

 


 

PART I:  Last Week in Mayhem

Project Mayhem highlights the most important stories of the last week

1) Five Financial Stocks Dominate Market Volume

Five Stocks No Need To Talk

An increasing majority of equity market volume has been comprised of just five financial stocks -- Citi, AIG, CIT, Fannie, and Freddie.  On Friday  August 21, these five stocks accounted for roughly 30% of overall market volume.  This is quite remarkable.

http://www.zerohedge.com/article/five-financial-stocks-dominating-market-volume

 

2) Federal Reserve Disclosed Trading $1.4 trillion in OTC "Other" Derivatives in March 2009  *corrected

Federal Reserve Does Derivatives

The Federal Reserve has apparently been engaged in OTC derivatives trading. As of March 2009, they began publishing this information in several categories broken down by 'risk'. Tyler discovered this bombshell last Friday. In Treasury TIC data there are large sums classified as "Other Contracts".  While it is not clear what specifically is being traded , we know these are not "Single-currency Interest Rate Contracts" nor are they "Foreign Exchange Contracts".  These contracts are classified as "Other Contracts by Type of Risk" -- and they include $85 billion in OTC equity derivatives , and $1.169 trillion (yes, with a T) in OTC credit derivatives. 

Federal Reserve OTC Contract Growth

What is interesting here is that prior to March 2009 such trading was not reported in detail. The March disclosure by category is what is completely new.  These Fed OTC derivatives have $1 trillion+ in capital in "Other".  It is unclear what aspect of the credit capital markets this is allocated to or propping up:  is it CDS?   And if so, what entities are the contracts written on?  At this time, it is unclear what relationship, if any, these $1.4 trillion in Federal Reserve OTC derivatives have to the unusual market activity many of us have been observing.

http://www.zerohedge.com/article/fed-proposed-become-next-aig

 

 

 

3) Capital Flees U.S. -- Heads to Undisclosed Tropical Location

Capital Says GTFO

Jim Willie and JSmineset broke this story last week -- capital appears to be subscribing to Keynes's little-known "OMG GTFO" theory.  In other words, the flow of funds for US Corporate Bonds and US Government Agency Bonds have turned negative.   Let me run this through our CNBC translator -- ah yes, here we go, CNBC translation was successful:  "It's never been a better time to buy"


Indeed.  Come and catch these falling knives.

http://www.321gold.com/editorials/willie/willie082109/1.gif

http://jsmineset.com/2009/08/19/the-countdown-to-the-implosion-of-the-dollar/

 

 

 

 


PART II: This Week in Mayhem

    Well there are several things brewing. Project Mayhem prefers to put world events in context. Those of you that are familiar with our style realize we prefer to look at finance through an international geopolitical lens, seasoned to taste with measured speculation. There are multiple financial and geopolitical plane crashes coinciding, although nothing have gone 'hot' as of yet. It is only a matter of time , worker bees!

Fail Plane

Unfortunately, we are all on this plane together.


    The slow motion disaster in progress could fly a bit further before the wings come off. So we need to pay attention to sources of trouble.  This is what we intend to highlight here. These trouble spots could simply fizzle, as they will likely do -- or they may be the source of a black swan which gets sucked into the engine.  You will know there is a problem when the airplane starts to shake.

 

    Let's start with the finance.

 

1) International Financial Situation:

a. Equity Rally May Be Hot Air; Bernanke Checks For Rips In USS Spaceblimp

Fail Blimp


Stockmarket Past 6 months

We have highlighted the two important disclosures in Part I -- namely the interesting yet strange facts regarding market volume, as well as the discovery of uncharacterized "other" OTC derivatives on the Federal Reserve TIC data. Based on this information , we believe that there is a good case to be made that this 'rally' is mostly running on gasoline fumes -- fumes provided by sprawling and corrupt institutions such as the Federal Reserve.    Something to keep in mind.  The rug may be pulled at any time.  If you want to trade this mess, you'd best know what you are doing.  Don't pass out.

 

 

b. FDIC Has Probably Depleted Its Funds; Tapped Emergency Credit Line

FDIC Fail

 

On Tuesday August 25th, the FDIC will release its Q2 report. At the end of Q1, the FDIC had drained its $52.8 billion down to a mere $13 billion.  There have been 56 bank failures since March 31st -- they have cost the FDIC an estimated $16 billion. Our math ain't so good , but captcha says that's a negative number.  We may find with the release of the FDIC's Q2 report that "the well ran dry".

What then, asks you, corporate worker drone?  We're not sure.  Unfortunately, our crystal ball had a segmentation fault early this morning.  There was blood everywhere. But yes, ultimately this really is a matter of perception -- and as such, is basically driven by the MSM and associated network idiocy. So it is difficult to say. Regardless of social effects, speaking pragmatically -- in May 2009, Congress extended the FDIC a Treasury line of credit worth $100bn -- with borrowing authority of up to $500 billion through 2010.  You ask: Has the FDIC quietly tapped this line of credit?   We may find out on Tuesday.  Keep in mind that this is immediate additional pressure on the USTbond complex -- which requires borrowing from Japan, China, and the PetroStates -- or else requires covert or semi-covert monetization by the Federal Reserve. 

Quick -- back to the well Little Timmy !

http://www.lewrockwell.com/sardi/sardi116.html

 

c. Treasury Wants to Borrow $207 billion -- Looks For Change In White House Sofa

Bernanke Bubbles

Treasury will attempt to borrow approx $200 billion in spacebucks this week.   There should be no issue -- as there are always those indirect bids coming out of the Carribean!  I hear the cocaine business is booming over there.  Anyway,  Karl Denninger writes

*U.S. TREASURY TO AUCTION $27 BILLION IN 52-WEEK BILLS
*U.S. TREASURY TO AUCTION $42 BILLION IN TWO-YEAR NOTES
*U.S. TREASURY TO AUCTION $31 BILLION IN THREE-MONTH BILLS
*U.S. TREASURY TO AUCTION $28 BILLION IN SEVEN-YEAR NOTES
*U.S. TREASURY TO AUCTION $30 BILLION IN SIX-MONTH BILLS
*U.S. TREASURY TO AUCTION $39 BILLION IN FIVE-YEAR NOTES

http://market-ticker.denninger.net/archives/1356-Treasury-Insanity-In-Support-Of-Grift.html

 

 

 

2) International Geopolitical situation:

a. Georgia Initiates Naval Blockade of Abkhazia

Saakashvilli Eats Tie

The President of Georgia, Tie-eating psychopath Mikheil Saakashvili, has decided to enforce a naval blockade on the breakaway province of Abkhazia -- on the Black Sea.  A naval blockade is usually an act of war.  But perhaps not here, with any luck.  As some may remember, Georgian shelling of S Ossetian civilians and subsequent Russian counterattack was responsible for a brief 'hot' war which began on 8/8/8.  The situation in Georgia could flare up once again.  

Map of Georgia and Abkhazia

This may be important to your crude investment positions as the BTC pipeline runs through Georgia, and carries approx 1 mmbpd from the Caspian Sea through Azerbaijan and Georgia to both Supsa and Cehyan -- ports on the Black Sea and Mediteranian Sea, respectively.  Two days prior the 2008 Russian-Georgian war, this pipeline was bombed and remained shut down for 19 days.  The impact on the oil price in 2008 was muted due to the massive double-top and subsequent price collapse (Hubbert is rolling in his grave).  We assume a similar non-effect would occur again,  unless this were to escalate into a regional conflict.

Geogia BTC Pipeline

 

Georgia War Oil Prices 2008

 

http://www.straitstimes.com/Breaking+News/World/Story/STIStory_419353.html

 

 

 

 

b.  Ex-ISI Chief Says Purpose of New Afghan Intelligence Agency RAMA Is ‘to destabilize Pakistan’

Pakistan Map

The map is to help the Americans.  Europeans may skip.


Pakistan is a key to watch.  The situation on the ground is becoming increasinly unstable due to a confluence of negative forces.  This is why we bring the following to your attention -- an excellent interview with Lt. Gen. Hamid Gul published 12 days ago in the Foreign Policy Journal.

 

Pakistan Spooks Hamid Gul


The former head of Pakistani ISI from 1987 to 1989 -- Lt. Gen. Hamid Gul (on far left in above picture)-- has made the claim that the newly created Afghan Intelligence Agency 'RAMA' has the officially-sanctioned purpose of destabilizing neighboring Pakistan.   A bold claim indeed.

 

Pakistan Deep Water Port

Pakistan Deep Water Port.   US wants it.  China wants it.  


For those familiar with the "Great Game" once played in Central Asia by the British Empire, the current game for future control of Caspian oil and gas reserves may not be much of a surprise. Perhaps our friends in the oil and gas industry can share their perspectives on Central Asia.  Pakistan has a deep water port on the Arabian Sea -- and connects via Afghanistan to the Central Asian oil fields. In some policy planning circles we may see more of "the ends justifies the means" types of thinking which characterized past US administrations.  Additionally, Pakistan is a nuclear power which is of course a wildcard . . .  Shall we bet?   The U.S. is "all-in" on pocket 2s. 


http://www.foreignpolicyjournal.com/2009/08/12/ex-isi-chief-says-purpose-of-new-afghan-intelligence-agency-rama-is-%E2%80%98to-destabilize-pakistan%E2%80%99/

 


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Tue, 08/25/2009 - 18:53 | Link to Comment Project Mayhem
Project Mayhem's picture

Just an additonal note -- word on the street is FDIC report is coming out Thursday -- this would be 57 days after end of Q1 , rather than the usual 55 days.    The suspense is killing me.

Mon, 08/24/2009 - 23:18 | Link to Comment michael olsen
michael olsen's picture

I would like to thank all those involved in anyway to this site and all who post.Everyday I cant wait to read this site.This stuff feeds my head and keeps me going in the right direction.I only wish that I could put my thoughts together and convey my message as well as everyone here.

When this thing finally breaks,I hope were all in the best position not to get sucked down with the blind sheep.Hey that mogumbo guru guy was right,buy gold and silver.Hey this investing stuff is easy.

                                                            Michael Olsen

                                                            Rye ,New York

 

 

Mon, 08/24/2009 - 22:28 | Link to Comment Bruce Krasting
Bruce Krasting's picture

Re Fed OTC activity. What jumped out at me was the amount of otc stuff on interest rates. What the hell is that? In 07 they have $700b It jumps up to over 4 Trillion. This is two years of our funding requirement. It is nearly half the debt that is in the public hands. Given that only 40% of the debt is longer than 2 years it means they wrote contracts on most of what is out there?

The Fed can't do this size business with Goldman or Merrill. Can they? It has to be CB stuff. Whatever it is, it is too big not to have a more complete explanation. Thanks to ZH (and others) we might just get an explanation on this one. Can't wait!

Tue, 08/25/2009 - 12:36 | Link to Comment Anonymous
Tue, 08/25/2009 - 15:44 | Link to Comment Project Mayhem
Project Mayhem's picture

Tyler says only the Fed has the authority to hold securities on behalf of the US public.

Wed, 08/26/2009 - 16:49 | Link to Comment Anonymous
Mon, 08/24/2009 - 22:06 | Link to Comment Bruce Krasting
Bruce Krasting's picture

Great post. Scared the shit out of me.

I was struck with the Capital Flees America part. My read of the Graph is that the red line peak to trough is +/- $700b. Big number.

If this much money is leaving the table how come the dollar, bonds and stocks are all doing so well? At the end of the day this is a flow of funds story.

It looks like the foreign CBs put a gun to the Fed/Treasury and said: "Take us out of Agency MBS. If you don't we will not play ball with you any longer". Nice. America still has the upper hand in global economics. Not.

Mon, 08/24/2009 - 21:40 | Link to Comment Uros Slokar
Uros Slokar's picture

Being such a novice at the whole finance "game", this site has proven to be nothing short of a revelation. Stories like this are what keep me coming back. To everyone in the Zero Hedge universe, kudos. Don't stop fighting against the man. Sorry, have to run, the GS spy outside my window in the 5000$ suit is listening as I type. haha

Mon, 08/24/2009 - 20:27 | Link to Comment Anonymous
Mon, 08/24/2009 - 23:33 | Link to Comment Project Mayhem
Project Mayhem's picture

done!

Mon, 08/24/2009 - 20:06 | Link to Comment Ich bin ein whatever
Ich bin ein whatever's picture

PM, that was wonderful work.

I fully appreciate the amount of time it took for you to put that together for us.

You won't find anything that comes near this in the mainstream media.

Mon, 08/24/2009 - 19:16 | Link to Comment Anonymous
Mon, 08/24/2009 - 17:01 | Link to Comment bullwinkle123
bullwinkle123's picture

sublime .. thnx

Mon, 08/24/2009 - 15:45 | Link to Comment straightershooter
straightershooter's picture

Pakistan? Who cares?

Israel could attack Iran tomorrow.

Mon, 08/24/2009 - 23:32 | Link to Comment Project Mayhem
Project Mayhem's picture

This is true -- but notice Pakistan borders Iran.  Iran is implictly backed by Russia.  Russia also influences large parts of central Asia (remember, the U.S. was kicked out of Uzbekistan by actions of the FSB)  Anyway if Israel attacks Iran, they will need to use air bases in Georgia.  This would no doubt ignite a regional war.  

 

On the other hand, there is lots of disinformation around so it is hard to analyze what is going on regarding Iran, so I try to avoid speculating on this topic unless there is new concrete information (We have heard about imminent attack on Iran for years now!)

Mon, 08/24/2009 - 15:04 | Link to Comment HankPaulson
HankPaulson's picture

lol!

 

Brilliant. Well done!

Mon, 08/24/2009 - 13:47 | Link to Comment My cognitive di...
My cognitive dissonance's picture

PM,

I've always read and enjoyed your comments but you really out did yourself this time. Excellent!

I look forward to reading more.

Mon, 08/24/2009 - 13:39 | Link to Comment MurryRothbard
MurryRothbard's picture

Love the work PM, you're an artist

Mon, 08/24/2009 - 13:17 | Link to Comment AnonymousMonetarist
AnonymousMonetarist's picture

I see no paraffin in Ben's explosions.

Mon, 08/24/2009 - 12:32 | Link to Comment alien-IQ
alien-IQ's picture

Damn that was good.

Mon, 08/24/2009 - 12:23 | Link to Comment Anonymous
Mon, 08/24/2009 - 14:12 | Link to Comment Project Mayhem
Project Mayhem's picture

Thanks.  The input is appreciated, as I think I may be over my head -- haha.   I'll be interested to read people's reactions to the FDIC report tomorrow.

Mon, 08/24/2009 - 12:12 | Link to Comment Anonymous
Mon, 08/24/2009 - 11:38 | Link to Comment Cindy_Dies_In_T...
Cindy_Dies_In_The_End's picture

Hey Project:

 

Ya know I think you're sexy right?  ;)

 

 

Epic awesome commentary. Geez with the pictures some of my slower friends might actually read and understand this.

 

Thanks for your efforts.

Mon, 08/24/2009 - 13:00 | Link to Comment Project Mayhem
Project Mayhem's picture

Thanks.  Though you haven't even seen me , lol.  For all you know I could be from somewhere in New Jersey.  Project Mayhem is WAY into the whole Guido style. 

 

Ah yes, pictures always make things more fun.  Robottrader knows what I'm talking about.

 

No problem -- the effort was worth it.  Cheers, and thanks to Marla and Tyler for giving me the opportunity to post.

Mon, 08/24/2009 - 14:09 | Link to Comment Project Mayhem
Project Mayhem's picture

It's the reverse side of the Treasury Building.   I bled the color from the roses much like Treasury has bled the wealth from this country. ;)

Mon, 08/24/2009 - 11:23 | Link to Comment Anonymous
Mon, 08/24/2009 - 11:13 | Link to Comment Anonymous
Mon, 08/24/2009 - 11:12 | Link to Comment crzyhun
crzyhun's picture

The big picture helps to make granular decisions.

I have said here and elswhere before, the market shifted, like a ripple in the force field, in March, 09. This is confirmation of my theory.

Thanks for the work. More again?

Mon, 08/24/2009 - 12:55 | Link to Comment Project Mayhem
Project Mayhem's picture

Yes there will be more .  I will try for at least one good article a week.

Mon, 08/24/2009 - 11:05 | Link to Comment Ned Zeppelin
Ned Zeppelin's picture

I hope this is appropriate, but I have read Jim Kunstler's blog for a while, and find him to be another truthsayer who has been marginalized as yet another unAmerican naysayer - his column today, worthy of its own entry on ZH IMHO:  

Financial Crisis Called Off

          Whew, what a relief!  Everybody from Ben Bernanke and a Who's Who of banking poobahs schmoozing it up in the heady vapors of Jackson Hole, Wyoming, to the dull scribes at The New York Times, toiling in their MC Escher hall of mirrors, to poor dim James Surowiecki over at The New Yorker, to - wonder of wonders! - the Green Shoots claque at the cable networks, to the assorted quants, grinds, nerds, pimps, factotums, catamites, and cretins in every office from the Bureau of Labor Statistics to the International Monetary Fund - every man-Jack and woman-Jill around the levers of power and opinion weighed in last week with glad tidings that the world's capital finance system survived what turned out to be a mere protracted bout of heartburn and has been reborn as the Miracle Bull economy. Our worries over.  If you believe their bullshit.  Which I don't.

            All this goes to show is how completely the people in charge of things in the USA have lost their minds.  They seem to think this mass exercise in pretend will resurrect the great march to the WalMarts, to the new car showrooms, and the cul-de-sac model houses, reignite another round of furious sprawl-building, salad-shooter importing, and no-doc liar-lending, not to mention the pawning off of innovative, securitized stinking-carp debt paper onto credulous pension funds in foreign lands where due diligence has never been heard of, renew the leveraged buying-out of zippy-looking businesses by smoothies who have no idea how to run them (and no real intention of doing it, anyway), resuscitate the construction of additional strip malls, new office park "capacity" and Big Box "power centers," restart the trade in granite countertops and home theaters, and pack the turnstiles of Walt Disney world - all this while turning Afghanistan into a neighborhood that Beaver Cleaver would be proud to call home.

            By the way - and please pardon the rather sharp digression - but does anybody know if they buried Michael Jackson yet?  It's only been a couple of months. And, if not, is that the stench now wafting across the purple mountains' majesty from sea-to-shining sea? Isn't it a little indecent to keep the poor fellow waiting?  Or is a really surprising comeback secretly planned, with product tie-ins and all?

            America loves the word "recovery" as only a catastrophically sick society can. "In recovery" is the new universal mantra of loser individuals and loser nations.  Everybody in the USA is in recovery.  Even Michael Jackson (he may have given up on somatic activity but, on the plus side, as the Rotarians love to say, he's quit using drugs for once and for all, and the magazines have stopped publishing photos of him taken after 1990, when he turned himself into something out of the Hammer Films catalog).

            To sum it all up, the US economy is in recovery.  Paul Krugman says that we'll soon realize that Gross Domestic Product (GDP) is growing.  He actually said that on the Sunday TV chat circuit. Not to put too fine a point on it, but I would really like to know what you mean by that Paul, you fatuous wanker.  Do you mean that the Atlanta homebuilders are going to open up a new suburban frontier down in Twiggs County so that commuters can enjoy driving Chrysler Crossfires a hundred and sixty miles a day to new jobs as flash traders in the Peachtree Plaza?  Do you mean that the Home Equity Fairy is going to wade into the sea of foreclosure and save twenty million mortgage holders currently sojourning in the fathomless depths with the anglerfish?  Do you mean that all the bales of deliquescing, toxic "assets" hidden in the vaults of Citibank, JP Morgan, Bank of America, et al, (not to mention on the books of every pension fund in the USA, and not a few elsewhere) will magically turn into Little Debbie Snack Cakes on Labor Day weekend?  Do you mean that American Express and Master Card are about to declare a Jubilee on accounts in default everywhere?  Do you mean that General Motors will produce a car that a.) anyone really wants to buy and b.) that the company can sell at a profit?  Are you saying we get a do-over, going back to, say, 1981?  Did we win some cosmic lottery that hasn't been announced yet?  What's growing in this country besides unemployment, bankruptcy, repossession, liquidation, gun ownership, and suicidal despair?  In short, are you out of your mind, Paul Krugman?

            The key to the current madness, of course, is this expectation, this wish, really, that all the rackets, games, dodges, scams, and workarounds that American banking, business, and government devised over the past thirty years - to cover up the dismal fact that we produce so little of real value­ these days - will just magically return to full throttle, like a machine that has spent a few weeks in the repair shop. This is not going to happen, of course.  It is permanently and irredeemably broken - this Rube Goldberg contraption of swindles all based on the idea that it's possible to get something for nothing. And more to the point, we're really doing nothing to reconstruct our economy along lines that are consistent with the realities of energy, geopolitics, or resource scarcity.  So far, our notions about a "green" economy amount to little more than blowing green smoke up our collective ass.  We think we're going to build "green" skyscrapers! We're too dumb to see what a contradiction in terms this is. The architects are completely uninterested in the one thing that really is "green" - traditional urban design - and most particularly the walkable neighborhood.  That's just too conventional, not special enough, lacking in star power, not enough of a statement, boring, tedious, so not cutting edge! We blather about high speed rail, but you can't even get from Cleveland to Cincinnati on a regular train - and what's more amazing, nobody is really interested in making this happen.  All we really care about is finding some miracle method to keep all the cars running.

            What we've been seeing is nothing more than a massive pump-and-dump operation in the stock markets, most of it executed by programmed robot traders, with the trading nut provided by taxpayers current and future.  These shenanigans add up to new risks and fragilities so extreme that the next time a grain of sand catches in the exquisite machinery they will sink the USA as a viable enterprise.  We will end up discrediting not just capitalism, but also the idea of capital per se, that is, of deployable acquired wealth.  As this occurs, of course, events on-the-ground will give new meaning to the term "reality television."

Mon, 08/24/2009 - 12:08 | Link to Comment mcgowanmc
mcgowanmc's picture

Of fat tails and leptokurtosis:

"If markets are not efficient, if they are not a random walk, then they are interdependent (as opposed to independent). What does interdependent mean? It means the market has a memory – that one day’s prices affect the next day's: that if the market sees a big down day, the probability is actually increased that the next day will be down (and vice versa). It means that one week’s prices affect the next week's, that one year’s prices affects the next year’s and so on. The market remembers."

Scott Reamer  Mar 02, 2005

Two months before oil peaked.

"We emphasize the importance of understanding dragon-kings as being often associated with a neighborhood of what can be called equivalently a phase transition, a bifurcation, a catastrophe (in the sense of René Thom), or a tipping point. The presence of a phase transition is crucial to learn how to diagnose in advance the symptoms associated with a coming dragon-king. Several examples of predictions using the derived log-periodic power law method are discussed, including material failure predictions and the forecasts of the end of financial bubbles."

 

Mon, 08/24/2009 - 12:50 | Link to Comment Project Mayhem
Project Mayhem's picture

Thanks.  .  .  I like this area of mathematics. . .   Phase transition in nonlinear dynamical systems is one of the most beautiful things in this universe...  I'm not sure if it still applies to finance, due to what seems to be manipulation --  but it still applies to cardiac rhythms, fluid turbulence, brain electronics, etc.  What's so interesting is how periods of stability appear in otherwise unstable systems.

Close up of Bifurcation Fractal : Quadratic Iterator

*Note how there are periods of stability within chaos!  Wonderful!

 

I'm not so good at applying this to financial markets -- Martin Armstrong is a better read for that sort of thing.  Personally, I have tried to apply chaos theory to credit markets, using a technique I pirated from image processing.   Basically, the one powerful method of analyzing time-dependent data is to remove the time component of any set, and plot the data purely in phase space.  I did this oncefor LIBOR.  I'm pretty sure I got a strange attractor. 

 

Strange Attractors

http://en.wikipedia.org/wiki/Strange_attractor

 

Here were my results:

 

Credit Spreads and Strange Attractors

During an attempt to apply chaos theory to the credit markets, I noticed something remarkable. LIBOR spreads graphed in phase space appear to exhibit attractive behavior of unknown topology.

I am uncertain if this behavior is unique to the data series (noise), or whether these are actual basins of attraction in a nonlinear dynamical system. If this model continues to hold using higher resolution data, then framing the state of credit systems within attractive basins may provide a way to assess their functional stability in phase space."

 

Did Project Mayhem get a strange attractor?  You be the judge!   ---^

 

 

Anyway despite the fact that strange attractors in apparently exist in LIBOR phase space, I think the biological applications are far more pleasant to look at!

An EEG trace from the olfactory system of the brain of a rat, during an epileptic seizure. The trajectory of a point moving through this space in time traces the subspace that is occupied by a strange attractor. We have colored it red when the fourth variable is negative and blue-white when it is positive. The Hausdorff dimension is reduced to 2.52, and the structure of the strange attractor appears to be that of a 2-torus.

 

From:  Chaos and Neurodynamics

http://www.theory.org/fracdyn/neurodyn/

 

Mon, 08/24/2009 - 13:39 | Link to Comment mcgowanmc
mcgowanmc's picture

Let's start here:

"I'm not sure if it still applies to finance, due to what seems to be manipulation"

Chaos theory applies.  Even more so in that you can "see" the manipulation

as a, what's the word, outlier to the schematic. TPTB try for the avoidance of the "solution" (their insolvency), but the "act of avoidance throws the strange attractor out of sync.

As well the act of avoidance pulls the "problem" closer to the vortex, which is intent on "solving" the problem.  Am I making myself clear?

The bottom line. The problem should be solved ASAP. For the most peaceful outcome. Because there is a timewall where the solution will be presented even if the characters in the problem don't realize it. Eventual delay by the characters in question will only pull them into the vortex. Violent ending assured.  But the problem will be solved.

More on request. Mandelbrot, Cotton prices,

and the computer drawing of a curved line. ;}

And thanxx for your reply Mayhem.  Well met.

Mon, 08/24/2009 - 14:18 | Link to Comment Project Mayhem
Project Mayhem's picture

You write: "TPTB try for the avoidance of the "solution" (their insolvency), but the "act of avoidance throws the strange attractor out of sync."

By this, do you mean that a given phase space orbit falls into a different basin of attraction due to market manipulation?  Or do you mean something else? 

 

You write, "As well the act of avoidance pulls the "problem" closer to the vortex"

What vortex?  Is this a math concept , or just a metaphor for where the system becomes unstable because of the actions of our  authorities?

 

Thanks

Mon, 08/24/2009 - 17:48 | Link to Comment mcgowanmc
mcgowanmc's picture

Put "time back in". In your post you stated,

I think, that you took it out for phase change.

 

given phase space orbit falls into a different basin of attraction due to market manipulation"

exactly.  a new pole.  Three new poles with "time" added back.  Note you see a vortex in every bifurcation. 

"What vortex.  OK.  Now we're there. You're moving from one plane to the next.  The vortex takes you there.  Cosmic, eh ;}

The vortex is a math concept:

 When cascade propagation is limited by the connectivity of the network, a power law distribution of cascade sizes is observed, analogous to the cluster size distribution in standard percolation theory and avalanches in self-organized criticality. But when the network is highly connected, cascade propagation is limited instead by the local stability of the nodes themselves, and the size distribution of cascades is bimodal, implying a more extreme kind of instability that is correspondingly harder to anticipate.

More on request.  Again.  Well met.  James

 

 

Mon, 08/24/2009 - 18:41 | Link to Comment mcgowanmc
mcgowanmc's picture
Scalar and vector potentials

 

The vector potential is related in exactly the same way to the currents. Each little piece of current creates a retarded vector potential that is proportional to current and inversely proportional to distance, and the news about where the current is travels at the speed of light.

You are probably already familiar with the scalar potential: in many situations, it is just the same thing as voltage.

One of my favorite tornadoes has a lightening bolt coming out of it.

Mon, 08/24/2009 - 10:57 | Link to Comment Anonymous
Mon, 08/24/2009 - 14:08 | Link to Comment Project Mayhem
Project Mayhem's picture

I think you are correct.  Thanks.

There are questions, however.  Why was the detail missing for prior years? Tyler says it is "a new item without a doubt."  Did they just decide to start publishing this extra data in March 2009?   Why?  Are the Fed involved in OTC credit derivatives at all?  What types?  Are these CDS?  What is the credit exposure?  What is this "other" category? Are there any details on these OTC contracts?  Who are the counterparties?  There are lots of questions and no answers forthcoming.  You are correct that this is not 'new' -- but prior to March 2009 we did not know what comprised these categories.  I will edit to clarify this point.  I also added a chart of the data so people can see for themselves what the numbers are doing.

 

Mon, 08/24/2009 - 18:38 | Link to Comment Anonymous
Mon, 08/24/2009 - 22:41 | Link to Comment Project Mayhem
Project Mayhem's picture

Yes this TIC report describes FRB holdings.

Tue, 08/25/2009 - 00:53 | Link to Comment Anonymous
Mon, 08/24/2009 - 17:41 | Link to Comment mcgowanmc
mcgowanmc's picture

That is the vortex.  There are no counterparties.

Thu, 08/27/2009 - 17:24 | Link to Comment Anonymous
Mon, 08/24/2009 - 10:53 | Link to Comment Anonymous
Mon, 08/24/2009 - 10:48 | Link to Comment ratava
ratava's picture

The U.S. is "all-in" on pocket 2s.

Let uncle B deal the cards, I bet he could inflate the 51% a bit.

Mon, 08/24/2009 - 13:19 | Link to Comment Neo of Zion
Neo of Zion's picture

more like a 2-7 not suited. Quite unlikely 2-2-7 flops on the table...

Mon, 08/24/2009 - 10:42 | Link to Comment taraxias
taraxias's picture

Great stuff, Mayhem.

Mon, 08/24/2009 - 10:22 | Link to Comment peoplesdemocrat...
peoplesdemocraticsocialistrepublicofmaryland's picture

Good job Mayhem.  Thx!

Mon, 08/24/2009 - 10:18 | Link to Comment Anonymous
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