RateWatch #426 First Hanging Chads Now Pseudo Kerning
September 25, 2004 by Dick Lepre

What's Happening

The FOMC hiked the Fed rate by 0.25%.  This is a preemptive strike against inflation and is seen
as positive  by the buyers of Treasuries. Remember that holders of Treasuries have one main
concern - inflation.

With the technicals indicating a long-term (12-15 months) bull market (higher prices, lower yields)
for Treasuries, we should see mortgage rates test the lows of last year.  A good forecast of where
the bottom will  be for the 10-year yield is not yet available.  The bull market is still in its developing stage.  I think that a key element will be the same one as in the last market - if mortgage interest rates set off another refinancing wave we will see convexity buying.  In brief, convexity buying occurs when the duration of assets and liabilities of institutions becomes mismatched.  Large institutions turn to buying 10 and 30-year Treasuries to extend the weighted average maturity of their asset portfolios. The has positive feedback. Convexity buying causes rates to fall which cause more refinancing which cause more convexity buying which...

Note that the shorter term stochastic is about to turn bearish.  This will mean slightly higher yields and mortgage rates until (approximately) mid-December.

First Hanging Chads Now Pseudo Kerning

I was promising myself a few months ago that I would write as little as possible about the election

There are a lot of things that I just don't get. The Bush/National Guard/ Dan Rather thing is now
added to that list.  Apparently, Dan Rather and the people at 60 Minutes thought that the following
two items were highly newsworthy:
1) George W. Bush's dad helped him to get into the National Guard and
2) George W. Bush missed a physical which should have resulted in some disciplinary action.  I am clearly missing something as in, "so what?"

Neither of those actions strikes me as earth-shaking. For George 41 to have gotten George 43 into the National Guard to avoid having his butt sent to 'Nam was par for the course. That's what folks did to protect their kids.  Bush 43 did not get some kind of rolling deferment. He actually flew fighter planes for the Texas Air National Guard.  I am of the impression that flying an F-105 is a relatively dangerous activity. He seems to have flaked out on the last year of his commitment which, theoretically, exposed him to call-up.  He did not go into hiding (or Canada).  Presumably the National Guard knew where he was if they wanted his service.

No one was going to vote for Bush because they thought that he was a National Guard hero.  It was and is not part of his pitch.

The irony is that while Bush's alleged malfeasances seem like no big deal to the public, a TV
network airing fraudulent documents attacking the president in the middle of an election campaign,
and stonewalling it for 12 days is a big deal. CBS played a very bad poker hand.

What is mind-boggling is CBS's persistence. They claim to have spent 5 years on the story (good thing they didn't rush it.)  They get fake documents to put on camera. They run the story. Within hours, doubt is cast. Rather goes into denial and insists that the story is accurate. They say that it is being attacked by right-wingers. Then they run a piece when an elderly woman in a position to
know says in an interview that the documents are fake but the story is true. On Monday Rather blames Mr. Burkett saying that they cannot verify the authenticity of the documents because Burkett lied about who he got them from.

The underlying CBS theme seems to be "The facts are correct.  The story is true.  Poor us.  We were deceived (passive voice) by this Burkett guy."  The irony is that the core points (Bush 41 helped Bush 43 and Bush 43 flaked) may indeed be accurate but a) no one cares and b) the fake docs have overshadowed those points.

Since I have gotten cable TV (about 20 years ago) I stopped watching the nightly network news.  I am not the only one. Network news viewership has declined 60% since 1969, 44% since 1980 and 34% in the past 10 years.  Dan Rather is the least-watched of the three network anchors.
Rather-haters calling for his dismissal miss the sweet spot of justice available here. CBS's punishment for this matter should be that they are forced to keep Rather for another 10 years.

There are several important things that the cable news networks have done to change the
landscape.  Before CNN the three networks had an oligopoly on national and international news. CNN made an extremely wise business decision. It agreed to share its footage with local TV stations in exchange for their feeds. The TV news process was changed forever. 

The latest wrinkle is the Fox News Channel. Fox made a clever marketing pitch.  The proposition was that CNN, The New York Times, the Washington Post and CBS were the "elite liberal media" and that Fox was "Fair and Balanced".  Fox is not really "Fair and Balanced" but it is "Balancing".  The pitch is like a multi-vitamin.  Take a hit of Fox to offset the effects of the evil liberal media.  Plus, they understand the entertainment value of having good-looking blonds on camera. Lauri Dhue is a heck of a lot better-looking than Dan Rather.  While CNN may present
more "hard news" than Fox, Fox treats TV news more as something resembling entertainment.
They get big names like Geraldo Rivera, Oliver North and (for the Scott Peterson stuff) Greta Van Susteren. This results in ratings.

I enjoy watching Bill O'Reilly because he manages to cover a lot of topics, gets people's opinions out without letting everyone talk at once. He also has the advantage of making it clear that his program is not "the news" but a "news magazine" or "news analysis" program which gives him a lot of latitude. His contentiousness and willingness to "take a punch" makes him entertaining.

Regarding the concept that the media (newspapers and TV networks) are liberal-biased: I think that this has always been the case.  People with liberal political-social values are positively
correlated with things such as writing, education, music, and acting.  I don't find that surprising
or annoying.  It is not that media discriminate against people with conservative values it is
just that people with conservative values tend not to seek careers in that direction.

Conservatives have their ground on talk radio. Conservatives have been successful with Rush
Limbaugh, Sean Hannity, and Michael Savage. Liberal talk show successes are Jim Hightower
and Alan Colmes.

Liberals have countered with Air America which has little market penetration.  The only
explanation that I can imagine is a sort of "the medium is the message" concept.  Conservative listeners are like the folks who listen to and call in to sports-talk programs after the game. They are all rooting for the same team. Liberal politics needs to appeal to the "big tent" agenda. It is difficult to get a cohesive message/theme that appeals to the disparate groups that have high correlations with liberal values. Really, as we see in the present Presidential campaign, the only
cohesive message is "we hate Bush."

Talk radio is ineffective, in general, because it tends to preach to the choir.  Maybe I am
missing the concept but I assume that nearly everyone who listens to Rush Limbaugh is going
to vote for Bush unless he decides to kill his mother and the twins.  I suppose that the real
value is getting out the vote.

I don't, personally, feel that CBS, for example, needs to be fair.  If they want to lean to the left, I understand.  I, personally, have more trouble with the New York Times because I always have respect for it. It covers the news with an unmatched depth.  I am annoyed by its increasing tendency to move the op-ed page onto page one. 

I don't think that folks hold TV news to the same standard as newspapers.  When the
Janet Cooke/Jimmy/Pulitzer Prize thing occurred at the Washington Post they were embarrassed and  admitted fully the truth.  When the Jayson Blair thing happened at the NYT they took their lumps and some heads rolled.  People do not inherently take TV so seriously and it makes little difference what CBS does to or with Dan Rather.  Rather is more a relic of a bygone era than he is relevant today. People do not watch TV news for depth of coverage.  They watch it to get the headlines. One exception is Jim Lehrer.  PBS has a different concept of TV news than the networks or cable.  They cover just a few stories and cover them in depth.  The only problem is that so few folks watch Lehrer.

The other important part of this story is how the Internet as both a means of obtaining information
and disseminating opinion has become a factor in a national election. The unraveling of CBS's case
took place largely on the Internet and happened very quickly.  The unnerving thing about how
the Internet functioned in this case is that the 60 Minutes fraud was not uncovered by
stone-objective bloggers but driven by blog sites with a conservative agenda.  It would be
nice to imagine the Internet as a place where everyone could meet to exchange information and
analysis that was agenda-free and objective, but I am dreaming.

CBS is in no position to say, "Trust us, we checked out these documents and they are the real deal." Folks sitting in their pajamas have been able to examine copies of the documents, draw conclusions and express their opinions.  It is as if the First Amendment were really working.  You no longer need a printing press to have freedom of the press.

The other upside is that we have all had some education as to what "proportional spacing"
and "pseudo-kerning" are.  That has to be worth something. In addition, I am guessing that some
computer nuts will create fonts that replicate typewriters. Instead of buying "Top Hits of the
'50's, '60's or '70's" we will buy Oldie but Goodie Fonts. Dan Rather can do the commercials.

For me, the truly sad thing about this election is that it is about one candidate.  People are either
voting for or against Bush. Weird.

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