Wednesday, December 31, 2008

Two Articles on Seeking Alpha

Two must read articles to sum up the year in finance:

Three Views of Three Big Failures -- a summary plus Merkel's notes of three articles (two on WaPo and one on Vanity Fair) about AIG, the GSEs, and the meltdown in general.

and:

Another Big Bank Failure: More Likely Than Not to Occur -- Middleton explains why we still have a long way to go before things look reasonable again in the capital markets.

Tuesday, December 30, 2008

2009 Predictions - Saxo Bank

As reprinted on Yahoo! Finance, Saxo Bank made its annual predictions, with my comments to follow in blue.

They are:
  1. Iranian Revolution -- Only if the US goes into Civil War as predicted by a Russian analyst.
  2. Crude Oil to $25 -- Our only hope for a quick recovery.
  3. S&P 500 to 500 -- A necessary correction to match historical values.
  4. Italy could drop the euro -- Will Italy be the first? I think there is a behind-the-scenes race to exit the euro, which will intensify as the Eurozone continues to stagnate.
  5. Australian dollar slump versus yen -- Predicated on continued commodities plunge, but one has to wonder what the yen has to offer nevertheless, especially when Japan absolutely needs some inflation to prevent defaulting on its bonds. Oh never mind, Japan owes mostly to itself, so default is meaningless. Keep making debt, Japan! It's a small wonder they haven't increased their official debt to GDP ratio to 1000000%. That would stimulate something.
  6. Dollar to outstrip the euro -- How can this be when the eurozone is fighting inflation and the US will need some inflation to make Bernanke's upcoming Quantitative Easing regime work?
  7. Chinese GDP to 0% growth -- No way. With their weak currency, they'll just find buyers in India and Latin America.
  8. Eastern European forex pegs to fail -- Haven't they already failed?
  9. Commodities prices to plunge -- Ain't I been saying this? Let's pray this is wrong.
  10. (Chinese) Yen to become the currency peg -- If the dollar and the euro continue their wild swings, the Chinese artificial currency valuations will look attractive for small economies. Remember Argentina!

More Words

Courtesy of Howard Ruff:
New Stock Market Terms
(I Still have a Sense of Humor)
CEO -- Chief Embezzlement Officer.
CFO -- Corporate Fraud Officer.
BULL MARKET -- A random market movement causing an investor to mistake himself for a financial genius.
BEAR MARKET -- A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.
VALUE INVESTING -- The art of buying low and selling lower.
P/E RATIO -- The percentage of investors wetting their pants as the market keeps crashing.
BROKER -- What my broker has made me.
STANDARD & POOR -- Your life in a nutshell.
STOCK ANALYST -- Idiot who just down-graded your stock.
STOCK SPLIT -- When your ex-wife and her lawyer split your assets equally between themselves.
FINANCIAL PLANNER -- A guy whose phone has been disconnected.
MARKET CORRECTION -- The day after you buy stocks.
CASH FLOW-- The movement your money makes as it disappears down the toilet.
YAHOO -- What you yell after selling it to some poor sucker for $240 per share.
WINDOWS -- What you jump out of when you're the sucker who bought Yahoo @
$240 per share.
INSTITUTIONAL INVESTOR -- Past year investor who's now locked up in a nuthouse.
PROFIT -- An archaic word no longer in use.

Retail Blues


It's just fear now (unless your name is Linens & Things or Sharper Image), but there is a foreboding sense of inevitability. Yes, stores will close. Yes, more stores will go bankrupt.




In my house, we're betting on the survival of Target, even though their numbers are weak. We're betting on the failure of The Body Shop, however. Only time will tell.

Wednesday, December 24, 2008

Top 10 Words for 2009


It has been hard to get my head wrapped around the financial crisis. I console myself that this is true even for geniuses and Wall Street veterans. One thing is sure, though, the financial crisis has elevated new words into common parlance, and has changed the definitions of rather technical terms. Looking ahead to 2009, there are 10 words that popped up a lot in the past year, and the meanings of these words will remain important as we collectively figure out a way out of the quagmire.

10. Credit. We have seen the post-Lehman world become one where no one gives anyone any credit. Credit facilities are nullified, credit lines are dried up. The impact on trade is currently immeasurable, but the forecasts are dim. So much of trade is reliant on the money market (short term loans for the purposes of buying inventory), but that whole industry is now a Fed facility. There Wall Street, and then there’s the street, the neighborhoods in which real people live. In the neighborhood, credit also has meaning. It means money sent from a lender to you. This is not your money. This is money you don’t have. So, spend it wisely if it’s offered to you.


9. Derivative. A derivative is an instrument that has a value. Okay. And that value is dependent on the value of other things. Got it? So, for example, I think oil will go through the roof in several years. So, I make a contract to buy oil in ten years at low price (someone else thinks oil will be even cheaper, and is willing to supply it to me at the buying price as agreed in the contract). The contract itself has a value because it allows the holder to buy oil at a certain price, regardless of what the actual market value will be. Now, as time goes by and we get closer to the ten year point of the contract, the value of the contract itself will go up or down. If, for example, oil is super, super cheap, then my contract will have less value, because it allows the holder of the contract to buy oil at a price higher than market value. Who wants that? But, if the price of oil skyrockets, then the contract is worth more because the holder of the contract gets to buy oil at less than market value. Similarly, the bonds that bundled mortgages are derivatives because the value of the bond (the bundle of mortgages) is determined by whether the home buyers continue to pay their mortgages. If there are a lot of defaults, then the bond’s value goes down. If everyone pays, then the bond retains its value (and may even go up if investors are eager for a safe place to put their money).

There is no street equivalent, strictly speaking, because we have more common sense in the neighborhood.

8. On/Off Balance Sheet. As lenders piled up stacks of risky mortgages and related derivatives, there was a need to place these volatile assets some place where they couldn’t do damage to the lenders’ balance sheets. Neighborhood equivalent: buying a car you can’t afford and putting it in your mom’s name. When you stop making payments, the dealer comes and takes away the Escalade, crippling your mother’s credit and possibly putting her in legal trouble. You don’t escape, though, because your mother may forgive, but she won’t forget. Plus, your siblings will all know you suck, thus ensuring that you will always have to double check your turkey sandwich for special sauce courtesy of your older brother.

7. Transparency. This means both operations and products are open for inspection. In the derivative buying madness, we had a de facto lack of transparency as there was literally no time to unravel the mortgage bundles prior to the sale of the bonds. Simply, there were too many risk-dumb investors who wanted a piece of the action and were willing to shell out hundreds of millions to buy something they didn’t inspect. Of course, the mortgage originators and other securitizors willfully created this environment, giving short notice prior to auctions.

The neighborhood equivalent is buying dope advertised as chronic, but sold in an opaque, airtight bag. “No, don’t look at it. I’ve got other buyers lined up with cash in hand. You want the good stuff or not?” Take it home, light it up, cough on the mortgage shwag.


6. Leverage/Overleveraged. Bank regulations require a certain ratio between assets and outstanding loans and deposits. This means banks have to have a certain level of money on hand in case depositors pull out. For a bank, a customer’s deposit is an obligation. They are borrowing money from the depositor. So, if there is a bank run, the banks need to be able to pay depositors as well as any loans they owe to other banks. A bank or other entity becomes overleveraged when its obligations to pay others far exceed the cash on hand.

In the neighborhood, college loans are increasingly the cause of people being overleveraged. You enter college without many assets, yet are given credit lines up to infinity. Doctors, lawyers, and other professional degree holding persons are saddled with immense debt upon graduation. The credit given to them is predicated on the idea that they will make a lot of money. Basically, the lender is looking at (future) cash flows rather than assets when determining how much money to lend. Plus, the law gives these lenders a great deal of security – college debt cannot be discharged in bankruptcy.


5. Liquidity/Illiquidity. Liquidity and leverage go hand in hand. If you are liquid, then you have enough cash to pay for your obligations. These days, with the credit markets frozen, liquidity equates to solvency. Basically, if you can’t pay your bills today, you’re out of business.

In the neighborhood, we know this all too well. That’s why we have credit cards.


4. Collateral. If you take out a loan, you should pledge something of value in return. That’s what makes credit cards so scary. Visa doesn’t ask you to put anything up of value, it doesn’t even take an interest in the thing you purchased. If you buy a house, the bank can take the house away if you don’t pay your monthly mortgage payments. If you don’t pay your credit cards, however, Visa doesn’t come and take away your Coldplay CD. Stock tip: don’t buy credit card companies. The business model is just too sketchy in the post-credit bubble world.


3. Subprime. People who meet certain financial criteria are given loans at a rate near the prime rate (mortgage jargon for something that will exceed inflation). Those with shaky credit histories are riskier, so the banks will lend to you with a risk-adjusted premium. This can mean a percentage point or two above the average. That’s no big deal. But, mortgage lenders developed all these terribly stupid mortgages that entice people to take out a loan that they can only pay for a year or two before the rates reset to the risk-adjusted levels.

It’s like dating someone with a checkered history of infidelity. Once the infatuation period wears off, he or she is going to be looking elsewhere. You can count on it. Just like you can count on people defaulting on loans they couldn’t really afford to pay. The introductory rate was the infatuation period. The rest is just what you deserve.


2. Bailout. I have two definitions for this one. The first is: the social cost of poor regulation. The second one is: a tax for believing U Chi ideology.

The neighborhood equivalent is believing that the preacher with the Cadillac is putting God first, then when he goes to jail for embezzlement, the congregation has to pitch in to keep the soup kitchen running.

1. Accountability. This is as hard to define as “spirit” or “mind”. We know it exists, but it has never been observed in replicable conditions.

Tuesday, December 23, 2008

Economic Statistics for November

http://www.treas.gov/offices/economic-policy/macroecon/monthly_economic_data.pdf

I am not sure which of those figures is the ugliest. The spread between 10-year Treasuries and corporate bonds is pretty bad -- nearly 6 points. It makes me wonder if we're still not seeing the worst of the equity market if the perception of risk of bond default has any grounding in reality.

The jobs loss figures are also staggering, but that has been discussed everywhere.

Retail sales are down over 6% for the year, but only down 1.8% if you take out autos and auto parts. Makes me wish I had enough money to go buy a car on discount!

The housing and oil trends basically tell the whole story of the economy. Oil spiked this summer with the weak dollar. Demand plummeted due to decreased use of cars -- a consumer driven reduction in demand. Then, the oil market dropped as manufacturers and others decreased output and scaled back growth -- a producer driven reduction in demand. That's the real economy in microcosm.

With housing, the market was still fairly strong back in springtime. As the subprime defaults piled up, and the derivatives became personan non grata amongst the securities and collateral cliques, consumers got the message: housing is too expensive to buy. Plus, savvy home buyers started thinking about the correction and vultures (not meant to be pejorative) started thinking about foreclosures. Have you divested your stock in Pulte Homes yet?

As much as it pains me, the only domestic solution to the economic and financial crisis is restoring value to the toxic assets. That means 1) insuring the stupid things at par value (which no one wants to do because of the fear of placing cash anywhere but in reserve right now), or 2) bail out the home owners. Option 1 allows the housing market to correct, and it gives some value to the CDOs and MBSs and whatever else -- so those things can be pledged as collateral to get the secondary lending market back on track. Of course, the formation of the insurance pool would require such an outlay of funds that the banks wouldn't have any cash to lend anyway. Catch 22, I guess. I suppose that is why the banks rejected this plan back in April when Bernanke and Paulson demanded that the banks work out the subprime debacle on their own.

Option 2, the homeowner bailout. This keeps people in their homes, but it will preserve the artificially inflated home values, which will crush demand. People will keep their homes, but they'll be stuck in them.

Friday, December 19, 2008

Pretend Bailout: GM and Chrysler


See: http://online.wsj.com/article/SB122969367595121563.html

The ineptitude of journalists reporting on law is exceeded only by their misadventures with science news.

Let's get one thing straight right away about this auto bailout: it is not yet in effect, and won't be until the Unions agree to it. And they won't.

See: http://www.treas.gov/press/releases/reports/chrysler%20final%20term%20&%20appendix.pdf

The bailout money will come when the auto companies come back with the unions' blessing to cut pay, cut unemployment packages, and convert cash contributions for benefit plans into stock holdings.

The UAW gets it: http://www.uaw.org/auto/12_19_08auto1.cfm
On the other hand, the auto companies have to sell their corporate jets! That just cracks me up!

Germany Kaput?


Ambrose Evans-Pritchard (is Evans his maiden name? I just don't get the hyphenated names) points out the grim news that Germany is toast. Great.

http://blogs.telegraph.co.uk/ambrose_evans-pritchard/blog/2008/12/19/germany_is_already_collapsing

In short, no one's buying anything, so Germany is not selling anything and expects its economy to shrink at Depression levels. Awesomely bad.

I wish I had posted this statement earlier because it is now too painfully true: the European Central Bank has no idea what it is doing. Is it a tool for Grand Europolitik? Is it a lender of last resort? Does it represent Europe (a misformed entity, as though Hephaestus rather than Athena was sprung from the forehead of Zeus)? Or does it represent European nations? I just can't understand why the ECB has been trying to fight inflation through autumn when the world economy has been facing meltdown.

If the ECB fails to stimulate the Eurozone economy in the next 18 months or so, expect the death of the EU. No joke.

Thursday, December 18, 2008

Churn Theory on the NYTimes

Cohen doesn't address the complexity of churn, especially when the vectors are all out of whack, as in today's economy. Plus, the churn is global. Nonetheless, a good piece:

http://www.nytimes.com/2008/12/18/opinion/18Cohen.html?_r=1&hp

Last Step Before QE

What more can the Fed do? Quantitative easing is next, I guess. As if the Fed's balance sheet didn't look bad enough. The only good news about the Fed rate cut is the weakening of the dollar. This should bolster commodities a bit, plus it will quiet the deflationary spiral panic monkeys.

See:
http://www.thebigmoney.com/articles/explainer/2008/12/16/bernanke-s-blowout

What can't the Fed do? Fix the economy. The problems are now systemic. The spread between the corporate bond (Baa) and 10-year Treasuries is around 6 percentage points (http://www.treas.gov/offices/economic-policy/macroecon/monthly_economic_data.pdf), which means the perception that corporations will fail is extremely high. Think of it another way, corporate bonds are now giving much greater returns than shares of equity. I thought several months ago that there might be a bit of a bond bubble. Looks like it has arrived. The good thing about a bond bubble is that it can only burst with widespread corporate defaults. If that happens, get a gun because chaos will reign when unemployment hits 20% or so.

Thursday, December 11, 2008

Interesting and scary slideshow at CNNMoney.

Highlights: The future is precarious. Don't expect the markets to improve any time soon. Dampen expectations.

One expert is long on commodities. Not a bad plan, but I think the short run is going to be terrible for commodities. Then again, he specifically referenced ag commodities. That is probably going to be the one bright spot. Oh, and water, once that gets listed.

Everyone, put on your visored helmets! Shit-alanche is coming!

But, seriously, what is a person to do? If you can trust your financial advisor, that's great. But, what about the rest of us? Inflation is lurking. So, getting deleveraged is of no use unless you're struggling to pay the bills. The question remains though, if you don't aggressively pay down your debt, where should you put your money?

Fundamentals. Desired/needed product or service. Low cost production. Low overhead. Adequate cash on hand or reliable credit facilities (preferably the former, of course). Management style: grinder, rather than visionary.

What companies fit that description?

Wednesday, December 10, 2008

Cybersecurity and Non-Proliferation: Losers' Lunch

CSIS is asking the President-Elect to make cybersecurity a national priority. Sounds good. But, how does a centralized structure with agencies and departments spewing out like kraken tentacles coordinate a coherent cybersecurity policy?

The brains at CSIS are big, but I was hoping for something better than nuclear nonproliferation as a model. If national cybersecurity works out as well as nonproliferation, we're in for a rough quarter century ahead of us.

Tuesday, December 9, 2008

Shamanism and the Dismal Science

Basically, no one knew what would happen when Lehman Bros. was allowed to fail. If enough people in economics and finance understood the interplay amongst derivatives, no one would have permitted Lehman to fail.

Our modern shaman, the economist garbed in a button down shirt, consults his models the way his ancient predecessor examined the stars. The economist looks at indicators; the shaman spills the blood of a goat and prods the entrails. Both the modern and the ancient look for the same thing, a clue to forces about which he possesses no direct knowledge.

The scientific method excised much of shamanic practice, and clinicalized the remainder. Will there be a time when humankind looks back at our era with a sense of patronizing pity, wondering at how we relied on the solo ignorant economist to divine our fortune?

Friday, December 5, 2008

Commodities Update

According to Bloomberg News:

Down: copper, corn, oil
Up: soybeans (Chinese states were ordered to obtain reserves)
Gold is unchanged.

Once minerals hit bottom, hopefully that will inspire more production. The question will remain, though, as to who will be buying finished goods.

OPEC will cut production. They have to be careful, though. If they cut production too much, the whole world will switch to batteries.

When will potable water supplant oil and gold as the commodity of prime speculation?

Thursday, December 4, 2008

Financial Market Meltdown: The Churn Theory

I console myself as I watch the grim headlines spit out by Google News and Yahoo! News each day by remembering that there is value out there. Workers somewhere are building stuff. Consumers out there are buying things. We just have a lot to churn through until the fundamentals appear rational again.

The sources of the churn are many. Incomprehensible derivatives. Too much liquidity. Lax lending standards. Mortgage fraud. Lack of common sense. Corruption.

And that is just a recent list. The churn has other vectors. Globally, we're still trying to integrate the post-USSR countries into the market. China produces, but it does not consume. It keeps its currency artificially weak. Europe is getting old. The price of oil is increasingly unstable.

For the financial meltdown to end, it will require time. During this time, policy makers should contemplate ways to mellow the churn. This will require a plan to stabilize currencies globally, develop alternative energies to power the BRIC economies and American drivers, and try to restore competition to the marketplace free and clear of liens held by political entities. There should be no systemic risk posed by any single company's survival or failure.

Thursday, November 20, 2008

Forget Deflation

Consumer and producer inflation indexes are both down. Consumer confidence is down. Employment is up. In a vacuum, this is a recipe for a deflationary cycle. Don’t be fooled. Unless you're a dust mite, you don't live in a vacuum.

We live in a world of interconnected national markets. Even though there is ample granite in the 50 states, we import granite countertops from India. Think of that, a boat full of rocks sailing the Pacific. All that fuel and overhead, yet it is less expensive to import the items than to produce them domestically.

I’m not worried about India. Like China and Brazil, it has a diversified economy. So, as the ass falls out of the commodities markets, India will be able to absorb the downturn over time.

Think, though, of Colombia. By natural assets alone, it should be one of the wealthiest countries in the world. Yet, we know that geopolitics prevent national stability. This instability (or chaos and butchery, if you prefer), prevents the country from reaching the market fantasy of maximizing wealth through comparative advantage (low labor costs + abundant resources = lucre from sales with countries with consumer and producer demand for raw materials).

Even with a free trade agreement, what happens when the prices of their exports drop? Farmers go back to growing cocaine. Shippers go back to shipping cocaine inside vats of coffee beans. Bureaucrats receive a higher concentration of bribes from cocaine producers. Military expenditures by the official government increase. Civilian deaths increase. Crime shoots up (so to speak). Instability foments into carnage. Again. Net effect: prices of raw materials will increase due to increased labor and transaction costs (in the form of physical security) and from scarcity as producers of raw materials flood back to the profits of the illicit drug trade.

Play this out in Kenya, Nigeria, Indonesia, Bolivia, Mexico, Egypt. What about Iran? As the demand for oil drops, the wealth dries up. What will the mullahs do to fasten their grip on a population hungry for economic modernity?

Net effect: we’re still sitting on an inflationary time bomb. Prices are correcting as a result of the bursting of the asset bubbles and as consumers feel the reckoning of their own over-leverage. There’s still too much money out there. It’s just not changing hands – yet.

Tuesday, November 18, 2008

President-Elect P.T. Barnum?

If true, there really is a sucker born every minute:

http://www.guardian.co.uk/world/2008/nov/17/hillary-clinton-secretary-of-state

At least Barnum could be counted on to give us dancing bears. What will Obama cough up?

The Harvard MBA Feudal System

Forget Adam Smith, the prophet of America’s real religion. Forget that he knew the value of an organization rested in the labor, not the management. Forget all that. Forget dignity and common sense. Forget consequences.

Instead, let us take a moment to regale our munificent lords. Verily, let us raise our hands to toast those who are known not for riding into town in shining armor, but rather for fleeing the scene in golden parachutes. Yea, those Masters of the Universe who have fought their way up through the ranks, with nine iron couched astride their Michigan-born steeds, squires of the Harvard Business School and its pedigreed cousins with names like Wharton, Sloan, and Fuqua.

To them, I say, please shut up. If you win, take your money, sip something expensive for me while you lounge away your retirement in the south of France. If you lose, drop your head and admit you are a loser. Do not expect me to bail you out.

Friday, November 14, 2008

Next Contender: Globalism

The marauding financial crisis slaughtered the GOP and ransacked Reagan’s capitalism. Libertarians have run for the hills, pondering their fate. Will they regroup and form an organized guerrilla resistance, or will they skulk back into town and be assimilated with the rest of us into the next iteration of market theory?

We have learned that our financial systems, in their interdependence, rest on a fragile base, knees knocking with hysteria from the bursting of the mortgage bubble. Indeed, defaults on home loans are at a peak. Yet, at the same time, the actual dollar loss directly attributable to the imprudent loans is not anywhere near the dollar loss to capital markets in the G-20.

As the churn works its way around the world, exposing even greater fragility, the concept of globalism itself will be challenged. At risk is more than wealth, prosperity, and access to mangoes in December. The international cooperation in other matters will feel the strain. For example, the international terrorist black list is maintained and enforced through mutual cooperation. It is expensive to adequately check your customer base for terrorist financiers. As goodwill dissipates in tandem with financial losses, the incentive for countries like Ireland and Singapore to expend resources for the benefit of terrorist target nations will likewise diminish.

As the commodity bubbles burst with global recession and a strangely resurgent dollar, nationalist socialism a la Venezuela and Iran will become more attractive to whichever warlords can benefit from the misery and chaos caused by the meltdown. Warlordism like this will self-perpetuate, and isolationism will become an international norm due to a lack of trust and a breakdown of observing international standards.

Prior to World War I, many believed that the era of European wars was over because of the interconnectedness of markets and the free flow of people and ideas across borders that characterized the 30 years prior to the assassination of Franz Ferdinand. Yet, devastating war did break out, mostly as a result of the vestigial inferior political systems of Germany, Austria-Hungary, and Russia. If the march of democracy is reversed and the world is gripped by a new era of warlordism, not even the allure of global interchange of commercial goods and cultural artifacts will prevent a repeat of the horrors of multinational, intercontinental war.

Wednesday, November 5, 2008

November 5, 2008

Numerous thoughts on the day after the historic election of Barack Obama:

  • There used to be slaves in the White House.
  • Obama has not shared his vision with us to the fullest extent. Political viability prohibits it. People are going to be shocked and dismayed about certain things. For example, watch affirmative action die away. Conservatives will ask why there should be affirmative action when a black man has been elected president, which should effectively wipe away all remaining badges and incidents of slavery. That argument will catch hold. I predict that Obama will only give lukewarm support to affirmative action while strongly emphasizing the need for individual accountability.
  • We will see America and Europe work together on pollution and climate change. In reality, the two spheres are not far apart. What has been needed is an executive willing to frame the issue as one of diplomacy rather than one of domestic economics. I think Obama will see it through the lens of diplomacy.
  • Obama’s economic legacy will be more Square Deal than New Deal. Personally, I think that is the appropriate measure. What we need is not massive government hiring, but rather a system and culture that demands that workers get treated like humans, a system that values the psychological and moral reward of gainful employment rather than treats labor as a collection of fungible assets. We live in a society, not a marketplace. I go to Wal-Mart; I don’t live in Wal-Mart.
  • We will see two months of America’s rivals jockeying to simultaneously provoke Bush and predetermine Obama’s initial foreign policy. Russia today moved missiles and electronic jammers into Kaliningrad. Israel and Palestine have commenced killing each other again. North Korea has already ratcheted up the bellicosity. What will Iran do? What will Syria do?
  • I think Obama will continue the anti-secular trend, to my dismay.
  • Not even Obama can fix what’s wrong with education. Only personal accountability and a judicial/legislative limitation on what parents can sue for will fix education. I see the decline of educational performance as a problem with personal standards and discipline, rather than a failure of providing incentives or a proper curriculum.
  • Obama will have his first falling out with the Democratic Congress over the issue of financial stimulus. I think Obama will not support another check distribution, but will rather look for a more comprehensive and meaningful demand-side bailout to buttress whatever will be done with TARP.
  • His personality and ethical determination to listen to his opponents will win him some unexpected allies (Lieberman, Hagel), and earn him some dogged enemies from within his own party. Watch this create a schism in the Democratic party’s second tier of leaders, with people like Pelosi and Reid leading the partisan brigades against bipartisan pragmatists like Steny Hoyer. As Clinton tries to retain relevance, it will be interesting to see how she plays this.
  • Health care reform will not even get touched during year one. There are too many immediate problems to fix as soon as he gets into office.
  • USA is officially transitioning to the post-Boomer era. Technology, practical ecology, work-life balance, entrepreneurship will be key components.
  • Evangelicals are too numerous to be stereotyped. Watch this unfold: increasing numbers of non-insane, non-insecure evangelical Christians will want to contribute to and be a part of the cultural changes Obama’s election will create. Environmentalism, charity, education, and foreign aid are important to this type of evangelical.
  • The "true conservative" movement will gain more traction. The large numbers of people who voted Republican in the past do not hold much sympathy for the blue blooded Wall Street sycophants who have dominated their party. I think of the points of view of many of my family members. They don't want big government. They don't want restrictions on their personal freedoms. They don't want to reward those who put forth less effort than themselves. They don't want wars for oil. They don't want valor exercised for greed, or personal sacrifice made for the gain of a few. This is a principled position. Obama exemplified the candidate that post-Boomer liberals want. Who will come from the right to give action and words to conservative populism? Ron Paul is ancient. Sarah Palin is a fraud. Bob Barr looks like a pervo. What about Jesse Ventura? He was a fine governor (and I mean that in all seriousness).


Tuesday, November 4, 2008

11/04/20008

Did you vote?

Wednesday, October 29, 2008

NBA: First Glance

Glance it was, and only a glance. My son got two shots for his 15 month checkup so he was unhappy and I was all too happy to give him attention last night. Nonetheless, the NBA season began anew. Here are my brief notes.

Cavs: I like the combo of LeBron, Delonte, and Mo. Delonte can score, but I always thought of him as a playmaker. He can guard the two. The only problem with this lineup is that it leaves the bench without a playmaker. If Mike Brown can keep either Mo or Delonte in the game at all times, though, this shouldn't be a problem.

Celts: KG reminds me of championship-era Wilt. Stats lacking, but wins abound. He could see his stats drop to about 16 and 7 this year, but those would be the most important 16 points and 7 rebounds in the league. Tony Allen and Powe are going to be electric off the bench. My only wonder was how Allen would recover from the knee injury -- athleticism is an important part of his game. He looked good.

Bulls and Bucks: Flawed teams. If each were to be reborn as presently constructed, but under different astrological signs, either could be a playoff team. Neither will do anything this year, though, not unless Rose has an unusually excellent season for a rookie point guard, or if Bogut finds his inner Moses Malone.

Lakers: As a long-time Laker hater, it pains me to admit that they intrigue me this year. I like the twin towers. I like the Farmar, Odom, Ariza bench. I like that they look like they're having fun.

Blazers: I only wish I had written it down. Oden got hurt. I knew from preseason that his road to ROY would be derailed by injury. I am a big fan of Oden, having marveled at his dominance with his dominant hand wrapped and useless during his solo year at Ohio State. It's not fair to compare him to Shaq or Dwight Howard. Those guys were gifted with imperviousness in their youth. If Shaq had been treated fairly by the refs all those years and had not needed to put on a layer of padding, I am sure he would not have had the serial injuries that have plagued him since toe surgery back in his LA days. Oden should emulate Duncan and let his skills, brains, and footwork define his game. It is not easy to appreciate, but the way Duncan moves his feet to keep a penetrating defender away from the basket is just amazing.

Tonight: NBA on ESPN. If Bill Walton is calling either game, I'm going to consult a lawyer about getting an injunction against the network on a public nuisance theory.

Friday, October 24, 2008

Thank You, Slate.com

Finally, the grand history of "socialism" (i.e., a well-ordered market economy befitting of a civilized society) is getting its due:

http://www.slate.com/id/2202950/

It is proper and sane to fear revolutionary communism. It's just crass to side with certain 'true conservatives" drunk on strong words like "liberty" and "freedom" and who see trees rather than a forest, cows instead of a herd, intent like Greenspan to ignore repeated facts about human nature and live with delusional optimism about humans' capacity to self-regulate and be unswayed by greed and powerlust. Libertarianism of that stripe is like bizarro Taoism, with an invisible hand instead of a Way, where water somehow defies gravity and flows up the mountain, and where striving is the supreme virtue.

(can you see my fingers making the "word in quotes" gesture?)

Wednesday, October 22, 2008

Championship Ingredients: The Bench

There are many factors to analyze when making NBA predictions of which team will win the championship. Who has the best player? Who has the best team? Who has the best chemistry? Who has the best defense? Who has the right mix of youthful athleticism and veteran savvy?

All of those inquiries can yield intriguing insights into the components of a successful NBA season. I was reading today about the Raptors’ lack of bench cohesion and it made me think of the importance of the reinforcements in deciding the outcome of a game. No one would underestimate the value of a strong starting five, especially when it features a Hall-destined scorer like Kobe or MJ. At the same time, however, the top six players on a team are the most heavily scouted and most heavily mocked in opponents’ practices. If you’re the Bucks, for example, you practice in expectation of neutralizing the jump shooters that litter the Bulls’ roster. You don’t ponder the intricacies of Thabo Sefalosha’s crossover or worry about Aaron Gray’s strongside rebounding position. Who cares? They only play for a few minutes each game, if at all.

Nonetheless, bench play can spark a rally, re-energize a discombobulated first team, or simply force the opponents out of their comfort zone. I think of last year’s Celtics with Posey, Powe, and House coming off the bench and instantly going on the attack. They played without ego or expectation, eager only to vie for the W. I recall Horry throughout his career doing the same thing, and also providing veteran leadership to keep bench malcontents from infecting team play. I think of the Pistons and the debt owed to players like Salley, Rodman, Edwards, Microwave, Hunter, McDyess, and Maxiell. I think of Thompson, Cooper, and Rambis keeping Showtime flowing even when the superstars were resting.

So, the question that emerges is which elite teams in 08-09 have the bench fury needed for the rise to the top.

Boston Celtics
Bench Stalwarts: House, Cassell, Big Baby, Powe, Tony Allen, Bill Walker
Analysis: If Cassell can actually play, this must be regarded as the cream of the bench crop. Walker and Allen are certifiably insane. You can’t coach against that. If these two are kept in check by Powe and veteran House, then collateral damage will be minimal. Strengths include confidence and scoring ability. This lineup would be better if it had a thirsty rebounder, though.
Grade: A (they won last year, ain’t that good enough for an A?)

LA Lakers
Bench Stalwarts: Odom, Farmar, Ariza, Walton the Younger
Analysis: This analysis is predicated on the assumption that the starting five somehow requires Vlad in order to appease Phil Jackson’s need to insert mental instability into the team’s chemistry. This bench lineup includes athleticism, scoring, and passing. If they jell, this could be a real difference maker in the Lakers’ quest for another banner.
Grade: A, but only if Odom learns to love the bench, otherwise a C.

San Antonio Spurs
Bench Stalwarts: who knows?
Analysis: Manu is injured for half the season. Presumably that means he will come back as a bench player. Will Horry even return? If so, can he play? The rest of the bench is nebulous. Bonner thinks he’s a gunner. Stoudamire thinks he’s still Mighty Mouse. Mahinmi is an unknown quantity. Either Oberto or Kurt Thomas will start, but neither alone is a game changer. Their strengths are best utilized around good players.
Grade: F. This pains me as a long time Spurs fan.

New Orleans Hornets
Bench Stalwarts: I don’t know.
Analysis: Julian Wright stands to improve on the flashes of brilliance he displayed last year. Bonzi Wells might decide he’s a basketball player this year. Either Mo Pete or Po-Z with start; the other will provide defense and shooting off the bench. Maybe Hilton Armstrong will develop. One thing that is certain is that Ely will prove to be a good second-string rebounder.
Grade: D (for now). If the bench rallies around the personality and leadership of Posey, I would expect that the Hornets will be strong contenders to unseat the Lakers.

Cleveland Cavaliers
Bench Stalwarts: Boobie, West, Andy, Wally.
Analysis: Assuming Pavlovic can round into starter shape and push World to the bench, the Cavs stand to have a strong second string attack. World and Boobie are excellent spot up shooters. Delonte West can run an offense as well as score. Varejao is one of the most annoying characters on the offensive boards. If Szszszszserbiack gets it into his head that he’s on planet Earth and not Wally World, this could be the year that LeBron gets his crown.
Grade: B+

Houston Rockets
Bench Stalwarts: Battier, Chuck Hayes, Carl Landry, Aaron Brooks, Brent Barry, Dikembe
Analysis: For some reason, I always think that Brent Barry looks like Robin Hood. His brother, on the other hand, looks like the Sheriff of Nottingham. I wonder if I could get a research grant to see if the ancient foes were also brothers. The Rockets could run a second line of Barry at the one, Battier at the two, and Hayes, Landry, and Mutombo all at the five. Is there a tougher second line in the NBA? Is there a better defensive squad than that? For some reason, I like it a lot.
Grade: A- (for lack of scoring on the second line, which would be fixed by starting Hayes/Landry and putting Scola in contention with Battier for 6th man of the year.)

Philadelphia 76ers
Bench Stalwarts: Williams, Smith, Evans
Analysis: First off, the Sixers are only here because of the strength of the starting five and the lack of another team worth mentioning in the East (sorry Detroit, Toronto, and Orlando). With Smith and Evans you get rebounding and intangibles. Louis can score. The question for the Sixers' bench will be whether they can get notable contributions from Ivey, AARP members Ratliff and Marshall, and the mercurial Kareem Rush.
Grade: C- (rated this high only because Williams is projected to be a contender for 6th Man)

Phoenix Suns
Bench Stalwarts: Barbosa, Diaw, Sgt. Barnes, Robin Lopez, Goran Dragic
Analysis: If Goran can just get the ball to Barbosa, and if Lopez can pull down the defensive rebounds, this is a great second team. Barnes, Diaw, and Blur could each contend for 6th Man. Plus, Blur and Barnes will be like Manu, de facto starters even though they come off the bench. Lopez might find himself in the same shoes when Shaq gets injured.
Grade: A

Portland Trail Blazers
Bench Stalwarts: Hold on, let’s figure out their starting five, first. Blake, Roy, Webster, Aldridge, Oden. Sounds reasonable through mid-December. After that, though, Bayless, Rodiguez, and Fernandez will all be pushing Blake to the pine. For now, though, the bench brigade will be: Bayless, Rodriguez, Fernandez, Pryzbilla, Frye, Outlaw, and Diogu.
Analysis: The bench could beat some starting fives (I’m talking about you, Charlotte and Sacramento). That’s why I’m including the Blazers even though I think by season end they’ll still be looking to lock up a playoff spot. Even when Blake gets relegated to the second team, there will be a lot of weapons. As an opposing coach, I think Portland would give me fits, especially once they come together as a team and accept Roy and Oden as their leaders. To that end, Roy is ready to be Le Roi, but Oden still has a lot to prove. If Oden can simply avoid injury and clog the middle, I think by the All Star break that the team will be finding its identity. The unknowns are how the foreign players will mesh. I think Outlaw, Pryzbilla, and Frye will all thrive in their auxiliary roles, but Sergio, Rudy, and Jerryd will all be approaching each game like they think they should be starting. A move that traded some of these young guys for a Championship-starved veteran would be a wise move.
Grade: B+ (because I have real doubts about chemistry, despite MacMillan’s cool hand)

Notably omitted: Dallas (put a fork in them), Utah (bench is too boring to discuss), Nuggets (not an elite team).

Friday, October 17, 2008

Do I Have the Right Not to Suffer? Some Random Thoughts on Health Care.

In the second debate, Obama said that access to health care is a right. If so, what does that mean for us? So it got me thinking. Of course, not all rights are the same. Some are inalienable, as recorded in the Bill of Rights. Others are by convention, such as the right of way given to pedestrians at crosswalks. If health care is a right, where does it fall on that spectrum?

Outside of the Anglo-American constitutional tradition, rights are seen differently. Socialist and Marxist constitutions will accord more rights to more people. For example, a right to education is enshrined in the constitutions of many countries, but no such language will be found in the US Constitution, where rights stand as pillars. The non-American constitution, however, will couple the right with an obligation. There may be a right to education in the Russian constitution, but it is incumbent upon the citizen not to impede the education of others and to support the school system.

Sounds good, right? Well, imagine what a strong-man government will do with free speech if citizens are obligated not to abuse the right. For certain authoritarian societies, such a paradigm would be pragmatic and morally acceptable. Americans are not like that, though. At least in principle.

America, the land of frontiers, regards any rights involving self-sacrifice for the good of others as dangerous. Some would argue it’s a slippery slope into communism once you start guaranteeing benefits. Maybe those critics are right, but maybe they have not accurately grasped what kind of slippery slope it is. Are we talking Alpine skiing likely to trigger a Maoist avalanche? Or is it more like a slip and slide (you know, that plastic strip you put down in your yard – you stream the garden hose down it) whereby all the kids in the neighborhood get to have a great day in the sun, complete with laughter, injuries, and Kool Aid?

So you have to ask yourself what health care means to us all and you yourself. What is the cost to you to know that children are not dying simply because they don’t have adequate health insurance. What is the cost to you if you can rest at ease knowing that if you lose your job, your family will still be able to get treatment from a doctor rather than an emergency room. What is the cost to you to know that people with cancer can’t get kicked off their insurance plan simply because their treatments affect the company’s profit margin.

Are we talking about communism? Or is this simple humanity, and the necessary cost to wear the badge of civilization?

This still doesn’t answer the question about whether access to health care is a right worthy of the name. At the same time, it exposes the fact that health care can be understood through many different lenses.

In the school of economics that dominates American industry, health care is treated as a good or service, not much different in principle than the market for soda or for legal services. If you can afford it, you can buy it. If not, then you have to rely on charity (or government charity). Quite clearly, based on the number of uninsured, and the number of people with preventable chronic diseases, the market for health care is broken. Even staunch conservatives (perhaps with the exception of radical libertarians) would admit that intervention is warranted in the case of market failure. No one, however, can write a general prescription for what the proper policy measure should be to fix a broken market. That’s why it’s always easier to just paint the government as the bad guy, rather than admit that we don’t know what to do, either.

Beyond the simple (simpleton?) economics of invisible hands, there is extensive analysis of specialty markets, and of goods that defy the laws of supply and demand. For example, there are so-called natural monopolies like for the manufacture of space shuttles, or certain countries’ airline industry. Also, not all goods are the same. Some defy monetary valuation. Some goods are illegal because of the harm they produce. Some goods are public goods, like roads and courts. Health care seems to fit in with some of these exceptional markets. It does serve a public good. The valuation of health tends to defy monetary value. For example, if I got attacked by someone with a chainsaw and I lost my leg, I could probably get a court to award me several million dollars. Does that mean I could go and trade my leg for the same amount of money? Certainly not. There is no weight of gold comparable to the fine sinew of my leg. If you steal my candy bar, however, I’d be made whole with about a dollar.

There is a religious or moral component, as well. Kantian ethics would formulate a maxim like this: "I will that all should be afforded adequate access to basic health care." There is no internal contradiction. Hume and other utilitarians would cite the benefit of legislatively mandated access to health care with an appeal to the greater good. Christians are supposed to embrace charity. Buddhists are supposed to be compassionate. Etc.

Lastly, there may be more pragmatic reasons to embrace so-called socialized medicine. The USA is falling behind our fellow nations in many health and lifestyle measures. If their more socialized systems work better than ours, we should be fools not to inquire further or at least test the waters. Either that or watch us slide from 28th to 29th or lower on the infant mortality scale. I mean, seriously, this is the richest and most powerful country the world has ever seen. There should be zero infant mortality. It's kind of embarassing when you think about it.

And maybe that's the most compelling reason of all to embrace health care as a basic right. Everyone's laughing at us.

Sunday, October 12, 2008

The Economic Crisis. Part 2: The Solutions

This posting could really be called Part 2: More Problems. The law of unintended consequences has staked dominion over our lives for the past 15 months, and threatens to do so for the next several years until a proper regulatory system gets put into place, and the demons work their way through the broader world economy. By then, I’ll be writing about the next bubble, though.

There are three entry points, or nodes, for a solution to the economic crisis. The first is at the top, or the supply side. The second is at the bottom, or the demand side. The third is outside the financial system altogether, the so-called real economy.

Piddle Down Economics
The Treasury’s bailout plan (as modified by the Senate) is your classic supply side corporate welfare. Granted, there are some provisions that will punish the financial industry, but the solution will most directly assist financial institutions. By infusing cash into the banks (in exchange for shares of stock), the banks will then have enough money on hand to minimize their overnight borrowing needs. In theory, the banks could just not dip into their reserves and use the taxpayer’s money to develop more stable lines of cash flow. For example, instead of taking high risk measures in order to simply gamble on survival, Bank of Brokeback can instead concentrate on issuing commercial loans in the money market, develop a broad portfolio of prime mortgages, and work out lines of credit for businesses for bridge loans or long-term capital investment.

The other aspect to the bailout is the option to buy off the CDOs from the banks. That makes the banks’ balance sheets look better and gives them some cash. Their share prices should go up.

Piddle Down Pros: Relatively simple in that there are only a few actors who stand to get involved. Long-term gain to the taxpayer if the financial institutions remain solvent and the CDOs eventually return on their coupon.

Piddle Down Cons: Very little direct benefit to Main Street. Dilution of stock will hurt shareholders, especially those looking to retire. Long-term risk of taxpayer losses.

Hot Gasses Rise
McCain recently announced a solution that seemed to come from a common source of hot gas. Yet, despite the flatulence of it all, the demand side solution merits discussion. Here’s how it would work (in general, since McCain has not offered a concrete blueprint). The government would assist homeowners who are having trouble paying their mortgages by making payments on their behalf. This serves the double benefit of keeping people in their homes and restoring value to the toxic CDOs. Basically, the government would be replacing the mayo on the CDO sandwich with ketchup. On the other hand, though, it would be a big do-over for imprudent buyers and flippers who got ahead of themselves. Further, it serves the secondary unintended consequence of preventing the housing market correction. Each house that is foreclosed upon or sold at a loss helps the housing market come down to reasonable levels. People should eat losses on bad investments. That’s the way the market is supposed to work. If the government gives support to the bubble values of these houses, then supply of houses is artificially reduced. This keeps the prices on available houses higher than they would be if the market was allowed to correct itself. Thus, flippers and fools get a subsidy to reward their bad behavior while prudent would-be home buyers remain on the sideline, punished for others’ excess.

Basically, preventing foreclosures on houses that people can’t afford anyway prevents those houses from being sold to people who can afford them at an affordable price. So, I sit on the sidelines waiting to buy a house, not willing to put money down on a house that I know is overvalued, and which will remain overvalued as long as the market gives the illusion that the overvalued sale price is

Hot Gas Pros: Neighborhood salvation in keeping people in homes. Restores value to CDOs and thus restores interbank lending.

Hot Gas Cons: Prevents recovery of housing market for the next decade or longer. Complex to implement because there are hundreds of thousands of potential actors looking for a bailout.

Down on Main Street
While the banks and the housing market toil in pandemonium, the rest of the market it taking a beating. Entrepreneurs can’t find seed money. Consumers are taking credit rating hits because banks are taking away their credit cards (thus worsening the consumers’ debt to available credit ratio). Importers and other producers can’t find commercial paper (that’s why Treasury made a guarantee on money market accounts, to prevent the total collapse of our economy). Tax revenues are way down, thus threatening to bankrupt states, municipalities, and Iceland. Lack of consumer confidence is killing retail, even with the holidays around the corner. The panic sprint out of equity and into the commodity market has driven up the cost of everything from rice to oil (I bet Ron Paul thinks he’s scored some kind of coup with the chaos in the currency markets).

Ideally, it would be great to isolate the financial industry and housing market from the rest of the economy. You know, let them stew in their own juices. Tasty? Anyway, that is a difficult task. Again, there are supply side and demand side solutions for this. One way to manage the feat would be for the Fed to open up its lending facilities to every entity incorporated in the 50 states. Another would be to dump $700 billion into the wallets of consumers. That translates to roughly $2,300 for each American. The question then becomes, how would you spend two grand? If we all paid down debt, it would still cause a recession because of the impact on retail and manufacturing. If we all spent it on Christmas gifts, we would still be vulnerable to the next crisis because Americans’ debt levels are still dangerously high. Plus, the aggregate spending might not be enough to stave off a recession given the global meltdown in the markets.

I wonder what it must be like for Ben and Hank. Do they sleep at all, knowing that their actions may determine whether or not we see Depression II? Or, maybe the sleep just fine, knowing that the success of their actions will ultimately be determined by a fickle goddess. Fortuna gives in plenty, but she also robs without regard to Justice.

The Economic Crisis. Part 1: The Problems

The economic crisis – and given the latest figures on the so-called real economy (production orders, unemployment, etc.), this really is more than a financial sector crisis – actually has a rather simple breakdown. Unfortunately, the laws of physics and the law of unintended consequences prohibit a rather simple solution. I like to break it down in a manner similar to the logical proofs I used to do in Prof. Dolan’s (R.I.P.) freshman logic class.

“What we have here is a failure to communicate.”
Basically, the banks do not trust each other. They do not trust each other’s solvency, nor do they trust the collateral pledged for overnight loans is worth anything. Thus, they do not lend to one another. Banks therefore have to get their money each night from the Fed’s discount window. The Fed, unlike any sane commercial actor (are there any sane commercial actors left in the financial industry?), is willing to take CDOs (think of them as sandwiches of questionable freshness) as collateral. Yes, that’s right, the Fed is willing to take on other banks’ toxic bonds.

This should be enough, right? I mean, if the lender of last resort will take them at value, why shouldn’t we? Well, the banks remember that if the Fed fails, the Treasury will automatically bail it out. Thus, the Fed’s courage to hold onto the toxic bond waste is not reassuring at all. It’s like comparing apples to oranges, but where the oranges are backed by 300 million taxpayers and nearly infinite capacity from whom to draw debt. Commercial banks are not quite so lucky.

The other reason why the Fed opening up its treasure chest to hold the toxic CDOs is not a silver bullet goes to the nature of overnight lending. Overnight lending is meant to be one of the shortest loans in the market. Banks take out overnight loans so that they can meet their legal requirement to hold a cash reserve equal to 10% of their total assets. So, in practice, the banks are using as much cash as possible to try to make more money so that they can avoid failure. Well, how is that working right now? What lines of credit can a bank offer that can, in the aggregate, make up for exfusion (is that a word? Should be) of their cash. Think of it like this. Bank of Brokeback gives out a $1 million loan, with 10% interest. It might take a month for the first $100 thousand payment to come back in. If Bank of Brokeback exfused all of its cash reserves in similar loans, they would need to find an overnight loan equal to 90% (or thereabouts) each night until the loan payments start coming back in. Recently, Bank of Brokeback could just build CDOs and sell them off for a huge cash infusion each night. That’s dried up.

“You put what in that sandwich?”
So, the reason why the banks won’t trust each other comes down to fear of what’s on their books. Like Jaws in the water, those CDOs are out there waiting to eat up the banks’ balance sheets.

Here’s why the CDOs are a problem. Imagine building a sandwich. You get some tasty ciabatta. Some pickles. Some smoked chicken. Fresh tomatoes. Lettuce (or arugula, depending on your politics). Some salt and pepper. Looks like a AAA rated sandwich to me! But, wait. What’s the sauce? Well, what if I told you that the mayo had been left out overnight. How much would you pay for that sandwich? It could be just fine. Or, you could end up behind the uninsured people at the emergency room. Want to take that risk? Who wants to eat that CDO?

“The turd in the punch bowl.”
Or, to maintain the metaphor, I wonder who left the mayo on the countertop overnight. Strangely, though this is actually the least sophisticated aspect of the equation, it is the most complicated. Hence the lack of trust in the CDOs. Mortgage defaults are nearing or surpassing historic levels. This fact is not limited to subprime and Alt A mortgages. Prime 30 years are defaulting at about 3%, which is a staggering number of defaults given that most mortgages today fit that description.

There is a lot of blame to spread around for the defaults. First, buyers behaved as though the price values of houses would forever rise at 10% per annum. Enter stage left The Flippers. Enter stage right The Fools. But, really, it gets worse. There is a lot worse activity out there in the mortgage industry beyond imprudent purchasing by wannabe homeowners. The people charged with clearing up this mess have uncovered a disgusting amount of fraud on the part of the mortgage brokers. For example, Johnny Acorn went in to buy a house. He’s a self-employed community organizer. He claims he makes $60K per year and he can put down 5% on a mortgage. Somehow, he gets approved for a $500,000 loan. Do that math! Later on, the regulators get their hands on the CDO portfolio of a failed bank and they see that the paperwork submitted by the loan originator make it look like Mr. Acorn could afford to vacation every weekend in Hawai’i. Prediction: Acorn defaults within 90 days. Result: Acorn defaults within 90 days.

“The measure of injustice in a society is not what’s illegal, but what is legal.”
Eat that, comrade! Our people own their own homes. Your people are commie slaves. Oh, and, property law since the Magna Carta has supported the concept of freely flowing property to be put to use for economic means. Locke knew that. One more thing to consider in terms of the society-wide impetus that drove us to this crisis: free money. Mr. Greenspan made money so dang cheap, even poor people could afford it. Sounds great, right? But, not really. Not when there was a regulatory environment that permitted mortgage brokers and investment banks to operate outside the purview of the law, and beyond the reach of state legislatures due to federal preemption. A system ripe for abuse was abused. Duh. Can’t hardly blame ‘em. I want to make more money, too.

Tuesday, September 30, 2008

Blaming the Left?

“Socialism,” my dad said, laying heavy on the first syllable. By tone alone, he could have been saying “hemorrhoids” or “foot fungus.”

I don’t know why exactly the financial services sector bailout failed in the House. I suspect, however, that we are reaping Buckley, Jr.’s idea harvest. I am hesitant to invoke the imagery of food cultivation because you can’t eat mere words, no matter how frothy and bitter they may be. Yet, nonetheless, there are Americans with jobs who have drunk this smoothie.

Socialism. Liberalism. Contrasted of course with: Freedom, Liberty.

It shocks me that a man can walk through life oblivious to the fact that each person operates as a component of a society. This readily ascertained fact does nothing to impinge on liberty, except insofar as it extends the laws of physics (laws of nature?) into the social realm.

The freedom to swing my arm ends where your nose begins.

No one’s liberty is of greater value than anyone else’s.

For better or for worse, our duly elected representatives in two branches of government abdicated their duties to the people of America by retrenching the oversight of the mortgage industry and the investment houses. You can blame Cox at the SEC for sleeping at the wheel, but we have to blame ourselves, too, for reelecting a regime hellbent on destroying America and Iraq at the same time.

Maybe the House had it right, but for all the wrong reasons. Maybe we shouldn’t be bailing out the fat cats – but because we deserve the punishment for failing to do so.

Tuesday, September 9, 2008

Monta Joins Thunder on Warriors Curse Victim List

Seriously, I now believe in curses. Monta.

SAN JOSE, CALIFORNIA (TICKER) —Golden State Warriors Guiard Monta Ellis admitted that he lied about the left ankle injury which most likely
will cost him the first three months of the season, according to a report
published Saturday.
Citing a team source, the San Jose Mercury-News reported
that the Warriors know that the star guard’s injury was not sustained “in a gym”
and that “it happened outdoors and not while playing basketball.”
The 22-year-old Ellis had been diagnosed with a high ankle sprain, a torn deltoid
ligament and a syndesmosis disruption last week. Golden State did not release a
timetable for his return, but multiple sources claim he will not be back until
at least January.

http://sports.yahoo.com/nba/news;_ylt=AvZjqOKpeai6AEg5SNtRkEK8vLYF?slug=txwarriorsellis&prov=st&type=lgns


Some teams’ misfortunes can be linked to a certain personality or personalities. Knicks with Dolan the Lesser, Zeke, and Larry Brown. Pacers with the cascading effects of Artest. Hawks and Clippers with their ownership. Bucks with the secret lawyer cabal that runs the team from the shadows. Kevin McHale.

The Warriors, though, seem to be caught in a typhoon of bad luck atop bad decisions. I remember being angry when they let Mitch Richmond go. Webber and Don Nelson’s first tour of duty. Overpaying Foyle like a royal. Now, this summer they’ve lost defensive stalwart Pietrus, bench gunner and energy man Sgt. Barnes (albeit, coming off a bad season), and Baron von Davis. Oh, and Jack believes he’s underpaid.

None of these recent moves are killers if one assumes that Monta maintains his trajectory. Watching him play in the regular season has convinced me he’s going to be a very special star. Of course, his playoff withering may be symptomatic of a psyche that will shy away from assuming the burden of being the best. Nevertheless, I figured that a roster of gunners (Monta, Jack, Spaghetti, and Baby Al) backed by thugs like Turiaf and Azubuike would be competitive. This vision works only if Monta Ellis becomes the team’s on-court leader and focal point. If Monta is playing like short Jordan out there, then Jack et al. won’t feel as compelled to take matters into their own hands.

Here’s to a full and speedy recovery.

Monday, September 8, 2008

Other Uses of Conservatorship

Though I can’t ethically discuss the Federal takeover of Fannie and Freddie, my mind got to thinking about other problematic institutions that would benefit from being placed in a conservatorship. Without delay, let us begin.

Stephon Marbury
Assets: crossover dribble, teardrop in the lane, well-intended Starbury line of sneaks.
Liabilities: gambling on defense, egotism, insanity, silly tats.
Regulator: NBA.
Actions to be taken: Like the government killing off the GSEs’ lobbying, David Stern should remove Marbury’s agent, PR, and posse. A gag order should be imposed upon the point guard himself. The real key to resuscitating the corporation (indeed, NBA players are corporations to be traded, bought, sold, and suffer bankruptcy when no longer relevant) is to put in place the proper psychiatrist and/or life coach. A realistic goal would be Allen Iverson light. Anyone thinking Marbury could be the next Bob Cousy needs to be seen by the conservator-appointed head shrink.

The English Language
Assets: Ubiquitous, adaptable, analytical
Liabilities: Spelling, lacks a word to rhyme with orange.
Regulator: Ghost of Teddy Roosevelt
Actions to be taken: English, the language of global business, will go the way of French and Latin if it does not rectify its inherent weakness. Granted, the word processor age protects against immediate failure by propping up the lexicon with spell checkers. In the long run, however, this fundamental vulnerability must be ironed out for continued viability in the global linguistic market. Teddy Roosevelt worked hard to reform English spelling, but he face the same conservative pressures that metric system proponents have faced.

For the second problem, I propose the creation of a new word, gastrournj, referring to the stomach sensation that one gets after eating an entire sausage pizza and following it up with a two liter of Mountain Dew. Usage example: I thought I was having a heart attack, but the medical resident in the ER shook her head and prescribed antacids and a glass of warm milk to mitigate the effects of delayed onset gastrournj.

Cable News Talking Heads
Assets: none
Liabilities: lies, malice, and the continuing degradation of American culture
Regulator: We, the people.
Actions to be taken: Forget Tim Leary’s “Tune in, turn on, drop out.” What we need to do, in order to stave off the inevitable slide into a country where ad hominem attacks are the only acceptable rhetoric, is to tune out, deep think, and read a book. Only you can prevent dumb.

American Corporate Beer
Assets: worldwide market in the billions per annum.
Liabilities: reliance on hops extract, continued reliance on recipes using recycled urine instead of water and grains.
Regulator: WTO
Actions to be taken: First, the fundamental question is: Can the Belgians save American beer? The answer is no. Like Bill Clinton’s wasted chances to make headway against poverty and inequality during his eight years, experts foresee that the Belgians will squander their opportunity to fix corporate shwag beer. International consultants should be brought in to form a workgroup with domestic craft and microbrewers. It could be called Project Napa, and emulate the way California wineries have become some of the top producers of quality wines. Just think for a moment, why isn’t there a Michelob Lambic? Understand this question, and you will understand the deeply entrenched rot in the corporate boards of American beer.

Saturday, September 6, 2008

Contingencies: A Churning Market

World stock exchanges are down. Oil is down. Dollar still enervated. Fannie and Freddie being taken into federal conservatorship. Interest rates low, but little interest in buying houses -- not that it would matter, banks are so skittish about handing out loans.

What scares me the most is the wholesale inflation rate (PPI), which is up double digits from a year ago. Oil and other commodities are likely driving this, since labor unions have not had the clout to lock in wage increases to match inflation. Wholesale inflation can be weathered as long as consumers spend enough money on enough junk to keep the junk makers' cash flow going. But, consumer confidence and spending are down -- and crushing loads of consumer debt has now scared people off of using leverage for personal consumption.

So, if production prices keep increasing, this will inevitably lead to greater inflation (CPI) as producers pass on the cost to the purchasers. Again, if people are willing to spend, the inflation increase will be a bump in the road while the market works towards equilibrium. If people decide instead to pay down debt or bury their cash in the backyard (afraid of losing it in a failing bank or plummeting equity markets), then we have lowered demand. The fallout from that will either be bankruptcies or corrections in the price of goods. Pretty ugly -- unless the commodity bubble bursts. (Of course, lowered demand means greater inventories, which is factored as a plus in the GDP. Nice.)

Oh, yeah, and if the commodity bubble bursts, farmers everywhere will be in financial ruin. They can line up with foreclosed house flippers at the Capitol, looking for a solution or a bailout.

That's just how the market looks today. It was different two weeks ago, and it will be different in another two weeks (especially if the federal bailout of the GSEs works to stabilize the debt market). It's puzzling. Investors better have a pair of shot puts in their jockstraps. Or beer, more beer. Oh, speaking of beer, I can save Starbucks. Listen Howard, instead of flavor shots, you need to offer whiskey shots. Trust me.

It's a lot of churn. There are certain fundamentals, worldwide, that seem to say that the global economy is strong. Markets are increasingly de-centralized. Mergers and acquisitions are surprisingly robust. Hedge funds and sovereign wealth funds (both holders of enormous amounts of preferred stock) are becoming both more accepted and more transparent. Revolution has gone the way of parachute pants and white guys with mustaches. Only Argentina has had an Argentina-style meltdown of late.

Yet, at the same time, no one knows the proper value of anything. Despite the tsunami of cash that crashed upon the markets during the Greenspan era, money is locked up like European wives during the Crusades. Geopolitics reminds some (including me -- and I've been saying it for about six years now) of the buildup to World War I. There is a looming demographic bomb in the West and parts of East Asia. There is a flip side to the retirement bomb in the Near East and North Africa, with a lot of young people looking for work and a means to build meaningful lives in regressive national economies with repressive national governments.

Two weeks. A pay period. What will my money be worth?

Friday, September 5, 2008

Key Excerpts from McCain's Acceptance Speech

In case you missed it, I have compiled key excerpts from John Sidney McCain's RNC Convention acceptance speech.

"My friends, there are green fumes emanating from my head. I don't know if this means I am actually broadcasting from an interdimensional timewarp, or if I just smell bad. If I had picked Joey Lieberman instead of my hot little trophy veep, maybe he could correct me. To use the vernacular of our time, and to show that I have appeal to African American voters, I'd just like to give a shout out to my shorty Joey L. I still have your Post-It note explaining the difference between Sunnis and Shi'ites."

. . .

"My friends, I have the scars to prove that I have been tortured. What I learned in my stay at the Hanoi Hilton is that America is a great country. A great idea. With great food. I learned there in Vietnam to honor, love, and respect my country. That's why I support torture. It taught me to be a better American. Plus what's the big deal with waterboarding, anyway? I mean, when I was in Hawai'i trying to find the Madrassa that Obama Bin Barack attended, I saw all kinds of scantily clad men and women out with their waterboards, riding twelve foot waves.

"Hold one a second, I need to put on my bifocals. I can't read the teleprompter from this distance. All righty. That's why I support torture. Oh yeah, I said that already. You see, my friends, America is about choice, but not that kind of choice. And I believe that American children deserve a choice to go to whatever school they think will best benefit them. You see, education creates a virtue. And those who are already virtuous can afford to go to the best schools around. And those who are less virtuous can go schools that might make them more virtuous. And by that, I mean to lead by example. All Americans should have scars identical to mine. That would be awesome."

. . .

"My friends, Americans don't need an elitist running the country. Someone who learned about the birds and the bees from a banned textbook. That's why I'm the best candidate. I couldn't even get into school on my own merits. I could never have been a pilot if I didn't have Navy royalty in my lineage. And when I met a model slash heiress, I pulled myself up from bootstraps and overcame the shackles of my marital vows. I'm just like you, America."

. . .

"America has many enemies. I can name some of them. Some of them are Sunnis. Some are Shinobis. I mean Shi'ites. And then there's Russia. You may not know, but Russia invaded Georgia. That means right now as we speak, innocent Georgians are starving in Atlanta, trembling in fear from the Russian polar bear. That's why, my friends, Sarah Palin had the courage to step up the fight against polar bears. They are Russian double agents moving with impunity on American soil while the angry left sips Starbucks and gets expensive haircuts. We need vision, not facts."

. . .

"Vote for me, change is coming. Trust me, my Depends undergarment is definitely the source of these green fumes emanating from my head. I need a change."

Green fumes:
http://www.colbertnation.com/?p=1593

Thursday, September 4, 2008

Thx OKC - Thunder Is Worse than Thrashers

Perhaps the saddest consequence of the Schultz - Bennet - Stern debacle that led to the relocation of the once-proud Sonics to the bluffs of OKC is that the natural hierarchy of craptacular pro sports team names has been wracked. What's the worst thing you can name your team? History tells us that it is better to have a radically unlikely name than a blase name (see, e.g., Utah Jazz).

I'm still reeling from the realization that Mayor McSquiggles from Bhumphuque, Alaska might be a Viagra-induced heart attack away from the red phone to the Kremlin. There's not enough beer in the world to sedate me. So, my friends, please be lenient as I whip the grey matter squirrels up into a dervish frenzy. Verily, let us name the five worst sports team names in pro sports.

Rules and caveats: Stupid names that are culturally significant to the locale are excluded. Thus, the fiercesome Twins (look out, it's Matt and Mike in matching jumpers!) are exempt from scrutiny, and I regret that the Columbus Blue Jackets are also off limits today (something about the Civil War).

1. OKC Thunder
Primacy and recency are heuristics that prejudice homo sapiens' analytical ability. Today, recency beats out primacy (I remember puzzling as a child, "what is an Expo, would I be able to spot one in the wild before it ate me?"). Swiftbutt Bennett, you win a free turd cookie. Could you at least have had the courtesy to ingratiate yourself to T. Boone Pickens by naming your vanity project The Wind? Britons everywhere are laughing. Why not call them the Wanks, what what.

Wouldn't it have been easier to just name them The Farts? I mean, really?

Sadly, the Thunder do not proffer Thunder Jocks or similarly branded underpants. "No, that wasn't the beans, it was my OKC Thunder Thong." Uh huh, uh huh.

http://www.nbathundershop.com/categories-equipment.html

I guess this is what Seattle gets for linking a sports team name to a local Fortune 500 company. I mean, think about it. It would be the Timberwolves having been named the Rocket Targeting System Components (after the once notable Honeywell Corporation). Or the Houston Slicks (Oil, duh). Or the Chicago Southside Victims of Stray Bullets (that's not funny -- really. Sad, actually).

2. Thrashers
I understand that there is a team named the Thrashers in the NHL. I refuse to even learn what city they are in, but if I could pick a city that deserved a team with such a stupid name I would elect KC (why the attitude when I stop for gas???). I started a petition to EA to have this team excluded from the NHL video game franchise. Thrashers. Flashing back to junior high, I seem to recall that thrashers were skateboarders. They were, in the social orbit, far removed from hockey players. I am offended. Well, not morally -- just aesthetically. Can you imagine a chess club mascot named Kardashian? Think about it and you might find a simpatico with me on the issue of the Thrashers.

3. Lakers.
Stinkin' bandits! It shocks me that Bennet et al. have more savoir faire than the carpetbaggers who robbed MPLS of the Lakers. Leave the name behind. Doesn't LA have a water problem every summer? Could you, in good conscience, name a Baltimore team the STD-Free Hookups? NOLA Roof Rescues? Tuscon Militia? Greeley Cow Butts? Dig?

4. Redskins.
The nation's capital uses a racial epithet for the citizens of the sovereign dependent nations also known as the Native Americans. Great. I'm proud to be an American, where at least . . .
Beer. More beer. More beer. If you are under 21, I mean root beer. Sugar rush. Maybe it's no worse than the Vikings. Or, maybe it's something that Trey Parker and Matt Stone would have thought up had it not already been a nonfiction tragedy. See also, Cleveland Indians (exempted only because Cleveland has problems on par, or worse than, any Reservation).

5. Arizona Cardinals.
Everything is wrong about this. The team colors clash with the natural hues of the Phoenix valley. Keeping the name seems like pandering to the Catholic Hispanic population. Do Cardinals even winter in Phoenix? I am doubtful:

http://www.birds.cornell.edu/AllAboutBirds/BirdGuide/Northern_Cardinal.html#map

Arizona is rife with eligible mascots. Gila Monsters. Scorpions. Hawks. Anasazi (take that, DC and Cleveland!). If I could be commish, I would decree that the NFL team in Phoenix be renamed to the Arizona Joe Arpaios. The defensive line would wear pink underwear on the outside of their uniforms. Trust me on this one.

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

Afterword/Runners Up:
It is hard to limit myself to just five. Marketing is not a science, but rather a cynical misadventure. Thus, we will always have the Minnesota Wild, Charlotte Bobcats, Houston Texans, Colorado Rockies, and the Memphis Grizzlies. Well, not into perpetuity will these names reside, but rather will morph when money, opportunity, and initiative coincide to create even dumber names.