Politics is not Football

There is only one Biden in the senate, so we should definitely appoint Beau to take his fathers seat, because we need more Biden's in the senate....

If I hear another talking head decry the lack of blacks in the senate, I will...I will turn the channel.

Politics is not business or Football. There is no autocracy or old boys club making picks from on high. There are only voters, of literally thousands of different stripes, who choose of their own free will.

The fact that Obama is black, should have no bearing on who fills his seat. In 2004 Obama walked the streets of Southern Illinois for months, convincing voters to choose him as their next senator, which they did of their own free will.

I realize the significance, but the best way to get more blacks in statewide office is to groom (or better yet let them groom themselves) more black candidates NOT black appointments.

Post No Bills - Happy Holidays

Posting will be light to non existent b/t here and the early New Year.  I'm having way to much fun with family and friends and as my computer crashed...but the guys at Geek Squad should have be back online soon.

Happy Holidays, here's a little Fray, it's a good song

Buying in 2009

I've been thinking about buying a home, but am being bitten by the deflation bug I've written so much about, and who wouldn't? With all of the talk about banks lowering existing mortgage principle, millions of additional foreclosures in 2009 and new housing starts lows, it seems intuitive to wait until at least the 2nd half of next year to make a decision.

What worries me about buying now is:

1. Buying at too high a price and losing significant value on my property because of surrounding property principle reductions.

2. Buying into a community with huge foreclosure interest that hasn't been realized yet.

3. Missing out on one of the sure to be infinite number of programs that both private institutions like banks and homebuilders and the government will put into place to entice first time homeowners. It would really suck to buy a house in March only to have record low interest rates or rebates introduced in June.

Tips for Rich People

In light of Bernie Made-off's alleged $50B hustle I have created a list to help future rich people pick a money manager:

1. If your guys operation wreaks of chronisism and nepotism, don't give him your money.

2. If your guy wants your money but won't meet you in person, don't give him your money.

3. If your guys auditor has a degree from an online university don't give him your money.

4. If your guy simply gives your money to another guy to manage and charges you twice for the pleasure, don't give him your money.

5. If your guy gets between 15-22% per annum returns consistently, don't give him your money...this is a statistical improbability.

6. If you're greedy and want exorbitant returns, and you're lazy and don't want to do any due diligence, don't give anyone your money...you will lose it.

Dynastic?

I'm a little mystified at all of the faux outrage regarding Caroline Kennedy and her potential appointment to the senate. All of the talk regarding dynastic politics, monarchies and romanticism I think are misguided, here's why:

First as a country we were one additional Jeremiah Wright appearance away from nominating and transitively electing Hillary Clinton as president. Her election would have meant the last 24 years of the presidency being controlled by 2 families and as a nation we seemed okay with that. If ever there was an argument against dynastic politics this would be it.

Second W wasn't crowned by his father he was elected (kinda sorta) by the masses, who knew full well who is father and family were and voted him in anyway (again kinda sorta). This is not inherently dynastic, this is democratic.

Third, I will openly admit to being excited about Caroline serving in the senate and that's okay. I'm not irrational or emotional I just think it is a fitting next chapter in the Kennedy lore. Plus, I distinctly remember NY's last senator being lambasted for being unqualified and by all indications she turned out more than okay.

Lastly, I'm tired of hearing talking heads opine on "qualifications." The only qualifications for the senate, are the arbitrary ones the voters (or in the case the Governor) assign. This isn't a consulting or I-banking gig where an esoteric skill set is evaluated, the only skill set needed is getting people to vote for you....that's it.

Baked In Schmaked In

Fed funds rates is cut to a quarter of 1% a new historic low.

Krugman has some opinions on this, mainly that it's not good and that we're dangerously close to a liquidity trap, which I compare to being off balance on the ledge of the abyss.

I'm not as concerned with that as I'm upset with myself regarding my trades today. I, as well as most traders, were expecting a half percent. When news hit of a quarter percent, my target stocks shot straight up with the Dow closing up 349 points! And like an idiot I missed every point of it. I like to take my long or short positions prior to major announcements, and because I was expecting a half instead of a quarter point I stayed on the sidelines anticipating what I call a baked in sell off. I guess not.

The hardest thing to do is to not throw away money tomorrow trying to over compensate for missing huge gains today. Hopefully we get a pullback and then more momentum the rest of the week that I can get a piece of.

Old Guard...

Both Matt Yglesias and Megan McCardle tackle the death of the newspaper today in their blogs. Their posts are well written and it's obvious from the number of comments that people have strong views on the old v new media argument.

But for me the newspaper decline is emblematic of a broader old v new mentality, that has more to do with lazy v creative than young v aged.

Like the big autos, record companies and video stores, the newspapers have no one to blame but themselves. Instead of embracing and frontrunning the literally endless ways to monetize digital content the old guard did everything in their power to curtail it (Napster anyone?) and squeeze every cent out of their crusty b-models of yore. In the meantime Netflix, Apple and opportunistic bloggers were running right past them to the black.

What confounds me is HOW the old guard missed the boat so many times? Not to brag, but 6 years ago when the paradigm shifted from video cassette to DVD I recognized at 22 that a mail order model was no longer cost prohibitive and should be developed...by Blockbuster. But apparently they made too much money from late fees and didn't want to give that up...in other news today Blockbuster closed at $1.57, Netflix at $28.49. I guess Blockbuster.

Thomas Friedman had a great article over the weekend called "While Detroit Slept" you should check it out if you get some time. It deals with this old v new way of thinking and how the businessmen, entrepreneurs and creative individuals embracing 21st century technologies, cultures and methodologies are sure to run laps around the old guard...I'll see you at the finish line dude.

You gotta admit...

President Bush is pretty reflexive. I've been boxing for a little over 18 months now and that was a sweet bob and weave for an old dude, seriously.

Watch how fast dude chucks the first shoe...hahahaha

Monday Morning Funny Stuff

Sorry but this probably won't be funny out of context!

Bacevich I

"The 19 hijackers that killed 3000 Americans on 9/11 didn't succeed because they had advanced technology, because they were particularly smart or because they were 10 feet tall. They succeeded because we let our guard down and we were stupid."
dddddddddddddddddddddddddddddddddddd-Andrew Bacevich

"Why were scissors and box cutters allowed on planes?" This was my first thought in the wake of 9/11 followed by how stupid it was that they were. Seriously. I'm certain Bacevich's criticism extends to intel and policy, but I'll always be mystified at the utter stupidity of allowing shanks on a plane.

I've always thought like Bacevich regarding 9/11 but was so worried about the pervasive 'with us or against us' culture that proceeded, outcasting anyone who didn't parrot Bush's narrative as unpatriotic. Were the hijackers responsible? Yes. Should we (TSA, NTSB, et al) have let them board with shanks? No. Would they still have been able to hijack the plane w/o their shanks? Maybe, maybe not. However, I can say with certainty that it's infinitely harder to kill a man with your bare hands than with a knife...err box cutter or scissor.

Gate Agent: Sir we don't allow knives on the plane.
Passenger: It's a box cutter, not a knife...see?
Agent: Oh! Well in that case go right ahead, you're in seat 57.

Did This Week Just Happen????

Yes it did Ryan...yes it did! I'm down HUGE this week, after having some relative success the past month. How? My broker offered me 4:1 leverage on equity and I picked this week to put it to work thinking my streak would continue. Unfortunately that didn't happen and instead of making 4:1 I lost 4:1. I'm still up on the year so it's not really my money but nevertheless it hurts.

A friend of mine warned me not to be induced by the seductive powers of substantial leverage, but like a Wall Street Bank I levered it up with visions of million dollar grandeur and paid the price, unfortunately I don't qualify for funds under TARP (lol). The good news is I learned a valuable lesson...be patient. Some fellow traders warned me against trying to get rich all at once, now I know. Based on my model I can still do very well over the next few months if I'm patient, stick to my plan and just let the small daily gains add up.

Stupid...Stupid...Stupid

NCAA Football seriously needs to rethink their BCS scheduling. In a year where we have superb teams, talent and qb's battling for the national championship it is a disgrace that we will be forced to wait another 3 weeks for the game.

During this time, the teams will invariably lose their edge by not playing for three weeks, and we will have to suffer through a quarter of offsides, dropped balls and a plethora of other miscues before they settle in. The NCAA should push back the start of the season so that the conference championship games are the weekend before Christmas followed by a week off and then the bowl series. As a former college athlete I can almost guarantee the players and coaches HATE having this much time off.

Milwaukee Bucks...

Not the Michael Redd kind, the money kind. Straight out of the great depression a small enclave in Milwaukee is set to begin minting a special currency for use by their residents. This all in an effort to jumpstart local businesses by keeping dollars local. Check it out, I continue after the jump.

It's an attractive idea when times are tight. Communities print what look like ordinary bills with serial numbers, anti-counterfeiting details and images of local landmarks (the Milwaukee River, for instance) instead of presidential portraits. Residents benefit through an exchange system: 10 traditional dollars, for instance, nets them $20 worth of local currency.

According to the Newseek article it's all legal, but I'm not sure how effective it will be. In theory as long as merchants keep the dollar price of goods at 1/2 that of the 'milwaukee buck' price and the "community treasury" maintains 1:2 dollar capital reserves it will work...it will just be a glorified dollar but it will work. But this is where things get screwy.

And when businesses agree to value the funny money like real greenbacks, they also get a free stack to kick-start spending.

As soon as you introduce a set of 'milwaukee bucks' that aren't backed by a real dollar things get out of whack pretty quickly:

-Pam exchanges $20 for 40 milwaukee buck (mb) a 2:1 mb/$ exchange rate

-The "community treasury" now has $20 on reserve as Pam is the only person using mb's so far

-The local restaurant charges Pam 40mb ($20) for dinner. If they were to charge less in mb's than the dollar exchange rate they would be losing money.

-The "community treasury" issues the business an additional 20mb for participating in the program

-The local restaurant has to pay their supplier from New York who doesn't accept mb's

-The restaurant goes to exchange their 60mb's for dollars

-The "community treasury" gives them the only $20 they have on reserve at a 3:1 exchange rate

I guess if the "community treasury" restricted the exchange of non dollar backed mb's or merchants repriced in mb's daily based on the quoted exchange rate this could work, but at some point an mb will have to leave the community in the form of a dollar and if the currency is inflated (getting weaker against the dollar) someone's gonna get shafted.

Attribution

Matt Yglesias has a great post on Attribution Theory. If you go back to Psych 101 you'll remember that attribution deals with how we explain our behavior. In general an internal loci attributes causality to you and an external to someone or something else. Check the example, I finish up after the jump:

Internal: In the semi-final matchup in the NCAA Final Four John torches the opponents for 37 points. After the game he credits his hard work over the summer and his extra preparation in the previous days practice.

External: In the championship game John scores only 9 points and misses a game high 17 shots. After the game he mentions the coaches flawed game plan and the inability of his teammates to get him the ball.

As a consultant I can say that many business people lauded themselves ad infinitum for their success during the boom. They were high on internal, rolling in bonuses and ego. Now that the growth by default business environment has passed those same individuals are finding fault in an external a.k.a "the economy." Nothing on the downside has to do with their skillset or lack thereof, their failure is all beyond their control.

While it's front and center in the business community at the moment, this is a fairly common condition in all humans and takes a lot of practice and focus to fix. With a lot of honesty and a little analysis anyone can find the appropriate mix to explain a success or failure, the trick is wanting to do so...afterall why credit fortuitous timing or serendipity when you can credit yourself? I'm competitive so I'm always assessing myself after a failure. Even if it's clearly external I hate the thought of my fortunes being out of my control.

But I guess if I was an exec with millions of dollars of bonuses on the line, I could find total fault in a defenseless economy...I guess.

Rod...Whiskey Tango Foxtrot???

Seriously Gov. Blagojevich? Really?? I guess I should have known. I lived in Chicago for some time and all I heard from the locals was how much more slimy Blago was than Ryan, which was unbelievable at the time considering Ryan, but not so much anymore.

A friend of mine told me the feds rarely indict unless their case is airtight, so I have to assume some of what is being reported is credible. Accepting that, this guy has to be one of the most brazen elected 'corrupters' in modern history.

We'll see if this touches O in anyway. He wouldn't touch Blago with a ten foot pole during the campaign, but I'm not so sure about some of his prominent and less well known surrogates. Blago's acting with a confidence that berays a guy who knows where the skeleton's are buried, and not his own. This should be interesting.

Going to Extremes

I just read the account of Starla Darling a young mother who was on maternity leave when her company abruptly filed for bankruptcy, effectively ending her insurance. Here is a recount of what happened next:

The crisis is on display here. Starla D. Darling, 27, was pregnant when she learned that her insurance coverage was about to end. She rushed to the hospital, took a medication to induce labor and then had an emergency Cesarean section, in the hope that her Blue Cross and Blue Shield plan would pay for the delivery.

This is pretty extreme but who can blame her? Most people with no insurance simply put off critical surgeries or procedures until they get the money or are covered, but you can't put off a pregnancy. And since her company filed for bankruptcy Cobra was not a viable option either. It turns out the insurer decided not to cover it, leaving Starling with a $17,000 bill.

I'm certain there will be hundreds of thousands of laid off workers losing coverage over the next 2 years and I wonder how many of them will have to go to extremes. I'm not sure there is a healthcare solution to prevent further Starling's, typically you would look to the government but both state and federal have their hands full with this quickly worsening recession and frankly the money for Obama's healthcare reform is probably off the table.

Maybe a short term solution is to revise Cobra to extend to bankrupt companies??? But even then the worker is responsible for 100% of their premiums and I'm not sure how many workers can afford that during unemployment?

One silver lining is that Starla's got a new little person which is pretty awesome!

Chalk It Up

Another win for me against the computer. Either my brain is swelling or someone hacked the program and dumbed down the algorithms because this one was pretty easy, and I hadn't even played in a while.

O taps Shinseki for VA Secretary

I was a huge fan of Shinseki back in 2003 when he directly stood up to the extreme doucherity a.k.a Wolfowitz, Rumsfeld and Feith and indirectly known as VP Cheney. After being treated like crap by the Bush Administration for speaking up on Iraq it's got to be a little redeeming for him to get this post...especially in a Democratic Administration.

David Gregory gets Meet the Press

I guess that ends my ten year love affair with the show. I want Tim Russert back NOW. Brokaw was okay as the temp, but I'm not a huge fan of Gregory, he spends too much time trying to 'get' the interviewee instead of just asking the tough questions, the thing Tim was great at.

Class warfare? No thanks, not now.

Word out of Chicago is that a group of 250 recently laid-off workers are peacefully refusing to leave their recently closed warehouse. You can read the whole story here, an excerpt from the groups leader below:

"Across cultures, religions, union and nonunion, we all say this bailout was a shame," said Richard Berg, president of Teamsters Local 743. "If this bailout should go to anything, it should go to the workers of this country."

Unfortunately this class warfare rhetoric, stoked incessantly over the last 8 years, really does no one any good in a crisis. Conservative or progressive, labor or management, the truth is the bank bailout was necessary. It's true, a window manufacturer and a bank are both businesses ultimately responsible for their own P&L. But it's also true that a bank and a window manufacturer vis-a-vis trade and commerce are not equal. Unfortunately banks are waaaay more important to the functioning of this system and thus must be treated as such...this is just a fact.

I understand the movement, but knowledgeable progressives would do well to explain to friends and family alike that the bank bailout was just as necessary for labor as it was for the CEO. The sooner we do away with trivialities during this VERY REAL AND VERY SERIOUS GLOBAL CRISIS the better.

The -flation Wars

With all the ersatz money being pumped into the economy it'd be easy to think that at some point inflation would become a problem, and in theory it will. But I'm convinced that the prospect of deflation, not inflation, is what's keeping Bernanke and Paulson up at night. Here's a quick primer on the flations, I finish up after the jump:

Inflation: Prices are rising - A pair of Air Jordans went from $100 in Jan, to $125 in Feb, to $150 in Mar.

Disinflation: Prices are rising, just not as fast - Those same Jordans go to $155 in April and to $159 in May.

Deflation: Prices are falling fast - Those Jordans fall to $135 in June, $105 in July and $85 in August.

Most opponents of the bailout are concerned the increase in money supply will cause prices to rise because there will be more dollars competing for the same amount of goods. I'm not totally convinced of that in this instance, mainly because so much wealth has been destroyed, but in theory this is correct. Fortunately there's a known fix for inflation. Raise the interest rate, make it more expensive to buy money, decrease the money supply and voila bye, bye inflation.

But deflation is like Macaulay Culkin in The Good Son...outright nefarious. It's part of the vicious cycle I've blogged about ad nauseam. With deflation people begin assuming prices will continually drop. So instead of buying that tv today I wait...and wait...and wait, and since it's not something I absolutely need I wait some more. All of this waiting eventually forces prices to the point of loss or nominal profitability for the seller, which in turn causes them to layoff workers, which in turn drives up unemployment and exacerbates the recession and the deflationary spiral further.

The antidote for deflation is the exact opposite of inflation, to lower interest rates and increase the money supply (in essence encouraging inflation). What makes this antidote less effective is twofold. First you can only decrease rates to 0% (unlike its infinite converse), and with rates already low there's not much ammunition there. Second is human emotion. Once society has been conditioned to expect lower prices, it's hard to reverse that course of thinking especially in a recessionary environment where people are already skiddish about spending.

I'm sure there's someone out there reading this thinking "This sounds like an after Christmas sale, what's wrong with waiting for prices to drop?" Nothing. If it's just one cheapo who's waiting for clearance. But if the masses are indefinitely waiting, then they're not spending which is a problem in a consumption economy.

There are few other types of -flation that only the wonkish care about and in general a little disinflation is pretty harmless.

Sardonic...I can't help it.

President Bush is coming on to reassure the markets and talk about the jobs report at 11:30 EST. I sure am glad the markets, the nation and the globe really take solace in his reassurances. I say tap the brakes on Obama and give Bush another 6 months, we need his leadership during this period.

Oh, he's on...let me listen now, more later!

Update 10:34: He kept it short and sweet and the markets held steady, he's learning!

The Jobs Report

533,000. That's the total number of jobs lost in the November, you can read for yourself here. This is in conjunction with upward revisions of the September and November numbers that totaled another 70,000+ and second but less painful modest wage gains for those still employed. It's been said greed and fear are the two most powerful human emotions. Unfortunately these emotions are not created equal, with fear being by far the more powerful of the two. This fear building among the masses with every job loss and negative headline is what I believe could push us into the inescapable vicious cycle that I've talked about before. This would invariably make our current recession much much worse. I'll be blogging on deflation, which I think is the government's biggest concern regarding this cycle a little later.

0-10

Looks like the Big Ten loses the ACC/Big Ten challenge again for an amazing tenth year in a row.

Thanks Big Ten, that's really something all Midwesterner's can be proud of. I particularly liked the way the ACC's best (Duke/UNC) came onto the homecourt's of our best (Purdue/MSU) and mopped the floor with them...way to compete guys.

This is why you plan!

Unfortunately it looks like my home state is joining the plurality of states in fiscal trouble. Sometimes, I wonder why more competent MBA's don't run for office to balance out the JD's who are seemingly unable to grasp the concept of economic cycles. Afterall, finance and commerce are the engines of government and who better understands those than MBAs.

Case in point: Sending out massive surplus checks, unnecessarily cutting or flatlining taxes and FAILING TO DECREASE SPENDING during a boom is a sure fire recipe for massive deficits during a contraction...as my state has just found out. What's weird is that even a bush league MBA could tell you that you need to maintain adequate capital reserves, before increasing salaries, paying massive bonuses or allocating more for capex.

Note to Pols: If a thing can't go on forever, it won't.

Funny Stuff: Mascot Fight

Watch the Oregon Duck and Houston Cougar do battle.

WARNING: The Duck is absolutely hilarious. Watch the way he kicks the cheerleaders cone at the end...hahahaha!

Japan Stimulus: Failure or Failure of Execution

Over the last few weeks the up swell for robust stimulus has grown to include both prominent conservatives, progressives and anecdotally a large majority of Americans. However, as typical the crew at CNBC still seems to be pandering to a non-existent or at least severely de-idealogued ultra conservative business community, continuously invoking the failed Japan stimulus as reasons against trying it here.

Since I don't know enough about 90's style Japan economics to comment on whether the stimulus worked I won't. However, I will point out that it is entirely plausible that if it didn't work, the reason could be poor execution instead of a bad plan.

Since the parallels between business and athletics are endless I will demonstrate with a sports metaphor:

In order for Small State University to beat North Carolina in the championship b-ball game the coaches decide to use a 2-3 zone. If Small State loses by continuously flubbing assignments, failing to box out and not challenge jump shooters, should we just grossly conclude that North Carolina can't be beat using a 2-3 zone. Or should we review the film and determine if, Small State had boxed out, not flubbed assignments and challenged shooters, they could have won with the 2-3.

I get the feeling that those, like Kudlow and Chuck Gasparino, are well aware of the fact that the stimulus in Japan could have been too small, allocated inappropriately or flubbed in some other way. But why contend that when you can always default to your trusty contention of upper class and business tax cuts?

ACC/Big Ten Challenge

I believe this is the last year for the coveted ACC/Big Ten Challenge. Since I'm from Big Ten country (and proud of it...thank you very much), I'm hoping that the Big Ten can get an overall win. In it's 9 year history we have yet to accomplish this.

This is very disappointing, especially since I went to school in SEC/ACC country and talked major smack to my teammates daily about how the Big Ten was far and away the best athletic conference in the country.

Wisconsin beat A.D. Vassallo and the Hokies yesterday, let's hope the other 10 can handle their business! I might add I think this challenge is a little unfair since the ACC has 3 more teams than the Big Ten, our perennial bottom feeders, namely Northwestern and Penn State, are stuck playing every year, where the ACC's bottom feeders are gapped.

Time for your monthly Auto-Bailout Redux

With the auto bailout redux upon us, the grandstanding, like Citigroup stock, is reaching new lows. Execs hitchhiking to DC, Senator's extolling free market virtues and talking heads making ridiculous arguments. Today on CNBC Mo Francis had on a few guests to discuss the pressing question of 'to give or not to give'. The bowtied gentleman's (I didn't get is name) argumentation against the bailout is paraphrased as such:

...there is some waitress scraping by, waiting tables for $6 per hour at a diner in California. Why should we give her tax dollars to Detroit so that they can continue overpaying the unions to sit around.

First it's perfectly plausible that said waitress sees the connection between Detroit and her job, and thus is for the bailout, in which case he is now as well, based on his argument. Second since a dollar of tax revenue is the same regardless of the source, her fictionalized struggle is ad hominem at best, only inserted to appeal to emotion and thus wholly irrelevant, making the argument as such too. Lastly, and I've addressed this before, anyone blaming the unions is simply blowing smoke. The unions signed a contract to trade labor for money. Whoever agreed to pay them should draw conservative ire, not unions.

On another note, it's pretty clear the waitress is a smokescreen. What he's really concerned with is the allocation of upperclass (his) tax dollars to Detroit a.k.a the unions a.k.a working class, as he sees it. For him this is some form of nefarious wealth redistribution, one that doesn't redistribute to his own pockets which means that it cannot be tolerated.

True to Form

Hank stumbles through another speech and true to form the market heads south, closing 600+ points down. Obviously there is no causality, but there is definitely a real negative correlation between his public speeches and the market. I say bring on Geithner, or speak after 4pm EST. Otherwise Bollinger, SMA and RSI are going out the window and I'm just going to go short when Hank speaks...seriously.

It's Official!

It seems that the economist have come around to what my readers have known for a while we're in a recession.

I don't want to be a negative Ned but I've said here a couple times that I think the globe, led by the US, is in for some pain over the next year or maybe more. To anyone remotely familiar with the concepts of business and economic cycles this shouldn't be a surprise. Our market in almost every industry was way oversold and thus must come back down. This is precisely why you budget and spend responsibly during times of excess, this goes for individuals, businesses and governments.

The govt will do all that it can to minimize the pain, but it will still hurt nonetheless and in the end the govt can only pump in so many monopoly dollars before our economy becomes ersatz. As a country we are going to have to return to net or marginally deficient trade balances, which indicate REAL NEW dollars being introduced into our economy. We've got to develop some type of technology, widget or knowledge that we can sell en masse to the rest of the world. A country of our size can't maintain dominance by being a service based economy, we can't all sell insurance.