Kids unhappy with hamburgers

Politico has the headline Latino's unhappy with Obama up on their homepage. I think I also saw:

-Blacks unhappy with tv show Lost
-Whites unhappy with grape juice
-Old people unhappy with Bob Evans
-Universe unhappy with time and space

I really wish this kind of hyperbole and media phrasing would stop, it really is pretty insulting to any group whether it be races, professions or demos. Instead of the generic group they should simply name the person being quoted and the group they represent:

So the headline Women upset with Mayor Wilson, would instead read Gloria Steinam and Ms. Magazine are upset with Mayor Wilson.

I guess that doesn't have the same divisive sting though...just a thought.

Three Days of Terror

Read an early in-depth account of the Mumbai attacks here. Very chilling. Not to analogize b/c the analogy falls apart pretty quick, but a visually graphic, first person account of gun violence that comes to mind is the opening of the movie Runaway Jury.

On another note, I just saw the Pakistani Ambassador to the U.S. on Late Edition imploring the globe to ratchet down the India/Pakistan talk. I agree. It's still way too soon for uninformed citizens and pseudo newsie analyst to be providing bush league courses of action.

And while I agree that India has the right to act as it deems fit, the last thing the globe needs is a war with India and Pakistan, especially considering the fragile state of nuclear Pakistan. Unfortunately any goodwill and leadership cred the US could have bartered to necessitate this has been squandered by Bill Clinton and Barack Obama. Because we all know over the last 8 years it has really been those two, not President Bush, who have severely trashed our status as world leader. Thanks for that guys.

President Bush vs. The Word Sovereign

Sovereign wins! If you listen carefully you can actually here the crowd laugh at, not with...The President of these United States. How sad.



Remember that rule? You know the one you learned in first grade that went something like 'never define a word using the word you are defining.' Well which of the following are most likely true vis-a-vis Yale, President Bush and that rule?

A. They teach that rule in public elementary schools, but not at Yale.

OR

B. President Bush and many, many, many, many, many, many, many, many, many more like him have benefited from a type of affirmative action NO ONE ever talks about.

Movie Review: The Boy in the Striped PJ's

Just saw this movie and all I can say is wow! Totally awesome. I won't spoil, but it centers on a new found friendship between two young boys. One a prisoner inside a Nazi concentration camp, the other a son of a Nazi officer. The innocence, symmetry and juxtaposition are palpable. It all unfolds seamlessly while taking your emotions on a roller coaster ride and the end...well the end is absolutely horrifying.

As such The Boy in the Striped Pyjamas has a new found place in my Top 5...so long Gangs of New York:

1. Boyz in the Hood

2. The Usual Suspects

3. The Boy in the Striped Pyjamas

4. No Country for Old Men

5. There Will Be Blood

This Just In - Teachers make lousy parents, but great teachers

Check out the Atlantic's Clay Risen piece on Michelle Rhee the reformer Chancellor of DC Public Schools.

Rhee’s name doesn’t appear among the signatures. In her opinion, external factors simply underline the need for better educators. And while she pays lip service to the realities of urban poverty outside school walls, she dismisses the impact that poverty and violence might have on achievement. “As a teacher in this system, you have to be willing to take personal responsibility for ensuring your children are successful despite obstacles,” she told me. “You can’t say, ‘My students didn’t get any breakfast today,’ or ‘No one put them to bed last night,’ or ‘Their electricity got cut off in the house, so they couldn’t do their homework.’” This sort of moral certitude is exactly what turns off many veteran teachers in Washington. Even if Rhee is right, she seems to be asking for superhuman efforts, consistently, for decades to come. Making missionary zeal a job requirement is a tough way to build morale, not to mention support, among the teachers who have to confront the D.C. ghetto every day.

Really Michelle Rhee? Seriously? Basic inputs as a requisite constitute moral certitude? I guess.

I've had this urban education debate with classmates, professors and colleagues ad nauseam and until someone outside of education industry talks me down, I'm sticking with my position, which is as such:

IT IS NOT A TEACHERS JOB TO FEED HUNGRY STUDENTS, BABYSIT, ENSURE THEY WAKE UP, CONVINCE THEM NOT TO GET HIGH, MOTIVATE, ENSURE THEY DO THEIR HOMEWORK, ENSURE THEY GO TO BED ON TIME, PROVIDE HEAT, DINNER OR SHELTER.

To argue otherwise is absurd on its face. How so? Indulge me. I'm a mgmt consultant, let's say I'm brought into a client for three weeks to evaluate a merger. I'm not trained in teaching clients how to type or write or read basic financial docs, which I determine fairly quickly is a daily precondition to getting what I really need from them regarding the merger...my real task. Meanwhile my colleague will be working with clients who know how to type, write and read. At the end of the 3 weeks, both the CEO who hired him and the CEO who hired me will require our findings. My colleague will present them in a dossier containing exactly what was requested, I will either give him an inferior report (time constrained by my other task) or...suprise...a set of employees who can now type, read and write, either way it's not what he's looking for as he's not making any allowances for his crappy employees and is now extolling the work of my colleague...he with the literate clients, as a measuring stick.

For those who parrot the erroneous argument that 'these urban teachers need to be prepared to work harder and go the extra mile' I'm calling bullocks. I was 27 and making a lot of money as a consultant, and was never put into a situation where the input was beyond faulty, and if it had been I had recourse with my firms partners. Asking a teacher, on what I'm certain is a fraction of the pay, to go above and beyond daily for the life of their career and, AND be thrown under the bus by self-serving boards and politicians is also absurd on its face.

I would submit that I'm willing to undertake teaching clients to read, write and type in a related but wholly independent industry from mgmt consulting. To be sure this would be a situation in which CEOs don't conflate consulting with teaching, and I'm judged only on how well I teach the clients not consult. To further the analogy this would mean a part of urban education would be spun off into de facto parenting that would handle all basic parenting functions, namely providence and guidance. Teachers...err..."de facto parents" would provide meals, shelter, protection, counseling and environs for success. These teachers...err..."de facto parents" would be judged by the bureaucracy only on their kids overall alacrity and health not on test scores or graduation rates, which would be function of the real teachers that is.

In case you couldn't tell I was being sardonic when I penned the above paragraph, but as I think this through, creating inner city boarding schools wouldn't be a half bad idea. I'm almost certain many at risk kids long for security, safety and just the ability to be a kid. If you created a system where after school the kid would be allowed to be with the parent from only 6-8pm nightly you could almost ensure that they were warm, safe, eating properly, getting enough rest, doing homework and being a kid.

Understand I know to some how off the wall my suggestion sounds, but you now see how off the wall the innovative, charter for all, vouchers for reform sounds to me, an inner city schoolboy who was the function of parents (plural) who ensured warmth, safety, proper nutrition, rest, time for studies and most importantly a childhood.

I have no doubt Michelle Rhee and others hearts are in the right place, but if you can't fix my engine then find an adequate proxy, not a political strawman.

Grover...Whiskey Tango Foxtrot??

CNBC had Grover Norquist on late last week to discuss Obama's forthcoming tax plan vis-a-vis the current economy. The host (spicy Trish Regan) asks a very simple but relevant question "Should Obama abandon his original tax plan?" It should be noted that I think this is a very fair question. How so? Well when Obama put together his tax plan our economy wasn't in crisis state, it was trending bad, but it didn't' indicate crisis. Things have changed and only idiot leaders "stick to their guns" without a hint of reevaluation during a crisis.

Anyways, it seems like my guy Grover isn't even concerned with the question, the ostensible purpose for his visit is to jab the D's...I give him an A+ for effort and finish up after the jump:



Instead of FURTHERING the debate by laying out cogent reasons why Obama shouldn't raise taxes (there are some), he totally ignores the question and doubles down, blaming the looming recession and market crisis squarely on the 2006 House and Senate Democrats for...lol...having the nerve to get elected, imagine that.

I love debates and cogent arguments. I hate hyperbole and vapid, ideological, recalcitrant partisanism. Political and intellectual leaders would do well to learn that Americans specifically and the globe in general are moving away from hyperpartisanism and "hard right, hard left" memes that have dominated our political milieu for way too long.

5 Thanks

1. My mother and father

2. My brother and sisters

3. My friends

4. My faith

5. My health

Isn't it kinda interesting how when you really reflect on the things that you are truly thankful that cars, salaries, platinum cards, flat screens, status and super-awesome laptops seem to never make the list, but conversely seem to occupy a lot of our time?

I wonder if there is some theory that explains this??? I guess we believe that these things will remain constant and thus require less attention than those things that may be perceived as fleeting or difficult to attain and as such are (however illogical) reasoned to require more effort, time and attention.

Attacks in Mumbai

News out of India indicates a terrorist attack with at least 80 dead, and a possible hostage standoff. From what I gather they are/were targeting Western citizens, especially UK and US.

I remember during the Va Tech shootings being horrified at what the time was 3 deaths, I left to run errands came back and it had exponentially increased to 30+. I'm scared to leave right now, for fear that ongoing standoff could make things much worse.

My professional life has exposed me to many wonderful, creative and incredibly intelligent native born and American born Indians, which has made this latest terrorist attack that much more personal.

Greed and Excess - Consumer Edition

Most people have been pretty harsh on the banks and the govt since this whole mess got started, and rightfully so. These guys in conjunction controlled the purse strings and approved the loans to the masses that were the impetus for all of this crisis. If you haven't read it yet check out Michael Lewis' inside look at the investment banking mentality that fueled this crisis. It's a long but good read if you have the time.

As much as the banks and govt have been beaten up over the past 2 months you'd think this whole thing rest with them. It doesn't. The 3rd piece of the puzzle in this crisis is the consumer (aka YOU). Friedman has a good piece in the times today, check it out here, I finish up after the jump

So many people were in on it: People who had no business buying a home, with nothing down and nothing to pay for two years; people who had no business pushing such mortgages, but made fortunes doing so; people who had no business bundling those loans into securities and selling them to third parties, as if they were AAA bonds, but made fortunes doing so; people who had no business rating those loans as AAA, but made a fortunes doing so; and people who had no business buying those bonds and putting them on their balance sheets so they could earn a little better yield, but made fortunes doing so.

The progressive in me hates to stipulate to this fact, because WHO could be against people owning a home? We know owning a home is the best way for the average person to begin to build their wealth. And with income spreads WIDENING between the classes, it was and still is hard to argue against...in theory. In practicality though, I must say people who were taking out these loans WITHOUT understanding the implications were either ignorant or greedy or both.

I recently debated with a buddy of mine, who continued to echo the meme that somehow "the consumers were fooled" into buying these types of mortgages. I asked him how is it that an adult, who had never entered into a contract for liabilities this large before (a mortgage loan) could do so without UNDERSTANDING the terms. My only answer is either ignorance (they didn't think they needed to know...huh???) or greed, more likely.

The ignorant piece I kinda sorta understand, maybe people THOUGHT that these subprime loans were structured like normal loans and that their low payments were static. However, it's hard for me to see how any reasonable person would think they could pay $600 per month on a 15 year loan for the life when it originated at $250,000??? That doesn't square.

The greed piece is probably more likely. I think for a lot of people the loans went something like this.

-John Q makes $35,000 per year and has a revolving savings of about $2000.

-John's buddy circa 2006 tells him that he took out an ARM, bought a house for $75k and sold it 8 months later for $150k.

-John read about people backing into these sales (buying a house to live in and just getting lucky with hyper-appreciation) or doing this on purpose (flipping).

-John takes out the loan, circa 2007, not bothering to understand the terms because it's worked for his buddy and "all" of these people he saw online.

-The pyramid ends, as it always does, and John gets left holding the bag, aka known as foreclosure, screwed up credit and a massive headache.

What's my point? Well the banks lent the money, so they're most responsible because it's their money. The govt allowed for this scheme to get out of control, so they're second inline. But the consumer played a willing role. And I understand taking advantage of opportunities, but since NO ONE forced you to do anything...you deserve some blame too.

The Holiday's

Expect a lot more blogs during this long weekend as my other activities (websites, trading, part-time consulting) slow down.

A gagillion bagillion dollars

I've seen and heard the Citi bailout described with all of the esoteric govt nomenclature, no doubt included to confuse the casual reader, but this is what it essentially boils down to.

1. The government has given Citi an additional $20B on top of the $25B it gave them back in October under the original TARP. This is in the form of preferred equity, meaning that common equity is now VERY diluted.

2. The government has "ringfenced" or essentially backed $306B of bad assets (toxic sub prime mortgages and derivative investments that are REALLY weighing it down). It should be noted that the CEO told hundreds of thousands of Citi employees on Friday (before the deal was announced Sunday) that the bank was in a good position which raises the question of why they're ringfencing 300 billion in assets if they're in such a good position, but I digress. I guess if my stock was nearing zero I could spare a lie or two until someone threw a life preserver.

3. Citi will eat 12% or ~37B of the ringfenced assets and the govt will essentially back the rest at a rate of 90/10 US to Citi. This means that as every remaining dollar of toxic assets is realized the govt will "loan" Citi 90 cents and Citi will cover 10 cents. It should be noted that while it is structured as an "as needed loan", I believe Citi is in pretty deep, so it's really all needed now!

Obviously I don't like it in theory but I realize that these measures, and most likely many more like them need to happen. There was a cabal of 9 major bank CEO's that met with Sec. Paulson back in October to discuss the initial disbursement of TARP funds. While Citi had the greatest exposure to these toxic investments, I would bet donuts to dollars that all of the banks represented in that meeting (it would be irresponsible to name them publicly) are in a similar position. Which means that Tarp 1.0's 700B won't be close enough to get all of these banks even close to solvency. Not to hyperbolize but after considering this $350B+ total just for Citi I think anything less than $3T is wishful thinking at this point....for those who are counting that's at least $2.3T more in addition to Tarp 1.0, at least.

There was a scene in one of the Austin Powers flicks where Dr. Evil has a laser pointed at the U.S. and is negotiating a settlement with the President circa 1960 played by Tim Robbins. Dr. Evil, having traveled back in time to threaten these guys ask for some huge amount like $500B dollars (relative to that time). Robbins and the rest of the cabinet pause and then all crack up in laughter at Dr. Evil, saying "it's 1960, that kind of money hasn't even been invented yet, that's like asking for a gagillion, bagillion dollars."

A gagillion bagillion...who knew?

Blizz is Back Baby!

I missed SNL this weekend, it kinda hasn't been the same since my girl Amy P left (your extreeeeeme doucherity!), but fortunately nbc has the vids up on their site.

Samberg as blizzard man is one of my favorite characters. They only have him on when a rapper is on the show. The gig is that blizzard man pretends to be a hardcore rapper until it's actually time to rap...it's hilarious!

"In my Pierre Cardin and Jordache jeans"....hahahahaha

Never a good time

Check out this blog by Krugie here...it's short, sweet and hilarious!

The point he makes (which is a good one) is that some think lower taxes, especially capgains, are the answer to everything. They're not. What's more, it's a veiled opportunistic argument at best. How so? Those advocating for it, aren't really interested in increasing aggregate consumption (which is what they argue), they're interested in keeping more of their money. Don't believe me? Ask anyone who is parroting this supply side argument, when IS a good time to raise taxes and see what their answer is.

The informed wonk, academic or well informed citizen will tell you during war (the simpleton will show their colors by arguing for a flat tax or saying no increases ever...when you hear this stop the conversation immediately because you're talking to an ideologue who will only waste your time repeating fantastical free market memes they've heard somebody else talk about on tv.)

With war being a valid answer, ask this informed person why we didn't raise taxes during the Afghanistan war and then ask them why we didn't raise them during the Iraq war, then ask them how is it we've been in two wars for over 5 years, at a cost of over $7B/mo. and haven't raised taxes. Then ask them again, so when is a good time to raise taxes? If they say during war, remind them that we still have two on.

This meme must go

This meme that is quickly taking hold that WPA (aka public works program, you know the one FDR enacted after the depression to put people to work building bridges and roads) not only didn't serve it's purpose but actually exacerbated the depression is fallacious, erroneous and just plain wrong.

The unemployment rate in 1932 was 23.6%. By 1936 it was 16.9%. A difference of roughly 6.5 points! Govt tried to tighten it's belt, thinking it would continue to subside and it was back to 19% by 1938. We all know the effect of WWII after that....

Any educated or well reasoned person still arguing against the stimulus at this point is either purposefully contrarian or a simple ideologue, either way I wish you well. For the rest of the pragmatist I say this. We can either stimulate demand by giving people traditional out of work benefits such as unemployment, welfare, wic and increasing medicare/aid. OR, OR we can provide jobs, along with which come a sense of pride, worth and contribution.

With chronic extended unemployment expected to reach as high as 12% YOUR JOB could be on the line. If that was the case which would you rather have:

A. A govt created job, where you go to work everyday, have co-workers, have a routine and a semblance of continuity, and pride!

B. A book of foodstamps, a welfare card and a weekly trip to unemployment.

If the cost to the govt is the same or even comparable who would argue against A. I can only surmise those who derive some nominal benefit from subjecting their fellow citizens to the latter.
You'll hear a lot of people arguing Keynes, Mill, Bastiat, Say et al and while on its face their findings are applicable vis-a-vis supply and demand, my point is not to argue the nuances of complex economic theory. My point is that IF the govt is going to subsidize the masses why not subsidize them with jobs instead of welfare, ceteris paribus?

One President At a Time

I'm glad Barack decided to start early, because either the globe has lost confidence in Bush (likely) or he just doesn't care (also likely). Anyway, like I said I feel better that Barack started early.

In The Bubble

When the congressman from California asked the Big 3 CEOs yesterday which of them had traveled to the proceedings in private jets, I thought for sure he had overplayed his hand. Surely, these 3 smart guys and (non?)titans of industry were well aware of the position and time they were in. Coming to congress, hat in hand, begging for $25B less than a month after congress had just doled out $700B on another massive bailout. Surely, they and their staffs realized how bad it looks for companies that are supposedly and arm's length away from bankruptcy to be spending $20k per instance on private jets. Surely Not! I forgot my first rule of debate and totally underestimated the congressman. He knew the answer to the question he asked, but asked anyway for effect. How well did it go over? Well Senator Harry Reid just mentioned the private jets as part of the reason the Big 3 were just rejected by the Dems of all people.

Poor leadership fellas, very poor leadership. This further makes my case that authority, appointment or election do not a leader make.

Book Review: Life At The Bottom

I heard about this book from another blogger and ordered it excited to learn more about the pathology of poorness and how it persist through generations. It was presented to me as an in depth insight into the many components that make up the working and poorer class, including government, family structure, education, culture, expectations and the mentality of the poor themselves. It turned out to be a harsh one sided critique of how 'those darn liberals' are really responsible for allowing criminals, gangsters and vagrants to ruin civilized western society by being soft on crime and not supporting rigorous compulsory education. Needless to say I was disappointed for 3 main reasons:

1. He conflates criminals, vagrants and gangsters with the poor (not used in the pejorative). I don't have to tell you how ridiculous and elementary this strawman argument is. You can't prologue on the poor, make your argument based on thuggery and then hint that the reason poorness persist is because liberals won't do anything about thuggery??? If you think liberals are soft on crime and weak on education, that's fine, but that's another argument, and one that should only be debated if you buy the premise that thugs and poor people are one in the same....methinks not.

2. I'm weary of liberals and conservatives who write or opine, while not admitting that any of the views to which they are predisposed ARE apart of the problem. These problems (poorness, crime, economic collapse, war, joblessness, et al) don't exist in a video game, that is there is no algorithm to which you plug in a set of values and get a right/wrong decision back. So anytime I hear people use phrases like "you conservatives..." or "liberals just want...." I realize the chance for seriousness discussion of the issues has dramatically decreased.

3. Theodore Dalrymple, the author, made no serious effort to include anecdotes or research that opposed or even tempered his hard line view. I like to think that serious thinkers don't do so in a vacuum. There are variables and inputs that must be accounted for, and painting everyone the color of your experiences, regardless of how vast you claim they are, doesn't make much sense, and doesn't help advance a debate.

Next Up: Bastiat's The Law

Katrina = Financial Crisis?

Paul Krugman has a great analogy at the end of this clip that addresses the applicable "moral hazard" meme surrounding subprime and ARM mortgage holders and the bailout. In case you don't know a lot of people are not too excited about helping borrowers who took out mortgages they couldn't afford, especially the ones that were responsible and borrowed within their means.

Krugman, likens those borrowers to the Katrina refugees and the financial crisis to the storm. Artfully pointing out that no one thought it imprudent to rescue those who decided to stick it out.....good point, if you accept the Katrina/Financial Mess parallel.

I really think if there was a time to replace your ideology for practicality and sincerity and self interest it would be now.

How to handle debts

This is too hilarious...

Auto Bailout: Here we go again!

I realize there are a lot of complexities both large and small crowding this argument. I also realize that my view is limited and I’m on the outside looking in. Lastly, I also realize that in the end there is really no right answer, other than something drastic must be done.

Unions: I’m an MBA and a consultant so my natural inclination, needless to say, isn't necessarily with unions. Now, to fully grasp the need for the UAW you have to realize that they and unions in general, came about when workers were treated like crap by their employers, in which case no one can fault them for unionizing. I realize that in the past the UAW has conceded a lot to GM mgmt in negotiations and are probably not interested in doing it again…my advice is they better. We are going to be a in a very bad recession, and even before the economy turned nasty GM wasn’t in the strongest position relative to their competitors, specifically Toyota. The UAW is the LARGEST stakeholder in GM (tens of thousands of jobs), so there really is never much reason to pout. If UAW isn’t getting it in some form of deferred comp or bonus structure for their guys on the other end, when times are good, well that’s the fault of the UAW’s (not GMs) management.

GM Mgmt: Rick Wagoner has been the CEO of General Motors for 8 years, he was admittedly responsible for stifling innovation including the electric and hybrid cars that could have been a HUGE life saver for them right now. And I have to repeat this, he has been at the helm for 8 YEARS. I’ve had fair exposure to senior execs over the last 4 years, and I’ll be the first to admit that there job isn’t all press conference, afternoon golf and marquis jets…it’s hard being a CEO even at firms like Google or Nike where things have been rosy for a while. But the point is he is paid very well to succeed and when you don’t you have to go. He’s a Ivy Leaguer, but unfortunately he hasn’t cut the mustard. The board should have let this guy go a long time ago. Plus a contract is a two way street and part of his job is to look towards the future. HE was the one that signed off on the contract with the UAW, if he didn’t like the terms he should have played hardball…he didn’t, you can’t be angry at the union for holding their end of the bargain. They contracted to build you cars and you agreed to pay them, don’t be upset with them doing what they signed up for.

Govt: Not sure where the bailouts…err…loans stop. I’m concerned about this whole “too big too fail” meme that is rearing its ugly head about once a month now. There are a number of firms in various industries whose tentacles and financial influence is widespread and indirect not only throughout the country but the globe. Are each of these firms too big too fail? What happens in September of next year, when Wal-Mart is nearing collapse do we bail them out? If so, then how do we determine it’s okay to let Target go bust? Are the fictional soon to be unemployed workers from Target and their families any less deserving than those from Wal-Mart of a paycheck? The question is rhetorical, and designed to illustrate that no one likes to hear of people losing their jobs and we know the human toll is grievous. I’m in favor of this mainly because all of the arguments I’m hearing really do underscore GM’s too big too fail status. But part of me hates to reward Wagoner’s poor decision making with 25B dollars.

Oh yeah a little note for all of the Big 3, since humongous gas guzzlers run on loads of fuel, and the world's fuel supply is rapidly deteriorating at the same time the number of motorized vehicles coming online is increasing exponentially it's probably not advisable to continue to try to make these, since it is unlikely that the people who buy cars will want to buy them, due to their cost of ownership (gas)....just a thought, take it as free advice.

Why they won't help...much

I'm hearing a lot about mortgage assistance, foreclosure forbearance and all other euphemisms aimed at helping sub prime borrowers stay in their home. While I'm a capitalist at heart, I do believe that these borrowers, not all of which were excessive, greedy or stupid, deserve some help for making bad decisions. Some of these people, who aren't savvy investors, were simply caught at the bottom of a pyramid scheme, meaning that they purchased property under the assumption that they could either sell for profit or refinance based on increased equity in the future. Is this their fault, YES, do they deserve help, YES.

What I haven't understood, until this morning, is why the banks and investors who owned these mortgages were loathe to renege and help them out. After all, banks want cash not foreclosed property don't they? I mean isn't it easier to say to Mr. and Mrs. Jones that hey we know you owe us $1000 per month, but we can renege and bring that down to $600 or we could foreclose and get $0...as a consultant it would seem like easy advice to my client, that is until this morning.

At the gym I factored in something that I hadn't previously thought about, that is the unemployment rate. More importantly how the banks are viewing the unemployment rate. Most economist and analyst are predicting that the unemployment rate will reach as high as 10%, that's not good. What I think the banks are considering, and what I would also advise that they consider is that if we reach that rate then that means not only sub prime borrowers will be in trouble (as they already are) but a lot of prime borrowers who now have good jobs and decent savings would find themselves out of work and possibly in trouble.

So if I'm a bank and I know I'm going to have to renege mortgages (and take a loss) at some point, do I want to renege with the Jones' who are sub prime borrowers and are already in trouble when the unemployment rate is 6%, which means that when the rate hits 10% they may not be able to payback even on the reneged terms? Or do I want to wait, take my losses with the Jones' and renege with the Smith's who are prime borrowers and are more likely to be able to stick to the renege terms with unemployment less likely to get any worse, meaning that the Smith not the Jones' would be in a better position to meet the renege terms and that I have a greater percentage to make money or lose less than I otherwise would.

I have a suspicion that there is a little bit of this thinking going on. To analogize, it's like investing, do I want to go long on a stock at $10 if it's going to hit $5 before it hits $15, or do I want to buy at $5 and then ride it all the way up?

The Stimulus

Paul Krugman from the Times opines on the forthcoming stimulus. Good article...I recommend you read the whole thing.

My Handout Please

It looks like American Express is next in line for TARP funds. I wake up this morning to the news that they are applying to become a bank...huh, that's interesting.

Either they feel like they can capitalize on the trouble in the existing banking market and eat up market share, or (and more likely) they are in trouble and like companies in every other industry they want a bailout too.

Welcome to your new mess Mr. President-Elect!

The Triangle and The 50 State Strategy

I've heard so much about the vaunted 50 State Strategy that Howard Dean and the DNC put in place to help carry the House, Senate and Presidency this past election, and while I like Dean and believe credit is due, I can't help but compare the talk of strategic success to the Triangle Offense that Phil Jackson in 9 championships in Chicago and LA.

There's one thing though, I think Phil Jackson, and his analgous counterpart Howard Dean, are getting way too much credit. If not for Michael Jordan in Chicago and the Kobester in LA, the Triangle would be just another offense. My beloved T-Wolves could institute and run the Triangle to perfection and still be doormats for the rest of the league. Conversely, they could (and could have) picked up Kobe and would instantly be considered a top tier team, sans Triangle.

It may be clumsy, but the point I'm trying to make is that the 50 State Strategy worked because President-Elect Obama was able to excite, moblizie and reassure citizens in those 50 states the same way MJ was able to elevate and knock down crucial jumpshots in Game 7's.

I'm willing to bet that the 50 State Strategy wouldn't have had the same results if I was starting in place of Kobe.

Vicious Cycle I hardly know you....

Ad nauseam, I continue to hear news reporters, writers and analyst tell the laymen how bad the recession is and how it's only going to get worse unless the government does X, Y and/or Z, and then out of the other side of their mouth they advise said layman to save, stop spending and decrease their consumption. I have a healthy respect for journalism majors but I'm not sure they realize that by advocating, en masse, that the public decrease consumption (buying stuff, eating out, going to the movies, purchasing big ticket goods) they are only contributing to the vicious cycle.

I covered it once here in my depression blog, but I will walk through another example below:

-Ted owns a shoe store
-Molly buys one pair of shoes per month from Ted
-With the revenue from Molly Ted pays his employee Sara
-Ted also pays taxes based on revenue
-Ted's taxes help fund local teacher's salaries
-Molly stops buying shoes because of the recession
-Ted lays off Sara because he can't afford to pay her
-The school lays off some teachers because of decrease in tax base
-In turn Sara and those teachers, like Molly, spend less on "shoes" too

That's a vicious cycle folks. Now on a micro level I'm a big fan of financial prudence, and obviously people need to adjust their budgets as they see fit. However, from a macro level you can easily see how this vicious cycle is more or less self-fulfilling in that everyone cutting back will only hasten layoffs and further cause everyone to cut back more...especially when hyperbolized by our jouranlism friends.

The good news is that there are smart people who do get it. Who, through history and basic logic, understand this cycle and its component parts and are being as proactive as they can in addresing it. NO ONE (latin for not a single person) knows exactly what needs to be done to lessen the impact of the recession, including the changeman himself. If you talk to 100 people in the know you are sure to get 150 different hypotheses on exactly what needs to happen. But the fact that smart, educated and well studied people have cogent and well thought out action plans increases my sanguinity.

Someone's Long Run

I got some really good inside trading advice today from the wonks at CNBC. They told me to buy low and sell high. Imagine that! They also said that in the long run stocks tend to go up, so NOW was a great time to buy, because odds are the market is near a bottom and by some mystical magical powers of wonderment it would only go up.

In case you can’t tell I’m being facetious. Even before my day trading career began in earnest, I was NEVER a huge fan of buy and hold, I absolutely loathe holding stock for more than a quarter (as a long term investment) and I think anyone recommending it is negligent. Think about it. Say you want an 8% return for the year and decide the best way to do that is to with a blue chip, so you pick McDonald’s. Over the course of the year you net $80 on a $1000 investment, good right? Not exactly, there are two problems with this type of thinking:

1. Timing isn’t Luck: MCD stock was actually up 15%, almost double your returns, a quarter and a half into your investment, but because of your buy and hold strategy you missed out on an extra $70. Or, MCD could have tanked after your purchase and without a cogent ‘cut your loss’ strategy in place you played with hope and lost %50.

2. Opportunity Cost: While the $1000 was sitting stagnant in MCD, other companies like Apple, Google and Delta Airlines were all over the place, offering the chance at greater returns on spike.

3. Someone’s Long Run: Remember the downturn is always someone’s long run. At 55, there was a person who, 10 years ago, was advised to invest with Microsoft for the long run, with the promise that Microsoft would be higher, and thus provide significant return when they retired. Surprise! If you bought MSFT in November of 1998 you bought it at around $35. It closed today at $22. Discounting the theory of the time value of money, you lost 37% (if you we apply that theory you lost more). That’s a loss of $370 for every $1000 invested. Probably not what a retiree was expecting.

The last point is especially powerful, again because of all the hype you hear about buying and holding because stocks are so cheap. There is no guarantee that the market will EVER return to its previous levels. What people don’t understand is that the 14,000 point Dow was fueled by the ersatz “housing economy” which was in turn fueled by false money. Assuming that we will naturally return to that level at some unnamed undetermined point in the near future is pure conjecture.

This is kinda scary....

But if you've watched the Couric or Gibson interview or heard her get punk'd then it's kinda hard to NOT believe.

Just a primer for you in case YOU don't know:
1. Africa is a continent
2. South Africa is a country, not a region (i.e. South Boston)
3. NAFTA is a free trade agreement between North American countries.

Whatever you think about Obama and Biden, I think we dodged a bullet with Palin. Intellectualism is a good thing, you need to KNOW stuff.



Update: Why would a Governor need to be tutored on continents vs country, NAFTA or basic structures of government like municipalities?

Top 11 Moments of Campaign 2008

1. Nicolas Sarkozy calling Sarah Palin: This was hilarious. Palin’s hubris shown bright. She actually tries to set it up so that the PRESIDENT of FRANCE is waiting on her (a VP NOMINEE) when she picks up the phone…you gotta be kidding.

2. Joe the Plumber sounding off: Somehow this guy turned into a wonk on all things foreign policy. I always thought you had to study these things thoroughly, have a background and the necessary skill set to be an analyst…silly rabbit.

3. Debate Two - Mr. Puddles and That One: Stewie and Leno had some fun with this one.

4. DNC Acceptance Speech: Obama inspired once again

5. Mike Murphy and Peggy Noonan live mike: Two conservative analyst give us their real feelings on Sarah Palin.

6. McCain gets the RNC nod: Should have happened in 2000, but I think conservatives wanted someone they could control. McCain is a serious pol and a statesmen. I would love nothing more than see him play a major role in reshaping our country…seriously.

7. Obama mistakenly channels Marxy: I know what he meant to say, but he is a pro, he should have said what he meant, which was its okay to help people who are not always in a position to help themselves.

8. Farewell Mr. Bush: Realizing that whoever wins, we get rid of an incompetent and the worst experiment in the history of American politics EVER. Period.

9. Record Turnout: It’s hard for me to understand how anyone could think that MORE Americans voting is a bad thing.

10. The Florida Reporter: Like Joe the Plumber, I guess this reporter saw this as her “big shot.” Unfortunately Biden is too skilled and smart to be sandbagged by a bush league reporter.

11. SNL: Too bad this election can’t go on for another year. Armissen, Fey, Pohler, Hannah, and Ferrell were comic gold.

Undecided? Please stand up.

An undecided voter during May was legit, during September was leaning, and during November is lying. The AP reported that 1 in 7 voters are persuadable and still haven’t settled on a candidate. As my UK friends would say “bullocks.” 14%? I think this is way too high and have a hard time believing the number is anything less than 3%. I’ve got two theories regarding this “myth of the undecided” and the specious claims you’re hearing on your TV every time you turn it on.

1. Like I mentioned before they’re lying, plain and simple. Undecideds are paid to participate in studies and election polls. They are paid by the campaigns, the media and independent organizations who service the campaigns and the media. It doesn’t follow that a person identified as a likely voter (determined heavily by whether or not they have voted [read: drawn a conclusion and decided] previously) would be this indecisive and slothful in drawing a conclusion, especially in an election where the starkness of candidate couldn’t be any more helpful in necessitating a decision, whatever candidate you back. It does follow that with this campaign easily setting the record for most money spent voters would readily self identify as an undecided to feed on the largesse. Also people like to feel important, I’m not sure where this falls on Maslow’s but empirically I’m sure you will agree. And there is no better opportunity than to legitimize your own self-importance than playing tie-breaker in an historic election.

2. A person turns on the television, picks up the paper or goes online. The medium, be it Newsweek, MSNBC, wsj.com, provides content to that person. The advertiser pays the medium different sums of money based on how many persons view the content. So it is in the interest of the medium to promote stories that keep people tuned in. There is no more compelling, nor tried and true, formula than the one point ballgame hanging in the balance with a myriad of variables that can determine the outcome.

Four years ago I had a professor tell me that they were undecided a week before the election and literally wouldn’t make up their mind until they were inside the voting booth. While not impossible, I seriously doubted the probability of their contention being true. However, I didn’t doubt their desire for self-importance, and the joy the seven days of being the center of attention brought them.

Paul Wellstone....My Guy!

“Acting now on our own might be a sign of our power; acting sensibly…in concert with our allies and bi-partisan support would be a mark of our strength.” -Paul Wellstone

October 25 was the anniversary of the death of one of my political heroes and one of the greatest senators the great state of Minnesota has ever seen, Paul Wellstone. I loved this dude, and many, many, many other Minnesotans did too. For me he literally epitomized a fighter and was TRULY always thinking of the little guy.

At the time of his death he was locked in a close re-election battle with Norm Coleman. Wellstone, like many other politicians (R or D) at the time, had questions and concerns about Bush’s leadership and wartime skill set and didn’t believe a war with Iraq was necessary. What’s more he was leery of the specious nexus being concocted by the administration and marketed to the masses. However, unlike those other politicians, Wellstone did what he thought was (and turned out to be) right, by voting against the resolution.

If you recall, at the time the administration had successfully marketed the ‘if you’re against what Bush wants to do then you’re against America’ conditional to many Americans. It was this successful marketing and Wellstone’s rock solid ethos of doing what you thought right (essentially rejecting the false conditional) that would have likely cost him re-election if he had lived. Paul Wellstone was a hero for me, because he was NOT scared to run to when everyone else was running from.



With the Bush debacle in Iraq it turns out Wellstone’s judgment has proved prescient and his wisdom and decision making have been vindicated. This is a fact that no one, not even the opportunistic, slick and slippery Coleman can deny.

It’s sad that more of our politicians don’t have these true convictions. If Hillary Clinton had voted against the war in 2002 (like she wanted too) instead of trying to position herself for 2008, by showing she was hawkish she would have mopped the floor with Obama and she would be on her way to the presidency…if she had had conviction.

It’s sad that more of our politicians don’t have these true convictions. If John McCain had stayed in opposition to Bush on many of the issues which he was originally right on, like immigration, tax cuts, ideological conservatism and religiosity instead of trying to position himself for 2008, by being his best friend he would have been WAY up on Obama and a President McCain would be on deck.

There was a speech that Obama gave on change…it was to a high school class back in 1991 and it was eerily similar to his stump speeches some 15 years later. Conviction. Maybe the country is ready for someone who has conviction and not wishy washy political ethos. I know Minnesota was ready for Paul Wellstone.

Paul Wellstone…my guy!