August 04, 2010

That's just horseshit...

Peter Boockvar posted this over at The Big Picture. It was the last sentence that caught my eye...

One hand, higher savings will put a crimp on consumer spending which of course makes up a majority of US GDP but on the other, higher savings is the fuel for investment which helps to finance businesses everywhere that are getting crowded out in their borrowing by the enormous needs of the US gov’t and some European ones.

Yeah, except for this and even this which make it pretty clear that in the real world, where we live, there's a massive gap between demand for fixed income (of every flavor) vs a limited supply of fixed income that even the government's massive issuance isn't able to fill. So interest rates stay low while investors fall over themselves trying to buy incrementally higher yields. So, yeah, not so much with that particular ideological talking point.

I can't fucking wait to hear that from that cocksucker Judd Gregg. Or that old, senile motherfucker from Arizona who has started defending the tax cuts he voted against, just to get back at the black man who beat him.

It's time we start calling these assholes out for their lies and bullshit, especially when they're advocating a return to treasonous economic policies that will bankrupt this country. Peter should fucking know better and the politicos are just opportunists.

Posted by mcblogger at 09:07 PM | Comments (0) | TrackBack

June 12, 2010


Seems that Brits have their knickers in a twist about the USA’s criticism of British Petroleum. Some of them claim that this “anti-British rhetoric” is causing a severe drop in the company’s stock and that no dividends will be paid out to UK pension funds. Apparently, pensioners will be thrown out on the streets, and unable to have their pudding because they can no longer afford to eat their meat. Curse those damn socialist and their redistribution of wealth.

We sure didn’t hear this whining when we saved their asses from Hitler and the Nazis. If it were not for us, the Brits would be speaking German and mass producing Volkswagens.

Who needs these snotty tea-sippers? Are they too good for natty light? Hell, they don’t even allow guns. Then there is that uppity accent. We should kick all the Brits out of this country, or at least throw them in the Gulf to soak up the oil.

Now is the time to change our vocabulary to freedom muffins, freedom peas, freedom thermal unit, and you put freedom on the ball. We’ll show those limeys. Also, heard a rumor that Osama Bin Laden is hiding out in Buckingham Palace.

Yeah, this is silly. Just like the French bashing leading up to this country’s invasion of Iraq.
Like then, oil is the catalyst for rancorous rhetoric and rude behavior between allies.

The most vocal public figure is gaffe-prone conservative Mayor of London Boris Johnson who is considered in many quarters, including the right, as a buffoon. He rode to victory behind a brilliant strategist who kept Johnson’s mouth shut, limited his public appearances, and was successful in getting out the vote.

Since Johnson seems to be manipulated by conservatives, and his anger is almost exclusively aimed at President Obama, would it be too outrageous to suggest that he is a proxy for GOP operatives across the pond who are whispering in his ear.

Posted by Captain Kroc at 09:59 AM | Comments (0) | TrackBack

May 14, 2010

The evolution of privacy on Facebook

One of the many reasons why I'm less and less interested, daily, in Facebook.

Posted by mcblogger at 12:20 PM | Comments (0) | TrackBack

May 13, 2010

Reg Reform : What fresh hell is this?

Sen. Lincoln's bill to spin off derivatives businesses of the banks survived yesterday, despite the efforts of Saxby Chambliss and the Republicans. Obviously, there are going to be some modifications to this proposal, probably something that allows the banks to keep derivative trading as part of the bank. What's making me happy is that the central thrust... exchange clearing, collateral requirements and some real transparency... will likely remain intact which does exactly what the market needs, create a stable insurance market for financial products. While the banks profitability will be reduced somewhat (they've been raping clients on derivative trades for decades on the open and the close), this will create a much bigger more stable market that will ultimately end up serving all participants well. Frankly, that's what makes the Republican argument so silly...

In floor debate, Mrs. Lincoln defended her tough rules. “The Chambliss amendment does not meet the test of what our markets require,” she said. “It is a stark reminder that if we do not act boldly in the face of the near collapse of our economy, tragic Wall Street abuses and abysmal regulatory failures, we will all suffer the consequences.”

Mr. Chambliss, echoing arguments from some bankers, warned that the legislation would harm businesses and drive derivatives trading to overseas markets outside the reach of American regulators.

“Our approach on transparency, on clearing, on end users, on capital requirements and on trading mandates are much more appropriate, much more reasonable, much more business-friendly,” he said. “My amendment will ensure that Main Street businesses will still be able to appropriately use derivatives in hedging their daily business risks.”

Sure. As an American business, I'm totally going to go set up a trade to hedge my risk on something with an unregulated (possibly undercapitalized) foreign bank and which I will only be able to settle with that bank. I will also be fine with the bank posting no collateral. Sen. Chambliss, that's just fucking retarded. Of course I won't; I'll enter the trade transparently, I'll know my counterparty has posted collateral and I know I can settle with an alternate party if needed. This argument is just bone headed dumb because it's like insurance... would you rather buy insurance from a respectable company that has an agent with a local office or from some guy in a conversion van in the parking lot at HEB representing a company that's overseas?

Sen. Lincoln deserves a ton of support based on this... what she's proposing would have stopped the collapse of AIG and saved tax payers $180 billion. Sure, the FP division was effectively unregulated, but with these regs, they wouldn't have been able to so egregiously cut their own throats.

There was a minor bit of comedy, courtesy of Republican Senator Brownback

In an unusually aggressive foray into the Senate floor debate on Wednesday, President Obama issued a statement in opposition to another Republican amendment, by Senator Sam Brownback of Kansas, that would exempt auto dealers from coming under the purview of a proposed new Consumer Financial Protection Bureau.

REALLY?!?! You want to exempt used car dealers? Is it because everyone knows they're paragons of integrity and excellent business ethics?

In his statement, Mr. Obama said the amendment would create a “special loophole for auto dealer-lenders” that “would carve out a special exemption for these lenders that would allow them to inflate rates, insert hidden fees into the fine print of paperwork and include expensive add-ons that catch purchasers by surprise.”

Thank you, Mr. President.

Todd Hill over a BOR has been interning with the Financial Services Roundtable and he's had some fun learning about the industry and reg reform. I think he's also come away with an appreciation for just how many different ways we can slice and dice an asset. He's done a series on reg reform (here and here) that's worth checking out as a primer ( I know I sometimes don't explain things too clearly). I wanted to just mention one thing with regard to Too Big to Fail (TBTF)...

While I think the asset caps are a good idea, there's a misconception regarding TBTF that somehow you can allow firms with smaller balance sheets to go into bankruptcy without negative effects on the rest of the banking system. That's false. The problem in 2008 wasn't that Bear Stearns or Lehman were too big to fail, it was that their failure would have had serious impacts across the board because of two big issues that are unlikely to change with any regulatory reform...

1) Derivative risk...both wrote a ton of derivative business and both had a lot of derivatives written on them with specific triggers related to credit events.
2) Mark to Market... when all banks are carrying the same or similar assets, if one large bank goes into an uncontrolled bankruptcy (where it must be liquidated rapidly), those assets will be selling at distressed prices. However, because of mark to market, those firesale prices become the market clearing price and everyone must change the valuation used for accounting purposes of the same or similar assets on their books. Suddenly, from just the collapse of one firm, you have gigantic holes in the balance sheets of 20 firms.

It's the second one that's a real killer, one of the reasons I really liked the bank funded workout fund since it could be used to effect an orderly dismantling of a firm. It's also one of the reasons we need a long term solution to FAS 157 that creates a concrete valuation model for illiquid or distressed assets based on performance and cashflow.

Until we get a real handle on accounting issues, TBTF is going to continue to haunt us.

Posted by mcblogger at 12:12 PM | Comments (0) | TrackBack

May 08, 2010

The jobs report and where we move from here

Don't kid yourselves, yesterday's jobs number was a blowout. Expectations steadily ratcheted up Thursday from a 140k increase to a 190k increase and the number still blew it away by 100k jobs. Add that to the increase in the February and March numbers by 120k and we now have much stronger job growth coming into this recovery than anticipated. The even bigger news is the household report which was FAR higher.

Which means shit like this ain't gonna fly much longer...

"Companies are still using productivity growth and cost-cutting as a major part of their business plan," said Joshua Shapiro, chief U.S. economist at forecasting firm Maria Fiorini Ramirez. "They are still being very slow to bring back people. Labor costs won't be an issue."

Nowhere is this more evident than at small businesses such as AlphaGraphics, where Alcanter is one of eight full-time employees, down from 12 two years ago. For those who remain, the modern-day mantra of "doing more with less" has changed the rhythm and intensity of daily life.

Brenda Middleton, 40, has been with the company for seven years, long enough for it to feel like family. It hurt when she saw four co-workers leave last year, three of them in layoffs. That's when she noticed the change in workload.

"It was a little bit of whiplash effect — you got used to doing less and now you have to do more," Middleton said. "When we did have to downsize, the people that remained were the ones who could wear more than one hat."

A few weeks ago, a corporate adviser visited to offer tips on efficiency. Middleton said the consultant observed her from afar and then told her that she was quick.

"I have to be, to get my work done," she replied.

The most disturbing thing to me about this recession has been the unnecessary depth of the cuts made in employment. Companies went way overboard with downsizing and have managed to muddle through by making retained employees work dramatically more. While employers can still replace employees, it's expensive. Employees, however, are already finding it easier to tell employers that they want a better deal or they're leaving.

Now, since we still have a high unemployment rate, it's unlikely that any real wage growth will occur since existing workers are already maxed and a raise won't result in more work. So, employers will continue hiring new people but even that will drive economic growth and eventually (as long as tax policy changes) lead to the holy grail, wage growth.

Now everyone is going to freak out about inflation and demand that the Fed raise interest rates...those people could really do with a nice tall glass of STFU. Here's what I'm looking at:

1) There is a eurozone debt restructuring (not a crisis, despite the media BS) problem which is driving investors into US assets. This is driving the dollar up, relative to the euro, but relative to other economies it's staying stable so it shouldn't hurt exports. It is, however, helping out nicely with oil prices which have come down aggressively which puts a huge lid on potential inflation.

2) Employment is still slack between full and current which means no wage push.

3) While growth is increasing and accelerating, there are still massive restrictions on credit and the balance sheet in the US, on the consumer side especially, continues to delever.

In other words, until we reach 4-5% unemployment, there's no reason to even think about increasing rates to slow growth.

So what does all this mean? For starters, it should be obvious that Republicans who poopoo'd the stimulus and other job saving programs were, you know, wrong. Just like we knew they would be. We also know conclusively that yes, the stimulus was too small and has taken too long to get into the economy, which was exactly what I and others said a year ago when Democrats caved to the Republicans demands for tax cuts vs. spending (here, here, here, here, here and here). Even still, despite it's diminutive size, if we'd just concentrated the entire package into spending, we could have had the recovery in employment long ago. Just so we're crystal on this, Republicans played politics with the entire country and as a result, caused a lot of people to stay out of work longer than they should have. And the President and Democrats let it happen for bipartisanship. People suffered to two political parties could work together. Doesn't that make you feel good?

At last it seems like the D's have finally realized that working in any way with the Republicans is just doomed to failure which is good news for them going into November. It's also going to be real clear, real soon that Republicans have been full of shit on economic issues since Reagan.

Finally, since there's been so much BS about the deficit, it's worth noting that the majority of the non-war, non-stimulus deficit is nothing more than a loss in tax revenue as a result of people out of work and extended benefit claims. With people going back to work, tax revenues go up and benefit claims go down. In other words, we may not have a deficit too much longer. Maybe then we can start paying down some of the Republican debt that we accumulated during the Bush years.

Posted by mcblogger at 03:49 PM | Comments (0) | TrackBack

April 30, 2010

Criminal investigation opened into Goldman Sachs

Sorry if you bought long, but I did warn you.

Posted by mcblogger at 03:02 PM | Comments (0) | TrackBack

April 27, 2010

The Goldman Sachs Fun Fest : Explaining Hudson Mezzanine

Oh, man... watching the Senate hearings on GS actually makes me think that they may not be long for the world. One of the lines of questioning today regarded a transaction known at Hudson Mezzanine, specifically if GS misrepresented it's interest in the transaction. Here's what went down from what I can see...

GS had built a lot of structured credit products, based at the end on mortgage backed securities. These trades were tranched with a certain percentage being rated AAA and down until you got to the BBB level, the equity, which was usually no more than 10% of the total product. So, out of a $2bn CDO, only $200 mn might be equity. Now, the problem for GS was that they couldn't give the equity (also known as the mezzanine layer) piece away and but it had to exist so they could unload the other $1.8 bn in mortgage... GS just got stuck with it. It's toxic waste because it takes the first losses when defaults rise.

Now, GS was sitting on, let's say, $2bn of this toxic waste so it built a synthetic CDO, worked with the rating agency to get most of it rated AAA and then to offset their risk sold it to their customers. But, yet again, they were stuck with the equity... but that didn't matter since someone bought the other $1.8 bn of the CDO and that cash now sat there ready to be claimed by GS when everything went south.

So, net, Goldman Sachs with this trade reduced it's loss from $2bn to only $200mn. Of course, they sold the shit to their customers but that doesn't appear to have been a major concern...

The subcommittee pointed to these deals as examples of how Goldman put its own interests ahead of clients. Mr. Levin read from several Goldman documents on Monday to underscore the point, including one in October 2007 that said, “Real bad feeling across European sales about some of the trades we did with clients. The damage this has done to our franchise is very significant.”

As the mortgage market collapsed, Goldman turned its back on clients who came knocking with older Goldman-issued bonds they had bought. One example was a series of mortgage bonds known as Gsamp.

“I said ‘no’ to clients who demanded that GS should ‘support the Gsamp’ program as clients tried to gain leverage over us,” a mortgage trader, Michael Swenson, wrote in his self-evaluation at the end of 2007. “Those were unpopular decisions but they saved the firm hundreds of millions of dollars.”

The Gsamp program was also involved in a dispute in the summer of 2007 that Goldman had with a client, Peleton Partners, a hedge fund founded by former Goldman workers that has since collapsed because of mortgage losses.

According to court documents reviewed by The Times on Monday, in June 2007, Goldman refused to accept a Gsamp bond from Peleton in a dispute over the securities that backed up a mortgage security called Broadwick. A Peleton partner was pointed in his response after Goldman refused the Gsamp bond.

“We do appreciate the unintended irony,” wrote Peter Howard, a partner at Peleton, in an e-mail message about the Gsamp bond.

During the hearing much was made by the GS folks of management desire to bring them net neutral on their mortgage related investments, neither long nor short. It's interesting that they chose to do this by, effectively, blowing up their customers with what they knew were going to be worthless securities.

Posted by mcblogger at 02:35 PM | Comments (0) | TrackBack

April 20, 2010

And now the story changes...

As you can probably tell from the post on Friday, the whole Goldman Sachs thing really makes me sick because it's just so goddamn gross. Of course, it also makes me really happy to have sold my GS months ago (and no, it wasn't because of this... it was because of the VAR in their prop trading)

  • Friday afternoon GS released a statement that said (essentially) the SEC was full of shit, Paulson had nothing to do with the construction of Abacus 2007-AC1 (which was the vehicle through which Paulson made his negative bet on the value of mortgage securities) and "Oh, by the way, we lost money on that trade, too... and now we're being persecuted"!

    Of course, it all fell apart yesterday when GS was forced to admit that yes, indeed, Paulson had a part in the construction of AC1. While it's true ACA, the independent management company (wink, wink), did make the final decision on the reference portfolio on which AC1 would be based, they did it with a lot of input from Paulson which GS mislead them into believing was the sponsor on the deal. Sponsor is a fancy way of saying he was the one buying the riskiest piece, the equity tranche, which also happens to be the smallest and the buyer of that usually gets to help with the construction of the reference security portfolio and credit structure. Problem is, he didn't... GS got stuck with that piece because no one wanted it. Paulson, greedy fuck that he is, wasn't even as smart as Magnetar in taking a small piece of the long side of the trade just to give the appearance that he wasn't out to fuck the world until it begged him to stop.

    Oh, and had someone not taken the equity it would have been unfunded which might have spooked the other investors or, as they should be called in this trade, the patsies.

  • Speaking of the mooks who bought this shit, I had a chance to read the prospectus and learned that nothing was hidden from these people, aside from Paulson's involvement. Which means, from my perspective, these fuckers deserved what they got. Why? These folks were allegedly sophisticated and savvy investors, managing billions in, for example, pension funds. The couldn't take the time to do the due diligence on the reference securities? Forget that, as most of the structure was rated A anyway (and none of it really was)... but they never even bothered to ask who was on the other side of the trade? Remember, for a synthetic CDO to exist, someone has to put up a mountain of cash (the long) and someone has to pay quarterly premiums (the short) which flow to the long through Credit Default Swaps. If a credit event occurs, all the money goes to the short. If it doesn't, the long gets payments for as long as they continue and then they take their money back eventually when the short finally stops paying.

    AND NO ONE BOTHERED TO ASK, WHO IS SHORT THIS TRADE?!?!?! This part actually pisses me off more than the due diligence because, frankly, you gotta be goddamn stupid to not even bother to ask the most basic of questions (I'm looking at you, ERS and TRS management... you guys better be concerned because someone is going to poke around and find out if you morons planted money in synthetics as well).

  • It was only a matter of time until folks came out of the industry wood work, like cockroaches, to defend GS. And upfront was Henry 'InternetStockPimp' Blodgett. Rather than link to what asshat said, here's a post over at Brad DeLongs that's very much worth the read just to see someone beat up on Blodgett.
  • The problem was, is and will continue to be that this was nothing more than a vehicle to funnel money to the short side... it was a rigged bet that dramatically increased the size and scope of the financial crisis. These investments were created not to increase market liquidity but instead to suck it up, into the hands of hedgies like Paulson and the peeps at Magnetar. Normally, I'd be congratulating them on their ingenuity but in this instance, I'll call them crooks because that's what they were. All the kvetching about 'having a long position' and 'losing money, too' is bullshit... they were bias short (meaning they stood to make far more on the short than the long). Further, by acting as or, in the case of Paulson, alluding to being the equity in the trade means that they were engineering not only the nature of the trade but also putting just enough into it to defraud people into thinking their interest was legitimate and matched that of the other investors.

    It was a classic confidence game and yeah, it should be prosecuted under RICO. Which gives the US Attorney in Manhattan something fun to do over the summer.

    Just as a side note to explain my interest in all this, I work in banking for a depository. This kind of crap pisses me off but that's not my only interest... The push on the Republican side to privatize our infrastructure in Texas is leading us down this same road with many of the same players. I'd love to think that our elected and appointed officials are smart enough to smell the sourness of a trade but like every taxpayer in this state, I can't afford that luxury. That and I already know what they gave up in negotiations on infrastructure projects the first time around. Republican officials in Texas are never happier than when they are giving away the store to a private company for pennies on the dollar and making sure that taxpayers get stuck with the difference.

    Posted by mcblogger at 09:21 PM | Comments (0) | TrackBack

    April 16, 2010

    Could end up hurting much more...

    So the SEC brings a civil suit against Goldman Sachs for defrauding investors. Cutting through the bullshit, the suit is based on the allegation that GS intentionally misled investors in synthetic CDO's (collateralized debt obligations) they sold as to the party that actually structured what was in the CDO . Honestly, I have real problems with all this because it was a synthetic trade which, frankly, shouldn't have been allowed in the first place.

    Breaking down the news, there's one critical piece undisclosed... did investors know the CDO was synthetic? In that event, GS would appear to have an affirmative defense since the very nature of a synthetic CDO is that someone has to be short the reference security (in this case, actual CDO's made up of low grade debt instruments... in this case, slices of some deep sub-prime mortgages) for investors IN the CDO to make money. It's an insurance trade, so one party pays premiums (the person short the reference security, in this case John Paulson) which simulate the actual payments which were being made on the reference security to the party who buys the CDO. If the value of the reference security then becomes worthless, then the buyers are wiped out and the short seller makes all the money. If the reference security doesn't lose value, then eventually the short seller will be wiped out and all the money will be transferred to the buyer.

    If buyers knew the trade was synthetic then they can't be upset about no one telling them the counterparty was a short seller (simply put, it's implied by the nature of the trade and the security). They can be upset and can take action in only one circumstance... if they lied about who selected the reference securities in the CDO.

    I don't like the very nature of a synthetic security since it's underlying basis is, frankly, a side bet. It's gambling using a financial instrument created solely to make the bet itself possible. It's also responsible for dramatically magnifying the losses experienced by investors all over the world. Instead of having just one $1 billion pool of mortgages default and investors losing money, there were 20 other synthetic pools that mirrored the first.

    Finally, if the investors DID know this was a synthetic trade, I have no sympathy for them. They were stupid to have purchased it in the first place. At the end of the day, they could have done their due diligence and asked Goldman for a list of the reference securities and investigated them to find out they were all trash. But they didn't so I could give two shits about them and their managers.

    Here's one thing no one is paying much attention to...

    The SEC case increases pressure on the Justice Department, which has been investigating many of the same Wall Street firms to look for possible criminal wrongdoing at the root of the financial crisis.

    If there is a criminal complaint filed and the result is either a guilty verdict or a no contest plea, GS can lose it's primary dealer status in US Treasury securities. That would be a devastating blow to the company since dealing in US debt is a lucrative business.

    Of course, the obvious effect is that many of their customers will think twice before accepting a trade from GS wondering what's really behind it. It's the optics of it all that can cause real, nasty, long term problems.

    On a political note, you gotta be wondering how long it will take the stupid Republicans to reverse course on their fight against regulatory reform...

    Posted by mcblogger at 03:47 PM | Comments (0) | TrackBack

    April 14, 2010

    This is what failure looks like


    Microsoft, even with all that money and all those smart people, still can't JUST DESIGN A FUCKING PHONE THAT PEOPLE WANT. They both look cheap and the focus is going into the trendiest thing out there, social networking, which is actually in mid jump of the fucking shark and is already being done (better) by other phones.

    Microsoft, why not just buy Palm? If you're going to be an also ran, why not at least have a decent platform that developers respect? It's pretty clear it would be a matched pairing with regard to hardware since your devices look like they suck and they Pre certainly does.


    Posted by mcblogger at 11:49 AM | Comments (0) | TrackBack

    March 24, 2010

    Whine on, executives

    It's long been an article of faith that executive pay, which has been growing at a breathtaking clip over the last 30 years, is earned (deserved, even!) because only these people are uniquely talented and able to do this job. Without them, our nations firms would all collapse.

    As we all know from the last 4 years, that's wasn't so much right. And when the federal pay czar, Ken Feinberg, decided to implement pay limits at companies that received federal money, we thought this was not only a brill idea, we actually waited for the indignant flood of incompetents who would flood out of the companies, only to be replaced by people a whole lot cheaper.

    As it turns out, that didn't happen.

    “For months, Wall Street banks and the troubled automakers feverishly protested that their top executives would flee if they were not lavishly rewarded for their talents. New data, however, suggests the departures were more of a trickle than a flood.

    Of the 104 senior executives whose pay was set by the federal pay regulator in the last two years, 88 executives, or nearly 85 percent, are still with the companies even though their pay was drastically cut back, according to people briefed on the government data.

    The relative stability, at least within the executive suite, suggests that a soft job market, corporate loyalty and personal pride helped deter the feared management exodus at the companies hardest hit by the pay rules.”

    I'm tired of lousy, overpaid, petulant management. Rise with me, fellow shareholders, and let's ask Ken Feinberg to serve on compensation committees for companies all over the US.

    Posted by mcblogger at 08:48 AM | Comments (0) | TrackBack

    January 19, 2010

    Thank you, Kenneth Feinberg

    It's always refreshing when something works. President Obama's pay czar decided that some at AIG didn't need to make more than 500k per year. Some of those people wrote him a letter and said they'd resign and pull far more in severance. Feinberg looked them in the eye and said, leave.

    So one of them resigned and as of today, the company has not collapsed. As for whether or not she'll get her full severance pay out, that's still up in air. I really hope not... because she wouldn't have gotten it in the event of a bankruptcy (she would have been a WAY junior creditor).

    The reality is that none of these people are too valuable to replace

    Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University, said no AIG employee was irreplaceable.

    "We have been duped into thinking that these AIG employees have some kind of secret code that no other employee could discover if they were hired to replace them and therefore they are able to basically hold the company ransom," Hurley said.

    Goddamn that do sound familiar, don't it? Sorry, couldn't resist the gratuitous high-five with myself from almost a year ago. As if that wasn't enough, here's the kicker to the whole thing (and I'm not really happy about this); Companies can pay more than the limits he sets but they have to do it in stock which really sucks for existing shareholders who are about to get diluted. As it turns out, the folks at AIG don't like the idea either. Why? Excellent question!

    Or there was A.I.G.’s behind-closed-doors argument against Feinberg’s directive to pay its top people in large part with A.I.G. stock. The company’s reasoning? That the stock — trading briskly at the time at around $40 on the New York Stock Exchange — was actually worthless.

    Reality is always way better than fiction, don't you agree? Wouldn't you also like to see some of these fuckwits out repairing a sidewalk with a sledge? Let them see what real work feels like and pays.

    As I write this post, this song popped into my head...

    I guess that means I better, you know, stop before I do something rash.

    Posted by mcblogger at 12:52 PM | Comments (0) | TrackBack

    January 08, 2010

    Dell to release shitty phone

    Dell wants badly to be thought of as a maker of quality consumer electronics. Anyone remember that POS jukebox they put out a few years ago?

    Posted by mcblogger at 09:44 AM | Comments (0) | TrackBack

    December 31, 2009

    Time Warner tells Rupert Murdoch to get bent

    Oh, noes!

    News Corp. said it isn’t likely to reach an agreement with Time Warner Cable Inc. and expects to pull the Fox broadcast network from the cable system when their deal expires tomorrow.

    “We deeply regret that millions of Fox customers will be deprived of our programming,” Chief Operating Officer Chase Carey said today in a memo to employees. “We need to receive fair compensation from Time Warner Cable to go forward with them.”

    At first, I was a wee bit concerned. Then I realized I only watch Fringe and I can catch that online. Or on broadcast WHICH just so happens to be the point here. See, TWX isn't charging me for what I can get for free. They're charging me for a good clean signal, not for the content on Fox. Fox makes that money when they draw in viewers
    and then sell ads. With that in mind, this seems like a shakedown.

    Go ahead, Time Warner, and pull the plug! We'll either get the content for free or Fox will lose some viewers.

    Posted by mcblogger at 09:11 AM | Comments (0) | TrackBack

    December 02, 2009

    Fun at the Times

    A recent lawsuit makes it clear that despite the rhetoric about free markets and capitalism, the Washington Times is a failure as a commercial enterprise.

    Too harsh? How the hell would YOU describe a newspaper that can only survive if their parent organization contributes $40 mn per year to it's operation.

    Posted by mcblogger at 09:37 AM | Comments (0) | TrackBack

    November 30, 2009

    Two data points, one conclusion...

    First off, more people were out shopping on Black Friday this year. However, on average they spent less than last year. Not the end of the world and aggregate sales should be higher... but it paints a grim picture of a still distressed consumer.

    Next up, banks are taking cheap money from depositors and the Fed and then investing it in US Treasuries. Why? Well, banks survive off fees and spread income. Spread is the difference between what banks pay depositors (or the Fed) and what they get in terms of a return on the money they lend. Since they are essentially paying 1% or less to depositors, they can make a risk free return by investing in long term Treasuries at 3-4%. It's easy because for the foreseeable future, there is no reason for banks to expect short term rates to spike higher which would destroy the spread.

    So what to do? One idea is to jack interest rates to 2% which would keep them low and 'force' the banks to stop with the treasury trade. Of course, what it would really do is drive up longer term rates which would stifle the recovery in housing and equities destroying what little of the wealth effect has been rebuilt. So, in other words, that's a stupid idea.

    What we need to do is nationalize one of the big banks and Geithner needs to let the others know, in no uncertain terms, they're next if they don't start lending to consumers and businesses. Only then will they finally act to restore credit to the economy.

    Posted by mcblogger at 03:41 PM | Comments (0) | TrackBack

    November 20, 2009

    The inestimably stupid Dick Armey

    OMG. I wish it was OK to beat stupid people senseless... if it was, I'd LOVE to introduce that fucktard Dick Armey's face to a hardcover copy of the Community Reinvestment Act since he's decided it (and not poor decision making at the banks) was the reason the banking industry melted down last year.

    I guess Dick doesn't understand how easy it is for $600bn in liabilities to crush a mere $20 bn in equity (in the case of Lehman).

    And thank you, Dr. Krugman, for nailing his ass. Yet again.

    Posted by mcblogger at 11:22 AM | Comments (0) | TrackBack

    November 13, 2009

    Reforming the financial system

    A little something worth a read... about the slow start in the investigation of the credit collapse and ensuing recession. Food for thought for those who want a faster timeline. Granted, this isn't the 30's so it will go faster. But we need someone with teeth leading it who can actually get Congress to act. That, no doubt, is where we'll step in.

    Posted by mcblogger at 12:07 PM | Comments (0) | TrackBack

    October 27, 2009

    More Mortgage Madness

    Much has been made about the Landmark ruling in KS. It needs to be remembered that all the legal maneuvering still resulted in the foreclosure of the home to satisfy the first lien. At issue was the second lien which Sovereign did not properly perfect, at least not according to the KS supreme court. The decision will likely be altered when Sovereign properly proves it's interest, but it'll be futile since I doubt the sheriff's sale of the property resulted in enough proceeds to even begin to satisfy the first lien. Still, it will straighten out the relationship between owner of the obligation (Sovereign) and their agent (MERS).

    MERS is never, in my experience, a party itself in the event of foreclosure so I don't know where that's coming from (this may be more common in other states but it's not really here). Further, servicers retain the right, on behalf of security holders and acting as their agents in fact (i.e., in their capacity as servicer) to foreclose even on homes that have mortgages that were securitized. MERS usually doesn't even act as a document custodian, that's usually the servicer. MERS just tracks the physical location of the collateral package documents, the servicer on the obligation and who owns the obligation, currently. In the event the note is securitized, the owner would be Fannie Mae Trust 1998-02 with 1998-02, being the second securitizion of 1998 issued by FNMA and held in trust for the investors. The investors in 1998-02 would not have an individual interest in any of the mortgages, they would have an individual interest in FNMA Trust 1998-02. It would be the servicer, acting as agent for FNMA Trust 1998-02,
    that would foreclose. And they'll have no problem doing it. They'll do it because their servicing contract requires them to keep making payments to the trust... even when those payments aren't received from the borrower. The charges people pay for late payments aren't just padding profits.

    The reality, however ugly, is that until the note is satisfied people are not homeowners, they are mortgagors. Since the mortgage is a debt instrument, it does not entitle the holder to an equity interest in the property (it's not a joint equity instrument) so if someone wants to sell a home for more than the current balance due on the note, they get to keep the difference due to their interest as mortgagor. If the home sells for less than the note amount, the borrowers owe the difference to the mortgagee. They signed the contract and they bear ultimate responsibility for it. It's an installment sales contract, like a car note. Everyone is pretty comfortable with the fact that a car is worth less than you pay for it the minute you drive it off the lot. We're not used to it with housing because, on balance, housing prices usually go up. But not always.

    This is going to sound nasty, but I have little sympathy for homeowners or for investors in all this. And I have real problems with the originator fraud issue as that is usually the complaint you hear in the event of foreclosure. When you dig down, you find that all documentation was executed properly and that the customer understood, per affidavit. They wanted the house and glossed over the terms of the obligation they were taking on. Worse, they were usually (on the west coast) counting on the greater fool theory. GFT states that the value of an asset is irrelevant because at some point in the future, a greater fool than you will pay you more for it. That was a HUGE part of the speculative bubble and big part of the loss mitigation problem we face now. So, no, I don't really have a lot of sympathy for the asshole who bought the McMansion on the 2/28 ARM thinking he'd sell it off for $200k more within the 2 year fixed period. He wasn't buying a house, he was going all in on red 21 at a roulette table.

    As for the investors, no one did any due diligence to figure out what should have been obvious... the insurance policies (the CDS) on this shit were juicing the credit quality and no one asked if the issuer of the policy had
    the wherewithal to pay in the event of a claim. Here's the simple conversation that should have taken place between the investor and the salesperson pushing the CDO...

    S: Oh, it's a really good package, filled with safe home loans. You know people always pay their mortgage!
    I: Actually, I don't. People can walk away from a house easily if they have little down.
    S: Maybe, but it's never happened. Besides, we have the entire issue guaranteed.
    I: Really? By whom?
    S: I think AIG is the CDS counterparty on this one.
    I: Really? How are they accounting for that one their books?

    And that's where things go off the rails because AIG wasn't accounting for these transactions on their books. Which would have told anyone that the insurance being sold in combo with these securities was, you know, worthless.

    This aside, I am a TRUE believer in securitization. Without it, our interest rates would be, at a minimum, 2-3% higher and we would not be able to take on some of the risks we take on in terms of borrower credit quality. I LOVE
    the way what was hailed a miracle four years ago for expanding homeownership in the US is now the red-headed stepchild that is constantly bitchslapped by people like Taibbi who really only have the vaguest idea what the fuck
    they're talking about.

    So, in case you are wondering, you can't get your home for free if MERS appears in your docs. Just sayin'.

    Posted by mcblogger at 02:43 PM | Comments (0) | TrackBack

    October 12, 2009

    This Old Company

    In Goodfellas, a restaurant owner has some problems with Joe Pesci's character and goes running to the family boss, played by Paul Sorvino. He asks Sorvino's character to step in, take an interest in the joint so maybe Joe Pesci won't forget to pay his tab.

    What ended up happening was Sorvino and the family loaded up the restaurant with debt and when they couldn't get any more credit, they torched the place and collected on the insurance. It's illegal when the mob does it, so why isn't it illegal when private equity does it? I mean, that is essentially what Thomas H. Lee Partners did to Simmons Mattress Company.

    Twice after buying Simmons, THL borrowed more. It used $375 million of that money to pay itself a dividend, thus recouping all of the cash it put down, and then some.

    A result: THL was guaranteed a profit regardless of how Simmons performed. It did not matter that the company was left owing far more than it was worth, just as many people profited from the mortgage business while many homeowners found themselves underwater.

    Investors who bought that debt are getting virtually nothing in the new deal.

    “From my experience, none of the private equity firms were building a brand for the future,” said Robert Hellyer, Simmons’s former president, who worked for several of the private equity buyers before being asked to leave the company in 2005. “Plus, the mind-set was, since the money was practically free, why not leverage the company to the maximum?”

    Just as with the housing market, the good times ended when the economy fell into recession and the credit markets froze. Simmons is now groaning under a huge amount of debt at a time when its sales are slowing. And this time there is no escaping by finding yet another buyer willing to shoulder its entire burden.

    Simmons is one of hundreds of companies swept up by private equity firms in the early part of this decade, during the greatest burst of corporate takeovers the world has ever seen. Many of these deals, cut in good times, left little or no margin for error — let alone for the Great Recession.

    Now, to some people, making an enormous profit is all good even when it's destroying whole companies, jobs and the fortunes of investors dumb enough to buy the debt (I am not one of those folks, so don't think I'm coming from there). However, I think we can all agree that while it's good for a very small number who are actually doing the deals, for the rest of society and the economy, it's really bad in a black and white, unmitigated kind of way.

    So how do we stop it? How about changing tax policy to asses a special tax against special, one time dividends paid to owners on companies that have acquired control of those companies in the last 10 years if the dividend is to be paid by issuing debt. And set the tax at 90%. While this won't completely stop the looting, it will at least make sure that companies aren't eaten alive with debt.

    Posted by mcblogger at 08:46 AM | Comments (0) | TrackBack

    September 04, 2009


    My world, as you can imagine, is shattered into billions of pieces...

    I'll be in the bar, if anyone needs me. thinking of creative ways to end all the pain and disappointment.

    Posted by mcblogger at 03:23 PM | Comments (0) | TrackBack

    September 02, 2009

    ExxonMobil going after bloggers?

    TX Sharon over at Bluedaze has the deets and this has to be one of the dumbest things ever done by an oil company. The blogger's transgression? Shooting and publicizing video of how XOM 'fixes' a leaky storage tank (with some kind of metal screw). Read more over at Bluedaze!

    Posted by mcblogger at 01:42 PM | Comments (0) | TrackBack

    August 17, 2009

    Worrying about Goldman

    After my post last month regarding Goldman's earnings, I got an email from a friend who sent me the link to this article over at Salon. Reich gets pretty close...

    But in another respect, Goldman's resurgence should send shivers down the backs of every hardworking American who has lost a large chunk of retirement savings in this economic debacle, as well as the millions who have lost their jobs. Why? Because Goldman's high-risk business model hasn't changed one bit from what it was before the implosion of Wall Street. Goldman is still wagering its capital and fueling giant bets with lots of borrowed money. While its rivals have pared back risks, Goldman has increased them. And its renewed success at this old game will only encourage other big banks to go back into it.

    "Our model really never changed, we've said very consistently that our business model remained the same," Goldman's chief financial officer tells Bloomberg News. Value-at-risk -- a statistical measure of how much the firm's trading operations could lose in a day -- rose to an average of $245 million in the second quarter from $240 million in the first quarter. In the second quarter of 2008, VaR averaged $184 million.

    Meanwhile, Goldman is still depending on $28 billion in outstanding debt issued cheaply with the backing of the Federal Deposit Insurance Corp. Which means you and I are still indirectly funding Goldman's high-risk operations.

    This actually hits on some of my issues with GS right now. First off, the inordinate dependence on proprietary trading. This isn't making commissions executing trades (small and large) for investors and funds. This is Goldman's traders playing with Goldman's money. And they have to make a lot of money to compensate for higher costs of funding (from all that government-backed debt which we'll get to in a moment) which means they have to make some really large, directional bets. That's OK for an insurance company with a large float of paid in capital (or, in industry parlance, float) from premiums, not good for an investment bank. Which leads me to think the VAR is way understated. I'd love to see the actual numbers used to calculate the VAR.

    As for the debt, GS has issued a lot of debt guaranteed by the FDIC since they are now a depository. That's long term capital which means they aren't as dependent on commercial paper (CP) and repo agreements, most of which can dry up quickly. Which is what happened in the wake of the disastrous decision to let Lehman go to BK... it wasn't that Lehman represented systemic risk (it's book was unwound fairly painlessly), it was the shock to the funding market that meant the government may not step in to save anyone. Which made the CP and repo's go away and caused a cash crunch at Goldman as they suddenly could not longer use that money to float their balance sheet. Technically, this isn't a horrible thing but it definitely means their cost of funding has gone up which means, again, they have to take outsized risks.

    One other thing that's worried me is the fact that Goldman is now a depository. They have no retail network and no experience in retail banking. Further, considering their business model, would YOU feel comfortable keeping your checking account there?

    Finally, GS management seems almost proud of the fact that they are not returning to their fee based roots. In short, they are doubling down and turning their backs on what made them successful. While it's not a prescription for disaster, it sure as hell doesn't leave me with an excessively high comfort level.

    Posted by mcblogger at 11:30 AM | Comments (0) | TrackBack

    August 05, 2009

    Oh, this is just shocking. No. Really, it's very surprising.

    According to research, more than a third of all pay in the United States goes exclusively to executives and certain highly paid managers. As a shareholder who's been bled dry by overpaid and incompetent management teams for years, this came as a huge shock.

    How to fix? Easy. Implement an 80% tax on the salaries of executives and management at any company that pays those people more than 10 times what the lowest paid worker makes. And apply it to contractors as well.

    Oh, and you should probably give tax breaks to those companies whose lowest paid employees make more than 2 times the regional poverty level.

    The bottom line is that as a shareholder I am enriching a largely worthless managerial class that does nothing for me and who are impoverishing the working and middle classes who are the backbone of a strong economy. The same people who create the underlying foundation for the success of the companies in which I have a stake. Needless to say, the best way for me to maximize earnings is to cap management and executive salaries and increase worker salaries.

    It's better for overall economic growth and the success of the country. Not to mention that better paid workers are more productive workers. And make me more money.

    Posted by mcblogger at 04:33 PM | Comments (0) | TrackBack

    July 22, 2009

    Mad props to Goldman Sachs

    Yo! GS! Way to bust through the earnings estimates!!

    And my thanks to the Fed's for the part they played in this. When I retire, I'll remember you all fondly. For now, I'm selling most of my stock. I don't believe these numbers are sustainable and I don't trust the management who are allowing the traders to run a overaggressive trading strategy.

    I want to see Goldman go back to it's banker roots. When I see that, I'm back in at any price. Right now, though, the risk of loss is far too great.

    Posted by mcblogger at 02:24 PM | Comments (0) | TrackBack

    June 30, 2009

    Eat our holes

    The Hardee's unit of CKE Restaurants is rolling out a new product which is, no joke, a biscuit hole (whatever that is) that's been deep fried, then rolled in cinnamon and sugar and served to you hot with icing in which to dip the balls of fried dough.

    Do you have any idea how much restraint I exercised just there talking about fried dough balls?

    There is, however, a small problem. The company has had some issues with a name for what many are calling a delicious product. So, they're asking for your help. Please visit here and feel free to leave your suggestions.

    Yes, I own stock in CKE. A lot of stock.

    Posted by mcblogger at 11:31 AM | Comments (4) | TrackBack

    June 06, 2009

    A different take on copyright

    Worried about copying tracks from a CD to an iPod? Don't.

    Posted by mcblogger at 11:27 AM | Comments (0) | TrackBack

    June 03, 2009

    The BK blues

    So, GM declares bankruptcy. In November, that's what I and a lot of others were recommending until a few things became clear...

    1) No one wanted to carry the DIP
    2) The previous Administration were going to use BK to break the UAW

    Now we're back to square one, the unions have take their hit and the bondholders have taken their hit. The ironic thing is that if the bondholders had caved and accepted equity, this wouldn't have needed to happen. Now, everyone walks away with less because the government now effectively owns GM.

    That'll teach you to be greedy and intractable.

    Posted by mcblogger at 03:10 PM | Comments (0) | TrackBack

    June 01, 2009

    Secretary Geithner, Plagiarist

    Well, Congress wants to regulate the more than $500 trillion market and asked Treasury to come up with a plan. Secretary Geithner, with tons to do, didn't really have the time. Wall St. had already written a plan that left regulation vague, had no real clearing authority or trade reporting (price quotes). And Geithner decided to just, well, put his name on that plan and submit it.

    Wall Street’s largest banks are getting what they want in the U.S. Treasury’s plan to regulate over-the-counter derivatives by making all market participants adhere to the same capital requirements.

    Goldman Sachs Group Inc., JPMorgan Chase & Co., Credit Suisse Group AG and Barclays Plc sent the Treasury a plan written in February saying the Federal Reserve should extend bank regulation practices to companies and hedge funds, according to a document obtained by Bloomberg News and confirmed by the Treasury. Corporations, energy companies and hedge funds don’t face capital and margin levels now, while banks do under central bank oversight.

    “The banks appear to wish to maintain the intra-dealer market and raise barriers to new entrants to keep the OTC business as compartmentalized as possible and to protect their profitable market conditions,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. “The Street’s lobbyists appear to be asking for a ‘club’ structure in OTC trading.”

    So, we get restrictions on entry into the market (meaning if you want to buy or sell, you'll have to go through one of the Wall St. banks), vague regulation AND we don't have to report trade information? What's not to love.

    Excellent work, Timmy.

    Posted by mcblogger at 12:30 PM | Comments (0) | TrackBack

    April 22, 2009

    Pity the bankers...

    As many of you know (because I've gone to great lengths to beat you over the head with the knowledge), I have little respect for the managerial class and even less for those in that class who run or work at money center banks. From the investment bankers all the way down to the trading floor, these are a group of people who've always been, in my opinion, far overpayed relative to the intrinsic value they bring to the table.

    Seriously, you tell me why I should be paying a 22 year old fresh faced BBA 7 figures to trade with my money? It just never made sense to me, especially now that we know those profits were all illusion (or in the case of AIG's Financial Products division, actual insurance fraud).

    Of course, there are some who just can't get used to the new world. Take this wife of a Wall St. CEO whose company received TARP funds. They've seen their nestegg disappear as most of it was in company stock. But, even more shocking, there is no remorse for the shareholders who trusted her husband to take care of their capital. And who are now broke, without the salary her husband still enjoys.

    Or these scheming little bitches in this article about the dry-up of bonuses and increased taxation. Here's a jewel from it...

    “No offense to Middle America, but if someone went to Columbia or Wharton, [even if] their company is a fumbling, mismanaged bank, why should they all of a sudden be paid the same as the guy down the block who delivers restaurant supplies for Sysco out of a huge, shiny truck?” e-mails an irate Citigroup executive to a colleague.

    None taken, DBag. I would like to point out though that the guy who delivers shit for Sysco actually makes money for his company. All you've done is lose money. Without the government, your hard work would have resulted in Citi's bankruptcy. Unarguably, the delivery guy provides far more to GDP than you.

    Oh, and on behalf of Citi shareholders around the world, you can go fuck yourself. Thanks for losing their goddamn money, asshole.

    Their anger takes many forms: There is rage at Obama for pushing to raise taxes (“The government wants me to be a slave!” says one hedge-fund analyst); rage at the masses who don’t understand that Wall Street’s high salaries fund New York’s budget (“We’re fucked,” says a former Lehman equities analyst, referring to the city); rage at the people who don’t “get” that Wall Street enables much of the rest of the economy to function (“JPMorgan and all these guys should go on strike—see what happens to the country without Wall Street,” says another hedge-funder).

    To the hedge fund analyst, speaking in hyperbole makes you look stupid. Now, run along before I ram a copy of Atlas Shrugged up your ass. This country enabled you to succeed and make money. Just like the rest of us, you'll pay your taxes to support it. As for the other hedge-funder, absent the government there wouldn't be a JP Morgan. As for what would happen to the country without Wall Street, as if you're all heading to a gulch somewhere with perpetual motion machines, don't flatter yourselves.

    With the advent of real time information services, talent no longer needs to be tied to lower and midtown Manhattan. Nor do we need the folks in Greenwich, CT. In Dallas, LA, Houston, Austin, SF, Portland, Seattle and Chicago there are tons of talented people who are ready to step up to the plate to provide financing to the people of this country. And they work cheaper than you do anyway. From community banks and credit unions to regional and superregional investment houses, we can replace all the supposed talent that got us into this mess. Not to mention, the B-schools nationally are churning out ever higher numbers of BBA's and MBA's.

    No, really, you won't be missed. Especially by shareholders who will be infinitely better off without you.

    Posted by mcblogger at 01:03 PM | Comments (0) | TrackBack

    April 15, 2009

    First, fire the managers at the banks

    Seriously, this is pretty much spot on. Insofar as removing morons like Ken Lewis. As for bank liquidations, I'm not sure it's needed. We've moved beyond some of the liquidity problems at the banks... what we need now is to jump start securitization. The only way we can do that is to see some of this paper start to move. I prefer ripping into them since it's the least expensive option. But I don't think Larry Summers is going to opt for that since he put us on the hook for more than a trillion.

    It would also help if we could start driving some wage and employment growth. I don't know why but people have an easier time paying debts when they're actually, you know, making money.

    Posted by mcblogger at 01:20 PM | Comments (0) | TrackBack

    April 02, 2009

    FASB rewrites 157

    This has only needed to be done for, oh I don't know, MORE THAN A FUCKING YEAR. Seriously, it was fall of 2007 when we first started talking about this crap. Little did I know it would lead us to the worst recession since World War II.

    Under intense political pressure, the board that sets accounting rules in the United States will meet on Thursday to complete changes in accounting rules that are aimed at reducing the losses banks have been forced to report as the values of their mortgage-backed securities have crumbled.

    The changes, proposed two weeks ago after a Congressional hearing in which Robert H. Herz, the chairman of the Financial Accounting Standards Board, was essentially ordered to change the rules or face Congressional action, are generally supported by banks, although some want the board to go even further.

    Oh, but before you get too excited at rationality's sudden return, here's what they're going to allow...

    The proposed rule interpretations deal with two issues in asset valuation. Banks are required to show some assets at market value, and report profits or losses based on changes in that value. Other assets may be reported at original cost, but if their value deteriorates they must be written down to market value if there is an “other than temporary impairment” in value.

    The banks argue that current market values are unreasonably low, reflecting distressed trading, and are producing values that are well below the amount that will eventually be realized.

    One change would allow banks much more room to conclude that inactive markets are distressed, allowing them to value the assets at what they believe they would be worth in a normal market. The other change would let banks avoid reporting some of the impairment losses on their income statements.

    Roughly translated, this allows the banks to mark the value of certain illiquid assets (like mortgage backed securities and CDO's that contain a wide variety of securitized paper in tranches that may (or may not) be performing) to whatever arbitrary value they like. No need to bother with cashflow analysis, actual vs. expected performance, credit quality or anything else. Just tell us what you think it's worth and that'll be fine.

    Investor groups are understandably pissed because now we'll have no idea how large the holes really are on the balance sheet. Meaning no one is going to know what these companies are really worth. Which also means few will be willing to invest and lend to them, further exacerbating the credit crunch.

    Can we PLEASE, at some point, start valuing off performance of these securities? I'll even throw in a carrot by letting y'all generate an estimate of value based on recovery in the non-performing assets. PLEASE?

    Posted by mcblogger at 08:35 AM | Comments (0) | TrackBack

    April 01, 2009

    Securitization isn't the problem

    Krugman wrote something about securitization being the big problem. Ritholtz wrote a nice piece taking him to task.

    Do not forget that Securitization had been around for decades without major problems. And over the entire period of time in question, credit card loans, auto financing, and student loans were securitized without incident (other than expected cyclical recessionary downturns).

    The same can be said about derivatives. Handled properly, they are tools that serve a function. Let loose with no regulation/supervision/transparency/reserve requirements, you have the making of a disaster . . .

    We can even say the same about Mortgages. Would you draw the conclusion that because the lending industry made so many bad loans, that mortgages were the problem, and therefore we should do away with them? You have to look at the context in which the loans took place.

    Securitization is no different.

    Under normal circumstances, it works fine. And if we tweak a bit around the edges — make sure that securitizers cannot shed liability as easily as they have, and adjust incentive compensation away from the current hit & run style of faux profits but real bonuses, Securitization will work just fine.

    Like him, I frequently agree with Dr. Krugman, especially during Our Most Recent Financial Crises, brought to you by the folks who told you government wasn't the solution, it was the problem. Much like those folks, though, Paul is blaming the tools and not the users.

    Posted by mcblogger at 09:50 AM | Comments (0) | TrackBack

    March 27, 2009

    And you thought your 2008 was good

    For those of you who blithely coasted through 2008 with nary an economic scratch, it probably seemed like a pretty good year. However, compared to these guys, you're a piker.

    I know this because you're reading McBlogger and our average income across all demographic groups is just south of $300mn per year. We hear Barron's calls us the poor man's II.

    Posted by mcblogger at 02:17 PM | Comments (0) | TrackBack

    March 20, 2009

    Layoffs hit even bartenders

    It's a sad, sad day when a bartender gets laid off.

    Eddie Doyle was the guy who really did know everybody’s name, at least when he started working at the tavern that inspired the television show “Cheers.”

    To the tens of thousands of tourists that later passed through, Doyle remained behind the bar to offer a smile, a beer and tips about where to find the Boston that wasn’t shown on TV.

    Now Doyle is out of a job, laid off from “Cheers” after 35 years.

    The bar’s owner has said a tough economy and sagging business forced the move, which was one of several layoffs.

    Doyle said he’s not bitter about being laid off, just surprised and a little sad.

    “This bar, for me ... it was not just another job,” Doyle said. “It was the perfect job.”

    Posted by mcblogger at 12:43 PM | Comments (0) | TrackBack

    March 19, 2009

    Santelli wrong again

    CNBC Personality and CME Trader Rick Santelli thinks it's silly for us to be focused on the bonuses at AIG.

    “Now think about it this way – maybe I’m missing something, but the outrage seems to be about ‘M’s – millions of dollars, right? Hundred and sixty five dollars, OK?” Santelli said, as he drew a large capital “M” on a sheet of paper. “I would think that it should be looked at as a pretty big positive because when you go from the ‘M,’ maybe you should try to go to the ‘B’s – which is the billions of dollars. And maybe that’s going to even enlighten for the ‘T’ – trillions of dollars.”

    “Squawk Box” co-host Becky Quick suggested the outrage wasn’t over the $165 million amount, but the “rewarding of bad behavior.” Yet, Santelli thought the bonus issue was being used to resonate with the average American, instead of attempting to examine the much larger pools of money.

    This may mark the first time that Quick actually seemed to semi-understand the issue. Santelli, of course, thoroughly misses the point which is that we are rewarding the same people who created, you know, THE PROBLEM. He's also telling us that getting rid of these folks will cost billions. Which is absolute bullshit, but that's nothing new from Santelli.

    Posted by mcblogger at 08:54 PM | Comments (0) | TrackBack

    March 17, 2009

    Tell Rep. Frank not so much with money for AIG

    Are you upset about AIG's bonus fun? Tell someone...

    Bottom line, we're giving bonuses to the very same people who cratered AIG. What did these people do? They wrote insurance policies without any money to pay losses and without even collecting enough in premiums. In a normal insurance company, that would be called fraud and these people who would be in jail. And we're talking about giving them bonuses because we're 'legally bound'? Yeah. Sure. What-the-fuck-ever.

    Enough is enough.

    Update - Originally I wrote this last night but this AM I saw this out of DealBook. And got pissed all over again.

    As much as we might want to void those A.I.G. pay contracts, Pearl Meyer, a compensation consultant at Steven Hall & Partners, says it would put American business on a worse slippery slope than it already is. Business agreements of other companies that have taken taxpayer money might fall into question. Even companies that have not turned to Washington might seize the opportunity to break inconvenient contracts.

    If government officials were to break the contracts, they would be “breaking a bond,” Ms. Meyer says. “They are raising a whole new question about the trust and commitment organizations have to their employees.” (The auto industry unions are facing a similar issue — but the big difference is that there is a negotiation; no one is unilaterally tearing up contracts.)

    Ross, it's not like this folks are good, salt of the earth, rank and file. These guys collapsed the largest insurance company in the world. The guy who broke Barings went to jail. And we're talking about honoring the bonus contracts for a bunch of people who functionally committed fraud? REALLY?

    The best excuse is this one...

    But what about the commitment to taxpayers? Here is the second, perhaps more sobering thought: A.I.G. built this bomb, and it may be the only outfit that really knows how to defuse it.

    A.I.G. employees concocted complex derivatives that then wormed their way through the global financial system. If they leave — the buzz on Wall Street is that some have, and more are ready to — they might simply turn around and trade against A.I.G.’s book. Why not? They know how bad it is. They built it.

    So as unpalatable as it seems, taxpayers need to keep some of these brainiacs in their seats, if only to prevent them from turning against the company. In the end, we may actually be better off if they can figure out how to unwind these tricky investments.

    How about this... most of that would be covered under work product laws. It would be really hard to do that and not be accused of violating an NDA in effect prior to bonuses (with initial employment contracts). It would be super easy to get an injunction that would all but make these folks unemployable. As for them being recruited, it's highly unlikely considering that in the blink of an eye their accumulated profits have been wiped out and replaced with a massive loss.

    There are more than 100,000 people, the vast majority of whom are now out of work, who could unwind these contracts. Are you really telling me we couldn't find someone cheaper? Who could then protect the book from a rogue?

    Yeah, these excuses are worthless. And I'm sick of the ridiculous bullshit out of the Obama Administration... if this were McCain or Bush we'd all be just as goddamn angry.

    Finally, if the UAW has to take a hit for something they didn't even do, then these fucko's surely have to take one for the shit they did.

    Posted by mcblogger at 10:56 AM | Comments (0) | TrackBack

    March 16, 2009

    Excuses are like shit...

    ...they're plentiful and they all stink. Take, for example, AIG's position on WHY bonuses have to paid to the morons who wrote insurance without adequate capital reserves or even premiums.

    I take this to mean that if a bunch of AIGFP managers quit because they didn't receive bonuses promised in their contracts, then France could, if it wanted, to appoint its own designee. And if that happened, then it would equate to a default and those contracts would kick in, at a cost to AIG the US government of at least tens of billions.

    In other words, I take this to be a threat: "if you don't give us our bonuses, we'll trigger a default event that will cost AIG the US government tens of billions of dollars." It's just a polite way of saying, "Pay us the $100 million ransom
    or we start exploding the suicide bomber vests we're wearing."

    Here's the catch... the counterparties are functionally at the mercy of the Feds at this point. We've played nice until now, paying off claims in full to prevent a further collapse of the financial system. But now it's time to play some hardball. This is NOT a default event and any CP that tries to claim it is should have their contract wiped clean. None of them will try it if they all know what they face which is loss of the protection they needed. Especially since the 'event' is an internal change that doesn't effect AIG's ability to pay out.

    What's so funny about this is that the excuse itself is proof of the incompetence of the 'geniuses' who wrote the business and the stupidity of the people who employed them.

    Posted by mcblogger at 01:55 PM | Comments (0) | TrackBack

    What ARE the CDO's worth?

    Well, here's one take...

    But now, at long last, one shard of reality has just emerged to piece this gloom. In recent weeks, bankers at places such as JPMorgan Chase and Wachovia have been quietly sifting data trying to ascertain what has happened to those swathes of troubled CDO of ABS.

    The conclusions are stunning. From late 2005 to the middle of 2007, around $450bn of CDO of ABS were issued, of which about one third were created from risky mortgage-backed bonds (known as mezzanine CDO of ABS) and much of the rest from safer tranches (high grade CDO of ABS.)

    Out of that pile, around $305bn of the CDOs are now in a formal state of default, with the CDOs underwritten by Merrill Lynch accounting for the biggest pile of defaulted assets, followed by UBS and Citi.

    The real shocker, though, is what has happened after those defaults. JPMorgan estimates that $102bn of CDOs has already been liquidated. The average recovery rate for super-senior tranches of debt – or the stuff that was supposed to be so ultra safe that it always carried a triple A tag – has been 32 per cent for the high grade CDOs. With mezzanine CDO’s, though, recovery rates on those AAA assets have been a mere 5 per cent.

    Now, there are trillions of dollars of this stuff floating around. My problem with this is that it's a limited sample. And frankly, I don't know what they are considering a recovery. What I want to see is the percentage on the face that's being recovered. In extreme cases, I can see a loss on the subprime credits of 60-70% in an environment that has seen 50% value declines. But 95%?

    Something stinks on that number. I don't buy it for a second.

    Posted by mcblogger at 12:47 PM | Comments (0) | TrackBack

    March 09, 2009

    Going Galt

    You know who's talking about 'going Galt'? All those poor, stupid Republicans who, frankly, we'd be better off without.

    Real rich people know what 'marginal tax rates' really mean. And, just FYI, they aren't afraid of it.

    Posted by mcblogger at 03:03 PM | Comments (0) | TrackBack

    March 06, 2009

    Ripping CNBC

    Y'all may remember a while back I got the shits of the ass reporting on CNBC and switched to Bloomberg. It's a video like this that reminds me just how spot on that decision was...

    Posted by mcblogger at 01:29 PM | Comments (0) | TrackBack

    March 05, 2009

    Kotok on AIG

    AIG: What It Means? March 2, 2009

    The news on AIG of additional federal funds and a change in the structure of the preferred stock and its implications have rattled the securities markets. We are scheduled to discuss this tonight on National Public Radio (NPR), “All Things Considered” and on CNBC in the 8:10 p.m. segment and, subsequently, in the 8:45 p.m. segment.

    It appears that the change in terms of the federal support for AIG were triggered by requirements that the “AAA” rating be maintained on AIG’s counterparty risk-based instruments. The policy behind this federal support seems clearly focused on avoiding a second Lehman-type failure and, subsequent, market meltdown. The devastation caused by Lehman’s failure was in the counterparty risk arena. This is the complex structure in which opposing parties of derivative instruments are dependent upon the credit worthiness of each other. If the instrument requires a “AAA” credit rating, loss of the credit rating can become an element of default.

    Whether we like it or not, America’s federal policy is now driven by the need to avoid another “Lehman.” Thus, we see increasing federal monies applied to support AIG. And, we see this elsewhere as my colleague, Bob Eisenbeis, noted about Citi in his comments today.

    We can spend hours debating whether or not this is a good or bad policy. We can spend more time arguing about whether or not Countrywide should have been permitted to fail rather than to be saved via a merger. We could examine the decisions about Bear Stearns or Fannie Mae or others. Those are the exercises that will occupy historians and academics for the next several decades. But those are not the relevant questions for portfolio managers today.

    The decisions made today and tomorrow come down to a very fundamental question. Will, (1) massive federal intervention like preferreds and equity ownership, (2) huge expansion of the Federal Reserve’s balance sheet, (3) trillions of federal contingent guarantees combine to avoid a deflationary prolonged depression?

    History says the answer is yes. There are no limits to the amount of federal credit that can be extended in support of this new policy. The Federal government is now committed to do whatever it takes, in whatever amount is necessary and with whatever tools are needed. If you believe as I do, that the economy will find some bottoming in 2009 or early 2010, then one has to view the future risk several years from now as inflation, not deflation.

    For today, inflation is not the risk, deflation is the threat and enormous new federal credit is the weapon used to confront it. That’s what the AIG bailout is all about.

    Courtesy BP.

    Posted by mcblogger at 12:47 PM | Comments (0) | TrackBack

    March 04, 2009

    Mortgage Writedowns... I'm THRILLED

    ... Jane is pissed as hell, mostly because she doesn't get the long term impact. Nor does she understand THAT THE HOMEOWNERS BEAR JUST AS MUCH RESPONSIBILITY AS THE BANKS.

    I'm TIRED of the 'the-banks-screwed-everyone, now-let's-screw-them' bullshit. Not only because it's based on a patently false assumption (that banks engineered loans for foreclosure), but also the fact that it fails to acknowledge the long term impact to the financial infrastructure of the US that will be caused by the judiciary being given arbitrary authority to write down debt on hard assets.

    People need help. I have no problem helping them. But fucking over banks in the process fucks us all, more slowly and over a longer period of time.

    Posted by mcblogger at 10:49 PM | Comments (0) | TrackBack

    February 28, 2009

    Come on, Mr. President!

    Here's the thing... we need real regulatory reform and enforcement in financial services. This is not so much a good start, Mr. President.

    Posted by mcblogger at 11:50 AM | Comments (0) | TrackBack

    February 19, 2009

    Fucking. Hell.

    You may remember that I, along with a bunch of other bloggers who clean up real purty, recently had dinner with John Sharp. At that dinner, I bet him $50 that the Dow would not break it's November low on the close.

    Which it, of course, did today thanks to the marvelous work being done by the Obama Administration in general and, in particular, the doucheriffic performance of Tim Geithner. Please allow me to eat crow on the bet and Timmy-boy.

    Note that I'm not taking it on the chin about Obama's fuckups. Putting the Democratic JV team in the White House was all you other people. I voted for the varsity in the primary.


    Posted by mcblogger at 09:55 PM | Comments (0) | TrackBack

    February 09, 2009

    Carly Fiorina on compensation caps

    "We deserve the money we con companies into giving us. I guess you could also say the money we get from our friends on the board who are members of the compensation committee."

    I've got a suggestion, Carly, that makes sense. How about no executive may make a salary that exceeds 20 times the pay of the lowest paid worker? That's, what, $200k for someone at Wal Mart? Sounds about right.

    Yeah, I'd be THRILLED with that and I think it's appropriate. As for stock grants/options, they should be expensed as a cash charge and they should be distributed evenly to all employees. And no long term contracts.

    The age of the celebrity CEO and their cronies on the board is OVER. They're losers and it's time they got cut off. If Buffett can find talented people to run his companies and not pay them outrageous salaries larded with stock options while performing exceptionally, then surely every other company can as well.

    Especially since many celebrity CEOs (like Carly) are only good at losing shareholder's money.

    Posted by mcblogger at 10:28 AM | Comments (0) | TrackBack

    January 24, 2009

    Best WSJ Ed Summary Ever

    The Original version which is so full of inaccuracies that I really don't have time to do a point by point. Especially the false assumption on the part of the WSJ Ed Board that the Bush tax cuts spurred economic growth (they didn't... it was interest rates) and wage growth (it didn't... we only got a little wage growth on the tail end, not enough to even offset the regression in the previous 6 years).

    Paul Krugman did a nice little capsule summary...

    Shorter WSJ I: Everything good that happened during the Bush years was due to Bush; everything bad was due to Alan Greenspan, who fostered the housing bubble whose existence we and our friends denied again and again.

    Shorter WSJ II: The decline in the unemployment rate in the middle Bush years, after Bush cut taxes, proves that tax cuts work — and had nothing to do with the housing bubble. The much larger, much more sustained decline in unemployment through the whole Clinton administration, which followed a tax increase, proves that tax increases are a terrible thing. Honest!

    Shorter WSJ III: Fannie and Freddie! And did we mention Alan Greenspan?

    Shorter WSJ IV: Who you gonna believe, us or your lying eyes?

    BRILLIANCE! Just in case you were wondering about the success of Republican Economic Plans, the Dow lost 25% during the Bush Presidency.

    Posted by mcblogger at 01:15 PM | Comments (0) | TrackBack

    January 22, 2009

    Today's Letter is N for NATIONALIZATION

    First thing that caught my attention was this on Wednesday, from the WaPo. Seems some business leaders in DC metro have some questions for President Obama (I'm still getting used to writing that)...

    From E. Hunt Burke, president and chief operating officer of Burke & Herbert bank in Alexandria:

    · "Is it fair that a strong, well-managed community bank that has consistently operated in full compliance under [Federal Deposit Insurance Corp.] regulations will now have to face a hefty increase in FDIC premiums in the near future to cover the cost of the losses from the mismanagement and poor lending decisions of other banks?"

    · "With respect to bankruptcy judges having the authority to cram down first deeds of trust on residential mortgages, is there concern that it will create economic incentives for persons to file bankruptcy who would otherwise not seek to do so?"

    · "Related to this, are you concerned that cramdowns on first trust mortgages will make mortgage loans less available to home buyers and more expensive because lenders will not want to incur the risk associated with making the loans and have the terms changes?"

    · "Should the largest financial institutions (megabanks) be restricted from acquiring a larger percentage of the nation's deposits than they already possess?"

    Cramdowns are going to be a problem. If, at any time and without penalty, a homeowner can get their debt readjusted then they will. Period. It violates the sanctity of contracts and renders the trillions we have outstanding worthless because the assets backing those loans are now subject to measures that can arbitrarily render the terms moot. Adjust unsecured consumer credit? Sure. Extend unemployment benefits? Absolutely. Provide relief to homeowners who need (financial assistance) it? Definitely. Cramdown the notes? No way. You'll see mortgage rates rise 2-3 points as demand for MBS drops precipitously.

    As for the last point, it's essential that we do not allow any one bank to exceed the 10% statutory limit.

    From Fred Malek, chairman and senior adviser at Thayer/Hidden Creek, a private-equity firm based in Washington:

    · "You were one of the architects and supporters of a [bailout/rescue] bill that has not achieved intended results, and credit markets remain largely frozen. What do you intend to do to encourage the flow of credit to support sound investments and growth?"

    · "What specific objectives do you have for the $825 billion stimulus package? Why do you think this is a better way to create jobs and reignite economic growth than providing incentives to business?"

    · "Other than World War II, which was borne of necessity, can you name any other instance in the United States, or any country for that matter, where government spending and grants have revived an ailing economy?"

    Here's the thing... credit markets aren't frozen because TARP failed. They are frozen because the banks are refusing to lend to damn near anyone. You have chickenshits like Jamie Dimon and Ken Lewis who are hoarding cash that the government has given them. Last week, Treasury and the Fed, surreptitiously, started telling the banks to lend. We'll know in the next few weeks if that's happened but in the meantime, they should be preparing to nationalize one or more of the banks.

    Trust me, I'm not a fan of nationalization. Government does some things exceedingly well and running a private bank is not one of them. However, we are funding in mountains of cash to stabilize the banks, at attractive terms regarding shareholder dilution, and receiving nothing of benefit for the broader economy. Sure, taxpayers are getting equity and substantially devalued assets. But what we NEED right now is for the banks to start putting all the liquidity back into the system. We need restore confidence to the economy.

    There are a ton of people advocating nationlization for various reasons. Krugman is among them, mostly because

    he thinks management teams at the banks are just too stupid (I'm paraphrasing) and that the only way to fix is to nationalize. the British are also coming to that conclusion, but here's my thing with all the talking heads bitching and moaning about asset values and the capital infusions...


    Take, for example, RBS and the Brit banks...

    If the Government is forced to nationalise RBS and perhaps Barclays with their vast exposure in dollars, euros, and yen, it risks being submerged. It is one thing for a sovereign state to let its national debt jump in a crisis -- or a war -- perhaps even to 100pc of GDP. It is another to take on foreign debts on such a scale with no reserves. Yes, the banks have foreign assets as well to match the debts. But how much are these assets really worth?

    There it is, boys and girls... no one knows what the assets are worth because the market done broke down. Mark to Market is great when everything is liquid. Supposedly, the evaluation on pricing is based on the collateral and cashflows from the asset. However, the market sometimes over pays and when asset prices are increasing, money chases money. When everything is going down, everyone wants to sit on their hands and Voila! you get a zero bid for an asset that's worth at least 75 cents on the dollar. How do I know?

    Because the CBO tells me so... that's the net of the subsidy on the TARP funds disbursed by 12/31/2008. However, even that doesn't tell the whole story because Treasury didn't pay par for these assets. Which means their value could be far higher when all is said and done.

    Some are advocating nationalization as a cheaper panacea. I disagree. Nationalization should only be used as billy club to get the banks off their collective asses, not a broad based solution. For one, it opens the door to politicization of banking (bad), full socialization of all losses (even worse), wiping out broad swaths of pension assets which the government will then have to backstop (super awful and expensive) and finally, when you go to reprivatization, you end up giving sweetheart deals to political friends and allies.

    In the end, we need a hybrid valuation model for fixed income assets combining M2M with cashflow modeling creating a valuation band that will keep people from having to write down an asset to zero that is still performing.

    Posted by mcblogger at 11:58 AM | Comments (0) | TrackBack

    January 16, 2009

    BofA, Citi get bailout. I'm throwing up...

    This is awesome and all but could, maybe, the government make the following happen when they do this...

    2) Start requiring these fuckers to actually, you know, LEND MONEY?

    Posted by mcblogger at 08:40 AM | Comments (0) | TrackBack

    January 14, 2009

    Chase decides to fuck consumers and taxpayers

    At a time when the US economy needs as much liquidity as possible, Chase has decided to freeze out 60% of the home lending market and take it over. The official announcement (PDF) discusses the WaMu purchase and details that they now have retail or consumer direct access to 70% of the US market.

    Here's the thing. This is a strategic move by a firm which has received TAF and TARP funds to dramatically reduce consumer access to credit and reduce consumer transparency in the mortgage market because Chase retail doesn't have to disclose NEARLY as much to consumers as brokers do. And it reeks of desperation.

    If you have money at Chase, this might be a good time to remove it.

    Posted by mcblogger at 08:58 AM | Comments (0) | TrackBack

    January 07, 2009

    Campbell is helping Teh Gays?!?!?!

    According to the American Family Association, Campbell is supporting The Gay Agenda by buying ads in The Advocate, a well known homosexual publication read by homosexuals. And apparently, the supposedly straight folks at the American Family Association.

    It's not immediately clear what this means for NFL players who have appeared on Campbell's commercials for their Chunky soup.

    And here I was just avoiding Campbell's Soup just because of the damn pound of MSG in every fucking can.

    The AFA will next be targeting Subaru.

    Posted by mcblogger at 03:39 PM | Comments (0) | TrackBack

    December 29, 2008

    Missing the point at the NYT

    This is one of the dumber articles on the credit crisis I've seen published so far. In this one, it's all about Bush's focus on expanding homeownership.

    Of course, that had little if anything to do with it. His desire to expand homeownership and the increase in it was more coincidence than result of a detailed and well thought out plan. Further, the article completely misses the ability of the IB's to lever to infinity on short term debt that, when it dried up, froze their access to funding. Without that funding, their capital structures and leverage were unsustainable and they collapsed. As they collapsed, it constituted a credit event which triggered counterparty claims on CDS and triggered (for example) AIG's need to raise collateral which would have forced them to sell already depressed securities into an already depressed market.

    All this was because someone lied about their income? Or bought more house than they could afford? No, the credit markets collapsed because no one ever reserved for losses and a bubble was created by cheap money, largely unregulated. Not to mention the fact that many people paid A credit prices for C credit risks, a poor proposition in the best of times.

    This was, purely and simply, a lack of regulation and common sense on the part of regulators and the players, many of whom are taking home large bonuses even this year. It was in that environment that a few defaults can lead to more and more defaults and ever larger, more robust losses that eventually overwhelm an individual bank or even an economy.

    It would be AWESOME if some members of the so-called financial press would actually, you know, get it right.

    Posted by mcblogger at 09:00 AM | Comments (0) | TrackBack

    December 11, 2008

    Kicking Ken Lewis in the head, or, What I'd like to be doing

    Ken Lewis, as many of you don't know, is the CEO of Bank of America. He's the asshole that soaked BofA shareholders (a group which mercifully doesn't include me) to the tune of $50 bn for Merrill Lynch which was, conservatively, worth $20bn at the time.

    Now he's going around talking about 'no sunshine' in the economy until the second half of next year.

    Ken Lewis, CEO at BofA ... said he was hopeful conditions would improve in the second half of next year. He sees no bright spots for the economy before then.

    “Times are really tough, and we don’t see any short-term rays of sunshine,” he told the more than 600 attendees at the Westin Charlotte hotel. When the panel was asked for advice on how to get through the next six months, Lewis recommended a conservative strategy of hoarding cash and capital and waiting for the storm to pass. “Think of getting through this as the primary objective,” he said.

    It's one thing for someone like Peter Schiff to bleat on endlessly about how bad things are. It's quite another when it's Ken Lewis, the head of a global bank that holds 10% of the deposit base in the US. While the government has gone out of it's way to pump money into the economy to keep us out of a deflationary spiral, here's Ken Lewis, dumbest of the dumb, telling everyone to hoard cash under their mattress.

    Not to mention that a bank that doesn't lend is a worthless thing. It really depresses income and earnings. Which means poorer shareholders. But that's OK, Ken's got your back. He'll make you money magically in the second half of the year. The unicorn told him that was when things would turn.

    No, Ken, things will improve pretty dramatically and pretty quickly next quarter. And when BofA misses the boat, one has to wonder how long your board will keep you on. Especially after overpaying for an asset by $30 billion.

    Posted by mcblogger at 11:59 AM | Comments (0) | TrackBack

    December 10, 2008

    Nerd funny

    In which fractional reserve banking is explained (for those who didn't pick it up in It's A Wonderful Life).

    Posted by mcblogger at 11:16 AM | Comments (0) | TrackBack

    December 09, 2008

    A Tasty Investment Tip

    I was going to name this post "Liquor? I Hardly Even Know Her!"...but that wouldn't have been funny OR accurate.

    It might interest some of you wary investors out there to know that the maker of Jack Daniels and Finlandia Vodka is making money hand over fist in this economy. Seems there's nothing like the hard stuff to help people brace for soup lines and barrel apparel.

    There's also some anecdotal evidence that liquor stocks respond favorably to good news as well. Rumor has it that William Grant & Sons, Ltd., maker of Hendrick's Gin, experienced an extraordinary spike in their stock price just after Election Day.

    Posted by hbalczak at 10:59 AM | Comments (0) | TrackBack

    December 08, 2008

    Scapegoating the CRA : Don't believe me

    I've said a number of times that the conservative talking point that the CRA led to the subprime debacle was complete garbage. Some of you still want to argue the point with me. Ladies and Gentleman, I give the Republican head of the FDIC, Sheila Bair...

    “I want to give you my verdict on CRA: NOT guilty,” said FDIC Chairman Sheila Bair, according to a press release by the Federal Deposit Insurance Corporation. Before the Consumer Federation of America, Bair said Thursday she wanted to clear up the “myth” that the Community Reinvestment Act caused the financial crisis — and she set out to do so with vigor.

    Posted by mcblogger at 05:09 PM | Comments (0) | TrackBack

    December 05, 2008

    Assigning blame

    Digby has Limbaugh's take on the Big Three's trip to Washington. Limbaugh is, of course, blaming the Democrats.

    PhotobucketI have some questions. You know, Pelosi, Reid, that crowd, they sent the auto execs home yesterday and they said, "You come back with a plan. We don't have the votes and you're not going to make us look bad. It sends a bad signal to the American people. We don't have the votes. So you come back with a plan. You tell us what you want for the $25 billion." Okay, I have some questions for the people like Pelosi and Reid and these other liberal hacks, just tough questions for you to ponder. With gasoline prices now under two bucks in most places and dropping, and the price of oil (I checked it right before the program) below $50 now ($49 a barrel it was earlier today.) So with the gas price under two bucks and oil plummeting, what would you say, Pelosi and Reid, if the car companies could become profitable by selling SUVs or go broke by turning out the green cars that you're going to demand they make? What would you say, Pelosi and Reid, if the best auto executive in the world could come in and fix the Detroit problem but he demands a hundred million dollars a year in income? Would you insist that they hire somebody who has no clue what they're doing and earns less than $400,000?

    Lookit, Limbaugh and his ilk have always found it easier to carp than offer real solutions. They have none which is par for the course with the unimaginative who refuse to think. Instead, they offer criticism and angry commentary that, frankly, is nigh unto incoherent. The problem with the auto industry has never been that they were making what Washington demanded, the problem was their planning and long term strategy was wrong. As oil prices increased, they never shifted gears. As the market transitioned to a recession, they never altered to more affordable cars or sought out cheap long term debt to bolster their capital structure. Now the problem is very dramatic as wages are cut, incomes drop and fewer people are buying cars.

    Their failure was a failure of management. For 30 years, they underfunded their pension plans. For thirty years they've been losing business to competitors who are just as large but far better at designing, building and selling what the market wants. Their failure is not the failure of liberal ideology, it's the failure of their leaders to adequately build for the future. They can blame CAFE, unions and anyone else they want but the failure is theirs.

    Despite having some of the best paid managers and CEO's in history. So, no, I would say that managerial talent is not worth $100mn per year. I'd put it at about $500k. Limbaugh is clearly a very poor businessman if he'd overpay THAT dramatically. But then again, people like Limbaugh often do things like that when it's not their money.

    There's one ally Democrats in Congress have on CEO pay and that's the millions of small investors like myself (those with net worth less than $1mn) who wholeheartedly agree with caps on CEO pay. In fact, we'd like to see caps on ALL executive and managerial pay. Unions and low level employees aren't bleeding us, as owners, dry. It's the management that is always to blame.

    And I'm all for creating problems for those parasites like Carly Fiorina who is best known for making Hewlett-Packard shareholders poor.

    Limbaugh's rant blaming the Democrats is not unlike the one being circulated by some in the media regarding the cause of the mortgage crisis. From the WSJ to the WaPo, there has been a lot written about the CRA being to blame which isn't even remotely true.

    While the issues are complex and ongoing, the bottom line is that a lack of regulation allowed people to create securities which hid the underlying risk. Subprime credits were packaged and credit enhanced to turn them into A credits. Investors looked the other way because whether it was A paper or subprime, they thought they were safe as houses since people always pay their mortgages. Well, they do as long as they have a wage. When all the equity they had accumulated has been used to offset the fact that borrowers wages hadn't really grown, they stopped paying their bills.

    The CRA requirements, for the last damn time, CAN NOT be satisfied with subprime loans. This isn't a point of disagreement I have with the WSJ, this is me saying they are completely wrong.

    Posted by mcblogger at 09:13 AM | Comments (0) | TrackBack

    December 04, 2008

    Saying goodbye to SIV's

    First off, anyone who refers to an investment security as toxic is really quite clueless. Over here is the article about Citi unwinding the last of their Structured Investment Vehicles. The SIV was a creature of an easy credit environment but their overall business plan was not unlike that of banks for hundreds of years. Basically, you hold money from depositors and agree to pay them a small amount of interest for their business. Then you lend it back out at higher rates. The difference you get to keep.

    The problem with SIVs is that rather than use relatively stable deposits, they used short term borrowing in the form of, for instance, commercial paper which had to be refinanced on terms of 30, 60 or 90 days. When that money dried up, there was no cheap replacement capital and as they had to pay off what were essentially IOU's, they eliminated their equity. And then began an asset firesale which dropped the value of the assets held still further.

    I can not write this too many times... there is no such thing as a toxic security. There are only toxic prices.

    Posted by mcblogger at 09:24 AM | Comments (0) | TrackBack

    December 02, 2008

    PSA : Speaking Authoritatively

    As part of our ongoing series of PSA's, we'd like to offer the following...

    Now, where did George Will go wrong? Possibly not having a full command of the economic history of the Great Depression? Maybe having a worldview driven less by reality and more by ideology? Using that worldview to draw conclusions that don't fit facts?

    If you answered all of the above, you're absolutely right. If you're going to speak authoritatively, it helps to know what the fuck you're talking about. And don't quibble with Nobel winners. If you are right, they'll never admit it anyway.

    Right, Paul?

    Posted by mcblogger at 03:15 PM | Comments (0) | TrackBack

    No more checks from Bo

    PhotobucketPilgrim's Pride has filed for bankruptcy protection. No word has been received on what Bo is going to do now that his equity has been scrubbed out.

    Posted by mcblogger at 10:08 AM | Comments (0) | TrackBack

    December 01, 2008

    Obama's Economic Team

    The WaPo has a good article up about the economic team that the President-elect is setting up and to be honest, I'm blown away by the quality of the people. Even Larry Summers.

    To fashion the government's response, Obama has turned to people who have been associated with more market-oriented approaches. Timothy F. Geithner, 47, Obama's choice for Treasury secretary, is president of the Federal Reserve Bank of New York and has been a key player in negotiations aimed at saving some of the nation's largest financial institutions.

    Lawrence H. Summers, whom Obama tapped to direct his National Economic Council, served eight years in the Clinton administration, including a year and a half as Treasury secretary. He has argued that the economic boom enjoyed during much of Clinton's presidency was largely a consequence of shrinking federal deficits.

    Both Summers and Geithner are proteges of Robert E. Rubin, Summers's predecessor as Treasury secretary and current Citigroup director and counselor, whose views in favor of free trade, deregulation and reduced deficits have come to define the economic approach of the Clinton years.

    Christina D. Romer, an economics professor at the University of California at Berkeley who is an expert on tax policy and the nation's recovery from the Depression, has been selected to lead Obama's Council of Economic Advisers. "She has the principal required characteristic of a CEA chair: the ability to clearly explain unpleasant and somewhat complex truths about the world to powerful people without making them mad," said Bradford DeLong, another Berkeley economist.

    "These are great choices," said Doug Roberts, chief investment strategist for, an investment research firm. "Right now, economics is the key thing. He is looking for experienced technocrats, despite the fact that some come from the right or the left."

    What's even more heartening are the specifics. No more bullshit about how raising the minimum wage will kill jobs (It never does. It gets the marginally employed back to work). Massive infrastructure spending to repair our existing roads and build new ones, not to mention dramatically expanding public transportation, providing not only a jumpstart to job growth, but the foundation for the next leg of economic expansion.

    I still think the job growth targets are weak. However, I'm feeling a little better about the direction in which things are heading, especially with Paul Volker taking on a leadership role.

    Posted by mcblogger at 03:03 PM | Comments (0) | TrackBack

    November 25, 2008

    uhm...GM planning what?!?

    GM to invest $1bn in Federal aid in BRAZIL?!?!

    Help Ford, help Chrysler, but FUCK GM. Let them go down the goddamn tubes. It's a global economy and money gets thrown all over the place. Some of the money used to let AIG work through it's funding problems is probably maintaining a job in Hong Kong or Singapore. From that perspective, this is much ado about nothing.

    HOWEVER, this is symptomatic of the retarded management in place at GM. This kind of a PR gaffe should bring down the entire company. Seriously, save Ford and Chrysler, but collapse GM and sell the pieces. The company is snakebit.

    Posted by mcblogger at 10:21 AM | Comments (1) | TrackBack

    November 23, 2008

    End the pain

    From an email sent by someone clearly upset about his evaporating 401(k)

    Back in 1929 Financial Crash it was said that some Wall Street Stockbrokers and Bankers JUMPED from their office windows and committed suicide when confronted with the news of their firms and clients financial ruin . . . Many people were said to almost feel a little sorry for them . . . . . .

    In 2008 the attitude has changed somewhat:


    Posted by hbalczak at 12:30 PM | Comments (0) | TrackBack

    November 21, 2008

    It's Geithner. We hope.

    PhotobucketThe rumor floating around is that President-Elect Obama has chosen NY Fed President Timothy Geithner to be Secretary of the Treasury. We, like the market, could not be happier.

    Well, we could but it would take Bob Rubin to do that. While he may not have been the staunchest of supporters for regulation, his focus on fiscal responsibility was perfect. And he's come around on regulation, too. However, since he decided he'd had enough, we're pleased Geithner will be picked as opposed to Larry Summers.

    Posted by mcblogger at 03:12 PM | Comments (0) | TrackBack

    November 18, 2008

    About GM

    Well, there's no shortage of opinions today out about GM. WhosPlayin' has a good (if simplistic) piece. Andrew Sorkin's article over at DealBook is beating the hell out of the unions and advocating the elimination of management as the US forces the company in bankruptcy.

    While this may surprise you given my vocation, I'm with Sorkin. Chapter 11 is necessary.

    First, let's head back to WP as it neatly points out that in the case of the automakers, things aren't as cut and dry as we'd like.

    More important still is the opportunity cost of saving the automakers. It is suggested that millions of jobs might be lost if the firms folded. That may well be true, but those workers would not remain unemployed forever.

    While this is true, the intermediate term pain will be very heavy and the effects cascade through the economy. You can't just scrub out the automakers and their payroll without causing dislocation nationally. For instance, the Big Three dealerships here in Central Texas provide for sales and property taxes, revenue that would have to be replaced if the companies were liquidated. That's just one of the effects from liquidating the automakers. Don't forget up to 10% of our workforce out of work as a result. That, plus our already high unemployment, would be a one two punch taking us directly into depression.

    Nah, the best thing to do is for the government to force them into a Chapter 11 re-org. But with a catch... 40% of the equity when the company returns to the public markets must be reserved with 20% to current shareholders of record on the date of the bankruptcy and the remaining 20% to the pension plans to make certain there is no cut to pensions. This will make it easier for workers to take the necessary cuts in benefits (sorry, you'll have the same crappy health insurance we all have) and slight cuts in pay to stabilize the company. Allowing existing shareholders to benefit post restructuring will make sure that pension funds nationally that carry GM stock will be able to benefit from a resurgent auto industry.

    Then, it's gotta be restructured.

    I'm all for merging GM and Chrysler but the brand strategy Sorkin lays out is incomplete...

    Both companies would have to jettison brands — lots of them. In the case of G.M., frankly, the only ones worth saving are Cadillac, Chevy and Buick. (Buick? Yes. Despite its lackluster sales and fuddy-duddy image in the United States, it’s a huge seller in China.)

    That means Saturn, Pontiac, GMC and Saab would all disappear. Deutsche Bank estimates that reducing G.M.’s brands from eight to three would bring down the company’s cost base by $5 billion annually. If you’re able to shut the dealerships too, lop off another $4 billion. Chrysler is an even sadder situation: the only brand with any value is Jeep. Its Dodge Ram truck lineup could be merged with Chevy, which would also pick up pieces of the GMC business. And Chrysler’s minivan business could be combined into the Chevy brand as well.

    Saab and Saturn should be merged and model numbers reduced. Saab is, oddly enough, a great brand. As for Chrysler, Pontiac and Dodge? Kill them.

    Some of you will no doubt think I'm crazy with only 'slight' paycuts. For one thing, this is temporary measure to boost earnings to pay off debt and rebuild the pension plan and you don't have to make massive cuts to achieve that objective when you're not paying a dividend. Once the company is restructured, with new management in place and a manageable debt load, you take it public again and with the money raised overfund the pension plan to 105% of obligations assuming a 5% asset growth rate. If there's any left over, cut pay down debt. GM has gotten itself into this mess in part by ignoring the pension plan that it's been underfunding for 30 years. But that's just part of the problem... the rest of it is management.

    For them, there should be nothing.

    Posted by mcblogger at 10:54 AM | Comments (2) | TrackBack

    November 17, 2008

    Economy : More fun to come

    Over the last four years, hedge and private equity funds have taken on a lot of debt they've used to buy companies to which they've then transferred that debt. And a lot of it is coming due fairly soon, during the worst credit freeze since the Great Depression.

    “The dangling other shoe is now about to drop,” said Jeffrey A. Sonnenfeld, senior associate dean of the Yale School of Management.

    When the economy was booming, the firms made huge profits by cutting costs at their new acquisitions, improving operations and then turning around and selling them. In 2007, at the height of the bubble, such deals totaled $796 billion, or more than 16 percent of the $4.83 trillion in all the deals made globally that year, according to data from Dealogic.

    Firms like the Blackstone Group and Kohlberg Kravis Roberts & Company, faced an image problem at the height of the bubble for excessive compensation and beneficial tax treatment, but their returns were so high that even investors like pension funds were drawn in. Now these firms, built on enormous amounts of debt, are being forced to go back to the financial markets just as those markets have nearly frozen up.

    If history is any guide, the worst may be yet to come. Steven N. Kaplan, a professor at University of Chicago Graduate School of Business, found that nearly 30 percent of all big public-to-private deals made from 1986 to 1989 defaulted.

    Without access to credit, many of these companies will be unable to pay their existing creditors, constituting a default event which will probably force them into bankruptcy where the funds will lose their equity. While this may seem like a wonderful solution, that equity really belongs to shareholders IN those funds. Pension funds, university endowments, insurance companies and the list goes on and on of the organizations that ostensibly invest for the future of ordinary people that will be hurt if these companies go under.

    Now, maybe, would be a good time to start regulating private equity?

    Posted by mcblogger at 08:56 AM | Comments (0) | TrackBack

    November 07, 2008

    The Economy, or, From the toilet to the sewer

    The unemployment rate in the US has now reached levels not seen since 1994 and is expected to continue to climb. The White House, for it's part, is still not real comfortable confronting reality...

    On Friday, a spokeswoman for President Bush, Dana Perino, called the employment numbers “a stark reminder of how critical it is we keep focused on utilizing” the programs that Washington has put in place, including a $700 billion bailout of the financial system.

    “We know what the main problems are — tight credit and housing markets — and we have the tools to solve them,” Ms. Perino said. “The programs we’re putting in place will improve the flow of credit to consumers and businesses that will spur economic growth, job creation, and stabilization of our financial markets.”

    A year ago, that was the problem. What has been put in place doesn't prevent a recession, it merely prevents a widespread collapse and a resulting depression. We're out of the woods there. However, we're entering a very dangerous time with unemployment creeping ever higher. Of course, these rates HAVE been high for years. We just haven't seen them because BLS has been politicized and the numbers were massaged.

    Typically, unemployment is a lagging indicator. First you see credit tightening, then businesses pulling back, then consumers, then layoffs and escalating unemployment followed by renewed growth. In other words, this is the crescendo. However, this doesn't mean things won't get worse before they get better. To wit...

    Many economists expect this picture to worsen as the consequences of the global financial crisis ripple out to businesses and households. Though the $700 billion taxpayer-financed bailout has staved off fears of an imminent collapse and restored some order to the financial system, it has not persuaded banks to lend freely. Credit remains tight for businesses and homeowners.

    OK, one way or another we have to get money back into the economy. If banks won't lend, then the government may do well to start lending itself or do a far larger stimulus package to reinflate the economy and kick start growth. We can worry about the resultant inflation once we are past the risk of deflationary death spiral. Inflation is easy to cure compared to deflation.

    My personal preference is to dump $1.5 trillion over 5 years into infrastructure. Schools, roads, public transport, etc. all need improvement and those improvements are expensive. For one thing, it lessens the budgetary constraints on the states and munis. For another, it drives job and wage growth from the lowest levels which creates a solid base from which to expand the economy dramatically over the next 20 years. Given the global financial crisis, the government can obtain this funding at very attractive interest rates.

    The long term prescription is wage growth at the bottom which will, in turn, drive up savings rates. Which is why tax policy at the corporate level needs to change dramatically.

    Posted by mcblogger at 12:01 PM | Comments (0) | TrackBack

    November 04, 2008

    A bailout plan for Boone

    PhotobucketI hate Boone Pickens, mostly because I always thought he was little more than an amateur hour promoter who got lucky, not a brilliant businessman who managed to build a successful company. In short, I've always thought of him as someone whose only real talent was in confusing brains with luck. And in giving gifts he could take advantage of.

    And lookit, I was right.

    Posted by mcblogger at 11:15 AM | Comments (0) | TrackBack

    October 30, 2008

    What gives AT&T nightsweats?

    Apparently, AT&T is all hot and nervous about D's winning next week, mostly because they've had the R's in the bag for a decade. Still, they really needn't worry so much... after all, it was all but one of the Republicans and a few D's who voted for retroactive immunity for T and it's competitors.

    Posted by mcblogger at 10:16 AM | Comments (0) | TrackBack

    October 15, 2008

    Biogen Idec vs. Fred Baron

    Biogen Idec has found itself in a rather unique position. It apparently has a drug that is extremely effective against certain cancers, specifically multiple myeloma which happens to afflict Fred Baron.

    Here's the rub...

    1) The drug, TYSABRI, is approved for treating MS and Crohn's.
    2) Tysabri can cause, in a very few cases, a deadly infection in the brain
    3) As a result of certain side effects in immunocompromised individuals, the drug's only available to registered patients. No offlabel uses are allowed.
    4) Tysabri is already in a trial to treat multiple myeloma

    Which is why it's not as easy as just getting Baron's oncologist to order treatment. Baron, to his credit, has gone to some extraordinarily lengths to get this drug including enlisting help from the FDA in letting the company know that this falls under a compassionate treatment variance. Baron has offered to sign a waiver of liability and FDA has apparently indicated that the MM trial will be unaffected by the results from this treatment which neatly punches holes in the arguments being offered by the company for refusing the request of Barron and his son (who kicked everything off with this letter) based on side effects.

    This also opens a larger discussion on medicine and it's future in the United States, specifically the pharmaceutical industry which has been making some big money, especially off the Fed's prescription drug benefit. Doctors do the research and a private company benefits from that research. At what point to do ethical considerations, compassionate considerations, come into play? Simply put, at what point do we fully nationalize research that we are, to a large extent, already paying for with our tax dollars?!?!

    Yeah, the vast majority of the medical research in the US is funded by ... wait for it... the United States government.

    Posted by mcblogger at 02:04 AM | Comments (0) | TrackBack

    October 13, 2008

    Shit announces merger talks with Vomit

    Remember way back in February, 2007 when we reported the about rumor a merger between GM and Chrysler? Well, it appears that the talks have since moved forward with all the deliberate speed of an accelerating Chevette.

    via The 'berg

    Combining GM, the biggest U.S. automaker, with No. 3 Chrysler would cement GM's global sales lead over Toyota Motor Corp. The money-losing Detroit companies are under pressure to boost cash as the credit crisis dries up loans for dealers and buyers, helping send U.S. auto sales to their lowest since 1991.

    ``It would be a classic consolidation,'' John Casesa, a partner at consulting firm Casesa Shapiro Group in New York, said today in an interview. ``The incentive would be to reduce cost by reducing overhead,''

    Oh.My. Casesa must have been at the bar this AM where the Bloomberg reporter who filed the story was enjoying breakfast (one egg, one english muffin and one eye opener consisting of equal parts bourbon, vodka, clamato and a quarter teaspoon of habernero chile). First off, I guess you could call this 'a classic consolidation' if you consider such success stories as Sony/Columbia and Federated/Allied 'classic consolidations'. And if you redefine 'classic consolidation' to mean 'peerless clusterfuck'.

    This is a super bad idea. You need to liquidate both the companies, guarantee the pensions of the workers and make sure that an acquirer doesn't fire them. Change the management, change the design teams and voila, you'll get a great company.

    The government would have to be involved in something like this, but that doesn't scare me. What terrifies me is allowing the managerial incompetence in place now to continue and drag down both companies. And their workers.

    Posted by mcblogger at 07:40 AM | Comments (0) | TrackBack

    October 09, 2008

    Greed and Fear, or, Thanks for the cheap stocks!

    Wall Street went on sale this afternoon and as I pulled cash from everywhere I could to buy the wonderful companies that were on sale, the only thing I could think of was something I was told by a manager more than a decade ago...

    Be fearful when others are greedy, be greedy when others are fearful

    So, you think that Altria was worth 4% less today than yesterday? Who am I to argue with your stupidity? I'll be happy to take those shares off your hands. And yes, bitches, Altria is all you get. I'm not telling you what else I'm buying.

    Here are a few choice quotes from the Times article published late today...

    Trevor Callan, a financial planner in La Jolla, Calif., said he has been bombarded by calls since Wednesday from nearly every one of his clients.

    “The bottom line here is we’re witnessing complete panic,” Mr. Callan said. “There are certainly periods of time where rationality is thrown out the window, and this is one of them.”

    Yep. It's true. Mr. Callan is getting our MOTO of the Month Award. It's very prestigious. He SHOULD be quite excited.

    Michael Cerenzie, a film producer, said he has been selling out of his million dollar position in banking stocks and is looking to invest in companies specializing in natural gas and energy.

    “This isn’t going to come back,” he said of the recent stock market losses. “This is going to be a long one. We are not going to see returns like we did in the past.”

    His business partner, Christine Peters, has her money managed professionally, but also sold her bank shares this week. She has replaced them with beaten down shares of IBM, as well as investments in gold.

    No, much like your career, stocks are in permanent decline. Thank you soooo much for selling me yours (and at a discount to your purchase price)!

    And finally I give you the Dumbest Smart Man In The World

    Robert M. Solow, who won the Nobel prize in 1987 for his work on economic growth, said that “potential for instability was always there” but he is caught surprise at the magnitude of the problems in the economy and financial system.

    “I’m as puzzled as anyone else,” he said. “I don’t have any particular wisdom to sell.”

    It's a PANIC. You don't figure that out. There's nothing to figure out when humans behave irrationally. It's rather pret a porter.

    Krugman, for his part, feels as I do about still more bloviating from our President.

    Finally, I'd like to leave you with this from dear, sweet, innocent and wonderful Larry Kudlow whom I've spent years deriding and who now looks like the asshole.

    I have long believed that stock markets are the best barometer of the health, wealth and security of a nation. And today's stock market message is an unmistakable vote of confidence for the president. Even the best low-tax, limited-government economic policies can be thwarted if the men and women going to work in the morning can't get safely back to their homes and families at night.

    Really, Larry?

    Posted by mcblogger at 10:23 PM | Comments (0) | TrackBack

    October 07, 2008

    The Nightmare and Oil

    More than a year ago, I wrote this about the nightmare scenario. We've experienced spot shutdowns in CP for more than year which has squeezed the investment banks. Unfortunately, it's now spread to a systemic problem which prompted the Fed to step in this AM to become the lender of last resort for commercial paper.

    A year ago I said an event like this could well cause the dollar to lose 30% of it's value. That flawed analysis was based on a breakdown mostly in the US. However, as the freeze in the capital markets has spread worldwide and as write downs have basically eliminated $2-3 trillion from the money supply, there is a flight to the perceived quality of US Treasuries.

    Voila! Instant dollar appreciation vs. other major currencies.

    What's the net effect? Well, for the $4-5 trillion on the sidelines, it's a wakeup call that the Fed and Treasury, working in concert with other central banks, will not let the entire global system go down the drain. Further, it lets them know that there are safe risks. Finally, they have got to get this money to work and were charging exorbitant rates to borrow. Now they have an absolutely massive competitor which will have a cooling effect on credit cost increases. This should accelerate a return to normalcy.

    This was the bogeyman in the closet. Now that it's come out, we realize it's not carrying a chef's knife. It's carrying a plastic potato peeler. And we have gun.

    This doesn't mean all is rosy. Unwinding AIG and Lehman will be very difficult and probably will cause temporary shocks in certain areas as distressed assets are sold into weak markets. This is unavoidable but it's not fatal.

    But all the news is not bad. Some buyers are stepping back into the market. Take Wells Fargo's offer for Wachovia. And Citi's subsequent lawsuit. The bottom line is that Wachovia, even with it's problems, is worth a lot of money. By Citi's estimate, $60 bn. Which means shareholders won't get screwed in the ultimate sale because a buyer is going to have to pony up some money... they won't walk away with it for free (as Citi tried to do).

    One positive? With demand dropping and dollar strengthening, oil prices have fallen through the floor at $90/bbl. As the picture in financial securities begins to clear up, look for more and more speculative money to come out of oil and other commodities, dropping them still further. I do not think oil will drop much below $60-67 range which will leave intact the transition to biofuels and more efficient vehicles.

    Still, wages are slack and unemployment is climbing. That's the official number. The unofficial one is far higher. All that aide, we're heading for a recession. Which is a relief considering what we were looking into last week.

    Posted by mcblogger at 12:30 PM | Comments (0) | TrackBack

    October 04, 2008

    We're looking to invest!

    McBlogger is looking for some cash starved businesses in which we can invest. Some might call it 'vulture' investing but we prefer to think of it as 'kicking someone when they're down' investing. We're currently looking for what you might call non-traditional investments. Sure, we know financial stocks are in the toilet, but that doesn't mean we think America is down and out! Quite the contrary, we think it's the perfect time to invest in businesses that show tremendous profit potential with little in capital expenditures. Some of our areas of focus include:

  • Puppy Mills - What's not to love? Buy one good bitch, then breed her out! Don't even need particularly good food and there's no air conditioning costs!
  • Medical and low-level radioactive waste disposal - Humans produce a lot of trash when they're healthy. When they're sick, fagedaboudit! With so many companies making a killing off injection wells, we figured it was our time to step in and drink some blood!
  • Rendering plants - America needs it's fats and with the price of oil what it is, it makes sense to use this natural resource for fertilizers and fuels (plus, it'll help us deal with excess inventory from the puppy mill). Why NOT run your car off the fat from a pork chop? I mean, it's better used doing that than sitting on your ass. Which reminds me, we need to talk about your ass.
  • And NO, for the last time, we are NOT interested in the Statesman. Not even in the land underneath it. Well, we aren't at the current price. But we ARE willing to negotiate.

    Posted by mcblogger at 03:19 PM | Comments (0) | TrackBack

    October 02, 2008

    Senate Passes Recap Plan

    This may be the only time that I will ever find myself in agreement with how Sen. 28 Gauge voted and not agreeing with Sen. Feingold. The Senate passed the plan. The House may vote on it on Friday.

    As for the real world effects, this is just a taste. This is happening to small businesses now. Just imagine what would happen if this occurred to consumers who suddenly fund their credit cards cut off?

    And this, my friends, is what I was trying to tell you. It's page four that's the most important. I want y'all to read it. Then read it again. I want it to sink in fully so that you'll understand exactly the kind of disaster scenarios that have been going through my mind and the level of frustration I've felt from the ridiculous bullshit on both sides. Your political wrangling, fear mongering and STUPIDITY damn near drove us over the edge.

    Frankly, it may still.

    From now on, remember that I don't panic easily. And it would be nice if, in the future, you'd give me the benefit of the goddamn doubt before sending me emails about freaking out over nothing.

    Posted by mcblogger at 01:54 AM | Comments (2) | TrackBack

    October 01, 2008

    Laboring under the delusion that everyone is as smart as you

    With all the crazy cow crap flying about as if in a West Texas windstorm, you'd think the recapitalization plan would already be DOA. That WAS the goal of the Laborers' International Union. Until someone figured out that they could lose their jobs if the banking system collapses.

    A touch of earthy fatalism from the Laborers' President Terry O’Sullivan: "We probably will have to hold our nose, grab the barf bags and do this because unfortunately we've got ourselves stuck on the same ship as those who caused this crisis and if they sink, working people sink too. But a bailout cannot just be another no-strings Bush raid on taxpayers. We need real protections to keep this from happening again and a stimulus package that creates jobs by building America."

    Couldn't agree more! What kind of stimulus package did you have in mind?

    The 500,000-member construction union, which endorsed Obama, wants $100 billion to go for a massive infrastructure program instead.

    "Investing in America has an immediate impact on our economy. The U.S. Department of Transportation estimates that 47,500 good jobs can be created for every $1 billion investment building America," a spokesman wrote in a statement.

    For one thing, unlike many of you mouthbreathers (on the right and left), these folks really understand the real world impact of scuttling this. They lose their jobs. Just like many of us will.

    And where they are WAY OUT in front of many of you (again, on the right and left) is that we NEED infrastructure. These folks, with this one little thing, just became the smartest people I've read about in weeks.

    Posted by mcblogger at 02:09 PM | Comments (0) | TrackBack

    September 29, 2008

    Recap vote is failing and the Dow is falling UPDATED

    The US House of Representatives is holding the vote on the financial services recapitalization plan and it's currently failing. The Dow had fallen more than 600 points but has paired losses to just shy of 500.

    Thinks this stuff doesn't matter? If this doesn't go through, take a look at your retirement account in a few days.

    I'd like to take a personal moment to thank all the idiots, within the Democratic and Republican parties, who are voting against this (not to mention all the pressure from outside groups put on them). When the books are closed on this era of American history, you'll all be remembered as the people who collapsed our economy.

    UPDATE - Boehner is on TV whining that the R's voted against the bill because of what Nancy Pelosi said. Blunt is saying the same thing. The reality is that 75% of his folks voted against this bill. Of course, as Rep. Cantor (who flipped on his support for the bill from against to for) pointed out, NINETY FOUR DEMOCRATS voted against this.

    I can't wait to hear their individual reasons, other than being gutless trash (and basically Republicans).

    UPDATE 2 - Pelosi is saying that D's were to bring half and the R's were to bring half. It appears that the D's followed through and it was the R leadership that failed. Apparently there were 94 Dem's who just didn't like the fact that it was an improved Administration bill. So, the deal was made... the D's bring more than half and the R's just need to balance it out. Apparently, the R's were 12 short.

    UPDATE 3 - I love me some Barney Frank. He just said when asked about Boehner's comment that he simply could not believe that 12 Republicans would disregard the imminent peril to our country, to ordinary Americans, because they got their feelings hurt. He then offered, if the R leadership would give him the names of the people, to go to talk to them 'uncharacteristically nicely' if it would help. The press corps died laughing.

    Now it's Rahm Emmanuel. And he SUCKS BALLS as a speaker at a press conference. He looks and sounds twerpy.

    As of right now, the US Equity Markets alone have lost more than ONE TRILLION DOLLARS since this failed. Thanks a bunch, R's.

    Posted by mcblogger at 12:58 PM | Comments (1) | TrackBack

    September 26, 2008

    Gas pains

    As part of the 'Ike Tours Texas' fallout, refiners on the Gulf are still shut down which is causing spot shortages in Atlanta (which sucks anyway) and in Tennessee. And, apparently, Dallas. Here's what caught my eye (and keep in mind the effected refiners account for 20% of US capacity)

    U.S. crude oil refinery inputs averaged 11.5 million barrels per day during the week ending September 19, down more than 1.7 million barrels per day from the previous week's average. Refineries operated at 66.7 percent of their operable capacity last week. Gasoline production fell last week, averaging about 8.0 million barrels per day. Distillate fuel production decreased last week, averaging nearly 3.3 million barrels per day. (EIA)

    So, refineries effected by Ike account for 20% of US refining capacity and we're down to 66%??!?! That seems strange at a time where wholesale gasoline recently spiked to $5/gal.

    Then I saw this and start to think maybe there is something going on.

    SO, we have a massive crude and gasoline supply disruption as a result of a hurricane. Combine that with newfound regulatory zeal from governments around the world, all of whom are looking to strangle speculation and suddenly refiners have decided to artificially (for 'repairs') reduce the gasoline available in the market?

    Methinks this is a pretty clear cut case of supply manipulation. They can't play with the price since the speculators (those still left in the business now that LEH is gone and MS and GS are under scrutiny) have had to cut back. So they energy companies themselves have decided to create an artificial supply constraint by shutting in capacity unaffected by Ike.

    Ain't it nice that the oil companies care so much about their customers?

    Posted by mcblogger at 04:13 PM | Comments (0) | TrackBack

    September 25, 2008

    Doubling down (craving crow with seconds)

    So this morning I wake up to this story.

    Really? Why, I never. How dare the Bush administration demand concessions it can probably get from this Congress...for reasons COMPLETELY INEXFUCKINGPLICABLE considering the mood of the electorate.

    Go ahead, bitches. I dare you. Sack up and take on the 19% bogeyman or else go suck on Karl Rove's subpoena and stop sending me fundraising letters.

    Crow is best served as a two-course meal. Damn I'm craving some.

    Posted by hbalczak at 01:30 AM | Comments (0) | TrackBack

    September 24, 2008

    May you live in interesting times...

    This financial crisis is finally waning. They always end when buyers finally realize that the firesale won't last forever and they dip back into the market to buy deeply discounted assets. We got a big boost of this yesterday.

    Until now, Mr. Buffett, who has navigated the stock market with legendary prowess, has largely refrained from investing in the stricken financial industry, saying repeatedly that things could get worse.

    Thousands of people on and off Wall Street follow Mr. Buffett’s moves, so his decision to invest in Goldman immediately heartened investors. After falling nearly 1.5 percent during the day, the Standard & Poor’s 500-stock index erased half its loss in after-hours trading Tuesday evening on news of the investment.

    “Buffett is saying he’s confident,” said Brad Hintz, an analyst at Sanford C. Bernstein & Company.

    Mr. Buffett’s conglomerate, Berkshire Hathaway, unveiled the move only days after Goldman, long the premier investment house on Wall Street, embarked on a radical plan to transform itself into a traditional bank to ensure its survival. Goldman, which examined various options over the last week as its shares tumbled and some clients abandoned the firm, also said Tuesday it would sell at least $2.5 billion of common stock to the public.

    The difference between Buffett and others is that HE can afford to hold something for decades until BRK makes a profit on it. Even if he dies, there is management at BRK that thinks exactly like him. And his success has not been the result of luck, it's research and thorough analysis. It's making the right decision.

    Be fearful when others are greedy. Be greedy when others are fearful.

    Last night and this morning I posted a couple of emails to Carl Whitmarsh in Houston regarding something he'd sent out on his massive email list. The first article was this from George Will. Now, George has never been a big fan of McCain. However, that's not the meat of the article. It's the craptastic analysis of the US falling into socialism. Here's what I sent to Carl:

    It's funny to me that McCain would attack Cox for not regulating the very securities that McCain voted to keep unregulated.

    I LOVE the way conservatives have decided that this is socialism, as if the entire
    capital market is now under the absolute control of the Treasury and Fed. Their
    plan, buying assets that the free market has assigned zero value to, is absolutely
    sound. Why? Because occasionally the market goes crazy and won't buy something
    that's worth a dollar even if it's discounted to 10 cents. The market, in short, is
    not always right.

    The Fed was CREATED to avoid panic and provide liquidity in times of market
    dislocations. Which is exactly what we have now.

    That being said, Paulson's plan, as presented on Sunday, is a thoroughgoing mess.
    There will have to be oversight. There will have to be caps on CEO compensation.
    However, the basic idea to add liquidity to our deflated economy is a good one.

    The second comment was related to a piece Harvey Kronberg ran from Royal Masset

    I love Royal but he's wrong on what's happening in the financial industry. This is a panic, pure and simple, and it should wake people up to the reality that markets are far from perfect.

    Markets are nothing more than buyers and sellers. Period. They are dependent on
    humans and their imperfect decision making. The idea that markets self regulate with
    minimal impacts is ALWAYS wrong. They do self regulate and in the process create
    what can charitably be called distress.

    Regulation and enforcement, while imperfect and sometimes overreaching, is a hell of
    a lot better than mass unemployment and starvation.

    That's the lesson most of the 'free market' Republican's have never learned.

    Of course, there are number of others who have problems with buying assets. They see another solution, lend directly to the banks.

    Here's why you can't just lend money to banks, allow them to take the losses in selling these assets, and then repay the debt over time. For one thing, these losses are going to (in many cases) wipe out all the equity in banks, rendering many insolvent. You can't replace that equity with debt owed to the government. Debt is Debt. For another, the market is so freaked out and dislocated (not to mention fearful) that no one wants these securities at any price. It's not that these securities aren't worth something. After all, the vast majority are A paper mortgage credits. It's that investors can't see the value and won't take ANY risk.

    What is needed is a prime mover to get these assets moving, worked out and restore the market. That prime mover is the only entity capable of operating for the long haul, the Federal Government.

    The issue is that these assets, when marked to market, have no value because the market is buying and selling NOTHING. However, the loans underneath are STILL performing. On a cashflow basis, many are performing exactly as predicted. We may now need to look at discounted cash flow as a value model to fall back on when MtoM fails. Which it is prone to do when the market seizes up. Which it, of course, does from time to time despite what the Republicans say.

    We have to stabilize home prices which means we need people with jobs who can buy homes with mortgages. Unfortunately, as this crisis deepens, it begins to effect employment AND the ability of people to secure financing for homes. Without a market, the value of homes continues to drop. In the end, we fall into a Depression. THAT'S the end result of doing nothing.

    Finally, there are some lesson we all need to take from this experience...

    1) Regulation and enforcement are not obstacles to the success of the market. They are ESSENTIAL to the success of the market.
    2) Capitalism has not failed. What failed was our obligation to oversee it and make it work for the majority.
    3) Just because something is valued at nothing right now, it doesn't mean it's worthless.

    One last point... one that everyone needs to understand unequivocally, if we don't do this the whole damn country fails. THAT'S the reality and all the whining about taxpayers footing the bill (which is a load of crap) isn't going to change it.

    Posted by mcblogger at 03:10 PM | Comments (0) | TrackBack

    Methinks they doth protest well enough (and that's what has me worried)

    So if we're to believe our eyes and ears, the Administration's bailout proposal sure has everyone on the Hill all frothing at the mouth.

    I don't know about you folks, but it makes me real nervous-like when the Democratic congressional leadership rails this loudly about a Bush proposal this feculent. Because all too often, the squallin' and wall-eyed fits give way to The Big Cave-In [see, e.g., FISA, reauthorization of Iraq War funding, domestic spending levels, etc.].

    At times, it seems as if this sort of rending of garments and gnashing of teeth is almost a kind of obligatory theatrical foreshadowing of a preordained tragic climax wherein vile douchebaggery and bitchassedness prevail over courage and righteousness. For you English majors out there not yet done with the metaphor, I suppose the denoument would be the part where said players engage in post hoc bitching about how the executive branch has usurped all the power and singlehandedly ruined the country and that's why only our side can provide the bold, gallant leadership the nation needs, bleh bleh bleh.

    (And I type this while aiming Ye Olde Stinkeye in your direction, Nancy, Steny and Harry.)

    Hopefully, things will be different this time. Maybe Democrats on the Hill will say, in one, big, loud unified voice, "I'm Rick James, bitch!" and imprint the Will of the People upon the forehead of Connecticut-native George W. Bush with the almighty knucklebling of Article One power. Maybe instead of handing a blank government check to the Gamma Beta House and hoping they'll notice the phrase "public service project" written on the memo line, Congress will pass some completely pinstriped-ass-whuppin' legislation and rock the nation with a new number one hit single, "Smells Like CEO Comeuppance."

    Lord, I hope that happens. But I know better than to emotionally invest in that prospect. Kind of like how I learned, as a kid, to tense up any time I saw Charlie Brown on television hauling ass toward Lucy holding a football.

    You know, a big heaping plate of pungent raw crow sure would taste good right about now.

    Posted by hbalczak at 01:26 PM | Comments (0) | TrackBack

    September 23, 2008

    Rewriting history, with Kevin Hassett

    Bloomberg is carrying some rather odious commentary from Kevin Hassett of the American Enterprise Institute, the right wing institute which provides little in the way of real information and research but is LONG on commentary.

    According to Kevin, this is all the fault of the Democrats because they wouldn't reform Fannie and Freddie. What Kevin doesn't point out is that the bill in question would have so severely curtailed Fannie and Freddie that it would have eliminated them as real competitors and an effective counterbalance to the banks. Kevin claims, stupidly, that the failure of Bear Stearns was caused by... Fannie Mae.

    30 to 1 leverage in a CDO of CDO's had NOTHING to do with it, right Kev? Neither did Bear's never ending hunger for riskier and riskier sub-prime garbage that was priced inadequately for the inherent risk, I'm sure. Of course, I understand how you can make mistakes, Kev. After all, it's easy when you ignore reality.

    Kevin also points out that FNMA is holding $388 bn in sub-prime and Alt A credits. That's true. Considering that at the height Wall Street was issuing $600-700 bn PER YEAR in sub-prime issues, it kinda dwarfs Fannie Mae's holdings. I'd also like to know just who issued those sub-prime credits on Fannie's books. I'd be willing to bet some of them show Lehman Brothers, Bear Stearns and Credit Suisse as the vintners.

    Of course, Kevin leaves all that out and points out his own ignorance of structured finance and the house cards by alluding that AIG was also collapsed (as if by magic) by Fannie Mae. AIG is even easier than Bear... they wrote too much insurance, too cheaply and when the call came for more collateral from counterparties, they couldn't sell assets fast enough... because they were carrying some the same assets they were insuring against default.

    Brill business strategy, especially for an insurer.

    Of course, Kevin can be excused for not knowing any of this. He is, after all, a political moron and (again) completely ignorant of finance. His only real work experience in business is at the AEI and as a McSame campaign adviser. Which puts him right up there with other economic luminaries like Carly Fiorina and the crew of lobbyists that McSame calls his close friends and advisers.

    Posted by mcblogger at 10:26 AM | Comments (0) | TrackBack

    September 22, 2008

    The fallout...

    First off, for a moment, take a look at this again. Specifically point one. Think about that every time you read something from one of the chicken little's on the right (or left) who are bleating on about toxic securities.

    One more time, there is no such thing as a toxic security. There is only a toxic price. In other words, be rational about the prices you pay for assets and you'll be happy. The market for credits got very frothy and people overpaid either because they were dumb or they didn't really understand the securities they were buying. Now people have gone the opposite way and are unwilling to buy these assets at any price.

    As the old saying goes, be greedy when others are fearful. Be fearful when others are greedy.

    Unfortunately, it looks like many investors are going to take a pass on these assets. Which leaves the Fed's and the few willing and smart enough to jump into the fray (like JPM). First off, I'm pleased as punch about the government getting involved since the 'free' market has completely gone off the rails. However, Paulson's plan is still the wrong way to go.

    We're also mostly on the same page (though I, unlike Stirling, don't subscribe to conspiracy theory) except for a few highlights...

    1) Cramdowns - Basically, this is a modification for mortgages in markets with declining values. It's also useless. What about the homeowner who is making their payments EVEN though their home is worth less than they paid? There's really no need for this unless you're talking about doing a workout on someone who really can't afford the mortgage and the value has declined dramatically. However, I don't like the government getting a piece of the inevitable increase in value down the road through some kind of hitherto unknown lien position. If you're going to help people, help people.

    My advice : Don't do this with anyone who has had a greater than 50% decline in value. That's what you'll get on a foreclosure. Anyone more underwater needs to just walk away with a wipeout on the mortgage history so they don't have an adverse hit on the credit report.

    Last thing... change the tax laws to benefit workouts rather than foreclosures. It's easy... if a company does a workout that results in the loss of loan balance (say, from $200k to $150k) then they can take that as a loss against ordinary income immediately. If they foreclose, they have to take the loss on that against income over THREE years. Either way, you have to alter the law to keep these companies from 1099ing the people effected for the difference.

    2) Not so much with a national emergency and rationing. Let's look at changing tax policy to increase wages for ordinary people. That'll take care of commodities inflation and our negative savings rate. And that whole petroleum thing can be easily fixed with biofuels. Actually, it WILL be fixed fast as long as oil is over $50/bbl.

    I'm fine with expanding FDIC and LOVE what Obama is hitting on. Plus, as many of you know, I've always hated excessive levels of executive compensation. I say go for it, Congressional Democrats! Take this time to make this a real solution, instead of another Paulson bandaid.

    Now, onto what's happening today. Obvs, the market loved the Paulson/Bush/McCain plan as much as we did. The Dow is down around 3% and oil has shot back up to $120/bbl as investors pull out of equities and dump speculative money into oil.

    Needless to say, we ALL apparently want something other than another silly gimmick. Except for Michelle Malkin who has turned this into yet another attempt to divorce herself and her Party from responsibility for this problem.

    Robert Novak called attention to Paulson’s Democrat DNA last October. It’s worth reminding you of Paulson’s instincts and the liberal allies he has installed at the Treasury Department

    No, no, Bitch. Paulson's one of yours. And quit quoting that sad, old alcoholic. As for him bringing in 'libruls', the problem is that all your financial guys suck balls. They all end up going broke.

    Posted by mcblogger at 03:16 PM | Comments (0) | TrackBack

    September 21, 2008

    A special invitation to the Secretary of the Treasury

    Go FUCK yourself, Hank.

    Seriously, THIS is what you came up with? A massive expansion of the Executive Branch, no help for homeowners and absolute power with a blank check?

    It's clear to me now that Paulson has got to go and we need Bob Rubin back at Treasury. Larry Summers is wrong for the job (honestly, he's a dumbass anyway) and Rubin is the only one with the kind influence in financial and political circles to get something done. He's also far smarter than Paulson which should help.

    We need to re-regulate commodities and derivative trading (fuck you, Phil Gramm, you dirt leg moron) and begin requiring a lot more capital be held by companies wishing to operate in the securities industry. No more of this 30 to 1 leverage bullshit. But I don't see that it this little 'plan'. I also don't see anything to help expand efforts already proceeding to pull borrowers out of bad mortgages. No, I'm not talking about a cram down and share the wealth plan (seriously, why even bother, Ian? You gonna give everyone who's upside down on a car note a bail out, too? Just get them outta the bad loan and regular appreciation will work out the gap), just a reworking of underwriting guidelines and insuring to allow people to get into affordable mortgages.

    We needed real solutions and an indication of some sort of contrition. Instead, we get a brazen attempt to steal still more power for an out of control President.

    Congress should act. The Democrats should write one hell of a bill and tell the President to sign it or we'll let everything go down the tubes.

    Enough bullshit and politics. And Chairman Frank should immediately demand Paulson's resignation.

    Posted by mcblogger at 04:37 PM | Comments (0) | TrackBack

    September 14, 2008

    Tomorrow could be hella bad UPDATED

    Item one, Lehman Brothers buyout talks break down when Barclay's balks at assuming Lehman's counterparty risk without a backstop. Broker/Dealers are already working on settlements of Lehman trades in preparation for the firms liquidation Monday morning.

    Item two, Bank of America is in advanced talks to buy Merrill Lynch.

    My prediction? Hold on to something... this could easily drive down the indices by 5-10% tomorrow.

    UPDATE - 10:50 PM

    AIG is now requesting $40 BILLION in liquidity from the Fed. So far this year, AIG has raised $20 billion.

    Posted by mcblogger at 10:56 PM | Comments (1) | TrackBack

    September 04, 2008

    The Icahn Speaketh

    Carl Icahn, while a largely self-important douche, has been a tremendous advocate for shareholders vs. management especially on the subject of takeovers and management's attempts to avoid/enrich themselves from them. This entry on his blog is really very good...

    Marty Lipton, the prominent Wachtell Lipton lawyer whom I have sparred with on numerous occasions, is no stranger to hyperbole about the "sanctity" of the corporate boardroom, but his latest comment about Anheuser-Busch is way over-the-top.

    In a July 24 memo to clients (Corporate Governance Ratings Debunked), Lipton pointed out that the giant beermaker recently changed its bylaws to allow for yearly elections of directors, rather than every three years. As a result of this, the company was subjected to a hostile takeover by Belgian beermaker InBev, which was poised to run a proxy battle to get new directors elected to the board, asserts Lipton.

    "Anheuser Busch is the latest US company to fall prey to a hostile takeover shortly after repealing its classified board in the name of adherence to best practices in corporate governance," Lipton said in the memo.

    Unfortunately, Lipton has it all wrong in this classic anti-shareholder view. His opinion suggests that it is a good thing that the maker of Budweiser should be protected from takeovers to maintain the cozy "status quo" of its boardroom.

    Fortunately, the directors of Anheuser Busch didn’t listen to Wachtell Lipton, but responded to shareholders who saw the InBev takeover as a positive thing – at the right price.

    I've never agreed with Lipton's constant defense of management teams at the expense of shareholders and employees. Icahn is also not someone with whom I consistently agree, mostly because he traps himself in short term thinking and a desire to make large, instant profits. I'm more of a long term value guy. However, if my choice is Icahn vs. Lipton, I'll take Icahn every time.

    And the InBev purchase of Anheuser Busch was a very good thing.

    Posted by mcblogger at 01:31 PM | Comments (0) | TrackBack

    September 03, 2008

    Cypress to shut down Fab 2

    Cypress Semiconductor has decided to shut down Round Rock based Fab 2, the facility where it has produced semiconductors for more than 22 years. The shut down will result in the loss of more than 200 jobs...

    The company informed the Workforce Commission that it will close the plant in four stages, eliminating 211 engineering, administrative and operator jobs. In the first stage, the company will cut 67 jobs between Oct. 27 and Nov. 11. Then it will cut 57 jobs between Nov. 10 and Nov. 23, followed by more job cuts between Dec. 8 and Dec. 21. The final 45 job reductions are planned to occur in early 2009.

    Cypress said that the Round Rock plant used older manufacturing process technology to make less advanced chips.

    "It is simply more cost-effective to shift manufacturing elsewhere than to retool Fab 2," said Shahin Sharifzadeh, the company's manufacturing vice president, last year.

    One has to wonder if Cypress received any 'incentives' and how much Round Rock has benefited from them. As for me, good riddance Cypress. You're kind of a loser any way. While it hurts to let jobs go, hopefully Samsung or another company will pick them up. They seem to be doing well.

    Posted by mcblogger at 02:15 PM | Comments (0) | TrackBack

    August 19, 2008

    Having it GOOOOOD (if you're a corporation)

    The WaPo decided to take some time out of it's busy schedule sucking up to McCain and his outrageously stupid staff to rain a little dookie on Senator Obama and his plan to stop offshoring American jobs and make sure corporations pay taxes on income earned by overseas divisions. Which is interesting in light of the recent report from the GAO that using loopholes, two-thirds (that's 66% for those of you who don't do fractions so well) of US and foreign corporations operating in the US didn't pay taxes between 1998 and 2005. In fact, 25% didn't pay a dime to the US Treasury on more than $1.1 TRILLION in revenue in 2005 alone.

    Some of course think this is great...

    I see it completely differently. First of all, corporations don't really pay any income taxes at all. People do. Every time a company decides to sell something to you, the price depends on a lot of things, including how much it costs to make the item, how much profit the company wants to make, and how high the company's tax bill is. You, the consumer, end up paying the corporate income tax with higher prices. And you want more of that?

    This is, of course, untrue. Whether a company makes a dollar or $1 billion, it should pay taxes on those profits. Consider it the cost of doing business in a country with a strong consumer base, a tradition of the rule of law (at least so far as commerce is concerned) and a fantastic (though deteriorating) infrastructure. Not to mention, police and fire protection and an education system that spits out workers that are easily trained. You don't get that in many other countries, especially not in those with lower taxes.

    Further, from an economic perspective, this is utter nonsense. For one thing, companies have competitors who offer similar products and servicesm not to mention a little something called demand elasticity. When consumers are gouged, they look for a cheaper alternative. Which means that it's hard to drive up prices arbitrarily, say to make more to pay your taxes as the author (a CPA) suggests.

    No, these taxes hit shareholders. As a shareholder in a number of companies, I'm fine with that. After all, in other countries, my stake could be arbitrarily taken away. Not so here. In point of fact, I'm happy to pay taxes... it means I made money and am doing my part as an American to maintain the country that has allowed me to prosper. You see, I'm a true conservative who believes fundamentally you pay for what you get. Sure, I don't want government waste but at the same time I don't want private sector waste, either. And the private sector is way more wasteful. I want efficiency and despite what some supposedly conservative ideologues would like to believe, GOVERNMENT IS THE ANSWER IN CERTAIN SITUATIONS.

    Finally, let's talk about corporations as people. The fact is, according to a number of SC rulings and interpretatins of the 14th Amendment, corporations ARE people. Why on earth shouldn't they pay taxes like the rest of the people?

    Krugman has his take on it and takes on the argument that poor US companies are taxed too high. Actually, as a percentage of GDP, American corporations are taxed at a rate that's middle of the road for first world countries. Only Germany and French corporations pay less as a percentage of GDP, something that will no doubt infuriate those who hate these allegedly socialist countries.

    The most striking thing about this debate are the ends to which some will go to dissemble. To wit...

    First, while it is true that 60 percent to 70 percent of companies in the study paid no tax in a given year, there was a big qualification. The study focused on an Internal Revenue Service tax database that included millions and millions of companies. The vast majority of firms in the study were tiny mom- and-pop enterprises.

    Why did the tiny mom-and-pop enterprises pay no taxes? Because they didn't make any money! The study reported that was the reason about 80 percent of the firms in the sample avoided taxes in a given year. How terrible of them.

    If the GAO issued a report that added together data for nine hot dog stands and General Electric Co., and found that 90 percent of companies didn't pay any tax, it would be a harmless and silly thing to do. But if the Democrats then rush to the microphones and insinuate to the general public that 90 percent of companies are tax dodgers, the stakes change.

    The author of the above is from the American Enterprise Institute and his focus was on the Democrats rightfully politicizing this. And, in case you were wondering, what he says above is utter bullshit. The focus of the study was on corporations with more than $50 mn in revenues and/or $250mn in assets. How many hot dog vendors do you think fall into that class? How many mom and pop Ebayers have more than $250mn in assets?

    Of course, the author didn't bother to leave his arguments there but instead decided to reiterate the tired assertion that US corporate tax rates are the highest in the western world. Which is true if you're looking at published tax rates. What he should be looking at is the actual tax burden which is composed of the actual taxes paid by companies in the US. That number is among the lowest in the world which rather neatly rains dookie all over the argument that our poor corporations are overburdened with taxes. Want more proof? See the Krugman link again.

    Leona Helmsley was often quoted as saying that only the poor pay taxes. They can't, after all, afford accountants to find exotic loopholes in the tax code and they certainly can't afford attorneys to defend them in the event of an audit.

    Posted by mcblogger at 02:03 PM | Comments (0) | TrackBack

    August 02, 2008

    Think the economy is good?

    Take a look at this... then tell me you're doing OK.

    Posted by mcblogger at 08:55 AM | Comments (0) | TrackBack

    July 30, 2008

    You're looking a little desperate...

    The EIA report came out this morning and had some interesting numbers. So far, the traders see it as bullish. So do the talking heads on Bloomberg, save one who picked up on the seasonal adjustment as refiners begin the shift to fall and winter formulations.

    But there's another issue as well... people aren't using as much. Margins on gas are tight. Therefore, refiners have been producing less which is why the dramatic drawdown in inventories. Refiners, simply put, are putting more emphasis on higher margin products like distillates. Now, want me to give you some back up numbers? How about this...

    Crude oil supplies declined 81,000 barrels to 295.2 million barrels last week, the report showed. A 1.3 million barrel drop was forecast in the Bloomberg News survey.

    Distillate Supplies

    Inventories of distillate fuel rose 2.4 million barrels to 130.5 million barrels last week, the report showed. A gain of 2.05 million was forecast, according to the median of 12 analyst estimates.

    So, Oil inventories dropped much less than expected (bearish for oil prices) and distillate inventories rose far more than expected. Everything fits... still, Goldman and the traders are focusing on gasoline inventories and bidding up oil. Goldman, for it's part, has dropped it's $200/bbl by the end of the year projection and replaced it with $149/bbl.

    Lehman is going in the opposite direction. Honestly, seeing the evidence and not really being prejudiced one way or the other, I'm going with Lehman.

    Posted by mcblogger at 02:09 PM | Comments (2) | TrackBack

    Goodbye, shitty Irish-style pub

    Bennigan's has filed for bankruptcy. Chapter 7 BK, to be exact, which means they are selling everything from the tables and chairs to the taps and the microwaves that actually cooked the food.

    I wish I could say I was nostalgic, but I'm just not. I haven't been to one of these places in years, mostly because of the proliferation of restaurants that were, frankly, far superior in terms of food. And in terms of staff who didn't judge my beverage choices.

    Posted by mcblogger at 09:56 AM | Comments (0) | TrackBack

    July 29, 2008

    Right. And Wrong.

    The NYT Ed team spent Sunday congratulating Democrats for stopping retarded R efforts to drill in ANWR and the OCS. Then they congratulated the R's for keeping the Demo's from enacting legislation to restrict speculation in commodities.

    While speculation is not the only thing driving oil prices, it IS a substantial component. Failure to acknowledge that fails to acknowledge the nature of markets and momentum players in them. For another, oil has steadily trended higher on rumor and, wait for it, speculation about events around the world. Why, for instance, Nigeria and production problems there have been the reason for fully $10 of the rise in oil at a minimum. Which would be understandable if Nigeria WASN'T PRODUCING ANY OIL.

    Like all commodities, demand is an issue. However, the primary talking point regarding the case for no speculative bubble has been (mostly from people in NYC) that gas demand hasn't fallen despite the historic high price. Of course, what's left unsaid is that refiners haven't been able to pass THAT price, NYMEX spot, onto consumers. And that demand destruction is, in fact occurring.

    The Ed Board at the Times apparently thinks that speculation is only someone trying corner the market. It's not. It's money chasing money regardless of fundamentals. While I wasn't a big fan of the D plan (I'd have rather seen short term cap gains taxes, realized in less than a year, drilled up to 70%) it would have at least done something. Of course, as the Times points out, it would have hurt hedging operations for airlines.

    I guess the bright folks up there don't realize that there are other ways to hedge. And that absent speculation, there isn't as much of a need TO hedge.

    Posted by mcblogger at 11:46 AM | Comments (0) | TrackBack

    July 28, 2008

    Oh, Paul... notes on the Housing Bill...

    Usually, I find myself agreeing with Krugman 90% of the time. This piece is absolutely spot on. As he astutely points out, financial regulations and statutes from the 1930's need to be updated for a 21st century global financial reality that includes 30 to 1 leverage and derivatives with notational values in the trillions.

    Basically, one firm going belly up can freeze the entire system. Thus, the need for the Fed and Treasury to step in because private firms went a little too wild and larded on too much risk. So much, in fact, that it stands to effect the 300 million of us who aren't investors in these firms. With that kind of reach, it's absolutely necessary that there be enhanced regulation. And Phil Gramm can go fuck himself.

    HOWEVER, I'm sick of the talking point, when referring the housing crisis, that this was all the fault of brokers.

    Mortgage originators didn’t worry about the solvency of borrowers, because they quickly sold off the loans they made, generally to investors who had no idea what they were buying.

    Uhm, Paul, originators can't originate a loan for which there aren't guidelines and a sales channel. In other words, for a loan to be originated there has to be someone willing to buy it and they set the rules. The people who bought and securitized these loans (like Bear Stearns and Lehman) knew exactly what they were getting.

    Think I'm wrong? Call an originator in the phone book, any originator, and ask for a 95% NoDoc loan with no MI for the purchase of a non-owner occupied property. They'll calmly explain that the product doesn't exist.

    Because the people who wanted them are either dead, dying or on life support. And that's not the fault of the originator. It's the fault of the moron bankers in the mortgage practice who thought these were such awesome credits that they should receive a premium price.

    Posted by mcblogger at 03:34 PM | Comments (0) | TrackBack

    July 23, 2008

    No. Really. Let's belabor the point.

    You know, what's irritating about all the information coming out about 'Our Current Financial Crisis' is that a lot of it is really good and some of it is just a bunch of damn bullshit. The vast majority is a combination of both. This piece from the Agonist, itself an expansion on an article by Gretchen Morgenson in the NYT, falls into the majority... some great work and some really specious arguments.

    The central argument is that banks, through their unrealistic demands for ever greater growth, brought this on themselves by leveraging themselves, disregarding risk and recognizing the profits to be made over years or decades instantly. Some of this is very valid criticism. Underwriting guidelines went off the rails and led to, for example, the stated income loan for wage earners (we called these Liar Loans). Further, demand in the market for securitizations and the perceived safety of those securities (they were backed by mortgages... people ALWAYS pay their mortgage) led to pricing substantially below risk. This was classic irrationality, paying far too much for assets worth much less. Now, everyone is so nervous that they don't want to own any but the safest credits, those insured by the government (directly or in the case of Fannie/Freddie, indirectly). 18 months have passed since the markets began to seize up and we're still stuck. Will they come back?

    Of course. However, underwriting is going to be a serious concern going forward and pricing is going to go way up. Many companies, for example, are still doing jumbo loans. However, they are being priced as if they are going to remain on the books forever, never to be sold.

    Everyone, from banks to borrowers to investors, is to blame for this crisis. However, the reality is that this was, in part, driven by nonexistent wage growth and lack of regulatory compliance. In other words, while the crash was inevitable, it would have been a lot less costly and damaging because the consumer and banks would have been better able to weather the storm. Government, as it turns out, really IS a necessary evil. It's funny how many people who invested in IndyMac are now bitching and moaning because OTS didn't do it's job.

    This is a failure of conservative, Reaganite ideology. And now, rationality is making a comeback. Which is why this won't be nearly as bad as everyone seems to think. And for another take on Morgenson, there's this.

    Posted by mcblogger at 09:11 AM | Comments (1) | TrackBack

    July 22, 2008

    Roundin' up the TPA

    It is time for another edition of the Texas Progressive Alliance's weekly round-up.

    This week's round-up is compiled by Vince from Capitol Annex.

    The Texas Cloverleaf asks if John Cornyn and Kay Bailey Hutchison want more HIV in the global pandemic? Our TX Senators were 2 of the 16 votes against the latest HIV/AIDS bill in the Senate this week that passed overwhelmingly.

    WCNews at Eye On Williamson posts on Diana Maldonado's great fundraising numbers in Diana Maldonado Has Almost 4 to 1 COH Advantage In HD-52.

    WhosPlayin at WhosPlayin steped outside of his comfort zone a bit and commented on the Fannie and Freddie situation.

    jobsanger blasts Republican attempts to allow offshore and ANWR drilling in Drilling Won't Make Us Energy Independent and in Bush Playing Politics With Oil.

    The bar may be open, says TXSharon at Texas Kaos in Fire Water: With Compliments from EnCana, but if Encana's serving up the cocktails, it might be better to abstain.

    McBlogger's own
    Harry Balczak has a new recurring feature, href="">Harry Balczak's Reminder To You People. In this edition, he'd like to remind Those Of You Who Just Couldn't Vote For Kerry that your decision was, well, pretty stupid. He is nice about it, though.

    Vince at Capitol Annex notes that poultry kingpin Bo Pilgrim paid to jet around Texas Governor Rick Perry's staff to promote the ethanol waver he bought and paid for with a $100,000 contribution to the Republican Governor's Association.

    Mean Rachel contemplates whether Fannie and Freddie have anything to do with being raised in 78704, but living through young-adulthood in 78749 in Crashes.

    The final word, for now, on the Webb County Sheriff's race says Martin Cuellar wins by 41 votes. Since the various 'official' totals for Cuellar have been +37, -133, +39 and finally +41, CouldBeTrue of South Texas Chisme wonders what the h*ll happened!

    Off the Kuff looks at the Harris County campaign finance reports and finds good news and not-so-good news for Democratic campaigns.

    The Texas Observer's Melissa Del Bosque had an observation about one
    of the panels at Netroots Nation this past weekend, and PDiddie at Brains and Eggs had some observations about what she observed.

    BossKitty at BlueBloggin shows us smuggling humans into the US is no problem at all; From Africa to Mexico to US, Any Way They Can Immigrate.

    BossKitty as TruthHugger points out the continued struggle by our soldiers suffering from PTSD and the inadequate response by the incapable VA, in But, When They Come Home ….

    Posted by mcblogger at 12:17 PM | Comments (0) | TrackBack

    July 21, 2008

    What matters most

    Last week there was this in the WaPo regarding the criticism of a bailout by the Fed's of Fannie Mae and Freddie Mac. At the end of the day, the question is not whether IT is right or wrong; The question is whether or not it will do the trick.

    As for Fannie and Freddie, nobody would be particularly happy if it became necessary for the Treasury to inject some fresh capital into the mortgage giants, in exchange, say, for newly issued preferred stock that could be sold back at a profit when the mortgage market recovers. But even the editorialists at the Wall Street Journal acknowledged yesterday that this wee bit of socialism might be the most effective and least costly way to keep the mortgage market functioning and prevent a meltdown in global credit markets.

    A financial crisis is not a morality play. What matters most isn't the precedents that are set, the amount of taxpayer money that's implicated or whether people are made to suffer fully for their financial misjudgments. In the end, what matters most is that we get through it as quickly as possible with an economy and a financial system intact.

    Friday I had the opportunity to sit through the Subprime Lending panel at Netroots Nation. Honestly, I expected much more mostly because I have a tremendous amount of respect for the people on the panel. Even Rep. Miller who seems, though well intentioned, very unwilling to understand the impact of what he wants to do.

    For one thing, Rep. Miller has a real problem with mortgage brokers. ALL MORTGAGE BROKERS. Working in the industry I can tell you from first hand experience that there are far more great brokers than mediocre or even bad ones. Rep. Miller makes no distinction between the two groups. In fact, he really doesn't understand the difference, apparently, between brokers and bankers. Nor does he seem to realize that the end effect of his legislative agenda will not be to kill an industry or to stop abusive lending practices. It will be to convert brokers to bankers.

    Both Miller and Mark Griffith really seemed to come alive at the notion of new regulations and laws restricting what they considered to be unfair lending products. They are operating from the mistaken assumption that some of these products were engineered to create default or, worse, continual refinancing. I say mistaken because neither of them are apparently aware of the fact that loans that pay off early end up costing investors money and banks hate foreclosures, mostly because they end up costing more than a loan that just pays off. But I digress... the point was new laws and regulations. Which aren't really needed because the ones that are ON the books now would have gone a long way to preventing the current crisis. However, they weren't enforced. Griffith and Miller live in that fantasy world where people always follow the law and there's no need to fund the people who look over their shoulders. I guess neither of them have ever driven on a freeway.

    Hale Stewart made some excellent points and, having worked in the securitization side of the industry, had a great command of the subject matter. He made a comment that 20% of Countrywide's non-prime portfolio (made up of deep subprime and Alt A credits) was delinquent. That's true, but the actual default rates are the key and they aren't near 20%. Countrywide hasn't disclosed them, but industry estimates put the number at close to 5%. While Cwide didn't price these credits for the underlying risk (they booking these loans at far too low a coupon), the default estimates are inline with what you would expect for loans of this type.

    There was one minor point that made regarding Hale about securitization and elimination of risk. Some investors, the same ones who are panicked right now, never understood that home loans can go bad. Even the ones with really high credit score borrowers and big down payments. Securitization was a way of balancing risk and creating fungible product that could be traded like a bond. Hale was spot on in that investors panicked when they discovered that securitization didn't mean complete and total safety.

    The panel, on the whole, presented about half and half in terms of correct information vs. incorrect information. It was the stuff that was bad that got me since it wasn't just wrong, it was REALLY wrong. For instance, Griffith claimed there aren't subprime borrowers, only subprime loans. While this may fit an progressive ideological frame, it does not fit reality. The reality is that some people have credit that is significantly worse than others, people who have shown a history of paying slow or not at all on even the most minor debts. Should these people receive the same terms and interest rates that people with fantastic credit get? If so, how exactly do you plan to compensate lenders for the substantially higher risk of default you're asking them to assume? That thought apparently had not occurred to Griffith.

    Griffith also discussed the right wing talking point that CRA REQUIRED subprime lending. He's right and wrong in saying that's not true. While CRA did not require 2/28 ARMs and Pick A Pay, it did lead to the creation of subclasses on the prime side represented by products like Freddie Mac's Home Possible and Fannie Mae's My Community. Both of these products required minimal or no down payment (a high risk factor), had income limitations (usually no more than 100% of area median income unless the property to be used as collateral was in a designated census tract for renewal), were aggressively priced and the mortgage insurance on them was far lower than the coverage on comparable prime products. To add to the risk on the loan, these products were extended down to credit classes that would ordinarily have been unacceptable on the prime side. The end result is that the loans having the most problems on the prime side are these, vintage 2006 and 2007 when the guidelines were loosened so dramatically that damn near anyone could get a loan as long as they could prove income.

    The panelists were unclear as to what to do to fix the problem of abusive originators. So, I'd like to offer a few suggestions that will actually work... these are geared toward cleaning up and standardizing origination. The larger problem in the industry right now, liquidity in the market and solvency of the firms, is being addressed and should be considered a separate issue. You'll note that I'm using originator exclusively in this... these rules should apply to EVERYONE in the market, whether banker or broker.

    1) National licensing for all originators. The state by state foolishness has to stop and there needs to be a national program in place to regulate.

    2) Eliminate prepayment penalties. My peers will hate me for this, but the reality is that these penalties end up not producing stability in a portfolio which is why they were put in place. Period. Therefore, it makes sense to scrap them altogether and price loans appropriately for a payoff in 4 years or less.

    3) End bait and switch... this happens infrequently but often enough that it's a problem. The best way to do it is to eliminate all advertising which bears an interest rate. These are teasers and only available to those with superb credit and 20% or more to put down. Needless to say, that doesn't remotely represent the majority of the borrowers in the market. Further, eliminate all disclosure of rate at initial application. Most of the time, when a borrower first applies for a loan, they don't even have a house selected yet. No underwriter has seen the file to determine if the borrower meets credit guidelines. In that condition, there is no way for an originator to disclose rate and they shouldn't be doing it. Rate should not be disclosed until the loan has been through initial underwriting and a house has been selected. At that time an originator should fully disclose a locked rate and the money they are making on the end sale of that loan.

    What no one on the outside realizes is that an interest rate must be locked prior to closing a loan. Every one that 'falls out' (doesn't close) ends up costing money. No one comes after the borrower for this. However, we expect originators to commit to an interest rate BEFORE knowing the risk on the loan which is absolutely insane.

    4) There need to be definitive metrics for originator performance. Offering 'the best rate' is not enough since not everyone is entitled to the same rate or terms. What these metrics might be are fairly simple. For example, if a borrower wants to refinance their home without cashout, does the new loan meet a net tangible benefit to the borrower in saving them money? If so, then the originator has fulfilled their obligation to the borrower. Does the borrower have the wherewithal to make payments on the house in the event of a job loss or other financially damaging event? If no, the originator should have the responsibility to terminate the transaction.

    There also need to be some easy to understand disclosures to the borrower that if they change properties they'll lose their rate lock. If they decide to materially change the terms, the rate may change. Borrowers have to understand that their decisions and delays in providing necessary documentation can put their loan in jeopardy.

    5) Absolute ban on all payments by originators to Realtors under any circumstances and a complete ban on any Realtor having an ownership interest of any kind in an originator. While we're at it, lets just go ahead and ban cross ownership by people or businesses in the industry. Realtors shouldn't own appraisers or title companies. Originators shouldn't own credit companies, etc. Every piece must be independent from the others to maintain the integrity of the system. And throw in the builders as well. They don't need to subsidize their primary business with mortgage lending because it has a real impact on the true value of the collateral.

    6) Restrict, either through legislation or Fed regulatory guidance, the use of limited or no doc products. These are FANTASTIC products... for a self employed borrower with 10% or more to put down, fantastic credit and who can prove low payment shock (i.e., not jumping from $800 per month in rent to $3500 per month in mortgage). These are not loans for W2 wage earners who are trying to buy more home than they can realistically afford. The panel on Friday addressed this and they were SPOT on. However, there seemed to be agreement among them that these products were de facto bad and it's simply not the case. The problem is that they were handed out like candy to people who frankly didn't require them. Not to mention the fact that, again, they weren't priced appropriately for the underlying risk of default which was substantially higher than a full doc Fannie/Freddie loan.

    7) Eliminate all option ARM and Pick A Pay loans. Really, do I need to go into this? A home loan with credit card-like repayment terms is just a bad idea and a prescription for default.

    8) SEVERELY restrict home equity lending. It frankly should not be so easy to pull equity out of your home. Further, you should not be able to pull out more than it's worth. This is not only to protect homeowners but banks as well. Texas has some very restrictive home equity laws that could serve as a good starting point.

    9) Mandate disclosure of YSP/SRP at time of rate lock. This disclosure should explain to the borrower that the low out of pocket costs for their mortgage are being covered by this fee paid by the lender to the originator and that the money represents the profit to be made off servicing that loan until it pays off. Brokers are already required to do this. Banks will throw a fit. However, if you want to level the playing field and make things transparent, then this is the way to go.

    As for YSP, it's time to note something. I have originators here in Austin that I work with who write mortgages at basically par rates. They provide no real customer service and they only accept applications with extremely good credit and at least 20% down. Obviously, this is a very narrow segment. I have others who charge more and price their loans at higher coupons. However, they deliver superior service to their borrowers. They also work with borrowers who the other originators wouldn't touch. Both groups are still, on average, cheaper than retail banks.

    Banking is, at it's core, a service. No service is free and people should be compensated for the work they do. This has got to be understood. When I originated I had an extremely loyal client base. I still talk to most of them. Some of them could have found better rates somewhere else and they knew it. However, they came to me because I answered their questions, worked with them on their plans and gave them the options they had available. To them that was worth an additional 12.5 basis points (1/8th of a point on the interest rate).

    For a more readily understandable example, I have been going to the same lady for haircuts for 7 years. I don't go to her because she's the cheapest. I go to her because she does a great job and she's a blast.

    10) FUND REGULATORY AND INVESTIGATIVE BODIES. Rules and regulations are worthless without enforcement and I, among many, have been begging for it for years.

    Most of these ideas would be supported by the industry wholeheartedly. Well, except for maybe banning prepayment penalties but that's just a cross they'll have to bear. As for the budding consumer advocates, you're never going to kill payments of YSP. PERIOD. All you're going to do is force brokers (who have to disclose YSP) to bankers who don't have to disclose. The solution is to make everyone disclose and make the disclosure easier to read so people can really compare apples to apples. As a side note, there is an element of stupidity in the let's ban YSP movement. In ANY market there are going to be some providers of a good or service who charge more than others. Be a savvy shopper and really think about the level of service you want and are willing to pay for. I don't shop at Neiman Marcus because it's the only place that has clothes, I shop there because I want my ass kissed when I go to spend money. That and my experiences buying clothes online have been something of a dismal failure.

    In the final analysis, ideological blinders, whether Democratic or Republican, are absolutely worthless. Demonizing whole industries, especially when it's clear you don't understand them, is counterproductive and stands a good chance of digging us deeper into the hole. Make an effort, policymakers, to understand the industries you are trying to regulate and work with the people in them on rational solutions. Those of us in the industry would do well to make necessary changes now.

    Posted by mcblogger at 01:56 PM | Comments (0) | TrackBack

    July 19, 2008

    Ed Gillespie, The Retard's Retard

    On Bloomberg Thursday evening, one of President Bush's many idiots, Ed Gillespie, told the simpleton interviewer that there was enough shale oil in the west to provide us with oil 'forever'. Ed also believes that there's BILLIONS OF BARRELS OF OIL on the continental shelf. Which there could be if a couple of things are true...

    1) Oil is abiotically created
    2) 90% of the 'VAST' supply of oil is on the 20% of the OCS where drilling is currently prohibited
    3) There's some magical oil fairy that put it all there just minutes ago

    On the topic of the shale oil, you'd have to flatten the Rocky Mountains. I bet some people in New Mexico, Wyoming and Colorado would kinda be irritated about that.

    What makes Ed say such stupid things? Well, as it turns out, Ed's resume is a little light on energy. It's heavy on political jobs. In fact, they're damn near all he's ever had. That may explain why he thinks you can easily get oil out of rock. Well, that AND pump it out of where it's not.

    Drill here? Drill now? Pay less? No. THERE'S.NOT.ENOUGH.THERE.


    Posted by mcblogger at 11:10 AM | Comments (0) | TrackBack

    July 15, 2008

    GM screws up again...

    Oh. Really? THIS is what GM came up with?

    Posted by mcblogger at 05:50 PM | Comments (2) | TrackBack

    July 14, 2008

    Bush steps into the Fannie/Freddie mess

    Oh, please don't do this...

    WASHINGTON — Alarmed about the sharply eroding confidence in the nation’s two largest mortgage finance companies, the Bush administration will ask Congress to approve a rescue package that would give the government the authority to buy billions of dollars in stock in Fannie Mae and Freddie Mac and also lend to the companies to meet their short-term funding needs, people briefed about the plan said on Sunday.

    Here's the thing, bubba. There's no need to BUY equity off the market. For one thing, that doesn't get new capital to Freddie and Fannie. It's not even the big problem since what has the equity holders panicked is the fear that Fannie and Freddie will have to raise equity capital and be diluted out of existence. If they don't have to do this, as Paulson and Bernanke have told them they by allowing them to use Treasury and the Fed as a counterparty for some of their illiquid assets, then the equity will reappreciate.

    Posted by mcblogger at 06:46 AM | Comments (1) | TrackBack

    July 11, 2008

    Freddie, Fannie in suicide pact

    Let me just say, there comes a time where you'd like to stop the world. And get off it. This is one of those days.

    On Bloomberg, they are currently interviewing two morons who, aside from today's manufactured crisis, would never be listened to. But today, because they think FNMA and FHLMC (the Agencies... those are the acronyms that represent Fannie and Freddie, respectively) are in trouble, they are the toast of financial television.

    Here's the thing... it's all a bunch of bullshit. For one thing, the Agencies (or GSE's, if you prefer) are adequately capitalized according to their regulator, the Office of Federal Housing Enterprise Oversight. Their projected losses were already telescoped and people knew about it. Further, those losses would have to increase by ten fold for them to be insolvent per OFHEO.

    The problem isn't that there ARE some non-performing assets. There have always been some non-performing assets because there will always be people who don't pay their mortgage. In point of fact, the OVERWHELMING majority of the credits (loans) that the Agencies have on their books are performing. However, that doesn't mean that they have value...and now we go down the rabbit hole of financial accounting.

    There are a number of ways to value assets. The prevailing way is to 'mark to market' which means, for simplicity, that you take a security you hold and price it according to the bid for that asset in the market, for instance the secondary market for mortgages and related securities. Unfortunately, the market can be irrational at times and this is one of those times.

    As I pointed out earlier, the PRICES paid for less than perfect credits were way too high. So the market corrected and stopped paying ANYTHING for them. Which meant, even though there securities were made up of paying loans, that according to accounting rules those securities are worthless. Those were the subprime and Alt A credits and now A credits, like the ones the Agencies have, are getting hit. The fear regarding the Agency's is that on a mark to market basis these companies are insolvent. It doesn't mean they have $5 trn in the hole, it means that they owe $5 trn but have assets worth less than $5 trn. Which means negative equity and insolvency.

    However, using that metric that means that 10 out of 20 major investment banks are now insolvent. It also means that Citibank is insolvent. And what's really going on is that the market has swung from one direction to the other... from valuing all mortgages too highly to not valuing them at all. Do they still have value? Of course. However, according to accounting rules it's tight.

    What's spooking the market today, in the equity of the two Agencies, is that shareholders may be diluted if the Agency's have to raise capital by issuing new equity. That devalues existing shareholders and so, you have a selloff of the stock. However, it doesn't mean the companies are going bankrupt.

    There's also former FOMC member Bill Poole telling anyone who'll listen that the Agencies are insolvent. For a little background on Poole, you gotta know he's NEVER been a big fan of the Agencies. He thinks their government charter (which they DO have) gives them an unfair advantage over depository and investment banks. He's right. However, that 'advantage' has been passed on to MILLIONS of homeowners in the United States.

    So, before you think this is all a huge bailout and taxpayers will be on the hook, keep in mind before mortgage securitization and the buildup of the Agencies, people had to put down 20% for a home. And pay a high interest rate.

    Oh, but McBlogger... you've been bitching about lax underwriting guidelines and mortgages with nothing down. Wouldn't it be better to go back to the old days of 20% down?

    Absolutely not. And my issue with lax underwriting and exotic, low down payment and low documentation mortgages is that the market never priced them adequately for the risk they represented, not to mention offering them to people who, frankly, didn't need them. I think it's ridiculous to price a no-doc loan made to a salaried borrower at a price comparable to the one you'd give a full income documentation loan. However, that doesn't mean the product itself was bad... the application and pricing of that product was bad. These loans were originally intended for borrowers with difficult to document income (usually self employed borrowers) and carried a high interest rate as well as 10% down payment in most cases. When these loans performed well, the market started to expand the eligible borrowers. And lessened the down payment requirements. And loosened the credit guidelines.

    And then people stopped paying. And that made everyone question all mortgages. Which left only Fannie and Freddie, not to mention FHA, to keep the market somewhat stable.

    THAT'S the problem no one is really pointing out right now... the private market that the supply-siders love so damn much froze up and stopped moving. The invisible hand just stopped all motion. It was the Agencies and FHA that have kept us afloat. And we need them to continue doing that.

    If they don't, then the repercussions are serious. Well, they're serious if you think an economic depression is serious.

    However, these companies will survive. So will the economy. And the smart money isn't sitting on the sidelines right now. It's quietly buying good assets at rock bottom prices.

    Posted by mcblogger at 02:54 PM | Comments (2) | TrackBack

    Still not getting it on the credit markets

    There is one critical point that's been left out of all the housing/asset/credit bubble mess and that is that consistently no one is pointing out the real underlying problem. Sure, there was lax underwriting, abusive fees and in a few cases outright fraud. However, the underlying issue is that NONE OF THIS WAS PRICED APPROPRIATELY.

    The Fed is is going to extend it's lending to primary dealers, the investment banks who make markets in everything from debts to equities to commodities. This is kind of a mixed bag since, for all intents and purposes, the Fed is the US Government and it's become the lender of last resort to thinly regulated non-depository institutions. Needless to say, this opens them up for more regulation and opens us up for more liability. However, that's not what caught my eye in the article. This is...

    Mr. Bernanke said that the Fed would issue next week long-awaited rules to restrict new exotic mortgages and high-cost loans for people with weak credit. Such mortgages have been a central cause of the current market problems.

    No, these loans AREN'T the reason for the crisis... the PRICES paid by end investors caused the problem. For one thing, institutions and to a lesser extent individual investors were buying these loans at prices that competed with fully documented, low risk FNMA loans. Which is insane since they represented FAR riskier credits. Part of that was a perception that these were rock solid loans, the other was masking the true credit quality by means of structured finance.

    However, the underlying product was not a terrible one. A no-doc loan makes since for a self-employed borrower with difficult to document credit, an established housing history and an excellent credit profile. With the changes the Fed aims to put in place, these loans will no longer exist. And it will become extremely difficult for SE borrowers to get loans.

    There is, at the base, no such thing as a toxic financial product. There is only one that is priced too expensively. While these mortgages were NOT worth as much as a traditional A credit, they were worth something. The problem is, people were buying them as if they WERE A credits... and borrowing against them. That's how a house of cards collapses.

    Because eventually, no matter how you dress it up, a risky credit is going to perform like a risky credit. Investors were stupid and, in many cases, willfully misled. That's a problem. However, the underlying products were not necessarily bad. They just needed to be priced for their risk which would have put an automatic brake on the number of these being originated.

    And now, the Statesman chimes in. And it's clear as hell they know not of what they write. Hey guys, leave this to people who actually know something about it, K?

    Posted by mcblogger at 08:08 AM | Comments (2) | TrackBack

    July 02, 2008

    Good news on CEO pay

    Well, it is if you're a CEO. If you're a shareholder, it's pretty damn bad because, yet again, WE'RE GETTING ASSRAPED BY MANAGEMENT. Take GM, for example (no, really, TAKE GM OUT BACK AND SHOOT IT)...

    Rick Wagoner, chief executive of General Motors Corp., announced this month that the company had to close four plants that make trucks and sport-utility vehicles because of lagging demand as fuel prices soar.

    That followed the posting of a $39 billion loss in 2007, a year when its stock price fell about 19 percent, without adjusting for dividends.

    And Wagoner? His pay rose 64 percent, to $15.7 million.

    This is the SAME Rick Wagoner who kept making giant SUV's while gas prices went up. And up. AND UP. Meanwhile, Toyota was busy making Priuses which they are selling literally as fast as they can make them.

    Here's a resolution we can support as shareholders... no member of management should make more than 50x the salary of the lowest paid worker in a company.

    The problem with American capitalism is the management. If shareholders would join with labor, we could finally get things back in line.

    Posted by mcblogger at 08:35 AM | Comments (1) | TrackBack

    June 27, 2008

    Michael Crofton : Ugh! The Democrats!

    In an interview with Bloomberg TV this afternoon (yes, you guessed it, I'm stuck in my office), Michael Crofton the CEO of The Philadelphia Trust Company, said it would be a disaster if the Democrats controlled Congress and the Presidency.

    A disaster for the economy, that is.

    At this time, we at McBlogger HQ would like to take a moment to point out to Mr. Crofton that the following things have occurred since President Bush and a mostly Republican Congress (they controlled it completely from 2003-2007) took over:

    1) Job growth has been non-existent. In fact, using real world statistics, instead of the BLS stats, a strong case can be made for negative real job growth.
    2) Deficits are at historic levels. And have been for years.
    3) The Dollar has devalued against the Euro by more than 50%.
    4) Oil prices have increased close to five times
    5) Wage growth has been nil
    6) Inflation is once again a problem
    7) Food prices are up dramatically
    8) House prices have collapsed

    And that's just a few of the Republicans greatest hits. Which makes me wonder, what IS Mr. Crofton fearful of? A vibrant economy? Low inflation? Paying off the national dent and running surpluses? Real wage growth and an increase in national savings?

    Come on, Mr. Crofton. Tell us what is so scary about the Democrats...

    (Am I going a little overboard on the lists today?)

    Posted by mcblogger at 03:54 PM | Comments (2) | TrackBack

    June 09, 2008

    Lehman finally comes clean

    $20 bn in mortgage-related asset writedowns. $6 bn in new capital. Deleveraging complete to 22% of gross assets.

    Which means that Lehman has $22 of assets floating on every $1 of equity. Which is a bit like a 400 lb man going ice skating. It can be done, but if there's any problem things get ugly fast.

    For weeks, Lehman management has been saying that everything is just peachy. During that time, speculation has run rampant. While today's news is worse than expected, it's still not as bad as some of the rumors. This should provide some stability to the financial sector, at least in realizing that the remaining shoes yet to drop aren't the equivalent of a Bear Stearns type debacle.

    Posted by mcblogger at 01:09 PM | Comments (0) | TrackBack

    June 02, 2008

    ...And sometimes, the press is REALLY stupid

    Here's a dreadful piece of journalism from R. A. Dyer of the Fort Worth Star Telegram. He leaves out...

    1) Deregulation has failed Texas consumers
    2) The excuses, regarding fuel costs, are irrelevant. If the standards to market entry are set so low that retailers end up being financially unable to manage their businesses (and, you know, HEDGE THEIR RISK) then clearly there is something wrong.
    3) This is related to excessive speculation in the energy market coupled with the decline in the dollar which is setting prices high for ALL natgas, even that produced domestically since we don't produce enough to meet domestic demand.
    4) The cheapest, most dependable electricity in the state is in two markets, SA Metro and Austin Metro. Neither deregulated.
    5) The price spikes are clearly indicative of market manipulation.

    Dyer, if you're going to write about something at least learn about it.

    Posted by mcblogger at 10:03 AM | Comments (0) | TrackBack

    May 18, 2008

    It's only a contract as long as we say it's a contract

    So there's a company called National Power Company (really imaginative, right?) that wrote contracts guaranteeing electricity at 11 cents /KWh to customers. They then discovered, much to their chagrin, that they'd mispriced their rates and should have been charging 15 cents per KWh. So, being responsible corporate citizens, they decided to eat the loss and honor the commitment to their customers.

    KIDDING! They totally rolled and fucked their customers in the pooper.

    There's a clause in their little 'contract' that says they can do that with 45 days notice and no early termination fee. ISN'T THAT AWESOME?!??!

    I know, right! I'm wondering if I can do that on my mortgage. Or my car. Or my credit cards. I mean, I know I agreed to pay these interest rates but seriously, yo! This shit is jamming me up and I need to drop it down.

    Posted by mcblogger at 12:16 PM | Comments (0) | TrackBack

    May 01, 2008

    I've got gas (tax relief) like a mother!

    So, Sen McThuselah proposes a gas tax holiday during the summer without proposing any way to pay for it. I know. It IS rather shocking that I've already given up on calling him Olden Times. I blame the media. And Hillary. Speaking of, she decided to AGREE with McThuselah about the gas tax holiday.

    But wait... before you jump all over her for bad economic policy, at least she bothered to pay for it. That's a huge step up from McThuselah who apparently thinks his road to the White House should be paved with promises of FREE MONEY (cue Matthew Lesko). Of course, a gas tax holiday is just going to end up in Exxon's quarterly dividend (that's when GIANT oil companies send shareholders, the owners, some of the profit. It's one of only four times a year my father smiles) which kind of mitigates that whole 'we're helping people thing' since the savings won't, you know, be passed on to people.

    Pandering? Yes. An empty gesture? Absolutely. Should they be focusing on this or this? Sure... well, that is, if you wanted to actually mitigate the economic costs of high fuel prices and stop using food to make fuel.

    Meanwhile, Clinton and McCain criticized Obama for not going along with their little scheme.

    Would someone please tell the Clinton folks that Obama is right? That'd be great! And then, could you fire the idiot on her policy team that keeps copying shit McCain does? It's embarrassing to those of us who, you know, SUPPORT HER.

    Posted by mcblogger at 08:41 AM | Comments (0) | TrackBack

    March 24, 2008

    Take this 2,000 acre development and shove it!

    Let me preface this with the fact that I like development. Not just new construction or renovations of existing buildings, but economic development. I especially like the kind that promises to create a massive number of jobs in our community. There is, however, one thing that'll make me turn into a zero growth nut. That's when developers come 'round asking for tax breaks and abatements and claiming that it's the only way they can bring their project to Austin.

    Really? Do you want a virgin to consummate the deal as well?

    Seriously, this crap about Villa Muse is about as retarded as I've ever seen. First off, the developers are taking over 2,000 acres in a developing area of Travis County, which just happens to be part of Austin's ETJ. What the developers want is to have that removed from taxation and zoning requirements, effectively reverting the land back to county control and keeping it from being annexed by the city. Not to mention that it would keep it out of city environmental oversight, which is exactly why the city shot down the proposal.

    Some council members said the city could not be guaranteed that it would be able to eventually annex the property even if the developers signed an agreement. Leffingwell and Kim were also worried about the lack of environmental oversight of the floodplain remediation that would be necessary and the proposed construction of the studio so close to Gilleland Creek.

    All this, of course, has Dawnna Dukes all upset...

    Dukes wrote that Villa Muse would have been a “once-in-a-lifetime opportunity for the Central Texas area, especially Eastern Travis County.”

    “Your decision to deny the temporary release of Villa Muse from the city’s Extra Territorial Jurisdiction takes certain financing options off the table, thus making the project financially unfeasible” and probably ensuring its relocation to a different city, she wrote.

    Dukes said she questioned whether environmental concerns were the real reason the council members decided refused to support the project, given that the council is considering building a landfill and wastewater treatment plant in Eastern Travis County.

    She asked the council members to reconsider their decision: “This project will succeed somewhere in Texas. It would be ideal to have it here.”

    First off, Dawnna, it's a mixed us development not unlike The Domain whose developers WERE able to talk the city into questionable tax breaks(which folks are even now trying to get rid of). Therefore, it's nothing special. Oh, there's the 70k seat amphitheater that's a huge risk in a town where people will squeeze 100 per square foot into some shitty club to hear some shitty band play shitty music.

    And you're wrong, Dawnna. This project will only really succeed here. There really aren't too many other areas of Texas where this can succeed. Maybe in Irving and if the developers want to pick up and move to the artistic hotbed of Irving, they are more than welcome. Have at it, fellas!

    As for the project being financially unfeasible, you wouldn't know if it was or wasn't, Dawnna. If their margins were soooo thin that only a tax break put them into the black, then this is really a blessing in disguise. The City Council just saved us from another nightmare because if their finances were THAT flimsy, odds are the developers would have gone bust during construction. Three strikes of stupid on this, Dawnna...

    1) You chastise people who clearly have a better understanding of this than you.
    2) You fight hard for developers with questionable financing (and who, by the way, was underwriting this package? USB? Lehman? Southwest?).
    3) You talk about tax abatements as if they're some sort of economic panacea (which they aren't).

    Needless to say, this or something like it is going to happen in this area with or without the wonderful developers who've given Dawnna so much over the years. The developers, for their part, are of threatening to take their toys and move on...

    The backers of a proposed entertainment studio and production facility in eastern Travis County say they are negotiating with other Texas cities to move the project after Austin officials refused to temporarily release the project from its regulatory grasp.

    Villa Muse Vice President Paul Alvarado-Dykstra would not reveal which other cities the developers are negotiating with but said there was more than one and all were in Texas.

    "We haven't closed the door on Austin, but we kind of feel like Austin closed the door on us last Thursday," he said.

    Ahhh... so long, fuckball. Try playing your financial shell game with a muni that's controlled by short sighted stupid people.

    And here, my friends, is why I'm supporting Jennifer Kim for re-election...

    Last week, state Rep. Dawnna Dukes, D-Austin, who represents the area, sent a scathing letter to Mayor Will Wynn and Council Members Betty Dunkerley, Jennifer Kim and Lee Leffingwell, all of whom voted against the release.

    Kim and Leffingwell said they were not surprised by the developers' decision to pursue other locations and are not inclined to revisit releasing the land anytime soon.

    "It is unfortunate that they are not going to locate here, but we need to make sure that we are protecting our environment and our quality of life," Kim said. "In this case, we couldn't assure that to our constituents."

    Translation... you aren't going to get something for nothing. If you want play in Austin, you have to pay just like everyone else. Either that or we'll steal your idea and do it ourselves.

    We're mean like that.

    Last point then I promise I'll move on to something exciting, the people who really get screwed with abatements are the existing property base. See, development needs infrastructure and services. Even if the developer is paying for the internal roads, power grid and water/wastewater systems, the external hookups will have to upgraded and city facilities will have to be ungraded to take care on the additional burden. That costs money and frankly I don't think any of us mind paying it.

    As long as the new development starts paying taxes just like the rest of us. If not, then you're wasting our time and our money. Come back when you have have the wherewithal to do things the right way.

    Posted by mcblogger at 10:59 AM | Comments (3) | TrackBack

    March 23, 2008

    Just in case you were wondering...

    ... this is the kind of housing you can get for $6 mm. At least, according to the NYT.

    Or you could just buy 15-20 houses in my 'hood.

    Posted by mcblogger at 08:04 AM | Comments (0) | TrackBack

    March 18, 2008

    Perception is reality

    Take a balance sheet weakened by the non-marketability of assets on it. Add in doubts from counterparties and an unwillingness to take the other side of a trade to, for example, assume interest rate risks. Combine with client uncertainty and top it all off with the loss of access to the critical commercial paper market (the financial lifeblood of all the large non-depository banks) and you have the perfect financial storm that destroys an investment bank.

    That, in short, is what happened to Bear Stearns. Was Bear in trouble? Sure. The fact that the company made some horrendous bets on some very toxic MBS, mostly filled with Alt A and Sub-Prime credits. Then they dumped them into CDO's, in which interests were sold to investors. Just to add another layer of risk, they then borrowed heavily against the shit credits in the CDO to, wait for it, buy still more shitty credits to juice the return. The CDO could borrow cheaply so the spread income was very good and helped Bear come in with extremely good profits. As long as no one doubted the value of the credits in the CDO. When those became unsaleable, creditors called loans and there was a run on the bank.

    And that last bit is what killed Bear. You can't pay off $100 Billion in loans with $20 Billion in equity, for example. If you can't float that $100 Billion with constant funding, you're effectively bankrupt. Well, that's actually putting it mildly. You're a cautionary tale. The fact that the assets you've acquired with that debt are worth less than 1/10 what you paid just seals the deal on the tragedy.

    Though the underlying event was different, something very similar happened to Salomon Bros. in 1991. Then, a white knight was able to step in, restore confidence and, by extension, the funding. No such luck this time with JPMorgan Chase. The only question that remains is were their actions deliberate. Consider this...

    The swiftness of Mr. Dimon’s decision to buy Bear is remarkable given that he has not been an aggressive acquirer since he joined the firm after selling it BankOne, where he was chief executive. He has cautioned patience about making acquisitions, though he had suggested in recent months that the firm might be ready to make a major deal.

    Earlier this month, the co-chief executive of JPMorgan’s investment bank, William T. Winters, said on a conference call with investors: “If a special opportunity came up to acquire a prime broker at a decent return, we wouldn’t hesitate. We’ve always said, ‘Boy, if there was one for sale, we’d love to look at it.’ ”

    A deal needed to be reached quickly to protect the business from collapsing entirely. With most if not all of its clients stopping trading with the firm, its days were numbered.

    One has to wonder if maybe the crisis of confidence was, if only in part, exacerbated by JPMC. Of course, we'll probably find out. That's what lawsuits are all about.

    Posted by mcblogger at 11:59 AM | Comments (0) | TrackBack

    March 10, 2008

    Bernanke, Congress, The NYT and new real estate

    The NYT has an op/ed piece congratulating Bernanke for suggesting that Congress act to give Bankruptcy judges the ability to reduce principal balances on outstanding mortgages. It's an interesting idea. It's also completely unnecessary and will cause a lot more harm than good.

    First off, the market for housing is a very delicate balance of forces and in that balance lies the value of a property. Part of what's killing people in many neighborhoods is NOT that they've lost equity, it's that their neighbors though bad financial planning and decision making, have been forced to 'give up their homes' creating a foreclosure in the immediate vicinity that, by virtue of being a comparable, ends up decreasing the value for all the homes around it. It's financial collateral damage and Bernanke's plan doesn't really address it. That the NYT can't see it is largely unsurprising given their lackluster reporting on this and the effect it's having.

    Second, the market for new originations (buyers who need mortgage financing) will be made vastly more expensive because what's being packaged and sold to investors is no longer a sound and safe instrument, it's a financial timebomb which can be modified (against it's owner) by the government at will. So much for the rule of law and the sanctity of contracts.

    What needs to happen and what we've been clamoring for is stabilization. What's driving foreclosures is the ADJUSTMENT of an adjustable rate mortgage. This means that consumers have been able to make a payment at a high interest rate... what they are having problems with is the payment when the rate jumps from 8% to 12%. That's a little tough to take. Reducing them balance still leaves them in a high interest rate loan. Wouldn't it be better to refinance them to a lower interest rate at which they can afford to comfortably make the payment on the full principle balance? Dropping the principle balance will help, but it shorts the investor who owns the loan, which makes it unlikely they'll invest in any more mortgages which will, in turn, drive up borrowing costs for Americans across the board.

    Why not a program that saves investors AND homeowners (investors by giving them full value on their securities and homeowners by taking them out of an expensive loan)? We've got it and Congress has, apparently unbeknown to the NYT, already taken the first step...they've increase the FHA loan limits. With guidelines tightening for even loans backed by FNMA and FHLMC, more and more loans will start being originated as FHA insured loans. Currently, in Travis County for example, the loan limit was just enough to take a large chunk of the market. Increasing it by almost 50% will help stabilize the market, keep buyers in and allowing those in trouble to hopefully refinance.

    The other is to modify FHA Secure to indemnify lenders and broaden the guidelines to cover the more than 2 million homeowners at risk. Instead of the max of 80k under Bush's retard program.

    Finally, the market has not responded to the stimuli pushed through by Congress and the Fed. Bank's are still too scared to act, bond insurers are on the brink of insolvency because of their inability to get ANY capital at ANY price. The market is, quite simply, not working and it's the ultimate weakness of Reagan-/Friedman-/Bush-onomics... fear in a market can become reinforcing and in the end, it's the very thing that kills the entire market and spurs a recession or, worse, a depression. The only way it gets fixed is for the lender of last resort to step up and let even the financial masters of the universe know things will be OK.

    Finally, in other news, some new real estate has been 'theorized'.

    Posted by mcblogger at 10:54 AM | Comments (0) | TrackBack

    March 06, 2008

    Silicon Valley turns to the sun

    Want to know what the next big technology trend sweeping the venture community is? Click here.

    Given the valley’s tremendous success in recent years with such down-to-earth products as search engines and music players, tackling solar power might seem improbable. Yet some of the valley’s best brains are captivated by the challenge, and they hope to put the development of solar technologies onto a faster track.

    There is, after all, a precedent for how the valley tries to approach such tasks, and it’s embodied in Moore’s Law, the maxim made famous by the Intel co-founder Gordon Moore. Moore’s Law refers to rapid improvements in computer chips — which would be accompanied by declining prices.

    A link between Moore’s Law and solar technology reflects the engineering reality that computer chips and solar cells have a lot in common.

    “A solar cell is just a big specialized chip, so everything we’ve learned about making chips applies,” says Paul Saffo, an associate engineering professor at Stanford and a longtime observer of Silicon Valley.

    Financial opportunity also drives innovators to exploit the solar field. “This is the biggest market Silicon Valley has ever looked at,” says T. J. Rogers, the chief executive of Cypress Semiconductor, which is part-owner of the SunPower Corporation, a maker of solar cells in San Jose, Calif.

    Mr. Rogers, who is also chairman of SunPower, says the global market for new energy sources will ultimately be larger than the computer chip market.

    “For entrepreneurs, energy is going to be cool for the next 30 years,” he says.

    Optimism about creating a “Solar Valley” in the geographic shadow of computing all-stars like Intel, Apple and Google is widespread among some solar evangelists.

    “The solar industry today is like the late 1970s when mainframe computers dominated, and then Steve Jobs and I.B.M. came out with personal computers,” says R. Martin Roscheisen, the chief executive of Nanosolar, a solar company in San Jose, Calif.

    Remember when laptops weighed 10 lbs , had 7" screens and costs upwards fo $4,000? That's the stage we're at with solar right now. Just wait... give solar ten years and you'll see a similar trend.

    Posted by mcblogger at 12:08 PM | Comments (0) | TrackBack

    March 02, 2008

    The oil may get low sooner than we think

    For all the talk about drilling our way to energy independence, which is little more than than rambling by ridiculous little people with ridiculous little ideas, there is one inescapable fact. The well will always peak and from there on out that oil is going to get more and more expensive to the point of production costs going asymptotic, mostly because the reservoir pressure drops to the point where you are spending more and more to lift the next barrel of oil. It's happening in Mexico in the Cantarell field and in the Ghawar in Saudi Arabia.

    The other inescapable fact is that as oil increases in value, those states that produce it will find themselves more and more affluent. And affluent people tend to become rabid consumers, especially when gasoline in 7 cents a gallon.

    The economies of many big oil-exporting countries are growing so fast that their need for energy within their borders is crimping how much they can sell abroad, adding new strains to the global oil market.

    Experts say the sharp growth, if it continues, means several of the world’s most important suppliers may need to start importing oil within a decade to power all the new cars, houses and businesses they are buying and creating with their oil wealth.

    Indonesia has already made this flip. By some projections, the same thing could happen within five years to Mexico, the No. 2 source of foreign oil for the United States, and soon after that to Iran, the world’s fourth-largest exporter. In some cases, the governments of these countries subsidize gasoline heavily for their citizens, selling it for as little as 7 cents a gallon, a practice that industry experts say fosters wasteful habits.

    “It is a very serious threat that a lot of major exporters that we count on today for international oil supply are no longer going to be net exporters any more in 5 to 10 years,” said Amy Myers Jaffe, an oil analyst at Rice University.

    The best part? Consumers in these countries care less about pollution than the rest of the world...

    In Mexico City the other day, a bricklayer named Jaime Guerrero arrived at a local Chevrolet dealership. His extended family cried “bravo!” as he signed the papers for his first car.

    “To have a new car in my name is a dream transformed into reality,” said Mr. Guerrero, 26. He and his family piled in and weaved through the chaotic traffic of the capital, hunting for a priest to douse the car with holy water.

    “I don’t worry about the climate or shortages of oil in the world,” Mr. Guerrero said. “I just worry if gasoline prices go up.”

    Frankly, it's a little hard for me to criticize Mr. Guerrero because he's representative not only of people in Mexico, but of people in the US and around the world. Given that, it's damn time we give him a cheaper, cleaner, long-term alternative.

    And just FYI, no damn interior decorator is going to do that. It's going to take someone like Dale Henry.

    Posted by mcblogger at 11:34 AM | Comments (0) | TrackBack

    February 27, 2008

    GM and GIANT Hybrid SUV

    This is it. The Yukon Hybrid. At best, this beast gets 22 miles per gallon. It's also $50k. Which is why GM will sell few of them and then moan about how the market really doesn't want hybrids.

    Meanwhile, Toyota and Honda will sell every hybrid they can make.

    Posted by mcblogger at 11:36 AM | Comments (0) | TrackBack

    February 21, 2008

    The controversy over who invented the telephone

    Yeah, I thought it was A.G. Bell as well but as it turns out there are STILL questions. After 132 years. At least there are for people who spend an inordinate amount of time on mind numbingly boring historical minutiae.

    Posted by mcblogger at 09:05 AM | Comments (0) | TrackBack

    February 19, 2008

    Paying for the nukes twice

    The NYT has a great article up about all the nuclear waste that's piling up waiting for permanent storage. The cool part is that we paid for disposal of it with our electricity rates. The other cool thing is that we're going to pay for the delay in storing the waste with our tax dollars.

    Cool, huh?

    The only answer is to recycle the waste into plutonium and uranium and continue the fuel cycle. It's saves on uranium mining and gives us a long term solution since the wastes left over from the recycling usually have extremely short half-lifes, in some cases minutes or hours. Those wastes can then be vitrified into glass and they won't affect the water table in a long term storage facility.

    What we have to do is get more comfortable with running reactors on plutonium. REACTOR grade plutonium, Ralph.

    Posted by mcblogger at 07:54 PM | Comments (0) | TrackBack

    January 09, 2008

    Dodd : Two issues, one right and one wrong

    Sen. Dodd has two items coming up this year, one is a reform of the horrendous 2005 Bankruptcy Act that made it extremely easy for lenders to foreclose on the homes of ordinary people, not to mention the millions with medical collections who would be forced to give up their homes should they be forced to file bankruptcy.

    Let me put it this way... when a banker tells you that a bill which makes it hard for a person to declare bankruptcy is bad, then it's pretty damn bad. This was a Republican kiss to the credit card companies and collection agencies, two groups that aren't exactly beloved in the US (from McClatchy via Somervell County Salon)

    In 2005, Congress passed a new law aimed at making it harder for people to file for bankruptcy and walk away from their debts.

    With the tougher requirements, the number of bankruptcies declined in 2006 but surged by nearly 40 percent in 2007, according to statistics released Thursday. And experts predict the numbers will go higher this year.

    The issue is gaining plenty of attention on Capitol Hill, where leading Democrats are proposing to roll back the landmark bankruptcy law. As the number of foreclosures rise, backers of an overhaul say it's needed to prevent more Americans from losing their homes.

    "You ought to never lose your home in a bankruptcy proceeding," Connecticut Democratic Sen. Chris Dodd said during a presidential debate in Iowa last month.

    Here's a little illustration. Let's say you're married and your spouse catches something bad, but curable. They go in for very expensive treatment and are cured. Of course, you're left with massive medical bills, even if you have insurance. Normally, you'd declare bankruptcy if you're unable to work out a payment plan. Under the Republican law, the bankruptcy judge has very little leeway and can force you to liquidate your assets, including your home. See how much fun this is? Maybe you decide not to file BK but instead just ignore the bills. The collection company then decides to take you to court and they get a lien against your home, effectively giving them ownership. Needless to say, Dodd reworking this legislation is nothing but a good thing.

    Unfortunately, we can't say the same for his version of the Home Ownership Protection and Preservation Act styled as S.2452. This legislation will, in effect, remove the majority of the originators from the market. Those that remain will either work for mega banks like BofA, JP Morgan Chase and Citibank OR they'll fold into mortgage banking companies. The fun part will be that what is transparent today, Yield Spread Premium, will be hidden forever since banks don't have to disclose what they make. This will, of course, make it more expensive for consumers AND remove capacity from the market at the precise time the market needs it. Click the link and see what I wrote about this mistake of a bill back in November. What I said then stands today and this thing, in it's current form, should be put in a drawer and forgotten.

    Trust me, there are a few bad brokers and they are slowly but surely being removed from the marketplace. This bill won't accomplish the goal of cleaning up the origination market. All it will do is hide more from the consumer and increase their costs to buy a home. For those of you who think I'm self dealing (I'm a wholesale banker) more than half of my clients are banks. I'll just shift the rest over so this bill will have no impact on my business. It will be shitty deal for consumers.

    And who's pushing this? Why none other than Wells Fargo, Bank of America and the other large banks who are tired of competing against the Third Party Originator (broker) market. Many of these banks have recently terminated their wholesale lending divisions in an effort to squeeze brokers and force consumers to their retail divisions. Further, they've been lobbying through community reinvestment groups for the elimination of brokers en masse. And the Democrats are actually falling for it.

    Take a second, contact Senator Dodd today and let him know we love the Bankruptcy reform but hate the mortgage reform.

    Posted by mcblogger at 08:43 AM | Comments (0) | TrackBack

    December 31, 2007

    Exxon drops itself in the grease

    Stop me if you've heard this one before... large oil company opens and exploits a producing field over a period of decades. When the economics no longer work, they shut in production and give up the lease. A new company comes in, negotiates a new lease and attempts to reopen the wells that should be profitable for them since they don't have the large company's overhead and can take advantage of a new tax break.

    Only problem is, the large oil company, in violation of state law, dumped trash and other materials down the well to make it very difficult or impossible to reopen. Further, in one case, they killed a producing formation.

    The large company? Exxon who has been sued by both the land owner (Exxon lost) and the new company (Emerald... Exxon lost against them as well). All this went to trial years ago. Now, it's with the TX SC which should rule in the next few months. However, while this little legal drama plays out, what the hell has the RRC done? Specifically, what has Republican Michael Williams of the RRC, who's up for re-elect next year, done?

    Absolutely nothing. Basically, what Exxon wanted him to do. He should have known for years that Exxon violated their lease AND state law, yet he's done NOTHING. Which is business as usual for the lazy and incompetent Williams who revels in triviality and fails, time and again, to protect Texans. If he didn't know, then he's negligent and should be removed from office.

    Damn good thing we have a choice this cycle... Dale Henry.

    Posted by mcblogger at 10:49 AM | Comments (0) | TrackBack

    December 27, 2007

    Consumer Alert

    Better check your checkcards, boys and girls...

    I have three accounts I spend money out of. Two checking and one savings. I have one checking account with Compass here in Austin. I rarely check the online system, so things can go for days before I notice something is up. Last week someone called WWW.VOIPAX.DE KAARST charged me for $15.60. Not knowing who they were, I went down to Compass and asked about it. They didn't know, but gave me a wonderful slip of paper detailing out how to talk to their 'un-authorized transaction' dept. I just got off the phone with them since there have been 6 charges today from someone called WORLDWIDE GLUCKSMANN T VENEZUELADEBIT. Which brings the total to $500 that is now missing from my checking account here in Austin.

    6 charges in one day from the same source and the nice folks at Compass didn't get a teensy bit suspicious?

    Compass says it will be 7-10 days before it's resolved. I have money (in other acounts) and credit, so I'll be OK. HOWEVER, there are many out there who don't. So, you might want to take a peek at your checkcard transactions online.

    Oh, and doesn't Compass suck, yo? Methinks I need to find a new bank.

    Posted by mcblogger at 06:48 PM | Comments (4) | TrackBack

    December 11, 2007

    Is it just me...

    Photo Sharing and Video Hosting at Photobucket...or is this a really stupid idea? I mean, isn't this what a BlackBerry and/or an IPhone are for?

    And I'm not even going to begin to rip on the assface design or the lack of a color screen. Idiots.

    Posted by mcblogger at 08:47 AM | Comments (0) | TrackBack

    December 05, 2007

    Xerox needs you (to thank the troops)!

    Via Hal at Half Empty comes a new service from Xerox to let all of us slobs sitting on our asses send a thank you note to the troops in the middle east. Whatever your opinion of Bush and this war, these men and women are doing their jobs as best they can. Take just a moment and say thanks!

    Posted by mcblogger at 09:04 AM | Comments (0) | TrackBack

    November 29, 2007

    The end of the strike...

    No, not that one...

    Striking Broadway Stagehands and Theater Producers Reach a Tentative Settlement

    The 19-day strike by stagehands that had closed most Broadway
    theaters ended late tonight as a tentative agreement was

    An announcement came at about 10:30p.m. The negotiations
    between the League of American Theaters and Producers and
    Local 1 of the International Alliance of Theatrical Stage
    Employees had begun at 10 a.m., the third marathon session of
    the week.

    Via the NYT

    Posted by mcblogger at 12:26 AM | Comments (0) | TrackBack

    November 27, 2007

    Verizon to allow 'any old thing' on network in '08

    Verizon, in an attempt to draw third party developers to make crap for it's subscribers, will allow almost anything on it's network that conforms to certain 'standards'.

    Oh... and just a smidge of exhaustive testing.

    In early 2008, the company will publish the technical standards the development community will need to design products to interface with the Verizon Wireless network. Any device that meets the minimum technical standard will be activated on the network. Devices will be tested and approved in a $20 million state-of-the-art testing lab which received an additional investment this year to gear up for the anticipated new demand. Any application the customer chooses will be allowed on these devices.

    So, no, the DIY rotary cell phone you painstakingly put together a year ago will not work on the network. Your friends were right. You were a total nerd for making that thing.

    Posted by mcblogger at 09:56 AM | Comments (0) | TrackBack

    November 26, 2007

    BP broke law at Texas City plant, lawyers say

    Remember that Texas City refinery that BP owns and operates? You know, the one that blew up in March, 2005 killing 15 workers and injuring hundreds? Apparently, it shouldn't have even been operating...

    BP Plc violated Texas's ``revolving door'' law in 2003 by hiring a state environmental engineer to work on the same air pollution permit he'd supervised as a regulator, lawyers suing the company claim.

    The permit, which governs BP's Texas City, Texas, refinery, allowed the company to operate its largest refinery without replacing outdated emissions controls, such as the one that exploded in March 2005, killing 15 workers. Texas law requires applications be rejected when the people involved worked on both sides of the permitting process.

    The engineer ``changed sides and worked on the other side of this same thing for BP, representing BP against the state?'' a lawyer for some of the injured workers asked Watson Dupont, a safety manager at the Texas City plant in a Nov. 15 deposition, portions of which were made public in court filings Nov. 23.

    ``He worked for BP in 2003 on the third draft of the flex permit, yeah,'' Dupont replied, referring to BP Senior Air Engineer Rueben Herrera, a former permitting engineer at Texas Council for Environmental Quality. The group regulates industrial emissions.

    Here's the best part...

    Mark Lanier, in a Nov. 23 filing in Houston federal court, singles out Herrera's involvement on both sides of BP's air- quality permit for the Texas City refinery as proof that BP ``flagrantly violated a variety of regulatory and ethical guidelines to ensure its criminal acts could proceed apace.''

    ``Herrera did secure the necessary permits despite the fact that such action was itself a crime,'' Lanier said in his objections to BP's plea. Lanier said the plea doesn't punish BP's ``breathtaking acts of criminality.''
    In hearings since September 2006, BP's lawyers have repeatedly told State District Judge Susan Criss, who is overseeing the civil case, that the company didn't break any laws regarding its Texas air-quality permits. Last year, Criss ruled she would allow jurors to consider evidence that BP may have falsified documents to fraudulently obtain its permits against the company for punitive damages purposes.

    ``Herrera testified many months ago, and it was incredible what we heard,'' Criss told civil lawyers during a Nov. 12 pretrial hearing, referencing Herrera's prior testimony on the permits. ``He indicated it was a criminal act for him to have left that agency and gone to work for BP,'' Criss said.

    Gotta love that this is before Judge Criss instead of one of those Republican gas bags who'll vote with industry 84% of the time...

    Posted by mcblogger at 01:41 PM | Comments (0) | TrackBack

    November 19, 2007

    Level 3 assets and the SIV backup fund

    Two weeks ago we talked a little about the next part of the meltdown in the credit markets, what will soon be the furor over level three assets. Now comes word that the nations big banks and investment houses have structured a fund that might actually help alleviate the problem. By creating a buyer of last resort in an illiquid market...

    Officials from Bank of America, Citigroup and JPMorgan Chase reached agreement late Friday, settling on a more simplified structure than had been proposed, said this person, granted anonymity because he was not authorized to talk for the group.

    Bank participants, money market investors and even some managers of the troubled investment vehicles that would benefit most had considered previous versions of the fund to be infeasible, casting doubt over a final plan. Discussions had been taking place since early fall, when the Treasury Department convened a meeting.

    Now, the proposed fund could begin operating by the end of December, this person said. The banks could begin asking roughly 60 financial institutions to contribute to the fund by Friday or early next week.

    Of course, this is kind of a backdoor way for the banks to take some pressure off their balance sheets from all the level 3 assets they've been forced to salt away. Look at it this way... you have a bunch of assets you can't sell because no one wants them. So, you create a company that will buy certain of those assets, creating a market value for them. It's self dealing, analogous to what our good friends at Enron did. However, unlike Enron, this is real capital the banks are having to cough up out of their equity. Frankly, it has to work or many of our largest banks are going to have to access their lender of last resort, the Federal Reserve, to remain solvent.

    Which is a nice way of saying US taxpayers.

    Posted by mcblogger at 12:44 PM | Comments (0) | TrackBack

    HR 3915 passes and other mortgage news

    Yes, HR 3915 has passed the House and is off to what one can only hope will be a rocky reception in either the Senate or with, God forbid, President Bush.

    Seriously, we need reform. The market needs regulation and consumers have to be protected. This doesn't do that AND it cripples the marketplace. Do you have any idea how depressing it is not only to see your party fuck up brilliantly but to be forced into agreement with douchebag's like Kenny Marchant and Patrick McHenry? I hate those guys.

    Still, they were right on this one. I guess it had to happen. Even a broken clock is right twice a day.

    In other mortgage related news, FHA Modernization was stalled out in the Senate by Tom Coburn, a Republican from Oklahoma (doesn't that make him a double retard?)

    Posted by mcblogger at 10:53 AM | Comments (0) | TrackBack

    November 15, 2007

    HR 3915 : A solution that creates bigger problems

    Reality is never an easy thing to acknowledge, especially when it becomes clear that our intention to help people will, instead, fail them. That's the case with Representative Brad Miller's bill, HR 3915. It's also hard for me, as a Democrat, to believe that a member of my party, serving his constituents, would propose this horrendously bad, consumer harmful legislation. Last night I finally realized that he didn't do this to help out big banks, the special interest that will most benefit from the passage of HR 3915.

    It's my belief that Rep. Miller had nothing but good, even noble, intentions. He wanted to protect consumers from being taken to the cleaners by unscrupulous mortgage brokers. Fortunately for Rep. Miller of North Carolina, his bill does exactly that, by killing the entire mortgage brokerage industry. Unfortunately, it still leaves consumers vulnerable to unscrupulous mortgage bankers and builder/Realtor controlled mortgage companies.

    It also removes 25% of Americans from even the possibility of owning a home because they will not able to obtain financing.

    This entire meltdown in the credit market is really nothing more than bad press and stupidity. For one thing, more than 80% of even the riskiest sub-prime mortgages are performing. That means that 80% of the people who obtained financing for a home outside of conventional (good credit, easy to document income and assets - the overwhelming majority of mortgage loans in US) guidelines still own their homes and will continue to. The reason the market has slowed down to a crawl (and why subprime has already disappeared) is that the loans packaged as securities and sold to investors were priced as if they bore no credit risk. In short, investors got panicked when they realized that the B/C credits they paid A prices for actually performed like, well, B/C credits.

    The market has already corrected the underwriting criteria available to brokers and frozen out subprime options. This has effectively removed 25% of Americans from the marketplace for mortgage financing. Rep. Miller's bill won't change that. What it will do is make sure that these people will never buy a home by making it illegal to underwrite loans to lenient, high risk, characteristics. They may be able to refinance into FHA, some may even clean their credit to the point where they will be able to see and buy a home. However, that basket will go away and many people with poor credit will never be able to achieve the American Dream.

    Of course, some of these people will able to obtain FHA or conventional financing with larger than usual down payments. However, at the very least, 15% of Americans will never own a home if Rep. Miller's bill passes.

    The saddest thing about this that Rep. Miller is trying to do through legislation what should more properly be done through regulation. Mortgage brokers think national licensing, standards and regulation is a great idea. However, it has to be funded. Rep. Miller's bill tasks the same old people with implementing the new rules. As we've all seen from the anecdotal cases of broker-initiated mortgage fraud in the US, those agencies just aren't up to the task of enforcing the rules we have now.

    The reality that Rep. Miller doesn't want to acknowledge is that more than 98% of brokers are good, decent professionals, a fact which no one has sought to question because more than 60% of the loans originated in the US are originated by brokers. These people who have close relationships with their borrowers. In many case, they have replaced the community banker and basically become the George Bailey's of the 21st century.

    What's needed is a better bill that creates a level mortgage loan origination playing field between banks and brokers, creating an even more vibrant and competitive market. A bill that ends the ability of builders and Realtors to own mortgage companies or profit from them. A bill that protects consumers without crushing them or destroying their options.

    What's needed is a do-over. We ask every Democrat in the House to vote against this horrible piece of legislation. And start over again on something that will actually do something to strengthen the market, not kill it.

    Posted by mcblogger at 08:58 AM | Comments (0) | TrackBack

    November 14, 2007

    Warren Buffett testifies today!

    First off, there was this in the WSJ suggesting Buffett may be the savior of the collateralized debt obligation market...

    In recent weeks, every major bond insurer has reached out to Berkshire -- owner of a range of companies including reinsurer General Re Corp. and auto insurer Geico -- as a source of capital relief while their financial strength comes under scrutiny by ratings firms and investors, according to these people. In the process of pleading their cases with Berkshire, these companies provide Mr. Buffett with opportunities to size up their businesses.

    "Fear has moved away from hurricanes and is now moving into the financial markets," said Glenn Tongue, a partner at T2 Partners LLC, a New York hedge fund that owns Berkshire Hathaway shares. "Warren Buffett can make a lot of money from fear," he said.

    And then there was this...

    Warren Buffett has said it before and he's likely to say it again to Congress on Wednesday: He thinks the heirs of the wealthy should be taxed on their inheritance.

    Buffett, one of the world's richest men and now its biggest philanthropist, has been an outspoken critic of efforts to repeal the estate tax and is scheduled to testify at a Senate Finance Committee hearing on how current law affects estate tax planning.

    The man is richer and smarter than every Republican in the Senate. It would be nice if they'd actually listen to someone who was successful instead of people who made their money off shareholders.

    "Without the estate tax, you in effect will have an aristocracy of wealth, which means you pass down the ability to command the resources of the nation based on heredity rather than merit," Buffett told the New York Times in 2001. "[Repeal would be like] choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics."


    Posted by mcblogger at 12:27 AM | Comments (0) | TrackBack

    November 06, 2007

    The saddest news I heard all day...

    Foreclosure proceedings have begun against Michael Jackson by the lender holding the mortgage on Neverland Ranch.

    Barney Frank will be having a press conference on this tomorrow during which he will blame mortgage brokers, Pat Boone and the ghost of Scatman Caruthers.

    Posted by mcblogger at 09:07 PM | Comments (0) | TrackBack

    Plastic electricity

    Gizmodo has the low down on dual layer plastic photovoltaics. While less efficient than semiconductor based PV systems, these plastic cells are very cheap to produce and drop price/efficiency ratios significantly.

    Nobel prize-winning scientist Alan Heeger and his buddies have figured out a way to print more-efficient plastic solar cells, boosting their efficiency to 6.5%, a world record for these photovoltaic polymers. Heeger and his colleagues perform this trick by using two layers of different types of plastic, and whenever one layer doesn't turn light into electricity, the other one picks up the slack. Now the scientists are getting cocky, saying they can improve the tech even further.

    Plus, you can make them out of plant or petroleum polymers. Granted this is all still in prototyping, but as we've seen in other systems, the pace of R&D has accelerated in recent years. It's not unlikely that you'll see plastic PV systems commercially deployed by the end of 2009. Shortly thereafter, Sears will be begin offering it as a siding option.

    Oh, and here's a graphic.

    Photo Sharing and Video Hosting at Photobucket

    Posted by mcblogger at 01:03 PM | Comments (0) | TrackBack

    November 05, 2007


    PetroChina shares went public today in Shanghai to Chinese domestic investors who have been unable to buy the stock which trade in NYC and HK. The offering was so massively oversubscribed that at one point the company had a valuation of more than $1 trillion, double that of Exxon.

    It was a record-setting day for PetroChina (PTR). With an $8.9 billion debut in Shanghai, the state-controlled oil-and-gas producer laid claim to raising the greatest amount of money of any new listing globally this year. By the end of the first day of Shanghai trading on Nov. 5, PetroChina's share price had more than doubled, to 59¢, up 163%.

    The Beijing-based company first went public in New York and Hong Kong in 2000, but until the Shanghai debut its stock was largely off-limits to China's huge pool of retail investors, who can't legally trade shares outside the mainland. Now PetroChina is no longer out of reach. The euphoria that greeted the Chinese debut left the company with a market capitalization of $1 trillion, leaving second-ranked Exxon Mobil (XOM), valued at a mere $488 billion at the Nov. 2 close, in its dust.

    However, on a normalized EPS multiple (13 for Exxon which has almost double the profit of PC which trades at a 55 multiple), the company is still substantially smaller than Exxon and the major global oil companies. In other words, the market cap is more a function of investor demand than corporate performance.

    But looking at PetroChina by market cap alone grossly overstates its relative size and importance in the global oil industry. The company's displacement of ExxonMobil is a reflection of just how overheated China's stock markets have become. PetroChina may have a market cap more than twice the size of ExxonMobil, for instance, but when measured in profits the Chinese company is still a pip-squeak compared to the U.S. giant: PetroChina saw earnings rise a mere 1.4% to $10.9 billion in the first half of this year, compared with Exxon Mobil's $19.54 billion.

    Regardless of the mechanics behind the valuation, on paper this is the first company in the world capitalized at more than $1 trillion. Pretty impressive for an economy that 30 years ago was widely viewed as just another third world basket case.

    Posted by mcblogger at 01:18 PM | Comments (0) | TrackBack

    November 02, 2007

    Toyota has a new hybrid

    And Toyota continues to lead the way on electric/hybrid vehicles, this time with a plug-in hybrid.

    According to Jalopnik, 'Toyota will officially be asking for permission from Japan's Ministry of Land, Infrastructure and Transport "for the testing of a prototype plug-in Prius on public roads."' Pricing and availability have not yet been announced.

    "After completing the road tests, Toyota will then be able to begin the process of bringing them to market by leasing them to public municipalities and governmental offices. Asahi is also saying Toyota is testing a lithium-ion battery pack in the plug-in."

    Wouldn't it be cool if GM, Ford or Chrysler could get off dead center and do something in this direction?

    Posted by mcblogger at 02:18 PM | Comments (0) | TrackBack

    Google enters wireless

    via Gizmodo

    Photo Sharing and Video Hosting at PhotobucketThough there's no official talk of a Google Phone just yet, the superpower has decided to ante up $4.6 billion to bid on wireless spectrum. Google did say it would only do this on one condition, however.

    That whoever won the spectrum would be bound by law to offer at least some access to it at a wholesale price to competitors. As you might have guessed, this has pissed off some of the existing wireless carriers, who claim that sharing spectrum would lessen the spectrum's value. I'm sure both sides have nice charts and graphs to prove their legitimate points, but for now I'm going to side with the Goog.

    Google stock today hit $710 proving that there is literally a sucker born every minute.

    Posted by mcblogger at 01:13 PM | Comments (0) | TrackBack

    October 21, 2007

    Reason #3296 why Verizon and AT&T suck

    Verizon joins AT&T in admitting that it complied with Bush's illegal wiretapping order...

    Verizon also disclosed that the FBI, using administrative subpoenas, sought information identifying not just a person making a call, but all the people that customer called, as well as the people those people called. Verizon does not keep data on this "two-generation community of interest" for customers, but the request highlights the broad reach of the government's quest for data.

    The disclosures, in a letter from Verizon to three Democrats on the House Energy and Commerce Committee investigating the carriers' participation in government surveillance programs, demonstrated the willingness of telecom companies to comply with government requests for data, even, at times, without traditional legal supporting documents. The committee members also got letters from AT&T and Qwest Communications International, but those letters did not provide details on customer data given to the government. None of the three carriers gave details on any classified government surveillance program.


    Posted by mcblogger at 11:54 AM | Comments (1) | TrackBack

    October 15, 2007

    Is it just me?

    Or do you get really irritated with that obnoxious douchebag AT&T is using on their wireless data commercials?

    Speaking of wireless broadband, don't bother with AT&T. Go to Sprint. I have accounts with both and can tell you Sprint's network is way faster.

    Posted by mcblogger at 07:40 PM | Comments (0) | TrackBack

    October 12, 2007

    Friedmanite utility dereg fails. Officially.

    Again, we're talking about utility deregulation. This time, from an analysis in the late to the party Chron (via Kuff)

    [T]he very structure of Texas' deregulated market exposes customers to the full impact of rising natural gas prices more than in other states, or even in parts of Texas still served by regulated electric companies, municipally owned utilities or electric cooperatives.

    The 25 percent of Texans living in those regulated markets generally pay less than rates available in markets that have been opened to competition.

    Houston residential consumers use an average of 1,130 kilowatt hours a month. Bills for that much power would range from $125.43 to $163.85 based on rates available in Houston at the end of September for a one-year, fixed-rate plan. The average rate available in Houston would produce a monthly bill of $142.95.

    The same amount of electricity would cost $97.41 in San Antonio and $105.32 in Austin, both served by municipally owned utilities.

    Deregulation supporters say its success should not be judged just on price, and point to the variety of electricity service options available to customers. But they have been slow to take advantage of the choices.

    The variety of service options? Like what? 12/12 plan that keeps my power on only for 12 hours a day and pulls me off the grid for the 12 that I'm at work/stuck in traffic? What difference does it make if the kWh is still more expensive than the pinko's in Austin are paying?

    Pretty sad when the widely derided most liberal city in Texas has better and cheaper utility service than the capitalist powerhouses of Dallas and Houston. But at least Dallas and Houston people have their choice from a 'variety of service options'.

    Variety of service options... You can stick that up a variety of assholes.

    Posted by mcblogger at 09:12 AM | Comments (0) | TrackBack

    October 11, 2007

    Draw your own conclusions...

    Naomi Klein has written a thoroughgoing indictment of Milton Friedman and his Chicago School of economic theory which is functionally supply-side with a penchant for what Friedman called 'economic shock treatment'. Basically, you create the conditions that allow the economy to get sooo bad that the people will accept a change, any change, that promises to fix the problems. In theory, it should expand services and create wealth across every economic level. In practice, it creates massive stratification and does little to fix or create critical services. It also makes everyone not already wealthy destitute...

    Klein argues that Friedmanian free market rules do exactly what they were designed to do: they don’t create a perfectly harmonious economy, complete with the much-lauded “trickle-down” effect, but rather, turn the already wealthy into the super-rich and the organized working class into the disposable poor. Further, she describes these orchestrated raids on the public sphere in the wake of catastrophic events, like war, as exciting marketing opportunities or “disaster capitalism.”

    So, why even mention this? Simple. This is about to happen to us and you might as well be prepared for it. Since the supply-side revolution Reagan ushered in more than 26 years ago, we've seen economic stratification climb to alarming levels not seen since the Gilded Age. Despite the fact that it doesn't really help anyone other than those already rich.

    Which brings us to the tax issue we mentioned yesterday. The supply siders will tell you that cutting taxes will increase economic growth and create surplus revenues. That's actually not true since it's dependent on the Laffer Curve and even it is subject to the law of diminishing returns. What's needed is a balance in marginal tax rates and efficient use of the money by the government, not endless deficits, mounting debt and low taxes for the already rich. That and the fact that tax policy has less of an impact on business conditions than interest rates.

    Think, for a second, about our crumbling infrastructure, our rising deficit, underfunded entitlement programs... it's all leading up to a situation in which things will spin violently out of the control. Of course, when that happens, then we'll be ready for shock treatment.

    Think it can't happen here? Cause a massive economic disruption in the US and people will accept anything that will fix it.

    They elected Reagan, didn't they? Think of that as a dry run.

    One other note about investments and taxes... I'm a HUGE fan of massive capital gains taxes, especially on gains realized in less than two years. Why? Because I hate traders and speculators. I'm a long term investor...THAT more than anything done by private equity companies actually provides long term stability and growth in businesses. It also stabilizes the retirements of hundreds of millions of people.

    Posted by mcblogger at 03:15 PM | Comments (1) | TrackBack

    October 05, 2007

    "A Strong and Vibrant Economy"

    President Bush used the mediocre job report to beat up Congress about raising taxes on the 'hard-workin' people of 'Merica'. By 'hard-workin' people' he means those making more than $200m per year which is the only income class that has seen any growth in their income. It's also a relatively few people in this country.

    I referred to the mediocre job report. August was revised up from -4,000 to +89,000. That means that in August, using BLS' numbers, the economy added 89m jobs. That's only 61m short of STATIC employment. The economy needs to produce 150m jobs per month to keep employment at a static percentage. Why? Because of growth in the population of the work force, balanced by deaths and retirements. In August, as in most of the months of this terrific expansion, the miraculous republican economy hasn't even produced enough jobs to keep up with the new people coming into the economy. So, there's no wage growth and jobs, not even the bad ones that are the real 'strength' of this economy, are still fewer than they should be.

    The September report which came out today will probably be revised downward. However, for today it was 110m jobs. The unemployment rate 'ticked up' to 4.7% but in reality it's far higher since BLS no longer counts people who've 'dropped out of the workforce' which is their nice way of saying people who've been unemployed longer than 12 weeks in most cases. The real number is probably 2.5-3% higher and there's a really easy way to prove it. Just look at the earnings of the nations largest retailer, Wal-Mart. The lower end of the economy(which includes everyone making less than 200m per year), the one that actually spends money and generates consumer spending, is hurting and they aren't buying at Wal-Mart or other discount retailers.

    They are going without. And that's what Connecticut native George W. Bush calls a 'Strong and Vibrant Economy'.

    Posted by mcblogger at 09:33 AM | Comments (0) | TrackBack

    September 12, 2007

    THE Country Song for the credit-crunch

    Posted by mcblogger at 12:25 PM | Comments (0) | TrackBack

    September 11, 2007

    DeLoreans. From Houston.

    You have to read it to believe it.

    Posted by mcblogger at 09:12 AM | Comments (0) | TrackBack

    September 08, 2007

    Fed release guidelines for sub-prime mortgages

    OK, not exactly exciting for those of you outside the finance industry, but the Federal Reserve has released guidelines for sub-prime loan originations. Some of the new regs are interesting given the current issue in the lending industry with the rampant problems in underwriting standards and the resulting defaults. What really stands out to me are the changes to income evaluation. While these may seem like common sense changes, you had to be in the industry to see how far away from common sense some lenders went.

    All this aside, this week we got the MBA's numbers on defaults and slowpays... Here's the skinny

    Foreclosures - Mortgages where foreclosure process has been started to perfect title and take formal ownership

    SUBPRIME - 2.72%

    Slow pays - Mortgages 90 days or more late, but no foreclosure proceedings started

    PRIME - .93%
    SUBPRIME - 9.80%

    See a trend? YES, subprime loans tend to have, on a historical basis, about 10 times the slow pays and foreclosure rates of prime mortgages. The other thing you should notice is that the sky is not falling.

    The reality is that these loans are not going to perform like prime mortgages. Which is surprising only to the folks on Wall Street who priced those loans as if they would perform BETTER than prime loans.

    Posted by mcblogger at 12:15 PM | Comments (0) | TrackBack

    September 07, 2007

    Smart people doing stupid things

    I love Wall Street. I especially love how when someone is sucessful with an investing strategy, EVERYONE mimics it to the point that any advantage the strategy may have enjoyed is washed out because everyone is doing it.

    Which is exactly the problem with quant funds. Run by fund managers armed with phalanxes of math nerds, these massive beasts use statistical models to predict the behavior of securities and reduce that behavior into a tradable strategy. These are some really smart folks with excellent strategies and statistical models. They just happen to be the same statistical models that everyone else is using. And none of them are capable to foreseeing a three-sigma event, like when a market stops working because of emotional people acting irrationally.

    And that gives you a fast loss on the DJIA of more than 300 points in a day. Or at least it did about four weeks ago.

    But the 387-point drop in the Dow Jones industrial average Aug. 9 and the continuing turmoil in the markets, in part attributed to massive sell-offs by the quant funds, have tarnished some of the quants' glimmering intellectual credentials and shown that, when push comes to shove, they can rush toward the exits as fast as a novice investor.

    When will people learn that math isn't all that great at predicting irrational behaviors?

    Posted by mcblogger at 10:17 AM | Comments (0) | TrackBack

    August 31, 2007

    In which two Republicans do something right

    Well, at least half right...Bush is proposing expansion of FHA along the same lines we've already discussed. See how smart I am? Not really. Seriously, anyone in banking could have said the same thing. It's unfortunate that our douchebag of a Republican President has a better proposal for dealing with this than our Democratic candidates. Obama the Tard has decided to punish third party originators (known as brokers and small banks) because they are all to blame for the mess, in his ridiculous opinion. Which is really smart and all because these same folks are on a first name basis with tens of millions of voters.

    Obama's proposal offers no real solution. Even if you want to collect penalties from brokers (which you can't do because more than 96% of them have never done anything illegal) they don't have the equity to pay the levy.

    The only problem I still have with Bush on this issue is broadening the GSE's (Freddie Mac and Fannie Mae) which is something Congress will have to do and shove down his still stupid throat. At least HE got half of it right, unlike our Democratic candidates who flubbed this like a motherfucker.

    Yes, there are two Republicans who've done something right. Perry finally gave in and commuted the sentence of Kenneth Foster.

    Republicans doing something right... not too impressive when you consider that a broken clock is right at least twice a day.

    Posted by mcblogger at 09:33 AM | Comments (0) | TrackBack

    August 10, 2007

    Sometimes markets break

    The madness known as a credit crunch has set in. This is a fun time when private markets essentially break down and everyone is too scared to do anything. We talked about this last week in relation to the collapse of one lender in particular. What I didn't say was that the private secondary market was illiquid. By 'illiquid' I mean there was no money in it, even for A credits. In short, private investors were too scared to buy anything.

    The only investors still reliably buying loans were the GSE's, known popularly as Fannie Mae and Freddie Mac, which IS, in fact the reason they exist. President Bankruptcy (so known because of his business prowess) said yesterday that he saw no need for an expansion at Fannie and Freddie to buy mortgage backed securities (MBS) and credit default swaps (CDS) outside of their charter (like jumbos and some Alt-A, as well as expanding the amounts that could take in and hold). So, with them under the control of the infinitely stupid, the Fed was left with little choice but to step in and establish a floor to the market. Normally, Fannie and Freddie would be the lenders of last resort. Because of the President's stupidity, the Fed had to step in and buy $35 Billion just this morning in MBS.

    And that, my friends, is why you have government getting involved in private business. Occasionally, the markets collapse. That's a FACT that often is left out of the supply-side, get rich quick fantasies of the Republicans. When it happens, someone has to step in and make things work again. The reason organizations like the Federal Reserve and GSE's were created is to do just this... keep the market from getting too irrational.

    Posted by mcblogger at 12:36 PM | Comments (0) | TrackBack

    August 07, 2007

    Oh, yes. Let's overreact.

    Thank you, Senator Clinton, for stepping up to the plate and underwhelming the crowd. Even though you're thoroughly unqualified to address the issue, you took the time out of your busy schedule to talk about what you would do to fix the mortgage market:

  • Candy for the kids!

  • A $1bn pool to help borrowers in trouble

  • Beating up on the horrible, predatory brokers

  • No pre-payment penalties

  • Free puppies and kittens

  • Southern special... take you mind off your troubles with NASCAR or Monster Truck tix!
  • Obvs, the first one and the last two aren't real, they're palliatives and they would actually do as much as Clinton's plan. For one thing, the HelpPool... this could be eaten up in Kansas alone, forget about CA, TX, FL, NY AND THE REST OF THE COUNTRY. Even if it was large enough, you still are providing a leaky bandaid, not fixing the problem which is people in mortgages they can't afford because of resetting ARMs.

    How do you do that? It's called 'government insurance' and there is already a program in place that would, if modified slightly, allow people to refinance into more affordable mortgages. It's called FHA. Clinton would know that had she actually spent any time researching the issue. No, sorry... had her policy team actually spent time on the issue. Not only will it take care of the immediate problem, it's a long term solution that is largely self-financing and won't require taxpayers to take it on the chin.

    As for beating up on predatory brokers, GO FOR IT. Every broker and banker I know would love nothing more than to see the few scummy shitheels in the business forced out. However, don't do it by squeezing the shit out of good people... do it by fully funding enforcement of the codes on the books. Texas, for example, has an excellent regulatory team that is chronically underfunded. They have the tools necessary to force the bad actors out of business, but they don't have the manpower. Rather than create new set of burdensome and ultimately confusing laws and regs, why not just enforce the perfectly good ones you have on the books now?

    On the subject of pre-payment penalties, curbing abusive practices is a one page guidance letter from the Fed. However, eliminating them altogether will have a deleterious effect on the market and will end up driving up prices to consumers. Why? The debt market (which the mortgage market depends on) LOVES stability and will pay a premium for it. That means better rates for consumers. While this is well intentioned (you're trying to stop people from putting a 5 year pre-pay on someone with a 2 year ARM), you're going to end up hurting more people than you help. Pre-payment penalties also have a stabilizing effect on the real estate market because they put a damper on transactions known as flips which do a lot of damage to the overall values in an area when the pyramid finally collapses.

    Next time, why not actually talk to someone in the industry. They'll tell you that the market is in panic mode because of lax underwriting guidelines driven by Wall Street, too much liquidity in the market, too little wage growth which has caused higher slow pays and default rates than anticipated. They'll also tell you how to fix things the right way.

    Then you won't look like such an uninformed fool, Senator.

    Posted by mcblogger at 11:04 AM | Comments (0) | TrackBack

    August 02, 2007

    The mortgage industry... what's going wrong?

    Sean-Paul has a good post up about the fallout in the mortgage business. While it's not completely accurate (true defaults are no where near as high as his estimate), it's a good piece detailing the problem in the business. We first commented on this in March and honestly, not much has changed. The weaker hands have continued to shake out and some of the larger players have had to ante up with additional equity (Bear Stearns with their hedge fund, GM with the GMAC-RFC sale) which they are by and large doing because the assets are performing.

    And that is the most stunning unreported fact. The loans are still performing. I asked the head of secondary marketing at my former employer point blank if he was going to cut Alt-A lending. Keep in mind, I used to work for one of the largest banks in the US and probably THE most conservative. Our Alt-A was almost as tight as conventional conforming. He told me that he foresaw no need because if the market wasn't there for a purchase, he'd hold the loans for sale and service them. Because they were performing perfectly.

    The issue with companies like AHM is that they weren't nearly as conservative in their underwriting as my former employer and they didn't have anything approaching the capital level. But that only scratches the surface... what happened to AHM was nothing short of rope-a-dope.

    Companies like AHM, which contrary to all the bullshit in the media was PRIMARILY a Conventional Conforming (Prime) and Alt-A lender, underwrote loans as part of a delegated correspondent relationship (with end investors who package the credits into mortgage backed securities) under the guidelines established BY the end investors. AHM used temporary money in the form of a warehouse line to fund it's loans until they are sold to one of those end investors. Those warehouse lines normally came from... wait for it... those same end investors. So, as the market tightened, and AHM was forced to repurchase some loans, they got stuck with loans that the end investors would no longer accept or would not pay as much for as they previously did. Since they were, in the opinion of management, good loans, they were held for sale. Problem is, when you are operating on a shoe string you can't do that for long. In their case, they could do it for less than 8 months. As the warehouse line filled up with unsaleable loans and the market didn't come back, the end investors whose sudden guidelines changes had caused all the problems in the first place, demanded additional equity to secure the warehouse line. When it didn't come, they pulled the plug.

    Now, does this mean there will be a depression? No. Wages are finally starting to lift a little which will provide the next leg of growth to the economy. Housing is going to feel still more pain and the weaker hands will continue to fold. Which is great news for people like me.

    And for those of you interested in buying a condo in downtown Austin... you'll want to wait for a bit. There hasn't been enough pain in that market and to be honest, the financing structures that sustained the market on the sale side no longer exist (try to get a nodoc option arm on a non-owner occupied condo). Fewer financing options means fewer buyers and when the market goes into into imbalance from few sellers and many buyers to the exact opposite, look out below.

    At the end of the day, the real winners are going to be the hedge funds who are stepping in and buying these companies for pennies on the dollar. They will end up paying millions for loans that should be worth billions. And homeowners will keep making those payments, month after month.

    There is ALWAYS a floor to the price of a given asset, a point at which buyers are plentiful.

    Posted by mcblogger at 10:16 AM | Comments (0) | TrackBack

    July 24, 2007

    Privatization... just look at how well it's gone for water

    With all the talk about how wonderful it is to privatize roads, I thought it might be a good idea to look at another public resource that is being privatized around the world...water. Wanna see some massive failure? Just look at what happened in Grenoble, France which saw water rates increase dramatically in the wake of privatization that was supposed to SAVE consumers money. There's also the ample failures, well documented outside of the US by new organizations around the world.

    The bottom line... there are SOME things that can truly be delivered most efficiently as a public service. While government may not be good at making soap and building TV's, not to mention retailing, it is extremely good at providing courts, law enforcement, fire departments, roads and, well, water. Fortunately, we have a chance to stop road privatization before this goes too far.

    Posted by mcblogger at 09:19 AM | Comments (0) | TrackBack

    July 05, 2007

    CEO compensation floating into the stratosphere

    Jobsanger has a great piece up about executive compensation and just how out of whack it is, not only from the perspective of performance (they really aren't EARNING that money, from the shareholder perspective) but also from the perspective of the gap between what the lowest paid workers are earning vs. their compensation. I think it's high time for a linkage between the two.

    Posted by mcblogger at 10:46 AM | Comments (0) | TrackBack

    June 24, 2007

    Tort Reform is little more than Insurance Company profiteering

    Peter Stern has a great post up at Somervell County Salon about the effects on Texas consumers of tort reform. The short version? We got screwed. Rates have, instead of dropping, gone up dramatically even though consumers have even less recourse against insurers.

    Three years ago with Gov. Perry, then Texas Department of Insurance (TDI) Commissioner Jose Montemayor, and legislators "looking the other way," lax insurance legislation permitted the industry to double the premiums paid by Texas homeowners.

    At that time and during the previous several years the insurance industry had been experiencing a "hard market" and was losing revenue, we were told it was due to excessive claims due to storms, , winds, flooding, hail and mold. It had called upon the state informally to help with correcting the market, but few listened to industry pleas.

    As in many previous years of "hard markets" the insurance industry elected to act on the problem without waiting any longer for government interaction on its behalf. Virtually overnight it then "over-corrected" the market by doubling home insurance premiums.

    In some instances, the industry decreased the coverage and still increased the premiums significantly.

    Posted by mcblogger at 11:24 AM | Comments (1) | TrackBack

    May 22, 2007

    If you want to do something about high gas prices... are a couple of ideas (provided you are in Congress):

    1) Windfall profits tax on all oil companies that are not reinvesting at least 30% of profits in additional distribution and refining capacity.
    2) Use some of the funds for advanced research into genetically modified biofuel crops.
    3) Use the balance to increase refining capacity nationwide. The Government has an interest in maintaining the economy and that can't happen with gas at historic highs.

    The refiners are going to whine and scream about regulation and it's bullshit. The reality is that the investment is minimal compared to the profit potential and Congress had better do something rational very quickly. We've talked about this before. We've also hoped the Lege would do something (which was, admittedly, about as stupid as a box of rocks). So far, nothing has happened and gas prices continue to escalate.

    I know we're not the only ones who get this. I know because I still have friends who work at the Merc. Why is it so difficult for our leaders to get it? And no, by leaders I'm talking about those to whom we actually look up and respect. Bush doesn't fall into that list. Let me tell you what some of my friends are talking about... isn't it curious that two major refiners are having issues at plants in Texas at the same time just as we're gearing up for summer? You know, because Attorney General Greg Abbott has done such a good job of prosecuting collusion and price gouging.

    Sure, BP and Valero. I totally believe y'all are STILL having problems.

    Posted by mcblogger at 09:48 AM | Comments (0) | TrackBack

    May 18, 2007

    Good on you, AA employees!

    It's about time y'all stood up and called bullshit...

    But most shareholders and employees at the meeting wanted to talk about just one thing — how the world’s largest airline compensates its top executives and managers, particularly in light of steep cuts in wages and benefits that employees took in 2003.

    "Our members, your employees, feel betrayed," Bobby Gless, international coordinator for the Transport Workers Union, told Arpey.

    The criticism focused on a slate of annual stock bonuses for about 800 top executives and managers, which totaled about $160 million this year. Many comments were blistering and personal.

    Phil McDaniel, a shareholder who also is a fleet service clerk for the airline, called Arpey and his executive team "arrogant, greedy, selfish and heartless" people. Patricia Haddon, a stockholder and former flight attendant, said, "We wouldn't trust any of you if you told us water was wet." She added that Arpey's nickname among many employees now is "Carpy," to associate him with former CEO Don Carty, vilified among workers for an executive perks scandal in 2003 that resulted in his resignation.

    One shareholder demanded to know why 15 emails he sent to executives had been ignored.

    This is a marvelous first step at changing the balance of power at American. You better squeeze AA in union negotiations next year. If they don't give exactly what you want, bankrupt the airline. Then align with a private equity player for the financing to buy the airline out of bankruptcy. Sorry, shareholders, you shouldn't have been so complacent. I'd have never put up with that. Of course, I'd never own stock in American Airlines.

    (via Jobsanger and Somervell County Salon)

    Posted by mcblogger at 01:17 PM | Comments (0) | TrackBack

    May 17, 2007

    Zune is dumb

    So, I'm watching MTV and I see a commercial for Microsoft's retarded Zune media player that uses this horrible song.

    Lame, Redmond. Way, way lame. The player is bad enough without the additional damage from Mims.

    Posted by mcblogger at 12:55 AM | Comments (0) | TrackBack

    May 04, 2007

    As it turns out, TXU was fucking us all...

    via the FWST

    The former traders, both Tarrant County residents, allege that they were fired for engaging in common company practices. They said their terminations came despite assurances that they would not lose their jobs and despite having advised superiors on numerous occasions about the improper activities.

    The plaintiffs' allegations are similar to those that have led to $210 million in fines and penalties against TXU Wholesale being recommended last month. The allegations also come as the Texas House is poised to consider legislation this week that could reduce the reach of TXU in North Texas and potentially limit the company's ability to engage in such practices in the future.

    The state's independent overseer of the electric wholesale market said Tuesday that he notified the Texas Public Utility Commission as soon as he became aware of the allegations. "We are going to take some time to review this," said Dan Jones, who, as an independent market monitor, helps guard against abuses among wholesale traders.

    Yeah. See, with public equity, debt and commodities markets there are rules and regulations. There are also people watching to make sure there is compliance. With electricity, the rules haven't been written well and those that are in place aren't followed or enforced. No surprise there. The fact of the matter is that a public market for electricity may not be the best idea. For one thing, electricity rates depend not only on the cost of generation but on the transmission facilities that bring the power to market and the distribution to the end user. For another, we depend on electricity for EVERYTHING. Do we really want to base the pricing of it on speculation of some rogue trader in a market?

    Now comes work via Vince at Capitol Annex that electricity prices are major factor in driving businesses out of Texas...

    Like average Texas consumers, many business owners and manufacturers get sticker shock every time they get the power bill. But companies have an option many people don’t: They can go somewhere else.

    Last year, for example, Nucor Steel took a multimillion-dollar expansion — and 500 jobs — to Tennessee rather than expand a facility in deep East Texas because electricity rates were too high there, according to U.S. Rep. Joe Barton, R-Arlington. Nucor did not respond to requests for comment.

    The quote is from the FWST and that fact that they talked to Smokey Joe about it is making me laugh my ass off.

    Posted by mcblogger at 03:38 PM | Comments (0) | TrackBack

    April 27, 2007

    American AirlinesExecutives way smarter than employees

    Jobsanger pointed out a great story at the Star-Telegram regarding the phat bonuses that went to American Airlines executives... after they got the unions to accepts pay and benefit cuts. I gotta say, that impresses the hell out of me. Good on you, American executives! Way to be pigs at the fucking trough! With every single executive decision, you further justify my decision to stay as far away from your equity as possible. Don't worry about your long suffering shareholders or employees who've taken it up the ass from you fuckers for the better part of a decade.

    Officials with the Allied Pilots Association, American's pilots union, said Friday that they would sponsor a shareholder resolution that would give investors the ability to voice approval or disapproval with the airline's executive pay packages.

    The so-called "Say on Pay" proposal wouldn't require the com- pany to make changes but could spur additional consideration of executive pay levels, union leaders said.

    "Shareholders need to be included in the debate," said Ralph Hunter, the union's president, who pointed out that many of the airline's employees are shareholders thanks to stock options awarded in 2003. "This is not intended to be disruptive in any way; it's really a way to generate a dialogue."

    I think it kinda sucks, but the shareholders and employees deserve the treatment they receive. Why? They don't call bullshit on it. Until those two groups come together, which the above indicates may be happening, professional managers are going to keep awarding themselves compensation that is far and away more than they deserve.

    Victims are people who got taken advantage of once. Morons are constant victims. Let's see a joining of shareholder and union efforts on a massive scale. Then we can begin to rein in the massive compensation given to a miserable few for what can be, at best, described as mediocre work.

    Posted by mcblogger at 10:56 AM | Comments (0) | TrackBack

    April 05, 2007

    Diebold sues Massachusetts?

    Aren't corporations always bitching about frivolous lawsuits? I guess Diebold never did...

    Diebold, everyone's favorite manufacturer of easily hacked voting machines, wasn't happy when the Commonwealth of Massachusetts decided to go with one of their competitors when purchasing voting machines for the disabled. In fact, their feelings were so badly hurt by the snub that they've decided to sue the state.

    Yes, Diebold is suing because Massachusetts chose competitor AutoMARK instead of them. Why is it worth suing the state over this? Because Diebold thinks their machines are better. That's the reason. Really. That's the only reason. I'm speechless. –Adam Frucci

    Gee, Diebold. Maybe if your shit didn't suck you'd sell some of it. Of course, since it does you resort to a lawsuit. Maybe I should sue Paramount for not buying my movie treatment about a guy who sits in a room and does nothing all day. Except shit himself. They said it sounded like a super bad movie. I think they're all talentless hacks but I don't turn around and sue them. Mostly because I have a sneaking suspicion it's kind of a shitty idea.


    What's next, Corporate America? Suing me for not eating Linda McCartney's Tofu Treats?

    Posted by mcblogger at 10:20 AM | Comments (0) | TrackBack

    March 30, 2007

    Success is a seminar away

    So, my flight to Dallas last week was pretty quick and I decided not to break out my computer or the magazines I brought. Which left me with the inflight magazine which I normally avoid like the plague. But I'm glad I picked this one up because ONE WEEKEND CAN MAKE ME A MILLIONAIRE! Allow me to explain...

    The Learning Annex is bringing these Douches to Dallas to teach us about how to invest in Real Estate (never mind that the big attraction, Donald Trump, went bankrupt in Real Estate) and make millions. After you pay them to attend their seminar. Hey, Tony Robbins ain't some cheap bitch and thgis seminar COULD. CHANGE. YOUR. LIFE.

    Photo Sharing and Video Hosting at Photobucket

    The cost for a weekend with these folks. And hundreds of others who, like you, were dumb enough to buy into this shit? $299 if you're an AA passenger (just click the link... I've already taken that bullet for the team). This it doesn't work? Just look at this, you doubting Helen Thomas

    Photo Sharing and Video Hosting at Photobucket

    HA. Guess you got schooled. 'Tard. Obviously, there will be some out there who still don't believe. For them I present... The Donald

    Photo Sharing and Video Hosting at Photobucket

    Had enough? They are even cutting the price! Please someone in Dallas go to this. I would, but it would require a trip to Dallas and I don't have that kind of time to be on the road. Those are valuable drinking hours that would be wasted.

    Posted by mcblogger at 02:30 PM | Comments (0) | TrackBack

    March 29, 2007

    RIAA battle continues

    Apparently, someone thinks Gizmodo is going about their anti-DRM campaign all wrong.

    Instead of demonizing them for doing the only thing they know how to do, why don't you come up with a better way? You guys understand the future of tech and what it means for music and movies better than most anyone, so why don't you stop throwing rocks at the dinosaurs and start solving the problem.

    To which Gizmodo responds...

    Now, I realize that these guys aren't evil incarnate and we just share differing beliefs, but I don't think I've demonized them personally too much (well, maybe a little bit yesterday). This is clearly an ideological debate, and we're just trying to get people talking about it so progress can be made.

    As for us needing to solve the problem, to be fair, we're a blog. It isn't our job to develop new products or services, and I certainly would have no idea where to start doing something like that. If anyone has new, groundbreaking ideas or innovations in this field, of course I would love to post them here and get them publicity. However, there's a huge line between writing about technology and developing technology.

    Plus, I write 13 posts a day, dude. There are only so many hours around to do stuff in. Publicizing the issue and educating people about what's at stake is our way of helping to solve the problem, as far as I'm concerned.

    Honestly, I hate the RIAA. I think they are struggling to remain relevant in a world where technology has completely overwhelmed them. The reality is that with or without penalties, there will always be a percentage of the population that will steal stuff. Get over it.

    Posted by mcblogger at 11:00 AM | Comments (0) | TrackBack

    March 17, 2007

    Yeah, the RIAA still sucks

    Gizmodo continues it's quest to end the tyranny of the RIAA which has now decided to start charging podcasters who use music as part of their 'casts. Since they have such a MASSIVE listener base and are totally making fat bank off their podcasts.

    "Per performance" rates are charged per stream per listener. The example the Radio and Internet Newsletter gives is that an "audience of 500 listeners racks up 500 'performances' for each song" played. There is also a minimum fee of 500 bucks per station, even for tiny or noncommercial ones.

    The Mayor and I were thinking about a podcast of our own. Then Sister Ruth interjected, tried to become a part of it and we all decided she would only be allowed to participate by saying the words 'EXTREME SNOWBOARDING' and playing the cymbal on occasion. The entire project fell apart over the insistence of McSleaze and Spamburgler that it be called 'Happy Hour' and my belief that it would only be successful if it was called 'Zebulon'.

    'Happy Hour' is a dumb idea for a podcast that's only 10 minutes long and that most of us will pass out while making. Even Boobilicious thought it was dumb. The only thing she thought was dumber was calling it 'Zebulon'. You'll not be hearing from her for a while.

    Posted by mcblogger at 02:12 PM | Comments (1) | TrackBack

    March 16, 2007

    Dude... RFID's aren't so secure...

    It's an article of faith that RFID systems are keeping buildings secure. It's misplaced faith, which is why this piece over at Somervell County Salon is such an eye opener. We knew these things were easy to destroy, what we didn't know was how easy they were to hack.

    Can't wait until someone clones my TXTag.

    Posted by mcblogger at 09:40 AM | Comments (0) | TrackBack

    March 14, 2007

    Making money the old fashioned way...

    It's a monopoly, baby!

    To many Mexicans, who make Slim richer with nearly every phone call or trip to the mall, his rise shows their businessmen can run world-class companies. He's widely praised for turning Telmex -- once notorious for taking months or years to install a phone line -- into a modern, professional operation.

    But he also has kept phone rates high in a country where the minimum wage is about 50 cents an hour, and his success inspires anger among Mexicans who resent the concentration of wealth in the hands of the nation's relatively tiny elite.

    "Why should we want a few people to hoard all the wealth, if the majority of Mexicans don't have enough to eat and 30 million Mexicans live on less than 22 pesos ($2) a day?" thundered former leftist presidential candidate Andres Manuel Lopez Obrador after Slim's jumped to No. 3 on Forbes' list of billionaires announced last week.

    Now worth an estimated $49 billion, the 67-year-old Slim is the son of a Lebanese father who built a small family fortune from retailing.

    Slim's Telefonos de Mexico SA controls more than 90 percent of the nation's fixed phone lines and made $15.9 billion in 2006; his America Movil SA controls about 70 percent of cell phone service in Mexico and made $21.6 billion.

    Carlos Slim is the worlds third richest man because he's gouging Mexican consumers. It's not skill, it's greed. If Mexico is ever going to drag itself into the first world, they have got to break up monopolies like that enjoyed by Mr. Slim.

    And we have to be ever vigilant against monopolies here in the US.

    Posted by mcblogger at 09:16 AM | Comments (0) | TrackBack

    Panic in the markets!

    So the Dow fell more than 240 points today. However, the world did not come to an end. The economy, while not good, is still decent as is the job market. Granted, nothing is a strong as it could be, but it's not the end of the world.

    Everyone is nervous about the mortgage industry, specifically the sub-prime sector. Some of the companies are going to go bankrupt, adding to the ones who have already filed. It's the kind of the thing that happens every 8-9 years and it's completely healthy as it shakes out the weaker lenders who underreserve for losses and have ridiculously lax underwriting guidelines. They were the ones who made life difficult even for those of us in the A paper market. Fuck New Century. I'm glad the bitches are gone.

    This brings up a great point on liquidity. Countrywide's CEO says the overall industry is entering a kind of liquidity crisis. While I think there are some issues, I don't think it can be classed as a crises. What the investment banks are doing is squeezing the folks with the weakest balance sheets. By forcing them to buy back bad loans while at the same time freezing their access to new capital, they are effectively shutting them down. This will work with a company like New Century, but it more than likely won't with someone like Novastar (on the smaller end of the business) or GMAC (on the larger end).

    Sellers are in charge of the market right now and are creating, as they always do, terrific buying opportunities. The bottom line, especially in the mortgage business, is that the players who aren't forced under are the ones who will end up being hugely profitable as time goes on. Bottom line is that the reaction in the market (selling everything they can) is way overdone. As a great friend said to me almost a decade ago, "Be greedy when others are fearful; Be fearful when others are greedy."

    Will the slowdown in housing and the collapse of many lenders cause a recession? Sure. That was already cooked into the market. The bigger problem is how much leeway the Fed has to drop rates. At this point, we need some real fiscal responsibility in Washington. Otherwise, what happens today to sub-prime lenders may be what happens tomorrow to the Federal government.

    One last note, for those looking for how far things may go, keep in mind there is TWO TRILLION DOLLARS sitting on the side lines, accessible by hedge funds.

    Eight of the top 10 LBOs in history have been inked since June; in 2006 alone some $420 billion in leveraged buyouts took place, a record. And yet private equity firms still wield as much as $2 trillion in combined buying power, enough to take out fully a 10th of the entire U.S. stock market.

    The fuel for all the buying—low long-term interest rates—remains in the tank. In fact rates have been falling in the past few weeks and fell even more Tuesday, making the debt, or leverage, that private equity firms wield even cheaper. "The difference between cost of capital and return on equity is so enormous that if you're a leveraged player you just have to buy," says market watcher Jason D. Trennert of Strategas Research Partners. He goes so far as to suggest that the Standard & Poor's 500-stock index itself, if it could be packaged into a single entity, would be a screaming LBO candidate. Hence what veteran market strategist Edward E. Yardeni has taken to calling the "private equity put"—for put option, a floor price under a security. In this case it's under the whole market.

    If you have stocks, hold 'em. If you have cash, buy. Then don't look at things for at least six months.

    Posted by mcblogger at 12:25 AM | Comments (0) | TrackBack

    March 08, 2007

    Diebold exiting the election business?

    Via Somervell County Salon comes word that Diebold may be exiting the vote machine business.

    Apparently executives high up at Diebold, the company that brought untold amounts of frustration to voters and countless faulty elections across the US, are considering dumping their Diebold Election Systems business unit, which it seems is almost systematically attempting to tarnish its parent company's brand with its infamous e-voting machines. After strained relationships with government officials over the utter craptasticality of their boxes, Diebold expects to announce the future of DES early this year; although there's no way to guarantee the 150k deployed Diebold machines would be decommissioned if DES were dismantled or sold, we'd really like to see a progressive technology organization -- like, say, a major university, the Open Voting Foundation, or the EFF -- raise the funds, buy the assets, opens source the software, and ensure that by the time the 2008 elections roll around, every vote will be properly accounted for, even if cast on old Diebold boxes.

    Actually, not a bad idea... and Verified Voting could do it by setting up a partnership with a private equity firm. I hear Citadel is looking for good investments.

    Posted by mcblogger at 06:11 PM | Comments (0) | TrackBack

    Diebold exiting the election business?

    Via Somervell County Salon comes word that Diebold may be exiting the vote machine business.

    Apparently executives high up at Diebold, the company that brought untold amounts of frustration to voters and countless faulty elections across the US, are considering dumping their Diebold Election Systems business unit, which it seems is almost systematically attempting to tarnish its parent company's brand with its infamous e-voting machines. After strained relationships with government officials over the utter craptasticality of their boxes, Diebold expects to announce the future of DES early this year; although there's no way to guarantee the 150k deployed Diebold machines would be decommissioned if DES were dismantled or sold, we'd really like to see a progressive technology organization -- like, say, a major university, the Open Voting Foundation, or the EFF -- raise the funds, buy the assets, opens source the software, and ensure that by the time the 2008 elections roll around, every vote will be properly accounted for, even if cast on old Diebold boxes.

    Actually, not a bad idea... and Verified Voting could do it by setting up a partnership with a private equity firm. I hear Citadel is looking for good investments.

    Posted by mcblogger at 06:11 PM | Comments (0) | TrackBack

    March 07, 2007

    Let me tell you a little story...

    Let's say, for instance, that you are in default on your student loans. Let's then say that you went to a buy a home and were a perfect fit for a FHA insured mortgage, save one problem... you were in default on your student loans. The reality is that you aren't eligible for a FHA insured mortgage because of that default. The same should be true of federal contractors who violate federal law. But, as it turns out, the Bush Admin thinks that what's best for individuals isn't necessarily best for government contractors. Think about how much we've heard about Halliburton's blatant violations of federal law and war profiteering? Now we find out that much of what has happened at Walter Reed may have been the responsibility of Halliburton?

    How about Congress passing a law to ban those who violate federal law or regulations from doing business with the government?

    Posted by mcblogger at 01:09 AM | Comments (0) | TrackBack

    March 06, 2007

    Just in time for hurricane season

    NYMEX is rolling out Catastrophic Risk futures (CAT risk) for trading on Globex and options on those contracts which will trade on the floor of the Merc. The options are European style contracts and will settle on ClearPort only at expiration. Usually, insurers and others who stand to lose billions from weather related events have purchased reinsurance through very large and financially sound insurers (it's called a SuperCAT policy). Now they'll have another way to insure against loss, by trading derivatives. With people who may not be able to pay up when the weather turns against them. Nice.

    Anyone want to even think about the counterparty risk? I know the NYMEX is safe, but one event could really break some people. Just ask Lloyd's underwriters who got creamed by Hurricane Andrew.

    One thing is for certain... the money has voted that global warming is real. That is a large part of the reason these contracts exist.

    Posted by mcblogger at 06:30 PM | Comments (0) | TrackBack

    February 28, 2007

    SprintNextel throws a punch at Verizon, AT&T

    This didn't get much notice, but SprintNextel is rolling our a new pricing plan... unlimited voice, messaging and data for $120/monthly. For another $30, you can add in wireless access for your home computer.

    Current Analysis analyst William Ho said in a research note that the trial plans “have the effect of a grenade blast, damaging not only wireless competitors but also landline carriers (both traditional wireline and cable) with an attractive wireline substitution story (both voice and data).”

    However, Ho went on to note that “although Sprint is the first national carrier to offer unlimited voice, messaging and Web access, it’s still a trial with limited availability.”

    Right now I'm paying more than $310/month to Cingular and will tell you honestly that if SprintNextel rolls this out in Austin, it'll be worth it to me to break my contract with them. I'd recoup the contract termination fee in a little over a month and I've no special love for Cingular (what do you expect when their 'network' drops me from EDGE to GSM all the time?).

    Posted by mcblogger at 09:09 AM | Comments (0) | TrackBack

    February 26, 2007

    What is KKR up to?

    You've no doubt heard the news that shareholders at TXU have accepted the LBO offer from KKR. You've probably also heard about the commitment the new owners have made to taking the company in a much greener direction. That last part has left some wondering WTF are thinking? Is it pure social responsibility or business genius?

    KKR and Texas Pacific Group agreed over the weekend to drop most of TXU's ambitious plans for building new coal-fired power plants, a move designed to win support for the deal from environmentalists and other critics of the company. The new buyers also agreed to support a mandatory national program to cap emissions of greenhouse gases and pledged not to build coal-fired plants outside Texas.

    I'm voting for the latter, here's why...

    1) Value added services - the technology to deliver broadband over power lines has been in existence for a while. It's a new revenue stream for TXU that will require a minimal upfront investment since they already have the distribution system in place.
    2) The additional plants were a stupid move, over committing to a legacy generation system while technology continues to advance rapidly.
    3) Then there is this

    The Natural Resources Defense Council said the new buyers have agreed to withdraw permit applications for eight of the 11 proposed plants and decline to propose new coal plants outside Texas and support caps on emissions linked to global warming.

    The buyers also agreed to support a system of trading credits for cutting emissions, called cap and trade.

    Pollution credits... by voluntarily reducing emissions, they'll end up with some pollution credits they can sell and realize a gain on. Every single year, it's a revenue stream they can tap without any new investment. While pollution credits aren't worth much now, they are going to be worth something much more down the road.
    4) They are planning a massive expansion of wind and cheap solar capacity in West Texas, coupled with an investment in upgrading the distribution grid. Over time, wind power and passive solar are cheaper than coal by virtue of a free input. This is long term thinking that will reap big rewards down the road while earning huge PR benefits. See again #3 for the secondary impact on pollution credit sales.

    The credits are the big thing. As the EU moves to tighten restrictions these will be become inherently more valuable worldwide. The US will soon be moving in that direction. The reason the cap and trade system has not really worked is that companies have never had to face real consequences. That's changing and the system will start to show some of the promised benefits.

    Oh, and the KKR/TPG group stands to make a ton of money, not only off operations but through the eventual sale of the enterprise back to the public.

    Posted by mcblogger at 01:30 PM | Comments (0) | TrackBack

    February 23, 2007

    Wal-Mart... not quite the great corporate citizen

    Apparently, Wal-Mart is not alone nor is Texas the only state in which this is happening. Vince at Capitol Annex has more on this loophole in tax law that allows a parent company to 'rent' space from a REIT subsidiary, which then passes the profits back to the corporate parent. The kicker? The corporate parent gets to use the 'rent' as an expense, thereby reducing it's tax liability.

    New York is currently devising laws to correct this problem. Republicans there are spinning it as a new tax when in fact it's simply the closure of a loophole (as it would be in Texas as well). Spitzer is having none of it.

    "Our definition of a tax loophole is a provision that is taken advantage of by a few sophisticated taxpayers to reduce their fair tax liability in a way that was never intended at the time the provision was enacted," said Spitzer's budget director, Paul Francis. "Given Gov. Spitzer's pledge not to raise taxes, we carefully scrutinized all of our proposals to make sure they met this definition."

    "When we are asking other parts of the state budget to make sacrifices, it is only fair to ask that all taxpayers play fairly under a simple set of clearly understood tax rules," said Francis, former CFO of

    New York is estimating that it could bring in more than $400 Mn annually. I haven't seen an estimate for Texas yet but would be willing to bet it's more than that, possibly as much as $1 Bn annually.

    Posted by mcblogger at 02:07 PM | Comments (0) | TrackBack

    The Austin Chamber of Commerce loves them some tolls

    Recently I got a mailer from, which is an education initiative funded by the Greater Austin CoC to inform the people of Austin that they need roads. Masters of the obvious, these folks.

    Tolls, tolls and more tolls appears to be on tap if the GACoC has their way. One has to wonder what they'll get out of it, especially since I'd be willing to bet most members of the CoC aren't so much for tolls... they just want traffic off the roads (we'll get to that in a bit). Most of the site is pretty worthless (the design's not bad... the information is. For example there is a lot of information about why we need roads. Which is pretty stupid because no one is arguing that point save maybe morons). The Transportation Funding section is the real meat of the site... the rest of it is as substantial and worthwhile as a rice cake.

    Gasoline taxes. This is the main source of revenue for highways right now. However, the state gas tax hasn’t been raised since 1991. With gas prices already reaching record highs, it’s unlikely that the state will ever raise this tax enough to pay for all of Texas’ unmet transportation needs.

    Yeah, not so much at record highs anymore and around current, lower, prices, alternatives still make a lot of sense which puts an upward cap on gasoline prices. However, let's not even get into that. Let's focus instead on the idea that the state won't raise the gas tax. This is as much BS as anything else on this site. The state has been made very aware that it's cheaper to do that than anything else.

    However, it may soon be possible for regions like Central Texas to institute local gasoline taxes. To meet our immediate needs, a Travis County gas tax would have to be set between 30 and 50 cents per gallon. This could have a severe impact on lower-income residents and on the regional economy.

    That number for the gas tax is just wrong. We already know that it'll cost much less, even without indexing which the state is going to eventually pass. Further, the idea that gas taxes hurt lower-income residents more than tolls is absurd. For one thing, if tolls are used for expansion of 35 through central Austin, we'll all be paying the price. That's the most obvious issue. The less obvious issue is that tolls are going to increase the cost of goods sold for every business through increased transport to market costs. That'll be passed on even to consumers who don't use cars.

    The other reason we'll be effected is that traffic won't disappear on 35 because there isn't a free 130 to take traffic away. 130 was always intended to be a bypass to 35 through Austin Metro for traffic moving north to south and vice versa. We already know that most trucking companies aren't going to use the toll roads. Which means that traffic in central Austin will continue to be bad and everyone will suffer. Take the tolls off 130 and watch the congestion on 35 disappear.

    Finally, let's consider the only cost metric that makes sense, cost per mile. On the toll roads, the absolute best you can do is $0.12 per mile. With the gas tax (at even an inflated $0.17 per gallon), the per mile break down if your car (like most) gets 20 miles per gallon is $0.0085 per mile. Less than a penny per mile for new roads and improvements to existing roads is hell of a lot better than $0.12 per mile.

    Sales taxes. This is main source of revenue for public transportation in Central Texas. Right now, state law limits the combined sales tax paid in local communities. However, Texas may allow regions to raise this limit to fund transportation improvements.

    To meet our immediate needs would mean adding two or three cents to the sales tax paid now in Travis County. Sales tax can be a volatile revenue source, going up and down dramatically depending on economic trends. This makes it tricky to use sales tax to fund projects that, even under the best conditions, take years to build.

    Nah, leave the sales tax alone. For one thing, it's more regressive than any other tax. For another, it'll just put a clamp on economic activity and more and more people will travel out of the area to shop (just ask people in NoCal how often they drive up to Southern Oregon).

    Property taxes. Bonds repaid with property taxes are the main source of revenue for city streets and county roads in Central Texas. Also, tax-backed bonds have paid for right-of-way for current highway projects. The region has already ramped up its use of tax-backed bonds to get projects like SH130 moving.

    To fund the system we need would require increasing Travis County property taxes as much as $200 a year for the next 20 years. Devoting such a large chunk of local bond capacity to transportation means less money for other capital improvements—like police and fire stations, jails and cultural facilities, parks and libraries—that are funded through tax-backed bonds.

    Yeah, property taxes are kinda dumb anyway as they are the ultimate delinking of a tax to the ability to pay it. Just because you live in an $850,000 home doesn't mean you can pay almost $26,500 in property taxes. Yeah, let's crap all over the this idea.

    Tolls. The tolls collected on new roads like SH 130 pay back the bonds that financed initial construction. Once those bonds are paid off, tolls can be lowered to the level needed to simply pay for maintenance. Or they can be used to fund other needed projects — like sidewalks, bike lanes, or bus service — that help make up a comprehensive system.

    Not so much because tolls on 130 are dedicated to TXDoT. Much like the tolls on the North Dallas Tollway, they aren't going away. EVER. The Chamber of Commerce is definitely inaccurate here. Show me the mechanism that makes them go away then, maybe, we'll talk. So far there's nothing. Of course, you can argue that revenue from one road will go to build another and if you're going to do that (benefiting two different user groups) then you may as well implement a gas tax that covers everyone as cheaply as possible.

    Tolls have been controversial in Central Texas, especially for projects where new toll lanes would be built in existing highway corridors. (No project in Central Texas involves tolling existing highway lanes.) Clear policies and accountable leadership are needed to make sure tolling is implemented wisely. However, compared to taxes, tolls have the advantage of only affecting the people who choose to drive on those roads, while still producing enough revenue to make a difference.

    Yeah, the problem, as Senator Watson is finding out, is not accountability, it's the fairness of tolls themselves and how much more expensive they are than gas taxes. That's why tolls are going to be DOA and our leaders that support them are going to have some real problems down the road. Tolls almost cost the Chair of the House Transportation Committee his seat in this last cycle (what, you thought we'd get through this without mentioning Krusee even once?).

    There is, of course, an upward density limit that forces a conversion to mass transit and less emphasis on roads. In most of Austin, which is a very compact city for the western US, some would say we are already there. That's what I'd like to see policy makers focus on as well expansion of (and improvements to) the freeway system. Even those who live in the burbs have, to some extent, been subsidizing public transportation through sales taxes for years. I point this out because I'm sick of hearing the argument that central Austin doesn't want to subsidize freeways for the burbs. One has to ask of the short sighted people, 'Who the hell do you think subsidized MoPac and 35?'

    Decades ago there was a debate over tolling vs. gas taxes for transportation in this country. For the most part, tolls lost because they were more expensive.

    Guess what? THAT HASN'T CHANGED.

    Posted by mcblogger at 12:03 AM | Comments (1) | TrackBack

    February 21, 2007

    Nationalize TXU?

    I am so sick of whiny ass corporations it's starting to make me sick. The problem is, we have a corporate welfare system in this country where we coddle corporations and shareholders and yet these people still complain about how horrible any regulation is. Tell you what, if you think having to go before a regulatory agency is such a horrible circumstance, imagine how much less you'd like it if the state legislated the dissolution of the company. I'm serious about this y'all. Why is it that TXU, with nothing but advantages, can't manage to outperform Austin Energy, a small municipal utility?

    Maybe it's time we nationalized the power companies and brought them fully under the control of the state. Having a publicly owned utility has certainly worked to the benefit of consumers in Austin. Why shouldn't everyone in Texas enjoy that? It's clear from all of Kim Morgan's whining that they just can't cut it...

    TXU spokeswoman Kim Morgan said the company is "disappointed" in the decision.

    "Every day that a solution is delayed leaves older, less efficient power plants online too long — affecting prices and clean air," Morgan said. "And it brings us one day closer to the potential of widespread blackouts.

    Kim, your employer damages public health as part of it's business providing power to people in Texas. Naturally, those people want to know their health is protected and TXU cleans up it's act going forward. That's why regulation exists, to restrict corporations from going too far in search of profit. Keep in mind, corporations exist only to make it easier for people to pool capital and operate a business. They aren't, in and of themselves, something that has more rights than any individual. The existence of TXU is TOLERATED by individuals who authorize the state to charter them. That can change quickly and your bitching is making that more and more likely. If I were you, I'd rethink my attitude, thank Judge Yelenosky, and talk about how happy TXU is to be allowed to operate in Texas.

    The thing that consistently amazes me is that more shareholders aren't pissed as hell about the job being done by Kim and her fellow employees. These shareholders stand to lose substantial capital if these companies go too far in their efforts to control the regulatory environment. Further, the greed of management in charging dramatically higher prices than companies like Austin Energy could well backfire and trigger the nationalization of the company. I'd also like to know exactly what the pollution footprint of TXU REALLY is. Trust me, Kim, there are some questions you don't want asked so I like I said it's really best to keep your mouth shut. Thank God Judge Yelenosky decided to override 39%'s fast track EO because 39% doesn't give a shit about public health unless it's being effected by HPV.

    State District Judge Stephen Yelenosky ruled that four environmental groups "are likely to prevail on their argument that the governor lacks the authority" to issue an executive order telling a state agency to hold hearings and reach a decision by a specific deadline.

    Yelenosky ordered the State Office of Administrative Hearings to ignore Perry's demand that hearings on new power plants be limited to six months.

    He did not specifically halt a hearing scheduled for today on TXU Corp.'s request for permits for six coal-fired plants, but he told the state's administrative law judge to reconsider requests for a delay from environmental groups.

    While Yelenosky's order did not specifically relate to the controversy over the human papillomavirus vaccine, HPV, it was the first judicial ruling that indicated a governor does not have the power to direct state agency operations by executive order.

    Kim doesn't understand that if TXU can't deliver power under the regulations established by the state of Texas then there is little point for TXU to exist as a public company. Given the comparison between electricity prices in Austin and Dallas, one has to wonder if there is any case for the continued existence of TXU. At the very least, the shareholders should be moving to rid themselves of the management team rapidly.

    Posted by mcblogger at 02:22 PM | Comments (2) | TrackBack

    February 19, 2007

    Compass to merge with BBVA, GM and Chrysler get hitched?

  • So, my bank is going to merge with the Spanish banking conglomerate, BBVA

    The acquisition of Compass Bancshares Inc. by Spain's Banco Bilbao Vizcaya Argentaria S.A. would create a formidable Southwestern financial institution with nearly $20 billion in deposits and 326 bank offices in the lucrative Texas market alone.

    BBVA is the same company that owns Mexico's largest bank, Bancomer. Want to know more about them?

    Headquartered in Spain, Banco Bilbao, also known as BBVA, operates 7,500 bank branches in 35 countries. It has about 100,000 employees and reports more than $520 billion in assets. If the merger is approved by shareholders and regulators, the bank said it would merge its U.S. bank affiliates, which include Texas Regional Bancshares, State National Bancshares and Laredo National Bancshares, with Compass, creating "the largest regional bank across the Sunbelt."

    Damn, the Spanish are just buying up all their old New World assets again. From transportation to banking, the Spanish seem hell bent on reconquista.

    No, not that crazy 'what are all these brown people doing here' reconquista (it's not real, but is instead a figment of some anglo's delusional mind). The Spanish kind. This time they will not have those ridiculous metal helmets, but some really smart suits from a haberdasher in Barcelona where Barfly got me some fab cufflinks years ago.

  • GM to buy Chrysler? Oh, sure. Any time two gimps get together you always create one healthy company. But not really. That's the kind of fantasy only an investment banker who stands to make a $20 mn bonus on the deal thinks is real. Everyone else thinks the idea blows...

    "A merger makes no sense," said economist Peter Morici of he University of Maryland.

    "There are no synergies to be found in a merger."

    Mr. Morici said GM and Chrysler could co-operate in a range of areas, including developing hybrid and hydrogen vehicles. A merger would solve neither company's main problems, including "unattractive products" and high labour costs, he said.

    "One of the reasons Daimler Chrysler wants to get out of the U.S. is because of [United Auto Workers president Ron] Gettelfinger," Mr. Morici said.

    Again with blaming the UAW! Let's be clear. The union may have been a problem at one time but that's passed. The problem now is that these companies have never done a good job of anticipating where demand is going to go, adapting once it's clear they are way out of the market and managing their finances effectively (when someone says they have a multi-billion dollar shortfall in the pension, that's a managerial problem. You fire them, except in the American auto industry where you give them a ton of money and a promotion). That's the problem with these companies and the analysts who track them. To a single person they want to blame labor and not the shitty cars these companies are producing. Oh sure, the quality is up but the designs are still bad, not to mention the strategic errors.

    1) Hyrdorgen powered cars? Dumbfucks. I mean seriously, this is not going to the future of transportation. Unless we find some ultra-efficient way to crack hydrogen out of water by electrolyzing it. With photovoltaics. And if you find PV systems that efficient, you'll just be running cars off them directly (screw the hydrogen).
    2) Electric cars. WAY missed the boat on this one.
    3) Hybrids. You had FEDERAL MONEY to help develop this and still Toyota is beating your ass? Losers.

    Federal money should be used to shore up the pension plans of these companies and the companies should be forced into bankruptcy. Like a horse that's lame, they should be put out of their misery. Sell the assets to Toyota and let me have stock in them. One of the problems with American capitalism is the managerial class. The workers are THE most productive in the world and capital, for the most part, is free to move and can be put to work easily. The missing piece is MANAGEMENT. It effects GM, TXU and countless others.

    It's not the workers, it's the management, stupid.

  • Posted by mcblogger at 09:29 AM | Comments (0) | TrackBack

    February 16, 2007

    Restrict Corporations? Commie...

    That's right, I'm a big commie. Not really, they wear ugly shoes and only drink vodka. I'm not so much for either.

    Capitalism, which has made this country a vibrant economic superpower, is being strangled not by communists or socialists but by corporations themselves. Who's Playin' has a great post up about restricting corporate lobbying, which has created too good an atmosphere for corporations. Why do corporations enjoy First Amendment protections of political speech? In Texas, we keep them out of it so why not at the Federal level?

    The point I’m slowly getting to here is that I do NOT believe that a First Amendment right to freedom-of-speech exists for corporations. I truly think that we would all be better off if certain restrictions were placed on corporate entities:

    1. No political lobbying.
    2. No political donations of any kind.
    3. No political advocacy of any kind.

    After all, our government is supposed to be a government of, by, and for the people. As long as the current rules allow for corporations to influence public policy, it is the ethical obligation of the officers and board members of that corporation to do their best to encourage public policy that protects the interests of the shareholders to the detriment of other market entrants or competing interests such as labor, public safety, or the environment.

    We've talked a lot about the failures of tort reform and deregulation. When you allow corporations to rewrite the rules, they won't do it to benefit consumers, especially when there is little more than lax government oversight. Deregulation is not altogether bad on it's face. However, it's time we take a serious look about what we're seeing in the competitive landscape and either prodding the companies forward to compete or re-regulate if they won't. That's a conversation that needs to be had sooner, rather than later and we need to cut the vocal chords of corporations first.

    I know the lobby will hate it but who the fuck cares? When was the last time you felt bad for Velma Luna?

    Posted by mcblogger at 03:10 PM | Comments (0) | TrackBack

    February 13, 2007

    Warrant issued for Verizon Wireless

    Photobucket - Video and Image Hosting

    A consumer who was wronged by Verizon Wireless sued the company in small claims court and won. He then went to a payment review hearing (which Verizon didn't show up for either) and the pissed off judge swore out a bench warrant for the entire company's arrest. Fortunately, before the warrant could be executed, the company paid up.

    "Verizon failed to pay me by the court-appointed deadline. As I had a payment review scheduled, I attended this and was surprised that Verizon did not feel it necessary to attend, especially considering that the court paperwork clearly indicated that they would be subject to arrest for failure to appear. Apparently, being considered to be in contempt of court was not initially of concern to them. Afterwards, just prior to (lucky them) submitting a motion to seize property of the judgment debtor (Verizon Wireless), that's when I got the check. To hell with them! It's lovely that the court issued a "Writ of Capius" authorizing the arrest of Verizon. I am glad that I was eventually paid, as I would otherwise have had an issue having a sheriff arrest a corporation. I'm not sure how that would have gone. Perhaps I would have had to have filed a motion to amend the judgment to include an individual's name (perhaps their CEO or some other hotshot?)."

    Posted by mcblogger at 04:00 PM | Comments (0) | TrackBack

    Warrant issued for Verizon Wireless

    Photobucket - Video and Image Hosting

    A consumer who was wronged by Verizon Wireless sued the company in small claims court and won. He then went to a payment review hearing (which Verizon didn't show up for either) and the pissed off judge swore out a bench warrant for the entire company's arrest. Fortunately, before the warrant could be executed, the company paid up.

    "Verizon failed to pay me by the court-appointed deadline. As I had a payment review scheduled, I attended this and was surprised that Verizon did not feel it necessary to attend, especially considering that the court paperwork clearly indicated that they would be subject to arrest for failure to appear. Apparently, being considered to be in contempt of court was not initially of concern to them. Afterwards, just prior to (lucky them) submitting a motion to seize property of the judgment debtor (Verizon Wireless), that's when I got the check. To hell with them! It's lovely that the court issued a "Writ of Capius" authorizing the arrest of Verizon. I am glad that I was eventually paid, as I would otherwise have had an issue having a sheriff arrest a corporation. I'm not sure how that would have gone. Perhaps I would have had to have filed a motion to amend the judgment to include an individual's name (perhaps their CEO or some other hotshot?)."

    Posted by mcblogger at 04:00 PM | Comments (0) | TrackBack

    February 10, 2007

    Fuck the RIAA

    The RIAA must be full of some of the dumbest people in the universe. They go after a mother not to long ago, don't get much out of it except a PR black eye. So they then turn around and go after her kid who countersues them for collusion and asks for a jury trial.

    Real smart, these guys.

    Posted by mcblogger at 10:31 AM | Comments (0) | TrackBack

    January 22, 2007

    TXU may be fucked...

    Possibly good news on the gloabl warming/pollution/being able to breathe in 20 years front. TXU may not get to build their dirty coal plants after all.

    "The Climate Stewardship and Innovation Act of 2007" would cap greenhouse-gas emissions of the electric power, industrial, transportation, and commercial sectors at 2004 levels by 2012 and reduce them to one-third that level by 2050.

    Similar bills, introduced by Sens. Joe Lieberman, an Independent from Connecticut, and John McCain, R-Ariz., in 2003 and 2005 have failed to pass.

    But the new measure, also co-sponsored by Sen. Barack Obama, D-Ill., has improved its chances of passing in the new Democratic-controlled Congress. The White House has opposed capping carbon emissions, saying they are too costly and deter economic growth.

    That last part really makes me laugh. Evidently Connecticut native George Bush hasn't read the Big Picture Book of New Technologies and New Jobs or Mommy, I can't breathe! (A primer for children living with asthma).

    Posted by mcblogger at 09:40 AM | Comments (0) | TrackBack

    January 20, 2007

    Trump to brand furniture...

    Not content to just furnish his own home in the most tasteless manner possible, Donald Trump is taking his keen eye for all things tacky and sectional to the consumer market.

    Lexington Home Brands will add “Trump Home” to its stable of licensees, which include Tommy Bahama, Liz Claiborne and Bob Timberlake. The collection, to be presented at the April High Point Market, will include a full line of case goods and upholstery in traditional and contemporary styles.

    “Mr. Trump wants to make his lifestyle of elegance and luxury available to the consumer in their own home,” Cathy Hoffman Glosser, vice president of Global Licensing for The Trump Organization, said in an e-mail interview.

    We know you're planning to buy new furniture. Isn't everyone? Isn't it great to know that in a few short months you'll be able to make your home look like brothel, just like Donalds?

    Oh, yeah... Hizzily and Richardson are in the Presidential race. Yay. Feel the excitement. Rock.Goodie. OMG, I'm about to burst from the possibilities. Oh, yeah, at this very moment I'm overcome with sheer joy.

    Posted by mcblogger at 11:10 AM | Comments (2) | TrackBack

    January 15, 2007

    Two takes on the minimum wage...

    First off, there's George Will's retarded, incoherent ramblings that reveal the fact he doesn't know a damn thing about how a consumer driven market economy works. Then there is Ruben Navarette's extremely good commentary on increasing the minimum wage.

    If the richest country in the world is going to have a minimum wage, we should have the decency to not let it hover near the poverty level. Forget the old saw that raising the minimum wage causes job losses. Research shows better paying jobs result in more people working. Workers tend to spend their wage increases, which pumps money back into the economy.

    Raising the minimum wage isn't just good for workers. It's good for everyone.

    Guess which one you should pick to read...

    Posted by mcblogger at 01:00 AM | Comments (0) | TrackBack

    January 12, 2007

    AT&T drops Cingular

    Photobucket - Video and Image HostingAT&T, which completed it's purchase of Bell South last month, has decided to scrub out the Cingular name and call the wireless company... AT&T. Thoroughly original, these people.

    "We did not enter that decision lightly," Wendy Clark, vice president of advertising at AT&T, said in an interview. "We came to understand that consumer customers and business customers alike are looking for a single provider. We heard it so consistently across the marketplace."

    Yes, Wendy. I, as a consumer, want everything to come from Ma Bell. The good news? It'll still be the same shitty service. That's right bitch, keep dropping me from EDGE to GSM and see if I don't call customer service over and over again. It's all I can do on GSM.

    Posted by mcblogger at 11:31 AM | Comments (0) | TrackBack

    January 09, 2007

    For those who remember when Apple was tres geek

    Yes, there was a time when Apple was decidedly geeky.Gizmodo has some photos up of a 1983 Apple Computer catalog. I want the wall hanging...
    Photobucket - Video and Image Hosting

    Posted by mcblogger at 09:03 AM | Comments (0) | TrackBack

    January 08, 2007

    The UCS takes on Exxon

    The Union of Concerned Scientists has issued a public call to Exxon to stop funding misleading, ideologically driven climate research that erroneously claims global warming is not a threat. We talked about this months ago when I introduced to you to Myron who might as well be on Exxon's payroll (yes, Myron, I think your brain is an integrity-free zone). It's great to see UCS take a real stand on this and come out publicly... even though it received less attention than Britney's latest revealing.

    Exxon Mobil lists on its Web site nearly $133 million in 2005 contributions globally, including $6.8 million for "public information and policy research" distributed to more than 140 think tanks, universities, foundations, associations and other groups. Some of those have publicly disputed any link between greenhouse gas emissions and global warming.

    Alden Meyer, the Union of Concerned Scientists' strategy and policy director, said in a teleconference that Exxon Mobil based its tactics on those of tobacco companies, spreading uncertainty by misrepresenting peer-reviewed scientific studies or emphasizing only selected facts.

    Dr. James McCarthy, a professor at Harvard University, said the company has sought to "create the illusion of a vigorous debate" about global warming.

    The company said its financial support doesn't mean control over any group's views.

    Sure. Seriously, is there anyone out there dumb enough to think that if Myron started talking about reality, instead of his 'carbon is good' bullshit, he'd still be getting his allowance from Exxon?

    Didn't think so.

    (Much love to the Somervell County Salon)

    Posted by mcblogger at 01:50 PM | Comments (0) | TrackBack

    Homeowners still get fucked

    Bay Area Houston and Muse are both on the case of The Missing Homeowners Insurance Coverage. Basically, even though there's been an assload of lawsuit reform in Texas, insurance rates have not gone down. Which isn't really news to me. Neither is losing coverage. Of course, the gutless Texas Dept. of Insurance, which is run by Republicans, isn't about to piss off the people who donate so much to Republicans. Instead, they'll make excuses for the inability of the companies to properly manage their business.

    We lose coverage, our rates remain the same (highest in the nation). We lose the ability to sue, our rates remain the same (highest in the nation). We have the easiest legal environment of any state and still our rates remain the highest in the nation.

    When WILL the Republicans learn than regulatory bodies without teeth are useless and that companies will get away with whatever they can in the absence of real penalties? Don't even get me started on how inefficient private enterprise can be when people aren't allowed to take them to court.

    What has happened in Texas should be a cautionary tale for the rest of the nation. Don't believe the lawsuit reform bullshit. We did and now corporations have more power in Texas than policyholders.

    Posted by mcblogger at 09:20 AM | Comments (0) | TrackBack

    January 05, 2007

    Energy ideas that makes sense

    There is a great article up by Lord Andrew Turnbull of Booze Allen Hamilton about how government and industry must cooperate to determine the best energy mix to power our growing economies. He takes into account carbon taxes, among other things, to come to the conclusion that the best idea is a 'managed market' that takes into account all stakeholders and impacts.

    In policy circles, this is coming to be known as the “modified market approach.” The government (or perhaps a regional political structure like the European Union) establishes a framework for energy prices. This framework incorporates the prices and costs of energy, as set by supply and demand, but also takes into account the social and ecological benefits and harms of each fuel source. Fuels that exacerbate climate change, for example, are made more expensive; fuels that reduce the danger cost less. An implied surcharge on carbon-based fuels reflects the desired CO2 reduction target. Once a rationale is agreed on, the government embeds the new framework in permits, surcharges, and regulations, after which the various technologies can effectively compete in the marketplace.

    Texas is, surprisingly, leading the country in terms of renewable energy which puts us ahead of the curve on increasing carbon-neutral energy production. However, we do not have a true cost for carbon and air pollution. Maybe we should start looking into that, you know, while we can still breathe the air.

    Posted by mcblogger at 02:22 PM | Comments (0) | TrackBack

    December 28, 2006

    Here's something the Lege could do to help homeowners

    My job is to buy loans. It's exciting, it's fun and I get an expense account which rocks (it's kind of like being a lobbyist, except the people you're taking out actually need you as much as you need them). At least once a week I get a call from a client regarding the purchase of a loan in which the borrower would like to liquefy equity (AKA, a 'cashout') in their owner occupied property. Normally, these aren't that big a deal (despite the ridiculous home equity laws in Texas) and I deal with them all the time. The problem that crops up is if it's a multi-unit property, like a duplex. Did you know that if you buy a duplex in the state of Texas, live in one unit, homestead it and rent the other side it's almost impossible to borrow against the equity in it?

    The reason is that no case law has been established to support the lender's ability to perfect title in the event of foreclosure. The law (50(a)6) doesn't specifically address it and Texas judges, when it comes to homesteads, are notoriously borrower friendly. Which makes people nervous about lending in Texas, period. Don't get me wrong, legal protections for homeowners are important. However, lenders have to be able to foreclose cleanly should the borrower not pay.

    While this happens in the metro's more than the rural areas, it is an issue that affects a surprisingly large number of homeowners. Any legislators out there want to take a crack at fixing it?

    Posted by mcblogger at 01:35 PM | Comments (0) | TrackBack

    December 19, 2006

    TXU runs afoul of the EPA and others

    You might remember that 39% fast tracked some dirty coal plants to be built over the next few years. Apparently, they are already running into problems. Somervell County Salon posted some items of interest on this, specifically

    In recent formal comments to the Texas Commission on Environmental Quality, regional EPA officials suggested that the state agency is not adequately taking into account the cumulative impact of the region’s proposed coal plants.

    ...In letters commenting on the permits for Lake Creek and Tradinghouse, EPA officials said more monitoring and analysis are needed to ensure the new plants don’t drive Waco and Robertson County into federal “nonattainment” status for ozone pollution.

    “Due to the ozone attainment challenges in Texas, EPA is concerned about the cumulative impacts of the proposed new power plants, especially on ozone levels,” wrote Jeff Robinson, EPA air permits chief, in a six-page letter to the TCEQ on Nov. 27.

    EPA officials also question whether TXU has proved that the pollution controls the company is proposing represent the “best available control technology,” as the Clean Air Act requires.

    Of course, the EPA is still solidly under the thumb of Connecticut native George W. Bush so don't expect too much from them. Might have better luck with the next group that has had a great idea... cut off TXU's funding

    The Rainforest Action Network (RAN) said it sent letters asking 54 financial institutions not to participate in lending TXU US$11 billion to fund construction of the plants.

    According to RAN, the plants will produce 78 million tons of new carbon dioxide emissions per year, greater than the greenhouse-gas emissions of 21 US states or the entire emissions reduction commitment of Japan under the Kyoto Protocol.

    TXU badly needs to rethink this entire project.

    Posted by mcblogger at 03:13 PM | Comments (0) | TrackBack

    December 14, 2006

    The Death of Greed

    Actually, it's not the death as much as it is a new awareness of greed and a realization that income distribution under the Republicans is a large part of the reason for their losses in November.

    Things are going to get worse for them. Krugman tells why, as well has giving an excellent background on what's wrong with income distribution in the US. His tone is over negative in that things are already changing... the elections, for one, will long be perceived as a major shift in power. You're watching the end of the 80's, at long last.

    Ivan Boesky spent a lot of the 80's talking about how good greed was. He was wrong. Greed focuses people on short term gains at the expense of longer term profits and stability. That's about to change. It's worth noting that Warren Buffet was one of the leading voices against the 'greed is good' philosophy of the 80's. Even then, he was among the richest Americans. Now, he's the second richest American. It's worth noting that this died in the wool capitalist spoke out against the Republican tax cuts that have played such a significant role in retarding income growth in the US.

    There is a rising level of unionization in this country which is, on balance, a good thing. There's also a realization by the vast majority of the people in this country that they got fucked. That's why Bush's numbers haven't rebounded and won't... provided the Democrats do what they are supposed to do and NEVER let Bush take credit for the inevitable success. They must have a unified communications effort and they must step all over the President at every turn.

    In fact, the public perception needs to be that this country is being run from Congress. Bush clearly can't do the job.

    Posted by mcblogger at 01:13 AM | Comments (0) | TrackBack

    December 12, 2006

    ICE busts Swift... or at least some of their employees

    La Migra goes after the meat packing industry...

    Federal agents raided meat processing plants in six states Tuesday and arrested an unknown number of suspected illegal immigrants in an identity theft investigation, temporarily suspending operations at all six plants.

    The company employing the illegal's was quick to issue a statement

    “Swift has never condoned the employment of unauthorized workers, nor have we ever knowingly hired such individuals,” Swift & Co. President and CEO Sam Rovit said in a written statement.

    Since 1997, Swift has been using a government pilot program that confirms whether Social Security numbers are valid. Company officials have previously said one shortcoming may be in the program’s ability to detect when two people are trying to use the same number.

    WHAT? Then what's the point of the program??!?!

    Honestly, ID theft is a huge problem in this country, much larger than credit bureau's and the Federal government would like to acknowledge. I see it almost daily with residential loans here in Texas.

    While I'm not for beating up on illegals (they are, after all, working hard in this country), we do need to do something about the laws. I'm leaning more and more toward a guest worker program that allows an immigrant to work legally and at some point in the future qualify for citizenship. Couple it with a program that really punishes employers who hire illegals and you'll actually begin to tackle the problem. And it makes a hell of lot more sense than a wall.

    This would end the abusive practices of some employers, provide a real wage floor for labor in this country and eliminate the need for illegals to ruin someone's life with ID theft just to earn a living.

    The most interesting thing about all this? There's almost $500 billion sitting in Washington in payroll and SS taxes with no one's name attached to it. That's something I didn't know.

    Posted by mcblogger at 03:09 PM | Comments (0) | TrackBack

    December 06, 2006

    Taco Bell ditches one of the few organic ingredients in its food

    Sometimes this shit writes itself...

    Taco Bell on Wednesday ordered the removal of green onions from its 5,800 restaurants nationwide after samples appeared to have a harsh strain of E. coli. The fast-food chain, whose restaurants were linked to a recent outbreak of E. coli in three states, said preliminary testing by an independent lab found positive results for the strain.

    And with the green onions, only lettuce, tomatoes and sometimes beans remain as actually organic products in Taco Bell's food. The rest of it comes from a mix of chemicals made by ExxonMobile and turned into 'food' by the nice people at Monsanto.

    Apparently, the removal is all about the fact that some green onions made people sick. Right. Like that's the only thing at Taco Bell that could upset someone's stomach.

    "In an abundance of caution, we've decided to pull all green onions from our restaurants until we know conclusively whether they are the cause of the E.coli outbreak," said Greg Creed, president of Irvine, Calif.-based Taco Bell.

    "We're leaving the rest of the menu intact", Greg went on to tell reporters, all of whom were eating Meximelts. "Our food is very healthy and nutritous. At Taco Bell we take the health and well being of their consumers very seriously. Except when we may or may not have poisoned them".

    The strangest thing about this story? It totally makes me want Taco Bell for lunch.

    Posted by mcblogger at 11:44 AM | Comments (0) | TrackBack

    December 04, 2006

    TXU steps in some dookey

    (Yeah, I normally would have posted 'shit', but the word 'dookey' is making me laugh today so I'm going with that instead)

    So TXU got it's coal plants fastracked for the low, low price (what is this, Crazy Eddie?) of 'contributions' to Rick Perry's 'FAVORITE charity'. Yuck, yuck, yuck.

    Turns out, some people aren't too happy about that and have decided to (gasp!) SUE IN A COURT OF LAW. I thought the Republicans banned the enviro's and common people from the courts? How the hell did this happen?!?!? How the hell could some goddamn tree huggers hold up one of the greatest power generation projects in history?

    Well, yeah... I guess it does pollute and you're right, there are newer, better technologies that can be used for coal driven power generation. However, they'll cut TXU's profit down. Yeah, I know that's a lie, too. Why? Well, let's do something simple...

    The energy industry is building, over the next 4-6 years, at least 12 plants in the state of Texas. We are currently running at 85-88% of production capacity on the grid and anticipated growth won't push us to 100% until sometime around 2018. However, ERCOT likes to have a 10% buffer, so we WILL need some new capacity... maybe a plant or two over the next 4-6 years. So, why would a company like TXU with a good management team that's dedicated to wringing every penny out of operations, decide to so dramatically expand capacity and why do it in Texas? There's actually an easy answer when you think about it... give yourself a moment then hit the supersize.

    Texas has the most lax environmental law and weakest regulators in the country. They are building their plants here where they don't have to worry about being tagged polluters, then shipping the power out of state. And all the people of Texas will get is asthma, mercury poisoning, and cancer.

    The best part of the article are the money qoutes from the sycophants for TXU and the industry lobby in DC:

    TXU spokeswoman Kimberly Morgan said Friday. “Lawsuits don’t clean the air. Investments in new technology will improve air quality.”

    Scott Segal, director of the Electric Reliability Coordinating Council in Washington, D.C., a utility industry trade group, said the lawsuit is a predictable effort to delay or derail new power plants in Texas.

    “Unfortunately, lawsuits don’t generate power, and they don’t clean the air,” he said.

    You gotta get up pret-ty early in the morning to be able to suck cock as well as Kimberly and Scott. What Kimmy and Scotty don't know is that TXU runs their plants in 'dirty' mode all the time. Therefore, a new TXU plant that doesn't utilize new technology like gasification is going to be pollute the hell out of the air. Seriously, ask TXU for the service records on their generators... see how long they are in either start up or shut down. You might also want to check and see how much of their power generation comes during those times.

    Interesting stuff... all I'm saying.

    Thanks, Don Henley, for filing this suit! I may hate The Eagles but I love me some lawsuits that protect the environment...

    Posted by mcblogger at 12:13 PM | Comments (1) | TrackBack

    December 02, 2006

    Bad Fucking Taste

    Photobucket - Video and Image Hosting

    This is an ad for an MP3 player that is all over China right now. The text translates to

    Even if the world is destroy[ed] to dust, I still believe in music

    You know, I can deal with stupidiotic, self-important people who actually think they've got a chance at the Presidency. However, I'm having issues with an MP3 player that takes itself seriously. It's a fucking piece of metal and some memory.

    Next time, if you're using an American image, run it by an American. Just sayin' is all.

    (kudos to Gizmodo and yes, I think Newt's chances of being President are as good as my chances of landing a scorching hot boyfriend by Monday... )

    Posted by mcblogger at 01:56 PM | Comments (0) | TrackBack