February 4, 2010
Next Terrorist threat: exploding breast implants (seriously)
By Gordon Thomas LONDON – Agents for Britain's MI5 intelligence service have discovered that Muslim doctors trained at some of Britain's leading teaching hospitals have returned to their own countries to fit surgical implants filled with explosives.
Women suicide bombers recruited by al-Qaida are known to have had the explosives inserted in their breasts under techniques similar to breast enhancing surgery. The lethal explosives – usually PETN (pentaerythritol Tetrabitrate) – are inserted during the operation inside the plastic shapes. The breast is then sewn up.
Similar surgery has been performed on male suicide bombers. In their cases, the explosives are inserted in the appendix area or in a buttock. Both are parts of the body that diabetics use to inject themselves with their prescribed drugs.
The discovery of these methods was made after the London-educated Nigerian Umar Farouk Abdulmutallab came close to blowing up an airliner on Christmas Day with explosives he had stuffed inside his underpants.
Hours after he had failed, GCHQ – Britain's worldwide eavesdropping "spy in the sky" agency – began to pick up "chatter" emanating from Pakistan and Yemen that alerted MI5 to the creation of the lethal implants.
A hand-picked team was appointed by Jonathan Evans, the head of MI5, to investigate the threat. He described it as "one that can circumvent our defense."
Top surgeons who work in the National Health Service confirmed the feasibility of the explosive implants.
In a report to Evans, one said:
"Properly inserted the implant would be virtually impossible to detect by the usual airport scanning machines. You would need to subject a suspect to a sophisticated X-ray. Given that the explosive would be inserted in a sealed plastic sachet, and would be a small amount, would make it all the more impossible to spot it with the usual body scanner."
Explosive experts at Britain's Porton Down biological and chemical warfare research center told MI5 that a sachet containing as little as five ounces of PETN when activated would blow "a considerable hole" in an airline's skin which would guarantee it would crash.
Other scientists at the research center on Salisbury Plain confirmed that a suicide bomber posing as a diabetic could detonate the sachet implanted in his or her body.
A doctor at a London teaching hospital who had advised the Security Service added:
"As long as a bomber has the paperwork confirming he is a diabetic and must carry his injection syringe with him all the time on a long flight, there is every chance he will be allowed to pass security after he is checked. Obtaining the paperwork is easy. Every day this hospital has headed paper stolen by its staff for all sorts of reasons. Forging the name of a consultant is easy. The only way to be certain that the bomber is a genuine diabetic would be to call the hospital. I can't imagine security at a busy airport like Heathrow taking that much time. And the chances were that even if a call was made to a hospital the doctor wouldn't be available."
Instead of containing medicine for diabetics, the syringe would contain the liquid to activate the explosive in the sachet.
All the bomber would have to do is to go to the aircraft toilet like Abdulmutallab did on Christmas Day and inject himself to pierce the sachet and there would be an instant explosion.
So far MI5 agents have established that as many as 50 Muslim doctors with the required surgical skills have returned to Pakistan and Yemen in the past two years.
"When you add that number to doctors who went to local medical schools in those countries you begin to see the extent of the threat these human bombs pose," said an intelligence source in London.
While the Home Office, the political master of MI5 said, "we never comment on security threats," the chairman of the Commons Counter-Terrorism Sub-Committee, MP Patrick Mercer, said:
"Our enemies are constantly evolving their techniques to try to defeat our methods of detection. These body bombs are one of the most frightening methods and we must take this into urgent account."
GCHQ agents have focused their satellite surveillance of the mountains in the north of Yemen after the latest "chatter" on Arab websites indicated that the surgically enhanced bombers are hiding in an al-Qaida base waiting for their surgery to heal before they are sent out into the world.
Gordon Thomas is the author of the newly published, "Secret Wars: One Hundred Years Of British Intelligence Inside MI5 and MI6."
Posted by Martin at 1:19 PM | Comments (0) | TrackBack
November 23, 2009
Do we need to keep arguing that tax cuts drive economic activity directly?
Existing home sales up over 10% in October. Why? The Tax credit. It is a bit like tax crack. Just like the cash for clunkers was for the auto industry, but the direct immediate effect on consumer behavior is measurable and real. I bet those two programs caused more direct economic activity than all the rest of the +$700B hand-out to special interest for “shovel ready” projects that recovery.gov says has had little or no impact. Proponents of funneling money through federal, state and local government to the unions are still trying to defend that saying we will see effects in 2010. Meanwhile 3.1M jobs have been lost since Obama signed that stimulus saying he would save or create 6 m jobs.
Tax cuts and tax credits work to get people spending money. People spending money stops the recession. It is just not that hard guys.
Posted by Martin at 8:52 AM | Comments (0) | TrackBack
April 23, 2009
One of the most disturbing letters on the financial crisis I have read so far
And I expect more. This is Cuomo’s letter to the Fed/Treasury notifying them of irregularities that they discovered in relation to the BofA/Merrill Lynch shotgun merger. Read this and you will realize that a couple bureaucrats in Washington are forcing private business to do non-economic things and actually violating a bunch of SEC regulations in the process. And hiding what they are doing from taxpayers and shareholders (who are getting screwed). This is very disturbing. Some excerpts below.
Posted by Martin at 11:54 AM | Comments (0) | TrackBack
April 14, 2009
Well something is going right
I have written before about the TED spread. Back in October it was approaching 5. Unfrigg’n believable. Since the election is has been on its way down. A TED Spread of 1 is normal. That means credit is moving again.
Well it is back to about 1, where it should be.
I am sleeping a bit better.
Posted by Martin at 7:47 PM | Comments (0) | TrackBack
March 17, 2009
Hawaii again proves they value surf over jobs and progress
Those silly protectionists have succeeded in stopping the Super Ferry again. The private company has investors who funded this major new investment in transportation infrastructure for the islands. They have been opposed by people who hate progress at every turn. The project has had to do costly extra studies, delays and “improvements” that have made the return for investors go down the tube. Now with tourism in the tank in Hawaii, you would think the natives would like infrastructure for tourists. But no. They want the islands without tourists. I guess they are going to get it.
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March 11, 2009
Another of those chain-emails that touches a special place in my heart around the economic stimulus package
Sometime this year, taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:
Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.
Q. Where will the government get this money?
A. From taxpayers.
Q. So the government is giving me back my own money?
A. No, they are borrowing it from China. Your children are expected to repay the Chinese.
Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.
Q. But isn’t that stimulating the economy of China ?
A. Shut up.
Below is some helpful advice on how to best help the US economy by spending your stimulus check wisely:
If you spend that money at Wal-Mart, all the money will go to China.
If you spend it on gasoline it will go to Hugo Chavez, the Arabs and Al Qaeda
If you purchase a computer it will go to Taiwan.
If you purchase fruit and vegetables it will go to Mexico, Honduras, and Guatemala (unless you buy organic).
If you buy a car it will go to Japan and Korea.
If you purchase prescription drugs it will go to India
If you purchase heroin it will go to the Taliban in Afghanistan
If you give it to a charitable cause, it will go to Nigeria.
And none of it will help the American economy. We need to keep that money here in America. You can keep the money in America by spending it at yard sales, going to a baseball game, or spend it on prostitutes, beer (domestic only), or tattoos, since those are the only businesses still in the US.
I am going to get another tattoo.
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March 8, 2009
Gerald Celente predicts revolution
if this guy wasn’t right before, he would sound crazy.
I hope he is wrong, but fear he is on the right path.
America was founded because of Taxation without Representation. We can’t borrow our way out of this by nationalizing the economy.
Posted by Martin at 8:39 PM | Comments (0) | TrackBack
February 20, 2009
Stimulus bill meme going around
This has been going around. Not sure of the source, but the sentiment and conclusion are shared by me.
How to understand the U.S. "Stimulus Bill".
After class, an economics student approaches his economics professor and says, "I don't understand this stimulus bill. Can you explain it to me?" The professor replied, "I don't have any time to explain it at my office, but if you come over to my house on Saturday and help me with my weekend project, I'll be glad to explain it to you." The student agreed.
At the agreed-upon time, the student showed up at the professor's house. The professor stated that the weekend project involved his backyard pool. They both went out back to the pool, and the professor handed the student a bucket. Demonstrating with his own bucket, the professor said, "First, go over to the deep end, and fill your bucket with as much water as you can." The student did as he was instructed. The professor then continued, "Follow me over to the shallow end, and then dump all the water from your bucket into it." The student was naturally confused, but did as he was told.
The professor then explained they were going to do this many more times, and began walking back to the deep end of the pool. The confused student asked, "Excuse me, but why are we doing this?" The professor matter-of-factly stated that he was trying to make the shallow end much deeper. The student didn't think the economics professor was serious, but figured that he would find out the real story soon enough. However, after the 6th trip between the shallow end and the deep end, the student began to become worried that his economics professor had gone mad. The student finally replied, "All we're doing is wasting valuable time and effort on unproductive pursuits. Even worse, when this process is all over, everything will be at the same level it was before, so all you'll really have accomplished is the destruction of what could have been truly productive action!"
The professor put down his bucket and replied with a smile,
"Congratulations. You now understand the stimulus bill."
Posted by Martin at 4:55 PM | Comments (0) | TrackBack
February 5, 2009
why is congress trying to CRAM the “stimulus” through quickly?
because when anyone reads it and the longer people have to consider it, the more are opposed. This week support fell to 37% with more people actually OPPOSING it.
Posted by Martin at 2:02 AM | Comments (0) | TrackBack
more fun charts
Lets see. the “stimulus” bill is urgent, must get passed without reading and IMMEDIATELY to help Americans right? Well then, why does only 25% of the money get spent in 2009? This is the CBO talking not some right with nutjob.
Posted by Martin at 1:56 AM | Comments (0) | TrackBack
Anyone who actually READS the “STIMULUS” bill will oppose it
go here to read the whole text and the analysis behind it. Your lawmakers are trying to pull off the greatest single expansion of government and greatest single indebtedness of our children in modern history. They are lining up to steal our children’s future to pay back the campaign supporters in this most recent election. These are not just the ranting of a conservative who lost the election. READ THE SPREADSHEET. outlined in detail, straight from the bill are where the money is going. It is straight up pouring more money into existing government agencies. ALL of THEM. There are a few new programs but no real attempt at actual job creation, remaking of government, or restarting the private sector. This is RESTARTING THE FEDERAL bureaucrats, repaying the lawyers, doctors, and auto workers to brought the Democrats to three branch control of the government.
I know even my most liberal friends didn’t vote for this kind of stealing. Maybe that is why Obama’s popularity is down 16% in the last two weeks.
Do not take my word for it. Read the bill. Read where the money is actually going, not where the sound bites say it should go. This so called stimulus is short term government works. Japan has been trying to restart it’s economy for 13 years with government spending and zero interest rates and has failed. Why? Because private industry got us into this and ONLY private job creation will get us out of it. Building new navy facilities will not. Building new roads will not. Even building new “broadband” infrastructure will not. Only innovation from entrepreneurs and structural change in our industrial/service base will. Nothing in this bill address that.
Posted by Martin at 1:52 AM | Comments (0) | TrackBack
January 19, 2009
Truly disturbing investigative video of gun markets in Pakistan
“these people live in caves, have no tongues and make guns with their bare hands. You can’t beat these people.”
Posted by Martin at 9:23 PM | Comments (0) | TrackBack
December 18, 2008
Blodget called Markopolos Madoff three years ago
No matter what you think of Blodget, he does have good sources and has made some very good calls. Check out his memo from 2005 calling Madoff a fraud. It is unbelievable the SEC let it go this long. Someone was getting paid.
Posted by Martin at 9:02 AM | Comments (0) | TrackBack
December 8, 2008
More reasons to call your senator and oppose the auto bail out
Dear Martin,
Theyve reached a deal with the automakers the same automakers who are investing millions of dollars in lawsuits to prevent states from selling cleaner cars.Congress will take a vote on this in a few days.Let them know TODAY that they should only vote YES on the bailout if it stamps out the auto companies lawsuits against state Clean Car laws.Climate Solutions helped pass Washington and Oregon's Clean Cars bills that will ensure cleaner, more fuel efficient cars are sold in both states starting next year.But, the auto industry has been suing to prevent us from putting this into action. Please call the Congressional Hotline and tell them you want to leave a message for your senators, congressman and for Congressman Barney Frank.
Hotline:(202) 224-3121Here is the message: Vote YES on the bailout ONLY if it stamps out the auto companies lawsuits against state Clean Car laws.
See the related article "Call it "Green Mobility" by Climate Solutions' Policy Director, KC Golden.
Posted by Martin at 2:47 PM | Comments (0) | TrackBack
Call your Senator and oppose the UAW full employment act
Congress, in bailing out the car companies, is not demanding that the United Auto Workers renegotiate labor contracts that are bankrupting the car companies.In fact, Congress is going to hand over your money without anyone really doing much of anything to fix problems.
This is unacceptable.Call your Senator at 202-224-3121 and tell him to oppose the auto industry bailout.
There is a good piece on this over at RedState. But this should not be a partisan issue. Although the Democrats are playing it as such. The proposal is 100% United Auto Worker pork and payback for them donating tens of milions to the Democrats in the recent election cycle. The auto companies need to go into bankruptcy so they can actually reorganize their businesses and make the hard renegotiations that need to happen. Including the labor contracts. Without bankruptcy, the companies are on the hook for the excessive labor contracts. Did you know that over at Ford when they laid off workers last year, the UAW contract required them to keep paying workers for 2 years! Wouldn't that be nice. That liability is a major factor in the companies not being economically viable.
The other is that they simply make too many cars. Lets do some simple math.
Americans: About 300M
New Cars/year: About 30M
Average life of a car: About 20 years.
See anything there? We are making cars at a 10 year replacement rate when they live 20 years. We are making 2X too many cars, using 2X too many employees, resources, etc. We only need about 15M cars/year to replace the old ones. Anything else is excessive consumption. We need an auto industry half the size. Do not let congress support the industry in the current form.
Posted by Martin at 12:14 PM | Comments (0) | TrackBack
December 2, 2008
the Liquidity trap
Jim Anderson over at SVB published a very insightful piece on the Liquidity trap we are in now (below). The key take away’s from the Japanese 10 year stagflation and the failure of FDR government led stimulus in the last Depression?
1. Higher marginal tax rates make the problem worse and longer (listening Democrats?)
2. When government expands it “crowds out” private industry taking away the ability of industry to grow, create jobs, recover in any way. You need private sector demand to drive the recovery.
Don’t let your government do that this time.
Liquidity Trap
This year one of the best performing asset classes is cash. People used to boast about hot stocks they owned. Now they crow about how much of their money is in cash. Those holding cash have been richly rewarded with no losses and opportunities to buy assets (condos and equities) at huge discounts. As prices continue to decline those that moved too quickly to buy at the bottom are seen as fools. Consider the massive losses of the sovereign wealth funds, BofA with the Countrywide deal and even Warren Buffet's latest foray into GE and Goldman Sachs. Investors, convinced that prices will continue to decline, sit with their liquid resources on the sidelines. As that investment demand takes a holiday, prices will decline further.
This phenomenon is well understood. In the 1930s it was called the liquidity trap. Households took their money out of the banks and literally buried in the backyard or under a mattress. When that happened the money supply contracted another notch and the lack of transactions cut into the velocity of money. As the supply of money and bank reserves dried up, credit availability declined and asset prices fell yet again. Today, because of FDIC insurance it is not the households that lack trust in the banking system, but rather, the bankers themselves. Even with Fed Funds at one percent, the lending rate among banks (LIBOR) until recently was stuck above four percent. Even now with four-week LIBOR down to 1.21 percent, it is 100 bps above Treasuries. Incredibly, the four-week bill is yielding one lonely basis point. We saw the same effect in Japan in the 1990s when their banks were clogged with bad loans and were unwilling to lend despite funding costs at zero percent. The largest banks instituted strategies to refuse additional institutional deposits because they had no loans they wanted to make. It took more than a decade for a modicum of liquidity and transactional velocity to return to the Japanese economy.
We can hope that our leaders today would benefit from the experience of the 1930s. Some of the mistakes made during that era have been carefully chronicled as extending and deepening the crisis. Chief among them were higher marginal tax rates, increases in import tariffs and a lack of international coordination producing round after round of competitive currency devaluations. Unfortunately, the history is still too fresh to allow a completely rational perspective and the debate now raging among economists is being filtered through a political lens that has as its focal point the historical standing of FDR. The editorial exchanges between Paul Krugman and others found him stretching to defend a political ideology which had little to do with economics. Lest we get to far afield, the data show that the Depression — as measured by economic activity and unemployment — got slightly better, then worse, then stabilized at a very low level compared to the 1920s. The one thing perhaps all can agree on is that the true end of the Great Depression did not occur until after the start of WWII. Employing millions of men in the activity of destroying most of the economically productive assets on the planet was after all an obvious solution. At once, demand was created with all those new jobs and supply was severely constricted. Naturally prices began to rise (rapidly after the war) and the deflationary spiral was broken.
To be sure, global conflagration is not a policy direction anyone would endorse no matter what the effectiveness. So why didn't the New Deal produce the desired results? One concept now gaining a following is the crowding out effect of government intervention in large areas of economic activity. As new projects were created under government control, the productive assets were pulled out of private hands. The government could pay higher wages and command lower materials costs essentially pushing any hope of private sector competition aside. To enhance their commanding position, laws were passed to favor the government entities over private business. As an example, suppose the Big Three of Detroit are nationalized. How long would it take some enterprising congressman from Ann Arbor to introduce legislation making it more difficult for Toyota, Honda and Nissan to compete? To use a catch phrase we hear all too frequently these days, they would do it to "protect the taxpayers' interests." Soon cars would be more expensive and quality would decline. Jobs would vanish as foreign manufacturers moved to other more friendly markets. Finally, the shrinking private sector would be unable to cope with the ever increasing tax burden needed to pay for the expenditures required by more government intervention. If you want a small example of what happened in the New Deal, consider the recent distortions in our mortgage market delivered by Fannie Mae and Freddie Mac.
The bigger worry is the case of Japan where for more than a decade they followed every policy prescription Western economists could devise. The failure of these measures is often attributed to their lack of intestinal fortitude in dealing with a banking sector awash in bad loans. Pretending bad loans were solid did not increase trust in the banks or increase their propensity to lend. Now, we also are hearing policy ideas intended to "keep people in their homes." A bad mortgage loan will not become a good loan even with some government edict. If fact, the edict will ruin the market's ability to make loans to creditworthy borrowers because they will never know when the government will allow them to enforce their legal rights to the collateral. A sort of Gresham's law of lending will ensue with the less competent government lender crowding out the more demanding private lender. The disturbing bottom line is we don't really understand in detail what happened in Japan.
There appears to be a consensus that the economy was over-levered from households to corporations to government sponsored entities. Leverage as measured by total debt to GDP grew from 140 percent 30 years ago to over 220 percent today. If that defines the problem then the solution should be a deleveraging over the next thirty years. That deleveraging will cause prices to fall dramatically as the credit supply shrinks, money supply falls and velocity slows. The policy agenda currently in vogue is to maintain the leverage and the asset prices by shifting all that debt from the private sector to the public. Why are we doing this? Because the near term political heat from a deep recession and re-pricing of assets is more than any of our leaders can handle. Eventually that massive intervention and concomitant increase in the money supply will come with a hefty price tag.
Anna Swartz, co-author with Milton Friedman of A Monetary History of the United States, addressed that question in a recent Barron's interview. She speculated that the deflationary impact of collapsing credit will be offset by the inflationary momentum of liquidity currently flooding in from the Fed and the Treasury. Pulling off that balancing act would be the central banking tour de force of the modern era. We wonder if working that delicate arrangement isn't perhaps riskier than simply allowing the short and harsh brutality of the market to work its wonders of creative destruction.
Posted by Martin at 4:48 PM | Comments (0) | TrackBack
November 19, 2008
PE Obama’s 1st Big Mistake
before you think this is a partisan rant, this is a hat tip to Mark Cuban over at Blog Maverick. Mark rightly points out that the economic “advisory team” is chock a block full of academics and big company guys, not a single entrepreneur in the bunch. If we go with their logic we are likely to get alot of protection for existing businesses and not alot of incentive for new businesses. The entrepreneur has always lead America out of economic collapse, not the corporate guys who drove us here. I hope Obama has some of them around somewhere.
Posted by Martin at 7:06 PM | Comments (0) | TrackBack
Let the auto companies file for bankruptcy
Why? They are poor businesses managed by idiots. Besides that, the prime problem of the US Auto industry is high cost of labor, health care, and retirement costs. Chapter 11 will allow those expenses to be renegotiated. If we just lend them money, they will be back and will not do the hard work to reorganize the businesses into profitable companies. The foreign companies can make money. The US companies make money overseas in buckets. The problem is the expense side in the US. This will ONLY be fixed by a Ch11 reorganization. This is what the process was designed for. GM is NOT AIG. There are not the size of credit default swaps or co-party risk dependent on a GM failure. Let them fail. We will have lots of new startups and a more efficient model. Take the medicine now. This will avert economic collapse by allowing these companies to be profitable again.
Posted by Martin at 6:07 PM | Comments (0) | TrackBack
November 12, 2008
Barstool economics
This has been going around the web. It is attributed to an economics professor. I like how it explains taxes, motivation and the current economic environment and potential reactions to different actions.
Suppose that every day, ten men go out for beer and the bill for all ten
comes to $100. If they paid their bill the way we pay our taxes, it would
go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do.
The ten men drank in the bar every day and seemed quite happy with
the arrangement, until one day, the owner threw them a curve.
'Since you are all such good customers,' he said, 'I'm going to
reduce the cost of your daily beer by $20.' Drinks for the ten now
cost just $80.
The group still wanted to pay their bill the way we pay our taxes
so the first four men were unaffected. They would still drink for
free.
But what about the other six men - the paying customers? How could
they divide the $20 windfall so that everyone would get his 'fair
share?'
They realized that $20 divided by six is $3.33. But if they
subtracted that from everybody's share, then the fifth man and the
sixth man would each end up being paid to drink his beer. So, the
bar owner suggested that it would be fair to reduce each man's bill
by roughly the same amount, and he proceeded to work out the
amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100%
savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four
continued to drink for free. But once outside the restaurant, the
men began to compare their savings.
'I only got a dollar out of the $20,'declared the sixth man. He
pointed to the tenth man,' but he got $10!'
'Yeah, that's right,' exclaimed the fifth man. 'I only saved a
dollar, too. It's unfair that he got ten times more than I got'
'That's true!!' shouted the seventh man. 'Why should he get $10
back when I got only two? The wealthy get all the breaks!'
'Wait a minute,' yelled the first four men in unison. 'We didn't
get anything at all. The system exploits the poor!'
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks so the nine
sat down and had beers without him. But when it came time to pay
the bill, they discovered something important. They didn't have
enough money between all of them for even half of the bill!
And that, ladies and gentlemen, journalists and college professors,
is how our tax system works. The people who pay the highest taxes
get the most benefit from a tax reduction. Tax them too much,
attack them for being wealthy, and they just may not show up
anymore. In fact, they might start drinking overseas where the
atmosphere is somewhat friendlier.
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.
Posted by Martin at 3:53 PM | Comments (0) | TrackBack
November 8, 2008
A Barack O Bottom?
It is no secret that I think the Election of Barack O Socialist is going to create a very dark time in American history. I also am smart/honest enough to point out any positive things that I see happening along the way. There were a couple this week.
First, about 70% of the economic crisis is a crisis of “confidence”. When banks don’t know who to trust of how to value the credit of a co-party they simply don’t loan money. Confidence and “Hope” are close cousins. So when the candidate of “Hope” wins, does “confidence” get a lift? I have to report yes in my little corner of the world. I have three pieces of real estate that are on the market. For the last 3 months I have gotten basically zero interest as everyone hunkered down waiting for the election. The day after the election I received five new inquiries on those properties. Something changed. Something got those people out of their chairs and back into the market looking to put new money to work. Maybe it was “Hope”. I sure “hope” so. Maybe simply electing a new face can create a Barack O Bottom. Lets hope so…
Posted by Martin at 7:39 AM | Comments (1) | TrackBack
October 20, 2008
TED spread shrinking, money moving again
Thank Ben. Down 5.136% today. 2.83. Money moving again, especially america to europe. Still historically high, but better. This had better keep going down. If it goes back into the 1.5 range we are starting to see light.
Posted by Martin at 8:33 PM | Comments (0) | TrackBack
October 14, 2008
Excellent article on GE
Think Freddie and Fannie are big? GE is multiple times big. And two weeks ago it had to go begging to Buffett and common. Here is a great article on what happened. I pulled all my money out of my deposit account at GE.
Posted by Martin at 1:42 PM | Comments (0) | TrackBack
October 13, 2008
TED spread widening
OK, the stock market rocketed today, but the TED spread is up to 4.57 (market closed today) from 3.91 when I posted about it five days ago. up 20% more. This is our real problem. Until that TED spread comes down, we are not heading out of the woods.
Posted by Martin at 7:24 PM | Comments (0) | TrackBack
October 11, 2008
read this
the Sequoia CEO sumit notes. Batten down the hatches. It is going to be a long darkness.
Posted by Martin at 10:41 AM | Comments (0) | TrackBack
October 8, 2008
TED Spread up another 10% today
For those who haven't been following what Paulsen and Bernanke follow, start tracking the TED spread. The bloomberg link is here. This is the best real time measurement of how reluctant banks are to lend to each other. It is the spread between the rate investors get loaning to the fed (the Tbill) and the rate they get loaning on an interday basis in Euro Dollars to each other (the big ones) - the ED. This has historically been about even. Maybe .19-.25. It is today 3.91, up 10% today. That means banks want 391 basis points MORE to loan to each other than to the fed. That has for all intensive purposes put the kibosh on interbank lending. No-one would pay that rate. And those who must borrow at that rate are in BIG trouble. Watch this rate. If it goes back down to around 1, we have restored enough confidence and money should start to move again. But we ain't there yet folks. No where near.
Posted by Martin at 2:45 PM | Comments (0) | TrackBack
September 30, 2008
Nancy Pelosi's wickedly partisan hatred filled speech that killed the rescue package
don't let anyone tell you the republicans killed it. 95 democrats voted against it. And Pelosi played politics and tried to make this a Bush failure. This speech turned back all the good work McCain did to get house republicans on board. She undid it in one speech. Listen to the partisan rant. It will turn your stomach. This is why Americans hate politicians.
Posted by Martin at 2:09 PM | Comments (1) | TrackBack
What is the actual rescue package?
With all the finger pointing and sound bites, i am confused as to what was actually proposed and voted on. No longer. Here is the exact text of the bill. I look forward to reading the new one.
Posted by Martin at 12:03 PM | Comments (0) | TrackBack
September 25, 2008
McCain does the right thing
by suspending the campaign. Obama and the media saying McCain is somehow scared of a debate are totally not understanding how serious this frigging thing is.
Posted by Martin at 2:41 PM | Comments (2) | TrackBack
September 15, 2008
New top level category
In light of the carnage going on in our financial system and the behind the sceens heroic efforts going on to preserve the very American way of life, I thought it was time to start point some of these events out and the good/bad things going on. So this category "Averting Economic Collapse" will have all that stuff. Paulson continues to impress me. The history books of this time will most likely credit him with saving the WORLD financial system (if it works). The politicians are largely followers and onlookers. Let the financial professionals do their job. And lets hope the poll watching vote sluts don't mess it up with some knee jerk red meat for the base.
Posted by Martin at 8:20 AM | Comments (0) | TrackBack
Special letter on Lehman collapse
Mark sent this around last night. He is right, We are closer to the beginning than the end. Look out mark to market accounting. In an upward spiral this is good for balance sheets. In a downward spiral marked by multiple firesales this is hell on balance sheets. More losses to come.
From: Strategic News Service
To: Martin
Sent: Sun Sep 14 23:02:40 2008
Subject: SNS Special Alert: U.S. Treasury Out of Bullets?
Lehman declared bankruptcy tonight, and B of A announced it was purchasing Merrill Lynch for $50B.
Here is my blog post from yesterday:
This weekend finds Lehman Bros. twisting in the wind. Guys who remember 8th grade dance class remember the feeling, as the Teutonic teacher loudly and suddenly announces the Sadie Hawkins dance, where girls get to pick boys, and there you are, still sitting along the wall. (Of course, for girls, every dance offered this delightful experience.)
Welcome to the world of Lehman.
People are fond of reciting the phrase: The darkest hour is often just before the dawn. It seems to me, on local as well as global stages, that the opposite is just as often true: the moment of greatest peril is when you think the challenge is over.
So it is for the U.S., and therefore global, financial system. And I dont say this with any intended hubris. I doubt that any reader would argue long over the posit that a failed U.S. financial system would cast the world into complete economic chaos. In this particular and key universe, the U.S. is still in the World Series hunt, and China is a farm team.
With the rescue of Fannie and Freddie (may we make that assumption? on paper, at least), my prediction to my British friends and co-bloggers has come to pass: there was no way Secretary Paulson was going to let them fail, and he didnt. It was never about moral hazard, it was about the complete collapse of the U.S. lending system.
But now what? Paulson has, just as wisely, met with Lehman and the leading global banks last night. While I havent seen any transcript of the meeting, my guess is that he has told them he will not be bailing out Lehman, that he will be glad to help with the meetings part, but the money and risk assumption will be theirs. Support, but no money.
This, too, is exactly the right move, in my opinion, but it brings up a difficult question. What if, in this game of chicken, no one blinks?
I have little doubt that Lehman is a basket case, based solely on their losses announced to date. But I have the same feeling about Merrill Lynch, one of the supposed saviors in last nights meeting. Other than Goldman Sachs, there are a lot of walking wounded out there right now, who, despite all the triage and medical care, will take a couple more years to heal their balance sheets.
The Congress, and the Treasury, are probably on the same page regarding additional bank failures: let them happen. But what will be the result, if they do?
The chances of another bank failure, starting with Lehman, are, I believe, very high. When these failures occur, they will probably be like Palins self description: pigs with lipstick on. In this case, that probably means, for example, a sale to someone like Bank of America on such draconian terms that all equity value is effectively wiped out, the managers are fired, and huge headcount reductions follow.
Was it a sale, a fire sale, or just a fire, with B of A sweeping up the ashes?
And if it turns out to be the latter, as I expect, will the ensuing damage to the markets be manageable? Once? Twice?
I think the Treasury is essentially out of bullets in this war to save the U.S. financial system, and if so, the next few weeks and months will be those of greatest peril, even as many on the Street are heaving sighs of relief and writing about how the danger has already passed.
--
The disappearance of Lehman and ML as independent banks over the 24 hours since this was written underlines the danger the U.S. financial sector is facing. No one can blame B of A for taking Merrill instead of Lehman; no doubt, some will try to blame John Thain for selling Merrill, but one should keep in mind that it is what we don't know, rather than what we know, that probably led to the (forced) sale.
This double event confirms my concerns about the elevated level of peril the banking industry is in today.
Mark Anderson
CEO
Strategic News Service
Posted by Martin at 8:13 AM | Comments (0) | TrackBack
interesting solution to the mortgage crisis
I have been saying for some time that the current economic crisis is actually a crisis of confidence not a fundamental problem with any particular business. It is a problem of Trust and Faith. things the scientific among us are very bad at managing. The core problem here is that investors have lost their bearings. The old "rules of thumb" are not working. Rules like "Bear Stearns and Lehman Bros are credible co-parties". Rules like "A house is worth what the assessment says". The basic problem is that money is frozen because parties are finding it too hard to assess the risk of lending it around. There is no way to come to a "clearing price". The market is illiquid. So how do you set prices that everyone can agree on and get the risk takers to start taking risk again (probably for a higher price now). Well in home markets, Michale Lissack has an interesting idea: I like it, pass it on.
Fixing the Financial MessUGH!
Procrastination has led us to what may be a financial precipice, but there is a solution.A vast portion of the mess is caused by the mark-to-market accounting rule and the lack of liquidity (and thus a market and thus a meaningful market price) for uncertain and "tainted" assets (mostly mortgages, credit card debt, and related derivatives).
The mark to market rules ASSUME a liquid market and thus meaningful market prices. Such is not our present environment. It is too late in the gain to suspend the mark to market rules. That solution would have worked well a year ago, but today investors would merely be even more spooked by the uncertainty.
The solution lies in recognizing the shift between equity and debt which the market turmoil has created. Since the government now control Fannie and Freddie it also controls the very mechanisms to solve the problem.
Fannie and Freddie should mandate that every conforming loan outstanding be subject to an appraisal for the underlying property. If the appraisal suggests a loan to value ration in excess of 110%, it is time to recognize that a PORTION of the loan is in reality an equity investment. All such loans should then be subjected to a mandatory split such that 90% of the appraised value receives a Fannie/Freddie guarantee and the other piece does not. The first piece would have an established market value based on par for the principal and current interest rates. The second piece would become in effect participating equity. Banks and borrowers should have the option of exchanging the second piece for up to 75% of the future appreciation in the property valuing each 25% of future appreciation (above the current appraised value determined above) at 5% of the current appraised value of the home.
These two steps would restore value to perhaps 70-80% of the currently illiquid uncertain mortgage assets plaguing the US financial markets. The mess would be over.Please pass this message on to your elected officials AND your bankers.
Posted by Martin at 8:09 AM | Comments (0) | TrackBack