Gentle Reader -- You are welcome to peruse my web-based journal. I assure you that my contributions to this medium will be both infrequent and inconsequential. Read on!

DON'T DO IT

The latest from New Hampshire:

An armed man, possibly with a bomb, has taken people hostage at Hillary
Clinton's campaign office in Rochester, N.H.

Clinton was attending a National Democratic Committee meeting in Virginia, but has
canceled a 3:30 p.m. EST speech. New York TV station WNBC reported that the
suspect has demanded to speak to her. Police said a man in his 40s, with
salt-and-pepper hair, is in the building and has what appears to be an explosive
device strapped to his body, TV station WMUR reported.

My impression is that all most of these guys really want is to go out in a blaze of glory. Let's hope that doesn't happen in this case . . . posted by Carlton at 2:37 PM

PRE-NEWS

There may be some minor news about to break for me professionally, which I think will be positive. Let's see, shall we? posted by Carlton at 2:35 PM

TIME CRASH

If you, like me, are a Doctor Who fan from way back (though not way, way back), this Youtube video is a kind of harmonic convergence of awesome.

To explain (although I wonder why I would do so): Doctor Who is a British sci-fi show that was on from the early '60s to the late '80s. It was on hiatus (except for a made for TV movie, which I haven't seen), until the BBC restarted it a few years ago. The main character is a time-travelling alien who periodically "regenerates" -- changes appearance, personality, etc. but remains essentially the same person. In the regular TV show + movie, there have been ten actors playing the role (Currently David Tennant).

For the last couple of years, DW has done a 7-minute episode for a charity special that appears around this time -- it comes after the finale of the last season and before the first of the next, and tends to be a long scene that takes place in that time which is very interesting to the viewer but not necessary to the overall story.

In this one, the Tenth Doctor end up running into the Fifth (played by Tristan from All Creatures Great and Small). Check it out! Or don't! posted by Carlton at 10:12 AM

NEXUS OF PLANET CARLTON DISCOURSES

This is really tough to excerpt, so I won't, but check out the story of how a guy who was indicted for bribing GOP former US Rep Duke Cunningham was ALSO commiting mortgage fraud and selling his fraudulent mortgages to the secondary securities market via Washington Mutual.
Fifty million dollars' worth. At least.

Oh, and take note of how, after signing a plea agreement for the bribery, he continued the mortgage fraud. Now that's class! posted by Carlton at 10:02 AM

LIFE CYCLE OF A BAD IDEA

Bad ideas are very revealing of a person's thinking, both in the kinds of bad ideas he/she/it generates and the response to having the badness exposed to the world. (Good ideas are far less revealing.) Take Sony's rootkit, as an example. Or take Iraq.

I'm not member of Facebook (although I have a mostly-neglected account at Friendster and an active one at MySpace). Evidently the newest "feature" that Facebook has offered to (read: forced upon) its readers is something called "Beacon", which somehow takes the users' activity at other (non-Facebook) sites and broadcasts them to all of FB. To use Josh Marshall's example,

I'm on Facebook. And I haven't noticed this. Maybe because I don't buy enough
stuff online. But according to this article in the Times, they've got it set up now where your "friends" are notified about what you buy online -- presumably by some modern equivalent of cookies. So you get pinged "Josh bought 'Jack's Big Music Show DVD" from Blahblah.com!

While I can see how somebody thought this was a neat idea ("Think of the cross-selling opportunities!"), it also sounds -- at best -- to be a giant, annoying pain in the ass. Forget the fact that I don't really care about what everyone is buying as much as they seem to think I should, I don't want MY purchases broadcast to the entire universe. Forget "Jack's Big Music Show" -- it's only a matter of time before everyone on Facebook is notified that "Carlton Bought 'Eskimo Cum Dumpsters 5' from Ass. com." Or whatever.

In its original mode, apparently the FB member couldn't opt out of the "feature" -- or at best, had to opt out for each individual purchase.

As you might imagine, this was met with a firestorm of appreciation!

Facebook keeps tweaking its new Beacon advertising program, which tracks users’ actions on sites other than Facebook. The program sparked a petition from MoveOn.org Civic Action that has won the support of 50,000 Facebook users. Facebook introduced a new version of the Beacon alert box on Thursday that still lacks an easy way to avoid participating.

All, right, so an otherwise successful new media company launched a facepalm-worthy bad idea that irritates its consumers to the extent that they are organizing a sizeable protest -- and only loyal, engaged consumers organize protests, right? If they weren't loyal or engaged, they would just let it happen or go somewhere else, right? These are important people, at least as a group.

What's FB's response to this protest? Do they say, "whoops, thought you folks would really like this, guess we were wrong, of course we understand how you all want to protect your privacy"?
All they would have to do is let users who never want to use the system opt-out, once and for all. Simple, Right?

From the same NYT article, above:

Facebook executives tell reporters that users who ignore the alert boxes will no
longer be considered to have said “yes,” even after two days. If users ignore
the alert box, Facebook says it will not post the news of their purchases to
their friends. This is a big change, if implemented correctly. Users will still
be hassled by the alert boxes from Facebook on its partner sites, but ideally
they can ignore them now and not worry about their purchases being
shared. Facebook executives say they do not want to add a universal
opt-out button because then users would not be able to try out Beacon on different sites to see what it can offer. One Facebook executive predicts that consumers may “fall in love” with Beacon once they understand it. Only time will tell.

Translation: We expect to make a lot of money off of this, so you're going to take it and like it. After all, you'd just die without Facebook, right? Hahahahahahahahaha! posted by Carlton at 9:21 AM

A QUICK ONE

The WSJ has a chart of major players that have blamed their troubles on the subprime problem. Most of these are probably legit, but some are probably companies hiding a bad year in the shadow of a much bigger crisis.

I mean . . . Hershey? posted by Carlton at 10:27 PM

CONSEQUENCES OF A FLIGHT TO QUALITY

Lawrence Summers, Harvard professor, discusses how our financial system may be unravelling at its roots.

In the FT:

Second, it is now clear that only a small part of the financial distress that
must be worked through has yet been faced. On even the most optimistic
estimates, the rate of foreclosure will more than double over the next year as
rates reset on subprime mortgages and home values fall. Estimates vary, but
there is nearly universal agreement that – if all assets were marked to market
valuations – total losses in the American financial sector would be several
times the $50bn or so in write-downs that have already been announced by big
financial institutions. These figures take no account of the likelihood that
losses will spread to the credit card, auto and commercial property sectors. Nor do they recognise the large volume of financial instruments that depend for their high ratings on guarantees provided by credit insurers whose own health is now very much in doubt.

Emphasis mine. As the passage quoted above suggests, he has a couple of additional points to make on the subject. It's stiff stuff. posted by Carlton at 10:16 PM

"TO SING OPERA"

Everyone on Earth probably knows about this already, but here's a fascinating clip from the first round of Britain's Got Talent, in which a snaggly-toothed fellow in a cheap suit steps up to sing. I especially enjoy watching the female judge's face during his performance.

(As a textual note, the word that is repeated three times at the end of the aria means "I will win!" Thanks, Wikipedia!) posted by Carlton at 6:58 PM

SUBPRIME, ALL THE TIME

Here's another article indicating that the source of this whole mess was less that people took on loans that they couldn't handle, but that banks were willing to make the loans in the first place.

While many accounts portray resetting rates as the big factor behind the surge
in home-loan defaults and foreclosures this year, that isn't quite the case.
Many of the subprime mortgages that have driven up the default rate went bad in
their first year or so, well before their interest rate had a chance to go
higher. Some of these mortgages went to speculators who planned to flip their
houses, others to borrowers who had stretched too far to make their payments,
and still others had some element of fraud.

Who is supposed to be the gatekeeper of the banking industry, after all -- the individual borrower, who doesn't know his credit score from his shoe size, or the professional banker?

Larry Litton Jr., chief executive of Litton Loan Servicing, says resetting of
adjustable-rate mortgages, or ARMs, has recently emerged as a bigger driver of
defaults. "The initial wave was largely driven by a higher frequency of
fraudulent loans...and loose underwriting," says Mr. Litton, whose
company services 340,000 loans nationwide. "A much larger percentage of the
defaults we're seeing right now are the result of ARM resets."

More than half of the subprime delinquencies and foreclosures this year involved loans that hadn't yet reset, and thus were due to factors such as weak
underwriting and falling home prices, according to Rod Dubitsky, an
analyst with Credit Suisse.

I read all this to indicate that loosening credit standards allowed all kinds of borrowers to get loans who shouldn't have: homeowners who couldn't sustain an ARM after the reset, speculators who depended upon prices rising to meet their obligations, and outright fraudsters. The first category is probably the largest, and is the one with the largest incentive to try to make good on their loans (i.e. to keep their homes). What the WSJ is getting at in this article is that it is mostly the latter two (smaller) categories of borrower who have defaulted at this point. The larger wave, of homeowners who have exhausted all avenues to make their payments, hanging on by fingernails until the last, has yet to come. So buckle up, folks.

Putting aside the relatively dire implications of that conclusion, there's still that question: how did this happen? What happened to all the sober, serious, professional bankers out there who are supposed to prevent massive miscalculations like this one? Answer: they were in it up to their hipbones, trying to make a buck. We're talking about big names: Merrill Lynch fired its CEO, which would be great if it was all his fault, rather than a fall guy. It's telling that they turned their back on all-but-certain successor, Larry Fink, when he asked too many questions:

Over the last week, Mr. Fink had been engaged in detailed conversations with the
Merrill Lynch search committee. Merrill Lynch is a 49 percent shareholder in BlackRock, the fund company he founded. Mr. Fink was thought to be a leading candidate, an impression Mr. Fink himself received, according to people briefed on the discussions.
According to these people, Mr. Fink said he would be interested
in pursuing the job further as long as he received a more detailed accounting of what Merrill’s exposure to subprime-related securities was.

ML recently announced its choice for a new CEO: some other guy! Then there's Citibank, writing down $ 11 billion or so, Barclays, etc.

What (little) I've read indicates as follows: They always do this. The reputation that the financial services industry has for being conservative and serious is little more than a good PR job. Every player seeks to maximize short-term profits in any way possible, and very few have a forecast horizon that stretches beyond the next two years (if that). And much like your average high school clique, there is a strong tendency to do what everyone else is doing, no matter how bad an idea it may be.

And what's the result of all this? Be careful who you give your money to, I suppose. posted by Carlton at 5:28 PM

THE MEMORY HOLE

TPM has a good rundown of the various types of (formerly public) government reports, official statements, and information that the administration has tried to keep from the public in 2007. It's a surprisingly long list. Check it out here.

My personal favorite (links probably don't work here):

* On June 2007, the New York Times reported that Dick Cheney's resistance to "routine oversight of his office's handling of classified information" is so intense that he has "suggested abolishing" the National Archives unit that monitors classification in the executive branch. Because Cheney has repeatedly refused "to comply with a routine annual request from the archives for data on his staff's classification," "the Information Security Oversight Office, a unit of the National Archives, [has] appealed the issue to the Justice Department, which has not yet ruled on the matter." In a related effort to prevent the release of information about his office, Cheney has also instructed the Secret Service to destroy copies of visitor logs.

posted by Carlton at 4:08 PM

O BRAVE NEW WORLD

Where the worlds of politics and female professional bridge players collide. posted by Carlton at 10:16 PM

"I COULD TELL FROM YOUR PRESENTATION THAT YOU APPRECIATE HUMOR"

Direct quote from a person who came up to me after a speech I made the other day to a group of accountants. He then proceeded to describe a New Yorker cartoon about an accountant.

(Now, I don't make any claims to be a great speaker. Or particularly funny. Compared to the woman who went after me, though, I killed. ) posted by Carlton at 8:40 PM

BATTLE OF THE PUNDIT STARS

This TPM post is a good roundup of the recent sub silentio contretemps between P. Krugman and D. Brooks on the NY Times Opinon page concerning Reagan, Republicans and Racism -- the "three Rs" of the Mississippi system of public education. It's pretty fun to watch, and worth checking out. Regular readers will know where my allegiances lie in that dustup.

(Sub silentio contretemps? WTF? I need two different kinds of italics to contain my erudition!) posted by Carlton at 1:04 PM

TALENTS

In response to my post "Out of Business", my brother cited the following passage from 1 Timothy:

9 But they that will be rich fall into temptation and a snare, and into many
foolish and hurtful lusts, which drown men in destruction and perdition.
10 For the love of money is the root of all evil: which while some coveted
after, they have erred from the faith, and pierced themselves through with many
sorrows.

That's certainly an important and relevant passage. Linking to the last post, regarding the colossal waste of capital and credit that has happened during this administration, I am reminded of the parable of the talents (found here: http://www.bible.org/page.php?page_id=3079).

One servant gets five talents (which are some kind of money), and uses them to earn five more. One gets two, and makes two more out of them -- who can argue with 100% returns? The last servant gets one, and buries it in the ground, so that he only has the one to give back to the master. The master thinks this is very wicked, and punishes the servant.

How much more wicked is it for a servant to take a hundred talents and squander them by giving some away and throwing the rest into a lake? And then, after wasting the many talents he has been given, to use the name and good reputation of his master to borrow two hundred more to cover up the losses? And when those are gone, to borrow still more and to gamble with them, each time thinking that a higher bet will get him out of the hole that he has dug for himself?

Eventually, the bill comes due. The servant has ruined himself, of course, but also has bankrupted his master. Worse, by trading on his master's good name, he has ruined his reputation.

In the parable, the master punished his servant. In my example, what punishment could possibly be enough for all the damage that servant has caused? posted by Carlton at 11:14 AM

THAT'S GONNA BE SOME VISA BILL

Joseph E. Stiglitz in Vanity Fair, on the true economic cost of the Bush years:

It is natural to wonder, What would this money have bought if we had spent
it on other things? U.S. aid to all of Africa has been hovering around $5
billion a year, the equivalent of less than two weeks of direct Iraq-war
expenditures. The president made a big deal out of the financial problems facing
Social Security, but the system could have been repaired for a century with what
we have bled into the sands of Iraq. Had even a fraction of that $2 trillion
been spent on investments in education and technology, or improving our
infrastructure, the country would be in a far better position economically to
meet the challenges it faces in the future, including threats from abroad. For a
sliver of that $2 trillion we could have provided guaranteed access to higher
education for all qualified Americans.

I used to imagine what would happen if every city in America had a decent public transport system -- and it cost a nickel to ride wherever you wanted to go. Now I imagine a world in which crossing a bridge isn't a crap shoot.

There's a lot more to the article, which is a good read. While I don't think that Bush + Cheney + Rumsfeld + whomever really anticipated the giant money suck that Iraq has become (to be fair, it has exceeded the most pessemistic expectations), they have made up the difference by borrowing. What I'm trying to say is that I think Bush's economic policy during the war is exactly the same as it would have been if there wasn't a war on. They don't maneuver, they don't adapt. If they suddenly have less cash on hand than they had thought they would, they put the rest on the credit card. posted by Carlton at 9:22 PM

WORK

I don't write much about my work, which is as it should be. But today, I lost my temper with someone -- technically my supervisor -- for being a ninny. My office has a lot of problems, which aren't exactly this fellow's fault, but they aren't NOT his fault either, exactly. And he's basically thrown up his hands and declared that he can't do anything about it and he's going to just sit on the sidelines and let someone else do his job, which no one else is available to do.

I know that's vague, but it's not going to get any clearer.

I try not to lose my temper, for a couple of different reasons. One is that I don't do so very effectively, and tend to come off as ridiculous rather than threatening or intimidating. The other is that I have a hard time getting over it, and I usually end up feeling really bummed out and embarassed for the rest of the day. Like now! posted by Carlton at 10:58 PM

OUT OF BUSINESS

For anyone following the beat-down of the various markets as a result of the subprime situation, I'd recommend a book: Manias, Panics, and Crashes, A History of Financial Crises, by Charles P. Kindleberger. I'm no economist, and the book was a struggle (although better on the reread that the first time through). I gather it's something of a classic in the area, though I, being an ignoramus, was unaware of it.

One thing that sticks with me from the book was the description of the "euphoria" that comes when a bubble becomes truly extraordinary, when the prized asset class (houses, tech stocks, tulip bulbs) seems to guarantee amazing profits for anyone who has the money to invest, and banks are co-incidentally willing to lend money easily to invest the the asset class. When the mania really gets cooking, evidently, other types of business and commerce slow or cease, because everyone is intent on the particular object of the mania.

Like, for example, bond insurance companies:

MBIA and Ambac are the two top players in the obscure but lucrative business of
bond insurance. Both sport market values of $7 billion and trace their roots
back more than 30 years when they insured municipal bonds against default,
helping cities like New York minimize financing costs. MBIA, based in Armonk,
N.Y., has about 500 employees, and Manhattan-based Ambac has 350. In recent
years, however, the firms have moved to guaranteeing more esoteric forms of debt, like subprime mortgage loans and other forms of so-called structured finance, which are securities often backed by speculative debt or loans.

One fascinating thing about the current crash of the subprime mortgage market is that it is slow-moving, like some kind of alien blob-creature. Anyone who's bought a house knows that it takes months, even when everything goes smoothly. That's contrasted to a stock trade, which can be accomplished in a few seconds over the Internet -- which makes this cycle seem to play out in slow motion.

Also, it seems to me, this crisis is kind of interesting because of the different ways in which it manifests and on how many levels. On the one hand we have the average Joe, who is able to participate by purchasing a house with one of these bad loans and then defaulting on it. On the other hand, the move to slice-and-dice these mortgages into exotic investment vehicles involves the big financial players like the bond insurance firms listed above, and -- hello -- General Motors?

Chief Executive Officer Rick Wagoner cited concerns about defaults on subprime
mortgage loans at GMAC LLC and auto sales in the U.S. and Germany. Slumping U.S. sales in the past half year ``feel like the conditions we're going to face,''
Wagoner said.

``This all suggests that GM thinks that things are so ugly out
there that they can't see the possibility of profitability for many quarters,
maybe even years,'' Bradley Rubin, an analyst with BNP Paribas in New York, said
in an interview.

Speaking of getting out of your normal business. GM has long had a financial services arm -- GMAC -- which might lead to some questions in and of itself. But everyone seemed to get in on this: banks, pension plans, private individuals, you name it. This crisis is so pervasive that at the same time Joe loses his house, the bank that made the loan may go under, the city where he lives may default on its bonds, its insurer may in turn go belly-up, and the company that makes Joe's car may go into bankruptcy.

Don't get me wrong -- this is going to bring a lot of pain to a lot of people (and even pseudo-people, like corporations). But it is fascinating to watch.

(If anyone knows anything about this, and wants to comment -- even to tell me I'm wrong -- please do so.) posted by Carlton at 10:13 PM

ADMIT IT

Watch this clip, then concede: our President is drunk off his ass at this press conference. posted by Carlton at 10:08 PM

THE (HERETOFORE UNKNOWN) NARCO-SUBMARINE MENACE

Say you're a Colombian drug lord. All your customers are in America, but you just can't get enough product to them via your normal channels: boat, truck, plane . What do you do?

Why, build yourself a fleet of diesel powered submarines, of course!

From the LA Times:

Perched on a makeshift wooden dry dock late last month were two 55-foot-long
fiberglass vessels, one ready for launch, the other about 70% complete. Each was
outfitted with a 350-horsepower Cummins diesel engine and enough fuel capacity
to reach the coast of Central America or Mexico, hundreds of miles to the
north.

The vessels had cargo space that could fit 5 tons of cocaine, a
senior officer with the Colombian coast guard's Pacific command said in an
interview.The design featured tubing for air, crude conning towers and cramped
bunk space for a crew of four, he added.

I don't have much to say about this, except to observe that: 1) the drug war has really improved our national security, and 2) it's a HOMEMADE SUBMARINE! How unbelievably cool is that? posted by Carlton at 10:01 PM

FILE UNDER 'Y' FOR 'YA THINK?'

Quoth Paul Krugman, from Friday's paper:

Memo to editors: If a candidate says something completely false, it's not
"in dispute." It's not the case that "Democrats say" they’re not advocating
British-style socialized medicine; they aren't.

posted by Carlton at 10:23 AM

CAUTIONARY TALES

From Radar magazine, the Ten Most Dangerous Toys of All Time.

CNN posted an interactive obesity map of the US over time. So go interact! posted by Carlton at 2:53 PM

A LITTLE TAX HISTORY

From the NY Review of Books:

The wealthiest Americans went from paying a top rate of 24 percent in the 1920s
to 63 percent during FDR's first term and 79 by his second. By the mid-1950s, it
was 91 percent (today's top rate is 35 percent).

This is an easy way to refute the "raising taxes one iota will cripple our economy" crowd -- if this chart (PDF or something similar) is to be believed, the top bracket hovered around that 91% mark (sometimes higher!) during the entire period of 1943-1963. Since the Roosevelt to Kennedy years weren't an economic catastrophe on the order of the Great Depression, but instead a period of pretty awesome expansion and growth for the US, then tax rates alone can't be the sole factor controlling growth. If the economic engine wants to run, it will run.

Just something to chew on. Enjoy your Saturday. posted by Carlton at 10:45 AM