Year: 2007

Reflections of Guy Fawkes Day

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Scott Horton has the definitive word:

But today Britons have a take on Guy Fawkes that is much at odds with the historical one. Once Fawkes was a symbol of the traitor within. The people were called to be on guard against his like. No longer. Today Guy Fawkes is increasingly viewed as the heroic figure prepared to stand against an unjust and oppressive state, as a martyr and a victim of torture. What are the lessons of Guy Fawkes Day for 2007? I propose three:

1. Torture Never Works and is Always Wrong

………

2. Beware the Government that Rules By Fear

……

3. A Government That Stereotypes Is Unjust

…

It should be noted that the brutality, fear-mongering, xenophobia, and paranoia of the Stuart Kings, those who tortured Guy Fawkes, led inexorably to the revolution in England that placed Oliver Cromwell in control of England as a dictator.

The bloodbath in credit and financial markets will continue and sharply worsen

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The bloodbath in credit and financial markets will continue and sharply worsen

Indeed, according to a MarketWatch article from September – based on Bernstein Research – many Wall Street firms put an excessive amount of securities in the level 3 bucket that uses unreliable models for valuation. The share securities in the level 3 is:

15% for Goldman Sachs;

13% for Morgan Stanley;

8% for Lehman Brothers;

7% for Bear Stearns

and only 2% for Merrill Lynch.

So, what is a level three asset: Ummm….Basically, it’s sh#@ that you cannot sell, because there is no regular market, and your asset value is pulled out of the ether using models that no one understands.

Merrill Lynch just tanked, and its CEO was fired with just 2% of its assets being level 3, and look at where the other investment banking firms are.

It’s stuff that might be a million dollars, and it might be ten dollars, but you cannot tell until you try to sell it.

Or, to quote the Prudent Bear:

We may be about to find out. From November 15, we will have a new tool for figuring out how much toxic waste is in investment banks’ balance sheets. The new accounting rule SFAS157 requires banks to divide their tradable assets into three “levels” according to how easy it is to get a market price for them. Level 1 assets have quoted prices in active markets. At the other extreme Level 3 assets have only unobservable inputs to measure value and are thus valued by reference to the banks’ own models.

I’m beginning to think that I should put everything in gold under my mattress.*

It’s 1929 all over again.

*Not really. But perhaps moving some more assets to foreign denominated stuff would be in order.

Fred Thompson Clown Show: This One Should Win an Oscar™

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OK, this one takes the cake. Philip J. Martin’s until, his resignation the chairman of Thompson’s “First Day Founders” team, has felony convictions on drug charges.

Martin pleaded guilty to the sale of 11 pounds of marijuana in 1979, the Washington Post reported Sunday. In 1983, Martin was charged with cocaine trafficking and conspiracy stemming from a plan to sell $30,000 worth of the drug, the newspaper reported. He pleaded no contest.

It’s one for a contributor to have a record, but this guy was a major public player.

Hollywood Writers Strike

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I know that there are doubtless a lot of people who think that they shouldn’t even be in a union, or strike, but half of these guy’s income is residuals, and the studios are proposing nothing as an amount.

The fact is that the writers should be given a cut of revenues regardless of channel, and there is no risk if they get a percentage.

The fact is that the studios have never, ever, taken a risk on new media. It’s always been someone else shelling out to the for the privilege of seeing if a media will fly or sink. There is no reason for the studios to freeze these guys out.

Gisele Bündchen No Longer Trusts the Dollar

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Yes, the dollar has become so weakthat even super models know about it. Gisele Bündchen is now demanding that all her contracts be Euro denominated.

The kicker is, she’s from Brazil….They know what it’s like there to have to get your salary daily because you need to spend it because it will be worthless in a week.

US money is not good enough for her.

Though apparently US guys are (that’s Tom Brady).

Yet another reason to hate the New England Patriots.

Reasons for Massive Nuclear Strike Now Include US Dick Swinging

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The FAS has a has obtained new nuclear strike guidelines developed by the Bush administration:

The 2001 Nuclear Posture Review (NPR) and White House guidance issued in response to the terrorist attacks against the United States in September 2001 led to the creation of new nuclear strike options against regional states seeking to acquire weapons of mass destruction, according to a military planning document obtained by the Federation of American Scientists.

It should be noted that this is not about one or two nukes, it’s about a massive nuclear strike on the country targeted.

The creation of a “target base” indicates that the planning went further than simple retaliatory punishment with one or a few weapons, but envisioned actual nuclear warfighting intended to annihilate a wide range of facilities in order to deprive the states the ability to launch and fight with WMD. The new plan formally broadened strategic nuclear targeting from two adversaries (Russia and China) to a total of seven.

The second draft from March 2005 listed five scenarios where use of nuclear weapons might be requested:

  • To counter an adversary intending to use weapons of mass destruction against U.S., multinational, or allies forces or civilian populations;
  • To counter an imminent attack from an adversary’s biological weapons that only effects from nuclear weapons can safely destroy;
  • To attack on adversary installations including weapons of mass destruction, deep, hardened bunkers containing chemical or biological weapons, or the command and control infrastructure required for the adversary to execute a WMD attack against the United States or its friends and allies; [this was probably the “target base” in OPLAN 8044 Revision 03]
  • To counter potentially overwhelming adversary conventional forces;
  • To demonstrate U.S. intent and capability to use nuclear weapons to deter adversary WMD use.

(emphasis mine)
Let’s be clear about this, the last line basically says that we will engage in a massive nuclear first strike as an exercise in dick swinging. Basically, it allows for nuclear strikes to show that we are willing to make nuclear strikes.

If you are not terrified by Bush and his Rapture driven nuclear policies, I want whatever it is that you are smoking.

Hack Allows Apple’s Leopard OS to Run on PCs

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Personally, I’m not interested in Macs, I’m a PC guy, my interest here is that I like to see companies with arrogant restrictions in their licenses get owned,

For those of you who who do care, I’m not so sure how much it would matter that Leopard can be made to run on PCs either. After all, you have the hardware.

In either case, I find this interesting from a purely voyeuristic perspective.

OK, I Was Right, How Did I Do That?

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Remember when I said that “Maybe they know that there is some level of bullsh&% in the figures that they cannot trust.” In response to why the Fed would cut rates when the economy was growing at a brisk 3.9% growth rate? I also noted that the markets felt the same way too. The dow fell something like 350 points.

Well, Barry Ritholtz of
The Big Picture gives us all the specifics on what happened. It appears that a measure of inflation, “the price deflator rose a much less than expected .8% vs expectations of 2%.”

Essentially, this is a measure of inflation, and is used to separate out real growth from inflation. By lowering the price deflator, you count inflation as real growth.

The average of the price index since Q1 2004 to Q2007 was 2.98, ranging froma low of 1.7% to a high of 4.2%. Thus, if the deflator matched consensus, it would have generated a GDP of 1.9%; if it was at its recent 3 year average of 2.98%, GDP would be ~1%.

See the graph, and notice the WTF: point.

This I think, is the difference between an amateur (me) and a professional (Mr. Ritholtz). I knew in my gut that something was off, but a professional can tell where, and how.