Year: 2008

Naomi Kline Nails It

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She has an article in the nation, Disowned by the Ownership Society, or as I like to refer to it, the Pwn3rsh1p society.

Go read it.

Here is a sample:

In November Nasdaq joined forces with several private banks, including Goldman Sachs, to form Portal Alliance, a private equity stock market open only to investors with assets upward of $100 million. In short order yesterday’s ownership society has morphed into today’s members-only society.

BTW, this private market will crash and burn, because there is no small investor left to hold the bag when the bubble bursts.

Economics Update

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The Consumer confidence index has dropped to 75, the lowest number since 2003, the expectations Index, which is on hop people see the future declined to 57.9, the lowest number since 1991.

In real estate, January foreclosures are up 57% from one year ago, the fall in house prices is accelerating, with the Case-Shiller home price index falling 9.1% year over year.

It appears that home improvement is stalling, with Home Depot having its first drop in sales ever. People don’t want to improve a depreciating asset.

Inflation (stagflation) is rearing its ugly head too, with Wholesale prices rising 1% for the month of January, and 7.4% in 2007.

In insurance, MBIA will stop writing policies for asset based securities for at least the next 6 months. Additionally, it is looking at spinning off its municipal bond business, and announced that it had eliminate its quarterly dividend.

In general investment news it appears that yet another complex obscure financial instrument will give the world heartburn, something called a “variable interest entity” (VIE). It appears to be another asset structured to keep sh&^ty investments off the balance sheets.

Sikorsky’s REveals Successor to It’s ABC Concept

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In the 1980s, Sikorsky had a test aircraft that they called the ABC (Advancing Blade Concept) helicopter. It used a coaxial rotor, and offloaded the retreating blades to eliminate retreating blade stall (as a helicopter goes faster, the blade going backwards goes more slowly relative to the air stream).

Sikorsky unveiled its successor, the X2 test aircraft at Heli-Expo:


It’s certainly a lot cleaner and more developed than its predecessor.

It also promises performance close to that of a tilt-rotor with the low speed handling and auto rotation of a helicopter.

Antidepressants Ineffective?

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A study has been released showing that Prozac, does not work better than a placebo for most people.

You can find the whole paper here.

The pattern they saw from the trial results of fluoxetine (Prozac), paroxetine (Seroxat), venlafaxine (Effexor) and nefazodone (Serzone) was consistent. “Using complete data sets (including unpublished data) and a substantially larger data set of this type than has been previously reported, we find the overall effect of new-generation antidepressant medication is below recommended criteria for clinical significance,” they write.

Two more frequently prescribed antidepressants were omitted from the study because scientists were unable to obtain all the data.

Socialism for the Rich

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You know the old saying, “Capitalism for the Poor, Socialism for the Rick”, and in that vein we have the large multinational banks lobbying congress for a bailout.

Bank of America is circulating a legislative proposal to create “a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates”.

It’s a bailout for the banks more than anything else, and the author of the article, NY Times reporter Edmund Andrews, notes he irony when he says:

A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government — now that it is in trouble.

These folks made their bed, and they had the computers and models, let them lie in it. Any bailout should be to the people at the bottom of the pyramid, not the top.

Mortgage Cram Down Bill Up In Senate

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The Republican’ts are threatening a filibuster, and Bush and His Evil Minions™ are threatening a filibuster, but the Senate bankruptcy reform bill is a decent piece of legislation.

Basically, it gives bankruptcy courts the right to modify the terms of a loan on a primary residence, much in the same way that they can for rental properties and vacation homes.

It should keep people in their homes, it will allow things like outrageous fees and deceptive loans to be modified, and it places the burden to a large degree on the purveyors of the toxic mortgages.

Needless to say, the mortgage industry hates it.

Hedge Funds Up Stakes in NY Times Company in Preparation for Proxy fight

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Two hedge funds have increased their stake in the NY Times company to 19%, and they are agitating for 4 of the 13 seats on the board of directors. (The other 9 seats are controlled by the Sulzberger family by virtue of the two tiered stock structure).

I think that this is the first stage of an assault on the two tiered stock structure.

The strategy of the hedge funds could fall into one of three categories:

  • They intend to make enough of a nuisance of themselves to get Times Co. to pay them off to leave.
  • They intend to take over and break up the company for profit.
  • They intend to take over to change the editorial direction of Times Co.

I think that the last one is least likely.

Boeing Pitches Co-Development Deal on Advanced F-15/F-18 to Japan

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Japan wants to purchase F-22s to replace its locally produced F-4 Phantoms, which is nearing the end of its service life, but is looking at alternatives, since congress is showing no signs of changing the laws that forbids this.

As a result, Boeing is making proposals to the Japanese about co-developing an advanced version (paid subscription required) of either the F-15 or F-18.

According to the article, Japan is looking at the F-16 and Eurofighter Typhoon, with the defense minster favoring the latter, though that may be a tactic to get F-22s released to the JASDF.

Economics Update

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It looks like the US dollar is trending downward on the expectation of further weakness in the US economy.

And in the late to the game category, business economists are finally predicting a recession.

This is not surprising, as Fed rate cuts are no longer effecting longer term rates, because people are expecting inflation to pick up, and do not wish to be repaid in devalued dollars.

It won’t help that bond insurer Ambac may be downgraded even if it manages to raise $3 billion in new capital.

The problem is that people are increasingly unable to sell their homes, as shown by a 23.4% year-over-year drop in existing home sales. That’s a collapse in the market.

So now, investors are lawyering up to go after corporate boards, on the theory that the guys on the boards are supposed to be professionals and to show a modicum of competence.

Pass the popcorn on this last one.