Year: 2009

Wanker of the Day: Henry Porter

No Comments

Mr. Porter is complaining about Google and Youtube, because in negotiating with Performing Rights Society, the UK music licensing organization, Google, “took down the videos of the artists concerned,” when the PRS demanded £0.22, about $0.40, for each video watched.

I would be surprised if Google grosses $0.04 per video watched on Youtube, and they are demanding nearly half a dollar, so Google tells you to pound sand, and it appears that he’s also angry because Google “only” takes down infringing material promptly when notified, when required by law, as opposed to…well, it’s not clear, but he thinks it’s bad.

Tough.

This is where the idea of IP as “property” as opposed to “temporary exclusive license” gets us, and it does not encourage the useful sciences and arts, which is what it’s there for, at least in the USA.

TARP Overseer Calls for Bank Execs to Be Fired

No Comments

Elizabeth Warren, the head of the TARP oversight commission is calling for executives at TARP recipients to be fired, and their shareholders to be whiped out, saying, “It is crucial for these things to happen. Japan tried to avoid them and just offered subsidy with little or no consequences for management or equity investors, and this is why Japan suffered a lost decade.”

It appears that her report will specifically mention Citi and AIG.

Your mouth to God’s ear, Dr. Warren.

Election Updates

No Comments

They have finished counting the 300 some odd absentee ballots in Minnesota, and Franken picked up 90 votes, which puts him ahead even if the throw out the lost ballots counted on election night, or any other scenario, except for Bush v. Gore judicial nullification, so it looks like the fat lady has sung.

In the NY-20 special election Murphy is setting up a legal fund for the clearly telegraphed legal challenges from Tedisco, hoping to get ahead of delaying tactics of the Norm Coleman variety.

Economics Update

No Comments

Scary Picture of the Day, Industrial Production, Courtesy of Naked Capitalism

The big news is that there are rumors of GM preparing for bankruptcy, and mark my words, if they do go into bankruptcy, it will be because of the bond holders, not the union, and I do not see it working as a prepackaged filing, so we would see massive disruptions amongst all the auto plants of all brands in the US.

Were it not for the GM rumors, the lede would be the continued implosion of consumer credit, with grim February reports showing that U.S. consumer credit falling by $7.48 billion, an annual rate of 3.5%, and homeowner mortgage default rates have increased to 7%, up more than 50% from a year ago.

That being said, it’s not just consumers and homeowners in trouble, as the default rate of “speculative-grade corporate borrowers” hit the highest rate since the depression in March.

Meanwhile in a harbinger of things to come in commercial real estate, New York City office rents fell 6% in the Q1 of 2009, and the vacancy rate is at 9.6%, up from 6.1% a year ago.

It is therefore unsurprising that the Business Roundtable’s survey of CEOs is showing falling confidence.

In the meantime, uncertainty, particularly the GM rumors have driven both the Yen and the US Dollar up, and has driven oil down.

The Phrase is “Good Germans”

No Comments

The term which should be applied to doctors and other medical personnel who aided in torture at Guantanamo and the CIA gulag system.

Note that while the Red Cross did say that medical assistance rendered in furtherance of torturer was unethical even if it was the preserve the life or health of the subject, that the activities of medical personnel did not even fall under this limited scope, but rather that they were, “medical professionals’ role was primarily to support the interrogators, not to protect the prisoners, and that the professionals had ‘condoned and participated in ill treatment.'”

This is wrong, and the people involved should never be allowed to participate in patient care ever again.

When Immigration Policy and Stimulus Intersect

No Comments

Matthew Yglesias has a post up on the stimulative effects to the economy of legalizing various activities. Item 7 is “Liberalized immigration”.

Undoubtedly, this will grow the GDP. That is not the question. The question is whether it will grow the per capita GDP, which is how the overall benefit to society should be defined.

As I noted before, the post Black Death prosperity in Europe was almost certainly at a lower aggregate GDP than before the plague, but because population fell faster than GDP, wages, and standard of living, went up.

Wall Street Self Dealing Again

No Comments

Zero Hedge is reporting that there are strong indications that Wall Street firms are going back to their Dotbomb era practice of swapping favorable ratings for analysts in exchange for business underwriting their IPOs:

1) First Merrill Lynch/BofA gets clients to subscribe to a massively diluting equity offering (105 million new shares out of 271 million pre-offering shares, or 39% dilution). The offering prices at $7.10/share, a 6% discount to the previous day closing price of $7.49. In the process Merrill pockets an underwriting fee likely equal to 3% of the offering or around $20 million.

2) Minutes after the offering Merrill REIT analyst Schmidt comes out with a report, changing the recommendation on the stock from a Sell to a Buy, thereby getting the vanilla money which makes critical fiduciary decisions merely based on what some sell-side analyst will recommend. As a result Kimco stock rises throughout the day and closes at $9.40, a 25% premium to the closing price, and a 30% premium to offering price of $7.10, which closed that very same day.

…

Go read the rest. It’s pretty damning, and yet another indication that at least 1 in 10 of the brokers, executives, and analysts on Wall Street should be under criminal investigation.

Is Dick Cheney Working the Phones to Blackmail Obama?

No Comments

That’s my guess as to why Senate Republicans are threatening the nominationsof Dawn Johnsen as head of the Office of Legal Counsel in the Department of Justice and Harold Koh as the State Department legal counsel if more torture memos are released.

It has been reported that they have told the administration that they will filibuster/place a hold on the nominations unless Obama covers up the torture memos

The people directly involved in this, and hence the ones most likely to face legal or disciplinary action, Alberto “Abu” Gonzalez, John Yoo, David Addington, etc., have no reputation or political pull to get the ‘Phant Senators to do this.

So, it has to be someone who:

  • Is implicated in the memos.
  • Has political pull with the base.
  • Has some sort of rapport with Republican members of the Senate, possibly from their days in Congress.

Sounds like Cheney, and as his latest appearances on the Sunday gas bag circuit, it is clear that he is worried that one of his stalwart supporters of torture will roll on him if they are facing real jeopardy.

Auto Industry Update

No Comments

Once again, it looks like the management at Ford did everything right to face this crisis, and they have executed debt for equity swaps and haircuts to bondholders that has lowered their outstanding debt by $9.9 billion, and lowered their interest payments by about $550 million a year.

On the other side of doing the right thing, we have GM, who says that they
expect to sell their SAAB automobile division by the end of June, as there are 3-5 serious bidders.

I never understood this merger in the first place, SAAB auto was too small for GM, and unlike Ford’s purchase of Jaguar, where Ford’s quality was marked superior, and was applied to the British sports care maker, GM didn’t have anything of value to send to SAAB.

Meanwhile, I get to say a sentence that I rarely get to say, that “The New Republic gets it,”on the auto bailout.

The problem is not the unions. It’s the bondholders and banks who are unwilling to deal.

Obama’s Bank Plan Worse Than Thought

No Comments

Jeffrey Sachs has looked at the plan, and his assessment is that it is far worse than previously believed, noting that, “Insiders can easily game the system created by Geithner and Summers to cost up to a trillion dollars or more to the taxpayers.”

Basically, it means that the banks can set up off the balance sheet subsidiaries to over pay for the assets, and when they go bankrupt, the federal government is left holding the bag:

Citibank thereby receives $1 million for the worthless asset, while the CPPIF ends up with an utterly worthless asset against $850K in debt to the FDIC. The CPPIF therefore quietly declares bankruptcy, while Citibank walks away with a cool $1 million. Citibank’s net profit on the transaction is $925K (remember that the bank invested $75K in the CPPIF) and the taxpayers lose $925K. Since the total of toxic assets in the banking system exceeds $1 trillion, and perhaps reaches $2-3 trillion, the amount of potential rip-off in the Geithner-Summers plan is unconscionably large.

This is so stupid and corrupt that Larry Summers has to be the guy who came up with this.

A Democrat You Should Not Make Donations To

No Comments

Senator Blanche Lincoln (R-AR), who has come out against the Employee Free Choice Act (Card Check).

Not only that, she is clearly signaling that she will support a filibuster.

Not only is this bad policy, it’s also bad politics, since union members vote Democratic, but being from Arkansas, Wal-Mart owns her.

Put your money elsewhere, and give to individual candidates, not the DSCC, which will doubtlessly funnel money to her race in 2010.

SecDef Gates Unveals FY 2010 DoD Budget Proposal

No Comments

You can read his speech, but here is the nickel tour:
Additions:

  • More UAVs
  • More ISR Assets
  • More Helos
  • More Spec Ops
  • More Littoral Combat Ships
  • More Joint High Speed Vessel (JHSV)
  • Accelerate production of F-35
  • More money terminal High Altitude Area Defense (THAAD) System and Standard Missile 3 (SM-3)
  • More Cyber warfare assets.
  • Will go ahead with tanker purchase.
  • Start replacement program for Ohio SSBN.

Reductions:

  • Delay next generation CGN aircraft carrier (Ford class) by shifting to a 5 year schedule.
  • Delay CGX BMD missile cruiser and reevaluate the requirements.
  • Delay amphibious ship and sea-basing programs.
  • Reduce the number of contractors in the Pentagon, and replace them with government employees.

Surprise, he’s saying that Dick Cheney’s brainchild when he was Bush I’s Sec Def, using the Department of Defense as a way to reward political contributions privatizing functions and expanding the number of contractors, does not work.

Kills:

  • Retire 250 of the oldest Air Force tactical fighter aircraft in FY10.
  • End production of the F-22 fighter at 187 (current 183 +4)
  • End acquisition of C-17s in FY 10.
  • Terminate the VH-71 presidential helicopter.
  • Terminate the Air Force Combat Search and Rescue X (CSAR-X) helicopter program.
  • Terminate the $26 billion Transformational Satellite (TSAT) program, and instead will purchase two more Advanced Extremely High Frequency (AEHF) satellites as alternatives.
  • Terminate he second airborne laser (ABL) prototype aircraft, and move program to technology demonstation.
  • Terminate the Multiple Kill Vehicle (MKV) program.
  • Terminate the DDG-1000 and restart the DDG-51 Aegis destroyers.
  • Terminate the Army’s Future Combat Systems (FCS) program’s vehicle,* and fold in the technology developed elsewhere.

I love his money quote:

Sixth, and finally, we will significantly restructure the Army’s Future Combat Systems (FCS) program. We will retain and accelerate the initial increment of the program to spin out technology enhancements to all combat brigades. However, I have concluded that there are significant unanswered questions concerning the FCS vehicle design strategy. I am also concerned that, despite some adjustments, the FCS vehicles – where lower weight, higher fuel efficiency, and greater informational awareness are expected to compensate for less armor – do not adequately reflect the lessons of counterinsurgency and close quarters combat in Iraq and Afghanistan. The current vehicle program, developed nine years ago, does not include a role for our recent $25 billion investment in the MRAP vehicles being used to good effect in today’s conflicts.

Further, I am troubled by the terms of the current contract, particularly its very unattractive fee structure that gives the government little leverage to promote cost efficiency. Because the vehicle part of the FCS program is currently estimated to cost over $87 billion, I believe we must have more confidence in the program strategy, requirements, and maturity of the technologies before proceeding further.

(emphasis mine)

This translates to, “They are not worth much in a counter-insurgency scenario, and once again the Lead System Integrator (LSI) model of procurement has given us an overpriced piece of crap.”

*Full disclosure, I worked on the Future Recovery and Maintenance Vehicle, FRMV, “wrecker” variant of the FCS-MGV† from 2003-2006 at United Defense (later BAE Systems after the Carlyle Group sold me to buy Dunkin Donuts).
†Future Combat Systems-Manned Ground Vehicle. These are the ones that are the tanks and APCs. As opposed to the various unnmanned vehicles, networking technologies, etc. that form the full FCS along with the MGVs.‡
‡Yes, I have worked everywhere. Maybe I can’t hold down a job, but more likely this has been my role as “technical hit man”, where you are parachuted in to take care of a specific need.

Orwell Alive and Well in the Obama Whitehouse

No Comments

One of the things that concerns me the most is Obama’s comfort in continuing to support Bush’s assault on basic procedural civil rights because they serve to reinforce the power of what is now his office.

Case in point, the Pentagon’s “privilege review team”, which is now considering charges against a victim of the torture protocols created by the Bush Administration.

What they posted was a cover sheet naming the case, and quoting unclassified portions of a UK court ruling saying that it was up to the US to release it, followed by a version redacted by said privilege review team”, which blacked out everything but the title of their report, which is clearly stamped “unclassified”:

The privilege team argue that by releasing the redacted memo Reprieve has breached the rules that govern Guantánamo lawyers and have made a complaint to the court of “unprofessional conduct”.

Stafford Smith described their actions as intimidation, saying the complaint “doesn’t even specify the rule supposedly breached”.

So, according to someone at the Pentagon, by sending an unclassified document to the president of the United States of America, they are in violation of regulations, and could face as much as 6 months in jail.

Scary Quote of the Day

No Comments

Courtesy of The Big Picture“

In fact, let’s learn from history. The only times we have ever seen the stock market surge close to this much in such a short time frame were:

  • December 1929
  • June 1931
  • August 1932
  • May 1933
  • July 1938
  • September 1982

Only in September 1982 and in May 1933 was the equity market embarking on a new bull phase.

Oh Belgium!

Dead Cat Bounce.