"History is a wonderful thing, if only it was true"

Friday, August 31, 2007

Head's keep rollin


"MCGRAW-HILL replaced S&P's president amid mounting criticism of the company's financial-information unit for its role in the subprime-mortgage crisis. Kathleen Corbet will be succeeded by Deven Sharma."

Wednesday, August 29, 2007

But But But ....

We're not Vegans, not even Vegetarians, but we do try to be modest in our animal protein intake.

But SUV's are such an easy target compared to steaks and burgers, or oil companies vs farmers.

Trying to Connect the Dinner Plate to Climate Change - NY Times:

"Ever since “An Inconvenient Truth,” Al Gore has been the darling of environmentalists, but that movie hardly endeared him to the animal rights folks. According to them, the most inconvenient truth of all is that raising animals for meat contributes more to global warming than all the sport utility vehicles combined."

Matt Ball, executive director of Vegan Outreach:

“Al Gore calls global warming an existential risk to humanity, yet it hasn’t prompted him to change his diet or even mention vegetarianism,” he complained. “And I guess the environmentalists recognize that it’s a lot easier to ask people to put in a fluorescent light bulb than to learn to cook with tofu.”

Tuesday, August 28, 2007


With some haze, the hills get some definition
Our hill is in the middle, the second back

Checking the logs, this is the 1,000th posting

What does it mean - just another number ...

Probably means that there are about 100 worthwhile posts

Not exactly my cup of tea

It's fine to set goals, work towards them, but lists?

Note that I keep lists of short term "things to do"

Ten Things to Do Before This Article Is Finished - NY Times:

"Once the province of bird-watchers, mountain climbers and sufferers of obsessive-compulsive disorder, the life list has become widely popular with the harried masses, equal parts motivational self-help and escapist fantasy."

It's all about looks

Or, don't try to confuse me with facts...

About Honda vs Toyota

Prius Envy: Honda to Introduce New Hybrid - Newsweek :
"Peter Kessner, a devout environmentalist, bought a Honda Civic hybrid four years ago to show everyone that he wants to save the planet. The only problem: no one noticed, since, other than the hybrid badge on the trunk, it looked like a regular Civic. So he traded it in for a Toyota Prius. Suddenly, strangers began stopping him on the street to ask about his hybrid, with its space-age styling and miserly mileage. 'That's a big part of why I bought the Prius,' says the Floral Park, N.Y., retiree. 'It opens up conversations, and I push my theory that we've got to do our best to conserve.' The Honda, on the other hand, didn't deliver what Kessner craved: green street cred. 'If I'm driving a hybrid,' he says, 'I want people to know it.'"

BP ... Belching Pollution?

Remember, BP, which touts "Beyond Petroleum" in it's ads is the company responsible for leaks in the Alaska Pipeline, major fire which killed over a dozen workers at a refinery ...

Chicago gagged at hearing on BP :: CHICAGO SUN-TIMES :: Metro & Tri-State:
"Asked about excluding the Chicago representatives, Pelath said that while 'we're all countrymen, we all live under the same flag . . . this is an Indiana hearing.' The City of Chicago has suggested technical methods its experts say would reduce pollution from the plant expansion.
Environmentalists were not altogether encouraged by testimony by a BP official who indicated that most of the suggestions wouldn't work."

Anti BP Editorial: Boycott BP

"At this point, the only clear message BP is sending is that it wants to have its cake and eat it too. BP executives want their company to be known as the greenest -- as suggested by its logo, meant to resemble a sunflower and show its commitment to the environment. But they also want to dump in our lakes. They can't have it both ways."

Green Investing

ETFs for Clean Energy Fans:

"ETFs for Clean Energy Fans A new crop of exchange-traded funds gives exposure to alternative energy companies in a straightforward, cost-effective way"

Starting a position in PBW - "Clean Energy"

Who't hand is in your wallet?

Sadly, it's likely that the politicians will hand out money to any and all. There will be plenty of scams.
Katrina all over again.

In Washington, Aid to Homeowners Debated - NY Times:
"From a political perspective, the wave would be crashing during the primary and general election campaigns next year. But the Bush administration and Congressional Democrats are ideologically divided about what Washington should do. Administration officials are reluctant to bail out people who bought homes they could not afford or simply gambled that easy credit and rising real estate prices would lead to quick profits. Democrats, though opposed to a broad bailout, are proposing an array of measures to help lower-income people renegotiate their loans and stay in their homes.
“You cannot simply decree that there will be no foreclosures,” Representative Barney Frank, Democrat of Massachusetts and chairman of the House Financial Services Committee, said. “You can’t just give people a free ride.”
Mr. Frank and other Democrats are pushing for changes that they hope will free more money for lower-income families and shift the balance of power between borrowers and lenders."

Monday, August 27, 2007

Road Trip

Doc Searls : Day one and done

I'm jealous (see his blog for photo)
Road Trip

Takes me back to many (many!) miles
Some 4 wheels, many on 2
Some solo, some two up.

Spaces between here and the Rockies, open and you can see damn near forever, esp. further North, Dakota's and Saskatchewan. Up there you can see weather hundreds of miles away.

Sunday, August 26, 2007

Bid em up Bruce on the Markets

Bruce Wasserstein: "Expect Lots More Embarrassment":

"Master dealmaker Bruce Wasserstein provides some much needed perspective on the current turmoil "

"Are we through the worst of it?
Many assets still are not yet fully marked to market. That's because for some of these securities, there is no market. We would expect lots more embarrassment in unforeseen places, where some people tried to spike their returns with this paper without regard to risk.

What consequences do you envision as losses are taken?
In the financial institutions market, you will see consolidation. There are firms that don't have a strong core business that basically got their profits during the bull market by being principal risk takers in debt. Those days are over. There will be a lot of pain and a lot of finger-pointing, but I don't think the financial system has suffered a fundamental wounding.

Is the meltdown threatening the economy?
If you look at the big industries, this has nothing to do with health care or food. It's got nothing to do, for the most part, with utilities, or energy, or resources, or technology. The stock market has drifted down, but it's still at a reasonably strong level because the world economy is reasonably strong. Obviously there is a storm, but this is not Katrina."

Blown Bubbles

Despite all the hype, Real Estate is NOT a sure bet.
One reason I've never been interested in RE other than what we use and enjoy.

Drop Foreseen in Median Price of U.S. Homes - NY Times:

"The median price of American homes is expected to fall this year for the first time since federal housing agencies began keeping statistics in 1950."

And Greenspan may have kept rates too low for too long:

Housing prices have previously declined for long stretches in various regions. Most recently, prices fell in California and in the Northeast during the recession of the early 1990s.

The current slump is different from that one, though, in both depth and breadth. In fact, the national median price rose only slightly faster than inflation from 1950 to the mid-1990s.

But as interest rates fell and lending standards became looser, prices started rising rapidly in the late 1990s, even in places like Chicago, which had rarely seen a real estate boom. The result was a “euphoric popular delusion” that real estate was a can’t-miss investment, said Edward W. Gjertsen II, president of the Financial Planners Association of Illinois. “That’s just human nature.”

2nd Life gets more "real"

Game | Life - Wired Blogs:
"Second Life Bank Run Imminent?"

Another market for CountryWide?

More here:

Technology Review: Money Trouble in Second Life:

"Money Trouble in Second Life A series of upsets could spell trouble for Second Life's virtual economy."

and here

A credit crunch in cyberspace | Trouble in paradise | Economist.com:

"The banking crisis finds an echo in Second Life"

Virtual Economies: Regulating Second Life - Valleywag


When Virtual Crises Turn Real - Technology - CFO.com:
"Real-world regulators may be largely ignoring virtual worlds because it is unclear what there is to regulate. Do virtual currencies, islands, and buildings have real value? Although they are in demand within Second Life, Zdanowski explains that such assets really just function as intellectual property. As of this month, 9,541 islands have been bought, according to Second Life's Website; users who spend about $1,675 (the green ones) to purchase one are actually just renting space on Linden Lab servers. What they do on those islands is up to them, but Linden Lab has certain advantages that agencies such as the SEC do not when fighting fraud. 'The threat is there, the danger is there,' says Zdanowski, who serves as CFO, central banker, and, in effect, chief regulator. 'The reality is that unlike the real world, in Second Life it just so happens that we know everything that happens.'"

Remember, in "2nd Life" you can't run out of Real Estate, they can, and do , always make more of it.

Just fire up another server, and with Moore's Law, it gets cheaper (For Linden Labs) all the time.


True Believer

sorta crappy image, pulled from my cellphone

I've also spotted similar from Arkansas

Oh yeah ... this is where we live, on the shores of Glen Lake


Digging into the practices of the country's largest mortgage generator.

Inside the Countrywide Lending Spree - NYTimes:

Not pretty.

I can't manage to trust someone with a perma-tan and white collars

"ON its way to becoming the nation’s largest mortgage lender, the Countrywide Financial Corporation encouraged its sales force to court customers over the telephone with a seductive pitch that seldom varied. “I want to be sure you are getting the best loan possible,” the sales representatives would say.

Lucas Jackson/Reuters

Angelo R. Mozilo, chief executive of the Countrywide Financial Corporation, remains undaunted as the mortgage market has cooled.

But providing “the best loan possible” to customers wasn’t always the bank’s main goal, say some former employees. Instead, potential borrowers were often led to high-cost and sometimes unfavorable loans that resulted in richer commissions for Countrywide’s smooth-talking sales force, outsize fees to company affiliates providing services on the loans, and a roaring stock price that made Countrywide executives among the highest paid in America.

Countrywide’s entire operation, from its computer system to its incentive pay structure and financing arrangements, is intended to wring maximum profits out of the mortgage lending boom no matter what it costs borrowers, according to interviews with former employees and brokers who worked in different units of the company and internal documents they provided. One document, for instance, shows that until last September the computer system in the company’s subprime unit excluded borrowers’ cash reserves, which had the effect of steering them away from lower-cost loans to those that were more expensive to homeowners and more profitable to Countrywide."

Read the whole thing - sleeze ...
And let the buyer beware

Tempest in a Teacup

Quarter-Degree Fix Fuels Climate Fight - NYTimes

Minor differences in data set right wing commentators into orbit over global warming.

Bottom line is that data collection is flawed and neither side has a solid case.

Saturday, August 25, 2007

Street Sages

Worth reading
Series of quick quotes from knowledgeable sources
Such as

Crisis Counsel - Warren Buffett (1) - FORTUNE
"Many institutions that publicly report precise market values for their holdings of CDOs and CMOs are in truth reporting fiction. They are marking to model rather than marking to market. The recent meltdown in much of the debt market, moreover, has transformed this process into marking to myth."

It's ain't over till it's over

And the beat goes on.
Personally, I can't wait till all of those annoying ads go away.
Ditech, Capital One, Quicken ...

Hey kids, there ain't no free lunch
Well, unless you're a politician I guess

As Woes Grow, Mortgage Ads Keep Up Pitch - NYTimes:

"Wall Street may have soured on the mortgage business. But on television, radio and the Internet, the industry is as ebullient as ever.

For example, Quicken Loans, no longer affiliated with the makers of Quicken software but the nation’s 25th-biggest lender, continues to run its signature spot on radio stations. “This is a rate alert,” the advertisement starts off, sounding much like a newscast. “Slower economic growth has caused the Fed to keep interest rates flat, and the market has responded with some of the lowest mortgage rates in years.”

As more homeowners fall behind on mortgage payments and investors abandon the industry in droves, mortgage companies are facing greater scrutiny over their lending practices and disclosures to borrowers."

Online too Looney Dunes: What's in who's wallet

Friday, August 24, 2007


Washington Wire - WSJ.com : The Challenges Facing Obama and Clinton:

"Zbigniew Brzezinski, a national-security adviser to President Carter, threw his support behind Barack Obama’s presidential campaign. In an interview airing this weekend on Bloomberg Television’s “Political Capital With Al Hunt,” Brzezinski said, “Obama is clearly more effective and has the upper hand. He has a sense of what is historically relevant and what is needed from the United States in relationship to the world.” Brzezinski, 79 years old, dismissed the notion that New York Sen. Hillary Clinton as more seasoned than Obama, 46, saying “being former first lady doesn’t prepare you to be president.” Obama “recognizes that the challenge is a new face, a new sense of direction, a new definition of America’s role in the world,'’ Brzezinski said."

Ahead of the Curve

Did a little back checking to see what I might have posted before.
While I don't post much on the markets in this blog, at least unless the markets get "interesting" ... I did post the following back on Feb 15 '06

Won't claim to be prescient on the current troubles, but the thread is there.

Posted to BusinessWeek

Looney Dunes: Bada Bing - I agree on the concept:

"Markets are NOT rational, but emotional. Patterns change, players change (both the players themselves and what they pay attention to). Anybody remember M1? M2? This is why trading was fun, as well as, mostly profitable while I was doing it. Now I’m just a long term investor. I always viewed the markets as a large experiment in mass psychology. Trade on the basis of how you expected the market to react to news. I have argued that “Rocket Science” does not work on the street. Engineering models are “brittle” and prone to failure when exogenous variables are introduced. They work for a while, but eventually fail."

PS to the Quant Quake

Looney Dunes: Sorta Sums it up

Gullibility is the flip side of Omnipotence

Pretty much covers my attitude towards "Rocket Science" on the Street

Sounds like home to me

Piece on portable work - or work from damn near anywhere

Off to Resorts, and Carrying Their Careers - New York Times

Thursday, August 23, 2007

Real Estate Bailout ?

Bill Gross on Mortgage Meltdown
He calls for massive bailout... OK, but don't re-ignite the speculation, get back to reality and require reasonable standards.

Personal responsibly means just that ... you are responsible for your obligations.

PIMCO Bonds - Investment Outlook- September 2007 "Where’s Waldo?":

"During times of market turmoil it helps to simplify and get basic – explain things to a public and even yourself in terms of what can be easily understood. Goodness knows it’s not a piece of cake for anyone over 40 these days to understand the maze of financial structures that now appear to be unwinding. They were created by youthful financial engineers trained to exploit cheap money and leverage who showed no fear and who have, until the last few weeks, never known the sting of the market’s lash. They are wizards of complexity. I, however, having just turned 63, am a professor of simplicity. "

More on Hybrid vs. Straight IC power

Note that some changes are easy, aerodynamics, rolling resistance.
Will consumers respond?
Will consumers even check tire pressures?

German Regulator Roils Auto-Emissions Debate - WSJ.com: "Mr. Friedrich, 60 years old, is a veteran of clashes between Germany's environmentalists and car makers. A year after joining the Federal Environmental Agency in 1980, he so irritated car makers by championing lead-free gasoline that they lobbied the government to shift him to a job dealing with asylum seekers. His employment contract protected him from such a move.

Germany's environmental agency is the biggest in Europe, and its extensive research capability has extended its influence beyond the continent. When California regulators wanted guidance years ago on how to slash soot particles from commercial diesel engines, they consulted Mr. Friedrich. "He's been a constant source of advice and knowledge," says Alan Lloyd, former chairman of California's Air Resources Board.

Last year, Mr. Friedrich's agency completed a study of an idea that has long fascinated car makers: using hydrogen to propel vehicles, either by turning it into liquid engine fuel or by combining it with oxygen in tiny electromechanical devices known as fuel cells. The fuel cells generate electricity, causing vehicles to emit only water vapor.

Mr. Friedrich used to be a fan of fuel cells. He wrote a paper about the principle when he was a university student. But a research project by his agency two decades ago made him a skeptic and turned him in the direction of tweaking the design of cars powered by traditional engines.

The problem, he says, is that pure hydrogen is rare. The gas has to be isolated, compressed, transported and stored -- which requires lots of energy from other sources, such as fossil fuels. The result, Mr. Friedrich contends, is that shifting to hydrogen fuel cells would wind up reducing net CO2 emissions by less than if auto makers simply redesigned cars so that they use gasoline and diesel more efficiently.

In a study completed last year, Mr. Friedrich's agency found that hydrogen fuel cells would be an effective way for Germany to cut fossil-fuel use only if the country had an enormous amount of solar power on tap to make the hydrogen. Building such solar-power capacity, he argues, would take decades.

"Fuel cells are just a gimmick to avoid regulation," Mr. Friedrich says, arguing that the auto industry is promising high-tech answers over the long term to reduce pressure to improve fuel efficiency now."

Sooo, to take a practical approach :

"Mr. Friedrich advocates using some of the money currently allocated to revolutionary ideas like fuel cells on improving conventional vehicles. To bolster his case, he hired engineers at the Institute for Automotive Engineering at RWTH University in Aachen, Germany, the alma mater of Porsche's Mr. Wiedeking and other German auto executives. He directed them to experiment on a gasoline-fueled VW Golf.

The engineers' goal was to reduce weight and wind drag without compromising safety or performance. They replaced the side mirrors, an aerodynamic hindrance, with tiny cameras that show on a dashboard screen what's happening behind the car. They changed to more efficient gear ratios, and added a weight-saving carbon engine hood, a stop-start engine mechanism, and speedometer lights that tell the driver the most efficient time to shift gear.

So far, the team has cut the test vehicle's CO2 emissions from 172 grams per kilometer -- the average for German cars sold in 2006 -- to 131 grams. The engineers aim to eventually reduce the Golf's emissions to 120 grams, the EU's tentative target for new cars sold in the region by 2012."

Now, will consumers go for such moves?

No mention was made of other techniques that can be applied to the IC power itself.
Such as variable valve timing, variable displacement, direct injection.

Wednesday, August 22, 2007

Tuesday, August 21, 2007

What's in who's wallet

While mortgage brokers woes are the news on CNBC, such as these headlines from the WSJournal:
Capital One to Close GreenPoint Mortgage Unit

Ads continue to run touting easy loans ...
The one above is ... GreenPoint

Online too: Media Biz Countrywide’s Internet ad spending spree �

Sunday, August 19, 2007

Bubble Bubble ... toil & trouble

"The Unforgivingness of Forgetfulness"


But what could be a more solid investment — literally and figuratively — than real estate? It was the perfect antidote to dot-com stocks. As a result, the popping of one bubble may have helped lay the groundwork for another.

Besides, home ownership has long been seen as a worthy goal in its own right. “Owning a home lies at the heart of the American dream,” President Bush has said. “It serves as the foundation of many Americans’ financial security.”

Lenders created an array of mortgages to get people into homes for the first time with modest initial payments. With interest rates so low, there seemed little reason for people to hold back.

House prices had been rising since pretty much forever, people were told, and they were rising faster now. The median house price more than doubled from 1993 to 2005, in nominal terms, while incomes rose just 49 percent. Only some of the increase in home prices could be attributed to falling interest rates and population growth.

Real estate became an easy ticket to a nationwide party where people seemed to be making life-changing money, spending their downtime watching real estate show like “Flip This House,” surfing Web sites like condoflip.com and reading books like “Are You Missing the Real Estate Boom?” by David Lereah, chief economist for the National Association of Realtors.

And the real estate boom was a far more inclusive party than the tech-stock bubble. People then needed to have the money to buy the stocks that, with luck, would rocket to the moon, or work at a hot company that was doling out stock options to employees.

Everyone else could only press their noses to glass, watching with envy.

But with real estate, homeowners needed to do little more than think about the soaring value of an asset they already owned. People who had been renting, meanwhile, could easily take the monthly check they had been sending to their landlord and turn it into a mortgage payment. A down payment wasn’t always necessary.

Flaws in fractional banking

Credit - Mortgages - Frauds and Swindling : New York Times:

 "America’s reliance on dubious credit goes all the way back to the country’s founding."

Brief exposition on history of bank notes in America

Sorta Sums it up

Sorry - link goes to pay per view Times piece...

Markets Quake, and a ‘Neutral’ Strategy Slips - New York Times:

"“We have to atone to our clients, but we have no right to whine for ourselves,” said Clifford Asness, the co-founder of AQR Capital Management, a money management firm that has been much in the news recently. “When we succeed, we make a boatload of money, we get imitators, and our risk increases. That’s how capitalism works.”"

Saturday, August 18, 2007

Threat of Global Warming!

These cats are "hot" ...

Los Gatos Official Web Site

Evening concert, Glen Arbor, second year that they performed, I'd swear the ambient temp moved up a few degrees (cool anyway so that's good)
Hot Afro-Cuban from a bunch of white guys and an Indian (India) cookin with percussion, vibes, base and 'letric piano.

Audience likely lost a few pounds as many were bopin and moving to the multi-layered and polyphonic beat.


Thurs afternoon meeting, most promising but no PR yet
Then run home, pick up Shirley and run to Northport for Gallery Walk (good stuff, mayby post later), cruise down east side and grab a burger at new little joint, sittin outside and spot

ISS: ground track
I was sitting looking north - spotted this bright object, and even with naked eye (well, with my glasses) saw extension out of the side ... shuttle

Then last night, another round of gallery openings - again some good stuff, bit of wine and cheese with friends, then off to "Dear Camp" (our cottage)

While not really too far off the beaten path, I do feel "comfortable" taking a piss off the back porch... save the septic system

Sooo... doing so, and we have a moonless night, not a cloud in the sky and, I look up (porch is facing roughly north) ... ISS passes

Images are from http://heavens-above.com

Friday, August 17, 2007

Thursday, August 16, 2007

Who pulled the plug?

Upper Lakes lower, Lower Lakes higher
Seems obvious that the plug got pulled...

Water Levels in 3 Great Lakes Dip Far Below Normal - New York Times

Although the drop in levels in all three lakes is variously ascribed to climate change or new rainfall patterns, evidence is growing that people caused some losses in Lakes Huron and Michigan.

Gravel mining early in the 20th century by private companies and dredging by the Army Corps of Engineers, particularly in the mid-1960s, may have widened and deepened the St. Clair River, through which those two lakes drain into Lake Erie.

The flow may be eroding the riverbed. The erosion may in turn result in increased outflow, more than can be replenished by rain or snowmelt, according to a study by a group of Canadian coastal engineers.

Back to Basics

Subtitle: Get Real

Remembering a Classic Investing Theory - New York Times:

"More than 70 years ago, two Columbia professors named Benjamin Graham and David L. Dodd came up with a simple investing idea that remains more influential than perhaps any other. In the wake of the stock market crash in 1929, they urged investors to focus on hard facts — like a company’s past earnings and the value of its assets — rather than trying to guess what the future would bring. A company with strong profits and a relatively low stock price was probably undervalued, they said."

Wednesday, August 15, 2007

Rocket Science ... doesn't work, cont.

Floyd Norris of NYTimes passing along comments on Goldman Sachs "explination" of what's wrong

The Quants Explain Disaster - Business - TimesSelect - New York Times:
" A hedge fund manager sent me a copy of a report from Goldman Sachs entitled “The Quant Liquidity Crunch.” What follows are Goldman’s conclusion, and his dissection of that conclusion. (The manager prefers not to have his name used here. The people he mentions, if anyone needs to be told, are Warren Buffett and Charles Munger of Berkshire Hathaway.)"

His commentary, with Goldman quotes in italics, follows. (Please note I have edited the manager a bit. He did not really use the word “baloney.”)

a) “we do not believe that current prices reflect fundamental values” — based on what? The very models that failed you last week?

b) “No one, however, could possibly have forecast the extent of deleveraging or the magnitude of last week’s factor returns.” Baloney. Buffett and Munger have been warning about the dangers of excessive leverage combined with crowded trades for quite some time.

c) “what the market experienced in recent days has been completely unprecedented” More baloney. 100-year storms happen every few years in financial markets. Always have, always will (though every storm’s a little bit different — maybe that’s what they mean). The only completely unprecedented thing was the LACK of any 100-year storms for the past few years.

d) “Going forward, we believe that successful quant managers will have to rely more on unique factors.” Given that you don’t seem to have come up with any, why should anyone believe that you will now? And given that every quant manager on the planet is trying to do the same thing, what makes you think that everyone else won’t come up with the same “more unique factors”?

e) “to protect our investors, we will need to make more of an effort to make sure that our proprietary factors remain proprietary” Yeah, that’s the problem: other quant managers stealing your highly proprietary factors of buying stocks with momentum or companies trading at low multiples of cash flow.

f) “In the coming weeks, we will continue to analyze this extraordinary period. We will also re-evaluate and re-prioritize our research agenda in light of recent events. Stay tuned. As we continue to study these events, we hope to gain additional insights that will help us avoid similar problems in the future.” Translation: we don’t know what happened to us or what we’re going to do about it, but we really, really, really don’t want to admit that the fundamental premise of our business is fatally flawed and shut down, so we’ll come up with something.

g) “we remain confident that stocks with better valuations, higher profitability, better earnings quality, shareholder-friendly management, strong momentum and improving analyst sentiment will outperform” I think they just about covered every single investing cliche here…

h) “our process should continue to add value under normal market conditions” Finally, in the last sentence, they perhaps inadvertently reveal the truth: their success depends on NORMAL MARKET CONDITIONS! In other words, what they do works 99% of the time, but the other 1% of the time they blow up — especially since they insist on using a ton of leverage because their brilliant models tell them that what happened last week was a 28-standard deviation event. Hint: IT WASN’T!

Tuesday, August 14, 2007

Hybrids on hold

Yet another caution (see prior post on Toyota delaying Li-ion hybrids).

There are still issues with the problem of "rapid return to neutral state" (aka discharge/heat)

"catastrophic normalization ?"

46 Million Nokia Cell Batteries Defective - New York Times:

"According to a statement by Nokia, short circuits generated by the defective batteries have so far led to 100 incidents of overheating, but none have resulted in serious injury or property damage. Nokia decided on a voluntary replacement program rather than an outright recall because it determined the danger was slight and not imminent, a spokesman said. Mr. Simonson stressed that incidents of overheating tended to occur only when batteries were excessively recharged. “Excessive recharging” means more than 300 recharges, said Arja Suominen, a Nokia spokeswoman."

Some chuckles

Whoever the author is, he/she seems to be insightful

Magazine Death Pool

Sunday, August 12, 2007

Rocket Science ... doesn't work

A Week When Risk Came Home to Roost - NY Times

Unfortunately the Times has made this a "pay per view" piece.

In short, computer models aka "black boxes" work great, until they don't

Once the exogenous variable comes on the scene, it is likely that the model will fail, catastrophically.

Extensive quote ... with some deletions for brevity:

Using what are known as market-neutral strategies designed by computer models, hedge fund traders have been blindsided by a correlation between bonds and stocks that they never expected would occur.

Portfolios of this stripe are often known as quantitative funds; some of their most common trades are called statistical arbitrage. These bets are suggested by brilliant mathematicians and academics, using computer models to scour the markets for interesting trading patterns that continue for long periods.


Seeing that such bets typically generated profits over long periods left traders believing that their stakes were conservative.

The only trouble is, financial markets do not always trade in a way that is typical or predictable. And when they deviate from the norm, all the wonderful and smart trades stop behaving according to plan.

ANALYSTS call it model misbehavior.


Compounding the problem, of course, is the borrowed money these funds use to enhance their performance. When things start to unravel, leverage aggravates an already painful fall.

Mr. Rothman also pointed out that so many fund managers had the same trades on their books that when they went to cash out of them, the ill effects were exaggerated.

The losses that investors are suffering this month, he wrote, are comparable only to those in the 1960s and during the bursting of the Internet bubble. “This appears to be an event with little precedent,” he wrote.

None of this would be a problem, of course, if fund managers were not relying so heavily on just that — precedent — to make their decisions. Computer models seem so perfect, so scientific, so flawless, and they are advertised to investors in precisely that fashion. Ingenious models lull investors into a dangerous complacency about the risks they are taking. It is almost as if the models eliminate risk entirely from the markets.

But risk is never gone, as investors are recognizing with a jolt. And that is so even if Wall Street assigns conservative-sounding labels to portfolio strategies that are, in fact, aggressive.

“They have their standard deviations, correlations, ‘stable value’ and ‘real return’ funds and nothing for what the normal human being would call risk at all,” said Frederick E. Rowe Jr., a money manager at Greenbrier Partners in Dallas. “They’ve taken the word ‘risk’ and hijacked it. The concept of risk — the permanent loss of capital — vanished in the minds of the people who speak the new language.”

Risk, and all that it should connote to investors, is back in the language now. Unfortunately, it has brought an awful lot of losses with it. "

From the Horse's mouth

Real Estate Woes: What the Experts Think Should Be Done - - CNBC.com:

"The housing downturn, subprime mortgage loan meltdown, lender bankruptcies and general credit crunch have focused attention on real estate. CNBC asked experts from across the industry to weigh in on the problems -- and what actions they think should be taken."

"Donald Trump, chairman and president of The Trump Organization, believes that Federal Reserve Chairman Ben Bernanke must cut interest rates, "or they'll kill the golden goose, real estate."

"[The Fed] should call a special meeting and not wait until September."

Trump told CNBC's Mark Haines that Fannie Mae and Freddie Mac should be permitted to increase their loan capacity: "They have to expand, or you're going to have people out on the streets."

I'm willing to bet that "The Donald" leveraged up the wazoo and hurting.
Won't be the first time.

And, without the Real Estate mania, who'll want to listen to him?

I would be more in agreement with Mort:

"Mort Zuckerman, chairman of Boston Properties, told CNBC's Erin Burnett that the residential and financial markets are in "poor shape" -- and the situation has been exacerbated by so-called "ninja loans," issued to borrowers with "no income, no jobs and no assets."

But Zuckerman does not believe the global economy will suffer a recession, thanks to "pressure points" in the system, such as infusions of liquidity by entities like the U.S. Federal Reserve and ECB.

He said expanding the portfolios of Fannie Mae and Freddie Mac is "a very bad idea," essentially rewarding borrowers who took big risks with very low equity. And in the end, the real estate decline may be a good thing, Zuckerman said: "These bubbles are going to collapse, people are going to lose money -- and the next time, they'll be more cautious."

Now go home

M22online.com - M22 Clothing & Accessories - Northern Michigan

"...the first T-shirt was designed. With an image of Point Betsie Lighthouse on the front and the words "Welcome to Northern Michigan...” and the M22 logo on back with the joking statement "Now Go Home," locals begged for the shirts everywhere they were worn."

OK, so rumored sightings this summer:
Tom Hanks & George Clooney at a big wedding last weekend (It WAS a big wedding, we cruised it with "Chip's Ahoy")
Harrison Ford - biking by
Always hear about Bruce Willis (word that he and Demi have had son/daughter at Interlochen)

The only one I can vouch for is Sydney Pollac at one of our favorite local restaurants...about 10 yrs ago.

Ah well, there goes the neighborhood

Saturday, August 11, 2007


Compounding of Spam and Spandex

While I'll accept Lance Armstrong in the Tour de France, after all, it's commercial, what's with the folks on the road in full logo-wear?

This came to me after talk by local Conservation officer at the Lake Assc. Annual Meeting.

He described a kayaker (at another lake) as being in full spandex "fully fudged up"
Tourist around here are sometimes called "Fudgies" after local sweet treat.

Furthermore, the officer described how this guy was so excited, how that lake was so pristine, should be "no motors", an undiscovered gem... then got on his cellphone to tell everybody he knew.

There goes another little piece of paradise

Friday, August 10, 2007


Good chuckle

Jeff Jonas: Social Engineering of Hotel Maids – Win Some, Lose Some

Reminded me of :
Decade or two ago I get off flight, Detroit.
Need to find the head pretty bad, and catch the first one, suitbag and briefcase... don't pay attention to the signage

Notice the bench, no standup's but grab a stall.

Then hear the click of high heels...

Did manage to slip out

Truth or Dare

Hedge Funds run in an opaque market, and it seems to me that spells of market turmoil about match the "service life" of a typical market trader ... maybe 10 yrs.
Therefore there is a lack of memory.

And maybe it's been long enough that some don't know that they can get spanked

"The SEC is checking the books at Wall Street firms, including Goldman, Bear Stearns and Merrill, to make sure they aren't hiding subprime-mortgage losses"

"Unlike investors who hold large stakes in publicly traded American stocks, and must report those holdings to the Securities and Exchange Commission, no central government agency or private organization tracks who may be holding subprime or other mortgage-related securities in any detail. (The United States Treasury does track broad foreign country holdings of American mortgage securities.)

“I don’t think any of the regulators have a handle on where the net exposure of subprime is,” said Christopher Whalen, managing director of Institutional Risk Analytics, which builds risk systems for regulators and auditors.

Mr. Whalen said the situation was worse in Europe, where even less public data was available.

Furthermore, because of accounting rules, some holders of these mortgage-backed securities do not have to own up to or recognize any losses until they actually sell them.

But these days, trying to value certain subprime securities or the more complicated collateralized debt obligations, or C.D.O.’s, which are pools of mortgage securities, is difficult as well."

Wednesday, August 08, 2007


But bottom line, I rarely look at baseball

Son of Pinto?

I've posted doubts about hybrid's before
Now Toyota stumbles

Toyota Delays Next Hybrids on Safety Concerns - WSJ.com: "Toyota Motor Corp., which used the green image of its gasoline-electric Toyota Prius to propel a U.S. sales surge, has decided to delay by one to two years the launches of new high-mileage hybrids with lithium-ion battery technology due to potential safety problems. The slowdown could offer General Motors Corp. and other rivals a chance to narrow the gap in the race to define future clean-vehicle technology.

Until recently, Toyota was preparing to roll out a dozen new and redesigned hybrids using new lithium-ion battery technology in the U.S. between 2008 and 2010. Its hybrids now use nickel-metal-hydride batteries. But safety concerns with the lithium-ion technology have forced Toyota to back away from that timetable, people familiar with the company's strategy say."

"The batteries Toyota is trying to develop use particles of lithium cobalt oxide. But such batteries have shown a tendency to overheat, catch fire or even explode. Tomomi Imai, a Toyota spokesman in Tokyo, declined to comment. But, according to Toyota executives, similar problems with lithium-ion batteries for laptops made by Japan's Sony Corp. sounded an alarm because the chemistry of the Sony batteries was similar to batteries Toyota was trying to use for future hybrids."

hedge - Definitions from Dictionary.com (more)

Further thought about those imploding "hedge funds"

Maybe the "hedges" were in the fine print in the prospectus.

"to protect with qualifications that allow for unstated contingencies or for withdrawal from commitment: He hedged his program against attack and then presented it to the board."

Tuesday, August 07, 2007

Is Capitalism genetic?

Review - A Farewell to Alms - Industrial Revolution - Human Population - New York Times:
"For thousands of years, most people on earth lived in abject poverty, first as hunters and gatherers, then as peasants or laborers. But with the Industrial Revolution, some societies traded this ancient poverty for amazing affluence.

Historians and economists have long struggled to understand how this transition occurred and why it took place only in some countries. A scholar who has spent the last 20 years scanning medieval English archives has now emerged with startling answers for both questions."


If the Industrial Revolution was caused by changes in people’s behavior, then populations that have not had time to adapt to the Malthusian constraints of agrarian economies will not be able to achieve the same production efficiencies, his thesis implies.

Dr. Clark says the middle-class values needed for productivity could have been transmitted either culturally or genetically. But in some passages, he seems to lean toward evolution as the explanation. “Through the long agrarian passage leading up to the Industrial Revolution, man was becoming biologically more adapted to the modern economic world,” he writes. And, “The triumph of capitalism in the modern world thus may lie as much in our genes as in ideology or rationality.”

Suggest clicking the link for whole story.
Interesting points to ponder.

Monday, August 06, 2007


A Top Official at Bear Stearns Ousted - New York Times

"...Bear, like many other firms on Wall Street, jumped into the market for bonds that backed subprime, or high risk, mortgages, offering a slew of racy fund products, one of which hit the market last August, just before the markets began to recoil from subprime assets. Mr. Spector, who was responsible for these areas, took the blame.

While other firms might have had as much or even more exposure, Bear had the misfortune of having two funds implode, prompting investors in the funds and the firm’s stock, to question its competence in this area."

What's wrong with this whole picture?
These "hedge funds" weren't ... they were glorified cash management funds, offing a bit more yield.

hedge - Definitions from Dictionary.com:

To mitigate a possible loss by counterbalancing (one's bets, investments, etc.).

To prevent complete loss of a bet by betting an additional amount or amounts against the original bet.

Finance. to enter transactions that will protect against loss through a compensatory price movement.

Note : counterbalancing, loss protection.

Sunday, August 05, 2007

Sleeper cars!

Amtrak Offers Free Booze on Rail Trips - washingtonpost.com

"WASHINGTON -- Amtrak is trying to gin up new business by offering $100 in free alcohol to customers on some overnight trains.

The national passenger rail company is making the unusual offer to promote a new high-end service being offered on a trial basis for certain sleeper car trips."

Friday, August 03, 2007

Act your age

Doc Searls Weblog � The future, cont'd

"Not sure I’ll use the same old picture of myself, though. I haven’t looked like that in a long time. (Though I might if I started wearing glasses again and shaved back everything but the mustache. There’s still a decade of wear & tear between that picture and reality.)"

I was going to post a reply, but decided to blog it
Reaction (we both just turned "60" this summer): you're only as old as you think you are, or maybe as old as you act?

The last idea seems to work best, considering that, as you age, you (should) increase your repertoire of behavior, therefor
you have a broader range of "ages" you can act.

Sorta compensates for some of the aches and pains.

Thursday, August 02, 2007

What's up Doc?

Doc turns 60 (welcome to the club)
Moves to Beantown and gets a new blog:

Doc Searls Weblog

And he say's he's gettin old
Yeah Right ...

Wednesday, August 01, 2007

Doh ... time to reprice Risk

Frankly not surprised
This has been building for some time.
Just another fallout from the real estate bubble / bust.

Jittery Stock Market Drops as Mortgage Fallout Spreads - New York Times:
"With little respite on the horizon, the mortgage market was hit with another wave of bad news yesterday, sending the stock market down sharply."

But I don't see it spreading to the rest of the market other than taking out some of the fluff.

Corp balance sheets still healthy, Global economy good.