A heartbeat away from the Presidency

What's all this about Joe Biden being a heartbeat away from the Oval Office. Sarah Palin is a heartbeat away. Joe Biden is a gunshot away. Barack Obama's a young and healthy man. He ain't having no heart attack.

To drive a point home

I may have stated this in brief earlier, but let me come back to this. Leading up to the passage of the Paulson bill there's been all this uproar over executive pay, and measures were added to the bill to curtail executive pay in companies getting help from the government. So people have been in an uproar over your Chuck Princes and Stan O'Neals. But they've been getting paid chump change compared to the heros of 2006, hedge fund managers like John Paulson, Steven Cohen, Jim Simons, David Shaw, people who bring home a billion or so in a good year. Or private equity heros like Steven Schwartzman and Henry Kravis. These people haul coin.

So once the shakeout of existing hedge funds gets done -- and lots of trained mid-level hedge fund people are sitting around, all the truly ambitious prop traders and bankers will cut loose and form new hedge funds. The only thing that might stop them is if institutional investors get cold feet from getting burned (horrible mixed metaphor -- I like) in the most recent generation of alternative investments.

In any case, unless the SEC or some other more robust regulator steps up and institutes more rigorous regulation, a new order of unencumbered but well-capitalized hedge funds will emerge. Not that that's all bad, but it's an unintended consequence at best.

A draw?

I'm sorry, but all the commentary about the veep debate out there that claims it was a draw just doesn't jibe with the half an hour I saw, where Palin tripped all over herself and sounded like an idiot and Biden sounded like a well-informed wonk and a politician. Hmmm, which is more suited for the job?

Check out time

Running to check out of Europamperdom after a very positive meeting yesterday. 11 hour flight back to New York, not even supported by the blessed cover of night.

Yesterday strolled around the nabe here and saw much wierdness, including derelict old houses and lots amidst densely packed high-end housing, 6 story buildings going in with 8 foot setbacks next to single family homes, primitive construction methods, immense piles of clippings piled up on disintegrating sidewalks, and a 2500 square foot supermarket which was BY FAR the largest food store I had seen in town. Everyone must drive to Hypermarkets on the freeways and/or old school bazaars somewhere. Hence the maddening traffic everywhere.

Real estate markets in the United States may be messed up, but they are largely transparent and comprehensible.

From the cloisters

So last night the Best Western Zinon. When I arrived that part of the city was consumed by something like a Sunday market, and it was pretty intense, thronged with people from different parts of the world. I got a room up on the 8th floor with a big balcony but no furniture on it, and across the way there was an old dude who had a bed set up out on his covered porch area, sitting on the side of the bed reading, partially obscured by his laundry hanging there. It was pretty good living, though this morning I saw his son and realized the al fresco sleeping may have been motivated by space constraints too.

After the crowds died back, the neighborhood was pretty cool, with a variety of restaurants and bars (including Kurdish, though they were out of everything good). Sick of grilled meat and tourist menus, I had Chinese, then I watched Inter play Milan through the window of a bar with 6 seats. There were cheap, old school internet cafes everywhere, where people from Africa and the Middle East were busy keeping in touch with home.

By now I have been transported to the five star Hotel Pentelikon in the leafy (but still chaotic) suburb of Kifasia, where I prepare for tomorrow's meeting while trying to ignore the chaos in the markets and the freakish escalation of histrionics from various representatives of the enraged masses, eager for the head of Henry Paulson and anyone else who would take their hard-earned dollars. I.e. the blogosphere and message boards which I shouldn't read, but which are nonetheless so interesting as a window into the abyss of the long-pampered American soul.

Athens, day 1

Most importantly, I got some sleep on the plane with some pharmacological help, which is a new one for me. That's how I've been able to survive the day.

Took the bus in from the airport and had a good look at how it unrolls. It's surprising to think that Athens and Greece have been populated continuously for millenia, because so very little looks like it's been planned. It has all just happened.

Once in my hotel I discovered that it is indeed in a touristy area but also that, in Greece, it's either touristy and cute or it ain't neither. At least from what I've seen thus far. What's touristy has reason to be. The Acropolis is an intensely commanding space. I hadn't picture it as being such a fortress, way up there on the fortifications. It's easy to imagine why they thought in terms of gods living up on the hills around here.

But the hotel, despite their having told me it was quiet when I called from the States, concerned that the hostel atmosphere might be a bit much, is anything but quiet. They have a big flat panel TV in the courtyard onto which my room faces playing music videos (songs from Grease, no pun intended) for the amusement of American 2osomethings (why aren't they in college). Amstel is sold from the drink machine in the courtyard, and there's a liquor store across the way, so the kids sit in there and drink and smoke. I am quickly being cured of nostalgia for the days of my youth. Tomorrow I move to the Best Western and get a AAA discount. And the early bird special, for good measure.

An allegory

Lets imagine that a water utility, as a cost-saving measure, shortened a water-filtering cycle and started pumping out water that was harmful to downstream users. At the same time, homebuilders and homeowners decided to build more cheaply and leave a filter out of household plumbing. People start getting sick. An uproar ensues.

What should be done? Is culpability the big question here? Government should move right in and assure that people have clean water, by assuming the expense of doing so and figuring out a way to get paid back. It's not a moral question, but a practical one.

People have been getting really worked up about the moral side of the current crisis. The investment banks are easy to point fingers at, because they're opaque and mysterious, but at the end of the day people are mad at them because they earn a bunch of money.

There's a fair amount of anti-Semitism mixed in here too, especially when you start talking about Goldman Sachs. How many messageboard references have I seen to "throwing out the moneylenders from the temple."

Anybody to took out an aggressive loan or did a cash-out refi and got in over their heads was playing the same game as the investment bankers. And/or maxed out credit card debt and snatched up an F150.

I have a 30-year fixed mortgage, and 1996 car with 175000 miles on it, and a portfolio all in registered product, hostage to ERISA. I'm getting raped in this deal, and I ain't bitching. It is what it is.

What have I done with my money through all of this? I put a roof on my house, donated to a soup kitchen, and am getting my windows painted, and I'm tired of listening to red state day traders whine about freedom and taxes.

I'm going to Greece.

When it rains pennies from heaven, it pours

This morning, for the first time, Graham wiped his own butt after taking a dump. And then he said to Mary: "Thank you for letting me ride the bus." How bout them apples.

Tomorrow I head off for Athens, Greece for a weekend of jet lag and dragging my sorry ass around a bunch of archaeological sites and purveyors of grilled lamb in preparation for a meeting on Tuesday. If all goes, well, I'll be returning to the Balkans for further reconnoitering.

For the first couple of nights (the ones on my nickel) I will be staying in this backpacker's dive and will resist the temptation to be lured back to the room of a pair Norwegian-Australian girls to smoke clove cigarettes and drink home-brewed Ouzo bought in a ditch on the south shore of Corfu.

I have sewed a Canadian flag on my bag as subterfuge.

A big day

This morning the school bus came and got Graham for the first time. He didn't freak out at all. He liked it. After school, the bus brought him home.

Also after school, Graham went to the allergist, where the doctor informed him and Mary that he was outgrowing his allergy to dairy, and faster than expected. This means we will be able to go to restaurants and travel like normal people. If we can force ourselves to spend the money, that is.

Natalie, for her part, went with Vivian to the shelter to help her pick out a cat. Two cats.

And Natalie's Iowa test scores came back, and they were better than I am prepared to admit here on the blog. She is rather clever, it would seem.

Somebody help me out here

The Housing and Economic Recovery Act of 2008, signed into law in July, which authorized the recent takeover of Fannie and Freddy, also provided for the merger of the Office of Federal Housing Enterprise Oversight (OFHEO) with the Federal Housing Finance Board (FHFB) to join a new Federal Housing Finance Authority (FHFA). The new organization will have oversight over the 14 GSEs, which is to say F & F and the twelve Federal Home Loan Banks (FHLBs).

The FHFA will be run by the former head of OFHEO, which used to supervise F & F, during the period in which they brought lots of crap onto their balance sheets and ran themselves into the ground in an effort not to cede market share to the investment banks in the exciting new frontiers of mortgage risk.

The FHFB, chartered in 1989 during the S & L party as a successor to the Federal Home Loan Bank Board, formerly oversaw the FHLBs, which have remained a crucial lifeline of liquidity to mortgage lenders throughout the crisis.

In short, the reorg of regulatory agencies gives empowers management of the agency that failed at the expense of the one that succeeded.

What's all the fuss about?

Paulson and Bernanke are of one mind that they need $700 bln NOW. Like they'll be positioned to use it once they've got it. Dodd and the rest of the Main St. advocates hem and haw and burnish their populist credentials (Christopher Dodd? Trying to cleanse himself from the perceived taint of Arthur Anderson and Enron?) while providing some reasonable due diligence.

But we know we're gonna give Hank'n'Ben something, and it won't be less than $450-500 bln. Why not $150-200 bln up front to get RTC2 up and running while the rest of the package gets hammered out?

Where's Stan O'Neal?

The connection between Obama and Franklin Gaines ex-of Fannie imputed by the McCain ad below is thinly veiled racism, an unironic riff on the sensibility parodied by this Spring's New Yorker cover: If Obama's in the White House -- we are told between the lines -- black people will stick together, and who knows what they do when we pale folk are not around. They could get.... uppity! It could be the inverse of the classic Eddy Murphy sketch from SNL where he puts on whiteface and finds out what life amidst whitey is all about: free no-doc loans, cocktail parties on public buses. So I'm waiting for a round of ads showing Obama with Stan O'Neal or Richard Parsons. But not Morgan Freeman, as that would imply divine sanction.

Main St and Wall St

Main St is having a lot of trouble coming to terms with Paulson's package, thinking that it constitutes a big giveaway to the evildoers who put us into this mess. But lets put aside the moral questions, because right now it's not a moral question, but a practical one. Main St needs to ask itself who financed its construction? More often than not street construction is funded by bond issuance, and to do that you need working capital markets.

So the question is, how can we have sufficiently responsive and innovative capital markets to motivate a bunch of really smart people to work insane work weeks year in year out, without creating a race of arrogant, entitled, overpaid and sometimes downright evil investment bankers? Therein lies the rub.

Part of it is that a class of 27-year olds needs to get back to thinking that $300,000 is a lot of money.

Natalie in NY

On Saturday and I Natalie and I headed off alone into Manhattan while Mary and Graham headed over to Sadie's birthday party theatrical performance. Natalie had declared a need to go to FAO Schwarz, which I understand all too well, having a memory from childhood of a magical visit to the store in which it had all kinds of crazy over the top shit, gokarts and what not.

For starters, it was immensely gratifying that she held my hand very intently as we walked from the Public Library, where I showed her the main reading room (which I think impressed her a little). So we headed up 5th Avenue, hand in hand, past all manner of crap including the new Prada store, and I couldn't help musing to myself about what it might look like in two years -- H & M, Barnes and Noble and TGI Fridays might be the only things left in their current forms -- but mostly I just revelled in the fact that my independent and at times defiant 8-year old really wanted to hold my hand... in front of all these people. Even if our palms were getting sweaty so we had to switch sides.

FAO Schwarz, it would seem, has morphed from being a place of great magic to being just a really good toy store. Really, a toy department store, which is to say a glorified mall. Has this been the influence of its acquisition by DE Shaw in 2004, I dunno.

But Natalie was more than adequately entranced, especially by the Harry Potter store. And she didn't even beg for anything big, accepting a small treat and the idea of inventorying for the Xmas list.

Afterwards, I took her to Central Park, including a trip to the disco rollerskating area by Sheep's Meadow, but she declared the skaters to be "weird," and it's hard to argue with that, really.

The eternal perils of translation

This is from the Serbian Chamber of Commerce:

Thorny path through transition
Tue, 22 Jul 2008 13:29:01 GMT Rasina region once was the biggest exporter of baby-beef meat, but now this sector has the share of 20 percent. It has been said at the meeting of the directors of SCC Representative Offices abroad and business people from Krusevac...

...The Director of SCC Representative Office in Moscow Sasa Gmijovic talked to business people interested to launch their products on the Russian market and exhibition that is to be held in Krasnodar. He also said that Russian market is very demanding and that friendly relations of the two countries will not contribute to selling of bad quality goods.

It's good to know there are standards in place around the world.

Cult of personality

A lot of Democrats are issuing a call for Obama to keep Paulson on as Treasury Secretary, should our candidate find a way to keep it together (like put a muzzle on Biden about the freakin Buckeyes) and win. Although there are good Democratic candidates, I also think it's a bad time to change horses, at least in that stable. Chris Cox we can waterboard.

But there is a danger of a cult of personality emerging around Paulson, just like it did around Greenspan. By now, everybody's ready to kick the dapper little positivist gremlin and blame him for everything, but that is a mistake. Greenspan was empowered by our awe and reverence, and when he told us asset-price bubbles didn't require pricking, we believed him because we really wanted to believe and had become accustomed to doing so, despite the tech stock thing.

Paulson, we must remember, is one big tough dude and he's doing as good a job as could be hoped, but he's one guy. Bernanke, as we have said, is a shrinking violet, and maybe that's restoring the Fed to its place. In any case, Paulson needs to find a lieutenant, elevate him and share the lectern with him to build up cred, so that he won't have to do every press conference and be the sole voice of wisdom.

We know for damn sure the Bush holds no weight.

Bring back Moral Hazard

Since the big general bailout basically gives all banks and borrowers a free pass to be reckless, there should be some measure to assure that people worry. The government organ, whatever it is, should refuse to buy the crappy assets of roughly (randomized) every 5th bank, but should purchase from the unlucky banks' counterparties any toxic paper they have issued (or perhaps excluding every third counterparty to keep them on their toes). As long as the selection is random -- and administered by an external CPA -- banks will need to stay on their toes.

More rumblings

When I wrote the first "rumbling in markets' tummy" post back in March, it was kind of funny. Today, when a however much liquidity was injected today was injected (it all starts to run together), the markets went up, but have come back down by lunchtime, hungering for more. I think a deal (Morgan Stanley/Somebody, Wamu/Somebody, Berkshire Hathaway picking from the carcass of AIG, Steven Schwartzman on a black horse) might sate the markets for half an hour or so. But then that gnawing hunger will return, and the markets will poke at the little red spot on Paulson's beak like baby gulls begging mama for regurgitated goodness.

The other interesting thing is that, back in March, Bernanke was still a player, but now it's the Hank show all the time. Was Bernanke cast aside as too bookish? Perhaps he's holed up in the bunker with Cheney alternately playing poker and conferring with the Trilateral Commission, the Council on Foreign Relations, and the Elders of Zion.

Birthday!

Today was Graham's fifth birthday, and both kids have been bouncing off walls since 7am. Cupcakes. Presents. Party to follow over the weekend. Textbook. What's striking is how stoked Natalie is.

The buzzards of Bentonville

Might this be the moment when Walmart could be allowed entry into banking as such? Bank lobbyists have fought it because they fear the big retailer, but now they're kind of hurting.

Like the Chinese Treasury, they have money. I'm no balance sheet wizard, so I can't really assess Walmart's financial condition, and I'm no M & A person, so I don't know synergies, but they could probably swoop in and snap up WaMu. Just getting the licenses and the franchise would be good, no? They could unwind the real estate portfolio over time and fall back to an in-store model.

Rumors are flying

Apparently Sarah Palin has flown to Washington work with her lobbyists towards some "earmarks" to purchase Lehman Brothers for the town of Wasilla, along with the proceeds of a bond issuance to be underwritten by the crack Lehman team. We will post further updates as they become available. She was quoted as saying: "The East Coast elite doesn't think towns like Wasilla really merit an investment bank of their own, but we're shaking up their whole way of thinking. We've really come together as community on this one."

Hope things eternal

In the course of a day's work, stopped by the OFHEO website and saw that they have a house price calculator. Took it for a test drive. Input quarter of purchase and state and quarter of valuation, and it told me that since 2Q '03 my house has appreciated 49%.

Well, we haven't done badly here in Princeton, but that's hyper-optimistic, a legacy of the boo-ya days. You would think the organization charged with overseeing the terrible twins Fannie and Freddy might be more careful. Perhaps the calculator was coproduced with the NAR.

Two ways in which it doesn't feel like a recession

1. Supermarkets have not cut back on giving samples
2. Cable operators do not appear to need to source ad revenue from local advertisers. I.e. national accounts are holding up, even with all those channels

Both of these are -- anecdotally at least -- dramatically different from the last recession.

Joe Biden's hair

If the upcoming vice-presidential debates were conducted on the basis of hair, Sarah Palin would surely win. What's up with Biden's do? It can only be termed a patrician mullet. I've seen this hair on the heads of Wall St eminence grises before. What it means is: "I'm old, rich, and powerful and I can wear whatever hairstyle I like." Much like not matching shirts and ties, the wearer is above fashion. If Biden really wanted to play up his man of the people credentials, he would have to commit to a much more drastic, purer mullet. Personally I think he should get a short haircut like a normal person. Otherwise people throughout this great land of ours will keep looking at him and thinking subconsciously: where is this guy from?

A few questions and observations

Was just watching C-Span dedication of Pentagon Memorial to 9/11.

1. Turns out, 9/11 is "Patriot Day." Who knew?
2. Why doesn't W join in when the national anthem is being sung? Does he not know the words? Strikes me that not singing along is at least as bad as not having a flag pin on your lapel.
3. Most importantly, how could having the Chief Chaplain of the armed services lead the whole fucking cabinet and war apparatus of the United States in prayer with heads bowed -- how does that not violate the separation of church and state?

It astonishes and astounds me at times that I live in the same country as those people. It is surely not the country in which I was raised.

Big boy

Graham went in for a blood test today for his milk allergy. Mary had been rather apprehensive about taking him there, thinking that he would have a big fit, as he has in the past, and on this occasion I didn't think she was exaggerating anything. I didn't want to take him, I'll tell you that. I'm sure you see where this is headed: it went just fine. He got his blood taken quite bravely.

The biggest risk point was perhaps afterwards, at the house, when Natalie saw that he had gotten a Tofutti Cutie for a snack, whereas she had gotten squat... aside from the trip to the library and quick book check out yesterday -- without and concealed from Graham -- that we took when we were getting Mary's surprise birthday treat. That might as well be ancient history. In any case, the moment of snack jealousy passed, and peace reigns within our household. For the moment. Stay tuned...

A strange form of lust

Saw this fine old Mercedes sports car at my garage when I was out snagging chicken khatti rolls for Mary's birthday lunch today. We had just decided that I wouldn't drive out to the sushi place because there's no way to mentally justify driving 8 miles to get food when the whole point of living where we do is you can walk. And here I am vaguely lusting after an old car.

I not rarely have this internal conflict, knowing that I'm basically post-car but nonetheless getting fired up about something smooth and elegant with four wheels. It says a couple of things about me, I know. First off, I'm getting old, if this kind of car gets me worked up. It's like a Mr. frickin Magoo car. Secondly, that despite my atheist "East Coast elite" ways, I'm downright pious at times.

More on American Funds

Since I see that I am receiving visits from a server named [host020.lao.capgroup.com (The Capital Group Inc)] in Newport Beach, CA (A hearty Grouse welcome to you!), let me note that my 401k contribution was processed this month on the 8th, the 5th business day of the month, despite having been deducted from payroll on the last business day of the previous month.

Now, markets moved in my favor this month, and NAVs (unit prices) declined, so my money bought more units, but generally that seems like an unconscionably long lag. I'm not sure how 401k Service Level Agreements are typically written, but from project work I've done T+3 (clear and settle by three days after a transaction) is a generally accepted target for exchange-traded securities when they are purchased through a broker-dealer and settled and cleared by outside agencies . Our case should be a direct payroll transfer to a 401k administrator which is captive to the fund manager. There should be fewer handoffs, so T+3 should be plenty of time to get my money where it belongs, instead of sitting out there somewhere in a money-market account accruing.

Perhaps our friends out in Newport Beach would care to comment.

The Mouse that Roared, the Sequel

The clever amongst you will recall the classic Peter Sellers film The Mouse that Roared, wherein our hero plays multiple roles in the saga of the Duchy of Grand Fenwyck, a small principality whose livelihood is imperiled by the post-war import of Australian wine, and therefore decides to attack America in the hopes of losing, so as to secure Marshall Plan like financing from our magnanimous land. So it sends an army in chainmail on its one ship to New York, only to land while everyone is underground while a scientist is dealing with some problems with his master nuclear bomb. They take the bomb and the professor and his very pretty blonde daughter back to Grand Fenwyck, and hilarious hijinks ensue.

Our new version would feature a bank that sets out to fail, in order to assure a rescue by the Fed. This time the Peter Sellers characters -- played by Alan Cummings -- would contrive to engineer a portfolio so contrarian and bad it would have to fail... but the market turns and great riches befall them.

OK, so it's hard to spin this plot out into more than an SNL skit. Unless, unless, we could use Woody Allen to enlist Scarlet Johansen in the role of the very pretty blonde daughter, such that hilarious hijinks could ensue.

Cmon back, yall

Analyzing my recent traffic statistics, I can't help to think that I must have alienated my core audience with my endless ramblings on Wall Street this and election that. So here's a picture, admittedly a couple of years old, so close to home that you just have to love it. Leslie and Graham having a good old time at the crisib.

Something in the water

I had been thinking that mutual funds should be having a day in the sun, simply by virtue of the fact that there haven't been any big blow-ups (until Bill Miller of Legg Mason hoovered up all those Freddie Mac shares), and I had thought it should Vanguard and Pimco soaking up the most rays. And indeed Pimco has been growing its assets and also aggressively seeking to hire hundreds of choice investment bankers getting pink slips. Perhaps the water has special nutrients, as it seems to encourage not just investment acumen but luxurious facial hair in a curious formation.

Here's Pimco's superstar portfolio manager Bill Gross



And there's also Paul McCulley, on CNBC this morning doing the talking head thing.



The question, obviously, is whether Wall Streeters who find their way to Pimco's Newport Beach digs will have to cultivate moustachioes of similar lushness. Only time will tell.

Four words about Georgia

For all of Dick Cheney's expostulations on our role in Georgia, let me say four words: "Monroe Doctrine, Roosevelt Corollary." If we have historically considered ourselves justified in laying down the law on what goes on in our backyard, we have to understand that Russia wants to do the same. The idea that putting Georgia in NATO will enhance anybody's security (save for job security at DOD, Bechtel and Lockheed-Martin) is -- we now see -- foolhardy. WTO, yes, EU, conceivably, NATO, no.

Angels of invigoration

The Times ran another cover photo of John and his cohort of younger women on stage in Colorado. I think it's rather atypical to run around with your wife and VP on stage at the same time, though I have a limited empirical base. I think bringing them out on stage is meant to demonstrate McCain's virility and youth: "look at all these young honeys I'm hangin with!"

But we certainly wouldn't want this to eclipse McCain's main qualification for the presidency: that he was a POW in Vietnam and was tortured. Don't forget that, anybody.

Executive experience? He doesn't even have experience managing household finances. His wife and he have separate accounts.

Charley's Angels, the presidential campaign

I can't find a good still, but I swear that John McCain up there on stage with his youngish blonde wife Cindy and his even younger brunette veep pick Sarah Palin just takes me back to the days of Charley and his gals. But who is Palin in this scenario: Jacqueline Smith or Kate Jackson (i.e. the brainy one)? Time will tell, though she does not project stupidity, even if she appears to make hasty and ill-considered judgments (no longer in the family? Hell, get him off the state payroll).

Another day, another schwarma

Not much report from my desk today. Powerpoint and schwarma with both white sauce and hot sauce. A phone call to a once and present nemesis. A market bottom? Once more did not get the haircut I should have.

Heat. To be followed by wind and rain.

Sarah Palin

What is it with Sarah Palin's scowl and intonation? She sounds like something out of one of those dreams on Twin Peaks with dancing dwarves.

So she's a pit bull in lipstick? Well, hell, that qualifies her to be Vice President for sure.

She had a fifth baby at the age of 43-44. Hmm. Lets check the odds: "At 40, your chance of carrying a child with Down syndrome is one in 82; at 45 it's one in 30. " And lo and behold she had a Down syndrome baby. Now I'm sure he'll be a fine person and will bring the family together, but he's going to have limited fun during his time on this planet. Did she do him a service by conceiving him? Might they not have considered a little basic birth control?

She's a skilled orator, but a demagogue par excellence. Does she have anything to say about the biggest problem facing the country now, i.e. the credit implosion? I don't think so, but then again I can't stay up to watch.

But one thing must be said in her favor. She receives applause well. When Obama was greeted at the Democratic Convention, he said "Thank you" and variants thereupon over and over and over again, in this tone of voice that said that it was he who was in fact Destiny's Child. He acted as if by trying to still the applause he was being modest, but it came off that he wanted to act upon the crowd and bestill it. I don't want to be too negative, but it wasn't his best moment.

For Palin it in many ways was. She came onto the stage, everybody cheered for a long time, and she nodded appreciatively, said thank you a few times, but graciously let them cheer to their hearts content.

All told, I think that she is excellent fodder for a heartwarming Julia Roberts role in a future biopic.

Bouncing balls and confidence

Graham has recently taken to bouncing a soccer ball excitedly, even commanding me to do it "hand to hand," i.e. dribbling one-handed. I cannot tell you how much glee this fills me with. Mastery of balls is everything for guys. It is the form and emblem of confidence.

Women just don't get it, so much of the time. They decry sports as a waste of time, but they don't get that, through several thousand reps of different muscle movement combinations, learning to control balls with hands, head, feet, racket, what have you, is all about decision-making, trust, learning to accept and react to uncertainty, all in the blinkling of an eye. Muscular memory becomes magic, as the case of one Earvin Johnson will attest, but equally Zidane.

And then you add crowds to the picture, the added pressure of people watching you while all this magic is taking place, and you see why sports are such great preparation for life. How what really great athletes bring to the table is supreme composure and comfort (though surely there are plenty of flakes like Allen Iverson to blow that theory).

That's why nerds without ball sense -- Bill Gates springs to mind immediately -- have to work at times so hard to project confidence. The world's richest man and he's defensive and passive-aggressive on camera. He should have been out back working on his handle.

Products we need

Public libraries should put RFID or other signal tags in books (esp children's books) and then sell little devices to help patrons find books. For instance, James Marshall's Speedboat, which lurks in some dark corner of our chaos-ridden home.

Revulsion

Watching the Republican National Convention and just saw the video about Medal of Honor winner Michael Monsour, and all I can say is that it sickens me, this continuing glorification and aggrandisement of war, these dudes now rising Rambo-like from water in silhouette, now crouching with hi-tech weapons pointed at whatever's out there, these chants of "U-S-A," all this macho bullshit. Michael Monsour was undoubtedly selfless and brave, and McCain and his fellow POWs were tough, but lets not make a fucking pep rally out of it, and lets not act as if it's about freedom. It's about war, it's about oil, and it's about penises.

Who was watching, watchmen?

I remember working on a project for a private mortgage insurance company in 2003 and learning the difference between conforming and non-conforming loans and how loans were underwritten and submitted to Fannie and Freddy through their respective browser-based tools (Desktop Underwriter and Loan Prospector) and processed in a matter of minutes, and I thought: if conforming loans go to the GSEs, then where's the secondary market for all this other stuff?

The graph at right, taken from a very informative OFHEO whitepaper, gives us the answer we already knew: to the various banks. Just look at how they gobbled up sweet, sweet market share.

Now, I read a lot of financial press, and in the years 2005-7 I read a lot of articles about how the traditional 30-year fixed was faltering and everybody was taking out ARMs and no-income no asset and negative amortization and other exotics, thereby making ill-advised interest rate bets and somehow it didn't all add up. How could it work, the journallistic world asked? How could the whole world refi at just the right moment to get out of this pickle?

The question I didn't hear asked is: who's buying all this debt? Where are the secondary markets? Post-Refco there was a lot of catastrophic talk of counterparty risk and the crazy notional numbers of the CDS market, and some talk of CDOs and securitization this that and the other, but there was very little focus on the fact that mortgages of any sort had become a huge chunk of the banks' balance sheets. And I doubt it's because there weren't better journalists much better informed than I was, but instead because they bought in to the way the numbers were being crunched.

So where were the irreverent and inquisitive journalists and bloggers? Why so little skepticism and investigative vigor? Was everybody drinking the same quant kool-aid, is there a general deficiency in financial reporting, or are banks just that opaque?

Experience comparison

On Larry King this evening a Republican shill is claiming that Sarah Palin has more experience than Barack Obama by virtue of her time as governor of Alaska. It's worth noting that the population of Obama's State senatorial district in Illinois is bigger than the population of Alaska.

Sarah Palin as VP is an embarassment to the United States, a good reason to move abroad.

For the record -- the Keating 5 rides again

Here's what Wikipedia says about John McCain's dealings with Charles Keating in the Lincoln Savings and Loan scandal back in the 80s. It would seem from his continued tenure in the Senate and his general popularity that one of the tortures inflicted on him in Vietnam was liberal application of Teflon.

McCain and Keating had become personal friends following their initial contacts in 1981.^[8] Between 1982 and 1987, McCain had received $112,000 in political contributions from Keating and his associates.^[14] In addition, McCain's wife Cindy McCain and her father Jim Hensley had invested $359,100 in a Keating shopping center in April 1986, a year before McCain met with the regulators. McCain, his family, and their baby-sitter had made nine trips at Keating's expense, sometimes aboard Keating's jet. Three of the trips were made during vacations to Keating's opulent Bahamas retreat at Cat Cay. McCain did not pay Keating (in the amount of $13,433) for some of the trips until years after they were taken, when he learned that Keating was in trouble over Lincoln.^[6][15]

Return to City Island, Horn of Plenty

The elephantine amongst you will recall my first sojourn to City Island and my solemn promise to come back with funds and appetite. Today was the day. Armed and determined to wrap my lips around fried clams, I suited up in spandex and headed out along the Boston Post Road, through New Rochelle and Pelham, past the oddly placed New York Athletic Club, and on to the island.

After checking out a couple of menus, I settled at Sammy's Shrimp Box, conveniently placed across the street from Sammy's Fish Box, Sammy's Take-Out and Tropical Bar, and Sammy's something else. While waiting for my meal I was plied with goods which indicated that noone around here had heard of skyrocketing food prices. Just look at that picture. A loaf of bread with a hunk of cheese knifed into it. Cornbread. Olives. Crudities, along with pickled cauliflower, peppers, carrots, and so on. A salad (who cares). When all was said and done, I ate about 1/5th of what they brought me, and was sad I was on a bike and could not haul the rest away.

After lunch I checked out Orchard Beach, built in the sixties in classic Robert Moses fashion by hauling in 1.2 million cubic yards of sand from New Jersey and Long Island. It is now a little derelict, at least on a Friday. Big-assed accordion MTA buses came and went through the big bus staging areas with 0-2 passengers each. A parking lot a good 200 meters across was 1/10th full if that. The big pavillion area was all scaffolded up, and there was lots of standing water.

There was lots of handball and racketball being played, though, by guys who looked as if they might actually be in the employ of one of those Italian groups they like to make movies about.

And there were lots of cops aplenty, well equipped with guns and flashlights and everything. And three SUVs of them hauled off to talk to one guy with long hair and a bike at the end of the beach. Suspiciously close to where a rather hot-looking woman was bathing topless.

And there was a nature walk down at the end which looked rather nice, though -- from the way Hispanic men plunged at high speed into the woods on their mountain bikes without looking around them -- I couldn't help but think that, like the Rambles in Central Park or the area of Riverside Park along the river and above the basketball courts at 105th street, that this was an area where consenting males both consent and act. So maybe we won't bring the kids.

All in all I must say that the overall impression of Orchard Beach can be summed up in two words: "wasting asset." It's a pretty nice facility, and it could be nicer even if the city managed it wisely. Like promote it. I've been coming to the nabe for almost 15 years and it's not even on the radar screen here.

Sneezing

I sneezed a couple of times on the train this morning, and as one expects, the guy across from me said "God bless you" or some variant. It occurred to me that it's very odd that sneezing is the only thing you can do where you absolutely expect any random bystanders to respond to. And they do.

Apparently the traditional reponses in European languages derive from an ancient belief that one's soul is leaving one's body during a sneeze, or somesuch, which is all good and well. But that doesn't really explain why people respond to sneezes so reflexively in the 21st century. It's so automatic that it's utterly emblematic of culture, the things people do because they do them.

Jackhammers on the Street

Damned hard to concentrate with all that racket. And then all the jabbering consultants in the room on top of it. It's enough to make a man break Harold and Maude upside himself, if it weren't for the free coffee and ice too!

Post-Soviet Medal count

Before the Olympics fade too far from view lets pause to take note of something pretty phenomenal. Between all the hullabaloo about how the Chinese count medals and how the US does the same, the nations of the Former Soviet Union collectively kick ass. Looking back at the medal count retrospectively (see below), it's clear that they never really went away, even in the deepest depths of the Yeltsin years.

Ukraine wins 23 medals consistently. Belarus snaps up 15 or so every games.

It's pretty striking. It seems like too many years for the Soviet sporting infrastructure to have held together in an environment of rapidly declining public health and mortality and a minimal culture public participation in sports due to shitty and scarce venues, but there they are, a bunch of medals. Is the state still throwing money at it? Belarus doesn't have hardly any money. Go figure.

2008 Total medals (of 958)
China 100
USA 110
Former Soviet Union 173

2004 Total Medals (of 929)
China 63
USA 102
Former Soviet Union 162

2000 Total Medals
China 59
USA 91
FSU 136

1996 Total Medals (of 842)
China 50
USA 101
FSU 122

Summer's come and gone

At 8 this morning David and I hit the courts at the high school, which were swarmed around by young female athletes: soccer, field hockey, and -- most damningly -- tennis players, the last carrying those bags which hold five rackets or something. I knew it was just a matter of time, and sure enough, a young coach type came out and gave us the kiss of death.

So we hopped on our bikes and rode across town to the university courts. Same story. The women's team occupying one set of courts, the men the other. And there was traffic coming back across campus.

It's over.

Sabre-rattling towards election day

The markets are scratching their heads at the US's recently penned agreement to stick some missile interceptors on Polish soil. This after we send Condee to Georgia for photo ops with Saakashvili and W acted all tough admonishing Putin and the one he calls "Mr. Med-viyedev" (he's gotten closer over the months) for their aggression. Election run-up for a war hero, anyone? Take our minds off the economy? Bush has such a gracious gift for foreign policy adventurism and dramatics, does he not?

No but seriously, why do we want missile interceptors in Poland? Do we really think Putin's Russia poses a serious threat to Western Europe? He may want to recreate Russia and the Soviet Union's glory days within its traditional bounds, but I don't think he's expansionist or aggressive towards anyone who doesn't own a Russian oil company or pipeline.

Putin is loving the attention. Paul Farrell had a piece on Marketwatch last week where he talked about how much Americans secretly love war. Well, the Russians make no secret about it. There are huge war memorials that people revere, and they have a national holiday commemorating victory in WWII, and so on. Afghanistan and Chechnya have dimmed the luster only a touch. War doesn't threaten the Russians, that's when they think they're living life properly.

There is an observed truth that two countries with McDonalds restaurants in them have never fought a war. Lets see how that goes.

All this talk of blood and iron

Some of my rather expansive core readership may have noticed my pathetic attempts in recent weeks to provide pithy market and credit-related commentary, which is, of course, all by way of pandering to Felix Salmon and his Market Movers blog, since he's the only person in the world who feeds me any real traffic. His blog is good, by the way, well worthy of your eyeballs.

But, let me return a second to real life. Graham has, if I haven't said so, had a good summer in the water. Not that he's swimming yet, but at least he's considering it. Not that he will let me wash his hair or put it in the water, but he will let me cut it and he will on occasion let me fill a Zinn/Design-Build hat with water and dump it right on its head. This is progress.

In recent weeks, he has let Mary and me carry him around in the big kids pool at Community Park, even to the deepest 4 3/4 foot deep part, and has recently started basically floating, hanging on to me very little, and kicking. It's as if -- shockingly -- he actually wants to swim, this child who last summer didn't even want to go in the water at all. It makes all of us very happy.

Santa Clawback

As the credit crisis drags on and on and grinds all manner of people worldwide ever downwards and threats of more and bigger bailouts loom on the horizon, direction forward is not clear. Whatever $800 billion the Housing bill may have raised the Federal debt ceiling for dear old Fannie and Freddy, the source of that cash is not quite evident given that tax coffers aren't expected to rise anytime soon and -- hey -- we may just find a third war to get involved in.

The banks don't have the money, that's the problem. The government can just crank up the printing presses, but we know where that leads. The one group we know does have some money is the very rich. CapGemini's 2007 World Wealth survey pegged the total assets of the wealthy at $40.7 trillion dollars. Admittedly, a lot of that's in the same emerging markets who already bought our T-Bills and gave us the liquidity to splurge on granite countertops and temperature-controlled cupholders, but a lot of it is here.

Given that much of the money that has accrued to the top 1% of the population and the top .01% of the population has come there way in the last few years and the last decade, to forestall dramatic changes in the US income tax code, it would behoove the executive and major investor class to just give some of the money they've pulled out of mortgages, structured products and back-dated options back to the government. Wrap it up in a bow and hand it to Paulson and Bernanke. Someone around the Street should take up this cause now, be it a Felix Rohatyn or a Steven Rattner or a Bob Rubin or even Larry and Sergei, somebody with some weight. It can't be done through a Gates Foundation or an Open Society Institute, these dollars need to come home to mama M3, and it's getting close to dinner time.

Feast for the small

Away from all the hoopla about the disturbingly oversized facial features of Michael Phelps (evidence of untraceable human growth hormone use, I've heard suggested) these Olympics remain a great platform for small countries to get visibility and grow heros. The Rumanian women's marathoner, the Panamanian long jumper, the Tunisian 1500 meter swimmer, the Ukrainian gold-silver combo in the Heptathlon, rowing medallists from Belarus, Estonia and what have you. It sort of enhances the world's balance of power to see athletes from less-well-heeled machines grimming atop the podium. It would be nice if NBC found the time to interview a few of them.

Hong Un Jong of North Korea took gold in the woman's vault and -- as a reward -- is reported to have had her family's annual food allocation raised an additional five kilos of meat and also ten kilos of flour and sugar for bringing glory to the Fatherland. She humbly offered thanks and praise Dear Leader Kim Jong-Il for his magnanimity and wisdom.

A surprise

Until I saw this recent article in the New Yorker, I had no idea Tavis Smiley was such a big deal in the black community. I always thought of him as the reductive and annoying host of a show on NPR that always made me put in a CD.

But I must give him credit for being critical and demanding of Obama. That takes some guts. I will make a concerted effort to listen to his show, if it happens to be on when I'm in the car.

Works of purest genius

My hat goes off to the brain surgeons who figured out they could send out free return address stickers to solicit contributions to various charities... just in time for email and online bill payment and presentment to basically make individually addressed snail mail a thing of the past. Why didn't they think of that back in the 80s when it would have been useful?

The beat goes on

I was surprised to hear that CDO salespeople are not just being fired but hired, but I did hear that today. Which I guess is good.

To granny's house

This morning I took Natalie to Newark Liberty Freedom and Justice for All Airport and put her on a plane to go down to the old north state to see Granny. She was pretty nervous but trying to act tough like it didn't bother her, but just I was about to let her walk away down the jetway she turned and put her face in my shirt and cried for a minute or so. Then she turned and walked off like it hadn't happened.

She is a big girl. And yet a little one too.

The flight departed on time and arrived early, and to hear her tell the tale she was fine once she crossed the hurdle.

Not what we need

Lebron James had a fine block against Angola today. But the post-block preening and posturing and glowering is not what the US needs right now with the rest of the world a little pissed off at us.

A stone left unturned

They say there are no new ideas out there, but apparently nobody's thought of this one: do a rocking, distortion-heavy cover of the Joni Mitchell song below. Skip Joni talking about Tolkien, fast forward two minutes to get to the song beginning, and tell me that riff doesn't beg for some Marshall Stacks and a pounding back beat. Just gotta figure out the vocal treatment, and I've got a hit on my hands.

Rumblings on the street

I am told that a loan trader at one investment bank is all in cash and has his wife running around opening savings accounts at various banks so that his money will be covered by FDIC insurance. Needless to say, this negativity is not reflected on his firm's website. If he's so apocalyptic what makes him think the FDIC will be adequate able to save him. One would think he would be comforted by the agency's recent action, as reported in the New York Times

At the end of July, the Federal Deposit Insurance Corporation proposed a new rule that would require troubled banks under its regulatory wing to produce, on the agency’s demand, detailed records of swaps and other financial contracts, their current market values, collateral posted by counterparties, the identities of those parties and copies of the agreements.

Golly, that's a fine idea. Why didn't I think of it? Should be helpful.

Onward to Tbilisi

Putin's (yes it's still his) Russia rolled into Georgia in a move providentially timed to coincide with the opening of the Olympics in Beijing, whence the sound of fireworks drowned out that of any minor Caucasian gunplay. President Bush was, as we see at left, concerned with more pressing matters of state.

President Bush did get around to commenting on the situation in Georgia later in the day Saturday: "The United States is working with our European partners to launch international mediation, and with the parties to restart their dialogue. Russia needs to support these efforts so that peace can be restored as quickly as possible." I'll bet Putin finds that very convincing. I'm sure he's looking for meaningful dialogue, just like he always is.

But seriously, this is a tough call. Georgian President Saakashvili is our boy, child of Soros even, and his heart is in the right place for sure. But he's a hothead. Most importantly, Georgia is smack dab in the middle of Russia's historical sphere of influence, and with oil still at $120 heading into hurricane season and American troops overextended elsewhere nobody's in a position to get tough with Putin. He's going to do whatever the hell he wants to and tell Medvedev to tell us he did it. That's the dialogue we can expect.

It all hangs together

Peter Bernstein -- whom I esteem highly, by the way -- had a column in the Times business section this last Sunday in which he noodles on the way various forces have aligned to mess with the US consumer: food, gas, housing. He sees coincidence at work: "At least the moves in oil and food share a common explanation, but what in the world to they have to do with the end of the boom in housing?"

Hmmm. Let me think. Would the answer be "China" (and other emerging economies), by any chance? Lets see, the world gets richer, needs more food and gas. Land is taken out of food production to grow a proxy for gas. Lets go back a step. How was the world getting richer? China and others were making stuff, selling it to us through WalMart and other big boxes. We stopped making stuff. Emerging markets developed large surpluses but lacked investment acumen, and so bought T-bills, holding interest rates, including mortgage rates down, pumping up house prices. That's all pretty linear.

A side step. After the dotcom bust recession of 2001, investors got risk averse and started hunting for yield in places like mortgage-backed securities. But inflows from emerging market treasuries held yield down. How to get it? Go for more risk. Securitize any cashflow that walks.

In 2003, Fannie and Freddy got slapped in accounting scandals and were forced to put more capital aside to account for bad loans. From 2004 forward, therefore, their hands were tied and investment banks stepped in and began to fund more of the secondary mortgage market. Giddy on cheap money and full of all the hubris that quantitative finance can provide, they created "sophisticated" new products...

But back to my main point: movements in oil, food, and housing are connected, and they are connected via the emergence of a changed world economy, which we haven't quite figured out. The United States new economy started making fewer things and more ideas. This worked as long as the ideas were good. The recent generation of financial innovation has not proven to be that. We can't really go back to making things. But then again, we have a reasonable shot at figuring this whole world economy thing out, if we can survive that long.

Moving on further

Lunch today was tremendous, a Fish Tikka Naan sandwich from Indus Express on 46th Street. A phenomenal dish, sweet and spicy with peppers and onions on naan that the guy made right then. Washed down with a Limca soda in a glass bottle. That's an Indian Coca-Cola lemon-lime product with hints of ginger.

After that the day petered downhill. I'll be going back there.

Scenes from the (re) movable feast

• On Hogan Place at Centre St, in front of some imposing Gothic municipal structure, a line of gaunt older Asian people lined up, plastic bags in hand, to receive some sort of food handout being distributed by civil servants and groovers at a leisurely pace out of the back of an unmarked white van.
• At a Vietnamese place (New Pasteur Restaurant) on Baxter, the waiter convinces us to order some south Asian greens with a name like "Sum Choy." It is OK, though soft-shell crabs are somehow tastier. The lemongrass squid "rice dish" costed only 5 bucks.
• At the Klatch on Maiden Lane this morning, the blondes who act like you should be honored to be served by somehow haven't figured out that when you toast a muffin, you should cut it in half before putting it in the toaster oven. That would really put them out.

Sovereign weal

The Economist this week (or was it last, catching up on back reading coming back from vacation) has an article about the atrocious returns the Japanese general pension fund is getting on its $1.4 trillion dollars in assets (compare $1.9 trln for Barclay's, $12 trln for Fannie and Freddy together). There are movements afoot to carve off a piece of it and establish a sovereign wealth fund to diversify away from moribund Japanese treasuries, and there is resistance.

At first I think, for sure they should diversify and let better investment minds generate better returns, and then I recall: what better minds? Wall Street fucked up big time, the world around.
This best and brightest model really hasn't been panning out for some time, so where should people and institutions be putting their money? It's a tough one.

Frenetic

Should be the title of a Polanski movie, but instead describes my abrupt re-entry into civilization today:

• Take Graham to camp
• Drop off Subaru at garage for "Check Engine" light
  
• Catch up on meetings blown off while on vacation
• Discuss new assignment in vague terms
  
• Accept shipment of roofing materials for new roof to be put on tomorrow. Guy driving forklift does minor damage to hedge (Mary OK with it, praise lord)
  
• Pay annual fee on unused HELOC (if credit is scarce keep what you got)
• Look for checkbook for HELOC to use to pay roofer (just for FICO purposes). Must have thrown out. Oh well, use other account.
• Schedule Thursday meeting with securities lending guru down from beantown (tweak powerpoint overview of firm and send)
• Schedule other crap
  
• Talk to kid with Ethics degree from a Divinity School about transitioning into consulting
• Flip compost
  
• Mow yard
• Read Graham stories. Offer extra story if he'll let me cut his hair (he will!)
• Read with Natalie in her bed.
• Clean out spam folder
• Blog, dammit.
  

the bad with the good

Today Natalie treaded (trod?) water for 6 minutes. She only needs to do it for 3 to pass the swim test at the quarry Monday. Also some point to point swimming, which she seems up for. This is huge.

However, in a separate incident, she spat on me totally out of the blue, earning herself an immediate time out.

The Canandaigua Lady

To make up for the cruise to Bermuda which got deferred for health reasons in the family, we decided to take Graham and Natalie out on The Canandaigua Lady, an honest to goodness good old fashioned steam-powered paddle wheel ship, by gum. The captain was a master of the microphone, regaling us with tales of grandeur of yore (with scarce mention of the present, somewhat oddly). Generally speaking, our fellow afternoon voyagers reminded us of our affluence and ability to put into practice dietary and exercise best practices, which is to say, we were provided ample evidence of the so-called obesity epidemic.

Towards the end, Graham got tired of the breeze upstairs so we went down into the restaurant area, with its drop ceilings and thick carpet. After Graham had some water, we played with the bottle some and I looked around at nerdy bespectacled folk doing macrame and/or wearing bad sunglasses and I realized that we could have been in Russia or just about anywhere that was the provinces, and that people were just getting through life, and that we were right at home amongst them.

Out for books

Natalie read through the last of her books and I needed to do timesheets, so we've snuck out to the local internet cafe here in Canandaigua, which seems to operate a lot like the ice cream shop of yore, lots of smoothies and elephantine cookies for teens.

But first, to the used book store, which was wall to wall mysteries, sci-fi, fantasy, with the so-called "classic literature" section populated only with the sparsest volumes of Seneca and Galsworthy. But we found plenty of things for Natalie, though she preferred yet another Nancy Drew to the Three Investigators, which I suggested for her. And it took me back to beach trips when I was a kid when our whole family would spread out across the cheap paperbackeries and gird ourselves for weeks with brown paper backs of yellowing dog-eared cast offs for something like the price of a plate of fried clams.

And now she's sitting here next to me reading as I type.

Crudities

For some reason I thought back to Knocked Up recently. It seems to me that those slacker dudes sitting around the living room making sperm jokes marks a new level of crassness in movies, though I was less shocked when I saw on The Soup's review of reality shows on E that on some show they had real families competing to suck the cream out of cannolis and spit them into bowls.

Naturally, my mind flashed back to Bakhtin's 1965 book on Rabelais where he extolled the as liberating political forces of Carnival and "the lower bodily strata" and satire in the Renaissance, and to Makaveyev's shitting contest in the 1974 classic Sweet Movie. But I don't think that fart and cum jokes are as liberating when they're part of everyday, everyminute life. I think they work their magic as exceptions.

Is it just me getting old, or are there new levels of lowness? Compare Animal House, a standard-bearer for its day, now looks chaste. Is crassness cyclical? (seemed like all the college students were into ballroom dance and frickin volleyball in the 90s.)

Couldn't find the shitting contest. Here's another fine scene from Sweet Movie

pre-dusk

It's late in the day, Mary and Natalie have swum out to the dock, the one with a short and crappy ladder which is hard to climb onto. The whole family -- even Graham -- have just had spins in the kayak. We kept Graham in the creek but I went out into the lake and was hard-pressed not to paddle over to the house of grocery-store impresario Danny Wegman (who has built a magnificent barn up the hill across the street to house god knows what kind of toys), but I held myself back to save energy for tennis at dusk, having put 20-odd hilly miles on the bike before lunch. Graham and I just had a snack: bananas, chips, lemonade.

RIM job

So here I am by the lake in Canandaigua, watching big power boats blow past noisily as I wonder how the vendors of these discretionary internal combustion nuisances will earn a living after multiple years of four dollar gas -- and the answer is: I don't care. What may be interesting is how the market for junk auto parts and scrap steel could be reshaped by SUVs disappearing from the roads.

Anyhow, all of this comes to you courtesy of my little hand held device (insert pun here) from our friends at Research in Motion.

On the road again

Once more, we are transformed into Griswolds and head off into the wilds of upstate New York, to Lake Canandaigua, a region so wild the Google hasn't even bothered to acquire satellite imagery. I will post as I can from up there and have already scheduled one mid-week post, but if you don't hear from me, it's not because I don't care, it's because we're jumping in the lake and looking 10 miles down it at the mountains converging at its South end. I like.

Commitment

Microsoft CEO Steve Ballmer told Wall Street analysts today that Microsoft is "committed to the internet." Which strikes me as wise, because it seems to me that this internet thing is going to be huge.

Here's a little something from back in the day. It runs long, but it's worth watching at least through the part about the cinnamon toast.

SCTV -- Roy's Food Repair

Idling

Often when I watch cops, limo drivers, contractors, and all manner of citizens idling in their vehicles for no good purpose and spewing useless emissions into the ether, I think to myself: there really ought to be a law about this. Especially for cops.

And, thanks to the miracle of the so-called "internet", I find that already in 2006 there were a number of state and local laws on idling. Below is the statute from Princeton Township, New Jersey (there is none for Princeton Borough, where I live, nor are there any in the whole state of North Carolina). Note below that cops are not exempted. But if you bust them, they'll hassle you. What are you gonna do?

Sec. 11-31.9 Idling of gasoline fueled motor vehicles on township streets.
Pursuant to N.J.A.C. 7:27-14.3, no person may cause, suffer allow or permit the engine of a gasoline fueled motor vehicle to idle for more than three consecutive minutes on streets within the Township of Princeton if the vehicle is not in motion with the following exceptions:
(a) The above provisions shall not apply to:
(1) Autobuses while discharging or picking up passengers;
(2) Motor vehicles stopped in a line of traffic;
(3) Motor vehicles whose primary and/or secondary power source is utilized in whole or in part for necessary and definitively prescribed mechanical operation other than propulsion, passenger compartment heating or air conditions;
(4) Motor vehicles being or waiting to be examined by state or federal motor vehicle inspectors;
(5) Emergency motor vehicles in an emergency situation;
(6) Motor vehicles while being repaired;
(7) Motor vehicles while engaged in the process of connection, detachment or exchange of trailers; or
(8) Motor vehicles manufactured with a sleeper berth while being used in a nonresidentially zoned area by the vehicle’s operator for sleeping or resting.
(Ord. No. 2004-9, § 2.)

Three more days to vacation

Could not be more psyched to throw the family in the car and head up to fabulous upstate New York. Have not been anywhere for a long time. It would probably be too depressing to really think about that. And Canandaigua barely counts as anywhere, since that's part of our normal circuit too.

Pool time

It was mighty hot in New Jersey this weekend, time for some pool time. After Graham took an initial foray into the big pool at Community Park in Mary's arms last weekend, I took him back to the pool solo this one. This time, he didn't even want to start out in the baby pool, we went straight to the big pool where he twirled around in my arms, hung out on the steps (coming down to his neck) and even "jumped" from the side. And he also let me dump water on his head with a baseball cap (a huge step). Then on Sunday at Broadmead he was similarly daring, even hanging out in an inner-tube by the steps and dipping the front of his head in the water, protected by his new goggles.

This on top of the fact that he's been sleeping through the night in underwear and letting me cut his hair some now and again. Coming along, he is.

How hard does YouTube rock

Here's a chestnut from Emir Kusturica's very early "Do you remember Dolly Bell?"

The guy is singing "How hard it is for me in Sarajevo," over and over again. Imagine if that was your uncle. You'd probably want to go wrestle on stones too.

Blowing of mind

I've heard about Dubai in passing but I've never really dug into it. Then I looked through this to get a little perspective. Scroll down to the pictures and read the captions. I'm not really one for excess, and I don't feel a strong need for desert heat, but the shear scale of everything makes a certain impression. It's hard not to want to go and gaze slack-jawed at the sheer scale of everything.

Of course, if I want to go somewhere to make myself feel poor, I can just hop on a train and go to Manhattan. Or, indeed, hop on my bike and ride into Princeton's "Western Section," sprinkled with more fancy private schools than you'd think they could find rich kids to fill. But Dubai is pretty over the top. Soon we may be all commuting to there using some sort of molecular dust reconstitutor like they had back in the sixties... as in this rare historical footage from back in the year of my birth, 1966:

Safe haven

My mind keeps running back to the $3 trillion in bank deposit growth. Flight to quality indeed, if the banks are gonna throw money at any mortgage that moves.

Meanwhile, where are the mutual fund blow-ups? Except for a few hiccups with money market funds exposed to too much auction-rate garbage, mutual funds have been pretty quiet.

A quick glance at inflows (at AMGdata) shows that trust in the both mutual funds and ETFs is still pretty high: Q2 had $70 bln flowing into stock and bond mutual funds and $56bln into ETFs. That's annualized long-only inflows of half a trillion, which doesn't sound horrible, without digging into historical context.

All in all it goes to show you, you may overpay for beta with actively managed funds, but it's better than overpaying for leveraged idiocy. The corporate governance overhead associated with mutual funds may in fact work for investors.

Superclasico!

For those amongst my readers hailing from the Piedmont region and believing that the Carolina-Duke game is pretty much it as far as sports rivalries go, may I recommend that you tune in to the Fox Soccer Channel (thanks Mike and Brendan for your sponsorship) and check out the series of "Superclasico" match ups between the Buenos Aires cross-town rivals Boca Juniors and River Plate. This is cash money. These people care about their teams, and it's good soccer.

BTW: From a blimp view of the stadium spied a parking lot, couldn't have held 800 cars. Google maps confirmed that this was the only dedicated parking for the stadium, which must seat 70-80,000. Think about getting all those people out of there. They must have to stack subway trains up at stations outside the stadium. It could take hours to clear the neighborhood. It would be a good place to own a cafe, if not a bar.

Return of the scarcely repressed

"I am tired of Goldman being viewed as the Prince of the street. They are cunning and manipulative. I hope that the SEC discovers their deceptive practices and finally mars their squeaky clean image that they try to portray."

Seeing this quote from one who calls himself "Bond33" on Marketwatch today took me way, way back, back to Slavoj Zhizhek's first English book The Sublime Object of Ideology. Zhizhek talks about a perverse logic of anti-semitism. Here's the archetypal conversation:

Villager 1: "That Jew trader Jakov is so shifty and deceiptful."
Villager 2: "What? He seems so honest and trustworthy"
Villager 1: "Exactly. He fools everyone."

Now, I wouldn't say Goldman is above always above reproach in all regards, but Bond33 is striking a classically anti-semitic tone. But hey, isn't that what anonymous web publishing is all about?

Bank deposit growth

Here's a pretty astonishing statistic from our friend Felix Salmon. Bank deposits are up $3 trillion. If we assume that's primarily corporate and High Net Worth money (given the negative savings rate for the general population), it signals a substantial risk aversion over the entire period, given that they're not in equities or bonds or something even fishier.

But, oh wait, they are in something fishier. They've got uninsured deposits in institutions punch drunk on vaporous underwriting and shareware risk management. You would think all those deposits would make for "capital adequacy." Guess not.

Cognitive dissonance

Another minor celebrity sighting on the NE Corridor train today as I spotted Kwame Anthony Appiah of the Princeton Philosophy Department reading (get this) USA Today. Perhaps he was doing some research of a sort, having found a discared copy on his seat, much like the Grouse is known to read Newsday or the Post. But that's only at the end of the day when the brain is fried.

Jim Jones, meet E.D.Hirsch

"I have a very bitter taste in my mouth from the 2004 Olympics, as if I just ate a sour grapefruit or something. This summer in Beijing, we’re going to drink a lot of Kool-Aid, because revenge is going to be sweet."

This is from Carmelo Anthony's initial entry in his blog on the New York Times for Beijing. Blogging is all good and well, but when both writer and host site are major commercial enterprises, it would be good to employ editors, because one year of education at Syracuse does not apparently protect one from the old foot in the mouth syndrome. After all, in common parlance, Anthony just told us that the US basketball team will be deluded into committing mass suicide, Guyana-style. He apparently has heard the phrase "drink the Kool-Aid," he just didn't get it.

One way American Funds suck

My current employer uses American Funds as its 401k provider. So I went to AmericanFunds.com to figure out how to get myself a login, and clicked on "Employer-Sponsored Plans" and then "Your Account," which landed me at https://www.americanfunds.com/account/login.htm, where I tried to set up an account and couldn't. I finally called an 800 number and after a while the woman tells me that I should be going to a different web site altogether, over at http://pr.retire.americanfunds.com/home.htm. When I went there I signed up and saw my account, etc. All good.

Now Institutional Investor ranks American Funds' parent company, the 3rd biggest Asset Manager in America with $1.55 trillion under management, after Barclay's and State Street but ahead of Fidelity and Vanguard, and I'm pretty sure that on the straight mutual fund side American is in the pole position. I don't know where they are in terms of 401k assets, but I can tell you they're not doing themselves a favor with their navigation. And they should synch up their color schemes too! Any old Estonian phishing scheme would do better matching look and feel across the site.

It's hard to stay at the top of the asset management ranks. Fidelity was up top for a while, then Magellan and Contrafund faltered and it fell back. Will American Funds be the next to regress to the mean? Stay tuned.

Washer and dryer

An older black man gets on the train in Edison. Hawaian shirt, white straw hat and cane. Tells friend on the phone of his excitement at getting an apartment for $1155 (on pretax income of $2600) and tells her with great and genuine feeling that it has a washer and dryer. I mean, he was deeply moved, as if he had spent many years going to the laundromat.

Meanwhile, an attractive hispanic woman across the way getting who is getting a degree in fashion merchandising with an focus on footware gets a suitable interview on her cell phone. She was also pretty stoked.

So the economy keeps chugging along, and little by little some people figure things out.

Orhan Pamuk -- Snow, done

It took me a long time to push my way through this novel. Pamuk is at times a little too enamored of doing everything through dialog. But at the end of the day, this is a special book, and I will read more of the guy.

At times, the dense interactions of the love interests of the disparate characters Ka, Ipek, Blue, Kadife, Fazil, Necip, etc., could only remind the attentive reader of my dissertation. And, indeed, Turgunev is invoked at the beginning and the end. Dostoevskii is almost more present, particularly Bakhtin's notion of the dialogic Dostoevskii in which all the characters has full-fledged visions which fight with the narrator. But, in the end, none of Pamuk's characters' visions really cohere for long, they just chrystallize, pass downwards, and melt elegantly away in the rearview.

A Cross of Oil

By some fluke, I started thinking about parallels between William Jennings Bryan's populism as expressed in the famed "Cross of Gold" speech from the 1896 Democratic Convention and the current situation with oil. Not that I really remembered much about the circumstances except that it was classic populism. Turns, out, the speech was given on 112 days ago today, July 9th. Frickin spooky, eh?

Anyhow, there were some parallels. Seems the heartland was hurting after 23 years of deflation and regular guys couldn't service debt because the dollar was on a gold standard, so they were advocating for "bimetallism," letting dollars be backed by silver too and thereby expanding M2 or M3 or whatever we'd call it today. And the Wall St interests were not down with this plan, as they'd end up with silver instead of gold, which was all you could used for foreign trade.

So Bryan broke out some rhetorical strategies which remain popular amongst politicians of all parties when playing demagogue:

We say to you that you have made the definition of a business man too limited in its application. The man who is employed for wages is as much a business man as his employer; the attorney in a country town is as much a business man as the corporation counsel in a great metropolis; the merchant at the cross-roads store is as much a business man as the merchant of New York; the farmer who goes forth in the morning and toils all day—who begins in the spring and toils all summer—and who by the application of brain and muscle to the natural resources of the country creates wealth, is as much a business man as the man who goes upon the board of trade and bets upon the price of grain; the miners who go down a thousand feet into the earth, or climb two thousand feet upon the cliffs, and bring forth from their hiding places the precious metals to be poured into the channels of trade are as much business men as the few financial magnates who, in a back room, corner the money of the world. We come to speak of this broader class of business men.

Ah, my friends, we say not one word against those who live upon the Atlantic coast, but the hardy pioneers who have braved all the dangers of the wilderness, who have made the desert to blossom as the rose—the pioneers away out there [pointing to the West], who rear their children near to Nature's heart, where they can mingle their voices with the voices of the birds—out there where they have erected schoolhouses for the education of their young, churches where they praise their Creator, and cemeteries where rest the ashes of their dead—these people, we say, are as deserving of the consideration of our party as any people in this country. It is for these that we speak. We do not come as aggressors. Our war is not a war of conquest; we are fighting in the defence of our homes, our families, and posterity. We have petitioned, and our petitions have been scorned; we have entreated, and our entreaties have been disregarded; we have begged, and they have mocked when our calamity came. We beg no longer; we entreat no more; we petition no more. We defy them!

...(the punchline) Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests, and the toilers everywhere, we will answer their demand for a gold standard by saying to them: You shall not press down upon the brow of labor this crown of thorns, you shall not crucify mankind upon a cross of gold.

Before long, somebody's going to actually break this toolkit out to talk about a cross of oil, which won't let the working man drive his F150 to the 7-11 for Marlboros and a 64oz Slurpee. John Edwards would already be there if he were still in business.

Get this man a new job

Henry Paulson, apparently not satisfied with his current position as Secretary of the Treasury, would seem to be advocating for a new job with the ever bubble-bedazzled National Association of Realtors with his statements today on the housing market. Quoth Marketwatch:

...Paulson said in a speech to an FDIC conference on low-income workers access to the mortgage markets. Paulson said that home prices typically include foreclosure sales, which usually occur at a discount. In some cities, foreclosure sales have spiked. For instance, foreclosure sales in March were 29% of sales in Los Angeles, Paulson said. Existing home sales appear to have flattened...

You have to love this logic: the sales occur at a discount, so they don't count. Put another way, sales statistics should only incorporate sales that occur at their stated or correct price, or they will drag the numbers down. This is the kind of sound judgment we really want to hear from our seniormost financial officials.

Or perhaps he said this to make Bush's statements sound rational and intelligent by contrast. That's called taking one for the team.

Molokanka

The year was 1994, and a rare confluence of fellowship money sent me on a plane to St. Petersburg, one time capital of Russia, for some extended language training to get me ready to teach that strange tongue and also to work on a paper to deliver in Kazan', out on the Volga, later that summer.

But anyhow, it was summer, and I was still single, and our teacher Natasha was quite charming and not evidently much older than me, so I applied my wiles to the task of charming her. And it all seemed to go well after a few class break time cigarettes and witty repartee. Turns out that despite her blonde hair she is from Baku, Azerbaijan, and is a molokanka, which is to say descended from an anarchic sect banished to the outskirts of the empire back in the day.

So she agrees to meet me one Sunday afternoon to go park strolling and coffee sipping and the like, and then she shows up with a friend (a total sneak). And we galavant about, getting further acquainted, and then we stop on some park bench to smoke and sip on something, and I whip out this cheap lighter, and I must have been fiddling with the gas control in my pocket because when I went to light Natasha's cigarette, it totally nicked her bangs and singed an eyebrow pretty good too. That nasty burning hair smell was everywhere.

All was not lost, but it was did not enhance anything.

Knocked Up

This is not a great movie, not even a good one, but there are moments of comic brilliance and a pretty great birthing scene.

This scene is typical. You have to fight through some stupid shit to get to real laughs.

The times they are a changin

You know something's afoot when Robert Reich is up on CNBC in a jacket, black t-shirt, and beard (OK, he's always got that to make himself look taller).

Where did all the dumb money go?

Maybe it’s just me, but at times like this it’s hard to figure out what all the “talent” on Wall St is supposed to be doing. The theory is you take a bunch of really smart people, pay them well, make them mingle and share ideas, work them to death, and they should produce value. Thing is, you look at the markets for the last eight years, the second half of arguably the most booya period for both retail and institutional participation in financial markets ever, and you’re not seeing value add. You probably need to go back 9 years for inflation-adjusted market cap parity.

So all the inflows of this period (like my 401k contributions, for example) have outflowed elsewhere. I have heard this called "dumb money" on the Street.

Controlling for the optical illusion of CNBC and Kramer -- looks as much like the doldrums of 1973-1982 as it does like 1991-2000.* One key difference is that the manses of Greenwich are themselves no optical illusion (would that they were), and that the concentration of wealth they attest to also is not, though my mind runs to such houses as Biltmore, the Tsarist palaces, the Mansion walk in Newport, RI. There’s a historical pattern of excess wealth concentration resulting in unsustainable residences that and have to be turned into museums which themselves cannot break even. Look at the deed restriction on Doris Duke’s estate near Somerville, NJ, which says the house cannot have tours go on. So they move plants inside the rooms and call it an “interior garden tour” to strip twenties off the unsuspecting Martha Steward wannabes just so they have money to mow the grass and run the AC. So even such obscene concentrations of “value” don’t work over time, as first the value dissipates, then the thing itself. Where, then, should Steven Cohen stick his basketball court? I have some ideas.

*One bellwether distinction between the 70s and now is Felix Rohatyn’s activities. Then he needed to swoop in transactionally and save New York City. Today he’s thinking more long-term about rebuilding roads, bridges and the like. I think that shows a little learning.

Fireworks

Tonight Princeton held its annual fireworks display at the baseball field, only this time it was attended by hordes -- maybe 3 times the normal number. It was also Graham's first time at the fireworks, and he did dig it, ooohing and aaahing like a seasoned pro. So there we were with everybody from Steve and Janet's gathering, lying on the blanket looking up, a gaggle of children clustered together but on the edge was Natalie, leaning against my leg, and on my other side Graham, leaning often against Mary but with his feet against me. And I could reach out and touch Mary's back, and I realized that for the first time in a long time I was touching all the members of my family at the same time. And it was nice.

Traffic patterns

The Grouse's traffic numbers are burgeoning (in relative terms) with what I term "organic" traffic, people just coming to the site. We got our regulars checking in first thing in the morning(good morning to you), and a fair amount of traffic that comes in through search engines looking for (as you can well imagine) all kinds of random shit. With 1200 plus posts, by now I have a little something for -- if not everybody, then a healthy plurality of the web-surfing populace. It's a diversified product strategy, like an internet convenience store with your slurpees over here, motor oil over there, and a key to the bathroom if you ask nicely.

Japanese tennis mom

Out on the tennis court at the high school yesterday evening, a couple of young tennis bucks were practicing their serves. Whack whack whack. Then one of them took off, and the other one's mom showed up. He kept on serving, and from his mom yelling to him in Japanese inferred that he was nisei, or second generation. I imagined that she was yelling at him, as he whacked serve after powerful serve at the corners of the box, something like this: "Don't kick your leg up like that after your topspin serve, you'll never get into Harvard like that!" She didn't sound happy.

But then again, she shagged all the many balls he whacked and delivered the serving hampers to his side so he could whack more. And then, when he was done, he zipped up his rackets and sauntered off, leaving mom to pick up all 100 odd practice balls. Now that's service.