...news, moderately offensive commentary, f-bombs...

Saturday, January 31, 2009

FT Weekend front page roundup

Barack Obama and his econonerds are set to announce a "big bang" catch-all financial rescue dealie, which will work itself out over the next 13 billion years.

A diplomatic spat erupted when Turkish prime minister Recep Tayyip Erdogan told Shimon Peres, Israel's former Mexican president, to "talk to the hand" during a debate at Davos, since Erdogan was not allotted enough time to call Peres a turdface. This is the worst disaster in debate moderation since John Adams stabbed William Pitt on
Meet the Press in 1778.

Germany is making its banks put all their toxic assets into superfun travel-size schei├če banks.

Morgan Tsvangirai, leader of Zimbabwe's opposition MDC, who actually won the election, will relent and join Epic Cocksucker Robert Mugabe's "national unity" government so everyone doesn't die of cholera.

And its the 30th anniversary of Ayatollah Ruhollah Khomeini's return from exile to Iran. Like everyone with 15 kids, the Ayatollah fathered some worthless hippies.

A tale of two McCains

John McCain, 2000: "Agents of Intolerance."
John McCain, 2009: Agent of Incontinence.

Friday, January 30, 2009

Nigeria has huge balls

The Nigerian government is gearing up for a bond issue in the next few months...

...in an environment where no one will finance a shipment of Happy Meal toys from China to the US...

...where the price of oil, its main money-earner, has plummeted...

...and whose president will almost certainly be dead by then...

Who, I say, will resist the naira-denominated awesomeness?

Huge balls. Huge.

FT front page roundup

Jean-Claude Trichet, head of the European Central Bank, told the elitists at Davos that banks better stop hoarding all the free monies he'd been giving them. He then burned a copy of the Basel II Accord, tipped over the podium, and walked off stage.

Barack Obama publicly castrated Wall Street douches who insisted on bonuses this year.

Bankers reacted to the president's remarks with a mixture of anger and resignation.

"Attacking Wall Street is like fishing out of a barrel at the moment," said one financial executive. "Obama is in the middle of a tough political battle to get the stimulus plan approved. He has to say these things."

Yea, dude. He actually really likes shoveling billions to the people who broke everyone's economy, and nevertheless continue to reward themselves. He just has to pretend he doesn't. Ha, yea. Sorry, fuckers. "The Man" is now black.

Ford "Everything is Fine, Seriously" Motor company is drawing on an emergency "prudent" $10 billion credit line.

Wen Jiabao, speaking in Germany, said China doesn't manipulate its currency, but will manipulate it at a "reasonable and balanced level."

And Illinois governor unemployed man Rod Blagojevich, Hairpile of Freedom, was impeached by the Illinois legislature, much like Rosa Parks.

Thursday, January 29, 2009

Americans don't apologize, unless we'll get laid

Mahmoud Amadi-Nejad, President of Iran and Sports Jacket of Terror, demands that the US apologize for past crimes against his country for there to be a fundamental shift in relations.

Pff
f, whatever, dude. It's not like we overthrew your government or anything. Or backed tilted toward some crazed dictator who invaded your country and killed everyone with chemical weapons. Or shot down one of your passenger airliners. Hell no.

Why don't YOU apologize for returning all our hostages alive and having a ridiculous-sounding name, and then we'll get Procter and Gamble to ease up on the sanctions so you can take a Mach-3 to that thing on your face. And if you're really nice, we'll get Oliver North to bring you some missiles again. Whatever you want.

America, fuck yeah.

FT front page roundup: Customer Service Wisely Avoids My Wrath Edition

The International Monetary Fund and the International Labor Organization, who secretly hate each other, are in agreement that the world economy will rape everyone and their pets this year.

The IMF slashed its global growth forecast by 1.5 percentage points, from the nothing it was forecast to grow anyway. Furthermore, it revised total global credit losses from $1.4 trillion to $2.2 trillion. The ILO is predicting 18-30 million job losses, with a chance of 50m if we're lucky. Fucking buzzkills, dude.

Bank stocks soared when tax delinquent Tim Geithner played down the possibility of nationalization. Instead he's probably going to buy their worthless assets and then compensate the banks for any lost capital as a result of the sale, which means banks haven't bothered to try valuing these things correctly, because they'll end up getting nationalized. This is pretty much what Hank Paulson was going to do a year ago until the smarts said it was a bad idea to overpay for a shit sandwich. But now it isn't, apparently.

Wells Fargo reported a $294m loss because clients defaulted when Bernard Madoff took all their monies.

Bank of America is planning to defer bonuses for its employees this year in response to a sexy probe from the NY attorney general into BofA acquisition Merrill Lynch's Bonus for Losers scheme. In times like these, a story like this...
BofA insiders said that the deferral of payments would be a particular problem for executives who have constructed a lifestyle around the near-certainty that there would be some kind of bonus each February.

They said that this could lead to departures beyond the 3,000 or so job cuts expected in the unit this quarter.

"This is going to cause an uproar," says one BofA executive familiar with the matter. "There will be cash-flow issues for families."

...would normally warrant a well-deserved "boo fucking hoo hoo." But recall that BofA employees are being forced to tuck in because of losses at Merrill, whose employees aren't. And some of those BofA bonuses would have been shitty already because Merrill has weighed so heavily on their share price. Haha, so everyone at BofA hates Merrill, and we can expect office pranks to soon escalate into horrible violence. They will be the Crips and Bloods of finance.

Chinese premier Wen Jiabao castigated the US an anonymous country for pursuing "inappropriate macroeconomic policies" and an "unsustainable model of development characterized by prolonged low savings and high consumption". This is accurate, but funny, because China's prolonged high saving and low consumption has necessarily been the mirror of the US's savings profile. Additionally, he said China had "the confidence, conditions and ability to maintain steady and fast economic growth and continue to contribute to world economic growth", which is true because making up GDP figures in a dictatorship is really easy.

Also, he said it while wearing his headphones upside down. Ha, dingleberry.

IMF chief economist Olivier Blanchard meanwhile is trying to play Dr. Phil to the US/China currency dispute, as if we didn't have enough to deal with already.

Wednesday, January 28, 2009

post-post-partisanship

::As my lone commenter points out, Mike at C&L was kind enough to link to me, even with the deluge of f-bombs and god knows what else. Thanks, dude! And welcome all C&Lers! Oh yea, wipe your damn feet!::

Well then, Mr. Obama. Congratulations on getting your stimulus bill over the first hurdle. But I noticed that your new best friends weren't so enthusiastic, and that the number of 'yes' votes from the R's hovered somewhere between one and zero.

Allow me to offer some free, drunken advice. I just got done watching Mongol, which sucked balls, but the story of the rise of Genghis Khan nevertheless has much to say about the perils of excessive bipartisanship. Mr. Khan initially tries to accommodate his rival khans who are always whining about tax cuts and boys kissing while the yurt foreclosure crisis continues unabated. Mr. Khan's attentiveness to their needs merely provokes more ridiculous concerns that bear no resemblance to reality. So he simply slaughters them, invades China or whatever, and everyone still in two pieces or less is much better off for the effort.

Bipartisanship is not without its place, of course, assuming the opposition is composed of responsible, well-meaning adults whose economic vocabulary consists of words other than "tax" and "cuts". Clearly that's not what you're dealing with.

So yea, dude, you tried. You told suit-wearing penis Mitch McConnell that he really didn't look like a wrinkled old penis in a suit. You comforted special-needs child Eric Cantor that his brain function was nothing to be ashamed of, even though it is. You told worthless dildo John Boehner that he's almost as good as those multi-setting three-pronged super dildos, even though he's not, and that its okay to wear a pink tie and cry on C-SPAN, even though it fucking isn't. You gave them their tax cuts. You got them wasted, etc. etc.

heroes

And what do you have to show for any of it? What did all this cuddly elephant-hugging, minority-pandering post-partisanship get you, Mr. Obama? Ha, not a single fucking vote.

Here's hoping you've learned a valuable lesson tonight, one you should be thankful to have learned so early on in your presidency.

And now comes the opportunity. Rewrite the bill. Cut out the tax cuts and whatever else you put in to secure votes you didn't get. Write the bill you wanted in the first place, but don't let House Democrats load it up with too many subsidized gay abortions for preschoolers which we know they love. And if Republicans want to stand in the way of it, the Save America From A Recession, Totally (SAFART) bill, then fucking let them. Americans will remember, for once, because they'll post a big note inside the cardboard refrigerator box they'll be living in.

Indeed, allowing them to try and block it will make even bothering to campaign in 2012 completely unnecessary.

FT front page roundup: Case of the Missing Delivery Guy Part VII Edition

Oh, they're testing me. They're only this far away from a polite phone call, they just don't even know.

Monday, January 26, 2009

FT front page roundup

It turns out Bank of America may have known about human turd John Thain's awesome Bonus for Losers scheme at Merrill Lynch. Thain then was presumably fired for other turdly reasons.

Also Tom Montag, whose department was responsible for fucking half of Merrill's losses, will be promoted at BofA, because it would cost millions to fire him thanks to previous severance agreements. Remember how we're always telling the Europe to make it easier to hire and fire people? God Bless America.

After the dismembered corpse of John Thain was mailed to their offices, Goldman Sachs decided not to throw a huge party at the Davos World Economic Forum this year. Sorry kids, no body shots of Lloyd Blankfein's hot abs. Instead, all the bankers will play a few rounds of "asshole", which they will win.

Shockingly, car part makers are also looking for a bailout. Its only a matter of time before the bailout industry needs a bailout.

And everyone in India is too poor to go see some movie about how poor they are, which isn't funny.

Sunday, January 25, 2009

paradigm shifts

Desmond Lachman, Resident Person with a Brain at the American Enterprise Institute, in responding to Joe Stiglitz's column about infrastructure spending, repeatedly violates sacred conservative principles--namely not bailing out anything other than a bank, a corporation, or rich people, and then only mentioning tax cuts in order to disparage them. Holy fucking shit.

Sir, Joseph Stiglitz is certainly right in asserting that tax cuts will not help much to stimulate the US economy. [...] However, one has to wonder whether Prof Stiglitz is right in proposing that increased investment in infrastructure, education and technology be given pride of place in President Barack Obama’s fiscal stimulus package.

[...]

By their very nature, even if “shovel ready”, infrastructure expenditures are spread over many quarters. As such, whatever their longer-run benefits to the economy might be, they should not be expected to provide the economy with the more immediate boost that it now desperately needs and that might be expected from increased public spending on unemployment benefits, food stamps and support to the states.

Unemployment benefits and food stamps? Aid to states? This is what hell freezing over looks like, which would be a cost-effective solution to global warming if anyone at AEI believed in that either.

Saturday, January 24, 2009

doppelgangers

While searching for FT articles to rip off and write about, I stumbled upon another blog which does exactly this, written by a "professor" of "finance" at "Johns Hopkins Carey Business School", which frankly sounds made up.

I can't fucking believe this guy traveled to the future to steal my idea, then traveled back and started it before I did. What a dick! He even stole my picture idea, showing him mocking our sacred government institutions by humorously standing in front of them. Also his blog isn't nearly as funny. Searching it revealed no items with the word "fuck" or "dildotron", for example. Still, now that I have (weak) competition, I'll have to be funnier.



...But if you like your financial news without porn references, and want it solely for the purpose of becoming a well informed citizen-scholar in an advanced democracy, then go read his, Financial Times for Us.

FT Weekend front page roundup

Prospects for the passage of Barack Obama's huge (stimulus) package improved. Republicans however still had some reservations since their idiotic ideas that wont work aren't being given a fair hearing, despite the $300bn in tax cuts already in the plan. Why is Obama pandering to minorities? Here's worthless dildo John Boehner:
At the end of the day, government can't solve this problem. The American people have to solve it and the way they can solve it is if we allow them to keep more of the money that they earn.
This only works of course if tax cuts aren't saved or used to pay down debt. But you heard him, losers. Stop clinging futilely to your remaining jobs and go fix the financial crisis with your tax monies.

China got all pissy about Tim Geithner's currency manipulation remarks. China said it doesn't and that they've merely enjoyed pissing away money on low-yield foreign exchange reserves for years because its fun. In fairness, the yuan has actually risen 20% against the dollar since the one-off revaluation in 2005. And um, if we're about to embark on a debt-fueled recovery spending binge of awesomeness, its probably not the best time to pick a fight with our largest creditor. Watch bond markets wobble for hilarity.

GE's profits shrank because hardly anyone needs electricity anymore, generally.

McDonald's told the recession to blow itself and is planning to open 240 restaurants and add 12,000 jobs. This is all thanks to its new lineup of McChange burgers, Hope nuggets, and the Suspiciously Fishy Madoff McChicken sandwich.

(Friday's) FT front page roundup: Hey Fuck You I Was Tired Edition

Haha. BofA chief Ken Lewis fired Merrill Lynch CEO and human turd John Thain in person, possibly because he suggested a $10m bonus for himself despite the awfulness of his company; or possibly because he snuck in bonuses for Merrill executives before BofA could cancel them; or possibly because he spent over $1m renovating his office. An insider explained that during their meeting there was a "mutual agreement" that Thain was a human turd and should die. New York's attorney general is now investigating the bonuses.

"Banker of the Year" and serial market-bottom-caller Ken Lewis, it should be noted, bought Merrill and other stellar institutions like Countrywide for like, 5 pesos, which it turns out was still too much. You get what you pay for, dude.

Tim Geithner hasn't even been confirmed for Treasury Secretary yet and he's already started a trade war with China. Geithner accused China of manipulating its currency, which everyone knows already, but violates the first rule of diplomacy which is to ignore the obvious.

Microsoft
gave notice that even consumer staples like internet porn wont save the company from the effects of the downturn.

And Spanish bank Santander was one of the few banks to make out decently from the financial crisis, until the whole Bernard Madoff Ponzi scheme thing. Homoerotic documents from one of Santander's funds describe Madoff's skills as "impeccable", and that he "find[s] great entry and exit points to benefit investors." Class-action lawyers are now looking for vulnerable "entry and exit points" of their own.

brotherly advice

Dick (Penis) Parsons, the new token black guy chairman of Citigroup, wants you stupid hippies to shut up while the grownups are talking.

Mr Parsons told the Financial Times the new administration should replicate the Resolution Trust Corporation, the government-owned "bad bank" charged with buying assets from failed savings and loans companies in the 1980s and 1990s.

"I lived through the first crisis," said Mr Parsons, who ran Dime Bank, a small lender, between 1991 and 1995. "I remember one of the keys to bottoming out of the crisis was the presence of the RTC . . . We now need something along those lines."

Mr Parsons suggested banks that sold assets to the new entity - also known as an "aggregator bank" - should be required to use some of the proceeds for loans to companies and individuals.

However, he argued that the nationalisation of troubled financial institutions would be misguided. "People who talk about this have no idea how complicated these things are," he said.

Complicated indeed. So complicated, in fact, that Penis Parsons neglects to mention that the Resolution Trust Corporation (RTC) didn't rescue the S&L's. The FSLIC (the FDIC for S&L's) nationalized failed S&L's before liquidating them, wiping out shareholders, publicly bare-bottom spanking their managements, etc. The RTC was left to pick over the remnants so taxpayers could recoup some of the cost of bailing them out.

All this is missing from Penis Parons' fantasy RTC, which will have the government simply buy the shitty assets that make his bank so shitty so he wont have to worry about it anymore. You can just dump your money in the hole there, Mr. Obama, thanks.

Also, "Dime Bank"? Haha, really?

Thursday, January 22, 2009

FT front page roundup: Oh Hey, Look What Finally Showed Up Edition

AIG is selling off its Asian life insurance arm to pay back Hank Paulson before he breaks their legs for fun.

Tim Geithner explained to Congress that he will single-handedly save the economies, but he wont tell them how other than that it will involve money. Cocktease.

Toyota avenged Hiroshima by becoming the world's largest car maker by sales, ousting GM from the top spot which it held for 77 years.

And John Thain is attempting to secure his nomination for Executive Most Likely to be Dismembered by a Mob. Thain is the captain of the fail boat known as Merrill Lynch. It seems he tried to sneak in bonuses for Merrill executives in December instead of January, before it was taken over by Bank of America, when said bonuses would have been laughed at and shit on, since Merrill was known to have huge losses. John Thain is a human turd.

Tuesday, January 20, 2009

FT front page roundup: Inaugurational Pee Pee Pants Edition

Legions of libtards flooded into Washington to see the inauguration of Barack Obama, who will almost certainly be America's worst black president ever.

Shares in Royal Bank of Scotland fell nearly 70% in a single day, as the goverment tries to avoid nationalization, which it wont.

Fiat is hammering out a deal to save Chrysler, which will survive thanks to an infusion of the stellar, streamlined corporate management that Italy is known for.

Standard & Poor's downgraded Spain, which now really, really misses its pesetas.

IBM is also facing anti-trust suits in Europe, which is um, yea really, dont care.

8 fucking years

That silly ole Constitution made George Bush surrender America today. Fortunately Barackaham Oblincoln is riding his soul train to Washington as we speak, where he will hold a promising and statistically insignificant chance of fixing anything noticeably forever, hooray! But my, has it been eight years already? Gee wiz...

---

Here was America in 2000. Remember him? This sprightly young go-getter was at the top of his game. He had a decent job with, uh, some benefits. His pension still existed and government programs to care for him in his old age still had, like, some money left over. His children were going to school to get super smart so they could think up the next big idea in aerospace engineering or internet porn. And he was really popular too! Even some Muslims wanted to be like him! He'd just won the whole Cold War thing against France or whatever and retained only a moderate desire to bomb and rage on brown people half-way across the globe. Ha, you go, America!

But eight years later...

...and look at him now. His bank just foreclosed on his house, or would have if it hadn't just failed and fired everyone, including his wife, who is fucking the guy at the unemployment office. His government is broke and dependent on the charitable givings of Asian dictatorships. His kids are on deployment somewhere fighting Islamoterrorpirates. His whole infantile Freudian desire to needlessly remake foreigners in his own glorious image failed when the foreigners, like, started fighting back. Everyone now hates him and thinks he's a dick because he thinks torture is cool, which it totally is. For shame.

---

I must say that's quite a legacy to rack up in less than a decade, Mr. Bush, one sure to be, uh, remembered, if anything. Anyway, we hope you enjoy retirement, and we're all looking forward to the petulant, self-serving book you'll write in a few years that no one will read.

So from all of us here in America, we bid you, adieu, which is American for go fuck yourself.

Monday, January 19, 2009

FT front page roundup

The United Kingdom announced the Bailout to End All Bailouts for its banks, which will never need to be bailed out again. Promise.

Change-licker Barack Obama will impose new conditions on bank bailouts, making banks lend the rescue money. As a reward, Obama will buy all of the shitty assets that they got the last time they lent money.

The Commodity Futures Trading Commission is being overwhelmed by the number of Ponzi schemes coming to light as douchebags rush to confess their douchebaggery since everyone else was doing it.

Israel ran out of people and food to bomb so declared a unilateral ceasefire in Gaza. Hamas scumbags haven't and didn't.

And North Korea may be engaging in uranium enrichment in violation of whatever agreement they last signed because they broke the one before it. Suspicions were raised last year when documents submitted by North Korea were found to have traces of enriched uranium on them. Haha! Oh, North Korea, you fail.

What Paul Krugman said

Stress in credit markets appeared to be easing somewhat in the last few weeks, but any optimism has since given way to utter craptimism. Bank of America was just bailed out. Citigroup will need to be bailed out, again. Things are back at square one, which will probably need to be bailed out.

The problem is that banks hold lots of "toxic assets" on their balance sheets, namely mortgage or other asset-backed securities whose underlying revenue streams have collapsed since people stopped paying their mortgages, car loans, student loans, etc, etc. These securites are more or less worthless. In better times they would have been sold to other investors but now they're stuck on bank's balance sheets.

Banks and the government are trying to pretend that the problem is a lack of liquidity due to the credit crunch. Hm, sorry, no. The reason no investors want to touch them is that they're fucking worthless. If credit markets healed tomorrow they would still be worthless because people would still be unemployed and defaulting on their mortgages. This has been the problem all along. If anything the past year has made it clearer.

Which makes the new plan to deal with them all the more worrying. FDIC head Sheila Bair is floating, and the incoming Obama team is supposedly backing, the idea of an "aggregator bank". This would be a government-run entity that would buy the shit burgers from the banks at "fair value." As my secret econolover Paul Krugman points out, "what [the fuck] does “fair value” mean?"

This problem is exactly the same as that posed by the initial TARP plan, which was originally designed to buy toxic assets to establish some kind of market for price discovery so people would start buying and selling these things again. That idea was scrapped when people pointed out that this was a raw deal for the government, because of the reasons stated above, that willingness to buy wasn't the issue, but the underlying (lack of) value.

Straight on recapitalization went ahead instead, which as events of the past week have shown, have been inadequate. Hence the new calls for the "aggregator". Krugman prefers something different:
A better approach would be to do what the government did with zombie savings and loans at the end of the 1980s: it seized the defunct banks, cleaning out the shareholders. Then it transferred their bad assets to a special institution, the Resolution Trust Corporation; paid off enough of the banks’ debts to make them solvent; and sold the fixed-up banks to new owners.
The problem with this option, as Krugman notes, is the general fear among the supposedly socioredistributizationalist Obama administration to just fucking nationalize these things already.

While creating an aggregator bank would certainly help clean up bank's balance sheets, there would still be no guarantee banks wouldn't need to be bailed out again because of the general awfulness of the economy. Moreover, there is no guarantee banks will use their newly cleansed balance sheets to pump credit back into the economy, which is supposedly the whole point of this idea. If there were time, a deal to restructure mortgages to put a floor under losses on mortgage-backed securities would be ideal before going all out and taking over the banks. But plans to do that, while still worthwhile, are at rudimentary stages and will take far too long to implement.

So seriously, Obama people. This has gone on long enough. Don't be pussies. Enough of the serial ad hocism and muddling through. We're still stuck with the exact same problem we had over a year ago now. No one wants Japanese zombie banks eating their tax dollars and brains forever. Just nationalize them and end this.

Update:
Willem Buiter makes the same point more clearly and with less space because he's better than me.
[T]he guarantee component of the Bank of America package (like the earlier insurance of/guarantee for $300bn worth of Citigroup toxic assets provided by the US Treasury) does not avoid the problem of valuing the toxic assets. The problem of determining a price or value for the illiquid assets stopped the TARP from being used as originally intended - for buying toxic assets from banks and in the process becoming a price and value revelation mechanism for illiquid assets.

[...]

[F]ull public ownership of the banks would greatly facilitate the creation of a ‘bad bank’ that would hold on its balance sheet all the toxic assets (illiquid assets of highly uncertain value) currently held by the high street banks. The key problem with any bad bank proposal is the price it pays for the toxic assets it acquires from the banks. If all the banks, and the bad bank, are publicly owned, this problem goes away. The toxic assets are simply moved to the balance sheet of the bad bank. They could be valued at anything from zero to their notional value or historic cost (or even higher). It would be a redistribution of wealth from one state-owned entity to another state-owned entity.

[...]

The bad bank would hold the toxic assets and collect the cash flows associated with it until a liquid market for these assets is re-established. This may never happen, in which case the bad bank would hold the toxic assets to maturity.

Saturday, January 17, 2009

FT front page roundup

Citigroup and Merrill Lynch reported huge losses last quarter and will need to be rescued again because they suck and I hate them.

Pressure is building for a new plan to deal with banks' troubled assets, since the TARP--the Troubled Asset Relief Program--didn't. Prepare for TARP II: The Swedish Connection.

European Union regulators launched an anti-trust investigation into Microsoft's inclusion of Internet Explorer in its Windows operating system. This will single-handedly save the planet.

Barack Obama dropped his Blackberry when he got out of his car because he's obviously incompetent.

And Warner Brothers is trying to make inroads into the mass synchronized frolicking that is Bollywood.

Friday, January 16, 2009

FT front page roundup

Suicide terrorist geese brought down a US Airways flight over New York but everyone survived.

President Bush said his "war on terror" thing worked because we only had one 9/11. God, please just go away.

Bank of America really will be the Bank, of America, with a $15 billion rescue combined with $100 billion in guarantees.

The European Central Bank cut rates by 50 basis points just like they said they wouldn't because they're pussies.

Former chancellor Gerhard Schroder of Germany will be appointed to the board of Anglo-Russian TNK-BP because Russia loves him and he loves their money.

Thursday, January 15, 2009

FT front page roundup

Bank of America is suffering buyers' remorse after buying failed investment bank Merrill Lynch, and then realizing it was a failure. BofA is now jonesing for some more government monies.

Just as people warned the first time, Citigroup is also probably going to need another bailout, as the US approaches Japanese zombie territory.

Apple CEO Steve Jobs is probably dying after all.

JP Morgan CEO Jamie Dimon said if you liked 2008 then you're going to love 2009.

Toronto-based Nortel Networks filed for bankruptcy, shifting the balance of power in Canada further to its hillbilly western provinces.

Wednesday, January 14, 2009

orders of stupid

As the financial crisis hit, legions of well-meaning people realized they didn't remotely understand the mechanisms behind the meltdown and resolved to seek out balanced, non-ideological explanations to sate their curiosity. Ha, kidding!

For wingtards, the financial crisis was the logical outcome of the Community Reinvestment Act of 1977. You see, the CRA forced banks to lend to poor people, and then, well, uh, you know the rest. Fannie Mae and Freddie Mac also jumped in on the action. This all conveniently blames brown people and the government for everything that's gone wrong ever. Anyway, its not true and, indeed, beyond stupid.

That said, credit default swaps (CDS) are to libtards what the CRA is to the right, though in fairness, CDSs are, you know, relevant to this whole thing. CDSs are, in effect, insurance contracts to insure against a default on pretty much anything its possible to default on. For example, one party agrees to insure against the risk of default on a security held by a second, transferring the risk of holding the security from the holder to the insurer. This market had grown to a nominal $62 trillion at one point, which is why it has attracted so much attention. That a little understood, completely unregulated market could grow to such a size made it seem like the logical source of so much trouble.

All that would make it hard to explain how this happened:

Big investment banks ripped up more than $30,000bn worth of credit derivatives last year, or almost half the record total outstanding at the start of 2008, as they aggressively pursued efforts to tidy up the industry.

Regulators raised the already-strong pressure for reform of the derivatives industry following the rescue of Bear Stearns and the collapse of Lehman Brothers, prompting banks to step up moves to terminate old and superseded contracts.

This gets to what CDSs are and aren't. You might expect that wiping out $30 trillion in contracts from its peak in a single year would be an earth-shattering event. Not exactly. While much has been made of the casino-like aspect of this market, it hints at why the trillion dollar figures are highly misleading: casinos are zero-sum. You lose, house wins and vice-versa. Much of finance is zero-sum. Boring-ass foreign exchange markets are zero sum; highly complex arbitrage trades are zero-sum. Someone's winning what another's losing. This means that, theoretically, the $62 trillion nets to zero, and explains why banks can pretty much say "eh, fuck it" to $30 trillion in contracts without the planet shutting down.

I say 'theoretically' because problems arose not only when people started defaulting and contracts were triggered, but when counterparties to trades themselves, the insurers, started failing. This is the role of CDSs in the crisis. With every bank failing along with systemically important companies like AIG, it was thought that many contracts would simply not be honored at all and the default risk transferred back to the original holder. Moreover, because of the lack of regulation, most CDS deals were structured bilaterally, meaning only the two counterparties themselves knew their own exposure, leaving everyone else to simply guess who was exposed to what. The prospects of actual defaults along with the sheer opacity of the market in CDSs thus resulted in an amplification of counterparty risk, and perhaps just as importantly, the perception of it. They were an important transmission mechanism of financial contagion, much as girls are to cooties.

Still, their importance is exaggerated since there were plenty of other avenues for counterparty risk. Clearly there would have been a big fat financial crisis without them. The solution to the CDS problem after all has been to just not have them anymore. The same approach cannot be applied to collateralized debt obligations (CDO) where the actual, tangible losses from the housing collapse reside. The two are linked, however, to the extent that you can write a CDSs on CDOs, which is, again, relevant since that's where plenty of payouts originated.

But the cause of the crisis, if anything, is the CDOs--shitty mortgages structured into shitty, yet AAA-rated securities, that were then sold to investors and other banks who were making similarly shitty securities. This is called the originate-to-distribute model, as in originating a turd and distributing it to the toilet. Knowing they would sell them to someone else, mortgage lenders had no incentive to maintain lending standards. Banks had the same lack of incentive when structuring CDOs. Moreover, they traded these things off-balance sheet, meaning no capital was held against them, leaving them vulnerable to an investor boycott when people started defaulting on their mortgages, which they did. Shitty securities came back on balance sheet, banks panicked, and everyone with money everywhere collectively peed their pants.

This, in a word, is your financial crisis. And yea, those securities are still fucking there.

Change we can believe in

Incoming Treasury secretary Tim Geithner apparently hired Bill Richardson as his housekeeper or something, and also didn't pay some taxes because they're too hard. Whoopses:
Democrats scrambled to defend Tim Geithner on Tuesday after it emerged that Barack Obama’s pick for Treasury secretary had failed to pay at least $34,000 in taxes on time and employed a housekeeper whose work visa had expired.
If a former IMF official can't get his taxes straight then we're all fucked.

FT front page roundup

Hillary Clinton had her confirmation hearing. The Pantsuit of Freedom explained how the US will probably bomb fewer things in an Obama administration.

In a speech, Ben Bernanke highlighted that banks still have lots of worthless shit on their books just like last year and that someone should probably do something about it.

On that note, Citigroup will end its famed 'universal' banking model by putting all its shitty non-core business into separate entities, so as not to destroy the universe again.

Advertisers are having multiple orgasms over the opportunities offered by the Obama inauguration festivities.

And China's government-run Xinhua news agency is planning on more English language services so it can bitch more effectively about China's hurt feelings every time someone points out its still a corrupt dictatorship. Suck it up, pansies.

Tuesday, January 13, 2009

FT front page roundup: Raging Hormones Edition

A black man beat up president Bush and made him hand over $350 billion. He then carved a 'B' into his face, for 'Bailout'.

Standard & Poor's threatened to downgrade Spain, which has a huge current account deficit and is facing a deep recession. There is literally nothing funny about this.

Citigroup's deal with Morgan Stanley will net the government $4 billion in tax revenue, which it will use to bailout Citigroup again.

Scienticians have discovered that traders with certain ring-index finger ratios are more profitable, because of hormones. Those traders are now using their pretty hands to commit unspeakable acts to pay their mortgages.

...A note on the study above. The authors give no timeframe for their research, so basically a bunch of testosterone-fueled douchebags did better when the market was on an upswing anyway. Previous studies have already noted this, and also that this same group was more prone to mania and then despair when their pussy girly hormones kicked in as the market turned, which proves that everything's great until it isn't. Hormones are procyclical, the end.

Update: Hm. Let it be known that the same fucking guy authored both of the studies and that I tried to use one to downplay the other. This is why I don't get paid.

Monday, January 12, 2009

FT front page roundup

Hope-fondler Barack Obama said he can't wait to get his calm, steady hands on the final $350 billion tranche of the TARP bailout monies, so he can show everyone how a real man handles a tranche.

US car companies are preparing to beg for more government support, as the US collectively forgets there is such a thing as the World Trade Organization.

US investigators are determining whether the sanctions breaking at Lloyds TSB and other European banks allowed Iran to use America to finance the doom missiles that will kill us all.

According to its dictatorship of statistics, China's economy performed better than expected last month, so please dont riot, k thanks.

Citigroup will make almost $9 billion in cash and capital gains by establishing a joint venture with Morgan Stanley for Smith Barney. Bankers recall what its like to get money from someone other than the government.

Sunday, January 11, 2009

naughty children

The United States just gave Israel the equivalent of a bare-assed smackdown at Toys R Us, all because Israel wanted the new Apache attack helicopter with ultrakill, which the US will end up buying anyway.
What made the UN vote particularly troubling for Israel was that, for the first time in many years, the US declined to veto a Security Council resolution opposed by Israel. The US abstention raised concern that US diplomatic support for the country may be weakening, as Barack Obama prepares to be sworn in as US president.

Dan Gillerman, a former Israeli ambassador to the UN, said on Friday: “This is a disappointing resolution. The most disappointing aspect is the American abstention, something we haven’t seen in a long time and I hope doesn’t indicate anything about the future.”
Usually the way things go in the Security Council is a mildly-worded draft resolution calling on everyone to knock shit off comes to the floor, the US vetoes it, nothing happens, the end. General Assembly resolutions regarding Israel are even more exciting, with votes usually hovering somewhere around everyone-2, or sometimes 4, depending on whether the delegates from Micronesia and Palau managed to paddle across the Pacific that week. So really, in diplomatese, the refusal of the US to veto the ceasefire resolution is kind of a big deal.

The US’s (in)action is most likely borne of the obvious realization that Israel finds itself precisely in the no-win situation even its sympathizers warned of. Israel cant plausibly eliminate Hamas’ capacity to launch rockets into Israel without either destroying Hamas completely, or reoccupying the Gaza, which it knew going in. Even in the unlikely event it successfully does either of these, there is no reason to believe it will make the country any safer in the long run--quite the opposite, in fact. But such is the perpetual short-termism of Israeli politics that a new ceasefire seems unlikely without actual, tangible US pressure, since the US has long since exhausted any influence it had over Hamas.

For Israel, to the extent there was a public relations war to win, it has lost it, when it started, you know, killing the public. The horribly one-sided casualty figures run the risk of radicalizing another generation of Palestinians beyond repproach, to the detriment of Israel's security. But with elections coming up, the government has no incentive to support a ceasefire since since whoever does immediately looks like a pussy and will probably lose.

So it's time for the US to give Israel an excuse to support a ceasefire, preferably with a little more than a Security Council abstention.

Update: Haha, or not.

Saturday, January 10, 2009

FT front page roundup

Haha, my newspaper delivery guy drilled my door with the FT this morning. He probably had to drive all the way from London. Sorry, dude...

Anyway, half a million workers in the US lucked out in December and wont have to show up for work ever again.

US job losses in 2008 were the worst since 1945, when everyone quit their job as an infantryman. The unemployment rate stands at a socialistly European 7.2%.

Former Treasury douche Robert Rubin decided to quit as board director of Citigroup before he could be ritually sacrificed at the next shareholder meeting. Citi meanwhile is selling part of itself to Morgan Stanley, for money.

Lloyds TSB of the UK will pay the US $350 million for letting dirty Muslims use American banks.

And finally, a US businessman has bought a tract of land the size of Dubai from a warlord in southern Sudan in order to live out his boyhood fantasy of being an African dictator and then getting killed in a coup the following week.

Friday, January 9, 2009

FT front page roundup

Barack Obama said that the American dream will kill you in your sleep if Congress doesn't pass his stimulus package.

Indian outsourcing firm Satyam, at the center of a $1 billion accounting scandal, is struggling for survival. The company will be downsized and everyone's job shipped to Swaziland.

A groundswell of support is building for Donald Kohn to replace incoming Treasury secretary Tim Geithner as chair of the New York Fed, which would be great if Kohn wanted to.

The Bank of England cut rates 50 basis points to 1.5%, and then Mervyn King wiped his ass with a pound in case anyone didn't get it.

And superdouche Bernard Madoff, who I'm sick of writing about, tried to transfer $150 million from his UK company to prop up his Ponzi thing a few weeks before he was caught because he's a douche and a penis with ears at the same time.

Thursday, January 8, 2009

Capital Injections #17

The federal bailout of every bank ever was justified because the failure of the financial system posed a systemic risk to the entire economy. Credit markets seized almost entirely. The boring mainstays of finance like money markets and trade finance were disrupted along with the sexier credit derivative kind.

But then came the car companies. Everyone pitied them so we stretched the definition of 'systemic' so they could get in on the action. Some complained at the time this would set an awful precedent, leaving the door open for just about anyone to request federal money.

Well here's just about anyone. From ThinkProgress:
Girls Gone Wild CEO Joe Francis and Hustler magazing publisher Larry Flynt have asked Congress for a $5 billion bailout, arguing that their industry is also one of the “nation’s most important businesses“:

[A]ccording to Flynt the recession has acted like a national cold shower. “People are too depressed to be sexually active,” Flynt says, “This is very unhealthy as a nation. Americans can do without cars and such but they cannot do without sex.”

While not to the degree felt by banks and automakers, the Adult Entertainment industry has been hit by the effects of the economic downturn. DVD sales and rentals have decreased by 22 percent in the past year as viewers turn to the internet for adult entertainment.

Yes, people won't fuck and make babies. It really doesn't get any more systemic than that.

Mr. Bloggington has decided to tentatively support the porn bailout, on the condition that the Fed or Treasury get to name the features it sponsors, and so long as they all contain public service announcements about predatory lending and adjustable-rate mortgages in between all the anal sex.

Here are my title suggestions. Feel free to add your own.

Liquidity Traps

Asset Swaps

Propensity to Consume

Disposable Income

Liquidity Operations

Accounts Receivable

Gaping Deficits

Front-End Loads

Cash Infusions

Regulatory Arbitrage

Executive Compensation

Naked Shorts

Quantitative Easing

Deposit Withdrawals

Fannie Does Freddie

Crack Spreads

Barack's Stimulus Package

Asset Strippers

High Turnover

Swap Facilities

Overleveraged

Private Placement

Distressed Assets

and my favorite...
Overpaid Cocksuckers

Jesus, this is so much like my dreams its scary.

Shorter Edward Luce

Profiles: Team Obama
Larry Summers, who is a huge dick, will nevertheless be a pragmatic and effective adviser to Barack Obama, because "when the facts change, Larry changes his mind," except about being a huge dick.

FT front page roundup

The Congressional Budget Office warned of a possible $1.2 trillion deficit this year, giving Republicans an opportunity to miraculously care about deficits finally.

All living presidents plus president-elect Barack Obama had lunch at the White House. Everyone laughed when Jimmy Carter called him "boy" after confusing him with a waiter.

Prosecutors detailed the $1m worth of jewelry Bernard Madoff tried to smuggle out of his house. Hilariously, his sons, who turned him in for the $50bn superfraud, also turned him in for this.

The European Central Bank is not budging on more interest rate cuts as it fights off the demons of hyperinflation and the British naval blockade.

And congratulations to India, parts of which are finally rich enough to have massive accounting fraud.

special interests

Serial change-hugger Barack Obama hasn't even left an ass groove in the Oval Office chair and already he's already breaking promises.
"We're working with Congress to develop a tax-cut package based on a simple principle - what will have the biggest and most immediate impact on creating private sector jobs and strengthening the middle class. We're guided by what works, not by any ideology or special interests," an Obama spokesperson told CNNMoney.com in an e-mail.
This is a fancy way of saying, "oh hey, we just caved to the biggest, whiniest special interest group of all. Can you guess which one? It starts with an 'R'. Haha no, not retards, but close!"

Obama's economic team has apparently decided that throwing tax cuts into the stimulus bill will decrease the likelihood of Republican temper tantrums blocking it in Congress. The problem, as John Maynard Keynes pointed out on my blog, is that tax cuts are likely to be saved and have little stimulative effect. Facing a $1 trillion deficit in 2009, the last thing we need is to have to come back in the middle of the year to spend hundreds of billions more because the first bill did nothing but leave a giant hole in the coffers.

I fail to understand how this even makes sense politically. If the tax cuts pass and are ineffective, Republicans can bitch on and on about how the stimulus bill failed and caused gay marriage or whatever. It'd make much more sense to let them try to block an anti-recession bill, in the middle of a recession, and thereby condemn their approval ratings to single-digits forever.

Republicans never offer anything constructive, just utterly mindless calls for tax cuts. Budget surplus? Tax cuts. Budget deficit? Tax cuts. War? Uh, tax cuts? Great Depression, Jr.? Tax cuts, duh. Tax cuts? Yay, tax cuts. Who can forget special-needs child Eric Cantor valiantly calling for a cut in the capital gains tax during the only time in recent memory when no one had any.

I get the impression Republicans love tax cuts because they like pretending that they're the defenders of capitalism or something. And this means they love capitalism only insofar as it absolves them of the responsibility to think.

But here comes Barry, just giving it to them.

Wednesday, January 7, 2009

FT front page roundup

Israeli shelling killed 33 civilians at a UN-run school in Gaza, bringing the death toll to over 600. Palestinians will of course take it on the chin and not get too worked up about it.

Barack Obama meanwhile said he was "deeply concerned" about civilian casualties in Gaza because he's an anti-Semite. America now has two presidents at a time.

Distraught German billionaire tycoon Adolf Merckle stepped in front of a train after realizing he only had a few billion dollars left. His business empire began to unwind last year after being caught out in Porsche's reacharound takeover of Volkswagen.

Complications have emerged in Bank of America's merger with Merrill Lynch after the head of Merrill's prized financial advisers peaced out for no reason, leaving this 16,000-strong "thundering herd" of strapping young alpha-males leaderless with no future other than gay porn.

Minutes from the last Federal Reserve meeting reveal the governors considered an inflation target, which is Ben Bernanke's favoritest thing ever. The target will be: "some".

Tuesday, January 6, 2009

FT front page roundup, Slow News Day Edition

Prosecutors are urging a judge to put superfraud Bernard Madoff in jail for letting relatives take $1m in jewelry out of his apartment in violation of his house arrest. His entire family will now have to wear one of those electronic dog fence things.

Steve Jobs, who appeared deathly thin at the last Apple shareholder meeting, has a "hormonal imbalance", and is almost certainly not dying.

Ex-Ebay CEO Meg Whitman, fresh from helping John McCain lose the presidency to some black guy, is preparing to run for governor of California, where she will lose.

Luxury table maker Waterford Wedgewood is totally fucked, so rich people will be forced to buy poor people tables to put stuff on just like everyone else.

Monday, January 5, 2009

Painfully Unfunny Book Reviewington

Fixing Global Finance
by Martin Wolf
Johns Hopkins University Press
248 pgs

My hero Martin Wolf has published probably the most unfortunately timed book about finance ever, which was written just before Earth caught on fire, because of finance. Despite the title, the book has little to say about the current financial crisis. Still, the content is highly relevant, surveying the massive global macroeconomic shifts that laid the groundwork for the current awesomeness. Wolf argues that the global imbalances that developed after the emerging market crises of the 1990s left the global economy vulnerable precisely to the kind of events we're seeing now. He is also not shy about fingering the culprits: dirty, dirty foreigners!

Wolf highlights the spike in frequency of financial crises since the collapse of the Bretton Woods system in 1971, with the crises of the 1990s being particularly destructive. Many countries ran current account deficits financed with lots of short-term foreign currency debt. Most had pegged their currencies to the dollar which perversely encouraged this kind of borrowing. As the deficits grew it left these countries vulnerable to a "sudden stop" of financing, as investors began to doubt whether governments could maintain their currency pegs. When financing finally did in fact stop, countries ran out of reserves to defend their currencies and they plummeted, amplifying the real burden of the foreign currency debt and causing massive, painful swings in the current account from deficit to saving. Most resigned themselves to IMF debt peonage.

China was one of few to come out relatively unscathed, managing to successfully defend the yuan, despite massive short positions against it. Surveying the carnage, it and other affected countries resolved "never again." Wolf is certainly sympathetic to China's desire to insure itself against such outcomes, but the mechanism through which it achieved this created its own problems. China intervened in foreign exchange markets to keep the yuan below the dollar to benefits its exporters, the byproduct of which was a massive accumulation of foreign currency reserves, as incoming foreign exchange was taken from exporters by the government and placed into US treasuries. This allowed the US to borrow freely leading to the huge bilateral deficit with China.

This is the "global savings glut" argument which Wolf comes down in support of, as opposed to the idea that US profligacy is largely to blame for global imbalances, though he acknowledges the argument is not without merit. US current account deficits with oil exporters and Japan are more or less explained by structural differences in their economies, but with China it looks like deliberate policy. The key piece of evidence is that long-term real interest rates have been low and falling the entire decade. If US profligacy were to blame, foreign investors would have demanded a higher risk premium on US debt, but that wasn't the case. Low rates were the result of China's accumulation of US treasuries, on which the return for the Chinese has been terrible, indicating ulterior motives.

Wolf argues this led inevitably to overconsumption and the housing bubble in the US, and indeed other countries as well. The US Federal Reserve after all sets short term rates, not long, which matter less for housing finance. This is where I would quibble, since its not as if the People's Liberation Army was kicking in doors making banks issue home equity loans on dog houses, but yea, low rates made it way easier.

So what the hell to do? Wolf wants China to stop being such a pussy about running current account deficits. Having one of the poorer countries on earth export capital to the richest on such a scale is perverse and should not last. Some kind of grand bargain must be made with China trading currency appreciation for a bigger seat at the IMF.

Easing this process along would be some sort of mechanism to allow countries to borrow in their own currency, eliminating the need to horde foreign exchange reserves. This is the "original sin" of emerging markets, that no one wants to lend to them in their own crappy currency. It refers to a story in the Bible where Jesus tries to take out a second mortgage in drachmas but the moneychangers got all Jewy and demanded euros so Jesus was like "fuck that" and trashed the place, or so I gather. Wolf's solution, in addition to insisting that developing countries get their finances and inflation under control, is for an IMF or World Bank facility to allow them to borrow in their own currency, but I'm not sure how this does anything other than shift currency risk onto the international financial institutions.

All that being said, for a primer on the important underlying macroeconomic issues that remain with us in the current crisis you could hardly do better. I would bear Martin Wolf's children if biology permitted.

Guest Blogger: John Maynard Keynes

Good evening, bitches. Amidst the tumult of an oncoming global recession, I wish to take this opportunity to offer your fine new Negro president some friendly advice. It has come to my attention that his proposed stimulus package would rely heavily on tax cuts, which I'm sad to say, will prove inadequate.

The argument over whether public or private spending is more effective is as old as my testicles. The problem is that businesses and consumers are retrenching, which is a fancy word for not making or buying shit. Tax cuts are likely to be ineffective since businesses wont be paying much taxes anyway, and consumers will simply hand over their stimulus checks to their bank or loanshark.

That being said, public spending has its own drawbacks, as it is unclear whether the dundertards in your government will prove adept at targeting spending any better than your mindless consumers. Clearly there is space for an extensive upgrade of your decaying bridges and motor-carriageways, but this I'm afraid will not be enough. There seems to be nothing stopping government spending merely being recycled from paychecks to bank accounts.

Therefore I must insist that any stimulus merely ensure that the money be spent, not saved. A simple way to do this would to have the government contract a credit card company and have them issue debit cards on their behalf. The cards would not be redeemable for cash and have a specific expiry window, ensuring one either spends it or loses it. The plan could be tinkered with in any number of ways to give preference to consumption of certain goods and services over others. You assholes wanted bang for the buck, well here it is.

Anyhoo, my assistant informs me that this fine computer machine allows one to look at young Welsh boys touching themselves for a modest fee. My, it's a wonder you people get anything done these days! Good luck, America!

John Maynard Keynes is a renowned UK economist and was designer of the Bretton Woods international financial architecture. He currently serves as chief economic adviser to Jesus Christ.

FT front page roundup

Barack Obama suffers his first cabinet appointment scandal finally. Known Mexican Bill Richardson withdrew his nomination as commerce secretary because of an FBI probe into a company he was probably a day laborer for.

Obama will also have nothing to do on inauguration day because a bunch of Andrew Mellons in Congress are blocking the $1zn stimulus bill for now because, hey, its not like there's a risk of depression or anything.

In an interview, Expert on the Great Depression Ben Bernanke says there's a risk of a depression.

It turns out lots of people suspected superfraud Bernard Madoff was a superfraud and steered clients away from his superfraudery. None of this was made public however because markets don't need perfect information to operate efficiently.

Israel continues a ground offensive into Gaza, cutting it in half and maintaining its 100:1 kill ratio, which means war really is like a video game.

The venture capital industry has a tough year ahead, but a start-up to allow video conferencing to facilitate congressional subpoenas looks promising (patent pending).

Saturday, January 3, 2009

30 Second Movie Reviewington

I've recently joined teh Netflix, which sends me the pretentious foreign movies that I demand.

This week: Lust, Caution

Summary: In Japanese-occupied Shanghai, an innocent young girl in over her head finds that she can, in fact, sell out her country, her soul, her friends, and her vagina, to a rapist, collaborationist douchetard, so long as he buys her a big enough diamond. Stereotypes are forever. The end.

If I wore a bra out of necessity, I would totally burn it over this one.

Manufacturing

In case you were wondering, the United States stopped producing things last month, unless you count dollars, which you don't. The Institute for Supply Management's survey index fell at its fastest rate in 30 years, from 36.2 to 32.4. Anything below 50 is considered contractionary. JP Morgan's index showed the same thing. Also Europe stopped making things.

Update:
...oh, ok, and factory orders fell to their lowest level since 1948, before we 'lost' China.