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

Wednesday, March 25, 2009

re: idiots

Welp, I'm famous.

The letter is in response to an op-ed by Gary Becker and Kevin Murphy, who wasted several column inches whining about literally everything being done or proposed so far to counter the recession, and that we should merely be comforted that capitalism is STILL BETTER THAN STALIN. This is the kind of rigor you'd expect from the University of Chicago, founders of the 'Ass, Insert Thumb' school of countercyclical economic policy.

The tulip thing is a reference to the mania that took hold in Holland in the 15th 17th (ha, whoops) century, when the price of tulips resembled that of houses in the US in the 2000s, stocks in the late 90s, and on back, before deodorant. It's a clever way of saying that the weight of centuries of human activity lands squarely in the "Becker and Murphy are dumb" school of thought.

Oh yea, Becker and Murphy still somehow managed to win the Nobel prize in economics and the John Bates Clark medal, respectively. Way to go.

Separately, I'm very disappointed with the FT editors for mangling the intent of my original letter which appears below:
What, if anything, are Gary fuck Becker and Kevin Murphy fuck advocating in response to the global recession and financial crisis balls? I read and re-read their op-ed for a specific proposal cock but they seemed more or less satisfied with their attitude of: "if its broke, don't fix it." Their weener concerns about overbearing or unrelated government intervention seem fucking valid enough, I suppose, but if they really believe that "[g]iven the losses, actors in these markets have a strong incentive to correct their mistakes the next time", well then I have some motherfucking tulips for sale, word.

Monday, March 23, 2009

FT Week in Reviewington: This Week in News

Yay, I missed my own self-imposed deadline since I got to spend two hours on the phone with my bank's credit card fraud department last night, hooray! So here's the abridged version of what I was going to write.

Everyone flipped a shit last week over bonuses to be paid at AIG Financial Products, the division of the company that killed all your money, and innocence. Congress managed to make this travesty seem reasonable by comparison and proposed a putative 90% tax on bonuses at all companies receiving government assistance. Some nerds argued that the tax might violate that thing, what's it called, the Constitution.

Banker douches predictably got all pissy over this "witch hunt", but in fairness to witches, they never actually came close to destroying the world economy, or, you know, existed.

Treasury secretary Tim Geithner took some serious heat over the AIG bonuses, since its the first event of the financial crisis Congress can actually understand. Separately, Mr. Geithner is still pretty much the only person working at Treasury because Obama's vetting process continues to find that everyone has done something moderately distasteful in their life, which is unacceptable.

Current AIG boss Edward Liddy, who is actually working for a nominal salary of $1, is accosted by the aging hippies of Code Pink who demanded he return it, even though he needs something to snort his dwindling coke stash.

John Gapper worries that the reason AIG gave for handing out the bonuses, that they needed to keep the writers of credit default swaps on payroll in order to unwind those trades, might be accurate. Those contracts alone are complicated enough, and the collateralized debt obligations they insure even more so. This is exactly like some bad comic book where only the super villain can disarm his doomsday device, so we all have to give him our monies. We'll call him "Derivatron".

Gillian Tett explains that the logic behind securitization, the bundling of mortgages, car loans and whatever else into securities and selling them to investors most capable of bearing the risk, worked more or less as planned. The idea was to disperse risk and indeed all of it was, directly to AIG.

The Federal
Reserve ramped up its quantitative easing strategy, only don't call it that or Ben Bernanke will kick you in the nuts. It's basically monetary policy on steroids, and Imodium AD. The Fed plans to buy $300bn in US treasuries and another $700 some-odd billion on mortgage-backed securities to, among other things, push rates down to assist in refinancing underwater mortgages. This is the first time the Fed has explicitly monetized US debt but follows similar moves by the Banks of England and Japan. The dollar fell sharply on the news. It is thought the Fed is attempting to buy time until Tim Geithner's toxic asset program and the revamped TALF can be implemented.

Pope to Africa: Drop Dead. The pontiff, fresh from re- then uncanonizing a holocaust denier, continues his charm offensive by telling Africans that condoms not only wont cure AIDS, duh, but will make the problem worse. Okay, Mr. Pope, its bad enough Africans have to deal with contradictory messages coming from their governments, traditional "healers", and poor-hugging NGOs without the Ambassador to Jesus coming along and sowing more confusion amongst all the crop failures. (Also the Pope wasn't counting on the soon-to-be-released Trojan Kevlar!) Even as a non-religious heathen I'm reluctant to just come out and say "hey, fuck you, Pope", so pardon me while I have a hot love-making session for one, just to spite you.

This Week in Graphs:
Corporate earnings are in for 2008, and they're pretty great, uh, if you flip them upside down, like they were on your boss's desk, when he was firing you...

Mohammad Khatami withdrew from the presidential race in Iran after two other reformists planned to run, threatening to dilute the vote against Mahmoud Amadi-Nejad.

Asif Ali Zardari of Pakistan agreed to reinstate the judge at the center of the political crisis and will ask courts to reconsider the banning of opposition leader Nawaz Sharif from politics. Thank fucking god.

Epic scumbag Avigdor Lieberman of Yisrael Beitenu, likely to be king-maker in any Likud-led coalition in Israel, is set to become foreign minister. So Israel's new public face to the world will have openly called for ethnic cleansing of Palestinians and actually lives in a Jewish settlement. Diplomacy!

Separately, the Israeli army wantonly killed civilians in the Gaza war according to allegations made by the incorrigible anti-Semites in, uh, the Israeli army.

The entity managing China's foreign exchange reserves, SAFE, lost roughly a bajillion dollars investing in equities right before they became a substitute for toilet paper.

Finally, the army in Madagascar overthrew president Marc Ravalomanana and installed...

...hey, Ralph Macchio, I guess. Alright.

Sunday, March 15, 2009

FT Week in Reviewington: Recession Defeated

Everyone put down your food stamps and fucking pay attention! The recession is overrrr! We fucking did it, yeaaah! Done. Pwned. Pull the money, if you have any, out from under the mattress and halt construction on your race-war bunkers...

The S&P 500, if you'll ignore for the moment the 4-month nosediveish trend shown above, and the entire year before it, was up 10% on the week with most other major indices topping 5% or so. The rally began Monday when Citigroup reported that it had made something called a "profit" in the first two months of the quarter. I had to look up what this was in the dictionary but apparently they are good and make up for the billions in government aid and no-cost financing from one of the Fed's many "temporary" liquidity programs. JP Morgan and Bank of America made similar claims, thought no word on the actual size of these alleged "profits". Retail sales in the US also held up at non-cataclysmic levels. So as I understand it, "not terrible" is the new awesome.

Some pants-jizzers were certain the news marked the bottom of the market:
One investor confident that equities have seen the worst is Anthony Bolton, president of investments at Fidelity International.

In a video interview with the FT this week, Mr. Bolton called a bottom in stocks and the start of a new bull market. Mr. Bolton made the same call late last year, before a renewed sell-off.
Haha, journalism. In all seriosity, the rally was a pleasant distraction from the continuing collapse of industrial output everywhere.

Moving along, there's still a fucking financial crisis. Eighteen months on and the only financial institutions that can access capital markets, if at all, are the ones huddled in a tent-village outside Sheila Bair's house. Possibly because banks still have huge amounts of unpriceable shit on their books. Possibly.

If anyone needed a single metric to determine just how bad the things really are, well here you go. The non-profit Sesame Workshop was forced to lay off 20% of its workforce. Meanwhile the entire Sesame Street gang has been forced to scrape by in Oscar's trash condo after a bitter labor dispute. Except Snuffleupagus, who doesn't fit. Fuck you, Snuffleupagus. The rest work in various semi-legal fields, struggling to pay off Oscar's mortgage, which is saddled with negative equity since he refinanced at the top of the market and built a cardboard add-on. TYPICAL SUBPRIME LOSERS.

The G-20 summit convened in the UK, so everyone get your caffeine pills ready, and probably those things that hold your eyelids open for extended periods, you know, pornography. Topping the agenda will be fiscal efforts to fight the recessions, establishing a framework for actually regulating global financial markets on a global level, and boosting IMF funding to keep eastern Europe from falling of a cliff.

Tim Geithner prefers phone chats with UK finance minister
Alistair Darling
so as to avoid looking him in the eyebrows.
The US initially called for a tripling of IMF contributions, which is amazing considering two years ago people openly discussed closing it down since it had nothing to do. But now everyone is broke so its saved, hooray. A deal on the IMF is likely to be the only significant outcome of the summit, since the US-UK front to throw money at the recession met stiff resistance from masochistic tightwads in Germany:
“We have reached our limits,” said Axel Weber, president of Germany’s Bundesbank, in Frankfurt yesterday. “The expectation that we could neutralise this synchronised recession through short-term fiscal policy measures is false. We should not even try. There will be costs.”
Axel Weber is totally gay for recessions.

light of US spending plans, Chinese premier Wen Jiabao finally, and hilariously, did what everyone in China had long fantasized about and yanked the choke-collar of post-imperialism. America will pee on the rug again anyway. Ruff.

Ken Lewis
of Bank of America is more or less openly flouting an actual for-real investigation into bonuses paid by the failboat U.S.S. Merrill Lynch before BofA acquired it. BofA, a recipient of billions in government aid, reasons that protecting the privacy of greedy douchebags at Merrill, whose company nearly destroyed them, mind you, is more important than cooperating with the NY attorney-general. Why anyone would possibly take a stand on principle over this, now, is beyond me. Never underestimate the power of the handicapped.

The perp-walk
we've all been waiting for: Bernard Madoff plead guilty to securities fraud and was marched directly to jail. He took all the blame and declined a plea bargain to rat out his employees, who prosecutors surmise must have known and helped in the fraud, what with the compiling of elaborate financial statements complete with pie-charts of deceit. Further cases are likely at some point. Madoff, who had been under Park Avenue-arrest, will hopefully get to shit in front of strangers forever.

Thirty years later, Jack Welch, father of the "shareholder value" movement, much maligned for breeding destructively procyclical short-termism in corporate boardrooms, derided those who ever listened to his "dumbest idea in the world." Uh, thanks, Jack.

Mike Mackenzie attempts to puncture the twisted cult of the Dow Jones Industrial Average.
Unlike most equity benchmarks, the price of a company matters greatly for the Dow, as it is weighted according to a company’s share price and not, like most indices, according to total market capitalisation. That means a stock with a low price has much less influence on the Dow’s overall performance.

Perma-bear Stephen Roach of Morgan Stanley, who has called three of the last one recessions, is worried that the paths chosen to counter the global meltdown so far are merely exacerbating the same underlying imbalances that led to this mess in the first place. Deficit countries have been the most jubilant about spending their way out while surplus countries seem reluctant. The noises coming out of the G20 summit unfortunately seem to confirm these attitudes haven't shifted.

Gillian Tett spoke with Dolf Bo Lundgren, the Swede who headed the efforts to clean up their banking system after the financial crisis of the early 90s:
[T]he grim truth is that, if the financial system keeps melting down, then eventually even the unfathomably large cost of a blanket guarantee might look more palatable than other options. And even before that, there is another crucial point: “What we learnt in Sweden is that you cannot solve financial crises by taking a piecemeal approach,” laments Mr Lundgren, who confesses to feeling deeply worried that “there are still [so many] piecemeal approaches being used”.
Hey, we've ignored you for so long, Sweden. Why stop now? Schnergen.

Pakistan, the basket-case enclosed in a hand-basket, post-marked to hell, just upgraded to overnight shipping. The opposition PML-N is staging protests against prime minister Asif Ali Zardari, after the Supreme Court barred its longtime leader Nawaz Sharif (the 'N' is for 'Nawaz') from holding public office, in a move that is widely seen as politically motivated. Sharif and Zardari had earlier united to secure the ousting of the military government of Pervez Musharraf but soon fell out over the failure to reinstate a senior judge dismissed by Musharraff, who it is thought may pursue corruption charges against Zardari. Pakistan already faces terrorist attacks, two insurgencies, an army only partially answerable to the government, and a desperate need of IMF funds, but will now have the more reasonable segments of the population rioting in the streets.

Hamid Karzai, president of Afghanistan, decided to annoy everyone and call a snap election for April, which would have been interesting considering the ballots for the planned August election haven't even been printed yet. He later changed his tune after the electoral commission politely informed him he was out of his fucking mind. Karzai is constitutionally required to step down in May but the logistical and security nightmare of holding countrywide elections means there will be an interim period no one is certain how to fill.

Switzerland fires
the opening salvo in the War of Competitive Devaluation, intervening to depress the franc in a move henceforth known as quantitative cheesing (patent pending). Hopefully everyone will give the Swiss a pass on this since the franc, like the yen and indeed the US dollar have been the subject of flights to safety, driving up the currency and tightening monetary policy unnecessarily given domestic economic conditions.

And finally, a few days ago I pointed out that Agent of Incontinence John McCain supported the temporary nationalization of banks that proved insolvent. I stupidly assumed the person who repeatedly confused "fiscal" and "financial" in the presidential debates knew what that meant. He and Richard Shelby, ranking Republican on the Senate banking committee, respectively called on Barack Obama to "let the banks fail" and "close them down", so as to avoid giving them more sweet, sweet tax monies. This, of course, is completely different from nationalization, which would require huge initial outlays of public funds and would almost certainly have to honor bank debt in order to avoid the multiple Lehman Brothers-like catastrophes of simply "closing them down." I'd be interested in hearing Mr. McCain's explanation of all this if I didn't already know the answer, which is "earmarks".

Friday, March 13, 2009

corporate restructuring

Since its been difficult to keep up with the demands of internet blogging, what with all the sitting around in my underwear and typing and whatnot, I've decided to try aiming for a weekly reviewington instead, mercifully limiting my mom readers to one Bernard Madoff joke per week.

Tuesday, March 10, 2009

FT front page roundup: Billionaires with Douchebags Edition

North Korea's temper tantrums have gotten worrying. The military hotline between the two Koreas was cut, this coming after the North said it would no longer respect maritime boundaries and threatened Southern commercial aircraft entering its airspace. The tizzy is likely to be a prelude to a missile test of the newer Kinedowang Taepodong IIs, which are capable of hitting Sarah Palin's house, which she can see countries from. There was even some speculation that the US would attempt to shoot down any missile launch, which recalls an episode from my childhood, throwing toys of my crib and then shaping up once my mom started shooting them down with surface-to-air missiles.

Also, one of Kim Jong-il's sons was "elected" to something this week, marking him as Kim's likely sucessor. It wasn't the one who likes Eric Clapton, unfortunately.

Pharmaceutical giant Merck is acquiring rival Schering-Plough, so hopefully they'll make us the hippie wonder drugs that make war and depression seem dull.

Japanese stocks tanked as the current account swung heavily into deficit in January, highlighting the swan dive in exports and the strength of the yen. The yen has since fallen back as investors finally forgot why they ever considered Japan a safe haven.

China introduced a security crackdown in Tibet on the eve of the 50th anniversary of the failed uprising in Lhasa, which last year sparked anti-Chinese riots. Communist party leaders continue to struggle with the mother of all public relations dilemmas, how to slander a nice old man who everybody likes.

And Helg Sgarbi, some douchebag who suckered wealthy women out of millions, including the billionaire heiress of BMW, confessed and will be going to Swiss federal pound-me-in-the-ass prison. Apparently he pretended to be a secret agent, just like sexy Bill Paxton in True Lies. This totally works, apparently. Anyway, I'd heard about this story a year ago so I suspected he must have been a dashing super stud. Yea, well...

I am doing something wrong.

In the Navy

This is so perfect. No explanation. No nothing.
White House protests to Beijing over naval incidents

The White House urged Beijing to follow international law yesterday after a series of incidents in which the Chinese navy allegedly harassed US naval vessels in the South China sea.


According to the Pentagon, five Chinese vessels surrounded the Impeccable on March 8, telling the ship to leave the area. After two ships came within 50 feet, the Impeccable sprayed its fire hoses at the Chinese vessel. The Chinese ship continued to approach, as its sailors stripped to their underwear.

FT front page roundup: Stupidly Misleading Headline Edition

I woke up yesterday morning afternoon and wandered outside to find my FT, waiting patiently as always below the dent in my front door. Plastered above the fold was this headline:
Summers backs state action
Holy dog shit, Summers backs nationalization? Or is this some thinly-veiled metaphor for his renowned sex parties, also to be nationalized somehow? Do tell!

Oh, hey, yea. Nothing about the banks at all. You fucking cockteases. A more accurate headline would have been "Summers backs things Summers is doing already". To think I actually stood there reading this while the 20-something hottie across the street cleaned out her car. Creepily staring at her would have been a much better use of those two minutes.

Anyway. The Asian Development Bank reckons the total fall in asset prices across the world for 2008 was around $50 trillion, give or take several trillion. Fortunately, I know the remedy for multi-trillion dollar wealth destruction...

Kittens. With poor motor skills.

Take that, Asian Development Bank.

Bank of America is canceling a program to recruit foreign MBA graduates of US schools due to conditions laid out in the TARP. Where will foreigners learn to make poor acquisitions and run their financial conglomerates into the ground like their hero, America?

In an interview, human dildo Hank Greenberg, fast replacing John Thain as the object of my impotent rage, berated the government for fumbling the bailout of his beloved AIG, which still exists only because of the government bailout.

He specifically blasted the AIG's purchase of collateralized debt obligations from counterparties at face value to avoid triggering payouts on credit default swaps written on those CDOs as a bad deal for the company. This, of course, is true, but guess who led AIG's charge into credit derivatives? Yes, Hank Greenberg, and his huge, wrinkly balls. He is literally the only person who is not allowed to complain about this.

And some potato-hugging douche-nozzles from an IRA splinter group killed two British soldiers outside their base in Northern Ireland, wounding two others and the two pizza delivery guys they were talking to. Patriots.

Friday, March 6, 2009

FT Week in Reviewington: Chinese Play Joke Edition

On Wednesday markets were pleased to find there was still in fact such a direction as "up", staging a broad rally. The optimism was driven by leaks from a senior Chinese official that prime minister Wen Jiabao was set to announce new stimulus measures at the Communist party's annual National People's Congress, where thousands of delegates gather to vote on who can stay awake the longest.

But then on Thursday, Mr. Wen went and peed in everyone's coke. Haha, it's funny, because its racist.

He offered no new stimulus measures and crucially failed to provide details for the already vague plans the party announced earlier, sending markets down horribly again. Capitalism is so punk'd.

Anyway, revel in the irony as the remnants of our financial system pathetically subject themselves to the whims of a communist dictatorship, widely suspected of making up economic figures.

Shares in GE fell over fears over the stability of its finance arm and worries that it may lose its AAA credit rating. If you're keeping score, GE, like everything else, is too big to fail.

The Mexican soap opera that is Ukrainian politics continues. Facing collapsing output, a souring deal with the IMF, and two leaders who hate each other slightly more than everyone hates them, literally the only positive development in the last month has been a resolution of the gas payment issues with Russia, so at least people aren't freezing to death anymore. (Or not.)

Well, security forces raided state-owned Naftogaz, in order to preemptively contradict anyone who'd have argued Ukraine had enough problems. Ukraine already has by far the highest credit default swap spreads in Europe indicating a universal lack of confidence. The raid itself is apparently an extension of the power struggle between president Viktor Yuschenko and prime minister Yulia Tymoshenko, which it was thought could not possibly get any more ridiculous. But then state security forces raid a state-owned company in the middle of an economic meltdown, literally days after the pair publicly agreed to stop feuding.

At least the SUB guys look cool.

Ford continues to entertain the fantasy that it wont end up asking for a government bailout with a debt-for-equity swap. Cash bonfire GM on the other hand is coming to terms with the inevitable, since everyone continues to not buy cars.

The firm in charge of the liquidation of Lehman Brothers is questioning a $3.3bn discrepancy in the accounts of Barclays, the UK bank which bought Lehman's North American operations. Alvarez & Marshal figure that Barclay's set aside far more than they actually paid out in compensation to former Lehman employees and may have booked the remainder as profit. Barclays responded with a calm, considered letter:
“Alvarez & Marsal’s position is completely without merit, baseless and a serious misunderstanding of the facts."
Methinks the lady doth protest too much.

Pantsuit of Freedom Hillary Clinton broke from Bush era protocol and invited her best friends in Iran to a regional discussion on "Afghanistan's future", which is perhaps the most optimistic statement in history. So long as we're guessing, this will include a slow, steady erosion of the Durand Line, as the Pashtun regions of Pakistan and Afghanistan unite as 'Clusterfuckistan', lots and lots of opium, a protracted death-spiral of medieval violence, and finally a reunion concert on VH1.

John Gapper seems to agree with my whole Hank-Greenberg-is-a-dildo thesis.

America's army of unemploids grows, with a third-straight month of 600,000+ jobless claims. Jesus fucking Christ.

Retarded petro-clown Hugo Chavez of Venezuela nationalized a Cargill rice mill, which violated strict laws ordering every business to sell everything at a loss, for the poors, who have been blessed with 30% inflation forever. Chavez has already nationalized broad sectors of the economy in pursuit of his 21st century socialism thing, and is mulling more takeovers.
Rice production has been the focus of government intervention so far this week. But Mr Chávez has said the government is looking at other sectors, including plants producing maize flour, cooking oil and toilet paper.
Oh please, please, please nationalize the toilet paper industry, so I can do a master's thesis on Caracas' black market for TP, for bungholes. I'm desperate to find out whether consumers prefer the ass-chafing solidarity of Simon Bolivar's revolutionary construction paper, or the imperialist comfort of scented Charmin ultra bunny soft.

A currency trader aboard the failboat Merrill Lynch is being investigated for possibly losing $400 million in undisclosed trades. Way to go, dickhead.

Superdouche Bernard Madoff, who took all the monies, is nearing a plea bargain with prosecutors.

And Mattel opened its ginormous Barbie store in Shanghai. Some early hits: soup-kitchen Barbie, unemployed financial analyst Barbie, and riot-police Ken.

Thursday, March 5, 2009

I'm not touching you, I'm not touching....

Years before my birth, God placed Clive Crook on this planet solely with me in mind, that may I grow up to have someone to annoy the shit out of me by the time I became literate and potty-trained.

That time has come.
Budget reveals the liberal Obama

Barack Obama’s first budget is a revelation. The US president’s plans will not come to pass in the form he suggests. Congress writes the laws and will make a hash of it. Still, this first full statement of intentions speaks volumes, and leaves me in a paradoxical position. On one hand, I admire much of what the budget says. On the other, I feel I owe Republicans an apology.
He's liberal? Do go on.
As you recall, in the debate over the fiscal stimulus, Republicans accused the president of presenting a measure they could not support, disguising this with an empty show of co-operation. Bipartisanship, they said, is more than inviting your opponents round for coffee and a chat. I did not buy it: I accused them, in effect, of brainless rejectionism and a refusal to compromise, and congratulated the president for trying to come to terms with the other side.
Brainless. Yes. Continue.
This budget says the Republicans had Mr Obama right all along. The draft contains no trace of compromise. It makes no gesture, however small, however costless to its larger agenda, of a bipartisan approach to the great questions it addresses. It is a liberal’s dream of a new New Deal.
Um, is Crook willing to grant that the reason Obama's new proposals are less than compromising is because his efforts at bipartisanship went nowhere, precisely because of the "brainless rejectionism" he points out? Let's recall that the stimulus bill was originally designed to include a large percentage of non-stimulative tax cuts specifically to sate Republicans, and that the final version was needlessly weighed down with more, yet still it gained minimal support.

But from what I gather, Crook is upset that even after Republicans threw a temper tantrum over the stimulus, in which their primary objections to the bill made literally no sense, Obama didn't go out of his way to court them again, as if he's learned nothing from the experience. Pardon me for thinking that the actual lesson here was for Republicans, that by blowing off a genuine attempt to gather their input, its hardly shocking the courtesy isn't extended the next time around.

Crook then argues regarding Obama's liberal new New Dealie, with which he more or less agrees, is setting a bad precedent because for now he's only asking the wealthiest 5% to pay for it:
When Mr Obama turns to financing this historic initiative, however, he moves left. His budget pencils in roughly $80bn a year in new revenues from a carbon cap-and-trade system – another welcome innovation, by the way, in my view. Does he use those revenues to pay for the new healthcare reserve, or to close the deficit in outlying years? No, he uses them to make permanent the tax credits in the fiscal stimulus: rebates and subsidies tilted to the working poor. To pay for healthcare reform, the plan curbs Medicare payments to private providers and, unexpectedly, reduces the value of income-tax deductions claimed by the better off.

So as well as reversing the Bush tax cuts for households making more than $250,000 a year, as promised during the campaign, the budget comes up with another way to extract tax from high earners. All but 5 per cent of households will pay “not a dime” for the panoply of public investments in the blueprint.

Take this budget at face value, and when Mr Obama talks about “a new era of responsibility” he does not mean: “We are all in this together.” He means: “The rich are responsible for this mess and it is payback time.” Leftist Democrats are thrilled, and rightly so. The budget has three themes: healthcare reform, public investment and unflinching redistribution. This is indeed a new social contract: we get, they pay. Liberals never had it so good.
Yes, everyone's taxes will have to go up eventually, fair enough. But how does the above square with what he just said? How does Obama call for higher taxes for everyone, and, at the same time, court Republicans who will no doubt lunge at the chance to support universal healthcare, universal tax hikes, and they're favorite, a cap-and-trade emissions program. What fucking planet are you on, dude? Two months into the presidency, I'm going to have to give Obama a pass for not striding out to the podium in his Mao suit vowing to RAISE EVERYONE'S TAXES FOREVER.

Lastly, Crook lays bare his pathological hatred of hippies, which I share, but nevertheless clouds his judgment, much like a cloud of patchouli and unwashed hair smell.
Tactically speaking, Mr Obama may have overdone it. If I were advising him, I would say that the elation of his party’s progressive wing is a red flag. It mocks the president’s claim to be a consensus-builder, and tells the centre to watch out. Keep the left unhappy, would be my counsel.
Hm, yes, brilliant. Piss off the people who vote for you. Suck off the people who will never vote for you. Build consensus where there will never be any. Clive Crook is Machiavelli's retarded third cousin.


Hippies in Germany are upset that some of their stimulus money is going to the Bundeswher to buy guns and other cool shit. I think they're forgetting Keynes' axiom, that in such dire economic circumstances the government might as well pay people to blow holes in the ground, and then pay others to fill them in, with the bodies of their enemies. Pretty straightforward, I thought.

Wednesday, March 4, 2009

FT front page roundup

Sorry, I've been slacking lately. It turns out finding the humor in epic human tragedy every day weighs on the soul. Anyway, news...

Stocks fell on Monday to their lowest level since 1996, when people still listened to Ace of Base.

David Moffett, who took over housing giant Freddie Mac only six months ago, discovered that life is demanding, without understanding, so he quit.

Ken Lewis, head of Bank of America, which has received a total of $45 billion in government assitance, told FT interviewers that it was a mistake to request the last $20 billion he asked for and that he shoud have asked for "only $10bn." Ken Lewis cannot hear himself talk.

AilIG became the biggest loser in corporate history by posting a $62 billion quarterly loss, largely due to the deteriorating situation in commercial mortgage-backed securities, which have until now held up better than residential. And the damage apparently is not over, as their books revealed a further $12 billion exposure in credit default swaps written on collaterallized debt obligations, the toxic assets that are at the heart of the financial crisis.

Even more interesting is news of a 'bad bank' set up by the Fed to clear AIG's balance sheet of toxic CDOs after the company was first nationalized. Cleverly named ‘Maiden Lane III‘, after Ben Bernanke’s favorite pornstar, the case illustrates the challenges facing the Fed and Treasury as they attempt to clear banks' balance sheets.
In November, the Federal Reserve Bank of New York set up a limited liability company called Maiden Lane III – backed by $5bn from AIG and borrowings of up to $30bn from the Fed – to resolve the situation. The idea was that Maiden Lane III would buy CDOs from AIG’s counterparties and then tear up the credit insurance issued by AIG.


In the days after the creation of Maiden Lane III, AIG and the Fed approached about 20 counterparties with an offer to buy
CDOs. By the end of the year, Maiden Lane III had paid nearly $30bn for CDOs with a face value of $62bn, AIG said.

AIG paid $32.5bn to terminate the credit insurance on the CDOs, recognising a 2008 loss of $21bn.

Counterparties received 100 cents on the dollar for the CDOs, but the prices paid by Maiden Lane III suggested that the CDOs were worth 47 cents on the dollar, said a person familiar with the matter.

Any sales of CDOs at a certain percentage below face value can trigger payouts on credit default swaps, leading to cascades of awfulness. But avoiding default triggers means paying disgustingly more than they’re actually worth. How to solve this? Fuck knows. Hooray for finance!

More hilariously, Hank Greenberg, former head of AIG, is suing the company for material misrepresentation after he bought shares at "inflated" prices. Greenberg, more than anyone, is responsible for AIG's foray into complex structured finance and credit derivatives that are the reason it failed. He was ousted in 2005 but remained the single largest shareholder, harboring fantasies of regaining leadership. For him to pretend to be the hoodwinked investor, in a company that he micromanaged for four decades, is simply beyond words. Hank Greenberg is a human dildo and these court decisions will prove definitively whether or not there is a God.

Barack Obama and Gordon Brown met to discuss the economic crisis before retiring to the Lincoln bedroom to cement the US and UK's "special relationship".

Nutcases in Pakistan shot up the Sri Lankan cricket team with rockets and machine guns, wounding several and killing six police officers.

German chancellor Angela Merkel and French president Nicolas Sarkozy decided to patch up their mutual hostility by invading Liechtenstein together.

And planet-huggers are complaining that the various stimulus bills being implemented around the world are too carbon-heavy, ignoring the fact that people’s concern for the environment is positively correlated with their net worth.

Monday, March 2, 2009

FT Weekend roundup

The US government completed its third bailout deal with Citigroup, becoming its single largest shareholder. This semi-nationalization, henceforth known as Tim Geithner's Semi, leaves the US with a 36% stake in the company and substantial leverage over its management. Analysts wonder whether this slow-motion time-wasting death by money can be a model for future clusterfucks.

Last month's awful terrible US GDP figures turned out to be too optimistic. Fourth quarter GDP for 2008 declined at an annual pace of 6.2%. The revision was largely due to huge fall in inventories, which would normally be good if there were signs of a pickup in demand, but there aren't, so it isn't. It's basically a series of tubes.

Financial scandals just got hotter. Laura Pendergest-Holt, chief investment officer of Sir Allen Stanford's Ponzi division, is escorted to court by an equally sexified US marshal. I'd misappropriate their assets! Ms. Pendergestt-Holt faces charges of obstruction of justice in the investigation of her boss. It's safe to assume her intransigence will be overcome in a manner most fitting that of your typical Cinemax coming-of-age lesbian prison-sex drama.

Finally, GE is cutting its dividend payments for the first time since 1938. Private equity firm Blackstone is also suspending dividend payments for the quarter. And only because dividends lack comedic value.

Sunday, March 1, 2009

Ben and Tim's bogus journey

Large US banks are essentially paralyzed by the toxic assets on their books, particularly collateralized debt obligations, the complex securities that managed to turn shitty mortgages into AAA-rated milk-chocolaty goodness.

But when investors began to realize that the chocolate was, in fact, shit, they no longer wanted to chow down. This led to the collapse of off-balance sheet vehicles banks were using to unload these things and landed them right square on their plates. Any solution to the financial crisis requires getting them off. Hence today’s dilemma.

The Treasury's plan for them is to center on finding private buyers, which is an indication that, after all this time, they still think the problem is a lack of liquidity. True, ascertaining what value, if any, they have has been near impossible given the credit crunch, but Gillian Tett reports on some recent efforts. They are, let's say, less than comforting:
In recent weeks, bankers at places such as JPMorgan Chase and Wachovia have been quietly sifting data trying to ascertain what has happened to those swathes of troubled CDO of [asset-backed securities].

The conclusions are stunning. From late 2005 to the middle of 2007, about $450bn of CDO of ABS were issued, of which about one third were created from risky mortgage-backed bonds (known as mezzanine CDO of ABS) and much of the rest from safer tranches (high grade CDO of ABS).

Out of that pile, about $305bn of the CDOs are now in a formal state of default, with the CDOs underwritten by Merrill Lynch accounting for the biggest pile of defaulted assets, followed by UBS and Citi.

The real shocker, though, is what has happened after those defaults. JPMorgan estimates that $102bn of CDOs has already been liquidated. The average recovery rate for super-senior tranches of debt – or the stuff that was supposed to be so ultra safe that it always carried a triple A tag – has been 32 per cent for the high grade CDOs. With mezzanine CDOs, though, recovery rates on those triple A assets have been a mere 5 per cent.

The covered years are admittedly at the height of the lending frenzy so losses are unlikely to be that great for earlier periods. Still, we can be generous and assume recovery rates on AAA tranches of 50% and still be stuck with a massive hole in banks' balance sheets.

Moreover, as Tett points out, these assets were rarely traded to begin with, so merely finding new buyers will do nothing to improve the underlying performance of these securities. But that is exactly what folliclely-challenged Ben Bernanke and Treasury douche Tim Geithner are proposing as a solution--trying to lure in buyers with subsidized government finance and hope they're worth more than they are.

As I pointed out earlier, Ben and Tim have been arguing that banks are solvent and that there is no need for nationalization, while at the same time they acknowledge that no one has a fucking clue how much the CDOs are actually worth, which means they have no idea if banks are solvent or not, and all the while they nurse at America’s Tit of Freedom.

Well, we now have our first glimpse of their real potential losses, which puts the inadequacy of the Treasury's plan into stark relief. But even supposing banks' actual losses are realized and they fail their stress tests, the Treasury has allotted a 6 month window in which they can try to raise capital and close the gap in their finances.

Given the state of the global economy, it's frankly unforgivable to let the uncertainty continue for that long. The government is so heavily exposed as it is that it might as well just take all of the banks' losses and get on with it, so long as it's actually communicating a definitive, if stupid, strategy.

But no, more dicking around. Heinous.