Collapsing Russia Fantasizes Over Collapsing United States

I am in relaxation mode here in the universe of Blax Alternate. With a week of vacation to go, I am trying to savor the not working part, while remaining glad that I've got a job to return to. So many don't, and the ranks of the unemployed will surely swell like we have not recently seen.

I picked up a Wall Street Journal today, which carried an article about a Russian professor who predicts that the United States will collapse by 2010 due to financial and moral decay. This was old news, having been widely reported a month or so back, and on a prediction that he has been making for some time. He concludes that eventually Russia and China will form the backbone of the world's future financial regulation.

It tickled my ha ha as I waited for my laundry to exit the dryer. For if the United States is to enter civil war and split into his predicted parts, surely Russia itself is headed for pure fire and complete collapse. It is amazing how hell is always so far away, the blaze at our backs unfelt. It must have been a really slow news day, because U.S.A. Today ran with the same story.

While the man with the whimsical mind, this Igor Panarin, is looking this way, finger pointed, the ruble daily takes to lower levels and once great flagships like Russia's Gazprom struggle under the burden of massive debt. This while China and India and certain Middle Eastern nations remain flush with cash.

Igor does make a valid argument that the U.S. national debt is one huge ponzi, and surely if that is not addressed we will in fact be flat on our face. By that will not occur by 2010, nor will it happen before Russia itself experiences a huge collapse. You cannot build your house on any one thing (like oil) or any two things (like oil and gas), for you remain at the mercy of pricing in such a narrow band of endeavor.

Today I was more amused than concerned. We have some time here in the States; we tend to bounce back. We make sure not to repeat the same bubble twice when blowing bubbles.

What we will see, and certainly in 2009, is major havoc in Russia as people grow angry over collapsed currency, falling incomes, loss of jobs, and the complete inability of the Russian government to weather the storm. I say this as a fan of Putin, to the extent that I believe all nations want leaders who are strong and who bring dignity (which I believe Putin has done, faults included). But Putin did not take the steps necessary to create a truly diverse economy. Unlike the Chinese, who proceed in deliberate fashion, and seem to learn from every error (and history), Russians will suffer greatly from Putin's shortsighted miscalculations of his nation's strength.

Not to say we won't join Russia on the heap. It's just that we will not get there first, if at all. We are also a nation with a short attention span, which allows for instant reinvention.

Christmas 2008: Cookies for Santa

It's very peaceful now. It's Christmas Eve, and all is quiet here in my part of the woods, oatmeal cookies on the table near my keyboard. The screen door is open and smells of winter are floating in, but with the warmth of the heat hitting me from the opposite direction. It's dark in here, but a small strand of Christmas lights glows from behind. There are no cookies for Santa because I am sitting eating them and because he does not exist.

We end the year rolling in the debacle created by ponzi master Madoff, who seems to have duped a rather large number of people into believing he could provide them with a steady 12% a year investment returns, regardless of the direction of the wider market. Had the economy not been so bad, forcing some of his investors to want to tap their cash holdings with him, he might have been able to maintain the illusion for a lot longer.

But there is no Santa, and things are bad, and now many things hidden are coming to light. Despite the difficulties of tight credit, job and 401K losses, and the decline in housing values, the light shed upon our economy is a good thing. True value is now evident. Or not quite. But at least we are being forced to march inevitably toward true value, and truth.

There are many times when faith is of great value. It leads us to reach for more, to try harder, to trust, to dream, to continue when all things obvious shout out "No, never, not". Many placed their trust in Madoff because he seemed a man of simple honesty and humility. But somewhere along the line Madoff lost his way, and departed from truth.

But he is not unique, nor are the rather high end investors who believed in him. Our entire economy in recent years was built on faith that home values would continue to rise. President Bush pushed the concept of the "ownership society" with genuine intent and everyone was willing to place their faith in the ability of assets to rise indefinately.

Sometimes faith, without the levening of truth, can lead to all sorts of unexpected outcomes. It's not merely believing, but what you believe, and how you believe. This year we have learned that truth matters and without truth, faith collapses and trust dissipates.

As I sit here in the dark, I know two things now and repeat them. There is no Santa, and, there are no cookies left to be eaten.

Daily Update: Happy Birthday Jesus and Year Old Recession!!

“‘When there’s a threat, find God,’ goes the proverb in Poland,” said Rafal Antczak, an economist at Warsaw University. “And that is what has happened."

(N.Y. Times)

That quote comes to us with the news that several European nations that previously rejected the euro (aka "God") are now starting to see the merits of the currency. Being forced to defend individual currencies against devaluation has pushed certain nations, like Iceland, into drastic and unforseen lifestyle changes. Poland, with their zloty, and Denmark, with their "picture perfect model of economic management" (N.Y.T.), are seeing their citizens warm to the idea of joining in a larger more powerful currency block.

This has to leave the Russians somewhat nervous on two fronts. Via this crisis, nations that were not fully integrated with Europe will seek to become even closer to the West, and second, it highlights the great difficulties Russians are having in keeping their own currency at sufficiently respectable levels. They are using the third largest pile of reserves in the world to protect their currency, but that pile is starting to shrink.

Russia's economy is spiraling downhill much faster than many expected just a few weeks ago. Companies have slashed up to a fifth of their staff, economists have drastically cut their growth forecasts, there are concerns of a steep currency devaluation and oil prices are in the doldrums - no good thing for an economy based on energy exports.
(U.S. News)

From the Economist:

Russia insists that its US$453bn reserves are large enough to prevent any sharpmoves in the exchange rate—yet these reserves have fallen by 24% since
August and the rate of depletion is accelerating.

Things are not likely to end well for Russia, no matter what they insist, and lacking a diversified economy or tradition of recent financial stability. If the United States is declaring a recession today, (with considerable backdating to last year), then we hardly see how the Russian economy will be able to withstand the rush to quality as people seek to put their money into the perceived safe hands of various gods (whether Treasuries or the euro).

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In case the actual economic news thus far has not totally convinced us of how much trouble we are in, the official word is in. No it's not the official definition of six months of negative growth, though we should hit that mark as we exit this festive holiday month, but rather, the word of the folks at the non-profit National Bureau of Economic Research. It's both Jesus' and the Recession's birthday, with the recession turning a year old this month.

George Bailey, Please Report to Citibank

Remember last night where we speculated that Citibank was probably in talks with the government to avoid some type of something or other: collapse maybe. Well here we are today reading of the "frantics" going on to save this massive institution from spilling its guts across the landscape.

More speculation over here at Dealbreaker.

We get an update from the Wall Street Journal which suggests that toxic assets may be lifted off the books of Citi in a reversal of a reversal of direction by Treasury Secretary Paulson. Such a crazy driver he is. They want the bad assets, they don't want the bad assets, and now, oh literal crap, they want the bad assets again.

The agreement, which was still under discussion and could fall apart, would
mark a new phase in government efforts to stabilize U.S. banks and securities
firms. After injecting nearly $300 billion of capital into financial
institutions, federal officials now appear to be willing to absorb bad assets,
on a targeted basis, from specific institutions.

The talks Sunday centered on the creation of what is sometimes called a "bad bank" -- an outside entity designed to hold some of a financial firm's worst assets. That structure would help Citigroup cleanse itself of billions of dollars in potentially toxic
assets, these people said.

(WSJ)

Of course what gives us the willies about the "un-done deal" nature of this, is the off balance sheet assets of Citi:

In addition to $2 trillion in assets it has on its balance sheet, it has another
$1.23 trillion in entities that aren't reflected there. Some of those assets are
tied to mortgages, and investors have worried they could cause heavy losses if
they are brought back on the company's books.

and this:

In Citigroup's case, the planned bad bank likely will be able to accommodate
only a sliver of the company's more than $3 trillion in assets, including its
holdings in off-balance-sheet entities. Jitters about such "hidden" assets
helped trigger the nose-dive in Citigroup's stock last week.

It would seem that the government should have been working on correct valuations and lifting out the bad assets from day one, and that's been an ongoing complaint here. The values are not entirely clear to the public, and no doubt shifting every day, and if the casual observer has no clue about the cancer the government is trying to scapel out, that same person will show their confidence in government action by yanking their funds out of the system.

Someone needs to sit down in front of the nation and explain in some level of detail exactly what is causing the losses, and the relationships between bad mortgages, credit default swaps, mortgage backed securities, large investors, banks, and the government. Not in enough clarity to spook, but explained in a manner that lets people know that the issue is a bit beyond mere greed, helping Wall Street, lax regulation, use of taxpayer funds, or shareholders losing money.

Someone really needs to have a George Bailey moment before everyone starts to cash out of the system not from great fear, but from a casual fear brought on by great ignorance.

Somali Pirates Face Looming Crisis: Wine, Women, Cars to be Lost

I am not going to bring you down with talk of Citibank, and how we can probably assume that someone, somewhere, in NYC or Washington, is having frantic and heated discussions right now. If we have learned anything this year, we have come to realize that every weekend brings a cluster of secret activity that will be sprung upon us Monday morning. Besides, it's the weekend. Gas prices are dropping, and next week brings us some delicious chow. Why focus on domestic financial crisis when we can look at the looming crisis about to fall upon the shores and waters of Somalia.

I am sitting here in the comfort of my home reading about pirates. Is this not so 17th century or what? This report is amusing, primarily because it includes the phrase "pirate lair":

Speaking to AFP from the pirate lair of Harardhere, a member of the group holding the Sirius Star said there was no plan to destroy the super-tanker or harm its crew but warned any military bid to free it would be "disastrous."

(AFP)

Are we in novel times or what? It almost seems like we are back in more adventurous days, where chaos is around every corner, and money can be had, and a young man can step out into the world and make his fortune, slave to the desk no more.

Thoughts of adventure aside, for the Somali pirates some introspection is probably in order.

I wonder if some smart pirate analyst is starting to ask his fellow pirates, "Are we overextending ourselves, much like western banks? How long do we really think we can continue in business when we start taking over tankers filled with millions of dollars of oil, or stuffed to the gills with Ukrainian tanks?"

Then again people, whether running Western financial institutions, or Somali financial schemes, rarely pause to reflect when caught up in the moment of accumulating money, and spending that money (and always on the usual stuff: wine, women, and big cars).  

They also seem to have missed the crucial inflection point in this ongoing endeavor, which came when the Indian Navy took it upon themselves to sink one of the mother ships used as a base.  When one of the less efficient Navies is starting to take shots at you directly, that should probably be a signal to change your business plan before the ten real navies from Europe and Russia start steaming in your direction.

SOMALI pirates who hijacked the Saudi oil supertanker Sirius Star are demanding $US25 million ($39 million) in ransom, while plans have emerged for additional warships from 10 European countries and Russia to converge on the region to tackle the pirate problem.


One of the pirates on the ship, Mohamed Said, told news agencies: "We do not want long-term discussions to resolve the matter. The Saudis have 10 days to comply, otherwise we will take action that could be disastrous."

(Sydney Morning Herald)

Clearly, the pirates are not looking at the long term. It goes something like this: all current hijacked ships get their ransoms paid as the developed nations get the decks cleared. Then, a flotilla of Western ships remain permanently in your waters sinking anything that moves. The money dries up. You lose your extra beautiful wives. You lose your fancy car. You lose your brick house. You lose the respect of the villagers who you have been tossing a few extra dollars to.

Daily Update: Ode to Norway (Bailing Out Iceland) Edition

Norway. It's one of those countries we have always wanted to visit, lacking both money, opportunity, and, again, money. At a time when everyone is scrambling for cash (Iceland that's you, and you Turkey, and you Pakistan, and you GM, and you GMAC, and you Joe homeowner), Norway seems to be all casual and willing to spread the wealth.

In unneighborly (to Sweden) fashion, Norway has opted to reject Sweden weaponry and purchase a new batch of military jet fighters from the United States.  The F-35 Joint Strike Fighter was determined to be the better plane, which should give us here in the States some comfort, since the overall contract represents about $21 billion over its life.

The F-35 - a single-seat, single-engine jet - is being developed by Bethesda, Maryland-based Lockheed Martin, with engines made United Technologies Corp.'s Pratt and Whitney unit and General Electric Co.
A news release said the total cost of the deal over the aircraft's' expected 30- year life span would be about 145 billion kroner ($20.7 billion) for the fighter, weapons, maintenance, infrastructure and operations.

*

News like the above makes you take a second look at Norway with a kind of "I never noticed you before" admiration. Obviously they are doing something right. (Russia, look at Norway, an oil state, and pay attention!), but how? One of the things they are doing now, unlike most everyone else, is buying stuff via their oil fund (aptly named "The Government Pension Fund Global). The fund's top manager Yngve Slyngstad had this to say:

"The market we are now in suits us very well. We are a large buyer in a market with a lot of sellers," he said.

According to U.S. News, they have $20 billion of the $286 billion fund set aside to begin buying real estate. Slyngstad also mentions that the fund is the largest equity investor in Europe, which just makes us respect Norway even more for brains rather than looks. Buying when others are panicking and selling is very novel, no? How this sensible ethic did not rub off on Iceland is anyone's guess, but we suspect that floating alone in the ocean, and being inches closer to the fun loving, carefree U.S.A. probably had a huge impact on their losing their sense of Nordic reserve.
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If Iceland did lose its better judgement, they have Norway, among other Scandinavian pals, to thank for bailing them out in their time of need:

Nordic countries followed up a $2.1 billion loan to Iceland by the International Monetary Fund with an additional $2.5 billion.
The finance ministers of Denmark, Finland, Norway and Sweden said in a joint statement that the money would help Iceland stabilize its economy and exchange rate, and reduce its public debt over the medium term.

(N.Y.Times)

Ah Norway. So quiet, so reserved, so serious. Oil and oil wealth like Russia, but not all in your face about it and wiser with the income from that oil.  Buying when others are selling, arming up and bailing out. Quiet, wise, sexy Norway.

*

It would be wrong of us to leave without more oil chat. The price has now fallen below $50 per barrel, which means that certain nations in certain parts of the world are going to come under increasing pressure.

Some analysts predict oil could fall to $30 to 40 a barrel as the world economy worsens.


The pillars that had pushed up the price of oil and other commodities seem to be crumbling all at once: the American consumer is in full retreat; the Chinese economy is sputtering; financial markets are collapsing; developing countries are trimming their energy subsidies; and the dollar is strengthening.

(N.Y.Times)

So this is a good moment for you if you have a car. Just as you are losing your home, you will be able to get a lot more mileage out of living in that car of yours. But this is really bad news for others, the Times tells us:

But for oil producers, the collapse is bad news. The downturn will probably herald a depressed cycle for the energy industry as markets shrink and prices drop. Dozens of large-scale projects have already been canceled, or delayed, because of the fall in prices and financing constraints, including refineries in Saudi Arabia, tar sands in Canada and offshore fields in Brazil.

What's interesting is how hysterical people were getting not too long ago about oil prices, and it seems almost ludicrous when we think back to the Republican convention and the chants of "Drill, Baby, Drill."  It's not that we don't need to work on energy efficiency, but rather, that we need to formulate long term policy that is not based upon current and fleeting perceptions of reality.

Daily Update: It's Wednesday, Let's Hijack a Football Sized Ship Edition

You know how we said (most recently yesterday) that we like to watch what smart (already wealthy) money is doing because it gives insight?  That knowing what a Bill Gates or Warren Buffett is buying tells you a lot about the world we live in?  Well, we don't grant such status to just any old wealthy or well connected chap that rolls across the border of our consciousness. Not every billionaire is leading you to wisdom. When we think of Mexican billionaire Ricardo Salinas Pliego, who holds a huge chunk of the now in bankruptcy retail chain Circuit City, we certainly have some doubts. CNN/Money tells us he built this stake before AND after the chain filed.

Says the billionaire:

"...Circuit City is a great brand and an important name in the U.S. retail industry."

Were kinda thinking that sentiment is so three years ago or more, and his purchases are not exactly the best buy available.

*

While the billionaire is feeling inappropriately optimistic, the homebuilders are feeling feelings quite reflective of reality:

The National Association of Home Builders/Wells Fargo housing market index, started in January 1985, tumbled five points to nine in November. The index stood at 14 in October after slipping three points from September.


Index readings higher than 50 indicate positive sentiment about the market. But the index has drifted below 50 since May 2006 and below 20 since April. 

And in one of those "duh" sentences, NAHB Chairman Sandy Dunn says, "Today's report shows that we are in a crisis situation." Yep, that report, and probably the near collapse of the world's economic order.

*

England deflated, just a little bit.  So good news on the cut interest rates front.

*

I don't mean to judge the military skills of countries like the United States, Russia, China, France or England, or underestimate the really bigness of the bodies of water off the coast of East Africa.  But is there something odd about a bunch of Somali based pirates in speed boats being able to take over ships the size of supertankers; ships filled with tanks and oil and other costly stuff?  And what of these crews, unarmed and so willing to get jacked as part of some elebatorate ransom scheme.

The company did not say specifically that it had begun negotiations with the hijackers. The supertanker, about the same length as an American Nimitz class aircraft carrier, is the largest ship known to have been seized by pirates, and it was fully loaded with two million barrels of oil.

"Our first and foremost priority is ensuring the safety of the crew," Salah Ka'aki, the president and chief executive of Vela, said in the statement. The crew members are citizens of Britain, Poland, Croatia, the Philippines and Saudi Arabia.

(International Herald Tribune)

The fact that $25 to $30 million has been paid to the pirates is shocking, and obviously working as an incentive to continue the status quo.  Shouldn't there be an opportunity here for military and security contractors to play a role? Or maybe change maritime laws to fit with the times. Instead of crew safety as priority number one, perhaps kill pirates should move up the priority scale.

*

And finally, Chris Kelly at Huffington Post reminds us that Chrysler is owned by a hedge fund/private equity firm, and not millions of shareholders.  If they had the hubris to think they could run a car company that the quite capable Germans were unable to tame, shouldn't they have the stones to make it work on their own? Kelly suggests that they sell off a few other assets to cover for their failing adventure in mini-van land. Amen to that.

Daily Update: The "We Won't Mention Citi Laying Off 50K plus" Edition

If there was ever a moment to see that Obama is more than what his critics hoped to suggest, it was his reaching out to both Hillary Clinton and John McCain in recent days (meaning, yesterday).

In this process we are vastly rewarded by Obama's desire to harness the effort of people of differing views on behalf of improving the problems facing the country.

Sources on both sides said Obama did not offer McCain a cabinet job, but focused on how the senator for Arizona could help to guide through Congress legislation that they both strongly favour.

(Guardian-UK)

This is good, even if it turns out to be symbolic.

*

Meanwhile over at The Economist were are told that the government's initial analysis and efforts in dealing with A.I.G. were flawed.

A bankruptcy was avoided only because of the size of the holding company’s book of toxic credit derivatives, which senior executives barely understood. These left AIG so intertwined with other financial firms that its failure was judged by the Federal Reserve and Treasury to endanger the financial system.

Whether that judgment was right remains unknowable. But it is now clear that the original plan was flawed. That may be understandable: panic was in the air, AIG faced crippling collateral calls and Lehman Brothers had just folded. And the authorities lacked the wide powers granted by the Troubled Asset Relief Programme (TARP) approved by Congress in October. Unorthodox options, such as splitting the systemically threatening credit derivatives from AIG, were not under discussion.

The article ends oddly:

"Plenty of time to reflect on how an offer of a temporary loan, to a company that barely made the list of systemically vital firms, spiralled into one of the biggest corporate bail-outs ever."

One would think that the company did in fact make the list of systemically vital firms by mere example of the actions of the government. One cannot be sitting on a stack of credit derivatives and not be considered vital. It was not so much a company moving from "non-vital" to vital, but merely the governments inability to deal with multiple moving parts (different companies, different products affecting the books, constantly changing valuations, etc).

And absent the alternative result (collapse), it is really too early to tell how bad a deal this will ultimately be for the taxpayers, regardless of the title of the piece. One imagines that most of the hand wringing is the type of analysis of the now that gets proved wrong with time and perspective.

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In our ongoing blathering, we have always recommended watching what the wise investor does and use that information to gain clues on where the world is headed. Thus we have hedge funder John Paulson beginning to buy some mortgage backed assets after making huge gains in 2007 betting the opposite way.
John Paulson, the hedge fund manager who was called before Congress last week to discuss the big profits he made by foreseeing the collapse of the subprime mortgage market, has started to buy securities backed by residential mortgages.

Mr Paulson’s move marks the latest example of a famously bearish investor shifting gears to profit from depressed prices in the global credit markets.
(FT-UK)

*

Hillary must be giving Bill the major frown right now, knowing that her future job as secretary of state is predicated on his purity.

Obama's advisers have begun looking into Bill Clinton's foundation, which distributes millions of dollars to Africa to help with development, to ensure that there is no conflict of interest. But Democrats do not believe that the vetting is likely to be a problem.

(Guardian-UK)

While we've always had a major dislike for Hillary, though never doubting her smarts or ambition, this seems like it might be a good move. Given the complexity of the chaos, having a strong person handling the "outside" issues will allow Obama freedom to focus on the economic internals. Unless Hillary wants to sabotage him from the inside. Hmmmm. (We actually think that would be ridiculous, and that most people are motivated by good, intially).

Slutty TARP Getting Hit On Right and Left

Isn't it about time the government made an effort to explain to the public the necessary $150 billion going into the firm A.I.G.?  Given the mal-explained situation at hand, the tendency is for the casual observer to assume that if American International Group--an evil insurance company--gets saved, surely the auto companies and other industries ought to be helped.

In terms of icons, it's easy to visualize the hard working midwesterner who is doing an honest day's work for a day's pay building your ram tough pickup; the man who is just trying to provide a pool for the kids and meatloaf on the table and a trip to Disneyland every fourth year. We like our cars, and we like the concept of "hardworking American," though it's not so elastic a concept as to extend to our local insurance guy. Too many people, most of the time, assume that the insurance industry in its various forms is profitable beyond reason, and secretly ripping everyone off. That would be wrong of course. But don't let the populararity of our former potential vice president (in Palin) lend any doubt to the desire for a huge mass of people to accept simplicity in place of complexity. So the reality of what AIG means to the financial system and America's health gets lost.

Thus, with the singular focus on "fairness," and not wanting to appear to help special interests, or explain tough concepts to the masses, the Feds are moving both toward helping out the auto industry (again) and redefining for the upteenth time a plan to assist the average homeowner. This new plan, announced yesterday, is designed to speed the process of helping Joe Homeowner (with all that implies).

Under the program, Fannie Mae, Freddie Mac and other companies would move to modify mortgages for borrowers who are more than 90 days late on paying their loans and fit within certain formulas. That contrasts with the current system, where modifications are addressed on a case-by-case basis.

The goal of the new program would be for borrowers' annual mortgage payment to equal 38 percent of annual income, the model used successfully by the government when it took over IndyMac in California. The companies would do that by extending the loan term, reducing the interest rate and, if necessary, delaying payment on a part of the principal of the loan. If a borrower is able to meet payments for three months, the change would become permanent.

(Washington Post)

We assume the government will put in place the type of safeguards to avoid abuse of the program, though Dealbreaker seems to think otherwise:

2. Putting the power for participants to qualify themselves for the program by merely ceasing to pay their mortgage payments for three months, making any due diligence on your part impossible by "fast tracking" decisions, especially where the program's benefits include:
A. Lengthening the loan term;
B. Reducing the interest rate, and;
C. Deferring payments until the loan is 38% or so of gross household income,

will expand the programs size to roughly every mortgage in the United States.

and

3. Any hope of securitizing mortgages cost-effectively after this program is doomed to failure.

These points are certainly a worry. If a certain percentage of homeowners were not essentially honest or financially astute the first time around, we hardly expect a violent shift in human nature now.  We also don't assume that the other legs of the problem (Congress, mortgage brokers, the Fannies, mortgage insurers) can be counted on to do what needs to be done to fully cherish and preserve taxpayer funds. The fundamental issue is that prices are not where they should be, and no amount of tinkering is going to restore that, though that seems to be a desired result of many. One hears the phrase, "stabilize prices" quite a bit, which is wishful thinking.

The Wall Street Journal also brings up the issue of moral hazard.

A bigger worry could be that these modification programs are too effective. In that case, "many current borrowers will wave the white flag of surrender and also try to get a modification," Rod Dubitsky, a senior strategist for asset-backed securities at Credit Suisse, wrote in a recent report.

The danger is that loan holders who otherwise could meet their payments would decide to fall behind to get their cut of the bailout. That could unleash a chain reaction that drives default rates even higher.

That means another dose of moral hazard. Federal officials stopped worrying months ago about that for companies, as they piled up bailout upon bailout to keep the financial system from collapsing. Now officials risk injecting warped incentives into the behavior of individuals.

And just how far will these T.A.R.P. (Trouble Asset Relief Program) funds go anyway?  It's about time someone started saying saying "no" with a little dignity and restraint.

Palin the Butt for McCain

The post-election reaction is going in different directions. While 52% of the voting public is marginally rejoicing, or watching the news with expectation, the Republican professionals (politicians, those in the media), are spending a lot of time pointing their fingers at each other. Reputations and future careers are in jeopardy as McCain and Palin seek to redefine their own failure, and as the wider Republican world seeks to determine on whom to pin its hopes for the future.  Those suggesting that Palin is anything close to being the future of the Republican party are completely out of their minds, but Palin seems to be her own number one fan (and assuming, as she says, that God gets on her side as well).  

Palin has been coming out to the media now, but still doing soft interviews on not very important topics, defending herself. The more we read, the more we see the disconnect between McCain and Palin, and the casual marriage of convenience between McCain's desperation and Palin's ambition.

ABC news reports that Palin did not think Obama and Biden would win by the margin they did, and she credits the money, among other things, for that win. Never does she reflect inward and question her own role and lack of preparation.

Palin told NBC she was disappointed that she was not allowed to speak on election night in Phoenix. She and a team of speechwriters had prepared remarks for her to deliver, but at the last minute McCain aides decided it would not be in keeping with tradition for the vice presidential candidate to speak before the candidate's concession speech.
"I thought even if it was unprecedented, so what. Geez, let's do something a bit out of the box there. But those were the type of shots that were called that I didn't have control over," Palin told Lauer.

One might think that the incredible amounts of money that Obama raised, combined with a popular vote win on par with Reagan's first win, should be a clear suggestion to Palin and others that the ideas behind the candidate are what attract support.
 
In Palin land, the assumption is that if more money was available, then they might have won. But the reality is that money could have been available, had they pushed ideas worth supporting. They never engaged a wide enough section of the voting populace with reality. We remember Ayers and Islam more than McCain's economic policy.  We see the shaky artiface of our current engagements in Afghanistan and Iraq more than McCain's ideas on moving those situations into a better light.
 
But she is home now in the comfort of Wassilla, and talking up a storm. She is preparing to address the Governor's Association, although one wonders what she would really have to offer of value.
 
Lacking wisdom and humility, onward she goes. That she could say what she said about Obama, and then, flip on a dime and move right on to making more moose stew without taking a vow of silence for a moment of reflection, speaks volumes about her and the people who support her.

Obama's Chief Mandate is for Substantive Change

It goes without saying that President-elect Barack Obama presents a welcome challenge to the status quo, and the mandate, if he has one, is to follow up with some change.  After soundly beating a GOP effort that can be best described as incompetent, he now has in place a Congress that can work with him to move legislation forward in a manner that begins to reverse existing trends little by little.  He should not assume his win is a mandate for radical social change, given the numbers of Republican, conservative, and independent voters who decided to support him out of the fear that doing nothing new would represent a continued fall in the American way of life.  Obama has to hang his effforts on a few clear and broadly popular themes, dividing his goals between satisfying the left, his own ambition, and the needs of the population at large.

The newspapers are already reporting his desire to examine some 200 Bush executive orders, and while this is always a good start for some quick and easy change, it is the type of change that can easily be reversed, or lead to partisan meandering.  Thus it is important for him to move immediately on major issues. We've always thought it best, both in terms of legacy and the good of the country, for a president to have as a goal reform of one of the big areas of government endeavor, whether healthcare reform, tax changes, or adjustments to social security and medicare. Should Obama manage to handle one of these areas, while also stabilizing the financial system, that in itself will be a worthy legacy.

When he looks in the mirror each day, he should be asking himself what he can do to improve the daily life of each American, beginning with those who did not support him. Such an approach will keep his effort broad enough to impact every corner of life without side ventures into the type of social policy and experimentation that will cause a reversal of support.

In many ways this election represented the triumph of sound judgement over ideology. The type of demagoguery employed by John McCain in this campaign, and the ability of conservative and often Christian voters to support him, created a level of cognitive disonnance that was astounding. One can hardly hold the Bible in one portion of the brain, with ideas like "not bearing false witness," while supporting the type of campaign that McCain chose to run. Fortunately just enough people, yet barely enough, could not live with the idea of holding reality at bay in order to accept the work of negative art that McCain was painting. And now the Republicans are scratching their heads, and rethinking their direction. The Miami Herald suggests that they are battling between returning to some sort of Reagan inspired ideal, or looking forward and trying to broaden their appeal. Whichever method is chosen, race baiting, negative appeals and subtle mind and image tricks should be kept to a minimum.

Hopefully they will come to the conclusion that you can win elections by presenting powerful ideas that address the issues at hand that affect people across lines of sex, race and color. Obama made that appeal this time around. While the United States and the world, from Iceland to Brazil to Germany to England were falling apart, Obama was focused on the issues of relevance, while McCain was focused on distorting the personal character of his opponent. While Obama was presenting ideas (however pie in the sky they might prove to be, given our economic condition), McCain was appealing to people's fears with falsities of elaborate construction. Further, and a slight majority of people realized this, McCain's chief assessment of the threats to the country centered on terrorism. This, while the enemy--economic retardation--was inside the house wreaking havoc.

Thus, we welcome the change that Obama represents. Aside from the actual issues of running the country, it also gives us a long overdue reinforcement of the idea that America is the land of opportunity for all, regardless of who you are, or how you got here.

Daily Update: Curb Euphoria Weekend Edition

The AP, via Miami Herald, reports that Republicans are stunned, just stunned, and seeking a way forward after the Democrats managed to gain more control of the government. These debates always come down to "more Reagan, less government, and taxes " versus  "bigger tent, less dogma"

Within hours of election returns that expanded Democratic congressional majorities and delivered a historic presidential victory to Barack Obama, Republicans began searching for a new way forward.

Just as quickly, a split emerged between Republican loyalists advocating a purer form of conservative ideology and those urging a less-dogmatic flexibility.

We are of the belief that a few new ideas (as in, less Reagan, and Reagan worship) might be nice, without abandoning the entire social platform.  How about expanding the morality based arguments to include helping the poor, or adjusting healthcare in a truly radical way, while pushing for tax reform and financial solvency? Yea, we should should probably keep dreaming. Assessments like this are not promising:

"In order for the social conservatives to succeed, they will need to have something to mobilise against. It could be an issue or the congressional leadership," said Michael Lindsay, a political sociologist at Rice University in Houston.

(Reuters)

A "Long Road Ahead" for social conservatives may indeed be accurate, if positive affirmation of new ideas that address broad issues are not part of any changes.

*

Having already been approved for $25 billion in loans, the auto industry is pushing for more assistance, with the support of Congressional Democrats, led by House Speaker Nancy Pelosi and Senate majority leader Harry Reid. 

They are urging that a portion of the $700 billion approved for bailouts go to the struggling GM, Ford, and Chrysler companies, in a somewhat quixotic effort, it seems to us, to put the near terminal body with smushed head on life support in order to induce a miraculous recovery.  How is it that foreign (Japanese) automakers can best American producers in quality year after year, and maintain a level of profitability to boot? 

The only possible way this assistance will be worthwhile is if the car companies (and their unions) are forced to radically change how they do business from an accounting standpoint, in additon to changing the types of cars they produce. If you are serious about energy intiatives and global warming, why not now demand that the companies produce cars that don't get all their power from oil? What can the industry say? No? If so, pull the plug.

Wethinks the TARP (Troubled Asset Relief Program) should be used primarily to fix systemic damage in the financial sector and not to help private industry reverse years of faulty decision making.

*

It seems we are kind of all over the place on how to allocate the TARP, but don't let that stop China in its efforts. China has moved forward with a dometically oriented bailout plan of $586 billion to help stimulate its still "more robust than everyone elses for now" economy.

The stimulus plan would be enormous for any country, let alone one whose gross domestic product is lower than most other major industrialized countries, estimated to be around $3.5 trillion this year. Earlier this year, the United States Congress passed a $700 billion bailout package in a country with an economy whose size is close to $14 trillion.

(N.Y.Times)

Beyond what this tells you, it should tell you even more. Perhaps something about the importance of the United States getting its financial house in order to remain competitive.

Wisdom of the Day:
Curb your euphoria and build your base.

Obama Slays Faulty Thinking, Frank Rich Points it Out

Having already spent considerable time debating with one of my friends that half the reasoning used by Hillary Clinton to argue her case against Obama was utter nonsense, the results of this election provided me with a moment of satisfaction.  After all, I was not even the Obama person. She was. I was happily hoping someone like Huckabee could peel away from the pack and assert himself with a combination of new face, conservative values, and distinct ideas. But no, it didn't work like that and McCain--the name best known--stumbled to the front of the pack.  I was inclined to get behind him under the assumption he would be his own man and put forward some ideas that differed enough from standard Republican group think.

Meanwhile Hillary and Obama battled on, with Hillary rotating through themes trying to maintain traction with voters. Apparently Hillary hit upon the right theme to attract women, and my friend, part of Hillary's target demographic, latched onto the idea that somehow Obama was not in fact deserving enough, female enough, experienced enough, or particularly white enough to reach necessary voters.  Counting Hillary's stints as wife to the former president Bill as experience in office, Obama faded in her eyes.  Or as she said once, "There is just something about him. He seems arrogant."  I took this as interesting, since, if anything, Obama's seeming arrogance can only be matched or surpassed by Hillary's demonstrated arrogance and supreme confidence.  Indeed it was her arrogance that led her to assume she had the primaries locked up back in December of 2007.  That arrogance forced her to constantly re-theme her efforts, rolling through issues of class and race before settling on sex as the primary tool to beat Obama over the head with.

Once Obama succeeded in his win (and leaving many pro-Hillary supporters carping from the sidelines), McCain latched onto Hillary's efforts with abandon. He decided to raise Hillary from the dead and resurrect her message in the form of Palin.  Of course Palin was no Hillary, so it was akin to substituting soy for chocolate in the cake mix. But still it was his attempt to reconstruct what he thought he was seeing. And what he saw was Hillary appealing to issues of race and gender to make an argument against the black, male candidate. McCain assumed that Palin could continue the task, while scooping up the women's vote in the process.

Frank Rich has a much needed piece in the N.Y. Times today pointing out the degree to which assumptions being made by those in power (politicians and the media) were quite simply wrong.  Some of us who knew this, and had to listen through friends saying, "Well I just can't put my finger on why I don't like him" when his positions were principled in the same direction as Hillary's, were quite vexed. Raised eyebrows and all.  If you can make an argument that not voting for a black person because he cannot win the white vote is not a racist argument (against the black candidate, against white voters), then one is doing miraculous cognitive things in the head with a level of unprecedented compartmentalization.

Rich lays it out:

For eight years, we’ve been told by those in power that we are small, bigoted and stupid — easily divided and easily frightened. This was the toxic catechism of Bush-Rove politics. It was the soiled banner picked up by the sad McCain campaign, and it was often abetted by an amen corner in the dominant news media. We heard this slander of America so often that we all started to believe it, liberals most certainly included. If I had a dollar for every Democrat who told me there was no way that Americans would ever turn against the war in Iraq or definitively reject Bush governance or elect a black man named Barack Hussein Obama president, I could almost start to recoup my 401(k). Few wanted to take yes for an answer.
So let’s be blunt. Almost every assumption about America that was taken as a given by our political culture on Tuesday morning was proved wrong by Tuesday night.

(N.Y.Times)

Now I actually think McCain took things in a more cynical direction than Bush ever did, and believe Bush thought he was acting on principle on most occassions. I do not extend such benevolence to McCain, who so clearly deviated from his previous self that it was a shock.  Nor is it wise to assume that every Republican, or every conservative is somehow acting out of cynicism or evil intent, and Rich seems to imply that as a trend.

If anything this election has lifted us out of the cookie cutter thought patterns that allowed us to assume that people could not put race behind them when it mattered most.

Daily Update: Phase Two: Economy Takes A Rest

"The steel mills, big suppliers to many sectors of the economy, are shutting 17 of the nation’s 29 blast furnaces — a startling indicator of how quickly output is declining as corporate America struggles to adjust to the spreading crisis."

(N.Y.Times)

It would seem we are now entering phase two of a three phase process whereby the United States (and the world) fall into deep recession. The official numbers are not in yet, but it's all but obvious that the current path will be passing by some bleak territory. Phase one consisted of the crafty mortgage lending that led to structural fallout--still with us--and the efforts to restore liquidity. We are of the opinion that such efforts will ultimately show slow success, in that the financial entities that need to be functioning, will be functioning, with few large scale collapses going forward.

The second phase consists of the rest of the economy adjusting to reflect the credit crunch and falling demand, and primarily in the form of layoffs and descending commodity prices. Just today a friend called, employee in a small medical business run by a husband and wife team; the wife was particularly panicked and reading a lot of books about world doom, evil central banks, collapsing societies and the merits of stockpiling gold. She gave a kind of heads up, assuring our friend of her job's stability, unless, situations changed. "Do you have people who, you know, own land, or people you can stay with?" asked her boss and McCain supporter bizarrely.

It's a particularly excited time for those whose main mental pursuits have consisted of predicting world collapse year after year, hoping coincidence knights them with wisdom. They are probably at climax right now, though reality will not prove as dire as their veiled hopes. The stockpiled gold will not soar into the stratosphere and render them king of the mountain in some long awaited new world structure.

In our third phase, (any good theory needing phases to sound compelling), the layoffs that are starting to roll now and that will continue on into 2009 will push us into a new massive wave of home foreclosures.

Barring some presidential wackiness, everything will right itself, or rather, reset itself to more normal valuations. Not sure exactly how that will happen, but should it not happen, then we will be quite worried indeed.

*

The Middle East, however, is ready for doom. Or, according to this article, impervious to it. Is it Islamic banking? Is it the light of the true view of God? Is it oil?

"So far, Gulf countries have contended they are largely insulated from the crisis circling the world, in part because of an oil money cushion they built during years of high oil prices."

(CNN)

I don't know, but I am thinking that the same forces at work everywhere will not take a vacay in Dubai, and as oil prices continue to drop, certain Middle Eastern nations won't fare so well. Which means it's good they are ruled by kings who can pretty much make the complainers shut up when the banks start foreclosing on everyone's second vacation tent. No doubt they too need an Obama, who in their version would be a Bill Smith and rumored to be connected to peace mongers and the secret choice of evil America.

The Washington Post gives us an even rosier view, suggesting that Middle Eastern hubs are seeing a rise in Americans hoping to work there. Fresh off of layoffs and laying waste to the American financial scene, they are looking for a fresh start. Apparently, while French (ha French!), Brits and Swiss are being hired, there are fewer Americans actually on the ground. Something about our reputation:

"Those who seek to move here will have to overcome a number of stereotypes about Americans, people here warn: that Americans don't know very much about the world, that their style in business negotiation tends to be too aggressive, that they demand high salaries and that they have trouble adjusting to life overseas."

(Washington Post)

We remain completely sure that if McCain manages to pull off his current job interview (uhm, just work with us here), Palin will be able to change the perception that Americans don't know anything about the world. "When Putin's head looms over your horizon..." she will tell Dubai during her first visit to the Emirates, inspiring confidence all around.

*

Meanwhile U.S. choppers may or may not be doing someting in or near the Syrian border that is annoying the Syrians. If we were kind of left wing we would raise our eyebrows and call pre-election shenanigans. But we've never been the type to think any American president would do such things merely to tilt the electorate: in broader policy, perhaps, but in battlefield decision, no. So another shenanigan-free incident.

*

As government continues to tweek its purpose for the $700 billion bailout funds, there are no shortage of folks who are calling for direct help of the homeowner. Of course weeding out the worthy from the "were not gonna help you" is a near impossible and time consuming task. The Washington Post reports that:

"Now, more than 30 percent of properties in the foreclosure process are owned by someone with a different address, indicating the home is likely owned by an investor, according to foreclosure listing service RealtyTrac Inc."

In other words, a good portion of the folks falling into trouble do not deserve any assistance at all unless it truly is the government's task to insure all of our investment decisions against the risk of loss.

Further, the article points out that a huge number of homeowners owe more than their homes are worth, and one must ask the question, again, if it's the government's job (meaning the taxpayers) to assist those who made bad investment decisions, even if the home is their primary residence. Would this create a precedent, or would this wave of home buyers and investors be uniquely rewarded for faulty financial decision making?

"Already, 23 percent of homeowners with a mortgage owe more on their loans than their homes are worth, and that figure is expected to rise to 28 percent by this time next year, according to Moody's Economy.com."

(Washington Post)

The article shows several complications that make structuring a bailout for the homeowner challenging. Indeed it is far simpler, and probably wiser, to shore up the financial institutions, regulate them better, and assume that many of the homeowners will be beyond reach. It's won't be politically popular, which tells you it's probably the right path.

Palin Mooses it Up on Saturday Night Live

You have to admit that Sarah Palin is one attractive woman. I was fighting that realization while up in front of the television waiting for her to appear on Saturday Night Live. The show, when non-political, is particularly unfunny, but every now and again you get a smidgeon of something amusing. So tonight I was amused at how our future pretend vice president can appear on a comedy show (looking quite smashing actually), but fail to find time to appear in front of serious journalists, particularly the ones on the Sunday morning political news shows who ask hard questions.

Instead Palin stood around looking lovely, and trying to appear the good sport, capable of laughing at herself despite failed attempts to rip the electorate in half plus one with her bare intellect. Deep into the show, she appeared at the "Weekend Update" desk as Amy Poehler did an Alaska rap. It was sort of funny, but there was something also disconcerting about seeing Palin bopping her head (and looking good again) to rap music, amd with the knowledge that she has used every negative theme in the book to portray the black candidate as someone to fear.

She did no heavy lifting, and was pleasant, and how can one really lose when using the white people rapping theme as a way to trivialize oneself into a likeable person? But still, she loses walking this path, bobbing and weaving and making her "groovy face" to the rythm.

Read more at the N.Y. Times, Huffington Post and L.A. Times:

Later in the show, Palin made an appearance on "Weekend Update," telling
co-anchors Seth Meyers and Amy Poehler that she wasn't going to do the piece they had rehearsed because she was afraid it was a bad idea for the campaign.

Instead, Poehler got up and rapped the song that Palin supposedly was going to perform, chanting: "McCain got experience, McCain got style, but don't let him freak you out when he tries to smile. Because that smile be creepy, but when I'm VP, all the leaders of the world gonna finally meet me."

Smiling, the governor nodded and swayed to the beat.

(LA Times)

Daily Update: McCain Appeals to Joe, Obama Appeals to America

Last night we found ourselves at Hofstra University on Long Island... not literally, but with the two candidates. My friends, what a debate that was...if one was looking for something rather medicinal to lull the eyeballs into a closed position. McCain came out a bit feisty, though the rampant phoniness rather overwhelmed his few cogent points; this was particularly apparent when he tried to suggest that Obama was running a dirty campaign, and that various attacks had been hurtful to John himself. Obama sounded like the adult, advising John in so many words to suck it up and be a politician (and further, focus on important issues). Given that everyone knows McCain was the chief baker of mud pies, and chief flinger of nonsense, McCain's attempt to spin the truth was astonishingly bold (in all the wrong ways).

While McCain asked Obama to disavow the words of another congressman (which Obama had already done in writing), McCain never found it necessary to apologize for the rather jabbing tongue of the Pythoness (his own vice presidential nominee), who has either implied or stated that Obama was any number of unsavory things. There is no equivalence between implying that your opponent is old and erratic and implying that your opponent is a terrorist, and especially if the sole truth is that Cain is in fact old, and quite often erratic as he lurches from one thing to another.

And who is this Joe the plumber that McCain kept talking to? We could do for a little less Joe, and a little more of America.

"Joe, I want to tell you, I'll not only help you buy that business that you worked your whole life for and I'll keep your taxes low and I'll provide available and affordable health care for you and your employees. And I will not stand for a tax increase on small business income."

(Huffington Post)

Why do I think this whole Joe as stand in for America will somehow blow up in Cain's face? And why do I think Joe will never be getting his business anytime soon if he was betting on getting bank financing?

*

And in other parts of the world:

Stocks continued their plunge, which will have the actual effect of convincing the average casual viewer that the government bailout was a waste. This is unfortunate given the complexity of what has occurred. The only thing we know for sure is that if the financial system manages to stabilize, the real economy will continue to slink to the bottom, and on the whole people will become more cynical. It would be nice to see a nice bi-partisan effort to explain in detail the scope of what is involved, whether we are talking the money markets, credit default swaps, securitization, or the many mortgage firms now gone bust.

*

The Republican National Committee intends to pull out of Wisconsin and Maine, focusing its efforts on the states it can actually win.

The party's independent ad operation is doubling its budget to about $10 million and focusing on crucial states such as Colorado, Missouri, Indiana and Virginia where Democrat Barack Obama has established a foothold, according to a Republican strategist familiar with presidential ad placements.

Florida and North Carolina have also been in the RNC ad mix. Pennsylvania is the only Democratic leaning swing state apparently left in the party's ad campaign.

Obama continues to outspend, though we remind that he is spending voluntary money as compared to McCain's use of taxpayer funds:

Flush with money, Obama is outspending the joint efforts of the Republican Party and the McCain campaign by more than 2-1.

Daily Update: Kim Jong IL Awesome Weekend Edition

Their continues to be no positive end in sight to the financial problems hitting the United States and the world, though we suspect that since we have put the economic system into the operating room, potential structural stability is not too far away. The day to day economy will continue to unravel into the next year, but we won't be worried that our bank will suddenly collapse, putting our $100 bucks in jeopardy (onto FDIC books).

But things are not quite so bad all over. For example, if you are a North Korean dictator, isolated in your world, you had an awesome weekend. You are no longer part of the Axis (of Evil) and a terrorist sponsoring state. Come out of the cold and into the ample bosom of American trust Dear Kim Jong-Il. Some people might say this is too much carrot, not enough stick, or cart before the horse. We suspect Bush is anxious to get progress on the record in his waning days.

"President George W. Bush struck North Korea from the terrorism list this
weekend after Pyongyang agreed to allow inspections to verify a nuclear
declaration that the Stalinist state made earlier this year. "

(FT)

*

While we are not actually looking for news that bolsters vice presidential candidate Sarah Palin, this AP article in U.S. News proves rather nit picky in title. "Palin has mixed record as fiscal conservative," it tells us, though in reading the details we are impressed with how she handled Alaska's budget. We can argue over her choice in leaving the town of Wasilla in debt, but the citizens did approve the bonds and tax increases for the sports complex. In other words, her choices in aggregate seem to be fiscally responsible and in tune with voter interests. (Though she is still far too superficially prepared to be a breath away from leading the nation).

*

In the interests of fairness, we will engage in some anti-Obama analysis. His rise has been amazing, and contrary to the concerned warnings of Hillary (that white people would be too racist to vote for him), he has managed to stay competitive. Which makes us wonder how this "that one" (to quote Cain) has managed to perform so well. Hmmm. McCain was never strong on the economy, and here, in time for the election, the entire financial system is falling apart? Coincidence? Or are dark forces in the Democratic Party manipulating the system to put a black man in office and introduce socialism to this great land?

Further evidence of dark conspiracies afoot? Over on Huffington Post, outpost of all things liberal and Obama, there are reports of an Obama monkey doll being waved at a Palin rally. Of course this is not what it seems, but rather, Democratic Party plants in the audience secretly making the crowds at Palin and Cain rallies appear more anti-monkey than they might possibly be. Of course when the truth comes out, it will be too late under the Obama Socialist state. So go head and shake your monkey. Curous George indeed!

*

24 Hours and then?:

As world leaders and bankers gathered in Washington for the weekend Group of Seven and global financial body meetings, Dominique Strauss-Kahn, International Monetary Fund managing director said: “Intensifying solvency concerns about a number of the largest US-based and European financial institutions have pushed the global financial system to the brink of systemic meltdown.”

Josef Ackermann, head of Deutsche Bank and chairman of the Institute of International Finance, representing nearly 400 of the world’s largest banks, said the next 24 hours was a ”critical moment” for the world financial crisis. ”If we miss this opportunity we will have more deterioration” in markets, he said.

(FT)

*

The bipartisan legislative committee reported announced that Palin had violated ethics laws:

The investigation said she violated Alaska Statute 39.52.110(a) of the Alaska Executive Branch Ethics Act, which states, "… each public officer holds office as a public trust, and any effort to benefit a personal or financial interest through official action is a violation of that trust."

When asked for her thoughts on the matter, Palin, resplendent in a fashionable pair of self designed rose colored glasses, spoke forth with the type of honesty we expect from the McCain campaign:

Palin said she's happy the report affirmed her right to fire Monegan. But shesaid she still doesn't think she abused her power like the report says she did. In fact, she said she considered herself vindicated.

In a briefconference call with press reported by the Anchorage Daily News, Palin said,"I’m very, very pleased to be cleared of any legal wrongdoing … any hint of any kind of unethical activity there. Very pleased to be cleared of any of that."

(CBS)

*

A (catty) fish story featuring John McCain from the New York Times:

Vietnamese sell catfish to United States. United States catfish growers get angry, push to block the Vietnamese catfish, called Pangasius. "You can't call that catfish," say North Americans trying to protect their market. McCain thinks all catfish are brothers, pushes for Vietnamese catfish to be free to be catfish in North America, to no avail. Bill passes in 2001, reserving catfish name for American born channel and other catfish. U.S. farmers later win anti-dumping petition. Pangasius turn to Europe. Europe eats lots of Pangasius. It's yummy. Vietnamese happy. U.S. farmers still hurting with high production costs. China decides to step into the business. China adopts American catfish to sell back to Americans as catfish. Everyone is afraid.

The moral of the story? Don't ignore China if selling catfish.

If there is one point of common ground for Vietnamese and American fish
farmers, it is a dread of the world’s largest aquaculturist: China. Chinese
researchers now travel the world in search of species that will thrive on their own farms and have developed aquaculture programs for both North American channel catfish and Vietnamese Pangasius. Here, all questions of names and standards crumble under China’s drive to sell at the cheapest price.

McCain and "That One's" Excellent Townhall Adventure

It was an interesting town hall debate, where McCain proposed a spending freeze, while also offering up, rather out of the blue, a proposal to buy all the individual homeowner's mortgages at great cost.  That home suggestion was probably his big effort to try to turn things around: a dangled carrot for the economically gullible. Which homeowners will get relief, and who would distinguish between the deserving and the undeserving?

Packed in between those two proposals, is a lot of, uhm, incongruity.  If spending is frozen, where will the money come from to buy the mortgages?

Also, don't know if Meg Whitman, formerly of Ebay, is the solution to our financial problems, despite McCain tossing her name into the potential treasury secretary mix. (We also know good and well, once in power, he would not choose Ms. Whitman).

We are not sure either candidate gained a lot of ground. Well actually, McCain certainly gained no ground. He talked a lot in that faux sincere voice, sucking up to the audience with a bunch of "thank yous" and "my friends".  McCain also exhibits a rather proprietary relationship with all things military as well, as though that relationship bestows infinite wisdom. We won't get into McCain referring to Obama as "that one."  It was probably accidental disrespect.

Daily Update: We Are All Suffering Now Edition

Well, it seems Europe, and Germany in particular, is not immune from the economic willies after all, and thus Germany is following the lead of Greece and Ireland in insuring all bank deposits.

Germany’s guarantee of its private savings — worth about 500 billion euros,or more than $700 billion— followed the news that a group of banks had pulled out of a deal to provide 35 billion euros, or $48.2 billion, to rescue the largeGerman mortgage lender, Hypo Real Estate.

(N.Y. Times)

This was soon followed late in the European night by another proposed deal to rescue Hypo.

Germany's government and financial regulators last night agreed to a second
bail-out package for Hypo Real Estate after the abrupt failure of a first
attempt to rescue the property lender.

(FT)

*

Blax Alternate's complete and comprehensive vice presidential debate coverage:

Near start of debate:

Palin: Hey, can I call you Joe or Frank so that later in the debate I can use it in a hokey comeback line?

Biden: Sure. ("She looks like Bambi with those eyes. I want to kiss her like Obama kisses Jill").

Near end of the debate:

Biden: And that's why under McCain blah blah blah blah blah.

Palin: Oh NO! Say it ain't so, JOE! (I'll save 'Frank-ly my dear I don't give a damn for later', and I think I will wink to the cute man standing behind that thing pointed at me that almost looks like a studio camera.)

*

As California goes, so goes the nation often enough. And as we may observe, financially speaking, Cali is going to pot, and Massachusetts is hard on their heels. Since the short term credit markets are sort of taking a vacay, California is speculating that $7 billion might be needed real soon; Massachusetts is still in the "What would you do if I did something bad and need help" phase of thinking through it sources of help. What they need, exactly, is still open to speculation. Can New York and Florida (facing a budget deficit of $1.4 billion) be far behind?

*

Here is where the N.Y. Times tells us it's the end of the world we know it, the end of an era.

“It’s the beginning of the end of the era of infatuation with the free market,” said Steve Fraser, author of “Wall Street: America’s Dream Palace,” and a historian. “It’s the end of the era where Wall Street carries high degrees of power and prestige. And it’s the end of the era of conspicuous displays of wealth. We are entering a new chapter in our history.”

If we are true students of human nature, this shaky "era" will replaced by an entirely different era doing largely the same sort of thing (making money), but in different plumage. In an effort to be first, or profound, people rush to make judgements (like success or failure in Iraq) on what events mean before all the facts roll in.

*

Iceland doing it for/to themselves:

Geir Haarde, prime minister,on Sunday met banking executives, including Hreidar Mar Sigurdsson,chief executive of Kaupthing, the country’s biggest bank,to discuss measures to ease the crisis, which has seen the Icelandic krona depreciate significantly and led to the quasi-nationalisation of Glitnir, the country’s third largest bank.

(FT)

Buffett Explains How the Stupid and the Smart Converge on Immutable Theory

“Three hundred million Americans, their lending institutions, their government, their media, all believed that house prices were going to go up consistently,” he said. “Lending was done based on it, and everybody did a lot of foolish things.”

(N.Y. Times quoting Warren Buffett on Charlie Rose from an interview last week)

That pretty much sums it up. Despite credit expert Jim Grant (and interviewer Steve Kroft, and bumbler Andy Rooney) blaming Wall Street for all problems on 60 Minutes this past Sunday, one can actually put the blame everywhere, and find an irrationally rational, and non-criminal, basis for much behavior in the mortgage boom.

To assume that housing prices will continue to rise is natural in that it conforms to human hopes and expectations. Everyone from the stupid to the smart accepted that theory like it was immutable, and thus, most actions following that one irrational assumption were quite plausible.

The Washington Post has a nice little piece that kind of demonstrates the point (in Ireland!):

"I have never seen property values in my life go down, and they just took a nosedive," said Finn, a father of four. He said if the economy had not turned sour, he would be sitting on multimillion-dollar profits from luxury property sales. Instead, he said, he has millions in debt.

European Rescue Collapses, American Misery Loving European Company

It seems like just yesterday, or last week, when the German finance minister was saying bold things about the fall of the United States as a financial superpower, as though the U.S. was an island alone, sinking into the abyss.

But apparently that was a bit of idle verbal finger pointing:

The scale of the financial storm was brought home when, during the summit, the German bank Hypo Real Estate (HRE) announced that a planned 35-billion-euro (48-billion-dollar) buy-out had collapsed.

A consortium of banks was to have led the biggest rescue in German history and its failure could wreak havoc when financial markets reopen on Monday.

Germany's Interior Minister Wolfgang Schaeuble has warned that the financial crisis could have political repercussions, noting how Adolf Hitler rose to power after the 1929 Wall Street crash.

"The consequences of that depression was Adolf Hitler and, indirectly, World War II and Auschwitz," the minister was quoted as saying in Der Spiegel's latest edition to appear Monday.

(AFP)

Goof up financially in America, and you get perhaps, an Obama. Make the same mistake in Germany and well, Hitler reborn.

Lesson from this? Don't point fingers when you can't afford to have them bitten off.

Biden-Palin Debate: Those Who Ignore the Past are..... (fill in the blank).

I've just spent the past hour and a half watching Senator Joe Biden debate Alaska Governor Palin. As I type, the pundits (on ABC) are calling it a wash, and that each candidate performed adequately enough to satisfy their own supporters and changed no minds.

My gut tells me that Ms. Palin, strategically holding her disabled child at the end of the debate (and why isn't he in bed?), will have been persuasive to some remarkably stupid people. There is an audience out there who will listen to her folksy talk and feisty manner and say, "Hot damn, that's just what we need to clean out Washington." This type of voter will ignore policy detail, ignore the larger arguments that Biden was presenting--that McCain's policies are not any different from Bush's, and that under Bush, we are in a heap of trouble on many fronts--and they will feast on the idea that Palin is like them. (They will also manage to ignore the fact that Republicans have not delivered on all those social issues they run their campaigns on).

Palin managed to perform to training and habit, using diversion into personal ancedote when detail proved too complicated. She also managed some well placed compliments in an effort to neuter any sort of attack from Biden. Biden, wisely, avoided ripping her head off for her special combination of ignorance and gusto. So much of what was said in the debate was the McCain camp's effort to short circuit the process of critical thinking. It was imagery over substance, as though the repetition of the words "soccer mom" or "folks" might carry more weight than policy integrity.

The best example of diversion was Palin's suggestion that looking at the history of the Bush administration was somehow akin to dwelling in the past and not being forward looking. "Say it ain't so Joe" said Palin, at her folksy contrived best, attempting to counter the wisdom being tossed in her direction; that ignoring the past is the perfect way to relive it, mistakes and all.

Additional Thoughts on Palin:
1) Can't pronounce nuclear.
2) I rather doubt McCain will be pleased that Palin and Biden came to the exact same policy position on gay rights.
3) What war has McCain actually won? Palin said he had won some.

Bailout Bill Voted Down: We are in Hell (for now)

In one of the most stunningly stupid moves ever, yesterday a majority of the members of the House of Representatives voted down the $700 billion bailout proposed by George Bush, Treasury Secretary Hank Paulson and other more responsible minds.

It is hard to comprehend the rationale aside from political motives. The members of Congress obviously felt greater pressure from their constituents, and took that outpouring of disgust with the bailout to heart. Unfortunately, listening to the mass of voters is akin to letting your two year old convince you that vegetables are wholly unnecessary to healthy growth.

The Associated Press reports that:

Two-thirds of Congress' most vulnerable members — Republicans and Democrats alike — voted against the massive economic bailout package, opting to protect their seats on Election Day rather than follow their party leaders off a political cliff.

So basically, rather than follow the leadership off a cliff by possibly losing their seats (yet saving the country), the chose to send America off a cliff (and preserve the seats where their derrieres will sit).

And here, still more cowardice:

The 228-205 rejection of the $700 billion rescue package for the financial markets reflected the every-man-for-himself posture of lawmakers with no plan to prop up the economy five short weeks from the election. Of the 19 most vulnerable House lawmakers tracked by The Associated Press, 13 of them voted against the bill despite pleas from their party leaders to pass it.

The article quotes one representative who states the deal, "was a step toward socialism and a philosophical leap he could not make." Thus intellectual purity trumps financial judgment and practicality, avoiding the philosophical leap to take the economic plunge.

The Dow Jones Industrial Average slid 778 points for its biggest point drop ever as $1.2 trillion in market value was erased from American equities. The MSCI World Index of 23 developed markets slid 6.9 percent, the most in 21 years.

(Bloomberg)

The drop in the Dow yesterday by a good 700 plus points, and in the world markets today, should be ample warning to the politicians to get on it, and if not, we are truly in hell.

N.Y. Times Says (Wrongly): "Wall Street, R.I.P.: The End of an Era..."

If ever there was a time to ignore the press, and the financial press in particular, it is when they attempt to predict trends and the larger meaning of events. There is a lot of prognosticating going on lately about how this current financial crisis will change the world as we know it. Wall Street is dead, profits will be down, and nothing will be the same as before. That's what the times is pitching here, although their argument is not entirely coherent.

They state:

IF Mr. Hintz is right, and Goldman’s legendary returns decline, so will its paychecks. Without those multimillion-dollar paydays, those top-notch investment bankers, elite traders and private-equity superstars may well stroll out the door and try their luck at starting small, boutique investment-banking firms or hedge funds — if they can.

in some contradiction to this statement:

As leverage dries up across Wall Street, so will the outsize returns at many private equity firms and hedge funds.Returns at many hedge funds are expected to be awful this year because of a combination of bad bets and an inability to borrow. One result could be a landslide of hedge funds’ closing shop.

So, if I read correctly, at firms like Goldman that are changing (and possibly temporarily) to a bank holding company structure, they will face a drain of talent as employees leave to make more money in fields (hedge/PE) where there is an inability to borrow or make outsized returns? It seems they are simultaneously making a case for a landslide of hedge funds closing shop and a landslide of bored talent seeking returns by starting... boutique hedge funds and private equity firms.

Reality actually tells us that many of the small boutique firms grow bigger, and expand their scope.

The truly interesting development (assuming the bailout works as plans) will be the rise of firms like TPG, SAC, Citadel , Carlyle and Blackstone, filling the void in the existing financial system. Citadel itself has thousands of employees around the world.

Maybe what we should realize is that change is constant, bubbles are constant, human nature is constant, and talent is constant, and thus there will always be people, and firms, to take advantage of what the current economic condition is. Even when those conditions don't exist, money and energy flows toward making those conditions happen.

Our guess here is that everyone hunkers down in whatever financial structure proves most useful toward stabilizing value, and then, when the dust settles, all eyes will begin to look at where money can be made. So when Europeans, and Germans in particular, are also announcing the death of the United States as a financial superpower, they are making assumptions that defy the reality of human nature, and particularly the human nature as exhibited by creative Americans.

“The US will lose its status as the superpower of the world financial system. This world will become multipolar” with the emergence of stronger, better capitalised centres in Asia and Europe, Mr Steinbrück told the German parliament. “The world will never be the same again.”

(FT)

The above comments can be made by German government officials, and there is a kernal of truth there, but the world never being the same again is not one of those truths. Money will flow to those who know how to make money, and unless other parts of the world actually become massively more creative, ultimately, the United States will be fine, and with some tweeking and humility and focus on making the financial foundation sound.

This is another reason why this current presidential election is so important. If economics is not your strong point, and yet, economics is what is setting the country back in world standing, then McCain is woefully unprepared for the major challenges ahead.

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Bonus Thoughts:
Every now and then we read about some pretty responsible financial types. We are impressed precisely because they are the opposite of how we have been personally, and they represent clear thinking in dealing with financial issues while remaining unswayed by foolish temptations. They represent what we want to be. We are thinking of  people like David Swenson at Yale, who views his stewardship of their funds almost like a sacred mission, or the practices of Norway's Pension fund. The New York Times has a nice short question and answer piece about Norway's fund here.

Daily Update: Friday "Palin the Muppet" Edition

Never would we have imagined that the largest banking collapse in United States history would proceed so smoothly, taking place last night while we enjoyed a new episode of The Office. Perhaps the news is still being overshadowed by the $700 billion bailout legislation that is not being passed (as of right this instant), and despite presidential candidate McCain being on hand to lend his shaky handed mental stimulous.

Regulators simultaneously brokered an emergency sale of virtually all of Washington Mutual, the nation’s largest savings and loan, to JPMorgan Chase for $1.9 billion, averting another potentially huge taxpayer bill for the rescue of a failing institution

(N.Y.Times)

The good news is that account holders are saved (though we wonder at J.P Morgan's hurculean strength to carry the wounded), and the bad news is that shareholders and a few bondholders will take one for the team. You just never imagine such wonderous things are happening while sipping some juice and aborbed in the television set. WaMu lived to be 119 years old, which is a ripe old age.

*

Yea, back to that bailout thingy. We know how McCain said he would not show up at the debate tonight because he is needed in Washington to save the bailout, or something like that. Thus far nothing has been resolved despite Cain on seen, dispensing wisdom and whatnot. In fact things are "imploding", according to the N.Y. Times.  If we read correctly, the Republicans squashed the deal because they did not want McCain to look like a fool in coming to Washington for nothing. Oh yea, and they didn't want to do the deal using tax funds to begin with.

Interesting scene setting in the article:

Mr. McCain was at one end of the long conference table, Mr. Obama at the other, with the president and senior Congressional leaders between them. Participants said Mr. Obama peppered Mr. Paulson with questions, while Mr. McCain said little. Outside the West Wing, a huge crowd of reporters gathered in the driveway, anxiously awaiting an appearance by either presidential candidate, with expectations running high.

We assume McCain was in deep contemplation, calculating permutations of various bailout options in his head, and waiting for the opportune moment to solve it all.  One could argue that not doing the bailout, or not doing the bailout in the way it's being put forward by Treasury, could very well be the correct path, but you don't get the impression that certain congressmen are totally focused on finding a quick solution as much as they are intent on sticking it to the Democrats. In the end you have Republicans in Congress dragging their feet on the Republican administrations bailout proposal. Not quite sure how they think they will crawl out of this one unscathed.

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Of course we can't leave you with doubts about the country's future. In times like this where the men are playing with themselves in Washington, we turn to the women for wisdom. Or rather, Katie Curic turns to vice presidential candidate Sarah Palin for wisdom on any number of issues. And here, Palin the Muppet, a puppet in the craggy hands of Cain, does not disappoint. 

The L.A. Times:

Palin's unblinking certitude gave way at other times in the interview to a striking imprecision, as when she struggled to respond to Couric's suggestion that the $700-billion bailout might be better funneled through middle-class families instead of Wall Street firms.
"That's why I say I, like every American I'm speaking with, we're ill about this position that we have been put in . . ." Palin began, before meandering off in fruitless pursuit of coherence.
But I'll let the governor speak for herself:
" . . . where it is the taxpayers looking to bail out. But ultimately, what the bailout does is help those who are concerned about the healthcare reform that is needed to help shore up our economy. Um, helping, oh -- it's got to be all about job creation too. Shoring up our economy, and putting it back on the right track. So healthcare reform and reducing taxes and reining in spending has got to accompany tax reductions, and tax relief for Americans, and trade, we've got to see trade as opportunity, not as a competitive, um, scary thing, but 1 in 5 jobs being created in the trade sector today. We've got to look at that as more opportunity. All of those things under the umbrella of job creation. This bailout is a part of that."

When asked how geographical proximity to Russia made for actual experience with Russia, she offered:

"We have trade missions back and forth," Palin told Couric. "We, we do, it's very important when you consider even national security issues with Russia as Putin rears his head and comes into the airspace of the United States of America, where, where do they go? It's Alaska. It's just right over the border. It is from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there. They are right next to, to our state."

It's answers like this that have made some serious minded Republicans opt to switch and take a flyer on the Democratic Party candidate as one can hardly expected someone so unprepared to be even remotely competent in these delicate times. It's actually no knock on Palin, or Republicans in general. It's a knock on McCain and his raging desire to be president right before the very end.

We often wonder if that end will be his life, or the United States as we know and love it.

Wisdom of the Day:
Beware of Putin in your airspace!

McCain Wants to Skip Debate and Fix Economy on Friday Night Instead.

In a move to do an end run around Obama, McCain  suggested that everyone take a time out so that he can go to Washington and fully concentrate on our economic doom. Obama, rightly, suggested Senator McCain needs to multitask a bit more, given that as president, you can't stop the merry go round and, for example, send Iran to a timeout while you spank the naughty North Korean bottom.

 

The N.Y Times writes:

Although Mr. McCain was the first to emerge on Wednesday afternoon and announce a change in campaign plans, Mr. Obama began the exchange with his Republican rival on Wednesday morning.

“At 8:30 this morning, Senator Obama called Senator McCain to ask him if he would join in issuing a joint statement outlining their shared principles and conditions for the Treasury proposal and urging Congress and the White House to act in a bipartisan manner to pass such a proposal,” said Bill Burton, the spokesman for the Obama campaign.

“At 2:30 this afternoon,” he added, “Senator McCain returned Senator Obama’s call and agreed to join him in issuing such a statement.” Some Democrats reacted skeptically to Mr. McCain’s surprise announcement, charging that it seemed like a political ploy to try to gain the confidence of voters concerned about the economy.

Team Obama was surprised at McCain's sudden announcement to suspend the debate and campaign, and one can be sure this has nothing to do with a recent L.A. Times poll showing Obama in the lead (49-45). Nothing. It also has nothing to do with the recent news that one of McCain's staff was actually still receiving income from Freddie Mac, in contrast to McCain's previous assertions (lies). And it has absolutely nothing to do with McCain's desire to push back the vice presidential debate to some unspecified point in the future (like never) so that Palin can continue her crash course in understanding the world.

The real problem is not that McCain is unprepared, per se, but that he faces a conflict between the perception he would like to give in a debate, and the reality of what he will do to help (or not help) Secretary Paulson's bailout plan.  McCain himself is probably not sure what he will do, and does not want to be on the record Friday, only for reality to dictate a different position. That is, he would rather deal with reality first, and then shape that reality into advertising or campaign talking points.