Friday, February 29, 2008
Thursday, February 28, 2008
"Readers with exceptionally tenacious memories will recall that this pundit was opposed to the NATO intervention in Kosovo nine years ago. This may come as a suprise to readers without tenacious memories, since it is widely believed that I never saw a war I didn't like. Yet, believe it or not, I was opposed not only to the wanton bombing of Serbia, but to the whole 'inevitable' project of carving a new European Muslim state out of the flesh of that Orthodox Christian country. ... But the fact that Kosovo had a significant ethnic majority of Albanian Muslims over Serbian Christians was not, in itself, sufficient argument to detach it from Serbia by main force. For if that is the argument, the state system which provides the only order the planet currently enjoys will disintegrate. Strange to say, I am with Vladimir Putin on this one, and against George W. Bush. Mr. Putin's remarks on the inspiration that Kosovo's independence has given to violent separatists in Chechnya, Abkhazia-South Ossetia and elsewhere, are entirely to the point. Indeed, driving the Serbian government and Serbian people into the protective embrace of ex-Soviet Russia, and ultimately her ex-KGB strongman, was among several counter-productive dimensions in the war that Madeline Albright organized, along with other ruinous Clinton interventions in areas of peripheral interest to the U.S. ... The NATO action in Kosovo brought Mr. Putin--the hammer of the Chechens--to power, by demonstrating that force and force alone will decide secession struggles. ... Bush et al have validated ... a deadly new round of Balkan troubles, ripe for Islamicization", David Warren (DW) at http://www.realclearpolitics.com/, 23 February 2008.
"But with the presence of NATO troops, and swift recognition yesterday by the U.S. and European powers, ought to calm nerves and end the last territorial dispute in the Balkans. By taking the lead in the 1999 war that forced Slobodan Milosevics's ethnic cleansers from Kosovo and now on independence, the U.S. is shepherding one more Muslim nation to freedom", Editorial at the WSJ, 19 February 2008.
Well said DA. I wish Connie Baby, our Secretary of State, would read you column. I await the next administration's response to a Kosovar-like declaration of independence for the new state of Aztlan to be carved out of Southern California. Will Russia immediately offer it recognition and military support? Putin called the breakup of Serbia a dangerous precedent. I agree with Putin. Putin for President. Of the US. See my 11 January 2008 post.
VDH, be serious. The US lacks the military capability to defend Kosovo in Russia's backyard and everyone knows it. Why the Russians don't intervene militarily is for them to to know and for us to find out.
Wednesday, February 27, 2008
Tuesday, February 26, 2008
Monday, February 25, 2008
Sunday, February 24, 2008
Saturday, February 23, 2008
Friday, February 22, 2008
Thursday, February 21, 2008
Buffett's "offer yesterday to wade into the bond-insurance market was only half-brave, so its worth paying attention to where he thinks the risks lie. ... The argument goes that if the bond insurers are downgraded across the board, the bonds they've insured go south too, causing writeoffs and another cascade of financial-industry losses. ... But the notion that a spare billion or two for the 'monolines' could forestall many billions more in writedowns never made any sense. ... That's why the calculating Mr. Buffett only wants to reinsure the municipal business, which is pretty much all premiums and no claims. ... And a few billion dollars in capital won't be nearly enough to make a dent in the $1 trillion in exposure that the bond insurers have to the asset-backed market", my emphasis , Editorial at the WSJ, 13 February 2008.
Wednesday, February 20, 2008
"Many big Wall Street firms were asleep at the switch in the years leading up to the credit crisis. At least another group--the auditors--seems to be minding the store. They fell down badly during the tech-stock bubble, but their standards seem to be pretty tight these days. The most recent evidence: The apprently hard line taken by [AIG's] auditors [PWC], when it came to how the insurer valued credit default swaps", David Reilly (DR) at the WSJ, 13 February 2008.
"You see things; and you say, 'Why?' But I dream things that never were; and I say, 'Why not'?", George Bernard Shaw, Back to Methuselah, 1921. Similarly, I ask: why didn't PWC find this weakness before? What changed? "In valuing those swaps, AIG ... benefitted from assumed differences in value of the swaps and the securities they were insuring", LP&DR write. Assumed? What's going on here? Did PWC have an "internal inspection" team review its AIG audit workpapers and find no support for AIG's assumption? Is AIG's credit default swap valuation as well documented as Enron's valuation of long-term electric sale contracts that tripped up Arthur Andersen? Stay tuned.
Tuesday, February 19, 2008
The commodities markets look like those of the early 1970s. Everything is going up. Will Bush follow Nixon and close the "wheat window" as Nixon closed the gold window in 1971 and the soybean window in 1973?
Monday, February 18, 2008
Sunday, February 17, 2008
Saturday, February 16, 2008
Friday, February 15, 2008
Bravo KR. Go Ackman go. Also see my 20 December 2007 post.
Thursday, February 14, 2008
Wednesday, February 13, 2008
In 1933 the DJIA got down to 41 with gold at $20.67, a 2 to 1 ratio, in 1980, gold got to $875 with the DJIA at 889 a 1 to 1 ratio. Three to one gold would put it over $4,000. Gold looks cheap to me. Also see my 24 December 2007 post.
"Mortgage companies have stepped up their efforts to work with delinquent borrowers, but their actions aren't keeping up with the rapid rise in bad loans, a new study by state officials suggests. ... The mortgage companies expect less than 7% of the troubled borrowers to come up with the funds to make the loan current. ... The state report also found that resets aren't the key issue for many homeowners who are falling behind. More than 30% of borrowers with subprime or Alt-A ARMs .... are already at least 30 days past due even though they haven't yet seen their first reset, according to the report. ... Meanwhile, just 3% of borrowers with subprime or Alt-A ARMS who are currently delinquent fell behind on their payments in the first three months after the intererst rate on their loan first reset. That suggests that many borrowers were put into loans they could never have afforded, says [Mark] Pierce of North Carolina. The report also highlights the tensions between state and federal officials. J.P. Morgan Chase & Co. and Wells Fargo refused to provide data to the working group 'on the advice or direction' of the Office of the Comptroller of the Currency [COOC], according to the report. ... 'We think it's better if we collect the information we think is important for the national banks we supervise,' says [COOC] John C. Dugan, adding that 'it's great for the state to focus on the banks they supervise'," my emphasis, WSJ, 7 February 2008.
Here we go again. "Ruffling feathers"; Wall Streeters are so "sensitive", they're "New Age Men". I bet they cry regularly. The Treasury and the Fed are apparently trying to strong-arm state prosecutors to protect Wall Street's "malefactors of great wealth". I think ED should show brass 'cohones", call a press conference and tell Robert Steel (RS), super "former" GS guy, him again, and the NY Fed, "nuts" citing General McAuliffe's 1944 statement. Alternatively, ED may be biding his time. ED may get the "advice" vetted by a RS-approved "advisor", then reject it and explain why in excruciating detail. On television. What would RS do then? Attempt to have ED arrested for interfering with the operations of a federal agency under 18 USC 1505 for rejecting RS's "disinterested" advice? Suppose Joe Schmoe called RS to complain his savings were being depleted to protect the banks, would RS take his call? Get serious. Would RS or Timothy Geithner answer Joe Schmoe's phone call?
Dugan's concern for the banks is touching. Is he afraid the state regulators will expose the real reasons for the Fed-Treasury bank bailout are inconsistent with the stated reasons? The party of Abraham Lincoln, who said something about "government, of the people, by the people and for the people", in 1863 has morphed into a government, of, by and for, the banks. What a country.
Tuesday, February 12, 2008
"Although prosecutors have expressed an interest in the subprime matters, the criminal investigations might not result in the filing of any charges. Securities-valuation cases involve a fair amount of judgment based on an opaque market. To bring fraud charges, 'prosecutors need proof beyond a reasonable doubt that the banks made materially misleading statements about securities, and proof that they did it with the intent to deceive,' says Christopher J. Clark [CJC], a New York white-collar lawyer and former [AUSA] in Manhattan in the securities and commodities fraud unit", WSJ, 2 February 2008.
"Federal criminal prosecutors are stepping up their interest in Wall Street's mortgage-securities activities. ... The SEC is examining, among other things, whether [Merrill] booked inflated prices of mortgage bonds it held despite knowledge that the valuations had dropped, [people familiar with the matter] say. ... The interest of the Manhattan U.S. attorney's office follows a series of investigations being pursued by state and federal regulators with criminal and civil enforcement powers around the nation into the financial industry", my emphasis, WSJ, 8 February 2008.
The SEC and (In)Justice Department are "forced" to farm out investigations to private law firms, and Ofheo doesn't want NY's Attorney General investigating mortgage fraud. That's interesting. Think about it. Why would the Feds prefer private law firm investigations to NY's Attorney General? I realize the firms which hire the private law firms are large publicly-held entities. So? I can't believe there isn't a large potential "substititution effect" possible here.
CJC is correct so? Intent is inferred from actions. If the securities were improperly valued, will those who valued them, plead incompetence as a defense? If so, that will leave them open to civil claims. Or will the US Attorney's office for the SDNY let its "alumni network" take care of things and state there is insuffient evidence to prosecute. This after those who got target notices spend fortunes in attorney fees. Stay tuned. See my 31 January 2008 post.
I appreciate our good friend, Mike Garcia, showing "interest" after other state and federal authorities. How nice.
The (In)Justice Department is amazing. Banks which aid and abet felonies are never accused of anything. Just peasants who defraud banks of insignificant amounts. Consider, "the agencies responded by saying they lacked jurisdiction". Really? Why did the Bush Aministration push Stoneridge?
Monday, February 11, 2008
Price drives cost. "Excess" profits by oil companies will be taxed or competed away. See my 24 December 2007 post.
A company tells an employee if he works for it for say, 30 years, he will get a pension of $X when he gets to 55 based on his last five years wages. After working for the company for 25 years it says, "Oh we didn't mean that. We'll give you a pension based on your earnings in years 15-20". I conclude: either you defrauded the employee when you hired him since you never intended to pay him his pension as agreed, or you broke an existing contract with him and should get sued for damages. Amazing, the plutocrat-run Treasury sides with employers on this. I say: if an employer can't pay, it has a place to go: bankruptcy court. Using Treasury reasoning, after I borrow from a bank I can say: I'll pay you in two years and not pay any interest during that time. It's interest wearaway? I don't think so.
I agree with LM. This is another example of "regulatory capture", where the regulator works for the regulated. It's Alice in Wonderland at Treasury. "In class society, everyone lives as a member of a particular class, and every kind of thinking, without exception, is stamped with the brand of a class. ... The ruthless economic exploitation and political oppression of the peasants by the landlord class forced them into numerous uprisings against its rule. ... It was the class struggles of the peasants, the peasant uprisings and peasant wars that constituted the real motive force of historical development in Chinese feudal society", Mao Zedong, Little Red Book, chapter 2. The Bush Administration (BA) undermines the rule of law and respect for America's courts daily. Mao explains the BA's actions, i.e., each class has its own logic, and the BA's is that of China's 1900 landlord class. Why is Hank Paulson (HP) the BA's "Man on China"? Because HP exemplifies the thinking of China's landlord class of 1900. I add HP is busy exporting that thinking to the US. Seize the peasants' savings to support Wall Street rentiers.
Sunday, February 10, 2008
There is a continuous arbitrage between the public and private markets. If the estimated asset values are correct, commercial real estate prices will fall.
No, the dollar isn't "a good store of value", hence it's not money. As for gold being an inflation hedge, go back to 1913. Gold was $20.67, it's $903 as I write, 44X as high. That's beaten inflation over the long run.
Saturday, February 9, 2008
CI said one thing I take issue with. I think foreign buying of Treasuries has been driven by mercantilist economics for years. I can't explain China's accumulating $1.4 trillion of foreign exchange reserves any other way.
"Deloitte & Touche, one of the Big Four accounting firms, agreed yesterday to pay $1 million to settle accusations that it had botched an audit of a pharmaceutical company by entrusting it to a partner it new to be a poor auditor. ... The wholesalers had the right to return unsold drugs to Ligand, which could report sales on its financial statement only after reducing them to reflect estimated returns. The board said Deloitte had not challenged those estimates despite evidence that returns were running at a much higher rate", Floyd Norris (FN) at http://www.nytimes.com/, 11 December 2007.
Consider how differently the (In)Justice Department (DOJ) treats well-known tax protestors versus its apparent failure to prosecute well-known Wall Street figures. Why couldn't Snipes hire say, Mary Jo White and pay her a fee to show his contrition and investigate his tax situation. Why not? The DOJ permits this to corporations? Should an individual have fewer rights?
I previously mentioned James Fazio's case on 12 December 2007. It illustrates the critical area of accounting estimates. There is no reason banks can't estimate their losses from loan reconsiderations.
Friday, February 8, 2008
Yves Smith has a fine post about this at http://www.nakedcapitalism.blogspot.com/ on 28 January 2008. He says it all. I previously discussed those models, unflatteringly, on 23 August, 8 November and 1 December 2007.