31 December 2007

Top Financial Stories, 2007

This is my first new year's eve blogging at blogspot. I generally ask myself at this time what were the biggest stories of the past year, in business/financial news.

By "stories," I don't mean themes, such as "China rising" or "subprime mortgage troubles." I mean stories, such as one might have seen in a particular newspaper on some specific day. Two of the stories on my list involve the year's subprime mortgage crisis, so I'm not slighting its importance.

Of course, I choose the ones I do largely because they illustrate an important theme. But the theme itself isn't the story.

Further, I don't rank them, as in a top ten list. I'll simply give one "top" story from each of the twelve months of the year now ending. All that understood, here we go.

January: The Islamic Development Bank sets up structured finance unit in Saudi Arabia. The question of recycling petrodollars, and the development of a distinctive style of "Islamic finance" to do so, have been important themes for several years. This is a very good headline to hang that one on.

Feb. Fortress Investment's initial public offering. Fortress has been a very large and influential private equity operation. When it went public it (ironically?) drew a lot of attention to the private equity world it was exiting.

March. Government officials in Hanoi proposed new measures designed to attract more foreign investment capital into Vietnam. The symbolism needs no further comment from me.

April. SEC backs away from a plan to subpoena reporters about an alleged short-sellers' conspiracy.

May. A bidding war breaks out over control over the Chicago Board of Trade, one of the world's premier futures exchanges. The auction isn't resolved until July. The Chicago Mercantile Exchange ended up buying the CBOT, uniting the two venerable windy city institutions.

June. A dispute breaks out over how to document mortgage derivatives. To alert minds, this indicated that trouble was brewing in that area.

July. Cerberus Capital buys Chrysler from Daimler.

August. An appellate court rules against an intellectual property claim by the New York Mercantile Exchange.

September. The California Supreme Court throws out Gradient's motion to dismiss in a short-sellers' conspiracy case. Click on "Gradient" below to learn more.)

October. The year's inconclusive debate over the taxation of carried interest briefly occupies the Presidential candidates.

November. HSBC puts structured investment vehicles on its balance sheet -- may be turning point on subprime credit crunch, indicating that the problems that had obsessed so many in the summer and into the fall have a limit.

December. OPEC announces it will maintain existing levels of production. The announcement is generaly seen as heralding more price increases, as world demand increases are certain.

The AP has listed 10. There's is a more traditional theme-heavy sort of list. I'll reproduce it here.

1 housing contagion
2 record oil prices
3 toy recall
4 Fed moves
5 Dow 14000
6 dollar's fall
7 China and India roar
8 ethanol boom
9 bank ceo departures
10 United Auto Workers health care deals.

30 December 2007

Gambling, Debts, Opera

Yesterday, in my list of operas that will shortly be produced at The Met, I included without any special note The Gambler, an adaptation of the great Dostoyevsky novel of the same name. Both the music and the libretto are the creation of Sergei Prokofiev.

The origin of the Dostoyevsky novel is itself legendary. The great writer was addicted to the roulette tables himself, and he had to cook up something for publication fast to restore some level of contentment to the creditors he had acquired as a result. Pressed also to write on the deadline of an unforgiving publisher, he came up with a novella about -- debts and a casino.

That sounds like a prescription for a veritable hack-job of a novel. Still, Dostoyevsky was Dostoyevsky. He couldn't write a hack job, and of course he didn't.

You can read the result online:

The central character, who narrates the book in the first person, is the household employee of a general and his family who were once affluent but who are now living in tightened circumstances.

On the first page, the narrator has just returned from two weeks' leave. He tells us that things were different when he got back.

Of course, since this is the first page, we don't know what they had been like, so telling us that they had become different creates an air of mystery and plunges us into the middle of things, as an opening should.

The narrator's fascination with gambling is something he shares with several other characters in the novel, including a wealthy older woman called only Grandmother.

The General is waiting for Grandmother to die, because inheriting her wealth would ease his circumstances. She's in no hurry to help him out, and her displeasure with the deathwatch helps make her reckless at the roulette table -- at first recklessly successful, then ruinously (for the General's hopes) unsuccessful.

Here's one brief passage: "Yet now, when the Grandmother had just performed an astonishing feat at roulette; now, when the old lady's personality had
been so clearly and typically revealed as that of a rugged, arrogant woman who was 'tombee en enfance'; now, when everything appeared to be lost,--why, now the Grandmother was as merry as a child which plays with thistle-down."

I can certainly see how Grandmother would make a fine operatic character, but the complexity of the plot (quite intricate given its brevity) would seem to create some difficulties.

29 December 2007

The Metropolitan Opera

The following productions will be playing at the Met in New York in February-March, 2008.

Manon Lescaut, Puccini
Die Walkure, Wagner
Il Barbiere di Siviglia, Rossini
Carmen, Bizet
Otello, Verdi
Peter Grimes, Britten
Lucia di Lammermoor, Donizetti
Tristan und Isolde, Wagner
Ernani, Verdi
The Gambler, Prokofiev
La Boheme, Puccini.

I'm no opera aficionado -- indeed, I've never seen an opera performed live -- but even I can recognize that this is the traditional canon.

Except perhaps for "Peter Grimes," which is of a more recent vintage that the others. It premiered in 1945 in Sadler's Wells, London.

I mention the Sadler's Wells theatre for a reason. That particular theatre has a fascinating history of its own, going back to the 17th century when a businessman excavating gravel for use on roads, Richard Sadler, discovered a natural spring there. Hence the name of the place. The water from Sadler's Wells was soon reputed to be medicinal.

Here's more: http://www.sadlerswells.com/?page=complete-history

Anyway, here's a question for such of my readers who might have an informed opinion about the items on the above list. If you could only see one of them this season, which one would it be?

28 December 2007

"Welcome to the helm, Mr. Murdoch"

This summer, News Corp. (the corporate parents of Rupert Murdoch's various newspapers and the Fox broadcasting properties) agreed to buy Dow Jones, the famous keeper-of-stock-indexes, and publisher of the Wall Street Journal. The price tag was $5.6 billion.

Months elapsed, though, between agreement and the closing of the deal. The latter took place earlier this month.

Anyway, the WSJ may have decided to welcome him with a bit of controversy, because November saw a memorable screw-up in a front-page story in which the Journal accused the giant broker-dealer Merrill Lynch of accounting shenanigans, then had to back down, issuing a correction.

On Nov. 2, the Journal alleged that Merrill had participated in transactions with hedge funds designed to cover up and delay the reporting of its losses on collateralized debt obligations. That article's only specific example of one of the supposed off-balance-sheet deals had been a deal in which the broker-dealer allegedly sold mortgage securities to a fund, while providing that the fund would have the right to sell the securities back to Merrill after one year for a guaranteed return. This deal did have the smell to it of the old "Nigerian barge" transactions of Enron scandal memory. Class-action lawsuits by and on behalf of Merrill stockholders have since prominently referenced that publication.

Merrill Lynch's stock price (NYSE: MER) as of the close of business Nov. 1 was $62.19 per share. By the end of trading on Nov. 2, it was at $57.28. Merrill's price continued to fall through two and a half more weeks, closing at $51.81 on Nov. 21.

The following Monday, good news arrived, in the form of a "correction and amplification" by the Journal, in which the paper acknowledged that its Nov. 2 article had been based on incorrect information. The correction focused on the only specific instance the original article had purported to produce -- that sale and buy-back.

In its later note, the Journal said that while Merrill did "propose" such a deal, it was never completed, because "the firm's finance department determined it didn't meet proper accounting criteria." This has a much more hygienic odor, suggesting simply that some risk manager or compliance officer was on the ball.

Murdoch's detractors can say if they like that it was the dispiriting influence of his looming captaincy that created such a gaffe. His admirers can say, "this is the sort of thing that he's coming in to fix!"

Say what you will, it seems like a big black eye to me. And I think it might be time for those of us accustomed to a fix of market-oriented news each morning to switch to the Financial Times.

27 December 2007

Morality is focus

William James said it, in The Principles of Psychology (1890): the whole of the moral life is a matter of focusing the mind.

The actual quote is: "To sustain a representation, to think, is, in short, the only moral act, for the impulsive and the obstructed, for sane and lunatics alike."

Here's a simple example. I may need to get up at a certain time in the morning to get a job done. Ah, but the simple act of rolling over and getting out of bed requires that I focus on doing so. There are much more interesting pleasant subjects of focus -- the warmth of the blankets, for example, and the pleasant possibility that my early morning duties might turn out to be not so important after all.

If I sustain the thought, keep the focus, on getting out of bed and on with my day, and assuming of course that my nervous system is in a healthy state -- I will get out of bed.

Likewise with the rest of the day. Sustaining a representation, focusing my thoughts ... that is the key.

So, why are you surfing about reading blogs? Don't you have work to do? Focus!

25 December 2007

From JM's Nativity Ode

Time will run back, and fetch the age of gold,
And spekl'd vanity
Will sicken soon and die,
And leprous sin will melt from earthly mould,
And Hell itself will pass away,
And leave her dolorous mansions to the peering day.

Yea Truth, and Justice then
Will down return to men,
Th'enamelled Arras of the Rainbow wearing,
And Mercy set between,
Thron'd in celestial sheen,
With radiant feet the tissued clouds down steering,
And Heav'n as at some festival,
Will open wide the Gates of her high Palace Hall.

[lines 135-148].

Through the previous two Christmases, I maintained a blog with the same name as this one through another service, blog-city. Each of those years, I've used this Miltonic passage for the holiday. We've now created a tradition with cyberspatial portability.

Merry Christmas

23 December 2007

Reading Assignment

Today I'll simply suggest a bit of seasonally appropriate reading: The classic Conan Doyle story, "The Adventure of the Blue Carbuncle."

The story actually takes place on December 27, and a couple of years after Dr. Watson has moved out of the famous Baker Street flat.

Nonetheless, 'tis still the season ... when better to visit an old friend and wish him the best? Watson does this, and before long he's seated himself in the old armchair to listen to Holmes cogitate about an abandoned hat, while he (Watson) warms his hands by the crackling fire, "for a sharp frost had set in, and the windows were thick with ice crystals."

With the familiar setting already warming him and his readers, I leave you to it.


22 December 2007

Defensible Choice from Time

The more loyal of my readers my remember my grousing a year ago about Time Magazine's choice for 2006 Person of the Year. It was "you." The cover pictured a computer, with a reflecting surface used for its screen, so the reader, or casual walker-by of a newsstand for that matter, would see him/herself on/in the screen as POTY.

I thought the whole thing was a cop-out, and that Time should stick closed to the idea of an idiosyncratic individual newsmaker for this honor -- the idea that inspired the first Man of the Year cover in 1927 (Charles Lindbergh) and most since.

The first woman to receive the nod, by the way, was Wallis Simpson, in 1936.

Time has come through for us traditionalists this year. Its POTY is ... Vladimir Putin of Russia. I'm not crazy about the aesthetics of Putin's ugly mug staring out at us but, hey, maybe that's just me.

Its a defensible choice, since Russia has been one of the world's great powers under one political regime or another since around the time Napoleon ran into trouble there, and the head of state there is almost inevitably important to the destinies far beyond its borders.

Obviously, the naming of a POTY is not a political endorsement. Henry Luce wasn't expressing his happiness about the abdication of a monarch when he put Mrs Simpson on the cover, either.

Joseph Stalin (not a Russian, strictly, a Georgian) was POTY twice: 1939 and 1942. He was Hitler's ally when the first of those covers appeared, and had become Hitler's adversary by the time the second did.

Yuri Andropov shared POTY status with negotiating partner Ronald Reagan in 1983.

Gorbachev was POTY twice -- 1987 and 1989. The first of those recognitions concerned his efforts to reform the Soviet Union from within. By the second such cover, it was clear that the process had brought an end to that superpower.

The point is, I guess, this: I shouldn't be disheartened. I couldn't really have expected that I'd win twice in a row. Heck, even Gorbachev has that off-year in '88.

21 December 2007

"My Kid Could Paint That!"

The headline of this entry is also the title of a new documentary film by Amir Bar-Lev.

Sounds fascinating. (It isn't playing anywhere in my area, so this is very much a hearsay blog entry.)

The movie concerns the Olmstead family, celebrity, and the whole idea of a prodigy. Are we as a public too eager for the next child genius, the next Mozart?

Maria Olmstead, the 4-year-old painter at the heart of this documentary, was a media sensation. Jane Pauley introduced a segment about her, "The hottest new phenomenon to hit the art scene is a painter who arrives at the gallery in a car seat."

Then came 60 Minutes, with an expose, suggesting that her father was actually doing the work, and the searchlight turned ugly.

Then, in turn, came Mr. Bar-Lev, who seems to have begun work on this movie with the idea that Maria really was a genius/prodigy, that he could prove it, thus rebuking 60 Minutes and chilvarously rescuing the Olmsteads.

Things didn't work out as he had hoped, though. I understand the over-all tone of the movie is one of ambivalence.

But finally, as I indicated above, Maria isn't really its subject. We are. The idea of the "prodigy" and our eagerness to celebrate, then to tear down the "imposter" when our expectations aren't quite met -- that's the subject.

20 December 2007

South Korea

I wrote about politics in South Korea in August, when I focused on the presidential campaign of Lee Myung-bak, why some people were calling him a "pragmatist," and what that term meant in such a context.

So now, I'm hapy to report, the pragmatist has prevailed.

Mr. Lee won the election this week with a strong plurality. He received 48.7% of the vote in a multiple-candidate field. The runner up, Chung Dong-young, received only 26.2%.

Mr. Chung was seen as the proxy for the incumbent, Roh Moo-hyun, and the electorate was unhappy with the sluggish growth of the last five years under Roh.

Sluggish is a comparative term, of course. Nearby, the Japanese government just announced that its only predicting growth of 2% in its next fiscal year. The growth that makes Koreans so unhappy has been at about 4.5% annual. Still, it was a good deal more than that in pre-Roh years.

Mr. Lee was a natural figure to replace the current leadership under such conditions, as a former executive within the Hyundai corporate empire.

East Asia in general is a crucial economic driver for the world's economy, and South Korea is in the thick of it, so everyone has a special reason, not just distant philanthropic sentiment but a genuine basis in self interest, to wish the best for the people of the half peninsula.

16 December 2007

Bodily resurrection

I encountered recently in my internet surfing an expression of the idea that "substance dualism" is dead among neuroscientists and philosophers alike. Nobody with any relevant training and intellectual focus any longer believes that the soul is a thing that could survive and remain conscious separate from the body.

This author continued: "This is indeed a CRUSHING blow to religion in general, specifically Christianity, because the idea of an immortal soul is central to most religions."

Allow me just to respond to that. The disappearance of substance dualism might not be as crushing a blow as he would think, even if it were complete. After all, Christianity incorporates the idea of bodily immortality. The new testament insists that Jesus was no ghost after his death, that he returned in body, and in time ascended to heaven to the right hand of the father still in his earthly clay.

Millions of Christians believe that there will be a general resurrection of the saved. So to say that the soul will be immortal doesn't imply that it is something essentially separate from the body.

Augustine said that no dogma of the church is "more opposed" to the ways of the world than this. In his environment, filled with strict mind/body dualisms, the idea that the soul, having escaped the body, would willingly and gladly put it back on at the end of days was the most shocking aspect of Christianity to the pagans.


If we 'awake' onjudgment day to find ourselves in a reconstituted body, will we feel continuous with our present selves? Will it matter how much time will have lapsed? Will it feel like waking from a good night's sleep?

15 December 2007

Tony Soprano Pragmatism

If you type those words: Tony Soprano Pragmatism, into the google search engine, this humble blog comes up fifth on the resulting list of more than 2,000 results.

Indeed, according to sitemeter, somebody in Burlington, Mass. did did get to my blog by typing that string of words two days ago.

That person wasn't disappointed, either. (S)he spent more than 24 minutes here, looking at 15 pages. I'm proud to have received such attention for this collection of stochastically-generated sitemaster-friendly, synaptic snapshots.

My guess? Some teacher in an intro-to-philosophy course suggested a pro or con assignment on pragmatism, as part of which, said instructor suggested asking yourself "Was Tony Soprano a pragmatist?" A teacher must always use his student's existing interests as a base, after all, and presumably Tony S. was known to our Burlingtonian student going in.

I regret to say, though, that although such an inquirer into this blog could find some material on Tony, and could of course find some material on pragmatism, in the task of interestingly relating the two, I'd be unhelpful.

And so I remain even in this post, despite its promising title.

14 December 2007


I encountered recently a quotation attributed to J.P. Morgan: the elder of the father-son financiers with that illustrious name. One has to give him credit for a neat turn of phrase here:

"The time is coming when all business will have to be conducted with glass pockets."

Morgan apparently said this in a spirit of weariness or frustration. The whole idea of public scrutiny of what he was doing was repugnant to him, but he was practical enough to make some adjustments in that direction, and to prophecy that his heirs would have to go further.

The idea of business transparency has made some headway in the ninety-six years since the elder Morgan died. But then, by the standards of most earthly projects, that's a long time. Morgan barely lived long enough to see the inauguration of Woodrow Wilson.

These thoughts come to my mind this morning because the world is moving closer toward one prerequisite of transparency -- a single global system of accounting standards. The fact that different countries and regions have long had different standards can itself make balance sheets and income statements confusing or (in terms of our guiding metaphor here) opaque.


13 December 2007


If you haven't read the final book yet, and are counting on suspense, please stop reading.

For the rest of you, it has been a long time since I last reported on my readings in the final volume of this series. October 7th, in fact.

The ending of the book/series was in some ways a disappointment. Harry gets to have things both ways. He gets to make a noble self-sacrifice -- heading off in the woods at one point to what he is certain is his death -- yet through some authorly non-magical wand-waving he gets to be still alive and well at the end of the novel, too.

And the wands. There's too much in the final chapters of this book about wands. There are rules in the wizardly world about wands, and who can steal a wand from whom and how effective it will be when stolen. These rules are much discussed, and various wands show up where they aren't supposed to be. But it is all rather more confusing than any pay-off would warrant. The final defeat of Voldemort didn't really require all the stagecraft with wands.

Still, Rowling isn't just mechanically tying things up. She still has her moments of inspiration. The final appearance of the giant spiders, for example, was both unexpected and appropriate. It will look great on a movie screen when they get to that one.

And given the vastness of her achievement over seven volumes now, I'm willing togive Rowling a pass on some of the clumsiness here.

For the sentimentalists out there: Harry ends up married to Gina. They have kids and are sending them off at the famous fractional train platform in the final pages.

Ron and Hermione and there, too, sending their kids off to school, their own destinies to be determined by the sorting hat.

09 December 2007

Jersey Boys and Reality

I saw the "Jersey Boys" at a matinee performance yesterday.

Let's get it straightened out exactly who I saw performing as whom. When I walked into the theatre, the usher handed me a program, including five separate loose slips of paper announcing cast changes. This is not unusual for a matinee, I take it.

The four lead characters are: Tommy DeVito, Nick Massi, Frankie Valli, and Bob Gaudio.

As an anonymous informant reminded me in a comment on this blog last week, Travis Cloer plays the Valli role on Saturday matinees these days. One of those cast-change slips they handed me says the same thing: "The role of Frankie Valli will be played by Travis Cloer."

Before the recent changes, I understand, Cloer had played the role of Joe Pesci, the future actor, a 'jersey boy' himself. The script gives Pesci credit for introducing Gaudio to the rest of the group.

So Cloer moved up, if you will, from playing 'Joey' to playing Frankie Valli. Another slip tells me that Eric Schneider stepped into the roles usually played by Cloer. So it was Schneider I saw doing Pesci.

The other three main roles were played as long advertised: by David Reichard (Gaudio), Christian Hoff (DeVito), and J. Robert Spencer (Nick Massi).

Donnie Kehr usually plays Norm Waxman. I'm afraid I can't tell you right now who "Waxman" is exactly. Isn't he the loan shark to whom DeVito owes $150,000?
That's my bet. Anyway, I didn't see Kehr playing Waxman. The slip tells me I saw John Leone doing so. And if he's who I think he is, he did a fine job with it.

I'm not a fan of so-called "jukebox musicals" as a form. I'd rather have the producers of a new musical have the guts to put some new songs into play, rather than relying on the fact that their audience already knows the tunes we're going to hear. Surprise us! Also, I'd like a plot that isn't just a strung-together quasi-documentary that glues the songs together. I enjoyed both Spelling Bee and Chicago far more than I did this. So sue me. Or, as they say in Jersey, Fuhgeddaboddit.

Notwithstanding: I had a fine time. There was some play with the philosophical issue of reality and appearance. We saw the figures on stage talking about the British invasion, and the need to resist it by going on the Ed Sullivan show (as the Liverpudlians famously had) themselves. Then a projection screen appears, and we see two things at once. On the stage we see the actors performing as the Four Seasons did on their Sullivan show gig. On the screen, we see black-and-white footage from that show.

So ... which is the reality and which is the appearance? On the screen we're seeing the "real" Four Seasons, whereas beneath it we're seeing "only" actors. On the other hand, on the stage we're seeing flesh-and-blood three dimensional humans performing. On the screen we're seeing grainy black-and-white images.

So the reality/appearance divide is relative? Like ... wow.

08 December 2007

Mezrich's latest

Rigged, the latest book by Ben Mezrich, describes the world of oil-futures trading.

It may not sound like the most natural subject for book by a general-interest publisher like William Morrow -- given the bald statement of the setting above, one might have expected Wiley & Sons to publish this.

But Mezrich became famous with a book about card counting in casinos. For him, the oil futures exchange, especially the New York Mercantile Exchange, or NYMEX, where much of this book is set, is as exciting as any casino in Vegas, and his goal is to make us feel the same.

I've written about Ben Mezrich in this blog before, in particular about his book about American arbitrageurs in east Asia, The Ugly Americans. As I said at the time, the claims of the book to be non-fiction are a bit unsettling. Mezrich changes more than merely the names of his characters, and at some point "protecting one's sources" and such becomes, simply, fictionalization.

I have the same difficulty with this one. Consider the subtitle of Rigged. It's "The True Story of an Ivy League Kid who Changed the World of Oil, from Wall Street to Dubai." The insistence upon the "true story" part is my hang-up here.

Consider, now, the following passage, the opening paragraph of chapter 3.

"There was something uniquely soothing about the whir of helicopter blades. The rhythmic, circular disruption of air, each and every turn apply calculable lift, allowing a thing that should not fly instead to float, like a magic carpet in a child's coloring book -- a carpet made of steel and Plaxiglas and in this case solid gold. Even as the rhythm slowed and the floating, five-ton, bug-eyed carpet came to a gentle rest on the jutting ivory-white helipad, the whirring blades continued their soulful cadence, the long steel appendages cutting slower and slower arcs until all that was left was the beat of the thing itself, the soothing rhythm of a thing that should not be -- but, indeed, was."

Clearly, the author is taking us inside the mind of one of his characters here. The character in question isn't the "ivy league kid" the book is written about. Rather, its another young man, a Cambridge University schooled heir to Arabic nobility, Khaled Abdul-Aziz. Khaled's desire to do something grand for the future of Dubai makes him in time an important ally to the central character's desire to modernize and expand NYMEX. And it's Khaled who is supposedly thinking these thoughts about helicopters and their soothing blades.

As a piece of descriptive prose in a novel, I'd consider the above over-wrought. And the "carpet made of steel" bit makes the helicopter sound like a train they call the City of New Orleans. Still, since we're reading a work of non-fiction, we can infer that at some point Khaled confided in Mezrich about his feelings regarding helicopters, right?

Wrong. At this point, we have to flip back to the author's note, where we find the following lovely disclaimer. "Characters such as Gallo and Khaled are composites and are not meant to portray particular people."

I'll ignore Gallo for this post. Khaled is a composite? Non-fiction is, I think, consistent with the use of composites to simplify an overly complex narrative when the author is (as here) upfront about that. But ... composites in that sense don't have a "stream of consciousness." If we portray a composite as thinking of the "slower and slower arcs" of a helicopter on the landing pad as "soothing" then we've crossed the line and created a fictional character.

The South Park character "Towlie" did this sort of "non-fiction" writing once. He had an excuse. He was smoking pot at the time.

07 December 2007

Greenberg: Man of the Year?

I love the website Dealbreaker, a purveyor of shameless Wall Street gossip, low-brow humor that may or may not have a finance-industry connection, and once in awhile, an actual thoughtful entry about some matter of public contemporary concerns.

In fact, as soon as I saw our fearless leader, President George Bush II, and Treasury Secretary Paulson, on television spelling out their plan to solve the subprime-mortgage-related credit crunch, I thought to myself, "I wonder if the folks at Dealbreaker are going to have anything to say about this?"

They didn't disappoint me. In accord with my usual plundering impulses, their thoughts are copied and pasted below.


"First of all, let’s call it what it is: a massive bailout.

"Second, let’s see how it works: price controls.

"Third, let’s not pretend that this thing will stay as small as it started. When was the last time a government program ever did that? With defaults accelerating in every type of residential mortgage, there will be intense pressure to expand the program. Recall that we’ll very likely have either Hillary Clinton or Barrack Obama in the White House next year, with Democrats continuing to control the House and Senate. Do you still think the parameter’s of the freeze won’t expand?

"Fourth, let’s notice that the Bush administration is being just about as dishonest about this as they can get away with. They’re denying it’s a bailout. Denying it operates through price-controls. In fact, they’re denying they had any serious role at all. They just brought the parties to the table. Not even the editorial board of the Wall Street Journal buys that line.

"Fifth, let’s stop pretending we actually know what the costs of the bailout will be. It’s going to take quite some time to learn exactly how this will all work out. But we’re none too satisfied that the folks putting this together have even asked the right questions much less arrived at persuasive answers. What’s the moral hazard risk that future homeowners will also look for government bailouts? What investors demand as the price for taking on the risk of a bailout in the future?

"Sixth, can 'Mortgages' be named Time Magazines Person of the Year?"


Brilliant. I endorse every word of it. Well ... I endorse the first five. I think Time ought to abandon its bad habit of naming a gimmicky evasion as POTY. It should name an actual person, not "you," or "the computer chip," or "the planet Earth."

With that thought in mind, let me propose a POTY for TIME. Herb Greenberg.

Novastar Financial has had as much to do with the blowing up of this credit bubble as any single privately owned institution you might name. And Herb Greenberg flagged Novastar's problems years ago, as early as January 2004, and has rigorously pursued them every since. He rocks, too.

Greenberg is the Smith/Emshwiller of the subprime-mortgages story. Put him on the cover of Time.

For those not familiar with the Novastar story, let me just say that it has spent most of 2007 flirting with a stock price of zero, although it has received various sorts of rescue that have so far kept it solvent. Early this year, one of the company's long-time fans, a fellow who had created a website exclusively for the promotion of this company's wonderfulness, lost faith. He posted the following swan song:

"This will be probably my last writing here. Like most long NFI investor, I am shell-shocked after the conference that took place yesterday, and quite annoyed that I participated in the collective hallucination that led so many into such a disaster. Yes, hallucination, or more to the point, collectice delusion, a variant of the latter."

And there was more in that line.

It's sad to see faith die. But of course the stock markets aren't the place for unreasoning acts of faith in the first place.

The Paulson plan is, along with everything else one might say about it, another rescue for Novastar. A rescue for a "collective delusion". The federal government will get behind belief in tinkerbell and keep her flying for awhile longer.

06 December 2007

Against riding tigers

It was one thousand and forty-four years ago this week that a council called by an Emperor deposed a Pope.

More specifically, it was on December 4 of 963 that a council called and controlled by the Holy Roman Emperor, Otto, deposed Pope John XII.

John's offense? were they arguing about Arianism or the payment of taxes on Church land or ... what?

Actually, the dispute between John XII and Otto was quite nakedly one about power. John had asked for Otto's help in protecting him from a more small-time despot, Berenger II of Italy, (a Lombard). But John soon realized that he was riding a tiger, that the Emperor's power both above and below the Alps threatened to eclipse his own.

John began a search for allies who might overthrow Otto. Otto heard about this and, unsurprisingly, took offense. Hence his call for a council.

Emperors and Popes would continue to battle for supremacy in western Europe for a long time to come, until the rise of national monarchies and Protestantism created multiple supremacies and rendered their old rivalry moot.

So this week, marking the anniversary of that deposition, let us give a smidgen, but only a smidgen, of sympathy to John XII and to tiger-riders everywhere. As a general rule, there are better ways to deal with the local trouble-maker than calling in the bigger bully from across the mountains.

02 December 2007

New Encyclical

Pope Benedict has issued a new encyclical, formally known as "Spe Salvi."

Papal encyclicals are issued in Latin, of course, and their first two words serve also as their title. "Spe salvi" comes from a biblical verse in a letter of St. Paul, "In hope we were saved," or Spe salvi facti sumus.

The gist of the encyclical seems to be that we should work toward improving this world, the secular reality into which we were born, and not let our hopes for the next one distract us from that.

On the other hand, the assurance of a next world, His Holiness tells us, will provide us with some useful perspective in our work bettering this one.

Secular hopes are often quite distant -- a utopia it may take several generations to build. But, the encyclical tells us, "a kind of hope that has nothing to do with me in person is not a real hope."

Further, we need criteria for the evaluation of whatever work we're doing to create a better world here, and that criteria must ultimately be otherworldly in nature.

More here (in English) if you're curious: http://www.zenit.org/article-21161?l=english

01 December 2007

Jersey Boys

The trip is back on. The strike after all is off.

One week from today.

For those of you who haven't heard. Its a musical based on the life of Frankie Valli and the Four Seasons. The other three "seasons" (aside from Valli) were: Bob Gaudio, Tommy DeVito, Nick Massi.

Among their hits: "Sherry," "Big Girls Don't Cry," "Rag Doll," "Oh What a Night," and "Can't Take My Eyes Off of You."

The cast?

John Lloyd Young plays Valli.
Daniel Reichard = Gaudio
Christian Hoff = DeVito, and
J. Robert Specer = Massi.

Knowledge is warranted belief -- it is the body of belief that we build up because, while living in this world, we've developed good reasons for believing it. What we know, then, is what works -- and it is, necessarily, what has worked for us, each of us individually, as a first approximation. For my other blog, on the struggles for control in the corporate suites, see www.proxypartisans.blogspot.com.