Monday: Billionaire Biologists

It is by will alone I set my mind in motion.

The NYTimes has an article about the world of D. E. Shaw quants and an Larry Summers.  Louise Story, who wrote the piece, doesn’t go into details about what it is that Shaw’s group does exactly and, to be honest, this is really a job for someone like David Kestenbaum, the Harvard trained physicist turned financial guru at Planet Money (Hint, hint).  But I do know a smidgeon about what Shaw’s group does in the pharma field and at least one of my former colleagues was approached by someone in finance like Shaw more than a decade ago.  She was a physical chemist working on a program that did sensitivity analysis.  The math would make your eyes glaze over because it’s all eigen this and Green’s functions that and stuff I’ve forgotten long ago.  Basically, her program would be able to track an amino acid in a protein and determine how sensitive it is to its environment.

Now, in the pharma industry, this stuff belongs to a type of computation called molecular dynamics.  We start with a 3D representation of a protein in a solvent, usually water.  The model is really just a set of coordinates for each atom in the protein.  There are parameters for each atom that account for bond length between atoms and springiness and intermittant bonds between atoms called hydrogen bonds.   A simulation can be run in several ways.  One of the most common is something called simulated annealing.  That is, heat is added to the system, the protein absorbs this heat and starts to move.  The system is allowed to equilibrate and a trajectory is calculated for a series of time steps.  After the simulation is run, you can concatenate all of the time steps together and run them like a movie.  What you get is something like this (actual simulation starts at about 30 seconds in):

In the animation, the purple and red springs are called α-helices and the yellow ribbons make up a β-sheet.  These are relatively stable secondary structures of the protein that come together to form the tertiary structure of the protein.  They wiggle and shimmy but don’t move much.  The most interesting part of the dynamics run was at the right of the screen where there is a “loop” that has the greatest movement.  It is the action of the loop that is of primary interest to the researcher.  What does it do?  What amino acids around it does it impact and can we tell from its movement what its function is in the protein?

Now, these are all cool and groovy models but there are some things about them that make them tricky.  First, the system is only as good as the parameters you give it.  Some simulations run in cellular membranes that add an additional level of complexity.  If you don’t account for absolutely everything, the result can be waaaaay off.  Second, the simulations suck up a lot of memory and I/O and, up til now, it’s been hard to find systems that will let you do more than a very short span of time.  Luckily for D. E. Shaw, Moore’s law has allowed the area to grow a lot lately.  Also, in the bio end of his business, he has contracted with one of the chip makers for ASICs, or custom made processors, that he is using to build a massive cluster with more than 1000 nodes.  Molecular dynamics has been around for a long time but until Shaw’s latest programs came out, it was a pain in the ass to set up and run more than a few time steps.  His latest molecular dynamics code is called DESMOND and it is commercially available. My site is just beginning to use it, albeit without the fancy cluster.

So, what does all of this have to do with financial markets?  Well, I *guess* you could think of the financial world as a giant protein and if you can figure out what the parameters are and how much heat (money?) you are putting into the system, you could calculate which parts of it are most sensitive to change and then place some bets on that portion of the system.  For instance, you might be able to predict what effect the stimulus package is going to make on the economy and which industries will be most sensitive to that stimulus.  Or, maybe you could calculate the TED spread or LIBOR or a zillion other indicators.   As I said, this is really a job for David Kestenbaum so let’s hope he has a Planet Money segment on it soon.

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Sunday: Ask not for whom the pitchfork comes.

PBO made this “you’re in a heap o’trouble” statement to his friends in the financial industry the other day:

The bankers struggled to make themselves clear to the president of the United States.

Arrayed around a long mahogany table in the White House state dining room last week, the CEOs of the most powerful financial institutions in the world offered several explanations for paying high salaries to their employees — and, by extension, to themselves.

“These are complicated companies,” one CEO said. Offered another: “We’re competing for talent on an international market.”

But President Barack Obama wasn’t in a mood to hear them out. He stopped the conversation and offered a blunt reminder of the public’s reaction to such explanations. “Be careful how you make those statements, gentlemen. The public isn’t buying that.”

“My administration,” the president added, “is the only thing between you and the pitchforks.”

Yeah?  Well, that’s the problem, Barry.  You are deflecting all the rage and ire onto the banker boys.  We’re comin’ to get’em and there’s nothing standing between us and the $1500 suits but you and Jon Favreau.

Not so fast.  The real target of my rage isn’t the banker who is by nature reckless, selfish and greedy.  Oh, no, not by a long shot.  My anger is directed at the people who were supposed to keep the beasts caged in the first place.  Sure, it would have been nice to let them play in a natural habitat setting where they could fell a few hapless antelope.  But someone should have been keeping an eye on the electric fence.  *THAT’S* who I am sharpening my tines for.  And that would include Barney Frank, Chris Dodd, all of the Republicans who have served in Congress, Executive or Judicial branch in the past 30 years and YOU.

The banker dudes paid you well for keeping the power off of the fence.  Like the true shmoozer you are, acquiring the office was as far as your plans went.  The real process of governing means you have to shoulder the responsibility and fulfill your constitutional oath to “promote the General Welfare.”   (I’ve given up on your intention to “protect the blessings of liberty”, considering how you cheated your way into the nomination with the caucuses, the RBC hearing and the help of the superdelegates you paid off with banker-buddy dollars) Willam Black, senior regulator of the S&L crisis, thinks that you and Geithner are afraid to tell the country just how bad the bankers have screwed things up.  Judging from the stunned expressions on my friends’ faces, who have stashed away all of their money in 401K’s and other investments as they were instructed, you have a very limited amount of time before they snap out of their state of shock and come a-lookin’ for you.  Your reticence to rein the bankers in may have created the biggest surge in liberalism the country has seen since 1930.

We’ve got about 18 months to take over Congress.  It can be done, Barry.  People are really angry and there are a lot of motivated and intelligent PUMA-esque people out there who may be unemployed and find a Congressional salary very much to their liking.  Wouldn’t that frost Pelosi’s and Reid’s crockies?  We can be very demanding.

Here’s some of my demands:

• Bonuses should be limited to 15% of total compensation.  That’s right, bankers should be forced to live on s straight salary and bonuses given for good customer service.  Those customers are US.  You want to talk merit pay?  Ok, we institute merit pay for bankers.  Restore our confidence and you will get paid a nice salary.  F^&* us over, you get nothing.
• Cancel the debts on the credit default swaps.  As far as I know, they weren’t insured by the FDIC.  Gambling is Ok as long as you do it with your own money.  If we the taxpayers didn’t agree to insure them before they created the “instrument”, there is no reason why we should agree to bail them out now.  We shouldn’t have to honor a gambling debt.
• Take Citigroup, Bank of America and the other two almost insolvent banks into receivership.  Quit conflating it with nationalization.  Just get it done already.
• Get rid of Geithner, Summers and the rest of the Goldman Sachs operation they rode in on.
• Leave the autoworkers alone and fire the pension fund managers who played with our retirements.  Recapitalize the pensions and leave the fricking bankers to fend for themselves.
• Address the mortgage principle problem for those of us with house values that are now underwater.  Failure to do so will result in many homeowners walking away from their obligations and make the financial crisis worse.  We know Hillary would have been on top of this problem by now.  Too bad for us, we got stuck with you.  If you don’t have time to do it right, you won’t have time to do it over, so, get on it now.

I’m also getting really tired of the finance industry wailing that the full faith and credit of the US is on the line if we don’t pay off the people who bet over and over again using CDS’s.  We guarantee bank deposits of up to $250,000.  We have (had) rules in place for pension funds.  We had regulations on the insurance industry.  If the banking and insurance industry found ways around what regulation was left to fritter away money and didn’t take advantage of the insurance we the taxpayers provided, tough.  We are not responsible for protecting the lifestyles of the rich and shameless while the auto assembly line guy watches the only job he’s ever had get terminated because some rich asshole in the CEO’s office couldn’t think beyond the next quarter’s earnings. We know that it’s going to be painful to get out of this mess but for gawd’s sakes, don’t prolong it.  Every month, 600K+ people are losing their jobs, including lots of people we know.  Our patience is wearing thin.

Take this seriously, Barry, Barney and Chris and all you faithless superdelegates.  The deflection to the banking boys will only last a short time.  Destitution has a wonderful way of concentrating the mind.  It won’t be long before the public finds out that the people who are standing in the way are the ones who need the sharp poke in the ass.

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Saturday: Stuff

Ivan Boesky: They don't bust them like they used to

I’m going to dinner in NYC this evening so I may miss part of the “Worst Music Video Awards” ceremony.  I have made my submission in the category of Worst International Music Video.  Myiq2xu has it.  It’s very promising.  Let’s just say that the disco era was not kind to India.

In the meantime, the economic crisis continues to slouch towards Gommorah.  Bill Moyers has an interview with William Black, senior regulator during the S&L crisis of the late 80’s.  It’s worth a listen because I get a sense that when Moyer’s asks Black whether he is disillusioned with Obama after having supported him last year, he is really expressing his own disillusionment.

I am disillusioned with Moyers.  His embrace of Obama seems to have been driven by his desire to fulfill Martin Luther King’s Dream than by any real sense of what might be good for America at this time and place.  Don’t get me wrong.  I am convinced on a daily basis that Obama’s victory in November has had a profound effect on African-Americans.  It is evident in everyday interactions demonstrated by a greater openness and friendliness that just wasn’t there prior to his election.  And if anything good can come out of Obama taking credit for the decades of work by more dedicated members of the Civil Rights Movement, then I guess we can console ourselves that it has done some good to heal the rift of race relations in this country.

But Moyers succumbed to a carefully planned assault.  Some young, testosterone poisoned males were targeted by misogynistic messages that allowed them to shuffle off the thin bandage our country had put on gender relations.  Some liberals were targeted with messages about corporatism and lobbying that linked Hillary with those two no-no’s inextricably.  They got under Moyers’ skin with civil rights.  Moyers came to Washington from Texas with the LBJ crowd.  I just finished listening to The Irregulars by Jennet Conant, about the British secret propaganda unit in Washington during WWII.  She covers  a lot of history regarding the liberal Texas establishment in wartime Washington.  In short, there were a lot of liberal, New Deal type of Democrats from Texas.  These were ruthless politicians but deeply sincere about liberal causes.  Moyers is from this stock.  He was a sitting duck.  More than this, he was just about the only truly credible, liberal journalist left to us on TV.  Capturing him was a prize.

Moyers is a cautionary tale.  We all have to be on our guard about who and what we listen to and how our emotions might be leveraged.  We all have triggers.  For example, that video that we posted last night of the Pakistani girl being beaten by the Taliban invoked in me the desire to bomb the whole no-man’s land of Waziristan back to the stone age.  Wherever the Taliban is, I want to hunt every one of those bastards down and cut their balls off.  The whole Taliban region should be made into a vast smoking crater and every Taliban mullah eliminated.  See where I’m going with this?

We don’t have to become as cold and detached as Michael Dukakis, but we need to sometimes pull back and think calmly about our intentions.  Maybe we need to question our sources.  Where did that video come from and why did it suddenly surface on YouTube?  Is it genuine or staged?  After all, we were suckered into the first Gulf War by a staged presentation in front of Congress by a well connected Kuwaiti girl who claimed to have personally witnessed dozens of premature Kuwaiti infants unceremoniously dumped out of their incubators by Iraqi soldiers.  Even as I was outraged at her testimony, the back of my mind wondered how Kuwait, a tiny country, managed to have so many premature infants in one hospital.

Now, the video in question looks authentic enough but until we know the answers to where it came from, I suggest we proceed with caution.  You never know who is trying to distract or for what reason.  If we’re not careful, we might end up stepping up and prolonging a war or take our eyes off the financial crisis ball.

Or end up electing a president whose only tangible asset was that he is black.

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Friday: Gag me with a spoon

The Obama's "hobbitize" the Queen in protocol faux pas

The NYTimes has a nauseating account of Barack Obama’s international debut at the G20 conference in London.  Our apprentice president had his very own press conference where he couldn’t help but conjure up the memories of Churchill and Roosevelt, regretting that it wasn’t just Great Britain and America running things anymore.  Now, every other country has to get into the act, so accommodations must be made.

But the silliest part of this account was the brave leadership he showed at wordsmithing:

In a premiere diplomatic tour that has already been scrutinized for every blemish, Mr. Obama has, thus far, gotten some not-so-good reviews — several European news outlets complained that he seemed aloof — and some raves. (President Nicolas Sarkozy of France called him “very helpful.”)

Mr. Sarkozy was referring to Mr. Obama the mediator. For a tense hour on Thursday, Mr. Sarkozy and President Hu Jintao of China were going back and forth about tax havens. In a large conference room at the Excel Center, surrounded by 18 other world leaders, the two men sniped at each other, according to officials in the room.

Mr. Sarkozy wanted the big communiqué produced by the Group of 20 to endorse naming and shaming global tax havens, maybe even including Hong Kong and Macao, which are under China’s sovereignty. Unsurprisingly, Mr. Hu was having none of it. He appeared angry that Mr. Sarkozy was effectively accusing China of lax regulation, and that the French leader was asking China to endorse sanctions issued by the Organization for Economic Cooperation and Development, a club of wealthy nations that Beijing has yet to join.

According to accounts provided by White House officials and corroborated by European and other officials also in the room, Mr. Obama escorted both men, one at a time, to a corner of the room, to judge the dispute. How about replacing the word “recognize,” Mr. Obama suggested, with the word “note?”

The result: “The era of banking secrecy is over,” the final communiqué said. “We note that the O.E.C.D. has today published a list of countries assessed by the Global Forum against the international standard for exchange of tax information.” Hong Kong and Macao did not appear on the list.

It was not a Middle East peace accord. But Mr. Obama had his first moment as a statesman.

Amazing.  That Harvard Law degree finally gets some exercise.  Well, I know *I* feel safer now.

This is an interesting spin on the conference.  It’s all Obama’s baby.  The conference did manage to accomplish something but it sounds like the Europeans get the edge.  The Europeans got some concessions on the transparency of the banking transactions  and more money for International Financial Institutions while not ceding an inch on providing more stimulus to their own countries’ economies.  Sarkozy called Obama “very helpful” in a way that suggests that the more mature leaders were able to conduct business without him getting in the way.  “Let’s have a little tiff that Obama can settle off in the corner while the rest of us get some work done.  Oh, and can anyone find a teleprompter?  Maybe he can give a speech or something.  Just keep him out of our hair.”

Oh and American workers can just take an old, cold tater and wait:

Answering a question from a reporter from China, Mr. Obama managed to acknowledge that he had to care most about how American workers and companies were affected by globalization, while still making the argument for why globalization was in America’s best interest.

***“Look, I’m the president of the United States. I’m not the president of China,” Mr. Obama said. Then he added, “It is also my responsibility to lead America into recognizing that its interests, its fate, is tied up with the larger world.”

Mr. Obama said that if America neglected or abandoned poor countries, “not only are we depriving ourselves of potential opportunities for markets and economic growth, but ultimately that despair may turn to violence that turns on us.”

“Unless we are concerned about the education of all children and not just our children, not only may we be depriving ourselves of the next great scientist who’s going to find the next new energy source that saves the planet, but we also may make people around the world much more vulnerable to anti-American propaganda.”

Oh, brother, where to start?  How about here *in* America where our teachers are woefully unprepared to teach science and math at a world class level?  Any American child who wants to be the next scientist discovering anything has to run a gauntlet of the educational establishment’s goal to assimilate students and produce perfect accountants.  Resistance is useless!  If you’re lucky enough to have parents who can afford private tutoring you may get a degree in a science field but find that globalization has taken your job to India.

Does he even know what goes on in his own country?  He isn’t president of the world.  His job is to shore up our dying research industry in America, not the rest of the world.  We were once leaders.

*sigh*

Ok, Nicolas, the joke is over.

*** Am I the only one who hears nails on a chalkboard when he starts his sentences with “Look” then follows that with a Bushesque description of his job title?  Both he and Bush have a tendency of talking to us like we might not be aware of his constitutional obligations.  He has to keep reminding us that he is President of America, as if in a global economy, we might not already know.  Can you imagine Hillary talking like this?

StateofDisbelief found this video of Obama’s side vacation in Europe:

Thursday: This is what happens when you don’t have principles

Carla Bruni teaches Nicolas Sarkozy to walk

What do the following posts have in common?:

The New Masters of the Universe by James Kwak at baselinescenario.com

The Obama Enigma by E.J. Dionne at WaPo

G20 Color Commentary by Adam Posen on Planet Money

What’s Wrong With Washington? by James Wolcott at Vanity Fair

Actually, the Wolcott piece doesn’t belong.  I just liked his description of Fox News gasbags like Karl Rove and Bob Beckel as “plump juicy roasters”.  Wolcott makes it safe for the mixed metaphor.  The piece is hillarious and spot on.

For the other three, the theme throughout is one of trying to make sense of several moves by the Obama administration and the various players in the economic mess.  One gets the sense that what is going on is not that hard to figure out: The finance industry is taking us to the cleaners.  It is going to prolong the recession/depression because it is going to be the last entity called upon to make any sacrifices.  Each piece suggests that the White House is playing a dangerous game and gambling whole industries and our futures by engineering workarounds that won’t upset the bankers and their friends in the private investment clubs who stand to make out like bandits on our dime. Each solution is tailored to extract the least amount of pain from the wealthy and well connected and saddles the rest of us with the most risk. At the heart of this is the fact that each crisis is dealt with individually, as if the other crises were unrelated.  Each is solved in isolation, deal by deal, banker by banker. And it’s ticking off the rest of the world.

Nicolas (pronounced nee-ko-la) Sarkozy may be a petulant prima donna but he’s right about one thing.  The world cannot get on its feet economically if we continue to deal with the finance industry in a piecemeal fashion without regulatory fixes.  If there continues to be separate deals for each problem and no international or domestic law to hold the financials accountable, there can be no trust or faith in the system.  If there is no trust, there is no confidence that once leant, your money will come back to you.  People understand risk.  What they don’t understand is how their governments can allow them to be fleeced.  Confidence needs to be restored to the system to make sure the money flows to where it is needed.  That can’t happen until the big countries involved agree to set standards for financial transactions and regulations.  We are global now.

But this is not something that is in Obama’s blood.  Obama is of the “everything is on the table” variety of president.  Actually, I don’t think we’ve ever had a president who has ever put his principles on such a sliding scale as this one.  George W. Bush was a stickler for details compared to Obama.  And Bill Clinton, that master of triangulation, at least had the perfectly rational excuse that he was faced with an overtly hostile Congress and national press.  But what is Obama’s excuse for throwing away the tenets and principles of the party he comandeered to shmooze his way to the top?  He has every advantage a president could want and still he sides with the bad guys.

Well, we shall see if Sarkozy follows through with his threat and walks out.  Europe may not be doing enough to stimulate the economy but at least they aren’t stupid enough to throw more money at the banking industry and not ask, “And how do you intend to spend this?”  You have to draw the line somewhere.  And after all,  a leader has to have principles.

OT

It occured to me that there are those who would argue that healthcare benefits that the unions demanded are ruining the auto industry.  This is the lame excuse we hear from the plump juicy roasters on cable TV all of the time.  You know, “Healthcare costs add $X to the cost of an automobile, blah, blah, blah.”  It makes you kind of PO’d to buy a car if your mind is on how many gall bladder operations and hemorrhoid treatments those X number of dollars paid for.  But even if the UAW *did* ask for so-called “gold-plated” policies {{snort!, like a working class guy isn’t going to have to run the insurance gauntlet anyway}}, the cost of those policies wouldn’t have increased so damned much if it hadn’t been for Harry and Louise.

Remember them?

If you don’t like the cost of the cars, you can send a thank you note to the GOP.

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Wednesday: Obama puts a gun to the UAW’s head

Labor protests and mourns the Triangle Shirtwaist fire

I am unabashedly pro-union.

Yeah, I know that unions are not free from corruption and sometimes their demands can seem ridculous and anachronistic.  But I would defend them to the death.  Why?

They brought us the weekend.

Let’s just think back to all of the laborers who protested and went on strike and sometimes risked their lives and livelihoods in order to achieve dignity and justice in the workplace.  Without them we wouldn’t have the minimum wage or overtime or weekends.  Working life might still be non-stop, unsafe, for little pay and no benefits.  Unions fought for all of the stuff we non-union people take for granted.  We indirectly benefit as long as unions fight for and set a standard for compensation, benefits, safety and division of labor.  Unions negotiate for themselves and it trickles down to the rest of us. In fact, the trickle down theory only makes sense with respect to unions.

And the business overlords hate them.  They’ve been under attack since the beginning of the 20th century.  Unions got stronger under the New Deal provisions of the Roosevelt Administration and met their nemesis in Ronald Reagan 40 years later.  It’s been all downhill since then.

Cesar Chavez of United Farm Workers

Now, comes Barack Obama, who once called unions a “special interest”.  The auto industry is being forced to accept the government’s plan for rescue that will surely result in concessions from them. From the NYTimes, we get a picture of what’s going on:

If he does not act, Mr. Gettelfinger could imperil the workers he has fought to protect. In bankruptcy, companies can seek to persuade a judge to set aside labor contracts and terminate pension plans, by making a case that they are too expensive, forcing workers to rely on smaller government-provided retirement checks. But Mr. Gettelfinger also has to persuade his members that any cuts would be vital for the companies’ survival.

Pressure is mounting. G.M.’s new chief executive, Fritz Henderson, said Tuesday it was “certainly more probable” that G.M. would file for bankruptcy. Mr. Obama, on Monday, left no question that the government would not hesitate to go that route if necessary.

Obama, the “Democrat”, is finally doing what the GOP could only accomplish in their wet dreams.  Obama is putting the final nails in the unions’ coffins.  What he would not force on the bankers or the investment and insurance industries, he will ram down the throats of the guys who assemble your cars.  Gettelfinger thinks he can get a good deal with Obama.  I wouldn’t be too sure about that.  Obama is an opportunist first, last, always.  If he thinks he can get away with stripping the union of any power without raising any fuss from the public, he will.  His banker buddies will reward him lavishly for it someday.

And let’s make this clear, the people who assemble your cars did not make the management decisions to build gas guzzlers or engage in risky investments.  All they wanted were living wages, a share of the profits and a secure retirement.  They negotiated with their management for these things in good faith.  They defered part of their compensation to get pensions and health care in their old age.  Their contracts should be just as binding as any Vice President of Financial Products.  But right now, Obama is holding a gun to their heads and is forcing them to break their own contracts in order to keep their jobs.  This is not required of the criminals and thieves who took out 401K money.  Only the unions are required to do this.

“What we’ve worked for, for 25 years, can be gone in 25 days, basically,” said Bob Vistinar, an assembly inspector who has spent a quarter-century at the General Motors Technical Center in Warren, Mich. “That’s how fast this is moving.”

I’m standing in solidarity with the unions.  An attack on working people anywhere is an attack on all of us.  And I’m not giving up my weekend.

Money speaks for money, the devil for his own

Who comes to speak for the skin and the bone?

The comfort to the widow, the light to the child

There is power in a union.

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I’m No Economist, but I Think We Need Prosecutions!

The face of greed

I’m hooked on the economics blogs these days. Blame Dakinikat for starting me on a (probably hopeless) quest to understand the economic meltdown. I have been mathphobic since the eighth grade when I was horribly traumatized by algebra. And geometry! Don’t even get me started. When I was an undergrad, I was forced to take two math classes–basic math and statistics. Fortunately, those of us in the psych department were assigned a good humored, patient professor who cracked jokes about our having post-traumatic stress from high school math and had developed simple ways to explain mathematical concepts. Thanks to that kind and supportive professor, I was also able to survive two mind-numbing semesters of graduate statistics without too much anxiety.

Despite my lifelong troubled relationship with numbers, I am determined to understand what is happening to our economic and political systems to the best of my ability. These days, when I first get up, I open up The Confluence (my home page), quickly see what’s happening and then I check all my favorite econ blogs to find out the latest news and views.

This morning via The Market Ticker, I found this ABC News story on Joseph Cassano. (By the way, Cassano donated $2,500 to Obama’s primary campaign and $2,300 to his presidential campaigns. Isn’t $2,300 the maximum?) But back to ABC News:

The FBI and federal prosecutors are reportedly closing in on the AIG executive whose suspect investments cost the insurance giant hundreds of billions of dollars. The government is investigating whether or not 54-year old Brooklyn-native Joseph Cassano committed criminal fraud in virtually bankrupting the company.

Tuesday: Reboot

(Early morning meeting.  This will be quick)

Nicholas Lemann, who I know nothing about, has written Mad and Madder in The New Yorker that hints at why Obama may be reluctant to nationalize the banks.  Well, *another* reason that is independent from the fact that his banker backers have him by the junk:

Bank nationalization would drive the stock market down and increase the agita of people with 401(k) plans. Moderate Democrats in Congress would further soften in their support for the Administration’s legislation. The price of bank nationalization might be Obama’s super-ambitious plans in other realms, which, if history is a guide, are likely to pass only in this first year of his Presidency. If they do pass, he will have generated tax revenues from affluent people for social purposes far beyond those of the House’s tax on A.I.G. bonuses, and he will have significantly eased the distress of people who can’t get good health care or education. That is a lot to put at risk.

Ok, the first part of that sentence makes sense; the second part is utter bull$#@&.  It’s the plunging 401K values Obama’s worried about.  Well, not exactly worried about.  Obama doesn’t really worry about people who makes less than 7 figures a year.  But revolutions happen when the middle class gets fed up with being treated badly.  As Thomas Jefferson wrote once upon a time: “all experience hath shewn that mankind are more disposed to suffer, while evils are sufferable than to right themselves by abolishing the forms to which they are accustomed.”  Yep, we can hold out a long time as long as its the usual suspects that get the shaft.  You know, the perpetually poor, the undereducated, the ne’erdowells.  But when the value of middle class property starts to fall, “when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.”

So, maybe Obama’s strategy, and we have to assume their is a point to all of this even though there is no policy that we can detect, is to make sure that the middle class doesn’t lose its temper.  Plunging 401k’s would definitely make some people peevish, including moi.  However, if we descend into the semi-darkness of a Japan style “lost decade” where the already devalued 401k’s do not regain any of their value, just so that the bankers don’t have to eat their losses, that would piss me off more.  Maybe Obama figures that his chances of being a president when that happens are very slim.  Fine.  But don’t expect your picture on any stamps or money.  Your name will be “Bush”.

No, what we need is a reboot if there’s any chance to salvage the 401K system.  Of course, I would willingly forgo it if someone would just give me a fricking pension I could live off.  The rally of the stock market recently, I suspect, was partially the result of 401K contributions from bonuses that got disbursed in March.  It’s not going to last.  The market is going to start sinking again and stay there.  And then, people who were about to retire are going to get angry anyway.

Then it won’t be long before the anger spreads upwards to the smelly bourgeoisie.

Hmmm, NYC or Philly? NYC or Philly?

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Monday: Who appointed the financial wizards as Gods anyway?

"Greed is Good" Gekko

Automakers are on the frontpage of the NYTimes again today.  It looks like someone is trying to replace the finance giants smarting asses with a new whipping boy.  Who can feel much sympathy for the guys who ran Detroit?  They’ve known for at least 30 years that the oil would run out and that we would all have to switch over to more fuel efficient cars.   Back in the early eighties, they had even made some lame attempts to produce some of them.  But they were poorly designed, half-hearted attempts, as if someone was forcing them to eat spinach.  The Japanese killed them in the small car area and that, combined with an oil glut, caused the automakers to forget all about fuel efficiency.  They partied like it was 1999.

Of course, it is the union workers who have to pay for that.  Well, naturally.  It goes without saying.  Why does it go without saying that the unions must pay for the mistakes of the guys in the boardroom?  I don’t know.  It just is.

And now, bonddad at Huffington Post tells us we shouldn’t get down on the finance guys either.  They provide a valuable service:

But that does not mean that finance in and of itself is evil or that all people involved in this area of the economy are corrupt. I have often read the criticism that “The US doesn’t make things anymore” as if creating financial structures is somehow less valid than making a physical good. In fact, both activities are equally valid and should be treated as such. Individuals who prudently manage other’s money and take well-thought out risks provide a valuable service to the economy; they should not be publicly vilified because other members of their profession have made huge mistakes. In essence, there are good practitioners and bad practitioners in any profession; but the presence of bad practitioners does not nullify the contributions of the professions as a whole.

In addition, many finance people provided invaluable advice to their clients throughout this recession — advice which preserved their client’s money during an incredibly difficult time. Market watchers such as Barry Ritholtz, Mish Shedlock and Tim Iacona all provided invaluable advice to their clients and the public at large. Yet the criticism of finance groups all people in this industry together — or provides asterisks and caveats regarding industry professionals who are agreed with while still spilling a fair amount of bile at the industry as a whole. Throughout this recession I am often reminded of the public’s attitudes about criminal defense lawyers — a profession which is ridiculed and roundly criticized on a regular basis until you need one. Then you can bet your bottom dollar that you want Johhny Cochran at your side saying, “If the glove does not fit, you must acquit.” The point is broad brush strokes about any profession are inappropriate at best.

In short, Dr. Krugman’s analysis is wrong. Securitization has provided many benefits to the economy as a whole. It is not the sole problem with the current situation; we arrived at out present crisis because of a combination of numerous ill-thought out events and decisions. Finally, finance is not in and of itself bad and not all “wizards were frauds.” Securitization has been around a long enough time to indicate that properly done it does not pose a threat to the economy as a whole. The current mess is not solely caused by securitization, but instead a combination of many inter-related events.

In short, I respectfully disagree with Dr. Krugman’s analysis.

Is it true that the US doesn’t make things anymore?  Probably not.  Oh, sure, we don’t really make the world’s steel, appliances, furniture, textiles, computers and now, cars.  I think we can still give the world a run for the money in munitions, aircraft and pharmaceticals.  Agriculture is still pretty strong, though it’s mostly owned by big agribusiness.  But mostly, we have a lot of small businesses and the service industry.  Thank God we still have the finance industry.  It would never put out shoddy or poorly designed products like the auto industry.

Heck, didn’t we all gladly turn in our pension funds for cash-balance plans that we could manage ourselves?  And weren’t the finance wizards so very helpful in telling us how to set up our 401k’s that would steadily grow and grow and grow until we were 65?  And didn’t we listen to them when they told us that we didn’t put aside enough for our retirements and we should put more and more and more of our compensation into the stock market that, over many decades has shown only to increase in value?  Surely, they deserved all of the fees they wracked up whenever there was a transaction.  Surely, the work they did warranted the billions of dollars in bonuses.  It is very hard to skim money off the top of all those trillions of dollars of our hopes and dreams of adult communities on the golf course of our futures.

What I can’t understand is how they managed to appoint themselves Gods in the first place.  And was there a plan to first convince us to fork over our cash and then defraud us of the profits or did it just “happen”?  The rise in the financial genius class happened right about the time Reagan took office.  Reagan who preached “rugged individualism”, “voodoo economics” and the Laffer Curve. What we have 30 years later is a stratified society, a true class system, where the finance giants justify their existence in life as creating wealth, mostly for themselves.  What is their purpose in life really?  Who would be harmed if we got rid of the whole lot of them?

Let’s try that thought experiment.  Without the finance Gods handling our money we might still have pensions.  We might be making more money because the investor class wouldn’t be cheering for the increase in quarterly earnings that happen every time a company announces a layoff.  We might not have to have teleconferences at ridiculous hours with programmers in India.  People who need to get stuff done at work wouldn’t have to spend half of their time negotiating contracts with outsourcers, trying to get multiple contractors to handle what a single full time employee with benefits used to handle.  We might be making more fuel efficient cars if CEO’s had spent less time resisting the future, skimming the profits off the top, and more time encouraging the design of cars that would take advantage of that future.  But that would require hiring more designers and letting them design instead of figuring out how to make changes without incurring any additional expense.  They might have gotten good at car design, had they been allowed the creativity and money to do it.  We might have a Michigan that doesn’t resemble Blade Runner.  We could have dispensed with Six Sigma, “rank and yank” and other silly management theories that justified the MBA’s existence and wasted our precious time.  Workers everywhere could have been spared the biz speak jargon than made our ears bleed and meant that our pink slips were right around the corner.  We could have actually been rewarded for the work we did instead of being subjected to the stress of “what have you done for me lately?”.

That last question has been the focus of the finance giants for the last 30 years.  The finance industry has been focussed on their own bottom line with such intensity that producing anything of value has been an afterthought, just like the lives of the people who were affected by their machinations and securitization have been an afterthought.  And we can’t heal ourselves as a nation until we ask the finance giants “What have you done for me lately?” and impose the same performance based standards on them that they’ve forced on us for the last 30 years.

It’s time for a performance review.

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CALLING FOR A MUCH NEEDED INTERVENTION!

I love shopping online! I have to ask myself , could I get any more indolent than I am now? I mean, how much easier can they make it for you then by keying in your credit card number (and in many instances they remember it for you for God’s sake!) while all you are required to do is just hit the “Submit” button and wait for the latest thing to arrive. It’s like Christmas all year round!

I must have been bored this week because I was very busy as you will see. It even required my credit card company to call and ask if these purchases were actually mine. Yes, yes, I replied, not to worry, I was just in that kind of mood.

My ink cartridge to my printer went dry so I ordered a new one online to the tune of $26.00 and the roll started from there.

The undercounter radio that I have had for about 12 years suddenly stopped working. I loved that radio which also came with a light and timer. Off I went to the computer in search of a new one and found almost the exact same item only this time upgraded to contain a c.d. player and an instant weather report! Order placed, address given, credit card recorded, and “submit”. Easier then fighting the crowds. And who can actually go without having an instant weather report at their fingertips? This item had my name engraved right on it.