Steve Hamlin

Clean Lines

2009-03-20T09:37:00.003-04:00

Production as Art

2009-03-14T19:05:00.012-04:00

http://thru-you.com - "Kutiman mixes Youtube." The music is great; how it came about is even greater. Funk, reggae, neo-soul, trip-hop, d&b. Tracks 2,3,6,7 in particular.

S&P Composite P/E over the past 150 years

2009-03-13T10:24:00.003-04:00

$50 Trillion of Global Financial Assets Lost in 2008

2009-03-10T10:00:00.002-04:00

(Bloomberg): "The value of global financial assets including stocks, bonds and currencies probably fell by more than $50 trillion in 2008...Global stock markets lost about $28.7 trillion in 2008, and another $6.6 trillion has been wiped from the value of world equities in 2009"
...
"The loss of financial wealth is enormous, and the consequences for the economies of the world will be unfortunately commensurate," said a former IMF Director. "There are serious economic and political stumbling blocks that may well cause the recovery to be costly and slow to consolidate...Poor macroeconomic and regulatory policies allowed the global economy to exceed its capacity to grow and contributed to a buildup in imbalances across asset and commodity markets. The previous sense of strength and invulnerability is now gone."
...
The global economy is likely to shrink for the first time since World War II, and trade will decline by the most in 80 years. "This crisis is the first truly universal one in the history of humanity," said a former IMF Managing Director. “No country escapes from it. It has not yet bottomed out."

Foreclosure & Housing Crisis - March 2009 C.O.P. Report to Congress

2009-03-08T17:41:00.010-04:00

Congressional Oversight Panel (Elizabeth Warren, Chair)
March 2009 Report - "Foreclosure Crisis: Working Toward a Solution"
January 2009 Report - "Regulatory Reform"
-Submitted under the Emergency Economic Stabilization Act of 2008

Puscifer - from Maynard of Tool

2009-03-07T19:15:00.000-05:00

Maynard James Keenan's other project - more electronic, hip-hop, lounge, drama

Box 1

2009-03-06T22:38:00.019-05:00

From an email conversation with friends
Sent: Friday, March 06, 2009
To: Friends
Subject: Time To Fire Tim Geithner (article), and other thoughts

(From an article : http://www.businessinsider.com/henry-blodget-time-to-fire-tim-geithner-2009-3)

"We don't mean to sound impatient, but we've seen enough. The country is in the middle of the worst financial crisis in 75 years, and the second-most-important person in charge clearly isn't the right man for the job."..."Before taking office at the end of January, Tim Geithner had many months to develop a solid plan for what to do. He had the opportunity to see what was working and what wasn't and to consult with dozens of experts, many of whom had no stake in the matter (unlike the Wall Street kingpins who seem to have shaped Geithner's inaccurate view of the situation). He had the opportunity to see and understand that what America needs most right now is clarity and decisiveness."

"Then he took office. In the five weeks since, Tim Geithner has:

* Given a speech billed as the solution to the financial crisis in which he promised something vague, someday, that sounded an awful lot like the bad plan that didn't work in the past administration (which really isn't that surprising, given that Geithner was the one who came up with the earlier bad plan).

* Floated multiple versions of the same plan into the press hoping that one would be enthusiastically received by someone other than Wall Street (no dice.)

* Refused to seriously discuss the consensus opinion of most neutral economists and experts: That the banking system is insolvent and that the solution is pre-privatization.

* Given Congressional testimony in which his brusque, defensive manner and weak responses have inspired no confidence and served only to make people wonder again why Obama picked him for the job."

"and, most importantly, Tim Geithner has:"

"* Refused to revisit or defend his almost certainly inaccurate view that this crisis is merely a temporary price decline caused by a lack of liquidity, rather than a collapse of a debt-driven economy. You can't cure the patient if you're treating the wrong problem."

"With a few years of seasoning in a normal environment, Tim Geithner might turn out to be a fine Treasury Secretary. But this isn't a normal environment, and we don't have a few years."
---- end article quote----

I'm all over the map - the govt is doing too much and not enough at the same time, doing a terrible job of selling it, and inspiring zero confidence which is what's needed most of all. Tortured logic and complicated plans to avoid simple solutions.

Obama is fiddling on healthcare while Rome burns . His senior Treasury appointees just dropped out, again, leaving no one except the marginalized Volcker to oppose the Summers/Geithner/Rubin-esque view that over the past 15 years certainly didn't prevent this calamity. Who have managed to give half a trillion dollars of taxpayer money to keep the inside crowd in control (TARP), and spent 5 trillion more making sure none of their social circle lost everything, like should have happened (stupid Fed/Treasury guarantees).

The names change, but the mindset remains the same - protect the established order, even at the expense of the next generations.

If you watch CNBC, there was a great line last night from sensible economist Steve Liesman to conservative 'free-markets' blowhard Larry Kudlow: "I don't remember where in the Constitution it is written that senior preferred bondholders are guaranteed to not lose a penny, Larry"

The order of risk, and thus the order of capitalistic justice, is: shareholders, preferreds, sub debt, senior debt, secured debt and debtor-in-possession financing (aka the taxpayer's "save the banks, save the world" money).

Yet you, the taxpayer, are losing FIRST.

Why do new-money taxpayers lose their ass before old-money-bondholders/CDS-holders lose a penny? The free market only works when people risk their own money, and lose their own investments. WHO IS FAILING?

$175bn into AIG is looting of the Treasury, plain and simple, for the benefit of counterparties that the govt refuses to disclose. Rumor is: mostly to Goldman Sachs and large European banks (Bloomberg/Fox are suing the Treasury to get them to release basic information - full transparency what?)

Capitalism is dead, long live crony-capitalism, long live plutocracy-of-the-connected. Privatized gains, socialized losses.

Sometimes I hope it gets bad enough that serious social disorder erupts and scares the shit out the 5,000 people that run this country enough to permanently change things. Other than that, I don't see anything other than status quo ante.

---

Brian Vann wrote back:

Does anyone like the plan that we bail out the individuals who purchased homes at 100% financing, no proof of income, with adjustable rate mortgages on homes that were far out of their budgets? Why are we helping those that were irresponsible? I understand that there are those that have lost their jobs and can’t pay for their “traditional” mortgage and I am sympathetic towards those unfortunate soles. I am not sympathetic to those that purchased 500K homes with unconventional mortgages when they only could offer $250k under a traditional mortgage.

Hamlin a question for you: I read in “TIME” magazine, yes a liberal magazine, and I watch FOXnews where a reader emailed a question about PMI. He asked why hasn’t PMI been helping the folks who couldn’t pay their mortgage. Isn’t that what PMI (insurance) is used for, to make the lender whole when the folks can’t pay? We haven’t heard anything about PMI.

Brian A. Vann
Vice President of Corporate Sales
LearnSomething, Inc.
www.learnsomething.com

----- Original Message ------
Subject: Re: Time To Fire Tim Geithner (article), and other thoughts
Date: Fri, 06 Mar 2009
From: Steve Hamlin
To: Brian Vann
CC: Friends

(PMI answer below)

Do I like mortgage relief directed at mortgagors (i.e "owner" with 0% equity)? Not really - they're renters who afforded a better house than they otherwise could have - get out and be happy you had 4 years high on the hog. Devastates the neighborhood, though - collateral damage is pretty bad. The guy that put 50% down, and is now underwater? That sucks, and if there's help to go around, I'd rather he get it than a CDO^2 investor.

Seriously - I'm curious - what would you propose? What is the alternative, what are you willing to do? Any sense of shared-struggle or community? Unfortunately, all I hear from some is NO, not solutions. And just for fun, you can't mention income tax cuts as a solution.

Of course, if one disagrees with mortgage relief to individual homeowners in general, then Obama's package is good, because it's not all that much help, and won't be taken up by many. What's been proposed so far is a crappy plan that solves nothing: it kicks the debt can down the road, refuses to adjust the principal, focuses almost all the incentives on the mortgage servicers, is basically a predatory loan, and will ultimately not be of much help. It continues the line of thinking that house prices are going to bounce back once this slight unpleasantness is behind us, which is folly. It's not a liquidity issue, it's a 350%-debt-to-national-income insolvency issue. Housing is only now getting to some semblance of a fair price, and the associated debt load needs to be written down to recognize that. [That is the core of the entire global financial problem: there is more pain coming - who should be forced to take it? Where within global capital structures does each government step in, and why? And how can we distribute it (on the hidden)?]

I'd prefer the solutions to be bottom up, not top down: If the government is going to bail out someone, I'd rather it be individual mortgagors, than the investors in the mortgage securitizations and the bondholders of banks. Bailout Americans in CA, AZ, FL rather than sophisticated investors, banks around the world, sovereign wealth funds and the Chinese Central Bank. Those investors, who knew or should have known the risks better than the rest of the parties, take more of it in the shorts that the individual homeowners. That is my preferred public policy. I welcome arguments for why institutional/capital frameworks take priority over citizens/taxpayers.

Unfortunately, since our nation permanently runs a net trade and fiscal deficit, which requires us to 'borrow' a trillion dollars a year from those same parties - that will never happen. Gotta keep our masters happy.

Of course, we're bailing out the over-leveraged credit system with money we're borrowing from everyone else to begin with, which is kinda ironic. Plus, we will never truly pay back our national debt: just keep rolling it forward forever, inflating away the old debt for new debt.

That's why Sec. of State Clinton flew to China in February, begging them to continue buying U.S. Treasuries and Agency (FNM/FRE) mortgage debt. There is serious concern the U.S. won't be able to successfully (read cheaply) find buyers of $2 trillion of new issuances in 2009 (new debt plus rollovers).

It's also why taxpayers have pumped $175bn into AIG, to keep Europe from imploding (it's coming anyway). Gotta keep the people that bought our shit happy, so they'll be open to buying more shit in the future.

---
PMI: Best article I found: http://searchchicago.suntimes.com/homes/news/1428121,HOF-News-kay13.article

PMI mostly only applies to mortgage loans that wound up in Fannie/Freddie MBS (mortgage backed securities). That was the "conservative" part of the market.

"Even though people were buying with no money down, many did not have any PMI," due to exotic mortgage structures (80-15-5, piggybacks, carrybacks)

"In addition, most subprime and Alt-A loans were not sold to Fannie Mae or Freddie Mac, which have conventional lending requirements, said David Crowe, chief economist at the National Association of Home Builders. "So they did not have mortgage insurance and hence the ultimate investor is unprotected." "

and then, PMI only covers 20-40% of the the loan amount, and only after a home is actually foreclosed on. "The coverage is designed to cover the lender's cost of marketing and selling a foreclosed property." Doesn't cover renegotiations, short sales, defaults not yet foreclosed, deeds in lieu of foreclosure. etc.

Surprise: PMI companies have taken a beating, but are still around. Brian Vann: I agree - you'd think that they would have gone 'POOF' in the first 30 seconds of this game.

---
"The companies that specialize in that business have been strained by the current housing downturn and record foreclosures."
- http://uk.reuters.com/article/marketsNewsUS/idUKWAT01101020090220
---
WASHINGTON (Reuters) - The U.S. Treasury Department has no current plans to give the ailing mortgage insurance industry an injection of capital under its financial rescue fund, an administration official said on Friday. "There (are) no current plans to provide funds under the financial stability plan to mortgage insurance companies," the official said.
- http://uk.reuters.com/article/gc06/idUKTRE51Q4VW20090227

Banks are insolvent - can we just recognize that already?

2009-02-11T19:50:00.008-05:00

(from an email to friends)

Will Obama and Geithner please explain, again, why we aren't just ~~nationalizing~~...~~pre-privatizing~~...having the FDIC simply take over these insolvent institutions? Receivership, audits, crams-downs, carve-outs, sell-offs to new capital - the big pieces continue functioning, and a few changes in the capital accounts. Why all the panic at doing that? Why the tortured logic in trying to avoid the obvious answer?

Every dollar that a shareholder, bondholder or SIV-investor does NOT lose in these banks, is a dollar that the taxpayer and future generations just gave those private investors. The same investors that were happy to take the phantom profits in the good times. Every dividend and bonus paid after the companies were insolvent, or took TARP money, is money directly out of the taxpayer's pocket. Looted, stolen in broad daylight.

"But we didn't use the money to pay bonuses" they said to Congress this morning. Bullshit: that they continue to even exist is only because of the misplaced goodwill of the public that they fleece. There are no $10mm bonuses in a Ch. 7 liquidation or FDIC takeover - perhaps they'd like those options instead? I sure do.

Geithner's debut: Entirely underwhelming. Ridiculous. Pathetic. Insulting. And why the markets fell 5% yesterday. It is not a plan, not a framework, not a skeleton, not even a term sheet, barely an outline, and no more than vague utterances. There was no there, there. And that is the best they can come up with. We're screwed.

"Has Barack Obama’s presidency already failed?" - Martin Wolf (ft.com) via http://www.nakedcapitalism.com/2009/02/geithner-plan-smackdown-wrap.html

(fn1: this doesn't include the $200+ billion ALREADY provided or guaranteed by the Treasury. We've ALREADY bought them at least once, and now again, but still manage to somehow own less than 10%.)

Long Term Dow Chart

2009-02-05T20:48:00.004-05:00

UPS - 6% of the U.S. GDP in its system at any given moment

2009-02-03T23:29:00.010-05:00

"Once viewed as a leading indicator, UPS has become a proxy for the economy in real time, with 6% of the U.S. GDP and 2% of the world's GDP in its system at any given moment."

"It was looting, and it is high time the media starts describing it in those terms."

2008-12-18T11:26:00.006-05:00

"Why are CEOs allowed to keep bonuses based on profits that were ephemeral, false or even fraudulent?...Either investors should be able to pursue recovery via litigation, or the SEC should go after the ill-gotten cash. Either way, Bonuses based on profits that were not real are not bonuses - they are the proceeds from theft, and as crime, should be disgorged." (Ritholtz)

"Our theoretical analysis shows that an economic underground can come to life if firms have an incentive to go broke for profit at society's expense (to loot) instead of to go for broke (to gamble on success). Bankruptcy for profit will occur if poor accounting, lax regulation, or low penalties for abuse give owners an incentive to pay themselves more than their firms are worth and then default on their debt obligations. Bankruptcy for profit occurs most commonly when a government guarantees a firm's debt obligations." (Brookings in 1993, via NakedCapitalism)

http://www.ritholtz.com/blog/2008/12/clawing-back-at-exec-comp-part-ii/
http://www.nakedcapitalism.com/2008/12/new-york-times-story-pulls-punches-on.html
http://www.nytimes.com/2008/12/18/business/18pay.html?ref=us&pagewanted=all

A Christmas Card from the Stock Market

2008-12-17T18:22:00.000-05:00

S&P Index, 1825-2008

2008-11-26T22:11:00.003-05:00

Tracking the Bailout - The Government's Committments

2008-11-26T22:02:00.002-05:00

Reducing the Risk of Human Extinction

2008-11-17T11:42:00.000-05:00

"In this century a number of events could extinguish humanity. The probability of these events may be very low, but the expected value of preventing them could be high, as it represents the value of all future human lives. We review the challenges to studying human extinction risks and, by way of example, estimate the cost effectiveness of preventing extinction-level asteroid impacts."

Brazil - The Modern

2008-11-14T19:48:00.001-05:00

Federal Land as a Percentage of State Land

2008-11-14T19:30:00.001-05:00

"This is a panic in the way of the fine 19th-century panics, where we all run around like headless chickens."

2008-10-25T16:23:00.000-04:00

DJIA over a Century

2008-10-15T19:43:00.002-04:00

Technical market indicators

2008-10-12T09:25:00.002-04:00

S&P 500 trading ranges:1939-2008

2008-10-12T01:04:00.005-04:00

Economic value of the ongoing destruction of the forests: $2 - $5 trillion per year

2008-10-11T22:40:00.001-04:00

U.S. National Debt and the Presidents Responsible

2008-10-11T21:00:00.001-04:00

they should have made the Y-axis log(n)

Economics: crisis of confidence - equilibrium theory vs. computational modeling

2008-10-05T20:26:00.012-04:00

An interesting NYT article about economic theory, by a theoretical physicist, and why new econometric models and computational approaches are needed.

He also explains one of the underlying causes of the market-seizing credit crisis - a financial manifestation from the 'The Tipping Point' and 'The Black Swan': a quickly developing, self-reinforcing crisis of confidence caused by an unexpected confluence of forces; a tail-eating downward spiral that nobody thought could happen.

---

"For example, a computational 'agent' model being developed ...looks at how the level of credit in a market can influence its overall stability."

"Obviously, credit can be a good thing as it aids all kinds of creative economic activity, from building houses to starting businesses. But too much easy credit can be dangerous."

"In the model, market participants, especially hedge funds, do what they do in real life — seeking profits by aiming for ever higher leverage, borrowing money to amplify the potential gains from their investments. More leverage tends to tie market actors into tight chains of financial interdependence, and the simulations show how this effect can push the market toward instability by making it more likely that trouble in one place — the failure of one investor to cover a position — will spread more easily elsewhere."

"That’s not really surprising, of course. But the model also shows something that is not at all obvious. The instability doesn’t grow in the market gradually, but arrives suddenly. Beyond a certain threshold the virtual market abruptly loses its stability in a “phase transition” akin to the way ice abruptly melts into liquid water. Beyond this point, collective financial meltdown becomes effectively certain. This is the kind of possibility that equilibrium thinking cannot even entertain."

Was the Wachovia - Citi - Wells Fargo story planned from the start?

2008-10-03T22:41:00.007-04:00

Scenario: Suppose this Wachovia-Citi-Wells story was designed from the start by financial leaders, in order to instill support in the market. The Treasury, FDIC, Buffett, Wells' CEO (at least, if not the others), working together?

Script: Have the FDIC show that it (a/k/a Treasury, US Govt) is backstopping all banks, but then have a non-governmental recapitalization with private money from Citi. This, along with the FDIC forcibly reorganizing an increasing number and size of other banks. Both of which show that the floor-supporting framework of the FDIC works wells enough that the private markets can feel safe to work, companies can trust, and the markets can operate. That would target a core problem - a lack of faith in the concept of 'return of cash'.

Result: restored public & credit-market confidence in the banking system, and hopefully long-term equity values.

Reason: Buffett already has put his money to use in a public show of support for Wall Street (GS) and Corporate America (GE). Why not core banking (WFC/WB)?

Did Buffett, as large shareholder, stop Wells Fargo from acquiring Wachovia, just before Citi wound up getting it with/from the FDIC in a quasi-receivership/bankruptcy/workout? Perhaps he tanked the Wells acquisition on purpose, either guessing or knowing the events that would happen: the lack of non-FDIC-assisted bids, then the Citi deal, then Wells 'recognition of WB value by the private market' via the public show of private WFC-WB recapitalization. To facilitate the orderly market process of strong balance sheets taking over the levered and weak - which supports the feeling that the markets still work.

Yet for a third time is Buffett now riding in to calm our fears, to reassure the markets that everything will be OK and the American dream is not dead.

Nice work if it's true - a deft propagandist's touch. Where was that in U.S. international relations over the past 8 years? That failure cost a trillion dollars, too.