DOW WTF?!

In SD!

2008-10-30T16:37:00.000-07:00

DOWWTF is in San Diego, designing software with the coolest guy in the world, for the next three days, so don't expect any posts until Sunday or Monday. In the meantime, take a look at the office I'm working at, here. Yes, it's outside. Yes, it's on a rooftop. And yes, that's the Pacific Ocean in the background. And yes, we're taking surfing breaks.

Oh, and here's Miss Kigurumi to keep you company while I'm gone...

Credit Crisis Interferes With Punjabi Woman's Effort to Import Caste System to New Jersey

2008-10-29T13:02:00.000-07:00

From the LA Times...

"Here in Jersey you just have to have a house unless you're just a fresh immigrant," says Mona, who thinks she should be past that stage. Twenty years ago, she moved from the Punjab state in India to Santa Clara, Calif., where she lived with her parents in another two-bedroom apartment."

If You Were an Impoverished Egyptian

2008-10-29T07:41:00.000-07:00

Bad news if you were one of the Egyptians rioting over the high food prices this past summer: at first, the credit crisis was good for the poor of developing nations. It lowered food and commodity prices. But now, farmers have reacted, and decided to cut production, and raise prices. So now you're effed. More from Bloomberg (they're on a roll, today)...

"The credit crunch is compounding a profit squeeze for farmers that may curb global harvests and worsen a food crisis for developing countries.
Global production of wheat, the most-consumed food crop, may drop 4.4 percent next year, said Dan Basse, president of AgResource Co. in Chicago, who has advised farmers, food companies and investors for 29 years. Harvests of corn, and soybeans also are likely to fall, Basse said.

Smaller crops risk reviving prices of farm commodities that sank from records in 2008 after a six-year rally that spurred inflation and sparked riots from Asia to the Caribbean. Futures contracts on the Chicago Board of Trade show wheat will jump 16 percent by the end of 2009, corn will rise 15 percent and soybeans will gain 3 percent."

Obama's a Muslim Antichrist

2008-10-29T06:38:00.000-07:00

Who the eff are these people? (Note that the man is knowingly on camera, speaking to an international news source, giving his name, and representing his company, and doing it all with pride, not an ounce of hesitation.)

Who's on TARP?

2008-10-29T06:24:00.000-07:00

Who's in the Paulson club, and who ain't? From Bloomberg today...

"The U.S. government's $160 billion handout to banks from Niagara Falls to Beverly Hills is going mostly to lenders that need it least, putting weaker rivals at risk of being shut down or taken over, analysts say.
'This has the unintended effect of making the strong stronger and the weak weaker,' said Gray Medlin, founder of Carson Medlin Co., a Raleigh, North Carolina, investment bank focused on banking deals. 'Banks that are getting bad exams and are under intense pressure from regulators won't be successful in applying.'"

Election TV-Ad Roundup

2008-10-29T06:17:00.000-07:00

Great interactive graphic from the Times...

But Bloomberg notes that, because many of the big state races aren't competitive, election TV ad spending is down 40% from '04:

"Instead, campaign spending on local TV will fall to $984.3 million from 2004's $1.05 billion, Cassino said. Total ad sales for local TV will fall 8 percent this year."

KUDURO!

2008-10-28T21:31:00.000-07:00

Just give up: this kid is so much cooler than you will ever be...

M.I.A Lives In Bed Stuy, Now? Whoa.

2008-10-28T20:46:00.000-07:00

"Bingo (Diplo Mix)"--M.I.A (right click SAVE AS to download, press play below to preview)

Choice quote from recent Interview Magazine interview:

"Because I spent time in L.A., too, growing up on gangster rap. My cousin was a gangster bitch, and she knew the Bloods and the Crips and she was Sri Lankan, so we’d go to all these clubs down on Crenshaw. Then I would come back to college at Saint Martins, and I was learning a whole other way. Like having that whole ‘90s hip-hop from L.A. and then going to Saint Martins, where it’s all the Britpop stuff about being shy and hating yourself. I was a Sri Lankan refugee, like, the scum of society, and then I went right to Los Angeles, into African-American culture, and it was just incredible. I’ve never seen black people like that in England. In England black people still live within the parameters of white society. It was an eye-opener. Then I’d be in school and the students would be like, 'I’m white, and I’m male, and I don’t know what to do, I hate myself.' I was just like, there is this contemporary culture in America that’s writhing with so much good shit and bad shit that no one is really making art out of yet, you know?"

Dubai Uh Oh

2008-10-28T15:50:00.000-07:00

Walking through Dubai International airport last summer on, I passed an enormous aerial photograph of what claimed to be the Dubai skyline. But it looked nothing at all like the city I just flew over. I looked closer, and saw that many of the buildings were not photographs, but computer renderings, and they were accompanied by an asterisk, indicating that they were "slated for completion 2010-2012." These imaginary buildings took up 0ver 75% of the skyline.

In addition to being a complete sht hole, the city is also a sham. It doesn't exist in the form that it's presented to the world. And now it looks like many of those buildings won't be built for a long, long time, if at all. (I wonder how many of them will get Hearsted?) From today's Journal:

"Emaar [one of the city’s biggest developers]'s stock has fallen 62% since the beginning of the year, that’s more than the 48% fall in the Dubai Financial Market’s main index over the same period, according to Zawya.com data. Earlier this month, Colliers International said the growth of property prices in Dubai slowed to 16% in the second quarter of 2008 from 42% in the first quarter. Morgan Stanley warned in August that property hotspot Dubai could see a 10% fall in prices by 2010."

Learn You Some LIBOR

2008-10-28T15:42:00.000-07:00

Great Donald MacKenzie piece in the LRB. Some excerpts..

"Libor anchors contracts amounting to some $300 trillion, the equivalent of $45,000 for every human being on the planet."

"As rates rose sharply in the 1980s, almost all the savings and loan associations in the US – the equivalent of the UK’s building societies – were caught out in this way. The resulting crisis, a precursor of today’s credit crunch, pushed more than 700 savings and loans into insolvency, and the rescue operation ended up costing US taxpayers around $130 billion."

"Given the criticism of Libor, why not abandon its conditional aspect (the submission of rates at which banks could borrow), and shift, as some critics have suggested, to an index based on actual transactions? At least two such indices already exist. Eonia (Euro Overnight Index Average), calculated by the European Central Bank, is a weighted average of the rates of overnight interbank loans denominated in euros. Sonia, its sterling equivalent, is a similar average of overnight loans transacted via London’s main money brokers."

Your New Favorite (Don Armondo, Girl Talk, and Aeroplane) Track(s)

2008-10-28T14:43:00.000-07:00

Two classic tracks ("I'm An Indian, Too"--Don Armondo's 2nd Avenue Rhumba Band and DJ Girl Talk's "Call It Off") and a new Aeroplane remix that has a shtty vocal track, but is kinda fun, and it's pissing like London outside all day, so wtf: "Paris (ft. Au Revoir Simone Aeroplane Remix)"--Friendly Fires. (Right click SAVE AS to download, click play below to preivew.)

"I'm An Indian, Too"--Don Armondo's 2nd Avenue Rhumba Band

"Call It Off"--DJ Girl Talk

"Paris (ft. Au Revoir Simone Aeroplane Remix)"--Friendly Fires

Percentage Change of New York City Housing Prices, Month-Over-Month

2008-10-28T14:11:00.001-07:00

Poors Vote Dem'

2008-10-28T13:01:00.000-07:00

Check out these maps of the electoral college votes from before and after the Great Depression...

1928

1932

State Bailout Package, Here We Come

2008-10-28T12:47:00.000-07:00

There are a number of crises we can see heading our way (defaults in the muni market, the ARMs in April '09, post election feuding, the banks stating more "write downs," 8-10% unemployment, wildly unstable currency markets, credit-crisis-ends-access-to-student-loans) and here's my favorite crises watch at the moment: the States bailout package.

New York State Gov, David Patterson, observed that he's projecting $12.5 billion deficit next year (that's more than 10 times the $1.5 billion that the State faces for '08) and noted that “In order to get through this, we are going to need federal assistance.” And so will every other state in the Union.

This is gonna get messy. More here.

Your New Favorite (It's Raining In New York) Track

2008-10-28T12:43:00.000-07:00

Zach Condon's "Venice" (right click SAVE AS to download, press play below to preview)

Gift Ideas For the Holidays

2008-10-28T10:04:00.001-07:00

Check out these great gift ideas from America The Gift Shop! Abu Graib coffee table, "Regions Destabilized While U Wait!" sign, inflatable Guantanamo Bay cell, and more, here.

Another Earworm

2008-10-27T11:53:00.001-07:00

Another DJ Earworm track, just for the eff of it. "Got to Give Up the Dancefloor (Marvin Gaye vs. Stylophonic)" Click below to preview, right click SAVE AS to download.

Give him ups for transposing Marvin's vocal track in a minor key, with little/no compression on the sample.

The Original NINJA Mortgage

2008-10-26T22:16:00.000-07:00

Referring to the Dutch Tulip bubble of the late 17th century has become popular among journalists reporting on the credit crisis. But a later historical anecdote, the case of Theresa Humbert, of 1903, offers a better analogy of our current predicament.

Claiming to have inherited $20 million (in 1906 dollars) worth of bonds, title deeds, and securities, which she kept locked in a private chest, Theresa secured a loan for $10 million, which she then used to buy a fancy Parisian townhouse, a castle, and a yacht. When the bills came due, she was forced to open the chest and furnish the collateral, in a dramatic public trial, and inside, were several coins, a button, and some papers.

August 9, 1903, New York Times piece here.

Mashup as Socio-Political Essay

2008-10-26T12:47:00.001-07:00

DJ Earworm unleashes the illest mashup to date, putting DJ Girltalk to shame. "No More Gas," picks up where the Avalanches left off. (Right click SAVE AS to download, preview below by pressing play.)

For the uninitaited, a mashup is an editing (as opposed to a sampling) of multiple tracks into a single track. "No More Gas" combines works by, Estelle & Kanye West, Rihanna, Flo-Rida & T-Pain, Lupe Fiasco & Matthew Santos, Madonna & Timbaland & Justin Timberlake, Ne-Yo, Britney Spears, Pussycat Dolls, Danity Kane, Leona Lewis, Kardinal Offishal & Akon.

And, speaking of no more gas...

Mary Boone on the Art Market

2008-10-26T08:51:00.001-07:00

Don't be fooled by Damien Hirst's Sotheby's bonanza, the art market is not immune to the credit market. In this week's Observer, Mary Boone issues a piece of classic New York mental calculus...

"At the Whitney Museum Gala on Monday, Oct. 20, gallerist Mary Boone told the Transom she has been through three economic downturns: the first when she opened her gallery in 1977; another in the late ’80s; and finally a third directly following 9/11. And so the petite Ms. Boone, whose 5-foot-1-inch frame and tame, pitch-black hair make her seem deceptively mousy, is not particularly concerned this time around.

'In November of ’89, only 20 percent of works were selling at auctions,' Ms. Boone said. 'But the works then went on the market at the right prices. So it’s all a correction.'

Ms. Boone hopes that the economic downturn will rid the market of some of the exorbitantly priced works of art that are being flipped like real estate was until very recently. (She is also hoping real estate prices will drop so that her 21-year-old son, Max, will be able to afford a 'nice place downtown.')"

The Obama Administration Will Deprive the World of a Million Funny YouTube Videos

2008-10-26T08:34:00.000-07:00

NBC and and Tina Fey aren't the only ones cashing in on the Palin-McCain mess, I swear that YouTube's traffic must have increased by at least 5% since Palin was put on the ticket.

To Muni Or Not to Muni

2008-10-26T07:27:00.001-07:00

Municipal bonds, known as munis, have historically been the safest bonds on the market (save for the Orange County meltdown in the '90s). Buffet's been a longtime fan of them, and shows no sign of withdrawing his faith. Their payments are often tax exempt, they're safe, and they're popular. The muni market is estimated at $1.7 trillion.

But let's assume (as noted earlier), that the states, facing massive budget deficits, will soon collectively petition the federal government for a bailout package of their own (remember, the projected New York State budget deficit more than doubled in the last two months). When that happens, it will deliver a crushing blow to confidence in the treasuries and bond markets, and some municipalities could be faced with default.

As American municipal budgets go, Greenwich, Connecticut has one of the sweetest set ups. The hedge fund capital of the world is a small town, with a massive tax base, low population, a relatively small public school system (many of the kids go to private school), low crime, and no pressing infrastructure projects. But the Greenwich Citizen reports that the town faces a $4.2 million budget deficit, has frozen all new hires (despite the need for 40 new positions) and is preparing to cut further spending.

I'm not saying that munis are slated for massive default because Greenwich is in the red, but if I were sitting on a bunch of munis, I would start pulling out of them now. As the last month has shown, the name of the game now is getting out of the way of the next crisis before everyone else does.

02138 Gets Deep Sixed

2008-10-26T06:19:00.000-07:00

02138, the 'life style' rag for Harvard alum, was one of the most obnoxious and embarrassing magazine concepts. It suggested that its readers were merely grow-up Gossip Girl fans, fretting about comparing their post Cambridge careers to those of fellow alum. So, this email from the magazine's publisher arrives with relief:

"Manhattan Media has decided to suspend publication of 02138. There is no question that, since the acquisition of the magazine in May earlier this year, a great team of editors, marketers, salespeople and designers have worked hard to re-launch the business. Nor is there a question that our views on the possibilities of a mix of media serving to inform, entertain and network alumni of leading universities have driven us to back that team to the hilt. But the current economic environment has made it too difficult to proceed at this time. While Manhattan Media, and its financial backer Isis Venture Partners, are committed to long-term growth capital, the funds needed to execute AMN's strategic vision would by necessity have grown significantly and beyond the company's risk/return profile.

The current issue is almost at completion and is full of great edit and design work. We plan to have the pages converted by our vendor Texterity into a digital magazine so that the world has access to this issue of 02138 in its entirety.

We thank Jamie Hooper, David Blum and all those who have worked on this venture so hard and so passionately. We hope there will be another day and another venture with all of you in the future"

Those Stupid Bud Commercials Redeemed

2008-10-26T06:10:00.000-07:00

McCain Supporters Go Nuts In Vegas

2008-10-26T05:00:00.000-07:00

Father Krisis vs Yohji Yamamoto

2008-10-25T12:28:00.000-07:00

If the credit crisis (and this whole ALL OF YOUR MONEY'S ON FCKING FIRE FOREVER AND EVER!!!! thing) were personified, he'd be like an anti Santa Claus. He'd be all huge and ugly and scary, and instead of giving you crap, he'd take it away, and he'd have a name like Father Krisis. So, here's my letter to Father Krisis...

Dear Father Krisis,

       Several months ago, an evil and tasteless man from Japan, named Yohji Yamamoto, opened up two pieces of architectural botulism at the intersection of the West Village and the Meat Packing District. You don't need to take away Yohji's life, or even his right arm, but if you could take these two stores away, I would love you forever!
       See, the West Village is the best neighborhood in New York (and ergo, the world) to live in, and the Meat Packing District was once the coolest neighborhood in the history of man, and it's as if Yohji found an intercontinental toilet, that leads from Ginza to the West Village, and he's just emptying his bowels here. It's offensive, and it has to end!
       The first store looks like a Foot Locker, and the other one looks like a Pottery Barn take on a Bauhaus building made for a shopping mall in Tampa.

Thank You Father Krisis,
DOWWTF

Wal-Mart Sales Trends

2008-10-25T12:11:00.001-07:00

Interesting fun fact about Wal-Mart: its share price, since 2003, moves at roughly the inverse of the DOW. This makes sense. When the markets and credit and confidence are up, people shop at pricier stores, including Target, which, you can see below, moves far more in line with the DOW.

At the moment, though, Wal-Mart's sinking with everything else. On Tuesday, Eduardo Castro-Wright, president and chief executive of Wal-Mart's U.S. operations, revealed some interesting bits about the company's recent sales data:

For the first time, Wal-Mart is seeing a paycheck-related spike in sales of baby formula, suggesting consumers are rushing to buy such necessities as soon as they have the cash.
Credit used as a form of payment at Wal-Mart is falling and the decline is expected to reach into the double digits this year. He noted that many consumers have "maxed out. Credit card limits don't allow them to use credit."
Wal-Mart's sales typically surge around pay periods at the beginning and middle of the month. Castro-Wright said that spike has become more pronounced as consumers' budgets become more stressed. In the last few months, the percentage of overall sales from the days surrounding those pay periods has risen 250 basis points, he said.

Heavy copy and pasting done from here.

Palin's Aiming for FOX

2008-10-25T08:09:00.000-07:00

Palin doesn't care about politics. She wants her own show on FOX, and she'll get one, and it will be as tragic is it is hilarious. She's probably in negotiations with Murdoch as we speak.

Julie Taymor in Iraq

2008-10-25T07:18:00.000-07:00

Julie Taymor, the Emmy- and Tony-award-winning director and set designer for the Metropolitan Opera and the Broadway production of The Lion King, has been contracted by Haliburton to design Iraqi prisons. This morning's Times includes a photo of her work at Camp Bucca, in southern Iraq...

I Love Me Some Elite Liberal Media

2008-10-25T00:30:00.000-07:00

Crash...Real Estate...California...Blah Blah Blah...

2008-10-24T15:28:00.000-07:00

Blah blah blah...California real estate market crashing....blah blah blah...but what about New York? More specifically, what about 2 bedroom walk ups, on Charles, W 10th, W 12th, Perry, or Horatio?

...also...

Your New Favorite (Sally Shapiro Booty Bumping) Track

2008-10-24T15:19:00.000-07:00

Sally Shapiro, by way of the Junior Boys, serves up some basey beefy booty (sounds-like-45-at-33-lushness) bumps: "Jackie Junior (Junior Boys Remix)"--Sally Shapiro

(If This Isn't) Your New Favorite Track (You Have No Taste)

2008-10-24T14:32:00.001-07:00

"Failure (Alfie version)"--Kings of Convenience

Howed Effed Are We?

2008-10-24T12:28:00.000-07:00

Volcker and Stiglitz on a recent panel (this is worth it for the hilariously-mommy-cool-Women's-Economic-Forum-Round-Table logo, alone)...

Your New (Almost) Favorite Track

2008-10-24T11:40:00.000-07:00

You know how when you read crap like, the DOW affects the hem lines of womens' dresses, and you think to yourself, Dude, who's the douche who majored in American Studies at Sarah Lawrence College?...? Well, in our weakest moments, we all get seduced by that kind of dumb calculus. My latest fantasy postulation? Diplo's been off his game 'cause he's been so busy traveling around the world, touring, and if the economy tanks, he'll stay local in Philly, and get back to producing greats like he was in '04-'06.

I remember walking into Other Music in early 'o4, and Geoff handing me the Montreal Mix and other Diplo mixes on a home made CD. This was pre-internet music blogness, and having that CD made me the coolest guy below 110th St. It was nutty coolness overload. But then Diplo blew up, starting hanging with A-track, and playing the Microsoft corporate Christmas party (wtf).

Anyhow, his latest isn't tops, but it's in the right direction, and it's fueling my fantasy that a low DOW=a tip top DIPLO.

"I'm a Lady (Diplo Mix featuring Amanda Bank)"--Santagold (left click to play, right click SAVE AS to download)

And because the liner notes (pasted below) are a study in coolness, here's "The Dutch Antilles Mix"--Diplo...

"if u go to the caribean u probably in like jamaica or bahamas or PR or somewhere thas relatively normal.. but sometimes u might end up steppn of a boat and hearin people speaking some weird german and trying to braid your hair..... thas when u realized ur in st maarten, curacao, suriname or one of the other netherland antilles.. those are wierd places for sure. recently i was clubbin with atrak in amsterdam and hangin out with some of the kids in holland.. its a wierd mix in the clubs.. all the girls ook like they are chinese african indonesian dutch martian and are hot and everyone knows the lyrics to house tracks and lil wayne.. its a special place. but they island kids there wer makin wierd music for a coupla years.. i had to inspect this stuff.. seems back in the day in curacao or N.A. this DJ mortje.. was playin reggae inst at 45 and gettin parties turned out .. then later on the sound moved back to holland and kids renamed it bubblin'... now they puttin anythign that represnts in amsterdam under these drums.. paul johson - check, tiesto- check, ciara - check, wierd polka - check, jumpstep - hell yeah.. ok so basically this is a mad decent radio made in heaven.. big up infatda sound form AMsterdam and laid back luke for the help and big ups any of my surinamese, aruban, bonairian, curacaoian, saba, sint eustatians and st maartians in the buildin"

For the uninitiated, "SOY CUMBIA!"--Diplo (left click to play, right click SAVE AS to download)

Look Out: State Bail Out Package

2008-10-24T10:27:00.000-07:00

DOWWTF has reports that Goldman's about to lay off 10,000, and that a number of US states are gearing up to pitch the federal government for a bail out package of their own.

Let's take New York itself. The state relies on Wall Street (directly) for 20% of its funds. Albany taxes bank profits, and when there are only bank losses, that means there's no tax to pay. Period. And it all trickles down from there. The New York State deficit jumped from a projected $5 billion to almost $13 billion in the last two months.

In '09, look for a number of states to petition the federal government, en banc, for a bailout package of their own. And the size of that mess is going to be achingly huge. The (federal) government baling out the (state) government by printing T-bills?! How is that sustainable?

White Lines

2008-10-24T10:13:00.000-07:00

Reuters report s that someone in Texas, is sending white powders, to banks, threatening death. So American, right? It's like a riff on the 9/11 anthrax scare, the unibomber, James Brussel (the original American terrorist...although I would accept a 12-page essay on the Boston 'Massacre' crew), and angry 1930s American populism. This is like an NYU MFA project gone really, really wrong.

Anyhow, here's the weird part: the letters were also sent to the FDIC and the U.S. Office of Thrift Supervision. Anyone smell Ron Paul (I mean, a Ron Paul-er) up in this? Also, parsing the first clause (which the author ambitiously presents as a complete sentence sans subject), while noting the correct placement of both possessive and conjunctive apostrophes throughout, is an exercise in Americans-are-so-weird-cool-ness!: "STEAL TENS OF THOUSANDS OF PEOPLE'S MONEY AND NOT EXPECT REPERCUSSIONS." (On second thought, maybe we just have Microsoft Word to thank for the correct spelling and the apostrophes?)

But in all seriousness, criminal activity is a defining element of any nation's culture. Americans have made much from the mob (the Soprano's, the Godfather, etc) and gang bangers (50 Cent, 2 Live Crew). The Brits had the first serial killer, Jack the Ripper, and anglophone countries have continued to dominate the serial killer genre. The Russians are starting to perfect the sophisticated-poisoning-of-highly-placed-targets schtick. Mexico has its people-just-go-missing-in-the-night bit. Germans OWN the cannibalism genre. Arabs, suicide bombers? 'nuff said! And this latest installment in the white-powder-in-envelope-sent-anonymously-through-the-post ouvre is another case in point. It is so American, in so many ways.

Ok, Last of the YouTube Videos for the Night...

2008-10-23T18:21:00.001-07:00

Very Worth Your Next Two Minutes and Twenty-Two Seconds

2008-10-23T18:02:00.001-07:00

Moody's Ranks the Times Just Above Junk Bonds and Gawker Commenter Calls Bullsh*t

2008-10-23T17:41:00.001-07:00

Sometimes, comments are better than the post. Check out this comment left on Gawker's post about Moody's report on the New York Times debt. First, the excerpted Moody's quote:

"(New York) Times' third quarter 2008 operating performance was within the lower end of the range Moody's had anticipated, but weaker expectations for the balance of 2008 and in 2009 and the refinancing risk associated with upcoming debt and committed revolver maturities have prompted Moody's to review the company's ratings," analysts John E. Puchalla and Alexandra S. Parker wrote...
Moody's will consider (New York) Times' ability to return free cash flow generation to meaningfully positive levels during 2009 through the culmination of several significant capital projects, a possible reduction in the dividend, and revenue and cost initiatives."

...and then the post:

I love the gray lady, even if she deserves a beat down sometimes.

Awkwardness Footprint=1,000,000,000,000,000

2008-10-23T16:11:00.000-07:00

Brian says Palin told him in the interview that she will release her medical records? That must mean she's succumbing to the pressure mounted by those claiming that insufficient evidence exists to support that her youngest child is actually hers.

The (Scandanavian) Kids Are Alright!

2008-10-23T15:52:00.000-07:00

Obama and the Big Picture

2008-10-23T14:42:00.000-07:00

As the DOW tanks, so do commodity prices. If you're a starving Egyptian (remember the food riots this past summer?), that's good news. Food prices are also linked to oil prices directly, though. An acre sowed with nitrogen-based fertilizer will produce six times the amount of food that an acre without it will. And nitrogen-based fertilizer is an oil product. Since the globe is dependent on nitrogen-fertile soil, as oil prices go, so go commodity prices. It's therefore heartening to know that Obama is at least aware of this stuff:

"the fact that our entire agricultural system is built on cheap oil. As a consequence, our agriculture sector actually is contributing more greenhouse gases than our transportation sector. And in the mean time, it's creating monocultures that are vulnerable to national security threats, are now vulnerable to sky-high food prices or crashes in food prices, huge swings in commodity prices, and are partly responsible for the explosion in our healthcare costs because they're contributing to type 2 diabetes, stroke and heart disease, obesity, all the things that are driving our huge explosion in healthcare costs."

More here.

Adam Smith, Merit and Demerit

2008-10-23T10:42:00.000-07:00

In commenting on the "Joe the Plumber" election side show, Steve Coll points out in this week's New Yorker that Adam Smith, in 1776, wrote that

"The necessaries of life occasion the great expense of the poor...The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess...It is not very unreasonable that the rich should also contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

(Ugly writing, but makes the point.) Whether you disagree with the notion of flat tax (as Smith did) or not, recent events encourage us to revisit Smith and his English and French contemporaries.

In Wealth of the Nations, Smith also confessed that the success of capitalism depended on the propagation of the myth of human equality, noting that the myth is a necessary “deception which arouses and keeps in continual motion the industry of mankind.” And in his Theory of Moral Sentiments, the ever-candid Smith observed that this new liberalism was a system of “merit and demerit” (italics, mine). In other words, capitalism doesn't just reward one for his labors, it also holds reward back (and in effect, punishes) for one's losses (or non labors).

If the ratings agencies lied, if NINJA mortgages (no income, no job, no assets) were hidden in securities, if lies were told, then let's see the system of demerit in place!

It's Time to Revive Shame Punishment

2008-10-23T10:16:00.001-07:00

While I'm not willing to say that capitalism is dead, it's clear that the last several months have delivered a mindbendingly huge blow to the notion that in efficient markets, people act in their own interest and that markets will regulate themselves. The system totally and utterly collapsed, and now the American taxpayer is being called upon to guarantee loans, in the form of T-bills, to shore it up. This is, without a doubt, a brand of socialism. And it is hugely, hugely embarrassing. And we need to own up to it.

The US Congress has been putting on a parade, calling forth Fuld, other imbeciles, and now Greenspan. Their mea culpas, excuses, explanations, and prevarications have all been crap. We need a real cleansing of the system. We need to revive shame punishment. Put these guys in the stocks in the town square. Let's name the hundreds of guys who managed the fixed-income desk at Merrill and Morgan. Letting everyone slide is not gonna help.

White collar criminals have historically shown that the threat of fines and imprisonment are not a sufficient deterrent. But shame is. Puritan Massachusetts got a lot of mileage from shame punishment. It costs the public purse nothing to put someone in the stocks, and it's a hugely effective deterrent.

The Japanese took a long time (in terms of regulation and guidance) to turn themselves around, but they did, and they made realistic and stable and steady gains. They learned once again to fear debt and embrace transparency. But first, they embraced shame and public humiliation. For comparison, let's look again at the bosses of the failed Nippon bank in 1998, and Fuld several week ago and Greenspan today, both testifying before Congress.

Best Manhattan Chinese

2008-10-22T15:53:00.000-07:00

New York foodies will claim it's heresy to pick a favorite NYC Chinese joint and rule out Brooklyn, which, by any measure, has the best Chinese food in the City (Win Shing on Avenue U and 12th St leads the pack), but for those of us in the greatest borough...head to Oriental Garden on Elizabeth below Canal.

Look for big, angry- and carnivorous-looking live fish, and giant crab in the window. Stare at the blond prostitutes that the Chinese tycoons in cheap suits have on their arms (no joke!). Notice how polite the staff is, especially for Chinese. Imagine what the $285 pot of shark-fin soup tastes like while ordering the duck-pork lettuce medallions, the mixed-seafood soup, and the snow-pea-and-sea-food dumplings. Sit at a big, round family table with your crew, and order too much food. Go at 9:30pm on a weekday, when the place still has some diners, but you'll get seated without a wait. And make a pact with your companions to hit up Win Shing next time you go for Chinese (go in the fall or winter for crab with black bean sauce)!

US Ain't the Uggliest?

2008-10-22T14:42:00.001-07:00

Huh?! Here's more info that suggests we're not as effed up as the rest of the world. Who knew?

But Why Cows?

2008-10-22T14:33:00.001-07:00

Choice quote from an internal email that came out of today's ratings agency testimony: “It could be structured by cows and we would rate it.” In another, an employee asserts: “Rating agencies continue to create [an] even bigger monster — the CDO market. Let’s hope we are all wealthy and retired by the time this house of cards falters.”

More here. Background and general info here.

TED Watch

2008-10-22T14:28:00.000-07:00

TED finished the day below 3, but let's see what it does tomorrow in response to today's shitty DOW performance and earnings reports. More on the TED and why it matters, here.

Who's in the Hole the Most?

2008-10-22T08:18:00.000-07:00

Here's a table from the World Bank Group that weighs the total private and public debt of various countries against each countries' GDP, though I must admit I don't totally trust the data, the US looks way too low (absolutely and relatively) on the list, if you ask me...

NYTimes: Fat=Republican?

2008-10-22T08:04:00.000-07:00

So, I was reading the Times piece about the McCain-supporting couple in Park Slope this morning, and I thought, Couldn't they at least pick a couple who looked like a New York couple? Do they have to be fat hicks? Can't you show us some Republicans who don't look like the stereotype? There must be some reasonably good looking, non-obese Republicans in New York!?

And then the gray lady outdoes herself, also in today's paper, they give us this by Olivia Judson: "Weighing the Vote: Could obesity in a pregnant woman influence the eventual political outlook of her child?"

Schnabel's Mark Downs and Super Sales

2008-10-21T14:46:00.000-07:00

Here's a phrase that's new for Manhattan real estate agents, "Price reduced $2,995,000 about 20 hours ago."

60 Minutes

2008-10-21T12:09:00.000-07:00

Busy here, so going to be light on the commentary and the insanely genius insight you've come to expect from this space. Anyhow, 'cause none of you watch 60 minutes and this has some interesting clips: Lewis says stuff like, capitalism is dead, but it'll be alive again once the banks pay the government bank, and the era of high compensation for Wall St is OVER...

413 Point Rise in the DOW is now Barely Above the Fold

2008-10-21T10:55:00.000-07:00

DOW's up 413 in a day, and the Times barely puts it above the fold. Here it is on the front page, above the fold, one column, no art: THAWING BEGINS IN CREDIT FLOW: DOW RISES BY 413

Vacancies on the Rise in Manhattan

2008-10-21T07:16:00.000-07:00

Busy here, so I'm straight ripping off the Observer:

"The 16,000 jobs that Manhattan employers are expected to shed this year will help by the end of 2008 drive the borough's apartment vacancy rate up to 2.8 percent for larger buildings, according to a report from Marcus & Millichap.

The rate could rise even further in 2009 ("further" being a relative term in Manhattan, which traditionally has the nation's lowest apartment vacancy rate). The City Comptroller's office last week predicted New York would lose over 165,000 private-sector jobs in the next 24 months. Higher unemployment usually means less demand for apartments. Less demand generally means lower rents--over time. So far, despite several consecutive quarters of iffy economic news, Manhattan apartment rents have stayed generally steady.

The Marcus & Millichap report also concluded that apartment development will produce nearly 1,500 new units in Manhattan this year."

Link here.

Your New Favorite Track

2008-10-21T07:06:00.001-07:00

This shit is low, slow, and gentle, so sit back and turn it up: "Re: Stacks"--Bon Iver (click to play, right click SAVE AS to download)

This my excavation and today is kumran
Everything that happens is from now on
This is pouring rain
This is paralyzed

I keep throwing it down two-hundred at a time
It's hard to find it when you knew it
When your money's gone
And you're drunk as hell

On your back with your racks as the stacks as your load
In the back and the racks and the stacks are your load
In the back with your racks and you're un-stacking your load

I've twisting to the sun I needed to replace
The fountain in the front yard is rusted out
All my love was down
In a frozen ground

There's a black crow sitting across from me; his wiry legs are crossed
And he's dangling my keys he even fakes a toss
Whatever could it be
That has brought me to this loss?

On your back with your racks as the stacks as your load
In the back and the racks and the stacks of your load
In the back with your racks and you're un-stacking your load

This is not the sound of a new man or crispy realization
It's the sound of the unlocking and the lift away
Your love will be
Safe with me

FDR

2008-10-21T06:16:00.000-07:00

FDR's inauguration speech:

"True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish."

Full text here.

Carbon Footprint=0, Awesomeness Footprint=1,000,000,000,000

2008-10-17T19:45:00.000-07:00

Pedi-stripper pole. 8th Ave and 23rd St. 10:23pm. New York City. Friday, October 17, 2008. Suck on this, London!

DOWWTF?! Is Off for the Weekend...In the Meantime...

2008-10-17T19:26:00.000-07:00

Buffet's NY Times Op-Ed

2008-10-17T09:34:00.000-07:00

In today's Times, Buffet announced that he's moving his personal holdings into American equities. It's pretty clear that the market will hit a bottom, and in several years will be up far from where we are now. The question is when to get in. Buffet's getting in now.

I've been waiting for April, when the next round of ARMs re-set, another round of earnings reports, the holiday sales season over, and the new administration. That was looking like the best case for spotting a nadir on the horizon. But if Buffet moves in, and does so publicly, and everyone else does too, then screw April, this could be the bottom.

If you've been watching some stocks, now might be the time to make a move.

Lynch America Countrywide

2008-10-16T19:06:00.000-07:00

Andy Kessler has a new name for the merged unit of Merrill Lynch, Bank of America, and Countrywide: Lynch America Countrywide. I think it's so awesome, I made a logo for them...

...well, ok, don't lynch all of America. Folks like Vita Ciullo are a model of good America. If you haven't seen this piece, read it and weep. Vita is the sweetest woman on the planet!

(PS--Note how all the Times writers are trying to get on the economy beat. After yesterday's Mike Albo piece, this is Michael Winerip writing in the "Parenting" column!)

Oy vey!

2008-10-16T10:25:00.000-07:00

I don't want to slam him because he can't speak (there is no established relationship between erudition and intelligence), but the facts are these: McCain's been unable to distinguish between Iran and al Quaeda and between Suniis and Shia. And they weren't just slip ups. The issues are too big not to have clear in your mind. To anyone remotely informed on the issue, that's like accidentaly calling Wasila, New York City. Is it too much to ask of a presidential candidate?

Thursday Styles is on the Finance Beat

2008-10-16T07:51:00.000-07:00

Mike Albo and Thursday Styles are getting in on the action, covering the credit crunch...

"There must have been 100 Europeans in this store: men wearing sweaters tied around their shoulders, women wearing sunglasses inside, entire families chattering and pointing. All of them had rapacious looks in their eyes because they knew time is money. They needed to buy as much as possible before the increasingly global financial meltdown turned their powerful euros into a currency as pathetic as, well, the United States dollar."

Way too cool for school!

On the Off, Off Chance that You Haven't Already Seen It...

2008-10-15T15:57:00.000-07:00

Sign of the Times

2008-10-15T10:29:00.000-07:00

The uber hip (but also ugly and tacky ... apologies Ian, you rock, it's just Julian who effed this one up) Gramercy Park Hotel is advertising discounted rooms on its homepage. Several months ago, this would have been unimaginable. Whoa.

If I were in Manhattan retail, I would start freaking out right now. This can only mean that the Europeans are no longer flooding JFK/EWR.

Your New Favorite Track

2008-10-15T09:49:00.000-07:00

"Golden Cage" by the INSANELY genius Erlend Oye and (one of his bands) The Whitest Boy Alive. Erlend's also in Kings of Convenience, does a lot of solo stuff, remixes, DJs, and collaborates with a bunch of Norwegians. (Left click to play, right click SAVE AS to download.)

If I couldn't come back as Tom Brady, I'd come back as Erlend. No joke. Seriously. And I mean, like, look at the dude.

Italian Finance Minister Calls to Abolish Hedge Funds

2008-10-15T09:08:00.000-07:00

The Italians at Via Quadronno may have to start showing up at work a little earlier (see previous post)! Global Pensions UK (weird source, I know, but a bunch of others are reporting it, too) reports that Italian Finance Minister Minister Giulio Tremonti is calling for the end of hedge funds, calling the massive, privately-held (well, kinda) investment pools "insane."

"Speaking to Italian media at the G8 meeting in Washington last Saturday, he said hedge funds were unlike other players in the financial industry because they escaped control by the authorities, as well as media and public opinion screening. He concluded they were opaque instruments, which constituted a normative problem."

This would be dumb. Lots of people have stakes in hedge funds, not just wealthy individuals. Pensions, foundations, schools. And they're not responsible for this mess. Low interest rates and the securitization of mortgages are.

Best Pre/Post-Met Meal/Snack

2008-10-15T07:24:00.000-07:00

(This is the first of a series of Best Of posts, in which I'll recommend the best places in New York for a variety of standard and not-so-standard purposes...)

The best place for a sandwich or a full, sit-down meal before or after a visit to the Met is Via Quadronno, on 73rd between Madison and 5th. The food is excellent, and for the 'hood, well priced. For paninis, go for the breseola: buttered, crispy focacia-style panini with thinly sliced lemons and breseola. The gellato is the best in Mahattan, and the wine list is solid.

But the best part is the crowd. Without fail, every hour, the place is full of UES European lushes (mostly Italian, French, and Swiss), fully kitted out in Kitton and Prada. Every once in awhile, you come across an article about the luxury real estate market in Europe, and you think, Where do the they get all that money? Doesn't the social-dem state tax them all to the middle class? And it's not as if you've ever actually met anyone who works for PNB Paribas or Credit Lyonaise! Who are these people? They're the diners at Via Quadronno. And as the Times points out, they're sitting there with all of their money in the middle of weekday afternoons, too. As Della Puppa, the Italian owner of the joint said, "American rich, you are a C.E.O., you have no time. Italian rich, they live like rich people. They go to work at noon. They enjoy life." Go because you're envious, go because you're righteous, but go because this is the most easily-accessible stomping ground of this rare, but definite Manhattan subculture. And the food's top rate.

Closer runner up: Cafe Sabarsky at the Neue Gallerie, at 86th and 5th.

(For drinks, make sure you're dressed right, and hit the Bemelman's Bar at the Carlyle.)

Red vs Blue Historical S&P

2008-10-14T14:50:00.000-07:00

This is total crap, but funny nonetheless (in the Times' defense, it's published as an Op-Ed piece)...

Palin's On Crack Cocaine

2008-10-14T14:44:00.001-07:00

Reckoner (Rune RK Remadoodle Remix)--Radiohead

2008-10-14T13:51:00.000-07:00

Kinda flat, but also ambient and spacey and lush, Rune RK Remadoodle's remix of Readiohead's "Reckoner" (click to play, right click SAVE AS to download)

Real Estate Porn to End All Real Estate Porns

2008-10-14T13:31:00.001-07:00

This is the kind of stuff that makes you thrill inside when the DOW drops and the president of the United States starts saying shit like, "this sucker is gonna go down." You imagine (fantasize) what it would be like if the market tanked so far down that you take over this building in some kind of Blade Runneresque orgy with all of your arty friends, building impromptu fireplaces on the protruding balconies, and climbing the stairs 'cause there isn't enough money to fix the elevators. I mean, who the eff are the people who get to live in this awesomeness? If it's some Saudi with 6 hijabed wives, 24 kids, and a dozen Phillipina maids, I am SO gonna go United 93 on this crap!

Buckley's Left the National Review

2008-10-14T12:49:00.000-07:00

Tina Brown's Diller-backed The Daily Beast snagged Christopher Buckley's Obama endorsement just before he left the National Review, riffing off Reagan: "I haven’t left the Republican Party. It left me." More here.

David Mancuso and Eddie Kendrick

2008-10-14T12:04:00.000-07:00

Ok, I'm getting a lot of lip for not inviting ya'll to The Loft Party on Saturday night. To underscore the point: I was a guest of a guest of a guest. If it's any consolation, here's Eddie Kendrick's "Girl You Need a Change of Mind" ( as always, click to play, right click SAVE AS to download).

Learn You Some TED, Fred!

2008-10-14T09:23:00.000-07:00

(Note to the already initiated: skip this post.)

Ok, now that you know what a derivative is, here's what to watch this week and next: the Ted spread.

The Ted spread can be thought of as an indicator of credit risk. It measures the price difference between three-month futures contracts for U.S. Treasuries (aka, T-bills/the paper/loans that the FED is printing to raise/borrow all the billions it's injecting into the banks right now) and three-month contracts for Eurodollars (aka, LIBOR, London inter bank offer rate) having identical expiration months. This is because U.S. T-bills are considered risk free while the rate associated with the Eurodollar futures is thought to reflect the credit ratings of corporate borrowers. As the Ted spread increases, default risk is considered to be increasing, and investors will have a preference for safe investments. As the spread decreases, the default risk is considered to be decreasing. (Some investopedia copy-and-pasting in the this paragraph.)

While the headlines are dedicated to the DOW, it's really all about the Ted, right now.

So, here's the Ted now (and you can track it here)...

Middle Class Education

2008-10-14T07:31:00.000-07:00

One of Reagan's most incredible feats was convincing the American middle class to vote in favor of tax cuts for the richest Americans. Call it trickle down, call it "aspirational voting," call it whatever, but it worked, and throughout the Reagan, Bush, Clinton, and Bush W. years, the American middle class held onto the fictions that (a) many of them would one day be rich, so why not just go ahead and cut taxes on that bracket, now?, and (b) wealthy Americans would take their tax cut money, and spend it on crap that would generate American jobs. But now, despite all the tax-and-spend-liberal mud that McCain and Palin sling at Obama, Obama leads McCain in the polls on this most important of issues. Given Obama's slim, slim record on the economy, one has to give credit to the market drop, and not Obama (or the Democrats) for this one. (Set aside, for the moment, the fact that the real issue is goverment spending, and both parties have shown themselves incapable of reigning it in.)

Market's Up, And?

2008-10-14T07:00:00.000-07:00

Yes, DOW's up, but the underlying problems are serious and will remain for some time. And it's not clear yet what this means for equity markets in the short- and near terms. If equity prices are currently 'undervalued' (assuming that they will be 'corrected' to some golden-rule P:E/EBITDA ratio), then one would expect to see more people moving into the market than we see now.

As a general measure, take the terms of Buffet's investments in GE and Goldman Sachs. Yes, he put in some billions, but the more aggressive the terms, the less bullish he is, really. He's not pouring cash into general equities at the moment, instead, GE and Goldman drew up these insanely privileged contracts for a new class of shares, all his own, with a generous dividend and almost infinite options.

The questions now are:

Now that the banks have FED capital, when, and how far will LIBOR rates drop? (Meaning, When will the banks start trusting, and loaning to, each other, regardless of the spin that's being given to the general public at the moment?)
How honest will the banks be in stating their losses in the next earnings report?
How aggressively will the Financial Accounting Standards Board enforce the rules on valuing the toxic assets in the next round of earnings reports? (Meaning, When will the charade end, and when will finally know what debt's good and what debt's bad?)
As the FED racks up more debt (DOWWTF?! earlier predicted that the final tab will come in at $1.5 trillion, though that's now looking kinda low), who will keep buying the T-Bills?

Sushi's Also Better for You Than a Burger

2008-10-12T11:03:00.000-07:00

Bosses of Nippon Bank bow in apology for the failure of the bank in 1998 vs. former-Lehman CEO, Fuld, testifying before Congress last week in response to Lehman's bankruptcy...

Reading Bacevich

2008-10-12T09:49:00.000-07:00

I've been reading Andrew Bacevich's The Limits of Power: The End of American Exceptionalism. As I come across excerpts of note, I'll post them here.

"By the end of World War II, the [US] possessed nearly two-thirds of the world's gold reserves and more than half it's entire manufacturing capacity. In 1947, the United States by itself accounted for one-third of the world's exports. Its foreign trade balance was comfortably in the black. As measured by value, its exports more than doubled its imports. The dollar had displaced the British pound sterling as the global reserve currency, with the Bretton Woods system, the international monetary regime created in 1944, making the United States the world's money manager. The country was, of course, a net creditor. Among the world's producers of oil, steel, airplanes, automobiles, and electronics, it ranked first in each category. "Economically," wrote historian Paul Kennedy, "the world was its oyster." And that was only the beginning. Militarily, the United States possessed unquestioned naval air supremacy, underscored until August 1949 by an absolute nuclear monopoly, affirmed thereafter by a permanent and indisputable edge in military technology. The nation's immediate neighbors were weak an posed no threats. Its adversaries were far away and possessed limited reach."

It's obvious that the United States reached that high point only after the near-decimation of Western Europe, Russia, and Japan, but the question still stands, How, with all of that wealth and power and good will, did we get to our present crisis?

It's notable that, of that long list, the only things the US has maintained is its military power and high-standard of living, but the last several weeks and the last 7 years, have seen both of these unravel. Bacevich is making the case that simple, short-sighted greed, driven by an idiotic energy policy and access to easy credit have lowered us to where we are now.

"How This Bear Market Compares"

2008-10-11T15:43:00.000-07:00

The Times' graphics department has really been knocking it out of the park. This is some of the best information display and Flash work around...

Nouriel Roubini: Your Money's Still on Fire!

2008-10-11T07:47:00.000-07:00

In the event you were beginning to feel optimistic, Roubini predicts 2-year recession...

Financing for Oliver Stone's "W." Came From Abroad

2008-10-11T07:14:00.000-07:00

This morning's Journal has a piece on the foreign-sourced financing for Oliver Stone's "W."...

"Hollywood today is full of big corporations," says Mr. Stone, referring to the conglomerates that own most of the movie studios. "The larger the corporation, the less the appetite for risk for this kind of film," he adds, noting that "a major executive said, 'I love this project, but I can't touch it.' "

G7 to the Rescue!

2008-10-10T17:24:00.001-07:00

So, the finance heads of the G7 met in DC today, and announced that they're gonna (try to) come to the rescue (main points of the plan below).

Take the decisive action to support financial institutions and use all available tools to support systematically important financial tools and prevent their failure.
Take all necessary steps to unfreeze credit and money markets and ensure that banks and other financial institutions have broad access to liquidity and funding.
Ensure that our banks and other major financial intermediaries, as needed, can raise capital from public as well as private sources, in sufficient amounts to re-establish confidence and permit them to continue lending to households and businesses.
Ensure that our respective national deposit insurance and guarantee programs are robust and consistent so that our retail depositors will continue to have confidence in the safety of their deposits.
Take action, where appropriate, to restart the secondary markets for mortgages and other securitized assets. Accurate valuation and transparent disclosure of assets and consistent implementation of high quality accounting standards are necessary.

"Walk on Bank Street"

2008-10-10T17:06:00.000-07:00

FT's put together an appropriately tongue-in-cheek graphic summary of the past several months...

Going to Amsterdam or Paris?

2008-10-10T16:52:00.001-07:00

You can sit in this shit for $1,000 round trip!

BA Open Skies is having an insane sale. I don't mean to schill for them. It's really just a favor (like this post)--an attempt to save you from the hell of flying Air India from JFK to CDG and getting bumped 24 hours to the next flight out (true story!).

Oops, I Did it Again: RSI Hits 30

2008-10-10T16:35:00.000-07:00

The historic RSI (which has only gone below 30 on 3 previous occasions: 1929, 1973, and 2002) suggests we have hit the bottom.

WTF's the RSI?

...it's a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula:

RSI = 100 - (100/1+RS)
(where RS = Average of x days' up closes / Average of x days' down closes)

The RSI ranges from 0 to 100. An asset is deemed to be overbought once the RSI approaches the 70 level, meaning that it may be getting overvalued and is a good candidate for a pullback. Likewise, if the RSI approaches 30, it is an indication that the asset may be getting oversold and therefore likely to become undervalued.

Some Charts From the NY Times

2008-10-10T15:51:00.001-07:00

Commercial paper is short-term debt issued primarily by banks and large businesses, often just for a few days. The rate shown here is for "top-tier" companies, or those with the best credit ratings. High rates have made it more difficult for business to obtain the money they need for everyday expenses.

_______________________________________

Higher bond yields indicate less willingness to lend to businesses. Yields on junk bonds have jumped, signaling an aversion to risk.

_______________________________________

Libor--the London Interbank Offered Rate--is what banks charge one another for short-term loans. It is the basis for many financial contracts--including home mortgages and student loans--and it is a sign of whether banks trust each other. Higher rates mean banks are less willing to lend to one another.

_______________________________________

The difference between Treasury bills and a three-month Libor is a measure of stress in the credit markets. By historical standards, the spread has been high all year: it averaged about 25 basis points (0.25%) from 2002 to 2006. Higher spreads are signs of anxiety.

_______________________________________

Investors have taken money out of stocks, bonds, and money market funds to buy safe assets, forcing the yield on short-term Treasury bills down. A lower yield indicates greater concern about the financial system.

Joel Kotkin on NYC Real Estate

2008-10-10T14:53:00.000-07:00

The Observer sits down with Joel Kotkin, the author of The City: A Global History and an authority on urban social trends. The 55-year-old took some time on a recent visit from L.A. to talk about what’s to become of his native New York in a post-boom universe.

"You know, I was walking around the corner [in the Flatiron district], the two-bedroom apartments were still $3,000, $4,000 [monthly]. I mean, who’s got that kind of money?
So, if the prices were allowed to drop, what would happen? More of the young people who are now leaving New York in their 30s might stay; the immigrants who are now leaving New York once they get their feet on the ground, they might stay. You could see a similar scenario as to what happened in L.A. in the ’90s and Houston in the ’80s—which is, the drop in property prices allowed people an opportunity to get into a market that became very affordable. … In L.A. after the ’90s, after the riots and earthquakes and everything, what happened? The middle-class people were finally able to afford nice houses that they could never afford before; and immigrants went and bought everything that wasn’t nailed down."

Give the Man a Greencard!

2008-10-10T13:39:00.001-07:00

In this week's installment of Give the Man a Greencard, DOWWTF?! goes out on a limb to nominate a New York-based start up that's gearing up to market purchase-supported social gaming software for mobile devices.

Specifics and development specs are tightly under-wraps, but Michael Dory, Adam Simon, Scott Varland, and Mihir Dange make a great team, and from what we've heard here at DOW WTF?!, the concept they've come up with will be crack cocaine to the masses of FaceBook addicts. Check back for more details as they emerge...

Lehman Settles CDSs for 8.625 Cents on the Dollar

2008-10-10T12:22:00.000-07:00

From the Journal...

"The recovery rate on the bankrupt firm's senior debt was fixed at 8.625 cents on the dollar, just below the 9.75 cents published in the first estimate Friday. That means the sellers of insurance on these defaulted bonds are on the hook for the remaining 91.375 cents. That's well above the approximate 88 cents envisaged earlier this week, when increased demand for paper to present in return for compensation inflated the market price."

This isn't making big waves in the financial media yet, despite the fact that everyone in-the-know was well cued up for this. That's an unexpected good sign.

WHO'S ON FIRST?

2008-10-10T11:53:00.000-07:00

In the event that you happening to be managing a bunch of cash for a group of rich Saudis, here's something to look out for...

Floyd Norris notes of the current cratering of market indexes that,

"Some of this is no doubt overdone, as the need to cut leverage forces investors to sell the good with the bad. When a bottom does come, the ensuing rally could be explosive."

To date, tax-refund checks, massive government-sponsored bailouts, interest-rate cuts (remember when that was big news? How quaint!), and $10+ Buffet-backed billion have been thrown at the crisis, to no avail. But there's got to be a bottom to sinking equity markets. At the moment, it doesn't look like individual and institutional investors will be the first to call the bottom and move into the market. Instead, expect deals like these...

"The recent plunge in the market value of BlackBerry maker Research In Motion could leave the company vulnerable to a takeover from a well-capitalized buyer such as Microsoft Corp.
RIM's shares, which were worth more than $148 on the Nasdaq market just four months ago, now are trading around the $60 mark amid the U.S. financial crisis and margin pressures the company is experiencing because of expenses related to launching new smartphones." (Full Reuters piece here.)

Microsoft's ability to complete the transaction without credit would only amplify the, in effect, already discounted RIM shares. As Mark McQueen, chief executive of Wellington Financial LP in Toronto, observes, "If you did a stock and cash deal, you wouldn't need to tap the credit markets."

WTF Has Happened So Far

2008-10-10T11:41:00.000-07:00

S&P performance over the past 12 months...

Consumer staples, down 14.7% in October, down 16.2% for the 12 months
Health Care, down 17.5% in October, down 30.6% for the 12 months
Utilities, down 18.6% in October, down 35.0% for the 12 months
Telecommunications, down 19.3% in October, down 48.1% for the 12 months
Information Technology, down 19.9% in October, down 40.9% for the 12 months
Materials, down 21.8% in October, down 41.7% for the 12 months
Industrials, down 21.9% in October, down 43.7% for the 12 months
Consumer discretionary, down 23.2% in October, down 43.2% for the 12 months
Energy, down 24.5% in October, down 36.9% for the 12 months
Financials, down 31.9% in October, down 61.7% for the 12 months

Global markets, year-to-date...and the winner is...Isreal...

United States, down 38%
Canada, down 41%
Mexico, down 45%
Brazil, down 55%
Argentina, down 42%
Chile, down 41%
Peru, down 52%
Britain, down 47%
Germany, down 49%
France, down 47%
Spain, down 44%
Switzerland, down 35%
Italy, down 51%
Portugal, down 51%
Iceland, down 73%
Ireland, down 61%
Netherlands, down 53%
Belgium, down 52%
Denmark, down 44%
Finland, down 54%
Norway, down 55%
Sweden, down 48%
Greece, down 58%
Austria, down 60%
Poland, down 48%
Russia, down 65%
Hungary, down 54%
Ukraine, down 74%
Lithuania, down 55%
Turkey, down 57%
South Africa, down 48%
Israel, down 30%
Japan, down 39%
Hong Kong, down 47%
China, down 57%
Taiwan, down 40%
South Korea, down 53%
Australia, down 53%
Singapore, down 45%
India, down 58%
Indonesia, down 50%
Malaysia, down 39%
New Zealand, down 46%
Philippines, down 50%
Pakistan, down 49%
Vietnam, down 61%

WTF?!

2008-10-10T09:07:00.000-07:00

Excellent summary from Sequoia Capital. Click the 'right' arrow to advance the slideshow...

Sequoia Capital on startups and the economic downturn

View SlideShare presentation or Upload your own. (tags: depression recession)

Dwight Cass on Lehman CDSs Today

2008-10-10T08:49:00.000-07:00

We should know how this pans out by 2pm EST today...

"Lehman, which filed for bankruptcy in mid-September, has about $113bn of bonds outstanding, according to Reuters Knowledge. It’s impossible to know how much protection has been written on that debt, since credit derivatives are privately negotiated and not all protection buyers hold the underlying debt. It’s likely that the amount of CDS linked to Lehman is at least several times the size of its borrowings.

The Lehman CDS auction process is set for Friday [today]. Large amounts of cash are likely to change hands as a result. But since there’s a winner for every loser in this market, the net effect on the financial system should be minimal. Except that no-one knows if all the losers will be able to pay – and that’s what has Wall Street worried."

Full piece here.

Remember Hearst

2008-10-10T06:15:00.000-07:00

In 1929, the plans for the Hearst skyscraper in New York were curtailed to 6 stories. For the next 77 years, the building remained a squat profile until the Norman Foster addition was added in 2006.

Down the street from DOWWTF?!, at the corner of 8th Ave and Greenwich Ave, construction is now under way on One Jackson Square, an 11 story luxury condominium, asking $6 million for 2 bedroom units. So far, concrete has been poured on 4 of the 11 story units, not all of which have been sold.

I suspect many of the pre-sold contracts cannot be dissolved, but if no fools step up to buy the remaining units, and if some of the existing contracts don't come through, and people pull out (as has been the trend in Las Vegas for over two years), the corner of 8th and Greenwich may not look like the developers hope...

Lehman and the CDSs

2008-10-09T15:05:00.000-07:00

Busy here, so I'm quickly going to quote (rip off) FT, Rueters, and Barry Ritholtz...

Banks are hoarding cash in expectation of pay-outs on up to $400bn of defaulted credit derivatives linked to Lehman Brothers and other institutions, according to analysts and -dealers.

This added pressure on the frozen financial system comes as authorities prepare to meet participants in the so-far unregulated $54,000bn credit derivatives market to speed up plans for the creation of a central clearing house.

The Federal Reserve will meet dealers, investors and exchange executives in New York today. Although big dealers had committed to setting up a central counterparty by the end of the year, urgency has increased in light of the collapse of banks around the world and as company bankruptcies loom.

"The New York Fed will hold a meeting [today] with a small number of banks and buyside firms to discuss the progress being made toward the creation of a central counterparty for credit default swaps," said a Fed official, adding that this would "help reduce systemic risk associated with counterparty credit exposure and improve how the failure of a major participant would be addressed".

So what does that mean? Tomorrow...

Twenty-two dealers will participate in the auctions, which will determine how much protection sellers will recover after paying out the insurance. The timeline for the auctions follows, according to JPMorgan.

9:45 a.m.-10 a.m. Auction participants will submit bids and offers for the debt backing the credit default swaps, which will be used to determine the initial recovery rate of the swaps.

10:30 a.m. Auction administrators Creditex and Markit will publish the initial recovery price and the open interest for the contracts will be published. The open interest reflects the amount of bids and offers that have been made, and will show if there are more buyers than sellers, or vice versa.

12:45 p.m. -1 p.m. Participating dealers will submit limit orders for the debt on behalf of themselves and their clients to fill the open interest

2 p.m. The final price of the auction will be published.
Permalink: http://dowwtf.blogspot.com/2008/10/lehman-and-cdss.html

McCain Steps Up the Crap

2008-10-09T08:16:00.000-07:00

As McCain lowers himself further into the gutter, drawing attention to Obama's middle name and his association with William Ayers, let's take a moment to examine the electorate for whom this will make a difference...

BA, 777, 26 A/K

2008-10-04T09:21:00.001-07:00

If you're flying economy on a route that's covered by a British Airways, Boeing 777, take seat A or K in row 26. You get 6 feet of leg room, and a ledge to put your feet up on.

Permalink: http://dowwtf.blogspot.com/2008/10/ba-777-26-aj.html

Obama in London Town

2008-10-04T09:11:00.001-07:00

Saturday, October 4, 2008, 12:13, London, UK, Camden Town, south-bound lane of the Northern Line tube station...

Permalink: http://dowwtf.blogspot.com/2008/10/obama-in-london-town.html

Live Blogging from the Risk Metrics Conference Call

2008-10-02T15:11:00.000-07:00

Live Blogging from the Credit Crisis call hosted by Risk Metrics with Nouriel Roubini, Barry Ritholtz, and Zach Gast:

Barry is very bullish on physical gold, less bullish on paper gold. He says put 5-10% of your portfolio in it, and "go to the store and buy the bars, if you have to."
Zach notes that the ban on short selling hasn't kept financial stock from dropping and that it's raised the transaction costs. Barry says the ban has been counterproductive.
Nouriel argues for an FDIC guarantee on all deposits on all amounts.
Zach suggests that the Treasury should match institutional and PE investments.
Barry predicts that there's a 40% chance that the House won't pass TARP tomorrow.
Barry predicts that the DOW will drop another 15-20% from its peak.
Nouriel thinks the dollar will range between $1.50-1.60 per euro. He thinks that American exports will shrink, no matter what.
Barry thinks that, long term ("3-6 months"), defense, infrastructure, and small-to-medium-cap biotech and medical devices.
Barry notes that Buffet is one of Obama's economic advisers, and that McCain also has some good advisers, but concedes that McCain has some real idiots on his team. But on the top rung, he says they are toe-to-toe.

Permalink: http://dowwtf.blogspot.com/2008/10/live-blogging-from-risk-metrics.html