"Whatever Works"

It was difficult to find a good review of this Woody Allen film starring Larry David, but in a mood with time on my hands I strolled down the hill to town and bought my ticket. What's not to like. It was terrific.

DiNapoli, Comptroller, 2010

Saw this bumper sticker in a grocery parking lot today. This is a campaign for a job in New York State that is responsible for the New York State Pension Fund, one of the largest institutional investors in the world. This is a campaign, as always, for sole trustee of that fund. Comptroller of New York oversees all pension rules as well.

This may be the most corrupt job in America. DiNapoli, like the convicted Hevesi before him, and still investigated McCall before him, has no experience in investment mangagement, no possible idea of what he's doing other than being a politician with power over money. This job also has control over the so obviously and massively corrupt system of pensions which allows pay over the last three years of work to be the gauge of life long pension benefits. Hence the pervasive overtime of short timers, a trick so obvious that it is just blatant corruption. The Comptroller overseas such things as disability payments, as in the exposed but ignored fact that 97% of Long Island Railroad union employees retire on disability, despite working for one of the highest rated safety systems in the country. Photos of the disabled on the golf course are ignored, and these pensions are large, $100,000 per year plus and amazingly comprehensive health benefits for picking up tickets for 20 years.

No one in state power seems to want to downsize the powers of the comptroller, a significant lightweight politico. It's not personal. This system has been wrong forever. New York is an extremely corrupt state. The legal system is run completely by the lawyers, everything, on any issue, requires fault, meaning litigation. Every encounter with any state rule requires counsel, that means competing counsel to demand controversy and encourage judicial discretion, often meaning coercion and bribery. Something as simple as guardianship for someone with completely obvious dementia takes at least a year with attorneys on every issue, four in the case being experienced, plus financial advisors on the tab as well. In Virginia this takes at most six weeks.

A starting point in the Comptroller issue must be a resolution to remove the pension funds from political control. Nothing is possible under the completely and bizarrely incompetent David Patterson but if he could be impeached... not possible I know, black, blind, and retarded is just too many covered classes, Spitzer was massively insecure... but in the future this seriously corrupt place needs change, or will the whole state just default to the New York City area, which has become an international city of wealth where the power of money and avarice competes to overrule the power of art and creativity, until catastrophe hits again.

Obama urges patience, Republicans respond with histrionics

Yesterday in his radio address President Obama stated that the stimulus plan was working as intended and that patience is required to see real economic recovery. The Republicans responded with politically charged misstatements and exaggerations.

As described here on Wednesday, there is effectively no "stimulus" plan underway, if "stimulus" is intended to mean new growth and opportunity as opposed to stopgap measures. The reasons for this are many, but one thing for sure is that it's by no means Obama or his administration that gets full responsibility for this. Dysfunction, acrimony, and incompetence have taken years to build up within our system and Obama's totally right in saying that patience will be required. He is, however, not at all forthright about addressing the status of "stimulus". He would rather, it seems, move on to health care, the environment, and other admittedly important issues than discuss what is required for economic recovery, what will work and importantly what will not work no matter how much people want to believe that Humpty Dumpty can be put back together again.

Representative Eric Cantor, the Republican spokesperson who responded, said that the stimulus plan was "full of pork barrel spending" --- $7 billion our of $787 billion is not bad and it's on the record that Republican's got a faceful from this trough as well --- "full of government waste" --- just as catch-slogan from the years of Bush incompetents running all major facets of our government --- "and massive borrowing cleverly called stimulus" --- Fed borrowing is part of their mandate as managers of the monetary system and these short term liquidity injections have been vital to getting world capital markets functioning again, albeit still not as smoothly as one could hope for. This has never been part of the stimulus plan nor has it been disguised as such. Cantor went on to say that the Obama administration's "economic decisions have not worked". What school of economic thought does this "rising star" among Republicans subscribe to, what economic plan of any type could work in the world's largest economy in four months.

Obama may not be completely straightforward or focused enough, but the segment of Republicans that Cantor represents are obstructionist. A strong reaction would suggest that they are shameless liars while a more moderate one would be that they are just old style politicos who refuse to join any coalition of sentiment or action to get this economy going again. It almost seems that they want failure,no matter the consequence.

They are informative in the sense that they are emblematic of the dysfunction within our system with their political mantra of keeping the message "simplistic, hostile, and personal".

Many Dems do the same dance but on corporate America.

Palin exits for now, Boehner ascendant

Sarah Palin's resignation as Governor of Alaska was unexpected. By God she is independent, so there you have it. She can make money with a book and on television or radio, or she can run a grass roots campaign for the 2012 Republican nomination, or she can really get back at the Republican establishment and run as an independent, or threaten to do so. Who knows. She's an action person, a vindictive wild person, an attractive charmer, and an Alaskan family person with all that apparently entails, and she is not a policy or process or information based person. She's made her statement and it's believable when she says that she "does not know what's next". What's next is something that would not have been remotely possible without John McCain's decision in September 2008.

That she could have been a leader of the Republican party was unlikely. There's been much media speculation about who the leaders of the Republicans really are, a default to Rush Limbaugh or Newt Gringrich?, but that's absurd. The real leader at the moment is John Boehner, the House Minority Leader, who opposes everything the Obama administration proposes and brings the votes to back it up. He comes across as tough, stubborn, unyielding, and highly political, but he does not come off as a resentful whiner like Mitch McConnell, the Senate Minority Leader. Boehner seems to be driven equally by Republican principles, someone define please, and an intense hatred for Nancy Pelosi, favor of course returned.

A lifelong native of southwest Ohio, otherwise known as the buttoned-down conservative Cincinnati area, Boehner has not historically been a favorite of the religious conservatives or xenophobes of his party. He has tended to favor business over orthodoxy. Now he is completely and totally ruled by an anti-anything-Obama approach. He does represent the fading Republican party in a way that could work with their transition from exploiting "values" fears over religion, abortion, guns, immigration, and gays, to being a resurgent party that bizarrely wants to recast itself as populist, standing up for the little guy against Wall Street and exploitive big business as well as against big government.

At the moment he's smart enough to not seek the role of Republican leader or do anything to suggest an interest. He's too intense, however, to be unaware of his potential within his party.

Equity markets reflect pervasive lack of conviction

Technology, financials, materials, energy, transportation, and equipment stocks are reeling. Basically anything having to do with growth is leaking, while fast foods and discount retailers are resiliant. This is a direct reflection of the market's growing loss of confidence in the effectiveness of any government stimulus initiatives.

Stimulus money to date has been spent to supplement state budgets for education and social services, to enhance federal transfer payments, and to prevent cataclysmic break-downs of AIG, Citigroup, Merrill Lynch, GM, and Chrysler. Most of this is necessary, but it is not stimulus. It allows already existing businesses, programs, and supplements to stay in place and survive the economic crisis. Stimulus in the sense of new spending for infrastructure development, green projects, small business development, rural and inner city entrepreneurial initiatives, or any other new growth development is for the most part all talk, all plans, no spending, no stimulus. As the world's largest consumer economy flounders amid dysfunctional execution of its stimulus plan, the world markets follow, and now we are again in a low volume equity market globally that lacks any enthusiasm.

Why the dysfunction. Why can't anything get done. How can administration officials and some Democrats in Congress possibly be calling for a second stimulus package when there has yet to be any "stimulus" from the one passed in March?

Is it simply the result of dysfunctional bureacracies built up at the federal, state, and local levels over many years, bureacracies in which delegation is limited, red tape is ubiquitous, and initiative is a path of much more risk than reward. Or can this culture have seized up in a way that's deeper than that, one reflected in the television shows that are watched, the reality show fixation, the lowest common denominator news programs that focus on entertainment rather than analysis, or the fiction best seller lists that are dominated by books written generally at a sixth grade level, entertainment for many but radically different from the middle of the last century.

Maybe that's a stretch and the key is the polarization of politics, the inability of Republicans and Democrats, liberals and conservatives, libertarians and fundamentalists, or whatever groups one chooses, to seek any common ground, and to hold not just differing views from each other but to be stridently hostile in supporting positions, positions that are more intuitively based resentment in one case, entitlement in another, than ones based on any thought process.

If the U.S. can pull out of this summer malaise, the world will follow. If the autumn just brings more talk and more delay, with stimulus efforts forecast to take hold by mid-2010, the market will not discount future cash flows in which it has no confidence. Stocks will languish.

Network news now officially dead, fittingly CBS leads the way

CBS evening news tonight began with 11 minutes on Michael Jackson. The network of Edward R. Murrow, Eric Sevareid, and Walter Cronkite chose this extensive lead above the Obama visit to and negotiations with Russia, the huge civil unrest in western China, and the upheaval in Central America with the ousting of Honduras's elected leader by the military. We have known that Katie Couric of CBS, Brian Williams of NBC, and Charles Gibson of ABC are each in their own way seriously limited in their knowledge and insight, news readers who don't seem to even know how impaired they are. CBS tonight, however, lived up to its trendsetter role of old and extended Entertainment Tonight by a half hour, and soon no doubt Ryan Seacrest will be the anchor.

"Gran Torino" and "Le fils de l'épicier"

These two films may seem to have nothing in common. They do, however, because they were both watched here this weekend.

"Gran Turino" has been the # 1 selling DVD since it came out, with #2 far behind. Being in the Netflix queue is hopeless. An infrequent visit now to Hollywood Video was the only way to see it. What a painful and contorted throwback of a film. Walt, the upright, disaffected, and grim man of principle who is the main character, is a caricature of a person that in real life does not exist, the sort of play on Marvel Comics that Harry Callahan represented. His overt but shucks it don't mean nothing racism is pablum for some Eastwood fans. That said, the movie's realism when it comes to the lives of immigrants and their joined at the hip requirement to deal with gangs spawned within their own ethnic group is unsparing and toughly, almost too toughly to be entertainment, realistic. It's a film that needed to be seen, and it's so distinctly American that why not on the Fourth of July. The allegorical resolution is open to interpretation by all, we get the classic Eastwood style as well, and a few great takes on the old Harry. Sell those DVD's.

Now why would this French film, translated "The Grocer's Son", be discussed here as well, other than same weekend viewing. There's a reason. Both have as one of the central characters an early old age man who has lived his life working hard, not expecting to be entertained or be happy or to find any answers, just wanting to be a vital part of some community of like minded stubborn folks. Both are alienated from their adult children and have a not completely irrational inability to relate to 21'st century social values.

"The Grocer's Son" is a small film, pleasant, slow on the uptake but with an easy evolution into a charmer. Cut down by a stroke, the hardworking father stays bitter, stays almost to the point of death by depression, until the acceptance of defeat, or it should be called love, pulls him through.

These are two completely different films. You will only once read anything that discusses them together. The cultural difference in the exaggerated resolutions, however, is something to think about, one so harsh, the other so humane.

"Secret, Profane, & Sugarcane", Elvis Costello

Picked this CD up at Starbucks a month or so ago and now realize that I really like it. At first there just seemed to be an overall good sound and a few catchy tunes but as a major house cleaning was underway today, set to music, it was obvious that this observation was an underestimation.

With most songs written by Elvis Costello and with the album produced by T Bone Burnett it's a winner. Burnett's productions have a distinct sound and he always adds a little writing and some occasional guitar work. His last major production was the Robert Plant and Alison Krauss collaboration, one in which he was leader of their touring band, and there were riffs there that are evoked on "Secret, Profane, & Sugarcane". Same for T Bone"s own albums as far back as ten years ago, a distinct sound, which is unusual for a producer these days.

Costello's voice works with Burnett's production and musicians, and some of the lyrics are perfect. There's even humor, so how about that.

"The women in Poughkeepsie...the girls in Ypsilanti..."

Closing was troubling, Obama's comments did not help

Following up on the prior post, the closing did not play out as expected here, and the result was "troubling". If the equity market had a chance of a late day salvage, it definitely could not happen after President Obama's 2:30pm comments.

Obama addressed the press corps and acknowledged his disappointment and surprise at the employment numbers. He stated the obvious in saying that a problem created over a number of years could not be solved in a few months and that while the day's numbers were poor, the 2nd quarter overall was an improvement on the first quarter. Switching gears quickly he then proceeded to discuss environmental policy and green initiatives, touting energy solutions businesses as an area that will be hiring many more people into jobs that will be long term and stay in America. With a group of executives whose companies are investing in green solutions surrounding him, he stressed their role in creating employment opportunities to address the problem so evident in today's employment numbers.

There were a number of reasons for investors to be befuddled by this performance. First, even many ardent supporters of significant changes in environmental practices admit that a transition of any consequence to wind, solar, and other power alternatives is a long term process, more dream than employment bonanza today. Why was this three quarters of the President's presentation today. Second, he did not make any substantive comment at all about the employment numbers, even dice and slice the numbers in the most general way to give the public a sense of perspective. And third, he did not address any of the initiatives underway through the economic recovery programs and how they had the potential to ease employment pressures in the next two to three quarters. He did not address the gorilla in the room. He talked about his environmental initiatives.

As to the recovery program's progress, it was politically astute to keep quiet. Of the $750 billion approved by Congress in March, the most quoted figure suggests that only $170 billion of that has been allocated to projects and relief thus far(could this possibly be true), and the word is "allocated", not necessarily spent. Concerning the $100 billion of distressed securities buying through the public/private plan announced by Geithner in February to relieve credit market stresses, it was announced today that a $20 billion program would soon be underway, five months later and $80 billion short of projections(this is definitely true). Both the administration and Congress poisoned the atmosphere for such a plan with their anti-banking and anti-investor comments. "Politically astute to keep quiet", but every one who pays attention notices, and the market pays attention.

One administration official, when asked, said today that it was too early to say whether more government relief would be necessary, but that all options were open. The obvious response to the administration and Congress that should be "do the work and act constructively enough to deliver on your commitments and invest the money that's already been approved".

It's 1pm --- do you know where your money is and what it is doing

In the early afternoon of this last trading session of a holiday shortened week the equity markets are off significantly. Finding a stock that is up at all today is almost impossible at the moment, so broad based is this sell-off in light of the various employment statistics reported this morning. While the unemployment rate at 9.5% came in slightly better than the 9.6% consensus forecast, so-called payroll numbers were much worse than expected by analysts.

The question here is not why the market is reacting negatively, that's to be expected, but why there is such alarmist commentary from every source in the media, from politicians, and from economists. Doesn't everyone know that employment statistics lag the beginning of a recovery by perhaps six months. On top of that it's the summer when slower activity in many businesses gives the opportunity for layoffs. On top of that the auto industry and all of its economic beneficiaries, not only parts suppliers but also food and retail businesses in affected areas, is seeing a totally predictable decline. And for one more on top of that, until the recovery is absolutely clear all businesses will pare back staff and risk going too far with the cuts, knowing that hiring back enough workers will be absolutely no problem this time around given the depth of recent economic stress.

The most troubling number was the average workweek, down to 33 hours, the lowest since statistics on this metric started in 1964. That basically means that the existing employment levels have plenty of room to expand productivity with no new hiring anytime soon, even as we're stuck with 9.5% unemployment and rising.

These employment statistics should not be expected to improve in the next two months as the rolling restructuring of the auto industry continues and as the pace of momentum from the government stimulus plans only slowly builds. We know that but isn't the market supposed to look at future cash flows. The autumn months always bring improved retail activity as families gear up for school and winter, and as those many people who choose to move in the summer address household needs.

The danger now is that investors will overeact to the summer's employment stats and create a negative momentum in the market, and that the government and politicians will think that more programs and more stimulus and more mandates on businesses will have any impact at all on the painful but needed process that the economy is going through. There might, of course, be an impact, but it could just be one that prolongs the problems.

With the long weekend coming it would be normal for the market, Dow down 177 now, to come back somewhat in the afternoon as shorts cover, take some gains, and then be able to relax out in the Hamptons over the weekend, not worrying about being caught in a Monday morning rally. No recovery in the afternoon would be troubling.

Kirkuk bombings

The much publicized withdrawal of U.S. troops independently controlling major cities in Iraq was met by a major blast in the city of Kirkuk in the north of the country. Ten days ago there was another huge bombing in Taza, just outside of Kirkuk. Is a new more active front of the Iraq war beginning as Americans pull back.

During much of the last six years of war and internal turmoil the northern area of Iraq that is a multi-ethnic mix of Kurds, Turkmen, and Arabs has been at times almost a semi-autonomous regions. It has stood apart from much of the Sunni and Shiite rivalry and the attention of outside insurgents. The most powerful group in this area is the Kurds, an Indo-European ethnic group that for centuries has worked for and fought to establish an independent territory in an area that covers parts of Turkey and Iran as well as Iraq. In some ways the U.S. invasion and occupation diverted attention elsewhere to some extent and after years of attacks, forced relocations, discrimination, and even poison gas attacks under Saddam Hussein, the Kurds were given some measure of self-rule as well as a mandated participation in the U.S. dominated Iraqi government. They as well were given roles in the management of the massive oil fields near Kirkuk, damaged and underutilized but still with huge potential. This may all now change and these bombings are a terrible sign.

Under the Sunni governments the Kurds were targeted for persecution. Shiite Iran has centuries old enmity toward the Kurds, and now Shiite Iraqis, a majority no longer dominated by the Sunnis, can begin to exercise their historic biases that are shared with Iran. Turkey has long fought border wars with Kurds, and Kurdish guerilla groups and civilians are a constant and despised presence on their borders. The fact that Kurdish areas have benefitted to some extent in recent years and have become more organized as a political force in northern Iraq has few supporters. In fact it is likely seen as threatening to all that surround them. This could be ugly.

The two bombings in the Kirkuk area over the past two weeks represent almost half of the deaths during the recent upsurge in terrorist attacks in Iraq that have seemingly in anticipation of this U.S. first step back. In the chaotic atmosphere of Iraq this may have little meaning, one could hope so, but one could also have reason to expect that this is the beginning of another dark time for the Kurdish population of northern Iraq.

Summer crime

Reading that is.

As an entertainment, as a diversion, or as a sleep aid or stimulant, crime and mystery novels are a part of the reading repetoire for some. With summer underway and the opportunities to take a break from self-improvement, or undergo self-improvement that just means letting go into relaxation, the crime and mystery genre is a place to look. Some of the writing is not bad at all, many of the plots are repeatable templates but comfortable in their own way, and a few a just fine.

Some of the favorites here are based in Italy: Donna Leon, an American who has lived in Venice for many years, Andrea Camilleri who lives in Sicily, and Gianrico Carofiglio from Rome. They generally have a touch of humor and a sense of civility not found in American crime fiction. Unfortunately I have read everything published or translated into English that this group has written so it's just wait for the next from these folks.

That leaves the American writers who are mostly old stand-bys. Donald Westlake and Richard Stark, one in the same, died earlier this year but left behind a huge catalogue of books beginning in the 1960's. He is viewed by some as the master of "stark" straightforward crime writing, admired by some literate types that one would not expect, such as Michael Ondaatje who praises him in "Divisadero". His books are really like extended novellas, and with their crisp style are generally no more the four hour diversions. They are distinctive for their characters and the human flaws that undermine each of them, and not in the whack you in the head with a baseball bat style of some crime, romance, and suspense writers.

Other half decent and diverting writers are Laurence Block, who has been around for a long time, and Jason Starr who came on the scene in the early 2000's. Both spend most of their time around Manhattan and occasionally the outer boroughs, Block with an ethos of New York styles and behaviors over the last 50 years and Starr with a current take on the way people live and the quirks they have. They both make occasional contributions to the Hard Case Crime series, but their stand alone books published by others tend to be more polished, if that description can be used here. For another setting, there's James Lee Burke whose fairly grim crime novels set in New Orleans, Cajun country, and Montana, with some Texas always thrown in, have some flair and the stories develop at times in unexpected ways. The downside is that the bad guys, and gals, are always really evil, and the good guys are often not much better. Burke at times writes well, with some humor and colloquialisms thrown in, but he overwrites as well with descriptions that are an over the top effort at literate fiction. At least he makes the effort but it doesn't quite work some of the time.

Elmore Leonard and Carl Hiassen, favorites of many it seems, are not included here as their characters are generally repetitive and unattractive. Leonard is seen as the best at dialogue and unlike the work of many writers, screenwriting has made some of his stories stronger over the years. Each to his own.

For a different genre adventure, the espionage writing of Charles McCarry is not so well known today but it's worth checking out. He did venture out of retirement four or five years ago with "Old Boys". His writing draws well developed characters, more so than LeCarre, and his plots are less byzantine. The knowledge of history that he weaves in is exceptional. As a former CIA officer and traveler to many places, his settings evoke place in a way that makes them familiar.

And now to find something redeeming to balance out the diet.

Infrastructure spending

Despite the hoopla around infrastructure spending that accompanied the various stimulus plans, it has been reported that only $72 billion has been allocated to that effort. The majority of the money has been allocated to shoring up local and state governments who simply do more of the same. As David Patterson of New York said when allocated $4 billion for education, "now I don't need to change anything", that in a state with inflexible teachers unions, custodians unions, you name it.

China spends almost 10% of its federal budget on infrastructure development, India almost 9%, and of course the reaction is that they need to do that. The U.S. spends 2% on an overall infrastructure that is running out of time in the northeast, mideast, midwest and west coast. It was an amazing accomplishment in the last century but it needs reinvestment. Under Roosevelt, to get the economy going, admittedly with many missteps, the part of the federal budget dedicated to infrastructure was 13%.

From highways to water systems to dams to electric grids to bridges the infrastructure in many parts of the U.S. is in disrepair. Several months ago, riding in a taxi from the airport in Paris it was immediately apparent how up to date, nice and clean everything looked, the expressways, the off ramps, everything, compared to a trip from JFK or LGA in New York. Paris is not exactly a new city, but they seem to be staying on top of investment in a way that we in the USA do not.

More from the saintly George W. Bush years

We already knew that more than 130 graduates from Pat Robertson's Regents Law School were placed in the Justice Dept. during the Bush administration and that one 32 year old from that suspect school reached number 3 in the department and led the firings of U.S. attorneys that became a scandal.

We have learned that Defense Department head Rumsfeld laced his war recommendations to the President with Bible verses in order to get approval.

Now we learn that we are stuck with a military chaplain corps that is two thirds evangelical and pentacostal Christian while only 22% of soldiers profess that religious approach. It's further been reported in Newsweek that these chaplains see their main role as one of distributing Bibles in U.S. occupied territories as a way to spread the word. They boast that as many as 500,000 Bibles translated into Arabic have been distributed in one year.

Onward "Christian" soldiers, the George and Laura Bush legacy lives on.

Elizabeth Warren

It is postulated that Elizabeth Warren, a Harvard Law School professor, should become head of any new consumer protection agency mandated by Congress, but she is not fit for broad public powers. She already has these powers in some sort of powerful oversight role for Congress of the TARF and TALP plans. She simply has an agenda that is vindictive and is not based on facts. She is a visibly self-righteous attention seeker, and we do not need more of these in the public arena.

Why this today. She attacked Citicorp today for their plan to increase some salaries by 50% by saying in a big public way "they don't get it". Like Sheila Barr of the FDIC she thinks personal attacks are the best approach to governance.

Here's the deal. Even in big multi-product banks the normal protocol for even middle management employees had become that a base salary was supplemented by a bonus and by stock awards. Experience here, not a trader or merger guy, was that salary increases stopped in 1997 and all increases in compensation depended on bonus and deferred stock awards. In 2009 that no longer works. Bonuses are eliminated or contained and regulated and the stock awards of the past worthless. Just to retain valuable employees and give them the basic money to pay their bills in high cost environments justifies Citi's action. From this perspective the bills could not have been paid on basic salary at this point.

Elizabeth Warren, smart as she is and with all the academic accolades, knows this. One could only guess that she is just looking for attention and looking for the opportunity to ridicule when she says that Citi "just doesn't get it". There is no place for her in a constructive role in our government.

The FASB is wrong---not unusual

The Obama administration has made a giant step in addressing the mistakes of the FASB(Financial Accounting Standards Board), this somehow previously sacrocant but flawed group of experienced accountants and narrow minded bureaucrats, by recommending that the loan-loss provisioning standard be revised to a sane one. The standard set by these inexplicable quasi-regulators was such that bankers could only reserve against current non-performing loans to determine what their loan loss provisions should be. Under the Clinton and Bush administrations the SEC would indict banks for managing earnings if they appeared to be too conservative in their reserve for loan losses policies(too conservative?). Obviously, when times are good, capable bankers do the work to determine how much should be aside to protect the bank against future loan losses. The FASB did not allow it, and the SEC agreed.

For example, the credit card business is a hugely quantitative business. They know everything about aggregate groups and sub-groups. They know and price in the fact that loan losses on a prime based portfolio might, for example, be between 3.5% and 6.5% depending on where we are in the economic cycle. When they are at the lowest level, they should be reserving more but the FASB and the SEC would not allow it. Scratch your head and figure out who could benefit from this---bureaucrats just covering their jobs or hedgers setting up a fall---take your pick. Members of the FASB should be audited for lunches, trips, loans, etc. Bet you that there will be something there.

As Jamie Dimon of JP Morgan Chase said, "I find it absurd that loan-loss reserves tend to be at their lowest point precisely when things are about to get worse". But that's the effect of the FASB. No one should think that they are anything but a group of challenged accountants and lost souls from the investment community who are terrified by what happened in light of Arthur Anderson's demise after Enron, and who have no understanding of corporate finance or capital markets. That the Obama administration recognizes this is just fine, and it should play over into the issues of extremes on mark to market accounting which are beginning to be well known and all parts of the accounting code. Using the FASB as some sort of intelligent backstop is a joke---just look at this loan loss provisioning issue as an obvious example.

Lucas Glover, another golf man

That's all you can really say about Lucas Glover, the U.S. Open winner, another golf man. He's polite, not outspoken or out of line, they say he likes to read one book a week, he likes Manhattan and he and his wife spent their honeymoon here doing the tourist things. Based on that he's just fine, and his family is fine, his grandparent's are fine, everything is just fine. What's not to like. That's perfect golf mythology.

That's why the John Daly's and David Duval's are so appealing to some. They're different, their personality shows through, and it's not all on the straight and narrow. There is still the occasional Rocco Mediate and Anthony Kim who don't mind mixing it up with the crowd and being animated. On the whole, however, the golf tour is dominated by a focused and fairly uniform group of relatively uninteresting players. They are led by Tiger Woods and Phil Mickelson, seeming gentlemen both, who make fortunes and donate money to causes that their tax advisors and publicity agents suggest but have no passion for anything but golf and their families. That's it. Golf personalities in general do not project any personal qualities outside of a narrow range of possibility and they are not expected to have opinions on anything outside of the condition of the course on any given day. They are just golf people. That their sport creates a massive waste of water and enviromental poisoning by fertilizers and other toxic agents worldwide is no concern of theirs, they have no knowledge and no opinions.

I like golf. It's a great game. Play it in Scotland and see what it's about, and it's not environmental destruction, it's the opposite. Learn to play the game on many of the hardtack public or small private courses around this country and it's the same. No pro golfer talks about this, they just "appreciate" the differences in links golf when the British Open comes around or some have distant memories of those less privileged days.

You must admit that many of these golfers are good examples of steady lives, at least it seems that way, not so interesting but fine. In an earlier era golf was a game of real characters, Walter Hagen, Sam Snead, Arnold Palmer, Lee Trevino, and then came the more low key but still animated Gary Player and Jack Nicklaus. On the whole, however, today they're just a group who in a broad sense are risk averse, put all their effort into their game, and want to live a comfortable life. Nothing wrong with that, I guess, but it doesn't put any of them on any kind of pedestal, except of course in their discreet game of golf.

Lucas Glover, you're a true golf man of today.

Ugh --- Jolt down

Jolt up? jolt down? has been the market outlook here for a few weeks as the malaise lingered. Today the answer arrived in the form of an across the board sell off of equity markets. Less liquid stocks were clobbered. Big liquid stocks dropped sharply. Europe down, Russia collapsed, and now we await Asia and the reverberation there.

In most market commentary the leading cause of this sell-off was a revised forecast from the World Bank projecting that global economic output is now expected to contract at 2.9% for the year as compared to their March forecast of down 1.7%. This is interesting, a demonstration of the hair-trigger mentality of that first line of market response, the traders. Robert Zoellick, President of the World Bank, initially made these comments in a World Bank press release and on their website on June 11 saying "according to the latest Bank estimates, the global economy will decline this year by close to 3%, a significant revision from a previous estimate of 1.7%". Today in a detailed report on their website, the World Bank refined that decline to 2.9% as part of major report of recommended prescriptions for mitigating the impact of this on poor countries and a list of their own active initiatives.

While the World Bank is intensely focused on how to avoid calamity in the developing world as the world economic crisis pushes more people into poverty and hunger with less access to health care, the traders in the developing markets focused on the World Bank's projected growth numbers that had been disclosed and were available, but obviously not widely published, for the previous seven market trading days.

What this all suggests is that this information was in the market hands of knowledgeable people with more than a one day perspective, but had not reached the hands and heads of the broad trader market that reacts with viral ferocity to news that can be tradeable, or can make them money. Bloomberg and other sources led with this World Bank "news' this morning and the frenzy was on.

This commentary does not mean this is a short lived bit of market weakness. Now confidence has been shaken and it's wait and see time. This commentary does suggest that there has been no major economic change in the last day or weeks. The World Bank's outlook reflects the ebb and flow of working through serious financial and structural problems that led to extreme crisis and having for now survived, those problems are mostly recognized but certainly not all cured. In Zoellick's June 11 press release he said "some of the main risks still remaining include the need to clean up the balance sheets and recapitalize banks, address the unique financial risks in Central and Eastern Europe, guard against a rise in protectionism, and roll over large amounts of private sector debt in developing countries".

Still a lot to do but that big picture is well known.

Market torpor continues...

Just ten days ago a brief post here commented on the "Directionless market..." that we are in an "unusual vacuum", that will eventually lead to a "jolt up, jolt down". In financial markets that once seemed to mark time by nanoseconds we have moved to one that has, for the moment, all the time in the world. Ten days, no change, nothing has really happened apart from a gradual sapping of energy in the equity markets, one that has reduced the VIX, or volatility index, to a healthy level not seen in months but for the wrong reasons.

Investors see no real opportunity. Equities have moved up but there is not a catalyst for the move to continue. Short term safe havens pay nothing, medium term fixed income plays are there but the winning move is over, longer term fixed income looks like a loser's bet. Everyone talks about commodities but in the short term they have been punishing anyone looking for easy money. The hedge fund, private equity, and venture capital worlds are all on hold, not wanting any attention that would attract the Feds and hoping to find discrete opportunities, giving up for the moment on any broad based bets on financial engineering schemes or sector moves.

The summer solstice arrives and may offer a change in the atmospherics of the market's mind. That's the best one can say based on the last two weeks. Yet one could still wonder whether the ravages of the last 20 months, since August of '07, haven't dulled the senses to possibility. There has been a massive amount of stimulus to the U.S. economy. Is it not entirely possible that despite the expected rising unemployment that the stimulus money is just beginning to work its way into the system. Shovel ready projects mean you still need to hire the contractors, employ the people, lease the equipment, buy the concrete, cable, steel grids and bolts, and whatever. Shovel ready is still a few months away. Job security bought with Federal money to local governments is "we'll spend it when we see it" money based on what happened and how terrified everyone was. That's just the U.S.

China, India, and Brazil haven't vanished and appear to have life, ready to slowly step back out again. Little old Peru is cranking, but most of Europe is still cranky. France and Germany could still lead the way out while England, Italy, and Spain deal with devastated property markets. Global credit markets are functioning more smoothly with the most rational spreads since before Lehman, not great but that's a big statement. They are not deep or robust credit markets but the pricing mechanisms are functioning. Equity markets globally are still focusing on short term p/e ratios and not on longer term competitive advantage, not on any real hope for what was once seen as just reasonable growth rates for the many countries with an expanding middle class.

Jolt up, jolt down, maybe, little opportunity near term, lanquid times these. Don't discount the future, or maybe that's the opportunity --- corporate finance 101?

"Taken"

This film starring Liam Neeson is not the type usually eyed here, the action thriller violence type. It did not seem to have an especially long run in theaters and, while I haven't read any reviews, I doubt if it was reviewed especially well. Directed and written respectively by a French team, Pierre Morel and Luc Besson, and set partially in Paris, it's the tale of an ex-CIA "preventer" living in L.A. who goes into trained rescue mode when his 17 year old daughter is kidnapped by human traffickers in Paris.

Since anyone who had seen the trailer, which was widely aired in television adverts, knew what was to come, the fairly lame opening set-up worked because we knew what it was up to. As the plot evolved the film began to click, the Parisian search had an air of authenticity, and then the mayhem began.

The film did not strain for political correctness or sensitivity, at all. It was a reminder of 1974's "Death Wish", a classic of this genre that remade Charles Bronson's career. That film opened two months after yours truly experienced a fairly rough and terrifying mugging on a visit to New York, and I fully understood the huge success of that film, in fact I enjoyed it despite thinking that it was blatantly crude. Neesem's character in "Taken" is unforgiving in his at all costs search and destroy mission. He's like a Bruce Lee in his B movie days who annihilates everyone in his path, no matter how many and how unlikely. No effort is made to balance ethnic issues. The Albanians are all heinous and despicable gang members played by actors whose facial appearances, snarls, and brutality would never be mistaken for good people. So we don't find a sympathetic Albanian here who is the good informer or some such thing. The end buyer of the best girls as the film rushes to its climax is an aging and overweight Arab sheik on his luxury Seine River cruising yacht. No good Arabs either, just rich procurors, protectors, and users. It's an unusual approach for today's movie market, but what's wrong with it. In the context of the film it's the only approach that could work. While these ethnic groups are of course not all cut from the same cloth, Albanian gangs are well known as particularly ugly and in New York today it's written that as they've gained critical mass they're even worse than the Russians or the Fukien Chinese. Arabs broadly have a gracious culture when not seen at its extremes, but anyone who has been around the block in London has seen the crude and arrogant behavior of many hugely wealthy Saudi or other royal family low life who make Dodi Fayed look like a Boy Scout. These folks are around and "Taken" did not bother to dilute that fact.

After killing at least 30 or 40 villians and being the general cause of a new wrecked car lot on a few acres in Paris, the next and final scene shows Neeson's almost unscathed man arriving back at LAX with his smiling relaxed rescued daughter, looking as if they have actually been on a vacation in Paris. No accountability, nothing post-traumatic, on to the promising next phase of their lives.

All that said, I enjoyed it. No one could have carried the film like Neeson, there were some scenes that were perfectly set-up and filmed, and it was nice to see something straightforward, despite being completely improbable.

Senators accept no responsibility, but politick for more

In reading and hearing the members of the Senate banking committee comment on the Obama administration's plan for financial regulation, one could be excused from coming to the conclusion that they are all freshman senators having entered Congress as the extreme financial crisis was already underway and unavoidable. Democrats and Republicans alike act as if Congress has no power and had no complicity in the regulatory choices and administrative laxity that led to the crisis. Somebody should add up the dinners, favors, sponsored speeches, campaign contributions, and general ass kissing that this group received from the financial services industry in the years leading up to the disaster.

Leading the charge of amnesia is Senator Dodd, Democrat and Chairman of the Banking Committee, undercutting his administration's efforts in a completely transparent effort to save his own political life in Connecticut. Shelby and Bunning, each with their own unique undercurrents of nastiness, are the most quoted on the Republican side. It was a surprise to hear Democrat Mark Warner of Virginia immediately voice negative concerns about the proposal.

This is not to say that there should not be a thorough discussion and debate about the Administrations proposals. Once a plan is passed it will have staying power and a long term impact. It is, however, disappointing to see such initial bias given Congress's general blind eye or contributing one (as in both Democratic and Republican initiatives over 12 years to mandate that Fannie and Freddie expand dramatically their lending to borrowers who were not credit worthy) to what occurred. The fact seems to be that Congress sees the Obama plan as one that will limit their power and legislative authority and they want no part of that.

If bills are ultimately put forward that give Congress a greater position of power to regulate our financial system there is no recent precedent that suggests that it would be a good thing. None. As recently as the last few months we have seen the TALF proposal to liquify credit markets sabotaged by Congressmen asserting regulatory power over any participant in the public/private partnerships envisioned by that creative and needed plan. So no go for that, of course.

Maybe this is just initial sparring and something constructive will come out of it. If not it will at a minimum be a wasted opportunity for needed change and at worst a guarantee of another financial crisis within in a few years.

"Jeff in Venice, Death in Varanesi", Geoff Dyer

When it comes to books by Geoff Dyer I am so completely biased that what is written here may be unreliable. Whether it's his novels, travel writing, essays, war history, or his perspectives on jazz, painting, photography, or literature, everything he writes is read here.

"Jeff in Venice, Death in Varenesi" is his latest novel, published in April and somehow unknown to me until last week. This novel is really two novellas joined at the hip by one main character. The first is set at the Biennale, Venice's every other year indulgence in some of the most entertaining and bizarre "art" displays possible, or improbable. As a journalist taking in the scene in the day and participating in its seemingly incestuous celebrations each night, our jaded protagonist Jeff is revitalized, or is he drained of his last strength. The second story sets Jeff in Varanesi, called India's holiest city, on a spur of the moment brief reporting job that extends into weeks and months. The chaos and unpredictability that ensue make this city a tableau for a Dyer tour de force of writing.

Yeah, I actually wrote "tour de force" like some formal book reviewer. This is just an appreciation.

The two tales in "Jeff in..." are completely different but at the same time one in the same. Jeff leads a middle-aged muddled life in London, going through the motions of a reasonably successful free lance journalist career, churning out work that he no longer cares about and not getting any psychic charge out of seeing his name in print as he did in his earlier years. His Biennale and Varanesi experiences are both serious and almost ludicrous breaks from his stagnant London routine, and he immerses himself completely in them, or literally almost immerses at the close in Venice and completely does so at the Varanesi conclusion. Both trips are a purge of a life that he fell into and now is stuck with, a home that is simply a consequence of birth, a mordantly repetitive set of activities, and a future that is completely unclear.

George Soros calls CDS "instruments of destruction"

That's a headline today on Bloomberg video. It's amazing that there is even a debate about this. Credit default swaps created a downward spiral in the market for the benefit of closeted traders to the tune of billions which had nothing to do with the overall economy. That Aunt Mamie refinanced her house to pay off credit card bills and buy a Cadillac, that Golden State invented the most risky mortgages and then sold the book off to Wachovia's mindless Ken Thompson at a premium, that WAMU's strategy of a bait and hook mortgage book plus de novo expansion never made any sense at all, that Lehman and Bear both lived off of the CMO market, all, yes all, of that pales in comparison to the damage done by this derivative, the CDS's. Now it's as if we're on CNN where no matter how ludicrous the issue they feel compelled to have two panelists who support it and two who are opposed. Balanced idiocy, which is the case here now. The CDS market has a purpose as a hedge for held debt, but even now it is being used to gang up on soveriegn debt as a naked bet. It seems fishy that in an issue so obvious that big political contributors like SAC who live off of these regulatory anomalies somehow prevent any serious examination of the issue. George Soros is no wallflower, and he is no saint. That he would step out, as he did a few months ago as well, and condemn this market says more than we need to know about the evolution of this market in the hands of an incestuous cadre of traders and Steve Cohen --- this is not a very attractive group of people. That they pay millions for art is no redemption.

Directionless market with no leaders

There is no leadership in the equity markets up or down now. This is an unusual vacuum. Activity in the bond markets, commodities markets, and CNBC blabber markets aside, equities have been in a trance. It's a stalemate between the obvious screaming values of well financed companies with distinct market advantages and the fear that inflation, a declining dollar, and a second round of consumer stress related to mortgage and credit card debt is set to take hold in 2010.

Mid-market and small cap companies are vulnerable to extreme buying and selling, seeing them both here on a daily basis, but the big steadies are just hanging at 20 to 25% below any "normal" calculation of value. After GE, or as more extreme examples after AIG and C, what's "normal" and when will the normal investor return. With the role of securities analysts neutered and the rating agencies completely discredited, when will a leader emerge. The nitwitisms on business televison are just distractions.

Jolt up, jolt down, we're due for one or the other.