Author: Matthew G. Saroff

Not Enough Bullets: Can’t Live on $150 to $180,000 Edition

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It appears that for investment banking types an outrageous salary is not enough.

They also need bonuses. Bonuses whether their company makes money or not. Whether their company is on the bederal dole or not.

It’s because….It’s because….I don’t know why, but the rules don’t apply to them.

BTW, the last paragraph of the story is the killer:

“Without a doubt, $18 billion is a lot of money, but it’s a drop in the bucket on Wall Street,” said Gustavo Dolfino, president of the WhiteRock Group, a headhunter for the banks. “These bonuses are down, and the salaries are not enough for these people. They can’t live on $150 to $180,000, so they haven’t saved any money. They put it on credit lines and at bonus time, they thought they’d pay it off.

Median family income is $49K/year, and they cannot live on three times that.

Andred Lahde got it right when he called them, “The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government.“

Zimbabwe Government Formed, Etc.

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It appears that their parliament has passed a bill allowing for a unity government, as a result of the strong-arming of former South African president Mbeki and the South African Development Community (SADC).

As I’ve said before, I think that this will work as well as Nkomo’s incorporation into Zimbabwe government, as in not at all.

Meanwhile the EU will maintain sanctions against ZANU-PF officials, even though the
African Union has asked them to be lifted.

This is a good thing. The upper levels of ZANU-PF are nothing more than thieves, and denying them easy access to banks to hide their ill-gotten gains is a good start, particularly when Zimbabwe was just forced to issue new dollars worth a trillion times more than the old ones, because of hyper-inflation.

GDP Numbers Artificially Inflated by TARP

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Barry Ritholtz has the goods.

He notes that the Bureau of Economic Analysis (BEA) notes the effect in their report:

Troubled Asset Relief Program

In October 2008, the Emergency Economic Stabilization Act of 2008 established
the Troubled Asset Relief Program (TARP). Among its provisions, the act authorized the Department of the Treasury to purchase or insure up to $700 billion in assets to alleviate the financial crisis. By the end of the fourth quarter, the program had disbursed $243 billion to banks and other institutions in exchange for shares of preferred stock and warrants. The program also disbursed a $4 billion loan to General Motors in the fourth quarter.

Purchases of financial assets are generally not recorded in the GDP accounts (though they appear in the Federal Reserve’s flow of funds accounts). However, when the Treasury purchases a financial asset (other than a loan) at more favorable terms than are available in private markets, BEA records a portion of the purchase as a capital transfer, calculated as the difference between the actual price paid for the financial asset and an estimate of its market value. This treatment is consistent with the recommendations of the newly updated international guidelines, System of National Accounts 2008. For the fourth quarter, in most cases BEA’s estimates of these capital transfers are based on Congressional Budget Office estimates, which are prepared on a net present value basis. The recording of a capital transfer in the GDP accounts does not affect GDP or net government saving, but does reduce net government lending or borrowing.

(emphasis mine)

You’ll notice that that the BEA is saying that the TARP is just a transfer payment, and hence is not counted as GDP, but I would argue that in overpaying for assets and preferred stock, these expenditures find their way into the numbers indirectly.

Ritholtz says that the effect is close to 8% of Q4 GDP, I’d say a bit less, say 2-4%, because the money finds its way into the economy indirectly and slowly, but in either case, it makes the GDP numbers worse than they seem.

If any bankers want to correct me, please do so.

Not Enough Bullets: The Ever Reliable AIG

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AIG is looking getting more US government aid to unload its dodgy assets because at this point it has only been able to unload about $1b in assets, and that money had to go to retention payments:

So far, AIG has announced sales of only a few smaller businesses that, at least based on deals where a sale price was announced, will earn it a little over $1 billion. That is about what AIG is paying employees in retention payments to keep them from leaving for rivals, which could further erode the value of its units.

They need to pay money to the the very people who ran the company into the ground, in an employment scenario where no one on Wall Street is hiring, because they are worried they might go somewhere else.

I’m not just referring to the people who actually sold insurance here, I’m referring to the people who actually set up the CDS catastrophe that took the company down:

American International Group Inc., the insurer saved from collapse by government money after losses on credit-default swaps, offered about $450 million in retention pay to employees of the unit that sold the derivatives, according to two people familiar with the situation.

About 400 workers at the financial products unit may get the money in two installments, said the people, who declined to be named because details of the payments were confidential. The business was responsible for about $34 billion in writedowns since 2007 as the market value of swaps AIG sold to banks plunged amid the subprime mortgage market collapse.

They are not just paying people who were passengers at some car wreck in another division, they are paying the driver of the car that crashed.

What’s more, the driver was drunk, sending a text message, getting a blow job, and speeding at about 150 mph when they plowed into an orphanage.

Again, heads I win, tails you lose remuneration, bonuses to the tune of over a million dollars per employee to the folks who bankrupted the company.

Economics Update

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Consumer spending fell for the 6th straight month in December, and all of 2008 turned in just 3.6% increase, the worst year over year number since 1961.

The Institute for Supply Management’s factory index was better than expected, but still an anemic 35.6, but better than the consensus prediction of 32.5, but 50 is neutral, so anything under 50 signifies more contraction.

In inflation, the “Treasury Real Yield” is at a 16 month high.

The Treasury Real Yield is the spread between TIPS (Treasury Inflation Protected Securities) and regular treasuries, and is a measure of investor expectations of inflation….Which means that they are expecting more inflation…..Which is a good thing in this topsy-turvey economy.

Meanwhile in the Celtic kitten, Ireland is looking at injecting €8 billion into its troubled banks.

In Russia, and it looks like speculators are betting very heavily against the Ruble, which just hit a new low.

With Russia having already burnt through about 1/3 of its reserves in an unsuccessful attempt to maintain the currency, this could get very ugly.

Shrinking consumer demand has oil prices dropping again, and has pushed the dollar down against the Yen and Euro, though it improved against the sick man of Europe, the British Pound.

Broken News and Accusations of Witchcraft

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So I’m surfing the net and come across PZ Myers on his blog Pharyngula talking about an ACLU press release about a student in Oklahoma who was suspended for allegedly placing a hex on a teacher which resulted in a “mystery illness”.

So I set fingers to keyboard, and write a ferociously critical piece, invoking knowledge, Texas, and, of course Monty Python and the Holy Grail, and while I’m Googling to see the outcome of the case I notice something in the ACLU press release:

ACLU of Oklahoma Files Federal Lawsuit on Behalf of Student Accused of “Hexing” a Teacher (10/26/2000)

(emphasis mine)

It’s from almost 9 years ago, and the events in question occurred 10 years ago, and Lifetime made a TV Movie about it, but that still does not mean that you can’t have a minor Blogasm over this. (Google Search Link)

I’m just glad that I noticed the dateline before I made a complete ass of myself.

For those of you wondering, the judge dismissed the case, and assessed legal fees against the parents, who then dropped the case in exchange for the fees being waived.

I still need an excuse to invoke Monty Python though….I’m Jonesing for it right now.

Update on Gregg as Commerce Secretary

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It appears that Judd Gregg is demanding a promise that anyone who the (Democratic) governor appoints would caucus with the Republicans, and the word is that the rather Broderiffic Governor of New Hampshire, John Lynch would likely do this anyway.

Screw it. Why give a ‘Phant a leg up in the 2010 election in a state that is increasingly blue.

Update:

OK, the NY Times is reporting that there is a rumor that former NH Senator Warren Rudman would be appointed as a caretaker:

But there are no guarantees that Mr. Lynch would pick a Democrat: New Hampshire prizes its political independence, and the governor is a moderate. Some analysts say he could turn to a well-regarded Republican — former Senator Warren Rudman has been mentioned — to serve as a kind of caretaker to fill out the remainder of Mr. Gregg’s term, which expires at the end of 2010.

This might work, as Rudman is fairly clearly a vote against cloture almost all the time, and he won’t run in 2010.

Diamond Aero-Diesel Gets Euro Certification

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I have been following the story of Thielert’s insolvency, and Diamond Aircraft has been hit particularly hard by the loss of their engines, which were a major part of their business strategy.

Diamond has now certified Austro AE 300 turbo-diesel, which it has been feverishly working on since Thielerts troubles, which means that it can start shipping aircraft with the highly efficient, and perhaps more importantly, jet fuel compatible, engines shortly.

They still need type certificates, but that should be relatively straightforward, as their engine uses the same Mercedes block as the Thielert, and so fit and mounting should be very similar.

Russian Defense Recapitalization Threatened by Financial Meltdown

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Vladimir Putin committed to major new spending on the Russian military. He has committed to 1 trillion rubles ($30.5 b) on new procurement, upgrades, and R&D.(paid subscription required)

Notwithstanding this spending, the Russian defense industry is still not in great shape, as commercial credit has largely dried up:

Putin met with industry leaders recently at Tactical Missile Corp. headquarters in Korolev, a Moscow suburb. The package unveiled by Putin includes the injection of 35 billion rubles in additional capitalization and the allocation of 100 billion rubles as a state guarantee on bank loans. Along with the loan guarantee, there is a further 15 billion rubles to compensate for high interest rates.

(emphasis mine)

Additionally, there is likely to be further rationalization (mergers and tighter integration) among manufacturers, as is evidenced by the continuing submergence of MiG in United Aircraft Corp. (UAC) with Sukhoi firmly in the lead.

In terms of likely purchases, the Russian air force is looking for upgraded Su-27s (SU-35 shown) in the near term, and the Indo-Russian PAK-FA in the long term.

Further Delays in Indian MMRCA Competition

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There is still no word on when when field trials will start for the Medium Multi-Role Combat Aircraft fighter competition. (paid subscription required)

One of the issues that complicates this is mother nature: If the demonstrations do not finish by July, then they run into delays as a consequence of the monsoon season.

Current competitors for the medium fighter are the, “Boeing F/A-18, Lockheed Martin F-16, Eurofighter Typhoon, Mikoyan MiG-35, Saab Gripen, and Dassault Rafale.”

It’s intended to replace their fleets of older model MiG-21s, which are at end of life.

My guess would be the the MiG-35 has the inside track, the Indian AF already has operational experience with the MiG-29, though the least expensive over the life time is very likely the Gripen.

It’s unclear to me whether SAAB is submitting the base Gripen, or the improved Gripen NG.

Well, Paint My Ass Purple, and Call Me Shirley

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OK, so I lost a memory stick that I’ve had for about 1¼years, Sandisk USB 2 Micro Cruzer 1Gb Pendrive U3.

It’s no big deal, really. I had all the data elsewhere, so I pick up a new drive, the 4GB variant for about $12 at the Radio Shack®, which is a lot cheaper than the $50 or so that I recall paying for the 1GB version.

Wouldn’t you know it, the next day, I find my old drive.

Actually, I didn’t find it, Sharon* did, in the dryer.

It had gone through the wash, AND the dryer, and it looked little worse for the wear. The printing on the case was a bit worn, but that could have happened over the past 15 months sitting in my pocket.

So, I leave it out and open for a day to ensure full drying, and I put it in my computer, and ALL THE DATA IS THERE.

Needless to say, this product has my seal of approval.

*Love of my life, light of the cosmos, she who must be obeyed, my wife.

People Make a Living At This???

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Let me rephrase: Really Stupid People Make a Living At This???

Because it appears that Pajamas Media, a sort of Blogads for right wingers blew through its venture capital, and has told its bloggers that it is dumping them, because the next big thing is, “Internet television called Pajamas TV,” for which even stupider people will actually pay to listen to right wingers with faces made for radio.

The soon-to-be former members of Pajamas Media, such as Jeff G. of Protein Wisdom, are in full whine:

What this means is that as of April 1, I am officially out of work. So save going to a pay model, this site will likely have to shut down.

Small price to pay for helping PJM pick up an audience and credibility during its “formative years.”

I do this blog mostly to make regular notes for my annual newsletter (it’s about 5% of the content), and I’ve gotten a bit of money from Google ads, a $107.24 check in October, and I’ve been blogging since May, 2007.

The idea that someone could make a living at this is just a complete mind f%$#.

H/T TBogg, for letting me know that, “Nobody could have anticipated that Pajamas Media would sucker the rubes and then destroy teh intertubes.”

Republicans Formally Come Out in Favor of Syphilis

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Mark Steyn supports Syphilis and other STDs because they might prevent people from having sex outside of wedlock:

Nancy Pelosi, Speaker of the House, is on TV explaining the (at this point the congregation shall fall to its knees and prostrate itself) “stimulus.” “How,” asks the lady from CBS, “does $335 million in STD prevention stimulate the economy?”

“I’ll tell you how,” says Speaker Pelosi. “I’m a big believer in prevention. And we have, er… there is a part of the bill on the House side that is about prevention. It’s about it being less expensive to the states to do these measures.”

Makes a lot of sense. If we have more STD prevention, it will be safer for loose women to go into bars and pick up feckless men, thus stimulating the critical beer and nuts and jukebox industries. To do this, we need trillion-dollar deficits, which our children and grandchildren will have to pay off, but, with sufficient investment in prevention measures, there won’t be any children or grandchildren, so there’s that problem solved.

I really cannot read this as anything but an endorsement of STDs, and this is not The Onion.

H/t Booman Tribune.