Author: Matthew G. Saroff

Economics Update

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It’s a heavy news day. I know this because I was not sure whether or not consumer confidence falling to its lowest level ever recorded, and the Conference Board’s sentiment index began in 1967.

Economists were predicting an increase from 44.9 to 45.5.

This probably explains why the International Council of Shopping Centers says that this has been the weakest holiday sales season since 1970.

Well, the Standard & Poor’s/Case-Shiller home price index fell 18% from October 2007 to October 2008, so the index is now at March 2004 levels, and by all indications, it’s still headed down.

Will the last realtor please turn off the lights?

Finally, in 4th place in the competition for which story should be the lede, we have
assets in mutual funds falling 3% in November, they are down 22.7% since December 2007.

What we are seeing here is a slow run on mutual funds by investors who are fleeing to quality.

Banks are fleeing to quality too, with banks cutting lending this year by 55%, to the lowest level since 1994.

In currency, Russia has devalued the ruble again, it’s now down about 18.6% from its peak.

The dollar fell again against the Yen and Euro, though it rose against the Pound, largely because the UK appears to be in worse shape than the US.

I wonder if this might give additional impetus for the UK to move from the Pound to the Euro.

The fall of both the USD and the Pound are largely because of “quantitative easing”, otherwise called printing money, by the central banks.

One bit of financial news that surprises me is that the
Israeli Shekel just had it’s biggest pop vs. the dollar in 10 years, and this was despite the fact that the central bank cut its benchmark rate by 75 basis points (¾%).

The claim is that it’s year end repatriation of profits that drove the Shekel up, but my guess is that it’s people who think that the current fighting will calm things down in the short term (3-18 months) and are trying to flip the currency for a quick buck.

In energy, both oil and retail gasoline were down today, and this picture is from today. (Click picture for link)

Why Yes, We Are A Bunch of Racists

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Today’s Republican party, where not only does a candidate for chairman of the RNC, Chip Saltsman, release a holiday Christmas CD with “Barack the Magic Negro” on it, but it now appears that doing so help his bid to succeed current Republican National Committee Chairman Mike Duncan.

Of course, former Ohio Secretary of State, Ken Blackwell, decided to weigh in in favor of Mr Saltsman, cementing his role as the biggest Tom of the century in an attempt to use this in his bid to become RNC chair.

When this crap is so toxic that Michael Steele (also looking for the chair) is keeping his head down, Ken Blackwell is bringing Tomfoolery to a new level.

Gaza Upate

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First, something we can all agree on, that this clusterf&$% is Bush and Condi’s gift to the middle east.

You remember, first they insisted on elections in the territories, and then when Hamas won, because the PA is corrupt and incompetent at governing even by the standards of the Arab world, they proceeded to encourage Israel and the PLO to go after Hamas, which led to Hamas kicking the PLO out of Gaza, because the PLO is the worst army ever.

In breaking news, it looks like there may be a 48 hour cease fire, though both sides are currently acknowledging any negotiations.

Also I have one report of a ground offensive starting, it’s an eyewitness account, but it has since been corrected to say that tanks are shelling from over the Green Line.

JEEBUS

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The only governor to give Sarah Palin a run for her money in the “just plain nuts” department Rod Blagojevich has named former Illinois AG Roland Burris to replace Barack Obama.

Given that the Senate Dems have already said they won’t seat him, it guts ugly, particularly since the precedent of Adam Clayton Powell indicates that they may have to.

Furthermore, we have reports on him, and we know that he is 71, that he is the first Black man to be elected to state wide office in Illinois, that it appears that he is not interested in running for reelection in 2010, and he has excoriated Blago:

Burris has also condemned Blagojevich and supported his removal,and that he’s said he would not seek another term.”

The Illinois secretary of state is trying to reject the paperwork, though the legality of that is unclear.

The initial reports on Burris is that he’s squeaky clean, and he ran against, and lost to, Blagojevich in the primary. See here:

My home state’s culture of political corruption is well documented. Roland Burris managed to build a career in politics in this state without falling into that muck. He is, to the best of everyone’s knowledge, squeaky clean, and he’s highly respected. He’s 71 years old, so I wonder if he intends to serve as a caretaker. But he’s an honorable guy, well liked by people across the state in both parties. It’s a stroke of brilliance by Blagojevich in my opinion.”

A Photograph of Him in a Mariachi Outfit?

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Peter S. Goodman and Gretchen Morgenson have what might be the single most entertaining account of bank mismanagement of the year.

They recount the story of WaMu, and start by quoting former CEO Kerry K. Killinger”

We hope to do to this industry what Wal-Mart did to theirs, Starbucks did to theirs, Costco did to theirs and Lowe’s-Home Depot did to their industry. And I think if we’ve done our job, five years from now you’re not going to call us a bank.

Well, he’s right, it’s 5 years later, and nobody is calling Washington Mutual a bank anymore.

But it gets even better when they interview a former supervisor at a WaMu mortgage processing center, John D. Parsons, who is now in prison on drug charges:

…..

Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer.

Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved.

(emphasis mine)

Yog-Sothoth’s Yam Yogurt, this is eerily reminiscent of the Tulip Mania of 1637.

H/T Wallstreetjackass for noticing this bit of absurdity.

The Post-Soviet Politicians are Dancing to a Non-Existent Tune

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I used to think that John Paul II’s jihad against the church working for the poor, going so far as to expel priests who were causing right wing despots grief, which pretty much repudiated 1800 years of church history was an anomaly.

JP2 clearly hated the Soviets, he hated communism, and it left him with an antipathy to anti-poverty action by the Roman Catholic Church.

I had kind of hoped that other folks who objected to the excesses of Communism, and those excesses are legion, had found perspective if they had remained in leadership positions.

Now, in the middle of the greatest economic crisis in 3 generations, we are seeing leaders who grew up in former communist nations trying to turn to Hoovernomics, because they have a visceral revulsion to anything that remotely looks like economic management by the state.

It doesn’t matter if the most successful model in fixing this has been the Swedish model, state capitalization and take over followed by sale when the conference is over, it’s just too pink for them.

In the first case, we have Czech President Vaclav Klaus, who appears to be trying his level best to destroy any coherent EU response to the economic crisis:

Klaus, an admirer of Milton Friedman and Margaret Thatcher, says “excessive state intervention” and “irresponsible increases of state expenditures” are behind the global financial crisis, according to an October commentary he wrote for Mlada Fronta Dnes newspaper.

Hoovernomics as driven by what are now archaic anti-Soviet and anti-Communists.

And let us not forget Angela Merkel, who is content to (mis)manage the largest economy in the EU, and also continues to go the Hoovernomics route:

With battle lines sharpening, the German government appears determined to resist calls to spend an additional €40 billion to fight its way out of the recession, according to officials attending a meeting in the Chancellery in the past week.

It appears that in the case of Merkel, there has been extensive lobbying from what amounts to the German Chamber of Commerce to lower taxes, but that is were she wanted to be in the first place, until other EU members dope slapped some sense into her.

I’m wondering how true this is of a generation that lived through a revolution.

If the US founding fathers were the exception, we were very, very lucky.

Gaza Update

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The here lede is that Israel is calling up reservists, and armored units are massing on the border.

I would assume that infantry units are massing as well, as sending unsupported armor into an urban combat situation is suicidally stupid.

In terms of tactics and technoligy (I really wish that the War Nerd were not on vacation), we have a report that IDF chief of staff Lt. Gen. Gabi Ashkenazi demanded a clear exit strategy during the planning of this action.

It shows that he’s rather a bit more together than the flyboy who screwed up in Lebanon in 2006.

It also appears that Israel navy is heavily involved too, though it’s unclear if they are shelling, enforcing a blockade, or using the ships as bases for UAV flights. (My guess would be all three)

We are also getting some reports on the use of sophisticated multi-spectral sensors to locate targets. (The top image is post strike imagery of an underground missile launch site, the bottom image is pre-strike imagery of a Hamas military post)

We also have a “News” story from Haaretz making rather a big deal of the fact that this operation has been actively planned for months:

Sources in the defense establishment said Defense Minister Ehud Barak instructed the Israel Defense Forces to prepare for the operation over six months ago, even as Israel was beginning to negotiate a ceasefire agreement with Hamas. According to the sources, Barak maintained that although the lull would allow Hamas to prepare for a showdown with Israel, the Israeli army needed time to prepare, as well.

It’s not really news. It’s the job of the military to plan for contingencies, and to keep their mouth shut about it.

It would be news if the Defense minister and the Chief of Staff weren’t planning for a breakdown in negotiations. It’s their job.

Politically, it appears that the Israeli right wing is seeing the immediate benefit of combat operations, with Israel Beiteinu, which advocates redrawing the borders of Israel so that predominantly Arab areas of Israel are included in a Palestinian entity (I call it ethnic cleansing, but you are moving lines, not people so pedants may disagree), picking up support.

I imagine that the same thing is happening on the Palestinian side.

Finally, as to the report in the comments (BTW, go to the commenter’s blog, it’s cool) that Israel sent SMS warnings to warn civilians living near Gaza that they needed to get out and keep their heads down, I now have two links, one from bazonline.ch (Google translation that reads a bit like a Salvadore Dali paintint) and one from The Forward, though the latter says that it’s voice mails:

Late Saturday, thousands of Gazans received Arabic-language voice mails on their cell phones from the Israel Defense Forces, urging them to leave homes where militants might have stashed weapons.

While identifying the appropriate recipients of message is involved, it’s by no means impossible, particularly when the basic directory information should be available to Israeli telcos.

Note that this sort of action has been policy, and documented by independent sources going back to the 1948 war for independence.

One of the things in the coverage that has surprised me is that Guardian Columnist Seth Freedman has come down fairly hard on Hamas.

I reviewed his articles, and his beat seems to be largely Israel, Palestine, and the NGOs therein, and he generally hews fairly close to the Guardian editorial line, which has been unsympathetic to Israel for about 30 years.

Economics Update

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It appears that credit is still easing, with the 3 month LIBOR (London interbank offered rates) falling.

The spread between LIBOR and Treasuries is still awful, but it’s a bit better, largely because the Treasuries are effectively 0% right now.

On the other hand, the Chicago Federal Reserve Bank’s Midwest factory index dropped to the lowest level in 12 years.

I’m a mechanical engineer, so I believe that manufacturing and services, and not banking, are the core activities of the economy, so I tend to believe the factory index more than LIBOR spreads.

In international currencies, Pound hit an all time low vs the Euro £0.9798:€1.000, nearly parity.

The experts are saying that they believe that the Pound will gain vs the Euro in the coming because the Bank of England won’t be lowering rates much more.

This makes sense. The BOE is already bumping up against zero interest rates.

The US dollar is down too, largely on concerns that the Gaza conflict will drive up oil prices and because the Fed’s zero target lending rate makes it a less attractive currency.

The conflict in Gaza has also driven oil up, though retail gasoline is near a 5-year low at $1.619/gal.

Yowza, I gots to buy me a Hummer!

More Pushback on Caroline Kennedy

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Basically, her critics are starting to pile on, and it comes down to not voting Democratic party primaries more often than not, her refusal to endorse whichever Dem opposes Bloomberg, not making donations to the party at the state level, her unwillingness to disclose financial data, her unwillingness to talk to the press, and the increasing sense that Governor Patterson is completely unimpressed with her tactics regarding him.

Of course, she has finally done an interview, and it’s been pretty widely panned, you know.

In fairness, I think that her statement that, “Have you guys ever thought about writing for, like, a woman’s magazine or something?” was justified. The entire bit with the interviewer asking her, “Could you, for the sake of storytelling, could you tell us a little bit about that moment, like, where you were, what you said to him about your decision, how that played out?” was trivial bullsh%$.

That being said, it pissed off the press, because it was not sufficiently deferential.

She increasingly sounds to me like the second coming of Kathleen Kennedy Townsend, who was the worst political candidate in the history of…well…history.

Tom Friedman, Suck on This: Part II

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The Buksbaum family, one of whose members is Tom Friedman’s wife, has been ejected from the management of General Growth Properties Inc., after financial irregularities were discovered.

Basically, what happened here is that GGP fueled its growth by leveraging itself up to its eyeballs:

Rather than apply for bank loans, General Growth began taking out short-term mortgages on its malls. As the mortgages came due, the company would replace them with even larger mortgages to provide cash for additional acquisitions.

This is what happens when you let the finance folks drive your business, rather than the other way around….It’s also why people wonder how different Bernie Madoff was from business as usual in the US financial system.

Will Russia Buy the Crimea from Ukraine?

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This is all pure speculation on my part, and my record on predictions is only marginally better than that of the Detroit Lions with regards to football, but I think that there is a distinct possibility that this might happen.

We have a number of developments going on simultaneously, with Medvedev and Gazprom playing hardball on a $2.1 billion debt and warning of a cutoff of gas if there is no resolution.

Then we have Edward Hugh’s amusingly named essay, “As The Politicians Battle It Out Ukraine’s Economy Tunnels South In Search Of Australia,” (H/T, Paul Krugman Blog for the link) which provides us with the included chart pr0n.*

You see industrial production falling by nearly 25%, and inflation and the central banks both topping 20%.

Simply put, this is an economic meltdown that starts looking like something out of Mad Max.

When you juxtapose this with reports that Russian PM Vladimir Putin Ukrainian PM Yulia Timoshenko are holding talks to resolve the issue, it appears to me that the Ukrainians have very little leverage.

About the only thing that I think that the Ukrainians can offer Russia is the Crimea, which is already primarily a Russian speaking province, and had been a part Russia until Khrushchev gifted it to Ukraine in 1954.

I’m not sure whether a “sale” of the Crimea to Russia would involve an actual negotiated transfer of territory. We could see extensions regarding treaty rights for the Russian naval base at Sevastopol, increased autonomy for the region, and perhaps agreements to protect the “heritage” of the province, which would mean that the Russian speaking nature of the the Crimea would be preserved.

In the long run though, a full separation of the Crimea from the Ukraine might be beneficial for both sides. For the Russians, the benefits are obvious, the protection of ethnic Russians and national pride, and for the Ukrainians, it creates a less ethnically diverse state, which means that you will likely have real issues of governance, as opposed to the current paralysis which is driven by the Russian minority being largely disengaged.

*I tend to disagree with Hugh’s thesis that demographic issues are at the root of much of this problem. While the Ukrainian population has fallen by a remarkable 11% since 1992, and with the death rate exceeding the birth rate by over 50%, I do not believe that a growing population is necessary for economic well-being.†
†Case in point what happened in Europe following the Black Death, which had a with a mortality rate of around 50%. There was a marked increase in social mobility and wages for the average worker, largely at the expense of the landholders and other members of the economic elite, despite largely ineffective anti-labor laws that were instituted. The lesson here is that if population falls, the total GDP may fall, it certainly did during the black death, but per capita GDP went up, and if you can pry this out of the hands of the economic elites, life can be better for everyone.

Your Daily Dose of Batsh%$ Insane (Israel/Palestine Edition)

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In the process of googling things about the blow-up in Gaza, I came across an opinion piece in the the Grauniad* that I found rather interesting by Seth Freedman.

Well before quoting someone’s OP/Ed, I always check out their other articles, and/or Wiki them, just to make sure that they are not raving moonbats.

It is a policy that I wholeheartedly recommend.

In any case, it turns out that Mr. Freedman is not a raving moonbat, his opinions on the conflict seem to be pretty much in line with the Guardian‘s editorial stance.

He is “in country”, and writes rather a lot about what is going on there, and his “beat” seems to involve a lot of writing about what is going on with the various NGOs out there.

So, I’m perusing his articles, and I come across one that he wrote just over a week ago, “Aid workers reveal their deep malaise in ‘western-style gym’ battle,” and I gave it a read.

It appears that there is a mailing list dedicated to discussing issues confronting employees of NGOs in the territories, and someone posted what should have been an innocuous question, “Is there a proper, western-style gym in Ramallah? If so, where is it?

The response from a sane human being should be some asking what the person wants from the gym. “Western-style,” could mean fancy machines, or mixed gender, or any other number of options.

But that’s not what happened.

Instead, someone suggested that the request was racist, “You forgot to add: ‘where only white people go,’ so it can’t be ‘proper’ if not ‘western-style’? If you miss western styles that much, get your ass out of here and keep it in your western world.“

From that point, it devolved in a flame war lasting at least a week.

Too many people in this world take themselves way too seriously.

In any case, it is a very amusing read.

*According to the Wiki, The Guardian, formerly the Manchester Guardian in the UK. It’s nicknamed the Grauniad because of its penchant for typographical errors, “The nickname The Grauniad for the paper originated with the satirical magazine Private Eye. It came about because of its reputation for frequent and sometimes unintentionally amusing typographical errors, hence the popular myth that the paper once misspelled its own name on the page one masthead as The Gaurdian, though many recall the more inventive The Grauniad.”

Brazil to Buy French Assistance on Nuke Boat

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It’s a part of a $12 billion purchase by Brazil

Brazil on Dec. 23 signed contracts worth $12 billion to buy 50 military transport helicopters and five submarines from France.

The submarine deal involves the purchase of four conventionally powered Scorpene submarines, and the construction of a nuclear-powered submarine to be built with French cooperation.

It’s unclear to me what “French Cooperation” means, though it appears that the nuclear reactor would be a wholly Brazilian endeavor.

Like This is a Surprise

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Well, defence ministry spokesman Huang Xueping has announced that China is considering building an aircraft carrier.

This is really no surprise. There have been indications that China was considering building a carrier for some time, as I have noted.

It will be news when China actually starts formally drawing up requirements, and again when it starts cutting metal or negotiating a purchase, but this is no surprise.

Your Defense Procurement Dollars at Work

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The USAF has announced a “restructuring” of the Transformational Satellite Communications System which will delay the launch of the first satellite from 2013 to 2019.

It’s supposed to replace MILSTAR, and it is suppose to have 100 times the bandwidth, and from what I know of the “systems of systems” that is supposed to be the new networked military, this capability is very much a part of it.

And now it’s been delayed 6 years.

Whiskey Tango Foxtrot?