Author: Matthew G. Saroff

Money Market Funds Freeze

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This is why money is fleeing into treasuries because stuff that is supposed to be as good as cash is freexing up, and people cannot get their money.

So we had a Bank of New York Mellon Corp institutional money market fund just fell below $1/share, meaning you can’t get all your money out, and the $15 billion Putnam Prime Money Market Fund money market fund just shut down, because of “redemption pressures”, i.e. a run on the bank.

If that weren’t scary enough, The Reserve’s Primary Fund is also below par, and includes retail as well as institutional investors:

Reserve Primary has both institutional and retail accounts. “This appears to be the first case where a retail investor will lose money in a money market fund.” said Peter Crane, president of market research firm Crane Data in Westborough, Mass., though he called the situation “an anomaly.”

My investment advice: Buy stocks in safes, because people won’t be trusting banks much longer.

Got Schwag?

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Went to a Career Fair down in Greenbelt today.

I really hate these things, but I went, handed out my resume, and got Schwag, free handouts, from potential employers, mostly pens, though a TLA (three letter acronym) government agency had a combined tape measure, level, and pen on a belt clip.

Now Palin is Now Plagiarizing Her Lies

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Remember when political operatives maintained that Sarah Palin’s teleprompter broke and that she had to “wing it”?

Remember, that reports watching the speech, who were in a position to see the teleprompter, and saw that she was reading from a fully working teleprompter, and they could actually read it as she was talking, and that she followed the directions, such as adding emphasis at underlined texts, and pausing when the instruction “pause” was there.

It appears that someone was feeding Neanderbloggers and Drudge a load of crap

Well, now, apparently having run out of her own lies, Palin now feels compelled to use someone else’s lies:

At a fundraiser in Canton, Ohio, this evening, Alaska Gov. Sarah Palin had an interesting description of her speech to the Republican convention.

“There Ohio was right out in front, right in front of me,” Palin said. “The teleprompter got messed up, I couldn’t follow it, and I just decided I’d just talk to the people in front of me. It was Ohio.”

It really is pathetic when a Republican runs out of lies to tell.

On the bright side for Ms. Palin, I do believe that it is a sign of the coming “Rapture”, which she has been waiting for with baited breath.

It’s Definitely the Weird Season

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You may recall Vito Fossella, who dropped out of his race for reelection after he was busted for driving drunk from his wife to his mistress, both of whom have borne him children.

Well, the Republicans selected Francis H. Powers, whose son Francis M. Powers was running against him on the Libertarian ticket.

And then Francis H. Powers died.

Well, it now looks like Vito Fossella is considering re-entering the race.

The political gods are smoking some serious dope in Staten Island.

Sarah Palin Hates Rape Victims

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In a new twist of Troopergate, the McCain campaign is saying that Palin fired public safety commissioner Walt Monegan because he was “insubordinate” over budget issues:

On May 7 of this year, Randy Ruaro, the governor’s deputy chief of staff, complained in an e-mail to Rehfeld, the budget director, that Monegan’s department “is constantly going off the reservation.”

“The last straw” leading up to Monegan’s firing, Van Flein wrote, was Monegan’s planned trip to Washington, D.C., to seek funding for a new, multimillion-dollar sexual assault initiative the governor hadn’t yet approved.

So, not only did she sign off regarding charging rape victims for rape kits, she is now saying that fired her public security director because he was looking for money to help rape victims.

Remember, Alaska has the highest per capita rape rate in the nation, and it appears that Palin is determined to punish the victims.

This is repugnant.

A Very Good Read on the Economy

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Titled The End of Leverage. Money quote:

An enormous hoax has been perpetrated on global financial markets during the past 10 years. An American economy based on opening containers from China and selling the contents at Wal-Mart, or trading houses back and forth, provides scant profitability. Where the underlying profitability of the American economy was poor, financial engineering managed to transform thin profits into apparently fat ones through the magic of leverage.

This paragraph illustrates why I am such a bear.

In 1929, the US was an energy exporter, and the most robust manufacturer in the world.

Today, it’s all arbitrage with other people’s money….We have nothing left to fall back on.

Go read it.

Borat Economics

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Felix Salmon of Condé Nast notes:

It’s not just hedge funds, either, which could end up being the vector by which crisis is spread. It could be a big insurance company, or it could be a series of failures of small and medium-sized banks. Or it could come out of left field entirely: the “shadow banking system” is now so big and so global that for all we know a series of bad decisions by a mid-level technocrat in Kazakhstan could precipitate cataclysm across America and the world.

(emphasis mine)
I would note that Borat Sagdiyev hails from, “Glorious Nation of Kazakhstan”.

It does raise the point that when markets are deregulated to the degree they are, people will stomp all over the line in an attempt to maximize short term gain, and this raises the possibility that minor actions will have major effects on the economy.

That’s why we need regulation in the first place. Enlightened self interest absent common sense regulation, gives way to unenlightened, and uninformed self interest, which invariably becomes bubbles and fraud.

H/T Kevin Drum for the catch.

Breathalyzer Firm Must Turn Over Source Code

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In Arizona, Pima County Superior Court Judge Deborah Bernin has told breathalyzer manufacturer CMI to turn over the source code for their devices to the defendants.

This is more than just a legal ploy to get out of a drunk driving charge,* there actually appear to be some reliability issues with the device in question:

Allegedly inconsistent, odd or inexplicable results involving the Intoxilyzer 8000 have led to legal action in six states (Florida, Louisiana, Massachusetts, Minnesota, Tennessee and New Jersey as well as Arizona). A Florida judge also ordered CMI to hand over the source code running the controversial devices but the firm has refused to comply, earning it $1.2m in fines as a result.

I support this ruling, even without the history of problems. Having a closed box that just says, “guilty” is not acceptable.

*Full disclosure, my mom was killed by a drunk driver when I was 14.

Finally!

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It looks like the Obama campaign has concluded that “behold my incredible awsomeness” is not a winning strategy, so they have reversed themselves, and they are telling Democrats that they should “get serious” about contributing money to “independent” groups to attack McCain.

Nice that they finally got a clue that they need a a way to point out the many problems that McCain has with his temperament, ethics, philosophy, intellect, and health.

They are right to go after McCain’s character, after John Sidney McCain has no character, it’s just a pity that they are this late to the game.

Ukrainian Government Coalition Collapses

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It appears that President Viktor Yushchenko and Prime Minister Yulia Tymoshenko* have a major difference of opinion regarding foreign policy.

It appears Yushchenko is natavist Ukrainian nationalist bellicose nut, and Tymoshenko merely hates the Russians with a white hot passion, so she doesn’t want to start shooting at Russians today, so the President thinks the PM is some sort of traitor.

*Why can’t news happen in places where I can spell the damn names.

Stupid Lawsuit of the Day

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Merrill Lynch shareholders suing, because they think that they did not get enough from Bank of America to buy them.

If BoA shareholders sued, they would have a case, because Merril shows every sign of being like Countrywide, where every few days/weeks, more unpleaseantness will be found as rocks are turned over.

BoA bought itself another money pit.

I approve of the right to litigate, but this is a stupid lawsuit.

AIG Nationalized

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The FRB: Press Release:

The Federal Reserve Board on Tuesday, with the full support of the Treasury Department, authorized the Federal Reserve Bank of New York to lend up to $85 billion to the American International Group (AIG) under section 13(3) of the Federal Reserve Act. The secured loan has terms and conditions designed to protect the interests of the U.S. government and taxpayers.

The Board determined that, in current circumstances, a disorderly failure of AIG could add to already significant levels of financial market fragility and lead to substantially higher borrowing costs, reduced household wealth, and materially weaker economic performance.

Fragility, huh? If this economy had any more of a glass jaw, it could shave with Windex®.

BTW, the following is a lie:

The interests of taxpayers are protected by key terms of the loan. The loan is collateralized by all the assets of AIG, and of its primary non-regulated subsidiaries. These assets include the stock of substantially all of the regulated subsidiaries. The loan is expected to be repaid from the proceeds of the sale of the firm’s assets. The U.S. government will receive a 79.9 percent equity interest in AIG and has the right to veto the payment of dividends to common and preferred shareholders.

The Fed is treating this as a liquidity problem but in fact, it’s an insolvency problem. There is not enough assets to pay back the Fed.

Economics Update

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You know that there is a problem, when I open with ratings downgrades.

We have S&P downgrading Washington Mutual to junk status, and even more significantly, AIG, the largest insurance company in the world has been downgraded by Fitch Ratings to A from AA-, and S&P and Moody’s downgraded them too, from to A- from AA- for S&P, and to to A2 from Aa3 for Moody’s.

This is ugly, and it is not surprising that the costs of corporate bond insurance has skyrocketed on what is called “counterparty risk” by the MBA types, and the belief that you are dealing with a bunch of lying bastards foo the rest of us.

It’s the same reason that the costs of overnight borrowing has gone up too, with the LIBOR more than doubling from 3.10625% to 6.43750%.

No one knows when the next shoe is going to drop, and even the additional $70 billion that the Fed dropped out of helicopters wasn’t much help.

It’s why we’re seeing Thornburg Mortgage struggle under a sudden onslaught of margin calls.

When Goldman Sachs earnings 70%, even though they hedged against the real estate crash, you know that no one is making money.

And at the end of all this the Fed decided to leave interest rates unchanged, which is not surprising, since they are already pushing on a string.

Meanwhile, the dollar is behaving like my cat when he gets outside in a rain squall, it really did not move, but you can see the conflict between fear driving people to dollars, and the fear of the US financial meltdown driving people away from the dollar.

We actually saw consumer prices fall, driven by falling energy prices (oil is now about $91.15/bbl on demand concerns from the financial meltdown)

Gasoline still went up, driven by the came hurricane refinery concerns that have driven prices over the past 4 or so days.

John Sidney McCain III Invented the BlackBerry

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No, this is not a report from Declan “Draw By Crayon Libertarian” McCullagh, this is an actual claim from the McCain campaign:

Asked what work John McCain did as chairman of the Senate Commerce Committee that helped him understand the financial markets, the candidate’s top economic adviser wielded visual evidence: his BlackBerry.

“He did this,” Douglas Holtz-Eakin told reporters this morning, holding up his BlackBerry. “Telecommunications of the United States is a premier innovation in the past 15 years, comes right through the Commerce Committee. So you’re looking at the miracle John McCain helped create and that’s what he did.”

It would be less laughable if he had not become chair of the commerce committee until 1997, by which point, RIM had been in existence for seven years.