Tuesday, September 30, 2008

Current Bailout, and why it's bad...

Please read the link to John Hussman's post about the recent "failed" legislation that did not pass in the House. It's a simple as this, really...please read the link below.

The bailout will NOT prevent the recession. It's an election year, which prevents the general public from getting real information. If you want to rise above the masses and understand the bailout in its original form, click the links below. The package puts the taxpayers on the hook, and absolutely encourages future "irresponsible behavior". If you don't believe me, or Dr. Hussman, there's a link to lots of economists that signed a petition against the bailout.

The proposal will not solve anything. Taxpayers should not be on the hook to bail out debt holders in a company's capital structure. From a relative perspective, our generation has lived on credit, and now free markets are telling us we can't live like this going forward. If you can't afford a house, you shouldn't be allowed to buy one. It's that simple. Local banks took regional risk by originating loans that were bogus, and took this regional, localized risk and transformed it into a systemic risk. We are all now caught in the downdraft; price discovery of distressed assets is painful, disruptive but necessary. It's like an alcoholic going through detox.

Link to John Hussman's Post

Link to Economists Petition Against Bailout Presented in House

Saturday, September 27, 2008

M.A.D. and The Man who Prevented WW3

Here is a link to an article printed in Time magazine about a man that apparently had the "rocks" to stand up to group think and say "maybe we aren't being attacked by the U.S." If you are under the age of 30, you may not remember M.A.D. but this man made sure we never had to test the theory out.

The sad part about this story, is the guy did the right thing, and all he did was go pay for it. Typical tragic flawed protagonist, seeking justice in an unjust world.

Have a read, it's a good reminder that doing the right thing isn't always easy. I'm glad he made the right decision, since it allowed me to meet the love of my life and allow our daughter to be born.

Link to Stanislav Petrov here

Thursday, September 18, 2008

The Ryder Cup 2008 is Here

The Ryder Cup is here...this year it's at Valhalla. Hopefully the American team can put up a fight, and I think Zinger's strategy is a good one. Let's face it, since the 1999 win at Brookline, it's been a European drubbing, so maybe hungry rookies can handle the pressure of a tournament that stresses team formats. The best is alternate shot, where you and your teammate have to hit alternate shots. It's a great format.

Let's go USA...and for heaven's sake, somebody shut Sergio down. 15 of 20 possible points in 4 Cups is insane.

Repost of Leverage Related Entries

Below is the link to the posts I've previously entered related to subprime and the credit bubbles. They are timely, and getting lots of hits these days.

Morgan Stanley looks like they will not make it by end of weekend.

Posts Related to Housing, Banking, and the Credit Bubbles

AIG is the latest headline in the news, here is a link that explains the part of AIG's business that really got them into this mess, which was Credit Default Swaps (CDS) that AIG wrote for securities related to the structured finance products (collateralized debt obligations, etc.) that Wall Street created and traded. It's written by a personal friend and he's wicked smart, but does a great job of assessing the true risk of this "insurance" on these products. It's insurance, plain and simple that AIG wrote, and the worst case scenario has played out. The expected value of the "losses" that AIG thought could never occur, as remote as they seemed at the time, have come true. Their model is broken.

Also, below I've posted some links to the smart money, that actually have been calling the markets up to this point. It's in your best interest to check out, but they are highly technical.

John Hussman

Safe Haven Capital Preservation

Nouriel Roubini -- Go to his RGE webpage

The Float

GMO

Epoch Investments

Wednesday, September 17, 2008

Team Pootie comes Roaring Back in Week 2

Team Pootie was down 116.5 to 57 going into Monday night's epic game between the Iggles and Dallas. I had D-Mac, Marion Barber and TO, and needed 59 points to win my game. I was 0-1 already, and this was not looking good, needing 20 points from each player.

Fred Taylor had screwed me again, Vikings D had let Peyton back into the game after a great 1st half of defense.

Team Pootie pulled it out. It was a confusing game to watch, but fun, since every possesion meant something to my fantasy football league game. D-Mac looks healthy again, and actually should have had two touchdowns ala Reggie Brown and DeSean Jackson. I hope Dawkins took care of that situation in the locker room this week. But if the exchange gets done between Westbrook and D-Mac, we send Tony, TO and Jerry friggin Jones home and we're the favorites.

Week 3 should be a close one. Playing the 0-2 guy in the division, so he's due, and I put Sheffler on the team and picked up Seattle D this week against the Rams.

Tuesday, September 16, 2008

Telomerase Enzyme and Aging

The enzyme I used to study in grad school is in the news...I blogged about it here. It's a good read, but as I recall, the enzyme is potentially multi-meric, so turning on the enzyme might take a multi-step approach.

Would you really want to live to 200?

Fed Might Cut Rates? -- Fed Funds Futures Now Price in Rate Cut

The two curves below show the implied Fed Funds rate from the futures market from June 18th and Sept. 15. Stunning. The rate is now at 2.00%, but with the pressure that financials have put on the system, most hope that they stay pat, but another 25 basis point cut is being priced in with about 32% chance today, and an 88% chance of 25 basis point cut in November. Rick Santelli on Friday actually noted that from the trading floor in Chicago, traders had already begun to price the change in sentiment in as he noticed a cut was now being implied...and the VIX volatility index ( the fear index) broke through 30 again after this weekend's events.
Unbelievable stuff. But when two Wall Street icons go down, it makes sense why sentiment has changed. Most knew Lehman was going to fall due to the amount of leverage they had and the amount of level 3 assets this leverage represented, but since Merrill effectively got taken out, the domino theory was now in play. Back in the Cold War, the USSR and US fought small "theater wars" in S.E. Asia, Afghanistan, etc. US foreign policy believed it was necessary to fight Russia because of what was then thought of as the Domino theory. The Fed is now playing the same part in the current financial crisis.

Net net, Bear Stearns was "supposed" to be the only one, and the Fed's actions, vis-a-vis JP Morgan, was supposed to be the end of the credit crisis. Guess again. Whether it's the space shuttle, or financial systems, when complicated, well organized and interconnected systems fail, they fail catastrophically.

Friday, September 12, 2008

Dogtown -- Redemption

National Geographic has a special on TV that documents the sanctuary that took in the pit bulls from Michael Vick. The sanctuary (and name of the show) is called Dogtown, and it provides an illustration of how these dogs were rehabilitated and resocialized. I watched it recently, and it is a truly heartwarming story about how animals are no different than humans in that they can rise above tremendous suffering. If I were rich, I'd probably be doing something like this. I blogged about Vick's dogs before here.

If you have a chance, check the show out. I promise it will warm your heart. Thank god these dogs found peace. Their rehabilitation makes the dogs seem more humane than some of the human sh*t out there.

Official Link to Show

Official Link to Sanctuary on Show

Lehman Brothers

My bet is that the Fed will announce something by 7:00 PM this coming Sunday night re: Lehman and another large bank (possibly 2 or 3) buying the assets of Lehman. Every crisis, the Fed announced their actions on a Sunday night. If not, trading on Lehman's stock will probably be halted Monday morning.

AIG seems to be taking a hit on the issue of their credit default swaps, or CDS, business. But really at the heart of this matter is the FASB rule that states that level 3 assets must be marked to market. In the current environment, marking to market results in marking level 3 assets to virtually zero. If someone is going to step in and buy all of Lehman's Alt-A, level 3 assets, someone has to assure that their assets are worth more than zero. The current accounting rules do not allow for this, so it's a vicious cycle that ultimately looks like the Fed will again need to step in.

Log Me In -- Remote Access to Home Computer from Anywhere


This is a great, free service that you can use to access your home computer from anywhere. The service is called Log Me In (www.logmein.com) and it's tremendous. Justin told me about while in Seattle, and I now use it to check on our dog since I have a webcam hooked up to a computer at home. It's just cause I miss her during the day, and like to check in and make sure she's ok.

The simple idea is much like Window's NetMeeting, where you give control to a remote user who then can troubleshoot your computer, etc. If you want to use the free service, you go to the site from a computer at home you want to access, and create an account with Log Me In. Then you enroll the computer, and you're done. Test it out by going to another computer and you can log in much like you would when you access the computer as if you were sitting right there. Be aware though, not all corporate firewalls let you do this, but I've tested from hotels, etc. and it works. Make sure you click on the "free service," as they do auto-enroll you in fee service after 30 days. But once you sign up, just change the subscription/service level from the dashboard and you will never be charged. I've never been. I used to use Orb, which is also good, but this is much more multi-functional, in case I need to access files from home, etc.

Here's a screenshot of Katie cakes looking over our couch. We've learned that her routine is to sleep on our couch most of the day, but she begins each day flipping over our rug and throwing a pillow onto the floor. It's kind of funny to watch. (Click to enlarge)


"Our Site" -- Click and Viewing Behavior

Here is a chart that shows the number of visitors that hit the site since February this year. The reason I chose Feb is because statcounter started tracking the site as a new project in Feb '08 since I had hit my limit of 500 as a free service (www.statcounter.com)

June's traffic really picked up because I realized how to drive traffic to the website. However, I think that the blue area is the most meaningful. Over time, I have been able to drive new, unique visitors, which is everything. If you want to know the secret, email me, as it's still a work in progress, and still too early to tell. But if you are thinking about monetizing your website, it's an idea worth thinking about.

If you drill into this data above, you will see some patterns of behavior by the people who click on the site. What the data shows is that the traffic is non-existent on weekends, then builds slowly from Monday to Wednesday, then tapers again.



Two things come to mind:

1. Either people are bored as the week starts and find the site and return...

2. I blog in bursts, specifically during weekends, and post all new stuff on Sunday night. This drives traffic.

I know the motives of my behavior well, and Sunday night is when all of my pent up creativity from things I think about get "written". What I'd like to do is drive traffic with less "seasonality" if you will, so that demand is more constant. But before you can address and change a market, you have to be able to understand the behavior of it's participants. I'm the supplier, I want to understand my corresponding demanders.

It'll be interesting to see if folks start to subscribe to the Feed Burner update service or if the StumbleUpon button drives traffic higher...we'll see.

Lehman In Trouble

Here is the 1-year chart for Lehman (LEH)

Here is the 1-year chart for Lehman vs. Washington Mutual (WM) and Merrill (MER).


I blogged about this earlier.
Looks like it's a race against time. Lehman is the overlevered borrower whose house price is falling through the floor. It's the negative equity story, and unless they find a buyer for this distressed "asset", it doesn't look good. Maybe the gov't will bail these folks out too. I know some really good people over at Lehman, so this one has been tough to watch play out. It sucks that their management has mortally wounded the company. Agency issues and greed.

Tuesday, September 9, 2008

StumbleUpon -- A Marketing Pitch

One of the best ideas...highly recommended

www.stumbleupon.com

Tough Week for Team Pootie

It was a tough week for Team Pootie. Put up 103 and lost to the high points winner of the week. D-Mac threw 3 touchdowns for the team, and Marion Barber and TO got us 40 points. Dogs of the week, Vikings Defense almost laid an egg, Aaron Rodgers, bite me.

Being a fantasy football manager is a lot like being a portfolio/asset manager. It's a long season, so I'm managing for the long run, but week to week is tough. You can think of each "position" (QB, RB, WR, etc.) as an asset class, and I'm looking for uncorrelated assets that have high returns and low volatility to generate consistent, high points through diversification across the entire portfolio. Specifically, in the short run, I'm looking to "diversify" my risk concentrated with the Dallas Cowboys, and I'd like to gain more exposure to a better Defense. Simply put, Pootie Tang needs to man up and get some players.

Sunday, September 7, 2008

Hadron Collidor Turned on This Wednesday

The collider goes live this Wednesday, the 10th....If you google "Hadron Collider", you will get a ton of sites that walk through different aspects of the collider. However, my favorite is the article that claims that scientists that have been working on this project are getting death threats. If you scroll down, there is a comment by one of the readers to the article that states,

"The only substance behind these threats is that some religious nut went full retard, never go full retard."

Full retard, well put. I tried to blog about this before....here.

Here are some other great sites, including CERN's Operational Site, below:

CERN's Site

Interactive Guide on Hadron Collider

Educational Site for the Religious Freaks on Particle Physics

Link to Brian Greene's book The Elegant Universe


PBS Special on Brian Greene's Book

Friday, September 5, 2008

Our Trip to Seattle



Our Trip to Seattle Erin and I just got back from a mini vacation in Seattle. We went out to visit the Leigh’s, our friends from b-school who work at Amazon, who just had their first, baby Frances Laura. It was a great time, and we spent time doing all the usual touristy stuff. Saturday, we arrived at Sea-Tac and went to Qwest Field to watch Washington State play Oklahoma State. Justin went to undergrad at Wazzu, and I did my “Master’s” work there, and according to the math, we were both there at the same time for one year. Qwest Field is a neat stadium, and it’s pretty loud…Saturday night we had drinks and pizza in Columbia Hill. Justin and I got to play some golf at Trilogy, and I am sad to report that playing on tired legs, I could not bring my dollars back to their rightful home. But a $2 Nassau is a $2 Nassau, and Justin netted me to death throughout the round.

The Vibe As tourists, I would offer that downtown Seattle has an interesting vibe, and could not be more different from NYC, or dirty jersey, for that matter. It’s hard to describe, but for lack of a better term, the vibe is a nice mix of “alternative, polite, and slower pace.” While we didn’t do the high profile stuff, like the Space Needle, or the Museum of Flight, we did go to the aquarium and spent some time at Pike’s Place, which is incredibly cool and embodies better the vibe of Seattle. I have posted some pictures below, and a link to my Webshots that shows more here…

Pike's Place Market Several things were super cool; we went to the original Starbucks”, walked around all the Farmer’s markets, and finally stopped to watch the famous Pike’s Place Fish Company, where the business owners throw large fish across to each other. My mom told me that there are corporate, team-building programs based upon this store and these workers. The rationale is that these workers have created a fun, unique and productive workplace in a job that most would find boring and gross. The proof is in the crowds that were lined up around these workers, waiting for someone to order a fish. I posted the video I took on my camera of these guys working...it's up above.




Baby Frances Laura Hanging out with the Leighs was fun, and seeing Seattle and the surrounding areas was fun. Our hosts could not have been more gracious, and it was weird to see folks we had spent so much time with in b-school on their home turf (I think I mentioned the word “anachronism” on hole #5 to JL)…We got to see baby Frances; she’s adorable and pretty responsive at 2 months. Mom and dad are running 5Ks and half marathons 2 months after the birth, which is inspirational if nothing else…All I know is that I’m pretty sure I got her to smile, and all it took was some funny noises. What a cutie, maybe next time we’ll introduce her to Allison.

An Interesting Side Note Finally, it bears mentioning that we stayed downtown at the Hyatt right near Pike’s Place. When we arrived on Saturday after the game to check in, there were throngs of people across the street at the Convention Center, and all looked “familiar” in a subconscious way. Our hotel was also overrun with many of these people, who were wearing various t-shirts; one of the patrons had on a black t-shirt with 3 Pac-man ghosts, another was wearing a t-shirt with Zelda on it. So, to the dismay of my wife, I asked the 20-35 year old male who we rode the elevator up with, “what’s going on across the street?” Turns out, there was a electronic gamer conference going on, and most were staying in our hotel.

Well, I admit, I’ve played my share of video games. Most recently, one of my more shameful gamer moments was getting sucked into the hype of Halo 2 in 2005. I was in State College, PA at the time and had reserved my advanced copy, which I could pick up at 12:00AM on the day of the product launch. So I drove to Nittany Mall at 12AM in the morning, thinking I’d just run in and run back out with my game. Well, upon arriving, I waited in a long line in the mall for 2 ½ hours with some of the greatest representation that central Pennsylvania has to offer (Central PA is tremendous, but perhaps this is not my moment to throw stones at glass houses…) When I got back to my apartment, I played the game till 7:00AM, and then went to my Investments class that same morning. Having taken no shower and not brushed my teeth, my classmate Hristo looked at me and asked “late night at CafĂ© 210?” and I explained “nope, I waited in line last night for Halo 2 and played the game up till about an hour ago.” Hristo replied, “dude, when else can you take a break from the real world and do something like that?” Well said Hristo, and absolutely true.

The point of my story is that I needed to illustrate my “motive” for snapping the picture below. If you’ve ever watched the show G4 on cable, then you know who the dude is in the picture below. If you don’t, well then, maybe you’ve never played video games or waited in line for Halo.

Adam and Me, outside the hotel in Seattle, super cool about a dumb fan...

Video of Adam on PAX2008 Show in Seattle


Seattle is a beautiful, great town, I highly recommend anyone check it out. Thanks again to the Leighs!!!

Image hosted by Webshots.com
by jkweil

Thursday, September 4, 2008

Flying on a Plane and the Theory of Relativity
























Being a commuter, I spend a lot of time on buses and trains, and while traveling back and forth from Seattle recently, I realized that the captive time makes my mind race. Well at one point, I had to go to the bathroom, and while standing in line, I got to thinking about the theory of relativity.

Most people know who “discovered” the theory of relativity. But few can explain it. I'm quite sure I would have asked Einstein "what does that mean" when he made the absolute statements about relativity, and I'm sure he would have answered and explained with examples and details. As a digression, Erin will tell you that the statement I make most when I give someone the opportunity to explain absolute statements* is “what does that mean?” or “please give me an example.” It’s a simple statement that you can follow up anyone’s prior statement, and it’s most useful when someone flat out says something you either don’t agree with, want to challenge the validity or conviction of their belief, or just probe to make sure they even know what they are talking about. You’d be surprised how many people try to tell you how you should think. It’s on you to challenge them and ask them “ok, I hear you, but what does that mean??” I find the statement indispensable, and there are lots of other folks eligible for this question. Erin and I always laugh at some of the responses we hear when we ask that simple question.

So what does the theory of relativity mean? Well, relativity was born out of Einstein’s constant struggle to reconcile the speed of light and the measurement of time. I remember the first time I ever read about the theory in Physics in undergrad, and two things stick out: If nothing else, the theory of relativity is profound and should make your head spin, and you realize how far ahead of his time Einstein was as an intellectual. Think of relativity this way, as I am sitting next to Erin on the plane, she and I are not moving relative to one another. However, we are in a plane that is moving at a cruising speed of 450 mph at 30,000 feet. Again, my speed relative to the plane is zero, I am sitting still. But, relative to the ground, I am moving 450 m.p.h. That’s awesome, and guess what?? If I froze the plane in the air, then relative to the plane, the ground is moving 450 miles per hour. Think about that.

Here’s where it gets crazy. If you hold speed constant, the farther away from the ground you get, time begins to slow down. There is nothing that you and I know of that moves fast enough to make this difference noticeable. But if you could move at or near the speed of light, time starts to standstill. It’s a hard thing to conceptualize, but it’s the fundamental basis for time travel, and was instrumental in reconciling the 4th dimension, which is space-time. If you think this is from a science fiction movie, guess again. Global Positioning Satellite units that you can buy for your car sometimes make the marketing claim that they correct for this time lag given that the satellites are moving much faster relative to your position so that you don't have errors in your position magnified...Einstein was ridiculous…think about it. There were no computers back then, just great minds.

*For example, if someone makes an absolute statement like "I think my coworker talks about me?" you should ask simply "What does that mean?" If you can make the person give you an example, or further clarify, 9 times out of 10, if the statement is true, the person can explain what they meant and there is usually a good basis for their belief. If they can't explain their statement or back up with evidence, well, then you know the person just says things with little evidence to back up their beliefs.

RNC -- Will McCain Get a Bounce?? -- UPDATED

McCain is set to accept his party's nomination tonight. InTrade shows as of 8:00PM that the futures market for the presidential election pegs OB's chances at 59.8%, and McCain's at 39.6%. We will see...

UPDATED
Looks like the Palin bounce is in full effect. This is a tremendous election year, like watching two midgets argue over who is taller. The public will choose between which choice is less worse. Whoever wins, either candidate is screwed and the agency issue will rear its ugly head once fame and power are achieved by leadership midget 1 or 2. The question we all find ourselves asking at the end of the day is which candidate potentially screws us less? Think about it.




Check this tomorrow to see if the bounce moves McCain higher than 40%...